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2014
ANNUAL REPORT
FY14 PERFORMANCE HIGHLIGHTS
REVENUE
$578 million
Revenue up 2% to $578 million with strong
growth in Bathrooms & Kitchens (excluding
Hot Water)
NET PROFIT
$18.6 million
Net profit after tax of $18.6 million impacted
by one-off significant items
TRADING EBIT
$72.3 million
Trading earnings before interest and tax (EBIT)
up 8% on the prior period to $72.3 million
DIVIDENDS
5.5 cents
Fully franked final dividend of 5.5 cents
per share to be paid in October 2014
STRATEGIC REVIEW COMPLETED
with focus on core Bathrooms & Kitchens
and Door & Access Systems businesses
and divestment of non-core businesses –
Dux Hot Water and Brivis Heating & Cooling
SUBJECT TO SUCCESSFUL DIVESTMENT
of Dux and Brivis, capital return options to
shareholders will be reviewed
DWELLING COMPLETIONS
rise only 4% on a moving annual total
basis year on year to March 2014
CONTENTS
Five Year Financial Summary
Company Profile and Our Mission
Chairman’s Review
Managing Director’s Review of Operations
Health and Safety
GWA Bathrooms & Kitchens
GWA Door & Access Systems
1
2
4
6
10
12
13
GWA Heating & Cooling
Board of Directors
Corporate Governance Statement
Directors’ Report
Financial Report
Other Statutory Information
Shareholder Information
14
16
18
28
43
90
91
FIVE YEAR
FINANCIAL SUMMARY
2009/10
$’000
2010/11
$’000
2011/12
$’000
2012/13
$’000
2013/14
$’000
Revenue from continuing operations
656,809
726,367
602,128
565,365
577,994
Earnings before interest, tax, depreciation,
amortisation and significant items**
112,099
125,243
94,228
87,168
89,903
(%)
17.1
17.2
15.6
15.4
15.6
Depreciation and amortisation
(17,551)
(18,087)
(18,864)
(20,398)
(17,563)
Earnings before interest, tax and significant items**
94,548
107,156
75,364
66,770
72,340
(%)
Interest (net)
14.4
14.8
12.5
11.8
12.5
(15,027)
(15,175)
(14,247)
(13,324)
(11,201)
Trading profit before tax**
79,521
91,981
61,117
53,446
61,139
(%)
Tax expense
(%)
Trading profit after tax**
Significant items after tax
12.1
12.7
10.2
9.5
10.6
(24,068)
(28,622)
(15,565)
(14,115)
(17,363)
30.3
31.1
25.5
26.4
28.4
55,453
63,359
45,552
39,331
43,776
–
–
621
(6,941)
(25,180)
Net profit after tax from continuing operations
55,453
63,359
46,173
32,390
18,596
Loss from discontinued operations (net of income tax)
(6,926)
–
(6,518)
–
–
Net profit after tax for the period
48,527
63,359
39,655
32,390
18,596
Net cash from operating activities
Capital expenditure
Net debt
Shareholders’ equity
Other Ratios and Statistics
Return on shareholders’ equity (%)
Interest cover (times)
Net debt / (net debt + equity) (%)
Basic earnings per share (cents)
Trading earnings per share (cents)*
Ordinary dividend per share (cents)
Franking (%)
Ordinary dividend payout ratio (%)
Share price (30 June) ($)
Dividend yield (total dividend)(%)
Number of employees
* excludes significant items
67,165
15,450
88,558
24,727
60,499
25,798
63,349
14,703
33,898
5,570
175,952
198,083
174,472
162,243
145,127
431,089
439,995
426,984
426,742
425,989
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
6.5
27.5
10.6
12.9
12.0
100
113.2
2.40
5.0
1,680
4.4
8.0
25.4
6.1
14.3
5.5
100
90.2
2.63
2.1
1,681
** trading profit before significant items is a non-IFRS financial measure reported to provide a greater understanding of the underlying business performance of the Group. The disclosures are
extracted or derived from the financial report for the year ended 30 June 2014 but have not been subject to review or audit. The non-IFRS financial measure included in this table exclude
significant items that are detailed in Note 5 of the financial report.
Notes: The Rover Mowers and Wisa Beheer businesses were divested during FY10 and were disclosed as discontinued operations in FY10. The results of the Sebel Furniture and Caroma North
America businesses are included in FY10 through to FY11. These businesses were divested during FY12 and were disclosed as discontinued operations in FY12.
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 Group had 1,681
employees at 30 June 2014 with manufacturing, sales and distribution
facilities located across Australia and with a branch office in New
Zealand. GWA is a member of the ASX 200 index of listed Australian
companies with a market capitalisation in excess of $800 million at
30 June 2014.
GWA currently operates through three distinct business divisions including:
GWA Bathrooms & Kitchens is Australia’s foremost designer, manufacturer, importer and
distributor of residential and commercial bathroom and kitchen products. The product range
is distributed under Australian brands including Caroma, Dorf, Fowler, Stylus, Clark, Epure,
Radiant, Irwell, Dux, Ecosmart and international brands including Hansa, 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 and importer of heating and
cooling systems for residential and light 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 Group 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 and solutions.
GWA GROUP LIMITED • 2014 ANNUAL REPORT OUR MISSION
We will be efficient and easy to deal with.
We recognise that time is precious to both our external and internal
customers and is a source of value and sustainable competitive advantage.
We recognise markets are changing and will deliver products and solutions
that save time for tradesmen, builders and across commercial projects.
We will refocus our business units on their target market segments to ensure
they have unmatched understanding of customer needs, able
to reach and influence the key decision makers in these segments.
We will free up our business units to focus on their markets by leveraging
corporate functions which will enable:
Increased innovation and market insights;
Closer customer engagement and information via group
information systems;
Supply chain efficiencies and responsiveness;
A supportive culture and pipeline of appropriately skilled management; and
Unmatchable scale.
We will pursue acquisitions which leverage our existing market relationship
and scale.
To be Australia’s LEADING
SUPPLIER of PRODUCTS
and SOLUTIONS to the
RESIDENTIAL and COMMERCIAL
building markets
2014 ANNUAL REPORT
3
3
CHAIRMAN’S
REVIEW
The GWA Group delivered a mixed performance
in FY14 with market conditions showing signs of
improvement as the financial year progressed.
The performance of Bathrooms & Kitchens, excluding Hot Water,
was the highlight for the year as it delivered improved sales
and profitability; however this was offset by the continuing poor
performance in the Dux Hot Water and Gliderol businesses and
supply issues which impacted Gainsborough during the year.
Improvement initiatives have been implemented in the Gliderol
business to address its underperformance and the supply issues
impacting Gainsborough have been resolved which should lead
to improved contributions from these businesses in FY15.
As announced to the market in July 2014, the Dux Hot Water
and Brivis Heating & Cooling businesses have been determined
to be non-core and will be divested. The divestment process has
commenced and subject to a successful sale process, the Board
will review options to return a portion of the capital raised from the
divestments to shareholders.
Dwelling completions activity reached cyclical lows during FY13 and
the sector has been steadily recovering as a result of the low interest
rate environment and rising house prices. At June 2014, the moving
annual total for dwelling approvals increased to 193,186 representing
a 21% increase on the prior year with significant growth in multi
residential approvals and rising house approvals.
The increase in dwelling approvals to near record high levels as
at June 2014 will eventually flow through to completions, which
is the stage when the GWA Group’s products are typically sold;
the Managing Director provides further comment on business
performance and market activity in his Review of Operations.
A combination of a number of restructuring activities and the
implementation of a recently adopted strategy, places the Group
in a strong position to take advantage of the increasing levels of
market activity expected in FY15 and future periods.
The Board expects an improved sales and trading profit performance
by the Group in FY15.
STRATEGY
Due to the significant changes in GWA’s market context over recent
years, a major strategic review was completed during FY14 with the
assistance of external consultants.
The review led to a redefinition of the GWA Group mission – To be
Australia’s leading supplier of products and solutions to the residential
and commercial building markets. The Group will focus on the core
Bathrooms & Kitchens and Door & Access Systems businesses
where we see opportunities for future growth and profitability that will
flow through to improved shareholder returns. The operations and
organisation structure of the Group is being aligned to support the
new strategy.
OVERVIEW OF FINANCIAL RESULTS
The Group achieved trading EBIT of $72.3 million in FY14 on sales
revenue of $578 million. This represents an increase of 8% and
2% respectively on the prior year reflecting the improving trading
conditions in calendar 2014. Trading profit after tax of $43.8 million
was up 11% on the prior year. Net profit after tax of $18.6 million
was impacted by the Gliderol impairment charge of $17 million
as announced in December 2013, restructuring costs and one
off significant items.
Cash generated from trading operations of $63.5 million represented
71% of EBITDA and was impacted by higher inventory levels in
Bathrooms & Kitchens and Gainsborough; inventory levels will
be brought back into line during FY15.
DIVIDENDS AND CAPITAL MANAGEMENT
As a consequence of the impairment to Gliderol goodwill the Group
did not have sufficient retained earnings from which to declare
an interim dividend to shareholders. The Board recognises the
importance of dividends to shareholders and was significantly
disappointed that an interim dividend was unable to be declared;
however the Board has declared a final fully franked dividend of
5.5 cents per share to be paid in October 2014 representing a 91%
payout ratio of net profit after tax. The Dividend Reinvestment Plan
remains suspended as the Group has access to sufficient funding
to meet its needs.
GWA GROUP LIMITED • 2014 ANNUAL REPORT Trading EBIT
$m
Net Debt
$m
13/14
12/13
11/12
10/11
09/10
13/14
12/13
11/12
10/11
09/10
0
25
50
75
100
125
0
50
100
150
200
250
Trading EBIT of $72.3 million in FY14 represents an increase of 8% on the
prior year reflecting the improving trading conditions in calendar 2014.
The Group’s financial metrics remain strong with net debt at the end of
June 2014 of $145 million, a reduction of $17 million from June 2013.
The Group’s financial metrics remain strong with net debt at the end of
June 2014 of $145 million, a reduction of $17 million from June 2013.
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 arise from a
diverse workforce and has approved a Diversity Policy which is
available on the Group’s website at www.gwagroup.com.au.
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. The appointment of a
new Group General Manager – People, Culture and Communications,
Ms Kay Veitch, to the senior executive team will assist the Board with
progress in achieving the Group’s 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 Group lodged
its Workplace Gender Equality Report with the Workplace Gender
Equality Agency in May 2014 and the report is available on the Group’s
website at www.gwagroup.com.au under Gender Equality Reporting.
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 FY15 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 fixed remuneration
varies between the median and third quartiles relative to companies
of comparable size and scope.
Following shareholder feedback and advice from Guerdon Associates,
the Board has approved changes to the Long Term Incentive Plan which
will apply to grants of Performance Rights to executives during FY15.
of Performance Rights vest at average performance levels.
The changes to the plan which are outlined in detail in the
2014 Remuneration Report are designed to address shareholder
concerns whilst ensuring the plan continues to achieve its
performance objectives.
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, Mr Peter Crowley.
The fixed remuneration for Mr Crowley has been frozen since
2011. For other GWA executives, the review by Guerdon Associates
concluded that fixed remuneration is in line with market levels.
Bathrooms & Kitchens and Brivis achieved their short term incentive
trading EBIT financial targets for FY14 reflecting their improved
trading result. No other divisional or corporate short term incentive
financial targets were achieved in FY14.
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 NGER
Scheme and the reports can be accessed on GWA’s website at
www.gwagroup.com.au under Carbon Reporting.
The FY14 total carbon emissions from GWA’s controlled facilities is
expected to be in line with the previous financial year and has been
impacted by a combination of factors including new facilities, facility
closures, increased production at key manufacturing sites, full year
reporting for API Locksmiths and the implementation of 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 a 19%
reduction in the total injury frequency rate in FY14. This was an
excellent outcome and represents the ninth consecutive year of
improvement reflecting the ongoing commitment to creating an
injury free work environment.
The changes address concerns raised by shareholders that the
performance requirements under the EPS hurdle are not sufficiently
challenging for executives compared to market expectations of the
Group’s future EPS growth, and that a significant proportion
In closing, I thank management and staff for their efforts in FY14 and
their ongoing commitment to GWA. We have the people, businesses
and strategies to take advantage of the expected stronger trading
conditions in FY15 as the recovery in dwelling activity gathers pace.
5
MANAGING
DIRECTOR’S
REVIEW OF OPERATIONS
Market conditions slowly improved through the second
half of FY14 with the Group lifting revenue over the
prior year by 2%. After adjusting for API Locksmiths
which was acquired in October 2012, revenue grew
by 1%. Bathrooms & Kitchens (excluding Hot Water)
drove the improvement in sales and profitability for the
Group, with growth over the prior year of 7% and 23%
respectively. This was offset by declines in Dux Hot
Water and Gliderol and a lower performance from the
Gainsborough business due to supply issues.
Chart 1 on the opposite page shows that new dwelling
commencements increased by 12% on a moving annual total (MAT)
basis at the end of March 2014 compared to the prior year. This
growth was mainly driven by medium and high density dwellings
rather than detached housing. Completions which typically lag
commencements by approximately 6 to 9 months increased by only
4% on a MAT basis at the end of March 2014 compared to the prior
year. The strong growth in medium to high density dwellings generally
means longer lags between commencements and completions, and
in some cases can be up to 2 years. In addition, the skew of activity to
medium and high density dwellings compared to detached dwellings
generally drives demand for lower end products and therefore a lower
dollar margin per unit is generated on the sale of these products.
The longer lags have impacted GWA’s financial results for FY14 as
typically our products are sold at the completion stage. The demand
for our products during the year was not as strong as expected
but we are confident that trading conditions will steadily improve
as the growth in approvals and commencements flows through to
completions during FY15 and future periods. Whilst renovation activity
was subdued in FY14, continuing low interest rates and rising house
prices should lead to increasing renovation activity further supporting
demand for GWA’s products.
Against a market growth of 4%, Bathrooms & Kitchens (excluding
Hot Water) grew revenues 7% and volumes by 5%. Margins also
improved aided by price increases and positive overhead recoveries
through increased production at the Wetherill Park facility. The Hot
Water product category was extremely challenging with overall market
volumes flat and value declining as key competitors discounted prices
to improve their market share. To address the underperformance,
a series of restructures were undertaken in Dux Hot Water during
the year and coupled with the strong sales of the Thermann OEM
products, resulted in an improved trading EBIT in the last quarter.
Gainsborough also grew revenues by 2% however volumes were down
year on year with the positive revenue growth driven by product mix
and price. The supply issues that emerged from April 2013 resulted
in lost sales and market share. The estimated impact of this issue on
trading EBIT during the year is approximately $5 million representing
a combination of lost margin and incremental costs associated with
air freight. The supply issues have been resolved and we expect an
improved performance from Gainsborough in FY15.
The poor Gliderol performance continued through FY14 culminating in
a trading EBIT loss of $4 million. Although significant improvements
were made in operations, installation and customer service, sales
declined as a result of the loss of market share particularly in New South
Wales and Victoria. A number of new customers have been gained,
especially in Western Australia, and these should start to have a positive
impact on Gliderol’s performance as we move into the new financial
year. Due to the underperformance of Gliderol the carrying value of
goodwill was impaired by $17 million in the half year accounts.
Brivis saw revenues grow 7% year on year with a strong performance
in the evaporative cooling product category driven by a range
extension and gains in market share. Trading EBIT declined slightly
on the prior year however this was a result of investment in new
product development and higher information technology charges
from corporate.
Corporate costs were $2.6 million lower than the prior period driven
by write backs in both short and long term incentives.
GWA GROUP LIMITED • 2014 ANNUAL REPORT Chart 1 – New Dwelling Activity (2003 – 2014)
Approvals
Commencements
Completions
Source: BIS Shrapnel – August 2014
s
r
e
b
m
u
N
l
a
u
n
n
A
g
n
i
v
o
M
200,000
190,000
180,000
170,000
160,000
150,000
140,000
130,000
120,000
June 03
June 04
June 05
June 06
June 07
June 08
June 09
June 10
June 11
June 12
June 13
June 14
Dec 03
Dec 04
Dec 05
Dec 06
Dec 07
Dec 08
Dec 09
Dec 10
Dec 11
Dec 12
Dec 13
Cash generated from trading operations of $63.5 million during FY14
represents 71% of EBITDA. The focus on working capital management
resulted in improvements in debtors and creditors however inventories
increased year on year by $33 million. Gainsborough accounted for
$10 million of the increase. Gainsborough inventory at June 2013
was unsustainably low. This coupled with poor performance by a key
vendor resulted in lost sales and the need to build extra stocks as we
transitioned the business to new suppliers. The new supply chain has
been established with our vendors performing well. The inventory we
have built is all high turnover core products and it is expected the
stock levels will reduce to sustainable levels through FY15.
The balance of the inventory build is in Bathrooms & Kitchens. Earlier
in the year we planned to build inventory to mitigate any risk from
impending Enterprise Agreement (EA) negotiations, the Chinese New
Year supplier factory closures and in anticipation of improving dwelling
activity levels. With EA negotiations now largely behind us and dwelling
completion activity continuing to lift we expect that inventory levels will
be brought back in line as we move through FY15.
Due to the impairment of the carrying value of goodwill in Gliderol
in the half year accounts, the Group did not have sufficient retained
earnings to declare an interim dividend in February 2014. However
the Board will pay a fully franked final dividend of 5.5 cents per share,
representing a 91% payout ratio of net profit after tax. The Dividend
Reinvestment Plan will not be offered to shareholders for the final
dividend and remains suspended.
STRATEGY AND GROWTH
GWA completed a major strategic review of its operations with the
assistance of Second Road Consulting. The outcome of the work
defined the following:
It is clear that our market context is changing and while GWA remains
Australia’s leading supplier of building fixtures and fittings, our markets
are evolving:
• The relationship with our buyers is becoming more equal and
also less predictable, through trends such as channel consolidation
and digitisation.
• Shifts in supply chain are required for us to be more efficient
Financial Results for FY14
and effective.
$Million
Sales Revenue
Trading EBIT *
EBIT Margin
2013/14
2012/13
578.0
565.4
72.3
66.8
12.5%
11.8%
%
Change
2%
8%
• Value does not lie solely in the products themselves but also in
the systems and experiences that come with them.
