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Georgia Capital PlcAnnual Report 2015
Contents
Director’s Report
1
Operating and Financial Review
2
6
Remuneration Report (audited)
12 Auditor’s Independence Declaration
13 Consolidated Statement of Profit or Loss
14 Consolidated Statement of Other Comprehensive Income
15 Balance Sheet
16 Consolidated Statement of Changes in Equity
17 Consolidated Statement of Cash Flows
18 Notes to the Consolidated Financial Statements
18 1. Corporate Information
18 2. Summary of Significant Accounting Policies
26 3. Significant Accounting Judgements, Estimates
and Assumptions
27 4. Profit from Operations
29 5. Income Tax
31 6. Dividends Paid and Proposed
32 7. Earnings Per Share (EPS)
32 8. Trade and Other Receivables
33 9. Inventories
33 10. Investment in Associates
35 11. Property, Plant and Equipment
36 12. Intangible Assets
36 13. Trade and Other Payables
37 14. Financial Assets and Financial Liabilities
39 15. Provisions
40 16. Issued Capital
40 17. Non Controlling Interests
40 18. Reserves
41 19. Cash Flow Information
42 20. Information Relating to HGL Limited (parent)
43 21. Segment Information
43 22. Related Party Disclosures
44 23. Employee Share Scheme
44 24. Commitments and Contingencies
44 25. Events after the Reporting Period
45 26. Auditors’ Remuneration
45 27. Investment in Controlled Entities
46 Director’s Declaration
47
49 ASX Additional Information
50 Five Year Summary
51 Corporate Information
Independent Auditor’s Report
•
HGL Limited Annual Report 2015 DIRECTOR’S
REPORT
for the year ended 30 September 2015
Your directors submit their report for the year ended 30 September 2015.
Directors
The names and details of the Company’s directors in office during the financial year and until the date of this report are set
out below. Directors were in office for this entire period unless otherwise stated.
Peter Miller, FCA (Chairman)
Non executive Chairman, appointed 2000. Peter is a Chartered Accountant with over 30 years experience in public
practice. He is Chairman of the Nomination and Remuneration Committee, and a member of the Audit Committee.
Dr Frank Wolf, BA (Hons), PhD (Director)
Non executive Director, appointed 2000. Frank has over 30 years experience in strategic planning, financing and corporate
advice. Dr Wolf was appointed Managing Director of the listed Abacus Property Group in 2006. He is Chairman of the
Audit Committee, and was appointed to the Nomination and Remuneration Committee on 25 August 2015.
Kevin Eley, CA, F Fin, FAICD (Director)
Non executive Director, appointed 1985. Kevin is a Chartered Accountant with significant executive and director
experience, including as Chief Executive Officer of HGL Ltd from 1985 to 2010. Kevin is a member of the Audit Committee.
He is a director of Po Valley Energy (since June 2012), Milton Corporation Ltd (since December 2011), Equity Trustees Ltd
(since November 2011) and Hunter Hall International Ltd (since September 2015), and was a director of Kresta Holdings Ltd
between April 2011 and February 2014.
Julian Constable (Director)
Non executive Director, appointed 2003. Julian has 30 years experience in the stockbroking industry, and is an authorised
representative of Bell Potter Securities Ltd. He is a member of the Nomination and Remuneration Committee. Julian is a
director of Hunter Hall Global Value Limited (since May 2010).
Interests in the shares and options of the Company and related bodies corporate
As at the date of this report, the interests of the directors in the shares and options of HGL Limited were:
Peter Miller
Dr Frank Wolf
Kevin Eley
Julian Constable
Number
of direct
shares
Number
of indirect
shares
46,163
11,225,289
–
–
721,038
809,872
125,000
5,600,625
Key Management Personnel
The following names and details are of the key management personnel of the Company. Key management personnel were
in office for the entire period unless otherwise stated.
Chief Executive Officer
Henrik Thorup, BSc (Econ), GAICD
Appointed CEO in 2013, Henrik has over 20 years experience in CEO and other senior executive roles across a number of
businesses, including Pandora Jewellery, Nilfisk and ISS Facility Service.
Chief Operating Officer
Julian Pidcock, BSc
Appointed COO in 2013, Julian has more than 20 years executive management and business development experience
with leading global corporations including Nestle, Pizza Hut and McPherson’s Consumer Products.
Chief Financial Officer and Company Secretary
Iain Thompson, BEc (Accg), Grad Dip CSP, FGIA, GAICD
Appointed CFO/Company Secretary in May 2015, Iain has nearly 20 years experience in finance and company secretarial
roles, the most recent being at Brickworks Ltd. He also has directorship experience in the Not For Profit sector, focussing
on early childhood intervention.
1
HGL Limited Annual Report 2015 DIRECTORS
REPORT
continued
Dividends
The Directors have declared a final dividend of 1.5 cents per share fully franked, to be paid on 18 December 2015.
There were no dividends paid during the financial year ended 30 September 2015.
Dividend Reinvestment Plan
The Dividend Reinvestment Plan (DRP) was established by the directors to provide shareholders with the opportunity of
reinvesting their dividends in ordinary shares in the Company. No brokerage is payable if shares are allotted under the DRP.
During the year the total number of shares issued under the DRP was nil (2014: 1,481,126).
Share buy-back
The Company operates an unlimited duration on-market share buy-back. During the current and prior years no ordinary
shares were acquired pursuant to the on-market buy-back.
Principal Activities
The principal activity during the year of entities within the consolidated group was the distribution of branded products.
Operating and Financial Review
Summary
– Sales revenue $52.0 million, up 2.4%
– Statutory profit $3.7 million, improvement on FY14 loss of $21.4 million
– Underlying net profit after tax $2.6 million, up 391%
– Net cash of $4.7 million, up $2.5 million
–
Final dividend of 1.5 cents per share fully franked
Overview
For the year ended 30 September 2015 HGL reports a Statutory Profit of $3.7 million, up from a loss of $21.4 million in the
prior corresponding period.
Underlying profit was $2.6 million, up from $0.5 million in the prior corresponding period. Underlying profit is statutory
profit excluding irregular transactions that are not part of the core or ongoing business operations. Non-underlying items
increased statutory net profit after tax by $1.1 million, with the significant non-underlying items being $0.7 million from
the release of warranties in relation to the Anitech sale in 2014, and $0.6 million from the re-recognition of previously
derecognised deferred tax assets, offset by $0.4 million in restructuring costs. Prior year non-underlying expenses included
significant asset impairments and de-recognitions totalling $21.9 million.
A key strategic priority in 2015 was to achieve organic sales growth and reverse the declining sales trend. Total revenue
of $52.0 million improved by 2.4% from $50.7 million in 2014.
The overall group gross margin remained strong at 44.7% (2014: 44.6%), despite cost inflation from foreign exchange
rate movements.
Operating expenses reduced by 1.7% from continuous improvement programs minimising operational complexity and
introducing new business process technology. The decline in operating expenses was achieved after increased investment
in staff development programs and expanding sales force resources in several business units.
The positive uplift in profit performance is a result of the successful implementation of our Growth, Profit and Sustainability
(GPS) Strategy Plan over the past 12 months.
The key enablers of the GPS Strategy are: driving revenue growth from additional product sales in core and new markets;
increasing profitability through continuous process improvement; and ensuring sustainable performance through
investment in leadership and talent management programs.
Phase one of the plan, which is substantially complete, was to rebuild foundations. Phase two is to reshape the industry
footprint of the HGL Group to operate in segments with long-term growth prospects. Phase three will leverage the rebuilt
company portfolio and industry dynamics to deliver enhanced shareholder returns.
2
HGL Limited Annual Report 2015 Dividend
The Directors have declared a final dividend of 1.5 cents per share fully franked, payable on 18 December 2015 to
shareholders on the ordinary register at 5pm on 4 December 2015. This dividend level is in recognition of the fact that
underlying profits have stabilised, and are expected to be sustainable while the businesses target earnings growth.
The dividend reinvestment plan will continue to be available to all shareholders with no discount.
Corporate Strategy and Operational Priorities
With solid progress made on the continued transformation of HGL this financial year, we have conducted commercial
and strategic planning sessions across the business units incorporating a five year horizon to 2020. The strategic plans
highlight the operational priorities and required activities to achieve our near term Group financial benchmarks of 10% EBIT
to Sales and 20% Return on Capital Employed, while delivering the core objectives of Growth, Profit and Sustainability in
the GPS Strategy Plan.
The operational priorities are designed to build sustained competitive advantage and consistently direct management
attention towards specific objectives, including:
– Expand product portfolio
– Superior sales execution
– Online market presence
– Develop intellectual property
– Reduce operational complexity
Integrate business technology
–
Increase employee engagement
–
The ongoing execution of the defined strategic priorities will underpin organic revenue growth, maintain strong gross
margins, improve operational efficiency and increase employee retention across the HGL Group.
The restructure of the HGL head office was completed in May 2015 with the relocation to Macquarie Park in Sydney.
The restructure is expected to generate operational cost savings of approximately $0.5 million per annum.
An important element of the strategic plan is to secure HGL’s position in industry sectors with long-term growth prospects
to support ongoing expansion. Our portfolio acquisition strategy targets investments in profitable companies in growth
industries, with emphasis on health & beauty, homewares, building products and medical devices.
To give the homewares sector greater focus, from 1 October 2015 a new entity, Nido Interiors, was created to operate
a new innovative and cost effective business model, selling home décor and soft furnishing product ranges under the
existing One-Duck-Two and private label brands.
Business Unit Review
With the exception of Biante, each of the HGL business units increased its underlying earnings before interest and tax
compared to the previous year.
JSB Lighting, which sells architectural lighting solutions to the commercial building market in all states through its branch
network, achieved significant revenue and profit growth in 2015. Revenue grew by 29.4% to $19.8 million. The addition of
the premium Hubbell and Meyer outdoor lighting brands contributed positively to the continued expansion of JSB Lighting
in 2015.
With record sales growth, solid gross margins and targeted expenditure, including investment in additional staff and
premises, JSB delivered 127% growth in EBIT in 2015. The core objective for JSB Lighting is to leverage its strong market
position, expand market share with specific emphasis on Melbourne, and continue to develop its product portfolio.
Leutenegger, despite revenue decline of 10.3% compared to last year, reduced its rate of sales decline by taking advantage
of new business development opportunities with major retail chains like Spotlight, Lincraft and Big-W. Leutenegger
returned to profit in 2015, which is encouraging after progressing its turnaround program with product range rationalisation,
normalising customer service levels, improving delivery performance and developing a new competitive brand portfolio.
Leutenegger continued to develop its soft furnishing brand One-Duck-Two in the Homewares market with dedicated
collections by renowned interior designer Greg Natale. With the establishment of Nido, Leutenegger will now
concentrate on new revenue opportunities in the contemporary craft, fabric and kids craft toy markets with its
Leutenegger and Make-it brands.
BLC Cosmetics achieved profit in 2015, improving from break-even last year. This was underpinned by expanded online
trading capabilities through several new introduced websites, enhanced beauty therapist training and productivity gains
from cost effective operation.
3
HGL Limited Annual Report 2015 DIRECTORS
REPORT
continued
With multiple new brands successfully launched during 2015, including Alpha-H cosmeceutical skincare, Issada
mineral make-up and Lightstim LED light therapy devices, BLC Cosmetics delivered revenue growth of 6% over the
prior corresponding period. This was an important milestone for BLC Cosmetics and the leadership team plans for
further revenue growth in 2016, having secured the exclusive distribution rights to the Jbronze tanning brand and
Fusion mesotherapy product lines in the Australian spa and salon market.
SPOS Group improved sales in the second half of financial year 2015. Despite full year sales decline of $2.5 million, total
gross margin ratio rose, impacted by the refocused business strategy of selling standard shelving product lines to brand
owners and national retailers.
The discontinuation of non-profitable revenue and reduced operating expenses improved efficiency and profit performance
in SPOS achieving EBIT to sales ratio of 5.2% in 2015. This demonstrates SPOS’s potential to compete profitably in its
core market and reflects progress made, except securing overall sales growth, which is a key strategic improvement
point in 2016.
Biante delivered revenue in line with the previous year, however manufacturing delays on several planned models
postponed their release dates. The depreciation of the Australian dollar compared to US dollar during 2015 reduced gross
margins compared to the prior year, impacting the overall profitability of the business. The company remains profitable, but
achieved a lower EBIT to sales margin.
Biante renewed its exclusive agreement with the factory backed Holden Racing Team to produce dedicated V8 supercars,
including models from the recently launched Star Wars franchise partnership between Holden and Disney. Biante will
launch the delayed V8 supercar and other road car models in 2016, which is expected to increase the profit level this year.
Our 50% joint venture with Mountcastle had another solid year. The company increased its market share in the school
uniform and bag market with expanded product ranges and sales force across the country. A new partnership with The
School Locker, a Harvey Norman owned specialist retail chain, assisted the total revenue growth of 9.8% compared to
the prior period.
Mountcastle is in the final stage of launching a new online ordering portal for its school uniform clients to enhance
efficiency, demand planning and customer satisfaction. During 2015 Mountcastle entered into a new partnership to
manufacture for the School Locker partnership. Mountcastle increased its EBIT by 6.6% in 2015, maintaining its solid
EBIT to sales margin as in previous years.
People and the Environment
Our employees are our most important resource and HGL is committed to supporting them to reach their full potential. We
continue to develop high performing teams across our businesses and invest in leadership, talent management programs
and staff training. The board acknowledges and thanks our employees for their effort and contribution throughout the year.
Cash Flow
During the year the net cash balance increased by $2.5 million to $4.7 million after the repayment in full of the bank
borrowings at balance date. The current facility remains with a limit of $2.8 million, providing the group with capacity to
fund growth initiatives.
Cash flow from operations was $2.8 million at 30 September 2015 incorporating additional sales force resource
investments, improved profits, strong working capital discipline and improved collection practices.
Balance Sheet
The net assets of the group have increased by $3.7 million to $22.5 million during the year. The increase in net assets
was largely due to the improved cash position, repayment of debt, and a targeted increase in working capital to support
contracted service levels with major customers. Net tangible assets increased 43.8% to 23.0 cents per share.
Executive Incentive Scheme
The Board is considering an Executive Incentive Plan for HGL executives based on company strategies and to focus
management on controllable outcomes and manage risk. It is the intention of the board to present the plan for shareholder
approval if required.
4
HGL Limited Annual Report 2015 Risk Management
The achievement of our business objectives in HGL may be affected by internal and external incidents potentially impacting
the operational and financial performance of the business. The Group has developed an Enterprise Risk Management
and Reporting System, which identifies strategic and operational risks and specifies mitigation actions. Dedicated risk
mitigation actions, executed in each business unit, are reported quarterly to the HGL board and monitored accordingly.
Key risks for the Group include:
Currency risk – Exposure to foreign currency fluctuations (predominantly USD and Euro) is mitigated through the use of
hedging structures, and adjusting selling prices for drops in exchange rates on key contracts
Supplier risk – Reliance on a small number of key suppliers is being managed through the use of distribution agreements
for key suppliers, ongoing development of long term supplier relationships, and the use of complimentary product range
brands to decrease percentage contribution from important suppliers
Financing risk – Access to funding for working capital and growth initiatives is important for future growth. Transparent and
positive relationships with lenders, low debt levels, and utilisation of alternative funding sources will provide mitigation of
this risk
WH&S risk – The HGL Group is committed to ensuring the work health and safety (WH&S) of its employees, customers and
the general public. Wherever possible manual handling is reduced or eliminated, and training is made available to staff on
safety related matters
Although we have little exposure to environmental risks, we strive to be environmentally friendly and embrace technologies
and processes that limit environmental impact.
Outlook
HGL is directing its priorities from rebuilding foundations towards profitable revenue growth and employee capability
development with investments in new brand introductions, human resource training programs and targeted marketing
activities.
We remain cautious but optimistic in the outlook for the trading conditions with prevailing low consumer and business
confidence.
The Board is confident in the positive outlook of the Group and the continued execution of the GPS Strategy Plan,
underpinned by growth opportunities and clear operational plans, to improve profit for the coming year, and allow the
reinstatement of regular dividends.
Significant Changes in the State of Affairs
There have been no significant changes in the state of affairs of the Group during the year other than those referred to in
the Operating and Financial Review.
Significant Events after the Balance Date
There have been no significant events occurring after the balance date which may affect either the Group’s operations or
results of those operations or the Group’s state of affairs.
Likely Developments and Expected Results
Likely developments in the operations of the Group are detailed in the Operating and Financial Review.
5
HGL Limited Annual Report 2015 DIRECTORS
REPORT
continued
Remuneration Report (audited)
The remuneration report provides an overview of the Group remuneration policies and practices and explains the
links between rewards and Company performance. The report also gives detailed information about the remuneration
arrangements for the key management personnel of the Company. The remuneration report has been audited.
Details of Key Management Personnel
Key Management Personnel (KMP) are those individuals with authority and responsibility for planning, directing and
controlling the major activities of the Group, directly or indirectly including any director of the parent. The list below outlines
the KMP of the Group during the financial year ended 30 September 2015. Unless otherwise indicated, the individuals were
KMP for the entire financial year.
