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GWA INTERNATIONAL LIMITED
2007 ANNUAL REPORT
GWA INTERNATIONAL LIMITED
ABN 15 055 964 380
Level 14 10 Market Street Brisbane Queensland 4000 Australia
Telephone: 61 7 3109 6000 Facsimile: 61 7 3236 0522
Website: www.gwail.com.au
BUILT ON STRONG BRANDS
1
Performance Highlights
2
Chairman’s Review
5
Managing Director’s
Review of Operations
10
Strategic Direction
and Business Divisions
15
GWA Sustainability Story
18
Board of Directors
20
Corporate Governance
Statement
29
Directors’ Report
38
Financial Statements
83
Other Statutory
Information
85
Shareholder
Information
and Timetable
Caroma Dorf is
Australia’s foremost
designer, manufacturer,
importer and distributor of
domestic and commercial
bathroom and kitchen
products, including
sanitaryware, tapware,
accessories, bathware,
stainless steel sinks and
laundry tubs. Caroma
Dorf is at the forefront
of product innovation
incorporating water saving
technologies, and is the
market leader in water
efficient sanitaryware
and tapware.
Dux is an Australian
designer, manufacturer,
importer and distributor
of a range of hot water
systems. The range
includes mains pressure
gas and electric storage,
continuous flow gas,
electric and gas boosted
solar and heat pump
products. Dux has
developed an extensive
range of innovative
environmental products
to meet the changing
regulatory requirements,
and which assist in
reducing domestic energy
consumption.
Gainsborough is
a leading Australian
designer, manufacturer,
importer and distributor of
a comprehensive range of
domestic and commercial
door hardware and
fittings, including security
products.
Rover is one of
Australia’s leading
designers, importers and
distributors of domestic
and commercial lawn and
garden care equipment.
Sebel is at the forefront
of Australian design,
manufacture, import and
distribution of quality
commercial furniture
and seating.
GWA International Limited was listed on the
Australian Securities Exchange in May 1993 and is
one of Australia’s largest designers, manufacturers,
importers and distributors of household consumer
products. The Company is the owner of an extensive
range of well-known brands including Caroma,
Dorf, Fowler, Stylus, Clark, Radiant, Irwell, Dux,
Gainsborough, Sebel and Rover, and is the exclusive
Australian distributor of other brands including
Hansa and KWC.
GWA International Limited currently comprises
five business divisions, Caroma Dorf, Dux,
Gainsborough, Rover and Sebel, all of which are
well-established businesses with strong brand
names and market positions. The Company
is a significant Australian employer and has
manufacturing facilities located throughout Australia.
GWA International Limited invests significantly in
research and new product development which has
enabled the businesses to maximise opportunities
in a competitive marketplace. The Company is
committed to the research and development of
innovative environmental products which provide
sustainable solutions for reducing domestic and
commercial water consumption, and greenhouse
gas emissions.
GWA International Limited has grown significantly
since listing as a result of the strong operating
performance of the businesses and successful
acquisitions. The Company remains committed
to growing long term shareholder wealth through
improved business performance and the pursuit of
further appropriate domestic acquisitions that add
value to its existing businesses, and that support
expansion into new markets.
Mission Statement
GWA International Limited’s primary objective is
to grow shareholder wealth. This objective will be
achieved by continuing to invest in the development
of its people, new products and world leading
technologies, to sustain and build premium
profitability of its businesses over time.
The Company’s core business segment is building
fixtures and fittings which will focus on the research
and development of innovative new products to
maximise market opportunities for the businesses.
The Company will continue to develop products
which provide sustainable solutions for reducing
domestic and commercial water consumption, and
greenhouse gas emissions.
GWA International Limited will grow the profitability
of its businesses by investing for sustainable growth
and adapting its business models for a changing
market. The Company will continue the pursuit of
appropriate domestic acquisitions that add value to
its existing businesses, and that support expansion
into new markets.
CORPORATE DIRECTORY
HEAD OFFICE LOCATIONS
Directors
B Thornton, Chairman
J J Kennedy, Deputy Chairman
P C Crowley, Managing Director
D R Barry, Non-Executive Director
R M Anderson, Non-Executive Director
M D E Kriewaldt, Non-Executive Director
G J McGrath, Non-Executive Director
W J Bartlett, Non-Executive Director
Company Secretary
R J Thornton, CA B Com (Acc) LLB (Hons) LLM
Registered Office
Level 14, 10 Market Street
Brisbane QLD 4000
AUSTRALIA
Telephone: 61 7 3109 6000
Facsimile: 61 7 3236 0522
Website: www.gwail.com.au
ASX code: GWT
Auditor
KPMG
10 Shelley Street
Sydney NSW 2000
AUSTRALIA
Telephone: 61 2 9335 7000
Facsimile: 61 2 9299 7077
Share Registry
Computershare Investor Services Pty Ltd
Level 19, 307 Queen Street
Brisbane QLD 4000
AUSTRALIA
GPO Box 523
Brisbane QLD 4001
AUSTRALIA
Telephone: 1300 552 270
Facsimile: 61 7 3237 2152
Website: www.computershare.com.au
Group Bankers
BNP Paribas
Citibank
Commonwealth Bank of Australia
National Australia Bank
GWA INTERNATIONAL LIMITED
Level 14
10 Market Street
Brisbane QLD 4000
AUSTRALIA
Telephone: 61 7 3109 6000
Facsimile: 61 7 3236 0522
Website: www.gwail.com.au
CAROMA DORF
4 Ray Road
EPPING NSW 2121
Telephone: 61 2 9202 7000
Facsimile: 61 2 9869 0625
Websites: www.caroma.com.au
www.smartflush.com.au
www.fowler.com.au
www.stylus.com.au
www.wisa-sanitair.com
www.starion-industries.com
www.dorf.com.au
www.clark.com.au
DUX MANUFACTURING LIMITED
Lackey Road
Moss Vale NSW 2577
AUSTRALIA
Telephone: 61 2 4868 0200
Facsimile: 61 2 4868 2014
Websites: www.dux.com.au
www.ecosmart.com.au
GAINSBOROUGH HARDWARE INDUSTRIES LIMITED
31-33 Alfred Street
Blackburn VIC 3130
AUSTRALIA
Telephone: 61 3 9877 1555
Facsimile: 61 3 9894 1599
Website: www.gainsboroughhardware.com.au
ROVER MOWERS LIMITED
155 Fison Avenue West
Eagle Farm QLD 4009
AUSTRALIA
Telephone: 61 7 3213 0222
Facsimile: 61 7 3868 1010
Website: www.rovermowers.com.au
SEBEL FURNITURE LIMITED
96 Canterbury Road
Bankstown NSW 2200
AUSTRALIA
Telephone: 61 2 9780 2222
Facsimile: 61 2 9793 3152
Website: www.sebel.com.au
1
2006/07 YEAR PERFORMANCE HIGHLIGHTS
• Sales revenue up 4.1% to $645.7 million
• Trading earnings before interest and tax up 3.7% to $98.75 million
• Trading earnings per share of 22.0 cents
• Fully franked dividend of 22.0 cents per share (including 4.0 cents in special dividends)
Five Year Financial Summary
2002/03
2003/04
2004/05
2005/06
2006/07
$’000
$’000
$’000
$’000
$’000
Revenue
666,525
677,393
626,866
619,989
645,669
Earnings before interest, tax, depreciation,
amortisation and restructuring costs
120,426
131,564
130,067
117,617
118,533
(%)
18.1
19.4
20.7
19.0
18.4
Depreciation and amortisation
28,034
30,549
26,714
22,420
19,779
Earnings before interest, tax
and restructuring costs
(%)
Interest (net)
Trading profit before tax
(%)
Tax expense
(%)
92,392
101,015
103,353
95,197
98,754
13.9
13,816
78,576
11.8
14.9
12,614
88,401
13.1
16.5
11,137
92,216
14.7
15.4
11,490
83,707
13.5
15.3
12,366
86,388
13.4
23,569
26,348
28,328
23,628
24,975
30.0
29.8
30.7
28.2
28.9
Trading profit after tax
55,007
62,053
63,888
60,079
61,413
Restructuring costs after tax
-
-
-
3,227
5,095
Net profit after tax
55,007
62,053
63,888
56,852
56,318
Net cash flow provided from operating
activities before debt cost and tax
Capital expenditure
Research and development
Net debt
Shareholders’ equity
Other Ratios and Statistics
128,200
162,104
130,157
24,392
5,770
20,579
5,485
21,331
6,488
98,234
30,966
5,775
63,584
21,516
5,360
207,678
159,451
161,706
141,000
191,146
413,787
428,510
409,546
411,968
408,802
Return on shareholders’ equity
(%)
Interest cover
Net debt / equity
Earnings per share
Trading earnings per share
Ordinary dividend per share
Special dividend per share
(times)
(%)
(cents)
(cents)
(cents)
(cents)
Total dividend per share
(cents)
Franking
Ordinary dividend payout ratio
Share price (30 June)
Dividend yield (total dividend)
(%)
(%)
($)
(%)
13.3
6.7
50.2
19.8
19.8
15.5
2.5
18.0
100
78.3
2.70
6.7
14.5
8.0
37.2
22.3
22.3
18.0
2.5
20.5
100
80.7
2.95
6.9
15.6
9.3
39.5
23.0
23.0
18.0
4.5
22.5
100
78.3
2.92
7.7
13.8
8.3
34.2
20.4
21.6
18.0
3.5
21.5
100
88.2
3.11
6.9
13.8
8.0
46.8
20.2
22.0
18.0
4.0
22.0
100
89.1
4.42
5.0
Number of employees
2,646
2,565
2,474
2,226
1,957
Note: EBIT for financial years 2003 and 2004 has been calculated in accordance with previous Australian GAAP.
EBIT for financial years 2005 to 2007 has been calculated in accordance with Australian equivalents to IFRS (AIFRS).
2
GWA INTERNATIONAL LIMITED 2007 ANNUAL REPORT
CHAIRMAN’S REVIEW
A sound financial performance was achieved
for the 2006/07 financial year against the
backdrop of the extensive restructuring
activities of the Group’s businesses and a
continued soft domestic dwelling construction
and renovation market. The decline in market
demand, particularly in the major markets of
New South Wales and Victoria, together with
rising business input costs contributed to
difficult domestic market conditions during
the year. Importantly, the Group is beginning
to realise the benefits of the restructuring
activities undertaken to date to reduce costs
and improve the long term competitiveness
and profitability of the businesses.
The Group achieved a trading profit after tax
of $61.4 million for the 2006/07 year on sales
revenue of $645.7 million. Restructuring expenses
after tax of $5.1 million were incurred during the
year, reducing net profit after tax to $56.3 million.
Trading earnings before interest and tax of $98.75
million represents a 3.7% increase from the prior
year, and was in line with guidance provided to the
market in February 2007. This is a commendable
financial result and demonstrates the strength
of the Group’s core building fixtures and fittings
businesses in challenging market conditions.
DIVIDENDS
The Board recognises the importance of fully
franked cash dividends to shareholders, and
aims to increase ordinary dividends in line with
growth in trading profitability. The sound financial
performance for the 2006/07 year has enabled
the Board to declare a final fully franked dividend
of 10.5 cents per share comprising an ordinary
dividend of 8.0 cents per share and a special
dividend of 2.5 cents per share, which will be paid
in October 2007. Together with the interim dividend
of 11.5 cents per share paid in April 2007, this
brings the total dividend for the 2006/07 year to
22.0 cents per share which represents an after tax
yield of 5.0% based on the closing share price at
30 June of $4.42.
The payment of further special dividends of in total
4.0 cents per share for the 2006/07 year continues
the Group’s impressive track record in delivering
fully franked special dividends to shareholders.
In this regard, a total of 17.0 cents per share in
fully franked special dividends has been paid to
shareholders in the past 5 years. The Group will
give consideration to further special dividends
and other capital management initiatives in future
periods as a means of distributing surplus cash and
franking credits to shareholders.
The Dividend Reinvestment and Share Purchase
Plans remain suspended, but the Board will give
consideration to the re-introduction of these plans
when a major acquisition is undertaken.
RESTRUCTURING ACTIVITIES
The Group has realised opportunities to restructure
the businesses aimed at reducing costs and
creating further competitive advantage. These
activities will increase shareholder wealth into the
future through improved business performance,
and the Group is beginning to realise the benefits
of these changes as demonstrated by the sound
financial result for the 2006/07 year in difficult
market conditions. Some of the restructuring
activities undertaken to date include the following:
•
•
•
•
•
•
Upgrade of the Caroma sanitaryware factory
at Wetherill Park, including the significant
investment in plant automation and a new
Caroma Dorf National Distribution Centre;
Closure of the sanitaryware factory at Coburg
and the movement of the production to the
upgraded Wetherill Park factory;
The establishment of a wholly-owned China
subsidiary, GWA Trading (Shanghai) Co Ltd, to
provide sourcing and quality assurance services
to the Australian businesses;
Closure of the Dorf tapware factory at Penrith
with the movement of production to overseas
suppliers;
Closure of the Rover lawn mower assembly
operation at Eagle Farm with the activities
moved to overseas suppliers; and
Closure of the acrylic bath and shower tray
factory at Smithfield with product sourced from
overseas suppliers.
Barry Thornton
Chairman
3
The restructuring activities are an ongoing
transformation process of the businesses to meet
the challenges of the changing market place.
Opportunities will be considered for further
restructuring activities in future periods that are
consistent with the Group’s strategic objectives. The
restructuring activities undertaken to date will place
the Group in a strong position when the domestic
dwelling construction and renovation market
recovers in future periods.
PRODUCT INNOVATIONS
The Group is a significant investor in research
and new product development. This has enabled
the Group to remain at the forefront of product
innovation, particularly in the area of water
efficiency through dual flush sanitaryware and
tapware products developed by the Caroma
Dorf business.
It is well known that Caroma was the first
sanitaryware company in the world to introduce
dual flush technology, and continues to lead the
market in developing water efficient dual flush
sanitaryware and tapware products. Recent
examples include Caroma Smartflush which was
the first Water Efficiency Labelling Standards
(WELS) 4A rated dual flush sanitaryware product
on the market, and Caroma Profile with Integrated
Hand Basin which was developed in collaboration
with the Brisbane City Council and was the first
WELS 5A rated dual flush sanitaryware product on
the market.
In May 2007, Caroma Dorf was the inaugural
recipient of the Standards Australia Award for
Excellence in Sustainable Design for the Caroma
H2Zero Cube Urinal. This product is a waterless
urinal and has the potential to save billions of
litres of water, further enhancing Caroma Dorf’s
environmental credentials.
Caroma Dorf continues to work with all levels of
Government in Australia and its overseas markets
in developing solutions to reduce domestic and
commercial water consumption. In this regard,
Caroma Dorf has assisted with consumer and
commercial retrofit programs of water efficient dual
flush toilets and tapware. These measures have
had a substantial impact on reducing domestic
and commercial water consumption which in
turn has reduced pressure on the country’s water
infrastructure. This is an immediate solution to
address this critical water shortage problem, rather
than infrastructure solutions which can take many
years to have an impact.
The Board is proud of Caroma Dorf’s achievements
in developing sustainable solutions through the
development of innovative products incorporating
world leading water saving technologies. The
Board is committed to the significant investment
in research and development to maintain Caroma
Dorf’s position as the market leader in water
efficient sanitaryware and tapware.
For further information on the Group’s
environmental product innovations, I refer you
to page 15 of the Annual Report.
CORPORATE GOVERNANCE
The Board of GWA International Limited comprises
long serving directors who have overseen the
growth of the Company since listing. A stable and
effective Board is critical to a successful business,
and is particularly important during the current
Group restructuring activities. Succession plans
have been developed by the Board for the future
retirement plans of individual Board members,
whilst ensuring the necessary skills and experience
are maintained on the Board.
In accordance with the Board’s succession
plans, Mr Bill Bartlett joined the Board of GWA
International Limited on 21 February 2007. Mr
Bartlett is a valuable addition to the Board and his
skills and experience as a company director will
ensure that shareholders are well served by his
appointment. Mr Bartlett is a Fellow of the Institute
of Chartered Accountants and has been appointed
a member of the Audit Committee. Mr Bartlett will
hold office until the 2007 Annual General Meeting
where he will be eligible for re-election.
The Board continues to review and monitor the
corporate governance practices of the Group to
ensure that current good practice is maintained.
A review will be conducted on the corporate
governance practices in light of the recent
release of the revised ASX Corporate Governance
Council’s Corporate Governance Principles and
Recommendations. The Group will report by
reference to these revised guidelines in next year’s
Annual Report. For a comprehensive overview of
the Group’s corporate governance practices, I refer
you to page 20 of the Annual Report.
STAFF DEVELOPMENT
The Board recognises the benefits to the Group
from investing in the development of staff to
improve productivity and individual skills. During
the year, the Group has continued the investment
in the GWA Leadership Development Program in
4
GWA INTERNATIONAL LIMITED 2007 ANNUAL REPORT
conjunction with Monash University. The program’s
objectives are to identify and develop talent within
the organisation for the benefit of both the Group’s
businesses and the individuals. The Board views
the program as critical in developing future leaders
in the organisation which is essential to the Group’s
future success.
STRATEGIC DIRECTION
The sound financial performance for the 2006/07
year demonstrates the strength of the Group’s core
building fixtures and fittings businesses in a difficult
operating environment. Based on recent housing
indicators, it is unlikely there will be a sustained
recovery in domestic dwelling construction during
the 2007/08 year.
Together with the recent interest rate increases,
rising business input costs and record low housing
affordability, this means a continued difficult
operating environment for the Group’s
core businesses.
The upturn in the domestic dwelling construction
market is forecast to commence during the
2008/09 year, and the introduction of Federal and
State Government initiatives to address the housing
affordability problem will assist the recovery. I am
confident that the Group’s businesses are well
managed with good prospects for growth, and can
build on the sound financial performance of the
2006/07 year as the domestic dwelling construction
market recovers.
The restructuring activities undertaken by the
Group to date will underpin the future success of
the business and provide the Group with flexibility
in meeting the needs of a changing market place.
The Group is beginning to realise the benefits of the
restructuring activities, as evidenced by the sound
financial performance for the 2006/07 year in
difficult market conditions. The full benefits of the
restructuring activities will be realised over future
periods and will add to shareholder wealth in the
long term.
During the year, the Group announced that
following a strategic review, the Sebel Furniture
and Rover Mowers businesses would be divested.
These businesses are small contributors to Group
profitability and are non-core in the Group’s
business portfolio. To date, the Group has been
unsuccessful in divesting the businesses, and
the opportunity has been taken to restructure the
businesses to improve their competitiveness
and profitability.
The Group is focused on maximising the long term
profitability of its businesses, which are all well
established businesses with strong brand names
and market positions. The Group is committed to
acquiring another major domestic business division
or bolt-on acquisitions to add value to the existing
core businesses and to support expansion into
new markets. The Group will continue to review
and evaluate potential acquisitions, but will only
proceed with acquisitions which are in the best
interests of shareholders.
In closing, I would like to thank management
and staff for their contributions towards the
commendable 2006/07 year financial result. The
Group has undergone significant change over the
past few years and I am confident that the Group
will realise the benefits of the changes in future
periods through the generation of increasing
shareholder returns.
B Thornton
Chairman
Trading Earnings Per Share
cents
25
20
15
10
5
0
02/03
03/04
04/05
05/06
06/07
Dividend Per Share
cents
25
20
15
10
5
0
02/03
03/04
04/05
05/06
06/07
Ordinary Dividend
Special Dividend
5
Peter Crowley
Managing Director
MANAGING DIRECTOR’S REVIEW
OF OPERATIONS
The GWA Group has recorded a sound trading
result for the 2006/07 year in tight domestic
trading conditions and has completed further
business restructuring for sustainable cost
competitiveness. The trading highlights
for the year were the performances of the
Caroma Dorf and Gainsborough businesses
in a market where new dwelling completions
tightened further and raw material costs rose
significantly, with this impact being partly
offset by the rising Australian dollar.
Following on the extensive business transformation
initiatives of the prior year, two further supply
reorganisation opportunities were realised
during the year. The continuing development of
international supply markets enabled Rover to
access sustainably lower cost supply from China,
and Rover closed its mower production facility at
the end of the 2006/07 season. In the first half
of the year, Caroma Dorf transferred production
of its acrylic products, baths and shower trays, to
manufacturers of greater scale in China.
The Group’s overall trading performance for
the year demonstrates the value of scale and
market position which is being leveraged with
supply restructuring to build sustainable total cost
competitiveness. The year’s result also highlights
the impact of industry change with the trading
results of both Rover and Dux being significantly
reduced on the prior year.
The 2006/07 year is the third consecutive year
of reduced domestic demand from dwelling
construction and the Group’s businesses have
contributed sound earnings through this tight
trading period in changing markets whilst also
delivering extensive successful
business restructuring.
The Group’s businesses expected a challenging
trading environment for the 2006/07 year
with continued low levels of domestic dwelling
construction, legislation driven market change in
the hot water business and rising raw materials
and energy prices.
2006/07 TRADING EBIT UP 3.7% TO $98.75 million
Trading EBIT for the Group of $98.75 million
was a pleasing result on sales revenue of $645.7
million up 4.1% on the prior year. Property rentals
increased in the year with the sale and leaseback of
Sebel’s Bankstown site at a rental of $1.8 million for
the 2006/07 year.
2006/07
2005/06
$M
$M
Trading EBIT
Trading Profit after Tax
Reorganisation costs net of tax
Profit after Tax
98.75
61.4
(5.1)
56.3
95.2
60.1
(3.2)
56.9
The growth in sales revenue was in the Building
Fixtures and Fittings segment. Sebel recorded sales
in line with the prior year and Rover’s sales reduced
on lower market demand in the drought season.
Building
Fixtures
& Fittings
Sebel
Rover
$M
$M
$M
Total
$M
Sales revenue
2006/07
2005/06
555.6
57.0
33.1
645.7
523.1
56.7
40.2
620.0
The sales revenue for Building Fixtures and Fittings
was a very good result including revenue growth
in hot water flowing from environmental products.
Sales growth in Caroma Dorf and Gainsborough
was in a market where dwelling construction was at
low levels for the third consecutive year.
2003/04 2004/05 2005/06 2006/07
Dwelling construction
Starts
172,400 157,500 150,600 149,300
Completions
157,900 160,600 155,800 147,400
Sales revenue includes increases in selling prices
as rising product costs are being recovered in
market prices.
6
GWA INTERNATIONAL LIMITED 2007 ANNUAL REPORT
2006/07
$000’s
2005/06
$000’s
Interest paid
Interest received
Interest Net
18,084
(5,718)
12,366
17,586
(6,096)
11,490
Borrowing costs, net of interest income, increased
over the prior year by 7.6%. The effect of increased
interest rates was partly offset by the interest rate
swaps in place during the year. Interest income was
reduced by a repayment of borrowings from funds
on deposit during the year, also reducing interest
expense, and the lower funds on deposit flowing
principally from an increase in working capital
across the year.
Income tax expense for the year, and in the prior
year, benefited from recoveries of past capital
losses, consequent to the capital gains flowing
from the sale of properties under the business
reorganisation initiatives.
Profit after tax of $56.3 million is after the
expensing of reorganisation costs net of tax of
$5.1 million.
CASH FLOW
Net cash from operating activities was $28.3
million for the year and this result is net of cash
expenditures relating to reorganisation costs of
$12.1 million.
Trading cash flow from operations was reduced
for the year by the increase in stocks across the
Group’s businesses of $32.9 million. Cash receipts
from customers of $714.4 million was 4.5%
above the prior year reflecting the sound debtors
management performance.
New plant capital expenditures of $18.2 million
were well below the prior year’s $30.2 million
which included the Wetherill Park warehouse
construction costs.
OPERATING PERFORMANCE
Strong sales revenue and trading EBIT results were
achieved even though the difficult domestic trading
conditions of the first half continued through the full
year across the Group’s businesses.
Caroma Dorf and Gainsborough recorded strong
sales performances in these trading conditions
contributing increased profits over the prior year.
Caroma Dorf is continuing to implement initiatives
aimed at strengthening total cost competitiveness
and extending market reach, through leveraging
on the supply reorganisation and investment of
prior years. The Group’s European business, Wisa,
performed strongly in the 2006/07 year growing
sales revenue by 23% and recording an increased
profit also in tight market conditions. Caroma Dorf’s
international business in North America continues
to realise its opportunities for growth within niche
market segments with all product now competitively
supplied ex Asia.
Dux, the Group’s hot water business, suffered a
significant decline in profit contribution for the
year even though sales revenue increased by
7.9%. The changes in market demand flowing
from energy conservation legislation are reducing
market sales of electric water heaters and whilst
sales of environmental products are growing, the
profitability of these new products was reduced by
a number of factors. The severe fall in the market
value of Renewable Energy Certificates in the first
half impacted on profitability, combined with the
development expenditures and increased marketing
and distribution costs of these new products. The
expanded product range and more complex supply
channels also resulted in higher stock levels which
will be reduced to a sustainably lower level in the
2007/08 year. Going forward higher stock levels is
one outcome of these changes in the hot
water industry.
The Rover business has been transforming to
meet the new challenges of its industry. Rover’s
profitability suffered from the impacts of further
reduction in industry margins as imports benefited
from the rising exchange rate combined with the
impact on demand of the drought. At the end of the
season, Rover closed its mower production facility
and its products will be cost competitively produced
in China. To reflect this outsourcing for both its
domestic and international markets, mower stocks
have been increased at year end and these stocks
will progressively reduce over the 2007/08 selling
season. The early winter rains stimulated sales
in May and June and Rover has now established
a strong cost competitive position going forward,
however, industry profitability is likely to remain at a
low level in the 2007/08 year.
In the 2005/06 year, Sebel, the Group’s commercial
furniture business, reorganised supply of its
timber and metal products and also sold and
leased back its Bankstown site, preparatory to
relocating. The 2006/07 year profit contribution is
reduced by this leasing cost with assets employed
significantly lower. This business contributed a
sound sales result, in line with the prior year,
with the weakness of its core New South Wales
market offsetting growth in other markets. A strong
international sales result was achieved even though
7
competitiveness in these markets was impacted by
the rising Australian dollar.
INVESTMENT IN FUTURE PERFORMANCE
In the 2006/07 year, the Group has realised
opportunities to improve cost competitiveness
and build competitive advantage through
further restructuring. The Group’s businesses
are continuing to invest with new plant capital
expenditure projects approved in the year of
$9 million.
RESTRUCTURING
In the first half of the year, Caroma Dorf ceased
manufacturing acrylic products (baths, shower
trays) at the leased Smithfield site. Remaining
activities at this site will be progressively relocated
prior to termination of the lease in the 2007/08
year. Acrylic products are now entirely sourced cost
competitively from Asia.
The mower manufacturing facilities of Rover at
Eagle Farm were closed in the second half. The
Rover business is now transformed to a significantly
lower investment base with competitive operating
costs in this highly price competitive market.
The cost incurred in these reorganisation activities
in the 2006/07 year were $7.3 million and this cost
was expensed in the year’s results.
OVERSEAS SOURCING SERVICE
GWA Trading (Shanghai) Co. Ltd, the Group’s
operating entity in China, has expanded its
resources and scope through the 2006/07 year to
meet the growing needs of the Group’s businesses
within China and the Asia region. This Company
now employs 24 personnel in quality assurance,
vendor management and trading.
NEW PRODUCT DEVELOPMENT
Each of the Group’s businesses conducts ongoing
research and product development. In the 2006/07
year Caroma’s H2Zero Cube waterless urinal won
the Award for Excellence in Sustainable Design
at the Australian Design Awards. This product
features another successful innovation in Caroma’s
long history of the development of water saving
Sanitaryware products.
In April 2007, Caroma Dorf launched the first
toilet suite in Australia to achieve a WELS 5 star
rating. The Caroma ProfileTM Toilet Suite with
Integrated Hand Basin is an all-in one toilet, basin
and tapware system. The Profile incorporates an
innovative system whereby water used for hand
washing is re-used to fill the toilet’s cistern following
flushing. The flush cycle activation controls the flow
of fresh water through the basin tap allowing time
for thorough hand washing before the water fills the
cistern tank. This product offers upwards of a 70%
water saving when compared with older style toilet
suites used in combination with a separate hand
basin and tap.
