Gowing Bros. Limited Annual Report 2018

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FY2018 Annual Report · Gowing Bros. Limited

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Gowing Bros 150th Annual Report
31 July 2018

Corporate Directory

Contents

Directors

Professor Jonathan West (Chairman)
Mr. John Gowing (Managing Director)
Mr. Sean Clancy (Non-executive Director)
Mr. John Parker (Non-executive Director)

Associate Directors

Mr. James Gowing
Mr. Ellis Gowing

Secretary

Ms. Belinda Flatters

Stock Exchange Listing

The Australian Securities Exchange
Ticker Code: GOW

Registered Office

Share Registry Office

Auditors

ABN

ACN

Suite 21, Jones Bay Wharf
26 – 32 Pirrama Road
Pyrmont NSW 2009
Phone: 61 2 9264 6321
Fax: 61 2 9264 6240
Email: info@gowings.com

Computershare Investor Services Pty Limited
Level 4, 60 Carrington Street
Sydney NSW 2000
Phone: 1300 855 080
Fax: 61 2 8234 5050

HLB Mann Judd (NSW Partnership)
Level 19, 207 Kent Street
Sydney NSW 2000
Phone: 61 2 9020 4000

68 000 010 471

000 010 471

"We are now
firmly focussed on
building our wealth
management business.
We have successfully
delivered on our
strategy plan to-date &
we expect to continue
doing so."

John Gowing

Iconic Gowings Ads Campaigns Through Time

History and Innovation 1868 - 2018

About Gowings

Our North Coast Commitment:'Steady, Constant Growth'

Managing Director’s Review of Operations

The Board of Directors

Directors’ Report

Remuneration Report

ASX Listing Requirements

Financial Report

150th ANNUAL REPORT 2018 I Year ended 31 July 2018150th ANNUAL REPORT 2018 I Year ended 31 July 2018INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED

Iconic Gowings Ads Campaigns Through Time

'Gone to Gowings' 1946 - 1968

'The boys go to Gowings' 1990 - 2001

The slogan 'Gone to Gowings' has gone on to become part of the Australian vernacular, even earning a place in the
Macquarie dictionary as meaning : Down on your luck, lost at the races... The Gowings' cartoons quickly gained recognition
and 'Gone to Gowings' was seen scrawled on wrecked jeeps and tanks during World War II. The ads ran over many years in
the local papers. Local artists were commissioned to create images for the 'Gone to Gowings' cartoons.

The 'boys go to Gowings' campaign which started in May 1990 was developed by McSpeddan Carey to capitalise on the
success of the earlier 'Gone to Gowings' campaign. Featuring Australian native birds and iconic Australian brands, this
campaign put Gowings back on the Sydney shoppers map. Largely as a result of the 'boys go to Gowings' advertisements
placed in the Sydney Morning Herald, the Market & George Street store sales increased by 35% from $8.8 million to $12
million per year. A mighty achievement.

The campaign won the Caxton Newspaper Campaign of the Year award and was placed on permanent display at the
Powerhouse Museum in Sydney.

Innovators Evolution 1950s - 1990s

'Gone to Gowings' transforms to 'Go to Gowings'

150th ANNUAL REPORT 2018 I Year ended 31 July 2018150th ANNUAL REPORT 2018 I Year ended 31 July 2018INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED
History and Innovation 1868 - 2018

E S T 1 8 6 8
GOWING BROS.LTD

Gowings open 498
George St

Gowings pioneers promotion
of ‘Australian Made’

1890

1901

Gowings
establishes employee
share scheme

1946

Ted Gowing
establishes
share portfolio

1953

Cash & wrap installed with
self-service to counter
wage explosion

‘Boys Go To Gowings’
Campaign

Market st store refurbished.
Gowings Whale trust established

Gowings establishes
Pacific Coast
Shopping Centres

1974

1991

2000

2010

1868

John Ellis Gowing
opens first Gowings
Store

1890s Australian Depression

Great Depression

WW2

Malay Emergency

1893-95

1929-39

1939-45

1950-60

Gowings is first retailer
to install air con and
music in the lifts
1960

First Gulf War

1990-91

Gowings online store
opens

Gowings sell the
Market St Building

Gowings Launches
Coastbeat

2018

1998

2006

2017

1899-1902

1914-18

1940

1950-53

1987

1995

1999

2008-11

2017

Gowings Establishes
1868 Capital

Boer War

WW1

‘GONE TO GOWINGS’
Campaign

Korean war

J.E. (John) Gowing
appointed Managing
Director

Gowings
Reintroduce Own Brand

East Timor
Peacekeeping

Global
Financial Crisis

Gowings
Whale Trust partners
with Sea Shepherd

1892

1908

1929

1941

1959-73

1968

1992

1996

2003

2016

Gowings are one of the first
companies to list in the
telephone directory as ‘6321’

John Ellis Dies.
Gowings Book
released

Gowings store George &
Market St opens First steel
structure building in Sydney
CBD & one of the tallest
buildings in Sydney

EJ(Ted ) Gowing
becomes a director

vietnam War

Gowings
100 Birthday
Celebrations

Gowings
Journal re-issued

Oxford St store opens.
Wynyard store opens
319 George St, with
"Blokeatorium"
Gowings open QVB Link.

Second Gulf War

Gowings acquires
Surf Hardware
International

150th ANNUAL REPORT 2018 I Year ended 31 July 2018150th ANNUAL REPORT 2018 I Year ended 31 July 2018INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITEDAbout Gowings

Net Assets

£92,781
1928

$3.4M
1972

$216M

2018

Our Purpose
Enriching people’s lives
since 1868

Investment Objective

The Company’s focus is to preserve and grow
the value of its underlying financial and real
assets and to grow net income from ordinary
activities as the principal source of income to
pay ordinary dividends.

Investment Philosophy

On 31 July 2018 Gowings completed its 150th
year of operations. Gowings is an investment
company whose investment horizon is
inter-generational. In fact, Gowings has
had only four managing directors since its
establishment in 1868. Being a shareholder in
Gowings is for investors who share a similar
investment philosophy and who wish to invest
alongside the Gowings family.

An important investment philosophy is to
generate sustainable and reliable dividends
that can provide income for shareholders.

The Company’s investment portfolio adjusts
as opportunity and risk are managed.
Gowings provides investors with access to
opportunities not normally available to retail
investors. The Company does not limit itself
to ASX-listed equities, to any single national
boundary or currency, or any particular
industry type.

Risk is actively managed through portfolio
selection, natural hedges, diversity, and
conservative gearing. The Company does not
attempt to reduce risk and preserve capital
by investing only in so-called “low-risk”
assets, but rather seeks to offset risk with a
balanced and diverse portfolio of different
asset classes.

As an inter-generational investment vehicle,
the Company does not focus on the day-to-
day ASX share price, but rather on preserving
and increasing the long-term value of
underlying assets, which are the ultimate
source of income and growth.

Investments are made across different
asset classes to take advantage of changing
economic cycles.

At Gowings, the Board of Directors are
shareholders, giving rise to our commitment
‘Investing together for a secure future’.

Transparent Communication

As an investor itself, Gowings values
transparent information. An audit review is
conducted half-yearly and formal audited
financial statements are provided annually
along with regular informal company updates.

All shareholder communication can be
accessed from the Company’s website
www.gowings.com or on the ASX’s website
www.asx.com.au.

Investing in Gowings

Gowings shares can be bought or sold
through the Australian Securities Exchange
under the ticker code GOW.

Gowings is internally managed and does
not pay performance fees to an external
manager in relation to the administration of
the company. There are no entry or exit fees
and no trailing commissions for investors in
Gowings.

Endless
Possibilities

Our People
Matter

We’re
Australian

Environmentally
Aware

Quality &
Value

Our
Values

Community

Customer
First

Working &
Investing
Together

Integrity

Commonsense
Pioneers

Everyone’s
Business

150th ANNUAL REPORT 2018 I Year ended 31 July 2018150th ANNUAL REPORT 2018 I Year ended 31 July 2018INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED
Our North Coast Commitment: 'Steady, Constant Growth'

Moonee Market

Moonee Vacant Land

Coffs Central

Harbour Drive Solitary 30

Sawtell Commons

Kempsey Central

Port Central

Gowings has made a considerable investment in the North
Coast of NSW. The area has, on an ongoing basis, been
a significant beneficiary of substantial infrastructure
investment by Local, State and Federal Governments. Many
billions of dollars have already been invested in upgrading
the Pacific Highway, the airports at Coffs Harbour and Port
Macquarie, local hospitals, TAFEs and Universities, and
of course connection to the NBN. Further infrastructure
investments have been earmarked, including the $1.2 billion
Coffs Harbour Bypass and a $156 million upgrade of Coffs
Harbour Hospital. Gowings strategy is to invest alongside
these infrastructure upgrades and benefit from the resultant
'steady, consistent growth' of the region.

The North Coast Regional Plan 2036 is the State Government's
blueprint for the development of the North Coast over the
next two decades. As a result of the infrastructure spending
and natural growth, it envisages a population increase of
76,200 and more than 46,000 new homes being built.

Gowings' investments on the North Coast are summarised below:

In Port Macquarie we have Port Central shopping centre and have lodged a
development application for $15.2 million additional retail on the adjacent vacant
site. We continue to be in discussion with Woolworths about opportunities for this site.

In Coffs Harbour we have Coffs Central shopping centre where the $35 million
development has recently been finalised. We have also lodged a development
application for the 222 lot Sawtell Commons housing subdivision and are
investigating mixed-use opportunities for the Solitary 30 site on Harbour Drive.

In Kempsey, we have Kempsey Central shopping centre where- in conjunction
with Kempsey Council and Federal Government-we are investing $7 million to
build a new cinema complex on the roof of our shopping centre.

In Moonee Beach, we have Moonee Market shopping centre which has recently
had a multi-million dollar upgrade, and we are investigating mixed-use
opportunities for the 9,000m² site that sits adjacent to the shopping centre.

Gowings media initiative ‘Coastbeat’ supports our investments on the North Coast
and showcases the best of local life, economy and events through print and digital
media platforms.

Population Growth *
2016-2036

76,200

+46,000

more homes required

Tourism Impact
2016

$3.7b

Regional Economy

12.2m

Tourist Visits

3RD

Most popular Australian tourist
destination by overnight stays

Regional Airport Passengers
2006-2016

250%

Increase

1,064,100(2016)

304,008(2006)

New Dwelling Construction
2016-2036

$11b

Projected Gross
Regional Product
Contribution

Pacific Hwy Freight Transport
2011-2031

83%

Increase

Coastbeat

* Source: North Coast Regional Plan 2036, published in
2017 by NSW Government Planning & Environment

This map of the Mid North Coast was commissioned by Gowings and illustrated by Peita Blythe in 2017

150th ANNUAL REPORT 2018 I Year ended 31 July 2018150th ANNUAL REPORT 2018 I Year ended 31 July 2018INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITEDManaging Director’s Review of Operations

Gowing Bros is now in its 150th year. This is a
milestone for the company, and I feel privileged to
be only the fourth managing director of our small
but vibrant company. This year we have made
several significant advances, yet there is still lots of
work ahead of us to take full advantage of all our
opportunities.

Key Developments

During the half we refinanced all our individual
property loans with the Commonwealth Bank.
We negotiated a new 5-year facility with 70%
of the $86 million underlying loan hedged
at a fixed rate. The facility also provides us
with a $30 million rotating working capital
facility. This working capital facility will allow
us to undertake the proposed development
works at Sawtell Commons and Harbour Drive
Solitary 30 sites. Another key aspect of the
new facility is that it allows us to move all our
shopping centres into individual trusts and out
of the existing company ownership structure.
This will provide more flexibility in the future,
in the event of introducing capital partners
or undertaking corporate reorganisations, to
potentially streamline shopping centre cash
flow to shareholders.

During the half, Gowings was granted a
wholesale Australian Financial Services
License. This License will allow Gowings to
leverage our proven track record of managing
investments without diluting existing
investors. Neil Rogan was appointed during
the half to lead this exciting new initiative.
We are considering establishing several new
wholesale funds, focusing in fields in which we
believe we have an established advantage or
an opportunity.

The Pacific Coast
Shopping Centres

At Coffs Harbour the re-development of Coffs
Central is nearing completion, Kmart has
opened and is trading strongly. BCU has taken
a lease over three quarters of the newly built
commercial office space for its new head
office, and half of the new ground floor retail
space. We welcome them to Coffs Central. We
are working on leasing up the balance of the
new retail space with the optimal mix of new
retailers. This leasing campaign which will take
18 to 24 months, should generate an additional
$1.4 - $1.6 million in speciality annual retail
income.

At Moonee Beach the leasing campaign started
2 years ago is drawing to a close with the
centre almost fully leased. Moonee is likely to
be a major beneficiary of the planned Coffs
Harbour bypass as it’s the only shopping
centre adjacent to the proposed new highway
between Sydney and Brisbane.

At Kempsey, a builder (O’Donnell and
Hanlon) has been contracted to build a new
four screen Cinema on top of our shopping
centre. This development is being supported
by Gowings, Kempsey Shire Council, the
Federal Government and Majestic Cinemas.
On expected completion in September 2019,
the cinema should provide a much-needed
entertainment and cultural hub for Kempsey
residents and the many tourists to the Macleay
Valley and beaches.

At Port Macquarie we have lodged a DA to
build new shops and 150 carparks on the
block of land adjoining our shopping centre.
This is to satisfy one of the pre-conditions for
exercising our option with Port Macquarie
Council over that land. During the half, Target
exercised its option to remain in the centre
for a further 5 years. We continue to have
constructive discussions with Woolworths
about joining us in the centre.

Sawtell Commons

A significant amount of work has gone into
progressing the planning approvals for our
approved residential subdivision adjacent to
Lyons Rd Sawtell, “Sawtell Commons”. We are
hopeful of receiving a construction certificate
for the first 8 blocks in the next few weeks. This
will allow us to start building display homes to
showcase the proposed 220-lot subdivision.
Sawtell Commons, is the last greenfield site
available for residential blocks east of the
Pacific Highway on the southern side of Coffs
Harbour. We are planning to start pre-sales
for Sawtell Commons in the near future and
have already received over 30 expressions of
interest from potential buyers. Revenue from
these sales, once civil works are complete, and
the contracts are finalised, should provide a
strong boost to underlying profit over the next
3 years.
This is of course subject to regulatory risk and
continuing favourable market conditions.

Our investments in the Coffs Harbour region
should all be beneficiaries of the $1.2 billion
Coffs harbour bypass project and the $156
million upgrade of Coffs Harbour Hospital.

Overview of Current Year
Financial Performance and
Outlook

The results for the year were impacted by
the development works at Coffs Central, as
existing retailers were given rental abatements
to compensate them for the disruption during
the construction process and capital that had
previously being earning income by way of
interest and dividends was deployed into:
the Coffs redevelopment; Lyons Rd, “Sawtell
Commons”; the Harbour Drive mixed-
use development site and Surf Hardware
International. A material improvement in
recurring earning is expected over the coming
few years as these investments begin to
generate positive income.

Final Dividend

The board has declared a fully franked
final dividend of 6 cents per share. We are
reintroducing the DRP to help preserve
capital. There is more detail on the above and
our other investments in the accompanying
commentary.

J. E. Gowing
Director
Sydney

Key Highlights

Profit after tax for the Year

$5.5m

$23.2 million in 2017

Final Fully Franked Dividends

6.0¢

6.0 cents in 2017

Total Shareholder Return

+4.7%

Net asset increase per share
plus dividends

Total Net Assets

$216.0m

$214.0 million in 2017

1868150th ANNUAL REPORT 2018 I Year ended 31 July 2018150th ANNUAL REPORT 2018 I Year ended 31 July 2018INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED

Managing Director’s Review of Operations

On behalf of the Board of Directors, I am pleased to comment on the results for the year ended 31 July 2018.

Financial Review

Net Assets per Share

$4.50

$4.00

$3.50

$3.32

$3.00

$2.50

$4.02

$3.77

Dividends per Share

DPS

Total Dividend

$4.43

$4.52

12.5c

12.0c

12.0

$6.4m

12.0

$6.4m

12.0

$6.4m

11.5c

$5.8m

11.0c

10.5c

10.0c

$7.000.000

$6.500.000

$6.000.000

$5.500.000

$5.000.000

$4.500.000

2014

2015

2016

2017

2018

2014

2015

2016

2017

2018

Net assets per share before tax on unrealised gains on equity, investment property, and freehold property increased 2.0% to $4.52 as at
31 July 2018 after the payment of 12c in dividends. Total Shareholder Return was 4.7% including the growth in net assets per share plus
dividends paid to Shareholders.

Net assets per share have grown steadiy over the past 5 years driven by the continued growth in our Pacific Coast Shopping Centre
portfolio as well as solid returns achieved in the Equity portfolio.

The Company paid a total of 12c in fully franked dividends for the 2018 year. The directors have reinstated the dividend reinvestment plan for the
final declared dividend to be paid on 13 November 2018.

The Company has maintained a prudent approach to dividends given the capital requirements of the Company having various development and
investment opportunities currently under consideration.

Net Profit After Tax ($million)

$22.0

$23.2

$19.1

$14.1

$5.5

2014

2015

2016

2017

2018

Key Metrics

For the year ended

31 July 2018

31 July 2017

31 July 2016

31 July 2015

31 July 2014

Net Assets

Net Assets per Share²

- Before tax on unrealised gains¹

- After tax on unrealised gains¹

Net profit after tax

Earnings per Share

Dividends per Share

Total Shareholder Return

$216.0m

$214.0m

$198.6m

$186.8m

$170.2m

$4.52

$4.03

$5.5m

10.15c

12.0c

4.7%

$4.43

$3.99

$23.2m

43.29c

12.0c

13.2%

$4.02

$3.70

$22.0m

40.92c

12.0c

9.8%

$3.77

$3.47

$19.1m

35.48c

12.0c

16.3%

$3.34

$3.16

$14.1m

26.10c

12.0c

15.2%

¹Unrealised gains on equity, investment property and freehold property.
²Net assets per share as at 31 July 2015 and 31 July 2014 have been restated for comparative purposes to reflect the 1 for 10 bonuss issue during
the 31 July 2016 financial year. Dividends per share have not been adjusted.

Net Profit After Tax for the year ended 31 July 2018 includes underlying income from ordinary activities such as rent, interest and
dividends. This year’s profit was impacted by, the rental abatements provided to retailers during the Coffs Central development, capital
that had previously being earning income by way of interest and dividends was deployed into capital works, and the uplift in the
current year due to revaluation of the Pacific Coast Shopping Centre Portfolio which was substantially lower than the revaluation uplift
in the prior year.

Shareholder Returns

The graph on the following page is compiled by Bloomberg and Andex Charts illustrating the growth in
value of Gowings as an investment (share price and dividends reinvested) over 40 years in relation to
other investments. An investment of $10,000 in Gowings in 1976 would be worth $1,515,924 in 2018.

