Gowest Gold Ltd.
Annual Report 2009

Plain-text annual report

G W A I N T E R N A T O N A L I I I L M T E D 2 0 0 9 A N N U A L R E P O R T Level 14 10 Market Street Brisbane Queensland 4000 Australia Telephone: 61 7 3109 6000 Facsimile: 61 7 3236 0522 Website: www.gwail.com.au GWA INTERNATIONAL LIMITED 2009 ANNUAL REPORT CONTENTS Performance Summary Company Profile and Mission Statement Chairman’s Review Managing Director’s Review of Operations Health and Safety In the Community Business Divisions GWA Sustainability and Innovation Story Board of Directors Corporate Governance Statement Directors’ Report Financial Statements Other Statutory Information Shareholder Information and Timetable 1 2 4 6 10 12 14 19 30 32 39 48 102 104 HEAD OFFICE LOCATIONS 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 AUSTRALIA Telephone: 61 2 9202 7000 Facsimile: 61 2 9869 0625 Websites: www.caroma.com.au www.fowler.com.au www.stylus.com.au www.starion-industries.com www.dorf.com.au www.clark.com.au www.irwell.com.au www.radiantstainless.com.au www.ecologicalsolutions.com 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 www.hotwaterrebate.com.au CORPORATE DIRECTORy 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 G J McGrath, Non-Executive Director W J Bartlett, Non-Executive Director D D McDonough, Non-Executive Director R J Thornton, Executive Director CHIEF FINANCIAL OFFICER W R Saxelby, FCPA GAICD 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 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 www.ausloc.com 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 92 Gow Street Padstow NSW 2211 AUSTRALIA Telephone 61 2 9780 2222 Facsimile 61 2 9793 3152 Website: www.sebel.com.au WISA Bv Driepoortenweg 5 6827 BP Arnhem NETHERLANDS Telephone +31 (0) 26 362 9020 Facsimile +31 (0) 26 363 5480 Website: www.wisa-sanitair.com AuDITOR KPMG 10 Shelley Street Sydney NSW 2000 AUSTRALIA Telephone: 61 2 9335 7000 Facsimile: 61 2 9335 7001 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 Commonwealth Bank of Australia Australia and New Zealand Banking Group Limited HSBC Bank Australia Limited National Australia Bank Westpac Banking Corporation Printed using Forestry Stewardship Council (FSC) certified paper. All paper sourced from responsibly managed plantation forests. ISO14001 environmental management system in use. Revenue increased 4% due to new product and market development initiatives in a weak market Net Profit rose 5% after restructuring charges Trading EBIT down 12% to $87 million due to market decline impacting high margin products Two new banks join banking group with core facilities increased to $268 million Strong cash flow and capital management initiatives reduced net debt to $155 million Final fully franked dividend of 8.5 cents per share, maintaining full year ordinary dividend at 18 cents per share 2008/09 YEAR PERFORMANCE SUMMARY Five Year Financial Summary 2004/05 $’000 2005/06 $’000 2006/07 $’000 2007/08 2008/09 $’000 $’000 Revenue 626,866 619,989 636,124 648,902 678,344 Earnings before interest, tax, depreciation, amortisation and restructuring costs (%) Depreciation and amortisation Earnings before interest, tax and restructuring costs (%) Interest (net) Trading profit before tax (%) Tax expense (%) Trading profit after tax Restructuring costs after tax Net profit after tax Net cash from operating activities Capital expenditure Research and development Net debt Shareholders’ equity Other Ratios and Statistics Return on shareholders’ equity (%) Interest cover (times) Net debt / (net debt + equity) (%) Earnings per share Trading earnings per share Ordinary dividend per share Special dividend per share Total dividend per share Franking Ordinary dividend payout ratio Share price (30 June) Dividend yield (total dividend) Number of employees (cents) (cents) (cents) (cents) (cents) (%) (%) ($) (%) 130,067 117,617 118,533 117,314 105,060 20.7 26,714 103,353 16.5 11,137 92,216 14.7 19.0 22,420 95,197 15.4 11,490 83,707 13.5 18.6 19,779 98,754 15.5 12,366 86,388 13.6 18.1 17,920 99,394 15.3 14,623 84,771 13.1 15.5 18,105 86,955 12.8 13,844 73,111 10.8 28,328 23,628 24,975 24,612 21,919 30.7 63,888 – 63,888 83,767 21,331 6,488 161,706 409,546 28.2 60,079 3,227 56,852 60,038 30,966 5,775 28.9 61,413 5,095 56,318 24,841 21,516 5,360 29.0 60,159 14,269 45,890 102,992 22,235 6,056 30.0 51,192 2,867 48,325 78,628 17,348 8,119 141,000 225,614 193,557 154,985 411,968 408,802 389,120 426,164 15.6 11.7 28.3 23.0 23.0 18.0 4.5 22.5 100 78.3 2.92 7.7 13.8 10.2 25.5 20.4 21.6 18.0 3.5 21.5 100 88.2 3.11 6.9 13.8 9.6 35.6 20.2 22.0 18.0 4.0 22.0 100 89.1 4.42 5.0 11.8 8.0 33.2 16.4 21.5 18.0 1.5 19.5 100 11.3 7.6 26.7 16.9 17.9 18.0 – 18.0 100 109.8 106.5 2.50 7.8 2.30 7.8 2,474 2,226 1,957 1,786 1,891 1 GWA INTERNATIONAL LIMITED 2009 ANNUAL REPORT GWA INTERNATIONAL LIMITED 2009 ANNUAL REPORT COMPANY PROFILE 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 technology, 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 acquisitions that add value to its existing businesses and that support expansion into new markets. GWA International Limited (GWA) is one of Australia’s leading designers, manufacturers, importers and distributors of household consumer products. A key focus is the research and development of innovative environmental products which provide sustainable solutions for reducing domestic and commercial water consumption and greenhouse gas emissions. We support our customers through five well-established business divisions, Caroma Dorf, Dux, Gainsborough, Rover and Sebel. These business divisions serve as the foundation for our suite of well-known brands, including many household names such as Caroma, Dorf, Fowler, Stylus, Clark, Radiant, Irwell, Dux, Gainsborough, Sebel and Rover. In Australia, we are also the exclusive distributor for other brands including Hansa and KWC. GWA International Limited is a large Australian employer with manufacturing operations across the country. The Company invests significantly in research and new product development which enables GWA to take advantage of opportunities in a competitive marketplace. GWA International Limited has achieved substantial growth since its listing on the Australian Securities Exchange in 1993 as a result of robust operating performance, successful acquisitions and strong management. The Company remains committed to building shareholder value through continuously improving business performance and pursuing acquisitions which add value to existing operations and support our entry into new markets. 2 2 logical solutions PMS279 Process Black 75% CAROMA DORF Australia’s foremost designer, manufacturer, importer and distributor of domestic and commercial bathroom and kitchen products, including sanitaryware, tapware, showers, accessories, bathware, stainless steel sinks and laundry tubs. Caroma Dorf is at the forefront of product innovation incorporating water saving technology, and is the market leader in water efficient sanitaryware and tapware. DUx 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 A leading Australian designer, manufacturer, importer and distributor of a comprehensive range of domestic and commercial door hardware and fittings, including security products. SEBEL At the forefront of Australian design, manufacture, import and distribution of quality commercial furniture and seating. ROvER One of Australia’s leading designers, importers and distributors of domestic and commercial lawn and garden care equipment. 3 3 GWA INTERNATIONAL LIMITED 2009 ANNUAL REPORT ChAIRMAN’S REvIEW Undoubtedly the operational highlight of the year has been the growth in revenue achieved through new product and market development activities which helped to partially offset the negative impact of the lower underlying demand. As we entered into the 2008/09 financial year there was considerable uncertainty about the economic conditions ahead but few predicted the near collapse of the global financial system and the depth of the recession which would engulf the world in the last quarter of 2008. For the first time in living memory finance was simply not available for many organisations due to a loss of confidence and company collapses ensued. GWA was not immune to these conditions but the robustness of the business and a long history of prudent financial management meant we have been able to refinance the business, maintain dividends, and avoid large capital raisings which if not offset by strong earnings growth will destroy shareholder value. The Group achieved a trading profit after tax of $51.2 million in the 2008/09 year on sales revenue of $678.3 million. Net profit after tax of $48.5 million was after restructuring charges of $2.9 million after tax. These charges will results in improved efficiency over the next 12 months through ongoing rationalisation of operations and by realising benefits from the recently implemented Movex ERP system into Caroma Dorf. Trading earnings before interest and tax of $87.0 million represented a 12.5% decrease on the prior year’s performance due to the fall in underlying demand. Undoubtedly the operational highlight of the year has been the growth in revenue achieved through new product and market development activities which helped to partially offset the negative impact of the lower underlying demand. The Managing Director will expand on this in his Review of Operations. DIvIDENDS AND CAPITAL MANAGEMENT The Group’s impressive operating cash flow enabled the directors to declare a final fully franked ordinary dividend of 8.5 cents per share to be paid in October 2009. Together with the interim dividend of 9.5 cents per share paid in April, this maintains the ordinary fully franked dividend for the 2008/09 year at 18.0 cents per share, in line with the prior year ordinary dividend. This is a commendable achievement in an economic environment where many listed companies have been reducing and in some instances ceasing dividend payments to improve their balance sheet. Following the announcement last year, the Board ceased payment of the special dividend to better position the Company for growth through acquisition. The current dividend policy is that absent an unexpected decline in profitability, ordinary dividends will be maintained at 18.0 cents per share until such time as it equals 70–80% of earnings. At such a time, it is proposed that dividends will then increase in line with improvements in profitability. In August 2008, the Board announced the reintroduction of the Dividend Reinvestment Plan (DRP). The DRP has been well supported by shareholders throughout the year with take-up rates of 26% and 35% for the final 2007/08 and interim 2008/09 dividends respectively. The DRP has again been offered to shareholders for the final 2008/09 dividend at a discount of 3%, with future availability being subject to the funding requirements of the business. Another highlight for the year has been the overall refinancing of the group loan facilities. BNP Paribas has exited as a lender to GWA and two new banks now provide loan facilities to GWA. The ability to attract these new lenders during a global financial crisis reflects the strength of the business and confidence in the management of GWA. We appreciate the ongoing support of Commonwealth Bank of Australia, National Australia Bank Limited and Australia and New Zealand Banking Group Limited, and welcome Westpac Banking Corporation and HSBC Bank Australia Limited to the GWA banking group. 4 ExECUTIvE REMUNERATION As part of the overall GWA salary structure, a new equity performance plan for the executives was implemented during the year following shareholder approval at the 2008 Annual General Meeting (AGM). The plan incorporates challenging performance hurdles based on earning per share growth and total shareholder return targets with the objective of maximising long term performance. The plan was well supported by shareholders at the 2008 AGM and will continue as part of the remuneration arrangements for the executives. The Board takes advice from external remuneration consultants in setting remuneration levels for the executives. Given the difficult economic environment and downturn in dwelling construction and renovation activity, incentive payments have been limited and a Company wide freeze has been imposed on fixed executive remuneration increases for the 2009/10 year. Despite these actions, the Board is satisfied that the current remuneration levels are market competitive and will enable the retention of its high quality executive and management team. SUSTAINABILITY AND PRODUCT INNOvATION The Board is committed to reducing energy and water usage across the Group’s operations. In 2008/09, the Company has continued to build on the progress of the prior year. I congratulate Caroma Dorf on the significant water and waste reductions achieved during the year at the Wetherill Park factory through recycling initiatives. Significant energy savings were also achieved at this site during the year. There are many other examples of the Company’s commitment to reducing energy, waste and water across its operations, and I refer you to the Sustainability and Environment (Operations) section in the Annual Report for highlights of the Company’s initiatives during the year. The Group invests over 1% of revenue in research and development and in excess of 25% of revenue is derived from products which were not in the market two years ago. This is a source of competitive advantage for the Company with its commitment to develop new market opportunities in our building fixtures and fittings businesses. The focus of product innovation is in both water saving and energy efficient water heating. The Company is a leading manufacturer and distributor of products which deliver sustainable environmental benefits. These products include Caroma Dorf’s market leading water efficient sanitaryware and tapware, and Dux’s environmental water heating products. During the year, Caroma Dorf won the prestigious 2009 Australian Design Award for the Caroma Invisi Series II toilet suite in the Housing and Building Category. The product was developed at Caroma Dorf’s Research and Development Centre and features the latest water saving technology, and demonstrates the Company’s commitment to the development of innovative environmentally friendly products. I refer you to the Sustainability and Innovation (Products) section in the Annual Report for further information on the Group’s sustainability focus. CORPORATE GOvERNANCE The Board of GWA International Limited comprise experienced and long serving directors who have overseen the growth of the Company, and the significant restructuring activities of recent years. Succession plans have been developed for the retirement of individual directors and in accordance with these plans, the Deputy Chairman, Mr Jim Kennedy will retire as a director at the Annual General Meeting in October 2009. Mr Kennedy has been Deputy Chairman of GWA and Chairman of the Audit Committee since the float in 1993. His experience has been a valuable asset to the Board and I wish to thank Mr Kennedy for his contributions as a director and wish him well for the future. Mr Darryl McDonough and Mr Richard Thornton have joined the Board during the year and will be subject to election at the Annual General Meeting in October 2009. Mr McDonough will become Deputy Chairman of the Board and Mr Bill Bartlett will become Chairman of the Audit Committee following the retirement of Mr Kennedy. STRATEGIC DIRECTION The Group will continue to focus on maximising opportunities for the existing businesses through the development and marketing of innovative new products, and will continue the search for suitable acquisition opportunities. Progress has been made in this regard with the acquisition of Austral Lock in January 2009 for $12 million which is a leading Australian manufacturer of locks for the residential security door and patio door markets. The Group is actively searching for further acquisitions that will enable the expansion of our core building fixtures and fittings businesses. Our balance sheet is strong and we have capacity to grow with support from our banks and shareholders as required. The financial performance for the 2008/09 year demonstrates the strength of the Group’s businesses in challenging market conditions. Despite some early increased activity in the first home buyer market we do not see a substantial increase in overall building activity during the 2009/10 financial year. The cost competitiveness of our operations, new product innovation, improved efficiency of our supply chain and benefits from implementation of the new Movex ERP system will ensure we are well positioned to take advantage of the upturn when it occurs. In closing, I would like to thank management and staff for their efforts in achieving a sound financial result in the 2008/09 year, and look forward to a further improvement in the performance in the 2009/10 year. Revenue $million 08/09 07/08 06/07 05/06 04/05 0 100 200 300 400 500 600 700 800 Dividend Per Share cents 08/09 07/08 06/07 05/06 04/05 0 5 10 15 20 25 Ordinary Dividend Special Dividend 5 GWA INTERNATIONAL LIMITED 2009 ANNUAL REPORT MANAGING DIRECTOR’S REvIEW OF OPERATIONS A real highlight for the year has been the very strong cashflow which is a function of improved supply chain management and stable operations at the upgraded Wetherill Park vitreous china factory. Trading conditions for the 2008/09 year have been the most difficult in recent history with dwelling commencements falling to the lowest level since 2001. The loss of confidence arising from the global financial crisis in late 2008 and subsequent lack of financing available for developers, builders and investors, has resulted in a fall in new construction which is unlikely to improve until the 2010 calendar year. The following chart shows the level of dwelling activity since 2003: New Dwelling Activity S R E B M U N L A U N N A G N I V O M 190,000 180,000 170,000 160,000 150,000 140,000 130,000 120,000 6 APPROVALS COMMENCEMENTS COMPLETIONS 3 0 E N U J 3 0 C E D 4 0 E N U J 4 0 C E D 5 0 E N U J 5 0 C E D 6 0 E N U J 6 0 C E D 7 0 E N U J 7 0 C E D 8 0 E N U J 8 0 C E D ) f ( 9 0 E N U J Source: BIS Shrapnel Trading Earnings Per Share cents 07/08 06/07 05/06 04/05 03/04 07/08 06/07 05/06 04/05 03/04 0 5 10 15 20 25 Dividend Per Share cents 0 5 10 15 20 25 Ordinary Dividend Special Dividend Given this context, the results for 2008/09 have been acceptable and reflect the success of GWA’s core strategies which require: ■■ ■■ ■■ ■■ ■■ Investment in innovative and sustainable products Leveraging our investment in brands, sales and marketing to ensure products are specified and widely available Low cost supply chain to ensure a cost competitive supply position Continuing improvement in operational and business efficiency improvement with the aid of a modern ERP system Optimising our supply chain infrastructure to deliver superior customer service levels. The summary of financial results for 2008/09 outlined in the table below highlight the key achievements for the year which saw increased revenue from new product and market development and strong operating cash flow reflecting improved supply chain management. $million Sales Revenue Cash Flow before Financing Activities Trading EBIT Trading Profit after Tax Restructure Costs after Tax Net Profit after Tax 2008/09 2007/08 678.3 648.9 55.3 87.0 51.2 (2.9) 48.3 95.2 99.4 60.2 (14.3) 45.9 Sales revenue increased by 4.5% despite a decline in underlying demand. This is due to the successful development of new product and market opportunities, principally in environmental water heating and the Do It Yourself (DIY) market. Increased demand in environmental water heating is being driven by government rebates aimed at replacing less energy efficient water heating. Over the past two years Dux has successfully developed new products and marketing strategies to take advantage of this market opportunity. For the Group as a whole, overall margins have declined due to additional product and market development costs and a general decline in higher margin product sales. A real highlight for the year has been the very strong cashflow which is a function of improved supply chain management and stable operations at the upgraded Wetherill Park vitreous china factory. The restructure charge for 2008/09 reflects a planned 4% reduction in the workforce during 2009 as a result of on-going rationalisation of operations and planned improvements in efficiency after the full implementation of the Movex ERP system into Caroma Dorf in September 2009. We expect this charge to be fully recovered through cost savings in the 2009/10 financial year. SEGMENT PERFORMANCE The Company’s Building Fixtures and Fittings business segment comprise the Caroma Dorf, Gainsborough and Dux business units. Caroma Dorf sales declined by 7% for the year. While all markets experienced declines in building activity, the downturns were most pronounced in Queensland (-16%) and New Zealand (-14%). The completion of restructuring initiatives during the 2007/08 financial year and improved supply chain management has driven cost reductions during 2008/09, but these could not offset the volume decline and adverse Australian dollar exchange rate movements. Price rises were successfully implemented but overall margins have declined in line with the lower volumes. Dux sales increased by 50% for the year due to the regulatory- driven change to higher-priced environmental products. Improved performance of new products and investment in distribution is flowing through to higher revenue and profitability. The business is continuing to focus on enhancing its range of energy efficient products based on technology developed in-house and through key partnerships with offshore suppliers. Gainsborough sales increased by 8% for the year due to the impact of the Austral Lock acquisition in January 2009 and new product and market development. Gainsborough is supplementing its strong presence in the builder segment with a broader product offering targeting the architectural and commercial market segments. Sales have also improved in the DIY market and the business has done well to offset the weaker underlying demand through these initiatives. Sebel has encountered extremely difficult trading conditions with the total absence of demand from the hospitality sector and delays in Government spending. Sales revenue has been maintained due to increased stadium work, but this is much lower margin contract work resulting in lower profitability. Rover sales have been severely impacted by lower discretionary spending and poor weather conditions early in the year. This was compounded by the devaluation of the Australian dollar which increased product costs prior to the peak selling season. The restructured business is far better positioned now to deliver profitable sales with a stable low cost supply source in China. CASh FLOW The strong net cash flow from operating activities of $78.6 million resulted from our continued focus on working capital management and was a very pleasing result given the overall weak market conditions. Expenditure on the acquisition of plant and equipment of $10.5 million was in line with depreciation. Further investment in the Movex ERP system implementation totalled $6.8 million during the period. Proceeds from the sale of property, plant and equipment of $6.4 million includes a change to more flexible lease arrangements for motor vehicles. Sales Revenue $million 2008/09 2007/08 Trading EBIT $million 2008/09 2007/08 Building Fixtures and Fittings 593.6 558.6 Building Fixtures and Fittings 98.5 109.5 Sebel 56.1 56.9 Sebel 2.0 3.4 Rover 28.6 33.4 Rover (0.9) 0.4 Other – – Other (12.6) (13.9) Total 678.3 648.9 Total 87.0 99.4 7 GWA INTERNATIONAL LIMITED 2009 ANNUAL REPORT GWA INTERNATIONAL LIMITED 2009 ANNUAL REPORT MANAGING DIRECTOR’S REvIEW OF OPERATIONS Net interest paid during the year reduced to $12.8 million following the rapid fall in market interest rates in late 2008 and the repayment of lending facilities to the exiting banker, BNP Paribas. The acquisition of Austral Lock in January 2009 for $12.4 million was funded through operating cash flow. FINANCIAL CONDITION AND CAPITAL MANAGEMENT As a result of the strong cash flow performance and capital management initiatives, the Company’s net debt reduced by $38.6 million to $155.0 million at June 2009. During the financial year the Company paid $49.2 million in dividends and $33.3 million was reinvested through the Dividend Reinvestment Plan (DRP). Of this amount, $15.2 million was taken up by shareholders and $18.1 million was taken up by the underwriters of the DRP for the interim dividend in April 2009. Net debt at June 2009 totalled $155.0 million, representing gearing of 26.8% as measured by net debt / net debt plus equity. The Company has a strong balance sheet, established lines of funding and investment grade financial metrics which will support future growth opportunities. This has been achieved without a dilutive equity issue so future increases in profits will deliver growth in earnings per share and support our capacity to lift ordinary dividend payments to shareholders. The Group’s financial position at 30 June 2009 has been achieved with the support of our banks over a difficult period in the credit markets. GWA has renegotiated its Master Financing Agreement with its banks, established new bank covenants and managed the exit of BNP Paribas as a core lender using operating cash flow and existing facilities. GWA has negotiated the addition of two new banks to our banking group. Westpac and HSBC will provide new facilities which further assist our capacity to grow through acquisitions. Currently, we have total core loan facilities of $267.5 million, of which $200 million is drawn. A summary of current facilities and maturity dates is provided below. Bank $million CBA ANZ NAB Westpac HSBC Total Available Facilities Drawn Facilities 90.0 60.0 50.0 47.5 20.0 90.0 60.0 50.0 - - 267.5 200.0 Maturity Dates June 2011 Jan 2011 Jan 2011 June 2011 Jan 2011 GWA is finalising arrangements for a stand alone EUR5 million facility with ING for our Wisa operations in the Netherlands, as a replacement for the EUR facility previously provided by BNP Paribas. 8 8 hEALTh AND SAFETY Management is determined to improve the Company’s health and safety performance through better safety systems and processes, through extensive communication with our workforce and through increased diligence in identifying safety risks across our workplace. PEOPLE GWA’s long term success has been due to the efforts of a committed and talented workforce. We are continuing to look for ways to bring new thinking and skills into the business while also developing our people to provide succession opportunities. During the 2008/09 year, the total injury frequency rate (injuries per million man hours worked) was reduced by 21% which is a pleasing result, however our safety performance remains an area of on-going management focus and our objective is to improve this by a further 30% in the coming year. In support of these objectives a significant investment has been made through the GWA Leadership Program, with the aim of underpinning a high performance culture through the development of personnel with superior skills and capabilities supported by rigorous goal setting and performance management systems. OUTLOOk There are a number of positive signals in the market with increased housing finance and first home buyer activity and a more stable Australian dollar, but we do not believe we will see a sustained recovery in dwelling and non-dwelling construction until business confidence improves and financing is available for developers, builders and investors. Given that our products tend to be installed towards the end of the construction phase, we do not expect any material improvement in underlying sales in the 2009/10 financial year. Increased sales of environmental water heating products, continued benefits from product innovation and market development activities and cost improvements from restructuring are expected to result in some improvement in profitability in the 2009/10 financial year. Further market guidance for 2009/10 will be provided at the Company’s Annual General Meeting in October following first quarter trading. SUSTAINABILITY AND CARBON REDUCTION GWA is committed to improving the environment both through the products we make and sell and the manufacturing processes we utilise. The Company is at the forefront of technology with the development of water efficient toilets and tapware, and energy efficient water heaters. Our environmentally-sustainable products are a major source of competitive advantage for the Company. The achievement of the 2009 Australian Design Award for the Caroma Invisi Series II toilet suite further highlights the Company’s commitment to sustainable design and innovation. During the year, the Company spent $8.1 million on research and development and new products sold during the year accounted for 17% of total sales revenue. This demonstrates the importance of new product development to support future growth in revenue and profitability. GWA manufacturing operations are continually seeking ways in which to reduce the levels of energy and water usage at our sites as well as the waste produced through our processes and packaging. During the year, recycling initiatives were implemented at the Wetherill Park factory which has resulted in significant reductions in water usage and waste. Similar sustainability initiatives are being implemented at the other factory locations. The current focus on carbon reduction and the new requirements for carbon reporting and trading are being properly addressed. For GWA this is not just a matter of compliance, but an opportunity to ensure a profitable and sustainable future for the business. STRATEGIC DIRECTION GWA is well placed to pursue future growth opportunities. Our strong cashflow, together with supportive shareholders and banks ensures the Company will be able to continue pursuing internal and external investment opportunities which will grow shareholder value. Management will continue to focus on growing our Building Fixtures and Fittings segment by expanding on our core strategies of low cost supply, product innovation and high-quality products and service levels. The Company is also well positioned to capitalise on acquisition opportunities which complement our Building Fixtures and Fittings businesses. The small Austral Lock acquisition during the year has improved our capabilities to evaluate, execute and integrate an acquisition and provides the model for larger acquisitions in the future. We will continue to look at options to divest non-core businesses but we have not been successful in identifying a way to achieve this in the current market. Indicative offers were received for Wisa and Rover which did not reflect fair value and we will continue to work on improving these businesses so they are better positioned for sale when the opportunity arises. 