2013 Annual Report
For personal use only
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GALE PACIFIC LIMITED
2013 ANNUAL REPORT
CONTENTS
Corporate Directory
Chairman’s & Managing Director and
Chief Executive Officer’s Report
Board of Directors
Senior Management
Corporate Governance
Directors’ Report
Financial Results
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4
9
10
11
18
32
2013 ANNUAL GENERAL MEETING
The Annual General Meeting will be held on Friday 18 October 2013.
The Notice of Meeting and Proxy Form are separate items accompanying this 2013 Annual Report.
For personal use only
CORPORATE DIRECTORY
GALE PACIFIC LIMITED
2013 ANNUAL REPORT 3
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
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GALE PACIFIC LIMITED
2013 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 improve, with record results for the year ended 30 June
2013. The company recorded an increase in net profit after tax of 7.0% to $9.1 million compared to $8.5 million for the previous corresponding
period.
The results included the positive contribution from the Highgrove Glass Solutions business which was acquired in December 2012. Very strong
sales and profit growth was recorded for our Americas and Middle East businesses. Our Australasian businesses faced subdued and very
competitive trading conditions.
We were again very pleased with the contribution from our Chinese manufacturing operations.
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
2012 / 2013
(A $ Million)
120.0
2011 / 2012
(A $ Million)
110.5
18.0
5.1
12.9
0.9
12.0
2.9
9.1
11.5
3.2
3.00
18.0
5.6
12.4
0.9
11.5
3.0
8.5
9.5
4.1
2.86
Change
(%)
9%
0%
(9)%
4%
0%
4%
(3)%
7%
21%
(22)%
5%
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GALE PACIFIC LIMITED
2013 ANNUAL REPORT 5
REVENUE INCREASE OF 9% TO $120 MILLION
Revenue for the year increased by 9% to $120 million. Sales revenues in local currencies grew by 22% in the USA and 23% in the Middle East.
We continued to invest in building our international business as we increased our marketing efforts in South Africa, Europe, South America and
India. Lower sales were recorded to our distributor in Japan due to a carry-over of inventory in the network from the record sales in 2011/2012.
Sales increased in Australasia due to the addition of the Highgrove Glass Solutions business from December 2012. Lower sales were recorded
in our traditional markets in Australia and New Zealand due to weaker demand in some market segments, price deflation, ongoing inventory
reduction programs with our major retail customer and competitive conditions.
EBITDA IN LINE WITH LAST YEAR AT $18.0 MILLION
Earnings before interest, tax, depreciation and amortisation (EBITDA) was in line with last year at $18.0 million.
EBIT INCREASE OF 4% TO $12.9 MILLION
Earnings before interest and tax (EBIT) was $12.9 million compared to $12.4 million for the previous corresponding period. The increase was
achieved through sales growth in the USA and the Middle East and the contribution from the Highgrove Glass Solutions business which is
being integrated into the operations of the Australian business. Lower waste 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 7% TO $9.1 MILLION – HIGHEST ON RECORD
Net profit after tax of $9.1 million for the financial year ended 30 June 2013 is the highest on record for the Company. This result is a 7% or
$0.6 million increase on the reported result for the previous corresponding period.
FINAL DIVIDEND PAYMENT OF 1.35 CENTS FRANKED TO 80%
Directors are pleased to announce to shareholders that the Company has increased the ordinary final dividend to 1.35 cents per share.
Dividends for the full year of 2.65 cents per share have been declared on diluted earnings of 3.00 cents per share. This represents an 8%
increase on full year ordinary dividends compared to last year. The final dividend payment of 1.35 cents per share will be franked to 80% and
will be paid to shareholders on 4 October 2013.
CASH FROM OPERATIONS $11.5 MILLION
The Company continued to generate strong cash flow from operations and net debt at 30 June 2013 reduced to $3.2 million from $4.1 million at
30 June 2012.
The business invested capital expenditure of $2.5 million during the year (an increase of $1.1 million on the prior year and including $1.1 million
of expenditure for upgraded I.T. systems for implementation in 2013/2014) and dividends totalling $7.6 million were paid to shareholders.
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GALE PACIFIC LIMITED
2013 ANNUAL REPORT
AUSTRALASIA (AUSTRALIAN DOLLARS)
Local Currency
Sales
EBITDA
FY13
(A$M’s)
76.9
6.2
FY12
(A$M’s)
71.0
7.8
Change
(%)
8%
(21)%
Sales increased by 8% over the prior year (reported in Australian dollars) and include the contribution of the Highgrove Glass Solutions
business acquired in December 2012. Consumer demand in Australia and New Zealand showed ongoing signs of weakness and trading
conditions remained highly competitive. Sales of Coolaroo and Zone branded products sold to the retail channel were slightly lower than the
previous year but inventory levels in the retail channel reduced significantly. Products including Coolaroo branded synthetic grass and shade
sails showed positive growth in the retail market. The Riva Window Fashions business, which sells custom made interior window blinds direct
to consumers contributed an operating loss for the year and this business model was found to be extremely challenging. In July 2013, the
decision was made to exit this business and closure costs have been included in the 2012/2013 result.
Sales of Synthesis branded coated fabrics were 5% less than the previous year due to lower volumes of grain storage covers, fabrics used in
the mining industry and some price deflation due to the high Australian dollar and strong market competition. Construction activity was subdued
and impacted the sales of shade fabrics for commercial applications. Paper coating for Visy products increased by 24% over last year and
contributed to additional volumes through the Australian manufacturing operation.
We are pleased with the contribution from the Highgrove Glass Solutions business which was acquired in December 2012. The business is
being integrated with the Gale operations.
Sales of Coolaroo and Zone branded products sold through retail channels in New Zealand decreased by 14% over the prior year. The
continued weak horticultural market in New Zealand resulted in lower sales of commercial shade cloth and protective nets. During the year the
business lost a large customer for the electric fence business through a competitive tender.
EBITDA declined year on year due to selling price reductions in response to competitive pressure and product cost increases that we were
unable to pass on at the time. A number of price increases have now been implemented to improve this position as we move into FY14. Also
within the Australian business, warehousing and freight costs have increased year on year due to picking and load inefficiencies and freight
increases. A number of management changes have been made within the Australasian operation to improve operational and financial
performance.
EBITDA for the Australasian region fell by 21% year on year which was a disappointing result in tough market conditions.
AMERICAS (US DOLLARS)
Local Currency
Sales
EBITDA
FY13
(US$M’s)
25.9
2.1
FY12
(US$M’s)
21.2
1.6
Change
(%)
22%
31%
The Gale Americas business secured additional range listings with some of the larger retailers in the USA during the year in addition to
improved market conditions and consumer sentiment. The weather conditions in most parts of the USA have been favourable to boosting
demand for outdoor shading and screening products. The improved performance is also the result of earlier investments in expanding our retail
sales and marketing resources. Sales of products through the retail channel grew by approximately 25%.
Sales of commercial fabrics were slightly down on the previous year and are a result of more subdued activity in the commercial sector. The
funding of projects for the government sector has been tight and private sector project spending has been sporadic and often delayed. We
have launched our fire retardant architectural range and waterproof Synthesis Commercial 95 fabrics ranges in the USA market.
EBITDA increased in the Americas by 31% to US$2.1 million for the year due to the growth in sales to the retail market.
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GALE PACIFIC LIMITED
2013 ANNUAL REPORT 7
MIDDLE EAST (US DOLLARS)
Local Currency
Sales
EBITDA
FY13
(US$M’s)
9.7
1.9
FY12
(US$M’s)
7.9
1.6
Change
(%)
23%
19%
Market conditions and business activity in the Middle East region were very positive. Sales growth of 23% to US$9.7 million was achieved for
the year. Strong growth was recorded in the U.A.E. and Qatar markets and solid sales were recorded in the key Saudi market. Construction
activity has shown areas of steady improvement and the demand for Gale commercial fabrics continues to be 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.
The sales growth has been enhanced by the continued growth of our new waterproof range of Synthesis Commercial 95 fabric with strong
penetration into key markets.
EBITDA increased by 19% to US$1.9 million in our Middle East business due to the increased level of sales.
INTERNATIONAL MARKETS (US DOLLARS)
International market sales reduced by 27% to US$7.6 million mainly due to a reduction in sales to Japan due to a carryover of seasonal
inventory by our Japanese distributor following record sales in the 2011/2012 year. Sales into South Africa declined year on year as sales in
FY12 included the initial full year pipe-line fill orders which were not repeated in FY13 as the business is now established. We have added
further market development resources based in Europe and China to support future growth initiatives in these markets. Business development
activities are expanding in Europe, South America, India, China and other key markets.
CHINA (US DOLLARS)
Local Currency
Sales – International
Sales - Internal
EBITDA
FY13
(US$M’s)
7.6
28.6
7.6
FY12
(US$M’s)
10.4
23.0
7.2
Change
(%)
(27)%
24%
6%
Increased demand from our USA and Middle East businesses has seen additional production volumes from our Chinese manufacturing
operation for the year. The continuous improvement program has also generated further reductions in scrap rates and improved yields. The
higher production volumes, labour efficiencies and improving yields have been important elements in curbing the impact of higher wage rates
and labour on costs in China. There have also been increases in raw material costs and the unfavourable impact of the strengthening Chinese
renmimbi against the US dollar. During the year we undertook a number of initiatives to improve our sourcing from third party Chinese suppliers
to procure high quality and lower cost sourced products which continue to become an increasing part of our business.
