ANNUAL REPORT 2010
Gale Pacific is a trusted global marketer and
manufacturer of branded screening and
shading products
CONTENTS
Corporate Directory ............................................................................................................................................................. 5
Chairman’s and Managing Directors and Chief Executive’s Report ............................................................................ 6
Board of Directors ............................................................................................................................................................. 10
Senior Management .......................................................................................................................................................... 12
Corporate Governance .................................................................................................................................................... 14
Directors’ Report ................................................................................................................................................................ 19
Financial Results .................................................................................................................................................................. 32
Additional Securities Exchange Information .................................................................................................................. 76
2 | Gale Pacific Limited ABN 80 082 263 778
OUR VISION & VALUES
To provide leading branded screening and shading products to world markets, consistent with the
following core values:
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To understand and consistently meet our customers' expectations
To provide a safe working environment, personal development and open communication with all
employees
To foster a culture of continuous improvement
To maintain a reputation of excellence in our endeavours
To constantly innovate to develop new and improved products to drive sales and profit growth
To deliver strong financial performance and growing returns to shareholders
To be responsible with our impact on the environment
2010 Annual Report | 3
4 | Gale Pacific Limited ABN 80 082 263 778
CORPORATE
DIRECTORY
GALE PACIFIC LIMITED
ABN 80 082 263 778
DIRECTORS
Mr David Allman (Chairman)
Mr Peter McDonald (Managing Director
and Chief Executive Officer)
Mr John Murphy (Non Executive Director)
Mr George Richards (Non Executive Director)
COMPANY SECRETARY
Ms Sophie Karzis
REGISTERED OFFICE
145 Woodlands Drive, Braeside, Victoria, 3195
T + 613 9518 3333
SOLICITORS
Norton Gledhill
Level 23, 459 Collins Street, Melbourne, Victoria, 3000
T + 613 9614 8933
AUDITOR
Pitcher Partners
Level 19, 15 William Street, Melbourne, Victoria, 3000
T + 613 8610 5000
SHARE REGISTER
Computershare
Yarra Falls, 452 Johnston Street, Abbotsford, Victoria,
3067
T + 613 9415 4000
WEBSITE ADDRESS
www.galepacific.com
2010 ANNUAL GENERAL MEETING
The Annual General Meeting will be held on 29 October
2010, 11.00am at Pitcher Partners, Level 19, 15 William
Street, Melbourne, Victoria, 3000.
The Notice of Meeting and Proxy Form are separate
items accompanying this 2010 Annual Report.
2010 Annual Report | 5
CHAIRMAN’S AND
MANAGING DIRECTORS
AND CHIEF EXECUTIVE
OFFICER’S REPORT
DAVID ALLMAN
CHAIRMAN
PETER MCDONALD
MANAGING DIRECTOR
AND CHIEF EXECUTIVE
OFFICER
DEAR SHAREHOLDERS,
THE YEAR IN REVIEW
It is very pleasing to report to shareholders the significantly improved results for the year ended 30 June 2010. Gale has
undergone major restructuring in the prior three years and the positive results for the year ended 30 June 2010 are
confirmation that the turnaround of Gale has been successful. Gale has developed a very solid base for future growth.
Gale has posted these improved results while operating with some weak economic conditions in several markets.
The highlights of the results were:
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Revenue increase of 1% to $98.8 million
Revenue for the year grew by 1% to $98.8 million, resulting from strong sales growth in the Australian and USA
markets in local currencies, offset by weaker sales in the New Zealand and Middle East markets.
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EBITDA increase of 17% to $16.5 million
Earnings before interest, tax, depreciation and amortisation was $16.5 million for the year compared to $14.1 million
for continuing businesses for the previous corresponding period. The improved margins are a result of new product
introductions, leaner operating costs and ongoing yield and efficiency improvements in our Chinese manufacturing
facility.
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EBIT increase of 63% to $9.3 million
Earnings before interest and tax was $9.3 million compared to $5.7 million for continuing businesses (and excluding
the FY09 impairment of goodwill in New Zealand) before significant items.
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Reported NPAT up $18.0 million to $6.0 million
Cash from operations increase of 58% to $18.0 million
The consistently increasing annual cash generation from operations is the result of strong EBITDA margins and also
improvements in working capital management, particularly in the management of inventory levels and production
planning. Inventory reduced by $3.4 million to $20.3 million.
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Net cash on deposit of $3.1million at 30 June 2010 compared to net debt of $14.1 million at 30 June 2009
The strong cash generation from operations and the business requiring a low level of capital expenditure of $1.2
million, has resulted in Gale having net cash on deposit at 30 June 2010 of $3.1 million.
6 | Gale Pacific Limited ABN 80 082 263 778
REGIONAL RESULTS
Asia Pacific (excluding China)
Sales
EBITDA
EBIT
FY10
(A$M’s)
71.4
9.3
7.2
FY09
(A$M’s)
66.3
6.5
4.1
Change
(%)
+8%
+43%
+75%
Sales growth of 8% was generated from new products and strong sell through of consumer products in Australia and New
Zealand. The continued weak horticultural market in New Zealand resulted in lower sales of commercial shade fabric and
protective nets. Sales to Japanese customers increased by more than 20% on the previous year. Improved margins resulted
from the stronger Australian dollar and new product sales growth.
FY09 EBIT is before significant items.
Americas
Sales
EBITDA
EBIT
FY10
(US$M’s)
18.7
0.8
0.4
FY09
(US$M’s)
17.7
(0.5)
(1.0)
Change
(%)
+6%
The 6% sales growth rate is pleasing given that market conditions continue to be subdued. New products and category
expansion were the drivers of growth. Leaner infrastructure costs and lower product costs resulted in improved margins.
Middle East
Sales
EBITDA
EBIT
FY10
(US$M’s)
5.4
0.9
0.9
FY09
(US$M’s)
6.1
1.0
1.0
Change
(%)
- 11%
- 10%
- 10%
Subdued (construction) market conditions particularly in Dubai and Kuwait remain a challenge. Excellent growth was recorded
in the Saudi market. Selling prices and margins have been steady. The company has maintained the market leading position
and has recently added waterproof fabrics and high end architectural PVC products to the range.
China
Sales (intercompany)
EBITDA
EBIT
FY10
(US$M’s)
26.5
4.3
0.4
FY09
(US$M’s)
28.4
5.1
1.1
Change
(%)
- 7%
- 16%
- 74%
We are extremely pleased with the progress that has been made in our Chinese manufacturing operation. Plant yields have
increased and scrap rates have reduced throughout the year as part of the continuous manufacturing improvement program.
The margin decline was due to higher prices on some inputs and lower production volumes resulting mainly from the group
inventory reductions achieved.
2010 Annual Report | 7
DIVIDEND PAYMENTS RESUME
Directors are extremely pleased to confirm to shareholders that the major restructuring of Gale is complete and announce the
resumption of the payment of dividends. An ordinary fully franked dividend of one (1) cent per share has been declared.
SPECIAL DIVIDEND PAYMENT
As a consequence of the excellent result and significant cash generation from operations, the Directors have further declared a
special dividend, fully franked of one (1) cent per share.
A total dividend payment of two (2) cents per share fully franked will be paid to shareholders on Friday 22 October 2010.
The Company’s Dividend Reinvestment Plan was suspended in September 2006 and the Directors have determined that the
plan is to remain suspended.
STRATEGY REVIEW COMPLETED
During the year management completed a review of the business which has given us a clearer view of where we see our
growth opportunities. Historically the business has been defined with a technical focus on advanced polymer fabrics which has
limited our growth in the markets we service. By redefining our strategy to be more market driven in branded shading and
screening products, we now have a much broader view to leverage off our core capabilities to grow the business.
NEW PRODUCTS – “XCELTEX” WATERPROOF OUTDOOR FABRIC
After several years of research and development, Gale has successfully trialed a new outdoor waterproof fabric in a range
of umbrella’s during the 2009/10 summer season. The trial was very successful and quickly sold out. Listings for an expanded
range of products has been won for the 2010/11 summer sales season in both Australia and New Zealand and presentations
are underway in the USA and European markets.
This exciting new fabric also provides Gale with further opportunities in the commercial markets which are currently being
explored.
NEW PRODUCT CATEGORIES – “COOLAROO” SYNTHETIC GRASS
Gale has expanded its product offerings and product sourcing capabilities and has won new listings of product into the fast
growing synthetic grass market. While Gale does not manufacture these products, the production techniques and technologies
for these outdoor polymer based products are well understood, particularly in the important product benefits of colorfastness
and UV stability.
POSITIONED FOR ORGANIC AND ACQUISITION GROWTH
Gale has built and maintains a strong continuous improvement culture, skilled and motivated employees and management, and
effective and efficient infrastructure. Innovation and product development continues to be a main focus of organic growth and
plans are in place to ensure that we grow our core business. With a much stronger Balance Sheet and ongoing strong cash
generation, complementary acquisitions are also a growth imperative which are being actively pursued.
8 | Gale Pacific Limited ABN 80 082 263 778
MANAGEMENT AND STAFF
On behalf of the Directors, we would like to thank all Gale employees for their hard work, dedication and commitment to the
business and congratulate the whole team for the results which have been achieved this year. In all areas of the business the
team has been challenged to focus on continuing to improve the way we operate and do business with our customers. Many
positive changes have been implemented and will continue to be made as we look forward into the new financial year.
During the year our lost time injury rate has declined as we strive to eliminate safety hazards from the business. This is a good
result and an area we will continue to look for improvement. Employee safety and personal development are a key part of
the values of the business.
OUTLOOK
Trading conditions in most markets are expected to remain subdued. The strength of Gale’s brands, Coolaroo for consumer
products sold through retail channels and Synthesis for the commercial products, will continue to provide a positive competitive
position. Exciting new product initiatives and the expansion of ranges into the existing distribution network provide growth
opportunities for the company.
In view of the global market volatility it is difficult to provide firm guidance of the future profitability of Gale. On the basis of
current economic conditions, raw material prices, and exchange rates, Gale expects to achieve moderate sales and profit
growth for the year ended 30 June 2011.
ANNUAL GENERAL MEETING
A notice of the Company’s Annual General Meeting to be held on 29th October 2010 and a proxy voting form is enclosed
with this report.
Mr David Allman
Chairman
27 August 2010
Mr Peter McDonald
Managing Director and Chief Executive Officer
27 August 2010
2010 Annual Report | 9
BOARD OF DIRECTORS
DAVID ALLMAN
PETER MCDONALD
JOHN MURPHY
GEORGE RICHARDS
DAVID ALLMAN
B.SC.