9 9 GWA INTERNATIONAL LIMITED 2009 ANNUAL REPORT hEALTh AND SAFETY GWA continues to ensure it provides a safe workplace for its employees, contractors, visitors and customers, in an efficient and compliant manner. GWA continues to ensure it provides a safe workplace for its employees, contractors, visitors and customers, in an efficient and compliant manner. Through divisionally or site-based health and safety advisors, GWA promotes health and safety awareness in an environment which encourages continuous improvement. GWA’s health and safety advisors meet with the Group Risk Manager approximately three times each year with the objectives of: ■ Discussing safety performance, goals and improvement strategies; ■ Exchanging ideas and detailing successful improvement programs; ■ Promoting training through guest speakers and external experts; ■ Arranging visits to view best practice sites; ■ Planning for cross-site auditing (with health and safety advisors visiting different GWA sites); and ■ Planning and implementing new systems and procedures. The Group Risk Manager reports two times each year to the GWA Audit Committee. The reporting includes current health and safety performance, current improvement plans and compliance with regulations (e.g. asbestos and air monitoring). An audit plan, consistent with GWA’s health and safety objectives, is also presented for approval for the new financial year. In January 2009, “eLearning” was successfully introduced into GWA. eLearning is a computer-based online learning tool provided by Learning Seat (a division of News Limited). eLearning allows GWA to deliver its own tailored online learning courses and access an extensive library of more than 400 available courses. Each course meets Federal and State Government compliance obligations and is independently audited by an Australian legal firm. Courses can be delivered as a package and can also be mandated to designate certain pass marks and completion dates. For example, the GWA induction package for all new employees, integrates various training and education elements and can be tailored to meet each individual’s role and needs. Learning elements include: ■■ GWA company history, vision and values; and ■ Key policies u Health and Safety; u Equal Opportunity; u Trade Practices; u Emergency management; u Harassment and bullying prevention; and u Local site specific inductions. eLearning provides GWA and its people with records of training which are easily accessible online at all times. Training completion certificates are also sent electronically to employees when training has been successfully completed. eLearning is cost and time effective and delivers top-up training to existing employees. 10 hEALTh AND SAFETY PERFORMANCE GWA measures a range of balanced safety performance indicators. Proactive indicators such as number of hazards identified, risk assessments undertaken and actions issued and completed on time are recorded for each GWA site. Three key measures of safety outcomes are: ■■ ■■ ■■ Lost Time Injury Frequency Rate (LTIFR), which measures lost time injury resulting in an inability to work for at least one full shift; Medical Treatment Injury Frequency Rate (MTIFR), which measures the number of doctor-treated injuries per million hours worked; and Injury Severity Rate (ISR), which measures the number of hours for a lost time injury per million hours worked. In 2008-09, GWA posted a creditable improvement in two of the key performance measures (LTIFR and MTIFR) by reporting 3% and 26% respective reductions, compared with last financial year. ISR was 1% above the previous financial year. In 2009-10, GWA will target a 30% year-on-year improvement on the 2008-09 results for total injury frequency. Improvement objectives are planned to be met through continuation of the 2008-09 initiatives and new initiatives. These new initiatives include improved investigations following medical and lost time injuries and an increased focus on return to work after an injury. One of the flow-on effects of good safety performance has been the continued and sustainable reduction of workers compensation premiums. 10 8 10 GWA Lost Time Injury Frequency Rate 6 8 10 4 6 8 2 4 6 0 2 4 0 2 0 2006 2007 2008 2009 2006 2007 2008 2009 Initiatives introduced for 2008-09 year include: 2006 2007 2008 2009 ■■ Improvements to “Visual Factory” (Safety Star and noticeboards) u Major sites now have improved visibility of safety performance with dedicated noticeboards. This reinforces the safety message; ■■ Increased hazard reporting focus; ■■ Increased focus and emphasis on supervisor participation and awareness of responsibility for health and safety; ■■ Monthly event calendars; ■■ Increased mandatory scheduled audits; ■■ ■■ Integration of Austral Lock (acquired in January 2009) with health and safety systems consistent with GWA policies and procedures; Upgraded computer-based health and safety system with significant improvements to incident reporting protocols and the automatic scheduling and reporting of audits undertaken in operational risk and general housekeeping. 35 GWA Medical Treatment Injury Frequency Rate 30 35 25 30 20 35 25 15 30 20 10 25 15 5 20 10 0 15 5 10 0 5 0 2006 2007 2008 2009 2006 2007 2008 2009 GWA Injury Severity Rate 2006 2007 2008 2009 6000 5000 6000 4000 5000 6000 3000 4000 5000 2000 3000 4000 1000 2000 3000 0 1000 2000 0 1000 0 2006 2007 2008 2009 2006 2007 2008 2009 2006 2007 2008 2009 11 GWA INTERNATIONAL LIMITED 2009 ANNUAL REPORT IN ThE COMMUNITY GWA takes its role as a good corporate citizen very seriously, and for this reason, is keen to support community events and organisations, particularly those with a sustainability or environmental focus. GWA takes its role as a good corporate citizen very seriously, and for this reason, is keen to support community events and organisations, particularly those with a sustainability or environmental focus. The Company is also committed to forming strong relationships with the communities surrounding its operations and making a positive contribution wherever possible. In early 2009, bushfires swept across Victoria, devastating 78 communities and 400,000 hectares of land. A total of 173 people lost their lives. The devastation also resulted in 2,029 homes being destroyed along with hundreds of businesses, five schools and kindergartens, three sporting clubs and numerous other buildings. GWA wanted to play its part to support individuals and communities in towns and suburbs affected by these devastating fires. We felt our best opportunity to help those who suffered such profound loss was during the reconstruction and recovery phase, which is presently underway. Through a direct approach to the Victorian Government, GWA developed a plan to donate to the fit-out of two public information centres being built at Kinglake and Marysville, which were the two towns worst affected by the fires. These centres will provide vital information to home owners seeking to rebuild after the devastation of the fires. Our Gainsborough, Caroma, Dux and Sebel businesses are each donating products including locks and door handles, all vitreous china products, taps, sinks, solar hot water systems and public seating for the two centres. 12 In 2009, GWA’s head office also contributed to numerous events and organisations including: ■■ ■■ ■■ Sponsorship of the ASX Thomson Reuters Charity Foundation, which raises funds for children’s and medical research charities Support for the Lions Club of Golden Valley which provides funds for local special needs children Donating to Variety Australia which contributes to various projects assisting the Variety Children’s Charity ■■ Contributing to the Rotary Club of Ipswich ■■ Donating to the Closeburn Rural Fire Brigade. Individually, our separate businesses also supported several community events and organisations throughout the year. Caroma Dorf was the Exclusive Bathroom Partner for Channel Nine’s Jack of All Trades TV series for 2009. Caroma assisted with the design, supply and installation of the two complete bathrooms within the Jack of all Trades house. The completed house was auctioned and all proceeds donated to Cystic Fibrosis Australia and the Mater Hospital Brisbane, raising in excess of $250,000. Caroma Dorf was a sponsor of World Toilet Day in November 2008. This event was organised by the not-for-profit Engineers Without Borders organisation. The event featured a public art exhibition of 100 decorated toilet pans at Reddacliff Place and the Queen Street Mall in Brisbane. Designed by local creative industries and firms, the toilet pan exhibition was created to raise awareness of World Toilet Day. This event was established to raise awareness of global sanitation issues. Designed toilets were auctioned on eBay after the event with all proceeds raised donated towards funding sanitation projects in disadvantaged communities via the World Toilet Organisation and Water Aid Australia. Caroma Dorf was a silver sponsor of the Australian Water Association’s fifth International Water Association specialist conference on efficient use and management of urban water. It was also a diamond sponsor of the Kitchen Bathroom Designer Institute (KBDI), a national organisation providing kitchen and bathroom designers with accreditation, training and professional development opportunities. GWA is committed to forging strong relationships in the communities where it has its operations. With this objective in mind, our Gainsborough business is a sponsor of the Kyneton Football Club in Victoria, where one of our manufacturing operations is located. Fundraising for the Royal Children’s Hospital Melbourne is a further initiative of Gainsborough, which is supported by employee contributions. Our Dux business was the sponsor of the 2008 race day at the famous Bong Bong Picnic Races. The race day is one of the biggest sporting events in the Southern Highlands attracting thousands of visitors from all over Australia. The 2008 race day was the 50th anniversary of the races being held at its current location, Wyeera, and was a huge success for Dux and its invited guests from Victoria, Queensland and parts of New South Wales. Dux sponsored the Ute Muster at the local Moss Vale Show which attracts thousands of local visitors each year. Dux also purchased for its staff family passes to the Show so the whole family could enjoy the friendly country atmosphere of this very popular event. Dux is also sponsoring local sporting clubs – the Moss Vale Junior Dragons Rugby League Club, the Moss Vale Soccer Club and the Robertson Junior Rugby League Club. 13 GWA INTERNATIONAL LIMITED 2009 ANNUAL REPORT BUSINESS DIvISIONS BUSINESS DESCRIPTION Caroma Dorf is Australia’s foremost designer, manufacturer, importer and distributor of domestic and commercial bathroom and kitchen products. The product range includes sanitaryware, tapware, showers, accessories, bathware, stainless steel sinks and laundry tubs. Caroma Dorf is at the forefront of product innovation incorporating water saving technology and is the market leader in water efficient sanitaryware and tapware. PMS279 STRATEGIC DIRECTION Caroma Dorf will maintain leadership in the domestic market by creating value for its customers through the development of innovative products with appealing design and advanced water saving technology, and providing a superior level of customer service. Caroma Dorf will continue to invest in its iconic brands to reinforce its brand values. Caroma Dorf is committed to continuous process improvement in its Australian manufacturing and supply operations. MAIN PRODUCTS AND SERvICES Vitreous china toilet suites, urinals, basins, plastic cisterns, bathroom Process Black 75% accessories and fittings. Acrylic and pressed steel spas, baths and shower trays. Tapware, showers and accessories, stainless steel sinks and laundry tubs. MAjOR BRANDS Owned: Caroma, Dorf, Fowler, Stylus, Clark, Radiant, Irwell Exclusive: Hansa, Schell, KWC, Virtu OPERATING LOCATIONS Australia, New Zealand, North America, China MAjOR MARkETS New dwellings, renovation, replacement and commercial markets in Australia, New Zealand and selected international markets. hEAD OFFICE LOCATION Caroma Dorf 4 Ray Road Epping NSW 2121 AUSTRALIA Telephone 61 2 9202 7000 Facsimile 61 2 9869 0625 Website: www.caroma.com.au www.fowler.com.au www.stylus.com.au www.starion-industries.com www.dorf.com.au www.clark.com.au www.irwell.com.au www.radiantstainless.com.au www.ecologicalsolutions.com 14 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 SERvICES 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, Radiant 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 Dux will continue to develop and improve its range of environmental water heaters to meet the new market requirements of improved energy efficiency. Dux will continue to strengthen its key customer relationships, and reduce costs through improved factory performance and selective sourcing of products and components. hEAD OFFICE LOCATION Dux Manufacturing Limited Lackey Road Moss Vale NSW 2577 AUSTRALIA Telephone 61 2 4868 0200 Facsimile 61 2 4868 2014 Website: www.dux.com.au www.ecosmart.com.au www.hotwaterrebate.com.au 15 GWA INTERNATIONAL LIMITED 2009 ANNUAL REPORT BUSINESS DIvISIONS 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. STRATEGIC DIRECTION Gainsborough’s strategic direction encompasses the development of new and innovative door hardware products to suit domestic buildings and commercial projects. MAIN PRODUCTS AND SERvICES A comprehensive range of door hardware comprising door handles (knobs and levers), door locks, door closers, hinges and other metal door accessories. MAjOR BRANDS Owned: Gainsborough, Trilock, Homecraft, Stronghold Series, Contractor Series, In Style, Mode, Aspect, Austral Lock OPERATING LOCATIONS Australia, New Zealand, export markets MAjOR MARkETS Domestic home builders, DIY and building projects, commercial buildings and multi-dwelling developments. hEAD OFFICE LOCATION 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 www.ausloc.com 16 BUSINESS DIvISIONS BUSINESS DESCRIPTION Sebel is at the forefront of Australian design, manufacture, import and distribution of quality commercial furniture and seating. MAIN PRODUCTS AND SERvICES 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 and aged care markets. MAjOR BRANDS Owned: Sebel OPERATING LOCATIONS Australia, New Zealand, Hong Kong, United Kingdom, Germany and dealers in over 50 export markets. MAjOR MARkETS Entertainment, hospitality, healthcare, public seating, sports stadia, corporate and educational markets. Sells direct to builders, developers, clubs and hotels. STRATEGIC DIRECTION As well as its strong emphasis on new product development, Sebel will continue to pursue traditional markets using its strong brand name and good customer service to drive sales through increased market share. Current export markets will also be expanded, with the division pursuing opportunities in education and stadia markets overseas. hEAD OFFICE LOCATION Sebel Furniture Limited 92 Gow Street Padstow NSW 2211 AUSTRALIA Telephone 61 2 9780 2222 Facsimile 61 2 9793 3152 Website: www.sebel.com.au 17 GWA INTERNATIONAL LIMITED 2009 ANNUAL REPORT GWA INTERNATIONAL LIMITED 2009 ANNUAL REPORT BUSINESS DIvISIONS BUSINESS DESCRIPTION Rover is a leading Australian designer, importer and distributor of domestic and commercial lawn and garden care equipment. MAIN PRODUCTS AND SERvICES Range of walk-behind and ride-on mower equipment, garden chip and shred products and spare parts. 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. STRATEGIC DIRECTION Rover will continue to target market growth segments in Australia and overseas through its focus on new product development and its relationships with its key customers. hEAD OFFICE LOCATION 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 18 ThE GWA SUSTAINABILITY AND INNOvATION STORY 19 GWA INTERNATIONAL LIMITED 2009 ANNUAL REPORT CAROMA DORF – COMMITMENT TO WATER-SAvING INNOvATION A key area of focus for the Caroma Dorf business is the design, development and commercialisation of a range of retrofit-specific water-saving product solutions. logical solutions Government, businesses and the wider community are actively pursuing solutions and initiatives to address sustainability challenges including climate change and water usage. Caroma Dorf is committed to developing market-leading water saving technologies to meet market needs for more water efficient product solutions. A key area of focus for the Caroma Dorf business is the design, development and commercialisation of a range of retrofit-specific water-saving product solutions. These solutions not only help reduce water consumption with their design features, they also facilitate the replacement of inefficient fixtures in commercial and residential premises. Winner of the GreenPlumbers Innovative Product of the Year Award, the Caroma Flex is designed to cover the footprint of many older wall hung toilet pans found in aging commercial bathrooms across Australia. Flex features a unique bracket with adjustable inlet and outlet connections to suit a range of existing set outs, which makes old inefficient pans easier to retrofit. This installation flexibility reduces the need to relocate plumbing and demolish walls, helping lower installation costs and making previously cost prohibitive retrofits possible. It also minimises the need to re-tile or re-paint over old pan footprints. CAROMA FLEx RETROFIT SOLUTION Caroma’s Flex Retrofit solution is the only product of its kind in the Australian market and it is already recognised for its innovation. The Caroma Flex is an advanced and cost-effective way of accelerating the retrofit of commercial premises, while reducing water consumption. With many commercial buildings built in the 1970s and now needing refurbishment, Flex provides a retrofit solution previously only possible through a full bathroom renovation. These buildings often have inefficient fixtures and by providing an innovative, retrofit solution, Caroma Dorf is assisting commercial premises to lower their water usage. The Flex pan has been specially developed to be coupled with the new Caroma Invisi™ Series II concealed in-wall cistern, which is another breakthrough innovation, for a complete water-saving retrofit solution. CAROMA RETROFIT CISTERN The Caroma Sovereign Retro Suite is an innovative product that simplifies the retrofitting of older style toilet suites. The suite features the unique Retro cistern with a large footprint designed to cover most of the old single-flush cisterns. This water-efficient Smartflush® option can often be installed without the need for re-tiling or re-paint. This 4-star water-saving solution results in minimal disruption and cost. 20 RETROFIT PROGRAM PARTNERShIPS The Caroma Dorf Eco Logical Solutions team works proactively with government bodies and the plumbing industry to encourage retrofit programs which deliver both product and installation solutions to help businesses and communities to more easily upgrade their premises. RESIDENTIAL PROGRAMS With millions of single flush toilet suites still in use across Australia, Caroma Dorf continues to provide market-leading, water-saving solutions for government-led toilet replacement programs. These programs have been developed in consultation with the plumbing industry. By providing consumers with a packaged product and installation solution, these programs are making it easy for householders to reduce their water consumption. These initiatives include: ■■ ■■ ■■ ■■ Launching the ACT Government ToiletSmart Program in mid-2008. This program is now in its second phase with more than 3,900 single flush and inefficient dual flush toilets already replaced with Smartflush® toilet suites. Caroma Dorf worked closely with the ACT Government to develop this program, which to date has already led to significant water savings and significantly reduced the amount of water flowing to the sewerage treatment plant within the Territory Partnering with local councils, Caroma Dorf also played a key role in the development of toilet retrofit programs currently underway in regional areas of New South Wales including Palerang, Leeton, Bathurst and Yass Playing an instrumental role in implementing residential toilet retrofit programs in Toowoomba (QLD), Dalby (QLD) and Port Macquarie (NSW) in 2008; and Continuing to work closely with local councils, water authorities and government departments around Australia to promote the benefits of toilet retrofitting as a cost effective and sustainable solution to saving water. COMMERCIAL RETROFIT INITIATIvES With a significant amount of water used in bathrooms, commercial retrofit solutions are a viable option for companies seeking to save water and cut their operating and maintenance expenses by changing to more efficient fixtures and fittings. The Caroma Dorf Eco Logical team continues to work with government and businesses to develop retrofit programs designed to make bathrooms in commercial premises more water efficient. In February 2009, the ACT Government launched a Commercial Bathroom Retrofit Program to assist businesses in reducing their water consumption. Caroma Dorf is pleased to be part of this proactive initiative, offering a product range designed to meet the needs of most commercial buildings. The program provides eligible businesses with access to funding of up to $20,000 per property to replace inefficient bathroom fixtures with more water efficient product solutions. NEW ECO LOGICAL TOOLS LAUNCh OF COMMERCIAL WATER SAvING CALCULATOR Caroma Dorf launched a sophisticated new Commercial Water Saving Calculator created in conjunction with The Institute for Sustainable Futures at the University of Technology, Sydney. The calculator supports the Caroma Dorf Eco Logical Solutions platform and is an easy-to-use tool that allows businesses to review their water usage and make informed decisions about their retrofit programs. The calculator further reinforces Caroma Dorf’s commitment to delivering innovative environmental solutions to help industry to reduce water consumption. The calculator highlights water savings that can be made from installing more efficient bathroom products in commercial buildings. For specific retrofit projects, a tailored savings assessment can be generated and for new premises the calculator can be used to pre-determine future water usage based on the efficiency of the fixtures selected. SUSTAINABILITY WEBSITE Caroma Dorf has launched a new website to support its sustainability initiatives. www.ecologicalsolutions.com reinforces Caroma Dorf’s position as a viable partner for sustainability and commitment to a sustainable future through the development of environmentally- friendly bathroom products and the provision of packaged retrofit solutions. The new website highlights the products, services and tools that Caroma Dorf offers to support businesses wanting to reduce water consumption. The site is an information hub for commercial and residential retrofitting. It is also a platform to keep the market informed on the latest water-saving technologies and retrofit initiatives from Caroma Dorf. 21 GWA INTERNATIONAL LIMITED 2009 ANNUAL REPORT CAROMA’S REvOLUTIONARY INvISI™ SERIES II TOILET SUITE WINS 2009 AUSTRALIAN INTERNATIONAL DESIGN AWARD logical solutions The Caroma Invisi™ Series II toilet suite collection has been awarded the highly acclaimed 2009 Australian International Design Award for the Housing and Building Category in recognition of its innovative design at the Australian International Design Awards. “A more comprehensive range of toilet suites is offered by the Invisi™ Series II collection, which are suitable for both residential and commercial applications. This allows the sophisticated look of concealed cistern toilet suites to be integrated into any bathroom.” The awards, which are a division of Standards Australia, represent Australia’s only national product design awards program, which recognises local product design and innovation excellence. The Invisi™ Series II range is a unique in-wall toilet system recognised for its water saving technology and ease of installation for commercial and domestic applications. The 2009 Design Award for the Invisi™ Series II adds to Caroma’s earlier Design Awards for the Smartflush® toilet suite system, which innovatively delivers maximum water savings while optimising flushing performance, and the H2Zero™ Cube urinal, a sustainable, high performance waterless urinal. Caroma Dorf’s Research and Design Manager Dr Steve Cummings said: “We are proud the Invisi™ Series II has been acknowledged with a Design Award amongst so many high quality designs across such varied product categories.” “The Invisi™ Series II has been developed using world class technology that breaks new ground in the housing and building sectors,” he said. The versatile Invisi™ Series II toilet suites are suitable for in-wall, under counter, induct and in-ceiling applications, and are the first wall-hung toilet suites that fit within a standard 90mm wall cavity with 450mm centres. Suite servicing can be completed through the wall-mounted button plate to access the cistern and plumbing, as required. The Invisi™ Series II also incorporates Caroma’s reliable and proven Smartflush® water-saving technology and carries a 4 star Water Efficiency Labelling and Standards (WELS) rating. The collection meets all relevant Australian Standards and is guaranteed against leaking in wall when installed by a certified plumber, in accordance with the installation instructions. 