150th ANNUAL REPORT 2018 I Year ended 31 July 2018150th ANNUAL REPORT 2018 I Year ended 31 July 2018INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED
A Strong Investment Over Time

E S T 1 8 6 8
GOWING BROS.LTD

“Investing Together for a Secure Future”
- John Gowing -

76777879808182838485868788899293949596979891907677787980818283848586878889929394959697989190Sources: Australian Bureau of Statistics, ASX Limited, Bloomberg Finance L.P., Commonwealth Bank of Australia, Melbourne Institute of Applied Economic and Social Research, MSCI Inc., Reserve Bank of Australia, Standard & Poors, Thomson Reuters.Notes: 1. One year returns are total returns from 30 June 2017, to 30 June 2018. Five, Ten, Twenty, Thirty and Forty-year returns are per annum returns to 30 June 2018. 2. Gowing Brothers Total Return data calculated by Bloomberg. 3. Index prior to January 1980 is the MSCI Australia Gross Total Return Index. From January 1980 the index is the Standard & Poors ASX All Ordinaries Accumulation Index. 4. MSCI World ex-Australia Gross Total Return Index. 5. S&P500 Total Return Index in AUD. 6. Data used in the construction of the index prior to January 1977 provided by the Reserve Bank of Australia. From January 1977 the index is the Commonwealth Bank All Series Greater than 10 Years Bond Accumulation Index. 7. Data used in the construction of the index prior to March 1987 provided by the Reserve Bank of Australia. From March 1987 the index is the Bloomberg AusBond Bank Bill Index. 8. Interest Rate prior to July 1981 is a short-term Government Bond rate. From July 1981 the interest rate is the Reserve Bank of Australia's Official Cash Rate. 9. Annualised rate of inflation.15%10%5%0%US$1.25US$1.00US$0.75US$0.5020%15%10%5%0%HOWARDKEATINGHAWKEFRASERGrowth of A$10,000with no acquisition costs or taxes & all income reinvested$10,000$100,000$1,000,000Stock MarketCrashIraq invades KuwaitAustralian dollar ﬂoatedAustralian population 7,032,034Life expectancy at birth males 69.6 yrsfemales 76.6 yrs"a recessionwe had to have"Asian Currency CrisisJohn Gowing appointed directorGowings 125th BirthdayGowings opens Wynyard storeGowings Market St store fully refurbished9900010203040506070809101112131415161718989900010203040506070809101112131415161718Copyright © 2018 Andex Charts Pty Ltd.Reproduction either in whole or in part is expressly prohibited without the written permission of Andex Charts Pty Ltd.www.andex.com.auDisclaimer:The information contained herein is intended for informational purposes only. It is not intended as investment advice, and must not be relied upon as such. No responsibility isaccepted for inaccuracies. Past performance does not guarantee future returns.15%10%5%0%INFLATION RATE9US$1.25US$1.00US$0.75US$0.50USD/AUD EXCHANGE RATE20%15%10%5%0%INTEREST RATE8HOWARDRUDDGILLARDABBOTTTURNBULL$1,515,92412.7% p.a.$1,466,41512.6% p.a.$1,115,54511.9% p.a.$764,92110.9% p.a.$361,8008.9% p.a.$275,4628.2% p.a.$63,8364.5% p.a.Lehman Brothers collapseUS subprime crisisSydney OlympicGamesEnron & HIH collapseSeptember 11 terrorist attacksSecond Iraq warBoxing Day tsunamiBREXITGowings Market St store fully refurbishedMarket St Building soldGowings purchases Port Central Shopping CentreAustralian population 24,960,000Life expectancy at birth males 80.4 yrsfemales 84.5 yrsINVESTMENTRETURNS15 YEARS10 YEARS20 YEARS30 YEARS40 YEARSGOWINGBROS212.0%7.1%8.9%8.3%12.6%AUSTRALIANSHARES310.3%6.2%8.8%9.1%12.3%INT.SHARES414.9%9.2%4.2%7.4%10.9%USSHARES518.7%13.1%5.5%10.6%13.1%AUST.BONDS64.4%6.1%5.8%8.0%8.6%CASH72.2%3.3%4.5%6.1%8.1%CPI1.9%2.1%2.6%2.8%4.2%Investment returns assume reinvestment of all dividends and entitlements. All ﬁgures are Australian dollars.INVESTMENT OVER TIMEA STRONG150th ANNUAL REPORT 2018 I Year ended 31 July 2018150th ANNUAL REPORT 2018 I Year ended 31 July 2018INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITEDManaging Director’s Review of Operations

Managing Director’s Review of Operations

Profit and Loss Statement

Gowings at a Glance

31 July 2018 $’000

31 July 2017 $’000

Strategic Equity Investments
Surf Hardware International (at cost)

Boundary Bend Limited

Carlton Investments

Hydration Pharmaceuticals

Murray Darling Food Company

DiCE Molecules

Event Hospitality Group

BBBSA Finance

TPI Enterprises Limited

Hexima

Blackfynn

EFTsure

Power Pollen Accelerated Ag Technologies
Other listed investments

Total

Private Equity Funds
Five V Capital

OurCrowd Australia

Our Innovation Fund

Macquarie Wholesale Co Investment Fund
Other Private Equity Funds

Total

Pacific Coast Shopping Centre Portfolio
Sub-regional shopping centres

Neighbourhood shopping centres
Borrowings

Total

Other Direct Properties
Sawtell Commons - residential subdivision

Harbour Drive Solitary 30 Site

Other properties
Borrowings

Total

Cash and Other
Cash

Investment lending facility

Tax liabilities
Surf Hardware International consolidation impact¹
Fair value impact of Sawtell Commons – residential subdivision2
Other assets & liabilities

Total

Net assets before tax on unrealised gains on equities and investment properties

Provision for tax on unrealised gains on equities, investment and direct properties

Net assets after tax on unrealised gains on equities and investment properties

16,000

14,834
5,648
2,665

2,319
2,237
1,654
1,400

1,363

749

403

333

260
4,318
54,183

1,242

1,141

750

-
316

3,449

199,861

48,800
(89,745)

158,916

11,500

3,200

16,850
(1,600)

29,950

4,065

(6,200)

(991)

(2,118)
1,410

(3,834)

242,664

(26,699)

215,965

16,000

13,961
5,521
2,003

2,045
1,230
1,578
-

2,801

749

250

-
3,831
49,969

300

1,092

750

884
275

3,301

173,280

45,300
(56,023)

162,557

9,044

3,190

16,366
(1,675)

26,925

4,435

3,000

(7,067)

(1,581)

-
(3,621)

(4,834)

237,918

(23,942)

213,976

¹ Difference between the investment in Surf Hardware International (at cost) and net assets attributable to the group on consolidation.
² Fair value of property is based on directors’ valuation, however the property is recorded at cost in the statement of financial position as required by Australian Accounting
Standards.

Commentry

The Company’s focus is to preserve and grow the
value of its underlying financial and real assets and for
Net Income from Ordinary Activities to be the principle
source of income to pay ordinary dividends.

Total Net Income from Ordinary Activities of $10.2
million was 12% lower than the prior corresponding
period and relates mainly to the reduction in investment
property income due to abatements provided during
construction and redevelopment of the centres. There
was also a reduction in interest and dividend income
earned due to lower cash and share portfolio balances.

Total Head Office Expenses of $3.7 million were 9%
lower than the prior corresponding period and were
largely due to a reduction in employee expenses and
travel costs.

Investment properties – unrealised gains of $5.6
million for the current year was substantially lower
than the prior year of $23.3 million. The current year
increase related to the revaluation of the Coffs Central
shopping centre during the year after the successful
redevelopment of the centre and a better than expected
start to trading for the new full line Kmart store.

Equity – unrealised impairment of $1.5 million relates
to the write down of the investment in TPI Enterprises
Limited.

SHI – consolidation acquisition cost of sales
adjustment – GBL acquired Surf Hardware
International on 16 December 2016 and as a result of
Australian Accounting Standards was required to record
SHI inventory at fair value as at the date of acquisition.
This represented an uplift of $3.1 million to the carrying
value of inventory compared to cost. Of this $3.1

million uplift, $0.5 million has been recorded as cost of
sales as at 31 July 2018 compared to the $2.6 million in
the prior year. The uplift amount has now been totally
released through cost of sales and will not appear in
future periods.

Borrowings Break Costs of $1.8 million were incurred
with the consolidation of the groups financing facilities
into a single $116 million facility on the 18 July 2018
and relate to costs incurred in order to exit the previous
interest rate swap and financing facilities.

Other Consulting Costs of $0.4 million mainly due to
consulting costs associated with the sales campaign for
Port Central at the start of the financial year.

Profit After Tax was $5.5 million, compared to $23.2m
on the prior corresponding period.

For the year ended31 July 2018 $’00031 July 2017 $’000Net Income from Ordinary ActivitiesInterest income219672Investment properties8,1198,810Equities6181,173Managed Private Equities449173Surf Hardware International821802Total Net Income from Ordinary Activities10,22611,630Head Office Expenses Administration, public company and other3,6864,038Operational Profit6,5407,592Gains / (losses) on sale or revaluationInvestment properties – unrealised gains5,60023,302Investment properties – realised gains(11)-Equity – realised gains-5,696Equity – unrealised impairment(1,546)(518)Managed private equity(148)(318)Derivatives(418)367SHI Subsidiary AcquisitionAcquisition Costs(55)(473)SHI - Consolidation acquisition cost of sales adjustment(512)(2,578)OtherConsulting Costs(438)(120)Borrowings Break Costs(1,790)-Other Costs(72)-Other Income28(26)Profit Before Tax7,17832,924Income tax expense (1,725)(9,684)Profit After Tax5,45323,240150th ANNUAL REPORT 2018 I Year ended 31 July 2018150th ANNUAL REPORT 2018 I Year ended 31 July 2018INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITEDManaging Director’s Review of Operations
Pacific Coast Shopping Centre Portfolio

Coffs Central

Port Central

During the period, Gowings neared completion
on the $35 million development of Coffs
Central which included the extension of the
centre to the adjoining site on the corners of
Harbour Drive, Gordon and Vernon Streets.
The new extension includes one floor of
underground parking, ground and first floor
retail, second floor parking and third and
fourth floor commercial office space. 75% of
the new commercial office space has been
leased to BCU as an anchor tenant, which also
has 50% of the new ground floor retail space.

The building extension also included a
reconfiguration of the first floor for a new full
line Kmart which commenced trading in March
and an additional 20 specialty stores.

Provision has been made on the new building
to allow for an additional DA-approved hotel
with 5 floors of rooms and rooftop dining. We
continue to evaluate the economics of this
development which would be a great addition
for Coffs Harbour.

Moonee Market

Kempsey Central

The multi-million dollar upgrade of Moonee
Marketplace continued during the period,
including an all-weather roof, establishing
a food court area, installing new flooring
throughout and upgrading the amenities.
The upgrade has meant that Gowings has
successfully attracted new tenants and the
centre is now effectively leased. New centre
retailers include Russell’s Prime Meats,
Moonee Dental and Facial, La La Land indoor
play centre, Kinetic Martial Arts, Sugarmill
cafe, Lighthouse Health and Education and
Moon Dragon restaurant. Improved centre
occupancy has resulted in positive cashflow
with an associated significant appreciation in
the underlying value of the centre. The newly
funded Coffs Harbour bypass means that
Moonee Marketplace is well placed to capture
increased trade as it will be the first shopping
stop available to people travelling North, after
bypassing Coffs Harbour.

Gowings is also exploring development
opportunities for the adjoining vacant lot of
9,000sqm including retirement living, service
station and mixed-use options.

Port Central continues to be a core asset
that performs solidly within the Pacific Coast
Shopping Centre portfolio. With the Port
Macquarie Hastings region expected to grow
26% by 2036, the centre is well placed and
tenanted to capitalise on this forecasted
economic growth.

During the period Gowings lodged a DA for
a building on the adjoining block of land,
currently owned by Port Macquarie Hastings
Council. Gowings has a conditional purchase
option over this land. One of the conditions
is to submit and have a DA for a new building
with 150 additional car parks approved. This
DA will be considered by council and referred
to the Joint Regional Planning Authority. We
continue to hold constructive discussions
with Woolworths about joining us at Port
Central.

Work has now commenced on the new cinema
complex on top of Kempsey Central. The
cinema project is an arrangement between
Gowings, Kempsey Council and the Federal
Government with Majestic Cinemas being
appointed as the cinema operator. The cinema
will be completed in the final quarter of 2019.
The centre will continue to operate during the
construction phase with as little as possible
disruption to our retailers. The cinema will
drive increased foot traffic and sales by
attracting the local and tourist population into
the centre.

Surf Hardware International
($16 million)

We experienced another strong result from
our European region in FY18 who continued
their recent growth trajectory. Our Japanese
business also grew their sales during the
period and we successfully re-organised
our USA business, hiring two new senior
management staff, along with new sales
representatives in the all-important Hawaiian
and Californian territories.

Following on from these changes, the USA
business performed well in the last quarter of
the year and is now well positioned to grow in
FY19.

The Australasian business saw improved
results in the back half of the year and
manufacturing sales to Asia were up on the
prior year.

FY18 saw the launch of the FCS Freedom
Leash, a new product innovation which drove
considerable growth in this important category
and created momentum around the FCS
brand. Looking ahead to FY19, an extension of

the product line and additional manufacturing
capacity should support further growth in the
FCS leash category.

Our Softech Softboard business also
experienced strong growth in FY18 and
the brand continues to grow supported by
new products, the addition of key brand
ambassadors and a shift toward soft surfboards
for the beginner and intermediate surf markets.

The advent of wave pools and an increasing
number of surf schools targeting the growing
number of consumers wanting to try surfing for
the first time should support further growth in
all our businesses.

SHI’s portfolio expanded during the period
following the acquisition of the Kanulock
brand, a market leader in the premium
lockable roof rack tie-down category.

This acquisition is part of a broader strategy to
expand the business beyond the current surf
specialty channel and into the fast growing

Outdoor & Adventure markets.

Opportunities for future growth exist via
international expansion, extension of
existing product lines and further channel
development.

In FY19 we are planning growth across all
regions with a specific focus on the USA and
Australia.

Key focus areas will include leveraging
our new product initiatives, including the
new FCS board bag, bag & packs and travel
accessory categories, continuing the growth
in our softboard business and managing the
successful integration of the Kanulock brand
into the SHI business.

At 2018 year end we had upgraded our online
direct-to-consumer websites to the Shopify
platform. This should enhance the online
customer experience and allow SHI to build
meaningful online sales globally.

Michael Heath, General Manger of SHI

TPI Enterprises Limited
($1.4 million)

Murray Darling Food Company
($2.3 million)

remaining one to Packwood. This will mean
that even in the dry conditions substantial
amounts of fodder will still be able to be
produced on the land. Also, during the second
half a number of the older commercial ewes
were culled to reduce the overall flock size to
reduce running costs. At 30 June 2018 MDFC
was running 3,290 commercial ewes, with
2,084 stud ewes, and 673 stud rams. Even
given the difficult conditions in the second
half of the year MDFC was still able to record
a profit, a considerable effort considering the
drought.

The price for lamb has remained relatively
strong due to the low levels of supply but this
has been offset by the cost required to breed
the lamb. The board of MDFC believes that
the installation of the new irrigation pivots
will see the company through this difficult
period, allowing it to maintain stock levels to
capitalise on when conditions improve and the
industry returns to normal conditions.

TPI Enterprises Limited uses poppy straws to
manufacture narcotic raw materials (NRM) used
to create drugs such as morphine, thebaine,
oripavine, and codeine. TPI converts the raw
material into Active Pharmaceutical Ingredients
which are then processed into Finished Dosage
Formula (tablets) via its recently acquired
Norwegian facility. Additionally, TPI sells poppy
seed for culinary purposes.

TPI’s stock performance has been poor over the
last half following an earnings downgrade due
to limited imported Poppy Straw supply in 2H
2017, unfavourable foreign exchange rates and
softer than expected sales into the UK.

However, 2018 is looking to be a favourable
year as TPI expects to generate $50 million
in revenue and come closer to breakeven.
The Norwegian acquisition of Vistin was an
important strategic step for TPI as it has allowed
for vertical integration through the supply chain
and the immediate ability to add value to the
narcotic raw material produced in Australia
into a final tablet form in Norway. By expanding
down the supply chain TPI has potential to
significantly increase margin and broaden its
customer universe from a small number of raw
material customers to a wide range of end use
customers.

During the period Peter Robinson stepped
down as chairman being replaced by Simon
Moore, ex-managing director and global partner
at The Carlyle Group.

FY18 saw Murray Darling Food Company
(MDFC) enter its first full year of operations.
The year started strongly with the purchase
of “Packwood” an 840-acre property in
Condobolin NSW. This property complements
the existing Burrawang West Station “BWS”
(Ootha NSW) and Bombah (Tottenham NSW)
properties. Overall MDFC now has 18,268
acres of farmland over its three properties.
Packwood is a strategic acquisition as not only
does it provide the ability to carry more stock,
but it also comes with water licences, access
to a good supply of artesian water and also a
prime Lucerne growing paddock on the river.

During the first part of the year the team
at MDFC were busy clearing remnant
vegetation land and fencing to create new
grazing paddocks on BWS and Bombah. This
development activity helped add $1.0 million
to the carrying value of the land which was
supported by external valuations. From a
trading perspective the October ram sale was
another success setting industry benchmark
prices. However, in the second half of the
year, like all central NSW farmers, MDFC was
impacted by the tough drought conditions.
MDFC had to resort to purchasing fodder
from external sources which had not been
planned at the start of the year. To combat the
dry conditions the board of MDFC approved
the significant investment into 4 new centre
pivot irrigation systems which were installed
in July 2018, three deployed to BWS and the

Boundary Bend Limited
($14.8 million)

Hydration Pharmaceuticals
($2.7 million)

DiCE Molecules
($2.2 million)

Carlton Investments ($5.6
million) and Event Hospitality
Group ($1.7 million)

BBBSA Finance
($1.4 million)

Boundary Bend is both Australia’s and one
of the world’s leading producers of premium
extra virgin olive oil and Australia’s largest olive
farmer. Boundary Bend produces Australia’s
two top selling home grown extra virgin olive
oil brands, Cobram Estate and Red Island,
whose sales have grown by 27% over the last
4 years. It owns 2.3 million producing trees
on over 6,575 hectares of pristine Australian
farmland located in the Murray Valley region
of north-west Victoria. The underlying value
of this olive producing land has appreciated
strongly over the last few years. In addition to
growing and pressing olives and producing
olive oil, Boundary Bend operates a bottling,
storage and laboratory facility near Geelong.
Boundary Bend has expanded into the USA
with groves, an olive mill, bottling facilities,
laboratory and administrative offices in
Woodland, California.

With a growing demand for high quality
agricultural and horticultural produce from the
emerging Asian middle class, Gowings believes
Boundary Bend is well positioned for strong
growth in Australia, Asia and the USA.

Powerpollen ($0.3 million)

During the period Gowings made an investment
into PowerPollen, an early stage Agricultural
Bio Tech company based in Iowa, USA, that is
working on an advanced yield enhancement
technology that enables higher productivity
in seed and grain production. PowerPollen
has created a paradigm shift in agriculture
by revolutionizing how plants reproduce,
providing unprecedented control of pollination
that simplifies corn seed production while

enabling hybrid production and higher profits
in current low profit crops like wheat. This
breakthrough may increase farmer profits and
global food supplies that are necessary to feed
the growing global population.

Since Gowings’ recent investment, PowerPollen
has negotiated an additional investment from
two major partners and users of its technology.
This was an up-round, resulting in a 10%
increase in Gowings investment over this short
period. PowerPollen won the Technology
Association of Iowa AgTech company of the year
award for 2018.

Hexima ($0.7 million)

Hexima is a biotechnology company actively
engaged in the research and development
of plant-derived proteins and peptides for
applications in human therapeutics and for the
genetic modification of crops. Hexima conducts
most of its research under contract with La
Trobe University and has five main areas of
interest: plant fungal disease, insect resistance,
human antifungal, non-melanoma skin cancer,
and multi-gene expression vehicle.

Hexima has been focusing on its flagship
research (HXP124) which presents the most
likely source of increased shareholder value in
the short to medium term. HXP124, is designed
to treat fungal nail infections and has secured
patents across USA, Japan, China, Mexico and
Europe. HXP124 kills nail fungi much better
than current treatments and looks to address a
market that is expected to grow to US$4.7b by
2021. During the period, Hexima has obtained
Human Research Ethics Committee approval
to conduct a clinical trial of HXP124 in patients
with fungal nail infections.

Hydralyte markets great-tasting clinical
hydration products scientifically formulated
to contain the correct balance of glucose and
electrolytes for rapid rehydration. Hydralyte
products have up to 75% less sugar and four
times the electrolytes compared to leading
sports drinks and are based on the World
Health Organization criteria for effective
rehydration. Hydralyte products fill a consumer
need by providing a solution that is both
appealing and clinically effective.

Hydralyte’s Canadian business continues to
deliver strong year on year growth but uptake
in the United States of America has been
slower than expected. Hydralyte anticipates
that increased investment in healthcare
professional education, and a rollout in the
regional grocery channel, will lead to a model
of success that could be extended to national
retailers in the USA. In addition, Hydralyte is
driving ecommerce sales in the United States
and continues to evaluate other global markets

Blackfynn ($0.4 million)

During the period Gowing Bros made an
investment in Blackfynn, a Philadelphia
based early stage company that is
accelerating new treatments for neurological
disease. Blackfynn aims to create better
therapeutics through data and treat
neurological diseases like Epilepsy,
Parkinson’s disease and Alzheimer’s. Their
solutions cover closed loop implanted
devices for personalised therapy, analysing
real-time patient data to improve clinical
outcomes, lower cost, and facilitating the
discovery of biomarkers and targets for drug
development.

DiCE Molecules is a privately held US
biotechnology company with a technology
platform that brings the power of directed
evolution to the field of synthetic chemistry.
DiCE’s technology platform, which originated
at Stanford University, has the potential to
revolutionise small molecule drug discovery.
DiCE’s business model includes the generation
of milestone and royalty revenue through
drug discovery collaborations, with Sanofi and
Genentech. It also looks to monetise its own
drug development assets, the most advanced
of which is in preclinical studies.

DiCE’s technology has been industrialised and
is now producing valuable drug development
candidates. During the period DiCE triggered
its first significant collaboration milestone,
and they expect to earn milestone payments
in excess of $US10 million by the end of 2019.

DiCE has recently completed a further
financing round at a step up in valuation, led
by biotech-focused venture capital investors
and we expect these domain-expert investors
to bring valuable knowledge and network
connections to DiCE’s quickly expanding
business.

BBBSA Finance (BBBSA) is a specialist
financial services lender offering business
loans, valuations and M&A advice and
execution services, specifically tailored for
financial intermediaries. Clients include
mortgage brokerage and financial planning
firms, wealth management; insurance and
finance brokers; residential real estate
management and tax & accounting practices.
Its advice and product offerings are broad
and include a specialisation in SME and small
listed companies.

The Group is headquartered in Sydney,
Australia. Over the past 7 years BBBSA has
launched a diverse range of innovative cash
flow backed finance products for the financial
service and property industries, particularly
for mortgage brokers. This has enabled
BBBSA to grow to almost $10 billion dollars
of underlying mortgages, real estate rental
contracts and financial planning books that
underpin its loan book security and which
serve as the source of cashflows that support
and service its loan book.

In late FY2018, Gowing’s made a strategic
investment and assumed a Board seat in
BBBSA Finance Pty Ltd – bbbsa.com.au

Carlton Investments Limited is an investment
company listed on the ASX. Incorporated in
1928, Carlton’s principal activities are the
acquisition and long term holding of shares
and units in entities listed on the ASX.

The Group has a significant holding in
Event Hospitality & Entertainment (EVT)
- a group engaged in cinema exhibition in
Australia, New Zealand and Germany, hotel
management and ownership (Rydges, Atura
and QT), operation of the Thredbo Alpine
Resort and investment property ownership.
Carlton, through its interest in Event has a
significant investment in the Australian and
New Zealand tourism sector, a growth sector
benefiting from Chinese and international
tourists looking for safe destinations.

EFTsure ($0.3 million)

EFTsure is an Australian owned IT company
incorporated to deliver electronic payment
authentication services to its customers.
EFTsure has developed a real-time
authentication software solution which verifies
payee name data with BSB and account numbers
to prevent fraud and erroneous transactions by
cross checking data prior to release of funds and
ensuring authentic payments.

We are pleased to see strong expansion of
EFTsure over the period, with key updates
including the signing of multiple councils
(50% of NSW councils expected to sign on by
end 2018) and further engagement with major
Australian banks.

We have also been pleased to see the further
growth in customers, new product features
and the corresponding expansion of all aspects
of the service.

150th ANNUAL REPORT 2018 I Year ended 31 July 2018150th ANNUAL REPORT 2018 I Year ended 31 July 2018INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITEDGrowth Rate of Strategic Equity Portfolio
From 1987 To 2018
Gowings has a history of strong results within its strategic equity portfolio & has successfully
outperformed the ASX by more than 36% over a 30 year investment period.

E S T 1 8 6 8
GOWING BROS.LTD

“Performance Proven Over Time”
- John Gowing -

1988

1991

1995

1998

1999

2000

2001

2006

2007

2008

2013

2014

2016

2017

2018

Oct 1987 - known as
'Black Monday', the
global stock market
crashed.

