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7
2017
ANNUAL
REPORT
FY17
PERFORMANCE HIGHLIGHTS
REVENUE
$446.3 million
Revenue 2% to $446.3 million ahead of
market growth with margin expansion delivering
solid net profit and earnings growth
Bathrooms & Kitchens revenue 3%
Door & Access Systems revenue 2%
EARNINGS
Earnings Before Interest, Tax, Depreciation
and Amortisation (EBITDA)
2% to $86.2 million
Earnings Before Interest and Tax (EBIT)
3% to $80.6 million
Bathrooms & Kitchens EBIT 4%
Door & Access Systems EBIT 14%
Earnings per share 7% to 20.3 cents per share
Note: All references are to continuing operations which excludes Gliderol which was sold
on 31 July 2015. All comparisons are to the year ended 30 June 2016 (FY16) unless
otherwise stated.
NET PROFIT
$53.7 million
Net Profit After Tax (NPAT)
3% to $53.7 million
FINANCIAL POSITION
Strong financial position with net debt
10% and credit metrics continue to
improve supporting growth plans
RETURN
Return on Funds Employed (ROFE)
0.9pp to 20.2%
STRATEGY
Continued progress on strategy to deliver
stronger platform to manage through the
market cycle
FINAL DIVIDEND
Fully-franked final dividend of 9 cents per
share, bringing the FY17 full year dividend
to 16.5 cents per share fully-franked 10%
CONTENTS
Five Year Financial Summary
Company Profile
Strategic Summary
Chairman’s Review
Managing Director’s Review of Operations
Health and Safety
GWA Bathrooms & Kitchens
1
2
3
4
7
10
11
GWA Door & Access Systems
Board of Directors
Directors’ Report
Financial Report
Other Statutory Information
Shareholder Information
12
13
15
32
77
78
4 | GWA GROUP LIMITED | 2017 ANNUAL REPORT
FIVE YEAR FINANCIAL SUMMARY
Continuing operations
Revenue from continuing operations
Earnings before interest, tax, depreciation, amortisation
(EBITDA) and significant items(3)
EBITDA margin (%)
Depreciation and amortisation
Earnings before interest, tax (EBIT) and significant items(3)
EBIT margin (%)
Interest (net)
Normalised profit before tax(3)
(%)
Tax expense
Effective tax rate (%)
Normalised profit after tax(3)
Significant items after tax
Net profit after tax from continuing operations
Profit / (loss) from discontinued operations (net of income tax)
Net profit / (loss) after tax for the period
Net cash from operating activities
Capital expenditure
Net debt(4)
Shareholders' equity
Other Ratios and Statistics
Interest cover (times)(7)
Gearing: net debt / (net debt + equity) (%)(4)
Return on shareholders' equity (%)
Dividend payout ratio (%)(6)
Dividend per share (cents)(8)
Franking (%)
Capital return (cents)(5)
Share price (30 June) ($)
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)
2012/13(1)
$’000
565,365
2013/14(1)
$’000
399,394
2014/15(1)
$’000
426,218
2015/16(1)
$’000
439,666
2016/17
$’000
446,332
86,156
19.3
(5,562)
80,594
18.1
(5,338)
75,256
16.9
(21,585)
28.7
53,671
–
53,671
–
53,671
57,171
5,281
79,756
87,168
15.4
76,819
19.2
(20,398)
(12,328)
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
(14,115)
(15,452)
(20,278)
(19,837)
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
1,680
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
320,603
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
17.1
19.9
16.7
81.1
16.5
100
-
3.15
5.2
760
20.3
20.3
20.3
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
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. FY13 has not been re-presented and includes the operating activities of Gliderol, Dux and Brivis as part of continuing operations.
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 FY13-FY15 financial reports 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 FY13-FY15 financial reports.
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 the 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.
Dividend per share includes ordinary and special dividends.
GWA GROUP LIMITED | 2017 ANNUAL REPORT | 1
GWA GROUP LIMITED | 2017 ANNUAL REPORT | 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 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.
2 | GWA GROUP LIMITED | 2017 ANNUAL REPORT
2 | GWA GROUP LIMITED | 2017 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
Leverage and build on core assets & brands
to drive revenue and market share growth
Add value to customers through
improved insights, analytics and processes
Build “fit for future” culture,
engagement and capability
Build an advantaged Supply Chain to deliver
superior NPD, Quality and Service at best cost
Drive cost out in SG&A and Supply Chain to improve
profitability and allow selective reinvestment
MAXIMISE SHAREHOLDER VALUE CREATION
Key Financial Measures – NPAT Growth, TSR, ROFE
OUR CULTURAL PILLARS
We are
empowered to
make a difference
We strive
to be the best
We collaborate
to achieve goals
We are
customer focused
and consumer driven
We care
for each other
GWA GROUP LIMITED | 2017 ANNUAL REPORT | 3
GWA GROUP LIMITED | 2017 ANNUAL REPORT | 3
CHAIRMAN’S
REVIEW
GWA continued to deliver improved
financial results in FY17 with increased
revenue and disciplined cost management
driving higher earnings and profitability.
As a result, earnings per share and ordinary dividends to shareholders
increased on the prior year with the company continuing to maintain a
strong financial position.
GWA continues to make good progress on its strategy and your Board
believes the company remains well positioned to capitalise on our
market-leading position in our core markets to continue to deliver
value for shareholders.
FINANCIAL OVERVIEW¹
GWA’s revenue growth was ahead of the market with net sales increasing
by 2 per cent to $446.3 million on the prior year.
Earnings Before Interest and Tax (EBIT), increased by 3 per cent to
$80.6 million from improved earnings in the Bathrooms & Kitchens’
division and a reduction in costs, partially offset by the decline in
earnings from the Door & Access Systems division.
Net profit after tax increased by 3 per cent to $53.7 million. Earnings
per share of 20.3 cents increased by 7 per cent, driven by improved
profitability and also due to the reduced weighted average number of
shares on issue following the completion of the on-market share buyback
program in the prior year.
Our continued focus on effective use of capital across the business
was reflected in an improvement in Return on Funds Employed of
0.9 percentage points to 20.2 per cent.
DIVIDENDS / CAPITAL MANAGEMENT
Your Board maintains 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 9 cents per share, fully-franked. This brings the full-year
ordinary dividend to 16.5 cents per share, fully-franked compared to
15 cents for the prior year.2
The record date for entitlement to receive the final dividend will be
25 August 2017 with the dividend being paid on 5 September 2017.
The Dividend Reinvestment Plan will not be offered to shareholders for
the final ordinary dividend.
GWA’s financial position remains strong which provides the company
with ongoing financial flexibility to implement its strategic growth agenda
through the market cycle. Net debt at 30 June 2017, was $79.8 million,
compared to $88.4 million in the previous year.
GWA’s financial metrics, comprising leverage, gearing, and interest cover
ratios continued to strengthen on the prior year and remain consistent
with investment grade.
STRATEGY
GWA has a clearly defined strategy to build its competitive position in its
core markets to maximise returns for shareholders.
Our strategy has evolved from a focus on manufacturing products to a
focus on developing solutions for customers and consumers to create
“pull” for our brands.
The Group is focused on growing revenue and profitable market share
through customer and consumer initiatives targeting specific segments
where we have significant opportunities to grow.
We are also driving further efficiencies in overhead costs and supply
chain to enable reinvestment in the business and maintain margins
through the cycle.
Importantly, our strategy requires us to build our internal capability,
engagement and culture to deliver sustainable results.
The Group has made significant progress in implementing this strategy in
FY17 which is detailed in the Managing Director’s Review of Operations.
BOARD RENEWAL
The Board was pleased to welcome the appointments of Jane McKellar
and Stephen Goddard as Non-Executive Directors at 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.
1
Unless specified, all amounts and comparisons are based on results in respect of Continuing Operations which exclude the Gliderol Garage Doors business which was divested on
31 July 2015
2
Excluding the FY16 fully-franked special dividend of 1 cent per share paid in September 2016
4 | GWA GROUP LIMITED | 2017 ANNUAL REPORT
Robert Anderson retired from the Board at the conclusion of the 2016
Annual General Meeting. Bill Bartlett will retire at the conclusion of the
2017 Annual General Meeting. Both Robert and Bill have made valuable
contributions to the Board over many years and we wish them both well
in their future endeavours.
DIVERSITY
GWA is committed to promoting diversity through the implementation
of targeted employment policies and initiatives to achieve a diverse
workforce. The Board understands the significant benefits that arise from
increasing the pool of diverse employees. In line with GWA’s approach to
embedding diversity in the organisation, the company’s Diversity Policy
has been refreshed and renamed the Diversity and Inclusion Policy and
is available on the Group’s website.
A number of measurable objectives have been approved by the Board to
promote and encourage diversity, particularly the improvement of female
representation within our workforce. These objectives are assessed
annually and are reported in the Corporate Governance Statement which
is also available on the Group’s website.
During the year, the Group conducted a detailed review of its recruitment
practices leading to the implementation of a new simplified process which
continues to encourage the promotion of equal opportunity and diversity.
GWA also completed a detailed review of employment policies and
practices during the year to ensure that, among other things, flexibility is
offered to attract and retain female talent. Together with this review, the
Group introduced a new policy enabling victims of domestic violence to
take an additional five days paid leave per year.
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 2017 and the report is available on the Group’s website
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 FY18 executive remuneration review. We aim to provide
remuneration to executives which is fair and which is designed to
attract and retain a high quality management team with the requisite
experience, knowledge, skills and judgement required for the business.
Normalised EBIT from continuing operations
$m
16/17
15/16
14/15
13/14
12/13
0
20
40
60
80
Group EBIT improved by 3 per cent to $80.6 million. Group EBIT in the second
half of FY17 increased by 5 per cent compared to the first half, in line with market
guidance provided at the half year result in February 2017.
Net Debt
$m
16/17
15/16
14/15
13/14
12/13
0
50
100
150
200
GWA remains in a solid financial position with financial flexibility to support
strategic growth initiatives and manage through the market cycle. Net debt at
30 June 2017 was $79.8 million compared to $88.4 million in the prior year.
Dividend per share
cents
16/17
15/16
14/15
13/14
12/13
0
5
10
15
20
The Board resolved to pay a final dividend of 9 cents per share fully-franked,
bringing the full-year FY17 dividend to 16.5 cents per share fully-franked
compared with 16 cents for the full-year FY16 which includes the special dividend
of 1 cent per share paid in September 2016.
GWA GROUP LIMITED | 2017 ANNUAL REPORT | 5
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 in FY16 following the provision of market
data from Guerdon Associates and was aligned with the market
median in relation to a group of comparable companies to GWA.
The Board continued the freeze on executive fixed remuneration for
FY17. This is the second consecutive year executive fixed remuneration
has been frozen. The short term incentive payments for the Managing
Director and other executives for FY17 reflect the improved group
performance and profitability driven by sales growth in the Bathrooms &
Kitchens business exceeding market growth for the period. This growth
enabled the Board to increase dividend payments to shareholders for
FY17 and resulted in higher shareholder returns.
SAFETY
GWA continues to focus on providing a safe workplace for employees,
contractors, visitors and customers, while driving a positive safety culture
and actively reducing and mitigating risk.
In FY17, GWA introduced a Safety Interaction Program to develop and
drive safety behaviour engagement between employees and business
‘safety’ leaders. The intent is to acknowledge and celebrate ‘safe’
behaviour, while addressing ‘at-risk’ behaviour.
We measure a range of safety performance indicators. ‘Lead’ indicators
such as the number of safety interactions conducted, hazards reported
and actions closed were measured in FY17. GWA also measures key ‘lag’
indicators which 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.
Our safety performance in respect of lag indicators in FY17 was below our
expectation and the Group did not achieve its key lag indicator targets.
Actions are being implemented to address this issue and the Board and
management remain focused on initiatives to improve the Group’s safety
performance and culture with the aim of an injury-free workplace.
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
National Greenhouse and Energy Reporting (NGER) scheme as its energy
and emissions are below the reporting thresholds from FY15. GWA is a low
emissions intensity entity and continues to report its carbon emissions on
the GWA website www.gwagroup.com.au under Carbon Reporting.
For FY17 total carbon emissions from GWA’s controlled facilities are
expected to be approximately 7,300 tonnes CO2e, representing a
15 per cent reduction on the prior year. This reduction is due to a
combination of factors including the closure of the Norwood plastics
factory and the implementation of energy efficiency measures across
the group.
CONCLUSION
GWA delivered improved financial performance in FY17 while continuing
to build a stronger business for the future.
On behalf of the Board, I acknowledge and thank Tim Salt, his executive
team and our people across GWA for their contribution over the past year
in delivering this result.
GWA remains in a strong financial position and we have a clear
strategy and focus to build our platform further to maximise returns
to shareholders.
6 | GWA GROUP LIMITED | 2017 ANNUAL REPORT
MANAGING DIRECTOR’S
REVIEW OF OPERATIONS
I am pleased to report that GWA delivered
a solid financial result for the year ended
30 June 2017. We continued to make
significant progress on our strategy to build
a stronger platform for future growth across
our business.
During the year, we maintained our focus on building profitable market
share in the core segments of Renovations and Replacements, Commercial
and Detached Housing which has assisted GWA in achieving continued
growth at both the top line and bottom line and also margin improvement.
Meanwhile, we continued to progress our strategic priorities. Our
strategy is focused on improving engagement with our major customers,
leveraging our strong brands and assets to drive revenue and market
share growth and simplifying our business by continuing to address
our cost base and improving our supply chain.
As a result, GWA has strengthened its competitive position over the past
year. While we still have considerable work to do to deliver our strategic
goals, I am pleased with the progress we’re continuing to make in
creating a stronger platform to deliver growth through the market cycle.
MARKET CONDITIONS1
In total GWA estimates that the increase in market activity weighted
across its end markets was approximately 1.3 per cent for the year
ended 30 June 2017.
• Market activity for home Renovations and Replacements,
(approximately 52% of GWA revenue) is forecast to have decreased
by 0.2 per cent (MAT).
• Detached House completions (representing approximately
22 per cent of GWA revenue) decreased by 5.9 per cent.
• Medium and high-density dwelling completions (approximately
11 per cent of GWA revenue) increased by 29.3 per cent.
• On a value of work done basis, Commercial building activity
(approximately 15% of GWA revenue) is forecast to have declined
by 2.8 per cent (MAT).
GROUP RESULTS OVERVIEW2
A$ million
Sales Revenue
EBITDA
EBIT
FY16
439.7
84.3
78.3
FY17 % change
446.3
86.2
80.6
+2%
+2%
+3%
EBIT margin (%)
17.8%
18.1% +0.3ppts
NPAT
51.9
53.7
+3%
GWA’s revenue continues to grow ahead of the market. Group net sales
increased by 2 per cent to $446.3 million, reflecting an improvement in
Bathrooms & Kitchens’ sales of 3 per cent; partially offset by a 2 per cent
decline in sales from Door & Access Systems compared to the prior year.
Group EBITDA increased by 2 per cent to $86.2 million while Group
EBIT improved by 3 per cent to $80.6 million. Group EBIT in the second
half of FY17 increased by 5 per cent compared to the first half, in line
with market guidance provided at the half year result in February 2017.
Continued focus on cost containment and margin led to a further
reduction in corporate costs of 2 per cent which assisted in improved
earnings and also an increase in Group EBIT margin to 18.1 per cent
from 17.8 per cent in the prior year.
Further information on division earnings is provided on the following page.
Net profit after tax increased by 3 per cent to $53.7 million, reflecting
the increase in EBIT together with lower interest expense compared to
the prior year due to lower average borrowings and lower interest rates
in FY17.
The effective tax rate for the year was 28.7 per cent compared to the
prior year’s rate of 27.6 per cent.
GWA’s earnings per share of 20.3 cents improved by 7 per cent on the
prior year from increased profitability and the reduced weighted average
number of shares on issue in FY17 following the completion of the
accretive on-market share buyback program on 20 June 2016.
GWA continues to generate strong cashflow with cashflow from operations
of $88.8 million in FY17 compared to $91.7 million in the prior year. Cash
conversion remains strong with operating cashflow 103 per cent of EBITDA.
Cash restructuring costs of $11.5 million relate primarily to the closure of
the Norwood factory. As disclosed previously, these costs were provided
for in previous accounts and the cash outflow did not impact GWA’s net
profit in FY17.
1
2
Source: BIS Shrapnel, GWA estimates (B&K FY17)
Unless specified, all amounts and comparisons are based on results for Continuing Operations which exclude the Gliderol Garage Doors business which was divested on 31 July 2015
GWA GROUP LIMITED | 2017 ANNUAL REPORT | 7
Capital expenditure of $4.9 million was $1.4 million higher than the
prior year and included investments in new products, tooling and
information technology.
Sales growth in the second half was impacted by the timing of
public holidays in April and fewer trading days compared to the
prior corresponding period.
GWA continues its focus on generating strong returns on capital
employed in the business with Return on Funds Employed up
0.9 percentage points on the prior year to 20.2 per cent.
FINANCIAL POSITION AND CAPITAL
MANAGEMENT
GWA remains in a solid financial position with financial flexibility to
support strategic growth initiatives and manage through the market cycle.
Net debt at 30 June 2017 was $79.8 million compared to $88.4 million
in the prior year.
GWA’s credit metrics remain consistent with investment grade with the
company’s gearing ratio (net debt/net debt plus equity) of 20 per cent
compared to 22 per cent at 30 June 2016 and leverage ratio (net debt/
EBITDA) of 0.9 times compared to 1.1 times for the prior year.
Revenue growth was strong across the eastern states with net sales in
NSW up 11 per cent, Victoria up 5 per cent and QLD up 3 per cent.