22 The Invisi™ Series II has been developed using world class technology that breaks new ground in the housing and building sectors 23 GWA INTERNATIONAL LIMITED 2009 ANNUAL REPORT DUx hOT WATER – AWARD WINNING ENvIRONMENTAL INNOvATION STRONG GROWTh IN ENvIRONMENTAL WATER hEATERS The hot water market has undergone rapid change over the past three to five years with strong growth in high-efficiency gas, solar and heat pump water heaters. Legislation, backed by significant government incentives, has supported the strong growth of environmental water heaters. These incentives are forecast to continue until the government’s proposed ban on storage electric water heaters in 2012. Dux continues to focus on constant product innovation. In 2008-09 Dux received industry accolades including: ■■ ■■ ■■ ■■ “ Environmental Product of the Year” at the Queensland Plumbing Industry Awards “ Environment and Heritage Award” at the Engineering Excellence Awards WA Master Plumbers “Environmental Product of the Year” 2009 Endeavour Award “Australian Trade/Consumer Product of the Year” Dux has a highly awarded range of environmental water heaters, following the receipt of these important industry accolades. In September 2008, Dux launched the pioneering rebate website, www.hotwaterrebate.com.au. It is the first national website that calculates Federal and State Government hot water rebates for homeowners across Australia. The website helps to simplify and explain rebates as well as making the claim process easier. With more than 2.5 million page views in less than a year, it is now the industry’s most popular rebate information source. Dux also has a strong focus on customer service and training improvement. The company will soon launch the ‘Dux Solar University’. This will be a state-of-the-art training facility, which will enable staff and customers to be provided with the very best technical information on all Dux products, their installation and servicing. 24 homeowners can reduce their energy costs and household carbon emissions by installing a solar hot water system. AIROhEAT® Airoheat continues to be a highly-successful product. Its unique and innovative design has made it an award winning environmental hot water system with six prestigious industry awards. Airoheat is an efficient compact heat pump water heater as well as being simple, convenient and quick to install. Airoheat is very appealing to consumers seeking environmentally-friendly solutions because it offers similar benefits to electric-boosted solar hot water systems but without the need for solar roof panels. This dramatically reduces installation costs and complexity. GAS BOOSTED SOLAR SYSTEMS Dux continues to be a strong player in the gas boosted solar hot water system market as these systems are among the most environmentally- friendly hot water solutions available. There are two types of gas solar hot water systems in the Dux range. These include Sunpro 305, which provides a lower entry point price, while maintaining all of the benefits of mains pressure hot water. Its compact footprint has made it an ideal choice on smaller building blocks, particularly in Victoria. ELECTRIC BOOSTED SOLAR SYSTEMS The traditional electric storage water heater is presently the dominant hot water system type in Australian households. Homeowners can reduce their energy costs and household carbon emissions by installing a solar hot water system. The Dux range of Sunpro® electric boosted solar hot water systems (along with the Airoheat), is the logical replacement for these old electric systems. These systems are rapidly gaining popularity among consumers because of their environmental benefits. The Dux range of Sunpro® electric boosted solar is at the forefront of efficiency and will continue to be a hugely popular product of the future. The more efficient gas continuous solar range, which combines a larger tank coupled with the Endurance® continuous flow system, has been a popular choice for higher-end home builders. This type of system is the most efficient on the market and is designed to maximise solar gain and provide unlimited hot water. GAS hOT WATER SYSTEMS Dux currently has a range of high efficiency gas storage and gas continuous flow water heaters. Reticulated natural gas is viewed as an inexpensive, environmentally-friendly fuel source for heating water. The future for this segment of the market is in highly efficient gas systems, which typically have an energy rating of 5 stars or higher. Dux continues to develop quality products in these categories with an emphasis being placed on efficiency and innovation. 25 GWA INTERNATIONAL LIMITED 2009 ANNUAL REPORT GAINSBOROUGh – A COMMITMENT TO ThE ENvIRONMENT Gainsborough is committed to reducing the use of packaging across the supply chain and increasing the use of recyclable packaging materials. Gainsborough is actively managing a number of initiatives to improve environmental sustainability. Water usage has been reduced by 55% in core production activities over the past three years. Gainsborough is proud to introduce the exciting new Trilock Eclipse and Trilock Omni, both featuring modern styling and the world renowned Trilock ‘3 in 1’ functionality with the unique convenience of lockset, deadbolt and passage functions. These products are presented in the Gainsborough Designer Collection. Over the past year, solid waste has been reduced by 22%, with further waste minimisation initiatives to be implemented later in 2009. Gainsborough was awarded Certificates of Recognition by the Victorian EPA for participation in the Resource Efficiency in Metal Finishing Program in 2007 and for participation in the EPA’s Partnership Program in 2008. Product marketing is also subject to a strong program of sustainability. As a signatory to the National Packaging Covenant, Gainsborough is committed to reducing the use of packaging across the supply chain and increasing the use of recyclable packaging materials. INNOvATIvE NEW PRODUCTS FROM GAINSBOROUGh Gainsborough combines the latest in door hardware styling with Trilock ‘3 in 1’ functionality, to provide innovative door solutions for today’s homes. The Trilock Eclipse includes a slim, elegantly designed internal and external escutcheon plate to add style to exterior doors. This door solution is available in a selection of lever designs and finishes and combines impressive styling with Trilock ‘3 in 1’ functionality. Finishes include bright chrome, fusion and brushed satin chrome. Matching leversets are available to coordinate interior doors. The new Trilock Omni offers all the benefits of Trilock ‘3 in 1’ functionality combined with an impressive 600mm stainless steel pull handle. The external side of the lock features the 600mm pull handle, slim escutcheon plate and lever, all manufactured from durable 316 marine- grade stainless steel. The inside lever and contemporary escutcheon plate are finished in popular brushed satin chrome. There are three fashionable inside lever designs which complement the styling of the interior leversets in the Designer Collection’s Accent range. Both products feature a five-year tarnish resistant and 10 year mechanical guarantee. 26 SEBEL – QUALITY FURNITURE AND SEATING SEBEL LEADING ThE WAY IN REDUCING ITS ECOLOGICAL FOOTPRINT ON ThE ENvIRONMENT Sebel remains at the forefront of injection moulding technology and recycling with today’s state-of-the-art factory producing high-quality, sustainable products. In an effort to support sustainability and strategically position Sebel as an expert in developing and manufacturing polypropylene products, the company sets the environmental and ecological benchmarks within the markets that it operates in. Examples of Sebel’s new innovative sustainable products include: Postura Chair – 100% Recyclable The most significant recent event for Sebel has been the release of the 100% recycled school chair called the Postura. Education clients demand high quality furniture that withstands the rigours of a modern classroom environment. Sebel has established itself as a market leader and Australia’s largest school furniture company. Sebel has taken the global environmental lead with the new Postura totally recycled school chair. The new Sebel Postura recycled school chair has been designed and strenuously tested to pass the highest Australian and European standards, with key features being strong durability and comfort for students of all ages. Coinciding with the Federal Government’s Building the Education Revolution stimulus package, Sebel is now buying back old Sebel school chairs, re-manufacturing them and creating totally new products. Under Sebel’s new buy-back system, schools can now renew their classrooms with bright new chairs at a low cost, while not adding to landfill with discarded chairs. The launch of this product has further consolidated Sebel’s Australian and International leadership position in plastic recycling technology. Chameleon Office Chair Range To improve our competitive position and profile in the office furniture market, Sebel has developed a responsible solution to help clients who make their purchasing decisions based on environmental factors. The Chameleon range is innovative, versatile and environmentally- friendly. It is GECA certified, and with a NATA certified in-house testing facility, the Chameleon range has been tested over 500,000 cycles at 150kg which is well beyond severe duty standards AS 4438. All of its plastic components are moulded in Australia, using recycled materials (excluding specific outer). At the end of the products useful life, it is genuinely recyclable thus reducing our ecological footprint. This new range will set Sebel apart from this segment of the market and create new standards that meet or exceed market requirements. 27 GWA INTERNATIONAL LIMITED 2009 ANNUAL REPORT SUSTAINABILITY AND ENvIRONMENT (OPERATIONS) Waste Stream Clay waste Vitreous china waste Cardboard packaging Office paper All plastics Bulker bags One trip pallets Tonnes per Annum 1440 840 All All 240 All All GROUP INITIATIvES GWA’s product ranges in the building fixtures sector have continued to provide innovative products that enhance water and energy saving measures. GWA’s commitment to sustainability and the environment also extends to its operations. 2008-09 has been another year of significant developments in water and energy savings, continuing on from the successes of the 2007-08 year. Significant highlights include: CAROMA WEThERILL PARk, NEW SOUTh WALES ■■ Caroma Wetherill Park became a member of Sustainability Advantage – a NSW State Government initiative targeting reduction in energy/emissions and awareness of environmental influences in manufacturing operations and associated capital projects. Objectives and outcomes targeted include maximising efficiency of resources employed in manufacturing including electricity, gas (natural and LPG) and water. As further benefit to Caroma, Wetherill Park has achieved a 75% cost reduction on a waste disposal cost base of $1.1million per annum. Water Recycling/Reduction ■■ The installation of a new water treatment plant was completed last year. Caroma Wetherill Park is now treating all process water, and generating water quality suitable for reuse in non-critical plant (approximately 40% of total usage). Distribution of recycled water is being introduced in phases during the 2009-10 year. In order to extend water reuse to critical plant, further enhancement of water quality will be required. Capital investment for this project is pending approval. When approved it will give Caroma Wetherill Park the opportunity to recycle and reuse an estimated 80% of total water consumption (approximately 200,000 litres) of which 170,000 litres is being discharged to Sydney Water sewerage ■■ Engineers reprogrammed the computer wash cycles for Pressure Casting Moulds to deliver an annual town water usage reduction of 5,000,000 litres per year. Waste Stream Recycling Glaze Reclamation ■■ Caroma Wetherill Park manufactures vitreous china sanitaryware including toilets and hand basins. Caroma has established a comprehensive program for segregation of waste streams for recycling as outlined in the table above. ■■ The most significant recycling initiative has been the clay and fired waste (vitreous china) streams which were previously sent to landfill. Boral Recycling are now taking 95% of Caroma Wetherill Park’s manufacturing waste material by weight. Boral Recycling re-use these materials to manufacture (for clay waste) bricks, pavers and garden blocks and (for vitreous china waste) as a material component for road base and also as an adjunct to brick manufacture. Caroma Wetherill Park is partnering Boral in the study of further uses of the clay and vitreous china waste into other manufactured products. Paper, cardboard and plastics collected are 100% recycled. Timber and particle board pallets, which are classed as single use by Caroma, are 95% recycled. These pallets are now being reused in other applications or converted to timber chips for reuse in landscaping applications. It is estimated that for all the waste streams, greater than 95% are recycled and reused in secondary manufacturing processes such as bricks, road base and recycled paper and cardboard. 28 The glaze recycling system has now operated successfully for 12 months. The system, called Xtract, recovers the overspray glaze which is applied onto the vitreous china ware. Caroma Wetherill Park is reclaiming all overspray at the rate of 336 tonnes per annum of recycled glaze, which represents 40% of total glaze requirements. The process also produces 8,000 litres of recycled water which is re-used in cleaning operations. Previously the used glaze was sent to landfill (1,400kg annually) and the water sent to waste via the sewer. Energy Reduction ■■ ■■ ■■ ■■ ■■ Air conditioning – a combination of replacement, rebalancing and installation of timers has occurred in office and canteen areas with estimated usage reductions of 25% for these facilities Factory air compressors have been refitted to new energy efficient inverter drive compressors Baseline measurements are currently underway to identify opportunities for further efficiency improvements Lighting – lux sensors have been trialled in some factory areas. Work is in progress to retro-fit energy efficiency light bulbs throughout the Wetherill Park site Investigation and feasibility studies are a work in progress for the feasibility of co-generation, kiln heat recovery, forklift energy conversion and rain water harvesting. CAROMA NORWOOD, SOUTh AUSTRALIA NATIONAL PACkAGING COvENANT SIGNATORY Energy Reduction ■■ Electricity consumption was reduced by 6% when measured as a ratio of consumption compared to factory output. This was achieved via more efficient use of air compressors. Water Reduction ■■ Water usage was reduced by 26% compared to the previous year when measured as a ratio of usage compared to factory output by more efficient use of water for cooling. SEBEL BANkSTOWN, NEW SOUTh WALES Energy Reduction ■■ Sebel conducted an air consumption and energy usage survey on three air compressors running on site. Modifications were made to control equipment to optimise running times and efficiency. Estimated savings are approximately 357,000KWh per annum. Water Reduction ■■ Sebel Bankstown has reduced the water consumption used in the cooling towers on site by 50% through reconfiguring the cooling tower set-up. This has resulted in an annual saving of approximately 30,000 litres per year. GAINSBOROUGh BLACkBURN, vICTORIA Plating Waste Reduction ■■ Plating waste weight reduction of 6.5% has been realised due to waste filter cake being allowed to dry out prior to being sent off-site as prescribed waste, saving disposal costs. Additional initiatives to be implemented are to capture heat generated by die-casting machines into an oven to dry filter cake more efficiently. Further advantages can be achieved if waste can be stored on-site to be sent away in larger volumes made possible due to weight reduction. Diecast Waste Reduction ■■ A program to treat oily water from the diecast process is being implemented. Cooling emulsion is currently trapped in machine bunds and pumped to holding tanks for disposal as prescribed waste. The solution will use chemical separation of emulsion streams from holding tanks and will allow the water component to be discharged to sewer. The emulsifying agent to be employed does not require pH and temperature adjustment, which means lower cost for disposal. GWA joined the National Packaging Covenant (NPC) during 2008. The signatory commitment is for three years. The aim of the scheme is to reduce packaging to waste by encouraging recycling, minimisation and reuse. Each GWA division has now submitted an approved action plan. During 2009-10 each division will report progress to the NPC against approved action plans. GREENhOUSE GAS INITIATIvES AND REPORTING Ultimately all identified energy and water savings will reduce greenhouse gases. Reduction in water usage frequently leads to reduced on-site treatment and typically leads to less energy demands for downstream sewerage treatment plants through decreased effluent processing. GWA remains committed to sustainability, through energy, water and waste reductions in all operations as well as products. During 2009, a sustainability group was formed within GWA. The group is made up of key operational staff from major operations sites and group marketing. The aim of the group is to promote awareness of sustainability for both products and processes in GWA by: ■■ ■■ ■■ ■■ Reducing energy and water consumption in both products and processes Reducing waste in processes Encouraging recycling of material where practical Ensure reporting requirements under NPC and National Greenhouse Emissions Reporting (NGER). National Greenhouse Emissions Reporting (NGER) ■■ GWA has been undertaking preparatory work to capture, record and report greenhouse gas emissions under NGER. In 2009, Caroma Wetherill Park will trigger reporting obligations for greenhouse gas emissions. Policy and procedures are well advanced to report on emissions. A computer based system to streamline recording and to assist with compliance to NGER is running and, with further enhancements, will be used to help provide empirically based data for sustainability based capital projects as well as track reductions. The database captures water and energy usage at all GWA sites where there is operational control. It is expected that all GWA sites will report greenhouse gas emissions during the 2009-10 financial year. 29 BARRY ThORNTON AM 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 the former public company, 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 a former director of many major listed public companies, including Stockland Corporation Limited and Suncorp-Metway Limited. He is also a former Chairman of the Brisbane Airport Corporation Limited and the Ports Corporation of Queensland. PETER CROWLEY BA B ECON FAICD Managing Director, Appointed 2003 ■■ 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. 30 GWA INTERNATIONAL LIMITED 2009 ANNUAL REPORT GWA INTERNATIONAL LIMITED 2008 ANNUAL REPORT BOARD OF DIRECTORS BOARD OF DIRECTORS jIM kENNEDY AO CBE DUNIv (QUT) FCA FCPA Deputy Chairman and Non-Executive Director, Elected to the Board 1992 ■■ ■■ Expertise: Chartered Accountant, corporate and financial management Special Responsibilities: Deputy Chairman of the Board and Chairman of Audit Committee Mr Kennedy is one of Australia’s most experienced major listed public company directors. 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 Securities Exchange Limited 1990 - 2006 Qantas Airways Limited 1995 - 2006 ROBERT ANDERSON Non-Executive Director, Elected to the Board 1992 ■■ Expertise: Property investment and transport logistics Mr Anderson was appointed a director of the former public company, 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. 30 DAvID BARRY FAIM Non-Executive Director, Elected to the Board 1992 DARRYL MCDONOUGh BBUS (ACTY), LLB (hONS), SjD, FCPA, FAICD ■■ ■■ Expertise: Importation, distribution and retailing Special Responsibilities: Member of Remuneration Committee Mr Barry was appointed a director of the former public company, 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. RIChARD ThORNTON CA B COM LLB (hONS) LLM Executive Director and Company Secretary, Elected to the Board 2009 Non-Executive Director, Elected to the Board 2009 ■■ ■■ Expertise: Lawyer and experienced public company director Special Responsibilities: Member of Nomination Committee Darryl McDonough is a practicing solicitor with over 25 years of corporate experience. He has served as a director of a number of public companies in the past, including Bank of Queensland Limited and is currently a director of Super Cheap Auto Group Limited and is a Past-President of The Australian Institute of Company Directors, Queensland Division. During the past three years, Mr McDonough has served as a director of the following other listed company, and the period in which the directorship has been held: ■■ Expertise: Chartered Accountant, taxation and finance ■■ Super Cheap Auto Group Limited since 2004 * Mr Thornton joined GWA International Limited in 2002 as Group Taxation Manager and Treasurer and was appointed Company Secretary in 2003. He is a Chartered Accountant and is experienced in accounting, taxation and finance through positions at Coopers & Lybrand, Citibank and Ernst & Young in Australia and overseas. Mr Thornton continued in his role as Company Secretary following his appointment as an Executive Director. *denotes current directorship GEOFF MCGRATh MIIE Non-Executive Director, Elected to the Board 2004 BILL BARTLETT FCA, CPA, FCMA, CA(SA) Non-Executive Director, Elected to the Board 2007 ■■ ■■ Expertise: Manufacturing and general management Special Responsibilities: Chairman of Remuneration Committee and member of Nomination 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 the former public company, 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 2003 – 2009 *denotes current directorship +denotes Chairman Expertise: Chartered Accountant, actuarial, insurance and financial services Special Responsibilities: Member of Audit Committee and member of Remuneration 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. 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* Arana Therapeutics Limited (formerly Peptech Limited) 2004 - 2007 Abacus Property Group since 2007* ■■ Retail Cube Limited 2004 – 2006 *denotes current directorship 31 GWA INTERNATIONAL LIMITED 2009 ANNUAL REPORT CORPORATE GOvERNANCE STATEMENT FOR ThE YEAR ENDED 30 jUNE 2009 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. 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. The corporate governance practices of the Company have been in place since listing and are constantly reassessed in the light of experience, contemporary views and 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. The Board supports the Corporate Governance Principles and 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. PRINCIPLE 1 – LAY SOLID FOUNDATIONS FOR MANAGEMENT AND OvERSIGhT ROLE OF ThE BOARD The Board is responsible for the long term growth and financial performance 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: ■■ Providing input into and final approval of corporate strategies and performance objectives developed by senior management ■■ 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 32 ■■ 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. DELEGATIONS POLICY The Board has approved a Delegations Policy which clearly outlines the authorities of the Board and those which have been delegated to senior management. The policy ensures that senior management understands the authorities delegated by the Board and are accountable to the Board for its compliance. Regular reviews are conducted on the appropriateness of the delegated authorities, and any material breaches are reported to the Board. LETTER OF APPOINTMENT New directors of the Company are provided with a formal letter of appointment which outlines the key terms and conditions of their appointment. Similarly, senior executives including the Managing Director and Chief Financial Officer have formal job descriptions and letter of appointment describing their salary arrangements, rights and responsibilities and entitlements on termination. PERFORMANCE REvIEWS Performance reviews of staff including senior executives are conducted formally on an annual basis. The performance review process is critical to the development of staff and enables performance issues to be addressed. The Company has identified core competencies for the key roles in the organisation and these are incorporated into the job descriptions. During the performance review process, the performance of staff is assessed against the business objectives and core competencies. PRINCIPLE 2 – STRUCTURE ThE BOARD TO ADD vALUE 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 various business locations, followed by management presentations and site tours. The Divisional General Managers are required to regularly attend and present at the Board meetings on operational issues and performance. A Group strategy meeting is held annually as part of the budget approval process, which enables the Board to review corporate strategies and performance with the Divisional General Managers. This ensures that the Board is effectively carrying out its duties of providing input into and 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. COMPOSITION OF ThE BOARD The Board presently comprises 9 directors, 7 of whom, including the Chairman and Deputy Chairman, are non-executive directors and 2, the Managing Director and Executive Director, are executive directors. Profiles of the directors are set out on in the Annual Report. The profiles outline the skills, experience and expertise of each Board member, including the period of office held by each director. 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 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 be financially literate and have 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. 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 considering the relationships which may affect independent status as 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 non-executive directors of the Company: ■■ Mr Jim Kennedy, Deputy Chairman and Non-Executive Director ■■ Mr David Barry, Non-Executive Director ■■ Mr Robert Anderson, Non-Executive Director ■■ Mr Bill Bartlett, Non-Executive Director ■■ Mr Darryl McDonough, Non-Executive Director ■■ Mr Geoff McGrath, Non-Executive Director. 33 GWA INTERNATIONAL LIMITED 2009 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 earlier, 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 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 to assume the role as acting Chairman of the Board. (ii) Mr Geoff McGrath – Non-Executive Director In previous years, Mr Geoff McGrath was deemed not to be an independent director as he was the former Managing Director until his retirement in May 2003. It has been more than three years since the appointment of Mr McGrath as a non-executive director in July 2004. Accordingly, Mr McGrath now meets the definition of an independent director as outlined in the recommendations of the ASX Corporate Governance Council. In the Board’s view, Mr McGrath exercises independent judgement in carrying out his duties as director and should be considered an independent director. 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. 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. 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. NOMINATION COMMITTEE The Nomination Committee meets as required and on several occasions throughout the year. For membership and attendance details of the Nomination Committee, refer to the Directors’ 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 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 the Board’s objectives and responsibilities. The main responsibilities of the Committee include: ■■ 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. 34 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; and ■■ The Board members consent to the proposed appointee. 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. PERFORMANCE EvALUATION On an annual basis, the Nomination Committee conducts a formal evaluation of the performance of Board, the Board Committees and the individual Board members to determine whether 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. PRINCIPLE 3 – PROMOTE EThICAL AND RESPONSIBLE DECISION-MAkING CODE OF CONDUCT The Company’s objective is to conduct 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 Code of Conduct states the values and policies of the Company and complements the Company’s 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. 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. PRINCIPLE 4 – SAFEGUARD INTEGRITY IN FINANCIAL REPORTING AUDIT COMMITTEE The Audit Committee meets as required and on several occasions throughout the year. For membership and attendance details of the Audit Committee, refer to 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 Chairperson of the Audit Committee must not be 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 and accounting related expertise. The Audit Committee 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. A detailed Terms of Reference has been developed to ensure the Audit Committee meeting agenda is consistent with the Committee’s role and responsibilities as outlined in the charter. 