ORGANIC AND ACQUISITION GROWTH
Gale maintains a strong continuous improvement culture, skilled and motivated employees and management, and an effective and expanding
international 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 and the Highgrove Glass Solutions business in December 2012 has provided a broader product offering
and additional growth opportunities for our business. Further complementary acquisitions are being assessed and actively pursued.
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GALE PACIFIC LIMITED
2013 ANNUAL REPORT
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 throughout the year. We continue to focus on
improvements in the way we operate and do business with our customers. The ongoing
manufacturing efficiency gains and waste reduction achievements have again been very
pleasing in our manufacturing operations in China and Australia.
OUTLOOK
Trading conditions are expected to remain highly competitive in all markets. Retail
conditions generally in Australia and New Zealand are difficult, but on a positive note we
are seeing improved consumer spending in the USA and improved construction activity in
the Middle East.
Further sales expansion of Coolaroo, Zone, Highgrove and Synthesis branded products is
expected to deliver another solid financial result in 2013/2014 and 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 18 October 2013 and a
voting form is enclosed with this report.
Mr David Allman
Chairman
23 August 2013
Mr Peter McDonald
Managing Director and Chief Executive Officer
23 August 2013
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GALE PACIFIC LIMITED
2013 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 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
Non Executive Director since May 2004.
Mr Richards was the Chief Executive of Mitre 10 South West Ltd during the 1990’s 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 Society of
Accountants (CPA).
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
2013 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.
NICK PRITCHARD
MANAGING DIRECTOR, AUSTRALIA & NEW ZEALAND
Nick joined Gale in August 2013 as Managing Director Australia and New Zealand. Prior to joining Gale, Nick
held various senior leadership positions at Newell Rubbermaid including, most recently, Vice-President /
General Manager – Australia and New Zealand. At Newell Rubbermaid, a $6 billion USA public company
(brands including Parker, Waterman, PaperMate, DYMO, IRWIN Tools and Rubbermaid), Nick led all business
segments encompassing office products, tools, commercial and home businesses for the Australia and New
Zealand markets. Nick has considerable local and international experience in brand development, business
consolidation and leading a highly profitable, high growth organisation. Nick returns to Gale after more than 10
years at Newell Rubbermaid. Nick was formerly Marketing Manager and Product Manager of Gale Pacific
between 1996 and 2003 and developed the Coolaroo brand and many of the company’s highly successful
products. Nick has a Bachelor of Business (Marketing).
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
2013 ANNUAL REPORT 11
CORPORATE GOVERNANCE
This statement sets out the corporate governance practices that were in operation throughout the 2013 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 FOUNDATIONS FOR MANAGEMENT AND 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. Similarly senior executives including the chief
executive officer, and the chief financial officer, have a formal job description and letter of appointment describing their term of office, duties,
rights and responsibilities, and entitlements on termination.
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 Chief Executive Officer, evaluates the performance of the Group’s
senior executives annually. The Remuneration Committee also reviews the Chief Executive Officer’s performance annually.
Recommendation 1.3: Companies should disclose in the corporate governance statement in the annual report:
(cid:131)
(cid:131)
(cid:131)
an explanation of any departure from Recommendation 1.1, 1.2 or 1.3.
whether a performance evaluation for senior executives has taken place in the reporting period and whether it was in accordance with
the process disclosed.
a statement of matters reserved for the board, or the board charter or the statement of areas of delegated authority to senior
executives should be made publicly available, ideally by posting it to the company’s website in a clearly marked corporate governance
section.
Complying.
The Company has complied with Recommendations 1.1, 1.2, and 1.3.
A performance evaluation for the Group’s senior executives and the Chief Executive Officer has taken place in the reporting period in
accordance with the process outlined under the Company’s comments on Recommendation 1.2.
A copy of the Company’s Board Charter is posted on the Group’s website, www.galepacific.com in the Corporate Governance section under
the Investor Relations tab.
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 should be independent directors.
Complying.
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2013 ANNUAL REPORT
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. Non executive directors confer
without management at two scheduled sessions per annum, and on an ad hoc basis as and if required.
Recommendation 2.2: The chair 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.
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 three members of all of whom are 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
and each Committee’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.
Senior executives supply the Board with information in a form and timeframe, and of a quality that enables the Board to discharge its duties
effectively. Directors are entitled to request additional information where they consider such information necessary to make informed decisions.
The appointment and removal of the company secretary is a matter for decision by the board as a whole and the company secretary is
accountable to the Board, through the chair, on all governance matters.
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)
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;
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GALE PACIFIC LIMITED
2013 ANNUAL REPORT 13
(cid:131)
(cid:131)
(cid:131)
(cid:131)
(cid:131)
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 Board has established a Code of Conduct which articulates acceptable practices for directors, senior executives and employees, to guide
their behaviour and to demonstrate the commitment of the Company to ethical practices. The Code of Conduct has the commitment of the
Directors and senior management and is supported by appropriate training and monitoring of compliance. The Company also seeks to ensure
that advisers, consultants and contractors aware of the Company’s expectations as set out in its Code of Conduct.
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 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 objectives of the Company’s Diversity policy are centred on a wide
range of diversity criteria including gender, age, ethnicity and cultural background. 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)
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
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GALE PACIFIC LIMITED
2013 ANNUAL REPORT
(cid:131)
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.
Whilst the Company has not set formal measurable objectives for achieving gender diversity, the Company is nonetheless committed to
recruiting employees from a diverse pool of qualified candidates.
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 403 male employees and 203 female employees. 34 male employees hold senior management roles and 5
female employees 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.
An explanation of any departures from the Recommendations under Principle 3 is included in this statement, and the Company’s Code of
Conduct 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.
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 three non executive independent directors; and the chairman of the Audit Committee is
independent and 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 2013 Annual Report:
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GALE PACIFIC LIMITED
2013 ANNUAL REPORT 15
(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.
There are no departures from Recommendations 4.1, 4.2, 4.3 or 4.4.
The following material is available on the Company’s website in a clearly marked corporate governance section:
(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 ASX 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 purpose of the
procedures for identifying information for disclosure is to ensure timely and accurate information is provided equally to all shareholders and
market participants.
The Company Secretary is responsible for all communications with the ASX. All Company announcements are vetted and authorised by the
Board and senior management to ensure they are made in a timely manner, are factual, do not omit material information and are expressed in
a clear and objective manner that allows investors to assess the impact of the information when making investment decisions.
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.
PRINCIPLE 6: RESPECT THE RIGHTS OF SHAREHOLDERS
Companies should respect the rights of shareholders and facilitate the effective exercise of those rights.
Recommendation 6.1: 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.
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)
placing all relevant announcements made to the market, on the Company’s website after they have been released to ASX;
releasing information provided to analysts or media during briefings to ASX and placing such information on the Company’s website;
placing the full text of notices of meeting and explanatory material on the Company’s website;
providing information about the last six years’ announcements the last ten years of financial data on the Company’s website in the
Investor Relations section.
Recommendation 6.2: Companies should provide the information indicated in the Guide to reporting on Principle 6.
Complying.
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GALE PACIFIC LIMITED
2013 ANNUAL REPORT
There are no departures from Recommendations 6.1 or 6.2.
The Company confirms that it communicates with its shareholders and key stakeholders by posting information on the Company’s website in a
clearly marked corporate governance section under the Investor Relations tab.
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 Group has established policies and procedures to identify, assess and manage all material business and operational risks. 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 reviews the risk management framework and policies of the Group, and is satisfied that management has developed and
implemented a sound system of risk management and internal control.
The Board oversees policies on risk assessment and management and has delegated certain responsibilities in these matters to the Audit
Committee. The Audit Committee regularly reviews the Company’s Risk Register and its risk management policies and reports to the Board
accordingly.
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 reviews the Group’s major business units, organisational structure and accounting controls and processes on a regularly basis
and reports accordingly to the Audit Committee and in turn to the Board; 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.
Recommendation 7.4: Companies should provide the information indicated in the Guide.
Complying.
There are no departures from Recommendations 7.1, 7.2, or 7.3. 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.
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GALE PACIFIC LIMITED
2013 ANNUAL REPORT 17
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 are detailed in the Directors’
Report of this Annual Report.
There are no schemes for retirement benefits, other than superannuation, for non executive directors.
There are no departures from Recommendations 8.1, 8.2, 8.3 or 8.4.
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.
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GALE PACIFIC LIMITED
2013 ANNUAL REPORT
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 2013.
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
2013.
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 2013.
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, and Gale Pacific Limited. Also at that date Mr Murphy changed from an executive to a non executive director
of Investec Bank (Australia) Limited.
In the three years prior to 30 June 2013 Mr Murphy was also a director of Clearview Wealth 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
Non Executive Director since May 2004
Mr Richards was the Chief Executive of Mitre 10 South West Ltd during the 1990’s 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
Society of Accountants (CPA).
No other directorships of listed companies were held by Mr Richards at any time during the three years prior to 30 June 2013.
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
2013 ANNUAL REPORT 19
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
Revenue for the year increased by 9% to $120 million. Sales revenues in local currencies grew by 22% in the USA and 23% in the Middle East.
We continued to invest in building our international business as we increased our marketing efforts in South Africa, Europe, South America and
India. Lower sales were recorded to our distributor in Japan due to a carry-over of inventory in the network from the record sales in 2011/2012.