Gowings took
advantage of
undervalued
shares in the stock
market and added
$2M of shares to
its investment
portfolio.

Gowings sold off
its investment in
Lavington Shopping
Centre. The sale
generated a healthy
profit which was
sufficient to meet
Gowings' capital
investment plans
over the next few
years.

Many stock
valuations were
considered
unsustainable.
Subsequent
weakness and
unprecedented
volatility in the
Australian and
world equity market
led Gowings'
to realise these
investments.

Gowings began
actively reviewing
its investments in
the wholesale and
venture capital
markets. First step
in this direction
was a commitment
at wholesale level
to Macquarie
Direct Investment,
a subsidiary of
Macquarie Bank.

Gowings gained
exceptional returns
from its equity
investment in Open
Telecommunica-
tions Ltd, which
generated over $4M
in profits. Another
tech investment,
Peg Technology Ltd
had a market value
of $4.8M, $3M in
excess of its original
entry price.

The slump of tech
stocks, negatively
affecting the
market value of
our investment in
PEG Technology
Limited to $500K.
On a positive note
Gowings received
its first return
from Macquarie
Investment
Trust IIIB of
approximately
$476K when the
fund successfully
took their stake
in HPAL Limited
to IPO.

Good returns mainly
from revaluation of
shares. Boundary
Bend doubled in
its market value,
while the Carlton
Investment more
than tripled our
original purchase
price with a market
value of $3.9M, 39%
increase from last
year.

Boundary Bend
increased a further
57% during the year
to a MV of $6.4M.
Carlton Investment
up 29% from prior
year with market
value to $5M,
representing a total
of 330% increase
from cost to date.

$18M realisation
of the investment
in Blackmores, in
excess of $2.9M paid
out in dividend over
the years. Over 300%
appreciation in the
market value of
Boundary Bend Ltd
since acquisition.

Realisation of
financial services
shares provided a
net gain of $3.55M
(ANZ $1.25M,
Westpac $1M & BT
Financial Mgmt
$1.3M)

Gowings took the
opportunity of
the weak stock
market to increase
its holdings in
resource & energy
stocks, increasing
its weighting in the
shares portfolio to
approximately 25%.

Investments witch
increased in market
value over the last
year includes: BHP
Billiton increased
33% to $17.3M;
Blackmores
increased 73%
to $4.7M (7x
increase to date);
and Woolworths
increased 43% to
$4.9M (5x increase
to date). Top
realised gains
include: Rural Press
(profit of $1.8M);
West Australian
Newspaper (profit of
$1.1M); and Noni B
(profit of $1M).

Global Financial
Crisis. Shares were
realised included a
range of write-offs
and negative
returns, notably the
$2.5 million write
off of Coolangatta
Notes and $1.4
million in Babcock
Brown. Top Gains
are: Soul Pattinson
$3.5 million realised
gains, Westpac $2
million, ANZ $1.7
million, Invocare
$1.9million, Hills
$1.4million, Rio
Tinto $1.3 million
(83% gain).

Major movements
for the year
included increase
to the carrying
value of DiCE
Molecules Holdings
LLC by 47% to
$2.2M; Hydralyte
by 33% to $2.6M;
Boundary Bend by
22% to $14.8M; and
SEEK Ltd by 25%
to $1.5M. These
gains however
were partially
offset against an
impairment in the
carrying value of
TPI Enterprises of
$1.5M as the share
price fell over 20%
during the year.

Returns

13%

-2%

14%

23%

-12%

25%

20%

Growth of A$10,000 investment in Gowings
listed equity portfolio since 1 Aug 1986, with no
acquisition costs or taxes & all income reinvested

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

Gowings Listed Equity Portfolio

ASX AllOrd Accum Index

Bloomberg Ausbond Bank Bill Index (BAUBIL)

RBA Cash Rate

$250,000

$200,000

$150,000

$100,000

$50,000

GOWINGS

$269,628
10.84% p.a.

ASX All Ord

$210,800
9.99% p.a.

BAUBIL

$76,999
6.59% p.a.

RBA Cash Rate

$63,552
5.95% p.a.

Managing Director’s Review of Operations
Other Direct Properties
Other Direct Properties

New Ventures - Media & Wealth Management

OurCrowd Australia
($1.1 million)

Our Innovation Fund
($0.8 million)

Five V Capital
($1.2 million)

Sawtell Commons
Residential Subdivision

1868 Capital Pty Ltd

Coastbeat Pty Ltd

OurCrowd is one of the leading global equity
crowdfunding platforms for accredited
investors. Managed by a team of seasoned
investment professionals, OurCrowd vets and
selects opportunities, invests its own capital,
and brings companies to its accredited
membership of global investors. OurCrowd
provides post-investment support to its
portfolio companies, assigns industry experts
as mentors, and takes board seats.

The OurCrowd community of almost 17,000
investors from over 110 countries has reached
$1 billion in funds under management
with over 110 portfolio companies and
funds. Gowings has made a $US0.9 million
investment into OurCrowd of which
$US0.68 million has been deployed across
21 companies covering healthcare, tech
hardware, software, fintech, and mobility, the
remaining capital being available for follow
on rounds in successful companies. Our
best performers to date are Zoomcar, a self-
drive car rental company headquartered in
Bangalore, with an unrealised return of 41%,
and Wave, a financial and accounting software
company, which has an unrealised return of
66% to date.

Gowings takes a diversified approach with the
philosophy that out of ten investments, two
will fail, six will provide an acceptable return,
and two will be top performers that drive the
portfolio return. Our connection to OurCrowd
keeps us informed as to what is happening
globally in the early to mid-stage technology
space. We are hoping to leverage this with
our new funds management strategy and
platform.

Our Innovation Fund LP (“OIF”) is an early stage
venture capital limited partnership (ESVCLP)
fund which invests in Australian based early
stage, innovative technology businesses with
the potential for high growth and attractive
returns. The Fund is run by a team with
decades of experience investing in and building
technology businesses and is capitalising
on the Australian government's National
Innovation and Science Agenda, seeking to
stimulate the Australian innovation ecosystem
with various grants and tax concessions.

The Fund makes investments throughout
various stages of company development
(from seed through to early expansion),
with attention given to the experience and
mindset of the founders of potential investee
companies, potential for the long-term
success of business models and the potential
investment returns for Limited Partners in the
Fund.

OIF has continued to deploy capital over the
period with five new investments across the
financial year, taking the total portfolio up
to nine companies including investments in
enterprise software, hardware/devices and
financial technology businesses. Performance
has been in line with expectations and we
are encouraged by the progress the portfolio
companies have made.

OIF adds value to portfolio companies helping
them to grow and succeed, and the Fund is
continuing to look for solid opportunities to
deploy further capital. The management of OIF
has a close relationship to OurCrowd and also
holds an investment in EFT Sure.

Five V Capital has been set up and managed
by Adrian MacKenzie and Srdjan Dangubic,
experienced Australian private equity and
venture capital managers with whom Gowings
have enjoyed a long relationship. Gowings
have committed $1 million to Five V’s Fund II
(together with co-investment amounts to date
of $0.6 million) which invests in businesses
across Australia and New Zealand. The
principals of Five V Capital have committed
a substantial amount of their own capital to
Fund II, driving alignment of interests between
the managers and investors.

Over the year Five V has made significant
investments into portfolio companies
including RateSetter Australia, Education
Perfect and The Probe Group. Five V’s recent
investment in The Probe Group saw the
fund run a simultaneous acquisition and
combination of two Customer Management
Outsourcing businesses run by a market
leading management team. The combination
has created a market leading business and
enabled the delivery of meaningful synergies.

The portfolio is performing well, with a robust
and healthy pipeline to deploy the remaining
committed capital. During the period we
received a return of $0.1 million as part of Fund
II interest in Five V’s initial Fund I.

Gowings established Coastbeat in December
2017 due to the significant stake we hold in
the North Coast of NSW though the ownership
of the Pacific Coast Shopping Centre portfolio
and other properties such as Sawtell
Commons & Harbour Drive Solitary 30 Site.

We have created a digital and print media
platform where the Coastbeat community
can communicate, share and learn more
about the region. Supporting the locals by
showcasing their work, creating jobs in the
area and care for our environment were also
key motives behind its creation. We have
successfully secured regional foundation
sponsors including Destination Coffs Coast
and advertising revenues have a positive
outlook.

Sawtell Commons, ‘between the mountains
and the sea' is a DA approved residential sub-
division located near Sawtell, 8km South of
Coffs Harbour.

Development approval has already been
secured for 165 lots and a second application
for 220 lots has been submitted to Council
for approval. Block sizes range from 450m2
to 850m2, all with North-South or East-West
orientation with access to cycleways and
pathways connecting natural vegetation
areas to creek reserves and parklands.

First stage release and pre-sales are expected
to commence in the last quarter of 2018.

Due to strong market demand for residential
land in Coffs Harbour, the expression of
interest campaign that we ran in Coastbeat
magazine has already attracted over 30
enquiries from prospective EOI purchasers
that if converted would result in pre-sales of
over $10 million.

Harbour Drive Solitary 30
Development Site

Gowings continues to hold and undertake
development planning for the 3,000m²
development site at the prominent Jetty
Village in Coffs Harbour.

The site is considered one of the best
development sites in Coffs Harbour and its
use is currently being evaluated subject to
some potential heritage issues for residential,
hotel and mixed use.

Gowings, under four generations of the Gowing
Family has prospered through 150 years of
economic booms and busts, world wars and
market crashes. Gowings has been investing
for decades and as part of this focus was one
of the founding investors in Woolworths. In
the 1950’s, a significant reallocation of capital
was made into listed equities. Since then, the
Company’s investment portfolio mix has shifted
between equities, property, and private equity
investments according to the prospective
outlook for each one.

'1868 Capital' - Gowings’ Australian Financial
Services Licensed business - utilises experience
in investing for the long term across multiple
asset classes and provides these opportunities
to investors to co-invest alongside Gowings.
1868 Capital will develop a range of funds for
investors based on the following principles:

• The funds are aligned to the core values

of Gowings

• Management are experienced in the

sector and have invested in the business

• There are barriers to entry in the chosen

market

• The business operates in a market niche

with defined global growth path

• The operating model of the business is
aligned to a number of global trends

• The business is fairly priced

• The Gowings network can add value to

the business.

Within each fund, Gowings will be a
cornerstone investor and expects to be
launching several funds over the next year.

150th ANNUAL REPORT 2018 I Year ended 31 July 2018150th ANNUAL REPORT 2018 I Year ended 31 July 2018INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITEDThe Board of Directors

The Board of Directors

Jonathan West

Chairman and Non-executive Director
Bachelor of Arts, PHD (Harvard)
Shareholdings: 477,581 shares

Professor West was appointed Chairman of the Company in 2016 and is a member of the
Audit Committee.

Professor West has served as a strategic and investment advisor to the Company over the
past ten years as an external consultant.

Professor West has devoted most of his academic career to Harvard University, where he
spent 18 years and was Associate Professor in the Graduate School of Business.

In addition to his academic career, Professor West has extensive International and
Australian business experience.

He is a board member of Boundary Bend Ltd, the Hydralyte Pharmaceuticals Trust, the
Bruny Island Cheese Company and chairman of Hexima Ltd.

John Gowing

Managing Director
Bachelor of Commerce, CA, CPA
Shareholding: 20,881,150 shares

John serves as Managing Director and is a member of the Remuneration Committee.

Over the years, John has steered the Company through the various global economic
times and has overseen significant expansion of the Company.

John was first appointed as Non-executive Director of the Company upon completion of
his commerce degree from the University of New South Wales in 1983. John’s experience
includes Arthur Young now known as Ernst & Young where he worked for 4 years in the
audit division. After finishing his professional practice year and upon graduating as a
chartered accountant, he accepted a fulltime position with the Company as Managing
Director in 1987 and he continues in the role.

John Parker

Non-executive Director
Bachelor of Economics
Shareholding: 55,000 shares

John has served as an independent Non-executive Director of Gowings since January
2002. John is a coach with Foresight’s Global Coaching, providing one-to-one business
coaching to senior executives in Australia. John is Chairman of the Audit Committee.

John brings considerable experience to the board with over 33 years in equities research
and funds management in Sydney, London and South Africa.

Sean Clancy

Non-executive Director
Diploma of Marketing
Shareholding: 5,000 shares

Sean was appointed as an independent Non-executive Director of the Company in 2016
and is Chairman of the Remuneration Committee and member of the Audit Committee.

Sean grew his own business Creative Sales and Marketing Group from 1989 until 2007,
when the business was sold to Clemenger BBDO. He has been a businessman with a
career focus on sales and marketing. He successfully established and is currently CEO of
Transfusion Ltd a business specialising in shopper marketing, licensing, merchandising and
below the line marketing. Sean is a non-executive director of Mortgage Choice Ltd and is
Board Ambassador to Business Events Sydney. He is also Chairman of Metropolis, a brand
marketing digital and media agency and Touch To Buy, a mobile application specialist.

Associate Directors*

Ellis Gowing

Associate Director
Bachelor of International Business
Shareholding: 55,368

Ellis has a degree in International Business from the University of Wollongong, he
graduated in 2013. He has been working since 2013 with chartered accounting firms, with
a focus on investment clients.

Working in business advisory has given Ellis knowledge of the bureaucratic systems
companies and individuals must navigate on their road to success and wealth generation.
His contact with clients has engendered Ellis with great communication skills, this
experience should render Ellis’ services to the company invaluable now, and moving
forward.

James Gowing

Associate Director
Bachelor of Business, CA
Shareholding: 61,909

James graduated from UTS with a Bachelor of Business in 2014 majoring in Accounting
and Marketing. He has worked for William Buck since November 2014, primarily in Audit
and Assurance dealing with a wide range of clients in and around Sydney. James is also a
qualified Chartered Accountant.

While young, James’ work ethic and commitment to furthering his expertise in the field of
accounting will, as the next generation of the family, prove invaluable to the future of the
company and its direction. Importantly James’ work in auditing has given him an insight
into how successful and poor businesses are run.

*Associate Directors have access to board papers and are invited to attend board mettings in an observer
capacity. Associate Directors do not hold any voting rights.

150th ANNUAL REPORT 2018 I Year ended 31 July 2018150th ANNUAL REPORT 2018 I Year ended 31 July 2018INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITEDExecutive Management

Neil Rogan

Head of Wholesale Funds Management
Bachelor of Arts and a Grad Dip Commerce

Neil Rogan was appointed as Head of Wholesale Funds Management for Gowings (1868
Capital) on 30 April 2018. Neil will be responsible for the development and growth of 1868
Capital, Gowings Funds Management Business as well as managing key strategic projects.

Neil has more than 25 years in the financial services industry having most recently been
the General Manager Investment Bond Division Centuria Life, prior to this Neil held
several senior roles at AMP Ltd including; Head of Marketing Campaigns, Head of Product
Marketing and leading the changes for the introduction of MySuper in 2013.

Throughout 2014, Neil was a NSW Council Member of the Australian Marketing Institute
and has chaired several Financial Services Council (FSC) sub-committees including the
judging panel for the FSC/Deloitte Future Leaders Award.

Robert Ambrogio

Chief Financial Officer
Bachelor of Economics, CA

Robert was appointed as Chief Financial Officer on 1 February 2017 and has over 20
years’ experience in managing and leading finance teams across advertising, marketing
and social services sectors. Robert’s experience comes from his past employment with
Arthur Andersen, XM Holdings, Creative Activation, and MTC Australia.

Robert is a Member of the Institute of Chartered Accountants in Australia and New
Zealand.

Belinda Flatters

General Counsel and Company Secretary
Dip Law SAB, FGIA FCIS

Belinda was appointed Company Secretary of Gowing Bros. Limited on 13 March 2017.
Belinda joins Gowings after a 19 year career as an in-house corporate counsel, 15 years of
which she held the dual roles of company secretary and in-house counsel for a number of
different listed entities. Belinda’s experience comes from previous roles held with CBHS Health
Fund, Pan Pacific Petroleum, Worley Parsons, Novus Petroleum and Customers Limited.

Belinda was admitted as a solicitor of the Supreme Court of New South Wales in 1998,
she was awarded the Graduate Diploma of Corporate Governance in 2005 and was
admitted as a Fellow of the Governance Institute of Australia in 2011.

150th ANNUAL REPORT 2018 I Year ended 31 July 2018150th ANNUAL REPORT 2018 I Year ended 31 July 2018INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITEDDirectors’ Report

Directors’ Interests

Your Directors are pleased to present their report on the Company for the year ended 31 July 2018.

The following persons were directors or executives of Gowing Bros. Limited either during or since the end of the year.

Results

For the year ended

31 July 2018 $'000

31 July 2017 $'000

Operating profit for the year before income tax

Income tax expense

Net profit after income tax

Net profit attributable to members of Gowing Bros. Limited

7,178

(1,725)

5,453

32,924

(9,684)

23,240

23,242

Dividends

$3,217,975

$3,220,816

A final fully franked
dividend of 6.0 cents per
share is to be paid to
shareholders on
13 November 2018

An interim fully franked
dividend of 6.0c per
share was paid to
shareholders on
26 April 2018

A final fully franked
LIC dividend of 6.0c
per share was paid to
shareholders on
26 October 2017

An interim fully franked
LIC dividend of 6.0c
per share was paid to
shareholders on
27 April 2017

Review of Operations

The operations of the Company are reviewed in the Managing Director’s ‘Review of Operations’ on page 10.

Environment
The Company is committed to a policy of environmental responsibility in all its business dealings. This policy ensures that when the Company
can either directly or indirectly influence decisions that have an impact on the environment, this influence is used responsibly.

Principal Activities
The principal activity of the Company is investment and wealth management. The Company maintains and actively manages a diversified
portfolio of assets including long-term equity and similar securities, investment properties, managed private equity, property development
projects and cash.

Significant Changes in the State of Affairs
There were no significant changes in the state of affairs of the Company other than as disclosed elsewhere in this report.

Matters Subsequent to the End of the Financial Year
No matter or circumstance has arisen since the end of the financial year which has significantly affected, or may significantly affect, the operations
of the Company, the results of those operations or the state of affairs of the Company in future financial years.

Likely Developments and Expected Results of Operations
Further information on likely developments in the operations of the Company is included in the Managing Director’s ‘Review of Operations’
on page 10.

SharesProfessor J. West Non-Executive Chairman BA (Syd), PHD (Harvard) Director since April 2016 Member of the Audit CommitteeProfessor West is a former Associate Professor in the Graduate School of Business at Harvard University and is an experienced global businessman No other directorships held in listed companies over the past 3 years477,581J. E. Gowing Managing Director Executive Director Bachelor of Commerce Member of Chartered Accountants Australia and New Zealand Member of CPA Australia Member of the Remuneration Committee Director since 1983 No other directorships held in listed companies over the past 3 years20,881,150Neil Rogan General Manager Bachelor of Arts and a Grad Dip CommerceMr Rogan was appointed on 30 April 2018 as the Head of Wholesale Funds Management and has more than 25 years experience in the financial services industry. Mr Rogan's experience comes from his previous roles as General Manager Investment Bond Division Centuria Life, prior to this Neil held several senior roles at AMP Ltd._J. G. Parker Non-Executive DirectorBachelor of Economics Director since 2002 Chairman of the Audit CommitteeMr. Parker is a coach of senior executives, with over three decades as an investment professional. No other directorships held in listed companies over the past 3 years55,000S. J. Clancy Non-Executive Director Diploma of Marketing Director since April 2016 Chairman of the Remuneration Committee Member of the Audit CommitteeMr Clancy is an experienced businessman with a focus on sales and marketing and is presently a director of Mortgage Choice Limited, Metropolis Pty Ltd, Transfusion Pty Ltd and Touch To Buy Pty Ltd.5,000Robert Ambrogio Chief Financial OfficerBachelor of Economics, CAMr Ambrogio was appointed as Chief Financial Officer on 1 February 2017 and has over 20 years’ experience in managing and leading finance teams across advertising, marketing and social services sectors. Mr Ambrogio’s experience comes from his past employment with Arthur Andersen, XM Holdings, Creative Activation, and MTC Australia. _150th ANNUAL REPORT 2018 I Year ended 31 July 2018150th ANNUAL REPORT 2018 I Year ended 31 July 2018INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED
Meetings of Directors

Attendance at Board, Audit Committee & Remuneration Committee meetings by each Director of the Company during the financial year is set out
below:

Board Meetings

Audit Committee Meetings

Remuneration Committee Meetings

Meetings eligible
to attend

Attended

Meetings eligible
to attend

Attended

Meetings eligible
to attend

Attended

Prof J. West

J. E. Gowing

J. G. Parker

S. J. Clancy

Remuneration Report

The Company’s remuneration report, which forms a part of the Directors’ Report, is on pages 36 to 38.

Corporate Governance
The Company’s statement on the main corporate governance practices in place during the year is set out on the Company’s website at http://
gowings.com/reports-announcements/

Auditor’s Independence Declaration
A copy of the Auditor’s Independence Declaration as required under section 307C of the Corporations Act 2001 is set out on page 79.

Shares Under Option
There were no unissued shares under option at the date of this report.

Indemnification and Insurance of Directors and Officers
The Company’s constitution provides an indemnity for every officer against any liability incurred in his/her capacity as an officer of the Company
to another person, except the Company or a body corporate related to the Company, unless such liability arises out of conduct involving lack
of good faith on the part of the officer. The constitution further provides for an indemnity in respect of legal costs incurred by those persons
in defending proceedings in which judgement is given in their favour, they are acquitted or the court grants them relief. During the year the
Company paid insurance premiums in respect of the aforementioned indemnities. Disclosure of the amount of the premiums and of the
liabilities covered is prohibited under the insurance contract.

