GALE Pacific
Annual Report 2009

Plain-text annual report

2009 Annual Report 2009 Annual Report 1 C O N T E N T S CORPORATE INFORMATION REPORT FROM THE CHAIRMAN AND MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER SENIOR MANAGEMENT CORPORATE GOVERNANCE DIRECTORS’ REPORT AUDITOR'S INDEPENDENCE DECLERATION INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF GALE PACIFIC LIMITED FINANCIAL RESULTS INCOME STATEMENT BALANCE SHEET STATEMENT OF CHANGES IN EQUITY STATEMENT OF CASH FLOWS NOTES TO THE FINANCIAL STATEMENTS ADDITIONAL SECURITIES EXCHANGE INFORMATION 3 4 10 11 14 22 23 24 25 26 27 28 29 68 2 Gale Pacific Limited ABN 80 082 263 778 C O R P O R A T E I N F O R M A T I O N G A L E P A C I F I C L I M I T E D S O L I C I T O R S ABN 80 082 263 778 D I R E C T O R S Mr Harry Boon (Chairman) Mr Peter McDonald (Managing Director and Chief Executive Officer) Mr John Murphy (Non Executive Director) Mr George Richards (Non Executive Director) C O M P A N Y S E C R E T A R Y Ms Sophie Karzis R E G I S T E R E D O F F I C E 145 Woodlands Drive, Braeside, Victoria, 3195 T + 613 9518 3333 Norton Gledhill Level 23, 459 Collins Street, Melbourne, Victoria, 3000 T + 613 9614 8933 S H A R E R E G I S T E R Computershare Yarra Falls, 452 Johnston Street, Abbotsford, Victoria, 3067 Local call 1300 850 505 T + 613 9415 4000 A U D I T O R Pitcher Partners Level 19, 15 William Street, Melbourne, Victoria, 3000 T + 613 8610 5000 W E B S I T E A D D R E S S www.galepacific.com 2009 Annual Report 3 R E P O R T F R O M T H E C H A I R M A N A N D M A N A G I N G D I R E C T O R A N D C H I E F E X E C U T I V E O F F I C E R Dear Shareholders, T H E Y E A R I N R E V I E W The Group reported revenue from continuing operations for the full year on a consolidated basis in line with last year at $98.3 million. In local currencies, revenue increased in the Middle East and was in line with last year in Australia. Difficult trading conditions in New Zealand and the USA resulted in a sales decline from the same period last year. Earnings before interest, tax, depreciation and amortisation (EBITDA) was $14.1 million (14.3% of revenue) from continuing operations compared with $17.7 million (17.9% of revenue) from continuing operations for the previous corresponding period. This result is in line with the Directors Statement guidance as advised in the Company’s announcement on 26 February 2009. The reported loss after tax of $12.0 million for the 12 months ended 30 June 2009 compares with a reported profit after tax of $2.5 million for the previous corresponding period. This result was after incurring charges relating to a number of initiatives designed to strengthen the balance sheet and provide a base for improved company performance in the future. These additional costs include, the impairment of goodwill for the New Zealand operations of $3.2 million, additional lease charges for the New Zealand leased premises of $0.4 million and $11.5 million losses from discontinued operations. Excluding these costs, the profit after tax for continuing operations was $3.1 million compared with $7.3 million for the previous corresponding period. The reduction in profit year on year is a direct result of record high polymer raw material prices combined with volatile currency movements which led to lower margins. Both of these factors have since stabilised. The Group continued to generate strong cash flows. Cash provided from operating activities was $11.4 million compared to $9.8 million for the previous corresponding period. Net debt reduced to $14.1 million at 30 June 2009 compared to $20.5 million at 30 June 2008. Key structural changes included: (cid:133) (cid:133) (cid:133) 4 the Group closed the loss-making full service European operation and entered into a distribution agreement with European sales and distribution company Windhager GmbH. This new distribution structure substantially reduces the Groups operating costs in a highly seasonal market. Sale of remaining inventory and recovery of some receivables reduced the one off loss from the closure of European operation to $11.5 million, slightly less than originally anticipated; restructuring of New Zealand operations was completed in response to increased competition following structural changes in that market. As part of the reorganisation, a provision for lease costs has been taken-up in the current year ($0.4 million) and the carrying value of New Zealand goodwill has been written down by ($3.2 million); and the Group successfully completed a rights issue raising $4.7 million. These funds, together with the ongoing strong cash generated from operations, give the Group an improved balance sheet with significant head room and flexibility within existing facilities. Gale Pacific Limited ABN 80 082 263 778 A summary profit and loss account for continuing and discontinued operations appears below. Individually significant items for the year are shown separately to provide greater understanding of the Group’s performance for the year: Profit and Loss Continuing Operations Sales revenue EBITDA pre New Zealand lease provision New Zealand lease provision Continuing operations EBITDA Depreciation and amortisation expense Net interest expense Profit before significant items and tax New Zealand goodwill impairment Profit before income tax Tax expense Continuing operations (NLAT) / NPAT Discontinued Operations Loss from discontinued operations Loss attributable to minority interests Reported net (loss) / profit after tax C A P I T A L R A I S I N G Year to 30 June 2009 ($000) Year to 30 June 2008 ($000) 98,251 14,499 422 14,077 8,180 2,066 3,831 3,155 676 1,166 (490) (11,461) (11) (11,962) 98,653 17,658 - 17,658 6,543 2,085 9,030 - 9,030 1,686 7,344 (4,839) - 2,505 In March 2009 the Company completed a capital raising for $4.7 million by way of a 1.25 for 1 pro rata renounceable rights issue resulting in an additional 142,857,142 shares being issued. C A S H F L O W A N D B A L A N C E S H E E T It is particularly pleasing to report that, in a difficult trading environment, cash provided from operating activities was $11.4 million compared to $9.8 million for the previous corresponding period. Inventory was reduced by $2.9 million from June 2008. In local currencies (US dollars), inventory in USA, Middle East and China reduced by US$2.7 million. The weaker Australian dollar compared to prior periods resulted in an increase of $9 million in the reported value of non current assets in China. Capital expenditure on plant and equipment was substantially reduced to $1.0 million and compares to $3.4 million for the prior comparable period. With the manufacturing operations now fully established in China there has been a minimal requirement for capital expenditure. Net tangible assets remained constant at $68 million, however net tangible asset per ordinary security was 24.3 cents per share as at 30 June 2009 compared to 49.6 cents at 30 June 2008, due to the increase in the number of shares on issue after the March 2009 capital raising. B A N K I N G The Group uses bank debt to finance operations in Australia (multicurrency facility denominated in Australian dollars) and China (US dollar and Renminbi facilities). At 30 June 2009, the amount drawn of these facilities net of cash on deposit had been reduced to $14.1 million compared with $20.5 million at 30 June 2008. 2009 Annual Report 5 Until October 2008, the Group maintained a portion of the Australian dollar multicurrency facility in US dollars and Euros to match physical assets in those regions as a strategy to manage the impact on profit of exchange rate risk. As previously advised in the Group’s announcements on 23 December 2008 and the 26 February 2009, the rapid fall in the Australian dollar against the US dollar and Euro increased overall bank borrowings as measured in Australian dollars by approximately $10 million. In October 2008, to prevent further increases in banking borrowings due to currency movements in the volatile foreign exchange rate environment, the Group used available Australian dollar facilities, working capital and cash to repay all Euro facilities and substantially reduce US dollar exposures to ensure that the Group continued to operate within facility limits. The Group’s Australian banking partner has renewed its banking facilities until January 2011 conditional on the ongoing renewal of Chinese banking facilities as they mature. It has also agreed to exclude European closure and restructuring costs, the impairment of goodwill in New Zealand and the additional lease costs in New Zealand from covenant calculations. The Group’s Chinese banking partners have renewed current facilities as they fell due for an additional 12 month period, being the customary maximum term for our Chinese banking facilities. As is normal in our Chinese banking, renewal of a loan facility involves two steps; firstly the repayment of the facility and then the subsequent redrawing of the new facility, which can be days or even weeks later. Based on all available information and past experience, the Group believes that the Chinese banking facilities will continue to be renewed as they fall due. The March 2009 capital raising and the ongoing strong cash generation has resulted in the Group having significant head room and flexibility within existing banking facilities. The Group’s banking facilities at 30 June 2009 are summarised in the following table: Region Australia Australia China Total Facility Currency Total Facility Limit (Local Currency Million) Total Facility Limit (AUD Million) AUD multi-currency Chattel Mortgage USD/Renminbi 15.0 2.4 11.0 n/a 15.0 2.4 13.6 31.0 Facility Maturity January 2011 February 2011 Various dates in September, October and November 2009, and January 2010 The US dollar and Renminbi facilities for the China region have various sizes and maturity dates over the next year. The maturity profile for these facilities is as follows: China Facility Maturity Dates July 2009 (renewed to July 2010) September 2009 October 2009 November 2009 January 2010 January 2010 – Letter of Credit Facilities Total China facilities O P E R A T I O N S (USD Million) 1.0 0.6 0.5 0.5 5.7 2.7 11.0 The following table outlines regional sales performance (excluding other income) in local currency. Australia & Japan New Zealand Americas Middle East/Africa AUD 000’s NZD 000’s USD 000’s USD 000’s Europe (Discontinued) EURO 000’s China External Sales USD 000’s Full Year 2009 Full Year 2008 59,144 58,556 8,788 13,687 17,726 18,766 6,074 5,841 1,209 3,265 565 416 6 Gale Pacific Limited ABN 80 082 263 778 Asia / Pacific Asia / Pacific revenue reduced to $67.0 million from $70.8 million in the previous corresponding period. Revenue increased in Australia / Japan by $0.6 million (1%), and was lower in New Zealand by $4.9 million (36%), due to difficult economic conditions particularly in the agricultural net market. Operating profit before tax for the region decreased to $0.5 million from $6.7 million in the previous corresponding period due to higher Australian dollar cost of product imported into Australia and New Zealand from our China operations and from overseas suppliers where product is usually purchased in US dollars. Our major base raw material, polymer, was at record high prices during the period, however has since stabilised at lower levels. The region recorded an operating loss after tax of $0.7 million and includes the impairment of goodwill for New Zealand ($3.2 million) and an additional lease charge for the previous manufacturing site at Christchurch, New Zealand ($0.4 million). Sales to the retail market in Australia were 5% higher than the previous year following the introduction of new products, mainly a new range of blinds, as well as particularly warm weather in the early part of the calendar year. Sales of retail products to the Japanese market were also very strong for the year. Sales of industrial fabrics in Australia were 14% lower compared to the prior year and reflect the lower demand for grain covers. Sales of architectural fabrics also experienced slower demand due to weaker economic conditions. The demand for nets to protect crops in New Zealand has fallen significantly and is representative of this weakened sector. Additionally, some sales to New Zealand export customers were transferred to other Gale regions during the year, making year-on-year comparisons difficult. China operations were focused on waste and efficiency improvements. In February 2009, the Group appointed a new General Manager, Mr Bernie Wang, for our Chinese manufacturing operation. Mr Wang has over 20 years experience in plastic and textile manufacturing in China. Middle East / Africa Revenue in the Middle East increased 4% in local currency to US Dollars 6.1 million, driven by increased market penetration despite recent subdued levels of construction and development in this region. Revenue measured in Australian dollars increased to $8.0 million from $6.5 million, while operating profit after tax for this region was $1.5 million compared with $1.6 million for the previous corresponding period. The Americas Sales in the Americas reduced by 5% in local currency (to US Dollars 17.7 million) in difficult economic conditions. Measured in Australian dollars, sales increased to $23.3 million from $20.9 million. The operating loss after tax for this region was $1.5 million compared with a break even result for the previous corresponding period. The sell through rates with the Group’s two major retail customers, Lowe’s and The Home Depot were impacted by lower overall consumer spending in the DIY home improvement market sector. Although Gale sold products through more stores than in previous years, sell through rates per store were lower. Sales to the commercial market were in line with the previous corresponding period in local currency at US Dollars 2.4 million. The operating loss is due to the lower sales performance and the inability to pass on price increases in a timely manner to absorb the sharp increase in product costs arising from the increase in raw material costs. The increase in the raw material costs has now abated and stabilised. C L O S U R E C O S T S O F T H E E U R O P E A N B U S I N E S S The establishment of a full service distribution operation in Europe has been a significant drain on resources, management focus and shareholders funds over the past few years. The Group has reported significant losses in prior years from the sale of the Jung distribution business and the related European inventory write downs. The decision to close the loss-making full service European operation and enter into a distribution agreement with European sales and distribution company Windhager GmbH has resulted in closure costs of $11.5 million, which include: (cid:133) $2.5 million for the write off of the accumulated foreign currency translation reserve (non-cash) which relates to the currency movements in the investment in Europe since inception; and (cid:133) $9 million for the loss from operations for the twelve months to June 2009 which included; - - - - - $3.5 million losses from Trading in 2008 / 2009 $2.6 million for the liquidation below cost of remaining finished goods inventories and the write down of related raw material inventories in China, including European specific packaging, components and fabric; $1.2 million for remaining non collectable debts from distressed customers after the company aggressively pursued these debtors and made some recoveries; $0.7 million for residual costs in respect to employees, leases, office closure, legal and accounting; $1.0 million fixed asset write offs including some European specific manufacturing equipment in China, merchandising stands, software and office equipment. 2009 Annual Report 7 D I V I D E N D S Directors believe it is prudent to maintain a strong balance sheet with reduced borrowings in the current economic environment. No dividend will be declared, and Directors will continue to review the position each reporting period. C O R P O R A T E G O V E R N A N C E The Group is committed to the principles of good corporate governance. The full discussion on the Group’s progress in maintaining strong, transparent and improving corporate governance and in meeting the best practice recommendations is contained in the Directors report section of this annual report. A N N U A L G E N E R A L M E E T I N G A notice of the Company’s Annual General Meeting to be held on 17th November 2009 and a proxy voting form is enclosed with this report. M A N A G E M E N T A N D S T A F F On behalf of the Directors, we would like to thank all Gale employees for their dedication and commitment to the business during these uncertain and volatile times. The senior management team has been strengthened throughout the year and we are confident in the team’s ability to deliver improved performance for the business. O U T L O O K While there is still a degree of uncertainty in the current market, the recent stabilisation of lower polymer prices and the strengthening of the Australian dollar should be favourable to the Group’s performance if sustained for the full year. Together with the operational improvements made throughout the year, the Group is well positioned for any opportunities when the global economy returns to growth. However, due to the current uncertain economic outlook worldwide, forecasting financial performance remains challenging, and the Group is not in a position to provide specific profit guidance. D I R E C T O R S Mr Harry Boon has announced that he will be stepping down as Chairman and retiring from the Board after the Company’s 2009 Annual General Meeting. The Directors would like to thank Harry for his service and contribution during more than four years as Chairman, seeing the Group through a period of difficult restructuring, refinancing and key management changes. A search is underway to find a suitable replacement to fill the role and an announcement will be made as soon as an appointment is made. Mr Harry Boon Chairman 25 September 2009 Mr Peter McDonald Managing Director and Chief Executive Officer 25 September 2009 8 Gale Pacific Limited ABN 80 082 263 778 B O A R D O F D I R E C T O R S HARRY BOON, LLB (HONS), B. Com PETER MCDONALD, Bachelor of Business (Marketing) JOHN MURPHY, CA, FCPA, B.Comm, M.Comm GEORGE RICHARDS, CPA, AAICD H A R R Y B O O N Chairman and Non Executive Director since August 2005 Mr Boon joined the Company in August 2005 and brings to the role his experience as a senior executive in one of Australia’s leading listed companies, Ansell Limited. Mr Boon’s executive career culminated with the position of Chief Executive Officer of Ansell Limited from April 2002 to June 2004, having previously been President, Chief Executive Officer and Managing Director of Ansell Healthcare since February 1989. Mr Boon is also Chairman of Tatts Group Limited, a Non Executive Director of Hastie Group Limited, Non Executive Director of Paperlinx Limited and Non Executive Director of Toll Holdings Limited. Mr Boon has lived and worked in Australia, Europe, United States and Canada, and has broad based experience in global marketing and sales, large scale manufacturing operations, and product development. He is multi lingual, has a strong track record of delivering business results through setting ambitious goals, building the appropriate organisation structures, and pursuing achievement. Mr Boon is Chairman of the Company’s Nomination Committee and is a member of the Audit and Risk and Remuneration Committees. He recently announced his retirement as a director of Gale Pacific Limited, effective after the Company's Annual General Meeting on 17 November 2009. P E T E R M C D O N A L D Managing Director and Chief Executive Officer since April 2006 Mr McDonald is the Company Managing Director and Chief Executive Officer since April 2006 and Executive Director since 1998. Mr McDonald joined Gale in 1988 and was appointed as an Executive Director of the Company in 1998. Mr McDonald has held the positions of Product Manager, National Marketing Manager, National Sales and Marketing Manager and most recently the Company’s Chief Operating Officer and Managing Director of the Group’s United States operations. J O H N M U R P H Y Non Executive Director since August 2007 Mr Murphy is the Managing Director of Investec Wentworth Private Equity Limited and in this capacity is a board member of the fund’s investments, including the following listed companies: Ariadne Australia Limited, Staging Connections Group Limited and Gale Pacific Limited. Mr Murphy is also a Non Executive Director of First Opportunity Fund Limited, Investec Bank (Australia) Limited and Specialty Fashion Group Limited. During the last three years, Mr Murphy was a Non Executive Director of the following listed companies: Fone Zone Group Limited (2005 -2006) and Australian Pharmaceutical Industries Limited (2004-2007). Mr Murphy is the Chairman of the Company’s Remuneration Committee and is a member of the Audit and Risk and Nomination Committees. G E O R G E R I C H A R D S Non Executive Director since May 2004 Mr Richards joined the Board in 2004. Mr Richards 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 45 years experience in retail, marketing, manufacturing and distribution. He is a board member of The Alfred Foundation, a director of Bowen & Pomeroy Pty Ltd, Chairman of Carpet Court Australia Limited, Associate Member of the Australian Institute of Company Directors and Australian Society of Accountants. Mr Richards is Chairman of the Company’s Audit and Risk Committee and is a member of the Nomination and Remuneration Committees. 