CHAIRMAN AND NON EXECUTIVE DIRECTOR SINCE NOVEMBER 2009
Mr Allman was Managing Director of McPherson’s Limited from 1995 to 2009 and
prior to that he was Managing Director of Cascade Group Limited for 7 years. Before
this he held senior positions with Elders IXL Limited and Castlemaine Tooheys Limited.
Mr Allman holds a degree in engineering and prior to obtaining general management
positions held managerial roles in production management, finance and marketing.
Mr Allman is the Chairman of the Company’s Nomination Committee and is a member
of the Audit and Risk and Remuneration Committees.
PETER MCDONALD
B.BUS (MARKETING)
MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER SINCE APRIL 2006
Mr McDonald is the Company’s 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, Chief Operating Officer
and Managing Director of the Gale’s United States operations.
10 | Gale Pacific Limited ABN 80 082 263 778
JOHN MURPHY
CA, FCPA, B.COMM, M.COMM
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, Vocus
Communications Limited (formally First Opportunity Fund Limited), ClearView Wealth
Limited and Gale Pacific Limited. Mr Murphy is also a Non Executive Director of
Investec Bank (Australia) Limited and Specialty Fashion Group Limited.
Mr Murphy is the Chairman of the Company's Remuneration Committee and is a
member of the Audit and Risk and Nomination Committees.
GEORGE RICHARDS
CPA, AAICD
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.
2010 Annual Report | 11
SENIOR MANAGEMENT
JEFF COX
SHAUN MCPHERSON
MARTIN DENNEY
BERNIE WANG
JEFF COX
CHIEF FINANCIAL OFFICER (“CFO”)
Jeff joined Gale in March 2006 and is an experienced CFO having 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 in a successful and global company.
SHAUN MCPHERSON
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.
MARTIN DENNEY
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), and Business Development Manager at Adacel Technologies.
BERNIE WANG
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.
12 | Gale Pacific Limited ABN 80 082 263 778
2010 Annual Report | 13
CORPORATE
GOVERNANCE
This statement sets out the corporate governance practices that were in operation throughout the 2010 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.
PRINCIPLE 1:
LAY SOLID FOUNDATION FOR MANAGEMENT OVERSIGHT
Formalise and disclose the functions reserved to the board and those delegated to management.
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 Remuneration Committee evaluates the Group’s Key
Executives annually.
PRINCIPLE 2:
STRUCTURE THE BOARD TO ADD VALUE
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 D Allman, 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.
Directors may seek independent professional advice, at the Company’s expense, on any matter connected with the discharge
of their responsibilities, provided the advice, together with a copy of the letter of instructions, is provided to the Board.
14 | Gale Pacific Limited ABN 80 082 263 778
The chairman should be an independent Director.
Complying.
The Chairman, Mr D Allman has been Chairman of the Company since 17 November 2009 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.
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.
Complying.
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:
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The skills and experience of directors.
The directors considered by the Board to constitute independent directors.
A statement regarding directors’ ability to take independent professional advice at the expense of the Company.
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.
PRINCIPLE 3:
PROMOTE ETHICAL AND RESPONSIBLE DECISION MAKING
Establish a code of conduct and disclose the code as to:
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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.
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.
2010 Annual Report | 15
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 periods 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.
PRINCIPLE 4:
SAFEGUARD INTEGRITY IN FINANCIAL REPORTING
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:
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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.
PRINCIPLE 5:
MAKE TIMELY AND BALANCED DISCLOSURE
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.
16 | Gale Pacific Limited ABN 80 082 263 778
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 is
responsible for all communications with the Australian Securities Exchange. The purpose of the procedures for identifying
information for disclosure is to ensure timely and accurate information is provided equally to all shareholders and market
participants. The policy on continuous disclosure is posted on the Company’s website.
PRINCIPLE 6:
RESPECT THE RIGHTS OF SHAREHOLDERS
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:
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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 to the Australian Securities Exchange contains summarised financial information and a review of
the operations of the Group during the period.
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.
PRINCIPLE 7:
RECOGNISE AND MANAGE RISK
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.
The Board oversees policies on risk assessment and 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.
2010 Annual Report | 17
Management has previously 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. The Group’s risk management processes continue to be monitored and reported against
on an ongoing basis.
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.
PRINCIPLE 8:
REMUNERATE FAIRLY AND RESPONSIBLY
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.
The Board has established a Remuneration Committee. The role of the Remuneration Committee is to review and make
recommendations to the Board on remuneration packages and practices applicable to the Chief Executive Officer, Senior
Executives and Directors themselves. This role also includes responsibility for share option schemes incentive performance
packages and retirement 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.
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.
18 | Gale Pacific Limited ABN 80 082 263 778
DIRECTORS’ REPORT
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 2010.
The Directors in office at any time during or since the end of the year to the date of this report are:
DAVID ALLMAN, B.SC.
Chairman and Non Executive Director since November 2009
Mr Allman was Managing Director of McPherson’s Limited from 1995 to 2009 and prior to that he was Managing Director of
Cascade Group Limited for 7 years. Before this he held senior positions with Elders IXL Limited and Castlemaine Tooheys
Limited. Mr Allman holds a degree in engineering and prior to obtaining general management positions held managerial roles
in production management, finance and marketing.
Mr Allman is a Director of McPherson's Limited and Non Executive Director of Lomb Scientific Pty Ltd.
Mr Allman is Chairman of the Company’s Nomination Committee and is a member of the Audit and Risk and Remuneration
Committees.
PETER MCDONALD, B.BUS (MARKETING)
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, Chief Operating Officer and
Managing Director of the Gale’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
2010.
2010 Annual Report | 19
JOHN MURPHY, CA, FCPA, B.COMM, M.COMM
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,
Vocus Communications Limited( formally First Opportunity Fund Limited), ClearView Wealth Limited and Gale Pacific Limited.
Mr Murphy is also a Non Executive Director of Investec Bank (Australia) Limited and Specialty Fashion Group Limited.
During the last three years, Mr Murphy was a Non Executive Director of 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.
GEORGE RICHARDS, CPA, AAICD
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
2010.
Mr Richards is Chairman of the Company’s Audit and Risk Committee and is a member of the Nomination and Remuneration
Committees.
HARRY BOON, LLB (HONS), B. COM
Chairman and Non Executive Director since August 2005
Mr Boon joined the Company in August 2005.
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 and Funtastic Limited.
Mr Boon retired as a Director of Gale Pacific Limited, effective after the Company’s Annual General Meeting on 17
November 2009.
MS SOPHIE KARZIS, B JURIS LLB
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.
20 | Gale Pacific Limited ABN 80 082 263 778
NATURE OF OPERATIONS AND PRINCIPAL ACTIVITIES
The Group’s principal activities in the course of the financial year were the marketing, sales, manufacture and distribution of
screening and shading products to global markets.
REVIEW AND RESULTS OF OPERATIONS
The consolidated profit of the Group for the financial year attributable to the members of Gale Pacific Limited was
$6.022 million. Refer to the Chairman and Managing Director’s and Chief Executive Officer’s Report for further details on the
Group’s result.
STATE OF AFFAIRS
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.
EVENTS SUBSEQUENT TO BALANCE DATE
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.
LIKELY DEVELOPMENTS
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.
ENVIRONMENTAL REGULATION AND PERFORMANCE
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.
DIVIDENDS
In respect of the financial year ended 30 June 2010, no interim dividend was paid and the Directors have determined to pay
a final dividend of one cent per share. In addition, the Directors have declared a special dividend of one cent per share. The
total of two cents per share will be franked and is to be paid to the holders of fully paid ordinary shares on Friday 22
October 2010.
The Company’s Dividend Reinvestment Plan was suspended in September 2006 and the Directors have determined that the
plan is to remain suspended.
2010 Annual Report | 21
SHARE BASED PAYMENTS
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 13,940,000. 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, 3,000,000 performance rights were issued to the Managing Director and Chief Executive
Officer, Mr Peter McDonald on 1 December 2009. 8,000,000 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; and Mr Bernie Wang, Managing Director China. 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 two year period 1 July 2009 to 30 June 2011. None of these performance rights can vest until
30 June 2012 and expire on 30 June 2019.
2,940,000 performance rights have been issued to Senior Executives outside the key management group on 18 August 2010.
These performance rights are subject to the satisfying of relevant performance hurdles based on the Group’s diluted earnings
per share over the two year period 1 July 2010 to 30 June 2012. None of these performance rights can vest until 30 June
2013 and expire on 18 August 2020.
Further details of the options and performance rights movements during the reporting period are disclosed in Note 25 to the
Financial Statements.
INDEMNIFICATION OF OFFICERS AND AUDITORS
During the financial year, the Company paid a premium in respect of a contract insuring the Directors of the Company, the
Company Secretary and all Executive Officers of the Company and of any related body corporate against a liability incurred
as a Director, Secretary or Executive Officer to the extent permitted by the Corporations Act 2001. The contract of insurance
prohibits disclosure of the nature of the liability and the amount of the premium.
The Company has not otherwise, during or since the financial year, indemnified or agreed to indemnify an officer or auditor of
the Company or of any related body corporate against a liability incurred as an officer or auditor.
DIRECTORS’ SHAREHOLDINGS
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
D Allman
P McDonald
J Murphy
G Richards
Fully Paid Ordinary
Shares
Options
Performance Rights
-
978,105
-
491,899
-
-
-
-
-
3,000,000
-
-
22 | Gale Pacific Limited ABN 80 082 263 778
DIRECTORS’ MEETINGS
The table below sets out the attendance by Directors.
Directors
D Allman
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
Attended
No of
Meetings
Eligible
to Attend
Attended
No of
Meetings
Eligible
to Attend
Attended
No of
Meetings
Eligible
to Attend
Attended
6
6
12
12
12
6
6
12
11
12
1
2
0
3
3
1
2
0
2
3
1
2
0
3
3
1
2
0
3
3
0
1
0
1
1
0
1
0
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 Audit Committee are David Allman, John Murphy, and George Richards. The Chairman of the Audit
Committee is George Richards.
The members of the Remuneration Committee are David Allman, John Murphy, and George Richards. The Chairman of the
Remuneration Committee is John Murphy.
The members of the Nomination Committee are David Allman, John Murphy, and George Richards. The Chairman of the
Nomination Committee is David Allman.