INFORMATION TECHNOLOGY
Caroma Dorf is currently preparing for the
implementation of the Movex Enterprise Resource
Planning systems and the amount expended
during the 2006/07 year of $2.7 million has
been capitalised to Intangibles in the financial
accounts. The Movex system will be progressively
implemented through Caroma Dorf’s activities and
subsequently across the Group’s other businesses.
TALENT IDENTIFICATION AND DEVELOPMENT
The collaboration with Monash University, which
commenced in the 2004/05 year, has successfully
progressed further in the current year with more
than 150 senior staff having participated in the
programs conducted to date.
EMPLOYEE HEALTH AND SAFETY
The Group’s OH&S information systems were
successfully upgraded during the 2006/07 year and
these improved systems are assisting to identify
areas of risk and to track the actions implemented
to mitigate these risks, and also to improve the
reporting and escalation of priority risks.
The Group’s businesses have undertaken
capital projects to mitigate identified risks and
management recognise the challenges in creating
and maintaining the workplace behaviour and
management emphasis required to achieve a safe
working environment.
ENVIRONMENTAL SUSTAINABILITY
The Company is committed to reducing energy
and water usage. By way of example, during the
2006/07 year Gainsborough has reduced liquid
waste by 22.7%, solid waste by 13.4% and water
usage by 38.7%. Capital expenditure has recently
been approved for two major recycling initiatives
at Caroma’s Wetherill Park factory. The first
involves the recycling of water on site to be used
for both process and cleaning activities. When
commissioned in February 2008 an estimated
166,000 litres per day of water will be saved
and recycled. The second initiative involves the
recycling of the glaze over-spray. This will reduce
glaze use by 30% (approximately 500 tonnes per
year), which in turn will further reduce water use
and solid waste disposal.
8
GWA INTERNATIONAL LIMITED 2007 ANNUAL REPORT
HOUSING INDICATORS
s
r
e
b
m
u
N
y
l
r
a
e
Y
200,000
180,000
160,000
140,000
120,000
100,000
6
9
n
u
J
7
9
n
u
J
8
9
n
u
J
9
9
n
u
J
0
0
n
u
J
1
0
n
u
J
2
0
n
u
J
3
0
n
u
J
4
0
n
u
J
5
0
n
u
J
6
0
n
u
J
)
f
(
7
0
n
u
J
)
f
(
8
0
n
u
J
)
f
(
9
0
n
u
J
)
f
(
0
1
n
u
J
)
f
(
1
1
n
u
J
Source: BIS Shrapnel
Commencements
Completions
Approvals
OUTLOOK FOR THE 2007/08 YEAR
The strong and improving trading performance of
the Group’s Building Fixtures and Fittings segment
and, in particular, the Caroma Dorf business will
underpin another sound performance for the Group
in the 2007/08 year.
I expect some recovery in the trading performance
of Dux and Rover over the reduced contributions
of the 2006/07 year and also expect the
Gainsborough and Sebel businesses to contribute
sound results for the 2007/08 year.
Dwelling commencements are forecast to weaken
further in the 2007/08 year. No real improvement in
dwelling construction activity is expected until the
2008/09 year.
With the benefit of major restructuring initiatives
flowing through the business, I expect that Trading
EBIT for the 2007/08 year will exceed the 2006/07
result of $98.75 million.
The Group’s businesses continue to consider and
evaluate further opportunities for restructuring
and the Group’s 2007/08 profit after tax may
be reduced by such initiatives with the benefits
boosting profitability in future years.
LONGER TERM OUTLOOK
The current growth in profitability of the GWA Group
has been generated from the Building Fixtures
and Fittings segment and, within that segment,
principally by the Caroma Dorf business.
Dwelling construction and renovation activity are
major drivers of market demand for this segment.
The level of dwelling construction has been at low
levels relative to underlying demand for the last
three years and is expected to remain so through
the 2007/08 year. Dwelling completions are forecast
to grow from the 2008/09 year as illustrated in the
chart above and this recovery will be positive to
the Group’s longer term outlook. The findings of
the recent census suggest that underlying demand
may be near 180,000 new dwellings per annum
whereas dwelling starts in the 2006/07 year were
slightly under 150,000 dwellings.The current and
ongoing water crisis in Australia and other countries
provides a significant market opportunity for
Caroma Dorf, which is recognised as a world leader
in the development and sale of water efficient
plumbing products.
Community, business and Government
stakeholders are all increasing their efforts to
replace inefficient toilets, showers and tapware,
as water demand management is recognised as
the critical first step in the execution of large scale
water capital programs.
The community water grants program has seen
hundreds of schools replace inefficient products,
with many hundreds still to go. Businesses are
increasingly adopting a “green“ position and
retrofitting their bathrooms and washrooms.
All levels of Government and water authorities
are developing and implementing aggressive
demand management plans that target product
replacement, and consumers are showing a real
willingness to support the changes.
We expect retrofitting of inefficient toilets, tapware
and showers will gain momentum over the
coming years.
The benefits of the Group’s extensive business
reorganisation initiatives which have strengthened
cost competitiveness and competitive advantage
will enable the Company to harness the market
positions of the businesses to grow domestic
market profitability in the long term. The Company
also has opportunities in international markets
which, with the sustainable low cost supply
established through supply reorganisation, offer
profitable growth in niche market segments.
9
GWA International Limited continues to strengthen
its strong financial position and is in a position to
acquire businesses complementary to our core
activities and also to invest further in our industries
and markets.
I remain confident that the Company has
the growth opportunities to continue to build
shareholder wealth through both profitable growth
from the current portfolio of businesses and
through further acquisitions as opportunities arise.
FINANCIAL CONDITION
The Group’s financial condition remains strong
with Cash Assets of $80.4 million at balance date.
During the 2006/07 year, Cash Assets reduced
with increases in working capital, principally higher
levels of stock and the repayment of $25 million in
borrowings.
The increased stock levels result from a number
of factors and include both short term, related to
supply restructuring initiatives, and underlying,
reflecting expanded product range requirements.
Stock levels will reduce through the 2007/08 year
from the current high levels.
The major expenditures in the current year were
with respect to the factory upgrade project at
Wetherill Park and further investment in this factory
is committed for the 2007/08 year.
The Company paid $64 million in dividends in
the 2006/07 year, all fully franked. The balance of
franking credits at year end was $30.2 million and
the Company remains in a position to continue to
pay fully franked ordinary and special dividends.
During the year, the Group’s businesses expended
$12.1 million in cash relating to business
reorganisation initiatives, having expended $10.6
million in the prior year. These cash expenditures
have been funded from the Group’s operating
cash flow.
Debt funding and other financing facilities are
provided to the Company under a Master Financing
Agreement. At balance date, bank loans were made
up of:
Australian Currency $260 million
Euro
€7.3 million
These loans and other facilities are extended
annually under 2 year and 3 year evergreen
arrangements.
Over the 2006/07 year the Company held interest
rate swaps totalling $125 million at rates between
5.50% and 5.67% and these swaps have deferred
the impact of domestic interest rate rises through
the year on the amount of the swaps.
The major proportion of these swaps will expire in
the 2007/08 year in the period August 2007 to
November 2007.
The Group’s businesses enter into foreign currency
hedges with respect to purchases of goods. At
balance date the Group held forward exchange
contracts principally in US dollars.
The ratio undertakings under the Master Financing
Agreement have been comfortably met throughout
the 2006/07 year and the Group has maintained
the capability to increase borrowings to fund
acquisition opportunities.
In the 2006/07 year, the Company issued 1.6
million ordinary shares with respect to an employee
share issue which added $6.2 million to share
capital. At balance date, 3.4 million shares were on
issue under the scheme with a nominal loan value
of $9.6 million.
SUMMARY
The 2006/07 year has been challenging for the
Group’s businesses and the trading results have
been very pleasing in the context of the scope and
scale of business restructuring and
industry change.
The domestic dwelling construction market has
now operated at low levels for the past three years
and the increasing interest rates and low housing
affordability environment can be expected to hold
back any recovery through the 2007/08 year. With
underlying demand for new dwellings estimated
at up to 180,000 per annum, I am confident
that dwelling construction levels will increase
progressively and sustainably to the level of
underlying demand in the medium term.
The Company’s management and staff have
achieved sound trading results whilst strengthening
the Group’s businesses through restructuring
initiatives, and further benefits of these initiatives
are expected to flow through to profitability in the
near term.
I am confident that the improved cost
competitiveness and strong market positions of the
Group’s businesses will contribute sustainable and
profitable growth going forward for the benefit of
our shareholders, customers and staff.
P C Crowley
Managing Director
10
GWA INTERNATIONAL LIMITED 2007 ANNUAL REPORT
STRATEGIC DIRECTION AND BUSINESS DIVISIONS
Business Division
Business Description
Main Products
and Sevices
Major Brands
Caroma Dorf is Australia’s foremost designer, manufacturer, importer and
distributor of domestic and commercial bathroom and kitchen products, including
sanitaryware, tapware, accessories, bathware, stainless steel sinks and laundry
tubs. Caroma Dorf is at the forefront of product innovation incorporating water
saving technologies, and is the market leader in water efficient sanitaryware
and tapware
Vitreous china toilet suites, urinals, bidets, basins, plastic cisterns, bathroom
accessories and fittings. Acrylic and pressed steel spas, baths and shower trays.
Tapware and accessories, stainless steel sinks and laundry tubs
Owned: Caroma, Dorf, Fowler, Stylus, Clark, Radiant, Irwell, Wisa
Exclusive: Hansa, Keuco, Schell, KWC, Virtu
Operating Locations
Australia, New Zealand, North America, Europe, China
Major Markets
New dwellings, renovation, replacement and commercial markets in Australia,
New Zealand and selected international markets
Strategic Direction
Head Office Location
Caroma Dorf will maintain leadership in the domestic market through its
investment in the research and development of innovative products incorporating
water saving technologies. Caroma Dorf is world leading in water efficient
sanitaryware and tapware and will continue to work with authorities in Australia
and its overseas markets in developing solutions for reducing domestic and
commercial water consumption
Caroma Dorf
4 Ray Road
EPPING NSW 2121
Telephone: 61 2 9202 7000
Facsimile: 61 2 9869 0625
Websites: www.caroma.com.au
www.dorf.com.au
www.stylus.com.au
www.wisa-sanitair.com
www.smartflush.com.au
www.fowler.com.au
www.clark.com.au
www.starion-industries.com
11
GWA International Limited’s primary objective is to grow shareholder wealth. This objective will be
achieved by continuing to invest in the development of its people, new products and world leading
technologies, to sustain and build premium profitability of its businesses over time.
Business Division
Business Description
Dux is an Australian designer, manufacturer, importer and distributor of a range of
hot water systems. The range includes mains pressure gas and electric storage,
continuous flow gas, electric and gas boosted solar and heat pump products.
Dux has developed an extensive range of innovative environmental products
to meet the changing regulatory requirements, and which assist in reducing
domestic energy consumption
Main Products
and Sevices
Range of hot water systems including mains pressure gas and electric storage,
continuous flow gas, electric and gas boosted solar and heat pump products
Major Brands
Owned: Dux, EcoSmart
Operating Locations
Australia, overseas distributors
Major Markets
Dux participates actively in the new home and replacement markets. The primary
market for hot water systems is the replacement or breakdown market
Strategic Direction
Head Office Location
Dux will continue to focus on improving business performance by developing
new innovative environmental products to meet emerging market requirements
and regulations, and that will assist in reducing domestic energy consumption.
Dux will continue to strengthen its key customer relationships, and reduce costs
through improved factory performance and selective sourcing of products
and components
Dux Manufacturing Limited
Lackey Road
Moss Vale NSW 2577
AUSTRALIA
Telephone: 61 2 4868 0200
Facsimile: 61 2 4868 2014
Websites: www.dux.com.au
www.ecosmart.com.au
12
GWA INTERNATIONAL LIMITED 2007 ANNUAL REPORT
STRATEGIC DIRECTION AND BUSINESS DIVISIONS
Business Division
Business Description
Gainsborough is a leading Australian designer, manufacturer, importer and
distributor of a comprehensive range of domestic and commercial door hardware
and fittings, including security products
Main Products
and Sevices
Major Brands
A comprehensive range of door hardware comprising door handles (knobs and
levers), door locks, door closers, hinges and other metal door accessories
Owned: Gainsborough, Trilock, Homecraft, Stronghold Series, Contractor Series,
In Style, Mode, Aspect
Operating Locations
Australia, New Zealand, export markets
Major Markets
Main Products
Strategic Direction
and Sevice
Domestic home builders, DIY and building projects, commercial buildings and
multi-dwelling developments
Dux is an Australia designer, manufacturer, importer and distributor of a range of
Gainsborough’s strategic direction encompasses the development of additional
hot water systems. The range includes mains pressure gas and electric storage,
door hardware products to suit domestic buildings, continued development of
continuous flow gas, electric and gas boosted solar and heat pump products.
commercial markets and development of export markets
Brand Names
Dux, Ecosmart
Operating Locations
Australia, overseas distributors
Major Markets
Head Office Location
Strategic Direction
Dux participates actively in the new home and replacement markets. However, the
Gainsborough Hardware Industries Limited
primary market for hot water systems is the replacement or breakdown market
31-33 Alfred Street
Blackburn VIC 3130
Dux will continue to focus on improving business performance by developing new
AUSTRALIA
environmentally friendly products to meet emerging market requirements and
Telephone: 61 3 9877 1555
regulations, strengthening key customer service to drive slaes through increased
Facsimile: 61 3 9894 1599
market share. Current export markets will also be expanded, with the division pursuing
Website: www.gainsboroughhardware.com.au
opportunities in education and stadia markets overseas
13
GWA International Limited invests significantly in research and new product development which
has enabled the businesses to maximise opportunities in a competitive marketplace.
The Company is committed to the research and development of innovative environmental
products which provide sustainable solutions for reducing domestic and commercial water
consumption, and greenhouse gas emissions.
Business Division
Business Division
Main Products
and Sevice
Dux is an Australia designer, manufacturer, importer and distributor of a range of
hot water systems. The range includes mains pressure gas and electric storage,
continuous flow gas, electric and gas boosted solar and heat pump products.
Brand Names
Dux, Ecosmart
Operating Locations
Australia, overseas distributors
Major Markets
Business Description
Strategic Direction
Main Products
and Sevices
Dux participates actively in the new home and replacement markets. However, the
Rover is a leading Australian designer, importer and distributor of domestic and
primary market for hot water systems is the replacement or breakdown market
commercial lawn and garden care equipment
Dux will continue to focus on improving business performance by developing new
environmentally friendly products to meet emerging market requirements and
regulations, strengthening key customer service to drive slaes through increased
market share. Current export markets will also be expanded, with the division pursuing
opportunities in education and stadia markets overseas
Range of walk-behind and ride-on mower equipment, garden chip and shred
products and spare parts
Business Division
Major Brands
Owned: Rover
Operating Locations
Australia, overseas distributors
Major Markets
Domestic and commercial lawn care and garden products and equipment,
marketed in over 35 countries
Main Products
Strategic Direction
and Sevice
Dux is an Australia designer, manufacturer, importer and distributor of a range of
Rover will continue to target market growth segments in Australia and overseas
hot water systems. The range includes mains pressure gas and electric storage,
through its focus on new product development and its relationships with its key
continuous flow gas, electric and gas boosted solar and heat pump products.
customers
Brand Names
Dux, Ecosmart
Operating Locations
Australia, overseas distributors
Major Markets
Head Office Location
Strategic Direction
Dux participates actively in the new home and replacement markets. However, the
Rover Mowers Limited
primary market for hot water systems is the replacement or breakdown market
155 Fison Avenue West
Eagle Farm QLD 4009
Dux will continue to focus on improving business performance by developing new
AUSTRALIA
environmentally friendly products to meet emerging market requirements and
Telephone: 61 7 3213 0222
regulations, strengthening key customer service to drive slaes through increased
Facsimile: 61 7 3868 1010
market share. Current export markets will also be expanded, with the division pursuing
Website: www.rovermowers.com.au
opportunities in education and stadia markets overseas
14
GWA INTERNATIONAL LIMITED 2007 ANNUAL REPORT
STRATEGIC DIRECTION AND BUSINESS DIVISIONS
Business Division
Business Description
Sebel is at the forefront of Australian design, manufacture, import and distribution
of quality commercial furniture and seating
Main Products
and Sevices
Broad range of commercial furniture suited to its target markets. The range
includes dining seating and tables, outdoor furniture, mass seating for stadia
and public areas, casual corporate markets, and tables, desks and chairs for
the education market
Major Brands
Owned: Sebel
Operating Locations
Australia, New Zealand, Hong Kong, United Kingdom, export markets
Major Markets
Main Products
Strategic Direction
and Sevice
Brand Names
Entertainment, hospitality, healthcare, public seating, sports stadia, corporate
and educational markets. Sells direct to builders, developers, clubs and hotels
Dux is an Australia designer, manufacturer, importer and distributor of a range of
As well as its strong emphasis on new product development, Sebel will continue to
hot water systems. The range includes mains pressure gas and electric storage,
pursue traditional markets using its strong brand name and good customer service
continuous flow gas, electric and gas boosted solar and heat pump products.
to drive sales through increased market share. Current export markets will also
be expanded, with the division pursuing opportunities in education and stadia
Dux, Ecosmart
markets overseas
Operating Locations
Australia, overseas distributors
Major Markets
Head Office Location
Strategic Direction
Dux participates actively in the new home and replacement markets. However, the
Sebel Furniture Limited
primary market for hot water systems is the replacement or breakdown market
96 Canterbury Road
Bankstown NSW 2200
Dux will continue to focus on improving business performance by developing new
AUSTRALIA
environmentally friendly products to meet emerging market requirements and
Telephone: 61 2 9780 2222
regulations, strengthening key customer service to drive slaes through increased
Facsimile: 61 2 9793 3152
market share. Current export markets will also be expanded, with the division pursuing
Website: www.sebel.com.au
opportunities in education and stadia markets overseas
15
THE GWA SUSTAINABILITY STORY
Leading the way in eco efficient technology
SAVING WATER FROM THE BEGINNING
Caroma Dorf has always been at the forefront
of product innovation, corporate responsibility
and the development of environmentally sound
technologies. A long-standing commitment
to helping Australians save water has made
Caroma Dorf an international market leader in the
development of water efficient products.
A HISTORY OF WATER SAVING INNOVATION
Over the last 25 years, as shown in the below chart,
Caroma has designed toilets that have progressively
reduced water consumption, from the 11/6 litre,
to the 9/4.5 litre, to the 6/3 litre dual flush to
today’s Caroma Smartflush®, Australia’s first 4.5/3
litre dual flush toilet, which can save the average
household 35,000 litres of water per year.
CAROMA DORF ECO LOGICAL SOLUTIONS
Given the nature of our product portfolio, Caroma
Dorf has a vested interest in ongoing water saving
opportunities. Devising sustainable solutions
for homes and businesses is key to our market
positioning, whilst ensuring we maintain a
leadership position in water saving
product innovation.
With around 156,000 new dwellings built in
Australia every year, there remains an existing
stock of seven million dwellings where there is
significant potential to replace inefficient fittings
and appliances with the latest water
efficient technologies.
The practise of retrofitting inefficient toilets and
urinals is often overlooked or considered too hard,
as part of a ‘demand management’ water saving
strategy, both within the community and within
various levels of government.
It is Caroma Dorf’s endeavour to change this
perception by devising fully installed solutions that
can easily be adopted and implemented by the
relevant party resulting in greater levels of water
saving, as flushing a toilet involves no behavioural
changes and the savings are immediate
and profound.
Ongoing government lobbying to recognise the
potential water saving benefits of retrofitting and as
a result legislate the mandatory retrofitting of water
saving products and innovations in established
households, is a key objective of our
sustainability business.
ECO LOGICAL SOLUTIONS
To support the development of our sustainability
business, a dedicated team has been appointed
both at a national and state level to drive the new
initiatives. A Caroma Dorf Eco Logical SolutionsTM
brand platform has been devised to sell the
concept at a high level.
ECO LOGICAL SOLUTIONS CASE STUDIES
Locally
•
•
•
Queanbeyan Council utilised Caroma dual flush
toilet suites to retrofit over 6,000 toilet suites,
resulting in significant water and waste savings
In NSW Caroma Dorf managed a toilet retrofit
pilot program for Sydney Water
In Victoria Caroma Dorf devised a fully installed
retrofit program with the Green Plumbers and
have retrofitting in excess of 2,000 suites to
Smartflush
Average
daily water
consumption
(litres/person/day)
80
60
40
20
0
13 litre flush (65l/p/d)
10 litre flush (55l/p/d)
11/5.5 litre flush (33l/p/d)
9/4.5 litre flush (27l/p/d)
6/3 litre flush (18l/p/d)
4.5/3 litre flush (14l/p/d)
PROFILE 4.5/3 litre flush (12.5l/p/d)
1900
1910
1920
1930
1940
1950
1960
1970
1980
1990
2000
2010
Year
Reduction in maximum WC flush volumes (for new installations) and corresponding average daily per capita WC water usage in Australia
with particular reference to the period since 1982.
logical solutions
logical solutions
logical solutions
logical solutions
16
GWA INTERNATIONAL LIMITED 2007 ANNUAL REPORT
•
•
In coordination with the QLD Department
of Public Works Caroma Dorf managed a
commercial retrofit program, which has lead the
way to numerous QLD government buildings
being made more water efficient
In Brisbane Caroma Dorf conducted a mail out
to 5,000 swimming pool owners to coincide with
moving to Level 4 water restrictions, resulting in
over 100 toilet retrofits
Internationally
•
•
In San Antonio, Texas over 50,000 toilet suites
have been converted to Smartflush
Consulting with the Beijing Olympics Committee
on water saving initiatives
OUR HIGHLY AWARDED PRODUCT PORTFOLIO
•
•
•
•
•
•
•
2004 Green Plumbers ‘Product of the Year’ –
Caroma Smartflush®
2005 Australian Design Award – Caroma
Smartflush®
2005 Green Plumbers ‘Water Efficient Product
of the Year’ – Smartflush® Urinals
2005 Home Beautiful ‘Product of the Year’ –
Caroma Smartflush®
2007 Inaugural winner of the ‘Excellence in
Sustainable Design’ Australian Design Award
2007 Winner Australian Design Award for
‘Excellence in Australian Design’ in the Housing
& Building category
2007 nominee for ‘Global Index’ Award –
Copenhagen (International Design Competition)
H2Zero Waterless Urinal
Caroma Profile™ Toilet Suite with Integrated
Hand Basin
The first toilet in Australia to achieve a 5-star
Water Efficiency Labelling Standards WELS rating,
the Caroma Profile™ Toilet Suite with Integrated
Hand Basin provides a simple, effective way to
re-use water in the bathroom. Profile™ achieves
this leading water rating by using the same water
twice, for hand washing followed by toilet flushing.
Resulting in water saving 10% greater than that of
the 4.5/3L Smartflush® System.
Given the high degree of innovation of the Profile™
Toilet Suite, the launch of this product has further
consolidated Caroma Dorf’s position both in
Australia and internationally as a leader in water
saving technology. The Profile™ has enhanced
Caroma Dorf’s already extensive range of water
efficient bathroom products, whilst ensuring
Caroma Dorf sets the innovation benchmarks within
the markets in which it operates.
The ‘demand management’ approach to bathroom
water usage demonstrates the company is well
connected with the market place needs. The
innovation attached to the Profile™ Toilet Suite
is providing new opportunities for new
sustainability based discussions with
new and existing audiences.
Researched and designed in Australia, Caroma
Dorf are ensuring this unique technology is
fully accessible to the Australian market from a
distribution, ease of installation and price position
so the water saving benefits of this innovation can
be carried through to our environment.
Caroma H2Zero™ Cube Urinal
The Caroma H2Zero™ Cube Urinal won the
inaugural Award for Excellence in Sustainable
Design at the Australian Design Awards. The
H2Zero™ Cube Urinal was selected from a shortlist
of 32 environmentally friendly entries for its
breakthrough design, allowing it to be the first truly
viable and sustainable high-performance, waterless
urinal option.
The H2Zero™ Urinal also won the Australian
Design Award for Excellence in Australian Design in
the Housing and Building category, as well as being
one of six products nominated for Australian Design
Award of the year. Entries were judged against a
common set of criteria, including innovation, visual
appeal, functionality, originality, quality, ergonomics,
safety, sustainability, and commercial viability. In
addition, the urinal remains in the running for the
International Index Award, which will be awarded in
October this year.
Australian Designed Mixers Deliver Serious Style & 5
Star Water Rating – Dorf Eclipse mixer range
The Eclipse Basin Mixer releases a low 6 litres of
water per minute to achieve a superior WELS 5 star
rating, while the WELS 3 star rated Eclipse Sink
Mixer is durable enough to withstand even the most
demanding of kitchen duties. The contemporary
good looks of the Eclipse Bath/Shower Mixer,
available with optional diverter, will make a stylish
addition to any bathroom space.
Smartflush – Brand Relaunch
With the market focus on water efficiency we are in
the process of re-launching the Smartflush brand,
to reinforce our market leading position and to
continue educating the market on our superior
level of innovation, teamed with the level of industry
recognition in the form of awards the Smartflush®
System has won.
We have also enhanced the system to include new
XPV technology for even greater flushing power.
The XPV (Express Power Valve) increases flushing
17
®
CMYK
performance a further 25%, maximising flow rate
performance and minimising water usage.
Dorf Smart – Brand Relaunch
which addresses all regulatory standards, provides
the tradesperson with a product that is simple to
install and importantly provides the consumer with
no compromise to their hot water experience.
Additionally, the Dorf range is being enhanced to
have Dorf smart as the next phase of the original
Water Efficient Tapware W.E.T campaign.
Product Development
In simple terms water heaters are viewed by their
energy source, either Gas or Electric.
The Dorf smartTM range combines visual appeal
with elegant style, advanced technology with
innovative thinking, water-saving ideas with energy
efficient solutions, and the reliability and reputation
of Australia’s most respected brand of tapware.
Smart Styling – Wide range of innovative designs to
suit all bathroom and kitchen styles
Smart Performance – Special features to improve
water savings, water flow and temperature control
Smart Engineering – Beautifully crafted from solid
brass for durability and longevity
Caroma Dorf is proud to be embracing the water
saving aspect of our business and building a
sustainable business around making water efficient
decisions easier for Australians and beyond.
Dux Hot Water – At the Forefront of Energy Efficient
Water Heating
The Market Environment
®
“Energy Efficient”, previously this term meant
different things to different people.
50% Pantone 5425c
100% Pantone 5425c
For manufacturers of water heaters, the term
energy efficiency is a constant. It reflects the
regulatory standards, which set minimum
performance and efficiency targets that all water
heaters must comply if they are to be sold in the
Australian market place.
Given the need to reduce the levels of greenhouse
gas emissions, these performance standards are
becoming tougher, asking for greater gains in
efficiency levels. As a result, manufacturers must
look to develop new and better ways to heat water
without compromising the consumer’s level
of comfort.
State Regulation
Over and above the minimum performance
standards set for these appliances are the new
state regulations, which only allow the most efficient
water heaters to be installed into new homes.
Further to these restrictions, state based regulations
are being implemented over a broader section of
the community and are now putting limitations on
the type of water heater that is used to replace an
existing unit.
Dux Approach to this Challenge
Given this challenging regulatory environment the
Dux approach is to drive new product innovation,
Gas Fuel Source
With the gas market in mind, Dux offers 5 star
storage heaters, and 5 star continuous flow heaters,
the award winning Sunpro continuous gas boosted
solar heater, and now the Sunpro 305 gas boosted
heater. The Sunpro 305 takes a different approach
to traditional gas boosted solar units, by using a
pre-boost system. This means that the consumer
receives full flow mains pressure hot water, meeting
their expectations.
Electric Fuel Source
Most efficiency arguments are focused toward
electric powered water heaters, and the challenge
for Dux is to maintain our share of this critical
market. Our electric boosted solar market
continues to grow strongly where Gas fuel is not
available. Recently the Solarone was launched in
Queensland, which is a single panel solar water
heater, perfect for the new home market.
Airoheat
The most significant event for Dux was the release
of the new Dux Airoheat, heat pump water heater.
The Dux Airoheat, features NHT (new heat
technology), and through this offers the most
efficient domestic heat pump water heater
available. Over the years heat pump water heaters
have developed a reputation as being noisy,
Airoheat on the other hand is the quiet achiever,
registering half the sound level of some other
units tested. It has been described as being “as
quiet as a refrigerator” providing lots of appeal to
the consumer. Airoheat reportedly reduces the
electricity consumption by approx 65%, compared
to an electric water heater.