2009 Annual Report 9 S E N I O R M A N A G E M E N T J E F F C O X Chief Financial Officer (“CFO”) Jeff joined Gale in March 2006 and is an experienced CFO and has held senior finance positions for over 20 years. He has been the CFO of major divisions within the Pacific Dunlop Group including the Battery Group, Food Group and at Ansell. All these businesses had revenues in excess of $1 billion and significant international sales, distribution and manufacturing operations. Jeff’s experience at Ansell included residing in the USA for 5 years while playing a significant part of a successful and global company. S H A U N M C P H E R S O N Managing Director, Asia Pacific Shaun joined Gale in late November 2008 as Managing Director Asia Pacific. Shaun has extensive experience in general management, sales and marketing in commercial / industrial and retail markets. He has held senior management positions with global companies including General Manager, Country Director for Newell Rubbermaid Australia / New Zealand, Group Category Manager (Industrial, Engineering & Safety) for Hagemeyer Australia, and Regional Sales Manager (Industrial) for Ansell. Shaun has an Associate Diploma in Business Management and a MBA. M A R T I N D E N N E Y Managing Director, USA Martin joined Gale in June 2006 and has strong commercial and strategic planning skills gained over 20 years across a range of industries including food and beverage, distribution, manufacturing, technology and property development. He has held senior management roles including General Manager of Socomin, a branded food import and distribution division of Pacific Dunlop Group (turnover A$40 million). Other roles include National Sales and Marketing Manager at Dennis Family Corporation (turnover A$250 million), a leading Australian property developer, and Business Development Manager at Adacel Technologies, a global simulation and systems company based in Australia. B E R N I E W A N G Managing Director, China Bernie joined Gale in February 2009 and has 20 years experience in the chemical fibre textile industry. Bernie started his career with a large tyre cord manufacturer in China as a spinning process engineer and was promoted to plant manager and finally to technical director. Bernie then spent four years with DuPont Fibre as operations manager and maintenance manager. Before joining Gale, he worked for 5 years as General Manager for a German company in China where he was responsible for the design and construction of the factory and the establishment of manufacturing operations. 10 Gale Pacific Limited ABN 80 082 263 778 C O R P O R A T E G O V E R N A N C E This statement sets out the corporate governance practices that were in operation throughout the 2009 financial year for Gale Pacific Limited (“the Company”) and its controlled entities (“the Group”) and includes a summary of how the Group complies with the revised ASX Corporate Governance Principles and Recommendations. The various charters and policies are all available on the Gale Pacific web site: www.galepacific.com. P R I N C I P L E 1 : L A Y S O L I D F O U N D A T I O N F O R M A N A G E M E N T O V E R S I G H T an independent director to be appointed prior to Mr Boon’s retirement. The roles of the chairman and the chief executive officer should not be exercised by the same individual. Complying. The positions of Chairman and Chief Executive Officer are held by separate persons. The board should establish a nomination committee. Formalise and disclose the functions reserved to the board and those delegated to management. Complying. Complying. The Board has adopted a charter which establishes the role of the Board and its relationship with management. The primary role of the Board is the protection and enhancement of long term shareholder value. Its responsibilities include the overall strategic direction of the Group, establishing goals for management and monitoring the achievement of these goals. The functions and responsibilities of the Board and management are consistent with ASX Principle 1. A copy of the Board Charter is posted on the Group’s website. Each director is given a letter upon his or her appointment which outlines the director’s duties. The Group has in place systems designed to fairly review and actively encourage enhanced Board and management effectiveness. The Nomination Committee takes responsibility for evaluating the Board’s performance and the Group’s key the Remuneration Committee evaluates executives annually. P R I N C I P L E 2 : S T R U C T U R E T H E B O A R D T O A D D V A L U E A majority of the board members should be independent. Complying. The Board comprises four directors, three of whom are non executive and independent. The directors considered by the Board to constitute independent directors are Mr H Boon, Mr G Richards and Mr J Murphy. 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 with the Group that could materially interfere with or could reasonably be perceived to materially interfere with the exercise of their unfettered and independent judgement. The chairman should be an independent director. Complying. The Chairman, Mr H Boon has been Chairman of the Company since August 2005 and was, at the date of his appointment and continues to be, independent. The Chairman leads the Board and is responsible for the efficient organisation and conduct of the Board’s functions. Mr Boon recently advised the Company of his intention to retire from the Board and step down as Chairman at the conclusion of the Company’s 2009 Annual General Meeting. It is the Board’s intention that the role of chairman will be filled by The Board has a formal Nomination Committee comprising of all of the independent non executive directors. The Nomination Committee’s functions and powers are formalised in a Charter. Provide the information indicated in the Guide to reporting on Principle 2. Complying. The following information is set out in the Company’s annual report: • • • • • The skills and experience of directors. The directors considered by the Board to constitute independent directors. regarding directors’ ability A statement take independent professional advice at the expense of the Company. to The term of office held by each director in office at the date of the report. The names of members of the Company’s committees and their attendance at committee meetings. P R I N C I P L E 3 : P R O M O T E E T H I C A L A N D R E S P O N S I B L E D E C I S I O N M A K I N G Establish a code of conduct and disclose the code as to: • • • • The practices necessary to maintain confidence in the Company’s integrity. The practices necessary to take into account their legal obligations and the reasonable expectations of their stakeholders. The responsibility and accountability of individuals for reporting and investigating reports of unethical practices. Companies should establish a policy concerning trading in company securities by directors, senior executives and employees, and disclose the policy or a summary of that policy. Companies should provide the information indicated in the Guide to reporting on Principle 3. 2009 Annual Report 11 Complying. The Company has formulated a Code of Conduct which can be viewed on its website. The Code of Conduct has the commitment of the Directors and senior management to ensure practices are operating that are necessary to maintain confidence in the Company’s integrity, and responsibility and accountability of individuals for reporting and investigating reports of unethical practices. The Company has adopted a Share Trading Policy which can be viewed on its website. The Company has a policy concerning the trading in the Company’s securities by Directors, senior managers and employees. In summary, Directors, senior managers and employees must not deal in the Company’s securities when they are in possession of insider information. Directors and senior managers must not trade during the “trading blackout” beginning at the end of the Half Year and Full Year reporting period until the release to the ASX of the Financial Results for the relevant period. Details of the Company’s trading policy are posted on its website. P R I N C I P L E 4 : S A F E G U A R D I N T E G R I T Y I N F I N A N C I A L R E P O R T I N G Companies should have a structure to independently verify and safeguard the integrity of their financial reporting. The board should establish an audit committee. The audit committee should be structured so that it: • • • • Consists only of non executive directors. Consists of a majority of independent directors. Is chaired by an independent chair, who is not chair of the board. Has at least three members. The audit committee should have a formal charter. Companies should provide the information indicated in the Guide. Complying. 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 reviews the Group’s half yearly and annual financial statements. The Board requires that the Chief Executive Officer and the Chief Financial Officer state in writing to the Board that the Group’s financial reports present a true and fair view, in all material respects, of the Group’s financial condition and operational results and are in accordance with relevant accounting standards. The Board has an Audit Committee that reports to the Board. The Company’s Audit Committee comprises only non executive independent directors; and a chairman who is not chairman of the Board. The members of the Audit Committee during the year and attendance at meetings of the Committee are disclosed in the Directors’ Report in the Annual Report. The role of the Audit Committee is to advise on the establishment and maintenance of a framework of internal controls and appropriate ethical standards for the management of the Group and to advise on financial information prepared for use by the Board or for inclusion in financial statements. The Audit Committee has a formal charter that is posted on the Company’s website. The Board, with the involvement of the Audit Committee, has established procedures in relation to the external auditor selection and appointment and for discussing with the auditor the rotation of the lead partner. P R I N C I P L E 5 : M A K E T I M E L Y A N D B A L A N C E D D I S C L O S U R E Companies should promote timely and balanced disclosure of all material matters concerning the company. Companies should establish written policies designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure accountability at a senior executive level for that compliance and disclose those policies or a summary of those policies. Companies should provide the information indicated in the Guide. Complying. The Company has a documented policy which has established procedures designed to ensure compliance with Australian Securities Exchange Listing Rule disclosure requirements and to ensure accountability at a senior management level for that compliance. The focus of these procedures is on continuous disclosure of any information concerning the Group that a reasonable person would expect to have a material effect on the price of the Company’s securities and improving access to information for all investors. The Chief Executive Officer, the Chief Financial Officer and the Company Secretary are responsible for interpreting the Group’s policy and where necessary informing the Board. The Company Secretary for all communications with the Australian Securities Exchange. The purpose of for for disclosure is to ensure timely and accurate information is provided equally to all shareholders and market participants. The policy on continuous disclosure is posted on the Company’s website. the procedures responsible information identifying is P R I N C I P L E 6 : R E S P E C T T H E R I G H T S O F S H A R E H O L D E R S Companies should respect the rights of shareholders and facilitate the effective exercise of those rights. Companies should design a communications policy for promoting effective communication with shareholders and encouraging their participation at general meetings and disclose their policy or a summary of that policy. Companies should provide the information indicated in the Guide to reporting on Principle 6. Complying. The Board informs shareholders of all major developments affecting the Group’s state of affairs as follows: 1. 2. The annual report is distributed to all shareholders who have elected to receive it, including relevant information about the operations of the consolidated entity during the year and changes in the state of affairs. The half yearly report the Australian Securities to Exchange contains summarised financial information and a review of the operations of the Group during the period. 12 Gale Pacific Limited ABN 80 082 263 778 3. 4. 5. 6. All major announcements are lodged with the Australian Securities Exchange, and posted on the Company’s website. Proposed major changes in the Group which may impact on share ownership rights are submitted to a vote of shareholders. The Board encourages full participation of shareholders at the Annual General Meeting to ensure a high level of accountability and identification with the Group’s strategy and goals. The Company’s auditor attends the Annual General Meeting. P R I N C I P L E 7 : R E C O G N I S E A N D M A N A G E R I S K Companies should establish policies for the oversight and management of material business risks and disclose a summary of those policies. Complying. The Board has responsibility for monitoring risk oversight and ensures that the Chief Executive Officer and the Chief Financial Officer or equivalent report on the status of business risks through risk management programs aimed at ensuring risks are identified, assessed and appropriately managed. In addition the Board is responsible for reviewing the risk management framework and policies of the Group. risk assessment and The Board oversees policies on management and has delegated certain responsibilities in these matters to the Audit Committee. The Group has established policies and procedures to identify, assess and manage critical areas of financial and operating risk. The Group’s Risk Management policy is posted on the Company’s website. The board should require management to design and implement the risk management and internal control system to manage the company’s material business risks and report to it on whether those risks are being managed effectively. The board should disclose that management has reported to it as to the effectiveness of the company’s management of its material business risks. Complying. Management has completed a review of the Group’s major business units, organisational structure and accounting controls and processes. This review by management has been reported to the Audit Committee and in turn to the Board and the Board is satisfied that the processes in place to identify the Group’s material business risks are appropriate and that these risks are being effectively managed. A description of the Group’s risk management policy and internal compliance and control systems is available on the Company’s website. The board should disclose whether it has received assurance from the chief executive officer (or equivalent) and the chief financial officer (or equivalent) that the declaration provided in accordance with section 295A of the Corporations Act is founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to financial reporting risks. Companies should provide the information indicated in the Guide to reporting on Principle 7. Complying. The Chief Executive Officer and Chief Financial Officer are required to state to the Board in writing that the declaration provided in accordance with section 295A of the Corporations Act is founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to financial reporting risks. P R I N C I P L E 8 : R E M U N E R A T E F A I R L Y A N D R E S P O N S I B L Y Companies should ensure that the level and composition of remuneration is sufficient and reasonable and that its relationship to performance is clear. Complying. The Group has in place systems designed to fairly review and actively encourage enhanced Board and management effectiveness. The board should establish a remuneration committee. Complying. is to the Remuneration Committee The Board has established a Remuneration Committee. The role of to review and make recommendations to the Board on remuneration packages and practices applicable the Chief Executive Officer, senior executives and Directors themselves. This role also includes responsibility for share option schemes incentive performance packages and termination entitlements. Remuneration levels are competitively set to attract the most qualified and experienced Directors and senior executives. The Remuneration Committee may obtain independent advice on the appropriateness of remuneration packages. The members of the Remuneration Committee during the year and attendance at meetings of the Committee are disclosed in the Directors’ Report in the Annual Report. retirement and Companies should clearly distinguish the structure of non executive directors’ remuneration from that of executive directors and senior executives. Complying. Details of the Directors and key senior executives remuneration are set out in the Remuneration Report of the Annual Report. The structure of Non Executive Directors’ remuneration is distinct from that of executives and is further detailed in the Remuneration Report of the Annual Report. Equity based executive remuneration is made in accordance with thresholds set in plans approved by shareholders. In addition, the Company has issued equity based remuneration to both executive and senior management which has been approved by shareholders at a general meeting. Companies should provide the information indicated in the Guide to reporting on Principle 8. Complying. A charter setting out the responsibilities of the Remuneration Committee has been adopted and a copy of this charter is posted on the Company’s website. 