Non-Audit Services
The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s expertise and
experience with the Company are important.
The Board of Directors has considered the position in accordance with advice received from the Audit Committee and is satisfied that the
provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act
2001. The Directors are satisfied that the provision of non-audit services by the auditor, as set out below, did not compromise the auditor
independence requirements of the Corporations Act 2001 for the following reasons:

• all non-audit services have been reviewed by the Audit Committee to ensure that they do not impact the impartiality and objectivity of

the auditor;

• none of the services undermine the general principles relating to auditor independence as set out in APES110 Code of Ethics for

Professional Accountants, including reviewing or auditing the auditor’s own work, acting in a management or a decision-making capacity
for the Company, acting as advocate for the Company or jointly sharing economic risk and rewards.

Proceedings on Behalf of the Company
No person has applied for leave of court to bring proceedings on behalf of the Company or intervene in any proceedings to which the Company
is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings.

The company was not a party to any such proceedings during the year.

Audit and Non-Audit Fees
During the year the following fees were paid or payable for services provided by the auditor of the Company and its related practices.

2018 $

2017 $

Audit services

Audit and review of financial reports and other audit work under the
Corporations Act 2001

167,500

162,000

Taxation services

Tax compliance services, including review of Company income tax returns

79,500

68,000

Rounding of Amounts
The Company is of a kind referred to in ASIC Corporations (Rounding in the Financial/ Directors’ Reports) Instrument 2016/191 issued by the
Australian Securities and Investments Commission relating to the “rounding off” of amounts in the Directors’ report and financial report.
Amounts in the Directors’ report and financial report have been rounded to the nearest thousand dollars in accordance with that Legislative
Instrument, unless otherwise indicated.

Environmental Regulation
No significant environmental regulations apply to the Company.

This report is made in accordance with a resolution of the Directors of Gowing Bros. Limited.

Professor J. West
Director
Sydney
11 October 2018

J. E. Gowing
Director
Sydney
11 October 2018

150th ANNUAL REPORT 2018 I Year ended 31 July 2018150th ANNUAL REPORT 2018 I Year ended 31 July 2018INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED

Remuneration Report

The Remuneration Report is set out under the following main
headings:

• Principles used to determine the nature and amount of

remuneration

• Details of remuneration
• Service agreements
• Additional information

The information provided in this remuneration report has been audited
as required by section 308(3C) of the Corporations Act 2001.

Principles used to Determine the Nature and
Amount of Remuneration
It is the Company’s objective to provide maximum stakeholder benefit
from the retention of a high quality board and executive team by
remunerating Directors and executives fairly and appropriately with
reference to relevant employment market conditions and the nature of
Company operations.

The Board has established a Remuneration Committee which consists
of the following Directors:

• S. J. Clancy, Chairman of the Remuneration Committee
• J. E. Gowing, Managing Director

Non-Executive Directors

For Non-executive Directors, remuneration is by way of Directors’ fees
as described below. For the Executive Director and senior executives,
remuneration is by way of a fixed salary component and a discretionary
incentive component as described below.

Persons who were Non-executive Directors of the Company for all or
part of the financial year ended 31 July 2018 were:

• Prof. J. West, Chairman of the Board
• J. G. Parker
• S. J. Clancy

Directors’ Fees
The remuneration of Non-executive Directors is determined in
accordance with the Directors’ remuneration provisions of the
Company’s constitution. Fees and payments to Non-executive Directors
reflect the demands which are made on, and the responsibilities of, the
Directors. Non-executive Directors’ fees and payments are reviewed
annually by the Remuneration Committee in line with the market
and approved by the Board. The Chairman’s fees are determined
independently to the fees of Non-executive Directors based on
comparative roles in the external market. Non-executive Directors do
not receive any performance based remuneration or share options.

There is no scheme to provide retirement benefits to Non-executive
Directors.

Executives
Executives are officers of the Company who are involved in, concerned
with, take part in and are able to influence decisions in the management
of the affairs of the Company. Persons who were executives for all or part
of the financial year ended 31 July 2018 were:

• J. E. Gowing, Managing Director
• G. J. Grundy, General Manager (ceased 5 January 2018) and

Company Secretary (resigned 20 July 2018)

• R. Ambrogio, Chief Financial Officer
• N. Rogan, Head of Wholesale Funds Management (appointed

30 April 2018)

Executive remuneration is a combination of a fixed total employment
cost package and a discretionary incentive element which may be
awarded by cash or invitation to participate in the Company’s Employee
Share & Option Scheme or Deferred Employee Share Plan Scheme.
Remuneration is referenced to relevant employment market conditions
and reviewed annually to ensure that it is competitive and reasonable.

The incentive element is awarded at the discretion of the Remuneration
Committee and approved by the Board on the
basis of recommendations from the Managing Director.
The Managing Director’s incentive element is awarded at the discretion
of the Remuneration Committee and approved by the Board. In
determining the amount (if any) of bonus payments or of options
or shares issued, consideration is given to an executive’s effort and
contribution to both the current year performance and the long term
performance of the Company, the scope of the executive’s responsibility
within the Company, the scale and complexity of investments required
to be managed, the degree of active management required and the
degree of skill exhibited in the overall process. Regard is also given to the
quantum of an executive’s total remuneration. The 2018 Financial Year
bonus is limited to 40% of the base package of the relevant executive,
subject to the discretion of the Committee, for exceptional performance.

Details of Remuneration

Details of the remuneration of the Directors and key management personnel are set out in the following tables:

2018
$

Short term

Share
based

Post –
employment

Long term

Total

Cash
salary and
fees

Consultancy
Fees

Cash
bonus

Movement in
provision for
annual leave

Non-
monetary
benefits

Share
bonus

Superannuation

Movement in
provision for long
service leave

Non-executive Directors

Prof. J. West
(Chairman)

J. G. Parker

S. J. Clancy

27,397

100,000

50,000

54,795

132,192

100,000

Executive
Directors

J. E. Gowing¹

276,747

120,000

48,270

3,353

Other key management personnel

G. J. Grundy²

R. Ambrogio

N. Rogan³

Total key
management
personnel
compensation

318,934

219,178

74,183

147,240

350,000

(82,667)

10,532

5,666

1,021,234

247,240 470,000

(18,199)

3,353

2,603

10,000

5,205

17,808

130,000

60,000

250,000

22,679

12,489

483,538

10,024

20,822

7,047

(73,029)

670,502

3,565

1,257

254,097

88,153

78,380

(55,718)

1,746,290

¹J.Gowing bonus relates to his efforts towards the financial results of FY2017.
²G.Grundy resigned from his position as General Manager on 5 January 2018 and became a consultant to the business, and on 20 July 2018 resigned from his
position as Company Secretary. The cash bonus paid to G.Grundy related to his efforts towards the financial results of FY2016 ($150,000) and FY2017 ($200,000).
³N.Rogan was appointed as Head of Funds Management on 30 April 2018.

2017
$

Short term

Share
based

Post –
employment

Long term

Total

Cash
salary and
fees

Consultancy
Fees

Cash
bonus

Movement in
provision for
annual leave

Non-
monetary
benefits

Share
bonus

Superannuation

Movement in
provision for long
service leave

Non-executive Directors

Prof. J. West
(Chairman)

J. G. Parker

S. J. Clancy

R. D. Fraser¹

27,397

100,000

55,000

56,315

21,063

159,775

100,000

Executive Directors

J. E. Gowing

232,876

Other key management personnel

284,999

109,589

167,453

954,692

100,000

G. J. Grundy

R. Ambrogio²

J. Chorn³

Total key
management
personnel
compensation

35,358

3,943

2,603

5,000

5,350

2,001

14,954

130,000

60,000

61,665

23,064

274,729

22,123

(3,595)

290,705

16,239

3,731

(9,370)

17,250

30,000

10,411

14,315

4,772

2,020

353,260

125,751

(3,518)

168,880

45,958

3,943

17,250

91,803

(321)

1,213,325

¹ R. D. Fraser resigned 20 December 2016
² R. Ambrogio was appointed as Chief Financial Officer on 1 February 2017
³ J. Chorn ceased to be Chief Financial Controller on 31 January 2017 and Company Secretary on 13 March 2017

Share based compensation includes shares issued from the Deferred Employee Share Plan.

150th ANNUAL REPORT 2018 I Year ended 31 July 2018150th ANNUAL REPORT 2018 I Year ended 31 July 2018INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITEDRemuneration Report

The relative proportions of remuneration that are linked to performance and those that are fixed are as follows:

ASX Listing Requirements

1. Shareholders at 1 October 2018

Fixed

Performance

Range of shares

No. of shareholders

Executive Directors

J. E. Gowing¹

Other key management personnel

G. J. Grundy2

R. Ambrogio

N. Rogan

2018 (%)

2017 (%)

2018 (%)

2017 (%)

100

¹ Performance bonus paid to J.Gowing related to his efforts in relation to FY2017, no part of the bonus related to FY2018.
² Performance bonuses paid to G.Grundy related to his efforts in relation to FY2016 ($150,000) and FY2017 ($200,000), no part of the bonus related to FY2018.

Service Agreements

R. Ambrogio, Chief Financial Officer

There are service agreements in place with J. Parker, S. Clancy,
J. Gowing, Prof. J. West, N. Rogan and R. Ambrogio.

Remuneration and other terms of employment for the Managing
Director, executives and other key management personnel are
approved by the Board and provide for the provision of performance-
related incentives.

Other major provisions relating to remuneration are set out below:

• No fixed term
• Base salary, inclusive of superannuation, as at 31 July 2018
of $240,000, to be reviewed annually by the Remuneration
Committee

• No termination benefit is payable

The information provided in this remuneration report has been audited
as required by section 308(3C) of the Corporations Act 2001.

J. E. Gowing, Managing Director

Additional Information

• No fixed term
• Base salary, inclusive of superannuation, as at 31 July 2018
of $310,000, to be reviewed annually by the Remuneration
Committee

• Non-monetary benefits included motor vehicle and FBT related

charges for the year ended 31 July 2018 of $3,353

• No termination benefit is payable

N. Rogan, Head of Wholesale Funds Management

• No fixed term
• Base salary, inclusive of superannuation, as at 31 July 2018
of $320,000, to be reviewed annually by the Remuneration
Committee

• No termination benefit is payable

Employee Share & Option Scheme:
The scheme is operational. No shares or options were issued under this
scheme during the year.

Deferred Employee Share Plan Scheme:
All employees and non-executive directors are eligible to participate in
the Company’s Deferred Employee Share Plan Scheme. Shares issued
under this plan during the year were purchased on market.

The Company Employee Share & Option Scheme and Deferred
Employee Share Plan Scheme may be utilised as a part of the award
of any incentive payment for all employees which in turn assists in
aligning the interests of employees with the long term performance of
the Company.

The table set out below reflects the relationship between Remuneration
Policies and Company Performance:

The table set out below reflects the relationship between Remuneration Policies and Company Performance:

2018

2017

2016

2015

2014

Net Profit after tax

Basic and diluted earnings per share

Dividends per share

Share buy back – number of shares

Share buy back – value

Share price at financial year end

$5.5m

10.15c

12.0c

47k

$135k

$2.89

$23.2m

43.29c

12.0c

12k

$41k

$3.23

$22.0m

40.92c

12.0c

181k

$565k

$3.62

$19.1m

35.48c

12.0c

20k

$58k

$3.20

$14.1m

26.10c

12.0c

$19k

$2.78

1 – 1,000 shares

1,001 – 5,000 shares

5,001 – 10,000 shares

10,001 – 100,000 shares

Over 100,000 shares

Total shareholders

300

453

185

355

1,341

The number of shareholdings held in less than marketable parcels is 120.

2. Voting Rights

Members voting personally or by proxy have one vote for each share.

3. Substantial Shareholders at 1 October 2018

The substantial shareholders as defined by Section 9 of the Corporations Act 2001 are:

John Edward Gowing

Carlton Hotel Limited

JP Morgan Nominees Australia Limited

20,881,150

4,701,144

3,430,880

Ordinary shares

4. Top 20 Equity Security Holders at 1 October 2018

In accordance with Australian Securities Exchange Listing Rule 4.10, the top 20 equity security holders are:

No. of ordinary shares

% of issued shares

Warwick Pty Limited

Audley Investments Pty Limited

Carlton Hotel Limited

Mr John Edward Gowing

J P Morgan Nominees Australia Limited

Woodside Pty Limited

HSBC Custody Nominees (Australia) Limited

Josseck Pty Limited

Mr John Gowing

Mr Frederick Bruce Wareham

Mr Ronald Langley and Mrs Rhonda Langley

Enbeear Pty Limited

Mr Graeme Legge

Beta Gamma Pty Limited

Mrs Jean Kathleen Poole-Williamson

T N Phillips Investments Pty Limited

Mythia Pty Limited

National Nominees Limited

Cadmea Pty Limited

Cranley Holdings Pty. Limited

Total

Total issued share capital

5. Corporate Governance Practices

7,211,378

5,263,957

4,701,144

3,676,709

3,430,880

3,105,594

1,488,246

1,337,622

1,187,189

1,152,358

674,580

636,829

613,400

605,000

568,443

550,000

423,500

305,871

295,870

272,046

37,500,616

53,632,915

13.45

9.81

8.77

6.86

6.40

5.79

2.77

2.49

2.21

2.15

1.26

1.19

1.14

1.13

1.06

1.03

0.79

0.57

0.55

0.51

69.93

The Company’s statement on the main corporate governance practices in place during the year is set out on the Company’s website at www.
gowings.com/reports-announcements/.

150th ANNUAL REPORT 2018 I Year ended 31 July 2018150th ANNUAL REPORT 2018 I Year ended 31 July 2018INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITEDFinancial Report

Consolidated Statement of Profit or Loss

For the year ended

Revenue

Interest income

Equities

Private equities

Investment properties

Revenue from the sale of goods (Surf Hardware International)

Total revenue

Other income

Gains / (losses) on disposal or revaluation of:

Equities

Private equities

Investment properties

Derivatives

Other income

Total other income

Total revenue and other income

Expenses

Investment properties

Notes

31 July 2018
$’000

31 July 2017
$’000

219

618

449

19,829

37,189

58,304

(148)

5,589

(418)

739

5,762

64,066

8,342

37,136

1,745

5,230

603

1,776

455

55,342

8,724

(1,546)

7,178

(1,725)

5,453

672

1,173

173

19,672

24,546

46,236

5,696

(318)

23,302

367

299

29,346

75,582

7,876

26,313

1,532

2,986

469

1,948

543

473

42,140

33,442

(518)

32,924

(9,684)

23,240

23,242

(2)

23,240

Consolidated Statement of Profit or Loss

Consolidated Statement of Other Comprehensive Income

Consolidated Statement of Financial Postion

Consolidated Statement of Changes in Equity

Consolidated Statement of Cash Flows

Notes to the Consolidated Financial Statements

Directors’ Declaration

Auditor’s Independence Declaration

Independent Auditor’s Report

The consolidated financial statements were authorised for issue by the Directors on 11 October 2018.
The Directors have the power to amend and reissue the consolidated financial statements.

Finished goods, raw materials and other operating expenses
(Surf Hardware International)

Administration

Borrowing cost

Depreciation

Employee benefits

Public Company

Business acquisition costs

Total expenses

Profit from continuing operations before impairment & income tax expense

Unrealised impairment - equities

Profit before income tax expense

Income tax expense

Profit from continuing operations

Profit from continuing operations is attributable to:

Members of Gowing Bros. Limited

Non-controlling interests

Profit from continuing operations

The above Consolidated Statement of Profit or Loss should be read in conjunction with the accompanying Notes.

150th ANNUAL REPORT 2018 I Year ended 31 July 2018150th ANNUAL REPORT 2018 I Year ended 31 July 2018INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED

Consolidated Statement of Other Comprehensive Income

Consolidated Statement of Financial Position

For the year ended

Notes

31 July 2018
$’000

31 July 2017
$’000

As at

Notes

31 July 2018
$’000

31 July 2017
$’000

Profit from continuing operations

5,453

23,240

Other comprehensive income

Items that may be reclassified to profit or loss:

Transfer from unrealised reserves for realised (gains) / losses net of tax

Increase in fair value of investments net of tax

Exchange rate differences on translating foreign operations net of tax

Gain on revaluation of property, plant and equipment net of tax

Total comprehensive income

Total comprehensive income attributable to:

Members of Gowing Bros. Limited

Non-controlling interests

Total comprehensive income

Earnings per share

Basic earnings per share

Diluted earnings per share

2,257

302

554

8,566

10.15c

(3,528)

1,984

(162)

345

21,879

21,881

(2)

21,879

43.29c

The above Consolidated Statement of Other Comprehensive Income should be read in conjunction with the accompanying Notes.

Current assets
Cash and cash equivalents

Development properties

Loans receivable

Inventories

Trade and other receivables

Other

Total current assets

Non-current assets
Trade and other receivables

Loans receivable

Equities

Private equities

Development properties

Investment properties

Property, plant and equipment

Intangibles

Deferred tax assets

Other

Total non-current assets

Total assets

Current liabilities
Trade and other payables

Borrowings

Derivatives

Current tax liabilities

Provisions

Total current liabilities

Non-current liabilities
Trade and other payables

Borrowings

Provisions

Deferred tax liabilities

Total non-current liabilities

Total liabilities

Net assets

Equity
Contributed equity

Reserves
Retained profits

Contributed equity and reserves attributable to members of Gowing Bros. Limited

Non-controlling interests

Total equity

5,294

6,234

7,789

1,271

20,588

567

1,400

36,783

3,449

14,145

256,678

8,749

4,302

5,070

2,025

333,168

353,756

4,711

455

708

357

1,222

7,453

248

92,009

469

37,612

130,338

137,791

215,965

12,476

106,342
97,149

215,967

(2)

215,965

The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying Notes.

5,886

297

3,000

6,636

7,527

1,220

24,566

760
-
33,969

3,301

13,707

226,661

7,828

3,550

4,631

1,839

296,246

320,812

9,902

9,330

733

2,085

1,075

23,125

275

49,023

498

33,915

83,711

106,836

213,976

12,611

103,229
98,138

213,978

(2)

213,976

150th ANNUAL REPORT 2018 I Year ended 31 July 2018150th ANNUAL REPORT 2018 I Year ended 31 July 2018INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED

Consolidated Statement of Changes in Equity

Consolidated Statement of Cash Flows

Contributed
Equity
$’000

Capital Profits
Reserve-Pre
CGT Profits
$’000

Revaluation
Reserves
$’000

Foreign
Currency
Reserve
$’000

Retained
Profits
$’000

Non-
Controlling
Interests
$’000

Total
$’000

Balance at 31 July 2016

12,652

90,503

14,087

81,338

198,580

(1,199)

(162)

23,242

(2)

21,879

Total comprehensive income
for the year

Transactions with owners in
their capacity as owners:

Share buy-back

Dividends paid

Balance at 31 July 2017

Total comprehensive income
for the year

Transactions with owners in
their capacity as owners:

Share buy-back

Dividends paid

Balance at 31 July 2018

(41)

12,611

(135)

12,476

(6,442)

98,138

90,503

12,888

(162)

2,811

302

5,453

(6,442)

97,149

90,503

15,699

140

(41)

(6,442)

(2)

213,976

8,566

(135)

(6,442)

(2)

215,965

The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying Notes.

For the year ended

Notes

31 July 2018
$’000

31 July 2017
$’000

Cash flows from operating activities

Receipts in the course of operations (inclusive of GST)

Payments to suppliers and employees (inclusive of GST)

Dividends received

Interest received

Borrowing costs

Income taxes paid

Net cash inflows from operating activities

Cash flows from investing activities

Payments for purchases of properties, plant and equipment

Payments for purchases of intangibles

Payments for purchases of development properties

Payments for purchases of investment properties

Payments for purchases of equity investments

Loans made

Proceeds from repayment of loans made

Proceeds from sale of properties, plant and equipment

Proceeds from sale of equity investments

Proceeds from sale of investment properties

Proceeds from loans on development properties

Payment for subsidiary, net of cash acquired

Proceeds from sale of development properties

Net cash outflows from investing activities

Cash flows from financing activities

Payments for share buy-backs

Proceeds from borrowings

Repayment of borrowings

Payments for derivatives

Dividends paid

Net cash inflows from financing activities

Net decrease in cash held

Cash and cash equivalents at the beginning of the financial year

Cash and cash equivalents at the end of the financial year

62,010

(54,079)

618

497

(3,454)

(1,380)

4,212

(733)

(752)

(438)

(29,026)

(1,975)

(1,400)

3,000

543

896

(29,885)

(135)

33,764

(79)

(2,027)

(6,442)

25,081

(592)

5,886

5,294

48,300

(36,687)

1,172

465

(2,986)

(5,780)

4,484

(297)

(117)

(12,244)

(12,653)

(6,198)

(997)

22,046

1,600

391

(14,293)

(22,674)

(41)

35,667

(26,105)

(6,442)

3,079

(15,111)

20,997

5,886

The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying Notes.

150th ANNUAL REPORT 2018 I Year ended 31 July 2018150th ANNUAL REPORT 2018 I Year ended 31 July 2018INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED

Notes to the Consolidated Financial Statements

1. Summary of Significant Accounting Policies

Gowings Bros. Limited (“the Company”) is a company limited by
shares incorporated in Australia whose shares are publicly traded on
the Australian Securities Exchange (“ASX”). The consolidated financial
statements comprise the Company and its controlled entities (referred
herein as “the Group”).

The principal accounting policies adopted in the preparation of the
consolidated financial statements are set out below. These policies
have been consistently applied to all the years presented, unless
otherwise stated.

(a) Basis of preparation
These general purpose consolidated financial statements have been
prepared in accordance with Australian Accounting Standards, other
authoritative pronouncements of the Australian Accounting Standards
Board and the Corporations Act 2001.

Compliance with IFRS
The consolidated financial statements comply with International
Financial Reporting Standards (IFRS) as issued by the International
Accounting Standards Board (IASB).

Historical cost convention
These consolidated financial statements have been prepared under
the historical cost convention, as modified by the revaluation of
equities (available-for-sale financial assets), private equities (financial
assets at fair value through profit or loss), investment properties and
certain classes of property, plant and equipment.

Critical accounting estimates
The preparation of consolidated financial statements in conformity
with Australian Accounting Standards requires the use of certain
critical accounting estimates. It also requires management to
exercise its judgement in the process of applying the Group’s
accounting policies. Areas involving a higher degree of judgement and
complexity or where assumptions and estimates are significant to the
consolidated financial statements are disclosed in note 3.

