Gowing Bros. Limited Annual Report 2019

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FY2019 Annual Report · Gowing Bros. Limited

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151st ANNUAL REPORT
31 July 2019

Corporate Directory

Directors

Associate Directors

Secretary

Stock Exchange Listing

Registered Office

Share Registry Office

Auditors

ABN

ACN

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

Mr. James Gowing
Mr. Ellis Gowing

Mr. Ian Morgan
Mr. Robert Ambrogio

The Australian Securities Exchange
Ticker Code: GOW

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 3, 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

Contents

History and

Innovation 1868 -

2019

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

151st ANNUAL REPORT 2019 I Year ended 31 July 2019GOWING BROS. LIMITED

History and Innovation 1868 - 2019

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

Gowings 100
Birthday
Celebrations

1968

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

1974

Gowings
Reintroduce
Own Brand

1995

Second Gulf War

Gowings acquires
Surf Hardware
International

2003

2016

Gowings 150
Birthday
Celebrations

2018

1868

1890s Australian
Depression

Great Depression

WW2

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

1893-95

1929-39

1939-45

1950-60

‘Boys Go To Gowings’
Campaign

Market st store
refurbished.
Gowings Whale trust
established

Global Financial
Crisis

1991

2000

2008-11

Gowings
Launches
Coastbeat

2017

1899-1902

1914-18

1940

1953

1987

1998

2006

2017

2019

John Ellis Gowing
opens first Gowings
Store

2019

Cinema opens at
Kempsey Central

Boer War

WW1

‘GONE TO GOWINGS’
Campaign

Ted Gowing
establishes
share portfolio

J.E. (John) Gowing
appointed Managing
Director

Gowings online
store opens

Gowings sell the
Market St Building

Gowings
Whale Trust
partners
with Sea
Shepherd

Sawtell
Commons
land sales
commence

1892

1908

1929

1941

1959-73

1972

1992

1996

2010

2018

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

Window
Display

Gowings
Journal
re-issued

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

Gowings establishes
Pacific Coast
Shopping Centres

Gowings Establishes
1868 Capital

151st ANNUAL REPORT 2019 I Year ended 31 July 2019151st ANNUAL REPORT 2019 I Year ended 31 July 2019INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITEDAbout Gowings

Net Assets

£92,781
1928

$3.4M
1988

$191M

2019

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 2019 Gowings completed its 151st
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.

Our Purpose
Enriching people’s lives
since 1868

Our Values

Integrity

Customer First

Quality & Value

We’re Australian

Our People Matter

Everyone’s Business

Endless Possibilities

Environmentally Aware

Common Sense Pioneers

Working & Investing Together

151st ANNUAL REPORT 2019 I Year ended 31 July 2019151st ANNUAL REPORT 2019 I Year ended 31 July 2019INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED
Our North Coast
Commitment: 'Steady,
Constant Growth'

Gowings varied interests in the North Coast
continue to benefit from the ongoing substantial
infrastructure investment by Local, State
and Federal Governments. The North
Coast Regional Plan 2036 is the State
Government's blueprint for the
development of the North Coast
over the next two decades and it
envisages a population increase
of 76,200 and more than
46,000 new homes being
built. Here’s a snapshot
of what’s happening
and planned in the
region.

Cultural and civic space in the CBD

Coffs Central has always formed the cornerstone of the
ongoing revitalisation of Coffs Harbour CBD, a vision led
by Gowings in partnership with CHCC and the CBD master
planning committee. So the recent news that the $76.5 million
development will proceed and be located at Gordon St in the
Coffs CBD, adjacent to Coffs Central shopping centre, is very
positive for Gowings. The building will include a Regional
Gallery, Central Library, Regional Museum, Council offices
and car parking. An independent economic assessment has
identified a host of benefits to the CBD including financial gains
over a 30-year period totalling $57m and 31 ongoing jobs.

Coffs Harbour to Ballina Upgrades

The Australian and NSW governments are funding the $4.9 billion
Woolgoolga to Ballina upgrade to provide 155 kilometres of safer four-
lane divided road. Completion in 2020 will improve connectivity up and
down the coast, reduce travel time to just 3 hours between Brisbane
and Coffs Harbour and thus increase the visiting population, which can
only be a positive for all Gowings assets in the region. An example of
the new connectivity is the impressive bridge over the Clarence River at
Harwood which is now open. It’s 1.5 kilometres long and four lanes wide
and eliminates the need for highway motorists to stop while the existing
Harwood bridge is raised for maritime users.

129km
under construction

26km
open to traffic

25min
reduced travel time

350
fauna connections

3285
total workers

Coffs Harbour Health Campus upgrade

Jetty foreshore rejuvenation

This major NSW Health hospital extension is well under way and once
completed will total an investment of $194 million. Planning consent
was granted in February and contractors are expected to complete the
four storey expansion in 2021. The Clinical Service building will open by
the end of 2020. The continued provision of world class healthcare is a
positive drawcard to those considering a move to the region.

A new planning phase for the rejuvenation of the Coffs Harbour
foreshores was announced in May this year by State member for Coffs
Harbour Gurmesh Singh. Development is proposed for the railway
land along Jordan Esplanade and this is good news for Gowings as the
Solitary 30 mixed use development site is positioned within the Jetty
precinct and only a few blocks back from the foreshore.

Port Macquarie Airport upgrades

Clarence Correctional Centre

The nearly $10 million upgrade of the Port Macquarie Airport Terminal
is expected to be complete by the end of 2019. The upgrade will double
the existing floor space, increase service capability and provide a more
contemporary facility for passengers. Opening up Port Macquarie to
increased visitation via air travel will positively impact Port Central.

The Clarence Correctional Centre located approximately 12.5 kilometres
southeast of Grafton, will accommodate 1,700 inmates. Benefits of
the project include about $560 million injected into the local economy
over the next 20 years and the creation of up to 1,100 construction jobs
and 600 operational jobs. Project completion is expected by 2020. The
additional jobs created by this project should translate to increased
visitation to Kempsey Central and the soon to open cinema.

Coffs Harbour Bypass

The Australian and NSW governments are funding the 14 kilometre
Coffs Harbour bypass project. The bypass seeks to improve connectivity
and it will traverse the foothills of Coffs and re-connect at Korora. In
response to community feedback, design changes include lowering
the height of the bypass and incorporating three tunnels. The approx.
$1.2billion project is earmarked for a 2020 start and once completed will
benefit Moonee Market significantly as the first off ramp for amenities
and potentially fuel, north of Coffs Harbour.

‘The Clarence Valley, in particular
Yamba, Maclean and Grafton, is seeing
a continued increase in workforce due
to the Pacific Highway upgrade and
new Clarence Correctional Centre.
These infrastructure works have
drawn a workforce nationally and
locally and brought many workers
across state lines’

Source: Herron Todd White Property Report
September 2019

Moonee
Vacant
Land

Coffs
Central

Moonee
Market

Harbour
Drive Solitary
3D

Sawtell
Commons

Kempsey
Central

Port
Central

Port
Vacant
Land

Gowings strategy is to invest alongside these infrastructure
upgrades and benefit from the resultant 'steady, consistent
growth' of the region.

In Kempsey we have the CBD shopping centre Kempsey Central with
its $7 million rooftop cinema complex opening later this year.

Population Growth *
2016-2036

76,200

+46,000

more homes required

1, 2

In Moonee Beach we have the
dominant neighbourhood centre
Moonee Market and mixed use vacant
site adjacent to the shopping centre.

3, 4, 5

In Coffs Harbour we have the CBD
shopping centre Coffs Central with its
highly performing Kmart anchor; the
mixed use Solitary 30 site that aligns
with the Council’s Jetty foreshore
vision and the Sawtell Commons
residential development site
experiencing strong stage 1 sales.

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

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

7, 8

In Port Macquarie we have the
CBD shopping centre Port Central
and have received development
approval for the adjacent vacant
block.

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.

151st ANNUAL REPORT 2019 I Year ended 31 July 2019151st ANNUAL REPORT 2019 I Year ended 31 July 2019INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITEDCASE
STUDIES

Sawtell Commons

Sawtell Commons was a greenfield site bought by Gowings in 2016 for residential
development and is set over a picturesque 38.49 hectares, bordering the Bongil Bongil
National Park, with direct access to Bonville Creek.

It’s superbly placed with vibrant Sawtell Village only 3kms away, easy access to the
Pacific Highway and Coffs Harbour just a ten minute drive. It has a unique appeal in
its location between the mountains and the sea and is the last undeveloped land on
the ocean side of the highway in the region. The average block size is 640m2 and all
blocks feature a great orientation and planned access to cycleways and pathways,
connecting natural vegetation areas to creek reserves and parklands. A children’s
playground and community garden will feature in the parkland areas.

‘Not surprisingly, Coffs Harbour has
experienced very strong capital growth
and activity in the vacant land market
over the recent boom period. There is
never an oversupply in the market at any
one time given the natural constraints of
supply, however the increased demand
over the past two to three years has seen
values rise significantly. It has not been
uncommon in developing estates such as
North Sapphire Beach, Woolgoolga and
Sandy Beach for a high proportion of
sales to occur off the plan to either spec
builders, owner-occupiers or investors,
with values rising five to ten per cent as
each stage becomes available for sale.
Further expansion of large land tracts
will be required moving forward.'

‘Source: Herron Todd White Property Report
September 2019’

38.49

Hectares

There has been strong market interest from the outset, the
site sales office is busy with enquiries and the secondary
sales office in Coffs Central is due to open by the end of 2019.
The stage 1 Display Village is fully sold to Home Building
Partners and is now under construction with Coral Homes,
Perry Homes, Stroud Homes, Brian Hopwood, Adenbrook
Homes and Toscan Homes on board. The Stage 2 pre-sales
release commenced in July with pricing between $300-
350,000 and over 10% of blocks are already sold at time of
writing.

Stage 2 subdivision works are scheduled to commence in
the first quarter of 2020, subject to approvals. Gowings are
awaiting a positive determination of the new DA for 222 lots
from the JRPP and Coffs Harbour Council, which is currently
scheduled for determination in mid-October.

Coffs Harbour Airport

Sawtell

Bongil Bongil
National Park

Sawtell
Commons

Pacific Highway

151st ANNUAL REPORT 2019 I Year ended 31 July 2019GOWING BROS. LIMITED151st ANNUAL REPORT 2019 I Year ended 31 July 2019INVESTING TOGETHER FOR A SECURE FUTURECASE
STUDIES

Riverside Movies:
The Kempsey Cinema Project

The Kempsey Cinema, which is being constructed on the roof of the Kempsey Central
shopping centre further cements Gowings continued investment interest in the mid
north coast of New South Wales. The project was conceptualised over a number of
years resulting in a Voluntary Planning Agreement being entered into in 2018 with
the Kempsey Shire Council. In addition, an Agreement for Lease was entered into with
Majestic Cinemas who will become the operator of the facility for a period of 10 years
from its opening date which is expected to be November 2019.

The project was a result of
council investigations and
their desire to drive economic
growth within the LGA. The
Commonwealth Government
has also financially contributed
via the National Stronger
Regions Fund to further
promote economic development
in Australian regions. We are
confident that the cinema will
prove a valuable addition to
the Kempsey community and
visitors to the region.

Kempsey Cinema

2018

2019

Works commenced in September
2018 and as a result, the Country
Target lease was surrendered some
12 months prior to their lease expiry.
The leasing of the new, reconfigured
space is now underway.

The state of the art 4-screen cinema facility has been constructed on the
roof of the shopping centre. Access will be via a centralised stair case
and lift access will be available from the under-croft car park. As well as
welcoming Majestic Cinema as a new tenant to Kempsey Central, we are
confident the addition of the cinema will drive increased visitation, foot
traffic and sales to the shopping centre as a whole.

screen cinema

450

seats

easy

access

increase

visitors

The project is an example of multiple stakeholders successfully contributing to a local infrastructure project
and common goal. Participants included: Kempsey Shire Council, Commonwealth Government, Gowing Bros,
O’Donnell & Hanlon Builders and Majestic Cinemas.

151st ANNUAL REPORT 2019 I Year ended 31 July 2019151st ANNUAL REPORT 2019 I Year ended 31 July 2019INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITEDManaging Director’s Review of Operations

The year ended 31 July 2019 has been one of
volatility and uncertainty both on the international
and domestic stage. A federal and state election in
NSW, a building trade war between USA and China
and a significant, market downturn in official interest
rates have combined to move the economy into
unchartered territory.

The year ended 31 July 2019 has been one
of volatility and uncertainty both on the
international and domestic stage.
A federal and state election in NSW, continued
weakness in the housing market, the building
trade war between USA and China, and
a significant, market downturn in official
interest rates have combined to move the
economy into unchartered territory.
This has had an impact on both consumer
and investor sentiment, leading to a
slowdown in retail sales for a number of
retailers at our shopping centres and a
decrease in market value for sub-regional
shopping centres, as investors sit on the
sidelines while there is an oversupply of retail
properties to market.

Bearing the above in mind, the Directors
have revalued our portfolio of property
downward by $28.5 million during the year.
We have also revalued to market our fixed
interest rate hedge downward by $3.3 million.
The combined impact of these non-cash
revaluations is a $31.8 million expense in the
current year’s profit and loss, which is the
predominant reason for a reported statutory
loss after tax of $19.4 million.

The Directors consider it important to balance
dividends paid to shareholders and monies
retained to fund growth of the Company.
As a result of the current challenging market
and the strategy of the business to grow the
underlying recurring income streams, the
Directors have decided to reduce the final
dividend to 5c, fully franked. The dividend
re-investment plan will be suspended for this
dividend.

Since year end, conditions have improved,
with the new federal government’s fast
action on reducing personal income tax rates
together with the Reserve Bank's two interest
rate cuts positively impacting both consumer
and investor sentiment.

Operationally the company is in good shape,
underlying EBITDA of the Pacific Coast
Shopping Centre portfolio has improved as
contributions from new retailers at Moonee
Market and Coffs Central were brought
to account. Investments in 5V and Our
Innovation Fund also delivered a positive
impact as underlying investments were
revalued upward by $1.1 million.

At Sawtell Commons construction of the
first stage of eight lots is complete and all
eight lots have been sold with settlement
due in the next few months. Pre-sales have
commenced well for stage 2 with three lots
sold to date. The amended DA for 222 lots,
which is an update of the existing, approved
DA for 165 lots, is due to go to determination
at JRPP (Joint Regional Planning Panel) in
October. A positive determination will allow
us to ramp up the pre-sales and construction
programme.

Our mixed-use development site, Solitary
30, on Harbour Drive in the Jetty Precinct at
Coffs Harbour has received final approval
from Coffs Harbour Council to demolish
the existing building and infrastructure. We
have appointed architects DFJ to work with
us to develop an exciting new mixed-use
development for the site.

At Kempsey, the new cinema construction
which is part financed through government
grants is now nearing completion. ‘Riverside
Movies’ is scheduled to open later this year.

Activity at Port Central continues to be under
pressure, largely due to the poor performance
of Target and IGA our two major retailers.
However significant progress has been made
during the year on the repositioning of Port
Central from a sub-regional shopping centre
to a regional shopping centre. Port Macquarie
Hastings Council (PMHC) and JRPP approval of
a new DA submitted on council’s adjacent land
allowed us to exercise our option to acquire
that land from PMHC for ‘$1.10’. Subsequently
we have received a realistic intention to lease
from Woolworths to join our retailers at Port
Central. Detailed feasibility work continues.

As part of our continuing strategic review and
continuing capital expenditure commitments,
the directors decided during the second half to
canvas the market for expressions of interest
for the Moonee Market shopping centre.
The campaign conducted by CBRE has
generated strong interest for the strategically
well positioned neighbourhood centre.
We anticipate being in a position to make a
decision in relation to the sale in the next few
months.

We continue to work on improving the
performance and realising the potential of
all our investments, however as you can
see from the current year’s performance,
a strong result from the underlying
business can be overwhelmed by non-cash
movements in valuation metrics. We are
cautiously optimistic for the next year with
Sawtell Commons coming online, continued
leasing at Coffs Central, the completion of
Riverside Movies at Kempsey Central and the
establishment of 1868 Capital.

J. E. Gowing
Director
Sydney

151st ANNUAL REPORT 2019 I Year ended 31 July 2019151st ANNUAL REPORT 2019 I Year ended 31 July 2019INVESTING 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 2019.

Financial Review

Net Assets per Share

$5.00

$4.50

$4.00

$3.77

$4.02

$3.50

$3.00

$2.50

$4.43

$4.52

$3.83

Dividends Declared per Share

DPS

Total Dividend

15.0c

10.0c

5.0c

12.0

$6.4m

12.0

$6.4m

12.0

$6.4m

10.0

$5.8m

$7.000.000

$6.500.000

$6.000.000

$5.4m

$5.500.000

$5.000.000

$4.500.000

2015

2016

2017

2018

2019

2015

2016

2017

2018

2019

Net assets per share before tax on unrealised gains on equity, investment property, and freehold property decreased (15.3%) to $3.83
as at 31 July 2019, mainly due to the revaluation of the Pacific Coast Shopping Centre portfolio and the fixed interest rate hedge.
Total Shareholder Return was (12.8%) including the decrease in net assets per share and the 11.0c dividends paid to Shareholders
during the year.

The Company declared a total of 10.0c in fully franked dividends for the 2019 year. The directors have suspendeded the dividend reinvestment
plan for the final declared dividend to be paid on 31 October 2019.

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 / (Loss) After Tax ($million)

For the year ended

31 July 2019

31 July 2018

31 July 2017

31 July 2016

31 July 2015

Key Metrics

$19.1

$22.0

$23.2

$6.5

($19.4)

-10

-20

2015

2016

2017

2018

2019

Net Profit / (Loss) After Tax for the year ended 31 July 2019 includes underlying income from ordinary activities such as rent, interest,
dividends and revaluations of the investment protfolio. This year’s profit / (loss) was impacted by the revaluation of the Pacific Coast
Shopping Centre Portfolio and the fixed interest rate hedge.

Net Assets

Net Assets per Share²

- Before tax on unrealised gains¹

- After tax on unrealised gains¹

Net profit / (loss) after tax

Earnings / (loss) per Share

Dividends per Share - Paid

Total Shareholder Return

$191.1m

$216.0m

$214.0m

$198.6m

$186.8m

$3.83

$3.54

($19.4)m

(36.07)c

11.0c

(12.8)%

$4.52

$4.03

$6.5m³

12.18c³

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%

¹Unrealised gains on equity, investment property and freehold property.
²Net assets per share as at 31 July 2015 have been restated for comparative purposes to reflect the 1 for 10 bonus issue during
the 31 July 2016 financial year. Dividends per share have not been adjusted.
³See Note 1 of the financial report regarding the restatement as a result of a change in accounting policy.

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
(traded 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 $1,386,717 in 2019.

151st ANNUAL REPORT 2019 I Year ended 31 July 2019151st ANNUAL REPORT 2019 I Year ended 31 July 2019INVESTING 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. Per annum returns to 30 June 2019. 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 to provided by the Reserve Bank of Australia. From January 1977 to October 1989 the index is the Commonwealth Bank All Series Greater than 10 Years Bond Accumulation Index. From October 1989 the index is the Bloomberg AusBond Composite 0+ Yr 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 refurbishedInvestment returns assume reinvestment of all dividends and entitlements. All ﬁgures are Australian dollars.99000102030405060708091011121314151617181998990001020304050607080910111213141516171819Copyright © 2019 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 is accepted 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 RATE8HOWARDRUDDGILLARDABBOTTTURNBULLMORRISON$1,386,71712.2% p.a.$1,705,40612.7% p.a.$1,238,68611.9% p.a.$856,30810.9% p.a.$396,4338.9% p.a.$280,8998.1% p.a.$64,8744.4% 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 25,405,000Life expectancy at birth males 80.5 yrsfemales 84.6 yrsINVESTMENTRETURNS15 YEARS10 YEARS20 YEARS30 YEARS40 YEARSGOWINGBROS25.9%7.1%8.1%7.6%11.4%AUSTRALIANSHARES39.0%10.0%8.7%9.4%11.9%INT.SHARES413.2%12.4%4.4%7.2%10.8%USSHARES517.5%16.3%5.6%10.3%13.0%AUST.BONDS65.1%6.0%6.1%8.2%8.9%CASH72.1%3.0%4.3%5.6%7.9%CPI1.6%2.1%2.6%2.6%4.0%Investmentreturns assume reinvestment of all dividends and entitlements. All ﬁgures are Australian dollars.INVESTMENT OVER TIMEA STRONG151st ANNUAL REPORT 2019 I Year ended 31 July 2019151st ANNUAL REPORT 2019 I Year ended 31 July 2019INVESTING 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 (at Directors' Valuation)

31 July 2019 $’000

31 July 2018 $’000

Strategic Investments
Surf Hardware International (at cost)

Boundary Bend Limited

Carlton Investments

DiCE Molecules

BBBSA Finance

Murray Darling Food Company

NSX Limited
Event Hospitality Group

Phalla Pharma Limited / TPI Enterprises Limited

Hydration Pharmaceuticals

Hexima

Blackfynn

EFTsure

Power Pollen Accelerated Ag Technologies
Other listed investments

Total

Private Equity Funds
Five V Capital

OurCrowd Australia

Our Innovation 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

Solitary 30 - Coffs Harbour development land

Other properties
Borrowings

Total

Cash and Other
Cash

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
6,579
2,411

2,400

2,157
2,100
1,494
1,406

1,393

949

403

358

260
5,679
58,423

1,743

1,375

1,303
486

4,907

177,991

47,640
(89,745)

135,886

11,500

3,317

15,249
(1,425)

28,641

9,754

(9,859)

415

(380)
(20,991)

(21,061)

206,796

(15,672)

191,124

16,000

14,834
5,648
2,237

1,400

2,319
-
1,654
1,363

2,665

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

* See Note 1 of the financial report for details regarding the restatement as a result of a change in accounting policy

Commentary

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 $9.2
million was 9.6% lower than the prior corresponding
period and relates to the reduction in investment
property income due to increase in borrowing costs
associated with loans to finance the redevelopment

of Centres in prior year. There was also a reduction
in distributions received during the year from private
equity fund investments.

Investment properties – unrealised loss of $28.5
million for the current year was due to the revaluation of
the Pacific Coast Shopping Centre portfolio.

Total Head Office Expenses of $4.75 million were 29%
higher than the prior year and were largely due to an
increase in employee expenses and borrowing costs
associated with funds drawn down to fund Sawtell
Commons development works and also to fund listed
equity investments.

Derivatives (Fixed Interest Rate Hedge) - unrealised
of $3.3 million was due to the revaluation required
of the accounting standards of the fixed interest rate
hedge.

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.

For the year ended31 July 2019 $’00031 July 2018 $’000 (Restated)*Net Income from Ordinary ActivitiesInterest income256219Investment properties7,3728,119Equities – Dividend Income726618Managed Private Equities82449Surf Hardware International804821Total Net Income from Ordinary Activities9,24010,226Head Office Expenses Administration, public company and other4,2803,686Borrowing Costs470-Operational Profit4,4906,540Gains / (losses) on sale or revaluationInvestment properties – unrealised(28,454)5,600Investment properties – realised410(11)Managed private equity – unrealised1,228(148)Derivatives (Fixed Interest Rate Hedge) - unrealised(3,319)(418)SHI Subsidiary AcquisitionAcquisition Costs-(55)SHI - Consolidation acquisition cost of sales adjustment-(512)OtherConsulting Costs(154)(438)Borrowings Break Costs-(1,790)Other Costs(12)(72)Other Income2428Profit / (Loss) Before Tax(25,787)8,724Income tax benefit / (expense) 6,384(2,189)Profit / (Loss) After Tax(19,403)6,535151st ANNUAL REPORT 2019 I Year ended 31 July 2019151st ANNUAL REPORT 2019 I Year ended 31 July 2019INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITEDGowings Investment Diversity

E S T 1 8 6 8
GOWING BROS.LTD

LISTED INVESTMENT COMPANIES ($12.2 M)

• Carlton Investments
• Djerriwah Investments
• Australian Foundation Investments
• ARGO Investments

• Milton Investments
• Diversified United Investments
• WAM Capital
• BKI Investments

BIO AGRICULTURE ($0.3 M)

• Power Pollen

GLOBAL BRANDS CONSUMER FOCUS ($18.9 M)

• Surf Hardware International
• Hydration Pharmaceuticals
• Event Hospitality

INNOVATION – MANAGED FUNDS ($4.4 M)

• Five V Capital
• OurCrowd Australia
• Our Innovation Fund

DEVELOPMENT
PROPERTIES ($14.8 M)

• Sawtell Commons
• Solitary 30

AGRI-BUSINESS / GROWING ASIAN
MIDDLE CLASS ($17.0 M)

• Boundary Bend
• Murray Darling Food Company

E S T 1 8 6 8
GOWING BROS.LTD

SUPPLY CHAIN
DISRUPTION ($0.3 M)

• Casper

GLOBAL PHARMACEUTICALS ($1.4 M)

• Phalla Pharma

BIOTECH HEALTH ($3.8 M)

• Hexima
• Blackfynn
• DiCE Molecules

INVESTMENT PROPERTIES –
RETAIL ($225.6 M)

• Port Central
• Coffs Central

• Kempsey Central
• Moonee Market

FINTECH/FINANCIAL
DISRUPTION ($4.9 M)

• BBBSA Finance
• NSX
• EFTSure

Port Central

Coffs Central

Moonee Market

Kempsey Central

Capitalising on the success of Port Central’s positioning, the leasing
remix strategy achieved strong results for the period and the centre
welcomed Rockmans, Tree of Life, Lemon Tree Massage, The Eyebrow
Bar and The Clubhouse Café. Expansions include a double sized format
for the male fashion powerhouse Connor and re-fits are underway to
update Williams and House to the latest company formats. Certain
centre upgrade projects are currently being reviewed by Gowings,
including a new food precinct, upgraded centre entry locations and
additional parking levels.

In April 2019, Gowings received DA approval for the development land
adjacent to Port Central (99 William Street) and the ownership of the
site has now formally transferred from the vendor to Gowings. The
arrangements pertaining to the site require Gowings to provide 150
public car spaces for community benefit and this development must
be carried out within 5 years. Gowings continue to work with major
retailers and stakeholders to investigate the opportunity to amalgamate
this development site with the Port Central shopping centre.

As a result of the recent $35 million development upgrade of Coffs
Central the centre has been awarded a five and a half star Nabers energy
rating. Kmart’s first full year of trading is well above expectations,
trading at more than double its DDS predecessor on the same site.

The leasing campaign during the year welcomed bcu, Endota Spa,
Mister Minit, National Hearing Centre, and Laserclinics Australia, while
Officeworks also joined the centre in November 2018 taking the new
southern corner tenancy on a short-term basis until early 2020. It
remains an ongoing priority for the business to lease the remaining
vacant tenancies.

Gowings continue to evaluate the economic options of activating the
DA approved additional 5 floors and rooftop development on the new
building. A hotel, commercial or residential opportunities are all being
considered.

Moonee Market upgrade works were completed at the start of
the year. The new amenities, entrances, signage, mall tiling, food
court and flyover roof to the mall areas have facilitated strong foot
traffic and sales growth. Moonee Market is a dominant convenience
neighbourhood centre, it is in excellent repair, is 90% leased and
presents well for customers and visitors to the region. As such, Gowings
engaged CBRE to market the centre for sale via an Expression of
Interest. At the time of writing, early reports indicate that there is strong
interest in quality assets from both local and interstate investors.

The construction of the four screen Cinema on top of Kempsey Central
is nearing completion with an estimated launch date of November
2019. The centre continues to trade well through these works with
minimal disruption. Gowings looks forward to launching the cinema
to the community and is collaborating closely with the operator
Majestic Cinemas and Kempsey Shire Council to showcase local stars of
entertainment and sports as part of the opening event. The cinema will
drive increased foot traffic and sales by attracting the local population
and visitors.

Gowings continues to explore development opportunities for the
adjoining vacant lot of 9,000sqm including retirement living, service
station and mixed-use options. We await the outcome of a ruling by the
Land & Environment Court on a proposed service station DA and are
hopeful of a positive result, which could further strengthen the centres
dominant convenience positioning.

Gowings have also commenced due diligence to provide our retailers
with an alternative electricity supply via an Embedded Network and
Solar power, to deliver them greater cost savings.

Surf Hardware International ($16 M)

Murray Darling Food
Company ($2.2 M)

Hexima ($0.9 M)

Phalla Pharma Ltd / TPI
Enterprises Limited ($1.4 M)

Blackfynn ($0.4 M)

SHI performed well during the period, with
strong sales growth recorded compared to the
prior year.

Regionally, the US business recorded
encouraging results, with sales ahead of
the prior year as the recently installed
management team drive the business forward.
Sales in Australasia and Europe were also
ahead of last year and the Japanese business
continued to perform strongly.

Strong sales were recorded in FCS premium
retail fins and the FCS leash category also saw
growth driven by the continued momentum
of the FCS Freedom Leash. FCS luggage
sales increased compared to the prior year
following the relaunch of the bags, packs and
accessories range and the softboard business
continued its positive growth momentum.

SHI successfully integrated the newly acquired
Kanulock brand within the business with sales
and margins to date being ahead of plan with
distribution secured in several global outdoor
retailers across Australia and the USA.

The SHI ecommerce business recorded
strong growth following the move to a new
platform in 2018 and the re-launch of FCS
sites in Australia, the USA and Europe. The
launch of stand-alone Softech Softboard sites
in Australia and the USA also contributed
positively and a European site launch is
planned for early 2020.

FCS athletes performed well during the year
collecting several Men’s WSL event victories

and Gabriel Medina claimed the Men’s 2018
world title riding the FCS II system and fins.
Stephanie Gilmore, whilst not officially
sponsored by the brand, claimed the Women’s
2018 world title also riding the FCS II system
and fins.

The new “Freedom to Escape” campaign
was launched during the year supporting the
introduction of a new range of FCS Travel Bags,
Packs & Accessories. Also, during the year SHI
launched the FCS Shaper Awards, an initiative
designed to recognise and honour some of the
world’s leading surfboard shapers.

Looking ahead to FY’20, SHI is forecasting
continued sales growth as the new summer
product ranges and marketing initiatives begin
to flow into the southern hemisphere markets
(Australia, New Zealand) in September 2019
and the northern hemisphere markets (USA,
Europe and Japan) from March 2020.

A key product & marketing focus for the
coming year will be the launch of the FCS
H4 surfboard fin innovation project due for
release in March 2020 along with the new FCS
Technical Apparel range, also due for release in
March 2020.

The continued optimisation of SHI’s
ecommerce platform with a mobile first
approach, including improved conversion
rates, increased average order value (AOV),
increased website visitation and growing
the database is a key focus area, along with
implementing the new ERP system and
growing sales within New Zealand market.

During the year Murray Darling Food Company
(MDFC) like all NSW farmers were affected by the
severe weather conditions. While Burrawang
West Station received good rain during October
to December, its ram customers did not, and
most of them have encountered dust storms
which denuded what feed was available. This
has impacted MDFC’s financial results. To
combat this impact the MDFC team has stopped
any future planned property developments
and reduced operating staff levels and monthly
operating expenditure. Also, in October 2018,
MDFC sold a portion of land which was sub-
divided from the BWS property for $1.139 million
which was used to reduce debt.

However, with the rain received at BWS, MDFC
took the opportunity to purchase 4000 lambs
which were finished off by end of March and
sold. The irrigation pivots that were installed in
the previous year have performed as expected
during this year and have helped MDFC
continue some level of operations during the
year, however MDFC water allocation from
the Wyangala dam is forecasted to end in
September and the irrigation pivots will remain
idle until the dam refills.

The embryo program continues to provide
opportunities and currently MDFC have 1000
embryos in canisters ready for export and there
is strong interest from South America.

Long term MDFC is looking at options if the
drought conditions are not broken. These
options include selling the current properties
and leasing back to even relocating the business
to another location further south on a leased
block. The MDFC board is confident that when
the drought breaks with lower operating
costs the business can deliver returns to the
shareholders.

TPI Enterprises renamed to Phalla Pharma
(PAL) during this period to create a new brand
identity that reflects the Company’s shift of its
operations, product range and culture to that
of a global pharmaceuticals business.

PAL uses poppy straws to manufacture drugs
such as morphine, thebaine, oripavine, and
codeine. PAL converts the raw material into
Active Pharmaceutical Ingredients (API) which
are then processed into Finished Dosage
Formula (tablets) via its Norwegian facility.
Additionally, PAL sells poppy seed for culinary
purposes.

PAL had a strong result of $46.5 million in
revenues and positive quarterly EBITDA at
their full year report in February. Gowings
was happy to see PAL complete the Vistin
acquisition and come close to their target
revenue for the year.

In the upcoming financial year PAL will focus
on expanding and diversifying its API sales,
with aims to expand the customer base and
target an 80% year on year revenue growth in
this segment. Gowings expects PAL to continue
their expansion and drive higher margins
through supply chain synergies and economies
of scale as they ramp up production and sales.

Hexima is a biotechnology company actively
engaged in the research and development
of plant-derived proteins and peptides for
applications as human therapeutics. Its lead
drug candidate, HXP124, is in phase I/IIa
clinical trials for the treatment of fungal toenail
infections (onychomycosis).

Hexima has continued to show progress in
developing HXP124, their interim data show
HXP124 substantially reduced the area of
toenail infection in patients with a much shorter
treatment period than current best-in-class
therapies. They now have data from a total
of 36 patients treated with HXP124 and are
continuing clinical trials. Gowings expects that
HXP124 could provide a large payoff if taken
further in the clinical trial process and sold to
a pharmaceutical company or developed in
house with additional capital.

EFTsure ($0.4 M)

EFTSure provides Australian organisations access
to correct, verified and up-to-date information on
their payees through their 'Know Your Payee™’
(KYP) technology. This helps protect companies
against fraud and errors made through incorrect,
fraudulently changed, or maliciously altered
payee information. It was a strong half for
EFTSure with several milestones achieved,
including securing key customers and achieving
significant growth in annual recurring revenue
which hit approximately $2 million p.a. The
business signed a licence deal with a partner in
South Africa to develop a similar solution and are
currently investigating potential to expand into
the United Kingdom. Gowings continues to back
EFTSure as the strongest provider for improving
the security of electronic transactions and expect
them to continue gathering market share.

Blackfynn is a Philadelphia based company
building the most important and complete
human dataset in neurodegenerative diseases.
They are beginning with Parkinson’s disease,
and combining it with their data analysis
platform and experts to change the way
neurological diseases are treated. They have a
broad opportunity space across applications
in therapeutic drugs, devices, clinical care and
research. During the year Blackfynn received
a significant grant from the Michael J. Fox
Foundation to help with its research.

Blackfynn have refined their focus toward
collecting and providing data for third party
companies engaged in drug development and
have begun to see increased traction with
partners in this domain. Blackfynn is on track
to improve clinical trials for neurodegenerative
disease by reducing data variability and
identifying specific groups of subjects most
likely to respond to drugs. These results will be
important to drive additional partnerships and
a potential capital raise. While still a very early
stage investment, Gowings believe Blackfynn
has refined their offering and continues to
move forward to growth in revenues.

National Stock Exchange of
Australia Limited ($2.1 M)

NSX owns and operates the National Stock
Exchange of Australia; the second largest
listings exchange in Australia. NSX is building
an alternative exchange, creating a deeper,
more liquid and a lower cost of raising capital.
Gowings believes NSX has the potential
to develop into a Tier 1 listings exchange,
providing strong growth by initially targeting
lower market capitalisation companies and
providing exchange services at lower cost.

151st ANNUAL REPORT 2019 I Year ended 31 July 2019151st ANNUAL REPORT 2019 I Year ended 31 July 2019INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED

Managing Director’s Review of Operations
Strategic Equity Investments continued

Boundary Bend Limited
($14.8 M)

Powerpollen
($0.3 M)

Hydration Pharmaceuticals
($1.4 M)

DiCE Molecules
($2.4 M)

Carlton Investments ($6.6
million) and Event Hospitality
Group ($1.5 M)

BBBSA Finance
($2.4 M)

PowerPollen is an early-stage agricultural
technology company based in Iowa,
USA, that is working on 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 potentially enabling hybrid
production and higher profits in current low
profit crops like wheat. This break-through
will increase farmer profits and global
food supplies that are necessary to feed a
population that will grow to 9 billion by the
year 2050.

Over the winter, PowerPollen continued
testing in their Puerto Rico and Texas sites,
with results showing consistent increases in
yields. PowerPollen has been applying their
updated methods in the Mid-West during
the current USA summer and if this proves
a success they will likely have commercial
interest from seed producers to access their
technology on a paid royalty basis. Gowings
will look to invest in any further rounds as
PowerPollen grows into a profitable business.

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 4
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 effective.

The results through until July 2019 have been
disappointing as USA sales continue failing
to meet targets. Overall sales for the business
were down 11.7% on as Rite Aid reduced their
store count by 1200. However, operational
efficiency and margins have improved with
an increase in EBITDA that edges closer
to a positive number. Canadian sales
have performed well, up 20% on the prior
corresponding period and Hydralyte have
undertaken a rebranding of the products
providing a simpler, more appealing look.

Gowings believes that if Hydralyte can
continue to improve their marketing strategy
in the USA they will be able to capture greater
market share. Bringing Radek Sali (Former
Swisse Vitamins CEO) into the investor base
gives us greater confidence they will be able
to deliver.

DiCE Molecules is a privately held US
biotechnology company with a technology
platform that began at Stanford University
and has the potential to revolutionize small
molecule drug discovery. Their business
model includes the generation of milestone
payments and royalty revenue through drug
discovery collaborations, alongside the
monetization of its own drug development
assets.

IL-17, which helps regulate the immune
system in patients and a program against a
cancer immunotherapy target are currently
being progressed and continue to push
toward clinical trials by 2021. Strategically,
DiCE will focus further on expanding DiCE
owned drug development while maintaining
engagement and potential for milestones
with organizational partners. They continue
to remain very well positioned to achieve
their long-standing goal of building a great
biotech company, one that produces both
transformative medicines for patients and
creates meaningful value for stakeholders.

If these drug developments are executed
successfully the potential payoffs are large
and Gowings is excited to watch DiCE bring
these products forward.

Boundary Bend is Australia's leading producer
of premium extra virgin olive oil and Australia’s
largest olive farmer. Boundary Bend produces
Australia’s two top selling extra virgin olive
oil brands, Cobram Estate and Red Island,
and 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. Additionally, Boundary Bend
operates a bottling, storage and laboratory
facility near Geelong and has groves, an
olive mill, bottling facilities, laboratory and
administrative offices in Woodland, California.

Boundary Bend have established a wellness
arm to its operation and have launched the
Wellgrove brand, which produces olive leaf
extract products, which have been confirmed
to contain antioxidants, as well as many other
benefits to maximise health and wellbeing.

Boundary Bend had a strong year with
a recorded harvest of 13.1 million litres,
compared to last year’s frost affected crop
of 5.4 million litres. However, the price of
irrigation water for the groves was at very
high historical levels, with water shortages
in the Murray Darling river. Despite this, we
anticipate a strong result for the year. In
June, Boundary Bend formally launched their
Cobram Essentials range in the USA. The range
is 100% California extra virgin olive oil, aimed
at providing the consumer with a high quality,
healthy extra virgin olive oil, at an affordable
price. Although it is still early in the game
Boundary Bend have been pleased with initial
sales results.

Gowings remains positive on Boundary Bend
for the next year as more of their recently
planted crops begin producing olives and
harvest volumes increase.

Carlton Investments Limited is a listed
investment company, incorporated in 1928
and traded on the ASX. Carlton Investments’
strategy is to invest in established, well
managed Australian listed entities that are
expected to provide attractive levels of
franked dividends and long-term capital
growth. Investments are held for the long term
and are generally only disposed of through
takeover, mergers or other exceptional
circumstances that may arise. Carlton
Investments do not act as share traders nor do
they invest in speculative stocks.

BBBSA Finance (BBBSA), trading as
TrailBlazer Finance, is a specialist financial
services lender. It offers business loans,
valuations and M&A advice and execution
services, specifically tailored for financial
intermediaries. Client businesses include
mortgage brokerage; 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.

In late FY2018 Gowings made a strategic
investment and assumed a board seat in
BBBSA Finance Pty Ltd. The Company has
continued to grow and expand, consistent
with prior periods. It has been a beneficiary
of the recent Hayne Royal Commission which
has further exacerbated the reluctance by
major banks to continue to provide credit
facilities to SME’s that are cashflow backed.
This has enabled TrailBlazer Finance to grow
to over $13 billion dollars ($10 billion dollars
at half year) of underlying mortgages, real
estate rental contracts and financial planning
books that underpin its loan book security.
This annuity income serves as the source of
cashflows that support and service its loan
book. At the time of writing TrailBlazer has no
loan defaults and arrears of less than 1% on a
loan book of over $21,000,000.

Carlton Investments’ primary holding is Event
Hospitality and Entertainment (40%) followed
by substantial positions in the big 4 Australian
Banks (19%). During the period Carlton made
significant acquisitions in BHP Group, Boral,
Fortescue Metals Group, Macquarie Group and
Woodside Petroleum.

Event Hospitality & Entertainment’s (Event)
main divisions are cinema exhibition, hotel
operations and ownership alongside property
development. Their best-known brands
include: Event, Greater Union, Rydges, QT
hotels, and Thredbo Alpine Resort. Event had
average results over the period with results in
line with the previous year. The entertainment
division performed poorly as cinema
attendance fell, while property provided
increased revenues but a fall in valuations.
Thredbo Alpine Resort was the best performer
with growth of 14.6%.

Gowings continues to hold Carlton
Investments and Event as long-term equity
investments that we expect to provide strong
income and capital growth over time.

151st ANNUAL REPORT 2019 I Year ended 31 July 2019151st ANNUAL REPORT 2019 I Year ended 31 July 2019INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITEDGrowth Rate of Strategic Equity Portfolio

E S T 1 8 6 8
GOWING BROS.LTD

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.

“Performance Proven Over Time”
- John Gowing -

1991

1995

1998

1999

2000

2001

2006

2007

2008

2013

2014

2016

2017

2018

2019

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.

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%.

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)

Investments which
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 that
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).

$1.17M profit
from realisation
of investments
including Seek
Ltd ($747k profit,
representing 154%
capital growth),
Trademe ($208k,
69% capital
growth), Webster
Ltd ($94k, 19%
capital growth),
Carsales.com
($42k, 14% capital
growth). Invested
$7.9M into a variety
of equities and
listed investment
companies.

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%

$300,000

$250,000

$200,000

$150,000

$100,000

$50,000

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

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

2019

Gowings Listed Equity Portfolio

ASX AllOrd Accum Index

Bloomberg Ausbond Bank Bill Index (BAUBIL)

RBA Cash Rate

GOWINGS

$258,243
10.52% p.a.

ASX All Ord

$200,796
9.67% p.a.

BAUBIL

$77,7578
6.51% p.a.

RBA Cash Rate

$64,505
5.90% p.a.

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

New Ventures - Media & Wealth Management

Five V Capital
($1.7 M)

OurCrowd Australia
($1.4 M)

Our Innovation Fund
($1.3 M)

Coastbeat Pty Ltd

1868 Capital Pty Ltd

Sawtell Commons
Residential Subdivision

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 which invests in businesses across
Australia and New Zealand alongside 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.

The Fund II portfolio continues to progress
well, with the team bedding down their recent
investment in Universal Store, completing
the divestment of the Madman Anime Group
and UHG, as well as supporting the remaining
portfolio across a range of growth initiatives.
The divestment of UHG to MedHealth,
represented the first realisation from Fund II
and provided a positive return to investors.
Five V Capital is finalising fundraising for
Fund III, to continue to pursue its investment
strategy, with capital commitments now in
excess of $225 million.

OurCrowd Australia
($1.4 M)

OurCrowd is the leading global equity
crowdfunding platform for accredited
investors. OurCrowd selects investment
opportunities and brings companies to
its global investment community as an
opportunity for investment. OurCrowd has
reached almost 17,000 investors from over
110 countries and has $1 billion in funds
under management with over 110 portfolio
companies and funds.

Gowing Bros has invested $US 1 million into
OurCrowd which has now been fully deployed
across 25 companies covering healthcare, tech
hardware, software, fintech, and mobility.
During the year we added The Bouqs to
our portfolio, a Los-Angeles-based startup
disrupting the $100B global floral industry
in both the supply chain and the consumer
experience. The Bouqs has integrated
technology and data into every aspect of its
business to shorten and optimize the floral
supply chain while driving demand through a
branded ecommerce experience.

Also added during the year was an investment
into Casper Sleep. Casper is a global sleep
products company that launched in 2014
with a high-quality mattress sold directly to
consumers - eliminating commission-driven,
inflated prices. The company is a fast-growing
consumer brand, and its product line has
increased to include sheets, pillows and a
special dog mattress. Casper was named
one of Fast Company's 50 Most Innovative
Companies in the World, and its flagship
mattress was crowned one of TIME Magazine's
Best Inventions of 2015. Gowings expects
Casper to move toward a public listing in the
short term at a higher value than our entry
point.

Gowings have now fully deployed their
capital allocated to OurCrowd investments
but continue to monitor for any further
outstanding opportunities and follow-on
rounds. As venture capital is typically a
long-term investment, we expect returns to
start coming in over the next few years as our
portfolio companies start moving towards
trade sales or public listings.

Our Innovation Fund is an early stage venture
capital 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. The fund
capitalises 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,
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.

The fund currently has 10 portfolio companies
including investments in enterprise software,
hardware/devices and financial technology
businesses. The portfolio investments have had
strong performance to date with several follow-
on rounds expected. A standout is Enboarder, a
software platform that streamlines the process
for on-boarding new employees, which has
made strong inroads into major United States
firms alongside securing a key round with a
United States based venture firm.

The Our Innovation Fund is looking to raise a
Fund II which will have a mandate to invest
across both Australian and non-Australian
investments.

Sawtell Commons has been brought to
life during this period with the Stage 1
subdivision works complete and all 8 lots
sold to home building partners for the
display village. The stage one site has high
kerb appeal with elegant landscaping and
attractive aspects within a woodland setting.

The stage 2 pre-sales release is underway
with three lots of the thirty-three already
exchanged at time of writing. Stage
2 subdivision works are scheduled to
commence in the first quarter of 2020, subject
to approvals. Gowings are awaiting a positive
determination of the new DA for 222 lots from
the JRPP and Coffs Harbour Council, which
is currently scheduled for mid-October. An
impressive site sales office is now operational
with plenty of walk -in prospective
purchasers and the second sales office at
Coffs Central, next to Kmart is due to open in
September to capture the strong foot traffic
in that location. A local marketing campaign
is supporting sales including airport and
highway billboards, digital screens and
Coastbeat magazine.

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.

Harbour Drive Solitary 30
Development Site

The Jetty development site located at 357
Harbour Drive paves the way for an exciting
new mixed-use development for Gowings.
The project received conditional approval for
demolition of the existing Forestry Building
earlier in 2019. Part of this process was the
extensive documentation of the history of
the building via an Archival Recording and
submission of an approved Interpretation
Strategy which highlighted re-use
opportunities for the original local hardwood
contained therein.

Gowings appointed DFJ Architecture who
have presented initial concept schemes and
continue to work closely with stakeholders to
progress plans that align with the master plan
for the Jetty region. The Gowings development
should form a cornerstone in the Council
planned creation of a vibrant Jetty precinct.

1868 Capital, Gowings’ Australian Financial
Services Licensed business has utilised Gowings
long term investment philosophy to develop
concepts for a range of funds for investors.

Business selection criteria has included:

• Experience management in the sector
who have invested themselves into
business;

• The business has a sustainable

competitive advantage;

• The business operates in a niche market

with a defined global growth path;

• The business operating model is aligned

to global trends;

• The business is fairly priced; and

• The Gowings network can add value to

the business.

Within each fund that is established, Gowings
will be a cornerstone investor.

Draft term sheets have been prepared for
three unlisted Australian based wholesale
funds, providing investors with access to
private investment opportunities in Australia
and internationally. Opportunities have been
considered in investment areas such as listed
investment companies, food production and
distribution companies as well as venture
capital opportunities.

Lawyers for 1868 Capital have been engaged
and they have prepared a suite of documents
suitable for the launch of each fund.

Consideration is currently being given to the
most appropriate asset class and market
timing to launch the first fund.

151st ANNUAL REPORT 2019 I Year ended 31 July 2019151st ANNUAL REPORT 2019 I Year ended 31 July 2019INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED

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: 21,042,598 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: 57,306 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: 57,892

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: 64,504

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 board voting rights.

151st ANNUAL REPORT 2019 I Year ended 31 July 2019151st ANNUAL REPORT 2019 I Year ended 31 July 2019INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITEDDirectors’ Report

Directors’ and Executives' Interests

Your Directors are pleased to present their report on the Company for the year ended 31 July 2019.

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

Results

For the year ended

31 July 2019 $'000

31 July 2018 $'000
(Restated)*

Operating profit/(loss) for the year before income tax

Income tax benefit/(expense)

Net profit/(loss) after income tax

Net profit/(loss) attributable to members of Gowing Bros. Limited

(25,787)

6,384

(19,403)

8,724

(2,189)

6,535

* See Note 1 for details regarding the restatement as a result of a change in accounting policy

Dividends

$2,696,960

$2,689,559

$3,217,975

$3,220,816

A final fully franked
dividend of 5.0 cents per
share is to be paid to
shareholders on
31 October 2019

An interim fully franked
dividend of 5.0c per
share was paid to
shareholders on 30
April 2019

A final fully franked
dividend of 6.0 cents
per share was 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

Review of Operations

The operations of the Company are reviewed in the Managing Director’s ‘Review of Operations’ on page 14.

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 14.

Total Shares Professor J. West Non-Executive Chairman Director since April 2016 and Member of the Audit Committee BA (Syd), PHD (Harvard)Professor 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 Director since 1983 and Member of the Remuneration Committee Bachelor of Commerce Member of Chartered Accountants Australia and New Zealand Member of CPA Australia No other directorships held in listed companies over the past 3 years 21,042,598R. Ambrogio Chief Financial Officer and co-company secretaryBachelor of Economics, Member of Chartered Accountants Australia and New ZealandMr. 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. Robert’s experience comes from his past employment with Arthur Andersen, XM Holdings, Creative Activation, and MTC Australia. _N. Rogan Head of Wholesale Funds Management and Company SecretaryBachelor 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. Mr. Rogan resigned from his position as Head of Wholesale Funds Management and Company Secretary on 19 April 2019._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 of experience as an investment professional. No other directorships held in listed companies over the past 3 years 57,306S. J. Clancy Non-Executive Director Diploma of Marketing Director since April 2016 Chairman of the Remuneration Committee and 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. 5,000I. H. Morgan Company Secretary Bachelor of Business, Master of Law, Grad Dip Applied Finance and InvestmentMr. Morgan was appointed company secretary on 18 April 2019 and has over 35 years experience as a Company Secretary and Chartered accountant for businesses operating both in Australia and overseas._151st ANNUAL REPORT 2019 I Year ended 31 July 2019151st ANNUAL REPORT 2019 I Year ended 31 July 2019INVESTING 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:

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.

Board Meetings

Audit Committee Meetings

Remuneration Committee Meetings

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

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 40 to 42.

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 82.

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.

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

2019 $

2018 $

Audit services

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

187,000

167,500

Taxation services

Tax compliance services, including review of Company income tax returns

29,520

79,500

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
14 October 2019

J. E. Gowing
Director
Sydney
14 October 2019

151st ANNUAL REPORT 2019 I Year ended 31 July 2019151st ANNUAL REPORT 2019 I Year ended 31 July 2019INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED

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 2019 were:

• J. E. Gowing, Managing Director
• R. Ambrogio, Chief Financial Officer and joint Company

Secretary (appointed 31 July 2019)

• N. Rogan, Head of Wholesale Funds Management (resigned 19
April 2019) and Company Secretary (resigned 19 April 2019)

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 2019 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.

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 2019 were:

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

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.

Details of Remuneration

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

2019
$

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

10,654

132,192

110,654

Executive Directors

J. E. Gowing

289,951

Other key management personnel

219,178

221,347

R. Ambrogio

N. Rogan¹

Total key
management
personnel
compensation

862,668

110,654

(16,728)

1,133

1,686

(5,666)

(20,708)

1,133

2,603

11,012

5,205

18,820

130,000

71,666

60,000

261,666

20,049

4,948

299,353

20,822

14,693

3,741

245,427

(1,257)

229,117

74,384

7,432

1,035,563

¹N. Rogan resigned from his position as Head of Funds Management and Company Secretary on 19 April 2019.

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.

151st ANNUAL REPORT 2019 I Year ended 31 July 2019151st ANNUAL REPORT 2019 I Year ended 31 July 2019INVESTING 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 30 September 2019

Fixed

Performance

Range of shares

No. of shareholders

Executive Directors

J. E. Gowing

Other key management personnel

G. J. Grundy

R. Ambrogio

N. Rogan

2019 (%)

2018 (%)

2019 (%)

2018 (%)

100

Service Agreements

R. Ambrogio, Chief Financial Officer

There are/ were service agreements in place with J. Parker, J. Gowing,
Prof. J. West, S. Clancy, 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 2019
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 2019
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 2019 of $1,133.