REMUNERATION REPORT
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:
(cid:0)
(cid:0)
(cid:0)
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:
(cid:0)
(cid:0)
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; and
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 in this report.
2010 Annual Report | 23
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.
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 2010 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:
(cid:0)
(cid:0)
(cid:0)
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.
24 | Gale Pacific Limited ABN 80 082 263 778
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 the Managing
Director, 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:
(cid:0)
(cid:0)
(cid:0)
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 13,940,000.
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:
(cid:0)
(cid:0)
(cid:0)
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.
(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 2010.
2010 Annual Report | 25
Key Management Personnel of the Group Who Held Office During the Year
Directors
D Allman (Chairman, Non Executive, Appointed 17 November 2009)
J Murphy (Non Executive)
G Richards (Non Executive)
P McDonald (Managing Director and Chief Executive Officer)
H Boon (Chairman, Non Executive, Retired as at 17 November 2009)
Executives
J Cox (Chief Financial Officer)
M Denney (Managing Director, USA)
S McPherson (Managing Director, Asia Pacific)
B Wang (Managing Director, China)
The following table discloses the remuneration of the Directors of the Company:
2009 / 2010
Short Term Benefits
Share Based Payments
Total
Performance Related
Post
Employ-
ment
Directors
Salary &
Fees
Bonus
Non
Monetary
Super
Options
Performa-
nce Rights
Total
Options
Rights
$
$
$
$
$
$
$
%
%
%
Executive Directors
P McDonald
415,485
163,500
28,643
20,872
Non Executive Directors
D Allman 1
H Boon 2
G Richards
J Murphy
Total
65,602
54,287
68,807
65,000
-
-
-
-
-
-
-
-
5,904
2,636
6,193
-
669,181
163,500
28,643
35,605
-
-
-
-
-
-
94,076
722,576
35.6
0.0
13.0
-
-
-
-
71,506
56,923
75,000
65,000
-
-
-
-
-
-
-
-
-
-
-
-
94,076
991,005
2008 / 2009
Short Term Benefits
Share Based Payments
Total
Performance Related
Post
Employ-
ment
Directors
Salary &
Fees
Bonus
Non
Monetary
Super
Options
Performa-
nce Rights
Total
Options
Rights
$
$
$
$
$
$
$
%
%
%
Executive Directors
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
1 Mr Allman was appointed as a Non Executive Director and Chairman on 17 November 2009. His remuneration for the reporting period are from that date.
2 Mr Boon retired from his role as a Non Executive Director on 17 November 2009. His remuneration for the reporting period are to that date.
26 | Gale Pacific Limited ABN 80 082 263 778
The following table discloses the remuneration of the Group’s key management personnel and the five highest paid executives.
2009 / 2010
Short Term Benefits
Post
Employ-
ment
Share Based
Payments
Termin.
Benefits
Total
Performance Related
Super
Options
Key management
personnel
Salary &
Fees
$
Bonus
$
Non
Monetary
$
J Cox
264,908
118,388
S McPherson
275,000
81,000
-
-
M Denney 1
265,108
87,483
16,887
B Wang 2
128,902
35,064
14,457
$
23,842
25,229
-
-
R Campbell
169,129
19,261
102,262
37,069
-
-
-
-
15,222
6,482
26,414
-
1,242,378
341,196
57,758
70,775
P Cacioli 3
P Ducray 4
Total
Perf.
Rights
$
40,630
40,630
40,630
40,630
-
-
-
162,520
Total
Options
Rights
$
-
-
-
-
-
-
-
-
$
%
%
447,768
35.5
421,859
28.8
410,108
31.2
219,053
34.6
203,612
9.5
108,744
63,483
1,874,627
-
-
-
-
-
-
-
-
-
%
9.07
9.63
9.91
18.55
-
-
-
$
-
-
-
-
-
-
-
-
2008 / 2009
Short Term Benefits
Post
Employ-
ment
Share Based
Payments
Termin.
Benefits
Total
Performance Related
Key management
personnel
Salary &
Fees
$
F Albertsmeier 5
300,033
Bonus
$
-
Non
Monetary
$
47,497
M Denney
304,923
15,262
15,612
$
-
-
Super
Options
174,319
4,672
4,573
S McPherson 7
160,417
25,000
262,853
25,000
260,092
223,967
-
-
-
-
25,894
23,137
-
-
14,583
40,411
-
-
22,214
19,774
1,828
1,615
50,958
32,641
9,004
-
-
1,759,776
122,349
117,097
65,442
2,884
J Cox
P Cacioli
P Ducray
E Xu 6
S Carroll 8
B Wang 9
Total
$
-
-
-
-
808
461
-
Perf.
Rights
$
-
-
-
-
-
-
-
-
-
-
Total
Options
Rights
$
$
66,846
414,376
-
-
-
-
335,797
313,747
283,229
265,186
32,374
216,399
%
-
4.5
8.0
-
0.3
2.4
-
200,000
12.5
132,345
177,776
12.0
-
92,603
35.2
231,565
2,299,113
%
%
-
-
-
-
0.3
0.2
-
0.9
-
-
-
-
-
-
-
-
-
-
1 Mr Denney is based in the United States of America and remunerated in United States dollars converted to Australian dollars in the table above.
2 Mr Wang is based in China and remunerated in Chinese renminbi converted to Australian dollars in the table above.
3 Mr Cacioli departed his role as General Manager, Research and Development and Technical Services on 9 October 2009. His remuneration details for the
reporting period are to that date.
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
departed his role as Chief Manufacturing Officer on 30 September 2009. His remuneration details for the reporting period are to that date.
5 Mr Albertsemeier 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
comparative period are to that date.
6 Ms Xu is based in China and 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 comparative period are to that date.
7 Mr McPherson was appointed Managing Director Asia Pacific on 24 November 2008. His remuneration details for the comparative period are from that date.
8 Mr Carroll departed his role as Managing Director Australia on 1 August 2008. His remuneration details for the comparative period are to that date.
9 Mr Wang was appointed Managing Director China on 26 February 2009. His remuneration details for the comparative period are from that date.
2010 Annual Report | 27
Share Based Compensation
The terms and conditions of each grant of performance rights granted as at 30 June 2010 affecting remuneration in the
current or a future reporting period are as follows:
Grant Date
Value per performance rights at grant date
30 June 2009
1 December 2009
0.061
0.140
Each performance right entitles the holder to one (1) ordinary share in Gale Pacific in the event that the performance rights
are exercised. Performance rights carry no rights to dividends and no voting rights.
The performance rights are subject to the satisfying of relevant performance hurdles based on improvements in the Group’s
diluted earnings per share over the two year period 1 July 2009 to 30 June 2011. None of these performance rights can vest
until 30 June 2012 and expire on 30 June 2019.
Executive Directors
P McDonald
Key Management Personnel
J Cox
M Denney
P Ducray
P Cacioli
Total
No of Performance
Rights Granted
During the Year
Value Per
Performance
Rights at Grant
Date
Value of
Performance
Rights at Grant
Date ($)
No. of
Performance
Rights Lapsed
During the Year
Value of Lapsed
Performance
Rights ($)
3,000,000
0.14
420,000
150,000
(118,500)
-
-
-
-
-
-
-
-
-
-
-
-
3,000,000
420,000
75,000
75,000
75,000
1,075,000
1,450,000
(30,750)
(30,750)
(30,750)
(91,750)
(302,500)
AUDITOR INDEPENDENCE AND NON AUDIT SERVICES
A copy of the auditor’s independence declaration in relation to the audit for the financial year is provided with this report.
NON AUDIT SERVICES
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:
Consolidated
2009 / 2010
($000)
2008 / 2009
($000)
43
-
-
2
2
47
50
86
2
-
2
140
Taxation services
Corporate secretarial and management services
Systems review
Capital registration audit
Government grant review
Total
28 | Gale Pacific Limited ABN 80 082 263 778
PROCEEDINGS ON BEHALF OF THE COMPANY
No person has applied for leave of a Court to bring proceedings on behalf of the Company or intervene in any proceedings
to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those
proceedings. The Company was not a party to any such proceedings during the year.
ROUNDING OFF OF AMOUNTS
The Company is a company of the kind referred to in ASIC Class Order 98/0100, dated 10 July 1998, and in accordance
with that Class Order amounts in the financial report are rounded off to the nearest thousand dollars.
Signed in accordance with a resolution of Directors made pursuant to section 298(2) of the Corporations Act 2001.
On behalf of the Directors;
Mr David Allman
Chairman
27 August 2010
Mr Peter McDonald
Managing Director and Chief Executive Officer
27 August 2010
2010 Annual Report | 29
AUDITOR’S INDEPENDENCE DECLARATION
To the Directors of Gale Pacific Limited
In relation to the independent audit for the year ended 30 June 2010, 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
27 August 2010
PITCHER PARTNERS
MELBOURNE
DIRECTORS’ DECLARATION
The Directors of the Company declare that:
The financial statements and notes, as set out on pages 32 to 75 are in accordance with the Corporations Act 2001 including:
(cid:0)
(cid:0)
(cid:0)
(cid:0)
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 2010 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;
As stated in Note 1, the (consolidated) financial statements also comply with International Financial Reporting
Standards; 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 David Allman
Chairman
27 August 2010
Mr Peter McDonald
Managing Director and Chief Executive Officer
27 August 2010
30 | Gale Pacific Limited ABN 80 082 263 778
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF GALE PACIFIC LIMITED
We have audited the accompanying financial report of Gale Pacific Limited and controlled entities. The financial report
comprises the consolidated statement of financial position as at 30 June 2010, the consolidated statement of comprehensive
income, consolidated statement of changes in equity and consolidated statement of cash flows 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 consolidated entity's financial position as at 30 June 2010 and of its
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 23 - 28 of the directors' report for the year ended 30 June
2010. 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 2010,
complies with section 300A of the Corporations Act 2001.
S Schonberg
Partner
27 August 2010
PITCHER PARTNERS
MELBOURNE
2010 Annual Report | 31
FINANCIAL RESULTS
FINANCIAL RESULTS
Consolidated Income Statement ...................................................................................................................................... 33
Consolidated Statement of Comprehensive Income .................................................................................................... 34
Consolidated Statement of Financial Position ............................................................................................................... 35
Consolidated Statement of Changes In Equity ............................................................................................................. 36
Consolidated Statement of Cash Flows ......................................................................................................................... 37
Notes To The Financial Statements ................................................................................................................................. 38
32 | Gale Pacific Limited ABN 80 082 263 778
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 30 JUNE 2010
Revenue
Cost of goods sold
Gross profit
Other Income
Warehousing and distribution
Marketing and selling
Administration
Impairment of goodwill
Other expenses
Net finance costs
Profit from continuing operations before income tax
Income tax expense
Profit / (loss) from continuing operations after income tax
Profit / (loss) from discontinued operations
Profit / (loss) for the year
Depreciation and amortisation
Earnings Per Share
From continuing and discontinued operations
Basic earnings / (loss) per share (cents per share)
Diluted earnings / (loss) per share (cents per share)
From continuing operations
Basic earnings / (loss) per share (cents per share)
Diluted earnings / (loss) per share (cents per share)
The accompanying notes form part of these financial statements.