Sales increased in Australasia due to the addition of the Highgrove Glass Solutions business from December 2012. Lower sales were recorded
in our traditional markets in Australia and New Zealand due to weaker demand in some market segments, price deflation, ongoing inventory
reduction programs with our major retail customer and competitive conditions.
Earnings before interest, tax, depreciation and amortisation (EBITDA) was in line with last year at $18.0 million.
Earnings before interest and tax (EBIT) was $12.9 million compared to $12.4 million for the previous corresponding period. The increase was
achieved through sales growth in the USA and the Middle East and the contribution from the Highgrove Glass Solutions business which is
being integrated into the operations of the Australian business. Lower waste 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.
Net profit after tax of $9.1 million for the financial year ended 30 June 2013 is the highest on record for the Company. This result is a 7% or
$0.6 million increase on the reported result for the previous corresponding period.
Directors are pleased to announce to shareholders that the Company has increased the ordinary final dividend to 1.35 cents per share.
Dividends for the full year of 2.65 cents per share have been declared on diluted earnings of 3.00 cents per share. This represents an 8%
increase on full year ordinary dividends compared to last year. The final dividend payment of 1.35 cents per share will be franked to 80% and
will be paid to shareholders on 4 October 2013.
The Company continued to generate strong cash flow from operations and net debt at 30 June 2013 reduced to $3.2 million from $4.1 million at
30 June 2012.
The business invested capital expenditure of $2.5 million during the year (an increase of $1.1 million on the prior year and including
$1.1 million of expenditure for upgraded I.T. systems for implementation in 2013/2014) and dividends totalling $7.6 million were paid to
shareholders.
Sales increased by 8% over the prior year (reported in Australian dollars) and include the contribution of the Highgrove Glass Solutions
business acquired in December 2012. Consumer demand in Australia and New Zealand showed ongoing signs of weakness and trading
conditions remained highly competitive. Sales of Coolaroo and Zone branded products sold to the retail channel were slightly lower than the
previous year but inventory levels in the retail channel reduced significantly. Products including Coolaroo branded synthetic grass and shade
sails showed positive growth in the retail market. The Riva Window Fashions business, which sells custom made interior window blinds direct
to consumers contributed an operating loss for the year and this business model was found to be extremely challenging. In July 2013, the
decision was made to exit this business and closure costs have been included in the 2012/2013 result.
Sales of Synthesis branded coated fabrics were 5% less than the previous year due to lower volumes of grain storage covers, fabrics used in
the mining industry and tank liner markets, and some price deflation due to the high Australian dollar and strong market competition.
Construction activity was subdued and impacted the sales of shade fabrics for commercial applications. Paper coating for Visy products
increased by 24% over last year and contributed to additional volumes through the Australian manufacturing operation.
We are pleased with the contribution from the Highgrove Glass Solutions business which was acquired in December 2012. The business is
being integrated with the Gale operations.
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GALE PACIFIC LIMITED
2013 ANNUAL REPORT
Sales of Coolaroo and Zone branded products sold through retail channels in New Zealand decreased by 14% over the prior year. The
continued weak horticultural market in New Zealand resulted in lower sales of commercial shade cloth and protective nets. During the year the
business lost a large customer for the electric fence business through a competitive tender.
EBITDA declined year on year due to selling price reductions in response to competitive pressure and product cost increases that we were
unable to pass on at the time. A number of price increases have now been implemented to improve this position as we move into FY14. Also
within the Australian business, warehousing and freight costs have increased year on year due to picking and load inefficiencies and freight
increases. A number of management changes have been made within the Australasian operation to improve operational and financial
performance.
EBITDA for the Australasian region fell by 21% year on year which was a disappointing result in tough market conditions.
The Gale Americas business secured additional range listings with some of the larger retailers in the USA during the year in addition to
improving market conditions and consumer sentiment. The weather conditions in most parts of the USA have been favourable to boosting
demand for outdoor shading and screening products. The improved performance is also the result of earlier investments in expanding our retail
sales and marketing resources. Sales of products through the retail channel grew by approximately 25%.
Sales of commercial fabrics were slightly down on the previous year and are a result of more subdued activity in the commercial sector. The
funding of projects for the government sector has been tight and private sector project spending has been sporadic and often delayed. We
have launched our fire retardant architectural range and waterproof Synthesis Commercial 95 fabrics ranges in the USA market.
EBITDA increased in the Americas by 31% to US$2.1 million for the year due to the growth in sales to the retail market.
Market conditions and business activity in the Middle East region were very positive. Sales growth of 23% to US$9.7 million was achieved for
the year. Strong growth was recorded in the U.A.E. and Qatar markets and solid sales were recorded in the key Saudi market. Construction
activity has shown areas of steady improvement and the demand for Gale commercial fabrics continues to be 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.
The sales growth has been enhanced by the continued growth of our new waterproof range of Synthesis Commercial 95 fabric with strong
penetration into key markets.
EBITDA increased by 19% to US$1.9 million in our Middle East business due to the increased level of sales.
International market sales reduced by 27% to US$7.6 million mainly due to a reduction in sales to Japan due to a carryover of seasonal
inventory by our Japanese distributor following record sales in the 2011/2012 year. Sales into South Africa declined year on year as sales in
FY12 included the initial full year pipe-line fill orders which were not repeated in FY13 as the business is now established. We have added
further market development resources based in Europe and China to support future growth initiatives in these markets. Business development
activities are expanding in Europe, South America, India, China and other key markets.
Increased demand from our USA and Middle East businesses has seen additional production volumes from our Chinese manufacturing
operation for the year. The continuous improvement program has also generated further reductions in scrap rates and improved yields. The
higher production volumes, labour efficiencies and improving yields have been important elements in curbing the impact of higher wage rates
and labour on costs in China. There have also been increases in raw material costs and the unfavourable impact of the strengthening renmimbi
against the US dollar. During the year we undertook a number of initiatives to improve our sourcing from third party Chinese suppliers to
procure high quality and lower cost sourced products which continue to become an increasing part of our business.
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 and the Highgrove Glass Solutions business in December 2012 has provided a broader product offering and
additional growth opportunities for our business. Further complementary acquisitions are being assessed and actively pursued.
Trading conditions are expected to remain highly competitive in all markets. Retail conditions generally in Australia and New Zealand are
difficult, but on a positive note we are seeing improved consumer spending in the USA and improved construction activity in the Middle East.
Further sales expansion of Coolaroo, Zone, Highgrove and Synthesis branded products is expected to deliver another solid financial result in
2013/2014 and 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.
STATE OF AFFAIRS
There were no significant changes in the state of affairs of the Group during the financial year.
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GALE PACIFIC LIMITED
2013 ANNUAL REPORT 21
EVENTS SUBSEQUENT TO BALANCE DATE
The Riva Window Fashions business, which sells custom made interior window blinds direct to consumers contributed an operating loss for the
year and this business model was found to be extremely challenging. In July 2013, the decision was made to exit this business and closure
costs have been included in the 2012/2013 result.
Other than the matter above 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 2012 of 1.25 cents per share paid on 3 October 2012
Interim ordinary dividend for the year ended 30 June 2013 of 1.3 cents per share paid on 26 March 2013
2012 / 2013
($000)
3,693
3,709
2011 / 2012
($000)
3,446
3,446
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
1.35 cents per share to be paid on 4 October 2013.
Dividends for the full year of 2.65 cents per share have been declared on diluted earnings of 3.0 cents per share. This represents an 8%
increase on full year ordinary dividends compared to last year. The final dividend payment of 1.35 cents per share will be franked to 80% and
will be paid to shareholders on 4 October 2013.
SHARE BASED PAYMENTS
Performance Rights
3,500,000 performance rights were granted to key management personnel on 20 September 2012. On 30 June 2013, 875,000 of these
performance rights lapsed as the performance hurdles for the year ended 30 June 2013 were not met.
3,150,000 performance rights were granted to Executives outside the key management group on 20 September 2012. On 30 June 2013,
787,500 of these performance rights lapsed as the performance hurdles for the year ended 30 June 2013 were not met. 1,200,000
performance rights were granted to the Managing Director on the 26 November 2012. On 30 June 2013, 300,000 of these performance rights
lapsed as the performance hurdles for the year ended 30 June 2013 were not met. The remaining performance rights will vest subject to a
continuation of employment to 30 June 2015 and the satisfying of relevant performance hurdles based on the Group’s diluted earnings per
share over the three year period 1 July 2012 to 30 June 2015. None of these performance rights can vest until 20 September 2015 and expire
on 20 September 2022.
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.
On 5 July 2013 the Company issued 735,000 fully paid ordinary shares in the company relating to performance rights issued to senior
executives on 15 August 2010 and after satisfying the relevant performance hurdles for the period 1 July 2010 to 30 June 2013.
Further details of the options and performance rights movements during the reporting period are disclosed in Note 24 to the Financial
Statements.
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22
GALE PACIFIC LIMITED
2013 ANNUAL REPORT
INDEMNIFICATION OF OFFICERS AND AUDITORS
During the financial year, the Company paid a premium in respect of a contract insuring the Directors of the Company, the Company Secretary
and all Executive Officers of the Company and of any related body corporate against a liability incurred as a Director, Secretary or Executive
Officer to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the
amount of the premium.
The Company has not otherwise, during or since the financial year, indemnified or agreed to indemnify an officer or auditor of the Company or
of any related body corporate against a liability incurred as an officer or auditor.
DIRECTORS’ SHAREHOLDINGS
The following table sets out each Director’s relevant interest in shares, options and performance rights in shares of the Company as at the date
of this report.