2009 Annual Report 13 D I R E C T O R S ’ R E P O R T The Directors of Gale Pacific Limited (“the Company”) present their annual financial report for the Company and its controlled entities (“the Group”) for the financial year ended 30 June 2009. The Directors in office at any time during or since the end of the year to the date of this report are: H A R R Y B O O N , L L B ( H O N S ) , B . C O M Chairman and Non Executive Director since August 2005 Mr Boon joined the Company in August 2005 and brings to the role his experience as a senior executive in one of Australia’s leading listed companies, Ansell Limited. Mr Boon’s executive career culminated with the position of Chief Executive Officer of Ansell Limited from April 2002 to June 2004, having previously been President, Chief Executive Officer and Managing Director of Ansell Healthcare since February 1989. During the last three years, Mr Boon has also served as Chairman of Tatts Group Limited, Non Executive Director of Paperlinx Limited, Hastie Group Limited, Toll Holdings Limited, Funtastic Limited. Mr Boon is Chairman of the Company’s Nomination Committee and is a member of the Audit and Risk and Remuneration Committees. Mr Boon recently announced his retirement as a director of Gale Pacific Limited, effective after the Company’s Annual General Meeting on 17 November 2009. P E T E R M C D O N A L D , B A C H E L O R O F B U S I N E S S ( M A R K E T I N G ) Managing Director and Chief Executive Officer since April 2006 and Executive Director since 1998 Mr McDonald was appointed Managing Director and Chief Executive Officer of Gale in April 2006. Mr McDonald joined Gale in 1988 and was appointed as an Executive Director of the Company in 1998. Mr McDonald has held the positions of Product Manager, National Marketing Manager, National Sales and Marketing Manager and most recently the Company’s Chief Operating Officer and Managing Director of the Group’s United States operations. No other directorships of listed companies were held by Mr McDonald at any time during the three years prior to 30 June 2009. J O H N M U R P H Y , C A , F C P A , B . C O M M , M . C O M M Non Executive Director since August 2007 Mr Murphy is the Managing Director of Investec Wentworth Private Equity Limited and in this capacity is a board member of the fund’s investments, including listed companies Ariadne Australia Limited and Staging Connections Group Limited. Mr Murphy is also a Non Executive Director of First Opportunity Fund Limited, Investec Bank (Australia) Limited and Specialty Fashion Group Limited. During the last three years, Mr Murphy was a Non Executive Director of Fone Zone Group Limited (2005-2006) and Australian Pharmaceutical Industries Limited (2004-2007). Mr Murphy is Chairman of the Company’s Remuneration Committee and is also a member of the Audit and Risk and Nomination Committees. G E O R G E R I C H A R D S , C P A , A A I C D Non Executive Director since May 2004 Mr Richards 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 45 years experience in retail, marketing, manufacturing and distribution. He is a board member of The Alfred Foundation, Director of Bowen & Pomeroy Pty Ltd, Chairman of Carpet Court Australia Limited, Associate Member of the Australian Institute of Company Directors and Australian Society of Accountants. No other directorships of listed companies were held by Mr Richards at any time during the three years prior to 30 June 2009. Mr Richards is Chairman of the Company’s Audit and Risk Committee and is a member of the Nomination and Remuneration Committees. 14 Gale Pacific Limited ABN 80 082 263 778 M S S O P H I E K A R Z I S , B J U R I S L L B Company Secretary Ms Karzis was appointed as Company Secretary in June 2004. Ms Karzis is a practising lawyer who holds roles at a number of public and private companies. N A T U R E O F O P E R A T I O N S A N D P R I N C I P A L A C T I V I T I E S The Group’s principal activities in the course of the financial year were the marketing, sales, manufacture and distribution of advanced polymer fabrics and related products to global markets. R E V I E W A N D R E S U L T S O F O P E R A T I O N S The consolidated loss of the Group for the financial year attributable to the members of Gale Pacific Limited was $11.962 million. Refer to the Chairman and Managing Director’s and Chief Executive Officer’s Report for further details on the Group’s result. S T A T E O F A F F A I R S In the opinion of the Directors there were no significant changes in the state of affairs of the Group that occurred during the financial year under review not otherwise disclosed in this report or the accompanying financial report. During the financial year the Company conducted a capital raising the details of which are disclosed in note 16(a) to the Financial Statements. This capital raising was considered by the Directors to be a defensive measure in the best interest of the Company in difficult and volatile economic times. E V E N T S S U B S E Q U E N T T O B A L A N C E D A T E In the interval between the end of the financial year and the date of this report, no item, transaction or event of a material and unusual nature has arisen that is likely, in the opinion of the Directors, to affect significantly, the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial years. L I K E L Y D E V E L O P M E N T S Disclosure of information regarding likely developments in the operations of the Group in future financial years has been made in part in the Chairman and Managing Director’s and Chief Executive Officer’s Report of this Annual Report. Any further such disclosure and the expected results of those operations is likely to result in unreasonable prejudice to the Group and has accordingly not been disclosed in this report. E N V I R O N M E N T A L R E G U L A T I O N A N D P E R F O R M A N C E The Group’s operations are not subject to any significant environmental regulations under the Commonwealth or State legislation. The Directors believe that the Group has adequate systems in place for the management of its environmental requirements and is not aware of any breach of those environmental requirements as they apply to the Group. D I V I D E N D S In respect of the financial year ended 30 June 2009, no interim dividend was paid and the Directors have determined not to pay a final dividend. 2009 Annual Report 15 S H A R E B A S E D P A Y M E N T S Options The Company maintains an option scheme for certain staff and executives, including Executive Directors, as approved by shareholders at an annual general meeting. At the date of this report the number of unissued ordinary shares under option was nil. All options on issue at the end of the previous reporting period lapsed unexercised during the reporting period. No new options were issued during the reporting period. Performance Rights The number of performance rights on issue at the date of this report is 9,450,000. No amount is payable on the vesting of a performance right. Each performance right entitles the holder to one (1) ordinary share in Gale Pacific Limited in the event that the performance right is exercised. Performance rights carry no rights to dividends and no voting rights. Of the performance rights on issue, 150,000 performance rights were issued to the Managing Director and Chief Executive Officer, Mr Peter McDonald on 2 February 2007. The Board has determined that these rights will lapse on 30 September 2009. 525,000 of the performance rights are the second tranche (75%) of an issue on 16 November 2007. The hurdles for the first tranche were not achieved at 30 June 2008 so they expired unvested during the reporting period. The second tranche includes 75,000 each to the following current senior executives Dr Paul Cacioli, General Manager Research & Development and Technical; Mr Jeff Cox, Chief Financial Officer; Mr Martin Denney, Managing Director USA; and Mr Paul Ducray, Chief Manufacturing Officer. These performance rights are subject to satisfying of relevant performance hurdles based on improvements in the Group’s earnings before interest, tax, depreciation and amortisation (“EBITDA”) over the two year period 1 July 2007 to 30 June 2009. These hurdles have not been achieved so these performance rights will now also not vest. 9,000,000 of the performance rights were issued on 30 June 2009 to the following senior executives, 2,000,000 each to Mr Jeff Cox, Chief Financial Officer; Mr Martin Denney, Managing Director USA; Mr Shaun McPherson, Managing Director Asia Pacific; Mr Bernie Wang, Managing Director, China and 1,000,000 to Dr Paul Cacioli, General Manager Research & Development and Technical Services. These performance rights are subject to the satisfying of relevant performance hurdles based on improvements in the Group’s diluted earnings per share over the three year period 1 July 2009 to 30 June 2012. None of these performance rights can vest until 30 June 2012 and expire on 30 June 2019. Further details of the options and performance rights are disclosed in Note 24 to the Financial Statements. I N D E M N I F I C A T I O N O F O F F I C E R S A N D A U D I T O R S 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. D I R E C T O R S ’ S H A R E H O L D I N G S The following table sets out each Director’s relevant interest in shares, options and performance rights in shares of the Company as at the date of this report. Directors H Boon P McDonald J Murphy G Richards Fully Paid Ordinary Shares 607,500 978,105 - 491,899 Options Performance Rights - - - - - 150,000 1 - - 1 The Board has determined that these rights will lapse on 30 September 2009. 16 Gale Pacific Limited ABN 80 082 263 778 D I R E C T O R S ’ M E E T I N G S The table below sets out the attendance by Directors at meetings either in person or via their alternate. Directors H Boon P McDonald J Murphy G Richards Directors’ Meetings Audit and Risk Committee Meetings Remuneration Committee Meetings Nomination Committee Meetings No of meetings eligible to attend 19 19 19 19 Attended 19 19 19 19 No of meetings eligible to attend 3 3 3 3 Attended 3 3 3 3 No of meetings eligible to attend 3 3 3 3 Attended 3 3 3 3 No of meetings eligible to attend 1 1 1 1 Attended 1 1 1 1 By Board invitation, Mr Peter McDonald also attended all of the Audit and Risk, Remuneration and Nomination Committee meetings. The members of the Nomination Committee are Mr Harry Boon, Mr John Murphy and Mr George Richards. The Chairman of the Nomination Committee is Mr Harry Boon. R E M U N E R A T I O N R E P O R T This report contains the remuneration arrangements in place for Directors and executives of the Group. 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. The Group’s remuneration policy is based on the following principles: • • • Provide competitive rewards to attract high quality executives; Provide an equity incentive for senior executives that will provide an incentive to executives to align their interests with those of the Group and its shareholders; and Ensure that rewards are referenced to relevant employment market conditions. Remuneration packages contain the following key elements: • • Primary benefits – salary / fees; and Benefits, including the provision of motor vehicles and incentive schemes, including share options and performance rights. Share options entitle an executive, assuming the performance criteria are satisfied, to purchase shares in the Company at a future date at a pre determined price. The decision to and / or when to exercise any entitlement remains with the recipient up to the point that an option expires. Performance rights, if the performance criteria and any Board discretion are satisfied, entitle an executive to be issued shares in the Company at no cost to the executive. Shares are issued automatically at the time the performance rights vest. Details of these benefits are disclosed below in this report. Remuneration Practices The Group policy for determining the nature and amount of emoluments of 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 Group. The contracts of service between the Group and Executive Directors and executives are on a continuing basis, the terms of which are not expected to change in the immediate future. Upon retirement Executive Directors and executives are paid employee benefit entitlements accrued to date of retirement. Payment of bonuses, share options and other incentive payments are made at the discretion of the Remuneration Committee to key executives of the Group based predominantly on an objective review of the Group’s financial performance, the individuals’ achievement of stated financial and non financial targets and any other factors the Committee deems relevant. Non Executive Directors receive a fee for being Directors of the Company and do not participate in performance based remuneration. Remuneration Structure In accordance with best practice corporate governance, the structure of Non Executive Directors and senior manager remuneration is separate and distinct. 2009 Annual Report 17 Non Executive Director Remuneration Objective The Board seeks to set remuneration at a level which provides the Company with the ability to attract and retain directors of relevant experience and skill, whilst incurring costs which are acceptable to shareholders. Structure The Company’s Constitution and the Australian Securities Exchange Listing Rules specify that the aggregate remuneration of Non Executive Directors shall be determined from time to time by a general meeting. An amount not exceeding the amount determined is then divided between the directors as agreed. The last determination was at the Annual General Meeting held on 14 December 2000 when shareholders’ approved the Company’s constitution which provides for an aggregate remuneration of $300,000 per annum. The amount of the aggregate remuneration and the manner in which it is apportioned is reviewed periodically. The Board considers fees paid to non executive directors of comparable companies when undertaking this review process. Each Non Executive Director receives a fee for being a Director of the Company and does not participate in performance based remuneration. The remuneration of Non Executive Directors for the period ended 30 June 2009 is detailed below. Senior Manager and Executive Director Remuneration Objective The Group aims to reward executives with a level and mix of remuneration commensurate with their position and responsibilities within the Group. The objective of the remuneration policy is: • • • Reward executives for Group and individual performance; Align the interests of the executives with those of the shareholders; and Ensure that total remuneration is competitive by market standards. Structure In determining the level and make up of executive remuneration, the Remuneration Committee reviews reports detailing market levels of remuneration for comparable roles. Remuneration consists of fixed and variable elements. (a). Share Based Payments The Group maintains option and performance rights schemes for certain staff and executives, including executive directors, as approved by shareholders at an annual general meeting. These schemes are designed to reward key personnel when the Group meets performance hurdles relating to: • • • Improvement in net profit after tax. Improvement in return to shareholders. Improvement in share price. The number of unissued ordinary shares under option as at the date of this report is nil. The number of unissued ordinary shares under the performance rights scheme at the date of this report is 9,450,000. Each performance right entitles the holder one (1) ordinary share in Gale Pacific Limited when exercised and is subject to the satisfying of relevant performance hurdles based on improvements in the Group’s diluted earnings per share. Options and performance rights issued to executives during the year were issued in accordance with the Group’s remuneration policy which: • • • Reward executives for Group and individual performance; Align the interests of the executives with those of the shareholders; and Ensure that total remuneration is competitive by market standards. 18 Gale Pacific Limited ABN 80 082 263 778 (b). Cash Bonuses Cash bonuses granted to executives are based on the respective performance of their regional business unit. Bonuses are paid out at various times during the year and are determined at the discretion of the Remuneration Committee. For the current year bonuses have been granted as at 30 June 2009. Key Management Personnel of the Group Who Held Office During the Year Directors H Boon (Chairman, Non Executive); J Murphy (Non Executive): G Richards (Non Executive) P McDonald (Managing Director and Chief Executive Officer) Executives F Albertsmeier (Managing Director, Europe / Middle East / Africa) P Cacioli (General Manager, Research & Development and Technical Services) S Carroll (Managing Director, Australia) J Cox (Chief Financial Officer) M Denney (Managing Director, USA) P Ducray (Chief Manufacturing Officer) S McPherson (Managing Director, Asia Pacific) B Wang (Managing Director, China) E Xu (Managing Director, China) The following table discloses the remuneration of the Directors of the Company: 2008 / 2009 Short term benefits Post employ- ment Share based payments Total Performance related Directors Executive Directors Salary & fees $ Bonus Non monetary Super Options Performa- nce rights $ $ $ $ $ $ % Total Options Rights % % P McDonald 401,200 50,000 27,591 36,209 12,011 49,285 576,296 19.3 2.1 8.6 Non Executive Directors H Boon G Richards J Murphy Total 137,615 68,807 65,000 - - - - - - 12,385 6,193 - - - - - - - 150,000 75,000 65,000 - - - - - - - - - 672,622 50,000 27,591 54,787 12,011 49,285 866,296 2007 / 2008 Short term benefits Post employ- ment Share based payments Total Performance related Directors Executive Directors Salary & fees $ Bonus Non monetary Super Options Performa- nce rights Total Options Rights $ $ $ $ $ $ % % % P McDonald 380,379 85,000 26,471 37,114 5,521 49,285 583,770 23.9 0.9 8.4 Non Executive Directors H Boon G Richards J Murphy1 Total 137,615 72,807 55,161 - - - - - - 12,385 6,193 - - - - - - - 150,000 79,000 55,161 - - - - - - - - - 645,962 85,000 26,471 55,692 5,521 49,285 867,931 1 Mr Murphy was appointed as a Non Executive Director on 24 August 2007. The details of his remuneration for the reporting period are from that date. 2009 Annual Report 19 $ - - $ - - - - - - The following table discloses the remuneration of the key management personnel of the Group which includes the five highest paid executives. 2008 / 2009 Short-term Benefits Post Employ- ment Share Based Payments Termin. Benefits Total Performance Related Key management personnel F Albertsmeier 1 M Denney 2 J Cox P Cacioli 3 P Ducray 4 E Xu 5 S McPherson 6 S Carroll 7 B Wang8 Total Salary & fees $ 300,033 304,923 262,853 260,092 223,967 174,319 160,417 22,214 50,958 Bonus $ - 15,262 25,000 - - 4,672 25,000 19,774 32,641 Non- monetary $ 47,497 15,612 Super Options $ - - - - 808 461 - - - 25,894 23,137 - - 14,583 40,411 4,573 - - 1,828 1,615 9,004 - - 1,759,776 122,349 117,097 65,442 2,884 Perf. Rights $ - - - - - - - - - - Total Options Rights $ 66,846 - - - - 32,374 - 132,345 - $ 414,376 335,797 313,747 283,229 265,186 216,399 200,000 177,776 92,603 231,565 2,299,113 % - 4.5 8.0 - 0.3 2.4 12.5 12.0 35.2 % - - - - 0.3 0.2 - 0.9 - % - - - - - - - - - 2007 / 2008 Short-term Benefits Post Employ- ment Share Based Payments Termin. Benefits Total Performance Related Key management personnel Salary & fees $ Bonus $ Non- monetary $ F Albertsmeier 307,357 41,091 52,420 Z Fakroddin 9 J Cox P Cacioli S Carroll M Denney E Xu P Ducray C McCallum 10 356,807 252,290 246,903 261,373 - 40,000 25,000 - 246,336 33,051 242,284 189,692 108,528 19,397 10,469 42,930 - - - - 7,503 9,830 33,962 - Super Options Perf. Rights $ 22,541 $ - $ 423,409 $ - 6,426 - 27,932 391,165 24,956 20,510 - - 22,541 22,541 21,957 6,426 22,541 - 22,541 1,832 22,541 3,213 22,541 - - - - - - 339,787 314,954 312,297 309,431 295,884 259,877 10,050 - 51,097 212,605 Total Options % Rights % 15.0 1.6 18.4 15.1 9.3 18.0 14.8 13.9 24.9 - 1.6 - - 2.1 - 0.6 1.2 4.7 % 5.3 - 6.6 7.2 7.2 7.3 7.6 8.7 - Total 2,211,570 211,938 103,715 67,423 27,947 157,787 79,029 2,859,409 1 Mr Albertsmeier is based in Germany and remunerated in euro converted to Australian dollars in the table above. Mr Albertsmeier departed his role as Managing Director Europe, Middle East, Africa on 1 April 2009 following the closure of the European full service operation. His remuneration details for the reporting period are to that date. 2 Mr Denney is based in the United States of America and remunerated in United States dollars converted to Australian dollars in the table above. 3 Mr Cacioli will depart his role on 9 October 2009. 4 Mr Ducray is based in China and remunerated in Chinese renminbi and United States dollars converted to Australian dollars in the table above. Mr Ducray will depart his role on the 30 September 2009. 