2012 Annual Report
For personal use only
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GALE PACIFIC LIMITED
2012 ANNUAL REPORT
CONTENTS
Corporate Directory .................................................................. 3
Chairman’s & Managing Director and
Chief Executive Officer’s Report .............................................. 4
Board of Directors ..................................................................... 9
Senior Management ............................................................... 10
Corporate Governance ........................................................... 11
Directors’ Report ..................................................................... 17
Financial Results .................................................................... 29
2012 ANNUAL GENERAL MEETING
The Annual General Meeting will be held on Friday 26 October 2012.
The Notice of Meeting and Proxy Form are separate items accompanying this
2012 Annual Report.
For personal use only
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
Deloitte Touche Tohmatsu
550 Bourke Street, Melbourne, Victoria, 3000
T + 613 9671 7000
SHARE REGISTERY
Computershare
Yarra Falls, 452 Johnston Street, Abbotsford, Victoria, 3067
T + 613 9415 4000
WEBSITE ADDRESS
www.galepacific.com
GALE PACIFIC LIMITED
2012 ANNUAL REPORT 3
Shade Structure by Oasis
Manufacturing Facilities, Australia
Shade Structure by Paturiz
Manufacturing Facilities, China
Shade Structure, Middle East
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GALE PACIFIC LIMITED
2012 ANNUAL REPORT
CHAIRMAN’S & MANAGING DIRECTOR AND
CHIEF EXECUTIVE OFFICER’S REPORT
DEAR SHAREHOLDERS,
It is again very pleasing to report to shareholders that the results have continued to significantly improve, with record results for the year ended
30 June 2012. The company recorded an increase in net profit after tax of 20% to $8.5 million compared to $7.1 million for the previous
corresponding period. The results were generated in ongoing weak economic conditions in many markets and also after enduring a second
year of very wet and cool summer conditions in most parts of Australia. The stronger Australian dollar also had an unfavourable impact on the
translation of foreign currency revenue and earnings.
We are very excited about the increase in revenue from the newly resourced international sales team, with some outstanding success in the
Japanese, South African and European markets. The integration of the Zone Hardware and Riva Window Fashions businesses which were
acquired in June 2011, was completed during the year and has provided broader growth opportunities for the business.
The key items of the results were;
Sales
EBITDA
Depreciation and amortisation
EBIT
Interest
Profit before tax
Tax
Reported profit after tax
Net cash provided by operating activities
Net debt
Diluted earnings per share
2011 / 2012
(A $ Million)
110.5
18.0
5.5
12.5
1.0
11.5
3.0
8.5
9.5
4.1
2.86
2010 / 2011
(A $ Million)
Change
(%)
95.6
15.8
5.9
9.9
0.9
9.0
1.9
7.1
11.4
5.7
2.42
16%
14%
(2)%
26%
11%
28%
58%
20%
(17)%
(29)%
18%
Outdoor Garden, Bunnings
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GALE PACIFIC LIMITED
2012 ANNUAL REPORT 5
Shade Structure by Amin Al Shaer
Shade Structure, Middle East
REVENUE INCREASE OF 16% TO $110.5 MILLION
Revenue for the year increased by 16% to $110.5 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
10% in the USA and 27% in the Middle East. We continued to build our international business as we increased our
market penetration into the Japanese, South African and European markets following the increase in international
sales and marketing resources in 2010 / 2011. Lower sales were recorded in our traditional markets in Australia
due to weaker consumer demand, competitive conditions and the strength of the Australian dollar which lead to
significant price deflation, and another poor summer in most parts of the country. Sales to retail and commercial
channels in New Zealand were 13% lower than the previous year due to weak consumer demand and another
poor agricultural season in that market.
EBITDA INCREASE OF 14% TO $18.0 MILLION
Earnings before interest, tax, depreciation and amortisation (EBITDA) was $18.0 million for the year compared to
$15.8 million for the previous corresponding period. The increase over the prior year is due to the strong sales
growth in the businesses outside of Australasia and includes the unfavourable impact of translating foreign
currency EBITDA in the Middle East, USA and Chinese businesses to a stronger Australian dollar. The
unfavourable impact of the year on year exchange rate variation equates to approximately A$0.5 million in the
2011 / 2012 financial year.
EBIT INCREASE OF 26% TO $12.5 MILLION
Earnings before interest and tax (EBIT) was $12.5 million compared to $9.9 million for the previous corresponding
period. The increase was achieved through sales growth in the USA, Middle East, Japan, South Africa and Europe
and contribution from the Zone Hardware and Riva Window Fashions businesses which have now been fully
integrated into the operations of the Australian business. Substantial yield and efficiency improvements and the
benefits of additional production volume in the Company’s Chinese and Australian manufacturing facilities also
contributed to the increased earnings.
NPAT INCREASE OF 20% TO $8.5 MILLION
Net profit after tax of $8.5 million for the financial year ended 30 June 2012 is the highest on record for the
Company. This result is a 20% or $1.4 million increase on the reported result for the previous corresponding
period.
Shade Structure by Arkan Shades
FINAL DIVIDEND PAYMENT OF 1.25 CENTS FULLY FRANKED
Directors are pleased to announce to shareholders that the Company has increased the ordinary final dividend to
1.25 cents per share. Dividends for the full year of 2.45 cents per share have been declared on diluted earnings of
2.86 cents per share. This represents an 11% increase on full year ordinary dividends compared to last year. The
final dividend payment of 1.25 cents per share will be fully franked and will be paid to shareholders on Wednesday
3 October 2012.
CASH FROM OPERATIONS $9.5 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 $1.4 million for the year, an increase of $0.8 million
on the prior year. Dividends of $6.9 million were paid to shareholders.
The company had net debt of $4.1 million as at 30 June 2012 compared to net debt of $5.7 million at 30 June
2011.
Shade Structure by Diba
Shade Structure by Diba
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GALE PACIFIC LIMITED
2012 ANNUAL REPORT
AUSTRALASIA (AUSTRALIAN DOLLARS)
Local Currency
Sales
EBITDA
FY12
(A$M’s)
71.0
7.8
FY11
(A$M’s)
64.4
8.4
Change
(%)
+10%
-7%
A sales increase over the prior year of 10% (reported in Australian dollars) includes the full year contribution from the Zone Hardware and Riva
Window Fashions businesses. Consumer demand in Australia was weak, and cool, wet summer conditions prevailed across most of Australia.
Sales of Coolaroo branded products sold to retail channels in Australia were down due to the poor summer in Australia and the reduced selling
prices passed on to customers due to the strength of the Australian dollar and competitive market forces. Sales of some of the newer products
including weed control fabrics and synthetic grass increased as these branded product programs had a full year of sales and are growing
categories in the retail market.
Sales of Synthesis branded coated fabrics were lower than the previous year due to softer market conditions and price pressure across most
market segments due to the stronger Australian dollar and strong market competition. Significant efficiency gains were again made in the
Australian manufacturing operation during the year which contributed positively to the overall result.
The continued weak horticultural market in New Zealand resulted in lower sales of commercial shade cloth and protective nets. Sales of
Coolaroo products sold through retail channels in New Zealand decreased by 9% over the prior year due to weaker consumer demand and a
poor summer season which affected sales of outdoor sun protection products.
EBITDA for the Australasia region fell 7% year on year which was a disappointing result in tough market conditions and another poor summer
in key markets.
AMERICAS (US DOLLARS)
Local Currency
Sales
EBITDA
FY12
(US$M’s)
21.2
1.6
FY11
(US$M’s)
19.3
0.5
Change
(%)
+10%
+220%
Whilst market conditions in the USA continue to be extremely challenging and remain subdued, we are very pleased to report a positive uplift in
sales of 10% year on year in local currency. Most parts of the USA experienced hot weather conditions in spring and summer which boosted
demand for outdoor shading and screening products. During the year we have expanded our retail sales and marketing resources to drive
product range expansion and future sales growth.
Sales of commercial fabrics increased by more than 25% due to strengthened field sales resources and increased activity in commercial
markets also driven by the hot weather. We have launched a full range of fire retardant architectural commercial knitted fabrics along with the
release of the waterproof Synthesis Commercial 95 range in the USA market.
EBITDA increased in the USA by US$1.1 million for the year due to the sales growth and improved margins partially offset by increased freight
and selling costs.
Golf City, Middle East
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GALE PACIFIC LIMITED
2012 ANNUAL REPORT 7
MIDDLE EAST (US DOLLARS)
Local Currency
Sales
EBITDA
FY12
(US$M’s)
8.1
1.6
FY11
(US$M’s)
6.4
1.3
Change
(%)
+27%
+23%
The Middle East business performed extremely well throughout the year and recorded sales growth of 27% over
the prior year in local currency. This result was achieved despite the political and social turmoil in parts of the
region. Construction activity has been patchy, but the demand for Gale commercial fabrics has been enhanced
by the well earned and long held reputation in the market for quality and long lasting products which is essential
in the extreme weather conditions of the region.
Another major source of sales growth has been building on 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$300,000 or 23% in our Middle East business due to the increased sales
activity and tight expense controls in place. Debtor collections in the Middle East have been excellent as we
continue to operate with very tight trading terms in the region.
CHINA (US DOLLARS)
Local Currency
Sales - International
Sales - Internal
EBITDA
FY12
(US$M’s)
10.4
23.0
7.0
FY11
(US$M’s)
5.1
22.7
5.8
Change
(%)
+104%
+1%
+21%
Our Chinese manufacturing operation has again been able to deliver improved results on top of the efficiency
improvements generated over the past two years. Scrap rates have continued to reduce throughout the year as
part of the continuous manufacturing improvement program. Higher production volumes, continuing labour
efficiencies, and improved yields have more than offset the negative impact of higher wage rates and labour on
costs in China. We have also increased the resources for China based product sourcing operations with the
objective of securing higher quality and lower cost sourced products which are becoming an increasing part of
the business. We will establish a trading company in the coming months to improve the process of sourcing from
third party Chinese suppliers.
INTERNATIONAL MARKETS (US DOLLARS)
International market sales increased by 104% to $10.4 million driven by increases in sales to Japan, South Africa
and European markets. Sales to Japanese customers increased by more than 100% on the previous year by
expanding the retail product offering and also assisted by government targets set to encourage homeowners to
reduce energy consumption which has increased demand for exterior window shade products. Sales to South
Africa also increased by more than 100% as extended range offerings were listed in several major DIY retailers
during the 2011 / 2012 summer season. Strong sales of commercial fabrics into Israel and increased retail
product offering through our distributors in Europe were also key elements of the 2011 / 2012 growth for the
business.
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GALE PACIFIC LIMITED
2012 ANNUAL REPORT
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 in June 2011 has provided a broader product offering and additional growth opportunities for our business. 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 during
another challenging year and congratulate the whole team for the results which have been achieved this year. In all areas of the business the
team has focused on continuing to improve the way we operate and do business with our customers. Many improvements have been made
during the year, particularly the ongoing manufacturing efficiency gains and waste reduction achievements. A very pleasing area of
improvement has been identifying and implementing areas to grow the sales of the business in the many new geographic markets of the world
where our products are now sold.
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 conditions in the agricultural market in Australia for the coming season and
there are predictions of the return to more normal summer weather patterns in Australia.
Further sales expansion of Coolaroo, Zone, Riva and Synthesis branded products is expected to deliver another solid financial result in 2012 /
2013 in what is expected to be a 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 26 October 2012 and a voting form is enclosed with this report.
Mr David Allman
Chairman
24 August 2012
Mr Peter McDonald
Managing Director and Chief Executive Officer
24 August 2012
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GALE PACIFIC LIMITED
2012 ANNUAL REPORT 9
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 Chairman of McPherson’s Limited and Muir Engineering Pty Ltd.
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 was the Managing Director of Investec Wentworth Private Equity Limited until September 30, 2011
and sits on the board of a number of the fund's investments, including the following listed companies: Ariadne
Australia Limited, Staging Connections Group Limited, Vocus Communications Limited (formally First
Opportunity Fund Limited), ClearView Wealth Limited and Gale Pacific Limited. Mr Murphy is also a non-
executive Director of Investec Bank (Australia) Limited.
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 50 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.
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GALE PACIFIC LIMITED
2012 ANNUAL REPORT
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, AUSTRALASIA
Shaun joined Gale in November 2008 as Managing Director Australasia. 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.
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GALE PACIFIC LIMITED
2012 ANNUAL REPORT 11
CORPORATE GOVERNANCE
This statement sets out the corporate governance practices that were in operation throughout the 2012 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 ASX Corporate
Governance Council’s Corporate Governance Principles and Recommendations with 2010 Amendments, 2nd Edition.
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
Companies should establish and disclose the respective roles and responsibilities of board and management.
Recommendation 1.1: Companies should establish the functions reserved to the board and those delegated to senior executives and
disclose those functions.
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.
Recommendation 1.2: Companies should disclose the process for evaluating the performance of senior executives.
Complying.
The Company’s Remuneration Committee together with the Company’s Managing Director, evaluate the performance of the Group’s Key
Executives annually. The Remuneration Committee also reviews the Managing Director’s performance annually. A performance evaluation for
the Group’s Key Executives and the Managing Director has taken place in the reporting period in accordance with this process.
PRINCIPLE 2: STRUCTURE THE BOARD TO ADD VALUE
Companies should have a board of an effective composition, size and commitment to adequately discharge its responsibilities and duties.
Recommendation 2.1: 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. The Board has not set
a quantitative materiality threshold, but rather relies on qualitative factors to determine materiality such as whether a Director is a substantial
shareholder of the Company or an officer of, or otherwise associated directly with, a substantial shareholder of the Company; is employed, or
has previously been employed in an executive capacity by the Company or another Group member, and there has not been a period of at least
three years between ceasing such employment and serving on the Board; has within the last three years been a principal of a professional
adviser or a consultant to the Company or another Group member, or an employee associated with the service provided; is a supplier or
customer of the Company or other Group member, or an officer of or otherwise associated directly or indirectly with a supplier or customer; or
has a contractual relationship with the Company or another Group member other than as a director.
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.
Recommendation 2.2: 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.
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GALE PACIFIC LIMITED
2012 ANNUAL REPORT
Recommendation 2.3: 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.
Recommendation 2.4: 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 and is posted on the Group’s website.
Recommendation 2.5: Companies should disclose the process for evaluating the performance of the board, its committees and
individual directors.
The Directors undertake an annual process to review the performance and effectiveness of the Board, the Board Committees and individual
directors. The Company Secretary oversees this process. As part of the review, each Director completes a questionnaire relating to the Board’s
role, composition, procedures, practices and behavior. The questionnaires are confidential. The Chairman leads a discussion of the
questionnaire results with the Board as a whole, and provides feedback to individual Directors as necessary.
Recommendation 2.6: Provide the information indicated in the Guide to reporting on Principle 2.
Complying.
The following information is set out in the Company’s annual report:
(cid:131)
(cid:131)
(cid:131)
(cid:131)
(cid:131)
(cid:131)
(cid:131)
(cid:131)
(cid:131)
the skills, experience and expertise relevant to the position of director held by each director in office at the date of the annual report;
the directors considered by the Board to constitute independent directors and the Company’s materiality threshold;
the existence of any of the relationships listed in Box 2.1 and an explanation of why the board considers a director to be independent
notwithstanding the existence of these relationships;
a statement regarding directors’ ability to take independent professional advice at the expense of the Company;
a statement as to the mix of skills and diversity for which the board of directors is looking to achieve in membership of the Board;
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;
whether a performance evaluation for the board, its committees and directors has taken place in the reporting period and whether it
was in accordance with the process disclosed; and
an explanation of any departures from Recommendations 2.1, 2.2, 2.3, 2.4, 2.5 or 2.6.
The following material is made publicly available, on the Company’s website in a clearly marked corporate governance section:
(cid:131)
(cid:131)
(cid:131)
a description of the procedure for the selection and appointment of new directors and the re-election of incumbent directors;
the charter of the nomination committee; and
the Board’s policy for the nomination and appointment of directors.
PRINCIPLE 3: PROMOTE ETHICAL AND RESPONSIBLE DECISION MAKING
Companies should actively promote ethical and responsible decision making.
Recommendation 3.1: Establish a code of conduct and disclose the code as to:
(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; and
the responsibility and accountability of individuals for reporting and investigating reports of unethical practices.
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.
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GALE PACIFIC LIMITED
2012 ANNUAL REPORT 13
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.
Recommendation 3.2: Companies should establish a policy concerning diversity and disclose the policy or a summary of that policy.
The policy should include 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.
Complying.
The Company has adopted a Diversity Policy which can be viewed on its website.
The Diversity Policy has the commitment of the Directors and Senior Management to promote the specific objective of gender diversity and
seeks to ensure, to the extent that is practicable and appropriate, that the Company’s director appointment and employee recruitment
processes are undertaken with reference to the objectives of the Diversity Policy. The policy also 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.
Recommendation 3.3: Companies should disclose in each annual report the measurable objectives for achieving gender diversity set
by the board in accordance with the diversity policy and progress towards achieving them.
Part complying.
The Company is committed to the principles of employing people with a broad range of experiences, skills and views. All executives, managers
and employees are responsible for promoting workforce diversity. The Company’s Nomination Committee is charged with the responsibility of
undertaking an annual review to:
(cid:131)
(cid:131)
(cid:131)
assess its policies and procedures in reference to its diversity objectives;
determine whether its diversity policies and procedures are and are likely to continue to be appropriate; and
ensure that the Company, and its policies and procedures, comply with all applicable legal requirements in respect of diversity and that
such policies and procedures remain relevant and effective.
The Nomination Committee is then required to report on the findings of such an annual review, and make relevant recommendations in relation
to changes proposed. The Company’s Nomination Committee will perform its first annual review on gender diversity in October 2012 and the
Company will communicate these objectives as well as its progress in realising these objectives in the Annual Report for the year ending 30
June 2013.
Recommendation 3.4: Companies should disclose in each annual report the proportion of women employees in the whole
organisation, women in senior executive positions and women on the board.
Complying.
The Company employs a total of 657 employees; of these, 204 are female, and of these 5 hold senior management roles. There are currently
no female directors on the Company’s Board.
Recommendation 3.5: Companies should provide the information indicated in the Guide to reporting on Principle 3.
Complying.
The Company’s Code of Conduct, Share Trading Policy and Diversity Policy can be viewed on its website.
PRINCIPLE 4: SAFEGUARD INTEGRITY IN FINANCIAL REPORTING
Companies should have a structure to independently verify and safeguard the integrity of their financial reporting.
Recommendation 4.1: The board should establish an audit committee.
Complying.
The Company has an Audit Committee that reports to the Board. 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 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.
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GALE PACIFIC LIMITED
2012 ANNUAL REPORT
Recommendation 4.2: 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; and
Has at least three members.
Complying.
The Company’s Audit Committee comprises two 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.
Recommendation 4.3: The audit committee should have a formal charter.
Complying.
The Audit Committee has a formal charter that is posted on the Company’s website.
Recommendation 4.4: Companies should provide the information indicated in the Guide.
Complying.
The following material is included in the Company’s 2012 annual report:
(cid:131)
(cid:131)
the names and qualifications of those appointed to the audit committee and their attendance at meetings of the committee; and
the number of meetings of the audit committee.
The following material is available on the Company’s website in a clearly marked corporate governance section:
(cid:131)
(cid:131)
(cid:131)
the audit committee charter;
information on procedures for the selection and appointment of the external auditor, and
for the rotation of external audit engagement partners.
PRINCIPLE 5: MAKE TIMELY AND BALANCED DISCLOSURE
Companies should promote timely and balanced disclosure of all material matters concerning the company.
Recommendation 5.1: 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.
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.
Recommendation 5.2: Companies should provide the information indicated in the Guide.
Complying.
The policy on continuous disclosure is posted on the Company’s website in a clearly marked corporate governance section.
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GALE PACIFIC LIMITED
2012 ANNUAL REPORT 15
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; and
The Company’s auditor attends the Annual General Meeting.
PRINCIPLE 7: RECOGNISE AND MANAGE RISK
Companies should establish a sound system of risk oversight and management and internal control.
Recommendation 7.1: 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.
Recommendation 7.2: 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.
Recommendation 7.3: 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.
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16
GALE PACIFIC LIMITED
2012 ANNUAL REPORT
Recommendation 7.4: Companies should provide the information indicated in the Guide.
Complying.
The Board has received the report from management under Recommendation 7.2, and has received assurance from the Chief Executive
Officer and the chief financial officer under Recommendation 7.3.
A summary of the Company’s policies on risk oversight and management of material business risks is available on the Company’s website in a
clearly marked corporate governance section.
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.
Recommendation 8.1: 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.
Recommendation 8.2: The remuneration committee should be structured so that it:
(cid:131)
(cid:131)
(cid:131)
consists of a majority of independent directors;
is chaired by an independent chair; and
has at least three members.
Complying.
The Company’s Remuneration Committee comprises three non executive independent directors and is chaired by an independent chairman.
Recommendation 8.3: 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.
Recommendation 8.4: Companies should provide the information indicated in the Guide to reporting on Principle 8.
Complying.
The names of the members of the Remuneration Committee and their attendance at meetings of the Committee is detailed in the Directors’
Report of this Annual Report.
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.
The members of the Remuneration Committee during the year and attendance at meetings of the Committee are disclosed in the Directors’
Report section of this the Annual Report.
There are no schemes for retirement benefits, other than superannuation, for non executive directors.
A copy of the Company’s Remuneration Committee charter is posted on the Company’s website in a clearly marked corporate governance
section, together with a summary of the Company’s policy on prohibiting entering into transactions in associated products which limit the
economic risk of participating in unvested entitlements under any equity based remuneration schemes.
For personal use only
GALE PACIFIC LIMITED
2012 ANNUAL REPORT 17
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 2012.
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 Chairman of McPherson’s Limited and Muir Engineering Pty Ltd.
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
2012.
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 2012.
JOHN MURPHY, CA, FCPA, B.COMM, M.COMM
Non Executive Director since August 2007
Mr Murphy was the Managing Director of Investec Wentworth Private Equity Limited until 30 September 2011 and is a board member of a
number of the fund's investments, including the following listed companies: Ariadne Australia Limited, Staging Connections Group Limited,
Vocus Communications Limited, ClearView Wealth Limited and Gale Pacific Limited. Also at that date Mr Murphy changed from an executive to
a non executive director of Investec Bank (Australia) Limited.
No other directorships of listed companies were held by Mr Murphy at any time during the three years prior to 30 June 2012.
Mr Murphy is the Chairman of the Company's Remuneration Committee and is a member of the Audit and Risk and Nomination Committees.
GEORGE RICHARDS, CPA, AAICD
Non Executive Director since May 2004
Mr Richards was the Chief Executive of Mitre 10 South West Ltd from 1990 to 2000 and was previously the Managing Director of Cooper
Tools, a market leader in hand tools manufacture and distribution. Mr Richards has had over 50 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 2012.
Mr Richards is Chairman of the Company’s Audit and Risk Committee and is a member of the Nomination and Remuneration Committees.
For personal use only
18
GALE PACIFIC LIMITED
2012 ANNUAL REPORT
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, shading
and home improvement 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 $8.477 million. Refer to the
Chairman and Managing Director and Chief Executive Officers’ Report for further details on the Group’s result.
STATE OF AFFAIRS
There were no 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 Officers’ Report of this Annual Report. Any further such disclosure and the expected
results of those operations is likely to result in unreasonable prejudice to the Group and has accordingly not been disclosed in this report.
ENVIRONMENTAL REGULATION AND PERFORMANCE
The Group’s operations are not subject to any significant environmental regulations under the Commonwealth or State legislation. The
Directors believe that the Group has adequate systems in place for the management of its environmental requirements and is not aware of any
breach of those environmental requirements as they apply to the Group.
DIVIDENDS
Dividends paid to members during the financial year were as follows:
Final ordinary dividend for the year ended 30 June 2011 of 1.2 cents per share paid on 3 October 2011
Interim ordinary dividend for the year ended 30 June 2012 of 1.2 cents per share paid on 26 March 2012
Special dividend for the year ended 30 June 2010 of 1.0 cent per share paid on 22 October 2010
2011 / 2012
($000)
3,446
3,446
-
2010 / 2011
($000)
2,797
2,797
2,797
In addition to the above dividends, since the end of the financial year the Directors have declared the payment of a final ordinary dividend of
1.25 cents per share to be paid on 3 October 2012.
Dividends for the full year of 2.45 cents per share have been declared on diluted earnings of 2.86 cents per share. This represents an 11%
increase on full year ordinary dividends compared to last year. The final dividend payment of 1.25 cents per share will be fully franked and will
be paid to shareholders on 3 October 2012.
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GALE PACIFIC LIMITED
2012 ANNUAL REPORT 19
SHARE BASED PAYMENTS
Performance Rights
11,000,000 performance rights were granted to key management personnel (including the Managing Director) in previous financial years. On
30 June 2012, 2,750,000 performance rights lapsed and 8,250,000 performance rights vested and were exercised. 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.
2,940,000 performance rights were granted to Senior Executives outside the key management group on 18 August 2010. On 30 June 2012,
2,205,000 performance rights lapsed. The remaining 735,000 performance rights will be vested subject to a continuation of employment to 30
June 2013 and 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
-
3,228,105
1,000,000
491,899
Options
-
-
-
-
Performance Rights
-
-
-
-
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
D Allman
P McDonald
J Murphy
G Richards
No of
Meetings
Eligible to
Attend
12
12
12
12
Attended
11
12
12
12
No of
Meetings
Eligible to
Attend
2
0
2
2
Attended
2
2
2
2
No of
Meetings
Eligible to
Attend
1
0
1
1
Attended
1
1
1
1
No of
Meetings
Eligible to
Attend
1
0
1
1
Attended
1
1
1
1
By Board invitation, Mr Peter McDonald also attended all of the Audit and Risk, Remuneration and Nomination Committee meetings.
The members of the Audit and Risk 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.
For personal use only
20
GALE PACIFIC LIMITED
2012 ANNUAL REPORT
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 Managers remuneration is
separate and distinct.
Non Executive Director Remuneration
Objective
The Board seeks to set remuneration at a level which provides the Company with the ability to attract and retain directors of relevant
experience and skill, whilst incurring costs which are acceptable to shareholders.
Structure
The Company’s Constitution and the Australian Securities Exchange Listing Rules specify that the aggregate remuneration of Non Executive
Directors shall be determined from time to time by a general meeting. An amount not exceeding the amount determined is then divided
between the Directors as agreed. The last determination was at the Annual General Meeting held on 28 October 2011 when shareholders’
approved the Company’s constitution which provides for an aggregate remuneration of $500,000 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 2012 is detailed below.
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GALE PACIFIC LIMITED
2012 ANNUAL REPORT 21
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)
Improvement in earnings per share; and
Improvement in return to shareholders.
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 735,000. 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 and tax and profit after tax.
Key Management Personnel of the Group Who Held Office During the Year
Directors
D Allman (Chairman, Non Executive)
J Murphy (Non Executive)
G Richards (Non Executive)
P McDonald (Managing Director and Chief Executive Officer)
Executives
J Cox (Chief Financial Officer)
M Denney (Managing Director USA)
S McPherson (Managing Director Australasia)
B Wang (Managing Director China)
A Scott (General Manager International Sales and Marketing)
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22
GALE PACIFIC LIMITED
2012 ANNUAL REPORT
The following table discloses the remuneration of the Directors of the Company:
2011 / 2012
Short Term Benefits
Post
Employment
Share Based
Payments
Total
Performance Related
Directors
Salary &
Fees
$
Bonus
$
Non
Monetary
$
Super
$
Performance
Rights
$
$
Executive Directors
P McDonald
463,250
70,000
Non Executive Directors
D Allman
G Richards
J Murphy
Total
105,505
68,807
60,975
-
-
-
698,537
70,000
-
-
-
-
-
25,000
58,183
616,433
9,495
6,193
4,025
44,713
-
-
-
115,000
75,000
65,000
58,183
871,433
Total
%
20.8
-
-
-
Performance
Rights
%
9.4
-
-
-
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
$
Super
$
Performance
Rights
$
$
5,009
25,000
162,739
650,989
-
-
-
5,009
9,495
11,927
-
46,422
-
-
-
115,000
75,000
65,000
162,739
905,989
Total
%
25.0
-
-
-
Performance
Rights
%
25.0
-
-
-
The following table discloses the remuneration of the Group’s key management personnel and the five highest paid executives:
2011 / 2012
Short Term Benefits
Post
Employment
Share Based
Payments
Total
Performance Related
Key
management
personnel
J Cox
S McPherson
M Denney 1
A Scott 2
B Wang3
Total
Salary &
Fees
$
265,315
280,099
244,528
162,157
161,794
Bonus
$
60,000
-
48,912
53,025
57,215
1,113,893
219,152
Non
Monetary
$
-
22,500
8,684
-
6,217
37,401
Super
$
50,000
25,000
-
19,206
-
94,206
Performance
Rights
$
10,241
10,241
10,241
(10,156)
10,241
30,808
$
385,556
337,840
312,365
224,232
235,467
1,495,460
Total
%
18.2
3.0
18.9
19.1
28.6
Performance
Rights
%
2.7
3.0
3.3
(4.5)
4.3
2010 / 2011
Short Term Benefits
Post
Employment
Share Based
Payments
Total
Performance Related
Key
management
personnel
J Cox
S McPherson
M Denney
A Scott
B Wang
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
1 Mr Denney is based in the United States of America and remunerated in United States dollars converted to Australian dollars in the table above.
2 Mr Scott is the General Manager International Sales and Marketing and is located in Australia.
3 Mr Wang is based in China and remunerated in Chinese renminbi converted to Australian dollars in the table above.
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GALE PACIFIC LIMITED
2012 ANNUAL REPORT 23
Share Based Compensation
The terms and conditions of each grant of performance rights granted as at 30 June 2012 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
($)
No. of Performance
Rights Lapsed During
the Year
Value of Lapsed
Performance Rights
($)
Executive Directors
P McDonald
Executives
J Cox
M Denney
S McPherson
A Scott
B Wang
Other Management Personnel
Other Management
Total
Employment Agreements
-
-
-
-
-
-
-
-
0.14
0.06
0.06
0.06
0.20
0.06
0.20
-
-
-
-
-
-
-
-
750,000
105,000
500,000
500,000
500,000
735,000
500,000
1,470,000
4,955,000
30,500
30,500
30,500
147,000
30,500
294,000
668,000
Executives serve under terms and conditions contained in a standard executive employment agreement, that allows for termination under
certain conditions with two to three months’ notice. The agreements include restraints of trade on the employee as well as confidentiality and
intellectual property agreements.
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
2011 / 2012
($)
2010 / 2011
($)
-
-
-
-
-
37,000
37,000
2,000
2,000
78,000
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24
GALE PACIFIC LIMITED
2012 ANNUAL REPORT
PROCEEDINGS ON BEHALF OF THE COMPANY
No person has applied for leave of a Court to bring proceedings on behalf of the Company or intervene in any proceedings to which the
Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings. The Company
was not a party to any such proceedings during the year.
ROUNDING OFF OF AMOUNTS
The Company is a company of the kind referred to in ASIC Class Order 98/0100, dated 10 July 1998, and in accordance with that Class Order
amounts in the financial report are rounded off to the nearest thousand dollars.
Signed in accordance with a resolution of Directors made pursuant to section 298(2) of the Corporations Act 2001.
On behalf of the Directors;
Mr David Allman
Chairman
24 August 2012
Mr Peter McDonald
Managing Director and Chief Executive Officer
24 August 2012
For personal use only
GALE PACIFIC LIMITED
2012 ANNUAL REPORT 25
For personal use only
26
GALE PACIFIC LIMITED
2012 ANNUAL REPORT
For personal use only
GALE PACIFIC LIMITED
2012 ANNUAL REPORT 27
For personal use only
28
GALE PACIFIC LIMITED
2012 ANNUAL REPORT
DIRECTORS’ DECLARATION
The Directors of the Company declare that:
The financial statements and notes, as set out on pages 29 to 74 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 2012 and of the performance, as represented by the results of the
operations and the cash flows, of the Group for the year ended on that date;
As stated in Note 1, the 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
24 August 2012
Mr Peter McDonald
Managing Director and Chief Executive Officer
24 August 2012
For personal use only
FINANCIAL RESULTS
GALE PACIFIC LIMITED
2012 ANNUAL REPORT 29
CONTENTS
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Financial Statements
30
31
32
33
34
35
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30
GALE PACIFIC LIMITED
2012 ANNUAL REPORT
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 30 JUNE 2012
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 (i)
Income tax expense
Profit from continuing operations after income tax
Profit from discontinued operations
Profit for the year
(i) Profit includes depreciation and amortisation
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.
Consolidated
Note
2011 / 2012
($000)
2010 / 2011
($000)
2
3
3
4
23
19
3
21
110,473
(65,429)
45,044
173
(10,885)
(9,713)
(9,156)
(3,043)
(966)
11,454
(2,977)
8,477
-
8,477
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
(5,553)
(5,938)
2.95
2.86
2.95
2.86
2.54
2.42
2.54
2.42
For personal use only
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2012
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.
GALE PACIFIC LIMITED
2012 ANNUAL REPORT 31
Consolidated
Note
2011 / 2012
($000)
2010 / 2011
($000)
8,477
7,110
18
18
654
3,865
4,519
12,996
8,477
8,477
12,996
12,996
(807)
(11,406)
(12,213)
(5,103)
7,110
7,110
(5,103)
(5,103)
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32
GALE PACIFIC LIMITED
2012 ANNUAL REPORT
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FOR THE YEAR ENDED 30 JUNE 2012
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.
Consolidated
Note
2011 / 2012
($000)
2010 / 2011
($000)
6
7
9
8
4
10
11
12
4
13
14
15
4
16
14
4
16
17
18
19
3,121
16,992
127
24,538
-
661
45,439
35,368
17,044
235
52,647
98,086
8,134
7,225
-
1,561
2,257
19,177
-
4,650
82
4,732
23,909
74,177
70,988
(15,592)
18,781
74,177
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
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GALE PACIFIC LIMITED
2012 ANNUAL REPORT 33
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2012
30 June 2012
Note
Contributed
Equity
($000)
Reserves
($000)
Retained
Earnings
($000)
Total Equity
($000)
Balance at 1 July 2011
107,086
(19,544)
(19,583)
67,959
Profit for the year
Other comprehensive income for the year
Total comprehensive income for the year
Transactions With Owners In Their Capacity As Owners
Shares issued
Share capital reduction
Employee share based payments
Dividends paid
17
17
18
-
-
-
681
(36,779)
-
-
Total transactions with owners in their capacity as owners
(36,098)
-
4,519
4,519
(681)
-
114
-
(567)
8,477
-
8,477
-
36,779
-
(6,892)
29,887
8,477
4,519
12,996
-
-
114
(6,892)
(6,778)
Balance at 30 June 2012
70,988
(15,592)
18,781
74,177
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
The accompanying notes form part of these financial statements.
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34
GALE PACIFIC LIMITED
2012 ANNUAL REPORT
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2012
Cash Flow From Operating Activities
Receipts from customers
Payments to suppliers and employees
Interest received
Borrowing costs paid
Income tax 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 / (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.
Consolidated
Note
2011 / 2012
($000)
2010 / 2011
($000)
23
29
114,235
(100,627)
7
(973)
(3,186)
9,456
256
219
(1,372)
(57)
(954)
(7,891)
(321)
-
(6,892)
(15,104)
(6,602)
9,391
332
3,121
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
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GALE PACIFIC LIMITED
2012 ANNUAL REPORT 35
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
Gale Pacific Limited is a for profit entity. 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 derecognised 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)
Note 12 – Intangible Assets
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36
GALE PACIFIC LIMITED
2012 ANNUAL REPORT
NOTE 1: Statement of Significant Accounting Policies (continued)
(d).
Foreign Currencies
Functional and Presentation Currency
The financial statements of each Group entity are measured using its functional currency, which is the currency of the primary
economic environment in which that entity operates. The consolidated financial statements are presented in Australian dollars, as this
is the parent entity’s functional and presentation currency.
Transactions and Balances
Transactions in foreign currencies of entities within the Group are translated into functional currency at the rate of exchange ruling at
the date of the transaction.
Foreign currency monetary items that are outstanding at the reporting date (other than monetary items arising under foreign currency
contracts where the exchange rate for that monetary item is fixed in the contract) are translated using the spot rate at the end of the
financial year.
Resulting exchange differences arising on settlement or restatement are recognised as revenues and expenses for the financial year.
(e).
Net Investments in Foreign Operations
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.
On the disposal of a foreign operation (i.e. a disposal of the Group’s entire interest in a foreign operation, or a disposal involving loss
of control over a subsidiary that includes a foreign operation, loss of joint control over a jointly controlled entity that includes a foreign
operation, or loss of significant influence over an associate that includes a foreign operation), all of the accumulated exchange
differences in respect of that operation attributable to the Group are reclassified to profit or loss.
In addition, in relation to a partial disposal of a subsidiary that does not result in the Group losing control over the subsidiary, the
proportionate share of accumulated exchange differences are reattributed to non-controlling interests and are not recognised in profit
or loss. For all other partial disposals (i.e. partial disposals of associates or jointly controlled entities that do not result in the Group
losing significant influence or joint control), the proportionate share of the accumulated exchange differences is reclassified to profit or
loss.
Goodwill and fair value adjustments on identifiable assets and liabilities acquired arising on the acquisition of a foreign operation are
treated as assets and liabilities of the foreign operation and translated at the rate of exchange prevailing at the end of each reporting
period. Exchange differences arising are recognised in equity.
(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.
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GALE PACIFIC LIMITED
2012 ANNUAL REPORT 37
NOTE 1: Statement of Significant Accounting Policies (continued)
(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
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38
GALE PACIFIC LIMITED
2012 ANNUAL REPORT
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 tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the consolidated
statement of comprehensive income because of items of income or expense that are taxable or deductible in other years and items
that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or
substantively enacted by the end of the reporting period.
For personal use only
GALE PACIFIC LIMITED
2012 ANNUAL REPORT 39
NOTE 1: Statement of Significant Accounting Policies (continued)
(n)
Taxes (continued)
Deferred tax
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the consolidated
financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally
recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences
to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be
utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial
recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit
nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries and associates,
and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that
the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences
associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable
profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no
longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled
or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting
period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in
which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax liabilities and assets are offset when there is a legally enforceable right to set off current tax assets against current tax
liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax
assets and liabilities on a net basis.
Current and deferred tax for the year
Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive
income or directly in equity, in which case the current and deferred tax are also recognised in other comprehensive income or directly
in equity, respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is
included in the accounting for the business combination.
Tax consolidation
(cid:131)
Relevance of tax consolidation to the Group
The Company and all its wholly-owned Australian resident entities are part of a tax-consolidated group (formed on 1 June
2011), under Australian taxation law. Gale Pacific Limited is the head entity in the tax-consolidated group. The members of
the tax-consolidated group are identified in note 26. A tax funding arrangement and a tax sharing agreement has been
entered into between the entities. As such a notional current and deferred tax calculation for each entity as if it were a
taxpayer in its own right (except that unrealised profits, distributions made and received and capital gains and losses and
similar items arising on transactions within the tax-consolidated group are treated as having no tax consequences) has been
performed. Current tax liabilities and assets and deferred tax assets arising from unused tax losses and tax credits of the
members of the tax-consolidated group are recognised by the Company (as head entity in the tax consolidated group).
(cid:131)
Nature of tax funding arrangements and tax sharing agreements
Entities within the tax-consolidated group have entered into a tax funding arrangement and a tax-sharing agreement with the
head entity. Under the terms of the tax funding arrangement, Gale Pacific Limited and each of the other entities in the tax-
consolidated group has agreed to pay a tax equivalent payment to or from the head entity, based on the current tax liability or
current tax asset of the entity.
The tax sharing agreement entered into between members of the tax-consolidated group provides for the determination of the
allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations or if an
entity should leave the tax-consolidated group. The effect of the tax sharing agreement is that each member’s liability for tax
payable by the tax consolidated group is limited to the amount payable to the head entity under the tax funding arrangement.
(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.
For personal use only
40
GALE PACIFIC LIMITED
2012 ANNUAL REPORT
NOTE 1: Statement of Significant Accounting Policies (continued)
(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.
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.
For personal use only
NOTE 1: Statement of Significant Accounting Policies (continued)
(t).
New Accounting Standards and Interpretations
GALE PACIFIC LIMITED
2012 ANNUAL REPORT 41
Standards and Interpretations affecting amounts reported in the current period (and/or prior periods)
The following new and revised Standards and Interpretations have been adopted in the current year and have affected the amounts
reported in these financial statements. Details of other Standards and Interpretations adopted in these financial statements but that
have had no effect on the amounts reported are also set out below.
Standards affecting presentation and disclosure
Amendments
‘Financial
Disclosure’
to AASB 7
Instruments:
The amendments (part of AASB 2010-4 ‘Further Amendments to Australian Accounting Standards
arising from the Annual Improvements Project’) clarify the required level of disclosures about credit risk
and collateral held and provide relief from disclosures previously required regarding renegotiated
loans.
Amendments to AASB 101‘
Presentation of Financial
Statements’
The amendments (part of AASB 2010-4 ‘Further Amendments to Australian Accounting Standards
arising from the Annual Improvements Project’) clarify that an entity may choose to present the
required analysis of items of other comprehensive income either in the statement of changes in equity
or in the notes to the financial statements.
1054
‘Australian
AASB
Additional Disclosures’ and
AASB 2011-1 ‘Amendments
to Australian Accounting
Standards
from
Trans-Tasman Convergence
Project’
arising
AASB 1054 sets out the Australian-specific disclosures for entities that have adopted Australian
Accounting Standards. This Standard contains disclosure requirements that are in addition to IFRSs in
areas such as compliance with Australian Accounting Standards, the nature of financial statements
(general purpose or special purpose), audit fees, imputation (franking) credits and the reconciliation of
net operating cash flow to profit (loss). AASB 2011-1 makes amendments to a range of Australian
Accounting Standards and Interpretations for the purpose of closer alignment to IFRSs and
harmonisation between Australian and New Zealand Standards. The Standard deletes various
Australian-specific guidance and disclosures from other Standards (Australian-specific disclosures
retained are now contained in AASB 1054), and aligns the wording used to that adopted in IFRSs.
The application of AASB 1054 and AASB 2011-1 in the current year has resulted in the simplification of
disclosures in regards to audit fees, franking credits and capital and other expenditure commitments as
well as an additional disclosure on whether the Group is a for-profit or not-for-profit entity.
AASB 124
Disclosures’
December 2009)
‘Related Party
(revised
AASB 124 (revised December 2009) has been revised on the following two aspects: (a) AASB 124
(revised December 2009) has changed the definition of a related party and (b) AASB 124 (revised
December 2009) introduces a partial exemption from the disclosure requirements for government-
related entities.
The Company and its subsidiaries are not government-related entities. The application of the revised
definition of related party set out in AASB 124 (revised December 2009) in the current year has
resulted in the identification of related parties that were not identified as related parties under the
previous Standard. Specifically, associates of the ultimate holding company of the Company are
treated as related parties of the Group under the revised Standard whilst such entities were not treated
as related parties of the Group under the previous Standard. The related party disclosures set out in
note 25 to the consolidated financial statements have been changed to reflect the application of the
revised Standard. Changes have been applied retrospectively.
Standards and Interpretations affecting the reported results or financial position
There are no new and revised Standards and Interpretations adopted in these financial statements affecting the reporting results or
financial position.
For personal use only
42
GALE PACIFIC LIMITED
2012 ANNUAL REPORT
NOTE 1: Statement of Significant Accounting Policies (continued)
(t)
New Accounting Standards and Interpretations (continued)
Standards and Interpretations adopted with no effect on financial statements
The following new and revised Standards and Interpretations have also been adopted in these financial statements. Their adoption has
not had any significant impact on the amounts reported in these financial statements but may affect the accounting for future
transactions or arrangements.
2009-14
AASB
‘Amendments to Australian
Interpretation – Prepayments
of a Minimum Funding
Requirement’
Interpretation 114 addresses when refunds or reductions in future contributions should be regarded as
available in accordance with paragraph 58 of AASB 119; how minimum funding requirements might
affect the availability of reductions in future contributions; and when minimum funding requirements
might give rise to a liability. The amendments now allow recognition of an asset in the form of prepaid
minimum funding contributions. The application of the amendments to Interpretation 114 has not had
material effect on the Group’s consolidated financial statements.
AASB
2009-12
‘Amendments to Australian
Accounting Standards’
The application of AASB 2009-12 makes amendments to AASB 8 ‘Operating Segments’ as a result of
the issuance of AASB 124 ‘Related Party Disclosures’ (2009). The amendment to AASB 8 requires an
entity to exercise judgement in assessing whether a government and entities known to be under the
control of that government are considered a single customer for the purposes of certain operating
segment disclosures. The Standard also makes numerous editorial amendments to a range of
Australian Accounting Standards and Interpretations. The application of AASB 2009-12 has not had
any material effect on amounts reported in the Group’s consolidated financial statements.
AASB 2010-5 ‘Amendments
to Australian Accounting
Standards’
The Standard makes numerous editorial amendments to a range of Australian Accounting Standards
and Interpretations. The application of AASB 2010-5 has not had any material effect on amounts
reported in the Group’s consolidated financial statements.
Standards and Interpretations in issue not yet adopted
At the date of authorisation of the financial statements, the Standards and Interpretations listed below were in issue but not yet
effective.
Standard/Interpretation
AASB 9 ‘Financial Instruments’, AASB 2009-11 ‘Amendments to
Australian Accounting Standards arising from AASB 9’ and
AASB 2010-7 ‘Amendments to Australian Accounting Standards
arising from AASB 9 (December 2010)’
Effective for annual
reporting periods beginning
on or after
Expected to be initially
applied in the financial
year ending
1 January 2013
30 June 2014
AASB 10 ‘Consolidated Financial Statements’
1 January 2013
30 June 2014
AASB 127 ‘Separate Financial Statements’ (2011)
1 January 2013
30 June 2014
AASB 13
‘Fair Value Measurement’ and AASB 2011-8
‘Amendments to Australian Accounting Standards arising from
AASB 13’
1 January 2013
30 June 2014
For personal use only
NOTE 1: Statement of Significant Accounting Policies (continued)
(t)
New Accounting Standards and Interpretations (continued)
GALE PACIFIC LIMITED
2012 ANNUAL REPORT 43
Standard/Interpretation
Effective for annual
reporting periods beginning
on or after
Expected to be initially
applied in the financial
year ending
AASB 119 ‘Employee Benefits’ (2011) and AASB 2011-10
‘Amendments to Australian Accounting Standards arising from
AASB 119 (2011)’
1 January 2013
30 June 2014
AASB 2010-8 ‘Amendments to Australian Accounting Standards
– Deferred Tax: Recovery of Underlying Assets’
1 January 2012
30 June 2013
AASB 2011-4 ‘Amendments to Australian Accounting Standards
to Remove Individual Key Management Personnel Disclosure
Requirements’
1 July 2013
30 June 2014
AASB 2011-9 ‘Amendments to Australian Accounting Standards
– Presentation of Items of Other Comprehensive Income’
1 July 2012
30 June 2013
At the date of authorisation of the financial statements, the following IASB Standards and IFRIC Interpretations were also in issue but
not yet effective, although Australian equivalent Standards and Interpretations have not yet been issued. Management has not yet
assessed the impact of these standards and interpretations.
Standard/Interpretation
Effective for annual
reporting periods beginning
on or after
Expected to be initially
applied in the financial
year ending
Offsetting
(Amendments to IAS 32)
Financial Assets
and
Financial
Liabilities
1 January 2014
30 June 2015
Disclosures – Offsetting Financial Assets and Financial Liabilities
(Amendments to IFRS 7)
1 January 2013
30 June 2014
Mandatory Effective Date of IFRS 9 and Transition Disclosures
(Amendments to IFRS 9 and IFRS 7)
1 January 2015
30 June 2016
For personal use only
44
GALE PACIFIC LIMITED
2012 ANNUAL REPORT
NOTE 1: Statement of Significant Accounting Policies (continued)
(u).
Business Combinations
Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is
measured at fair value which is calculated as the sum of the acquisition-date fair values of assets transferred to the Group, liabilities
incurred by the Group to the former owners of the acquiree and the equity instruments issued by the Group in exchange for control of
the acquiree. Acquisition-related costs are recognised in profit or loss as incurred. At the acquisition date, the identifiable assets
acquired and the liabilities assumed are recognised at their fair value at the acquisition date, except that:
(cid:131)
(cid:131)
(cid:131)
deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognised and
measured in accordance with AASB 112 ‘Income Taxes’ and AASB 119 ‘Employee Benefits’ respectively;
liabilities or equity instruments related to share-based payment arrangements of the acquiree or share-based payment
arrangements of the Group entered into to replace share-based payment arrangements of the acquiree are measured in
accordance with AASB 2 ‘Share-based Payments’ at the acquisition date; and
assets (or disposal groups) that are classified as held for sale in accordance with AASB 5 ‘Non-current Assets Held for Sale
and Discontinued Operations’ are measured in accordance with that Standard.
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the
acquiree, and the fair value of the acquirer's previously held equity interest in the acquiree (if any) over the net of the acquisition-date
amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the net of the acquisition-date amounts
of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-
controlling interests in the acquiree and the fair value of the acquirer's previously held interest in the acquiree (if any), the excess is
recognised immediately in profit or loss as a bargain purchase gain.
Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity's net assets
in the event of liquidation may be initially measured either at fair value or at the non-controlling interests' proportionate share of the
recognised amounts of the acquiree's identifiable net assets. The choice of measurement basis is made on a transaction-by-
transaction basis. Other types of non-controlling interests are measured at fair value or, when applicable, on the basis specified in
another Standard.
Where the consideration transferred by the Group in a business combination includes assets or liabilities resulting from a contingent
consideration arrangement, the contingent consideration is measured at its acquisition-date fair value. Changes in the fair value of the
contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with corresponding
adjustments against goodwill. Measurement period adjustments are adjustments that arise from additional information obtained during
the ‘measurement period’ (which cannot exceed one year from the acquisition date) about facts and circumstances that existed at the
acquisition date.
The subsequent accounting for changes in the fair value of contingent consideration that do not qualify as measurement period
adjustments depends on how the contingent consideration is classified. Contingent consideration that is classified as equity is not
remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration that
is classified as an asset or liability is remeasured at subsequent reporting dates in accordance with AASB 139 ‘Financial Instruments’,
or AASB 137 ‘Provisions, Contingent Liabilities and Contingent Assets’, as appropriate, with the corresponding gain or loss being
recognised in profit or loss.
Where a business combination is achieved in stages, the Group’s previously held equity interest in the acquiree is remeasured to fair
value at the acquisition date (i.e. the date when the Group attains control) and the resulting gain or loss, if any, is recognised in profit
or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognised in other
comprehensive income are reclassified to profit or loss where such treatment would be appropriate if that interest were disposed of.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs,
the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted
during the measurement period (see above), or additional assets or liabilities are recognised to reflect new information obtained about
facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognised as of that
date.
NOTE 2: Revenue
Consolidated
Operating Activities
Sale of goods – other parties
Total revenue
2011 / 2012
($000)
2010 / 2011
($000)
110,473
110,473
95,580
95,580
For personal use only
NOTE 3: Profit
Profit before income tax expense has been determined after charging / (crediting):
Consolidated
Other Income
Government grant income
Other revenue
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
Total depreciation and amortisation
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
Net foreign exchange losses
Net Loss on Disposal of Non Current Assets
Plant and equipment
Motor vehicles
Office equipment
Total net loss on disposal
Operating lease rental expense
Share based payment (benefit) / expense
Consolidated
The auditor of the parent entity is Deloitte Touche Tohmatsu
(2011 : Pitcher Partners)
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
The auditors of the overseas controlled entities are overseas affiliates of
Deloitte Touche Tohmatsu
(2011 : Other unrelated auditors)
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
GALE PACIFIC LIMITED
2012 ANNUAL REPORT 45
2011 / 2012
($000)
2010 / 2011
($000)
Continuing
Continuing
Discontinued
-
173
173
44,219
21,225
(7)
973
966
233
65
4,733
50
197
42
73
160
5,553
(169)
42
(47)
48
92
37
9
138
1,962
114
102
38
140
38,792
18,500
(105)
964
859
303
33
4,983
27
266
32
60
234
5,938
75
38
2
166
463
13
1
477
1,951
457
-
-
-
-
-
-
-
-
-
-
233
-
-
-
-
-
-
-
-
-
-
-
-
-
472
-
-
2011 / 2012
($)
2010 / 2011
($)
175,000
-
-
-
175,000
50,000
-
-
50,000
225,000
211,000
24,000
37,000
2,000
274,000
112,000
13,000
2,000
127,000
401,000
For personal use only
46
GALE PACIFIC LIMITED
2012 ANNUAL REPORT
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
2011 / 2012
($000)
2010 / 2011
($000)
3,104
(127)
2,977
2,977
-
2,977
944
668
1,612
1,961
(349)
1,612
(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
2011 / 2012
($000)
3,435
2010 / 2011
($000)
2,615
(501)
-
-
-
-
43
2,977
-
2,977
-
2,977
(445)
110
(359)
(77)
(11)
126
1,959
2
1,961
(349)
1,612
(c).
Income Tax Recognised Directly in Equity
The following current and deferred tax amounts were (credited) / debited directly to equity during the period.
Deferred Tax
Cash flow hedges
Total
Consolidated
2011 / 2012
($000)
2010 / 2011
($000)
293
293
(362)
(362)
For personal use only
GALE PACIFIC LIMITED
2012 ANNUAL REPORT 47
Consolidated
2011 / 2012
($000)
2010 / 2011
($000)
-
(1,561)
(1,561)
72
(1,688)
(1,616)
Consolidated
2011 / 2012
($000)
(1,616)
(3,104)
3,186
-
(27)
(1,561)
2010 / 2011
($000)
(1,355)
(944)
1,222
(541)
2
(1,616)
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
Doubtful debts
Other financial liabilities
Provisions
Employee benefits
Capitalised costs
Equity raising costs
Other
Net deferred tax liability
Represented By
Deferred tax asset 1
Deferred tax liability 1
Total
Opening Balance
($000)
127
(5,135)
5
107
254
390
(253)
135
137
(4,233)
418
(4,651)
(4,233)
1 The deferred tax balances do not offset as they relate to different tax jurisdictions
Consolidated
Recognised in
Profit or Loss
($000)
Recognised
Directly in Equity
($000)
(186)
(95)
7
54
(27)
33
(251)
(68)
58
(475)
Closing Balance
($000)
(59)
(4,937)
12
161
227
423
(504)
67
195
-
293
-
-
-
-
-
-
-
293
(4,415)
235
(4,650)
(4,415)
For personal use only
48
GALE PACIFIC LIMITED
2012 ANNUAL REPORT
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
2011 / 2012
($000)
2010 / 2011
($000)
1,615
33,403
35,018
1,794
33,403
35,197
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.
Australasia
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 & Rest of the World Export Sales
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, screening and home improvement products. The
Group manufactures, sources and markets advanced durable knitted and woven polymer fabrics and value added structures made from these
fabrics.
For personal use only
NOTE 5: Operating Segments (continued)
Segment Information Reporting – Geographical Segments
30 June 2012
Australasia
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
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
China &
ROW Export
Sales
($000)
10,430
23,043
33,473
7,162
(4,230)
2,932
Americas
Middle East
($000)
21,189
(128)
21,061
1,624
(281)
1,343
($000)
7,872
33
7,905
1.568
(3)
1,565
($000)
70,982
1,708
72,690
7,810
(1,039)
6,771
Unallocated /
Elimination
($000)
Total
Continuing
Operations
($000)
-
110,473
(24,656)
-
(24,656)
110,473
(191)
-
(191)
40,694
18,439
38,784
3,198
14,968
2,054
4,489
336
(849)
(118)
Unallocated /
Elimination
($000)
Total
Continuing
Operations
($000)
-
95,580
China &
ROW Export
Sales
($000)
5,117
22,660
24,578
5,782
(4,255)
1,527
Americas
Middle East
($000)
19,605
(130)
19,475
501
(295)
206
($000)
6,508
169
6,677
1,337
(8)
1,329
($000)
64,350
798
68,347
8,353
(1,380)
6,973
(23,497)
(23,497)
(115)
-
(115)
46,472
24,459
39,079
6,001
11,908
1,789
3,620
294
(660)
(72)
30 June 2011
Australasia
GALE PACIFIC LIMITED
2012 ANNUAL REPORT 49
Discontinued
Operations
Total Group
($000)
-
-
-
-
-
-
-
-
-
-
-
-
($000)
110,473
-
110,473
17,973
(5,553)
12,420
(966)
11,454
(2,977)
8,477
98,086
23,909
Discontinued
Operations
Total Group
($000)
-
-
-
(106)
(233)
(339)
-
(339)
349
10
11
-
($000)
95,580
-
95,580
15,752
(6,171)
9,581
(859)
8,722
(1,612)
7,110
100,430
32,471
17,973
(5,553)
12,420
(966)
11,454
(2,977)
8,477
98,086
23,909
-
95,580
15,858
(5,938)
9,920
(859)
9,061
(1,961)
7,100
100,419
32,471
Notes:
(a).
(b).
(c).
(d).
All inter segment pricing is on a commercial basis.
Australasia result excludes finance costs, interest revenue and income tax expense.
Australasia includes foreign exchange hedge and Australian Corporate costs.
Revenue from one customer in the Australasia region represents $39,545,000 (2011 : $28,961,000) of the Group’s total revenues.
For personal use only
50
GALE PACIFIC LIMITED
2012 ANNUAL REPORT
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
Trade Receivables
Consolidated
2011 / 2012
($000)
2010 / 2011
($000)
15
2,662
444
3,121
20
9,068
508
9,596
Consolidated
2011 / 2012
($000)
2010 / 2011
($000)
17,238
(403)
16,835
157
16,992
(324)
(101)
30
-
(8)
(403)
13,623
(324)
13,299
672
13,971
(282)
(37)
35
(87)
47
(324)
The average credit period on sales of goods varies by geographic region and market from 0 to 90 days. No interest is charged on trade
receivables.
Before accepting any new customer, the Group uses internal resources and criteria to assess the potential customer’s credit quality and
defines credit limits by customer.
NOTE 8: Inventories
Current
Raw materials at cost
Work in progress at cost
Finished goods at cost
Less provision for obsolescence – finished goods
Total
Consolidated
2011 / 2012
($000)
2010 / 2011
($000)
4,997
1,928
17,707
(94)
24,538
2,723
1,844
17,555
(295)
21,827
For personal use only
NOTE 9: Other Financial Assets
Current
Foreign currency forward contracts
Total
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
GALE PACIFIC LIMITED
2012 ANNUAL REPORT 51
Consolidated
2011 / 2012
($000)
2010 / 2011
($000)
127
127
-
-
Consolidated
2011 / 2012
($000)
2010 / 2011
($000)
661
661
638
638
Consolidated
2011 / 2012
($000)
2010 / 2011
($000)
8,172
(964)
7,208
60,552
(33,524)
27,028
457
(367)
90
462
(302)
160
-
-
-
5,399
(4,573)
826
56
35,368
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
For personal use only
52
GALE PACIFIC LIMITED
2012 ANNUAL REPORT
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.
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
Reclassifications
Additions / (transfers)
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 / (transfers)
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
Reclassifications
Additions / (transfers)
Disposals
Depreciation expense
Net foreign currency movements arising from foreign operations
Carrying amount at the end of the year
Motor Vehicles Under Lease
Balance at the beginning of the year
Reclassifications
Additions / (transfers)
Disposals
Acquisitions through business combinations
Amortisation expense
Carrying amount at the end of the year
Office Equipment
Balance at the beginning of the year
Reclassifications
Additions / (transfers)
Disposals
Acquisitions through business combinations
Depreciation expense
Net foreign currency movements arising from foreign operations
Carrying amount at the end of the year
Consolidated
2011 / 2012
($000)
2010 / 2011
($000)
6,838
-
-
-
(233)
603
7,208
29,026
(82)
819
(189)
-
(4,731)
2,185
27,028
147
-
8
-
-
(65)
-
90
39
51
186
(68)
(50)
2
160
320
(16)
(154)
(108)
-
(42)
-
524
47
468
(29)
-
(199)
15
826
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
For personal use only
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
Goodwill
GALE PACIFIC LIMITED
2012 ANNUAL REPORT 53
Consolidated
2011 / 2012
($000)
2010 / 2011
($000)
17,721
(1,054)
16,667
1.362
(1,011)
351
1,315
(1,289)
26
4,865
(4,865)
-
17,044
16,453
90
124
16,667
365
57
-
(73)
2
351
185
(160)
1
26
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
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 2012 / 2013 reporting period as approved by the Board of Directors and revenue growth for the further four year period within the
range of 3% to 5% depending on the demographic, economic, trading conditions and growth potential, of the CGU. The discount rate applied
to the cash flow projections is 9.74% (2011 : 11.42%) being the Group’s post 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 – (2011 / 2012 US$2,077,000: 2010 / 2011 US$2,077,000)
China
Total
Consolidated
2011 / 2012
($000)
14,275
2,045
347
16,667
2010 / 2011
($000)
14,185
1,921
347
16,453
For personal use only
54
GALE PACIFIC LIMITED
2012 ANNUAL REPORT
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
2011 / 2012
2013 Budget
3% to 5%
2010 / 2011
2012 Budget
3% to 8%
The five year cash flow projections are based on the 2013 year budget (2011: based on 2012 budget) and an ongoing growth rate of 3% to 5%
which is considered reasonable in light of past performance and future operating plans and business strategies.
Sensitivity Analysis
Any reasonable change in the key assumptions of the value in use calculations would not result in an impairment.
NOTE 13: Trade And Other Payables
Current
Trade payables
Sundry payables and accruals
Total
NOTE 14: Borrowings
Current
Secured liabilities: 1
Bank overdrafts
Bank loans
Commercial bills
Finance lease liability
Total
Unsecured liabilities:
Bank loans
Total
Non Current
Secured liabilities:1
Finance lease liability
Total
Total
Disclosed in the Financial Statements As
Current borrowings
Non current borrowings
1 Secured by general security interests over certain assets of the Group.
Consolidated
2011 / 2012
($000)
2010 / 2011
($000)
5,885
2,249
8,134
4,364
3,094
7,458
Consolidated
2011 / 2012
($000)
2010 / 2011
($000)
-
425
6,800
-
7,225
-
-
-
-
7,225
7,225
-
205
4,574
10,000
166
14,945
232
232
155
155
15,332
15,177
155
For personal use only
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
Warranty claims
Non Current
Employee benefits
Total
Disclosed in the Financial Statements As
Current provisions
Non current provisions
(a) Aggregate employee benefits liability
Movements in Carrying Amounts
Movement in the carrying amounts for the following classes of provision between the beginning and the end of
the year
Restructuring and Termination Costs 1
Balance at the beginning of the year
Provisions recognised
Payments made
Reductions resulting from re-measurement
Net foreign currency movements arising from foreign operations
Carrying amount at the end of the year
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
Provisions written back
Payments made
Carrying amount at the end of the year
GALE PACIFIC LIMITED
2012 ANNUAL REPORT 55
Consolidated
2011 / 2012
($000)
2010 / 2011
($000)
-
-
-
1,063
1,063
1,063
Consolidated
2011 / 2012
($000)
2010 / 2011
($000)
1,648
501
108
82
2,339
2,257
82
1,730
353
141
-
-
7
501
-
-
-
-
331
30
(253)
-
108
1,541
353
331
54
2,279
2,225
54
1,595
445
43
(60)
(110)
35
353
553
-
(553)
-
58
631
-
(358)
331
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.
For personal use only
56
GALE PACIFIC LIMITED
2012 ANNUAL REPORT
NOTE 17: Contributed Equity
Paid Up Capital
Fully paid ordinary shares
Consolidated
2011 / 2012
($000)
2010 / 2011
($000)
70,988
107,086
Changes to the then Corporations Law abolished the authorised capital and par value concept in relation to share capital from 1 July 1998.
Therefore, the Company does not have a limited amount of authorised capital and issued shares do not have a par value.
Movement In Share Capital
Shares issued at the beginning of the financial year
Shares issued during the year
Share capital reduction
Total
(a).
Movement in Share Capital
Consolidated
Consolidated
2011 / 2012
($000)
2010 / 2011
($000)
2011 / 2012
(No. of Shares)
2010 / 2011
(No. of Shares)
107,086
681
(36,779)
70,988
105,586
1,500
-
287,191,658
279,691,658
8,250,000
7,500,000
107,086
295,441,658
287,191,658
On 30 June 2012 the Company issued 8,250,000 ordinary shares under the terms of the Performance Rights Plan.
On 23 August 2011 in accordance with s258F of the Corporations Act 2001, the Company reduced its share capital by $36.779 million
by cancelling share capital that was lost or not represented by available assets.
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.
(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 $6,892,600 (2011 : $8,390,750)
(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)
Improvement in earnings per share; and
Improvement in return to shareholders.
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 735,000. 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.
For personal use only
GALE PACIFIC LIMITED
2012 ANNUAL REPORT 57
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 - 2012
30 Jun 2009
30 Jun 2019
1 Dec 2009
30 Jun 2019
18 Aug 2010
30 Jun 2020
Total
Consolidated and Parent Entity - 2011
30 Jun 2009
30 Jun 2019
1 Dec 2009
30 Jun 2019
18 Aug 2010
30 Jun 2020
Total
Nil
Nil
Nil
Nil
Nil
Nil
8,000,000
3,000,000
2,940,000
13,940,000
8,000,000
3,000,000
-
-
-
-
-
-
-
2,940,000
11,000,000
2,940,000
(6,000,000)
(2,000,000)
(2,250,000)
(750,000)
-
(2,205,000)
(8,250,000)
(4,955,000)
-
-
735,000
735,000
-
-
-
-
-
-
-
8,000,000
3,000,000
2,940,000
13,940,000
-
-
-
-
-
-
-
-
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%
The market price of shares on the grant date has been used as the fair value.
For personal use only
58
GALE PACIFIC LIMITED
2012 ANNUAL REPORT
NOTE 18: Reserves
Foreign currency translation reserve
Share based payments 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
2011 / 2012
($000)
(17,277)
633
89
963
2010 / 2011
($000)
(21,142)
1,200
(565)
963
(15,592)
(19,544)
Consolidated
2011 / 2012
($000)
(21,142)
4,639
(774)
2010 / 2011
($000)
(9,736)
(14,405)
2,999
(17,277)
(21,142)
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 Payments Reserve
Balance at the beginning of the year
Share based expense
Transfer to share capital
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
2011 / 2012
($000)
2010 / 2011
($000)
1,200
114
(681)
633
743
457
-
1,200
Consolidated
2011 / 2012
($000)
2010 / 2011
($000)
(565)
947
(293)
89
242
(1,169)
362
(565)
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
2011 / 2012
($000)
2010 / 2011
($000)
963
-
963
852
111
963
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.
For personal use only
NOTE 19: Retained Earnings
Balance at the beginning of the year
Net profit attributable to members of the parent entity
Dividends paid
Transfers to reserves
Share capital reduction
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 3 October 2011)
Interim Dividend
Fully franked at a 30% tax rate (date of payment 26 March 2012)
Total
GALE PACIFIC LIMITED
2012 ANNUAL REPORT 59
Note
Consolidated
2011 / 2012
($000)
(19,583)
8,477
(6,892)
-
36,779
18,781
2010 / 2011
($000)
(18,191)
7,110
(8,391)
(111)
-
(19,583)
17(a)
Consolidated
2011 / 2012
Cents Per Share
2011 / 2012
($000)
1.2
1.2
2.4
3,446
3,446
6,892
On 24 August 2012, the Directors declared a fully franked dividend of 1.25 cents per share to the holders of fully paid ordinary shares in
respect of the year ended 30 June 2012, to be paid to shareholders on 3 October 2012. This dividend has not been included as a liability in
these financial statements. The total estimated dividend to be paid is $3.693 million.
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 the declared final dividend on
3 October 2012.
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
2011 / 2012
($000)
2010 / 2011
($000)
19
445
For personal use only
60
GALE PACIFIC LIMITED
2012 ANNUAL REPORT
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
Weighted average number of ordinary shares for the purposes of basic earnings per share
Weighted average number of shares deemed to be issued for no consideration in respect of:
Performance rights
Weighted average number of ordinary shares for the purposes of diluted earnings per share
Consolidated
2011 / 2012
(Cents Per Share)
2010 / 2011
(Cents Per Share)
2.95
-
2.95
2.86
-
2.86
2.54
-
2.54
2.42
-
2.42
Consolidated
2011 / 2012
($000)
2010 / 2011
($000)
8,477
7,110
-
8,477
(10)
7,100
Consolidated
2011 / 2012
(000)
2010 / 2011
(000)
287,192
280,288
8,985
296,177
13,545
293,833
For personal use only
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).
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
GALE PACIFIC LIMITED
2012 ANNUAL REPORT 61
Consolidated
2011 / 2012
($000)
2010 / 2011
($000)
-
-
-
-
-
-
-
-
259
109
368
(47)
321
166
155
321
Consolidated
2011 / 2012
($000)
2010 / 2011
($000)
2,138
1,696
3,834
1,726
902
2,628
The above lease commitments relate to property leases. The Company has no rights to purchase the properties at the end of the
lease term.
(c).
Capital Expenditure Commitments
Payable
Not longer than one year
Total
Consolidated
2011 / 2012
($000)
2010 / 2011
($000)
-
-
39
39
1 Minimum future lease payments includes the aggregate of all lease payments and any guaranteed residual.
For personal use only
62
GALE PACIFIC LIMITED
2012 ANNUAL REPORT
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 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
Consolidated
2011 / 2012
($000)
2010 / 2011
($000)
15
2,662
444
-
3,121
20
9,068
508
(205)
9,391
Consolidated
2011 / 2012
($000)
2010 / 2011
($000)
8,477
7,110
138
5,320
233
114
476
5,877
294
457
Gain / (loss) on the foreign exchange forward contracts
654
(807)
Changes in Assets and Liabilities
(Increase) / decrease in receivables
(Increase) / decrease in inventories
(Increase) / decrease in other assets
Decrease in payables, accruals and other financial liabilities
Increase in tax balances
Foreign exchange / other non operation movements backed out of assets and liabilities
Net cash provided by operating activities
(2,045)
(2,119)
(4)
(1,396)
123
(39)
9,456
(121)
(1,559)
182
(523)
518
(486)
11,418
For personal use only
GALE PACIFIC LIMITED
2012 ANNUAL REPORT 63
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 2012 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
Net cash outflow from financing activities
Effect of exchange rate changes on items nominated in foreign currencies
Net decrease in cash from discontinued operations
Consolidated
2011 / 2012
($000)
2010 / 2011
($000)
-
-
-
-
-
-
(10)
(1)
(11)
(339)
(339)
349
10
(59)
-
-
(4)
(63)
For personal use only
64
GALE PACIFIC LIMITED
2012 ANNUAL REPORT
NOTE 24: Directors’ and Executives’ Compensation
Details of Directors and Key Executives remuneration is disclosed in the Remuneration Report.
Directors’ and Executives’ Compensation by Category
Short term employment benefits
Post employment benefits
Share based payments
Termination benefits
Total
Directors’ and Executives’ Equity Holdings:
Fully Paid Ordinary Shares
Consolidated
2011 / 2012
($)
2010 / 2011
($)
2,138,983
2,031,900
138,919
88,991
-
115,668
384,415
-
2,366,893
2,531,983
2011 / 2012
Executive Directors
P McDonald
Non Executive Directors
D Allman
J Murphy
G Richards
Executives
J Cox
S McPherson
M Denney
B Wang
Total
2010 / 2011
Executive Directors
P McDonald
Non Executive Directors
D Allman
J Murphy
G Richards
Executives
J Cox
Total
Balance
30 June 2011
Granted as
Compensation
No.
No.
978,105
-
-
491,899
500,000
-
-
-
1,970,004
-
-
-
-
-
-
-
-
-
Received on
Exercise of
Options
No.
2,250,000
-
-
-
1,500,000
1,500,000
1,500,000
1,500,000
8,250,000
Other
Movements
Balance
30 June 2012
No.
No.
-
-
1,000,000
-
-
-
-
-
3,228,105
-
1,000,000
491,899
2,000,000
1,500,000
1,500,000
1,500,000
1,000,000
11,220,004
Balance
30 June 2010
Granted as
Compensation
No.
No.
Received on
Exercise of
Options
No.
Other
Movements
Balance
30 June 2011
No.
No.
978,105
-
-
491,899
500,000
1,970,004
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
978,105
-
-
491,899
500,000
1,970,004
For personal use only
GALE PACIFIC LIMITED
2012 ANNUAL REPORT 65
NOTE 24: Directors’ and Executives’ Compensation (continued)
Directors’ and Executives’ Equity Holdings, Compensation Options and Performance Rights:
Granted and Vested During the Year
2011 / 2012
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)
P McDonald
2,250,000
Non Executive Directors
None
Executives (Performance Rights)
J Cox
1,500,000
S McPherson
1,500,000
M Denney
B Wang
1,500,000
1,500,000
Other Management Personnel (Performance Rights)
None
Total
8,250,000
Nil
Nil
Nil
Nil
Nil
Nil
The performance rights disclosed above are subject to a continuation of employment to 30 June 2013 and hurdles based on improvements in
the Group’s diluted earnings per share over the two year period 1 July 2010 to 30 June 2012.
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 a continuation of employment to 30 June 2013 and hurdles based on improvements in
the Group’s diluted earnings per share over the two year period 1 July 2010 to 30 June 2012.
For personal use only
66
GALE PACIFIC LIMITED
2012 ANNUAL REPORT
NOTE 24: Directors’ and Executives’ Compensation (continued)
Directors’ and Executives’ Equity Holdings Compensation Options and Performance Rights: Movements During the Year
2011 / 2012
Balance
1 July 2011
Granted as
Compensation
Exercised
Lapsed
Net Other
Change
No.
No.
No.
No.
No.
Balance
30 June
2012
No.
Balance
Held
Nominally
No.
Executive Directors (Performance Rights)
P McDonald
3,000,000
(2,250,000)
(750,000)
Non Executive Directors
None
Executives (Performance Rights)
J Cox
M Denney
2,000,000
2,000,000
(1,500,000)
(500,000)
(1,500,000)
(500,000)
S McPherson
2,000,000
(1,500,000)
(500,000)
B Wang
A Scott
2,000,000
980,000
Other Management Personnel (Performance Rights)
Other
Management
1,960,000
(1,500,000)
(500,000)
-
-
(735,000)
(1,470,000
Total
13,940,000
(8,250,000)
(4,955,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
245,000
490,000
735,000
-
-
-
-
-
-
-
-
2010 / 2011
Balance
1 July 2010
Granted as
Compensation
Exercised
Lapsed
Net Other
Change
No.
No.
No.
No.
No.
Balance
30 June
2011
No.
Balance
Held
Nominally
No.
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
-
-
-
-
-
-
-
-
Value of Lapsed
Options/Rights
$
(105,000)
(30,500)
(30,500)
(30,500)
(30,500)
(147,000)
(294,000)
(668,000)
Value of Lapsed
Options/Rights
$
-
-
-
-
-
-
-
-
For personal use only
GALE PACIFIC LIMITED
2012 ANNUAL REPORT 67
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 Group.
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 $25,219,000 (2011 : $24,655,000)
Gale Pacific Limited received interest income from its subsidiaries totalling $558,000 (2011 : $521,000)
Gale Pacific Limited made interest payments to its subsidiaries totalling $34,000 (2011 : $155,000)
Reimbursement of certain operating costs totalling $261,000 (2011 : $288,000)
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 1
Controlled Entities
Consolidated
2011 / 2012
($000)
2010 / 2011
($000)
70
22
Country of Incorporation
Ownership Interest (%)
2011 / 2012
2010 / 2011
Australia
-
-
Gale Europe GmbH Vertriebsgesellschaft (Liquidated 2011)
Germany
De-Registered
Gale Pacific (New Zealand) Limited
Gale Pacific FZE
Gale Pacific Special Textiles (Ningbo) Limited
Gale Pacific USA Inc
Zone Hardware Pty Ltd 2, 3
Riva Window Fashions Pty Ltd 2, 3
New Zealand
United Arab Emirates
China
United States of America
Australia
Australia
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
1 Gale Pacific Limited is the head entity within the tax consolidated group.
2 These companies are members of the tax consolidated group.
3 These wholly owned subsidiaries are small proprietary companies and are relieved from the requirement to prepare and lodge an audited financial report.
For personal use only
68
GALE PACIFIC LIMITED
2012 ANNUAL REPORT
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 $1,933,000 of the trade receivables carrying balance at 30 June 2012 (2011 :
$1,868,000). 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 2012
($000)
As at 30 Jun 2011
($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:
Australasia
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
16,992
3,121
127
20,240
6,550
1,017
6,833
2,435
16,835
12,989
3,025
723
97
1
16,835
12
153
238
403
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
For personal use only
GALE PACIFIC LIMITED
2012 ANNUAL REPORT 69
NOTE 27: Financial Instruments (continued)
(b).
Liquidity Risk
The following tables detail both the Group’s effective weighted average interest rates on classes of its financial liabilities at reporting
date and the contractual maturity of these financial liabilities. Contractual cash flows include both interest and principal cash flows, are
undiscounted and based on the earliest date on which the Group can be required to pay.
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 2012
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
Derivative Financial
Liabilities
Foreign currency forward
exchange contracts used
Total
13
13
14
15
5,885
2,249
5,885
2,249
5,885
2,249
5.48%
7,225
7,225
7,225
-
-
-
15,359
15,359
15,359
-
-
-
-
-
-
-
-
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
14,806
321
205
14,889
368
205
14,889
130
1,063
1,063
983
23,853
23,983
22,915
-
750
-
-
129
80
959
-
-
-
-
109
-
109
For personal use only
70
GALE PACIFIC LIMITED
2012 ANNUAL REPORT
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 contracts 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 fair value (level 2) was $127,000 receivable (2011 : $1,063,000 payable).
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(q).
Average Exchange Rate
Foreign Currency
Contract Value
Fair Value
2011 / 2012
2010 / 2011
2011 / 2012
(FC000)
2010 / 2011
(FC000)
2011 / 2012
($000)
2010 / 2011
($000)
2011 / 2012
($000)
2010 / 2011
($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
Less than 6 months
Buy European euro / sell
Australian dollars
Less than 6 months
6 – 12 months
Total
0.9968
0.9825
0.9700
0.9788
13,200
1,300
12,300
3,300
13,243
1,323
12,664
3,306
120
7
(944)
(113)
-
-
-
-
0.7064
-
-
-
-
-
130
-
-
-
-
-
184
-
-
-
-
-
(6)
-
127
(1,063)
Foreign Exchange Risk Sensitivity
The Group is mainly exposed to United States dollars, Euros and New Zealand dollars in its Australian operation and Australian dollars
in its foreign operations.
The following table details the Group’s sensitivity to a 10% (2011: 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.
For personal use only
NOTE 27: Financial Instruments (continued)
30 June 2012
CONSOLIDATED
Australian Dollar
Carrying Value
Australian Entities
($000)
Australian Dollar
Carrying Value
Foreign Entities
($000)
Profit / (Loss)
AUD +10%
($000)
Financial Assets
Cash and cash equivalents
United States dollars
Chinese renminbi
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
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
85
-
1
-
-
-
-
-
-
127
8
-
-
-
-
140
-
64
-
-
1
-
1,520
327
93
136
10,518
226
209
-
-
-
429
2,435
19
77
59
-
285
11,610
(2,167)
(19)
224
77
(9)
-
-
-
-
-
-
6
7
-
1
-
-
-
-
14
-
19
12
-
-
7
-
19
GALE PACIFIC LIMITED
2012 ANNUAL REPORT 71
Equity
AUD +10%
($000)
(152)
(33)
(9)
(14)
(1,052)
(23)
(21)
-
-
-
43
244
2
8
6
-
29
(972)
(1,161)
217
2
(22)
(8)
(972)
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
For personal use only
72
GALE PACIFIC LIMITED
2012 ANNUAL REPORT
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 2012
Financial Assets
Cash and cash equivalents
Financial Liabilities
Borrowings (all fixed rates instruments)
Total
30 June 2011
Financial Assets
Cash and cash equivalents
Financial Liabilities
Borrowings (all fixed rates instruments)
Total
NOTE 28: Parent Entity Disclosures
Results of the parent entity
Profit 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 payments reserve
Hedging reserve
Retained earnings
Total equity
Parent Entity Commitments
Operating leases
Capital expenditure
Total
Consolidated
Carrying Value
($000)
3,121
(7,225)
4,104
Profit / (Loss)
+1% Movement
($000)
31
(72)
(41)
Consolidated
Carrying Value
($000)
9,576
(15,011)
(5,435)
Profit / (Loss)
+1% Movement
($000)
96
(150)
(54)
2011 / 2012
($000)
2010 / 2011
($000)
3,651
654
4,305
15,659
90,265
(12,619)
(12,247)
78,018
70,988
633
89
6,308
78,018
3,474
-
3,474
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
For personal use only
GALE PACIFIC LIMITED
2012 ANNUAL REPORT 73
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 specialises in the marketing and distribution of branded home improvement products. Riva Window
Fashions specialises in a diverse range of custom made window furnishings made specifically to the customer’s measurements and
specifications. The acquisitions gave the Group 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))
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 acquired
Add goodwill
Net assets acquired
2011 / 2012
($000)
2010 / 2011
($000)
11,344
(454)
1,500
750
13,140
194
1,092
2,353
370
4
(1,183)
(331)
(75)
(486)
1,938
11,202
13,140
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% was paid in cash on 1 June 2012.
Revenue and Profit Contribution
In 2011 the acquired businesses contributed revenue of $1,367,000 and net profit after tax of $64,098 to the Group for the period 1
June 2011 to 30 June 2011.
Had these business combinations been effected at 1 July 2010, consolidated revenue and net profit after tax for the year ended 30
June 2011 would have been $109,770,000 and $7,780,000 respectively. (The net profit after tax of $7,780,000 factors into account the
estimated additional cost of debt that would have been incurred at a pre tax interest rate of 6.5%).
A purchase adjustment of $90,000 was made based on final agreed inventory valuation.
(b).
Purchase Consideration – Cash Outflow
Acquisition Related Costs
Acquisition related costs of $88,814 were included in other expenses in profit and loss and in operating cash flows in the statement of
cash flows.
For personal use only
74
GALE PACIFIC LIMITED
2012 ANNUAL REPORT
NOTE 30: Subsequent Events
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, Victoria, 3195
Australia
For personal use only
GALE PACIFIC LIMITED
2012 ANNUAL REPORT 75
ADDITIONAL SECURITIES EXCHANGE INFORMATION
NUMBER OF HOLDINGS OF EQUITY
SECURITIES AS AT 8 AUGUST 2012
The fully paid issued capital of the Company consisted of
295,441,658 ordinary fully paid shares held by 879 shareholders.
Each share entitles the holder to one vote.
3 holders have been granted 735,000 performance rights over
ordinary shares. Performance rights do not carry a right to vote.
DISTRIBUTION OF HOLDERS OF EQUITY
SECURITIES
Ordinary
Fully Paid
Shares
Total
Holders
122
219
131
299
108
-
Units
% Issued
Capital
38,831
639,375
1,034,075
11,038,687
0.01
0.22
0.35
3.74
282,690,690
95.68
-
-
-
879
295,441,658
100.00
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
UNMARKETABLE PARCELS
Unmarketable Parcels
as
at
8 August 2012
Minimum $500 parcel at
$0.28 per unit
Minimum
Parcel Size
Holders
Units
1786
165
98,302
SUBSTANTIAL SHAREHOLDERS AS AT
8 AUGUST 2012
Shareholder
Thorney Holdings Pty Ltd
Investec Wentworth Private Equity Ltd
Windhager Handels Gesmbh
No.
79,702,646
75,309,874
41,925,781
%
26.98
25.49
14.19
TWENTY LARGEST HOLDERS OF QUOTED
EQUITY SECURITIES
Shareholder
Thorney Holdings Pty Ltd
Windhager Handels Gesmbh
IWPE Nominees Pty Ltd
IWPE Nominees Pty Ltd
Guinness Mahon & Co Limited
Gale Australia Pty Ltd
MGB Equity Growth Pty Limited
JP Morgan Nominees Australia Limited
UBS Nominees Pty Ltd
Ruminator Pty Ltd
Clipper Island Pty Ltd
Investec Bank (Australia) Limited
Gernis Holdings Pty Limited
Mr Geoffrey Duncan Nash
Haroldswick Corporation Pty Ltd
GFS Securities Pty Ltd
Mr Peter McDonald
Venn Milner Superannuation Pty Ltd
Atkone Pty Ltd
Jeffrey Cox
No.
71,984,262
41,925,781
28,365,369
18,234,879
14,182,685
13,927,844
10,130,490
8,803,950
7,718,384
6,691,433
5,000,000
4,396,451
4,369,941
3,327,428
2,500,000
2,447,935
2,371,801
2,000,000
1,919,796
1,500,000
%
24.36
14.19
9.60
6.17
4.80
4.71
3.43
2.98
2.61
2.26
1.69
1.49
1.48
1.13
0.85
0.83
0.80
0.68
0.65
0.51
Top 20 Holders Of Ordinary Fully Paid
Shares As At 08 August 2012
251,798,429
Total Remaining Holders Balance
43,643,229
85.23
14.77
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, Victoria, 3067, Australia, local call is
1300 850 505, international call is + 613 9415 4000.
For personal use only
76
GALE PACIFIC LIMITED
2012 ANNUAL REPORT
OFFICE LOCATIONS
Australia
PO Box 892
145 Woodlands Drive,
Braeside, Victoria, 3195,
Ph: +61 3 9518 3399
Toll Free 1800 331 521
China
777 Hengshan West Road
Beilun, Ningbo, 315800
Ph: +86 574 5626 8888
Middle East
PO Box 17696
Jebel Ali, Dubai, U.A.E.
Ph: +971 4 881 7114
New Zealand
Unit 9, 39 Apollo Drive,
Rosedale, Auckland, 0632
Ph: + 64 3 373 9500
Toll Free: 0800 555 171
United States
Suite 1704, 285 West Central Parkway,
Altamonte Springs, Florida, 32714
Ph: +1 407 333 1038
For personal use only