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NACCO Industries2016
ANNUAL
REPORT
1
FY16 PERFORMANCE HIGHLIGHTS
REVENUE
$439.7 million
Revenue from continuing operations 3% to
$439.7 million broadly in line with market growth
Bathrooms & Kitchens revenue 4%
Door & Access Systems revenue 2%
NET PROFIT
$51.9 million
Normalised net profit after tax from continuing
operations 15% to $51.9 million
EARNINGS
Normalised earnings before interest and
tax from continuing operations 8% to
$78.3 million
OPERATING CASHFLOW
from continuing operations 12% to
$91.7 million with improved working
capital management in 2nd half
FINANCIAL POSITION
remains strong with net debt 7%
and credit metrics improved
FINAL ORDINARY DIVIDEND
of 8 cents per share and special dividend of
1 cent per share, bringing FY16 full year
dividend to 16 cents per share fully-franked
NORMALISED EARNINGS
per share from continuing operations 29%
STRATEGY
Good progress on strategy:
• Successful launch of Caroma Cleanflush
• Strengthened new product
development pipeline
• Cost base further reduced
• Supply chain improved through
Integrated Business Planning project
CONTENTS
Five Year Financial Summary
Company Profile
Strategic Summary
Chairman’s Review
Managing Director’s Review of Operations
Health and Safety
GWA Bathrooms & Kitchens
1
2
3
4
7
10
11
GWA Door & Access Systems
Board of Directors
Directors’ Report
Financial Report
Other Statutory Information
Shareholder Information
12
13
15
32
77
78
GWA GROUP LIMITED | 2016 ANNUAL REPORT FIVE YEAR FINANCIAL SUMMARY
Continuing operations
Revenue from continuing operations
Earnings before interest, tax, depreciation, amortisation
(EBITDA) and significant items(3)
EBITDA margin (%)
Depreciation and amortisation
Earnings before interest, tax (EBIT) and significant items(3)
EBIT margin (%)
Interest (net)
Normalised profit before tax(3)
(%)
Tax expense
Effective tax rate (%)
Normalised profit after tax(3)
Significant items after tax
Net profit after tax from continuing operations
Profit / (loss) from discontinued operations (net of income tax)
Net profit / (loss) after tax for the period
Net cash from operating activities
Capital expenditure
Net debt(4)
Shareholders' equity
Other Ratios and Statistics
Interest cover (times)(7)
Gearing: net debt / (net debt + equity) (%)(4)
Return on shareholders' equity (%)
Dividend payout ratio (%)(6)
Dividend per share (cents)(8)
Franking (%)
Capital return (cents)(5)
Share price (30 June) ($)
Dividend yield at 30 June share price (%)
Number of employees
Basic earnings per share (cents) – Group
Basic earnings per share (cents) – Continuing
Normalised earnings per share (cents) – Continuing(2)
2011/12(1)
$’000
602,128
2012/13(1)
$’000
565,365
2013/14(1)
$’000
399,394
2014/15(1)
$’000
426,218
2015/16(1)
$’000
439,666
94,228
15.6
87,168
15.4
76,819
19.2
(18,864)
(20,398)
(12,328)
75,364
12.5
(14,247)
61,117
10.2
66,770
11.8
(13,324)
53,446
9.5
64,491
16.1
(11,201)
53,290
13.3
81,734
19.2
(8,970)
72,764
17.1
(7,329)
65,435
15.4
84,250
19.2
(5,985)
78,265
17.8
(6,508)
71,757
16.3
(15,565)
(14,115)
(15,452)
(20,278)
(19,837)
25.5
45,552
621
46,173
(6,518)
39,655
60,499
25,798
174,472
426,984
6.6
29.0
9.3
136.4
18.0
100
–
2.10
8.6
26.4
39,331
(6,941)
32,390
–
32,390
63,349
14,703
162,243
426,742
6.5
27.5
7.6
113.2
12.0
100
–
2.40
5.0
1,788
1,680
13.2
15.3
15.1
10.6
10.6
12.9
29.0
37,838
(6,664)
31,174
(12,578)
18,596
33,898
5,570
149,385
425,989
8.5
26.1
4.4
90.3
5.5
100
–
2.63
2.1
1,681
6.1
10.2
12.4
31.0
45,157
(34,796)
10,361
(26,544)
(16,183)
43,505
5,062
94,763
27.6
51,920
–
51,920
1,761
53,681
54,924
3,628
88,420
305,894
307,698
12.8
23.7
(5.3)
–
6.0
76.7
22.8
2.28
2.6
1,183
(5.3)
3.4
14.8
14.3
22.3
17.4
81.4
16.0
100
–
2.09
7.7
876
19.7
19.0
19.0
(1)
(2)
(3)
(4)
(5)
(6)
During the year ended 30 June 2016, the Gliderol business was sold with an effective date of 31 July 2015. During the year ended 30 June 2015, the Dux Hot Water
Business was sold with an effective date of 19 December 2014 and the Brivis Heating & Cooling business was sold with an effective date of 2 February 2015. Accordingly,
the operating activities of Gliderol, Dux and Brivis were classified as discontinued operations in FY16 and FY15 and presented separately from the results of continuing
operations. The FY14 results have been re-presented to be comparable with FY16 and FY15. FY12 to FY13 have not been re-presented and include the operating activities
of Gliderol, Dux and Brivis as part of continuing operations. In addition, Sebel Furniture and Caroma North America were divested during FY12 and were disclosed as
discontinued operations in FY12.
Excludes significant items.
Normalised 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 years FY12 to FY15 and have not been subject to review or audit. The non-IFRS financial measures
included in this table exclude significant items that are detailed in the financial report for the years FY12 to FY15.
Net debt reflects the Group’s borrowings and bank guarantees less cash (including cash classified within assets held for sale at 30 June 15).
A capital return of 22.8 cents per share and a special dividend of 6.0 cents per share from the Brivis and Dux net sale proceeds were paid to shareholders on 15 June 2015.
Dividend payout ratio is calculated as Dividend per share (cents) divided by the Basic EPS for the Group (cents). Basic EPS is calculated using the weighted average number
of ordinary shares at 30 June.
Interest cover (times) is calculated using EBITDA excluding non-recurring other significant items divided by net interest expense.
(7)
(8) Dividend per share includes ordinary and special dividends.
1
1
COMPANY PROFILE
GWA Group Limited (GWA) listed on the Australian
Securities Exchange in May 1993 and is a leading
Australian supplier of building fixtures and fittings to
households and commercial premises. The Group has
sales and distribution facilities located across Australia
and a branch office in New Zealand. GWA is a member
of the ASX 200 index of listed Australian companies.
GWA operates a central-led business with corporate functions supporting
two business divisions focused on customers in their target market
segments. GWA’s business divisions currently comprise:
GWA Bathrooms & Kitchens is Australia’s foremost designer, importer
and distributor of iconic brands and products, servicing and enhancing
residential and commercial bathrooms and kitchens across Australia and
New Zealand. The product range is distributed under Australian brands
including Caroma, Clark, Dorf, Fowler, Stylus and international brands
including Cristina, Schell, EMCO, Virtu and Sanitron.
GWA Door & Access Systems is a leading Australian designer,
manufacturer, importer and distributor of a comprehensive range
of access and security systems and door hardware for use in residential
and commercial premises. The product range is distributed under
Australian brands including Gainsborough, Trilock, TradePro, Austral
Lock and international brands including Salto, Lorient and Eco Schulte.
GWA Door & Access Systems was expanded in 2012 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 since listing as a result of the strong 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 target 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 | 2016 ANNUAL REPORT
GWA GROUP LIMITED | 2016 ANNUAL REPORT STRATEGIC SUMMARY
OUR MISSION
To build GWA as the most trusted and respected company in the building sector
OUR PURPOSE
Making life better
with simple, superior
water solutions
Bathrooms & Kitchens
with a superior range of access
and security systems
Door & Access Systems
GWA OPERATIONAL MEASURES
Market share, NSV, EBIT, ROFE, DIFOT, NPS, Safety, Engagement
CORPORATE PRIORITIES
Drive cost out in
SG&A and Supply
Chain to improve
profitability and
allow selective
reinvestment
Build an
advantaged
Supply Chain to
deliver superior
NPD, Quality
and Service at
best cost
Build “fit for
future” culture,
engagement
and capability
Add value to
customers through
improved insights,
analytics and
processes
Leverage and
build on core
assets & brands
to drive revenue
and market
share growth
MAXIMISE SHAREHOLDER VALUE CREATION
Key Financial Measures – NPAT Growth, TSR, ROFE
3
3
CHAIRMAN’S REVIEW
GWA’s FY16 focus has been on growing our core
Bathrooms & Kitchens and Door & Access
Systems divisions following the divestment of
the non-core Dux, Brivis and Gliderol businesses.
It is pleasing to report GWA improved its earnings and profitability
compared to the prior year.
The group resumed the payment of ordinary dividends to shareholders
with a full year ordinary dividend of 15 cents per share, together with a
special dividend of 1 cent per share, both fully franked.
DIVIDENDS / CAPITAL MANAGEMENT
The Board has adopted a policy to pay 65-85 per cent of net profit after tax
as ordinary dividends.
Consistent with this policy, the Board resolved to pay a final ordinary
dividend of 8 cents per share fully franked. This brings the full-year
ordinary dividend to 15 cents per share fully franked.
Having resolved the Carrier dispute, your Board considered it appropriate
that the net proceeds should be returned to shareholders, consistent with
its previous practice of returning the proceeds of business divestments to
shareholders.
GWA’s financial position continues to be strong and your Board believes
GWA is well positioned to capitalise on its market-leading presence in core
markets to continue to deliver value for shareholders.
As a result, the Board has declared a special fully franked dividend of
1 cent per share. This brings the total dividends for the year to 16 cents
per share which represents a dividend pay out ratio of 81 per cent.
FINANCIAL OVERVIEW¹
Net sales revenue increased by 3 per cent to $439.7 million on the
prior year.
Earnings Before Interest and Tax (EBIT) of $78.3 million, increased by
8 per cent on FY15, from improved earnings in our Bathrooms & Kitchens
division and a reduction in costs.
GWA’s net profit after tax of $51.9 million was 15 per cent higher than
the prior year. Earnings per share of 19 cents increased by 29 per cent
as a result of improved profitability and the reduced weighted average
number of shares on issue following the completion of the on-market share
buyback program.
Return on Funds Employed improved by 2.6 percentage points to
19.3 per cent as we continued our focus on effective use of capital
across the business.
On 14 June 2016, GWA announced the resolution of the dispute with
the Carrier companies regarding losses incurred by GWA in relation to
the Brivis business. Brivis was acquired by GWA in March 2010 and
subsequently divested in February 2015. As part of the resolution,
GWA received a net payment of $2.8 million which was classified as
a significant item from Discontinued Operations in the FY16 accounts.
On a reported basis, including the net proceeds from the resolution of
the Carrier dispute, GWA reported an after tax net profit of $53.7 million
compared to a net loss of $16.2 million in the prior year.
The record date for entitlement to receive the final ordinary and special
dividend will be 2 September 2016 with the dividend being paid on
16 September 2016. The Dividend Reinvestment Plan will not be offered
to shareholders for the final ordinary and special dividend.
On 1 December 2015, GWA commenced an on-market share buy-back of
its ordinary shares which was completed on 20 June 2016. The buyback
was an efficient and flexible capital management initiative to the benefit of
all shareholders; importantly it is accretive to earnings per share, assisting
in an increase of 29 per cent on the prior year.
The company bought back 15 million shares representing approximately
5.4 per cent of the shares on issue; as at 30 June 2016 GWA had
263,947,630 shares on issue.
GWA’s financial position remains strong. Notwithstanding the $30m share
buyback, net debt at 30 June 2016, was $88.4 million, compared to
$94.8 million in the previous year.
Our financial metrics, comprising leverage, gearing, and interest cover
ratios remain consistent with investment grade and GWA has significant
headroom within its banking facilities, providing significant financial
flexibility for the group.
1 Unless specified, all amounts and comparisons are based on normalised results (before significant items) in respect of Continuing Operations which exclude the Brivis Climate
Systems and Dux Hot Water businesses which were divested in FY15 and the Gliderol Garage Doors business which was divested on 31 July 2015.
GWA GROUP LIMITED | 2016 ANNUAL REPORT Normalised EBIT from continuing operations
$m
15/16
14/15
13/14
12/13
11/12
0
20
40
60
80
Normalised EBIT from continuing operations of $78.3 million, increased by
8 per cent on FY15, from improved earnings in the Bathrooms & Kitchens
division and a reduction in costs.
Net Debt
$m
15/16
14/15
13/14
12/13
11/12
0
50
100
150
200
GWA’s financial position remains strong. Notwithstanding the $30m share buyback,
net debt at 30 June 2016, was $88.4 million, compared to $94.8 million in the
previous year.
Dividend per share
$m
15/16
14/15
13/14
12/13
11/12
0
5
10
15
20
The Board declared a final ordinary dividend for FY16 of 8 cents per share fully
franked and special dividend of 1 cent per share fully franked, bringing the full-year
dividend to 16 cents per share fully franked.
STRATEGY
Having divested non-core businesses in FY15 and early FY16, and
returned proceeds to shareholders, GWA has a clear focus on our core
Bathrooms & Kitchens and Door & Access Systems businesses where
we believe shareholder returns can be maximised.
In FY16, we continued the restructure of group operations to drive greater
focus and accountability and to further reduce our cost base. We have
centralised critical functions such as supply chain and safety to ensure
we can maximise efficiencies to support our core businesses.
During the year, GWA outlined its objectives to build our competitive
position further and maximise returns for shareholders.
In summary, the core elements of the strategy are to:
•
•
•
Leverage and build on our core assets and brands and investment in
new product development to drive revenue and market share growth;
Improve market share through further value-added service solutions;
and
Drive further efficiencies in overhead costs and supply chain to enable
reinvestment in the business and maintain margins through the cycle.
The Managing Director’s Review of Operations provides shareholders with
important detail on our strategy and the group’s progress against these
specific strategic objectives.
BOARD RENEWAL
We were pleased to announce that Tim Salt, who was appointed Chief
Executive Officer on 1 January 2016, has joined the Board as Managing
Director and Chief Executive Officer with effect from 1 July 2016. Tim has
already made a significant impact since joining GWA and we look forward
to his ongoing contribution to the group.
Robert Anderson and Bill Bartlett have announced their retirements as
Non-Executive Directors from the Board at the conclusion of the 2016
and 2017 Annual General Meetings respectively. On behalf of GWA,
I acknowledge and thank Robert and Bill for their contributions to the
Board over many years.
Following a comprehensive Board succession process, I am pleased to
welcome the appointments of Jane McKellar and Stephen Goddard as
Non-Executive Directors effective from the conclusion of the 2016
Annual General Meeting.
Jane and Stephen bring significant experience to the Board, specifically
within retail and customer-focused businesses, which is a strong
complement to our strategy and I look forward to their contributions.
5
DIVERSITY
The Board acknowledges the significant benefits that arise from a diverse
workforce and has a Diversity Policy which is available on the Group’s
website at www.gwagroup.com.au.
SAFETY
We continue to focus on providing a safe workplace for our employees,
contractors, visitors and customers while driving a positive safety culture
across our business.
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. This has led to an increase in the
overall percentage of female employees from the prior year and also an
increase of females in senior management roles.
We have also been mindful of the need to increase gender diversity of the
Board and we are pleased to welcome the appointment of Jane McKellar
as Non-Executive Director to the Board from the conclusion of the 2016
Annual General Meeting.
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 2016 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
FY17 executive remuneration review. We aim to provide remuneration to
executives which is fair and sufficient to attract and retain a high quality
management team with the requisite experience, knowledge, skills and
judgement required for the business.
In order to achieve this objective, the key principle is that fixed
remuneration for executives varies between the median and third
quartiles relative to companies of comparable size and scope.
The remuneration package for the Managing Director, Tim Salt, was
determined by the Board following the provision of market data from
Guerdon Associates. The fixed remuneration and incentive opportunity
for Mr Salt has been aligned with the market median in relation to a group
of comparable companies to GWA. Executive fixed remuneration was
frozen for FY16 and the short term incentive payments to Mr Salt and
other GWA executives for FY16 reflect the improved group performance
and profitability.
Our safety performance in FY16 was mixed. We recorded fewer total
injuries with less lost time and medically treated injuries compared to
the prior year. However, when measured in terms of frequency (number
of injuries / hours worked) GWA’s Total Injury Frequency Rate (TIFR)
deteriorated on the prior year. The main driver in this deterioration was
the reduction in total hours worked compared to the prior year as a result
of the decline in headcount following business divestments and our
corporate restructure.
While GWA will continue to monitor and report safety frequency rates,
we will also report raw data which we believe is a more accurate metric
to measure relative safety performance.
We have taken additional steps to ensure accountability for safety at all
levels of the organisation. To assist this process, individual senior managers
are sponsoring key safety elements such as incident management, chain
of responsibility and contractor management to drive an improved safety
culture and employee engagement.
CARBON EMISSIONS
The Board is committed to reducing energy, carbon emissions, water
and waste across the GWA Group operations. GWA has deregistered from
reporting the Group’s carbon emissions under the Federal Government’s
NGER scheme as its energy and emissions are below reporting thresholds
from FY15. GWA is a low emissions intensity entity but will continue to
report its carbon emissions on the GWA website at www.gwagroup.com.au
under Carbon Reporting.
The FY16 total carbon emissions from GWA’s controlled facilities are
expected to be approximately 58 per cent below the previous financial
year and have been impacted by a combination of factors including the
Dux, Brivis and Gliderol business divestments, factory closure at Wetherill
Park and phased exit from Norwood and the implementation of energy
efficiency measures.
CONCLUSION
On behalf of the Board, I acknowledge and thank Tim, his executive team
and our people across GWA for their contribution over the past year.
We continue to make progress in strengthening our competitive position;
we have a clear strategy and focus to build on the current position to
deliver improved returns to shareholders.
GWA GROUP LIMITED | 2016 ANNUAL REPORT MANAGING DIRECTOR’S
REVIEW OF OPERATIONS
I am pleased to present my first review of operations as
Managing Director of GWA.
Since joining the company in September 2015, I have been impressed
by the calibre and passion of our people, the quality and reputation of
our market-leading brands, the strength of our customer relationships
and the expertise and value-add of our long term supply agreements with
our manufacturing partners.
This provides a strong growth platform for GWA and we remain focused
on developing and implementing our strategy to build this position further.
MARKET CONDITIONS¹
While construction activity in Australia increased in FY16, the key
renovations and replacements segment, which represents over half
of GWA’s revenue, continued to remain relatively flat.
In total, GWA estimates that the increase in market activity weighted
across its end markets2 was approximately 4 per cent for the year
ended 30 June 2016.
•
Detached house completions (representing approximately 23 per cent
of GWA revenue) increased by 5 per cent.
• Medium and high-density dwelling completions (approximately
10 per cent of GWA revenue) increased by 7 per cent.
•
On a value of work done basis, non-residential building activity
(approximately 15% of GWA revenue) is forecast to have declined
by 3 per cent (MAT).
• Market activity for home renovations and replacements,
(approximately 52% of GWA revenue) is forecast to have
increased by 2 per cent (MAT).
Results Overview³ – Continuing Operations
A$ million
Sales Revenue
EBITDA
EBIT
EBIT margin (%)
NPAT (pre sig. items)
NPAT (after sig. items)
FY15
426.2
81.7
72.8
FY16
439.7
84.3
78.3
%
change
+3%
+3%
+8%
17.1%
17.8%
+7ppts
45.2
10.4
51.9
51.9
+15%
+399%
Revenue increased by 3 per cent to $439.7 million, reflecting an
improvement in Bathrooms & Kitchens’ sales of 4 per cent and an increase
in revenue from Door & Access Systems of 2 per cent compared to the
prior year.
EBITDA increased by 3 per cent to $84.3 million while Group EBIT
improved by 8 per cent to $78.3 million. Improvements in price and
mix were offset by the decline in the Australian dollar which was not fully
recovered through price increases implemented during the year.