Water Recirculation
Although Dux is in the business of creating hot
water, substantial water and energy can be wasted
waiting for hot water to be delivered. As a result
Dux released the Readyhot water recirculation
system. Proudly, this innovative system won the
HIA Greensmart “Product of the Year” Award, in
September 2006. In the same month Readyhot also
won the Green Plumbers “Water Saving Product of
the Year” Award.
Regulation and Government incentives continues to
impact on all areas of the water heater market and
Dux is proud to be at the leading edge of
this change.
18
GWA INTERNATIONAL LIMITED 2007 ANNUAL REPORT
BOARD OF DIRECTORS
Peter Crowley BA BEcon FAICD
Managing Director, Appointed 6 May 2003
Barry Thornton KSJ FCA FAICD FAIM FCIS
Chairman and Non-Executive Director, Elected to
the Board 1992
Expertise: Chartered Accountant, corporate and
financial management.
Special Responsibilities: Chairman of the Board,
Chairman of Nomination Committee and member
of Audit Committee.
Mr Thornton joined GWA Limited in 1974 as
Finance Director and was appointed Chief
Executive in 1981. In 1986, he was appointed
Executive Chairman and, following the privatisation
of GWA Limited in 1989 and the public float of
the Manufacturing Division as GWA International
Limited in 1993, he became Non-Executive
Chairman. He is also a member of the Brisbane
Advisory Board of the Salvation Army, and is
the former Chairman of the Brisbane Airport
Corporation Limited where he served from 1997 to
January 2007.
During the past three years, Mr Thornton has
served as a director of the following other listed
company, and the period in which the directorship
was held:
> Stockland Corporation Limited 1995-2004
Jim Kennedy AO CBE DUniv (QUT) FCA FCPA
Deputy Chairman and Non-Executive Director, Elected to
the Board 1992
Expertise: Chartered Accountant and director of a
number of public and other corporations.
Special Responsibilities: Deputy Chairman of the
Board, Chairman of Audit Committee and member
of Nomination Committee.
During the past three years, Mr Kennedy has
served as a director of the following other
listed companies, and the period in which the
directorships have been held:
> Suncorp-Metway Limited 1997 – 2006
> Australian Stock Exchange Limited 1990 – 2006
> Macquarie Goodman Funds Management
Limited 1994 – 2004
> Qantas Airways Limited 1995 – 2006
Expertise: Broad manufacturing experience in
Australia and overseas.
2001: Managing Director and Chief Executive,
Austrim Nylex Limited, a diversified industrial
company;
1999: Executive Director, Cement and Lime, The
Rugby Group PLC, a UK Public Company
with extensive international cement
operations. During this period, also served as
a director of Adelaide Brighton Limited;
1997: Chief Executive, Cockburn Cement Limited
(a subsidiary of The Rugby Group PLC),
Western Australia’s largest cement producer
and Australia’s largest lime producer;
1982: Various roles with Queensland Cement
Limited and its parent company Holderbank
culminating in General Management
responsibilities within Australia and
South-East Asia.
David Barry FAIM
Non-Executive Director, Elected to the Board 1992
Expertise: Importation, distribution and retailing.
Special Responsibilities: Member of Remuneration
Committee.
Mr Barry was appointed a director of GWA Limited
in 1979, and was primarily responsible for one of its
major divisions involved in importation, wholesaling
and retailing.
Mr Barry was appointed a Non-Executive Director
of GWA International Limited in 1992.
Robert Anderson
Non-Executive Director, Elected to the Board 1992
Expertise: Property investment and transport
logistics.
Mr Anderson was appointed a director of GWA
Limited in 1979 after joining the Group in 1955
where he gained wide experience in management,
investment and property matters.
Mr Anderson was appointed a Non-Executive
Director of GWA International Limited in 1992.
19
Martin Kriewaldt BA LLB FAICD
Non-Executive Director, Elected to the Board 1992
Bill Bartlett FCA, CPA, FCMA, CA(SA)
Non-Executive Director, Elected to the Board
21 February 2007
Expertise: Lawyer and director of a number of
public and other corporations.
Special Responsibilities: Member of Remuneration
Committee, member of Audit Committee and
member of Nomination Committee.
Mr Kriewaldt provides advice to the law firm
Allens Arthur Robinson and to Aon insurance
brokers. He formerly practised in a wide range of
areas including banking and finance, insurance,
insolvency and receivership and intellectual
property. Mr Kriewaldt is Chairman of Opera
Queensland Limited.
Expertise: Chartered Accountant, actuarial,
insurance and financial services.
Special Responsibilities: Member of Audit
Committee.
Mr Bartlett is a Fellow of the Institute of Chartered
Accountants, with over 35 years experience in
accounting, and was a partner at Ernst & Young in
Australia for 23 years, retiring on 30 June 2003.
He is a director of the Bradman Foundation and
Museum and Moneyswitch Limited.
During the past three years, Mr Kriewaldt has
served as a director of the following other
listed companies, and the period in which the
directorships have been held:
During the past three years, Mr Bartlett has served
as a director of the following other listed companies,
and the period in which the directorships have
been held:
> Suncorp-Metway Limited * since 2003
> Reinsurance Group of America Inc (NYSE)
*since 2004
> Peptech Limited* since 2004
> Abacus Property Group* since 14 February 2007
> Retail Cube Limited 2004 - 2006
*denotes current directorship
Company Secretary
R J Thornton CA B Com LLB (Hons) LLM FTIA
Appointed 4 July 2003
Expertise: Chartered Accountant, taxation
and finance.
Mr Thornton joined GWA International Limited in
2002 as Group Taxation Manager and Treasurer. He
is experienced in accounting, taxation and finance
through positions at Coopers & Lybrand, Citibank
and Ernst & Young in Australia and overseas.
> Campbell Brothers Limited* since 2001
> Oil Search Limited*
since 2002
> Suncorp-Metway Limited* since 1996
> Peptech Limited
2003 – 2007
*denotes current directorship
Geoff McGrath MIIE
Non-Executive Director, Elected to the Board 2004
Expertise: Manufacturing and general management.
Special Responsibilities: Chairman of Remuneration
Committee.
2003: Mr McGrath retired as Managing Director of
GWA International Limited on 6 May 2003,
and continued his involvement with the
Group as an adviser to the Board;
1992: Mr McGrath was appointed Managing
Director of GWA International Limited;
1982: After the takeover of UPL Group
by GWA Limited, Mr McGrath was
appointed Managing Director of the GWA
Manufacturing Group companies comprising
Caroma, Sebel and Rover Mowers.
During the past three years, Mr McGrath has
served as a director of the following other
listed companies, and the period in which the
directorships have been held:
> Campbell Brothers Limited*+ since 2003
> Fletcher Building Limited* since 2003
* denotes current directorship
+ denotes Chairman
20
GWA INTERNATIONAL LIMITED 2007 ANNUAL REPORT
CORPORATE GOVERNANCE
STATEMENT
for the year ended 30 June 2007
The Board of Directors is responsible for the
corporate governance of GWA International
Limited (“the Company”) which is an essential
part of the role of the Board. Corporate
governance is about the Board undertaking an
active monitoring of the Company’s systems
and procedures and ensuring that integrity
prevails within the Company. The governance
principles adopted by the Board are designed
to achieve this outcome.
The corporate governance practices of the
Company have been in place since listing and are
constantly reassessed in the light of experience
(within the Company and in other organisations),
contemporary views and good practice guidelines
on corporate governance practices. The Board
adopts practices it considers to be superior
and which will lead to better outcomes for the
Company’s shareholders, whilst endeavouring to
avoid those which are based on unsound principles
or represent temporary fads.
The Board supports the Principles of Good
Corporate Governance and Best Practice
Recommendations (“the recommendations”) of
the ASX Corporate Governance Council. The Board
confirms that the current corporate governance
practices of the Company meet or exceed the
recommendations, except for Recommendation
2.2 which provides that the chairperson should
be an independent director. The Chairman of
the Company, Mr Barry Thornton, would not be
considered an independent director in accordance
with the definition of independence outlined in
the recommendations, as he is associated with a
substantial shareholder. This matter is outlined in
more detail below – refer Independence
of Directors.
As part of its responsibilities, the Board has
ensured that management has put in place a
comprehensive system of risk management and
internal controls. These are outlined in more detail
below – refer Risk Management and Internal
Controls. The Board continues to review and
monitor the Company’s risk management and
internal control practices to ensure that good
practice is maintained.
For further information on the corporate
governance practices of the Company, please refer
to the corporate website at www.gwail.com.au in the
Corporate Governance section.
1. ROLE OF THE BOARD
The Board is responsible for the long term growth
and profitability of the Company. The Board charts
the strategic direction of the Company and monitors
executive and senior management performance on
behalf of shareholders. To achieve this, the Board is
engaged in the following activities:
•
•
•
•
•
•
•
•
Final approval of corporate strategies and
performance objectives developed by senior
management, with Board input
Approval and monitoring of financial and other
reporting
Monitoring of executive and senior management
performance, including the implementation of
corporate strategies, and ensuring appropriate
resources are available
Appointment and monitoring of the performance
of the Managing Director
Liaison with the Company’s External Auditor
through the Audit Committee
Ensuring that the Company has appropriate
systems of risk management and internal
controls, reporting mechanisms and delegation
authority limits in place
Approval and monitoring of the progress of
major capital expenditure, capital management,
acquisitions and divestments
Any other matters required to be dealt with by
the Board from time to time depending upon
circumstances of the Company
•
Other matters referred to in the Board
Committee charters
The Board operates under a charter that details
the functions and responsibilities of the Board.
The charter is regularly reviewed to ensure it
remains consistent with the Board’s objectives
and responsibilities. The Board charter has been
posted on the Company’s website in the Corporate
Governance section.
21
2. BOARD MEETINGS
The Board meets at least 11 times each year for
scheduled meetings and may, on other occasions,
meet to deal with specific matters that require
attention between scheduled meetings. Together
with the Board Committees, the directors use the
Board meetings to challenge and fully understand
the business and its operational issues. To assist
with the Board’s understanding of the businesses,
the Board regularly conducts Board meetings at the
factories, followed by management presentations
and factory tours.
The General Managers of the business divisions
are required to regularly attend and present at
the Board meetings on corporate strategies and
performance. A Group strategy meeting is held
annually, which enables the Board to review
corporate strategies and performance with the
Managing Director. This ensures that the Board
is effectively carrying out its duty of approving
corporate strategies and performance objectives.
The Chief Financial Officer is required to attend
Board meetings and present the Finance
Department Monthly Report, and to answer
questions from the directors on financial
performance, accounting, risk management and
treasury matters.
The Company Secretary is responsible for the
completion and dispatch of the agenda and Board
papers for each meeting. The Company Secretary
prepares the draft minutes for each meeting, which
are tabled at the next Board meeting for review and
approval. The Company Secretary is accountable to
the Board, through the Chairman, on all corporate
governance matters.
3. COMPOSITION OF THE BOARD
The Board presently comprises 8 Directors, 7
of whom, including the Chairman and Deputy
Chairman, are non-executive directors and one, the
Managing Director, is an executive director.
Profiles of the directors are set out on page 18 of
the Annual Report. The profiles outline the skills,
experience and expertise of each Board member.
The composition of the Board is determined by the
Nomination Committee and, where appropriate,
external advice is sought. The following principles
and guidelines are adhered to:
•
•
•
•
•
•
The Board should maintain a majority of non-
executive directors
The Board should maintain a majority of
independent directors
The Chairperson should be a non-executive
director
The role of Chairperson and Managing Director
should not be exercised by the same individual
Non-executive directors should not be involved
in management of the day to day operations of
the Company
All Board members should have financial
expertise and relevant experience in the
industries in which the Company operates
Re-Election of Directors
In accordance with the Company’s constitution,
at each Annual General Meeting, a number of
directors will face re-election. One third of the
Board (excluding the Managing Director and any
director not specifically required to stand for re-
election) must stand for re-election. In addition,
no director (other than the Managing Director)
may hold office for more than three years without
standing for re-election, and any director appointed
by the Board since the last Annual General Meeting
must stand for re-election at the next Annual
General Meeting. All retiring directors are eligible
for re-election.
4. INDEPENDENCE OF DIRECTORS
The Board considers that directors must be
independent from management and free of any
business or other relationship that could interfere,
or reasonably be perceived to interfere, with the
exercise of their unfettered and independent
judgment. In applying the definition of
independence outlined in the recommendations of
the ASX Corporate Governance Council, it has been
determined that the majority of the Board members
of GWA International Limited are independent.
The following directors are considered by the Board
to constitute the independent directors of
the Company:
• Mr Jim Kennedy, Deputy Chairman and
Non-Executive Director
• Mr Martin Kriewaldt, Non-Executive Director
• Mr David Barry, Non-Executive Director
• Mr Robert Anderson, Non- Executive Director
• Mr Bill Bartlett, Non-Executive Director
22
GWA INTERNATIONAL LIMITED 2007 ANNUAL REPORT
The Board is responsible for ensuring that
the action of individual directors in the
Boardroom is that of independent persons. The
Board distinguishes between the concept of
independence and issues of conflict of interest or
material personal interest which may arise from
time to time – refer Conflicts of Interest below.
In recognising the importance of the independence
of directors and the immediate disclosure of
conflicts of interest, the Board has included both
matters as permanent items on the agenda at
Board meetings. Any independence or conflict of
interest issues arising during the relevant period
must be disclosed to the Chairman prior to each
Board meeting. The disclosure is recorded in the
Register of Directors’ Interests and in the
Board minutes.
(i) Mr Barry Thornton – Chairman and
Non-Executive Director
As indicated above, the Chairman, Mr Barry
Thornton, would not be considered an independent
director based on the definition of independence
outlined in the recommendations of the ASX
Corporate Governance Council. This is on the basis
that Mr Thornton is associated with a substantial
shareholder. In the Board’s view, Mr Thornton’s
association with a substantial shareholder in no way
prevents Mr Thornton from exercising independent
judgment in carrying out his duties as Chairman of
the Board. Mr Thornton is a long serving Chairman
and has overseen the efficient and effective
conduct of the Board’s functions since listing
in 1993.
In the event that any independence or conflict of
interest issue arises with respect to Mr Thornton’s
association with a substantial shareholder, the
Company has procedures in place for the Deputy
Chairman, Mr Jim Kennedy to assume the role as
acting Chairman of the Board.
(ii) Mr Geoff McGrath – Non-Executive Director
At the Annual General Meeting on 28 October 2004
shareholders approved the re-election of Mr Geoff
McGrath as director. As disclosed in the 2003/04
Annual Report, Mr McGrath was the former
Managing Director of the Company and accordingly,
does not meet the definition of an independent
director as outlined in the recommendations of the
ASX Corporate Governance Council. In the Board’s
view, this in no way impacts on Mr McGrath’s
effectiveness and performance as a director, nor
does it affect Mr McGrath’s ability to exercise
independent judgment in carrying out his duties as
a Director.
(iii) Director Tenure
The current Non-Executive Board members have
been in office for many years, as disclosed on
page 18 of the Annual Report (excluding Mr Geoff
McGrath and Mr Bill Bartlett who were appointed in
the 2003/04 and 2006/07 years respectively). The
Board does not consider that the independence
of a director can be assessed by reference to an
arbitrary and set period of time. The Board has
overseen the growth and development of the
Company since listing and in the Board’s view
the Company derives benefits from having long
serving directors with a detailed knowledge of
the Company’s operations. The Board considers
this a significant factor in their effectiveness and
performance in their roles as directors of
the Company.
The Board has developed succession plans for
the future retirement of individual directors. In
formulating the succession plans, the Board
recognises the importance of maintaining corporate
memory and ensuring the appropriate balance of
skills required to maintain an efficient and
effective Board.
In accordance with the succession plans, Mr Bill
Bartlett was appointed Non-Executive Director of
GWA International Limited on 21 February 2007.
Mr Bartlett is a Fellow of the Institute of Chartered
Accountants and is an experienced company
director, and has been appointed a member of the
Audit Committee.
5. CONFLICTS OF INTEREST
The directors are required to disclose to the
Board any relationships from which a conflict
of interest might arise. A director who has an
actual or potential conflict of interest or a material
personal interest in a matter is required to absent
himself from any meeting of the Board or Board
Committee, whenever the matter is considered. In
addition, the director does not receive any Board
papers or other documents in which there is a
reference to the matter.
This process is applied to business and trading
relationships, dealings with the directors, dealings
with companies with common directors and
dealings with any significant shareholders of
the Company.
23
The materiality thresholds used for the
determination of independence and issues of
conflict of interest has been considered from the
point-of-view of the Company and Directors. For
the Company, a relationship which accounts for 5%
or more of its revenue is considered material. For
a director, a relationship which accounts for 5% or
more of the total income of a director is considered
material. Directors’ fees are not subject to this test.
6. ACCESS TO INDEPENDENT ADVICE
Directors and the Board Committees have the right
in connection with their duties and responsibilities
to seek independent advice at the Company’s
expense. Prior written approval of the Chairman is
required, but this will not be unreasonably withheld.
Where appropriate, directors share such advice
with the other directors.
7. BOARD COMMITTEES
The Board has a number of standing Board
Committees to assist in carrying out its duties and
responsibilities as outlined in the Board charter.
All members of Board Committees are
Non-Executive Directors.
The standing Board Committees are:
(i) Audit Committee
The Audit Committee consists of the following
Non-Executive Directors:
•
•
•
•
J J Kennedy (Chairman)
AO CBE DUniv (QUT)
FCA FCPA
M D E Kriewaldt
BA LLB FAICD
B Thornton
KSJ FCA FAICD FAIM FCIS
W J Bartlett
FCA, CPA, FCMA, CA (SA)
The Audit Committee meets as required and
on several occasions throughout the year. For
attendance details of the Audit Committee, refer to
page 37 of the Annual Report.
The composition of the Audit Committee is based
on the following principles:
•
•
•
The Audit Committee should consist of
Non-Executive Directors only
The Audit Committee should maintain a majority
of Independent Directors
The Chairperson must be independent, and not
Chairperson of the Board
•
•
The Audit Committee should consist of at least
three members
The Audit Committee should include members
who are financially literate with at least one
member who has financial expertise
The Audit Committee was established in 1993
and is governed by a charter which outlines the
Committee’s role and responsibilities, composition,
structure and membership requirements. The
charter is regularly reviewed to ensure it remains
consistent with the Board’s objectives and
responsibilities. The Audit Committee charter has
been posted on the Company’s website in the
Corporate Governance section.
The External Auditor, Managing Director, Chief
Financial Officer, Company Secretary, Group
Commercial Manager and other Company
executives (as required) attend Audit Committee
meetings, by invitation, to present the relevant
statutory information, Financial Statements, reports,
and to answer the questions of the Audit Committee
members. At the Audit Committee meetings to
consider the half and full year financial results,
the Audit Committee members will meet with the
External Auditor without management present.
The main responsibilities of the Audit Committee
include:
•
•
•
•
•
•
•
•
•
Review of financial statements and external
financial reporting
Assess the management processes supporting
external reporting
Assess whether the external reporting is
adequate to meet the information needs for
shareholders
Recommendations on the appointment and
removal of the External Auditor
Review and monitor the performance and
independence of the external audit
Review of tax planning and tax compliance
systems and processes
Review and monitor risk management and
internal compliance and control systems
Assess the performance and objectivity of the
internal audit function
Reporting to the Board on the Committee’s role
and responsibilities covering all the functions in
its charter
24
GWA INTERNATIONAL LIMITED 2007 ANNUAL REPORT
The Company Secretary prepares the draft minutes
for each Audit Committee meeting, which are
tabled at the next Audit Committee meeting for
review and approval. The draft minutes are also
included in the Board papers of the next Board
meeting following the Audit Committee meeting.
the Board’s objectives and responsibilities. The
Nomination Committee charter has been posted
on the Company’s website in the Corporate
Governance section.
The main responsibilities of the Committee include:
Certification of Financial Reports
The Managing Director and Chief Financial Officer
state in writing to the Board each reporting period
that in their opinion the Company’s financial reports
present a true and fair view of the Company’s
financial position and performance, and are in
accordance with relevant Accounting Standards.
The statements from the Managing Director and
Chief Financial Officer are based on a formal sign-
off framework established throughout the Company
and reviewed by the Audit Committee as part of the
financial reporting process.
(ii) Nomination Committee
The Nomination Committee consists of the following
Non-Executive Directors:
•
•
•
B Thornton (Chairman)
KSJ FCA FAICD FAIM FCIS
J J Kennedy
AO CBE DUniv (QUT) FCA FCPA
M D E Kriewaldt
BA LLB FAICD
The Nomination Committee meets as required
and on several occasions throughout the year. For
attendance details of the Nomination Committee,
refer to page 37 of the Annual Report.
The composition of the Nomination Committee is
based on the following principles:
•
•
•
•
The Nomination Committee should consist of
Non-Executive Directors only
The Nomination Committee should maintain a
majority of Independent Directors
The Nomination Committee should consist of a
minimum of three members
The Chairperson should be the Chairperson of
the Board or another Non-Executive Director
The Nomination Committee operates under a
charter that details the Committee’s role and
responsibilities, composition, structure and
membership requirements. The charter is regularly
reviewed to ensure it remains consistent with
•
Assessment of the necessary and desirable
competencies of Board members
•
Review of the Board succession plans
•
•
•
•
Evaluation of the performance and contributions
of Board members
Recommendations for the appointment and
removal of Directors
Review of the remuneration framework for the
Non-Executive Directors
Reporting to the Board on the Committee’s role
and responsibilities covering all the functions in
its charter
In performing its responsibilities, the Nomination
Committee receives appropriate advice from
external consultants and other advisers as required.
The Company Secretary prepares the draft minutes
for each Nomination Committee meeting, which
are tabled at the next Nomination Committee
meeting for review and approval. The draft minutes
are also included in the Board papers of the next
Board meeting following the Nomination Committee
meeting.
Selection and Appointment of Directors
The Nomination Committee is responsible for the
selection and appointment of directors. In the
circumstances where there is a need to appoint a
director, whether due to the retirement of a director,
growth of the Company, or changed circumstances
of the Company, certain procedures will be
followed, including the following:
•
•
Determination of the skills and experience
appropriate for an appointee, having regard to
those of the existing directors and other likely
changes to the Board
Upon identifying a potential appointee,
consider the competency and qualifications,
independence, other directorships, time
availability, and the effect that their appointment
would have on the overall balance of the
composition of the Board
•
The Board members consent to the
proposed appointee
25
Induction Program
The Nomination Committee is responsible for
ensuring that an effective induction program for
new directors is in place, and regularly reviewed
to ensure its effectiveness. The Board has
developed a comprehensive induction program
for new directors to allow the new appointees to
participate fully and actively in Board decision
making. The Board views the induction program
as critical in enabling the new directors to gain an
understanding of the Company and the markets in
which it operates.
A similar induction program is also available for key
executives.
Performance Evaluation
On an annual basis, the Nomination Committee
conducts a formal evaluation of the performance
of Board members to determine whether the
Board and Committees are functioning effectively
by reference to current good practice. The
performance evaluation is conducted by the
Chairman of the Board through interviews with
individual Board members, the results of which are
reported to the Board.
(iii) Remuneration Committee
The Remuneration Committee consists of the
following Non-Executive Directors:
•
G J McGrath (Chairman)
MIIE
•
M D E Kriewaldt
BA LLB FAICD
•
D R Barry
FAIM
The Remuneration Committee meets as required
and on several occasions throughout the year. For
attendance details of the Remuneration Committee,
refer to page 37 of the Annual Report.
The composition of the Remuneration Committee is
based on the following principles:
The Remuneration Committee should consist of
Non-Executive Directors only
The Remuneration Committee should maintain a
majority of Independent Directors
The Remuneration Committee should consist of
a minimum of three members
•
•
•
•
The Remuneration Committee operates under
a charter that details the Committee’s role and
responsibilities, composition, structure and
membership requirements. The charter is regularly
reviewed to ensure it remains consistent with
the Board’s objectives and responsibilities. The
Remuneration Committee Charter has been
posted on the Company’s website in the Corporate
Governance section.
The main responsibilities of the Committee include:
•
•
•
•
•
Review of the Company’s remuneration and
incentive policies
Review of executive and senior management
remuneration packages
Review of the Company’s recruitment, retention
and termination policies and procedures
Review of the Company’s superannuation
arrangements
Reporting to the Board on the Committee’s role
and responsibilities covering all the functions in
its charter
In performing its responsibilities, the Remuneration
Committee receives advice from external
remuneration consultants and other advisers
as required.
The Company Secretary prepares the draft minutes
for each Remuneration Committee meeting, which
are tabled at the next Remuneration Committee
meeting for review and approval. The draft minutes
are also included in the Board papers of the
next Board meeting following the Remuneration
Committee meeting.
8. CODE OF CONDUCT
The Company conducts its business with the
highest standards of personal and corporate
integrity. To assist employees in achieving
this objective, the Company has developed a
comprehensive Code of Conduct which guides the
behaviour of directors, officers and employees and
demonstrates the commitment of the Company
to ethical practices. The Code of Conduct is
incorporated as part of new employees’ induction
training and an acceptance form is signed by new
employees acknowledging their understanding and
on-going compliance.
The Chairperson of the Remuneration
Committee should be a Non-Executive Director
The Code of Conduct states the values and policies
of the Company and complements the Company’s
26
GWA INTERNATIONAL LIMITED 2007 ANNUAL REPORT
risk management and internal control practices.
The Code of Conduct is regularly reviewed and
updated to ensure that it reflects current good
practice, and to promote the ethical behaviour
of all employees. The Code of Conduct has been
posted on the Company’s website in the Corporate
Governance section. In addition, a whistleblowing
policy has been put in place to enable employees to
report unacceptable workplace behaviour.
9. SHARE TRADING POLICY
The Company has developed a share trading
policy which prohibits directors, officers and
other “potential insiders” from trading in GWA
International Limited shares during designated
periods. The designated periods are 30 June until
the release of the Company’s full year results to the
Australian Securities Exchange and 31 December
until the release of the Company’s half year results
to the Australian Securities Exchange, unless
otherwise determined by the directors.
Outside of these designated periods, there are no
trading restrictions where the directors, officers and
other “potential insiders” are not in the possession
of unpublished insider information. At all times,
if an employee possesses unpublished insider
information about the Company, that person is
prohibited from trading. In addition, employees
must not engage in any short term trading in the
Company’s shares.
As an additional restriction, the directors must
advise the Chairman prior to trading outside the
designated periods and confirm to the Chairman
that they do not possess unpublished insider
information. The policy also requires the directors
to notify the Company Secretary within three
business days after trading, to enable the Company
Secretary to lodge the required disclosures with the
Australian Securities Exchange.
10. RISK MANAGEMENT AND INTERNAL CONTROLS
The Board recognises that effective risk
management processes help ensure the business
is more likely to achieve its business objectives,
and that the Board meets its Corporate Governance
responsibilities. In meeting its responsibilities, the
Board has ensured that management has put in
place comprehensive risk management policies and
practices across the Company which addresses
each of the key elements and requirements of AS/
NZS Standard 4360: 2004 - Risk Management.
Such processes include defining the risk oversight
responsibilities of the Board and the responsibilities
of management in ensuring risks are both identified
and effectively managed. The agreed policies and
practices are made effective through the combined
activities of:
•
•
•
•
•
An Audit Committee that reports to the Board on
risk management and internal control matters
in accordance with its main responsibilities as
outlined in the Audit Committee Charter
(refer above)
An Executive Risk Committee (ERC), comprising
the senior management of the Company, which
has been established to review and monitor
the day to day risk activities of the businesses.
The ERC reports to the Audit Committee on its
activities as outlined in the ERC Charter
A Group Commercial Manager who has primary
responsibility for designing, implementing and
co-ordinating the overall risk management and
internal control practices of the Company. Whilst
reporting to the Managing Director on a day to
day basis, the Group Commercial Manager has
the authority to report directly to the Board on
any matter
A Group Risk Manager, who has specific
responsibilities in respect of employee
health and safety, business continuity and
environmental risks. The Group Risk Manager
reports to the Managing Director on
such matters
Internal audit activities, undertaken by a
combination of internal and appropriately
qualified external resources, based on a Board
approved programme of work. Such activities
link to the risk management practices of the
Company by ensuring risks are being adequately
identified and managed through the effective
and efficient operation of control procedures
The Company has implemented risk management
software across the Group for the purpose of
identifying and managing employee health and
safety, business continuity and environmental
risks. The software is a critical tool for senior
management and has enhanced the identification,
reporting and monitoring of actions in this
important area, in order to support
management’s objectives.