35 GWA INTERNATIONAL LIMITED 2009 ANNUAL REPORT 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, the Audit Committee members will meet with the External Auditor without management present. 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. The main responsibilities of the Audit Committee include: ■■ Review of financial statements and external financial reporting ■■ Assess the management processes supporting external reporting During the year, the Company’s External Auditor, KPMG, provided an Auditor Independence Declaration to the Board (refer to the Directors’ Report) that, to the best of their knowledge and belief, there have been no contraventions of: ■■ ■■ ■■ Assess whether the external reporting is adequate to meet the information needs for shareholders Recommendations on the appointment and removal of the External Auditor ■■ ■■ the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and any applicable code of professional conduct in relation to the audit. Review and monitor the performance and independence of the external audit In considering this declaration, the Board were satisfied with the continuing independence of the audit function. ■■ 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. 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. 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. 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 approved by the Board on the role of the External Auditor, which is designed to ensure the independence of the external audit function. For details of the non-audit roles performed by KPMG during the year, please refer to the notes to the Financial Statements. SELECTION AND APPOINTMENT OF ExTERNAL AUDITOR Following shareholder approval at the 2004 Annual General Meeting, KPMG were appointed External Auditor for the financial year commencing 1 July 2004 after a comprehensive tender process conducted by the Audit Committee. KPMG replaced Ernst & Young who had been the External Auditor since 1995. 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. An audit partner rotation plan has been reviewed and approved by the Audit Committee to ensure the transition process is managed effectively. PRINCIPLE 5 – MAkE TIMELY AND BALANCED DISCLOSURE The Company is committed to ensuring the timely disclosure of material information through compliance with the continuous disclosure obligations in the ASX Listing Rules and the Corporations Act 2001. The Company includes 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. The Managing Director is the Company’s Continuous Disclosure Compliance Officer and is responsible for ensuring compliance with the continuous disclosure requirements, and overseeing and authorising disclosure of information to the ASX. All media releases which contain material price sensitive information must be approved by the Board prior to release to the ASX. The Company Secretary coordinates the communications with the ASX including ensuring compliance with regulatory requirements and overseeing information released to the ASX, shareholders and other interested parties. Announcements made to the ASX by the Company are published on the Company’s website immediately after release. 36 PRINCIPLE 6 – RESPECT ThE RIGhTS OF ShAREhOLDERS 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: ■■ ■■ ■■ ■■ ■■ Ensuring that shareholder communications (including Annual Report, Half Year Report and Notice of Annual General Meeting) satisfy relevant regulatory requirements and guidelines. 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 shareholders have the opportunity to receive external announcements by the Company through the corporate website, www.gwail.com.au. All Company announcements and information released to the market are located on the website and may be accessed by shareholders. There is a Corporate Governance section on the website which outlines the practices of the Company, and other Company information including the Company’s environmental and social impacts The Board is committed to the enhancement of electronic communications with shareholders to reduce the environmental impact and costs. Shareholders can elect to receive Company communications electronically, although not all communications are made available electronically. Annual Reports are no longer printed and mailed to shareholders, unless specifically requested. Annual Reports are made available to shareholders on the Company’s website in an accessible and user friendly format. Shareholders are mailed the Notice of Annual General Meeting and Proxy Form, which includes details on accessing the online Annual Report and proxy voting The Company encourages shareholders to attend and participate at the Annual General Meeting to canvass the relevant issues of interest with the Board. If shareholders are unable to attend the Annual General Meeting personally, they are encouraged to participate through proxy voting. The Company has recently embraced online proxy voting to make it easier for shareholders to lodge their proxy votes if they are unable to attend the Annual General Meeting. The Company endeavours to set the timing and the location of the Annual General Meeting so that it is convenient for shareholders generally The External Auditor attends the Annual General Meeting and is available 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. PRINCIPLE 7 – RECOGNISE AND MANAGE RISk 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. Whilst ultimate responsibility for risk oversight rests with the Board, the Audit Committee is an efficient mechanism for focusing the Company on risk oversight, risk management and internal control an Executive Risk Committee (ERC), comprising the executive and senior management of the Company, which has been established to identify business risks in the organisation and review status and risk mitigation activities. Formal enterprise risk profiles have been prepared for the businesses and these are reviewed quarterly by the ERC. The major business risks are reported to the Audit Committee at the June and December meetings together with risk mitigation activities. The ERC reports to the Audit Committee on its activities as outlined in the ERC Charter a Finance Committee, comprising the executive and senior management of the Company, which has been established to review and monitor the financial risks in the organisation and oversee the execution of finance policies and risk mitigation activities. The Finance Committee reports to the Audit Committee on its activities as outlined in the Finance Committee charter a Group Commercial Manager who has primary responsibility for designing, implementing and coordinating the overall risk management and internal control practices of the Company. The Group Commercial Manager attends the Audit Committee meetings to present the Internal Audit Report. Whilst reporting to the Chief Financial Officer 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 operational risks including occupational health and safety, business continuity, environmental and sustainability risks. The Group Risk Manager prepares a monthly Group Risk Report for the Board and attends the June and December Audit Committee meetings to present the Operational Risk Report Internal Audit activities, undertaken by a combination of internal and appropriately qualified external resources, based on an Audit Committee 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 occupational 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. 37 In performing its responsibilities, the Remuneration Committee receives appropriate advice from external 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. 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 to align with shareholder wealth creation. The Nomination Committee is responsible for determining the remuneration for the non-executive directors, with the maximum aggregate amount approved by shareholders. The non-executive directors receive their remuneration by way of directors’ fees only (including statutory superannuation), and are not able to participate in the incentive schemes for the executives. 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 been structured to ensure that performance is fairly rewarded 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. LONG TERM INCENTIvE (EQUITY) PLAN Shareholders approved a new Long Term Incentive (Equity) Plan (LTIP) as part of the incentive arrangements for executives at the 2008 Annual General Meeting. Full details of the operation of the LTIP is described in the Remuneration Report. GWA INTERNATIONAL LIMITED 2009 ANNUAL REPORT Risk management is embedded in the Company’s policies and procedures which have enabled the Company to pro-actively identify and manage all 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. CERTIFICATION OF RISk MANAGEMENT CONTROLS In conjunction with the 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 statement is founded on a sound system of risk management and internal compliance and control which implements the policies adopted by the Board; and 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. PRINCIPLE 8 – REMUNERATE FAIRLY AND RESPONSIBLY REMUNERATION COMMITTEE The Remuneration Committee meets as required and on several occasions throughout the year. For membership and attendance details of the Remuneration Committee, refer to the Directors’ 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 consist of a minimum of three members The Chairperson of the Remuneration Committee should be a non- executive director. 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 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. 38 DIRECTORS’ REPORT AS AT 30 jUNE 2009 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 2009. 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 (Retired 30 October 2008) G J McGrath, Non-Executive Director W J Bartlett, Non-Executive Director D D McDonough, Non-Executive Director (Appointed 16 February 2009) R J Thornton, Executive Director (Appointed 6 May 2009) Details of the directors’ qualifications, experience and special responsibilities are located in 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 2008/09 financial year, and the period for which each directorship has been held, are listed in the Annual Report. COMPANY SECRETARY Mr R J Thornton was appointed Company Secretary of GWA International Limited in 2003. Mr Thornton continued in his role as Company Secretary following his appointment as an Executive Director on 6 May 2009. Details of Mr Thornton’s qualifications and experience are located in the Annual Report. DIRECTORS’ INTERESTS The relevant interest of each director in the share capital of the Company as notified by the directors to the Australian Securities Exchange in accordance with Section 205G(1) of the Corporations Act 2001 as at the date of this report is: Director B Thornton J J Kennedy P C Crowley D R Barry R M Anderson G J McGrath W J Bartlett D D McDonough R J Thornton Ordinary Shares Nil 101,000 750,000 3,553,830 8,418,442 150,000 15,425 43,635 110,850 Mr P C Crowley and Mr R J Thornton are holders of Performance Rights under the Long Term Incentive (Equity) Plan. For details of the Performance Rights held, please refer to the Remuneration Report. Note 33 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 61,351,674 shares (last year 58,719,673 shares). 39 GWA INTERNATIONAL LIMITED 2009 ANNUAL REPORT 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 2009, which are outlined in Note 31 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. EMPLOYEES The Company employed 1,891 employees as at 30 June 2009 (last year 1,786 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. SEGMENT PERFORMANCE The segment performance of the Company for the financial year ended 30 June 2009 is as follows: Business Segment Segment Revenue Trading EBIT Building fixtures and fittings Commercial furniture Mowers Other Total Earnings Per Share Basic earnings per share Trading earnings per share 2008/09 $’000 2007/08 $’000 2008/09 $’000 2007/08 $’000 593,671 558,657 98,493 109,552 56,088 28,585 – 56,864 33,381 2,033 3,369 (931) 370 – (12,640) (13,897) 678,344 648,902 86,955 99,394 2008/09 2007/08 cents 16.9 17.9 cents 16.4 21.5 REvIEW OF OPERATIONS AND STATE OF AFFAIRS A review of the operations of the Company and the results of those operations for the financial year ended 30 June 2009 is provided in the Managing Director’s Review of Operations which is located in the Annual Report. In the opinion of the directors other than the decision to no longer classify the Wisa Beheer sanitaryware business as an asset held for sale, 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. DIvIDENDS Dividends paid or declared by the Company to shareholders since the end of the previous financial year were: Dividends Cents per share Total Amount Franked Date of Payment $’000 Final 2007/08 Ordinary Interim 2008/09 Ordinary 8.0 9.5 22,414 Fully Franked 7 October 2008 26,831 Fully Franked 1 April 2009 Franked dividends declared and paid during the year were franked at the corporate tax rate of 30%. DECLARED AFTER END OF ThE 2008/09 FINANCIAL YEAR After the balance sheet date the following dividend was approved by the directors. The dividend has not been provided and there are no income tax consequences. 40 Dividend Cents per share Total Amount Franked Date of Payment $’000 Final 2008/09 Ordinary 8.5 25,332 Fully Franked 7 October 2009 The financial effect of the dividend has not been brought to account in the Financial Statements for the year ended 30 June 2009 and will be recognised in subsequent Financial Reports. The record date for the final dividend is 18 September 2009 and the dividend payment date is 7 October 2009. The Dividend Reinvestment Plan (DRP) will be offered to shareholders for the final dividend, and a discount of 3% will apply to shares subscribed for under the DRP. The record date for DRP participation is 18 September 2009. SIGNIFICANT EvENTS AFTER BALANCE DATE On 18 August 2009, the directors declared a final ordinary dividend of 8.5 cents per share in respect of the financial year ended 30 June 2009. The dividend will be fully franked at the 30% corporate tax rate. The total amount of the dividend is $25.332 million (last year $22.414 million). In accordance with Accounting Standards, the dividend has not been provided for in the Financial Statements for the year ended 30 June 2009. 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 in 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 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. 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 2009. ENvIRONMENTAL REMEDIATION In previous financial years, the Company investigated and reported two environmental contamination issues at factory sites at Eagle Farm, Queensland and Revesby, NSW. The Eagle Farm site is leased and occupied by Rover Mowers Limited and the Revesby site is leased and occupied by McIlwraith-Davey Pty Ltd. Both entities are wholly owned subsidiaries of the ultimate parent entity, GWA International Limited. The costs to remediate the Eagle Farm site have been provided in the Financial Statements for the year ended 30 June 2009. Whilst there is currently no legal obligation to remediate the site, the Board has approved targeted remediation activities to mitigate potential future environmental liabilities. It is expected that these activities will be carried out during the year ending 30 June 2010. A Site Management Plan will be developed following remediation. The costs to remediate the Revesby site have been provided in prior years. During the year, a Voluntary Remediation Proposal for the site was submitted to the Department of Environment and Climate Change (NSW) and it is expected that remediation activities will commence during the year ending 30 June 2010. A Site Management Plan will be developed following remediation. 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 in the Directors’ Report, the Chief Financial Officer and all persons concerned or taking part in the management of the Company and its controlled entities. 41 GWA INTERNATIONAL LIMITED 2009 ANNUAL REPORT REMUNERATION REPORT - AUDITED 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 2004 Annual General Meeting, 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. 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 the termination of the Directors’ Retirement Scheme in 2003, retirement benefits are not available for non-executive directors of the Company, other than statutory superannuation. For details of the emoluments paid to the non-executive directors for the year ended 30 June 2009, refer to the Remuneration Tables. 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 u Short Term Incentive u Long Term Incentive ■■ Employee Share Plan The fixed remuneration component includes base salary, statutory superannuation and non-monetary benefits including medical benefits membership, salary continuance and life insurance and the provision of motor vehicles. The variable remuneration component includes a Short Term Incentive and Long Term Incentive under the Executive Incentive Scheme. Lower level management and senior staff may be invited to participate in the GWA International Employee Share Plan. 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. The fixed remuneration of the five most highly remunerated executives and other key management personnel is detailed in the Remuneration Tables. 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. All performance plan payments are subject to maximum amounts. ExECUTIvE INCENTIvE SChEME The Executive Incentive Scheme participants include the members of the divisional and corporate executive. Under the scheme, there are two incentives including a Short Term Incentive and Long Term Incentive. The objectives of the scheme are to maximise short term operating performance and longer term performance on an absolute basis, and compared to peer companies. 42 The Short Term Incentive for senior executives operates from divisional performance targets for divisional executives and group performance targets for corporate executives. Where the yearly targets are achieved, the Managing Director will receive an incentive payment in the range of 40% to 60% of fixed remuneration depending on the level of performance. Other senior executive participants will receive an incentive payment in the range of 30% to 40% of fixed remuneration depending on the level of performance. Short term incentive payments are subject to a cap such that two thirds of the incentive is designed to be reasonably achievable based on good business performance, with the balance rewarding high growth performance. The yearly targets are based on the achievement of personal goals and financial targets approved by the Remuneration Committee at the beginning of the financial year. The provision of incentives based on the achievement of personal goals reinforces the Company’s leadership model for improved business performance. The financial targets are based on profit growth which is aimed at improving performance consistent with shareholder wealth creation. Lower levels of incentives are also paid to key senior staff to reward personal performance. The Long Term Incentive is provided as Performance Rights under the rules of the GWA International Long Term Incentive (Equity) Plan. The plan replaced the previous cash based Long Term Incentive and was approved by shareholders at the 2008 Annual General Meeting. Under the plan, the Board may offer Performance Rights to participants which entitle the holder to ordinary shares in the Company (or in limited cases cash payments made), subject to meeting financial performance hurdles and the holder remaining in employment with the Company until the nominated vesting date. The performance hurdles are selected by the Remuneration Committee and are subject to financial performance conditions which measure Total Shareholder Returns (TSR) compared to a peer group of companies, and growth in Earnings Per Share (EPS). The EPS hurdle is calculated as statutory EPS adjusted at the discretion of the Board for significant or abnormal events. The performance hurdles are challenging and achievable and focus senior executives on sustained long term growth consistent with shareholder wealth creation. The plan runs over a three year performance period and the rights will only vest if the performance hurdles are achieved. If the vesting conditions and performance hurdles are achieved, ordinary shares will be issued to the participants at no cost. If the performance hurdles are not met, then the rights are cancelled after three years. In accordance with the rules of the Long Term Incentive (Equity) Plan, the executives are prohibited from entering into hedging transactions or arrangements which reduce or limit the economic risk of holding unvested Performance Rights. The Long Term Incentive is aligned to shareholder interests as Performance Rights only vest if the EPS and TSR performance hurdles are achieved over the three year performance period. The performance hurdles and vesting proportions for each measure are as follows: EPS Growth over three year performance period Proportion of Performance Rights that may be exercised if EPS growth hurdle is met 10% or more 50% (ie, 50% of total grant) TSR of GWA International Limited relative to TSRs of Comparator Companies Proportion of Performance Rights that may be Exercised if TSR hurdle is met More than the 50th percentile 50% (ie, 50% of total grant) Comparator companies GUD Holdings Limited Hills Industries Limited Bradken Limited Spotless Group Limited Alesco Corporation Limited Crane Group Limited Pacific Brands Limited Adelaide Brighton Limited Ansell Limited Paperlinx Limited 43 GWA INTERNATIONAL LIMITED 2009 ANNUAL REPORT EMPLOYEE ShARE PLAN As a further component of remuneration for lower level management and senior staff, the Company may invite employees to participate in the GWA International Employee Share Plan. This plan was previously available to executives, but following the recent review by the Remuneration Committee and introduction of the GWA International Long Term Incentive (Equity) Plan, it is now limited to lower level management and senior staff. 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 2009 there are currently 3.9 million shares issued under the GWA International Employee Share Plan, which have an outstanding loan balance of $9.96 million. The plan does not provide for the issue of options and no options have been issued by the Company. The GWA International Employee Share Plan is an effective incentive in encouraging and rewarding sustained higher performance from management and senior staff who merit recognition of their performance and are integral to the future success of the Company. Participation in the plan represents a long term financial commitment to their employment with the Company. ShAREhOLDER WEALTh The below table is a summary of key shareholder wealth statistics for the Company over the last five years. Trading EBIT has declined in the 2008/09 year due to the downturn in the domestic dwelling construction and renovation market following the global financial crisis in late 2008. This follows a number of years of weak domestic dwelling construction activity which is a key driver of earnings growth in the Company’s core building fixtures and fittings business. Despite the difficult market conditions, the core business has performed soundly over the last five years generating strong operating cash flows enabling the Company to maximise fully franked dividend payments to shareholders. The restructuring activities of recent years placed the Company in a strong position during the current downturn, and will underpin profitability growth as the market recovers. 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 out in the above table, including a total of $1.035 in fully franked dividends paid to shareholders in the last five financial years, which includes 13.5 cents in special dividends. The Board will continue to review and monitor the remuneration and incentive framework to ensure that performance is fairly rewarded and encouraged, and to attract, motivate and retain a high quality executive team. TERMINATION OF EMPLOYMENT The specified executives in the Directors’ Report are on open-ended contracts, except for the Managing Director, Mr Peter Crowley, whose employment contract specifies an initial term of twelve months with subsequent rolling terms of twelve months. The employment contract for Mr Crowley provides that if either the Company or Mr Crowley wishes to terminate employment for any reason, three months notice of termination is required, or payment in lieu, based upon current salary levels. On termination by the Company, Mr Crowley will be entitled to receive payment of twelve months salary. For the other specified executives, the Company is legally required to give reasonable notice of termination, or payment in lieu, based upon current salary levels. Performance Rights held by executives under the Long Term Incentive (Equity) Plan will lapse upon the cessation of employment with the Company. Any loan to management and senior staff under the GWA International Employee Share Plan must be repaid in full upon the cessation of employment with the Company. REMUNERATION TABLES - AUDITED DIRECTORS’ AND ExECUTIvE OFFICERS’ REMUNERATION Details of the nature and amount of each element of remuneration of each director of the Company, each of the five named Company executives and relevant consolidated entity executives who receive the highest remuneration and other key management personnel are outlined in the table on the following page. Financial Year Trading EBIT ($m) Trading EPS (cents) Total DPS (cents) Share Price ($) 2004/05 2005/06 2006/07 2007/08 2008/09 103.4 95.2 98.8 99.4 87.0 23.0 21.6 22.0 21.5 17.9 22.5 21.5 22.0 19.5 18.0 2.92 3.11 4.42 2.50 2.30 44 Short–term Salary & Fees STI Cash Bonus Non– Monetary Long– term Value of Share– Based Awards Post–employment Super annuation Benefits Termin– ation Benefits $ $(a)* $(b) $(c) $ Proportion of remuneration performance based STI Cash Bonus vested in year STI Cash Bonus forfeited in year % % % – – – – – – – – – – – – – – – – – 250 – 250 – 250 – 250 – 250 – 250 – 250 – – – – – – – – – – – – – – – – – – 26,001 24,584 100,000 100,000 3,639 10,092 9,207 8,696 100,000 99,245 86,172 88,078 10,377 9,256 28,000 – 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 65,342 54,683 40,433 112,130 102,300 96,624 4,967 – 28,241 17,242 115,300 102,840 – – Non–Executive Directors B Thornton, Chairman 2009 2008 288,899 273,150 J Kennedy, Deputy Chairman M Kriewaldt (Retired 30 October 2008) D Barry R Anderson G McGrath W Bartlett D McDonough (Appointed 16 February 2009) Executive Directors P Crowley, Managing Director R Thornton, Executive Director (Appointed 6 May 2009) Executives S Wright, Group Operations Manager 2009 2008 1,379,601 1,164,718 112,500 – 240,918 206,927 194,658 – 50,000 100,000 2009 2008 39,160 – 4,167 – 9,526 – 3,199 – 3,767 – 1,977,677 1,471,645 59,819 – 15.5 – 12.3 – (Ceased employment 18 July 2008) 2008 461,523 300,000 75,504 100,000 937,027 32.0 2009 28,634 – 26,603 100,000 500,000 655,237 – – – A Rusten, Group Marketing Manager 2009 316,280 17,000 100,817 27,417 31,160 2008 300,224 – 96,397 – 29,680 T Dragicevich, Chief Executive – Caroma Dorf 2009 2008 435,219 45,833 41,000 100,000 40,659 767 54,833 – 100,000 – G Douglas, General Manager – Rover 2009 2008 182,943 184,743 – 33,965 45,286 34,337 21,933 – 100,000 100,000 J Measroch, General Manager – Sebel (Ceased employment 31 Oct 2008) 2009 105,337 2008 271,092 - - 18,994 44,567 - - 26,663 9,333 210,000 343,664 G Oliver, General Manager –Gainsborough 2009 2008 295,097 255,676 147,000 76,920 44,888 43,236 30,158 - 101,112 99,768 W Saxelby, Chief Financial Officer G Welsh, General Manager – Sebel 2009 552,854 62,000 199,172 54,833 96,000 2008 223,245 200,000 32,222 - 77,619 2009 216,684 75,000 4,460 21,933 18,109 (Commenced employment 20 October 2008) 2008 - - - - - L Patterson, General Manager – Dux 2009 2008 356,290 309,429 142,000 88,200 123,033 121,398 30,158 - 41,220 29,400 * Comparative STI cash bonus amounts have been adjusted to reflect the actual amounts paid. 336,186 28.8 - 692,701 548,427 - 24.9 16.1 Total $ 314,900 297,984 165,342 154,933 44,072 122,472 111,507 105,570 104,967 99,495 114,413 105,570 125,677 112,346 28,000 – 492,674 426,301 671,711 146,600 350,162 353,045 342,322 618,255 475,600 964,859 533,086 – – – – – – – – – – – – – – – – 9.0 – 14.3 68.2 6.3 9.6 - - 28.7 16.2 12.1 37.5 $ – – – – – – – – – – – – – – – – – – – – – – – – – – – - - - - - - - - - – – – – – – – – – – – – – – – – 13 – 25 – – 100 13 – 19 100 – 50 - - 100 50 25 100 100 - 100 100 – – – – – – – – – – – – – – – – 87 100 75 – – – 87 100 81 – 100 50 - 100 - 50 75 - - - - - 45 GWA INTERNATIONAL LIMITED 2009 ANNUAL REPORT (a) The Short Term Incentive cash bonus is for the performance during the financial year ended 30 June 2009 based on the achievement of personal goals and specified performance criteria as set out earlier in the report. The STI cash bonuses are paid annually following the end of the preceding financial year. The amounts have been determined following individual performance reviews and have been approved by the Remuneration Committee. (b) The non-monetary benefits include the provision of other benefits such as motor vehicles, medical benefits membership, salary continuance and life insurance, interest free loans under the GWA International Employee Share Plan and any applicable fringe benefits tax thereon. (c) The Long Term Incentive (Equity) Plan was approved by shareholders at the 2008 Annual General Meeting and runs for a three year performance period. If the performance hurdles are achieved the performance rights will vest on the date of the release of the Company’s audited financial results for the year ending 30 June 2011 to the Australian Securities Exchange. The fair value of the performance rights granted during the year ended 30 June 2009 is calculated using Binomial option pricing model (EPS hurdle) and Monte Carlo simulation (TSR hurdle) valuation methodologies and allocated to each financial year evenly over the three year performance period. PERFORMANCE RIGhTS OvER ORDINARY ShARES GRANTED AS COMPENSATION Details of Performance Rights over ordinary shares in the Company that were granted as compensation to each key management person under the Long Term Incentive (Equity) Plan during the year are as follows: Executive Directors P Crowley, Managing Director 355,000 27 February 2009 583,975 Number of rights granted Grant date* Fair value of rights at grant date $* R Thornton, Executive Director (Appointed 6 May 2009) 35,000 27 February 2009 57,575 Executives S Wright, Group Operations Manager (Ceased employment 18 July 2008) – – – A Rusten, Group Marketing Manager 50,000 27 February 2009 82,250 T Dragicevich, Chief Executive – Caroma Dorf 100,000 27 February 2009 164,500 G Douglas, General Manager – Rover 40,000 27 February 2009 65,800 J Measroch, General Manager – Sebel (Ceased employment 31 October 2008) – – – G Oliver, General Manager –Gainsborough 55,000 27 February 2009 90,475 W Saxelby, Chief Financial Officer 100,000 27 February 2009 164,500 G Welsh, General Manager – Sebel (Commenced employment 20 October 2008) 40,000 27 February 2009 65,800 L Patterson, General Manager – Dux 55,000 27 February 2009 90,475 All of the above rights carry an exercise price of nil and vest on the date of the release of the Company’s audited financial results for the year ending 30 June 2011 to the Australian Securities Exchange, subject to the achievement of the performance hurdles set out earlier in this report. No rights were forfeited, vested or exercised during the year. The number of rights granted during the year also represents the balance yet to vest at 30 June 2009. * The issue price used to determine the number of rights offered to all participants during the year, including Mr Crowley and other key management personnel, was $2.46 being the volume weighted average price of the Company’s shares calculated over the 20 trading days after the Company’s Annual General Meeting on 30 October 2008. The grant dates and corresponding fair values per right in the above table have been determined in accordance with Australian Accounting Standards and are dependent on the dates on which the individual executives are deemed to have received their offers to participate in the plan. Fair values have been calculated using Binomial option pricing model (EPS hurdle) and Monte Carlo simulation (TSR hurdle) valuation methodologies. The fair value of rights issued during the year under the EPS hurdle was $1.78 per right, and the TSR hurdle was $1.51 per right. 