The GWA restructure contributed to a reduction in costs which assisted
in improved earnings and also an increase in Group EBIT margin to
17.8 per cent from 17.1 per cent in the prior year.
Further information on segment earnings is provided on the following page.
Net profit after tax increased by 15 per cent to $51.9 million due to
improved earnings and lower interest and tax expense compared to the
prior year.
The effective tax rate for the year was 28 per cent.
Earnings per share of 19 cents were significantly ahead of the prior year
of 14.8 cents from increased profitability and the reduced weighted
average number of shares on issue following the completion of the
accretive on-market share buyback program during the year.
On a reported basis, including $2.8 million in proceeds from the settlement
of the Carrier dispute classified as a significant item from Discontinued
Operations, GWA reported a net profit after tax of $53.7 million compared
to a net loss of $16.2 million in the prior year.
Results Overview – Continuing and Discontinued Operations
A$ million
EBITDA
EBIT
NPAT (pre sig. items)
Reported NPAT (after sig. items)
(16.2)
FY15
FY16
86.8
74.3
46.2
83.8
77.7
51.7
53.7
1 Source for Dwelling Commencements, Completions, Renovations and Replacements and Non-residential Building Activity is BIS Shrapnel
2 Based on GWA estimates Australia market B&K (FY16) only
3 Unless specified, all amounts and comparisons are based on normalised results (before significant items) in respect of Continuing Operations which exclude the
Brivis Climate Systems and Dux Hot Water businesses which were divested in FY15 and the Gliderol Garage Doors business which was divested on 31 July 2015.
%
change
(3%)
+5%
+12%
n/m
7
The Board resolved to pay a final ordinary dividend of 8 cents per share
fully-franked, bringing the full-year ordinary dividend to 15 cents per share
fully-franked.
In addition, the Board declared a special dividend of 1 cent per share,
fully-franked which represents the net proceeds from the resolution of
the dispute with the Carrier companies.
The record date for entitlement to receive the final ordinary and special
dividend will be 2 September 2016 with the dividend being paid on
16 September 2016. The Dividend Reinvestment Plan will not be
offered to shareholders for the final ordinary and special dividend.
For the full year, cashflow from operations was $91.7 million compared
to $81.7 million in the prior year.
Cashflow from operations improved significantly in the second half from
lower inventory and effective working capital utilisation driving an overall
reduction in working capital compared to the first half.
Capital expenditure of $3.5 million was consistent with the prior year, but
slightly below forecasts primarily reflecting the timing of some projects
which are now expected to be implemented in FY17.
GWA continues its focus on generating strong returns on capital employed
in the business with Return on Funds Employed up 2.6 percentage points
on the prior year to 19.3 per cent.
FINANCIAL POSITION AND CAPITAL MANAGEMENT
GWA remains in a solid financial position with net debt of $88.4 million at
30 June 2016 compared to $94.8 million in the prior year. This net debt
position is after outlaying approximately $30 million to acquire 15 million
shares on issue through the on-market share buy-back programme which
concluded on 20 June 2016.
Credit metrics remain consistent with investment grade with the company’s
gearing ratio (net debt / net debt plus equity) of 22 per cent compared to
24 per cent at 30 June 2015 and leverage ratio (net debt / EBITDA) of
1.1 times steady on the prior year.
The company’s strong financial position continues to be reflected in the
improved interest cover ratio (EBITDA / net interest) which at 30 June
2016 was 14.3 times compared to 12.8 times last year.
GWA’s syndicated banking facility was extended in October 2015 to a
three-year revolving $225 million facility which matures in October 2018.
The company maintains significant headroom within its banking facilities
which provides ongoing financial flexibility.
SEGMENT RESULTS
Bathrooms & Kitchens
The Bathrooms & Kitchens division delivered a solid top line result
with earnings improvement from price / mix offset by the decline in the
Australian dollar. EBIT margin was down slightly on the prior year, however
disciplined cost management and focus on higher margin product sales
resulted in improved EBIT margin in the second half.
Revenue in the Bathrooms & Kitchens division increased by 4 per cent to
$342.0 million, reflecting increased pricing and improved mix, across all
categories but particularly in sanitaryware driven by a shift to the Urbane
product range.
Revenue growth was broadly in line with end market growth of
approximately 4 per cent. Sales growth was particularly strong in QLD (up
12 per cent), NSW and Victoria (up 6 per cent), partially offset by declines
in WA and SA, where construction activity was considerably weaker than
the prior year and where GWA has strong market positions.
EBIT of $84.6 million was 2 per cent higher than the prior year’s earnings
of $83.3 million.
Improvements in earnings from mix and price were more than offset by the
decline in the Australian dollar and the anticipated lag in recovering the
impact of higher product costs through price increases.
The average A$ / US$ exchange rate for FY16 was 13 per cent lower than
the prior year.
In response to the lower Australian dollar, effective price increases of
approximately 5 per cent were implemented in September 2015 and
4 per cent in March 2016.
While the lower Australian dollar resulted in lower EBIT margin compared
to the prior year, EBIT margin was slightly higher in the second half than
the first half of FY16 from continued cost discipline and focus on higher
margin products.
While there has been a market shift in some segments towards lower
margin, cheaper products, GWA’s primary focus remains on higher
margin products which are accretive to earnings.
GWA has progressed its strategy to deliver market-leading innovation with
the launch of the new Caroma Cleanflush rimless toilet range to the market
in the fourth quarter.
Market feedback and initial sales results have been encouraging with the
product also ranged in over 200 Reece showrooms across Australia.
Caroma Cleanflush was recently awarded the prestigious 2016 Good
Design Award for Best in Category, Product Design – Hardware and
Building.
Door & Access Systems
Revenue in the Door & Access Systems division increased by 2 per cent
while earnings were marginally ahead of the prior year despite the impact
of the lower currency.
A$ million
Sales Revenue
EBIT
EBIT Margin
Return on Funds
Employed (ROFE)
FY15
96.2
7.2
7.5%
FY16
97.7
7.3
7.5%
% change
+2%
+1%
0.0pp
13.2%
13.7%
+0.5pp
A$ million
Sales Revenue
EBIT
EBIT Margin
Return on Funds
Employed (ROFE)
FY15
330.0
83.3
FY16
342.0
84.6
% change
+4%
+2%
25.2%
24.7%
(0.5 pp)
Revenue in Door & Access Systems increased by 2 per cent to
$97.7 million. Sales were stronger, particularly in NSW (up 7 per cent)
and Victoria (up 12 per cent), partially offset by Western Australia
where GWA has a strong market position and construction activity was
considerably weaker.
22.5%
24.1%
+1.6pp
EBIT of $7.3 million was marginally ahead of the prior year impacted by
the 13 per cent decline in the Australian dollar compared to FY15. In
response, a price increase was implemented in November 2015 while
continued cost savings in SG&A assisted in maintaining earnings.
GWA GROUP LIMITED | 2016 ANNUAL REPORT Finally, we are implementing leadership development programmes
to build capability and to drive greater accountability and agility across
the organisation.
While we recognise we have significant work to do in terms of reaching our
strategic goals, I am encouraged by the progress we have made over the
past year in creating a platform to deliver on each of these priorities.
FUTURE PROSPECTS AND RISKS
The renovation and replacements segment, the market’s largest segment
accounting for just over half of GWA’s group revenue, is expected to remain
relatively stable, assisted modestly by recent cuts to interest rates.
While recent lead market indicators point to an expected slow-down
in housing construction, new building activity remains at historically
high levels.
GWA’s products are typically sold at the completions stage of the
building cycle and therefore the lag between approvals flowing through
to completions and the significant pipeline of work to be completed
should support continued activity and demand for our products and
brands into FY17.
GWA monitors exchange rates closely and adopts appropriate mitigation
strategies as appropriate. As at 30 June 2016, approximately 70 per cent
of foreign exchange exposure is hedged for FY17.
The company is pursuing initiatives to selectively improve market share
across its core product categories through the launch of new products
and services and working collaboratively with key customers.
In the meantime, we remain focused on continuing to address the
company’s cost base through SG&A and supply chain savings.
The company’s financial position remains robust with the ability to
generate strong operating cashflow across the business.
The risks to this outlook include:
•
•
•
•
a significant slow-down in the renovations and replacements market
impacting sales growth;
a significant deterioration in dwelling commencements flowing
through to completions activity;
a significant reduction in the Australian dollar impacting the price
of imported products not able to be recovered through price
increases; and
unforeseen disruptions impacting product supply from offshore
suppliers leading to lower sales and loss of market share.
GWA expects to provide a further update at the company’s
Annual General Meeting on 28 October 2016.
Return on Funds Employed of 13.7 per cent was 0.5 percentage points
higher than the prior year.
During the year, the Door & Access Systems division reorganised its sales
team to dedicate part of the team to drive sales growth in multi-residential
and commercial segments. The new team has now been established which
provides a stronger platform into FY17.
STRATEGY
The company’s strategic priority for the past two years has been to
divest non-core businesses to focus on its core operations in Bathrooms
& Kitchens and Door & Access Systems and exit local manufacturing to
source products from offshore supply partners.
As a result, GWA now has a clear focus on its core markets, which together
represent a $2 billion addressable market opportunity.
We own and distribute market-leading brands and maintain cost efficient,
long term supply agreements with selected, mostly exclusive partners with
global expertise in manufacturing of bathrooms and kitchens and access
and security products.
Our focus now is to capitalise on those strengths to maximise value
creation for our shareholders.
GWA’s strategy is centered around five priorities:
•
•
•
•
•
Drive cost out in SG&A and supply chain to improve profitability
and allow selective reinvestment;
Build an advantaged supply chain to deliver superior new product
development, quality and service at best cost;
Build a “fit for future” culture, engagement and capability;
Add value to customers through improved insights, analytics and
processes; and
Leverage and build on core assets and brands to drive revenue
and market share growth.
During FY16, the company has made progress against these
strategic priorities.
We have successfully reduced corporate costs which is part of our
overall programme to generate $13-15 million in cost savings
progressively from FY16 to FY19 through a combination of SG&A
and supply chain efficiencies.
These savings will be used to reinvest in growth initiatives as well
as providing margin resilience and to offset cost inflation.
We have implemented an Integrated Business Planning project across
the business to better align sales and operational processes to enhance
working capital utilisation, reduce inventory and improve service delivery
to our customers.
Our focus on key customers is being enhanced through the appointment
of a new Executive General Manager of Sales in the Bathrooms & Kitchens
division and the reorganisation and capability improvement of our sales
team in the Door & Access Systems division.
The successful launch of the Caroma Cleanflush toilet range demonstrates
our commitment to driving revenue and market share growth through new
product development.
We have strengthened our new product development pipeline with a key
focus on improving share in the renovations and replacement market
which is the largest category opportunity for GWA.
9
HEALTH AND SAFETY
GWA continues to ensure that it provides a safe
workplace for its employees, contractors, visitors
and customers whilst driving a positive safety culture,
to ensure everyone is safe… every day.
To highlight the importance placed by GWA on the proactive management
of workplace health and safety (WHS) and positive safety culture
development, the National Safety Manager prepares a monthly report
and attends Executive Leadership Team (ELT) meetings for a joint
discussion on WHS matters and to develop plans and strategy.
The ELT discussions include Group WHS performance, improvement
plans and strategy updates. As an important safety initiative for FY17
each ELT member will sponsor and report on key safety topics including
incident management, risk management, traffic management, chain of
responsibility, product and packaging, health and wellbeing and
contractor management.
There were a number of WHS undertakings during FY16, including the
development and implementation of the three year safety strategic plan,
a Group wide safety culture review, and the introduction of the integrated
GWA WHS management system called SafetyOne. SafetyOne integrates
10 key elements of WHS and will continue to be embedded throughout
FY17 with business unit specific safety plans developed.
The management structure of Group WHS also transitioned from
the business units to a GWA central-led structure with a National
WHS Manager.
GWA measures a range of balanced safety performance indicators.
Proactive ‘LEAD’ indicators such as number of hazards reported and
actions closed were measured during FY16, as were four key ‘LAG’
indicators that measure lost time and medically treated injuries,
hours lost due to injury, and total injuries (which represents a combination
of lost time and medically treated injuries) as frequency rates. Total Injury
Frequency Rate (TIFR) is our main LAG measure for FY16.
In FY16 GWA delivered on a reduction of total injuries with less lost time
and medically treated injuries than the year prior, as well as a reduction of
total hours lost due to injury than the prior year. Overall these are positive
results for GWA. However, as the FY16 LAG measures are frequency rate
based (calculated based on labour hours worked) the GWA TIFR presents
as negative.
The TIFR performance for FY16 is attributed to the significant reduction
in head count, which in turn has significantly reduced the labour hours
worked (total labour hours worked during FY16 was a little over a million
less than the year prior). This was driven by the divestment of non-core
businesses in FY15 and GWA’s transition from a domestic manufacturing
business to a supply chain organisation following the business restructure.
Given the significant reduction in head count and labour hours worked,
this has led to a review of the structure in which we measure safety
and the parameters. Moving forward, GWA will continue to monitor and
report on ‘frequency rates’, however as they are affected by labour hours
worked, GWA will also report on the raw data which is a better measure to
demonstrate year on year performance.
Further, a commitment from the ELT is to remove any GWA safety based
incentives for managers, particularly around incident and injury reporting,
as they can drive an adverse effect. We will however include individual
key performance indicators for selected ELT and Senior Leadership Team
members to participate in the Safety Interaction Program, which is aimed
at driving a positive safety culture and employee engagement.
GWA Total Injury Frequency Rate (TIFR)
GWA Injury Severity Rate (ISR)
24
18
12
6
0
4,000
3,000
2,000
1,000
0
07/08 08/09
09/10
10/11
11/12
12/13
13/14
14/15
15/16
10/11
11/12
12/13
13/14
14/15
15/16
GWA GROUP LIMITED | 2016 ANNUAL REPORT STRATEGIC DIRECTION
With innovation at its core, GWA Bathrooms & Kitchens will drive category
leadership by providing market leading solutions that create long term
value for customers across the commercial, residential, renovation and
replacement segments. GWA Bathroom & Kitchens will continue to invest
in its strong portfolio of brands and deliver innovative and high quality
products incorporating advanced water saving technology, supported by an
outstanding level of service to enhance the experience of our customers.
GWA Bathrooms & Kitchens are committed to continuous process
improvements in its Australian supply chain operations.
HEAD OFFICE LOCATION
GWA Bathrooms & Kitchens
Caroma Industries Limited
Level 1, 7-9 Irvine Place
Bella Vista NSW 2153
AUSTRALIA
Telephone 61 2 8825 4400
Facsimile 61 2 8825 4567
www.caroma.com.au
www.caroma.co.nz
specify.caroma.com.au
www.dorf.com.au
www.stylus.com.au
www.clark.com.au
www.fowler.com.au
www.cristinataps.com.au
SEGMENT PERFORMANCE
Continuing Operations A$M
Revenue
EBITDA
EBIT
EBIT Margin %
Return on Funds Employed %
FY15
330.0
87.7
83.3
25.2%
22.5%
FY16
% Change
3.6%
-1.3%
1.6%
342.0
86.6
84.6
24.7%
24.1%
BUSINESS DESCRIPTION
GWA Bathrooms and Kitchens is Australia’s foremost designer, importer
and distributor of iconic brands and products, servicing and enhancing
residential and commercial bathrooms and kitchens across Australia and
New Zealand. With a strong Australian heritage and a commitment to local
design and engineering, GWA Bathrooms & Kitchens is at the forefront of
delivering brilliantly designed and innovative market leading solutions to
meet our customer needs. GWA Bathrooms & Kitchens is at the forefront
of product innovation incorporating water saving technology and is the
market leader in water efficient sanitaryware, showers and tapware.
MAIN PRODUCTS AND SERVICES
•
Vitreous china toilet suites, plastic cisterns, seats, urinals and basins
•
•
•
•
Acrylic, pressed steel and solid surface baths
Tapware, showers, accessories and thermostatic mixing valves
Stainless steel sinks and laundry tubs
Solutions for aged care and commercial applications
MAJOR BRANDS
Owned: Caroma, Clark, Dorf, Fowler, Stylus
Distributed: Cristina, Schell, EMCO, Virtu, Sanitron
OPERATING LOCATIONS
Australia, New Zealand, export markets
MAJOR MARKETS
•
Renovation and replacement
•
•
•
New residential builds
New and refurbished commercial projects
New multi residential developments
11
SEGMENT PERFORMANCE
Continuing Operations A$M
Revenue
EBITDA
EBIT
EBIT Margin %
FY15
96.2
8.6
7.2
7.5%
Return on Funds Employed %
13.2%
97.7
8.7
7.3
7.5%
13.7%
FY16
% Change
MAJOR MARKETS
•
Residential new home builders
1.6%
1.2%
1.4%
•
•
•
Renovation and replacement
Commercial and multi-residential developments
Commercial locksmithing services
STRATEGIC DIRECTION
GWA Door & Access Systems’ strategic direction encompasses the
development of new and innovative door hardware and access system
solutions 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. Its key strategic growth drivers include
specific innovation in electronic access products for the residential and
commercial markets as well as a continued push into project opportunities
in commercial building and multi-residential developments.
HEAD OFFICE LOCATIONS
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 5882
www.gainsboroughhardware.com.au
www.ausloc.com
www.apisec.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 and door hardware for use in residential
and commercial premises. The division comprises two business units
including the following:
•
•
Gainsborough Hardware has achieved a superlative position in
the Australian market for more than 40 years, supplying first
class door furniture and developing a succession of innovative
products. Gainsborough Hardware is a leading Australian designer,
manufacturer, importer and distributor of a comprehensive range
of residential and commercial door hardware and fittings, including
security products and electronic access solutions
API has long been Australia’s pre-eminent national locksmith
providing installation and service of electronic and mechanical
locking systems to major corporations, governments, educational
and infrastructure facilities. They have recently made inroads in
the architectural hardware supply segment focusing on multi
residential and commercial developments and in the electronic
home services segments
MAIN PRODUCTS AND SERVICES
•
A comprehensive range of door hardware and access systems
comprising door handles (knobs and levers), door closers, hinges
and other door accessories
•
•
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, TradePro, Austral Lock, API Locksmiths
Distributed: Salto, Lorient, Eco Schulte
OPERATING LOCATIONS
Australia, export markets
GWA GROUP LIMITED | 2016 ANNUAL REPORT
BOARD OF DIRECTORS
DARRYL McDONOUGH BBUS (ACTY), LLB (HONS), SJD, FCPA, FAICD
Independent Chairman and Non-Executive Director
ROBERT ANDERSON
Independent Non-Executive Director
Expertise: Experienced public company director and corporate lawyer
•
Expertise: Property investment and transport logistics
•
•
Special Responsibilities: Chairman of Board and member of
Nomination and Remuneration and Audit and Risk Committees
Mr McDonough was appointed Deputy Chairman and Non-Executive
Director of GWA Group Limited in 2009 and Chairman effective
31 October 2013. He has over 30 years of corporate experience as a
director and corporate 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, is currently Chairman of unlisted QInsure
Limited and is a Past-President of The Australian Institute of Company
Directors, Queensland Division.
JOHN MULCAHY PHD (CIVIL ENGINEERING), FIE AUST
Independent Deputy Chairman and Non-Executive Director
•
•
Expertise: Engineer, banker and experienced public company director
Special Responsibilities: Chairman of Nomination and Remuneration
Committee
Mr Mulcahy was appointed a Non-Executive Director of GWA Group
Limited in 2010 and Deputy Chairman effective 1 November 2013.
He is a Fellow of the Institute of Engineers and is Chairman of Mirvac
Group Limited and a Non-Executive Director of ALS Limited. 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*
•
•
ALS Limited since 2012*
Coffey International Limited 2009 to 2016
*denotes current directorship
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.
BILL BARTLETT FCA, CPA, FCMA, CA (SA)
Independent Non-Executive Director
•
•
Expertise: Chartered Accountant, actuarial, insurance and
financial services
Special Responsibilities: Chairman of Audit and Risk Committee
and member of Nomination and Remuneration 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
13
PETER BIRTLES BSC, ACA
Independent Non-Executive Director
RICHARD THORNTON CA B COM (ACC) LLB (HONS) LLM
Executive Director and Company Secretary
Expertise: Chartered Accountant, retail, financial and operational
•
Expertise: Chartered Accountant, taxation and finance
•
•
Special Responsibilities: Member of Audit and Risk Committee
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 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
TIM SALT BSC
Managing Director and Chief Executive Officer
•
Expertise: Extensive global experience in managing market leading
branded portfolios
Mr Salt was appointed Managing Director and Chief Executive Officer of
GWA Group Limited on 1 July 2016. He was appointed Executive General
Manager of GWA Bathrooms & Kitchens in September 2015 and Chief
Executive Officer of GWA Group Limited on 1 January 2016.
Originally from the UK, Mr Salt was appointed Managing Director at Diageo
Australasia in July 2008. As Managing Director for Diageo Australasia,
he was responsible for all aspects of Diageo’s business in Australia,
New Zealand and the South Pacific Islands, including product supply,
marketing, sales, innovation and company reputation.
Mr Salt was until recently Chair of the Distilled Spirits Industry Council
of Australia and represented the spirits industry on the DrinkWise Board
in Australia.
After commencing at Unilever, Mr Salt spent much of his career in
beverage companies including Tetley Tea in the UK, Pepsi in Australia
and USA, and brewer Lion Nathan in Australia. In March 2004 he joined
Campbell Arnott’s and was General Manager Arnott’s Australasia prior to
his move to Diageo in 2008.
GWA GROUP LIMITED | 2016 ANNUAL REPORT DIRECTORS’ REPORT
AS AT 30 JUNE 2016
Your directors present their report on the consolidated entity of
GWA Group Limited (the Group) and the entities it controlled during FY16.
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.
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.
D D McDonough, Chairman and Non-Executive Director
J F Mulcahy, Deputy Chairman and Non-Executive Director
T R Salt, Managing Director and Chief Executive Officer
(appointed 1 July 2016)
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:
R M Anderson, Non-Executive Director
W J Bartlett, Non-Executive Director
P A Birtles, Non-Executive Director
R J Thornton, Executive Director
P C Crowley, Managing Director (retired 31 December 2015)
On 14 July 2016, the Chairman announced the retirements of
R M Anderson and W J Bartlett from the Board at the 2016 and 2017
Annual General Meetings respectively. The Chairman also announced
the appointments of Jane McKellar and Stephen Goddard as Non-
Executive Directors effective from the conclusion of the 2016 Annual
General Meeting.
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 FY16, and the period for which each
directorship has been held, are outlined in the director profiles in the
Annual Report.
Director
D D McDonough
J F Mulcahy
T R Salt*
R M Anderson
W J Bartlett
P A Birtles
R J Thornton*
Total**
Notes:
Ordinary Shares
118,300
40,950
11,900
7,387,783
30,207
13,650
81,902
7,684,692
* The executive directors, Mr T R Salt 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 16,732,241 shares
(last year 17,234,489 shares).
15
DIRECTORS’ REPORT CONTINUED
AS AT 30 JUNE 2016
DIRECTORS’ MEETINGS
The number of meetings of directors (including meetings of Committees of directors) held during FY16 and the number of meetings attended by each
director is outlined in the following table:
Director
Board
Audit and Risk Committee
Nomination and
Remuneration Committee(3)
D D McDonough
J F Mulcahy
R M Anderson
W J Bartlett
P A Birtles
R J Thornton(1)
P C Crowley(2)
Notes:
A
10
10
10
10
10
10
6
B
10
10
10
10
10
10
6
A
4
–
–
4
4
–
–
B
4
–
–
4
4
–
–
A
2
2
–
2
–
–
–
B
2
2
–
2
–
–
–
A – Number of meetings held during the time the director held office during the year
B – Number of meetings attended
(1) R J Thornton attends Committee meetings as Company Secretary
(2) P C Crowley retired as Managing Director on 31 December 2015
(3) The Nomination and Remuneration Committees were combined in FY16
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.
The consolidated entity completed the divestment of non-core businesses
in FY16 through finalisation of the sale of Gliderol International Pty Ltd on
31 July 2015. There have been no other 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 2016 is provided in the Managing Director’s
Review of Operations, and forms part of this Directors’ Report.
DIVIDENDS
Dividends paid or declared by the Group to shareholders since the end
of the previous financial year were:
Declared and paid during FY16
Dividend
Interim
2015/16
Ordinary
Cents
per share
Total Amount
$’000
Franked
Date of
Payment
7.0
18,718
Fully
Franked
5 April
2016
Franked dividends declared and paid during the year were franked at the
corporate tax rate of 30%.
Declared after end of FY16
After the balance date the following dividends were approved by the
directors. The dividends have not been provided and there are no income
tax consequences.
Dividends
Final 2015/16
Ordinary
Special
2015/16
Cents
per
share
8.0
1.0
Total Amount
$’000
Franked
Date of
Payment
21,116
2,639
Fully
Franked
16 September
2016
Fully
Franked
16 September
2016
The financial effect of these dividends has not been brought to account
in the financial statements for the year ended 30 June 2016 and will be
recognised in subsequent financial reports.
The record date for the final ordinary and special dividend is 2 September
2016 and the dividend payment date is 16 September 2016. The Dividend
Reinvestment Plan will not be offered to shareholders for the final and
special dividend.
EVENTS SUBSEQUENT TO REPORTING DATE
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.
GWA GROUP LIMITED | 2016 ANNUAL REPORT LIKELY DEVELOPMENTS
Likely developments and expected results of the operations of the
consolidated entity are provided in the Managing Director’s Review
of Operations.
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.
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 FY16.
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.
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 8 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 FY16.
ROUNDING
The Group is of a kind referred to in ASIC Corporations (Rounding
in Financial / Directors’ Reports) Instrument 2016/191 relating to the
rounding of amounts in the Directors’ Report.
Amounts in the Directors’ Report have been rounded off in
accordance with that Instrument to the nearest thousand dollars,
unless otherwise stated.
REMUNERATION REPORT -– AUDITED
INTRODUCTION
The report covers the following matters for FY16:
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.
17
DIRECTORS’ REPORT CONTINUEDAS AT 30 JUNE 2016 1. BOARD ROLE IN SETTING REMUNERATION STRATEGY
AND PRINCIPLES
The Board reviews, approves and monitors GWA’s remuneration strategy.
The 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 Board also engages with shareholders, management and other
stakeholders to continuously refine and improve executive and director
remuneration policies and practices.
The Board delegates some aspects of the review and monitoring process
to the Nomination and Remuneration Committee. The Board’s Nomination
and Remuneration Committees were combined during FY16. The
Committee’s role and responsibilities include:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Review of Board size and composition;
Assessment of the necessary and desirable competencies
of Board members;
Review of Board, Managing Director and other executive
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;
Review of the Group’s executive remuneration and incentive policies
and schemes;
Review of Managing Director and other executives remuneration
packages;
Review of Managing Director and other executives performance
objectives;
Review of Managing Director and other executive development plans;
Review of the Group’s recruitment, retention and termination policies
and procedures;
Review of the Group’s superannuation arrangements;
Review of the Group’s overall remuneration budget;
Review of the annual Remuneration Report for inclusion in the
Directors’ Report;
Approval of engagement of external remuneration consultants;
Review of Diversity Policy and assessing progress against measurable
objectives; and
Reporting to the Board on the Committee’s role and responsibilities
covering all the functions in its charter.
The charter for the Nomination and Remuneration Committee is available
on the Company’s website at www.gwagroup.com.au under Corporate
Governance Policies.
During the reporting period, the Nomination and Remuneration Committee
obtained market data from Guerdon Associates for the FY17 executive
remuneration review and for determining the incoming Managing Director’s
salary package. 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.
1.1 Managing Director Succession
On 27 November 2015, the Group announced the retirement of the
Managing Director, Mr Peter Crowley effective on 31 December 2015.
Mr Tim Salt joined the Group on 7 September 2015 as Executive General
Manager of GWA’s Bathrooms & Kitchens business and transitioned to
the roles of Chief Executive Officer and Managing Director from 1 January
2016 and 1 July 2016 respectively.
The termination arrangements for Mr Crowley were determined by the
Nomination and Remuneration Committee and were advised to the market
on 27 November 2015.
The following is a summary of Mr Crowley’s termination entitlements and
other arrangements:
•
•
6 months Total Fixed Remuneration (TFR) equating to a cash
payment of $780,000 being the notice period previously provided;
Payment for accrued entitlements to annual and long service leave;
• Mr Crowley agreed to provide consultancy services to GWA for the
period 1 January 2016 to 31 December 2016 in particular to assist
Mr Salt transition to his role as Chief Executive Officer for a fee of
$250,000. Mr Crowley has agreed not to compete with GWA or any
of its businesses for the period 1 January 2016 to 30 June 2017;
• Mr Crowley did not participate in the FY16 Short Term Incentive
• Mr Crowley retains 200,000 unvested Performance Rights granted
in 2014 under the Long Term Incentive (LTI) Plan which are subject
to testing in August 2016, and 153,333 unvested Performance Rights
granted in 2015 which are subject to testing in August 2017
in accordance with the LTI Plan Rules; that latter number represents
an apportionment of the 2015 grant;
•
All other Performance Rights granted to Mr Crowley under the LTI
Plan lapsed.
The remuneration arrangements for Mr Salt as Chief Executive Officer were
determined by the Nomination and Remuneration Committee following
the provision of market data from Guerdon Associates. Based on the
benchmark data, Mr Salt’s total remuneration is aligned with the market
median in relation to a group of 16 companies of comparable operational
scope and size to GWA. The remuneration arrangements for Mr Salt were
advised to the market on 27 November 2015 and did not change following
the appointment of Mr Salt as Managing Director from 1 July 2016.
Evaluation of Managing Director performance against objectives;
(STI) Plan;
GWA GROUP LIMITED | 2016 ANNUAL REPORTDIRECTORS’ REPORT CONTINUEDAS AT 30 JUNE 2016 The following is a summary of Mr Salt’s remuneration package:
•
•
•
TFR comprising salary, superannuation and all other benefits other
than incentive plans of $1,000,000;
Payment of $300,000 at the end of FY16 as agreed compensation for
loss of income and benefits as a result of Mr Salt accepting the role as
Executive General Manager of GWA’s Bathrooms & Kitchens business;
Short term incentive opportunity of $200,000 subject to GWA
Bathrooms & Kitchens achieving financial performance targets
for FY16;
•
Participation in GWA’s STI Plan from FY17;
– STI opportunity of 40% of TFR based on Mr Salt meeting Board
approved Key Performance Indicator (KPI) objectives, with
provision for a maximum 50% of TFR for outperformance against
these KPIs.
•
Participation in GWA’s LTI Plan from FY16:
– LTI opportunity of 60% of TFR over a three year performance
period and subject to achievement of performance hurdles in
respect of growth in Return on Funds Employed (ROFE) and
Total Shareholder Returns (TSR). The number of rights granted
to Mr Salt in March 2016 were calculated based on the volume
weighted average closing price of GWA shares over 20 trading days
after the release of the Company’s results to 31 December 2015.
1.2 FY16 and FY17 Remuneration
As outlined in the 2015 Remuneration Report, the Board approved
a reduction in non-executive director remuneration effective from
1 July 2015. The changes are within the annual aggregate maximum
amount approved by shareholders and ensure non-executive director
remuneration is in line with peer companies. The changes are outlined
in further detail in section 3.1. The Board also determined that the fixed
remuneration for the outgoing Managing Director and other executives was
to be frozen for FY16 as reflected in the executive salaries included in the
Remuneration Tables in section 5.1.
3 Year Rolling Total Shareholder Returns (TSR)*
In August 2016, the Board determined that the fixed remuneration for
the Managing Director and other executives will be frozen for FY17.
This will be reflected in the Remuneration Tables included in the 2017
Remuneration Report.
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:
•
•
•
Normalised earnings before interest and tax (EBIT);
Return on funds employed (ROFE); and
Total shareholder returns (TSR).
Remuneration for all executives varies with performance on these key
measures together with achievement of KPI objectives, which underpin
delivery of the financial outcomes, and are linked to the consolidated
entity’s performance review process.
The following graph shows the Group’s relative performance over a rolling
3 year period to 30 June 2016 compared to the peer group companies
used for the FY16 grant of Performance Rights to executives being James
Hardie Industries PLC, Fletcher Building Ltd, Boral Ltd, Adelaide Brighton
Ltd, DuluxGroup Ltd, Brickworks Ltd, Super Retail Group Ltd, CSR Ltd,
ARB Corp Ltd, Burson Group Ltd, Breville Group Ltd, Asaleo Care Ltd,
GUD Holdings Ltd, Cedar Woods Properties Ltd, Villa World Ltd, Decmil
Group Ltd, Simonds Group Ltd, Hills Ltd and Fleetwood Corp Ltd.
30 Jun 2013
31 Dec 2013
30 Jun 2014
31 Dec 2014
30 Jun 2015
31 Dec 2015
30 Jun 2016
GWA 3 YEAR ROLLING TSR
PEER GROUP 3 YEAR ROLLING TSR 50TH PERCENTILE
*Assuming 36 months in each rolling year
100%
80%
60%
40%
20%
0%
– 20%
19
DIRECTORS’ REPORT CONTINUEDAS AT 30 JUNE 2016
The following is a summary of key statistics for the Group over the last five years:
Financial Year
Normalised EBIT(a)
($m)
Normalised EPS(a)
(cents)
Total DPS
(cents)(e)
Capital Return(d)
(cents)
Share Price (30 June)
($)
2011/12(b)
2012/13
2013/14(c)
2014/15(b)
2015/16(b)
Notes:
75.4
66.8
64.5
72.8
78.3
15.1
12.9
12.4
14.8
19.0
18.0
12.0
5.5
6.0
16.0
–
–
–
22.8
–
2.10
2.40
2.63
2.28
2.09
(a) excludes significant items
(b) excludes discontinued operations
(c) FY14 performance has been restated to exclude the discontinued operations in FY15
(d) a capital return of 22.8 cents per share and a special dividend of 6 cents per share from the Brivis and Dux net sale proceeds was paid to shareholders on 15 June 2015
(e) includes ordinary and special dividends
The remuneration and incentive framework focuses executives on
sustaining short term operating performance coupled with moderate
long term strategic growth.
Following the divestment of non-core businesses and significant
restructuring activities in FY15, the Group focused on its core operations
in Bathrooms & Kitchens and Door & Access Systems to deliver another
improved profit performance in FY16. This enabled the Board to declare
higher dividend payments to shareholders in FY16 including a special
dividend.
The Group has made significant progress against its strategic priorities
in FY16 to enhance the operating performance of the business and
to maximise returns to shareholders over time. The progress against
the strategic priorities is outlined in the Managing Director’s Review of
Operations in the Annual Report. The successful execution of the Group’s
strategic priorities were included as performance objectives and reflected
in the financial performance targets for the executives under the STI Plan
for FY16; refer Section 4.3 Short Term Incentive.
The remuneration and incentive framework has allowed the Group to
respond to higher levels of dwelling construction activity. STI payments
related to performance improvement, strategy implementation and
restructuring has encouraged management to respond quickly and make
long term decisions to sustain competitiveness and improve profitability.
This has placed the Group in a strong position to take advantage of the
upswing in market activity in FY16 and ensures the Group is well placed
to maximize returns as market activity slows.
3. DESCRIPTION OF NON-EXECUTIVE DIRECTOR
REMUNERATION
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
$1.095 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 chairing a Board committee.
The payment of committee fees recognises the additional time
commitment required by a chair of a Board committee. Non-executive
directors are not able to participate in the executive incentive schemes.
The Nomination and Remuneration 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.
Retirement benefits other than statutory superannuation are not available
for non-executive directors.
GWA does not require its non-executive directors to hold GWA shares,
however the holding of shares is actively encouraged.
3.1 FY16 Remuneration
The Board approved a reduction in non-executive director remuneration
effective from 1 July 2015 as follows:
•
•
•
•
The Chairman’s remuneration was reduced to $280,000 (including
statutory superannuation);
For all other non-executive directors, remuneration was reduced to
$120,000 (including statutory superannuation);
Committee membership fees are no longer paid apart from a fee of
$10,000 for the Chair of a Committee; and
The Nomination and Remuneration Committees have been
combined.
The changes brought non-executive director remuneration in line with the
peer group median based on the market benchmarking data provided by
Guerdon Associates for the FY16 remuneration review.
Following the changes, total non-executive director remuneration reduced
to $780,000 (including statutory superannuation) for FY16 representing
a 16% reduction from the prior year; please refer to the Remuneration
Tables in section 5.1 for FY16 non-executive director remuneration.
GWA GROUP LIMITED | 2016 ANNUAL REPORTDIRECTORS’ REPORT CONTINUEDAS AT 30 JUNE 2016 4. DESCRIPTION OF EXECUTIVE REMUNERATION
4.1 Executive remuneration structure
The FY17 STI components for the Managing Director are provided in the
following table:
Executive remuneration has a fixed component and a component that
varies with performance. The variable component comprises a short
term incentive (STI) which provides rewards for performance over a
1 year period and a long term incentive (LTI) which provides rewards
for performance over a 3 year period. The maximum total remuneration
that can be provided to an executive is capped, with incentive payments
expressed as a percentage of total fixed remuneration. Total fixed
remuneration for the purposes of incentives includes superannuation
and non-monetary benefits.
The remuneration structure implemented for the executives, including
the Managing Director, recognises the short term challenges posed by
operating in the cyclical Australian building industry, ability to sustain
competitiveness, deliver value and growth in mature markets and
maintain operating cash flows for dividends.
4.1.1 Managing Director remuneration structure
The outgoing Managing Director, Mr Peter Crowley, did not participate
in the GWA STI Plan in FY16 and no STI payments were paid for FY16
service; refer Section 1.1 Managing Director Succession.
The Managing Director, Mr Tim Salt, did not participate in the GWA STI
Plan in FY16. Mr Salt was eligible for an STI payment of $200,000 subject
to GWA Bathrooms & Kitchens achieving financial performance targets for
FY16. Mr Salt will participate in the Managing Director STI Plan from FY17;
refer Section 1.1 Managing Director Succession.
The FY17 incentives structure for the Managing Director is provided in the
following table:
Maximum STI
as % of fixed
remuneration
Maximum LTI
as % of fixed
remuneration
(grant date fair
value)
Maximum total
performance
pay as %
of fixed
remuneration
50
60
110
Managing
Director
FY17
Financial
Targets as
maximum
% of fixed
remuneration
Personal Goals
as maximum
% of fixed
remuneration
Maximum STI
as % of fixed
remuneration
30
20
50
Managing
Director
FY17
4.1.2 Other Executives’ remuneration structure
The FY16 incentives structure for other executives is provided in the
following table:
Maximum STI
as % of fixed
remuneration
Maximum LTI
as % of fixed
remuneration
(grant date fair
value)
Maximum total
performance
pay as %
of fixed
remuneration
50
30
80
Other
Executives
FY16
The FY16 STI components for the other executives are provided in the
following table:
Financial
Targets as
maximum
% of fixed
remuneration
Personal Goals
as maximum
% of fixed
remuneration
Maximum STI
as % of fixed
remuneration
30
20
50
Other
Executives
FY16
4.1.3 Actual remuneration received by executives for FY16
The table on the following page sets out the actual value of remuneration
received by the executives for FY16, derived from the various components
of their remuneration during FY16. This table differs from the more detailed
remuneration disclosures in the Remuneration Tables in Section 5.1 due to
the exclusion of LTI amounts not vested or reversal of accounting expenses
associated with LTI grants.
21
DIRECTORS’ REPORT CONTINUEDAS AT 30 JUNE 2016 Executives
FY16
T Salt, Managing Director(d)
R Thornton, Executive Director
P Gibson, Group Chief Financial Officer
S Mitchell, Group General Manager –
Supply Chain
S Ralphsmith, Executive General Manager –
GWA Door & Access Systems
K Veitch, Group General Manager –
People, Culture & Communications
C Norwell, General Manager Sales –
GWA Bathrooms & Kitchens(e)
P Crowley, Managing Director(f)
Total
Notes:
Fixed
Remuneration
$(a)
1,039,421
411,553
749,999
100,000
81,908
150,000
376,923
80,000
399,999
16,000
381,538
76,000
92,819
1,204,285
4,656,537
88,235
–
592,143
Short Term
Incentive
$(b)
Long Term
Incentive (Earned)
$(c)
Termination
Benefits
$
–
44,763
–
–
–
–
–
–
–
–
–
–
–
–
237,581
282,344
780,000
780,000
Total
$
1,139,421
538,224
899,999
456,923
415,999
457,538
181,054
2,221,866
6,311,024
(a) Fixed remuneration includes base salary, non-monetary benefits and superannuation.
(b) Represents the STI payments awarded for FY16 inclusive of deferred amounts. These amounts, exclusive of the deferred amounts, will be paid in FY17. The amount
awarded to Mr Craig Norwell represents a payment for FY16 benefits forgone on recruitment.
(c) The performance hurdles for the 2013 LTI grant were tested in FY16 and partially achieved; refer section 5.2.1 Performance Rights. Excludes the value of any unvested LTI
grants expensed or reversed during FY16.
(d) Mr Tim Salt was appointed Managing Director effective 1 July 2016. He was previously Executive General Manager of GWA’s Bathrooms & Kitchens business from
7 September 2015 and Chief Executive Officer from 1 January 2016. For details of Mr Salt’s remuneration arrangements as Managing Director please refer to
Section 1.1 Managing Director Succession.
(e) Mr Craig Norwell commenced employment on 7 April 2016.
(f) The outgoing Managing Director, Mr Peter Crowley ceased employment on 31 December 2015. For details of Mr Crowley’s termination arrangements and other entitlements
please refer to Section 1.1 Managing Director Succession.
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;
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 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 FY17
executive remuneration review, the fixed remuneration for the executive
positions at GWA are at or above market benchmark levels for companies
of comparable operational scope and size to GWA.
The 16 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. The Nomination and
Remuneration Committee therefore exercised judgment 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 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. For FY16, the
Board froze the fixed remuneration for the outgoing Managing Director and
other executives. This is reflected in the executive salaries included in the
Remuneration Tables in Section 5.1. The Board has also determined that
the fixed remuneration for the Managing Director and other executives will
be frozen for FY17.
GWA GROUP LIMITED | 2016 ANNUAL REPORTDIRECTORS’ REPORT CONTINUEDAS AT 30 JUNE 2016 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 2016. 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 in Section
5.1, 50% of the financial target component of the STI has been deferred
for the executives that achieved their STI financial targets for FY16.
The deferred component will be subject to further testing by the Board
to confirm the integrity of the achievement of the STI financial targets
following finalisation of the FY17 audited financial statements. If the Board
is satisfied then the deferred component will be paid to the executives in
September 2017 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 Financial Performance Targets
For FY16, STI financial performance targets are based on normalised
Earnings Before Interest and Tax (EBIT) and Return On Funds Employed
(ROFE) targets as determined by the Nomination and Remuneration
Committee. The use of normalised EBIT and ROFE as the basis of STI
financial targets is aimed at ensuring executives are accountable for
delivering both profit and working capital improvements.
The Board is of the view that a combination of normalised EBIT and ROFE
targets are an effective basis for STI targets as they are currently key
metrics used in the business.
The normalised EBIT and ROFE targets are weighted equally and assessed
separately and on an aggregated basis for divisional and corporate
executives. Normalised is before significant items and ensures the STI
targets are reflective of underlying trading performance.
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 Nomination and 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 FY16.
For FY16, GWA Corporate and Bathrooms & Kitchens partially achieved
their EBIT and ROFE STI financial targets reflecting the strong performance
of the business. Door & Access Systems did not achieve their STI financial
targets in FY16. 50% of the STI incentive payment relating to financial
targets has been deferred for GWA Corporate and Bathrooms & Kitchens
executives and will be subject to further testing and potential clawback
in August 2017 under the STI Plan rules. The full amount of the STI
cash bonuses (including the deferred component) is reflected in the
Remuneration Tables in Section 5.1.
The deferred component of the STI incentive payment for FY15 for
Bathrooms & Kitchens executives was tested by the Board in August 2016
to confirm the integrity of the achievement of the STI financial targets
in FY15. Following satisfaction with the testing, the Board approved the
payment of the deferred component to Bathrooms & Kitchens executives
together with interest at market rates.
4.3.2.2 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
Nomination and 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 FY16 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 Nomination and 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 Nomination
and Remuneration Committee. The personal goals of the executives for
FY17 were established at the performance reviews.
23
DIRECTORS’ REPORT CONTINUEDAS AT 30 JUNE 2016 A participant may not dispose of the ordinary shares issued under the LTI
until the fifteenth anniversary of the grant date (for the FY16 LTI grant)
and the shares are subject to a holding lock upon issue. This ensures that
executives retain a suitable shareholding in the Group. There are limited
circumstances where a participant may dispose of the shares before the
end of the fifteen 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, the extent of the executives Group shareholdings as a multiple
of fixed remuneration 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 FY16 LTI grant, the proportion of Performance Rights that can
vest will be calculated and the shares will vest in August 2018 subject to
achieving the performance hurdles. If the performance hurdles are not met
then the Performance Rights are cancelled.
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 2016 was 1,620,833 which represents 0.6% of the
Group’s total issued shares.
4.4.2 LTI performance requirements
For the FY16 LTI grant, the performance hurdles continue to provide
for vesting scales graduated with performance and demanding
performance hurdles.
The inclusion of personal goals in the remuneration structure ensures that
executives can be recognised for good business performance, including
periods where troughs in the building industry cycle mean financial
performance is consequently weaker. 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.
4.4 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 Nomination and
Remuneration Committee. The basis of the grants of Performance Rights
to executives is as follows:
•
•
50% of the Performance Rights are subject to a Total Shareholder
Return (TSR) hurdle (which is a relative performance requirement);
and
50% of the Performance Rights are subject to a Return On Funds
Employed (ROFE) hurdle (which is an absolute performance
requirement).
Both TSR and ROFE are key measures on which the Group’s strategic
plan is focused. Therefore ensuring LTI rewards are contingent on these
measures is consistent with the Board approved strategy.
The ROFE performance hurdle is calculated by reference to the Group’s
audited accounts. Threshold performance is required to be above the
Group’s Weighted Average Cost of Capital (WACC), which takes into
account the minimum return required by investors given the perceived risk
of the investment.
GWA GROUP LIMITED | 2016 ANNUAL REPORTDIRECTORS’ REPORT CONTINUEDAS AT 30 JUNE 2016 4.4.2.1 TSR Hurdle
The performance hurdles and vesting proportions for the TSR performance measure that applied to the FY16 LTI grant is outlined in the following table:
TSR of GWA Group Limited relative to TSRs of Comparator Companies
Proportion of Performance Rights to Vest if TSR hurdle is met
Less than the 50th percentile
50th percentile
0%
12.5%
Between the 50th percentile and 75th percentile
Straight line vesting between 12.5% and 50%
75th percentile or higher
50% (i.e. 50% of total grant)
The group of comparator companies for the TSR hurdle includes 19 domestic ASX listed companies exposed to similar economic, market, and / or
financial factors, including:
James Hardie Industries PLC, Fletcher Building Ltd, Boral Ltd, Adelaide Brighton Ltd, DuluxGroup Ltd, Brickworks Ltd, Super Retail Group Ltd, CSR Ltd,
ARB Corp Ltd, Burson Group Ltd, Breville Group Ltd, Asaleo Care Ltd, GUD Holdings Ltd, Cedar Woods Properties Ltd, Villa World Ltd, Decmil Group Ltd,
Simonds Group Ltd, Hills Ltd, Fleetwood Corp Ltd
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 ROFE Hurdle
The performance hurdles and vesting proportions for the ROFE performance measure that applied to the FY16 LTI grant is outlined in the following table:
GWA Group Limited ROFE over three year performance period
Proportion of Performance Rights to Vest if ROFE hurdle is met
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
0%
12.5%
Straight line vesting between 12.5% and 50%
50% (i.e. 50% of total grant)
The ROFE hurdle is calculated as earnings before interest and tax (EBIT) divided by funds employed. Funds employed is calculated as net assets minus
cash plus borrowings. The Board has discretion to make reasonable adjustments to the EBIT figure where it is unduly distorted by significant or abnormal
events. The use of any discretion and the reasons for it will be disclosed.
5. DETAILS OF DIRECTOR AND EXECUTIVE REMUNERATION
5.1 Remuneration Tables
Details of the nature and amount of each element of remuneration for each director of the Group and other key management personnel (KMP) for the year
ended 30 June 2016 are provided in the Remuneration Tables on the following page.
25
DIRECTORS’ REPORT CONTINUEDAS AT 30 JUNE 2016 s
e
e
F
&
y
r
a
l
a
S
$(a)
254,800
319,221
117,649
150,010
109,589
107,829
117,649
142,918
108,599
123,500
Non-Executive Directors
D McDonough, Chairman
J Mulcahy, Deputy Chairman
R Anderson,
Non-Executive Director
W Bartlett,
Non-Executive Director
P Birtles,
Non-Executive Director
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
Total – Non-Executive Directors(h)
2016
708,286
2015
843,478
Short-term
Long-term
Post-employment
s
u
n
o
B
h
s
a
C
I
T
S
y
r
a
t
e
n
o
M
-
n
o
N
$(b)
$(c)
-
e
r
a
h
S
f
o
e
u
l
a
V
s
d
r
a
w
A
d
e
s
a
B
$(d)
e
c
i
v
r
e
S
g
n
o
L
$
e
v
a
e
L
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
135,760
–
22,160
97,007
–
–
–
–
–
–
–
–
–
–
–
–
–
–
6,343
8,746
n
o
i
t
a
u
n
n
a
r
e
p
u
S
$
s
t
fi
e
n
e
B
25,199
35,000
12,350
15,746
10,410
10,243
12,350
15,002
11,400
12,964
71,709
88,955
16,089
–
19,307
18,783
s
t
fi
e
n
e
B
n
o
i
t
a
n
i
m
r
e
T
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
l
a
t
o
T
$
279,999
354,221
129,999
165,756
119,999
118,072
129,999
157,920
119,999
136,464
779,995
932,433
–
524,883
591,234
1,314,694
17.9
Executive Directors
T Salt, Managing Director(e)
(Appointed 1 July 2016)
R Thornton, Executive Director
2016
1,062,845
100,000
–
–
2015
2016
2015
393,152
81,908
387,059
77,813
2,014
1,825
P Crowley, Managing Director(f)
(Retired 31 December 2015)
2016
1,088,983
2015
1,389,031
–
–
82,542
(201,381)
(323,040)
25,000
780,000
1,452,103
130,334
501,407
26,114
50,000
–
2,096,886
23.9
Total – Directors Remuneration
2016 3,253,266 181,908
84,555
(43,462)
(316,697) 132,105 780,000 4,071,675
2015 2,619,568
77,813 132,159 598,414
34,860 157,738
– 3,620,552
Executives
P Gibson, Group Chief
Financial Officer
(Appointed 27 April 2015)
S Mitchell, Group General
Manager – Supply Chain
(Appointed 16 February 2015)
S Ralphsmith, Executive
General Manager – GWA Door
& Access Systems
(Appointed 5 November 2014)
K Veitch, Group General Manager –
People, Culture & Communications
(Appointed 1 July 2014)
C Norwell, General Manager Sales –
GWA Bathrooms & Kitchens(g)
(Appointed 7 April 2016)
2016
738,076
150,000
2015
2016
2015
2016
2015
2016
2015
2016
2015
142,426
–
351,623
80,000
145,474
60,000
375,928
16,000
245,437
106,666
349,161
76,000
365,746
80,000
92,400
88,235
–
–
–
–
–
–
–
–
–
–
–
–
61,662
–
61,724
29,080
61,724
29,080
61,724
29,080
32,645
–
–
–
–
–
–
–
–
–
–
–
34,999
4,226
30,000
11,461
38,000
24,797
34,000
18,783
7,500
–
–
–
–
–
–
–
–
–
–
–
984,737
21.5
146,652
–
523,347
27.1
246,015
36.2
100
491,652
15.8
12
405,980
33.4
100
520,886
26.4
493,609
22.1
38
40
220,779
54.8
100
–
–
–
Total – Executives Remuneration(i) 2016 1,907,189 410,235
2015
899,083 246,666
– 279,479
–
87,240
– 144,499
–
59,267
– 2,741,402
– 1,292,256
Total – Directors and Executives(j)
Remuneration
2016 5,160,455 592,143
84,555 236,017 (316,697) 276,604 780,000 6,813,077
2015 3,518,651 324,479 132,159 685,654
34,860 217,005
– 4,912,808
d
e
s
a
b
e
c
n
a
m
r
o
f
r
e
p
f
o
n
o
i
t
r
o
p
o
r
P
n
o
i
t
a
r
e
n
u
m
e
r
s
u
n
o
B
h
s
a
C
I
T
S
r
a
e
y
n
i
d
e
t
s
e
v
s
u
n
o
B
h
s
a
C
I
T
S
r
a
e
y
n
i
d
e
t
i
e
f
r
o
f
%
%
%
–
–
–
–
–
–
–
–
–
–
–
19.8
29.6
–
–
–
–
–
–
–
–
–
–
–
50
–
40
38
–
–
40
–
40
–
–
–
–
–
–
–
–
–
–
50
–
60
62
–
100
60
–
60
–
88
–
62
60
–
–
GWA GROUP LIMITED | 2016 ANNUAL REPORTDIRECTORS’ REPORT CONTINUEDAS AT 30 JUNE 2016
Notes to the Remuneration Tables
(a) Salary and fees represents base salary and includes the movement in annual leave provision. The fixed remuneration for the outgoing Managing
Director and other executives was frozen by the Board for FY16; refer Section 4.2.
(b) The Short Term Incentive (STI) Plan cash bonuses include the deferred component and relates to performance during FY16 based on the
achievement of personal goals and financial performance targets. GWA Corporate and Bathrooms & Kitchens partially achieved their STI financial
performance targets in FY16 and in accordance with the STI Plan rules, 50% of the amount has been deferred and will be subject to further testing
in August 2017. Door & Access Systems did not achieve their STI financial performance targets in FY16. The STI cash bonuses will be paid in
FY17, excluding the deferred component. The amounts have been determined following individual performance reviews and have been approved
by the Nomination and 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.
(d) The Long Term Incentive (LTI) Plan was approved by shareholders at the 2008 Annual General Meeting. The outstanding Performance Rights at
30 June 2016 were granted to executives in each of the years 30 June 2014, 2015 and 2016 (as applicable) and are subject to vesting conditions
and the achievement of specified performance hurdles over the three year performance periods. During FY16, 73% of the Performance Rights
in respect of the 2013 LTI grant lapsed as the EPS hurdle was not achieved and 27% of the Performance Rights vested as the TSR hurdle was
partially achieved. The fair value of the Performance Rights granted in 30 June 2014 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. The fair value of the Performance Rights granted in 30 June 2015 and 2016 were calculated using Black Scholes Model
(ROFE and EPS hurdles) and Monte Carlo Simulation (TSR hurdle) valuation methodologies and allocated to each financial year evenly over the
three year performance period. If the specified performance hurdles are not achieved, then no benefits will be received by the executives under the
LTI Plan and the Performance Rights are cancelled.
(e) Mr Tim Salt was appointed Managing Director effective 1 July 2016. He was previously Executive General Manager of GWA’s Bathrooms & Kitchens
business from
7 September 2015 and Chief Executive Officer from 1 January 2016. In line with Mr Salt’s remuneration package, the base salary amount for
Mr Salt included in the Remuneration Tables includes the payment of $300,000 at the end of FY16 as agreed compensation for loss of income
and benefits as a result of Mr Salt accepting the role as Executive General Manager of GWA’s Bathrooms & Kitchens business. Mr Salt did not
participate in the Group STI Plan for FY16. The STI amount included in the Remuneration Tables represents Mr Salt’s award based on Bathrooms
& Kitchens partially achieving their STI financial performance targets for FY16. Mr Salt will participate in the Group STI Plan from FY17. For details
of Mr Salt’s remuneration arrangements as Managing Director please refer to Section 1.1 Managing Director Succession.
(f) Mr Peter Crowley retired as Managing Director on 31 December 2015 and received a termination payment of $780,000 representing 6 months
salary. Mr Crowley did not participate in the GWA STI Plan in FY16 and no STI payments were paid for FY16 service. For details of Mr Crowley’s
termination arrangements and other entitlements please refer to Section 1.1 Managing Director Succession.
(g) Mr Craig Norwell commenced employment on 7 April 2016 as General Manager Sales – GWA Bathrooms & Kitchens and as part of his
employment package was entitled to a payment of $88,235 representing FY16 benefits forgone on recruitment.
(h) The Board approved a reduction in non-executive director remuneration effective from FY16. The changes are within the annual aggregate
maximum amount approved by shareholders. The changes are outlined in further detail in Section 3.1.
(i) The fixed remuneration for the outgoing Managing Director and other executives was frozen by the Board for FY16; refer Section 4.2. For the actual
remuneration received by the executives for FY16 please refer to the table in Section 4.1.3.
(j) Totals in FY16 are higher than FY15 due to a combination of factors, including a number of KMP commencing employment in FY15, the inclusion
in FY16 of the termination entitlements of the outgoing Managing Director and the impact of the re-organisation in FY15 to align with the new
Group strategy approved by the Board. The changes resulted in new executive KMP positions and incumbents with greater responsibility, with
higher market rates than executive positions and their incumbents in the prior structure.
27
DIRECTORS’ REPORT CONTINUEDAS AT 30 JUNE 2016 DIRECTORS’ REPORT CONTINUED
AS AT 30 JUNE 2016
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 2016 and in prior years
that affects compensation in this or future reporting periods.
Number
of rights
granted
%
vested
in year
%
forfeit
in year
Grant date*
Executive Directors
T Salt, Managing Director
(Appointed 1 July 2016)
R Thornton, Executive Director
P Crowley, Managing Director
(Retired 31 December 2015)
Executives
P Gibson, Group Chief Financial Officer
(Appointed 27 April 2015)
S Mitchell, Group General Manager –
Supply Chain
(Appointed 16 February 2015)
S Ralphsmith, Executive General Manager –
GWA Door & Access Systems
(Appointed 5 November 2014)
K Veitch, Group General Manager –
People, Culture & Communications
(Appointed 1 July 2014)
C Norwell, General Manager Sales –
GWA Bathrooms & Kitchens
(Appointed 7 April 2016)
Note:
2016
2015
2014
2013
2016
2015
2014
2013
2016
2015
2014
2013
2016
2015
2014
2013
2016
2015
2014
2013
2016
2015
2014
2013
2016
2015
2014
2013
2016
2015
2014
2013
262,000
23 March 2016
–
–
–
–
–
–
65,000
23 March 2016
45,000
25 February 2015
40,000
24 February 2014
–
–
–
–
–
–
–
65,000
25 February 2013
27
–
–
230,000
25 February 2015
200,000
24 February 2014
–
–
–
345,000
25 February 2013
27
119,000
23 March 2016
–
–
–
–
–
–
63,000
23 March 2016
44,000
25 February 2015
–
–
–
–
63,000
23 March 2016
44,000
25 February 2015
–
–
–
–
63,000
23 March 2016
44,000
25 February 2015
–
–
–
–
63,000
23 March 2016
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
73
–
33
–
73
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Fair value
of rights at
grant date
$*
Issue price used
to determine
number of rights
granted
407,279
2.29
–
–
–
115,408
89,222
74,400
127,400
–
456,021
372,000
676,200
184,986
–
–
–
97,934
87,239
–
–
97,934
87,239
–
–
97,934
87,239
–
–
97,934
–
–
–
–
–
–
1.89
2.72
3.12
1.70
–
2.72
3.12
1.70
1.89
–
–
–
1.89
2.72
–
–
1.89
2.72
–
–
1.89
2.72
–
–
1.89
–
–
–
*
The issue price used to determine the number of Performance Rights offered to key management personnel during FY16, excluding Mr Salt, was $1.89 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 2015. The issue price used to
determine the number of Performance Rights offered to Mr Salt was $2.29 per right being the volume weighted average price of the Group’s shares calculated over the
20 trading days after the Group’s half year results on 16 February 2016. 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 the Black Scholes Model valuation methodology for the ROFE hurdle and Monte
Carlo simulation for the TSR hurdle. The fair value of rights issued during the year under the ROFE hurdle was $1.78 per right and TSR hurdle was $1.33 per right.
GWA GROUP LIMITED | 2016 ANNUAL REPORT
DIRECTORS’ REPORT CONTINUED
AS AT 30 JUNE 2016
All of the rights carry an exercise price of nil. The rights granted on 24 February 2014 and 25 February 2015 and 23 March 2016 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 2016, 2017 and 2018
respectively, subject to the achievement of the performance hurdles. The rights granted to Mr Thornton were approved by shareholders at the 2013, 2014
and 2015 Annual General Meetings in accordance with ASX Listing Rule 10.14. The rights granted to Mr Salt in FY16 did not require shareholder approval
as he was not a director of the Company at the time of the grant.
Rights were forfeited where an employee ceased employment with the Group during the year in accordance with the rules of the LTI Plan. For the rights
granted to key management personnel on 25 February 2013, the Group did not achieve the EPS hurdle and partially achieved the TSR hurdle for the
performance period of 1 July 2012 to 30 June 2015. The rights subject to the EPS hurdle lapsed in FY16 resulting in the forfeiture of 363,000 rights with
a value of $791,340. The rights subject to the TSR hurdle partially vested in FY16 resulting in the exercise of 177,887 shares (adjusted for the share
consolidation effective on 9 June 2015) with a value of $340,127 and forfeiture of 167,525 rights with a value of $291,493.
The number of rights outstanding at 30 June 2016 also represents the balance yet to vest.
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 2016 (2015: nil).
5.3.2 Other key management personnel transactions with the Group or its controlled entities
There were no other key management personnel transactions with the Group or its controlled entities during the year ended 30 June 2016.
The Chairman, Mr Darryl McDonough, retired as an equity partner of Clayton Utz effective on 31 December 2015. Accordingly, legal services
provided by Clayton Utz to the Group in FY16 are not considered other key management personnel transactions with the Group or its controlled
entities (2015: $1,924,342).
There were no transactions with Great Western Corporation Pty Ltd in FY16, a company of which Mr Richard Thornton is a Non-Exectutive Director
(2015: $46,326).
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.
29
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, is as follows:
Held at
1 July 2015
Granted as
compensation
Purchases
Sales
Held at
30 June 2016
Non-Executive Directors
D McDonough
J Mulcahy
R Anderson
W Bartlett
P Birtles
Executive Directors
T Salt (Appointed 1 July 2016)
R Thornton
P Crowley (Retired 31 December 2015)
Executives
P Gibson (Appointed 27 April 2015)
S Mitchell (Appointed 16 February 2015)
S Ralphsmith (Appointed 5 November 2014)
K Veitch (Appointed 1 July 2014)
C Norwell (Appointed 7 April 2016)
Non-Executive Directors
D McDonough
J Mulcahy
R Anderson
W Bartlett
P Birtles
Executive Directors
P Crowley (retired 31 December 2015)
R Thornton
Executives
P Gibson (Appointed 27 April 2015)
S Mitchell (Appointed 16 February 2015)
S Ralphsmith (Appointed 5 November 2014)
K Veitch (Appointed 1 July 2014)
I Brannan (Ceased employment 13 March 2015)
L Patterson (Ceased employment 1 July 2015)
C Camillo (Ceased employment 2 February 2015)
Note:
118,300
40,950
16,435,332
30,207
13,650
n/a
65,975
459,550
–
–
–
–
n/a
–
–
–
–
–
–
15,927
84,532
–
–
–
–
–
–
–
–
–
–
11,900
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Held at
1 July 2014
Granted as
compensation
Purchases
Sales
Share
Consolidation(a)
118,300
40,950
16,435,332
30,207
13,650
11,900
81,902
n/a
–
–
–
–
–
Held at
30 June
2015
107,905
45,000
18,060,801
33,194
15,000
480,000
58,694
n/a
n/a
n/a
n/a
–
77,500
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
22,095
–
–
–
–
25,000
13,806
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(11,700)
(4,050)
118,300
40,950
(1,625,469)
16,435,332
(2,987)
(1,350)
30,207
13,650
(45,450)
(6,525)
459,550
65,975
–
–
–
–
–
(6,975)
–
–
–
–
–
n/a
70,525
n/a
(a) The balances at 30 June 2015 have been adjusted for the share consolidation approved by shareholders at a General Meeting on 29 May 2015. On the effective
date of 9 June 2015, the share capital of the Company was consolidated through the conversion of every one fully paid ordinary share in the Company into
0.9100 fully paid ordinary shares in the Company.
GWA GROUP LIMITED | 2016 ANNUAL REPORTDIRECTORS’ REPORT CONTINUEDAS AT 30 JUNE 2016 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 2016 is listed in the Directors’ Report under Directors’ Interests.
During the FY16 reporting period, there were 100,459 shares granted to
key management personnel as compensation (2015: nil). The aggregate
number of shares held by key management personnel or their related
parties at 30 June 2016 was 16,732,241 (2015: 17,234,489).
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 Nomination and Remuneration Committee. Shareholder
approval is required for termination payments in excess of twelve
months salary.
6. KEY TERMS OF EMPLOYMENT CONTRACTS
6.1 Notice and termination payments
Unless as a consequence of redundancy, an executive will not be eligible
for an STI payment following cessation of employment with the Group.
The specified executives in the Directors’ Report including the Managing
Director, Mr Tim Salt, are on open-ended contracts.
The employment contract for Mr Salt provides that if either the Group or
Mr Salt wishes to terminate employment for any reason, no less than one
year’s written notice of termination is required. The Group retains the right
to immediately terminate the employment contract of Mr Salt by making
payment equal to twelve months salary in lieu of providing notice.
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
immediately terminate the employment contracts of the executives by
making payment equal to the relevant notice period (of up to six months)
in lieu of providing notice.
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:
Darryl D McDonough
Chairman
Sydney, 22 August 2016
Tim R Salt
Managing Director
31
DIRECTORS’ REPORT CONTINUEDAS AT 30 JUNE 2016
GWA GROUP LIMITED
FINANCIAL REPORT
GWA GROUP LIMITED AND ITS CONTROLLED ENTITIES
ABN 15 055 964 380
CONTENTS
Consolidated statement of profit or loss and other comprehensive income
Consolidated statement of financial position
Consolidated statement of cash flows
Consolidated statement of changes in equity
NOTE
1
Significant accounting policies
2 Operating segments
3 Discontinued operations
4 Other income
5 Other expenses
6
Significant items
7 Personnel expenses
8 Auditor's remuneration
9 Net financing costs
10
Income tax expenses
11 Earnings per share
12 Cash and cash equivalents
13 Trade and other receivables
14
Inventories
15 Current tax liabilities
16 Deferred tax assets and liabilities
17 Property, plant and equipment
18
Intangible assets
Directors’ Declaration
37
44
46
47
47
48
48
49
49
50
51
52
52
52
52
53
54
55
19 Trade and other payables
20
Loans and borrowings
21 Employee benefits
22 Share-based payments
23 Provisions
24 Capital and reserves
25
Financial instruments and
financial risk management
26 Operating leases
27 Capital commitments
28 Contingencies
29 Deed of cross guarantee
30 Consolidated entities
31 Parent entity disclosures
32
Reconciliation of cash flows
from operating activities
33 Related parties
34 Subsequent events
Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001
Independent Auditor’s Report to the members of GWA Group Limited
33
34
35
36
56
57
58
58
60
60
62
69
70
70
70
72
73
74
74
74
75
75
76
GWA GROUP LIMITED | 2016 ANNUAL REPORTDIRECTORS’ REPORT CONTINUEDAS AT 30 JUNE 2016
GWA Group Limited and its controlled entities
CONSOLIDATED STATEMENT OF PROFIT OR
LOSS AND OTHER COMPREHENSIVE INCOME
For the year ended 30 June 2016
In thousands of AUD
CONTINUING OPERATIONS
Sales revenue
Cost of sales
Gross profit
Other income
Selling expenses
Administrative expenses
Other expenses
Operating profit
Finance income
Finance expenses
Net finance costs
Profit before tax
Tax expense
Profit from continuing operations
DISCONTINUED OPERATIONS
Profit / (loss) from discontinued operations, net of tax
Profit / (loss)
OTHER COMPREHENSIVE INCOME
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign subsidiaries, net of tax
Cash flow hedges, net of tax
Other comprehensive (loss) / income, net of tax
Total comprehensive income / (loss)
EARNINGS / (LOSS) PER SHARE (CENTS)
Total
– Basic
– Diluted
Continuing operations
– Basic
– Diluted
Note
2016
2015
2
4
5
9
10
3A
11
11
11
11
439,666
(259,924)
179,742
779
(60,939)
(41,288)
(29)
78,265
500
(7,008)
(6,508)
71,757
(19,837)
51,920
426,218
(249,268)
176,950
5,065
(59,560)
(43,572)
(57,649)
21,234
935
(8,264)
(7,329)
13,905
(3,544)
10,361
1,761
53,681
(26,544)
(16,183)
78
(2,850)
(2,772)
50,909
19.66
19.58
19.02
18.94
(9)
827
818
(15,365)
(5.30)
(5.30)
3.39
3.38
33
The consolidated statement of profit or loss and other comprehensive income is to be read in conjunction with the accompanying notes.
GWA Group Limited and its controlled entities
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June
In thousands of AUD
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Inventories
Other
Assets classified as held for sale
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
Liabilities associated with assets classified as held for sale
Total current liabilities
NON-CURRENT LIABILITIES
Trade and other payables
Loans and borrowings
Employee benefits
Provisions
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Issued capital
Reserves
Retained earnings / (accumulated losses)
Total equity
Note
2016
2015
12
13
14
16
17
18
19
21
15
23
19
20
21
23
24
24
35,696
51,983
76,361
2,267
–
33,043
63,885
83,498
2,502
15,339
166,307
198,267
18,189
11,281
314,894
188
344,552
510,859
40,510
6,889
1,851
22,430
–
71,680
432
120,000
8,447
2,602
131,481
203,161
307,698
307,877
(3,356)
3,177
307,698
22,103
13,937
316,549
322
352,911
551,178
47,599
7,559
8,857
40,891
6,023
110,929
–
125,000
9,337
18
134,355
245,284
305,894
337,942
(51)
(31,997)
305,894
The consolidated statement of financial position should be read in conjunction with the accompanying notes.
The Gilderol business was sold in July 2015 and classified as a discontinued operation (refer to Note 3 Discontinued Operations). The 30 June 2015
consolidated statement of financial position includes the assets and liabilities associated with the Gliderol business within assets and liabilities classified
as held for sale.
GWA GROUP LIMITED | 2016 ANNUAL REPORT GWA Group Limited and its controlled entities
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 30 June 2016
In thousands of AUD
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers
Payments to suppliers and employees
Cash generated from operations
Interest and facility fees paid
Interest received
Income taxes paid
Net cash from operating activities
32
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property, plant and equipment
Acquisition of property, plant and equipment
Acquisition of intangible assets
Proceeds from business disposals, net of transaction costs
Net cash from investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings
Repayment of borrowings
Dividends paid
Capital return to holders of FY13 LTI grant
Payment for on-market share buy-back
Capital return to shareholders
Net cash used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Effect of exchange rate changes
Cash within assets held for sale on the statement of financial position
Cash and cash equivalents at 30 June
12
Note
2016
2015
502,464
(421,842)
80,622
(6,662)
500
(19,536)
54,924
70
(2,708)
(920)
3,570
12
20,000
(25,000)
(18,718)
(44)
(30,029)
–
(53,791)
1,145
33,043
181
1,327
35,696
610,596
(548,445)
62,151
(8,319)
935
(11,262)
43,505
33,059
(3,344)
(1,718)
88,599
116,596
105,000
(155,000)
(35,251)
–
–
(70,273)
(155,524)
4,577
29,873
(80)
(1,327)
33,043
The consolidated statement of cash flows is to be read in conjunction with the accompanying notes.
The cash flows of the Gliderol business are included in the consolidated statement of cash flows for the year ended 30 June 2016 only for the part of the
year that they were owned by GWA Group Limited and its controlled entities. The 30 June 2015 consolidated statement of cash flows included Gliderol for
the full year and has not been re-stated. Accordingly, the consolidated statement of cash flows for the years ended 30 June 2016 and 30 June 2015 are
not comparable.
35
GWA Group Limited and its controlled entities
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2016
In thousands of AUD
Balance at 1 July 2015
Total comprehensive income for the year
Profit for the year
Other comprehensive income
Exchange differences on translation of foreign
subsidiaries, net of tax
Cash flow hedges, net of tax
Total other comprehensive loss
Total comprehensive income
Transaction with owners, recorded
directly in equity
Share-based payments, net of tax
On-market share buy-back, net of tax
Dividends declared
Total transactions with owners
Balance as at 30 June 2016
For the year ended 30 June 2015
In thousands of AUD
Balance at 1 July 2014
Total comprehensive income for the year
Loss for the year
Other comprehensive income
Exchange differences on translation of foreign
subsidiaries, net of tax
Cash flow hedges, net of tax
Total other comprehensive income
Total comprehensive loss
Transaction with owners, recorded directly
in equity
Share-based payments, net of tax
Dividends declared
Capital return to shareholders, net of tax
Total transactions with owners
Balance as at 30 June 2015
Share capital
Translation
reserve
337,942
(1,150)
Hedging
reserve
(1,081)
Equity
compensation
reserve
(Accumulated
losses) /
retained
earnings
Total
2,180
(31,997)
305,894
–
–
–
–
–
(44)
(30,021)
–
(30,065)
307,877
–
78
–
78
78
–
–
–
–
–
–
(2,850)
(2,850)
(2,850)
–
–
–
–
(1,072)
(3,931)
–
–
–
–
–
(533)
–
–
(533)
1,647
53,681
53,681
–
–
–
53,681
211
–
(18,718)
(18,507)
3,177
78
(2,850)
(2,772)
50,909
(366)
(30,021)
(18,718)
(49,105)
307,698
Share capital
Translation
reserve
408,100
(1,141)
Hedging
reserve
(1,908)
Equity
compensation
reserve
(Accumulated
losses) /
retained
earnings
Total
1,808
19,130
425,989
–
–
–
–
–
–
–
(70,158)
(70,158)
337,942
–
(9)
–
(9)
(9)
–
–
–
–
–
–
827
827
827
–
–
–
–
(1,150)
(1,081)
–
–
–
–
–
372
–
–
372
2,180
(16,183)
(16,183)
–
–
–
(9)
827
818
(16,183)
(15,365)
307
(35,251)
–
(34,944)
(31,997)
679
(35,251)
(70,158)
(104,730)
305,894
The consolidated statement of changes in equity is to be read in conjunction with the accompanying notes.
GWA GROUP LIMITED | 2016 ANNUAL REPORT
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 2016 comprises the Company and its
subsidiaries (together referred to as the ‘consolidated entity’). 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.
The financial report was authorised for issue by the directors on
22 August 2016.
(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
derivative financial instruments that are measured at fair value.
The Company is of a kind referred to in ASIC Corporations (Rounding in
Financial / Directors’ Report) Instrument 2016/191 dated 24 March 2016
and in accordance with that Instrument, 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 18 - measurement of the recoverable amounts
of intangible assets
note 22 - fair value of share-based payments
note 23 and 28 - provisions and contingencies
note 25 - 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) Changes in accounting policies, disclosures, standards and
interpretations
(i)
Standards and Interpretations affecting amounts reported in the
current period
The following new and revised Standards and Interpretations have been
adopted by the consolidated entity for the first time for the year ended
30 June 2016:
•
AASB 2015-3 Amendments to Australian Accounting Standards
arising from the Withdrawal of AASB 1031 Materiality
The initial adoption of the above revision has not had a material impact
on the amounts reported in the consolidated annual financial report.
(ii) Standards and Interpretations issued but not yet adopted
At the date of authorisation of the consolidated financial statements, the
following Standards and Interpretations were issued but not yet effective.
37
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA Group Limited and its controlled entities 1. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
(c) Changes in accounting policies, disclosures, standards and interpretations continued
(ii) Standards and Interpretations issued but not yet adopted continued
Standard / Interpretation
AASB 16 Leases
AASB 9 Financial Instruments (December 2014), AASB 2014-7 Amendments to Australian
Accounting Standards arising from AASB 9 (December 2014), AASB 2014-8 Amendments to
Australian Accounting Standards arising from AASB 9 (December 2014) – Application of AASB 9
(December 2009) and AASB 9 (December 2010) and AASB 2014-7 Amendments to Australian
Accounting Standards arising from AASB 9 (December 2014)
AASB 15 Revenue from Contracts with Customers, AASB 2014-5 Amendments to Australian
Accounting Standards arising from AASB 15 and AASB 2015-8 Amendments to Australian
Accounting Standards – Effective Date of AASB 15
AASB 2016-1 Amendments to Australian Accounting Standards – Recognition of Deferred Tax
Assets for Unrealised Losses
AASB 2016-2 Amendments to Australian Accounting Standards – Disclosure Initiative:
Amendments to AASB 107 Statement of Cash Flows
AASB 2014-4 Amendments to Australian Accounting Standards – Clarification of Acceptable
Methods of Depreciation and Amortisation
AASB 2015-1 Amendments to Australian Accounting Standards – Annual Improvements to
Australian Accounting Standards 2012-2014 Cycle
AASB 2015-2 Amendments to Australian Accounting Standards – Disclosure Initiative:
Amendments to AASB 101 Presentation of Financial Statements
Effective for the
annual reporting period
beginning on
Expected to be initially
applied in the financial
year ending
1 January 2019
1 January 2018
(Applies on a modified
retrospective basis)
30 June 2020
30 June 2019
1 January 2018
30 June 2019
1 January 2017
30 June 2018
1 January 2017
30 June 2018
1 January 2016
30 June 2017
1 January 2016
30 June 2017
1 January 2016
30 June 2017
AASB 1057 Application of Australian Accounting Standards and AASB 2015-9 Amendments to
Australian Accounting Standards – Scope and Application Paragraphs
1 January 2016
30 June 2017
The consolidated entity is assessing the potential impact of the above Standards and Interpretations issued but not yet adopted on its consolidated
financial statements.
(d) 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) Transaction eliminated on consolidation
Intra-group balances and transactions, and unrealised income and expense arising from intra-group transactions, are eliminated.
(e) Foreign currency
(i) Foreign currency transactions
Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies at the reporting date are retranslated to Australian dollars at the foreign exchange rate ruling at that date. Foreign
exchange differences arising on translation are recognised in profit or loss. Non-monetary assets and liabilities that are measured in terms of historical
cost in a foreign currency are retranslated to Australian dollars using the exchange rate at the date of the transaction. Non-monetary assets and liabilities
denominated in foreign currencies that are stated at fair value are translated to Australian dollars at foreign exchange rates ruling at the dates the fair value
was determined.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA Group Limited and its controlled entities GWA GROUP LIMITED | 2016 ANNUAL REPORT 1. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
(e) Foreign currency continued
(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 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.
(f) 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 (g)).
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.
(g) 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 hedge 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 probable to occur and should present an exposure to variation in
cash flows that could ultimately affect reported profit or loss. Derivatives
are recognised initially at fair value and attributable transaction costs are
recognised in profit or loss as incurred. Subsequent to initial recognition,
derivatives are measured at fair value and changes therein
are accounted for as described below.
(i) Cash flow hedges
When a derivative is designated as the hedging instrument in a hedge of
the variability in cash flows attributable to a particular risk associated with
a recognised asset or liability or a highly probable forecast transaction
that could affect profit or loss, the effective portion of changes in the fair
value of the derivative is recognised in other comprehensive income and
presented in the hedging reserve in equity. Any ineffective portion of
changes in the fair value of the derivative is recognised immediately
in profit or loss.
When the hedged item is a non-financial asset, the amount recognised
in equity is included in the carrying amount of the asset when the
asset is recognised. In other cases the amount accumulated in equity
is reclassified to profit or loss in the same period as 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.
39
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA Group Limited and its controlled entities 1. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
(g) Hedging continued
(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.
(h) 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.
When 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
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. The estimated useful lives in the current and
comparative periods are as follows:
•
plant and equipment
• motor vehicles
3-15 years
4-8 years
Expenditure on development activities, whereby research findings are
applied to a plan or design for the production of new or substantially
improved products and processes, is capitalised only if the product or
process is technically and commercially feasible and the consolidated
entity has sufficient resources to complete development. Capitalised
development expenditure is measured at cost less accumulated
amortisation and impairment losses.
(ii) Brand names
Acquired brand names are stated at cost. Expenditure incurred in
developing, maintaining or enhancing brand names is recognised in
profit or loss in the year in which it is incurred. The brand names are not
amortised as the directors believe that the brand names have an indefinite
useful life. The carrying values of brand names are tested each year to
ensure that no impairment exists.
(iii) Goodwill
Goodwill acquired in business combinations of the consolidated entity
is measured at cost less accumulated impairment losses. Goodwill
represents the excess of the cost of the acquisition over the consolidated
entity’s interest in the net fair value of the identifiable assets, liabilities and
contingent liabilities of the acquired business.
(iv) Other intangible assets
Other intangible assets that are acquired by the consolidated entity are
measured at cost less accumulated amortisation and impairment losses.
(v) Subsequent expenditure
Subsequent expenditure on capitalised intangible assets is capitalised only
when it increases the future economic benefits embodied in the specific
assets 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
indefinite
10-20 years
15 years
3-19 years (based on patent term)
customer relationships
8 years
The residual value, the useful life and the depreciation method applied
to an asset are reassessed annually.
(j) Trade and other receivables
(i) 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.
Trade and other receivables are initially measured at fair value and
subsequently at their amortised cost less impairment losses.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA Group Limited and its controlled entities GWA GROUP LIMITED | 2016 ANNUAL REPORT 1. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
(k) 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.
(l) Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits with
an original maturity date of three months or less. Bank overdrafts that
are repayable on demand and form an integral part of the consolidated
entity’s cash management are included as a component of cash and cash
equivalents for the purpose of the statement of cash flows.
(m) Impairment
(i) Non-derivative financial assets
Financial assets measured at amortised cost
The consolidated entity considers evidence of impairment for financial
assets measured at amortised cost (loans and receivables) at both a
specific asset and collective level. All individually significant assets are
assessed for specific impairment. Those found not to be specifically
impaired are then collectively assessed for any impairment that has been
incurred but not yet identified. Assets that are not individually significant
are collectively assessed for impairment by grouping together assets with
similar risk characteristics.
In assessing collective impairment the consolidated entity uses historical
trends of the probability of default, timing of recoveries and the amount of
loss incurred, adjusted for management’s judgement as to whether current
economic and credit conditions are such that the actual losses are likely to
be greater or less than suggested by historical trends.
An impairment loss in respect of a financial asset measured at amortised
cost is calculated as the difference between its carrying amount and the
present value of the estimated future cash flows discounted at the asset’s
original effective interest rate. Losses are recognised in profit or loss and
reflected in an allowance account against receivables. Interest on the
impaired asset continues to be recognised through the unwinding of the
discount. When an event occurring after the impairment was recognised
causes the amount of impairment loss to decrease, the decrease in
impairment loss is reversed through profit or loss.
Available-for-sale financial assets
Impairment losses on available-for-sale financial assets are recognised
by reclassifying the losses accumulated in the fair value reserve in equity
to profit or loss. The cumulative loss that is reclassified from equity to
profit or loss is the difference between the acquisition cost, net of any
principal repayment and amortisation, and the current fair value, less
any impairment loss recognised previously in profit or loss. Changes in
cumulative impairment losses attributable to application of the effective
interest method are reflected as a component of interest income. If, in a
subsequent period, the fair value of an impaired available-for-sale debt
security increases and the increase can be related objectively to an event
occurring after the impairment loss was recognised, then the impairment
loss is reversed, with the amount of the reversal recognised in profit or
loss. However, any subsequent recovery in the fair value of an impaired
available-for-sale equity security is recognised in other comprehensive
income.
(ii) Non-financial assets
The carrying amounts of the consolidated entity’s non-financial assets,
other than inventories and deferred tax assets, are reviewed at each
reporting date to determine whether there is any indication of impairment.
If any such indication exists, then the asset’s recoverable amount is
estimated. Goodwill and indefinite life intangible assets are tested at least
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 own
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 of CGU’s. Subject to an operating segment ceiling test, CGU’s
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 CGU’s that are expected to benefit
from the synergies of the combination.
Impairment losses are recognised in profit or loss. Impairment losses
recognised in respect of CGU’s are allocated first to reduce the carrying
amount of any goodwill allocated to the CGU (or group of CGU’s), 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.
41
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA Group Limited and its controlled entities 1. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
(n) Share capital
(i) Ordinary shares
Ordinary shares are classified as equity. Incremental costs directly
attributable to the issue of ordinary shares are recognised as a
deduction from equity, net of any tax effects.
(ii) Dividends
Dividends are recognised as a liability in the period in which they are
declared.
(iii) Transaction costs
Transaction costs of an equity transaction are accounted for as a deduction
from equity, net of any related income tax benefit.
(o) 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.
(p) 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.
(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 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.
(q) 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.
(r) Trade and other payables
Trade and other payables are initially measured at fair value and
subsequently at their amortised cost.
(s) Revenue
(i) 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.
(t) Expenses
(i) Costs of goods sold
Cost of goods sold comprises the cost of manufacturing and purchase of
goods including supply chain costs such as freight and warehousing.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA Group Limited and its controlled entities GWA GROUP LIMITED | 2016 ANNUAL REPORT 1. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
(t) Expenses continued
(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.
(u) Income tax
Tax expense comprises current and deferred tax. Current and deferred
taxes 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.
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-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.
(v) Goods and services tax
Revenue, expenses and assets are recognised net of the amount
of goods and services tax (GST), except where the amount of GST
incurred is not recoverable from the taxation authority. In these
circumstances, the GST is recognised as 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.
(w) 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.
(x) 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.
43
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA Group Limited and its controlled entities Discontinued operations in the current and prior period includes the
sale of garage doors and openers (Gliderol Garage Doors), water heaters
(Dux Hot Water) and ducted heating and climate control systems (Brivis
Heating & Cooling). Refer to note 3 for further information regarding
discontinued operations.
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.
1. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
(y) 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.
2. OPERATING SEGMENTS
The consolidated entity has two continuing 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, kitchen
sinks, laundry tubs and bathroom accessories.
Door & Access Systems – This segment includes the sale of
door locks and levers and supply and maintenance of commercial
door systems.
In thousands of AUD
2016
2015
2016
2015
2016
2015
2016
2015
Bathrooms &
Kitchens
Door & Access
Systems
Discontinued
operations
Total
Sales revenue
341,953
330,015
97,713
96,203
4,798
121,564
444,464
547,782
Segment profit / (loss) before significant items and tax
84,582
83,291
7,318
7,239
(605)
1,528
91,295
92,058
Impairment losses on non-financial assets
Supplier compensation payment
Loss on sale of discontinued operations
Restructuring income – gains on disposal of property
Brivis product defect issues (note 28)
Restructuring costs
Other restructuring and significant items
–
–
–
–
–
–
–
–
(525)
–
4,253
–
(40,764)
(545)
–
–
–
–
–
–
–
–
–
–
–
–
–
96
–
–
–
–
2,805
–
–
(24,204)
–
(3,634)
–
–
–
(2,380)
–
–
–
–
(24,204)
(525)
(3,634)
4,253
2,805
–
–
–
(40,764)
(2,829)
Segment profit / (loss) before income tax
84,582
45,710
7,318
7,335
2,200
(28,690)
94,100
24,355
Depreciation
Amortisation
Capital expenditure
1,983
4,360
–
1,896
–
903
935
406
758
964
406
513
Reportable segment assets
Reportable segment liabilities
389,947
408,294
61,157
49,673
66,609
9,816
63,555
12,433
103
41
44
–
–
2,787
787
1,700
3,021
447
2,698
8,111
1,193
3,116
10,490
451,104
482,339
6,023
59,489
85,065
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA Group Limited and its controlled entities GWA GROUP LIMITED | 2016 ANNUAL REPORT 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
Elimination of discontinued operations
Consolidated revenue – continuing operations
Profit
Total profit for reportable segments
Elimination of discontinued operations
Other significant items
Restructuring expenses: corporate
Unallocated amounts: corporate expenses
Profit from operating activities
Net financing costs
Consolidated profit before tax – continuing operations
Assets
Total assets for reportable segments
Unallocated amounts: corporate assets*
Consolidated total assets
Liabilities
Total liabilities for reportable segments
Unallocated amounts: corporate liabilities*
Consolidated total liabilities
2016
2015
444,464
(4,798)
439,666
94,100
(2,200)
-
-
(13,635)
78,265
(6,508)
71,757
451,104
59,755
510,859
59,489
143,672
203,161
547,782
(121,564)
426,218
24,355
28,690
(2,427)
(11,619)
(17,765)
21,234
(7,329)
13,905
482,339
68,839
551,178
85,065
160,219
245,284
* 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
Elimination of discontinued operations
Unallocated amounts: depreciation on corporate assets
Consolidated depreciation – continuing operations
Amortisation
Total amortisation for reportable segments
Elimination of discontinued operations
Unallocated amounts: amortisation on corporate assets
Consolidated amortisation – continuing operations
Capital expenditure
Total capital expenditure for reportable segments
Elimination of discontinued operations
Unallocated amounts: corporate capital expenditure
Consolidated capital expenditure – continuing operations
2016
3,021
(103)
470
3,388
447
(41)
2,191
2,597
2,698
(44)
930
3,584
2015
8,111
(2,787)
509
5,833
1,193
(787)
2,734
3,140
3,116
(1,700)
1,946
3,362
45
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA Group Limited and its controlled entities
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 6% of the consolidated entity’s total sales revenue for the current
year (2015: 6%).
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
Non-current assets*
Australia
New Zealand
Consolidated
2016
415,336
321,107
2015
402,474
326,255
2016
24,330
5,256
2015
23,744
4,553
2016
439,666
326,363
2015
426,218
330,808
*Non-current assets exclude financial instruments and deferred tax assets.
Major customers
The consolidated entity conducts business with 3 customers where the net revenue generated from each customer exceeds 10% of the consolidated
entity’s net revenue. Net revenue from these customers represent $71,365,000 (2015: $68,519,000), $63,426,000 (2015: $59,209,000) and
$56,073,000 (2015: $63,265,000) respectively of the consolidated entity’s total net revenues for the current year of $439,666,000 (2015: $426,218,000).
The revenues from these customers are reported in the Bathrooms & Kitchens and Door & Access Systems segments.
3. DISCONTINUED OPERATIONS
During the year ended 30 June 2016, the Gliderol business was sold with an effective date of 31 July 2015.
During the year ended 30 June 2015, the Dux Hot Water business was sold with an effective date of 19 December 2014 and the Brivis Heating & Cooling
business was sold with an effective date of 2 February 2015.
The operating activities of these three businesses were classified as discontinued in the current and prior years. The assets and liabilities associated with
the Gliderol business were classified as held for sale at 30 June 2015.
A. Results of discontinued operations
For the year ended 30 June
In thousands of AUD
Revenue
Expenses
(Loss) / profit from operating activities
Tax benefit / (expense) on operating activities
(Loss) / profit from operating activities, net of tax
Impairment loss recognised on the re-measurement to fair value less costs to sell – Gliderol
Tax benefit on impairment loss – Gliderol
Product defect issues settlement – Brivis
Tax expense on product defect issues settlement
Loss on sale of discontinued operations
Other restructuring and significant items
Tax benefit on other restructuring and significant items
Profit / (loss) for the year
Basic profit / (loss) per share (cents per share)
Diluted profit / (loss) per share (cents per share)
2016
4,798
(5,403)
(605)
403
(202)
–
–
2,805
(842)
–
–
–
1,761
0.64
0.64
2015
121,564
(120,036)
1,528
(517)
1,011
(24,204)
2,034
–
–
(3,634)
(2,380)
629
(26,544)
(8.69)
(8.69)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA Group Limited and its controlled entities GWA GROUP LIMITED | 2016 ANNUAL REPORT 3. DISCONTINUED OPERATIONS CONTINUED
B. Cash flows from discontinued operations
For the year ended 30 June
In thousands of AUD
Net cash (used in) / from operating activities
Net cash from investing activities
Net cash from discontinued operations
C. Effect of disposal of Gliderol on the financial position of the consolidated entity
As at 30 June
In thousands of AUD
Trade and other receivables
Inventories
Net deferred tax assets
Other liabilities
Trade and other payables
Provisions
Employee benefits
Net assets and liabilities
Disposal costs
Consideration proceeds
Cash and cash equivalents disposed of
Net cash inflow
4. OTHER INCOME
In thousands of AUD
Foreign currency gains – realised
Foreign currency gains – unrealised
Other – scrap income, royalties
Restructuring income – gains on disposal of property
6
2016
(682)
4,779
4,097
2016
(5,685)
(5,095)
(982)
12
4,239
383
1,718
(5,410)
(1,360)
(6,770)
6,900
(130)
6,770
Note
2016
42
292
445
–
779
5. OTHER EXPENSES
In thousands of AUD
Foreign currency losses – realised
Foreign currency losses – unrealised
Significant items – expenses
Note
2016
6
29
–
–
29
2015
2,290
86,533
88,823
2015
5
–
807
4,253
5,065
2015
1,132
734
55,783
57,649
47
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA Group Limited and its controlled entities 6. SIGNIFICANT ITEMS
In thousands of AUD
Restructuring costs
Restructuring income – gains on disposal of property
Supplier exit compensation
Corporate transformation costs
Total significant items before tax
Tax benefit
Net significant items after tax
(i) Restructuring costs
Note
(i)
(i)
(ii)
(iii)
2016
–
–
–
–
–
–
–
2015
52,633
(4,253)
723
2,427
51,530
(16,734)
34,796
In October 2014, GWA announced its plans to restructure its manufacturing activities following a detailed review of its operations. This resulted in decisions
to phase out the Norwood plastics operation in Adelaide over the next three years, and cease production in the Wetherill Park vitreous china manufacturing
facility by the end of calendar 2014. There were no expenses recognised in association with this in the current year (2015: $41,000,000).
In June 2015, GWA announced that it would restructure its group operations to drive greater focus across its businesses, realign the cost base to adjust
for the divested businesses, and further capture supply chain efficiencies. There were no expenses recognised in association with this in the current year
(2015: $11,600,000).
In April 2015, GWA announced the sale and leaseback of its Wetherill Park facility. A gain of $4,253,000 was recognised in the prior year (2016: nil).
(ii) 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 relationships with a few core suppliers. During the year ended 30 June 2014, a former
China sanitaryware supplier threatened legal action for breach of contract and management entered into an agreement to settle the dispute in order
to focus on the strategic supply relationships. During the year ended 30 June 2016 no costs were incurred in relation to the settlement of this dispute
(2015: $723,000).
(iii) Corporate transformation costs
In 2014, the Board approved and completed a strategic review of the Group 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. No costs were incurred in the current
year in relation to the execution of this review (2015: $2,427,000).
7. PERSONNEL EXPENSES
In thousands of AUD
Wages and salaries – including superannuation contributions, annual leave,
long service leave and on-costs
Equity-settled share-based payment transactions
2016
86,730
99
86,829
2015
99,931
679
100,610
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA Group Limited and its controlled entities GWA GROUP LIMITED | 2016 ANNUAL REPORT
8. AUDITOR’S REMUNERATION
In AUD
Auditor services
Auditor 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
Auditor of the Company
KPMG Australia:
Taxation services
Overseas KPMG Firms:
Taxation services
9. NET FINANCING COSTS
In thousands of AUD
Finance income
Interest income on call deposits
Other
Finance expense
Interest expense on financial liabilities
Interest expense on swaps
Facility fees on financial liabilities
Establishment and legal fees amortisation
Other
Net financing costs
2016
2015
402,300
34,186
10,000
446,486
–
52,112
52,112
457,233
–
15,000
472,233
5,300
31,504
36,804
2016
2015
447
53
500
2,891
1,241
2,143
733
–
7,008
6,508
843
92
935
3,786
991
2,809
630
48
8,264
7,329
49
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA Group Limited and its controlled entities
10. INCOME TAX EXPENSES
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 / (benefit)
Origination and reversal of temporary differences
Tax expense from continuing operations
Tax expense / (benefit) from discontinued operations
Total 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 from continuing operations before tax
Profit / (loss) from discontinued operations before tax
Profit / (loss) before tax
Tax expense / (benefit) using the domestic rate of 30% (2014: 30%)
Tax (benefit) / expense due to:
Non-deductible expenses
Non-deductible impairment loss
(Deductible) / non-deductible net share-based payments
Effect of tax rate in foreign jurisdictions
Non-assessable accounting gain on disposal of capital gains tax assets
Carried forward tax losses utilised
Building depreciation allowance
Rebateable research and development
(Over) / under provided in prior years
Income tax expense on pre-tax net profit
Deferred tax recognised directly in equity
In thousands of AUD
Derivatives
Share buy-back and capital return costs
2016
2015
15,497
(780)
14,717
5,120
19,837
439
20,276
2016
71,757
2,200
73,957
22,187
94
–
(72)
(40)
(629)
(56)
–
(207)
21,277
(1,001)
20,276
2016
(1,222)
16
(1,206)
12,759
978
13,737
(10,193)
3,544
(2,146)
1,398
2015
13,905
(28,690)
(14,785)
(4,435)
384
5,227
204
(128)
(237)
(86)
(15)
(312)
602
796
1,398
2015
354
(92)
262
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA Group Limited and its controlled entities GWA GROUP LIMITED | 2016 ANNUAL REPORT 2016
2015
51,920
–
51,920
(202)
1,963
1,761
53,681
45,157
(34,796)
10,361
1,011
(27,555)
(26,544)
(16,183)
2015
306,534
–
(1,209)
305,325
11. EARNINGS PER SHARE
The calculation of basic and diluted earnings per share (EPS) has been based on the following profit attributable to ordinary shareholders.
Profit attributable to ordinary shareholders – basic / diluted
In thousands of AUD
Continuing operations
Profit before significant items
Net significant items
Profit for the year from continuing operations
Discontinued operations
(Loss) / profit before significant items
Net significant items
Profit / (loss) for the year from discontinued operations
Profit / (loss) for the year
Basic earnings per share
The calculation of basic earnings per share has been based on the following weighted average number of shares outstanding.
Weighted average number of ordinary shares (basic)
In thousands of shares
Issued ordinary shares at 1 July
Effect of on-market share buy-back*
Effect of share consolidation**
Weighted average number of ordinary shares at 30 June
Diluted earnings per share
2016
278,948
(5,923)
–
273,025
The calculation of diluted earnings per share has been based on the following weighted average number of ordinary shares outstanding adjusted for the
effects of all dilutive potential ordinary shares.
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)
*Effect of on-market share buy-back
2016
273,025
1,162
274,187
2015
305,325
1,533
306,858
On 16 November 2015, GWA announced an on-market share buy-back program as part of its ongoing capital management initiatives. The share
buy-back was completed on 17 June 2016. As at 30 June 2016, 15,000,356 shares were purchased on-market and subsequently cancelled
(refer to note 24 for further details). This reduction is reflected in the calculation of the weighted average number of ordinary shares at 30 June 2016.
**Effect of share consolidation
On 29 May 2015, GWA shareholders approved a consolidation of the Company’s share capital through the conversion of each fully paid ordinary share
in GWA into 0.9100 fully paid ordinary shares. Upon completion of the share consolidation, the number of the Company’s shares on issue reduced
from 306,533,770 to 278,947,986 (refer to note 24 for further details). This reduction is reflected in the calculation of the weighted average number
of ordinary shares at 30 June 2015.
51
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA Group Limited and its controlled entities
2016
2015
19.66
19.58
18.94
18.86
19.02
18.94
19.02
18.94
2016
21,150
14,546
35,696
(5.30)
(5.30)
15.12
15.04
3.39
3.38
14.79
14.72
2015
10,873
22,170
33,043
2015
62,540
328
1,017
63,885
11. EARNINGS PER SHARE CONTINUED
Earnings / (loss) per share (cents)
Total
- Basic
- Diluted
- Basic (excluding significant items)
- Diluted (excluding significant items)
Continuing operations
- Basic
- Diluted
- Basic (excluding significant items)
- Diluted (excluding significant items)
12. CASH AND CASH EQUIVALENTS
In thousands of AUD
Bank balances
Call deposits
Cash and cash equivalents in the statement of cash flows
The consolidated entity’s exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities are disclosed in note 25.
13. TRADE AND OTHER RECEIVABLES
In thousands of AUD
Net trade receivables
Forward exchange contracts used for hedging (net receivable)
Other
2016
50,502
–
1,481
51,983
The consolidated entity’s exposure to credit and currency risk and impairment loss related to trade and other receivables are disclosed in note 25.
14. INVENTORIES
In thousands of AUD
Raw materials and consumables
Work in progress
Finished goods
2016
4,078
149
72,134
76,361
2015
3,617
173
79,708
83,498
15. CURRENT TAX LIABILITIES
The current tax liability for the consolidated entity of $1,851,000 (2015: $8,857,000) 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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA Group Limited and its controlled entities GWA GROUP LIMITED | 2016 ANNUAL REPORT 16. DEFERRED TAX ASSETS AND LIABILITIES
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
In thousands of AUD
Property, plant and equipment
Intangible assets
Inventories
Employee benefits
Provisions
Other items
Tax assets / (liabilities)
Set off of tax
Net tax assets
Assets
Liabilities
Net
2016
–
1,710
2,578
4,599
7,486
3,108
19,481
(1,292)
18,189
2015
1
1,677
2,090
4,834
11,856
3,019
23,477
(1,374)
22,103
2016
(741)
(517)
–
–
–
(34)
(1,292)
1,292
–
2015
(633)
(634)
–
–
–
(107)
(1,374)
1,374
2016
(741)
1,193
2,578
4,599
7,486
3,074
18,189
–
2015
(632)
1,043
2,090
4,834
11,856
2,912
22,103
–
–
18,189
22,103
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
2016
67,346
20
2015
20,771
76
The deductible capital 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 15
Recognised in
income
Recognised
in equity
Balance
30 June 16
(632)
1,043
2,090
4,834
11,856
2,912
22,103
(109)
150
488
(235)
(4,370)
(1,044)
(5,120)
–
–
–
–
–
1,206
1,206
(741)
1,193
2,578
4,599
7,486
3,074
18,189
Balance
1 July 14
Recognised in
income
Recognised in
equity
Reclassified
to Assets /
Liabilities Held
for Sale
Balance
30 June 15
(1,378)
(3,479)
2,214
7,495
6,164
2,890
13,906
746
4,522
122
(2,144)
5,943
297
9,486
–
–
–
–
–
(262)
(262)
–
–
(246)
(517)
(251)
(13)
(1,027)
(632)
1,043
2,090
4,834
11,856
2,912
22,103
53
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA Group Limited and its controlled entities Land and
buildings
Plant and
equipment
Motor
Vehicles
Work in
progress
17. PROPERTY, PLANT AND EQUIPMENT
In thousands of AUD
Cost
Balance at 1 July 2015
Additions
Disposal of discontinued operations (Gliderol)
Disposals transferred to restructuring provision
Other disposals
Effect of movements in exchange rates
Balance at 30 June 2016
Balance at 1 July 2014
Additions
Disposal of discontinued operations (Dux and Brivis)
Other disposals
Transfers
Effect of movements in exchange rates
Balance at 30 June 2015
Depreciation and impairment losses
Balance at 1 July 2015
Depreciation
Depreciation charged to restructuring provision
Disposal of discontinued operations (Gliderol)
Disposals transferred to restructuring provision
Other disposals
Effect of movements in exchange rates
Balance at 30 June 2016
Balance at 1 July 2014
Depreciation
Depreciation charged to restructuring provision
Disposal of discontinued operations (Dux and Brivis)
Other disposals
Impairment loss
Effect of movements in exchange rates
Balance at 30 June 2015
Carrying amounts
At 30 June 2016
At 1 July 2015
At 30 June 2015
At 1 July 2014
–
–
–
–
–
–
–
57,635
263
(24,584)
(33,314)
–
–
–
–
–
–
–
–
–
–
–
(9,086)
(817)
–
2,338
7,565
–
–
–
–
–
–
48,549
126,952
1,386
(9,231)
(1,540)
(58,847)
71
58,791
173,887
3,028
(48,853)
(1,567)
485
(28)
126,952
520
–
(342)
–
(76)
3
105
729
–
(76)
(132)
–
(1)
520
804
1,781
(177)
–
–
–
2,408
1,723
53
(487)
–
(485)
–
804
Total
128,276
3,167
(9,750)
(1,540)
(58,923)
74
61,304
233,974
3,344
(74,000)
(35,013)
–
(29)
128,276
(113,642)
(520)
(177)
(114,339)
(3,491)
(1,677)
9,231
916
58,810
(65)
(49,918)
(127,290)
(7,699)
(1,542)
31,826
1,416
(10,386)
33
(113,642)
8,873
13,310
13,310
46,597
–
–
342
–
76
(3)
(105)
(576)
(104)
–
52
116
(10)
2
(520)
–
–
–
153
–
–
177
–
–
–
–
–
–
–
–
–
(177)
–
(177)
2,408
627
627
1,723
(3,491)
(1,677)
9,750
916
58,886
(68)
(50,023)
(136,952)
(8,620)
(1,542)
34,216
9,097
(10,573)
35
(114,339)
11,281
13,937
13,937
97,022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA Group Limited and its controlled entities GWA GROUP LIMITED | 2016 ANNUAL REPORT
18. INTANGIBLE ASSETS
In thousands of AUD
Cost
Balance at 1 July 2015
Additions
Disposal of discontinued operations (Gliderol)
Other disposals
Effects of movements in exchange rates
Balance at 30 June 2016
Balance at 1 July 2014
Additions
Disposal of discontinued operations
(Dux and Brivis)
Effects of movements in exchange rates
Balance at 30 June 2015
Amortisation and impairment losses
Balance at 1 July 2015
Amortisation
Disposal of discontinued operations (Gliderol)
Other disposals
Impairment loss
Balance at 30 June 2016
Balance at 1 July 2014
Amortisation
Amortisation charged to restructuring provision
Disposal of discontinued operations (Dux and
Brivis)
Impairment loss
Balance at 30 June 2015
Carrying amounts
At 30 June 2016
At 1 July 2015
At 30 June 2015
At 1 July 2014
Software
Brand names
Trade names,
designs, patents
and customer
relationships
Goodwill
Total
35,099
909
(475)
(7,196)
–
28,337
33,573
1,617
(91)
–
35,099
(30,635)
(2,201)
485
7,196
–
(25,155)
(26,469)
(2,798)
(55)
13
(1,326)
(30,635)
3,182
4,464
4,464
7,104
302,767
–
–
–
33
12,897
–
(7,317)
–
–
30,080
–
(24,074)
–
–
302,800
5,580
6,006
308,788
–
(6,000)
(21)
302,767
–
–
–
–
–
–
–
–
–
–
–
302,800
302,767
302,767
308,788
24,354
101
(11,558)
–
12,897
(9,585)
(437)
7,348
–
–
(2,674)
(5,470)
(1,129)
–
2,709
(5,695)
(9,585)
2,906
3,312
3,312
18,884
50,914
–
(20,834)
–
30,080
(24,074)
–
24,074
–
–
–
(17,000)
–
–
–
(7,074)
(24,074)
6,006
6,006
6,006
33,914
380,843
909
(31,866)
(7,196)
33
342,723
417,629
1,718
(38,483)
(21)
380,843
(64,294)
(2,638)
31,907
7,196
–
(27,829)
(48,939)
(3,927)
(55)
2,722
(14,095)
(64,294)
314,894
316,549
316,549
368,690
55
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA Group Limited and its controlled entities 18. INTANGIBLE ASSETS CONTINUED
Carrying value of brand names and goodwill for each cash generating unit and segment
In thousands of AUD
Bathrooms & Kitchens
Door & Access Systems
2016
284,201
24,605
308,806
2015
284,168
24,605
308,773
Impairment testing for brand names and goodwill
The recoverable amounts of all brand names and goodwill were assessed at 30 June 2016 based on internal value in use calculations and no impairment
was identified for any cash generating units (2015: $nil).
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% (2015: 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 12.5% - 13.0% were used (2015: 14.4% - 14.5%).
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 and Door & Access Systems 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 2016 and
there are no reasonably possible changes in any of the key assumptions that would cause the cash generating units’ carrying amounts to exceed their
recoverable amount.
19. TRADE AND OTHER PAYABLES
In thousands of AUD
Current
Trade payables and accrued expenses
Forward exchange contracts used for hedging (net payable)
Interest rate swaps used for hedging
Non-trade payables and accrued expenses
Non-current
Trade payables and accrued expenses
2016
2015
33,903
3,944
1,705
958
40,510
432
43,964
–
1,872
1,763
47,599
–
The consolidated entity’s exposure to currency risk and liquidity risk related to trade and other payables are disclosed in note 25.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA Group Limited and its controlled entities GWA GROUP LIMITED | 2016 ANNUAL REPORT 20. 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 25.
Non-current liabilities
In thousands of AUD
Unsecured cash advance facilities
Terms and debt repayment schedule
2016
120,000
2015
125,000
In thousands of AUD
Unsecured cash advance facilities
Unsecured cash advance facilities
Currency
AUD
AUD
Year of
maturity
2016
Face value
2016 Carrying
amount
2015
Face value
2015 Carrying
amount
2017
2018
–
120,000
120,000
–
125,000
125,000
120,000
120,000
–
–
125,000
125,000
In thousands of AUD
Financing facilities
Standby letters of credit
Bank guarantees
Unsecured cash advance facilities
Facilities utilised at reporting date
Standby letters of credit
Bank guarantees
Unsecured cash advance facilities
Facilities not utilised at reporting date
Standby letters of credit
Bank guarantees
Unsecured cash advance facilities
Unsecured cash advance facility
2016
2015
2,000
7,000
225,000
234,000
–
4,116
120,000
124,116
2,000
2,884
105,000
109,884
2,000
7,044
225,000
234,044
–
4,133
125,000
129,133
2,000
2,911
100,000
104,911
On 23 October 2015, GWA Finance Pty Limited successfully completed the extension of its syndicated banking facility. The facility now comprises a single
three year revolving facility of $225 million which matures in October 2018. Prior to 23 October 2015 and for the year ended 30 June 2015, the facility
matured in October 2017. The loan is denominated in Australian dollars, bears 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
agreement.
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.
57
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA Group Limited and its controlled entities 21. EMPLOYEE BENEFITS
In thousands of AUD
Current
Liability for annual leave
Liability for long-service leave
Non-current
Liability for long-service leave
2016
5,398
1,491
6,889
8,447
2015
5,888
1,671
7,559
9,337
Defined contribution superannuation funds
The consolidated entity makes contributions to defined contribution superannuation funds. Contributions are charged against income as they are made
based on various percentages of each employee’s gross salary. The amount recognised as an expense was $6,430,000 for the financial year ended 30
June 2016 (2015: $8,936,000).
22. 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), subject to meeting
certain financial performance hurdles and the holder remaining in employment with the Company until the nominated vesting date.
The performance hurdles in relation to the 2015/16 year are subject to financial performance conditions which measure growth in Return on Funds
Employed (ROFE) and Total Shareholder Return (TSR) compared to a peer group of companies (2014/15 year: performance hurdles were subject
to financial performance conditions that measured growth in ROFE and EPS relative to dwelling completions growth). 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 2015/16 year, the performance hurdles and vesting proportions for the ROFE performance measure
are outlined in the table below.
GWA Group Limited ROFE over three year performance period
Proportion of Performance Rights to Vest if ROFE hurdle is met
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
0%
12.5%
Straight line vesting between 12.5% and 50%
50% (i.e. 50% of total grant)
For performance rights granted to executives in the 2015/16 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
Proportion of Performance Rights to Vest if TSR hurdle is met
Less than the 50th percentile
50th percentile
0%
12.5%
Between the 50th percentile and 75th percentile
Straight line vesting between 12.5% and 50%
75th percentile or higher
50% (i.e. 50% of total grant)
For performance rights granted to executives in the 2014/15 year, the performance hurdles and vesting proportions for the ROFE performance measure
are outlined in the table below.
GWA Group Limited ROFE over three year performance period
Proportion of Performance Rights to Vest if ROFE hurdle is met
ROFE less than 15% per annum
ROFE equal to 15% per annum
ROFE between 15% and 18% per annum
ROFE equal to 18% of higher per annum
0%
12.5%
Straight line vesting between 12.5% and 50%
50% (i.e. 50% of total grant)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA Group Limited and its controlled entities GWA GROUP LIMITED | 2016 ANNUAL REPORT 22. SHARE-BASED PAYMENTS CONTINUED
For performance rights granted to executives in the 2014/15 year, the performance hurdles and vesting proportions for the EPS performance measure are
outlined in the table below.
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
0%
12.5%
EPS CAGR exceeding dwelling completions CAGR up to 6%
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)
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
2016
(i)
(ii)
(iii)
(iv)
2015
(i)
(ii)
(iii)
(iv)
Fair value
25/02/2013
30/06/2015
24/02/2014
30/06/2016
25/02/2015
30/06/2017
23/03/2016
30/06/2018
17/02/2012
30/06/2014
25/02/2013
30/06/2015
24/02/2014
30/06/2016
25/02/2015
30/06/2017
726,000
340,000
507,000
–
1,573,000
292,500
892,000
540,000
–
1,724,500
–
–
–
850,500
850,500
–
–
–
507,000
507,000
–
–
(76,667)
–
(195,476)
(530,524)
–
–
–
–
–
–
–
340,000
430,333
850,500
(76,667)
(195,476)
(530,524)
1,620,833
–
(166,000)
(200,000)
–
(366,000)
–
–
–
–
–
(292,500)
–
–
–
–
726,000
340,000
507,000
(292,500)
1,573,000
During the current financial year 850,500 performance rights were granted to employees (2015: 507,000) at a weighted average fair value of $1.33 (TSR)
and $1.78 (ROFE) (2015: $1.98 ROFE & EPS).
For the 30 June 2016 financial year, the fair value of the performance rights granted subject to the ROFE hurdle was determined by using a Black Scholes
Model. The fair value of the performance rights granted subject to the TSR hurdle for vesting was determined by using a Monte Carlo simulation. When
determining the fair values it was assumed the Company would have a dividend yield of 5.85%, the risk free rate was 2.04% and annualised share price
volatility was 33.0% 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 performance period. The
amount recognised as personnel expenses in the current financial year was $99,000 (2015: $679,000). Refer to the Remuneration Report section of the
Directors’ Report for further details.
59
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA Group Limited and its controlled entities 23. PROVISIONS
In thousands of AUD
Balance at 1 July 2015
Provisions made during the year
Provisions used during the year
Disposal of discontinued operations
Transfers between provisions / other
balance sheet accounts
Warranties
Restructuring Site restoration
2,538
667
(596)
–
–
32,471
–
(13,236)
–
–
1,332
469
(43)
–
–
Balance at 30 June 2016
2,609
19,235
1,758
Current
Non-current
Warranties
2,574
35
2,609
18,726
509
19,235
676
1,082
1,758
Product
liability
1,826
–
(1,553)
–
599
872
175
697
872
Other
2,742
1,076
(2,908)
176
(528)
558
279
279
558
Total
40,909
2,212
(18,336)
176
71
25,032
22,430
2,602
25,032
The provision for warranties relates to future warranty expense on products sold during the current and previous financial years. The major warranty
expense relates to Bathroom & Kitchens’ sanitaryware and tapware products. The provision is based on estimates made from historical warranty data
associated with similar products and services. The consolidated entity expects to expend the remaining balance in the next financial year.
Restructuring
The restructuring provision relates to the estimated costs of redundancies, site closures and product rationalisation related to business restructuring. The
majority of the provision is expected to be utilised in the next financial year.
Product liability
The provision for product liability is in respect of any future liabilities relating to Brivis product defect issues for which GWA remains responsible. Refer to
note 28 for further details.
24. CAPITAL AND RESERVES
Share capital
In thousands
On issue at 1 July – fully paid
On-market buy-back shares acquired and cancelled, net of tax
Capital return to holders of FY13 LTI grant
Capital return, net of tax
Share consolidation
On issue at 30 June – fully paid
Ordinary shares
AUD
2016
278,948
(15,000)
–
–
–
263,948
2015
306,534
–
–
–
(27,586)
278,948
2016
337,942
(30,021)
(44)
–
–
2015
408,100
–
–
(70,158)
–
307,877
337,942
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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA Group Limited and its controlled entities GWA GROUP LIMITED | 2016 ANNUAL REPORT 24. CAPITAL AND RESERVES CONTINUED
On-market share buy-back
On 16 November 2015, GWA announced its intention to commence an on-market share buy-back program as part of its ongoing capital management
initiatives. The share buy-back commenced on 1 December 2015 and completed on 17 June 2016. As at 30 June 2016, 15,000,356 shares,
representing 5.4% of GWA’s issued share capital, were purchased on-market and subsequently cancelled. The ordinary shares were bought back at an
average price of $2.00 per share for a total cost of $30,021,000 (including $21,000 of associated transaction costs, net of income tax).
Return of Funds to Shareholders and Share consolidation
On 15 June 2015, GWA completed a return of funds to shareholders of $88,282,000 ($0.288 per fully paid ordinary share) comprising a capital return of
$69,890,000 ($0.228 per fully paid ordinary share) and a partly franked special dividend of $18,392,000 ($0.06 per fully paid ordinary share). The capital
return is reflected as a reduction in the value of the Company’s issued share capital at 30 June 2015.
On 29 May 2015, GWA shareholders approved a consolidation of the Company’s share capital through the conversion of each fully paid ordinary share
in GWA into 0.9100 fully paid ordinary shares. Upon the completion of the share consolidation on 9 June 2015, the number of the Company’s shares on
issue reduced from 306,533,770 to 278,947,986 at 30 June 2015.
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:
2016
Interim 2016 ordinary
Total amount
2015
Special 2015
Final 2014 ordinary
Total amount
Costs per share
(In AUD cents)
Total amount
(In thousands of AUD)
Franked
Date of Payment
7.0
7.0
6.0
5.5
11.5
18,718
18,718
18,392
16,859
35,251
100%
5th Apr 2016
76.65%
100%
15th Jun 2015
8th Oct 2014
Franked dividends declared or paid during the year were franked at the tax rate of 30%.
After the balance date the following dividends were approved by the directors. These will be paid out of the parent entity’s current year profit at the time in
accordance with the Corporations Act 2001. The dividends have not been provided for. The declaration and subsequent payment of the dividend has no
income tax consequences.
Final 2016 ordinary
Special 2016
Costs per share
(In AUD cents)
Total amount
(In thousands of AUD)
8.0
1.0
21,116
2,639
Franked
Date of Payment
100%
100%
16th Sep 2016
16th Sep 2016
The financial effect of these dividends has not been brought to account in the financial statements for the financial year ended 30 June 2016 and will be
recognised in subsequent financial reports.
61
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA Group Limited and its controlled entities 24. 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
2016
13,689
2015
7,157
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.
25. 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 risk 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 Audit and Risk 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 Audit and Risk Committee is assisted in its
oversight role by the Internal Audit function. The Internal Audit function conducts both regular and ad hoc reviews of risk management controls and
procedures. The results of the reviews are reported to the Audit and Risk 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 Board’s approach to capital management during the year.
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. 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 sound credit ratings, management
does not expect any counterparty to fail to meet its obligations.
The consolidated entity has three major customers which comprise 39% of the trade receivables carrying amount at 30 June 2016 (2015: 45%).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA Group Limited and its controlled entities GWA GROUP LIMITED | 2016 ANNUAL REPORT
25. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT CONTINUED
Credit risk continued
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
The ageing of trade receivables for the consolidated entity at balance date is as follows.
2016
35,696
50,502
1,481
87,679
2015
33,043
62,540
1,017
96,600
2016 Receivable
2016 Impairment
2015 Receivable
2015 Impairment
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.
51,357
15,193
678
164
84
(16,889)
50,587
–
–
(2)
(8)
(75)
–
(85)
53,402
25,496
828
306
233
(17,502)
62,763
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 written back
Provisions used during the year
Disposal of Brivis and Dux businesses
Transfer of liabilities associated with assets classified as held for sale
Other transfer
Balance at 30 June
Liquidity risk
2016
(223)
109
29
–
–
–
(85)
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:
63
–
–
–
(43)
(180)
–
(223)
2015
(1,323)
738
48
162
175
(23)
(223)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA Group Limited and its controlled entities
25. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT CONTINUED
Liquidity risk continued
Maturity analysis
In thousands AUD
2016
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
(120,000)
(129,391)
(2,012)
(2,012)
(4,025)
(121,342)
Trade and other payables
Derivative financial liabilities
(35,293)
(35,293)
(34,861)
–
(96)
(144)
Interest rate swaps designated as hedges
(1,705)
(926)
(438)
(362)
Forward exchange contracts designated as
hedges – net outflow
(3,944)
(3,944)
(2,744)
Total at 30 June 2016
(160,942)
(169,554)
(40,055)
(1,198)
(3,572)
(96)
(2)
(30)
–
(4,219)
(121,516)
(192)
–
(192)
–
–
2015
Non-derivative financial liabilities
Unsecured cash advance facilities
(125,000)
(136,469)
(2,458)
(2,458)
(4,915)
(126,638)
Trade and other payables
Derivative financial liabilities
(45,727)
(45,727)
(45,727)
–
–
–
Interest rate swaps designated as hedges
(1,872)
(2,135)
(710)
(583)
(744)
(98)
Forward exchange contracts designated as
hedges – net inflow
328
328
328
–
–
–
Total at 30 June 2015
(172,271)
(184,003)
(48,567)
(3,041)
(5,659)
(126,736)
–
–
–
–
–
The unsecured cash advance facilities mature in October 2018 (2015: the unsecured cash advance facilities matured in October 2017). The periods in
which the cash flows associated with derivatives arise match the periods of profit and loss impact.
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
Finance 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. At 30 June 2016, the
consolidated entity had interest rate swaps in operation with a notional contract amount of $75,000,000 (2015: $125,000,000). The swaps have
fixed rates ranging from 3.11% to 3.49% (2015: 3.11% to 3.50%) and mature over the next year. During 2016, the consolidated entity entered into
replacement interest rate swaps effective in 2017 with a notional contract amount of $75,000,000. These swaps have fixed rates ranging from 2.14%
to 2.30% and mature over the next two to four years.
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 2016 of $1,705,000 was recognised as a fair value derivative liability (2015: $1,872,000 fair value
derivative liability).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA Group Limited and its controlled entities GWA GROUP LIMITED | 2016 ANNUAL REPORT
25. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT CONTINUED
Market risk continued
(a) Interest rate risk continued
(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
2016 Notional
value
2016 Carrying
amount
2015 Notional
value
2015 Carrying
amount
(120,000)
(120,000)
(125,000)
(125,000)
21,150
14,546
(84,304)
150,000
65,696
21,150
14,546
(84,304)
(1,705)
(86,009)
10,873
22,170
(91,957)
125,000
33,043
10,873
22,170
(91,957)
(1,872)
(93,829)
*As at 30 June 2016, $75,000,000 of interest rate swap derivatives were in effect and $75,000,000 were not effective until 2017.
(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 decrease / (increase)
Financial assets increase / (decrease)
Financial liabilities (increase) / decrease
Decrease of 100 basis points
Hedging reserve (increase) / decrease
Financial assets increase / (decrease)
Financial liabilities decrease / (increase)
2016
2015
(2,219)
(548)
2,767
–
2,223
–
(2,223)
–
(1,808)
(97)
1,905
–
1,921
–
(1,921)
–
65
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA Group Limited and its controlled entities 25. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT CONTINUED
Market risk continued
(a) Interest rate risk continued
(iii) Cash flow sensitivity analysis for fixed and variable rate instruments
A change of 100 basis points in interest rates during the period would have affected the consolidated entity’s 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
Decrease of 100 basis points
Unsecured cash advance facilities (AUD)
Bank balances
Interest rate swap deliverables
Call deposits variable rate
(b) Foreign currency risk
2016
2015
(1,289)
(1,509)
30
1,205
239
185
1,289
(30)
(1,205)
(239)
(185)
40
1,234
328
93
1,509
(40)
(1,234)
(328)
(93)
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 up to 13 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 12-month period after the balance date.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA Group Limited and its controlled entities GWA GROUP LIMITED | 2016 ANNUAL REPORT
25. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT CONTINUED
Market risk continued
(b) Foreign currency risk continued
(i) Exposure to currency risk
In thousands of AUD
Currency transaction risk
2016
Trade payables
Cash
Net balance sheet exposure
Estimated forecast sales
Estimated forecast purchases
Net forecast transaction exposure
Forward exchange contracts
Net exposure 30 June 2016
Foreign exchange rates at balance date
2015
Trade payables
Cash
Net balance sheet exposure
Estimated forecast sales
Estimated forecast purchases
Net forecast transaction exposure
Forward exchange contracts
Net exposure 30 June 2015
Foreign exchange rates at balance date
Currency translation risk
2016
Net assets
2015
Net liabilities
USD
NZD
EUR
RMB
(2,702)
6
(2,696)
–
(82,961)
(82,961)
71,574
(14,083)
0.7426
(4,747)
1,227
(3,520)
–
(61,372)
(61,372)
31,250
(33,642)
0.7680
–
–
–
5
5
28,298
(10,880)
17,418
(9,534)
7,889
1.0489
(1)
445
444
13,875
(4,398)
9,477
(3,320)
6,601
1.1294
2,706
(3,009)
(194)
7
(187)
–
(3,251)
(3,251)
–
(3,438)
0.6699
(641)
57
(584)
–
(2,930)
(2,930)
–
(3,514)
0.6866
–
–
(1,255)
1
(1,254)
–
(20,810)
(20,810)
18,248
(3,816)
4.9344
(465)
595
130
–
(9,388)
(9,388)
4,931
(4,327)
4.7661
53
(209)
67
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA Group Limited and its controlled entities 25. 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 and profit and loss is not material.
Fair values
The fair value of financial assets and liabilities, together with the carrying amounts shown in the statement of financial position is as follows:
In thousands of AUD
Cash and cash equivalents
Trade and other receivables
Interest rate swaps:
Liabilities
Forward exchange contracts:
(Liabilities) / assets
Unsecured cash advance facilities
Trade and other payables
(c) Estimation of fair values
Carrying amount
Fair value
Carrying amount
Fair value
2016
35,696
51,983
2016
35,696
51,983
2015
33,043
63,557
2015
33,043
63,557
(1,705)
(1,705)
(1,872)
(1,872)
(3,944)
(120,000)
(35,293)
(73,263)
(3,944)
(120,000)
(35,293)
(73,263)
328
(125,000)
(45,727)
(75,671)
328
(125,000)
(45,727)
(75,671)
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 have a three year term.
(iii) Trade and other receivables / payables
All current receivables / payables are either repayable within twelve months or repayable on demand. The non current payables relate to a supplier
contractual obligation. Accordingly, the notional amount is deemed to reflect the fair value.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA Group Limited and its controlled entities GWA GROUP LIMITED | 2016 ANNUAL REPORT
25. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT CONTINUED
Market risk continued
(c) Estimation of fair values continued
(iv) Interest rates used for determining fair value
The consolidated entity uses the government yield curve as of 30 June 2016 plus an adequate constant credit spread to discount financial instruments.
The interest rates used are as follows:
Derivatives
Loans and borrowings
(v) Fair value hierarchy
2016
2015
1.77% - 1.96%
2.10% - 2.75%
2.97% - 3.29%
2.92% - 3.45%
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 2016
Forward contracts used for hedging
Interest rate swaps used for hedging
30 June 2015
Forward contracts used for hedging
Interest rate swaps used for hedging
26. 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
–
–
–
–
–
–
(3,944)
(1,705)
(5,649)
328
(1,872)
(1,544)
–
–
–
–
–
–
2016
14,089
18,836
441
33,366
(3,944)
(1,705)
(5,649)
328
(1,872)
(1,544)
2015
15,764
27,914
92
43,770
The consolidated entity leases various plant and equipment, property 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 these leases include contingent rentals.
During the financial year ended 30 June 2016, $16,189,000 (2015: $15,419,000) was recognised as an expense in profit or loss in respect of
operating leases.
69
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA Group Limited and its controlled entities
27. CAPITAL COMMITMENTS
In thousands of AUD
Capital expenditure commitments
PLANT AND EQUIPMENT
Contracted but not provided for and payable:
Within one year
Between one and five years
28. CONTINGENCIES
Brivis Product Defect Issues
2016
2015
3,954
1,688
5,642
2,009
601
2,610
On 14 June 2016, GWA announced the settlement of the dispute with Carrier Air Conditioning Pty Ltd, Carrier Corporation and Others (Carrier companies)
in relation to Brivis Climate Systems Pty Ltd (Brivis). The dispute arose from the liabilities of the Carrier companies to GWA for losses incurred in relation to
the Brivis business which was acquired by GWA in March 2010. GWA subsequently sold Brivis to Rinnai Australia Pty Ltd in February 2015 but continued
to remain responsible for certain Brivis product defect issues.
The dispute with the Carrier companies has been resolved through the establishment of an agreed confidential process for dealing with any future claims
together with a net payment of $2,805,000 to GWA. The payment has been treated as part of discontinued operations in GWA’s financial statements at
30 June 2016. The terms of the settlement are otherwise confidential. A provision exists at 30 June 2016 in respect of any future liabilities for which GWA
remains responsible.
29. 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 30 are relieved from the
Corporations Act 2001 requirements for preparation, audit and lodgement of financial reports, and Directors’ reports.
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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA Group Limited and its controlled entities GWA GROUP LIMITED | 2016 ANNUAL REPORT 29. DEED OF CROSS GUARANTEE CONTINUED
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 2016, is set
out in the table below.
SUMMARISED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME AND RETAINED PROFITS
In thousands of AUD
Sales revenue
Cost of sales
Gross profit
Operating expenses
Finance income
Finance expenses
Profit before tax
Tax expense
Profit from continuing operations
Profit / (loss) from discontinued operations, net of tax (refer note 3)
Net profit / (loss)
Total comprehensive income / (loss), net of tax
(Accumulated losses) / retained earnings at beginning of year
Dividends recognised during the year
Share-based payments, net of tax
Accumulated losses at end of the year
STATEMENT OF FINANCIAL POSITION
In thousands of AUD
Assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other
Assets classified as held for sale
Total current assets
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
Liabilities associated with assets classified as held for sale
Total current liabilities
2016
420,169
(250,235)
169,934
(94,218)
495
(7,008)
69,203
(19,130)
50,073
1,761
51,834
51,834
(36,488)
(18,718)
211
(3,161)
2015
410,393
(236,057)
174,336
(153,906)
933
(8,251)
13,112
(3,932)
9,180
(26,072)
(16,892)
(16,892)
15,348
(35,251)
307
(36,488)
2016
2015
33,225
48,400
74,116
2,253
–
157,994
11,113
18,004
10,763
310,819
188
350,887
508,881
39,300
1,862
6,820
22,430
–
70,412
31,328
60,599
80,924
2,486
15,339
190,676
11,113
21,879
13,774
312,507
318
359,591
550,267
46,445
9,496
7,516
40,891
6,023
110,371
71
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA Group Limited and its controlled entities 29. DEED OF CROSS GUARANTEE CONTINUED
STATEMENT OF FINANCIAL POSITION CONTINUED
In thousands of AUD
Trade and other payables
Intercompany payables
Loans and borrowings
Employee benefits
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Accumulated losses
Total equity
30. CONSOLIDATED ENTITIES
Parent entity
GWA Group Limited
Subsidiaries
API Services and Solutions Pty Limited
Austral Lock Pty Ltd
Canereb Pty Ltd
Caroma Holdings Limited
Caroma Industries Limited
Caroma Industries (NZ) Limited
Caroma International Pty Ltd
Corille Limited
Dorf Clark Industries
Dorf Industries (NZ) Ltd
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
2016
432
4,603
120,000
8,442
2,602
136,079
206,491
302,390
307,877
(2,326)
(3,161)
302,390
2015
–
2,993
125,000
9,334
18
137,345
247,716
302,551
337,942
1,097
(36,488)
302,551
Parties to cross
guarantee
Country of
incorporation
Ownership
interest
2016
2015
Y
Y
Y
N
Y
Y
N
Y
Y
Y
N
Y
Y
N
Y
Y
N
Y
N
Y
Y
Y
Y
Y
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
Australia
Australia
Australia
New Zealand
Australia
Australia
Australia
Australia
Australia
New Zealand
Australia
China
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%
*
This entity was sold during the year ended 30 June 2016, refer to Note 3. Gliderol International Pty Limited was released from its obligations under the Deed by executing a
Notice of Disposal on 31 July 2015.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA Group Limited and its controlled entities GWA GROUP LIMITED | 2016 ANNUAL REPORT
31. PARENT ENTITY DISCLOSURES
As at, and throughout, the financial year ended 30 June 2016 the parent company of the consolidated entity was GWA Group Limited.
In thousands of AUD
Results of the parent entity
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Financial position of the parent entity
Current assets
Total assets
Current liabilities
Total liabilities
Equity of the parent entity
Share capital
Equity compensation reserve
Retained earnings
Total equity
Parent entity contingencies
Company
2016
2015
19,038
–
19,038
–
662,268
19
350,836
307,877
1,647
1,908
311,432
17,712
–
17,712
–
643,089
–
301,590
337,942
2,180
1,377
341,499
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
Apart from the contingent liability referenced in note 28, the directors are not aware of any contingent liabilities of the parent entity as at reporting date
(2015: $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 (2015: $nil).
Parent entity guarantees in respect of debts of its subsidiaries
The parent entity has entered into a Deed of Cross Guarantee with the effect that the parent entity has guaranteed the repayment of all current and future
creditors in the event any of the entities party to the Deed is wound up. Further details of the Deed of Cross Guarantee and the subsidiaries subject to the
Deed are disclosed in Notes 29 and 30.
73
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA Group Limited and its controlled entities
32. RECONCILIATION OF CASH FLOWS FROM OPERATING ACTIVITIES
In thousands of AUD
Cash flows from operating activities
Profit / (loss) for the year
Adjustments for:
Depreciation
Amortisation
Share-based payments
Foreign exchange (gain) / loss unrealised
Net financing costs
Impairment loss
Gain on sale of property, plant & equipment and intangible assets
Loss on sale of discontinued operations
Income tax expense
Operating profit before changes in working capital and provisions
Decrease / (increase) in trade and other receivables
Decrease in inventories
(Decrease) / increase in trade and other payables
(Decrease) / increase in provisions and employee benefits
Net cash before finance costs and taxes
Net interest paid
Income taxes paid
Net cash from operating activities
33. RELATED PARTIES
Key management personnel compensation
The key management personnel compensation included in ‘personnel expenses’ (see note 7) are as follows:
In AUD
Short-term employee benefits
Post-employment benefits
Termination benefits
Share-based payments
Other long term employee benefits
2016
2015
53,681
(16,183)
3,491
2,638
(322)
(292)
6,508
–
(58)
–
20,276
85,922
11,046
5,078
(10,573)
(10,851)
80,622
(6,162)
(19,536)
54,924
8,620
3,927
679
734
7,329
24,204
(7,265)
3,634
1,398
27,077
(4,627)
64
2,418
37,219
62,151
(7,384)
(11,262)
43,505
2016
5,837,153
276,604
780,000
236,017
(316,697)
6,813,077
2015
5,558,823
288,574
–
569,287
(127,312)
6,289,372
Individual directors and executives compensation disclosures
Information regarding individual and executives compensation is provided in the Remuneration Report section of the Directors’ Report.
34. SUBSEQUENT EVENTS
To the Directors’ best knowledge, there are no events that have arisen subsequent to 30 June 2016 that will, or may, significantly affect the operation or
results of the consolidated entity.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA Group Limited and its controlled entities GWA GROUP LIMITED | 2016 ANNUAL REPORT
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 2016 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 29 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 2016.
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 Sydney on 22 August 2016.
Signed in accordance with a resolution of the directors:
Darryl D McDonough
Director
Tim R Salt
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 2016 there have been:
(i)
no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and
(ii)
no contraventions of any applicable code of professional conduct in relation to the audit.
KPMG
Sydney 22 August 2016
Julie Cleary
Partner
75
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF THE GWA GROUP LIMITED
Independence
In conducting our audit, we have complied with the independence
requirements of the Corporations Act 2001.
Auditor's opinion
In our opinion:
(a) The financial report of GWA Group Limited is in accordance with
the Corporations Act 2001, including:
(i)
giving a true and fair view of the Company's and the Group's
financial position as at 30 June 2016 and of their performance
for the year ended on that date; and
(ii)
complying with Australian Accounting Standards and the
Corporations Regulations 2001.
(b) the financial report also complies with International Financial Reporting
Standards as disclosed in note 1.
REPORT ON THE REMUNERATION REPORT
We have audited the Remuneration Report included in the directors'
report for the year ended 30 June 2016. 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 2016, complies with Section 300A of the
Corporations Act 2001.
KPMG
Sydney 22 August 2016
Julie Cleary
Partner
REPORT ON THE FINANCIAL REPORT
We have audited the accompanying financial report of GWA Group Limited
(the Company), which comprises the consolidated statements of financial
position as at 30 June 2016, and consolidated statement of profit or loss
and other comprehensive income, consolidated statements of changes in
equity and consolidated statements of cash flows for the year ended on
that date, notes 1 to 34 comprising a summary of significant accounting
policies and other explanatory information and the directors' declaration of
the company and the Group comprising the Company and the entities it
controlled at the year's end or from time to time during the financial year.
Directors' responsibility for the financial report
The directors of the Company are responsible for the preparation 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 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.
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 Company's and the Group's
financial position and of their performance.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our audit opinion.
GWA GROUP LIMITED | 2016 ANNUAL REPORT
OTHER STATUTORY INFORMATION
AS AT 19 AUGUST 2016
STATEMENT OF SHAREHOLDING
In accordance with the Australian Securities Exchange Listing Rules, the directors state that, as at 19 August 2016, 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
1,692
3,778
1,607
1,184
75
8,336
779,173
10,360,073
11,714,400
25,317,265
215,776,719
263,947,630
%
0.30
3.93
4.44
9.59
81.75
100.00
The number of shareholders with less than a marketable parcel of 221 shares is 570.
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 19 August 2016:
Shareholder
Ellerston Capital Limited
Investors Mutual Limited
20 LARGEST SHAREHOLDERS AS AT 19 AUGUST 2016
Shareholder
J P Morgan Nominees Australia Limited
HSBC Custody Nominees (Australia) Limited
RBC Investor Services Australia Nominees Pty Limited
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