Risk management is embedded in the Company’s
policies and procedures which has enabled the
Company to pro-actively identify and manage all
27
types of risk within the organisation. The Board
aims to continually evaluate and re-assess the
risk management and internal control practices of
the Company to ensure current good practice is
maintained, and to preserve and create value within
the organisation.
been structured to ensure that performance is
fairlyrewarded and to attract, motivate and retain a
high quality executive team.
For details of the Company’s remuneration policies
and disclosures, refer to the Remuneration Report
on page 32 of the Annual Report.
Certification of Risk Management Controls
In conjunction with the certification of financial
reports (refer above), the Managing Director and
Chief Financial Officer state in writing to the Board
each reporting period that in their opinion:
•
•
The statement is founded on a sound system of
risk management and internal compliance and
control which implements the policies adopted
by the Board
The Company’s risk management and internal
compliance and control system is operating
efficiently and effectively in all material respects.
The statements from the Managing Director and
Chief Financial Officer are based on a formal sign-
off framework established throughout the Company
and reviewed by the Audit Committee as part of the
financial reporting process.
11. REMUNERATION POLICIES
The Board’s objective in setting the Company’s
remuneration policies is to provide maximum
stakeholder benefit from the retention of a high
quality Board and executive team. This is achieved
by remunerating directors and executives fairly
and appropriately based on relevant employment
market conditions, and the linking of the Managing
Director’s and executives emoluments to the
Company’s financial and operating performance.
The Nomination Committee is responsible for
determining the remuneration for the non-executive
directors, with the maximum aggregate amount
approved by shareholders. The directors receive
their remuneration by way of directors’ fees only
(including statutory superannuation), and are
not able to participate in the Executive Incentive
Scheme or the GWA International Employee
Share Plan.
The Remuneration Committee is responsible
for reviewing and determining the remuneration
and incentive arrangements for the executives.
The Remuneration Committee takes advice from
external remuneration consultants to assist in
determining market remuneration levels. The
remuneration and incentive arrangements have
12. EMPLOYEE SHARE PLAN
The Company has operated an Employee
Share Plan since listing in 1993 as part of the
remuneration and incentive arrangements for
executives and senior management. Full details
of the operation of the Employee Share Plan are
described in the Remuneration Report on page 32
of the Annual Report.
The Employee Share Plan does not provide for the
issue of options and no options have been issued
by the Company.
13. AUDIT AND AUDITOR INDEPENDENCE
The Board recognises the importance of a truly
independent audit firm to ensure that the audit
function delivers, for the benefit of the Board and
all other stakeholders, an unbiased confirmation
of both the Financial Statements and the state of
affairs of the Company. Consistent with the Board’s
commitment to an independent audit firm, a policy
has been prepared and approved by the Board on
the role of the External Auditor, which is designed
to ensure the independence of the external
audit function.
During each year, the Audit Committee examines
the non-audit roles performed by the audit firm
and other potential audit service providers to satisfy
itself that the auditor’s independence will not be
compromised and that alternate providers are
available, if considered desirable. Whilst the value
of the non-audit services could, in extreme cases,
compromise audit independence, more important
is to ensure that the External Auditor is not passing
an audit opinion on the non-audit work of its
own firm.
At the Annual General Meeting on 28 October
2004, shareholders approved the appointment
of KPMG as the Company’s External Auditor for
the financial year commencing 1 July 2004. This
followed a comprehensive tender process for the
external audit conducted by the Audit Committee.
KPMG replaced Ernst & Young who had been
the Company’s External Auditor since the 1995
financial year.
28
GWA INTERNATIONAL LIMITED 2007 ANNUAL REPORT
During the year, KPMG provided an Auditor
Independence Declaration to the Board (refer
page 37 of the Annual Report) that, to the best of
their knowledge and belief, there have been no
contraventions of:
•
•
The auditor independence requirements of the
Corporations Act 2001 in relation to the audit
Any applicable code of professional conduct in
relation to the audit.
In considering this declaration, the Board were
satisfied with the continuing independence of the
audit function.
For details of the non-audit roles performed by
KPMG during the year, please refer to Note 6 of the
Financial Statements.
Rotation of External Auditor
KPMG has advised the Company that their policy
of audit partner rotation requires a change in the
lead engagement partner and review partner after a
period of five years.
14. SHAREHOLDER COMMUNICATIONS
The Company is committed to ensuring
shareholders and the financial markets are
provided with full, open and timely information
about its activities. This is achieved by
the following:
•
•
Complying with the continuous disclosure
obligations contained in the ASX Listing Rules
and the Corporations Act 2001. The Company
has for many years included continuous
disclosure as a permanent item on the agenda
for Board meetings. The Board has approved
a Continuous Disclosure Policy to ensure
the Company complies with the continuous
disclosure requirements, and to ensure
accountability at the executive and senior
management level for that compliance
Ensuring that all shareholder communications
(including Annual Report, Half Year Report
and Notice of Annual General Meeting) satisfy
relevant statutory requirements and the
guidelines of the ASX Corporate Governance
Council and other professional bodies. The
Company is committed to producing shareholder
communications in plain English with full and
open disclosure about the Company’s policies
and procedures, operations and performance
•
•
•
•
•
Ensuring that all shareholders have the
opportunity to receive externally available
information issued by the Company. The
Company has a corporate website at
www.gwail.com.au for the purpose of enhancing
communication with shareholders and
other parties. All Company announcements
and information released to the market are
located on the website and may be accessed
by shareholders. There is also a Corporate
Governance section on the website which
outlines the practices of the Company and other
Company information
The Board is committed to the continued
development and enhancement of electronic
communications to shareholders. Shareholders
are able to register with its Share Registry to
receive Company communications electronically,
although not all Company communications
are made available electronically. Electronic
communications is a developing area for all
publicly listed companies and the Company
will continue to monitor what is happening in
the market place, particularly regarding cost
savings, take-up rates and service features
Pursuant to new legislation recently passed
by the Federal Government, the Company has
communicated to shareholders that Annual
Reports will no longer be mailed to shareholders,
unless specifically requested. Annual Reports
are made available to shareholders on the
Company’s website at www.gwail.com.au in
an easily accessible and user friendly format.
Shareholders are mailed the Notice of Annual
General Meeting and Proxy Form, which include
details on accessing the online Annual Report
The Company encourages shareholders to
attend the Company’s Annual General Meeting
to canvass the relevant issues of interest. If
shareholders are unable to attend the Annual
General Meeting personally, they are encouraged
to participate through the appointment of a
proxy or proxies. The Company endeavours to
set the timing and the location of the Annual
General Meeting so that it is convenient for
shareholders generally
The attendance at the Annual General Meeting
by the External Auditor to answer questions from
shareholders about the conduct of the audit and
the preparation and content of the Independent
Audit Report. Shareholders attending the Annual
General Meeting are made aware they can ask
questions of the External Auditor concerning the
conduct of the audit.
29
DIRECTORS’ REPORT
as at 30 June 2007
Your Directors present their report on the
consolidated entity of GWA International
Limited and the entities it controlled (“the
Company”) during the financial year ended
30 June 2007.
DIRECTORS
The following persons were directors of the
Company during the financial year and up to the
date of this report. Directors were in office this
entire period unless otherwise stated.
B Thornton
Chairman and Non-Executive Director
J J Kennedy
Deputy Chairman and Non-Executive Director
P C Crowley
Managing Director
D R Barry
Non-Executive Director
R M Anderson
Non-Executive Director
M D E Kriewaldt
Non-Executive Director
G J McGrath
Non-Executive Director
W J Bartlett
Non-Executive Director
Mr W J Bartlett was appointed Non-Executive
Director of GWA International Limited on 21
February 2007.
Details of the Directors’ qualifications, experience
and special responsibilities are located on page 18
of the Annual Report.
Details of the directorships of other listed
companies held by each director in the three years
prior to the end of the 2006/07 financial year, and
the period for which each directorship has been
held, are listed on page 18 of the Annual Report.
Company Secretary
Mr R J Thornton was appointed Company
Secretary of GWA International Limited on 4 July
2003. Details of Mr Thornton’s qualifications and
experience are located on page 19 of the
Annual Report.
DIRECTORS’ INTEREST
At the date of this report, the relevant interest
(as defined in the Corporations Act 2001) of the
directors in shares of the Company were:
Director
Ordinary Shares
Interest
B Thornton
J J Kennedy
Nil
Note 4
1,000
Notes 1 and 4
D R Barry
3,398,961
Notes 2 and 4
R M Anderson
8,198,000
Notes 2 and 4
M D E Kriewaldt
100,000
Notes 2 and 4
P C Crowley
500,000
Notes 3 and 4
G J McGrath
300,000
Notes 1 and 4
W J Bartlett
Nil
Note 4
Note 1: Beneficially and legally owned.
Note 2: The relevant interest is the power to exercise control over
the disposal of the shares and the power to control the
right to vote.
Note 3: In accordance with a resolution of shareholders at the
Annual General Meeting on 30 October 2003, Mr Crowley
was issued 500,000 shares on 14 November 2003
under the terms and conditions of the GWA International
Employee Share Plan.
Note 4: Note 30 to the Financial Statements sets out the
number of shares held directly, indirectly or beneficially
by directors or their related entities at balance date as
prescribed in Accounting Standard AASB 124, this being
57,221,623 shares (last year 57,317,081 shares).
CORPORATE STRUCTURE
GWA International Limited is a Company limited
by shares that is incorporated and domiciled in
Australia. GWA International Limited has prepared
a Consolidated Financial Report incorporating the
entities that it controlled during the financial year
ended 30 June 2007, which are outlined in Note
28 of the Financial Statements.
PRINCIPAL ACTIVITIES
The principal activities during the year within the
consolidated entity were the research, design,
manufacturing, importing, and marketing of
household consumer products as well as the
distribution of these various products through a
range of distribution channels in Australia
and overseas.
There have been no significant changes in the
nature of these activities during the year.
30
GWA INTERNATIONAL LIMITED 2007 ANNUAL REPORT
EMPLOYEES
REVIEW OF OPERATIONS AND STATE OF AFFAIRS
The Company employed 1,957 employees as at 30
June 2007 (last year 2,226 employees).
The Company recognises the productivity benefits
to be gained from investing in its employees to
improve motivation and individual skills. The
Company remains committed to ensuring that staff
are provided access to appropriate training and
development programs.
All companies in the consolidated entity are active
equal opportunity employers.
A review of the operations of the Company and the
results of those operations for the financial year
ended 30 June 2007 is provided in the Managing
Director’s Review of Operations which is located on
page 5 of the Annual Report.
In the opinion of the directors, there were no
significant changes in the state of affairs of the
Company during the financial year, other than that
referred to in the Financial Statements or
notes thereto.
SEGMENT SALES AND PROFIT
The segment sales and profit of the Company for
the financial year ended 30 June 2007 is
as follows:
Business Segment
Segment Sales
Segment Profit
2006/07
$’000
555,633
56,973
33,063
645,669
Buildings, fixtures and fittings
Commercial furniture
Other
Total
Restructuring expenses
Profit before interest and tax
EARNINGS PER SHARE
Basic earning per share
Basic earnings per share (prior to restructuring expenses)
DIVIDENDS
2005/06
$’000
2006/07
$’000
523,100
110,521
56,738
40,151
619,989
2005/06
$’000
102,858
4,655
3,619
(15,386)
(12,316)
98,754
(7,279)
91,475
95,197
(5,944)
89,253
2006/07
2005/06
cents
cents
20.2
22.0
20.4
21.6
Dividends paid or declared by the Company to shareholders since the end of the previous financial
year were:
Declared and paid during 2006/07 financial year
Dividends
Cents per share
Total amount
Franked/unfranked
Date of payment
Final 2005/06 ordinary
Special 2005/06
Interim 2006/07 ordinary
Special 2006/07
$’000
22,264
9,741
27,830
4,175
64,010
8.0
3.5
10.0
1.5
23.0
Franked
Franked
Franked
Franked
3 Oct 2006
3 Oct 2006
2 April 2007
2 April 2007
Franked dividends declared and paid during the year were franked at the corporate tax rate of 30%
31
Declared after end of the 2006/07 financial year
Dividends
Cents per share
Total amount
Franked/unfranked
Date of payment
Final 2006/07 ordinary
Special 2006/07
$’000
22,394
6,998
29,392
8.0
2.5
10.5
Franked
Franked
2 Oct 2007
2 Oct 2007
After the balance sheet date the above dividends
were proposed by the directors. The dividends have
not been provided and there are no income
tax consequences.
The financial effect of these dividends has not been
brought to account in the Financial Statements
for the year ended 30 June 2007 and will be
recognised in subsequent Financial Reports.
SIGNIFICANT EVENTS AFTER BALANCE DATE
On 21 August 2007, the directors of GWA
International Limited declared a final ordinary
dividend of 8.0 cents per share and a special
dividend of 2.5 cents per share in respect of the
financial year ended 30 June 2007. The dividends
will be fully franked at the 30% corporate tax rate.
The total amount of the dividend is $29.392 million
(last year $32.005 million). In accordance with
Accounting Standards, the dividends have not been
provided for in the Financial Statements for the year
ended 30 June 2007.
There has not been any other matter or
circumstance, other than that referred to in the
Financial Statements or notes thereto, that has
arisen since the end of the financial year, that has
significantly affected, or may significantly affect,
the operations of the Company, the results of those
operations, or the state of affairs of the Company.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS
Likely developments and expected results of the
operations of the Company are provided in the
Managing Director’s Review of Operations which is
located on page 05 of the Annual Report.
In the next financial year, the Company will
continue to pursue strategies for increasing the
profitability and market share of the businesses.
There will be further investment in research and
new product development to ensure that the
Company generates the best possible returns from
the businesses.
Further information on likely developments and
expected results of the operations of the Company
have not been included in this report because
the directors believe it would be likely to result in
unreasonable prejudice to the Company.
ENVIRONMENTAL REGULATION AND PERFORMANCE
Environmental Licences
The Company holds licences issued by
Environmental Protection Authorities and Water
Authorities that specify limits for discharges to the
environment, which arise from the operations of
entities that it controls. These licences regulate
the management of discharge to air, storm water
run-off, removal and transport of waste associated
with the manufacturing operations in Australia.
Where appropriate, an independent review of the
Company’s compliance with licence conditions is
made by external advisors.
Designated entities comply with the Australian
National Pollutant Inventory by reporting on
emissions annually.
The Company in conjunction with external advisors
monitors storage and treatment of hazardous
materials within particular operations. Prior to
any discharge to sewers, effluent is treated and
monitored to ensure strict observance with licence
conditions.
The directors are not aware of any breaches of the
Company’s licence conditions during the financial
year ended 30 June 2007.
Environmental Remediation
During the year, the Company investigated and
reported two environmental contamination issues
at factory sites at Eagle Farm, Queensland and
Revesby, NSW. The Eagle Farm site is an owned
site and is currently occupied by Rover Mowers
Limited and the Revesby site is a leased site and
is currently occupied by McIlwraith Davey Pty Ltd.
Both entities are wholly owned subsidiaries of GWA
International Limited.
32
GWA INTERNATIONAL LIMITED 2007 ANNUAL REPORT
In conjunction with the Company’s external
environmental consultant, investigations and testing
at both the sites is continuing, the results of which
will form the basis of any remediation plans for the
sites. For further information in relation to these
environmental contamination issues, please refer to
Note 26 of the Financial Statements.
INDEMNIFICATION AND INSURANCE OF DIRECTORS
AND EXECUTIVES
Indemnification
The Company’s Constitution provides that, to the
extent permitted by the law, every current (and
former) director or secretary of the Company
shall be indemnified out of the assets of the
Company against all costs, expenses and liabilities
which results directly or indirectly from facts or
circumstances relating to the person serving
(or having served) in their capacity as director
or secretary of the Company, but excluding any
liability arising out of conduct involving a lack of
good faith or conduct known to the person to be
wrongful or any liability to the Company or related
body corporate.
Insurance Premiums
The Company has paid premiums in respect of
insurance contracts which provide cover against
certain liabilities of every current (and former)
director and officer of the Company and its
controlled entities. The contracts of insurance
prohibit disclosure of the total amount of the
premiums paid, or the nature of the liabilities
covered under the policies.
Premiums were paid in respect of every current
(and former) director and officer of the Company
and controlled entities, including the directors
named on page 18 of the Annual Report, the
Chief Financial Officer, the Company Secretary
and all persons concerned or taking part in the
management of the Company and its
controlled entities.
REMUNERATION REPORT
This report outlines the remuneration arrangements
in place for the directors and executives of
the Company.
Remuneration Objectives
The performance of the Company depends
upon the quality of its directors and executives.
To maximise the performance of the Company’s
businesses, the Company must attract, motivate
and retain a highly skilled director and executive
team. This is achieved through a remuneration and
incentive framework which has been put in place
by the Board, and is guided by the
following objectives:
•
•
•
•
•
Provide fair and competitive rewards to attract
high quality executives
Linking of executive reward to improvement in
Company performance
Significant proportion of executive remuneration
is “at risk”, dependent upon meeting pre-
determined performance benchmarks
The establishment of challenging and achievable
performance hurdles in relation to variable
executive remuneration
An employee share plan which rewards
performance and represents a long term
financial commitment to employment with
the Company
Remuneration Structure
The remuneration structure for the non-executive
directors is separate and distinct from the
remuneration structure for the executives.
Non-Executive Directors’ Remuneration Policy
The Nomination Committee is responsible for
determining the remuneration arrangements for the
non-executive directors, with the annual maximum
aggregate amount approved by shareholders. At
the Annual General Meeting on 28 October 2004,
shareholders approved an annual maximum
aggregate amount of $1 million (excluding
statutory superannuation).
The non-executive directors are remunerated by
way of directors’ fees only (including statutory
superannuation) and are not able to participate
in the Executive Incentive Scheme or the GWA
International Employee Share Plan (refer below).
An additional fee is also paid for each Board
Committee on which a director sits. The payment
of additional fees for serving on a Committee
recognises the additional time commitment
required by directors who serve on one or
more Committees. The Company permits directors
to salary sacrifice directors’ fees
into superannuation.
In setting the level of non-executive Directors fees’
and the manner in which it is to be apportioned
amongst the directors, the Nomination Committee
takes advice from external remuneration
consultants to determine market remuneration
levels, with the objective of ensuring that the
33
levels are market based and fairly represent
the responsibilities and time spent by the Non-
Executive Directors on Company matters.
Following shareholder approval of the termination
of the Directors’ Retirement Scheme for Non-
Executive Directors at the Annual General Meeting
on 30 October 2003, retirement benefits are not
available for any new non-executive directors of the
Company, other than statutory superannuation.
Fixed Remuneration
The level of fixed remuneration is set so as to
provide a base level of remuneration which is both
appropriate to the position and is competitive in the
market. Fixed remuneration is reviewed annually by
the Remuneration Committee based on advice from
external remuneration consultants for determining
market remuneration levels, as well as having
regard to Company, divisional and
individual performance.
At the Annual General Meeting on 28 October
2004, shareholders approved the payment of the
accrued benefits to the non-executive directors
under the former Directors’ Retirement Scheme,
when each director requests that payment
be made.
For details of the emoluments paid to the non-
executive directors for the year ended 30 June
2007, refer to the Remuneration Tables on
page 35 of the Annual Report.
Executives’ Remuneration Policy
The Remuneration Committee is responsible
for determining and reviewing the remuneration
arrangements for the executives. The Remuneration
Committee takes advice from external remuneration
consultants to ensure the appropriateness of the
nature and amount of emoluments of such officers,
with the overall objective of ensuring maximum
stakeholder benefits from the retention of a high
quality executive team.
The executives’ remuneration consists of the
following key elements:
•
•
Fixed Remuneration
Variable Remuneration
– Short Term Incentive
– Medium Term Incentive
•
Employee Share Plan
The fixed remuneration component includes base
salary, statutory superannuation and non-monetary
benefits including medical benefits membership,
life and disability insurance and the provision
of motor vehicles. The variable remuneration
component includes a short term incentive and
medium term incentive under the Executive
Incentive Scheme. As a further component of
remuneration, employees of the Company may
be invited to participate in the GWA International
Employee Share Plan.
The fixed remuneration of the five most highly
remunerated executives is detailed in the
Remuneration Tables on page 35 of the
Annual Report.
Variable Remuneration
To assist in achieving the objective of retaining a
high quality executive team, the Remuneration
Committee links the nature and amount of the
executive emoluments to the Company’s financial
and operating performance. Executives have
the opportunity to qualify for participation in the
Executive Incentive Scheme. Under the scheme
there are two incentives, one based on yearly
performance and one based on discrete three year
periods. All performance plan payments are subject
to maximum amounts.
Executive Incentive Scheme
The Executive Incentive Scheme came into effect
on 1 July 2001 and its participants include the
members of the divisional and corporate executive.
There are two incentives including an Operating
Performance Incentive and a Strategic Growth
Incentive, with the objective of maximising short
term operating performance and long term
strategic growth.
The Operating Performance Incentive operates
from divisional operating profit targets for divisional
executives, and group earnings before interest
and tax targets for corporate executives. Where
the yearly profit targets are achieved, participating
executives receive an incentive payment, subject to
a cap of 30% to 35% of their base salary.
The yearly profit targets are set by the
Remuneration Committee at the beginning of the
year having regard to the major external factors
which are expected to impact each division
including forecast economic conditions, expected
benefits from new products, capital expenditure
and other relevant factors. The Remuneration
Committee ensures that the profit targets are
challenging yet achievable, and will assist in
34
GWA INTERNATIONAL LIMITED 2007 ANNUAL REPORT
focusing divisional and corporate executives
on maximising operating performance of the
Company’s businesses.
The Strategic Growth Incentive rewards progressive
growth in underlying divisional profitability and
earnings per share over time. The incentive is
calculated based on divisional profit targets for
divisional executives, and earnings per share
targets for corporate executives, within discrete
three year periods. Where the three year profit
and earnings per share targets are achieved,
participating executives receive an incentive
payment, subject to a cap of 20% to 30% of
their base salary.
The three year profit and earnings per share targets
are set by the Remuneration Committee at the
beginning of the three year period having regard
to current performance and forecast external
factors expected to impact each division, and are
also subject to minimum return on investment
achievement. The Remuneration Committee
ensures that the three year profit and earnings
per share targets are challenging yet achievable,
and will assist in focusing divisional and corporate
executives on maximising growth in profitability and
return on investment.
The total combined payments under the
abovementioned two incentives are capped at 50%
to 65% of salary for each participating executive.
Payments are delivered by way of cash bonus, and
are paid when the Company’s annual Financial
Statements are completed.
Employee Share Plan
As a further component of remuneration,
employees of the Company may be invited to
participate in the GWA International Employee
Share Plan which commenced on the listing of
the Company in 1993. Under the plan, employees
are provided with a non-interest bearing loan from
the Company to acquire shares in the Company at
market value. The loan is repaid through dividends,
or in full upon an employee ceasing employment
with the Company. The employee bears the risk of
share price movements below the issue price.
In accordance with the rules of the plan, the
total number of employee shares on issue may
not exceed 5% of the total Company shares on
issue. At 30 June 2007 there are currently 3.44
million shares issued under the GWA International
Employee Share Plan, which have an outstanding
loan balance of $9.6 million. The plan does not
provide for the issue of options and no options have
been issued by the Company.
There are three events which trigger employee
share issues, all of which must be approved by the
Remuneration Committee, including:
•
•
•
Appointment of new divisional and corporate
executives as recommended by the Managing
Director
Achievement of three year targets by divisional
and corporate executives pursuant to the
Executive Incentive Scheme (refer above)
The periodic issue to employees who merit
additional recognition of their performance
and are integral to the future success of the
Company, as recommended by the
Managing Director
The GWA International Employee Share Plan is an
effective incentive in encouraging and rewarding
sustained higher performance from executives and
senior management, and represents a long term
financial commitment to their employment with
the Company.
Shareholder Wealth
The table on page 35 is a summary of key
shareholder wealth statistics for the Company over
the last five years.
EBIT has been flat since the year ended 30
June 2004 due to the softer domestic dwelling
construction and renovation market, and rising
business input costs. Despite the difficult market
conditions, the Company’s core building fixtures
and fittings businesses have performed strongly
enabling the Company to maintain its high dividend
pay-out ratio, and continue its track record in
paying fully franked dividends to shareholders
including special dividends. The Company has
realised opportunities to restructure the businesses
aimed at reducing costs and creating further
competitive advantage. The restructuring activities
will place the Company in a strong position when
the market recovers and will underpin profitability
growth into the future.
The remuneration and incentive framework, which
has been put in place by the Board, has ensured
that executives are focused on both maximising
short term operating performance and long term
strategic growth. This has contributed to the
Company generating the shareholder returns as set
35
out in the below table, including a total of $1.045
in fully franked dividends paid to shareholders in
the last five financial years, which includes 17.0
cents in special dividends.
The Board will continue to review and monitor
the remuneration and incentive framework to
ensure that performance is fairly rewarded and
encouraged, and to attract, motivate and retain a
high quality executive team.
Termination of Employment
The specified executives on page 36 of the Annual
Report are on open-ended contracts, except for
the Executive Director, Mr Peter Crowley, whose
employment contract specifies an initial term of
twelve months with subsequent rolling terms of
twelve months.
The employment contract for Mr Crowley provides
that if either the Company or Mr Crowley wishes
to terminate employment for any reason, three
months notice of termination is required, or
payment in lieu, based upon current salary levels.
On termination by the Company, Mr Crowley will be
entitled to receive payment of twelve months salary.
For the other specified executives, the Company
is legally required to give reasonable notice of
termination, or payment in lieu, based upon
current salary levels.
Under the Executive Incentive Scheme, no
incentive is payable in the event of termination of
employment during the incentive period.
Any loan to an executive under the GWA
International Employee Share Plan, must be repaid
in full upon the cessation of employment with
the Company.
SHAREHOLDER WEALTH
Financial Year
30 June 2003
30 June 2004
30 June 2005
30 June 2006
30 June 2007
EBIT(3)
($m)
92.4
101.0
103.4
95.2
98.8
EPS(3)
(cents)
19.8
22.3
23.0
21.6
22.0
DPS(2)
Share Price
(cents)
18.0
20.5
22.5
21.5
22.0
($)
2.70
2.95
2.92
3.11
4.42
Notes: (1) EBIT for financial years 2003 and 2004 has been calculated in accordance with previous Australian GAAP. EBIT for financial
years 2005 to 2007 has been calculated in accordance with Australian equivalents to IFRS (AIFRS)
(2) Total dividends per share including special dividends
(3) EBIT and EPS is prior to restructuring costs
REMUNERATION TABLES
Table 1: Emoluments of the Directors of GWA International Limited
Directors’
Fees
Incentives
Other
Benefits
Superannuation Termination
Payments
Total
Proportion
Emoluments
Performance
Related
$
$
$
$
$
$
%
Non-Executive
Directors
B Thornton
177,873
J J Kennedy
144,024
D R Barry
90,948
R M Anderson
85,800
M D E Kriewaldt
102,960
G J McGrath
22,737
W J Bartlett
-
-
-
-
-
-
-
-
250
250
250
250
250
250
250
102,693
-
280,816
-
8,185
7,722
9,266
76,396
36,434
-
-
-
-
-
-
144,274
99,383
93,772
112,476
99,383
36,684
-
-
-
-
-
-
-
36
GWA INTERNATIONAL LIMITED 2007 ANNUAL REPORT
Table 1: Emoluments of the Directors of GWA International Limited (Continued)
Incentives
Salary
and Leave 1 Year 3 Year
Plan
$
Entitlements
$
Plan
$
Other
Benefits
$
Super- Termination
Payments
$
annuation
$
Proportion of
Emoluments
Performance
Related
%
Total
$
Executive Director
P Crowley
1,057,228
-
- 164,730
36,000
- 1,257,958
-
Table 2: Emoluments of the Five Most Highly Paid Executives of the Company and the Consolidated Entity
Incentives
Salary
and Leave 1 Year 3 Year
Plan
$
Entitlements
$
Plan
$
Other
Benefits
$
Super- Termination
Payments
$
annuation
$
Proportion of
Emoluments
Performance
Related
%
Total
$
Executives
S Wright
Group Operations
Manager
E Harrison
Chief Financial
Officer
R Watkins
General Manager,
Rover
G Oliver
General Manager,
Gainsborough
L Patterson
General Manager,
Dux
417,957
-
-
54,542
123,420
-
595,919
365,707
-
-
87,605
105,000
-
558,312
161,844
-
-
47,235
70,000
250,000
529,079
-
-
-
194,603
84,810
-
49,119
147,695
-
476,227
17.8
285,269
-
-
79,903
28,163
-
393,335
-
Notes: Incentives and Vesting
The incentive for Mr G Oliver of $84,810 is based on his entitlement under the yearly Executive Incentive Scheme, and is fully
vested in the 2006/07 year. None of the other executives are entitled to any incentive payments under the Executive Incentive
Scheme for the 2006/07 year.
Other Benefits
Other benefits for the Executive Director and executives include the provision of fringe benefits including motor vehicles, loans
under the Employee Share Plan, insurances and applicable fringe benefits tax.
Termination Payments
Mr R Watkins received a payment from the Company of $250,000 on termination of employment on 14 February 2007.
DIRECTORS’ MEETING
The number of meetings of directors (including meetings of Committees of directors) held during the
financial year ended 30 June 2007 and the number of meetings attended by each director
are outlined in the table on page 37.
37
Director
Board
Committee
Committee
Audit
Remuneration
B Thornton
J J Kennedy
P C Crowley (2)
D R Barry
R M Anderson
M D E Kriewaldt
G J McGrath
W J Bartlett (1)
A
11
10
11
11
11
11
9
3
B
11
11
11
11
11
11
11
3
A
3
3
3
1
B
3
3
3
1
A
B
2
2
2
2
2
2
Nomination
Committee
A
3
3
B
3
3
3
3
Notes: A - Number of meetings attended
B - Number of meetings held during the time the director held office during the year
(1) W J Bartlett was appointed Non-Executive Director on 21 February 2007
(2) P C Crowley attends Committee meetings by invitation of the Board
As at the date of this report, the Company had an Audit
Committee, a Remuneration Committee and a Nomination
Committee of the Board of Directors. The charter for each
Committee outlines its role and responsibilities, a summary of
which is provided in the Corporate Governance Statement on
page 20 of the Annual Report.
The members of the Audit Committee are:
• Mr J J Kennedy (Chairman)
• Mr B Thornton
• Mr M D E Kriewaldt
• Mr W J Bartlett
Mr W J Bartlett was appointed a member of the Audit Committee
on 21 February 2007.
NON-AUDIT SERVICES
Details of the non-audit services provided by the
Company’s External Auditor, KPMG, during the
financial year ended 30 June 2007 are outlined
in Note 6 of the Financial Statements. Based on
advice from the Company’s Audit Committee,
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 2001. The nature and scope
of each type of non-audit service provided means
that auditor independence was not compromised.
LEAD AUDITOR’S INDEPENDENCE DECLARTION
The members of the Remuneration Committee are:
• Mr G J McGrath (Chairman)
• Mr M D E Kriewaldt
• Mr D R Barry
During the year, the Chairman of the Remuneration Committee
was rotated and Mr Geoff McGrath was appointed the new
Chairman, in replace of Mr Martin Kriewaldt who remains a
member of the Committee.
The members of the Nomination Committee are:
• Mr B Thornton (Chairman)
• Mr J J Kennedy
• Mr M D E Kriewaldt
Details of the Committee members qualifications and experience
are located on page 18 of the Annual Report.
Signed in accordance with a resolution of
the Directors.
B Thornton
Chairman
Brisbane, 21 August 2007
P C Crowley
Managing Director
Lead Auditor’s Independence Declaration under
Section 307C of the Corporations Act 2001
To the Directors of GWA International Limited:
The Lead Auditor’s Independence Declaration is set
out below and forms part of the Directors’ Report
for the financial year ended 30 June 2007.
I declare that, to the best of my knowledge and
belief, in relation to the audit for the financial year
ended 30 June 2007 there have been:
ROUNDING
The Company is of a kind referred to in Class
Order 98/100 issued by the Australian Securities
Investment Commission relating to the rounding of
amounts in the Directors’ Report.
Amounts in the Directors’ Report have been
rounded off in accordance with that Class Order to
the nearest thousand dollars, unless
otherwise stated.
(i) no contraventions of the auditor independence
requirements as set out in the Corporations Act
2001 in relation to the audit; and
(ii) no contraventions of any applicable code of
professional conduct in relation to the audit.
KPMG
21 August 2007
Mark Epper
Partner
38
GWA INTERNATIONAL LIMITED 2007 ANNUAL REPORT
CONTENTS
Income Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Statements of Recognised Income and Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Note
1
2
Significant accounting policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Segment reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
3 Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
4 Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
5 Personnel expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
6 Auditors’ remuneration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
7
Net financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
8 Restructuring expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
9
Income tax xpense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
10 Earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
11 Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
12 Trade and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
13
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
14 Current tax assets and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
15 Deferred tax assets and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
16 Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
17
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
18 Trade and other payables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
19
Interest-bearing loans and borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
20 Employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
21 Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
22 Capital and reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
23 Financial instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
24 Operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
25 Capital and other commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
26 Contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
27 Deed of cross guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
28 Consolidated entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
29 Reconciliation of cash flows from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
30 Related parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
31 Subsequent events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Directors’ Declaration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Independent Auditor’s Report to the members of GWA International Limited . . . . . . . . . . . . 82
39
GWA INTERNATIONAL LIMITED AND ITS CONTROLLED ENTITIES
INCOME STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
In thousands of AUD
CONSOLIDATED
THE COMPANY
Note
2007
2006
2007
2006
Revenue
Cost of sales
Gross profit
Other income
Distribution expenses
Administrative expenses
Restructuring expenses
Other expenses
Results from operating activities
Financial income
Financial expenses
Net financing costs
Profit before tax
Income tax expense
Profit for the year
2
645,669
619,989
(345,222)
(326,128)
300,447
293,861
–
–
–
–
–
–
3
4,998
15,797
75,000
30,734
8
4
7
7
(139,709)
(135,818)
–
(62,440)
(61,004)
(502)
(7,279)
(21,963)
(4,542)
(1,620)
–
–
–
(1)
–
–
91,475
89,253
74,498
30,733
5,718
6,096
(18,084)
(17,586)
(12,366)
(11,490)
502
–
502
27
–
27
79,109
77,763
75,000
30,760
9
(22,791)
(20,911)
–
624
56,318
56,852
75,000
31,384
Basic and diluted earnings per share (cents per share)
10
20.2
20.4
Dividends per share
Ordinary shares (cents per share)
22
23.0
20.0
The income statements are to be read in conjunction with the notes of the financial statements set out on pages 43 to 80.
40
GWA INTERNATIONAL LIMITED 2007 ANNUAL REPORT
GWA INTERNATIONAL LIMITED AND ITS CONTROLLED ENTITIES
STATEMENTS OF RECOGNISED INCOME AND EXPENSE
FOR THE YEAR ENDED 30 JUNE 2007
In thousands of AUD
Foreign exchange translation differences
Cash flow hedges:
Gains/(losses) taken to equity
Net income recognised directly in equity
Profit for the year
CONSOLIDATED
THE COMPANY
Note
2007
(1,158)
2006
688
(525)
385
(1,683)
1,073
2007
2006
–
–
–
–
–
–
56,318
56,852
75,000
31,384
Total recognised income and expense for the period
22
54,635
57,925
75,000
31,384
Effects of change in accounting policy – adjustment
on adoption of AASB 132 and 139
–
157
–
–
Other movements in equity arising from transactions with owners as owners are set out in note 22.
The statements of recognised income and expense are to be read in conjunction with the notes to the financial statements set out on
pages 43 to 80.
41
GWA INTERNATIONAL LIMITED AND ITS CONTROLLED ENTITIES
BALANCE SHEETS
AS AT 30 JUNE 2007
In thousands of AUD
Assets
Cash and cash equivalents
Trade and other receivables
Inventories
Income tax receivable
Other – prepayments
Total current assets
Receivables
Deferred tax assets
Investment in subsidiaries
Property, plant and equipment
Intangible assets
Other – prepayments
Total non–current assets
Total assets
Liabilities
Trade and other payables
Employee benefits
Income tax payable
Provisions
Total current liabilities
Interest–bearing loans and borrowings
Payables
Employee benefits
Provisions
Total non–current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained earnings
Total equity
CONSOLIDATED
THE COMPANY
Note
2007
2006
2007
2006
11
12
13
14
12
15
28
16
17
18
20
14
21
19
18
20
21
80,421
156,498
75,508
67,853
128,211
95,342
1,440
5,043
2,512
4,399
232
576
–
348
724
–
518
–
2,512
413
290,623
326,604
1,880
3,443
4,983
3,676
598,992
512,482
24,531
25,034
–
–
–
–
325,646
325,646
113,019
117,839
344,463
343,786
–
–
–
–
3,549
2,333
3,381
1,771
490,545
492,668
928,019
839,899
781,168
819,272
929,899
843,342
51,440
48,664
16,056
17,451
–
258
13,570
19,586
81,066
85,959
271,567
297,498
–
–
–
–
–
–
54
–
–
–
54
–
–
–
527,430
458,018
11,015
12,503
8,718
11,344
–
–
–
–
291,300
321,345
527,430
458,018
372,366
407,304
527,430
458,072
408,802
411,968
402,469
385,270
353,062
346,853
353,062
346,853
(2,536)
(853)
–
–
58,276
65,968
49,407
38,417
22
408,802
411,968
402,469
385,270
The balance sheets are to be read in conjunction with the notes to the financial statements set out on pages 43 to 80.
42
GWA INTERNATIONAL LIMITED 2007 ANNUAL REPORT
GWA INTERNATIONAL LIMITED AND ITS CONTROLLED ENTITIES
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2007
In thousands of AUD
Cash flows from operating activities
Cash receipts from customers
Dividends and trust distributions received
Cash paid to suppliers and employees
Cash generated from operations
Interest paid
Interest received
Income taxes paid
CONSOLIDATED
THE COMPANY
Note
2007
2006
2007
2006
714,364
683,805
–
–
–
–
75,000
13,142
(650,780)
(585,571)
(1)
(1)
63,584
98,234
74,999
13,141
(19,366)
(14,717)
5,180
5,540
–
–
–
27
(21,100)
(29,019)
(18,220)
(27,927)
Net cash from operating activities
29
28,298
60,038
56,779
(14,759)
Cash flows from investing activities
Proceeds from sale of property, plant and equipment
Acquisition of property, plant and equipment
Acquisition of intangibles
Net cash from investing activities
Cash flows from financing activities
Issue of employee shares
Proceeds from issue of shares
Repayment of employee share loans
Repayment of loans by controlled entities
Repayment of loans from controlled entities
Issue of loans to other parties
Repayment of loans by related parties
Repayment of bank bills
Dividends paid
Net cash from financing activities
–
–
–
–
–
–
1,719
46,422
(18,161)
(30,228)
(2,717)
(738)
(19,159)
15,456
–
–
–
–
(7,828)
6,208
4,387
–
–
–
510
(25,000)
–
–
(7,828)
6,208
1,792
4,387
1,792
–
–
(7)
284
–
4,750
68,621
–
–
–
–
–
–
–
–
(64,010)
(55,660)
(64,010)
(55,660)
(85,733)
(53,591)
(56,493)
14,753
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at 1 July
Effect of exchange rate fluctuations on cash held
(76,594)
21,903
156,498
134,854
517
(259)
Cash and cash equivalents at 30 June
11
80,421
156,498
286
(54)
–
232
(6)
(48)
–
(54)
The statements of cash flows are to be read in conjunction with the notes to the financial statements set out on pages 43 to 80.
43
GWA INTERNATIONAL LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Significant accounting policies
and future periods if the revision affects both current and
GWA International Limited (the ‘Company’) is a company
domiciled in Australia. The consolidated financial report of the
Company for the financial year ended 30 June 2007 comprises
the Company and its subsidiaries (together referred to as the
‘consolidated entity’).
The financial report was authorised for issue by the directors
on 21 August 2007.
(a) Statement of compliance
The financial report is a general purpose financial report which
has been prepared in accordance with Australian Accounting
Standards (‘AASBs’) adopted by the Australian Accounting
Standards Board (‘AASB’) and the Corporations Act 2001. The
consolidated entity’s financial report and the financial report
of the Company comply with International Financial Reporting
Standards (‘IFRSs’) and interpretations adopted by the
International Accounting Standard Board.
(b) Basis of preparation
The financial report is presented in Australian dollars. The
entity has elected not to early adopt any accounting standards
or amendments.
The financial report is prepared on the historical cost basis
except that derivative financial instruments are measured at
their fair value.
The Company is of a kind referred to in ASIC Class Order
98/100 dated 10 July 1998 (updated by CO 05/641 effective
28 July 2005 and CO 06/51 effective 31 January 2006) and in
accordance with that Class Order, amounts in the financial
report and Directors’ Report have been rounded off to the
nearest thousand dollars, unless otherwise stated.
The preparation of a financial report in conformity with
Australian Accounting Standards requires management to
make judgements, estimates and assumptions that affect
the application of policies and reported amounts of assets
and liabilities, income and expenses. The estimates and
associated assumptions are based on historical experience
and various other factors that are believed to be reasonable
under the circumstances, the results of which form the basis
of making the judgements about carrying values of assets and
liabilities that are not readily apparent from other sources.
future periods.
The accounting policies set out below have been applied
consistently to all periods presented in the consolidated
financial report. The accounting policies have been applied
consistently by all entities in the consolidated entity.
Accounting standards not yet effective
The AASB has issued additional standards and interpretations
that are effective for periods commencing after the date
of this financial report. The following standards have been
identified as those which are relevant to the consolidated
entity. These standards are available for early adoption at 30
June 2007, but have not yet been adopted by the
consolidated entity:
• AASB 7 Financial Instruments and Disclosures –
applicable to annual reporting periods beginning
on or after 1 January 2007. Adoption of AASB 7 will
result in additional disclosures in respect of financial
instruments.
• AASB 8 Operating Segments – and consequential
amendments to other accounting standards resulting
from this issue – applicable to annual reporting periods
beginning on or after 1 January 2009. This standard
relates to disclosure only.
The consolidated entity does not anticipate that adoption of
these standards will have a material impact on its financial
reports on initial adoption.
(c) Basis of consolidation
(i)
Subsidiaries
Subsidiaries are entities controlled by the Company. Control
exists when the Company has the power, directly or indirectly,
to govern the financial and operating policies of an entity so
as to obtain benefits from its activities. In assessing control,
potential voting rights that presently are exercisable or
convertible are taken into account. The financial statements
of subsidiaries are included in the consolidated financial
statements from the date that control commences until the
date that control ceases.
Investments in subsidiaries are carried at their cost of
acquisition in the Company’s financial statements.
Actual results may differ from these estimates.
(ii) Transactions eliminated on consolidation
The 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
Intragroup balances and any unrealised gains and losses or
income and expenses arising from intragroup transactions, are
eliminated in preparing the consolidated financial statements.
44
GWA INTERNATIONAL LIMITED 2007 ANNUAL REPORT
GWA INTERNATIONAL LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Significant accounting policies (continued)
the nature of the item being hedged (see accounting policy(f)).
(d) Foreign currency
(i) Foreign currency transactions
Transactions in foreign currencies are translated at the foreign
exchange rate ruling at the date of the transaction. Monetary
assets and liabilities denominated in foreign currencies at
the balance sheet date are translated to Australian dollars
at the foreign exchange rate ruling at that date. Foreign
The fair value of interest rate swaps is the estimated amount
that the consolidated entity would receive or pay to terminate
the swap at the balance sheet date, taking into account
current interest rates and the current creditworthiness of
the swap counterparties. The fair value of forward exchange
contracts is their quoted market price at the balance sheet
date, being the present value of the quoted forward price.
exchange differences arising on translation are recognised in
(f) Hedging
the income statement. Non–monetary assets and liabilities
that are measured in terms of historical cost in a foreign
currency are translated using the exchange rate at the date
of the transaction. Non–monetary assets and liabilities
denominated in foreign currencies that are stated at fair value
are translated to Australian dollars at foreign exchange rates
ruling at the dates the fair value was determined.
(ii) Financial statements of foreign operations
The assets and liabilities of foreign operations including
goodwill and fair value adjustments arising on consolidation
are translated to Australian dollars at foreign exchange rates
ruling at the balance sheet date. The revenues and expenses
of foreign operations are translated to Australian dollars at
rates approximating to the foreign exchange rates ruling at
the dates of the transactions. Foreign exchange differences
arising on retranslation are recognised directly in the foreign
currency translation reserve.
(iii) Net investment in foreign operations
Exchange differences arising from the translation of the
net investment in foreign operations, and of related hedges
recognised in the foreign currency translation reserve. They are
released into the income statement upon disposal.
(e) Derivative financial instruments
On entering into a hedging relationship, the consolidated
entity formally designates and documents the hedge
relationship and the risk management objective and strategy
for undertaking the hedge. The documentation includes
identification of the hedging instrument, the hedged item
or transaction, the nature of the risk being hedged and how
the entity will assess the hedging instrument’s effectiveness
in offsetting the exposure to changes in the hedged item’s
fair value or cash flows attributable to the hedged risk. Such
hedges are expected to be highly or fully effective in achieving
offsetting changes in fair value or cash flows and are
assessed on an ongoing basis to determine that they actually
have been highly effective throughout the financial reporting
periods for which they are designated.
(i) Cash flow hedges
Where a derivative financial instrument is designated as a
hedge of the variability in cash flows of a recognised asset
or liability, or a highly probable forecasted transaction, the
effective part of any gain or loss on the derivative financial
instrument is recognised directly in equity. When the
forecasted transaction subsequently results in the recognition
of a non–financial asset or non–financial liability, or the
forecast transaction for a non–financial asset or non–financial
liability becomes a firm commitment for which fair value
The consolidated entity uses derivative financial instruments
hedge accounting is applied, the associated cumulative gain
to hedge its exposure to foreign exchange and interest
or loss is removed from equity and included in the initial cost
rate risks arising from operating, financing and investing
or other carrying amount of the non–financial asset or liability.
activities. In accordance with its treasury policy, the
If a hedge of a forecasted transaction subsequently results in
consolidated entity does not hold or issue derivative financial
the recognition of a financial asset or a financial liability, the
instruments for trading purposes.
Derivative financial instruments are recognised initially at fair
value. Subsequent to initial recognition, derivative financial
instruments are stated at fair value. The gain or loss on
remeasurement to fair value is recognised in profit or loss,
unless the derivative qualifies for hedge accounting, in which
case the recognition of any resultant gain or loss depends on
associated gains and losses that were recognised directly in
equity are reclassified into profit or loss in the same period or
periods during which the asset acquired or liability assumed
affects profit or loss.
45
GWA INTERNATIONAL LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Significant accounting policies (continued)
the item will flow to the consolidated entity and the cost of the
(f) Hedging (continued)
For cash flow hedges, other than those described above, the
item can be measured reliably. All other costs are recognised in the
income statement as an expense as incurred.
associated cumulative gain or loss is removed from equity
(ii) Depreciation
and recognised in the income statement in the same period
or periods during which the hedged forecast transaction
affects profit or loss. The ineffective part of any gain or loss is
recognised immediately in the income statement.
When a hedging instrument expires or is sold, terminated
or exercised, or the entity revokes designation of the hedge
relationship, but the hedged forecast transaction is still
expected to occur, the cumulative gain or loss at that point
remains in equity and is recognised in accordance with the
above policy when the transaction occurs. If the hedged
transaction is no longer expected to take place, the cumulative
unrealised gain or loss recognised in equity is recognised
immediately in the income statement.
(ii) Hedge of monetary assets and liabilities
Where a derivative financial instrument is used to hedge
economically the foreign exchange exposure of a recognised
monetary asset or liability, no hedge accounting is applied and
any gain or loss on the hedging instrument is recognised in
the income statement.
(iii) Hedge of net investment in foreign operation
The portion of the gain or loss on an instrument used to hedge
a net investment in a foreign operation that is determined
to be an effective hedge is recognised directly in equity. The
ineffective portion is recognised immediately in the income
statement.
(g) Property, plant and equipment
Items of property, plant and equipment are stated at cost less
accumulated depreciation and impairment losses. The cost
of self–constructed assets includes the cost of materials,
direct labour, the initial estimate, where relevant, of the costs
of dismantling and removing the items and restoring the site
on which they are located, and an appropriate proportion of
production overheads.
Where parts of an item of property, plant and equipment have
different useful lives, they are accounted for as separate items
of property, plant and equipment.
(i) Subsequent costs
The consolidated entity recognises in the carrying amount of
an item of property, plant and equipment the cost of replacing
part of such an item when that cost is incurred if it is probable
that the future economic benefits embodied within
With the exception of freehold land, depreciation is charged
to the income statement on a straight–line basis over the
estimated useful lives of each part of an item of property,
plant and equipment. Land is not depreciated. The estimated
useful lives in the current and comparative periods are
as follows:
• buildings
• plant and equipment
• fixtures and fittings
40 years
3–10 years
7–15 years
The residual value, the useful life and the deprecation method
applied to an asset are reassessed annually.
(h) Intangible assets
(i)
Research and development
Expenditure on research activities, undertaken with the
prospect of gaining new scientific or technical knowledge and
understanding, is recognised in the income statement as an
expense as incurred.
Expenditure on development activities, whereby research
findings are applied to a plan or design for the production
of new or substantially improved products and processes,
is capitalised if the product or process is technically and
commercially feasible and the consolidated entity has
sufficient resources to complete development. Capitalised
development expenditure is stated at cost less accumulated
amortisation and impairment losses.
(ii) Brand names
Expenditure incurred in developing, maintaining or enhancing
brand names is written–off against profit from ordinary
activities in the year in which it is incurred. The brand names
are not amortised as the directors believe that the brand
names have an indefinite useful life. The carrying value of
these brand names is reviewed each year to ensure that no
impairment exists.
(iii) Other intangible assets
Other intangible assets that are acquired by the consolidated
entity are stated at cost less accumulated amortisation and
impairment losses.
(iv) Subsequent expenditure
Subsequent expenditure on capitalised intangible assets
is capitalised only when it increases the future economic
benefits embodied in the specific asset to which it relates.
All other expenditure is expensed as incurred.
46
GWA INTERNATIONAL LIMITED 2007 ANNUAL REPORT
GWA INTERNATIONAL LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Significant accounting policies (continued)
(h) Intangible assets (continued)
(v) Amortisation
Amortisation is charged to the income statement on a
straight–line basis over the estimated useful lives of
intangible assets unless such lives are indefinite. Intangible
assets with an indefinite useful life are systematically tested
for impairment at each balance sheet date. Other intangible
assets are amortised from the date they are available for use.
The estimated useful lives in the current and comparative
periods are as follows:
• capitalised software development costs
5 years
For intangible assets that have an indefinite useful life, the
recoverable amount is estimated at each balance sheet date.
An impairment loss is recognised whenever the carrying
amount of an asset or its cash–generating unit exceeds its
recoverable amount. Impairment losses are recognised in
the income statement, unless an asset has previously been
revalued, in which case the impairment loss is recognised as
a reversal to the extent of that previous revaluation with any
excess recognised through profit or loss.
Impairment losses recognised in respect of cash–generating
units are allocated first to reduce the carrying amount of any
goodwill allocated to cash–generating units (group of units)
and then, to reduce the carrying amount of the other assets in
(i) Trade and other receivables
the unit (group of units) on a pro rata basis.
Trade and other receivables are stated at their amortised cost
less impairment losses.
(j) Inventories
(i) Calculation of recoverable amount
The recoverable amount of the consolidated entity’s
receivables carried at amortised cost is calculated as the
Inventories are stated at the lower of cost and net realisable
present value of estimated future cash flows, discounted at
value. Net realisable value is the estimated selling price in
the original effective interest rate (i.e. the effective interest
the ordinary course of business, less the estimated costs of
rate computed at initial recognition of these financial assets).
completion and selling expenses.
Receivables with a short duration are not discounted.
The cost of inventories is based on the first–in first–out
Impairment of receivables is not recognised until objective
principle and includes expenditure incurred in acquiring the
evidence is available that a loss event has occurred.
inventories and bringing them to their existing location and
Significant receivables are individually assessed for
condition. In the case of manufactured inventories and work
impairment. Impairment testing of significant receivables
in progress, cost includes an appropriate share of overheads
that are not assessed as impaired individually is performed
based on normal operating capacity.
(k) Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call
deposits with an original maturity date of three months or
less. Bank overdrafts that are repayable on demand and form
an integral part of the consolidated entity’s cash management
are included as a component of cash and cash equivalents for
the purpose of the statement of cash flows.
(l) Impairment
The carrying amounts of the consolidated entity’s assets,
other than inventories and deferred tax assets, are reviewed
at each balance sheet date to determine whether there is any
indication of impairment. If any such indication exists, the
asset’s recoverable amount is estimated.
by placing them into portfolios of significant receivables
with similar risk profiles and undertaking a collective
assessment of impairment. Non–significant receivables are
not individually assessed. Instead, impairment testing is
performed by placing non–significant receivables in portfolios
of similar risk profiles, based on objective evidence from
historical experience adjusted for any effects of conditions
existing at each balance sheet date.
The recoverable amount of other assets is the greater of their
fair value less costs to sell and value in use. In assessing
value in use, the estimated future cash flows are discounted to
their present value using a pre–tax discount rate that reflects
current market assessments of the time value of money and
the risks specific to the asset. For an asset that does not
generate largely independent cash inflows, the recoverable
amount is determined for the cash–generating unit to which
the asset belongs.
47
GWA INTERNATIONAL LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Significant accounting policies (continued)
(iii) Wages, salaries, annual leave, sick leave and
(l) Impairment (continued)
(ii) Reversals of impairment
non–monetary benefits
Liabilities for employee benefits for wages, salaries, annual
leave and sick leave that are expected to be settled within 12
Impairment losses are reversed when there is an indication
months of the reporting date represent present obligations
that the impairment loss may no longer exist and there
has been a change in the estimate used to determine the
recoverable amount. An impairment loss in respect of
a receivable carried at amortised cost is reversed if the
resulting from employees’ services provided to reporting
date, are calculated at undiscounted amounts based on
remuneration wage and salary rates that the consolidated
entity expects to pay as at reporting date including related
subsequent increase in recoverable amount can be related
on–costs, such as workers compensation insurance and
objectively to an event occurring after the impairment loss
payroll tax. Non–accumulating non–monetary benefits, such
was recognised.
An impairment loss is reversed only to the extent that the
asset’s carrying amount does not exceed the carrying amount
that would have been determined, net of depreciation or
as medical care, housing, cars and free or subsidised goods
and services, are expensed based on the net marginal cost to
the consolidated entity as the benefits are taken by
the employees.
amortisation, if no impairment loss had been recognised.
(p) Provisions
(m) Share capital
(i) Dividends
Dividends are recognised as a liability in the period in which
they are declared.
(ii) Transaction costs
Transaction costs of an equity transaction are accounted for
as a deduction from equity, net of any related income
tax benefit.
(n) Interest–bearing borrowings
Current accounting policy
Interest–bearing borrowings are recognised initially at fair
value less attributable transaction costs. Subsequent to
initial recognition, interest–bearing borrowings are stated
at amortised cost with any difference between cost and
redemption value being recognised in the income statement
over the period of the borrowings on an effective
interest basis.
(o) Employee benefits
(i) Defined contribution superannuation funds
Obligations for contributions to defined contribution
superannuation funds are recognised as an expense in the
income statement as incurred.
(ii) Long–term service benefits
The consolidated entity’s net obligation in respect of
long–term service benefits is the amount of future benefit that
employees have earned in return for their service in the current
and prior periods. The obligation is calculated using expected
future increases in wage and salary rates including related
on–costs and expected settlement dates, and is discounted to
present value.
A provision is recognised in the balance sheet when the
consolidated entity has a present legal or constructive
obligation as a result of a past event, and it is probable that
an outflow of economic benefits will be required to settle
the obligation. Provisions are determined by discounting the
expected future cash flows at a pre–tax rate that reflects
current market assessments of the time value of money and,
where appropriate, the risks specific to the liability.
(i) Warranties
A provision for warranties is recognised when the underlying
products or services are sold. The provision is based on
historical warranty data and a weighting of all possible
outcomes against their associated probabilities.
(ii) Restructuring
A provision for restructuring is recognised when the
consolidated entity has approved a detailed and formal
restructuring plan, and the restructuring has either
commenced or has been announced publicly. Future operating
costs are not provided for.
(iii) Site restoration
A provision for restoration in respect of leased premises is
recognised when the obligation to restore arises. The provision
is the best estimate of the present value of the expenditure
required to settle the restoration obligation at the reporting
date. Future restoration obligations are reviewed annually and
any changes are reflected in the present value of the provision
at the end of the reporting period.
The unwinding of the effect of discounting on the provision is
recognised as a finance cost.
48
GWA INTERNATIONAL LIMITED 2007 ANNUAL REPORT
GWA INTERNATIONAL LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Significant accounting policies (continued)
(q) Trade and other payables
Trade and other payables are stated at their amortised cost.
(r) Revenue
Goods sold
Revenue from the sale of goods is measured at the fair
value of the consideration received or receivable, net of
returns, discounts and rebates and recognised in the income
statement when the significant risks and rewards of ownership
have been transferred to the buyer.
(s) Expenses
(i) Operating lease payments
Payments made under operating leases are recognised in the
income statement on a straight–line basis over the term of the
lease. Lease incentives received are recognised in the income
statement as an integral part of the total lease expense and
spread over the lease term.
(ii) Net financing costs
Net financing costs comprise interest payable on borrowings
calculated using the effective interest method, interest
receivable on funds invested and gains and losses on hedging
instruments that are recognised in the income statement.
Borrowing costs are expensed as incurred and included in net
financing costs. Interest income is recognised in the income
statement as it accrues, using the effective interest method.
(t) Income tax
Income tax on the profit or loss for the year comprises
current and deferred tax. Income tax is recognised in the
income statement except to the extent that it relates to items
recognised directly in equity, in which case it is recognised
in equity.
Current tax is the expected tax payable on the taxable income
for the year, using tax rates enacted or substantively enacted
at the balance sheet date, and any adjustment to tax payable
in respect of previous years.
The amount of deferred tax provided is based on the expected
manner of realisation or settlement of the carrying amount of
assets and liabilities, using tax rates enacted or substantively
enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is
probable that future taxable profits will be available against
which the asset can be utilised. Deferred tax assets are
reduced to the extent that it is no longer probable that the
related tax benefit will be realised.
Tax consolidation
The Company and its wholly–owned Australian resident
entities have formed a tax–consolidated group with effect
from 1 July 2003 and are therefore taxed as a single entity
from that date. The head entity within the tax–consolidated
group is GWA International Limited.
Current tax expense/income, deferred tax liabilities and
deferred tax assets arising from temporary differences of the
members of the tax–consolidated group are recognised in the
separate financial statements of the members of the tax–
consolidated group using the ‘separate taxpayer within group’
approach by reference to the carrying amounts of assets and
liabilities in the separate financial statements of each entity
and the tax values applying under tax consolidation.
Any current tax liabilities (or assets) are assumed by the head
entity in the tax–consolidated group and are recognised as
amounts payable (receivable) to (from) other entities in the
tax–consolidated group in conjunction with any tax funding
arrangement amounts (refer below). Any difference between
these amounts is recognised by the Company as an equity
contribution or distribution.
Nature of tax funding arrangements and tax
sharing arrangements
The members of 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 GWA International Limited and each of the
Deferred tax is provided using the balance sheet liability
entities in the tax consolidated group recognise inter–entity
method, providing for temporary differences between the
receivables (payables) equal in amount to the tax liability
carrying amounts of assets and liabilities for financial
(asset) assumed by the head entity.
reporting purposes and the amounts used for taxation
purposes. The following temporary differences are not provided
for: the initial recognition of assets or liabilities that affect
neither accounting nor taxable profit and differences relating
to investments in subsidiaries to the extent that they will
probably not reverse in the foreseeable future.
(u) Segment reporting
A segment is a distinguishable component of the consolidated
entity that is engaged either in providing products or services
(business segment), or in providing products or services within
a particular economic environment (geographical segment),
which is subject to risks and rewards that are different from
those of other segments.
49
GWA INTERNATIONAL LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Significant accounting policies (continued)
2. Segment reporting
(v) Goods and services tax
Revenue, expenses and assets are recognised net of the
amount of goods and services tax (GST), except where the
amount of GST incurred is not recoverable from the taxation
authority. In these circumstances, the GST is recognised as
Segment information is presented in respect of the
consolidated entity’s business and geographical segments.
The primary format, business segments, is based on the
consolidated entity’s management and internal
reporting structure.
part of the cost of acquisition of the asset or as part of
Inter–segment pricing is determined on an arm’s length basis.
the expense.
Segment results, assets and liabilities include items
Receivables and payables are stated with the amount of GST
directly attributable to a segment as well as those that
included. The net amount of GST recoverable from, or payable
can be allocated on a reasonable basis. Unallocated items
to, the ATO is included as a current asset or liability in the
comprise mainly the mower business, interest–bearing loans,
balance sheet.
borrowings and expenses, and corporate assets and expenses.
Cash flows are included in the statement of cash flows on a
Segment capital expenditure is the total cost incurred during
gross basis. The GST components of cash flows arising from
the period to acquire segment assets that are expected to be
investing and financing activities which are recoverable from,
used for more than one period.
or payable to, the ATO are classified as operating cash flows.
(w) Accounting estimates and judgements
Business segments
The consolidated entity comprises the following main business
Management discussed with the Audit Committee the
segments:
development, selection and disclosure of the consolidated
entity’s critical accounting policies and estimates and the
application of these policies and estimates. The estimates and
judgements that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities
within the next financial year are discussed below.
Impairment of intangibles with indefinite useful lives
The consolidated entity assesses whether intangibles with
indefinite useful lives are impaired at least annually in
accordance with the accounting policy. These calculations
involve an estimation of the recoverable amount of the
• Building fixtures and fittings
Sanitaryware
Building hardware products
Baths and spas
Household accessories, sinks and tapware
Hot water products
• Commercial furniture
Education products
Hospitality products
Stadia seating
cash–generating units to which the intangibles with indefinite
• Unallocated
useful lives are allocated.
Domestic and ride–on mowers
Corporate administration
Geographical segments
The business segments are managed on a worldwide basis,
but operate mainly in one geographical area being Australia.
Sales offices are operated in New Zealand, Asia, United States
and Europe, however the sales revenue from these
geographical areas comprise only 16% of the consolidated
entity’s total sales revenue and are individually less
than 10%.
In presenting information on the basis of geographical
segments, segment revenue is based on the geographical
location of customers. Segment assets are based on the
geographical location of the assets.
50
GWA INTERNATIONAL LIMITED 2007 ANNUAL REPORT
GWA INTERNATIONAL LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Building fixtures
Commercial
and fittings *
furniture*
Unallocated*
Eliminations
Consolidated*
In thousands of AUD
2007
2006
2007
2006
2007
2006
2007
2006
2007
2006
2.
Segment reporting
(continued)
Business segments
Revenue:
External sales
555,633 523,100
56,973
56,738
33,063
40,151
–
– 645,669 619,989
Inter–segment sales
–
–
1,993
2,810
–
–
(1,993)
(2,810)
–
–
Total sales revenue
555,633 523,100
58,966
59,548
33,063
40,151
(1,993)
(2,810) 645,669 619,989
Segment result
110,521 102,858
3,619
4,655
(15,386)
(12,316)
(3,158)
(12,228)
–
6,284
(4,121)
–
–
–
–
98,754
95,197
–
(7,279)
(5,944)
107,363
90,630
3,619
10,939
(19,507)
(12,316)
–
–
91,475
89,253
Restructuring
income/(expenses)
Segment result after
restructuring expenses
Net financing costs
Income tax expense
Profit for the period
(12,366)
(11,490)
(22,791)
(20,911)
56,318
56,852
– 781,168 820,734
– 372,366 408,766
–
–
–
–
19,240
21,929
539
491
21,516
30,966
1,227
2,816
Segment assets
595,294 570,143
34,498
36,941
151,376
213,650
Segment liabilities
76,517
92,655
6,331
8,316
289,518
307,795
Depreciation
Amortisation
15,689
17,023
2,325
3,418
1,226
1,488
276
276
–
–
263
215
Capital expenditure
18,726
28,569
156
1,024
2,634
1,373
Impairment losses
1,227
1,206
–
1,610
–
–
–
–
–
–
–
–
* All segments are continuing operations
Geographical segments
In thousands of AUD
External sales revenue
Segment assets
Capital expenditure
* All segments are continuing operations
Australia*
Unallocated*
Consolidated *
2007
2006
2007
2006
2007
2006
544,939 521,265 100,730
95,724
645,669
619,989
718,230 760,329
63,491
60,405
781,721
820,734
18,666
29,175
2,850
1,791
21,516
30,966
51
GWA INTERNATIONAL LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3.
4.
5.
6.
In thousands of AUD
Other income
Foreign currency gains – realised
Foreign currency gains – unrealised
Net gain on disposal of property, plant and equipment
Impairment reversals
Dividends received from controlled companies
Distributions received from controlled trusts
Other
Other expenses
Foreign currency losses – realised
Foreign currency losses – unrealised
Net loss on disposal of property, plant and equipment
Personnel expenses
Wages and salaries – including annual leave,
long service leave and on–costs
In AUD
Auditors’ remuneration
Audit services
Auditors of the Company
KPMG Australia:
Audit and review of financial reports
Other regulatory audit services
Overseas KPMG Firms:
Audit and review of financial reports
Other services
Auditors of the Company
KPMG Australia:
Due diligence services
Taxation services
Other
In thousands of AUD
7.
Net financing costs
Interest income
Interest expense
Net financing costs/(income)
CONSOLIDATED
THE COMPANY
2007
2006
2007
2006
2,288
204
–
–
–
–
2,506
4,998
969
2,278
1,295
4,542
116
551
14,471
–
–
–
659
–
–
–
–
75,000
–
–
–
–
17,592
–
13,142
–
–
15,797
75,000
30,734
432
1,188
–
1,620
–
–
–
–
–
–
–
–
–
140,785
138,251
–
CONSOLIDATED
THE COMPANY
2007
2006
2007
2006
340,000
–
260,000
36,329
10,000
–
10,000
–
60,000
62,559
–
–
400,000
358,888
10,000
10,000
30,000
102,819
101,500
–
–
27,500
132,819
129,000
–
–
–
–
–
–
–
–
CONSOLIDATED
THE COMPANY
2007
2006
2007
2006
(5,718)
(6,096)
(502)
18,084
17,586
–
12,366
11,490
(502)
(27)
–
(27)
52
GWA INTERNATIONAL LIMITED 2007 ANNUAL REPORT
GWA INTERNATIONAL LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
In thousands of AUD
8.
Restructuring expenses
Restructuring expenses
Gains on property sales (included in other income)
Net expense before tax
Tax benefit
Net restructuring expense after tax
9.
Income tax expense
Recognised in the income statement
Current tax expense
Current year
Adjustments for prior years
Deferred tax expense
Origination and reversal of temporary differences
Benefit of tax losses recognised
Total income tax expense/(benefit) in income statement
CONSOLIDATED
THE COMPANY
2007
2006
2007
2006
7,279
21,963
–
(16,019)
7,279
5,944
(2,184)
(2,717)
5,095
3,227
23,487
21,898
(1,539)
(1,411)
21,948
20,487
706
137
843
434
(10)
424
22,791
20,911
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
8
(632)
(624)
–
–
–
(624)
Numerical reconciliation between tax expense and pre–tax net profit
Profit before tax
79,109
77,763
75,000
30,760
Income tax using the domestic corporation tax rate of 30% (2006: 30%)
23,733
23,329
22,500
9,228
Increase in income tax expense due to:
Non–deductible building depreciation
Non–deductible expenses
Effect of tax rate in foreign jurisdictions
Decrease in income tax expense due to:
Effect of tax losses recognised
Non–assessable income
Non–assessable capital profits
Rebateable research and development
Impairment reversals
Rebateable trust distributions
Rebateable dividends
Under / (over) provided in prior years
Income tax expense/(benefit) on pre–tax net profit
Deferred tax recognised directly in equity
Derivatives
63
636
39
–
–
–
(141)
–
–
–
76
381
156
(10)
(576)
(934)
(100)
–
–
–
24,330
22,322
(1,539)
(1,411)
22,791
20,911
–
–
–
–
–
–
–
–
–
(22,500)
–
–
–
–
–
–
–
–
–
–
(5,278)
(3,942)
–
8
(632)
(624)
(340)
232
–
–
53
GWA INTERNATIONAL LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
10.
Earnings per share
Basic and diluted earnings per share
Cents per share
Profit attributable to ordinary shareholders
In thousands of AUD
Profit for the period
Weighted average number of ordinary shares
In thousands of shares
Issued ordinary shares at 1 July
Effect of shares issued
Weighted average number of ordinary shares at 30 June
In thousands of AUD
11.
Cash and cash equivalents
Bank balances
Call deposits
Cash and cash equivalents in the statement of cash flows
12.
Trade and other receivables
Current
Trade receivables
Provision for impairment
Fair value derivatives
Employee share loans
Other
Non–current
Receivables due from controlled entities
Employee share loans
Other
CONSOLIDATED
2007
2006
20.2
20.4
56,318
56,852
278,303
278,303
453
–
278,756
278,303
CONSOLIDATED
THE COMPANY
2007
2006
2007
2006
47,497
93,011
32,924
63,487
80,421
156,498
73,520
65,407
(804)
(1,126)
637
576
920
518
1,579
2,134
75,508
67,853
232
–
232
–
–
–
576
–
576
–
–
–
–
–
–
518
–
518
–
–
594,069
509,021
4,923
3,461
4,923
3,461
60
215
–
–
4,983
3,676
598,992
512,482
54
GWA INTERNATIONAL LIMITED 2007 ANNUAL REPORT
GWA INTERNATIONAL LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
In thousands of AUD
13.
Inventories
Raw materials and consumables
Work in progress
Finished goods
CONSOLIDATED
THE COMPANY
2007
2006
2007
2006
22,205
19,930
10,220
8,396
95,786
67,016
128,211
95,342
–
–
–
–
–
–
–
–
14.
Current tax assets and liabilities
The current tax asset for the consolidated entity of $1,440,000 (2006: $2,512,000) and for the Company of $348,000 (2006: $2,512,000)
represents the amount of income taxes recoverable in respect of prior periods and the current period. No current tax liability exists for the
consolidated entity at balance date (2006: $258,000). The current tax asset for both the prior and current periods arise from the payment of
tax in excess of the amounts due to the relevant tax authorities and also payment of non–resident withholding tax on payment of a dividend
from a New Zealand subsidiary company to an Australian subsidiary company. This tax will be claimable against current year profits by
New Zealand subsidiary companies. In accordance with the tax consolidation legislation, the Company as the head entity of the Australian
tax–consolidated group has assumed the current tax asset / (liability) initially recognised by the members in the tax–consolidated group.
In thousands of AUD
2007
2006
2007
2006
2007
2006
ASSETS
LIABILITIES
NET
15.
Deferred tax assets and liabilities
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities
are attributable to the following:
Consolidated
Property, plant and equipment
Intangible assets
Inventories
Employee benefits
Provisions
Other items
Tax loss carry–forwards
Tax assets / (liabilities)
Set off of tax
Net tax assets / (liabilities)
948
–
3,979
7,524
56
–
5,001
8,987
10,653
10,628
1,626
–
370
137
(1)
(197)
–
–
–
(1)
–
(50)
(95)
–
–
–
–
–
947
(197)
3,979
7,524
6
(95)
5,001
8,987
10,653
10,628
1,625
–
370
137
24,730
25,179
(199)
(145)
24,531
25,034
(199)
(145)
24,531
25,034
199
–
145
–
–
–
24,531
25,034
55
GWA INTERNATIONAL LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
In thousands of AUD (net)
15.
Deferred tax assets and liabilities (continued)
Unrecognised deferred tax assets
Deferred tax assets have not been recognised in respect of the following items:
CONSOLIDATED
THE COMPANY
2007
2006
2007
2006
Tax losses
403
2,160
–
–
The deductible tax losses accumulated at balance date do not expire under current tax legislation. Deferred tax assets have not been
recognised in respect of these items because it is not probable that future taxable profit will be available against which to offset the tax
benefit of these losses.
Movement in temporary differences during the year
CONSOLIDATED
THE COMPANY
In thousands of AUD
Balance Recognised Recognised
1 July 05
Balance
in equity 30 June 06
in income
Balance Recognised Recognised
in income
1 July 05
Balance
in equity 30 June 06
Property, plant and equipment
233
Intangible assets
Inventories
Employee benefits
Provisions
Other items
Tax loss carry–forwards
65
5,641
9,005
9,850
769
127
(227)
(160)
(640)
(18)
778
(167)
10
–
–
–
–
–
(232)
–
6
(95)
5,001
8,987
10,628
370
137
25,690
(424)
(232)
25,034
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
In thousands of AUD
Property, plant and equipment
Intangible assets
Inventories
Employee benefits
Provisions
Other items
Tax loss carry–forwards
Balance Recognised Recognised
1 July 06
Balance
in equity 30 June 07
in income
Balance Recognised Recognised
in income
1 July 06
Balance
in equity 30 June 07
6
(95)
5,001
8,987
10,628
370
137
25,034
941
(102)
(1,022)
(1,463)
25
915
(137)
(843)
–
–
–
–
–
947
(197)
3,979
7,524
10,653
340
1,625
–
–
340
24,531
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
56
GWA INTERNATIONAL LIMITED 2007 ANNUAL REPORT
GWA INTERNATIONAL LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
In thousands of AUD
Land and Plant and
Motor Work in
buildings equipment vehicles progress
Motor Work in
Land and Plant and
buildings equipment vehicles progress
Total
Total
CONSOLIDATED
THE COMPANY
16.
Property, plant
and equipment
Cost
Balance at 1 July 2005
Additions
Disposals
Effect of movements in
foreign exchange
58,755
216,207
14,238
9,417
298,617
14,415
7,085
2,463
6,265
30,228
(18,469)
(17,179)
(2,603)
–
(38,251)
287
2,066
(54)
25
2,324
Balance at 30 June 2006
54,988
208,179
14,044
15,707
292,918
Balance at 1 July 2006
54,988
208,179
14,044
15,707
292,918
Additions
Transfers
Disposals
Effect of movements in
foreign exchange
518
16,173
2,108
–
18,799
–
4,929
–
(4,929)
–
(976)
(38,554)
(2,885)
–
(42,415)
(303)
(1,765)
54
(96)
(2,110)
Balance at 30 June 2007
54,227
188,962
13,321
10,682
267,192
Depreciation and
impairment losses
Balance at 1 July 2005
Depreciation charge
for the year
(7,872)
(152,011)
(4,816)
–
(164,699)
(961)
(18,317)
(2,651)
–
(21,929)
Disposals
2,449
12,386
1,555
Impairment losses
–
(2,816)
–
–
–
16,390
(2,816)
Effect of movements in
foreign exchange
(222)
(1,788)
(15)
–
(2,025)
Balance at 30 June 2006
(6,606)
(162,546)
(5,927)
–
(175,079)
Balance at 1 July 2006
(6,606)
(162,546)
(5,927)
–
(175,079)
Depreciation charge
for the year
Disposals
Impairment losses
Effect of movements in
foreign exchange
(1,025)
(15,746)
(2,469)
–
(19,240)
–
–
37,262
2,010
(1,227)
–
229
1,903
(31)
–
–
–
–
39,272
(1,227)
2,101
(154,173)
Balance at 30 June 2007
(7,402)
(140,354)
(6,417)
Carrying amounts
At 1 July 2005
50,883
64,196
9,422
9,417
133,918
At 30 June 2006
48,382
45,633
8,117
15,707
117,839
At 1 July 2006
48,382
45,633
8,117
15,707
117,839
At 30 June 2007
46,825
48,608
6,904
10,682
113,019
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Impairment losses
During the 2007 financial year decisions were made to close certain operating sites. The consolidated entity assessed the recoverable amount
of plant and equipment at these sites. Based on this assessment, the carrying amount of this plant and equipment was written down by
$1,227,000 (2006: $2,816,000).
57
GWA INTERNATIONAL LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
In thousands of AUD
Software Brand names
Total
Software Brand names
Total
CONSOLIDATED
THE COMPANY
17.
Intangible assets
Cost
Balance at 1 July 2005
Additions
Effect of movements in foreign exchange
Balance at 30 June 2006
Balance at 1 July 2006
Additions
1,911
340,338
342,249
738
–
–
738
1,508
1,508
2,649
341,846
344,495
2,649
2,717
341,846
344,495
–
2,717
Effect of movements in foreign exchange
–
(1,501)
(1,501)
Balance at 30 June 2007
5,366
340,345
345,711
Amortisation and impairment losses
Balance at 1 July 2005
Amortisation for the year
Balance at 30 June 2006
Balance at 1 July 2006
Amortisation for the year
Balance at 30 June 2007
Carrying amounts
At 1 July 2005
At 30 June 2006
At 1 July 2006
At 30 June 2007
(218)
(491)
(709)
(709)
(539)
(1,248)
–
–
–
–
–
–
(218)
(491)
(709)
(709)
(539)
(1,248)
1,693
1,940
1,940
4,118
340,338
342,031
341,846
343,786
341,846
343,786
340,345
344,463
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Impairment testing for brand names
The values of brand names in the building fixtures and fittings segment were assessed by an independent valuer effective 30 June
2006 and no impairment was identified. The carrying values of the CaromaDorf brand names at 30 June 2007 are $284,200,000 (2006:
$284,200,000). The carrying value of the multiple units without significant brand name value is $60,263,000 (2006: $59,586,000).
Business valuations were based on the capitalisation of earnings approach and brand name valuations on the relief from royalty approach.
Maintainable earnings were based on current divisional profitability adjusted for an allocation of corporate overheads. Earnings before
interest and tax (EBIT) multiples for the cash generating units ranged from 8.1 to 9.2 except for the CaromaDorf cash generating unit for
which the EBIT multiple was 12.7.
The royalty rates applied for brand name value calculation were in the range of 4% to 6.5% except for the CaromaDorf brand names for
which the royalty rate was 12.5%.
The 30 June 2006 business valuation and brand name valuations with respect to the CaromaDorf brand names were significantly above
the carrying values for the business and brand names respectively. The circumstances of the CaromaDorf business have not significantly
changed during the 2007 financial year.
58
GWA INTERNATIONAL LIMITED 2007 ANNUAL REPORT
GWA INTERNATIONAL LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
In thousands of AUD
18.
Trade and other payables
Current
Trade payables and accrued expenses
Fair value derivatives
Non–trade payables and accrued expenses
Non–current
Payables to controlled entities
19.
Interest–bearing loans and borrowings
This note provides information about the contractual terms
of the consolidated entity’s interest–bearing loans and borrowings.
For more information about the consolidated entity’s exposure to
interest rate and foreign currency risk, see note 23.
Non–current liabilities
Unsecured bank loans
Financing facilities
Bank overdraft
Standby letters of credit
Unsecured bank facility
Facilities utilised at reporting date
Bank overdraft
Standby letters of credit
Unsecured bank facility
Facilities not utilised at reporting date
Bank overdraft
Standby letters of credit
Unsecured bank facility
CONSOLIDATED
THE COMPANY
2007
2006
2007
2006
47,372
42,363
998
146
3,070
6,155
51,440
48,664
–
–
–
–
54
–
–
54
–
–
527,430
458,018
271,567
297,498
–
6,408
6,370
25,378
27,320
271,567
312,498
303,353
346,188
–
–
1,440
6,967
271,567
297,498
273,007
304,465
6,408
6,370
23,938
20,353
–
15,000
30,346
41,723
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
59
GWA INTERNATIONAL LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
19.
Interest–bearing loans and borrowings (continued)
Financing arrangements
GWA International Limited, GWA Finance Pty Limited, a wholly owned controlled entity of GWA International Limited, and each other
controlled entity of GWA International Limited, have entered into a Master Financing Agreement with a number of banks.
This document provides for the following:
(i) GWA Finance Pty Limited and certain other operating controlled entities of GWA International Limited to borrow and enter into
certain risk and hedging facilities
(ii) Individual banks to provide facilities direct to GWA Finance Pty Limited and certain other operating controlled entities of GWA
International Limited by joining the Master Financing Agreement and being bound by the common covenants and conditions
contained therein.
Bank overdraft
The bank overdraft facility available to the consolidated entity is unsecured. Interest on the bank overdraft facility is charged at prevailing
market rates. No drawdowns against this facility had been made as at 30 June 2007.
Unsecured bank loans
Bank loans are provided to GWA Finance Pty Limited under the facility agreements. The bank loans are denominated in Australian dollars,
except for the Euro facility which is denominated in Euros. The bank loans are unsecured and have a maximum three year rolling maturity,
subject to annual review.
The loans bear interest at market rates and interest is payable every 30 to 90 days. The consolidated entity hedges its exposure to variable
interest rates through interest rate swap transactions.
Letter of credit
The letter of credit facilities are committed facilities available to be drawn down under the facility agreements. The limits are specified in
the facility agreements.
In thousands of AUD
20.
Employee benefits
Current
Liability for long service–leave
Liability for annual leave
Liability for on–costs
Non – current
Liability for long–service leave
Liability for on–costs
CONSOLIDATED
THE COMPANY
2007
2006
2007
2006
1,792
2,048
11,773
11,985
2,491
3,418
16,056
17,451
10,157
11,734
858
769
11,015
12,503
–
–
–
–
–
–
–
–
–
–
–
–
–
–
60
GWA INTERNATIONAL LIMITED 2007 ANNUAL REPORT
GWA INTERNATIONAL LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
20.
Employee benefits (continued)
Defined contribution superannuation funds
The consolidated entity makes contributions to a defined contribution superannuation fund. The amount recognised as expense was
$9,326,000 for the financial year ended 30 June 2007 (2006: $10,101,000).
Employee share plan
The employee share plan was established to assist in the retention and motivation of employees. All permanent employees of the Company,
who are invited to participate, may participate in the plan.
The maximum number of shares subject to the Plan at any time may not exceed 5% of the nominal amount of all Ordinary Shares on issue.
The Plan does not provide for the issue of options and no options have been issued by the Company.
Under the Plan, shares can either be issued to employees or purchased on market, and in both cases the employee will pay market price
for the shares. During 2007, 540,000 ordinary shares were purchased on market for employees at an average share price of $2.98 and
1,620,000 ordinary shares were issued to employees at the market price of $3.84, being total market value of $7,828,000. In the prior year,
no ordinary shares were issued to employees.
As at 30 June 2007, loans are issued for 3,436,561 (2006: 3,081,250) shares and the remaining balances of these loans is $9,605,000
(2006: $6,163,000) or $5,499,000 (2006: $3,979,000) at net present value. During 2007, dividends of $640,000 (2006: $735,000) were paid
against the loans and a further $3,747,000 (2006: $1,057,000) was paid by employees against these loans.
21.
Provisions
In thousands of AUD
Consolidated
Balance at 1 July 2006
Provisions made during the year
Provisions used during the year
Provisions reversed during the year
Effect of movements in foreign exchange
Balance at 30 June 2007
Current
Non–current
Warranties Restructuring
Site
restoration
Other
Total
9,104
5,489
9,176
7,279
(5,611)
(13,857)
–
–
4,486
8,164
160
158
30,930
13,086
–
–
–
(899)
(20,367)
(711)
(1,305)
–
(56)
2,598
4,646
6,712
22,288
2,598
–
2,598
–
4,646
4,646
5,328
1,384
6,712
13,570
8,718
22,288
(594)
(56)
8,332
5,644
2,688
8,332
Warranties
The total provision for warranties at balance date of $8,332,000 relates to future warranty expense on products sold during the current and
previous financial years. The major warranty expense relates to hot water systems. The provision is based on estimates made from historical
warranty data associated with similar products and services. The consolidated entity expects to expend $3,541,000 of the total provision in
the financial year ending 30 June 2008, and the majority of the balance of the liability over the following four years.
Restructuring
During the financial year ended 30 June 2007, provisions of $7,279,000 were made to cover the estimated costs of redundancies and
related costs with respect to the closure of manufacturing operations and other business restructuring. Of this amount, $2,598,000 remains
provided for at balance date and this amount represents the estimate of costs to be expended in the financial year ending 30 June 2008. The
restructuring is expected to be completed by May 2008.
Site restoration
At balance date the balance of the site restoration provision was $4,646,000. No expenditures were made in the current financial year, the
only movement being an adjustment to reflect the net present value of this provision. This provision relates to the removal of plant installed
in leased premises where there is a liability under the lease for the plant to be removed on expiry and the leased premises made good, and
for site remediation required. The net present value of the provision has been calculated using a discount rate of 6.5 per cent.
61
GWA INTERNATIONAL LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
22.
Capital and reserves
Reconciliation of movement in capital and reserves attributable to equity holders of the parent
In thousands of AUD
Balance at 1 July 2005
Effect of change in accounting policy
Balance at 1 July 2005 restated
Total recognised income and expense
Dividends to shareholders
Balance at 30 June 2006
Balance at 1 July 2006
Total recognised income and expense
Issue of ordinary shares
Dividends to shareholders
Balance at 30 June 2007
Reconciliation of movement in capital and reserves
In thousands of AUD
Balance at 1 July 2005
Total recognised income and expense
Dividends to shareholders
Balance at 30 June 2006
Balance at 1 July 2006
Total recognised income and expense
Issue of ordinary shares
Dividends to shareholders
Balance at 30 June 2007
Share capital
CONSOLIDATED
Share
capital
Translation
reserve
Hedging
reserve
Retained
earnings
Total
346,853
(2,083)
–
–
346,853
(2,083)
–
–
688
–
–
157
157
385
64,776
409,546
–
64,776
56,852
157
409,703
57,925
–
(55,660)
(55,660)
346,853
(1,395)
542
65,968
411,968
346,853
–
6,209
–
(1,395)
(1,158)
–
–
353,062
(2,553)
542
65,968
411,968
(525)
56,318
54,635
6,209
–
(64,010)
(64,010)
58,276
408,802
–
–
17
THE COMPANY
Share capital Retained earnings
Total equity
346,853
–
–
346,853
346,853
–
6,209
–
353,062
62,693
31,384
(55,660)
38,417
38,417
75,000
–
(64,010)
49,407
409,546
31,384
(55,660)
385,270
385,270
75,000
6,209
(64,010)
402,469
In thousands of shares
On issue at 1 July – fully paid
Issue of shares under the employee share plan
On issue at 30 June – fully paid
THE COMPANY
Ordinary shares
2007
278,303
1,620
279,923
2006
278,303
–
278,303
Effective 1 July 1998, the Company Law Review Act abolished the concept of par value shares and the concept of authorised capital.
Accordingly, the Company does not have authorised capital or par value in respect of its issued shares.
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at
meetings of the Company. All shares rank equally with regard to the Company’s residual assets.
62
GWA INTERNATIONAL LIMITED 2007 ANNUAL REPORT
GWA INTERNATIONAL LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
22.
Capital and reserves (continued)
Translation reserve
The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign
operations where their functional currency is different from the presentation currency of the reporting entity, as well as from the translation
of liabilities that hedge the Company’s net investment in a foreign subsidiary.
Hedging reserve
The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments related
to hedged transactions that have not yet occurred.
Dividends
Dividends recognised in the current year by the Company are:
In thousands of AUD
2007
Interim 2007 ordinary
Interim 2007 special
Final 2006 ordinary
Final 2006 special
Total amount
2006
Interim 2006 ordinary
Final 2005 ordinary
Final 2005 special
Total amount
Cents per share
Total amount
Franked
Date of payment
10.0
1.5
8.0
3.5
23.0
10.0
8.0
2.0
20.0
27,830
4,175
22,264
9,741
64,010
27,830
22,264
5,566
55,660
100%
100%
100%
100%
100%
100%
100%
2nd April 2007
2nd April 2007
3rd Oct 2006
3rd Oct 2006
3rd April 2006
3rd Oct 2005
3rd Oct 2005
Franked dividends declared or paid during the year were franked at the tax rate of 30%.
After the balance sheet date the following dividends were approved by the directors. The dividends have not been provided. The declaration
and subsequent payment of dividends has no income tax consequences.
In thousands of AUD
Final ordinary
Final special
Total amount
Cents per share
Total amount
Franked
Date of payment
8.0
2.5
10.5
22,394
6,998
29,392
100%
100%
2nd Oct 2007
2nd Oct 2007
The financial effect of these dividends have not been brought to account in the financial statements for the financial year ended 30 June
2007 and will be recognised in subsequent financial reports.
Dividends
In thousands of AUD
Dividend franking account:
THE COMPANY
2007
2006
30 per cent franking credits available to shareholders of
GWA International Limited for subsequent financial years
30,225
37,274
The above available amounts are based on the balance of the dividend franking account at year-end adjusted for:
(a) franking credits/debits that will arise from the payment/settlement of the current tax liabilities/assets; and
(b) franking debits that will arise from the payment of dividends recognised as a liability at the year-end.
The ability to utilise the franking credits is dependent upon there being sufficient available profits to declare dividends. The impact
on the dividend franking account of dividends proposed after the balance sheet date, but not recognised as a liability, is to reduce it
by $12,597,000 (2006: $13,716,000). In accordance with the tax consolidation legislation, the Company as the head entity in the tax-
consolidated group has also assumed the benefit of $30,225,000 (2006: $37,274,000) franking credits.
63
GWA INTERNATIONAL LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
23.
Financial instruments
Exposure to credit, interest rate and currency risks arises in the normal course of the consolidated entity’s business. Derivative financial
instruments are used to hedge exposure to fluctuations in foreign exchange rates and interest rates.
Credit risk
Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. The consolidated entity
minimises concentrations of credit risk by undertaking transactions with a large number of customers within the industries it trades. A risk
assessment process is used for customers requiring credit over $50,000 and credit insurance is utilised for major concentrations of trade
debts. The consolidated entity does not require collateral in respect of financial assets.
Transactions involving derivative financial instruments are with counterparties with sound credit ratings. Given their high credit ratings,
management does not expect any counterparty to fail to meet its obligations.
At the balance sheet date there were no uninsured concentrations of credit risk. The maximum exposure to credit risk is represented by the
carrying amount of each financial asset, including derivative financial instruments, in the balance sheet.
Interest rate risk
The consolidated entity’s variable rate borrowings are exposed to a risk of change in cash flows due to changes in interest rates.
Hedging
The consolidated entity adopts a policy of ensuring that its exposure to changes in interest rates on borrowings is reduced. Interest rate
swaps, denominated in Australian dollars, have been entered into to achieve an appropriate mix of fixed and floating rate exposure.
The swaps mature over the next 2 years and have fixed swap rates ranging from 5.52 per cent to 5.67 per cent. At 30 June 2007, the
consolidated entity had interest rate swaps with a notional contract amount of $125,000,000 (2006: $125,000,000).
The consolidated entity classifies interest rate swaps as cash flow hedges and states them at fair value.
The net fair value of swaps at 30 June 2007 was $637,000 (2006: $920,000). These amounts were recognised as fair value derivative assets
in the current financial year.
64
GWA INTERNATIONAL LIMITED 2007 ANNUAL REPORT
GWA INTERNATIONAL LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
23.
Financial instruments (continued)
Effective interest rates and repricing analysis
In respect of income-earning financial assets and interest-bearing financial liabilities, the following table indicates their effective interest
rates at the balance sheet date and the periods in which they reprice.
CONSOLIDATED
In thousands of AUD
Average effective
interest rate
Total
6 months
or less
6–12 months 1–2 years
More than
5 years
2–5 years
2007
Cash and cash equivalents
6.10%
80,421
80,421
Effect of interest rate
swap derivatives*
(0.79)%
–
25,000**
Unsecured bank loans
6.34%
(271,567)
(271,567)
(191,146)
(166,146)
–
–
–
–
–
(25,000)
–
(25,000)
–
–
–
–
–
–
–
–
CONSOLIDATED
In thousands of AUD
Average effective
interest rate
Total
6 months
or less
6–12 months 1–2 years
More than
5 years
2–5 years
2006
Cash and cash equivalents
5.57%
156,498
156,498
Effect of interest rate
swap derivatives*
Unsecured bank loans
(0.21)%
–
125,000
5.80%
(297,498)
(297,498)
(141,000)
(16,000)
–
–
–
–
–
–
(100,000)
(25,000)
–
–
(100,000)
(25,000)
–
–
–
–
COMPANY
2007
In thousands of AUD
Average effective
interest rate
Cash and cash equivalents
6.00%
Total
232
6 months
or less
232
6–12 months 1–2 years
More than
5 years
2–5 years
–
–
–
–
COMPANY
2006
In thousands of AUD
Average effective
interest rate
Total
6 months
or less
6–12 months 1–2 years
More than
5 years
2–5 years
5.57%
–
–
–
–
–
–
* These assets / liabilities bear interest at a fixed rate.
** As at 30 June 2007, the consolidated entity holds interest rate swaps of $125,000,000. Of this total, $100,000,000 reprice within the
next 6 months and $25,000,000 reprice within the next 2 years.
65
GWA INTERNATIONAL LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
23.
Financial instruments (continued)
Foreign currency risk
The consolidated entity is exposed to foreign currency risk on sales, purchases and borrowings that are denominated in a currency other
than the AUD. The currencies giving rise to this risk are primarily NZD, USD and EUR.
The consolidated entity hedges its foreign currency exposure in respect of forecasted sales and purchases by entering into forward exchange
contracts. The forward exchange contracts have maturities of less than one year after the balance sheet date. Where necessary, the forward
exchange contracts are rolled over at maturity.
Forecasted transactions
The consolidated entity classifies its forward exchange contracts hedging forecasted transactions as cash flow hedges and states them at
fair value.
The net fair value of forward exchange contracts used as hedges of forecasted transactions at 30 June 2007 was $728,000 (2006:
$146,000). These amounts were recognised as fair value derivative liabilities in the current financial year.
Hedge of net investment in foreign subsidiary
The consolidated entity’s EUR denominated bank loan is designated as a hedge of the consolidated entity’s investment in its subsidiary
in the Netherlands. The carrying amount of the loan at 30 June 2007 was $11,567,000 (2006: $12,556,000). A foreign exchange gain of
$989,000 (2006: loss of $996,000) was recognised in the foreign currency translation reserve on translation of the loan to AUD.
Fair values
The fair values together with the carrying amounts shown in the balance sheet are as follows:
Consolidated
In thousands of AUD
Trade and other receivables
Cash and cash equivalents
Interest rate swaps:
Assets
Forward exchange contracts:
Liabilities
Unsecured bank loans
Carrying amount
Fair value Carrying amount
Fair value
2007
2007
2006
2006
79,854
79,854
70,609
70,609
80,421
80,421
156,498
156,498
637
637
920
920
(998)
(998)
(146)
(146)
(271,567)
(271,567)
(297,498)
(297,498)
Trade payables and accrued expenses
(50,442)
(50,442)
(48,518)
(48,518)
The Company
In thousands of AUD
Cash and cash equivalents
Trade and other receivables
Payables to controlled entities
(162,095)
(162,095)
(118,135)
(118,135)
Carrying amount
Fair value Carrying amount
Fair value
2007
232
2007
232
2006
2006
–
–
599,568
599,568
513,000
513,000
(527,430)
(527,430)
(458,018)
(458,018)
Trade payables and accrued expenses
–
–
(54)
(54)
72,370
72,370
54,928
54,928
66
GWA INTERNATIONAL LIMITED 2007 ANNUAL REPORT
GWA INTERNATIONAL LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
23.
Financial instruments (continued)
Estimation of fair values
The following summarises the major methods and assumptions used in estimating the fair values of financial instruments reflected in
the table.
Derivatives
Forward exchange contracts are marked to market by discounting the contractual forward price and deducting the current spot rate. For
interest rate swaps broker quotes are obtained. These quotes are back tested using discounted cash flow techniques.
Where discounted cash flow techniques are used, estimated future cash flows are based on management’s best estimates and the discount
rate is a market related rate for a similar instrument at the balance sheet date. Where other pricing models are used, inputs are based on
market related data at the balance sheet date.
Interest–bearing loans and borrowings
The notional amount of the interest–bearing loans is deemed to reflect the fair value. The interest–bearing loans have a maximum
three–year rolling maturity, however are rolled for periods no longer than 90 days. At balance date, the AUD loans were rolled over to 27
August 2007 and the EUR loan was rolled over to 28 August 2007.
Trade and other receivables / payables
All receivables / payables are either repayable within twelve months or repayable on demand. Accordingly, the notional amount is deemed to
reflect the fair value.
Employee share loans and other employee loans
Employee share loans and other employee loans are carried at fair value using discounted cash flow techniques.
Interest rates used for determining fair value
The entity uses the government yield curve as of 30 June 2007 plus an adequate constant credit spread to discount financial instruments.
The interest rates used are as follows:
Derivatives
Employee share loans and other loans
Interest bearing loans and borrowings
24.
Operating leases
Leases as lessee
Non–cancellable operating lease rentals are payable as follows:
In thousands of AUD
Less than one year
Between one and five years
More than five years
2007
2006
6.49% – 6.96%
5.98% – 6.21%
7.05% – 7.30%
7.05% – 7.05%
5.80% – 6.35%
5.53% – 5.80%
CONSOLIDATED
THE COMPANY
2007
2006
2007
2006
8,838
10,055
19,116
23,440
–
1,868
27,954
35,363
–
–
–
–
–
–
–
–
The consolidated entity leases a number of warehouse and factory facilities under operating leases. The leases typically run for a period of 5
years, with an option to renew the lease after that date. None of the leases include contingent rentals.
One of the leased properties has been sublet by the consolidated entity. The lease and sublease expire in November 2009. Sublease
payments of $273,000 will be received during the following financial year.
During the financial year ended 30 June 2007, $9,770,000 (2006: $9,497,000) was recognised as an expense in the income statement in
respect of operating leases, which was net of sub–lease income.
67
GWA INTERNATIONAL LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
In thousands of AUD
25.
Capital and other commitments
Capital expenditure commitments
Plant and equipment
Contracted but not provided for and payable:
Within one year
26.
Contingencies
CONSOLIDATED
THE COMPANY
2007
2006
2007
2006
2,274
10,636
–
–
The directors are of the opinion that provisions are not required in respect of these matters, as it is not probable that a future sacrifice of
economic benefits will be required or the amount is not capable of reliable measurement.
CONSOLIDATED
THE COMPANY
2007
2006
2007
2006
In thousands of AUD
Contingent liabilities not considered remote
During the year, environmental testing conducted by the consolidated
entity identified levels of contamination at two sites. Rectification costs
of $200,000 have been expensed with respect to the Eagle Farm site.
Two types of contaminants have been identified at the leased Revesby
site and the scope and scale of rectification are being assessed.
Further testing is proceeding at both sites and all costs incurred to
date have been expensed. The costs of future rectification activities
were not able to be reliably estimated with respect to either site and at
balance date no amount has been provided in the consolidated accounts.
–
–
–
–
Contingent liabilities considered remote
Guarantees
(i) Under the terms of a Deed of Cross Guarantee, described in note 27,
the Company has guaranteed the repayment of all current and future
creditors in the event any of the entities party to the Deed is wound up.
No deficiency in net assets exists in these companies at reporting date.
–
–
(ii) Bank guarantees
4,387
3,243
–
–
–
–
68
GWA INTERNATIONAL LIMITED 2007 ANNUAL REPORT
GWA INTERNATIONAL LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
27.
Deed of cross guarantee
Pursuant to ASIC Class Order 98/1418 (as amended) dated 13 August 1998, the wholly–owned subsidiaries as listed in Note 28 are relieved
from the Corporations Act 2001 requirements for preparation, audit and lodgement of financial reports, and directors’ report.
It is a condition of the Class Order that the Company and each of the subsidiaries enter into a Deed of Cross Guarantee. The effect of the
Deed is that the Company guarantees to each creditor payment in full of any debt in the event of winding up of any of the subsidiaries under
certain provisions of the Corporations Act 2001. If a winding up occurs under other provisions of the Act, the Company will only be liable in
the event that after six months any creditor has not been paid in full. The subsidiaries have also given similar guarantees in the event that
the Company is wound up.
A consolidated income statement and consolidated balance sheet, comprising the Company and controlled entities which are a party to the
Deed, after eliminating all transactions between parties to the Deed of Cross Guarantee, at 30 June 2007, is set out below.
Summarised income statement and retained profits
In thousands of AUD
Profit before tax
Income tax expense
Profit after tax
Retained profits at beginning of year
Dividends recognised during the year
Retained profits at end of year
CONSOLIDATED
2007
80,072
(21,751)
58,321
33,252
(64,010)
27,563
2006
63,137
(17,972)
45,165
43,747
(55,660)
33,252
69
GWA INTERNATIONAL LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
In thousands of AUD
27.
Deed of cross guarantee (continued)
Balance Sheet
Assets
Cash and cash equivalents
Trade and other receivables
Inventories
Income tax receivable
Other
Total current assets
Receivables
Intercompany receivables
Investments
Deferred tax assets
Property, plant and equipment
Intangible assets
Other
Total non–current assets
Total assets
Liabilities
Trade and other payables
Employee benefits
Provisions
Total current liabilities
CONSOLIDATED
2007
2006
66,332
65,627
116,511
320
4,636
138,298
61,045
85,869
4,905
3,969
253,426
294,086
4,982
44,179
15,600
24,673
77,287
321,244
3,542
491,507
744,933
46,132
14,618
13,329
74,079
3,677
31,252
16,280
25,330
92,896
319,066
2,326
490,827
784,913
45,257
16,400
19,219
80,876
Interest–bearing loans and borrowings
271,567
297,498
Deferred tax liabilities
Employee benefits
Provisions
Total non–current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained earnings
Total equity
512
10,871
8,720
291,670
365,749
379,184
967
12,369
11,344
322,178
403,054
381,859
353,062
346,853
(1,441)
27,563
1,754
33,252
379,184
381,859
70
GWA INTERNATIONAL LIMITED 2007 ANNUAL REPORT
GWA INTERNATIONAL LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
COUNTRY OF INCORPORATION
OWNERSHIP INTEREST
Parties to
Cross Guarantee
2007
2006
28.
Consolidated entities
Parent entity
GWA International Limited
Subsidiaries
GWA Group Limited
Gainsborough Hardware Industries Limited
Caroma Holdings Limited
GWA (North America) Pty Ltd
Sebel Furniture Inc
Caroma Industries Limited
G Subs Pty Ltd
Sebel Furniture (Hong Kong) Ltd
GWA Trading (Shanghai) Co Ltd
GWA International (Hong Kong) Limited
Stylus Pty Ltd
Ecohome Pty Ltd
Fowler Manufacturing Pty Ltd
Starion Tapware Pty Ltd
Dorf Clark Industries Ltd
Dorf Industries (NZ) Ltd
McIlwraith Davey Pty Ltd
Stylus Sales Limited
Caroma Industries Europe BV
Wisa Beheer BV
Wisa BV
Wisa Systems BV
Wisa GmbH
Stokis Kon Fav. Van Metaalwerken NV
Caroma International Pty Ltd
Caroma USA Inc
Caroma Canada Industries Ltd
Caroma Industries (UK) Ltd
Canereb Pty Ltd
Dux Manufacturing Limited
GWA Taps Manufacturing Limited
Lake Nakara Pty Ltd
Mainrule Pty Ltd
Warapave Pty Ltd
Rover Mowers (NZ) Limited
Caroma Industries (NZ) Limited
GWAIL (NZ) Ltd
Rover Mowers Limited
Industrial Mowers (Australia) Limited
Olliveri Pty Ltd
Sebel Service & Installations Pty Ltd
Sebel Properties Pty Ltd
Y
Y
Y
Y
Y
N
Y
Y
N
N
N
Y
Y
Y
Y
Y
N
Y
N
N
N
N
N
N
N
Y
N
N
N
N
Y
Y
N
N
N
N
N
N
Y
Y
Y
Y
Y
Australia
Australia
Australia
Australia
Australia
USA
Australia
Australia
Hong Kong
China
Hong Kong
Australia
Australia
Australia
Australia
Australia
New Zealand
Australia
New Zealand
Netherlands
Netherlands
Netherlands
Netherlands
Germany
Netherlands
Australia
USA
Canada
UK
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
New Zealand
New Zealand
Australia
Australia
Australia
Australia
Australia
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
71
GWA INTERNATIONAL LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
28.
Consolidated entities (continued)
Sebel Furniture Limited (NZ)
Sebel Furniture Limited
Sebel Furniture (SEA) Pte Ltd
Sebel Sales Pty Limited
Caroma Singapore Pte Limited
GWA Finance Pty Limited
Hetset (No. 5) Pty Ltd
Gainsborough Hardware Limited
Bankstown Unit Trust
COUNTRY OF INCORPORATION
OWNERSHIP INTEREST
Parties to
Cross Guarantee
2007
2006
N
Y
N
Y
N
Y
Y
N
Y
New Zealand
Australia
Singapore
Australia
Singapore
Australia
Australia
UK
Australia
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
In thousands of AUD
29.
Reconciliation of cash flows from operating activities
Cash flows from operating activities
Profit for the period
Adjustments for:
Depreciation
Amortisation
Impairment/(reversal of) losses
Foreign exchange (gains)/losses
Interest expense/(income)
Dividends from controlled entities
Distributions from controlled trusts
(Gain)/loss on sale of property, plant and equipment
Income tax expense/(benefit)
CONSOLIDATED
THE COMPANY
2007
2006
2007
2006
56,318
56,852
75,000
31,384
19,240
21,929
539
491
–
–
–
–
1,227
2,816
–
(17,592)
755
755
12,366
11,490
–
–
–
–
1,295
(14,471)
22,791
20,911
–
–
(75,000)
–
(27)
–
–
(13,142)
–
–
–
–
(624)
(1)
Operating profit before changes in working capital and provisions
114,531
100,773
(Increase)/decrease in trade and other receivables
(8,380)
(8,235)
12,806
(41,778)
(Increase)/decrease in inventories
Increase/(decrease) in trade and other payables
(32,869)
2,148
–
–
1,986
(4,498)
62,193
54,920
Increase/(decrease) in provisions and employee benefits
(11,684)
8,046
–
–
Interest received/(paid)
Income taxes paid
Net cash from operating activities
63,584
98,234
74,999
13,141
(14,186)
(9,177)
–
27
(21,100)
(29,019)
(18,220)
(27,927)
28,298
60,038
56,779
(14,759)
72
GWA INTERNATIONAL LIMITED 2007 ANNUAL REPORT
GWA INTERNATIONAL LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
30.
Related parties
The following were key management personnel of the consolidated entity at any time during the reporting period and unless otherwise
indicated were key management personnel for the entire period:
Non–executive Directors
B Thornton (Chairperson)
J Kennedy
M Kriewaldt
D Barry
R Anderson
G McGrath
Executives
E Harrison (Chief Financial Officer)
S Wright (Group Operations Manager)
A Rusten (Group Marketing Manager)
R Watkins (General Manager – Rover) – terminated 14 February 2007
J Measroch (General Manager – Sebel)
G Oliver (General Manager – Gainsborough)
W Bartlett – appointed 21 February 2007
D Duncan (General Manager – Dorf Clark) – ceased key management personnel
Executive Directors
P Crowley (Managing Director)
status 30 June 2006
L Patterson (General Manager – Dux)
Key management personnel compensation
The key management personnel compensation included in ‘personnel expenses’ (see note 5) are as follows:
In AUD
Short–term employee benefits
Post–employment benefits
Termination benefits
Other benefits
Principles of compensation
Remuneration objectives
CONSOLIDATED
THE COMPANY
2007
2006
2007
2006
4,318,898 4,263,776
804,337
570,997
250,000
–
39,076
39,054
5,412,311 4,873,827
–
–
–
–
–
–
–
–
–
–
The performance of the Company depends upon the quality of its directors and executives. To maximise the performance of the Company’s
businesses, the Company must attract, motivate and retain a highly skilled director and executive team. This is achieved through a
remuneration and incentive framework which has been put in place by the Board, and is guided by the following objectives:
• Provide fair and competitive rewards to attract high quality executives
• Linking of executive reward to improvement in Company performance
• Significant proportion of executive remuneration is “at risk”, dependent upon meeting pre–determined performance benchmarks
• The establishment of challenging and achievable performance hurdles in relation to variable executive remuneration
• An employee share plan which rewards performance and represents a long term financial commitment to employment with
the Company.
Remuneration structure
The remuneration structure for the Non–Executive Directors is separate and distinct from the remuneration structure for the executives.
73
GWA INTERNATIONAL LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
30.
Related parties (continued)
Principles of compensation (continued)
Non–executive directors’ remuneration policy
The Nomination Committee is responsible for determining the remuneration arrangements for the Non–Executive Directors, with the annual
maximum aggregate amount approved by shareholders. At the Annual General Meeting on 28 October 2004, shareholders approved an
annual maximum aggregate amount of $1 million (excluding statutory superannuation).
The Non–Executive Directors are remunerated by way of directors’ fees only (including statutory superannuation) and are not able to
participate in the Executive Incentive Scheme or the GWA International Employee Share Plan (refer below). An additional fee is also paid for
each Board Committee on which a director sits. The payment of additional fees for serving on a Committee recognises the additional time
commitment required by directors who serve on one or more Committees.
In setting the level of non–executive directors fees’ and the manner in which it is to be apportioned amongst the directors, the Nomination
Committee takes advice from external remuneration consultants to determine market remuneration levels, with the objective of ensuring
that the levels are market based and fairly represent the responsibilities and time spent by the Non–Executive Directors on
Company matters.
Following shareholder approval of the termination of the Directors’ Retirement Scheme for Non–Executive Directors at the Annual General
Meeting on 30 October 2003, retirement benefits are not available for any new Non–Executive Directors of the Company, other than
statutory superannuation.
At the Annual General Meeting on 28 October 2004, shareholders approved the payment of the accrued benefits to the Non–Executive
Directors under the former Directors’ Retirement Scheme, when each director requests that payment be made.
Executives’ remuneration policy
The Remuneration Committee is responsible for determining and reviewing the remuneration arrangements for the executives. The
Remuneration Committee takes advice from external remuneration consultants to ensure the appropriateness of the nature and amount
of emoluments of such officers, with the overall objective of ensuring maximum stakeholder benefits from the retention of a high quality
executive team.
The executives’ remuneration consists of the following key elements:
• Fixed Remuneration
• Variable Remuneration
• Short-Term Incentive
• Medium-Term Incentive
• Employee Share Plan.
The fixed remuneration component includes base salary, statutory superannuation and non–monetary benefits including medical benefits
membership, life and disability insurance and the provision of motor vehicles. The variable remuneration component includes a short-term
incentive and medium-term incentive under the Executive Incentive Scheme. As a further component of remuneration, employees of the
Company may be invited to participate in the GWA International Employee Share Plan.
74
GWA INTERNATIONAL LIMITED 2007 ANNUAL REPORT
GWA INTERNATIONAL LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
30.
Related parties (continued)
Principles of compensation (continued)
Fixed remuneration
The level of fixed remuneration is set so as to provide a base level of remuneration which is both appropriate to the position and is
competitive in the market. Fixed remuneration is reviewed annually by the Remuneration Committee based on advice from external
remuneration consultants for determining market remuneration levels, as well as having regard to Company, divisional and
individual performance.
Variable remuneration
To assist in achieving the objective of retaining a high quality executive team, the Remuneration Committee links the nature and amount of
the executive emoluments to the Company’s financial and operating performance. Executives have the opportunity to qualify for participation
in the Executive Incentive Scheme. Under the scheme there are two incentives, one based on yearly performance and one based on discrete
three year periods. All performance plan payments are subject to maximum amounts.
Executive incentive scheme
The Executive Incentive Scheme came into effect on 1 July 2001 and its participants include the members of the divisional and corporate
executive. There are two incentives including an Operating Performance Incentive and a Strategic Growth Incentive, with the objective of
maximising short term operating performance and long term strategic growth.
The Operating Performance Incentive operates from divisional operating profit targets for divisional executives, and group earnings before
interest and tax targets for corporate executives. Where the yearly profit targets are achieved, participating executives receive an incentive
payment, subject to a cap of 30% to 35% of their base salary.
The yearly profit targets are set by the Remuneration Committee at the beginning of the year having regard to the major external factors
which are expected to impact each division including forecast economic conditions, expected benefits from new products, capital
expenditure and other relevant factors. The Remuneration Committee ensures that the profit targets are challenging and achievable, and
will assist in focusing divisional and corporate executives on maximising operating performance of the Company’s businesses.