5 Ms Xu is based in China and is remunerated in Chinese renminbi converted to Australian dollars in the table above. Ms Xu departed her role as Managing Director China on 12 December 2008. Her remuneration details for the reporting period are to that date. 6 Mr McPherson was appointed Managing Director Asia Pacific on 24 November 2008. The details of his remuneration for the reporting period are from that date. 7 Mr Carroll departed his role as Managing Director Australia on 1 August 2008. His remuneration details for the reporting period are to that date. 8 Mr Wang was appointed Managing Director China on 26 February 2009 and the details of his remuneration for the reporting period are from that date. 9 Mr Fakroddin is based in Europe and is remunerated in euro converted to Australian dollars in the table above. Mr Fakroddin departed his role with Gale Europe on 30 June 2008. 10 Mr McCallum is based in New Zealand and remunerated in New Zealand dollars converted to Australian dollars in the table above. Mr McCallum departed his role as Managing Director of New Zealand on 31 December 2007 following the completion of the restructuring of the New Zealand operations. His remuneration details for the comparative period are to that date. 20 Gale Pacific Limited ABN 80 082 263 778 A U D I T O R I N D E P E N D E N C E A N D N O N A U D I T S E R V I C E S A copy of the auditor’s independence declaration in relation to the audit for the financial year is provided with this report. N O N A U D I T S E R V I C E S The non audit services provided by the Company’s auditor, Pitcher Partners are disclosed in the table below under the Company. Non audit services have been approved by the Audit Committee and reported to the Board. The Directors are satisfied that the provision of non audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act. The nature and scope of each non audit service provided means that auditor independence was not compromised. Amounts paid or payable to an auditor for non audit services provided during the year by the auditors to any entity that is part of the Group for: Taxation services Corporate secretarial and management services Systems review Capital raising related services Government grant review General assistance Total Consolidated Company 2008 / 2009 ($000) 2007 / 2008 ($000) 2008 / 2009 ($000) 2007 / 2008 ($000) 50 86 2 - 2 - 140 62 21 2 - 3 2 90 19 - - 2 2 - 23 17 - - - 3 2 22 P R O C E E D I N G S O N B E H A L F O F T H E C O M P A N Y 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. R O U N D I N G O F F O F A M O U N T S 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 section 298(2) of the Corporations Act 2001. On behalf of the Directors; Mr Harry Boon Chairman 25 September 2009 Mr Peter McDonald Managing Director and Chief Executive Officer 25 September 2009 2009 Annual Report 21 A U D I T O R ’ S I N D E P E N D E N C E D E C L A R A T I O N To the Directors of Gale Pacific Limited In relation to the independent audit for the year ended 30 June 2009, to the best of my knowledge and belief there have been: (i) No contraventions of the auditor independence requirements of the Corporations Act 2001. (ii) No contraventions of any applicable code of professional conduct. S Schonberg Partner 25 September 2009 PITCHER PARTNERS MELBOURNE D I R E C T O R S ’ D E C L A R A T I O N The Directors of the Company declare that: The financial statements and notes, as set out on pages 24 to 67 are in accordance with the Corporations Act 2001 including: • • • Compliance with Accounting Standards in Australia and the Corporations Regulations 2001; Providing a true and fair view of the financial position as at 30 June 2009 and of the performance, as represented by the results of the operations and the cash flows, of the Company and the Group for the year ended on that date; and That the Directors have been given the declaration required under section 295A of the Corporations Act 2001. 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. Mr Harry Boon Chairman 25 September 2009 Mr Peter McDonald Managing Director and Chief Executive Officer 25 September 2009 22 Gale Pacific Limited ABN 80 082 263 778 I N D E P E N D E N T A U D I T O R ’ S R E P O R T T O T H E M E M B E R S O F G A L E P A C I F I C L I M I T E D We have audited the accompanying financial report of Gale Pacific Limited and controlled entities. The financial report comprises the Balance Sheet as at 30 June 2009, and the Income Statement, Statement of Changes in Equity and Cash Flow Statement for the year ended on that date, a summary of significant accounting policies, other explanatory notes and the directors' declaration of the consolidated entity comprising the company and the entities it controlled at the year's end or from time to time during the financial year. Directors' Responsibility for the Financial Report The directors of the company are responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining internal control relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that compliance with the Australian equivalents to International Financial Reporting Standards ensures that the financial report, comprising the financial statements and notes, complies with International Financial Reporting Standards. Auditor's Responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor's judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Independence In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. Auditor’s Opinion In our opinion, (a) the financial report of Gale Pacific Limited is in accordance with the Corporations Act 2001, including: (i) (ii) giving a true and fair view of the company's and consolidated entity's financial position as at 30 June 2009 and of their performance for the year ended on that date; and complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and (b) the consolidated financial report also complies with International Financial Reporting Standards as disclosed in Note 1. Report on the Remuneration Report We have audited the Remuneration Report included in pages 17 to 20 of the directors' report for the year ended 30 June 2009. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Auditor’s Opinion In our opinion the Remuneration Report of Gale Pacific Limited and controlled entities for the year ended 30 June 2009, complies with section 300A of the Corporations Act 2001. S Schonberg Partner 25 September 2009 PITCHER PARTNERS MELBOURNE 2009 Annual Report 23 F I N A N C I A L R E S U L T S 24 Gale Pacific Limited ABN 80 082 263 778 I N C O M 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 9 Consolidated Company Note 2008 / 2009 2007 / 2008 2008 / 2009 2007 / 2008 ($000) ($000) ($000) ($000) Revenue Other income Expenses Changes in inventories of finished goods and work in progress Raw materials and consumables used Employee benefits expense Depreciation and amortisation expense Impairment of goodwill and assets Restructuring and termination costs Impairment of related party receivables Operating overheads Other expenses Finance costs Profit from continuing operations before income tax Income tax expense (Loss) / profit from continuing operations after income tax Loss from discontinued operations Profit attributable to minority interests Net (loss) / profit attributable to the members of the parent entity Earnings Per Share From Continuing and Discontinued Operations Basic earnings per share (cents per share) Diluted earnings per share (cents per share) From Continuing Operations Basic earnings per share (cents per share) Diluted earnings per share (cents per share) 2 3 3 4 23 19 18 21 21 21 21 The accompanying notes form part of these financial statements. 98,251 2,453 98,653 1,735 56,960 9,592 57,989 2,609 75 (42,160) (16,384) (8,180) (3,155) (422) - (706) (39,098) (16,519) (6,543) - - - 635 (597) (29,951) (27,570) (7,544) (2,313) - - (9,473) (7,698) (2,604) - - - (27,210) (24,901) (13,963) (13,089) (1,860) (1,497) 586 (161) 425 (27,311) - (3,249) (2,252) 3,539 (1,232) 2,307 - - (26,886) 2,307 (151) (2,441) 676 (1,166) (490) (11,461) (11) (11,962) (6.75) (6.75) (0.28) (0.28) (562) (3,029) 9,030 (1,686) 7,344 (4,839) - 2,505 1.92 1.90 5.64 5.58 2009 Annual Report 25 B A L A N C E S H E E T A S A T 3 0 J U N E 2 0 0 9 Current Assets Cash and cash equivalents Trade and other receivables Inventories Current tax assets Other current assets Total current assets Non Current Assets Amounts receivable from controlled entities Other financial assets Property, plant and equipment Intangible assets Deferred tax assets Total non current assets Total assets Current Liabilities Trade and other payables Borrowings Other financial liabilities Current tax liabilities Provisions Total current liabilities Non Current Liabilities Borrowings Deferred tax liabilities Provisions Total non current liabilities Total liabilities Net assets Equity Contributed equity Other reserves Accumulated losses Parent entity interest Minority interests Total equity Consolidated Company Note 2008 / 2009 ($000) 2007 / 2008 ($000) 2008 / 2009 ($000) 2007 / 2008 ($000) 5 6 7 4 9 6 8 10 11 4 12 13 14 4 15 13 4 15 16 17 18 19 7,141 14,674 23,663 980 741 47,199 - - 57,505 7,405 1,038 65,948 113,147 8,703 19,419 459 217 2,689 31,487 1,754 4,372 118 6,244 37,731 75,416 105,594 (5,965) (24,213) 75,416 - 75,416 16,594 19,552 26,576 178 760 63,660 - - 55,344 10,845 175 66,364 130,024 10,649 34,140 28 6 1,778 46,601 2,978 1,587 112 4,677 51,278 78,746 100,813 (10,026) (12,030) 78,757 (11) 78,746 1,893 4,449 11,731 949 271 19,293 7,935 45,103 6,369 4,380 1,185 64,972 84,265 2,897 8,996 459 - 922 12,317 5,856 10,914 - 296 29,383 41,641 30,585 7,918 5,081 2,842 88,067 117,450 4,182 17,643 28 6 883 13,274 22,742 1,754 - 88 1,842 15,116 69,149 105,594 225 (36,670) 69,149 - 69,149 2,978 - 69 3,047 25,789 91,661 100,813 632 (9,784) 91,661 - 91,661 The accompanying notes form part of these financial statements. 26 Gale Pacific Limited ABN 80 082 263 778 S T A T E M E N T O F C H A N G E S I N E Q U I T Y F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 0 9 Consolidated Company Note 2008 / 2009 2007 / 2008 2008 / 2009 2007 / 2008 ($000) ($000) ($000) ($000) Total Equity at the Beginning of the Period 78,746 60,697 91,661 70,189 Cash flow hedges, net of tax Exchange differences on translation of foreign operations Employee share based expenditure 17 17 17 (316) 4,302 (146) - (3,621) 288 (261) - (146) Net income / (loss) recognised directly in equity 3,840 (3,333) (407) - - 288 288 (Loss) / profit for the period (11,951) 2,505 (26,886) 2,307 Total recognised income and expense for the period (8,111) (828) (27,293) 2,595 Transaction with Equity Holders in their Capacity as Equity Holders Contributions, net of raising costs and tax 16 4,781 4,781 18,877 18,877 4,781 4,781 18,877 18,877 Total equity at the end of the period 75,416 78,746 69,149 91,661 Total Recognised Income and Expense for the Period is Attributable To Members of the parent Minority interest Total The accompanying notes form part of these financial statements. (11,962) 11 (11,951) 2,505 - 2,505 (26,886) - (26,886) 2,307 - 2,307 2009 Annual Report 27 S T A T E M E N T O F C A S H F L O W 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 9 Consolidated Company Note 2008 / 2009 2007 / 2008 2008 / 2009 2007 / 2008 ($000) ($000) ($000) ($000) 63,563 62,987 (54,171) (55,035) Cash Flow From Operating Activities Receipts from customers Payments to suppliers and employees Interest received Borrowing costs paid Income tax payments Dividends received 114,700 (100,090) 471 (2,468) (1,225) - Net cash provided by operating activities 23 11,388 Cash Flow From Investing Activities Proceeds from sale of plant and equipment Payment for plant and equipment Payment for intangible assets Payment for investments Proceeds from related parties 470 (1,007) (198) - - 109,476 (96,139) 876 (3,276) (1,118) - 9,819 443 (3,370) (866) - - 1,777 (1,365) (1,093) 192 8,903 87 (176) (198) (14,518) 662 Net cash used by investing activities (735) (3,793) (14,143) Cash Flow From Financing Activities Proceeds from issue of equity securities Repayment of borrowings Repayment of principal on finance leases Repayment of principal on hire purchase Net cash (used) / provided by financing activities Net (decrease) / increase in cash held Cash at beginning of year Effects of exchange rate changes on items denominated in foreign currencies 4,687 (20,584) (148) (359) (16,404) (5,751) 15,685 (2,793) 18,395 (5,709) (175) (2,225) 10,286 16,312 539 (1,166) 4,687 (11,413) (148) (359) (7,233) (12,473) 11,408 2,958 2,379 (2,378) (1,060) - 6,893 70 (402) (836) (5,259) 603 (5,824) 18,395 (6,025) (175) (2,225) 9,970 11,039 (790) 1,159 Cash at the end of the year 23 7,141 15,685 1,893 11,408 The accompanying notes form part of these financial statements. 28 Gale Pacific Limited ABN 80 082 263 778 N O T E S T O T H E F I N A N C I A L S T A T E M E N T S N O T E 1 : B A S I S O F P R E P A R A T I O N This financial report is a general purpose financial report that has been prepared in accordance with Australian Accounting Standards, Interpretations and other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001. The financial report covers Gale Pacific Limited (“the Company”) as an individual parent entity and Gale Pacific Limited and controlled entities as a consolidated entity (“the Group”). Gale Pacific Limited is a company limited by shares, incorporated and domiciled in Australia. The financial report was authorised for issue by the Directors at the date of the Directors Reoprt. The following is a summary of material accounting policies adopted by the Group in the preparation and presentation of the financial report. The accounting policies have been consistently applied, unless otherwise stated. (a). Basis of Preparation of the Financial Report The financial report of Gale Pacific Limited and controlled entities, and Gale Pacific Limited as an individual parent entity comply with Australian equivalents to International Financial Reporting Standards. The financial report has been prepared under the historical cost convention, as modified by revaluations to fair value for certain classes of assets as described in the accounting policies. Compliance with Australian equivalents of International Financial Reporting Standards ensures compliance with International Financial Reporting Standards. (b). Principals of Consolidation The consolidated financial statements are those of the consolidated entity, comprising the financial statements of the parent entity and of all entities, which Gale Pacific Limited controlled from time to time during the year and at balance date. Details of the controlled entities are contained in Note 26. The financial statements of subsidiaries are prepared for the same reporting period as the parent entity, using consistent accounting policies. Adjustments are made to bring into line any dissimilar accounting policies, which may exist. All related party balances and transactions, including any unrealised profits or losses have been eliminated on consolidation. Minority interests in the equity and results of the entities that are controlled are shown separately in the consolidated financial report. (c). Net Investments in Foreign Operations During 2006 / 2007, the Group reclassified a portion of the Company’s related party balances as net investments in foreign operations as permitted by AASB 121 The Effects of Changes in Foreign Exchange Rates. The balances reclassified were identified as being monetary items of a non current nature as settlement of these balances is not planned and the Group’s forecasts showed that any settlement would not occur in the foreseeable future. While this situation persists, impacting the Group’s current year profits with the movement in the foreign exchange rates applying to these monetary items would not provide the best representation of a current year’s performance. As permitted by AASB 121, from the date of reclassification, all changes in the Australian dollar value of these items arising from changes in foreign exchange rates are, in the consolidated financial statements, being recognised in the foreign currency translation reserve. As and when settlements occur, the cumulative amount of these changes in value deferred in the foreign currency translation reserve will be recognised in that current year’s profit in the consolidated accounts. During the reporting period, the net investment in Gale Europe GmbH has been written off following the closure of the European full service operation; a portion of the net investment in Gale Pacific Special Textiles (Ningbo) Limited was converted to equity and the Group’s forecasts identified additional balances in Gale Pacific (New Zealand) Limited and Gale Pacific USA Inc where settlement is not planned, so these balances have been reclassified as net investments in foreign operations. 2009 Annual Report 29 N O T E 1 : B A S I S O F P R E P A R A T I O N ( C O N T I N U E D ) In the accounts of the Company, these changes in value continue to be recognised in the current year’s profit as required by AASB 121. Details of the monetary items reclassified and the total exchange difference recognised in the foreign currency translation reserve are detailed below. Monetary item identified as a net investment in a foreign operation Related party receivable to the company from Gale Europe GmbH Vertriebsgesellschaft Related party receivable to the company from Gale Pacific Special Textiles (Ningbo) Limited Related party receivable to the company from Gale Pacific (New Zealand) Limited Related party receivable to the company from Gale Pacific USA Inc Total Consolidated Note 2008 / 2009 2007 / 2008 ($000) ($000) - 6,842 6,800 9,473 16,855 13,421 5,238 - 23,115 35,514 Exchange movement arising in the reporting period on monetary item forming part of the net investment in related party, recognised in foreign currency translation reserve 17 1,334 (1,591) It is impracticable to estimate the effect of this change on future periods because movements in foreign exchange rates cannot be predicted. (d). Revenue Recognition Revenue from the sale of goods is recognised upon the delivery of goods to customers. Where a government grant (including Strategic Investment Plan income (SIP)) is received or receivable relating to research and development costs that have been expensed, the grant is recognised as revenue. Where a grant is received or receivable relating to research and development costs that have been deferred, the grant is deducted from the carrying amount of the deferred costs. Other revenue is recognised when the right to receive the revenue has been established. All revenue is stated net of the amount of goods and services tax (GST). (e). Cash and Cash Equivalents For the purposes of the statement of cash flows, cash 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 net of bank overdrafts. For the purposes of the statement of cash flows, cash 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 net of bank overdrafts. Cash has been offset against borrowings where; • • the Group has a legally enforceable right to set off cash and borrowings, and the Group intends to settle on a net basis or realise the asset and settle the liability simultaneously. The amount recognised as an offset against borrowings has been disclosed in Note 5 and Note 13. (f). Inventories Inventories are measured at the lower of cost or net realisable value. Net realisable value is determined on the 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 variable and fixed overhead expenses. 30 Gale Pacific Limited ABN 80 082 263 778 N O T E 1 : B A S I S O F P R E P A R A T I O N ( C O N T I N U E D ) (g). 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 is measured on a cost basis. The carrying value of plant and equipment is reviewed annually 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 discounted net cash flows that will be received from the asset’s employment and subsequent disposal. Refer to Note 1(j). The cost of fixed assets constructed within the Group 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. The depreciation rates used for each class of assets are: Class of Fixed Asset Buildings Leasehold improvements Plant and equipment Leased plant and equipment Motor vehicles Office equipment (h). Leases Finance Leases Depreciation Rates Depreciation Basis 2.25% Determined by lease term 6.7% - 20.0% 6.7% - 20.0% 20.0% 14.3% - 50.0% Straight line Straight line Straight line Straight line Straight line Straight line 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 Group 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 amortised on a straight line basis over their estimated useful lives or over the term of the lease where it is likely that the Group will obtain ownership of the asset. Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the period. Operating Leases 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. (i). Intangibles Goodwill Goodwill on consolidation represents the excess of the cost of an acquisition over the fair value of the Group’s share of net identifiable assets of the acquired entities at the date of acquisition. Goodwill is not amortised but is tested annually for impairment, or more frequently if events or changes in circumstances indicate that it might be impaired. Goodwill is carried at cost less accumulated impairment losses. Patents and Trademarks 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 20 years. 2009 Annual Report 31 N O T E 1 : B A S I S O F P R E P A R A T I O N ( C O N T I N U E D ) Application Software Application software is valued in the accounts at cost and amortised on a straight line basis over its expected useful life but not exceeding five years. Research and Development Expenditure on research is recognised as an expense when incurred. Expenditure on development activities is capitalised only when it is expected that future benefits will exceed the deferred costs. Capitalised development expenditure is stated at cost less accumulated amortisation. Amortisation is calculated using a straight line method to allocate the cost over a period (not exceeding three years), during which the related benefits are expected to be realised, once commercial production is commenced. (j). Impairment of Assets Assets with an indefinite useful life are not amortised but are tested annually for impairment in accordance with AASB 136. Assets subject to annual depreciation or amortisation are reviewed for impairment whenever events or circumstances arise that indicate that the carrying amount of the asset may be impaired. An impairment loss is recognised where the carrying amount of the asset exceeds its recoverable amount. The recoverable amount of an asset is defined as the higher of its fair value less costs to sell, and value in use. Refer to note 1(s) for the significant estimates and assumptions relating to impairment of assets. (k). Taxes Current income tax expense or revenue is the tax payable on the current period’s taxable income based on the applicable income tax rate adjusted by changes in deferred tax assets and liabilities. A balance sheet approach is adopted under which deferred tax assets and liabilities are recognised for temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements. No deferred tax asset or liability is recognised in relation to temporary differences arising from the initial recognition of an asset or a liability if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss. Deferred tax assets are recognised for temporary differences and unused tax losses only when it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity. Tax Offset Deferred tax assets and deferred tax liabilities are only offset when the Group has: • • Legally enforceable right to offset current tax assets with current liabilities; and The deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority. (l). Employee Benefits Provision is made for the Group’s liability for employee entitlements arising from services rendered by employees to balance date. Employee entitlements expected to be settled within one year together with entitlements arising from wages and salaries, annual leave and sick leave which will be settled after one year, have been measured at 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. Contributions are made by the Group to employee superannuation funds and are charged as expenses when incurred. Share Based Payments The Group operates share option and performance rights schemes for certain staff and executives including executive directors. The bonus element over the exercise price for these instruments is recognised as an expense in the income statement in the period(s) when the benefit is earned. 32 Gale Pacific Limited ABN 80 082 263 778 N O T E 1 : B A S I S O F P R E P A R A T I O N ( C O N T I N U E D ) The total amount to be expensed over the vesting period is determined by reference to the fair value of the share options and performance rights at grant date. The fair value of options and performance rights at grant date is determined using either the Binomial Tree or a Black Scholes option pricing model, and is recognised as an employee expense over the period during which the employees become entitled to the option or performance right. The market value of shares issued to employees for no cash consideration under an employee share scheme is recognised as an expense when the employees become entitled to the shares. (m). Financial Instruments The Group classifies its financial instruments in the following categories Non Derivative Financial Instruments Loans and Receivables Loans and receivables are measured at fair value at inception and subsequently at amortised cost using the effective interest rate method less any impairment losses. Financial Liabilities Financial liabilities include trade payables, other creditors, loans from third parties, related party balances and loans from or other amounts due to director related entities. Financial liabilities are recognised at amortised cost, comprising original debt less principal payments and amortisation. Investment in Controlled Entities Investments in controlled entities are carried at cost and tested for impairment. Derivative Financial Instruments Cash Flow Hedges Forward foreign currency contracts are classified as cash flow hedges when they hedge exposure to variability in cash flows of a recognised asset, liability or a highly probable forecasted transaction. When established, a cash flow hedge is formally documented. This documentation includes identification of the hedging instrument, the hedged item or transaction, the foreign currency risk being hedged and an assessment of the hedging instrument’s effectiveness in offsetting the exposure to the hedged item’s cash flows. Cash flow hedges are expected to be highly effective in offsetting changes in cash flows and are assessed on an ongoing basis to determine effectiveness. The portion of any gain or loss on a hedging instrument that is an effective hedge is recognised directly in equity. Any ineffective portion is immediately recognised through profit and loss. Hedge accounting is discontinued when the hedging instrument matures or is closed out, or the designation as a cash flow hedge is terminated. At that point in time any gain or loss recognised in equity remains in equity until the hedged transaction occurs when it is transferred to profit and loss in the same period that the hedged item affects profit and loss, or is included as a basis adjustment to a non financial hedged item. Financial Instruments at Fair Value Through Profit and Loss Forward foreign currency contracts that do not qualify for hedge accounting are measured at their fair value with any increment or decrement in fair value recognised in profit and loss. (n). Foreign Currencies Functional and Presentation Currency The financial statements of each Group entity are measured using its functional currency, which is the currency of the primary economic environment in which that entity operates. The consolidated financial statements are presented in Australian dollars, as this is the parent entity’s functional and presentation currency. Transactions and Balances Transactions in foreign currencies of entities within the Group are translated into functional currency at the rate of exchange ruling at the date of the transaction. 2009 Annual Report 33 N O T E 1 : B A S I S O F P R E P A R A T I O N ( C O N T I N U E D ) Foreign currency monetary items that are outstanding at the reporting date (other than monetary items arising under foreign currency contracts where the exchange rate for that monetary item is fixed in the contract) are translated using the spot rate at the end of the financial year. Resulting exchange differences arising on settlement or restatement are recognised as revenues and expenses for the financial year. Group Companies The financial statements of foreign operations whose functional currency is different from the Group’s presentation currency are translated as follows: • • • Assets and liabilities are translated at year end exchange rates prevailing at that reporting date; Income and expenses are translated at average exchange rates for the period; and All resulting exchange differences are recognised as a separate component of equity. Exchange differences arising on translation of foreign operations are transferred directly to the Group’s foreign currency translation reserve as a separate component of equity in the balance sheet. (o). Rounding Amounts The Company is of a kind referred to in ASIC Class Order CO 98/0100 and in accordance with that Class Order, amounts in the financial statements have been rounded off to the nearest thousand dollars, or in certain cases, to the nearest dollar. (p). Comparatives Where necessary, comparative information has been reclassified and repositioned for consistency with current year disclosures. (q). Discontinued Operations On 22 December 2008 the Company closed its European full service operation Gale Europe GmbH and entered into a distribution agreement with an established European sales and distribution company, Windhager GmbH, to have it take over the inventory, sales and distribution of Gale products in key European markets. The income statements of the current and comparative periods reflect this change by disclosing the trading results and closure costs of Gale Europe GmbH as a separate line under the description “loss from discontinued operations”. (r). New Accounting Standards and Interpretations A number of accounting standards have been issued at the reporting date but are not yet effective. The Directors have not yet assessed the impact of these standards and interpretations. (s). Significant Estimates and Assumptions Goodwill The recoverable amount of the cash generating units (CGU) have been determined based on a value in use calculation using financial projections approved by the Board of Directors covering the next five financial years. The revenue growth for the five year period varies within the range of 2% to 10% depending on the demographic, economic, trading conditions and growth potential, of the CGU. The discount rate applied to the cash flow projections is 7.5% (2008 : 9.8%) being the Group’s pre tax weighted average cost of capital. The terminal value multiple represents the growth rate applied to extrapolate the cash flows beyond the five year forecast period. These growth rates are based on the Board of Directors expectations, industry knowledge, market comparative multiples and other features specific to each CGU. Key assumptions used in value in use calculations The key assumptions on which management has based its cash flow projections when determining the value in use of the cash generating units is that projected turnover, margins and expenses are determined based on historical performance, adjusted for internal / external changes anticipated in the forecast years. 34 Gale Pacific Limited ABN 80 082 263 778 N O T E 1 : B A S I S O F P R E P A R A T I O N ( C O N T I N U E D ) Impairment losses recognised An impairment loss on consolidation, based upon a value in use calculation of $3.155 million (refer note 11) relating to goodwill was recognised for continuing operations in the 2009 financial year. The impaired goodwill related to Gale Pacific New Zealand. The impairment loss has been recognised in the income statement in the line item “impairment of goodwill and assets”. The cash generating units consist of the working capital, property, plant and equipment and goodwill of the subsidiary. The impairment is a consequence of lower profitability in response to increased competition following structural changes in that market and therefore, the current and forecast results do not support the carrying value of the full amount of goodwill paid upon acquisition. Impairment testing of investments in controlled entities and loans with related parties The recoverable amount of the investments in controlled entities and loans with related parties has been determined based on a value in use calculation as described above. Impairment losses recognised An impairment loss in the Company, based upon a value in use calculation, relating to loans from related parties was recognised for continuing operations in the 2009 financial year. The impairment loss has been recognised in the income statement in the line item “impairment of related party assets”. Net investment in foreign operations As described in Note 1 (c). N O T E 2 : R E V E N U E Operating Activities Sale of goods – other parties Sale of goods – related parties Total revenue Operating Activities Sale of goods – other parties Sale of goods – related parties Dividends – related parties Total revenue 2009 Annual Report Consolidated 2008 / 2009 ($000) 2007 / 2008 ($000) Continuing Discontinued Continuing Discontinued 98,251 - 98,251 2,219 - 2,219 Company 98,653 - 98,653 5,367 148 5,515 2008 / 2009 ($000) 2007 / 2008 ($000) Continuing Discontinued Continuing Discontinued 56,046 722 192 56,960 - - - - 57,175 814 - 57,989 - - - - 35 N O T E 3 : P R O F I T Profit before income tax expense has been determined after charging / (crediting): Consolidated 2008 / 2009 ($000) 2007 / 2008 ($000) Continuing Discontinued Continuing Discontinued Other Income Interest income – other parties Interest income – related parties SIP income Other revenue Net foreign exchange gains Total other income Cost of sales Finance Costs Other persons Related parties Depreciation of Non Current Assets Buildings Leasehold improvements Plant and equipment Motor vehicles Office equipment Amortisation of Non Current Assets Leased plant and equipment Leased motor vehicles Patents and trademarks Application software Research and Development Expenditure Amortisation of previously capitalised expenditure Expensed as incurred Impairment of Non Current Assets Goodwill Intangible assets Inventory write down Restructuring and termination costs Increase / (decrease) in provision for obsolete inventory Bad and Doubtful Debts Bad debts written off – trade debtors Movement in provisions for doubtful debts – trade debtors Remuneration of the Auditors of the Parent Entity For Auditing the financial report Taxation services Capital raising related services Government grant review General assistance Total remuneration of the auditors of the parent entity Remuneration of Other Auditors of Controlled Entities For Auditing the financial report Taxation services Secretarial and management services Systems review Total remuneration of other auditors Total remuneration of auditors Net Loss / (Gain) on Disposal of Non Current Assets Plant and equipment Motor vehicles Office equipment Operating lease rental expense Share based payment (benefit) / expense 375 174 321 31 1,552 2,453 58,925 2,441 - 227 86 6,441 54 423 4 84 62 252 547 373 3,155 - - 422 189 122 22 207 19 2 2 - 230 138 25 - - 163 393 1 63 7 2,213 (146) - - - 248 79 327 4,254 - 174 - - 247 - - - - - - - - - 144 - - - - - 18 - - - - 18 37 6 86 - 129 147 - - - 753 - 944 417 102 51 221 1,735 53,280 3,029 - 197 76 4,557 81 476 12 96 63 167 818 670 - - - - (1,177) 115 103 194 17 - 3 2 216 105 33 14 2 154 370 (5) (3) 10 2,115 288 2 - - - 31 33 3,445 8 417 - - 818 - - - - - - - - - - 1,581 - 468 95 - - - - - - - 31 12 7 - 50 50 - - - 674 - 36 Gale Pacific Limited ABN 80 082 263 778 N O T E 3 : P R O F I T ( C O N T I N U E D ) Company 2008 / 2009 ($000) 2007 / 2008 ($000) Continuing Discontinued Continuing Discontinued Other Income Interest income – other parties Interest income – related parties SIP income Other revenue Net foreign exchange gains Total other income Cost of sales Finance Costs Other persons Related parties 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 Patents and trademarks Application software Research and Development Expenditure Amortisation of previously capitalised expenditure Expensed as incurred Impairment of Non Current Assets Intangible assets Impairment of related party balances Increase / (decrease) in provision for obsolete inventory Bad and Doubtful Debts Movement in provisions for doubtful debts – trade debtors Remuneration of the Auditors of the Parent Entity For Auditing the financial report Taxation services Capital raising related services Government grant review General assistance Total remuneration of auditors Net foreign exchange losses Net Loss / (Gain) on Disposal of Non Current Assets Plant and equipment Motor vehicles Operating lease rental expense Share based payment (benefit) / expense 330 1,220 321 - 7,721 9,592 32,730 1,362 135 22 1,219 6 189 4 84 42 200 547 373 - 9,473 205 201 207 19 2 2 - 230 - 12 68 1,165 (146) - - - - - - - - - - - - - - - - - - - 144 25,236 - - 5 - - - - 5 - - - - - 871 1,580 102 56 - 2,609 30,428 2,158 94 22 1,289 30 242 12 96 (38) 133 818 713 - - (43) - 194 17 - 3 2 216 2,202 - (5) 1,071 288 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 2009 Annual Report 37 N O T E 4 : I N C O M E T A X (a). The Components of Tax Expense Current tax Deferred tax Total income tax expense Disclosed in the financial statements as Income tax expense from continuing operations Income tax expense from discontinued operations Total Consolidated Company 2008 / 2009 2007 / 2008 2008 / 2009 ($000) 659 1,760 2,419 1,166 1,253 2,419 ($000) 638 1,048 1,686 1,686 - 1,686 ($000) 138 1,863 2,001 161 1,840 2,001 2007 / 2008 ($000) 684 548 1,232 1,232 - 1,232 (b). The Prima Facie Income Tax Payable on Profit is Reconciled to the Income Tax Expense as Follows Prima facie tax payable on profit before income tax at 30% Add tax effect of: Tax rate differentials in foreign countries Impairment of goodwill Tax losses not recognised / (derecognised) Exempt income Effect of tax rate changes on deferred tax balances Tax credits Other (non assessable) / non allowable items Less tax effect of: Over provision for income tax in the prior year Income tax expense attributed to profit from continuing operations Plus income tax expense from discontinued operations Total income tax expense Consolidated Company 2008 / 2009 2007 / 2008 2008 / 2009 2007 / 2008 ($000) 202 (515) 946 1,166 - - (321) (322) 1,156 10 1,166 1,253 2,419 ($000) 2,709 (682) - (103) (213) 7 - (37) 1,681 5 1,686 - 1,686 ($000) 176 - - - (58) - - 33 151 10 161 1,840 2,001 ($000) 1,062 - - - - - 170 1,232 - 1,232 - 1,232 (c). Income Tax Recognised Directly in Equity The following current and deferred tax amounts were credited directly to equity during the period. Deferred Tax Equity raising costs deductible over 5 years Cash flow hedges Total Consolidated Company 2008 / 2009 ($000) 2007 / 2008 ($000) 2008 / 2009 ($000) 2007 / 2008 ($000) (94) (135) (229) (482) - (482) (94) (112) (206) (482) - (482) 38 Gale Pacific Limited ABN 80 082 263 778 N O T E 4 : I N C O M E T A X ( C O N T I N U E D ) (d). Current Tax Current tax asset Current tax liability Total Consolidated Company 2008 / 2009 ($000) 2007 / 2008 ($000) 2008 / 2009 ($000) 2007 / 2008 ($000) 980 (217) 763 178 (6) 172 949 - 949 - (6) (6) (e). Movement in Net Carrying Amount Movement in the current tax net carrying amount between the beginning and the end of the year. Balance at the beginning of the year Current year tax expense Income tax payments Net foreign currency movements arising from foreign operations Carrying amount at the end of the year (f). Deferred Tax Deferred Tax (Liabilities) / Assets Arise from the Following Consolidated Company 2008 / 2009 ($000) 2007 / 2008 ($000) 2008 / 2009 ($000) 2007 / 2008 ($000) 172 (659) 1,225 25 763 (296) (638) 1,118 (12) 172 (6) (138) 1,093 - 949 (382) (684) 1,060 - (6) Consolidated Company 2008 / 2009 ($000) 2007 / 2008 ($000) 2008 / 2009 ($000) 2007 / 2008 ($000) Property, plant and equipment Foreign exchange Income not derived Finance leases Research and development Doubtful debts Other financial liabilities Provisions Employee benefits Capitalised costs Borrowing costs Equity raising costs Other Total Unused Tax Losses and Credits Tax losses Net deferred tax (liability) / asset Represented By Deferred tax asset Deferred tax liability Total 2009 Annual Report (406) (3,881) 126 80 (39) 77 (298) 262 300 (295) 19 492 229 (705) (1,720) (71) 133 (203) 45 91 58 327 (190) 44 590 199 (3,334) (1,402) - (3,334) 1,038 (4,372) (3,334) (10) (1,412) 175 (1,587) (1,412) (287) (2,874) (84) 80 (39) 60 23 3,432 228 135 19 492 - 1,185 - 1,185 1,185 - 1,185 (629) (407) (71) 133 (203) - 71 2,933 265 116 44 590 - 2,842 - 2,842 2,842 - 2,842 39 N O T E 4 : I N C O M E T A X ( C O N T I N U E D ) (g). Unrecognised Deferred Tax Assets The following deferred tax assets have not been brought to account as it is not probable that these can be recovered. Tax losses – income Temporary differences not brought to account Tax losses – capital Total Consolidated Company 2008 / 2009 ($000) 2007 / 2008 ($000) 2008 / 2009 ($000) 2007 / 2008 ($000) 2,228 - 33,360 35,588 6,205 143 1,990 8,338 - - 33,360 33,360 - - 1,990 1,990 Unrecognised deferred tax assets are calculated by applying to the pre tax value the tax rate of the jurisdiction in which the asset resides. Assets are converted to Australian dollars at the prevailing period end exchange rate. (h). Tax Losses The Group has recognised as a deferred tax asset income tax losses of nil (2008: $10,000) in tax jurisdictions where it is probable that future taxable income will be available to utilise these losses. N O T E 5 : C A S H A N D C A S H E Q U I V A L E N T S Cash on hand Cash at bank Cash on deposit 1 Total Consolidated Company 2008 / 2009 ($000) 2007 / 2008 ($000) 2008 / 2009 ($000) 2007 / 2008 ($000) 8 4,647 2,486 7,141 18 3,514 13,062 16,594 1 942 950 1,893 1 493 11,823 12,317 N O T E 6 : T R A D E A N D O T H E R R E C E I V A B L E S Current Trade debtors Less provision for doubtful debts Other receivables Total Non Current Amounts receivable from related parties Less provision for non recoverability Total Consolidated Company 2008 / 2009 ($000) 2007 / 2008 ($000) 2008 / 2009 ($000) 2007 / 2008 ($000) 14,315 (258) 14,057 617 14,674 - - - 19,117 (244) 18,873 679 19,552 - - - 4,348 (201) 4,147 302 4,449 19,041 (11,106) 7,935 5,526 - 5,526 330 5,856 51,340 (9,699) 41,641 1 Cash on deposit is after setting off nil (2008 : $5,827,000) of deposit against bank loans held with the bank. 40 Gale Pacific Limited ABN 80 082 263 778 N O T E 7 : I N V E N T O R I E S Current Raw materials at cost Work in progress at cost Finished goods at cost Less provision for obsolescence Total Consolidated Company 2008 / 2009 ($000) 2007 / 2008 ($000) 2008 / 2009 ($000) 2007 / 2008 ($000) 3,174 2,200 18,500 (211) 23,663 3,659 2,383 21,146 (612) 26,576 1,367 - 10,447 (83) 11,731 1,185 - 9,734 (5) 10,914 N O T E 8 : O T H E R F I N A N C I A L A S S E T S Non Current Investments in controlled entities at cost Total N O T E 9 : O T H E R A S S E T S Current Prepayments Total Consolidated Company 2008 / 2009 ($000) 2007 / 2008 ($000) 2008 / 2009 ($000) 2007 / 2008 ($000) - - - - 45,103 45,103 30,585 30,585 Consolidated Company 2008 / 2009 ($000) 2007 / 2008 ($000) 2008 / 2009 ($000) 2007 / 2008 ($000) 741 741 760 760 271 271 296 296 2009 Annual Report 41 N O T E 1 0 : P R O P E R T Y , P L A N T A N D E Q U I P M E N T Consolidated Company 2008 / 2009 2007 / 2008 2008 / 2009 2007 / 2008 ($000) ($000) ($000) ($000) Buildings At cost Less accumulated depreciation Plant and Equipment At cost Less accumulated depreciation Plant and Equipment Under Lease At cost Less accumulated amortisation Leasehold Improvements At cost Less accumulated depreciation Motor Vehicles At cost Less accumulated depreciation Motor Vehicles Under Lease At cost Less accumulated amortisation Office Equipment At cost Less accumulated depreciation Capital Work in Progress Total property, plant and equipment 9,246 (917) 8,329 69,909 (22,406) 47,503 75 (75) - 605 (387) 218 328 (196) 132 251 (79) 172 4,097 (3,276) 821 330 57,505 7,754 (590) 7,164 59,263 (16,741) 42,522 75 (71) 4 528 (280) 248 595 (279) 316 406 (221) 185 3,869 (2,917) 952 3,953 55,344 - - - 14,096 (8,435) 5,661 75 (75) - 331 (189) 142 - - - 251 (79) 172 2,519 (2,125) 394 - 6,369 - - - 14,067 (7,257) 6,810 75 (71) 4 331 (167) 164 270 (114) 156 406 (221) 185 2,498 (1,937) 561 38 7,918 42 Gale Pacific Limited ABN 80 082 263 778 N O T E 1 0 : P R O P E R T Y , P L A N T A N D E Q U I P M E N T ( C O N T I N U E D ) Consolidated Company 2008 / 2009 ($000) 2007 / 2008 ($000) 2008 / 2009 ($000) 2007 / 2008 ($000) Movements in Carrying Amounts Movement in the carrying amounts for each class of property, plant and equipment between the beginning and the end of the year. Buildings Balance at the beginning of the year Additions / (transfers) Depreciation expense Net foreign currency movements arising from foreign operations Carrying amount at the end of the year Plant and Equipment Balance at the beginning of the year Additions / (transfers) Disposals Depreciation expense Net foreign currency movements arising from foreign operations Carrying amount at the end of the year Plant and Equipment Under Lease Balance at the beginning of the year Amortisation expense Carrying amount at the end of the year Leasehold Improvements Balance at the beginning of the year Additions / (transfers) Depreciation expense Net foreign currency movements arising from foreign operations Carrying amount at the end of the year Motor Vehicles Balance at the beginning of the year Reclassifications Additions / (transfers) Disposals Depreciation expense Net foreign currency movements arising from foreign operations Carrying amount at the end of the year Motor Vehicles Under Lease Balance at the beginning of the year Reclassifications Additions / (transfers) Disposals Amortisation expense Carrying amount at the end of the year Office Equipment Balance at the beginning of the year Reclassifications Additions / (transfers) Disposals Depreciation expense Net foreign currency movements arising from foreign operations Carrying amount at the end of the year 2009 Annual Report 7,164 - (227) 1,392 8,329 42,522 5,012 (374) (6,688) 7,031 47,503 4 (4) - 248 37 (86) 19 218 316 (137) - (25) (54) 32 132 185 137 76 (142) (84) 172 952 (2) 224 (12) (423) 82 821 7,427 82 (197) (148) 7,164 48,676 1,345 (564) (5,375) (1,560) 42,522 16 (12) 4 314 11 (76) (1) 248 323 - 91 (12) (81) (5) 316 217 - 127 (63) (96) 185 968 - 500 (19) (476) (21) 952 - - - - - 6,810 82 (12) (1,219) - 5,661 4 (4) - 164 - (22) - 142 156 (137) - (13) (6) - - 185 137 76 (142) (84) 172 561 - 22 - (189) - 394 - - - - - 7,511 588 - (1,289) - 6,810 16 (12) 4 183 3 (22) - 164 176 - 12 (2) (30) - 156 217 - 127 (63) (96) 185 404 - 399 - (242) - 561 43 N O T E 1 1 : I N T A N G I B L E A S S E T S Consolidated Company Goodwill at cost Less accumulated impairment Patents, trademarks and licenses at cost Less accumulated amortisation Application software at cost Less accumulated amortisation Research and development Less accumulated amortisation Total intangible assets Movements in Carrying Amounts Movement in the carrying amounts for each class of intangible assets between the beginning and the end of the year Goodwill Balance at the beginning of the year Impairment Net foreign currency movements arising from foreign operations Carrying amount at the end of the year Patents, Trademarks and Licences Balance at the beginning of the year Additions / (transfers) Amortisation expense Net foreign currency movements arising from foreign operations Carrying amount at the end of the year Application Software Balance at the beginning of the year Reclassifications Additions / (transfers) Amortisation expense Impairment loss Net foreign currency movements arising from foreign operations Carrying amount at the end of the year Research and Development Balance at the beginning of the year Amortisation expense Carrying amount at the end of the year 2008 / 2009 ($000) 9,894 (3,944) 5,950 1,330 (695) 635 1,494 (804) 690 4,865 (4,735) 130 7,405 8,659 (3,155) 446 5,950 680 - (62) 17 635 829 36 198 (252) (144) 23 690 677 (547) 130 2007 / 2008 ($000) 9,588 (929) 8,659 1,297 (617) 680 1,074 (245) 829 4,865 (4,188) 677 10,845 9,327 - (668) 8,659 716 39 (63) (12) 680 169 - 827 (167) - - 829 1,495 (818) 677 2008 / 2009 ($000) 4,127 (1,054) 2007 / 2008 ($000) 4,127 (1,054) 3,073 1,097 (539) 558 1,119 (500) 619 4,865 (4,735) 130 4,380 3,073 1,097 (497) 600 886 (155) 731 4,865 (4,188) 677 5,081 3,073 3,073 - - - - 3,073 3,073 600 - (42) - 558 731 34 198 (200) (144) - 619 677 (547) 130 523 39 38 - 600 67 - 797 (133) - - 731 1,495 (818) 677 N O T E 1 2 : T R A D E A N D O T H E R P A Y A B L E S Current Trade payables Sundry payables and accruals Total 44 Consolidated Company 2008 / 2009 ($000) 2007 / 2008 ($000) 2008 / 2009 ($000) 2007 / 2008 ($000) 6,219 2,484 8,703 6,560 4,089 10,649 1,654 1,243 2,897 2,163 2,019 4,182 Gale Pacific Limited ABN 80 082 263 778 N O T E 1 3 : B O R R O W I N G S Current Secured liabilities: Bank overdrafts Bank loans 1 Other loans Commercial bills Finance lease liability Hire purchase liability Unsecured liabilities: Bank loans Other loans Non Current Secured liabilities: Other loans Finance lease liability Hire purchase liability Unsecured liabilities: Other loans Consolidated Company 2008 / 2009 ($000) 2007 / 2008 ($000) 2008 / 2009 ($000) 2007 / 2008 ($000) - 8,387 895 7,700 69 29 909 29,600 818 - 210 359 17,080 31,896 2,036 303 2,339 1,553 109 18 1,680 74 74 1,898 346 2,244 2,449 116 47 2,612 366 366 - - 895 7,700 69 29 8,693 - 303 303 1,553 109 18 1,680 74 74 909 15,001 818 - 210 359 17,297 - 346 346 2,449 116 47 2,612 366 366 Total 21,173 37,118 10,750 20,621 Disclosed in the Financial Statements As Current borrowings Non current borrowings 19,419 1,754 34,140 2,978 8,996 1,754 17,643 2,978 N O T E 1 4 : O T H E R F I N A N C I A L L I A B I L I T I E S Derivatives Carried at Fair Value Current Foreign currency forward contracts Total Disclosed in the Financial Statements As Current other financial liabilities Consolidated Company 2008 / 2009 ($000) 2007 / 2008 ($000) 2007 / 2008 ($000) 459 459 459 28 28 28 459 459 459 28 28 28 1 Bank loans are after set off of nil (2008 : $5,827,000) on deposit held with the bank as an offset. 2009 Annual Report 45 N O T E 1 5 : P R O V I S I O N S Current Employee benefits Restructuring and termination costs Factory make good costs Discontinued operations closure Warranty claims Non Current Employee benefits Total Disclosed in the Financial Statements As Current provisions Non current provisions (a) Aggregate employee benefits liability (b) Number of employees at year end Movements in Carrying Amounts Movement in the carrying amounts for the following classes of provision between the beginning and the end of the year Restructuring and Termination Costs 1 Balance at the beginning of the year Provisions recognised Payments made Reductions resulting from re measurement Net foreign currency movements arising from foreign operations Carrying amount at the end of the year Factory Make Good Balance at the beginning of the year Payments made Reductions resulting from re measurement Carrying amount at the end of the year Discontinued operations closure 2 Balance at the beginning of the year Provisions recognised Carrying amount at the end of the year Warranty claims Balance at the beginning of the year Provisions recognised Carrying amount at the end of the year Consolidated Company 2008 / 2009 ($000) 2007 / 2008 ($000) 2008 / 2009 ($000) 2007 / 2008 ($000) 1,170 860 - 628 31 118 2,807 2,689 118 1,288 734 478 490 (115) - 7 860 70 (70) - - - 628 628 - 31 31 1,230 478 70 - - 112 1,890 1,778 112 1,342 772 4,751 - (3,595) (56) (622) 478 250 (150) (30) 70 - - - - - - 832 59 - - 31 88 1,010 922 88 920 86 - 68 (9) - - 59 70 (70) - - - - - - 31 31 813 - 70 - - 69 952 883 69 882 86 - - - - - - 250 (150) (30) 70 - - - - - - 1 $801,000 of the provision for the restructuring and termination costs is an onerous lease provision raised by the New Zealand operation from the closure of its manufacturing facility 2 The provision for discontinued operations closure represents the Directors best estimate of the remaining costs to be incurred for the closure of the European full service operation. 46 Gale Pacific Limited ABN 80 082 263 778 N O T E 1 6 : C O N T R I B U T E D E Q U I T Y Paid Up Capital 279,691,658 fully paid ordinary shares (2008: 136,834,516) Movement in Share Capital Shares issued at the beginning of the financial year 40,000,000 shares issued as part of a private placement and a Share Purchase Plan – 30 August 2007 142,857,142 shares issued in a rights issue – 18 March 2009 Costs of capital raising (net of tax) Total Company 2008 / 2009 ($000) 2007 / 2008 ($000) 105,594 100,813 100,813 - 5,000 (219) 105,594 81,936 20,000 - (1,123) 100,813 (a). Movement in Share Capital During the financial year, (18 March 2009) the Company raised $5 million through a 1.25 for 1 pro rata renounceable rights issue of 142,857,142 shares issued at 3.5 cents per share. (b). Share Based Payments The Group maintains option and performance rights schemes for certain staff and executives, including executive directors, as approved by shareholders at an annual general meeting. These schemes are designed to reward key personnel when the Group meets performance hurdles relating to: • • • Improvement in net profit after tax. Improvement in return to shareholders. Improvement in share price. The number of unissued ordinary shares under option as at the date of this report is nil. The number of unissued ordinary shares under the performance rights scheme at the date of this report is 9,450,000. Each performance right entitles the holder one (1) ordinary share in Gale Pacific Limited when exercised and is subject to the satisfying of relevant performance hurdles based on improvements in the Company’s diluted earnings per share. Options and performance rights issued to executives during the year were issued in accordance with the Group’s remuneration policy which: • • • Reward executives for Group and individual performance; Align the interests of the executives with those of the shareholders; and Ensure that total remuneration is competitive by market standards. The following share based payment arrangements were in existence during the current and comparative reporting periods. 2009 Annual Report 47 N O T E 1 6 : C O N T R I B U T E D E Q U I T Y ( C O N T I N U E D ) Options Grant Date Expiry Date Exercise Price Balance at Start of the Year No. Granted During the Year No. Exercised During the Year No. Lapsed During the Year No. Balance at End of the Year No. Exercisable at End of the Year No. Consolidated and Parent Entity - 2009 15 Dec 2004 16 Nov 2005 24 Oct 2006 Total 1 Dec 2008 1 Dec 2008 31 Dec 2008 Weighted average exercise price Consolidated and Parent Entity - 2008 15 Dec 2004 16 Nov 2005 24 Oct 2006 Total 1 Dec 2008 1 Dec 2008 31 Dec 2008 Weighted average exercise price $3.00 $1.52 $1.52 $3.00 $1.52 $1.52 180,000 450,000 120,000 750,000 $1.88 180,000 450,000 120,000 750,000 $1.88 - - - - - - - - - - - - - - (180,000) (450,000) (120,000) (750,000) - - - - - - - - 180,000 450,000 120,000 750,000 $1.88 - - - - 60,000 - - 60,000 $3.00 Options Valuation Assumptions Option Series Grant date share price Exercise price Expected volatility Option Life Tranche 1 Tranche 2 Tranche 3 Tranche 4 Dividend yield Risk Free Interest Rate Tranche 1 Tranche 2 Tranche 3 Tranche 4 Grant Date 15 December 2004 Grant Date 16 November 2005 Grant Date 24 October 2006 $3.00 $3.00 35% 2.50 years 3.00 years 3.50 years 4.00 years 2.47% 4.86% 4.87% 4.91% 4.95% $1.60 $1.52 40% 2.49 years 2.99 years - - 2.96% 5.21% 5.21% - - $0.90 $1.52 45% 2.10 years - - - 1.70% 6.04% - - - 48 Gale Pacific Limited ABN 80 082 263 778 N O T E 1 6 : C O N T R I B U T E D E Q U I T Y ( C O N T I N U E D ) Performance Rights Grant Date Expiry Date Exercise Price Balance at Start of the Year No. Granted During the Year No. Exercised During the Year No. Lapsed During the Year No. Balance at End of the Year No. Exercisable at End of the Year No. N/A N/A N/A N/A N/A 150,000 700,000 - 850,000 150,000 - 150,000 - - 9,000,000 9,000,000 - 700,000 700,000 - - - - - - - (400,000) - (400,000) - - - 150,000 300,000 9,000,000 9,450,000 150,000 700,000 850,000 - - - - - - - Consolidated and Parent Entity - 2009 2 Feb 2007 16 Nov 2007 30 Jun 2009 Total 2 Feb 2017 16 Nov 2017 30 Jun 2019 Consolidated and Parent Entity - 2008 2 Feb 2007 16 Nov 2007 Total 2 Feb 2017 16 Nov 2017 Performance Rights Valuation Assumptions Grant date share price Exercise price Expected volatility Expected Life Tranche 1 Tranche 2 Dividend yield Risk free interest rate N O T E 1 7 : R E S E R V E S Foreign currency translation reserve Share based payment reserve Hedging reserve Enterprise reserve fund Total (a). Foreign Currency Translation Reserve Grant Date 30 June 2009 Grant Date 16 November 2007 Grant Date 2 February 2007 $0.061 N/A N/A 3 years 3 years 0.0% N/A $0.45 N/A N/A 0.9 years 1.9 years 5.0% N/A $0.83 N/A N/A 2.4 years - 1.8% N/A Consolidated Company 2008 / 2009 ($000) (6,987) 486 (316) 852 (5,965) 2007 / 2008 ($000) (11,289) 632 - 631 (10,026) 2008 / 2009 ($000) 2007 / 2008 ($000) - 486 (261) - 225 - 632 - - 632 Balance at the beginning of the year Translation of foreign controlled entities for the year Movement arising from the reclassification of non current related party monetary items to net investments in foreign operations Balance at the end of the year Consolidated Company 2008 / 2009 ($000) (11,289) 2,968 1,334 (6,987) 2007 / 2008 ($000) (7,668) (2,030) (1,591) (11,289) 2008 / 2009 ($000) 2007 / 2008 ($000) - - - - - - - - Exchange differences relating to foreign currency monetary items forming part of the net investment in a foreign operation and the translation of foreign controlled entities are brought to account by entries made directly to the foreign currency translation reserve, as described in Notes 1(c) and 1(n). (b). Employee Share Based Payment Reserve Consolidated Company 2008 / 2009 ($000) 2007 / 2008 ($000) 2008 / 2009 ($000) 2007 / 2008 ($000) Balance at the beginning of the year Share based (benefit) / expenditure Balance at the end of the year 632 (146) 486 344 288 632 632 (146) 486 2009 Annual Report 344 288 632 49 N O T E 1 7 : R E S E R V E S ( C O N T I N U E D ) (c). Hedging Reserve Balance at the beginning of the year Loss recognised on cash flow hedges Income tax related to losses recognised in equity Balance at the end of the year Consolidated Company 2008 / 2009 ($000) 2007 / 2008 ($000) 2008 / 2009 ($000) 2007 / 2008 ($000) - (451) 135 (316) - - - - - (373) 112 (261) - - - - The hedging reserve represents hedging gains and losses recognised on the effective portion of cash flow hedges. The cumulative gain or loss on the hedge is recognised as a profit or loss when the hedging instrument impacts the profit or loss, or is included as a basis adjustment to a non-financial hedged item, consistent with the applicable accounting policy. (d). Enterprise Reserve Fund (Gale Pacific Special Textiles (Ningbo) Limited) Balance at the beginning of the year Statutory transfers from retained earnings Balance at the end of the year Consolidated Company 2008 / 2009 2007 / 2008 2008 / 2009 2007 / 2008 ($000) ($000) ($000) ($000) 631 221 852 540 91 631 - - - - - - Gale Pacific Special Textiles (Ningbo) Limited (“GPST”) is required by Chinese Company Law to maintain this reserve in its accounts. This reserve is unavailable for distribution to shareholders but can be used by GPST to expand the business, make up losses or increase the registered capital. GPST is required to allocate 10% of its annual profit after tax to this reserve until it reaches 50% of GPST’s registered capital. N O T E 1 8 : A C C U M U L A T E D L O S S E S Balance at the beginning of the year Net (loss) / profit attributable to members of the parent entity Transfers to reserves Balance at the end of the year N O T E 1 9 : M I N O R I T Y I N T E R E S T S Minority interest in controlled entities comprises: Balance at the beginning of the year Net profit attributable to minority interest Balance at the end of the year Consolidated Company 2008 / 2009 2007 / 2008 2008 / 2009 2007 / 2008 ($000) (12,030) (11,962) (221) (24,213) ($000) (14,444) 2,505 (91) ($000) (9,784) (26,886) - (12,030) (36,670) ($000) (12,091) 2,307 - (9,784) Consolidated Company 2008 / 2009 2007 / 2008 2008 / 2009 2007 / 2008 ($000) ($000) ($000) ($000) (11) 11 - (11) - (11) - - - - - - 50 Gale Pacific Limited ABN 80 082 263 778 N O T E 2 0 : F R A N K I N G C R E D I T S Adjusted franking account balance N O T E 2 1 : E A R N I N G S P E R S H A R E Basic Earnings Per Share From continuing operations From discontinued operations Total basic earnings per share Diluted Earnings Per Share From continuing operations From discontinued operations Total diluted earnings per share Earnings Per Share The earnings and weighted average number of ordinary shares used in the calculation of basic and diluted earnings per share are as follows: Net profit Earnings Used in the Calculation of Basic EPS Adjustments to exclude loss for the period from discontinued operations Earnings used in the calculation of basic and diluted EPS from continuing operations Weighted average number of ordinary shares for the purposes of basic earnings per share Weighted average number of shares deemed to be issued for no consideration in respect of: Employee options Performance rights Weighted average number of ordinary shares for the purposes of diluted earnings per share Company 2008 / 2009 ($000) 3,066 2007 / 2008 ($000) 2,273 Consolidated 2008 / 2009 ($000) 2007 / 2008 (Cents Per Share) (0.28) (6.47) (6.75) (0.28) (6.47) (6.75) 5.64 (3.72) 1.92 5.58 (3.72) 1.90 Consolidated 2008 / 2009 ($000) 2007 / 2008 ($000) (11,951) 11,461 (490) Consolidated 2008 / 2009 (No. 000) 177,148 378 719 178,245 2,505 4,839 7,344 2007 / 2008 (No. 000) 130,168 900 434 131,502 Due to the anti-dilutent effect from discontinued operations, total diluted earnings per share in the comparative period is not the sum of diluted earnings per share from continuing operations and diluted earnings per share from discontinued operations. 2009 Annual Report 51 N O T E 2 2 : C A P I T A L A N D L E A S I N G C O M M I T M E N T S (a). Finance Leasing Commitments Payable Not longer than one year Longer than one year and not longer than five years Minimum future lease payments 1 Less future finance charges Present value of minimum lease payments Disclosed in the Financial Statements As Current borrowings Non current borrowings Total (b). Hire Purchase Commitments Payable Not longer than one year Longer than one year and not longer than five years Minimum future hire purchase payments 2 Less future finance charges Present value of minimum hire purchase payments Disclosed in the Financial Statements As Current borrowings Non current borrowings Total (c). Operating Lease Commitments Consolidated Company Note 2008 / 2009 2007 / 2008 2008 / 2009 2007 / 2008 ($000) ($000) ($000) ($000) 153 170 323 (145) 178 69 109 178 230 128 358 (32) 326 210 116 326 153 170 323 (145) 178 69 109 178 230 128 358 (32) 326 210 116 326 13 13 Consolidated Company Note 2008 / 2009 2007 / 2008 2008 / 2009 2007 / 2008 ($000) ($000) ($000) ($000) 35 20 55 (8) 47 29 18 47 372 50 422 (16) 406 359 47 406 35 20 55 (8) 47 29 18 47 372 50 422 (16) 406 359 47 406 13 13 Consolidated Company Note 2008 / 2009 2007 / 2008 2008 / 2009 2007 / 2008 ($000) ($000) ($000) ($000) Non cancellable operating capitalised in the accounts leases contracted for but not Payable Not longer than one year Longer than one year and not longer than five years Total 2,664 4,164 6,828 2,172 5,158 7,330 1,375 2,379 3,754 1,078 2,947 4,025 1 Minimum future lease payments includes the aggregate of all lease payments and any guaranteed residual. 2 Minimum future hire purchase payments includes the aggregate of all hire purchase payments and any guaranteed residual. 52 Gale Pacific Limited ABN 80 082 263 778 N O T E 2 3 : C A S H F L O W I N F O R M A T I O N (a). Reconciliation of Cash Consolidated Company 2008 / 2009 ($000) 2007 / 2008 ($000) 2008 / 2009 ($000) 2007 / 2008 ($000) Cash at the end of the financial year as shown in the statement of cash flows is reconciled to the related items in the balance sheet as follows Cash on hand Cash at bank Cash on deposit Bank overdrafts Total 8 4,647 2,486 - 7,141 18 3,514 13,062 (909) 15,685 1 942 950 - 1,893 1 493 11,823 (909) 11,408 (b). Reconciliation of Profit for the Period to Net Cash Provided by Operating Activities Consolidated Company 2008 / 2009 ($000) 2007 / 2008 ($000) 2008 / 2009 ($000) 2007 / 2008 ($000) (11,951) 2,505 (26,886) 2,307 (Loss) / profit after income tax Non Cash Flows in Profit Loss / (profit) on disposal of fixed assets Depreciation of fixed assets Impairment of related party balances Amortisation / impairment of intangible assets Equity settled share based payments Changes in tax balances processed directly in equity Changes in tax balances due to foreign exchange movements Changes in Assets and Liabilities Decrease / (increase) in receivables Decrease / (increase) in inventories Decrease in other assets 83 7,566 - 4,160 (146) (222) (9) 6,854 5,349 99 215 6,313 - 1,048 288 482 4 (189) 3,567 757 (Decrease) / increase in payables, accruals and other financial liabilities Increase / (decrease) in tax balances Net cash provided by operating activities (1,690) (5,252) 1,295 11,388 81 9,819 80 1,524 32,777 933 (146) (167) - 1,407 (817) 292 (796) 702 8,903 (5) 1,691 - 913 288 482 - (299) (333) 873 1,286 (310) 6,893 2009 Annual Report 53 N O T E 2 3 : C A S H F L O W I N F O R M A T I O N ( C O N T I N U E D ) (c). Discontinued Operations In response to the worsening economic conditions and modified economic outlook, the operating and cost structure of the Group’s European business was reviewed in November / December 2008. The business operated as a full service business in a highly seasonal market and has under performed to expectations. To reduce costs and de-risk the business the decision was made to close the existing European full service operation and enter into a distribution agreement with an established European sales and distribution company to have it take over the inventory, sales and distribution of Gale products in key European markets as of 22 December 2008. The costs associated with this decision have been classified under discontinued operations in these accounts and the comparatives for June 2008 adjusted accordingly. Financial information relating to discontinuing operations for the period 30 June 2009 is set out below. Further information is set out in Note 27 Segment Reporting. Consolidated Company 2008 / 2009 2007 / 2008 2008 / 2009 2007 / 2008 ($000) ($000) ($000) ($000) Loss From Discontinued Operations Revenue Other income Expenses Loss before income tax Income tax expense 2,219 307 5,515 33 - - (12,754) (10,387) (25,471) (10,208) (4,839) (25,471) (1,253) - (1,840) Loss after income tax from discontinued operations (11,461) (4,839) (27,311) Cash Flows From Discontinued Operations Net cash outflow from operating activities Net cash outflow from investing activities Effect of exchange rate changes on items nominated in foreign currencies Net decrease in cash from discontinued operations (4,419) (2,531) (146) 4,525 93 (13) (40) (2,451) - - - - - - - - - - - - - - 54 Gale Pacific Limited ABN 80 082 263 778 N O T E 2 4 : D I R E C T O R S A N D E X E C U T I V E S ’ C O M P E N S A T I O N Details of directors and key executives remuneration is disclosed in the remuneration report. Directors and Executives Compensation by Category Short term employment benefits Post employment benefits Share based payments Termination benefits Total Consolidated Company 2008 / 2009 ($000) 2007 / 2008 ($000) 2008 / 2009 ($000) 2007 / 2008 ($000) 2,749 120 64 232 3,165 3,284 123 241 79 3,727 1,715 93 62 32 1,902 1,583 123 129 - 1,835 Directors’ and Executives Equity Holdings: Fully Paid Ordinary Shares 2008 / 2009 Executive Directors P McDonald Non Executive Directors H Boon J Murphy G Richards Executives J Cox Total 2007 / 2008 Executive Directors P McDonald Non Executive Directors H Boon J Murphy G Richards Executives J Cox Total Balance 30 June 2008 No. Received as Remuneration No. Options Exercised Net Change No. No. Balance 30 June 2009 No. 434,714 263,513 - 128,851 158,923 986,001 - - - - - - - - - - - - 543,391 978,105 343,987 607,500 - - 363,048 491,899 341,077 1,591,503 500,000 2,577,504 Balance 30 June 2007 No. Received as Remuneration No. Options Exercised Net Change No. No. Balance 30 June 2008 No. 334,714 73,000 - 78,851 10,000 496,565 - - - - - - - - - - - - 100,000 434,714 190,513 - 50,000 148,923 489,436 263,513 - 128,851 158,923 986,001 2009 Annual Report 55 N O T E 2 4 : D I R E C T O R S A N D E X E C U T I V E S ’ C O M P E N S A T I O N ( C O N T I N U E D ) Directors’ and Executives’ Equity Holdings, Compensation Options and Performance Rights: Granted and Vested During the Year 2008 / 2009 Vested Number Granted Number Grant Date Terms and Conditions for Each Grant Exercise Price Expiry Date First Exercise Date Last Exercise Date Value Per Option / Right at Grant Date Executive Directors None Non Executive Directors None Executives (Performance Rights) P Cacioli J Cox M Denney S McPherson B Wang Total - - - - - - 1,000,000 30/06/2009 2,000,000 30/06/2009 2,000,000 30/06/2009 2,000,000 30/06/2009 2,000,000 30/06/2009 9,000,000 $0.061 $0.061 $0.061 $0.061 $0.061 Nil Nil Nil Nil Nil 30/06/2019 30/06/2012 30/06/2019 30/06/2019 30/06/2012 30/06/2019 30/06/2019 30/06/2012 30/06/2019 30/06/2019 30/06/2012 30/06/2019 30/06/2019 30/06/2012 30/06/2019 The performance rights disclosed above are subject to hurdles based on improvements in the Group’s diluted earnings per share over the three year period 1 July 2009 to 30 June 2012. 2007 / 2008 Vested Number Granted Number Grant Date Terms and Conditions for Each Grant Exercise Price Expiry Date First Exercise Date Last Exercise Date Value Per Option / Right at Grant Date Executive Directors None Non Executive Directors None Executives (Performance Rights) F Albertsmeier P Cacioli S Carroll J Cox M Denney P Ducray E Xu Total 56 - - - - - - - - - - - - - - - 25,000 75,000 25,000 75,000 25,000 75,000 25,000 75,000 25,000 75,000 25,000 75,000 25,000 75,000 700,000 16/11/2007 16/11/2007 16/11/2007 16/11/2007 16/11/2007 16/11/2007 16/11/2007 16/11/2007 16/11/2007 16/11/2007 16/11/2007 16/11/2007 16/11/2007 16/11/2007 $0.43 $0.41 $0.43 $0.41 $0.43 $0.41 $0.43 $0.41 $0.43 $0.41 $0.43 $0.41 $0.43 $0.41 Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil 16/11/2017 30/09/2008 16/11/2017 16/11/2017 30/09/2009 16/11/2017 16/11/2017 30/09/2008 16/11/2017 16/11/2017 30/09/2009 16/11/2017 16/11/2017 30/09/2008 16/11/2017 16/11/2017 30/09/2009 16/11/2017 16/11/2017 30/09/2008 16/11/2017 16/11/2017 30/09/2009 16/11/2017 16/11/2017 30/09/2008 16/11/2017 16/11/2017 30/09/2009 16/11/2017 16/11/2017 30/09/2008 16/11/2017 16/11/2017 30/09/2009 16/11/2017 16/11/2017 30/09/2008 16/11/2017 16/11/2017 30/09/2009 16/11/2017 Gale Pacific Limited ABN 80 082 263 778 N O T E 2 4 : D I R E C T O R S A N D E X E C U T I V E S ’ C O M P E N S A T I O N ( C O N T I N U E D ) Directors’ and Executives’ Equity Holdings Compensation Options and Performance Rights: Movements During the Year 2008 / 2009 Balance 1 July 2008 No. Granted as Compensation No. Exercised Lapsed No. No. Net Other Change No. Balance 30 June 2009 No. Balance Held Nominally No. Value of Lapsed Options/Rights $ 150,000 180,000 40,000 20,000 40,000 40,000 Executive Directors (Options) P McDonald Executive Directors (Performance Rights) P McDonald 1 Non Executive Directors None Executives (Options) S Carroll 2 P Ducray 3 Z Fakroddin 4 E Xu 5 Executives (Performance Rights) F Albertsmeier 6 P Cacioli 7 S Carroll J Cox M Denney P Ducray S McPherson B Wang E Xu Total 100,000 100,000 100,000 100,000 100,000 100,000 - - 100,000 1,170,000 - - - - - - - 1,000,000 - 2,000,000 2,000,000 - 2,000,000 2,000,000 - 9,000,000 - - - - - - - - - - - - - - - (180,000) - (40,000) (20,000) (40,000) (40,000) (100,000) (25,000) (100,000) (25,000) (25,000) (25,000) - - (100,000) (720,000) - - - - - - - - - - - - - - - - - 150,000 - - - - - 1,075,000 - 2,075,000 2,075,000 75,000 2,000,000 2,000,000 - 9,450,000 - - - - - - - - - - - - - - - - (137,250) - (18,400) (9,200) (18,400) (4,000) (41,500) (10,750) (41,500) (10,750) (10,750) (10,750) - - (41,500) (354,750) 2007 / 2008 Balance 1 July 2007 No. Granted as Compensation No. Exercised Lapsed No. No. Net Other Change No. Balance 30 June 2008 No. Balance Held Nominally No. Value of Lapsed Options/Rights $ Executive Directors (Options) P McDonald Executive Directors (Performance Rights) P McDonald Non Executive Directors 180,000 150,000 40,000 20,000 40,000 50,000 40,000 None Executives (Options) S Carroll P Ducray Z Fakroddin C McCallum 8 E Xu Executives (Performance Rights) F Albertsmeier S Carroll P Cacioli J Cox M Denney P Ducray E Xu Total - - - - - - - 520,000 - - - - - - - 100,000 100,000 100,000 100,000 100,000 100,000 100,000 700,000 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 180,000 150,000 - - - (50,000) - - - - - - - - (50,000) 40,000 20,000 40,000 - 40,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 1,170,000 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 1 The Board has determined that these rights will lapse on the 30 September 2009. 2 Mr Carroll departed his role as Managing Director Australia on 1 August 2008 3 Mr Ducray will depart his role on 30 September 2009 4 Mr Fakroddin departed his role with Gale Europe on 30 June 2008 5 Ms Xu departed her role as Managing Director Gale Pacific Special Textiles (Ningbo) Ltd on 12 December 2008 6 Mr Albertsmeier departed his role as Managing Director Europe, Middle East, Africa on 1 April 2009 following the closure of the European full service operation 7 Mr Cacioli will depart his role on 9 October 2009 8 Mr McCallum departed his role as Managing Director New Zealand on 31 December 2007 following the completion of the restructuring of the New Zealand operations. 2009 Annual Report 57 N O T E 2 5 : R E L A T E D P A R T Y T R A N S A C T I O N S Equity Investments in Controlled Entities Details of the percentage of ordinary shares held in controlled entities are disclosed in Note 26 to the financial statements. Directors’ Remuneration Details of Directors’ remuneration are disclosed in the remuneration report. (a). 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 or payable to entities in the wholly owned group are disclosed in Note 6. These amounts are unsecured and are subordinate to other liabilities. These amounts will be settled in cash. The provision for impairment of $9,699,000 as at 30 June 2008 was restructured and increased to $11,106,000 during the reporting period. During the financial year, the following transactions occurred between entities in the wholly owned group: • Sale and purchase of goods totalling $35,715,000 (2008: $32,119,000) • Gale Pacific Limited received interest income from its subsidiaries totalling $1,220,000 (2008: $1,580,000) • Gale Pacific Limited made interest payments to its subsidiaries totalling $135,000 (2008: $94,000) • • Plant and equipment was transferred totalling nil (2008: $7,335,000) Reimbursement of certain operating costs totalling $3,371,000 (2008: $1,066,000) (b). Transactions with Directors and Director Related Entities The following amounts were payable to Directors and their Director related entities as at the reporting date. Consolidated Company 2008 / 2009 ($000) 2007 / 2008 ($000) 2008 / 2009 ($000) 2007 / 2008 ($000) Current – accrued bonus and director fees 73 108 73 108 58 Gale Pacific Limited ABN 80 082 263 778 N O T E 2 6 : C O N T R O L L E D E N T I T I E S Parent Entity Gale Pacific Limited Controlled Entities Aquaspan Pty Ltd Gale Europe GmbH Vertriebsgesellschaft Gale Pacific (New Zealand) Limited Gale Pacific Employees Superannuation Fund Pty Ltd Gale Pacific FZE Gale Pacific Special Textiles (Ningbo) Limited Gale Pacific USA Inc Country of Incorporation Ownership Interest (%) 2008 / 2009 2007 / 2008 Australia Australia Germany New Zealand Australia United Arab Emirates China United States of America 50% 100% 100% 100% 100% 100% 100% 50% 100% 100% 100% 100% 100% 100% N O T E 2 7 : S E G M E N T R E P O R T I N G Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise consolidation generated assets and liabilities that cannot be reasonably allocated. Segment capital expenditure is the total cost incurred during the period to acquire segment assets that are expected to be used for more than one period. Inter segment pricing is predominantly determined on an arm’s length basis. Geographical Segment In presenting information on the basis of geographical segments, segment revenue is based on the geographical location of customers. Segment assets are based on the geographical location of the assets. The Group comprises the following main geographical segments, based on the Group’s management reporting system. Asia / Pacific Manufacturing and distribution facilities are located in Australia, China and New Zealand which supplies products to Australia, New Zealand, Europe, USA and the Middle East. Sales offices are located in all states in Australia and in New Zealand. Americas Sales offices are located in Florida and custom blind manufacturing and distribution facilities are located in California which service the North American region. Middle East / Africa A sales office and distribution facility is located in the United Arab Emirates to service this market. Business Segment The Group operates predominantly in one business segment, being the advanced polymer fabrics industry. The Group manufactures and markets advanced durable knitted and woven polymer fabrics and value added structures made from these fabrics. 2009 Annual Report 59 N O T E 2 7 : S E G M E N T R E P O R T I N G ( C O N T I N U E D ) Segment Information Primary Reporting – Geographical Segments Asia / Pacific Americas Middle East / Africa Discontinued Operations Eliminations Consolidation ($000) ($000) ($000) ($000) ($000) ($000) 30 June 2009 Revenue outside the economic entity Inter segment revenue Total revenue Segment operating profit / (loss) Income tax expense Operating (loss) / profit after tax 67,017 16,495 83,512 466 (1,127) (661) 23,263 484 23,747 (1,506) - (1,506) 7,971 236 8,207 1,520 - 1,520 2,219 - 2,219 (10,208) (1,253) (11,461) Depreciation and amortisation 7,436 717 27 247 Individually Significant Items Impairment of goodwill Lease restructuring costs Segment assets Unallocated assets Total assets Segment liabilities Unallocated liabilities Total liabilities Acquisition of non current assets 30 June 2008 Revenue outside the economic entity Inter segment revenue Total revenue Segment operating profit / (loss) Income tax (expense) / benefit Operating profit / (loss) after tax Depreciation and amortisation Individually Significant Items Reimbursement of R & D expenditure Inventory write down Segment assets Unallocated assets Total assets Segment liabilities Unallocated liabilities Total liabilities Acquisition of non current assets (3,155) (422) 92,995 - 92,995 34,089 - 34,089 876 70,771 13,377 84,148 6,651 (1,683) 4,968 6,004 102 - 105,077 - 105,077 48,527 - 48,527 3,638 - - 16,017 - 16,017 2,387 - 2,387 327 20,884 144 21,028 40 (40) - 516 - - 16,354 - 16,354 1,660 - 1,660 573 - - 4,503 - 4,503 278 - 278 2 6,499 36 6,535 1,617 - 1,617 - - 175 - 175 1,072 - 1,072 - 5,367 148 5,515 (4,839) - (4,839) 23 818 - - 2,833 - 2,833 286 - 286 10 - (1,581) 6,498 - 6,498 941 - 941 15 - 100,470 (17,215) (17,215) 196 (39) 157 - - - (647) - (647) (87) - (87) - 499 (13,705) (13,206) 722 37 759 - - - (842) - (842) (126) - (126) - - 100,470 (9,532) (2,419) (11,951) 8,427 (3,155) (422) 113,043 104 113,147 37,739 (8) 37,731 1,205 104,020 - 104,020 4,191 (1,686) 2,505 7,361 102 (1,581) 129,920 104 130,024 51,288 (10) 51,278 4,236 60 Gale Pacific Limited ABN 80 082 263 778 N O T E 2 8 : F I N A N C I A L I N S T R U M E N T S Financial Risk Management Overview The Group’s activities expose it to a variety of financial risks: credit risk; liquidity risk; and market risk (including foreign currency risk and interest rate risk). Financial Instruments Derivative financial instruments are used by the Group to limit exposure to exchange rate risk associated with foreign currency transactions. Derivative financial instruments are recognised in the financial statements. Transactions to reduce foreign currency and interest rate exposure are undertaken without the use of collateral as the Group only deals with reputable institutions with sound financial positions. The Group does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes. Net Fair Values The net fair value of assets and liabilities approximates their carrying value. No financial assets or financial liabilities are readily traded on organised markets in standardised form other than forward exchange contracts. (a). Credit Risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Group’s receivables from customers and deposits with banks. For the Company it also arises from receivables due from controlled entities. Trade and other receivables The individual characteristics of a customer are the main determinant of credit risk. Approximately 25% percent of the Group’s revenue is attributable to sales transactions with a single customer. The geographic risk is set out in the segment reporting note 27. Asia Pacific, which is predominantly Australia and New Zealand represents 70% of the Group’s sales and the USA represents 25%.The industry concentration of credit risk is spread between retail, commercial and agricultural markets. Group policy is that a customer credit account is only opened after credit verification procedures have been conducted. These include an assessment of a customer’s independent credit rating, financial position, past experience and industry reputation. Credit limits are established for each customer based on this assessment and these are regularly monitored by management. Customers that do not show sufficient creditworthiness to satisfy management only transact on a cash in advance basis. While this reporting period the Group has provided for a potentially large bad debt in Australia (Nylex $0.2million), in the Group’s past experience bad debts have not been significant. Financial assets The Group limits its exposure to credit risk from financial assets by only using its banks as counterparties to these transactions. Exposure to credit risk The maximum exposure to credit risk, excluding the value of any collateral or other security, at the reporting date to recognised financial assets is the carrying amount of those assets, net of any provisions for doubtful debts of those assets. 2009 Annual Report 61 N O T E 2 8 : F I N A N C I A L I N S T R U M E N T S ( C O N T I N U E D ) Consolidated Company Note As at 30 Jun 2009 ($000) As at 30 Jun 2008 ($000) As at 30 Jun 2009 ($000) As at 30 Jun 2008 ($000) The maximum exposure to credit risk at the reporting date was: Investments in controlled entities Amounts receivable from related parties Loans and receivables Cash and cash equivalents Total The maximum exposure to credit risk for trade receivables at the reporting date by geographic region was: Asia Pacific Americas Middle East / Africa Discontinued operations Total The ageing of trade receivables not impaired at the reporting date was: Not outside credit terms Outside credit terms 0-30 days Outside credit terms 31-120 days Outside credit terms 121 days to one year More than one year Total The ageing of impaired receivables at the reporting date was: Outside credit terms 0-30 days Outside credit terms 31-120 days Outside credit terms 121 days to one year More than one year Total 8 6 6 5 6 6 6 - - 14,674 7,141 21,815 5,179 6,173 2,696 9 14,057 10,527 1,509 1,157 842 22 14,057 - 44 210 4 258 - - 19,552 16,594 36,146 7,647 6,266 1,654 3,306 18,873 13,215 3,283 1,816 411 148 18,873 - 14 - 230 244 45,103 7,935 4,449 1,893 59,380 30,585 41,641 5,856 12,317 90,399 4,147 5,526 - - - - - - 4,147 5,526 2,358 867 175 747 - 4,147 - 44 157 - 201 2,779 1,264 1,231 252 - 5,526 - - - - - (b). Liquidity Risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as and when they fall due. The Group manages this risk by ensuring that, as far as possible, it will always have sufficient liquidity to meet its liabilities when due under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. The Group centrally monitors its cash flows on a weekly basis, in detail for a 16 week forecast period and in summary for the longer term. This ensures all short term financial obligations can be met and longer term obligations can be foreseen and planned for. A cash flow forecast is reviewed by the Board at its meetings. In addition, the Group maintains the following lines of credit: • • $15 million multi option facility in Australia with the Commonwealth Bank of Australia. Credit facilities totaling approximately US$ 11 million with a range of banks in China. The Commonwealth Bank facility has been recently been extended until 31 January 2011, while the Chinese bank facilities are reviewed annually as is the practice with the Group’s facilities in that country. The Group endeavours to ensure that these Chinese annual reviews are spread over the year as much as possible. During the reporting period, management continued to focus on the Group’s liquidity risk and achieved a further reduction in net debt through a combination of cash generation from operating activities, minimal capital expenditure and a shareholders rights issue. The following tables detail both the Group’s effective weighted average interest rates on classes of its financial liabilities at reporting date and the contractual maturity of these financial liabilities. Contractual cash flows include both interest and principal cash flows, are undiscounted and based on the earliest date on which the Group can be required to pay. 62 Gale Pacific Limited ABN 80 082 263 778 N O T E 2 8 : F I N A N C I A L I N S T R U M E N T S ( C O N T I N U E D ) Consolidated 30 June 2009 Non Derivative Financial Liabilities Bank loans Other loans Finance lease liabilities Hire purchase liabilities Derivative Financial Liabilities Tradeable foreign currency forward contracts Total Company 30 June 2009 Non Derivative Financial Liabilities Bank loans Other loans Finance lease liabilities Hire purchase liabilities Derivative Financial Liabilities Foreign currency forward contracts Total Consolidated 30 June 2008 Non Derivative Financial Liabilities Bank overdrafts Bank loans Other loans Finance lease liabilities Hire purchase liabilities Derivative Financial Liabilities Foreign currency forward contracts Total Company 30 June 2008 Non Derivative Financial Liabilities Bank overdrafts Bank loans Other loans Finance lease liabilities Hire purchase liabilities Derivative Financial Liabilities Foreign currency forward contracts Total 2009 Annual Report Note Weighted Average Effective Interest Rate Carrying Amount Contractual Cash Flows Contractual Cash Flows Maturing In: Less Than 6 Months 6 To 12 Months 1 To 2 Years 2 To 5 Years (%) ($000) ($000) ($000) ($000) ($000) ($000) 13 13 13 13 14 4.12% 8.89% 9.66% 9.25% 18,123 2,825 178 47 - 459 21,632 18,340 11,765 3,109 200 51 738 60 16 459 388 6,575 663 23 16 71 - 1,708 117 19 - 22,159 12,967 7,348 1,844 - - - - - - Note Weighted Average Effective Interest Rate Carrying Amount Contractual Cash Flows Contractual Cash Flows Maturing In: Less Than 6 Months 6 To 12 Months 1 To 2 Years 2 To 5 Years (%) ($000) ($000) ($000) ($000) ($000) ($000) 13 13 13 13 14 3.23% 8.89% 9.66% 9.25% 7,700 2,825 178 47 7,700 3,109 200 51 - 459 11,209 459 11,519 7,700 738 60 16 388 8,902 - 663 23 16 71 773 - 1,708 117 19 - 1,844 - - - - - - Note Weighted Average Effective Interest Rate Carrying Amount Contractual Cash Flows Contractual Cash Flows Maturing In: Less Than 6 Months 6 To 12 Months 1 To 2 Years 2 To 5 Years (%) ($000) ($000) ($000) ($000) ($000) ($000) 13 13 13 13 13 14 9.54% 5.07% 8.79% 7.82% 8.84% 909 31,498 3,979 326 406 946 946 32,267 27,991 4,568 358 422 736 172 352 - 28 28 28 - 4,276 736 58 19 - - - - - 1,393 1,703 63 32 - 65 19 - 37,146 38,589 30,225 5,089 1,488 1,787 Note Weighted Average Effective Interest Rate Carrying Amount Contractual Cash Flows Contractual Cash Flows Maturing In: Less Than 6 Months 6 To 12 Months 1 To 2 Years 2 To 5 Years (%) ($000) ($000) ($000) ($000) ($000) ($000) 13 13 13 13 13 14 9.54% 3.03% 8.79% 7.82% 8.84% 909 15,001 3,979 326 406 946 946 15,368 15,368 4,568 358 422 736 172 352 - 28 28 28 20,649 21,690 17,602 - - 736 58 19 - 813 - - - - 1,393 1,703 63 32 - 1,488 65 19 - 1,787 63 N O T E 2 8 : F I N A N C I A L I N S T R U M E N T S ( C O N T I N U E D ) (c). Market Risk The Group’s activities expose it to the financial risks of changes in foreign currency exchange rates and interest rates. Foreign Exchange Risk The Group undertakes transactions denominated in foreign currencies that exposes it to fluctuations in foreign currency exchange rates. Foreign Exchange Contracts The Group enters into foreign exchange contracts to buy and sell specified amounts of foreign currency in the future at stipulated exchange rates. The objective of entering into forward exchange contracts is to protect the Group against unfavourable exchange rate movements for both contracted and anticipated future sales and purchases undertaken in foreign currencies. The Group has this financial year adopted hedge accounting and now classifies forward exchange contracts as cash flow hedges where these contracts are hedging highly probably forecasted transactions and they are timed to mature when the cash flow from the underlying transaction is scheduled to occur. Cash flows are expected to occur during the next financial year. Changes in fair value on forward exchange contracts designated as cash flow hedges are taken directly to equity. There was no cash flow hedge ineffectiveness during the reporting period. Forward exchange contacts that are not designated as cash flow hedges have any changes in fair value recognised in profit or loss in the period the changes occur. The full amount of foreign currency the Group will be required to pay or purchase when settling forward exchange contracts should the counterparty not pay the currency it is committed to deliver to the Group has been recognised in the Group’s balance sheet. At balance date the net amount payable was $459,000 (2008: $28,000). The accounting policy in regard to forward exchange contracts is detailed in Note 1(n). Average Exchange Rate Foreign Currency Contract Value Fair Value 2008 / 2009 2007 / 2008 2008 / 2009 2007 / 2008 2008 / 2009 2007 / 2008 2008 / 2009 2007 / 2008 (FC000) (FC000) ($000) ($000) ($000) ($000) Foreign Exchange Contracts Designated as Cash Flow Hedges Buy United States dollars / sell Australian dollars Less than 6 months 6 – 12 months Sell United States dollars / buy Australian dollars 0.7599 0.7520 Less than 6 months 0.8008 Buy United States dollars / sell New Zealand dollars Less than 6 months 6 – 12 months Buy European euro / sell Australian dollars 0.5869 0.5825 Less than 6 months 0.5720 Foreign Exchange Contracts Not Designated as Cash Flow Hedges Buy United States dollars / sell Australian dollars - - - - - - 4,167 610 800 445 96 59 - - - - - - 5,484 811 999 614 133 103 - - - - - - (326) (56) 9 (63) (15) - (451) - - - - - - - Less than 6 months 0.7160 0.9310 54 660 75 709 (8) (21) Buy European euro / sell Australian dollars Less than 6 months Total - 0.5990 - 358 - 598 - (8) (459) (7) (28) (28) 64 Gale Pacific Limited ABN 80 082 263 778 N O T E 2 8 : F I N A N C I A L I N S T R U M E N T S ( C O N T I N U E D ) Foreign Exchange Risk Sensitivity The Group is mainly exposed to United States dollars, Euros and New Zealand dollars in its Australian operation and Australian dollars in its foreign operations. The following table details the Group’s sensitivity to a 10% (2008: 10%) increase or decrease in the Australian dollar against these currencies. This analysis includes only unhedged foreign currency denominated monetary items, including loans to foreign operations within the Group, as shown at the carrying value, and details the profit effect from each of these items of a 10% strengthening in the Australian dollar on the reporting date with all other variables held constant. For a weakening of the Australian dollar there would be an equal and opposite impact on profit to that shown below. 30 June 2009 Financial Assets Cash and cash equivalents United States dollars Euro Trade receivables Australian dollars Amounts receivable from related parties United States dollars New Zealand dollars Financial Liabilities Trade payables United States dollars Foreign currency forward contracts United States dollars Profit or (loss) impact Currency Asset / (Liability) Breakdown United States dollars Euro New Zealand dollars Australian dollars Profit or (loss) impact 2009 Annual Report Consolidated Company Carrying Value ($000) Profit//(Loss) AUD +10% ($000) Carrying Value ($000) Profit//(Loss) AUD +10% ($000) 458 9 69 - - 304 67 - 87 9 - 69 - (46) (1) 7 136 (29) 30 (7) 90 113 (1) (29) 7 90 458 9 - 5,074 2,820 304 67 - 5,161 9 2,820 - - (46) (1) - (507) (282) 30 (7) (813) (530) (1) (282) - (813) 65 N O T E 2 8 : F I N A N C I A L I N S T R U M E N T S ( C O N T I N U E D ) 30 June 2008 Financial Assets Cash and cash equivalents United States dollars Euro Trade receivables United States dollars Australian dollars Amounts receivable from related parties United States dollars Euro New Zealand dollars Financial Liabilities Trade payables United States dollars Euro Borrowings United States dollars Euro New Zealand dollars Foreign currency forward contracts United States dollars Euro Profit or (loss) impact Currency Asset / (Liability) Breakdown United States dollars Euro New Zealand dollars Australian dollars Profit or (loss) impact Consolidated Company Carrying Value ($000) Profit//(Loss) AUD +10% ($000) Carrying Value ($000) Profit//(Loss) AUD +10% ($000) 313 167 6 1,060 - - - 783 164 13,189 7,996 150 688 591 (14,341) (8,584) (150) 1,060 313 167 6 - 23,056 24,173 4,055 783 164 13,189 7,996 150 688 591 8,715 15,589 3,905 - (31) (17) (1) 114 (1,243) (818) 46 78 16 1,319 800 15 (69) (59) 150 53 (78) 61 114 150 (31) (17) (1) - (2,306) (2,417) (406) 78 16 1,319 800 15 (69) (59) (3,078) (1,010) (1,677) (391) - (3,078) 66 Gale Pacific Limited ABN 80 082 263 778 N O T E 2 8 : F I N A N C I A L I N S T R U M E N T S ( C O N T I N U E D ) Interest Rate Risk The Group is exposed to interest rate risk as entities in the Group borrow and deposit funds at both fixed and variable interest rates. Effective weighted average interest rates on classes of financial liabilities are disclosed under liquidity risk. The following table details the Group’s sensitivity to every 1% increase in interest rates at the reporting date. The analysis is on its variable rate financial instruments shown in the carrying value and details the profit effect of a 1% increase in interest rates on these financial instruments with the change taking place at the beginning of the following financial year and held constant throughout the reporting period. All other variables remain constant. Consolidated Company 30 June 2009 Carrying Value Financial Assets Cash and cash equivalents Amounts receivable from controlled entities Financial Liabilities Borrowings (Loss) or profit impact ($000) 7,133 - 7,700 Profit//(Loss) +1% Movement ($000) 71 - (77) (6) Carrying Value ($000) 1,315 14,400 7,700 Profit//(Loss) +1% Movement% ($000) 13 144 (77) 80 Consolidated Company 30 June 2008 Carrying Value Financial Assets Cash and cash equivalents Amounts receivable from controlled entities Financial Liabilities Borrowings (Loss) or profit) impact ($000) 16,576 - 21,666 Profit//(Loss) +1% Movement ($000) 166 - (217) (51) Carrying Value ($000) 12,316 26,981 15,910 Profit//(Loss) +1% Movement ($000) 123 270 (159) 234 N O T E 2 9 : S U B S E Q U E N T E V E N T S There has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the Directors of the Company, to affect significantly, the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial years. N O T E 3 0 : C O M P A N Y D E T A I L S The registered office of the Company is: Gale Pacific Limited 145 Woodlands Drive Braeside, Vic, 3195 Australia 2009 Annual Report 67 A D D I T I O N A L S E C U R I T I E S E X C H A N G E I N F O R M A T I O N 68 Gale Pacific Limited ABN 80 082 263 778 Ordinary Fully Paid Shares MGB Equity Growth Pty Ltd 10,130,490 N U M B E R O F H O L D I N G S O F E Q U I T Y S E C U R I T I E S A S A T 1 4 S E P T E M B E R 2 0 0 9 The fully paid issued capital of the Company consisted of 279,691,658 ordinary fully paid shares held by 856 shareholders. Each share entitles the holder to one vote. 7 holders have been granted 9,450,000 performance rights over ordinary shares. Performance rights do not carry a right to vote. D I S T R I B U T I O N O F H O L D E R S O F E Q U I T Y S E C U R I T I E S Range 1 – 1,000 1,001 – 5,000 Total Holders Units % Issued Capital 119 255 43,168 722,073 5,001 – 10,000 145 1,099,581 10,001 – 100,000 247 7,994,447 0.02 0.26 0.39 2.86 100,001 and over 92 269,832,389 96.47 Total 858 279,691,658 100.00 D I S T R I B U T I O N O F H O L D E R S O F E Q U I T Y S E C U R I T I E S Unmarketable Parcels as at 31 August 2009 Minimum Parcel Size Holders Units Minimum $500 parcel at $0.075 per unit 6,667 420 1,027,450 S U B S T A N T I A L S H A R E H O L D E R S A S A T 1 4 S E P T E M B E R 2 0 0 9 Shareholder No. % Thorney Holdings Pty Ltd 71,427,646 25.54 Investec Wentworth Private Equity 70,913,423 25.35 Windhager Handels Gesmbh 41,925,781 14.99 Gale Australia Pty Ltd 13,997,844 5.00 T W E N T Y L A R G E S T H O L D E R S O F Q U O T E D E Q U I T Y S E C U R I T I E S Shareholder No. % ANZ Nominees Limited 72,184,460 25.81 Windhager Handels Gesmbh 41,925,781 14.99 IWPE Nominees Pty Ltd 28,365,369 10.14 IWPE Nominees Pty Ltd 18,234,879 Investec Bank (Australia) Limited 14,182,685 Gale Australia Pty Ltd ANZ Nominees Limited 13,927,844 12,791,957 USB Nominees Pty Ltd Ruminator Pty Ltd Citicorp Nominees Pty Ltd Gernis Holdings Pty ltd Mr Geoffrey Duncan Nash GFS Securities Pty Ltd 8,626,135 4,870,586 3,883,411 3,800,000 3,327,428 2,498,335 Venn Milner Superannuation Pty Ltd 2,000,000 Atkone Pty Ltd Mr Simon Gautier Hannes Mr David Corley Beta Gamma Pty Ltd 1,919,796 1,732,003 1,005,882 1,000,000 Lippo Securities Nominees L:td 1,000,000 6.52 5.07 4.98 4.57 3.62 3.08 1.74 1.39 1.36 1.19 0.89 0.72 0.69 0.62 0.36 0.36 0.36 Top 20 Holders of Ordinary Fully Paid Shares as at 31 August 2009 247,407,041 88.46 O T H E R I N F O R M A T I O N The name of the Company Secretary is Ms Sophie Karzis. The address of the principal registered office in Australia, and the principal administrative office is 145 Woodlands Drive, Braeside, 3195, Victoria, Australia, telephone is (03) 9518 3333. The Company is listed on the Australian Securities Exchange. The home exchange is Melbourne. Registers of securities are held by Computershare Investor Services Pty Limited, Yarra Falls, 452 Johnston Street, Abbotsford, 3067, Australia, local call is 1300 850 505, international call is + 613 9415 4000. 2009 Annual Report 69 Australia PO Box 892, Braeside, Victoria 3195 Ph: +61 3 9518 3399 Toll Free: 1800 331 521 New Zealand PO Box 15 118 Aranui, Christchurch Ph: + 64 3 373 9500 Toll Free: 0800 555 171 United States PO Box 951509, Lake Mary, Florida, 32795-1509 Phone +1 407 333 1038 Middle East PO Box 17696 Jebel Ali, Dubai, U.A.E. Ph: +971 4 881 7114 China No.777 Hengshan West Rd, Beilun, Ningbo 315800 Ph: +86 574 5626 8888 Gale Pacific Limited ABN 80 082 263 778 

Continue reading text version or see original annual report in PDF format above