New and amended standards adopted
The Group has adopted all of the new, revised or amending
Accounting Standards and Interpretations issued by the Australian
Accounting Standards Board (‘AASB’) that are mandatory for the
current reporting period. The adoption of these standards did not
have a material impact.

Any new, revised or amending Accounting Standards or Interpretations
that are not yet mandatory have not been early adopted.

Comparative information
Information has been reclassified where applicable to enhance
comparability.

(b) Principles of Consolidation
The consolidated financial statements incorporate all the assets,
liabilities and results of the Company and all the subsidiary companies
and other interests it controlled during the year ended 31 July 2018.
The Company controls an entity when it is exposed to, or has the
rights to, variable returns from its involvement with the entity and has
the ability to affect those returns through its power over the entity.
Details of subsidiary companies and other interests of the Company
are set out in note 37.

The assets, liabilities and results of its subsidiaries are fully
consolidated into the financial statements of the Group from the
date which control is obtained by the Group. The consolidation
of a subsidiary is discontinued from the date that control ceases.
Intercompany transactions, balances and unrealised gains or losses
on transactions between group entities are fully eliminated on
consolidation. Accounting policies of subsidiaries have been changed
and adjustments made where necessary to ensure uniformity of the
accounting policies of the Group.

Equity interests in a subsidiary not attributable, directly or
indirectly, to the Group are presented as “non-controlling interests”.
The Group initially recognises non-controlling interests that are
present ownership interests in subsidiaries and are entitled to a
proportionate share of the subsidiary’s net assets on liquidation at
either fair value or at the non-controlling interests’ proportionate
share of the subsidiary’s net assets. Subsequent to initial recognition,
non-controlling interests are attributed their share of profit or
loss and each component of other comprehensive income. Non-
controlling interest are shown separately with the equity section of
the consolidated statement of financial position and consolidated
statement of comprehensive income.

A business combination is accounted for by applying the acquisition
method, unless it is a combination involving entities or businesses
under common control. The business combination will be accounted
for from the date that control is attained, whereby the fair value of
the identifiable assets acquired and liabilities (including contingent
liabilities) assumed is recognised (subject to certain limited
exceptions).

When measuring the consideration transferred in the business
combination, any asset or liability resulting from a contingent
consideration arrangement is also included. Subsequent to initial
recognition, contingent consideration classified as equity is not
remeasured and its subsequent settlement is accounted for within
equity. Contingent consideration classified as an asset or liability is
remeasured in each reporting period to fair value, recognising any
change to fair value in profit or loss, unless the change in value can be
identified as existing at acquisition date.

1. Summary of Significant Accounting Policies (Continued)

Where settlement of any part of cash consideration is deferred,
the amounts payable in the future are discounted to their present
value as at the date of exchange. The discount rate used is the
entity’s incremental borrowing rate, being the rate at which a similar
borrowing could be obtained from an independent financier under
comparable terms and conditions.

where such level is not larger than an operating segment. Gains and
losses on the disposal of an entity include the carrying amount of
goodwill related to the entity sold.

Changes in the ownership interests in a subsidiary that do not result
in a loss of control are accounted for as equity transactions and do not
affect the carrying amounts of goodwill.

All transaction costs incurred in relation to business combinations are
recognised as expenses in profit and loss when incurred.

The acquisition of a business may result in the recognition of goodwill
or a gain from a bargain purchase.

(e) Segment reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision maker
including:

(d) Goodwill
Goodwill is carried at cost less any accumulated impairment losses.
Goodwill is carried as the excess of the sum of:

(i)
(ii)

(iii)

the consideration transferred;

any non-controlling interest (determined under either the full
goodwill or proportionate interest method); and

the acquisition date fair value of any previously held equity
interest;

over the acquisition date fair value of net identifiable net assets
acquired.

The acquisition date fair value of the consideration transferred for
a business combination plus the acquisition date fair value of any
previously held equity interest form the cost of the investment.

Fair value re-measurements in any pre-existing equity holdings are
recognised in profit or loss in the period in which they arise. Where
changes in the value of such equity holdings had previously been
recognised in other comprehensive income, such amounts are
recycled to profit or loss.

The amount of goodwill recognised on acquisition of each subsidiary
in which the Group holds a less than 100% interest will depend on
the method adopted in measuring the non-controlling interest. The
Group can elect in most circumstances to measure the non-controlling
interest in the acquiree either at fair value (“full goodwill method”)
or at the non-controlling interest’s proportionate share of the
subsidiary’s identifiable net assets (“proportionate interest method”).
In such circumstances, the Group determines which method to adopt
for each acquisition and this is stated in the respective notes to these
financial statements disclosing the business combination.

Under the full goodwill method, the fair value of the non-controlling
interests is determined using valuation techniques which make the
maximum use of market information where available. Under this
method, goodwill attributable to the non-controlling interest is
recognised in the consolidated financial statements.

Goodwill on acquisitions of subsidiaries is included in intangible
assets.

Goodwill is tested for impairment annually and is allocated to the
Group’s cash-generating units or groups of cash-generating units,
which represents the lowest level at which goodwill is monitored but

• Cash and fixed interest
• Equities
• Private equities
•
Investment properties
• Development properties
• Surf Hardware International business
• Other

(f) Foreign currency translation

(i)

(ii)

Functional and presentation currency
Items included in the consolidated financial statements of
the Group are measured using the currency of the primary
economic environment in which the Group operates
(“functional currency”).
The consolidated financial statements are presented in
Australian dollars, which is the Group’s functional and
presentation currency.
Transactions and balances
Foreign currency transactions are translated into the
functional currency using the exchange rates prevailing at
the dates of the transactions. Translation differences on
private equities are recognised in profit or loss as part of the
fair value gain or loss. Translation differences on equities are
recognised in equity.

(iii) Foreign Operations

The financial results and position of foreign operations,
whose functional currency is different from the Group’s
presentation currency, are translated as follows:

(a) assets and liabilities are translated at exchange rates

prevailing at the end of the reporting period;

(b)

(c)

income and expenses are translated at average
exchange rates for the period; and

retained earnings are translated at the exchange rates
prevailing at the date of the transaction.

Exchange differences arising on translation of foreign
operations with functional currencies other than Australian
dollars are recognised in other comprehensive income and
included in the foreign currency translation reserve in the
consolidated statement of financial position. The cumulative
amount of these differences is reclassified into profit or loss
in the period in which the operation is disposed of.

150th ANNUAL REPORT 2018 I Year ended 31 July 2018150th ANNUAL REPORT 2018 I Year ended 31 July 2018INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED
1. Summary of Significant Accounting Policies (Continued)

1. Summary of Significant Accounting Policies (Continued)

(g) Income tax
The income tax expense or revenue for the period is the tax payable on
the current period’s taxable income adjusted by changes in deferred
tax assets and liabilities attributable to temporary differences and
to unused tax losses. Deferred income tax is provided in full, using
the liability method, on temporary differences arising between the
tax bases of assets and liabilities and their carrying amounts in the
consolidated financial statements. Deferred tax assets and liabilities
are recognised for temporary differences at the tax rates expected to
apply when the assets are recovered or liabilities are settled.

No deferred tax asset or liability is recognised in relation to these
temporary differences if they arose in a transaction, other than a
business combination, that at the time of the transaction did not
affect either accounting profit or loss or taxable profit or loss. Deferred
tax assets are recognised for deductible temporary differences and
unused tax losses only if it is probable that future taxable amounts
will be available to utilise those temporary differences and losses.
Deferred tax assets and liabilities are offset when there is a legally
enforceable right to offset tax assets and liabilities and when the
deferred tax balances relate to the same taxation authority. Current
tax assets and tax liabilities are offset where the Group has a legally
enforceable right to offset and intends either to settle on a net basis,
or to realise the asset and settle the liability simultaneously. Current
and deferred tax is recognised in profit or loss, except to the extent
that it relates to items recognised in other comprehensive income
or directly in equity. In this case, the tax is also recognised in other
comprehensive income or directly in equity, respectively.

(h) Impairment of assets
Assets are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognised for the amount by
which the asset’s carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of an asset’s fair value less costs
to sell and value in use. For the purpose of assessing impairment,
assets are grouped at the lowest levels for which there are separately
identifiable cash inflows which are largely independent of the cash
inflows from other assets or groups of assets (cash generating units).
Non-financial assets that suffered impairment are reviewed for
possible reversal of the impairment at each reporting date.

(i) Property, plant and equipment
Property, plant and equipment (excluding freehold properties) are
measured at cost. Costs are measured at fair value of assets given
up, shares issued or liabilities undertaken at the date of acquisition
plus incidental costs directly attributable to the acquisition. Freehold
properties are measured at fair value, with changes in fair value
recognised in other comprehensive income. Depreciation is calculated

on a straight-line basis to write off the net cost or revalued amount of
each item of plant and equipment (excluding freehold land) over its
expected useful life to the Group. Estimates of remaining useful lives
are made on a regular basis for all assets, with annual reassessments
for major items. Land is not depreciated. Depreciation is calculated to
allocate cost or revalued amounts, net of their residual values, over
their estimated useful lives, as follows:

Furniture, fittings and equipment
Motor vehicles
Buildings

3 to 10 years
6 years
40 years

The assets’ residual values and useful lives are reviewed, and adjusted
if appropriate, at each statement of financial position date. An asset’s
carrying amount is written down immediately to its recoverable
amount if the asset’s carrying amount is greater than its estimated
recoverable amount. Gains and losses on disposal are determined
by comparing proceeds with carrying amount. These are included in
profit or loss.

(j) Inventories
Inventories comprise raw materials and finished goods and are stated
at the lower of cost and net realisable value. Costs of raw materials
and finished goods are determined after deducting rebates and
discounts. Net realisable value is the estimated selling price in the
ordinary course of business less the estimated costs of completion
and the estimated costs necessary to make the sale.

(k) Intangibles Other than Goodwill
Intangible assets are identifiable non-monetary assets without physical
substance. They are recognised only if it is probable the asset will
generate future benefits for the Group. Those assets with an indefinite
useful life are tested for impairment annually. All intangible assets
are tested for impairment when there is an indication that carrying
amounts may be greater than recoverable amounts as set out in note
1(h).
(i)

Patents
Patents have a finite useful life and are carried at cost less
accumulated amortisation and impairment losses. Amortisation
is calculated using the straight-line method to allocate the cost of
patents over their useful lives which is currently 20 years.
Brand Names
Brand names are initially recognised at fair value when acquired
in a business combination. Brand names are assessed to have
an indefinite useful life and are carried at cost less accumulated
impairment. An indefinite useful life is considered appropriate
when there is no foreseeable limit to the period over which the
brand name is expect to generate cash flows.

(ii)

Recognition/de-recognition and subsequent measurement
Regular purchases and sales of investments are recognised on trade-
date, the date on which the Group commits to the purchase or sale of
the asset. Investments in equities are initially recognised at fair value
plus transaction costs. Investments in private equities are initially
recognised at fair value, and transaction costs are expensed in profit or
loss.

Interests in equities are brought to account at fair value, with the change in
fair value reflected in the long term revaluation reserve. Interests in private
equities are brought to account at fair value, with any change in fair value
reflected in profit or loss. The interest in joint ventures is accounted for
as set out in note 38. Financial assets are derecognised when the rights
to receive cash flows from the financial assets have expired or have been
transferred and the Group has transferred substantially all the risks and
rewards of ownership.

The fair values of quoted investments are based on current market prices.
If the market for a financial asset is not active (and for unlisted securities),
the Group establishes fair value by using valuation techniques. These
include the use of recent arm’s length transactions, reference to other
instruments that are substantially the same and relying as little as possible
on Group-specific inputs.

Impairment
The Group assesses at each balance date whether there is objective
evidence that a financial asset or group of financial assets is impaired. In
the case of equities, a significant or prolonged decline in the fair value of
a security below its cost is considered as an indicator that the security is
impaired. If any such evidence exists for equities, the cumulative loss –
measured as the difference between the acquisition cost and the current
fair value, less any impairment loss on that asset previously recognised in
profit or loss, is transferred to profit or loss. Impairment losses recognised
in profit or loss on equities are not reversed through profit or loss.

(o) Investment properties
Investment property, principally comprising freehold commercial and
retail buildings, is held for long-term rental yields and is not occupied by
the Group. Investment property is carried at fair value determined annually
by management. Changes in fair values are recorded in profit or loss as
part of other income.

(p) Joint ventures
Jointly controlled assets
The proportionate interests in the assets, liabilities and expenses of joint
venture activities have been incorporated in the consolidated financial
statements under the appropriate headings. Details of the joint ventures
are set out in note 38.

(l) Revenue recognition
Revenue is recognised for the major business activities as follows:

(i)

(ii)

(iii)

Equities
Dividend income is recognised when received. Revenue from
the sale of investments is recognised at trade date.
Property rental
Rental income is recognised in accordance with the
underlying rental agreements.
Land development and sale
Revenue is recognised on settlement.

(iv) Sales of goods

(v)

Revenue from the sales of goods is recognised at the point of
delivery as this corresponds to the transfer of significant risks
and rewards of ownership of the goods and the cessation of
all involvement with those goods.
Property construction and sale
Contract revenue and expenses are recognised in accordance
with the percentage completion method unless the outcome of
the contract cannot be reliably estimated. Where the outcome
of a contract cannot be reliably estimated, contract costs
are recognised as an expense when incurred, and where it is
probable that costs will be recovered, revenue is recognised
to the extent of costs incurred. Where it is probable that a loss
will arise from a construction contract, the excess of the total
expected contract costs over total expected contract revenue is
recognised as an expense immediately.

(vi) Other investment revenue

Changes in fair value of private equities are recognised
through profit or loss. Trust income and option income is
recognised when earned.

(vii) Other property revenue

Other property revenue is recognised in accordance with
underlying agreements.

(viii) Interest revenue

Interest income is recognised on an accrual basis.

(m) Trade and other receivables
Receivables consists mainly of amounts due for rental income and sale
of goods. Amounts are usually due between seven and ninety days from
invoice date. Amounts due for the sale of financial assets and properties
are usually due on settlement unless the specific contract provides for
extended terms.

(n) Investments and other financial assets
The Group classifies its investments in the following categories: private
equities (financial assets at fair value through profit or loss) and equities
(available-for-sale financial assets). The classification depends on
the purpose for which it was acquired. Management determines the
classification on initial recognition.

(i)

(ii)

Equities
Equities, comprising principally marketable equity securities,
are either designated in this category or not classified
in any of the other categories. They are included in non-
current assets unless management intends to dispose of the
investment within 12 months of the statement of financial
position date.
Private equities
Private equities are held with the view that they are long term
investments.

150th ANNUAL REPORT 2018 I Year ended 31 July 2018150th ANNUAL REPORT 2018 I Year ended 31 July 2018INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED

1. Summary of Significant Accounting Policies (Continued)

The changes made to accounting requirements by these standards
include:

• simplifying the classifications of financial assets into those carried
at amortised cost and those carried at fair value and an allowance
for debt instruments to be carried at fair value through other
comprehensive income in certain circumstances
• simplifying the requirements for embedded derivatives
• allowing an irrevocable election on initial recognition to present
gains and losses on investments in equity instruments that are
not held for trading in other comprehensive income. Dividends
in respect of these investments that are a return on investment
can be recognised in profit or loss and there is no impairment or
recycling on disposal of the instrument

•

financial assets will need to be reclassified where there is a change
in an entity’s business model as they are initially classified based
on (a) the objective of the entity’s business model for managing the
financial assets; and (b) the characteristics of the contractual cash
flows

• amending the rules for financial liabilities that the entity elects to
measure at fair value, requiring changes in fair value attributed to
the entity’s own credit risk to be presented in other comprehensive
income

The Group is in the process of completing its impact assessment of AASB9
however initial indications are that it may affect the Group’s accounting
of its available-for-sale financial assets, since AASB 9 only permits the
recognition of fair value gains and losses in other comprehensive income if
they relate to equity investments that are not held for trading.

AASB 15 Revenue from Contracts with Customers (applicable for annual
reporting periods commencing on or after 1 January 2018)

AASB 15 establishes a single, comprehensive framework for revenue
recognition, and replaces the previous revenue Standards AASB 118
Revenue and AASB 111 Construction Contracts.

The new standard is based on the principle that revenue is recognised
when control of a good or service transfers to a customer.

The Group is is in the process of completing its impact assessment of
AASB15 however initial indications are that the effects of AASB15 will not
be material to the group.

AASB 16 Leases (applicable for annual reporting periods commencing on
or after 1 January 2019)

AASB 16 removes the classification of leases between finance and
operating leases, effectively treating all leases as finance leases for the
lessee.

•

introducing new general hedge accounting requirements intended
to more closely align hedge accounting with risk management
activities as well as the addition of new disclosure requirements

Although the group anticipate the adoption of AASB16 will impact the
group's future financial statements it is impracticable at this stage to
provide a reasonable estimate of such impact.

requirements for impairment of financial assets

The Group has decided against early adoption of these standards.

(q) Trade and other payables
These amounts represent liabilities for goods and services provided to
the Group prior to the end of the financial year and which are unpaid. The
amounts are unsecured and are usually paid within thirty to sixty days
after the end of the month of recognition.

(r) Borrowings
Bills payable are carried at their principal amounts. Borrowings are
classified as current liabilities unless the Group has an unconditional
right to defer settlement of the liability for at least 12 months after the
statement of financial position date.

the present value of the minimum lease payments. The corresponding
rental obligations, net of finance charges, are included in other
short-term and long-term payables. Each lease payment is allocated
between the liability and finance costs. The finance cost is charged
to profit or loss over the lease period so as to produce a constant
periodic rate of interest on the remaining balance of the liability for
each period. The property, plant and equipment acquired under
finance leases is depreciated over the asset’s useful life or over the
shorter of the asset’s useful life and the lease term if there is no
reasonable certainty that the Group will obtain ownership at the end
of the lease term.

(s) Dividends
Provision is made for the amount of any dividend declared, determined
or publicly recommended by the Directors on or before the end of the
financial year but not distributed at balance date.

(t) Employee entitlements

(i) Wages, salaries and annual leave

(ii)

Liabilities for wages, salaries and annual leave are
recognised in other creditors, and are measured as the
amount unpaid at the reporting date in respect of employees’
services up to that date at pay rates expected to be paid
when the liabilities are settled.
Long service leave
A liability for long service leave is recognised, and is
measured as the present value of expected future payments
to be made in respect of services provided by employees
up to the reporting date. Consideration is given to expected
future wage and salary levels and periods of service.

(u) Borrowing costs
Borrowing costs are recognised as expenses in the period in which
they are incurred except where they are included in the costs of
qualifying assets. Only borrowing costs relating specifically to the
qualifying asset are capitalised. Borrowing costs include interest on
bank overdrafts and short-term and long-term borrowings, including
amounts paid or received on interest rate swaps.

(v) Cash and cash equivalents
For purposes of the statement of cash flows, cash includes deposits
at call which are readily convertible to cash on hand and are subject
to an insignificant risk of changes in value, net of outstanding bank
overdrafts. Bank overdrafts are shown within borrowings in current
liabilities in the consolidated statement of financial position.

(w) Leases
Leases of property, plant and equipment where the Group, as
lessee, has substantially all the risks and rewards of ownership are
classified as finance leases. Finance leases are capitalised at the
lease’s inception at the fair value of the leased property or, if lower,

(x) Earnings per share

(i)

Basic earnings per share
Basic earnings per share is calculated by dividing the profit
attributable to equity holders of the Group, excluding any
costs of servicing equity other than ordinary shares, by the
weighted average number of ordinary shares outstanding
during the financial year, adjusted for bonus elements in
ordinary shares issued during the year.

(ii) Diluted earnings per share

Diluted earnings per share adjusts the figures used in the
determination of basic earnings per share to take into
account the after tax effect of the interest and other financing
costs associated with dilutive potential ordinary shares
and the weighted average number of shares assumed to
have been issued for no consideration in relation to dilutive
potential ordinary shares.

(y) Rounding of amounts
The Company is of a kind referred to in ASIC Corporations (Rounding
in the Financial/ Directors’ Reports) Instrument 2016/191 issued by
the Australian Securities and Investments Commission relating to
the “rounding off” of amounts in the directors’ report and financial
report. Amounts in the directors’ report and financial report have
been rounded to the nearest thousand dollars in accordance with that
Legislative Instrument, unless otherwise indicated.

(z) New accounting standards and interpretations
The AASB has issued new and amended accounting standards and
interpretations that have mandatory application dates for future
reporting periods and which the Group has decided not to early adopt.
A discussion of those future requirements and their impact on the
Group is as follows:

AASB 9 Financial Instruments (applicable for annual reporting
periods commencing on or after 1 January 2018)

AASB 9 includes requirements for the classification and measurement
of financial assets, the accounting requirements for financial
liabilities, impairment testing requirements and hedge accounting
requirements.

150th ANNUAL REPORT 2018 I Year ended 31 July 2018150th ANNUAL REPORT 2018 I Year ended 31 July 2018INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED
2. Financial Risk Management

2. Financial Risk Management (Continued)

The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk, price risk and interest rate risk),
liquidity risk, credit risk and fair value estimation risk. The Group’s overall risk management program focuses on the unpredictability of financial
markets and seeks to minimise potential adverse effects on the financial performance of the Group through the mix of investment classes. The
Board of Directors and management undertake various risk management practices, both informally on a daily basis and formally on a monthly
basis at board level. Risks are identified and prioritised according to significance and probability. Progress towards managing these risks is
documented and formally reviewed on a monthly basis.

Market risk

(i) Foreign exchange risk
Foreign exchange risk arises when future commercial transactions and recognised financial assets and liabilities are denominated in a currency
that is not the Group’s functional currency. The Group does not have a policy with regard to hedging currency risk. The Group has not hedged
its foreign currency investments. The multiple currencies provide diversification benefits to the portfolio. The Group monitors foreign currency
movements daily and seeks advice from foreign currency specialists as to potential courses of action that may protect or enhance the value of
the Group’s investments.

