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2013
AnnuAl report
2012/13 YEAR
PERFORMANCE HIGHLIGHTS
Revenue down 6% with underlying revenue
down 9% excluding API Locksmiths
Trading earnings before interest and tax (EBIT)
from continuing operations of $66 million, down
13% on the prior period
Restructure delivered an $8 million contribution
to trading EBIT and operating cashflow in the
second half
Strong cash generated from trading operations
reduced net debt to $162 million
Fully franked final dividend of 6 cents per share with
total fully franked dividend of 12 cents for the year
CONTENTS
Five Year Financial Summary
Company Profile and Overarching Strategy
Chairman’s Review
Managing Director’s Review of Operations
Health and Safety
GWA Bathrooms & Kitchens
GWA Door & Access Systems
GWA Heating & Cooling
Board of Directors
Corporate Governance Statement
Directors’ Report
GWA Group Financial Report
Other Statutory Information
Shareholder Information and Timetable
1
2
4
6
10
12
13
14
16
18
28
43
91
92
Five year Financial summary
2008/09
$’000
2009/10
$’000
2010/11
$’000
2011/12
$’000
2012/13
$’000
revenue from continuing operations
678,344
656,809
726,367
602,128
565,365
earnings before interest, tax, depreciation,
amortisation and restructuring costs**
105,060
112,099
125,243
94,228
85,181
(%)
15.5
17.1
17.2
15.6
15.1
Depreciation and amortisation
(18,105)
(17,551)
(18,087)
(18,864)
(19,411)
earnings before interest, tax and restructuring costs**
86,955
94,548
107,156
75,364
65,770
(%)
interest (net)
12.8
14.4
14.8
12.5
11.6
(13,844)
(15,027)
(15,175)
(14,247)
(13,324)
Trading profit before tax**
73,111
79,521
91,981
61,117
52,446
(%)
Tax expense
(%)
Trading profit after tax**
restructuring costs after tax
10.8
12.1
12.7
10.2
9.3
(21,919)
(24,068)
(28,622)
(15,565)
(13,815)
30.0
51,192
(2,867)
30.3
31.1
25.5
55,453
63,359
45,552
–
–
621
26.3
38,631
(6,241)
Net profit after tax from continuing operations
48,325
55,453
63,359
46,173
32,390
loss from discontinued operations (net of income tax)
–
(6,926)
–
(6,518)
–
Net profit after tax for the period
net cash from operating activities
capital expenditure
research and development
net debt
shareholders’ equity
Other Ratios and Statistics
return on shareholders’ equity (%)
interest cover (times)
net debt / (net debt + equity) (%)
Basic earnings per share (cents)
Trading earnings per share (cents)*
Ordinary dividend per share (cents)
Franking (%)
Ordinary dividend payout ratio (%)
share price (30 June) ($)
Dividend yield (total dividend)(%)
number of employees
* excludes restructuring expenses
48,325
48,527
63,359
39,655
32,390
78,628
17,348
6,619
67,165
15,450
7,729
88,558
24,727
9,486
60,499
25,798
7,587
63,349
14,703
7,117
154,985
175,952
198,083
174,472
162,243
426,164
431,089
439,995
426,984
426,742
11.3
7.6
26.7
16.9
17.9
18.0
100
106.5
2.30
7.8
1,891
11.3
7.5
29.0
16.2
18.5
18.0
100
111.1
3.01
6.0
1,922
14.4
8.3
31.0
21.0
21.0
18.0
100
85.7
2.75
6.5
2,150
9.3
6.6
29.0
13.2
15.1
18.0
100
136.4
2.10
8.6
1,788
7.6
6.4
27.5
10.6
12.7
12.0
100
113.2
2.40
5.0
1,680
** non-iFrs financial measures – given the significance of restructure costs, the directors believe the presentation of non-iFrs financial measures is useful for the users of this document as they reflect
the underlying financial performance of the business. The non-iFrs financial disclosures included in this document exclude restructuring costs that are detailed in note 6 of the financial report.
notes: The financial year 2008/09 includes the results of both rover mowers and Wisa Beheer. These businesses were divested during the 2009/10 financial year and were disclosed as discontinued
operations in the 2009/10 year. The financial years 2008/09 through to 2010/11 includes the results of sebel Furniture and caroma north america. These businesses were divested during the 2011/12
financial year and were disclosed as discontinued operations in the 2011/12 year.
1
1
cOmPany PrOFile
GWA Group Limited (GWA) listed on the Australian Securities
Exchange in May 1993 and is Australia’s leading supplier of
building fixtures and fittings to households and commercial
premises. The Company had 1,680 employees at 30 June 2013
with manufacturing and distribution facilities located across
Australia and with branch offices in New Zealand.
GWa currently operates through three distinct business divisions including:
GWA Bathrooms & Kitchens is australia’s foremost designer, manufacturer, importer and
distributor of domestic and commercial bathroom and kitchen products. The product range
is distributed under australian brands including caroma, caroma marc newson, Dorf, Fowler,
stylus, clark, epure, radiant, irwell, Dux, ecosmart and international brands including Hansa,
KWc, schell, virtu, emcO and sanitron. in December 2012, the division was expanded to
include Dux Hot Water which is an australian manufacturer and importer of hot water systems
for residential and commercial markets.
GWA Heating & Cooling is an australian designer, manufacturer, importer and distributor of
heating and cooling systems for residential and commercial markets. The product range is
distributed under australian brands including Brivis and aPac.
GWA Door & Access Systems is a leading australian designer, manufacturer, importer and
distributor of a comprehensive range of access and security systems for use in residential
and commercial premises. The product range is distributed under australian brands including
Gainsborough, Trilock, renovator, austral lock, Gliderol, matador and international brands
including salto, Hillaldam and eco schulte. in October 2012, the division was expanded to
include aPi locksmiths which is an australian supplier of security and access control systems
and locksmithing services to major commercial enterprises.
GWa has grown significantly since listing as a result of the strong operating performance of the
core building fixtures and fittings businesses and through successful acquisitions. The company
remains committed to growing shareholder wealth through organic growth initiatives in targeted
market segments and acquisitions that add value to its core businesses by supporting expansion
into new markets or providing access to new products.
GWA GROUP LIMITED ∕ ∕ 2013 ANNUAL REPORT GWa’s
OverarcHinG
sTraTeGy
GWA’s overarching strategy is entirely consistent for the Group
and across each Division. This strategy is built around FOCUS,
REACH and LEVERAGE.
Our FOcus is to grow in our core australian building fixtures and fittings markets. in particular
we will FOcus on growth in targeted market segments where GWa can sustain long term
competitive advantage. Growth can be organic in which case our FOcus is on better servicing
our existing markets and improving our overall business efficiencies. GWa will also pursue
inorganic growth opportunities in which case our FOcus is on acquiring businesses or
distribution rights for products and services which complement GWa’s existing offer to our
target market segments.
GWa will reacH the key decision makers across our target market segments. in doing
so we will seek to influence their purchasing decisions:
• Through a clear understanding of their needs;
• Through a value proposition which meets the needs of each target market segment; and
• Through the appropriate value proposition to those aligned channel partners servicing
each target market segment.
GWa will maximise competitive advantage through leveraGe to ensure the
Group operates the most efficient structures to support our target market
segments and aligned channel partners. GWa will leveraGe the Group
wide investment in:
• Brands, innovation, systems and processes,
supply chain, transport and logistics,
business relationships, market knowledge,
sales and marketing.
GWA’s overarching strategy
of FOCUS, REACH and
LEVERAGE will drive
competitive advantage
and deliver growth.
3
3
cHairman’s revieW
2012/13 was a challenging year for the group given weak building and renovation activity, intense
import competition resulting from the high Australian dollar and low consumer confidence levels.
We commenced the year poorly with trading earnings before interest and tax (EBIT) down 41%
in the September 2012 quarter versus the same period last year. It is commendable that we were
able to finish the year with EBIT down only 13% on the prior year, and highlights the resilience of
the business in the tough market conditions and the successful implementation of the strategic
plans announced in December 2012.
Building activity levels reached
cyclical lows at the beginning
of 2012/13 and the sector has
been recovering at a modest pace
supported by low interest rates and
gradually rising house prices. at
June 2013, the moving annual total
for dwelling approvals increased
to 157,544 representing a 5% increase on the prior year. Following
significant restructuring activities to improve competitiveness and
acquisitions of complementary businesses to expand our product
and service offerings, we are well positioned to take advantage of
the expected higher market activity levels. The managing Director
will provide further comments on market activity in his review
of Operations.
With growth in the resources sector set to decline over the next few
years it is imperative that other sectors of the australian economy grow
strongly if the country is to avoid a sustained period of weak growth.
Whilst a modest recovery has commenced in the building sector, the
current level of activity does not appear sufficient to make up for the
shortfall in national economic growth. We welcome various Federal and
state Government initiatives to support dwelling construction activity.
sTraTeGy
Our strategy continues to focus on the australian and new Zealand
building fixtures and fittings sector with three core business
segments of scale, comprising Bathrooms & Kitchens, Heating &
cooling and Door & access systems. We are committed to providing
compelling customer value propositions in the sector through product
innovation, efficient manufacturing and supply chains, strong brand
management, and installation and service capabilities.
The strategic initiatives announced by the Board in December 2012
resulted in changes to the divisional structures to improve efficiency,
deliver cost savings and provide a stronger platform for growth. as part
of these changes, Dux Hot Water was combined with the Bathrooms
& Kitchens division and Gliderol Garage Doors was combined with the
Gainsborough business. These changes were implemented in 2012/13
and enabled the group to deliver improved profitability and cash flow.
OvervieW OF resulTs
The Group achieved a net profit after tax from continuing businesses
of $32.4 million in 2012/13 on sales revenue of $565.4 million. This
represents a decline of 18% and 6% respectively on the prior year
reflecting the difficult trading conditions. net profit was impacted
by the considerable restructuring activities completed during the
year following the strategic initiatives announced by the Board in
December 2012. The restructuring activities delivered a positive
contribution to trading eBiT and operating cash flow of $8 million
during the second half of the financial year.
a highlight for the year was the strong cash generated from trading
operations of $97.2 million, representing 113% of eBiTDa, due to
management’s focus on reducing working capital. The cash flow
performance provided funding for the restructuring activities and the
acquisition of aPi locksmiths in October 2012.
DiviDenDs anD caPiTal manaGemenT
The Group’s strong cash generated from trading operations in
2012/13 enabled the Directors to declare a final fully franked dividend
of 6 cents per share to be paid in October 2013 which brings the total
fully franked dividend for the year to 12 cents per share. GWa has
maintained a high dividend payout at 95% of trading profit after tax in
2012/13 whilst funding the aPi locksmiths acquisition, restructuring
activities and reducing debt levels. The Dividend reinvestment Plan
has been suspended as the company has access to sufficient funding
to meet its needs.
GWA GROUP LIMITED ∕ ∕ 2013 ANNUAL REPORT Trading EBIT
$m
Net Debt
$m
12/13
11/12
10/11
09/10
08/09
12/13
11/12
10/11
09/10
08/09
0
25
50
75
100
125
0
50
100
150
200
250
Trading EBIT from continuing operations of
$66 million reflects the difficult trading conditions
Strong cash generated from trading
operations reduced net debt to $162 million
net debt at the end of June 2013 was $162 million, down
by $12 million from June 2012 due to improved working capital
management. Debt is well covered by total bank facilities of
$275 million and we appreciate the ongoing support of our
banks including commonwealth Bank of australia, australia
and new Zealand Banking Group, HsBc Bank australia and
Westpac Banking corporation.
DiversiTy
The Board understands the significant benefits that can arise from
a diverse workforce and strengthened its focus on diversity in 2012
through the approval of a specific Diversity Policy which is available
on the company’s website. a number of measurable objectives have
been approved by the Board to promote and encourage diversity,
particularly the improvement of female representation within the
workforce. Whilst some of the diversity initiatives were delayed during
the year due to the considerable restructuring activities, the Board
is committed to the achievement of the measurable objectives.
The Board supports the recommendations of the asX corporate
Governance council on diversity and has provided the required
diversity disclosures in its corporate Governance statement. The
company lodged its Workplace Gender equality report with the
Workplace Gender equality agency in may 2013 and the report
is available on the company’s website.
eXecuTive remuneraTiOn
GWa’s remuneration policies continue to be assessed with the
independent advice of Guerdon associates who were engaged by
the Board for the 2013/14 executive remuneration review. We aim to
provide remuneration to executives that is fair and sufficient to attract
and retain a high quality management team with the experience,
knowledge, skills and judgment required for the business. in order
to achieve this objective, the key principle is that remuneration varies
between the median and third quartiles relative to companies of
comparable size and scope.
The only change in the remuneration policy in 2012/13 was the
cessation of the legacy GWa employee share Plan. changing
employee attitudes to share ownership has led to lower participation
levels in recent years and it was no longer effective as a long term
incentive (lTi). Following the wind down of the Plan, total loan
repayments of $8.3 million were received by the company from
employees during 2012/13. The Plan has been discontinued and
there will be no further share issues to employees under the Plan.
GWa executives will continue to participate in the lTi (Performance
rights) Plan approved by shareholders in 2008.
The Board attempts to balance the need to address market trends
whilst positioning GWa to retain and attract a high quality executive
team led by our experienced managing Director of the past 10 years,
mr Peter crowley. in 2011, mr crowley agreed to a freeze on his fixed
remuneration for 3 years from 2011 to 2014 and will not receive any
increase in fixed remuneration in 2013/14. For other GWa executives,
the review by Guerdon associates during the year concluded that
fixed remuneration is in line with market levels. in addition, short
term incentive payments to executives in 2012/13 subject to the
achievement of financial targets have declined in line with the
lower trading result.
carBOn emissiOns
The Board is committed to reducing energy, carbon emissions,
water and waste across the GWa Group operations. GWa reports its
group carbon emissions annually under the Federal Government’s
national Greenhouse and emissions reporting (nGer) scheme and
the reports can be accessed on GWa’s website. During 2012/13,
GWa’s carbon emissions have declined by an estimated 20% due to
a combination of factors including site rationalisations, site closures,
reduced demand and energy efficiency measures.
saFeTy
Our business is only as good as our people and we aim to provide a
safe and rewarding environment in the workplace. We are pleased
with continuing progress in safety performance resulting in an 11%
reduction in the total injury frequency rate (TiFr) in 2012/13. This
represents the eighth consecutive year of improvement and reflects
the ongoing commitment to creating an injury free work environment.
in closing, i would like to thank management and staff for their efforts
in 2012/13 and their ongoing commitment to GWa. We have the
people, businesses and strategies to take advantage of the expected
improvement in trading conditions in 2013/14 and to build a stronger
business for the future.
5
manaGinG DirecTOr’s
revieW OF OPeraTiOns
Difficult trading conditions and competitive pressures led to a 6% decline in revenue for 2012/13.
On a like for like basis sales were down by 9% offset by the contribution from API Locksmiths
which was acquired in October 2012.
chart 1 below shows that the overall
dwelling commencements for the
year increased by approximately
7% compared to 2011/12. This
growth was driven by medium and
high density units which grew 13%,
whereas detached housing increased
by 3%. The key growth states were
new south Wales and Western australia and this positive momentum
should continue through the 2013/14 year. it is clear that over time the
mix has changed between residential and multi-units and we expect
this trend to continue and increase gradually over the medium to long
term. although this is a positive indicator in the 2012/13 period the
impact for GWa Group is lagged as the majority of our sales occur
at completion which can be some 6 to 9 months later, and generally
longer for multi-unit developments.
One of the key issues through the 2012/13 year was housing
affordability driven by Government charges and regulatory costs.
virtually all the state Governments have allocated some provisioning for
building activity initiatives however these are limited given their budget
constraints. new south Wales looks to have more options available and
these were highlighted through its Building the state initiative.
The trading conditions during 2012/13 were tough and chart 2
demonstrates the trend in dwelling construction by showing the twelve
month moving annual numbers for dwelling activity since 2003. The
chart highlights that dwelling completions were very low, in line with
activity levels experienced during the Global Financial crisis in 2008/09.
The nine month sales contribution from aPi locksmiths, which was
acquired in October 2012, added 3% to overall revenue in 2012/13,
partially offsetting the decline in underlying demand for our products.
This decline has been driven by three key factors:
• decline in new dwelling and renovation activity;
• cessation of Federal Government stimulus spending and
environmental heater rebates which impacted the first quarter
of 2012/13; and
•
loss of market share in the Garage Door and Hot Water categories.
it was pleasing to see that in the last quarter of 2012/13 sales
improved slightly in our core target market segments and in some
key categories we are regaining market share.
The decline in trading profit in 2012/13 is a reflection of the loss
of sales however this was offset by cost savings arising from the
restructuring that was implemented in December 2012. approximately
2% of the 6% revenue decline for the year arose from market share
Chart 1 – Dwelling Commencements (2003 – 2013)
Starts – Thousands
Houses Multi-Units
2003/4
2004/5
2005/6
2006/7
2007/8
2008/9
2009/10
2010/11
2011/12
2012/13 Forecast
source – Hia economics Group may 2013
118.6
106.2
104.0
106.3
107.0
91.5
111.7
96.8
88.1
90.6
56.5
54.2
48.4
45.7
51.6
39.9
55.4
60.7
54.0
61.1
Total
175.1
160.3
152.4
152.0
158.6
131.4
167.1
157.5
142.1
151.7
%
Houses
% Multi-
Units
% Chg
Houses
% Chg
Multi-Units
% Chg
Total
68%
66%
68%
70%
67%
70%
67%
61%
62%
60%
32%
34%
32%
30%
33%
30%
33%
39%
38%
40%
-10%
-2%
2%
1%
-14%
22%
-13%
-9%
3%
-4%
-11%
-6%
13%
-23%
39%
10%
-11%
13%
-8%
-5%
0%
4%
-17%
27%
-6%
-10%
7%
GWA GROUP LIMITED ∕ ∕ 2013 ANNUAL REPORT Chart 2 – New Dwelling Activity (2003 – 2013)
Approvals
Commencements
Completions
Source: BIS Shrapnel
190,000
180,000
170,000
160,000
150,000
140,000
130,000
120,000
s
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A
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June 03
June 04
June 05
June 06
June 07
June 08
June 09
June 10
June 11
June 12
June 13
Dec 03
Dec 04
Dec 05
Dec 06
Dec 07
Dec 08
Dec 09
Dec 10
Dec 11
Dec 12
loss in the Garage Door and Hot Water categories. The loss of market
share in the Garage Door category is a result of poor management
and business practices. significant work has been undertaken
since December 2012 to fix these issues and we expect to see an
improvement in performance through 2013/14. in the Hot Water
category we have seen aggressive pricing in the market and as a result
we have experienced share loss in the core electric and gas storage
heaters. a thorough review of our Hot Water offer and pricing was
completed in the last quarter of 2012/13 and a new strategy targeting
our key market segments has been implemented.
The impact of restructuring delivered a positive contribution to trading
eBiT of $8 million during the year. as a result the workforce reduced
by 256 employees (14%), almost all of which were salaried staff.
corporate costs were slightly ahead of the prior period driven by
external consulting and acquisition costs.
cash generated from trading operations of $97 million represents
113% of eBiTDa. We are pleased with the strong operating cash
flow reflecting the benefits of management focus on working capital
improvement. This strong cash flow allowed the business to acquire
aPi locksmiths, implement the major restructuring and reduce net debt
levels by $12 million to $162 million. The cash flow performance also
enabled the Board to pay a fully franked dividend for the year of 12 cents
per share, representing a 95% payout ratio of trading profit after tax.
Financial Results for 2012/13
$Million
sales revenue
Trading eBiT*
eBiT margin
2012/13
2011/12
%
Change
565.4
602.1
-6%
65.8
75.4
-13%
11.6%
12.5%
Trading Profit after Tax from
continuing Operations*
38.6
45.6
-15%
Net Profit after Tax
32.4
39.7
-18%
Trading earnings per share –
continuing Operations
* excludes net restructuring expenses
12.7
15.1
-16%
sTraTeGy anD GrOWTH
We estimate that the australian building fixtures and fittings sector
generates sales of approximately $5 billion per annum. GWa has
approximately 13% market share in the sector. The australian building
fixtures and fittings sector is highly competitive however we believe
there are significant opportunities to increase our market share
through organic and inorganic growth initiatives.
GWa completed a major strategic review in late 2012 with the
assistance of leK consulting. This led to the restructuring of the key
business units to better service the market, deliver cost savings and
improve efficiency. as part of the restructuring, the Dux Hot Water
business was consolidated into the Bathrooms & Kitchens division
and the Gliderol Garage Door business was consolidated into the
Gainsborough business. The core business segments are:-
Bathrooms & Kitchens – vitreous china toilet suites, basins, plastic
cisterns, tapware, baths, kitchen sinks, laundry tubs, bathroom
accessories and water heaters.
Door & Access Systems – garage doors, door locks and levers
and supply and maintenance of commercial door systems.
Heating & Cooling – sale of ducted heating and climate control systems.
GWa’s overarching strategy is entirely consistent for the Group and
across each Division. This strategy is built around FOcus, reacH
and leveraGe.
Our FOcus is to grow in our core australian building fixtures and
fittings markets. in particular we will FOcus on growth in targeted
market segments where GWa can sustain long term competitive
advantage. Growth can be organic in which case our FOcus is
on better servicing our existing markets and improving our overall
business efficiencies. GWa will also pursue inorganic growth
opportunities in which case our FOcus is on acquiring businesses
or distribution rights for products and services which complement
GWa’s existing offer to our target market segments.
7
manaGinG DirecTOr’s
revieW OF OPeraTiOns (cOnT)
GWa will reacH the key decision makers across our target market
segments. in doing so we will seek to influence their purchasing
decisions:
• Through a clear understanding of their needs;
• Through a value proposition which meets the needs of each
target market segment; and
• and through the appropriate value proposition to those aligned
channel partners servicing each target market segment.
GWa will maximize competitive advantage through leveraGe to
ensure the Group operates the most efficient structures to support
our target market segments and aligned channel partners. GWa
will leveraGe the Group wide investment in:
• Brands, innovation, systems & processes, supply chain,
transport & logistics, business relationships, market knowledge
and sales & marketing.
GWa’s overarching strategy of FOcus, reacH and leveraGe
will drive competitive advantage and deliver growth.
The nature of GWa’s products means that there is an important
installation and service offering in a number of our businesses.
We see potential growth opportunities by extending these capabilities
to enable a larger range of products to be offered with an installation
and service option. an example of this is the recent acquisition of
aPi locksmiths which is primarily a commercial locksmithing
business. it provides GWa with options for installed offers for both
mechanical and electronic access systems and provides access to
the commercial sector where we are looking to increase sales.
Our key strategies for success in our core target market
segments include:
•
reaching and engaging key decision makers in our target market
segments through direct engagement and via digital strategies;
•
investment in innovative and sustainable products;
• efficient and low cost supply chain management to ensure
a cost competitive supply position;
• delivering superior customer service levels; and
•
improving our installation and service capabilities.
segment results are summarised below:
seGmenT PerFOrmance
sales from Bathrooms & Kitchens were adversely impacted by the
Hot Water category with revenue from our traditional Bathrooms &
Kitchens ranges (excluding the Hot Water category) down only 5%
compared to last year. sales in the Hot Water category were down
24% reflecting the cessation of the environmental rebates which
impacted the business in the first quarter and market share loss in
core electric and gas storage heating. Bathrooms & Kitchens made
important progress during the second half of the year rationalising the
product range and reviewing our customer service offering.
Heating & cooling sales were impacted by a weak victorian housing
market however the business performed well in the circumstances.
The last quarter saw strong recovery of momentum and higher sales
compared to last year.
sales by the Door & access systems segment increased due to the
inclusion of aPi locksmiths. The residential door furniture business,
which is highly leveraged to new housing completions, found
conditions difficult. in addition issues relating to poor management
and business practices were identified in the Garage Door business
which led to the loss of market share. sales in the Garage Door
category were down 14% compared to last year.
Financial cOnDiTiOn anD caPiTal manaGemenT
net debt at June 2013 reduced by $12 million from $174 million to
$162 million as a result of improved working capital management, the
sale of non-core assets and lower capital expenditure. The gearing
ratio (net debt/net debt plus equity) of 28% is within our target range
and the leverage ratio (net debt/eBiTDa) is an acceptable 1.92 times.
interest cover (eBiTDa/net interest) of 6.9 times further highlights
GWa’s strong financial metrics.
While we continue to review growth options, we also remain very
focussed on maintaining GWa’s investment grade metrics. The
business has a strong balance sheet. This ensures GWa is well
positioned to respond to acquisition opportunities as they arise.
in may 2013, the Group completed refinancing of the syndicated
banking facility and put in place a new $275 million facility. This facility
comprises a three year tranche of $200 million which expires in July
2016 and a five year tranche of $75 million which expires in July 2018.
$Million
Sales Revenue
2012/13
2011/12
% change
Trading EBIT
2012/13
2011/12
% change
Bathrooms
& Kitchens
Heating
& Cooling
Door & Access
Systems
367.5
404.7
-9%
64.5
67.8
-5%
58.8
62.5
-6%
5.2
6.5
-19%
140.9
138.6
2%
10.9
14.1
-23%
Other
(1.8)
(3.7)
(14.8)
(13.0)
Total
565.4
602.1
65.8
75.4
GWA GROUP LIMITED ∕ ∕ 2013 ANNUAL REPORT GWa has sufficient undrawn debt facilities and in-principle support
from our banks to increase facilities to fund growth opportunities if
required. as a consequence of this, the Dividend reinvestment Plan
which was reopened last year has been suspended by the Board until
further notice.
a summary of our debt position and existing facilities is provided below:
Bank
$Million
Available
Facilities
Drawn
Facilities
Maturity Profile
cBa
anZ
Westpac
HsBc
85
80
55
55
Gross debt
275
195.0
0.0
July 2016 – $200 million
July 2018 – $75 million
cash and deposits
Net debt
(32.8)
162.2
HealTH anD saFeTy
management is committed to continuous improvement in GWa’s
health and safety performance through better safety systems and
processes, extensive communication with our workforce and increased
diligence in identifying and removing safety risks across our workplace.
continuous improvement in safety performance over the past 8
years has been consolidated with a further 11% decline in the total
injury frequency rate in 2012/13. With our total injury frequency rate
reducing to 7.7, we have a consistent sense of purpose in creating
a safe work environment for our people. Despite these impressive
results, we still had 14 employees sustain lost time injuries during the
year which we will strive to reduce. Good safety is good management
and reflects both the efforts of management and the diligence of our
workforce. We remain committed to continuous safety improvements
with the objective of creating an injury free work environment.
chart 3 below highlights the continued improvement in the total injury
frequency rate in the 2012/13 year.
