t
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o
p
e
R
l
a
u
n
n
A
0
2
0
2
In this report
Five Year Financial Summary
Company Profile
Strategic Summary
Chairman’s Report
Managing Director’s Review of Operations
1
2
3
4
7
Board of Directors
Directors’ Report
Financial Report
Other Statutory Information
Shareholder Information
12
14
32
79
80
FY20 Performance Highlights
GWA delivers disciplined financial result
Continued cost discipline helps mitigate challenging
market conditions
NORMALISED1 FROM CONTINUING OPERATIONS2
A$ million excludes significant items, includes Methven for full year
1 Normalised is before $(1.0)m in significant items (after tax) relating to integration costs associated with the acquisition of Methven (FY19: $(7.6)m).
2 Continuing Operations include the revenue and earnings contribution from Methven from the effective date of acquisition, 10 April 2019, but
exclude the Door & Access Systems’ business which was sold on 3 July 2018.
3 Reported result includes $(1.0)m significant items (after tax) relating to integration costs associated with the acquisition of Methven. FY19
Reported result includes $50.8 million after tax profit from the sale of the Door & Access Systems business and $(7.6)m in significant items
(after tax) relating to transaction and integration costs associated with the acquisition of Methven.
REVENUE$398.7 million 4.4%EBITDA$92.2 million 0.8%EBIT$71.8 million 8.0%NPAT$44.9 million 11.6%OPERATING CASH FLOW$61.0 million 9.9%EPS$17.0c per share 2.3c per shareReported3 Net Profit After Tax for the period was $43.9 million $43.9 million Final dividend 3.5 cents per share, full-year dividend 11.5 cents, fully franked 11.5 centsSolid balance sheet maintained with strong cashflow conversion and cost discipline, enabling the Company to manage through the current challenging conditions.Continued execution of superior water solutions growth strategy which has strengthened the Company’s competitive position for when market conditions improve.Successful integration of the Methven acquisition into the Group which remains on track with synergies achieved ahead of schedule.Caroma Smart Command® gaining market traction with focus on sustainability benefits and enhanced hygiene. Five Year Financial Summary
CONTINUING OPERATIONS(1)
2015/16
$’000
2016/17
$’000
2017/18
$’000
2018/19(7)
$’000
2019/20(7)
$’000
Revenue from continuing operations
439,666
350,437
358,622
381,730
398,704
Earnings before interest, tax, depreciation,
amortisation (EBITDA) and significant items(2)
EBITDA margin (%)
Depreciation and amortisation
84,250
78,423
19.2
22.4
80,171
22.4
92,986
92,206
24.4
23.1
(5,985)
(4,122)
(3,929)
(14,869)
(20,366)
Earnings before interest, tax and significant items (EBIT)(2)
78,265
74,301
76,242
78,117
71,840
EBIT margin (%)
Interest (net)
Normalised profit before tax(2)
(%)
Tax expense on normalised profit
Normalised effective tax rate (%)
Normalised profit after tax(2)
Significant items after tax
Net profit after tax from continuing operations
Profit from discontinued operations (net of income tax)
Net profit after tax for the period
Net cash from operating activities
Capital expenditure
Net debt(3)
Shareholders' equity
17.8
21.2
21.3
(6,508)
(5,338)
(4,813)
20.5
(5,811)
71,757
68,963
71,429
72,306
16.3
19.7
19.9
18.9
18.0
(8,644)
63,196
15.9
(19,837)
(19,712)
(21,290)
(21,467)
(18,273)
27.6
28.6
29.8
29.7
28.9
51,920
49,251
50,139
50,839
44,923
–
51,920
1,761
53,681
54,924
3,628
88,420
–
49,251
4,420
53,671
57,171
5,281
79,756
–
(7,597)
(1,037)
50,139
4,113
43,242
50,802
43,886
–
54,252
94,044
43,886
39,158
12,475
97,729
67,630
4,326
141,930
307,698
320,603
333,401
286,756
OTHER RATIOS AND STATISTICS
Interest cover (times)(4)
Gearing: net debt/(net debt + equity) (%)(8)
Return on shareholders' equity (%)
Dividend payout ratio – Group (%)(5)
Dividend payout ratio – Normalised Continuing (%)(5)
Dividend per share (cents)(6)
Franking (%)
Share price (30 June) ($)
Dividend yield at 30 June share price (%)
Number of employees
Basic earnings per share (cents) – Group
Basic earnings per share (cents) – Continuing
Normalised basic earnings per share (cents) – Continuing
14.3
22.3
17.4
81.4
84.1
16.0
100
2.09
7.7
876
19.7
19.0
19.0
17.1
19.9
16.7
81.1
88.4
16.5
100
3.15
5.2
760
20.3
18.7
18.7
19.6
22.7
16.3
87.4
94.7
18.0
100
3.40
5.3
757
20.6
19.0
19.0
23.5
27.5
32.8
51.9
96.0
18.5
100
3.42
5.4
665
35.6
16.4
19.3
60,952
12,317
144,841
279,731
13.6
28.4
15.7
69.2
67.6
11.5
100
2.77
4.2
629
16.6
16.6
17.0
(1)
The Door and Access Systems’ business has been sold with an
effective date of 3 July 2018. During the year ended 30 June 2016,
the Gliderol business was sold with an effective date of 31 July 2015.
Accordingly, the operating activities of Door and Access Systems were
classified as discontinued in FY18 and FY17, and Gliderol classified as
discontinued operations in FY16, and presented separately from the
results of continuing operations. FY16 includes the operating activities
of Door and Access Systems as part of continuing operations.
Continuing operations includes the contribution from Methven from
the effective date of acquisition, 10 April 2019.
(2) Normalised profit before significant items is a non-IFRS financial
measure reported to provide a greater understanding of the
underlying business performance of the Group. The disclosures are
extracted or derived from the financial 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 relevant
years’ financial reports.
(3) Net debt reflects the Group’s borrowings and bank guarantees
less cash (including cash classified within assets held for sale).
(4) Interest cover (times) is calculated using EBITDA excluding
non-recurring other significant items divided by net interest expense.
(5) Dividend payout ratio is calculated as the Dividend per share (cents)
divided by the relevant Basic EPS. Basic EPS is calculated using the
weighted average number of ordinary shares at 30 June.
(6) Dividend per share includes ordinary and special dividends.
(7) AASB16 Leases and the May 2020 IFRS Intepretation Committee
decision on ‘Multiple Tax Consequences of Recovering an Asset’
have been adopted from 1 July 2019 (FY20), with retrospective
restatement of FY19 made. FY16-FY18 has not been restated.
(8) Equity for the purposes of gearing excludes the retained earnings
impact from the adoption of the May 2020 IFRS Intepretation
Committee decision on ‘Multiple Tax Consequences of Recovering
an Asset’.
GWA GROUP LIMITED | 2020 ANNUAL REPORT | 1
Company Profile
We make life
better for all
our stakeholders
GWA Group Limited (GWA) listed on the Australian
Securities Exchange in May 1993 and is a leading innovator,
designer and supplier of product solutions, services and
intelligent technology focused on the water solutions
segment.
We own and distribute market-leading brands and state of
the art product solutions across our ranges of sanitaryware,
tapware, showers, basins, baths, kitchen sinks, laundry tubs,
bathroom/kitchen accessories and valves. We have an
intelligent bathroom system incorporating IoT smart water
management solutions.
GWA operates a central-led business with corporate
functions supporting our water solutions business.
We have sale and distribution facilities across our
primary end markets of Australia, New Zealand,
United Kingdom and China.
We are highly respected within the building industry
for innovation, water efficiency, product reliability and
quality, technical expertise and superior service.
We maintain cost efficient long term supply agreements
with selected, exclusive manufacturing partners across
Asia and Europe, and with light manufacturing operations
in New Zealand and China. GWA has an experienced
senior management team in R&D, design, brand building,
customer engagement, supply and distribution.
GWA remains committed to growing shareholder
value through our focus on superior solutions for
water and has strong market positions, market-leading
brands and significant growth opportunities.
GWA is a member of the ASX 200 index of listed
Australian companies.
OUR BRANDS
2 | GWA GROUP LIMITED | 2020 ANNUAL REPORT
Strategic Summary
Purpose: We make life better through the design and delivery of
products, services and technologies that create superior solutions for
people to enjoy and sustain water, our planet’s most precious resource.
Goal: To build GWA as the most trusted and respected water solutions company.
STRATEGIC GROWTH DRIVERS
BUILD
R&R market
share in ANZ
EXTEND
ANZ leadership
position in
Commercial
segment
LEADERSHIP
of water smart,
connected
bathrooms
and buildings
GROW
select overseas
markets leveraging
ANZ Commercial
expertise
INNOVATE AND PARTNER
Solutions, services and ways of doing business
EXCEED CUSTOMER SERVICE EXPECTATIONS
Good to do business with — people, processes, systems
DRIVE BEST COST
Continuous improvement to support profitability
and fund selective reinvestment
ATTRACT AND DEVELOP GREAT PEOPLE
Continue to build capability, culture and engagement
GWA OPERATIONAL MEASURES
Safety, Market share, NSV, EBIT, DIFOT, NPS, Engagement
EXTERNAL MEASURES OF SUCCESS
NPAT growth, ROFE, TSR, Water sustainability
WE ALL LEAD. WE ARE CUSTOMER FOCUSED AND
CONSUMER DRIVEN. WE CARE FOR EACH OTHER.
GWA GROUP LIMITED | 2020 ANNUAL REPORT | 3
Chairman’s Report
FINANCIAL RESULTS
Normalised1 Group Net Profit After Tax from Continuing
Operations was $44.9 million compared to $50.8 million
for the prior year. Revenue increased by 4 per cent to
$398.7 million while Normalised EBIT declined by 8 per cent
to $71.8 million. Continuing Operations normalised results
include the full year contribution from Methven in FY20.
For FY19 Methven results are included only from the
effective date of acquisition – 10 April 2019.
GWA’s reported Net Profit After Tax for the period was
$43.9 million which includes significant items (after tax)
of $1.0 million relating to integration costs associated
with the acquisition of Methven in FY20.
The Company’s balance sheet and cash flow generation
remain strong.
In line with the Company’s dividend policy, the Board
determined a final dividend of 3.5 cents per share, bringing
the full-year dividend to 11.5 cents per share fully-franked,
compared with 18.5 cents per share for the prior year.
The full year dividend represents a reported dividend
payout ratio of 69 per cent.
The Company’s Dividend Reinvestment Plan will be
offered to shareholders for the final dividend at a
1.5 per cent discount2.
COVID-19 RESPONSE
As the COVID-19 pandemic emerged in the second half
of the year, GWA responded with our priority being to
ensure the health and safety of all our staff and visitors
to our sites as we continued our role as an essential
supplier of products and services to the plumbing
and construction sectors.
In response to the lockdown restrictions in the United
Kingdom and New Zealand, 112 staff were furloughed
during those periods. The fixed remuneration of the
Board and Group Executive was reduced by 20 per
cent for the period 1 April 2020 to 30 June 2020.
GWA has maintained its existing sources of supply
and is in a strong position to supply all key products
to our customers.
GWA will continue to closely monitor and adjust its business
operations as required and in accordance with the latest
Government and regulatory health and safety advice.
FINANCIAL STRENGTH
GWA retains a strong balance sheet to manage through
the current challenging environment while maintaining
investments to support the strategy for medium
term growth.
1
Continuing Operations normalised results (excludes significant items) includes the full year contribution from Methven in FY20. For FY19 Methven
results are included only from the effective date of acquisition – 10 April 2019.
2 1.5% discount to the volume weighted average market price (VWAP).
4 | GWA GROUP LIMITED | 2020 ANNUAL REPORT
We enhanced our near-term liquidity by securing an
additional $33 million in facilities through members of
our current banking syndicate.
Total Group facilities at 30 June 2020 are $283 million,
comprising a multicurrency revolving facility of $243 million
which matures in October 2022 and a $40 million short-
term revolving bilateral facility which is due to mature in
October 2020.
The Group remains in a strong financial position. Net debt
as at 30 June 2020 was $144.8 million which was broadly
in line with the prior year’s total of $141.9 million.
GWA’s financial metrics, including leverage, gearing and
interest cover ratios remain solid.
SUSTAINABILITY
GWA is committed to sustainable practices throughout
its operations and we work with our key stakeholders
and communities to deliver on that commitment.
WORKPLACE HEALTH AND SAFETY (WHS)
The Group made significant progress in implementing
its workplace health and safety strategy this year.
That strategy focuses on leadership and behavioural
aspects of safety and identifies and mitigates physical
risks in its operations.
A major achievement was the integration of all Methven sites
across New Zealand, China and the United Kingdom into the
GWA safety system, SafetyOne. It was a significant task to
standardise operating procedures to deliver a consistent and
measurable approach to safety across the Group.
Our workplace health and safety engagement programme,
(Homecoming) is now into its third year and continues to
be rolled out to all employees across Australia and New
Zealand. The roll-out into China and the United Kingdom
was delayed due to the COVID-19 pandemic.
The implementation of our WHS programme has resulted
in an improvement in lead and lag safety metrics for FY20.
GWA recorded a material decrease in the Total Injury
Frequency Rate from 6.2 in FY19 to 0.9 in FY20. The FY19
data did not include the Methven business which has been
captured in the FY20 data.
Net Debt ($m)
Net Debt ($m)
19/20
Net Debt ($m)
19/20
18/19
19/20
18/19
17/18
18/19
17/18
16/17
17/18
16/17
15/16
16/17
15/16
15/16
0
0
0
50
50
50
100
100
100
150
150
150
The Group remains in a strong financial position to manage
through the current challenging environment. Net debt as at
30 June 2020 was $144.8 million which was broadly in line with
the prior year’s total of $141.9 million.
Dividend per share (cents)
Dividend per share (cents)
Dividend per share (cents)
19/20
19/20
18/19
19/20
18/19
17/18
18/19
17/18
16/17
17/18
16/17
15/16
16/17
15/16
15/16
0
0
0
5
5
5
10
10
10
15
15
15
20
20
20
In line with the Company’s dividend policy, the Board determined
a final dividend of 3.5 cents per share, bringing the full-year
dividend to 11.5 cents per share fully-franked.
Normalised EBIT from Continuing Operations ($m)
Normalised EBIT from Continuing Operations ($m)
Normalised EBIT from Continuing Operations ($m)
19/20
19/20
18/19
19/20
18/19
17/18
18/19
17/18
16/17
17/18
16/17
15/16
16/17
15/16
15/16
50
50
60
60
80
80
Normalised EBIT from Continuing Operations declined by 8 per cent
80
to $71.8 million. Our continued focus on operational and cost
discipline across the business resulted in a resilient EBIT margin
of 18.0 per cent.
70
70
60
50
70
GWA GROUP LIMITED | 2020 ANNUAL REPORT | 5
The decrease is a significant improvement, particularly
in the context of an increase in manufacturing activity
and Methven’s manufacturing sites being included in the
FY20 data.
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.
There were no short-term incentive payments for all
executives for FY20 as the financial gateways were not
achieved due to the weaker market activity and the
negative impact of the COVID-19 pandemic on revenue
and earnings for the Group.
CONCLUSION
Your Board believes GWA is well equipped to manage
through the current challenging market conditions.
The business has been repositioned significantly
over recent years, including increased traction in
key market segments, improvements in supply chain
efficiency, enhancements to our customer experience
and the acquisition of Methven which brings further
geographic diversity and scale to the Group.
Investments made in product and systems innovation,
including our intelligent bathroom system, Caroma Smart
Command® are also key drivers of our growth strategy.
The Board remains committed to leveraging the
Company’s strategy to generate shareholder value over
the medium term.
On your behalf and on behalf of the Board, I acknowledge
and congratulate our Managing Director and CEO Tim Salt,
our executive leadership team and employees across the
Group for their significant contribution over the year.
In particular, I want to thank and acknowledge our
employees for their ongoing efforts during the COVID-19
pandemic in managing a difficult operating environment by
supporting each other and our customers.
To our shareholders, thank you for your continuing support
of GWA.
WORKPLACE DIVERSITY
We are committed to promoting diversity and inclusion
through the implementation of policies and initiatives
to achieve a diverse workforce.
Females comprised 42 per cent of GWA’s overall
workforce for the reporting period, up from 39 per cent
for the prior year.
We will publish our second stand-alone Sustainability
Report in September 2020 which provides further details
of our policies and initiatives.
That Report will also detail how we are operating in a
sustainable manner across our business and continue
to leverage our leading position to provide a range of
products and systems that make life better through
superior water saving solutions for the built environment.
EXECUTIVE REMUNERATION
During the year, the changes from the FY19 review of
the executive remuneration structure were implemented.
The review was designed to ensure our structure remains
aligned with the Board’s remuneration strategy and
market practice. The changes mainly relate to our long-
term incentive plan to reflect current market practice and
alignment of the Managing Director’s incentive opportunity
with peer company CEOs.
As outlined at last year’s AGM, the review concluded that
the Group’s remuneration framework is fit for purpose and
aligned with our growth strategy and market practice. The
details of the changes as a consequence of the review are
outlined in the Remuneration Report.
The Board seeks to remunerate executives on a fair
basis that is sufficient to attract and retain a high-
quality management team with the requisite experience,
knowledge, skills and judgement required to grow
the business.
6 | GWA GROUP LIMITED | 2020 ANNUAL REPORT
Managing Director’s
Review of Operations
SUMMARY
In a very challenging year, with significant uncertainty and
a strong focus on the health and wellbeing of our people,
GWA delivered a disciplined result in FY20.
Revenue was significantly impacted by lower construction
activity in the residential new build and renovation and
replacement segments, merchant destocking in the first
half and the impact of the COVID-19 pandemic in the last
quarter of the year.
GWA’s pro forma1 revenue declined year on year by
$55.1 million (12.1) per cent.
The year on year EBIT1 decline was $12.1 million (14.3) per cent.
The continuous focus on operational and cost discipline
across the business resulted in a resilient EBIT margin1 of
18.0 per cent compared to 18.5 per cent in the prior year.
At the same time, the Company continued to execute its
strategy for medium term growth.
We continued our investment in growth and cost-out
initiatives which have strengthened the Company’s
competitive position for when market conditions improve.
The Company remains well capitalised to manage through
the current challenging conditions and continues to
generate strong operating cashflow.
The implementation of our superior water solutions
strategy and ongoing investment in revenue enhancing
initiatives means GWA has a very solid foundation and
increased leverage to improve revenue and earnings
momentum when market conditions improve.
FOCUS IN FY20 — “CONTROLLING
THE CONTROLLABLES”
As expected, market conditions were difficult in FY20
but this was compounded by the unforeseen impact of
COVID-19. Our focus continues to be on controlling those
elements within our control. Specifically, that relates to:
• working more collaboratively with our key customers
to leverage mutual growth opportunities in our core
markets;
improving engagement with consumers, with an
increased focus on digital to enable us to respond
to changing consumer buying dynamics; and
• optimising our cost base and supply network to
•
drive operational efficiencies and improve customer
experience across the business.
We made good progress in each of these areas.
We continued to build stronger engagement with our key
customers through our joint business planning initiative.
That collaboration has resulted in enhanced ranging of
Caroma, Clark and Methven brands in-store and behind
our merchant customers’ trade counters and importantly,
strong traction in specific growth segments such as
aged care.
We continue to drive growth in commercial segments
through increased collaboration with our customers to
capture segment opportunities including aged care and
commercial renovation and replacement.
These initiatives have resulted in GWA maintaining its
market share in the Australian market.
1
Continuing Operations pro forma normalised results (excludes significant items) include a comparison for the prior year, including GWA results
and the management accounts for Methven.
GWA GROUP LIMITED | 2020 ANNUAL REPORT | 7
Our commercial forward order book remains strong and
ahead of the same period last year.
Our intelligent bathroom system, Caroma Smart Command®,
continues to represent a growth opportunity. Caroma
Smart Command® includes a set of Bluetooth-enabled,
touchless bathroom products which enable monitoring and
management of water usage in commercial buildings.
The system has been successfully installed in 49 sites with
a solid bank of additional projects in the pipeline. The
anticipated roll-out into other sites during the second half
of FY20 was delayed by the impact of COVID-19, including
the temporary closure of key airport and retail sites where
installations were expected in FY20.
Market support for Caroma Smart Command®, continues to
be positive, not only surrounding the system’s sustainability
benefits but also increasingly on its enhanced hygiene
and touchless applications as commercial building owners
and managers adjust to new operational procedures and
protocols due to COVID-19.
We continued our consumer engagement strategy with the
launch of new products such as the Caroma Elvire range
and brand building initiatives through traditional and social
media. Digital consumer engagement continues to increase
with Caroma website traffic increasing by 23 per cent in
the second half of FY20.
In response to the weaker market conditions, we accelerated
cost-out and efficiency improvements across the business.
We successfully delivered $5 million in cost savings and are
on track to deliver the overall $9-12m cost-out programme
by FY21. In addition, we implemented further short-term
actions which delivered an additional $10.5 million of cost
savings to partially mitigate the reduction in revenue
caused by the weaker market conditions and merchant
destocking in FY20. Not all these further cost savings
will be repeatable in FY21.
Meanwhile, we continued to invest in our Australian
distribution network and consolidated to four key
distribution centres in New South Wales (NSW),
Queensland, Victoria and Western Australia which
complements the investment previously made at Prestons,
NSW. This consolidation has enabled us to integrate
Methven products into GWA systems and enhance
customer service through an increase in the number of
Methven and Caroma orders with a single invoice and
single order delivery. In addition, we anticipate improved
operating efficiencies from FY21.
The integration of Methven remains on track. The new
executed sales structure has been successfully created
which is providing improved ranging of Methven products
in the Australian merchant channel.
In addition, the world leading Methven shower IP will be
used in Caroma new shower launches taking place in FY21.
