152nd ANNUAL REPORT | For the year ended 31 July 2020
Est. 1868
Investing together for a secure future
Gowing Bros. Limited
ABN 68 000 010 471
Suite 21, Jones Bay Wharf
26 – 32 Pirrama Rd, Pyrmont NSW 2009
T: 61 2 9264 6321 F: 61 2 9264 6240
www.gowings.com
F I N A N C I A L R E P O R T | Y e a r e n d e d 3 1 J u l y 2 0 2 0
Managing Directors Review of Operations
When I think back to the start of this year what a different world and expected outlook it was. Now as I write this six
months since the last shareholder update in April we have experienced such a sea of change and degree of
uncertainty caused by a pandemic, truly unprecedented in the modern era.
At Gowings we have navigated this calamity to the best of our ability, always putting the safety of our customers and
team members to the forefront. We were first movers in deploying hand sanitisers and safe distancing practices in
our shopping centres and facilitated work from home practices to keep team members safe.
All members of the team including senior management and the board of directors have taken a temporary cut in
remuneration.
To underpin the viability of our retail partners, with the support of our bank, CBA, we provided a blanket 3-month
rental abatement for our smaller retailers for the months of April, May and June.
Now we are a few months into the pandemic, how have we travelled and what does the future hold?
Most of our retailers have paid rent for July, August and September. In fact, we have received approx. 80% of the
scheduled rent for this period. Most of the unpaid rent pertains to listed fashion groups who are trying to use the
crisis to renegotiate their legal commitments. August reported sales and foot traffic figures were at an all-time record
for that month!
The pandemic has caused havoc for most retail businesses in Australia, as we went through lockdown, came out of
lockdown and then faced the threat of a second lockdown, with the outbreak in Victoria. Ironically our shopping
centres based on the Mid North Coast of NSW have fared fairly well due to their isolated position approx. halfway
between Sydney and Brisbane.
We have also been the beneficiary of the increased working from home trend, which we believe will see many
Australians choose to leave the big cities and relocate to well serviced regional centres like Port Macquarie,
Kempsey and Coffs Harbour.
COVID 19 IMPACTS AND RESPONSE
During the COVID-19 outbreak, Gowings has taken a proactive approach to ensuring the health and wellbeing of all
those who visit our retail venues and work within them. We were the first shopping centre owner in the mid north
coast NSW region to implement hand sanitisers and hygiene signage at our venues. We have maintained vigilance
throughout this period with our hygiene, social distancing practices and signage in compliance with regulations and
regularly updated our customers, retailers and staff regarding the measures in place.
We supported all our specialty retailers by offering them a three month rent moratorium from April to June to ensure
continued trade wherever possible. This severely impacted our performance during that time and is a major reason
for the decline in the net income derived from Investment Properties when compared to the prior year.
We also worked closely with our fresh food and dining retailers on initiatives, including an e-commerce platform, to
maximise their takeaway and delivery offer during the period that food courts were closed for eat in dining.
Increased cleaning routines implemented
Some of the safety measures in place:
Hand sanitizers installed throughout the centres
Signage at all entry points and throughout the centres
Weekly toolbox meetings with cleaners and security guards
Daily COVID-19 safety check at all centres
As an additional security measure, face masks are mandatory for staff, cleaners and security teams
Retailers are sent updated protocols as they come through and on a monthly ongoing basis
Retailers assisted in developing in-store COVID-19 safety plans
Social distancing floor stickers throughout centres
UV sanitisation of reticulated air implemented at Majestic Cinema in Kempsey Central
Food Courts have been reconfigured to maintain social distancing
Independent contractor review of adopted protocols
Gowing Bros. Limited INVESTING TOGETHER FOR A SECURE FUTURE
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Managing Directors Review of Operations (continued)
Our international surf business Surf Hardware International has been, to our greatest surprise, a significant
beneficiary of the pandemic. Australian surfers and surfers all around the world had more time during lockdown and
were focused on improved personal fitness. They dusted off their surfboards and stocked up on new surfing
equipment. The last four months sales and profits have been the best on record.
At Sawtell Commons, our residential subdivision, we have completed stage 1, almost completed stage 2A and the
major creek crossing work is complete. Sawtell Commons Is located 10km south of Coffs Harbour CBD and is the
only ready to go subdivision in Coffs Harbour at the moment. Sales enquiries for stage 2 have been solid. All of
stage 1 has been settled and our display village is nearing completion. Sawtell Commons will also be the
beneficiary of the regional relocation trend I mentioned earlier. It should also benefit from the significant major
Regional State infrastructure projects in the area, including the Coffs Harbour Highway Bypass.
Earlier this year, motivated by the pandemic, we decided to permanently relocate Gowings head office from Pyrmont
Sydney to the new Gowings Building on the eastern end of Coffs Central. This move will free up some capital from
the sale of the Pyrmont offices to be applied against debt or redeployed to other investments. The move will also
ensure there are more boots on the ground at our major place of business. I anticipate that the move will generate
savings and efficiencies of approx. $800K per annum.
OUTLOOK
Looking to the future, I hope we have seen the worst of the financial and health crisis brought on by this pandemic.
However, as the past few months has shown we cannot anticipate the future particularly in this period of
unprecedented uncertainty. We need to continue to work together as a company and a community to navigate our
way through the crisis with the hope of emerging stronger as a group on the other side.
I would like to thank all our team members and the wider Gowings community for their support during this period.
J. E. Gowing
Director
Gowing Bros. Limited INVESTING TOGETHER FOR A SECURE FUTURE
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Managing Directors Review of Operations (continued)
On behalf of the Board of Directors, I am pleased to comment on the results for the year ended 31 July 2020.
FINANCIAL REVIEW
Net Assets per Share
$4.43
$4.52
$4.02
$3.83
$3.64
$5.00
$4.50
$4.00
$3.50
$3.00
$2.50
$2.00
$1.50
$1.00
$0.50
$0.00
2016
2017
2018
2019
2020
Net assets per share before tax on unrealised gains on equity, investment property, and freehold property decreased
(5.0%) to $3.64 as at 31 July 2020, mainly due to the change in market value of the strategic equity investment
portfolio. Total shareholder return was (2.3%) including the decrease in net assets per share and the 10.0c paid to
Shareholders during the year.
Net Profit / (Loss) After Tax ($million)
$30.0
$25.0
$20.0
$15.0
$10.0
$5.0
$0.0
-$5.0
-$10.0
-$15.0
-$20.0
-$25.0
$22.0
$23.2
$6.5
2016
2017
2018
2019
$4.7
2020
-$19.4
Net Profit/(Loss) After Tax for the year ended 31 July 2020 includes underlying income from ordinary activities such
as rent, interest, dividends and revaluations of the investment portfolio. This year’s profit/(loss) includes the sale of
Moonee Market shopping centre and the profit generated from the sale of stage 1 of Sawtell Commons lessoned by
the negative COVID-19 impact on investment property income.
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Managing Directors Review of Operations (continued)
Dividends Declared per Share
$0.12
$0.12
$0.12
$0.10
$0.08
$0.14
$0.12
$0.10
$0.08
$0.06
$0.04
$0.02
$0.00
2016
2017
2018
2019
2020
The Company declared a total dividend of 8.0c in fully franked dividends for the 2020 year. The directors have
suspended the dividend reinvestment plan for the final dividend declared to be paid on 29 October 2020.
The Company has maintained a prudent approach to dividends given the capital requirements of the company
having various development and investments opportunities currently either underway or under consideration.
KEY METRICS
31 July 2020
31 July 2019
31 July 2018
31 July 2017
31 July 2016
Net Assets(1)
Net Assets per Share(2)
Net profit after tax
Earnings per Share
Dividends per Share
Total Shareholder Return
$195.5m
$3.64
$4.7m
8.82c
10.0c
(2.3%)
$206.8m
$3.83
($19.4)m
(36.07)c
11.0c
(12.8%)
$242.7m
$4.52
$6.5m
12.18c
12.0c
4.7%
$237.9m
$4.43
$23.2m
43.29c
12.0c
13.2%
$215.9m
$4.02
$22.0m
40.9c
12.0c
9.8%
(1) Net Assets before tax on unrealised gains on equities, investment properties, and freehold properties.
(2) Net Assets per share before tax on unrealised gains on equities, investment properties, and freehold properties.
The Company meets the definition of a Listed Investment Company (“LIC”) for taxation purposes. Certain
shareholders of the Company, including individuals, trusts, partnerships and complying superannuation entities may
benefit from the Company’s LIC status by being able to claim a tax deduction for the part of the dividend that is
attributable to LIC capital gains made by the Company. The amount that shareholders can claim as a tax deduction
depends on their individual situation. As an example, an individual, trust (except a trust that is a complying
superannuation entity) or partnership who is an Australian resident taxpayer at the date a dividend is paid would be
entitled to a tax deduction equal to 50% of the amount attributable to LIC capital gains included in the dividend.
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Managing Directors Review of Operations (continued)
PROFIT AND LOSS STATEMENT
For the year ended
Net Income from Ordinary Activities
Interest Income
Investment Properties
Development Properties
Equities – Dividend Income
Managed Private Equities
Surf Hardware International
Total Net Income from Ordinary Activities
Head Office Expenses
Administration, public company and other
Borrowing Costs
Operational Profit
Gain/(loss) on sale or revaluation
Investment properties – unrealised
Investment properties – realised
Managed private equity – unrealised
Managed private equity - realised
Derivatives (Fixed Interest Rate Hedge) - unrealised
Other
Consulting Costs
Other Costs
Other Income
Profit / (loss) before tax
Income tax (expense) / benefit
Profit / (Loss) after tax
31 Jul 2020
$’000
31 Jul 2019
$’000
211
4,413
736
679
131
1,272
7,442
3,664
495
3,283
(959)
2,115
386
604
(290)
(128)
-
33
5,044
(297)
4,747
256
7,372
-
726
82
804
9,240
4,280
470
4,490
(28,454)
410
1,228
-
(3,319)
(154)
(12)
24
(25,787)
6,384
(19,403)
Net Investment Property income of $4.4 million was 40% lower than the previous year due to the impact of COVID-
19 on the Pacific Coast Shopping Centre portfolio as the Company offered speciality tenants 100% rental
abatements for the months of April, May and June to secure the viability of tenants during this period in order to
protect the long term value of the portfolio.
Net Development Property income of $0.7 million represents the income derived during the year from the sale and
settlement of the first 8 lots in the Sawtell Commons Residential sub-division development.
Surf Hardware International net income of $1.3 million represented 58% increase over the prior period and mainly
relates to prudent expense management and also positive impact to surfing participation rates due to changes in
working habits as a result of COVID-19.
Overall Total Net Income from Ordinary Activities of $7.4 million was lower 19.5% lower than the previous year. To
combat this reduction in net income, head office expense were lowered by 14.4% to $3.7 million. This was mainly
through a reduction in staff costs via mitigation strategies that were employed to combat COVID-19.
The unrealised loss on investment properties was $1.0 million compared to the prior year of $28.5 million. For more
detail on Investment properties please refer to page 13.
The realised gain on investment properties of $2.1 million mainly relates to the booked profit on sale of Moonee
Market shopping centre that settled on 25 November 2019. The centre was originally purchased in April 2010 and
the sale price of $30.5 million represents a capital gain of $14.8 million over the life of the investment.
It was also pleasing to note that the movement in the valuation of the fixed interest hedge for the year was only $0.3
million compared to the previous year movement of $3.3 million.
Overall, the profit after tax was $4.7 million compared to the previous year which was a loss of $19.4 million.