Chart 3 – GWA Group Total Injury Frequency Rate
30
20
10
0
2007/08
2008/09
2009/10
2010/11
2011/12
2012/13
susTainaBiliTy anD carBOn reDucTiOn
GWa has an active program to improve our impact on the environment
through the reduction of energy, carbon emissions, water and waste.
Our environmentally sustainable products are also a major source of
competitive advantage for the company.
GWa reports greenhouse gas emissions under the national
Greenhouse and energy reporting scheme and the reports are
available on the company’s website. in 2012/13 GWa’s estimated
direct carbon emissions totalled 9,700 tonnes plus 20,300 tonnes
of indirect carbon emissions through the purchase of energy.
This compares with 37,000 tonnes of total reported emissions in
2011/12. The estimated 20% reduction reflects the impact of plant
rationalisations and energy efficiency initiatives.
PeOPle
GWa’s long term success has been due to the efforts of a committed
and talented workforce. We continue to bring new thinking and
skills into the business and are committed to developing our people
to provide succession opportunities. The company recognises the
benefits that can be achieved from a diverse workforce and has
implemented policies aimed at improving workplace diversity.
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. This involves the development of core
capabilities for our personnel supported by rigorous goal setting and
performance management procedures.
GWa continues to work with the australian institute of management to
provide an in-house certificate of management program constituting
4 modules of advanced learning to better prepare our managers to
be effective in their roles. 42 managers and senior staff attended the
programme during 2012/13.
FuTure PrOsPecTs anD risKs
The outlook for 2013/14 is difficult to assess but improving house
prices and gradually rising dwelling approvals should result in higher
sales in the second half of the financial year. The business is well
positioned to take advantage of opportunities with clear initiatives
aimed at our target market segments supported by lower cost
structures and improving Group leverage. Our focus is on improving
and optimising the business whilst awaiting the recovery in market
demand for our products. Benefits from the major restructure activity
undertaken in December 2012 will continue to flow into the 2013/14
year and this will provide a lower cost base from which to leverage the
business as trading conditions improve.
There are a number of key business risks that may impact on the
achievement of the outlook for 2013/14 and future periods including:
•
•
the expected recovery in building and renovation activity does not
eventuate or is delayed and leads to continuing weak demand for
GWa’s products;
the actions implemented in 2012/13 to address the loss of market
share in the Dux and Gliderol businesses does not lead to improved
business performance and profitability; and
• unforseen disruptions impacting product supply from material
offshore suppliers leading to lower sales and loss of market share.
We will be in a better position to update the market on 2013/14 trading
performance at the annual General meeting in October 2013 following
first quarter trading and updated data on dwelling activity.
9
HealTH anD saFeTy
GWA continues to ensure that it provides a
Three key measures of safety outcomes are:
safe workplace for its employees, contractors,
visitors and customers in an efficient and
compliant manner.
Through divisional or site based health and safety advisors,
GWa promotes awareness of health and safety in a continuous
improvement environment.
The health and safety advisors meet periodically with the Group
risk manager with the collective 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 (whereby health and safety
advisors visit other internal GWa sites); and
• planning and implementing of new systems and procedures.
The Group risk manager reports twice per annum to the GWa
audit committee. The reporting includes current health and safety
performance, current improvement plans and compliance to
regulations. an audit plan, consistent with health and safety
objectives, is also presented for approval for the new financial year.
WOrK 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.
1.
2.
3.
lost Time injury Frequency rate (lTiFr) which measures lost time
(injury that results 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
injury severity rate which measures the number of hours
for a lost time injury per million hours worked.
The collective sum of mTiFr plus lTiFr results in the Total injury
Frequency rate (TiFr) for GWa.
major projects for the 2012/13 year include:
• work to integrate aPi Work Health and safety (WHs) software
systems with GWa systems. Whilst this project will continue in
2013/14, the GWa WHs software for reporting hazards, incidents
and conducting audits and key performance indicators has been
successfully deployed. recently GWa have appointed a national
WHs manager reporting to the chief executive of GWa Doors &
access systems (which includes aPi, Gliderol and Gainsborough);
• work completed to integrate caroma and Dux into GWa Bathrooms
& Kitchens under one national WHs manager and WHs
management system;
•
•
successful 2013/14 renewal application for the nsW “retro Paid
loss” (rPl) scheme which has reduced nsW workers compensation
premiums by approximately $740,000 per annum; and
the appointment (new role) of a national injury management
coordinator reporting to the Group risk manager. This has enabled
GWa to commence fully integrating and streamlining Workers
compensation and return to Work activities and procedures across
all businesses in all states. The project is expected to be completed
by October 2013.
GWA Group Total Injury Frequency Rate (TIFR)
GWA Group Lost Time Injury Frequency Rate (LTIFR)
30
20
10
0
2007/08 2008/09
2009/10
2010/11
2011/12
2012/13
8
6
4
2
0
2007/08 2008/09
2009/10
2010/11
2011/12
2012/13
GWA GROUP LIMITED ∕ ∕ 2013 ANNUAL REPORT •
in June 2013, work commenced to integrate WHs management
systems across all businesses into one consistent structure that
will adopt the nsW rPl criteria as its framework. rPl closely
aligns with the australian standard as4801 together with additional
Key Performance indicators for injury management. This project is
expected to be completed by april 2014.
at the start of the 2012/13 year GWa set a target of 13% year on
year improvement versus the 2011/12 results for TiFr. The actual
improvement in performance was 11%, which is just short of the
target. This is the 8th consecutive year that GWa has improved TiFr.
Highlights within the GWa business units include:
•
injury severity rate reducing compared to the prior year for the first
time in many years (reduction of 30% on 2011/12 result and below
that of 2010/11);
• all GWa business units except GWa Bathroom & Kitchens achieved
better than target results for TiFr. GWa Doors & access systems
(Gainsborough, Gliderol and aPi) achieved a combined TiFr of
3.85 which is an excellent result; and
• GWa absenteeism has reversed its trend of recent years with
a reduction in total absenteeism of 17% in 2012/13 compared
with the prior year.
WHs improvement objectives and projects are planned to be
met through continuation of the 2012/13 initiatives including:
• a 2013/14 TiFr target of a further 12% reduction versus the
2012/13 year;
• plans to reduce injury severity rate to 2600 through improved
return to work plans; and
•
the completion of a software based contractor management system.
GWA Group Medical Treatment Injury Frequency Rate (MTIFR)
GWA Group Injury Severity Rate (ISR)
25
20
15
10
5
0
2007/08 2008/09
2009/10
2010/11
2011/12
2012/13
5000
4000
3000
2000
1000
0
2007/08 2008/09
2009/10
2010/11
2011/12
2012/13
11
11
technology, and providing a superior level of customer service.
GWa Bathrooms & Kitchens will continue to invest in its iconic
brands to reinforce its brand values. GWa Bathrooms & Kitchens
are committed to continuous process improvement in its australian
manufacturing and supply chain operations.
%
Change
-9%
-5%
HeaD OFFice lOcaTiOn
GWA Bathrooms & Kitchens
caroma industries limited
level 1, 7-9 irvine Place
Bella vista nsW 2153
ausTralia
Dux manufacturing limited
lackey road
moss vale nsW 2577
ausTralia
Telephone: 61 2 8825 4400
Facsimile: 61 2 8825 4567
Telephone: 61 2 4868 0200
Facsimile: 61 2 4868 2014
www.gwabathroomsandkitchens.com.au
www.dux.com.au
www.ecosmart.com.au
www.hotwaterrebate.com.au
www.caroma.com.au
www.fowler.com.au
www.dorf.com.au
www.irwell.com.au
www.stylus.com.au
www.epure.com.au
www.clark.com.au
www.radiantstainless.com.au
www.starionaust.com.au
seGmenT PerFOrmance
$M
sales
Trading eBiT
eBiT %
return on Funds employed
June 13
June 12
367.5
64.5
17.6%
14.4%
404.7
67.8
16.7%
14.7%
Business DescriPTiOn
GWa Bathrooms & Kitchens is australia’s foremost designer,
manufacturer, importer and distributor of domestic and commercial
bathroom and kitchen products. Through its portfolio of well known
bathroom and kitchen brands, GWa Bathrooms & Kitchens aims to
create environmentally friendly innovative product solutions for every
australian and new Zealand bathroom and kitchen. GWa Bathrooms
& Kitchens is at the forefront of product innovation incorporating
water saving technology and is the market leader in water efficient
sanitaryware and tapware. in December 2012, GWa Bathrooms
& Kitchens was expanded to include Dux Hot Water which is an
australian manufacturer and importer of hot water systems for
residential and commercial markets.
main PrODucTs anD services
vitreous china toilet suites, urinals, basins, plastic cisterns, bathroom
accessories and fittings. acrylic and pressed steel baths and shower
trays. Tapware, showers and accessories, stainless steel sinks and
laundry tubs. 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: caroma, caroma marc newson, Dorf, Fowler, stylus,
clark, epure, radiant, irwell, Dux, ecosmart
Distributed: Hansa, KWc, schell, virtu, emcO, sanitron
OPeraTinG lOcaTiOns
australia, new Zealand, export markets
maJOr marKeTs
new residential dwellings, renovation, replacement and commercial
markets in australia, new Zealand and selected international markets.
sTraTeGic DirecTiOn
GWa Bathrooms & Kitchens 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
GWA GROUP LIMITED ∕ ∕ 2013 ANNUAL REPORT
seGmenT PerFOrmance
$M
sales
Trading eBiT
eBiT %
return on Funds employed
10.6%
June 13
June 12
140.9
10.9
7.7%
138.6
14.1
10.1%
15.9%
%
Change
2%
-23%
Business DescriPTiOn
GWa Door & access systems is a leading australian designer,
manufacturer, importer and distributor of a comprehensive range of
access and security systems for use in residential and commercial
premises. in January 2011, the division was expanded with the
acquisition of Gliderol Garage Doors which is a leading australian
manufacturer and distributor of garage doors and openers for
residential and commercial markets. The division was further
expanded in October 2012 through the acquisition of aPi locksmiths
which is a national supplier of security and access control systems
and locksmithing services to major commercial enterprises.
main PrODucTs anD services
a comprehensive range of door hardware and access systems
comprising door handles (knobs and levers), locking systems, door
closers, hinges and other door accessories. a wide range of roller
doors, sectional overhead doors, automatic operators, gate operators
and roller shutters. commercial locksmithing services for security
systems and safes, supply and installation of electronic access
control systems and associated products including ccTv, alarms
and intercoms.
maJOr BranDs
Owned: Gainsborough, Trilock, renovator, austral lock, Gliderol,
matador, aPi locksmiths
Distributed: salto, Hillaldam, eco schulte
OPeraTinG lOcaTiOns
australia, export markets
maJOr marKeTs
Domestic home builders, Diy and renovation projects, commercial
buildings and multi-dwelling developments, after sales servicing.
sTraTeGic DirecTiOn
GWa Door & access systems strategic direction encompasses the
development of new and innovative door hardware, access system
technologies and garage door products to suit domestic buildings and
commercial projects. GWa Door & access systems will continue
to focus on its key customer relationships through the supply of
market leading product innovation and design, and high levels
of customer service.
HeaD OFFice lOcaTiOn
GWA Door & Access Systems
Gainsborough Hardware
industries limited
31-33 alfred street
Blackburn vic 3130
ausTralia
aPi services and solutions
Pty limited
248 normanby road
south melbourne vic 3205
ausTralia
Telephone: 61 3 9877 1555
Facsimile: 61 3 9894 1599
Telephone: 131Key(539)
Facsimile: 61 3 9644 5887
www.gainsboroughhardware.com.au
www.ausloc.com
www.apisec.com.au
Gliderol international Pty limited
32 Jacobsen crescent
Holden Hill sa 5088
ausTralia
Telephone: 61 8 8261 9633
Facsimile: 61 8 8261 9700
www.gliderol.com.au
13
sTraTeGic DirecTiOn
GWa Heating & cooling will continue to develop its range of climate
solutions for consumers and take them to market through its
channel partners under its strong brands. much of the development
in the division will be centered around reducing energy and water
consumption to meet emerging australian regulations. GWa Heating
& cooling will continue to strengthen its key customer and channel
relationships, invest in brands and reduce costs through investment in
improved manufacturing capability and selective sourcing of products
and components.
HeaD OFFice lOcaTiOn
GWA Heating & Cooling
Brivis climate systems Pty ltd
61 malcolm road
Braeside vic 3195
ausTralia
Telephone: 61 3 9264 9555
Facsimile: 61 3 9264 9400
www.brivis.com.au
seGmenT PerFOrmance
$M
sales
Trading eBiT
eBiT %
return on Funds employed
10.9%
June 13
June 12
58.8
5.2
8.9%
62.5
6.5
10.4%
13.8%
%
Change
-6%
-19%
Business DescriPTiOn
GWa Heating & cooling is an australian designer, manufacturer
and importer of heating and cooling systems for residential and
commercial markets. all products are developed to provide
consumers with greater control and comfort in their home or work
environments. GWa Heating & cooling has developed an extensive
range of innovative environmental products to meet the changing
regulatory requirements, while assisting consumers to reduce their
energy consumption and manage comfort in the home.
main PrODucTs anD services
a wide range of products to assist consumers manage comfort and
energy use in their homes. The range includes heating and cooling
systems, including ducted gas furnaces, evaporative coolers and
inverter based refrigerated heating and cooling systems.
maJOr BranDs
Owned: Brivis, aPac
OPeraTinG lOcaTiOns
australia, overseas distributors
maJOr marKeTs
GWa Heating & cooling participates in the new home, renovation and
replacement or breakdown markets primarily for residential and light
commercial applications.
GWA GROUP LIMITED ∕ ∕ 2013 ANNUAL REPORT 15
15
BOarD OF DirecTOrs
GeOFF mcGraTH miie
chairman and non-executive Director
• expertise: manufacturing and general management
• special responsibilities: chairman of Board, chairman
of nomination committee and member of audit and
remuneration committees
Darryl mcDOnOuGH
BBus (acTy), llB (HOns), sJD, FcPa, FaicD
Deputy chairman and non-executive Director
• expertise: experienced public company director and lawyer
• special responsibilities: Deputy chairman of Board and
member of nomination committee
mr mcGrath was appointed a non-executive Director of GWa Group
limited in 2004 and was appointed chairman effective 1 July 2010.
He retired from GWa Group limited in may 2003 after 43 years
service, including the last 10 years as managing Director. in 1982
mr mcGrath was appointed managing Director of the GWa
manufacturing Group companies following the takeover of uPl
Group by the former public company, GWa limited. He retired
as chairman of campbell Brothers limited in July 2012 and is
a former director of Fletcher Building limited.
During the past three years, mr mcGrath has served as a director
of the following other listed company, and the period in which the
directorship has been held:
• campbell Brothers limited 2003 – 2012
mr mcDonough was appointed a non-executive Director of GWa
Group limited in February 2009 and was appointed Deputy chairman
in October 2009. He has over 25 years of corporate experience as a
director and lawyer. He has served as a director of a number of public
companies in the past, including Bank of Queensland limited and
super retail 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:
• super retail Group limited 2003 – 2010
PeTer crOWley Ba BecOn FaicD
managing Director
rOBerT anDersOn
non-executive Director
• Expertise: Property investment and transport logistics
mr anderson was appointed a non-executive Director of GWa
Group limited in 1992. He 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.
•
expertise: Broad manufacturing experience in australia
and overseas
2003: managing Director of GWa Group limited
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
GWA GROUP LIMITED ∕ ∕ 2013 ANNUAL REPORT Bill BarTleTT Fca, cPa, Fcma, ca(sa)
JOHn mulcaHy PHD (civil enGineerinG), Fie ausT
non-executive Director
non-executive Director
•
expertise: chartered accountant, actuarial, property,
insurance and financial services
• expertise: civil engineer and experienced public company director
• special responsibilities: member of remuneration committee
• special responsibilities: chairman of audit and remuneration
committees and member of nomination committee
mr Bartlett was appointed a non-executive Director of GWa Group
limited in 2007 and chairman of the audit committee in October
2009. He is a Fellow of the institute of chartered accountants and
was a partner at ernst & young in australia for 23 years, retiring on
30 June 2003. He is chairman of the cerebral Palsy council of
Governors and a former director and honorary treasurer of the
Bradman museum and Foundation.
mr mulcahy was appointed a non-executive Director of GWa Group
limited in november 2010. He is a Fellow of the institute of engineers
and is a non-executive Director of mirvac Group limited, mirvac
Funds management limited, coffey international limited, campbell
Brothers limited and a Guardian of the Future Fund. He is the former
managing Director and chief executive Officer of suncorp Group
limited (“suncorp”). Prior to joining suncorp, he held a number
of senior executive roles at the commonwealth Bank and lend
lease corporation.
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:
During the past three years, mr mulcahy has served as a director
of the following other listed companies, and the period in which
the directorships have been held:
• suncorp Group limited since 2003*
• reinsurance Group of america inc (nyse) since 2004*
• abacus Property Group since 2007*
*denotes current directorship
• mirvac Group limited since 2009*
• coffey international limited since 2009*
• campbell Brothers limited since 2012*
*denotes current directorship
PeTer BirTles Bsc, aca
non-executive Director
ricHarD THOrnTOn ca B cOm llB (HOns) llm
executive Director and company secretary
• expertise: chartered accountant, retail, financial and operational
•
expertise: chartered accountant, taxation and finance
• special responsibilities: member of audit committee
mr Birtles was appointed a non-executive Director of GWa Group
limited in november 2010. He is a chartered accountant and is the
current managing Director and chief executive Officer of super retail
Group limited (“super retail”). He was formerly the chief Financial
Officer of super retail. Prior to joining super retail, he held a variety
of finance, operational and information technology roles with The
Boots company in the united Kingdom and australia and worked
for coopers & lybrand.
During the past three years, mr Birtles has served as a director
of the following other listed company, and the period in which
the directorship has been held:
• super retail Group limited since 2006*
*denotes current directorship
mr Thornton was appointed an executive Director of GWa Group
limited in may 2009. He joined GWa Group 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 in 2009. He is a director
of Great Western corporation Pty ltd.
17
cOrPOraTe GOvernance sTaTemenT
FOr THe year enDeD 30 June 2013
The Board of Directors is responsible for the corporate governance
of GWa Group limited (“the company”) which is an essential part of
the role of the Board. The company’s corporate governance practices
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.
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.
The Board operates under a charter that details the functions and
responsibilities of the Board. The charter is reviewed annually
to ensure it remains consistent with the Board’s objectives and
responsibilities. refer to the company’s website for a copy of
the charter.
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 executives. The policy ensures that the executives understand
the authorities delegated by the Board and are accountable to
the Board for its compliance. annual reviews are conducted on
the appropriateness of the delegated authorities and any material
breaches are reported to the Board.
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:
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, executive Director and chief Financial Officer have formal
job descriptions and letters of appointment describing their salary
arrangements, rights and responsibilities and entitlements on
termination.
• providing input and final approval of corporate strategies and
performance objectives developed by senior management;
• approval and monitoring of financial and other reporting;
a comprehensive induction program is available to directors and
senior executives to ensure full understanding of the company, its
policies and procedures and the industry within which it operates.
• 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 the progress of major capital expenditure,
capital management, acquisitions and divestments;
• any other matters required to be dealt with by the Board from
time to time depending upon circumstances of the company; and
• other matters referred to in the Board and Board
committee charters.
Performance reviews
Performance reviews of staff including senior executives are
conducted formally on a bi-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 individual job descriptions. During the performance
review process, the performance of staff is assessed against the
business objectives and core competencies.
measurable personal financial and business improvement goals
are established during the performance review process and the
achievement of the personal goals is incorporated into the company’s
short Term incentive Plan as outlined in the remuneration report.
GWA GROUP LIMITED ∕ ∕ 2013 ANNUAL REPORT PrinciPle 2 – sTrucTure THe BOarD TO aDD value
Board meetings
The Board meets at least 9 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 business, the Board regularly
conducts Board meetings at the various business locations followed by
management presentations and site tours.
The Divisional chief executives and General managers are required to
regularly attend and present at the Board meetings on divisional and
business unit operational issues and performance. an annual group
strategy meeting is held as part of the budget approval process which
enables the Board to review corporate strategies and performance with
the executives. This ensures that the Board is effectively carrying out
its duties of providing input 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 executive Director is responsible for the completion and dispatch
of the agenda and Board papers for each meeting. The executive
Director prepares the draft minutes for each meeting, which are tabled
at the next Board meeting for review and approval. The executive
Director is accountable to the Board, through the chairman, on all
corporate governance matters.
composition of the Board
The Board presently comprises 8 directors, 6 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 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 Board should consist of a majority of independent directors;
the chairperson should be an independent 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; and
• 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 the non-executive 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 company’s non-executive
directors are independent. Therefore, the Board comprises 75%
independent directors and 25% non-independent directors (being
the managing Director and executive Director) which meets the
recommendations of the asX corporate Governance council.
19
cOrPOraTe GOvernance sTaTemenT (cOnT)
FOr THe year enDeD 30 June 2013
The following table outlines the company’s directors considered
to be independent:
Non-
Executive
Independent
Director
Role
mr Geoff mcGrath
chairman
mr Darryl mcDonough Deputy
mr Peter crowley
mr Bill Bartlett
chairman
managing
Director
non-executive
Director
yes
yes
no
yes
mr robert anderson non-executive
yes
mr John mulcahy
mr Peter Birtles
mr richard Thornton
Director
non-executive
Director
non-executive
Director
executive
Director
yes
yes
no
yes
yes
no
yes
yes
yes
yes
no
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 that arise
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) Board Succession Planning
The Board has established succession plans for the retirement of
individual Board members to ensure an appropriate balance of skills,
experience and expertise on the Board. The Board views director
renewal as an essential process to ensure optimal Board performance.
The Board is also mindful of the need to increase diversity of the
Board for future director appointments. in accordance with the
succession plans, the following director retirements and appointments
have occurred in recent years:
• appointment of mr Bill Bartlett in 2007
• retirement of mr martin Kriewaldt in 2008
• retirement of mr Jim Kennedy in 2009
• appointment of mr Darryl mcDonough in 2009
• appointment of mr richard Thornton in 2009
• retirement of mr Barry Thornton in 2010
• retirement of mr David Barry in 2010
• appointment of mr John mulcahy in 2010
• appointment of mr Peter Birtles in 2010
Further director retirements and appointments are expected in future
years to continue the Board succession planning process, whilst
ensuring an efficient and effective Board is maintained.
(ii) Legal Services provided by Clayton Utz
During the 2012/13 year clayton utz provided legal services of
$332,195 to the company as outlined in note 34 to the Financial
statements. The legal services were provided on an arm’s length basis
and covered specialty areas including employment, environment,
competition, acquisition, corporate and commercial advice. mr Darryl
mcDonough is a non-executive Director of GWa Group limited and is
also the current chief executive Partner at clayton utz. mr mcDonough
is not involved in providing any of the legal services to the company,
nor does he influence the selection of legal adviser by the company.
The company has utilised clayton utz for legal services for many
years prior to the appointment of mr mcDonough as a non-executive
Director, and the legal services have continued to the present date.
The company uses a variety of legal service providers (including
clayton utz) and selects its legal providers based on the company’s
assessment of the skills and expertise of the legal firm providing the
relevant services.
The Board is of the view that the provision of legal services by
clayton utz has no impact on the independence of mr mcDonough
who continues to be classified as 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 approval of the chairman is required, but
this will not be unreasonably withheld. Where appropriate, directors
share such advice with the other directors.
GWA GROUP LIMITED ∕ ∕ 2013 ANNUAL REPORT 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.
• consideration of the need for Board diversity and whether the
potential appointee furthers the Board’s objective of achieving
a diverse workforce in accordance with its Diversity Policy; and
•
the Board members consent to the proposed appointee.
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 majority
of independent directors;
the nomination committee should consist of a minimum
of three members; and
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 reviewed annually to ensure
it remains consistent with the Board’s objectives and responsibilities.
refer to the company’s website for a copy of the charter.
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; and
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 executive Director prepares the draft minutes for each nomination
committee meeting, which are tabled at the next nomination
committee meeting for review and approval. The draft minutes are
also included in the Board papers of the next Board meeting following
the nomination committee meeting.
selection and appointment of Directors
The nomination committee is responsible for the selection and
appointment of directors. in the circumstances where there is a
need to appoint a director, whether due to the retirement of a director,
growth of the company, or changed circumstances of the company,
certain procedures will be followed including the following:
• determination of the skills and experience appropriate for an
appointee, having regard to those of the existing directors and
other likely changes to the Board;
• upon identifying a potential appointee, consider the competency
and qualifications, independence, other directorships, time
availability, and the effect that their appointment would have on
the overall balance of the composition of the Board;
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 the Board, the Board committees
and the individual Board members to determine whether they are
functioning effectively by reference to current good practice. The
performance evaluation is conducted by the chairman of the Board
through open discussions with the Board members and detailed
questionnaires as required. any issues or improvement opportunities
identified from the performance evaluation are actioned.
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 with the code of conduct and the company’s policies
and procedures.
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 reviewed annually and
updated to ensure that it reflects current good practice and to
promote the ethical behaviour of all employees. refer to the
company’s website for a copy of the code of conduct.
share Trading Policy
The Board has approved a share Trading Policy which complies with
the asX listing rules. The policy limits the trading periods for directors
and senior executives in the company’s securities to 30 days after
each yearly/half yearly results announcement and annual General
meeting, and provided they are not in the possession of unpublished
insider information.