•
Industry boundaries are not what they used to be – innovations
from outside of the traditional building and construction spaces
are becoming relevant.
Trading Profit after Tax *
Net Profit after Tax
Trading Earnings per Share *
* excludes significant items
43.8
18.6
14.3
39.3
32.4
12.9
11%
-43%
11%
7
In response to these market context changes, we have developed a
strong argument for our portfolio which is outlined in the table below:
Our Mission
To be Australia’s leading supplier of products and solutions to the
residential and commercial building markets.
What we will do
• We will be efficient and easy to deal with.
• We recognise that time is precious to both our external and
internal customers and is a source of value and sustainable
competitive advantage.
• We recognise markets are changing and will deliver products
and solutions that save time for tradesmen, builders and across
commercial projects.
• We will refocus our business units on their target market
segments to ensure they have unmatched understanding of
customer needs, able to reach and influence the key decision
makers in these segments.
• We will free up our business units to focus on their markets
by leveraging corporate functions which will enable:
›
Increased innovation and market insights;
› Closer customer engagement and information
via group information systems;
› Supply chain efficiencies and responsiveness;
› A supportive culture and pipeline of appropriately
skilled management; and
› Unmatchable scale.
• We will pursue acquisitions which leverage our existing
market relationship and scale.
SEGMENT PERFORMANCE
Bathrooms & Kitchens Division
Bathrooms & Kitchens (excluding Hot Water) had strong volume and
net sales growth across most of its product categories. The table below
shows the % change compared to the prior year.
% Change
Volume
Net Sales
Sanitary-
ware
5.6%
9.0%
Tapware
1.2%
2.1%
Kitchens
& Laundry
Baths
& Spas
9.8%
8.2%
8.3%
2.9%
With dwelling completions growing 4% to the end of March 2014,
volume performance across most categories was at or above
expectations. The price increases in Bathrooms & Kitchens that
became effective during the second half of FY14 contributed to the
net sales performance and started to mitigate the impact of the decline
in the Australian dollar. The Baths & Spas net sales performance was
impacted by mix as products were rationalised and ranges streamlined.
The Tapware performance was disappointing as it declined compared
to the market and will be a key focus area as we move into FY15. The
Hot Water market is extremely challenging however volume through the
Moss Vale facility increased as strong sales of Thermann OEM products
led to positive trading EBIT in the last quarter.
Door & Access Systems Division
The Door & Access Systems business was heavily impacted by
the supply issues in Gainsborough of the standard lever sets and
architectural products from a major supplier in China. Although new
suppliers and dual sourcing options were put in place to address
the supply issues, the result was lost sales and market share. These
issues coupled with the costs of airfreight impacted trading EBIT by
approximately $5 million in FY14.
The Gliderol business performance was also disappointing reporting a
$4 million trading EBIT loss as market share losses (mainly business
lost in the previous financial year) became evident. While a variety
of improvements have been put in place to lift operational efficiency,
installation and customer service, it was only late in the financial year
that we commenced recovering business.
Heating and Cooling Division
Heating & Cooling sales grew on the back of strong evaporative cooler
sales and as a result of product range extensions and market share
gains. The Victorian housing market although weak relative to other
States did hold up better than expected during FY14. The business
does have momentum especially on the back of investment in new
heating and cooling products and should continue to grow in FY15.
FINANCIAL CONDITION AND CAPITAL MANAGEMENT
The net debt position of the Group as at the end of June 2014 was
$145 million, a reduction of $17 million from June 2013. Although
working capital grew due to the increase in inventory during the year,
the reduction in net debt was primarily as a result of the non-payment
of an interim dividend in April 2014. The gearing ratio (net debt/net
debt plus equity) of 26% and the leverage ratio (net debt/EBITDA) of
1.67 times are within our targeted range. Interest cover (EBITDA/net
interest) of 8.5 times further highlights GWA’s strong financial metrics.
Segment results are summarised below:
$Million
Sales Revenue
2013/14
2012/13
% Change
Trading EBIT
2013/14
2012/13
% Change
Bathrooms
& Kitchens
Heating
& Cooling
Door & Access
Systems
379.2
367.5
3%
75.0
64.5
16%
62.8
58.8
7%
5.7
6.2
-9%
136.6
140.9
-3%
3.9
10.9
-64%
Other
(0.6)
(1.8)
(12.3)
(14.8)
Total
578.0
565.4
2%
72.3
66.8
8%
GWA GROUP LIMITED • 2014 ANNUAL REPORT As we commence the implementation of the strategic plans, we
remain focussed on maintaining GWA’s investment grade metrics.
The business has a strong balance sheet ensuring it is well positioned
to respond to growth opportunities that arise which are in line with the
strategic plans. The Group has a $275 million facility which was put
in place in May 2013. 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. GWA has sufficient undrawn
debt facilities and in-principle support from our banks to increase
facilities to fund growth opportunities if required.
A summary of our debt position and existing facilities at the end
of June 2014 is provided in the table below:
GWA Group Bank Facilities and Net Debt at 30 June 2014
Bank
$Million
Available
Facilities
Drawn
Facilities Maturity Profile
CBA
ANZ
Westpac
HSBC
85
80
55
55
Gross debt
275
175.0
0.0
July 2016 – $200 million
July 2018 – $75 million
Cash and deposits
Net debt
(29.9)
145.1
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 9 years
has been consolidated with a further 19% decline in the total injury
frequency rate (TIFR) in FY14. With our TIFR reducing to 6.2, we have
a consistent sense of purpose in creating a safe work environment for
our people. Despite these impressive results, we still had 12 employees
(two fewer than last year) sustain lost time injuries during the year which
we will continue striving 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.
The below chart highlights the continued improvement in the TIFR
in FY14.
Chart 2 – GWA Group Total Injury Frequency Rate (TIFR)
30
20
10
0
2008/09
2009/10
2010/11
2011/12
2012/13
2013/14
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 Group.
GWA reports greenhouse gas emissions under the National
Greenhouse and Energy Reporting Scheme and the reports are
available on the Group’s website at www.gwagroup.com.au under
Carbon Reporting. The FY14 carbon emissions will not be finalised
until September 2014 however our direct carbon emissions are
estimated to be 9,000 tonnes CO2e with 20,000 tonnes CO2e of
indirect carbon emissions through the purchase of energy. The total
carbon emissions (both direct and indirect) for FY14 are expected to
be approximately 29,000 tonnes CO2e which is in line with the total
reported carbon emissions for the Group in FY13.
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 Group recognises the benefits
that can be achieved from a diverse workforce and has implemented
policies aimed at improving workplace diversity. The appointment of a
new Group General Manager – People, Culture and Communications,
Ms Kay Veitch, to the senior executive team will assist the promotion
of diversity and the development of succession plans for key senior
management roles.
In support of these objectives, a significant investment has been
made during the year with Spencer Stuart assessing our leaders and
key senior managers. GWA Group is committed to creating a high
performance culture where employees can learn and develop to their
full potential. This will ensure the Group has the right capabilities to
execute the strategic plans and meet our growth ambitions.
FUTURE PROSPECTS AND RISKS
The outlook for FY15 is positive with improved house prices and rising
dwelling commencements driving higher sales. We will implement
the strategic plans and with the focus on growing the core Bathrooms
& Kitchens and Door & Access Systems businesses, we will be
well positioned to take advantage of the stronger market conditions
expected in FY15 and future periods. We have developed clear
initiatives aimed at our target market segments in both core divisions
and together with an enhanced and centralised corporate structure
should see leveraging of Group expertise and improved efficiency.
There are a number of key business risks that may impact on the
achievement of the outlook for FY15 and future periods including:
• The expected improvement in dwelling and renovation activity does
not eventuate or is delayed.
• The regaining of market share in Gainsborough and Gliderol takes
longer than expected leading to continued underperformance and
poor profitability.
• Unforeseen 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 FY15 trading
performance at the Annual General Meeting in October 2014 following
first quarter trading and updated data on dwelling activity.
9
HEALTH
& SAFETY
GWA continues to ensure that it provides a safe
workplace for its employees, contractors, visitors
and customers in an efficient and compliant manner.
Through divisional or site based health and safety
managers, the Group promotes awareness of health
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.
and safety in a continuous improvement environment.
Three key measures of safety outcomes are:
The health and safety managers 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
• Planning for cross site auditing (whereby health and safety
managers visit other internal GWA sites)
• Planning and implementing of new systems and procedures
The Group Risk Manager prepares a monthly Group Risk Report
for the Board and attends the May and November Audit and Risk
Committee meetings to present the Operational Risk Report. The
reporting includes current health and safety performance, current
improvement plans and compliance to regulations. An audit plan,
consistent with the Group’s health and safety objectives, is also
presented for approval by the Board for the new financial year.
1.
2.
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.
3.
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 FY14 include:
• Successful FY15 renewal application for the NSW “Retro Paid
Loss” (RPL) scheme. FY15 will mark the third year in the scheme
which has significantly reduced NSW workers compensation
premiums. At the end of the third year the RPL scheme should
deliver savings totalling $1.5 million.
GWA Group Total Injury Frequency Rate (TIFR)
GWA Group Lost Time Injury Frequency Rate (LTIFR)
30
20
10
0
2008/09
2009/10
2010/11
2011/12
2012/13
2013/14
8
6
4
2
0
2008/09
2009/10
2010/11
2011/12
2012/13 2013/14
GWA GROUP LIMITED • 2014 ANNUAL REPORT • The upgrade of GWA’s elearning platform to enhance compliance
for workplace health and safety (WHS) training in areas such as
bullying, safety in the workplace and site inductions. The training
is an important supplement to the Group’s policies and procedures
in these areas.
• Completed training of approximately 200 GWA managers for
anti-bullying awareness. A central GWA bullying reporting/
compliance officer has been appointed to handle bullying
complaints in the Group.
• Continued the project commenced in 2013 to integrate WHS
management systems across all Group businesses into one
consistent structure. This project is expected to be completed
by December 2014.
At the start of FY14 the GWA executive team set a target of 10% year
on year improvement for TIFR versus the FY13 results. The actual
improvement in TIFR performance was 19% which was significantly
better than the target and was an excellent outcome. This is the ninth
consecutive year that GWA has improved TIFR performance and
demonstrates the Group’s ongoing commitment to an injury
free workplace.
Highlights within the GWA divisions during FY14 include:
• The Group Injury Severity Rate (ISR) has reduced for the second
year in a row however the reduction in FY14 was less than 1%
compared to the prior year and the target of 2600 was not met.
Heating & Cooling and Bathrooms & Kitchens achieved a reduction
in ISR of 43% and 20% respectively from the prior year.
•
All GWA divisions except Doors & Access Systems achieved
better than target results for TIFR. Bathrooms & Kitchens
achieved a 52% reduction in TIFR from the prior year which
was an excellent outcome.
WHS improvement objectives and projects are planned to be met
through continuation of the FY14 initiatives including:
• FY15 TIFR target of a further 6% reduction versus FY14 results
by continuing to focus on hazard identification and regular audits.
• Plans to reduce ISR to 2600 through improved return to work plans
and injury management.
GWA Group Medical Treatment Injury Frequency Rate (MTIFR)
GWA Group Injury Severity Rate (ISR)
20
15
10
5
0
2008/09
2009/10
2010/11
2011/12
2012/13 2013/14
5000
4000
3000
2000
1000
0
2008/09
2009/10
2010/11
2011/12
2012/13 2013/14
11
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.
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.dux.com.au
www.ecosmart.com.au
www.caroma.com.au
specify.caroma.com.au
www.fowler.com.au
www.dorf.com.au
www.stylus.com.au
www.clark.com.au
www.radiantstainless.com.au
www.epure.com.au
www.irwell.com.au
www.starionaust.com.au
SEGMENT PERFORMANCE
$M
Sales Revenue
Trading EBIT
EBIT Margin
Return on Funds Employed
June 14
June 13 % Change
379.2
75.0
19.8%
17.2%
367.5
64.5
17.6%
14.4%
3%
16%
BUSINESS DESCRIPTION
GWA Bathrooms & Kitchens is Australia’s foremost designer,
manufacturer, importer and distributor of residential 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. GWA Bathrooms & Kitchens was expanded in
2012 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, Dorf, Fowler, Stylus, Clark, Epure, Radiant, Irwell,
Starion, Dux, Ecosmart
Distributed: Hansa, Schell, EMCO, Virtu, 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 technology, and providing a superior level of customer service.
GWA GROUP LIMITED • 2014 ANNUAL REPORT
SEGMENT PERFORMANCE
$M
Sales Revenue
Trading EBIT
EBIT Margin
Return on Funds Employed
June 14
June 13 % Change
136.6
3.9
2.9%
4.4%
140.9
10.9
7.7%
10.6%
-3%
-64%
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 residential 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.apisec.com.au
www.ausloc.com
Gliderol International Pty Limited
31-33 Alfred Street
Blackburn VIC 3130
AUSTRALIA
Telephone: 61 3 9877 1555
Facsimile: 61 3 9894 1599
www.gliderol.com.au
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. The division comprises three business units including
the following:
• Gainsborough Hardware which is a leading Australian designer,
manufacturer, importer and distributor of a comprehensive range
of residential and commercial door hardware and fittings, including
security products.
• Gliderol Garage Doors which is a leading Australian manufacturer
and distributor of garage doors and openers for residential and
commercial markets.
• 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
Residential home builders, DIY and renovation projects, commercial
buildings and multi-dwelling developments, after sales servicing.
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 Revenue
Trading EBIT
EBIT Margin
June 14
June 13 % Change
62.8
5.7
9.0%
7%
-9%
58.8
6.2
10.6%
13.0%
Return on Funds Employed
12.6%
BUSINESS DESCRIPTION
GWA Heating & Cooling is an Australian designer, manufacturer
and importer of heating and cooling systems for residential and light
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
The range includes heating and cooling systems, such as ducted gas
furnaces, evaporative coolers and inverter based refrigerated heating
and cooling systems. All products are supported by an after sales and
service department with a full range of spare parts used to maintain
the products.
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 • 2014 ANNUAL REPORT 15
BOARD OF DIRECTORS
DARRYL MCDONOUGH
BBUS (ACTY), LLB (HONS), SJD, FCPA, FAICD
Independent Chairman and Non-Executive Director
• Expertise: Experienced public company director and lawyer
• Special Responsibilities: Chairman of Board and Nomination
Committee and member of Remuneration and Audit and
Risk Committees
Mr McDonough was appointed Deputy Chairman and Non-Executive
Director of GWA Group Limited in 2009 and was appointed Chairman
effective 30 October 2013. 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.
PETER CROWLEY BA BECON FAICD
Managing Director
•
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
JOHN MULCAHY PHD (CIVIL ENGINEERING), FIE AUST
Independent Deputy Chairman and Non-Executive Director
.
company Holderbank culminating in General Management
responsibilities within Australia and South-East Asia
• Expertise: Civil Engineer and experienced public company director
•
Special Responsibilities: Member of Remuneration and
Nomination Committees
Mr Mulcahy was appointed a Non-Executive Director of GWA Group
Limited in 2010 and Deputy Chairman effective 30 October 2013.
He is a Fellow of the Institute of Engineers and is a Non-Executive
Director of Mirvac Group Limited, Coffey International Limited,
ALS 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 Mulcahy has served as a director
of the following other listed companies, and the period in which
the directorships have been held:
• Mirvac Group Limited since 2009*
• Coffey International Limited since 2009*
• ALS Limited since 2012*
*denotes current directorship
BILL BARTLETT FCA, CPA, FCMA, CA (SA)
Independent Non-Executive Director
• Expertise: Chartered Accountant, actuarial, property, insurance
and financial services
• Special Responsibilities: Chairman of Remuneration and Audit
and Risk 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 and Risk 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.
During the past three years, Mr Bartlett has served as a director of
the following other listed companies, and the period in which the
directorships have been held:
• Suncorp Group Limited since 2003*
• Reinsurance Group of America Inc (NYSE) since 2004*
• Abacus Property Group since 2007*
*denotes current directorship
GWA GROUP LIMITED • 2014 ANNUAL REPORT ROBERT ANDERSON
RICHARD THORNTON CA B COM (ACC) LLB (HONS) LLM
Independent Non-Executive Director
Executive Director and Company Secretary
• Expertise: Property investment and transport logistics
•
Expertise: Chartered Accountant, taxation and finance
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.
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.
.
PETER BIRTLES BSC, ACA
Independent Non-Executive Director
• Expertise: Chartered Accountant, retail, financial and operational
• Special Responsibilities: Member of Audit and Risk 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
17
CORPORATE GOVERNANCE STATEMENT
FOR THE YEAR ENDED 30 JUNE 2014
The Board of Directors is responsible for the corporate governance
of GWA Group Limited (the Group) which is an essential part of the
role of the Board. The Group’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 Group’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 Group meet or exceed the
recommendations. The Group’s corporate governance disclosures
have been prepared in accordance with the third edition of the
recommendations of the ASX Corporate Governance Council which
are effective for financial years commencing 1 July 2014. Additional
disclosures have also been provided to enhance the transparency
of the Group’s corporate governance practices.
PRINCIPLE 1 – LAY SOLID FOUNDATIONS FOR
MANAGEMENT AND OVERSIGHT
Role of the Board and Management
The Board is responsible for the long term growth and financial
performance of the Group. The Board charts the strategic direction
of the Group and monitors executive and senior management
performance on behalf of shareholders. To achieve this, the
Board is engaged in the following activities:
• Providing input and final approval of corporate strategies and
performance objectives developed by senior management.
• Approval and monitoring of financial and other reporting.
• Monitoring of executive and senior management performance,
including the implementation of corporate strategies, and
ensuring appropriate resources are available.
• Appointment and monitoring of the performance of the
Managing Director.
• Liaison with the Group’s External Auditor through the Audit
and Risk Committee.
• Ensuring that the Group has appropriate systems of risk
management and internal controls, reporting mechanisms
and delegation authority limits in place.
• Any other matters required to be dealt with by the Board
from time to time depending upon circumstances of the Group.
• Other matters referred to in the Board and Board Committee charters.
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 Group’s website at www.gwagroup.com.au
for a copy of the charter.