Directors
D Allman
P McDonald
J Murphy
G Richards
Fully Paid Ordinary Shares
Options
Performance Rights
1,000,000
2,337,874
3,684,579
491,899
Nil
Nil
Nil
Nil
Nil
900,000
Nil
Nil
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
11
11
11
11
Attended
No of
Meetings
Eligible to
Attend
Attended
No of
Meetings
Eligible to
Attend
Attended
No of
Meetings
Eligible to
Attend
Attended
10
11
10
11
2
-
2
2
2
2
2
2
1
-
1
1
1
1
1
1
2
-
2
2
2
2
2
2
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.
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GALE PACIFIC LIMITED
2013 ANNUAL REPORT 23
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 26 October 2012 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 2013 is detailed below.
For personal use only
24
GALE PACIFIC LIMITED
2013 ANNUAL REPORT
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 30 June 2013 was 6,622,500. 735,000 of the
performance rights vested on 30 June 2013 and the shares were subsequently issued to settle the rights on 5 July 2013. The
performance rights granted on 20 September 2012 and 26 November 2012 will not vest until 20 September 2015. 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)
For personal use only
GALE PACIFIC LIMITED
2013 ANNUAL REPORT 25
The following table discloses the remuneration of the Directors of the Company:
2012 / 2013
Short Term Benefits
Post
Employment
Share Based
Payments
Total
Performance Related
Directors
Salary &
Fees
$
Executive Directors
P McDonald
480,339
Non Executive Directors
D Allman
G Richards
J Murphy
Total
114,679
77,982
77,982
750,982
Bonus
$
-
-
-
-
-
Non
Monetary
$
Super
$
Performance
Rights
$
$
-
-
-
-
-
25,000
14,750
520,089
10,321
7,018
7,018
49,357
-
-
-
125,000
85,000
85,000
14,750
815,089
Total
%
2.8
-
-
-
Performance
Rights
%
2.8
-
-
-
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
-
-
-
The following table discloses the remuneration of the Group’s key management personnel and the five highest paid executives:
2012 / 2013
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
$
301,351
314,066
256,106
178,372
179,560
Bonus
$
-
-
114,446
-
69,328
1,229,455
183,774
Non
Monetary
$
-
-
8,266
-
13,955
22,221
Super
$
25,000
25,000
-
16,053
-
66,053
Performance
Rights
$
-
9,219
6,760
6,760
6,760
$
326,351
348,285
385,578
201,185
269,603
29,499
1,531,002
Total
%
-
2.6
31.4
3.4
28.2
Performance
Rights
%
-
2.6
1.8
3.4
2.5
2011 / 2012
Short Term Benefits
Post
Employment
Share Based
Payments
Total
Performance Related
Key
management
personnel
J Cox
S McPherson
M Denney1
A Scott2
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
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.
For personal use only
26
GALE PACIFIC LIMITED
2013 ANNUAL REPORT
Share Based Compensation
The terms and conditions of each grant of performance rights granted but not vested as at 30 June 2013 affecting remuneration in the current
or a future reporting period are as follows:
Grant Date
26 November 2012
20 September 2012
Value per performance rights at grant date
0.1475
0.1475
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 20 September 2015 and then the satisfying of relevant performance
hurdles based on improvements in the Group’s diluted earnings per share over the three year period 1 July 2012 to 30 June 2015. None of
these performance rights can vest until 20 September 2015 and expire on 20 September 2022.
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
S McPherson
M Denney
A Scott
B Wang
Other Management Personnel
Other Management
Total
Employment Agreements
1,200,000
750,000
750,000
550,000
550,000
550,000
3,500,000
7,850,000
0.1475
0.1475
0.1475
0.1475
0.1475
0.1475
0.1475
177,000
(300,000)
(44,250)
110,625
110,625
81,125
81,125
81,125
516,250
1,157,875
(187,500)
(187,500)
(137,500)
(137,500)
(137,500)
(875,000)
(1,962,500)
(27,656)
(27,656)
(20,281)
(20,281)
(20,281)
(129,062)
(289,467)
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.
No non audit services were provided during the year by the auditors to any entity that is part of the Group for:
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.
For personal use only
GALE PACIFIC LIMITED
2013 ANNUAL REPORT 27
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
23 August 2013
Mr Peter McDonald
Managing Director and Chief Executive Officer
23 August 2013
For personal use only
28
GALE PACIFIC LIMITED
2013 ANNUAL REPORT
For personal use only
GALE PACIFIC LIMITED
2013 ANNUAL REPORT 29
For personal use only
30
GALE PACIFIC LIMITED
2013 ANNUAL REPORT
For personal use only
GALE PACIFIC LIMITED
2013 ANNUAL REPORT 31
DIRECTORS’ DECLARATION
The Directors of the Company declare that:
The financial statements and notes, as set out on pages 32 to 76 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 2013 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
23 August 2013
Mr Peter McDonald
Managing Director and Chief Executive Officer
23 August 2013
For personal use only
32
GALE PACIFIC LIMITED
2013 ANNUAL REPORT
FINANCIAL RESULTS
CONTENTS
Consolidated Statement of Profit or Loss
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
Additional Securities Exchange Information
33
34
35
36
37
38
77
For personal use only
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
FOR THE YEAR ENDED 30 JUNE 2013
Revenue
Cost of goods sold
Gross profit
Other Income
Warehousing and distribution
Marketing and selling
Administration
Other expenses
Net finance costs
Profit before income tax
Income tax expense
Profit for the year
Depreciation and amortisation continuing operations
Earnings Per Share
From operations
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
The accompanying notes form part of these financial statements.
GALE PACIFIC LIMITED
2013 ANNUAL REPORT 33
Consolidated
Note
2012 / 2013
($000)
2011 / 2012
($000)
2
3
3
4
18
3
119,988
(70,697)
49,291
481
(13,542)
(11,003)
(8,802)
(3,552)
(857)
12,016
(2,932)
9,084
110,473
(65,429)
45,044
173
(10,885)
(9,713)
(9,156)
(3,043)
(966)
11,454
(2,977)
8,477
(5,163)
(5,553)
3.07
3.00
2.95
2.86
For personal use only
34
GALE PACIFIC LIMITED
2013 ANNUAL REPORT
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2013
Profit for the year
Other Comprehensive Income
Items that may be reclassified subsequently to profit or loss
Net changes in fair value of cash flow hedges, net of tax
Exchange differences on translation of foreign operations
Other comprehensive income for the year
Total comprehensive income for the year
Profit Attributable To
Members of the parent
Profit for the year
Total Comprehensive Income Attributable To
Members of the parent
Total comprehensive income for the year
The accompanying notes form part of these financial statements.
Consolidated
Note
2012 / 2013
($000)
2011 / 2012
($000)
9,084
8,477
17
17
1,032
5,985
7,017
16,101
9,084
9,084
16,101
16,101
654
3,865
4,519
12,996
8,477
8,477
12,996
12,996
For personal use only
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FOR THE YEAR ENDED 30 JUNE 2013
Current Assets
Cash and cash equivalents
Trade and other 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
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.
GALE PACIFIC LIMITED
2013 ANNUAL REPORT 35
Consolidated
Note
2012 / 2013
($000)
2011 / 2012
($000)
6
7
9
8
4
10
11
12
4
13
14
4
15
14
4
15
16
17
18
11,187
19,026
1,580
27,876
233
1,159
61,061
34,669
21,233
924
56,826
117,887
11,723
13,913
1,493
2,023
29,152
462
5,059
50
5,571
34,723
83,164
71,338
(8,079)
19,905
83,164
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
For personal use only
36
GALE PACIFIC LIMITED
2013 ANNUAL REPORT
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2013
30 June 2013
Note
Contributed
Equity
($000)
Reserves
($000)
Retained
Earnings
($000)
Total Equity
($000)
Balance at 1 July 2012
70,988
(15,592)
18,781
74,177
Profit for the year
Other comprehensive income for the year
17(a)(c)
Total comprehensive income for the year
Transactions With Owners In Their Capacity As Owners
Shares issued
Transfer
Employee share based payments
Dividends paid
Total transactions with owners in their capacity as owners
16
17(d), 18
17(b)
-
-
-
350
-
-
-
350
-
7,017
7,017
-
409
87
-
496
9,084
-
9,084
-
(409)
-
(7,551)
(7,960)
9,084
7,017
16,101
350
-
87
(7,551)
(7,114)
Balance at 30 June 2013
71,338
(8,079)
19,905
83,164
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
17(a)(c)
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
16
16
17(b)
-
-
-
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
The accompanying notes form part of these financial statements.
For personal use only
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2013
GALE PACIFIC LIMITED
2013 ANNUAL REPORT 37
Consolidated
Note
2012 / 2013
($000)
2011 / 2012
($000)
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
22
Cash Flow From Investing Activities
Proceeds from sale of plant and equipment
Proceeds / (payment) from / for disposal / acquisition of business
28(b)
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
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
22
The accompanying notes form part of these financial statements.
127,139
(110,516)
2
(859)
(4,246)
11,520
93
(2,498)
(1,508)
(989)
(4,902)
7,126
-
(7,551)
(425)
6,193
3,121
1,873
11,187
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
For personal use only
38
GALE PACIFIC LIMITED
2013 ANNUAL REPORT
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 25.
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
For personal use only
GALE PACIFIC LIMITED
2013 ANNUAL REPORT 39
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.