• 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:

2019

2018

2017

2016

2015

Net Profit/(loss) after tax

Basic and diluted earnings/(loss) per share

Dividends per share declared

Share buy back – number of shares

Share buy back – value

Share price at financial year end

($19.4)m

(36.07)c

10.0c

$2.45

$6.5m¹

12.18c¹

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

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

302

440

191

365

1,351

The number of shareholdings held in less than marketable parcels is 127.

2. Voting Rights

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

3. Substantial Shareholders at 30 September 2019

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

John Edward Gowing

Carlton Hotel Limited

21,042,598

4,701,144

Ordinary shares

4. Top 20 Equity Security Holders at 30 September 2019

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

Woodside Pty Limited

J P Morgan Nominees Australia Limited

Mr John Gowing

Mr Frederick Bruce Wareham

Charles and Cornelia Goode Foundation Pty Limited

Josseck Pty Limited

Mr Ronald Langley and Mrs Rhonda Langley

Mr Graeme Legge

Enbeear Pty Limited

BNP Paribas Nominees Pty Limited

Beta Gamma Pty Limited

Mrs Jean Kathleen Poole-Williamson

T N Phillips Investments Pty Limited

Mythia Pty Limited

National Nominees Limited

HSBC Custody Nominees (Australia) Limited

Total

Total issued share capital

5. Corporate Governance Practices

7,211,378

5,263,957

4,701,144

3,676,709

3,235,816

2,337,390

1,187,189

1,152,358

1,100,000

849,971

674,580

641,690

636,829

632,145

630,368

568,443

550,000

441,258

378,314

354,923

36,224,462

53,939,195

13.37

9.76

8.72

6.82

6.00

4.33

2.20

2.14

2.04

1.58

1.25

1.19

1.18

1.17

1.05

1.02

0.82

0.70

0.66

67.16

(1) See Note 1 of the financial report regarding the restatement as a result of a change in accounting policy

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/.

151st ANNUAL REPORT 2019 I Year ended 31 July 2019151st ANNUAL REPORT 2019 I Year ended 31 July 2019INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED
Financial 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:

Private equities

Investment properties

Derivatives

Other income

Total other income / (loss)

Total revenue and other income

Expenses

Investment properties

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

Administration

Borrowing costs

Depreciation and amortisation

Employee benefits

Public Company

Business acquisition costs

Total expenses

Profit / (loss) from continuing operations before income tax expense

Income tax benefit / (expense)

Profit / (loss) from continuing operations

Profit / (loss) from continuing operations is attributable to:

Members of Gowing Bros. Limited

Non-controlling interests

Profit / (loss) from continuing operations

Notes

31 July 2019
$’000

31 July 2018
$’000
(Restated)*

256

726

20,835

42,538

64,437

1,228

(28,044)

(3,319)

943

(29,192)

35,245

8,859

41,881

1,323

5,211

815

2,490

453

61,032

(25,787)

6,384

(19,403)

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

(2,189)

6,535

Consolidated Statement of Profit or Loss

Consolidated Statement of Other Comprehensive Income

Consolidated Statement of Financial Position

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 14 October 2019.
The Directors have the power to amend and reissue the consolidated financial statements.

The above Consolidated Statement of Profit or Loss should be read in conjunction with the accompanying Notes.
*See Note 1 for details regarding the restatement as a result of a change in accounting policy.

151st ANNUAL REPORT 2019 I Year ended 31 July 2019151st ANNUAL REPORT 2019 I Year ended 31 July 2019INVESTING 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 2019
$’000

31 July 2018
$’000
(Restated)*

Profit / (loss) from continuing operations

(19,403)

6,535

Other comprehensive income / (loss)

Items that will be reclassified to profit or loss:

Exchange rate differences on translating foreign operations, net of tax

254

302

Items that may be reclassified to profit or loss:

Changes in fair value of equity instruments held at fair value through other
comprehensive income, net of tax

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

Total comprehensive income / (loss)

Total comprehensive income / (loss) attributable to:

Members of Gowing Bros. Limited

Non-controlling interests

Total comprehensive income / (loss)

Earnings / (loss) per share

Basic earnings / (loss) per share

Diluted earnings / (loss) per share

(596)

(19,745)

(36.07)c

1,175

554

8,566

12.18c

The above Consolidated Statement of Other Comprehensive Income should be read in conjunction with the accompanying Notes.
*See Note 1 for details regarding the restatement as a result of a change in accounting policy.

As at

Current assets
Cash and cash equivalents

Loans receivable

Inventories

Trade and other receivables

Current tax receivable

Other

Total current assets

Non-current assets
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

Derivatives

Provisions

Deferred tax liabilities

Total non-current liabilities

Total liabilities

Net assets

Equity
Contributed equity

Reserves

Retained profits

Notes

31 July 2019
$’000

31 July 2018
$’000
(Restated)*

20
21

11,314

6,538

8,885

1,750

28,660

480

2,400

40,021

4,907

16,164

232,016

8,778

4,536

3,406
1,800
314,508

343,168

7,370

2,453

895

1,330

12,048

222

107,073

3,132

547

29,022

139,996

152,044

191,124

13,288

100,796

77,042

191,126

(2)

191,124

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

101,956

101,535

215,967

(2)

215,965

The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying Notes.
*See Note 1 for details regarding the restatement as a result of a change in accounting policy.

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

Non-controlling interests

Total equity

151st ANNUAL REPORT 2019 I Year ended 31 July 2019151st ANNUAL REPORT 2019 I Year ended 31 July 2019INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED

Consolidated Statement of Changes in Equity

Consolidated Statement of Cash Flows

For the year ended

Notes

31 July 2019
$’000

31 July 2018
$’000

Balance at 1 August 2017
(Restated)*

Total comprehensive income
for the year

Transactions with owners in
their capacity as owners:

Share buy-back

Dividends declared

Balance at 31 July 2018
(Restated)*

Total comprehensive income
/ (loss) for the year

Transfer of gains on disposal
of equity instruments
at fair value through
comprehensive income to
retained earnings, net of tax

Transactions with owners in
their capacity as owners:

Issue of ordinary shares

Dividends declared

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

12,611

90,503

9,584

(162)

101,442

(2)

213,976

(135)

1,729

302

6,535

(6,442)

8,566

(135)

(6,442)

12,476

90,503

11,313

140

101,535

(2)

215,965

812

(596)

254

(19,403)

(19,745)

(818)

818

(5,908)

77,042

812

(5,908)

Balance at 31 July 2019

13,288

90,503

9,899

394

(2)

191,124

The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying Notes.
*See Note 1 for details regarding the restatement as a result of a change in accounting policy.

Payments for purchases of equity investments

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 paid

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

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

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 increase / (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

69,735

(58,982)

726

256

(5,211)

(355)

6,169

(654)

(472)

(2,083)

(5,398)

(8,698)

(1,089)
-
70

4,378

1,831

(12,115)

17,692

(630)

(5,096)

11,966

6,020

5,294

11,314

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

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

151st ANNUAL REPORT 2019 I Year ended 31 July 2019151st ANNUAL REPORT 2019 I Year ended 31 July 2019INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED

Notes To The Consolidated Financial Statements

1. Summary Of Significant Accounting Policies

1. Summary Of Significant Accounting Policies (Continued)

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 Group had to change its accounting policies and make
retrospective adjustments as a result of adopting AASB 9: Financial
Instruments. The impact of the adoption of this standard and the
respective accounting policies are disclosed below.

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 (financial assets at fair value through other comprehensive
income), 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.

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

New and amended standards adopted
The Group has adopted all new, revised or amending Australian
Accounting Standards and Interpretations issued by the Australian
Accounting Standards Board that are mandatory for the current
reporting period.

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

Adoption of AASB 9: Financial Instruments (AASB 9)

AASB 9 replaces AASB 139 Financial Instruments: Recognition and
Measurement (AASB 139) bringing together all three aspects of the
accounting for financial instruments: classification and measurement;
impairment; and hedge accounting. The Group has applied AASB 9
retrospectively, with the initial application date of 1 August 2018 and
adjusting the comparative information for the period beginning 1
August 2017.

(i) Classification and measurement

Under AASB 9, the classification and measurement model of financial
assets has been revised and is now based on the Group’s
business model for managing the assets and their contractual cash
flow characteristics according to one of the three categories described
below:

Amortised cost
This category includes financial assets managed under a business
model to hold the assets in order to collect the contractual cash flows
(CCFs) and those cash flows represent solely payments of principal
and interest (SPPI).

Fair value through other comprehensive income (FVTOCI)
This category includes financial assets managed under a business
model to sell the assets and collect the CCFs and those cash
flows represent SPPI. An irrevocable election can also be made
for investments in equity instruments on initial recognition to be
measured at FVTOCI.

Fair value through profit or loss (FVTPL)
This includes financial assets managed under a business model that
is not based on collecting the CCFs e.g. they are held for trading or the
CCFs of the asset do not represent SPPI.

On 1 August 2018, the date of initial application of AASB 9, the
Group assessed which business models apply to the financial assets
and liabilities held and classified its financial instruments into the
appropriate AASB 9 categories which are presented in the table below.
There was no change in the carrying values of the Group’s financial
assets or liabilities as a result of adopting AASB 9.

Financial instrument category

AASB 139

AASB 9

Current & non-current financial assets

Trade and other receivables

Loans receivable

Equities (a)

Private equities

Current & non-current financial liabilities

Trade and other payables

Borrowings

Derivatives

Amortised cost

Available-for-sale

FVTPL

Amortised cost

FVTPL

Amortised cost

FVTOCI

FVTPL

Amortised cost

FVTPL

(a) Equity investments previously classified as available-for-sale

The Group elected to classify equity investments previously classified
as available-for-sale as FVTOCI, because these investments are held
as long-term strategic investments that are not expected to be sold in
the short to medium term.

Under AASB 9, these equity investments are no longer subject to
impairment (as was the case under AASB 139) and when these equity
investments are disposed, any gain or loss will not be recycled to
profit or loss and will remain in equity. The change in fair value on
these equity investments will continue to be accumulated in the
investment revaluation reserve until they are derecognised.

As a result of this change the following adjustments have been made
retrospectively:

•

An amount of $3.304 million was reclassified from retained
profits at 1 August 2017 to the investment revaluation
reserve for accumulated impairment expenses recognised
in prior periods on equity investments previously classified
as available-for-sale held on the initial date of application of
AASB 9.

An amount of $1.082 million was reclassified from retained
profits at 31 July 2018 to the investment revaluation reserve
for impairment expenses recognised during the 31 July 2018
financial year on equity investments previously classified as
available-for-sale held on the initial date of application of
AASB 9. Consequently, for the 31 July 2018 financial year,
impairment –equities have reduced by $1.546 million, income
tax expense has increased by $0.464 million, profit after
income tax has increased by $1.082 million and fair value of
investments net of tax presented in other comprehensive
income decreased by that same amount.

Basic and diluted earnings per share for the 31 July 2018 financial year
has also been restated as a result of the change in profit after income
tax. Basic and diluted earnings per share increased by 2.03 cents from
the amount reported in the 31 July 2018 Annual Report.

(ii) Impairment of financial assets

AASB 9 introduced a new impairment model for financial assets which
requires the recognition of impairment provisions based on expected
credit losses (ECL) rather than only incurred credit losses (as required
under AASB 139).

Under this new model, the Group recognises ECL at initial recognition
and the measurement of ECL depends on the level of credit risk
associated with the financial asset. If there has been no significant
increase in credit risk since initial recognition, then the Group
recognises a 12-month ECL which is the total credit losses from
expected defaults in the next 12 months. If there has been a significant
increase in credit risk since initial recognition or if the asset is credit
impaired, then the Group recognises a lifetime ECL which is the total
credit losses from all expected defaults over the life of the asset. A
simple approach is followed in relation to trade and other receivables
and the impairment provision is calculated based on the lifetime ECL.

The Group uses judgement in making assumptions about risk of
default and ECL and the inputs to the impairment calculation, based
on the Group’s history, existing market conditions and future looking
estimates at the end of each reporting period.

Despite the Group changing its accounting policies, the application of
the new impairment model did not result in any material adjustments
to the current or preceding financial reporting periods.

(iii) Other impacts

There has been no other material impacts as a result of the adoption
of AASB 9, consequently no further disclosures have been included
regarding the adoption of AASB 9.

151st ANNUAL REPORT 2019 I Year ended 31 July 2019151st ANNUAL REPORT 2019 I Year ended 31 July 2019INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED
1. Summary Of Significant Accounting Policies (Continued)

1. Summary Of Significant Accounting Policies (Continued)

Other amending Accounting Standards and Interpretations

Several other amending Accounting Standards and Interpretations
apply for the first time for the current reporting period commencing
1 August 2018. These other amending Accounting Standards and
Interpretations did not result in any adjustments to the amounts
recognised or disclosures in the financial report.

(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 2019. 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 35.

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
interests are shown separately within the equity section of the
consolidated statement of financial position and consolidated
statement of comprehensive income.

Business combinations occur where the Group acquires control over
one or more businesses.

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.

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.

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.

(d) Goodwill

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

the consideration transferred;

(i)
(ii) any non-controlling interest (determined under either the full

goodwill or proportionate interest method); and

(iii) 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.

(e) Segment reporting

Equities

Cash and fixed interest

Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision maker
including:
•
•
•
•
•
•
• Other

Surf Hardware International business

Development properties

Investment properties

Private equities

(f) Foreign currency translation

(i) 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.

(ii) 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 and
development properties held at fair value through profit or loss
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) income and expenses are translated at average exchange rates for
the period; and

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.

Goodwill on acquisitions of subsidiaries is included in intangible assets.

(g) Income tax

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 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.

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 non-financial 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.

151st ANNUAL REPORT 2019 I Year ended 31 July 2019151st ANNUAL REPORT 2019 I Year ended 31 July 2019INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED

1. Summary Of Significant Accounting Policies (Continued)

(j) Inventories

(m) Trade and other receivables

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.

(ii) 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 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.

(l) Revenue recognition

Revenue is recognised for the major business activities as follows:
(i) Equities

Dividend income is recognised when received. Revenue from the
sale of investments is recognised at trade date.

(ii) Property rental

Rental income is recognised in accordance with the underlying
rental agreements.

(iii) Land development and sale

Revenue is recognised on settlement.

(iv) Sales of goods

Revenue from the sale of goods is recognised at the point in
time when the customer obtains control of the goods, which is
generally at the time of delivery.

(v) Other investment revenue

Trust income and option income is recognised when earned.

(vi) Other property revenue

Other property revenue is recognised in accordance with
underlying agreements or when the right to receive payment is
established.
(vii) Interest revenue

Interest revenue is recognised as interest accrues using the
effective interest method. This is a method of calculating the
amortised cost of a financial asset and allocating the interest
income over the relevant period using the effective interest rate,
which is the rate that exactly discounts estimated future cash
receipts through the expected life of the financial asset to the net
carrying amount of the financial asset.

Receivables consists mainly of amounts due for rental income and
sale of goods. Receivables are initially recognised at fair value and
subsequently measured at amortised cost using the effective interest
method, less any allowance for expected credit losses. 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

Investments and other financial assets are initially measured
at fair value. Transaction costs are included as part of the initial
measurement, except for financial assets at fair value through profit
or loss. Such assets are subsequently measured at either amortised
cost or fair value depending on their classification. Classification is
determined based on both the business model within which such
assets are held and the contractual cash flow characteristics of the
financial asset unless, an accounting mismatch is being avoided.

Financial assets are derecognised when the rights to receive cash
flows have expired or have been transferred and the Group has
transferred substantially all the risks and rewards of ownership.
When there is no reasonable expectation of recovering part or all of a
financial asset, it’s carrying value is written off.

(i) Financial assets at fair value through profit of loss

Financial assets not measured at amortised cost or at fair value
through other comprehensive income are classified as financial
assets at fair value through profit or loss. Typically, such financial
assets will be either: (i) held for trading, where they are acquired
for the purpose of selling with an intention of making a profit, or
a derivative; or (ii) designated as such upon initial recognition
where permitted. Fair value movements are recognised in profit
or loss.

(ii) Financial assets at fair value through other comprehensive income

Financial assets at fair value through other comprehensive
income include equity investments which the Group intends to
hold for the foreseeable future and has irrevocably elected to
classify them as such upon initial recognition.

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 unobservable inputs and maximising the use of relevant
observable inputs.

(iii) Impairment of financial assets

The Group recognises a loss allowance for expected credit losses
on financial assets which are either measured at amortised cost
or fair value through other comprehensive income.
The measurement of the loss allowance depends upon the
Group’s assessment at the end of each reporting period as to
whether the financial instrument’s credit risk has increased
significantly since initial recognition, based on reasonable and
supportable information that is available, without undue cost or
effort to obtain.

Where there has not been a significant increase in exposure to
credit risk since initial recognition, a 12-month expected credit
loss allowance is estimated. This represents a portion of the
asset’s lifetime expected credit losses that is attributable to a
default event that is possible within the next 12 months. Where
a financial asset has become credit impaired or where it is
determined that credit risk has increased significantly, the loss
allowance is based on the asset’s lifetime expected credit losses.
The amount of expected credit loss recognised is measured on
the basis of the probability weighted present value of anticipated
cash shortfalls over the life of the instrument discounted at the
original effective interest rate.

For financial assets measured at fair value through other
comprehensive income, the loss allowance is recognised
within other comprehensive income. In all other cases, the loss
allowance is recognised in profit or loss.

(o) Investment properties

Investment properties, principally comprising freehold commercial and
retail buildings, are held for long-term rental yields and are not occupied
by the Group. Investment properties are initially recognised at cost,
including transaction costs, and are subsequently remeasured at fair
value. Movements in fair value are recognised directly to profit or loss.

(t) Employee entitlements

(i) Wages, salaries and annual leave

Liabilities for wages, salaries and annual leave 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.

(ii) 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

Investment properties are derecognised when disposed of or when
there is no future economic benefit expected.

Investment properties also include properties under construction for
future use as investment properties. These are carried at fair value

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.

(p) Joint ventures

(i) 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 36.

(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

Borrowings are initially recognised at the fair value of the
consideration received, net of transaction costs. They are
subsequently measured at amortised cost using the effective interest
method. 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.

(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.

(w) Leases

The determination of whether an arrangement is or contains a lease is
based on the substance of the arrangement and requires an assessment
of whether the fulfilment of the arrangement is dependent on the use of
a specific asset or assets and the arrangement conveys a right to use the
asset.

A distinction is made between finance leases, which effectively transfer
from the lessor to the lessee substantially all the risks and benefits
incidental to the ownership of leased assets, and operating leases, under
which the lessor effectively retains substantially all such risks and benefits.

Finance leases are capitalised. A lease asset and liability are established at
the fair value of the leased assets, or if lower, the present value of minimum
lease payments. Lease payments are allocated between the principal
component of the lease liability and the finance costs, so as to achieve a
constant rate of interest on the remaining balance of the liability.

Leased assets acquired under a finance lease are 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.

Operating lease payments, net of any incentives received from the lessor,
are charged to profit or loss on a straight-line basis over the term of the
lease.

151st ANNUAL REPORT 2019 I Year ended 31 July 2019151st ANNUAL REPORT 2019 I Year ended 31 July 2019INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED

1. Summary Of Significant Accounting Policies (Continued)

2. Financial Risk Management

(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

Australian Accounting Standards and Interpretations that have
recently been issued or amended but are not yet mandatory, have
not been early adopted by the Group for the annual reporting period
ended 31 July 2019. The Group’s assessment of the impact of these
new or amended Accounting Standards and Interpretations, most
relevant to the Group, are set out below.

(i) AASB 16: Leases (AASB 16)

This standard is applicable to annual reporting periods
beginning on or after 1 January 2019. The standard replaces
AASB 117 Leases and for lessees will eliminate the classifications
of operating leases and finance leases. Subject to exceptions,
a ‘right-of-use’ asset will be capitalised in the statement
of financial position, measured at the present value of the
unavoidable future lease payments to be made over the lease
term.

The exceptions relate to short-term leases of 12 months or less and
leases of low-value assets (such as personal computers and small
office furniture) where an accounting policy choice exists whereby
either a ‘right-of-use’ asset is recognised or lease payments are
expensed to profit or loss as incurred. A liability corresponding to
the capitalised lease will also be recognised, adjusted for lease
prepayments, lease incentives received, initial direct costs incurred
and an estimate of any future restoration, removal or dismantling
costs. Straight-line operating lease expense recognition will be
replaced with a depreciation charge for the leased asset (included
in operating costs) and an interest expense on the recognised lease
liability (included in finance costs). In the earlier periods of the lease,
the expenses associated with the lease under AASB 16 will be higher
when compared to lease expenses under AASB 117. However EBITDA
(Earnings Before Interest, Tax, Depreciation and Amortisation)
results will be improved as the operating expense is replaced by
interest expense and depreciation in profit or loss under AASB 16. For
classification within the statement of cash flows, the lease payments
will be separated into both a principal (financing activities) and
interest (either operating or financing activities) component. The
Group will adopt this standard from 1 August 2019 but the impact of
its adoption is yet to be assessed fully by the Group.

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 and liabilities at the reporting date was as follows:

Currency exposure in AUD

Cash

Trade receivables

Trade payables

Equities

Private equities

31st July 2019

EUR
$’000

GBP
$’000

JPY
$’000

USD
$’000

424

2,233

(312)

459

388

983

(24)

(486)

448

2,400

(342)

5,565

1,141

31st July 2018

EUR
$’000

391

1,796

(255)

311

GBP
$’000

JPY
$’000

247

933

(415)

USD
$’000

612

2,862

(498)

4,467

1,375

Based on the cash held at 31 July 2019, if the Australian dollar weakened / strengthened by 10% against the US dollar, cash would have been
$68,000 higher / $55,636 lower (2018: $49,778 higher / $40,727 lower). If the Australian dollar weakened / strengthened by 10% against the GBP,
cash would have been $1,444 higher / $1,182 lower (2018: $1,000 higher / $818 lower). If the Australian dollar weakened / strengthened by 10%
against the EUR, cash would have been $47,111 higher / $38,545 lower (2018: $43,444 higher / $35,545 lower). If the Australian dollar weakened /
strengthened by 10% against the JPY, cash would have been $43,111 higher / $35,273 lower (2018: $27,444 higher / $22,455 lower).

Based on the trade receivables held at 31 July 2019, if the Australian dollar weakened / strengthened by 10% against the US dollar, receivables
would have been $318,000 higher / $260,182 lower (2018: $266,667 higher / $218,182 lower). If the Australian dollar weakened/strengthened by
10% against the EUR, receivables would have been $248,111 higher/ $203,000 lower (2018: $199,556 higher / $163,273 lower). If the Australian
dollar weakened/strengthened by 10% against the JPY, receivables would have been $109,222 higher/ $89,364 lower (2018: $103,667 higher/
$84,818 lower).

Based on the trade payables held at 31 July 2019, if the Australian dollar weakened / strengthened by 10% against the US dollar, payables would
have been $55,384 higher / $45,315 lower (2018: $38,000 higher / $31,091 lower). If the Australian dollar weakened/strengthened by 10% against
the EUR, payables would have been $34,624 higher/ $28,329 lower (2018: $28,233 higher/ $23,182 lower). If the Australian dollar weakened/
strengthened by 10% against the GBP, payables would have been $2,621 higher/ $2,144 lower (2018: $nil higher/ $nil lower). If the Australian
dollar weakened/strengthened by 10% against the JPY, payables would have been $53,996 higher/ $44,179 lower (2018: $46,111 higher/ $37,727
lower).

Based on the equities held at 31 July 2019, if the Australian dollar weakened / strengthened by 10% against the US dollar, equities would have
been $496,299 higher / $406,063 lower (2018: $618,333 higher / $505,909 lower).

Based on the private equities held at 31 July 2019, if the Australian dollar weakened / strengthened by 10% against the US dollar, private equities
would have been $152,802 higher / $125,020 lower (2018: $126,778 higher / $103,727 lower). If the Australian dollar weakened / strengthened by
10% against the Euro, private equities would have been $50,954 higher / $41,689 lower (2018: $34,556 higher / $28,273 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.

151st ANNUAL REPORT 2019 I Year ended 31 July 2019151st ANNUAL REPORT 2019 I Year ended 31 July 2019INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED

2. Financial Risk Management (Continued)

(i) Price risk

The Group is exposed to asset price risk. This arises from equities and private equities held by the Group. A price reduction at 5% and 10%
spread equally over the investment portfolio would reduce its value by $2,246,410 (2018: $2,011,590) and $4,492,820 (2018: $4,023,180)
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.

(ii)

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.

31 July 2018

Less than
1 year

Between
1-2 years

Non-derivatives

Non-interest bearing

Fixed rate

Variable rate

Total non-derivatives

Derivatives

Fixed rate

Fair value estimation risk

$'000

4,711

448

5,166

708

$'000

248

1,936

2,184

Between
2-5 years

$'000

Over
5 years

Total contractual
cash flow

$'000

90,073

4,959

92,457

97,423

708

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

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

Weighted average
interest rate

31st July 2019
Balance $’000

Weighted average
interest rate

31st July 2018
Balance $’000

Borrowings

Interest rate swaps (notional principal
amount)

Net exposure to cash flow interest rate risk

1.38%

2.64%

109,526

(60,200)

49,326

2.15%

2.64%

92,457

(60,200)

32,257

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 has
a strict code of credit, including obtaining agency credit information, confirming references and setting appropriate credit limits. 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 2019

Less than
1 year

$'000

7,370

2,453

9,823

895

Non-derivatives

Non-interest bearing

Variable rate

Total non-derivatives

Derivatives

Fixed rate

Between
1-2 years

$'000

Between
2-5 years

Over
5 years

Total contractual
cash flow

$'000

222

328

550

895

106,745

2,237

7,592

109,526

117,118

4,027

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 than 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.

The following tables present the Group’s assets and liabilities measured at fair value at 31 July 2019 and 31 July 2018.

31 July 2019

Level 1

$’000

Level 2

$’000

Financial assets – designated at fair value through other comprehensive income

Investments – Australian equities

Investments – Global equities

Financial assets – designated at fair values through profit or loss

Investments – Private equities

Investments – Investment properties

Other assets – designated at fair value

Freehold – Properties

Financial liabilities – designated at fair value through profit or loss

Derivatives

Total

17,257

Level 3

$’000

18,297

4,467

Total

$’000

35,554

4,467

4,907

232,016

7,105

(4,027)

266,792

(4,027)

280,022

151st ANNUAL REPORT 2019 I Year ended 31 July 2019151st ANNUAL REPORT 2019 I Year ended 31 July 2019INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED
2. Financial Risk Management (Continued)

3. Critical Accounting Estimates And Judgements

31 July 2019

Level 1
$’000

$’000

Level 2
$’000

$’000

Financial assets – designated at fair value through other comprehensive income

Investments – Australian equities

Investments – Global equities

Financial assets – designated at fair values through profit or loss

Investments – Private equities

Investments – Investment properties

Other assets – designated at fair value

Freehold – Properties

12,985

Level 3
$’000

$’000

18,234

5,564

3,449

256,678

Total
$’000

$’000

31,219

5,564

3,449

256,678

Managed and Direct Private Equity

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 2019 was a gain of $1,228,471 (2018: a gain of $279,153) 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.

7,148

Investment property

Financial liabilities – designated at fair value through profit or loss

Derivatives

Total

12,985

(708)

291,073

(708)

303,350

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 loss of $28,453,509 (2018: gain of $5,472,142).

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 17.

•

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.

31 July 2019
Reconciliation of level 3 fair value movements

Opening balance

Transfers to level 1

Transfers from development properties

Purchases

Sales

Amortisation and depreciation

Gain / (loss) 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 14

- refer to note 15

- refer to note 17

31 July 2019
$’000

31 July 2018
$’000

291,073

256,601

7,503

(2,162)

(1,386)

(28,300)

266,792

297

28,289

(1,439)

(1,293)

8,618

291,073

151st ANNUAL REPORT 2019 I Year ended 31 July 2019151st ANNUAL REPORT 2019 I Year ended 31 July 2019INVESTING 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 received

Private equities – distributions received

Investment properties – rent received

Surf Hardware International business – sale of goods

Segment other income

Private equities – realised and unrealised gains/(losses)

Investment properties –realised and unrealised gains/(losses)

Other

Total segment revenue and other income

Segment result

Cash and fixed interest

Equities

Private equities

Investment properties

Surf Hardware International business

Other

Total segment result

Income tax benefit / (expense)

Net profit / (loss) after tax

*See note 1 for details regarding the restatement as a result of a change in accounting policy

31 July 2019
$’000

31 July 2018
$’000
(Restated)*

256

726

20,835

42,538

64,437

1,228

(28,044)

(2,376)

(29,192)

35,245

256

726

1,310

(20,690)

804

(8,193)

(25,787)

6,384

(19,403)

219

618

449

19,829

37,189

58,304

(148)

5,589

321

5,762

64,066

219

618

301

11,846

308

(4,568)

8,724

(2,189)

6,535

Revenue from external customers by geographical region

Australia

United States of America

Japan

Europe

Total revenue from external customers

31 July 2019
$’000

31 July 2018
$’000

31,880

13,386

7,206

10,901

63,373

30,239

11,563

5,597

9,619

57,018

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

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

11,314

40,021

4,907

232,016

16,164

17,944

20,802

343,168

91,170

5,471

55,403

152,044

307,015

7,116

202

175

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

314,508

333,168

151st ANNUAL REPORT 2019 I Year ended 31 July 2019151st ANNUAL REPORT 2019 I Year ended 31 July 2019INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED

4. Segment Information (Continued)

6. Income Tax Expense

For the year ended

Payments for the acquisition of:

- Investment properties

- Development properties

- Equities

Gains / (losses) on disposal or revaluation of:

- Investment properties

- Private equities

Unallocated:

- Payments for the acquisition of property, plant and equipment

- Payments for the acquisition of intangibles

Accounting policies

31 July 2019
$’000

31 July 2018
$’000

5,398

2,083

8,698

(28,044)

1,228

654

472

29,026

438

1,975

5,589

(148)

733

752

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, development
properties and plant and equipment, net of related provisions. While most of these assets can be directly attributable to individual segments,
the 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 $1.56 million (2018: $1.23 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.

For the year ended

Current tax

Deferred tax

(Over) / under provided in prior years

Income tax attributable to:

Profit / (loss) from continuing operations

Aggregate income tax (benefit) / expense on profit

Reconciliation of income tax (benefit) expense to prima facie tax on profit / (loss)

Profit / (loss) from continuing operations before income tax (benefit) / expense

Tax at the Australian tax rate of 30% (2018: 30%)

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

Deferred tax assets recorded not recognised and effect of tax rates in foreign
jurisdictions

Income tax (benefit) / 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

*See Note 1 for details regarding the restatement as a result of a change in accounting policy.

7. Cash And Cash Equivalents

31 July 2019
$’000

31 July 2018
$’000
(Restated)*

286

(7,573)

903

(6,384)

(25,787)

(7,736)

502

(127)

903

(6,384)

(256)

139

2,199

(149)

2,189

8,724

2,617

144

(102)

(149)

(321)

2,189

741

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.

As at

Cash at bank and on hand

31 July 2019
$’000

11,314

31 July 2018
$’000

5,294

5. Operating Profit / (Loss)

For the year ended

31 July 2019
$’000

31 July 2018
$’000

Loan receivable

8. Current Loans Receivable

Profit / (loss) from continuing operations before income tax expense includes
the following specific items:

9. Current Trade And Other Receivables

Gains

Private equity investment distributions

Expenses

Interest and other borrowing costs

Employee benefits

Cost of sales

5,211

12,735

25,290

449

5,230

11,166

21,926

Trade debtors

Less: Provision for expected credit losses

Balance at end of year

10. Other Current Assets

8,924

(39)

8,885

8,015

(226)

7,789

Prepayments

1,750

1,271

151st ANNUAL REPORT 2019 I Year ended 31 July 2019151st ANNUAL REPORT 2019 I Year ended 31 July 2019INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED

31 July 2019
$’000

31 July 2018
$’000

256,678

6,491

(1,831)

410

(1,342)

(28,454)

232,016

20,835

(8,859)

410

(28,454)

(16,068)

226,661

26,276

(896)

(11)

297

(1,249)

5,600

256,678

19,829

(8,342)

(11)

5,600

17,076

11. Current Inventories

For the year ended

At cost or net realisable value
Raw materials and finished goods

Balance at end of year

12. Non-Current Other Receivables

Loans to employees

Other receivables

Balance at end of year

13. Non-Current Loan Receivables

31 July 2019
$’000

31 July 2018
$’000

6,538

479

480

6,234

566

567

17. Non-Current Investment Properties

For the year ended

At fair value

Balance at beginning of year

Additions

Disposal proceeds

Net gain / (loss) on disposal

Transfers in / (out)

Amortisation on incentives

Net gain / (loss) from fair value adjustment

Balance at end of year

Amounts recognised in profit of loss for investment properties

Rental revenue

Loan receivables

2,400

1,400

Direct operating expenses from rental generating properties

Interest on loans are charged at commercial interest rates.

14. Non-Current Equities

At fair value through other comprehensive income

Balance at beginning of year

Revaluation to fair value

Additions

Disposal proceeds

Balance at end of year

Changes in fair value of equities are recorded in equity.

15. Non-Current Private Equities

At fair value through profit or loss

Balance at beginning of year

Revaluation to fair value

Additions

Disposal proceeds

Net gain / (loss) on disposal

Balance at end of year

36,783

(852)

8,137

(4,047)

40,021

3,449

1,228

561

(331)

4,907

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

16. Non-Current Development Properties

At cost or net realisable value

Balance at beginning of year

Additions

Transfers in / (out)

Balance at end of year

14,145

2,083

(64)

16,164

33,969

1,678

1,136

36,783

3,301

279

839

(543)

(427)

3,449

13,707

438

14,145

Net gain / (loss) on disposal

Gain / (loss) on revaluation

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

Valuation
Method

Weighted
average cap
rate 2019

Weighted
average cap
rate 2018

31 July 2019
$’000

31 July 2018
$’000

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

Neighbourhood shopping centres (Kempsey
Central and Moonee Market)

Other properties

(a)

(b)

6.75%

7.71%

n/a

6.25%

177,991

199,861

7.25%

n/a

47,640

6,385

232,016

48,800

8,017

256,678

(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.

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.

Sensitivity analysis of sub-regional and neighbourhood shopping centre investment properties held at fair value

At 31 July 2019, a reduction of 0.5% in the capitalisation rate applied to each property would result in an additional gain of $18.2 million in
the consolidated statement of profit or loss and consolidated statement of other comprehensive income. Similarly, an increase of 0.5% in
the capitalisation rate of each property would result in an additional loss of $15.7 million in the consolidated statement of profit or loss and
consolidated statement of other comprehensive income.

151st ANNUAL REPORT 2019 I Year ended 31 July 2019151st ANNUAL REPORT 2019 I Year ended 31 July 2019INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED

18. Non-Current Property, Plant and Equipment

19. Non-Current Intangibles

Year ended 31 July 2019

Opening net book amount

Additions

Disposals

Depreciation charge

Closing net book amount

At 31 July 2019

Cost or fair value

Accumulated depreciation

Net book amount

Year ended 31 July 2018

Opening net book amount

Additions

Revaluation to fair value

Depreciation charge

Closing net book amount

At 31 July 2018

Cost or fair value

Accumulated depreciation

Net book amount

Freehold
Property
$’000

Motor vehicles
$’000

Furniture, fittings
& equipment
$’000

7,148

(44)

7,105

7,566

(461)

7,105

186

(43)

(49)

414

(318)

1,415

651

(5)

(484)

1,577

7,877

(6,300)

1,577

Freehold
Property
$’000

Motor vehicles
$’000

Furniture, fittings
& equipment
$’000

6,401

791

(44)

7,148

7,565

(417)

7,148

247

(67)

186

505

(319)

186

1,180

727

(492)

1,415

7,304

(5,889)

1,415

Total
$’000

8,749

654

(48)

(577)

8,778

15,857

(7,079)

8,778

Total
$’000

7,828

733

791

(603)

8,749

15,374

(6,625)

8,749

As at

Goodwill

Brand names

Software

Patents

Balance at end of year

31 July 2019
$’000

31 July 2018
$’000

2,383

1,050

256

847

4,536

2,383

1,050

869

4,302

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 either value-in-use calculations or the estimated fair value less costs to sell.

Goodwill

The recoverable amount of goodwill is determined based on value-in-use of the Surf Hardware International business segment which 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 $7.3m. Key assumptions include: (a) 12.5%
discount rate; (b) 4.8% 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.

Brand Names

The recoverable amount of brand names is determined based on their estimated fair value less costs to sell determined by applying the relief
from royalty methodology. Key assumptions include: (a) a royalty rate of 5%; (b) 12.5% discount rate; (c) 3% per annum projected net revenue
growth rate; (d) 3% per annum increase in brand maintenance expenses; and (e) 3% terminal growth rate. Based on these assumptions the
Directors have determined that no impairment charge shall be recognised during the current reporting period.

20. Deferred Tax Assets

As at

31 July 2019
$’000

31 July 2018
$’000

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

The balance comprises temporary differences attributable to:

Employee benefits

Accruals

Equities

Derivatives

Tax losses

Other

Net deferred tax assets

Movements:

Opening balance at 1 August

(Debited) / credited to profit or loss

Closing balance at 31 July

Deferred tax assets to be recovered within 12 months

Deferred tax assets to be recovered after 12 months

383

545

1,208

1,034

236

3,406

5,070

(1,664)

3,406

741

2,665

3,406

361

336

2,124

212

1,725

312

5,070

4,631

439

5,070

4,229

841

5,070

151st ANNUAL REPORT 2019 I Year ended 31 July 2019151st ANNUAL REPORT 2019 I Year ended 31 July 2019INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED

21. Other Non-Current Assets

26. Non-Current Borrowings (Continued)

31 July 2019
$’000

1,800

31 July 2018
$’000

2,025

Total secured liabilities

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

31 July 2019
$’000

31 July 2018
$’000

As at

Other assets

22. Current Trade and Other Payables

Trade creditors

Other creditors and accruals

Balance at end of year

23. Current Borrowings

Bill payable – secured

Market rate loan - secured

Trade facility – secured

Commercial advance facility - secured

Finance lease – secured

Balance at end of year

Risk

4,334

3,036

7,370

1,425

336

692

2,453

2,140

2,571

4,711

336

112

455

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 26.

24. Current Tax Liabilities

Income tax payable

357

25. Current Provisions

Employee Entitlements

26. Non-Current Borrowings

Bill payable - secured

Commercial advance facility - secured

Balance at end of year

Risk

1,330

1,222

106,745

328

107,073

91,345

664

92,009

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.

Bills payable¹

Trade facility – secured

Market rate loan facility - secured²

Commercial advance facility – secured³

Finance lease – secured

108,170

664

692

109,526

91,345

112

1,000

92,464

¹$1.425m bill is secured against 328-332 Bong St, Bowral. Interest is charged at BBSY plus 1.90% p.a.

¹$106.745 million bill is secured against Port Central Shopping Centre, Coffs Central Shopping Centre, Moonee Market Shopping Centre and
Kempsey Central Shopping Centre (the “SC properties”). The facility consists of two tranches, the first tranche is a non-revolving facility, has a
facility limit of $86 million (fully drawn at 31 July 2019), 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 2019 the current interest rate that applies to amounts advanced is 1.1714% p.a. for the first tranche and 1.8714% 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 2.15 times; the Group must have a minimum interest coverage ratio of 2.0 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$0.664 million market rate loan 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 loan entered into during the year has a total facility limit of $1
million (drawn to $0.664 million at 31 July 2019), and interest is charged at BBSY. At 31 July 2019 the current interest rate that applies to amounts
advanced is 1.1809%.

³$0.692 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 was revised during the year and has a total facility limit of
$2 million. At 31 July 2019 the current interest rate that applies to amounts advanced is 8.65%.

As at

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

31 July 2019
$’000

31 July 2018
$’000

Total facilities

Secured bill facilities

Secured trade facility

Secured commercial advance facility

Secured market rate loan facility

Used at balance date
Secured bill facilities

Secured trade facility

Secured commercial advance facility

Secured market rate loan facility

Unused at balance date
Secured bill facilities

Secured trade facility¹

Secured commercial advance facility

Secured market rate loan facility

117,650
-
2,000
664

120,314

108,170

692

664

109,526

9,480

1,308

10,788

117,650
2,000
-
1,000

120,650

91,345

112

1,000

92,457

26,305

1,888

28,193

151st ANNUAL REPORT 2019 I Year ended 31 July 2019151st ANNUAL REPORT 2019 I Year ended 31 July 2019INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED

26. Non-Current Borrowings (Continued)

29. Contributed Equity (Continued)

¹Of the $1.31 million (2018: $1.89 million) remaining commercial advance facilty (2018: trade facility), $0.15 million (2018: $0.15 million) has been
used for bank guarantees.

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 suspended for the final dividend declared on 27 September 2019.

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

Nil shares were bought back during the year (2018: 47,344).

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.

Off-balance sheet

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

27. Non-Current Provisions

As at

Employee entitlements

28. 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

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

29. Contributed Equity

31 July 2019
$’000

547

31 July 2018
$’000

469

278

315

23,657

4,068

704

29,022

37,612

(8,334)

(256)

29,022

278

28,744

29,022

291

315

30,139

6,179

688

37,612

33,915

2,493

1,204

37,612

291

37,321

37,612

Share capital

Ordinary shares fully paid

Movements in ordinary share capital

Date

Details

31/07/2018

Balance

13/11/2018

Shares issued - DRP

30/04/2019

Shares issued - DRP

31/07/2019

Balance

Number of
shares 2019

Number of
shares 2018

2019
$’000

2018
$’000

53,939,195

53,632,915

13,288

12,476

Number of
shares

53,632,915

158,256

148,024

53,939,195

Issue price per
share

2.77

2.52

$’000

12,476

438

374

13,288

151st ANNUAL REPORT 2019 I Year ended 31 July 2019151st ANNUAL REPORT 2019 I Year ended 31 July 2019INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED
31 July 2019
$’000

31 July 2018
$’000
(Restated)*

31. Dividends

As at

Ordinary shares

30. 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

- Equities

- Deferred tax applicable to fair value adjustments

- Transfer of gains on sale of equity instruments at fair value
through comprehensive income to retained earnings, net of tax

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

90,503

9,722

(852)

256

(818)

8,308

1,591

140

254

394

100,796

90,503

8,547

1,678

(503)

9,722

1,037

791

(237)

1,591

(162)

302

140

101,956

*See Note 1 for details regarding the restatement as a result of a change in accounting policy.

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 held at fair value through other
comprehensive income.
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.

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

2019 interim dividend of 5.0 cents (2018: 6.0 cents interim) per share

Total dividends declared

Dividends paid in cash

Dividends paid via Dividend Reinvestment Plan

31 July 2019
$’000

31 July 2018
$’000

3,218

2,690

5,908

5,096

812

5,908

3,221

6,442

Franked dividends declared and paid during the year were fully franked at the tax rate of 30% (2018: 30%).

Dividends declared after year end

Subsequent to year end the Directors have declared the payment of a final dividend of 5.0 cents per ordinary share fully franked based on tax
paid at 30%. The maximum amount of the proposed dividend expected to be paid on 31 October 2019 out of retained profits at 31 July 2019 is
$2,696,960.

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 2019 and will be recognised in subsequent financial reports.

Franked dividends
The franked portions of the final dividends declared after 31 July 2019 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)

4,540

6,678

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 receivable;

(b) franking debits that will arise from the payment of dividends recognised as a liability at the reporting date;

(d) franking credits that may be prevented from being distributed in subsequent financial years.

32. Remuneration of Auditors

Audit and review – parent entity

Audit and review – subsidiary companies

Tax services

33. Commitments For Expenditure

Capital commitments – Private equities

31 July 2019
$

31 July 2018
$

113,300

73,700

29,520

216,520

105,000

62,500

79,500

247,000

The Group has uncalled capital commitments of up to $1,070,346 (2018: $1,132,923) in relation to private equity and property fund investments
held at year end.

Capital commitments – Investment properties

The Group has capital commitments of $2,123,474 (2018: $1,342,517) in relation to construction works on investment properties at year end.

151st ANNUAL REPORT 2019 I Year ended 31 July 2019151st ANNUAL REPORT 2019 I Year ended 31 July 2019INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED

33. Commitments For Expenditure (Continued)

34. Related Parties (Continued)

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:

Within one year

Later than one year but not later than five years

Later than five years

34. Related Parties

Directors

31 July 2019
$

31 July 2018
$

1,448

2,599

4,047

922

909

1,861

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 2018.

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

953,747

74,384

7,432

1,035,563

1,723,628

78,380

(55,718)

1,746,290

Movement in shares

Key management person

J. E. Gowing

J. G. Parker

Prof. J. West

S. J. Clancy

*Directly and indirectly

Shares held* at

(disposed) during

Shares held* at

(disposed) during

Shares held* at

Shares acquired/

31-Jul-17

No.

20,888,150

55,000

397,581

5,000

the year

No.

80,000

31-Jul-18

No.

20,888,150

55,000

477,581

5,000

the year

No.

154,448

2,306

31-Jul-19

No.

21,042,598

57,306

477,581

5,000

Detailed remuneration disclosures can be found in the remuneration report on pages 40 to 42.

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 (2018: $nil).

Transactions with key Management Personnel & Directors

Key management person

Transaction type

J. E. Gowing

Marketing services

Associate director services

31 July 2019
$

96,443

10,950

31 July 2018
$

82,250

10,950

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 $41,994 (2018: $36,150) for the year. The sons of Mr J E Gowing provided marketing services during the year on an employment
basis totalling $54,449 (2018: $46,100), and associate director services totalling $10,950 (2018: $10,950).

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

35. Interests In Other Entities (Excluding 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.

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 New Zealand Pty Ltd

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 % 2019

Ownership
Interest % 2018

Australia

France

England

Australia

United States of America

Japan

Australia

New Zealand

Australia

100

99.9

100

99.9

100

99.9

100

99.9

100

No other interests in subsidiaries or other entities (excluding joint ventures) were held by the Group in the 31 July 2019 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 detailed in note 26, there are no significant restrictions over the Group’s ability to access or use
assets, and settle liabilities, of the Group.

151st ANNUAL REPORT 2019 I Year ended 31 July 2019151st ANNUAL REPORT 2019 I Year ended 31 July 2019INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED

36. Interests In Joint Ventures

39. Parent Entity Information

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

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:

Statement of Financial Position

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 2019
$’000

31 July 2018
$’000

3,000

3,045

1,425

1,452

1,593

3,000

3,078

1,600

1,617

1,461

$1.425 million of borrowings is secured against investment properties of Regional Retail Properties (note 26).

37. 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 (2018: Nil).

38. Earnings / (Loss) Per Share

Basic earnings / (loss) per share (cents)

Diluted earnings / (loss) per share (cents)

Weight average number of ordinary shares on issue

Net profit / (loss) after tax

*See Note 1 for details regarding the restatement as a result of a change in accounting policy.

31 July 2019

(36.07)c

53,782,955

$(19,403,000)

31 July 2018
(Restated)*

12.18c

53,675,837

$6,535,000

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 / (loss) after income tax

Total comprehensive income / (loss)

31 July 2019
$’000

31 July 2018
$’000
(Restated)*

13,479

326,383

339,862

7,007

138,818

145,825

194,037

13,288

90,503

8,308

1,591

80,347

194,037

(18,873)

(19,470)

7,318

344,069

351,387

3,922

128,863

132,785

218,602

12,476

90,503

9,722

1,591

104,310

218,602

7,195

8,923

*See Note 1 for details regarding the restatement as a result of a change in accounting policy.

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 33 (2018: Uncalled capital commitments for private equities and construction works on
investment properties as noted in note 33).

Parent entity contingent liabilities

The Company has no contingent liabilities at year end (2018: 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 (2018: None).

151st ANNUAL REPORT 2019 I Year ended 31 July 2019151st ANNUAL REPORT 2019 I Year ended 31 July 2019INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED
40. Reconciliation of Net Profit / (Loss) to Net Cash Inflow from Operating Activities

Directors’ Declaration

31 July 2019
$’000

31 July 2018
$’000
(Restated)*

Profit / (loss) from ordinary activities after income tax
Amortisation of lease incentives
Depreciation and amortisation
Net gain on sale of equities and private equities
Net gain 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)
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

(19,403)
1,342
815
-
(22)
(410)
28,454
(1,228)
3,319
-
-
(1,009)
(254)
(304)
(7,112)
186
1,795

6,169

6,535
1,429
603
427
-
11
(5,600)
(279)
418
1,584
192
(867)
(184)
402
791
118
(1,368)

4,212

*See Note 1 for details regarding the restatement as a result of a change in accounting policy.

41. Changes in Liabilities Arising from Financing Activities

Liabilities
from financing
activities

Derivatives¹

Borrowings²

Opening balance –
31 July 2018

Cash flows from
financing activities

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

Closing balance –
31 July 2019

708

92,464

17,062
17,062³

3,319

-
3,319

¹ Relates to current and non-current derivatives.
² Relates to current and non-current borrowings.
³ Relates to the following cash flows from financing activities for the year ended 31 July 2019 :

-Proceeds from borrowings
-Repayments from borrowings

4,027

109,526

17,692
(630)
17,062

In the directors’ opinion:
(a)

the consolidated financial statements and notes set out on pages 45 to 80 are in accordance with the
Corporations Act 2001, including:
(i)

complying 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 2019 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 2019

required by section 295A of the Corporations Act 2001.

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

Professor J. West
Director

Sydney
14 October 2019

J. E. Gowing
Director

Sydney
14 October 2019

42. Subsequent Events

No matter or circumstance has arisen since the end of the financial year, other than the dividend declared (refer note 31) 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 year.

43. 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.

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

Phone:
Facsimile:
Email:
Website:

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.

151st ANNUAL REPORT 2019 I Year ended 31 July 2019151st ANNUAL REPORT 2019 I Year ended 31 July 2019INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED

GOWING BROS. LIMITED ACN 000 010 471

AUDITOR’S INDEPENDENCE DECLARATION

GOWING BROS. LIMITED ACN 000 010 471

INDEPENDENT AUDITOR’S REPORT

As lead auditor for the audit of the consolidated financial report of Gowing Bros. Limited for the year ended 31 July 2019, 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.

Sydney, NSW

14 October 2019

S Grivas
Partner

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 2019, 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 2019 and of its financial performance 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.

151st ANNUAL REPORT 2019 I Year ended 31 July 2019151st ANNUAL REPORT 2019 I Year ended 31 July 2019INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITEDGOWING BROS. LIMITED ACN 000 010 471

INDEPENDENT AUDITOR’S REPORT (CONTINUED)

GOWING BROS. LIMITED ACN 000 010 471

INDEPENDENT AUDITOR’S REPORT (CONTINUED)

Key Audit Matter How our audit addressed the key audit matter

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 2019, 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.

Valuation of subregional and neighbourhood shopping centre investment properties and investment properties under
development
Note 17

The aggregate fair value of the Group’s subregional and
neighbourhood shopping centre investment properties and
investment properties under development as at 31 July 2019 is
$225.63 million, representing 65.7% 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 significant 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, 14 & 15

At 31 July 2019 the Group owned investments of $27.67 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 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

151st ANNUAL REPORT 2019 I Year ended 31 July 2019151st ANNUAL REPORT 2019 I Year ended 31 July 2019INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED

GOWING BROS. LIMITED ACN 000 010 471

INDEPENDENT AUDITOR’S REPORT (CONTINUED)

GOWING BROS. LIMITED ACN 000 010 471

INDEPENDENT AUDITOR’S REPORT (CONTINUED)

Auditor’s Responsibilities for the Audit of the Financial Report

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 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.

REPORT ON THE REMUNERATION REPORT

Opinion on the Remuneration Report

We have audited the Remuneration Report included in pages 40 to 42 of the directors’ report for the year ended 31 July 2019.

In our opinion, the Remuneration Report of Gowing Bros. Limited for the year ended 31 July 2019 complies with section 300A of the Corporations
Act 2001.

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:

Responsibilities

•

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

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 estimates and related

disclosures made by the directors.

• 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 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.

• 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.

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.

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
14 October 2019

S Grivas
Partner

151st ANNUAL REPORT 2019 I Year ended 31 July 2019151st ANNUAL REPORT 2019 I Year ended 31 July 2019INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITEDIssues 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

13/11/2018

30/04/2019

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

Dividend Re-investment

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

Accumulated profits

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

2.77

2.52

151st ANNUAL REPORT 2019 I Year ended 31 July 2019151st ANNUAL REPORT 2019 I Year ended 31 July 2019INVESTING TOGETHER FOR A SECURE FUTUREGOWING BROS. LIMITED
“Investing Together for
a Secure Future”

- John Gowing -