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Natuzzi Group2022 ANNUAL REPORT
GWA delivered
a very pleasing
result for FY22
despite challenging
economic conditions.
IN THIS REPORT
01 FY22 Performance Highlights
02 Five Year Financial Summary
03 Company Profile
04 Strategy on a Page
05 Chairman’s Report
07 Managing Director’s Review
of Operations
11 Board of Directors
13 Directors’ Report
39 Financial Report
86 Other Statutory Information
87 Shareholder Information
88 Head Office Locations
89 Corporate Directory
B | GWA GROUP LIMITED | 2022 ANNUAL REPORT
FY22 PERFORMANCE HIGHLIGHTS
The Company reported an
improved performance in
the second half of the year,
consistent with our guidance
provided at the first half.
The increase in FY22 earnings
resulted in an improved net
profit and a corresponding
lift in the full year dividend
for shareholders.
During the year we improved
our safety performance,
implemented our new
Enterprise Resource Planning
system, following a strategic
review exited the loss making
China sales function, and
successfully continued to
address the challenges
of ongoing supply chain
disruptions and cost increases.
Meanwhile we
continued to
implement our
strategy for growth,
achieving considerable
progress in core elements of
our strategic focus areas.
This provides a stronger
platform for medium term
growth and shareholder returns.
› Improved our
safety performance
› Delivered underlying EBIT
growth for the full year
with strong growth from
H1 to H2
› Rebuilt our management
team with five high calibre
appointments to the
Executive Leadership Team
› Exited our loss-making
China sales function
($4.9 million in one-off
closure costs)
› Achieved considerable
progress in our strategic
initiatives, providing a
stronger platform for
medium term growth and
shareholder returns
GWA GROUP LIMITED | 2022 ANNUAL REPORT | 1
1
Normalised results excludes certain project costs – 2022: $15.2m ($12.1m post tax) in
relation to the Group’s Enterprise Resource Planning/Customer Relationship Management
(ERP/CRM) project, and closure of the China sales function. 2021: $9.5m ($7.3m post tax)
in relation to Methven integration and the Group’s ERP/CRM project.
TOTAL SALES $418.7 million 3.2%REPORTED EBIT$59.7 million 1.2%REPORTED NPAT$35.2 million 0.4%FINAL DIVIDEND 8c per share, fully frankedNORMALISED1 EBIT$74.8 million 9.3%NORMALISED NPAT $47.3 million 11.7%EBIT MARGIN17.9% FY21: 16.9%FULL YEAR DIVIDEND 15c per share, fully franked 20% FIVE YEAR FINANCIAL SUMMARY
CONTINUING OPERATIONS(1)
2017/18
$’000
2018/197
$’000
2019/207
$’000
2020/217
$’000
2021/227
$’000
Revenue from continuing operations
358,622
381,730
398,704
405,736
418,717
Earnings before interest, tax, depreciation,
amortisation and significant items2
EBITDA margin (%)
Depreciation and amortisation
80,171
22.4
92,986
92,206
88,401
94,610
24.4
23.1
21.8
22.6
(3,929)
(14,869)
(20,366)
(19,919)
(19,761)
Earnings before interest, tax and significant items (EBIT)2
76,242
78,117
71,840
68,482
74,849
EBIT margin (%)
Interest (net)
Normalised profit before tax2
Normalised profit before tax (%)
Tax expense on normalised profit
Normalised effective tax rate (%)
Normalised profit after tax2
Significant items after tax
Net profit after tax from continuing operations
Profit from discontinued operations (net of income tax)
Net profit after tax for the period
Net cash from operating activities
Capital expenditure
Net debt3
Shareholders' equity
OTHER RATIOS AND STATISTICS
Interest cover (times)4
Leverage ratio4
Gearing: net debt/(net debt + equity) (%)8
Return on shareholders' equity (%)
Dividend payout ratio – Group (%)5
Dividend payout ratio – Normalised Continuing (%)5
Dividend per share (cents)6
Franking (%)
Share price (30 June) ($)
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
1
2
The Door and Access Systems’ business has been sold with an
effective date of 3 July 2018. Accordingly, the operating activities
Door and Access Systems were classified as discontinued in FY18,
and presented separately from the results of continuing operations.
Continuing operations includes the contribution from Methven from
the effective date of acquisition, 10 April 2019.
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.
2 | GWA GROUP LIMITED | 2022 ANNUAL REPORT
21.3
(4,813)
20.5
(5,811)
18.0
16.9
(8,644)
(8,019)
71,429
72,306
63,196
60,463
19.9
18.9
15.9
14.9
17.9
(7,233)
67,616
16.1
(21,290)
(21,467)
(18,273)
(18,140)
(20,351)
29.8
29.7
28.9
30.0
30.1
50,139
–
50,139
4,113
50,839
(7,597)
43,242
50,802
54,252
94,044
39,158
12,475
97,729
67,630
4,326
44,923
(1,037)
43,886
42,323
47,265
(7,267)
(12,086)
35,056
35,179
–
–
–
43,886
60,952
12,317
35,056
78,298
5,147
35,179
13,988
2,408
141,930
144,841
104,804
138,248
333,401
286,756
279,731
296,611
303,826
19.6
1.1
22.7
16.3
87.4
94.7
18.0
100
3.40
5.3
757
20.6
19.0
19.0
23.5
1.6
27.5
32.8
51.9
96.0
18.5
100
3.42
5.4
665
35.6
16.4
19.3
13.6
1.9
28.4
15.7
69.2
67.6
11.5
100
2.77
4.2
629
16.6
16.6
17.0
15.5
1.4
21.5
11.8
94.6
78.1
12.5
100
2.77
4.5
578
13.3
13.3
16.0
18.3
1.7
26.2
11.6
113.1
84.2
15.0
100
1.97
7.6
550
13.3
13.3
17.8
3
Net debt reflects the Group’s borrowings and bank guarantees less
cash (including cash classified within assets held for sale).
4
5
6
7
8
Interest cover (times) and Leverage ratio is calculated using EBITDA
excluding non-recurring other significant items.
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.
Dividend per share includes ordinary and special dividends.
AASB16 Leases and the May 2020 IFRS Interpretations Committee
decision on ‘Multiple Tax Consequences of Recovering an Asset’
have been adopted from 1 July 2019 (FY20), with retrospective
restatement of FY19 made. FY18 has not been restated.
Equity for the purposes of gearing excludes the retained earnings
impact from the adoption of the May 2020 IFRS Interpretations
Committee decision on ‘Multiple Tax Consequences of Recovering
an Asset’.
COMPANY PROFILE
OUR PURPOSE
Making everyday
water experiences
extraordinary – today,
and for tomorrow.
OUR STRATEGY
To be the trusted and integrated
solutions partner in the delivery
of sustainable water solutions for
bathrooms, kitchens and laundries.
OUR CULTURAL PILLARS
We are one team
We are customer focused
We care for each other
We make life better
for all our stakeholders.
GWA Group Limited (GWA) listed on the
Australian Securities Exchange in May 1993.
GWA is a leading innovator, designer and
supplier of product solutions, services and
intelligent technology focused on the delivery
of sustainable water solutions for bathrooms,
kitchens and laundries.
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 Internet of
Things (IoT) smart water management solutions.
GWA operates a central-led business with corporate
functions supporting our sustainable water solutions
business. We have sale and distribution facilities across our
primary end markets of Australia, New Zealand, the United
Kingdom and Asia (noting that GWA ceased its China sales
function as of 30 June 2022).
We are highly respected within the building industry for
innovation, water efficiency and safety, product reliability
and quality, technical expertise and superior service.
We maintain quality and cost efficient long-term supply
agreements with selected, exclusive manufacturing
partners across Asia and Europe. GWA has an experienced
senior management team in design, research and
development, brand building, customer engagement,
supply and distribution.
GWA remains committed to growing shareholder value
through our focus on making everyday water experiences
extraordinary within our sustainable water solutions
business which has strong market positions, market-
leading brands and significant growth opportunities.
GWA is a member of the ASX 300 index of listed
Australian companies.
OUR BRANDS
GWA GROUP LIMITED | 2022 ANNUAL REPORT | 3
STRATEGY ON A PAGE
Making everyday
water experiences extraordinary —
today, and for tomorrow.
STRATEGY
To be the trusted and integrated solutions partner in the delivery of
sustainable water solutions for bathrooms, kitchens and laundries.
FOCUS
1
2
3
4
WIN THE
PLUMBER
INNOVATE THROUGH
DESIGN & PARTNERSHIPS
GROW OUR AFTER-
MARKET OFFERINGS
FOCUS ON STRATEGIC
GROWTH OPPORTUNITIES
Connect, deepen and
leverage plumbing industry
relationships.
Leverage in-house capability
and global partnerships to
fast-track value creation and
portfolio modernisation.
Build a comprehensive
after-market capability.
Disciplined and targeted
investment in local and
international markets.
FOUNDATION
OUR CULTURAL PILLARS
We are one team.
We are customer focused.
We care for each other.
4 | GWA GROUP LIMITED | 2022 ANNUAL REPORT
CUSTOMER EXPERIENCE Integrated customer experience with structured brands and category portfolios.DIGITAL Investment in digital opportunities to deliver a superior customer experience.ENVIRONMENTAL, SOCIAL, GOVERNANCE A sustainable business that drives value and fuels growth.ALIGNED ORGANISATION The right people in the right roles, focused on the right outcomes. CHAIRMAN’S REPORT
CONTINUED FOCUS ON SAFETY
AND SUSTAINABILITY
GWA is committed to sustainable practices throughout
its operations and we continue to work with our key
stakeholders and communities to deliver on that
commitment.
We measure a range of balanced safety performance
indicators which is part of our focus on identifying,
implementing and monitoring activities to eliminate
unsafe acts and practices.
Following a disappointing increase in our Total Injury
Frequency Rate (TIFR) in FY21, we were pleased to see
our continued focus on safety issues resulted in a decrease
in the TIFR in FY22. This will remain an ongoing focus of
management at our sites.
GWA is 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 which is largely consistent
with the 43 per cent for the prior year. GWA also has a fair
remuneration and pay equity structure in place which we
adhere to during the annual remuneration review cycle to
ensure issues of inequity are addressed.
We remain focused on the areas of sustainability where
we believe we can make the most impact. Our business
operates in a sustainable manner by managing resources
efficiently, effectively and in a socially responsible manner.
GWA also provides innovative sustainable solutions for
the built environment with a clear focus on sustainable
water solutions.
GWA acknowledges that the supply, pumping, heating
and treatment of water is carbon intensive and can have
significant impacts on the environment. We believe that
every effort should be taken to reduce water usage
through water efficient fixtures, design and smart sensor
connected systems.
We are committed to further understanding the
greenhouse gas emission impact of water supply,
pumping and heating and working with relevant partners
to articulate the reduction in greenhouse gas emissions
through lower water utilisation.
As part of this commitment GWA became a member of the
Green Building Council of Australia in 2022.
GWA will publish its fourth Sustainability Report in
September 2022, providing further details on its policies
and initiatives in these areas.
Despite ongoing challenges caused by
significant supply chain disruption, input cost
inflation and COVID-19, GWA delivered an
improved and pleasing financial performance
during the year.
The company continued to implement its strategy and
as a result is well positioned to capitalise on market
opportunities in FY23.
FY22 RESULTS
Group revenue increased by 3.2 per cent to $418.7 million,
reflecting a solid performance in our Australian and UK
businesses, partially offset by lower sales in New Zealand
and the China business with both regions being impacted
by COVID-19 restrictions and disruptions.
As part of the continual strategic review of operations, the
company closed its sales function in China with effect from
30 June 2022.
Our continued focus on operational discipline and cost
control helped to deliver a 9.3 per cent increase in
Normalised Group EBIT to $74.8 million.
Normalised net profit after tax increased by 11.7 per cent to
$47.3 million.
GWA reported a net profit after tax (including significant
items) of $35.2 million for FY22 compared to $35.1 million
in FY21.
SOLID BALANCE SHEET MAINTAINED AND FULL YEAR
DIVIDEND UP 20 PER CENT ON THE PRIOR YEAR
In line with the Company’s dividend policy, the Board
declared a final dividend of 8 cents per share fully-franked,
bringing the full-year dividend to 15 cents per share fully-
franked; an increase of 20 per cent compared to the prior
year. The full year dividend represents a normalised payout
ratio of 84 per cent and reported dividend payout ratio of
113 per cent.
The Company’s Dividend Reinvestment Plan will not be
offered to shareholders for the final dividend.
Net debt as at 30 June 2022 was $138.2 million which
was $33.4 million above the prior year, primarily reflecting
an increase in stock on hand of $38.8 million to ensure
ongoing supply of product to our customers during a
period of significant supply chain disruption.
Notwithstanding the above, credit metrics remain within
target levels and the Group continues to maintain its
strong financial position to support investment in future
growth initiatives.
GWA GROUP LIMITED | 2022 ANNUAL REPORT | 5
GWA GROUP LIMITED | 2022 ANNUAL REPORT | 5
EXECUTIVE REMUNERATION
The Board determined there should be a change in
variable remuneration mix for FY22 with a greater
weighting being placed on long-term incentives coupled
with a continued focus on short-term financial targets and
critical non-financial Key Performance Indicators (KPIs).
This change applied to all members of the Executive team
for FY22 to better align executive remuneration outcomes
and long-term shareholder wealth creation.
The FY22 STI plan continued to adopt EBIT as a single
financial target. EBIT is an effective basis for STI financial
targets as it is currently a key metric used in the business
and aligns with the Group’s strategy.
In FY22 the Board decided to retain relative Total
Shareholder Return (TSR) as single performance measure
under the LTI plan due to ongoing uncertainty caused by
the continuing impact of COVID-19, resulting in difficulty
in accurately forecasting business performance for the next
three-year period.
BOARD CHANGES
The Board has commenced a formal review to consider
Board renewal and appointments. This process has been
assisted by external advisers, Hattonneale.
Peter Birtles retired from the Board on 30 June 2022. Peter
was appointed a Non-Executive Director of GWA in 2010
and served on the Audit and Risk Committee. I want to
acknowledge and thank Peter for his exceptional service
and valuable contribution to GWA as a director and more
specifically, as a member of the Audit and Risk Committee.
I would also like to acknowledge the outstanding
commitment and contribution of Alison Barrass, who
is retiring from the Board by rotation at GWA’s annual
general meeting later this year. Alison was appointed a
Non-Executive Director of GWA in 2019, and joined the
Board following the Group’s acquisition of Methven.
Alison’s and Peter’s support and wise counsel has been
greatly valued, and on behalf of the Board we wish them
well with their future endeavours.
In addition, Richard Thornton transitioned from his role
as Executive Director and Company Secretary of GWA
to that of Non-Executive Director in June 2022. Richard’s
appointment as a Non-Executive Director will continue the
family connection to the Anderson Brothers who were the
founders of what is GWA today with the current Anderson
Family members continuing as significant shareholders
of GWA.
I want to thank Richard for his long service to GWA in an
executive capacity and we look forward to his continuing
contribution to the Board as a Non-Executive Director.
CONCLUSION
GWA successfully managed a challenging environment
in FY22 to deliver a solid financial result.
While economic and market conditions remain uncertain
the business continues to be supported by a solid balance
sheet which enables the continued generation of returns
to shareholders.
On behalf of the Board, I wish to acknowledge and
thank Urs Meyerhans and the executive leadership team
and all employees across the Group for their significant
contribution over the year.
I also thank shareholders for their continuing support
of GWA.
6 | GWA GROUP LIMITED | 2022 ANNUAL REPORT
MANAGING DIRECTOR’S
REVIEW OF OPERATIONS
OVERVIEW
GWA delivered a very pleasing result for FY22
considering ongoing COVID-19 disruptions
and restrictions, particularly in New Zealand
and Asia and the challenging economic
environment, particularly in relation to
input cost inflation and continued supply
chain disruptions.
The Company reported an improved performance in the
second half of the year, consistent with our guidance
provided at the first half. The increase in FY22 earnings
resulted in an improved net profit and a corresponding lift
in the full year dividend for shareholders.
During the year we improved our safety performance,
implemented our new Enterprise Resource Planning
system, following a strategic review exited the loss-making
China sales function, and successfully continued to address
the challenges of ongoing supply chain disruptions and
cost increases.
Meanwhile we continued to implement our strategy for
growth, achieving considerable progress in core elements
of our strategic focus areas. This provides a stronger
platform for medium term growth and shareholder returns.
HEALTH & SAFETY
During FY22 the Company continued to manage its
operations within the COVID-19 impacted environment
with the health and safety of our people and customers
remaining our first priority.
We continued to implement customised training strategies
focused on reducing manual handling injuries at our sites,
and introduced mental health and wellbeing programs.
I am pleased to report a reduction in the Lost Time Injury
Frequency Rate (LTIFR) in FY22 to 1.9 from 4.3 in the
prior year.
RESPONDING TO MARKET CHALLENGES
Global supply chains were severely disrupted during the
year which impacted freight container availability and
increased freight costs. GWA continued to implement a
number of strategies to mitigate these impacts.
We continued to work with our supply partners on demand
planning to ensure minimal disruption to our customers.
GWA proactively increased inventory of core SKUs to
ensure ongoing product availability for our merchant
partners. This resulted in a planned increase in working
capital, particularly in the second half which we expect
to start to unwind in FY23.
Price increases of approximately three per cent and four
per cent were implemented in Australia from July 2021 and
December 2021 respectively, which partly mitigated the impact
of increased input and freight costs during the year. However,
cost escalation continued to impact the business following the
Russia/Ukraine conflict and as a result, GWA implemented a
further price increase of five per cent from July 2022.
GWA maintains a regionally diversified supplier base
with long term supply agreements with our partners
which enable the Company to continue to address these
market challenges while supporting our customers in our
key markets.
IMPLEMENTATION OF NEW ERP SYSTEM
The Company implemented its new Enterprise Resource
Planning (ERP)/Customer Relationship Management (CRM)
system in April 2022. The new system replaces a number of
outdated legacy systems across Australia and New Zealand
with a single integrated system.
Notwithstanding extensive pre-go-live testing and delayed
launch of the new system from January to April 2022,
we experienced some short term issues on implementation
which resulted in stock delivery delays in May/June, not
unexpected with an implementation of this scale. These
issues have now largely been rectified. As we are moving
into FY23 our focus will turn to extracting efficiencies using
this single integrated system.
GROUP FINANCIAL RESULTS
NORMALISED — EXCLUDES SIGNIFICANT ITEMS
A$ million
(Excludes Significant Items)
Revenue
EBITDA
EBIT
EBIT Margin (%)
NPAT
FY21
405.7
88.4
68.5
16.9%
42.3
FY22 % change
418.7
94.6
74.8
17.9%
+3.2%
+7.0%
+9.3%
+1.0pp
47.3
+11.7%
Group normalised results exclude significant items. In FY22
significant items were $15.2 million (pre tax) and included
costs associated with the implementation of the ERP/CRM
system and costs associated with the closure of the China
sales function.
Group revenue increased by 3.2 per cent to $418.7
million, reflecting strong commercial refurbishment
activity in Australia and continued sales momentum in
our UK business, partially offset by the decline in sales
in New Zealand and Asia as a result of COVID-19-related
disruptions, including staff shortages.
Revenue in Australia improved by 6.5 per cent for the year
with second half sales continuing to grow on the first half.
Commercial sales strengthened during the year, primarily
led by renovation and replacement projects within the Care
and Medium Density segments. Shifts toward touchless
products and refurbishments (vs New Build) were evident
throughout the year, however traction with key developers
on smart water solutions created a number of wins in New
Build Office Projects, against the overall market trend.
GWA’s commercial forward Order Bank remains strong and
increased 16 per cent in value on the start of the year which
creates a strong platform for future growth, especially with
sustained growth in the Health and Aged Care, Offices and
Medium Density Residential segments.
GWA GROUP LIMITED | 2022 ANNUAL REPORT | 7
Sales to the Builder’s segment increased again on the
prior year, reflecting ongoing strength in residential
detached housing activity, particularly in NSW, SA and QLD
(although growth tempered in H2 with the floods).
Residential renovation and replacement remained strong
with growth again on the back of high approvals, and we’re
expecting completions being ‘stronger for longer’ due
to trade labour and material shortages. In fact, all states
experienced restrictions to growth throughout the year
with labour and material shortages evident in all segments.
However, sales in the commercial new build and multi
residential segments continued to be soft.
Performance in New Zealand was disappointing with
revenue declining by 16.6 per cent on the prior year.
Sales in the first half were impacted by the government
mandated five-week shutdown which resulted in no sales
being recorded for that period.
While GWA experienced a partial recovery in sales in the
second half in Australia as some restrictions were lifted,
the ongoing impacts of COVID-19 causing staff absences
impacted our ability in New Zealand to ship product to
customers resulting in delayed sales.
Sales in International markets increased by 3.7 per cent,
reflecting good growth in the UK business, offset by a
decline in China sales. In June following a detailed strategic
review, GWA closed its sales function in China. The China
sales function was acquired by GWA as part of the
Methven acquisition in April 2019.
Notwithstanding the challenges of COVID-19 in China, the
sales function lacked sufficient scale to be profitable and
as a result we made the decision to close this function.
Closure costs of $4.9 million, ($3.4 million cash/$1.5 million
non-cash) were incurred as significant items in the
FY22 accounts.
This decision does not impact GWA’s sourcing and supply
operations in China which continue as normal.
Normalised Group EBIT increased by 9.3 per cent
compared to the prior year. The improvement in earnings
came despite the significant increase in freight and other
input costs compared to the prior year which were only
partially mitigated through pricing.
Normalised Group EBIT margin was 17.9 per cent compared
to 16.9 per cent for the prior year demonstrating GWA’s
positive leverage to current market conditions.
Group Reported Results include significant items of
$15.2 million (pre tax) outlined above.
Including significant items, Group Reported EBIT was
$59.7 million compared to $59.0 million for the prior year.
Normalised net profit after tax increased by 11.7 per cent
to $47.3 million.
GWA reported a net profit after tax of $35.2 million for
FY22 compared to $35.1 million in FY21.
CASHFLOW FROM OPERATIONS
Given the ongoing supply chain disruption in global
markets, GWA increased inventory of its core SKUs
to ensure ongoing product availability for customers.
This resulted in a planned increase in working capital,
particularly in the second half which negatively impacted
operating cashflow for the period.
Cashflow from operations was $49.6 million compared to
$103.1 million for the prior year.
The cash conversion ratio (cashflow from operations/
normalised EBITDA) was 52 per cent.
Capital expenditure and other investing activities was
$2.4 million in FY22. The Group’s capital expenditure
programme remains focused on growth initiatives to drive
revenue enhancing opportunities and cost efficiencies.
FULL YEAR DIVIDEND OF 8.0 CENTS PER SHARE
FULLY FRANKED; UP 20 PER CENT
The Board declared a final dividend of 8.0 cents per share,
fully-franked, bringing the full-year dividend to 15.0 cents
per share, fully-franked. This represents an increase of
20 per cent on the prior year.
The record date for entitlement to receive the final
dividend will be 22 August 2022 with the payment date
of 6 September 2022. The full-year dividend represents
a payout ratio of normalised profit of 84 per cent and
reported profit of 113 per cent.
As part of the Company’s capital management approach,
the Dividend Reinvestment Plan will not be offered to
shareholders for the final dividend.
GWA’S FINANCIAL METRICS REMAIN SOLID
Net debt as at 30 June 2022 was $138.2 million, which was
higher than 30 June 2021 and reflected the planned increase
in inventory relating to continued supply chain disruptions.
Notwithstanding this increase, GWA’s credit metrics remain
solid. The Company’s gearing ratio (net debt/net debt plus
equity) was 26.2 per cent compared to 21.5 per cent at 30
June 2021 and leverage ratio (net debt/EBITDA) was 1.7
times compared to 1.4 times at 30 June 2021.
GWA’s interest cover ratio (EBITDA/net interest) was
18.3 times at 30 June 2022 compared to 15.5 times at
30 June 2021.
In October 2021, GWA successfully completed the
extension of its syndicated banking facility which
comprises a single three year multicurrency revolving
facility of $180 million which matures in October 2024.
GWA also maintains a separate $40 million one-year
multi-currency revolving bilateral facility which matures in
October 2022. This will be reviewed as part of our ongoing
treasury management.
8 | GWA GROUP LIMITED | 2022 ANNUAL REPORT
OUTLOOK
GWA remains well positioned to capitalise on positive
sentiment across key construction segments.
There is ongoing demand for care products in the
Commercial segment and signs of recovery in the new
build category, while there is continued momentum in
the residential detached category.
Approvals in the residential and commercial renovation
and replacement segments remain at historically
elevated levels.
We maintain strong operational leverage to the market,
underpinned by ongoing operational discipline including
managing higher input cost through proactive pricing and
managing inventory levels to meet customer demand.
Our cash flows for the current financial year were impacted
primarily by significant items and a temporary increase in
working capital. We expect cash flow in FY23 to return to
normalised levels.
GWA monitors key risks to its future prospects and
implements measures to mitigate these risks, where
possible, which are outlined in the Appendix to this report.
THE GWA TEAM
I am proud of what the GWA team achieved over the last
12 months considering ongoing COVID-19 disruptions and
restrictions in some of our markets and the challenging
economic environment in relation to input cost inflation
and continuing supply chain disruptions. Our achievements
wouldn’t be possible without the contribution of the entire
GWA team.
I would like to thank my executive team and everyone
across GWA for their dedication, passion and contribution
to the achievements delivered during FY22.
PROGRESSING GROWTH STRATEGY
During the year GWA continued to implement its strategy
which is focused on being a trusted and integrated
solutions partner in the delivery of sustainable water
solutions for bathrooms, kitchens and laundries.
We made good progress on key focus areas of our strategy:
WIN THE PLUMBER
Plumbers are the single biggest opportunity for GWA
to grow volume and share in Australia/New Zealand.
We are implementing measures to connect, deepen and
leverage our plumbing industry relationships with a focus
on delivering trusted and valued, services and solutions
to plumbers.
During FY22 we extended our reach with Australian
plumbers from 4,500 to 10,000.
CUSTOMER EXPERIENCE
Our focus is to deliver an integrated customer experience
with structured brands and category portfolios. To support
this objective we redefined our brand strategy with a clear
brand and customer value proposition.
We have also completed a brand and product category
review and as a result we have identified approximately
20 per cent of SKU’s to be deleted over the next one to
two years.
DIGITAL
We continued our investment in digital opportunities to
deliver a superior customer experience.
This included key projects to enhance our online platforms
to offer virtual and augmented reality experiences,
allowing purchasers to visualise their new bathroom,
kitchen and laundry.
In December, we launched the Caroma Visualiser which
enables a user to build and visualise their bathroom with a
virtual “walk-through” experience using augmented reality.
Using the visualiser, the user specifies their bathroom
dimensions, adds floor and wall tiles and can then
customise the new bathroom with products (including
basins, taps, showers, toilet suites). In addition, in May
2022 we launched the virtual tour of our flagship store
in Alexandria, NSW. This will enable customers anywhere
to experience our product offerings from the comfort of
their home.
This project is consistent with GWA’s strategy to improve
the customer experience with our brands to build
engagement with customers on the renovation and
purchase journey.
GWA GROUP LIMITED | 2022 ANNUAL REPORT | 9
APPENDIX — RISK MATERIALITY TABLE
GWA’s key risks to its future prospects, and measures to mitigate these risks, where possible, are outlined in the following table.
Risk
Monitoring and Mitigation
A significant
deterioration in
building activity
impacting sales growth
and margins.
GWA monitors building activity and this is factored into the company’s monthly reporting, forecasting,
annual budget and planning processes.
Approximately 61 per cent of GWA’s revenue is generated from the Renovation and Replacements
segment in Australia which is the largest and most stable segment of the overall market.
GWA’s forward order book for commercial projects remains solid and is growing with several major
projects secured.
In addition, GWA’s corporate strategy incorporates opportunities for GWA to expand beyond current
segments, categories and markets
A significant
movement in the
Australian dollar
impacting the price
of imported products
leading to changes
in market pricing to
maintain profitability.
Unforeseen disruptions
impacting product
supply from offshore
suppliers leading to
reputational damage,
lower sales and loss of
market share.
Security risks around
external threats to
the digital network,
IT systems and data
could potentially
result in adverse
operational, financial
and reputational
impacts through
possible system failures
and security/cyber
breaches.
Workplace health
and safety risks could
potentially result in
physical injury to
employees, contractors
or others, or damage
to the Company’s
reputation.
Major global event
(e.g. war, pandemic)
impacting GWA’s
ability to operate,
including workforce,
supply chain and
customer service
disruptions.
Adverse impact of
environmental or social
risks on the GWA
business.
GWA monitors foreign exchange rates closely and adopts appropriate mitigation strategies.
Approximately 52 per cent of US dollar exposure is hedged at US$0.73 for FY23.
GWA’s contracts with major customers include provisions for pricing changes based on significant
movements in the Australian dollar.
GWA has exclusive long-term supply partnerships with experienced offshore suppliers.
GWA’s supply chain processes include dual-sourcing strategies and access to safety stock to mitigate
the risk of supplier disruption.
GWA has its own employees located in Asia working directly with its supply partners and is actively
diversifying its regional supply base.
The global supply chain landscape continues to evolve rapidly because of COVID-19 related events,
which has been exacerbated by changing market conditions, escalating trade tensions, armed conflict
and extreme weather events. GWA’s business continuity plans are being updated frequently to deal
with these issues.
GWA has established a formal IT security risk and governance framework to mitigate the risks being
faced by GWA.
In FY22, GWA implemented a new Enterprise Resource Planning and Customer Relationship
Management systems across its operations in Australia and New Zealand, with enhanced security and
protection technologies.
In addition, GWA carries out disaster recovery and business continuity planning each year to test the
effectiveness of its ability to respond to security and cyber risks.
GWA has a cyber program that continually monitors the effectiveness of GWA’s mitigation measures
against evolving cyber threats.
Aligned with its Cultural Pillar of ‘We care for each other’, GWA remains committed to continuous
improvement in workplace health and safety performance.
GWA has implemented comprehensive safety systems and processes, communications with and
training of employees, and increased diligence in identifying and removing safety risks. GWA has also
increased its focus on the management of mental health issues, given the impact of COVID-19 and the
significant workplace changes which occurred because of the pandemic.
All GWA managed sites are certified to ISO45001:2018 (occupational health and safety management
system).
GWA has comprehensive crisis management and business continuity plans in place for dealing with
major global and domestic events. These were activated to address recent global events such as the
COVID-19 pandemic and conflict in Ukraine.
The plans guide GWA’s response to events outside of the control of GWA and are continually reviewed
to ensure they remain effective.
GWA’s approach to ESG is one of the foundations of the 2025 corporate strategy. GWA has established
an ESG Steering Committee to oversee the progress and execution of GWA’s ESG program.
The physical risks of climate change on the GWA business are regularly assessed with risk mitigation
and contingency plans in place. Notwithstanding that GWA is a low emissions intensity entity, as its
business activities are less carbon intensive than other sectors, GWA’s ESG program is designed to
meet the long-term sustainability credentials that are expected by stakeholders.
In December 2021, GWA’s latest Modern Slavery Statement was lodged with the Australian Border
Force. GWA has undertaken an analysis of its operations and supply chains to identify potential risks
of modern slavery and believes the overall risk level to be low given the scope and location of GWA’s
operations, the maturity of its supply partner relationships and the diligence applied by GWA to identify
and manage risks in the business.
Refer to GWA’s sustainability reports for further information.
10 | GWA GROUP LIMITED | 2022 ANNUAL REPORT
BOARD OF DIRECTORS
DARRYL McDONOUGH
BBUS (ACTY), LLB (HONS), SJD, FCPA, FAICD
URS MEYERHANS
FCPA, MAICD
INDEPENDENT CHAIRMAN AND
NON-EXECUTIVE DIRECTOR
Expertise: Experienced Non-Executive Director
Special Responsibilities: Chairman of Board and member
of People and Culture and Audit and Risk Committees
Mr McDonough was appointed Chairman on 31 October
2013. He has over 35 years of experience as a director
and as a corporate lawyer. He has served as a director of
a number of public companies and is a former President
of The Australian Institute of Company Directors,
Queensland Division.
JOHN MULCAHY
PHD (CIVIL ENGINEERING), FIE AUSTT
INDEPENDENT DEPUTY CHAIRMAN AND
NON-EXECUTIVE DIRECTOR
Expertise: Engineer, banker and experienced public
company director
Special Responsibilities: Chairman of People and
Culture 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*
MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER
Expertise: Experienced executive officer with extensive
operational and finance experience
Mr Meyerhans was appointed Managing Director and Chief
Executive Officer of GWA Group Limited on 1 July 2021.
He was formerly the Acting Chief Executive Officer of GWA
Group Limited from 1 March 2021.
Mr Meyerhans has international industry experience in
manufacturing and distribution, professional services,
mining, engineering and construction in Australia, Europe,
USA and Asia Pacific. Mr Meyerhans served as President
of Tetra Tech Asia Pacific and Chief Executive Officer of
Coffey International Limited (Coffey) from 2017 to 2020.
Previous roles have included Chief Operating Officer and
Finance Director of Coffey, Finance Director of Wattyl
Limited as well as executive roles with United Group
Limited and WMC Resources Limited.
Mr Meyerhans is a graduate of the School of Business
Executive Program at Stanford University, and a member of
the Australia Institute of Company Directors and Fellow of
CPA Australia.
JANE McKELLAR
BA, MA (HONS), GAICD, CISL
INDEPENDENT NON-EXECUTIVE DIRECTOR
Expertise: International brand and consumer marketing
and sales; public company Non-Executive Director
Special Responsibilities: Member of People and
Culture 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 Chief Marketing Officer and/or CEO
roles with Unilever, NineMSN, Microsoft, Elizabeth Arden
and Stila Corp. She is presently a Non-Executive Director at
ASX listed Noumi 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:
• Noumi Limited since May 2020*
• McPherson’s Limited since 2015*
* denotes current directorship
GWA GROUP LIMITED | 2022 ANNUAL REPORT | 11
ALISON BARRASS
BSC, DipMA
During the past three years Mr Goddard has served as
a director of the following listed companies for the time
periods noted:
INDEPENDENT NON-EXECUTIVE DIRECTOR
Expertise: Extensive experience in FMCG Sector,
governance leadership and innovation
• Nick Scali Limited since March 2018*
• Accent Group Limited since November 2017*
• JB Hi-Fi Limited since August 2016*
RICHARD THORNTON
CA BCOM (ACC) LLB (HONS) LLM
NON-EXECUTIVE DIRECTOR
Expertise: Chartered Accountant with extensive
governance, risk management and finance experience
Special Responsibilities: Member of the Audit and
Risk Committee
Mr Thornton was appointed a Non-Executive Director of
GWA Group Limited on 3 June 2022. He joined GWA Group
Limited in 2002, and was the Company Secretary between
2003 and 2022 and an Executive Director between 2009
and 2022. 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. He has extensive leadership, governance
and risk management experience as a longstanding GWA
senior executive, having served over 20 years with the
business until his appointment as a Non-Executive Director
in June 2022.
He is a Director of HGT Investments Pty Ltd and Great
Western Corporation, a diversified Australian private group.
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,
Zespri Limited, Rockit International and Chair of Tom and
Luke Limited and Babich Wines 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
STEPHEN GODDARD
BSC (HONS), MSC
INDEPENDENT NON-EXECUTIVE DIRECTOR
Expertise: Extensive finance, operational and
governance experience
Special Responsibilities: Chairman of Audit and
Risk Committee
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 the Board and
Remuneration and Nomination Committee 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.
* denotes current directorship
12 | GWA GROUP LIMITED | 2022 ANNUAL REPORT
DIRECTORS’ REPORT
AS AT 30 JUNE 2022
The directors present their report on the consolidated
entity consisting of GWA Group Limited (the Company)
and its controlled entities at the end of, or during, the
financial year ended 30 June 2022 (together, the Group).
COMPANY SECRETARY
ERNIE LAGIS
BBus LLB (Hons), LLM, CertGov&RiskMgt
DIRECTORS
The following persons were directors of the Company
during the financial year and up to the date of this report
unless otherwise stated.
Darryl McDonough, Chairman and Independent,
Non-Executive Director
John Mulcahy, Deputy Chairman and Independent,
Non-Executive Director
Urs Meyerhans, Managing Director and
Chief Executive Officer
Alison Barrass, Independent, Non-Executive Director
Peter Birtles, Independent, Non-Executive Director
(resigned 30 June 2022)
Stephen Goddard, Independent, Non-Executive Director
Ernie Lagis was appointed the Company Secretary
and General Counsel of the Company on 6 June 2022.
Ernie has an extensive career in legal, governance and
company secretariat. Ernie most recently led the company
secretariat, legal and insurance functions for the Asia
Pacific operations of Tetra Tech Inc, including Tetra Tech
Coffey. He began his career as a lawyer with Ashurst
(formerly Blake Dawson).
Richard Thornton was the Company Secretary of the
Company until 3 June 2022.
DIRECTORS’ INTERESTS
The relevant interest of each director in the share capital of
the Company as notified by the directors to the Australian
Securities Exchange in accordance with Section 205G(1) of
the Corporations Act 2001 as at the date of this report is:
Jane McKellar, Independent, Non-Executive Director
Director
Ordinary Shares1
Richard Thornton, Executive Director and Company
Secretary (resigned 3 June 2022)
Richard Thornton, Non-Executive Director
(appointed 3 June 2022)
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 FY22,
and the period for which each directorship has been held,
are outlined in the director profiles in the Annual Report.
The information referred to in the director profiles forms
part of this Directors’ Report.
Darryl McDonough
John Mulcahy
Urs Meyerhans2
Alison Barrass
Peter Birtles
Stephen Goddard
Jane McKellar
Richard Thornton3
Total4
Notes:
170,000
40,950
65,217
0
38,650
10,000
13,034
299,561
637,412
1 The number of shares held refers to shares held either directly or
indirectly by the relevant director.
2 Urs Meyerhans also holds 541,516 Performance Rights. For details of
the Performance Rights held, please refer to sections 7.2 and 7.3 of
the Remuneration Report.
3 As at the date of this report, and as an executive director of the
Company until 3 June 2022, Richard Thornton also holds 94,415
Performance Rights. For details of the Performance Rights held,
please refer to sections 7.2 and 7.3 of the Remuneration Report.
4 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 789,941 shares (2021:
869,006 shares).
GWA GROUP LIMITED | 2022 ANNUAL REPORT | 13
DIRECTORS’ MEETINGS
The number of directors’ meetings (including meetings of
Committees of directors) held during FY22 and the number
of meetings attended by each director is outlined in the
following table:
DIVIDENDS
Dividends paid or declared by the Group to shareholders
since the end of the previous financial year were as follows.
DECLARED AND PAID DURING FY22
Director
Board
A
B
Darryl McDonough 10 10
John Mulcahy
Urs Meyerhans
Alison Barrass
Peter Birtles1
10 10
10 10
10 10
10 10
Stephen Goddard
10 10
Jane McKellar
10 10
Richard Thornton
10 10
Notes:
Audit and Risk
Committee
People
and Culture
Committee2
A
4
–
–
–
4
4
–
–
B
4
–
–
–
4
4
–
–
A
6
6
–
–
–
–
6
–
B
6
6
–
–
–
–
6
–
A Number of meetings held during the time the director held office
during the year including meetings of the Non-Executive Directors only
B Number of meetings attended during the period the director was a
member of the Board of Committee
1
Peter Birtles resigned as a Non-Executive Director of the Company
on 30 June 2022.
2 Previously the Nomination and Remuneration Committee.
PRINCIPAL ACTIVITIES
The principal activities of the Group during the financial
year were the research, design, import and marketing of
building fixtures and fittings to residential and commercial
premises, and the distribution of various products through
a range of distribution channels in Australia, New Zealand
and selected international markets.
There have been no significant changes in the nature of
the activities of the consolidated entity during the financial
year. It is noted that the Group ceased its distribution and
sales function in China with effect from 30 June 2022,
but maintains its sourcing and supply operations in
that country.
STATE OF AFFAIRS
There have been no significant changes in the Group’s state
of affairs during the financial year.
OPERATING AND FINANCIAL REVIEW
The Operating and Financial Review for the
consolidated entity during FY22 is provided in the
Managing Director’s Review of Operations, and forms
part of this Directors’ Report.
Cents
per
Share
Total
Amount
$’000
Franked
Percentage
Date of
Payment
6.5
17,238
100%
6 October 2021
7.0
18,564
100%
4 March 2022
Dividends
Final
2020/21
Ordinary
Interim
2021/22
Ordinary
Franked dividends declared and paid during the year were
franked at the corporate tax rate of 30%.
DETERMINED AFTER END OF FY22
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 as at
30 June 2022.
Cents
per
Share
Total
Amount
$’000
Franked
Percentage
Date of
Payment
8.0
21,216
100% 6 September 2022
Dividend
Final
2021/22
Ordinary
The financial effect of the final dividend has not been
brought to account in the financial statements for FY22
and will be recognised in subsequent financial reports.
The record date for the FY22 final dividend is 22 August
2022 and the dividend payment date is 6 September 2022.
The Dividend Reinvestment Plan will not be offered to
shareholders for the final dividend.
EVENTS SUBSEQUENT TO
REPORTING DATE
Excepting the dividend declared after the end of FY22,
as described above, there has not arisen in the interval
between the end of the financial year and the date of this
report any item, transaction or event of a material and
unusual nature likely, in the opinion of the directors of
the Company, 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.
14 | GWA GROUP LIMITED | 2022 ANNUAL REPORT
LIKELY DEVELOPMENTS
Likely developments and expected results of the
operations of the Group are provided in the Managing
Director’s Review of Operations.
Further information on likely developments and expected
results of the operations of the Group has not been
included in this report because the directors believe it
would be likely to result in unreasonable prejudice to
the Group.
ENVIRONMENTAL REGULATIONS
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 Company’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.
In accordance with the Company’s constitution, the
Company has entered into a Deed of Indemnity, Insurance
and Access with each of the Company’s directors and
company secretary. No director or officer of the Company
has received benefits under an indemnity from the
Company during or since the end of the financial year.
INSURANCE PREMIUMS
The Company has paid a premium in respect of a contract
insuring current and former directors, company secretaries
and executives of the Company and its subsidiaries against
liability that they may incur as an officer of the Company
or any of its subsidiaries, including liability for costs and
expenses incurred by them in defending civil or criminal
proceedings involving them as such officers, with certain
exceptions. It is a condition of the insurance contract that
no details of the premiums payable or the nature of the
liabilities insured are disclosed.
NON-AUDIT SERVICES
During the year KPMG, the Group’s lead auditor, did not
perform any non-audit services.
The Board has considered the non-audit services provided
by PwC, a UK subsidiary company auditor, 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 KPMG and PwC,
and their network firms, for audit and non-audit services
provided during the year are outlined in Note 21 of the
financial statements.
LEAD AUDITOR’S INDEPENDENCE
DECLARATION
The lead Auditor’s Independence Declaration is set out in
the Annual Report and forms part of the Directors’ Report
for FY22.
PROCEEDINGS ON BEHALF OF THE
COMPANY
No application has been made under section 237 of the
Corporations Act 2001 in respect of the Company, and
there are no proceedings that a person has brought or
intervened in on behalf of the Company under that section.
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.
GWA GROUP LIMITED | 2022 ANNUAL REPORT | 15
This report outlines how GWA’s performance has driven
the remuneration outcomes for executives. The P&CC
had oversight of the performance and remuneration
arrangements of the Managing Director and the other
ELT members during FY22, together with the Group’s
remuneration framework and incentive plans. The P&CC
ensures that the financial reward for executives is aligned
with performance and shareholders’ interests.
GWA’s remuneration framework reflects our approach
to providing remuneration which is fair and equitable to
attract and retain talented individuals necessary to deliver
our strategy, and 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;
•
• Board discretion to adjust or ‘clawback’ executive
reward where business and operational risks have not
been adequately managed; and
• best practice governance in determining remuneration
arrangements and outcomes that are fair and
reasonable taking into consideration community and
shareholder expectations.
As advised in the FY21 Remuneration Report, the
remuneration arrangements for Mr Meyerhans, the
Managing Director & Chief Executive Officer and the
Executive team signaled a significant change in the variable
remuneration mix for FY22 to a greater weighting to long-
term incentives coupled with a lower weighted focus on
short-term financial targets and critical non-financial KPIs
(refer section 6).
2.
KEY MANAGEMENT PERSONNEL
(KMP)
KMP are as defined by the Accounting Standard AASB 124
Related Party Disclosures (AASB 124).
Following the formal appointment of Urs Meyerhans as
Managing Director and Chief Executive Officer on 1 July
2021, changes were made to the accountability of the
Executive team including shared strategic influence as a
collective. This triggered a change to the assessment of
Key Management Personnel (KMP) at that time increasing
the KMP to include all eight current Executives for the full
FY22 year, together with each of the directors.
REMUNERATION REPORT
INTRODUCTION
The directors of GWA Group Limited present this
Remuneration Report for the period ended 30 June
2022. The Remuneration Report outlines the Group’s
remuneration strategy and principles, explains how
the Group’s FY22 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 and
applicable accounting standards.
Sections 2 to 8 of this Remuneration Report, excluding
Section 7.1.1, have been audited by the Group’s External
Auditor, KPMG.
The structure of the Remuneration Report is outlined below:
Message from the People & Culture Committee;
1.
2. Key Management Personnel;
3.
Board role in setting remuneration strategy
and principles;
4. Relationship between remuneration policy and
Group 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 PEOPLE &
CULTURE COMMITTEE (P&CC)
The P&CC is pleased to present shareholders with the FY22
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’s performance during FY22 reflected the Company’s
continued disciplined response to the impact of COVID-19
related challenges, particularly in New Zealand and China,
supply chain disruption and inflationary pressures. GWA
responded to these challenges with a focus on operational
and cost discipline and made significant progress against
its strategic objectives which have positioned the company
well to capitalise on opportunities in FY23 and beyond.
The Company is in strong financial health. The incentive
outcomes for the Managing Director and other Executive
Leadership Team (ELT) members for FY22 reflected GWA’s
improved underlying financial performance compared to
FY21 and progress with executing the Group’s strategy.
While market conditions were challenging, management
continued to proactively respond to the unforeseen impacts
of COVID-19 in ensuring the health, safety and wellbeing of
staff and taking actions to control costs and create a strong
growth platform by continuing to implement key initiatives
supporting the strategic framework.
16 | GWA GROUP LIMITED | 2022 ANNUAL REPORT
3.
BOARD ROLE IN SETTING
REMUNERATION STRATEGY
AND PRINCIPLES
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
competitive and equitable and is designed to attract, retain
and motivate directors and executives 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 People & Culture Committee.
The charter for the People & Culture Committee is available
on the Company’s website at www.gwagroup.com.au under
Corporate Governance Policies.
TABLE 1: KEY MANAGEMENT PERSONNEL (KMP)
Name
Position
Term as KMP
Non-Executive Directors
D McDonough
J Mulcahy
Chairman and
Non-Executive Director
Deputy Chairman and
Non-Executive Director
A Barrass
Non-Executive Director
P Birtles
Non-Executive Director
S Goddard
Non-Executive Director
J McKellar
Non-Executive Director
Executive Director and
Company Secretary
(to 3 June 2022)
Non-Executive Director
(from 3 June 2022)
R Thornton1
Full year
Full year
Full year
Full year
(retired 30
June 2022)
Full year
Full year
Full year
Executive Directors
U Meyerhans
Managing Director and Chief
Executive Officer
Full Year
Other Executive KMP
Group Chief Financial
Officer
Group General Manager,
Marketing
to 28
January
2022
Full year
Company Secretary and
General Counsel
from 6 June
2022
P Gibson
M Hayes
E Lagis
A Larson
Chief Information Officer
Full year
Group General Manager,
Sales – Aust, UK & Asia
Group General Manager,
People & Performance
Group Chief Financial
Officer
Full year
Full year
from 10
January
2022
Group General Manager,
Supply Chain & Innovation
from 1
August 2021
C Norwell
P Oliver
C Scott
C Sunaryo
Note:
1
Richard Thornton’s remuneration for the period to 3 June 2022
reflected his role as Executive Director and Company Secretary and
included performance-based remuneration. His remuneration from
3 June 2022 reflected his role as Non-Executive Director and does
not include performance- based remuneration (refer Section 5 for
details on Non-Executive Director remuneration structure).
GWA GROUP LIMITED | 2022 ANNUAL REPORT | 17
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 People and Culture Committee.
WITH ADVICE FROM:
PEOPLE AND CULTURE COMMITTEE
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.
INDEPENDENT EXTERNAL ADVISERS
• Provide independent advice, information and
recommendations relevant to remuneration decisions;
• The People and Culture Committee receives information
from independent external advisers related to
remuneration market benchmark data and analysis for the
annual executive fixed remuneration review; and
• There were no remuneration recommendations received
from the external adviser during the year.
BASED ON:
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.
3.2 FY23 EXECUTIVE REMUNERATION
CHANGES
For FY23 the Board approved two LTI performance
hurdles, which will be relative TSR and absolute EPS
growth (CAGR over three-year performance period).
LTI performance rights granted will be split evenly between
these two performance hurdles.
Maximum LTI
As % of fixed
remuneration
150%
60%
Maximum total
performance pay
(STI and LTI)
As % of fixed
remuneration
200%
100%
Managing Director
Other ELT
The proposed relative TSR peer group (20 in total) for the
FY23 LTI grant is as follows (unchanged since FY22).
James Hardie Industries PLC, Fletcher Building Ltd, Boral
Ltd, Adbri Limited1, Brickworks Ltd, Super Retail Group Ltd,
CSR Ltd, ARB Corp Ltd, Bapcor Ltd, Breville Group Ltd,
GUD Holdings Ltd, Cedar Woods Properties Ltd, Decmil
Group Ltd, Simonds Group Ltd, Hills Ltd, Fleetwood Ltd,
Accent Group Ltd, Pact Group Holdings Ltd, Reece Ltd,
Wagner Holding Company Ltd.
The TSR hurdle and the proportion of performance rights
to vest if the TSR hurdle is met are summarised below:
TSR of GWA Group Limited
relative to TSR of Comparator
Companies
Proportion of Performance
Rights to vest if TSR hurdle
is met
Less than the 50th percentile
0%
50% percentile
25%
Between 50% and
75% percentile
Straight line vesting
between 25% and 100%
75th percentile or higher
100%
EPS (CAGR OVER 3-YEAR PERFORMANCE PERIOD)
The EPS hurdle and the proportion of performance rights
to vest if the EPS hurdle is met are summarised below:
EPS (CAGR) of
GWA Group Limited
Less than 5%
Equal to 5%
Between 5% and 10%
Proportion of Performance
Rights to vest if EPS hurdle
is met
0%
25%
Straight line vesting
between 25% and 100%
10% and higher
100%
1
(Compared to FY22, while the proposed peer group remained the same, there was a change in name from Adelaide Brighton Ltd to Adbri Limited).
18 | GWA GROUP LIMITED | 2022 ANNUAL REPORT
3.2.1
FY22 Managing Director variable remuneration
structure
3.2.3 Managing Director and member of the Executive team
remuneration mix for FY23
The FY23 incentives structure for the Managing Director
remains unchanged from FY22 and is provided in the
following table:
The components of remuneration for the Managing
Director and other executives’ for FY23 remains unchanged
from FY22 and are provided in the following table.
Maximum STI
as % of fixed
remuneration
Maximum LTI1
as % of fixed
remuneration
(grant date
fair value)
Maximum total
performance
pay as %
of fixed
remuneration
FY23 Managing Director Remuneration Mix
Performance dependent
34%
13% 3%
50%
50%
150%
200%
FY23 Executives’ Remuneration Mix2
Managing
Director
FY23
1
The Managing Director’s LTI grant for FY23 will require shareholder
approval at the Annual General Meeting in October 2022.
The FY23 STI components for the Managing Director are
provided in the following table:
Financial Targets2
as maximum
% of fixed
remuneration
Critical Non-
Financial KPIs3
as maximum
% of fixed
remuneration
Maximum STI
as % of fixed
remuneration
40%
10%
50%
Managing
Director
FY23
Note:
2 Following the achievement of the STI financial targets, 25% of the
financial component will be deferred until the Board approves the
FY24 audited financial statements to verify the integrity of achieving
the results.
3 Critical non-financial KPIs have been established for the Managing
Director at the beginning of FY23 covering key areas such as
health and safety, customer experience, employee engagement and
strategy achievement.
3.2.2 FY22 Member of Executive team variable
remuneration structure
The FY23 incentives structure for members of the
executive team remains unchanged from FY22 is provided
in the following table:
Maximum STI
as % of fixed
remuneration
Maximum LTI
as % of fixed
remuneration
(grant date
fair value)
Maximum total
performance
pay as %
of fixed
remuneration
40%
60%
100%
Other
Executives
FY23
The FY23 STI components for other executives are
provided in the following table:
Financial Targets1
as maximum
% of fixed
remuneration
Critical Non-
Financial2 KPIs
as maximum
% of fixed
remuneration
Maximum STI
as % of fixed
remuneration
30%
10%
40%
Other
Executives
FY23
Note:
1
Following the achievement of the STI financial targets, 25 per cent
of the financial component will be deferred and subject to further
testing by the Board following finalisation of the FY24 audited
financial statements.
2 Critical non-financial KPIs have been established for the other
executives at the beginning of FY23 covering key areas such as
health and safety, customer experience, employee engagement and
strategy achievement.
Performance dependent
50%
16% 4%
30%
Fixed
STI (cash)1
STI (deferred)1
LTI1
Note:
1 STA and LTI are based on 100% vesting.
2 Includes the average remuneration Executives’ excluding the
Managing Director.
3.2.4 FY23 Short-Term Incentive Plan Targets
The Board has decided to maintain the Short-Term
Incentive (STI) financial targets for FY23 under the STI plan
of Earnings Before Interest and Tax (EBIT) as the single
financial target. EBIT is an effective basis for STI financial
targets as it is currently a key metric used in the business
and aligned with the Group’s strategy.
The Board has the discretion to normalise the EBIT
measure where it is unduly distorted by significant or
abnormal events, to ensure that the measure reflects
underlying trading performance. Any adjustments to
normalise the EBIT measure, and the reasons for any
adjustments, will be disclosed.
STI payments for non-financial KPI’s will be at the Board
discretion if the financial threshold is not met. 25 per cent
of the payment applicable to achievement of the financial
target to be deferred until the Board approves the FY24
audited financial statements to verify the integrity of
achieving the results.
3.2.5 FY23 Long-Term Incentive Plan Targets
As outlined in section 6.4 Long-Term Incentive (LTI), for the
FY22 LTI plan the Board maintained a single performance
measure of relative Total Shareholder Return (TSR) due
to the ongoing uncertainty caused by the impacts of
the COVID-19 pandemic. The COVID-19 pandemic has
weighed heavily on construction markets which has
resulted in difficulty in accurately forecasting the business
performance for the next three-year period.
For the FY23 LTI plan, the Board has re-introduced a
second performance measure of Earnings Per Share
(EPS) growth (CAGR over three-year performance period).
The introduction of this second performance measure
is in addition to retaining the relative TSR measure.
GWA GROUP LIMITED | 2022 ANNUAL REPORT | 19
3.3 FY23 EXECUTIVE FIXED REMUNERATION
Executive fixed remunerations for FY23 remain unchanged
from FY22 with one exception. Considering the strategic
importance of the supply chain function and the increased
responsibility taken on by Ms Caroline Sunaryo, her
salary has been adjusted by 20 per cent.
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 executives on
strategic and operational 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)
• Total shareholder return (TSR)
• Earnings per Share (EPS) growth (introduced for FY23)
The Board has the discretion to normalise the EBIT
and EPS measures where they are unduly distorted by
significant or abnormal events, 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 EPS measures,
and the reasons for any adjustments, will be disclosed.
In FY22, the EBIT measure under the STI plan was
normalised to exclude $15.2 million in significant items
(pre-tax) relating to costs associated with the Group’s
Enterprise Resource Planning/Customer Relationship
Management project and the exit from the Asia
sales operation.
For the FY20 LTI grant (performance period for the
three years to 30 June 2022) to be tested in August
2022, the impact of the adoption of the May 2020 IFRS
Interpretations Committee decision (refer Note 1c to
the 30 June 2020 financial statements) will be excluded
from ROFE i.e. the resulting deferred tax liability (DTL)
will be added back to net assets. This ensures there is no
unintended benefit for the executives with the testing of
the ROFE hurdle.
Remuneration for all executives varies with performance
on the key EBIT, EPS and TSR measures together with
achievement of their measurable personal KPI objectives,
which underpin delivery of the financial outcomes, and are
linked to the Group’s performance review process.
GWA’s Total Shareholder Return (TSR) has underperformed
the ASX 300 Accumulation Index over the last two years.
This led to the FY19 LTI grant TSR hurdle not being achieved
in August 2021, and those performance rights lapsed.
The following is a summary of key statistics for the Group
over the last five years:
Financial Year
2017/182
2018/192,3
2019/203,4
2020/213,4
2021/223,4
Notes:
1 Excludes significant items.
EBIT1
($m)
76.2
78.1
71.8
68.5
74.8
EPS1
(cents)
Total DPS
(cents)3
Share Price
(30 June)
($)
Market Capitalisation
(30 June)
($m)
19.0
19.3
17.0
16.0
17.8
18.0
18.5
11.5
12.5
15.0
3.40
3.42
2.77
2.77
1.97
897.4
902.7
731.1
734.6
522.5
2 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.
3 FY19 to FY22 includes the results of Methven Limited from the date of acquisition (10 April 2019).
4 FY20 to FY22 performance was negatively impacted by COVID-19 resulting in business interruption from lockdown restrictions in various
geographies and challenging market conditions.
20 | GWA GROUP LIMITED | 2022 ANNUAL REPORT
Total dividend per share (cents)
FY22
FY21
FY20
FY19
FY18
0
5
10
15
20
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.
Group Revenue for FY22 increased on the prior year
reflecting sustained residential renovation activities and
refurbishment led commercial growth in Australia and sales
momentum in the UK business, partly offset by lower sales
performance in New Zealand and China due to ongoing
COVID-19 restrictions. The Group’s Normalised2 EBIT
improved by 9.3 per cent year on year due to improved
revenue and focused approach on operations, particularly
supply chain, and cost discipline during FY22. During FY22
the Group introduced a new ERP/CRM system in Australia
and New Zealand to mitigate old and legacy systems. The
company continued to progress on core priority areas of
the Group Strategy.
The Group is in a strong financial position. While the R&R
segment in Residential/Commercial is expected to decline
from historical highs, it is expected to remain above the
long-term average. We expect continued momentum in
residential detached completions and Commercial new
builds showing early signs of recovery. The earnings
performance for FY22 enabled the Board to pay an
increased full year fully franked dividend of 15 cents per
share for FY22 representing a dividend pay-out ratio of
reported profit of 113 per cent and normalised profit of 84
per cent which is in line with the Company’s dividend policy.
The Group has continued its progress in FY22 against its
strategic objectives to enhance the operating performance
of the business 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 FY22; 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 FY22 which included the ongoing
impacts of COVID-19 and continuing supply chain issues.
It has encouraged management to respond quickly and
make medium 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.
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 People and Culture 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 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.
2 Normalised is before $15.2 million in significant items (pre-tax) relating to costs associated with the Enterprise Resource Planning/Customer
Relationship Management system project and China sales operations closure.
GWA GROUP LIMITED | 2022 ANNUAL REPORT | 21
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 one-year
period, and a long-term incentive (LTI) plan which
provides rewards for performance over a three-year period.
No retention bonus is payable in respect of the whole
amount if the participant resigns or their employment
is terminated before 31 March 2022 or in respect of
the second amount if the participant resigns or their
employment is terminated before 30 September 2022.
The amounts accrued (expense) are included in the
Statutory Remuneration Table in section 7.1, and amounts
paid are included in Actual Remuneration Table in
section 7.1.1. The retention bonus scheme has not been
incorporated into the tables in 3.2.2 and 3.2.3 or in 6.1.2 and
6.1.4 as it is considered to be neither fixed nor performance
related remuneration.
Objective
Attract and retain
best talent
Reward current year
performance
Reward long-term
performance
Fixed
Variable (at risk)
Remuneration
Components
Delivery
FY22 Approach
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 three 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: EBIT measure
• Financial targets (30-40%)
EBIT
• Personal targets (10%):
measureable personal
KPIs.
LTI performance measures:
• Three year performance
period
• Relative TSR Performance
Hurdle
The Board is of the view that EBIT is an effective basis for
STI financial targets as it is currently a key metric used
in the business and aligned with the Group’s strategy.
Due to the market uncertainty from the COVID-19
pandemic, the Board conducted a review with an external
remuneration advisor regarding the appropriate measures
for the FY21 LTI grant to executives. Based on this review,
a decision was made that the performance measure for
the FY21 LTI grant would be solely based on relative TSR.
This was a change from the FY20 LTI grant where the
LTI performance measures were 50 per cent TSR and
50 per cent ROFE.
The Board continued with a single performance measure of
relative TSR for the FY22 LTI grant. Please refer to section
3.2 FY23 Executive Remuneration Changes for details on
the FY23 LTI grant.
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.
6.1.1 GWA’s Executive Remuneration Structure for FY22
In addition to the above structure, in FY21 the Board put
in place a retention scheme for certain senior executives
and key management to provide stability following the
departure of the former CEO. The retention scheme
provides for the payment of a retention bonus representing
25 per cent of fixed remuneration with 50 per cent of
that amount to be paid on or about 31 March 2022 and
the balance on or about 30 September 2022 subject to
satisfactory performance as determined by the Board.
22 | GWA GROUP LIMITED | 2022 ANNUAL REPORT
6.1.2 Managing Director and other executives’
6.1.4 FY22 Other Executives’ variable remuneration
remuneration mix for FY22
structure
The components of remuneration for the Managing
Director and other executives’ for FY22 are provided in the
following table. Please note that the variable remuneration
mix for the Managing Director and other executives’ was
changed for FY22 with a greater weighting to long-term
incentives coupled with a lesser weighting on short-term
financial and critical non-financial KPIs.
FY22 Managing Director Remuneration Mix
Performance dependent
34%
13% 3%
50%
FY22 Other Executives’ Remuneration Mix2
Performance dependent
50%
16% 4%
30%
Fixed
STI (cash)1
STI (deferred)1
LTI1
Note:
1 STA and LTI are based on 100 per cent vesting.
2 Includes the average remuneration Executives’ excluding the
Managing Director.
6.1.3 FY22 Managing Director variable remuneration
structure
The FY22 incentives structure for the Managing Director is
provided in the following table:
Maximum STI
as % of fixed
remuneration
Maximum LTI
as % of fixed
remuneration
(grant date
fair value)
Maximum total
performance
pay as %
of fixed
remuneration
50%
150%
200%
Managing
Director
FY22
The FY22 STI components for the former 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
40%
10%
50%
Managing
Director
FY22
The FY22 incentives structure for other executives is
provided in the following table:
Maximum STI
as % of fixed
remuneration
Maximum LTI
as % of fixed
remuneration
(grant date
fair value)
Maximum total
performance
pay as %
of fixed
remuneration
40%
60%
100%
Other
Executives
FY22
The FY22 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%
10%
40%
Other
Executives
FY22
6.2 FIXED REMUNERATION
Fixed remuneration is the sum of base salary, non-monetary
benefits and superannuation.
The level of fixed remuneration is set:
•
•
•
to retain proven performers with the relevant and
required executive 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 required focus on
long-term growth.
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.
GWA GROUP LIMITED | 2022 ANNUAL REPORT | 23
6.3 SHORT-TERM INCENTIVE (STI)
6.3.2 STI performance requirements
6.3.1 STI overview
6.3.2.1 Financial Performance Targets
The STI plan provides for an annual payment that varies
with performance measured over the Group’s financial year
to 30 June 2022. The STI is aligned to shareholder interests
as executives will only become entitled to the majority
of payments if profitability improves year on year, 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. If the gateway has not been achieved,
then the executives are not eligible for an STI payment
related to financials. The Board has absolute discretion
in exercising any power or discretion concerning the STI
and any payments accordingly made as they relate to
the Executive.
The STI payment is made in cash after finalisation of the
annual audited financial statements. 25 per cent of the
financial 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.
For FY22, STI financial performance target is based on
Earnings Before Interest and Tax (EBIT) as determined by
the Board. The use of EBIT as the sole basis of STI financial
targets is aimed at ensuring executives are accountable for
delivering profit improvements. The Board is of the view
that EBIT is an effective basis for STI financial targets as it
is currently a key metric used in the business and aligned
with the Group’s strategy.
The ‘gateway’ and ‘maximum’ STI financial targets are
determined by the Board at the beginning of the financial
year following approval of the budget by the Board.
The budget performance levels are taken into consideration
in setting the financial targets but different targets may
be set (either higher or lower than budget) that ensure
management is motivated while reflecting the degree of
difficulty in achieving the budget. Performance between
the ‘gateway’ and ‘maximum’ levels is rewarded on a
straight-line basis.
The Board retains the right to vary from policy.
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 FY22.
6.3.2.1.1 FY22 STI Financial Performance Outcomes
Due to the disciplined response to everchanging market
conditions throughout FY22 and successful execution
of key business activities, the executives exceeded the
gateway hurdles and were eligible for STI payments
(both financial and personal goals).
24 | GWA GROUP LIMITED | 2022 ANNUAL REPORT
The following table provides an overview of the STI metrics
for FY22 and outcomes:
Financial Metric
Gateway
FY21 STI Outcomes
EBIT
Achieved
Financial target partially
achieved at 97%
The STI performance outcomes for FY22 were aligned
with shareholders’ interests as profit performance was
maximised and improved over FY21 in a challenging market
enabling higher dividend payments to shareholders, with
a stronger platform for future growth and shareholder
wealth creation.
This outcome is reflected in the Remuneration Tables in
section 7.1.
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 10 per cent for the
Managing Director and 10 per cent 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 People & Culture 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 improving 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
Board. The personal goals for executives for the following
year are established at the performance reviews and
reviewed and approved by the Board.
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 Board. An assessment of key performance goals
subject to STI incentive payments for FY22 is provided in
section 6.3.2.2.1.
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 | 2022 ANNUAL REPORT | 25
6.3.2.2.1 Key performance goals and outcomes
An assessment of key performance goals and financial targets subject to STI incentive payments for FY22 is provided in the
following table:
FY22 Goals
Performance
Personal Objectives
Achieve leading workplace
health and safety (WHS)
performance with the aim of an
injury free workplace.
Measures:
• Safety culture and initiatives
• Leading safety measures
(safety interactions, hazards
reported, site inspections,
actions closed)
• Lagging safety measures
(MTIFR, LTIFR, TIFR)
• COVID-19 response
Ownership and accountability for safety exists at all levels in the business
with ‘Caring For Each Other’ central to the Group’s cultural pillars. During
FY22 the Group continued its progress on implementing the safety
strategy. This strategy focuses on leadership and behavioural aspects
of safety together with identifying and mitigating physical risks in our
operations. The TIFR decreased from 4.3 in FY21 to 1.9 in FY22. The Group
has continued to support the health, safety and psychological wellbeing of
staff during the COVID-19 pandemic through its well-established programs
and practices around flexible work, EAP support, Mental Health First Aid
and other support and referral programs. The Group continued to maintain
effective COVID-19 Safe Plans across all sites with strict adherence to
safety protocols and standards. Warehouse staff continued to work on site
as essential workers with COVID-19 safety protocols in place.
Establishing a revised business
strategy with clear ownership
across the Executive team.
The objective includes setting
key milestones and delivering
against a Board approved plans.
A five year strategy has been developed for the Group in order to
accelerate growth and improve shareholder returns. The plans outline
growth initiatives including ‘Win the Plumber’, ‘Innovate through design and
partnership’, ‘Aftermarket’ and ‘Strategic Growth Opportunities’. The above
growth pillars are underpinned by four foundations, customer experience,
digital, aligned organisation and ESG.
Build employee engagement
and culture and embed purpose
and values to deliver the
strategy.
Measures:
• Leadership and development
• Mental health and
well being
The Group surveyed the broader GWA team and introduced a number
of engagement related actions to respond to feedback. The Group also
surveyed team members throughout the year to understand sentiment
in relation to impact of the pandemic and implemented a number of
new initiatives including Mental Health First Aid Officers, Lunch & Learn
sessions on Referral, Advocacy and Resilience and promoted the EAP and
Well-Being resources available. All the above initiatives are underpinned
and consistent with our cultural pillar ‘we care for each other’. The Group
continues to invest in the development of its people through leadership
development and training programs which provide the knowledge, skills
and support to enable staff to perform at their best in their current role and
build competence and confidence for progression. The Group developed
and deployed a Leading Hybrid Teams program to support leaders in the
shift to remote leadership.
Assessment
On target
On target
On target
Implement a new ERP/CRM
system to replace outdated and
legacy systems across ANZ
The Group implemented a new ERP/CRM solution for the Australian/
New Zealand business in the context of ongoing COVID-19 restrictions.
The solution is based on Microsoft Dynamics 365.
On target
Financial targets
STI financial performance
targets.
Measures:
• EBIT financial gateway
Due to the disciplined response to everchanging market conditions
throughout FY22 and successful execution of key business activities, the
Managing Director and other executives exceeded the gateway hurdles and
were eligible for STI payments (both financial and personal goals) for FY22’
(refer section 6.3.2.1.1). Profit performance was maximised in a challenging
market enabling higher dividend payments to shareholders, with a stronger
platform for future growth and shareholder wealth creation. This outcome
is reflected in the Remuneration Tables in section 7.1.
Above
target
On target
Above target
Below target
26 | GWA GROUP LIMITED | 2022 ANNUAL REPORT
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
Board. For the FY22 LTI grant, the basis of the grants of
Performance Rights to executives is 100 per cent of the
Performance Rights are subject to a single performance
measure being Total Shareholder Return (TSR) which is a
relative performance requirement. TSR is a key measure on
which the Group’s strategic plan is focused and ensures LTI
rewards are contingent on this measure is consistent with
the Board’s approved strategy.
As outlined in Section 3.2.5 for the FY23 LTI plan, the
Board has re-introduced a second performance measure
of Earnings Per Share (EPS) growth (CAGR over three-year
performance period).
The introduction of this second performance measure is in
addition to retaining the relative TSR measure.
For the FY22 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 FY22.
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 at 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 FY22 LTI grant, the proportion of Performance
Rights that can vest will be calculated when the shares
vest in August 2024 subject to achieving the performance
hurdle. If the performance hurdle is not met the
Performance Rights will be cancelled.
The ‘clawback’ provisions under the LTI plan 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 per cent of the
total number of shares on issue by the Group. The total
number of outstanding Performance Rights granted
to executives as at 30 June 2022 was 1,934,463 which
represents 0.7 per cent of the Group’s total issued shares.
GWA GROUP LIMITED | 2022 ANNUAL REPORT | 27
6.4.2 LTI performance requirements
6.4.2.2 ROFE hurdle
For the FY20 LTI grant, 50% of the performance rights
were subject to a ROFE hurdle (50% subject to TSR as per
6.4.2.1). The performance hurdles and vesting proportions
for the ROFE performance measure that applies to the
FY20 LTI grant is outlined in the following table:
GWA Group Limited
ROFE over three year performance
period
Proportion of Performance
Rights to Vest
if ROFE hurdle is met
ROFE less than 16% per annum
ROFE equal to 16% per annum
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)
The ROFE performance hurdle is calculated by reference
to the Group’s audited accounts. 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.
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
2022 are provided in the following Remuneration Tables.
For the FY21 and FY22 LTI grant, the single performance
measure provides for vesting scales graduated with
performance and demanding performance requirements.
6.4.2.1 TSR hurdle
The TSR hurdle and the proportion of performance rights
to vest if the TSR hurdle is met are summarised below:
TSR of GWA Group Limited
relative to TSRs of Comparator
Companies
Proportion of
Performance Rights to Vest
if TSR hurdle is met
Less than the 50th percentile
50% percentile
Between 50% and
75% percentile
0%
25%
Straight line vesting between
25% and 100%
75th percentile or higher
100%
The group of comparator companies for the TSR hurdle
includes a bespoke group of twenty 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 proposed peer group (20 in total) for the FY23 LTI
grant is as follows (unchanged since FY22):
James Hardie Industries PLC, Fletcher Building Ltd, Boral
Ltd, Adbri Limited1, Brickworks Ltd, Super Retail Group Ltd,
CSR Ltd, ARB Corp Ltd, Bapcor Ltd, Breville Group Ltd,
GUD Holdings Ltd, Cedar Woods Properties Ltd, Decmil
Group Ltd, Simonds Group Ltd, Hills Ltd, Fleetwood Ltd,
Accent Group Ltd, Pact Group Holdings Ltd, Reece Ltd,
Wagner Holding Company 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.
1 (Compared to FY22, while the proposed peer group remained the same, there was a change in name from Adelaide Brighton Ltd to Adbri Limited).
28 | GWA GROUP LIMITED | 2022 ANNUAL REPORT
Short-term
Long-term
Post-
employment
s
e
e
F
&
y
r
a
a
S
l
y
r
a
t
e
n
o
M
-
n
o
N
s
u
n
o
B
h
s
a
C
I
T
S
–
s
u
n
o
B
h
s
a
C
I
T
S
d
e
r
r
e
f
e
D
$(a)
$(c)
$(b)(h)
$(b)
-
e
r
a
h
S
f
o
e
u
a
V
l
s
d
r
a
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A
d
e
s
a
B
$(d)
i
e
c
v
r
e
S
g
n
o
L
e
v
a
e
L
$(k)
2022
280,000
2021
258,306
2022
117,000
2021
117,650
2022
108,000
2021
108,600
2022
108,000
2021
108,600
2022
117,000
2021
117,650
2022
108,000
2021
108,600
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
-
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
n
o
i
t
a
u
n
n
a
r
e
p
u
S
s
t
fi
e
n
e
B
$
–
21,694
13,000
12,350
12,000
11,400
12,000
11,400
13,000
12,350
12,000
11,400
–
–
–
–
–
–
–
–
–
–
–
–
2022
375,952
5,595
144,139
27,311
34,987
15,934
22,938
2021
393,684
5,051
169,868
61,431
108,841
6,325
21,694
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
%(i)
% %
n
o
i
t
a
n
m
r
e
T
i
s
t
fi
e
n
e
B
$
l
a
t
o
T
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
280,000
280,000
130,000
130,000
120,000
120,000
120,000
120,000
130,000
130,000
120,000
120,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
626,856
29 98
766,894
41
100
2022
1,213,952 5,595
144,139
27,311
34,987
15,934 84,938
– 1,526,856
2021
1,213,090 5,051
169,868
61,431
108,841
6,325 102,288
– 1,666,894
2022
1,018,653
2,238
391,000 97,000 241,877
2021
342,333
434
150,000
–
–
–
–
27,500
16,499
–
–
1,778,268
41 98
509,266
29 100
2022 2,232,605
7,833
535,139
124,311 276,864
15,934 112,438
– 3,305,124
2021
1,555,423 5,485
319,868
61,431
108,841
6,325 118,787
– 2,176,160
–
–
–
–
–
–
–
–
–
–
–
–
2
–
2
–
Non-Executive
Directors(f)
D McDonough,
Chairman
J Mulcahy,
Deputy Chairman
A Barrass,
Non-Executive
Director
P Birtles,
Non-Executive
Director
(retired 30 June 2022)
S Goddard,
Non-Executive
Director
J McKellar,
Non-Executive
Director
R Thornton,
Non-Executive
Director(j)
Total –
Non-Executive
Directors
Remuneration
Executive
Directors
U Meyerhans,
Managing
Director and
Chief Executive
Officer(e)
(appointed 1 March
2021)
Total —
Directors
Remuneration(l)
GWA GROUP LIMITED | 2022 ANNUAL REPORT | 29
Short-term
Long-term
s
e
e
F
&
y
r
a
a
S
l
y
r
a
t
e
n
o
M
-
n
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s
u
n
o
B
h
s
a
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I
T
S
–
s
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n
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B
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s
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I
T
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$(a)
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-
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Post-
employment
n
o
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u
S
s
t
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$
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T
i
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n
e
B
$
l
a
t
o
T
$
d
e
s
a
b
e
c
n
a
m
r
o
f
r
e
p
f
o
n
o
i
t
r
o
p
o
r
P
n
o
i
t
a
r
e
n
u
m
e
r
s
u
n
o
B
h
s
a
C
I
T
S
r
a
e
y
n
i
d
e
t
s
e
v
s
u
n
o
B
h
s
a
C
I
T
S
r
a
e
y
n
i
d
e
t
i
e
f
r
o
f
%(i)
% %
Executives(g)
P Gibson,
Group Chief
Financial Officer
(resigned
28 January 2022)
M Hayes,
Group General
Manager –
Marketing
(KMP from
1 July 2021)
E Lagis, Company
Secretary and
General Counsel
(appointed 6 June
2022)
A Larson, Chief
Information
Officer
(KMP from
1 July 2021)
C Norwell, Group
General Manager
– Sales (AU,
UK and Asia)
(KMP from
1 July 2021)
P Oliver, Group
General Manager
– People &
Performance
(KMP from 1 July
2021)
C Scott, Group
Chief Financial
Officer
(appointed
10 January 2022)
C Sunaryo, Group
General Manager
– Supply &
Innovation
(KMP from
1 August 2021)
Total —
Executives
Remuneration(l)
Total — Directors
and Executives
Remuneration(l)
2022
406,086
7,685
(48,583)
– (327,292)
(77,257)
16,042
–
(23,319)
–
–
2021
733,654
8,918
311,083
112,500
199,653
12,498 25,000
– 1,403,306
41
100
2022
369,344
1,335
127,300
29,100
38,701
2021
–
–
2022
29,288
2021
–
217
–
–
–
–
–
–
–
–
–
–
–
–
–
–
27,500
–
593,280
33 98
–
–
–
–
–
1,964
–
–
–
31,469
–
–
–
–
–
2022
393,461
2,797
193,494
29,100
65,747
2021
–
–
–
–
–
– 25,000
–
–
2022
437,500
1,263
224,937
33,829
54,650
7,751
27,500
2021
–
–
–
–
–
2022
378,032
1,877
124,117
28,373
37,733
2021
–
–
–
–
–
2022
248,595
776
77,984
17,827
25,155
2021
–
–
–
–
–
–
–
–
–
–
–
23,568
–
14,810
–
2022
231,317 2,490
148,621
25,463
53,020
(38,688) 31,078
2021
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
709,599
31 98
–
–
–
787,430
30 98
–
–
–
593,700
32 98
–
–
–
385,147
31 98
–
–
–
453,301
42 98
–
–
–
–
–
2
–
–
–
2
–
2
–
2
–
2
–
2
–
2022 2,493,623 18,440
847,870 163,692
(52,286)
(108,193) 167,462
– 3,530,608
2021
733,654
8,918
311,083
112,500 199,653
12,498 25,000
– 1,403,306
2022 4,726,228 26,273 1,383,009 288,003 224,578 (92,259) 279,900
– 6,835,732
2021 2,289,077 14,403
630,951
173,931 308,494
18,823 143,787
– 3,579,467
30 | GWA GROUP LIMITED | 2022 ANNUAL REPORT
Notes to the Remuneration Tables:
(a) Salary and fees represent base salary and includes the movement in annual leave provision.
(b) Due to the disciplined response to everchanging market conditions throughout FY22 and successful execution of key business activities,
the Managing Director and other executives met the gateway hurdles and were eligible for STI payments (both financial and personal goals).
Refer to section 6.3.1 for details on the deferred STI component.
(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 as
at 30 June 2022 were granted to executives in FY20, FY21 and FY22 (as applicable) and are subject to vesting conditions and the achievement
of specified performance hurdles over the three year performance periods. The fair values of the Performance Rights granted in FY20, FY21 and
FY22 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. During FY22, 0 per cent of the Performance Rights
granted to executives in respect of the FY19 LTI grant vested, and the reversal is included in the table above where applicable.
(e) As advised to the market on 1 March 2021, the Acting Chief Executive Officer’s, Mr Urs Meyerhans’, remuneration arrangements comprise
fixed remuneration of $1 million per annum and a bonus at the complete discretion of the Board based on Mr Meyerhans’ performance. At the
conclusion of FY21 the Board determined a bonus of $150,000 for Mr Meyerhans which was paid in July 2021. For details of Mr Urs Meyerhans’
FY22 remuneration arrangements as Managing Director, please refer to section 8.1. The Managing Director’s total remuneration for FY22 was
aligned with the market median in relation to a group of 18 peer companies of comparable operational scope and size to GWA based on the
market benchmark data provided by an independent expert adviser, Guerdon Associates.
(f) Non-Executive Director remuneration has remained frozen since FY16 (excluding the pay reduction of 20 per cent 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) The fixed remuneration for most executives in FY22 was frozen with one exception to reflect additional responsibilities in the role undertaken.
For the actual remuneration received by the executives for FY22, please refer to the table in section 7.1.1.
(h) Short term bonus is inclusive of the accounting accrual for the retention bonus scheme as disclosed in Section 6.1. for Mr Richard Thornton,
Mr Patrick Gibson (reversal of FY21 accrual), Mr Alex Larson, Mr Craig Norwell and Ms Caroline Sunaryo.
(i) Performance based remuneration does not include the retention bonus scheme.
(j) Mr Richard Thornton’s was Executive Director and Company Secretary to 3 June 2022, and Non-Executive Director from 3 June 2022.
All performance based remuneration relates to the period to 3 June 2022. Refer to Note 1 to Table 1 of Section 2 for details.
(k) Long service leave remuneration is based on the movement in long service leave provision.
(l) Total Directors remuneration reported has increased largely due to the transition of the Managing Director and CEO from 1 March 2021,
with the outgoing director not required to be disclosed in the FY22 Remuneration Report. Total Executive Remuneration reported has increased
largely due to determination of additional KMP from 1 July 2021, with their comparative remuneration not required to be disclosed in the FY22
Remuneration Report.
GWA GROUP LIMITED | 2022 ANNUAL REPORT | 31
GWA GROUP LIMITED | 2022 ANNUAL REPORT | 31
GWA GROUP LIMITED | 2022 ANNUAL REPORT | 31
7.1.1 Actual remuneration received by executives for FY22
The following table sets out the actual value of
remuneration received by executives for FY22, derived
from the various components of their remuneration
during FY22.
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
and the reversal of accounting expenses associated with
LTI grants, accruals for the retention bonus scheme, and
movements in leave entitlements, and is therefore unaudited.
Fixed
Remuneration
$1
Short Term
Incentive
$2
Long Term
Incentive (Earned)
$3
M Hayes, Group General Manager – Marketing
393,002
156,400
FY22
R Thornton, Non-Executive Director4
U Meyerhans, Managing Director and
Chief Executive Officer5
P Gibson, Group Chief Financial Officer
(resigned 28 January 2022)
E Lagis, Company Secretary and General Counsel
(appointed 6 June 2022)
A Larson, Chief Information Officer
C Norwell, Group General Manager – Sales
(AU, UK and Asia)
P Oliver, Group General Manager –
People & Performance
C Scott, Group Chief Financial Officer
(appointed 10 January 2022)
C Sunaryo, Group General Manager –
Supply & Innovation (KMP from 1 August 2021)
Total
Notes:
394,347
197,978
1,002,238
488,000
442,300
–
29,447
–
402,797
466,263
206,400
239,940
384,377
152,490
249,442
95,811
323,323
164,975
Total
$
592,325
1,490,238
442,300
549,402
29,447
609,197
706,203
536,867
345,253
488,298
–
–
–
–
–
–
–
–
–
–
4,087,536
1,701,995
–
5,789,531
1
Fixed remuneration represents amounts actually paid to executives during FY22 and includes base salary, non-monetary benefits and
superannuation.
2 Due to the disciplined response to everchanging market conditions throughout FY22 and successful execution of key business activities,
the Managing Director and other executives met the gateway hurdles and were eligible for STI payments (both financial and personal goals).
Short term bonus is inclusive of the retention bonus scheme paid during FY22 as disclosed in section 6.1.1 for Mr Richard Thornton, Mr Alex Larson,
Mr Craig Norwell and Ms Caroline Sunaryo.
3 The performance hurdles for the FY19 LTI grant were tested during FY22 and 0% vested; refer section 7.2.1 Performance Rights. Excludes the value
of any unvested LTI grants expensed or reversed during FY22.
4 Mr Richard Thornton was Executive Director and Company Secretary to 3 June 2022, and Non-Executive Director from 3 June 2022.
All performance based remuneration relates to the period to 3 June 2022. Refer to Note 1 to Table 1 of Section 2 for details.
5 For details of Mr Urs Meyerhans’ remuneration arrangements as Managing Director from 1 July 2021 refer to section 8.1.
32 | GWA GROUP LIMITED | 2022 ANNUAL REPORT
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 2022 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
$1
Issue price used
to determine
number of
rights granted
Grant date*
Executive Directors
U Meyerhans,
Managing Director
R Thornton,
Non-Executive Director
(Executive Director to 3 June 2022)
2022
541,516
6 December 2021
2022
88,709
6 December 2021
2021
43,723
7 December 2020
2020
40,500
14 February 2020
2019
45,000
18 February 2019
Executives
P Gibson,
Group Chief Financial Officer
(resigned 28 January 2022)
2022
2021
–
–
80,071
7 December 2020
2020
74,000
14 February 2020
2019
83,000
18 February 2019
2022
86,643
6 December 2021
2022
–
–
2022
86,643
6 December 2021
2021
42,705
7 December 2020
2022
100,722
6 December 2021
2021
49,644
7 December 2020
2020
46,000
14 February 2020
2019
48,000
18 February 2019
2022
84,477
6 December 2021
2022
112,635
29 June 2022
M Hayes, Group General
Manager – Marketing
E Lagis,
Company Secretary and
General Counsel
(appointed 6 June 2022)
A Larson,
Chief Information Officer
C Norwell,
Group General Manager – Sales
(AU, UK and Asia)
P Oliver, Group General
Manager – People &
Performance
C Scott, Group Chief
Financial Officer
(appointed 10 January 2022)
C Sunaryo, Group General
Manager – Supply & Innovation
2022
2021
2020
75,812
6 December 2021
12,011
7 December 2020
11,000
14 February 2020
Note:
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
725,631
69%
36%
3%
100%
–
100%
100%
100%
–
–
–
–
–
–
–
118,870
83,074
127,575
115,875
–
152,135
233,100
213,725
116,102
–
116,102
81,140
134,967
94,324
144,900
100%
123,600
113,199
–
–
–
–
–
150,931
2.77
101,588
22,821
34,650
2.77
2.81
3.04
2.77
2.77
2.81
3.04
2.73
–
2.81
3.04
2.73
2.77
–
2.77
2.81
2.77
2.81
3.04
2.73
2.77
1
The issue price used to determine the number of Performance Rights offered to key management personnel during FY22 was $2.77 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 29 October
2021. 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 TSR hurdle was $1.34 per right.
GWA GROUP LIMITED | 2022 ANNUAL REPORT | 33
All the rights carry an exercise price of nil. The rights
granted on 17 February 2020, 7 December 2020 and
6 December 2021 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 2022,
2023 and 2024 respectively, subject to the achievement
of the performance hurdles.
The rights granted to Mr Thornton and Mr Meyerhans were
approved by shareholders at the 2019, 2020 and 2021
Annual General Meetings (as applicable) 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 as at 30 June 2022
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
18 February 2019
Valuation
Per Right1
Tranche A
(TSR) $2.23
Tranche B
(ROFE) $2.92
14 February 2020
Tranche A
(TSR) $2.71
Tranche B
(ROFE) $3.54
7 December 20203 Tranche A
(TSR) $1.90
6 December 20213
Tranche A
(TSR) $1.34
Notes:
Performance
Testing Windows
Expiry Date
(if hurdle not met)
Performance Status2
26 October 2018
to 16 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)
30 October 2020
to August 2023
(Tranche A)
29 October 2021
to August 2024
(Tranche A)
16 August 2021
Tranche A (TSR): Performance condition
was below the 50th percentile resulting
in 0% vesting of the grant.
Tranche B (ROFE): Performance
condition was below the 16% hurdle,
resulting in 0% vesting of the grant.
August 2022
Performance testing not yet commenced.
August 2023
Performance testing not yet commenced.
August 2024
Performance testing not yet commenced.
1 The value of performance rights at grant date calculated in accordance with AASB 2 Share-based Payments. Valuations were performed by a third
party, Deloitte.
2 To ensure an independent TSR measurement, GWA engages the services of an 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.
3 Due to the uncertainty in the market from the COVID-19 pandemic, the Board decided that the performance measure for the FY21 and FY22 LTI
grant would be solely based on TSR. Refer section 6.4 Long-Term Incentive for further details.
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 2022 (2021: 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.
7.3.2 Other key management personnel transactions with
7.3.3 Movements in shares
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 2022 (2021: nil).
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:
34 | GWA GROUP LIMITED | 2022 ANNUAL REPORT
Held at
1 July 2021
Granted as
compensation
Purchases
Sales
30 June 2022
Held at
Non-Executive Directors
D McDonough
J Mulcahy
A Barrass
P Birtles (retired 30 June 2022)
S Goddard
J McKellar
R Thornton
Executive Directors
U Meyerhans
Executives
155,234
40,950
–
38,650
10,000
10,977
272,311
–
P Gibson (resigned 28 January 2022)
297,221
M Hayes
E Lagis (appointed 6 June 2022)
A Larson
C Norwell
P Oliver
C Scott (appointed 10 January 2022)
C Sunaryo
–
n/a
–
150,663
–
n/a
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
14,766
–
–
–
–
2,057
27,250
65,217
–
–
–
–
–
–
1,866
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
170,000
40,950
–
38,650
10,000
13,034
299,561
65,217
n/a
–
–
–
150,663
–
1,866
–
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 2021 is listed in the Directors’
Report under Directors’ Interests.
During FY22, nil shares vested to key management personnel as compensation (2021: 372,529). The aggregate number of
shares held by key management personnel or their related parties as at 30 June 2022 was 789,941 (2021: 869,006).
7.3.4 Movements in performance rights
The movement during the reporting period in the number of performance rights in GWA Group Limited held by each key
management person is as follows:
Directors
R Thornton1
Executive Directors
U Meyerhans
Executives
P Gibson (resigned 28 January 2022)
M Hayes
E Lagis (appointed 6 June 2022)
A Larson
C Norwell
P Oliver
C Scott (appointed 10 January 2022)
C Sunaryo
Held at
1 July 2021
Granted
during
the year
Vested
during
the year
Forfeited
during
the year
Held at
30 June 2022
129,223
88,709
–
541,516
237,071
–
n/a
42,705
143,644
–
n/a
23,011
–
86,643
–
86,643
100,722
84,477
112,635
75,812
–
–
–
–
–
–
–
–
–
(123,517)
94,415
–
541,516
(237,071)
–
–
–
(48,000)
–
–
–
n/a
86,643
–
129,348
196,366
84,477
112,635
98,823
1 All performance rights held by Mr Richard Thornton relate to his role up to 3 June 2022 as Executive Director and Company Secretary.
GWA GROUP LIMITED | 2022 ANNUAL REPORT | 35
8.
KEY TERMS OF EMPLOYMENT
CONTRACTS
8.1 MANAGING DIRECTOR REMUNERATION
The remuneration arrangements for Mr Urs Meyerhans
as Managing Director and Chief Executive Officer were
advised to the market on 29 June 20211. The arrangements
were determined by the Board following the provision
of market data from an independent external adviser,
Guerdon Associates. Based on the benchmark data, Mr
Meyerhans’ total remuneration was aligned with the market
median in relation to a group of 18 peer companies of
comparable operational scope and size to GWA. For details
of Mr Meyerhans’ remuneration arrangements as Acting
Chief Executive Officer during FY21, refer note (e) to the
Remuneration Tables in section 7.1.
The following is a summary of Mr Meyerhans’ remuneration
package for FY22:
• Total Fixed Remuneration (TFR) of $1,000,000
comprising salary, superannuation and all other benefits
other than incentive plans and minor fringe benefits;
• Participation in GWA’s Short-Term Incentive (STI) plan:
– STI opportunity of 50 per cent of TFR based
on Mr Meyerhans meeting Board approved Key
Performance Indicator (KPI) objectives, including
both financial and critical non-financial KPIs.
• Participation in GWA’s Long-Term Incentive (LTI) plan:
– LTI opportunity of 150 per cent of TFR over a three
year performance period and subject to achievement
of a single performance hurdle of relative Total
Shareholder Return (TSR).
8.2 NOTICE AND TERMINATION PAYMENTS
The specified executives in the Directors’ Report including
the Managing Director, Mr Urs Meyerhans, are on open-
ended contracts.
The employment contract for Mr Meyerhans provides that
if either the Group or Mr Meyerhans 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 Meyerhans 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 six 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 six 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 Board.
Shareholder approval is required for termination payments
in excess of twelve months salary.
1 Due to the continuing market uncertainty from the COVID-19 pandemic, the Board decided on a single performance measure of relative TSR for the
FY22 LTI grant to the Managing Director. Please refer to section 3.2 FY23 Executive Remuneration Changes for further details.
36 | GWA GROUP LIMITED | 2022 ANNUAL REPORT
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)
Change of control
STI will be paid on a pro-rata basis
Board discretion to allow awards to vest
or remain subject to performance hurdles
after termination 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
15 August 2022
Urs B Meyerhans
Managing Director
GWA GROUP LIMITED | 2022 ANNUAL REPORT | 37
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 2022 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
Trent Duvall
Partner
Sydney, 15 August 2022
KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International
Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the
independent member firms of the KPMG global organisation. Liability limited by a scheme approved under Professional Standards Legislation.
38 | GWA GROUP LIMITED | 2022 ANNUAL REPORT
GWA GROUP LIMITED FINANCIAL REPORT
FINANCIAL REPORT
GWA GROUP LIMITED AND ITS CONTROLLED ENTITIES
ABN 15 055 964 380
Notes to the Consolidated Financial Statements
CONTENTS
NOTES
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
40
41
42
43
44
1. Significant accounting policies
2. Operating segments
3.
Income and expenses
4. Income tax expenses
5. Earnings per share
6. Cash and cash equivalents
7. Trade and other receivables
8.
Inventories
9. Deferred tax assets and liabilities
10. Property, plant and equipment
11. Intangible assets
12. Right-of-use assets and lease liabilities
13. Trade and other payables
14. Employee benefits
15. Provisions
16. Loans and borrowings
17. Share capital and reserves
18. Financial instruments and financial risk management
19. Share-based payments
20. Related parties
21. Auditor’s remuneration
22. Commitments
23. Consolidated entities
24. Deed of cross guarantee
25. Parent entity disclosures
26. Subsequent events
Directors’ Declaration
Independent Auditor’s Report
To the Shareholders of GWA Group Limited
44
46
48
50
52
53
53
54
54
56
58
60
62
62
62
63
64
66
74
75
76
76
77
78
80
80
81
82
GWA GROUP LIMITED | 2022 ANNUAL REPORT | 39
GWA GROUP LIMITED | 2022 ANNUAL REPORT | 39
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(i)
Operating profit
Finance income
Finance expenses
Net financing costs
Profit before tax
Income tax expense
Profit from continuing operations
OTHER COMPREHENSIVE INCOME
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign subsidiaries,
net of tax
Net change in fair value of financial assets
Cashflow hedges, net of tax
Other comprehensive income, net of tax
Total comprehensive income for the period
EARNINGS PER SHARE (CENTS)
Total
– Basic
– Diluted
Note
2022
2021
3(a)
3(c)
3(b)
3(d)
3(f)
3(f)
4
418,717
(256,902)
161,815
1,942
(47,542)
(41,058)
(15,485)
59,672
22
(7,255)
(7,233)
52,439
(17,260)
35,179
(510)
100
8,499
8,089
43,268
5
5
13.3
13.2
405,736
(241,660)
164,076
1,387
(50,844)
(45,929)
(9,737)
58,953
21
(8,040)
(8,019)
50,934
(15,878)
35,056
477
–
2,705
3,182
38,238
13.3
13.2
The consolidated statement of profit or loss and other comprehensive income is to be read in conjunction with the accompanying notes.
Other expenses in the current year includes $15.2m (pre-tax) of project costs incurred in relation to the Group’s Enterprise Resource Planning/Customer
(i)
Relationship Management (ERP/CRM) project, and closure of the Asia sales operation. In the prior year, $9.5m (pre-tax) of costs was incurred in relation
to Methven integration and the Group’s ERP / CRM project. Refer to Note 3(d).
40 | GWA GROUP LIMITED | 2022 ANNUAL REPORT
GWA GROUP LIMITED AND ITS CONTROLLED ENTITIES
CONSOLIDATED STATEMENT OF
FINANCIAL POSITION
Note
30 June 2022
30 June 2021(i)
6
7
8
18
9
10
11
12
18
18
13
16
14
4
12
15
18
9
13
16
12
14
15
17
31,440
70,394
108,845
4,785
2,951
218,415
2,455
16,978
418,430
49,969
6,846
2,935
497,613
716,028
66,042
20,000
5,786
1,615
11,161
3,666
–
108,270
95,007
597
148,328
49,808
4,188
6,004
303,932
412,202
303,826
311,294
5,489
(12,957)
303,826
42,634
56,425
70,019
686
2,922
172,686
3,039
21,534
420,619
57,118
–
2,835
505,145
677,831
51,271
25,000
5,623
3,859
11,813
4,737
1,413
103,716
90,452
734
121,106
54,685
4,378
6,149
277,504
381,220
296,611
311,294
(2,349)
(12,334)
296,611
As at
In thousands of AUD
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Inventories
Derivative financial instruments
Other
Total current assets
NON-CURRENT ASSETS
Deferred tax assets
Property, plant and equipment
Intangible assets
Right-of-use assets
Derivative financial instruments
Financial asset at fair value
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
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
The consolidated statement of financial position should be read in conjunction with the accompanying notes.
(i) Refer to Note 9 regarding the re-presentation of certain comparative balances.
GWA GROUP LIMITED | 2022 ANNUAL REPORT | 41
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
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property, plant and equipment
Acquisition of property, plant and equipment
Acquisition of intangible assets
Acquisition of financial assets
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowing
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
2022
2021
444,584
(405,376)
39,208
(4,883)
(2,426)
22
(17,933)
13,988
–
(1,708)
(700)
–
(2,408)
92,000
(68,797)
(35,802)
(9,950)
(22,549)
(10,969)
42,634
(225)
31,440
455,549
(358,317)
97,232
(4,780)
(2,739)
21
(11,436)
78,298
1
(3,584)
(1,563)
(2,835)
(7,981)
37,747
(67,000)
(21,585)
(8,695)
(59,533)
10,784
32,359
(509)
42,634
12
6(b)
12
6(a)
The consolidated statement of cash flows is to be read in conjunction with the accompanying notes
42 | GWA GROUP LIMITED | 2022 ANNUAL REPORT
GWA GROUP LIMITED AND ITS CONTROLLED ENTITIES
CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
For the year ended 30 June 2022
In thousands of AUD
Note
Share
capital
Translation
reserve
Hedging
reserve
Asset
revaluation
reserve
Equity
compensation
reserve
Retained
earnings
Total
Balance as at 1 July 2021
311,294
(3,662)
(266)
–
1,579
(12,334)
296,611
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
17
Net change in fair value
of financial assets
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
–
–
–
–
–
–
–
–
–
–
(510)
–
–
–
–
8,499
–
(510)
(510)
8,499
8,499
–
–
–
–
–
–
–
100
100
100
–
–
–
35,179
35,179
–
–
–
–
–
–
–
–
–
(510)
8,499
100
8,089
35,179
43,268
(251)
–
(251)
–
(35,802)
(35,802)
(251)
(35,802)
(36,053)
Balance at 30 June 2022
311,294
(4,172)
8,233
100
1,328
(12,957) 303,826
For the year ended 30 June 2021
In thousands of AUD
Share
capital
Translation
reserve
Hedging
reserve
Asset
revaluation
reserve
Equity
compensation
reserve
Retained
earnings
Total
Balance as at 1 July 2020
307,790
(4,139)
(2,971)
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
17
Total other comprehensive income
Total comprehensive income
Transaction with owners,
recorded directly in equity
Share-based payments, net of tax
Dividends paid and issue of
shares under the Dividend
Reinvestment Plan
Total transactions with owners
–
–
–
–
–
–
3,504
3,504
–
477
–
477
477
–
–
–
–
–
2,705
2,705
2,705
–
–
–
Balance at 30 June 2021
311,294
(3,662)
(266)
–
–
–
–
–
–
–
–
–
–
1,352
(22,301)
279,731
–
35,056
35,056
–
–
–
–
–
–
–
477
2,705
3,182
35,056
38,238
227
–
227
–
(25,089)
(21,585)
227
(25,089)
(21,358)
1,579
(12,334)
296,611
The consolidated statement of changes in equity is to be read in conjunction with the accompanying notes
GWA GROUP LIMITED | 2022 ANNUAL REPORT | 43
GWA GROUP LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
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:
• Note 8 - valuation of inventories
• Note 11 - measurement of the recoverable amounts of
intangible assets
• Note 18 - valuation of financial instruments
The accounting policies set out in this consolidated financial
report have been applied consistently to all periods presented.
The accounting policies have been applied consistently by all
entities in the consolidated entity. The entity has elected not to
early adopt any accounting standards or amendments.
Certain comparative information included in note disclosures
have been amended in these financial statements to conform to
the current year presentation.
(c) Changes in accounting policies, disclosures,
standards and interpretations
(i)
Standards and Interpretations affecting amounts reported
in the current period
The following new and revised Standards and Interpretations
have been adopted by the consolidated entity for the first time
for the year ended 30 June 2022:
• AASB 2020-8 - Interest Rate Benchmark (IBOR) Reform –
Phase 2 Amendments to AASB 4, AASB 7, AASB 9, AASB 16
and AASB 139
The initial adoption of these Standards and Interpretations
have not had a material impact on the amounts reported or
disclosures made in the consolidated financial statement.
SECTION I: OVERVIEW
1. Significant accounting policies
GWA Group Limited (the ‘Company’) is a for-profit company
domiciled in Australia, limited by shares, which are publicly
traded on the Australian Securities Exchange (‘ASX’) under
the ASX code ‘GWA’. The consolidated financial report of the
Company for the financial year ended 30 June 2022 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, import, and marketing of
building fixtures and fittings to residential and commercial
premises and the distribution of these various products
through a range of distribution channels in Australia,
New Zealand and selected international markets.
The financial report was authorised for issue by the directors
on 15 August 2022.
(a) Statement of compliance
The financial report is a general purpose financial report
which has been prepared in accordance with Australian
Accounting Standards 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 (‘AUD’)
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 and financial assets
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.
44 | GWA GROUP LIMITED | 2022 ANNUAL REPORT
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)
(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 2022
30 June 2023
1 January 2023
30 June 2024
1 January 2023
30 June 2024
1 January 2023
30 June 2024
AASB 2020-3 – Narrow
Scope amendments
to AASB 16, AASB 137
and AASB 3. Annual
improvements to AASB
16, AASB 1, AASB 9 and
AASB 141
AASB 2020-1 Classification
of Liabilities as Current or
Non-current - Amendments
to IAS 1
AASB 2021-2 Disclosure
of accounting policies
and definition of
accounting estimates
AASB 2021-5 Amendments
to AASs – Deferred Tax
related to Assets and
Liabilities arising from a
Single Transaction
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.
(ii) Subsidiaries
Subsidiaries are entities controlled by the consolidated entity.
The consolidated entity controls an entity when it is exposed
to, or has rights to, variable returns from its involvement with
the entity and has the ability to affect those returns through
its power over the entity. The financial results and balances
of subsidiaries are included in the consolidated financial
statements from the date on which control commences
until the date on which control ceases.
(iii) 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.
(ii) Financial statements of foreign operations
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.
GWA GROUP LIMITED | 2022 ANNUAL REPORT | 45
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES SECTION I: OVERVIEW (CONTINUED)
SECTION II: RESULTS FOR THE YEAR
2. Operating segments
The consolidated entity has one continuing reportable segment,
Water Solutions. 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
certain project costs (e.g. costs in relation to the Group’s ERP/
CRM project, closure of the Asia sales operation, and Methven
integration), 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.
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.
46 | GWA GROUP LIMITED | 2022 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES SECTION II: RESULTS FOR THE YEAR (CONTINUED)
2. Operating segments (continued)
In thousands of AUD
For the year ended 30 June
Sales revenue
Segment EBIT
Depreciation (property, plant and equipment)
Depreciation (right of use assets)
Amortisation
Capital expenditure
Reconciliation of profit
Total EBIT for reportable segment
Project costs(i)
Operating profit from continuing operations
Project costs(i)
In thousands of AUD
ERP/CRM project costs
Closure of Asia sales operation
Methven integration costs
Total project costs, pre-tax
Income tax benefit
Total project costs, net of tax
As at 30 June
Reportable segment assets
Reportable segment liabilities
Geographical information
Water Solutions
2022
2021
418,717
74,849
6,202
11,784
2,042
2,408
74,849
(15,177)
59,672
10,284
4,893
–
15,177
(3,091)
12,086
716,028
412,202
405,736
68,482
5,960
11,901
2,540
5,147
68,482
(9,529)
58,953
4,732
–
4,797
9,529
(2,262)
7,267
677,831
381,220
In thousands of AUD
Australia
New Zealand
Other
Consolidated
For the year ended 30 June
2022
2021
External sales revenue
Non-current assets
340,625
319,831
448,989
452,609
2022
45,173
24,311
2021
2022
2021
2022
2021
54,186
26,773
32,919
24,313
31,719
25,763
418,717
405,736
497,613
505,145
The revenue information above is based on the geographical location of customers. Non-current assets are based on the
geographical location of the assets.
GWA GROUP LIMITED | 2022 ANNUAL REPORT | 47
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES SECTION II: RESULTS FOR THE YEAR (CONTINUED)
2. Operating segments (continued)
Major customers
The consolidated entity conducts business with four customers (2021: three) 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
3. Income and Expenses
(a) Sales revenue
In thousands of AUD
Sales revenue
2022
2021
95,401
64,026
50,113
43,029
88,842
65,618
52,354
32,294
2022
2021
418,717
405,736
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, in accordance with AASB 15 Revenue from Contracts with
Customers. 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 rebates (estimated based
on customer contracts) and stock return estimates, which are recognised as revenue at the time of delivery.
Refer to Note 2 geographical information for disaggregated revenue information.
(b) Other income
In thousands of AUD
Foreign currency gains
Government grant income
Other — scrap income, royalties
2022
48
929
965
1,942
2021
370
607
410
1,387
Government grant income is recognised as income where there is reasonable assurance that the grant will be received and all
attached conditions will be complied with.
(c) Cost of sales
In thousands of AUD
Cost of sales
2022
2021
256,902
241,660
Cost of sales comprises the cost of manufacturing and purchase of goods including supply chain costs such as freight
and warehousing.
The amount of inventories recognised as an expense (within cost of sales) during the period was $205,599,000 (2021: $193,287,000).
(d) Other expenses
In thousands of AUD
Project costs
Foreign currency losses
Other
48 | GWA GROUP LIMITED | 2022 ANNUAL REPORT
Note
2
2022
15,177
305
3
15,485
2021
9,529
208
-
9,737
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES SECTION II: RESULTS FOR THE YEAR (CONTINUED)
3. Income and Expenses (continued)
(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
2022
73,831
(252)
73,579
2021
74,844
1,381
76,225
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 $4,076,000 for the financial year ended 30 June 2022 (2021: $4,084,000)
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
2022
22
3,601
852
376
2,426
7,255
7,233
2021
21
3,691
1,224
386
2,739
8,040
8,019
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 | 2022 ANNUAL REPORT | 49
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES SECTION II: RESULTS FOR THE YEAR (CONTINUED)
4. Income tax expenses
Recognised in profit or loss
For the year ended 30 June
In thousands of AUD
Current tax expense
Current year
Adjustments for prior years
Deferred tax (expense)/benefit
Origination and reversal of temporary differences
Total tax expense for the consolidated entity
Numerical reconciliation between tax expense and pre-tax profit
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 project costs
Rebateable research and development
Other items
(Over)/under provided in prior years
Income tax expense on pre-tax profit for the consolidated entity
Deferred tax recognised directly in equity
In thousands of AUD
Cash flow hedges
Current tax liability
In thousands of AUD
Current tax liability
50 | GWA GROUP LIMITED | 2022 ANNUAL REPORT
2022
2021
15,771
(31)
15,740
1,520
17,260
52,439
15,732
103
64
1,075
(180)
497
17,291
(31)
17,260
2022
3,619
3,619
2022
1,615
16,233
29
16,262
(384)
15,878
50,934
15,280
75
(180)
595
(165)
244
15,849
29
15,878
2021
941
941
2021
3,859
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES
SECTION II: RESULTS FOR THE YEAR (CONTINUED)
4. 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 in the countries where the Company and its subsidiaries operate in, 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 taxation authorities 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 taxation authorities are classified as operating cash flows.
GWA GROUP LIMITED | 2022 ANNUAL REPORT | 51
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES SECTION II: RESULTS FOR THE YEAR (CONTINUED)
5. Earnings per share
In cents
Total
– Basic
– Diluted
Continuing operations excluding project costs
– Basic
– Diluted
2022
13.3
13.2
17.8
17.7
2021
13.3
13.2
16.0
15.9
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 project costs
Project costs, net of tax (Note 2)
Profit for the year
2022
2021
47,265
(12,086)
35,179
42,323
(7,267)
35,056
The calculation of basic earnings per share has been based on the following weighted average number of shares outstanding.
Weighted average number of ordinary shares (basic)
In thousands of shares
Issued ordinary shares at 1 July
Effect of new shares issued under the DRP
Weighted average number of ordinary shares
2022
265,205
–
265,205
2021
263,948
374
264,322
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 new shares issued under the DRP
Effect of performance rights on issue
2022
265,205
–
1,619
2021
264,322
374
1,227
Weighted average number of ordinary shares (diluted)
266,824
265,923
52 | GWA GROUP LIMITED | 2022 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES
SECTION III: ASSETS AND LIABILITIES
6. Cash and cash equivalents
(a) Balances
In thousands of AUD
Bank balances
Cash and cash equivalents
2022
31,440
31,440
2021
42,634
42,634
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 18.
(b) Reconciliation of cash flows from operating activities to net profit
In thousands of AUD
Profit for the year
Adjustments for:
Depreciation
Amortisation
Net share-based payments
Unrealised foreign exchange (gain)/loss
Loss/(gain) on sale of PP&E and intangible assets
Deferred tax recognised directly in equity
Other non-cash movements
Changes in assets and liabilities:
(Increase)/decrease in trade and other receivables
(Increase)/decrease in inventories
(Increase)/decrease in prepayments
Increase/(decrease) in trade payables and accrued expenses
Increase/(decrease) in deferred taxes and in taxes payable
(Decrease)/increase in provisions and employee benefits
Net cash flows from operating activities
7. Trade and other receivables
In thousands of AUD
Net trade receivables
Other
2022
35,179
17,986
2,042
251
165
(5)
(3,619)
(1,610)
(13,969)
(38,826)
(29)
14,771
2,895
(1,243)
13,988
2022
69,285
1,109
70,394
2021
35,056
17,861
2,540
133
37
(32)
(941)
1,052
203
8,763
850
7,610
4,279
887
78,298
2021
55,399
1,026
56,425
Trade receivables are initially measured at the transaction price determined under AASB 15 Revenue from Contracts with Customers
(refer to Note 3(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 18.
GWA GROUP LIMITED | 2022 ANNUAL REPORT | 53
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES
SECTION III: ASSETS AND LIABILITIES (CONTINUED)
8. Inventories
In thousands of AUD
Raw materials and consumables
Work in progress
Finished goods
2022
184
140
108,521
108,845
2021
822
134
69,063
70,019
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 or disposal 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.
During the year $132,000 of inventories was scrapped, and a $95,000 net reduction in the provision for inventories was recognised.
9. 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
Assets
Liabilities
Net
2022
616
675
–
4,051
2,936
2,454
2,753
2,922
2021
889
648
2022
(1,707)
(958)
2021
(1,668)
(1,123)
2022
(1,091)
(283)
2021
(779)
(475)
–
(102,667)
(102,760)
(102,667)
(102,760)
5,000
2,947
3,019
2,225
4,188
–
–
–
–
–
–
–
–
(3,627)
(778)
4,051
2,936
2,454
2,753
(705)
5,000
2,947
3,019
2,225
3,410
16,407
18,916
(108,959)
(106,329)
(92,552)
(87,413)
(13,952)
(15,877)
13,952
15,877
–
–
Net tax assets/(liabilities)
2,455
3,039
(95,007)
(90,452)
(92,552)
(87,413)
The presentation of the deferred tax assets and deferred tax liabilities for the comparative period in the consolidated statement of
financial position has been amended in these financial statements to conform to the current year presentation. The adjustment was
a decrease in both deferred tax asset and deferred tax liabilities of $12,308,000 with nil impact to net assets.
54 | GWA GROUP LIMITED | 2022 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES SECTION III: ASSETS AND LIABILITIES (CONTINUED)
9. 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
Indefinite life intangibles
Inventories
Employee benefits
Provisions
Leases
Other items
Balance
1 July 21
Recognised
in income
Recognised
in equity
Exchange
differences
Balance
30 June 22
(779)
(475)
(102,760)
5,000
2,947
3,019
2,225
3,410
(272)
197
–
(939)
(16)
(569)
520
(485)
(87,413)
(1,564)
–
–
–
–
–
–
–
(3,619)
(3,619)
(40)
(5)
93
(10)
5
4
8
(11)
44
(1,091)
(283)
(102,667)
4,051
2,936
2,454
2,753
(705)
(92,552)
Balance
1 July 20
Recognised
in income
Recognised
in equity
Exchange
differences
Balance
30 June 21
(132)
(300)
(102,846)
4,661
2,816
2,914
1,449
4,582
(86,856)
(612)
(165)
–
354
123
99
765
(217)
347
–
–
–
–
–
–
–
(941)
(941)
(35)
(10)
86
(15)
8
6
11
(14)
37
(779)
(475)
(102,760)
5,000
2,947
3,019
2,225
3,410
(87,413)
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
2022
15,203
1,312
2021
15,203
–
The deductible capital losses accumulated at balance date do not expire under current tax legislation.
Refer to Note 4 for the consolidated entity’s accounting policy on deferred tax.
GWA GROUP LIMITED | 2022 ANNUAL REPORT | 55
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES
SECTION III: ASSETS AND LIABILITIES (CONTINUED)
10. Property, plant and equipment
In thousands of AUD
Cost
Balance at 1 July 2021
Additions
Disposals
Transfers
Exchange rate movements
Balance at 30 June 2022
Balance at 1 July 2020
Additions
Disposals
Transfers
Exchange rate movements
Balance at 30 June 2021
Accumulated depreciation
Balance at 1 July 2021
Depreciation
Disposals
Exchange rate movements
Balance at 30 June 2022
Balance at 1 July 2020
Depreciation
Disposals
Exchange rate movements
Balance at 30 June 2021
Carrying amounts
As at 30 June 2022
As at 30 June 2021
Plant and
equipment
Work in
progress
50,881
1,644
(1,024)
938
(161)
52,278
48,866
1,919
(1,679)
1,792
(17)
50,881
(31,352)
(6,202)
993
86
(36,475)
(25,903)
(5,960)
507
4
(31,352)
2,005
108
–
(938)
–
1,175
1,867
1,930
–
(1,792)
–
2,005
–
–
–
–
–
–
–
–
–
–
Total
52,886
1,752
(1,024)
–
(161)
53,453
50,733
3,849
(1,679)
–
(17)
52,886
(31,352)
(6,202)
993
86
(36,475)
(25,903)
(5,960)
507
4
(31,352)
15,803
19,529
1,175
2,005
16,978
21,534
56 | GWA GROUP LIMITED | 2022 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES SECTION III: ASSETS AND LIABILITIES (CONTINUED)
10. 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 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 | 2022 ANNUAL REPORT | 57
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES SECTION III: ASSETS AND LIABILITIES (CONTINUED)
11. Intangible assets
In thousands of AUD
Cost
Balance at 1 July 2021
Additions
Disposals
Exchange rate movements
Balance at 30 June 2022
Software
Brand names
33,110
347,175
618
–
(29)
33,699
–
–
(501)
346,674
Balance at 1 July 2020
33,045
346,855
Additions
Disposals
Exchange rate movements
Balance at 30 June 2021
Accumulated amortisation
Balance at 1 July 2021
Amortisation
Disposals
Exchange rate movements
Balance at 30 June 2022
Balance at 1 July 2020
Amortisation
Disposals
Exchange rate movements
Balance at 30 June 2021
Carrying amounts
As at 30 June 2022
As at 30 June 2021
433
(373)
5
33,110
(31,734)
(1,103)
–
42
(32,795)
(30,117)
(1,835)
223
(5)
(31,734)
–
–
320
347,175
–
–
–
–
–
–
–
–
–
–
904
1,376
346,674
347,175
Trade names,
designs
and patents
6,024
144
(78)
(137)
5,953
5,027
1,144
(135)
(12)
6,024
(1,081)
(939)
72
32
(1,916)
(520)
(705)
135
9
(1,081)
4,037
4,943
Goodwill
Total
67,125
453,434
–
–
(310)
66,815
762
(78)
(977)
453,141
66,936
451,863
–
–
189
67,125
–
–
–
–
–
–
–
–
–
–
1,577
(508)
502
453,434
(32,815)
(2,042)
72
74
(34,711)
(30,637)
(2,540)
358
4
(32,815)
66,815
67,125
418,430
420,619
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.
58 | GWA GROUP LIMITED | 2022 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES SECTION III: ASSETS AND LIABILITIES (CONTINUED)
11. Intangible assets (continued)
Capitalisation of configuration and customisation costs in SaaS arrangements
Software-as-a-service (‘SaaS’) arrangements are service contracts providing the Company with the right to access the cloud
provider’s application software over the contract period. As such, the Group does not receive a software intangible asset for this
right to use at the contract commencement date and associated costs are recognised as an operating expense when the services
are received.
In implementing SaaS arrangements, the Company develops software code that either enhances, modifies or creates additional
capability of existing software and connects with the SaaS arrangement cloud-based application, or develops software code
that meets the definition of and recognition criteria of an intangible asset in accordance with AASB 138 Intangible Assets and
International Financial Reporting Standards Interpretations Committee’s (IFRIC) Configuration or customisation costs in a cloud
computing arrangement - April 2021 agenda decision. This requires the application of judgement including determining whether
the developed software code is distinct or not from the underlying use of the application software. Costs that do not meet either
of these criteria are recognised as an operating expense.
Amortisation
Amortisation is recognised in the Income Statement on a straight-line basis over the estimated useful lives of intangible assets
unless such lives are indefinite. Intangible assets are amortised from the date they are available for use. The estimated useful lives
in the current and comparative periods are as follows:
• goodwill
• brand names
• software
•
trade names
• designs
• patents
indefinite
indefinite
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
In thousands of AUD
Water Solutions
2022
413,489
2021
414,300
GWA GROUP LIMITED | 2022 ANNUAL REPORT | 59
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES
SECTION III: ASSETS AND LIABILITIES (CONTINUED)
11. 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 2022 based on internal
value in use calculations and no impairment was identified (2021: 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 business unit, with projected cash flows
to five years before a terminal value was calculated.
• Management used a constant growth rate of 2.2% (2021: 2.3%) in calculating the terminal value, which does not exceed the
long- term average growth rate for the industry.
• A pre-tax discount rate of 9.9% was used (2021: 8.8%).
Key assumptions include management’s forecast of construction market activity, market share and economic conditions
(e.g. inflationary impacts to product costs). 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 value as at 30 June 2022 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.
12. Right-of-use assets and lease liabilities
For the year ended 30 June
In thousands of AUD
Right of use assets
Balance as at 1 July
Additions to right-of-use assets
Modification of 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
Modification of lease liabilities
Accretion of interest
Payments made
Exchange rate movements
Balance as at 30 June
Current lease liabilities
Non-current lease liabilities
60 | GWA GROUP LIMITED | 2022 ANNUAL REPORT
2022
2021
57,118
4,755
–
(11,784)
(120)
49,969
(66,498)
(4,730)
–
(2,426)
12,376
309
67,833
1,600
(473)
(11,901)
59
57,118
(74,596)
(1,015)
491
(2,739)
11,434
(73)
(60,969)
(66,498)
(11,161)
(49,808)
(60,969)
(11,813)
(54,685)
(66,498)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES
SECTION III: ASSETS AND LIABILITIES (CONTINUED)
12. Right-of-use assets and lease liabilities (continued)
The following table sets out the 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
2022
2021
13,316
12,170
30,349
13,574
69,409
14,246
12,948
33,318
22,498
83,010
Recognition and Measurement
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 entity’s 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 (contracts typically
have 3 to 6 years 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
2022
2021
2,426
11,784
882
15,092
(9,950)
(2,426)
(12,376)
2,739
11,901
889
15,529
(8,695)
(2,739)
(11,434)
GWA GROUP LIMITED | 2022 ANNUAL REPORT | 61
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES
SECTION III: ASSETS AND LIABILITIES (CONTINUED)
13. Trade and other payables
In thousands of AUD
Current
Trade payables and accrued expenses
Non-current
Trade payables and accrued expenses
2022
2021
66,042
597
51,271
734
Trade and other payables are initially measured at fair value and subsequently at their amortised cost.
The consolidated entity’s exposure to currency risk and liquidity risk related to trade and other payables are disclosed in Note 18.
14. Employee benefits
In thousands of AUD
Current
Liability for annual leave
Liability for long service leave
Non-current
Liability for long service leave
2022
2021
4,739
1,047
5,786
4,528
1,095
5,623
4,188
4,378
Short-term employee benefits
Short-term employee benefits are expensed as the related service is provided. A liability is recognised for the amount expected
to be paid if the consolidated entity has a present legal or constructive obligation to pay this amount as a result of past service
provided by the employee and the obligation can be estimated reliably.
Long-term employee benefits
The consolidated entity’s net obligation in respect of long-term employee benefits is the amount of future benefit that employees have
earned in return for their service in the current and prior periods. The benefit is calculated using expected future increases in wage and
salary rates including related on- costs and expected settlement dates, and is discounted to present value using market yields at the
reporting date on corporate bonds with terms to maturity that match, as closely as possible, the estimated future cash outflows.
15. Provisions
In thousands of AUD
Balance at 1 July 2021
Additional provisions made/(written back)
Provisions used
Exchange rate differences
Balance at 30 June 2022
Current
Non-current
Warranties
Restructuring
4,590
(353)
–
(44)
4,193
2,949
1,244
4,193
1,384
–
(702)
(20)
662
662
–
662
Site
restoration
4,480
71
(123)
(32)
4,396
–
4,396
4,396
Other
432
–
(13)
–
419
55
364
419
Total
10,886
(282)
(838)
(96)
9,670
3,666
6,004
9,670
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.
62 | GWA GROUP LIMITED | 2022 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES
SECTION III: ASSETS AND LIABILITIES (CONTINUED)
15. Provisions (continued)
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.
Site restoration
A provision for restoration in respect of 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
16. Loans and borrowings
This note provides information about the contractual terms of the consolidated entity’s loans and borrowings, which are measured at
amortised cost. For more information about the consolidated entity’s exposure to interest rate and foreign currency risk, refer to Note 18.
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
2022
20,000
148,328
168,328
220,000
7,317
227,317
168,328
1,360
169.688
51,672
5,957
57,629
2021
25,000
121,106
146,106
266,670
7,258
273,928
146,106
1,332
147,438
120,564
5,926
126,490
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 21 October 2021 the consolidated entity successfully completed the refinance of its syndicated banking facility. The facility
comprises a single three year multicurrency revolving facility of $180,000,000 which matures in October 2024. For the period
18 November 2020 to 20 October 2021 the facility was $226,670,000. For the period 8 April 2020 to 17 November 2020 the
facility was $243,340,000.
GWA GROUP LIMITED | 2022 ANNUAL REPORT | 63
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES
SECTION IV: FUNDING AND RISK MANAGEMENT (CONTINUED)
16. Loans and borrowings (continued)
On 17 September 2021 the consolidated entity extended its one year multicurrency revolving bilateral facility of $40,000,000 which
now matures in October 2022.
The consolidated entity has unsecured bank loans of $168,328,000 drawn as at 30 June 2022 (30 June 2021: $146,106,000). The
notional amount of the interest-bearing loans is deemed to reflect the fair value. The facilities were drawn in the following currencies:
In thousands of AUD
AUD
NZD
GBP
USD
2022
145,000
20,000
3,000
–
2021
110,000
30,000
3,000
2,000
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 18(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.
17. Share capital and reserves
Share capital
In thousands
On issue at 1 July — fully paid
FY20 Final Dividend — DRP*
FY21 Interim Dividend — DRP*
Ordinary shares
Number of shares
AUD
2022
265,205
–
–
2021
263,948
248
1,009
2022
311,294
–
–
On issue at 30 June — fully paid
265,205
265,205
311,294
* Dividend Reinvestment Plan
2021
307,790
648
2,856
311,294
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.
The Company has neither 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.
In thousands of AUD – Net of tax
Opening balance at 1 July
Reclassed to P&L
Change in fair value
Closing balance at 30 June
64 | GWA GROUP LIMITED | 2022 ANNUAL REPORT
2022
(266)
938
7,561
8,233
2021
(2,971)
1,650
1,055
(266)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES SECTION IV: FUNDING AND RISK MANAGEMENT (CONTINUED)
17. Share capital and reserves (continued)
Equity compensation reserve
The equity compensation reserve represents the fair value of the cumulative net charges of performance rights granted
(refer Note 19).
Dividends
Dividends recognised in the current year are:
Costs per share
(In cents)
Total amount
(In thousands of AUD)
Franked
Date of Payment
2022
Interim 2022 ordinary
Final 2021 ordinary
Total amount
2021
Interim 2021 ordinary
Final 2020 ordinary
Total amount
7.0
6.5
13.5
6.0
3.5
9.5
18,564
17,238
35,802
15,851
9,238
25,089
100%
100%
4th March 2022
6th October 2021
100%
100%
20th April 2021
16th October 2020
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.
Final 2022 ordinary
Costs per share
(In cents)
8.0
Total amount
(In thousands
of AUD)
21,216
Franked
Date of Payment
100%
6th September 2022
The financial effect of these dividends has not been brought to account in the financial statements for the financial year ended
30 June 2022 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 2022 ordinary dividend.)
The Company
2022
13,181
2021
11,229
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.
GWA GROUP LIMITED | 2022 ANNUAL REPORT | 65
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES
SECTION IV: FUNDING AND RISK MANAGEMENT (CONTINUED)
18. Financial instruments and financial risk management
(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 exposures 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 value by monitoring the performance of the consolidated entity by reference to earnings
growth and 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.
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.
66 | GWA GROUP LIMITED | 2022 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES SECTION IV: FUNDING AND RISK MANAGEMENT (CONTINUED)
18. Financial instruments and financial risk management (continued)
(a) Policies (continued)
Derivative financial instruments (continued)
Hedging (continued)
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.
(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 some 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, recent economic uncertainties driven by global events (e.g. inflation) have not led to any material losses in
respect of trade receivables.
Transactions involving derivative financial instruments are with counterparties with sound credit ratings. Given their sound credit
ratings, management does not expect any counterparty to fail to meet its obligations.
The consolidated entity has three major customers which comprise 57% of the trade receivables carrying amount as at 30 June
2022 (2021: three customers comprising 61% of trade receivables).
GWA GROUP LIMITED | 2022 ANNUAL REPORT | 67
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES SECTION IV: FUNDING AND RISK MANAGEMENT (CONTINUED)
18. Financial instruments and financial risk management (continued)
(b) Credit risk (continued)
The carrying amount of financial assets represents the maximum credit exposure of the consolidated entity. The maximum exposure
to credit risk at balance date was:
In thousands of AUD
Cash and cash equivalents
Net trade receivables
Other receivables
The ageing of 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
2022
31,440
69,285
1,109
101,834
2022
64,592
23,036
2,242
473
593
(21,608)
69,328
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
Impairment losses written back/(recognised)
Provisions used during the year
Balance at 30 June
2022
(34)
(13)
4
(43)
2021
42,634
55,399
1,026
99,059
2021
53,926
18,144
735
163
47
(17,582)
55,433
2021
(27)
(12)
5
(34)
68 | GWA GROUP LIMITED | 2022 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES SECTION IV: FUNDING AND RISK MANAGEMENT (CONTINUED)
18. Financial instruments and financial risk management (continued)
(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
2022
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
(168,328)
(184,023)
(23,304)
(3,304)
(6,609)
(150,806)
Trade and other payables
(66,639)
(67,143)
(66,367)
–
(425)
(351)
–
–
Lease liabilities
(60,969)
(69,409)
(6,658)
(6,658)
(12,170)
(30,349)
(13,574)
Derivative financial instruments
Interest rate swaps used for hedging (net)
6,846
6,998
1,300
1,295
2,385
2,018
Forward exchange contracts used for
hedging (net)
4,785
4,785
4,067
718
–
–
–
–
Total at 30 June 2022
(284,305)
(308,792)
(90,962)
(7,949)
(16,819)
(179,488)
(13,574)
2021
Non-derivatives financial liabilities
Unsecured cash advance facilities
(146,106)
(154,902)
(26,852)
(1,852)
(3,703)
(122,495)
Trade and other payables
(52,005)
(52,509)
(51,535)
–
(506)
(351)
–
(117)
Lease liabilities
(66,498)
(83,010)
(7,123)
(7,123)
(12,948)
(33,318)
(22,498)
Derivative financial instruments
Interest rate swaps used for hedging (net)
(1,413)
(1,413)
(365)
(365)
(532)
(151)
Forward exchange contracts used for
hedging (net)
686
686
583
103
–
–
–
–
Total at 30 June 2021
(265,336)
(291,148)
(85,292)
(9,237)
(17,689)
(156,315)
(22,615)
(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 (typically
to less than 50% for the next two year period). 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 2022, the consolidated entity had interest rate swaps in operation with a notional contract amount of $118,038,000
(2021: $118,613,000). These swaps have fixed rates ranging from 0.43% to 1.45% (2021: 0.43% to 1.56%) and mature over the next
four years.
GWA GROUP LIMITED | 2022 ANNUAL REPORT | 69
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES SECTION IV: FUNDING AND RISK MANAGEMENT (CONTINUED)
18. Financial instruments and financial risk management (continued)
(d) Market risk (continued)
(i)
Interest rate risk (continued)
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 1.02% and matures over the next four years.
The consolidated entity classifies interest rate swaps as cash flow hedges and states them at fair value.
The net fair value of swaps as at 30 June 2022 of $6,846,000 was recognised as a fair value derivative asset (2021: $1,413,000
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
Total
2022
Notional
value
2022
Carrying
amount
(168,328)
(168,328)
31,440
31,440
2021
Notional
value
(146,106)
42,634
2021
Carrying
amount
(146,106)
42,634
(136,888)
(136,888)
(103,472)
(103,472)
143,038
6,150
6,846
(130,042)
118,613
15,141
(1,413)
(104,885)
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.
2022
Post Tax
Profit
(37)
12
(47)
16
(28)
9
2022
OCI(i)
1,405
(468)
160
(54)
–
–
2021
Post Tax
Profit
(65)
26
(16)
16
(10)
4
2021
OCI(i)
348
(139)
90
(90)
–
–
In thousands of AUD – Higher/(Lower)
AUD denominated loans
+75 basis points (2021: +25 basis points)
-25 basis points (2021: -10 basis points)
NZD denominated loans
+75 basis points (2021: +25 basis points)
-25 basis points (2021: -25 basis points)
GBP denominated loans
+75 basis points (2021: +25 basis points)
-25 basis points (2021: -10 basis points)
(i) Other Comprehensive Income: cash flow hedges, net of tax
70 | GWA GROUP LIMITED | 2022 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES
SECTION IV: FUNDING AND RISK MANAGEMENT (CONTINUED)
18. Financial instruments and financial risk management (continued)
(d) Market risk (continued)
(ii) Foreign currency risk
The consolidated entity is exposed to foreign currency risk on sales, purchases and asset and liability holdings that are denominated
in a currency other than the respective functional currencies of its subsidiaries. The currencies giving rise to this risk are primarily
USD and RMB.
The consolidated entity hedges its foreign currency exposure in respect of forecasted sales and purchases by entering into forward
exchange contracts (typically for at least 50% for the next six months). 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
GBP:USD
NZD:AUD
2022
51%
57%
41%
53%
2021
36%
40%
70%
70%
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 2022 of $4,785,000 was recognised as a fair value derivative asset (2021: $686,000 asset). No hedge
ineffectiveness was recognised, and therefore the full movement in the value of the hedging instrument was recognised in Other
Comprehensive Income.
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.
GWA GROUP LIMITED | 2022 ANNUAL REPORT | 71
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES SECTION IV: FUNDING AND RISK MANAGEMENT (CONTINUED)
18. Financial instruments and financial risk management (continued)
(d) Market risk (continued)
(ii) Foreign currency risk (continued)
In thousands of AUD – Higher/(Lower)
USD
15% increase in USD:AUD – OCI (cash flow hedges, net of tax)
(2021: 10% increase in USD:AUD)
15% decrease in USD:AUD – OCI (cash flow hedges, net of tax)
(2021: 10% decrease in USD:AUD)
15% increase in USD:GBP – OCI (cash flow hedges, net of tax)
(2021: 10% increase in USD:GBP)
15% decrease in USD:GBP – OCI (cash flow hedges, net of tax)
(2021: 10% decrease in USD:GBP)
RMB
15% increase in RMB:AUD – OCI (cash flow hedges, net of tax)
(2021: 10% increase in RMB:AUD)
15% decrease in RMB:AUD – OCI (cash flow hedges, net of tax)
(2021: 10% decrease in RMB:AUD)
NZD
15% increase in NZD:AUD – OCI (cash flow hedges, net of tax)
(2021: 10% increase in NZD:AUD)
15% decrease in NZD:AUD – OCI (cash flow hedges, net of tax)
(2021: 10% decrease in NZD:AUD)
15% increase in NZD:AUD – OCI (net investment hedge, net of tax)
(2021: 10% increase in NZD:AUD)
15% decrease in NZD:AUD – OCI (net investment hedge, net of tax)
(2021: 10% decrease in NZD:AUD)
GBP
15% increase in GBP:AUD – OCI (net investment hedge, net of tax)
(2021: 10% increase in GBP:AUD)
15% decrease in GBP:AUD – OCI (net investment hedge, net of tax)
(2021: 10% decrease in GBP:AUD)
(e) Fair values
2022
2021
5,890
(4,353)
828
(612)
5,399
(3,991)
(1,501)
1,110
(2,228)
1,647
(411)
337
1,861
(1,523)
749
(915)
1,639
(1,341)
(1,662)
1,359
(2,172)
1,777
(430)
352
The carrying value of financial assets and liabilities as at 30 June 2022 equalled fair value (30 June 2021: equalled fair value). The fair
values 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) Financial asset at fair value
The investment in an unlisted company is accounted as a financial asset at fair value through other comprehensive income
(‘FVOCI’) following an irrevocable decision made at initial recognition. The fair value of the financial asset is based on the equity
price established in the most recent round of equity financing and consideration of any other key changes in the investment which
requires a level of judgement.
72 | GWA GROUP LIMITED | 2022 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES
SECTION IV: FUNDING AND RISK MANAGEMENT(CONTINUED)
18. Financial instruments and financial risk management (continued)
(e) Fair values (continued)
(v) 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
(vi) Fair value hierarchy
2022
1.8% - 3.9%
3.2% - 3.4%
3.4% - 3.6%
2.6% - 3.4%
2021
0.1% - 1.0%
1.8% - 2.0%
2.1% - 2.3%
1.9% - 2.0%
The consolidated entity recognises the fair value of its financial instruments and financial asset at fair value using the level 2 and
level 3 valuation methods respectively. 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 2022
Forward contracts used for hedging
Interest rate swaps used for hedging
Investment in unlisted entity
30 June 2021
Forward contracts used for hedging
Interest rate swaps used for hedging
Investment in unlisted entity
Level 1
Level 2
Level 3
Total
–
–
–
–
–
–
–
–
4,785
6,846
–
11,631
686
(1,413)
–
(727)
–
–
2,935
2,935
–
–
2,835
2,835
4,785
6,846
2,935
14,566
686
(1,413)
2,835
2,108
GWA GROUP LIMITED | 2022 ANNUAL REPORT | 73
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES
SECTION V. OTHER INFORMATION
19. 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 the 2022, 2021 and 2020 financial years are subject to
financial performance conditions which measure growth in Return on Funds Employed (ROFE) and/or 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. 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 for the 2022 and 2021 financial year, the performance hurdles and vesting proportions
for the TSR performance measure are outlined in the table below.
TSR of GWA Group Limited relative
to TSRs of Comparator Companies
Less than the 50th percentile
50th percentile
Proportion of Performance Rights
to Vest if TSR hurdle is met
0%
25%
Between the 50th percentile and 75th percentile
Straight line vesting between 25% and 100%
75th percentile or higher
100%
For the performance rights granted to executives for the 2020 financial year, the performance hurdles and vesting conditions
for the ROFE and TSR performance measures 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.
74 | GWA GROUP LIMITED | 2022 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES SECTION V. OTHER INFORMATION (CONTINUED)
19. Share-based payments (continued)
Fair Value
During the year 1,250,933 performance rights were granted to employees (2021: 827,073) at a weighted average fair value of $1.34 (TSR)
(2021: $1.90 (TSR)).
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 4.90%, the risk free rate
was 0.79% and annualised share price volatility was 38% for the Company and its comparator companies listed for the TSR hurdle.
The amount recognised as personnel expenses (Note 3(e)) in the current financial year was a $251,649 credit (2021: $1,381,000 expense).
For further details of the Long Term Incentive (Equity) Plan, refer to the Remuneration Report section of the Directors’ Report.
In number of
performance rights
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
2022
2021
18/02/2019
30/06/2021
14/02/2020
30/06/2022
507,556
526,278
7/12/2020
30/06/2023
544,985
–
–
–
6/12/2021
30/06/2024
–
1,250,933
19/02/2018
30/06/2020
18/02/2019
30/06/2021
14/02/2020
30/06/2022
7/12/2020
30/06/2023
1,578,818
1,250,933
537,000
532,000
672,500
–
1,741,580
–
–
–
827,073
827,073
–
–
–
–
–
(507,556)
–
(142,458)
383,820
(183,672)
361,313
(61,603)
1,189,330
(895,289)
1,934,463
(498,873)
(38,127)
(24,444)
(146,222)
–
507,556
526,278
(282,088)
544,985
(498,873)
(490,882)
1,578,818
–
–
–
20. Related parties
Key management personnel compensation
The key management personnel compensation included in personnel expenses (Note 3(e)) are as follows:
In AUD
Short-term employee benefits
Post-employment benefits
Termination benefits
Share-based payments
Other long term employee benefits
2022
6,423,513
279,900
–
224,578
(92,259)
6,835,732
2021
5,447,396
185,452
1,000,000
1,001,525
126,812
7,761,185
Information regarding individual key management personnel compensation is provided in the Remuneration Report section of the
Directors’ Report.
GWA GROUP LIMITED | 2022 ANNUAL REPORT | 75
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES
SECTION V. OTHER INFORMATION (CONTINUED)
21. 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
Total audit services
Other services
Network firm of overseas non-KPMG audit firms:
PwC — internal audit services
PwC — other services
Total other services
2022
2021
359,000
16,000
39,200
414,200
269,400
58,000
30,000
357,400
83,000
83,000
79,000
79,000
497,200
436,400
203,000
44,000
247,000
161,000
21,000
182,000
22. Commitments
Expenditure commitments for software, plant and equipment purchases and major projects contracted but not provided for
are payable as follows:
In thousands of AUD
Less than one year
2022
2,519
2,519
2021
6,669
6,669
76 | GWA GROUP LIMITED | 2022 ANNUAL REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES
SECTION V. OTHER INFORMATION (CONTINUED)
23. Consolidated entities
Parties
to cross
guarantee
Country
of incorporation
Ownership Interest
2022
2021
Parent entity
GWA Group Limited
Subsidiaries
Caroma Holdings Limited
Caroma Industries Limited
Caroma International Pty Ltd
Caroma Middle East FZCO
Caroma Singapore Pte Ltd
Deva Tap Company Ltd
GWA Finance Pty Limited
GWA Group Holdings Limited
GWA Group Holdings (NZ) Limited
GWA Group (NZ) Limited
GWA Trading (Shanghai) Co Ltd
Methven Australia Pty Limited
Methven ROI Limited (incorporated 30/09/2021)
Methven UK Limited
Sebel Furniture Holdings Pty Ltd
Y
Y
Y
N
N
N
N
Y
Y
N
N
N
Y
N
N
N
Australia
Australia
Australia
Australia
UAE
Singapore
United Kingdom
Australia
Australia
New Zealand
New Zealand
China
Australia
Ireland
United Kingdom
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%
GWA GROUP LIMITED | 2022 ANNUAL REPORT | 77
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
SECTION V. OTHER INFORMATION (CONTINUED)
24. 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 23 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, as at 30 June 2022, is set out in the table below.
Summarised statement of profit or loss and other comprehensive income
In thousands of AUD for the year ended 30 June
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
Net profit
Other comprehensive income, net of tax
Total comprehensive income, net of tax
2022
340,625
(202,078)
138,547
(80,610)
1,047
(4,950)
54,034
(16,436)
37,598
37,598
8,223
45,821
2021
319,831
(186,855)
132,976
(100,029)
1,074
(7,736)
26,285
(8,200)
18,085
18,085
2,931
21,016
78 | GWA GROUP LIMITED | 2022 ANNUAL REPORT
GWA GROUP LIMITED AND ITS CONTROLLED ENTITIES SECTION V. OTHER INFORMATION (CONTINUED)
24. Deed of cross guarantee (continued)
Statement of financial position
In thousands of AUD for the year ended 30 June
2022
2021
Assets
Cash and cash equivalents
Trade and other receivables
Inventories
Derivative financial instruments
Other
Total current assets
Investments
Intercompany receivable
Property, plant and equipment
Intangible assets
Right-of-use assets
Total non-current assets
Total assets
Liabilities
Trade and other payables
Loans and borrowings
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
Retained earnings at beginning of the year
Net profit
Dividends received during the year
Dividends paid during the year
Retained earnings at end of the year
23,591
57,706
84,369
11,196
2,411
179,273
466,895
37,361
13,815
385,031
44,027
947,129
1,126,402
49,553
20,000
4,082
1,498
11,860
2,550
–
89,543
92,859
148,328
42,988
4,883
4,788
293,846
383,389
743,013
311,294
9,165
422,554
743,013
420,758
37,598
–
(35,802)
422,554
29,090
45,419
54,395
–
2,374
131,278
465,632
36,515
17,573
385,717
50,460
955,897
1,087,175
37,697
25,000
4,671
4,659
11,175
2,748
1,413
87,363
87,803
121,106
48,469
4,266
4,922
266,566
353,929
733,246
311,294
1,194
420,758
733,246
427,762
18,085
–
(25,089)
420,758
GWA GROUP LIMITED | 2022 ANNUAL REPORT | 79
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSGWA GROUP LIMITED AND ITS CONTROLLED ENTITIES GWA GROUP LIMITED AND ITS CONTROLLED ENTITIES
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
SECTION V. OTHER INFORMATION (CONTINUED)
25. Parent entity disclosures
As at, and throughout, the financial year ended 30 June 2022 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
2022
119,540
–
119,540
648
946,721
575
419,733
311,294
1,328
214,366
526,988
2021
(1,192)
–
(1,192)
300
862,661
–
419,162
311,294
1,578
130,628
443,500
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 (2021: $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 (2021: $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 23 and 24.
26. Subsequent events
To the Directors’ best knowledge, there are no events that have arisen subsequent to 30 June 2022 that will, or may, significantly
affect the operation or results of the consolidated entity.
80 | GWA GROUP LIMITED | 2022 ANNUAL REPORT
GWA 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 2022 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 23 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 2022; 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 15 August 2022.
Signed in accordance with a resolution of the directors:
Darryl D McDonough
Director
Urs B Meyerhans
Director
GWA GROUP LIMITED | 2022 ANNUAL REPORT | 81
INDEPENDENT AUDITOR’S REPORT
TO THE SHAREHOLDERS OF GWA GROUP LIMITED
Report on the audit of the Financial Report
OPINION
We have audited the Financial Report of GWA Group
Limited (the Company).
In our opinion, the accompanying Financial Report of
the Company is in accordance with the Corporations
Act 2001, including:
•
giving a true and fair view of the Group’s financial
position as at 30 June 2022 and of its financial
performance for the year ended on that date; and
• complying with Australian Accounting Standards
and the Corporations Regulations 2001.
BASIS FOR OPINION
The Financial Report comprises:
• Consolidated Statement of Financial Position as at 30 June 2022;
• 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 (including Independence
Standards) (the Code) that are relevant to our audit of the Financial Report in Australia. We have fulfilled our other ethical
responsibilities in accordance with these requirements.
KEY AUDIT MATTERS
The Key Audit Matters we identified are:
• Valuation of finished goods inventory.
• Changes to Enterprise Resource Planning System.
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.
KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International
Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the
independent member firms of the KPMG global organisation. Liability limited by a scheme approved under Professional Standards Legislation.
82 | GWA GROUP LIMITED | 2022 ANNUAL REPORT
GWA GROUP LIMITED AND ITS CONTROLLED ENTITIES INDEPENDENT AUDITOR’S REPORT
TO THE SHAREHOLDERS OF GWA GROUP LIMITED (CONTINUED)
VALUATION OF FINISHED GOODS INVENTORY ($108.5M)
Refer to Note 8 to the Financial Report
The key audit matter
How the matter was addressed in our audit
The valuation of finished goods inventory is a key audit
matter given it is a significant asset in the financial report
and the net realisable value is impacted by the building
industry cycles and changes in consumer preferences.
This necessitated an additional audit focus on excess
and discontinued inventory SKUs (stock keeping unit).
The most significant areas of judgement we focused on
was in assessing the Group’s:
• Expected forecast demand which is based on previous
sales, as the criteria for categorisation of inventory
SKUs by risk (ageing analysis), such as discontinued
or excess as the Group attributes different values due
to the differing provision policy rates;
• The Group’s assessment of SKU recovery rates based
on the expected selling price of inventory; and
• Provision percentages (risk weightings) by
inventory category.
Such judgements may have a significant impact on the
Group’s provision and therefore the overall carrying value
of finished good inventories, necessitating additional
audit effort.
Our procedures included:
• Obtaining an understanding of the Group’s key processes for the
valuation of finished goods inventory (net realisable value) and the
Group’s determination of discontinued inventory;
• Assessing the Group’s policies for the valuation of finished goods
inventory against the requirements of the accounting standards and
our understanding of the business;
• Attending stocktakes in significant locations and observing the
Group’s processes;
• Assessing the accuracy of Group sales forecasts by inventory SKU by
comparing forecast demand to actual sales for each inventory SKU in
the period. This informed our evaluation of sales forecasts incorporated
in the inventory provision at 30 June 2022;
• Testing the completeness of inventory SKUs identified as discontinued
or excess as follows:
» Assessing the Group’s identification of excess inventory by
independently developing an expectation based on actual sales
data and comparing to the Group’s results; and
» Checking a sample of inventory SKUs to be discontinued in the
inventory provision to sales management approval;
• Comparing the inventory write off history for the last 3 years
against the inventory provision to assess the adequacy of the
inventory provision;
• Comparing the estimated selling or disposal expenses to actual selling
or disposal expenses;
• Challenging the Group’s assumptions, such as the Group’s assessment
of recovery rates and provision percentages by product category by:
» Using our understanding of the Group’s business;
»
Independently developing 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 a sample of sales recorded below
original cost;
» Comparing the independently developed expected inventory
valuation range to the inventory value recorded by the Group; and
• Assessing the disclosures in the financial report using our
understanding obtained from our testing and against the requirements
of the accounting standard.
GWA GROUP LIMITED | 2022 ANNUAL REPORT | 83
GWA GROUP LIMITED AND ITS CONTROLLED ENTITIES INDEPENDENT AUDITOR’S REPORT
TO THE SHAREHOLDERS OF GWA GROUP LIMITED (CONTINUED)
CHANGES TO ENTERPRISE RESOURCE PLANNING SYSTEM
The key audit matter
How the matter was addressed in our audit
The Group has implemented a new Enterprise Resource
Planning (ERP) system during the year.
This is a key audit matter due to:
• The significant impact of the ERP on the Group’s
financial reporting process. This required us
to understand the extent of changes, and the
associated impact on our audit.
• During the implementation phase of the new
ERP, the Group established temporary processes,
which included manual elements, to govern the
implementation of new systems and to record
certain transactions. Manual processes and controls
generally result in a higher risk of error and increase
the audit effort to test extended samples of the
underlying transactions which are checked to source
documentation, such as invoices, proof of delivery
documents and bank statements.
Our procedures included:
• Working with our IT Audit specialists, we tested the general IT
controls operating in the ERP system that underpins the Group’s
financial reporting.
• Obtaining an understanding of the Group’s processes revised
during the year and evaluating the updated controls and control
environment as they relate to financial reporting processes, to further
inform our related audit approach.
• Assessed migration of data transferred from the decommissioned
system to the new system to check the accuracy of the data
transferred.
• On a sample basis, we assessed the transactions that were subject to
manual processes and controls recorded in the financial statements by:
» Checking the integrity of manual calculations;
» Comparing amounts in the Group’s financial records to the
financial statements; and
» Checking amounts to source documentation.
OTHER INFORMATION
Other Information is financial and non-financial information in GWA Group Limited’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.
84 | GWA GROUP LIMITED | 2022 ANNUAL REPORT
GWA GROUP LIMITED AND ITS CONTROLLED ENTITIES INDEPENDENT AUDITOR’S REPORT
TO THE SHAREHOLDERS OF GWA GROUP LIMITED (CONTINUED)
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL REPORT
Our objective is:
•
to obtain reasonable assurance about whether the Financial Report as a whole is free from material misstatement, whether due
to fraud or error; and
•
to issue an Auditor’s Report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Australian
Auditing Standards will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of 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: https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part of our Auditor’s Report.
REPORT ON THE REMUNERATION REPORT
Opinion
Directors’ responsibilities
In our opinion, the Remuneration Report of GWA Group
Limited for the year ended 30 June 2022, 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 Sections 2 to 8 (excluding Section 7.1.1) of the
Remuneration Report included in pages 16 to 37 of the Directors’
Report for the year ended 30 June 2022.
Our responsibility is to express an opinion on the Remuneration
Report, based on our audit conducted in accordance with Australian
Auditing Standards.
KPMG
Trent Duvall
Partner
Sydney, 15 August 2022
GWA GROUP LIMITED | 2022 ANNUAL REPORT | 85
GWA GROUP LIMITED AND ITS CONTROLLED ENTITIES OTHER STATUTORY INFORMATION
AS AT 15 AUGUST 2022
STATEMENT OF SHAREHOLDING
In accordance with the Australian Securities Exchange Listing Rules, the directors state that, as at 15 August 2022, 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
1,857
3,329
1,475
1,227
74
7,962
Ordinary Shares
837,507
9,245,471
11,101,618
27,811,868
216,208,649
265,205,113
%
0.32
3.49
4.19
10.48
81.52
100.00
The number of shareholders with less than a marketable parcel of 230 shares is 667.
VOTING RIGHTS
The voting rights attached to shares are as set out in rule 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 15 August 2022:
Shareholder
Perpetual Limited
Mitsubishi UFJ Financial Group, Inc
Franklin Resources, Inc
20 LARGEST SHAREHOLDERS AS AT 15 August 2022
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
National Nominees Limited
JMB Investments Pty Ltd
Mr Peter Zinn
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