For personal use only
40
GALE PACIFIC LIMITED
2013 ANNUAL REPORT
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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GALE PACIFIC LIMITED
2013 ANNUAL REPORT 41
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.
Any impairment loss for goodwill is recognised directly in profit or loss. An impairment loss recognised for goodwill is not reversed in
subsequent periods.
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.
(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.
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42
GALE PACIFIC LIMITED
2013 ANNUAL REPORT
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 25. 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.
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GALE PACIFIC LIMITED
2013 ANNUAL REPORT 43
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
44
GALE PACIFIC LIMITED
2013 ANNUAL REPORT
NOTE 1: Statement of Significant Accounting Policies (continued)
(t).
New Accounting Standards and Interpretations
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 to AASB 101
‘Presentation of Financial
Statements’
The amendment (part of AASB 2011-9 ‘Amendments to Australian Accounting Standards Presentation
of Items of Other Comprehensive Income’) introduce new terminology for the statement of
comprehensive income and incomes statement. Under the amendments to AASB 101, the statement
of comprehensive income is renamed as a statement of profit or loss and other comprehensive income
and the come statement is renamed as statement of profit or loss. The amendments to AASB 101
retain the option to present profit or loss and other comprehensive income in either a single statement
or in two separate but consecutive statements. However, the amendments to AASB 101 require items
of other comprehensive income to be grouped into two categories in the other comprehensive income
section: (a) items that will not be reclassified subsequently to profit or loss and (b) items that may be
reclassified subsequently to profit or loss when specific conditions are met. Income tax on items of
other comprehensive income is required to be allocated on the same basis – the amendments do not
change the option to present items of other comprehensive income either before tax or net of tax. The
amendments have been applied retrospectively, and hence the presentation of items of other
comprehensive income has been modified to reflect the changes. Other than the above mentioned
presentation changes, the application of the amendments to AASB 101 does not result in any impact
on profit or loss, other comprehensive income and total comprehensive income.
Amendments to AASB 101
‘Presentation of Financial
Statements’
The amendments (part of AASB 2012-5 ‘Further Amendments toAustralian Accounting Standards
arising from Annual Improvements 2009-2011 Cycle) requires an entity that changes accounting
policies retrospectively, or makes a retrospective restatement or reclassification to present a statement
of financial position as at the beginning of the preceding period (third statement of financial position).
When the retrospective application, restatement or reclassification has a material effect on the
information in the third statement of financial position.The related notes to the third statement of
financial position are not required to be disclosed.
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
GALE PACIFIC LIMITED
2013 ANNUAL REPORT 45
NOTE 1: Statement of Significant Accounting Policies (continued)
(t)
New Accounting Standards and Interpretations (continued)
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
Effective for annual
reporting periods beginning
on or after
Expected to be initially
applied in the financial
year ending
AASB 9 ‘Financial Instruments’, and the relevant amending
standards
1 January 2015
30 June 2016
AASB 10 ‘Consolidated Financial Statements’
1 January 2013
30 June 2014
AASB 127 ‘Separate Financial Statements’ (2011)
1 January 2013
30 June 2014
‘Fair Value Measurement’ and AASB 2011-8
AASB 13
‘Amendments to Australian Accounting Standards arising from
AASB 13’
1 January 2013
30 June 2014
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 2011-4 ‘Amendments to Australian Accounting Standards
to Remove Individual Key Management Personnel Disclosure
Requirements’
1 July 2013
30 June 2014
AASB 2012-3 ‘Amendments to Australian Accounting Standards
Offsetting
Liabilities
(Amendments to IAS 32)’
Financial Assets
Financial
and
1 January 2014
30 June 2015
AASB 2012-2 ‘Amendments to Australian Accounting Standards
Disclosures – Offsetting Financial Assets and Financial Liabilities
(Amendments to IFRS 7)’
1 January 2013
30 June 2014
AASB 2012-5 ‘Amendments to Australian Accounting Standards
arising from Annual Improvements 2009–2011 Cycle’
1 January 2013
30 June 2014
AASB 2012-10
Standards – Transition Guidance and Other Amendments’
‘Amendments
to Australian Accounting
1 January 2013
30 June 2014
At the date of authorisation of the financial statements, management has not yet assessed the impact of these Standards and
Interpretations.
For personal use only
46
GALE PACIFIC LIMITED
2013 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
Total revenue
2012 / 2013
($000)
2011 / 2012
($000)
119,988
119,988
110,473
110,473
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GALE PACIFIC LIMITED
2013 ANNUAL REPORT 47
NOTE 3: Profit
Profit before income tax expense has been determined after charging / (crediting):
Consolidated
2012 / 2013
($000)
2011 / 2012
($000)
Other 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 expense
Consolidated
The auditor of the parent entity is Deloitte Touche Tohmatsu
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
Remuneration of Other Auditors of Controlled Entities For
Auditing the financial report
Total remuneration of other auditors
Total remuneration of auditors
481
481
51,433
23,814
(2)
859
857
228
34
4,558
47
229
-
51
16
5,163
289
54
(49)
376
113
2
9
124
2,704
87
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
2012 / 2013
($000)
2011 / 2012
($000)
175
-
-
-
175
50
50
225
175
-
-
-
175
50
50
225
For personal use only
48
GALE PACIFIC LIMITED
2013 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
Total
Consolidated
2012 / 2013
($000)
2011 / 2012
($000)
3,684
(752)
2,932
2,932
2,932
3,104
(127)
2,977
2,977
2,977
(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
Total income tax expense
Consolidated
2012 / 2013
($000)
3,605
2011 / 2012
($000)
3,435
(579)
(501)
-
-
-
-
(32)
2,994
(62)
2,932
2,932
-
-
-
-
43
2,977
-
2,977
2,977
(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
2012 / 2013
($000)
2011 / 2012
($000)
459
459
293
293
For personal use only
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
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
Deferred tax liability
Total
GALE PACIFIC LIMITED
2013 ANNUAL REPORT 49
Consolidated
2012 / 2013
($000)
2011 / 2012
($000)
233
(1,493)
(1,260)
-
(1,561)
(1,561)
Consolidated
2012 / 2013
($000)
2011 / 2012
($000)
(1,561)
(3,684)
4,246
-
(261)
(1,260)
(1,616)
(3,104)
3,186
-
(27)
(1,561)
Consolidated
2012 / 2013
($000)
2011 / 2012
($000)
203
(4,548)
14
181
440
521
(660)
-
(286)
(4,135)
924
(5,059)
(4,135)
(59)
(4,937)
12
161
227
423
(504)
67
195
(4,415)
235
(4,650)
(4,415)
For personal use only
50
GALE PACIFIC LIMITED
2013 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
2012 / 2013
($000)
2011 / 2012
($000)
1,637
33,403
35,040
1,615
33,403
35,018
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 and 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
GALE PACIFIC LIMITED
2013 ANNUAL REPORT 51
NOTE 5: Operating Segments (continued)
Segment Information Reporting – Geographical Segments
30 June 2013
Australasia
China & ROW
Export Sales
Americas
Middle East
Unallocated /
Elimination
Total Group
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
($000)
76,862
1,844
78,706
6,239
(890)
5,349
($000)
7,555
28,641
36,196
7,642
(3,959)
3,683
($000)
25,873
(102)
25,771
2,121
(311)
1,810
($000)
9,698
31
9,729
1,916
(3)
1,913
($000)
-
(30,414)
(30,414)
118
-
118
53,847
26,542
40,163
4,781
18,630
2,963
5,978
525
(731)
(88)
($000)
119,988
-
119,988
18,036
(5,163)
12,873
(857)
12,016
(2,932)
9,084
117,887
34,723
30 June 2012
Australasia
China & ROW
Export Sales
Americas
Middle East
Unallocated /
Elimination
Total Group
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
($000)
70,982
1,708
72,690
7,810
(1,039)
6,771
($000)
10,430
23,043
33,473
7,162
(4,230)
2,932
($000)
21,189
(128)
21,061
1,624
(281)
1,343
($000)
7,872
33
7,905
1.568
(3)
1,565
($000)
-
(24,656)
(24,656)
(191)
-
(191)
40,694
18,439
38,784
3,198
14,968
2,054
4,489
336
(849)
(118)
($000)
110,473
-
110,473
17,973
(5,553)
12,420
(966)
11,454
(2,977)
8,477
98,086
23,909
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 $44,985,000 (2012 : $39,545,000) of the Group’s total revenues.
For personal use only
52
GALE PACIFIC LIMITED
2013 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
Net foreign currency movements arising from foreign operations
Balance at the end of the year
Trade Receivables
Consolidated
2012 / 2013
($000)
2011 / 2012
($000)
12
10,627
548
11,187
15
2,662
444
3,121
Consolidated
2012 / 2013
($000)
2011 / 2012
($000)
18,959
(366)
18,593
433
19,026
(403)
1
48
(15)
(369)
17,238
(403)
16,835
157
16,992
(324)
(101)
30
(8)
(403)
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
2012 / 2013
($000)
2011 / 2012
($000)
6,360
1,994
20,120
(598)
27,876
4,997
1,928
17,707
(94)
24,538
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
Office Equipment
At cost
Less accumulated depreciation
Total
Capital Work in Progress
Total property, plant and equipment
GALE PACIFIC LIMITED
2013 ANNUAL REPORT 53
Consolidated
2012 / 2013
($000)
2011 / 2012
($000)
1,580
1,580
127
127
Consolidated
2012 / 2013
($000)
2011 / 2012
($000)
1,159
1,159
661
661
Consolidated
2012 / 2013
($000)
2011 / 2012
($000)
9,571
(1,845)
7,726
65,977
(40,239)
25,738
480
(413)
67
350
(212)
138
5,164
(4,348)
816
184
34,669
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
For personal use only
54
GALE PACIFIC LIMITED
2013 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
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
Additions / (transfers)
Depreciation expense
Net foreign currency movements arising from foreign operations
Carrying amount at the end of the year
Motor Vehicles
Balance at the beginning of the year
Reclassifications
Additions / (transfers)
Disposals
Depreciation expense
Net foreign currency movements arising from foreign operations
Carrying amount at the end of the year
Motor Vehicles Under Lease
Balance at the beginning of the year
Reclassifications
Additions / (transfers)
Disposals
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
Depreciation expense
Net foreign currency movements arising from foreign operations
Carrying amount at the end of the year
Consolidated
2012 / 2013
($000)
2011 / 2012
($000)
7,208
(21)
(228)
767
7,726
27,028
16
1,097
(158)
35
(4,558)
2,278
25,738
90
12
(34)
(1)
67
160
2
72
(50)
(47)
1
138
-
-
-
-
-
-
-
826
3
204
(9)
(229)
21
816
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
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)
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
Additions
Amortisation expense
Net foreign currency movements arising from foreign operations
Carrying amount at the end of the year
Goodwill
GALE PACIFIC LIMITED
2013 ANNUAL REPORT 55
Consolidated
2012 / 2013
($000)
2011 / 2012
($000)
20,987
(1,054)
19,933
1,404
(1,071)
333
2,293
(1,326)
967
4,865
(4,865)
-
21,233
16,667
3,095
171
19,933
351
32
(51)
1
333
26
957
(16)
-
967
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
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 2013 / 2014 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 9.73% (2012 : 9.74%) being the Group’s post tax weighted average cost of capital (pre tax weighted average
cost of capital 13.90% for 2013 and 13.91% for 2012).
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 and other features specific to each CGU.
Goodwill by CGU
Australia
USA – (2012 / 2013 US$2,077,000: 2011 / 2012 US$2,077,000)
China
Total
Consolidated
2012 / 2013
($000)
17,370
2,216
347
19,933
2011 / 2012
($000)
14,275
2,045
347
16,667
For personal use only
56
GALE PACIFIC LIMITED
2013 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
2012 / 2013
2014 Budget
3% to 5%
2011 / 2012
2013 Budget
3% to 5%
The five year cash flow projections are based on the 2013 year budget (2012: 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 loans
Other loans
Commercial bills
Total
Non Current
Unsecured liabilities:
Other loans
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
2012 / 2013
($000)
2011 / 2012
($000)
7,740
3,983
11,723
5,885
2,249
8,134
Consolidated
2012 / 2013
($000)
2011 / 2012
($000)
-
263
13,650
13,913
462
462
14,375
13,913
462
425
-
6,800
7,225
-
-
7,225
7,225
-
For personal use only
NOTE 15: 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
(b) Number of employees at year end
Movements in Carrying Amounts
Movement in the carrying amounts for the following classes of provision between the beginning and the end of
the year
Restructuring and Termination Costs
Balance at the beginning of the year
Provisions recognised
Payments made
Reductions resulting from release of provision no longer required
Net foreign currency movements arising from foreign operations
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
2013 ANNUAL REPORT 57
Consolidated
2012 / 2013
($000)
2011 / 2012
($000)
1,795
-
228
50
2,073
2,023
50
1,845
606
501
20
(75)
(461)
15
-
108
125
(7)
2
228
1,648
501
108
82
2,339
2,257
82
1,730
657
353
141
-
-
7
501
331
30
(253)
-
108
For personal use only
58
GALE PACIFIC LIMITED
2013 ANNUAL REPORT
NOTE 16: Contributed Equity
Paid Up Capital
Fully paid ordinary shares
Consolidated
2012 / 2013
($000)
2011 / 2012
($000)
71,338
70,988
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
2012 / 2013
($000)
2011 / 2012
($000)
2012 / 2013
(No. of Shares)
2011 / 2012
(No. of Shares)
70,988
350
-
71,338
107,086
681
(36,779)
70,988
295,441,658
287,191,658
1,297,738
8,250,000
-
-
296,739,396
295,441,658
On 30 November 2012 the Company issued 1,297,738 ordinary shares as part of the consideration for the acquisition of Highgrove
Glass Solutions.
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.
(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 $7,550,633 (2012 : $6,892,600)
(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 6,622,500. 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
2013 ANNUAL REPORT 59
NOTE 16: 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 - 2013
18 Aug 2010
30 Jun 2020
20 Sep 2012
20 Sep 2022
26 Nov 2012
20 Sep 2012
Total
Consolidated and Parent Entity - 2012
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
735,000
-
-
-
6,650,000
1,200,000
735,000
7,850,000
-
-
-
-
-
735,000
735,000
(1,662,500)
4,987,500
(300,000)
900,000
-
-
(1,962,500)
6,622,500
735,000
8,000,000
3,000,000
2,940,000
13,940,000
-
-
-
-
(6,000,000)
(2,000,000)
(2,250,000)
(750,000)
-
(2,205,000)
(8,250,000)
(4,955,000)
-
-
735,000
735,000
-
-
-
-
Performance Rights Valuation Assumptions
Value of rights to acquire one share
Exercise price
Expected Life
Tranche 1
Tranche 2
Tranche 3
Dividend yield
Grant Date
26 November 2012
Grant Date
20 September 2012
Grant Date
18 August 2010
$0.1475
Nil
3.0 years
3.0 years
3.0 years
13.13%
$0.1475
Nil
3.0 years
3.0 years
3.0 years
13.13%
$0.20
Nil
2.9 years
2.9 years
0.0%
For personal use only
60
GALE PACIFIC LIMITED
2013 ANNUAL REPORT
NOTE 17: 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
Consolidated
2012 / 2013
($000)
(11,292)
720
1,121
1,372
(8,079)
Consolidated
2012 / 2013
($000)
(17,277)
7,372
(1,387)
2011 / 2012
($000)
(17,277)
633
89
963
(15,592)
2011 / 2012
($000)
(21,142)
4,639
(774)
Balance at the end of the year
(11,292)
(17,277)
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 on net changes recognised
Balance at the end of the year
Consolidated
2012 / 2013
($000)
2011 / 2012
($000)
633
87
-
720
1,200
114
(681)
633
Consolidated
2012 / 2013
($000)
2011 / 2012
($000)
89
1,491
(459)
1,121
(565)
947
(293)
89
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
2012 / 2013
($000)
2011 / 2012
($000)
963
409
1,372
963
-
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 18: 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 19: Dividends
The following dividends were paid during the year.
Fully Paid Ordinary Shares
Final Dividend for the Financial Year 2011 / 2012
Fully franked at a 30% tax rate (date of payment 3 October 2012)
Interim Dividend for the Financial Year 2012 / 2013
Fully franked at a 30% tax rate (date of payment 25 March 2013)
Total
Fully Paid Ordinary Shares
Final Dividend for the Financial Year 2010 / 2011
Fully franked at a 30% tax rate (date of payment 3 October 2011)
Interim Dividend for the Financial Year 2011 / 2012
Fully franked at a 30% tax rate (date of payment 26 March 2012)
Total
GALE PACIFIC LIMITED
2013 ANNUAL REPORT 61
Note
Consolidated
2012 / 2013
($000)
2011 / 2012
($000)
18,781
9,084
(7,551)
(409)
-
19,905
(19,583)
8,477
(6,892)
-
36,779
18,781
17(d)
16(a)
Consolidated
2012 / 2013
Cents Per Share
2012 / 2013
($000)
1.25
1.30
2.55
3,693
3,858
7,551
Consolidated
2011 / 2012
Cents Per Share
2011 / 2012
($000)
1.20
1.20
2.40
3,446
3,446
6,892
On 23 August 2013, the Directors declared a dividend franked to 80% of 1.35 cents per share to the holders of fully paid ordinary shares in
respect of the year ended 30 June 2013, to be paid to shareholders on 4 October 2013. This dividend has not been included as a liability in
these financial statements. The total estimated dividend to be paid is $4.0 million.
Dividend Franking Account
Adjusted franking account balance
Consolidated
2012 / 2013
($000)
850
2011 / 2012
($000)
1,716
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.
For personal use only
62
GALE PACIFIC LIMITED
2013 ANNUAL REPORT
NOTE 20: Earnings Per Share
Basic Earnings Per Share
From continuing operations
Total basic earnings per share
Diluted Earnings Per Share
From continuing 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
2012 / 2013
(Cents Per Share)
2011 / 2012
(Cents Per Share)
3.07
3.07
3.00
3.00
2.95
2.95
2.86
2.86
Consolidated
2012 / 2013
($000)
2011 / 2012
($000)
9,084
8,477
-
9,084
-
8,477
Consolidated
2012 / 2013
(000)
296,195
2011 / 2012
(000)
287,192
6,602
302,797
8,985
296,177
For personal use only
NOTE 21: Capital and Leasing Commitments
(a).
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
2013 ANNUAL REPORT 63
Consolidated
2012 / 2013
($000)
2011 / 2012
($000)
2,332
1,363
3,695
2,138
1,696
3,834
The above lease commitments relate to property leases. The Company has no rights to purchase the properties at the end of the
lease term.
(b).
Capital Expenditure Commitments
Payable
Not longer than one year
Total
Consolidated
2012 / 2013
($000)
2011 / 2012
($000)
-
-
-
-
For personal use only
64
GALE PACIFIC LIMITED
2013 ANNUAL REPORT
NOTE 22: Cash Flow Information
(a).
Reconciliation of Cash
Cash at the end of the financial year as shown in the statement of cash flows is reconciled to the
related items in the statement of financial position as follows:
Cash on hand
Cash at bank
Cash on deposit
Total
(b).
Reconciliation of Profit for the Period to Net Cash Provided by Operating Activities
Profit after income tax
Non Cash Flows in Profit
Loss on disposal of fixed assets
Depreciation of fixed assets
Amortisation / impairment of intangible assets
Equity settled share based payments
Changes in Asset and Liabilities Processed Directly in Equity
Changes in Tax Balances Processed Directly in Equity
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
Consolidated
2012 / 2013
($000)
2011 / 2012
($000)
12
10,627
548
11,187
15
2,662
444
3,121
Consolidated
2012 / 2013
($000)
2011 / 2012
($000)
9,084
8,477
126
5,096
67
87
1,034
(409)
(1,114)
(1,658)
(466)
565
(670)
(222)
11,520
138
5,320
233
114
654
-
(2,045)
(2,119)
(4)
(1,396)
123
(39)
9,456
For personal use only
NOTE 23: Directors’ and Executives’ Compensation
Details of Directors and Key Executives remuneration is disclosed in the Remuneration Report.
Directors’ and Executives’ Compensation by Category
Short term employment benefits
Post employment benefits
Share based payments
Total
Directors’ and Executives’ Equity Holdings:
Fully Paid Ordinary Shares
GALE PACIFIC LIMITED
2013 ANNUAL REPORT 65
Consolidated
2012 / 2013
($)
2,186,432
115,410
44,249
2,346,091
2011 / 2012
($)
2,138,983
138,919
88,991
2,366,893
2012 / 2013
Executive Directors
P McDonald
Non Executive Directors
D Allman
J Murphy
G Richards
Executives
J Cox
S McPherson
M Denney
A Scott
B Wang
Total
2011 / 2012
Executive Directors
P McDonald
Non Executive Directors
D Allman
J Murphy
G Richards
Executives
J Cox
S McPherson
M Denney
A Scott
B Wang
Total
Balance
30 June 2012
Granted as
Compensation
No.
No.
Received on
Exercise of
Options
No.
Other
Movements
Balance
30 June 2013
No.
No.
3,228,105
-
1,000,000
491,899
2,000,000
1,500,000
1,500,000
-
1,500,000
11,220,004
-
-
-
-
-
-
-
-
-
-
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
(890,231)
2,337,874
1,000,000
2,684,579
-
(551,528)
(1,000,000)
(700,000)
-
-
542,820
1,000,000
3,684,579
491,899
1,448,472
500,000
800,000
-
1,500,000
11,762,824
Other
Movements
Balance
30 June 2012
No.
No.
-
-
1,000,000
-
-
-
-
-
-
1,000,000
3,228,105
-
1,000,000
491,899
2,000,000
1,500,000
1,500,000
-
1,500,000
11,220,004
For personal use only
66
GALE PACIFIC LIMITED
2013 ANNUAL REPORT
NOTE 23: Directors’ and Executives’ Compensation (continued)
Directors’ and Executives’ Equity Holdings, Compensation Options and Performance Rights:
Granted and Vested During the Year
2012 / 2013
Vested
Number
Granted
Number
Grant Date
Executive Directors (Performance Rights)
Terms and Conditions for Each Grant
Exercise
Price
Expiry Date
First
Exercise
Date
Last Exercise
Date
Value Per
Option /
Right at
Grant Date
P McDonald
-
1,200,000
26/11/2012
$0.1475
Nil
20/09/2022
20/09/2015
20/09/2022
Non Executive Directors
None
Executives (Performance Rights)
J Cox
S McPherson
M Denney
A Scott
B Wang
-
-
-
750,000
20/09/2012
750,000
20/09/2012
550,000
20/09/2012
245,000
550,000
20/09/2012
-
550,000
20/09/2012
$0.1475
$0.1475
$0.1475
$0.1475
$0.1475
Other Management Personnel (Performance Rights)
Nil
Nil
Nil
Nil
Nil
20/09/2022
20/09/2015
20/09/2022
20/09/2022
20/09/2015
20/09/2022
20/09/2022
20/09/2015
20/09/2022
20/09/2022
20/09/2015
20/09/2022
20/09/2022
20/09/2015
20/09/2022
Other
Management
490,000
3,500,000
20/09/2012
$0.1475
Nil
20/09/2022
20/09/2015
20/09/2022
Total
735,000
7,850,000
The performance rights are subject to a continuation of employment to 20 September 2015 and then the satisfying of relevant performance
hurdles based on improvements in the Group’s diluted earnings per share over the three year period 1 July 2012 to 30 June 2015. None of
these performance rights can vest until 20 September 2015 and expire on 20 September 2022.
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
1,500,000
A Scott
B Wang
-
1,500,000
Other Management Personnel (Performance Rights)
Other
Management
-
Total
8,250,000
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
For personal use only
GALE PACIFIC LIMITED
2013 ANNUAL REPORT 67
NOTE 23: Directors’ and Executives’ Compensation (continued)
Directors’ and Executives’ Equity Holdings Compensation Options and Performance Rights: Movements During the Year
2012 / 2013
Balance
1 July 2012
Granted as
Compensation
Exercised
Lapsed
Net Other
Change
No.
No.
No.
No.
No.
Balance
30 June
2013
No.
Balance
Held
Nominally
No.
Executive Directors (Performance Rights)
P McDonald
-
1,200,000
-
(300,000)
-
900,000
Non Executive Directors
None
Executives (Performance Rights)
J Cox
S McPherson
M Denney
B Wang
A Scott
-
-
-
-
245,000
750,000
750,000
550,000
550,000
550,000
Other Management Personnel (Performance Rights)
Other
Management
490,000
3,500,000
Total
735,000
7,850,000
-
-
-
-
-
-
-
(187,500)
(187,500)
(137,500)
(137,500)
(137,500)
(875,000)
(1,962,500)
-
-
-
-
-
-
-
562,500
562,500
412,500
412,500
657,500
3,115,000
6,622,500
-
-
-
-
-
-
-
-
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
-
-
-
-
-
-
-
-
Value of Lapsed
Options/Rights
$
(44,250)
(27,656)
(27,656)
(20,281)
(20,281)
(20,281)
(129,062)
(289,467)
Value of Lapsed
Options/Rights
$
(105,000)
(30,500)
(30,500)
(30,500)
(30,500)
(147,000)
(294,000)
(668,000)
For personal use only
68
GALE PACIFIC LIMITED
2013 ANNUAL REPORT
NOTE 24: 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 $31,291,000 (2012 : $25,219,000)
Gale Pacific Limited received interest income from its subsidiaries totalling $614,000 (2012 : $558,000)
Gale Pacific Limited made interest payments to its subsidiaries totalling $1,000 (2012 : $34,000)
Reimbursement of certain operating costs totalling $430,000 (2012 : $261,000)
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 Director fees
NOTE 25: Controlled Entities
Parent Entity
Gale Pacific Limited 1
Controlled Entities
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
Gale Pacific Trading Limited
Consolidated
2012 / 2013
($000)
5
2011 / 2012
($000)
-
Country of Incorporation
Ownership Interest (%)
2012 / 2013
2011 / 2012
Australia
-
-
New Zealand
United Arab Emirates
China
United States of America
Australia
Australia
China
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
GALE PACIFIC LIMITED
2013 ANNUAL REPORT 69
NOTE 26: 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 $3,818,000 of the trade receivables carrying balance at 30 June 2013 (2012 :
$1,933,000). 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 2013
($000)
As at 30 Jun 2012
($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
19,026
11,187
1,580
31,793
6,786
509
8,132
3,166
18,593
14,318
3,072
985
204
14
18,593
-
71
295
366
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
For personal use only
70
GALE PACIFIC LIMITED
2013 ANNUAL REPORT
NOTE 26: 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 2013
Note Weighted Average
Effective Interest
Rate
(%)
Carrying
Amount
Contractual
Cash Flows
Less Than
6 Months
6 To 12
Months
1 To 2
Years
2 To 5
Years
($000)
($000)
($000)
($000)
($000)
($000)
Contractual Cash Flows Maturing In:
Trade and Other
Payables
Trade payables
Sundry payables and
accruals
Non Derivative Financial
Liabilities
Bank loans
Other loans
Total
13
13
14
14
7,740
3,984
7,740
3,984
7,740
3,984
3.95%
13,650
13,650
13,650
725
725
133
26,099
26,099
25,507
-
-
-
130
130
-
-
-
275
275
-
-
-
187
187
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
2 To 5
Years
($000)
($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
Total
13
13
14
5,885
2,249
5,885
2,249
5,885
2,249
5.41%
7,225
15,359
7,225
15,359
7,225
15,359
-
-
-
-
-
-
-
-
-
-
-
-
For personal use only
GALE PACIFIC LIMITED
2013 ANNUAL REPORT 71
NOTE 26: 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 $1,580,000 (2012 : $127,000 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
2012 / 2013
2011 / 2012
2012 / 2013
(FC000)
2011 / 2012
(FC000)
2012 / 2013
($000)
2011 / 2012
($000)
2012 / 2013
($000)
2011 / 2012
($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
Chinese renminbi
Less than 6 months
Less than 6 months
Less than 6 months
Total
1.0035
0.9452
0.9968
0.9825
12,350
8,900
13,200
1,300
12,307
9,416
13,243
1,323
1,130
400
6.1351
6.1531
6.1681
-
-
-
600
500
500
-
-
-
614
512
513
-
-
-
20
15
15
120
7
-
-
-
1,580
127
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% (2012: 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
72
GALE PACIFIC LIMITED
2013 ANNUAL REPORT
NOTE 26: Financial Instruments (continued)
30 June 2013
CONSOLIDATED
Australian Dollar
Carrying Value
Australian Entities
($000)
Australian Dollar
Carrying Value
Foreign Entities
($000)
Profit / (Loss)
AUD +10%
Equity
AUD +10%
($000)
($000)
Financial Assets
Cash and cash equivalents
United States dollars
Chinese renminbi
Euro
New Zealand dollars
UAE dirham
Trade receivables
United States dollars
Chinese renminbi
New Zealand dollars
Amounts receivable from related parties
United States dollars
New Zealand dollars
Foreign currency forward contracts
United States dollars
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
30 June 2012
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
6,373
-
64
5
-
-
-
-
-
-
1,530
500
-
-
-
-
-
-
7,403
-
64
5
-
2,950
883
-
95
241
11,758
334
148
-
-
50
2,087
2,800
87
70
102
-
-
12,671
(1,583)
(87)
172
139
(637)
-
(6)
(1)
-
-
-
-
694
14
-
50
-
-
-
-
-
-
114
107
-
(6)
13
-
114
CONSOLIDATED
Australian Dollar
Carrying Value
Australian Entities
($000)
Australian Dollar
Carrying Value
Foreign Entities
($000)
Profit / (Loss)
AUD +10%
($000)
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
(295)
(88)
-
(9)
(24)
(1,176)
(33)
(15)
-
-
(5)
209
280
9
7
10
-
-
(1,130)
(1,267)
159
9
(17)
(14)
(1,130)
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)
For personal use only
GALE PACIFIC LIMITED
2013 ANNUAL REPORT 73
NOTE 26: 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 2013
Financial Assets
Cash and cash equivalents
Financial Liabilities
Borrowings (all fixed rates instruments)
Total
30 June 2012
Financial Assets
Cash and cash equivalents
Financial Liabilities
Borrowings (all fixed rates instruments)
Total
NOTE 27: 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)
11,187
(14,375)
(3,188)
Profit / (Loss)
+1% Movement
($000)
112
(144)
(32)
Consolidated
Carrying Value
($000)
3,121
(7,225)
(4,104)
Profit / (Loss)
+1% Movement
($000)
31
(72)
(41)
2012 / 2013
($000)
2011 / 2012
($000)
4,554
982
5,536
29,702
102,790
(21,380)
(21,810)
80,980
71,338
720
1,071
7,851
80,980
3,115
-
3,115
3,651
654
4,305
15,659
90,302
(12,656)
(12,284)
78,018
70,988
633
89
6,308
78,018
3,474
-
3,474
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74
GALE PACIFIC LIMITED
2013 ANNUAL REPORT
NOTE 28: Business Combinations
(a).
2012 / 2013 Summary Of Acquisition
On 30 November 2012 the parent entity acquired the assets of Highgrove (Victoria) Pty Ltd. Highgrove specialises in the marketing
and distribution of branded home improvement products including glass fencing, frameless shower screens, glass safety mirrors and
kitchen splashback panels.
Details of the purchase consideration, the net assets acquired and goodwill are as follows.
Purchase consideration (refer to (b))
Cash paid
Consideration to be paid
Shares issued
Deferred consideration
Total consideration
The assets and liabilities recognised as a result of the acquisition are as follows:
Inventories
Plant and equipment
Provision for employee entitlements
Deferred tax asset
Total tangible net assets acquired
Add goodwill
Net assets acquired
2012 / 2013
($000)
2,498
7
350
825
3,680
597
36
(69)
21
585
3,095
3,680
The goodwill will not be deductible for tax purposes. Goodwill arising from the acquisition of Highgrove is mainly attributable to the
expected synergies and revenue growth opportunities.
Shares Issued
1,297,738 shares were issued as part of the consideration. The issue price of $0.2697 was based on the weighted average share
price for the ten days prior to 30 November 2012.
Deferred consideration
Additional consideration of $825,000 is to be paid in cash on 31 August 2013:
Revenue and Profit Contribution
The acquired businesses contributed revenue of $6,710,000 and net profit after tax of $802,000 to the Group for the period 1
December 2012 to 30 June 2013.
Initial Accounting Incomplete
The accounting arising from the business combination is incomplete and the amounts recognised have thus been determined only
provisionally. An assessment of any required split in the value of intangible assets between brand names and goodwill will be
undertaken in the next period.
(b).
2012 / 2013 Purchase Consideration – Cash Outflow
Acquisition Related Costs
Cash consideration
Outflow of cash – investing activities
2012 / 2013
($000)
2,498
2,498
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GALE PACIFIC LIMITED
2013 ANNUAL REPORT 75
NOTE 28: Business Combinations (continued)
(c).
2011 / 2012 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)
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
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.
A purchase adjustment of $90,000 was made based on final agreed inventory valuation.
(d).
2011 / 2012 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
76
GALE PACIFIC LIMITED
2013 ANNUAL REPORT
NOTE 29: Subsequent Events
The Riva Window Fashions business, which sells custom made interior window blinds direct to consumers contributed an operating loss for the
year and this business model was found to be extremely challenging. In July 2013, the decision was made to exit this business and closure
costs have been included in the 2012/2013 result.
Other than the matter above, there has not arisen in the interval between the end of the financial year and the date of this report any item,
transaction or event of a material and unusual nature likely, in the opinion of the Directors of the Company, to affect significantly, the operations
of the Group, the results of those operations, or the state of affairs of the Group in future financial years.
NOTE 30: Company Details
The registered office of the Company is:
Gale Pacific Limited
145 Woodlands Drive
Braeside, Victoria, 3195
Australia
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GALE PACIFIC LIMITED
2013 ANNUAL REPORT 77
ADDITIONAL SECURITIES EXCHANGE INFORMATION
NUMBER OF HOLDINGS OF EQUITY
SECURITIES AS AT 5 AUGUST 2013
TWENTY LARGEST HOLDERS OF QUOTED
EQUITY SECURITIES
The fully paid issued capital of the Company consisted of
fully paid shares held by 1,265
297,474,396 ordinary
shareholders. Each share entitles the holder to one vote.
16 holders have been granted 7,850,000 performance rights over
ordinary shares. Performance rights do not carry a right to vote.
DISTRIBUTION OF HOLDERS OF EQUITY
SECURITIES
Range
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
Ordinary Fully Paid Shares
Total
Holders
120
232
169
505
239
Units
36,916
686,961
1,357,827
20,741,007
274,651,685
1,265
297,474,396
% Issued
Capital
0.01
0.23
0.46
6.97
92.33
100.00
UNMARKETABLE PARCELS
Minimum
Parcel Size
Holders
Units
Unmarketable Parcels
as at
5 August 2013
Minimum $500 parcel at
$0.28 per unit
Shareholder
THORNEY HOLDINGS PTY LTD
WINDHAGER HANDELS GESMBH
GUINNESS MAHON & CO LIMITED
GALE AUSTRALIA PTY LTD
JP MORGAN NOMINEES AUSTRALIA
LIMITED
UBS NOMINEES PTY LTD
RUMINATOR PTY LTD
INVESTEC BANK (AUSTRALIA)
LIMITED
No.
71,984,262
41,925,781
14,182,685
13,927,844
8,383,549
7,718,384
6,691,433
4,396,451
GERNIS HOLDINGS PTY LIMITED
4,169,941
MR GEOFFREY DUNCAN NASH
CLIPPER ISLAND PTY LTD
HAROLDSWICK CORPORATION PTY
LTD
CHILLEN PTY LIMITED (TALLEN)
GFS SECURITIES PTY LTD
GALLIUM PTY LTD
GERNIS HOLDINGS PTY LIMITED
TRAELIX CORPORATION PTY LTD
WINMAR INVEST HOLDINGS PTY LTD
VENN MILNER SUPERANNUATION
PTY LTD
ATKONE PTY LTD
3,327,428
2,500,000
2,500,000
2,431,317
2,380,935
2,279,359
2,026,097
2,026,097
2,026,097
2,000,000
1,919,796
Top 20 holders of Ordinary Fully Paid
Shares as at 05 August 2013
198,797,456
%
24.20
14.09
4.77
4.68
2.82
2.59
2.25
1.48
1.40
1.12
0.84
0.84
0.82
0.80
0.77
0.68
0.68
0.68
0.67
0.65
66.83
33.17
1,725
157
87,766
Total Remaining Holders Balance
98,676,940
SUBSTANTIAL SHAREHOLDERS AS AT
5 AUGUST 2013
Shareholder
Thorney Holdings Pty Ltd
Windhager Handels Gesmbh
Investec Bank (Australia) Limited
No.
79,702,646
41,925,781
19,713,768
%
26.79
14.09
6.63
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
78
GALE PACIFIC LIMITED
2013 ANNUAL REPORT
OFFICE LOCATIONS
Australia
PO Box 892
145 Woodlands Drive,
Braeside, Victoria, 3195,
Ph: +61 3 9518 3333
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