The Group’s exposure to foreign currency risk on financial assets at the reporting date was as follows:

Currency exposure in AUD

Cash

Trade receivables

Trade payables

Equities

Private equities

31st July 2018

USD
$’000

448

2,400

(342)

5,565

1,141

EUR
$’000

GBP
$’000

391

1,796

(255)

311

JPY
$’000

247

933

(415)

USD
$’000

915

2,222

(168)

3,233

1,092

EUR
$’000

352

1,784

(58)

272

31st July 2017

GBP
$’000

JPY
$’000

137

826

Based on the cash held at 31 July 2018, if the Australian dollar weakened / strengthened by 10% against the US dollar cash would have been $49,778
higher / $40,727 lower (2017: $101,667 higher / $83,182 lower). If the Australian dollar weakened / strengthened by 10% against the GBP cash would
have been $1,000 higher / $818 lower (2017: $3,000 higher / $2,455 lower). If the Australian dollar weakened / strengthened by 10% against the EUR
cash would have been $43,444 higher / $35,545 lower (2017: $39,111 higher / $32,000 lower). If the Australian dollar weakened / strengthened by 10%
against the JPY cash would have been $27,444 higher / $22,455 lower (2017: $15,222 higher / $12,455 lower).

Based on the trade receivables held at 31 July 2018, if the Australian dollar weakened / strengthened by 10% against the US dollar receivables would
have been $266,667 higher / $218,182 lower (2017: $246,889 higher / $202,000 lower). If the Australian dollar weakened/strengthened by 10% against
the EUR, the receivables would have been $199,556 higher/ $163,273 lower (2017: $198,222 higher/ $162,182 lower). If the Australian dollar weakened/
strengthened by 10% against the JPY, the receivables would have been $103,667 higher/ $84,818 lower (2017: $91,778 higher/ $75,091 lower).

Based on the trade payables held at 31 July 2018, if the Australian dollar weakened / strengthened by 10% against the US dollar payables would have
been $38,000 higher / $31,091 lower (2017: $18,667 higher / $15,273 lower). If the Australian dollar weakened/strengthened by 10% against the EUR, the
payables would have been $28,333 higher/ $23,182 lower (2017: $6,444 higher/ $5,273 lower). If the Australian dollar weakened/strengthened by 10%
against the JPY, the payables would have been $46,111 higher/ $37,727 lower (2017: $nil higher/ $nil lower).

Based on the equities held at 31 July 2018, if the Australian dollar weakened / strengthened by 10% against the US dollar equities would have been
$618,333 higher / $505,909 lower (2017: $359,222 higher / $293,909 lower).

Based on the private equities held at 31 July 2018, if the Australian dollar weakened / strengthened by 10% against the US dollar private equities would
have been $126,778 higher / $103,727 (2017: $121,333 higher / $99,273 lower). If the Australian dollar weakened / strengthened by 10% against the Euro
private equities would have been $34,556 higher / $28,273 lower (2017: $30,222 higher / $24,727 lower).

The percentage change is the expected overall volatility of the significant currencies, which is based on management’s assessment of reasonable
possible fluctuations taking into consideration movements over the last 6 months each year and the spot rate at each reporting date.

(ii) Price risk
The Group is exposed to asset price risk. This arises from equities and private equities held by the Group and classified on the Consolidated
Statement of Financial Position either as available-for-sale or at fair value through profit or loss. A price reduction at 5% and 10% spread equally
over the investment portfolio would reduce its value by $2,011,590 (2017: $1,863,505) and $4,023,180 (2017: $3,727,010) respectively.

The Group seeks to reduce market risk at the investment portfolio level by ensuring that it is not overly exposed to one company or one
particular sector of the market. The relative weightings of the individual investments and the relevant market sectors are reviewed regularly and
risk can be managed by reducing exposure where necessary. The Group does not have set parameters as to a minimum or maximum amount of
the portfolio that can be invested in a single company or sector. The writing and purchasing of options provides some protection against a fall in
market prices by both generating income to partially compensate for a fall in capital values and buying put protection to lock in asset prices.

(iii) Cash flow and fair value interest rate risk
The Group’s interest-rate risk arises from long-term borrowings and cash on deposit. Borrowings issued at variable rates expose the Group to
cash flow interest-rate risk. Borrowings issued at fixed rates expose the Group to fair value interest-rate risk. The Group’s interest bearing assets
include deposits on the overnight money market. Interest earnt on these deposits varies according to the Reserve Bank’s monetary policy
decisions.

As at the reporting date, the Group had the following variable rate borrowings and embedded derivative interest rate swap contracts in use:

Weighted average
interest rate

31st July 2018
Balance $’000

Weighted average
interest rate

31st July 2017
Balance $’000

Borrowings

Interest rate swaps (notional principal
amount)

Net exposure to cash flow interest rate risk

2.15%

2.64%

92,457

(60,200)

32,257

3.09%

3.53%

58,342

(35,000)

23,342

Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group
obtains guarantees where appropriate to mitigate credit risk. The maximum exposure to credit risk at the reporting date to recognised financial
assets is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the consolidated statement of financial
position and notes to the consolidated financial statements. The Group does not hold any collateral.

Liquidity risk

This is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. Prudent liquidity risk
management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of
committed credit facilities and the ability to close-out market positions. Management monitors its cash flow requirements daily. Furthermore,
management monitors the level of contingent payments on a weekly basis by reference to known sales and purchases of securities and
dividends and distributions to be paid or received.

Maturity of Financial Liabilities

31 July 2018

Less than
1 year

Between
1-2 years

Between
2-5 years

Over
5 years

Total contractual
cash flow

Non-derivatives

Non-interest bearing

Fixed rate

Variable rate

Total non-derivatives

Derivatives

Fixed rate

$'000

4,711

448

5,166

708

$'000

248

1,936

2,184

$'000

90,073

4,959

92,457

97,423

708

150th ANNUAL REPORT 2018 I Year ended 31 July 2018150th ANNUAL REPORT 2018 I Year ended 31 July 2018INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED2. Financial Risk Management (Continued)

Maturity of Financial Liabilities (Continued)

31 July 2017

Non-derivatives

Non-interest bearing

Fixed rate

Variable rate

Total non-derivatives

Derivatives

Fixed rate

Fair value estimation risk

Less than
1 year

$’000

9,902

9,319

19,232

733

Between
1-2 years

$’000

275

1,023

1,298

Between
2-5 years

$’000

14,000

Over
5 years

Total contractual
cash flow

$’000

34,000

10,177

58,342

68,530

733

2. Financial Risk Management (Continued)

There were no transfers between level 1, level 2 and level 3 for recurring fair value measurements during the year.

The Group had no assets or liabilities measured at fair value on a non-recurring basis in the current period.

• The fair value of listed equities is based on quoted market prices at the reporting date.
• The fair value of directly held unlisted equity investments is determined by management valuations in accordance with the AVCAL

valuation guidelines. A variety of methods are used including reference to recent shares issued and net assets of underlying investments.

• The fair value of investment properties are determined by capitalisation rates derived by using the income approach method and/or

using external registered property valuers: refer to note 18.

•

Investments in private equities primarily consist of investments in managed private equity funds, each of which consists of a number of
investments in individual companies, none of which are material. Fair value of managed private equity investments has been determined
using fund manager valuations, which are prepared in accordance with AVCAL Guidelines. Directors have reviewed those valuations.
• The fair value of freehold properties included in Property, Plant and equipment is determined by Directors based on comparable property

market information.

The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes.

31 July 2018 Reconciliation of level 3 fair value movements

Fair value hierarchy

The Group measures fair value using the following fair value hierarchy that reflects the significance of the inputs used in making the measurements.

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities that the Group can access at the measurement date.
Level 2: inputs other quoted prices included within level 1 that are observable for the assets or liabilities, either directly or indirectly.
Level 3: unobservable inputs for the assets or liability.

Opening balance

Transfers to level 1

Transfers from development properties

Purchases

Sales

The following tables present the Group’s assets and liabilities measured at fair value at 31 July 2018 and 31 July 2017.

Amortisation and depreciation

31 July 2018
$’000

31 July 2017
$’000

256,601

297

28,289

(1,439)

(1,293)

8,618

291,073

214,289

153

19,780

(2,109)

(1,260)

25,748

256,601

Level 1
$’000

12,985

Level 1
$’000

13,731

Level 2
$’000

(708)

Level 2
$’000

31 July 2018

Financial assets - available for sale

Investments - Australian equities

Investments - Global equities

Financial assets - designated at fair value through profit or loss

Investments - private equities

Investments - properties

Other assets - designated at fair value

Freehold - properties

Financial liabilities - designated at fair value through profit or loss

Derivatives

Total

31 July 2017

Financial assets - available for sale

Investments - Australian equities

Investments - Global equities

Financial assets - designated at fair value through profit or loss

Investments - private equities

Investments - properties

Other assets - designated at fair value

Freehold - properties

Financial liabilities - designated at fair value through profit or loss

Derivatives

Total

Level 3
$’000

18,234

5,564

3,449

256,678

Total
$’000

31,219

5,564

3,449

256,678

Gain recognised in profit or loss or other comprehensive income

Closing balance

Refer to the following notes for reconciliation for individual class of assets:

• Equities
• Private equities
•

Investment properties

- refer to note 15

- refer to note 16

- refer to note 18

3. Critical Accounting Estimates & Judgements

7,148

Managed and Direct Private Equity

291,073

Level 3
$’000

17,004

3,234

3,301

226,661

(708)

303,350

Total
$’000

30,735

3,234

3,301

226,661

The Group’s practice for ‘Managed Private Equity’ valuations is
to procure each Fund Manager’s published unit price valuation
and review it for reasonableness, potential misstatements and
impairments. In reviewing each Fund Manager’s valuation,
consideration is given to audited accounts, compliance with Australian
Venture Capital Association (AVCAL) valuation guidelines, Australian
Accounting Standards, valuation methodology and assumptions, peer
valuations, recent market prices, liquidity and control provisions,
discussions with the Fund Manager and, where considered relevant,
meetings with the underlying investee company’s management.

The impact of the revaluation of managed private equities at 31 July
2018 was a gain of $279,153 (2017: a loss of $318,123) recognised in
profit or loss.

The Group holds ‘Direct Private Equity’ investments in unlisted
private companies which have been valued using the Board and
management’s best estimation of market value. The valuation
considerations for managed private equity are applied to direct
private equity based on recent shares issued and net assets of
underlying investments, liquidity and minority shareholder provisions.

Investment property

Investment property valuations are estimated by the board and
management with reference where possible to external valuations,
market appraisals, recent comparable sales, date of purchase and
capitalisation rate valuations. The impact on profit or loss relating
to the revaluation of investment properties was a gain of $5,472,142
(2017: gain of $23,301,780).

6,401

13,731

(733)

256,601

(733)

269,599

150th ANNUAL REPORT 2018 I Year ended 31 July 2018150th ANNUAL REPORT 2018 I Year ended 31 July 2018INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED

4. Segment Information

4. Segment Information (Continued)

The Group comprises of the following business segments, based on the group’s management reporting systems:

For the year ended

• Cash and fixed interest
• Equities
• Private equities
•
Investment properties
• Development properties
• Surf Hardware International business
• Other

For the year ended

Segment revenue

Cash and fixed interest – interest received

Equities – dividends and option income

Private equities – distributions received

Investment properties – rent received

Surf Hardware International business – sale of goods

Segment other income

Equities – realised gains on disposal

Private equities – realised losses on disposal/unrealised fair value gains/(losses)

Investment properties – realised losses on disposal/unrealised fair value gains

Other

Total segment revenue and other income

Segment result

Cash and fixed interest

Equities

Private equities

Investment properties

Surf Hardware International business

Other

Income tax (expense)

Net profit after tax

Revenue from external customers by geographical region

Australia

United States of America

Japan

Europe

Total revenue from external customers

31 July 2018
$’000

31 July 2017
$’000

30,239

11,563

5,597

9,619

57,018

25,459

8,458

3,937

6,364

44,218

31 July 2018
$’000

31 July 2017
$’000

The Group only derives revenue from external customers in the Investment properties and Surf Hardware International business segments.

219

618

449

19,829

37,189

58,304

(148)

5,589

321

5,762

64,066

219

(928)

301

11,846

308

(4,568)

7,178

(1,725)

5,453

672

1,173

173

19,672

24,546

46,236

5,696

(318)

23,302

666

29,346

75,582

672

6,351

(145)

32,112

(1,776)

(4,290)

32,924

(9,684)

23,240

As at

Segment assets

Cash and fixed interest

Equities

Private equities

Investment properties

Development properties

Surf Hardware International business

Unallocated assets

Total assets

Segment liabilities

Investment properties

Surf Hardware International business

Unallocated liabilities

Total liabilities

Non-current assets by geographical region

Australia

United States of America

Japan

Europe

Total non-current assets

31 July 2018
$’000

31 July 2017
$’000

5,294

36,783

3,449

256,678

14,145

15,691

21,716

353,756

91,345

4,193

42,253

137,791

324,655

8,016

398

5,886

33,969

3,301

226,661

14,004

14,841

22,150

320,812

57,698

3,383

45,755

106,836

290,615

5,294

216

121

333,168

296,246

150th ANNUAL REPORT 2018 I Year ended 31 July 2018150th ANNUAL REPORT 2018 I Year ended 31 July 2018INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED
4. Segment Information (Continued)

5. Operating Profit

31 July 2018
$’000

31 July 2017
$’000

For the year ended

31 July 2018
$’000

31 July 2017
$’000

For the year ended

Payments for the acquisition of:

- Investment properties

- Development properties

- Equities

- Surf Hardware International business, net of cash acquired

Gains / (losses) on disposal or revaluation of:

- Investment properties

- Equities

- Private equities

- Impairment – equities

Unallocated:

29,026

438

1,975

5,589

(148)

(1,546)

12,653

12,244

6,198

14,293

23,302

5,696

(318)

(518)

- Payments for the acquisition of property, plant and equipment

733

297

Accounting policies
Segment information is prepared in conformity with the accounting policies of the Group as disclosed in note 1.

Segment revenues, expenses, assets and liabilities are those that are directly attributable to a segment and the relevant portion that can be
allocated to a segment on a reasonable basis.

All segments other than Surf Hardware International business segment
Segment assets include all assets used by a segment and consist primarily of operating cash, investments, investment properties and plant and
equipment, net of related provisions. While most of these assets can be directly attributable to individual segments, the development properties
carrying amounts of certain assets used jointly by segments are allocated based on reasonable estimates of usage. Segment liabilities consist
of borrowings. Segment assets and liabilities do not include income taxes. Tax assets and liabilities, trade and other creditors and employee
entitlements and goodwill are represented as unallocated amounts.

Surf Hardware International business segment
Segment assets include all assets (excluding operating cash of $1.23 million (2017: $1.45 million) which is included in the cash segment) used by
the Surf Hardware International business segment and consist primarily of trade and other receivables, inventories, plant and equipment and
intangibles, net of related provisions. Segment liabilities consist of borrowings, trade and other payables and employee entitlements. Segment
assets and liabilities do not include income taxes. Tax assets and liabilities are represented as unallocated amounts.

Segment cash flows
Segment information is not prepared for cash flows as management consider it not relevant to users in understanding the financial position and
liquidity of the Group.

Profit from continuing operations before income tax expense includes the
following specific items:

Gains

Private equity investment distributions

Expenses

Interest and other borrowing cost

Employee benefits

Cost of sales

6. Income Tax Expense

For the year ended

Current tax

Deferred tax

(Over) / under provided in prior years

Income tax attributable to:

Profit from continuing operations

Aggregate income tax expense on profit

Reconciliation of income tax expense to prima facie tax payable

Profit from continuing operations before income tax expense

Tax at the Australian tax rate of 30% (2017: 30%)

Deferred tax assets not recognised

Deferred tax assets recorded not previously recognised

Tax effect of amounts which are not deductible (taxable) in calculating taxable income:

Non-assessable income/ Non-deductable expenses

Franked dividends

(Over) / under provision in prior year

Income tax expense

Amounts recognised directly in equity
Aggregated current and deferred tax arising in the reporting period and not
recognised in net profit or loss but directly debited or (credited) to equity

7. Cash and Cash Equivalents

As at

Cash at bank and on hand

8. Current Development Properties

449

5,230

11,166

21,926

173

2,986

7,908

16,795

31 July 2018
$’000

31 July 2017
$’000

139

1,735

(149)

1,725

7,178

2,153

(321)

144

(102)

(149)

1,725

1,204

2,421

7,658

(395)

9,684

32,924

9,877

409

(256)

(395)

9,684

(503)

31 July 2018
$’000

5,294

31 July 2017
$’000

5,886

Development Properties

297

150th ANNUAL REPORT 2018 I Year ended 31 July 2018150th ANNUAL REPORT 2018 I Year ended 31 July 2018INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED

9. Current Trade and Other Receivables

16. Non-Current Private Equities

As at

Trade debtors

Less: Provision for doubtful debts

Balance at end of year

10. Other Current Assets

31 July 2018
$’000

31 July 2017
$’000

8,015

(226)

7,789

7,770

(243)

7,527

Prepayments

1,271

1,220

For the year ended

At fair value through profit or loss

Balance at beginning of year

Revaluation to fair value

Additions

Disposal proceeds

Net gain on disposal

Balance at end of year

11. Current Inventories

At cost or net realisable value
Raw materials and finished goods

Balance at end of year

12. Current Loan Receivable

Changes in fair values of private equities at fair value through the profit or loss are recorded in other income.

17. Non-Current Development Properties

6,234

6,636

At cost or net realisable value

Balance at beginning of year

Additions

Balance at end of year

Loan to property developers

3,000

18. Non-Current Investment Properties

Interest on loans to property developers held in the prior year were charged at commercial rates.

13. Non-Current Receivables

Loans to employees

Other loans

Balance at end of year

14. Non-Current Loan Receivable

566

567

758

760

Balance at beginning of year

Additions

Disposal proceeds

Net loss on disposal

Transfers in/(out)

Amortisation on incentives

Net gain from fair value adjustment

Balance at end of year

Loan receivable

1,400

15. Non-Current Equities

At fair value

Balance at beginning of year

Revaluation to fair value

Additions

Impairment

Disposal proceeds

Net gain on disposal

Balance at end of year

Changes in fair value of equities are recorded in equity.

33,969

3,224

1,136

(1,546)

36,783

47,774

(2,195)

4,749

(518)

(21,537)

5,696

33,969

Amounts recognised in profit of loss for investment properties

Rental revenue

Direct operating expenses from rental generating properties

Net loss on disposal

Gain on revaluation

Changes in fair values of investment properties are recorded in other income.

31 July 2018
$’000

31 July 2017
$’000

3,301

279

839

(543)

(427)

3,449

13,707

438

14,145

226,661

26,276

(896)

(11)

297

(1,249)

5,600

256,678

19,829

(8,342)

(11)

5,600

17,076

2,679

(318)

1,449

(509)

3,301

1,463

12,244

13,707

192,716

15,041

(1,600)

(1,582)

(1,216)

23,302

226,661

19,672

(7,876)

23,302

35,098

150th ANNUAL REPORT 2018 I Year ended 31 July 2018150th ANNUAL REPORT 2018 I Year ended 31 July 2018INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED

18. Non-Current Investment Properties (Continued)

19. Non-Current Property, Plant and Equipment

Valuation
Method

Weighted
average cap
rate 2018

Weighted
average cap
rate 2017

31 July 2018
$’000

31 July 2017
$’000

Sub-regional shopping centres (Coffs Central
& Port Central)

Neighbourhood shopping centres (Kempsey
Central and Moonee Marketplace)

Other properties

(a)

(b)

6.25%

7.25%

n/a

6.47%

199,861

173,280

7.38%

n/a

48,800

8,017

256,678

45,300

8,081

226,661

(a)

Fair value is based on capitalisation rates, which reflect vacancy rates, tenant profile, lease expiry, developing potential and the
underlying physical condition of the centre. The higher the capitalisation rate, the lower the fair value. Capitalisation rates used at
31 July 2018 were based on management prepared valuations and externally prepared valuations.

Where a property is under development, the investment property fair value is based on the fair value of the property “as if
complete” less the estimated costs to complete. Development risks (such as construction and letting risks) are taken into
consideration when determining the fair value of investment property.

(b) Current prices in an active market for properties of similar nature or recent prices of different nature in less active markets.

Year ended 31 July 2018

Opening net book amount

Acquired on business combination (note 33)

Additions

Disposals

Transfers in/(out)

Revaluation to fair value

Depreciation charge

Closing net book amount

At 31 July 2018

Cost or fair value

Accumulated depreciation

Net book amount

Year ended 31 July 2017

Opening net book amount

Acquired on business combination (note 33)

Additions

Disposals

Transfers in / (out)

Revaluation to fair value

Depreciation charge

Closing net book amount

At 31 July 2017

Cost or fair value

Accumulated depreciation

Net book amount

Freehold
Property
$’000

Motor vehicles
$’000

Furniture, fittings
& equipment
$’000

6,401

247

791

(44)

7,148

7,565

(417)

7,148

(67)

186

505

(319)

186

1,180

727

(492)

1,415

7,304

(5,889)

1,415

Freehold
Property
$’000

Motor vehicles
$’000

Furniture, fittings
& equipment
$’000

4,217

1,735

493

(44)

6,401

6,774

(373)

6,401

227

(46)

247

499

(252)

247

446

821

297

(5)

(379)

1,180

6,577

(5,397)

1,180

Total
$’000

7,828

733

791

(603)

8,749

15,374

(6,625)

8,749

Total
$’000

4,890

887

297

(5)

1,735

493

(469)

7,828

13,850

(6,022)

7,828

Revaluation to fair value uplifts on property, plant and equipment are recorded in equity.

150th ANNUAL REPORT 2018 I Year ended 31 July 2018150th ANNUAL REPORT 2018 I Year ended 31 July 2018INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED

20. Non-Current Intangibles

22. Other Non-Current Assets

As at

Goodwill

Brand names

Patents

Balance at end of year

31 July 2018
$’000

31 July 2017
$’000

2,383

1,719

200

4,302

2,383

1,050

117

3,550

Intangible assets, other than goodwill and brand names have finite useful lives. Goodwill and brand names have an indefinite useful life.