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Managing Directors Review of Operations (continued)
GOWINGS AT A GLANCE (At Directors Valuation)
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
31 July 2020
$’000
31 July 2019
$’000
16,000
12,216
4,650
2,304
2,400
2,157
900
892
948
1,331
949
403
602
885
4,029
50,666
1,620
1,248
1,788
95
4,751
178,277
19,854
(80,175)
117,956
10,578
3,734
13,250
(1,350)
26,212
15,329
(12,017)
(609)
-
(6,757)
(4,054)
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)
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
195,531
206,796
(11,456)
(15,672)
184,075
191,124
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.
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Managing Directors Review of Operations (continued)
INVESTMENT PORTFOLIO
Strategic Investments
Surf Hardware International ($16 million)
During the year Surf Hardware International (SHI), like most businesses, was impacted by COVID -19. Each region
globally was affected by lockdown measures and other restrictions imposed by local government authorities which
had an immediate effect on our revenue during the early stages of the pandemic.
While we experienced challenging conditions in our wholesale business due to store closures and other restrictions,
our online business performed strongly and increased as a share of our overall revenue during the year.
As restrictions started to ease and stores re-opened, we saw a strong rebound in wholesale sales while our online
sales remained strong.
Increasing rates of surfing participation, a change in working conditions leading to an increase in leisure time along
with fiscal support from government authorities which stimulated discretionary expenditure on surfing accessories
enabled us to recover from the initial impacts of the pandemic and record a net revenue result slightly up on last
year of $42.7 million.
A prudent approach to expense management along with stronger margins from our growing online business enabled
us to increase our net income over the period to $1.3 million.
In addition to the positive trajectory of our online sales growth, an additional highlight during the period was the
successful launch of a key product innovation, the FCS H4 fin. A key element of our product strategy is the
development of innovative products that provide the business with a competitive advantage and higher margins from
premium product.
Looking ahead, we will expand our product offer in order to appeal to a broader audience and commence local
production of key product categories in order to secure our supply chain.
In the upcoming financial year SHI will focus on continuing to drive growth in the online business in order to capitalise
on a rapid change in consumer buying patterns. SHI will extend its product offer online in order to appeal to a broader
audience and look to optimise our ecommerce platforms. Developing new and recurring sources of revenue in the
form of loyalty programs and subscription businesses will also be a focus. Driving a higher share of revenue from
direct to consumer sales should lead to an enhanced valuation of the business.
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Managing Directors Review of Operations (continued)
Boundary Bend ($12.2 million)
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 northwest 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.
Due to the “biennial bearing” nature of olive groves, the previous year was an off year with lower oil production. The
crop produced 6.2 million litres of olive oil this year and 13.1 million litres last year (an ‘on-year’) and the year before
5.4 million litres (an ‘off-year’). This reflects the maturity of recently planted crops becoming producing. Boundary
Bend is required to account for their crop in the year of harvest (not when it is sold), which means that the low crop
will translate into a material loss for the 2020 financial year, but will likely have a strong reversion for next years ‘on-
year’.
Boundary Bend suffered through last financial year and early in this financial year due to the high prices of water.
The inflows of water into the Murray River over the last few months have been strong and consequently the price of
water has softened favouring a reduction in Boundary Bend’s operating costs.
Additionally, Boundary Bend reported strong Australian olive oil sales throughout the COVID-19 pandemic with
results at least 20% higher across their range. USA olive oil sales have been performing well with gross sales at
USD$15.4m vs. US$4.4m last year, this has led to a significant turnaround in the financial performance of the
business and they are forecasting a positive EBITDA for this unit in FY 2021.
Carlton Investments ($4.7 million) and Event Hospitality Group ($0.9 million)
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. Carlton Investments’ primary
holding is Event Hospitality and Entertainment (34%) followed by substantial positions in the big 4 Australian Banks
(17%) and further positions in BHP, AGL, and Wesfarmers. During the period Carlton made significant acquisitions
in Santos, Rio Tinto, Fortescue Metals Group, Link Administration, BHP 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 has suffered due to COVID-19 restrictions with full year revenue down 22.3% and a
net loss after tax of $11.4m. Prior to COVID-19 Event recorded revenue up 2.5% and normalised profit up 2.2%.
The group has been able to achieve $140m in cost reductions during the period and Jane Hastings (CEO) believes
business will rebound relatively quickly once restrictions are lifted due to pent-up demand. Event has increased their
debt facilities to $750m, the majority of which matures in 2023, they have a strong balance sheet, underpinned by a
solid property portfolio.
Hydration Pharmaceuticals ($1.3 million)
Hydralyte markets great tasting clinical hydration products that are 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.
Hydralyte continues to secure good sales results in the Canadian market but poor results in the USA. They have
been experimenting with a number of different marketing and product placement strategies and have now moved
Hydralyte into the baby section at pharmacies, placing them alongside Pedialyte in the hope to accelerate sales.
Amazon sales have been growing rapidly, albeit from a low base, where powders have proved more successful
online due to shipping constraints. Hydralyte continues to be a mediocre performer in Gowing’s portfolio, however,
with improving marketing strategies we hope they can crack the USA market and, through operational efficiencies,
draw a positive earnings figure.
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Managing Directors Review of Operations (continued)
Murray Darling Food Company ($2.2 million)
During the year Murray Darling Food Company (MDFC) sold both the Packwood and Bombah properties and
consolidated activities to the main property Burrawang West Property (Burrawang) in order to combat the difficult
conditions farmers in central NSW continue to face. The proceeds from the sales were used to reduce debt within
the group.
Burrawang was revalued during the year which saw the property value rise of $2.35 million to an overall carrying
value of $12.5 million. This uplift was attributable to the 14 year prospective cashflow from the NSW Biodiversity
Conservation Trust.
Operationally MDFC had a strong year with overall revenue for the group at $3.77 million which was 26% increase
on the prior year. The overall group profit for the year was $0.6 million compared to a loss of $2.28 million in the
prior year.
As conditions improve in various parts of the country the demand for Dorper stud rams and ewes is increasing and
the focus over the next year is to ramp up the operation of the stud to increase stock levels in order to meet the
demand.
DiCE Molecules ($2.3 million)
DiCE Molecules is a privately held US biotechnology company running 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.
DiCE has been making great progress in 2020, despite the COVID-19 related challenges. DiCE now has an orally
available drug candidate approaching clinical development, this candidate has a strong potential for an efficacious
and convenient oral treatment for psoriasis. Additionally, DiCE is continuing work on their Sanofi-partnered
immunology small molecule program which they are seeking to advance into preclinical studies this year. If these
drug developments are executed successfully the potential payoffs are large and Gowings is excited to watch DiCE
bring these products forward.
BBBSA Finance ($2.4 Million)
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 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 $14.4 billion
dollars 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 almost $24,000,000 (June
2020).
National Stock Exchange of Australia Limited ($0.9 million)
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.
NSX has had an eventful year with ISignthis investing $4.2m, John Karantzis (founder of Isignthis) stepping into an
interim CEO role and the completion of a separate capital raise in May of $3m. The key challenge for NSX is to
facilitate connections between brokers and their exchange which will facilitate greater liquidity on their platform and
encourage further companies to list. The management team is working on a number of strategies to achieve this
and Gowings hopes to see significant progress in the upcoming financial year.
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Managing Directors Review of Operations (continued)
Phalla Pharma Limited / TPI Enterprises Limited ($0.9 million)
Phalla Pharma is an Australian headquartered global pharmaceutical business which uses poppy straws to
manufacture drugs such as Morphine, Thebaine, Oripavine, and Codeine. PAL converts the raw material into Active
Pharmaceutical Ingredients (API) in Melbourne, which are then processed into Finished Dosage Formula (tablets)
via its Norwegian facility and distributed globally. Additionally, PAL sells poppy seed for culinary purposes.
PAL had a poor half yearly result through to the end of June 2020 with significant falls in revenue and other income
statement items. This was driven by a planned early exit from a non-opiate based supply agreement, lower poppy
seed sales volumes, and lower active pharmaceutical ingredients volumes sold to a UK customer who lost their
operating license. The company expects modestly lower full year revenue. Longer term, PAL is looking to secure
more finished dosage formula contracts which will allow it to capture the full value of its supply chain as opposed to
selling active pharmaceutical ingredients which doesn’t allow for full margin capture of their vertical.
Hexima ($0.9 million)
Hexima is a biotechnology company actively engaged in the research and development of plant-derived proteins
and peptides for applications as human therapeutics. Hexima’s lead product (HXP124) is a topical treatment for nail
fungus (onychomycosis). HXP124 is an easy to apply solution that is painted onto nails, and rapidly clears fungus
from the nail bed.
Hexima’s clinical trial results to date indicate that HXP124 is safe and well tolerated, having an industry-leading rate
of improvement of infected nails: eliminating the fungal infection in >50% of nails after 6 weeks of daily treatment
which is twice as effective as the next best product in that time frame.
Hexima is now conducting an Australian Phase IIb clinical trial for HXP124 which will assess the activity of HXP124
after longer dosing and follow-up to allow time for the infected nail to grow out and resolve the infection. Hexima is
pleased to report that this trial was recently given Australian ethics approval to proceed and has begun screening
for eligible patients. Gowings looks forward to seeing the result from these trials and the eventual move to monetising
this drug candidate.
Blackfynn ($0.4 Million)
Blackfynn is a Philadelphia based start-up focused on helping to solve the unmet need in neurology through building
the leading high-quality clinical and patient data ecosystem linked to deep domain expertise. Their objective is to
become the de facto clinical partner for every pharmaceutical and biotech company developing medicines for
neurodegenerative disease. Blackfynn aims to accelerate the development of new treatments and improve the
probability of success of clinical studies.
Blackfynn closed a funding expansion of their existing collaboration with the Michael J Fox Foundation and are
focusing on three key projects: (1) building an electronic data capture system, (2) conducting analyses to predict
Parkinson’s Disease progression, (3) deploying a patient-facing platform that will enable direct acquisition of patient
reported outcomes data. This deal provides them substantially increased runway and ability to grow their team and
supports the cost of building a high-quality patient and clinical data capture platform.
EFTsure ($0.6 million)
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.
The year for EFTSure was one of continued growth and while the second half of the year (and certainly the final
quarter) was defined by the societal and economic impact of COVID-19, the year concluded having proved that the
EFTSure product is highly relevant, their team is resilient and its customers sufficiently loyal to continue to grow
through the complex and challenging months ahead.
During the year EFTSure grew annual recurring income by 67% with major client wins in the Construction and
Property, hospitality, healthcare and professional service sectors. These wins together with 89% of the customer
base on yearly contracts place EFTSure in a strong position for future growth.
Gowings continues to back EFTSure as the strongest provider for improving the security of electronic transactions
and expect them to continue gathering market share.
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Managing Directors Review of Operations (continued)
PowerPollen Accelerated Ag Technologies ($0.9 million)
PowerPollen is an early-stage agricultural technology company based in Iowa, USA, that is working on advanced
yield enhancement technology that enables higher yields 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 is expected to grow to 9 billion by the year 2050.
PowerPollen continues to advance both its technology and its business agreements, they are now fairly consistently
delivering commercially relevant increases in yields and have secured a number of monetizable agreements.
PowerPollen closed a US$13 million series B funding round which will accelerate global adoption of their pollination
on-demand technology in corn seed and expand innovation to corn grain, wheat, and rice. Gowings convertible note
converted during this round and the group also committed additional equity capital, we’re excited by the progress
and looking forward to seeing what the team at PowerPollen can deliver in the coming years.
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Managing Directors Review of Operations (continued)
Private Equity Funds
Five V Capital ($1.6 million)
Five V Capital was set up and is 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 has invested in leading businesses across a range of sectors including
healthcare, retail, media, consumer, technology, and financial services. The Five V focus is on businesses with an
enterprise value of between $20 million and $200 million, where they can take a significant ownership position
alongside their partners. 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.
Five V have been really pleased with the performance of their portfolio since the pandemic presented itself as a
significant issue. Having a starting position of low debt and high liquidity has proven its worth during these
challenging times. Their portfolio company management teams have been excellent and invaluable, each of them
took swift and decisive action to batten down the hatches to ensure that their respective businesses were able to
weather the storm. Five V Capital has finalised fundraising for Fund III, to continue to pursue its investment strategy,
with capital commitments now in excess of $350 million.
OurCrowd Australia ($1.2 million)
OurCrowd is the leading global equity crowdfunding platform for accredited investors, selecting investment
opportunities and bringing 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.
Gowings has invested $US 1.1 million into OurCrowd which has now been fully deployed across 25 companies
covering healthcare, tech hardware, software, fintech, and mobility. During the period Gowings participated in follow
on rounds for Celeno, a smart wi-fi semiconductor company, and enVerid, an air treatment and energy saving tool
for HVAC systems.
Gowings has now fully deployed their capital allocated to OurCrowd investments but continues to monitor for any
further outstanding opportunities and follow-on rounds. As venture capital is typically a long-term investment, we
expect returns to be realised over the next few years as our portfolio companies start moving towards trade sales or
public listings.
Our Innovation Fund ($1.8 million)
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 portfolio companies across sectors including enterprise software, hardware/devices and
financial technology businesses including companies such as Advanced Navigation, Enboarder, and Interclustr. The
portfolio investments have had strong performance to date, no new portfolio companies have been invested in this
period, and cash remains for several follow-on rounds.
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Managing Directors Review of Operations (continued)
Pacific Coast Shopping Centre Portfolio
Whilst the COVID 19 pandemic brought significant disruption to our shopping centres during the period, we are
pleased with the current performance of our regional centres. Foot traffic levels have recovered to be in line with
prior year corresponding periods and many retailers are reporting higher sales. Of course, there are retailers who
continue to be impacted by the restrictions, whom we will continue to support.
Prior to the Federal Government announcing the Retail Code of Conduct, Gowings moved expediently to support its
long term specialty retail partners by granting them a 100% rental abatement for the April to June 2020 period. This
afforded much needed certainty and support to many small businesses providing a lifeline during one of the worst
retail periods in history. Gowings demonstration of its commitment to its retailers was industry leading and meant
that we lost only one tenant (travel related) during the period. Importantly, our actions have fostered stronger
relationships with our retailers and protected the value of our centres.
The financial impact to our business during the period has been on cashflow with rental income down in line with
abatements granted. Given our generosity for the quarter through to 30 June 2020, we have been invoicing our
retailers 100% since 1 July 2020, of which, to date we have collected 84% of the July invoices. Notably, the retailers
who are not paying their rent are some of the largest nationals who appear to have an agenda with landlords.
Pleasingly, we implemented a restructure of our leasing operations in February, which has born fruit with occupancy
marginally increasing during a difficult period and a large number of lease renewals having been completed. Post
year end, we have secured further new retailers with the leasing momentum continuing.
We continue to progress various leasing and development opportunities at each of the centres subject to the ongoing
environment.
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Managing Directors Review of Operations (continued)
Moonee Marketplace
The centre was purchased in April 2010 and received significant capital reinvestment during the following nine years
of ownership including centre refurbishment works and a complete leasing re-mix. Further to the ASX announcement
dated 1 November 2019, Gowings was pleased with the sale of Moonee Market. The sale price of $30.5 million
representing a passing yield of 6.4%. The sale price exceeded the current book value and delivered an overall
capital gain of $14.8m for shareholders.
Other Direct Properties
Sawtell Commons – Residential Subdivision
Sawtell Commons continues with Stage 2 release and already 23 lots have progressed to being pre-sold. Most of
the display village homes from stage 1 are now open with the remaining homes due to open shortly. The open house
weekend events have attracted over 100 groups through daily. Construction continues on site with stage 2a
registration expected before the end of 2020 and stage 2 registration during 2021. Both sales offices onsite and at
Coffs Central are operational with plenty of walk-in interest from prospective buyers.
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Managing Directors Review of Operations (continued)
The Forestry – Development Site
The Jetty development site located at 357 Harbour Drive has now been demolished, paving the way for an exciting
new mixed-use development for Gowings. DFJ Architecture 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.
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Financial Report
DIRECTORS’ REPORT
REMUNERATION REPORT
STATEMENT OF PROFIT OR LOSS
STATEMENT OF OTHER COMPREHENSIVE INCOME
STATEMENT OF FINANCIAL POSITION
STATEMENT OF CHANGES IN EQUITY
STATEMENT OF CASH FLOWS
NOTES TO THE FINANCIAL STATEMENTS
DIRECTORS’ DECLARATION
AUDITOR’S INDEPENDENCE DECLARATION
INDEPENDENT AUDITOR’S REPORT
17
21
26
27
28
29
30
31
63
64
65
The consolidated financial statements were authorised for issue by the Directors on
30 October 2020. The Directors have the power to amend and reissue the consolidated
financial statements.
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Director’s Report
Your Directors are pleased to present their report on the Company for the year ended 31 July 2020.
Results
For the year ended
Operating profit / (loss) for the year before income tax
Income tax (expense) / benefit
Net profit / (loss) after income tax
Net profit / (loss) attributable to members of Gowing Bros. Limited
Dividends
31 July 2020
$'000
31 July 2019
$'000
5,044
(297)
4,747
4,747
(25,787)
6,384
(19,403)
(19,403)
A final fully franked LIC dividend of 3.0 cents per share was paid to shareholders on 29 October 2020.
$1,609,387
An interim fully franked LIC dividend of 5.0c per share was paid to shareholders on 30 April 2020
A final fully franked dividend of 5.0 cents per share was 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
$2,690,050
$2,696,960
$2,689,559
Review of operations
The operations of the Company are reviewed in the Managing Director’s ‘Review of Operations’ on page 1.
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 1.
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Director’s and Executive’s Interests
The following persons were directors, executives or a company secretary of Gowing Bros. Limited either during or
since the end of the year.
Professor J. West
Director since April 2016 and Member of the Audit Committee
Non-Executive Chairman
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 years
Total Shares
477,581
J. E. Gowing
Managing Director
Executive Director, and Member of the Remuneration Committee
Director since 1983
21,042,598
Bachelor of Commerce Member of Chartered Accountants Australia
and New Zealand, and Member of CPA Australia
No other directorships held in listed companies over the past 3 years
J. G. Parker
Director since 2002 and Chairman of the Audit Committee
57,306
Non-Executive Director
Bachelor of Economics
Mr. Parker is a coach of senior executives, with over three
decades as an investment professional. No other directorships
held in listed companies over the past 3 years
S. J. Clancy
Non-Executive Director
Director since April 2016 Chairman of the Remuneration Committee
and Member of the Audit Committee
5,000
Diploma of Marketing
Mr. 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.
R. Ambrogio
Bachelor of Economics, CA
10,000
Chief Financial Officer
and joint company
secretary
Mr. 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.
I.H. Morgan
Joint Company Secretary
Bachelor of Business, Master of Law, Grad Dip Applied Finance and
Investment
-
Mr. 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.
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Meetings of Directors
Attendance at Board, Audit Committee & Remuneration Committee meetings by each Director of the Company
during the financial year is set out below:
Board Meetings
Audit Committee Meetings
Meetings
Eligible to
attend
Attended
Meetings
Eligible to
attend
Attended
Remuneration Committee
Meetings
Meetings
Eligible to
attend
Attended
Prof J. West
J. E. Gowing
J. G. Parker
S. J. Clancy
4
4
4
4
4
4
4
4
1
-
1
1
-
-
1
1
-
2
-
2
-
2
-
2
Given the significant health concerns attributed to the COVID-19 pandemic, in addition to guidelines and restrictions
issued by Australian state and federal governments, the Company considers that it is appropriate for members of
the Company’s Board and its Committees to communicate electronically. When required, the Board has resolved
matters by circular resolution.
During the year ended 31 July 2020, meetings were held in person, by telephone and by email. Where necessary,
circular resolutions were also approved.
Remuneration report
The Company’s remuneration report, which forms a part of the Directors’ Report, is on pages 21 to 24.
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 64.
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.
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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.
Audit services
Audit and review of financial reports under the Corporations Act 2001
194,100
187,000
Taxation services
Tax compliance services, including review of Company income tax returns
35,330
29,520
2020
$
2019
$
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, NSW
30 October 2020
.
J. E. Gowing
Director
Sydney, NSW
30 October 2020
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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 2020
were:
Prof. J. West, Chairman of the Board
J. G. Parker
S. J. Clancy
Directors’ fees
The remuneration of Non-executive Directors is determined in accordance with the Directors’ remuneration provisions
of the Company’s constitution. Fees and payments to Non-executive Directors reflect the demands which are made
on, and the responsibilities of, the Directors. Non-executive Directors’ fees and payments are reviewed annually by
the Remuneration Committee in line with the market and approved by the Board. The Chairman’s fees are determined
independently to the fees of Non-executive Directors based on comparative roles in the external market. Non-
executive Directors do not receive any performance based remuneration or share options.
There is no scheme to provide retirement benefits to Non-executive Directors.
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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 2020 were:
J. E. Gowing, Managing Director
R. Ambrogio, Chief Financial Officer and joint Company Secretary
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 2020 Financial Year bonus is limited to 40% of the base package
of the relevant executive, subject to the discretion of the Remuneration Committee, for exceptional performance.
Details of Remuneration
Details of the remuneration of the Directors and key management personnel are set out in the following tables:
2020
Short term
Cash
salary
and fee
Consultancy
Fees
Cash
bonus
Non-
monetary
benefits
Movement
in
provision
for annual
leave
Non- executive
Directors
Prof J. West
(Chairman)
J. G. Parker
S. J. Clancy
25,571
94,277
47,000
51,142
123,713
17,047
-
111,324
Executive Directors
J. E. Gowing
243,384
Other key management personnel
R. Ambrogio
198,250
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
39,155
836
22,831
5,100
-
Total key
management
personnel
compensation
565,347
111,324
22,831
44,255
836
Share
based
Share
bonus
Post -
Employment
Long term
Total
Superannuation Movement
in
provision
for long
service
leave
-
-
-
-
-
-
-
5,211
10,620
4,858
20,689
-
-
-
-
125,059
74,667
56,000
255,726
18,282
4,962
306,619
21,138
3,751
251,070
60,109
8,713
813,415
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2019
Short Term
Cash
salary
and fee
Consultancy
Fees
Cash
bonus
Non-
monetary
benefits
Movement
in
provision
for annual
leave
Share
based
Share
bonus
Post -
Employment
Long term
Total
Superannuation Movement
in
provision
for long
service
leave
Non- executive
Directors
Prof J. West
(Chairman)
J. G. Parker
S. J. Clancy
27,397
50,000
54,795
132,192
100,000
10,654
-
110,654
Executive Directors
J. E. Gowing
289,951
219,178
221,347
Other key management personnel
R. Ambrogio
N. Rogan 1
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
(1,257)
245,427
229,117
74,384
7,432
1,035,563
1 N. Rogan resigned from his position as Head of Funds Management and Company Secretary on 19 April 2019.
The relative proportions of remuneration that are linked to performance and those that are fixed are as follows:
Executive Directors
J. E. Gowing
Other Key Management personnel
R. Ambrogio
N. Rogan (resigned 19 April 2019)
Service agreements
Fixed
Performance
2020 (%)
2019 (%)
2020 (%)
2019 (%)
100
100
91
-
100
100
-
9
-
-
-
-
There are / were service agreements in place with J. Parker, J. Gowing, Prof. J. West, S. Clancy, 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:
J. E. Gowing, Managing Director
No fixed term.
Base salary, inclusive of superannuation, as at 31 July 2020 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 2020
of $836.
No termination benefit is payable.
R. Ambrogio, Chief Financial Officer
No fixed term.
Base salary, inclusive of superannuation, as at 31 July 2020 of $265,000, 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.
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Additional information
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:
2020
2019
2018
2017
2016
Net profit / (loss) after tax
$4.7m
($19.4)m
$6.5m
$23.2m
$22.0m
Basic and diluted earnings / (loss) per share
8.82c
(36.07)c
12.18c
43.29c
40.92c
Dividends per share - declared
Share buy back – number of shares
Share buy back – value
Share price at financial year end
8.0c
193k
$393k
$1.34
10.0c
-
-
$2.45
12.0c
47k
$135k
$2.89
12.0c
12k
$41k
$3.23
12.0c
181k
$565k
$3.62
Gowing Bros. Limited INVESTING TOGETHER FOR A SECURE FUTURE
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ASX Listing Requirements
1. Shareholders at 15 October 2020
Reconciliation of level 3 fair value movements
No. of shareholders
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
339
445
171
376
55
1,386
The number of shareholdings held in less than marketable parcels is 174.
2. Voting Rights
Members voting personally or by proxy have one vote for each share.
3. Substantial Shareholders at 15 October 2020
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
Ordinary shares
4. Top 20 Equity Security Holders at 15 October 2020
In accordance with Australian Securities Exchange Listing Rule 4.10, the top 20 equity security holders are:
1 Audley Investments Pty Ltd
Carlton Hotel Limited
2
3 Mr John Edward Gowing
4 Mr John Gowing
5
6 Mr Frederick Bruce Wareham
Ace Property Holdings Pty Ltd
7
J P Morgan Nominees Australia Pty Limited
Charles and Cornelia Goode Foundation Pty Ltd
8
9 Mr Ronald Langley & Mrs Rhonda Langley
10 Enbeear Pty Limited
11 Beta Gamma Pty Ltd
12 BNP Paribas Nominees Pty Ltd
13 Mr Graeme Legge
14 Mrs Jean Kathleen Poole-Williamson
15 T N Phillips Investments Pty Ltd
16 Jamina Investments Pty Ltd
17 Cranley Holdings Pty Limited
18 Cadmea Pty Ltd
19 Capitol Securities Pty Ltd
20 Howard Hargrave Pty Limited
Total
Total issued share capital
5. Corporate Governance Practices
No. of ordinary shares % of issued shares
29.29
15,711,151
4,701,144
3,676,709
1,187,189
1,161,759
1,152,358
1,120,000
1,100,000
674,580
636,829
630,368
610,599
598,690
568,443
550,000
441,258
283,453
277,350
276,000
230,017
35,587,897
53,646,240
8.76
6.85
2.21
2.17
2.15
2.09
2.05
1.26
1.19
1.18
1.14
1.12
1.06
1.03
0.82
0.53
0.52
0.51
0.43
66.34
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/.
Gowing Bros. Limited INVESTING TOGETHER FOR A SECURE FUTURE
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Consolidated Statement of Profit or Loss
For the year ended
Revenue
Interest income
Equities
Private equities
Investment properties
Development 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
Development properties
Finished goods, raw materials and other operating expenses (Surf
Hardware International)
Administration
Borrowing costs
Depreciation and amortisation
Employee benefits
Public company
Total expenses
Profit / (Loss) from continuing operations before income tax expense
Income tax (expense) / benefit
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
2020
$’000
31 July
2019
$’000
5
17
15
17
17
5
6
211
679
131
15,819
2,277
42,660
61,777
256
726
82
20,835
-
42,538
64,437
990
1,156
(290)
1,193
3,049
64,826
1,228
(28,044)
(3,319)
943
(29,192)
35,245
7,490
1,541
8,859
-
40,637
41,881
1,644
4,716
1,805
1,499
450
59,782
5,044
(297)
4,747
1,323
5,211
815
2,490
453
61,032
(25,787)
6,384
(19,403)
4,747
-
4,747
(19,403)
-
(19,403)
The above Consolidated Statement of Profit or Loss should be read in conjunction with the accompanying Notes.
Gowing Bros. Limited INVESTING TOGETHER FOR A SECURE FUTURE
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Consolidated Statement of Other Comprehensive Income
For the year ended
Notes
31 July
2020
$’000
31 July
2019
$’000
Profit / (loss) from continuing operations
4,747
(19,403)
Other comprehensive income / (loss)
Items that will be reclassified to profit or loss:
Exchange rate differences on translating foreign operations, net of tax
(197)
254
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
Total comprehensive loss
Total comprehensive income loss attributable to:
Members of Gowing Bros. Limited
Non-controlling interests
Total comprehensive loss
Earnings / (loss) per share
Basic earnings / (loss) per share
Diluted earnings / (loss) per share
(5,819)
(596)
(1,269)
(19,745)
(1,269)
-
(1,269)
(19,745)
-
(19,745)
41
41
8.82
8.82
(36.07)c
(36.07)c
The above Consolidated Statement of Other Comprehensive Income should be read in conjunction with the
accompanying Notes.
Gowing Bros. Limited INVESTING TOGETHER FOR A SECURE FUTURE
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F I N A N C I A L R E P O R T | Y e a r e n d e d 3 1 J u l y 2 0 2 0
Consolidated Statement of Financial Position
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
Right of use assets
Deferred tax assets
Other
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Borrowings
Lease liabilities
Derivatives
Current tax liabilities
Provisions
Total current liabilities
Non-current liabilities
Trade and other payables
Borrowings
Lease liabilities
Derivatives
Provisions
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained profits
Contributed equity and reserves attributable to members of Gowings
Bros. Limited
Non-controlling interests
Total equity
Notes
31 July 2020
31 July 2019
$’000
$’000
7
8
11
9
10
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
18,599
11,314
-
5,095
7,412
-
1,166
89
6,538
8,885
84
1,750
32,272
28,660
62
2,700
32,265
4,751
16,117
202,442
8,504
4,485
2,802
3,610
1,769
279,507
311,779
5,042
1,824
1,030
1,439
5,032
1,402
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
15,769
12,048
169
84,386
1,970
2,878
482
22,050
111,935
127,704
184,075
12,895
95,151
76,031
222
107,073
-
3,132
547
29,022
139,996
152,044
191,124
13,288
100,796
77,042
184,077
191,126
(2)
(2)
184,075
191,124
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying Notes.
Gowing Bros. Limited INVESTING TOGETHER FOR A SECURE FUTURE
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Consolidated Statement of Changes In Equity
Capital
Profits
Reserve-
Pre CGT
Profits
$’000
90,503
Contributed
Equity
$’000
12,476
Foreign
Currency
Translation
Reserve
$’000
140
Revaluation
Reserves
$’000
11,313
Retained
Profits
$’000
101,535
Non-
Controlling
Interests
$’000
(2)
Total
$’000
215,965
-
-
-
(596)
254
(19,403)
-
(19,745)
-
(818)
-
818
-
-
812
-
13,288
-
-
90,503
-
-
9,899
-
-
394
-
(5,908)
77,042
-
-
(2)
812
(5,908)
191,124
-
(5,819)
(197)
4,747
-
(1,269)
-
371
-
(371)
(393)
-
12,895
-
-
90,503
-
-
4,451
-
-
197
-
(5,387)
76,031
-
-
(2)
-
(393)
(5,387)
184,075
Balance at 31 July 2018
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
Balance at 31 July 2019
Total comprehensive income /
(loss) for the year
Transfer of losses on disposal
of equity instruments at fair
value through comprehensive
income to retained profits, net
of tax
Transactions with owners in
their capacity as owners:
Share buy-back
Dividends declared
Balance at 31 July 2020
-
-
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying Notes.
Gowing Bros. Limited INVESTING TOGETHER FOR A SECURE FUTURE
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Consolidated Statement of Cash Flows
For the year ended
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 received (paid)
Notes
31 July
2020
$’000
31 July
2019
$’000
67,260
(56,053)
679
211
(4,716)
470
69,735
(58,982)
726
256
(5,211)
(355)
Net cash inflows from operating activities
43
7,851
6,169
Cash flows from investing activities
Payments for purchases of properties, plant and equipment
Payments for purchases of intangibles
Payments for purchases of development properties
Payments for purchases of investment properties
Payments for purchases of equity investments
Loans made
Proceeds from repayment of loans made
Proceeds from sale of properties, plant and equipment
Proceeds from sale of development properties
Proceeds from sale of equity investments
Proceeds from sale of investment properties
(213)
(210)
(1,817)
(3,540)
(5,086)
(300)
89
10
2,277
5,675
32,452
(654)
(472)
(2,083)
(5,398)
(8,698)
(1,089)
-
70
-
4,378
1,831
Net cash inflows / (outflows) from investing activities
29,337
(12,115)
Cash flows from financing activities
Payments for share buy-backs
Proceeds from borrowings
Repayment of borrowings
Repayments of lease liabilities
Dividends paid
Net cash (outflows) / inflows from financing activities
44
44
34
Net increase 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
7
(393)
6,000
(29,316)
(807)
(5,387)
(29,903)
7,285
11,314
18,599
-
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.
Gowing Bros. Limited INVESTING TOGETHER FOR A SECURE FUTURE
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Notes to the Consolidated Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Gowings Bros. Limited (“the Company”) is a company limited by shares incorporated in Australia whose shares are
publicly traded on the Australian Securities Exchange (“ASX”). The consolidated financial statements comprise the
Company and its controlled entities (referred herein as “the Group”).
The principal accounting policies adopted in the preparation of the consolidated financial statements are set out
below. These policies have been consistently applied to all the years presented, unless otherwise stated.
(a) Basis of preparation
These general purpose consolidated financial statements have been prepared in accordance with Australian
Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board and the
Corporations Act 2001.
Compliance with IFRS
The consolidated financial statements comply with International Financial Reporting Standards (“IFRS”) as issued by
the International Accounting Standards Board (“IASB”).
Historical cost convention
These consolidated financial statements have been prepared under the historical cost convention, as modified by the
revaluation of equities (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, revised or amending Accounting Standards and Interpretations 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.
The Group had to change its accounting policies as a result of adopting AASB 16: Leases. The impact of the adoption
of this standard and the respective accounting policies are disclosed below.
Adoption of AASB 16: Leases (AASB 16)
The Group has adopted AASB 16 from 1 August 2019 which replaces AASB 117 Leases (“AASB 117”). AASB 16
has been applied using the modified retrospective approach and comparative information has not been restated, as
permitted under the specific transition provisions in the standard.
The adoption of AASB 16 has resulted in the Group recognising right of use assets and related lease liabilities in
connection with all former leases except for those identified as low-value or having a remaining lease term of less
than 12 months from the date of initial application. Operating lease expense is also no longer recognised for these
operating leases and is now replaced by interest and depreciation expense in the statement of profit or loss. For
classification within the statement of cash flows, the interest portion is disclosed in operating activities as borrowing
costs paid and the principal portion of the lease payments are separately disclosed in financing activities, as
repayment of lease liabilities.
On adoption, lease liabilities were measured at the present value of the remaining lease payments, discounted using
the Group’s incremental borrowing rate as at 1 August 2019. The weighted average incremental borrowing rate that
applied to the lease liabilities on 1 August 2019 was 6%.
The Group also elected to measure the right of use assets at an amount equal to the lease liability adjusted for any
prepaid or accrued lease payments that existed at the date of adoption.
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1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The following practical expedients permitted by AASB 16 were applied by the Group on adoption:
The Group accounted for operating leases with a remaining lease term of less than 12 months as at 1 August 2019
as short-term leases; the Group applied a single discount rate to a portfolio of leases with reasonably similar
characteristics; and the Group relied on previous assessments on whether leases are onerous as an alternative to
performing an impairment review.
The Group has also elected not to reassess whether a contract is, or contains a lease at the date of the date of initial
application. Instead, for contracts entered into before the transition date the Group has relied on its assessment made
applying AASB 117 and Interpretation 4 Determining whether an Arrangement contains a Lease.
(i) Measurement of lease liabilities
The following is a reconciliation of total operating lease commitments at 31 July 2019 to the total lease liabilities
recognised at 1 August 2019:
Operating lease commitments as at 31 July 2019
Short-term leases and leases of low-value assets not recognised as a liability
Other minor adjustments relating to commitment disclosures
Operating lease liabilities before discounting
Discounted using incremental borrowing rate
Total lease liabilities recognised under AASB 16 at 1 August 2019
$’000
4,047
(307)
60
3,800
(405)
3,395
(ii) Adjustments recognised in the statement of financial position on 1 August 2019
Adjustments recognised as a result of the adoption of AASB 16 affected the following items in the statement of
financial position on 1 August 2019:
Lease liabilities (current & non-current) – increase by $3,395,000
Right of use assets (non-current) – increase by $3,438,000
Prepayments (current) – decrease by $43,000
The net impact on retained profits on 1 August 2019 was $nil.
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 2019. These other amending Accounting Standards and Interpretations did not result
in any adjustments to the amounts recognised or disclosures in the financial report.
New, revised or amending Accounting Standards and Interpretations issued but not yet mandatory
Certain new Australian Accounting Standards and Interpretations have been recently published that are not yet
mandatory for the reporting period ended 31 July 2020. The Group's assessment is that these new Australian
Accounting Standards and Interpretations are not expected to have a material impact on the Group in future reporting
periods.
(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 2020. 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 38.
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.
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1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(c) Business combinations
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:
(i)
(ii)
(iii)
the consideration transferred;
any non-controlling interest (determined under either the full goodwill or proportionate interest method); and
the acquisition date fair value of any previously held equity interest;
over the acquisition date fair value of net identifiable net assets acquired.
The acquisition date fair value of the consideration transferred for a business combination plus the acquisition date
fair value of any previously held equity interest form the cost of the investment.
Fair value re-measurements in any pre-existing equity holdings are recognised in profit or loss in the period in which
they arise. Where changes in the value of such equity holdings had previously been recognised in other
comprehensive income, such amounts are recycled to profit or loss.
The amount of goodwill recognised on acquisition of each subsidiary in which the Group holds a less than 100%
interest will depend on the method adopted in measuring the non-controlling interest. The Group can elect in most
circumstances to measure the non-controlling interest in the acquiree either at fair value (“full goodwill method”) or
at the non-controlling interest’s proportionate share of the subsidiary’s identifiable net assets (“proportionate interest
method”). In such circumstances, the Group determines which method to adopt for each acquisition and this is stated
in the respective notes to these financial statements disclosing the business combination.
Under the full goodwill method, the fair value of the non-controlling interests is determined using valuation techniques
which make the maximum use of market information where available. Under this method, goodwill attributable to the
non-controlling interest is recognised in the consolidated financial statements.
Goodwill on acquisitions of subsidiaries is included in intangible assets.
Goodwill is tested for impairment annually and is allocated to the Group’s cash-generating units or groups of cash-
generating units, which represents the lowest level at which goodwill is monitored but 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.
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1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(e) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating
decision maker including:
Cash and fixed interest
Equities
Private equities
Investment properties
Development properties
Surf Hardware International business
Other
(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 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)
(c)
income and expenses are translated at average exchange rates for the period; and
retained earnings are translated at the exchange rates prevailing at the date of the transaction.
Exchange differences arising on translation of foreign operations with functional currencies other than Australian
dollars are recognised in other comprehensive income and included in the foreign currency translation reserve
in the consolidated statement of financial position. The cumulative amount of these differences is reclassified
into profit or loss in the period in which the operation is disposed of.
Income tax
(g)
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.
Impairment of non-financial assets
(h)
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.
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1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(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 3 to 10 years
Motor vehicles
Buildings
6 years
40 years
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each statement of financial
position date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying
amount is greater than its estimated recoverable amount. Gains and losses on disposal are determined by comparing
proceeds with carrying amount. These are included in profit or loss.
(j) Right of use assets
A right of use asset is recognised at the commencement date of a lease. The right of use asset is measured at cost,
which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or
before the commencement date net of any lease incentives received, any initial direct costs incurred, and, except
where included in the cost of inventories, an estimate of costs expected to be incurred for dismantling and removing
the underlying asset, and restoring the site or asset.
Right of use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated
useful life of the asset, whichever is the shorter. Where the Group expects to obtain ownership of the leased asset
at the end of the lease term, the depreciation is over its estimated useful life. Right of use assets are subject to
impairment or adjusted for any remeasurement of lease liabilities.
The Group has elected not to recognise a right of use asset and corresponding lease liability for short-term leases
with terms of 12 months or less and leases of low-value assets. Lease payments on these assets are expensed to
profit or loss as incurred.
Inventories
(k)
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.
Intangibles Other than Goodwill
(l)
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.
(m) 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.
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1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(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.
(n) Trade and other receivables
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.
Investments and other financial assets
(o)
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.
Gowing Bros. Limited INVESTING TOGETHER FOR A SECURE FUTURE
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1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Investment properties
(p)
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.
Investment properties are derecognised when disposed of or when there is no future economic benefit expected.
(q) Joint ventures
Jointly controlled assets
The proportionate interests in the assets, liabilities and expenses of joint venture activities have been incorporated
in the consolidated financial statements under the appropriate headings. Details of the joint ventures are set out in
note 39.
(r) 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.
(s) 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.
(t) 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.
(u) 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.
(v) 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.
(w) Cash and cash equivalents
For purposes of the statement of cash flows, cash includes deposits at call which are readily convertible to cash on
hand and are subject to an insignificant risk of changes in value, net of outstanding bank overdrafts. Bank overdrafts
are shown within borrowings in current liabilities in the consolidated statement of financial position.
(x) Lease liabilities
A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the
present value of the lease payments to be made over the term of the lease, discounted using the interest rate implicit
in the lease or, if that rate cannot be readily determined, the Group's incremental borrowing rate. Lease payments
comprise of fixed payments less any lease incentives receivable, variable lease payments that depend on an index
or a rate, amounts expected to be paid under residual value guarantees, exercise price of a purchase option when
the exercise of the option is reasonably certain to occur, and any anticipated termination penalties. The variable lease
payments that do not depend on an index or a rate are expensed in the period in which they are incurred.
Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are
remeasured if there is a change in the following: future lease payments arising from a change in an index or a rate
used; residual guarantee; lease term; certainty of a purchase option and termination penalties. When a lease liability
is remeasured, an adjustment is made to the corresponding right-of use asset, or to profit or loss if the carrying
amount of the right of use asset is fully written down.
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1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(y) 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.
(z) 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.
2. FINANCIAL RISK MANAGEMENT
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 and cash equivalents
Trade and other receivables
Trade and other payables
Borrowings
Lease liabilities
Equities
Private equities
31 July 2020
31 July 2019
USD
$’000
1,519
2,685
(506)
-
(1,659)
4,923
1,248
EUR
$’000
432
2,199
(331)
-
(240)
-
50
GBP
$’000
19
-
(16)
-
(28)
-
-
JPY
$’000
355
1,330
(627)
(76)
(411)
-
-
USD
$’000
612
2,862
(498)
-
-
4,467
1,375
EUR
$’000
424
2,233
(312)
-
-
-
459
GBP
$’000
13
-
(24)
-
-
-
-
JPY
$’000
388
983
(486)
-
-
-
-
Based on the cash held at 31 July 2020, if the Australian dollar weakened / strengthened by 10% against the US
dollar, cash would have been $170,000 higher / $139,000 lower (2019: $68,000 higher / $55,636 lower). If the
Australian dollar weakened / strengthened by 10% against the GBP, cash would have been $2,000 higher / $2,000
lower (2019: $1,444 higher / $1,182 lower). If the Australian dollar weakened / strengthened by 10% against the EUR,
cash would have been $48,000 higher / $39,000 lower (2019: $47,111 higher / $38,545 lower). If the Australian dollar
weakened / strengthened by 10% against the JPY, cash would have been $39,000 higher / $32,000 lower (2019:
$43,111 higher / $35,273 lower).
Based on the trade receivables held at 31 July 2020, if the Australian dollar weakened / strengthened by 10% against
the US dollar, receivables would have been $298,000 higher / $244,000 lower (2019: $318,000 higher / $260,182
lower). If the Australian dollar weakened/strengthened by 10% against the EUR, receivables would have been
$244,000 higher
the Australian dollar
weakened/strengthened by 10% against the JPY, receivables would have been $148,000 higher / $121,000 lower
(2019: $109,222 higher/ $89,364 lower).
lower (2019: $248,111 higher/ $203,000
/ $200,000
lower).
If
Gowing Bros. Limited INVESTING TOGETHER FOR A SECURE FUTURE
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F I N A N C I A L R E P O R T | Y e a r e n d e d 3 1 J u l y 2 0 2 0
2. FINANCIAL RISK MANAGEMENT (CONTINUED)
Based on the trade payables held at 31 July 2020, if the Australian dollar weakened / strengthened by 10% against
the US dollar, payables would have been $56,000 higher / $46,000 lower (2019: $55,384 higher / $45,315 lower). If
the Australian dollar weakened/strengthened by 10% against the EUR, payables would have been $37,000 higher/
$30,000 lower (2019: $34,624 higher/ $28,329 lower). If the Australian dollar weakened/strengthened by 10% against
the GBP, payables would have been $2,000 higher/ $1,000 lower (2019: $2,621 higher/ $2,144 lower). If the
Australian dollar weakened/strengthened by 10% against the JPY, payables would have been $70,000 higher/
$57,000 lower (2019: $53,996 higher/ $44,179 lower).
Based on the borrowings held at 31 July 2020, if the Australian dollar weakened / strengthened by 10% against the
JPY, borrowings would have been $8,000 higher / $7,000 lower.
Based on the lease liabilities held at 31 July 2020, if the Australian dollar weakened / strengthened by 10% against
the US dollar, lease liabilities would have been $184,000 higher / $151,000 lower. If the Australian dollar
weakened/strengthened by 10% against the EUR, lease liabilities would have been $27,000 higher/ $22,000 lower.
If the Australian dollar weakened/strengthened by 10% against the GBP, lease liabilities would have been $3,000
higher/ $3,000 lower. If the Australian dollar weakened/strengthened by 10% against the JPY, lease liabilities would
have been $46,000 higher/ $37,000 lower.
Based on the equities held at 31 July 2020, if the Australian dollar weakened / strengthened by 10% against the US
dollar, equities would have been $547,000 higher / $448,000 lower (2019: $496,299 higher / $406,063 lower).
Based on the private equities held at 31 July 2020, if the Australian dollar weakened / strengthened by 10% against
the US dollar, private equities would have been $139,000 higher / $113,000 lower (2019: $152,802 higher / $125,020
lower). If the Australian dollar weakened / strengthened by 10% against the Euro, private equities would have been
$6,000 higher / $5,000 lower (2019: $50,954 higher / $41,689 lower).
The percentage change is the expected overall volatility of the significant currencies, which is based on
management’s assessment of reasonable possible fluctuations taking into consideration movements over the last 6
months each year and the spot rate at each reporting date.
(ii) Price risk
The Group is exposed to asset price risk. This arises from equities and private equities held by the Group. A price
reduction at 5% and 10% spread equally over the investment portfolio would reduce its value by $1,850,811 (2019:
$2,246,410) and $3,701,622 (2019: $4,492,820) 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.
Interest rate risk
(iii)
The Group’s interest-rate risk arises from long-term borrowings and cash on deposit. Borrowings issued at variable
rates expose the Group to cash flow interest-rate risk. Borrowings issued at fixed rates expose the Group to fair value
interest-rate risk. The Group’s interest bearing assets include deposits on the overnight money market. Interest earnt
on these deposits varies according to the Reserve Bank’s monetary policy decisions.