46 DIRECTORS’ MEETINGS The number of meetings of directors (including meetings of Committees of directors) held during the financial year ended 30 June 2009 and the number of meetings attended by each director were as follows: Director Board Audit Committee Remuneration Committee Nomination Committee B Thornton J J Kennedy P C Crowley (1) D R Barry R M Anderson M D E Kriewaldt (4) G J McGrath (2) W J Bartlett (3) D D McDonough (6) R J Thornton (5) A 13 13 13 13 13 5 13 13 5 2 B 13 13 13 13 12 5 12 13 5 2 A 4 4 1 4 B 4 4 1 4 A 3 1 3 2 B 3 1 3 2 A 2 2 2 B 2 2 2 Note: A – Number of meetings held during the time the director held office during the year B – Number of meetings attended (1) P C Crowley attends Committee meetings by invitation of the Board (2) G J McGrath was appointed a member of the Nomination Committee on 30 October 2008 (3) W J Bartlett was appointed a member of the Remuneration Committee on 30 October 2008 (4) M D E Kriewaldt retired as a non-executive director on 30 October 2008 (5) R J Thornton was appointed an executive director on 6 May 2009 (6) D D McDonough was appointed a non-executive director on 16 February 2009 and a member of the Nomination Committee on 3 March 2009 As at the date of this report, the Company had an Audit Committee, Remuneration Committee and 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 in the Annual Report. The members of the Audit Committee are: ■■ ■■ ■■ Mr J Kennedy (Chairman) Mr B Thornton Mr W Bartlett The members of the Remuneration Committee are: ■■ ■■ ■■ Mr G McGrath (Chairman) Mr D Barry Mr W Bartlett The members of the Nomination Committee are: ■■ ■■ ■■ Mr B Thornton (Chairman) Dr D McDonough Mr G McGrath Details of the Committee members qualifications and experience are located in the Annual Report. NON-AUDIT SERvICES Details of the non-audit services provided by the Company’s External Auditor, KPMG, during the financial year ended 30 June 2009 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 DECLARATION The Lead Auditor’s Independence Declaration is set out in the Annual Report and forms part of the Directors’ Report for the financial year ended 30 June 2009. 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. Signed in accordance with a resolution of the directors. B Thornton Chairman Brisbane, 18 August 2009 P C Crowley Managing Director 47 GWA INTERNATIONAL LIMITED 2009 ANNUAL REPORT CONTENTS 48 Income Statements Statements of Recognised Income and Expense Balance Sheets Statements of Cash Flows Note 1 Significant accounting policies 2 Segment reporting 3 Other income 4 Other expenses 5 Personnel expenses 6 Auditors’ remuneration 7 Net financing costs 8 Restructuring and impairment expenses 9 Income tax expense 10 Earnings per share 11 Cash and cash equivalents 12 Trade and other receivables 13 Inventories 14 Assets and liabilities classified as held for sale 15 Acquisitions of subsidiaries 16 Current tax assets and liabilities 17 Deferred tax assets and liabilities 18 Property, plant and equipment 19 Intangible assets 20 Trade and other payables 21 Interest-bearing loans and borrowings 22 Employee benefits 23 Share-based payments 24 Provisions 25 Capital and reserves 26 Financial instruments and financial risk management 27 Operating leases 28 Capital and other commitments 29 Contingencies 30 Deed of cross guarantee 31 Consolidated entities 32 Reconciliation of cash flows from operating activities 33 Related parties 34 Subsequent events Directors’ Declaration Independent Auditor’s Report to the members of GWA International Limited 49 50 51 52 53 61 63 63 63 64 64 64 65 66 67 67 67 68 68 69 69 71 73 74 75 76 77 78 79 81 90 91 91 92 94 95 96 99 100 101 GWa international limited and its controlled entities ABN 15 055 964 380 income statements income statements For the year ended 30 June 2009 consolidated the company In thousands of AUD Note 2009 2008 2009 2008 Sales revenue Cost of sales Gross profit Other income Selling expenses Administrative expenses Other expenses Results from operating activities Finance income Finance expenses Net financing costs Profit before tax Income tax (expense)/benefit Profit for the year 2 678,344 648,902 (448,815) (416,043) 229,529 232,859 – – – – – – 3 4,338 11,333 40,000 65,000 (97,550) (93,981) – – (47,916) (42,805) (1,465) (745) (5,542) (24,828) – (2,359) 82,859 82,578 38,535 61,896 2,866 5,068 (16,710) (19,691) (13,844) (14,623) 797 – 797 745 – 745 4 7 7 69,015 67,955 39,332 62,641 9 (20,690) (22,065) 3 – 48,325 45,890 39,335 62,641 Basic and diluted earnings per share (cents per share) Dividends per share: Ordinary shares (cents per share) 10 25 16.9 16.4 17.5 22.0 The income statements are to be read in conjunction with the notes to the financial statements set out on pages 53 to 99. 49 GWa international limited 2009 ANNUAL REPORT GWa international limited and its controlled entities ABN 15 055 964 380 statements oF recoGnised income and eXpense For the year ended 30 June 2009 consolidated the company In thousands of AUD Foreign exchange translation differences for foreign operations Note 2009 4,026 (5,012) 2008 2009 2008 Cash flow hedges: Gains/(losses) taken to equity, net of tax Net income recognised directly in equity (755) 176 3,271 (4,836) – – – – – – Profit for the year 48,325 45,890 39,335 62,641 Total recognised income and expense for the year 25 51,596 41,054 39,335 62,641 Other movements in equity arising from transactions with owners as owners are set out in note 25. The statements of recognised income and expense are to be read in conjunction with the notes to the financial statements set out on pages 53 to 99. 50 GWa international limited and its controlled entities ABN 15 055 964 380 Balance sheets For the year ended 30 June 2009 consolidated the company In thousands of AUD Assets Cash and cash equivalents Trade and other receivables Inventories Income tax receivable Other Total current assets Receivables Deferred tax assets Investment in subsidiaries Property, plant and equipment Intangible assets Other Total non–current assets Total assets Liabilities Trade and other payables Employee benefits Income tax payable Provisions Total current liabilities Trade and other payables Interest–bearing loans and borrowings Deferred tax liabilities Employee benefits Provisions Total non–current liabilities Total liabilities Net assets Equity Issued capital Reserves Retained earnings Total equity Note 2009 2008 2009 2008 11 12 13 16 12 17 31 18 19 20 22 16 24 20 21 17 22 24 45,015 53,418 135,039 131,580 111,671 107,508 980 3,694 829 4,832 – 661 – – – 644 – – 562 814 296,399 298,167 1,223 1,458 12,185 22,961 – 5,298 703,666 663,132 22,845 – – – 325,646 325,646 98,569 106,307 349,438 339,060 – – – – 2,901 3,777 2,879 3,699 486,054 477,287 1,032,191 992,477 782,453 775,454 1,033,414 993,935 89,231 14,191 7,207 81,292 16,599 5,890 57 – 54 – 7,123 5,854 19,853 17,091 – – 130,482 120,872 7,180 5,908 5,585 – 597,077 583,653 200,000 246,975 22 – 11,337 10,675 8,863 7,812 – – – – – – – – 225,807 265,462 597,077 583,653 356,289 386,334 604,257 589,561 426,164 389,120 429,157 404,374 387,981 353,938 387,981 353,938 (3,451) (7,372) 650 – 41,634 42,554 40,526 50,436 25 426,164 389,120 429,157 404,374 The balance sheets are to be read in conjunction with the notes to the financial statements set out on pages 53 to 99. 51 GWa international limited 2009 ANNUAL REPORT GWa international limited and its controlled entities ABN 15 055 964 380 statements oF cash FloWs For the year ended 30 June 2009 consolidated the company 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 Note 2009 2008 2009 2008 738,652 726,256 – – – – 40,000 62,641 (628,092) (594,781) (8) – 110,560 131,475 39,992 62,641 (14,852) (18,527) 2,070 4,323 – – – – (19,150) (14,279) (18,559) (12,505) Net cash from operating activities 32 78,628 102,992 21,433 50,136 Cash flows from investing activities Proceeds from sale of property, plant and equipment Acquisition of property, plant and equipment Acquisition of intangibles 6,395 14,492 (10,514) (18,305) (6,834) (3,930) Acquisition of subsidiary, net of cash acquired 15 (12,419) – Net cash from investing activities (23,372) (7,743) – – – – – – – – – – Cash flows from financing activities Issue of employee shares Proceeds from issue of share capital Repayment of employee share loans Repayment of loans by controlled entities Repayment of loans by related parties Repayment of bank bills Dividends paid Net cash from financing activities (841) (2,107) (841) (2,107) 34,043 876 34,043 876 1,321 1,270 1,321 1,270 – 8 – 81 (48,167) (25,000) (6,711) 11,205 – – – – (49,245) (61,612) (49,245) (61,612) (62,881) (86,492) (21,433) (50,368) Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at 1 July Effect of exchange rate fluctuations on cash held (7,625) 8,757 53,418 45,953 (778) (1,292) Cash and cash equivalents at 30 June 11 45,015 53,418 – – – – (232) 232 – – The statements of cash flows are to be read in conjunction with the notes to the financial statements set out on pages 53 to 99. 52 GWa international limited and its controlled entities ABN 15 055 964 380 notes to the consolidated Financial statements 1.siGniFicant accountinG policies 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 2009 comprises the Company and its subsidiaries (together referred to as the ‘consolidated entity’). The financial report was authorised for issue by the directors on 18 August 2009. (a) Statement of compliance The financial report is a general purpose financial report which has been prepared in accordance with Australian Accounting Standards (‘AASBs’) (including Australian Interpretations) 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 In particular, information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amount recognised in the financial statements are described in the following notes: ■■ note 19 – measurement of the recoverable amounts of intangible assets ■■ note 23 – fair value of share–based payments ■■ note 24 and 29 – provisions and contingencies ■■ note 26 – valuation of financial instruments 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. (c) Basis of consolidation (‘IFRSs’) and interpretations adopted by the International Accounting (i) Subsidiaries Standards Board (‘IASB’). (b) Basis of preparation The financial report is presented in Australian dollars which is the Company’s functional currency and the functional currency of the majority of the consolidated entity. 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 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 requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. 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. Actual results may differ from these estimates. 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 and future periods if the revision affects both current and future periods. 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. (ii) Transactions eliminated on consolidation Intragroup balances and any unrealised gains and losses or income and expenses arising from intragroup transactions, are eliminated in preparing the consolidated financial statements. (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 reporting date are retranslated to Australian dollars at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the income statement. Non–monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are retranslated to Australian dollars 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. 53 GWa international limited 2009 ANNUAL REPORT GWa international limited and its controlled entities ABN 15 055 964 380 notes to the consolidated Financial statements 1. siGniFicant accountinG policies (continued) (f) Hedging (d) Foreign currency (continued) (ii) Financial statements of foreign operations 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 The assets and liabilities of foreign operations, including goodwill and documentation includes identification of the hedging instrument, the fair value adjustments arising on acquisition, are translated to Australian hedged item or transaction, the nature of the risk being hedged and how dollars at foreign exchange rates ruling at the reporting date. The the entity will assess the hedging instrument’s effectiveness in offsetting revenues and expenses of foreign operations are translated to Australian the exposure to changes in the hedged item’s fair value or cash flows dollars at rates approximating to the foreign exchange rates ruling at attributable to the hedged risk. Such hedges are expected to be highly or the dates of the transactions. Foreign exchange differences arising on fully effective in achieving offsetting changes in fair value or cash flows retranslation are recognised directly in the foreign currency translation and are assessed on an ongoing basis to determine that they actually reserve (FCTR). have been highly effective throughout the financial reporting periods for (iii) Net investment in foreign operations Foreign exchange differences arising from the retranslation of the net which they are designated. (i) Cash flow hedges investment in foreign operations, and of related hedges are recognised in Where a derivative financial instrument is designated as a hedge of the FCTR to the extent that the hedge is effective. They are released into the variability in cash flows of a recognised asset or liability, or a highly the income statement upon disposal. (e) Derivative financial instruments 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 The consolidated entity uses derivative financial instruments to hedge non–financial asset or non–financial liability, or the forecast transaction its exposure to foreign exchange and interest rate risks arising from for a non–financial asset or non–financial liability becomes a firm operating, financing and investing activities. In accordance with its commitment for which fair value hedge accounting is applied, the treasury policy, the consolidated entity does not hold or issue derivative associated cumulative gain or loss is removed from equity and included financial 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 in the initial cost or other carrying amount of the non–financial asset or liability. If a hedge of a forecasted transaction subsequently results in the recognition of a financial asset or a financial liability, the 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. depends on the nature of the item being hedged (see accounting For cash flow hedges, other than those described above, the associated policy (f)). 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 reporting date, taking into account current interest rates and the current cumulative gain or loss is removed from equity 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. creditworthiness of the swap counterparties. The fair value of forward When a hedging instrument expires or is sold, terminated or exercised, or exchange contracts is their quoted market price at the reporting date, the entity revokes designation of the hedge relationship, but the hedged being the present value of the quoted forward price. 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. 54 GWa international limited and its controlled entities ABN 15 055 964 380 notes to the consolidated Financial statements 1. siGniFicant accountinG policies (continued) (ii) Depreciation (f) Hedging (continued) (ii) Hedge of monetary assets and liabilities 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 Where a derivative financial instrument is used to hedge economically depreciated. The estimated useful lives in the current and comparative the foreign exchange exposure of a recognised monetary asset or liability, periods are as follows: 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 measured at cost less accumulated depreciation and impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self–constructed assets includes the cost of materials, direct ■■ buildings 40 years ■■ plant and equipment 3–11 years ■■ fixtures and fittings 7–15 years The residual value, the useful life and the depreciation 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. labour, the initial estimate, where relevant, of the costs of dismantling Expenditure on development activities, whereby research findings are and removing the items and restoring the site on which they are located, applied to a plan or design for the production of new or substantially and an appropriate proportion of production overheads. Purchased improved products and processes, is capitalised only if the product or software that is integral to the functionality of the related equipment is process is technically and commercially feasible and the consolidated capitalised as part of that equipment. 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. entity has sufficient resources to complete development. Capitalised development expenditure is measured at cost less accumulated amortisation and impairment losses. (ii) Brand names Gains and losses on disposal of an item of property, plant and equipment Expenditure incurred in developing, maintaining or enhancing brand are determined by comparing proceeds from disposal with the carrying names is written off against profit from ordinary activities in the year amount of property, plant and equipment and are recognised net within in which it is incurred. The brand names are not amortised as the “other income” or “other expenses” in the income statement. (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 directors believe that the brand names have an indefinite useful life. The carrying value of brand names is reviewed each year to ensure that no impairment exists. (iii) Goodwill item when that cost is incurred if it is probable that the future economic Goodwill acquired in business combinations of the consolidated entity benefits embodied within the item will flow to the consolidated entity and are measured at cost less accumulated impairment losses. Goodwill the cost of the item can be measured reliably. The carrying amount of represents the excess of the cost of the acquisition over the consolidated the replaced part is derecognised. All other costs are recognised in the entity’s interest in the net fair value of the identifiable assets, liabilities income statement as an expense as incurred. and contingent liabilities of the acquired business. 55 GWa international limited 2009 ANNUAL REPORT GWa international limited and its controlled entities ABN 15 055 964 380 notes to the consolidated Financial statements 1. siGniFicant accountinG policies (continued) (k) Cash and cash equivalents (h) Intangible assets (continued) (iv) Other intangible assets 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 Other intangible assets that are acquired by the consolidated entity are entity’s cash management are included as a component of cash and cash measured at cost less accumulated amortisation and impairment losses. equivalents for the purpose of the statement of cash flows. (v) Subsequent expenditure (l) Impairment Subsequent expenditure on capitalised intangible assets is capitalised The carrying amounts of the consolidated entity’s assets, other than only when it increases the future economic benefits embodied in the inventories and deferred tax assets, are reviewed at each balance sheet specific asset to which it relates. All other expenditure is expensed as date to determine whether there is any indication of impairment. If any incurred. (vi) Amortisation Amortisation is charged to the income statement on a straight–line such indication exists, the asset’s recoverable amount is estimated. For intangible assets that have an indefinite useful life, the recoverable amount is estimated at each balance sheet date. basis over the estimated useful lives of intangible assets unless such An impairment loss is recognised whenever the carrying amount of lives are indefinite. Intangible assets with an indefinite useful life are an asset or its cash–generating unit exceeds its recoverable amount. systematically tested for impairment at each balance sheet date. Other Impairment losses are recognised in the income statement, unless an intangible assets are amortised from the date they are available for use. asset has previously been revalued, in which case the impairment loss The estimated useful lives in the current and comparative periods are is recognised as a reversal to the extent of that previous revaluation with as follows: ■■ designs ■■ patents 15 years 3–19 years (based on patent term) ■■ trade names 10 years 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 the unit (group of units) on a pro rata basis. ■■ capitalised software development costs 5 years (i) Calculation of recoverable amount (i) Trade and other receivables Trade and other receivables are initially measured at fair value and subsequently at their amortised cost less impairment losses. (j) Inventories The recoverable amount of the consolidated entity’s receivables carried at amortised cost is calculated as the present value of estimated future cash flows, discounted at the original effective interest rate (i.e. the effective interest rate computed at initial recognition of these financial assets). Receivables with a short duration are not discounted. Inventories are measured at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. The cost of inventories is based on the first–in first–out principle and includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on normal operating capacity. Impairment of receivables is not recognised until objective evidence is available that a loss event has occurred. Significant receivables are individually assessed for impairment. Impairment testing of significant receivables that are not assessed as impaired individually is performed 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. 56 GWa international limited and its controlled entities ABN 15 055 964 380 notes to the consolidated Financial statements 1. siGniFicant accountinG policies (continued) (o) Employee benefits (l) Impairment (continued) (i) Defined contribution superannuation funds (i) Calculation of recoverable amount (continued) 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 A defined contribution superannuation fund is a post–employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution superannuation funds are recognised as an expense in the income statement as incurred. generate largely independent cash inflows, the recoverable amount is (ii) Other long–term employee benefits determined for the cash–generating unit to which the asset belongs. (ii) Reversals of impairment Impairment losses are reversed when there is an indication 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 The consolidated entity’s net obligation in respect of long–term employee 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. subsequent increase in recoverable amount can be related objectively to (iii) Short–term benefits an event occurring after the impairment loss was recognised. Liabilities for employee benefits for wages, salaries, annual leave and sick An impairment loss is reversed only to the extent that the asset’s carrying leave that are expected to be settled within 12 months of the reporting amount does not exceed the carrying amount that would have been date represent present obligations resulting from employees’ services determined, net of depreciation or amortisation, if no impairment loss had provided to reporting date, are calculated at undiscounted amounts been recognised. An impairment loss in respect of goodwill is not reversed. based on remuneration wage and salary rates that the consolidated entity (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 Interest–bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest– expects to pay as at reporting date including related on–costs, such as workers compensation insurance and payroll tax. Non–accumulating non–monetary benefits, such 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. (iv) Share–based payment transactions The grant date fair value of performance rights granted to employees is recognised as a personnel expense, with a corresponding increase in equity, over the specified period that the performance rights vest to employees. The amount recognised as an expense is adjusted to reflect the actual number of performance rights for which the related service and non–market vesting hurdles are met. bearing borrowings are measured at amortised cost with any difference (p) Provisions between cost and redemption value being recognised in the income statement over the period of the borrowings on an effective interest basis. 