Goodwill and brand names are allocated to the Surf Hardware International business segment (“the cash-generating unit”). The Group tests
whether goodwill and brand names have suffered any impairment at each reporting period. The recoverable amount of the cash-generating unit
is determined based on value-in-use calculations. Value-in-use is calculated based on the present value of cash flow projections over a five year
period with the period extending beyond four years extrapolated using an estimated growth rate.

Five year projected cash flows in respect of the Surf Hardware International business segment are $6.0 million. Key assumptions include:
(a) 12.5% discount rate; (b) 5% per annum projected net revenue growth rate; (c) 3% per annum increase in operating expenses; and (d) 3%
terminal growth rate. Based on these assumptions the Directors have determined that no impairment charge shall be recognised during the
current reporting period.

As at

Other assets

23. Current Trade and Other Payables

Trade creditors

Other creditors and accruals

Balance at end of year

24. Current Borrowings

Bill payable – secured

Commercial advance facility - secured

Trade facility – secured

Finance lease – secured

Balance at end of year

31 July 2018
$’000

2,025

31 July 2017
$’000

1,839

2,140

2,571

4,711

336

112

455

5,507

4,395

9,902

8,675

644

9,330

21. Deferred Tax Assets

As at

The balance comprises temporary differences attributable to:

Employee benefits

Accruals

Equities

Private equities

Derivatives

Tax losses

Other

Net deferred tax assets

Movements:

Opening balance at 1 August

Acquired on business combination (note 33)

(Debited) / credited to profit or loss

Closing balance at 31 July

Deferred tax assets to be recovered after 12 months

Deferred tax assets to be recovered within 12 months

31 July 2018
$’000

31 July 2017
$’000

361

336

2,124

212

1,725

312

5,070

4,631

439

5,070

841

4,229

5,070

329

915

1,229

1,655

220

283

4,631

4,191

258

182

4,631

1,534

3,097

4,631

Risk
The Group’s exposure to interest rate changes arising from current and non-current borrowings is set out in note 2.

Refinancing / Repayment
The Group expects to renew or refinance current borrowing facilities on normal commercial terms and rates that are acceptable to the Group
prior to the respective repayment dates. Alternatively, the Group believes it has the ability to repay any outstanding debt under these facilities
from excess cash reserves, proceeds received from the disposal of assets or from cash sourced or raised through the Group’s operating or
financing activities.

Security
Information about the security relating to each of the secured liabilities and the fair value of each of the borrowings is provided in note 27.

25. Current Tax Liabilities

As at

Income tax

26. Current Provisions

Employee Entitlements

27. Non-Current Borrowings

Bill payable - secured

Commercial advance facility - secured

Balance at end of year

31 July 2018
$’000

357

31 July 2017
$’000

2,085

1,222

1,075

91,345

664

92,009

49,023

Risk
The Group’s exposure to interest rate changes arising from current and non-current borrowings is set out in note 2.

Security
Details of the security relating to each of the secured liabilities and further information on banks loans are set
out below.

150th ANNUAL REPORT 2018 I Year ended 31 July 2018150th ANNUAL REPORT 2018 I Year ended 31 July 2018INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED

27. Non-Current Borrowings (Continued)

Total secured liabilities

The total secured liabilities (current and non-current) are as follows:

Bills payable¹

Trade facility – secured²

Commercial advance facility – secured³

Finance lease – secured

Assets pledged as security

31 July 2018
$’000

31 July 2017
$’000

91,345

112

1,000

92,464

57,698

644

58,353

1$1.6 million bill is secured against 328-332 Bong Bong St, Bowral. The facility has a total facility limit of $1.65 million and interest is charged at BBSY plus
1.90%.

¹$89.745 million bill is secured against Port Central Shopping Centre, Coffs Central Shopping Centre, Mooney Marketplace Shopping Centre and Kempsey
Central Shopping Centre (the “SC properties”). The facility entered into during the year consists of two tranches, the first tranche is a non-revolving
facility, has a facility limit of $86 million (fully drawn at 31 July 2018), interest on the outstanding principal is charged at the BBSY rate p.a. and a line fee is
charged at a fixed rate of 2.35% p.a. on the first tranche facility limit. The second tranche is a revolving facility, has a facility limit of $30 million, interest
on the outstanding principal is charged at BBSY plus 0.70% p.a. and a line fee is charged at a fixed rate of 1.65% p.a. on the second tranche facility limit.
At 31 July 2018 the current interest rate that applies to amounts advanced is 2.05% p.a. for the first tranche and 2.75% p.a. for the second tranche. The
lender requires the Group and SC properties to meet certain financial ratios: the SC properties must have a minimum interest coverage ratio of 1.75 times;
the Group must have a minimum interest coverage ratio of 1.5 times; the combined facility limit of the first and second tranches must not to exceed 55%
of the aggregate market value of the SC properties; and the Group’s gearing ratio must not exceed 50%.

²$0.112 million trade facility is held by Gowings SHI Pty Limited and secured by the assets of Gowings SHI Pty Limited, Fin Control Systems Pty Ltd, Oz4u
Holdings Pty Ltd, SHI Holdings Pty Ltd, Sunbum technologies Pty Ltd, Surfing Hardware International Holdings Pty Ltd, Surf Hardware International Pty
Ltd, and Surf Hardware International Asia Pty Ltd. The facility was revised during the year and has a total facility limit of $2 million, interest is charged at
the trade interest rate determined by the lender at the date of drawn down plus 2.5%. At 31 July 2018 the current interest rate that applies to amounts
advanced is 4.90%.

³$1 million commercial advance facility is held by Gowings SHI Pty Limited and secured by the assets of Gowings SHI Pty Limited, Fin Control Systems
Pty Ltd, Oz4u Holdings Pty Ltd, SHI Holdings Pty Ltd, Sunbum technologies Pty Ltd, Surfing Hardware International Holdings Pty Ltd, Surf Hardware
International Pty Ltd, and Surf Hardware International Asia Pty Ltd. The facility entered into during the year has a total facility limit of $1 million (fully
drawn at 31 July 2018), interest is charged at BBSY plus 3.0%. At 31 July 2018 the current interest rate that applies to amounts advanced is 5.09%.

As at

Financing Arrangements
Unrestricted access was available at balance date to the following lines of credit:

31 July 2018
$’000

31 July 2017
$’000

¹Of the $1.89 million (2017: $1.36 million) remaining trade facility, $0.15 million (2017: $0.15 million) has been used for bank guarantees.

Off-balance sheet
There are no off-balance sheet borrowings or related contingencies other than the amount secured for bank guarantees referred above.

28. Non-Current Provisions

As at

Employee entitlements

29. Deferred Tax Liabilities

The balance comprises temporary differences attributable to:

Prepayments

Intangibles

Investment properties

Equities

Other

Net deferred tax liabilities

Movements:

Opening balance at 1 August

Acquired on business combination (note 33)

Charged/(credited) to profit or loss

Charged/(credited) to equity

Closing balance at 31 July

Deferred tax liabilities to be settled within 12 months

Deferred tax liabilities to be settled after 12 months

31 July 2018
$’000

469

31 July 2017
$’000

498

291

315

30,139

6,179

688

37,612

33,915

2,493

1,204

37,612

291

37,321

37,612

303

315

27,699

5,047

551

33,915

25,861

729

7,828

(503)

33,915

398

33,517

33,915

Total facilities

Secured bank overdrafts

Secured bill facilities

Secured trade facility

Secured commercial advance facility

Used at balance date

Secured bill facilities

Secured trade facility

Secured commercial advance facility

Unused at balance date

Secured bank overdrafts

Secured bill facilities

Secured trade facility¹

Secured commercial advance facility

117,650

2,000

1,000

120,650

91,345

112

1,000

92,457

26,305

1,888

28,193

1,000

82,240

2,000

85,240

57,698

644

58,342

1,000

24,542

1,356

26,898

150th ANNUAL REPORT 2018 I Year ended 31 July 2018150th ANNUAL REPORT 2018 I Year ended 31 July 2018INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED
30. Contributed Equity

Share capital

Ordinary shares fully paid

Movements in ordinary share capital

Date

Details

31/07/2017

Balance

27/06/2018

Share buy back

31/07/2018

Balance

Number of
shares 2018

Number of
shares 2017

2018
$’000

2017
$’000

53,632,915

53,680,259

12,476

12,611

Number of
shares

53,680,259

(47,344)

53,632,915

Issue price per
share

2.84

$’000

12,611

(135)

12,476

Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number of
and amounts paid on the shares held. On a show of hands every holder of ordinary shares present at a meeting in person or by proxy is entitled
to one vote, and upon a poll each share is entitled to one vote.

Dividend Reinvestment Plan
The Dividend Reinvestment Plan may be offered to shareholders by Directors, and allows shareholders to reinvest dividends into shares in the
Company. The Dividend Reinvestment Plan is in place for the final dividend declared on 14 September 2018. The last date for the receipt of an
election for participation in the Dividend Reinvestment Plan is 2 November 2018.

Deferred Employee Share Plan
The Deferred Employee Share Plan may be used as part of any incentive payments for all employees. For transaction cost reasons, where
possible shares bought back as part of the Company’s ongoing capital reduction program are recognised for this purpose rather than cancelled.

Options
There were no options on issue at the time of this report.

On-market share buy back
47,344 shares were bought back during the year (2017: 11,940).

Capital risk management
The Company’s objective when managing capital is to safeguard the ability to continue as a going concern, so that continued returns to
shareholders and benefits for other stakeholders can be provided while maintaining an optimal capital structure.

31. Reserves

As at

Movements

Capital profits reserve¹

Opening balance

Transfer from retained profits

Closing balance

Long term investment revaluation reserve²

Opening balance

Fair value adjustments on available for sale assets

- Equities

- Deferred tax applicable to fair value adjustments

Closing balance

Asset revaluation reserve³

Opening balance

Fair value adjustments on property, plant and equipment

- Property, plant and equipment

- Deferred tax applicable to fair value adjustments

Closing balance

Foreign currency translation reserve⁴

Opening balance

Exchange differences on translation of foreign operations

Closing balance

Total reserves

31 July 2018
$’000

31 July 2017
$’000

90,503

11,851

3,224

(967)

14,108

1,037

791

(237)

1,591

(162)

302

140

106,342

90,503

13,395

(2,195)

651

11,851

692

493

(148)

1,037

(162)

103,229

¹ The capital profits reserve is used to record pre-CGT profits.
² The long term investment revaluation reserve is used to record increments and decrements on equities recognised in other comprehensive
income. Amounts are reclassified to profit or loss when the equities are sold. Impaired amounts are recognised in profit or loss.
³ The asset revaluation reserve is used to record increases and decreases in the fair value of property, plant and equipment recognised in
other comprehensive income.
⁴ The foreign currency translation reserve records exchange rate differences arising on translation differences on foreign controlled subsidiaries.

150th ANNUAL REPORT 2018 I Year ended 31 July 2018150th ANNUAL REPORT 2018 I Year ended 31 July 2018INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED

32. Dividends

As at

Ordinary shares

2017 final dividend of 6.0 cents (2016: 6.0 cents final) per share

2018 interim dividend of 6.0 cents (2017: 6.0 cents interim) per share

Total dividends declared

Dividends paid in cash

31 July 2018
$’000

31 July 2017
$’000

3,221

6,442

3,221

6,442

Franked dividends declared and paid during the year were fully franked at the tax rate of 30% (2017: 30%).

Dividends declared after year end
Subsequent to year end the Directors have declared the payment of a final dividend of 6.0 cents per ordinary share fully franked based on tax
paid at 30%. The maximum amount of the proposed dividend expected to be paid on 13 November 2018 out of retained profits at 31 July 2018 is
$3,217,975.

The financial effect of the dividend declared subsequent to the reporting date has not been brought to account in the financial statements for
the year ended 31 July 2018 and will be recognised in subsequent financial reports.

Franked dividends
The franked portions of the final dividends declared after 31 July 2018 will be franked out of existing franking credits or out of franking credits
arising from the payment of income tax in the year ending 31 July 2019.

Franking credits available for subsequent financial years (tax paid basis)

6,678

9,762

The above amounts are based on the balance of the franking account at year end, adjusted for:
(a) franking credits that will arise from the payment of the current tax liability;
(b) franking debits that will arise from the payment of dividends recognised as a liability at the reporting date;
(c) franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date; and
(d) franking credits that may be prevented from being distributed in subsequent financial years.

33. Business Combination

Acquisition of SHI Holdings Pty Limited
On 16 December 2016, a subsidiary of the Group, Gowings SHI Pty Ltd, acquired 100% of the issued shares in SHI Holdings Pty Limited and its
controlled entities (“Surf Hardware International”) for total consideration of $16,000,000. Surf Hardware International is a manufacturer and
global supplier of surf related hardware products. The acquisition is aligned with the Group’s continued focus of investing in selected direct
private equity investments in its investment portfolio.

Details of the purchase consideration, the net assets acquired and goodwill are as follows:

Purchase consideration
The acquisition-date fair value of the total purchase consideration was $16,000,000. The purchase consideration is split into two tranches as
follows:

Purchase consideration (first tranche) – cash paid on acquisition date

Purchase consideration (second tranche) – cash paid on 30 June 2017

Total fair value of the total purchase consideration

$’000

10,000

6,000

16,000

33. Business Combination (Continued)

Purchase consideration was payable in two tranches, the first tranche was paid on the acquisition date in cash and the second tranche was paid
in cash on 30 June 2017. At 31 July 2018 no purchase consideration remains outstanding in relation to this acquisition.

Fair value of identifiable assets and liabilities recognised as a result of the acquisition
Fair value of identifiable assets recognised as a result of the acquisition are as follows:

Cash and cash equivalents

Trade and other receivables

Inventories

Other assets

Property, plant and equipment

Intangibles

Deferred tax assets

Total fair value of identifiable assets acquired

Fair value of identifiable liabilities recognised as a result of the acquisition are as follows:

Trade and other payables

Employee provisions

Other provisions

Lease liability

Income tax payable

Deferred tax liabilities

Total fair value of identifiable liabilities acquired

$’000

1,707

4,655

10,392

324

887

1,050

258

19,273

$’000

1,726

989

334

729

1,861

5,656

The fair value of assets and liabilities acquired were previously recorded on a provisional basis. The Group has retrospectively adjusted the fair
value of certain identifiable assets and liabilities recorded in prior period based on new information obtained since the data of acquisition about
the facts and circumstances that existed at the date of acquisition. The fair value of identifiable assets and liabilities acquired are no longer
recorded on a provisional basis.

Goodwill
The Group has measured the fair value of identifiable assets and liabilities acquired at acquisition date with the remainder of the purchase price
being attributed to goodwill. This treatment is consistent with the Group’s accounting policy at note 1(d)

Goodwill recorded in relation to the acquisition of Surf Hardware International is as follows:

Purchase price

Less: net fair value of identifiable assets and liabilities acquired

Goodwill recorded on acquisition

$’000

16,000

(13,617)

2,383

The goodwill is attributed to Surf Hardware International's strong position in the global surf related hardware market & future growth potential.

Goodwill is not deductible for tax purposes.

Revenue and profit contribution
During the year ended 31 July 2018, Surf Hardware International contributed sales revenue of $37,188,969 (2017: $24,546,236 for the period from
acquisition to 31 July 2017) and a loss before tax of $253,137 (2017:$2,080,601) to the Group’s results. This loss includes an amount of $512,347
(2017: $2,577,653) relating to fair value adjustments made to Surf Hardware International’s inventory on acquisition.

150th ANNUAL REPORT 2018 I Year ended 31 July 2018150th ANNUAL REPORT 2018 I Year ended 31 July 2018INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED

33. Business Combination (Continued)

36. Related Parties (Continued)

Acquisition costs
Acquisition costs of $nil (2017: $473,143) were expensed in the consolidated statement of profit or loss in relation to the acquisition of Surf
Hardware International.

Acquired receivables
On acquisition the gross contractual amount for trade receivables due was $4,729,720, of which $74,601 was expected to be uncollectible.

34. Remuneration of Auditors

Audit and review – parent entity

Audit and review – subsidiary companies

Tax services

35. Commitments for Expenditure

31 July 2018
$

31 July 2017
$

105,000

62,500

79,500

247,000

102,000

60,000

68,000

230,000

Capital commitments – Private equities
The Group has uncalled capital commitments of up to $1,132,923 (2017: $1,528,000) in relation to private equity investments held at year end.

Capital commitments – Investment properties
The Group has capital commitments of $1,342,517 (2017: $18,939,143) in relation to construction works on investment properties at year end.

Operating lease commitments
The Group has entered into leases for commercial premises, motor vehicles, and office equipment. Commitments for minimum lease payments
in relation to non-cancellable operating leases are payable as follows:

Remuneration
Information on remuneration of Directors and other key management personnel is disclosed in the remuneration report.

Directors and other key management personnel

Short-term employee benefits

Share based compensation

Post-employment benefits

Long-term benefits

Detailed remuneration can be found in the remuneration report on pages 36 to 38.

31 July 2018
$

31 July 2017
$

1,723,628

78,380

(55,718)

1,746,290

1,104,593

17,250

91,803

(321)

1,213,325

Movement in shares

Key management person

J. E. Gowing

J. G. Parker

Prof. J. West

S. J. Clancy

G. J. Grundy

*Directly and indirectly

Shares acquired/

Shares held* at

(disposed) during

Shares held* at

(disposed) during

Shares held* at

31-Jul-16

No.

20,881,150

55,000

397,581

5,000

344,707

the year

No.

5,000

31-Jul-17

No.

20,881,150

55,000

397,581

5,000

349,707

the year

No.

80,000

31-Jul-18

No.

20,881,150

55,000

477,581

5,000

349,707

Within one year

Later than one year but not later than five years

Later than five years

36. Related Parties

922

909

1,861

1,193

1,539

168

2,900

Other key management personnel did not hold shares in the company.

Receivables from Directors and Executives
At year end there were no receivables from the Directors and executives (2017: $nil).

Transactions with key Management Personnel & Directors

Directors
The names of persons who were Directors of Gowing Bros. Limited at any time during the financial year were Messrs J. E. Gowing, J. G. Parker,
Prof. J. West and S. J. Clancy.

Those persons that were also Directors during the year ended 31 July 2017 were Messrs J. E. Gowing, J. G. Parker, R. D. Fraser, Prof. J. West and S.
J. Clancy.

Key management person

Transaction type

J. E. Gowing

Marketing services

Associate director services

31 July 2018
$

82,250

10,950

31 July 2017
$

44,640

3,650

The wife of Mr J E Gowing, Managing Director, is a Director of Creative License Pty Limited. Creative License Pty Limited provided marketing services
totalling $36,150 for the year (2017 $34,094). Dealings were at commercial rates. The sons of Mr J E Gowing provided marketing and accounting
services at market rates during the year on a casual basis, $46,100 (2017: $10,546) and associate director services $10,950 (2017: $3,650).

There were no other transactions with Directors and Director related entities and Executives.

150th ANNUAL REPORT 2018 I Year ended 31 July 2018150th ANNUAL REPORT 2018 I Year ended 31 July 2018INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED37. Interests in Other Entities (Excluding Joint Ventures)

38. Interests in Joint Ventures

The Group’s principal subsidiaries and other interests are set out below:

Unless otherwise stated, subsidiaries and other interests listed below have share capital comprising of ordinary shares or ordinary units which
are held directly by the Group. The proportion of ownership interests held equals the voting rights held by the Group.

The Group has entered into a joint venture operation known as Regional Retail Properties, a long term investment in a small regional retail
centre. The Group has a 50% participating interest in this joint venture and is entitled to 50% of its output.

The Group’s interests in the assets employed in the joint ventures are included in the consolidated statement of financial position, in accordance
with the accounting policy described in note 1(p), under the following classifications:

Entity Name

Pacific Coast Developments 357 Pty Ltd

Pacific Coast Developments 357 Fund

1868 Capital Pty Ltd

Pacific Coast Developments 112 Fund

Gowings SHI Pty Ltd

SHI Holdings Pty Ltd*

Fin Control Systems Pty Ltd*

Surfing Hardware International Holdings Pty Ltd*

Surf Hardware International Asia Pty Ltd*

Surf Hardware International Europe SARL*

Surf Hardware International UK Ltd*

OZ4U Holdings Pty Ltd*

Sunbum Technologies Pty Ltd*

Surfing Hardware International USA Inc.*

Surf Hardware International USA Inc.*

Surf Hardware International Hawaii Inc.*

Surf Hardware International Japan KK*

Surf Hardware International Pty Ltd*

Surf Hardware International Brazil Com. De Mat. Esportivos LTDA*

Gowings Master Trust

1868 High Yield Trust

Gowings Life Sciences Trust

Gowing Bros Management Services Pty Ltd

Coastbeat Pty Ltd

Country of
Incorporation

Ownership
Interest % 2018

Ownership
Interest % 2017

Australia

France

England and Wales

Australia

United States of America

Japan

Australia

Brazil

Australia

100

99.9

100

99.9

100

99.9

100

99.9

*SHI Holdings Pty Limited and controlled entities acquired by Gowings SHI Pty Ltd during the prior year (note 33).

No other interests in subsidiaries or other entities (excluding joint ventures) were held by the Group in the 31 July 2018 financial year.

Non-controlling interests in subsidiaries and other interests of the Group are not material to the Group.

Significant Restrictions
Other than certain assets pledged as security for the secured trade facility detailed in note 27, there are no significant restrictions over the
Group’s ability to access or use assets, and settle liabilities, of the Group.

Current assets

Cash

Trade and other receivables

Total current assets

Non-current assets

Investment properties

Total non-current assets

Current share of assets employed in joint venture

Current liabilities

Trade and other payables

Borrowings

Total current liabilities

Non-current liabilities

Borrowings

Total non-current liabilities

Current share of liabilities employed in joint venture

Net assets employed in joint venture

31 July 2018
$’000

31 July 2017
$’000

3,000

3,078

1,600

1,617

1,461

3,000

3,075

1,675

1,680

1,395

$1.6 million of borrowings is secured against investment properties of Regional Retail Properties (note 27).