We had good sales momentum in Methven in the first
half which continued until the COVID-19 restrictions were
implemented in New Zealand and the United Kingdom.
The enhanced geographic diversification that Methven
provides continues to be a strategic growth opportunity
for the Group.
8 | GWA GROUP LIMITED | 2020 ANNUAL REPORT
Methven cost synergies are in line with our increased
target. On acquisition we expected NZ$5 million in cost
synergies by the end of FY21. We realised A$3 million in
FY20 and remain on track to deliver ahead of the initial
target with at least A$6 million in cost synergies by the
end of FY21.
GWA continued to make solid improvements in our
sustainability agenda in FY20.
We recorded a material reduction in our Total Injury
Frequency Rate (TIFR) from 6.2 in FY19 to 0.9 in FY20
while we maintained a MTIFR (Medically Treated Injury
Frequency Rate) at zero for FY20.
These results have been achieved from a continued focus
on our health and safety culture and behavioural change
at all sites across the GWA network. Our enhanced focus
on preventative measures, including hazard reduction and
near miss reporting at individual sites is also helping to
drive cultural change in the way we interact at our sites.
We continued to implement our employee engagement
strategy with 90 per cent of our people completing
our “Making Life Better” employee survey. Our Group
engagement score increased 9 percentage points (ppts)
to 61 per cent, which is above the median for companies
in Australia and New Zealand.
Meanwhile, our commitment to promoting diversity
and inclusion in our workplace was reflected in an increase
in female participation from 39 per cent to 42 per cent
in FY20.
GWA is committed to designing and developing new
products and systems in Australia for Australian and
New Zealand consumers and performance that exceeds
stringent local standards and contributes to water
efficiency in the built environment.
As part of its commitment to sustainable product design,
Caroma announced during FY20 that its market-leading
product warranty has now been extended to 20 years.
For over 75 years, Caroma has been at the forefront
of innovation and design of quality bathroom and
kitchen products and this new, extended warranty is our
sustainable promise to customers that Caroma products
will stand the test of time.
In February 2021, Caroma Smart Command® will launch
the Sustainable Water Summit, which will be a forum for
industry leaders across Australia to discuss what the future
in sustainable water management in the built environment
looks like and what our pathway to success is through data
and innovation. At this event we will showcase various
case studies which demonstrate the water saving benefits
of Caroma Smart Command® and discuss various other
benefits such as hygiene, wellness and maintenance.
MARKET CONDITIONS IN FY20
GWA estimates that its Australian addressable market
declined by approximately (10) per cent for FY20
compared to FY19. The significant merchant destocking
experienced in the first half of FY20 did not continue into
the second half; however, due to the market uncertainty,
the anticipated uplift in revenue we normally experience,
as some customers pursue year end incentives, did not
eventuate in June 2020.
The overall market slowdown was driven primarily by the
reduction in activity in the residential new build segment
and a reduction in residential renovation activity. Weak
consumer sentiment impacted retail spending and, coupled
with house price declines and lower housing turnover,
contributed to the market decline over the year.
For FY20 in Australia the market declined in total by
(10) per cent:
• Renovations and Replacements market segment
declined by approximately (8) per cent.
• Detached House completions decreased by
approximately (20) per cent.
• Medium and High-Density dwelling completions
decreased by approximately (18) per cent.
• On a value of work done basis, Commercial building
activity decreased by approximately (4) per cent.
The New Zealand and United Kingdom markets were
both impacted significantly as COVID-19 restrictions were
implemented. However, GWA grew share in the United
Kingdom and maintained share in New Zealand.
IMPACT AND RESPONSE TO COVID-19
In response to COVID-19, GWA’s primary focus has been
to ensure the ongoing health and safety of our employees
and, the financial sustainability of our business, while
maintaining investment on our strategic growth agenda.
During the pandemic we are providing enhanced safety
protection including sanitiser, masks, temperature checks
and increased cleaning at our work sites. All our office-
based staff have been supported to work remotely. At our
warehouses, we have implemented shift management and
social distancing protocols including staggered break times
to limit personal interactions.
In 2H FY20 we activated business continuity plans
internally and with our suppliers to minimise disruption
to the business and our customers. During the pandemic
GWA has been able to maintain continuity of supply while
continuing to honour agreed payment terms.
The COVID-19 pandemic impacted the Company, primarily
in the final quarter of the year.
The shutdowns in New Zealand and the United Kingdom
from April 2020 resulted in disruption to the business.
GWA recorded negligible revenue in New Zealand during
the period of level 4 restrictions and significantly reduced
revenue in the United Kingdom during the shutdowns.
Together, these markets comprised 20 per cent of GWA’s
Group revenue2.
In the United Kingdom and New Zealand 112 staff were
furloughed during the lockdown periods. GWA enabled
staff to utilise their leave entitlements and supported them
in accessing relevant government support, where available,
during the period. Despite significantly reduced revenue in
these markets, GWA continued to incur a number of costs
(fixed costs and a number of staff not being stood down as
they were involved in future-focused development activity).
2 GWA’s Revenue before the impact of COVID-19
In acknowledgement of employees being furloughed in
New Zealand and the United Kingdom, fixed remuneration
of the Board and Group Executive was reduced by 20 per
cent for the period Q4 FY20.
Lockdown restrictions in Australia (79 per cent of Group
revenue)2 were less severe than in New Zealand and the
United Kingdom, with trading for the fourth quarter at
approximately 90 per cent of expected levels.
GWA estimates that COVID-19 impacted Group Revenue
by approximately $22.2 million and Group EBIT by
approximately $8.6 million in FY20.
We continue to closely monitor and adjust our business
operations as required and in accordance with the latest
Government and regulatory health and safety advice.
FINANCIAL RESULTS
CONTINUING OPERATIONS (PRO FORMA)
NORMALISED — EXCLUDES SIGNIFICANT ITEMS
Continuing Operations pro forma normalised results
(excludes significant items) include a comparison for the
prior year, including GWA results and the management
accounts for Methven.
A$ million
(Excludes Significant
Items)
FY19
Includes
Methven for
full year
Revenue
EBITDA
EBIT
EBIT Margin (%)
NPAT
453.8
102.2
83.9
18.5%
53.8
FY20
Includes
Methven for
full year % change
398.7
92.2
71.8
(12)%
(10)%
(14)%
18.0% (0.5)ppts
44.9
(17)%
Net sales declined by 12.1 per cent to $398.7 million
reflecting the continued decline in residential new build
and renovation construction activity in Australia, the impact
of merchant destocking in the first half and COVID-19
restrictions in the second half, particularly in New Zealand
and the United Kingdom.
The slowdown in residential construction, merchant
destocking in Australia and the impact of COVID-19
impacted Group pro forma revenue by $(55.1) million
and EBIT by $(27.6) million.
GWA was able to successfully offset $18.5 million of
the EBIT impact through a continued strong focus on
operational discipline and SG&A efficiencies ($5 million),
Methven synergies ($3 million) and short-term cost
reductions of $10.5 million.
These initiatives assisted GWA to maintain EBIT margin of
18.0 per cent compared to 18.5 per cent for the prior year.
ROFE was five percentage points lower on the prior
corresponding period at 16.4 per cent. This reflects the
revenue decline and EBIT margin dilution, as expected,
due to Methven.
GWA GROUP LIMITED | 2020 ANNUAL REPORT | 9
CONTINUING OPERATIONS NORMALISED RESULT
(EXCLUDES SIGNIFICANT ITEMS)
STRONG FINANCIAL METRICS ENABLE GWA
TO DETERMINE 3.5 CENT FINAL DIVIDEND
The Board determined a final dividend of 3.5 cents per share,
bringing the full-year dividend to 11.5 cents per share, fully-
franked compared with 18.5 cents per share for the prior year.
The record date for entitlement to receive the final dividend
will be 9 September 2020 with the payment date of
16 October 2020.
This FY20 dividend represents a payout ratio of reported
profit of 69 per cent. This is consistent with our policy
to pay dividends in the range of 65-85 per cent of net
profit after tax. The Board believes the level of dividends
is appropriate and strikes the right balance between
immediate returns to shareholders and maintaining the
Company’s financial position for current conditions and
continued investment for future growth.
As part of the Company’s capital management approach,
the Dividend Reinvestment Plan (DRP) will be offered to
shareholders for the FY20 final dividend at a 1.5 per cent
discount3. The DRP is not underwritten.
ONGOING STRONG FINANCIAL POSITION
GWA’s balance sheet metrics remain strong, enabling the
Company to manage through the current challenging
conditions and remain well positioned as markets improve.
Net debt as at 30 June 2020 was $144.8 million which was
broadly in line with the prior year’s total of $141.9 million.
In October 2019, GWA successfully completed the refinance
of its syndicated banking facility. In April 2020, the Group
also secured an additional $33 million in facilities through
members of its current banking syndicate. The increase in
facilities will provide further liquidity should it be required
and importantly it also provides the Group with the flexibility
to take advantage of any opportunities that may arise.
Total Group facilities are $283 million, comprising a
multicurrency revolving facility of $243 million which
matures in October 2022 and a $40 million revolving
bilateral facility which is due to mature in October 2020.
The bilateral facility is a short-term working capital facility
which the Company plans to extend in Q1 FY21.
GWA’s credit metrics remain solid. The Company’s gearing
ratio (net debt/net debt plus equity) was 28.4 per cent
compared to 27.5 per cent at 30 June 2019 and leverage
ratio (net debt/EBITDA) of 1.9 times compared to 1.6 times
at 30 June 2019.
GWA’s interest cover ratio (EBITDA/net interest) was
13.6 times at 30 June 2020.
Continuing Operations normalised result includes the
full year contribution from Methven in FY20. For FY19
Methven results are included only from the effective date
of acquisition – 10 April 2019.
A$ million
(Excludes Significant Items)
Revenue
EBITDA
EBIT
FY19
Includes
Methven
from
10 April
FY20
Includes
Methven
for full
year % change
381.7
93.0
78.1
398.7
92.2
71.8
+4%
(1)%
(8)%
EBIT Margin (%)
20.5%
18.0% (2.5)ppts
NPAT
50.8
44.9
(12)%
Normalised Continuing Operations EBIT (excluding
significant items) was $71.8 million compared to $78.1
million for the prior year.
Continuing Operations normalised EBIT margin was 18.0
per cent compared to 20.5 per cent for the prior year,
reflecting the full-year inclusion of Methven’s lower margin
earnings in FY20 which dilute the overall group EBIT
margin and the impact of COVID-19.
GROUP REPORTED RESULTS — CONTINUING AND
DISCONTINUED OPERATIONS
The Group reported result for FY20 includes the full year
contribution from Methven in FY20. For FY19 Methven
results are included only from the effective date of
acquisition – 10 April 2019. FY19 also includes the profit on
sale from the Door & Access Systems’ business which was
sold on 3 July 2018.
A$ million
Revenue
EBITDA
EBIT
NPAT
Earnings Per Share (cents)
FY19
Includes
Methven
from
10 April
381.7
134.4
119.4
94.0
35.6c
FY20
Includes
Methven
for full
year % change
398.7
90.7
70.3
43.9
16.6c
+4%
(33)%
(41)%
(53)%
(19.0)c
GWA’s reported net profit after tax for the period was
$43.9 million.
Group reported results include significant items. In FY20
these included net costs associated with the acquisition
and integration of Methven of $(1.0) million (after tax).
Significant items in FY19 included the after-tax profit on
sale of the Door & Access Systems’ business of $50.8
million and $(7.6) million of transaction costs (after tax)
incurred for the acquisition of Methven.
The results and balances for the year ended 30 June 2019
have been restated for the impact of the adoption of AASB
16 Leases. This has resulted in an adjustment to FY19 NPAT
down $(0.9) million and FY19 EBIT up $1.0 million.
3 1.5% discount to the volume weighted average market price (VWAP)
10 | GWA GROUP LIMITED | 2020 ANNUAL REPORT
SOLID CASH GENERATION
GWA continues to generate strong operating cashflow,
notwithstanding the weaker market conditions.
Pro forma cashflow from operations in FY20 was
$88.6 million compared to $107.7 million in the prior year.
Cash conversion remains strong with a cash conversion
ratio of 96 per cent from Continuing Operations.
GWA remains focused on debtor management to ensure no
deterioration as a result of COVID-19. Day Sales Outstanding
(DSO) at 30 June was consistent with the prior year.
Capital expenditure was $12.3 million in FY20 which
is towards the lower end of the guidance provided at
the half year result, reflecting the Company’s prudent
approach to cash management as COVID-19 restrictions
were implemented.
The Group’s capital expenditure programme is focused on
growth initiatives to drive revenue enhancing opportunities
and cost efficiencies including further investment in Caroma
Smart Command®, warehouse and office consolidation and
further investment in IT systems.
FY21 MARKET OUTLOOK
Trading in the first six weeks of FY21 has been slightly
ahead of the same period in the prior year. However,
trading is expected to remain very challenging in FY21
due to weak construction market conditions further
exacerbated by the uncertainty surrounding the effects
of COVID-19 across all regions and as highlighted by the
rapidly evolving situation in Victoria.
Lead indicators such as residential building approvals,
housing turnover and lower consumer confidence,
increased unemployment and lower net migration point to
a reduction in GWA’s overall addressable market for FY21.
GWA expects this decline will be driven predominantly
by the residential new build segment in multi-residential
and detached housing with the decline in the residential
renovation and replacement segment to be less pronounced.
The timing and extent of any potential longer-term benefit
from government stimulus measures, such as homebuilder,
remains uncertain as to whether it will bring building work
forward or generate incremental business.
While Commercial renovation and new build activity is
expected to moderate, GWA’s forward order book remains
solid and is higher than at the corresponding period last year.
In FY21 we will continue to execute our focused customer
and consumer initiatives to generate share growth.
These initiatives include agreed business plans with
primary merchant customers targeting specific product
and segment categories, ongoing collaboration with key
secondary customers in core segments such as aged care
and increased focus on digital consumer engagement.
We will leverage the market leading Caroma and Methven
brands with new product development and range launches
in sanitaryware, tap and showerware to build further
consumer engagement in core categories.
We will continue to drive further growth of Caroma
Smart Command® both in Australia/New Zealand and
in International markets. We will continue to leverage
Methven’s presence in the United Kingdom and Asia.
To mitigate input cost inflation GWA has announced price
increases to be implemented from August 2020 across
Australia/New Zealand in conjunction with other cost
saving initiatives, including Methven cost synergies, and
the final year of the Company’s $9-12 million cost savings
target by FY21.
Approximately 70 per cent of US dollar exposure is hedged
to 30 June 2021 at US$0.67 cents.
GWA expects to provide a further update on trading at the
Company’s Annual General meeting on 30 October 2020.
While markets remain challenging, GWA has demonstrated
its ability to deliver a disciplined result in FY20. We
executed well by focusing on the elements within our
control to respond to the short term challenges.
As a result, we have created a strong platform for growth
as market conditions improve with enhanced operational
leverage supported by an ongoing strong financial position.
GWA GROUP LIMITED | 2020 ANNUAL REPORT | 11
Board of Directors
DARRYL MCDONOUGH
BBUS (ACTY), LLB (HONS), SJD, FCPA, FAICD
PETER BIRTLES
BSC, ACA, MAICD
INDEPENDENT CHAIRMAN AND
NON-EXECUTIVE DIRECTOR
Expertise: Experienced non-executive director
Special Responsibilities: Chairman of Board and
member of Nomination and Remuneration and
Audit and Risk Committees
Mr McDonough was appointed Deputy Chairman and
Non-Executive Director of GWA Group Limited in 2009
and Chairman on 31 October 2013. He has over 30 years of
experience as a director and as a 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. He is a Past-President of The Australian
Institute of Company Directors, Queensland Division.
JOHN MULCAHY
PHD (CIVIL ENGINEERING), FIE AUST
INDEPENDENT DEPUTY CHAIRMAN AND
NON-EXECUTIVE DIRECTOR
Expertise: Engineer, banker and experienced public
company director
Special Responsibilities: Chairman of Nomination and
Remuneration Committee
Mr Mulcahy was appointed a Non-Executive Director
of GWA Group Limited in 2010 and Deputy Chairman
effective 1 November 2013. He is a Fellow of the Institute
of Engineers and is Chairman of Mirvac Group Limited
and a Non-Executive Director of ALS Limited. He is the
former Managing Director and Chief Executive Officer
of Suncorp Group Limited (“Suncorp”). Prior to joining
Suncorp, he held a number of senior executive roles at the
Commonwealth Bank and Lend Lease Corporation.
During the past three years Mr Mulcahy has served as a
director of the following listed companies for the time
periods noted:
• ALS Limited since 2012*
• Mirvac Group Limited since 2009*
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 2010. He is a Chartered Accountant
and is the former 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. He is also a director of
Metcash Limited, Apparel Group (Hong Kong) Limited,
APG & Co Pty Ltd and Good360 Australia Pty Ltd.
During the past three years Mr Birtles has served as a
director of the following listed companies for the time
periods noted:
• Metcash Limited since August 2019*
• Super Retail Group Limited since 2006 to 2019
TIM SALT
BSC
MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER
Expertise: Extensive global experience in managing market
leading branded portfolios across different industry sectors
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 starting at Unilever, Mr Salt spent much of his career
in beverage companies including Tetley Tea in the UK,
Pepsi in Australia and the 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.
* denotes current directorship
12 | GWA GROUP LIMITED | 2020 ANNUAL REPORT
JANE MCKELLAR
BA, MA (HONS), GAICD
STEPHEN GODDARD
BSC (HONS), MSC
INDEPENDENT NON-EXECUTIVE DIRECTOR
INDEPENDENT NON-EXECUTIVE DIRECTOR
Special Responsibilities: Member of Nomination
and Remuneration Committee
Special Responsibilities: Chairman of Audit and Risk
Committee
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 Freedom Foods
Group Limited and McPherson’s Limited and, is also on
the Board of the NRMA.
During the past three years Ms McKellar has served as
a director of the following listed companies for the time
periods noted:
• Freedom Foods Group Limited since May 2020*
• McPherson’s Limited since 2015*
• Automotive Holdings Group Limited 2015 – 2019
ALISON BARRASS
BSC, DipMA
INDEPENDENT NON-EXECUTIVE DIRECTOR
Expertise: Extensive experience in FMCG Sector,
governance leadership and innovation
Ms Barrass was appointed a Non-Executive Director
of GWA Group Limited on 24 May 2019. She is a highly
experienced executive across private and publicly-listed
organisations and was most recently the Chair of Methven
Ltd, a leading New Zealand-based business which was
acquired by GWA in April 2019. Her career has included
significant marketing and business transformation roles
with major FMCG companies, including CEO roles with
both Goodman Fielder New Zealand and Griffins Foods.
She is currently a Non-Executive Director of Spark NZ,
Heilala Vanilla, Rockit International, Lewis Road Creamery,
and Chair of Tom and Luke Limited.
During the past three years Ms Barrass has served as a
director of the following listed companies for the time
periods noted:
• Spark NZ Limited since 2016*
• Methven Limited 2012 – 2019
* denotes current directorship
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 Chairman of JB Hi-Fi Limited. He is
also a Non-Executive Director and Chairman of the Audit
and Risk Committee of both Accent Group Limited and
Nick Scali Limited and 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 listed companies for the time
periods noted:
• Nick Scali Limited since March 2018*
• Accent Group Limited since Nov 2017*
• JB Hi-Fi Limited since 2016*
RICHARD THORNTON
CA B COM (ACC) LLB (HONS) LLM
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
Director of Great Western Corporation Pty Ltd.
GWA GROUP LIMITED | 2020 ANNUAL REPORT | 13
Directors’ Report
as at 30 June 2020
Your directors present their report on the consolidated
entity of GWA Group Limited (the Group) and the entities
it controlled during FY20.
DIRECTORS
The following persons were directors of the Group during
the financial year and up to the date of this report unless
otherwise stated.
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
P A Birtles, Non-Executive Director
J M McKellar, Non-Executive Director
S T Goddard, Non-Executive Director
A J Barrass, Non-Executive Director
R J Thornton, Executive Director and Company Secretary
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 FY20, and the period for which each directorship
has been held, are outlined in the director profiles in
the Annual Report.
COMPANY SECRETARY
Mr R J Thornton was appointed Company Secretary of
GWA Group Limited in 2003. Mr Thornton continued in his
role as Company Secretary following his appointment as
Executive Director in May 2009. Details of Mr Thornton’s
qualifications and experience are outlined in the director
profiles in the Annual Report.
DIRECTORS’ INTERESTS
The relevant interest of each director in the share capital
of the Group as notified by the directors to the Australian
Securities Exchange in accordance with Section 205G(1) of
the Corporations Act 2001 as at the date of this report is:
Director
D D McDonough
J F Mulcahy
T R Salt*
P A Birtles
J M McKellar
S T Goddard
A J Barrass
R J Thornton*
Total**
Notes:
Ordinary Shares
150,000
40,950
512,570
38,650
3,054
10,000
–
229,577
984,801
* 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 7.2.1 of the Remuneration Report.
** Section 7.3.3 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 1,194,301 shares (2019:
855,301 shares).
DIRECTORS’ MEETINGS
The number of meetings of directors (including meetings
of Committees of directors) held during FY20 and the
number of meetings attended by each director is outlined
in the following table:
Audit
and Risk
Committee
Nomination
and
Remuneration
Committee
Board
Committee
COVID-191
Director
Board
A B
D D McDonough 11
J F Mulcahy
T R Salt
P A Birtles
J M McKellar
S T Goddard
A J Barrass
R J Thornton2
Notes:
11
11
11
11
11
11
11
A
4
–
–
4
–
4
11
11
11
11
11
11
10 –
11
–
B
4
–
–
4
–
4
–
–
A
6
6
–
–
6
–
–
–
B
6
6
–
–
6
–
–
–
A
4
4
4
4
4
4
4
4
B
3
3
4
4
4
4
4
4
A – Number of meetings held during the time the director held office
during the year
B – Number of meetings attended
1. The Board established a Committee to provide oversight
and support to management in dealing with the impacts of
the COVID-19 pandemic during April and May 2020. In addition,
the Chairman of the Board and Chairman of the Audit and
Risk Committee met weekly with management as part of the
oversight measures put in place during this time.
2. R J Thornton attends Committee meetings as Company Secretary.
PRINCIPAL ACTIVITIES
14 | GWA GROUP LIMITED | 2020 ANNUAL REPORT
The principal activities of the consolidated entity during
the year 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, United Kingdom and China.
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 FY20 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 FY20
Dividends
Final
2018/19
Ordinary
Interim
2019/20
Ordinary
Cents
per
share
Total
Amount
$’000
Franked
Date of
Payment
9.5
25,075
Fully
Franked
4 September
2019
8.0
21,116
Fully
Franked
4 March
2020
Franked dividends declared and paid during the year were
franked at the corporate tax rate of 30%.
DETERMINED AFTER END OF FY20
After the balance date the following dividend was
determined by the directors. The dividend has not been
provided and there are no income tax consequences at
30 June 2020.
Dividend
Final
2019/20
Ordinary
Cents
per
share
Total
Amount
$’000
Franked
Date of
Payment
3.5
9,238
Fully
Franked
16 October
2020
The financial effect of the final dividend has not been
brought to account in the financial statements for FY20
and will be recognised in subsequent financial reports.
The record date for the final dividend is 9 September
2020 and the dividend payment date is 16 October 2020.
The Dividend Reinvestment Plan (DRP) will be offered to
shareholders for the final dividend and a discount of 1.5%
to the volume weighted average market price (VWAP) will
apply to shares subscribed for under the DRP. The record
date for DRP participation is 9 September 2020.
EVENTS SUBSEQUENT TO
REPORTING DATE
The directors’ continue to assess the uncertain and
evolving impact of the COVID-19 pandemic on the
Group’s operations.
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.
LIKELY DEVELOPMENTS
Likely developments and expected results of the operations
of the consolidated entity are provided in the Managing
Director’s Review of Operations.
Further information on likely developments and expected
results of the operations of the consolidated entity have
not been included in this report because the directors
believe it would be likely to result in unreasonable prejudice
to the consolidated entity.
ENVIRONMENTAL ISSUES
The Group’s operations are not regulated by any
significant environmental regulation under a law
of the Commonwealth or of a State or Territory.
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 result 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 Group Chief Financial Officer and all persons
concerned or taking part in the management of the
Group and its controlled entities.
GWA GROUP LIMITED | 2020 ANNUAL REPORT | 15
NON-AUDIT SERVICES
During the year KPMG, the consolidated entity’s auditor,
did not perform any non-audit services.
The Board has considered the non-audit services provided
during the year 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 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 22 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 FY20.
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
INTRODUCTION
The Directors of GWA Group Limited present this
Remuneration Report for the period ended 30 June
2020. The Remuneration Report outlines the Group’s
remuneration strategy and principles, explains how
the Group’s FY20 performance has driven executive
remuneration outcomes, and provides the details of
specific remuneration arrangements that apply to Key
Management Personnel (KMP) in accordance with section
300A of the Corporations Act 2001 (Cth) (Corporations
Act) and applicable accounting standards.
16 | GWA GROUP LIMITED | 2020 ANNUAL REPORT
The structure of the Remuneration Report is outlined below:
1.
Message from the Remuneration and Nomination
Committee;
2. Key Management Personnel;
3.
4. Relationship between remuneration policy and Group
Board role in setting remuneration strategy and principles;
performance;
5. Description of non-executive director remuneration;
6. Description of executive remuneration;
7. Details of director and executive remuneration; and
8. Key terms of employment contracts.
1. MESSAGE FROM THE REMUNERATION
AND NOMINATION COMMITTEE (RNC)
The RNC is pleased to present shareholders with the FY20
Remuneration Report. This report outlines GWA’s approach
to remuneration for its executives and in particular, the link
between GWA’s strategy and its remuneration framework
and the link between performance and executive reward.
GWA delivered a disciplined result in FY20 in challenging
market conditions and with the negative impacts of
COVID-19 on revenue and earnings. GWA responded to
these short-term challenges with a focus on operational
and cost discipline and made significant progress
against its strategic objectives which have strengthened
the company’s competitive position for when market
conditions improve.
The decline in earnings for FY20 was disappointing
but the company remains in strong financial health to
navigate through these uncertain times. The incentive
outcomes for the Managing Director and other Executive
Leadership Team (ELT) members for FY20 reflected the
lower profitability and shareholder returns. While market
conditions were difficult, management responded quickly
to the unforeseen impact of COVID-19 in ensuring the
health and safety of staff and taking immediate actions to
control costs. The Board and executives took a 20% pay
reduction in Q4 FY20 to support cost management plans
due to COVID-19.
This report outlines how GWA’s performance has driven
the remuneration outcomes for executives. The RNC
had oversight of the performance and remuneration
arrangements of the Managing Director and the other
ELT members during FY20, together with the Group’s
remuneration framework and incentive plans. The RNC
ensures that the financial reward for executives is aligned
with performance and shareholders’ interests.
GWA’s remuneration framework reflects our approach
on providing remuneration which is fair and equitable
to attract and retain talented individuals necessary
to deliver our strategy, while aligning the interests of
executives and shareholders.
At the centre of our remuneration framework are:
• challenging financial and non-financial measures
to assess performance and focus executives on key
operational and strategic objectives critical to GWA’s
long-term success;
incentive plans that align reward for executives
to shareholder wealth creation over the short and
medium term;
•
• ability for the Board to exercise its discretion to adjust
or ‘clawback’ executive reward where business and
operational risks have not been adequately managed; and
• best practice governance in determining remuneration
3. BOARD ROLE IN SETTING
REMUNERATION STRATEGY
AND PRINCIPLES
arrangements and outcomes that are fair and
reasonable taking into consideration community
and shareholder expectations.
During FY19, the RNC completed a review of the executive
remuneration structure which confirmed that the
remuneration framework is fit for purpose and aligned with
our strategy. As a result of the review we implemented
some changes to our approach for FY20 to better align
with market practice. Most of the changes relate to our
Long-Term Incentive plan and alignment of the Managing
Director’s incentive opportunity with peer company CEO’s
based on market benchmarking data provided by an
independent adviser.
Further details on the changes made in FY20 are outlined
in section 3.2.
As a result of COVID-19 the Board will be conducting a
further review of GWA’s remuneration framework during
FY21 to ensure it remains fit for purpose and aligned with
our strategy. Any changes from the review will be outlined
in the FY21 Remuneration Report.
2. KEY MANAGEMENT PERSONNEL
The names and titles of the Group’s KMP for FY20, being
those persons having authority and responsibility for
planning, directing and controlling the activities of the
entity, are set out below.
The Board has overall responsibility for reviewing,
approving and monitoring GWA’s remuneration strategy
and outcomes including for the directors and executives.
The strategy is designed to provide remuneration that
is fair and equitable, and is designed to attract and
retain directors and management with the experience,
knowledge, skills and judgement required for success.
The Board also engages with all stakeholders to
continuously refine and improve director and executive
remuneration policies and practices.
The Board delegates some aspects of the review and
monitoring process to the Nomination and Remuneration
Committee. The charter for the Nomination and
Remuneration Committee is available on the Company’s
website at www.gwagroup.com.au under Corporate
Governance Policies.
3.1 GWA’S REMUNERATION GOVERNANCE FRAMEWORK
GWA BOARD
• Overall responsibility for the remuneration strategy
and outcomes for the Group; and
• Reviews and, as appropriate, approves recommendations
from the Remuneration and Nomination Committee.
WITH ADVICE FROM:
Name
Position
Non-Executive Directors
D McDonough
J Mulcahy
Chairman and
Non-Executive Director
Deputy Chairman and
Non-Executive Director
P Birtles
Non-Executive Director
J McKellar
Non-Executive Director
S Goddard
Non-Executive Director
A Barrass
Non-Executive Director
Executive Directors
T Salt
R Thornton
Managing Director and
Chief Executive Officer
Executive Director and
Company Secretary
Other Executive KMP1
Term as KMP
REMUNERATION AND NOMINATION COMMITTEE
Full year
Full year
Full year
Full year
Full year
Full year
Full year
Full year
Review of the:
• Group’s executive remuneration and incentive policies
and schemes;
• Remuneration framework for non-executive directors;
• MD and other executives’ remuneration packages
and performance objectives;
• Evaluation of MD performance;
• MD and other executives’ development plans;
• Group’s recruitment, retention and termination policies
and procedures;
• Group’s superannuation arrangements; and
• Diversity policy and assessing progress against objectives.
EXTERNAL ADVISERS
• Provide independent advice, information and
recommendations relevant to remuneration decisions;
• The Remuneration and Nomination Committee receives
information from independent external adviser related to
remuneration market benchmark data and analysis for the
annual executive fixed remuneration review; and
• There were no remuneration recommendations received
P Gibson
Group Chief Financial Officer Full year
from the external adviser during the year.
Group General Manager –
People & Performance
Full year
BASED ON:
C Reil
Note:
1. C Norwell, General Manager Sales was previously included as Other
Executive KMP for FY19 but does not meet the definition of KMP for
FY20 based on his delegated authorities.
REMUNERATION PRINCIPLES
• Align and contribute to GWA’s key strategic business
objectives and desired business outcomes;
• Align executives’ remuneration with the interests
of securityholders;
• Assist GWA in attracting executives and retaining the
best talent required to execute the business strategy;
• Support GWA’s performance based culture against
business plans and shareholder returns; and
• Be fair, equitable and easy to understand.
GWA GROUP LIMITED | 2020 ANNUAL REPORT | 17
4. RELATIONSHIP BETWEEN
REMUNERATION POLICY AND
GROUP PERFORMANCE
Remuneration is linked to performance by:
• Applying challenging financial and non-financial
measures to assess performance;
• Ensuring that these measures focus management
on operational and strategic business objectives that
create shareholder value while balancing short-term
and medium/longer term shareholder value creation.
GWA measures performance on the following key
corporate measures:
• Earnings before interest and tax (EBIT);
• Return on funds employed (ROFE);
• 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 or income to ensure management
is not discouraged from undertaking initiatives in the long-
term interests of shareholders.
Any adjustments to normalise the EBIT and ROFE
measures, and the reasons for any adjustments, will be
disclosed. There were no STI payments made to executives
in respect of FY20 performance. This is reflected in the
Remuneration Tables in section 7.1.
For the FY18 LTI grant (performance period for the 3 years
to 30 June 2020) to be tested in August 2020, the impact
of the adoption of the May 2020 IFRS Interpretation
Committee decision (refer Note 1c of the financial
statements) will be excluded from ROFE i.e. the resulting
deferred tax liability (DTL) will be added back to net
assets. This ensures there is no unintended benefit for the
executives with the testing of the ROFE hurdle.
Remuneration for all executives varies with performance
on the key EBIT, ROFE and TSR measures together with
achievement of their measurable personal KPI objectives,
which underpin delivery of the financial outcomes, and are
linked to the Group’s performance review process.
The following graph shows the Group’s relative TSR
performance over the five-year period from 1 July 2015
to 30 June 2020 compared to the ASX 200 Accumulation
Index. The ASX 200 Accumulation Index comprises the top
200 stocks on the Australian Securities Exchange based
on liquidity and size, and is recognised as the benchmark
for the Australian equity market. In the second half of FY20
there was significant volatility in both the equity markets
and GWA’s share price due to the COVID-19 pandemic.
3.2 EXECUTIVE REMUNERATION STRUCTURE REVIEW
During FY19 the Remuneration and Nomination Committee
engaged an independent remuneration consultant to
review the executive remuneration structure to ensure
that it remains aligned with its remuneration strategy and
market practice. The review concluded that the Group’s
remuneration framework is fit for purpose, with the
following changes implemented in FY20 to better align
with market practice:
• The clawback provisions under the Long-Term Incentive
(LTI) plan have been strengthened so that the Board
may reduce or ‘clawback’ benefits under the LTI plan
(including Performance Rights, shares, proceeds of
shares or cash amounts) if the Board considers that is
justified by the performance of the Group, any member
of the Group, any business, area or team, or the conduct,
capability or performance of the executive;
• The LTI plan has been revised to provide flexibility
for executives in the timing of exercise of vested
Performance Rights, by providing that a Performance
Right is not deemed to be exercised automatically upon
vesting, but rather may be exercised by the executive at
any time from vesting until expiry of the Performance
Right seven years after the date of grant;
• The LTI plan has been revised to provide the Group with
the flexibility, at the discretion of the Board, to settle
vested and exercised Performance Rights in cash to
executives as an alternative to shares;
• The LTI plan has been revised to provide the Board with
broader discretion to determine whether some or all
of the Performance Rights lapse, vest, are exercised or
settled in shares or cash in the event that the Group is
the subject of a successful takeover bid or acquisition
by scheme of arrangement. The treatment for unvested
rights will be determined by the Board in its absolute
discretion. Vested rights will be automatically exercised
unless the Board determines otherwise;
• Under the Short-Term Incentive (STI) plan for FY20
there has been an increased focus on the measurability
of personal KPIs and the inclusion of role specific
non-financial KPIs for executives that reflect how the
financial goals have been achieved during the period
with an increased focus on customer outcomes;
• The remuneration mix for the Managing Director
between fixed and variable components for FY20 has
been adjusted to reflect a higher variable component.
The Managing Director’s STI opportunity for FY20 was
increased to 50% at target performance and 75% at
stretch performance (previously 40% at target and 50%
at stretch) and the LTI opportunity was increased to
100% (previously 60%). This is in line with the market
benchmarking data provided by an independent adviser
during FY19 which indicated that peer company CEO’s
typically have a higher variable opportunity for STI and
LTI plans;
• The Managing Director’s fixed remuneration has
remained unchanged for FY20 (excluding the pay
reduction of 20% during Q4 FY20 to assist in managing
costs during COVID-19) and has not changed since his
appointment during FY16. There were no changes to the
variable components for the other executives for FY20.
18 | GWA GROUP LIMITED | 2020 ANNUAL REPORT
Total Shareholders Return (TSR) Chart for GWA vs ASX 200 Acc Index
From 1 July 2015 to 30 June 2020
GWA
ASX 200 Acc Index
120%
100%
80%
60%
40%
20%
0%
-20%
30 Jun
2015
31 Dec
2015
30 June
2016
31 Dec
2016
30 Jun
2017
31 Dec
2017
30 Jun
2018
31 Dec
2018
30 Jun
2019
31 Dec
2019
30 Jun
2020
The following is a summary of key statistics for the Group over the last five years:
Financial Year
2015/16(b)
2016/17
2017/18(d)
2018/19(d)(e)
2019/20(e)(f)
Notes:
EBIT(a)
($m)
78.3
80.6
76.2
78.1
71.8
EPS(a)
(cents)
19.0
20.3
19.0
19.3
17.0
Total DPS
(cents)(c)
Share Price
(30 June)
($)
Market Capitalisation
(30 June)
($m)
16.0
16.5
18.0
18.5
11.5
2.09
3.15
3.40
3.42
2.77
551.7
831.4
897.4
902.7
731.1
(a) excludes significant items
Total dividend per share (cents)
(b) excludes the discontinued operations of Gliderol, Dux and Brivis
(c) includes ordinary and special dividends
(d) FY18 and FY19 represent continuing operations and exclude the
discontinued operations of the Door & Access Systems’ business
(including the gain on sale) which was sold on 3 July 2018. FY16
and FY17 include the results of the Door & Access Systems’
business
(e) FY19 and FY20 includes the results of Methven Limited from the
date of acquisition (10 April 2019)
FY20
FY19
FY18
FY17
FY16
(f) FY20 performance was negatively impacted by COVID-19 resulting
0
5
10
15
20
in business interruption and challenging market conditions across
all regions. GWA recorded negligible revenue in New Zealand
during the period of level 4 restrictions and significantly reduced
revenue in the United Kingdom during the shutdowns. Together,
these markets comprised 21 per cent of GWA’s revenue (before
the impact of COVID-19). Lockdown restrictions in Australia
(79 per cent of Group revenue before COVID-19) were less severe
than in New Zealand and the United Kingdom, with trading for
the fourth quarter at approximately 90 per cent of expected levels
GWA GROUP LIMITED | 2020 ANNUAL REPORT | 19
The remuneration and incentive framework aims to focus
executives on sustaining short-term operating performance
coupled with investment in long-term strategic growth in
the markets in which the business operates.
The Group’s Normalised1 profit performance for Continuing
Operations2 declined in FY20 due to weaker market
activity and the negative impact of COVID-19 on revenue
and earnings for the Group. The focus on operational and
cost discipline during FY20 ensured the company was able
to manage through the short-term challenges and continue
to invest in its growth strategy.
The company is in a strong financial position to manage
through the current challenging environment. The earnings
performance for FY20 enabled the Board to pay a full
year fully franked dividend of 11.5 cents per share for FY20
representing a dividend pay-out ratio of reported profit of
69% which is in line with the company’s dividend policy.
The Group has continued its progress in FY20 against its
strategic objectives to enhance the operating performance
of the business, to continue to grow market share and to
maximise returns to shareholders over time. The progress
against the strategy is outlined in the Managing Director’s
Review of Operations.
The successful execution of the Group’s strategy was
included in executives’ measurable personal goals and
reflected in the financial performance targets under the
STI and LTI plans for FY20; refer sections 6.3 Short-Term
Incentive and 6.4 Long-Term Incentive.
The remuneration and incentive framework has focused
executives on responding appropriately to the challenging
market conditions in FY20 which included the impacts
of COVID-19. It has encouraged management to respond
quickly and make long-term decisions to sustain
competitiveness ensuring that the Group is well placed to
maximise returns through the market cycle.
5. 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
that non-executive directors maintain their independence.
At the 2018 Annual General Meeting, shareholders
approved an increase in non-executive director fees to
an annual maximum aggregate amount of $1,350,000
including statutory superannuation. This increase was
to allow for new director appointments over time in
accordance with the Board succession plans.
The actual fees paid to the non-executive directors are
outlined in the Remuneration Tables in section 7.1 and are
based on the following:
• Board Chair $280,000 (including superannuation);
• Other non-executive directors $120,000 (including
superannuation); and
• Committee Chair $10,000 (including superannuation).
There have been no changes to these amounts since FY16.
The non-executive directors took a 20% pay reduction
in Q4 FY20 to support cost management plans due to
COVID-19. This is reflected in the Remuneration Tables
in section 7.1.
Non-executive director remuneration comprises base
fees and statutory superannuation, plus an additional
fee for chairing a Board Committee (where applicable).
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.
The Board does not require its non-executive directors to
hold GWA shares, however the holding of shares is actively
encouraged. For details of the non-executive director
shareholdings, please refer to section 7.3.3.
6. DESCRIPTION OF EXECUTIVE
REMUNERATION
6.1 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) plan
which provides rewards for performance over a 1-year
period, and a long-term incentive (LTI) plan 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 executives,
including the Managing Director, recognises the short-
term challenges posed by operating in the cyclical housing
industry, ability to sustain competitiveness, deliver value
and growth in mature markets and maintain operating cash
flows for dividends.
As outlined in section 3.2, during FY19 the Board engaged
an independent remuneration consultant to review the
executive remuneration structure to ensure it remains
aligned with the Board’s remuneration strategy and
market practice. The changes following the review were
implemented in FY20.
1
Normalised is before $1 million in significant items (after tax) relating primarily to integration costs associated with the acquisition of Methven in FY20.
2 Continuing Operations include the revenue and earnings contribution from Methven from the effective date of acquisition, 10 April 2019.
20 | GWA GROUP LIMITED | 2020 ANNUAL REPORT
6.1.1 GWA’s Executive Remuneration Structure for FY20
Objective
Attract and retain
best talent
Reward current year
performance
Reward long-term
performance
Remuneration
Components
Delivery
FY20 Approach
Fixed
Variable (at risk)
Fixed Remuneration
Short Term
Incentive (STI)
Long Term
Incentive (LTI)
• Base Salary
• Non-monetary benefits
• Superannuation
• Annual cash payment
subject to performance
• Portion deferred for one
year and paid in cash
• Annual grant of
Performance Rights
vesting after 3 years
subject to performance
• Fixed remuneration
targeted between median
and 75th percentile of
comparator group
• Benchmark companies
of similar size and
operational scope
STI performance measures:
• Gateway: Revenue and
EBIT at 95% of target
• Financial targets (60%):
EBIT and ROFE
• Personal targets (40%):
measureable personal KPIs
LTI performance measures:
• 3 year performance
period
• Performance hurdles
(each 50%):
ROFE (absolute measure)
TSR (relative measure)
Note:
1
The Managing Director’s remuneration structure for FY20 is the same as the other executives, however the remuneration mix is different as outlined
in section 6.1.2. For details of the Managing Director’s remuneration arrangements, please refer to section 8.1.
The Board is of the view that a combination of EBIT, ROFE
and TSR performance measures are an effective basis for
STI and LTI targets as they are currently key metrics used
in the business and aligned with the Group’s strategy.
ROFE is an appropriate target, both over the one-year
horizon, for STI purposes, and over the three-year horizon,
for LTI purposes. The Board is cognisant that in any one
year or longer period ROFE can be impacted by the timing
of investments in growth, e.g. acquisitions, capital spend,
where benefits (EBIT) may accrue in subsequent periods,
thereby depressing ROFE in the current year. By setting a
longer term ROFE target the Board is also able to incentivise
executives for achievement of the ROFE target above the
cost of capital over time and to ensure that management
make decisions aligned with shareholders’ interests over
time, notwithstanding, that in the short-term, investments
in future growth may detract from headline ROFE numbers.
6.1.2 Managing Director and other executives’
remuneration mix
The components of remuneration for the Managing
Director and other executives’ for FY20 at ‘target’ and
‘stretch’ performance are provided in the following table:
Managing Director Remuneration Mix
At target
Performance dependent
40%
15% 5%
40%
At stretch
Performance dependent
36%
18%
9%
37%
Other Executives’ Remuneration Mix1
At target
Performance dependent
59%
18%
6%
17%
At stretch
Performance dependent
56%
19%
8%
17%
Fixed
STI (cash)
STI (deferred)
LTI (maximum)
Note:
1 Based on the average of the other executives’ fixed remuneration
excluding the Managing Director and CFO.
6.1.3 Managing Director variable remuneration structure
The FY20 incentives structure for the Managing Director
is provided in the following table:
Maximum LTI
as % of fixed
remuneration
(grant date fair
value)
Maximum total
performance
pay as %
of fixed
remuneration
Maximum STI
as % of fixed
remuneration
75
100
175
Managing
Director
FY20
The FY20 STI components for the Managing Director are
provided in the following table:
Financial Targets
as maximum
% of fixed
remuneration
Personal Goals
as maximum
% of fixed
remuneration
Maximum STI
as % of fixed
remuneration
50
25
75
Managing
Director
FY20
6.1.4 Other Executives’ variable remuneration structure
The FY20 incentives structure for other executives is
provided in the following table:
Maximum LTI
as % of fixed
remuneration
(grant date fair
value)
Maximum total
performance
pay as %
of fixed
remuneration
Maximum STI
as % of fixed
remuneration
50
30
80
Other
Executives
FY20
The FY20 STI components for other executives are
provided in the following table:
Financial Targets
as maximum
% of fixed
remuneration
Personal
Goals as
maximum
% of fixed
remuneration
Maximum STI
as % of fixed
remuneration
30
20
50
Other
Executives
FY20
GWA GROUP LIMITED | 2020 ANNUAL REPORT | 21
6.2 FIXED REMUNERATION
6.3 SHORT-TERM INCENTIVE (STI)
Fixed remuneration is the sum of base salary,
non-monetary benefits and superannuation.
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;
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 a market benchmarking report provided by an
independent adviser for the FY20 executive remuneration
review, the fixed remuneration for most executive
positions at GWA are comparable to market benchmark
levels for companies of comparable operational scope
and size to GWA, having regard to market capitalisation
and revenue. The 19 listed peer companies included
in the survey provided reliable and robust statistical
remuneration benchmarking and shared some common
attributes with GWA, however, 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.
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 FY20, the Board made no adjustment to the
Managing Director’s fixed remuneration which was
at the median of the comparator group based on the
independent benchmark data. The Managing Director’s
fixed remuneration has remained unchanged since his
appointment during FY16. In addition, the Managing
Director and the other executives took a pay reduction of
20% during Q4 FY20 to assist in managing costs during
COVID-19. This is reflected in the Remuneration Tables
in section 7.1.
6.3.1 STI overview
The STI plan provides for an annual payment that varies
with performance measured over the Group’s financial
year to 30 June 2020. The STI is aligned to shareholder
interests as executives will only become entitled to the
majority of payments if profitability improves (relative
to peers in the cyclical housing industry), with maximum
incentive payments above the target level linked directly
to shareholder value creation. As noted in section 6.1, the
maximum STI that can be earned is capped.
Financial gateways are in place to ensure a minimum
level of financial performance is achieved before any STI
payments (both financial and personal goals) are awarded
to executives. The gateways represent 95% of at target
Revenue and EBIT. If both gateways have not been achieved,
then the executives are not eligible for an STI payment of
either component – ‘financials’ and ‘personal goals’.
The STI payment is made in cash after finalisation of the
annual audited financial statements. 50% of the financial
target component of the STI is deferred for executives that
achieve their STI financial targets. 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 following year’s audited financial
statements. If the Board is satisfied the deferred component
will be paid to executives together with nominal interest
at market rates. However, if the Board is not satisfied the
deferred component will be subject to forfeiture.
6.3.2 STI performance requirements
6.3.2.1 Financial Performance Targets
For FY20, 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 and ROFE
is a key target in driving returns on capital employed
in excess of the cost of capital. The EBIT and ROFE
targets are weighted equally for divisional and corporate
executives, and adjusted for normalisation if applicable;
refer section 4.
The ‘target’ 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.
22 | GWA GROUP LIMITED | 2020 ANNUAL REPORT
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
‘target’ and ‘stretch’ levels is rewarded on a straight line basis
between ‘target’ achievement and ‘stretch’ achievement.
The Board retains the right to vary from policy if required.
However, any variation from policy and the reasons for
it will be disclosed. There was no variation from policy in
setting the STI financial performance targets for FY20.
6.3.2.1.1 FY20 STI Financial Performance Outcomes
For FY20, due to the weaker market conditions and
negative impact of COVID-19 the financial gateways were
not achieved and therefore, the executives were not eligible
for an STI payment (both financial and personal goals).
The following table provides an overview of the STI metrics
for FY20 and outcomes:
Financial Metric
Gateway
Net Sales
EBIT
ROFE
Not Achieved
Not Achieved
–
FY20 STI
Outcomes
–
Nil
Nil
The STI performance outcomes for FY20 were aligned with
shareholders’ interests as it reflected the lower profitability
and shareholder returns for the period.
This outcome is reflected in the Remuneration Tables in
section 7.1.
The deferred component of the STI incentive payments
for FY19 for executives was tested by the Board in August
2020 to confirm the integrity of the achievement of the
STI financial targets in FY19. Following satisfaction with the
testing, the Board approved the payment of the deferred
component to executives together with interest at nominal
market rates.
6.3.2.2 Personal Goals
The personal goals set for each executive include
achievement of key milestones to improve or consolidate
the Group or business unit’s strategic position. The
personal goals vary with the individual’s role, risks
and opportunities and are aligned with the Group’s
strategic plan and corporate priorities. Achievement of
personal goals accounts for a maximum of 25% for the
Managing Director and 20% of the other executives’
fixed remuneration.
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 and
influence on the wider business. Examples may include
achieving working capital reductions, sales/margin targets
or cost reduction targets. The measurable business
improvement goals are outcomes which drive sustainable
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,
enhancing sustainability, delivering a major project on time
and budget, market share and productivity improvements
or implementing a significant change or strategic initiative.
Assessment of the personal goals STI component is
determined following a formal performance review process
for each executive. The performance reviews for executives
are conducted semi-annually by the Managing Director
with the annual outcomes reviewed and approved by the
Nomination and Remuneration Committee. The personal
goals for executives for the following year are established
at the performance reviews, and reviewed and approved by
the Nomination and Remuneration Committee.
The Managing Director’s performance review is conducted
semi-annually by the Chairman following input from the
Board and with the outcomes 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 FY20 is
provided in section 6.3.2.2.1. As outlined in section 6.3.2.1.1
the financial gateways were not achieved for FY20 and
therefore, there were no STI payments made to the
Managing Director and other executives. This is reflected in
the Remuneration Tables in section 7.1.
The inclusion of personal goals in the remuneration
structure ensures that executives can be recognised for
improved business performance, including periods where
troughs in the housing industry cycle mean financial
performance is consequently weaker across the sector.
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 | 2020 ANNUAL REPORT | 23
6.3.2.2.1 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
FY20 is provided in the following table.
FY20 Goals
Performance
Personal Objectives
Achieve leading workplace
health and safety (WHS)
performance with the aim
of an injury free workplace.
Measures:
• Safety initiatives to
reduce risk
• Leading safety indicators
(Safety Interactions,
Hazards Reported,
Actions Closed)
• Lagging safety measures
(MTIFR, LTIFR, TIFR)
Executing and delivering
FY20 business plan
including the integration of
Methven. Deliver the growth
strategy in accordance with
the horizon plans.
Measures:
•
•
Integration of Methven
Improvement in market
share
• Growth strategy
development and
execution including
increased installations
of Caroma Smart
Command®
Build employee
engagement and culture
and embed purpose
and values to deliver the
strategy. Continue to
increase diversity with a
focus on increasing female
representation.
Measures:
• Culture and
engagement surveys
• Gender diversity
Assessment
On target
On target
During FY20 the Group made substantial progress on implementing our safety
strategy. This strategy focuses on leadership and behavioural aspects of safety
together with identifying and mitigating physical risks in our operations. This
continued focus on safety has resulted in a significant improvement in the
Group’s performance in both lead and lag safety indicators. The Group recorded
a material decrease in TIFR from 6.2 in FY19 to 0.9 in FY20. The Methven
sites across NZ, China and the UK have been integrated into the GWA safety
system, SafetyOne, with the standardisation of operating procedures to deliver
a consistent and measurable approach to safety across the Group. The Group
ensured staff were safe and well during COVID-19 through its well established
practice of supporting flexible work which enabled all office based staff to work
from home. A number of measures were implemented to ensure employees
could work safety at their work sites. Ownership and accountability for safety
exists at all levels in the business with “Caring For Each Other” central to the
Group’s cultural pillars and with employee engagement on safety increasing
2 percentage points to 89% which is above the Australia/NZ top quartile based
on our 2019 engagement survey.
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 strengthen the core business, build emerging businesses and create
growth options into the future in line with the Group’s superior water solutions
strategy. The integration of Methven remains on track with cost synergies in
line with expectations and with improved ranging of Methven products in
Australia. The Group maintained market share in FY20 during challenging
market conditions with the impact of COVID-19 in the last quarter of the year.
The Group responded to the weaker market conditions in FY20 by accelerating
cost-out and efficiency improvements, whilst continuing to implement our
growth strategy. Solid progress was achieved with our consumer engagement
strategy and growth in commercial segments. The number of installations of
Caroma Smart Command® (CSC) increased to 49 sites in FY20 with a solid bank
of additional projects in the pipeline. CSC continues to represent a significant
growth opportunity for the Group.
The Group continues to implement programs to drive a high performance culture
and to encourage staff to perform their best while upholding GWA’s Cultural
Pillars. There is an active Culture Council which is led by the Managing Director
who champions programs aligned to GWA’s Cultural Pillars. An employee
engagement survey was conducted during FY20 in partnership with Kincentric
(formerly Aon). The overall engagement score was 61% which is above the
Australia/NZ average. Increasing the diversity of the Group’s talent continues to
be a focus and the percentage of female employees increased to 43% globally. In
Australia, the percentage of women increased to 42%, and 60% of all promotions
were awarded to women, as reported in the Group’s 2020 Workplace Gender
Equality Report which is available on the Group’s website at www.gwagroup.
com.au under Gender Equality Reporting. The Group received notification during
August 2020 that it is compliant with the Workplace Gender Equality Act 2012.
On target
24 | GWA GROUP LIMITED | 2020 ANNUAL REPORT
Financial targets
STI financial performance
targets
Measures:
• Revenue and EBIT
financial gateways
• EBIT and ROFE financial
targets
Due to the weaker market conditions and negative impact of COVID-19 in
FY20, the STI financial gateways were not achieved. As a result there were
no STI payments (both financial and personal goals) to the Managing Director
and other executives for FY20. This outcome is reflected in the Remuneration
Tables in section 7.1.
Below target
On target
Above target
Below target
6.4 LONG-TERM INCENTIVE (LTI)
6.4.1 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 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,
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, the participants may exercise the Performance
Rights at no cost before their expiry seven years after the
grant date. 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.
For the FY20 LTI grant, a participant may not dispose
of the ordinary shares issued under the LTI until Board
approval has been obtained and the shares are subject to a
holding lock upon issue. This was to ensure that executives
retain a suitable shareholding in the Group. 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 executive’s Group shareholdings as a
multiple of fixed remuneration, and such other factors as it
considers relevant to the application. No applications from
participants to dispose of the shares were received by the
Board in FY20.
In accordance with the LTI plan rules, 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 FY20 LTI grant, the proportion of Performance
Rights that can vest will be calculated and the shares will
vest in August 2022 subject to achieving the performance
hurdles. If the performance hurdles are not met the
Performance Rights will be cancelled.
As outlined in section 3.2, the clawback provisions under the
LTI plan rules were strengthened following an independent
external review conducted in FY19. The clawback provisions
enable the Board to reduce or ‘claw back’ benefits under the
LTI (including unvested Performance Rights, shares, proceeds
of shares or cash amounts) if the Board considers that action
is justified in the circumstances. This includes where an
executive has committed an act of fraud, defalcation or
gross misconduct.
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 2020 was 1,741,500 which represents 0.7% of
the Group’s total issued shares.
GWA GROUP LIMITED | 2020 ANNUAL REPORT | 25
6.4.2 LTI performance requirements
6.4.2.2 ROFE hurdle
For the FY20 LTI grant, the performance hurdles continue
to provide for vesting scales graduated with performance
and demanding performance hurdles.
The performance hurdles and vesting proportions for the
ROFE performance measure that applies to the FY20 LTI
grant is outlined in the following table:
6.4.2.1 TSR hurdle
The performance hurdles and vesting proportions for the
TSR performance measure that applies to the FY20 LTI
grant are outlined in the following table:
TSR of GWA Group Limited
relative to TSRs of Comparator
Companies
Proportion of
Performance Rights to Vest
if TSR hurdle is met
Less than the 50th percentile
50th percentile
0%
12.5%
Between the 50th percentile
and 75th percentile
Straight line vesting
between 12.5% and 50%
75th percentile or higher
50% (i.e. 50% of total grant)
The group of comparator companies for the TSR hurdle
includes a bespoke group of domestic ASX listed
companies exposed to similar economic, market, and/or
financial factors.
GWA and the comparator companies operate in a number
of different sectors (e.g. Industrial, Material, Consumer
Discretionary) and the choosing of one sector or industry
will not provide a comprehensive list of related companies.
To ensure an adequate number of comparator companies
is included for the TSR hurdle, the Board has selected
companies outside the building supplies and construction
materials industry, but subject to similar external influences.
The group of comparator companies for the FY20 LTI grant
is as follows:
James Hardie Industries PLC, Fletcher Building Ltd, Boral
Ltd, Adelaide Brighton 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, Decmil Group Ltd, Simonds Group
Ltd, Hills Ltd, Fleetwood Corp Ltd, Accent Group Ltd, Pact
Group Holdings Ltd, Reece 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. The Board
reviews the comparator group on an annual basis to ensure
they remain relevant and to ensure potential new peers are
considered for inclusion.
GWA Group Limited
ROFE over three year
performance period
ROFE less than 16%
per annum
ROFE equal to 16%
per annum
ROFE between 16%
and 19% per annum
ROFE equal to 19%
or higher per annum
Proportion of
Performance Rights to
Vest if ROFE hurdle is met
0%
12.5%
Straight line vesting
between 12.5% and 50%
50% (i.e. 50% of total grant)
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.
The ROFE hurdle is calculated as earnings before interest
and tax (EBIT) divided by funds employed and adjusted for
normalisation if applicable; refer section 4. Funds employed
is calculated as net assets minus cash plus borrowings and
net AASB16 Leases balances.
The Board has discretion to make reasonable adjustments
to the EBIT figure where it is unduly distorted by significant
or abnormal events, and in order to ensure that it reflects
underlying trading performance. The use of any discretion
and the reasons for it will be disclosed.
For the FY18 LTI grant (performance period for the 3 years
to 30 June 2020) to be tested in August 2020, the impact
of the adoption of the May 2020 IFRS Interpretation
Committee decision (refer Note 1c of the financial
statements) will be excluded from ROFE i.e. the resulting
deferred tax liability (DTL) will be added back to net
assets. This ensures there is no unintended benefit for
the executives with the testing of the ROFE hurdle.
7.
DETAILS OF DIRECTOR AND
EXECUTIVE REMUNERATION
7.1 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
2020 are provided in the following Remuneration Tables.
26 | GWA GROUP LIMITED | 2020 ANNUAL REPORT
Short-term
Long-term
Post-employment
s
e
e
F
&
y
r
a
a
S
l
s
u
n
o
B
h
s
a
C
I
T
S
y
r
a
t
e
n
o
M
-
n
o
N
$(a)
$(b)
$(c)
-
e
r
a
h
S
f
o
e
u
a
V
l
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
$
2020
244,997
2019
259,469
2020
111,150
2019
117,650
2020
102,600
2019
108,600
2020
102,600
2019
108,600
2020
111,150
2019
116,969
2020
102,600
2019
12,769
2020
775,097
2019
724,057
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
n
o
i
t
a
n
m
r
e
T
i
s
t
fi
e
n
e
B
$
n
o
i
t
a
u
n
n
a
r
e
p
u
S
s
t
fi
e
n
e
B
$
21,003
20,531
12,350
12,350
11,400
11,400
11,400
11,400
12,350
13,031
11,400
1,213
79,903
69,925
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2020
967,514
– 4,277
676,736
2019
967,308 400,000
1,627
452,597
–
–
25,000
24,999
2020
369,520
– 4,254
110,404
6,344
21,003
2019
389,008
163,816
8,013
92,763
6,325
20,531
2020
2,112,131
–
8,531
787,140
6,344 125,906
2019 2,080,373
563,816 9,640 545,360
6,325
115,455
2020
701,848
– 10,440
202,361
64,758
25,000
2019
733,654 300,000
8,289
170,188
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
%
%
%
–
–
–
–
–
–
–
–
–
–
–
–
40
46
22
38
20
38
22
36
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
100
80
20
–
100
80
20
–
100
80
20
–
100
80
20
l
a
t
o
T
$
266,000
280,000
123,500
130,000
114,000
120,000
114,000
120,000
123,500
130,000
114,000
13,982
855,000
793,982
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,673,527
1,846,531
511,525
680,456
– 3,040,052
– 3,320,969
–
–
–
–
–
1,004,407
1,237,130
515,752
650,924
1,520,159
Non-Executive Directors(f)
D McDonough,
Chairman
J Mulcahy,
Deputy Chairman
P Birtles,
Non-Executive Director
J McKellar,
Non-Executive Director
S Goddard,
Non-Executive Director
A Barrass,
Non-Executive Director
(Appointed 24 May 2019)
Total – Non-Executive
Directors Remuneration
Executive Directors(g)
T Salt,
Managing Director(e)
R Thornton,
Executive Director
Total – Directors
Remuneration
Executives(g)
P Gibson,
Group Chief Financial Officer
C Reil,
Group General Manager –
People & Performance
2020
373,012
– 4,792
112,948
2019
386,512
168,000 2,040
69,373
–
–
–
24,999
25,000
24,999
Total – Executives
Remuneration
Total – Directors
and Executives
Remuneration
2020 1,074,860
– 15,232
315,309 64,758
50,000
2019
1,120,166 468,000 10,329
239,561
–
49,998
– 1,888,054
2020 3,186,991
– 23,763 1,102,449
71,102
175,906
– 4,560,211
2019 3,200,539 1,031,816 19,969
784,921
6,325
165,453
– 5,209,023
Notes to the Remuneration Tables:
(a) Salary and fees represent base salary and includes the movement in annual leave provision.
(b) Due to the weaker market conditions and the negative impact of COVID-19 the financial gateways under the Short-Term Incentive (STI) plan were
not achieved and therefore, the executives were not eligible for an STI payment (both financial and personal goals) for FY20 performance.
(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 2020 were granted to executives in FY18, FY19 and FY20 (as applicable) and are subject to vesting conditions and the achievement of specified
performance hurdles over the three year performance periods. During FY20, 100% of the Performance Rights granted to executives in respect of the
FY17 LTI grant vested as the ROFE and TSR hurdles were fully achieved. The fair value of the Performance Rights granted in FY18, FY19 and FY20 were
calculated using Black Scholes Model (ROFE hurdle) 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) For details of Mr Tim Salt’s remuneration arrangements as Managing Director, please refer to section 8.1. The Managing Director’s fixed remuneration
for FY20 was at the median of the comparator group based on the market benchmark data provided by an independent adviser and has remained
unchanged since his appointment during FY16 (excluding the pay reduction of 20% during Q4 FY20 to assist in managing costs during COVID-19).
(f) Non-executive director remuneration has remained frozen since FY16 (excluding the pay reduction of 20% during Q4 FY20 to assist in managing costs
during COVID-19). The total non-executive director remuneration is within the annual aggregate maximum amount approved by shareholders. For details
of non-executive director remuneration, please refer to section 5.
(g) For the actual remuneration received by the executives for FY20, please refer to the table in section 7.1.1.
GWA GROUP LIMITED | 2020 ANNUAL REPORT | 27
7.1.1 Actual remuneration received by executives for FY20
The following table sets out the actual value of remuneration received by executives for FY20, derived from the various
components of their remuneration during FY20. This table differs from the more detailed statutory remuneration disclosures
in the Remuneration Tables in section 7.1 due to the exclusion of LTI amounts not vested or reversal of accounting expenses
associated with LTI grants and is therefore unaudited.
Executives
FY20
T Salt, Managing Director(d)
R Thornton, Executive Director
P Gibson, Group Chief Financial Officer
C Reil, Group General Manager –
People & Performance
Total
Notes:
Fixed
Remuneration
$(a)
Short Term
Incentive
$(b)
Long Term
Incentive (Earned)
$(c)
954,277
393,317
722,940
412,407
2,482,941
–
–
–
–
–
363,931
74,653
136,580
–
575,164
Total
$
1,318,208
467,970
859,520
412,407
3,058,105
(a) Fixed remuneration represents amounts actually paid to executives during FY20 and includes base salary, non-monetary benefits and
superannuation. It includes the 20% pay reduction in Q4 FY20 to support cost management plans due to COVID-19.
(b) Due to the weaker market conditions and the negative impact of COVID-19 the financial gateways under the Short-Term Incentive (STI)
plan were not achieved and therefore, the executives were not eligible for an STI payment (both financial and personal goals).
(c) The performance hurdles for the FY17 LTI grant were tested during FY20 and fully achieved; refer section 7.2.1 Performance Rights.
Excludes the value of any unvested LTI grants expensed or reversed during FY20.
(d) For details of Mr Tim Salt’s remuneration arrangements as Managing Director refer to section 8.1.
7.2 SHARE BASED PAYMENTS
7.2.1 Performance Rights
The following table shows details of the Performance Rights granted to key management personnel during the year ended
30 June 2020 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
Fair value
of rights at
grant date
$*
Issue price used
to determine
number of
rights granted
Grant date*
Executive Directors
T Salt, Managing Director
2020 329,000
14 February 2020
2019
220,000
18 February 2019
2018
224,000
19 February 2018
–
–
–
2017
214,500
24 February 2017
100
R Thornton, Executive Director 2020
40,500
14 February 2020
Executives
P Gibson, Group Chief
Financial Officer
45,000
18 February 2019
46,000
19 February 2018
44,000
24 February 2017
100
2020
74,000
14 February 2020
83,000
18 February 2019
84,000
19 February 2018
80,500
24 February 2017
100
2019
2018
2017
2019
2018
2017
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,036,350
566,500
427,358
363,931
127,575
115,875
87,761
74,653
233,100
213,725
160,259
136,580
130,725
118,450
89,669
–
3.04
2.73
2.68
2.80
3.04
2.73
2.68
2.80
3.04
2.73
2.68
2.80
3.04
2.73
2.68
–
C Reil, Group General Manager
– People & Performance
2020
41,500
14 February 2020
2019
2018
2017
46,000
18 February 2019
47,000
19 February 2018
–
–
–
–
–
–
Note:
* The issue price used to determine the number of Performance Rights offered to key management personnel during FY20 was $3.04 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 25 October
2019. 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 $3.54 per right and TSR hurdle was $2.71 per right.
28 | GWA GROUP LIMITED | 2020 ANNUAL REPORT
All of the rights carry an exercise price of nil. The rights granted on 19 February 2018, 18 February 2019 and 14 February 2020
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 2020, 2021 and 2022 respectively, subject to the achievement of the performance hurdles. The rights
granted to Mr Salt and Mr Thornton were approved by shareholders at the 2017, 2018 and 2019 Annual General Meetings in
accordance with ASX Listing Rule 10.14.
Rights were forfeited where an employee ceased employment with the Group during the year in accordance with the rules of
the LTI plan.
The number of rights outstanding at 30 June 2020 represents the balance yet to be tested.
7.2.2 Status and key dates of LTI awards
The following table shows the status and key dates for Performance Rights granted to key management personnel under the
LTI plan.
Grant Date
24 February 2017
19 February 2018
18 February 2019
14 February 2020
Valuation
Per Right1
Tranche A
(TSR) $1.28
Tranche B
(ROFE) $2.11
Tranche A
(TSR) $1.43
Tranche B
(ROFE) $2.38
Tranche A
(TSR) $2.23
Tranche B
(ROFE) $2.92
Tranche A
(TSR) $2.71
Tranche B
(ROFE) $3.54
Performance
Testing Windows
Expiry Date
(if hurdle not met)
Performance Status2
19 August 2019
Tranche A (TSR): Performance condition
met at 89th percentile resulting in
maximum 100% vesting of the grant.
Tranche B (ROFE): Performance
condition met at an average of
20% per annum resulting in maximum
100% vesting of the grant.
August 2020
Performance testing
not yet commenced.
August 2021
Performance testing
not yet commenced.
August 2022
Performance testing
not yet commenced.
28 October 2016
to 19 August 2019
(Tranche A)
1 July 2016 to
30 June 2019
Tranche B)
27 October 2017
to August 2020
(Tranche A)
1 July 2017 to
30 June 2020
(Tranche B)
26 October 2018
to August 2021
(Tranche A)
1 July 2018 to
30 June 2021
(Tranche B)
25 October 2019
to August 2022
(Tranche A)
1 July 2019 to
30 June 2022
(Tranche B)
Notes:
1 The value of performance rights at grant date calculated in accordance with AASB 2 Share-based Payments. Valuations are performed by a third
party, PWC for the 2017 and 2018 grants and Deloitte for the 2019 and 2020 grants.
2 To ensure an independent TSR measurement, GWA engages the services of external organisation, Deloitte, to assist with determining performance
under the TSR hurdle. In addition, GWA’s external auditor, KPMG, is engaged to perform agreed upon procedures to assist with ROFE measurement
and the accuracy of LTI vesting outcomes.
7.3 KEY MANAGEMENT PERSONNEL TRANSACTIONS
7.3.1 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 2020 (2019: nil).
7.3.2 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 2020 (2019: 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.
GWA GROUP LIMITED | 2020 ANNUAL REPORT | 29
7.3.3 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
P Birtles
J McKellar
S Goddard
A Barrass
Executive Directors
T Salt
R Thornton
Executives
P Gibson
C Reil
Non–Executive Directors
D McDonough
J Mulcahy
P Birtles
J McKellar
S Goddard
A Barrass (Appointed 24 May 2019)
Executive Directors
T Salt
R Thornton
Executives
P Gibson
C Reil
Held at
1 July 2019
Granted as
compensation
Purchases
Sales
30 June 2020
Held at
150,000
40,950
38,650
3,054
10,000
–
298,070
185,577
–
–
–
–
–
–
214,500
44,000
129,000
80,500
–
–
Held at
1 July 2018
Granted as
compensation
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
150,000
40,950
38,650
3,054
10,000
–
512,570
229,577
209,500
–
Held at
Purchases
Sales
30 June 2019
150,000
40,950
38,650
1,000
10,000
n/a
36,070
120,577
10,000
–
–
–
–
–
–
–
262,000
65,000
119,000
–
–
–
–
2,054
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
150,000
40,950
38,650
3,054
10,000
–
298,070
185,577
129,000
–
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 2020 is listed in the Directors’
Report under Directors’ Interests.
During the FY20 reporting period, there were 339,000 shares vested to key management personnel as compensation
(2019: 446,000). The aggregate number of shares held by key management personnel or their related parties at 30 June
2020 was 1,194,301 (2019: 855,301).
8. KEY TERMS OF EMPLOYMENT CONTRACTS
8.1 MANAGING DIRECTOR REMUNERATION
The remuneration arrangements for Mr Tim Salt as Chief Executive Officer were determined by the Nomination and
Remuneration Committee in FY16 following the provision of market data from an independent external adviser. Based on
the benchmark data, Mr Salt’s total remuneration was aligned with the then 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 his fixed remuneration has not changed since then (excluding the pay reduction
of 20% during Q4 FY20 to assist in managing costs during COVID-19). As mentioned in section 3.2, following a review of
executive remuneration in FY19, the STI and LTI opportunity for Mr Salt were adjusted to be in line with market.
30 | GWA GROUP LIMITED | 2020 ANNUAL REPORT
The following is a summary of Mr Salt’s remuneration package for FY20:
• 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 50% of TFR based on Mr Salt meeting Board approved Key Performance Indicator (KPI) objectives,
with provision for a maximum 75% of TFR for outperformance against these KPIs.
• Participation in GWA’s Long-Term Incentive (LTI) plan:
– LTI opportunity of 100% 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 FY20 executive remuneration review, the market benchmark data provided by an independent external adviser
confirmed that the Managing Director’s fixed remuneration was at the median level of the comparator group consisting of
19 companies with comparable operational scope and size to GWA.
8.2 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 Tim Salt provides that if either the Group or Mr Tim 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 Tim 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.
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.
8.3 TREATMENT OF INCENTIVES ON TERMINATION
The following table shows the treatment of incentives on termination of employment in the various circumstances shown.
Circumstances
Short term incentive1
Immediate termination
for cause
No STI payable and clawback provisions may
apply (including deferred STI)
Long term incentive –
unvested Performance Rights
Performance Rights are forfeited
Resignation
Board discretion to award STI on a pro-rata
basis (including deferred STI)
Performance Rights are forfeited unless Board
determines otherwise
Notice by company,
good leaver, retirement,
redundancy, death or
permanent disability
Board discretion to award STI on a pro-rata
basis (including deferred STI)
Board discretion to allow awards to vest or
remain subject to performance hurdles after
termination on a pro-rata basis
Change of control
STI will be paid on a pro-rata basis
The Board has discretion to allow awards
to vest on a change of control of GWA
(e.g. a takeover or merger)
Notes:
1
Any STI payments will be paid according to the normal annual STI payment time frame (i.e. payment timing will not be accelerated).
The Directors’ Report is made out in accordance with a resolution of the directors:
Darryl D McDonough
Chairman
Tim R Salt
Managing Director
17 August 2020
GWA GROUP LIMITED | 2020 ANNUAL REPORT | 31
GWA Group Limited Financial Report
NOTES
1. Significant accounting policies
33
34
35
36
37
2. Operating segments
3. Business combination
4. Income and expenses
5.
Income tax expenses
6. Earnings per share
7. Cash and cash equivalents
8. Trade and other receivables
9.
Inventories
10. Deferred tax assets and liabilities
11. Property, plant and equipment
12. Intangible assets
13. Leases
14. Trade and other payables
15. Employee benefits
16. Provisions
17. Loans and borrowings
18. Capital and reserves
19. Financial instruments and financial
risk management
20. Share-based payments
21. Related parties
22. Auditor’s remuneration
23. Capital commitments
24. Consolidated entities
25. Deed of cross guarantee
26. Parent entity disclosures
27. Discontinued operations
28. Subsequent events
Directors’ Declaration
Independent Auditor’s Report to the
Shareholders of GWA Group Limited
Lead Auditor’s Independence Declaration under
Section 307C of the Corporations Act 2001
37
39
41
42
44
46
47
47
48
48
50
52
54
56
57
57
58
59
60
67
68
69
69
70
71
73
73
74
75
76
78
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
Notes to the Consolidated Financial Statements
32 | GWA GROUP LIMITED | 2020 ANNUAL REPORT
32 | GWA GROUP LIMITED | 2020 ANNUAL REPORT
Consolidated Statement of Profit or Loss
and Other Comprehensive Income
For the year ended 30 June
In thousands of AUD
Profit or loss
CONTINUING OPERATIONS
Sales revenue
Cost of sales
Gross profit
Other income
Selling expenses
Administrative expenses
Other expenses
Operating profit (excluding transaction & integration costs)
Transaction & integration costs on business combination(iii)
Operating profit
Finance income
Finance expenses
Net financing costs
Profit before tax
Income tax expense
Profit from continuing operations
DISCONTINUED OPERATIONS(IV)
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, net of tax
Total comprehensive income for the period
EARNINGS PER SHARE (CENTS)
Total
– Basic
– Diluted
Continuing operations
(excluding transaction & integration costs)
– Basic
– Diluted
Continuing operations
– Basic
– Diluted
Note
2020
2019(i)
Restated(ii)
4(a)
4(c)
4(b)
4(d)
3
4(f)
4(f)
5
27
6
6
6
6
6
6
398,704
(237,432)
161,272
2,892
(53,781)
(38,020)
(523)
71,840
(1,543)
70,297
156
(8,800)
(8,644)
61,653
(17,767)
43,886
–
43,886
(1,740)
(3,120)
(4,860)
39,026
16.6
16.5
17.0
16.9
16.6
16.5
381,730
(218,801)
162,929
2,014
(52,033)
(34,771)
(22)
78,117
(8,737)
69,380
414
(6,225)
(5,811)
63,569
(20,327)
43,242
50,802
94,044
(1,238)
(3,086)
(4,324)
89,720
35.6
35.5
19.3
19.2
16.4
16.3
The consolidated statement of profit or loss and other comprehensive income is to be read in conjunction with the accompanying notes.
(i) The results for the year ended 30 June 2019 include the results from Methven Limited from the date of acquisition (10 April 2019).
Refer to Note 3 for further information.
(ii) Refer to Note 13 for information on the impact of the adoption of AASB 16 Leases, including restatement of comparatives.
(iii) Transaction & integration costs are a form of ‘other expenses’ however disclosed separately due to their significance.
(iv) The Door & Access Systems’ business was sold with an effective date of 3 July 2018 and is classified as a discontinued operation
in the above statement. Refer to Note 27 for further information.
GWA GROUP LIMITED | 2020 ANNUAL REPORT | 33
GWA GROUP LIMITED AND ITS CONTROLLED ENTITIES
Consolidated Statement of Financial Position
As at
In thousands of AUD
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Inventories
Derivative financial instruments
Other
Assets classified as held for sale
Total current assets
NON-CURRENT ASSETS
Deferred tax assets
Property, plant and equipment
Intangible assets
Right of use assets
Other
Total non-current assets
Total assets
CURRENT LIABILITIES
Trade and other payables
Loans and borrowings
Employee benefits
Income tax payable
Lease liabilities
Provisions
Derivative financial instruments
Liabilities classified as held for sale
Total current liabilities
NON-CURRENT LIABILITIES
Deferred tax liability
Trade and other payables
Loans and borrowings
Lease liabilities
Employee benefits
Provisions
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Issued capital
Reserves
Retained earnings
Total equity
Note
30 June 2020
30 June 2019
Restated(i)
1 July 2019
Restated(i)
7
8
9
19
27
10
11
12
13
14
17
15
5
13
16
19
27
10
14
17
13
15
16
18
32,359
56,628
78,782
–
3,772
–
171,541
15,990
24,830
421,226
67,833
–
529,879
701,420
43,699
27,000
5,120
137
11,458
6,438
4,315
–
98,167
102,846
696
148,400
63,138
4,310
4,132
323,522
421,689
279,731
307,790
(5,758)
(22,301)
279,731
39,637
71,057
75,262
1,656
4,178
–
191,790
15,512
20,804
422,091
48,288
71
506,766
698,556
55,495
–
5,786
947
8,325
9,141
1,448
–
81,142
102,842
659
177,759
44,343
3,884
1,171
330,658
411,800
286,756
307,790
(1,038)
(19,996)
286,756
27,860
61,476
70,029
4,777
2,413
61,912
228,467
10,666
14,906
286,808
47,549
297
360,226
588,693
42,934
–
4,371
6,532
8,555
7,341
156
12,025
81,914
85,247
718
125,000
42,725
4,427
1,631
259,748
341,662
247,031
307,790
4,451
(65,210)
247,031
The consolidated statement of financial position should be read in conjunction with the accompanying notes.
(i) Refer to Note 13 for information on the impact of the adoption of AASB 16 Leases, and Note 1(c)(i) for information
on the impact of the adoption of the IFRS IC (Interpretation Committee) decision, including restatement of comparatives.
34 | GWA GROUP LIMITED | 2020 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
Lease interest paid
Interest received
Income taxes paid
Net cash from operating activities
7(b)
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 disposal, net of transaction costs
Acquisition of subsidiary, net of cash acquired
3
Net cash used in investing activities
Proceeds from borrowings
Repayment of borrowings
Dividends paid
Repayment of lease liability
Net cash used in financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effect of exchange rate changes
Cash and cash equivalents at 30 June
Note
2020
2019(i)
Restated(ii)
461,319
(374,567)
86,752
(5,431)
(2,683)
159
(17,845)
60,952
35
(10,044)
(2,308)
–
–
(12,317)
293,145
(293,827)
(46,191)
(8,384)
(55,257)
(6,622)
39,637
(656)
32,359
424,661
(328,988)
95,673
(3,357)
(2,058)
225
(22,853)
67,630
210
(3,137)
(1,399)
98,883
(108,671)
(14,114)
193,759
(177,275)
(48,830)
(11,452)
(43,798)
9,718
29,070
849
39,637
The consolidated statement of cash flows is to be read in conjunction with the accompanying notes.
(i) The cashflows for the year ended 30 June 2019 include the cashflows from Methven Limited from the date of acquisition
(10 April 2019). Refer to Note 3 for further information.
(ii) Refer to Note 13 for information on the impact of the adoption of AASB 16 Leases, including restatement of comparatives.
(iii) The Door & Access Systems’ business was sold with an effective date of 3 July 2018 and is classified as a discontinued operation.
The above cash flows are inclusive of discontinued operations. Refer to Note 27 for further information regarding discontinued
operations including summarised cash flow information.
GWA GROUP LIMITED | 2020 ANNUAL REPORT | 35
GWA GROUP LIMITED AND ITS CONTROLLED ENTITIES
Consolidated Statement of Changes in Equity
For the year ended 30 June 2020
In thousands of AUD
Share capital
Translation
reserve
Hedging
reserve
Equity
compensation
reserve
Retained
earnings
Total
Balance as at 1 July 2019 – Restated(i)(ii)
307,790
(2,399)
149
1,212
(19,996)
286,756
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
Dividends paid
Total transactions with owners
–
–
–
–
–
–
–
–
–
(1,740)
–
(1,740)
(1,740)
–
–
–
–
–
(3,120)
(3,120)
(3,120)
–
–
–
–
–
–
–
–
140
–
140
43,886
43,886
–
–
–
43,886
–
(46,191)
(46,191)
(1,740)
(3,120)
(4,860)
39,026
140
(46,191)
(46,051)
Balance at 30 June 2020
307,790
(4,139)
(2,971)
1,352
(22,301)
279,731
For the year ended 30 June 2019
In thousands of AUD
Share capital
Translation
reserve
Hedging
reserve
Equity
compensation
reserve
Balance as at 1 July 2018
307,790
(1,161)
3,235
2,377
Transition impact of AASB 16 Leases(i)
Impact on adoption of IFRS IC
decision(ii)
–
–
–
–
–
–
–
–
Retained
earnings
21,160
(1,123)
Total
333,401
(1,123)
(85,247)
(85,247)
Balance as at 1 July 2018 restated
307,790
(1,161)
3,235
2,377
(65,210)
247,031
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
Dividends paid
Total transactions with owners
–
–
–
–
–
–
–
–
–
(1,238)
–
(1,238)
(1,238)
–
–
–
–
–
(3,086)
(3,086)
(3,086)
–
–
–
Balance at 30 June 2019
307,790
(2,399)
149
–
–
–
–
–
94,044
94,044
–
–
–
94,044
(1,238)
(3,086)
(4,324)
89,720
(1,165)
–
(1,165)
1,212
–
(48,830)
(48,830)
(1,165)
(48,830)
(49,995)
(19,996)
286,756
The consolidated statement of changes in equity is to be read in conjunction with the accompanying notes.
(i) Refer to Note 13 for information on the impact of the adoption of AASB 16 Leases, including restatement of comparatives.
(ii) Refer to Note 1(c)(i) for information on the impact of the adoption of the IFRS IC (Interpretation Committee) decision.
36 | GWA GROUP LIMITED | 2020 ANNUAL REPORT
GWA GROUP LIMITED AND ITS CONTROLLED ENTITIES Notes to the Consolidated Financial Statements
SECTION I: OVERVIEW
• Note 3 – valuation of identifiable assets and liabilities of
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 2020 comprises
the Company and its subsidiaries (together referred to as the
‘consolidated entity’).
The principal activities of the consolidated entity during the
year were the research, design, manufacture, import, and
marketing of building fixtures and fittings to 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.
(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 which 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 to the nearest thousand dollars, unless otherwise stated.
The preparation of a financial report requires management to
make judgements, estimates and assumptions that affect the
application of accounting policies and the reported amounts
of assets, liabilities, income and expenses. The estimates and
associated assumptions are based on historical experience and
various other factors that are believed to be reasonable under
the circumstances, the results of which form the basis of making
the judgements about carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results
may differ from these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised
in the period in which the estimate is revised if the revision
affects only that period, or in the period of the revision and
future periods if the revision affects both current and future
periods. Information about significant areas of estimation
uncertainty and critical judgements in applying accounting
policies that have the most significant effect on the amounts
recognised in the financial statements are described in the
following notes:
businesses acquired
• Note 12 – measurement of the recoverable amounts of
intangible assets
• Note 19 – 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 2020:
• AASB 16 Leases
•
IFRS Interpretations Committee Decision on Multiple
Tax Consequences of Recovering an Asset
• AASB Interpretation 23 Uncertainty over Income
Tax Treatments
• AASB 2018-1 Annual Improvements to IFRS Standards
2015-2017 Cycle
Refer to Note 13 for the impact of adopting AASB 16 Leases.
In May 2020, the IFRS Interpretations Committee published its
final agenda decision ‘Multiple Tax Consequences of Recovering
an Asset (IAS 12 Income Taxes)’ which considers how an entity
accounts for deferred taxes on an asset that has two distinct tax
consequences over its life that cannot be offset (taxable economic
benefits from use and capital gains on disposal or expiry).
The IFRS Interpretations Committee concluded that in these
circumstances an entity identifies separate temporary differences
(and deferred taxes) that reflect these distinct and separate tax
consequences of recovering the asset carrying amount.
The consolidated entity’s accounting policy had been to
consider these two tax consequences of recovering the assets
carrying amount together as they crystallised over the asset’s
life, irrespective of how the asset was recovered.
As a result of the May 2020 IFRS Interpretation Committee’s
decision, the consolidated entity has changed its accounting
policy, retrospectively adjusting the deferred tax accounting for
impacted intangible assets (brand names) which were acquired
prior to the adoption of IFRS.
GWA GROUP LIMITED | 2020 ANNUAL REPORT | 37
GWA 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
The impact of this change as at 1 July 2018 was as follows:
(ii) Subsidiaries
In thousands of AUD
Decrease in retained earnings
(Increase in) deferred tax liabilities
Adjustment
85,247
(85,247)
The initial adoption of all other Standards and Interpretations
listed above have not had a material impact on the amounts
reported, or disclosures made, in the consolidated financial report.
(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.
Effective for
the annual
reporting
period
beginning on
Expected to
be initially
applied in
the period
ending
1 January 2020 30 June 2021
1 January 2020 30 June 2021
1 January 2020 30 June 2021
1 January 2022
30 June 2023
AASB 2018-6 Definition of
a Business – Amendments
to AASB 3
AASB 2019-3 Interest
Rate Benchmark Reform –
Amendments to AASB 9,
AASB 139 and AASB 7
AASB 2018-7 Definition of
Material – Amendments to
IAS 1 and IAS 8
AASB 2019-1 Amendments
to The Conceptual
Framework for Financial
Reporting
AASB 2020-1 Classification
of Liabilities as Current
or Non-current –
Amendments to IAS 1
The consolidated entity is assessing the potential impact of the
above standards and interpretations issued but not yet effective
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 a business
combination shall be measured at fair value, which shall be
calculated as the sum of the business combination date fair
values of the assets transferred by the acquirer, the liabilities
incurred by the acquirer to former owners of the acquiree
and the equity issued by the acquirer, and the amount of any
non-controlling interest in the acquiree. Transaction costs are
expensed as incurred.
38 | GWA GROUP LIMITED | 2020 ANNUAL REPORT
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) Transactions eliminated on consolidation
Intra-group balances and transactions, and unrealised income
and expense arising from intra-group transactions, are eliminated.
(e) Foreign currency
(i) Foreign currency transactions
Transactions in foreign currencies are translated at the foreign
exchange rate ruling at the date of the transaction. Monetary
assets and liabilities denominated in foreign currencies at the
reporting date are retranslated to Australian dollars at the
foreign exchange rate ruling at that date. Foreign exchange
differences arising on translation are recognised in profit or
loss. Non-monetary assets and liabilities that are measured in
terms of historical cost in a foreign currency are retranslated
to Australian dollars using the exchange rate at the date of the
transaction. Non-monetary assets and liabilities denominated in
foreign currencies that are stated at fair value are translated to
Australian dollars at foreign exchange rates ruling at the date
the fair value was determined.
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.
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. 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. Hedge instrument
movements of a hedge of a net investment in a foreign
operation is also recognised in the FCTR to the extent the
hedge is effective.
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.
1 January 2020 30 June 2021
(ii) Financial statements of foreign operations
Notes to the Consolidated Financial StatementsGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES SECTION I: OVERVIEW CONTINUED
SECTION II: RESULTS FOR THE YEAR
1.
Significant accounting policies continued
(f) Current vs non-current classification
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.
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.
2. Operating segments
The consolidated entity has one continuing reportable segment,
Water Solutions. This amalgamates the two continuing reportable
segments reported in the 30 June 2019 financial report
(Bathrooms and Kitchens, and Methven) following continued
integration. This segment includes the sale of vitreous china
toilet suites, basins, plastic cisterns, taps and showers, baths,
kitchen sinks, laundry tubs, domestic water control valves, smart
products and bathroom accessories. The CEO reviews internal
management reports on a monthly basis.
Information regarding the results of each reportable segment
is included below. Performance is measured based on segment
profit before interest and income tax (‘EBIT’), and excludes
transaction and integration costs, in line with 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
segment relative to other entities that operate in these industries.
Discontinued operations includes the Door & Access Systems’
business that was sold with an effective date of 3 July 2018.
Refer to Note 27 for further information regarding discontinued
operations.
GWA GROUP LIMITED | 2020 ANNUAL REPORT | 39
Notes to the Consolidated Financial StatementsGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES SECTION II: RESULTS FOR THE YEAR CONTINUED
2. Operating segments continued
In thousands of AUD
For the year ended 30 June
Water Solutions
Discontinued
Total
2020
2019
2020
2019
2020
2019
Sales revenue
398,704
381,730
71,840
78,117
–
–
71,840
78,117
5,303
12,956
2,107
12,317
3,734
9,951
1,224
4,326
701,420
698,556
421,689
411,800
Segment EBIT before gain on sale(i)
Gain on sale(i)
Segment EBIT
Depreciation (property, plant and equipment)
Depreciation (right of use assets)
Amortisation
Capital expenditure
As at 30 June
Reportable segment assets
Reportable segment liabilities
Reconciliation of profit
In thousands of AUD
For the year ended 30 June
Total EBIT for reportable segments
Elimination of discontinued operations
Transaction and integration costs on business combination
Operating profit from continuing operations
–
–
–
–
–
–
–
–
–
–
–
398,704
381,730
–
71,840
78,117
50,060
50,060
–
50,060
71,840
128,177
–
–
–
–
–
–
5,303
12,956
2,107
12,317
3,734
9,951
1,224
4,326
701,420
698,556
421,689
411,800
2020
2019
71,840
–
(1,543)
70,297
128,177
(50,060)
(8,737)
69,380
(i) Gain on sale of discontinued operations excluding tax benefit. Refer to Note 27 for further information regarding the gain on sale
of discontinued operations.
Geographical information
In thousands of AUD
2020
2019
External sales revenue
323,183
342,406
2020
47,319
2019
2020
2019
2020
2019
31,401
28,202
7,923
398,704
381,730
Non-current assets
470,869
444,078
37,588
40,884
21,422
21,804
529,879
506,766
Australia
New Zealand
Other
Consolidated
The revenue information above is based on the geographical location of customers. Non-current assets are based on the
geographical location of the assets.
Major customers
The consolidated entity conducts business with four customers (2019: four) where the net revenue generated from each customer
exceeds 10% of the consolidated entity’s net revenue. Net revenue from these customers was:
In thousands of AUD
For the year ended 30 June
Customer 1
Customer 2
Customer 3
Customer 4
40 | GWA GROUP LIMITED | 2020 ANNUAL REPORT
2020
2019
85,091
64,545
49,456
40,637
79,370
45,183
65,136
48,122
Notes to the Consolidated Financial StatementsGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES SECTION II: RESULTS FOR THE YEAR CONTINUED
3. Business combination
On 10 April 2019, the consolidated entity acquired 100% of the share capital of Methven Limited.
The acquisition provides a number of strategic benefits, strengthening the consolidated entities’ position in Water Solutions across
Australia and New Zealand, provides a platform for international growth, and opportunity to realise product, freight, logistics, and
public company cost savings.
The fair value of the identifiable assets and liabilities of Methven as at the date of the acquisition as disclosed on the following
page have been finalised during the year ended 30 June 2020 and changes to provisional values retrospectively reflected in the
comparative period presented.
The $68,505,000 of goodwill recognised comprises the value of synergies to be achieved as a result of combining Methven Limited
and its subsidiaries (‘Methven’) with the rest of the consolidated entity, as well as intangible assets that do not qualify for separate
recognition. None of the goodwill recognised is expected to be deductible for tax purposes.
The goodwill has been allocated to the Water Solutions group of cash-generating units (CGU’s).
In thousands of AUD
Cash and cash equivalents
Trade and other receivables
Inventories
Other assets
Deferred tax assets
Property, plant and equipment
Intangible assets
Right of use assets
Trade and other payables
Employee benefits
Income tax payable
Deferred tax liabilities
Loans and borrowings
Provisions
Lease liabilities
Derivative financial instruments
Fair value of identifiable net assets
Goodwill arising on acquisition
Cash paid
Acquisition date fair value of consideration transferred
Cash acquired on acquisition
Cash paid
Net consolidated cash outflow
10 April 2019
3,762
14,518
20,371
1,867
5,804
6,304
68,336
9,095
(17,457)
(1,636)
(226)
(17,663)
(36,275)
(3,606)
(9,095)
(171)
43,928
68,505
112,433
112,433
112,433
3,762
(112,433)
(108,671)
The fair value of the acquired receivables amounts to $14,518,000. The gross contractual amount receivable was $14,551,000,
however only the fair value amount is expected to be collected. Various valuation techniques were used to determine fair value
of the identifiable assets and liability of Methven. The relief-from-royalty method was used to value brand names and patented
technology (intangible assets) acquired.
GWA GROUP LIMITED | 2020 ANNUAL REPORT | 41
Notes to the Consolidated Financial StatementsGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES SECTION II: RESULTS FOR THE YEAR CONTINUED
3. Business combination continued
Transaction and integration costs on business combination are as follows:
For the year ended 30 June 2019
Direct costs relating to the acquisition
Integration costs
Transaction and integration costs on business combination
Income tax benefit
For the year ended 30 June 2020
Direct costs relating to the acquisition
Integration costs
Transaction and integration costs on business combination
Income tax benefit
Total
Direct costs relating to the acquisition
Integration costs
Transaction and integration costs on business combination
Income tax benefit
Income and Expenses
4.
(a) Sales revenue
In thousands of AUD
Sales revenue
5,843
2,894
8,737
(1,140)
7,597
–
1,543
1,543
(506)
1,037
5,843
4,437
10,280
(1,646)
8,634
2020
2019
398,704
381,730
Sales revenue is recognised on the satisfaction of each performance obligation the consolidated entity has with its customers, and
is measured based on an allocation of the contract’s transaction price. The consolidated entity’s key performance obligation is the
delivery of goods to its customers with typical payment terms of 30 days. Key components of the transaction price include the price
for the goods, along with retrospective rebates and stock return estimates.
Refer to Note 2 geographical information for disaggregated revenue information.
(b) Other income
In thousands of AUD
Foreign currency gains
Other – transitional services income, scrap income, royalties
Government grant income
2020
968
876
1,048
2,892
2019
106
1,908
–
2,014
Government grant income relates to employment assistance funding provided by governments in response to the coronavirus.
These grants have been recognised in other income where there is reasonable assurance that the grant will be received and all
attached conditions will be complied with.
42 | GWA GROUP LIMITED | 2020 ANNUAL REPORT
Notes to the Consolidated Financial StatementsGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES SECTION II: RESULTS FOR THE YEAR CONTINUED
4.
Income and Expenses continued
(c) Cost of sales
In thousands of AUD
Cost of sales
2020
2019
237,432
218,801
Cost of sales comprises the cost of manufacturing and purchase of goods including supply chain costs such as freight and
warehousing.
(d) Other expenses
In thousands of AUD
Foreign currency losses
Other
(e) Personnel expenses
In thousands of AUD
Wages and salaries – including superannuation contributions, annual leave and long service leave
Equity-settled share-based payment transactions
2020
94
429
523
2019
22
–
22
2020
69,554
1,431
2019
60,912
1,113
70,985
62,025
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 $3,948,000 for the financial year ended 30 June 2020 (2019: $3,738,000) for
continuing operations.
(f) Net financing costs
In thousands of AUD
Finance income
Finance expense
Interest expense on financial liabilities
Interest expense on swaps
Fees on financial liabilities including amortisation
Interest on lease liabilities
Net financing costs
2020
156
4,910
910
297
2,683
8,800
8,644
2019
414
3,572
331
272
2,050
6,225
5,811
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 | 2020 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
In thousands of AUD
Current tax expense from continuing operations
Current year
Adjustments for prior years
Deferred tax (benefit)/expense from continuing operations
Origination and reversal of temporary differences
Tax expense from continuing operations
Tax (benefit)/expense from discontinued operations
Total tax expense for the consolidated entity
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 for the consolidated entity
Tax expense using the domestic rate of 30%
Tax expense/(benefit) due to:
Non-deductible expenses
Effect of tax rate in foreign jurisdictions
Non-deductible transaction & integration costs on business combination
Non-assessable accounting gain on disposal of discontinued operations
on capital account
Rebateable research and development
Other items
(Over)/under provided in prior years
Income tax expense on pre-tax profit for the consolidated entity
In thousands of AUD
Cash flow hedges
Share buy-back costs (2019: share buy-back and capital return costs)
2020
2019
17,792
(945)
16,847
920
17,767
–
17,767
61,653
–
61,653
18,496
256
(178)
71
–
(129)
196
18,712
(945)
17,767
(1,396)
2
(1,394)
17,997
(81)
17,916
2,411
20,327
(742)
19,585
63,569
50,060
113,629
34,089
196
(24)
1,454
(15,760)
(158)
(131)
19,666
(81)
19,585
(1,320)
25
(1,295)
Current tax liability
In thousands of AUD
Current tax liability
137
947
44 | GWA GROUP LIMITED | 2020 ANNUAL REPORT
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 they relate 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 judgements 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 | 2020 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
Continuing operations
– Basic
– Diluted
- Basic (excluding transaction & integration costs)
- Diluted (excluding transaction & integration costs)
Discontinued operations
– Basic
– Diluted
2020
16.6
16.5
16.6
16.5
17.0
16.9
–
–
2019
35.6
35.5
16.4
16.3
19.3
19.2
19.2
19.2
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 and diluted
In thousands of AUD
Continuing operations
Profit before transaction & integration costs
Net transaction & integration costs
Profit for the year from continuing operations
Profit for the year from discontinued operations
Profit for the year
2020
2019
44,923
(1,037)
43,886
–
43,886
50,839
(7,597)
43,242
50,802
94,044
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
Weighted average number of ordinary shares
2020
263,948
263,948
2019
263,948
263,948
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)
2019
263,948
1,306
265,254
2018
263,948
1,197
265,145
46 | GWA GROUP LIMITED | 2020 ANNUAL REPORT
Notes to the Consolidated Financial StatementsGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES
SECTION III: ASSETS AND LIABILITIES CONTINUED
7. Cash and cash equivalents
(a) Balances
In thousands of AUD
Bank balances
Cash and cash equivalents
2020
32,359
32,359
2019
39,637
39,637
Cash and cash equivalents comprise cash balances and call deposits with an original maturity date of three months or less.
The consolidated entity’s exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities are disclosed in
Note 19.
(b) Reconciliation of cash flows from operating activities to net profit
In thousands of AUD
Profit for the year
Adjustments for:
Depreciation
Amortisation
Share-based payments
Unrealised foreign exchange loss/(gain)
Loss/(gain) on sale of PP&E and intangible assets
Gain on sale of the Door & Access Systems' business
Cash flow hedge movements
Other non-cash movements
Changes in assets and liabilities:
Decrease in trade and other receivables
(Increase)/Decrease in inventories
Decrease in prepayments
(Decrease) in trade payables and accrued expenses
(Decrease) in deferred taxes and in taxes payable
Increase/(Decrease) in provisions and employee benefits
Net cash flows from operating activities
8. Trade and other receivables
In thousands of AUD
Net trade receivables
Other
2020
43,886
18,259
2,107
(1,719)
(713)
429
–
4,523
(4,177)
14,429
(3,521)
478
(11,759)
(1,288)
18
60,952
2020
56,080
548
56,628
2019
94,044
13,685
1,224
(1,624)
(36)
(160)
(50,802)
4,413
2,799
4,938
15,879
328
(8,299)
(7,032)
(1,727)
67,630
2019
70,151
906
71,057
Trade receivables are initially measured at the transaction price determined under AASB 15 (refer to Note 4(a)) and subsequently
measured at amortised cost using the effective interest rate (EIR) method and are subject to impairment. Impairment losses are
recognised in profit or loss and reflected in an allowance account against trade receivables.
The consolidated entity recognises an allowance for expected credit losses (ECLs) for trade receivables. ECLs are based on the
difference between the contractual cash flows due in accordance with the contract and all the cash flows expected to be received,
discounted at an approximation of the original EIR.
The consolidated entity applies a simplified approach in calculating ECLs. Therefore, the consolidated entity does not track changes
in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date. The consolidated entity has
established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to
the debtors and the economic environment.
The consolidated entity’s exposure to credit and currency risk and impairment loss related to trade and other receivables are
disclosed in Note 19.
GWA GROUP LIMITED | 2020 ANNUAL REPORT | 47
Notes to the Consolidated Financial StatementsGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES
SECTION III: ASSETS AND LIABILITIES CONTINUED
Inventories
9.
In thousands of AUD
Raw materials and consumables
Work in progress
Finished goods
2020
4,268
181
74,333
78,782
2019
3,861
466
70,935
75,262
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
(i.e. ageing analysis), 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 & equipment
Non-indefinite life intangibles
Indefinite life intangibles
Inventories
Employee benefits
Provisions
Leases
Other items
Tax assets/(liabilities)
Set off of tax
Net tax assets/(liabilities)
Assets
Liabilities
Net
2020
1,141
660
–
4,661
2,816
2,914
1,449
4,831
18,472
(2,482)
15,990
2019
1,348
732
2020
(1,273)
(960)
2019
(924)
(777)
2020
(132)
(300)
2019
424
(45)
–
(102,846)
(102,842)
(102,846)
(102,842)
4,294
2,934
3,070
652
4,183
–
–
–
–
(249)
–
–
–
–
–
4,661
2,816
2,914
1,449
4,582
4,294
2,934
3,070
652
4,183
17,213
(105,328)
(104,543)
(86,856)
(87,330)
(1,701)
2,482
1,701
–
–
15,512
(102,846)
(102,842)
(86,856)
(87,330)
48 | GWA GROUP LIMITED | 2020 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 & equipment
Non-indefinite life intangibles
Indefinite life intangibles
Inventories
Employee benefits
Provisions
Leases
Other items
In thousands of AUD
Property, plant & equipment
Non-indefinite life intangibles
Balance
1 July 19
Recognised
in income
Recognised
in equity
Exchange
differences
Balance
30 June 20
424
(45)
(102,842)
4,294
2,934
3,070
652
4,183
(87,330)
(539)
(257)
–
386
(110)
(132)
787
(988)
(853)
–
–
–
–
–
–
–
1,394
1,394
(17)
2
(4)
(19)
(8)
(24)
10
(7)
(67)
(132)
(300)
(102,846)
4,661
2,816
2,914
1,449
4,582
(86,856)
Balance
1 July 18
Recognised
in income
Recognised
in equity
Exchange
differences
Acquisition
of subsidiary
Balance
30 June 19
(311)
752
Indefinite life intangibles
(85,247)
Inventories
Employee benefits
Provisions
Leases
Other items
2,763
2,638
3,229
491
1,104
(626)
(21)
–
(1,430)
(184)
(1,434)
273
975
(74,581)
(2,447)
–
–
–
–
–
–
–
1,295
1,295
(5)
2
68
(5)
(1)
(1)
(2)
206
262
1,366
(778)
424
(45)
(17,663)
(102,842)
2,966
481
1,276
(110)
603
4,294
2,934
3,070
652
4,183
(11,859)
(87,330)
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
2020
15,203
–
2019
15,203
–
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 | 2020 ANNUAL REPORT | 49
Notes to the Consolidated Financial StatementsGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES
Plant and
equipment
Work in
progress
47,311
11,507
(9,466)
681
(1,167)
48,866
39,712
2,614
4,648
(680)
828
189
47,311
(28,849)
(5,303)
8,205
44
(25,903)
(25,767)
(3,734)
680
(28)
(28,849)
Total
49,653
11,739
(9,466)
–
(1,193)
50,733
40,673
3,118
6,304
(680)
–
238
2,342
232
–
(681)
(26)
1,867
961
504
1,656
–
(828)
49
2,342
49,653
–
–
–
–
–
–
–
–
–
–
(28,849)
(5,303)
8,205
44
(25,903)
(25,767)
(3,734)
680
(28)
(28,849)
22,963
18,462
1,867
2,342
24,830
20,804
SECTION III: ASSETS AND LIABILITIES CONTINUED
11. Property, plant and equipment
In thousands of AUD
Cost
Balance at 1 July 2019
Additions
Disposals
Transfers
Exchange rate movements
Balance at 30 June 2020
Balance at 1 July 2018
Additions
Acquisition of controlled entities
Disposals
Transfers
Exchange rate movements
Balance at 30 June 2019
Accumulated depreciation
Balance at 1 July 2019
Depreciation
Disposals
Exchange rate movements
Balance at 30 June 2020
Balance at 1 July 2018
Depreciation
Disposals
Exchange rate movements
Balance at 30 June 2019
Carrying amounts
As at 30 June 2020
As at 30 June 2019
50 | GWA GROUP LIMITED | 2020 ANNUAL REPORT
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 where 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 | 2020 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 2019
Additions
Disposals
Exchange rate movements
Balance at 30 June 2020
Balance at 1 July 2018
Acquisition of controlled entities
Additions
Disposals
Exchange rate movements
Balance at 30 June 2019
Accumulated amortisation
Balance at 1 July 2019
Amortisation
Disposals
Exchange rate movements
Balance at 30 June 2020
Balance at 1 July 2018
Amortisation
Disposals
Exchange rate movements
Balance at 30 June 2019
Carrying amounts
As at 30 June 2020
As at 30 June 2019
Software
Brand names
Trade names,
designs and patents
Goodwill
Total
31,618
1,615
(178)
(10)
33,045
30,202
474
950
–
(8)
31,618
(28,748)
(1,423)
52
2
(30,117)
(27,575)
(1,224)
–
51
(28,748)
346,968
5,007
67,246
450,839
–
–
(113)
346,855
284,181
63,208
–
–
(421)
346,968
–
–
–
–
–
–
–
–
–
–
291
(168)
(103)
–
–
(310)
1,906
(346)
(536)
5,027
66,936
451,863
–
–
4,654
68,505
478
(50)
(75)
–
–
(1,259)
314,383
136,841
1,428
(50)
(1,763)
5,007
67,246
450,839
–
(684)
160
4
(520)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(28,748)
(2,107)
212
6
(30,637)
(27,575)
(1,224)
–
51
(28,748)
2,928
2,870
346,855
346,968
4,507
5,007
66,936
67,246
421,226
422,091
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.
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.
52 | GWA GROUP LIMITED | 2020 ANNUAL REPORT
Notes to the Consolidated Financial StatementsGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES SECTION III: ASSETS AND LIABILITIES CONTINUED
12. Intangible assets continued
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
•
• designs
• patents
trade names
indefinite
indefinite
3-5 years
10-20 years
15 years
3-19 years (based on patent term)
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 or 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
Water Solutions (2019: Bathroom & Kitchens)
Unallocated
2020
413,791
–
413,791
2019
284,199
130,015
414,214
Unallocated brand names and goodwill for 2019 pertained to provisional purchase price accounting for the business combination of
Methven Limited. Refer to Note 3 for further information.
GWA GROUP LIMITED | 2020 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 Water Solutions’ brand names and goodwill were assessed as at 30 June 2020 based on internal value
in use calculations and no impairment was identified (2019: 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 names and goodwill are attached and was based on the following assumptions:
• Cash flows were projected based on actual operating results and business plans of the units, with projected cash flows 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 2.7% (2019: 2.6%) in calculating the terminal value, which does not exceed the long-
term average growth rate for the industry.
• A pre-tax discount rate of 9.1% was used (2019: 12.8%).
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 Water Solutions industry and are based on both external
sources and internal sources (historical data).
The recoverable amount of the CGU exceeds its carrying values as at 30 June 2020 and there are no reasonably possible changes
in any of the key assumptions that would cause the CGU’s recoverable amount to be less than its carrying amount. Sensitivities
included reasonably possible changes in the discount rate (including applying the prior year discount rate), and included sensitivities
considering the economic uncertainties due to the coronavirus pandemic based on information available to date.
13. Leases
Transition to AASB 16 Leases
The consolidated entity has applied AASB 16 Leases using the full retrospective approach, which required restatement of
comparative information (30 June 2019 results and balances in these financial statements), including an adjustment to the
comparative year’s opening retained earnings (1 July 2018).
On transition, the consolidated entity recorded the following adjustments as at 1 July 2018:
In thousands of AUD
Increase to right of use assets
Increase to lease liabilities
Decrease to payables and provisions
Increase to deferred tax assets
Decrease to retained earnings
The statement of financial position as at 30 June 2019 has been restated as follows:
In thousands of AUD
Increase to right of use assets
Increase to lease liabilities
Decrease to payables and provisions
Increase to deferred tax assets
Increase to translation reserves
Decrease to retained earnings
Adjustment
47,549
(51,280)
2,117
491
1,123
Adjustment
48,288
(52,668)
1,940
652
(253)
2,041
54 | GWA GROUP LIMITED | 2020 ANNUAL REPORT
Notes to the Consolidated Financial StatementsGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES SECTION III: ASSETS AND LIABILITIES CONTINUED
13. Leases continued
The income statement for the year ended 30 June 2019 has been restated as follows:
In thousands of AUD
Increase to EBITDA
Increase to operating profit
Increase to financing costs
Decrease to profit before tax
Decrease to profit after tax
Policy
Adjustment
(11,017)
(736)
2,050
1,314
918
The consolidated entity enters into non-cancellable lease contracts, largely for the use of office and warehouse facilities. The leases
typically run for a period of three to ten years.
The consolidated entity recognises a right of use asset and a lease liability at the lease commencement date.
The right of use asset is initially measured at cost, which comprises the initial amount of the lease liability, adjusted for any lease
payments made at or before the commencement date, plus any initial direct costs incurred, and an estimate for site restoration,
less any lease incentives received.
The right of use asset is subsequently depreciated using the straight line method from commencement date to the end of the lease
term, unless the lease transfers ownership of the underlying asset to the consolidated entity by the end of the lease term or the cost
of the right of use asset reflects that the consolidated entity will exercise a purchase option. In that case the right of use asset will
be depreciated over the useful life of the underlying asset. The right of use asset is also adjusted for certain remeasurements of the
lease liability, and for any impairment losses recognised.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date,
discounted using the consolidated entities’ incremental borrowing rate (adjusted to reflect the lease terms, for example, the lease
period). The consolidated entity assesses whether it is reasonably certain to exercise the extension options, and if so, includes the
option period into the calculation of the lease liability.
The lease liability is remeasured when there is a change in future payments arising from a change in an index or rate, or if there is a
changed assessment as to whether it will exercise an extension option.
The consolidated entity has elected not to recognise right of use assets and lease liabilities for leases of low value and/or those that
are short term.
The principal component of leased payments forms part of financing cash flows, and the interest component forms part of
operating cash flows in the statement of cash flows.
In thousands of AUD
For the year ended 30 June
Amounts recognised in the profit or loss statement
Interest on lease liabilities
Depreciation of right of use assets
Payments made for low value leases
Amounts recognised in the statement of cash flows
Payments of lease liability principal
Payments of lease liability interest
2020
2019
2,683
12,956
752
16,391
2,058
9,951
634
12,643
(8,384)
(2,683)
(11,452)
(2,058)
(11,067)
(13,510)
GWA GROUP LIMITED | 2020 ANNUAL REPORT | 55
Notes to the Consolidated Financial StatementsGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES
SECTION III: ASSETS AND LIABILITIES CONTINUED
13. Leases continued
In thousands of AUD
Right of use assets
Balance as at 1 July
Additions to right of use assets
Depreciation for the period
Exchange rate movements
Balance as at 30 June
Lease liabilities
Balance as at 1 July
Additions to lease liabilities
Accretion of interest
Payments made
Exchange rate movements
Balance as at 30 June
Current lease liabilities
Non-current lease liabilities
2020
2019
48,288
32,340
(12,956)
161
47,549
10,982
(9,951)
(292)
67,833
48,288
(52,668)
(30,145)
(2,683)
11,067
(167)
(51,280)
(13,159)
(2,058)
13,510
319
(74,596)
(52,668)
(11,458)
(8,325)
(63,138)
(44,343)
(74,596)
(52,668)
The following table sets out a maturity analysis of lease payments, showing the undiscounted lease payments to be made after the
reporting date (and therefore differs from the carrying amount of lease liabilities).
In thousands of AUD
Less than one year
One to two years
Two to five years
More than five years
Total
14. Trade and other payables
In thousands of AUD
Current
Trade payables and accrued expenses
Non-current
Trade payables and accrued expenses
2020
2019
13,904
11,767
29,905
29,608
85,184
11,210
9,003
21,347
21,944
63,504
2020
2019
43,699
55,495
696
659
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 19.
56 | GWA GROUP LIMITED | 2020 ANNUAL REPORT
Notes to the Consolidated Financial StatementsGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES
SECTION III: ASSETS AND LIABILITIES CONTINUED
15. Employee benefits
In thousands of AUD
Current
Liability for annual leave
Liability for long service leave
Non-current
Liability for long service leave
2020
2019
4,065
1,055
4,837
949
5,120
5,786
4,310
3,884
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.
16. Provisions
In thousands of AUD
Balance at 1 July 2019
Additional provisions made/(written back)
Provisions used
Exchange rate differences
Balance at 30 June 2020
Current
Non-current
Warranties
Restructuring
Site
restoration
4,693
(221)
–
(33)
4,439
4,439
–
4,439
1,693
–
(351)
–
1,342
1,342
–
1,342
3,438
1,883
(998)
(3)
4,320
551
3,769
4,320
Other
488
–
(19)
–
469
106
363
469
Total
10,312
1,662
(1,368)
(36)
10,570
6,438
4,132
10,570
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 expenses 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 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.
GWA GROUP LIMITED | 2020 ANNUAL REPORT | 57
Notes to the Consolidated Financial StatementsGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES
SECTION III: ASSETS AND LIABILITIES CONTINUED
16. Provisions continued
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.
SECTION IV: FUNDING AND RISK MANAGEMENT
17. 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, refer to Note 19.
In thousands of AUD
Current – unsecured bilateral loan facilities
Non-current – unsecured syndicated loan facilities
Facilities available
Unsecured loan facilities
Bank guarantees and standby letters of credit
Facilities utilised at reporting date
Unsecured loan facilities
Bank guarantees and standby letters of credit
Facilities not utilised at reporting date
Unsecured loan facilities
Bank guarantees and standby letters of credit
2020
27,000
148,400
175,400
283,400
7,125
2019
–
177,759
177,759
250,000
7,418
290,525
257,418
175,400
1,800
177,200
108,000
5,325
113,325
177,759
3,808
181,567
72,241
3,610
75,851
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 using the effective interest rate (EIR) method. The EIR amortisation is
included as finance costs in profit or loss.
Unsecured loan facility
On 11 October 2019 the consolidated entity successfully completed the refinance of its syndicated banking facility (multicurrency
revolving facility) which matures in October 2022. On 8 April 2020 the facility was increased from $210,000,000 to $243,340,000.
For the period 10 April 2019 to 10 October 2019 the facility was $250,000,000, and for the period 1 July 2018 to 9 April 2019 the
facility was $225,000,000.
On 11 October 2019 the consolidated entity put in place a one year multicurrency revolving bilateral facility of $40,000,000 which
matures in October 2020.
The facilities were drawn in the following currencies:
In thousands of AUD
AUD
NZD
GBP
2020
142,000
30,000
3,000
2019
115,000
61,500
2,200
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 (refer Note 19(d)).
Bank guarantee and standby letter of credit facilities
The bank guarantee and standby letter of credit facilities are committed facilities available to be drawn down under the facility
agreement. The limits are specified in the facility agreement.
58 | GWA GROUP LIMITED | 2020 ANNUAL REPORT
Notes to the Consolidated Financial StatementsGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES
SECTION IV: FUNDING AND RISK MANAGEMENT CONTINUED
18. Capital and reserves
Share capital
In thousands of shares
On issue at 1 July – fully paid
On issue at 30 June – fully paid
Ordinary shares
Number of shares
AUD
2020
2019
2020
2019
263,948
263,948
307,790
307,790
263,948
263,948
307,790
307,790
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.
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 20).
Dividends
Dividends recognised in the current year are:
2020
Interim 2020 ordinary
Final 2019 ordinary
Total amount
2019
Interim 2019 ordinary
Final 2018 ordinary
Total amount
Costs per share
(In cents)
Total amount
(In thousands of AUD)
Franked
Date of Payment
8.0
9.5
17.5
9.0
9.5
18.5
21,116
25,075
46,191
23,755
25,075
48,830
100%
100%
4th March 2020
4th September 2019
100%
100%
5th March 2019
6th September 2018
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 determined by the directors. These will be paid out of the parent entity’s
retained earnings in accordance with the Corporations Act 2001. The dividends have not been provided for as at the balance date.
The determination and payment of the dividend has no income tax consequences.
GWA GROUP LIMITED | 2020 ANNUAL REPORT | 59
Notes to the Consolidated Financial StatementsGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES
SECTION IV: FUNDING AND RISK MANAGEMENT CONTINUED
18. Capital and reserves continued
Final 2020 ordinary
Costs per share
(In cents)
3.5
Total amount
(In thousands
of AUD)
9,238
Franked
Date of Payment
100%
16th October 2020
The financial effect of these dividends has not been brought to account in the financial statements for the financial year ended 30
June 2020 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 (i.e. prior to payment of final 2020 ordinary dividend.)
The Company
2020
9,759
2019
13,371
The above available amounts are based on the balance of the dividend franking account at year-end adjusted for:
(a) franking credits/debits that will arise from the payment/settlement of the current tax liabilities/assets; and
(b) franking debits that will arise from the payment of dividends recognised as a liability at year-end.
The above franking account balance will decrease following the payment of the final dividend determined subsequent to balance date.
19. Financial instruments and financial risk management
(a) Policies
Exposure to credit, interest rate and currency risks arise 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 Audit and Risk Committee on its activities.
Risk management policies are established to identify and analyse the risk faced by the consolidated entity, to set appropriate risk
limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to
reflect changes in market conditions and the consolidated entity’s activities.
The Audit and Risk Committee oversees how management monitors compliance with the risk management policies and procedures
and reviews the adequacy of the risk management framework in relation to the risks faced by the consolidated entity. The Audit
and Risk Committee is assisted in its oversight role by the Internal Audit function. The Internal Audit function conducts both regular
and ad hoc reviews of risk management controls and procedures. The results of the reviews are reported to the Audit and Risk
Committee.
Capital management policy
The Board’s policy is to maintain a strong capital base and grow shareholder wealth. The Board monitors debt levels, cash flows
and financial forecasts to establish appropriate levels of dividends and funds available to reinvest in the businesses or invest in
growth opportunities.
The Board focuses on growing shareholder wealth by monitoring the performance of the consolidated entity by reference to the
return on funds employed. The Board defines return on funds employed as operating profit (earnings before interest and tax)
divided by net assets after adding back net debt and net AASB 16 Leases balances.
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.
60 | GWA GROUP LIMITED | 2020 ANNUAL REPORT
Notes to the Consolidated Financial StatementsGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES SECTION IV: FUNDING AND RISK MANAGEMENT CONTINUED
19. Financial instruments and financial risk management continued
(a) Policies continued
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 hedged items. 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.
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.
GWA GROUP LIMITED | 2020 ANNUAL REPORT | 61
Notes to the Consolidated Financial StatementsGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES SECTION IV: FUNDING AND RISK MANAGEMENT CONTINUED
19. Financial instruments and financial risk management continued
(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. To date, the economic uncertainties caused by coronavirus pandemic have not led to any 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 four major customers which comprise 85% of the trade receivables carrying amount at 30 June 2020
(2019: four customers comprising 83% of trade receivables).
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 gross trade receivables for the consolidated entity at balance date was as follows:
In thousands of AUD
Not yet due
Past due 0-30 days
Past due 31-60 days
Past due 61-120 days
Past due 120+ days
Less accrued rebates
2020
32,359
56,080
548
88,987
2020
58,203
14,389
446
250
195
(17,376)
56,107
2019
39,637
70,151
906
110,694
2019
67,283
18,545
1,296
109
225
(17,236)
70,222
There were no trade receivables with re-negotiated terms.
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
Acquisition of controlled entities
Impairment losses written back/(recognised)
Provisions used during the year
Balance at 30 June
62 | GWA GROUP LIMITED | 2020 ANNUAL REPORT
2020
(71)
–
(44)
88
(27)
2019
(1)
(33)
(62)
25
(71)
Notes to the Consolidated Financial StatementsGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES SECTION IV: FUNDING AND RISK MANAGEMENT CONTINUED
19. 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
2020
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
(175,400)
(182,515)
(28,552)
(1,552)
(3,105)
(149,306)
–
Trade and other payables
(44,395)
(44,899)
(44,197)
–
(117)
(351)
(234)
Derivative financial instruments
Interest rate swaps used for hedging (net)
(2,940)
(2,940)
(597)
(448)
(896)
(999)
Forward exchange contracts used for
hedging (net)
(1,375)
(1,375)
(1,031)
(344)
–
–
–
–
Total at 30 June 2020
(224,110)
(231,729)
(74,377)
(2,344)
(4,118)
(150,656)
(234)
2019
Non-derivatives financial liabilities
Unsecured cash advance facilities
(177,759)
(185,869)
(3,139)
(3,139)
(179,591)
–
–
Trade and other payables
(56,154)
(56,657)
(55,839)
–
(117)
(351)
(351)
Derivative financial instruments
Interest rate swaps used for hedging (net)
(1,448)
(1,448)
(293)
(299)
(466)
(390)
Forward exchange contracts used for
hedging (net)
1,656
1,656
1,408
248
–
–
–
–
Total at 30 June 2019
(233,705)
(242,319)
(57,863)
(3,190)
(180,174)
(741)
(351)
(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 in Australia, New Zealand and
the United Kingdom.
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 and New Zealand dollars, have been entered into to achieve an appropriate mix of
fixed and floating rate exposure.
As at 30 June 2020, the consolidated entity had interest rate swaps in operation with a notional contract amount of $118,686,000
(2019: $119,117,000). These swaps have fixed rates ranging from 0.88% to 2.30% (2019: 1.49% to 2.30%) and mature over the next
four years.
The consolidated entity also has a replacement interest rate swap effective in the following financial year with a notional contract
amount of $25,000,000. This swap has a fixed rate of 0.43% and matures over the next four years.
The consolidated entity classifies interest rate swaps as cash flow hedges and states them at fair value.
GWA GROUP LIMITED | 2020 ANNUAL REPORT | 63
Notes to the Consolidated Financial StatementsGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES
SECTION IV: FUNDING AND RISK MANAGEMENT CONTINUED
19. Financial instruments and financial risk management continued
(d) Market risk continued
(i)
Interest rate risk continued
The net fair value of swaps as at 30 June 2020 of $2,940,000 was recognised as a fair value derivative liability (2019: $1,448,000
liability). No hedge ineffectiveness was recognised, and therefore the full movement in the value of the hedging instrument was
recognised in Other Comprehensive Income.
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
Cash
Fixed rate financial instruments
Interest rate swap derivatives
2020
Notional
value
2020
Carrying
amount
(175,400)
(175,400)
32,359
32,359
(143,041)
(143,041)
2019
Notional
value
(177,759)
39,637
(138,122)
2019
Carrying
amount
(177,759)
39,637
(138,122)
143,686
(2,940)
144,117
(1,448)
Total
645
(145,981)
5,995
(139,570)
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)
AUD denominated loans
+50 basis points (2019: +75 basis points)
-25 basis points (2019: -75 basis points)
NZD denominated loans
+50 basis points (2019: +75 basis points)
-25 basis points (2019: -75 basis points)
GBP denominated loans
+50 basis points (2019: +50 basis points)
-25 basis points (2019: -50 basis points)
(i) Other Comprehensive Income: cash flow hedges, net of tax
(ii) Foreign currency risk
2020
Post Tax
Profit
(160)
80
(67)
34
(17)
8
2020
OCI(i)
458
(865)
128
(255)
2019
Post Tax
Profit
53
(53)
2019
OCI(i)
1,293
(1,293)
(84)
84
342
(342)
–
–
(3)
3
–
–
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 currencies giving rise to this risk are primarily USD and RMB.
64 | GWA GROUP LIMITED | 2020 ANNUAL REPORT
Notes to the Consolidated Financial StatementsGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES
SECTION IV: FUNDING AND RISK MANAGEMENT CONTINUED
19. Financial instruments and financial risk management continued
(d) Market risk continued
(ii) Foreign currency risk continued
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.
Forward exposure for the 12 months after the
balance date covered by forward exchange contracts
AUD:USD
AUD:RMB
NZD:USD
GBP:USD
2020
74%
71%
91%
82%
2019
77%
78%
82%
83%
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 2020 of $1,375,000 was recognised as a fair value derivative liability (2019: $1,656,000 asset).
The consolidated entity is also exposed to foreign currency risk on retranslation of the financial statements of foreign subsidiaries
into AUD. The currencies giving rise to this risk are NZD, GBP and RMB. The consolidated entity hedges this exposure by holding net
borrowings in foreign currencies, and designates these as net investment hedges.
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, as well as from changes in the net borrowings in foreign currencies designated as net
investment hedges (these movements will offset the translation of the financial statements foreign subsidiaries into AUD).
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 monetary assets and liabilities not designated as cash flow hedges are not material.
In thousands of AUD – Higher/(Lower)
USD
20% increase in USD:AUD – OCI (cash flow hedges, net of tax)
(2019: 10% increase in USD:AUD)
10% decrease in USD:AUD – OCI (cash flow hedges, net of tax)
20% increase in USD:NZD – OCI (cash flow hedges, net of tax)
(2019: 10% increase in USD:NZD – OCI)
10% decrease in USD:NZD – OCI (cash flow hedges, net of tax)
20% increase in USD:GBP – OCI (cash flow hedges, net of tax)
(2019: 10% increase in USD:GBP – OCI)
10% decrease in USD:GBP – OCI (cash flow hedges, net of tax)
RMB
20% increase in RMB:AUD – OCI (cash flow hedges, net of tax)
(2019: 10% increase in RMB:AUD – OCI)
10% decrease in RMB:AUD – OCI (cash flow hedges, net of tax)
NZD
10% increase in NZD:AUD – OCI (net investment hedge, net of tax)
10% decrease in NZD:AUD – OCI (net investment hedge, net of tax)
GBP
10% increase in GBP:AUD – OCI (net investment hedge, net of tax)
10% decrease in GBP:AUD – OCI (net investment hedge, net of tax)
2020
2019
10,709
(3,894)
1,207
(439)
1,683
(612)
4,083
(1,485)
(2,180)
1,784
(348)
285
5,573
(4,961)
485
(593)
451
(551)
2,500
(2,045)
(2,230)
1,825
(309)
253
GWA GROUP LIMITED | 2020 ANNUAL REPORT | 65
Notes to the Consolidated Financial StatementsGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES
SECTION IV: FUNDING AND RISK MANAGEMENT CONTINUED
19. Financial instruments and financial risk management continued
(e) Fair values
The carrying value of financial assets and liabilities as at 30 June 2020 equalled fair value (30 June 2019: equalled fair value).
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.
(iv) Interest rates used for determining fair value
The consolidated entity uses the government yield curve as at the balance date plus an adequate constant credit spread to discount
financial instruments. The interest rates used are as follows:
Derivatives
Loans and borrowings denominated in AUD
Loans and borrowings denominated in NZD
Loans and borrowings denominated in GBP
(v) Fair value hierarchy
2020
0.2% – 0.4%
1.5% – 1.7%
1.6% – 1.8%
1.5% – 1.7%
2019
2.0% – 2.1%
3.3% – 3.8%
3.2% – 3.7%
2.1% – 2.6%
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 2020
Forward contracts used for hedging
Interest rate swaps used for hedging
30 June 2019
Forward contracts used for hedging
Interest rate swaps used for hedging
Level 1
Level 2
Level 3
Total
–
–
–
–
–
–
(1,375)
(2,940)
(4,315)
1,656
(1,448)
208
–
–
–
–
–
–
(1,375)
(2,940)
(4,315)
1,656
(1,448)
208
66 | GWA GROUP LIMITED | 2020 ANNUAL REPORT
Notes to the Consolidated Financial StatementsGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES
SECTION V. OTHER INFORMATION
20. Share-based payments
The Long Term Incentive (Equity) Plan was approved by shareholders at the 2008 Annual General Meeting. Under the plan, the
Board may offer performance rights to participants which entitle the holder to ordinary shares in the Company (or in limited
cases cash payments), subject to meeting certain financial performance hurdles and the holder remaining in employment with the
Company until the nominated vesting date.