Consolidated
Note
2009 / 2010
($000)
2008 / 2009
($000)
2
3
3
4
24
19
3
98,811
98,251
(62,788)
(64,664)
36,023
472
(7,675)
(7,538)
33,587
1,904
(8,130)
(8,334)
(10,458)
(11,335)
-
(1,506)
(1,247)
8,071
(2,060)
6,011
11
6,022
(3,155)
(1,969)
(1,892)
676
(1,166)
(490)
(11,461)
(11,951)
(7,216)
(8,427)
2.15
2.08
2.15
2.07
(6.75)
(6.75)
(0.28)
(0.28)
2010 Annual Report | 33
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2010
Consolidated
Note
2009 / 2010
($000)
2008 / 2009
($000)
18
18
6,022
(11,951)
558
(2,749)
(2,191)
3,831
(316)
4,302
3,986
(7,965)
6,022
(11,962)
-
11
6,022
(11,951)
3,831
(7,976)
-
11
3,831
(7,965)
Profit / (loss) for the year
Other Comprehensive Income
Movement in fair value of cash flow hedges, net of tax
Exchange differences on translation of foreign operations
Other comprehensive income for the year
Total comprehensive income for the year
Profit / (Loss) Attributable To
Members of the parent
Non controlling interest
Profit / (loss) for the year
Total Comprehensive Income Attributable To
Members of the parent
Non controlling interest
Total comprehensive income for the year
The accompanying notes form part of these financial statements.
34 | Gale Pacific Limited ABN 80 082 263 778
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FOR THE YEAR ENDED 30 JUNE 2010
Current Assets
Cash and cash equivalents
Receivables
Other financial assets
Inventories
Current tax assets
Other current assets
Total current assets
Non Current 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
Reserves
Accumulated losses
Total equity
The accompanying notes form part of these financial statements.
Consolidated
Note
2009 / 2010
($000)
2008 / 2009
($000)
6
7
9
8
4
10
11
12
4
13
14
15
4
16
14
4
16
17
18
19
15,139
14,142
341
20,281
-
913
7,141
14,674
-
23,663
980
741
50,816
47,199
49,552
6,649
379
56,580
107,396
7,269
11,989
-
1,355
2,832
23,445
-
4,382
73
4,455
27,900
79,496
105,586
(7,899)
(18,191)
79,496
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
2010 Annual Report | 35
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2010
30 June 2010
Note
Contributed
Equity
Reserves
Accumulated
Losses
($000)
($000)
($000)
Non
Controlling
Interest
($000)
Balance at 1 July 2009
105,594
(5,965)
(24,213)
Profit for the year
Other comprehensive income for the year
Total comprehensive income for the year
Transactions With Owners In Their Capacity As Owners
Cost of capital raising net of tax
Employee share based payments
17
18
Total transactions with owners in their capacity as owners
-
-
-
(8)
-
(8)
-
6,022
(2,191)
(2,191)
-
6,022
-
257
257
-
-
-
Balance at 30 June 2010
105,586
(7,899)
(18,191)
-
-
-
-
-
-
-
-
Total Equity
($000)
75,416
6,022
(2,191)
3,831
(8)
257
249
79,496
30 June 2009
Note
Contributed
Equity
Reserves
Accumulated
Losses
($000)
($000)
($000)
Non
Controlling
Interest
($000)
Total Equity
($000)
Balance at 1 July 2008
100,813
(10,026)
(12,030)
(11)
78,746
(Loss) / profit for the year
Other comprehensive income for the year
Total comprehensive income for the year
-
-
-
-
(11,962)
3,986
-
3,986
(11,962)
11
-
11
(11,951)
3,986
(7,965)
Transactions With Owners In Their Capacity As Owners
Contributions, net of raising costs and tax
Employee share based payments
Statutory transfer to reserves
17
18
18
4,781
-
-
Total transactions with owners in their capacity as owners
4,781
-
(146)
221
75
-
-
(221)
(221)
Balance at 30 June 2009
105,594
(5,965)
(24,213)
The accompanying notes form part of these financial statements.
-
-
-
-
-
4,781
(146)
-
4,635
75,416
36 | Gale Pacific Limited ABN 80 082 263 778
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2010
Consolidated
Note
2009 / 2010
($000)
2008 / 2009
($000)
Cash Flow From Operating Activities
Receipts from customers
Payments to suppliers and employees
Interest received
Borrowing costs paid
Income tax refunds / (payments)
Net cash provided by operating activities
24
Cash Flow From Investing Activities
Proceeds from sale of plant and equipment
Payment for plant and equipment
Payment for intangible assets
Net cash used by investing activities
Cash Flow From Financing Activities
(Cost of) / proceeds from issue of equity securities
Repayment of borrowings
Repayment of principal on finance leases
Repayment of principal on hire purchase
Net cash used by financing activities
Net increase / (decrease) in cash held
Cash at beginning of year
Effects of exchange rate changes on items denominated in foreign currencies
Cash at the end of the year
24
The accompanying notes form part of these financial statements.
106,302
(87,652)
95
(1,350)
558
17,953
40
(1,160)
-
(1,120)
(11)
(8,588)
(69)
(29)
114,700
(100,090)
471
(2,468)
(1,225)
11,388
470
(1,007)
(198)
(735)
4,687
(20,584)
(148)
(359)
(8,697)
(16,404)
8,136
7,141
(138)
15,139
(5,751)
15,685
(2,793)
7,141
2010 Annual Report | 37
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
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 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 Report.
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, 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).
Principles 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 27.
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).
Use of Estimates and Judgements
The preparation of the financial report requires management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses.
Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the
revision and future periods if the revision affects both current and future periods.
Information about areas of estimation and critical judgements in applying accounting policies that have the most
significant effect on the amounts recognised in the financial report is included in the following notes:
(cid:0)
(cid:0)
Note 12 – Intangible Assets
Note 28 – Financial Instruments
38 | Gale Pacific Limited ABN 80 082 263 778
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(d).
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.
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:
(cid:0)
(cid:0)
(cid:0)
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 statement of financial position.
(e).
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 comparative period, the net investment in Gale Europe GmbH was 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 additional balances in Gale Pacific (New Zealand) Limited and Gale Pacific USA Inc were
reclassified as net investments in foreign operations. No further adjustments to these balances occurred in the reporting
period.
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.
2010 Annual Report | 39
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Monetary item identified as a net investment in a foreign operation
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
2009 / 2010
2008 / 2009
($000)
($000)
6,842
6,800
9,473
6,842
6,800
9,473
23,115
23,115
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
18
559
1,334
It is impracticable to estimate the effect of this change on future periods because movements in foreign exchange rates
cannot be predicted.
(f).
Segment Reporting
AASB 8 Operating Segments has been adopted as of 1 July 2009. Operating segments are now reported based on
internal reporting provided to the Managing Director and Chief Executive Officer who is the Group’s chief operating
decision maker. This has resulted in China being identified as an operating segment as disclosed in Note 5; previously
China was part of the Asia Pacific operating segment.
Changes in segment reporting have also impacted the goodwill allocation by management to groups of cash
generating units on a segment level. This change in reportable segments has resulted in a reallocation of goodwill of
$176,000 from the Asia Pacific operating segment to the newly identified China operating segment.
Comparative operating segment information has been restated to conform to the transitional requirements of AASB 8.
(g).
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).
(h).
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand at call, deposits with banks or financial institutions, investments in
money market instruments maturing within less than three months and bank overdrafts. Bank overdrafts are shown
within borrowings in current liabilities on the statement of financial position
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 three months and net of bank overdrafts.
40 | Gale Pacific Limited ABN 80 082 263 778
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(i).
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.
(j).
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( m).
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
Motor vehicles
Office equipment
(k).
Leases
Finance Leases
Depreciation Rates
Depreciation Basis
2.25%
Determined by lease term
6.7% - 50.0%
20.0%
20% - 50.0%
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.
2010 Annual Report | 41
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(l).
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.
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.
(m).
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 annually.
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(c) for the significant estimates and assumptions relating to impairment of assets.
(n).
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.
42 | Gale Pacific Limited ABN 80 082 263 778
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Tax Offset
Deferred tax assets and deferred tax liabilities are only offset when the Group has:
(cid:0)
(cid:0)
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.
(o).
Provisions
A provision is recognised if, as a result of a past event , the Group has a present legal or constructive obligation that
can be estimated reliably and it is probable that an outflow of economic benefits will be required to settle the
obligation.
(p).
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 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.
(q).
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.
2010 Annual Report | 43
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
(r).
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.
(s).
Comparatives
Where necessary, comparative information has been reclassified and repositioned for consistency with current year
disclosures.
(t).
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 “profit/(loss) from discontinued operations”.
(u).
New Accounting Standards and Interpretations
A number of accounting standards have been issued at the reporting date but are not yet effective. Managment has
not yet assessed the impact of these standards and interpretations.
44 | Gale Pacific Limited ABN 80 082 263 778
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(v).
Presentation of Financial Statements
Revised AASB 101 Presentation of Financial Statements, which became effective from 1 January 2009, has been
adopted. All non-owner changes in equity are now presented in the new Statement of Comprehensive Income where
previously these were included in the Statement of Changes in Equity. Comparative information has been re-stated so
that it conforms to the revised standard.
The presentation of the Consolidated Income Statement has been changed from the nature of expense method used in
previous reporting periods to the function of expense method. This change has been made because the function of
expense method aligns the financial report with the presentation used for management reporting and provides a
better understanding of the expense drivers within the Group’s operations. The comparative period information has
been reclassified to this new format and to assist with the transition to this change, all the significant items disclosed
under the nature of expense method are disclosed in Note 3.
NOTE 2: REVENUE
Consolidated
Operating Activities
Sale of goods – other parties
Total revenue
2009 / 2010
($000)
2008 / 2009
($000)
Continuing
Discontinued
Continuing
Discontinued
98,811
98,811
-
-
98,251
98,251
2,219
2,219
2010 Annual Report | 45
NOTE 3: PROFIT
Profit before income tax expense has been determined after charging / (crediting):
2009 / 2010
($000)
2008 / 2009
($000)
Continuing
Discontinued
Continuing
Discontinued
399
3
70
472
37,665
16,154
(108)
1,355
-
-
1,247
228
66
5,872
30
353
-
41
204
262
130
189
-
-
-
23
199
20
224
33
-
2
259
86
10
2
98
357
137
1
6
2,174
257
-
-
-
-
23
-
-
-
-
-
-
-
-
-
-
-
-
-
30
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
321
31
1,552
1,904
42,085
16,384
(375)
2,441
(174)
-
1,892
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
3,249
1,006
-
-
-
174
174
-
-
247
-
-
-
-
-
-
-
-
-
144
-
-
-
-
18
-
-
-
18
37
6
-
129
147
-
-
-
753
-
Consolidated
Other Income
Government grant income
Other revenue
Net foreign exchange gains
Total other income
Changes in inventories of finished goods and work in progress and raw
materials and consumables used
Employee benefits
Net Finance Costs
Finance income – other parties
Finance expense – other parties
Finance income – related parties
Finance expense – related parties
Net finance costs
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
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
Total remuneration of the auditors of the parent entity
Remuneration of Other Auditors of Controlled Entities For
Auditing the financial report
Taxation services
Capital registration review
Total remuneration of other auditors
Total remuneration of auditors
Net Loss on Disposal of Non Current Assets
Plant and equipment
Motor vehicles
Office equipment
Operating lease rental expense
Share based payment (benefit) / expense
46 | Gale Pacific Limited ABN 80 082 263 778
NOTE 4: INCOME TAX
(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 (benefit) / expense from discontinued operations
Total
Consolidated
2009 / 2010
($000)
2008 / 2009
($000)
1,581
456
2,037
2,060
(23)
2,037
659
1,760
2,419
1,166
1,253
2,419
(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
Previously unrecognised tax losses utilised
Tax credits
Other non allowable / (non assessable) items
Total
Less tax effect of:
Over provision for income tax in the prior year
Income tax expense attributed to profit from continuing operations
Add income tax (benefit) / expense from discontinued operations
Total income tax expense
Consolidated
2009 / 2010
($000)
2008 / 2009
($000)
2,420
(366)
-
101
(227)
(133)
225
2,020
40
2,060
(23)
2,037
202
(515)
946
1,166
-
(321)
(322)
1,156
10
1,166
1,253
2,419
(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
2009 / 2010
($000)
2008 / 2009
($000)
(3)
238
235
(94)
(135)
(229)
2010 Annual Report | 47
NOTE 4: INCOME TAX (CONTINUED)
(d).
Current Tax
Current tax asset
Current tax liability
Total
Consolidated
2009 / 2010
($000)
-
(1,355)
(1,355)
2008 / 2009
($000)
980
(217)
763
(e).
Movement in Net Carrying Amount
Movement in the current tax net carrying amount between the beginning and the end of the year.
Consolidated
2009 / 2010
($000)
2008 / 2009
($000)
763
(1,581)
(558)
21
(1,355)
172
(659)
1,225
25
763
Consolidated
2009 / 2010
($000)
2008 / 2009
($000)
(10)
(4,711)
(71)
109
-
18
(275)
293
482
(278)
7
310
123
(406)
(3,881)
126
80
(39)
77
(298)
262
300
(295)
19
492
229
(4,003)
(3,334)
379
(4,382)
(4,003)
1,038
(4,372)
(3,334)
Balance at the beginning of the year
Current year tax expense
Income tax (refunds) / payments
Net foreign currency movements arising from foreign operations
Carrying amount at the end of the year
(f).
Deferred Tax
Deferred Tax Assets / (Liabilities) Arise from the Following
Property, plant and equipment
Foreign exchange
Income not (received) / derived
Finance leases
Research and development
Doubtful debts
Other financial liabilities
Provisions
Employee benefits
Capitalised costs
Borrowing costs
Equity raising costs
Other
Net deferred tax liability
Represented By
Deferred tax asset
Deferred tax liability
Total
48 | Gale Pacific Limited ABN 80 082 263 778
NOTE 4: INCOME TAX (CONTINUED)
(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
Tax losses – capital
Total
NOTE 5: OPERATING SEGMENTS
Consolidated
2009 / 2010
($000)
2008 / 2009
($000)
1,834
33,403
35,237
2,228
33,360
35,588
The Group has identified its operating segments based on the internal reports that are reviewed and used by the Chief
Executive Officer in assessing performance and determining the allocation of resources.
The Group’s four operating segments are identified by geographic location and identity of the service line manager. Discrete
financial information about each of these segments is reported on a monthly basis.
Revenue, result, depreciation and amortisation, significant items, assets and liabilities for the Group’s four operating segments
plus discontinued operations are set out in the tables below.
Asia / Pacific (excluding China)
Manufacturing and distribution facilities are located in Australia, and distribution facilities are located in New Zealand. Sales
offices are located in all states in Australia and in New Zealand.
China
Manufacturing facilities are located in Beilun, China which supply to the Group’s sales and marketing operations throughout the
world.
Americas
Sales offices are located in Florida and custom blind assembly 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 branded shading and screening products. The Group
manufactures, sources and markets advanced durable knitted and woven polymer fabrics and value added structures made
from these fabrics.
2010 Annual Report | 49
NOTE 5: OPERATING SEGMENTS (CONTINUED)
Segment Information Primary Reporting – Geographical Segments
30 June 2010
Asia Pacific
China
Americas
Middle East
/ Africa
Unallocated
($000)
($000)
($000)
($000)
($000)
Total
Continuing
Operations
($000)
Discontinued
Operations
Total Group
($000)
($000)
71,401
(81)
21,343
6,148
-
98,811
Revenue outside the
economic entity
Inter segment revenue
Total revenue
Segment EBITDA
Depreciation and
amortisation
571
71,972
9,286
27,721
27,640
5,082
(2,136)
(4,586)
69
150
(28,511)
21,412
6,298
(28,511)
915
(457)
989
(7)
982
232
-
232
Segment EBIT
7,150
496
458
Net finance expense
Profit before income
tax
Income tax expense
Profit for the year
Segment assets
Segment liabilities
34,235
12,175
52,901
12,701
16,381
1,869
4,116
286
(311)
(44)
-
98,811
16,504
(7,186)
9,318
(1,247)
8,071
(2,060)
6,011
107,322
26,987
-
-
-
18
(30)
(12)
-
(12)
23
11
74
913
98,811
-
98,811
16,522
(7,216)
9,306
(1,247)
8,059
(2,037)
6,022
107,396
27,900
30 June 2009
Asia Pacific
China
Americas
Middle East
/ Africa
Unallocated
($000)
($000)
($000)
($000)
($000)
Total
Continuing
Operations
($000)
Discontinued
Operations
Total Group
($000)
($000)
66,275
742
23,263
7,971
-
98,251
2,219
100,470
593
66,868
6,499
34,072
34,814
6,446
(2,349)
(5,087)
484
23,747
(650)
(717)
8,207
1,412
(27)
236
(35,385)
(35,385)
196
-
-
Impairment of assets
(3,155)
-
-
-
Segment EBIT
995
1,359
(1,367)
1,385
196
-
98,251
13,903
(8,180)
(3,155)
2,568
(1,892)
-
2,219
(9,643)
(247)
(144)
(10,034)
(174)
676
(10,208)
(1,166)
(1,253)
(490)
(11,461)
-
100,470
4,260
(8,427)
(3,299)
(7,466)
(2,066)
(9,532)
(2,419)
(11,951)
113,147
37,731
Revenue outside the
economic entity
Inter segment revenue
Total revenue
Segment EBITDA
Depreciation and
amortisation
Net finance expense
Profit before income
tax
Income tax expense
Loss for the year
Segment assets
Segment liabilities
33,323
19,307
59,672
14,782
16,017
2,387
4,503
278
(543)
(95)
112,972
36,659
175
1,072
Notes:
(a).
(b).
(c).
(d).
(e).
All inter segment pricing is on a commercial basis.
Asia Pacific result excludes finance costs, interest revenue and income tax expense.
Asia Pacific includes foreign exchange hedge and Australian Corporate costs.
Asia Pacific excludes China which is now disclosed separately.
Revenue from one customer in the Asia Pacific region represents $31,546,000 (2009 : $26,515,000) of the Group’s
total revenues.
50 | Gale Pacific Limited ABN 80 082 263 778
NOTE 6: CASH AND CASH EQUIVALENTS
Cash on hand
Cash at bank
Cash on deposit
Total
NOTE 7: TRADE AND OTHER RECEIVABLES
Current
Trade debtors
Less provision for doubtful debts
Total
Other receivables
Total
NOTE 8: INVENTORIES
Current
Raw materials at cost
Work in progress at cost
Finished goods at cost
Less provision for obsolescence
Total
NOTE 9: OTHER FINANCIAL ASSETS
Current
Foreign currency forward contracts
Total
Consolidated
2009 / 2010
($000)
2008 / 2009
($000)
12
8,486
6,641
15,139
8
4,647
2,486
7,141
Consolidated
2009 / 2010
($000)
2008 / 2009
($000)
13,900
(282)
13,618
524
14,142
14,315
(258)
14,057
617
14,674
Consolidated
2009 / 2010
($000)
2008 / 2009
($000)
2,866
1,952
15,699
(236)
20,281
3,174
2,200
18,500
(211)
23,663
Consolidated
2009 / 2010
($000)
2008 / 2009
($000)
341
341
-
-
2010 Annual Report | 51
NOTE 10: OTHER ASSETS
Current
Prepayments
Total
NOTE 11: PROPERTY, PLANT AND EQUIPMENT
Buildings
At cost
Less accumulated depreciation
Total
Plant and Equipment
At cost
Less accumulated depreciation
Total
Plant and Equipment Under Lease
At cost
Less accumulated amortisation
Total
Leasehold Improvements
At cost
Less accumulated depreciation
Total
Motor Vehicles
At cost
Less accumulated depreciation
Total
Motor Vehicles Under Lease
At cost
Less accumulated amortisation
Total
Office Equipment
At cost
Less accumulated depreciation
Total
Capital Work in Progress
Total property, plant and equipment
52 | Gale Pacific Limited ABN 80 082 263 778
Consolidated
2009 / 2010
($000)
2008 / 2009
($000)
913
913
741
741
Consolidated
2009 / 2010
($000)
2008 / 2009
($000)
9,641
(1,129)
8,512
67,622
(27,621)
40,001
-
-
-
560
(431)
129
212
(123)
89
179
(76)
103
4,378
(3,823)
555
163
49,552
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
NOTE 11: PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
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.
Consolidated
2009 / 2010
($000)
2008 / 2009
($000)
Buildings
Balance at the beginning of the year
Reclassifications
Additions
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
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
Reclassifications
Additions
Disposals
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
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
Disposals
Amortisation expense
Carrying amount at the end of the year
Office Equipment
Balance at the beginning of the year
Reclassifications
Additions
Disposals
Depreciation expense
Net foreign currency movements arising from foreign operations
Carrying amount at the end of the year
8,329
23
746
(228)
(358)
8,512
47,503
440
(142)
(5,872)
(1,928)
40,001
-
-
-
218
(23)
8
(3)
(66)
(5)
129
132
-
(7)
(30)
(6)
89
172
-
-
(28)
(41)
103
821
-
119
(7)
(353)
(25)
555
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
2010 Annual Report | 53
NOTE 12: INTANGIBLE ASSETS
Goodwill at cost
Less accumulated impairment
Total
Patents, trademarks and licenses at cost
Less accumulated amortisation
Total
Application software at cost
Less accumulated amortisation
Total
Research and development
Less accumulated amortisation
Total
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
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
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
54 | Gale Pacific Limited ABN 80 082 263 778
Consolidated
2009 / 2010
($000)
2008 / 2009
($000)
8,768
(2,939)
5,829
2,399
(2,002)
397
1,332
(909)
423
4,865
(4,865)
-
6,649
5,950
-
(121)
5,829
635
(234)
(4)
397
690
-
-
(262)
-
(5)
423
130
(130)
-
8,810
(2,860)
5,950
2,414
(1,779)
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
NOTE 12: INTANGIBLE ASSETS (CONTINUED)
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 12.99% (2009 : 7.50%) 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.
Impairment losses recognised
In the 2009 financial year an impairment loss on consolidation, based upon a value in use calculation of $3.155 million (refer
Note 1) relating to goodwill was recognised for continuing operations. 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 was 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.
NOTE 13: TRADE AND OTHER PAYABLES
Current
Trade payables
Sundry payables and accruals
Total
Consolidated
2009 / 2010
($000)
2008 / 2009
($000)
4,979
2,290
7,269
6,219
2,484
8,703
2010 Annual Report | 55
NOTE 14: BORROWINGS
Current
Secured liabilities:
Bank loans
Other loans
Commercial bills
Finance lease liability
Hire purchase liability
Total
Unsecured liabilities:
Bank loans
Other loans
Total
Non Current
Secured liabilities:
Other loans
Finance lease liability
Hire purchase liability
Total
Unsecured liabilities:
Other loans
Total
Total
Disclosed in the Financial Statements As
Current borrowings
Non current borrowings
NOTE 15: OTHER FINANCIAL LIABILITIES
Derivatives Carried at Fair Value
Current
Foreign currency forward contracts
Total
Disclosed in the Financial Statements As
Current other financial liabilities
56 | Gale Pacific Limited ABN 80 082 263 778
Consolidated
2009 / 2010
($000)
2008 / 2009
($000)
7,430
1,554
-
109
18
9,111
2,803
75
2,878
-
-
-
-
-
-
8,387
895
7,700
69
29
17,080
2,036
303
2,339
1,553
109
18
1,680
74
74
11,989
21,173
11,989
-
19,419
1,754
Consolidated
2009 / 2010
($000)
2008 / 2009
($000)
-
-
-
459
459
459
NOTE 16: PROVISIONS
Current
Employee benefits
Restructuring and termination 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
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
Carrying amount at the end of the year
Discontinued operations closure 2
Balance at the beginning of the year
Provisions recognised
Reductions resulting from re measurement
Carrying amount at the end of the year
Warranty claims
Balance at the beginning of the year
Provisions recognised
Payments made
Carrying amount at the end of the year
Consolidated
2009 / 2010
($000)
2008 / 2009
($000)
1,776
445
553
58
73
2,905
2,832
73
1,849
722
860
1
(429)
13
445
-
-
-
628
-
(75)
553
31
493
(466)
58
1,170
860
628
31
118
2,807
2,689
118
1,288
734
478
490
(115)
7
860
70
(70)
-
-
628
-
628
-
208
(177)
31
1 The provision for restructuring and termination costs represents the Directors’ best estimate of the remaining costs to be incurred by the New Zealand operation
for the closure of its manufacturing facility and the onerous lease obligation of the site. The restructuring is expected to be completed by January 2014 when the
lease expires.
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. The liquidation of the Gale Europe GmbH is expected to be completed by 30 June 2011.
2010 Annual Report | 57
NOTE 17: CONTRIBUTED EQUITY
Paid Up Capital
279,691,658 fully paid ordinary shares (2009: 279,691,658)
105,586
105,594
Consolidated
2009 / 2010
($000)
2008 / 2009
($000)
Movement in Share Capital
Shares issued at the beginning of the financial year
Costs of capital raising (net of tax)
142,857,142 shares issued in a rights issue – 18 March 2009
Total
(a).
Movement in Share Capital
105,594
100,813
(8)
-
(219)
5,000
105,586
105,594
There has been no movement in share capital during the reporting period. During the comparative period, (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:
(cid:0)
(cid:0)
(cid:0)
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 reporting date is 11,000,000.
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:
(cid:0)
(cid:0)
(cid:0)
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.
58 | Gale Pacific Limited ABN 80 082 263 778
NOTE 17: CONTRIBUTED EQUITY (CONTINUED)
Options
Grant Date
Expiry Date
Exercise
Price
Balance Start
of Year
No.
Granted
During Year
No.
Exercised
During Year
No.
Lapsed
During Year
No.
Balance End
of Year
No.
Exercisable
End of Year
No.
Consolidated and Parent Entity - 2010
None
Consolidated and Parent Entity - 2009
15 Dec 2004
1 Dec 2008
16 Nov 2005
1 Dec 2008
24 Oct 2006
31 Dec 2008
Total
Weighted average exercise price
Performance Rights
Grant Date
Expiry Date
Consolidated and Parent Entity - 2010
2 Feb 2007
2 Feb 2017
16 Nov 2007
16 Nov 2017
30 Jun 2009
30 Jun 2019
1 Dec 2009
30 Jun 2019
Total
Consolidated and Parent Entity - 2009
2 Feb 2007
2 Feb 2017
16 Nov 2007
16 Nov 2017
30 Jun 2009
30 Jun 2019
Total
Performance Rights Valuation Assumptions
Grant date share price
Exercise price
Expected volatility
Expected Life
Tranche 1
Tranche 2
Dividend yield
Risk free interest rate
$3.00
$1.52
$1.52
180,000
450,000
120,000
750,000
$1.88
-
-
-
-
-
-
(180,000)
(450,000)
(120,000)
(750,000)
-
-
-
-
-
-
-
-
Exercise
Price
Balance Start
of Year
No.
Granted
During Year
No.
Exercised
During Year
No.
Lapsed
During Year
No.
Balance End
of Year
No.
Exercisable
End of Year
No.
N/A
N/A
N/A
N/A
N/A
N/A
N/A
150,000
300,000
9,000,000
-
-
-
-
3,000,000
9,450,000
3,000,000
150,000
700,000
-
-
-
9,000,000
850,000
9,000,000
-
-
-
-
-
-
-
-
-
(150,000)
(300,000)
-
-
(1,000,000)
8,000,000
3,000,000
(1,450,000)
11,000,000
150,000
(400,000)
300,000
-
9,000,000
(400,000)
9,450,000
-
-
-
-
-
-
-
-
-
Grant Date
1 December 2009
Grant Date
30 June 2009
Grant Date
16 November 2007
Grant Date
2 February 2007
$0.14
N/A
N/A
2.6 years
2.6 years
0.0%
N/A
$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
2010 Annual Report | 59
NOTE 18: RESERVES
Foreign currency translation reserve
Share based payment reserve
Hedging reserve
Enterprise reserve fund
Total
(a).
Foreign Currency Translation Reserve
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
2009 / 2010
($000)
(9,736)
743
242
852
(7,899)
2008 / 2009
($000)
(6,987)
486
(316)
852
(5,965)
Consolidated
2009 / 2010
($000)
2008 / 2009
($000)
(6,987)
(3,308)
559
(9,736)
(11,289)
2,968
1,334
(6,987)
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(d) and 1(e).
(b).
Employee Share Based Payment Reserve
Balance at the beginning of the year
Share based expenditure / (benefit)
Balance at the end of the year
(c).
Hedging Reserve
Balance at the beginning of the year
Profit / (loss) on cash flow hedges
Income tax related to cash flow hedges recognised
Balance at the end of the year
Consolidated
2009 / 2010
($000)
2008 / 2009
($000)
486
257
743
632
(146)
486
Consolidated
2009 / 2010
($000)
2008 / 2009
($000)
(316)
796
(238)
242
-
(451)
135
(316)
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.
60 | Gale Pacific Limited ABN 80 082 263 778
NOTE 18: RESERVES (CONTINUED)
(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
2009 / 2010
($000)
2008 / 2009
($000)
852
-
852
631
221
852
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.
NOTE 19: ACCUMULATED LOSSES
Balance at the beginning of the year
Net profit / (loss) attributable to members of the parent entity
Transfers to reserves
Balance at the end of the year
NOTE 20: NON CONTROLLING INTERESTS
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
2009 / 2010
($000)
2008 / 2009
($000)
(24,213)
6,022
-
(18,191)
(12,030)
(11,962)
(221)
(24,213)
Consolidated
2009 / 2010
($000)
2008 / 2009
($000)
-
-
-
(11)
11
-
2010 Annual Report | 61
NOTE 21: DIVIDENDS
No dividends were declared or paid during the 2009 / 2010 or 2008 / 2009 financial periods. After 30 June 2010 the
following dividends were proposed by the Board. These dividends have not been provided for in the financial statements.
Fully Paid Ordinary Shares
Final Dividend
Fully franked at a 30% tax rate
Special Dividend
Fully franked at a 30% tax rate
Total Dividend Payable on Friday 22 October 2010
Dividend Franking Account
Franking credits at 30% available to shareholders at 30 June 2010
Franking credits that will be attributable to the above dividends total $2,397,000.
NOTE 22: EARNINGS PER SHARE
Consolidated
Cents Per Share
1.0
1.0
2.0
2009 / 2010
($000)
2,797
2,797
5,594
Consolidated
2009 / 2010
($000)
2,701
2008 / 2009
($000)
3,066
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 / (loss)
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
62 | Gale Pacific Limited ABN 80 082 263 778
Consolidated
2009 / 2010
(Cents Per Share)
2008 / 2009
(Cents Per Share)
2.15
-
2.15
2.07
0.01
2.08
(0.28)
(6.47)
(6.75)
(0.28)
(6.47)
(6.75)
Consolidated
2009 / 2010
($000)
2008 / 2009
($000)
6,022
(11,951)
(11)
6,011
11,461
(490)
Consolidated
2009 / 2010
(000’s)
2008 / 2009
(000’s)
279,692
177,148
-
10,183
289,875
378
719
178,245
NOTE 23: CAPITAL AND LEASING COMMITMENTS
(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
Non cancellable operating leases contracted for but not capitalised in the accounts
Payable
Not longer than one year
Longer than one year and not longer than five years
Total
(d).
Capital Expenditure Commitments
Not longer than one year
Total
Consolidated
2009 / 2010
($000)
2008 / 2009
($000)
170
-
170
(61)
109
109
-
109
153
170
323
(145)
178
69
109
178
Consolidated
2009 / 2010
($000)
2008 / 2009
($000)
20
-
20
(2)
18
18
-
18
35
20
55
(8)
47
29
18
47
Consolidated
2009 / 2010
($000)
2008 / 2009
($000)
1,956
2,282
4,238
2,664
4,164
6,828
Consolidated
2009 / 2010
($000)
2008 / 2009
($000)
44
44
-
-
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.
2010 Annual Report | 63
NOTE 24: CASH FLOW INFORMATION
(a).
Reconciliation of Cash
Cash at the end of the financial year as shown in the statement of cash flows is reconciled to the
related items in the statement of financial position as follows:
Cash on hand
Cash at bank
Cash on deposit
Total
(b).
Reconciliation of Profit for the Period to Net Cash Provided by Operating Activities
Profit / (loss) after income tax
Non Cash Flows in Profit
Loss on disposal of fixed assets
Depreciation of fixed assets
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 in receivables
Decrease in inventories
(Increase) / decrease in other assets
(Decrease) in payables, accruals and other financial liabilities
Increase in tax balances
Net cash provided by operating activities
64 | Gale Pacific Limited ABN 80 082 263 778
Consolidated
2009 / 2010
($000)
2008 / 2009
($000)
12
8,486
6,641
15,139
8
4,647
2,486
7,141
Consolidated
2009 / 2010
($000)
2008 / 2009
($000)
6,022
(11,951)
147
6,589
626
257
558
51
84
2,900
(194)
(1,869)
2,782
17,953
83
7,566
4,160
(146)
(222)
(9)
6,854
5,349
99
(1,690)
1,295
11,388
NOTE 24: CASH FLOW INFORMATION (CONTINUED)
(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 had 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 financial statements.
Financial information relating to discontinuing operations for the period 30 June 2010 is set out below. Further
information is set out in Note 5 Operating Segments.
Loss From Discontinued Operations
Revenue
Other income
Expenses
Loss before income tax
Income tax benefit / (expense)
Profit / (loss) after income tax from discontinued operations
Cash Flows From Discontinued Operations
Net cash inflow / (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
Consolidated
2009 / 2010
($000)
2008 / 2009
($000)
-
-
(12)
(12)
23
11
11
-
(16)
(5)
2,219
327
(12,754)
(10,208)
(1,253)
(11,461)
(4,419)
(146)
4,525
(40)
2010 Annual Report | 65
NOTE 25: DIRECTORS AND EXECUTIVES’ COMPENSATION
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
Directors’ and Executives’ Equity Holdings: Fully Paid Ordinary Shares
Consolidated
2009 / 2010
($000)
2008 / 2009
($000)
2,503
106
257
-
2,866
2,749
120
64
232
3,165
2009 / 2010
Executive Directors
P McDonald
Non Executive Directors
D Allman
H Boon 1
J Murphy
G Richards
Executives
J Cox
Total
2008 / 2009
Executive Directors
P McDonald
Non Executive Directors
H Boon
J Murphy
G Richards
Executives
J Cox
Total
Balance
30 June 209
No.
Received as
Remuneration
No.
Options
Exercised
No.
Net Change
No.
Balance
30 June 2010
No.
978,105
-
607,500
-
491,899
500,000
2,577,504
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(607,500)
-
-
-
978,105
-
-
-
491,899
500,000
(607,500)
1,970,004
Balance
30 June 2008
No.
Received as
Remuneration
No.
Options
Exercised
No.
Net Change
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
500,000
1,591,503
2,577,504
1 Mr Boon retired from his role as a Non Executive Director on 17 November 2009. The net change above represents the number of fully paid ordinary shares Mr
Boon held on the date of his retirement.
66 | Gale Pacific Limited ABN 80 082 263 778
NOTE 25: DIRECTORS AND EXECUTIVES’ COMPENSATION (CONTINUED)
Directors’ and Executives’ Equity Holdings, Compensation Options and Performance Rights: Granted and Vested During
the Year
2009 / 2010
Vested
Number
Granted
Number
Grant Date
Value Per
Option /
Right at
Grant Date
Executive Directors (Performance Rights)
Terms and Conditions for Each Grant
Exercise
Price
Expiry Date
First Exercise
Date
Last Exercise
Date
P McDonald
-
3,000,000
01/12/2009
$0.14
Nil
30/06/2019
30/06/2012
30/06/2019
Non Executive Directors
None
Executives (Performance Rights)
None
Total
3,000,000
2008 / 2009
Vested
Number
Granted
Number
Grant Date
Value Per
Option /
Right at
Grant Date
Terms and Conditions for Each Grant
Exercise
Price
Expiry Date
First Exercise
Date
Last Exercise
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
$0.061
Nil
30/06/2019
30/06/2012
30/06/2019
2,000,000
30/06/2009
$0.061
Nil
30/06/2019
30/06/2012
30/06/2019
2,000,000
30/06/2009
$0.061
Nil
30/06/2019
30/06/2012
30/06/2019
2,000,000
30/06/2009
$0.061
Nil
30/06/2019
30/06/2012
30/06/2019
2,000,000
30/06/2009
$0.061
Nil
30/06/2019
30/06/2012
30/06/2019
9,000,000
The performance rights disclosed above are subject to hurdles based on improvements in the Group’s diluted earnings per
share over the two year period 1 July 2009 to 30 June 2011.
2010 Annual Report | 67
NOTE 25: DIRECTORS AND EXECUTIVES’ COMPENSATION (CONTINUED)
Directors’ and Executives’ Equity Holdings Compensation Options and Performance Rights: Movements During the Year
2009 / 2010
Balance
1 July 2009
No.
Granted as
Compensation
No.
Exercised
Lapsed
No.
No.
Net Other
Change
No.
Balance
30 June 2010
No.
Balance Held
Nominally
No.
Value of Lapsed
Options/Rights
$
Executive Directors (Performance Rights)
P McDonald
150,000
3,000,000
-
(150,000)
-
3,000,000
Non Executive Directors
None
Executives (Performance Rights)
P Cacioli 1
J Cox
M Denney
P Ducray 2
S McPherson
B Wang
Total
1,075,000
2,075,000
2,075,000
75,000
2,000,000
2,000,000
9,450,000
-
-
-
-
-
-
3,000,000
-
-
-
-
-
-
-
(1,075,000)
(75,000)
(75,000)
(75,000)
-
-
(1,450,000)
-
-
-
-
-
-
-
-
2,000,000
2,000,000
-
2,000,000
2,000,000
11,000,000
-
-
-
-
-
-
-
-
(118,500)
(91,750)
(30,750)
(30,750)
(30,750)
-
-
(302,500)
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
$
Executive Directors (Options)
P McDonald
180,000
Executive Directors (Performance Rights)
P McDonald
150,000
Non Executive Directors
None
Executives (Options)
S Carroll 3
P Ducray
Z Fakroddin 4
E Xu 5
40,000
20,000
40,000
40,000
Executives (Performance Rights)
100,000
100,000
100,000
100,000
100,000
100,000
-
-
F Albertsmeier 6
P Cacioli
S Carroll
J Cox
M Denney
P Ducray
S McPherson
B Wang
E Xu
Total
-
-
-
-
-
-
-
1,000,000
-
2,000,000
2,000,000
-
2,000,000
2,000,000
100,000
-
1,170,000
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)
1 Mr Cacioli departed his role as General Manager Research and Development and Technical Services on 9 October 2009.
2 Mr Ducray departed his role as Chief Manufacturing Officer on 30 September 2009.
3 Mr Carroll departed his role as Managing Director Australia on 1 August 2008.
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.
68 | Gale Pacific Limited ABN 80 082 263 778
NOTE 26: RELATED PARTY TRANSACTIONS
Transactions within the Wholly Owned Group
The wholly owned group includes:
(cid:0)
(cid:0)
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.
During the financial year, the following transactions occurred between entities in the wholly owned group:
(cid:0)
(cid:0)
(cid:0)
(cid:0)
Sale and purchase of goods totalling $29,044,000 (2009 : $35,715,000)
Gale Pacific Limited received interest income from its subsidiaries totalling $548,000 (2009 : $1,220,000)
Gale Pacific Limited made interest payments to its subsidiaries totalling $132,000 (2009 : 135,000)
Reimbursement of certain operating costs totalling $1,704,000 (2009 : $3,371,000)
Transactions with Directors and Director Related Entities
The following amounts were payable to Directors and their Director related entities as at the reporting date.
Current – accrued bonus and Director fees
Consolidated
2009 / 2010
($000)
187
2008 / 2009
($000)
73
NOTE 27: CONTROLLED ENTITIES
Parent Entity
Gale Pacific Limited
Controlled Entities
Gale Europe GmbH Vertriebsgesellschaft
Gale Pacific (New Zealand) Limited
Gale Pacific FZE
Gale Pacific Special Textiles (Ningbo) Limited
Gale Pacific USA Inc
Controlled entities deregistered during the year
Aquaspan Pty Ltd
Gale Pacific Employees Superannuation Fund Pty Ltd
Country of Incorporation
Ownership Interest (%)
2009 / 2010
2008 / 2009
Australia
Germany
New Zealand
United Arab Emirates
China
United States of America
Australia
Australia
100%
100%
100%
100%
100%
-
-
100%
100%
100%
100%
100%
50%
100%
2010 Annual Report | 69
NOTE 28: FINANCIAL INSTRUMENTS
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).
The Group’s financial risk management processes and procedures seek to minimise the potential adverse effects on the
Group’s financial performance that may occur due to the unpredictability of financial markets. Risk management policies are
reviewed regularly to reflect changes in market conditions and the Group’s activities.
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
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.
The maximum exposure to credit risk at the reporting date was:
Loans and receivables
Cash and cash equivalents
Tradeable foreign currency forward contracts
Total
The maximum exposure to credit risk for trade receivables at the reporting
date by geographic region was:
Note
7
6
9
Asia Pacific
China
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
Consolidated
As at
30 Jun 2010
($000)
As at
30 Jun 2009
($000)
14,142
15,139
341
29,622
4,778
157
6,234
2,449
-
13,618
10,400
1,908
1,165
114
31
13,618
-
65
132
85
282
14,674
7,141
-
21,815
4,960
219
6,173
2,696
9
14,057
10,527
1,509
1,157
842
22
14,057
-
44
210
4
258
The Group’s most significant customer, an Australian retailer accounts for $1,405,000 of the trade receivables
carrying balance at 30 June 2010 (2009 : $1,897,000).
70 | Gale Pacific Limited ABN 80 082 263 778
NOTE 28: FINANCIAL INSTRUMENTS (CONTINUED)
(b).
Liquidity Risk
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.
Consolidated
30 June 2010
Non Derivative Financial Liabilities
Bank loans
Other loans
Finance lease liabilities
Hire purchase liabilities
Total
Consolidated
30 June 2009
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
(%)
($000)
($000)
($000)
($000)
($000)
14
14
14
14
4.49%
10,233
10,421
7,706
9.07%
1,629
1,708
10.06%
9.25%
109
18
117
21
593
38
19
2,715
1,115
79
2
11,989
12,267
8,356
3,911
-
-
-
-
-
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
(%)
($000)
($000)
($000)
($000)
($000)
Non Derivative Financial Liabilities
Bank loans
Other loans
Finance lease liabilities
Hire purchase liabilities
Derivative Financial Liabilities
14
14
14
14
4.12%
18,123
18,340
11,765
6,575
-
8.89%
2,825
3,109
9.66%
9.25%
178
47
200
51
738
60
16
663
1,708
23
16
71
117
19
-
Tradeable foreign currency forward contracts
15
459
459
388
Total
21,632
22,159
12,967
7,348
1,844
(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. There was no cash flow hedge ineffectiveness during the reporting period.
2010 Annual Report | 71
NOTE 28: FINANCIAL INSTRUMENTS (CONTINUED)
The Group has adopted hedge accounting and 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.
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 statement of financial position. At balance date the net amount receivable was $341,000 (2009:
$459,000 payable).
The accounting policy in regard to forward exchange contracts is detailed in Note 1(d).
Average Exchange
Rate
Foreign Currency
Contract Value
Fair Value
2009 /
2010
2008 /
2009
2009 /
2010
2008 /
2009
2009 /
2010
2008 /
2009
2009 /
2010
2008 /
2009
(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
0.8602
0.7599
9,683
4,167
11,258
4,167
292
(326)
0.8771
0.7520
850
610
969
610
56
(56)
Sell United States dollars / buy Australian
dollars
Less than 6 months
-
0.8008
-
800
-
999
-
9
Buy United States dollars / sell New Zealand
dollars
Less than 6 months
6 – 12 months
0.6723
0.5869
460
-
0.5825
-
Buy European euro / sell Australian dollars
0.6889
0.5720
0.6709
-
490
330
Less than 6 months
6 – 12 months
Total
Foreign Exchange Contracts Not Designated
as Cash Flow Hedges
Buy United States dollars / sell Australian
dollars
445
96
59
-
562
-
711
492
614
133
103
-
(12)
-
3
2
(63)
(15)
-
-
341
(451)
Less than 6 months
-
0.7160
-
54
-
75
Total
Total
-
-
(8)
(8)
341
(459)
72 | Gale Pacific Limited ABN 80 082 263 778
NOTE 28: FINANCIAL INSTRUMENTS (CONTINUED)
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% (2009: 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 2010
Financial Assets
Cash and cash equivalents
United States dollars
Euro
Amounts receivable from related parties
United States dollars
New Zealand dollars
Financial Liabilities
Trade payables
United States dollars
Euro
Profit or (loss) impact
Currency Asset / (Liability) Breakdown
United States dollars
Euro
New Zealand dollars
Profit or (loss) impact
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
Consolidated
Australian Dollar
Carrying Value
($000)
Profit / (Loss)
AUD +10%
($000)
4,090
4
-
-
297
125
3,793
(121)
-
(409)
-
504
(14)
30
13
124
125
13
(14)
124
Consolidated
Australian Dollar
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
2010 Annual Report | 73
NOTE 28: FINANCIAL INSTRUMENTS (CONTINUED)
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.
30 June 2010
Financial Assets
Cash and cash equivalents
Financial Liabilities
Borrowings (all fixed rates instruments)
Profit or (loss) impact
30 June 2009
Financial Assets
Cash and cash equivalents
Financial Liabilities
Borrowings
(Loss) or profit impact
Consolidated
Carrying Value
($000)
15,127
-
Consolidated
Carrying Value
($000)
7,133
7,700
Profit / (Loss)
+1% Movement
($000)
151
-
151
Profit / (Loss)
+1% Movement
($000)
71
(77)
(6)
74 | Gale Pacific Limited ABN 80 082 263 778
NOTE 29: PARENT ENTITY DISCLOSURES
Results of the parent entity
Profit / (loss) for the year
Other comprehensive income
Total
Financial position of the parent entity at year end
Current assets
Total assets
Current liabilities
Total liabilities
Net assets
Total equity of the parent entity comprising of:
Contributed equity
Share based payment reserve
Hedging reserve
Retained earnings
Total equity
Parent Entity Commitments
Finance leases
Hire purchase
Operating leases
Capital expenditure
Total
NOTE 30: SUBSEQUENT EVENTS
Consolidated
2009 / 2010
($000)
2008 / 2009
($000)
4,207
511
4,718
23,469
80,980
7,781
6,864
74,116
105,586
743
250
(32,463)
74,116
109
18
2,604
18
2,749
(26,886)
(261)
(27,147)
19,293
84,265
13,274
15,116
69,149
105,594
486
(261)
(36,670)
69,149
178
47
3,754
-
3,979
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.
NOTE 31: COMPANY DETAILS
The registered office of the Company is:
Gale Pacific Limited
145 Woodlands Drive
Braeside, Vic, 3195
Australia
2010 Annual Report | 75
ADDITIONAL
SECURITIES EXCHANGE
INFORMATION
NUMBER OF HOLDINGS OF EQUITY SECURITIES AS AT 17 AUGUST 2010
The fully paid issued capital of the Company consisted of 279,691,658 ordinary fully paid shares held by 812 shareholders.
Each share entitles the holder to one vote.
8 holders have been granted 13,940,000 performance rights over ordinary shares. Performance rights do not carry a right
to vote.
DISTRIBUTION OF HOLDERS OF EQUITY SECURITIES
Range
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 50,000
50,001 – 100,000
100,001 – 500,000
500,001 – 1,000,000
1,000,000 and over
Rounding
Total
Ordinary Fully Paid Shares
Total Holders
Units
% Issued Capital
118
234
129
189
48
64
8
22
812
42,019
660,485
988,661
4,420,689
3,635,116
16,394,318
6,005,085
247,545,285
279,691,658
0.02
0.24
0.35
1.58
1.30
5.86
2.15
88.51
-0.01
100.00
UNMARKETABLE PARCELS
Unmarketable Parcels as at
17 August 2010
Minimum Parcel Size
Minimum $500 parcel at $0.19 per unit
2,632
Holders
238
Units
262,641
76 | Gale Pacific Limited ABN 80 082 263 778
SUBSTANTIAL SHAREHOLDERS AS AT 17 AUGUST 2010
Shareholder
Thorney Holdings Pty Ltd
Investec Wentworth Private Equity Ltd
Windhager Handelges Mbh
Gale Australia Pty Ltd
TWENTY LARGEST HOLDERS OF QUOTED EQUITY SECURITIES
Shareholder
ANZ Nominees Limited (Cash Income A/C)
Windhager Handels Gesmbh
IWPE Nominees Pty Ltd (IWPE Fund 2 A/C)
IWPE Nominees Pty Ltd (MG Private Equity Fund A/C)
Investec Bank (Australia) Limited
Gale Australia Pty Ltd
MGB Equity Growth Pty Limited (MGB Equity Growth Fund 2 A/C)
ANZ Nominees Limited (Income Reinvest Plan A/C)
Ruminator Pty Ltd
Gernis Holdings Pty Limited
Mr Geoffrey Duncan Nash (GDN Super Fund A/C)
GFS Securities Pty Ltd (Glenfare Super Fund A/C)
UBS Nominees Pty Ltd
IWPE Nominees Pty Limited (MZL Opportunity Fund A/C)
Venn Milner Superannuation Pty Ltd
Atkone Pty Ltd
Mr Simon Gautier Hannes (SGH Super Fund A/C)
IWPE Nominees Pty Limited (MZL Opportunity Fund A/C)
Citicorp Nominees Pty Limited
Bell Potter Nominees Ltd (BB Nominees A/C)
Top 20 Holders of Ordinary Fully Paid Shares as at 17 August 2010
Total Remaining Holders Balance
OTHER INFORMATION
No.
79,817,646
74,148,162
41,925,781
13,997,844
No.
79,859,523
41,925,781
28,365,369
18,234,879
14,182,685
13,927,844
10,130,490
8,821,373
6,691,433
3,800,000
3,327,428
2,447,935
2,113,135
2,058,824
2,000,000
1,919,796
1,732,003
1,395,577
1,323,347
1,304,934
245,562,356
34,129,302
%
28.54
26.51
14.99
5.00
%
28.55
14.99
10.14
6.52
5.07
4.98
3.62
3.15
2.39
1.36
1.19
0.88
0.76
0.74
0.72
0.69
0.62
0.50
0.47
0.47
87.80
12.20
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.
2010 Annual Report | 77
Gale Pacific Limited
ABN 80 082 263 778
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
78 | Gale Pacific Limited ABN 80 082 263 778
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