39. Share Based Payments

The Deferred Employee Share Plan has been in operation since 2006 which allows fully paid ordinary shares to be issued for no cash
consideration from shares held by the Plan. All Australian resident permanent employees and non-executive directors are eligible to participate
in the scheme. Employees may elect not to participate in the scheme.

Shares are acquired on-market prior to the issue. Shares issued under the scheme may not be sold until the earlier of three years after issue or
cessation of employment of the Group. In all other respects the shares rank equally with other fully-paid ordinary shares on issue.

Options
No options were on issue at year end (2017: Nil).

40. Earnings Per Share

Basic earnings per share (cents)

Diluted earnings per share (cents)

Weight average number of ordinary shares on issue

Net profit after tax

31 July 2018

31 July 2017

10.15c

53,675,837

$5,453,000

43.29c

53,683,040

$23,240,000

150th ANNUAL REPORT 2018 I Year ended 31 July 2018150th ANNUAL REPORT 2018 I Year ended 31 July 2018INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED

41. Parent Entity Information

42. Reconciliation of Net Profit to Net Cash Inflow from Operating Activites

The following information has been extracted from the books and records of the Company and has been prepared in accordance with Australian
Accounting Standards:

Statement of Financial Position

31 July 2018
$’000

31 July 2017
$’000

Assets

Current assets

Non-current assets

Total assets

Liabilities

Current liabilities

Non-current liabilities

Total liabilities

Net assets

Equity

Issued capital

Capital profits reserve

Long term investment revaluation reserve

Asset revaluation reserve

Retained earnings

Total equity

Statement of Profit or Loss and other Comprehensive Income

Net profit after income tax

Total comprehensive income

7,318

344,069

351,387

3,922

128,863

132,785

218,602

12,476

90,503

14,108

1,591

99,924

218,602

10,403

308,163

318,566

19,540

82,770

102,310

216,256

12,611

90,503

11,851

1,037

100,254

216,256

31 July 2018
$’000

31 July 2017
$’000

6,112

8,923

25,358

24,159

Parent entity contractual commitments
The Company has no contractual commitments other than uncalled capital commitments for private equities and commitments for construction works
on investment properties as noted in note 35 (2017: Uncalled capital commitments for private equities as noted in note 35).

Parent entity contingent liabilities
The Company has no contingent liabilities at year end (2017: None).

Parent entity guarantees in respect to debts of its subsidiaries
The Company has not entered into any guarantees in respect to debts of its subsidiaries at year end (2017: None).

Profit from ordinary activities after income tax
Amortisation
Depreciation
Impairment – equities
Net gain on sale of equities and private equities
Net loss on sale of property, plant and equipment
Net loss on sale of investment properties
Revaluation of investment properties to market value
Revaluation of equities and private equities to market value
Revaluation of derivative to market value
Borrowing costs relating to financing activities (derivatives)
Borrowing costs relating to financing activities (borrowings)
Other (expense) / income
Decrease / (increase) in receivables
Decrease / (increase) in prepayments
Decrease / (increase) in inventories
Increase / (decrease) in income taxes
Increase / (decrease) in employee entitlements
Increase / (decrease) in trade creditors and accruals
Net cash inflow from operating activities

31 July 2018
$’000

31 July 2017
$’000

5,453
1,429
603
1,546
427
-
11
(5,600)
(279)
418
1,584
192
-
(867)
(184)
402
327
118
(1,368)
4,212

23,240
1,396
469
518
(5,696)
1
-
(23,302)
318
(367)
-
-
(17)
(2,184)
(475)
3,755
5,435
83
1,310
4,484

43. Changes in Liabilities Arising from Financing Activities

Liabilities
from financing
activities

Opening
balance –
31 July 2017

Cash flows
from financing
activities

(Gains)/ loss
on disposal or
revaluation
(non-cash)

Borrowing
costs expense
(non-cash)

Borrowing
costs
capitalised
(non-cash)

Derivatives¹

Borrowings²

733

58,353

(2,027)

33,685
31,658⁶

418

-
418

1,584³

192⁴
1,776

234⁵
234

Closing
balance –
31 July 2018

708

92,464

¹ Relates to current derivatives.
² Relates to current and non-current borrowings. Refer to note 24 and note 27.
³ Relates to termination costs of embedded derivatives recorded as borrowing costs expense.
⁴ Relates to non-cash interest expense recorded as borrowing costs expense.
⁵ Relates to non-cash loan establishment fees.
⁶ Relates to the following cash flows from financing activities for the year ended 31 July 2018:

-Proceeds from borrowings
-Repayments from borrowings

-Payments for derivatives

44. Subsequent Events

33,764
(79)

(2,027)

31,658

No matter or circumstance has arisen since the end of the financial year other than the dividend declared (refer note 32), which has significantly affected,
or may significantly affect, the operations of the Group, the results of those operations or the state of affairs of the Group in future financial years.

45. Other Information

Gowing Bros. Limited is incorporated and domiciled in New South
Wales. The registered office, and principal place of business, is Unit 21,
Jones Bay Wharf, 26 – 32 Pirrama Rd, Pyrmont NSW 2009.

Phone:
Facsimile:
Email:
Website:

61 2 9264 6321
61 2 9264 6240
info@gowings.com
www.gowings.com

Gowing Bros. Limited shares are listed on the Australian Securities
Exchange.

The share register is maintained by Computershare Investor
Services Pty. Limited, Level 3, 60 Carrington Street, Sydney NSW
2000, Telephone 1300 855 080, Overseas callers +61 (0)2 8234 5000,
Facsimile + 61 (0)2 8234 5050.

150th ANNUAL REPORT 2018 I Year ended 31 July 2018150th ANNUAL REPORT 2018 I Year ended 31 July 2018INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED

Directors’ Declaration

In the directors’ opinion:
(a)

the consolidated financial statements and notes set out on pages 40 to 77 are in accordance with the
Corporations Act 2001, including:
(i)

ccomplying with Accounting Standards and the Corporations Regulations 2001 and other mandatory professional reporting
requirements; and

(i) giving a true and fair view of the Group’s financial position as at 31 July 2018 and of its performance for the financial year

ended on that date; and

(b)

there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

2. The notes to the consolidated financial statements include a statement of compliance with International Financial Reporting Standards.

3. The directors have been given the declarations by the chief executive officer and chief financial officer for the year ended 31 July 2018

required by section 295A of the Corporations Act 2001.

This declaration is made in accordance with a resolution of the directors.

AUDITOR’S INDEPENDENCE DECLARATION

As lead auditor for the audit of the consolidated financial report of Gowing Bros. Limited for the year ended 31 July 2018, I declare that, to the
best of my knowledge and belief, there have been no contraventions of:

(a)
(b)

the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and

any applicable code of professional conduct in relation to the audit.

This declaration is in relation to the Gowing Bros. Limited and the entities it controlled during the year.

Professor J. West
Director

Sydney
11 October 2018

J. E. Gowing
Director

Sydney
11 October 2018

Sydney, NSW

11 October 2018

S Grivas
Partner

INDEPENDENT AUDITOR’S REPORT

INDEPENDENT AUDITOR’S REPORT (CONTINUED)

To the Members of Gowing Bros. Limited

REPORT ON THE AUDIT OF THE FINANCIAL REPORT

Opinion

We have audited the financial report of Gowing Bros. Limited (“the Company”) and its controlled entities (“the Group”), which comprises the
consolidated statement of financial position as at 31 July 2018, the consolidated statement of profit or loss, the consolidated statement of other
comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended,
and notes to the financial statements, including a summary of significant accounting policies, and the directors’ declaration.

In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including:

(a)

(b)

giving a true and fair view of the Group’s financial position as at 31 July 2018 and of its financial performance for the year then ended;
and

complying with Australian Accounting Standards and the Corporations Regulations 2001.

Basis for Opinion

We conducted our audit in accordance with Australian Auditing Standards. 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 auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical
Standards Board’s APES 110 Code of Ethics for Professional Accountants (“the Code”) that are relevant to our audit of the financial report in
Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

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.

Key Audit Matter How our audit addressed the key audit matter

Valuation of subregional and neighbourhood shopping centre investment properties and investment properties under
development
Note 18

The aggregate fair value of the Group’s subregional and
neighbourhood shopping centre investment properties and
investment properties under development as at 31 July 2018 is
$248.661 million, representing 70.3% of the Group’s total assets as at
that date.

The fair values of the Group’s investment properties and investment
properties under development were assessed either by management
and /or assessed by management based on independent valuations
prepared by an independent valuer.

The valuation of the Group’s investment properties and investment
properties under development requires judgement and the use of
subjective assumptions and estimates in determining fair value
including selecting the appropriate valuation methodology, market
rental rates, vacancy allowances and capitalisation rates and, for
investment properties under development, an estimation of costs to
complete the investment property.

We have identified the valuation of the Group’s investment properties
and investment properties under development as a key audit matter
because of the significance to the Group’s consolidated financial
statements and level of significant judgements and assumptions
applied to determine fair value.

Our audit procedures to assess the valuation of investment properties
and investment properties under development included:

• assessing the competence, capability, experience,

independence and objectivity of external valuers appointed
by management.

• evaluating the valuation methodology applied.
•

testing the reliability and reasonableness of inputs to
underlying contracts and supporting documentation.

•

testing the appropriateness of assumptions and estimates
with reference to historical rates and results, available
market data and other supporting documentation.
• checking the mathematical accuracy of valuation

calculations.

•

for investment properties under development, evaluated
management’s estimated costs to complete with reference
to construction contracts, quantity surveyor reports and
other supporting documentation.

reviewing the Group’s disclosures with reference to
Australian Accounting Standards.

Valuation of Unlisted Equities
Note 2, 15 & 16

At 31 July 2018 the Group owned investments of $27.247 million in a
number of unlisted equities which have been included in the Group’s
consolidated statement of financial position.

Management assess the value of these investments at least annually,
using various valuation techniques, such as a recent arm’s length
transaction, reference to other instruments that are of a similar nature
and relying as little as possible on unobservable inputs.

This is considered a key audit matter due to the significant judgment
involved in assessing the valuation of these assets, as they are often
traded in low volume markets.

Our audit procedures to assess the valuation of unlisted equities
included:

• assessing the valuation methodology applied by

management.

•

reviewing valuation inputs including evidence of recent
arm’s length transactions and agreeing these transactions
to external sources.

reviewing the Group’s disclosures with reference to
Australian Accounting Standards.

AUDITOR’S INDEPENDENCE DECLARATION As lead auditor for the audit of the consolidated financial report of Gowing Bros. Limited for the year ended 31 July 2017, I declare that, to the best of my knowledge and belief, there have been no contraventions of: (a)the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and(b)any applicable code of professional conduct in relation to the audit.This declaration is in relation to Gowing Bros. Limited and the entities it controlled during the year. Sydney, NSW S Grivas 28 September 2017 Partner INDEPENDENT AUDITOR’S REPORT To the Members of Gowing Bros. Limited REPORT ON THE AUDIT OF THE FINANCIAL REPORT Opinion We have audited the financial report of Gowing Bros. Limited (“the Company”) and its controlled entities (“the Group”), which comprises the consolidated statement of financial position as at 31 July 2017, the consolidated statement of profit or loss, the consolidated statement of other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and the directors’ declaration. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: (a)giving a true and fair view of the Group’s financial position as at 31 July 2017 and of its financialperformance for the year then ended; and(b)complying with Australian Accounting Standards and the Corporations Regulations 2001.Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. 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 auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (“the Code”) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters 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. INDEPENDENT AUDITOR’S REPORT (CONTINUED) Key Audit Matter How our audit addressed the key audit matterValuation of subregional and neighbourhood shopping centre investment properties Note 17 The aggregate fair value of the Group’s subregional and neighbourhood shopping centre investment properties as at 31 July 2017 is $218.580 million, representing 68.2% of the Group’s total assets as at that date. The fair values of the Group’s investment properties were assessed either by management and /or assessed by management based on independent valuations prepared by an independent valuer. The valuation of the Group’s investment properties requires judgement and the use of subjective assumptions and estimates in determining fair value including selecting the appropriate valuation methodology, market rental rates, vacancy allowances and capitalisation rates and, for investment properties under development, an estimation of costs to complete the investment property. We have identified the valuation of the Group’s investment properties as a key audit matter because of the significance to the Group’s consolidated financial statements and level of significant judgements and assumptions applied to determine fair value. Our audit procedures to assess the valuation of investment properties included: •assessing the competence, capability,experience, independence and objectivity ofexternal valuers appointed by management.•evaluating the valuation methodologyapplied.•testing the reliability and reasonableness ofinputs to underlying contracts andsupporting documentation.•testing the appropriateness of assumptionsand estimates with reference to historicalrates and results, available market data andother supporting documentation.•checking the mathematical accuracy ofvaluation calculations.•for investment properties underdevelopment, evaluated management’sestimated costs to complete with referenceto construction contracts, quantity surveyorreports and other supportingdocumentation.•reviewing the Group’s disclosures withreference to Australian AccountingStandards.Valuation of Unlisted Equities Note 2, 14 & 15 At 31 July 2017 the Group owned investments of $23.539 million in a number of unlisted equities which have been included in the Group’s consolidated statement of financial position. Management assess the value of these investments at least annually, using various valuation techniques, such as a recent arm’s length transaction, reference to other instruments that are of a similar nature and relying as little as possible on unobservable inputs. This is considered a key audit matter due to the significant judgment involved in assessing the valuation of these assets, as they are often traded in low volume markets. Our audit procedures to assess the valuation unlisted equities included: •assessing the valuation methodologyapplied by management.•reviewing valuation inputs includingevidence of recent arm’s length transactionsand agreeing these transactions to externalsources.•reviewing the Group’s disclosures withreference to Australian AccountingStandards.150th ANNUAL REPORT 2018 I Year ended 31 July 2018150th ANNUAL REPORT 2018 I Year ended 31 July 2018INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED

INDEPENDENT AUDITOR’S REPORT (CONTINUED)

Responsibilities of the Directors for the Financial Report

Information Other than the Financial Report and Auditor’s Report Thereon

The directors are responsible for the other information. The other information comprises the information included in the Group’s annual report
for the year ended 31 July 2018, but does not include the financial report and our auditor’s report thereon.

Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion
thereon.

In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, 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.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report
that fact. We have nothing to report in this regard.

Responsibilities of the Directors for the Financial Report

The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with
Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable
the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error.

In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the
Group or to cease operations, or have no realistic alternative but to do so.

•

Auditor’s Responsibilities for the Audit of the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a true
and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether
such internal control as the directors determine is necessary to enable the preparation of the financial
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
report that gives a true and fair view and is free from material misstatement, whether due to fraud or error.
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 and are considered material if, individually or in the aggregate, they could reasonably be expected
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
to influence the economic decisions of users taken on the basis of this financial report.
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain professional
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
scepticism throughout the audit. We also:
operations, or have no realistic alternative but to do so.

•

by the directors.

Auditor’s Responsibilities for the Audit of the Financial Report

Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit
procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.
The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the

Our objectives are 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
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.
conducted in accordance with Australian Auditing Standards will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are considered material if, individually or
in the aggregate, they could reasonably be expected to influence the economic decisions of users taken
on the basis of this financial report.

• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made

As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
judgement and maintain professional scepticism throughout the audit. We also:

•
We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings,
including any significant deficiencies in internal control that we identify during our audit.

obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to
continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to
the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on
the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to
continue as a going concern.
Identify and assess the risks of material misstatement of the financial report, whether due to fraud
• Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial
or error, design and perform audit procedures responsive to those risks, and obtain audit evidence
report represents the underlying transactions and events in a manner that achieves fair presentation.
that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group
material misstatement resulting from fraud is higher than for one resulting from error, as fraud may
involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal
to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group audit. We
control.
remain solely responsible for our audit opinion.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Group’s internal control.
•
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and
estimates and related disclosures made by the directors.
to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where
applicable, related safeguards.
•
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to events
From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial
or conditions that may cast significant doubt on the Group’s ability to continue as a going concern.
report of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or
If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s
regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be
report to the related disclosures in the financial report or, if such disclosures are inadequate, to
communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest
modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of
benefits of such communication.
our auditor’s report. However, future events or conditions may cause the Group to cease to
continue as a going concern.
Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and events in
a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the financial report. We are
responsible for the direction, supervision and performance of the Group audit. We remain solely
responsible for our audit opinion.

•

INDEPENDENT AUDITOR’S REPORT (CONTINUED) Key Audit Matter How our audit addressed the key audit matterAcquisition of Subsidiary Note 32 During the year, a subsidiary of the Group, Gowings SHI Pty Limited acquired 100% of SHI Holdings Pty Ltd and its controlled entities (the “acquisition”). The acquisition is accounted for on a provisional basis at 31 July 2017. Accounting for this acquisition is a complex and judgemental exercise, requiring management to determine the existence and fair value of acquired assets and liabilities, in particular determining the allocation of purchase consideration to goodwill and separately identifiable intangible assets such as brand names. The fair value of certain assets acquired on acquisition were assessed by management based on an independent valuation prepared by an external valuer. We have identified the acquisition as a key audit matter as the determination of the fair value of assets and liabilities on the date of acquisition is judgemental. Our audit procedures to assess the allocation of the acquisition purchase price and the acquisition accounting included: •reading the sale and purchase agreementto understand key terms and conditions.•reviewing management’s assessment of theidentified assets and liabilities (includingseparately identifiable intangible assets)acquired including the fair value attributableto these assets and liabilities.•reviewing the calculation of goodwill onacquisition.•reviewing the Group’s disclosures withreference to Australian AccountingStandards.Our audit procedures in relation to the independent valuation used by management included: •assessing the competence, capability,experience, independence and objectivity ofexternal valuer.•evaluating the valuation methodologyapplied.•testing the reliability and reasonableness ofinputs and assumptions.•checking the mathematical accuracy ofvaluation calculations.Information Other than the Financial Report and Auditor’s Report Thereon The directors are responsible for the other information. The other information comprises the information included in the Group’s Directors report for the year ended 31 July 2017, but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, 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. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. 150th ANNUAL REPORT 2018 I Year ended 31 July 2018150th ANNUAL REPORT 2018 I Year ended 31 July 2018INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED

INDEPENDENT AUDITOR’S REPORT (CONTINUED)

REPORT ON THE REMUNERATION REPORT

Opinion on the Remuneration Report

We have audited the Remuneration Report included in pages 36 to 38 of the directors’ report for the year ended 31 July 2018.

In our opinion, the Remuneration Report of Gowing Bros. Limited for the year ended 31 July 2018 complies with section 300A of the Corporations
Act 2001.

Responsibilities

The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section
300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.

HLB Mann Judd
Chartered Accountants

Sydney, NSW
11 October 2018

S Grivas
Partner

Issues to Shareholders Since 19 September 1985

Date

31/10/1985

30/04/1986

31/10/1986

16/03/1987

30/04/1987

30/04/1988

31/10/1988

30/04/1989

16/11/1989

31/10/1990

31/10/1991

30/04/1992

31/10/1992

29/10/1993

29/04/1994

28/04/1995

03/10/1995

31/10/1995

26/04/1996

30/10/1996

25/04/1997

15/05/1997

31/10/1997

30/04/1998

03/11/1998

28/04/1999

18/11/1999

28/04/2000

27/10/2000

27/04/2001

19/10/2001

18/12/2001

22/04/2002

25/10/2002

18/12/2002

24/04/2003

24/10/2003

23/04/2004

25/10/2004

22/04/2005

17/07/2009

05/11/2010

17/12/2010

05/11/2015

Particulars

Bonus issue in lieu

1 for 2 Bonus issue

Bonus issue in lieu

Dividend Re-investment

Special Scrip dividend

Dividend Re-investment

1 for 10 Bonus issue

1 for 20 Bonus issue

Dividend Re-investment

Bonus in Lieu Share Plan

1 for 10 Bonus issue

Dividend Re-investment

Bonus in Lieu Share Plan

Dividend Re-investment

Bonus in Lieu Share Plan

Dividend Re-investment

Bonus in Lieu Share Plan

Dividend Re-investment

Bonus in Lieu Share Plan

2 for 1 Share Split

Dividend Re-investment

Bonus in Lieu Share Plan

Dividend Re-investment

Bonus in Lieu Share Plan

Dividend Re-investment

Bonus in Lieu Share Plan

Dividend Re-investment

Bonus in Lieu Share Plan

Dividend Re-investment

Bonus in Lieu Share Plan

Dividend Re-investment

Bonus in Lieu Share Plan

Dividend Re-investment

In Specie Distribution

Dividend Re-investment

Bonus in Lieu Share Plan

Dividend Re-investment

Bonus in Lieu Share Plan

Dividend Re-investment

Bonus in Lieu Share Plan

Dividend Re-investment

1 for 8 Rights issue

1 for 10 Bonus issue

Issued From

Asset Revaluation reserve

Accumulated profits

Share Premium – Special Dividend Reserve

Share Premium Reserve

Accumulated profits

Share Premium Reserve

Accumulated profits

Share Premium Reserve

Accumulated profits

Share Premium Reserve

Accumulated profits

Share Premium Reserve

Accumulated profits

Share Premium Reserve

Accumulated profits

Share Premium Reserve

Accumulated profits

Share Premium Reserve

Accumulated profits

G Retail Ltd shares issued on listing

Accumulated profits

Share capital

Issue Price $

2.50

3.70

3.75

4.35

3.75

3.80

3.60

3.50

2.60

3.00

2.90

3.10

4.50

2.60

2.35

2.10

1.90

1.95

1.80

2.36

1.95

1.90

1.80

1.95

1.90

2.40

2.55

2.70

2.87

2.42

2.20

INDEPENDENT AUDITOR’S REPORT (CONTINUED) We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial report of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. REPORT ON THE REMUNERATION REPORT Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 20 to 23 the directors’ report for the year ended 31 July 2017. In our opinion, the Remuneration Report of Gowing Bros. Limited for the year ended 31 July 2017 complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. HLB Mann Judd S Grivas Chartered Accountants Partner Sydney, NSW 28 September 2017 150th ANNUAL REPORT 2018 I Year ended 31 July 2018150th ANNUAL REPORT 2018 I Year ended 31 July 2018INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED