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
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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