Management is responsible for the implementation of corporate
strategies and performance objectives and all aspects of the day to day
running of the Group. Management are also responsible for ensuring
the Group operates within the risk parameters set by the Board and for
providing the Board with accurate and timely information to enable the
Board to carry out its duties.
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 covering all management activities. 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.
Background Checks
Before the appointment of directors and senior executives the Group
ensures that appropriate background checks are conducted as to
the person’s character, experience, education, criminal record and
bankruptcy history. This is an important step in the recruitment
process to ensure the appointment of suitable candidates to the
director and senior executive roles.
All material information relevant to the election or re-election of directors
is provided to shareholders in the director profiles which are included in
the Explanatory Memorandum to the Notice of Annual General Meeting.
The following information is provided to shareholders:
• Details of the qualifications, skills and experience of the director
• Details of any other directorships held by the director
• The term of office currently served by the director (if any)
• A statement if the Board considers the director independent
• Approval and monitoring the progress of major capital expenditure,
• A statement on whether the Board supports the election or
capital management, acquisitions and divestments.
re-election of the director
• Any other material information advised to shareholders that is
relevant to the decision on whether to elect or re-elect the director
GWA GROUP LIMITED • 2014 ANNUAL REPORT Letter of Appointment
New directors of the Group 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.
A comprehensive induction program is available to directors and
senior executives to ensure full understanding of the Group, its
policies and procedures and the industry within which it operates.
Company Secretary
The Company Secretary is accountable to the Board, through the
Chairman, on all matters to do with the proper functioning of the
Board including all corporate governance matters. The Company
Secretary is responsible for the completion and dispatch of the agenda
and papers for each Board and Committee meeting. The Company
Secretary prepares the draft minutes for each meeting, which are
tabled at the next Board meeting for review and approval. The
Company Secretary and the directors communicate regularly
on all Group and governance matters.
Diversity in the Workforce
The Group 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 Group can draw high quality employees
and the different perspectives that can be brought to the organisation
from a diverse workforce.
The Group strengthened its focus on diversity in 2012 with the Board’s
approval of a specific Diversity Policy which is available on the Group’s
website at www.gwagroup.com.au. 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’.
•
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 Group to existing employees
and potential candidates.
•
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 Group’s succession planning process and actively
developed for career progression.
During the year the Group’s recruitment practices were reviewed to
ensure they continue to comply with equal opportunity principles and
encourage diversity. An easy to use recruitment guide was developed
and circulated to all managers. Recruitment training for managers
is planned for the upcoming year which will reinforce the equal
opportunity principles and encourage diversity in the recruitment
process to assist in achieving an increase in the percentage of females
employed by the Group. The implementation of a graduate program is
still under consideration.
The Group 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. It is pleasing that based on the Group’s 2014
Workplace Gender Equality Report, 44% of staff recruited into the
organisation during the reporting period were female, a significant
19
CORPORATE GOVERNANCE STATEMENT (CONT)
FOR THE YEAR ENDED 30 JUNE 2014
increase from the previous year’s percentage of 31%. The Group
continues to have a number of employees moving to flexible working
arrangements, particularly on return from parental leave. The Group
regularly reviews its policies and practices to ensure they are offering
the flexibility required to attract and retain female talent.
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.
In July 2014 the Group appointed a new Group General Manager –
People, Culture and Communications, Ms Kay Veitch. Ms Veitch is
part of the senior executive team reporting directly to the Managing
Director and will enhance the focus on developing talent in the
organisation and ensuring succession plans are in place for key senior
management roles including the promotion of talented and high
potential females. The position will assist the Board with its progress
towards achieving the Group’s measurable objectives to promote
and encourage increased diversity in the organisation including an
improved representation of females.
As outlined in the Group’s 2014 Workplace Gender Equality Report,
the overall workforce consists of 28% female and 72% male. This is a
small but encouraging increase in the percentage of female employees
from the prior year.
The following table outlines the Group’s workplace profile at
31 March 2014:
Title
Board
Key Management Personnel
Other executives/General Managers
Senior Managers
Other Managers
Total – Management
Professionals
Technicians and trade
Clerical and Administrative
Sales
Machinery Operators and drivers
Labourers
Others
Total – Non-Management
Overall Totals
% Female
% Male
0%
0%
33%
18%
12%
13%
28%
4%
70%
28%
8%
24%
0
30%
28%
100%
100%
66%
82%
88%
87%
72%
96%
30%
72%
92%
76%
100%
70%
72%
In May 2014, the Group lodged its 2014 Workplace Gender Equality
Report with the Workplace Gender Equality Agency in accordance
with the Workplace Gender Equality Act 2012. The Group notified its
employees and employee organisations that it lodged its report and
advised how it may be accessed. The Group also allowed employees
and employee organisations to make comments on the report. The
report is available on the Group’s website at www.gwagroup.com.au
under Gender Equality Reporting. The Group received notification
during June 2014 that it is compliant with the Workplace Gender
Equality Act 2012.
Performance Evaluation – Directors
The Nomination Committee conducts an annual evaluation of the
performance of the Board, the Board Committees and the individual
Board members to determine whether they are functioning effectively
During FY14 a performance evaluation of the Board was conducted
by the Chairman in accordance with the evaluation process.
Performance Evaluation – Senior Executives
Performance reviews of senior executives are conducted formally on
a bi-annual basis. The performance review process is critical to the
development of senior executives and enables performance issues to
be addressed. The Group 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 senior executives 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 Group’s
Short Term Incentive Plan as outlined in the Remuneration Report.
During FY14 performance reviews of senior executives were
conducted in accordance with the performance review process.
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.
Composition of the Board
The Board presently comprises 7 directors, 5 of whom, including the
Chairman and Deputy Chairman, are non-executive directors and 2,
the Managing Director and Executive Director, are executive directors.
The 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.
GWA GROUP LIMITED • 2014 ANNUAL REPORT 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 Group
•
All Board members should be financially literate and have relevant
experience in the industries in which the Group operates
Re-Election of Directors
In accordance with the Group’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 Group’s non-
executive directors are independent. Therefore, the Board comprises
5 independent directors and 2 non-independent directors (being
the Managing Director and Executive Director) which meets the
recommendation of the ASX Corporate Governance Council of
having a majority of the Board comprising independent directors.
The table below outlines the Group’s directors considered
to be independent.
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 on the following page.
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) Legal Services provided by Clayton Utz
During FY14 Clayton Utz provided legal services amounting to
$712,246 (2013: $332,195) to the Group as outlined in the key
management personnel transactions in the Directors’ Report. The legal
services were provided on arm’s length terms and covered specialty
areas including employment, environment, competition, acquisition,
litigation, corporate and commercial advice.
Mr Darryl McDonough is Chairman and Non-Executive Director of
GWA Group Limited and is also a partner of Clayton Utz. Mr McDonough
is not involved in providing any of the legal services to the Group,
nor does he influence the selection of legal adviser by the Group.
The Group also uses other legal providers.
The Group has utilised Clayton Utz for legal services for many years
prior to the appointment of Mr McDonough. Clayton Utz is one of
Australia’s leading legal firms and the Group has a high regard for the
expertise of their partners and quality of legal support. Over the years
Clayton Utz has developed a detailed knowledge and understanding
of GWA’s business operations and requirements which knowledge
enhances the quality of legal support provided to the Group.
The increase in legal fees paid to Clayton Utz during FY14 has been
driven by the selection of Clayton Utz as the Group’s preferred legal
provider for general corporate advisory work including commercial
contract and property leasing legal support. The Group previously used
a smaller legal firm for these services which did not meet the Group’s
needs. Litigaton services were also provided by Clayton Utz during
FY14 in support of the Group’s claims against Carrier – refer Note 27
of the financial statements.
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.
(ii) Length of Service – Mr Robert Anderson
The Board is of the opinion that the length of service of Mr Anderson
as Non-Executive Director (since 1992) has not compromised his
ability to bring independent judgement to bear on issues before
Director
Role
Length of Service
Non-Executive
Independent
Mr Darryl McDonough
Chairman
Mr John Mulcahy
Deputy Chairman
Mr Peter Crowley
Managing Director
Mr Bill Bartlett
Non-Executive Director
Mr Robert Anderson
Non-Executive Director
Mr Peter Birtles
Non-Executive Director
Mr Richard Thornton
Executive Director
5 years
4 years
11 years
7 years
22 years
4 years
5 years
Yes
Yes
No
Yes
Yes
Yes
No
Yes
Yes
No
Yes
Yes
Yes
No
21
CORPORATE GOVERNANCE STATEMENT (CONT)
FOR THE YEAR ENDED 30 JUNE 2014
the Board and to act in the best interests of the Group and its
shareholders. Mr Anderson is a highly experienced director and has a
deep understanding of the Group and its businesses through his long
association. The Group and its shareholders are well served by his
appointment as a director.
(iii) 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.
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 Group.
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 Group and directors. For the Group, 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
Group’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.
Nomination Committee
The Nomination Committee meets as required and on several
occasions throughout the year. For membership and attendance
details of the Nomination Committee, refer to the Directors’ Report.
The composition of the Nomination Committee is based on the
following principles:
• The Nomination Committee should consist of non-executive
directors only
• The Nomination Committee should consist of a majority
of independent directors
• The Chairperson of the Nomination Committee should
be an independent director
• The Nomination Committee should consist of a minimum
of three members
• The Chairperson should be the Chairperson of the Board
or another non-executive director
The Nomination Committee operates under a charter that details the
Committee’s role and responsibilities, composition, structure and
membership requirements. The charter is reviewed annually to ensure
it remains consistent with the Board’s objectives and responsibilities.
Refer to the Group’s website at www.gwagroup.com.au 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
• Reporting to the Board on the Committee’s role and responsibilities
covering all the functions in its charter
In performing its responsibilities, the Nomination Committee
receives appropriate advice from external consultants and
other advisers as required.
The Company Secretary prepares the draft minutes for each
Nomination Committee meeting, which are tabled at the next
Nomination Committee meeting for review and approval. The draft
minutes are also included in the Board papers of the next Board
meeting following the Nomination Committee meeting.
Selection and Appointment of Directors
The Nomination Committee is responsible for the selection and
appointment of directors. In the circumstances where there is a
need to appoint a director, whether due to the retirement of a director,
growth of the Group, or changed circumstances of the Group, 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.
• 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.
• The Board members consent to the proposed appointee.
Details of the skills, experience and expertise of each director are
outlined in the director profiles in the Annual Report.
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 Group and the markets in
which it operates. The Company Secretary assists with the induction
GWA GROUP LIMITED • 2014 ANNUAL REPORT program for directors to ensure the Group’s corporate governance
practices are understood. The Group also supports appropriate
professional development opportunities for directors to enable
them to enhance their skills and knowledge.
The composition of the Audit and Risk Committee is based
on the following principles:
• The Audit and Risk Committee should consist of non-executive
directors only
PRINCIPLE 3 – ACT ETHICALLY AND RESPONSIBLY
• The Audit and Risk Committee should consist of a majority
Code of Conduct
The Group’s objective is to conduct its business with the highest
standards of personal and corporate integrity. To assist employees in
achieving this objective, the Group has developed a comprehensive
Code of Conduct which guides the behaviour of directors, officers
and employees (including senior executives) and demonstrates the
commitment of the Group 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 Group’s policies and procedures.
The Code of Conduct states the values and policies of the Group
and complements the Group’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 Group’s website at
www.gwagroup.com.au 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 Group’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 Group’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
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 Group’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.
PRINCIPLE 4 – SAFEGUARD INTEGRITY
IN CORPORATE REPORTING
Audit and Risk Committee
The Audit and Risk Committee meets as required and at least four
times throughout the year. For membership and attendance details
of the Audit and Risk Committee, refer to the Directors’ Report. The
qualifications and experience of each member of the Audit and Risk
Committee is outlined in the director profiles in the Annual Report.
of independent directors
• The Chairperson of the Audit and Risk Committee should
be an independent director and not Chairperson of the Board
• The Audit and Risk Committee should consist of at least
three members
• The Audit and Risk Committee should include members who are
financially literate with at least one member who has financial and
accounting related expertise
The Audit and Risk 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 Group’s website at www.gwagroup.com.au for a copy of the
charter. A detailed Terms of Reference has been developed to ensure
the Audit and Risk 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 Group executives (as required) attend Audit and Risk
Committee meetings, by invitation, to present the relevant statutory
information, Financial Statements, reports, and to answer the
questions of the members. At the Audit and Risk Committee
meetings, the members will meet with the External Auditor
without management present.
The main responsibilities of the Audit and Risk 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
•
Reporting to the Board on the Committee’s role and responsibilities
covering all the functions in its charter
The Company Secretary prepares the draft minutes for each Audit and
Risk Committee meeting, which is tabled at the next Audit and Risk
Committee meeting for review and approval. The draft minutes are
also included in the Board papers of the next Board meeting following
the Audit and Risk Committee meeting.
23
CORPORATE GOVERNANCE STATEMENT (CONT)
FOR THE YEAR ENDED 30 JUNE 2014
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 and Risk Committee. KPMG replaced
Ernst & Young who had been the External Auditor since 1995.
Rotation of External Auditor
KPMG has advised the Group 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 and Risk 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.
AGM Attendance
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.
PRINCIPLE 5 – MAKE TIMELY AND BALANCED DISCLOSURE
The Group 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 Group includes continuous disclosure as a permanent
item on the agenda for Board meetings. The Board has approved a
Continuous Disclosure Policy to ensure the Group 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 Group’s Continuous Disclosure
Compliance Officer and is responsible for ensuring compliance
with the continuous disclosure requirements and overseeing and
authorising disclosure of information to the ASX. All media releases
which contain material price sensitive information must be approved
by the Board prior to release to the ASX.
The Company Secretary coordinates the communications with the
ASX including ensuring compliance with regulatory requirements and
overseeing information released to the ASX, shareholders and other
interested parties. Announcements made to the ASX are published on
the Group’s website immediately after release.
Certification of Financial Reports
The Managing Director and Chief Financial Officer state in writing to
the Board at each reporting period that, in their opinion:
• The financial records of the Group have been properly maintained;
• The financial reports present a true and fair view of the Group’s
financial position and performance;
• The financial reports comply with Accounting Standards; and
• The opinion has been formed on the basis of a sound system of
risk management and internal compliance and control which is
operating effectively.
The statements from the Managing Director and Chief Financial Officer
are based on a formal sign-off framework established throughout the
Group and reviewed by the Audit and Risk 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 Group.
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 and Risk 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
and Risk 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, 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 and Risk 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 Group’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 and Risk 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.
GWA GROUP LIMITED • 2014 ANNUAL REPORT PRINCIPLE 6 – RESPECT THE RIGHTS OF SECURITY
HOLDERS
The Group 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 Group is committed
to producing shareholder communications in plain english with full
and open disclosure about the Group’s policies and procedures,
operations and performance.
• Ensuring that shareholders have the opportunity to receive external
announcements by the Group through the corporate website at
www.gwagroup.com.au. All Group 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 Group’s governance practices and policies and other
information such as the Group’s carbon emissions reporting,
gender equality reporting and information on workplace health
and safety 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 Group 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 Group’s website
at www.gwagroup.com.au 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 instructions for casting proxy
votes electronically.
• The Group encourages shareholders to attend and participate
at the Annual General Meeting to canvass the relevant issues
of interest with the Board. An opportunity is given at the Annual
General Meeting for shareholders to ask questions on the Group’s
financial reports and the business operations and performance.
If shareholders are unable to attend the Annual General Meeting
personally, they are encouraged to participate through proxy voting.
The Group 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 Group endeavours to set
the timing and the location of the Annual General Meeting so that it
is convenient for shareholders generally.
• The Group has developed an investor relations program to facilitate
effective communications with investors. The Group actively engages
with the financial media, broking analysts, institutional and private
investors on the Group’s operations, performance, governance and
prospects, and to provide an opportunity for investors to express their
views or concerns about the Group. At all times the Group ensures
compliance with the continuous disclosure obligations in the ASX
Listing Rules and the Corporations Act 2001.
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 Group. The Board conducts annual reviews of
the Group’s risk management framework to ensure that it continues
to be sound. During FY14, the Audit and Risk Committee conducted
a review of the Group’s risk management framework to ensure it is
working effectively and within the risk parameters set by the Board.
Such risk management processes include defining the risk oversight
responsibilities of the Board and the responsibilities of management
in ensuring risks are both identified and effectively managed.
Whilst ultimate responsibility for risk oversight rests with the Board,
the Audit and Risk Committee is the delegated mechanism for
focusing the Group on risk oversight, risk management and internal
controls. The Audit and Risk Committee reports to the Board on risk
management and internal control matters in accordance with its main
responsibilities as outlined in the Audit and Risk Committee Charter.
For further details of the Audit and Risk Committee composition and
responsibilities, refer to the Audit and Risk Committee disclosures
under Principle 4 – Safeguard integrity in corporate reporting.
The Audit and Risk Committee is supported in managing risk through
the combined activities of:
• An Executive Risk Committee (ERC) comprising the executive and
senior management of the Group 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 and
Risk Committee at the May and November meetings together with
risk mitigation activities. The ERC reports to the Audit and Risk
Committee on its activities as outlined in the ERC charter;
• Enterprise risk profiles have been developed for the Group and its
divisions which are regularly reviewed and updated as part of the
strategic planning process together with mitigation actions. The
identified risks are analysed based on their potential impact and
likelihood of occurrence and mitigation responses are put in place
to manage the risks. Updates to the enterprise risk profiles form
part of the agenda for the quarterly business reviews and strategy
planning sessions with the Managing Director, Chief Financial
Officer and Group Commercial Manager. An enterprise risk update
for the major risks is prepared for the Audit and Risk Committee at
the May and November meetings;
• A Finance Committee comprising the executive and senior
management of the Group which has been established to review
and monitor the financial risks in the organisation, oversee the
execution of Group policies in relation to finance risk and measure
the impact of both the underlying risk and the mitigation strategies
employed. Financial risks include liquidity and funding risk, interest
rate risk, foreign currency risk, credit risk and legal risk. The
Finance Committee reports to the Audit and Risk Committee on its
activities as outlined in the Finance Committee charter;
25
CORPORATE GOVERNANCE STATEMENT (CONT)
FOR THE YEAR ENDED 30 JUNE 2014
• A Group Commercial Manager who has primary responsibility
for designing, implementing and coordinating the overall risk
management and internal control practices of the Group. The
Group Commercial Manager attends the Audit and Risk 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 or Audit and Risk Committee on any matter;
• A Group Risk Manager who has specific responsibilities in respect
of operational risks including workplace health and safety, business
continuity, environmental, sustainability and industrial relations risks.
The Group Risk Manager prepares a monthly Group Risk Report
for the Board and attends the May and November Audit and Risk
Committee meetings to present the Operational Risk Report;
• A Group Information Systems Manager who has specific
responsibilities in respect of the Group’s information technology
(IT) security and risk environment. The Group Information
Systems Manager attends the May and November Audit and
Risk Committee meetings to present the IT Security, Risk and
Governance Report;
• A Company Secretary who is responsible for putting in place
adequate insurances to cover the major group insurable risks
including property and business interruption, product and
public liability, product recall and directors and officers liability
insurances. The Group’s insurance brokers are AON Risk Solutions
who assist with arranging the insurances and claims management.
The insurance policies are placed with reputable insurers with
appropriate coverage, limits and deductibles;
• An Internal Audit function under the management of Grant
Thornton. The Internal Audit activities are carried out by a
combination of internal and appropriately qualified external
resources from Grant Thornton based on a program of work
approved by the Audit and Risk Committee. Such activities link
to the Group’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 and Group Financial Controller as part
of the stewardship review process for the half and full year accounts.
The Group has implemented risk management software across the
Group for the purpose of identifying and managing workplace 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 Group’s policies and
procedures which have enabled the Group 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 Group 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 Group’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
Group and reviewed by the Audit and Risk Committee as part of the
financial reporting process.
Environment and Sustainability Risks
The Group does not have any material exposures to environment and
social sustainability risks.
The Board is committed to reducing energy, carbon emissions, water
and waste across the Group’s operations. The Group reports its group
carbon emissions annually under the Federal Government’s National
Greenhouse and Emissions Reporting Scheme and the reports can
be accessed on the Group’s website at www.gwagroup.com.au under
Carbon Reporting. In recent years, the Group’s carbon emissions have
declined due to a combination of factors including site rationalisations,
site closures, reduced demand and energy efficiency measures.
GWA GROUP LIMITED • 2014 ANNUAL REPORT Remuneration Policies
The Board’s objective in setting the Group’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 Group’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.
The Group has an equity based remuneration scheme for senior
executives which was approved by shareholders in 2008. For details of
the scheme, refer to the Remuneration Report. In accordance with the
rules of the scheme, participants must not enter into any transactions
or arrangements (whether through the use of derivatives or otherwise)
which reduces or limits the economic risk of participating in the scheme.
For details of the Group’s remuneration policies and disclosures, refer
to the Remuneration Report.
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
• The Chairperson of the Remuneration Committee should
be an independent director
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 Group’s website at www.gwagroup.com.au for a copy of
the charter.
The main responsibilities of the Committee include:
• Review of the Group’s remuneration and incentive policies
• Review of executive and senior management remuneration packages
• Review of the Group’s recruitment, retention and termination
policies and procedures
• Review of the Group’s superannuation arrangements
• Reporting to the Board on the Committee’s role and responsibilities
covering all the functions in its charter
In performing its responsibilities, the Remuneration Committee
receives 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 FY15 executive remuneration review.
The Company Secretary prepares the draft minutes for each
Remuneration Committee meeting which are tabled at the next
Remuneration Committee meeting for review and approval. The draft
minutes are also included in the Board papers of the next Board
meeting following the Remuneration Committee meeting.
27
DIRECTORS’ REPORT
AS AT 30 JUNE 2014
Your directors present their report on the consolidated
entity of GWA Group Limited (the Group) and the
entities it controlled during the financial year ended
30 June 2014.
DIRECTORS
The following persons were directors of the Group during the financial
year and up to the date of this report. Directors were in office this
entire period unless otherwise stated.
D D McDonough, Chairman and Non-Executive Director
J F Mulcahy, Deputy Chairman and Non-Executive Director
P C Crowley, Managing Director
R M Anderson, Non-Executive Director
W J Bartlett, Non-Executive Director
P A Birtles, Non-Executive Director
R J Thornton, Executive Director
G J McGrath, Non-Executive Director (retired 30 October 2013)
Details of the directors’ qualifications, experience and special
responsibilities are outlined in the director profiles 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 FY14, and the period for
which each directorship has been held, are outlined in the director
profiles 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
outlined in the director profiles in the Annual Report.
DIRECTORS’ INTERESTS
The relevant interest of each director in the share capital of the Group
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:
Director
D D McDonough
J F Mulcahy
P C Crowley*
R M Anderson
W J Bartlett
P A Birtles
R J Thornton*
Total**
Ordinary Shares
107,905
45,000
480,000
8,118,442
33,194
15,000
58,694
8,858,235
* 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 section 5.2.1 of the
Remuneration Report.
** Section 5.3.3 of the Remuneration Report 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 18,800,594
shares (last year 19,129,596 shares).
DIRECTORS’ MEETINGS
The number of meetings of directors (including meetings of
Committees of directors) held during the financial year ended
30 June 2014 and the number of meetings attended by each
director is outlined in the table on the following page.
PRINCIPAL ACTIVITIES
The principal activities during the year of the consolidated entity were
the research, design, manufacture, import and marketing of building
fixtures and fittings to residential and commercial premises and the
distribution of these various products through a range of distribution
channels in Australia, New Zealand and selected international markets.
There have been no significant changes in the nature of the activities
of the consolidated entity during the year.
OPERATING AND FINANCIAL REVIEW
The Operating and Financial Review for the consolidated entity during
the financial year ended 30 June 2014 is provided in the Managing
Director’s Review of Operations, and forms part of this Directors’ Report.
GWA GROUP LIMITED • 2014 ANNUAL REPORT Director
Board
Audit and Risk
Committee
Remuneration
Committee
Nomination Committee
D D McDonough
J F Mulcahy
P C Crowley(1)
R M Anderson
W J Bartlett
P A Birtles
R J Thornton(2)
G J McGrath(3)
A
10
10
10
10
10
10
10
4
B
10
10
10
9
10
10
10
4
A
3
-
-
-
4
4
-
1
B
3
-
-
-
4
4
-
1
A
-
3
-
-
3
-
-
3
B
-
3
-
-
3
-
-
3
A
1
1
-
-
1
-
-
-
B
1
1
-
-
1
-
-
-
Note:
A Number of meetings held during the time the director held office during the year
B Number of meetings attended
(1) P C Crowley attends Committee meetings by invitation of the Board
(2) R J Thornton attends Committee meetings as Company Secretary
(3) G J McGrath retired on 30 October 2013
DIVIDENDS
Dividends paid or declared by the Group to shareholders since the end
of the previous financial year were:
Declared and paid during FY14
Dividend
Final 2012/13
Ordinary
Cents per
share
Total
Amount
$’000
6.0
18,392
Franked
Date of
Payment
Fully
Franked
4 October
2013
Franked dividends declared and paid during the year were franked
at the corporate tax rate of 30%.
Declared after end of FY14
After the balance sheet date the following dividend was approved by
the directors. The dividend has not been provided and there are no
income tax consequences.
Dividend
Final 2013/14
Ordinary
Cents per
share
Total
Amount
$’000
5.5
16,859
Franked
Date of
Payment
Fully
Franked
8 October
2014
The financial effect of the dividend has not been brought to account in
the consolidated financial statements for the year ended 30 June 2014
and will be recognised in subsequent financial reports.
The record date for the final dividend is 17 September 2014 and the
dividend payment date is 8 October 2014. The Dividend Reinvestment
Plan will not be offered to shareholders for the final dividend and
remains suspended.
EVENTS SUBSEQUENT TO REPORTING DATE
On 28 July 2014, as a result of an extensive strategic review, the
directors determined the consolidated entity’s focus will be on the
target market segments of the Bathrooms & Kitchens and Door &
Access Systems businesses, and that the Dux Hot Water and Brivis
Heating & Cooling businesses will be divested. The divestment process
is expected to take several months to execute and at the date of this
report, the consolidated entity has not entered into any agreements
for sale of the businesses.
Other than the matter discussed above, there has not arisen in the
interval between the end of the financial year and the date of this
report any item, transaction or event of a material and unusual
nature likely, in the opinion of the directors of the Group, to affect
significantly the operations of the consolidated entity, the results of
those operations, or the state of affairs of the consolidated entity,
in future financial years.
29
DIRECTORS’ REPORT (CONT)
AS AT 30 JUNE 2014
LIKELY DEVELOPMENTS
Likely developments and expected results of the operations of the
consolidated entity are provided in the Managing Director’s Review
of Operations.
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
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 2014.
INDEMNIFICATION AND INSURANCE OF DIRECTORS
AND OFFICERS
Indemnification
The Group’s constitution provides that, to the extent permitted by
the law, every current (and former) director or secretary of the Group
shall be indemnified out of the assets of the Group 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 Group, 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 Group or
related body corporate.
Insurance Premiums
The Group has paid premiums in respect of insurance contracts which
provide cover against certain liabilities of every current (and former)
director and officer of the Group 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 Group and controlled entities, including the directors
named in the Directors’ Report, the Chief Financial Officer and all
persons concerned or taking part in the management of the Group
and its controlled entities.
NON-AUDIT SERVICES
During the year KPMG, the consolidated entity’s auditor, has
performed certain other services in addition to the audit and
review of the financial statements.
The Board has considered the non-audit services provided during the
year by the auditor and in accordance with written advice provided
by resolution of the Audit and Risk Committee, is satisfied that the
provision of those non-audit services during the year by the auditor is
compatible with, and did not compromise, the auditor independence
requirements of the Corporations Act 2001 for the following reasons:
• All non-audit services were subject to the corporate governance
procedures adopted by the consolidated entity and have been
reviewed by the Audit and Risk Committee to ensure they do
not impact the integrity and objectivity of the auditor; and
• The non-audit services provided do not undermine the general
principles relating to auditor independence as set out in APES
110 Code of Ethics for Professional Accountants, as they did not
involve reviewing or auditing the auditor’s own work, acting in a
management or decision making capacity for the Group, acting
as an advocate for the Group or jointly sharing risks and rewards.
Details of the amounts paid to the auditor of the consolidated entity,
KPMG, and its network firms for audit and non-audit services provided
during the year are outlined in Note 7 of the financial statements.
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 2014.
Rounding
The Group 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.
REMUNERATION REPORT – AUDITED
Introduction
The report covers the following matters for FY14:
1. Board role in setting remuneration strategy and principles;
2. Relationship between remuneration policy and
Group performance;
3. Description of non-executive director remuneration;
4. Description of executive remuneration;
5. Details of director and executive remuneration; and
6. Key terms of employment contracts.
1. BOARD ROLE IN SETTING REMUNERATION
STRATEGY AND PRINCIPLES
GWA’s remuneration strategy is designed to provide remuneration that
is fair and able to attract and retain management and directors with
the experience, knowledge, skills and judgment required for 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 operational scope to GWA.
GWA GROUP LIMITED • 2014 ANNUAL REPORT 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%
80%
60%
40%
20%
0%
-20%
-40%
Jun 11
Oct 11
Feb 12
Jun 12
Oct 12
Feb 13
Jun 13
Oct 13
Feb 14
Jun 14
Aug 11
Dec 11
Apr 12
Aug 12
Dec 12
Apr 13
Aug 13
Dec 13
Apr 14
The Board engages with shareholders, management and other
stakeholders to continuously refine and improve executive and
director remuneration policies and practices.
The changes that have been made are outlined in section 4.4.3
and apply to grants of Performance Rights to executives in FY15 year.
In essence the changes are that:
The Board’s Nomination Committee is responsible for determining the
remuneration arrangements for the non-executive directors, with the
annual maximum aggregate amount approved by shareholders.
The Board’s Remuneration Committee deals with remuneration
matters for executives.
Both the Nomination Committee and the Remuneration Committee
have the authority to engage external professional advisers without
the approval of the Board or management.
During the reporting period, the Remuneration Committee obtained
market data from Guerdon Associates for the FY15 executive
remuneration review, and advice in relation to long term performance
measures. Guerdon Associates does not provide other services
to the Group and is otherwise independent. No remuneration
recommendations as defined under Division 1, Part 1.2.98 (1)
of the Corporations Act 2001, were made by Guerdon Associates.
In response to feedback from shareholders and following receipt
of advice from Guerdon Associates, important changes have been
implemented to remuneration after FY14 which are consistent with
the overall Group remuneration strategy. The changes are outlined
in section 1.1.
1.1 Executive remuneration – FY15 changes
The performance requirements under the Group’s long term incentive
plan (LTI) have been changed for grants of Performance Rights to
executives during FY15 year. The key concerns raised by shareholders
were that the performance requirements under the EPS hurdle
are not sufficiently challenging for executives compared to market
expectations of the Group’s future EPS growth and that a significant
proportion of Performance Rights vest at average performance levels.
• EPS growth will be assessed relative to growth in dwelling
completions obtained from the Australian Bureau of Statistics as
it is believed that growth in dwelling completions is a valid proxy
for overall growth of the market for the Group’s products. A strong
historical correlation exists between the Group’s EPS performance
and dwelling completions. It is also considered that assessing EPS
growth against dwelling completions growth will permit a fairer
assessment of the performance of management relative to market
opportunity; and
• Return on Funds Employed (ROFE) will replace relative TSR as the
second LTI performance measure. As a measure of capital efficiency,
the use of ROFE, together with the modified EPS growth hurdle will
permit a more complete assessment of management performance.
2. RELATIONSHIP BETWEEN REMUNERATION POLICY
AND GROUP 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;
• Return on funds employed (ROFE);
• Total shareholder return (TSR) relative to companies with similar
scope, operations, customers or products;
• Trading earnings before interest and tax (EBIT) targets; and
• Operating cash flow targets.
Remuneration for all executives varies with performance on these
key measures together with achievement of key personal goals which
underpin delivery of the financial outcomes, and are linked to the
consolidated entity’s performance review process.
31
DIRECTORS’ REPORT (CONT)
AS AT 30 JUNE 2014
The graph at the top of the previous page shows the Group’s relative
performance over a rolling 3 year period to 30 June 2014 compared
to the peer group companies used for the 2014 grant of Performance
Rights being 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 statistics for the Group over the last
five years:
Financial
Year
2009/10**
2010/11**
2011/12**
2012/13
2013/14
Trading
EBIT*
($m)
Trading
EPS*
(cents)
Total
DPS
(cents)
Share
Price
($)
94.5
99.9
75.4
66.8
72.3
18.5
19.6
15.1
12.9
14.3
18.0
18.0
18.0
12.0
5.5
3.01
2.75
2.10
2.40
2.63
*excludes significant items **excludes discontinued operations
The remuneration and incentive framework focuses executives on
sustaining short term operating performance coupled with moderate
long term strategic growth. This has contributed to the Group
generating less volatile shareholder returns and earnings than
peers despite low levels of building activity in recent years. This
has permitted a total of 71.5 cents in fully franked dividends paid
to shareholders over the last five financial years.
The improvement in the Group’s trading profitability performance in
FY14 was primarily driven by the strong performance of Bathrooms
& Kitchens (excluding Hot Water) and the gradual recovery in
residential dwelling construction following a number of years of
weak market activity.
The Group expects to benefit in future periods as the building recovery
gathers pace leading to increased demand for its products. The Group
will also benefit from the execution of its strategic plans leading to
improved profitability and cash flow performance enabling higher
returns to shareholders.
The remuneration and incentive framework has allowed the Group to
respond to cyclical dwelling construction activity. STI payments related
to performance improvement and restructuring during the recent
downturn encouraged management to respond quickly and make
long term decisions to sustain competitiveness and profitability.
This has placed the Group in a strong position to take advantage of the
recovery in dwelling activity that is underway and led to an improved
trading EBIT performance that was up 8% in FY14.
2.1 Managing Director’s key performance goals and outcomes
An assessment of the Managing Director’s key performance goals
and financial targets subject to STI incentive payments for FY14 is
provided in the following table:
FY14 Goals
Results
Assessment
Operational goals
Achieve leading safety
performance to work towards
an injury free workplace
The total injury frequency rate (TIFR) of 6.2 in FY14 was a significant improvement on the
targeted TIFR of 6.9 and represents a 19% improvement on the prior year. The outcome
continues the group’s strong safety performance and demonstrates the commitment to an
injury free workplace.
Improved working capital
management to maximise
operating cash flow
The higher inventory levels at Bathrooms & Kitchens and Gainsborough at 30 June 2014
meant that the operating cash flow target was not achieved. The higher stock levels will be
addressed in FY15.
Demonstrate improved
market service capabilities
through technology innovation
and measurable service
improvements
Strategy and growth goals
Develop the group and
divisional strategies, the way
forward and longer term
financial projections
Salesforce.com has been successfully deployed across the Group to improve market
service capabilities. Plumber digital applications and specification tools have been
developed in Bathrooms & Kitchens to service key customer segments. Demand planning
system has also been implemented in Bathrooms & Kitchens.
The Group strategy has been developed and has set the immediate future direction of
GWA. That development involved the Board, senior management, external research and
financial analysis. Divisional strategies have been developed which are aligned to the
overall Group strategy resulting in the adoption of major initiatives to focus the Group on
the growth of the core Bathrooms & Kitchens and Door & Access Systems divisions and
divestment of the non-core Brivis and Dux businesses with the aim of delivering higher
shareholder returns.
GWA GROUP LIMITED • 2014 ANNUAL REPORT FY14 Goals
Results
Assessment
Strategy and growth goals
Progress execution of the
strategic initiatives for
Bathrooms & Kitchens to
improve business performance
Bathrooms & Kitchens delivered a strong financial performance in FY14 following the
successful execution of the strategic initiatives approved by the Board in June 2013
and the cost savings in selling, general and administration expenses from the
restructuring in December 2012. Further improvement is expected in FY15 as
Bathrooms & Kitchens focuses on its target market segments and as the recovery
in the building sector gathers pace.
Ensure the turnaround of
Gliderol is completed and
generating acceptable returns
The financial performance of Gliderol in FY14 was disappointing with a $17 million
impairment expense in December 2013. Improvement plans are in place to address
the under-performance but progress has been slower than expected.
Supply chain goals
Progress supply chain
transformation to improve
demand management
processes and customer
service capabilities
Financial targets
STI financial
performance targets
New demand planning system has been implemented in Bathrooms & Kitchens during
FY14 to improve capabilities and tools in their demand management processes. The
supply issues in Gainsborough in FY14 resulted in lost sales and lost market share with
an estimated impact on trading EBIT of approximately $5 million. The supply issues in
Gainsborough have been resolved and risk mitigation plans have been put in place.
In FY14 the ‘reasonably achievable’ trading EBIT financial performance targets for
Bathrooms & Kitchens and Brivis were achieved but no other STI financial performance
targets were achieved.
= Fully achieved
= Partially achieved
= Not achieved
3. DESCRIPTION OF NON-EXECUTIVE DIRECTOR REMUNERATION
There has been no change to 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 Group to ensure non-executive directors
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 Group matters.
The benchmarking survey from Guerdon Associates in 2011 sampled the same companies used for executive remuneration benchmarking and
found the fees received by most non-executive directors were positioned at about the 60th percentile.
Retirement benefits other than statutory superannuation are not available for non-executive directors.
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.
33
DIRECTORS’ REPORT (CONT)
AS AT 30 JUNE 2014
The remuneration structure implemented for all executives, including
the Managing Director, recognises the short term challenges posed by
cyclical factors, ability to sustain competitiveness, deliver value and
growth, and maintain cash flows for dividends. However, to ensure
sustainability of 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 FY14 incentives structure for the Managing Director is provided
in the following table:
Maximum
STI as % of
fixed remuneration
Maximum LTI % of
fixed remuneration
(grant date fair
value)
Maximum total
performance pay
as % of fixed
remuneration
80
40
120
Managing
Director
2013/14
The FY14 STI for the Managing Director is provided in the following table:
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
2013/14*
40
25
65
15
80
* The Managing Director’s STI structure for FY14 was revised by the
Remuneration Committee to ensure the focus on the achievement of the key
performance goals outlined in section 2.1. This resulted in a higher personal
goal component and a lower financial target component to the STI structure
for FY14 than in prior years in order to give greater weight to factors that are
consistent with its focus on sustainable performance over time. There was no
change to the maximum STI amount for the Managing Director for FY14.
The FY14 total performance pay outcomes for the Managing Director, as
reflected in the Remuneration Tables, are provided in the following table:
Managing
Director
STI
LTI*
Total
Achievement
of STI and LTI
as % of fixed
remuneration
Forfeiture of STI
and LTI as % of
fixed remuneration
Total potential
performance pay
as % of fixed
remuneration
20
30
50
60
30
90
80
60
140
* This relates to the LTI plan prior to the changes implemented to the
remuneration structure in FY12 as outlined in the 2012 Remuneration Report.
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 FY12 changes, together
with graduated vesting scales and higher performance hurdles.
4.1.2 Other Executives remuneration structure
The FY14 incentives structure for other executives is provided in the
following table:
Other
Executives
Maximum
STI % of
fixed remuneration
Maximum LTI % of
fixed remuneration
(grant date fair
value)
Maximum total
performance pay
as % of fixed
remuneration
2013/14
50
30
80
The FY14 STI for the other executives is provided in the following table:
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
2013/14
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 of the short term challenges posed by cyclical factors
and the focus in recent years on conserving market leadership,
cash flow and dividends where 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 and relative to companies of comparable
size and operational scope to GWA. The comparator companies are
primarily from the consumer discretionary and industrial sectors.
Based on an independent survey by Guerdon Associates for the
FY15 executive remuneration review, the fixed remuneration for
most executive positions at GWA are generally at or above the 50th
percentile for companies of comparable operational scope and size
to GWA. The 21 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’s
fixed remuneration has been frozen since 2011 and remains frozen.
GWA GROUP LIMITED • 2014 ANNUAL REPORT 4.2.1 Managing Director’s fixed remuneration
The Managing Director’s fixed remuneration has been established over
the past 11 years of service to shareholders where he has consistently
delivered value and positioned the Group for sustainable performance.
The Managing Director has been instrumental in the restructuring of
the GWA businesses to compete in the cyclical Australian building
industry with the high Australian dollar increasing import competition.
During that time, the Group has successfully executed its growth
strategies with its strong financial position enabling the Group to
maximise shareholder returns.
Based on an independent survey by Guerdon Associates for the
FY15 executive remuneration review, the fixed remuneration of
the Managing Director is at the 73rd percentile for companies of
comparable size and operational scope to GWA. The percentile
has reduced in recent years following the freeze on the Managing
Director’s fixed remuneration that was implemented in 2011 and
the level is in line with the Group’s targeted remuneration strategy.
During the 11 years of service, the Managing Director has received
only modest incentive payments due to the low levels of building
sector activity during that period.
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 Group’s financial year to
30 June 2014. 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 FY14.
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 FY15 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 forfeiture.
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 Group or business unit’s
strategic position; the goals vary with the individual’s role, risks and
opportunities.
The achievement of personal goals reinforces the Group’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 Group.
Personal goals include both measurable financial goals and
measurable business improvement goals. The measurable financial
goals 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 FY14 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
following input from the Board and with the outcomes approved by
the Remuneration Committee. The personal goals of the executives
for FY15 were established at the performance reviews.
The inclusion of personal goals in the remuneration structure ensures
that executives can be recognised for good business performance
whether or not the Group or business unit achieves its STI financial
performance targets. The Group 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 Group’s performance
management process.
4.3.2.2 Financial Performance Targets
For FY14, STI financial performance targets are based on specified
trading EBIT and Operating Cash Flow targets as determined by the
Remuneration Committee. The use of trading EBIT and Operating
Cash Flow as the basis of STI financial targets is aimed at ensuring
executives are accountable for delivering both profit and working
capital improvements.
The Group had previously determined STI financial targets based on
Economic Profit but the Board is of the view that a combination of
trading EBIT and Operating Cash Flow targets are a more effective
basis for STI targets as they are currently key metrics used in the
business and are better understood than Economic Profit.
The specified trading EBIT and Operating Cash Flow targets are
weighted equally and assessed separately and on an aggregated basis
for divisional and corporate executives.
35
DIRECTORS’ REPORT (CONT)
AS AT 30 JUNE 2014
Under the STI framework, a divisional executive may receive an STI
payment if divisional financial targets are achieved, although the
overall corporate financial targets may not have been achieved, 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) that ensure management is motivated while
reflecting 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 FY14.
For FY14, Bathrooms & Kitchens and Brivis achieved their trading
EBIT STI financial targets at the ‘reasonably achievable’ level. No
other divisional or corporate STI financial targets were achieved by
the executives. 50% of the STI incentive payment has been deferred
for Bathrooms & Kitchens and 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 FY13 for
Brivis executives was tested by the Board in August 2014 to confirm
the integrity of the achievement of the STI financial targets in FY13.
Following satisfaction with the testing, the Board approved the
payment of the deferred component to Brivis’ executives together
with interest at market rates.
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 Group 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, and reflects what the Board considers is
a reasonable period to require and test the sustainability of earnings
accretion from investments and working capital improvement given
the nature of the business.
The LTI is provided as Performance Rights, with each right entitling the
holder to an ordinary share in the Group (or in limited cases to a cash
payment), subject to meeting financial performance hurdles and the
holder remaining in employment with the Group 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 Group’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 Group
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 Group, relevant policies and
regulations and other factors.
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.
In the event of a change of control, the Board will determine in
its discretion the extent to which outstanding Performance Rights
granted to executives will vest and be exercised into ordinary shares.
In exercising its discretion the Board will consider whether the
vesting conditions are unlikely to be satisfied and the outstanding
Performance Rights should lapse. If the Board makes the decision
that not all outstanding Performance Rights will vest on a change of
control, then all remaining Performance Rights will lapse.
For the 2014 LTI grant, the proportion of Performance Rights that can
vest will be calculated and the shares will vest in August 2016 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 Group. The total number of outstanding Performance
Rights granted to executives at 30 June 2014 was 2,017,000 which
represents 0.7% of the Group’s total issued shares.
4.4.2 LTI performance requirements
For the FY14 LTI grant, the performance hurdles continue to provide
for vesting scales graduated with performance and demanding
performance hurdles. The comparator group for the FY14 LTI plan
includes selected comparator group companies used by Guerdon
Associates for benchmarking executive fixed remuneration levels for
the FY14 remuneration review.
GWA GROUP LIMITED • 2014 ANNUAL REPORT 4.4.2.1 TSR Hurdle
4.4.3 LTI performance requirements – FY15 changes
The performance hurdles and vesting proportions for the TSR
performance measure that applied to the 2014 LTI grant is outlined
in the following table:
Following shareholder feedback and advice from the Group’s
independent external remuneration adviser, Guerdon Associates,
a number of important changes were made to the LTI in FY14.
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.
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 FY14 LTI grant, EPS growth is measured over the three years
from 1 July 2013 to 30 June 2016. The EPS hurdle is calculated as
net profit after tax, as set out in the Group’s annual audited financial
statements, divided by the weighted average number of ordinary shares
on issue. The base year EPS for the FY14 LTI grant was 12.7 cents.
The Board exercised its discretion to adjust the base year EPS by
excluding the significant items in FY13 year comprising restructuring
costs. This adjustment made the performance hurdle more demanding
as it increased the base year EPS from 10.6 cents to 12.7 cents to
ensure the hurdle was reflective of underlying trading performance.
The performance hurdles and vesting proportions for the EPS
performance measure that applied to the 2014 LTI grant is outlined
in the following table:
The changes will apply to grants of Performance Rights to executives
under the LTI in respect of FY15. The changes are as follows:
• EPS growth will be assessed relative to growth in dwelling
completions obtained from the Australian Bureau of Statistics.
Growth in dwelling completions is a valid proxy for overall growth
of the market for the Group’s products because a strong historical
correlation exists between the Group’s EPS performance and
dwelling completions. Assessing EPS growth against dwelling
completions growth permits a fairer assessment of management
performance relative to market opportunity.
• Return on Funds Employed (ROFE) will replace relative TSR as the
second LTI performance measure. As a measure of capital efficiency,
the use of ROFE, together with the modified EPS growth hurdle,
permits a more complete assessment of management performance.
The Board is satisfied that measuring EPS growth relative to market
growth as reflected in dwelling completions provides a more robust
benchmark for assessing relative performance than the relative TSR
hurdle used in previous LTI grants. EPS growth more directly focuses
on factors management can influence, so that results will be less likely
to fluctuate with general market sentiment.
4.4.3.1 LTI Performance Hurdles – FY15 Changes
The performance hurdles and vesting proportions for each measure
that will apply to the grant of Performance Rights during FY15 are:
GWA Group Limited EPS compound
annual growth rate (CAGR) relative
to dwelling completions growth over
three year performance period
Proportion of
Performance Rights
to Vest if EPS growth
hurdle is met
EPS CAGR less than
dwelling completions CAGR
EPS CAGR exceeding
dwelling completions CAGR
EPS CAGR exceeding dwelling
completions CAGR up to 6%
0%
12.5%
Straight line
vesting between
12.5% and 50%
EPS CAGR equal to dwelling
completions CAGR plus 6% or higher
50%
(i.e. 50% of total grant)
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)
GWA Group Limited ROFE over three
year performance period
ROFE less than 15% per annum
ROFE equal to 15% per annum
ROFE between 15%
and 18% per annum
ROFE equal to
18% or higher per annum
Proportion of
Performance Rights to
Vest if ROFE hurdle is
met
0%
12.5%
Straight line
vesting between
12.5% and 50%
50%
(i.e. 50% of total grant)
37
DIRECTORS’ REPORT (CONT)
AS AT 30 JUNE 2014
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 Group and other key management personnel for the
year ended 30 June 2014 are outlined in the Remuneration Tables on
the opposite page.
Notes to the Remuneration Tables
(a) Salary and fees represents base salary and includes the
movement in annual and long service leave provisions.
(b) The Short Term Incentive (STI) cash bonus is for the performance
during the financial year ended 30 June 2014 based on the
achievement of personal goals and financial performance
targets. Bathrooms & Kitchens and Brivis achieved 50% of their
‘reasonably achievable’ 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.
(c) The short term non-monetary benefits include the provision of
motor vehicles, salary continuance and life insurance and any
applicable fringe benefits tax thereon.
(d) As outlined in the 2013 Remuneration Report, the legacy
Employee Share Plan was wound down in March 2013 and has
been discontinued. There have been no further share issues to
employees under the former plan.
(e) The Long Term Incentive (LTI) Plan was approved by shareholders
at the 2008 Annual General Meeting. The outstanding
Performance Rights at 30 June 2014 were granted to executives
in each of the years 30 June 2012, 2013 and 2014 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 2011 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.
(f) Mr Darryl McDonough was appointed Chairman of GWA Group
Limited on 30 October 2013 following the retirement of the former
Chairman, Mr Geoff McGrath. Mr John Mulcahy was appointed
Deputy Chairman of GWA Group Limited on that date.
(g) The Managing Director, Mr Peter Crowley’s fixed remuneration
has been frozen since 2011 – refer Section 4.2.1 for further
details. The STI cash bonus for Mr Crowley for FY14 has
been approved by the Remuneration Committee based on
the achievement of key performance goals following a formal
performance review conducted by the Chairman – refer Section
2.1 for further details including Mr Crowley’s key performance
goals and outcomes. The STI corporate financial performance
targets for FY14 were not achieved and no amount is included in
Mr Crowley’s remuneration in respect of the achievement of STI
financial performance targets.
(h) Mr Celeste Camillo was appointed General Manager – Brivis on
1 December 2012 and is considered Key Management Personnel
from that date.
(i)
The former Chief Executive – GWA Door & Access Systems,
Mr Geoff Oliver, retired on 11 October 2013 after 17 years service
to the Group and received a termination benefit representing
9 months salary. As part of Mr Oliver’s termination arrangements
he is also eligible to participate in the 2012 LTI grant which will
be tested in August 2014.
(j)
The role of Chief Executive – GWA Door & Access Systems is
vacant following Mr Oliver’s retirement and the recruitment for
this position is progressing. The role is currently being overseen
by the Managing Director, Mr Peter Crowley.
GWA GROUP LIMITED • 2014 ANNUAL REPORT y
r
a
l
a
S
s
e
e
F
&
$(a)
253,947
130,353
138,225
112,861
83,563
75,415
143,313
142,096
123,841
122,789
112,148
318,723
Non-Executive Directors
D McDonough
Chairman
(Appointed 30 October 2013)(f)
J Mulcahy
Deputy Chairman
(Appointed 30 October 2013)(f)
R Anderson
Non-Executive Director
W Bartlett
Non-Executive Director
P Birtles
Non-Executive Director
G McGrath, Chairman
(Retired 30 October 2013)(f)
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
Total – Non-Executive
Directors
2014
855,037
2013
902,237
Short-term
Long-term
Post-employment
h
s
a
C
I
T
S
s
u
n
o
B
y
r
a
t
e
n
o
M
-
n
o
N
n
a
l
P
e
r
a
h
S
e
e
y
o
l
p
m
E
t
s
e
r
e
t
n
I
$(b)
$(c)
$(d)
-
e
r
a
h
S
f
o
e
u
l
a
V
s
d
r
a
w
A
d
e
s
a
B
$(e)
n
o
i
t
a
u
n
n
a
s
t
fi
e
n
e
B
-
r
e
p
u
S
$
n
o
i
t
a
n
i
m
r
e
T
s
t
fi
e
n
e
B
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
34,999
24,999
14,089
10,157
34,509
40,387
14,607
12,789
12,623
11,051
5,924
28,685
– 116,751
– 128,068
Executive Directors
P Crowley
Managing Director (g)
2014 1,424,527
313,420 119,418
–
235,433
50,000
2013 1,438,646
171,600
88,648
38,080
160,633
50,000
R Thornton
Executive Director
2014
2013
377,043
79,522
367,295
75,600
1,364
9,562
–
47,542
17,774
10,998
45,142
16,470
Total – Directors
Remuneration
2014 2,656,607 392,942 120,782
– 282,975 184,525
2013 2,708,178 247,200
98,210
49,078 205,775 194,538
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) (h)
G Oliver
Chief Executive – GWA
Door & Access Systems
(Ceased employment
11 October 2013)(i)(j)
Total – Executives
Remuneration
Total – Directors
and Executives
Remuneration
2014
2013
522,440
91,677
645,063
275,000
1,856
8,864
2014
529,986
146,522
2,905
–
–
–
96,820
24,600
62,720
22,550
65,692
24,999
2013
491,459
104,000 122,103
28,537
53,625
24,999
2014
2013
289,631
94,500
13,681
–
52,573
24,999
204,658
145,500
1,875
33,973
9,913
–
–
2014
138,005
–
2013
430,655
54,960
7,000
–
–
(76,375)
35,000
349,195
445,825
47,092
25,000
–
564,707
2014 1,480,062 332,699
18,442
– 138,710 109,598
349,195 2,428,706
2013 1,771,835 579,460 137,967
30,412 197,410
82,462
– 2,799,546
2014 4,136,669 725,641 139,224
– 421,685 294,123
349,195 6,066,538
2013 4,480,013 826,660 236,177
79,490 403,185 277,000
– 6,302,525
l
a
t
o
T
$
288,946
155,352
152,314
123,018
118,072
115,802
157,920
154,885
136,464
133,840
118,072
347,408
971,788
–
–
–
–
–
–
–
–
–
–
–
–
–
– 1,030,305
–
–
–
–
2,142,799
1,947,607
523,245
525,067
– 3,637,832
– 3,502,979
–
–
–
–
–
–
737,393
1,014,197
770,104
824,723
475,384
395,919
f
o
n
o
i
t
r
o
p
o
r
P
n
o
i
t
a
r
e
n
u
m
e
r
e
c
n
a
m
r
o
f
r
e
p
d
e
s
a
b
%
h
s
a
C
I
T
S
d
e
t
s
e
v
s
u
n
o
B
%
r
a
e
y
n
i
h
s
a
C
I
T
S
d
e
t
i
e
f
r
o
f
s
u
n
o
B
%
r
a
e
y
n
i
–
–
–
–
–
–
–
–
–
–
–
–
75
86
60
60
68
–
46
60
40
3
–
76
–
–
–
–
–
–
–
–
–
–
–
–
25.6
17.1
24.3
23.0
25.6
33.3
27.6
19.1
30.9
45.3
-17.1
18.1
–
–
–
–
–
–
–
–
–
–
–
–
25
14
40
40
32
100
54
40
60
97
–
24
39
DIRECTORS’ REPORT (CONT)
AS AT 30 JUNE 2014
5.2 Share based payments
5.2.1 Performance Rights
The following table shows details of the Performance Rights granted to key management personnel during the year ended 30 June 2014 and
in prior years that affects compensation in this or future reporting periods.
The testing of Performance Rights granted on 21 February 2011 in respect of the three year performance period of 1 July 2010 to 30 June 2013
occurred on 21 August 2013. 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 290,000 shares were purchased on-market for the executives at an average price of $2.91 following the achievement of the TSR
hurdle in respect of the 2011 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
(Ceased employment 11 October 2013)
2014
2013
2012
2011
2014
2013
2012
2011
2014
2013
2012
2011
2014
2013
2012
2011
2014
2013
2012
2011
2014
2013
2012
2011
200,000
345,000
260,000
300,000
40,000
65,000
45,000
30,000
55,000
96,000
–
–
50,000
90,000
55,000
50,000
30,000
52,000
–
–
–
80,000
55,000
50,000
24 February 2014
25 February 2013
17 February 2012
–
–
–
21 February 2011
50
24 February 2014
25 February 2013
17 February 2012
–
–
–
21 February 2011
50
24 February 2014
25 February 2013
–
–
24 February 2014
25 February 2013
17 February 2012
–
–
–
–
–
–
–
21 February 2011
50
24 February 2014
25 February 2013
–
–
–
25 February 2013
17 February 2012
–
–
–
–
–
–
–
21 February 2011
50
–
–
50
–
–
–
50
–
–
–
–
–
–
–
50
–
–
–
–
–
–
100
50
–
372,000
676,200
375,700
802,500
74,400
127,400
65,025
80,250
102,300
188,160
–
–
93,000
176,400
79,475
133,750
55,800
101,920
–
–
–
156,800
79,475
133,750
3.12
1.70
2.35
3.00
3.12
1.70
2.35
3.00
3.12
1.70
–
–
3.12
1.70
2.35
3.00
3.12
1.70
–
–
–
1.70
2.35
3.00
* 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
$3.12 being the volume weighted average price of the Group’s shares calculated over the 20 trading days after the Group’s Annual General Meeting on 30 October
2013. The grant dates and corresponding fair values per right in the 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 $2.36 per right and the TSR hurdle was $1.36 per right.
All of the rights carry an exercise price of nil. The rights granted on 17 February 2012, 25 February 2013 and 24 February 2014 will vest on the
date of the release to the Australian Securities Exchange of the Group’s annual audited financial statements for the years 30 June 2014, 2015
and 2016 respectively, subject to the achievement of the performance hurdles. The rights granted to Mr Crowley and Mr Thornton were approved
by shareholders at the 2011, 2012 and 2013 Annual General Meetings in accordance with ASX Listing Rule 10.14.
Rights were forfeited where an employee ceased employment with the Group during the year in accordance with the rules of the Long Term
Incentive Plan. For the rights granted to key management personnel on 17 February 2012, the Group has not achieved the EPS hurdle for the
performance period of 1 July 2011 to 30 June 2014. This has resulted in the forfeiture of 292,500 rights with a value of $538,200. The number
of rights outstanding at 30 June 2014 also represents the balance yet to vest.
GWA GROUP LIMITED • 2014 ANNUAL REPORT 5.3 Key management personnel transactions
5.3.1 Loans to key management personnel and their related parties
No loans were made to key management personnel or their related parties during the year ended 30 June 2014 (2013: nil).
5.3.2 Other key management personnel transactions with the Group or its controlled entities
The consolidated entity purchased components and tooling of $67,905 (2013: $109,983) from Great Western Corporation Pty Ltd, a company of
which Mr Richard Thornton is a non-executive director. Mr Thornton had no involvement with the purchasing of the components and tooling from
Great Western Corporation Pty Ltd and amounts were billed based on normal market rates for such supplies and were due and payable under
normal payment terms.
Held at
1 July 2013
Granted as
compensation
Purchases
Sales
Held at
30 June 2014
–
–
107,905
45,000
344,002
18,060,801
Directors: non-executive
D McDonough
J Mulcahy
R Anderson
W Bartlett
P Birtles
G McGrath
(retired 30 October 2013)
Executive Directors
P Crowley
R Thornton
Executives
I Brannan
L Patterson
C Camillo
G Oliver
(ceased employment 11/10/2013)
Directors: non-executive
D McDonough
J Mulcahy
R Anderson
W Bartlett
P Birtles
G McGrath
Executive Directors
P Crowley
R Thornton
Executives
I Brannan
L Patterson
C Camillo
G Oliver
W Saxelby
(ceased employment 31/10/2012)
N Evans
(ceased employment 17/10/2012)
107,905
45,000
18,404,803
33,194
15,000
150,000
330,000
43,694
–
52,500
–
244,175
–
–
–
–
–
–
150,000
15,000
–
25,000
–
25,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Held at
1 July 2012
Granted as
compensation
Purchases
Sales
100,495
45,000
18,404,803
30,914
15,000
150,000
750,000
128,694
–
227,500
–
202,407
350,000
–
–
–
–
–
–
152,500
15,000
–
25,000
–
25,000
–
–
37,500
7,410
–
–
2,280
–
–
–
–
–
–
–
16,768
–
–
–
–
–
–
–
–
(572,500)
(100,000)
–
(200,000)
–
–
–
–
33,194
15,000
n/a
480,000
58,694
–
77,500
–
n/a
Held at
30 June 2013
107,905
45,000
18,404,803
33,194
15,000
150,000
330,000
43,694
–
52,500
–
244,175
n/a
n/a
41
DIRECTORS’ REPORT (CONT)
AS AT 30 JUNE 2014
The consolidated entity incurred legal fees of $712,246
(2013: $332,195) from Clayton Utz, a legal firm of which
Mr Darryl McDonough is an equity partner. Mr McDonough
had no involvement with the provision of the legal services by
Clayton Utz and the amounts were billed based on normal market
rates for such services and were due and payable under normal
payment terms. For further details of the legal services provided
by Clayton Utz, please refer to the disclosures in the Group’s
Corporate Governance Statement under Independence of Directors.
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
2014
116,391
2013
29,801
From time to time, key management personnel of the Group 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.
5.3.3 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, including their related parties, are
shown in the tables on previous page.
The relevant interest of each director in the share capital of the Group
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 2014 is listed in the Directors’ Report under Directors’ Interests.
During the reporting period, 215,000 shares were granted to
key management personnel as compensation (2013: 255,000).
The aggregate number of shares held by key management
personnel or their related parties at 30 June 2014 was 18,878,094
(2013: 19,426,271).
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
Group or Mr Crowley wishes to terminate employment for any reason,
three months notice of termination is required. The Group 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 Group, Mr Crowley will be entitled to
receive payment of twelve months salary.
For the other specified executives, the Group is required to give
reasonable notice of termination of up to six months. The Group 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 Group, unless the Board
determines otherwise.
This Directors’ Report is made out in accordance with a resolution
of the directors:
J F Mulcahy
Director
P C Crowley
Director
Brisbane, 19 August 2014
GWA GROUP LIMITED • 2014 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 Other income
4 Other expenses
5
Significant items
6 Personnel expenses
7 Auditors’ remuneration
8 Net financing costs
9
Income tax expense
10 Earnings per share
11 Cash and cash equivalents
12 Trade and other receivables
13
Inventories
14 Current tax assets and liabilities
15 Deferred tax assets and liabilities
16 Property, plant and equipment
17
Intangible assets
18 Trade and other payables
48
55
57
57
58
59
59
59
60
61
62
62
62
62
63
64
65
67
19
Loans and borrowings
20 Employee benefits
21 Share-based payments
22 Provisions
23 Capital and reserves
24
Financial instruments and
financial risk management
25 Operating leases
26 Capital commitments
27 Contingencies
28 Deed of cross guarantee
29 Consolidated entities
30 Parent entity disclosures
31
Reconciliation of cash flows
from operating activities
32 Related parties
33 Subsequent events
Directors’ Declaration
Independent Auditor’s Report to the members of GWA Group Limited
44
45
46
47
67
69
70
71
72
73
80
81
81
81
84
85
86
87
87
88
89
43
CONSOLIDATED STATEMENT OF PROFIT OR
LOSS AND OTHER COMPREHENSIVE INCOME
GWA GROUP LIMITED AND ITS CONTROLLED ENTITIES
ABN 15 055 964 380
For the year ended 30 June 2014
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 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
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)
Note
2014
2013
2
3
4
8
9
10
10
577,994
(382,820)
195,174
1,295
(76,224)
(45,342)
(31,080)
43,823
683
(11,884)
(11,201)
32,622
(14,026)
18,596
844
(1,619)
(775)
17,821
6.07
6.04
565,365
(367,956)
197,409
6,720
(84,062)
(48,682)
(16,046)
55,339
1,479
(14,803)
(13,324)
42,015
(9,625)
32,390
669
1,959
2,628
35,018
10.64
10.59
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 87.
GWA GROUP LIMITED • 2014 ANNUAL REPORT
CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
GWA GROUP LIMITED AND ITS CONTROLLED ENTITIES
ABN 15 055 964 380
As at 30 June 2014
In thousands of AUD
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other
Total current assets
Non-current assets
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
2014
2013
11
12
13
15
16
17
18
20
14
22
19
20
22
23
23
29,873
126,950
113,053
2,068
271,944
13,906
97,022
368,690
673
480,291
752,235
105,200
11,748
3,471
9,802
130,221
175,000
13,241
7,784
196,025
326,246
425,989
408,100
(1,241)
19,130
425,989
32,757
111,461
80,336
2,223
226,777
15,064
107,624
389,094
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
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 87.
45
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 30 June 2014
In thousands of AUD
Cash flows from operating activities
Cash receipts from customers
Cash paid to suppliers and employees
Cash generated from operations
Interest and facility fees paid
Interest received
Income taxes paid
Net cash from operating activities
31
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
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 (decrease)/increase 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
11
Note
2014
2013
649,233
(595,099)
54,134
(11,319)
683
(9,600)
33,898
6,738
(4,270)
(1,300)
-
1,168
263
-
(20,000)
(18,392)
(38,129)
(3,063)
32,757
179
29,873
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
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 87.
GWA GROUP LIMITED • 2014 ANNUAL REPORTGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES ABN 15 055 964 380 CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
For the year ended 30 June 2014
In thousands of AUD
Share
capital
Translation
reserve
Hedging
reserve
Equity
compensation
reserve
Retained
earnings
Total
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
–
–
–
–
408,100
(1,985)
(289)
–
–
–
–
–
32,390
32,390
–
–
–
669
1,959
2,628
32,390
35,018
(547)
70
(477)
–
–
(43,953)
(43,953)
–
9,170
(547)
1,866
(43,883)
(35,260)
19,050
426,742
Balance at 1 July 2013
408,100
(1,985)
(289)
1,866
19,050
426,742
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
Total transactions with owners
Balance at 30 June 2014
–
–
–
–
–
–
–
–
–
844
–
844
844
–
–
–
–
–
(1,619)
(1,619)
(1,619)
–
–
–
–
–
–
–
–
18,596
18,596
–
–
–
18,596
844
(1,619)
(775)
17,821
(58)
–
(58)
(124)
(18,392)
(18,516)
(182)
(18,392)
(18,574)
408,100
(1,141)
(1,908)
1,808
19,130
425,989
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 87.
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 2014 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
19 August 2014.
(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
for the following items that are measured at fair value:
i) derivative financial instruments
ii)
trade and other receivables
iii) trade and other payables
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 17 – measurement of the recoverable amounts of
intangible assets
• note 21 – fair value of share-based payments
• note 22 and 27 – provisions and contingencies
• note 24 – 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) Business combinations
The consolidated entity accounts for business combinations using
the acquisition method when control is transferred to the consolidated
entity. The consideration transferred in the acquisition is generally
measured at fair value, as are the identifiable net assets acquired.
Any goodwill that arises is tested annually for impairment. Transaction
costs are expensed as incurred.
(ii) Subsidiaries
Subsidiaries are entities controlled by the consolidated entity. The
consolidated entity controls an entity when it is exposed to, or has
rights to, variable returns from its involvement with the entity and has
the ability to affect those returns through its power over the entity. The
financial statements of subsidiaries are included in the consolidated
financial statements from the date on which control commences until
the date on which control ceases.
(iii) Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income
and expenses arising from intra-group transactions, are eliminated.
(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
GWA GROUP LIMITED • 2014 ANNUAL REPORTGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES ABN 15 055 964 380NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(d) Foreign currency (continued)
(i)
Foreign currency transactions (continued)
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.
(iii) Net investment in foreign operations
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 as part of
the gain or loss on 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. 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.
49
GWA GROUP LIMITED AND ITS CONTROLLED ENTITIES ABN 15 055 964 380NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(f) Hedging (continued)
(i) Cash flow hedges (continued)
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.
(iii) Hedge of net investment in foreign operation
The portion of the gain or loss on an instrument used to hedge a net
investment in a foreign operation that is determined to be an effective
hedge is recognised 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
• motor vehicles
40 years
3-15 years
4-8 years
The residual value, the useful life and the depreciation method
applied to an asset are reassessed annually.
(h) Intangible assets
(i) Research and development
Expenditure on research activities, undertaken with the prospect
of gaining new scientific or technical knowledge and understanding,
is recognised in 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.
GWA GROUP LIMITED • 2014 ANNUAL REPORTGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES ABN 15 055 964 380NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(k) Cash and cash equivalents
(h) Intangible assets (continued)
(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.
(vi) Amortisation
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:
• software
• brand names
• trade names
• designs
• patents
4 years
nil
10-20 years
15 years
3-19 years (based on patent term)
• customer relationships
8 years
(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.
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.
Objective evidence that financial assets are impaired includes default
or delinquency by a debtor, restructuring of an amount due to the
consolidated entity on terms that the consolidated entity 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.
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)
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.
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.
(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.
(ii) Non-financial assets
(iii) Transaction costs
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.
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 benefit 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.
GWA GROUP LIMITED • 2014 ANNUAL REPORTGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES ABN 15 055 964 380NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(q) Trade and other payables
(o) Employee benefits (continued)
(iii) Short-term benefits
Short-term employee benefits are expensed as the related service
is provided. A liability is recognised for the amount expected to be
paid if the consolidated entity has a present legal or constructive
obligation to pay this amount as a result of past service provided
by the employee and the obligation can be estimated reliably.
(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.
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 which is
typically when goods are delivered to the customer, 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.
53
GWA GROUP LIMITED AND ITS CONTROLLED ENTITIES ABN 15 055 964 380NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(u) Goods and services tax
(t)
Income tax (continued)
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
• 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.
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.
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.
(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. Those which may be relevant
to the consolidated entity are set out below. The consolidated
entity does not plan to early adopt these standards.
GWA GROUP LIMITED • 2014 ANNUAL REPORTGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES ABN 15 055 964 380NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(y) New standards and interpretations not yet adopted (continued)
AASB 9 Financial Instruments
AASB 9 introduces new requirements for the classification and measurement of financial assets, requiring them to be classified and measured
based on the business model in which they are held and the characteristics of their contractual cash flows. AASB 9 also introduces changes
relating to financial liabilities. There is currently an active project to make limited amendments to the classification and measurement
requirements of AASB 9 and add new requirements to address the impairment of financial assets and hedge accounting. AASB 9 is effective for
reporting periods commencing on or after 1 January 2017, with early adoption permitted. The extent of the impact on the consolidated financial
statements of the consolidated entity on adoption of this standard has not been determined.
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.
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.
Bathrooms
& Kitchens
Door & Access
Systems
Heating
& Cooling
Total
In thousands of AUD
2014
2013
2014
2013
2014
2013
2014
2013
External sales revenue
379,211
367,547
136,327
140,878
62,455
56,935
577,993
565,360
Inter-segment revenue
–
–
260
–
349
1,815
609
1,815
Total sales revenue
379,211
367,547
136,587
140,878
62,804
58,750
578,602
567,175
Segment profit before significant
items and income tax
Impairment losses
on non-financial assets
Significant items
Segment profit/(loss)
before income tax
Depreciation
Amortisation
Capital expenditure
75,013
64,519
3,935
10,859
5,668
6,237
84,616
81,615
–
–
(17,000)
–
–
–
(17,000)
–
(4,201)
(9,569)
(2,040)
1,749
(1,314)
(1,625)
(7,555)
(9,445)
70,812
54,950
(15,105)
12,608
4,354
4,612
60,061
72,170
9,251
–
1,729
9,643
3,683
6,799
2,121
746
1,997
2,745
1,134
5,158
824
557
814
926
12,196
13,314
1,280
662
1,303
4,540
6,097
12,619
Reportable segment assets
490,359
478,726
102,362
121,499
Reportable segment liabilities
57,314
48,496
19,278
19,466
61,379
15,719
61,516
654,100
661,741
15,096
92,311
83,058
55
GWA 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
Consolidated revenue
Profit
Total profit for reportable segments
Significant items: corporate
Unallocated amounts: corporate expenses
Profit from operating activities
Net financing costs
Consolidated profit before tax
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
2014
2013
578,602
1
(609)
577,994
60,061
(3,962)
(12,276)
43,823
(11,201)
32,622
654,100
98,135
752,235
92,311
233,935
326,246
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
* Corporate assets include cash and cash equivalents, tax assets 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
2014
12,196
619
12,815
1,303
3,445
4,748
4,540
1,030
5,570
2013
13,314
429
13,743
6,097
558
6,655
12,619
2,084
14,703
GWA GROUP LIMITED • 2014 ANNUAL REPORTGWA 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. A sales office is also
operated in New Zealand. Sales revenue from geographical areas outside Australia comprised only 4% of the consolidated entity’s total sales
revenue for the current year (2013: 4%).
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
2014
555,172
745,152
5,539
2013
544,331
733,498
14,597
2014
22,822
7,083
31
2013
21,034
6,179
106
2014
577,994
752,235
5,570
2013
565,365
739,677
14,703
The consolidated entity conducts business with 3 customers where the net revenue generated from each customer exceeds 10% of the
consolidated entity’s total net revenue. Net revenue from these customers represent $100,355,000 (2013: $83,809,000), $71,924,000
(2013: $71,440,000) and $66,809,000 (2013: $62,592,000) respectively of the consolidated entity’s total net revenues for the current year
of $577,994,000 (2013: $565,365,000). The revenues from these customers are reported in the Bathrooms & Kitchens, Door & Access
Systems and the Heating & Cooling segments.
3. OTHER INCOME
In thousands of AUD
Foreign currency gains – realised
Foreign currency gains – unrealised
Significant items – gain on disposal of property
Compensation income – lease exit
Other – scrap income, royalties, bad debts recovered
4. OTHER EXPENSES
In thousands of AUD
Foreign currency losses – realised
Net loss on disposal of property, plant and equipment and intangible assets
Significant items
Acquisition costs
Note
5
Note
5
2014
39
373
–
–
883
1,295
2014
1,928
635
28,517
–
31,080
2013
11
29
3,537
1,993
1,150
6,720
2013
37
202
14,968
839
16,046
57
GWA GROUP LIMITED AND ITS CONTROLLED ENTITIES ABN 15 055 964 380NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 5. SIGNIFICANT ITEMS
In thousands of AUD
Restructuring income – gains on disposal of property
Restructuring costs
Impairment loss
Supplier exit compensation
Product liability costs
Corporate transformation costs
Total significant items before income tax
Income tax benefit
Net significant items after income tax
(i) Restructuring costs
Note
(i)
(i)
(ii)
(iii)
(iv)
(v)
2014
–
4,348
17,000
2,941
1,209
3,019
28,517
(3,337)
25,180
2013
(3,537)
13,968
–
–
1,000
–
11,431
(4,490)
6,941
During the current financial year, the consolidated entity incurred costs and redundancies associated with site closures as part of a program
to reduce operating costs and improve operational efficiencies. This resulted in costs of $3,130,000 and asset write-downs of $1,218,000.
In the prior financial year, the consolidated entity repositioned its businesses; integrating divisional structures to deliver cost savings and
improved efficiency. This resulted in redundancies of $7,130,000, site closure and supply chain costs of $1,913,000 and asset write-downs
of $4,925,000. These restructuring costs were partially offset by gains on property disposals of $3,537,000.
(ii) Impairment loss
As reported in the interim financial statements ending 31 December 2013, the Gliderol business had underperformed recording poor
trading results. As a consequence, the carrying value of the business exceeded its recoverable amount and an impairment loss of
$17,000,000 was recognised.
(iii) Supplier exit compensation
In prior reporting periods the Bathrooms & Kitchens business conducted a supply chain review and determined it would exit arrangements
with a number of overseas suppliers and focus on building strategic partnerships with a few core suppliers. As reported in the interim financial
statements ending 31 December 2013, a former China sanitaryware supplier threatened legal action for breach of contract. Although the
consolidated entity denied liability, management determined a compensation payment to the supplier of $2,941,000 was in the best interests
of the consolidated entity to settle the dispute and focus on the strategic supply partnerships.
(iv) Product liability costs
Since the acquisition of the Brivis business, the consolidated entity has continued product recalls by the former owner, Carrier, for evaporative
coolers containing defective components. Although the Brivis purchase agreement provides that Carrier is responsible for warranty, recall and
product liability costs above specified thresholds, the reimbursement of these costs incurred has not yet occurred. The consolidated entity
incurred costs of $1,209,000 in the current financial year (2013: $1,000,000). Refer to note 27 for further details.
(v) Corporate transformation costs
During the current financial year, the Board approved and completed a strategic review of the consolidated entity focus and structure.
Opportunity for future growth and shareholder returns were identified in the target market segments of the Bathrooms & Kitchens and Door
& Access Systems businesses. The consolidated entity incurred costs of $3,019,000 during the current financial year for this review (2013: nil).
Refer to note 33 for further details.
GWA GROUP LIMITED • 2014 ANNUAL REPORTGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES ABN 15 055 964 380NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 6. 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
7. 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
Overseas KPMG Firms:
Taxation services
8. 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
2014
2013
144,197
609
144,806
148,892
277
149,169
2014
2013
455,000
3,500
14,000
472,500
7,380
17,815
25,195
2014
601
–
82
683
5,172
1,727
4,261
720
4
11,884
11,201
466,000
3,500
12,000
481,500
10,860
17,121
27,981
2013
880
455
144
1,479
7,119
1,892
4,891
854
47
14,803
13,324
59
GWA GROUP LIMITED AND ITS CONTROLLED ENTITIES ABN 15 055 964 380NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 9.
INCOME TAX EXPENSE
Recognised in the 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
Total income tax expense in statement of profit or loss and other comprehensive income
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% (2013: 30%)
Increase in income tax expense due to:
Non-deductible expenses
Non-deductible impairment loss
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
2014
12,429
(255)
12,174
1,852
14,026
2014
32,622
9,787
97
5,100
–
88
(123)
–
(17)
(16)
(635)
14,281
(255)
14,026
2014
(694)
2013
8,569
(560)
8,009
1,616
9,625
2013
42,015
12,605
170
–
55
25
–
(1,771)
(164)
(23)
(712)
10,185
(560)
9,625
2013
840
GWA GROUP LIMITED • 2014 ANNUAL REPORTGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES ABN 15 055 964 380NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
10. EARNINGS PER SHARE
Basic earnings per share
The calculation of basic earnings per share has been based on the following profit attributable to ordinary shareholders and weighted average
number of ordinary shares outstanding.
Profit attributable to ordinary shareholders
In thousands of AUD
Profit before significant items
Net significant items
Profit for the period
Weighted average number of ordinary shares
In thousands of shares
Issued ordinary shares at 1 July
Effect of shares issued
Weighted average number of ordinary shares at 30 June
Diluted earnings per share
2014
43,776
(25,180)
18,596
2014
306,534
–
306,534
2013
39,331
(6,941)
32,390
2013
302,006
2,433
304,439
The calculation of diluted earnings per share has been based on the following profit attributable to ordinary shareholders and weighted average
number of ordinary shares outstanding adjusted for the effects of all dilutive potential ordinary shares.
Profit attributable to ordinary shareholders (diluted)
In thousands of AUD
Profit before significant items
Net significant items
Profit for the period
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)
Earnings per share
Basic earnings per share
Diluted earnings per share
Basic earnings per share (excluding significant items)
Diluted earnings per share (excluding significant items)
2014
43,776
(25,180)
18,596
2014
306,534
1,584
308,118
2014
6.07
6.04
14.28
14.21
2013
39,331
(6,941)
32,390
2013
304,439
1,438
305,877
2013
10.64
10.59
12.92
12.86
61
GWA GROUP LIMITED AND ITS CONTROLLED ENTITIES ABN 15 055 964 380NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 11. CASH AND CASH EQUIVALENTS
In thousands of AUD
Bank balances
Call deposits
Cash and cash equivalents in the statement of cash flows
2014
12,117
17,756
29,873
2013
15,711
17,046
32,757
The consolidated entity’s exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities are disclosed in note 24.
12. TRADE AND OTHER RECEIVABLES
In thousands of AUD
Current
Net trade receivables
Forward exchange contracts used for hedging
Employee share loans
Other
2014
2013
81,347
43,935
–
1,668
126,950
80,753
23,988
263
6,457
111,461
The consolidated entity’s exposure to credit and currency risk and impairment losses related to trade and other receivables are disclosed
in note 24.
13. INVENTORIES
In thousands of AUD
Raw materials and consumables
Work in progress
Finished goods
2014
21,188
1,210
90,655
113,053
2013
20,126
2,062
58,148
80,336
14. CURRENT TAX ASSETS AND LIABILITIES
The current tax liability for the consolidated entity of $3,471,000 (2013: $919,000) represents the amount of income taxes payable in respect of
the current period. In accordance with the tax consolidation legislation, the Company as the head entity of the Australian tax-consolidated group
has assumed the current tax liability initially recognised by the members in the tax-consolidated group.
GWA GROUP LIMITED • 2014 ANNUAL REPORTGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES ABN 15 055 964 380NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
15. DEFERRED TAX ASSETS AND LIABILITIES
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
Assets
Liabilities
Net
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)
2014
268
1,632
2,214
7,495
6,164
3,047
20,820
(6,914)
13,906
2013
685
1,063
3,093
7,349
6,348
3,600
22,138
(7,074)
15,064
2014
(1,646)
(5,111)
–
–
–
(157)
(6,914)
6,914
–
2013
(1,349)
(5,458)
–
–
–
(267)
(7,074)
7,074
–
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 from foreign jurisdictions
2014
(1,378)
(3,479)
2,214
7,495
6,164
2,890
13,906
–
13,906
2014
6,541
162
2013
(664)
(4,395)
3,093
7,349
6,348
3,333
15,064
–
15,064
2013
6,199
74
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 12
Recognised in
income
Recognised in
equity
Acquired
in business
combinations
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
Balance
1 July 13
Recognised in
income
Recognised in
equity
Acquired
in business
combinations
Balance
30 June 14
(664)
(4,395)
3,093
7,349
6,348
3,333
15,064
(714)
916
(879)
146
(184)
(1,137)
(1,852)
–
–
–
–
–
694
694
–
–
–
–
–
–
–
(1,378)
(3,479)
2,214
7,495
6,164
2,890
13,906
63
GWA GROUP LIMITED AND ITS CONTROLLED ENTITIES ABN 15 055 964 380NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 16. PROPERTY, PLANT AND EQUIPMENT
In thousands of AUD
Cost
Balance at 1 July 2012
Acquisitions through business combinations
Additions
Disposals
Transfers
Effect of movements in foreign exchange
Land and
buildings
Plant and
equipment
Motor vehicles
Work in
progress
58,226
169,209
–
2,285
(3,013)
–
–
1,303
9,089
6,950
105
(10,031)
(1,676)
Balance at 30 June 2013
57,498
176,625
Balance at 1 July 2013
57,498
176,625
Additions
Disposals
Transfers
Effect of movements in foreign exchange
199
(62)
–
–
3,464
(6,918)
593
123
Balance at 30 June 2014
57,635
173,887
Depreciation and impairment losses
Balance at 1 July 2012
Depreciation charge for the year
Disposals
Effect of movements in foreign exchange
(7,516)
(1,084)
626
–
(118,531)
(11,536)
9,421
(89)
Balance at 30 June 2013
(7,974)
(120,735)
Balance at 1 July 2013
Depreciation charge for the year
Disposals
Effect of movements in foreign exchange
(7,974)
(1,158)
46
–
(120,735)
(11,411)
4,958
(102)
Balance at 30 June 2014
(9,086)
(127,290)
Carrying amounts
At 1 July 2012
At 30 June 2013
At 1 July 2013
At 30 June 2014
50,710
49,524
49,524
48,549
50,678
55,890
55,890
46,597
Total
237,464
2,709
11,374
(14,720)
–
110
236,937
236,937
4,270
(7,359)
–
126
8,713
–
–
–
(6,950)
–
1,763
1,763
553
–
(593)
–
1,723
233,974
–
–
–
–
–
–
–
–
–
–
8,713
1,763
1,763
1,723
(126,830)
(12,931)
10,542
(94)
(129,313)
(129,313)
(12,815)
5,281
(105)
(136,952)
110,634
107,624
107,624
97,022
1,316
1,406
–
–
5
1,051
1,051
54
(379)
–
3
729
(783)
(311)
495
(5)
(604)
(604)
(246)
277
(3)
(576)
533
447
447
153
GWA GROUP LIMITED • 2014 ANNUAL REPORTGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES ABN 15 055 964 380NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 17. INTANGIBLE ASSETS
In thousands of AUD
Cost
Balance at 1 July 2012
Acquisitions through business combinations
Additions
Disposals
Effect of movements in foreign exchange
Software
Brand names
29,373
53
3,329
(78)
–
308,717
–
–
–
29
Trade names,
designs,
patents and
customer
relationships
Goodwill
Total
21,547
2,400
46,358
4,556
–
–
–
–
–
–
405,995
7,009
3,329
(78)
29
Balance at 30 June 2013
32,677
308,746
23,947
50,914
416,284
Balance at 1 July 2013
Additions
Effect of movements in foreign exchange
32,677
308,746
23,947
50,914
416,284
896
–
–
42
404
3
–
–
1,300
45
Balance at 30 June 2014
33,573
308,788
24,354
50,914
417,629
Amortisation
Balance at 1 July 2012
Amortisation for the year
Disposals
Balance at 30 June 2013
Balance at 1 July 2013
Amortisation for the year
Impairment losses
Effect of movements in foreign exchange
Balance at 30 June 2014
Carrying amounts
At 1 July 2012
At 30 June 2013
At 1 July 2013
At 30 June 2014
(16,988)
(6,113)
77
(23,024)
(23,024)
(3,445)
–
–
(26,469)
12,385
9,653
9,653
7,104
–
–
–
–
–
–
–
–
–
(2,812)
(1,354)
–
(4,166)
(4,166)
(1,303)
–
(1)
–
–
–
–
–
–
(17,000)
–
(19,800)
(7,467)
77
(27,190)
(27,190)
(4,748)
(17,000)
(1)
(5,470)
(17,000)
(48,939)
308,717
308,746
308,746
308,788
18,735
19,781
19,781
18,884
46,358
50,914
50,914
33,914
386,195
389,094
389,094
368,690
65
GWA GROUP LIMITED AND ITS CONTROLLED ENTITIES ABN 15 055 964 380NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 17. 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
2014
284,188
6,000
290,188
4,556
20,049
7,075
31,680
20,834
342,702
2013
284,146
6,000
290,146
4,556
20,049
24,075
48,680
20,834
359,660
Impairment testing for brand names and goodwill
The recoverable amounts of all brand names and goodwill were assessed at 30 June 2014 based on internal value in use calculations and
no impairment was identified for any cash generating units (2013: 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% (2013: 2.5%) in calculating terminal values of the units, which does not exceed the
long-term average growth rate for the industry.
• Pre-tax discount rates between 14.3% – 14.9% were used (2013: 12.30%).
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 2014.
The recoverable amount of the Gliderol business exceeds its carrying value by $3,300,000, following a $17,000,000 impairment recorded at
31 December 2013. A reduction in forecast dwelling completions that reduce the forecast earnings before interest and tax (EBIT) by 13% 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.
The recoverable amount of the Dux business exceeds its carrying value by $2,800,000. A reduction in forecast dwelling completions that
reduce forecast EBIT by 7% would reduce the recoverable amount of the Dux 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.
GWA GROUP LIMITED • 2014 ANNUAL REPORTGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES ABN 15 055 964 380NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 18. TRADE AND OTHER PAYABLES
In thousands of AUD
Current
Trade payables and accrued expenses
Forward exchange contracts used for hedging
Interest rate swaps used for hedging
Non-trade payables and accrued expenses
2014
2013
57,179
45,140
1,521
1,360
105,200
50,176
22,461
1,939
795
75,371
The consolidated entity’s exposure to currency risk and liquidity risk related to trade and other payables are disclosed in note 24.
19. 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 24.
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
2014
175,000
Currency
AUD
AUD
Year of
maturity
2016
2018
2014
Face
value
175,000
–
2014
Carrying
amount
175,000
–
2013
Face
value
195,000
–
2013
195,000
2013
Carrying
amount
195,000
–
The unsecured cash advance facilities mature over the next 3 to 5 financial years and have variable rates ranging from 4.50% – 4.85% at
30 June 2014 (2013: 4.68% – 5.03%).
175,000
175,000
195,000
195,000
67
GWA GROUP LIMITED AND ITS CONTROLLED ENTITIES ABN 15 055 964 380NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
19. LOANS AND BORROWINGS (CONTINUED)
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
Unsecured cash advance facility
2014
–
2,000
7,196
275,000
284,196
–
–
4,258
175,000
179,258
–
2,000
2,938
100,000
104,938
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
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.
GWA GROUP LIMITED • 2014 ANNUAL REPORTGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES ABN 15 055 964 380NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 20. EMPLOYEE BENEFITS
In thousands of AUD
Current
Liability for annual leave
Liability for long-service leave
Non-current
Liability for long-service leave
2014
2013
9,374
2,374
11,748
9,588
2,224
11,812
13,241
12,693
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 $9,769,000 for the financial
year ended 30 June 2014 (2013: $9,723,000).
69
GWA GROUP LIMITED AND ITS CONTROLLED ENTITIES ABN 15 055 964 380NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 21. 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 2013/14 year, the performance hurdles and vesting proportions for the EPS performance
measure is outlined in the table below. The base year EPS for the 2014 Long Term Incentive (Equity) Plan grant was 12.7 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 2013/14 year, the performance hurdles and vesting proportions for the TSR performance
measure are 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 section of the Directors’ 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
2014
(i)
(ii)
(iii)
(iv)
2013
(i)
(ii)
(iii)
(iv)
21/02/2011
30/06/2013
17/02/2012
30/06/2014
25/02/2013
30/06/2015
290,000
585,000
972,000
–
–
–
24/02/2014
30/06/2016
–
540,000
–
–
(80,000)
–
(290,000)
–
–
–
–
(292,500)
–
–
–
292,500
892,000
540,000
1,847,000
540,000
(80,000)
(290,000)
(292,500)
1,724,500
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
No performance rights were vested and exercisable at 30 June 2014.
GWA GROUP LIMITED • 2014 ANNUAL REPORTGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES ABN 15 055 964 380NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
21. SHARE-BASED PAYMENTS (CONTINUED)
Fair value
During the current financial year 540,000 performance rights were granted to employees (2013: 972,000) at a weighted average fair value of
$1.86 (2013: $1.96). The fair value of the performance rights subject to the EPS hurdle for vesting (50%) was determined as $2.36 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
$1.36 by using a Monte Carlo simulation. When determining the fair values it was assumed the Company would have a dividend yield of 5.23%,
the risk free rate was 2.97% and annualised volatility was 32.5% 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 $609,000 (2013: $277,000). Refer to the Remuneration
Report section of the Directors’ Report for further details.
22. PROVISIONS
In thousands of AUD
Balance at 1 July 2013
Provisions made during the year
Provisions used during the year
Balance at 30 June 2014
Current
Non-current
Warranties
Warranties
Restructuring
Site
restoration
11,783
7,481
(6,208)
13,056
6,883
6,173
13,056
1,879
3,688
(4,127)
1,440
1,168
272
1,440
1,994
591
(969)
1,616
277
1,339
1,616
Product
liability
1,070
1,035
(1,011)
1,094
1,094
–
1,094
Other
414
106
(140)
380
380
–
380
Total
17,140
12,901
(12,455)
17,586
9,802
7,784
17,586
The total provision for warranties at balance date of $13,056,000 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 $6,883,000 of the total
provision in the financial year ending 30 June 2015, 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 3.70%.
Restructuring
The restructuring provision relates to the estimated costs of redundancies, site closures and product rationalisation related to business
restructuring. During the financial year ended 30 June 2014, restructuring was undertaken across all operating segments with $3,688,000
being provided and $4,127,000 being utilised. At balance date the balance of the restructuring provision was $1,440,000 with the majority
to be utilised in the next financial year.
Site restoration
The provision for site restoration at balance date of $1,616,000 relates to site remediation and the removal of plant & fixtures installed in
leased premises where there is a liability under the lease for removal on expiry. Payments of $969,000 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 23. CAPITAL AND RESERVES
Share capital
In thousands
On issue at 1 July – fully paid
Issue of shares under the dividend
reinvestment plan
On issue at 30 June – fully paid
Ordinary shares
AUD
2014
306,534
–
306,534
2013
302,006
4,528
306,534
2014
408,100
–
408,100
2013
398,930
9,170
408,100
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
2014
Interim 2014 ordinary
Final 2013 ordinary
Total amount
2013
Interim 2013 ordinary
Final 2012 ordinary
Total amount
–
6.0
6.0
6.0
8.5
14.5
–
18,392
18,392
18,283
25,670
43,953
–
100%
100%
100%
–
4th Oct 2013
4th April 2013
4th Oct 2012
Franked dividends declared or paid during the year were franked at the tax rate of 30%.
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
Final ordinary
Cents per share
Total amount
5.5
16,859
Franked
100%
Date of payment
8th Oct 2014
The financial effect of these dividends has not been brought to account in the financial statements for the financial year ended 30 June 2014
and will be recognised in subsequent financial reports.
GWA GROUP LIMITED • 2014 ANNUAL REPORTGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES ABN 15 055 964 380NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 23. CAPITAL AND RESERVES (CONTINUED)
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
2014
5,943
2013
4,513
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 $7,225,000
(2013: $7,882,000). In accordance with the tax consolidation legislation, the Company as the head entity in the tax-consolidated group
has also assumed the benefit of $5,943,000 (2013: $4,513,000) franking credits.
24. 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 24. 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 44% of the trade receivables carrying amount at 30 June 2014
(2013: 40%). 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
Net trade receivables
Other receivables
Employee share loans
Forward exchange contracts used for hedging
2014
29,873
81,347
1,668
–
43,935
156,823
2013
32,757
80,753
6,457
263
23,988
144,218
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.
2014
Receivable
2014
Impairment
2013
Receivable
2013
Impairment
64,351
39,510
2,129
784
1,632
(25,736)
82,670
(100)
(86)
(20)
(51)
(1,066)
–
(1,323)
61,663
33,913
2,904
755
2,458
(19,451)
82,242
(70)
(40)
(4)
(80)
(1,295)
–
(1,489)
The movement in the allowance for impairment in respect of trade receivables during the year for the consolidated entity was as follows:
In thousands of AUD
Balance at 1 July
Impairment loss recognised
Impairment losses applied
Acquired through business combinations
Effect of movements in foreign exchange
Balance at 30 June
2014
(1,489)
(268)
436
–
(2)
2013
(1,666)
(610)
949
(162)
–
(1,323)
(1,489)
GWA GROUP LIMITED • 2014 ANNUAL REPORTGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES ABN 15 055 964 380NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 24. 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 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
2014
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
(175,000)
(193,292)
(4,472)
(4,472)
(8,944)
(175,404)
Trade and other payables
(58,539)
(58,539)
(58,491)
(48)
–
–
Derivative financial liabilities
Interest rate swaps designated
as hedges
Forward exchange contracts
designated as hedges – outflow
Forward exchange contracts
designated as hedges – inflow
(1,521)
(1,899)
(509)
(435)
(646)
(309)
(45,140)
(45,140)
(45,140)
43,935
43,935
43,935
–
–
–
–
–
–
Total at 30 June 2014
(236,265)
(254,935)
(64,677)
(4,955)
(9,590)
(175,713)
2013
Non-derivative financial liabilities
Unsecured cash advance facilities
(195,000)
(226,906)
(5,040)
(5,040)
(10,081)
(206,745)
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)
(2,014)
(770)
(619)
(448)
(177)
(22,461)
(22,461)
(22,461)
23,988
23,988
23,988
–
–
–
–
–
–
Total at 30 June 2013
(245,588)
(277,569)
(54,459)
(5,659)
(10,529)
(206,922)
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 24. 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 4.98% (2013: 3.37% to 5.20%). At 30 June 2014, the consolidated
entity had interest rate swaps in operation with a notional contract amount of $125,000,000 (2013: $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 2014 was $1,521,000 recognised as a fair value derivative liability. (2013: $1,939,000 fair value
derivative liability).
(i) Profile
At balance date the consolidated entity’s interest bearing financial instruments were:
In thousands of AUD
Variable rate financial instruments
Unsecured cash advance facilities
Bank balances
Call deposits
Fixed rate financial instruments
Interest rate swap derivatives
Total
2014
Notional value
2014
Carrying amount
2013
Notional value
2013
Carrying amount
(175,000)
12,117
17,756
(145,127)
125,000
(20,127)
(175,000)
12,117
17,756
(145,127)
(1,521)
(146,648)
(195,000)
15,711
17,046
(162,243)
125,000
(37,243)
(195,000)
15,711
17,046
(162,243)
(1,939)
(164,182)
GWA GROUP LIMITED • 2014 ANNUAL REPORTGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES ABN 15 055 964 380NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 24. 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
2014
2013
(2,484)
963
1,521
–
2,334
–
(2,334)
–
(2,135)
196
1,939
–
2,181
–
(2,181)
–
(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)
Bank balances
Interest rate swap derivatives
Call deposits variable rate
Call deposits fixed rate
Decrease of 100 basis points
Unsecured cash advance facilities (AUD)
Bank balances
Interest rate swap derivatives
Call deposits variable rate
Call deposits fixed rate
2014
2013
(2,000)
34
1,369
227
–
(370)
2,000
(34)
(1,369)
(227)
–
370
(2,259)
157
1,388
266
39
(409)
2,259
(157)
(1,388)
(266)
(39)
409
77
GWA GROUP LIMITED AND ITS CONTROLLED ENTITIES ABN 15 055 964 380NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 24. 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 balance date.
(i) Exposure to currency risk
In thousands of AUD equivalent
Currency transaction risk
2014
Trade payables
Cash
Net balance sheet exposure
Estimated forecast sales
Estimated forecast purchases
Net forecast transaction exposure
Forward exchange contracts
Net exposure 30 June 2014
Foreign exchange rates at balance date
2013
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
Currency translation risk
2014
Net assets
2013
Net assets
USD
NZD
EUR
RMB
(2,350)
5
(2,345)
–
(47,219)
(47,219)
37,686
(11,878)
0.9420
(2,816)
1,546
(1,270)
–
(39,172)
(39,172)
19,623
(20,819)
0.9275
–
–
(1)
4
3
11,802
(5,491)
6,311
(3,485)
2,829
1.0761
(5)
51
46
9,351
(5,397)
3,954
(3,791)
209
1.1871
2,524
2,441
(318)
4
(314)
–
(3,212)
(3,212)
–
(3,526)
0.6906
(331)
78
(253)
–
(3,452)
(3,452)
493
(3,212)
0.7095
–
–
(90)
1
(89)
–
(6,123)
(6,123)
2,566
(3,646)
5.8466
(372)
377
5
–
(4,299)
(4,299)
–
(4,294)
5.6991
(313)
45
GWA GROUP LIMITED • 2014 ANNUAL REPORTGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES ABN 15 055 964 380NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
24. 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 and other payables
Estimation of fair values
Carrying amount
2014
29,873
83,015
Fair value
2014
29,873
83,015
Carrying amount
2013
32,757
87,473
Fair value
2013
32,757
87,473
(1,521)
(1,521)
(1,939)
(1,939)
43,935
(45,140)
(175,000)
(58,539)
(123,377)
43,935
(45,140)
(175,000)
(58,539)
(123,377)
23,988
(22,461)
(195,000)
(50,971)
(126,153)
23,988
(22,461)
(195,000)
(50,971)
(126,153)
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. 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) Interest rates used for determining fair value
The consolidated entity uses the government yield curve as of 30 June 2014 plus an adequate constant credit spread to discount financial
instruments. The interest rates used are as follows:
Derivatives
Loans and borrowings
2014
2013
2.64% – 3.28%
2.66% – 3.65%
4.50% – 4.85%
4.68% – 5.03%
79
GWA GROUP LIMITED AND ITS CONTROLLED ENTITIES ABN 15 055 964 380NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 24. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (CONTINUED)
Estimation of fair values (continued)
(v) Fair value hierarchy
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 2014
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 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
25. 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
Level 1
Level 2
Level 3
Total
–
–
–
–
–
–
–
–
–
–
–
–
43,935
–
43,935
(45,140)
(1,521)
(46,661)
23,988
–
23,988
(22,461)
(1,939)
(24,400)
–
–
–
–
–
–
–
–
–
–
–
–
2014
13,374
23,255
1,029
37,658
43,935
–
43,935
(45,140)
(1,521)
(46,661)
23,988
–
23,988
(22,461)
(1,939)
(24,400)
2013
13,017
28,678
3,132
44,827
The consolidated entity leases warehouse, factory and office facilities and motor vehicles under operating leases. These leases typically run
for a period of 2 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 2014, $15,347,000 (2013: $16,576,000) was recognised as an expense in profit or loss in respect
of operating leases.
GWA GROUP LIMITED • 2014 ANNUAL REPORTGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES ABN 15 055 964 380NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 26. CAPITAL COMMITMENTS
In thousands of AUD
Capital expenditure commitments
Plant and equipment
Contracted but not provided for and payable:
Within one year
27. CONTINGENCIES
Brivis evaporative cooler recalls
2014
2013
2,114
2,981
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 Brivis purchase
agreement provides that Carrier is responsible for product warranty, recall and product liability costs above specified thresholds with an overall
cap on Carrier’s liability.
A progress claim and warranty breach notice was submitted to Carrier in March 2014 under the Brivis purchase agreement. Following Carrier’s
rejection of Brivis’ payment demands a Dispute Notice was served on Carrier in April 2014 which triggered the dispute resolution process under
the Brivis purchase agreement. The parties are currently undertaking the dispute resolution process provided by the Brivis purchase agreement.
The consolidated entity has not recognised the progress claim at 30 June 2014.
A further progress claim in the amount of $2,416,000 was submitted to Carrier in June 2014 under the Brivis purchase agreement. No payment
has been received from Carrier to date and the matter remains under dispute.
The directors believe the provision at 30 June 2014 of $1,094,000 is adequate to cover any remaining product recall costs and product liability
claims incurred but not reported at 30 June 2014 based on historical trends.
28. 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 29 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 2014, is set out in the table on the following page.
81
GWA GROUP LIMITED AND ITS CONTROLLED ENTITIES ABN 15 055 964 380NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 28. DEED OF CROSS GUARANTEE (CONTINUED)
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
2014
557,629
(370,558)
187,071
(143,584)
681
(11,883)
32,285
(12,713)
19,572
19,572
14,292
(18,392)
(124)
15,348
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
GWA GROUP LIMITED • 2014 ANNUAL REPORTGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES ABN 15 055 964 380NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 28. DEED OF CROSS GUARANTEE (CONTINUED)
Statement of financial position
In thousands of AUD
Assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other
Total current assets
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
2014
2013
27,938
123,629
109,925
2,054
263,546
36,023
11,113
13,776
57,939
364,625
673
484,149
747,695
103,981
2,859
11,685
9,802
128,327
175,000
13,236
7,784
196,020
324,347
423,348
408,100
(100)
15,348
423,348
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
83
GWA GROUP LIMITED AND ITS CONTROLLED ENTITIES ABN 15 055 964 380NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 29. 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
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
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
2014
2013
Y
Y
Y
Y
N
Y
Y
N
Y
Y
Y
N
Y
Y
Y
Y
Y
Y
N
Y
N
Y
Y
Y
Y
Y
N
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
Australia
Australia
Australia
New Zealand
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
Australia
China
Australia
Australia
Australia
Australia
Australia
Australia
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
GWA GROUP LIMITED • 2014 ANNUAL REPORTGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES ABN 15 055 964 380NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 30. PARENT ENTITY DISCLOSURES
As at, and throughout, the financial year ended 30 June 2014 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
2014
2013
18,089
–
18,089
–
627,810
2,822
199,294
408,100
1,807
18,609
428,516
30,363
–
30,363
216
607,001
551
178,000
408,100
1,866
19,035
429,001
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 (2013: nil).
Capital expenditure commitments
The parent entity has not entered into contractual commitments on behalf of wholly-owned subsidiaries for the acquisition of property,
plant or equipment as at reporting date (2013: $455,000).
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 (2013: nil). Further details of the Deed of Cross Guarantee and the subsidiaries subject to the Deed are disclosed in Note 28 and 29.
85
GWA GROUP LIMITED AND ITS CONTROLLED ENTITIES ABN 15 055 964 380NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31. 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 unrealised
Net financing costs
Impairment loss, net of income tax
Loss on sale of property, plant and equipment and intangible assets
Gain on sale of property
Income tax expense
Operating profit before changes in working capital and provisions
(Increase)/decrease in trade and other receivables
(Increase)/decrease in inventories
Increase in trade and other payables
Increase/(decrease) in provisions and employee benefits
Net interest paid
Income taxes paid
Net cash from operating activities
2014
2013
18,596
32,390
12,815
4,748
(235)
–
(373)
11,201
17,000
635
–
14,026
78,413
(1,007)
(32,717)
8,515
930
54,134
(10,636)
(9,600)
33,898
13,743
6,655
(451)
222
(3)
13,324
–
202
(3,537)
9,625
72,170
1,403
14,620
3,386
(7,941)
83,638
(14,454)
(5,835)
63,349
GWA GROUP LIMITED • 2014 ANNUAL REPORTGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES ABN 15 055 964 380NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 32. RELATED PARTIES
Key management personnel compensation
The key management personnel compensation included in ‘personnel expenses’ (see note 6) are as follows:
In AUD
Short-term employee benefits
Post-employment benefits
Other long term benefits
Termination benefits
Share-based payments
2014
5,001,534
294,123
–
349,195
421,685
2013
6,018,555
315,583
95,899
450,750
233,310
6,066,537
7,114,097
Individual directors and executives compensation disclosures
Information regarding individual directors and executives compensation is provided in the Remuneration Report section of the Directors’ Report.
33. SUBSEQUENT EVENTS
On 28 July 2014, as a result of an extensive strategic review, the directors’ determined the consolidated entity focus will be in the target
market segments of the Bathrooms & Kitchens and Door & Access Systems businesses, and that the Dux Hot Water and Brivis Heating
& Cooling businesses will be divested. The divestment process is expected to take several months to execute and at the date of this report,
the consolidated entity has not entered into any agreements for sale of the businesses.
Other than the matter noted above, to the directors’ best knowledge, there are no events that have arisen subsequent to 30 June 2014
that will, or may, significantly affect the operation or results of the consolidated entity.
87
GWA 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 2014 and of its performance for the financial year ended
on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and
(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.
There are reasonable grounds to believe that the Company and the group entities identified in Note 28 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 2014.
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 19 August 2014
Signed in accordance with a resolution of the directors:
John Mulcahy
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 2014 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
19 August 2014
Greg Boydell
Partner
GWA GROUP LIMITED • 2014 ANNUAL REPORTGWA 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 2014, and consolidated statement
of profit and loss and other comprehensive income, consolidated
statement of changes in equity or consolidated statement of cash
flows for the year ended on that date, notes 1 to 33 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 2014 and of its performance for the year
ended on that date; and
(ii)
complying with Australian Accounting Standards and
the Corporations Regulations 2001; and
(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 in pages
30 to 42 of the directors’ report for the year ended 30 June 2014.
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 2014, complies with Section 300A of the
Corporations Act 2001.
KPMG
Sydney
19 August 2014
Greg Boydell
Partner
89
GWA GROUP LIMITED AND ITS CONTROLLED ENTITIES ABN 15 055 964 380
OTHER STATUTORY INFORMATION
AS AT 14 AUGUST 2014
STATEMENT OF SHAREHOLDING
In accordance with the Australian Securities Exchange Listing Rules, the directors state that, as at 14 August 2014, 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
1,627
4,564
2,194
1,673
85
10,143
793,354
13,511,844
16,765,916
35,798,424
239,664,232
306,533,770
%
0.26
4.41
5.47
11.68
78.19
100.00
The number of shareholders with less than a marketable parcel of 177 shares is 479.
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 14 August 2014:
Shareholder
Ellerston Capital Limited
20 LARGEST SHAREHOLDERS AS AT 14 AUGUST 2014
Shareholder
J P Morgan Nominees Australia Limited
HSBC Custody Nominees (Australia) Limited
National Nominees Limited
HGT Investments Pty Ltd
KFA Investments Pty Ltd
Citicorp Nominees Pty Limited
Erand Pty Ltd
JMB Investments Pty Ltd
Ashberg Pty Ltd
Theme (No 3) Pty Ltd
Mr Peter Zinn
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