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 that can be estimated reliably, 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. 57 GWa international limited 2009 ANNUAL REPORT GWa international limited and its controlled entities ABN 15 055 964 380 notes to the consolidated Financial statements 1. siGniFicant accountinG policies (continued) (ii) Net financing costs (p) Provisions (continued) (i) Warranties 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 A provision for warranties is recognised when the underlying products or the income statement. Borrowing costs are expensed as incurred and services are sold. The provision is based on historical warranty data and included in net financing costs. Interest income is recognised in the a weighting of all possible outcomes against their associated probabilities. income statement as it accrues, using the effective interest method. (ii) Restructuring (t) Income tax A provision for restructuring is recognised when the consolidated Income tax expense on the profit or loss for the year comprises current entity has approved a detailed and formal restructuring plan, and the and deferred tax. Income tax expense is recognised in the income restructuring has either commenced or has been announced publicly. statement except to the extent that it relates to items recognised directly Future operating costs are not provided for. in equity, in which case it is recognised in equity. (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 Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. of the present value of the expenditure required to settle the restoration Deferred tax is recognised using the balance sheet liability method, obligation at the reporting date. Future restoration obligations are providing for temporary differences between the carrying amounts of reviewed annually and any changes are reflected in the present value assets and liabilities for financial reporting purposes and the amounts 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. (q) Trade and other payables 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 Trade and other payables are initially measured at fair value and reverse in the foreseeable future. The amount of deferred tax provided is subsequently 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. Revenue is recognised in the income statement when the 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 reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax significant risks and rewards of ownership have been transferred to the liabilities and assets on a net basis or their tax assets and liabilities will be buyer, recovery of the consideration is probable, the associated costs and realised simultaneously. 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. possible return of goods can be estimated reliably, there is no continuing management involvement with the goods and the amount of revenue can be measured reliably. (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. 58 GWa international limited and its controlled entities ABN 15 055 964 380 notes to the consolidated Financial statements 1. siGniFicant accountinG policies (continued) Receivables and payables are stated with the amount of GST included. (t) Income tax (continued) Tax consolidation The net amount of GST recoverable from, or payable to, the ATO is included as a current asset or liability in the balance sheet. Cash flows are included in the statement of cash flows on a gross basis. The Company and its wholly–owned Australian resident entities have The GST components of cash flows arising from investing and financing formed a tax–consolidated group with effect from 1 July 2003 and are activities which are recoverable from, or payable to, the ATO are therefore taxed as a single entity from that date. The head entity within classified as operating cash flows. the tax–consolidated group is GWA International Limited. Current tax expense/income, deferred tax liabilities and deferred tax assets arising (w) Earnings per share from temporary differences of the members of the tax–consolidated The consolidated entity presents basic and diluted earnings per share group are recognised in the separate financial statements of the (EPS) data for its ordinary shares. Basic EPS is calculated by dividing members of the tax–consolidated group using the ‘separate taxpayer the profit or loss attributable to ordinary shareholders of the Company within group’ approach by reference to the carrying amounts of assets by the weighted average number of ordinary shares outstanding during and liabilities in the separate financial statements of each entity and the the period. Diluted EPS is determined by adjusting the profit or loss 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 attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares. (receivable) to (from) other entities in the tax–consolidated group in (x) Changes in accounting policy conjunction with any tax funding arrangement amounts (refer below). Any difference between these amounts is recognised by the Company as (i) Warranty costs an equity contribution or distribution. Nature of tax funding arrangements and tax sharing arrangements During the reporting period, management changed its accounting policy in respect of the classification of warranty costs in the income statement. It was determined that warranty costs should be included in cost of sales to The members of the tax–consolidated group have entered into a tax better reflect the nature of the cost. In the prior reporting period warranty funding arrangement and a tax sharing agreement with the head entity. costs were reported in selling expenses. The impact on the income Under the terms of the tax funding arrangement GWA International statement in the consolidated entity for the year ended 30 June 2009 is Limited and each of the entities in the tax consolidated group recognise to increase cost of sales and decrease selling expenses by $12,300,000 inter–entity receivables (payables) equal in amount to the tax liability (asset) assumed by the head entity. (2008: $10,504,000). There is no impact on the balance sheet for the consolidated entity. No adjustments have arisen for the Company. (u) Segment reporting (ii) Selling costs A segment is a distinguishable component of the consolidated entity that During the reporting period, management changed its accounting policy is engaged either in providing products or services (business segment), in respect of the classification of costs incurred by state selling regions in or in providing products or services within a particular economic the income statement. It was determined that all costs incurred by state environment (geographical segment), which is subject to risks and selling regions should be included in selling expenses to better reflect the rewards that are different from those of other segments. (v) Goods and services tax nature of the cost. In the prior reporting period certain costs of the state selling regions were reported in administrative expenses. The impact on the income statement in the consolidated entity for the year ended 30 Revenue, expenses and assets are recognised net of the amount of June 2009 is to increase selling expenses and decrease administrative goods and services tax (GST), except where the amount of GST incurred expenses by $12,585,000 (2008: $12,218,000). There is no impact on is not recoverable from the taxation authority. In these circumstances, the the balance sheet for the consolidated entity. No adjustments have arisen GST is recognised as part of the cost of acquisition of the asset or as part for the Company. of the expense. 59 GWa international limited 2009 ANNUAL REPORT GWa international limited and its controlled entities ABN 15 055 964 380 notes to the consolidated Financial statements 1. siGniFicant accountinG policies (continued) (y) New standards and interpretations not yet adopted ■■ Revised AASB 123 Borrowing Costs removes the option to expense borrowing costs and requires that an entity capitalise borrowing costs directly attributable to the acquisition, construction or production The following standards, amendments to standards and interpretations of a qualifying asset as part of the cost of that asset. The revised have been identified as those which may impact the entity in the period AASB 123 will become mandatory for the consolidated entity’s 30 of initial application. They are available for early adoption at 30 June June 2010 financial statements. In accordance with the transitional 2009, but have not been applied in preparing this financial report: provisions the consolidated entity will apply the revised AASB 123 ■■ Revised AASB 3 Business Combinations (2008) changes the application of acquisition accounting for business combinations and the accounting for non–controlling (minority) interests. Key changes include: the immediate expensing of all transaction to qualifying assets for which capitalisation of borrowing costs commences on or after the effective date. Therefore, there will be no impact on prior periods in the consolidated entity’s 30 June 2010 financial statements. costs; measurement of contingent consideration at acquisition date with subsequent changes through the income statement; ■■ Revised AASB 127 Consolidated and Separate Financial Statements (2008) changes the accounting for investments in subsidiaries. Key measurement of non–controlling (minority) interests at full fair value changes include: the re–measurement to fair value of any previous/ or the proportionate share of the fair value of the underlying net retained investment when control is obtained/lost, with any resulting assets; guidance on issues such as reacquired rights and vendor gain or loss being recognised in profit or loss; and the treatment indemnities; and the inclusion of combinations by contract alone and of increases in ownership interest after control is obtained as those involving mutuals. The revised standard becomes mandatory transactions with equity holders in their capacity as equity holders. for the consolidated entity’s 30 June 2010 financial statements, The revised standard will become mandatory for the consolidated which will be applied prospectively and therefore there will be no entity’s 30 June 2010 financial statements. The consolidated entity impact on prior periods in the consolidated entity’s 30 June 2010 has not yet determined the potential effect of the revised standard on financial statements. the consolidated entity’s financial report. ■■ AASB 8 Operating Segments introduces the “management approach” to segment reporting. AASB 8, which becomes mandatory ■■ AASB 2008–1 Amendments to Australian Accounting Standard – Share–based Payment: Vesting Conditions and Cancellations for the consolidated entity’s 30 June 2010 financial statements, will changes the measurement of share–based payments that contain require a change in the presentation and the disclosure of segment non–vesting conditions. AASB 2008–1 becomes mandatory for information based on the internal reports regularly reviewed by the the consolidated entity’s 30 June 2010 financial statements with consolidated entity’s Chief Operating Decision Maker in order to assess each segment’s performance and to allocate resources to retrospective application. The consolidated entity has not yet determined the potential effect of the amending standard on the them. Currently the consolidated entity presents segment information consolidated entity’s financial report. in respect of its business and geographical segments (see note 2). Under the management approach, the effect of the revised standard on the consolidated entity’s 30 June 2010 financial statements is not significant. ■■ Revised AASB 101 Presentation of Financial Statements (2007) introduces as a financial statement (formerly “primary” statement) the “statement of comprehensive income”. The revised standard does not change the recognition, measurement or disclosure of transactions and events that are required by other AASBs. The revised AASB 101 will become mandatory for the consolidated entity’s 30 June 2010 financial statements. The consolidated entity has not yet determined the potential effect of the revised standard on the consolidated entity’s disclosures. 60 GWa international limited and its controlled entities ABN 15 055 964 380 notes to the consolidated Financial statements 2. seGment reportinG Geographical segments A segment is a distinguishable component of the consolidated entity The business segments are managed on a worldwide basis, but operate that is engaged either in providing related products or services (business mainly in one geographical area being Australia. Sales offices are segment), or in providing products or services within a particular operated in New Zealand, Asia, United States and Europe, however the economic environment (geographical segment), which is subject to risks sales revenue from these geographical areas comprise only 15% of the and rewards that are different from those of other segments. consolidated entity’s total sales revenue and are individually less Segment information is presented in respect of the consolidated entity’s than 10%. business and geographical segments. The primary format, business In presenting information on the basis of geographical segments, segments, is based on the consolidated entity’s management and internal segment revenue is based on the geographical location of customers. reporting structure. Segment assets are based on the geographical location of the assets. Inter–segment pricing is determined on an arm’s length basis. Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly the mower business, interest–bearing loans, borrowings and expenses, and corporate assets and expenses. Segment capital expenditure is the total cost incurred during the period to acquire segment assets that are expected to be used for more than one period. Business segments The consolidated entity comprises the following main business segments: ■■ Building fixtures and fittings u Sanitaryware u Building hardware products u Baths and spas u Household accessories, sinks and tapware u Hot water products ■■ Commercial furniture u Education products u Hospitality products u Stadia seating ■■ Unallocated u Domestic and ride–on mowers u Corporate administration 61 GWa international limited 2009 ANNUAL REPORT GWa international limited and its controlled entities ABN 15 055 964 380 notes to the consolidated Financial statements 2. seGment reportinG (continued) Business segments Building Fixtures and Fittings* Commercial Furniture* Unallocated* Eliminations Consolidated* In thousands of AUD 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 Revenue: External sales Inter–segment sales Total sales revenue 593,671 558,657 56,088 56,864 28,585 33,381 – – 678,344 648,902 – – 32 1,852 – – (32) (1,852) – – 593,671 558,657 56,120 58,716 28,585 33,381 (32) (1,852) 678,344 648,902 – – – – – – – – – – – – 86,955 99,394 (4,096) (16,816) 82,859 82,578 (13,844) (14,623) (20,690) (22,065) 48,325 45,890 – 782,453 775,454 – 356,289 386,334 – – – – 16,789 17,386 1,316 534 17,348 22,235 – 9,419 Segment result 98,493 109,552 2,033 3,369 (13,571) (13,527) Restructuring income/(expenses) (4,096) (21,629) – (614) – 5,427 Segment result after restructuring expenses 94,397 87,923 2,033 2,755 (13,571) (8,100) Net financing costs Income tax expense Profit for the year Segment assets Segment liabilities Depreciation Amortisation Capital expenditure Impairment losses Geographical segments 643,196 627,265 33,703 35,087 105,554 113,102 114,733 106,358 7,449 9,457 234,107 270,519 14,961 14,895 1,248 1,690 1,081 275 – – 580 235 801 259 14,165 17,028 2,332 1,504 851 3,703 – 9,419 – – – – Australia* Unallocated* Consolidated * In thousands of AUD 2009 2008 2009 2008 2009 2008 External sales revenue 580,934 551,587 97,410 97,315 678,344 648,902 Segment assets 737,836 727,045 44,617 48,409 782,453 775,454 Capital expenditure 15,759 19,433 1,589 2,802 17,348 22,235 * All segments are continuing operations 62 GWa international limited and its controlled entities ABN 15 055 964 380 notes to the consolidated Financial statements 3. other income In thousands of AUD Foreign currency gains – realised Foreign currency gains – unrealised Net gain on disposal of property, plant and equipment and intangible assets Dividends received from controlled companies Other 4. other eXpenses In thousands of AUD Foreign currency losses – realised Foreign currency losses – unrealised Net loss on disposal of intangible assets Distribution losses from controlled trusts Restructuring and impairment expenses 5. personnel eXpenses In thousands of AUD Wages and salaries – including superannuation contributions, annual leave, long service leave and on–costs Equity–settled share–based payment transactions CONSOLIDATED THE COmPANy 2009 1,148 1,927 156 – 1,107 4,338 2008 2,082 1,370 6,879 2009 2008 – – – – – – – 40,000 65,000 1,002 – – 11,333 40,000 65,000 CONSOLIDATED THE COmPANy 2009 660 743 43 – 4,096 5,542 2008 217 1,264 – – 23,347 24,828 2009 2008 – – – – – – – – – 2,359 – 2,359 CONSOLIDATED THE COmPANy 2009 2008 2009 2008 144,384 143,509 650 – 145,034 143,509 – – – – – – 63 GWa international limited 2009 ANNUAL REPORT GWa international limited and its controlled entities ABN 15 055 964 380 notes to the consolidated Financial statements 6. auditors’ remuneration CONSOLIDATED THE COmPANy In AUD Audit services Auditors of the Company KPMG Australia: Audit and review of financial reports Overseas KPMG Firms: Audit and review of financial reports Other services Auditors of the Company KPMG Australia: Other assurance services Taxation services Overseas KPMG Firms: Other assurance services Taxation services 7. net FinancinG costs In thousands of AUD Interest income Interest expense Net financing costs/(income) 2009 2008 2009 2008 398,000 360,000 12,000 10,000 85,000 66,000 – – 483,000 426,000 12,000 10,000 30,000 – 17,000 112,000 21,000 83,000 – – 151,000 112,000 – – – – – – – – – – CONSOLIDATED THE COmPANy 2009 2008 2009 2008 (2,866) (5,068) (797) (745) 16,710 13,844 19,691 14,623 – – (797) (745) 8. restructurinG and impairment eXpenses CONSOLIDATED THE COmPANy In thousands of AUD Restructuring expenses Impairment loss on intangible assets Gains on property sales (included in ‘other income’) Net expense before tax Tax benefit Net restructuring expense after tax 64 2009 2008 2009 2008 4,096 13,928 – – 9,419 (6,531) 4,096 16,816 (1,229) (2,547) 2,867 14,269 – – – – – – – – – – – – GWa international limited and its controlled entities ABN 15 055 964 380 notes to the consolidated Financial statements 9. income taX eXpense Recognised in the income statement In thousands of AUD Current tax expense/(benefit) Current year Adjustments for prior years Deferred tax expense Origination and reversal of temporary differences Benefit of tax losses recognised CONSOLIDATED THE COmPANy 2009 2008 2009 2008 20,491 20,572 32 – 20,523 20,572 167 – 167 1,493 – 1,493 (3) – (3) – – – (3) – – – – – – – Total income tax expense/(benefit) in income statement 20,690 22,065 Numerical reconciliation between tax expense and pre–tax net profit CONSOLIDATED THE COmPANy In thousands of AUD Profit before tax 2009 2008 2009 2008 69,015 67,955 39,332 62,641 Income tax using the domestic tax rate of 30% (2008: 30%) 20,705 20,387 11,800 18,792 Increase in income tax expense due to: Non–deductible expenses Non–deductible impairment loss Rebateable trust distributions Decrease in income tax expense due to: Effect of tax rate in foreign jurisdictions Non–assessable income Non–assessable capital profits Rebateable investment allowance Rebateable research and development Rebateable dividends Under / (over) provided in prior years Income tax expense/(benefit) on pre–tax net profit Deferred tax recognised directly in equity In thousands of AUD Derivatives 877 – – (48) (571) 530 2,825 – (97) (111) – (1,280) (86) (219) – – (189) 197 – – – – – – – – – 708 – – – – – – (12,000) (19,500) 20,658 22,065 32 – 20,690 22,065 (3) – (3) – – – CONSOLIDATED THE COmPANy 2009 (324) 2008 193 2009 2008 - - 65 GWa international limited 2009 ANNUAL REPORT GWa international limited and its controlled entities ABN 15 055 964 380 notes to the consolidated Financial statements 10. earninGs per share Basic earnings per share Calculation of basic earnings per share at 30 June 2009 was based on the profit attributable to ordinary shareholders of $48,325,000 (2008: $45,890,000) and a weighted average number of ordinary shares of 285,498,000 (2008: 280,075,000) calculated as follows: Cents per share Profit attributable to ordinary shareholders Profit for the year Weighted average number of ordinary shares Issued ordinary shares at 1 July Effect of shares issued Weighted average number of ordinary shares at 30 June Diluted earnings per share CONSOLIDATED 2009 16.9 2008 16.4 CONSOLIDATED 2009 2008 48,325 45,890 CONSOLIDATED 2009 2008 280,173 279,923 5,325 152 285,498 280,075 Calculation of diluted earnings per share at 30 June 2009 was based on the profit attributable to ordinary shareholders of $48,325,000 (2008: $45,890,000) and a weighted average number of ordinary shares of 285,899,000 (2008: 280,075,000) calculated as follows: Cents per share Profit attributable to ordinary shareholders Profit for the year Weighted average number of ordinary shares Issued ordinary shares at 1 July Effect of shares issued Weighted average number of ordinary shares at 30 June 66 CONSOLIDATED 2009 16.9 2008 16.4 CONSOLIDATED 2009 2008 48,325 45,890 CONSOLIDATED 2009 2008 280,173 279,923 5,726 152 285,899 280,075 GWa international limited and its controlled entities ABN 15 055 964 380 notes to the consolidated Financial statements 11. cash and cash equivalents CONSOLIDATED THE COmPANy In thousands of AUD Bank balances Call deposits Cash and cash equivalents in the statement of cash flows 2009 2008 2009 2008 22,011 23,004 45,015 18,323 35,095 53,418 – – – – – – The consolidated entity’s exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities are disclosed in note 26. 12. trade and other receivaBles CONSOLIDATED THE COmPANy In thousands of AUD Current Trade receivables Provision for impairment Derivatives used for hedging Employee share loans Other Non–current Receivables due from controlled entities Derivatives used for hedging Employee share loans Other 2009 2008 2009 2008 108,282 100,121 (2,028) (1,052) 23,943 27,872 661 4,181 644 3,995 135,039 131,580 – – – 661 – 661 – – – 644 – 644 – 6,318 5,859 8 – – 5,285 13 697,807 657,847 – – 5,859 5,285 – – 12,185 5,298 703,666 663,132 The consolidated entity’s exposure to credit and currency risk and impairment losses related to trade and other receivables are disclosed in note 26. 13. inventories In thousands of AUD Raw materials and consumables Work in progress Finished goods CONSOLIDATED THE COmPANy 2009 2008 2009 2008 17,818 18,676 7,518 6,892 86,335 81,940 111,671 107,508 – – – – – – – – 67 GWa international limited 2009 ANNUAL REPORT GWa international limited and its controlled entities ABN 15 055 964 380 notes to the consolidated Financial statements 14. assets and liaBilities classiFied as held For sale The sanitaryware business Wisa Beheer, which forms part of the Building Fixtures and Fittings segment, was presented as a disposal group held for sale in the prior reporting period. Management became aware during the current reporting period of the prospective buyer’s inability to obtain finance due to the difficult prevailing market conditions. Accordingly, the conditions for sale of the Wisa business no longer exist and the business is no longer classified as held for sale. There is no impact on the results for the current reporting period ended 30 June 2009 due to this change in circumstances. An impairment loss of $9,419,000 was recognised in the prior reporting period. 15. acquisitions oF suBsidiaries Business combination On 5 January 2009 the consolidated entity acquired 100% of the shares in Austral Lock Pty Ltd for $12,419,000. Austral Lock Pty Ltd is an Australian manufacturer of locks for security and sliding doors. As part of the transaction, the consolidated entity had a call option over the Indian operations of Austral Lock Pty Ltd which was not exercised. In the six months to 30 June 2009 the subsidiary contributed profit before tax of $432,000. If the acquisition had occurred on 1 July 2008, management estimates that consolidated revenue for the period would have been $682,930,000 and consolidated profit before tax would have been $69,447,000. In determining those amounts, management has assumed that the fair value adjustments that arose on the date of acquisition would have been the same if the acquisition occurred on 1 July 2008. The acquisition had the following effect on the consolidated entity’s assets and liabilities on acquisition date: In thousands of AUD Trade and other receivables Inventories Property, plant and equipment Intangible assets Deferred tax assets Trade and other payables Employee benefits Deferred tax liabilities Net identifiable assets and liabilities Goodwill on acquisition Consideration paid (including legal and consulting fees), satisfied in cash Pre–acquisition carrying amounts Fair value adjustments Recognised values on acquisition 2,078 2,899 3,901 2,365 – (278) (390) – 10,575 – – – 812 117 – – (180) 749 2,078 2,899 3,901 3,177 117 (278) (390) (180) 11,324 1,095 12,419 Pre-acquisition carrying amounts were determined based on applicable AASBs immediately before the acquisition. The values of assets and liabilities recognised on acquisition are their estimated fair values determined by independent consultants. The goodwill recognised on the acquisition is attributable mainly to the skills and technical expertise of the acquired businesses work force and the synergies expected to be achieved from integrating the company into the consolidated entity’s existing building hardware product business. 68 GWa international limited and its controlled entities ABN 15 055 964 380 notes to the consolidated Financial statements 16. current taX assets and liaBilities The current tax asset for the consolidated entity of $980,000 (2008: $829,000) represents the amount of income taxes recoverable in respect of current and prior periods. The current tax liability for the consolidated entity of $7,207,000 (2008: $5,890,000) and for the Company of $7,123,000 (2008: $5,854,000) represents the amount of income taxes payable in respect of the current period. 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. 17. deFerred taX assets and liaBilities Recognised deferred tax assets and liabilities Deferred tax assets and liabilities are attributable to the following: Consolidated In thousands of AUD Assets Liabilities Net 2009 2008 2009 2008 2009 2008 Property, plant and equipment 841 817 (218) (181) 623 636 Intangible assets Inventories Employee benefits Provisions Other items Tax assets / (liabilities) Set off of tax Net tax assets / (liabilities) – – (343) (205) (343) (205) 2,624 3,583 7,297 7,879 10,607 8,096 – – – – – – 2,624 3,583 7,297 7,879 10,607 8,096 2,603 3,202 (472) (346) 2,131 2,856 23,972 23,577 (1,033) (732) 22,939 22,845 (1,011) (732) 1,011 732 – – 22,961 22,845 (22) – 22,939 22,845 Unrecognised deferred tax assets Deferred tax assets have not been recognised in respect of the following items: In thousands of AUD Tax losses CONSOLIDATED THE COmPANy 2009 451 2008 351 2009 2008 – – 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. 69 GWa international limited 2009 ANNUAL REPORT GWa international limited and its controlled entities ABN 15 055 964 380 notes to the consolidated Financial statements 17. deFerred taX assets and liaBilities (continued) movement in temporary differences during the year CONSOLIDATED THE COmPANy In thousands of AUD Balance 1 July 07 Recognised Recognised in income in equity Acquired in business Balance Balance Recognised Recognised Balance combinations 30 June 08 1 July 07 in income equity 30 June 08 Property, plant and equipment 947 (311) Intangible assets (197) (8) Inventories 3,979 (396) Employee benefits 7,524 355 Provisions Other items 10,653 (2,557) 1,625 1,424 24,531 (1,493) – – – – – (193) (193) – – – – – – – 636 (205) 3,583 7,879 8,096 2,856 22,845 – – – – – – – – – – – – – – – – – – – – – – – – – – – – In thousands of AUD Balance 1 July 08 Recognised Recognised in income in equity Acquired in business Balance Balance Recognised Recognised Balance combinations 30 June 09 1 July 08 in income equity 30 June 09 Property, plant and equipment 636 (205) 3,583 7,879 (13) 42 (959) (699) 8,096 2,511 2,856 (1,049) 22,845 (167) – – – – – 324 324 – (180) – 117 – – 623 (343) 2,624 7,297 10,607 2,131 (63) 22,939 – – – – – – – – – – – – – – – – – – – – – – – – – – – – Intangible assets Inventories Employee benefits Provisions Other items 70 GWa international limited and its controlled entities ABN 15 055 964 380 notes to the consolidated Financial statements 18. property, plant and equipment In thousands of AUD Cost CONSOLIDATED THE COmPANy Land and buildings Plant and motor Work in equipment vehicles progress Total Land and Plant and motor Work in buildings equipment vehicles progress Total Balance at 1 July 2007 54,227 188,962 13,321 10,682 267,192 Additions Transfers Disposals 374 13,281 3,170 1,480 18,305 – 5,441 – (5,441) – (4,420) (19,638) (3,948) – (28,006) Effect of movements in foreign exchange 133 721 (119) (80) 655 Balance at 30 June 2008 50,314 188,767 12,424 6,641 258,146 Balance at 1 July 2008 50,314 188,767 12,424 6,641 258,146 Acquisitions through business combinations – 3,883 18 – 3,901 Additions Transfers Disposals 122 6,629 2,664 1,099 10,514 – – 740 – (740) – (18,002) (9,934) – (27,936) Effect of movements in foreign exchange 234 1,724 39 56 2,053 Balance at 30 June 2009 50,670 183,741 5,211 7,056 246,678 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 71 GWa international limited 2009 ANNUAL REPORT GWa international limited and its controlled entities ABN 15 055 964 380 notes to the consolidated Financial statements 18. property, plant and equipment (continued) In thousands of AUD Depreciation and impairment losses CONSOLIDATED THE COmPANy Land and buildings Plant and motor Work in equipment vehicles progress Total Land and Plant and motor Work in buildings equipment vehicles progress Total Balance at 1 July 2007 (7,402) (140,354) (6,417) – (154,173) Depreciation charge for the year (984) (13,985) (2,417) Disposals 942 16,623 2,828 Effect of movements in foreign exchange (102) (653) 82 – – – (17,386) 20,393 (673) Balance at 30 June 2008 (7,546) (138,369) (5,924) – (151,839) Balance at 1 July 2008 (7,546) (138,369) (5,924) – (151,839) Depreciation charge for the year (1,039) (13,826) (1,924) Disposals – 18,104 4,054 Effect of movements in foreign exchange (171) (1,460) (8) – – – (16,789) 22,158 (1,639) Balance at 30 June 2009 (8,756) (135,551) (3,802) – (148,109) Carrying amounts At 1 July 2007 At 30 June 2008 At 1 July 2008 At 30 June 2009 Impairment losses 46,825 48,608 6,904 10,682 113,019 42,768 50,398 6,500 6,641 106,307 42,768 50,398 6,500 6,641 106,307 41,914 48,190 1,409 7,056 98,569 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – There were no impairment losses to property, plant and equipment during the 2009 financial year (2008: nil). 72 GWa international limited and its controlled entities ABN 15 055 964 380 notes to the consolidated Financial statements 19. intanGiBle assets In thousands of AUD Software CONSOLIDATED THE COmPANy Trade names, Brand designs and names patents Goodwill Total Software Trade names, Brand designs and names patents Goodwill Total Cost Balance at 1 July 2007 Additions 5,366 340,345 3,930 – Effect of movements in foreign exchange – 620 Balance at 30 June 2008 9,296 340,965 Balance at 1 July 2008 9,296 340,965 Acquisitions through business combinations – Additions Disposals 6,834 (291) – – – Effect of movements in foreign exchange – 631 – – – – – – 345,711 – – 3,930 620 – 350,261 – 350,261 3,177 1,095 4,272 – – – – – – 6,834 (291) 631 Balance at 30 June 2009 15,839 341,596 3,177 1,095 361,707 Amortisation and impairment losses Balance at 1 July 2007 Amortisation for the year Impairment loss (1,248) (534) – – – (9,419) Balance at 30 June 2008 (1,782) (9,419) Balance at 1 July 2008 (1,782) (9,419) – – – – – Amortisation for the year Disposals (1,166) 248 – – (150) – Balance at 30 June 2009 (2,700) (9,419) (150) – – – – – – – – (1,248) (534) (9,419) (11,201) (11,201) (1,316) 248 (12,269) Carrying amounts At 1 July 2007 At 30 June 2008 At 1 July 2008 At 30 June 2009 4,118 340,345 7,514 331,546 7,514 331,546 – – – – 344,463 – 339,060 – 339,060 13,139 332,177 3,027 1,095 349,438 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 73 GWa international limited 2009 ANNUAL REPORT GWa international limited and its controlled entities ABN 15 055 964 380 notes to the consolidated Financial statements 19. intanGiBle assets (continued) Carrying value of brand names and goodwill In thousands of AUD Building Fixtures and Fittings Commercial Furniture Impairment testing for brand names and goodwill CONSOLIDATED THE COmPANy 2009 2008 2009 2008 320,872 319,146 12,400 12,400 333,272 331,546 – – – – – – The recoverable amounts of all brand names and goodwill were assessed at 30 June 2009 based on internal value in use calculations and no impairment was identified for any segments (2008: Building Fixtures and Fittings segment: $9,419,000, Commercial Furniture segment: nil). Value in use was determined by discounting the future cash flows generated from the continuing use of the business unit and to which the brand is attached and was based on the following assumptions: ■■ ■■ Cash flows were projected based on actual operating results and business plans of the units, with projected cash flows ranging from two to five years, before a terminal value was calculated. Maintainable earnings were adjusted for an allocation of corporate overheads. Management used a constant growth rate of 2.5% in calculating terminal values of the units, which does not exceed the long–term average growth rate for the industry. ■■ A post–tax discount rate of 10.27% was used in discounting the projected future cash flows. The values assigned to the key assumptions represent management’s assessment of future trends in the Building Fixtures and Fittings and Commercial Furniture industries and are based on both external sources and internal sources (historical data). The above assumptions are particularly sensitive in the following areas: ■■ ■■ An increase of 1 percentage point in the post–tax discount rate would have decreased value in use for the Building Fixtures and Fittings segment by $99,200,000 and for the Commercial Furniture segment by $4,600,000. No impairment losses would be realised for either segment as a result of this change. A 10 percent decrease in future planned revenues would have decreased value in use for the Building Fixtures and Fittings segment by $74,300,000 and for the Commercial Furniture segment by $2,500,000. No impairment losses would be realised for either segment as a result of this change. 20. trade and other payaBles CONSOLIDATED THE COmPANy In thousands of AUD Current Trade payables and accrued expenses Derivatives used for hedging Non–trade payables and accrued expenses Non–current Derivatives used for hedging Payables to controlled entities 2009 2008 2009 2008 60,583 25,477 3,171 50,287 27,592 3,413 89,231 81,292 5,585 – 5,585 – – – 57 – – 57 – 54 – – 54 – 597,077 583,653 597,077 583,653 The consolidated entity’s exposure to currency risk and liquidity risk related to trade and other payables are disclosed in note 26. 74 GWa international limited and its controlled entities ABN 15 055 964 380 notes to the consolidated Financial statements 21. interest–BearinG loans and BorroWinGs This note provides information about the contractual terms of the consolidated entity’s and the Company’s interest–bearing loans and borrowings, which are measured at amortised cost. For more information about the consolidated entity’s exposure to interest rate and foreign currency risk, see note 26. Non–current liabilities In thousands of AUD Unsecured bank loans CONSOLIDATED THE COmPANy 2009 2008 2009 2008 200,000 246,975 – – Terms and debt repayment schedule CONSOLIDATED In thousands of AUD Unsecured bank loan Unsecured bank loan Unsecured bank loan Unsecured bank loan Unsecured bank loan year of Currency maturity 2009 Face value 2009 Carrying amount 2008 Face value 2008 Carrying amount AUD 2011 60,000 60,000 60,000 60,000 AUD – – 60,000 60,000 AUD 2011 90,000 90,000 65,000 65,000 AUD 2011 50,000 50,000 50,000 50,000 EUR – – 11,975 11,975 200,000 200,000 246,975 246,975 The unsecured bank loans mature over the next 2 years and have variable rates ranging from 5.01% – 5.26% at 30 June 2009 (2008: 5.40% – 8.31%). Financing facilities In thousands of AUD 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 2009 6,000 8,000 2008 6,357 7,685 247,500 286,975 261,500 301,017 – – 1,530 1,578 200,000 246,975 201,530 248,553 6,000 6,470 47,500 59,970 6,357 6,107 40,000 52,464 2009 2008 – – – – – – – – – – – – – – – – – – – – – – – – 75 GWa international limited 2009 ANNUAL REPORT GWa international limited and its controlled entities ABN 15 055 964 380 notes to the consolidated Financial statements 21. 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 2009. Unsecured bank loans Bank loans are provided to GWA Finance Pty Limited under the facility agreements. The bank loans are denominated in Australian dollars. The bank loans are unsecured and have a maximum three year rolling maturity. 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. 22. employee BeneFits Current In thousands of AUD Liability for long–service leave Liability for annual leave Liability for on–costs Non–current Liability for long–service leave Liability for on–costs Defined contribution superannuation funds CONSOLIDATED THE COmPANy 2009 1,778 9,943 2,470 2008 1,728 11,357 3,514 14,191 16,599 10,073 1,264 9,794 881 11,337 10,675 2009 2008 – – – – – – – – – – – – – – The consolidated entity makes contributions to a defined contribution superannuation fund. Contributions are charged against income as they are made based on various percentages of each employee’s gross salaries. The amount recognised as expense was $9,212,000 for the financial year ended 30 June 2009 (2008: $8,656,000). 76 GWa international limited and its controlled entities ABN 15 055 964 380 notes to the consolidated Financial statements 22. employee BeneFits (continued) 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 at balance date. 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 2009, 442,500 ordinary shares were issued to employees at the market price of $1.90, being total market value of $840,750. In the prior year, 400,000 ordinary shares were purchased on market for employees at an average share price of $3.07 and 250,000 ordinary shares were issued to employees at the market price of $3.52, being total market value of $2,108,000. As at 30 June 2009, loans are issued for 3,933,750 (2008: 3,846,250) shares and the remaining balances of these loans is $9,962,000 (2008: $10,442,000) or $6,520,000 (2008: $5,929,000) at net present value. During 2009, dividends of $630,000 (2008: $814,000) were paid against the loans and a further $691,000 (2008: $456,000) was paid by employees against these loans. 23. share-Based payments The Long Term Incentive (Equity) Plan was approved by shareholders at the 2008 Annual General Meeting. Under the plan, the Board may offer performance rights to participants which entitle the holder to ordinary shares in the Company (or in limited cases cash payments made), subject to meeting certain financial performance hurdles and the holder remaining in employment with the Company until the nominated vesting date. The performance hurdles are subject to financial performance conditions which measure Total Shareholder Returns (TSR) compared to a peer group of companies, and growth in Earnings Per Share (EPS). The performance hurdles are challenging and achievable and focus senior executives on sustained long term growth consistent with shareholder wealth creation. The plan runs over a three year performance period and the rights will only vest if the performance hurdles are achieved. If the vesting conditions and performance hurdles are achieved, ordinary shares will be issued to the participants at no cost. If the performance hurdles are not met, then the rights are cancelled after three years. The performance hurdles are as follows: ■■ EPS hurdle – 10% or more EPS growth over the three-year performance period; and ■■ TSR hurdle – GWAIL’s TSR is more than the 50th percentile relative to the TSR of comparator companies. Fair value During the current financial year 1,185,000 performance rights were granted to employees (2008: nil) at a weighted average fair value of $1.65 (2008: nil). The fair value of the performance rights subject to the EPS hurdle for vesting (50%) was determined as $1.78 by using a Binomial option pricing model. The fair value of the performance rights granted subject to the TSR hurdle for vesting (50%) was determined as $1.51 by using a Monte Carlo simulation. When determining the fair values it was assumed the Company would have a dividend yield of 7.86%, the risk free rate was 3.25% and volatility ranged between 40-50% for the Company and its comparator companies listed for the TSR hurdle. The fair value of the performance rights granted will be allocated to each financial year evenly over the specified three year service period. The amount recognised as personnel expenses in the current financial year was $650,000 (2008: nil). 77 GWa international limited 2009 ANNUAL REPORT GWa international limited and its controlled entities ABN 15 055 964 380 notes to the consolidated Financial statements 24. provisions In thousands of AUD Consolidated Balance at 1 July 2008 Provisions made during the year Provisions used during the year Warranties Restructuring Site restoration Other Total 10,011 8,159 4,278 6,490 4,124 24,903 4,096 – 2,549 14,804 (6,093) (2,652) (541) (1,721) (11,007) Effect of movements in foreign exchange 16 – – – 16 Balance at 30 June 2009 12,093 5,722 5,949 4,952 28,716 Current Non–current Warranties 7,091 5,002 5,722 2,559 4,481 19,853 – 3,390 471 8,863 12,093 5,722 5,949 4,952 28,716 The total provision for warranties at balance date of $12,093,000 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 $7,091,000 of the total provision in the financial year ending 30 June 2010, and the majority of the balance of the liability over the following four years. Restructuring During the financial year ended 30 June 2009, provisions of $4,096,000 were made to cover the estimated costs of redundancies and related costs with respect to the closure of manufacturing operations and other business restructuring. At balance date the balance of the restructuring provision was $5,722,000. Of this amount $1,755,000 remains from the prior financial year for onerous lease commitments in relation to sites restructured and $3,967,000 represents the balance remaining for the provision raised in the current year. The restructuring is expected to be completed by June 2010. Site restoration At balance date the balance of the site restoration provision was $5,949,000. Payments of $541,000 were made in the current financial year. 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. Site restoration will be incurred when leased sites are exited. The net present value of the provision has been calculated using a discount rate of 5.85 per cent. 78 GWa international limited and its controlled entities ABN 15 055 964 380 notes to the consolidated Financial statements Balance at 1 July 2008 353,938 (7,565) 193 25. capital and reserves Reconciliation of movement in capital and reserves In thousands of AUD Consolidated Balance at 1 July 2007 Total recognised income and expense Issue of ordinary shares Dividends to shareholders Balance at 30 June 2008 Total recognised income and expense Share–based payments, net of tax Issue of ordinary shares Dividends to shareholders Balance at 30 June 2009 In thousands of AUD The Company Balance at 1 July 2007 Total recognised income and expense Issue of ordinary shares Dividends to shareholders Balance at 30 June 2008 Balance at 1 July 2008 Total recognised income and expense Share–based payments, net of tax Issue of ordinary shares Dividends to shareholders Balance at 30 June 2009 Share capital Translation Hedging compensation Retained earnings reserve reserve reserve Total Equity 353,062 (2,553) – (5,012) 876 – – – 17 176 – – 353,938 (7,565) 193 – – 34,043 – 4,026 (755) – – – – – – – – – – – – – 650 – – 58,276 408,802 45,890 41,054 – 876 (61,612) (61,612) 42,554 389,120 42,554 389,120 48,325 51,596 – – 650 34,043 (49,245) (49,245) 387,981 (3,539) (562) 650 41,634 426,164 Equity Share capital compensation reserve Retained earnings Total equity 353,062 – 876 – 353,938 353,938 – – 34,043 – 387,981 – – – – – – – 650 – – 650 49,407 62,641 – (61,612) 50,436 50,436 39,335 – – (49,245) 40,526 402,469 62,641 876 (61,612) 404,374 404,374 39,335 650 34,043 (49,245) 429,157 79 GWa international limited 2009 ANNUAL REPORT GWa international limited and its controlled entities ABN 15 055 964 380 notes to the consolidated Financial statements 25. capital and reserves (continued) Share capital In thousands of shares On issue at 1 July – fully paid Issue of shares under the dividend reinvestment plan Issue of shares under the employee share plan On issue at 30 June – fully paid THE COmPANy Ordinary shares 2009 2008 280,173 279,923 17,403 443 – 250 298,019 280,173 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. Translation reserve The translation reserve comprises all foreign exchange differences arising from the retranslation 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 retranslation 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. Equity compensation reserve The equity compensation reserve represents the fair value of performance rights expensed during the year ended 30 June 2009 (2008: nil). Dividends Dividends recognised in the current year by the consolidated entity and the Company are: In thousands of AUD 2009 Interim 2009 ordinary Final 2008 ordinary Total amount 2008 Interim 2008 ordinary Interim 2008 special Final 2007 ordinary Final 2007 special Total amount 80 Cents per share Total amount Franked Date of payment 9.5 8.0 17.5 26,831 100% 1st April 2009 22,414 100% 7th Oct 2008 49,245 10.0 28,017 100% 2nd April 2008 1.5 8.0 2.5 4,203 100% 2nd April 2008 22,394 100% 2nd Oct 2007 6,998 100% 2nd Oct 2007 22.0 61,612 GWa international limited and its controlled entities ABN 15 055 964 380 notes to the consolidated Financial statements 25. capital and reserves (continued) Dividends (continued) 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 for. The declaration and subsequent payment of dividends has no income tax consequences. In thousands of AUD Final ordinary Cents per share Total amount Franked Date of payment 8.5 25,332 100% 7th Oct 2009 The financial effect of these dividends has not been brought to account in the financial statements for the financial year ended 30 June 2009 and will be recognised in subsequent financial reports. Dividend franking account In thousands of AUD THE COmPANy 2009 2008 30 per cent franking credits available to shareholders of GWA International Limited for subsequent financial years 20,009 22,528 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 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 $10,857,000 (2008: $9,606,000). In accordance with the tax consolidation legislation, the Company as the head entity in the tax–consolidated group has also assumed the benefit of $20,009,000 (2008: $22,528,000) franking credits. 26. Financial instruments and Financial risk manaGement 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. Risk management policy The Board has overall responsibility for the establishment and oversight of the risk management framework. The Board has established the Executive Risk Committee, which is responsible for developing and monitoring risk management policies. The Committee is required to report regularly to the Board on its activities. Risk management policies are established to identify and analyse the risks faced by the consolidated entity and the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the consolidated entity’s and the Company’s activities. The Board Audit Committee oversees how management monitors compliance with the risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the consolidated entity and the Company. The Board Audit Committee is assisted in its oversight role by the Internal Audit team. The Internal Audit team conducts both regular and ad hoc reviews of risk management controls and procedures. The results of the reviews are reported to the Board Audit Committee. 81 GWa international limited 2009 ANNUAL REPORT GWa international limited and its controlled entities ABN 15 055 964 380 notes to the consolidated Financial statements 26. Financial instruments and Financial risk manaGement (continued) Capital management policy The Board’s policy is to maintain a strong capital base and grow shareholder wealth. The Board monitors debt levels, cash flows and financial forecasts to establish appropriate levels of dividends and funds available to reinvest in the businesses or invest in growth opportunities. The Board focuses on growing shareholder wealth by monitoring the performance of the consolidated entity by reference to the return on funds employed. The Board defines return on funds employed as trading earnings before interest and tax divided by net assets after adding back net debt. There were no changes to the Boards approach to capital management during the year. Credit risk Credit risk is the risk of financial loss to the consolidated entity and the Company if a customer or other counterparty to a financial instrument fails to discharge their obligations. Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. A risk assessment process is used for customers requiring credit and credit insurance is utilised for major concentrations of trade debts. Goods are sold subject to retention of title clauses in most circumstances. The consolidated entity does not require collateral in respect of financial assets. The consolidated entity maintains an allowance for impairment that represents its estimate of incurred losses in respect of trade receivables. 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. The consolidated entity has two major customers which comprise 42% of the trade receivables carrying amount at 30 June 2009 (2008: 46%). At the balance sheet date there were no material uninsured concentrations of credit risk. The carrying amount of financial assets represents the maximum credit exposure of the consolidated entity and the Company. The maximum exposure to credit risk at balance date was: In thousands of AUD Cash and cash equivalents Gross trade receivables Employee share loans Receivables due from controlled entities Commodity contracts used for hedging Forward exchange contracts used for hedging Interest rate swaps used for hedging CONSOLIDATED THE COmPANy 2009 2008 2009 2008 45,015 53,418 128,542 118,683 – – – – 6,520 5,929 6,520 5,929 – 13,819 – – 16,442 26,285 – 1,587 697,807 657,847 – – – – – – 210,338 205,902 704,327 663,776 82 GWa international limited and its controlled entities ABN 15 055 964 380 notes to the consolidated Financial statements 26. Financial instruments and Financial risk manaGement (continued) Credit risk (continued) The ageing of gross trade receivables for the consolidated entity at balance date is as follows: In thousands of AUD Not yet due Past due 0–30 days Past due 31–60 days Past due 61–90 days Past due 91–120 days Past due 120+ days 2009 Gross 78,523 40,155 3,245 1,584 2,850 2,185 CONSOLIDATED 2009 Impairment 2008 Gross 2008 Impairment (69) (13) (361) (150) (464) (971) 66,844 (170) 41,517 4,778 3,092 1,482 970 (7) (116) (140) (216) (403) 128,542 (2,028) 118,683 (1,052) The carrying amount of gross trade receivables classified as not yet due at balance date for the consolidated entity that would be past due if terms had not been re-negotiated is as follows: In thousands of AUD CONSOLIDATED 2009 Gross 2009 Impairment 2008 Gross 2008 Impairment Gross trade receivables with terms re–negotiated 74 (60) 265 (120) The movement in the allowance for impairment in respect of trade receivables during the year for the consolidated entity was as follows: In thousands of AUD Balance at 1 July Impairment loss recognised Impairment losses applied Effect of movements in foreign exchange Balance at 30 June Liquidity risk CONSOLIDATED 2009 2008 (1,052) (1,305) 354 (25) (804) (527) 279 – (2,028) (1,052) Liquidity risk is the risk that the consolidated entity and the Company will not be able to meet its financial obligations as they fall due. The consolidated entity and the Company prepares cash flow forecasts and maintains financing and overdraft facilities with a number of institutions to ensure sufficient funds will be available to meet obligations without incurring excessive costs. The cash flows of the consolidated entity and the Company are controlled by management and reported monthly to the Board who is ultimately responsible for maintaining liquidity. 83 GWa international limited 2009 ANNUAL REPORT GWa international limited and its controlled entities ABN 15 055 964 380 notes to the consolidated Financial statements 26. Financial instruments and Financial risk manaGement (continued) Liquidity risk (continued) The contractual maturities of financial liabilities and derivatives that are cash flow hedges of the consolidated entity and the Company, including estimated interest payments are as follows: In thousands of AUD Carrying Contractual Less than 6 6–12 cash flows months months amount 1–2 years Carrying Contractual Less than 6 6–12 amount cash flows months months 1–2 years CONSOLIDATED THE COmPANy Non–derivative financial liabilities – 2008 Unsecured bank loans (246,975) (287,830) (10,214) (10,214) (267,402) – – – Trade and other payables (50,287) (50,287) (50,262) (25) – (54) (54) (54) Derivative financial liabilities – 2008 Interest rate swaps designated as hedges 1,587 1,373 569 431 373 Forward exchange contracts designated as hedges – outflow Forward exchange contracts designated as hedges – inflow (27,592) (27,592) (27,592) 26,285 26,285 26,285 – – – – – – – – – – – – – Total at 30 June 2008 (296,982) (338,051) (61,214) (9,808) (267,029) (54) (54) (54) Non–derivative financial liabilities – 2009 Unsecured bank loans (200,000) (218,681) (5,490) (5,491) (207,700) – – – Trade and other payables (60,583) (60,583) (60,547) (36) – (57) (57) (57) Derivative financial liabilities – 2009 Interest rate swaps designated as hedges (1,839) (2,056) (1,205) (733) (118) Commodity contracts designated as hedges – outflow Commodity contracts designated as hedges – inflow Forward exchange contracts designated as hedges – outflow Forward exchange contracts designated as hedges – inflow (12,280) (12,280) (3,982) (2,713) (5,585) 13,819 13,819 4,342 3,159 6,318 (16,943) (16,943) (15,064) (1,879) 16,442 16,442 14,568 1,874 – – – – – – – – – – – – – – – – – Total at 30 June 2009 (261,384) (280,282) (67,378) (5,819) (207,085) (57) (57) (57) – – – – – – – – – – – – – – – – – – – – – – – – – – – – The unsecured bank loans have a maximum three year rolling maturity, subject to annual review. The periods in which the cash flows associated with derivatives arise match the periods of profit and loss impact. 84 GWa international limited and its controlled entities ABN 15 055 964 380 notes to the consolidated Financial statements 26. Financial instruments and Financial risk manaGement (continued) market risk Market risk is the risk that changes in market prices such as interest rates and foreign exchange rates will affect the consolidated entity’s and the Company’s income or value of holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters. The consolidated entity enters into derivatives and also incurs financial liabilities in order to manage market risks. All transactions are carried out within the guidelines set by the Executive Risk Committee. a) Interest rate risk Interest rate risk is the risk that changes in interest rates will affect the consolidated entity’s and the Company’s income. The consolidated entity’s variable rate borrowings are exposed to a risk of change in cash flows due to changes in interest rates. 