While construction markets in WA continued to remain weak, the rate
of decline in sales from WA in FY17 slowed from the previous year.
Sales of sanitaryware increased by 6 per cent on the prior year, assisted
by the launch of the new Caroma Cleanflush range of rimless toilets where
market response has been very positive. GWA has recorded strong sales
of Cleanflush since launch and built market share through launching and
extending new products in tapware, showers, basins and toilets in FY17.
GWA continues to focus on selling higher value products, particularly in
the Renovations and Replacements and Commercial segments which
resulted in improved mix compared to the prior year.
The Caroma brand continues to resonate positively in the market with
net sales from the Caroma brand increasing strongly on the prior year.
Meanwhile, GWA’s strong financial position continues to be reflected
in the improved interest cover ratio (EBITDA/net interest) which at
30 June 2017 was 17.1 times compared to 14.3 times last year.
Cost savings across the division also assisted to recover the impact of
higher product costs resulting from the impact of the lower Australian
dollar compared to the prior year.
GWA maintains significant headroom within its three-year revolving
$225 million facility which matures in October 2019, providing ongoing
financial flexibility.
DIVIDEND
The Board resolved to pay a final dividend of 9 cents per share fully-
franked, bringing the full-year dividend to 16.5 cents per share fully-
franked compared with 15 cents for the full-year FY163 – a 10 per cent
increase on the prior year. This represents a full-year FY17 dividend payout
ratio of 81 per cent which is in line with the company’s dividend policy to
pay out as ordinary dividends 65-85 per cent of net profit after tax.
The record date for entitlement to receive the final dividend will be
25 August 2017 with the dividend being paid on 5 September 2017.
The Dividend Reinvestment Plan will not be offered to shareholders
for the final ordinary dividend.
DIVISION RESULTS
The average A$/US$ exchange rate for FY17 was 3 per cent lower than
the prior year.
EBIT of $87.6 million was 4 per cent higher than the prior year’s earnings
of $84.6 million.
Ongoing cost discipline and focus on higher margin product categories
resulted in an increase in EBIT margin of 0.3 percentage points to
25.0 per cent compared to 24.7 per cent for FY16.
Meanwhile, Return on Funds Employed of 25.2 per cent was
1.1 percentage points higher than the prior year.
DOOR & ACCESS SYSTEMS
Earnings in Door & Access Systems improved 52 per cent on the first
half following the implementation of initiatives to refocus the business
to address short-term performance and strengthen for the medium term.
However, ongoing weak construction markets in WA, where GWA has a
strong relative market position, impacted earnings with full-year EBIT
14 per cent lower than the prior year.
BATHROOMS & KITCHENS
The Bathrooms & Kitchens’ division continued to deliver growth at
both the top line and bottom line, from increased market share in core
segments, together with an improvement in margin from a focus on
profitable product mix and continued cost control.
A$ million
Sales Revenue
EBIT
EBIT Margin
FY16
FY17
% change
97.7
7.3
95.9
6.3
(2%)
(14%)
7.5%
6.6%
(0.9ppts)
A$ million
Sales Revenue
EBIT
EBIT Margin
FY16
FY17 % change
342.0
84.6
350.4
87.6
+3%
+4%
24.7% 25.0%
+0.3ppts
Return on Funds Employed (ROFE)
24.1% 25.2%
+1.1ppts
Revenue in the Bathrooms & Kitchens division increased by 3 per cent.
Net sales continue to grow ahead of the market as GWA continues to
build profitable market share in its core focus segments of Renovations
and Replacements, Commercial and Detached Housing. Revenue
growth also reflected improved product mix and pricing.
Return on Funds Employed (ROFE) 13.7% 12.3%
(1.4ppts)
Revenue in Door & Access Systems declined by 2 per cent to $95.9 million.
Sales were generally stronger in the eastern states, with Victoria and QLD
up 2 per cent and NSW in line with the prior year. However, the weak
construction markets in Western Australia, where GWA has a strong relative
market position, resulted in revenue from WA declining by 27 per cent.
EBIT of $6.3 million was 14 per cent lower than the prior year’s earnings
of $7.3 million. However, earnings in the second half of $3.8 million were
significantly ahead of the first half of $2.5 million following initiatives
implemented to address short term performance and strengthen and
refocus the business for the medium term.
3
Excluding the FY16 fully-franked special dividend of 1 cent per share paid in September 2016.
8 | GWA GROUP LIMITED | 2017 ANNUAL REPORT
These include refocusing the sales team to better target the core
builder segment, a simplified structure to improve customer service
and rationalisation of the API branch network in Victoria.
Return on Funds Employed of 12.3 per cent was 1.4 percentage points
lower than the prior year of 13.7 per cent with 2H17 ahead of 1H17.
STRATEGY
Over the course of FY17, GWA continued to make significant progress
on its key strategic objectives:
• Leverage and build on core assets and brands to drive revenue
and market share growth;
• Add value to customers through improved insights, analytics
and processes;
• Build a “fit for future” culture, engagement and capability;
• Build an advantaged supply chain to deliver superior new product
development, quality and service at best cost; and
• Drive cost out in SG&A and supply chain to improve profitability
and allow selective reinvestment.
As a result, the group continues to build a stronger platform to
compete more effectively through the cycle to maximise value
creation for shareholders.
Leverage and build on core assets and brands to drive revenue and
market share growth
GWA remains focused on building profitable market share in the core
categories of Renovations & Replacements, Commercial and Detached
Housing which are accretive to earnings, while competing selectively in
the Multi-Residential segment. We continued to build market share in
FY17 through initiatives such as an expansion of the Caroma Cleanflush
range, having recently launched two further variants of Cleanflush for the
Commercial segment.
Our new product development pipeline continues to strengthen with new
products launching this year with a specific focus on the Renovations &
Replacements and Commercial segments. During FY18, GWA will also
open two new concept centres in Adelaide and Sydney, supported by
further investment in our core brands as part of our strategy to further
enhance the profile of our portfolio of market leading brands.
Add value to customers through improved insights, analytics
and processes
GWA continues to build engagement with key customers and has
commenced joint business planning with major merchants to agree
mutual targets and growth agendas.
We have specific plans in place with each major customer in relation
to product ranging and also increased visibility and presence in our
customers’ showrooms. We are also continuing to work collaboratively
on building a deeper understanding of our customers’ business and their
shoppers/customers to better support their growth.
Build a “fit for future” culture, engagement and capability
Our focus continues on our internal capability to drive greater accountability
and agility across the organisation. A critical component of this strategic
priority is to ensure all our people understand GWA’s purpose of “making life
better” and demonstrate the values and behaviours to drive our business.
To further our ambitions we have embarked on leadership development
initiatives for the top 60 leaders in the business. In addition we have rolled
out functional capability training in both Marketing and Sales.
Build an advantaged supply chain to deliver superior new product
development, quality and service at best cost
GWA continues to strengthen its supply network. We continue to progress
the integrated business planning initiative to better align demand and
supply to improve customer service.
The new international sea freight partnership is delivering improvements
in container yield and we have established our first consolidation centre
in Asia to further reduce freight costs and enable cross category shipping
of our product direct to capital cities across Australia.
Drive cost out in SG&A and supply chain to improve profitability and
allow selective reinvestment
GWA is currently tracking ahead of its target to achieve $13-15 million in
cost savings progressively by FY19 through a combination of SG&A and
supply chain efficiencies. These savings are being used to reinvest in
growth initiatives as well as providing margin resilience and to offset cost
inflation through the market cycle.
In summary, GWA has made substantial progress over the past year.
While we still have a lot of work to do, I remain confident that we are
continuing to create a strong foundation to achieve our strategic goals
and maximise value creation for shareholders over the medium term.
PROSPECTS AND RISKS
GWA expects the Renovation and Replacements segment, the largest
segment accounting for just over half of GWA’s revenue, to remain
relatively stable in FY18.
Residential construction activity is expected to slow, however the
pipeline of building work yet to be completed remains reasonably strong,
supporting continued demand for GWA’s brands into FY18.
GWA’s forward order book remains solid with several major Commercial
projects secured, primarily across the eastern states.
GWA monitors foreign exchange rates closely and adopts appropriate
mitigation strategies as appropriate. Approximately 79 per cent of foreign
exchange exposure is hedged for FY18.
The company continues to pursue initiatives to improve revenue and market
share across its core product categories and segments through the launch of
new products and services, working collaboratively with key customers and
engaging with end consumers as part of our brand “pull” strategy.
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 deterioration in the Renovations and Replacements
market and dwelling completions activity impacting sales growth
and margins;
• a significant movement in the Australian dollar impacting the price of
imported products leading to changes in market pricing in order to
maintain margins and competitiveness; and
• unforeseen disruptions impacting product supply from offshore
suppliers leading to reputational damage, lower sales and loss of
market share.
GWA expects to provide a further update at the company’s Annual
General Meeting on 27 October 2017.
GWA GROUP LIMITED | 2017 ANNUAL REPORT | 9
HEALTH
& SAFETY
GWA continues to ensure that it provides a
safe workplace for employees, contractors,
visitors and customers, whilst driving a
positive safety culture and actively reducing
and mitigating risk.
GWA’s objective remains to ensure everyone is safe... every day. GWA is
committed to “Caring for Each Other”, as central to the newly developed
Cultural Pillars.
Sydney and Adelaide, which the Safety Team are centrally involved
with planning and execution. Driver Safety is another item on the safety
agenda to improve risk management in this space.
GWA recently re-launched the SafetyOne online site to enhance the
internal experience including simpler navigation, ease of reporting and
recording and ensuring the information required is easily accessible.
For FY18 the new online Safety reporting system, Myosh, will be
implemented. This is set to change the way in which we report and
record safety events, hazards, create and complete actions, manage
visitors and contractors, training and other important features.
The GWA management structure for Workplace Health and Safety
(WHS) follows a central-led approach with a National WHS Manager and
Regional Safety Specialists (Northern and Southern). The National WHS
Manager addresses the Board and Executive Leadership Team (ELT) on
a regular basis to discuss all matters relating to WHS. This provides an
opportunity for updates, scope discussions and to monitor progress of
the WHS strategy and performance.
SAFETY PERFORMANCE INDICATORS
GWA measures a range of balanced safety performance indicators.
Proactive ‘LEAD’ indicators such as number of Safety Interactions
conducted, hazards reported and actions closed were measured in FY17.
GWA also measures 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.
The ELT members each continue to sponsor key risk areas aligned with
our business risk profile. These include Chain of Responsibility, Health
and Wellbeing, Environmental and Waste.
As a new safety initiative for FY17, GWA introduced a Safety Interactions
Program which is a program to develop and drive safety behaviour
engagement between employees and business ‘safety’ leaders. The
intent is to acknowledge and celebrate safe demonstrated behaviour,
whilst engaging and addressing at-risk behaviour.
A Due Diligence and Awareness training program was introduced in
FY17 which was delivered at the inaugural Senior Leadership Team
Summit by the National Safety Manager in September 2016. This
program provided the GWA business ‘safety’ leaders with the tools and
knowledge needed to drive the safety focus throughout the business.
In FY17 GWA rolled out the new Move 4 Life manual handling program
into the Supply Chain Division. Included in the plan for FY18 is a tailored
program for the remainder of the business. To accompany this initiative,
and similar to the Safety Interactions initiative, GWA has introduced Move
Interactions to address physical and movement behaviour. Daily routines
have been introduced at most sites called the ‘60 Seconds Investment’ to
prevent workplace injuries.
In FY18 GWA will continue to drive its WHS strategy with commencement
of initiatives such as Environmental and Waste Management with zero
waste being the aim. Also within the next 12 months a new Distribution
Centre will be established in Sydney and two new Concept Centres in
10 | GWA GROUP LIMITED | 2017 ANNUAL REPORT
In FY17 GWA did not achieve its key LAG indicator targets, with a final
Total Injuries (TI) result of 14 against a target of 9. This comprised of 7 Lost
Time Injuries (LTI) and 7 Medically Treated Injuries (MTI) against targets of
5 LTIs and 4 MTIs respectively. Despite not achieving the TI LAG target for
FY17, substantial progress was made to improve the Group’s safety culture
with a number of safety initiatives implemented, and ownership and
accountability for safety existing at all levels in the business. The Board
and management remain focussed on initiatives to improve the Group’s
safety performance and culture with the aim of an injury free workplace.
GWA Total Injury Frequency Rate (TIFR)
24
18
12
6
0
07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17
GWA Injury Severity Rate (ISR)
4,000
3,000
2,000
1,000
0
10/11
11/12
12/13
13/14
14/15
15/16
16/17
SEGMENT PERFORMANCE
FY16
Continuing Operations A$M
FY17
% Change
Revenue
EBITDA
EBIT
EBIT Margin %
342.0
350.4
86.6
84.6
24.7%
89.4
87.6
25.0%
25.2%
2.5%
3.2%
3.5%
0.3pp
1.1pp
Return on Funds Employed %
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: 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
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 improvement 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
GWA GROUP LIMITED | 2017 ANNUAL REPORT | 11
SEGMENT PERFORMANCE
FY16
Continuing Operations A$M
Revenue
EBITDA
EBIT
EBIT Margin %
97.7
8.7
7.3
7.5%
Return on Funds Employed % 13.7%
FY17 % Change
95.9
7.7
6.3
6.6%
12.3%
(1.8%)
(11.5%)
(13.7%)
(0.9pp)
(1.4pp)
OPERATING LOCATIONS
Australia, export markets
MAJOR MARKETS
• Residential new home builders
• 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 significant 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
12 | GWA GROUP LIMITED | 2017 ANNUAL REPORT
BOARD OF
DIRECTORS
DARRYL McDONOUGH BBUS (ACTY), LLB (HONS), SJD,
FCPA, FAICD
INDEPENDENT CHAIRMAN AND NON-EXECUTIVE DIRECTOR
• Expertise: Experienced public company director and corporate lawyer
• Special Responsibilities: Chairman of Board and member of
BILL BARTLETT FCA, CPA, FCMA, CA (SA), FAICD
INDEPENDENT NON-EXECUTIVE DIRECTOR
• Expertise: Chartered Accountant, actuarial, insurance and
financial services
• Special Responsibilities: Chairman of Audit and Risk Committee
Nomination and Remuneration and Audit and Risk Committees
and member of Nomination and Remuneration Committee
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 independent chair of WICET companies being Wiggins
Island Coal Export Terminal Pty Ltd and WICET Holdings Pty Ltd. He
is a Past-President of The Australian Institute of Company Directors,
Queensland Division.
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:
JOHN MULCAHY PHD (CIVIL ENGINEERING), FIE AUST
INDEPENDENT DEPUTY CHAIRMAN AND NON-EXECUTIVE
DIRECTOR
• Expertise: Engineer, banker and experienced public company director
• Special Responsibilities: Deputy Chairman of Board and 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, Zurich
Australian Insurance Limited and Zurich Financial Services Australia
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
• Suncorp Group Limited since 2003*
• Reinsurance Group of America Inc (NYSE) since 2004*
• Abacus Property Group since 2007*
*denotes current directorship
PETER BIRTLES BSC, ACA
INDEPENDENT NON-EXECUTIVE DIRECTOR
• Expertise: Chartered Accountant, retail, financial and operational
• Special Responsibilities: Member of Audit and Risk Committee
Mr Birtles was appointed a Non-Executive Director of GWA Group Limited
in November 2010. He is a Chartered Accountant and is the current
Managing Director and Chief Executive Officer of Super Retail Group
Limited (“Super Retail”). He was formerly the Chief Financial Officer of
Super Retail. Prior to joining Super Retail, he held a variety of finance,
operational and information technology roles with The Boots Company in
the United Kingdom and Australia and worked for Coopers & Lybrand.
During the past three years, Mr Birtles has served as a director of the
following other listed company, and the period in which the directorship
has been held:
• Super Retail Group Limited since 2006*
*denotes current directorship
GWA GROUP LIMITED | 2017 ANNUAL REPORT | 13
TIM SALT BSC
JANE McKELLAR BA, MA (HONS), GAICD
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.
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.
INDEPENDENT NON-EXECUTIVE DIRECTOR
Ms McKellar was appointed a Non-Executive Director of GWA Group
Limited on 28 October 2016. She is an experienced Non-Executive
Director in both public and private companies in Australia and the USA,
with key contributions in customer-focused business transformation,
harnessing digital technology, and brand and marketing strategies to
enhance business performance. Her executive experience includes
senior roles with Unilever, NineMSN, Microsoft, Elizabeth Arden and
Stila Corp. She is presently a Non-Executive Director at ASX listed
McPherson’s Limited and Automotive Holdings Group Limited, and
is also on the Board of Terry White Chemmart.
During the past three years, Ms McKellar has served as a director
of the following other listed companies, and the period in which the
directorships have been held:
•
•
Automotive Holdings Group Limited since 2015*
McPherson’s Limited since 2015*
*denotes current directorship
RICHARD THORNTON CA, BCOM, LLB (HONS), LLM
STEPHEN GODDARD BSC (HONS), MSC
EXECUTIVE DIRECTOR AND COMPANY SECRETARY
• Expertise: Chartered Accountant, taxation and finance
Mr Thornton was appointed an Executive Director of GWA Group Limited
in May 2009. He joined GWA Group Limited in 2002 as Group Taxation
Manager and Treasurer and was appointed Company Secretary in 2003.
He is a Chartered Accountant and is experienced in accounting, taxation
and finance through positions at Coopers & Lybrand, Citibank and Ernst
& Young in Australia and overseas. Mr Thornton continued in his role as
Company Secretary following his appointment as an Executive Director
in 2009. He is a Non-Executive Director of Great Western Corporation
Pty Ltd.
INDEPENDENT NON-EXECUTIVE DIRECTOR
Mr Goddard was appointed a Non-Executive Director of GWA Group
Limited on 28 October 2016. He has more than 30 years’ retail
experience having held senior executive positions with some of
Australia’s major retailers. His executive experience includes Finance
Director and Operations Director for David Jones, founding Managing
Director of Officeworks, and various senior management roles with Myer.
He is a Non-Executive Director of JB Hi-Fi Limited. Stephen is a former
Non-Executive Director and Chairman of the Audit and Risk Committees
of Pacific Brands Limited and Surfstitch Group Limited.
During the past three years, Mr Goddard has served as a director
of the following other listed companies, and the period in which the
directorships have been held:
•
•
•
JB Hi-Fi Limited since 2016*
Pacific Brands Limited 2013 to 2016
Surfstitch Group Limited 2014 to 2016
*denotes current directorship
14 | GWA GROUP LIMITED | 2017 ANNUAL REPORT
DIRECTORS’ REPORT
AS AT 30 JUNE 2017
Your directors present their report on the consolidated entity of GWA
Group Limited (the Group) and the entities it controlled during FY17.
DIRECTORS
The following persons were directors of the Group during the financial
year and up to the date of this report 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)
W J Bartlett, Non-Executive Director
P A Birtles, Non-Executive Director
R J Thornton, Executive Director
J M McKellar, Non-Executive Director (appointed 28 October 2016)
S T Goddard, Non-Executive Director (appointed 28 October 2016)
R M Anderson, Non-Executive Director (retired 28 October 2016)
On 14 July 2016, the Chairman announced the retirement of W J Bartlett
from the Board at the 2017 Annual General Meeting on 27 October 2017.
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 FY17, and the period for
which each directorship has been held, are outlined in the director
profiles in the Annual Report.
DIRECTORS’ INTERESTS
The relevant interest of each director in the share capital of the Group
as notified by the directors to the Australian Securities Exchange in
accordance with Section 205G(1) of the Corporations Act 2001 as
at the date of this report is:
Director
D D McDonough
J F Mulcahy
T R Salt*
W J Bartlett
P A Birtles
R J Thornton*
J M McKellar
S T Goddard
Total**
Notes:
Ordinary Shares
130,000
40,950
29,760
30,207
13,650
100,102
-
10,000
354,669
*
**
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 key management personnel or their related
entities at balance date as prescribed in Accounting Standard AASB 124, this being
359,669 shares (2016: 16,732,241 shares).
GWA GROUP LIMITED | 2017 ANNUAL REPORT | 15
DIRECTORS’ MEETINGS
The number of meetings of directors (including meetings of Committees of directors) held during FY17 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
D D McDonough
J F Mulcahy
T R Salt
W J Bartlett
P A Birtles
R J Thornton(1)
J M McKellar(2)
S T Goddard(2)
R M Anderson(3)
Notes:
A
9
9
9
9
9
9
5
5
4
B
9
9
9
9
9
9
5
5
4
A
4
–
–
4
4
–
–
–
–
B
4
–
–
3
4
–
–
–
–
A
3
3
–
3
–
–
–
–
–
B
3
3
–
3
–
–
–
–
–
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) J M McKellar and S T Goddard were appointed Non-Executive Directors on 28 October 2016
(3) R M Anderson retired as Non-Executive Director on 28 October 2016
DECLARED AFTER END OF FY17
After the balance date the following dividend was approved by the
directors. The dividend has not been provided and there are no income
tax consequences at 30 June 2017.
Cents
per
share
Total Amount
$’000
9.0
23,755
Franked
Fully
Franked
Date of
Payment
5
September
2017
Dividend
Final
2016/17
Ordinary
The financial effect of the final dividend has not been brought to account
in the financial statements for the year ended 30 June 2017 and will be
recognised in subsequent financial reports.
The record date for the final dividend is 25 August 2017 and the dividend
payment date is 5 September 2017. The Dividend Reinvestment Plan will
not be offered to shareholders for the final 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.
PRINCIPAL ACTIVITIES
The principal activities during the year of the consolidated entity were the
research, design, manufacture, import and marketing of building fixtures
and fittings to residential and commercial premises and the distribution
of these various products through a range of distribution channels
in Australia, New Zealand and selected international markets. There
have been no significant changes in the nature of the activities of the
consolidated entity during the year.
OPERATING AND FINANCIAL REVIEW
The Operating and Financial Review for the consolidated entity during
the financial year ended 30 June 2017 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 FY17
Dividends
Final 2015/16
Ordinary
Special
2015/16
Interim
2016/17
Ordinary
Cents
per
share
Total
Amount
$’000
8.0
21,116
1.0
2,639
7.5
19,796
Franked
Fully
Franked
Fully
Franked
Fully
Franked
Date of
Payment
16 September
2016
16 September
2016
7 March 2017
Franked dividends declared and paid during the year were franked at the
corporate tax rate of 30%.
16 | GWA GROUP LIMITED | 2017 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 FY17.
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 21 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 FY17.
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 in accordance with
that Instrument to the nearest thousand dollars, unless otherwise stated.
REMUNERATION REPORT – AUDITED
INTRODUCTION
This report covers the following matters for FY17:
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.
GWA GROUP LIMITED | 2017 ANNUAL REPORT | 17
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 which
is designed to attract and retain management and directors with the
experience, knowledge, skills and judgement required for success.
The Board also engages with all 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 Committee’s role
and responsibilities include:
• Review of Board size and composition;
• Assessment of the necessary and desirable skills and 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 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;
• Evaluation of Managing Director performance against 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
FY18 executive remuneration review. 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
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 remuneration arrangements for Mr Salt as Chief Executive
Officer were determined by the Nomination and Remuneration
Committee in FY16 following the provision of market data from Guerdon
Associates. Based on the benchmark data, Mr Salt’s total remuneration
was 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.
The following is a summary of Mr Salt’s remuneration package:
• Total Fixed Remuneration (TFR) comprising salary, superannuation
and all other benefits other than incentive plans of $1,000,000;
• Participation in GWA’s Short Term Incentive (STI) Plan:
» 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 Long Term Incentive (LTI) Plan:
»
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 Return (TSR).
For the FY18 executive remuneration review, the benchmark data and
analysis provided by Guerdon Associates confirmed that the Managing
Director’s remuneration remains aligned with peer company CEO
remuneration levels and market practice.
1.2 FY17 AND FY18 DIRECTOR AND EXECUTIVE
REMUNERATION
As outlined in the 2016 Remuneration Report, the Board determined
that the fixed remuneration for the Managing Director and other
executives was to be frozen for FY17. This is the second consecutive
year that fixed remuneration for the Managing Director and other
executives has been frozen. See section 4.2 for further details. This
position is reflected in the Remuneration Tables included in the 2017
Remuneration Report. The Board has also determined that the fixed
remuneration for the Managing Director and other executives will remain
frozen for FY18 with the exception of one executive who received a 4%
increase in fixed remuneration.
Following the Board’s approval of a 16% reduction in non-executive
director remuneration in FY16, non-executive director remuneration
remained frozen in FY17. See section 3.1 for further details. This
position is reflected in the Remuneration Tables included in the 2017
Remuneration Report. The Board has also determined that non-
executive director remuneration will remain frozen for FY18.
1.3 LONG TERM INCENTIVE PLAN – FY18 CHANGES
The Board has approved important changes to the LTI Plan for FY18
which will apply to any grant of Performance Rights to the Managing
Director and other executives. The changes relate to the Return on
Funds Employed (ROFE) hurdle, which is the second performance
measure under the LTI Plan. The performance requirements under
the ROFE hurdle have been increased to require a higher level of
performance over the three year performance period before vesting
will occur and at all vesting thresholds.
18 | GWA GROUP LIMITED | 2017 ANNUAL REPORT
The Board has changed the ROFE performance requirements for FY18
after taking into consideration the following:
•
•
•
•
the Company’s strong ROFE performance in FY16 and FY17 of
19.3% and 20.2% respectively;
the need to sustain an appropriate level of performance through
the market cycle which is forecast to decline over the next 3 years;
the increasing investment required to support the Group’s strategic
growth initiatives in marketing, research and development, customer
delivery and information technology; and
shareholder feedback in relation to the ROFE hurdle.
GWA measures performance on the following key corporate measures:
• Earnings before interest and tax (EBIT);
• Return on funds employed (ROFE); and
• Total shareholder return (TSR).
The Board has the discretion to normalise the EBIT and ROFE measures
where they are unduly distorted by significant or abnormal events,
and in order to ensure that the measures reflect underlying trading
performance. Examples include the impact of restructuring costs or other
non-recurring expenses to ensure management is not discouraged from
undertaking initiatives in the long term interests of shareholders.
The changes are reflected in the ROFE table in section 4.4.3.1.
There are no changes to the Total Shareholder Return (TSR) hurdle
under the LTI Plan.
Any adjustments to normalise the EBIT and ROFE measures, and
the reasons for any adjustments, will be disclosed. There were no
adjustments to normalise the EBIT and ROFE measures for FY17.
For the FY18 LTI grant the disposal restriction period for ordinary shares
issued under the LTI Plan upon the achievement of performance hurdles
will be reduced to seven years from the grant date as the previous
disposal restriction period of fifteen years was considered excessive.
The reduction in the disposal restriction period will still ensure that
executives retain the ordinary shares for a reasonable period.
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.
3 Year Rolling 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 2017 compared to the peer group companies
used for the FY17 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, Bapcor 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.
100%
80%
60%
40%
20%
0%
– 20%
30 Jun 2014
31 Dec 2014
30 Jun 2015
31 Dec 2015
30 Jun 2016
31 Dec 2016
30 Jun 2017
GWA 3 YEAR ROLLING TSR
PEER GROUP 3 YEAR ROLLING TSR 50TH PERCENTILE
(*) Assuming 36 months in each rolling year
GWA GROUP LIMITED | 2017 ANNUAL REPORT | 19
The following is a summary of key statistics for the Group over the last five years:
Normalised
EBIT(a)
($m)
66.8
64.5
72.8
78.3
80.6
Financial Year
2012/13(d)
2013/14(c)
2014/15(b)
2015/16(b)
2016/17
Notes:
(a) excludes significant items
Normalised EPS(a)
(cents)
Total DPS
(cents)(f)
Capital Return(e)
(cents)
12.9
12.4
14.8
19.0
20.3
12.0
5.5
6.0
16.0
16.5
–
–
22.8
–
–
Share Price
(30 June)
($)
Market
Capitalisation
(30 June)
($m)
2.40
2.63
2.28
2.09
3.15
735.7
806.2
636.0
551.7
831.4
(b) excludes the discontinued operations of Gliderol, Dux and Brivis
(c) FY14 performance has been re-presented to exclude the discontinued operations in FY15 and FY16
(d) FY13 performance has not been re-presented and includes the discontinued operations in FY15 and FY16
(e) 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
(f)
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.
The Group delivered another improved profit performance in FY17 driven
by sales growth in the core Bathrooms & Kitchens business exceeding
market growth for the period. This enabled the Board to increase
dividend payments to shareholders for FY17 with the dividend pay-out
ratio towards the high end of the Group’s dividend policy. The improved
performance for FY17 was reflected in the higher GWA share price and
resulted in higher shareholder returns.
The Group has continued its progress against the strategic objectives
in FY17 to enhance the operating performance of the business and to
maximise returns to shareholders over time. The progress against the
strategic objectives is outlined in the Managing Director’s Review of
Operations. The successful execution of the Group’s strategic objectives
were included as performance goals and reflected in the financial
performance targets for the executives under the STI Plan for FY17;
refer Section 4.3 Short Term Incentive.
The remuneration and incentive framework has allowed the Group to
respond to the high levels of dwelling construction activity in FY17. STI
payments related to performance improvement and strategy execution
has encouraged management to respond quickly and make long term
decisions to sustain competitiveness and improve profitability. This
has enabled the Group to take advantage of the upswing in market
activity over recent years while ensuring that the Group is well placed
to maximise returns through the market cycle.
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
in section 5.1.
20 | GWA GROUP LIMITED | 2017 ANNUAL REPORT
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 NON-EXECUTIVE DIRECTOR REMUNERATION CHANGES
The Board approved a reduction in non-executive director remuneration
effective from FY16 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); and
• Committee membership fees are no longer paid apart from a fee of
$10,000 for the Chair of a Committee.
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 for
FY16 reduced by 16% from the prior year. Non-executive director
remuneration has remained frozen in FY17 as reflected in the
Remuneration Tables included in the 2017 Remuneration Report. The
Board has also determined that non-executive director remuneration will
remain frozen for FY18.
4. DESCRIPTION OF EXECUTIVE
REMUNERATION
The FY17 STI components for the Managing Director are provided in the
following table:
4.1 EXECUTIVE REMUNERATION STRUCTURE
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
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 FY17 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
FY17
The FY17 incentives structure for the Managing Director is provided in
the following table:
The FY17 STI components for the other executives are provided in the
following table:
Maximum LTI
as % of fixed
remuneration
(grant date
fair value)
Maximum
total
performance
pay as %
of fixed
remuneration
Other
Executives
FY17
Maximum STI
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
GWA GROUP LIMITED | 2017 ANNUAL REPORT | 21
4.1.3 Actual remuneration received by executives for FY17
The following table sets out the actual value of remuneration received by the executives for FY17, derived from the various components of their
remuneration during FY17. This table differs from the more detailed statutory 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.
Executives
FY17
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
C Norwell, General Manager Sales
– GWA Bathrooms & Kitchens
K Veitch, Group General Manager –
People, Culture & Communications(e)
Total
Fixed
Remuneration
$(a)
1,001,247
415,060
752,453
399,808
Short Term
Incentive
$(b)
500,000
204,770
375,000
173,040
399,999
–
399,999
200,000
Long Term
Incentive
(Earned)
$(c)
–
56,470
–
–
–
–
Termination
Benefits
$
–
–
–
–
–
–
Total
$
1,501,247
676,300
1,127,453
572,848
399,999
599,999
208,045
60,000
–
3,576,611
1,512,810
56,470
100,000
100,000
368,045
5,245,891
(a) Fixed remuneration represents amounts actually paid to the executives during FY17 and includes base salary, non-monetary benefits and superannuation.
(b) Represents the STI payments awarded for FY17 inclusive of deferred amounts. These amounts, exclusive of the deferred amounts, will be paid in FY18.
(c) The performance hurdles for the 2014 LTI grant were tested in FY17 and partially achieved; refer section 5.2.1 Performance Rights. Excludes the value of any unvested LTI grants
expensed or reversed during FY17.
(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 refer to section 1.1.
(e) Ms Kay Veitch ceased employment on 31 December 2016.
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 who possess 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, Industrial and Material sectors.
Based on an independent survey by Guerdon Associates for the FY18
executive remuneration review, the fixed remuneration for the executive
positions at GWA are close to or above market benchmark median levels
for companies of comparable operational scope and size to GWA, having
regard to market capitalisation, EBITDA, total assets and revenue. The
15 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 judgement in determining
appropriate remuneration levels, having regard to the background and
experience of the individuals.
22 | GWA GROUP LIMITED | 2017 ANNUAL REPORT
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 and FY17, the
Board froze the fixed remuneration for the Managing Director and other
executives. This is reflected in the Remuneration Tables in section 5.1.
The Board has also determined that fixed remuneration for the Managing
Director and other executives will remain frozen for FY18 with the exception
of one executive who received a 4% increase in fixed remuneration.
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 2017.
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 is deferred for
the executives that achieved their STI financial targets for FY17. The
deferred component is subject to further testing by the Board to confirm
the integrity of the achievement of the STI financial targets following
finalisation of the FY18 audited financial statements. If the Board
is satisfied the deferred component will be paid to the executives in
September 2018 together with interest at market rates. However, if the
Board is not satisfied the deferred component will be subject to forfeiture.
4.3.2 STI performance requirements
4.3.2.1 Financial Performance Targets
For FY17, STI financial performance targets are based on Earnings
Before Interest and Tax (EBIT) and Return On Funds Employed (ROFE)
targets as determined by the Nomination and Remuneration Committee.
The use of EBIT and ROFE as the basis of STI financial targets is aimed
at ensuring executives are accountable for delivering both profit and
return on funds improvements.
The Board is of the view that a combination of EBIT and ROFE targets
are an effective basis for STI targets as they are currently key metrics
used in the business. The EBIT and ROFE targets are weighted equally
and assessed separately and on an aggregated basis for divisional and
corporate executives.
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.
4.3.2.1.1 FY17 STI Financial Performance Outcomes
For FY17, Bathrooms & Kitchens achieved their EBIT and ROFE STI
financial targets at the ‘stretch’ level reflecting the strong performance
of the business and gains in market share during the period. GWA
Corporate almost achieved their EBIT and ROFE STI financial targets at
the ‘stretch’ level for FY17, however the Board exercised its discretion
to award STI achievement for GWA Corporate executives at the ‘stretch’
level. This decision was aligned with shareholders interests as the
Group’s profit performance for FY17 was strong and above market
expectations, generated higher returns to shareholders for the period
both from the ability to pay higher dividends to shareholders and a
significant improvement in GWA’s share price.
Door & Access Systems did not achieve their STI financial targets for
FY17. Accordingly, no STI payments were awarded to Door & Access
Systems executives for FY17.
In accordance with the STI Plan rules, 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 2018 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 FY16 for GWA
Corporate and Bathrooms & Kitchens’ executives was tested by the Board
in August 2017 to confirm the integrity of the achievement of the STI
financial targets in FY16. Following satisfaction with the testing, the Board
approved the payment of the deferred component to GWA Corporate and
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 and business
improvement goals. The measurable financial goals are financial outcomes
which the individual aims to achieve through their effort and that of
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 FY17 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
reviewed and approved by the Nomination and Remuneration
Committee. The personal goals of the executives for FY18 were
established at the performance reviews.
The Managing Director’s performance review is conducted semi-
annually by the Chairman following input from the Board and with the
outcomes reviewed and approved by the Nomination and Remuneration
Committee. An assessment of the Managing Director’s key performance
goals subject to STI incentive payments for FY17 is provided in section
4.3.2.2.1. GWA Corporate and Bathrooms & Kitchens’ executives were
awarded STI payments for FY17 based on achievement of personal goals
following their performance reviews. However, Door & Access Systems’
executives did not achieve the minimum level of financial performance
for FY17 to enable the payment of any personal goal STI component.
This is reflected in the Remuneration Tables in section 5.1.
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.
GWA GROUP LIMITED | 2017 ANNUAL REPORT | 23
4.3.2.2.1 Managing Director’s key performance goals and outcomes
An assessment of the Managing Director’s key performance goals and financial targets subject to STI incentive payments for FY17 is provided in the
following table.
FY17 Goals
Personal Objectives
Results
Assessment
Achieve leading safety performance with
the aim of an injury free workplace
Progress key FY17 strategic growth
objectives and ensure resourced and
prioritised
Build employee engagement and
culture to deliver the strategy
Develop group growth strategy
and formulate plans to deliver
Financial targets
STI financial performance targets
Performance for FY17 is primarily assessed on ‘leading’ safety indicators that include
proactive measures to improve safety, rather than ‘lagging’ indicators. Substantial
progress was made to improve the Group’s safety culture with a number of safety
initiatives implemented, despite not achieving the Total Injury ‘lag’ target for FY17.
Ownership and accountability for safety exists at all levels in the business with
“Caring For Each Other” central to the newly developed cultural pillars.
Substantial progress has been made with each of the strategic growth objectives
in FY17 as outlined in the Managing Director’s Review of Operations. Performance
is assessed on the basis of the improvement in the Group’s sales and profitability,
principally driven by the strong performance of Bathrooms & Kitchens in FY17, which
achieved ‘stretch’ targets, and through successful execution of growth initiatives in
target market segments leading to gains in market share. Improvement plans have
been implemented in Door & Access Systems during FY17 to lift returns and address
the underperformance.
The Group has undergone significant cultural transformation to enable delivery of
the strategy. Cultural pillars and social contract have been established outlining the
values and behaviours expected of employees in the business and to improve delivery
and accountability for performance at all levels. Performance has been assessed via
engagement surveys as well as other factors. Employee engagement has risen strongly
with improved agility, customer and consumer focus, accountability and collaboration.
This has assisted the improvement in Group financial performance during FY17.
Long term growth plans have been developed for the Group in order to accelerate
growth and improve shareholder returns. The plans outline growth initiatives to extend
and defend the core businesses, build emerging businesses and create growth options
into the future as part of the transformation of the business in line with the strategy.
A strategic planning cycle with management and the Board has been implemented in
FY17 to speed up strategy development and execution, with work plans in place for
each of the strategic growth initiatives.
For FY17, GWA Corporate and Bathrooms & Kitchens achieved their EBIT and
ROFE financial performance targets at the ‘stretch’ level reflecting the strong trading
performance and gains in market share during the period. Door & Access Systems did
not achieve their STI financial performance targets for FY17, although the impact on
the Group’s financial results relative to ‘stretch’ levels was negligible. This is reflected in
the Remuneration Tables in section 5.1.
Fully achieved
Partially achieved
Not achieved
24 | GWA GROUP LIMITED | 2017 ANNUAL REPORT
4.4 LONG-TERM INCENTIVE (LTI)
4.4.1 LTI overview
Executives participate in a LTI Plan. This is an equity based plan that
provides for a reward that varies with 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 Plan 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.
For the FY17 LTI grant, a participant may not dispose of the ordinary
shares issued under the LTI until the fifteenth anniversary of the grant
date and the shares are subject to a holding lock upon issue. This was
to ensure 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 such
other factors as it considers relevant to the application.
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
cancelled. 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 be cancelled.
For the FY17 LTI grant, the proportion of Performance Rights that can
vest will be calculated and the shares will vest in August 2019 subject to
achieving the performance hurdles. If the performance hurdles are not
met 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 2017 was 1,823,500 which represents 0.7% of
the Group’s total issued shares.
4.4.2 LTI performance requirements
For the FY17 LTI grant, the performance hurdles continue to provide
for vesting scales graduated with performance and demanding
performance hurdles.
4.4.2.1 TSR Hurdle
The performance hurdles and vesting proportions for the TSR
performance measure that applied to the FY17 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
0%
50th percentile
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, Bapcor 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.
GWA GROUP LIMITED | 2017 ANNUAL REPORT | 25
4.4.2.2 ROFE Hurdle
The performance hurdles and vesting proportions for the ROFE
performance measure that applied to the FY17 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 0%
ROFE equal to 15% per annum 12.5%
ROFE between 15% and 18%
per annum
Straight line vesting between
12.5% and 50%
ROFE equal to 18% or higher
per annum
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.
4.4.3 LTI performance requirements – FY18 changes
As outlined in section 1.3, the Board has approved important changes to
the LTI Plan for FY18 which will apply to any grant of Performance Rights
to the Managing Director and other executives. The changes relate to the
ROFE hurdle which is the second performance measure under the LTI
Plan. The performance requirements under the ROFE hurdle have been
increased to require a higher level of performance over the three year
performance period before vesting will occur and at all vesting thresholds.
The changes are reflected in the ROFE table in section 4.4.3.1. There
are no changes to the TSR hurdle.
For the FY18 LTI grant the disposal restriction period for ordinary shares
issued under the LTI Plan upon the achievement of performance hurdles
will be reduced to seven years from the grant date as the previous disposal
restriction period of fifteen years was considered excessive. The reduction
in the disposal restriction period will still ensure that executives retain the
ordinary shares for a reasonable period.
4.4.3.1 ROFE hurdle – FY18 changes
The performance hurdles and vesting proportions for the ROFE
performance measure that will apply to the FY18 LTI grant to the
Managing Director and other executives 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 16% per annum 0%
ROFE equal to 16% per annum 12.5%
ROFE between 16% and 19%
per annum
Straight line vesting
between 12.5% and 50%
ROFE equal to 19% or higher
per annum
50% (i.e. 50% of total grant)
5. DETAILS OF DIRECTOR AND EXECUTIVE
REMUNERATION
5.1 REMUNERATION TABLES
Details of the nature and amount of each element of remuneration
for each director of the Group and other key management personnel
(KMP) for the year ended 30 June 2017 are provided in the following
Remuneration Tables.
26 | GWA GROUP LIMITED | 2017 ANNUAL REPORT
Short-term
Long-term
Post-employment
s
e
e
F
&
y
r
a
l
a
S
$(a)
260,423
254,800
117,649
117,649
118,149
117,649
108,600
108,599
81,450
–
70,950
–
37,184
109,589
794,405
708,286
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
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
976,330
500,000
1,248
257,070
1,062,845
100,000
–
135,760
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
376,785
204,770
393,152
81,908
5,521
2,014
93,094
22,160
6,320
6,343
n
o
i
t
a
u
n
n
a
r
e
p
u
S
$
s
t
fi
e
n
e
B
19,615
25,199
12,350
12,350
12,350
12,350
11,400
11,400
8,550
–
19,050
–
3,470
10,410
86,785
71,709
35,000
16,089
19,615
19,307
s
t
fi
e
n
e
B
n
o
i
t
a
n
i
m
r
e
T
$
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
%
%
%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
l
a
t
o
T
$
280,038
279,999
129,999
129,999
130,499
129,999
120,000
119,999
90,000
–
90,000
–
40,654
119,999
881,190
779,995
1,769,648
42.8
100
1,314,694
17.9
50
706,105
42.2
100
524,884
19.8
40
–
50
–
60
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Non-Executive Directors(i)
D McDonough, Chairman
J Mulcahy, Deputy Chairman
W Bartlett, Non-Executive Director
P Birtles, Non-Executive Director
J McKellar, Non-Executive Director
(Appointed 28 October 2016)
S Goddard, Non-Executive Director
(Appointed 28 October 2016)
R Anderson, Non-Executive Director
(Retired 28 October 2016)
Total – Non-Executive Directors
Executive Directors(j)
T Salt, Managing Director
(Appointed 1 July 2016)(e)
R Thornton, Executive Director
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
Total – Directors Remuneration
2017
2,147,520
704,770
6,769 350,164
6,320 141,400
– 3,356,943
2016
2,164,283
181,908
2,014 157,920
6,343 107,105
– 2,619,573
Executives(j)
P Gibson
Group Chief Financial Officer
S Mitchell, Group General Manager
– Supply Chain(f)
S Ralphsmith, Executive General
Manager – GWA Door & Access
Systems(g)
C Norwell, General Manager Sales –
GWA Bathrooms & Kitchens
(Appointed 7 April 2016)
K Veitch, Group General Manager –
People, Culture & Communications
(Ceased employment
31 December 2016)(h)
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
729,423
375,000
2,454
107,189
738,076
150,000
–
61,662
356,653
173,040
624
86,608
351,623
80,000
382,223
–
375,928
16,000
368,461
200,000
92,400
88,235
–
–
–
–
–
61,724
86,608
61,724
57,529
32,645
185,596
60,000
1,872
30,862
349,161
76,000
–
61,724
–
–
–
–
–
–
–
–
–
–
34,999
34,999
35,000
30,000
30,000
38,000
30,000
7,500
–
–
–
–
–
–
–
–
1,249,065
38.6
100
–
984,737
651,925
523,347
498,831
21.5
39.8
27.1
17.4
40
84
40
60
16
60
–
100
491,652
15.8
12
655,990
39.3
100
220,779
54.8
100
17,500
100,000
395,830
34,000
–
520,886
23.0
26.4
60
38
88
–
–
40
62
Total – Executives Remuneration
2017
2,022,356
808,040
4,950 368,796
– 147,499 100,000 3,451,641
Total – Directors and Executives
Remuneration(k)
2016
1,907,189
410,235
– 279,479
– 144,499
– 2,741,402
2017
4,169,876 1,512,810
11,719 718,960
6,320 288,899 100,000 6,808,584
2016
4,071,472
592,143
2,014 437,399
6,343 251,604
– 5,360,975
GWA GROUP LIMITED | 2017 ANNUAL REPORT | 27
(g) Mr Sean Ralphsmith is ceasing employment on 31 August 2017.
As part of his termination arrangements, Mr Ralphsmith will
receive a payment equal to 3 months salary in lieu of providing
notice in line with his employment agreement, 3 months severance
payment and statutory entitlements ($200,000 excluding statutory
entitlements). Mr Ralphsmith participated in the FY17 STI Plan
subject to achieving the STI financial performance targets. For the
outstanding Performance Rights held by Mr Ralphsmith under the
LTI Plan, the rights will continue to be tested in the normal manner
with any shares issued on a pro rata basis subject to achieving the
LTI performance hurdles.
(h) Ms Kay Veitch ceased employment on 31 December 2016. As part
of her termination arrangements, Ms Veitch received a payment
equal to 3 months salary in lieu of providing notice in line with her
employment agreement, and statutory entitlements. Ms Veitch
continued to participate in the FY17 STI Plan on a pro rata basis
subject to achieving the STI financial performance targets. For the
outstanding Performance Rights held by Ms Veitch under the LTI
Plan, the rights will continue to be tested in the normal manner
with any shares issued on a pro rata basis subject to achieving the
LTI performance hurdles.
(i) Non-executive director remuneration was frozen by the Board for
FY17. The total non-executive director remuneration is within the
annual aggregate maximum amount approved by shareholders.
For details of non-executive director remuneration changes in FY16
please refer to section 3.1.
(j) The fixed remuneration for the Managing Director and other
executives was frozen by the Board for FY16 and FY17; refer
section 4.2. For the actual remuneration received by the executives
for FY17 please refer to the table in section 4.1.3.
(k) Totals in FY17 are higher than FY16 mainly due to the higher
STI payments for GWA Corporate and Bathrooms & Kitchens’
executives following the strong trading performance for FY17.
This is aligned with shareholders interests as the Group’s profit
performance for FY17 was above market expectations, generating
higher returns to shareholders for the period both from the
improvement in GWA’s share price and higher dividend payments
to shareholders.
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 Managing
Director and other executives was frozen by the Board for FY16
and FY17; refer section 4.2.
(b) The Short Term Incentive (STI) Plan cash bonuses include the
deferred component and relates to performance during FY17
based on the achievement of personal goals and financial
performance targets. GWA Corporate and Bathrooms & Kitchens
achieved their STI financial performance targets in FY17 and
in accordance with the STI Plan rules, 50% of the amount has
been deferred and will be subject to further testing in August
2018. Door & Access Systems did not achieve their STI financial
performance targets in FY17. The FY17 STI cash bonuses for GWA
Corporate and Bathrooms & Kitchens’ executives will be paid in
FY18, 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 insurance and other
minor benefits including 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 2017 were granted to executives in each of
the years 30 June 2015, 2016 and 2017 (as applicable) and are
subject to vesting conditions and the achievement of specified
performance hurdles over the three year performance periods.
During FY17, 50% of the Performance Rights in respect of the
2014 LTI grant lapsed as the TSR hurdle was not achieved and
50% of the Performance Rights vested as the EPS hurdle was fully
achieved. The fair value of the Performance Rights granted in
30 June 2015, 2016 and 2017 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. For details of
Mr Salt’s remuneration arrangements as Managing Director
please refer to section 1.1 Managing Director Succession.
(f) Mr Sean Mitchell is ceasing employment on 31 August 2017.
As part of his termination arrangements, Mr Mitchell will receive a
payment equal to 3 months salary in lieu of providing notice in line
with his employment agreement, 3 months severance payment and
statutory entitlements ($206,000 excluding statutory entitlements).
Mr Mitchell participated in the FY17 STI Plan subject to achieving
the STI financial performance targets. For the outstanding
Performance Rights held by Mr Mitchell under the LTI Plan, the
rights will continue to be tested in the normal manner with any
shares issued on a pro rata basis subject to achieving the LTI
performance hurdles.
28 | GWA GROUP LIMITED | 2017 ANNUAL REPORT
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 2017 and in prior
years that affects compensation in this or future reporting periods.
Year
of
grant
Number
of rights
granted
%
vested
in year
%
forfeit
in year
Grant date*
Fair value
of rights at
grant date
$*
Issue price used
to determine
number of rights
granted
Executive Directors
T Salt, Managing Director
(Appointed 1 July 2016)
R Thornton, Executive Director
2017
214,500
24 February 2017
2016
262,000
23 March 2016
–
–
–
–
44,000
24 February 2017
65,000
23 March 2016
45,000
25 February 2015
2015
2014
2017
2016
2015
2014
–
–
–
–
–
–
–
–
–
–
–
–
–
–
40,000
24 February 2014
50
50
Executives
P Gibson, Group Chief Financial Officer
2017
80,500
24 February 2017
2016
119,000
23 March 2016
S Mitchell, Group General Manager –
Supply Chain
S Ralphsmith, Executive General Manager
– GWA Door & Access Systems
C Norwell, General Manager Sales –
GWA Bathrooms & Kitchens
(Appointed 7 April 2016)
K Veitch, Group General Manager –
People, Culture & Communications
(Ceased employment 31 December 2016)
2015
2014
2017
2016
2015
2014
2017
2016
2015
2014
2017
2016
2015
2014
2017
2016
2015
2014
–
–
–
–
44,000
24 February 2017
63,000
23 March 2016
44,000
25 February 2015
–
–
44,000
24 February 2017
63,000
23 March 2016
44,000
25 February 2015
–
–
44,000
24 February 2017
63,000
23 March 2016
–
–
–
–
–
–
63,000
23 March 2016
44,000
25 February 2015
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
50
17
–
363,931
407,279
–
–
74,653
115,408
89,222
74,400
136,580
184,986
–
–
74,653
97,934
87,239
–
74,653
97,934
87,239
–
74,653
97,934
–
–
–
97,934
87,239
–
2.80
2.29
–
–
2.80
1.89
2.72
3.12
2.80
1.89
–
–
2.80
1.89
2.72
–
2.80
1.89
2.72
–
2.80
1.89
–
–
–
1.89
2.72
–
Note:
*
The issue price used to determine the number of Performance Rights offered to key management personnel during FY17 was $2.80 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 28 October 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 $2.11 per right and TSR hurdle was $1.28 per right.
GWA GROUP LIMITED | 2017 ANNUAL REPORT | 29
All of the rights carry an exercise price of nil. The rights granted on 25
February 2015, 23 March 2016 and 24 February 2017 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 2017, 2018 and
2019 respectively, subject to the achievement of the performance hurdles.
The rights granted to Mr Thornton were approved by shareholders at the
2014, 2015 and 2016 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. The rights granted to Mr Salt in FY17 were approved by
shareholders at the 2016 Annual General Meeting in accordance with ASX
Listing Rule 10.14.
Rights were forfeited where an employee ceased employment with the
Group during the year in accordance with the rules of the LTI Plan. For
the rights granted to key management personnel on 24 February 2014,
the Group did not achieve the TSR hurdle and fully achieved the EPS
hurdle for the performance period of 1 July 2013 to 30 June 2016. The
rights subject to the TSR hurdle lapsed in FY17 resulting in the forfeiture
of 20,000 rights with a grant date fair value of $27,200 for current key
management personnel. The rights subject to the EPS hurdle fully vested
in FY17 resulting in the exercise of 18,200 shares (adjusted for the share
consolidation effective on 9 June 2015) with a grant date fair value of
$47,200 for current key management personnel.
The number of rights outstanding at 30 June 2017 represents the balance
yet to be tested.
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 2017 (2016: 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 2017
(2016: nil).
From time to time, key management personnel of the Group or its controlled
entities, or their related entities, may purchase goods from the consolidated
entity. These purchases are on the same terms and conditions as those
entered into by other consolidated entity employees or customers and are
trivial or domestic in nature.
5.3.3 Movements in shares
The movement during the reporting period in the number of ordinary
shares in GWA Group Limited held, directly, indirectly or beneficially, by
each key management person, including their related parties, is as follows:
Non-Executive Directors
D McDonough
J Mulcahy
W Bartlett
P Birtles
J McKellar (Appointed 28 October 2016)
S Goddard (Appointed 28 October 2016)
R Anderson (Retired 28 October 2016)
Executive Directors
T Salt (Appointed 1 July 2016)
R Thornton
Executives
P Gibson
S Mitchell
S Ralphsmith
C Norwell (Appointed 7 April 2016)
K Veitch (Ceased employment 31 December 2016)
Held at
1 July 2016
Granted as
compensation
Purchases
Sales
Held at
30 June 2017
118,300
40,950
30,207
13,650
n/a
n/a
16,435,332
11,900
81,902
–
–
–
–
–
–
–
–
–
–
–
–
–
18,200
–
–
–
–
–
11,700
–
–
–
–
10,000
–
17,860
–
5,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
130,000
40,950
30,207
13,650
–
10,000
n/a
29,760
100,102
5,000
–
–
–
n/a
30 | GWA GROUP LIMITED | 2017 ANNUAL REPORT
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
S Mitchell
S Ralphsmith
K Veitch
C Norwell (Appointed 7 April 2016)
Held at 1 July
2015
Granted as
compensation
Purchases
Sales
Held at
30 June 2016
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
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
118,300
40,950
16,435,332
30,207
13,650
11,900
81,902
n/a
–
–
–
–
–
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.
Unless the Board determines otherwise, executives will not be eligible
for an STI payment and Performance Rights held by executives under
the LTI Plan will lapse upon cessation of employment with the Group.
The Directors’ Report is made out in accordance with a resolution of
the directors:
Darryl D McDonough
Chairman
Tim R Salt
Managing Director
Sydney, 21 August 2017
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 2017 is listed in the Directors’ Report under Directors’ Interests.
During the FY17 reporting period, there were 18,200 shares granted
to key management personnel as compensation (2016: 100,459). The
aggregate number of shares held by key management personnel or their
related parties at 30 June 2017 was 359,669 (2016: 16,732,241).
6. KEY TERMS OF EMPLOYMENT CONTRACTS
6.1 NOTICE AND TERMINATION PAYMENTS
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 or the executives are
required to give no less than three months notice of termination of
employment for any reason. The Group retains the right to immediately
terminate the employment contracts of the executives by making
payment equal to three months salary in lieu of providing notice.
The executives are also entitled to receive on termination of employment
their statutory entitlements of accrued annual and long service leave,
together with any superannuation benefits.
GWA GROUP LIMITED | 2017 ANNUAL REPORT | 31
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 Revenue and other income
4
5
6
Expenses
Income tax expenses
Earnings per share
7 Cash and cash equivalents
8
9
Trade and other receivables
Inventories
10 Deferred tax assets and liabilities
11 Property, plant and equipment
12
Intangible assets
13 Trade and other payables
14 Employee benefits
15 Provisions
Directors’ Declaration
37
40
42
42
44
46
47
48
48
48
50
52
54
54
55
16
Loans and borrowings
17 Capital and reserves
18
Financial instruments and
financial risk management
19 Share-based payments
20
Related parties
21 Auditor’s remuneration
22 Operating lease commitments
23 Capital commitments
24 Consolidated entities
25
Deed of cross guarantee
26 Parent entity disclosures
27 Discontinued operations
28 Subsequent events
Independent Auditor’s Report to the members of GWA Group Limited
Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001
33
34
35
36
56
57
58
64
66
66
66
67
67
68
70
71
71
72
73
76
32 | GWA GROUP LIMITED | 2017 ANNUAL REPORT
GWA GROUP LIMITED | 2017 ANNUAL REPORTDirectors’ report continuedAs at 30 june 2016
CONSOLIDATED STATEMENT OF PROFIT OR
LOSS AND OTHER COMPREHENSIVE INCOME
For the period ended 30 June
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 financing costs
Profit before tax
Income tax expense
Profit from continuing operations
DISCONTINUED OPERATIONS
Profit from discontinued operations, net of income tax
Profit for the period
OTHER COMPREHENSIVE INCOME
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign subsidiaries, net of tax
Cashflow hedges, net of tax
Other comprehensive income / (loss), net of tax
Total comprehensive income for the period
EARNINGS PER SHARE (CENTS)
Total
– Basic
– Diluted
Continuing operations
– Basic
– Diluted
Note
2017
2016
3a
4a
3b
4b
4d
5
27
6
6
6
6
446,332
(260,361)
185,971
428
(63,736)
(41,420)
(649)
80,594
575
(5,913)
(5,338)
75,256
(21,585)
53,671
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
–
53,671
1,761
53,681
79
2,146
2,225
55,896
20.33
20.22
20.33
20.22
78
(2,850)
(2,772)
50,909
19.66
19.58
19.02
18.94
The consolidated statement of profit or loss and other comprehensive income is to be read in conjunction with the accompanying notes.
GWA GROUP LIMITED | 2017 ANNUAL REPORT | 33
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
Total current assets
NON-CURRENT ASSETS
Deferred tax assets
Property, plant and equipment
Intangible assets
Other
Total non-current assets
Total assets
CURRENT LIABILITIES
Trade and other payables
Employee benefits
Income tax payable
Provisions
Total current liabilities
NON-CURRENT LIABILITIES
Trade and other payables
Loans and borrowings
Employee benefits
Provisions
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Issued capital
Reserves
Retained earnings
Total equity
Note
2017
2016
7a
8
9
10
11
12
13
14
5
15
13
16
14
15
17
17
36,360
65,862
72,319
2,679
35,696
51,983
76,361
2,267
177,220
166,307
16,023
10,493
314,242
286
341,044
518,264
50,783
6,528
7,346
10,594
75,251
827
112,000
7,316
2,267
122,410
197,661
320,603
307,838
(334)
13,099
320,603
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
The consolidated statement of financial position should be read in conjunction with the accompanying notes.
34 | GWA GROUP LIMITED | 2017 ANNUAL REPORT
GWA GROUP LIMITED AND ITS CONTROLLED ENTITIES CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 30 June
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
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 (used in) / from investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings
Repayment of borrowings
Dividends paid
Capital return to holders of LTI grants
Payment for on-market share buy-back
Net cash used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effect of exchange rate changes
Cash within assets held for sale
Cash and cash equivalents at 30 June
2017
2016
483,652
(406,387)
77,265
(5,881)
575
(14,788)
57,171
370
(3,681)
(1,600)
–
(4,911)
27,000
(35,000)
(43,551)
(39)
–
(51,590)
670
35,696
(6)
–
36,360
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
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. Accordingly, the consolidated statement of cash flows for the years
ended 30 June 2017 and 30 June 2016 are not comparable (Refer Note 27).
GWA GROUP LIMITED | 2017 ANNUAL REPORT | 35
GWA GROUP LIMITED AND ITS CONTROLLED ENTITIES
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the period ended 30 June 2017
In thousands of AUD
Balance as at 1 July 2016
Total comprehensive income for the
period
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 income
Total comprehensive income
Transaction with owners, recorded
directly in equity
Share-based payments, net of tax
Dividends paid
Total transactions with owners
Balance at 30 June 2017
For the period ended 30 June 2016
In thousands of AUD
Balance at 1 July 2015
Total comprehensive income for the
period
Profit for the period
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 income
Transaction with owners,
recorded directly in equity
Share-based payments, net of tax
On-market share buy-back, net of tax
Dividends paid
Total transactions with owners
Balance at 30 June 2016
Share capital
Translation
reserve
Hedging
reserve
Equity
compensation
reserve
Retained
earnings
Total
307,877
(1,072)
(3,931)
1,647
3,177
307,698
–
–
–
–
–
(39)
–
(39)
–
79
–
79
79
–
–
–
–
–
2,146
2,146
2,146
–
–
–
–
–
–
–
–
53,671
53,671
–
–
–
79
2,146
2,225
53,671
55,896
797
–
797
(198)
( 43,551)
(43,749)
560
(43,551)
(42,991)
307,838
(993)
(1,785)
2,444
13,099
320,603
Share capital
Translation
reserve
Hedging
reserve
Equity
compensation
reserve
(Accumulated
losses) /
retained
earnings
Total
337,942
(1,150)
(1,081)
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)
78
(2,850)
(2,772)
50,909
(366)
(30,021)
(18,718)
(49,105)
3,177
307,698
The consolidated statement of changes in equity is to be read in conjunction with the accompanying notes.
36 | GWA GROUP LIMITED | 2017 ANNUAL REPORT
GWA GROUP LIMITED AND ITS CONTROLLED ENTITIES
SECTION I: OVERVIEW
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 2017 comprises the Company and its
subsidiaries (together referred to as the ‘consolidated entity’).
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.
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
21 August 2017.
(a) Statement of compliance
The financial report is a general purpose financial report which has been
prepared in accordance with Australian Accounting Standards (‘AASB’)
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 (‘IFRS’)
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 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.
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 12 – measurement of the recoverable amounts of intangible
assets
Note 18 – valuation of financial instruments
The accounting policies set out in this consolidated financial report
have been applied consistently to all periods presented. The accounting
policies have been applied consistently by all entities in the consolidated
entity. The entity has elected not to early adopt any accounting standards
or amendments.
Certain comparative information included in note disclosures have been
amended in these financial statements to conform to the current year
presentation.
(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 2017:
•
•
•
•
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
AASB 1057 Application of Australian Accounting Standards and
AASB 2015-9 Amendments to Australian Accounting Standards –
Scope and Application Paragraphs
The initial adoption of the above revisions have not had a material
impact on the amounts reported or disclosed in the consolidated
annual financial statements.
GWA GROUP LIMITED | 2017 ANNUAL REPORT | 37
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES SECTION I: OVERVIEW CONTINUED
1. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
(c) Changes in accounting policies, disclosures, standards and interpretations continued
(ii) Standards and Interpretations issued but not yet effective
At the date of authorisation of the consolidated financial statements, the following Standards and Interpretations were issued but not yet effective.
Standard / Interpretation
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 9 Financial Instruments(1)
AASB 15 Revenue from Contracts with Customers(2)
AASB 2016-5 Amendments to Australian Accounting Standards –
Classification and Measurement of Share-based Payment Transactions
AASB 16 Leases(3)
IFRIC 23 Uncertainty over Income Tax Treatments
Effective for the
annual reporting
period beginning on
Expected to be initially
applied in the period
ending
1 January 2017
30 June 2018
1 January 2017
30 June 2018
1 January 2018
1 January 2018
1 January 2018
30 June 2019
30 June 2019
30 June 2019
1 January 2019
1 January 2019
30 June 2020
30 June 2020
(1) AASB 9 will be first applicable for the year commencing 1 July 2018. Based on a preliminary assessment of financial instruments currently held,
the impact of this standard is not expected to be material to the results and balances of the consolidated entity.
(2) AASB 15 will be first applicable for the year commencing 1 July 2018. Based on a preliminary assessment of current revenue streams and
customer contracts, the impact of this standard is not expected to be material to the results and balances of the consolidated entity.
(3) AASB 16 will be first applicable for the year commencing 1 July 2019. Based on a preliminary assessment of current lease arrangements, the
impact of this standard is expected to be material to the results and balances of the consolidated entity with the recognition of Right of Use Assets
and Lease Liabilities, and corresponding depreciation and interest expense for the majority of operating leases. However, until a detailed review is
undertaken, it is not practicable to provide a reasonable estimate of the effect of this standard.
These assessments will be updated by the consolidated entity closer to their adoption dates.
For all other Standards and Interpretations issued but not yet effective listed above, the consolidated entity is assessing the potential impact 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 results and
balances 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.
38 | GWA GROUP LIMITED | 2017 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES SECTION I: OVERVIEW CONTINUED
1. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
(f) Current vs non-current classifications
(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.
The consolidated entity presents assets and liabilities in the consolidated
statement of financial position based on current/non-current
classification.
An asset is current when it is:
•
•
•
•
Expected to be realised or intended to be sold or consumed
in the normal operating cycle;
Expected to be realised within twelve months after the
reporting period;
Held primarily for trading; or
Cash and cash equivalent unless restricted from being exchanged
or used to settle a liability for at least twelve months after the
reporting period.
(ii) Financial statements of foreign operations
All other assets are classified as non-current.
A liability is current when:
•
•
•
•
It is expected to be settled in the normal operating cycle;
It is due to be settled within twelve months after the reporting
period;
Held primarily for trading; or
There is no unconditional right to defer the settlement of the liability
for at least twelve months after the reporting period.
All other liabilities are classified as non-current.
Deferred tax assets and liabilities are classified as non-current assets
and liabilities.
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 at balance date 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 nor 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.
GWA GROUP LIMITED | 2017 ANNUAL REPORT | 39
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES SECTION II: RESULTS FOR THE YEAR
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.
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.
Segment results 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.
Discontinued operations in the prior period includes the sale of Gliderol Garage Doors. Refer to Note 27 for further information regarding
discontinued operations.
In thousands of AUD
2017
2016
2017
2016
2017
2016
2017
2016
Bathrooms
& Kitchens
Door & Access
Systems
Discontinued
Total
Sales revenue
350,437
341,953
95,895
97,713
–
4,798
446,332
444,464
Segment profit / (loss) before
significant items and tax
87,603
84,582
6,293
7,318
Brivis product defect issues
–
–
–
–
Segment profit / (loss) before income tax
87,603
84,582
6,293
7,318
Depreciation
Amortisation
Capital expenditure
1,842
1,983
1,034
–
–
3,017
1,896
406
662
935
406
758
Reportable segment assets
400,532
389,947
60,153
61,157
Reportable segment liabilities
49,214
49,673
9,711
9,816
–
–
–
–
–
–
–
–
(605)
93,896
91,295
2,805
–
2,805
2,200
93,896
94,100
103
2,876
3,021
41
44
–
–
406
447
3,679
2,698
460,685
451,104
58,925
59,489
40 | GWA GROUP LIMITED | 2017 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES
SECTION II: RESULTS FOR THE YEAR CONTINUED
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
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
Reconciliations of other material items
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
2017
2016
446,332
–
446,332
93,896
–
(13,302)
80,594
(5,338)
75,256
460,685
57,579
518,264
58,925
138,736
197,661
2,876
–
487
3,363
406
–
1,793
2,199
3,679
–
1,602
5,281
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
3,021
(103)
470
3,388
447
(41)
2,191
2,597
2,698
(44)
930
3,584
*
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.
GWA GROUP LIMITED | 2017 ANNUAL REPORT | 41
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES
SECTION II: RESULTS FOR THE YEAR CONTINUED
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 (2016: 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
2017
421,443
319,784
2016
415,336
321,107
2017
24,889
5,237
2016
24,330
5,256
2017
446,332
325,021
2016
439,666
326,363
* 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 $72,682,000 (2016: $71,365,000), $65,065,000 (2016: $56,073,000) and
$60,440,000 (2016: $63,426,000) respectively of the consolidated entity’s total net revenues for the current year of $446,332,000 (2016:
$439,666,000). The revenues from these customers are reported in the Bathrooms & Kitchens and Door & Access Systems segments.
3. REVENUE AND OTHER INCOME
(a) Sales revenue
In thousands of AUD
Sales revenue
2017
2016
446,332
439,666
446,332
439,666
Sales revenue
Sales revenue 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.
(b) Other income
In thousands of AUD
Foreign currency gains
Other – scrap income, royalties
4. EXPENSES
(a) Cost of sales
In thousands of AUD
Cost of sales
2017
2016
130
298
428
334
445
779
2017
260,361
260,361
2016
259,924
259,924
Cost of sales
Cost of sales comprises the cost of manufacturing and purchase of goods including supply chain costs such as freight and warehousing.
42 | GWA GROUP LIMITED | 2017 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES SECTION II: RESULTS FOR THE YEAR CONTINUED
4. EXPENSES CONTINUED
(b) Other expenses
In thousands of AUD
Foreign currency losses
Other
(c) Personnel expenses
In thousands of AUD
Wages and salaries – including superannuation contributions,
annual leave and long service leave
Equity-settled share-based payment transactions
2017
2016
433
216
649
29
–
29
2017
2016
85,105
1,028
86,133
87,851
99
87,950
Defined contribution superannuation funds
The consolidated entity makes contributions to 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.
The amount recognised as an expense was $5,866,000 for the financial year ended 30 June 2017 (2016: $6,430,000).
(d) 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
Fees on financial liabilities including amortisation
Net financing costs
2017
2016
470
105
575
4,623
976
314
5,913
5,338
447
53
500
5,034
1,241
733
7,008
6,508
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.
GWA GROUP LIMITED | 2017 ANNUAL REPORT | 43
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES
SECTION II: RESULTS FOR THE YEAR CONTINUED
5.
INCOME TAX EXPENSES
Recognised in profit or loss
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 tax expense
Numerical reconciliation between tax expense and pre-tax profit
In thousands of AUD
Profit from continuing operations before tax
Profit from discontinued operations before tax
Profit before tax
Tax expense using the domestic rate of 30% (2016: 30%)
Tax expense / (benefit) due to:
Non-deductible expenses
Non-assessable accounting gain on disposal of CGT assets
Rebateable research and development
Other items
(Over) / under provided in prior years
Income tax expense on pre-tax profit
Deferred tax recognised directly in equity
In thousands of AUD
Derivatives
Share buy-back and capital return costs
Income tax payable
In thousands of AUD
Current tax liability
44 | GWA GROUP LIMITED | 2017 ANNUAL REPORT
2017
2016
21,431
(1,068)
20,363
1,222
21,585
–
21,585
75,256
–
75,256
22,577
135
–
(217)
158
22,653
(1,068)
21,585
919
25
944
15,497
(780)
14,717
5,120
19,837
439
20,276
71,757
2,200
73,957
22,187
94
(629)
(207)
(168)
21,277
(1,001)
20,276
(1,222)
16
(1,206)
7,346
1,851
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES
SECTION II: RESULTS FOR THE YEAR CONTINUED
5.
INCOME TAX EXPENSES CONTINUED
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.
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.
The current tax liability for the consolidated entity represents the amount of income taxes payable. In accordance with 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.
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.
GWA GROUP LIMITED | 2017 ANNUAL REPORT | 45
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES SECTION II: RESULTS FOR THE YEAR CONTINUED
6. EARNINGS PER SHARE
In cents
Total
– Basic
– Diluted
– Basic (excluding significant items)
– Diluted (excluding significant items)
Continuing operations
– Basic
– Diluted
– Basic (excluding significant items)
– Diluted (excluding significant items)
2017
20.33
20.22
20.33
20.22
20.33
20.22
20.33
20.22
2016
19.66
19.58
18.94
18.86
19.02
18.94
19.02
18.94
Basic earnings per share (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.
The calculation of basic and diluted 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
2017
2016
53,671
–
53,671
–
–
–
53,671
51,920
–
51,920
(202)
1,963
1,761
53,681
2016
278,948
(5,923)
273,025
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*
Weighted average number of ordinary shares at 30 June
2017
263,948
–
263,948
* 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 17 for further details). This reduction is
reflected in the calculation of the weighted average number of ordinary shares at 30 June 2016.
46 | GWA GROUP LIMITED | 2017 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES
SECTION II: RESULTS FOR THE YEAR CONTINUED
6. EARNINGS PER SHARE CONTINUED
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)
SECTION III: ASSETS AND LIABILITIES
7. CASH AND CASH EQUIVALENTS
(a) Balances
In thousands of AUD
Bank balances
Call deposits
Cash and cash equivalents in the statement of cash flows
2017
263,948
1,512
265,460
2017
12,872
23,488
36,360
2016
273,025
1,162
274,187
2016
21,150
14,546
35,696
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.
The consolidated entity’s exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities are disclosed in Note 18.
(b) Reconciliation of cash flows from operating activities to net profit
In thousands of AUD
Profit / (loss) for the year
Adjustments for:
Depreciation
Amortisation
Share-based payments – non cash component
Foreign exchange (gain) / loss – unrealised
(Gain) / loss on sale of PP&E and intangible assets
Write down of inventories
Other non cash movements
Changes in assets and liabilities:
Decrease / (increase) in trade and other receivables
Decrease / (increase) in inventories
Decrease / (increase) in prepayments
(Decrease) / increase in trade payables and accrued expenses
(Decrease) / increase in taxes payable and deferred taxes
(Decrease) / increase in provisions and employee benefits
Net cash flows from / (used in) operating activities
2017
53,671
3,363
2,199
587
65
(142)
3,583
(474)
(13,879)
4,042
(510)
10,668
7,661
(13,663)
57,171
2016
53,681
3,491
2,638
(322)
(292)
(58)
1,713
(23)
11,046
3,365
369
(10,573)
740
(10,851)
54,924
GWA GROUP LIMITED | 2017 ANNUAL REPORT | 47
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES
SECTION III: ASSETS AND LIABILITIES CONTINUED
8. TRADE AND OTHER RECEIVABLES
In thousands of AUD
Net trade receivables
Other
2017
65,124
738
65,862
2016
50,502
1,481
51,983
Trade and other receivables are initially measured at fair value and subsequently at their amortised cost less impairment losses. For financial assets
carried at amortised cost, the consolidated entity first assesses whether objective evidence of impairment exists individually for financial assets that
are individually significant, or collectively for financial assets that are not individually significant. If the consolidated entity determines that no objective
evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets
with similar credit risk characteristics and collectively assesses them for impairment.
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.
The consolidated entity’s exposure to credit and currency risk and impairment loss related to trade and other receivables are disclosed in Note 18.
9.
INVENTORIES
In thousands of AUD
Raw materials and consumables
Work in progress
Finished goods
2017
3,655
357
68,307
72,319
2016
4,078
149
72,134
76,361
Inventories are measured at the lower of cost and net realisable value.
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.
Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. The
future estimated recoverability of inventory was determined with consideration of excess inventory volumes, discontinued product lines and risk weightings
applied by management with reference to their assessment of recovery rates.
10. DEFERRED TAX ASSETS AND LIABILITIES
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
In thousands of AUD
Property, plant and equipment
Intangible assets
Inventories
Employee benefits
Provisions
Other items
Tax assets / (liabilities)
Set off of tax
Net tax assets / (liabilities)
Assets
Liabilities
Net
2017
–
1,582
3,893
4,152
4,452
2,645
16,724
(701)
16,023
2016
–
1,710
2,578
4,599
7,486
3,108
19,481
(1,292)
18,189
2017
(15)
(479)
–
–
–
(207)
(701)
701
–
2016
(741)
(517)
–
–
–
(34)
(1,292)
1,292
2017
(15)
1,103
3,893
4,152
4,452
2,438
16,023
–
2016
(741)
1,193
2,578
4,599
7,486
3,074
18,189
–
–
16,023
18,189
48 | GWA GROUP LIMITED | 2017 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES SECTION III: ASSETS AND LIABILITIES CONTINUED
10. DEFERRED TAX ASSETS AND LIABILITIES CONTINUED
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 16
Recognised
in income
Recognised
in equity
Balance
30 June 17
(741)
1,193
2,578
4,599
7,486
3,074
18,189
726
(90)
1,315
(447)
(3,034)
308
(1,222)
–
–
–
–
–
(944)
(944)
(15)
1,103
3,893
4,152
4,452
2,438
16,023
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
2017
71,352
104
(741)
1,193
2,578
4,599
7,486
3,074
18,189
2016
67,346
212
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
The deductible capital losses accumulated at balance date do not expire under current tax legislation.
Refer to Note 5 for the consolidated entity’s accounting policy on deferred tax.
GWA GROUP LIMITED | 2017 ANNUAL REPORT | 49
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES SECTION III: ASSETS AND LIABILITIES CONTINUED
11. PROPERTY, PLANT AND EQUIPMENT
In thousands of AUD
Cost
Balance at 1 July 2016
Additions
Disposals transferred to restructuring provision
Disposals
Transfers
Exchange rate movements
Balance at 30 June 2017
Balance at 1 July 2015
Additions
Disposals of discontinued operations
Disposals transferred to restructuring provision
Other disposals
Exchange rate movements
Balance at 30 June 2016
Depreciation and impairment losses
Balance at 1 July 2016
Depreciation
Depreciation charged to restructuring provision
Disposal transferred to restructuring provision
Disposals
Exchange rate movements
Balance at 30 June 2017
Balance at 1 July 2015
Depreciation
Depreciation charged to restructuring provision
Disposal of discontinued operations
Disposal transferred to restructuring provision
Other disposals
Exchange rate movements
Balance at 30 June 2016
Carrying amounts
As at 30 June 2017
As at 30 June 2016
50 | GWA GROUP LIMITED | 2017 ANNUAL REPORT
Plant and
equipment
Work in
progress
71,817
3,804
(27,168)
(5,557)
187
(3)
43,080
127,472
1,386
(9,573)
(1,540)
(46,002)
74
71,817
(62,944)
(3,363)
(102)
26,155
5,383
3
(34,868)
2,408
62
–
–
(187)
(2)
2,281
804
1,781
(177)
–
–
–
2,408
–
–
–
–
–
–
–
Total
74,225
3,866
(27,168)
(5,557)
–
(5)
45,361
128,276
3,167
(9,750)
(1,540)
(46,002)
74
74,225
(62,944)
(3,363)
(102)
26,155
5,383
3
(34,868)
(114,162)
(177)
(114,339)
(3,491)
(1,677)
9,573
916
45,965
(68)
(62,944)
–
–
177
–
–
–
–
(3,491)
(1,677)
9,750
916
45,965
(68)
(62,944)
8,212
8,873
2,281
2,408
10,493
11,281
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES SECTION III: ASSETS AND LIABILITIES CONTINUED
11. PROPERTY, PLANT AND EQUIPMENT CONTINUED
Recognition and Measurement
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.
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.
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.
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 3-15 years
The residual value, the useful life and the depreciation method applied to an asset are reassessed annually.
Impairment
The carrying values of property, plant and equipment are reviewed for impairment at each reporting date, with the recoverable amount being estimated
when events or changes in circumstances indicate that the carrying value may be impaired. The recoverable amount of property, plant and equipment
is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present
value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.
For an asset that does not generate largely independent cash inflows, recoverable amount is determined for the cash-generating unit to which the
asset belongs, unless the asset's value in use can be estimated to be close to its fair value.
An impairment exists when the carrying value of an asset or cash-generating unit exceeds its estimated recoverable amount. The asset or cash-
generating unit is then written down to its recoverable amount. Impairment losses are recognised in profit or loss.
GWA GROUP LIMITED | 2017 ANNUAL REPORT | 51
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES SECTION III: ASSETS AND LIABILITIES CONTINUED
12. INTANGIBLE ASSETS
In thousands of AUD
Cost
Balance at 1 July 2016
Additions
Disposals
Exchange rate movements
Balance at 30 June 2017
Balance at 1 July 2015
Additions
Disposals of discontinued operations
Other disposals
Exchange rate movements
Balance at 30 June 2016
Amortisation and impairment losses
Balance at 1 July 2016
Amortisation
Disposals
Balance at 30 June 2017
Balance at 1 July 2015
Amortisation
Disposal of discontinued operations
Other disposals
Balance at 30 June 2016
Carrying amounts
As at 30 June 2017
As at 30 June 2016
Software
Brand names
Trade names,
designs, patents
and customer
relationships
Goodwill
Total
28,337
1,600
(295)
–
302,800
5,580
6,006
342,723
–
–
–
–
–
–
–
–
–
1,600
(295)
–
29,642
302,800
5,580
6,006
344,028
35,099
302,767
909
(475)
(7,196)
–
–
–
–
33
12,897
–
(7,317)
–
–
30,080
380,843
–
(24,074)
–
–
909
(31,866)
(7,196)
33
28,337
302,800
5,580
6,006
342,723
(25,155)
(1,793)
242
(26,706)
(30,635)
(2,201)
485
7,196
(25,155)
–
–
–
–
–
–
–
–
–
(2,674)
(406)
–
(3,080)
(9,585)
(437)
7,348
–
(2,674)
–
–
–
–
(24,074)
–
24,074
–
–
(27,829)
(2,199)
242
(29,786)
(64,294)
(2,638)
31,907
7,196
(27,829)
2,936
3,182
302,800
302,800
2,500
2,906
6,006
6,006
314,242
314,894
Recognition and measurement
Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less
any accumulated amortisation and any accumulated impairment losses.
The cost of an intangible asset acquired in a business combination is its fair value as at the date of acquisition. Goodwill acquired in business
combinations is initially measured at cost being the excess of the cost of the business combination over the consolidated entity’s interest in the net fair
value of the acquiree’s identifiable assets, liabilities and contingent liabilities.
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.
52 | GWA GROUP LIMITED | 2017 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES SECTION III: ASSETS AND LIABILITIES CONTINUED
12. INTANGIBLE ASSETS CONTINUED
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.
Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognised in
the profit or loss as incurred. Expenditure incurred in developing, maintaining or enhancing brand names is recognised in the Income Statement in the
year in which it is incurred.
Amortisation
Amortisation is recognised in the Income Statement on a straight-line basis over the estimated useful lives of intangible assets unless such lives are
indefinite. 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:
•
•
•
•
•
•
•
goodwill
brand names
software
trade names
designs
patents
indefinite
indefinite
4 years
10-20 years
15 years
3-19 years (based on patent term)
customer relationships
8 years
Brand names are not amortised as the directors believe that they have an indefinite useful life.
Impairment
Intangible assets with finite lives are assessed for impairment whenever there is an indication that the intangible asset may be impaired.
Intangible assets with an indefinite useful life are tested for impairment annually, or more frequently if events or changes in circumstances indicate
that the carrying value is impaired.
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 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 CGU’s)
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.
Carrying value of brand names and goodwill for each cash generating unit and segment
In thousands of AUD
Bathroom and Kitchens
Door & Access Systems
2017
284,198
24,608
308,806
2016
284,198
24,608
308,806
GWA GROUP LIMITED | 2017 ANNUAL REPORT | 53
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES SECTION III: ASSETS AND LIABILITIES CONTINUED
12. INTANGIBLE ASSETS CONTINUED
Impairment testing for brand names and goodwill
The recoverable amounts of all brand names and goodwill were assessed as at 30 June 2017 based on internal value in use calculations and no
impairment was identified for any cash generating units (2016: 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 2.8% (2016: 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% – 14.1% were used (2016: 12.5% – 13.0%).
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 2017 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.
13. TRADE AND OTHER PAYABLES
In thousands of AUD
Current
Trade payables and accrued expenses
Forward exchange contracts used for hedging (net)
Interest rate swaps used for hedging (net)
Non-current
Trade payables and accrued expenses
2017
2016
48,232
2,188
363
50,783
34,861
3,944
1,705
40,510
827
432
Trade and other payables are initially measured at fair value and subsequently at their amortised cost.
The consolidated entity’s exposure to currency risk and liquidity risk related to trade and other payables are disclosed in Note 18.
Refer to Note 18 for details on forward exchange contracts and interest rate swaps.
14. EMPLOYEE BENEFITS
In thousands of AUD
Current
Liability for annual leave
Liability for long service leave
Non-current
Liability for long service leave
2017
2016
4,756
1,772
6,528
5,398
1,491
6,889
7,316
8,447
54 | GWA GROUP LIMITED | 2017 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES
SECTION III: ASSETS AND LIABILITIES CONTINUED
14. EMPLOYEE BENEFITS CONTINUED
Short-term employee 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.
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 using market yields at the reporting date on corporate bonds with terms
to maturity that match, as closely as possible, the estimated future cash outflows.
15. PROVISIONS
In thousands of AUD
Balance at 1 July 2016
Additional provisions made
Provisions used
Balance at 30 June 2017
Current
Non-current
Warranties
Restructuring
Site
restoration
2,609
605
(616)
2,598
2,554
44
2,598
19,235
–
(12,242)
6,993
6,912
81
6,993
1,758
326
(100)
1,984
444
1,540
1,984
Other
1,430
261
(405)
1,286
684
602
1,286
Total
25,032
1,192
(13,363)
12,861
10,594
2,267
12,861
Recognition and Measurement
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.
Warranties
The provision for warranties relates to future warranty expense on products sold during the current and previous financial years. A provision for
warranties is recognised when the underlying products or services are sold. The provision is based on estimates made from historical warranty data
associated and a weighting of all possible outcomes against their associated probabilities.
Restructuring
The restructuring provision relates to the estimated costs of redundancies, site closures and product rationalisation related to business 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.
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.
GWA GROUP LIMITED | 2017 ANNUAL REPORT | 55
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES
SECTION IV. FUNDING AND RISK MANAGEMENT
16. 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 18.
Non-current liabilties
In thousands of AUD
Unsecured cash advance facilities
Financing facilities
Facilities available
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
2017
112,000
2016
120,000
2,000
7,000
225,000
234,000
–
4,116
112,000
116,116
2,000
2,884
113,000
117,884
2,000
7,000
225,000
234,000
–
4,116
120,000
124,116
2,000
2,884
105,000
109,884
Recognition and Measurement
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.
Unsecured cash advance facility
On 19 October 2016, GWA successfully completed the extension of its syndicated banking facility. The facility comprises a single revolving facility
of $225,000,000 which matures in October 2019.
Prior to 19 October 2016 and as at 30 June 2016, the facility matured in October 2018.
The loan bears interest at market rates and interest is typically payable every 30 to 90 days. The consolidated entity partially 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.
56 | GWA GROUP LIMITED | 2017 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES
SECTION IV. FUNDING AND RISK MANAGEMENT CONTINUED
17. CAPITAL AND RESERVES
Share capital
In thousands of AUD
On issue at 1 July – fully paid
On-market buy-back shares acquired and cancelled, net of tax
Capital return to holders of FY14 LTI grant
On issue at 30 June – fully paid
Ordinary shares
AUD
2017
263,948
–
–
2016
278,948
(15,000)
–
2017
307,877
–
(39)
2016
337,942
(30,021)
(44)
263,948
263,948
307,838
307,877
Ordinary Shares
Ordinary shares are classified as equity. Incremental costs (transaction costs) directly attributable to the issue of ordinary shares are recognised as a
deduction from equity, net of any tax effects.
Transaction costs of an equity transaction are accounted for as a deduction from equity, net of any related income tax benefit.
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.
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).
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 performance rights granted (refer Note 19).
GWA GROUP LIMITED | 2017 ANNUAL REPORT | 57
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES SECTION IV. FUNDING AND RISK MANAGEMENT CONTINUED
17. CAPITAL AND RESERVES CONTINUED
Dividends
Dividends recognised in the current year are:
2017
Interim 2017 ordinary
Final 2016 ordinary
Special 2016
Total amount
2016
Interim 2016 ordinary
Total amount
Costs per share
(In cents)
Total amount
(In thousands of AUD)
Franked
Date of Payment
7.5
8.0
1.0
16.5
7.0
7.0
19,796
21,116
2,639
43,551
18,718
18,718
100%
7th March 2017
100% 16th September 2016
100% 16th September 2016
100%
5th April 2016
Dividends are recognised as a liability in the period in which they are declared. 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 2017 ordinary
9.0
23,755
100%
5th September 2017
Costs per share
(In cents)
Total amount
(In thousands of AUD)
Franked
Date of Payment
The financial effect of these dividends has not been brought to account in the financial statements for the financial year ended 30 June 2017 and will
be recognised in subsequent financial reports.
Dividend franking account
In thousands of AUD
30 per cent franking credits available to shareholders of GWA Group Limited for subsequent financial years
The 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.
18. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT
(a) Policies
The Company
2017
14,770
2016
13,689
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 Finance
Risk Committee, which is responsible for developing and monitoring risk management policies. The Finance Risk 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.
58 | GWA GROUP LIMITED | 2017 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES
SECTION IV. FUNDING AND RISK MANAGEMENT CONTINUED
18. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT CONTINUED
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.
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 re-measurement 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.
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.
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.
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.
Changes in the fair value of separable embedded derivatives are recognised immediately in profit or loss.
GWA GROUP LIMITED | 2017 ANNUAL REPORT | 59
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES SECTION IV. FUNDING AND RISK MANAGEMENT CONTINUED
18. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT CONTINUED
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.
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.
(b) 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 57% of the trade receivables carrying amount at 30 June 2017 (2016: 39%).
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 was as follows:
2017
36,360
65,124
738
102,222
2016
35,696
50,502
1,481
87,679
2017 Receivable
2017 Impairment
2016 Receivable
2016 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.
55,206
26,065
611
40
73
(16,851)
65,144
–
–
(7)
(4)
(9)
–
(20)
51,357
15,193
678
164
84
(16,889)
50,587
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 losses (recognised) / written back
Provisions used during the year
Balance at 30 June
2017
(85)
(14)
79
(20)
60 | GWA GROUP LIMITED | 2017 ANNUAL REPORT
–
–
(2)
(8)
(75)
–
(85)
2016
(223)
109
29
(85)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES SECTION IV. FUNDING AND RISK MANAGEMENT CONTINUED
18. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT CONTINUED
(c) Liquidity risk
Liquidity risk is the risk that the consolidated entity will not be able to meet its financial obligations as they fall due. The consolidated entity prepares
cash flow forecasts and maintains financing facilities with a number of institutions to ensure sufficient funds will be available to meet obligations
without incurring excessive costs. The cash flows of the consolidated entity are controlled by management and reported monthly to the Board who
is ultimately responsible for maintaining liquidity.
The contractual maturities of financial liabilities and derivatives that are cash flow hedges of the consolidated entity, including estimated interest
payments are as follows:
Maturity analysis
In thousands of AUD
2017
Non-derivative financial liabilities
Carrying
amount
Contractual
cash flows
0-6
months
6-12
months
1-2 years
2-5 years
5+ years
Unsecured cash advance facilities
(112,000)
(121,942)
(2,169)
(2,169)
(4,338)
(113,266)
–
Trade and other payables
Derivative financial liabilities
(51,610)
(52,114)
(51,061)
–
(117)
(351)
(585)
Interest rate swaps used for hedging (net)
(363)
(363)
(189)
(64)
(82)
(28)
Forward exchange contracts used for hedging
(net)
(2,188)
(2,188)
(1,053)
(1,135)
–
–
–
–
Total at 30 June 2017
(166,161)
(176,607)
(54,472)
(3,368)
(4,537)
(113,645)
(585)
2016
Non-derivatives financial liabilities
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)
(192)
Interest rate swaps used for hedging (net)
(1,705)
(926)
(438)
(362)
(96)
(30)
Forward exchange contracts used for hedging
(net)
(3,944)
(3,944)
(2,744)
(1,198)
(2)
–
–
–
Total at 30 June 2016
(160,942)
(169,554)
(40,055)
(3,572)
(4,219)
(121,516)
(192)
(d) 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
Risk Committee.
(i)
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.
As at 30 June 2017, the consolidated entity had interest rate swaps in operation with a notional contract amount of $75,000,000 (2016: $75,000,000).
These swaps have fixed rates ranging from 2.14% to 3.42% (2016: 3.11% to 3.49%) and mature over the next year. The consolidated entity also has
replacement interest rate swaps effective in the following financial year with a notional contract amount of $50,000,000 (2016: $75,000.000). These
swaps have fixed rates ranging from 2.20% to 2.30% and mature over the next two to three years.
The consolidated entity classifies interest rate swaps as cash flow hedges and states them at fair value. The net fair value of swaps as at 30 June 2017
of $363,000 was recognised as a fair value derivative liability (2016: $1,705,000).
GWA GROUP LIMITED | 2017 ANNUAL REPORT | 61
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES
SECTION IV. FUNDING AND RISK MANAGEMENT CONTINUED
18. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT CONTINUED
(d) Market risk continued
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
2017
Notional value
2017
Carrying amount
2016
Notional value
2016
Carrying
amount
(112,000)
(112,000)
(120,000)
(120,000)
12,872
23,488
(75,640)
12,872
23,488
(75,640)
21,150
14,546
(84,304)
21,150
14,546
(84,304)
125,000
(363)
150,000
(1,705)
Total
49,360
(76,003)
65,696
(86,009)
Sensitivity analysis
The following table demonstrates the sensitivity to a reasonably possible change in interest rates on that portion of loans and borrowings affected, after
the impact of hedge accounting, with all other variables held constant.
The impact on the consolidated entity’s profit is affected through the impact on floating rate borrowings and derivatives. The impact on the
consolidated entity’s other comprehensive income (‘OCI’) is due to changes in the fair value of interest rate swap contracts designated as cash flow
hedges.
The assumed movement in basis points for the interest rate sensitivity analysis is considered reasonably possible given the market forecasts available
at the reporting date and the current economic environment in which the consolidated entity operates.
In thousands of AUD - Higher/(Lower)
Increase of 100 basis points (2016: 100 basis points)
Post Tax Profit
OCI (cash flow hedges, net of tax)
Decrease of 50 basis points (2016: 100 basis points)
Post Tax Profit
OCI (cash flow hedges, net of tax)
(ii) Foreign currency risk
2017
(340)
1,035
170
(517)
2016
(356)
2,219
881
(2,223)
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, RMB and NZD.
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 12 months after the balance date.
As at 30 June 2017, the consolidated entity had forward exchange contracts covering 82% of its expected USD net transaction exposure (2016: 86%),
80% of its expected RMB net transaction exposure (2016: 88%), and 80% of its expected NZD net transaction exposure (2016: 55%) for the 12 month
period after the balance date.
The consolidated entity classifies forward exchange contracts as cash flow hedges and states them at fair value. The net fair value of contracts as at
30 June 2017 of $2,188,000 was recognised as a fair value derivative liability (2016: $3,944,000).
62 | GWA GROUP LIMITED | 2017 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES
SECTION IV. FUNDING AND RISK MANAGEMENT CONTINUED
18. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT CONTINUED
Sensitivity analysis
The following table demonstrates the impact of reasonably possible exchange rate movements with all other variables held constant. However,
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 on the consolidated entity’s other comprehensive income (‘OCI’) is due to changes in the fair value of forward exchange contracts
designated as cash flow hedges.
The assumed movement in exchange rates for the sensitivity analysis is considered reasonably possible given the market forecasts available at the
reporting date and the current economic environment in which the consolidated entity operates.
The impact on foreign currency translation and monetary assets and liabilities not designated as cash flow hedges are not material.
In thousands of AUD - Higher/(Lower)
USD
10% increase in USD:AUD – OCI (cash flow hedges, net of tax)
10% decrease in USD:AUD – OCI (cash flow hedges, net of tax)
RMB
10% increase in RMB:AUD – OCI (cash flow hedges, net of tax)
10% decrease in RMB:AUD – OCI (cash flow hedges, net of tax)
NZD
10% increase in NZD:AUD – OCI (cash flow hedges, net of tax)
10% decrease in NZD:AUD – OCI (cash flow hedges, net of tax)
(e) Fair values
2017
2016
6,700
(5,482)
1,581
(1,293)
(1,015)
835
5,599
(4,581)
1,417
(1,160)
(740)
605
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 used for hedging
Forward contracts used for hedging
Unsecured cash advance facilities
Trade and other payables
Carrying amount
2017
Fair value
2017
Carrying amount
2016
Fair value
2016
36,360
65,862
(363)
(2,188)
36,360
65,862
(363)
(2,188)
35,696
51,983
(1,705)
(3,944)
35,696
51,983
(1,705)
(3,944)
(112,000)
(112,000)
(120,000)
(120,000)
(49,059)
(61,388)
(49,059)
(61,388)
(35,293)
(73,263)
(35,293)
(73,263)
The fair value of financial instruments were estimated using the following methods and assumptions.
(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
Interest-bearing loans bear interest at market rates. Accordingly, the notional amount of the interest-bearing loans is deemed to reflect the fair value.
(iii) Trade and other receivables / payables
All current receivables / payables are either repayable within twelve months or repayable on demand. Non-current payables relate to a supplier
contractual obligation. Accordingly, the notional amount is deemed to reflect the fair value.
GWA GROUP LIMITED | 2017 ANNUAL REPORT | 63
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES
SECTION IV. FUNDING AND RISK MANAGEMENT CONTINUED
18. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT CONTINUED
(e) Fair values continued
(iv) Interest rates used for determining fair value
The consolidated entity uses the government yield curve as of 30 June 2017 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
2017
1.7% - 2.2%
3.2% - 3.7%
2016
1.8% - 2.0%
3.0% - 3.3%
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 2017
Forward contracts used for hedging
Interest rate swaps used for hedging
30 June 2016
Forward contracts used for hedging
Interest rate swaps used for hedging
SECTION V. OTHER INFORMATION
19. SHARE-BASED PAYMENTS
Level 1
–
–
–
–
–
–
Level 2
(2,188)
(363)
(2,551)
(3,944)
(1,705)
(5,649)
Level 3
–
–
–
–
–
–
Total
(2,188)
(363)
(2,551)
(3,944)
(1,705)
(5,649)
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 performance rights granted to executives in the 2016/17 year and 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. The performance hurdles are challenging but achievable and focus 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.
64 | GWA GROUP LIMITED | 2017 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES
SECTION V. OTHER INFORMATION CONTINUED
19. SHARE-BASED PAYMENTS CONTINUED
For performance rights granted to executives in the 2016/17 year and 2015/16 year, the performance hurdles and vesting proportions for the ROFE
performance measure and TSR performance measure are outlined in the tables 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)
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)
Recognition and Measurement
The grant date fair value of performance rights granted to employees is recognised as a personnel expense, with a corresponding increase in equity,
evenly over the specified three year 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.
Fair Value
During the year 581,500 performance rights were granted to employees (2016: 850,500) at a weighted average fair value of $1.28 (TSR) and $2.11
(ROFE) (2016: $1.33 (TSR) and $1.78 (ROFE)).
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 5.61%, the risk free rate was 1.96% and annualised share price volatility was 35% for the
Company and its comparator companies listed for the TSR hurdle.
The amount recognised as personnel expenses (Note 4) in the current financial year was $1,028,000 (2016: $99,000).
For further details of the Long Term Incentive (Equity) Plan, refer to the Remuneration Report section of the Directors’ Report.
In number of
performance rights
2017
2016
Grant date
Expiry date
24/02/2014
30/06/2016
25/02/2015
30/06/2017
23/03/2016
30/06/2018
24/02/2017
30/06/2019
25/02/2013
30/06/2015
24/02/2014
30/06/2016
25/02/2015
30/06/2017
23/03/2016
30/06/2018
–
850,500
Balance at
beginning of
the year
Granted
during
the year
Vested
during
the year
Forfeited
during
the year
Balance at
end of
the year
340,000
430,333
850,500
–
1,620,833
726,000
340,000
507,000
–
–
–
581,500
581,500
–
–
–
(170,000)
(170,000)
–
–
–
–
(7,333)
423,000
(31,500)
819,000
–
581,500
(170,000)
(208,833)
1,823,500
(195,476)
(530,524)
–
–
–
–
–
340,000
(76,667)
430,333
–
850,500
1,573,000
850,500
(195,476)
(607,191)
1,620,833
GWA GROUP LIMITED | 2017 ANNUAL REPORT | 65
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES
SECTION V. OTHER INFORMATION CONTINUED
20. RELATED PARTIES
Key management personnel compensation
The key management personnel compensation included in personnel expenses (Note 4) are as follows:
In AUD
Short-term employee benefits
Post-employment benefits
Termination benefits
Share-based payments
Other long term employee benefits
2017
5,694,405
288,899
100,000
718,960
6,320
6,808,584
2016
5,837,153
276,604
780,000
236,017
(316,697)
6,813,077
Individual directors and executives compensation disclosures
Information regarding individual and executives compensation is provided in the Remuneration Report section of the Directors’ Report.
21. AUDITOR’S REMUNERATION
In AUD
Audit 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
Auditors of the Company
KPMG Australia:
Other services
Overseas KPMG Firms:
Taxation services
22. OPERATING LEASE COMMITMENTS
Non-cancellable operating lease rentals are payable as follows:
In thousands of AUD
Less than one year
Between one and five years
More than 5 years
2017
2016
405,000
396,300
–
17,000
34,186
16,000
422,000
446,486
61,592
34,576
96,168
2017
14,884
34,517
22,728
72,129
–
52,112
52,112
2016
14,089
18,836
441
33,366
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.
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.
During the financial year ended 30 June 2017, $15,276,000 (2016: $16,189,000) was recognised as an expense in profit or loss in respect of
operating leases.
66 | GWA GROUP LIMITED | 2017 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES
SECTION V. OTHER INFORMATION CONTINUED
23. CAPITAL COMMITMENTS
Capital expenditure commitments for plant and equipment purchases contracted but not provided for are payable as follows:
In thousands of AUD
Within one year
Between one and five years
24. 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
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
2017
4,522
–
4,522
2016
3,954
1,688
5,642
Parties to cross
guarantee
Country
of incorporation
Ownership Interest
2017
2016
Y
Y
Y
N
Y
Y
N
Y
Y
Y
N
Y
Y
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
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%
GWA GROUP LIMITED | 2017 ANNUAL REPORT | 67
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES SECTION V. OTHER INFORMATION CONTINUED
25. 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 24 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.
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 2017, 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
Net profit / (loss)
Total comprehensive income / (loss), net of tax
(Accumulated losses) / retained earnings at beginning of the year
Dividends recognised during the year
Share-based payments, net of tax
Retained earnings / (accumulated losses) at end of the year
2017
425,783
(246,185)
179,598
(101,222)
571
(5,913)
73,034
(20,959)
52,075
–
52,075
52,075
(3,161)
(43,551)
(198)
5,165
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)
68 | GWA GROUP LIMITED | 2017 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES SECTION V. OTHER INFORMATION CONTINUED
25. DEED OF CROSS GUARANTEE CONTINUED
Statement of financial position
In thousands of AUD
Assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other
Total current assets
Investments
Deferred tax assets
Property, plant and equipment
Intangible assets
Other
Total non-current assets
Total assets
Liabilities
Trade and other payables
Employee benefits
Income tax payable
Provisions
Total current liabilities
Trade and other payables
Intercompany 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
2017
2016
33,437
62,900
69,238
2,626
168,201
11,113
15,846
9,993
310,167
286
347,405
515,606
48,997
6,458
7,222
10,594
73,271
667
6,431
112,000
7,308
2,267
128,673
201,944
313,662
307,838
659
5,165
313,662
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
6,820
1,862
22,430
70,412
432
4,603
120,000
8,442
2,602
136,079
206,491
302,390
307,877
(2,326)
(3,161)
302,390
GWA GROUP LIMITED | 2017 ANNUAL REPORT | 69
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES
SECTION V. OTHER INFORMATION CONTINUED
26. PARENT ENTITY DISCLOSURES
As at, and throughout, the financial year ended 30 June 2017 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
The Company
2017
2016
82,292
–
82,292
–
745,407
137
394,675
307,838
2,444
40,450
350,732
19,038
–
19,038
–
662,268
19
350,836
307,877
1,647
1,908
311,432
The directors are of the opinion that provisions are not required in respect of these matters, as it is not probable that a future sacrifice of economic
benefits will be required or the amount is not capable of reliable measurement.
Contingent liabilities
The directors are not aware of any contingent liabilities of the parent entity as at reporting date (2016: $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 (2016: $nil).
Parent entity guarantees
The parent entity in the ordinary course of business has guaranteed the performance of certain contractual commitments entered into by 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 24 and 25.
70 | GWA GROUP LIMITED | 2017 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES
SECTION V. OTHER INFORMATION CONTINUED
27. DISCONTINUED OPERATIONS
During the year ended 30 June 2016, the Gliderol business was sold with an effective date of 31 July 2015. The operating activities of the Gliderol
business was classified as discontinued in the prior year.
(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
Product defect issues settlement – Brivis
Tax expense on product defect issues settlement
Profit / (loss) for the year
Basic profit / (loss) per share (cents per share)
Diluted profit / (loss) per share (cents per share)
(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
2016
4,798
(5,403)
(605)
403
(202)
2,805
(842)
1,761
0.64
0.64
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
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.
28. SUBSEQUENT EVENTS
To the Directors’ best knowledge, there are no events that have arisen subsequent to 30 June 2017 that will, or may, significantly affect the operation
or results of the consolidated entity.
GWA GROUP LIMITED | 2017 ANNUAL REPORT | 71
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES DIRECTORS’ DECLARATION
In the opinion of the directors of GWA Group Limited (the Company):
1.
The consolidated financial statements and notes, and the Remuneration Report in the Directors’ Report, are in accordance with the
Corporations Act 2001 including:
a) giving a true and fair view of the financial position of the consolidated entity as at 30 June 2017 and of its performance for the year
ended on that date; and
b) complying with Australian Accounting Standards and the Corporations Regulations 2001;
2.
3.
4.
5.
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 25 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 the Chief Financial Officer for the financial year ended 30 June 2017; and
The directors draw attention to Note 1(a) to the consolidated financial statements which includes a statement of compliance with
International Financial Reporting Standards (IFRS).
Dated at Sydney on 21 August 2017.
Signed in accordance with a resolution of the directors:
Darryl D McDonough
Director
Tim R Salt
Director
72 | GWA GROUP LIMITED | 2017 ANNUAL REPORT
GWA GROUP LIMITED AND ITS CONTROLLED ENTITIES
INDEPENDENT AUDITOR’S REPORT
TO THE SHAREHOLDERS OF GWA GROUP LIMITED
REPORT ON THE AUDIT OF THE FINANCIAL REPORT
OPINION
We have audited the Financial Report of GWA Group Limited
(the Company).
In our opinion, the accompanying Financial Report of
the Company is in accordance with the Corporations
Act 2001, including:
• giving a true and fair view of the Group’s financial position
as at 3 June 2017 and of its financial performance for the
year ended on that date; and
• complying with Australian Accounting Standards
and the Corporations Regulations 2001.
BASIS FOR OPINION
The Financial Report comprises:
• Consolidated Statement of financial position as at 30 June 2017;
• Consolidated Income Statement, Consolidated Statement of Comprehensive
Income, Consolidated Statement of Changes in Equity, and Consolidated
Statement of Cash Flows for the year then ended;
• Notes including a summary of significant accounting policies; and
• Directors’ Declaration.
The Group consists of the Company and the entities it controlled at the year-end
or from time to time during the financial year.
We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Report section of our report.
We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and
Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the Financial Report
in Australia. We have fulfilled our other ethical responsibilities in accordance with the Code.
KEY AUDIT MATTERS
The Key Audit Matters we identified are:
• Valuation of Inventory
• Valuation of Brand Names and Goodwill
VALUATION OF INVENTORY $72M
Refer to Note 9 to the Financial Report
Key Audit Matters are those matters that, in our professional judgement, were
of most significance in our audit of the Financial Report of the current period.
These matters were addressed in the context of our audit of the Financial
Report as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters.
The key audit matter
How the matter was addressed in our audit
The valuation of inventory is a key audit matter as inventory is
a significant asset in the financial report and the net realisable
value is impacted by building industry cycles and changes in
consumer preferences. This necessitated an additional focus
on excess and discontinued inventory SKU’s (stock keeping
unit) and judgemental valuation assumptions.
We focused on the following elements of the Group’s estimation
of the valuation of inventory:
• Criteria for categorisation of inventory SKU’s by risk, such
as discontinued, excess or current range, as they attribute
different values;
• Evaluations of volume of inventory, as this may influence
categorisation and therefore attribute different values. This
included excess inventory volumes, determined by the
Group with reference to inventory volumes greater than the
last 12 months sales;
• Expected selling prices, and judgements associated to the
forward-looking estimation. This included assessing the
impact of inventory sold in the current year below cost.
Our procedures included:
• We tested the completeness and accuracy of inventory identified as
discontinued or excess as follows:
» We obtained sales data for the last 12 months by inventory SKU and
compared this to the calculations performed by the Group to determine
excess inventory volumes; and
» We compared inventory SKU’s approved to be discontinued to the
discontinued inventory categorisation report used in calculating the
recoverable value of inventory.
• We independently developed an expected inventory valuation range by
considering the following:
»
Inventory turnover rate by inventory SKU;
» Recovery rates achieved historically when selling excess or discontinued
inventory. We considered the historical quantum recovered compared to
the original cost; and
» Overall recoveries achieved for sales recorded below original cost.
We performed a sensitivity analysis by flexing the forecasted expected selling prices
applied to each category, and assessed the impact on the valuation of inventory.
We compared our estimated inventory valuation range to that recorded by the Group.
KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under Professional Standards Legislation.
GWA GROUP LIMITED | 2017 ANNUAL REPORT | 73
GWA GROUP LIMITED AND ITS CONTROLLED ENTITIES INDEPENDENT AUDITOR’S REPORT
TO THE SHAREHOLDERS OF GWA GROUP LIMITED
CONTINUED
VALUATION OF BRAND NAMES AND GOODWILL $309M
Refer to Note 12 to the financial report
The key audit matter
How the matter was addressed in our audit
The valuation of Brand Names and Goodwill is a key audit
matter due to the complexity in auditing, the inherent
uncertainty associated with forecasting and discounting future
cash flows (EBIT), especially where recent strategic initiatives
have been implemented.
The annual assessment of the carrying value of Brand
Names and Goodwill requires the Group to apply significant
judgements when determining the forecasted cash flows to
be applied in the valuation models of each Cash Generating
Unit (“CGU”). The judgements made include revenue growth
based on forecast dwelling completions and new customer
contracts, forecast earnings before interest and tax (EBIT),
terminal growth rates, corporate cost allocations and discount
rates.
Our procedures included:
• We evaluated the Group’s judgements applied in the valuation models.
Our testing focused on the following assumptions:
» Revenue growth – we compared this to external industry data, adjusted
for specific Group initiatives and new customer contracts;
» Forecast EBIT – we assessed this assumption against historical
performance and consideration of the recent strategic initiatives (including
new customer contracts) and their impact to future performance;
» Discount rates – our valuation specialist independently developed an
estimated range of each CGU’s discount rate based on their industry
knowledge, publicly available information for comparable entities and the risk
in forecasted cash flows. We then compared this to the discount rate applied
in the valuation model;
» Corporate costs – we considered the reasonableness of the basis used to
allocate corporate costs to each CGU with reference to the nature of the
costs, their relevance to the cash flows generated by the CGUs and the
criteria in the accounting standards.
» Terminal growth rate – we compared the rate applied to external industry
reports.
• We considered the financial forecasting accuracy of the Group by comparing
previous EBIT and revenue forecasts to actual results achieved. We
considered the results of this procedure and the level of risk embedded in
the underlying forecast cash flows in our consideration of the discount rate
applied.
•
Performed sensitivity analysis in relation to the following assumptions,
forecast EBIT, revenue and terminal growth rates, and the discount rate, and
considered the impact of this on the valuation.
OTHER INFORMATION
Other Information is financial and non-financial information in GWA Group’s annual reporting which is provided in addition to the Financial
Report and the Auditor’s Report. The Directors are responsible for the Other Information.
Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not express an audit opinion or any form
of assurance conclusion thereon, with the exception of the Remuneration Report.
In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In doing so, we consider whether
the Other Information is materially inconsistent with the Financial Report or our knowledge obtained in the audit, or otherwise appears to
be materially misstated.
We are required to report if we conclude that there is a material misstatement of this Other Information, and based on the work we have
performed on the Other Information that we obtained prior to the date of this Auditor’s Report we have nothing to report.
RESPONSIBILITIES OF THE DIRECTORS FOR THE FINANCIAL REPORT
The Directors are responsible for:
•
•
•
preparing the Financial Report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
implementing necessary internal control to enable the preparation of a Financial Report that gives a true and fair view and is free from material
misstatement, whether due to fraud or error
assessing the Group’s ability to continue as a going concern. This includes disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless they either intend to liquidate the Group or to cease operations, or have no realistic alternative but
to do so.
74 | GWA GROUP LIMITED | 2017 ANNUAL REPORT
GWA GROUP LIMITED AND ITS CONTROLLED ENTITIES INDEPENDENT AUDITOR’S REPORT
TO THE SHAREHOLDERS OF GWA GROUP LIMITED
CONTINUED
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL REPORT
Our objective is:
•
•
to obtain reasonable assurance about whether the Financial Report as a whole is free from material misstatement, whether due to fraud or
error; and
to issue an Auditor’s Report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Australian Auditing
Standards will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of this Financial Report.
A further description of our responsibilities for the audit of the Financial Report is located at the Auditing and Assurance Standards Board
website at: http://www.auasb.gov.au/auditors_files/2.pdf. This description forms part of our Auditor’s Report.
REPORT ON THE REMUNERATION REPORT
Opinion
Directors’ responsibilities
In our opinion, the Remuneration Report of GWA Group
Limited for the year ended 30 June 2017, complies with
Section 300A of the Corporations Act 2001.
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 responsibilities
We have audited the Remuneration Report included in the Director’s report for
the year ended 30 June 2017.
Our responsibility is to express an opinion on the Remuneration Report, based
on our Audit conducted in accordance with Australian Auditing Standards.
KPMG
Julie Cleary
Partner, Sydney
21 August 2017
GWA GROUP LIMITED | 2017 ANNUAL REPORT | 75
GWA GROUP LIMITED AND ITS CONTROLLED ENTITIES 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 of GWA Group Limited for the financial year ended
30 June 2017 there have been:
i. no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and
ii. no contraventions of any applicable code of professional conduct in relation to the audit.
KPMG
21 August 2017
Julie Cleary
KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under Professional Standards Legislation.
76 | GWA GROUP LIMITED | 2017 ANNUAL REPORT
GWA GROUP LIMITED AND ITS CONTROLLED ENTITIES
OTHER STATUTORY INFORMATION
AS AT 18 AUGUST 2017
STATEMENT OF SHAREHOLDING
In accordance with the Australian Securities Exchange Listing Rules, the directors state that, as at 18 August 2017, 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
1,539
3,410
1,386
994
72
7,401
673,172
9,343,839
10,058,885
20,891,450
222,980,284
263,947,630
%
0.26
3.54
3.81
7.91
84.48
100.00
The number of shareholders with less than a marketable parcel of 159 shares is 482.
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 18 August 2017:
Shareholder
Ellerston Capital Limited
Investors Mutual Limited
20 LARGEST SHAREHOLDERS AS AT 18 August 2017
Shareholder
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Limited
Citicorp Nominees Pty Limited
HGT Investments Pty Ltd
KFA Investments Pty Ltd
Erand Pty Ltd
JMB Investments Pty Ltd
Ashberg Pty Ltd
BNP Paribas Nominees Pty Ltd
Theme (No 3) Pty Ltd
National Nominees Limited
Mr Peter Zinn
ITA Investments Pty Ltd
BNP Paribas Noms Pty Ltd
Dabary Investments Pty Ltd
CJZ Investments Pty Ltd
Eidde Pty Ltd
Mr Michael John McFadyen
Citicorp Nominees Pty Limited
AMP Life Limited
Total
Number of Shares
% Shares on Issue
15,737,943
19,201,100
5.96%
7.27%
Number of Shares
% Shares on Issue
53,949,454
36,090,611
28,337,295
11,740,000
9,200,684
9,007,389
7,334,655
6,387,783
6,057,119
6,000,000
5,994,849
5,898,176
4,688,628
3,525,963
3,208,986
2,841,565
2,019,940
1,975,734
1,946,334
1,609,037
20.44
13.67
10.74
4.45
3.49
3.41
2.78
2.42
2.29
2.27
2.27
2.23
1.78
1.34
1.22
1.08
0.77
0.75
0.74
0.61
207,814,202
78.73
GWA GROUP LIMITED | 2017 ANNUAL REPORT | 77
GWA GROUP LIMITED AND ITS CONTROLLED ENTITIES
SHAREHOLDER INFORMATION
Annual General Meeting
Direct Credit of Dividends
The Annual General Meeting of GWA Group Limited will be held on
Level 5, at the Hilton Hotel, 190 Elizabeth Street, Brisbane on Friday
27 October 2017 commencing at 10:30am (Brisbane time).
Shareholders will be mailed their Notice of Annual General Meeting and
Proxy Form during September 2017.
Shareholder Enquiries
Shareholders with enquiries about their shareholding or dividend
payments should contact the Company’s share registry, Computershare
Investor Services Pty Limited, on 1300 850 505 or write to GPO Box
2975 Melbourne Victoria Australia 3001. Alternatively, you can view
details of your holding or make changes to your personal information
online at www.investorcentre.com.
Change of Address
Shareholders who have changed their address should immediately notify
the Company’s share registry in writing or update your details online at
www.investorcentre.com. If you are a CHESS sponsored holder and wish
to change your address, please contact your broker.
Consolidation of Shareholdings
Shareholders who wish to consolidate their separate shareholdings into
one holding should complete a Request to Consolidate Holdings Form
which can be downloaded at www.investorcentre.com. If you are a
CHESS sponsored holder and wish to consolidate your holdings, please
contact your broker.
Annual Reports
Annual Reports are made available to shareholders on the Company’s
website at www.gwagroup.com.au. Shareholders wishing to be mailed
a copy of the Annual Report should notify the Company’s share registry
in writing or update your communication preferences online at
www.investorcentre.com. Shareholders who have elected to receive
the Notice of Annual General Meeting and Proxy Form via post will
include details on accessing the online Annual Report.
Dividends
Dividends are determined by the Board having regard to the financial
circumstances of the Company. Dividends are normally paid in March
and September each year following the release of the Company’s half
and full year financial results to the market. The latest dividend details
can be found on the Company’s website at www.gwagroup.com.au.
To minimise cost and ensure fast and efficient payment of dividends
to shareholders, the Company mandates direct credit for payment of
dividends. Dividends may be paid directly to a bank, building society or
credit union account in Australia. Payments are electronically credited
on the dividend payment date and confirmed by an advice mailed
to shareholders on that date, or emailed where shareholders have
requested this form of communication. Direct credit application forms
can be obtained by contacting the Company’s share registry or can be
updated online at www.investorcentre.com.
Dividend Reinvestment Plan
The Dividend Reinvestment Plan was suspended by the Board in 2013.
At the present time the Company has access to sufficient capital to meet
its funding requirements. The Board keeps this position under review.
Securities Exchange Listing
The Company’s shares are listed on the Australian Securities Exchange
under the ASX code: GWA. Details of the trading activity of the
Company’s shares are published in most daily newspapers, generally
under the abbreviation GWA Grp.
Shareholder Timetable 2017
30 June
Financial year end
21 August
FY17 full year results and final dividend
announcement
24 August
Ex dividend date for final dividend
25 August
Record date for determining final dividend entitlement
5 September
Final dividend paid
22 September Notice of Annual General Meeting and Proxy Form
mailed to shareholders
25 October
Proxy returns close 10:30am Brisbane time
27 October
Annual General Meeting
31 December Half year end
78 | GWA GROUP LIMITED | 2017 ANNUAL REPORT
GWA GROUP LIMITED AND ITS CONTROLLED ENTITIES HEAD OFFICE LOCATIONS
GWA GROUP LIMITED
GWA BATHROOMS & KITCHENS
GWA DOOR & ACCESS SYSTEMS
Gainsborough Hardware Industries Limited
31-33 Alfred Street
Blackburn VIC 3130
AUSTRALIA
Telephone 61 3 9877 1555
Facsimile 61 3 9894 1599
www.gainsboroughhardware.com.au
www.ausloc.com
API Services and Solutions Pty Limited
248 Normanby Road
South Melbourne VIC 3205
AUSTRALIA
Telephone 131KEY(539)
Facsimile 61 3 9644 5882
www.apisec.com.au
Group Bankers
Commonwealth Bank of Australia
Australia and New Zealand Banking Group
HSBC Bank Australia
7 Eagleview Place
Eagle Farm QLD 4009
AUSTRALIA
Telephone 61 7 3109 6000
Facsimile 61 7 3852 2201
www.gwagroup.com.au
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
CORPORATE DIRECTORY
Directors
D D McDonough, Chairman
J F Mulcahy, Deputy Chairman
T R Salt, Managing Director
W J Bartlett, Non-Executive Director
P A Birtles, Non-Executive Director
J M McKellar, Non-Executive Director
S T Goddard, Non-Executive Director
R J Thornton, Executive Director
Auditor
KPMG
Level 38, Tower Three
International Towers Sydney
300 Barangaroo Avenue
Sydney NSW 2000
AUSTRALIA
Telephone 61 2 9335 7000
Facsimile 61 2 9335 7001
Share Registry
Computershare Investor Services Pty Limited
Chief Financial Officer
P A Gibson, BA, FCMA, FAICD, FGIA
Company Secretary
R J Thornton, CA, BCom (Acc), LLB (Hons), LLM
117 Victoria Street
West End QLD 4101
AUSTRALIA
GPO Box 2975
Melbourne VIC 3001
AUSTRALIA
(within Australia) 1300 850 505
(outside Australia) 61 3 9415 4000
www.computershare.com.au
Registered Office
7 Eagleview Place
Eagle Farm QLD 4009
AUSTRALIA
Telephone 61 7 3109 6000
Facsimile 61 7 3852 2201
www.gwagroup.com.au
ASX code: GWA
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7 Eagleview Place
Eagle Farm, QLD 4009
AUSTRALIA
Telephone: 61 7 3109 6000
Facsimile: 61 7 3852 2201
Website: www.gwagroup.com.au