Outside of these trading periods, the directors, senior executives and
other ‘potential insiders’ are prohibited from trading in the company’s
securities unless ‘exceptional circumstances’ exist and prior written
approval has been obtained. ‘exceptional circumstances’ mean
severe financial hardship or other circumstances considered to be
21
cOrPOraTe GOvernance sTaTemenT (cOnT)
FOr THe year enDeD 30 June 2013
exceptional, including a court order or court enforceable undertaking
in a bona fide family settlement or some other overriding legal or
regulatory requirement to transfer the company’s securities.
The share Trading Policy requires the directors to notify the
executive Director within two business days after trading, to
enable the executive Director to lodge the required disclosures
with the australian securities exchange.
Diversity in the Workforce
The company is committed to the promotion of diversity in the
organisation through the implementation of targeted employment
policies and initiatives to achieve a diverse workforce. The Board
understands the significant benefits that can arise from increasing
the pool of talent from which the company can draw high quality
employees and the different perspectives that can be brought to the
organisation from a diverse workforce.
The company strengthened its focus on diversity in 2012 with the
Board’s approval of a specific Diversity Policy which is available on
the company’s website. in accordance with the policy, the Board
has established a number of measurable objectives to promote
and encourage increased diversity and in particular, to improve the
representation of females within the workforce. The measurable
objectives are assessed annually and performance is reported in
the corporate Governance statement in the annual report.
The measurable objectives are:
1. Increase the percentage of females employed by GWA
• ensure the recruitment process and practices continue to
comply with equal opportunity principles;
• provide recruitment training for managers ensuring a focus
on equal opportunity and avoiding ‘unconscious bias’; and
•
investigate the feasibility of implementing a graduate program
with an emphasis on encouraging women into non-traditional roles.
2. Provide and promote flexible work practices to attract and retain
female employees
• continue to promote awareness of current flexible work practices
available in the company to existing employees and potential
candidates; and
•
investigate and implement any additional flexible work
arrangements appropriate to the needs of employees with families.
3. Succession planning and high potential employee development
• ensure high potential female employees are identified as part of the
company’s succession planning process and actively developed for
career progression.
The company follows a detailed recruitment process to ensure staff
are selected on merit, irrespective of their gender. The planned
recruitment training in 2012/13 was temporarily postponed due to the
significant restructuring announced in December 2012 which resulted
in changes to the divisional structures and lower overall employee
numbers. The recruitment training will now be completed during
the year ending 30 June 2014 and will be reported in next year’s
diversity disclosures.
Based on the company’s 2013 Workplace Gender equality report,
31% of staff recruited into the organisation during the reporting
period were female. although this percentage is slightly lower than
last year, the total number of new hires during the period was down
approximately 50% on last year due to the restructuring activities.
However, it is pleasing to see that the percentage of female senior
executives has increased from the prior year reflecting the focus on
improving diversity in the organisation.
During 2013, the company commenced the investigation into the
feasibility of a graduate program. Further work will be performed
to develop the right program for the company and ensure it will
meet its objectives of attracting high quality employees with diverse
backgrounds into the organisation. There has been some delays
with this initiative due to the restructure activities and further
progress is expected during the upcoming year.
The company has continued to promote the ‘Work life Balance’
policies introduced in 2011. These policies, such as paid parental
leave and flexible work arrangements, were aimed at assisting in
attracting more females to apply for positions advertised and retaining
the current female employees. The company continues to have
a number of employees moving to flexible working arrangements,
particularly on return from parental leave. The increased percentage
of female senior executives from the prior year is encouraging and has
been supported by the promotion of the ‘Work life Balance’ policies.
as part of the company’s succession planning process, a number
of female employees have been identified as high potential. The
company has ensured that they continue to be developed through
a mix of external and internal development. The aim for these
employees is to be ready to step up to the next level when a position
becomes available and it is pleasing that the company has recently
promoted a number of females into more senior positions. Discussions
are held regularly by the corporate and divisional executive with
the aim of identifying potential opportunities for the transfer of high
potential staff across the divisions.
as outlined in the company’s 2013 Workplace Gender equality
report, the overall workforce consists of 27% female and 73% male.
This is a slight fall in the percentage of female employees from the
prior year. However, as outlined above the company has undertaken
significant restructuring during the year resulting in lower overall
employee numbers. The company also acquired a new business,
aPi locksmiths, in October 2012 which employs approximately
150 staff consisting of 11% female and 89% male.
GWA GROUP LIMITED ∕ ∕ 2013 ANNUAL REPORT The following table outlines the company’s workplace profile
at 31 march 2013:
Title
Board
senior executives
senior managers
managers
Team leader/supervisor
Professional
skilled Workers
admin staff
Production/Distribution staff
sales staff
service staff
apprentice
Total
% Female
0
14%
14%
11%
32%
20%
4%
73%
20%
20%
66%
0
27%
% Male
100%
86%
86%
89%
69%
80%
96%
27%
80%
80%
34%
100%
73%
On 30 may 2013, the company lodged its 2013 Workplace Gender
equality report with the Workplace Gender equality agency in
accordance with the Workplace Gender Equality Act 2012. The
company notified its employees and employee organisations that
it lodged its report and advised how it may be accessed. The
company also allowed employees and employee organisations to
make comments on the report. The report is available on the
company’s website under Workplace Gender equality reporting.
PrinciPle 4 – saFeGuarD inTeGriTy in Financial
rePOrTinG
audit committee
The audit committee meets as required and at least four times
throughout the year. For membership and attendance details of the
audit committee, refer to the Directors’ report.
The composition of the audit committee is based on the
following principles:
•
•
•
•
•
the audit committee should consist of non-executive directors only;
The audit committee should consist of a majority of independent
directors;
the chairperson of the audit committee must be an independent
director and not chairperson of the Board;
the audit committee should consist of at least three members; and
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 reviewed annually to ensure
it remains consistent with the Board’s objectives and responsibilities.
refer to the company’s website for a copy of the charter. 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.
The external auditor, managing Director, chief Financial Officer,
executive Director, Group commercial manager, Group risk 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
members. at the audit committee meetings, the members will meet
with the external auditor without management present.
The main responsibilities of the audit committee include:
•
review of financial statements and external financial reporting;
• assess the management processes supporting external reporting;
• assess whether the external reporting is adequate to meet the
•
•
•
•
information needs for shareholders;
recommendations on the appointment and removal of the
external auditor;
review and monitor the performance and independence of
the external audit 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; and
•
reporting to the Board on the committee’s role and responsibilities
covering all the functions in its charter
The executive Director 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.
external auditor independence
The Board recognises the importance of a truly independent external
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.
The audit committee reviews the independence of the external audit
function annually and makes a recommendation to the Board on
continuing independence. as part of this review, the audit committee
examines the non-audit roles performed by the external auditor to
satisfy itself that the auditor’s independence is not compromised.
Whilst the value of non-audit services could, in extreme cases,
23
cOrPOraTe GOvernance sTaTemenT (cOnT)
FOr THe year enDeD 30 June 2013
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.
as a further measure to ensure the independence of the audit function,
the chairman of the audit committee must pre-approve all audit
services provided by the external auditor and non-audit services with
a value of greater than $5,000.
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:
•
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.
in considering the KPmG independence declaration and the
recommendation of the audit committee, the Board is satisfied
with the continuing 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. in accordance with the plan,
effective from 1 July 2010, mr Greg Boydell was appointed the lead
engagement Partner following the rotation of mr mark epper.
PrinciPle 5 – maKe Timely anD BalanceD DisclOsure
The company is committed to ensuring the timely disclosure of
material price sensitive 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 executive Director 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 are published on
the company’s website immediately after release.
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 the
annual 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.gwagroup.com.au. all company announcements
and information released to the market (including half and full
year results) are located on the website and may be accessed by
shareholders. There is a corporate Governance section on the
website which outlines the company’s governance practices and
policies and other information including details of the company’s
sustainability and environmental performance;
the Board is committed to the use of electronic communications
with shareholders to reduce the environmental impact and costs.
shareholders can elect to receive company communications
electronically, although at present 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 implemented
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; and
the external auditor attends the annual General meeting and is
available to answer questions from shareholders about the conduct
of the external audit and the preparation and content of the
independent auditor’s report. shareholders attending the annual
General meeting are made aware they can ask questions of the
external auditor concerning the conduct of the audit.
•
•
•
GWA GROUP LIMITED ∕ ∕ 2013 ANNUAL REPORT 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 controls;
• 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 half yearly
by the erc. The major business risks are reported to the audit
committee at the may and november 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 and prepares a
monthly commercial risk report for the Board. 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 may and november audit committee
meetings to present the Operational risk report;
• a co-sourced internal audit structure under the management of
Grant Thornton. The internal audit activities are carried out by
a combination of internal and appropriately qualified external
resources based on an audit committee approved program of
work. such activities link to the company’s risk management
practices by ensuring risks are being adequately identified and
managed through the effective and efficient operation of control
procedures. The internal audit function is independent of the
external audit function; and
• external audit activities undertaken by the external auditor, KPmG,
to review internal controls as part of the year end audit procedures.
internal control weaknesses are identified by the external auditor
and communicated to management to address through a formal
reporting process. The actions taken by management are reviewed
by the chief Financial Officer as part of the stewardship review
process for the half and full year accounts.
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 executives and senior management and
has enhanced the identification, reporting and monitoring of actions in
this important area in order to support management’s objectives.
risk management is embedded in the company’s policies and
procedures which 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 majority
of independent directors;
the remuneration committee should consist of a minimum
of three members; and
the chairperson of the remuneration committee should be
an independent director.
25
cOrPOraTe GOvernance sTaTemenT (cOnT)
FOr THe year enDeD 30 June 2013
The remuneration committee operates under a charter that details
the committee’s role and responsibilities, composition, structure and
membership requirements. The charter is reviewed annually to ensure
it remains consistent with the Board’s objectives and responsibilities.
refer to the company’s website for a copy of the charter.
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; and
reporting to the Board on the committee’s role and responsibilities
covering all the functions in its charter.
in performing its responsibilities, the remuneration committee
receives appropriate advice from independent external advisers.
During the year, the remuneration committee engaged the services
of Guerdon associates to provide market benchmarking data to assist
with the 2013/14 executive remuneration review.
The executive Director 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
market benchmarking data and the linking of the executives’
emoluments to the company’s financial and operating performance
in order 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 executive incentive schemes. There are no director retirement
benefits other than statutory superannuation.
The remuneration committee is responsible for reviewing and
determining the remuneration and incentive arrangements for
the executives. The remuneration committee obtains market
benchmarking data from an independent external adviser 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.
GWA GROUP LIMITED ∕ ∕ 2013 ANNUAL REPORT 27
27
DirecTOrs’ rePOrT
as aT 30 June 2013
Your directors present their report on the
consolidated entity of GWA Group Limited
(“the Company”) and the entities it controlled
during the financial year ended 30 June 2013.
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.
G J mcGrath, chairman and non-executive Director
D D mcDonough, Deputy chairman and non-executive Director
Director
G J mcGrath
D D mcDonough
P c crowley*
r m anderson
W J Bartlett
J F mulcahy
P a Birtles
r J Thornton*
Total**
Ordinary Shares
150,000
107,905
330,000
8,418,442
33,194
45,000
15,000
43,694
9,143,235
P c crowley, managing Director
r m anderson, non-executive Director
W J Bartlett, non-executive Director
J F mulcahy, non-executive Director
P a Birtles, non-executive Director
r J Thornton, executive Director
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 2012/13 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 Group
limited in 2003. mr Thornton continued in his role as company
secretary following his appointment as executive Director in
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 shown in the following table.
* The executive directors, mr P c crowley and mr r J Thornton, are holders
of Performance rights under the GWa Group limited long Term incentive
Plan. For details of the Performance rights held, please refer to the
remuneration report.
** note 34 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 19,129,596 shares
(last year 19,624,906 shares).
cOrPOraTe sTrucTure
GWa Group limited is a company limited by shares that is
incorporated and domiciled in australia. GWa Group limited has
prepared a consolidated Financial report incorporating the entities
that it controlled during the financial year ended 30 June 2013, 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, manufacture, import and marketing of
building fixtures and fittings to households and commercial premises
and the distribution of these various products through a range
of distribution channels in australia, new Zealand and selected
international markets.
The company acquired aPi services and solutions Pty ltd (aPi
locksmiths) on 2 October 2012. aPi locksmiths is an australian
supplier of safes, locks, alarms and locksmithing services to major
commercial enterprises. There have been no other significant changes
in the nature of the activities of the consolidated entity during the year.
GWA GROUP LIMITED ∕ ∕ 2013 ANNUAL REPORT emPlOyees
The consolidated entity employed 1,680 employees as at
30 June 2013 (last year 1,788 employees).
The consolidated entity recognises the productivity benefits to be
gained from investing in its employees to improve motivation and
individual skills. The consolidated entity remains committed to
ensuring that staff are provided access to appropriate training and
development programs.
The consolidated entity has implemented employment policies
aimed at encouraging diversity in the workforce to attract and
retain the best people, including a stronger representation of women.
all companies in the consolidated entity are active equal opportunity
employers. The company’s latest Workplace Gender equality report
lodged with the Workplace Gender equality agency is available on
the company’s website.
OPeraTinG anD Financial revieW
The Operating and Financial review for the consolidated entity during
the financial year ended 30 June 2013 is provided in the managing
Director’s review of Operations, and forms part of this Directors’ report.
seGmenT PerFOrmance
The segment performance of the company for the financial year ended
30 June 2013 is outlined in the table at the bottom of this page.
sTaTe OF aFFairs
changes in the state of affairs of the consolidated entity during the
financial year resulted from the pursuit of acquisition opportunities
to expand the core building fixtures and fittings business to provide
access to new markets and product extensions. Details of the changes
are as follows:
• on 2 October 2012, the consolidated entity purchased the
shares of aPi locksmiths for $12.4 million. aPi locksmiths is
an australian supplier of safes, locks, alarms and locksmithing
services to major commercial enterprises. aPi locksmiths has
been included in the GWa Door & access systems division
to further strengthen the consolidated entity’s market offer in
residential and commercial access systems and provide a service
capability to complement its product offerings.
in the opinion of the directors, there were no other significant changes
in the state of affairs of the consolidated entity during the financial
year, other than disclosed in the Directors’ report or 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:
Declared and paid during 2012/13 financial year
earninGs Per sHare
Earnings Per Share
Basic earnings per share
Basic earnings per share –
continuing operations
2012/13
cents
2011/12
cents
10.6
10.6
13.2
15.3
Dividend
Final 2011/12
Ordinary
interim 2012/13
Ordinary
Cents per
share
Total
Amount
$’000
8.5
25,670
6.0
18,283
Franked
Date of
Payment
Fully
Franked
4 October
2012
Fully
Franked
4 april
2013
Franked dividends declared and paid during the year were franked at
the corporate tax rate of 30%.
Business Segment
Sales Revenue
Trading EBIT
2012/13
$’000
2011/12
$’000
%
change
2012/13
$’000
2011/12
$’000
Bathrooms & Kitchens
Heating & cooling
Door & access systems
Other
Total
367.5
58.8
140.9
(1.8)
565.4
404.7
62.5
138.6
(3.7)
602.1
-9%
-6%
2%
64.5
5.2
10.9
(14.8)
65.8
67.8
6.5
14.1
(13.0)
75.4
%
change
-5%
-19%
-23%
29
DirecTOrs’ rePOrT (cOnT)
as aT 30 June 2013
Declared after end of the 2012/13 financial year
after balance date the following dividend was approved by the
directors. The dividend has not been provided and there are no
income tax consequences.
Dividend
Final 2012/13
Ordinary
Cents per
share
Total
Amount
$’000
6.0
18,392
Franked
Date of
Payment
Fully
Franked
4 October
2013
The financial effect of the dividend has not been brought to account in
the Financial statements for the year ended 30 June 2013 and will be
recognised in subsequent Financial reports.
The record date for the final dividend is 9 september 2013 and the
dividend payment date is 4 October 2013. The Dividend reinvestment
Plan was suspended by the Board in august 2013 and will not be
offered to shareholders for the final dividend.
siGniFicanT evenTs aFTer Balance DaTe
On 21 august 2013, the directors declared a final ordinary
dividend of 6.0 cents per share in respect of the financial year
ended 30 June 2013. The dividend will be fully franked at the
30% corporate tax rate. The total amount of the dividend is
$18.392 million (last year $25.670 million). in accordance with
accounting standards, the dividend has not been provided for
in the Financial statements for the year ended 30 June 2013.
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 consolidated
entity, the results of those operations, or the state of affairs of the
consolidated entity.
liKely DevelOPmenTs anD eXPecTeD resulTs
likely developments and expected results of the operations of the
consolidated entity are provided in the managing Director’s review
of Operations.
in the next financial year, the consolidated entity 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 consolidated entity generates
the best possible returns from the businesses.
Further information on likely developments and expected results of
the operations of the consolidated entity have not been included in
this report because the directors believe it would be likely to result
in unreasonable prejudice to the consolidated entity.
envirOnmenTal reGulaTiOn anD PerFOrmance
environmental licenses
The consolidated entity holds licenses 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 licenses 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 consolidated entity’s compliance with
license conditions is made by external advisers.
The consolidated entity, in conjunction with external advisers, 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 license conditions. The
directors are not aware of any breaches of the consolidated entity’s
license conditions during the financial year ended 30 June 2013.
environmental remediation
in previous financial years, the consolidated entity investigated and
reported two environmental contamination issues at factory sites at
revesby new south Wales and eagle Farm Queensland. The revesby
site was previously leased and occupied by mcilwraith-Davey Pty ltd,
a wholly owned subsidiary of the ultimate parent, GWa Group limited.
The site was exited on the lease expiry date of 30 april 2013. The
eagle Farm site was previously occupied by corille limited (formerly
rover mowers limited) and was exited in a prior financial year
following the sale of the rover mowers business.
The remediation activities at the revesby site were substantially
completed at 30 June 2013. The final environmental auditor’s
report was submitted to the new south Wales Office of environment
and Heritage (OeH) in July 2012. in august 2012, OeH advised
the company that the site no longer needed to be regulated under
the new south Wales contaminated land management act. Post
remediation groundwater testing has continued during the 2012/13
financial year. The company expects to finalise all OeH remediation
requirements at the revesby site after the final post remediation
groundwater testing report is validated which should occur during
the 2013/14 financial year.
The remediation activities at the eagle Farm site were completed
during the 2011/12 financial year. The final environmental auditor’s
report has been submitted to the Queensland Department of
environment and Heritage Protection (DeHP). The company received
notification from the DeHP in april 2013 that the site management
Plan has been approved.
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
GWA GROUP LIMITED ∕ ∕ 2013 ANNUAL REPORT 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.
Both the nomination committee and the remuneration committee
have the authority to engage external professional advisers without
seeking approval of the Board or management.
remuneraTiOn rePOrT – auDiTeD
The remuneration report provides information about the
remuneration arrangements for key management personnel
(KmP), which includes non-executive directors and the most senior
group executives, for the year ended 30 June 2013. reference to
‘executives’ in this report means KmP executives.
The report covers the following matters:
1. board role in setting remuneration strategy and principles;
2. relationship between remuneration policy and company
performance;
3. description of non-executive director remuneration;
4. description of executive remuneration;
5. details of director and executive remuneration;
6. key terms of employment contracts; and
7. legacy equity based remuneration plan.
1. BOarD rOle in seTTinG remuneraTiOn
sTraTeGy anD PrinciPles
GWa’s strategy is to provide remuneration that is fair and sufficient
to attract and retain management and directors with the experience,
knowledge, skills and judgment required for the consolidated
entity’s success.
The key principle is that remuneration varies between the median
and third quartiles (or higher if warranted by superior performance)
relative to companies of comparable size and scope to GWa.
The Board engages with shareholders, management and other
stakeholders to continuously refine and improve executive and director
remuneration polices and practices. The nomination committee is
responsible for determining the remuneration arrangements for the
non-executive directors, with the annual maximum aggregate amount
approved by shareholders. The remuneration committee deals with
remuneration matters for executives.
During the reporting period, the remuneration committee obtained
advice from Guerdon associates for the 2013/14 executive
remuneration review. Guerdon associates does not provide other
services to management and is considered to be independent.
consulting fees of $42,993 were paid to Guerdon associates for their
services during 2012/13. in response to feedback from shareholders
and advice from Guerdon associates a number of important changes
were implemented to the remuneration structure in 2011/12 which
are consistent with GWa’s remuneration strategy. These changes are
outlined in section 1.1.
1.1 executive remuneration strategy – 2011/12 changes
as a result of shareholder feedback on its remuneration practices,
GWa’s executive remuneration structure was changed with effect from
the start of the 2011/12 financial year.
The remuneration committee aims to ensure that the mix of fixed
and variable remuneration for executives is appropriate for the
cyclical, mature, competitive and lower growth industries in which
GWa operates, having regard to:
•
•
the need to protect the market leading positions of established
products against large global competitors in order to maintain
competitiveness; and
the importance of developing growth opportunities whilst
maintaining stability of earnings and a high operating cash flow
to fund the fully franked dividend payments to shareholders.
The remuneration committee acknowledges that this strategy has
generally resulted in the approval of a higher proportion of fixed
remuneration and a lower proportion of variable remuneration for
some executives compared to peer companies.
Key concerns raised by shareholders and the changes implemented
to GWa’s remuneration structure in the 2011/12 financial year are
summarised in the table below.
Shareholder Concern
GWA Board Response
Fixed remuneration for managing Director
and some executives is above third quartile
measured against peer companies
long term incentives are too high
long term incentives are subject to “cliff”
vesting with low targets
incentives could encourage excessive risk taking
managing Director’s fixed remuneration will be frozen for three years from 1 July 2011
to 30 June 2014.
reduce long term incentives with more emphasis on short term incentives with part
deferred subject to further testing and potential clawback.
remove “cliff” reward vesting that may encourage excessive risk taking as a performance
threshold is approached. The long Term incentive plan has graduated vesting scales to
more closely align reward with performance.
Performance targets have been increased for reasonably achievable levels and stretch
targets applied for full vesting.
shift some of the incentive from longer term to shorter term requirements for growth
with payment of deferred amounts subject to further testing and potential clawback if
performance is unsustainable.
31
DirecTOrs’ rePOrT (cOnT)
as aT 30 June 2013
1.2 managing Director’s remuneration
The managing Director’s fixed remuneration has been established over
the past 10 years of service to shareholders where he has consistently
delivered value and positioned the consolidated entity for sustainable
performance. The managing Director has been instrumental in the
restructuring of the GWa businesses over recent years to compete in
the cyclical australian building industry with the high australian dollar
increasing import competition in its primary markets.
During that time, the company has successfully executed its growth
strategies through the divestment of its non-core businesses and
surplus properties, and through strategic acquisitions to provide
options for growth and expand its core australian building fixtures
and fittings business. The strong financial position has enabled the
company to maintain a high dividend pay-out ratio and fund growth
opportunities as they arise.
During the 10 years of service, the managing Director has received
only modest incentive payments due to the low activity levels in the
building sector during that period.
The Board believes the above changes to the 2011/12 remuneration
structure represented an appropriate balance between addressing
the issues raised by shareholders and maintaining a competitive
compensation package for key executives.
2. relaTiOnsHiP BeTWeen remuneraTiOn POlicy
anD cOmPany PerFOrmance
remuneration is linked to performance by:
• applying challenging financial and non-financial measures to
assess performance; and
• ensuring that these measures focus management on operational
and strategic business objectives that create shareholder value.
GWa measures performance on the following key corporate measures:
• earnings per share (ePs) growth;
•
total shareholder return (Tsr) relative to companies with similar
scope, operations, customers or products; and
• economic Profit, defined as the pre tax profit after deducting the
cost of capital for funds used.
remuneration for all executives varies with performance on these
key measures together with achievement of key personal goals which
underpin delivery of these financial outcomes, and are linked to the
consolidated entity’s performance review process.
The graph at the bottom of the page shows the company’s relative
performance over a rolling 3 year period to 30 June 2013 compared
to the peer group companies used for the 2013 grant of Performance
rights. The companies comprise reece australia limited, Brickworks
limited, csr limited, Goodman Fielder limited, super retail Group
limited, Premier investments limited, Breville Group limited, GuD
Holdings limited, Hills industries limited, Bradken limited, Dulux
Group limited, Pacific Brands limited, adelaide Brighton limited
and ansell limited.
The following is a summary of key shareholder wealth statistics for the
company over the last five years:
Financial
Year
2008/09
2009/10**
2010/11
2011/12**
2012/13
Trading
EBIT*
($m)
Trading
EPS*
(cents)
Total
DPS
(cents)
Share
Price
($)
86.4
94.5
99.9
75.4
65.8
17.9
18.5
19.6
15.1
12.7
18.0
18.0
18.0
18.0
12.0
2.30
3.01
2.75
2.10
2.40
*excludes restructuring expenses **excludes discontinued operations
3 Year Rolling TSR^
GWA 3 Year Rolling TSR
Peer Group 3 Year Rolling TSR 50th Percentile
Source: Guerdon Associates
^ Assuming 36 months in each rolling period
100.00%
80.00%
60.00%
40.00%
20.00%
0.00%
-20.00%
-40.00%
June 10
Oct 10
Feb 11
June 11
Oct 11
Feb 12
June 12
Oct 12
Feb 13
June 13
Aug 10
Dec 10
Apr 11
Aug 11
Dec 11
Apr 12
Aug 12
Dec 12
Apr 13
GWA GROUP LIMITED ∕ ∕ 2013 ANNUAL REPORT The remuneration and incentive framework which has been put in
place by the Board has ensured that executives are focused on both
sustaining short term operating performance with moderate long term
strategic growth. This has contributed to the company maintaining the
shareholder returns outlined in the table above despite the low levels of
building activity in recent years. This includes a total of 84 cents in fully
franked dividends paid to shareholders in the last five financial years.
The decline in the company’s profitability performance in 2012/13
has been primarily driven by the continuation of the cyclical decline
in domestic dwelling construction and weak consumer confidence
impacting renovation activity. import competition has increased with
the high australian dollar which has led to further restructuring in the
past year.
The remuneration and incentive framework has allowed the company
to respond to the downturn. sTi payments to executives related
to economic Profit targets are lower in 2012/13. lTi rewards to
executives related to earnings per share growth have failed to meet
targets to date. However, sTi payments related to performance
improvement and restructuring in the downturn have encouraged
management to respond quickly and make long term decisions to
maintain competitiveness and profitability.
an assessment of the managing Director’s key performance goals
and financial targets subject to sTi incentive payments for 2012/13
is provided in the following table:
2012/13 Goals
Results
Assessment
achieve leading safety
performance to work towards
an injury free workplace
an 11% improvement in the total injury frequency rate (TiFr) in 2012/13 has continued
the group’s strong safety performance over the past 8 years. Whilst the TiFr target of
7.5 for 2012/13 was not achieved, the actual result of 7.7 still represents a significantly
improved outcome and demonstrates the commitment to an injury free workplace.
improved working capital
management by lowering
inventory levels
Deliver the strategic
repositioning of the group
and lead the restructuring
execute an acquisition to
grow the core building
fixtures and fittings business
Develop succession plans
for key company and divisional
executive roles
Demonstrate progress
with achieving synergies
with the new acquisitions
Financial targets
Group inventory levels have reduced by 12% in 2012/13, delivering strong operating
cash flow. The improved outcome has been driven by management focus, stock ordering
discipline and range rationalisation initiatives to simplify the business.
The strategic plans for the Bathrooms & Kitchens and Door & access systems divisions
were approved by the Board in December 2012 as part of the strategic re-positioning of
the business to better service the market, deliver cost savings and improve efficiency.
The plans have been successfully implemented during 2012/13 resulting in changed
divisional structures (ie, Dux combined with Bathrooms & Kitchens and Gliderol combined
with Gainsborough) delivering a positive contribution to eBiT and operating cash flow of
$8 million in 2012/13 with full year cost savings expected in 2013/14.
Whilst the group was focused on implementing the strategic plans approved by the
Board in December 2012, aPi locksmiths was acquired in October 2012 which further
strengthened the company’s market offer in residential and commercial access systems
and provides a service capability to complement its product offerings. This followed the
termination of the scheme implementation agreement with Q Technology Group ltd,
the owner of aPi locksmiths, in July 2012.
The significant restructuring occurring during 2012/13 and consequential changes to
divisional structures and executive roles meant that this objective was not progressed.
This task will be prioritised in 2013/14 to ensure succession plans are in place for the key
executive roles under the changed divisional structures including recruitment for vacant
management positions and the development of talent within the business.
The achievement of synergies has been slower than expected and focus is continuing
on leveraging the group’s capabilities to derive synergies from the acquisitions. Gliderol
was consolidated with Gainsborough during 2012/13 which should provide more scope
for synergies as a combined business. Brivis now operates as a standalone business
unit following the consolidation of Dux with Bathrooms & Kitchens during 2012/13.
synergy opportunities exist for group shared services and group marketing opportunities
with home builders.
For the 2012/13 year the company’s lower profitability performance has meant the
sTi financial targets at both the divisional and corporate level have not been achieved,
except for the Brivis business unit.
= Fully achieved
= Partially achieved
= not achieved
33
DirecTOrs’ rePOrT (cOnT)
as aT 30 June 2013
3. DescriPTiOn OF nOn-eXecuTive DirecTOr
remuneraTiOn
There has been no change to the basis of non-executive director
fees since the prior reporting period.
Fees for non-executive directors are fixed and are not linked to
the financial performance of the consolidated entity. The Board
believes this is necessary for non-executive directors to maintain
their independence.
at the 2004 annual General meeting, shareholders approved non-
executive director fees up to an annual maximum aggregate amount
of $1.09 million (including statutory superannuation). The actual fees
paid to the non-executive directors are outlined in the remuneration
Tables (see section 5.1).
non-executive director remuneration consists of base fees and
statutory superannuation, plus an additional fee for each Board
committee on which a director sits. The payment of committee fees
recognises the additional time commitment required by directors who
serve on one or more committees. non-executive directors are not
able to participate in the executive incentive schemes.
The nomination committee obtains market benchmarking data
from an external remuneration adviser to ensure that the level and
allocation of non-executive director remuneration is market based and
fairly represents the responsibilities and time spent by the directors
on company matters. The benchmarking survey from Guerdon
associates in 2011 sampled the same companies used for executive
remuneration benchmarking (see section 4.2) and found the fees
received by most non-executive directors were positioned at about the
60th percentile.
retirement benefits are not available for non-executive directors of the
company, other than statutory superannuation.
4. DescriPTiOn OF eXecuTive remuneraTiOn
4.1 executive remuneration structure
executive remuneration has a fixed component and a component that
varies with performance.
The variable component ensures that total pay varies with
performance. The short term incentive (sTi) provides rewards for
performance over a 1 year period. The long term incentive (lTi)
provides rewards for performance over a 3 year period.
The maximum total remuneration that can be provided to an executive
is capped, with maximum incentive payments expressed as a
percentage of total fixed remuneration. Total fixed remuneration for the
purposes of the incentives includes superannuation and non-monetary
benefits. The sTi and lTi maximum percentages are less than most
market peers given the emphasis on stability of earnings, cash flow
and dividends and the relatively high fixed pay for some executives.
The 2011/12 changes to the remuneration structure implemented
for all executives, including the managing Director, resulted in a shift
in incentives from longer term to shorter term requirements to focus
on responding to the short term challenges posed by cyclical factors,
sustain competitiveness, deliver value and growth, and maintain cash
flows for dividends. However, to ensure sustainability or performance
over time, there is a requirement that 50% of the financial component
of the sTi be deferred and subject to further testing and potential
clawback with payment at the discretion of the Board at the time of
signing the following year’s annual audited Financial statements.
The further testing involves the Board verifying the integrity of the
achievement of the sTi financial targets.
interest at market rates will be earned by the executives on the
deferred component.
4.1.1 Managing Director remuneration structure
The 2012/13 incentives structure for the managing Director is
provided in the table below:
Maximum
STI as % of
fixed remuneration
LTI % of fixed
remuneration
(grant date
fair value)
Total performance
pay as
% of fixed
remuneration
80
40
120
Managing
Director
2012/13
The 2012/13 sTi for the managing Director is provided in the table
below:
Reasonably
Achievable
– Personal
Goals as
% of fixed
remuneration
Reasonably
Achievable
– Financial
Targets as
% of fixed
remuneration
Total
Reasonably
Achievable
as % of fixed
remuneration
Stretch –
Financial
Targets as
% of fixed
remuneration
Maximum
STI as
% of fixed
remuneration
Managing
Director
2012/13
20
30
50
30
80
The 2012/13 total performance pay outcomes for the managing
Director as reflected in the remuneration Tables is provided in the
table below.
Achievement of
STI and LTI
as % of fixed
remuneration
Forfeiture of
STI and LTI as
% of fixed
remuneration
Total performance
pay as
% of fixed
remuneration
11
30
41
69
30
99
80
60
140
Managing
Director
sTi
lTi*
Total
* This relates to the lTi plan prior to the changes implemented to the remuneration
structure in 2011/12 as outlined in section 1.1 above. Previously, the managing
Director was eligible to receive Performance rights under the lTi plan to the value of
60% of his fixed remuneration. This was reduced to 40% of his fixed remuneration
as part of the 2011/12 changes, together with graduated vesting scales and higher
performance hurdles.
4.1.2 Other Executives remuneration structure
The 2012/13 incentives structure for other executives is provided in the
table below:
Maximum
STI % of
fixed remuneration
LTI % of fixed
remuneration
(grant date fair
value)
Total performance
pay as
% of fixed
remuneration
50
30
80
Other
Executives
2012/13
GWA GROUP LIMITED ∕ ∕ 2013 ANNUAL REPORT The 2012/13 sTi for the other executives is provided in the table below:
Reasonably
Achievable
– Personal
Goals as
% of fixed
remuneration
Reasonably
Achievable
– Financial
Targets as
% of fixed
remuneration
Total
Reasonably
Achievable
as % of fixed
remuneration
Stretch –
Financial
Targets as
% of fixed
remuneration
Maximum
STI as
% of fixed
remuneration
Other
Executives
2012/13
20
20
40
10
50
4.2 Fixed remuneration
Fixed remuneration is the sum of salary and the direct cost of
providing employee benefits, including superannuation, motor
vehicles, car parking and fringe benefits tax.
The level of fixed remuneration is set:
•
•
•
to retain proven performers with difficult to source experience in
manufacturing and global supply chain management;
to attract external recruits with depth and breadth of expertise
usually acquired while working with larger companies; and
in recognition that the primary focus in recent years has been
on conserving market leadership, cash flow and dividends
during the downturn in the building cycle where the opportunities
for outperformance and subsequent incentive payments are
more limited.
The Board targets the setting of fixed remuneration for executives
between the median and third quartiles (or higher if warranted by
superior performance) relative to companies of comparable size and
scope to GWa.
Based on an independent survey by Guerdon associates for the
2013/14 executive remuneration review, the fixed remuneration for
most executive positions at GWa is at or above the 50th percentile for
companies of comparable revenues. However, the Guerdon associates
survey concluded that compared to the prior year, fixed remuneration
for most GWa executives is relatively lower in positioning against
comparator companies.
The 23 listed companies included in the survey provided reliable
and robust statistical remuneration benchmarking and shared
some common attributes with GWa, but few direct competitors and
good position matches exist for precise remuneration positioning.
Judgment was therefore exercised by the remuneration committee
in determining appropriate remuneration levels, having regard to the
background and experience of the individuals.
While market levels of remuneration are monitored on a regular basis,
there is no contractual requirement or expectation that pay will be
adjusted each year. Where these levels are above the 75th percentile,
fixed remuneration will either be frozen or increases will be below
market levels. consistent with this approach, the managing Director
agreed in 2011 to a freeze on his fixed remuneration for 3 years to
30 June 2014.
4.3 short-term incentive (‘sTi’)
4.3.1 STI overview
The sTi plan provides for an annual payment that varies
with performance measured over the company’s financial year
to 30 June 2013. The sTi is aligned to shareholder interests as
executives will only become entitled to the majority of payments
if profitability improves (allowing for the building cycle), with maximum
incentive payments above the reasonably achievable level linked directly
to shareholder wealth creation. as noted in section 4.1, the maximum
sTi that can be earned is capped to minimise excessive risk taking.
The sTi payment is made in cash after finalisation of the annual
audited Financial statements. as outlined in the remuneration Tables,
50% of the financial target component of the sTi has been deferred
for the executives that achieved their sTi financial targets for 2012/13.
The deferred component will be subject to further testing to confirm
the integrity of the achievement of the sTi financial targets following
finalisation of the 2013/14 audited Financial statements. if the Board
is satisfied then the deferred component will be paid to the executives
together with interest at market rates. However, if the Board is not
satisfied then the sTi payment will be subject to clawback.
4.3.2 STI performance requirements
4.3.2.1 Personal Goals
The personal goals set for each executive includes achievement of
key milestones to improve or consolidate the company’s or business
unit’s strategic position. The goals vary with the individual’s role, risks
and opportunities.
The achievement of personal goals reinforces the company’s
leadership model for improved performance management through
achieving measurable personal goals established during the
performance review process at the beginning of the financial year.
strict criteria have been established by the remuneration committee
for the setting of personal goals in order for them to be approved.
The goals can be drawn from a number of areas specific to individual
roles but must be specific, measurable, aligned, realistic and time
based. Weightings are allocated to the personal goals based on their
importance to the individual’s role and the company.
Personal goals include both measurable financial goals and
measurable business improvement goals. The measurable financial
goals to improve economic Profit are financial outcomes which
the individual aims to achieve through their effort and their team.
examples may include achieving working capital reductions, sales/
margin targets or cost reduction targets. The measurable business
improvement goals are outcomes which drive business improvement
and which may or may not have an immediate financial outcome but
will improve the business in the short to medium term. examples may
include improved safety and environmental performance, delivering
a major project on time and budget, market share and productivity
improvements or implementing a change or strategic initiative.
assessment of the personal goals sTi component for 2012/13 has
been determined following a formal performance review process
conducted for the executives. The performance reviews for the
executives are conducted semi-annually by the managing Director
with the outcomes approved by the remuneration committee. The
managing Director’s performance review is conducted semi-annually
by the chairman with the outcomes approved by the remuneration
committee. The personal goals of the executives for 2013/14 were
established at the performance reviews.
35
DirecTOrs’ rePOrT (cOnT)
as aT 30 June 2013
The inclusion of personal goals in the remuneration structure ensures
that executives can be recognised for good business performance
whether or not the company or business unit achieves its sTi
financial performance targets. The company operates in the cyclical
building industry so fluctuations in profitability can occur through
the cycle which is out of the control of the executives. The reward for
achievement of personal goals provides specific focus on responding
to changes in the economic cycle, as well as on continuous
performance improvement. Hence the personal goals are a key
part of the company’s performance management process.
4.3.2.2 Financial Targets
Financial performance targets are based on a combination of
improving revenue, margin and/or improved return on Funds
employed (rOFe). This will be calculated using the principle of
economic Profit which is the pre tax profit after deducting the cost
of funds used in generating the profit.
The formula is:
economic Profit = eBiT – (Funds employed x pre tax cost of capital)
Pre tax cost of capital is 15% per annum
(nB: Where significant restructuring has been undertaken in a division, trading eBiT
will be used for the calculation of economic Profit)
under the sTi framework, a business unit head may receive an sTi
payment if business unit economic Profit has grown, although the
overall corporate economic Profit may not have grown, and vice versa.
The ‘reasonably achievable’ and ‘stretch’ sTi financial targets are
determined by the remuneration committee at the beginning of
the financial year following approval of the divisional and corporate
budgets by the Board.
The budget performance levels are taken into consideration in setting
the financial targets but different targets may be set (either higher or
lower than budget) to motivate management and reflect the degree of
difficulty in achieving the budget. Performance between the ‘reasonably
achievable’ and ‘stretch’ levels is rewarded on a pro rata basis.
The Board retains the right to vary from policy in exceptional
circumstances. However, any variation from policy and the reasons
for it will be disclosed. There were no variations from policy during
the period.
For the 2012/13 year the company’s lower profitability performance
has meant the sTi financial targets at both the divisional and corporate
level have not been achieved, except for the Brivis business unit
which achieved their financial targets at the ‘stretch’ level. 50% of
the incentive payment has been deferred for Brivis executives and
will be subject to further testing and potential clawback under the
sTi plan rules. This is reflected in the sTi cash bonus amounts in the
remuneration Tables.
The deferred component of the sTi incentive payment for 2011/12 for
Brivis executives was tested by the Board in august 2013 to confirm
the integrity of the achievement of the sTi financial targets in 2011/12.
Following their satisfaction with the testing, the Board approved the
payment of the deferred component to Brivis executives together with
interest at market rates.
4.3.2.3 Financial Targets – 2013/14 changes
For the 2013/14 year, the Board proposes to change the basis for
determining the sTi financial performance targets for executives.
The sTi targets will be based on specified trading eBiT and operating
cash flow targets as determined by the remuneration committee at
the beginning of the financial year following approval of the divisional
and corporate budgets. The Board is of the view that a combination of
trading eBiT and operating cash flow targets is a more effective basis
for sTi targets as they are currently key metrics used in the business
and are better understood than economic Profit. it is proposed that the
two metrics will be weighted equally and assessed separately and on an
aggregated basis for divisional and corporate executives. Further details
of the changes will be reported in next year’s remuneration report.
4.4 long-term incentive (‘lTi’)
4.4.1 LTI overview
executives participate in a lTi plan. This is an equity based plan that
provides for a reward that varies with company performance over
three year periods. Three years is considered to be the maximum time
period over which financial projections and detailed business plans
can reasonably be made.
The lTi is provided as Performance rights, with each right entitling
the holder to an ordinary share in the company (or in limited cases to
a cash payment), subject to meeting financial performance hurdles
and the holder remaining in employment with the company until the
nominated vesting date.
if the vesting conditions and performance hurdles are achieved,
ordinary shares will be issued to the participants at no cost. until
that time, the participants have no right to dividends or voting rights
on unvested Performance rights. if the performance hurdles are
not met then the Performance rights are cancelled. The lTi rules
do not allow for re-testing of the performance hurdles after the initial
performance period.
The performance hurdles for the lTi are selected by the remuneration
committee. Half of the Performance rights are based on Total
shareholder returns (Tsr) for GWa compared to a peer group of
companies (which is a relative performance requirement) and half of
the Performance rights are based on growth in earnings Per share
(ePs) (which is an absolute performance requirement). The ePs
performance condition is calculated as net profit after tax as set out
in the company’s annual audited Financial statements divided by
the weighted average of ordinary shares on issue. The Board has
discretion to make reasonable adjustments to base year ePs where
it is unduly distorted by significant or abnormal events. any such
adjustments will be disclosed.
a participant may not dispose of the ordinary shares issued under the
lTi until the seventh anniversary of the grant date and the shares are
subject to a holding lock upon issue. There are limited circumstances
where a participant may dispose of the shares before the end of
the seven year period, including cessation of employment with the
company or where the Board grants approval. in considering an
application from a participant to dispose of the shares, the Board will
consider whether the sale is in the best interests of the company,
relevant policies and regulations and other factors.
GWA GROUP LIMITED ∕ ∕ 2013 ANNUAL REPORT in accordance with the rules of the lTi 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 Board has discretion to adjust the comparator group to take into
account events including, but not limited to, takeovers, mergers,
de-mergers and similar transactions that might occur over the
performance period.
4.4.2.2 EPS Hurdle
For the 2013 lTi grant, ePs growth is measured over the three years
from 1 July 2012 to 30 June 2015. The ePs hurdle is calculated
as net profit after tax, as set out in the company’s annual audited
Financial statements, divided by the weighted average number of
ordinary shares on issue. The base year ePs for the 2013 lTi grant
was 15.1 cents.
The Board exercised its discretion to adjust the base year ePs by
excluding the significant items in the 2011/12 year comprising net
restructuring income and the loss from discontinued operations.
This adjustment made the performance hurdle more demanding as
it increased the base year ePs from 13.2 cents to 15.1 cents to
ensure the hurdle was reflective of underlying business performance.
The performance hurdles and vesting proportions for the ePs
performance measure that applied to the 2013 lTi grant is outlined
in the table below.
Compound annual EPS Growth
less than 3% per annum
3% per annum
Between 3% and 8% per annum
8% or higher per annum
Proportion
of Performance
Rights to Vest if EPS
growth hurdle is met
0%
25%
straight line vesting
between 25% and 50%
50%
(i.e. 50% of total grant)
5. DeTails OF DirecTOr anD eXecuTive remuneraTiOn
5.1 remuneration Tables
Details of the nature and amount of each element of remuneration of
each director of the company and other key management personnel
for the year ended 30 June 2013 are outlined in the remuneration
Tables on the following pages.
in the event of a change of control, all outstanding Performance rights
granted to executives will vest and be exercised into ordinary shares,
except to the extent the Board determines in its discretion that the
vesting conditions are unlikely to be satisfied. if the Board makes
the decision that not all Performance rights will vest on a change of
control, then all remaining Performance rights will lapse.
For the 2013 lTi grant, the proportion of Performance rights that can
vest will be calculated and the shares will vest in august 2015 subject
to achieving the performance hurdles.
all unvested rights will be forfeited if the Board determines that
an executive has committed an act of fraud, defalcation or gross
misconduct or in other circumstances specified by the Board.
The maximum number of outstanding Performance rights granted
to executives must not exceed 5% of the total number of shares on
issue by the company. The total number of outstanding Performance
rights granted to executives at 30 June 2013 was 2,137,000 which
represents 0.7% of the company’s total issued shares.
4.4.2 LTI performance requirements
For the 2013 lTi grant, the performance hurdles continue to provide
for vesting scales graduated with performance and demanding
performance hurdles. The comparator group for the 2013 lTi plan
includes selected comparator group companies used by Guerdon
associates for benchmarking executive fixed remuneration levels for
the 2012/13 remuneration review.
4.4.2.1 TSR Hurdle
The performance hurdles and vesting proportions for the Tsr
performance measure that applied to the 2013 lTi grant is outlined
in the table below.
TSR of GWA Group Limited relative
to TSRs of Comparator Companies
less than the 50th percentile
50th percentile
Between the 50th percentile
and 75th percentile
75th percentile or higher
Proportion
of Performance
Rights to Vest if
TSR hurdle is met
0%
25%
straight line vesting
between 25% and 50%
50%
(i.e. 50% of total grant)
The group of comparator companies for the Tsr hurdle includes 14
domestic asX listed companies with comparable market capitalisation
or revenues, including:
reece australia limited, adelaide Brighton limited, ansell limited,
Brickworks limited, csr limited, Goodman Fielder limited, Bradken
limited, Dulux Group limited, super retail Group limited, Premier
investments limited, Pacific Brands limited, GuD Holdings limited,
Breville Group limited and Hills Holdings limited.
37
Short-term
Long-term
Post-employment
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Non-Executive Directors
G mcGrath
chairman
D mcDonough
Deputy chairman
r anderson
non-executive Director
W Bartlett
non-executive Director
P Birtles
non-executive Director
J mulcahy
non-executive Director
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
318,723
306,465
130,353
69,078
75,415
61,054
142,096
136,631
122,789
118,066
112,861
108,520
Total – Non-Executive
Directors
2013
902,237
2012
799,814
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,606
–
2,606
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
28,685
27,581
24,999
49,998
40,387
50,293
12,789
12,296
11,051
10,626
10,157
9,766
– 128,068
– 160,560
Executive Directors
P crowley
managing Director
2013
1,438,646
171,600
88,648
38,080
160,633
50,000
2012
1,413,522
280,800
103,055
82,420
204,650
50,000
r Thornton
executive Director
2013
2012
367,295
75,600
365,207
72,000
9,562
8,921
10,998
18,466
45,142
16,470
29,925
24,639
Total – Directors
Remuneration
2013 2,708,178 247,200
98,210
49,078 205,775 194,538
2012 2,578,543 352,800 114,582
100,886 234,575 235,199
Executives
i Brannan
chief Financial Officer
(appointed 30 July 2012) (e)
l Patterson
chief executive – GWa
Bathrooms & Kitchens
(appointed 17 October 2012) (f)
c camillo
General manager – Brivis
(appointed 1 December 2012) (g)
G Oliver
chief executive – GWa
Door & access systems
(appointed 1 may 2012)
W saxelby
chief Financial Officer
2013
2012
645,063
275,000
8,864
–
–
–
–
–
62,720
22,550
–
–
2013
491,459
104,000
122,103
28,537
53,625
24,999
2012
449,529
57,850
9,162
46,689
40,242
57,066
2013
2012
204,658
145,500
–
–
–
–
2013
430,655
54,960
7,000
2012
444,203
173,550
29,330
1,875
33,973
9,913
–
–
–
–
–
47,092
25,000
40,242
49,999
2013
2012
241,227
–
17,883
613,113
135,100
16,548
16,409
54,549
–
–
24,000
48,000
l
a
t
o
T
$
347,408
334,046
155,352
119,076
115,802
111,347
154,885
148,927
133,840
128,692
123,018
120,892
–
–
–
–
–
–
–
–
–
–
–
–
– 1,030,305
–
–
–
–
–
962,980
1,947,607
2,134,447
525,067
519,158
– 3,502,979
– 3,616,585
–
–
–
–
–
–
–
–
–
–
1,014,197
–
824,723
660,538
395,919
–
564,707
737,324
299,519
867,310
(ceased employment 31 October 2012)
n evans
chief executive – GWa
Bathrooms & Kitchens
(ceased employment 17 October 2012)
2013
2012
200,895
–
15,699
521,156
108,180
13,047
–
–
(169,875)
14,583
450,750
512,052
56,750
50,000
–
749,133
Total – Executives
Remuneration
Total – Directors
and Executives
Remuneration
2013 2,213,957 579,460 171,549
46,821
27,535 121,045 450,750 3,611,117
2012 2,028,001 474,680
68,087
101,238 137,234 205,065
– 3,014,305
2013 4,922,135 826,660 269,759
95,899 233,310 315,583 450,750 7,114,096
2012 4,606,544 827,480 182,669
202,124 371,809 440,264
– 6,630,890
f
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–
–
–
–
–
–
–
–
–
–
–
–
17.1
22.7
23.0
19.6
33.3
–
19.1
14.9
45.3
–
18.1
29.0
–
15.6
–
22.0
–
–
–
–
–
–
–
–
–
–
–
–
14
23
40
40
100
–
40
26
97
–
24
78
–
40
–
36
–
–
–
–
–
–
–
–
–
–
–
–
86
78
60
60
–
–
60
74
3
–
76
22
–
60
–
64
GWA GROUP LIMITED ∕ ∕ 2013 ANNUAL REPORT
Notes to the Remuneration Tables
(e) mr ian Brannan was appointed chief Financial Officer on
30 July 2012. The employment contract for mr Brannan provided
for the payment of a guaranteed short term cash bonus for the
year ended 30 June 2013 equal to 40% of his fixed remuneration.
mr Brannan will participate in the sTi plan in future periods which
rewards performance based on the achievement of personal goals
and financial performance targets. mr Brannan will also participate
in the lTi plan in future periods.
(f) mr les Patterson was appointed chief executive – GWa
Bathrooms & Kitchens on 17 October 2012. He was formerly
chief executive – GWa Heating & cooling until that date. mr
Patterson is considered Key management Personnel under both
his former and current role.
(g) mr celeste camillo was appointed General manager – Brivis on
1 December 2012 and is considered Key management Personnel
from that date.
(a) The short Term incentive (sTi) cash bonus is for the performance
during the financial year ended 30 June 2013 based on the
achievement of personal goals and financial performance targets.
Brivis achieved their sTi financial performance targets during
the year and in accordance with the sTi plan rules, 50% of the
amount has been deferred and will be subject to further testing as
outlined in the remuneration 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 short term non-monetary benefits include the provision of
motor vehicles, medical benefits membership, salary continuance
and life insurance and any applicable fringe benefits tax thereon.
an amount of $60,019 has been included as a short term
non-monetary benefit for mr les Patterson during 2012/13
representing the waiver of an outstanding loan from the company
under the legacy GWa employee share Plan. The Board agreed
to the waiver of the loan as part of the arrangements for the wind
down of the plan in march 2013.
(c) The employee share Plan interest includes an amount
representing commercial interest that would have been charged
during the period on the executives outstanding employee
loan balances owed to the company had these loans not been
interest free. The benefit is classified as a long term benefit in the
remuneration Tables which reflects the long term nature of the
incentive. as outlined in section 7, the employee share Plan has
been discontinued and there will be no further share issues to
employees under the plan.
(d) The long Term incentive (lTi) Plan was approved by shareholders
at the 2008 annual General meeting. The outstanding
Performance rights at 30 June 2013 were granted to executives in
each of the years 30 June 2011, 2012 and 2013 and are subject
to vesting conditions and the achievement of the ePs and Tsr
performance hurdles over the three year performance periods.
During the year, 50% of the Performance rights in respect of the
2010 lTi grant vested following the achievement of the Tsr hurdle
and 50% of the Performance rights lapsed as the ePs hurdle was
not achieved. The fair value of the Performance rights granted in
each of the years were 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. if the ePs and Tsr
performance hurdles are not achieved, then no benefits will be
received by the executives under the lTi plan.
39
DirecTOrs’ rePOrT (cOnT)
as aT 30 June 2013
5.2 share based payments
5.2.1 Performance Rights
The table below shows details of the Performance rights granted to key management personnel during the year ended 30 June 2013
and in prior years that affects compensation in this or future reporting periods.
The testing of Performance rights granted on 12 march 2010 in respect of the three year performance period of 1 July 2009 to 30 June 2012
occurred on 14 august 2012. The ePs hurdle was not achieved and 50% of the Performance rights lapsed (in the prior period). The Tsr
hurdle was achieved and 50% of the Performance rights vested and were automatically exercised into ordinary shares at no cost to the
executives. a total of 375,000 shares were purchased on-market for the executives at an average price of $1.94 following the achievement
of the Tsr hurdle in respect of the 2010 lTi grant.
Number of
rights granted
Grant date*
%
vested
in year
%
forfeited
in year
Fair value
of rights at
grant date
$*
Issue price used to
determine number
of rights granted
Executive Directors
P crowley
managing Director
r Thornton
executive Director
Executives
i Brannan
chief Financial Officer
(appointed 30 July 2012)
l Patterson, chief executive –
GWa Bathrooms & Kitchens
(appointed 17 October 2012)
c camillo, General manager –
Brivis
(appointed 1 December 2012)
G Oliver, chief executive –
GWa Door & access systems
(appointed 1 may 2012)
n evans, chief executive –
GWa Bathrooms & Kitchens
(ceased employment 17 October 2012)
2013
2012
2011
2010
2013
2012
2011
2010
2013
2012
2011
2010
2013
2012
2011
2010
2013
2012
2011
2010
2013
2012
2011
2010
2013
2012
2011
2010
345,000
260,000
300,000
305,000
65,000
45,000
30,000
30,000
25 February 2013
17 February 2012
21 February 2011
–
–
–
12 march 2010
50
25 February 2013
17 February 2012
21 February 2011
–
–
–
12 march 2010
50
96,000
25 February 2013
–
–
–
90,000
55,000
50,000
50,000
52,000
–
–
–
80,000
55,000
50,000
50,000
–
75,000
75,000
75,000
–
–
–
–
–
–
–
–
–
–
25 February 2013
17 February 2012
21 February 2011
12 march 2010
50
25 February 2013
–
–
–
25 February 2013
17 February 2012
21 February 2011
–
–
–
–
–
–
–
12 march 2010
50
–
17 February 2012
21 February 2011
–
–
–
12 march 2010
50
–
–
50
–
–
–
50
–
–
–
–
–
–
–
50
–
–
–
–
–
–
–
50
–
–
100
100
–
676,200
375,700
802,500
785,375
127,400
65,025
80,250
77,250
188,160
–
–
–
176,400
79,475
133,750
128,750
101,920
–
–
–
156,800
79,475
133,750
128,750
–
108,375
200,625
193,125
1.70
2.35
3.00
2.84
1.70
2.35
3.00
2.84
1.70
–
–
–
1.70
2.35
3.00
2.84
1.70
–
–
–
1.70
2.35
3.00
2.84
–
2.35
3.00
2.84
* 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 $1.70 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 25 October 2012. The grant dates and corresponding fair values per right in the above table have been determined in accordance with australian accounting
standards. 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 $2.18 per right and the Tsr hurdle was $1.74 per right.
GWA GROUP LIMITED ∕ ∕ 2013 ANNUAL REPORT all of the rights on the opposite page carry an exercise price of
nil. The rights granted on 21 February 2011, 17 February 2012
and 25 February 2013 will vest on the date of the release to the
australian securities exchange of the company’s annual audited
Financial statements for the years 30 June 2013, 2014 and 2015
respectively, subject to the achievement of the performance hurdles.
The rights granted to mr crowley and mr Thornton were approved by
shareholders at the 2010, 2011 and 2012 annual General meetings
in accordance with asX listing rule 10.14.
rights were forfeited where an employee ceased employment with
the company during the year in accordance with the rules of the
long Term incentive Plan. For the rights granted to key management
personnel on 21 February 2011, the company has not achieved the
ePs hurdle for the performance period of 1 July 2010 to 30 June 2013.
This has resulted in the forfeiture of 290,000 rights with a value of
$884,500. The number of rights outstanding at 30 June 2013 also
represents the balance yet to vest.
6. Key Terms OF emPlOymenT cOnTracTs
6.1 notice and termination payments
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. The company
retains the right to terminate the employment contract of mr crowley
immediately, by making payment equal to three months salary in lieu
of providing notice. 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 required to give
reasonable notice of termination of up to six months. The company
retains the right to terminate the employment contracts of the
executives immediately, by making payment equal to the relevant
notice period (of up to six months) in lieu of providing notice.
The executives are also entitled to receive on termination of
employment their statutory entitlements of accrued annual and long
service leave, together with any superannuation benefits.
The termination arrangements for the executives are specified in their
employment contracts and any other termination payments require
approval of the remuneration committee. shareholder approval is
required for termination payments in excess of twelve months salary.
Performance rights held by executives under the lTi plan will lapse
upon the cessation of employment with the company.
7. leGacy eQuiTy BaseD remuneraTiOn Plan
as outlined in the 2012 remuneration report, the Board decided to
discontinue the use of the legacy GWa employee share Plan as it had
failed to achieve its objectives as a long term incentive for employees.
in march 2013 the Board approved the wind down of the plan with
employees being given the option to sell their shares on-market and
re-pay the loans provided by the company. if an employee decided not
to sell their shares, then they would remain subject to the plan rules.
as a result of the wind down process of the plan, total loan repayments
of $8.3 million (inclusive of dividends) were received by the company
from employees during the year ended 30 June 2013.
at 30 June 2013, there were 162,500 shares held by employees
under the plan with outstanding loans from the company of $263,111.
The plan has been discontinued and there will be no further share
issues to employees under the plan.
DirecTOrs’ meeTinGs
The number of meetings of directors (including meetings of
committees of directors) held during the financial year ended
30 June 2013 and the number of meetings attended by each
director are shown in the table below.
Director
Board
Audit Committee
Remuneration
Committee
Nomination Committee
G J mcGrath
D D mcDonough
P c crowley(1)
r m anderson
W J Bartlett
J F mulcahy
P a Birtles
r J Thornton(2)
note:
A
9
9
9
9
9
9
9
9
B
9
9
9
9
9
9
9
9
A
4
–
–
–
4
–
4
–
B
4
–
–
–
4
–
3
–
A
2
–
–
–
2
2
–
–
B
2
–
–
–
2
2
–
–
A
1
1
–
–
1
–
–
–
B
1
1
–
–
1
–
–
–
A number of meetings held during the time the director held office during the year
(1) P c crowley attends committee meetings by invitation of the Board
B number of meetings attended
(2) r J Thornton attends committee meetings as company secretary
41
DirecTOrs’ rePOrT (cOnT)
as aT 30 June 2013
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 W Bartlett (chairman)
• mr P Birtles
• mr G mcGrath
The members of the remuneration committee are:
• mr W Bartlett (chairman)
• mr J mulcahy
• mr G mcGrath
The members of the nomination committee are:
• mr G mcGrath (chairman)
• mr D mcDonough
• mr W Bartlett
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 external auditor,
KPmG, during the financial year ended 30 June 2013 are outlined in
note 8 of the Financial statements. Based on advice from the 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 2013.
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.
G McGrath
chairman
P C Crowley
managing Director
Brisbane, 21 august 2013
GWA GROUP LIMITED ∕ ∕ 2013 ANNUAL REPORT
GWa GrOuP limiTeD
Financial rePOrT
GWa GrOuP limiTeD anD iTs cOnTrOlleD enTiTies
aBn 15 055 964 380
CONTENTS
consolidated statement of profit or loss and other comprehensive income
consolidated statement of financial position
consolidated statement of cash flows
consolidated statement of changes in equity
NOTE
1
significant accounting policies
2 Operating segments
3 Discontinued operations
4 Other income
5 Other expenses
6 restructuring expenses
7 Personnel expenses
8 auditors’ remuneration
9 net financing costs
10
income tax expense
11 earnings per share
12 cash and cash equivalents
13 Trade and other receivables
14
inventories
15 acquisitions of subsidaries
16 current tax assets and liabilities
17 Deferred tax assets and liabilities
18 Property, plant and equipment
19
intangible assets
Directors’ Declaration
48
56
58
59
59
59
59
59
60
60
61
62
62
63
63
63
64
65
66
20 Trade and other payables
21
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 commitments
29 contingencies
30 Deed of cross guarantee
31 consolidated entities
32 Parent entity disclosures
33
reconciliation of cash flows
from operating activities
34 related parties
35 subsequent events
independent auditor’s report to the members of GWa Group limited
44
45
46
47
67
68
69
70
71
72
73
81
81
81
82
84
85
86
86
88
89
90
43
43
ConsolidAtEd stAtEmEnt of Profit or loss
And othEr ComPrEhEnsivE inComE
For the year ended 30 June 2013
in thousands of auD
Continuing operations
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
Profit from continuing operations
Discontinued operations
loss from discontinued operations, net of income tax
Profit for the period
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Foreign currency translation differences for foreign operations, net of income tax
Translation differences for disposed business transferred to profit or loss, net of income tax
effective portion of changes in fair value of cash flow hedges, net of income tax
Other comprehensive income for the period, net of income tax
Total comprehensive income for the period
Earnings per share
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
Continuing operations
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
note
2013
2012
2
4
5
9
10
3
11
11
565,365
(367,956)
197,409
6,518
(84,062)
(49,682)
(14,844)
55,339
1,479
(14,803)
(13,324)
42,015
(9,625)
32,390
602,128
(384,978)
217,150
12,847
(93,788)
(50,719)
(13,452)
72,038
1,979
(16,226)
(14,247)
57,791
(11,618)
46,173
–
32,390
(6,518)
39,655
669
–
1,959
2,628
35,018
10.64
10.59
10.64
10.59
(199)
2,975
(1,600)
1,176
40,831
13.15
13.08
15.31
15.23
The statement of profit or loss and other comprehensive income is to be read in conjunction with the notes to the financial statements set out
on pages 48 to 88.
GWA GROUP LIMITED ∕ ∕ 2013 ANNUAL REPORT Consolidated statement
of finanCial position
As at 30 June 2013
In thousands of AUD
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Income tax receivable
Other
Total current assets
Non-current assets
Receivables
Deferred tax assets
Property, plant and equipment
Intangible assets
Other
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Employee benefits
Income tax payable
Provisions
Total current liabilities
Non-current liabilities
Loans and borrowings
Employee benefits
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained earnings
Total equity
Note
2013
2012
12
13
14
16
13
17
18
19
20
22
16
24
21
22
24
32,757
111,461
80,336
–
2,223
226,777
–
15,064
109,470
387,248
1,118
512,900
739,677
75,371
11,812
919
10,760
98,862
195,000
12,693
6,380
214,073
312,935
426,742
408,100
(408)
19,050
426,742
30,528
99,187
91,766
1,564
2,691
225,736
4,747
17,488
113,292
383,537
3,521
522,585
748,321
68,099
13,536
169
13,857
95,661
205,000
12,346
8,330
225,676
321,337
426,984
398,930
(2,489)
30,543
426,984
45
The statement of financial position is to be read in conjunction with the notes to the financial statements set out on pages 48 to 88.
GWA Group Limited And its controLLed entities ABN 15 055 964 380 Consolidated statement
of Cash flows
For the year ended 30 June 2013
In thousands of AUD
Cash flows from operating activities
Cash receipts from customers
Cash paid to suppliers and employees
Cash generated from operations
Interest paid and facility fees
Interest received
Income taxes paid
Note
2013
2012
628,637
(544,999)
83,638
(15,478)
1,024
(5,835)
63,349
2,278
(11,374)
(3,329)
(12,443)
–
(24,868)
8,284
(22)
(10,000)
(34,761)
(36,499)
1,982
30,528
247
32,757
703,744
(604,859)
98,885
(17,284)
1,305
(22,407)
60,499
18,361
(21,339)
(4,459)
–
23,743
16,306
1,235
(5)
(29,874)
(54,275)
(82,919)
(6,114)
36,573
69
30,528
Net cash from operating activities
33
Cash flows from investing activities
Proceeds from sale of property, plant and equipment
Acquisition of property, plant and equipment
Acquisition of intangibles
Acquisition of subsidiary, net of cash acquired
Disposal of subsidiaries, net of cash disposed
Net cash from investing activities
Cash flows from financing activities
Repayment of employee share loans
Share listing fees paid
Repayment of bank bills
Dividends paid, net of dividend reinvestment plan
Net cash from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at 1 July
Effect of exchange rate fluctuations on cash held
Cash and cash equivalents at 30 June
12
The statement of cash flows is to be read in conjunction with the notes to the financial statements set out on pages 48 to 88.
GWA GROUP LIMITED ∕ ∕ 2013 ANNUAL REPORTGWA Group Limited And its controLLed entities ABN 15 055 964 380notes to tHe consoLidAted FinAnciAL stAtements Consolidated statement
of Changes in equity
For the year ended 30 June 2013
In thousands of AUD
Balance at 1 July 2011
Total comprehensive income for the period
Profit for the period
Other comprehensive income
Foreign currency translation differences
for foreign operations, net of income tax
Translation differences for disposed business
transferred to profit or loss, net of income tax
Effective portion of changes in fair value
of cash flow hedges, net of income tax
Total other comprehensive income
Total comprehensive income for the period
Transactions with owners, recorded
directly in equity
Share-based payments, net of income tax
Dividends to shareholders
Issue of ordinary shares
Total transactions with owners
Balance at 30 June 2012
Share
capital
Translation
reserve
Hedging
reserve
Equity
compensation
reserve
Retained
earnings
Total
397,844
(5,430)
(648)
2,802
45,427
439,995
–
–
–
–
–
–
–
–
1,086
1,086
–
(199)
2,975
–
2,776
2,776
–
–
–
–
–
–
–
(1,600)
(1,600)
(1,600)
–
–
–
–
398,930
(2,654)
(2,248)
–
–
–
–
–
–
39,655
39,655
–
–
–
–
39,655
(199)
2,975
(1,600)
1,176
40,831
(389)
(264)
(653)
–
–
(389)
2,413
(54,275)
(54,275)
–
1,086
(54,539)
(53,842)
30,543
426,984
Balance at 1 July 2012
398,930
(2,654)
(2,248)
2,413
30,543
426,984
Total comprehensive income for the period
Profit for the period
Other comprehensive income
Foreign currency translation differences
for foreign operations, net of income tax
Effective portion of changes in fair value
of cash flow hedges, net of income tax
Total other comprehensive income
Total comprehensive income for the period
Transactions with owners, recorded directly
in equity
Share-based payments, net of income tax
Dividends to shareholders
Issue of ordinary shares
Total transactions with owners
Balance at 30 June 2013
–
–
–
–
–
–
–
9,170
9,170
–
669
–
669
669
–
–
–
–
–
–
1,959
1,959
1,959
–
–
–
–
–
–
–
–
–
32,390
32,390
–
–
–
669
1,959
2,628
32,390
35,018
(547)
70
(477)
–
–
(43,953)
(43,953)
–
9,170
(547)
(43,883)
(35,260)
408,100
(1,985)
(289)
1,866
19,050
426,742
The statement of changes in equity is to be read in conjunction with the notes to the financial statements set out on pages 48 to 88.
47
GWA Group Limited And its controLLed entities ABN 15 055 964 380 1. signifiCant aCCounting poliCies
GWA Group Limited (the ‘Company’) is a for-profit company domiciled
in Australia. The consolidated financial report of the Company for
the financial year ended 30 June 2013 comprises the Company
and its subsidiaries (together referred to as the ‘consolidated entity’).
The principal activities of the consolidated entity during the year were
the research, design, manufacture, import and marketing of building
fixtures and fittings to households and commercial premises and
the distribution of these various products through a range of
distribution channels in Australia, New Zealand and selected
international markets.
The financial report was authorised for issue by the directors on
21 August 2013.
(a) statement of compliance
The financial report is a general purpose financial report which has
been prepared in accordance with Australian Accounting Standards
(‘AASBs’) adopted by the Australian Accounting Standards Board
(‘AASB’) and the Corporations Act 2001. The consolidated entity’s
financial report complies with International Financial Reporting
Standards (‘IFRSs’) adopted by the International Accounting
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.
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; and
• 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
(i) subsidiaries
Subsidiaries are entities controlled by the consolidated entity.
Control exists when the consolidated entity 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.
(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.
(iii) Business combinations
Business combinations are accounted for using the acquisition
method as at the acquisition date, which is the date on which
control is transferred to the consolidated entity.
For every business combination, the consolidated entity identifies
the acquirer, which is the combining entity that obtains control of
the other combining entities or businesses. Control is the power to
govern the financial and operating policies of an entity so as to obtain
benefits from its activities. In assessing control, the consolidated
entity takes into consideration potential voting rights that currently
are exercisable.
Measuring goodwill
The consolidated entity measures goodwill as the fair value of the
consideration transferred including the recognised amount of any
non-controlling interest in the acquiree, less the net recognised
amount (generally fair value) of the identifiable assets acquired
and liabilities assumed, all measured as of the acquisition date.
GWA GROUP LIMITED ∕ ∕ 2013 ANNUAL REPORTGWA Group Limited And its controLLed entities ABN 15 055 964 380notes to tHe consoLidAted FinAnciAL stAtements 1. signifiCant aCCounting poliCies (Continued)
(iii) net investment in foreign operations
(c) Basis of consolidation (continued)
(iii) Business combinations (continued)
Measuring goodwill (continued)
Consideration transferred includes the fair values of the assets
transferred, liabilities incurred by the consolidated entity to the
previous owners of the acquiree, and equity interests issued by
the consolidated entity.
Transaction costs
Transaction costs the consolidated entity incurs in connection
with a business combination, such as finder’s fees, legal fees,
due diligence fees, and other professional and consulting fees,
are expensed as incurred.
(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 profit or loss. 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.
(ii) financial statements of foreign operations
The assets and liabilities of foreign operations, including goodwill
and fair value adjustments arising on acquisition, are translated to
Australian dollars at foreign exchange rates ruling at the reporting
date. The revenues and expenses of foreign operations are
translated to Australian dollars at rates approximating to the foreign
exchange rates ruling at the dates of the transactions. Foreign
exchange differences arising on retranslation are recognised in
other comprehensive income, and presented in the foreign currency
translation reserve (FCTR) in equity.
When a foreign operation is disposed such that control, significant
influence or joint control is lost, the cumulative amount in the
translation reserve related to that foreign operation is reclassified
to profit or loss as part of the gain or loss on disposal.
Foreign exchange differences arising from the retranslation of the net
investment in foreign operations (including monetary items neither
planned to be settled or likely to be settled in the foreseeable future),
and of related hedges are recognised in the FCTR to the extent
that the hedge is effective. They are released into profit or loss
upon disposal.
(e) derivative financial instruments
The consolidated entity uses derivative financial instruments to hedge
its exposure to foreign exchange and interest rate risks arising from
operating, financing and investing activities. In accordance with
its treasury policy, the consolidated entity does not hold or issue
derivative 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 depends on the nature of the item being hedged (see accounting
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 creditworthiness of the swap counterparties. The fair value
of forward exchange contracts is their quoted market price at the
reporting date, being the present value of the quoted forward price.
(f) hedging
The consolidated entity holds derivative financial instruments
to hedge its foreign currency and interest rate risk exposures.
Embedded derivatives are separated from the host contract and
accounted for separately if the economic characteristics and risks
of the host contract and the embedded derivative are not closely
related, a separate instrument with the same terms as the embedded
derivative would meet the definition of a derivative, and the combined
instrument is not measured at fair value through profit or loss.
On initial designation of the derivative as the hedging instrument, the
consolidated entity formally documents the relationship between the
hedging instrument and hedged item, including the risk management
objectives and strategy in undertaking the hedge transaction and the
hedged risk, together with the methods that will be used to assess
the effectiveness of the hedging relationship. The consolidated entity
makes an assessment, both at the inception of the hedge relationship
as well as on an ongoing basis, whether the hedging instruments are
expected to be highly effective in offsetting the changes in the fair
value or cash flows of the respective hedged items attributable to
hedged risk, and whether the actual results of each hedge are within
a range of 80-125 percent.
49
GWA Group Limited And its controLLed entities ABN 15 055 964 380notes to tHe consoLidAted FinAnciAL stAtements 1. signifiCant aCCounting poliCies (Continued)
(iii) hedge of net investment in foreign operation
(f) hedging (continued)
For a cash flow hedge of a forecast transaction, the transaction
should be highly probably to occur and should present an exposure
to variations in cash flows that could ultimately affect reported profit
or loss.
Derivatives are recognised initially at fair value and attributable
transaction costs are recognised in profit or loss as incurred.
Subsequent to initial recognition, derivatives are measured at fair
value and changes therein are accounted for as described below.
(i) Cash flow hedges
When a derivative is designated as the hedging instrument in a
hedge of the variability in cash flows attributable to a particular risk
associated with a recognised asset or liability or a highly probable
forecast transaction that could affect profit or loss, the effective
portion of changes in the fair value of the derivative is recognised in
other comprehensive income and presented in the hedging reserve
in equity. Any ineffective portion of changes in the fair value of the
derivative is recognised immediately in profit or loss.
When the hedged item is a non-financial asset, the amount
recognised in equity is included in the carrying amount of the asset
when the asset is recognised. In other cases the amount accumulated
in equity is reclassified to profit or loss in the same period the hedged
item affects profit or loss. If the hedging instrument no longer meets
the criteria for hedge accounting, expires or is sold, terminated or
exercised, or the designation is revoked, then hedge accounting is
discontinued prospectively. If the forecast transaction is no longer
expected to occur, then the balance in equity is reclassified to
profit or loss.
Separable embedded derivatives
Changes in the fair value of separable embedded derivatives are
recognised immediately in profit or loss.
Other non-trading derivatives
When a derivative financial instrument is not designated in a hedge
relationship that qualifies for hedge accounting, all changes in its fair
value are recognised immediately in profit or loss.
(ii) hedge of monetary assets and liabilities
Where a derivative financial instrument is used to hedge economically
the foreign exchange exposure of a recognised monetary asset or
liability, no hedge accounting is applied and any gain or loss on the
hedging instrument is recognised in profit or loss.
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 in other comprehensive income, and presented
in the foreign currency translation reserve in equity. The ineffective
portion is recognised immediately in profit or loss.
(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 labour, the initial estimate, where relevant, of the costs of
dismantling and removing the items and restoring the site on which
they are located, and an appropriate proportion of production
overheads. Purchased software that is integral to the functionality
of the related equipment is 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.
Gains and losses on disposal of an item of property, plant and
equipment are determined by comparing proceeds from disposal
with the carrying amount of property, plant and equipment and are
recognised net within “other income” or “other expenses” in profit
or loss.
(i) subsequent costs
The consolidated entity recognises in the carrying amount of an
item of property, plant and equipment the cost of replacing part
of such an item when that cost is incurred if it is probable that the
future economic benefits embodied within the item will flow to the
consolidated entity and the cost of the item can be measured reliably.
The carrying amount of the replaced part is derecognised. All other
costs are recognised in profit or loss as an expense as incurred.
(ii) depreciation
With the exception of freehold land, depreciation is recognised in
profit or loss as incurred on a straight-line basis over the estimated
useful lives of each part of an item of property, plant and equipment.
Land is not depreciated. The estimated useful lives in the current and
comparative periods are as follows:
• buildings
• plant and equipment
• fixtures and fittings
• motor vehicles
40 years
3-15 years
5-10 years
4-8 years
The residual value, the useful life and the depreciation method
applied to an asset are reassessed annually.
GWA GROUP LIMITED ∕ ∕ 2013 ANNUAL REPORTGWA Group Limited And its controLLed entities ABN 15 055 964 380notes to tHe consoLidAted FinAnciAL stAtements 1. signifiCant aCCounting poliCies (Continued)
(vi) amortisation
(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 profit or loss as incurred.
Expenditure on development activities, whereby research findings are
applied to a plan or design for the production of new or substantially
improved products and processes, is capitalised only if the product or
process is technically and commercially feasible and the consolidated
entity has sufficient resources to complete development. Capitalised
development expenditure is measured at cost less accumulated
amortisation and impairment losses.
(ii) Brand names
Acquired brand names are stated at cost. Expenditure incurred in
developing, maintaining or enhancing brand names is recognised in
profit or loss in the year in which it is incurred. The brand names are
not amortised as the directors believe that the brand names have an
indefinite useful life. The carrying values of brand names are tested
each year to ensure that no impairment exists.
(iii) goodwill
Goodwill acquired in business combinations of the consolidated
entity is measured at cost less accumulated impairment losses.
Goodwill represents the excess of the cost of the acquisition over the
consolidated entity’s interest in the net fair value of the identifiable
assets, liabilities and contingent liabilities of the acquired business.
(iv) other intangible assets
Other intangible assets that are acquired by the consolidated
entity are measured at cost less accumulated amortisation and
impairment losses.
(v) subsequent expenditure
Subsequent expenditure on capitalised intangible assets is capitalised
only when it increases the future economic benefits embodied in the
specific asset to which it relates. All other expenditure is expensed
as incurred.
Amortisation is recognised in profit or loss on a straight-line basis
over the estimated useful lives of intangible assets unless such lives
are indefinite. Intangible assets with an indefinite useful life are
systematically tested for impairment at each balance date. Other
intangible assets are amortised from the date they are available
for use. The estimated useful lives in the current and comparative
periods are as follows:
• designs
• patents
15 years
3-19 years (based on patent term)
• customer relationships
8 years
• trade names
10-20 years
• capitalised software
development costs
• brand names
4 years
nil
(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
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.
(k) Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits
with an original maturity date of three months or less. Bank overdrafts
that are repayable on demand and form an integral part of the
consolidated entity’s cash management are included as a component
of cash and cash equivalents for the purpose of the statement of
cash flows.
(l)
impairment
(i) non-derivative financial assets
A financial asset not carried at fair value through profit or loss is
assessed at each reporting date to determine whether there is
objective evidence that it is impaired. A financial asset is impaired if
there is objective evidence of impairment as a result of one or more
events that occurred after the initial recognition of the asset, and that
the loss event(s) had an impact on the estimated future cash flows of
that asset that can be estimated reliably.
51
GWA Group Limited And its controLLed entities ABN 15 055 964 380notes to tHe consoLidAted FinAnciAL stAtements 1. signifiCant aCCounting poliCies (Continued)
(l)
impairment (continued)
(i) non-derivative financial assets (continued)
Objective evidence that financial assets are impaired includes
default or delinquency by a debtor, restructuring of an amount due
to the Group on terms that the Group would not consider otherwise,
indications that a debtor or issuer will enter bankruptcy, the
disappearance of an active market for a security. In addition, for an
investment in an equity security, a significant or prolonged decline in
its fair value below its cost is objective evidence of impairment.
Financial assets measured at amortised cost
The consolidated entity considers evidence of impairment for financial
assets measured at amortised cost (loans and receivables) at both a
specific asset and collective level. All individually significant assets are
assessed for specific impairment. Those found not to be specifically
impaired are then collectively assessed for any impairment that has
been incurred but not yet identified. Assets that are not individually
significant are collectively assessed for impairment by grouping
together assets with similar risk characteristics.
In assessing collective impairment the consolidated entity uses
historical trends of the probability of default, timing of recoveries and
the amount of loss incurred, adjusted for management’s judgement
as to whether current economic and credit conditions are such that
the actual losses are likely to be greater or less than suggested by
historical trends.
An impairment loss in respect of a financial asset measured at
amortised cost is calculated as the difference between its carrying
amount and the present value of the estimated future cash flows
discounted at the asset’s original effective interest rate. Losses are
recognised in profit or loss and reflected in an allowance account
against receivables. Interest on the impaired asset continues to be
recognised through the unwinding of the discount. When an event
occurring after the impairment was recognised causes the amount
of impairment loss to decrease, the decrease in impairment loss is
reversed through profit or loss.
Available-for-sale financial assets
Impairment losses on available-for-sale financial assets are recognised
by reclassifying the losses accumulated in the fair value reserve in
equity to profit or loss. The cumulative loss that is reclassified from
equity to profit or loss is the difference between the acquisition cost,
net of any principal repayment and amortisation, and the current fair
value, less any impairment loss recognised previously in profit or loss.
Changes in cumulative impairment losses attributable to application
of the effective interest method are reflected as a component of
interest income.
If, in a subsequent period, the fair value of an impaired available-
for-sale debt security increases and the increase can be related
objectively to an event occurring after the impairment loss was
recognised, then the impairment loss is reversed, with the amount
of the reversal recognised in profit or loss. However, any subsequent
recovery in the fair value of an impaired available-for-sale equity
security is recognised in other comprehensive income.
(ii) non-financial assets
The carrying amounts of the consolidated entity’s non-financial
assets, other than inventories and deferred tax assets, are reviewed
at each reporting date to determine whether there is any indication of
impairment. If any such indication exists, then the asset’s recoverable
amount is estimated. Goodwill and indefinite life intangible assets are
tested annually for impairment. An impairment loss is recognised if
the carrying amount of an asset or its related cash-generating unit
(CGU) exceeds its recoverable amount.
The recoverable amount of an asset or CGU unit is the greater of its
value in use and its fair value less costs to sell. 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 the purpose of impairment testing, assets that cannot be
tested individually are grouped together into the smallest group of
assets that generates cash inflows from continuing use that are largely
independent of the cash inflows of other assets or CGUs. Subject
to an operating segment ceiling test, CGUs to which goodwill has
been allocated are aggregated so that the level at which impairment
is tested reflects the lowest level at which goodwill is monitored
for internal reporting purposes. Goodwill acquired in a business
combination is allocated to groups of CGUs that are expected to
benefit from the synergies of the combination.
Impairment losses are recognised in profit or loss. Impairment losses
recognised in respect of CGUs are allocated first to reduce the
carrying amount of any goodwill allocated to the CGU (or group of
CGUs), and then to reduce the carrying amounts of the other assets
in the CGU (or group of CGUs) on a pro rata basis.
An impairment loss in respect of goodwill is not reversed. For other
assets, an impairment loss is reversed only to the extent that the
asset’s carrying amount does not exceed the carrying amount that
would have been determined, net of depreciation or amortisation,
if no impairment loss had been recognised.
GWA GROUP LIMITED ∕ ∕ 2013 ANNUAL REPORTGWA Group Limited And its controLLed entities ABN 15 055 964 380notes to tHe consoLidAted FinAnciAL stAtements 1. signifiCant aCCounting poliCies (Continued)
(m) share capital
(i) ordinary shares
Ordinary shares are classified as equity. Incremental costs directly
attributable to the issue of ordinary shares are recognised as a
deduction from equity, net of any tax effects.
(ii) dividends
Dividends are recognised as a liability in the period in which they
are declared.
(iii) 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-bearing borrowings are measured at amortised cost with
any difference between cost and redemption value being recognised
in profit or loss over the period of the borrowings on an effective
interest basis.
(o) employee benefits
(i) defined contribution superannuation funds
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 employee benefit
expense in profit or loss in the periods during which the services
are rendered by employees.
(ii) other long-term employee benefits
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.
(iii) short-term benefits
Liabilities for employee benefits for wages, salaries, annual leave and
sick leave that are expected to be settled within 12 months of the
reporting date represent present obligations resulting from employees’
services provided to reporting date, are calculated at undiscounted
amounts based on remuneration wage and salary rates that the
consolidated entity expects to pay as at reporting date including
related 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, such that the
amount ultimately recognised as an expense is based on the number
of awards that do not meet the related service and non-market
performance conditions at the vesting date. For share-based payment
awards with non-vesting conditions, the grant date fair value of
the share-based payment is measured to reflect such conditions
and there is no true-up for differences between expected and
actual outcomes.
(p) provisions
A provision is recognised 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.
(i) warranties
A provision for warranties is recognised when the underlying
products or services are sold. The provision is based on historical
warranty data and a weighting of all possible outcomes against their
associated probabilities.
(ii) Restructuring
A provision for restructuring is recognised when the consolidated
entity has approved a detailed and formal restructuring plan, and the
restructuring has either commenced or has been announced publicly.
Future operating costs are not provided for.
(iii) site restoration
A provision for restoration in respect of owned and leased premises is
recognised when the obligation to restore arises. The provision is the
best estimate of the present value of the expenditure required to settle
the restoration obligation at the reporting date. Future restoration
obligations are reviewed annually and any changes are reflected
in the present value of the provision at the end of the reporting
period. The unwinding of the effect of discounting on the provision is
recognised as a finance cost.
53
GWA Group Limited And its controLLed entities ABN 15 055 964 380notes to tHe consoLidAted FinAnciAL stAtements Deferred tax is recognised in respect of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for taxation purposes.
Deferred tax is not recognised for:
• temporary differences on the initial recognition of assets or
liabilities in a transaction that is not a business combination and
that affects neither accounting nor taxable profit or loss;
• temporary differences related to investments in subsidiaries and
associates and jointly controlled entities to the extent that it is
probable that they will not reverse in the foreseeable future; and
• taxable temporary differences arising on the initial recognition
of goodwill.
Deferred tax is measured at the tax rates that are expected to be
applied to temporary differences when they reverse, using tax rates
enacted or substantively enacted at the reporting date.
In determining the amount of current and deferred tax the
consolidated entity takes into account the impact of uncertain tax
positions and whether additional taxes and interest may be due.
The consolidated entity believes that its accruals for tax liabilities are
adequate for all open tax years based on its assessment of many
factors, including interpretations of tax law and prior experience.
This assessment relies on estimates and assumptions and may
involve a series of judgements about future events. New information
may become available that causes the consolidated entity to change
its judgement regarding the adequacy of existing tax liabilities; such
changes to tax liabilities will impact tax expense in the period that
such a determination is made.
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 liabilities and assets on a net basis or their tax assets and
liabilities will be realised simultaneously.
1. signifiCant aCCounting poliCies (Continued)
(q) trade and other payables
Trade and other payables are initially measured at fair value and
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 when the significant risks and
rewards of ownership have been transferred to the buyer, recovery
of the consideration is probable, the associated costs and 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) Cost of goods sold
Cost of good sold comprises the cost of manufacture and purchase of
goods including supply chain costs such as freight and warehousing.
(ii) operating lease payments
Payments made under operating leases are recognised in profit
or loss on a straight-line basis over the term of the lease. Lease
incentives received are recognised as an integral part of the total
lease expense and spread over the lease term.
(iii) net financing costs
Net financing costs comprise interest payable on borrowings
calculated using the effective interest method, interest receivable on
funds invested and gains and losses on hedging instruments that are
recognised in profit or loss. Borrowing costs are expensed as incurred
unless they relate to qualifying assets. Interest income is recognised
in profit or loss as it accrues, using the effective interest method.
(t)
income tax
Tax expense comprises current and deferred tax. Current and
deferred tax are recognised in profit or loss except to the extent that
it relates to a business combination, or items recognised directly in
equity or in other comprehensive income.
Current tax is the expected tax payable or receivable on the taxable
income or loss 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. Current tax payable also includes any tax
liability arising from the declaration of dividends.
GWA GROUP LIMITED ∕ ∕ 2013 ANNUAL REPORTGWA Group Limited And its controLLed entities ABN 15 055 964 380notes to tHe consoLidAted FinAnciAL stAtements 1. signifiCant aCCounting poliCies (Continued)
(w) discontinued operations
A discontinued operation is a component of the consolidated entity’s
business that represents a separate line of business operations
that has been disposed of or is held for sale. Classification as a
discontinued operation occurs upon disposal or when the operation
meets the criteria to be classified as held for sale if earlier. When an
operation is classified as a discontinued operation, the comparative
statement of profit or loss and other comprehensive income is
re-presented as if the operation had been discontinued from the
start of the period.
(x) segment reporting
Segment results that are reported to the CEO include items that
are directly attributable to a segment as well as those that can be
allocated on a reasonable basis. Unallocated items comprise mainly
corporate assets, head office expenses, loans and borrowings,
treasury financial instruments and income tax assets and liabilities.
(y) new standards and interpretations not yet adopted
A number of new standards, amendments to standards and
interpretations are effective for annual periods beginning after 1 July
2013, and have not been applied in preparing these consolidated
financial statements. None of these are expected to have a significant
effect on the consolidated financial statements of the consolidated
entity, except for AASB 9 Financial Instruments, which becomes
mandatory for the consolidated entity’s 2016 consolidated financial
statements and could change the classification and measurement of
financial assets. The consolidated entity does not plan to adopt this
standard early and the extent of the impact has not been determined.
(t)
income tax (continued)
A deferred tax asset is recognised for unused tax losses, tax credits
and deductible temporary differences, to the extent that it is probable
that future taxable profits will be available against which they can be
utilised. Deferred tax assets are reviewed at each reporting date and
are reduced to the extent that it is no longer probable that the related
tax benefit will be realised.
Additional income tax expenses that arise from the distribution of
cash dividends are recognised at the same time that the liability to
pay the related dividend is recognised. The consolidated entity does
not distribute non-cash assets as dividends to its shareholders.
The Company and its wholly-owned Australian resident entities are
part of a tax-consolidated group. As a consequence, all members
of the tax-consolidated group are taxed as a single entity. The head
entity within the tax-consolidated group is GWA Group Limited.
(u) goods and services tax
Revenue, expenses and assets are recognised net of the amount
of goods and services tax (GST), except where the amount of
GST incurred is not recoverable from the taxation authority.
In these circumstances, the GST is recognised as part of the
cost of acquisition of the asset or as part of the expense.
Receivables and payables are stated with the amount of GST
included. The net amount of GST recoverable from, or payable to,
the ATO is included as a current asset or liability in the statement of
financial position.
Cash flows are included in the statement of cash flows on a gross
basis. The GST components of cash flows arising from investing and
financing activities which are recoverable from, or payable to, the ATO
are classified as operating cash flows.
(v) earnings per share
The consolidated entity presents basic and diluted earnings per share
(EPS) data for its ordinary shares. Basic EPS is calculated by dividing
the profit or loss attributable to ordinary shareholders of the Company
by the weighted average number of ordinary shares outstanding
during the period. Diluted EPS is determined by adjusting the profit
or loss attributable to ordinary shareholders and the weighted average
number of ordinary shares outstanding for the effects of all dilutive
potential ordinary shares.
55
GWA Group Limited And its controLLed entities ABN 15 055 964 380notes to tHe consoLidAted FinAnciAL stAtements 2. opeRating segments
The consolidated entity has three reportable segments, as described below. The segments are managed separately because they operate in
different markets and require different marketing strategies. For each segment the CEO reviews internal management reports on a monthly
basis. The following describes the operations in each of the consolidated entity’s reportable segments:
• Bathrooms & Kitchens – This segment includes the sale of vitreous china toilet suites, basins, plastic cisterns, tapware, baths, spas, kitchen
sinks, laundry tubs, bathroom accessories and water heaters;
• Door & Access Systems –This segment includes the sale of garage doors, door locks and levers and supply and maintenance of commercial
door systems;
• Heating & Cooling – This segment includes the sale of ducted heating and climate control systems; and
• Discontinued operations – This segment includes the sale of education, hospitality and aged care furniture and stadia seating. It also
includes the sale of sanitaryware in the North American market.
Information regarding the results of each reportable segment is included below. Performance is measured based on segment profit before
interest and income tax as included in the management reports that are reviewed by the CEO. Segment profit is used to measure performance
as management believes that such information is the most relevant in evaluating the results of the segments relative to other entities that operate
in these industries.
In thousands of AUD
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
Bathrooms
& Kitchens
Door & Access
Systems
Heating
& Cooling
Discontinued
operations
Total
External sales revenue
367,547 404,702 140,878 138,568
56,935
58,784
Inter-segment revenue
–
5
–
–
1,815
3,682
Total sales revenue
367,547 404,707 140,878 138,568
58,750
62,466
Segment result before
restructuring
64,519
67,754
10,859
14,057
5,237
6,470
Restructuring income/(expense)
(9,569)
3,477
1,749
(6,104)
(625)
–
Segment profit/(loss) before
income tax
54,950
71,231
12,608
7,953
4,612
6,470
Depreciation
Amortisation
Capital expenditure
9,643
3,683
8,975
4,354
6,799
17,363
2,745
1,134
5,158
2,455
926
681
1,280
3,893
662
912
1,220
1,811
Reportable segment assets
478,726 499,022 121,499 106,100
61,516
61,722
Reportable segment liabilities
48,496
51,511
19,466
18,935
15,096
14,520
–
–
–
–
–
–
–
–
–
–
–
12,438 565,360 614,492
3
1,815
3,690
12,441 567,175 618,182
(7,792)
80,615
80,489
–
(8,445)
(2,627)
(7,792)
72,170
77,862
267
13,314
12,609
–
6,097
6,255
195
12,619
23,262
– 661,741 666,844
–
83,058
84,966
GWA GROUP LIMITED ∕ ∕ 2013 ANNUAL REPORTGWA Group Limited And its controLLed entities ABN 15 055 964 380notes to tHe consoLidAted FinAnciAL stAtements
2. opeRating segments (Continued)
Reconciliations of reportable segment revenues, profit or loss, assets and liabilities
In thousands of AUD
Revenues
Total revenue for reportable segments
Unallocated amounts: corporate revenue
Elimination of inter-segment revenue
Elimination of discontinued operations
Consolidated revenue from continuing operations
Profit
Total profit for reportable segments
Elimination of discontinued operations
Restructuring expenses: corporate
Unallocated amounts: corporate expenses
Profit from operating activities
Net financing costs
Consolidated profit before tax from continuing operations
Assets
Total assets for reportable segments
Unallocated amounts: corporate assets*
Consolidated total assets
Liabilities
Total liabilities for reportable segments
Unallocated amounts: corporate liabilities*
Consolidated total liabilities
2013
2012
567,175
5
(1,815)
–
565,365
72,170
–
(1,986)
(14,845)
55,339
(13,324)
42,015
661,741
77,936
739,677
83,058
229,877
312,935
618,182
74
(3,690)
(12,438)
602,128
77,862
7,792
(699)
(12,917)
72,038
(14,247)
57,791
666,844
81,477
748,321
84,966
236,371
321,337
* Corporate assets include cash and cash equivalents, tax assets, employee share loans and treasury financial instruments at fair value. Corporate liabilities
include loans and borrowings, tax liabilities and treasury financial instruments at fair value.
Reconciliations of other material items
In thousands of AUD
Depreciation
Total depreciation for reportable segments
Unallocated amounts: depreciation on corporate assets
Consolidated total depreciation
Amortisation
Total amortisation for reportable segments
Unallocated amounts: amortisation on corporate assets
Consolidated total amortisation
Capital expenditure
Total capital expenditure for reportable segments
Unallocated amounts: corporate capital expenditure
Consolidated total capital expenditure
2013
13,314
429
13,743
6,097
558
6,655
12,619
2,084
14,703
2012
12,609
242
12,851
6,255
114
6,369
23,262
2,536
25,798
57
GWA Group Limited And its controLLed entities ABN 15 055 964 380notes to tHe consoLidAted FinAnciAL stAtements 2. opeRating segments (Continued)
Geographical segments
The business segments are managed on a worldwide basis, but operate mainly in one geographical area being Australia. Sales offices are
operated in New Zealand and Asia. Sales revenue from geographical areas outside Australia comprised only 4% of the consolidated entity’s
total sales revenue for the current year (2012: 5%).
In presenting information on the basis of geographical segments, segment revenue is based on the geographical location of customers.
Segment assets are based on the geographical location of the assets.
In thousands of AUD
External sales revenue
Segment assets
Capital expenditure
Major customers
Australia
Unallocated
Consolidated
2013
541,675
733,498
14,597
2012
584,531
743,303
25,693
2013
23,690
6,179
106
2012
30,035
5,018
105
2013
565,365
739,677
14,703
2012
614,566
748,321
25,798
The consolidated entity conducts business with 3 customers where the gross revenue generated from each customer exceeds 10% of the
consolidated entity’s total gross revenue. Gross revenue from these customers represent approximately $92,000,000 (2012: $97,000,000),
$76,000,000 (2012: $84,000,000) and approximately $71,000,000 (2012: $71,000,000) respectively of the consolidated entity’s total gross
revenues for the current year of approximately $633,000,000 (2012: $674,000,000). The difference between gross revenue and reported sales
revenue is due to industry rebates. The revenues from these customers are reported in the Bathrooms & Kitchens, Door & Access Systems and
the Heating & Cooling segments.
3. disContinued opeRations
In the prior financial year, the commercial furniture and the North American sanitaryware businesses were sold. The results of these businesses
are reported as discontinued operations in the prior period.
In thousands of AUD
Results of discontinued operations
Revenue
Expenses
Results from operating activities
Income tax
Results from operating activities, net of income tax
Loss on sale of the discontinued operations
Income tax benefit on loss on sale of discontinued operations
Loss for the period
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
In thousands of AUD
Cash flows from discontinued operations
Net cash (used in) operating activities
Net cash from investing activities
Net cash from discontinued operations
2013
2012
–
–
–
–
–
–
–
–
–
–
2013
–
–
–
12,441
(15,002)
(2,561)
362
(2,199)
(5,231)
912
(6,518)
(2.16)
(2.15)
2012
(1,975)
23,559
21,584
GWA GROUP LIMITED ∕ ∕ 2013 ANNUAL REPORTGWA Group Limited And its controLLed entities ABN 15 055 964 380notes to tHe consoLidAted FinAnciAL stAtements 4. 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
Compensation income
Other
5. otheR expenses
In thousands of AUD
Foreign currency losses – realised
Foreign currency losses – unrealised
Restructuring expenses
Acquisition costs
6. RestRuCtuRing expenses
In thousands of AUD
Restructuring income – gains on disposal of property
Restructuring expenses
Tax benefit
Net restructuring expense/(income) after tax
7. 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
8. auditoRs’ RemuneRation
In AUD
Audit services
Auditors of the Company
KPMG Australia:
Audit and review of financial reports
Other regulatory services
Overseas KPMG Firms:
Audit and review of financial reports
Other services
Auditors of the Company
KPMG Australia:
Taxation services
Other services
Overseas KPMG Firms:
Taxation services
2013
11
29
3,335
1,993
1,150
6,518
2013
37
–
13,968
839
14,844
2013
(3,537)
13,968
(4,190)
6,241
2012
233
1,204
9,632
742
1,036
12,847
2012
86
53
13,180
133
13,452
2012
(9,854)
13,180
(3,947)
(621)
2013
2012
139,461
277
139,738
148,211
321
148,532
2013
2012
466,000
3,500
12,000
481,500
10,860
–
17,121
27,981
455,000
3,500
12,000
470,500
28,682
45,660
31,132
105,474
59
GWA Group Limited And its controLLed entities ABN 15 055 964 380notes to tHe consoLidAted FinAnciAL stAtements 9. net finanCing Costs
In thousands of AUD
Finance income
Interest income on call deposits
Unwinding of discount on loans and provisions
Other
Finance expense
Interest expense on financial liabilities
Interest expense on swaps
Facility fees on financial liabilities
Establishment fee amortisation
Other
Net financing costs
10. inCome tax expense
Recognised in the consolidated statement of profit or loss and other comprehensive income
In thousands of AUD
Current tax expense
Current year
Adjustments for prior years
Deferred tax expense
Origination and reversal of temporary differences
Income tax expense from continuing operations
Income tax (benefit)/expense from discontinued operations (excluding loss on sale)
Income tax benefit on loss on sale of discontinued operations
2013
880
455
144
1,479
7,119
1,892
4,891
854
47
14,803
13,324
2013
8,569
(560)
8,009
1,616
9,625
–
–
2012
1,226
674
79
1,979
10,061
674
4,897
521
73
16,226
14,247
2012
14,818
(2,374)
12,444
(826)
11,618
(362)
(912)
Total income tax expense in the consolidated statement
of profit or loss and other comprehensive income
9,625
10,344
GWA GROUP LIMITED ∕ ∕ 2013 ANNUAL REPORTGWA Group Limited And its controLLed entities ABN 15 055 964 380notes to tHe consoLidAted FinAnciAL stAtements
10. inCome tax expense (Continued)
Numerical reconciliation between tax expense and pre-tax net profit
In thousands of AUD
Profit before tax
Income tax using the domestic tax rate of 30% (2012: 30%)
Increase in income tax expense due to:
Non-deductible expenses
Non-deductible acquisition and disposal costs
Tax losses not recognised
Decrease in income tax expense due to:
Effect of tax rate in foreign jurisdictions
Capital gains offset with prior capital losses
Deductible share-based payments
Building depreciation allowance
Rebateable research and development
Over provided in prior years
Income tax expense on pre-tax net profit
Deferred tax recognised directly in equity
In thousands of AUD
Derivatives
11. eaRnings peR shaRe
Basic earnings per share
2013
42,015
12,605
170
55
25
–
(1,771)
(164)
(23)
(712)
10,185
(560)
9,625
2013
840
2012
49,999
15,000
274
–
437
(10)
(2,477)
(116)
(33)
(357)
12,718
(2,374)
10,344
2012
(631)
Calculation of basic earnings per share at 30 June 2013 was based on the profit attributable to ordinary shareholders of $32,390,000
(2012: $39,655,000) and a weighted average number of ordinary shares of 304,439,000 (2012: 301,662,000) calculated as follows:
Cents per share
Profit attributable to ordinary shareholders
In thousands of AUD
Continuing operations
Discontinued operations
Profit for the year
Weighted average number of ordinary shares
In thousands of shares
Issued ordinary shares at 1 July
Effect of shares issued
Weighted average number of ordinary shares at 30 June
2013
10.64
2013
32,390
–
32,390
2013
302,006
2,433
304,439
2012
13.15
2012
46,173
(6,518)
39,655
2012
301,525
137
301,662
61
GWA Group Limited And its controLLed entities ABN 15 055 964 380notes to tHe consoLidAted FinAnciAL stAtements 11. eaRnings peR shaRe (Continued)
Diluted earnings per share
Calculation of diluted earnings per share at 30 June 2013 was based on the profit attributable to ordinary shareholders of $32,390,000
(2012: $39,655,000) and a weighted average number of ordinary shares of 305,872,000 (2012: 303,232,000) calculated as follows:
Cents per share
Profit attributable to ordinary shareholders (diluted)
In thousands of AUD
Continuing operations
Discontinued operations
Profit for the year
Weighted average number of ordinary shares (diluted)
In thousands of shares
Weighted average number of ordinary shares (basic)
Effect of performance rights on issue
Weighted average number of ordinary shares (diluted)
12. Cash and Cash equivalents
In thousands of AUD
Bank balances
Call deposits
Cash and cash equivalents in the statement of cash flows
2013
10.59
2013
32,390
–
32,390
2013
304,439
1,438
305,877
2013
15,711
17,046
32,757
2012
13.08
2012
46,173
(6,518)
39,655
2012
301,662
1,570
303,232
2012
12,998
17,530
30,528
The consolidated entity’s exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities are disclosed in note 26.
13. tRade and otheR ReCeivaBles
In thousands of AUD
Current
Trade receivables
Provision for impairment
Derivatives used for hedging
Employee share loans
Other
Non-current
Employee share loans
2013
2012
82,242
(1,489)
23,988
263
6,457
111,461
80,549
(1,666)
18,495
660
1,149
99,187
–
4,747
The consolidated entity’s exposure to credit and currency risk and impairment losses related to trade and other receivables are disclosed
in note 26.
GWA GROUP LIMITED ∕ ∕ 2013 ANNUAL REPORTGWA Group Limited And its controLLed entities ABN 15 055 964 380notes to tHe consoLidAted FinAnciAL stAtements 14. inventoRies
In thousands of AUD
Raw materials and consumables
Work in progress
Finished goods
2013
20,126
2,062
58,148
80,336
2012
21,310
2,571
67,885
91,766
15. aCquisitions of suBsidiaRies
On 2 October 2012 the consolidated entity acquired 100% of the shares in API Services and Solutions Pty Limited for $12,442,000.
In the nine months to 30 June 2013 the business contributed revenue of $16,994,000 and a loss before tax of $218,000. If the acquisition
had occurred on 1 July 2012, management estimates that consolidated revenue from continuing operations for the period would have been
$571,740,000 and consolidated profit before tax of continuing operations would have been $42,168,000. In determining those amounts,
management has assumed that the fair values on the date of acquisition would have been the same if the acquisition occurred on 1 July 2012.
The acquisition had the following effect on the consolidated entity’s assets and liabilities on acquisition date:
Amounts recognised on acquisition
API Services and Solutions Pty Limited
In thousands of AUD
Trade and other receivables
Inventories
Other current assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Trade and other payables
Employee benefits
Net identifiable assets and liabilities
Goodwill on acquisition
Consideration paid, satisfied in cash
2013
3,348
2,905
286
2,709
2,453
32
(2,329)
(1,517)
7,887
4,556
12,443
The goodwill recognised on the acquisition is attributable mainly to the skills and technical expertise of the acquired business’ work force and
the synergies expected to be achieved from integrating the business into the consolidated entity’s existing businesses.
The consolidated entity incurred acquisition related costs of $839,000 (2012: $133,000) related to external legal fees and due diligence costs.
16. CuRRent tax assets and liaBilities
The current tax liability for the consolidated entity of $919,000 (2012: $169,000) represents the amount of income taxes payable in respect of
the current period. There is no current tax asset for the consolidated entity in the current year (2012: $1,564,000). In accordance with the tax
consolidation legislation, the Company as the head entity of the Australian tax-consolidated group has assumed the current tax liability initially
recognised by the members in the tax-consolidated group.
63
GWA Group Limited And its controLLed entities ABN 15 055 964 380notes to tHe consoLidAted FinAnciAL stAtements
17. defeRRed tax assets and liaBilities
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
In thousands of AUD
Property, plant and equipment
Intangible assets
Inventories
Employee benefits
Provisions
Other items
Tax assets / (liabilities)
Set off of tax
Net tax assets / (liabilities)
Assets
Liabilities
Net
2013
685
1,063
3,093
7,349
6,348
3,600
22,138
(7,074)
15,064
2012
562
509
2,578
7,762
8,082
4,462
23,955
(6,467)
17,488
2013
(1,349)
(5,458)
–
–
–
(267)
(7,074)
7,074
–
2012
(1,144)
(5,240)
–
–
–
(83)
(6,467)
6,467
–
2013
(664)
(4,395)
3,093
7,349
6,348
3,333
15,064
–
15,064
2012
(582)
(4,731)
2,578
7,762
8,082
4,379
17,488
–
17,488
Unrecognised deferred tax assets
Deferred tax assets have not been recognised in respect of the following items:
In thousands of AUD
Capital losses
Revenue losses
2013
6,199
74
2012
7,779
1,463
The deductible tax losses accumulated at balance date do not expire under current tax legislation. Deferred tax assets have not been
recognised in respect of these items because it is not probable that future taxable profit will be available against which to offset the tax benefit
of these losses.
Movement in temporary differences during the year
In thousands of AUD
Property, plant and equipment
Intangible assets
Inventories
Employee benefits
Provisions
Other items
In thousands of AUD
Property, plant and equipment
Intangible assets
Inventories
Employee benefits
Provisions
Other items
Balance
1 July 11
Recognised in
income
Recognised in
equity
Acquired
in business
combinations
Disposals
Balance
30 June 12
(128)
(5,477)
2,545
8,963
9,738
1,417
17,058
(691)
823
33
(399)
(1,336)
2,396
826
–
–
–
–
–
631
631
–
–
–
–
–
–
–
237
(77)
–
(802)
(320)
(65)
(582)
(4,731)
2,578
7,762
8,082
4,379
(1,027)
17,488
Balance
1 July 12
Recognised in
income
Recognised in
equity
Acquired
in business
combinations
Disposals
Balance
30 June 13
(582)
(4,731)
2,578
7,762
8,082
4,379
17,488
(82)
1,056
251
(868)
(1,734)
(239)
(1,616)
–
–
–
–
–
(840)
(840)
–
(720)
264
455
–
33
32
–
–
–
–
–
–
–
(664)
(4,395)
3,093
7,349
6,348
3,333
15,064
GWA GROUP LIMITED ∕ ∕ 2013 ANNUAL REPORTGWA Group Limited And its controLLed entities ABN 15 055 964 380notes to tHe consoLidAted FinAnciAL stAtements Land and
buildings
Plant and
equipment
Motor vehicles
Work in
progress
18. pRopeRty, plant and equipment
In thousands of AUD
Cost
Balance at 1 July 2011
Additions
Disposals
Transfers
Effect of movements in foreign exchange
Balance at 30 June 2012
59,622
364
(11,294)
9,534
–
58,226
186,624
16,076
(34,333)
4,021
70
172,458
1,682
30
(400)
–
4
1,316
1,316
1,406
–
Balance at 1 July 2012
58,226
172,458
Acquisitions through business combinations
Additions
Disposals
Transfers
Effect of movements in foreign exchange
–
2,285
(3,013)
–
–
1,303
9,089
(10,031)
(1,676)
6,950
105
–
5
Balance at 30 June 2013
57,498
179,874
1,051
Depreciation and impairment losses
Balance at 1 July 2011
Depreciation charge for the year
Disposals
Effect of movements in foreign exchange
(9,249)
(1,061)
2,794
–
(137,042)
(11,548)
29,514
(46)
Balance at 30 June 2012
(7,516)
(119,122)
Balance at 1 July 2012
Depreciation charge for the year
Disposals
Effect of movements in foreign exchange
(7,516)
(1,084)
626
–
(119,122)
(12,348)
9,421
(89)
Balance at 30 June 2013
(7,974)
(122,138)
Carrying amounts
At 1 July 2011
At 30 June 2012
At 1 July 2012
At 30 June 2013
50,373
50,710
50,710
49,524
49,582
53,336
53,336
57,736
(718)
(242)
179
(2)
(783)
(783)
(311)
495
(5)
(604)
964
533
533
447
17,741
4,869
(342)
(13,555)
–
8,713
8,713
–
–
–
(6,950)
–
1,763
–
–
–
–
–
–
–
–
–
–
17,741
8,713
8,713
1,763
Total
265,669
21,339
(46,369)
–
74
240,713
240,713
2,709
11,374
(14,720)
–
110
240,186
(147,009)
(12,851)
32,487
(48)
(127,421)
(127,421)
(13,743)
10,542
(94)
(130,716)
118,660
113,292
113,292
109,470
65
GWA Group Limited And its controLLed entities ABN 15 055 964 380notes to tHe consoLidAted FinAnciAL stAtements 19. intangiBle assets
In thousands of AUD
Cost
Balance at 1 July 2011
Acquisitions through business combinations
Additions
Effect of movements in foreign exchange
Trade names,
designs,
patents and
customer
relationships
Software
Brand names
Goodwill
Total
22,151
4,459
(486)
–
321,111
21,547
46,358
–
(12,400)
6
–
–
–
–
–
–
411,167
4,459
(12,886)
6
Balance at 30 June 2012
26,124
308,717
21,547
46,358
402,746
Balance at 1 July 2012
Acquisitions through business combinations
Additions
Disposals
Effect of movements in foreign exchange
26,124
53
3,329
(78)
–
308,717
–
–
–
29
21,547
2,400
46,358
4,556
–
–
–
–
–
–
402,746
7,009
3,329
(78)
29
Balance at 30 June 2013
29,428
308,746
23,947
50,914
413,035
Amortisation
Balance at 1 July 2011
Amortisation for the year
Disposals
Balance at 30 June 2012
Balance at 1 July 2012
Amortisation for the year
Disposals
Balance at 30 June 2013
Carrying amounts
At 1 July 2011
At 30 June 2012
At 1 July 2012
At 30 June 2013
(11,297)
(5,149)
49
(16,397)
(16,397)
(5,301)
77
(21,621)
10,854
9,727
9,727
7,807
–
–
–
–
–
–
–
–
321,111
308,717
308,717
308,746
(1,592)
(1,220)
–
(2,812)
(2,812)
(1,354)
–
(4,166)
19,955
18,735
18,735
19,781
–
–
–
–
–
–
–
–
46,358
46,358
46,358
50,914
(12,889)
(6,369)
49
(19,209)
(19,209)
(6,655)
77
(25,787)
398,278
383,537
383,537
387,248
GWA GROUP LIMITED ∕ ∕ 2013 ANNUAL REPORTGWA Group Limited And its controLLed entities ABN 15 055 964 380notes to tHe consoLidAted FinAnciAL stAtements 19. intangiBle assets (Continued)
Carrying value of brand names and goodwill for each cash generating unit and segment
In thousands of AUD
CaromaDorf
Dux
Bathrooms & Kitchens
API Locksmiths
Gainsborough
Gliderol
Door & Access Systems
Heating & Cooling
2013
284,146
6,000
290,146
4,556
20,049
24,075
48,680
20,834
359,660
2012
284,117
6,000
290,117
–
20,049
24,075
44,124
20,834
355,075
Impairment testing for brand names and goodwill
The recoverable amounts of all brand names and goodwill were assessed at 30 June 2013 based on internal value in use calculations and
no impairment was identified for any cash generating units (2012: nil for all cash generating units).
Value in use was determined by discounting the future cash flows to be generated from the continuing use of the business unit and to which
the brand or goodwill is attached and was based on the following assumptions:
• Cash flows were projected based on actual operating results and business plans of the units approved by the Board, with projected cash
flows 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% (2012: 2.5%) in calculating terminal values of the units, which does not exceed the
long-term average growth rate for the industry; and
• A pre-tax discount rate of 12.30% was used (2012: 12.26%).
The key assumptions relate to dwelling completions, economic activity and market share. The values assigned to the key assumptions represent
management’s assessment of future trends in the Bathrooms & Kitchens, Door & Access Systems and Heating & Cooling industries and are
based on both external sources and internal sources (historical data). The recoverable amount of the cash generating units exceeds their
carrying values at 30 June 2013. The recoverable amount of the Gliderol business exceeds it carrying value by $8,200,000. An increase in
the discount rate of 1.5% or a reduction in long term forecast dwelling completions that reduce the cash flow forecast by 15% would reduce
the recoverable amount of the Gliderol business to its carrying value. Management believe no other reasonably probable changes to the key
assumptions used in the calculations would cause the carrying amount to exceed the recoverable amount of the cash generating units.
20. tRade and otheR payaBles
In thousands of AUD
Current
Trade payables and accrued expenses
Derivatives used for hedging
Non-trade payables and accrued expenses
The consolidated entity’s exposure to currency risk and liquidity risk related to trade and other payables are disclosed in note 26.
2013
2012
50,176
24,400
795
75,371
45,069
21,706
1,324
68,099
67
GWA Group Limited And its controLLed entities ABN 15 055 964 380notes to tHe consoLidAted FinAnciAL stAtements
21. loans and BoRRowings
This note provides information about the contractual terms of the consolidated entity’s 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 cash advance facilities
Terms and debt repayment schedule
In thousands of AUD
Unsecured cash advance facilities
Unsecured cash advance facilities
Currency
AUD
AUD
2013
195,000
Year of
maturity
2016
2018
2013
Face
value
195,000
–
2013
Carrying
amount
195,000
–
195,000
195,000
2012
Face
value
200,000
5,000
205,000
2012
205,000
2012
Carrying
amount
200,000
5,000
205,000
The unsecured cash advance facilities mature over the next 3 to 5 financial years and have variable rates ranging from 4.68% – 5.03%
at 30 June 2013 (2012: 5.36% – 5.66%).
Financing facilities
In thousands of AUD
Bank overdraft
Standby letters of credit
Bank guarantees
Unsecured cash advance facility
Facilities utilised at reporting date
Bank overdraft
Standby letters of credit
Bank guarantees
Unsecured cash advance facility
Facilities not utilised at reporting date
Bank overdraft
Standby letters of credit
Bank guarantees
Unsecured cash advance facility
2013
1,000
12,000
9,200
275,000
297,200
–
–
2,965
195,000
197,965
1,000
12,000
6,235
80,000
99,235
2012
1,000
12,000
4,200
300,000
317,200
–
135
1,445
205,000
206,580
1,000
11,865
2,755
95,000
110,620
GWA GROUP LIMITED ∕ ∕ 2013 ANNUAL REPORTGWA Group Limited And its controLLed entities ABN 15 055 964 380notes to tHe consoLidAted FinAnciAL stAtements
21. loans and BoRRowings (Continued)
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 2013.
Unsecured cash advance facility
Bank loans are provided to GWA Finance Pty Limited under the Multi-currency Revolving Facility Agreement. The bank loans at reporting date
are denominated in Australian dollars. The bank loans are unsecured with a negative pledge in favour of the banks, and are split between three
year and five year terms.
The loans bear interest at market rates and interest is typically 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.
Bank guarantees
The bank guarantees are committed facilities available to be drawn down under the facility agreement. The limits are specified in the
facility agreement.
22. employee Benefits
In thousands of AUD
Current
Liability for annual leave
Liability for long-service leave
Non-current
Liability for long-service leave
2013
2012
9,588
2,224
11,812
11,195
2,341
13,536
12,693
12,346
Defined contribution superannuation funds
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 $9,723,000 for the financial
year ended 30 June 2013 (2012: $10,440,000).
Employee share plan
During the financial year, the consolidated entity discontinued the employee share plan (‘the Plan’) as it failed to achieve its objectives as a long
term incentive for employees. In March 2013, employees were given the option of selling their shares on-market with any loan deficiency being
waived by the consolidated entity. If an employee did not choose this option, the employee would remain subject to the Plan rules which require
loans to be repaid in full by the employee.
Due to the cessation of the Plan no shares were issued to employees in 2013. In the prior year, 480,500 ordinary shares were issued to
employees at the market price of $2.27, being total market value of $1,090,000 with listing fees of $5,000.
As at 30 June 2013, loans are issued for 162,500 shares (2012: 4,051,750) and the remaining balances of these loans is $263,000
(2012: $8,769,000). During 2013, dividends of $503,000 (2012: $660,000) were paid against the loans, a further $7,781,000
(2012: $575,000) was paid by employees against these loans and $222,000 was written-off.
69
GWA Group Limited And its controLLed entities ABN 15 055 964 380notes to tHe consoLidAted FinAnciAL stAtements 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 but 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 based on a 50% allocation of each grant to the two performance hurdles. 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.
For performance rights granted to executives in the 2012/13 year, the performance hurdles and vesting proportions for the EPS performance
measure is outlined in the table below. The base year EPS for the 2013 Long Term Incentive (Equity) Plan grant was 15.1 cents.
Compound annual EPS Growth
Proportion of Performance Rights to Vest if EPS growth hurdle is met
Less than 3% per annum
3% per annum
0%
25%
Between 3% and 8% per annum
Straight line vesting between 25% and 50%
8% or higher per annum
50% (i.e. 50% of total grant)
For performance rights granted to executives in the 2012/13 year, the performance hurdles and vesting proportions for the TSR performance
measure is outlined in the table below.
TSR of GWA Group Limited relative
to TSRs of Comparator Companies
Less than the 50th percentile
50th percentile
Proportion of Performance Rights to Vest if TSR hurdle is met
0%
25%
Between the 50th percentile and 75th percentile
Straight line vesting between 25% and 50%
75th percentile or higher
50% (i.e. 50% of total grant)
For further details of the Long Term Incentive (Equity) Plan, please refer to the Remuneration Report.
Tranche
Grant date
Expiry date
Balance at
beginning of
the year
Granted
during
the year
Cancelled
during the
year
Vested
during the
year
Forfeited
during the
year
Balance at
end of the
year
Number
Number
Number
Number
Number
Number
2013
(i)
(ii)
(iii)
(iv)
2012
(i)
(ii)
(iii)
(iv)
12/03/2010
30/06/2012
21/02/2011
30/06/2013
17/02/2012
30/06/2014
375,000
680,000
780,000
–
–
–
25/02/2013
30/06/2015
–
972,000
–
(375,000)
–
(100,000)
(195,000)
–
–
–
–
(290,000)
–
–
–
290,000
585,000
972,000
1,835,000
972,000
(295,000)
(375,000)
(290,000)
1,847,000
27/02/2009
30/06/2011
12/03/2010
30/06/2012
21/02/2011
30/06/2013
470,000
845,000
720,000
–
–
–
17/02/2012
30/06/2014
–
780,000
–
(470,000)
–
(95,000)
(40,000)
–
–
–
–
(375,000)
–
–
–
375,000
680,000
780,000
2,035,000
780,000
(135,000)
(470,000)
(375,000)
1,835,000
No performance rights were vested and exercisable at 30 June 2013.
GWA GROUP LIMITED ∕ ∕ 2013 ANNUAL REPORTGWA Group Limited And its controLLed entities ABN 15 055 964 380notes to tHe consoLidAted FinAnciAL stAtements
23. shaRe-Based payments (Continued)
Fair value
During the current financial year 972,000 performance rights were granted to employees (2012: 780,000) at a weighted average fair value of
$1.96 (2012: $1.44). The fair value of the performance rights subject to the EPS hurdle for vesting (50%) was determined as $2.18 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
$1.74 by using a Monte Carlo simulation. When determining the fair values it was assumed the Company would have a dividend yield of 5.5%,
the risk free rate was 2.85% and volatility ranged between 30-35% 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 $277,000 (2012: $321,000). Refer to the Remuneration Report for
further details.
24. pRovisions
In thousands of AUD
Balance at 1 July 2012
Provisions made during the year
Provisions used during the year
Effect of movements in foreign exchange
Balance at 30 June 2013
Current
Non-current
Warranties
Warranties
Restructuring
Site restoration
13,698
4,129
(6,044)
–
11,783
6,989
4,794
11,783
2,483
13,960
(14,581)
17
1,879
1,783
96
1,879
3,513
8
(1,527)
–
1,994
604
1,390
1,994
Other
2,493
48
(1,057)
–
1,484
1,384
100
1,484
Total
22,187
18,145
(23,209)
17
17,140
10,760
6,380
17,140
The total provision for warranties at balance date of $11,783,000 relates to future warranty expense on products sold during the current
and previous financial years. The major warranty expense relates to water heating products. The provision is based on estimates made from
historical warranty data associated with similar products and services. The consolidated entity expects to expend $6,989,000 of the total
provision in the financial year ending 30 June 2014, and the majority of the balance of the liability over the following four years. The net
present value of the provision has been calculated using a discount rate of 3.54%.
Restructuring
The restructuring provision relates to the estimated costs of redundancies, site closures and product rationalisation related to the business
restructuring announced in December 2012. During the financial year ended 30 June 2013, restructuring was undertaken across all operating
segments with $13,960,000 being provided and $14,581,000 being utilised. At balance date the balance of the restructuring provision was
$1,879,000 with the majority to be utilised in the next financial year.
Site restoration
The provision for site restoration at balance date of $1,994,000 relates to site remediation and 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. Payments of $1,527,000
were made in the current financial year. The balance remaining will be utilised when leased sites are exited.
71
GWA Group Limited And its controLLed entities ABN 15 055 964 380notes to tHe consoLidAted FinAnciAL stAtements 25. Capital and ReseRves
Share capital
In thousands
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
Ordinary shares
2013
302,006
4,528
–
306,534
2012
301,525
AUD
2013
398,930
2012
397,844
–
9,170
–
481
302,006
–
408,100
1,086
398,930
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 the cumulative net charges of the performance rights.
Dividends
Dividends recognised in the current year are:
In thousands of AUD
Cents per share
Total amount
Franked
Date of payment
2013
Interim 2013 ordinary
Final 2012 ordinary
Total amount
2012
Interim 2012 ordinary
Final 2011 ordinary
Total amount
6.0
8.5
14.5
9.5
8.5
18.0
18,283
25,670
43,953
28,645
25,630
54,275
100%
100%
100%
100%
4th April 2013
4th Oct 2012
4th April 2012
6th Oct 2011
Franked dividends declared or paid during the year were franked at the tax rate of 30%.
GWA GROUP LIMITED ∕ ∕ 2013 ANNUAL REPORTGWA Group Limited And its controLLed entities ABN 15 055 964 380notes to tHe consoLidAted FinAnciAL stAtements 25. Capital and ReseRves (Continued)
Dividends (continued)
After balance 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
Cents per share
Total amount
Final ordinary
6.0
18,392
Franked
100%
Date of payment
4th Oct 2013
The financial effect of these dividends has not been brought to account in the financial statements for the financial year ended 30 June 2013
and will be recognised in subsequent financial reports.
Dividend franking account
In thousands of AUD
30 per cent franking credits available to shareholders of
GWA Group Limited for subsequent financial years
The Company
2013
4,513
2012
14,722
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 balance date, but not recognised as a liability, is to reduce it by $7,882,000
(2012: $11,001,000). In accordance with the tax consolidation legislation, the Company as the head entity in the tax-consolidated group
has also assumed the benefit of $4,513,000 (2012: $14,722,000) 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, 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 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. 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.
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.
73
GWA Group Limited And its controLLed entities ABN 15 055 964 380notes to tHe consoLidAted FinAnciAL stAtements 26. finanCial instRuments and finanCial Risk management (Continued)
Credit risk
Credit risk is the risk of financial loss to the consolidated entity 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 three major customers which comprise 40% of the trade receivables carrying amount at 30 June 2013
(2012: 41%). At balance 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. The maximum exposure to credit
risk at balance date was:
In thousands of AUD
Cash and cash equivalents
Trade receivables
Employee share loans
Forward exchange contracts used for hedging
2013
32,757
82,242
263
23,988
139,250
2012
30,528
80,549
5,407
18,495
134,979
The ageing of 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 61-120 days
Past due 120+ days
Less accrued rebates and credit claims
There were no trade receivables with re-negotiated terms.
2013
Receivable
2013
Impairment
2012
Receivable
2012
Impairment
61,663
33,913
2,904
755
2,458
(19,451)
82,242
(70)
(40)
(4)
(80)
(1,295)
–
(1,489)
68,186
30,161
1,797
1,264
2,984
(23,843)
80,549
(70)
(61)
(35)
(312)
(1,188)
–
(1,666)
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)/reversed
Impairment losses applied
Acquired through business combinations
Disposals
Effect of movements in foreign exchange
Balance at 30 June
2013
(1,666)
(610)
949
(162)
–
–
2012
(2,200)
(231)
646
–
122
(3)
(1,489)
(1,666)
GWA GROUP LIMITED ∕ ∕ 2013 ANNUAL REPORTGWA Group Limited And its controLLed entities ABN 15 055 964 380notes to tHe consoLidAted FinAnciAL stAtements 26. finanCial instRuments and finanCial Risk management (Continued)
Liquidity risk
Liquidity risk is the risk that the consolidated entity will not be able to meet its financial obligations as they fall due. The consolidated entity
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 are controlled by management and
reported monthly to the Board who is ultimately responsible for maintaining liquidity.
The contractual maturities of financial liabilities and derivatives that are cash flow hedges of the consolidated entity, including estimated interest
payments are as follows:
Maturity analysis
In thousands of AUD
2013
Non-derivative financial liabilities
Carrying
amount
Contractual
cash flows
Less than
6 months
6–12
months
1–2
years
3–5
years
5+
years
Unsecured cash advance facilities
(195,000)
(252,702)
(9,329)
(9,329)
(18,659)
(215,385)
Trade and other payables
(50,176)
(50,176)
(50,176)
–
–
–
Derivative financial liabilities
Interest rate swaps designated
as hedges
Forward exchange contracts
designated as hedges – outflow
Forward exchange contracts
designated as hedges – inflow
(1,939)
(2,045)
(784)
(629)
(452)
(180)
(22,461)
(22,461)
(22,461)
23,988
23,988
23,988
–
–
–
–
–
–
Total at 30 June 2013
(245,588)
(303,396)
(58,762)
(9,958)
(19,111)
(215,565)
–
–
–
–
–
–
2012
Non-derivative financial liabilities
Unsecured cash advance facilities
(205,000)
(279,454)
(12,515)
(12,515)
(25,030)
(224,394)
(5,000)
Trade and other payables
(45,069)
(45,069)
(45,021)
(48)
–
–
Derivative financial liabilities
Interest rate swaps designated
as hedges
Forward exchange contracts
designated as hedges – outflow
Forward exchange contracts
designated as hedges – inflow
(3,096)
(2,026)
(806)
(599)
(559)
(62)
(18,610)
(18,610)
(18,610)
18,495
18,495
18,495
–
–
–
–
–
–
–
–
–
–
Total at 30 June 2012
(253,280)
(326,664)
(58,457)
(13,162)
(25,589)
(224,456)
(5,000)
The unsecured cash advance facilities are split between three year and five year terms. The periods in which the cash flows associated with
derivatives arise match the periods of profit and loss impact.
75
GWA Group Limited And its controLLed entities ABN 15 055 964 380notes 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 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 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 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 3 years and have fixed swap rates ranging from 3.37% to 5.20% (2012: 3.86% to 5.42%). At 30 June 2013, the consolidated
entity had interest rate swaps in operation with a notional contract amount of $125,000,000 (2012: $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 2013 was $1,939,000 recognised as a fair value derivative liability. (2012: $3,096,000 fair value
derivative liability).
(i) profile
At balance date the consolidated entity’s interest bearing financial instruments were:
In thousands of AUD
Notional value
Carrying amount
Notional value
Carrying amount
2013
2013
2012
2012
Variable rate financial instruments
Unsecured cash advance facilities
Bank balances
Call deposits
Fixed rate financial instruments
Interest rate swap derivatives
Total
(195,000)
15,711
17,046
(162,243)
125,000
(37,243)
(195,000)
15,711
17,046
(162,243)
(1,939)
(164,182)
(205,000)
12,998
17,530
(174,472)
125,000
(49,472)
(205,000)
12,998
17,530
(174,472)
(3,096)
(177,568)
GWA GROUP LIMITED ∕ ∕ 2013 ANNUAL REPORTGWA Group Limited And its controLLed entities ABN 15 055 964 380notes 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 equity and financial assets
and liabilities as follows:
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
2013
2012
(2,135)
196
1,939
–
2,181
–
(2,181)
–
(2,622)
–
2,622
–
2,690
–
(2,690)
–
(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 profit or loss as follows:
In thousands of AUD
Increase of 100 basis points
Unsecured cash advance facilities (AUD)
Unsecured cash advance facilities (USD)
Bank balances
Interest rate swap derivatives
Call deposits variable rate
Call deposits fixed rate
Decrease of 100 basis points
Unsecured cash advance facilities (AUD)
Unsecured cash advance facilities (USD)
Bank balances
Interest rate swap derivatives
Call deposits variable rate
Call deposits fixed rate
2013
2012
(2,259)
–
157
1,388
266
39
(409)
2,259
–
(157)
(1,388)
(266)
(39)
409
(2,519)
(25)
130
1,141
269
8
(996)
2,519
9
(130)
(1,141)
(267)
(8)
982
77
GWA Group Limited And its controLLed entities ABN 15 055 964 380notes to tHe consoLidAted FinAnciAL stAtements 26. finanCial instRuments and finanCial Risk management (Continued)
Market risk (continued)
b) foreign currency risk
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. The consolidated entity is also exposed to foreign currency risk on
retranslation of the financial statements of foreign subsidiaries. The currencies giving rise to this risk are primarily USD, NZD, EUR and RMB.
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 date. The consolidated entity classifies its
forward exchange contracts hedging forecasted transactions as cash flow hedges and states them at fair value. The estimated forecast sales and
purchases in the tables below are for the six month period after the respective balance dates.
(i) exposure to currency risk
In thousands of AUD equivalent
Currency transaction risk
2013
Trade receivables
Trade payables
Cash
Net balance sheet exposure
Estimated forecast sales
Estimated forecast purchases
Net forecast transaction exposure
Forward exchange contracts
Net exposure 30 June 2013
Foreign exchange rates at balance date
2012
Trade receivables
Trade payables
Cash
Net balance sheet exposure
Estimated forecast sales
Estimated forecast purchases
Net forecast transaction exposure
Forward exchange contracts
Net exposure 30 June 2012
Foreign exchange rates at balance date
Currency translation risk
2013
Net assets
2012
Net assets
USD
NZD
EUR
RMB
–
(2,816)
1,546
(1,270)
–
(39,172)
(39,172)
19,623
(20,819)
0.9275
285
(1,120)
2,030
1,195
–
(32,795)
(32,795)
15,602
(15,998)
1.0191
–
–
–
(5)
51
46
9,351
(5,397)
3,953
(3,791)
209
1.1871
–
(49)
1,669
1,620
8,983
(4,422)
4,561
(1,762)
4,419
1.2771
2,441
1,708
–
(331)
78
(253)
–
(3,452)
(3,452)
493
(3,211)
0.7095
–
(839)
553
(286)
–
(5,943)
(5,943)
1,050
(5,179)
0.8092
–
–
–
(372)
377
5
–
(4,299)
(4,294)
–
(4,294)
5.6991
–
(299)
6
(293)
–
(4,817)
(4,817)
–
(5,110)
6.4776
45
134
GWA GROUP LIMITED ∕ ∕ 2013 ANNUAL REPORTGWA Group Limited And its controLLed entities ABN 15 055 964 380notes to tHe consoLidAted FinAnciAL stAtements
26. finanCial instRuments and finanCial Risk management (Continued)
Market risk (continued)
b) foreign currency risk (continued)
(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.
Fair values
The fair values of financial assets and liabilities, together with the carrying amounts shown in the statement of financial position are as follows:
In thousands of AUD
Cash and cash equivalents
Trade and other receivables
Interest rate swaps:
Liabilities
Forward exchange contracts:
Assets
Liabilities
Unsecured cash advance facilities
Trade payables and accrued expenses
Estimation of fair values
Carrying amount
2013
32,757
87,473
Fair value
2013
32,757
87,473
Carrying amount
2012
30,528
85,439
Fair value
2012
30,528
85,439
(1,939)
(1,939)
(3,096)
(3,096)
23,988
(22,461)
(195,000)
(50,971)
(126,153)
23,988
(22,461)
(195,000)
(50,971)
(126,153)
18,495
(18,610)
(205,000)
(46,393)
(138,637)
18,495
(18,610)
(205,000)
(46,393)
(138,637)
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) loans and borrowings
The notional amount of the interest-bearing loans is deemed to reflect the fair value. The interest-bearing loans are split between three year
and five year terms.
(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.
79
GWA Group Limited And its controLLed entities ABN 15 055 964 380notes to tHe consoLidAted FinAnciAL stAtements 26. finanCial instRuments and finanCial Risk management (Continued)
Estimation of fair values (continued)
(v) interest rates used for determining fair value
The consolidated entity uses the government yield curve as of 30 June 2013 plus an adequate constant credit spread to discount financial
instruments. The interest rates used are as follows:
Derivatives
Employee share loans and other loans
Loans and borrowings
(vi) fair value hierarchy
2013
2012
2.66% – 3.65%
3.14% – 3.58%
n/a
7.40% – 7.80%
4.68% – 5.03%
5.36% – 5.66%
The consolidated entity recognises the fair value of its financial instruments using the level 2 valuation method. The different levels have been
defined as follows:
• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities
• Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices)
or indirectly (i.e. derived from prices)
• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs)
In thousands of AUD
30 June 2013
Forward exchange contracts used for hedging
Interest rate swaps used for hedging
Forward exchange contracts used for hedging
Interest rate swaps used for hedging
30 June 2012
Forward exchange contracts used for hedging
Interest rate swaps used for hedging
Forward exchange contracts used for hedging
Interest rate swaps used for hedging
Level 1
Level 2
Level 3
Total
–
–
–
–
–
–
–
–
–
–
–
–
23,988
–
23,988
(22,461)
(1,939)
(24,400)
18,495
–
18,495
(18,610)
(3,096)
(21,706)
–
–
–
–
–
–
–
–
–
–
–
–
23,988
–
23,988
(22,461)
(1,939)
(24,400)
18,495
–
18,495
(18,610)
(3,096)
(21,706)
GWA GROUP LIMITED ∕ ∕ 2013 ANNUAL REPORTGWA Group Limited And its controLLed entities ABN 15 055 964 380notes to tHe consoLidAted FinAnciAL stAtements 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
2013
13,017
28,678
3,132
44,827
2012
12,401
28,411
5,431
46,243
The consolidated entity leases warehouse, factory and office facilities and motor vehicles under operating leases. The warehouse, factory
and office facility leases typically run for a period of 3 to 8 years, with an option to renew the lease after that date. None of the leases include
contingent rentals.
During the financial year ended 30 June 2013, $16,576,000 (2012: $14,111,000) was recognised as an expense in profit or loss in respect
of operating leases.
28. Capital Commitments
In thousands of AUD
Capital expenditure commitments
Plant and equipment
Contracted but not provided for and payable:
Within one year
29. ContingenCies
Environmental remediation
2013
2012
2,981
4,111
In previous financial years, the consolidated entity investigated and reported two environmental contamination issues at factory sites at
Revesby, New South Wales and Eagle Farm, Queensland. The Revesby site was previously leased and occupied by McIlwraith-Davey Pty Ltd,
a wholly owned subsidiary of GWA Group Limited. The site was exited on the lease expiry date of 30 April 2013. The Eagle Farm site was
previously occupied by Corille Limited (formerly Rover Mowers Limited) and was exited in a prior financial year following the sale of the
Rover Mowers business.
The remediation activities at the Revesby site were substantially completed at 30 June 2013. Post remediation groundwater testing has
continued during the current financial year and the consolidated entity expects to finalise all remediation requirements at the Revesby site
during the 2014 financial year. The remediation activities at the Eagle Farm site were completed during the prior financial year.
The remediation provision at 30 June 2013 is $87,000 which the directors consider adequate.
Brivis evaporative cooler recalls
Since the acquisition of Brivis in April 2010, the consolidated entity has continued product recalls commenced by the former owner, Carrier, for
Brivis evaporative coolers manufactured between August 2000 and November 2003 due to defective components. The total cost of the product
recalls and associated product liability claims cannot be reliably estimated at this stage. The Brivis purchase agreement provides that Carrier is
responsible for product recall and product liability costs above specified thresholds with an overall cap on Carrier’s liability. A progress claim in
the amount of $953,000 was submitted to Carrier in May 2013 under the Brivis purchase agreement.
The directors believe the provision at 30 June 2013 of $970,000 in respect of potential product liability and product recall costs is adequate.
81
GWA Group Limited And its controLLed entities ABN 15 055 964 380notes to tHe consoLidAted FinAnciAL stAtements 29. ContingenCies (Continued)
Supplier dispute
The consolidated entity received a demand letter in June 2013 from lawyers representing a former China sanitaryware supplier, Carlyle
Sanitaryware Co Ltd, in relation to the termination of its business relationship with Caroma Industries Limited, a wholly owned subsidiary
of GWA Group Limited. The letter demanded the immediate payment to Carlyle of specified amounts covering Carlyle’s stock holdings,
compensation for lost sales revenue, interest and legal costs. Carlyle has threatened legal action if the payments are not made.
The consolidated entity has rejected the demands expressed in the demand letter and denied any liability to Carlyle following the
termination of its business relationship with Caroma Industries Limited. The consolidated entity has outlined its own claims against
Carlyle for breach of contract and infringement of Caroma Industries Limited’s intellectual property rights. On that basis, no amount
has been provided at 30 June 2013 in respect of this matter.
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 statement of profit or loss and other comprehensive income and consolidated statement of financial position, 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 2013, is set out below.
Summarised statement of profit or loss and other comprehensive income and retained profits
In thousands of AUD
Sales revenue
Cost of sales
Gross profit
Operating expenses
Finance income
Finance expenses
Profit before tax
Income tax expense
Profit after tax
Total comprehensive income for the period, net of tax
Retained earnings at beginning of year
Dividends recognised during the year
Share-based payments, net of income tax
Retained earnings at end of the year
2013
547,663
(336,801)
210,862
(156,671)
1,476
(14,803)
40,864
(8,955)
31,909
31,909
26,266
(43,953)
70
14,292
2012
592,989
(362,493)
230,496
(168,038)
1,979
(16,226)
48,211
(9,597)
38,614
38,614
42,191
(54,275)
(264)
26,266
GWA GROUP LIMITED ∕ ∕ 2013 ANNUAL REPORTGWA Group Limited And its controLLed entities ABN 15 055 964 380notes to tHe consoLidAted FinAnciAL stAtements 30. deed of CRoss guaRantee (Continued)
Statement of financial position
In thousands of AUD
Assets
Cash and cash equivalents
Trade and other receivables
Inventories
Income tax receivable
Other
Total current assets
Receivables
Intercompany receivables
Investments
Deferred tax assets
Property, plant and equipment
Intangible assets
Other
Total non-current assets
Total assets
Liabilities
Trade and other payables
Income tax payable
Employee benefits
Provisions
Total current liabilities
Loans and borrowings
Employee benefits
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained earnings
Total equity
2013
2012
30,766
108,620
77,421
–
2,042
218,849
–
36,996
11,113
15,003
69,479
383,226
1,118
516,935
735,784
74,584
657
11,728
10,860
97,829
195,000
12,669
6,379
214,048
311,877
423,907
408,100
1,515
14,292
423,907
29,085
96,936
89,428
1,537
2,496
219,482
4,747
35,213
11,435
17,418
74,579
379,543
3,521
526,456
745,938
67,486
–
13,433
13,857
94,776
205,000
12,337
8,330
225,667
320,443
425,495
398,930
299
26,266
425,495
83
GWA Group Limited And its controLLed entities ABN 15 055 964 380notes to tHe consoLidAted FinAnciAL stAtements 31. Consolidated entities
Parent entity
GWA Group Limited
Subsidiaries
API Services and Solutions Pty Limited
Austral Lock Pty Ltd
Brivis Climate Systems Pty Ltd
Canereb Pty Ltd
Caroma Holdings Limited
Caroma Industries Limited
Caroma Industries (NZ) Limited
Caroma International Pty Ltd
Caroma USA Inc
Corille Limited
Dorf Clark Industries Ltd
Dorf Industries (NZ) Ltd
Dux Manufacturing Limited
G Subs Pty Ltd
Gainsborough Hardware Industries Limited
Gliderol International Pty Limited
GWA Finance Pty Limited
GWA Group Holdings Limited
GWAIL (NZ) Ltd
GWA Taps Manufacturing Limited
GWA Trading (Shanghai) Co Ltd
Industrial Mowers (Australia) Limited
Mainrule Limited
McIlwraith Davey Pty Ltd
Sebel Furniture Holdings Pty Ltd
Starion Tapware Pty Ltd
Stylus Pty Ltd
Warapave Pty Ltd
Parties to cross
guarantee
Country of
incorporation
Ownership interest
2013
2012
Y
Y
Y
Y
N
Y
Y
N
Y
N
Y
Y
N
Y
Y
Y
Y
Y
Y
N
Y
N
Y
N
Y
Y
Y
Y
N
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
Australia
USA
Australia
Australia
New Zealand
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
Australia
China
Australia
New Zealand
Australia
Australia
Australia
Australia
Australia
100%
100%
100%
100%
100%
100%
100%
100%
–
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
–
100%
100%
100%
100%
100%
–
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
GWA GROUP LIMITED ∕ ∕ 2013 ANNUAL REPORTGWA Group Limited And its controLLed entities ABN 15 055 964 380notes to tHe consoLidAted FinAnciAL stAtements 32. paRent entity disClosuRes
As at, and throughout, the financial year ended 30 June 2013 the parent company of the consolidated entity was GWA Group Limited.
In thousands of AUD
Results of the parent entity
Profit for the period
Other comprehensive income
Total comprehensive income for the period
Financial position of the parent entity
Current assets
Total assets
Current liabilities
Total liabilities
Shareholders equity of the parent entity
Share capital
Equity compensation reserve
Retained earnings
Total shareholders equity
Parent entity contingencies
Company
2013
30,363
–
30,363
216
607,001
551
178,000
408,100
1,866
19,035
429,001
2012
81,889
–
81,889
2,775
585,340
–
151,442
398,930
2,413
32,555
433,898
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.
Contingent liabilities
The directors are not aware of any contingent liabilities of the parent entity as at reporting date (2012: nil).
Capital expenditure commitments
The parent entity has entered into contractual commitments amounting to $455,000 on behalf of wholly-owned subsidiaries for the acquisition
of property, plant or equipment as at reporting date (2012: nil).
Parent entity guarantees in respect of debts of its subsidiaries
The parent entity has entered into a Deed of Cross Guarantee with the effect that the parent entity 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 (2012: nil). Further details of the Deed of Cross Guarantee and the subsidiaries subject to the Deed are disclosed in Note 30
and 31.
85
GWA Group Limited And its controLLed entities ABN 15 055 964 380notes to tHe consoLidAted FinAnciAL stAtements 33. 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
Employee share loan waivers
Foreign exchange gains
Net financing costs
Loss on disposal of discontinued operations, net of income tax
Gain on sale of property, plant and equipment and intangible assets
Income tax expense
Operating profit before changes in working capital and provisions
Decrease in trade and other receivables
Decrease in inventories
Decrease in trade and other payables
Decrease in provisions and employee benefits
Net interest paid
Income taxes paid
Net cash from operating activities
34. Related paRties
Key management personnel compensation
2013
2012
32,390
39,655
13,743
6,655
(451)
222
(3)
13,324
–
(3,335)
9,625
72,170
1,403
14,620
3,386
(7,941)
83,638
(14,454)
(5,835)
63,349
12,851
6,369
(771)
–
(1,298)
14,247
4,319
(9,632)
11,256
76,996
21,941
3,835
(2,967)
(920)
98,885
(15,979)
(22,407)
60,499
The key management personnel compensation included in ‘personnel expenses’ (see note 7) are as follows:
In AUD
Short-term employee benefits
Post-employment benefits
Other long term benefits
Termination benefits
Share-based payments
2013
6,018,555
315,583
95,899
450,750
233,310
2012
5,980,847
463,822
202,124
50,000
344,678
7,114,097
7,041,471
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.
GWA GROUP LIMITED ∕ ∕ 2013 ANNUAL REPORTGWA Group Limited And its controLLed entities ABN 15 055 964 380notes to tHe consoLidAted FinAnciAL stAtements 34. Related paRties (Continued)
Loans to key management personnel and their related parties (consolidated)
Details regarding loans outstanding at the reporting date to key management personnel and their related parties, where the individual’s
aggregate loan balance exceeded $100,000 at any time in the reporting period, are as follows:
In AUD
Directors
P Crowley
R Thornton
Executives
L Patterson
W Saxelby
Balance
1 July 2012
Balance
30 June 2013
Interest not
charged in the
reporting period
Highest balance
in period
798,008
227,496
580,073
671,600
–
–
–
–
38,080
10,998
28,537
16,409
798,008
227,496
580,073
671,600
No loans were made to key management personnel or their related parties during the year (2012: nil).
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
Opening balance
Closing balance
Interest not
charged in the
reporting period
Number in group
at 30 June
Total for key management
personnel 2013
Total for key management
personnel 2012
2,277,177
–
95,899
2,907,169
2,277,177
202,124
–
4
Other key management personnel transactions with the Company or its controlled entities
The consolidated entity purchased components and tooling of $199,156 (2012: $78,769) from Great Western Corporation Pty Ltd, a company
of which Mr R 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 $332,195 (2012: $296,413) 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 or to their related parties at reporting date
arising from these transactions were as follows:
In AUD
Trade creditors
2013
29,801
2012
38,060
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.
87
GWA Group Limited And its controLLed entities ABN 15 055 964 380notes to tHe consoLidAted FinAnciAL stAtements 34. Related paRties (Continued)
Movements in shares
The movement during the reporting period in the number of ordinary shares in GWA Group Limited held, directly, indirectly or beneficially,
by each key management person (KMP), including their related parties, is as follows:
Directors: non-executive
R Anderson
G McGrath
W Bartlett
D McDonough
P Birtles
J Mulcahy
Executive directors
P Crowley
R Thornton
Executives
G Oliver
L Patterson
W Saxelby (ceased employment 31/10/2012)
N Evans (ceased employment 17/10/2012)
Directors: non-executive
R Anderson
G McGrath
W Bartlett
D McDonough
P Birtles
J Mulcahy
Executive directors
P Crowley
R Thornton
Executives
G Oliver
L Patterson
W Saxelby
P Crossley (ceased KMP status 1/05/2012)
G Welsh (ceased employment 30/09/2011)
Held at
1 July 2012
Granted as
compensation
Purchases
Sales
18,404,803
150,000
30,914
100,495
15,000
45,000
750,000
128,694
202,407
227,500
350,000
–
–
–
–
–
–
–
152,500
15,000
25,000
25,000
–
37,500
–
–
2,280
7,410
–
–
–
–
16,768
–
–
–
–
–
–
–
–
–
(572,500)
(100,000)
–
(200,000)
–
–
Held at
1 July 2011
Granted as
compensation
Purchases
Sales
18,399,803
150,000
30,914
100,495
15,000
25,000
750,000
116,313
174,907
200,000
320,000
–
–
–
–
–
–
–
–
177,500
17,500
27,500
27,500
50,000
15,000
20,000
5,000
–
–
–
–
20,000
–
–
–
–
–
–
–
–
–
–
–
–
–
(177,500)
(5,119)
–
–
(20,000)
–
–
Held at 30
June 2013
18,404,803
150,000
33,194
107,905
15,000
45,000
330,000
43,694
244,175
52,500
n/a
n/a
Held at 30
June 2012
18,404,803
150,000
30,914
100,495
15,000
45,000
750,000
128,694
202,407
227,500
350,000
n/a
n/a
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 2013 is listed in the Directors’ Report.
During the reporting period, 255,000 shares were granted to key management personnel compensation (2012: 335,000). The aggregate
number of shares held by key management personnel or their related parties at 30 June 2013 was 19,426,271 (2012: 20,404,813).
35. suBsequent events
To the directors’ best knowledge, there are no events that have arisen subsequent to 30 June 2013 that will, or may, significantly affect
the operation or results of the consolidated entity.
GWA GROUP LIMITED ∕ ∕ 2013 ANNUAL REPORTGWA Group Limited And its controLLed entities ABN 15 055 964 380notes to tHe consoLidAted FinAnciAL stAtements diReCtoRs’ deClaRation
1
In the opinion of the directors of GWA Group Limited (‘the Company’):
(a) the consolidated 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 group’s financial position as at 30 June 2013 and of its performance for the financial year ended
on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001;
(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.
There are reasonable grounds to believe that the Company and the group 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 group
entities pursuant to ASIC Class Order 98/1418.
The directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the Managing Director and
Chief Financial Officer for the financial year ended 30 June 2013.
The directors draw attention to Note 1(a) to the consolidated financial statements which includes a statement of compliance with
International Financial Reporting Standards.
2
3
4
Dated at Brisbane on 21 August 2013.
Signed in accordance with a resolution of the directors:
Geoff McGrath
Director
Peter Crowley
Director
lead auditoR’s independenCe deClaRation
undeR seCtion 307C of the CoRpoRations aCt 2001
To: the directors of GWA Group Limited
I declare that, to the best of my knowledge and belief, in relation to the audit for the financial year ended 30 June 2013 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
21 August 2013
Greg Boydell
Partner
89
GWA Group Limited And its controLLed entities ABN 15 055 964 380
independent auditoR’s RepoRt
to the memBeRs of gwa gRoup limited
RepoRt on the finanCial RepoRt
We have audited the accompanying financial report of GWA Group
Limited (the Company), which comprises the consolidated statement
of financial position as at 30 June 2013, and consolidated statement
of profit or loss and other comprehensive income, consolidated
statement of changes in equity and consolidated statement of cash
flows for the year ended on that date, notes 1 to 35 comprising a
summary of significant accounting policies and other explanatory
information and the directors’ declaration of the Group comprising the
Company and the entities it controlled at the year’s end or from time
to time during the financial year.
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,
a true and fair view which is consistent with our understanding of
the Group’s financial position and of its 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.
Directors’ responsibility for the financial report
The directors of the Company are responsible for the preparation of
the financial report that gives a true and fair view in accordance with
Australian Accounting Standards and the Corporations Act 2001 and
for such internal control as the directors determine is necessary to
enable the preparation of the financial report that is free from material
misstatement whether due to fraud or error. In Note 1, the directors
also state, in accordance with Australian Accounting Standard
AASB 101 Presentation of Financial Statements, that the financial
statements of the Group comply with International Financial Reporting
Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial report
based on our audit. We conducted our audit in accordance with
Australian Auditing Standards. 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 of the financial report that gives a true and fair
view in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entity’s internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by the directors, as
well as evaluating the overall presentation of the financial report.
Auditor’s opinion
In our opinion:
(a) the financial report of the Group is in accordance with the
Corporations Act 2001, including:
(i)
giving a true and fair view of the Group’s financial position
as at 30 June 2013 and of its performance for the year
ended on that date; and
(ii)
complying with Australian Accounting Standards and the
Corporations Regulations 2001.
(b) the financial report also complies with International Financial
Reporting Standards as disclosed in Note 1.
Report on the remuneration report
We have audited the Remuneration Report included on pages
31 to 41 of the Directors’ Report for the year ended 30 June 2013.
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 Group Limited for
the year ended 30 June 2013, complies with Section 300A of the
Corporations Act 2001.
KPMG
Sydney, 21 August 2013
Greg Boydell
Partner
GWA GROUP LIMITED ∕ ∕ 2013 ANNUAL REPORTGWA Group Limited And its controLLed entities ABN 15 055 964 380
otheR statutoRy infoRmation
as at 13 august 2013
statement of shaReholding
In accordance with the Australian Securities Exchange Listing Rules, the directors state that, as at 13 August 2013, 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
1,718
5,219
2,606
2,048
105
11,696
867,575
15,606,452
19,894,370
43,783,529
226,381,844
306,533,770
%
0.28
5.09
6.49
14.28
73.86
100.00
The number of shareholders with less than a marketable parcel of 184 shares is 466.
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 13 August 2013:-
Shareholder
Ellerston Capital Limited
Number of Shares
% Shares on Issue
21,421,668
7.03
20 laRgest shaReholdeRs as at 13 august 2013
Shareholder
J P Morgan Nominees Australia Limited
National Nominees Limited
HSBC Custody Nominees (Australia) Limited
HGT Investments Pty Ltd
KFA Investments Pty Ltd
Erand Pty Ltd
Citicorp Nominees Pty Limited
JMB Investments Pty Ltd
Ashberg Pty Ltd
Theme (No 3) Pty Ltd
Mr Peter Zinn
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