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 3.76% to 7.36% (2008: 5.63% – 7.36%). At 30 June 2009, the consolidated entity had interest rate swaps with a notional contract amount of $125,000,000 (2008: $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 2009 was $1,839,000 recognised as a fair value derivative liability. (2008: $1,587,000 fair value derivative asset). (i) Profile At balance date the consolidated entity’s and the Company’s interest bearing financial instruments were: CONSOLIDATED THE COmPANy In thousands of AUD Variable rate financial instruments 2009 2009 Notional Carrying Notional value amount value 2008 2008 2009 2008 Carrying Notional Carrying Notional Carrying amount amount amount 2009 2008 value value Unsecured bank loans (200,000) (200,000) (246,975) (246,975) Bank balances Call deposits Fixed rate financial instruments 22,011 22,011 18,323 18,323 23,004 23,004 35,095 35,095 (154,985) (154,985) (193,557) (193,557) Interest rate swap derivatives 125,000 (1,839) 125,000 1,587 Total (29,985) (156,824) (68,557) (191,970) – – – – – – – – – – – – – – – – – – – – – – – – 85 GWa international limited 2009 ANNUAL REPORT GWa international limited and its controlled entities ABN 15 055 964 380 notes to the consolidated Financial statements 26. Financial instruments and Financial risk manaGement (continued) market risk (continued) a) Interest rate risk (continued) (ii) Fair value sensitivity analysis for fixed rate instruments The consolidated entity does not account for fixed rate financial assets and liabilities at fair value through profit or loss. Therefore a change in interest rates at the reporting date would not affect profit or loss. A change of 100 basis points in interest rates at balance date would have affected the consolidated entity’s and the Company’s equity and financial assets and liabilities as follows: CONSOLIDATED THE COmPANy 2009 2008 2009 2008 (603) (1,311) – 603 – 1,311 – – 609 1,608 – (1,587) (609) – (21) – – – – – – – – – – – – – – – – – In thousands of AUD Increase of 100 basis points Hedging reserve (increase)/decrease Financial assets increase/(decrease) Financial liabilities (increase)/decrease Decrease of 100 basis points Hedging reserve (increase)/decrease Financial assets increase/(decrease) Financial liabilities (increase)/decrease 86 GWa international limited and its controlled entities ABN 15 055 964 380 notes to the consolidated Financial statements 26. Financial instruments and Financial risk manaGement (continued) market risk (continued) a) Interest rate risk (continued) (iii) Cash flow sensitivity analysis for fixed and variable rate instruments A change of 100 basis points in interest rates during the period would have affected the consolidated entity’s and the Company’s profit as follows: In thousands of AUD Increase of 100 basis points Unsecured bank loans (AUD) Unsecured bank loans (EUR) Bank balances Interest rate swap derivatives Call deposits variable rate Call deposits fixed rate Decrease of 100 basis points Unsecured bank loans (AUD) Unsecured bank loans (EUR) Bank balances Interest rate swap derivatives Call deposits variable rate Call deposits fixed rate b) Foreign currency risk CONSOLIDATED THE COmPANy 2009 2008 2009 2008 (2,207) (2,560) (117) 220 (122) 183 1,198 1,049 303 – 351 166 (603) (933) 2,209 2,565 117 (220) 122 (183) (1,198) (1,049) (303) – 605 (351) (166) 938 – – – – – – – – – – – – – – – – – – – – – – – – – – – – The consolidated entity is exposed to foreign currency risk on sales, purchases and asset and liability holdings that are denominated in a currency other than the respective functional currencies of its subsidiaries and retranslation of the financial statements of foreign subsidiaries. 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 six months after the balance sheet date. The consolidated entity classifies its forward exchange contracts hedging forecasted transactions as cash flow hedges and states them at fair value. The consolidated entity’s Euro denominated bank loan was designated as a hedge of the consolidated entity’s investment in its subsidiary in the Netherlands. 87 GWa international limited 2009 ANNUAL REPORT GWa international limited and its controlled entities ABN 15 055 964 380 notes to the consolidated Financial statements 26. Financial instruments and Financial risk manaGement (continued) market risk (continued) b) Foreign currency risk (continued) (i) Exposure to currency risk In thousands of AUD equivalent AUD USD NZD EUR HKD UKP yEN 2008 Trade receivables Trade payables Cash Gross balance sheet exposure Estimated forecast sales Estimated forecast purchases Gross exposure Forward exchange contracts Net exposure 30 June 2008 – – 3,246 (2,301) 6,658 6,658 334 1,279 – – – – 196 (162) 61 95 300 (12) 1 289 – – – – 13,747 – (45,808) – (5,092) (45,808) 13,747 (5,092) – 22,092 (2,195) 2,442 – – – – 2 (21) – (19) – – – – 6,658 (22,437) 11,552 (2,555) 289 (19) – – – – – (842) (842) 883 41 Foreign exchange rates at balance date 1.0000 0.9626 1.2609 0.6096 7.5091 0.4829 101.93 2009 Trade receivables Trade payables Cash Gross balance sheet exposure Estimated forecast sales Estimated forecast purchases Gross exposure Forward exchange contracts Net exposure 30 June 2009 – – – – – – – – – 1,457 (1,065) 93 485 – – – – 1,400 1,528 (191) 51 (26) 399 1,260 1,901 7,231 10,549 17,825 (66,101) (4,624) (20,501) (58,870) 5,925 (2,676) 16,330 – – – – – – (42,055) 5,925 (1,416) 1,901 3 (1) – 2 – – – – 2 – – – – – (3,472) (3,472) – (3,472) Foreign exchange rates at balance date 1.0000 0.8114 1.2428 0.5751 6.2884 0.4872 77.76 (ii) Sensitivity analysis The impact of exchange rate movements on profit is subject to other variables including competitor exchange rate positions and movement in market prices. The impact of exchange rate movements on equity is not material. 88 GWa international limited and its controlled entities ABN 15 055 964 380 notes to the consolidated Financial statements 26. Financial instruments and Financial risk manaGement (continued) Fair values The fair values of financial assets and liabilities, together with the carrying amounts shown in the balance sheet are as follows: Consolidated In thousands of AUD Cash and cash equivalents Trade and other receivables Interest rate swaps: Assets Liabilities Commodity contracts: Assets Liabilities Forward exchange contracts: Assets Liabilities Unsecured bank loans Carrying amount 2009 Fair value 2009 Carrying amount 2008 Fair value 2008 45,015 45,015 53,418 53,418 116,963 116,963 109,006 109,006 – – 1,587 1,587 (1,839) (1,839) 13,819 13,819 (12,280) (12,280) – – – – – – 16,442 16,442 26,285 26,285 (16,943) (16,943) (27,592) (27,592) (200,000) (200,000) (246,975) (246,975) Trade payables and accrued expenses (63,754) (63,754) (53,700) (53,700) The Company In thousands of AUD Trade and other receivables Payables to controlled entities (102,577) (102,577) (137,971) (137,971) Carrying amount 2009 Fair value 2009 Carrying amount 2008 Fair value 2008 704,327 704,327 663,776 663,776 (597,077) (597,077) (583,654) (583,654) Trade payables and accrued expenses (57) (57) (54) (54) 107,193 107,193 80,068 80,068 89 GWa international limited 2009 ANNUAL REPORT GWa international limited and its controlled entities ABN 15 055 964 380 notes to the consolidated Financial statements 26. Financial instruments and Financial risk manaGement (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. (i) Derivatives Forward exchange contracts are marked to market by discounting the contractual forward price and deducting the current spot rate. Commodity contracts are marked to market by discounting the contractual forward price and deducting the current commodity spot price. 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. (ii) 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. (iii) 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. (iv) Employee share loans and other employee loans Employee share loans and other employee loans are carried at fair value using discounted cash flow techniques. (v) Interest rates used for determining fair value The entity uses the government yield curve as of 30 June 2009 plus an adequate constant credit spread to discount financial instruments. The interest rates used are as follows: Derivatives 2009 2008 3.19% – 4.84% 7.77% – 7.82% Employee share loans and other loans 5.85% – 8.05% 7.30% – 7.55% Interest bearing loans and borrowings 5.01% – 5.26% 5.40% – 8.31% 27. 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 CONSOLIDATED THE COmPANy 2009 2008 2009 2008 13,416 10,127 29,494 28,014 2,967 4,317 45,877 42,458 – – – – – – – – The consolidated entity leases a warehouse and factory facilities and motor vehicles under operating leases. The warehouse and facility leases typically run for a period of 3 to 5 years, with an option to renew the lease after that date. None of the leases include contingent rentals. 90 GWa international limited and its controlled entities ABN 15 055 964 380 notes to the consolidated Financial statements 27. operatinG leases (continued) Leases as lessee (continued) One of the leased properties has been sublet by the consolidated entity. The lease and sublease expire in November 2009. Sublease payments of $95,000 will be received during the following financial year. During the financial year ended 30 June 2009, $11,407,000 (2008: $10,473,000) was recognised as an expense in the income statement in respect of operating leases, which was net of sub–lease income. 28. capital and other commitments CONSOLIDATED THE COmPANy In thousands of AUD Capital expenditure commitments Plant and equipment Contracted but not provided for and payable: Within one year 29. continGencies 2009 2008 2009 2008 4,401 3,152 – – 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. In thousands of AUD Contingent liabilities not considered remote In previous financial years, the Company investigated and reported two environmental contamination issues at factory sites at Eagle Farm, Queensland and Revesby, NSW. Both sites are leased and occupied by wholly owned subsidiaries of the ultimate parent entity, GWA International Limited. The costs to remediate the Eagle Farm site have been provided in the financial statements for the year ended 30 June 2009. The costs to remediate the Revesby site have been fully provided in prior years. Contingent liabilities considered remote Guarantees (i) Under the terms of a Deed of Cross Guarantee, described in note 30, 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 CONSOLIDATED THE COmPANy 2009 2008 2009 2008 – – – – – 1,404 3,865 – – – – – 91 GWa international limited 2009 ANNUAL REPORT GWa international limited and its controlled entities ABN 15 055 964 380 notes to the consolidated Financial statements 30. 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 31 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 2009, is set out below. Summerised 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 2009 2008 68,446 69,138 (20,396) (20,337) 48,050 48,801 14,752 27,563 (49,245) (61,612) 13,557 14,752 92 GWa international limited and its controlled entities ABN 15 055 964 380 notes to the consolidated Financial statements 30. deed oF cross Guarantee (continued) Balance sheet In thousands of AUD Assets Cash and cash equivalents Trade and other receivables Inventories 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 Income tax payable Employee benefits Provisions Total current liabilities Trade and other payables Interest–bearing loans and borrowings Employee benefits Provisions Total non–current liabilities Total liabilities Net assets Equity Issued capital Reserves Retained earnings Total equity CONSOLIDATED 2009 2008 37,979 33,700 126,447 121,355 99,729 92,807 3,052 4,358 267,207 252,220 12,185 5,298 25,729 55,493 22,973 12,212 22,516 22,553 63,040 70,101 334,206 324,640 2,894 3,770 483,543 494,067 750,750 746,287 85,063 77,336 7,211 5,948 12,953 15,537 19,473 16,982 124,700 115,803 5,585 – 200,000 246,975 11,091 10,514 8,864 7,812 225,540 265,301 350,240 381,104 400,510 365,183 387,981 353,938 (1,028) (3,507) 13,557 14,752 400,510 365,183 93 GWa international limited 2009 ANNUAL REPORT GWa international limited and its controlled entities ABN 15 055 964 380 notes to the consolidated Financial statements 31. consolidated entities Parent entity GWA International Limited Subsidiaries GWA Group Limited Gainsborough Hardware Industries Limited Caroma Holdings Limited GWA (North America) Pty Ltd Caroma Industries Limited G Subs Pty Ltd Sebel Furniture (Hong Kong) Ltd GWA Trading (Shanghai) Co Ltd GWA International (Hong Kong) Limited (liquidated) 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 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 Canereb Pty Ltd Dux Manufacturing Limited GWA Taps Manufacturing Limited Lake Nakara 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 Austral Lock Pty Ltd (acquired) 94 Parties to cross guarantee Country of incorporation Ownership interest 2009 2008 Y Y Y Y Y Y Y N N N Y Y Y Y Y N Y N N N N N N Y N N Y Y N N N N N Y Y Y Y Y Y Australia Australia Australia Australia Australia Australia Australia Hong Kong China Hong Kong Australia Australia Australia Australia Australia New Zealand Australia Netherlands Netherlands Netherlands Netherlands Germany Netherlands Australia USA Australia Australia Australia Australia Australia New Zealand New Zealand New Zealand Australia 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% – GWa international limited and its controlled entities ABN 15 055 964 380 notes to the consolidated Financial statements 31. consolidated entities (continued) Subsidiaries (continued) Sebel Furniture Limited (NZ) Sebel Furniture Limited Sebel Furniture (SEA) Pte Ltd (liquidated) Sebel Sales Pty Limited Caroma Singapore Pte Limited (liquidated) GWA Finance Pty Limited Hetset (No. 5) Pty Ltd Bankstown Unit Trust Parties to cross guarantee Country of incorporation Ownership interest 2009 2008 N Y N Y N Y Y N New Zealand 100% Australia 100% Singapore – Australia 100% Singapore – Australia 100% Australia 100% Australia 100% 100% 100% 100% 100% 100% 100% 100% 100% 32. reconciliation oF cash FloWs From operatinG activities In thousands of AUD Cash flows from operating activities Profit for the period Adjustments for: Depreciation Amortisation Share–based payments Impairment losses Foreign exchange (gains)/losses Interest expense/(income) Dividends from controlled entities Distributions from controlled trusts CONSOLIDATED THE COmPANy 2009 2008 2009 2008 48,325 45,890 39,335 62,641 16,789 1,316 650 – 17,386 534 – 9,419 (1,183) (1,971) 13,844 14,623 – – – – – – 650 – – – – – – – – – (40,000) (65,000) – – (3) (18) 2,359 – – – (Gain)/loss on sale of property, plant and equipment and intangible assets (113) (6,879) Income tax expense Operating profit before changes in working capital and provisions 20,690 22,065 100,318 101,067 (Increase)/decrease in trade and other receivables (19,114) (8,095) (40,541) (64,208) (Increase)/decrease in inventories Increase/(decrease) in trade and other payables Increase/(decrease) in provisions and employee benefits Interest received/(paid) Income taxes paid Net cash from operating activities (1,264) 28,942 1,677 20,703 12,378 5,422 – – 80,551 126,849 – – 110,559 131,475 39,992 62,641 (12,781) (14,204) – – (19,150) (14,279) (18,559) (12,505) 78,628 102,992 21,433 50,136 95 GWa international limited 2009 ANNUAL REPORT GWa international limited and its controlled entities ABN 15 055 964 380 notes to the consolidated Financial statements 33. related parties 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 Share–based payments Termination benefits CONSOLIDATED THE COmPANy 2009 2008 2009 2008 6,008,604 5,622,928 1,014,097 910,634 439,122 – 710,000 500,000 8,171,823 7,033,562 – – – – – – – – – – Individual directors and executives compensation disclosures Information regarding individual directors and executives compensation is provided in the remuneration report section of the director’s report. Apart from the details disclosed in this note, no director has entered into a material contract with the consolidated entity since the end of the previous financial year and there were no material contracts involving directors’ interests existing at year end. 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: In AUD Directors P Crowley R Thornton Executives S Wright A Rusten W Saxelby L Patterson Balance Balance Interest paid and payable in Highest balance 1 July 2008 30 June 2009 the reporting period in period 1,721,250 1,590,000 298,996 281,496 427,332 – 792,540 740,040 886,100 833,600 959,991 907,491 – – – – – – 1,721,250 298,996 427,332 792,540 886,100 959,991 No loans were made to key management personnel or their related parties during the year (2008: $1,227,467). The loans made in the prior financial year related to the Employee Share Plan. 96 GWa international limited and its controlled entities ABN 15 055 964 380 notes to the consolidated Financial statements 33. related parties (continued) Loans to key management personnel and their related parties (consolidated) (continued) 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: In AUD Total for key management personnel 2009* Total for key management personnel 2008 Opening Balance Closing Interest paid and payable in Number in group at Balance the reporting period 30 June 5,086,209 4,352,627 5,830,110 4,787,213 – – 6 5 *The 2009 opening balance differs to the 2008 closing balance due to the appointment of Richard Thornton as Director on 6 May 2009. 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 $214,331 (2008: $282,731) 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. The consolidated entity incurred legal fees of $380,343 (2008: n/a) from Clayton Utz Lawyers, a legal firm of which Mr D McDonough is an equity partner. 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 2009 67 2008 2009 2008 – – – 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. 97 GWa international limited 2009 ANNUAL REPORT GWa international limited and its controlled entities ABN 15 055 964 380 notes to the consolidated Financial statements 33. 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 (Retired 30 October 2008) D Barry R Anderson G McGrath W Bartlett D McDonough (Appointed 16 February 2009) Executive directors P Crowley R Thornton (Appointed 6 May 2009) Executives S Wright (Ceased employment 18 July 2008) A Rusten G Oliver W Saxelby L Patterson Held at 1 July 2008 Purchases Held at Sales 30 June 2009 16,186,722 1,263,228 101,000 100,000 – – 12,386,119 28,890,832 517,415 895,363 – – – – – 17,449,950 101,000 n/a 12,903,534 29,786,195 300,000 5,000 n/a 750,000 n/a 268,750 300,000 156,250 300,000 300,000 – (150,000) 150,000 10,425 – – – – – 13,280 – – – – – – – – – – – 15,425 83,635 750,000 111,935 n/a 300,000 169,530 300,000 300,000 The relevant interest of each director in the share capital of the Company as notified by the directors’ to the Australian Securities Exchange in accordance with Section 205G(1) of the Corporations Act 2001 as at 30 June 2009 is listed in the Directors’ Report. Directors: non–executive B Thornton J Kennedy M Kriewaldt D Barry R Anderson G McGrath W Bartlett (Appointed 21 February 2007) Executive directors P Crowley Executives S Wright A Rusten G Oliver W Saxelby L Patterson Held at 1 July 2007 Purchases Held at Sales 30 June 2008 15,073,902 1,112,820 1,000 100,000 12,355,889 28,890,832 300,000 n/a 100,000 – 30,230 – – – 500,000 250,000 268,750 300,000 156,250 – – – – 300,000 300,000 – – – – – – – – – – – – – – 16,186,722 101,000 100,000 12,386,119 28,890,832 300,000 5,000 750,000 268,750 300,000 156,250 300,000 300,000 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 2009 was 62,421,204 (2008: 60,044,673). 98 GWa international limited and its controlled entities ABN 15 055 964 380 notes to the consolidated Financial statements 33. 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. 34. suBsequent events To management’s best knowledge, there are no events that have arisen subsequent to 30 June 2009 that will, or may, significantly affect the operation or results of the consolidated entity. 99 GWa international limited 2009 ANNUAL REPORT GWa international limited and its controlled entities ABN 15 055 964 380 directors’ declaration 1. In the opinion of the directors of GWA International Limited (‘the Company’): (a) the financial statements and notes, and the Remuneration Report in the Directors’ Report, 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 2009 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; and (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 30 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 2009 pursuant to Section 295A of the Corporations Act 2001. Dated at Brisbane on 18 August 2009. Signed in accordance with a resolution of the directors: B Thornton Director P C Crowley Director lead auditor’s independence declaration under section 307c oF the corporations act 2001 To the Directors of GWA International Limited: I declare that, to the best of my knowledge and belief, in relation to the audit for the financial year ended 30 June 2009 there have been: (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 Sydney, 18 August 2009 mark Epper Partner 100 GWa international limited and its controlled entities ABN 15 055 964 380 independent auditor’s report to the memBers oF GWa international limited report on the Financial reports We have audited the accompanying financial report of GWA International Limited (the ‘Company’), which comprises the balance sheets as at 30 June 2009, and the income statements, statements of recognised income and expense and cash flow statements for the year ended on that date, a summary of significant accounting policies and other explanatory notes 1 to 34 and the directors’ declaration of the consolidated entity comprising the Company and the entities it controlled at the year’s end or from time to time during the financial year. Directors’ responsibility for the financial report The directors of the Company are responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining internal control relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. In note 1(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, comprising the financial statements and notes, complies with International Financial Reporting Standards. Auditor’s responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. We 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. Independence In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. Auditor’s opinion In our opinion: (a) the financial report of GWA International Limited is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the Company’s and the consolidated entity’s financial position as at 30 June 2009 and of their performance for the year ended on that date; and (ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001. (b) the financial report also complies with International Financial Reporting Standards as disclosed in note 1(a). Report on the Remuneration Report We have audited the Remuneration Report as included in the directors’ report for the year ended 30 June 2009. The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with Section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with auditing standards. Auditor’s opinion In our opinion, the remuneration report of GWA International Limited for the year ended 30 June 2009, complies with Section 300A of the Corporations Act 2001. KPmG Sydney, 18 August 2009 mark Epper Partner 101 GWa international limited 2009 ANNUAL REPORT GWa international limited and its controlled entities ABN 15 055 964 380 other statutory inFormation as at 17 august 2009 statement oF shareholdinG In accordance with the Australian Securities Exchange Listing Rules, the directors state that, as at 17 August 2009, 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 1,920 6,503 3,194 2,163 129 1,058,920 19,259,506 24,020,432 % 0.36 6.46 8.06 46,013,128 15.44 207,666,866 69.68 13,909 298,018,852 100 The number of shareholders with less than a marketable parcel of 174 shares is 325. votinG riGhts The voting rights attached to shares are as set out in clause 9.20 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; and 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 17 August 2009: Shareholder HGT Investments Pty Ltd Number of Shares % of Shares on Issue 15,784,678 5.30 102 GWa international limited and its controlled entities ABN 15 055 964 380 other statutory inFormation as at 17 august 2009 20 larGest shareholders as at 17 august 2009 Shareholder Number of Shares % Shares on Issue NATIONAL NOMINEES LIMITED J P MORGAN NOMINEES AUSTRALIA HGT INVESTMENTS PTY LTD KFA INVESTMENTS PTY LTD ERAND PTY LTD JMB INVESTMENTS PTY LTD RBC DEXIA INVESTOR SERVICES HSBC CUSTODY NOMINEES ASHBERG PTY LTD THEME (NO 3) PTY LTD CJZ INVESTMENTS PTY LTD 18,753,896 16,206,726 15,784,678 10,864,945 9,898,229 9,186,434 8,897,629 8,727,554 6.29 5.44 5.30 3.65 3.32 3.08 2.99 2.93 8,418,442 2.82 7,843,226 2.63 7,016,832 2.35 AUSTRALIAN FOUNDATION INVESTMENT COMPANY LIMITED 6,681,130 2.24 CITICORP NOMINEES PTY LIMITED ITA INVESTMENTS PTY LTD CITICORP NOMINEES PTY LIMITED DABARY INVESTMENTS PTY LTD 5,372,931 1.80 5,152,338 1.73 5,069,218 3,553,830 1.70 1.19 MR PETER ZINN & MRS CAROL JOAN ZINN (CAROL ZINN FAMILY NO 2 A/C) 3,353,740 1.13 HARVEST HOME HOLDINGS PTY LTD 2,586,416 0.87 ANZ NOMINEES LIMITED AMP LIFE LIMITED Total 2,496,205 2,319,688 158,184,087 0.84 0.78 46.92 103 GWa international limited 2009 ANNUAL REPORT GWa international limited and its controlled entities ABN 15 055 964 380 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 29 October 2009 commencing at 10:30 am. Shareholders will be mailed their Notice of Annual General Meeting and Proxy Form during September 2009. shareholder enquiries Shareholders with enquiries about their shareholding or dividend payments should contact the Company’s share registry, Computershare Investor Services Pty Limited, on 1300 552 270 or write to GPO Box 523 Brisbane Queensland Australia 4001. Alternatively, you can view details of your holding or make changes to your personal information online at www.computershare.com.au. dividend reinvestment plan The Dividend Reinvestment Plan (DRP) was re-introduced by the Board on 19 August 2008. The DRP rules can be found on the Company’s website. To participate in the DRP, shareholders must complete an election form which can be obtained from the Company’s share registry or online at www.computershare.com.au. 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. chanGe oF address Shareholders who have changed their address should immediately notify the Company’s share registry in writing or online at www. computershare.com.au. 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 a copy of the Annual Report should notify the Company’s share registry in writing or online at www.computershare.com.au. 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 or online at www.computershare.com.au. shareholder timetaBle 2009 30 JUNE Financial year end 18 AUGUST Year end result and final dividend announcement 14 SEPTEmBER Ex dividend date for final dividend 18 SEPTEmBER Record date for determining final dividend entitlement 25 SEPTEmBER Notice of Annual General Meeting and Proxy Form mailed to shareholders 7 OCTOBER Final ordinary dividend paid 27 OCTOBER Proxy returns close 10:30 am Brisbane 29 OCTOBER Annual General Meeting 31 DECEmBER Half year end 104 CONTENTS Performance Summary Company Profile and Mission Statement Chairman’s Review Managing Director’s Review of Operations Health and Safety In the Community Business Divisions GWA Sustainability and Innovation Story Board of Directors Corporate Governance Statement Directors’ Report Financial Statements Other Statutory Information Shareholder Information and Timetable 1 2 4 6 10 12 14 19 30 32 39 48 102 104 HEAD OFFICE LOCATIONS 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 AUSTRALIA Telephone: 61 2 9202 7000 Facsimile: 61 2 9869 0625 Websites: www.caroma.com.au www.fowler.com.au www.stylus.com.au www.starion-industries.com www.dorf.com.au www.clark.com.au www.irwell.com.au www.radiantstainless.com.au www.ecologicalsolutions.com 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 www.hotwaterrebate.com.au CORPORATE DIRECTORy 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 G J McGrath, Non-Executive Director W J Bartlett, Non-Executive Director D D McDonough, Non-Executive Director R J Thornton, Executive Director CHIEF FINANCIAL OFFICER W R Saxelby, FCPA GAICD 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 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 www.ausloc.com 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 92 Gow Street Padstow NSW 2211 AUSTRALIA Telephone 61 2 9780 2222 Facsimile 61 2 9793 3152 Website: www.sebel.com.au WISA Bv Driepoortenweg 5 6827 BP Arnhem NETHERLANDS Telephone +31 (0) 26 362 9020 Facsimile +31 (0) 26 363 5480 Website: www.wisa-sanitair.com AuDITOR KPMG 10 Shelley Street Sydney NSW 2000 AUSTRALIA Telephone: 61 2 9335 7000 Facsimile: 61 2 9335 7001 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 Commonwealth Bank of Australia Australia and New Zealand Banking Group Limited HSBC Bank Australia Limited National Australia Bank Westpac Banking Corporation Printed using Forestry Stewardship Council (FSC) certified paper. All paper sourced from responsibly managed plantation forests. ISO14001 environmental management system in use. G W A I N T E R N A T O N A L I I I L M T E D 2 0 0 9 A N N U A L R E P O R T Level 14 10 Market Street Brisbane Queensland 4000 Australia Telephone: 61 7 3109 6000 Facsimile: 61 7 3236 0522 Website: www.gwail.com.au GWA INTERNATIONAL LIMITED 2009 ANNUAL REPORT 

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