The performance hurdles in relation to performance rights granted to executives in the 2019/20 year and 2018/19 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.
For performance rights granted to executives in the 2019/20 year and 2018/19 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
ROFE less than 16% per annum
ROFE equal to 16% per annum
Proportion of Performance Rights
to Vest if ROFE hurdle is met
0%
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)
TSR of GWA Group Limited relative
to TSRs of Comparator Companies
Less than the 50th percentile
50th percentile
Proportion of Performance Rights
to Vest if TSR hurdle is met
0%
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 (equity compensation reserve), 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 market based 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 749,500 performance rights were granted to employees (2019: 617,000) at a weighted average fair value of $2.71
(TSR) and $3.54 (ROFE) (2019: $2.23 (TSR) and $2.92 (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 4.65%, the risk free rate
was 0.75% and annualised share price volatility was 30% for the Company and its comparator companies listed for the TSR hurdle.
The amount recognised as personnel expenses (Note 4(e)) in the current financial year was $1,431,000 (2019: $1,113,000).
For further details of the Long Term Incentive (Equity) Plan, refer to the Remuneration Report section of the Directors’ Report.
GWA GROUP LIMITED | 2020 ANNUAL REPORT | 67
Notes to the Consolidated Financial StatementsGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES SECTION V. OTHER INFORMATION CONTINUED
20. Share-based payments continued
In number of
performance rights
Grant date
Expiry date
Balance at
beginning of
the year
Granted
during
the year
Vested
during
the year
Forfeited
during
the year
Balance at
end of
the year
2020
2019
24/02/2017
30/06/2019
461,222
–
(461,222)
–
–
19/02/2018
30/06/2020
537,000
18/02/2019
30/06/2021
617,000
–
–
–
–
537,000
–
(85,000)
532,000
14/02/2020
30/06/2022
–
749,500
–
(77,000)
672,500
1,615,222
749,500
(461,222)
(162,000)
1,741,500
23/03/2016
30/06/2018
767,750
–
(767,750)
–
–
24/02/2017
30/06/2019
464,972
19/02/2018
30/06/2020
537,000
–
–
18/02/2019
30/06/2021
–
617,000
–
(3,750)
461,222
–
–
–
537,000
–
617,000
1,769,722
617,000
(767,750)
(3,750)
1,615,222
21. Related parties
Key management personnel compensation
The key management personnel compensation included in personnel expenses (Note 4(e)) are as follows:
In AUD
Short-term employee benefits
Post-employment benefits
Share-based payments
Other long term employee benefits
2020
3,214,647
175,906
1,102,449
71,102
4,564,104
2019
4,252,324
165,453
784,921
6,325
5,209,023
Individual directors and executives compensation disclosures
Information regarding individual and executives’ compensation is provided in the Remuneration Report section of the Directors’ Report.
68 | GWA GROUP LIMITED | 2020 ANNUAL REPORT
Notes to the Consolidated Financial StatementsGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES
SECTION V. OTHER INFORMATION CONTINUED
22. Auditor’s remuneration
In AUD
The auditor of GWA Group Limited is KPMG Australia.
Audit services
KPMG Australia:
Audit and review of financial reports
Other assurance services
Overseas KPMG Firms:
Audit of financial reports
Overseas non-KPMG audit firms:
PwC – audit of financial reports
PwC – other assurance services
Total audit services
Other services
KPMG Australia:
Other services
Overseas KPMG Firms:
Taxation services
Network firm of overseas non-KPMG audit firms:
PwC – internal audit services
PwC – other services
Total other services
2020
2019
351,200
16,000
18,500
385,700
122,600
12,200
134,800
403,710
15,965
17,000
436,675
181,900
–
181,900
520,500
618,575
–
–
–
9,118
261,000
25,000
286,000
309,000
7,000
325,118
23. Capital commitments
Capital expenditure commitments for plant and equipment purchases contracted but not provided for are payable as follows:
In thousands of AUD
Less than one year
2020
942
2019
3,438
942
3,438
GWA GROUP LIMITED | 2020 ANNUAL REPORT | 69
Notes to the Consolidated Financial StatementsGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES
SECTION V. OTHER INFORMATION CONTINUED
24. Consolidated entities
Parent entity
GWA Group Limited
Subsidiaries
Austral Lock Pty Ltd(b)(c)
Canereb Pty Ltd(c)
Caroma Holdings Limited
Caroma Industries Limited
Caroma Industries (NZ) Limited
Caroma International Pty Ltd(b)
Corille Limited(b)(c)
Deva Tap Company Ltd
Dorf Clark Industries(c)
G Subs Pty Ltd(b)(c)
GWA Finance Pty Limited
GWA Group Holdings Limited
GWAIL (NZ) Ltd
GWA Taps Manufacturing Limited(b)(c)
GWA Trading (Shanghai) Co Ltd
Heshan Methven Bathroom Fittings Co. Limited
Industrial Mowers (Australia) Limited(c)
Methven Australia Pty Limited(a)
Methven Hotel Solutions Pty Ltd(c)
Methven Limited
Methven UK Limited
Methven USA Inc
McIlwraith Davey Pty Ltd(b)(c)
Plumbing Supplies (NZ) Ltd
Sebel Furniture Holdings Pty Ltd(b)
Starion Tapware Pty Ltd(b)(c)
Stylus Pty Ltd(b)(c)
Parties
to cross
guarantee
Country
of incorporation
Ownership Interest
2020
2019
Y
Australia
N
N
Y
Y
N
N
N
N
N
N
Y
Y
N
N
N
N
N
Y
N
N
N
N
N
N
N
N
N
Australia
Australia
Australia
Australia
New Zealand
Australia
Australia
United Kingdom
Australia
Australia
Australia
Australia
New Zealand
Australia
China
China
Australia
Australia
Australia
New Zealand
United Kingdom
USA
Australia
New Zealand
Australia
Australia
Australia
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
(a) Entity joined the Deed via a Deed of Variation dated 24 May 2019.
(b) Entities removed from the Deed via a Deed of Variation dated 24 May 2019.
(c) Entities entered into liquidation on 23 June 2020.
70 | GWA GROUP LIMITED | 2020 ANNUAL REPORT
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 2020, is set out in the table below.
Summarised statement of profit or loss and other comprehensive income
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, net of tax
Profit from discontinued operations, net of tax
Net profit
Other comprehensive income, net of tax
Total comprehensive income, net of tax
Retained earnings at beginning of the year
Transition impact of AASB16 leases
Impact on adoption of IFRS IC decision
Net profit
Dividends received during the year
Dividends paid during the year
Retained earnings at end of the year
2020
323,263
(189,937)
133,326
(70,952)
1,717
(8,693)
55,398
(17,135)
38,263
–
38,263
(3,056)
35,207
2019
342,321
(196,292)
146,029
(79,139)
1,687
(5,628)
62,949
(19,776)
43,173
50,802
93,975
(3,494)
90,481
347,659
388,697
–
–
38,263
88,031
(46,191)
427,762
(1,064)
(85,119)
93,975
–
(48,830)
347,659
GWA GROUP LIMITED | 2020 ANNUAL REPORT | 71
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
Derivative financial instruments
Other
Total current assets
Investments
Intercompany receivable
Deferred tax assets
Property, plant and equipment
Intangible assets
Right of use assets
Total non-current assets
Total assets
Liabilities
Trade and other payables
Loans and borrowings
Intercompany payable
Employee benefits
Income tax payable
Lease liabilities
Provisions
Derivative financial instruments
Total current liabilities
Deferred tax liabilities
Loans and borrowings
Lease liabilities
Employee benefits
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained earnings
Total equity
72 | GWA GROUP LIMITED | 2020 ANNUAL REPORT
2020
2019
20,777
44,466
60,029
–
3,128
128,400
449,313
73,218
12,511
20,971
386,140
59,429
1,001,582
1,129,982
32,616
27,000
–
4,151
715
11,005
4,700
4,738
84,925
100,569
148,400
54,976
4,201
3,324
311,470
396,395
733,587
307,790
(1,965)
427,762
733,587
29,486
57,690
59,093
1,570
3,390
151,229
449,313
75,360
11,478
15,239
385,844
38,349
975,583
1,126,812
40,640
–
89,396
4,693
1,618
7,925
7,018
1,415
152,705
100,590
177,759
34,509
3,778
1,071
317,707
470,412
656,400
307,790
951
347,659
656,400
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 2020 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
2020
2019
78,775
–
79,244
–
78,775
79,244
446
885,212
–
419,162
307,790
1,352
156,908
848
852,486
–
419,162
307,790
1,211
124,323
466,050
433,324
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 (2019: $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 (2019: $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.
27. Discontinued Operations
A discontinued operation is a component of the consolidated entity’s business that represents a separate line of business operations
that has been disposed of or is held for sale. Classification as a discontinued operation occurs upon disposal or when the operation
meets the criteria to be classified as held for sale if earlier. When an operation is classified as a discontinued operation, the
comparative statement of profit or loss and other comprehensive income is re-presented as if the operation had been discontinued
from the start of the period.
The Door & Access Systems’ business (comprising of Gainsborough Hardware Industries Limited and API Services and Solutions
Pty Ltd) was sold with an effective date of 3 July 2018.
Refer to the consolidated annual financial report of the consolidated entity as at and for the year ended 30 June 2019 for details of
the prior period financial results and cash flows of the discontinued operations which only included the net proceeds from the sale
of the business. There were no financial results nor cash flows of the discontinued operations for the year ended 30 June 2020.
GWA GROUP LIMITED | 2020 ANNUAL REPORT | 73
Notes to the Consolidated Financial StatementsGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES
SECTION V. OTHER INFORMATION CONTINUED
28. Subsequent events
The Directors’ continue to assess the uncertain and evolving impact of the coronavirus pandemic on GWA’s operations.
To the Directors’ best knowledge, there are no events that have arisen subsequent to 30 June 2020 that will, or may, significantly
affect the operation or results of the consolidated entity.
74 | GWA GROUP LIMITED | 2020 ANNUAL REPORT
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 2020 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.
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 24 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;
4. 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 2020; and
5.
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 on 17 August 2020.
Signed in accordance with a resolution of the directors:
Darryl D McDonough
Director
Tim R Salt
Director
GWA GROUP LIMITED | 2020 ANNUAL REPORT | 75
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).
The Financial Report comprises:
• Consolidated Statement of Financial Position as at 30 June 2020;
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 30 June 2020 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
• Consolidated Statement of Profit or Loss and Other Comprehensive
Income, Consolidated Statement of Changes in Equity, and
Consolidated Statement of Cash Flows for the year 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 is:
• Valuation of Inventory.
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.
VALUATION OF INVENTORY $78.8M
Refer to Note 9 to the Financial Report
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 the building
industry cycles, changes in consumer preferences
and economic instability as a result of the coronavirus
pandemic. This necessitated an additional focus on
excess and discontinued inventory SKU’s (stock keeping
unit) and judgemental valuation assumptions.
These conditions gave rise to additional audit effort,
including greater involvement by our senior team
members, to gather evidence over the estimation
of the valuation of inventory.
Our procedures included:
• We assessed the accuracy of previous Group forecasts by inventory
SKU by comparing forecast demand to actual sales in the prior period.
This informed our evaluation of forecasts incorporated in the inventory
provision calculation in the current year;
• We tested the completeness of inventory identified as excess or fast
moving and discontinued as follows:
» We assessed the Group’s calculation for identifying excess
inventory. We did this by performing our own calculation based
on sales data for the last 12 months and comparing the results.
We considered the impact on our audit of any exceptions. Where
relevant, we obtained underlying documentation from the Group
to evaluate exceptions; and
» We compared inventory SKU’s to be discontinued to the approved
discontinued inventory report used by the Group in assessing the
recoverable value of inventory.
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 | 2020 ANNUAL REPORT
GWA GROUP LIMITED AND ITS CONTROLLED ENTITIES Independent Auditor’s Report
To the Shareholders of GWA Group Limited (continued)
VALUATION OF INVENTORY $78.8M
Refer to Note 9 to the Financial Report
The key audit matter
How the matter was addressed in our audit
We focused on the following elements of the Group’s
estimation of the valuation of inventory:
• We assessed the write off history for the last 3 years against the
provision to determine the adequacy of the inventory provision;
• Criteria for categorisation of inventory SKU’s by risk,
such as discontinued, new products, excess or fast
moving range, as they attribute different values due
to the differing provision policy rates;
• Expected forecast demand which is based on
the last 12 months’ sales, as this determines the
categorisation of inventory SKU’s as excess or fast
moving; and
• Assessing the impact of inventory sold in the
current year below cost.
• For certain components, we independently developed an expected
inventory valuation range by considering the following:
»
Inventory turnover rate by inventory SKU;
» Recovery rates achieved historically when selling discontinued
inventory. We considered the historical quantum recovered
compared to the original cost; and
» Overall recoveries achieved for sales recorded below original cost;
• We compared our estimated inventory valuation range to the
inventory value recorded by the Group;
• For other components, we tested a sample of inventory items to
purchase invoices and sales invoices to determine the recoverability
and valuation of inventory in line with accounting standards.
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 and our related assurance opinion.
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 and Company’s ability to continue as a going concern and whether the use of the going concern basis of
accounting is appropriate. 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 and Company or to cease operations, or have no realistic
alternative but to do so.
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 the 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_responsibilities/ar1.pdf. This description forms part of our Auditor’s Report.
GWA GROUP LIMITED | 2020 ANNUAL REPORT | 77
GWA GROUP LIMITED AND ITS CONTROLLED ENTITIES Independent Auditor’s Report
To the Shareholders of GWA Group Limited (continued)
REPORT ON THE REMUNERATION REPORT
Opinion
Directors’ responsibilities
In our opinion, the Remuneration Report of GWA Group
Limited for the year ended 30 June 2020, 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 Annual report
for the year ended 30 June 2020.
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, 17 August 2020
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 2020 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
Julie Cleary
Partner
Sydney, 17 August 2020
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.
78 | GWA GROUP LIMITED | 2020 ANNUAL REPORT
GWA GROUP LIMITED AND ITS CONTROLLED ENTITIES
Other Statutory Information
As at 14 August 2020
STATEMENT OF SHAREHOLDING
In accordance with the Australian Securities Exchange Listing Rules, the directors state that, as at 14 August 2020, 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
1,662
3,168
1,358
983
77
7,248
Ordinary Shares
724,330
8,805,544
9,981,054
20,647,369
223,789,333
263,947,630
%
0.27
3.34
3.78
7.82
84.79
100.00
The number of shareholders with less than a marketable parcel of 182 shares is 524.
VOTING RIGHTS
The voting rights attached to shares are as set out in clause 9.20 of the Company’s Constitution. Subject to that clause, at General
Meetings of the Company:
1. On a show of hands, every person present as a member, proxy, attorney or representative of a member has one vote; and
2. On a poll, every person present as a member, proxy, attorney or representative of a member, has one vote for each fully paid share.
SUBSTANTIAL SHAREHOLDERS
The following information is extracted from the Company’s Register of Substantial Shareholders as at 14 August 2020:
Shareholder
Ethical Partners Funds Management Pty Ltd
Mitsubishi UFJ Financial Group, Inc
The Vanguard Group, Inc
Franklin Resources, Inc
20 LARGEST SHAREHOLDERS AS AT 14 August 2020
Shareholder
HSBC Custody Nominees (Australia) Limited
Citicorp Nominees Pty Limited
J P Morgan Nominees Australia Pty Limited
HGT Investments Pty Ltd
KFA Investments Pty Ltd
JMB Investments Pty Ltd
National Nominees Limited
Mr Peter Zinn
Ashberg Pty Ltd
Theme (No 3) Pty Ltd
BNP Paribas Nominees Pty Ltd
ITA Investments Pty Ltd
Dabary Investments Pty Ltd
CJZ Investments Pty Ltd
BNP Paribas Noms Pty Ltd
Eidde Pty Ltd
Mr Michael John McFadyen
Citicorp Nominees Pty Limited
Neale Edwards Pty Ltd
AMP Life Limited
Total
Number of Shares
% Shares on Issue
18,506,941
16,352,838
15,925,463
15,804,194
7.01%
6.20%
6.03%
5.99%
Number of Shares
64,505,733
% Shares on Issue
24.44
33,801,094
32,752,169
10,000,000
9,200,684
6,884,655
6,581,988
5,898,176
5,887,783
5,100,000
4,780,998
4,688,628
3,178,986
2,841,565
2,049,392
2,019,940
1,975,734
1,736,886
1,352,500
1,272,883
12.81
12.41
3.79
3.49
2.61
2.49
2.23
2.23
1.93
1.81
1.78
1.20
1.08
0.78
0.77
0.75
0.66
0.51
0.48
206,509,794
78.24
GWA GROUP LIMITED | 2020 ANNUAL REPORT | 79
GWA GROUP LIMITED AND ITS CONTROLLED ENTITIES Shareholder Information
Annual General Meeting
Dividend Reinvestment Plan
The Annual General Meeting of GWA Group Limited will be
held via a virtual platform at https://web.lumiagm.com/ on
Friday 30 October 2020 commencing at 10:00am (AEST).
Shareholders will be mailed their Notice of Annual General
Meeting and Proxy Form during September 2020.
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.
The Dividend Reinvestment Plan (DRP) was reintroduced
by the Board in August 2020 to provide funds for future
growth opportunities. The DRP will apply for the FY20 final
dividend to be paid on 16 October 2020 and to participate
in the DRP, shareholders must make their election online
at www.investorcentre.com or submit an election form
on or before the record date. DRP election forms can be
obtained from the Company’s share registry or online at
www.investorcentre.com. For further details, please refer
to the DRP Rules which can be found on the Company’s
website at www.gwagroup.com.au.
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 2020
Consolidation of Shareholdings
30 June
Financial year end
17 August
FY20 full year results and final
dividend announcement
8 September
Ex dividend date for final dividend
9 September
• Record date for determining final
dividend entitlement
• DRP election must be received by
5:00pm AEST on the record date
16 October
Final dividend paid
25 September
Notice of Annual General Meeting
and Proxy Form mailed to shareholders
28 October
Proxy returns close 10:00am AEST
30 October
Annual General Meeting
31 December
Half year end
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.
Direct Credit of Dividends
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.
80 | GWA GROUP LIMITED | 2020 ANNUAL REPORT
GWA GROUP LIMITED AND ITS CONTROLLED ENTITIES Head Office Locations
GWA GROUP LIMITED
Building 3B, 200 Holt Street
Pinkenba QLD 4008
AUSTRALIA
Telephone 61 7 3109 6000
Facsimile 61 7 3852 2201
www.gwagroup.com.au
GWA BATHROOMS & KITCHENS
AUSTRALIA
GWA BATHROOMS & KITCHENS
NEW ZEALAND
Methven Limited
41 Jomac Place
Avondale AUCKLAND 1026
NEW ZEALAND
Telephone +64 9 829 0429
www.methven.com/nz
www.caroma.co.nz
GWA BATHROOMS & KITCHENS
CHINA
Heshan Methven Bathroom Fitting Co Ltd
A Zone, Dongxi Industrial Zone
Zhishan Town, Heshan City,
Guangdong Province, 529729
China
Telephone +86 750 866 6318
www.methven.com.cn
Caroma Industries Limited
Level 24, 100 Mount Street
North Sydney NSW 2060
AUSTRALIA
Telephone 61 2 8825 4400
Facsimile 61 2 8825 4567
www.caroma.com.au
specify.caroma.com.au
www.smartcommand.com.au
www.methven.com/au
www.dorf.com.au
www.clark.com.au
www.flexispray.com.au
GWA BATHROOMS & KITCHENS
UNITED KINGDOM
Methven UK Limited
Methven Experience Centre
3/3A Stone Cross Court
Yew Tree Way, Golborne, Warrington,
WA3 3JD
UNITED KINGDOM
Telephone 0800 195 1602
www.methven.com/uk
www.deva-uk.com
GWA GROUP LIMITED | 2020 ANNUAL REPORT | 81
GWA GROUP LIMITED AND ITS CONTROLLED ENTITIES Group Bankers
Commonwealth Bank of Australia
Australia and New Zealand Banking Group
HSBC Bank Australia
Corporate Directory
Directors
D D McDonough, Chairman
J F Mulcahy, Deputy Chairman
T R Salt, Managing Director
P A Birtles, Non-Executive Director
J M McKellar, Non-Executive Director
A J Barrass, Non-Executive Director
S T Goddard, Non-Executive Director
R J Thornton, Executive Director
Chief Financial Officer
P A Gibson
BA, FCMA, CGMA, FAICD, FGIA, FCIS
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
Level 1, 200 Mary Street
Brisbane QLD 4000
AUSTRALIA
Company Secretary
R J Thornton
CA, BCom (Acc), LLB (Hons), LLM
GPO Box 2975
Melbourne VIC 3001
AUSTRALIA
(within Australia) 1300 850 505
(outside Australia) 61 3 9415 4000
www.computershare.com.au
Registered Office
Building 3B, 200 Holt Street
Pinkenba QLD 4008
AUSTRALIA
Telephone +61 7 3109 6000
Facsimile +61 7 3852 2201
www.gwagroup.com.au
ASX code: GWA
82 | GWA GROUP LIMITED | 2020 ANNUAL REPORT
GWA GROUP LIMITED AND ITS CONTROLLED ENTITIES Building 3B, 200 Holt Street
Pinkenba QLD 4008
AUSTRALIA
Telephone: 61 7 3109 6000
Facsimile: 61 7 3852 2201
Website: www.gwagroup.com.au