As at the reporting date, the Group had the following variable rate borrowings and embedded derivative interest rate
swap contracts in use:
Borrowings
Interest rate swaps (notional principal amount)
Net exposure to cash flow interest rate risk
31 July 2020
31 July 2019
Weighted
average
interest rate
0.87%
2.64%
Weighted
average
interest rate
1.38%
2.64%
Balance
$’000
86,210
(60,200)
26,010
Balance
$’000
109,526
(60,200)
49,326
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2. FINANCIAL RISK MANAGEMENT (CONTINUED)
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 2020
Non-derivatives
Non-interest bearing
Fixed rate
Variable rate
Total non-derivatives
Derivatives
Fixed rate
31 July 2019
Non-derivatives
Non-interest bearing
Variable rate
Total non-derivatives
Derivatives
Fixed rate
Less than
1 year
Between
1-2 years
Between
2-5 years
Over 5
years
$’000
$’000
$’000
$’000
Total
contractual
cash flow
$’000
5,042
1,030
1,825
7,897
168
1,053
76
1,297
-
917
84,309
85,226
1,439
1,439
1,439
-
-
-
-
-
5,210
3,000
86,210
94,420
4,317
Less than
1 year
Between
1-2 years
Between
2-5 years
Over 5
years
$’000
$’000
$’000
$’000
Total
contractual
cash flow
$’000
7,370
2,453
9,823
222
328
550
-
106,745
106,745
895
895
2,237
-
-
-
-
7,592
109,526
117,118
4,027
Fair value estimation risk
The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for
disclosure purposes.
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.
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2. FINANCIAL RISK MANAGEMENT (CONTINUED)
Fair value hierarchy (continued)
The following tables present the Group’s assets and liabilities measured at fair value at 31 July 2020 and 31 July
2019.
31 July 2020
Level 1
Level 2
Level 3
$’000
$’000
$’000
Total
$’000
Financial assets – designated at fair value through
other comprehensive income
Investments – Australian equities
Investments – Global equities
11,419
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
31 July 2019
Financial assets – designated at fair value through
other comprehensive income
Investments – Australian equities
Investments – Global equities
17,257
Financial assets – designated at fair values through profit or loss
Investments – Private equities
Investments – Investment properties
Other assets – designated at fair value
Freehold – Properties
-
-
-
-
-
-
-
-
-
-
-
-
-
15,923
4,923
27,342
4,923
4,751
4,751
202,442
202,442
7,061
7,061
-
11,419
(4,317)
(4,317)
-
(4,317)
235,100
242,202
Level 1
Level 2
Level 3
$’000
$’000
$’000
Total
$’000
-
-
-
-
-
18,297
4,467
35,554
4,467
4,907
4,907
232,016
232,016
7,105
7,105
Financial liabilities – designated at fair value through profit or loss
Derivatives
Total
-
17,257
(4,027)
(4,027)
-
(4,027)
266,792
280,022
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.
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2. FINANCIAL RISK MANAGEMENT (CONTINUED)
Reconciliation of level 3 fair value movements
Opening balance
Transfers to level 1
Transfers from development properties
Purchases
Sales
Amortisation and depreciation
Gain recognised in profit or loss or other comprehensive income
Closing balance
Refer to the following notes for reconciliation for individual class of assets:
- refer to note 14
Equities
- refer to note 15
Private equities
Investment properties - refer to note 17
3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Managed and Direct Private Equity
31 July 2020 31 July 2019
$’000
266,792
$’000
291,073
-
-
3,516
(33,871)
(769)
(568)
235,100
-
64
7,503
(2,162)
(1,386)
(28,300)
266,792
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 2020 was a gain of $386,388 (2019: a gain of
$1,228,471) recognised in profit or loss.
The Group holds ‘Direct Private Equity’ investments in unlisted private companies which have been valued using the
Board and management’s best estimation of market value. The valuation considerations for managed private equity
are applied to direct private equity based on recent shares issued and net assets of underlying investments, liquidity
and minority shareholder provisions.
Investment property
Investment property valuations are estimated by the board and management with reference where possible to
external valuations, market appraisals, recent comparable sales, date of purchase and capitalisation rate valuations.
The impact on profit or loss relating to the revaluation of investment properties was a loss of $959,257 (2019: loss of
$28,453,509).
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4. SEGMENT INFORMATION
The Group comprises of the following business segments, based on the group's management reporting systems:
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
Development properties – realised gains on disposal
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
For the year ended
Segment result
Cash and fixed interest
Equities
Private equities
Investment properties
Development properties
Surf Hardware International business
Other
Total segment result
Income tax benefit / (expense)
Net profit / (loss) after tax
For the year ended
Revenue from external customers by geographical region
Australia
United States of America
Japan
Europe
Total revenue from external customers
31 July
2020
$'000
31 July
2019
$'000
211
679
131
15,819
2,277
42,660
61,777
990
1,156
903
3,049
64,826
256
726
82
20,835
-
42,538
64,437
1,228
(28,044)
(2,376)
(29,192)
35,245
31 July
2020
$'000
31 July
2019
$'000
211
679
1,121
5,569
736
1,272
(4,544)
5,044
(297)
4,747
31 July
2020
$'000
29,157
14,498
7,123
9,978
60,756
256
726
1,310
(20,690)
-
804
(8,193)
(25,787)
6,384
(19,403)
31 July
2019
$'000
31,880
13,386
7,206
10,901
63,373
The Group only derives revenue from external customers in the Investment properties, development properties
and Surf Hardware International business segments.
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4. SEGMENT INFORMATION (CONTINUED)
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
As at
Non-current assets by geographical region
Australia
United States of America
Japan
Europe
Total non-current assets
For the year ended
Payments for the acquisition of:
-
Investment properties
- Development properties
- Equities
Gains / (losses) on disposal or revaluation of:
-
- Private equities
Investment properties
Unallocated:
- Payments for the acquisition of property, plant and equipment
- Payments for the acquisition of intangibles
Accounting policies
31 July
2020
$'000
31 July
2019
$'000
18,599
32,265
4,751
202,442
16,117
18,814
18,791
311,779
81,525
7,959
38,220
127,704
11,314
40,021
4,907
232,016
16,164
17,944
20,802
343,168
91,170
5,471
55,403
152,044
31 July
2020
$'000
31 July
2019
$'000
269,328
8,951
829
399
279,507
307,015
7,116
202
175
314,508
31 July
2020
$'000
31 July
2019
$'000
3,540
1,817
5,086
5,398
2,083
8,698
1,156
990
(28,044)
1,228
213
210
654
472
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.
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4. SEGMENT INFORMATION (CONTINUED)
Accounting policies (continued)
Surf Hardware International business segment
Segment assets include all assets (excluding operating cash of $3.27 million (2019: $1.56 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, right of use assets and intangibles, net of related provisions.
Segment liabilities consist of borrowings, trade and other payables, lease liabilities and employee entitlements.
Segment assets and liabilities do not include income taxes. Tax assets and liabilities are represented as unallocated
amounts.
Segment cash flows
Segment information is not prepared for cash flows as management consider it not relevant to users in understanding
the financial position and liquidity of the Group.
5. OPERATING PROFIT
For the year ended
Profit / (loss) from continuing operations before income tax expense includes the
following specific items:
Gains
Private equity investment distributions
Expenses
Interest and other borrowing costs
Employee benefits
Cost of sales (Surf Hardware International)
Cost of sales (Development properties)
6. INCOME TAX EXPENSE
For the year ended
Current tax
Deferred tax
(Over) / under provided in prior years
Income / (loss) tax attributable to:
Profit / (loss) from continuing operations
Aggregate income tax expense / (benefit) on profit / (loss)
Reconciliation of income tax expense / (benefit) 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% (2019: 30%)
Tax effect of amounts which are not deductible (taxable) in calculating taxable
income:
Non-assessable income/ Non-deductible 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 expense / (benefit)
31 July
2020
$'000
31 July
2019
$'000
131
82
4,716
10,907
25,597
1,541
5,211
12,735
25,290
-
31 July
2020
$'000
5,038
(3,722)
(1,019)
297
31 July
2019
$'000
286
(7,573)
903
(6,384)
297
297
(6,384)
(6,384)
5,044
1,513
(25,787)
(7,736)
347
(194)
(1,019)
(350)
297
502
(127)
903
74
(6,384)
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
(2,494)
(256)
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7. CASH AND CASH EQUIVALENTS
As at
Cash at bank and on hand
8. CURRENT LOANS RECEIVABLE
31 July
2020
$'000
18,599
31 July
2019
$'000
11,314
Loans receivable
-
89
9. CURRENT TRADE AND OTHER RECEIVABLES
Trade debtors
Less: expected credit losses
Balance at end of year
10. OTHER CURRENT ASSETS
7,555
(143)
7,412
8,924
(39)
8,885
Prepayments
1,166
1,750
11. CURRENT INVENTORIES
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
5,095
5,095
6,538
6,538
-
62
62
1
479
480
Loan receivables
2,700
2,400
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.
40,021
(8,313)
4,814
(4,257)
32,265
36,783
(852)
8,137
(4,047)
40,021
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15. NON-CURRENT PRIVATE EQUITIES
As at
At fair value through profit or loss
Balance at beginning of year
Revaluation to fair value
Additions
Disposal proceeds
Net gain on disposal
Balance at end of year
31 July
2020
$'000
4,907
386
272
(1,418)
604
4,751
31 July
2019
$'000
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
For the year ended
At cost or net realisable value
Balance at beginning of year
Additions
Disposal proceeds
Net gain on disposal
Transfers out
Balance at end of year
17. NON-CURRENT INVESTMENT PROPERTIES
For the year ended
At fair value
Balance at beginning of year
Additions
Disposal proceeds
Net gain on disposal
Transfers in
Amortisation on incentives
Net loss from fair value adjustment
Balance at end of year
Amounts recognised in profit of loss for investment properties
Rental revenue
Direct operating expenses from rental generating properties
Net gain on disposal
Net loss on revaluation
Changes in fair values of investment properties are recorded in other income.
31 July
2020
$'000
16,164
1,494
(2,277)
736
-
16,117
31 July
2020
$'000
232,016
2,447
(32,452)
2,115
-
(725)
(959)
202,442
15,819
(7,490)
2,115
(959)
9,485
31 July
2019
$'000
14,145
2,083
-
-
(64)
16,164
31 July
2019
$'000
256,678
6,491
(1,831)
410
64
(1,342)
(28,454)
232,016
20,835
(8,859)
410
(28,454)
(16,068)
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17. NON-CURRENT INVESTMENT PROPERTIES (CONTINUED)
Sub-regional shopping centres
(Coffs Central & Port Central)
Neighbourhood shopping centres
(2020: Kempsey Central) (2019: Kempsey
Central & Moonee Marketplace)
Other properties
Valuation
Method
Weighted
average cap
rate 2020
Weighted
average cap
rate 2019
31 July
2020
$'000
31 July
2019
$'000
(a)
6.75%
6.75%
178,277
177,991
(a)
(b)
8.00%
7.71%
19,854
47,640
n/a
4,311
6,385
202,442
232,016
(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 property. The higher the capitalisation rate, the lower the
fair value.
Capitalisation rates used and the fair value adopted for each property at 31 July 2020 were based on internal
valuations prepared with the assistance of external property valuers or internal valuations prepared with
reference to the property’s latest independent valuation prepared by external property valuers adjusted for any
changes in assumptions, estimates or source data with reference to the properties current and forecasted
performance, vacancy levels, tenancy profile and recent market data.
At 31 July 2020, there is increased valuation uncertainty due to limited market transaction activity as a result of
the COVID-19 pandemic. The Group has estimated the fair value of the properties using available market data
and assumptions that take into account current market conditions. Given the increased valuation uncertainty in
fair value estimation at 31 July 2020, the fair value of the properties may change significantly or in a short period
of time given the higher degree of uncertainty associated with fair value estimation in the current climate.
(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 2020, a reduction of 0.5% in the capitalisation rate applied to each property would result in an additional
gain of $15.9 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 $13.8 million in the consolidated statement of profit or loss and consolidated statement of other
comprehensive income.
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18. NON-CURRENT PROPERTY, PLANT AND EQUIPMENT
Year ended 31 July 2020
Opening net book amount
Additions
Disposals
Depreciation charge
Closing net book amount
At 31 July 2020
Cost or fair value
Accumulated depreciation
Net book amount
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
Freehold
Properties Motor vehicles
$'000
$'000
Furniture,
fittings &
equipment
$'000
7,105
-
-
(44)
7,061
7,566
(505)
7,061
7,148
1
-
(44)
7,105
7,566
(461)
7,105
96
-
(10)
(28)
58
394
(336)
58
186
2
(43)
(49)
96
414
(318)
96
1,577
213
-
(405)
1,385
7,991
(6,606)
1,385
1,415
651
(5)
(484)
1,577
7,877
(6,300)
1,577
Total
$'000
8,778
213
(10)
(477)
8,504
15,951
(7,447)
8,504
8,749
654
(48)
(577)
8,778
15,857
(7,079)
8,778
Revaluation to fair value uplifts on property, plant and equipment are recorded in equity.
19. NON-CURRENT INTANGIBLES
As at
Goodwill
Brand names
Software
Patents
Balance at end of year
31 July
2020
$'000
2,383
1,050
427
625
4,485
31 July
2020
$'000
2,383
1,050
256
847
4,536
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.
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19. NON-CURRENT INTANGIBLES (CONTINUED)
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 $8.5m. 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 1% - 4%;
(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. NON-CURRENT RIGHT OF USE ASSETS
Year ended 31 July 2020
Right of use assets recognised on adoption of
AASB 16 (Note 1(a))
Additions
Lease modifications
Foreign exchange movements
Depreciation charge
Closing net book amount
At 31 July 2020
Cost
Accumulated depreciation
Net book amount
Land and
buildings Motor vehicles
$'000
$'000
Equipment
$'000
Total
$'000
3,438
118
279
(80)
(1,029)
2,726
3,737
(1,011)
2,726
-
80
-
-
(31)
49
80
(31)
49
-
34
-
-
(7)
27
34
(7)
27
3,438
232
279
(80)
(1,067)
2,802
3,851
(1,049)
2,802
AASB 16 was adopted using the modified retrospective approach and comparatives for right of use assets
have not been provided. Refer to Note 1(a).
Additional information regarding leases
The Group leases land and buildings for its offices and retail operations which have lease terms of between one and
five years with, in some cases, options to extend. On renewal, the terms of the leases are renegotiated. The Group
also leases motor vehicles and equipment under agreements of between one to five years.
Each lease generally imposes a restriction that, unless there is a contractual right for the Group to sublet the asset
to another party, the right of use asset can only be used by the Group.
The Group’s leases include extension and termination options which are exercisable by the Group. These clauses
provide the Group opportunities to manage leases in order to align with its strategies. The extension and termination
options which were reasonably certain to be exercised are included in the calculation of the right-to-use asset. As at
31 July 2020, potential future cash outflows of $3.1 million (undiscounted) have not been included in the lease liability
because it is not reasonably certain that the leases will be extended (or not terminated).
Interest expense recognised in profit or loss was $0.4 million and principal payments made to lessors in respect to
lease liabilities was $0.8 million for the year.
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21. DEFERRED TAX ASSETS
As at
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
31 July
2020
$'000
31 July
2019
$'000
448
485
6
1,295
371
1,005
3,610
3,406
204
3,610
1,246
2,364
3,610
383
545
-
1,208
1,034
236
3,406
5,070
(1,664)
3,406
741
2,665
3,406
22. OTHER NON-CURRENT ASSETS
Other assets
1,769
1,800
23. CURRENT TRADE AND OTHER PAYABLES
Trade creditors
Other creditors and accruals
Balance at end of year
24. CURRENT BORROWINGS
As at
Bills payable – secured
Market rate loan facility – secured
Commercial advance facility - secured
Other
Balance at end of year
Risk
1,874
3,168
5,042
4,334
3,036
7,370
31 July
2020
$’000
1,350
336
127
11
1,824
31 July
2019
$’000
1,425
336
692
-
2,453
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 28.
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25. CURRENT LEASE LIABILTIES
As at
Lease liabilities
31 July
2020
$’000
1,030
31 July
2019
$’000
-
AASB 16 was adopted using the modified retrospective approach and comparatives for lease liabilities
have not been provided. Refer to Note 1(a).
26. CURRENT TAX LIABILITIES
Income tax payable
27. CURRENT PROVISIONS
5,032
-
Employee entitlements
1,402
1,330
28. NON-CURRENT BORROWINGS
As at
Bills payable - secured
Market rate loan facility - secured
Balance at the end of the year
Risk
31 July
2020
$’000
84,310
76
84,386
31 July
2019
$’000
106,745
328
107,073
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.
Total secured liabilities
The total secured liabilities (current and non-current) are as follows:
Bills payable – secured1
Market rate loan facility – secured2
Commercial advance facility - secured3
Other
85,660
412
127
11
86,210
108,170
664
692
-
109,526
1$1.350m bill is secured against 328-332 Bong St, Bowral. Interest is charged at BBSY plus 1.530% p.a.
1$84.310 million bill is secured against Port Central Shopping Centre, Coffs Central 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 $76 million (fully drawn at 31 July 2020). The second tranche is a revolving facility, has
a facility limit of $30 million. Interest on the outstanding principal of both tranches is charged at BBSY plus 0.70%
p.a. and a line fee is charged at a fixed rate of 1.62% p.a. At 31 July 2020 the current interest rate that applies to
amounts advanced is 0.8549% p.a. The lender requires the Group and SC properties to meet certain financial ratios:
at 31 July 2020 the combined facility limit of the first and second tranches must not to exceed 55% of the aggregate
market value of the SC properties (based on the last borrower approval valuation of the SC properties) and the
Group’s gearing ratio must not exceed 50%.
2 $0.412 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, Surf Hardware International Pty Ltd, Surfing Hardware International Holdings Pty Ltd and Surf Hardware
International Asia Pty Ltd. Interest is charged at BBSY. At 31 July 2020 the current interest rate that applies to
amounts advanced is 0.2785%.
3 $0.127 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, Surf Hardware International Pty Ltd, Surfing Hardware International Holdings Pty Ltd and Surf
Hardware International Asia Pty Ltd. The facility has a total facility limit of $2 million. At 31 July 2020 the current
interest rate that applies to amounts advanced is 7.02%.
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28. NON-CURRENT BORROWINGS (CONTINUED)
As at
Financing arrangements
Unrestricted access was available at balance date to the following lines of credit:
Total facilities
Secured bill facilities
Secured commercial advance facility
Secured market rate loan facility
Other
Used at balance date
Secured bill facilities
Secured commercial advance facility
Secured market rate loan facility
Other
Unused at balance date
Secured bill facilities
Secured commercial advance facility1
Secured market rate loan facility
Other
31 July
2020
$’000
31 July
2019
$’000
107,400
2,000
412
11
109,823
85,660
127
412
11
86,210
21,740
1,873
-
-
23,613
117,650
2,000
664
-
120,314
108,170
692
664
-
109,526
9,480
1,308
-
-
10,788
1Of the $1.87 million (2019: $1.31 million) remaining commercial advance facility (2019: commercial advance facility),
$nil million (2019: $0.15 million) has been used for bank guarantees.
Off-balance sheet
There are no off-balance sheet borrowings or related contingencies other than the amount secured for bank
guarantees referred to above.
29. NON-CURRENT LEASE LIABILITIES
As at
Lease liabilities
31 July
2020
$’000
1,970
31 July
2019
$’000
-
AASB 16 was adopted using the modified retrospective approach and comparatives for lease liabilities
have not been provided. Refer to Note 1(a).
30. NON-CURRENT PROVISIONS
Employee entitlements
482
547
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31. DEFERRED TAX LIABILITIES
As at
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
31 July
2020
$’000
31 July
2019
$’000
100
315
18,326
1,691
1,618
22,050
29,022
(4,478)
(2,494)
22,050
128
21,922
22,050
278
315
23,657
4,068
704
29,022
37,612
(8,334)
(256)
29,022
278
28,744
29,022
32. CONTRIBUTED EQUITY
Share capital
Ordinary shares fully paid
Movements in ordinary share capital
Date
31/07/2019
23/10/2019
25/11/2019
28/11/2019
2/03/2020
25/06/2020
Details
Balance
Share buy back
Share buy back
Share buy back
Share buy back
Share buy back
Number of
shares 2020
Number of
shares 2019
2020
$’000
2019
$’000
53,746,240
53,939,195
12,895
13,288
Number of
shares
53,939,195
(73,200)
(10,000)
(20,000)
(35,000)
(54,755)
53,746,240
Issue price
per share
2.25
2.28
2.25
2.20
1.50
$’000
13,288
(165)
(23)
(45)
(77)
(83)
12,895
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 30 September 2020.
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
192,955 shares were bought back during the year (2019: Nil).
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.
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33. RESERVES
Capital profits reserve1
Opening balance
Transfer from retained profits
Closing balance
Long term investment revaluation reserve2
Opening balance
Fair value adjustments on equities
Equities
-
- Deferred tax applicable to fair value adjustments
-
Transfer of losses / (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
31 July
2020
$’000
31 July
2019
$’000
90,503
-
90,503
90,503
-
90,503
8,308
9,722
(8,313)
2,494
371
2,860
(852)
256
(818)
8,308
1,591
1,591
-
-
1,591
394
(197)
197
95,151
-
-
1,591
140
254
394
100,796
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.
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34. DIVIDENDS
Ordinary shares
2019 final dividend of 5.0 cents (2018: 6.0 cents interim) per share
2020 interim dividend of 5.0 cents (2019: 5.0 cents interim) per share
Total dividends declared
Dividends paid in cash
Dividends paid via Dividend Reinvestment Plan
31 July
2020
$’000
31 July
2019
$’000
2,697
2,690
5,387
5,387
-
5,387
3,218
2,690
5,908
5,096
812
5,908
Franked dividends declared and paid during the year were fully franked at the tax rate of 30% (2019: 30%).
Dividends declared after year end
Subsequent to year end the Directors have declared the payment of a final dividend of 3.0 cents per ordinary share
fully franked based on tax paid at 30%. The dividend paid on 29 October 2020 out of retained profits at 31 July 2020
was $1,609,387.
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 2020 and will be recognised in subsequent financial reports.
Franked dividends
The franked portions of the final dividends declared after 31 July 2020 will be franked out of existing franking credits
or out of franking credits arising from the payment of income tax in the year ended 31 July 2020.
Franking credits available for subsequent financial years (tax paid basis)
7,315
4,540
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 payable;
(b) franking debits that will arise from the payment of dividends recognised as a liability at the reporting date;
(c) franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date; and
(d) franking credits that may be prevented from being distributed in subsequent financial years.
35. REMUNERATION OF AUDITORS
Audit and review – parent entity
Audit and review – subsidiary companies
Tax services
36. COMMITMENTS FOR EXPENDITURE
Capital commitments – Private equities
31 July
2020
$
116,700
77,400
35,330
229,430
31 July
2019
$
113,300
73,700
29,520
216,520
The Group has uncalled capital commitments of up to $947,654 (2019: $1,070,346) in relation to private equity and
property fund investments held at year end.
Capital commitments – Investment properties
The Group has capital commitments of $Nil (2019: $2,123,474) in relation to construction works on investment
properties at year end.
Capital commitments – Development properties
The Group has capital commitments of $348,286 (2019: $nil) in relation to construction works on development
properties at year end.
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37. RELATED PARTIES
Directors
The names of persons who were Directors of Gowing Bros. Limited at any time during the financial year were Messrs
J. E. Gowing, J. G. Parker, Prof. J. West and S. J. Clancy.
Those persons that were also Directors during the year ended 31 July 2019.
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
Post-employment benefits
Long-term benefits
31 July
2020
$
744,593
60,109
8,713
813,415
31 July
2019
$
953,747
74,384
7,432
1,035,563
Detailed remuneration disclosures can be found in the remuneration report on pages 21 to 24.
Movement in shares
Key management person
J. E. Gowing
J. G. Parker
Prof. J. West
S. J. Clancy
R. Ambrogio
*Directly and indirectly
Shares
held* at
31-Jul-18
No.
20,888,150
55,000
477,581
5,000
-
Shares
acquired/
(disposed)
during the year
No.
154,448
2,306
-
-
-
Shares
held* at 31-
Jul-19
No.
21,042,598
57,306
477,581
5,000
-
Shares
acquired/
(disposed)
during the year
No.
-
-
-
-
10,000
Shares
held* at 31-
Jul-20
No.
21,042,598
57,306
477,581
5,000
10,000
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 (2019: $nil).
Transactions with Key Management Personnel and Directors
Key management person
J. E. Gowing
J. E. Gowing
Transaction type
Marketing services
Associate director services
2020
$
62,436
10,950
2019
$
96,443
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 $3,800 for the year (2019: $41,994). The sons of Mr J E Gowing
provided marketing services during the year on an employment basis totalling $58,636 (2019: $54,449), and
associate director services totalling $10,950 (2019: $10,950).
There were no other transactions with Directors and Director related entities and Executives.
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38. 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.
Country of
Incorporation
Ownership
Interest
%
2020
Ownership
Interest
%
2019
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
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
France
England
Australia
Australia
United States of America
United States of America
United States of America
Japan
Australia
Surf Hardware International New Zealand Pty Ltd
New Zealand
Gowings Master Trust
1868 High Yield Trust
Gowings Life Sciences Trust
Gowing Bros Management Services Pty Ltd
Coastbeat Pty Ltd
Australia
Australia
Australia
Australia
Australia
100
99.9
100
99.9
99.9
99.9
99.9
99.9
99.9
99.9
99.9
99.9
99.9
99.9
99.9
99.9
99.9
99.9
99.9
100
100
100
100
100
100
99.9
100
99.9
99.9
99.9
99.9
99.9
99.9
99.9
99.9
99.9
99.9
99.9
99.9
99.9
99.9
99.9
99.9
100
100
100
100
100
No other interests in subsidiaries or other entities (excluding joint ventures) were held by the Group in the 31 July
2020 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 28, there are no significant restrictions over the Group’s
ability to access or use assets, and settle liabilities, of the Group.
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39. INTERESTS IN JOINT VENTURES
The Group has entered into a joint venture operation known as Regional Retail Properties, a long term investment in
a small regional retail centre. The Group has a 50% participating interest in this joint venture and is entitled to 50%
of its output.
The Group’s interests in the assets employed in the joint ventures are included in the consolidated statement of
financial position, in accordance with the accounting policy described in note 1(q), under the following classifications:
Current assets
Cash and cash equivalents
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
2020
$’000
31 July
2019
$’000
74
18
92
3,000
3,000
3,092
18
1,350
1,368
-
-
1,368
1,724
24
21
45
3,000
3,000
3,045
27
1,425
1,452
-
-
1,452
1,593
$1.350 million of borrowings is secured against investment properties of Regional Retail Properties (note 28).
40. 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 (2019: Nil).
41. 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
31 July
31 July
2019
2020
(36.07)c
8.82c
(36.07)c
8.82c
53,842,723
53,782,955
$4,747,000 $(19,403,000)
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42. PARENT ENTITY INFORMATION
The following information has been extracted from the books and records of the Company and has been prepared in
accordance with Australian Accounting Standards:
Statement of Financial Position
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 profits
Total equity
Statement of Profit or Loss and other Comprehensive Income
Net profit / (loss) after income tax
Total comprehensive income / (loss)
Parent entity contractual commitments
31 July
2020
$’000
15,647
287,258
302,905
10,267
108,284
118,551
184,354
12,895
90,503
2,860
1,591
76,505
184,354
31 July
2019
$’000
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
1,916
(5,819)
(18,873)
(19,470)
The Company has no contractual commitments other than uncalled capital commitments for private equities and
development properties as noted in note 36 (2019: Uncalled capital commitments for private equities and construction
works on investment properties as noted in note 36).
Parent entity contingent liabilities
The Company has no contingent liabilities at year end (2019: nil).
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 (2019: nil).
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43. RECONCILIATION OF NET PROFIT / (LOSS) TO NET CASH INFLOW FROM OPERATING
ACTIVITIES
Profit /(loss) from ordinary activities after income tax
Amortisation of lease incentives
Depreciation and amortisation
Net gain on sale of private equities
Net gain on sale of property, plant and equipment
Net gain on the sale of investment properties
Net gain on the sale of development properties
Revaluation of investment properties to fair value
Revaluation of equities and private equities to fair value
Revaluation of derivatives to fair value
Decrease / (increase) in receivables
Decrease / (increase) in prepayments
Decrease / (increase) in inventories
Increase / (decrease) in income taxes
Increase / (decrease) in employee entitlements
Increase / (decrease) in trade creditors and accruals
Net cash inflow from operating activities
31 July
2020
$’000
4,747
725
1,805
(604)
-
(2,115)
(736)
959
(386)
290
1,891
615
1,443
434
7
(1,224)
7,851
31 July
2019
$’000
(19,403)
1,342
815
-
(22)
(410)
-
28,454
(1,228)
3,319
(1,009)
(254)
(304)
(7,112)
186
1,795
6,169
44. CHANGES IN LIABILITIES ARISING FROM FINANCING ACTIVITIES
Liabilities from
financing
activates
Derivatives1
Borrowings2
Opening
balance – 31
July 2019
4,027
109,526
Cash flows from
financing
activities
-
(23,316)
(Gains)/ loss on
disposal or revaluation
(non-cash)
290
-
Closing balance –
31July 2020
4,317
86,210
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 2020:
- Proceeds from borrowings
- Repayment of borrowings
45. SUBSEQUENT EVENTS
6,000
(29,316)
(23,316)
The COVID-19 pandemic has had a significant impact on domestic and global markets and economies and there
remains significant uncertainty. The Directors are continuing to manage and monitor the Group’s operations and
investments closely in response to the COVID-19 pandemic. COVID-19 pandemic impacts may affect the Group’s
financial performance and position in future periods however a definitive assessment of the extent of such impacts
cannot be practically made given the degree of uncertainty in the current climate.
No other matter or circumstance has arisen since the end of the financial year, other than the dividend declared (refer
note 34) which has significantly affected, or may significantly affect, the operations of the Group, the results of those
operations or the state of affairs of the Group in future financial years.
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46. OTHER INFORMATION
Gowing Bros. Limited is incorporated and domiciled in New South Wales. The registered office, and principal place
of business, is Unit 21, Jones Bay Wharf, 26 – 32 Pirrama Rd, Pyrmont NSW 2009.
Phone:
Facsimile:
Email:
Website:
61 2 9264 6321
61 2 9264 6240
info@gowings.com
www.gowings.com
Gowing Bros. Limited shares are listed on the Australian Securities Exchange.
The share register is maintained by Computershare Investor Services Pty. Limited, Level 3, 60 Carrington Street,
Sydney NSW 2000, Telephone 1300 855 080, Overseas callers +61 (0)2 8234 5000, Facsimile + 61 (0)2 8234 5050.
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Directors’ Declaration
1.
In the directors’ opinion:
(a)
the consolidated financial statements and notes set out on pages 26 to 62 are in accordance with the
Corporations Act 2001, including:
(i)
(ii)
complying with Accounting Standards and the Corporations Regulations 2001 and other
mandatory professional reporting requirements; and
giving a true and fair view of the Group’s financial position as at 31 July 2020 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.
3.
The notes to the consolidated financial statements include a statement of compliance with International
Financial Reporting Standards.
The directors have been given the declarations by the chief executive officer and chief financial officer for the
year ended 31 July 2020 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, NSW
30 October 2020
J. E. Gowing
Director
Sydney, NSW
30 October 2020
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Auditor’s Independence Declaration
As lead auditor for the audit of the consolidated financial report of Gowing Bros. Limited for the year ended
31 July 2020, I declare that, to the best of my knowledge and belief, there have been no contraventions of:
(a)
the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
(b)
any applicable code of professional conduct in relation to the audit.
This declaration is in relation to Gowing Bros. Limited and the entities it controlled during the year.
Sydney, NSW
30 October 2020
A G Smith
Partner
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Independent Auditor’s Report to the Members of Gowing Bros. Limited
REPORT ON THE AUDIT OF THE FINANCIAL REPORT
Opinion
We have audited the financial report of Gowing Bros. Limited (“the Company”) and its controlled entities
(“the Group”), which comprises the consolidated statement of financial position as at 31 July 2020, 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 2020 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 confirm that the independence declaration required by the Corporations Act 2001, which has been given
to the directors of the Company, would be in the same terms if given to the directors as at the time of this
auditor’s report.
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.
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Key Audit Matter
How our audit addressed the key audit matter
Valuation of sub-regional and neighbourhood shopping centre investment properties
Note 17
The aggregate fair value of the Group’s sub-
regional and neighbourhood shopping centre
investment properties as at 31 July 2020 is
$198.131 million, representing 63.54% of the
Group’s total assets as at that date.
The valuation of the Group’s investment
properties 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.
We have identified the valuation of the Group’s
investment properties as a key audit matter
because of the significance to the Group’s
consolidated financial statements and level of
significant judgements and assumptions applied
to determine fair value.
Valuation of Unlisted Equities
Notes 2, 14 & 15
At 31 July 2020 the Group owned investments of
$25.60 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 other market
evidence.
This is considered a key audit matter due to the
significant judgment involved in assessing the
valuation of these assets, as they are often
traded in low volume markets.
Our audit procedures to assess the valuation of
investment properties 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, market
conditions and other supporting documentation.
checking the mathematical accuracy of
valuation calculations.
reviewing the Group’s disclosures with
reference to Australian Accounting Standards.
Our audit procedures to assess the valuation of
unlisted equities included:
assessing the valuation methodology applied by
management.
reviewing valuation inputs including evidence of
recent arm’s length transactions and agreeing
these transactions to external sources.
reviewing market data and other financial
information.
reviewing the Group’s disclosures with
reference to Australian Accounting Standards.
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 2020, 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.
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Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a true
and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for
such internal control as the directors determine is necessary to enable the preparation of the financial report
that gives a true and fair view and is free from material misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations,
or have no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
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.
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:
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.
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From the matters communicated with the directors, we determine those matters that were of most
significance in the audit of the financial report of the current period and are therefore the key audit matters.
We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about
the matter or when, in extremely rare circumstances, we determine that a matter should not be
communicated in our report because the adverse consequences of doing so would reasonably be expected
to outweigh the public interest benefits of such communication.
REPORT ON THE REMUNERATION REPORT
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 21 to 24 of the directors’ report for the year
ended 31 July 2020.
In our opinion, the Remuneration Report of Gowing Bros. Limited for the year ended 31 July 2020 complies
with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the Remuneration
Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an
opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing
Standards.
HLB Mann Judd
Chartered Accountants
Sydney, NSW
30 October 2020
A G Smith
Partner
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