2011 ANNUAL REPORT
CONTENTS
Corporate Directory ................................................................. 3
Chairman’s and Managing Director and
Chief Executive Officer’s Report ........................................... 4
Board of Directors .................................................................... 8
Senior Management .................................................................. 9
Corporate Governance .......................................................... 10
Director’s Report .................................................................... 14
Financial Results ..................................................................... 25
2011 ANNUAL GENERAL
MEETING
The Annual General Meeting will be
held on Friday 28 October 2011.
The Notice of Meeting and Proxy
Form are separate items accompanying
this 2011 Annual Report.
2 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
2011 Annual Report
3
CHAIRMAN’S AND MANAGING DIRECTOR AND
CHIEF EXECUTIVE OFFICER’S REPORT
DEAR SHAREHOLDERS,
It is very pleasing to report to shareholders the results for the year ended 30 June 2011. The Company reported an increase in the net
profit after tax of 18% to $7.1 million compared to $6.0 million for the previous corresponding period. Gale has generated these solid
results while operating with some weak economic conditions in several markets and enduring a very mild and wet summer and flooding
across several parts of Australia. The stronger Australian dollar also had an unfavourable impact on the translation of foreign currency
revenue and earnings.
We are also very excited about the acquisition of the Zone Hardware and Riva Window Fashions businesses in June 2011 which is the
initial acquisition growth step.
The key items of the results were;
Revenue decrease of 3% to $95.6 million
Revenue for the year decreased by 3% to $95.6 million which was impacted by the unfavourable effect of translating foreign currency
revenues to a stronger Australian dollar. Sales revenues in local currencies grew by 3% in the USA, and 18% in the Middle East. New
customers were won in Europe and South Africa as we increased our market penetration into new markets following the hiring earlier this
year of a General Manager International Sales and Marketing. Lower sales were recorded in Australia due to an extremely mild summer,
wet weather and flooding across many parts of the eastern states. Whilst sales to retail channels in New Zealand increased year on year,
this increase was not enough to offset the shortfalls in commercial sales due to a poor agricultural season in that market.
EBITDA decrease of 4% to $15.8 million
Earnings before interest, tax, depreciation and amortisation (EBITDA) from continuing operations was $15.8 million for the year
compared to $16.5 million for the previous corresponding period. The decrease over the prior year is due to the unfavourable impact of
translating foreign currency EBITDA in the Middle East, USA and Chinese businesses to a stronger Australian dollar. The impact of this
equates to approximately A$0.9 million.
EBIT increase of 6% to $9.9 million
Earnings before interest and tax (EBIT) was $9.9 million for continuing operations compared to $9.3 million for the previous
corresponding period. The increase was achieved through sales growth in new markets, leaner operating costs, substantial yield and
efficiency improvements in the Company’s Chinese and Australian manufacturing facilities, and an immediate contribution from only the
first months trading of the recently acquired Zone Hardware and Riva Window Fashions.
NPAT up 18% from $6.0 million to $7.1 million
Net profit after tax of $7.1 million for the financial year ended 30 June 2011 is the highest on record for the Company. This result is an
18% or $1.1 million increase on the reported result for the previous corresponding period.
Final dividend payment of 1.2 cents fully franked
Directors are also pleased to announce to shareholders that the Company has increased the ordinary final dividend to 1.2 cents per share.
Dividends for the full year of 2.2 cents per share have been declared on diluted earnings of 2.4 cents per share. This represents a 10%
increase on full year ordinary dividends compared to last year. The final dividend payment of 1.2 cents per share will be fully franked and
will be paid to shareholders on Monday 3 October 2011. Gale considers this dividend frankable for Australian tax purposes as the
dividends are being paid out of current year profits and Gale has sufficient franking credits available to fully frank this dividend. However,
the Commissioner of Taxation has informally expressed a preliminary view on dividend franking capability in an ATO Draft Fact Sheet
dated 21 June 2011 which may or may not support the Company’s position. Shareholders will be advised should there be any impact on
the franking of Gale dividends.
4 Gale Pacific Limited ABN 80 082 263 778
Chairman’s And Managing Director And Chief Executive Officer’s Report (continued)
Cash from operations $11.4 million
The Company continued to generate strong cash flow from operations which is the result of strong profitability.
The business required only maintenance capital expenditure of $0.6 million for the year. The company paid net cash of $11.2 million for
the acquisition of the Zone Hardware and Riva Window Fashions businesses. Dividends of $8.4 million were paid to shareholders.
The company had net debt of $5.7 million as at 30 June 2011 compared to net cash on deposit of $3.1 million at 30 June 2010.
Asia Pacific (Excluding China)
Local Currency
Sales
EBITDA
FY11
(A$M’s)
67.5
9.1
FY10
(A$M’s)
71.4
9.3
Change
(%)
-5%
-2%
A sales decline from the prior year of 5% was due to a very mild and wet summer period on the east coast of Australia which had a
particularly strong negative impact on sales of Coolaroo product sold through retail channels which could not be fully offset by other
segments of the business which performed well. Whilst the wet weather and flooding created challenges in many markets, they provided
good conditions in some agricultural markets, particularly grain and cotton markets. As a result, sales of coated fabrics sold into these
markets were well ahead of the previous year. There were strong sales of new products including weed mat and synthetic grass as these
new branded product programs were rolled out fully into the retail market. Significant efficiency gains were made in the Australian
manufacturing operation during the year which contributed positively to the overall result.
The continued weak horticultural market in New Zealand resulted in lower sales of commercial shade cloth and protective nets, however
sales of Coolaroo products sold through retail channels in New Zealand increased by more than 10%.
Sales to Japanese customers increased by more than 20% on the previous year helped by government targets set to encourage
homeowners to reduce energy consumption by 15% which increased demand for exterior window shade products.
EBITDA for the Asia Pacific region fell slightly year on year but was still a very solid result considering the sales decline which resulted
from one of the worst summers recorded in Australia.
Americas
Local Currency
Sales
EBITDA
FY11
(US$M’s)
19.3
0.5
FY10
(US$M’s)
18.7
0.8
Change
(%)
+3%
-37%
Given that market conditions in the USA continue to be extremely challenging and remain subdued, we are pleased to report a small but
positive uplift in sales of 3% year on year. Consumer confidence is low and the markets for Gale products are best described as patchy
and unpredictable at present with many retail customers reducing inventory levels and taking a cautious approach on seasonal programs.
During the year we have been further challenged by regulatory changes in the window furnishings industry forcing widespread changes to
product design to reduce or eliminate the use of exposed loop cords on interior window furnishings which has led to a number of product
deletions and industry wide product recalls. This has resulted in the deletion of some parts of the Coolaroo range in the USA market. We
have developed a number of new initiatives to overcome these changes and proposed new industry standards which are being finalised
with customers for next season.
Sales of commercial fabrics increased by more than 50% due to strengthened field sales resources and increased activity in commercial
markets. We plan to launch a full range of fire retardant commercial knitted fabrics in 2011 / 2012 along with the release of the
waterproof Synthesis Commercial 95 range in the USA market. EBITDA fell in the USA by US$300,000 for the year due to increased
margin pressure from rising product costs, increased freight costs and costs associated with the window shade product changes to comply
with industry regulatory changes.
2011 Annual Report
5
Chairman’s And Managing Director And Chief Executive Officer’s Report (continued)
Middle East
Local Currency
Sales
EBITDA
FY11
(US$M’s)
6.4
1.3
FY10
(US$M’s)
5.4
0.9
Change
(%)
+18%
+44%
The Middle East business performed strongly. Sales growth of 18% over the prior year in local currency was due to solid growth in the
Saudi market generated from new customers gained throughout the year and increasing work from Gale products being specified and
major project wins. Sales in Saudi Arabia increased by more than 40% year on year. Whilst construction activity remained flat in other
parts of the region, particularly Dubai, we managed to achieve year on year sales increases in most of the major regions (U.A.E., Kuwait
and Qatar).
During the 2010 / 2011 financial year we shipped a major portion of the knitted fabric for the large (300,000 m2) mass vehicle storage
project awarded to Gale earlier in the year. Another major source of sales growth has been the successful market launch of our new
waterproof range of Synthesis Commercial 95 fabric which has gained wide market acceptance in a very short period of time.
EBITDA increased by a healthy US$400,000 or 44% in our Middle East business due to the increased sales activity and tight expense
controls in place. Debtor collections in the Middle East have been excellent and we continue to operate with very tight trading terms in
the region.
China
Local Currency
Sales - International
Sales - Internal
EBITDA
FY11
(US$M’s)
1.9
22.7
5.0
FY10
(US$M’s)
(0.1)
26.5
4.3
Change
(%)
+100%
-7%
+16%
Excellent results have been generated from our Chinese manufacturing operation. Scrap rates have continued to reduce throughout the
year as part of the continuous manufacturing improvement program. Margins have increased, despite lower volumes and higher wage
rates, due in part to continuing labour efficiencies, lower overhead costs and improved yields.
International market development
A full time dedicated resource was added to the team earlier in the year, focused on international market development, the opportunities
in new and existing markets have grown significantly over the past 12 months. We have attracted new customers in untapped markets
including South Africa, Spain, France, Chile, and Israel. We have also identified and capitalised on new opportunities with existing
customers.
International sales to third party customers are largely invoiced from China and were US$1,900,000 (2009/2010 : (US$69,000)).
Acquisition of Zone Hardware and Riva Window Fashions
The acquisition of Zone Hardware and Riva Window Fashions was concluded on 1 June 2011 and will add substantial sales and profit
growth to the company’s 2011/2012 results. Zone Hardware specialises in the marketing and distribution of branded home improvement
products sold into the do-it-yourself home improvement market, mass merchants and specialty retail outlets.
Riva Window Fashions has been recently established and specialises in a diverse range of custom window furnishings made specifically to
the consumer’s window measurements and specifications. This exciting new range is promoted and sold by Bunnings Warehouse with
measure and installation services provided by professional authorised Riva representatives. This program has already been launched
through all Melbourne and Brisbane metropolitan stores and will be rolled out nationally over the coming months. The hiring of the
professional field installer team has commenced and will be implemented fully with the planned store roll out. The Riva custom window
shade program gives both Bunnings and Riva entry into the large custom window shade market in Australia.
Integration plans to combine the operations of Zone and Riva with Gale are well underway.
6 Gale Pacific Limited ABN 80 082 263 778
Chairman’s And Managing Director And Chief Executive Officer’s Report (continued)
Organic and acquisition growth
Gale maintains a strong continuous improvement culture, skilled and motivated employees and management, and an effective and
efficient infrastructure. Innovation and product development continues to be a main focus as a driver of growth from our core business
base. The Company has ongoing strong cash generation and a strong balance sheet. The acquisition of the Zone Hardware and Riva
Window Fashions businesses will provide a solid contribution to the future results. Further complementary acquisitions are being assessed
and actively pursued.
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 improvements have been
made during the year particularly in the area of manufacturing efficiency gains and waste reduction initiatives.
We would like to welcome the team from Zone and Riva to the Gale community and look forward to their involvement and contribution
to the business.
Outlook
Trading conditions are expected to remain challenging with consumer and business confidence levels low in most markets. Retail
conditions in Australia are difficult, but on a positive note we do expect good market conditions in the agricultural market in Australia for
the coming season.
With the addition of the Zone and Riva businesses and planned international sales expansion of Coolaroo and Synthesis branded products
we expect to deliver another solid financial result in 2011/2012 in what will be a very difficult and volatile global market environment.
Gale continues to generate strong positive cash flows and operates with a solid balance sheet with the capacity to support further growth
opportunities which we continue to explore.
Annual General Meeting
A notice of the Company’s Annual General Meeting to be held on 28 October 2011 and a voting form is enclosed with this report.
Mr David Allman
Chairman
25 August 2011
Mr Peter McDonald
Managing Director and Chief Executive Officer
25 August 2011
2011 Annual Report
7
BOARD OF DIRECTORS
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 Non Executive Director of McPherson’s Limited.
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 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 Gale’s United States
operations.
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 an
Executive Director of Investec Bank (Australia) Limited and Non Executive Director of 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, 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.
8 Gale Pacific Limited ABN 80 082 263 778
SENIOR MANAGEMENT
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.
2011 Annual Report
9
CORPORATE GOVERNANCE
This statement sets out the corporate governance practices that were in operation throughout the 2011 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.
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.
10 Gale Pacific Limited ABN 80 082 263 778
Corporate Governance (continued)
The following information is set out in the Company’s annual report:
(cid:131)
(cid:131)
(cid:131)
(cid:131)
(cid:131)
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:
(cid:131)
(cid:131)
(cid:131)
(cid:131)
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.
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.
The Company has adopted a gender diversity policy. The policy includes requirements for the board to establish measurable objectives for
achieving gender diversity for the board to assess annually both the objectives and progress in achieving them. Progress towards achieving
the gender diversity objectives set by the board will be measured and reported on in the Company’s 2012 annual report.
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:
(cid:131)
(cid:131)
(cid:131)
(cid:131)
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.
2011 Annual Report
11
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.
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:
(cid:131)
(cid:131)
(cid:131)
(cid:131)
(cid:131)
(cid:131)
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.
12 Gale Pacific Limited ABN 80 082 263 778
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.
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.
2011 Annual Report
13
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 2011.
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 Non Executive Director of McPherson's Limited.
Other than the above, no other directorships of listed companies were held by Mr Allman at anytime during the three years prior to 30
June 2011.
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 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 2011.
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 an Executive Director of Investec Bank (Australia) Limited and Non Executive Director of Specialty Fashion Group Limited.
No other directorships of listed companies were held by Mr Murphy at any time during the three years prior to 30 June 2011.
Mr Murphy is the Chairman of the Company's Remuneration Committee and is a member of the Audit and Risk and Nomination
Committees.
14 Gale Pacific Limited ABN 80 082 263 778
Directors’ Report (continued)
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,
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 2011.
Mr Richards is Chairman of the Company’s Audit and Risk Committee and is a member of the Nomination and Remuneration
Committees.
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.
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 $7.110 million. Refer
to the Chairman and Managing Director and Chief Executive Officer’s Report for further details on the Group’s result.
STATE OF AFFAIRS
On 1 June 2011 the Group acquired 100% of the shares and units of Zone Hardware Pty Ltd and Riva Window Fashions Pty Ltd. For
details of the acquisition refer to Note 29 of the financial statements.
There were no other significant changes in the state of affairs of the Group during the financial year.
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 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.
2011 Annual Report
15
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
Dividends paid to members during the financial year were as follows:
Final ordinary dividend for the year ended 30 June 2010 of one cent per share paid on 22 October 2010
Special dividend for the year ended 30 June 2010 of one cent per share paid on 22 October 2010
Interim ordinary dividend for the year ended 30 June 2011 of one cent per share paid on 25 March 2011
2010 / 2011
($000)
2,797
2,797
2,797
2009 / 2010
($000)
-
-
-
In addition to the above dividends, since the end of the financial year the Directors have recommended the payment of a final ordinary
dividend of 1.2 cents per share to be paid on 3 October 2011.
Dividends for the full year of 2.2 cents per share have been declared on diluted earnings of 2.4 cents per share. This represents a 10%
increase on full year ordinary dividends compared to last year. The final dividend payment of 1.2 cents per share will be fully franked and
will be paid to shareholders on Monday 3 October 2011. Gale considers this dividend frankable for Australian tax purposes as the
dividends are being paid out of current year profits and Gale has sufficient franking credits available to fully frank this dividend. However,
the Commissioner of Taxation has informally expressed a preliminary view on dividend franking capability in an ATO Draft Fact Sheet
dated 21 June 2011 which may or may not support the Company’s position. Shareholders will be advised should there be any impact on
the franking of Gale dividends.
SHARE BASED PAYMENTS
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 a continuation of
employment to 30 June 2012 and then 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 a continuation of employment to 30 June 2013 and then 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 24 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
-
978,105
-
491,899
Options
-
-
-
-
Performance Rights
-
3,000,000
-
-
16 Gale Pacific Limited ABN 80 082 263 778
DIRECTORS’ MEETINGS
The table below sets out the attendance by Directors.
Directors’ Meetings
Audit and Risk Committee
Meetings
Remuneration Committee
Meetings
Nomination Committee
Meetings
Directors
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
D Allman
P McDonald
J Murphy
G Richards
12
12
12
12
12
12
12
12
2
-
2
2
2
-
2
2
1
-
1
1
1
-
1
1
1
-
1
1
1
-
1
1
By Board invitation, Mr Peter McDonald also attended all of the Audit and Risk, Remuneration and Nomination Committee meetings.
The members of the Audit Committee are David Allman, John Murphy and George Richards. The Chairman of the Audit and Risk
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:131)
(cid:131)
(cid:131)
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:131)
(cid:131)
Primary benefits – salary / fees; and
Benefits, including the provision of motor vehicles and incentive schemes, including performance rights;
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.
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, 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.
2011 Annual Report
17
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 2011 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:131)
(cid:131)
(cid:131)
Reward executives for Group and individual performance;
Align the interests of the executives with those of the shareholders; and
Ensure that total remuneration is competitive by market standards.
Structure
In determining the level and make up of executive remuneration, the Remuneration Committee reviews reports detailing market levels of
remuneration for comparable roles. Remuneration consists of fixed and variable elements.
(a).
Share Based Payments
The Group maintains a performance rights scheme 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 increasing the diluted earnings per share and relate to:
(cid:131)
(cid:131)
(cid:131)
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:131)
(cid:131)
(cid:131)
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
One year short term performance cash bonus payments are awarded in accordance with the company’s remuneration policy. The
budget targets for each business unit and the company overall is established each year by the Board. The performance criteria
include sales and earnings before interest and tax growth and working capital management. For corporate executives, the
performance criteria include growth in earnings before interest tax and depreciation and profit after tax.
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)
18 Gale Pacific Limited ABN 80 082 263 778
The following table discloses the remuneration of the Directors of the Company:
2010 / 2011
Short Term Benefits
Post
Employment
Share Based
Payments
Total
Performance Related
Directors
Salary &
Fees
$
Executive Directors
P McDonald
458,241
Non Executive Directors
D Allman
G Richards
J Murphy
Total
105,505
63,073
65,000
691,819
Bonus
$
-
-
-
-
-
Non
Monetary
$
5,009
-
-
-
5,009
Super
$
25,000
9,495
11,927
-
46,422
Performance
Rights
$
$
162,739
650,989
-
-
-
115,000
75,000
65,000
162,739
905,989
Total
%
25.0
-
-
-
Performance
Rights
%
25.0
-
-
-
2009 / 2010
Short Term Benefits
Post
Employment
Share Based
Payments
Total
Performance Related
Directors
Salary &
Fees
$
Bonus
$
Non
Monetary
$
Executive Directors
P McDonald
415,485
163,500
28,643
Non Executive Directors
D Allman 1
H Boon 2
G Richards
J Murphy
Total
65,602
54,287
68,807
65,000
-
-
-
-
-
-
-
-
669,181
163,500
28,643
Super
$
20,872
5,904
2,636
6,193
-
35,605
Performance
Rights
$
$
94,076
722,576
-
-
-
-
71,506
56,923
75,000
65,000
94,076
991,005
Total
%
35.6
-
-
-
-
Performance
Rights
%
13.0
-
-
-
-
The following table discloses the remuneration of the Group’s key management personnel and the five highest paid executives.
2010 / 2011
Short Term Benefits
Post
Employment
Share Based
Payments
Total
Performance Related
Key
management
personnel
J Cox
S McPherson
M Denney3
A Scott4
B Wang5
Total
Salary &
Fees
$
273,240
292,083
257,389
158,659
147,736
Bonus
$
47,681
20,000
12,388
52,667
53,583
1,129,107
186,319
Non
Monetary
$
-
-
12,380
-
7,266
19,646
Super
$
29,948
22,917
-
16,381
-
69,246
Performance
Rights
$
40,630
40,630
40,630
59,156
40,630
$
391,499
375,630
322,787
286,863
249,215
221,676
1,625,994
Total
%
22.6
16.1
16.4
39.0
37.8
Performance
Rights
%
10.4
10.8
12.6
20.6
16.3
2009 / 2010
Short Term Benefits
Post
Employment
Share Based
Payments
Total
Performance Related
Key
management
personnel
J Cox
S McPherson
M Denney 3
B Wang 5
R Campbell
Total
Salary &
Fees
$
264,908
275,000
265,108
128,902
169,129
Bonus
$
118,388
81,000
87,483
35,064
19,261
Non
Monetary
$
-
-
16,887
14,457
-
1,103,047
341,196
31,344
Super
$
23,842
25,229
-
-
15,222
64,293
Performance
Rights
$
40,630
40,630
40,630
40,630
-
$
447,768
421,859
410,108
219,053
203,612
162,520
1,702,400
Total
%
35.5
28.8
31.2
34.6
9.5
Performance
Rights
%
9.07
9.63
9.91
18.55
-
1 Mr Allman was appointed as a Non Executive Director and Chairman on 17 November 2009. His remuneration for the reporting period is 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 is to that date.
3 Mr Denney is based in the United States of America and remunerated in United States dollars converted to Australian dollars in the table above.
4 Mr Scott is the General Manager International Sales and Marketing and is located in Australia.
5 Mr Wang is based in China and remunerated in Chinese renminbi converted to Australian dollars in the table above.
2011 Annual Report
19
Share Based Compensation
The terms and conditions of each grant of performance rights granted as at 30 June 2011 affecting remuneration in the current or a future
reporting period are as follows:
Grant Date
Value per performance rights at grant date
18 August 2010
0.20
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 a continuation of employment to 30 June 2013 and then the satisfying of relevant performance
hurdles based on improvements in 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 30 June 2020.
No of Performance
Rights Granted
During the Year
Value Per
Performance Rights at
Grant Date
Value of Performance
Rights at Grant Date
($)
No. of Performance
Rights Lapsed During
the Year
Value of Lapsed
Performance Rights
($)
Key Management Personnel
A Scott
Other Management Personnel
Other Management
Total
980,000
1,960,000
2,940,000
0.20
0.20
196,000
392,000
588,000
-
-
-
-
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:
Taxation services
Assurance services regarding acquisition
Capital registration audit
Government grant review
Total
Consolidated
2010 / 2011
($000)
2009 / 2010
($000)
37
37
2
2
78
43
-
2
2
47
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.
20 Gale Pacific Limited ABN 80 082 263 778
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
25 August 2011
Mr Peter McDonald
Managing Director and Chief Executive Officer
25 August 2011
2011 Annual Report
21
AUDITOR’S INDEPENDENCE DECLARATION
To the Directors of Gale Pacific Limited
In relation to the independent audit for the year ended 30 June 2011, to the best of my knowledge and belief there have been:
(i) No contraventions of the auditor independence requirements of the Corporations Act 2001.
(ii) No contraventions of any applicable code of professional conduct.
S Schonberg
Partner
25 August 2011
PITCHER PARTNERS
MELBOURNE
22 Gale Pacific Limited ABN 80 082 263 778
DIRECTORS’ DECLARATION
The Directors of the Company declare that:
The financial statements and notes, as set out on pages 25 to 66 are in accordance with the Corporations Act 2001 including:
(cid:131)
(cid:131)
(cid:131)
(cid:131)
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 2011 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
25 August 2011
Mr Peter McDonald
Managing Director and Chief Executive Officer
25 August 2011
2011 Annual Report
23
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF GALE PACIFIC LIMITED
Report on the Financial Report
We have audited the accompanying financial report of Gale Pacific Limited and controlled entities, which comprises the consolidated
statement of financial position as at 30 June 2011, the consolidated statement of comprehensive income, the consolidated statement of
changes in equity and the consolidated statement of cash flows for the year then ended, notes comprising a summary of significant
accounting policies and other explanatory information, and the directors' declaration of the consolidated entity comprising the company
and the entities it controlled at the year's end or from time to time during the financial year.
Directors' Responsibility for the Financial Report
The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with
Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to
enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error. In Note 1, the
directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements
comply with International Financial Reporting Standards.
Auditor's Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with
Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements
and plan and perform the audit to obtain reasonable assurance about 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 of the financial report that gives a true and fair view 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.
Opinion
In our opinion:
(a)
the financial report of Gale Pacific Limited is in accordance with the Corporations Act 2001, including:
(i)
giving a true and fair view of the consolidated entity's financial position as at 30 June 2011 and of its performance for the
year ended on that date; and
(ii)
complying with Australian Accounting Standards and the Corporations Regulations 2001; and
(b)
the consolidated financial report also complies with International Financial Reporting Standards as disclosed in Note 1.
Report on the Remuneration Report
We have audited the Remuneration Report included in pages 17 to 20 of the Directors' Report for the year ended 30 June 2011. 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.
Opinion
In our opinion, the Remuneration Report of Gale Pacific Limited and controlled entities for the year ended 30 June 2011 complies with
section 300A of the Corporations Act 2001.
S Schonberg
Partner
25 August 2011
PITCHER PARTNERS
MELBOURNE
24 Gale Pacific Limited ABN 80 082 263 778
FINANCIAL RESULTS
CONTENTS
Consolidated Income Statement .......................................... 26
Consolidated Statement of Comprehensive Income ........ 27
Consolidated Statement of Financial Position ................... 28
Consolidated Statement of Changes in Equity .................. 29
Consolidated Statement of Cash Flows .............................. 30
Notes to the Financial Statements ....................................... 31
Additional Securities Exchange Information ..................... 67
2011 Annual Report
25
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 30 JUNE 2011
Revenue
Cost of goods sold
Gross profit
Other Income
Warehousing and distribution
Marketing and selling
Administration
Other expenses
Net finance costs
Profit from continuing operations before income tax
Income tax expense
Profit from continuing operations after income tax
Profit from discontinued operations
Profit for the year
Note only: Depreciation and amortisation (from continuing operations)
Earnings Per Share
From continuing and discontinued operations
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
From continuing operations
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
The accompanying notes form part of these financial statements.
Note
2
3
4
23
19
3
Consolidated
2010 / 2011
($000)
2009 / 2010
($000)
95,580
(58,808)
36,772
140
(7,937)
(7,407)
(9,461)
(2,187)
(859)
9,061
(1,961)
7,100
10
7,110
98,811
(62,788)
36,023
472
(7,675)
(7,538)
(10,458)
(1,506)
(1,247)
8,071
(2,060)
6,011
11
6,022
(5,938)
(7,186)
2.54
2.42
2.54
2.42
2.15
2.08
2.15
2.07
26 Gale Pacific Limited ABN 80 082 263 778
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2011
Profit for the year
Other Comprehensive Income
Net changes in fair value of cash flow hedges, net tax
Exchange differences on translation of foreign operations
Other comprehensive loss for the year
Total comprehensive income / (loss) for the year
Profit Attributable To
Members of the parent
Profit for the year
Total Comprehensive Income Attributable To
Members of the parent
Total comprehensive income / (loss) for the year
The accompanying notes form part of these financial statements.
Consolidated
Note
2010 / 2011
($000)
2009 / 2010
($000)
7,110
6,022
18
18
(807)
(11,406)
(12,213)
(5,103)
7,110
7,110
(5,103)
(5,103)
558
(2,749)
(2,191)
3,831
6,022
6,022
3,831
3,831
2011 Annual Report
27
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FOR THE YEAR ENDED 30 JUNE 2011
Consolidated
Note
2010 / 2011
($000)
2009 / 2010
($000)
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
Retained earnings
Total equity
The accompanying notes form part of these financial statements.
28 Gale Pacific Limited ABN 80 082 263 778
6
7
9
8
4
10
11
12
4
13
14
15
4
16
14
4
16
17
18
19
9,596
13,971
-
21,827
72
638
46,104
36,905
17,003
418
54,326
100,430
7,458
15,177
1,063
1,688
2,225
27,611
155
4,651
54
4,860
32,471
67,959
107,086
(19,544)
(19,583)
67,959
15,139
14,142
341
20,281
-
913
50,816
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
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2011
30 June 2011
Note
Contributed
Equity
($000)
Reserves
($000)
Retained
Earnings
($000)
Total Equity
($000)
Balance at 1 July 2010
105,586
(7,899)
(18,191)
79,496
Profit for the year
Other comprehensive income / (loss) for the year
Total comprehensive income / (loss) for the year
Transactions With Owners In Their Capacity As Owners
Contributions, net of raising costs and tax
Employee share based payments
Statutory transfer to reserves
Dividends paid
17
18
-
-
-
1,500
-
-
-
Total transactions with owners in their capacity as owners
1,500
-
(12,213)
(12,213)
-
457
111
-
568
7,110
-
7,110
-
-
(111)
(8,391)
(8,502)
7,110
(12,213)
(5,103)
1,500
457
-
(8,391)
(6,434)
Balance at 30 June 2011
107,086
(19,544)
(19,583)
67,959
30 June 2010
Note
Contributed
Equity
($000)
Reserves
($000)
Accumulated
Losses
($000)
Total Equity
($000)
Balance at 1 July 2009
105,594
(5,965)
(24,213)
75,416
Profit for the year
Other comprehensive income / (loss) for the year
Total comprehensive income / (loss) for the year
Transactions With Owners In Their Capacity As Owners
Contributions, net of raising costs and tax
Employee share based payments
18
18
Total transactions with owners in their capacity as owners
-
-
-
(8)
-
(8)
-
(2,191)
(2,191)
-
257
257
6,022
-
6,022
-
-
-
6,022
(2,191)
3,831
(8)
257
249
Balance at 30 June 2010
105,586
(7,899)
(18,191)
79,496
The accompanying notes form part of these financial statements.
2011 Annual Report
29
Consolidated
Note
2010 / 2011
($000)
2009 / 2010
($000)
23
29
100,699
(87,200)
105
(964)
(1,222)
11,418
254
(11,150)
(626)
(35)
(11,557)
-
5,017
212
(18)
(8,391)
(3,180)
(3,319)
15,139
(2,429)
9,391
106,302
(87,652)
95
(1,350)
558
17,953
40
-
(1,160)
-
(1,120)
(11)
(8,588)
(69)
(29)
-
(8,697)
8,136
7,141
(138)
15,139
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2011
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
Cash Flow From Investing Activities
Proceeds from sale of plant and equipment
Proceeds / (payment) from / for disposal / acquisition of business
Payment for plant and equipment
Payment for intangible assets
Net cash used by investing activities
Cash Flow From Financing Activities
Proceeds from issue of equity securities
Proceeds from / (repayment of) borrowings
Proceeds from / (repayment of) principal on finance leases
Repayment of principal on hire purchase
Dividends paid
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
23
The accompanying notes form part of these financial statements.
30 Gale Pacific Limited ABN 80 082 263 778
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1: Statement of Significant Accounting Policies
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 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, comply with Australian equivalents to International Financial Reporting
Standards.
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 financial report also complies with the International Financial Reporting Standards (IFRS) as issued by the International
Accounting Standards Board (IASB).
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.
(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 26.
The financial statements of subsidiaries are prepared for the same reporting period as the parent entity, using consistent
accounting policies. Adjustments are made to bring into line any dissimilar accounting policies, which may exist.
All inter company balances and transactions, including any unrealised profits or losses have been eliminated on consolidation.
Subsidiaries are consolidated from the date on which control is established and are de-recognised from the date that control
ceases.
(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:131)
(cid:131)
Note 12 – Intangible Assets
Note 27 – Financial Instruments
(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.
2011 Annual Report
31
NOTE 1: Statement of Significant Accounting Policies (continued)
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:131)
(cid:131)
(cid:131)
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.
In the 2008 / 2009 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.
Consolidated
Note
2010 / 2011
($000)
2009 / 2010
($000)
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
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
6,842
6,800
9,473
23,115
2,999
6,842
6,800
9,473
23,115
559
It is impracticable to estimate the effect of this change on future periods because movements in foreign exchange rates cannot be
predicted.
32 Gale Pacific Limited ABN 80 082 263 778
NOTE 1: Statement of Significant Accounting Policies (continued)
(f).
Segment Reporting
Operating segments are reported based on internal reporting provided to the Managing Director and Chief Executive Officer
who is the Group’s chief operating decision maker.
(g). Revenue Recognition
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to
the buyer and the costs incurred or to be incurred in respect of the transaction can be measured reliably. Risks and rewards of
ownership are considered passed to the buyer at the time of the delivery of goods to the customer.
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.
(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
Depreciation Rates
Depreciation Basis
2.25%
Determined by lease term
6.7% - 50.0%
20.0%
20.0% - 50.0%
Straight line
Straight line
Straight line
Straight line
Straight line
2011 Annual Report
33
NOTE 1: Statement of Significant Accounting Policies (continued)
(k).
Leases
Leases are classified at their inception as either operating or finance leases based on the economic substance of the agreement so
as to reflect the risks and benefits incidental to ownership.
Finance Leases
Leases of fixed assets, where substantially all the risks and benefits incidental to the ownership of the asset, but not the legal
ownership, are transferred to the entities within the Group are classified as finance leases. Finance leases are capitalised, recording
an asset and a liability equal to the present value of the minimum lease payments, including any guaranteed residual values. The
interest expense is calculated using the interest rate implicit in the lease and is included in finance costs in the statement of
comprehensive income. Leased assets are depreciated on a straight line basis over their estimated useful lives or over the term of
the lease. Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the period.
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.
(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 whenever events or circumstances arise that
indicate that the carrying amount of the asset may be impaired.
An impairment loss is recognised where the carrying amount of the asset exceeds its recoverable amount. The recoverable
amount of an asset is defined as the higher of its fair value less costs to sell, and value in use.
Refer to note 1(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.
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.
34 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:131)
(cid:131)
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 a share performance rights scheme 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 weighted
average share price, and is recognised as an employee expense over the period during which the employees become entitled to the
option or performance right.
(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.
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.
2011 Annual Report
35
NOTE 1: Statement of Significant Accounting Policies (continued)
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. Management has not yet
assessed the impact of these standards and interpretations.
Continuing
2010 / 2011
($000)
2009 / 2010
($000)
95,580
95,580
98,811
98,811
NOTE 2: Revenue
Consolidated
Operating Activities
Sale of goods – other parties
Total revenue
36 Gale Pacific Limited ABN 80 082 263 778
NOTE 3: Profit
Profit before income tax expense has been determined after charging / (crediting):
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
Net finance costs
Depreciation of Non Current Assets
Buildings
Leasehold improvements
Plant and equipment
Motor vehicles
Office equipment
Amortisation of Non Current Assets
Leased motor vehicles
Patents and trademarks
Application software
Research and Development Expenditure
Amortisation of previously capitalised expenditure
Expensed as incurred
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
Assurance services regarding acquisition
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 foreign exchange losses
Net Loss on Disposal of Non Current Assets
Plant and equipment
Motor vehicles
Office equipment
Operating lease rental expense
Share based payment (benefit) / expense
2010 / 2011
($000)
2009 / 2010
($000)
Continuing
Discontinued
Continuing
Discontinued
102
38
-
140
38,792
18,500
(105)
964
859
303
33
4,983
27
266
32
60
234
-
-
75
38
2
211
24
37
2
274
112
13
2
127
401
166
463
13
1
1,951
457
-
-
-
-
-
-
-
-
-
-
-
233
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
399
3
70
472
37,665
18,559
(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
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2011 Annual Report
37
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
2010 / 2011
($000)
2009 / 2010
($000)
944
668
1,612
1,961
(349)
1,612
1,581
456
2,037
2,060
(23)
2,037
(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
Tax losses not recognised
Previously unrecognised tax losses utilised
Exempt income
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
2010 / 2011
($000)
2,615
(445)
110
(359)
(77)
(11)
126
1,959
2
1,961
(349)
1,612
2009 / 2010
($000)
2,420
(366)
101
(227)
-
(133)
225
2,020
40
2,060
(23)
2,037
(c).
Income Tax Recognised Directly in Equity
The following current and deferred tax amounts were (credited) / debited directly to equity during the period.
Consolidated
2010 / 2011
($000)
2009 / 2010
($000)
-
(362)
(362)
(3)
238
235
Deferred Tax
Equity raising costs deductible over 5 years
Cash flow hedges
Total
38 Gale Pacific Limited ABN 80 082 263 778
NOTE 4: Income Tax (continued)
(d).
Current Tax
Current tax asset
Current tax liability
Total
(e). Movement in Net Carrying Amount
Movement in the current tax net carrying amount between the beginning and the end of the year.
Balance at the beginning of the year
Current year tax expense
Income tax payments / (refunds)
Acquired business
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
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 1
Deferred tax liability 1
Total
1 The deferred tax balances do not offset as they relate to different tax jurisdictions
Consolidated
2010 / 2011
($000)
2009 / 2010
($000)
72
(1,688)
(1,616)
-
(1,355)
(1,355)
Consolidated
2010 / 2011
($000)
(1,355)
(944)
1,222
(541)
2
(1,616)
2009 / 2010
($000)
763
(1,581)
(558)
-
21
(1,355)
Consolidated
2010 / 2011
($000)
2009 / 2010
($000)
127
(5,135)
-
-
5
107
254
390
(253)
-
135
137
(10)
(4,711)
(71)
109
18
(275)
293
482
(278)
7
310
123
(4,233)
(4,003)
418
(4,651)
(4,233)
379
(4,382)
(4,003)
2011 Annual Report
39
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
Consolidated
2010 / 2011
($000)
2009 / 2010
($000)
1,794
33,403
35,197
1,834
33,403
35,237
NOTE 5: Operating Segments
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
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.
40 Gale Pacific Limited ABN 80 082 263 778
NOTE 5: Operating Segments (continued)
Segment Information Reporting – Geographical Segments
30 June 2011
Revenue outside the economic entity
Inter segment revenue
Total revenue
Segment EBITDA
Depreciation and amortisation
Segment EBIT
Net finance expense
Profit before income tax
Income tax expense
Profit for the year
Segment assets
Segment liabilities
30 June 2010
Revenue outside the economic entity
Inter segment revenue
Total revenue
Segment EBITDA
Depreciation and amortisation
Segment EBIT
Net finance expense
Profit before income tax
Income tax expense
Profit for the year
Segment assets
Segment liabilities
46,472
24,459
39,079
6,001
11,908
1,789
3,620
294
Asia
Pacific
($000)
67,549
798
68,347
9,094
(1,380)
7,714
-
-
-
-
China
Americas
($000)
1,918
22,660
24,578
5,041
(4,255)
786
-
-
-
-
($000)
19,605
(130)
19,475
501
(295)
206
-
-
-
-
Asia
Pacific
($000)
71,401
571
71,972
9,286
(2,136)
7,150
-
-
-
-
China
Americas
($000)
(81)
27,721
27,640
5,082
(4,586)
496
-
-
-
-
($000)
21,343
69
21,412
915
(457)
458
-
-
-
-
Middle
East
Unallocated
($000)
($000)
Total
Continuing
Operations
($000)
Discontinued
Operations
($000)
6,508
169
6,677
1,337
(8)
1,329
-
-
-
-
6,148
150
6,298
989
(7)
982
-
-
-
-
-
95,580
(23,497)
(23,497)
(115)
-
(115)
-
-
-
-
(660)
(72)
-
95,580
15,858
(5,938)
9,920
(859)
9,061
(1,961)
7,100
100,419
32,471
-
-
-
(106)
(233)
(339)
-
(339)
349
10
11
-
-
98,811
(28,511)
(28,511)
232
-
232
-
-
-
-
(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
Middle
East
Unallocated
($000)
($000)
Total
Continuing
Operations
($000)
Discontinued
Operations
($000)
Total
Group
($000)
95,580
-
95,580
15,752
(6,171)
9,581
(859)
8,722
(1,612)
7,110
100,430
32,471
Total
Group
($000)
98,811
-
98,811
16,522
(7,216)
9,306
(1,247)
8,059
(2,037)
6,022
107,396
34,235
12,175
52,901
12,701
16,381
1,869
4,116
286
913
27,900
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 $28,961,000 (2010 : $31,546,000) of the Group’s total revenues.
2011 Annual Report
41
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
Movement in the provision for doubtful debts were:
Balance at the beginning of the year
Charge for the year
Amounts written off
Acquired businesses
Net foreign currency movements arising from foreign operations
Balance at the end of the year
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
42 Gale Pacific Limited ABN 80 082 263 778
Consolidated
2010 / 2011
($000)
2009 / 2010
($000)
20
9,068
508
9,596
12
8,486
6,641
15,139
Consolidated
2010 / 2011
($000)
2009 / 2010
($000)
13,623
(324)
13,299
672
13,971
(282)
(37)
35
(87)
47
(324)
13,900
(282)
13,618
524
14,142
(258)
(219)
198
-
(3)
(282)
Consolidated
2010 / 2011
($000)
2009 / 2010
($000)
2,723
1,844
17,555
(295)
21,827
2,866
1,952
15,699
(236)
20,281
Consolidated
2010 / 2011
($000)
2009 / 2010
($000)
-
-
341
341
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
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
Consolidated
2010 / 2011
($000)
2009 / 2010
($000)
638
638
913
913
Consolidated
2010 / 2011
($000)
2009 / 2010
($000)
8,019
(1,181)
6,838
57,715
(28,689)
29,026
474
(327)
147
149
(110)
39
831
(511)
320
4,429
(3,905)
524
11
36,905
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
2011 Annual Report
43
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
2010 / 2011
($000)
2009 / 2010
($000)
Buildings
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
Plant and Equipment
Balance at the beginning of the year
Additions
Disposals
Acquisitions through business combinations
Depreciation expense
Net foreign currency movements arising from foreign operations
Carrying amount at the end of the year
Leasehold Improvements
Balance at the beginning of the year
Reclassifications
Additions
Disposals
Acquisitions through business combinations
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
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
Disposals
Acquisitions through business combinations
Amortisation expense
Carrying amount at the end of the year
Office Equipment
Balance at the beginning of the year
Additions
Disposals
Acquisitions through business combinations
Depreciation expense
Net foreign currency movements arising from foreign operations
Carrying amount at the end of the year
44 Gale Pacific Limited ABN 80 082 263 778
8,512
-
-
(3)
(303)
(1,368)
6,838
40,001
475
(686)
39
(5,216)
(5,587)
29,026
129
-
33
(1)
20
(33)
(1)
147
89
(9)
(27)
(14)
39
103
(27)
276
(32)
320
555
240
(1)
35
(266)
(39)
524
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
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
Acquisition through business combinations
Net foreign currency movements arising from foreign operations
Carrying amount at the end of the year
Patents, Trademarks and Licences
Balance at the beginning of the year
Additions / (transfers)
Acquisitions through business combinations
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
Amortisation expense
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
Goodwill
Consolidated
2010 / 2011
($000)
2009 / 2010
($000)
17,507
(1,054)
16,453
1,295
(930)
365
1,298
(1,113)
185
4,865
(4,865)
-
17,003
5,829
11,112
(488)
16,453
397
35
4
(60)
(11)
365
423
(234)
(4)
185
-
-
-
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)
-
The recoverable amount of the cash generating units (CGU) have been determined based on a value in use calculation using the financial
budget for the 2011 / 2012 reporting period as approved by the Board of Directors and revenue growth for the further four year period
within the range of 3% to 8% depending on the demographic, economic, trading conditions and growth potential, of the CGU. The
discount rate applied to the cash flow projections is 11.42% (2010 : 12.99%) being the Group’s pre tax weighted average cost of capital.
The terminal value 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.
Australia
USA – (2010/2011 US$2,077,000: 2009/2010 US$2,077,000)
China
Zone Hardware Pty Ltd (provisionally accounted)
Total
Consolidated
2010 / 2011
($000)
3,073
1,921
347
11,112
16,453
2009 / 2010
($000)
3,073
2,409
347
-
5,829
2011 Annual Report
45
NOTE 12: Intangible Assets (continued)
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.
Assumptions Applicable To Five Year Cash Flow Forecast For Each Cash Generating Unit
Year one cash flows based on
Years two to five
2010 / 2011
2012 Budget
3% to 8%
2009 / 2010
2011 Budget
2% to 10%
The five year cash flow projections are based on the 2012 year budget (2010 : based on 2011 budget) and an ongoing growth rate of 3%
to 8% which is considered reasonable in light of past performance and future operating plans and business strategies.
Sensitivity Analysis
No reasonable change in the key assumptions of the value in use calculations would result in an impairment.
NOTE 13: Trade And Other Payables
Current
Trade payables
Sundry payables and accruals
Total
NOTE 14: Borrowings
Current
Secured liabilities:
Bank overdrafts
Bank loans
Other loans
Commercial bills
Finance lease liability
Hire purchase liability
Total
Unsecured liabilities:
Bank loans
Other loans
Total
Non Current
Secured liabilities:
Finance lease liability
Total
Total
Disclosed in the Financial Statements As
Current borrowings
Non current borrowings
46 Gale Pacific Limited ABN 80 082 263 778
Consolidated
2010 / 2011
($000)
2009 / 2010
($000)
4,364
3,094
7,458
4,979
2,290
7,269
Consolidated
2010 / 2011
($000)
2009 / 2010
($000)
205
4,574
-
10,000
166
-
14,945
232
-
232
155
155
15,332
15,177
155
-
7,430
1,554
-
109
18
9,111
2,803
75
2,878
-
-
11,989
11,989
-
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
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
Discontinued operations closure
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
2010 / 2011
($000)
2009 / 2010
($000)
1,063
1,063
1,063
-
-
-
Consolidated
2010 / 2011
($000)
2009 / 2010
($000)
1,541
353
-
331
54
2,279
2,225
54
1,595
623
445
43
(60)
35
353
553
-
(553)
-
58
631
(358)
331
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 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.
The restructuring is expected to be completed by January 2014 when the lease expires.
2011 Annual Report
47
NOTE 17: Contributed Equity
Paid Up Capital
Fully paid ordinary shares
Movement In Share Capital
Shares issued at the beginning of the financial year
Costs of capital raising (net of tax)
Shares issued during the year
Total
(a). Movement in Share Capital
Consolidated
2010 / 2011
($000)
2009 / 2010
($000)
107,086
105,586
Consolidated
2010 / 2011
(No. of Shares)
2010 / 2011
($000)
279,691,658
-
7,500,000
287,191,658
105,586
-
1,500
107,086
On 1 June 2011 the Company issued 7,500,000 ordinary shares at 20 cents per share as part of the purchase consideration for the
acquisition of Zone Hardware Pty Ltd and Riva Window Fashions Pty Ltd.
(b). Rights of Each Type of Share
Ordinary shares participate in dividends and the proceeds on winding up of the parent entity in proportion to the number of
shares held. At shareholders meetings each ordinary share is entitled to one vote when a poll is called.
The 7,500,000 ordinary shares issued on 1 June 2011 are not permitted to be sold for twelve months from their date of issue.
(c).
Capital Management
When managing capital, management’s objective is to ensure the consolidated entity continues as a going concern as well as to
maintain optimal returns to shareholders and benefits for other stakeholders. This is achieved through monitoring of historical
and forecast performance and cashflows.
During the year the Company paid dividends of $8,390,750 (2010: $Nil)
(d).
Share Based Payments
The Group maintains a performance rights scheme 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:131)
(cid:131)
(cid:131)
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 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 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:131)
(cid:131)
(cid:131)
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.
48 Gale Pacific Limited ABN 80 082 263 778
NOTE 17: Contributed Equity (continued)
Performance Rights
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 - 2011
30 Jun 2009
30 Jun 2019
1 Dec 2009
30 Jun 2019
18 Aug 2010
30 Jun 2020
Total
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
Nil
Nil
Nil
Nil
Nil
Nil
Nil
8,000,000
3,000,000
-
-
-
2,940,000
11,000,000
2,940,000
150,000
300,000
9,000,000
-
-
-
-
3,000,000
9,450,000
3,000,000
-
-
-
-
-
-
-
-
-
-
-
-
8,000,000
3,000,000
2,940,000
13,940,000
(150,000)
(300,000)
-
-
(1,000,000)
8,000,000
3,000,000
(1,450,000)
11,000,000
-
-
-
-
-
-
-
-
-
Performance Rights Valuation
Assumptions
Grant date share price
Exercise price
Expected Life
Tranche 1
Tranche 2
Dividend yield
Grant Date
18 August 2010
Grant Date
1 December 2009
Grant Date
30 June 2009
$0.20
Nil
2.9 years
2.9 years
0.0%
$0.14
Nil
2.6 years
2.6 years
0.0%
$0.061
Nil
3 years
3 years
0.0%
2011 Annual Report
49
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
2010 / 2011
($000)
(21,142)
1,200
(565)
963
2009 / 2010
($000)
(9,736)
743
242
852
(19,544)
(7,899)
Consolidated
2010 / 2011
($000)
2009 / 2010
($000)
(9,736)
(14,405)
2,999
(21,142)
(6,987)
(3,308)
559
(9,736)
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
Forward exchange contracts
Income tax related to cash flow hedges recognised
Balance at the end of the year
Consolidated
2010 / 2011
($000)
2009 / 2010
($000)
743
457
1,200
486
257
743
Consolidated
2010 / 2011
($000)
2009 / 2010
($000)
242
(1,169)
362
(565)
(316)
796
(238)
242
The hedging reserve represents hedging gains and losses recognised on the effective portion of cash flow hedges. The cumulative
gain or loss on the hedge is recognised as a profit or loss when the hedging instrument impacts the profit or loss, or is included as
a basis adjustment to a non financial hedged item, consistent with the applicable accounting policy.
(d). Enterprise Reserve Fund (Gale Pacific Special Textiles (Ningbo) Limited)
Balance at the beginning of the year
Statutory transfers from retained earnings
Balance at the end of the year
Consolidated
2010 / 2011
($000)
2009 / 2010
($000)
852
111
963
852
-
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.
50 Gale Pacific Limited ABN 80 082 263 778
NOTE 19: Accumulated Losses
Balance at the beginning of the year
Net profit attributable to members of the parent entity
Dividends paid
Transfers to reserves
Balance at the end of the year
NOTE 20: Dividends
The following dividends were paid during the year.
Fully Paid Ordinary Shares
Final Dividend
Fully franked at a 30% tax rate (date of payment 22 October 2010)
Special Dividend
Fully franked at a 30% tax rate (date of payment 22 October 2010)
Interim Dividend
Fully franked at a 30% tax rate (date of payment 25 March 2011)
Total
Dividend Franking Account
Balance of franking account on a tax paid basis at financial year end adjusted for franking credits arising
from payment of provision for income tax and franking debits arising from payment of proposed dividends.
Consolidated
2010 / 2011
($000)
2009 / 2010
($000)
(18,191)
7,110
(8,391)
(111)
(19,583)
(24,213)
6,022
-
-
(18,191)
Consolidated
2010 / 2011
Cents Per Share
2010 / 2011
($000)
1.0
1.0
1.0
3.0
2,797
2,797
2,797
8,391
Consolidated
2010 / 2011
($000)
2009 / 2010
($000)
445
1,659
2011 Annual Report
51
NOTE 21: Earnings Per Share
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:
Profit for the year
Earnings Used in the Calculation of Basic EPS
Adjustments to exclude profit for the period from discontinued operations
Earnings used in the calculation of basic and diluted EPS from continuing operations
Consolidated
2010 / 2011
(Cents Per Share)
2009 / 2010
(Cents Per Share)
2.54
-
2.54
2.42
-
2.42
2.15
-
2.15
2.07
0.01
2.08
Consolidated
2010 / 2011
($000)
2009 / 2010
($000)
7,110
(10)
7,100
6,022
(11)
6,011
Consolidated
2010 / 2011
(000’s)
2009 / 2010
(000’s)
Weighted average number of ordinary shares for the purposes of basic earnings per share
280,288
279,692
Weighted average number of shares deemed to be issued for no consideration in respect of:
Performance rights
Weighted average number of ordinary shares for the purposes of diluted earnings per share
13,545
293,833
10,183
289,875
52 Gale Pacific Limited ABN 80 082 263 778
NOTE 22: 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
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
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
Payable
Not longer than one year
Total
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.
Consolidated
2010 / 2011
($000)
2009 / 2010
($000)
259
109
368
(47)
321
166
155
321
170
-
170
(61)
109
109
-
109
Consolidated
2010 / 2011
($000)
2009 / 2010
($000)
-
-
-
-
-
-
20
20
(2)
18
18
18
Consolidated
2010 / 2011
($000)
2009 / 2010
($000)
1,726
902
2,628
1,956
2,282
4,238
Consolidated
2010 / 2011
($000)
2009 / 2010
($000)
39
39
44
44
2011 Annual Report
53
NOTE 23: Cash Flow Information
(a).
Reconciliation of Cash
Cash at the end of the financial year as shown in the statement of cash flows is reconciled to the
related items in the statement of financial position as follows:
Cash on hand
Cash at bank
Cash on deposit
Bank overdrafts
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
Increase / (decrease) in receivables
Increase / (decrease) in inventories
Increase / (decrease) in other assets
Increase / (decrease) in payables, accruals and other financial liabilities
Increase in tax balances
FX / other non operation movements backed out of assets and liabilities
Net cash provided by operating activities
54 Gale Pacific Limited ABN 80 082 263 778
Consolidated
2010 / 2011
($000)
2009 / 2010
($000)
20
9,068
508
(205)
9,391
12
8,486
6,641
-
15,139
Consolidated
2010 / 2011
($000)
2009 / 2010
($000)
7,110
476
5,877
294
457
(807)
-
(121)
(1,559)
182
(523)
518
(486)
11,418
6,022
147
6,589
626
257
558
51
84
2,900
(194)
(1,869)
2,782
-
17,953
NOTE 23: 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
accounts.
Financial information relating to discontinuing operations for the period 30 June 2011 is set out below. Further information is set
out in Note 5 Segment Information.
Profit From Discontinued Operations
Expenses
Loss before income tax
Income tax benefit
Profit 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
2010 / 2011
($000)
2009 / 2010
($000)
(339)
(339)
349
10
(59)
-
(4)
(63)
(12)
(12)
23
11
11
-
(16)
(5)
2011 Annual Report
55
NOTE 24: 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
2010 / 2011
($000)
2009 / 2010
($000)
2,032
116
384
-
2,532
2,503
106
257
-
2,866
2010 / 2011
Executive Directors
P McDonald
Non Executive Directors
D Allman
J Murphy
G Richards
Executives
J Cox
Total
2009 / 2010
Executive Directors
P McDonald
Non Executive Directors
D Allman
H Boon 1
J Murphy
G Richards
Executives
J Cox
Total
Balance
30 June 2010
Granted as
Compensation
No.
No.
Received on
Exercise of
Options
No.
Net Change
Balance
30 June 2011
No.
No.
978,105
-
-
491,899
500,000
1,970,004
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
978,105
-
-
491,899
500,000
1,970,004
Balance
30 June 2009
Granted as
Compensation
No.
No.
Received on
Exercise of
Options
No.
Net Change
Balance
30 June 2010
No.
No.
978,105
-
607,500
-
491,899
500,000
2,577,504
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(607,500)
-
-
-
(607,500)
978,105
-
-
-
491,899
500,000
1,970,004
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.
56 Gale Pacific Limited ABN 80 082 263 778
NOTE 24: Directors’ and Executives’ Compensation (continued)
Directors’ and Executives’ Equity Holdings, Compensation Options and Performance Rights:
Granted and Vested During the Year
2010 / 2011
Vested
Number
Granted
Number
Grant Date
Terms and Conditions for Each Grant
Exercise
Price
Expiry Date
First
Exercise
Date
Last
Exercise
Date
Value Per
Option /
Right at
Grant Date
Executive Directors (Performance Rights)
None
Non Executive Directors
None
Executives (Performance Rights)
A Scott
-
980,000
18/10/2010
$0.20
Nil
30/06/2020
30/06/2013
30/06/2020
Other Management Personnel (Performance Rights)
Other
Management
Total
-
1,960,000
18/10/2010
$0.20
Nil
30/06/2020
30/06/2013
30/06/2020
2,940,000
The performance rights disclosed above are subject to continuation of employment to 30 June 2013 and then hurdles based on
improvements in the Group’s diluted earnings per share over the three year period 1 July 2010 to 30 June 2013.
2009 / 2010
Vested
Number
Granted
Number
Grant Date
Executive Directors (Performance Rights)
Terms and Conditions for Each Grant
Exercise
Price
Expiry Date
First
Exercise
Date
Last
Exercise
Date
Value Per
Option /
Right at
Grant 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
The performance rights disclosed above are subject to a continuation of employment to 30 June 2012 and then hurdles based on
improvements in the Group’s diluted earnings per share over the three year period 1 July 2009 to 30 June 2012.
2011 Annual Report
57
NOTE 24: Directors’ and Executives’ Compensation (continued)
Directors’ and Executives’ Equity Holdings Compensation Options and Performance Rights: Movements During the Year
2010 / 2011
Balance
1 July 2010
Granted as
Compensation
Exercised
Lapsed
Net Other
Change
Balance
30 June 2011
No.
No.
No.
No.
No.
No.
Balance
Held
Nominally
No.
Value of
Lapsed
Options/Rights
$
Executive Directors (Performance Rights)
P McDonald
3,000,000
Non Executive Directors
None
Executives (Performance Rights)
J Cox
M Denney
2,000,000
2,000,000
S McPherson
2,000,000
-
-
-
-
-
B Wang
A Scott
2,000,000
-
980,000
Other Management Personnel (Performance Rights)
Other
Management
-
1,960,000
Total
11,000,000
2,940,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,000,000
2,000,000
2,000,000
2,000,000
2,000,000
980,000
1,960,000
13,940,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2009 / 2010
Balance
1 July 2009
Granted as
Compensation
Exercised
Lapsed
Net Other
Change
Balance
30 June 2010
No.
No.
No.
No.
No.
No.
Balance
Held
Nominally
No.
Value of
Lapsed
Options/Rights
$
Executive Directors (Performance Rights)
P McDonald
150,000
3,000,000
Non Executive Directors
None
Executives (Performance Rights)
P Cacioli 1
J Cox
M Denney
P Ducray 2
1,075,000
2,075,000
2,075,000
75,000
S McPherson
2,000,000
B Wang
Total
2,000,000
9,450,000
-
-
-
-
-
-
3,000,000
-
-
-
-
-
-
-
-
(150,000)
(1,075,000)
(75,000)
(75,000)
(75,000)
-
-
(1,450,000)
-
-
-
-
-
-
-
-
3,000,000
-
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)
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.
58 Gale Pacific Limited ABN 80 082 263 778
NOTE 25: Related Party Transactions
Transactions within the Wholly Owned Group
The wholly owned group includes:
(cid:131)
(cid:131)
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:131)
(cid:131)
(cid:131)
(cid:131)
Sale and purchase of goods totalling $24,655,000 (2010 : $29,044,000)
Gale Pacific Limited received interest income from its subsidiaries totalling $521,000 (2010 : $548,000)
Gale Pacific Limited made interest payments to its subsidiaries totalling $155,000 (2010 : $132,000)
Reimbursement of certain operating costs totalling $288,000 (2010 : $1,704,000)
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
NOTE 26: 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
Zone Hardware Pty Ltd
Riva Window Fashions Pty Ltd
Consolidated
2010 / 2011
($000)
2009 / 2010
($000)
22
187
Country of Incorporation
Ownership Interest (%)
2010 / 2011
2009 / 2010
Australia
Germany
New Zealand
United Arab Emirates
China
United States of America
Australia
Australia
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
-
-
2011 Annual Report
59
NOTE 27: 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
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.
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its
contractual obligations, and arises principally from the Group’s receivables from customers and derivative financial instruments.
To manage this risk, the Group has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis.
Credit evaluations are performed on all customers requiring credit over a certain amount. Transactions involving derivative
financial instruments are with counterparties with sound credit ratings. Given their high credit ratings, the Group does not expect
any counterparty to fail to meet its obligations.
The Group’s most significant customer accounts for $1,868,000 of the trade receivables carrying balance at 30 June 2011 (2010 :
$1,405,000). The maximum exposure to credit risk is represented by the carrying amount of each financial asset, including
derivative financial instruments, in the statement of financial position. In respect to those financial assets and the credit risk
embodied within them, the Group holds no significant collateral as security and there are no other significant credit
enhancements in respect of these assets. The credit quality of all financial assets that are neither past due nor impaired is
appropriate and is consistently monitored in order to identify any potential adverse changes in the credit quality.
Consolidated
Note
As at 30 Jun 2011
($000)
As at 30 Jun 2010
($000)
7
6
9
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:
Asia Pacific
China
Americas
Middle East
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 31-120 days
Outside credit terms 121 days to one year
More than one year
Total
13,971
9,596
-
23,567
5,528
1,001
4,629
2,141
13,299
9,591
2,268
1,018
409
13
13,299
94
113
117
324
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
60 Gale Pacific Limited ABN 80 082 263 778
NOTE 27: Financial Instruments (continued)
The Group’s most significant customer, an Australian retailer accounts for $1,868,000 of the trade receivables carrying balance at
30 June 2011 (2010 : $1,405,000).
(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.
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to
managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under
both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.
Consolidated
30 June 2011
Note
Weighted
Average Effective
Interest Rate
(%)
Carrying
Amount
Contractual
Cash Flows
Less Than 6
Months
6 To 12
Months
1 To 2 Years
($000)
($000)
($000)
($000)
($000)
Contractual Cash Flows Maturing In:
Trade and Other
Payables
Trade payables
Sundry payables and
accruals
Non Derivative
Financial Liabilities
Bank overdrafts
Bank loans
Finance lease liabilities
Derivative Financial
Liabilities
Foreign currency
forward exchange
contracts used
Total
13
13
14
14
14
15
4,364
3,094
4,364
3,094
4,364
2,344
9.84%
6.95%
8.62%
205
205
14,806
14,889
321
368
205
14,889
130
-
750
-
-
129
-
-
-
-
109
1,063
1,063
983
80
-
23,853
23,983
22,915
959
109
Consolidated
30 June 2010
Note
Weighted
Average Effective
Interest Rate
(%)
Carrying
Amount
Contractual
Cash Flows
Less Than 6
Months
6 To 12
Months
1 To 2 Years
($000)
($000)
($000)
($000)
($000)
Contractual Cash Flows Maturing In:
Trade and Other
Payables
Trade payables
Sundry payables and
accruals
Non Derivative
Financial Liabilities
Bank loans
Other loans
Finance lease liabilities
Hire purchase liabilities
Total
13
13
14
14
14
14
4,979
2,290
4,979
2,290
4.49%
9.07%
10.06%
9.25%
10,233
1,629
109
18
10,421
1,708
117
21
4,979
2,290
7,706
593
38
19
-
-
2,715
1,115
79
2
19,258
19,536
15,625
3,911
-
-
-
-
-
-
-
2011 Annual Report
61
NOTE 27: Financial Instruments (continued)
(c). Market Risk
The Group’s activities expose it to the financial risks of changes in the market rates for foreign currency exchange rates and
interest rates.
Foreign Exchange Contracts
The Group is exposed to currency risk on purchases and sales that are denominated in a currency other than the respective
currencies of the group entities, primarily the United States dollar, the New Zealand dollar and the European Euro.
The Group’s policy is to review its foreign currency exposures at least on a monthly basis and hedge an appropriate portion of its
foreign currency exposures in respect of forecast purchases and sales over the following 12 months.
The Group enters into foreign exchange contracts to buy and sell specified amounts of foreign currency in the future at stipulated
exchange rates. There was no cash flow hedge ineffectiveness during the reporting period.
The Group has adopted hedge accounting and classifies forward exchange contracts as cash flow hedges where these contracts
are hedging highly probable 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 the bought 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 payable was $1,063,000 (2010 : $341,000 receivable).
The Company holds cash in foreign currency as an effective hedge against foreign currency intercompany loans.
The Company does not hedge net investments in foreign operations.
The accounting policy in regard to forward exchange contracts is detailed in Note 1(d).
Average Exchange Rate
Foreign Currency
Contract Value
Fair Value
2010 / 2011
2009 /
2010
2010 /
2011
(FC000)
2009 /
2010
(FC000)
2010 /
2011
($000)
2009 /
2010
($000)
2010 /
2011
($000)
2009 /
2010
($000)
Foreign Exchange Contracts Designated
as Cash Flow Hedges
Buy United States dollars / sell
Australian dollars
Less than 6 months
6 – 12 months
Buy United States dollars / sell New
Zealand dollars
0.9700
0.9788
0.8602
0.8771
12,300
3,300
9,683
12,664
11,258
850
3,306
969
(944)
(113)
292
56
Less than 6 months
-
0.6723
-
460
-
562
-
(12)
Buy European euro / sell Australian
dollars
Less than 6 months
6 – 12 months
Total
Foreign Exchange Risk Sensitivity
0.7064
-
0.6889
0.6709
130
-
490
330
184
-
711
492
(6)
-
3
2
(1,063)
341
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% (2010: 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 on the following page.
62 Gale Pacific Limited ABN 80 082 263 778
NOTE 27: Financial Instruments (continued)
30 June 2011
CONSOLIDATED
Australian Dollar
Carrying Value
Australian Entities
($000)
Australian Dollar
Carrying Value
Foreign Entities
($000)
Profit / (Loss)
AUD +10%
Equity
AUD +10%
($000)
($000)
Financial Assets
Cash and cash equivalents
United States dollars
Chinese renminbi
Euro
New Zealand dollars
UAE dirham
Trade receivables
United States dollars
Chinese renminbi
New Zealand dollars
Amounts receivable from related parties
United States dollars
New Zealand dollars
Financial Liabilities
Trade payables
United States dollars
Chinese renminbi
Euro
New Zealand dollars
UAE dirham
Borrowings
Chinese renminbi
Foreign currency forward contracts
United States dollars
Euro
Profit or (loss) impact
Currency Asset / (Liability) Breakdown
United States dollars
Chinese renminbi
Euro
New Zealand dollars
UAE dirham
Profit or (loss) impact
4,040
-
56
-
-
-
-
-
-
-
183
-
84
-
-
-
1,057
6
2,800
-
(34)
-
-
1,778
375
11
337
53
7,641
445
434
-
-
(20)
1,630
44
191
70
4,806
-
-
9,439
(5,617)
(33)
580
(17)
(404)
-
(6)
-
-
-
-
-
444
(56)
18
-
8
-
-
-
-
-
4
58
-
2
(56)
-
4
(178)
(38)
(1)
(34)
(5)
(764)
(44)
(43)
-
-
(2)
163
4
19
7
481
1,597
18
1,180
653
562
21
(58)
2
1,180
30 June 2010
CONSOLIDATED
Australian Dollar
Carrying Value
Australian Entities
($000)
Australian Dollar
Carrying Value
Foreign Entities
($000)
Profit / (Loss)
AUD +10%
Equity
AUD +10%
($000)
($000)
Financial Assets
Cash and cash equivalents
United States dollars
Chinese renminbi
Euro
New Zealand dollars
UAE dirham
Trade receivables
United States dollars
Chinese renminbi
New Zealand dollars
Amounts receivable from related parties
United States dollars
New Zealand dollars
Foreign currency forward contracts
United States dollars
Euro
Financial Liabilities
Trade payables
United States dollars
Chinese renminbi
Euro
New Zealand dollars
UAE dirham
Borrowings
United States dollars
Chinese renminbi
Profit or (loss) impact
Currency Asset / (Liability) Breakdown
United States dollars
Chinese renminbi
Euro
New Zealand dollars
UAE dirham
Profit or (loss) impact
4,090
-
4
-
-
-
-
-
-
-
348
5
297
-
125
-
-
-
-
4,141
-
(116)
-
-
3,752
917
74
350
98
9,775
557
556
-
-
-
-
813
1,900
-
341
120
1,536
8,697
11,179
(9,122)
74
565
(22)
(409)
-
-
-
-
-
-
-
504
(14)
-
-
30
-
13
-
-
-
-
124
125
-
13
(14)
-
124
(375)
(92)
(7)
(35)
(10)
(978)
(56)
(56)
-
-
(1,223)
(120)
81
190
-
34
12
154
870
(1,612)
(2,341)
912
(127)
(57)
2
(1,612)
2011 Annual Report
63
NOTE 27: 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 Group does
not have long term borrowings and does not use interest rate swaps to manage the risk of interest rate changes.
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 2011
Consolidated
Financial Assets
Cash and cash equivalents
Financial Liabilities
Borrowings (all fixed rates instruments)
Profit or (loss) impact
Carrying Value
($000)
9,576
10,205
19,781
Profit / (Loss)
+1% Movement
($000)
96
(102)
(6)
30 June 2010
Consolidated
Financial Assets
Cash and cash equivalents
Financial Liabilities
Borrowings (all fixed rates instruments)
Profit or (loss) impact
NOTE 28: 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
64 Gale Pacific Limited ABN 80 082 263 778
Carrying Value
($000)
15,127
-
15,127
Profit / (Loss)
+1% Movement
($000)
151
-
151
2010 / 2011
($000)
2009 / 2010
($000)
7,348
(815)
6,533
21,732
90,710
(17,232)
(16,495)
74,215
107,086
1,200
(565)
(33,506)
74,215
-
-
1,479
18
1,497
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
NOTE 29: Business Combinations
(a).
Summary Of Acquisition
On 1 June 2011 the parent entity acquired 100% of the issued share capital and units of Zone Hardware Pty Ltd and Riva
Window Fashions Pty Ltd. Zone Hardware specializes in the marketing and distribution of branded home improvement
products. Riva Window Fashions specializes in a diverse range of custom made window furnishings made specifically to the
customer’s measurements and specifications. The acquisitions give Gale an expanded presence in the broader pre packaged and
custom window shade markets, an expanded product offer and a wider customer base to grow the combined businesses.
Details of the purchase consideration, the net assets acquired and goodwill are as follows.
Purchase consideration (refer to (b)) on next page:
Cash paid
Purchase adjustment
Shares issued
Deferred consideration
Total consideration
The assets and liabilities recognized as a result of the acquisition are as follows:
Cash
Trade receivables
Inventories
Plant and equipment
Intangible assets
Trade payables
Lease liabilities
Provision for employee benefits
Provision for taxation
Total tangible net assets required
Add goodwill
Net assets acquired
2010 / 2011
($000)
11,344
(544)
1,500
750
13,050
194
1,092
2,353
370
4
(1,183)
(331)
(75)
(486)
1,938
11,112
13,050
The goodwill will not be deductable for tax purposes.
Shares Issued
7,500,000 shares were issued as part of the consideration. The issue price of $0.20 was based on the volume weighted average
price of fully paid ordinary shares over the 30 trading days ending on 31 May 2011.
Deferred consideration
Additional consideration of $750,000 plus accrued interest at the rate of 6.5% is to be paid in cash on 1 June 2012. The fair value
of the deferred consideration of $750,000 was estimated based on a discount rate of 6.5%.
Revenue and Profit Contribution
The acquired businesses contributed revenues of $1,367,000 and net profit after tax of $64,098 to the Group for the period from
1 June 2011 to 30 June 2011. If the acquisition had occurred on 1 July 2010, consolidated revenue and net profit after tax for the
year ended 30 June 2011 would have been $109,770,000 and $8,271,000 respectively. (The net profit after tax of $8,271,000 does
not factor into account the additional cost of debt that would have been incurred.)
Initial Accounting Incomplete
The accounting for intangible assets arising from the business combination is incomplete and the amounts recognised has thus
been determined only provisionally. An assessment of any required split in the value of intangible assets between brand names
and goodwill will be undertaken in the next period.
Gross Contractual Amounts Receivable
The gross contractual amount of trade receivables acquired as part of the business combination total $1,155,000.
2011 Annual Report
65
NOTE 29: Business Combinations (continued)
(b).
Purchase Consideration – Cash Outflow
Outflow of cash to acquire subsidiary. Net of cash acquired.
Cash consideration
Less balances acquired
Cash
Outflow of cash – investing activities
Acquisition Related Costs
2010 / 2011
($000)
11,344
194
11,150
Acquisition related costs of $88,814 are included in other expenses in profit and loss and in operating cash flows in the statement
of cash flows.
NOTE 30: Subsequent Events
Dividends paid or determined by the Company to shareholders since the end of the previous financial year are set out in Note 20. The
financial effect of the dividends declared subsequent to the reporting date has not been brought to account in the financial statements for
the year ended 30 June 2011 and will be recognized in subsequent financial reports. Franked dividends determined or paid during the year
were franked at the tax rate of 30%.
Gale considers this dividend frankable for Australian tax purposes as the dividends are being paid out of current year profits and Gale has
sufficient franking credits available to fully frank this dividend. However, the Commissioner of Taxation has informally expressed a
preliminary view on dividend franking capability in an ATO Draft Fact Sheet dated 21 June 2011 which may or may not support the
Company’s position. Shareholders will be advised should there be any impact on the franking of Gale dividends.
The dividend reinvestment plan continues to be suspended.
Other than the proceeding matter above, 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
66 Gale Pacific Limited ABN 80 082 263 778
ADDITIONAL SECURITIES EXCHANGE INFORMATION
TWENTY LARGEST HOLDERS OF QUOTED
EQUITY SECURITIES
NUMBER OF HOLDINGS OF EQUITY
SECURITIES AS AT 16 AUGUST 2011
The fully paid issued capital of the Company consisted of
287,191,658 ordinary
shares held by 809
fully paid
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
Shareholder
JP Morgan Nominees Australia Limited
Windhager Handels Gesmbh
IWPE Nominees Pty Ltd
IWPE Nominees Pty Ltd
Guinness Mahon & Co Limited
Gale Australia Pty Ltd
MGB Equity Growth Pty Limited
UBS Nominees Pty Ltd
Ruminator Pty Ltd
Range
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – 999,999
1,000,000 and over
Rounding
Total
Ordinary
Fully Paid
Shares
Total
Holders
Units
% Issued
Capital
Clipper Island Pty Ltd
120
221
124
244
39,017
630,569
969,488
8,456,651
0.01
0.22
0.34
2.94
Gernis Holdings Pty Limited
Mr Geoffrey Duncan Nash
Haroldswick Corporation Pty Ltd
100
277,095,933
96.48
0
0
0.00
0.01
809
287,191,658
100.00
GFS Securities Pty Ltd
IWPE Nominees Pty Limited
IWPE Nominees Pty Limited
Venn Milner Superannuation Pty Ltd
Atkone Pty Ltd
Mr Simon Gautier Hannes
Citicorp Nominees Pty Limited
No.
80,856,612
41,925,781
28,365,369
18,234,879
14,182,685
13,927,844
10,130,490
9,921,075
6,691,433
5,000,000
4,369,941
3,327,428
2,500,000
2,447,935
2,204,481
2,058,824
2,000,000
1,919,796
1,532,003
1,170,382
%
28.15
14.60
9.88
6.35
4.94
4.85
3.53
3.45
2.33
1.74
1.52
1.16
0.87
0.85
0.77
0.72
0.70
0.67
0.53
0.41
UNMARKETABLE PARCELS
Unmarketable Parcels as
at
16 August 2011
Minimum $500 parcel at
$0.175 per unit
Minimum
Parcel Size
Holders
Units
2,858
242
273,349
SUBSTANTIAL SHAREHOLDERS AS AT 16 AUGUST
2011
Shareholder
Thorney Holdings Pty Ltd
No.
79,817,646
Investec Wentworth Private Equity Ltd
74,148,162
Windhager Handels Gesmbh
41,925,781
%
27.79
25.82
14.60
Top 20 Holders Of Ordinary Fully
Paid Shares As At 16 August 2011
252,766,958
Total Remaining Holders Balance
34,424,700
88.01
11.99
OTHER INFORMATION
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.
2011 Annual Report
67
OFFICES
Australia PO Box 892, Braeside, Victoria 3195, Ph: +61 3 9518 3399 Toll Free 1800 331 521
New Zealand PO Box 15 118 Aranui, Christchurch, Ph: + 64 3 373 9500 Toll Free: 0800 555 171
United States PO Box 951509, Lake Mary, Florida, 32795-1509, Phone +1 407 333 1038
Middle East PO Box 17696 Jebel Ali, Dubai, U.A.E., Ph: +971 4 881 7114
China No.777 Hengshan West Rd, Beilun, Ningbo 315800, Ph: +86 574 5626 8888
Zone Hardware Pty Ltd, 10 Elite Way, Carrum Downs, Victoria, 3201, Ph: +61 3 8773 4000
Riva Window Fashions, PO Box 685, Patterson Lakes, Victoria, 3197, Toll Free 1800 97 22 77