The Strategic Growth Incentive rewards progressive growth in underlying divisional profitability and earnings per share over time. The
incentive is calculated based on divisional profit targets for divisional executives, and earnings per share targets for corporate executives,
within discrete three year periods. Where the three year profit and earnings per share targets are achieved, participating executives receive
an incentive payment, subject to a cap of 20% to 30% of their base salary.
The three year profit and earnings per share targets are set by the Remuneration Committee at the beginning of the three year period having
regard to current performance and forecast external factors expected to impact each division, and are also subject to minimum return on
investment achievement. The Remuneration Committee ensures that the three year profit and earnings per share targets are challenging
and achievable, and will assist in focusing divisional and corporate executives on maximising growth in profitability and return
on investment.
The total combined payments under the abovementioned two incentives are capped at 50% to 65% of salary for each participating
executive. Payments are delivered by way of cash bonus, and are paid when the Company’s annual Financial Statements are completed.
75
GWA INTERNATIONAL LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
30.
Related parties (continued)
Principles of compensation (continued)
Employee share plan
As a further component of remuneration, employees of the Company may be invited to participate in the GWA International Employee Share
Plan which commenced on the listing of the Company in 1993. Under the plan, employees are provided with a non–interest bearing loan
from the Company to acquire shares in the Company at market value. The loan is repaid through dividends, or in full upon an employee
ceasing employment with the Company. The employee bears the risk of share price movements below the issue price.
In accordance with the rules of the plan, the total number of employee shares on issue may not exceed 5% of the total Company shares
on issue. At 30 June 2007 there are currently 3.44 million shares issued under the GWA International Employee Share Plan, which have an
outstanding loan balance of $9.6 million. The plan does not provide for the issue of options and no options have been issued by
the Company.
There are three events which trigger employee share issues, all of which must be approved by the Remuneration Committee, including:
• Appointment of new divisional and corporate executives as recommended by the Managing Director
• Achievement of three year targets by divisional and corporate executives pursuant to the Executive Incentive Scheme (refer above)
•
The periodic issue to employees who merit additional recognition of their performance and are integral to the future success of the
Company, as recommended by the Managing Director.
The GWA International Employee Share Plan is an effective incentive in encouraging and rewarding sustained higher performance from
executives and senior management, and represents a long term financial commitment to their employment with the Company.
Termination of employment
The executives are on open–ended contracts, except for the Executive Director, Mr Peter Crowley, whose employment contract specifies an
initial term of twelve months with subsequent rolling terms of twelve months.
The employment contract for Mr Crowley provides that if either the Company or Mr Crowley wishes to terminate employment for any reason,
three months notice of termination is required, or payment in lieu, based upon current salary levels. On termination by the Company, Mr
Crowley will be entitled to receive payment of twelve months salary.
For the other executives, the Company is legally required to give reasonable notice of termination, or payment in lieu, based upon current
salary levels.
Under the Executive Incentive Scheme, no incentive is payable in the event of termination of employment during the incentive period.
Any loan to an executive under the GWA International Employee Share Plan, must be repaid in full upon the cessation of employment with
the Company.
76
GWA INTERNATIONAL LIMITED 2007 ANNUAL REPORT
GWA INTERNATIONAL LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
30.
Related parties (continued)
Key management personnel compensation (continued)
Individual directors and executives compensation
Apart from the details disclosed in this note, no director has entered into a material contract with the Company or the consolidated entity
since the end of the previous financial year and there were no material contracts involving directors’ interests existing at year–end.
Details of the nature and amount of each major element of remuneration of each director of the Company and other key management
personnel are:
Directors:
Non-Executive
B Thornton
SHORT-TERM
POST-
EMPLOYMENT
Non-
1 year monetary
benefits
$
incentive
$
Salary
& fees
$
3 year *
incentive
$
Super-
annuation
benefits
$
Total
$
Other
$
Total
$
2007
177,873
2006
166,173
J Kennedy
2007
144,024
2006
137,477
M Kriewaldt
2007
102,960
D Barry
2006
98,280
2007
90,948
2006
86,814
R Anderson
2007
85,800
2006
81,900
G McGrath
2007
22,737
2006
86,814
2007
2006
–
–
W Bartlett (appointed
21 February 2007)
Executive Directors
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
177,873
102,693
250
280,816
166,173
101,640
250
268,063
144,024
137,477
–
–
250
144,274
250
137,727
102,960
9,266
250
112,476
98,280
8,845
250
107,375
90,948
8,185
250
99,383
86,814
7,813
250
94,877
85,800
7,722
250
93,772
81,900
7,371
250
89,521
22,737
76,396
250
99,383
86,814
7,813
250
94,877
–
–
36,434
250
36,684
–
–
–
P Crowley
2007
1,057,228
–
152,875
–
1,210,103
36,000
11,855 1,257,958
2006
917,997
–
158,916
(190,000)
886,913
36,000
10,727
933,640
Total – Directors
2007
1,681,570
–
152,875
–
1,834,445
276,696
13,605 2,124,746
Total – Directors
2006
1,575,455
–
158,916
(190,000)
1,544,371
169,482
12,227 1,726,080
* The incentives for the Executive Director and Executives under the three year Executive Incentive Scheme were provided for in the 2004/05
year and were written back in the 2005/06 year as the targets were not expected to be achieved.
77
GWA INTERNATIONAL LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
30.
Related parties (continued)
Key management personnel compensation (continued)
Individual directors and executives compensation (continued)
SHORT-TERM
POST-
EMPLOYMENT
Salary
& fees incentive
Non-
1 year monetary
benefits
3 year *
incentive
Super-
annuation
benefits
Total
$
$
$
$
$
$
Termin-
ation
benefits
$
Other
$
Total
$
Executives
E Harrison
2007
365,707
2006
447,268
S Wright
2007
417,957
2006
387,089
A Rusten
2007
272,087
2006
263,209
R Watkins (terminated
14 February 2007)
2007
161,844
2006
281,171
J Measroch
2007
278,245
2006
275,764
–
–
–
–
–
–
–
–
–
–
83,345
–
449,052
105,000
4,260
–
558,312
87,546
(70,546)
464,268
–
5,118
–
469,386
50,473
–
468,430
123,420
4,069
–
595,919
60,845
(70,945)
376,989
100,592
3,993
–
481,574
74,310
23,835
–
346,397
26,700
3,262
–
376,359
–
287,044
25,288
3,070
–
315,402
42,132
–
203,976
70,000
5,103 250,000
529,079
50,936
–
332,107
58,725
3,152
–
393,984
50,168
–
328,413
26,663
3,258
–
358,334
67,223
–
342,987
25,485
3,125
–
371,597
G Oliver
2007
194,603 84,810
47,027
–
326,440
147,695
2,092
–
476,227
D Duncan (ceased
key management
personnel status
30 June 2006)
2006
177,333 79,425
62,289
(47,505)
271,542
138,475
1,973
–
411,990
2007
–
–
–
–
–
–
–
–
–
2006
258,151
–
123,019
(50,000)
331,170
27,420
3,266
–
361,856
L Patterson
2007
285,269
2006
250,744
–
–
76,476
–
361,745
28,163
3,427
–
393,335
62,554
–
313,298
25,530
3,130
–
341,958
Total – Executives
2007 1,975,712 84,810
423,931
– 2,484,453
527,641
25,471 250,000 3,287,565
Total – Executives
2006 2,340,729 79,425
538,247 (238,996) 2,719,405
401,515
26,827
– 3,147,747
Total –Directors and
Executives
2007 3,657,282 84,810
576,806
– 4,318,898
804,337
39,076 250,000 5,412,311
Total – Directors and
Executives
2006 3,916,184 79,425
697,163 (428,996) 4,263,776
570,997
39,054
– 4,873,827
* The incentives for the Executive Director and Executives under the three year Executive Incentive Scheme were provided for in the 2004/05
year and written back in the 2005/06 year as the targets are not expected to be achieved.
78
GWA INTERNATIONAL LIMITED 2007 ANNUAL REPORT
GWA INTERNATIONAL LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
30.
Related parties (continued)
Loans to key management personnel and their related parties (consolidated)
Details regarding loans outstanding at the reporting date to key management personnel and their related parties, where the individual’s
aggregate loan balance exceeded $100,000 at any time in the reporting period, are as follows:
Directors
P Crowley
Executives
E Harrison
S Wright
A Rusten
J Measroch
G Oliver
L Patterson
D Duncan
Balance
1 July 2006
$
Balance
30 June 2007
$
Interest paid
and payable in
the reporting period
$
Highest balance
in period
$
1,095,000
980,000
610,255
141,269
–
339,745
362,900
97,303
486,457
858,540
–
–
280,991
1,025,991
780,991
–
–
–
–
–
–
–
–
–
1,095,000
845,986
486,457
893,040
379,745
362,900
1,025,991
780,991
Loans totalling $2,525,040 (2006: $nil) were made to key management personnel or their related parties during the year. The loans made in
the current financial year related to the Employee Share Plan.
Details regarding the aggregate of loans made, guaranteed or secured by any entity in the consolidated entity to key management personnel
and their related parties, and the number of individuals in each group, are as follows:
Opening
Balance
$
Closing
Balance
$
Interest paid
and payable in
the reporting period
$
Total for key management personnel 2007
3,706,901
5,830,110
Total for key management personnel 2006
4,769,637
3,706,901
–
–
Number in
group at
30 June
$
5
8
Mr E Harrison has an unsecured housing loan of $75,000. This loan is interest free and repayable on termination. Mr D Duncan repaid a
$500,000 housing loan during the current financial year. All other loans are with respect to the Employee Share Plan. The Employee Share
Plan loans are interest free and repayable over 15 years or earlier in certain circumstances. Dividends paid on the shares acquired under the
Plan are applied against the balance of the loan outstanding.
Other key management personnel transactions with the Company or its controlled entities
The consolidated entity purchased components and tooling of $355,128 (2006: $304,009) from Great Western Corporation Pty Ltd, a
company of which Mr B Thornton is a director. Amounts were billed based on normal market rates for such supplies and were due and
payable under normal payment terms. Amounts receivable from and payable to key management personnel at reporting date arising from
these transactions were as follows:
In AUD
Trade creditors
CONSOLIDATED
THE COMPANY
2007
2006
2007
2006
41,679
3,982
–
–
From time to time, key management personnel of the Company or its controlled entities, or their related entities, may purchase goods from
the consolidated entity. These purchases are on the same terms and conditions as those entered into by other consolidated entity employees
or customers and are trivial or domestic in nature.
79
GWA INTERNATIONAL LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
30.
Related parties (continued)
Movements in shares
The movement during the reporting period in the number of ordinary shares in GWA International Limited held, directly, indirectly or
beneficially, by each key management person, including their related parties, is as follows:
Directors: Non–Executive
B Thornton
J Kennedy
M Kriewaldt
D Barry
R Anderson
G McGrath
W Bartlett
Executive Directors
P Crowley
Executives
E Harrison
S Wright
A Rusten
R Watkins
J Measroch
G Oliver
L Patterson
Directors: non–executive
B Thornton
J Kennedy
M Kriewaldt
D Barry
R Anderson
G McGrath
Executive Directors
P Crowley
Executives
E Harrison
S Wright
A Rusten
R Watkins
J Measroch
G Oliver
D Duncan
L Patterson
Held at 1 July 2006
Purchases
Sales Held at 30 June 2007
15,023,402
52,000
10,000
100,000
12,372,389
28,890,832
420,458
–
500,000
620,975
168,750
–
100,000
200,000
231,250
100,000
–
–
–
–
–
–
–
100,000
100,000
300,000
–
–
25,000
200,000
(1,500)
(9,000)
–
(16,500)
–
(120,458)
–
–
(607,064)
–
–
(100,000)
(200,000)
(100,000)
–
15,073,902
1,000
100,000
12,355,889
28,890,832
300,000
–
500,000
113,911
268,750
300,000
–
–
156,250
300,000
Held at 1 July 2005
Purchases
Sales Held at 30 June 2006
15,025,902
50,000
100,000
12,409,189
20,692,832
593,026
500,000
620,975
418,750
–
100,000
200,000
231,250
100,000
100,000
–
–
–
–
8,198,000
–
–
–
–
–
–
–
–
–
–
(2,500)
(40,000)
–
(36,800)
–
(172,568)
–
–
(250,000)
–
–
–
–
–
–
15,023,402
10,000
100,000
12,372,389
28,890,832
420,458
500,000
620,975
168,750
–
100,000
200,000
231,250
100,000
100,000
No shares were granted to key management personnel during the reporting period as compensation. The aggregate number of shares held by
key management personnel or their related parties at 30 June 2007 was 58,360,534 (2006: 57,036,806).
80
GWA INTERNATIONAL LIMITED 2007 ANNUAL REPORT
GWA INTERNATIONAL LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
30.
Related parties (continued)
Subsidiaries
Loans are made by the Company to its wholly owned subsidiaries. The loans have no fixed date of repayment and are non–interest bearing.
Loans are made by wholly owned subsidiaries to other wholly owned subsidiaries. These loans are categorised as funding or trading
depending on the nature of transactions.
The funding loans represent funding for tax, capital expenditure and initial investment transactions. Where the funding loans are for tax
or capital expenditure and are also between different countries, interest is charged on these loans at market rates. Where the funding
loans are in relation to initial investment transactions, these loans are considered part of the net investment in the wholly owned foreign
subsidiary and accordingly these loans have no fixed date of repayment and are non–interest bearing. All other funding loans have no fixed
date of repayment and are non–interest bearing.
Trading transactions between wholly owned subsidiaries are generally transacted on 30 day credit terms.
31.
Subsequent events
To the best of our knowledge, since balance date, no matters have arisen which will, or may, significantly affect the operation or results of
the consolidated entity in later years.
81
DIRECTORS’ DECLARATION
1. In the opinion of the directors of GWA International Limited (‘the Company’):
(a) the financial statements and notes are in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the financial position of the Company and the consolidated entity as at 30 June 2007 and of
their performance, as represented by the results of their operations and their cash flows, for the financial year ended on that
date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001
(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.
2. There are reasonable grounds to believe that the Company and the controlled entities identified in Note 27 will be able to meet any
obligations or liabilities to which they are or may become subject to by virtue of the Deed of Cross Guarantee between the Company and
those controlled entities pursuant to ASIC Class Order 98/1418.
3. The directors have been given the declarations by the Managing Director and Chief Financial Officer for the financial year ended 30 June
2007 pursuant to Section 295A of the Corporations Act 2001.
Dated at Brisbane on 21 August 2007.
Signed in accordance with a resolution of the directors:
Barry Thornton
Director
Peter Crowley
Director
82
GWA INTERNATIONAL LIMITED 2007 ANNUAL REPORT
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
GWA INTERNATIONAL LIMITED
We have audited the accompanying financial report of GWA International Limited (the “Company”), which comprises the balance sheets
as at 30 June 2007, and the income statements, statements of recognised income and expense, and statements of cash flows for the year
ended on that date, a summary of significant accounting policies and other explanatory notes 1 to 31 to the financial statements, and the
Directors’ declaration of the consolidated entity comprising the Company and the entities it controlled at the year’s end or from time to time
during the financial year.
Directors’ responsibility for the financial report
The Directors of the Company are responsible for the preparation and fair presentation of the financial report in accordance with Australian
Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes
establishing and maintaining internal control relevant to the preparation and fair presentation of the financial report that is free from mate-
rial misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates
that are reasonable in the circumstances. In note 1(a), the directors also state, in accordance with Australian Accounting Standard AASB
101 Presentation of Financial Statements, that the financial report of the consolidated entity and the Company, comprising the financial
statements and notes, complies with International Financial Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian
Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and
plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures
selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether
due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair
presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purposes of
expressing an opinion on the effectiveness of the entity’s internal control.
An audit also involves evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by
the directors, as well as evaluating the overall presentation of the financial report.
We performed the procedures to assess whether in all material respects the financial report presents fairly, in accordance with the
Corporations Act 2001 and Australian Accounting Standards (including the Australian Accounting Interpretations), a view which is
consistent with our understanding of the Company’s and the consolidated entity’s financial position and of their performance.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Auditor’s opinion on the financial report
In our opinion:
(a) the financial report of GWA International Limited is in accordance with the Corporations Act 2001, including:
i. giving a true and fair view of the Company’s and consolidated entity’s financial position as at 30 June 2007 and of their performance
for the year ended on that date
ii. complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the
Corporations Regulations 2001.
(b) the financial report of the consolidated entity also complies with International Financial Reporting Standards as disclosed in note 1(a).
KPMG
Sydney, 21 August 2007
Mark Epper
Partner
83
OTHER STATUTORY INFORMATION AS AT 20 AUGUST 2007
Statement of shareholding
In accordance with the Australian Securities Exchange Listing Rules, the directors state that, as at 20 August 2007, the share capital in the
Company was held as follows:
Range
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
Ordinary Shareholders
Ordinary Shares
1,679
6,889
3,495
2,165
122
1,117,710
20,913,050
26,436,065
45,904,363
185,551,807
%
0.4
7.5
9.4
16.4
66.3
14,350
279,922,995
100.0
The number of shareholders with less than a marketable parcel of shares is 116.
Voting Rights
The voting rights attached to shares are as set out in clause 10.20 of the Company’s Constitution. Subject to that clause, at General
Meetings of the Company:
1. On a show of hands, every person present as a member, proxy, attorney or representative of a member has one vote;
2. On a poll, every person present as a member, proxy, attorney or representative of a member, has one vote for each fully paid share.
Substantial shareholders
The following information is extracted from the Company’s Register of Substantial Shareholders as at 20 August 2007:
Shareholder
HGT Investments Pty Ltd
Number of Shares % of Shares on Issue
14,448,152
5.16
84
GWA INTERNATIONAL LIMITED 2007 ANNUAL REPORT
OTHER STATUTORY INFORMATION AS AT 20 AUGUST 2007
20 Largest shareholders as at 20 August 2007
Shareholder
Number of Shares
% Shares on Issue
J P Morgan Nominees Australia Limited
HGT Investments Pty Ltd
National Nominees Limited
Erand Pty Ltd
KFA Investments Pty Ltd
CJZ Investments Pty Ltd
JMB Investments Pty Ltd
Ashberg Pty Ltd
Theme (No 3) Pty Ltd
Australian Foundation Investment Company Limited
Citicorp Nominees Pty Limited
HSBC Custody Nominees (Australia) Limited
RBC Dexia Investor Services Australia Nominees Pty Limited (Bkcust A/c)
ITA Investments Pty Ltd
Mr Barry Thornton & Mr Chris Hamlin (The Sharp Family Account)
Citicorp Nominees Pty Limited (CFS Future Leaders Fund A/c)
Dabary Investments Pty Ltd
Cogent Nominees Pty Limited
Harvest Home Holdings Pty Ltd
ANZ Nominees Limited
Total
18,439,775
14,448,152
13,209,411
9,898,229
9,863,817
9,700,651
8,800,425
8,198,000
7,201,160
6,612,136
6,193,456
6,014,585
5,774,569
5,152,338
4,740,033
3,842,940
3,398,961
2,656,460
2,586,416
2,286,165
6.59
5.16
4.72
3.54
3.52
3.47
3.14
2.93
2.57
2.36
2.21
2.15
2.06
1.84
1.69
1.37
1.21
0.95
0.92
0.82
149,017,679
53.24
85
SHAREHOLDER INFORMATION
Annual General Meeting
The Annual General Meeting of GWA International Limited will be held in The Grand Ballroom, Stamford Plaza Brisbane, Cnr Edward and
Margaret Streets Brisbane on Thursday 25 October 2007 commencing at 10:30 am. Shareholders will be mailed their Notice of Annual
General Meeting and Proxy Form during September 2007.
Shareholder Enquiries
Shareholders with enquiries about their shareholding or dividend payments should contact the Company’s share registry, Computershare
Investor Services Pty Ltd, on 1300 552 270 or write to GPO Box 523 Brisbane Queensland Australia 4001.
Change of Address
Shareholders who have changed their address should immediately notify the Company’s share registry in writing.
Consolidation of Shareholdings
Shareholders who wish to consolidate their separate shareholdings into one holding should notify the Company’s share registry in writing.
Annual Reports
Annual Reports are made available to shareholders on the Company’s website. Shareholders wishing to be mailed an Annual Report should
notify the Company’s share registry in writing. Shareholders will be mailed the Notice of Annual General Meeting and Proxy Form which will
include details on accessing the online Annual Report.
Dividends
Dividends are determined by the Board, having regard to the financial circumstances of the Company. Dividends are normally paid in April
and October each year following the release of the Company’s half year and full year results to the market. The latest dividend details can be
found on the Company’s website.
Direct Credit of Dividends
Dividends may be paid directly to a bank, building society or credit union account in Australia. Payments are electronically credited on the
dividend payment date and confirmed by an advice mailed to shareholders on that date, or emailed where shareholders have requested this
form of communication.
To ensure the timely receipt of dividends, the Company encourages shareholders to provide direct credit instructions. Direct credit
application forms can be obtained from the Company’s share registry.
Dividend Reinvestment Plan and Share Purchase Plan
Both Plans were suspended on 8 February 2000. Past support from shareholders has provided sufficient funds to meet the growth needs of
the Company. Directors keep this position under review.
Stock Exchange Listing
The Company’s shares are listed on the Australian Securities Exchange under the ASX code: GWT. Details of the trading activity of the
Company’s shares are published in most daily newspapers, generally under the abbreviation GWA Intl.
86
GWA INTERNATIONAL LIMITED 2007 ANNUAL REPORT
SHAREHOLDER INFORMATION
Shareholder Timetable 2007
30 June
21 August
10 September
14 September
17 September
2 October
23 October
25 October
31 December
Financial year end
Year end result and final dividend announcement
Ex dividend date for final dividend
Record date for determining final dividend entitlement
Notice of Annual General Meeting and Proxy Form mailed to shareholders
Final ordinary dividend and special dividend paid
Proxy returns close 10:30 am Brisbane
Annual General Meeting
Half year end
1
Performance Highlights
2
Chairman’s Review
5
Managing Director’s
Review of Operations
10
Strategic Direction
and Business Divisions
15
GWA Sustainability Story
18
Board of Directors
20
Corporate Governance
Statement
29
Directors’ Report
38
Financial Statements
83
Other Statutory
Information
85
Shareholder
Information
and Timetable
Caroma Dorf is
Australia’s foremost
designer, manufacturer,
importer and distributor of
domestic and commercial
bathroom and kitchen
products, including
sanitaryware, tapware,
accessories, bathware,
stainless steel sinks and
laundry tubs. Caroma
Dorf is at the forefront
of product innovation
incorporating water saving
technologies, and is the
market leader in water
efficient sanitaryware
and tapware.
Dux is an Australian
designer, manufacturer,
importer and distributor
of a range of hot water
systems. The range
includes mains pressure
gas and electric storage,
continuous flow gas,
electric and gas boosted
solar and heat pump
products. Dux has
developed an extensive
range of innovative
environmental products
to meet the changing
regulatory requirements,
and which assist in
reducing domestic energy
consumption.
Gainsborough is
a leading Australian
designer, manufacturer,
importer and distributor of
a comprehensive range of
domestic and commercial
door hardware and
fittings, including security
products.
Rover is one of
Australia’s leading
designers, importers and
distributors of domestic
and commercial lawn and
garden care equipment.
Sebel is at the forefront
of Australian design,
manufacture, import and
distribution of quality
commercial furniture
and seating.
GWA International Limited was listed on the
Australian Securities Exchange in May 1993 and is
one of Australia’s largest designers, manufacturers,
importers and distributors of household consumer
products. The Company is the owner of an extensive
range of well-known brands including Caroma,
Dorf, Fowler, Stylus, Clark, Radiant, Irwell, Dux,
Gainsborough, Sebel and Rover, and is the exclusive
Australian distributor of other brands including
Hansa and KWC.
GWA International Limited currently comprises
five business divisions, Caroma Dorf, Dux,
Gainsborough, Rover and Sebel, all of which are
well-established businesses with strong brand
names and market positions. The Company
is a significant Australian employer and has
manufacturing facilities located throughout Australia.
GWA International Limited invests significantly in
research and new product development which has
enabled the businesses to maximise opportunities
in a competitive marketplace. The Company is
committed to the research and development of
innovative environmental products which provide
sustainable solutions for reducing domestic and
commercial water consumption, and greenhouse
gas emissions.
GWA International Limited has grown significantly
since listing as a result of the strong operating
performance of the businesses and successful
acquisitions. The Company remains committed
to growing long term shareholder wealth through
improved business performance and the pursuit of
further appropriate domestic acquisitions that add
value to its existing businesses, and that support
expansion into new markets.
Mission Statement
GWA International Limited’s primary objective is
to grow shareholder wealth. This objective will be
achieved by continuing to invest in the development
of its people, new products and world leading
technologies, to sustain and build premium
profitability of its businesses over time.
The Company’s core business segment is building
fixtures and fittings which will focus on the research
and development of innovative new products to
maximise market opportunities for the businesses.
The Company will continue to develop products
which provide sustainable solutions for reducing
domestic and commercial water consumption, and
greenhouse gas emissions.
GWA International Limited will grow the profitability
of its businesses by investing for sustainable growth
and adapting its business models for a changing
market. The Company will continue the pursuit of
appropriate domestic acquisitions that add value to
its existing businesses, and that support expansion
into new markets.
CORPORATE DIRECTORY
HEAD OFFICE LOCATIONS
Directors
B Thornton, Chairman
J J Kennedy, Deputy Chairman
P C Crowley, Managing Director
D R Barry, Non-Executive Director
R M Anderson, Non-Executive Director
M D E Kriewaldt, Non-Executive Director
G J McGrath, Non-Executive Director
W J Bartlett, Non-Executive Director
Company Secretary
R J Thornton, CA B Com (Acc) LLB (Hons) LLM
Registered Office
Level 14, 10 Market Street
Brisbane QLD 4000
AUSTRALIA
Telephone: 61 7 3109 6000
Facsimile: 61 7 3236 0522
Website: www.gwail.com.au
ASX code: GWT
Auditor
KPMG
10 Shelley Street
Sydney NSW 2000
AUSTRALIA
Telephone: 61 2 9335 7000
Facsimile: 61 2 9299 7077
Share Registry
Computershare Investor Services Pty Ltd
Level 19, 307 Queen Street
Brisbane QLD 4000
AUSTRALIA
GPO Box 523
Brisbane QLD 4001
AUSTRALIA
Telephone: 1300 552 270
Facsimile: 61 7 3237 2152
Website: www.computershare.com.au
Group Bankers
BNP Paribas
Citibank
Commonwealth Bank of Australia
National Australia Bank
GWA INTERNATIONAL LIMITED
Level 14
10 Market Street
Brisbane QLD 4000
AUSTRALIA
Telephone: 61 7 3109 6000
Facsimile: 61 7 3236 0522
Website: www.gwail.com.au
CAROMA DORF
4 Ray Road
EPPING NSW 2121
Telephone: 61 2 9202 7000
Facsimile: 61 2 9869 0625
Websites: www.caroma.com.au
www.smartflush.com.au
www.fowler.com.au
www.stylus.com.au
www.wisa-sanitair.com
www.starion-industries.com
www.dorf.com.au
www.clark.com.au
DUX MANUFACTURING LIMITED
Lackey Road
Moss Vale NSW 2577
AUSTRALIA
Telephone: 61 2 4868 0200
Facsimile: 61 2 4868 2014
Websites: www.dux.com.au
www.ecosmart.com.au
GAINSBOROUGH HARDWARE INDUSTRIES LIMITED
31-33 Alfred Street
Blackburn VIC 3130
AUSTRALIA
Telephone: 61 3 9877 1555
Facsimile: 61 3 9894 1599
Website: www.gainsboroughhardware.com.au
ROVER MOWERS LIMITED
155 Fison Avenue West
Eagle Farm QLD 4009
AUSTRALIA
Telephone: 61 7 3213 0222
Facsimile: 61 7 3868 1010
Website: www.rovermowers.com.au
SEBEL FURNITURE LIMITED
96 Canterbury Road
Bankstown NSW 2200
AUSTRALIA
Telephone: 61 2 9780 2222
Facsimile: 61 2 9793 3152
Website: www.sebel.com.au
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GWA INTERNATIONAL LIMITED
2007 ANNUAL REPORT
GWA INTERNATIONAL LIMITED
ABN 15 055 964 380
Level 14 10 Market Street Brisbane Queensland 4000 Australia
Telephone: 61 7 3109 6000 Facsimile: 61 7 3236 0522
Website: www.gwail.com.au
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