Directors
Peter Miller
Dr Frank Wolf
Kevin Eley
Julian Constable
Executives
Henrik Thorup
Julian Pidcock
Iain Thompson
Andrew Whittles
Non-Executive Chair
Non-Executive Director
Non-Executive Director
Non-Executive Director
Chief Executive Officer
Chief Operating Officer
Chief Financial Officer & Company Secretary (appointed 29 May 2015)
Chief Financial Officer (ceased 29 May 2015)
Remuneration Governance
Remuneration Committee
The Board has an established Nomination and Remuneration Committee which operates under the delegated authority
of the Board of Directors. A summary of the Committee charter is included on the HGL website. Membership of the
Committee is as follows:
Peter Miller
Julian Constable
Dr Frank Wolf
Non-Executive Chair
Non-Executive Director
Non-Executive Director (appointed to the Committee 25 August 2015)
The main remuneration functions of the Committee are to assist the Board by making recommendations on:
1. executive remuneration and incentive policies;
2. remuneration packages of senior management, including incentive schemes and superannuation arrangements;
3. recruitment, retention and termination policies for senior management;
4. remuneration framework for directors; and
5. statutory reporting on remuneration.
The Committee is authorised by the Board to obtain external professional advice, and to secure the attendance of
outsiders with relevant experience and expertise if it considers this necessary.
6
HGL Limited Annual Report 2015
Use of Remuneration Consultants
Where the Nomination and Remuneration Committee will benefit from external advice, it will engage directly with a
remuneration consultant, who reports directly to the Committee. In selecting a suitable consultant, the Committee
considers potential conflicts of interest and requires independence from the Group’s KMP and other executives as part
of their terms of engagement.
During the financial year, the Committee approved the engagement of Godfrey Remuneration Group (GRG) as
remuneration consultants to provide information regarding potential short term and long term incentive schemes for senior
executives. The fees paid to GRG for the remuneration recommendations were $11,000.
Remuneration recommendations were provided to the Committee as an input into decision making only. The Committee
considered the recommendations in conjunction with other factors in making its remuneration determinations.
The Committee is satisfied the advice received from GRG is free from undue influence from the KMP to whom the
remuneration recommendations apply, as GRG were engaged by, and reported to, the Chair of the Nomination and
Remuneration Committee.
Executive Remuneration Arrangements
Principles of Remuneration
The Group’s executive remuneration strategy seeks to match the goals of the KMP to those of the shareholders. This is
achieved through combining market levels of guaranteed remuneration with incentive payments. These incentive payments
are only paid on attainment of previously agreed performance targets.
Remuneration packages are reviewed with due regard to performance and other relevant factors. In order to retain and
attract executives of sufficient calibre to facilitate the effective and efficient management of the Company’s operations the
Nomination and Remuneration Committee, when necessary, seeks the advice of external advisers in connection with the
structure of remuneration packages.
Components of Remuneration
Not at risk remuneration
Base remuneration is structured as a total employment package paid in cash and benefits at the executive’s discretion and
includes superannuation contributions. Base remuneration is reviewed but not necessarily increased each year. The base
remuneration is at market rates for the role and the individual. Total remuneration above the market rate can be achieved
through the attainment of previously agreed performance targets.
Long term employee benefits is the amount of long service leave entitlements accrued during the year.
At risk remuneration
There was no formal incentive scheme in place during the 2015 financial year. The Nomination and Remuneration
Committee has reviewed the performance of the KMP employed at 30 September 2015, and short term incentives totalling
$162,000 were approved on 10 November 2015 in relation to performance during the 2015 financial year. This amount has
been accrued at balance date, however payment of cash incentives is not made until following completion of the audit for
the relevant financial year.
During the financial year the Nomination and Remuneration Committee obtained advice in relation to potential formalised
incentive plans for the 2016 financial year and beyond. These plans had not been finalised at year end, however the board
intends to present the plans for shareholder approval if required.
No cash incentives were paid or accrued for 2014.
Employment contracts
Terms of employment are formalised in employment letters to each of the KMP. There are no fixed term contracts in place,
however personnel must give a minimum notice period. The CEO has a twelve month notice period, and the COO and
CFO have three month notice periods. The payment of any termination benefit is at the discretion of the Nomination and
Remuneration Committee.
7
HGL Limited Annual Report 2015 DIRECTORS
REPORT
continued
Executive & Board Remuneration
Short term benefits
Non
mone-
tary
benefits
Short
term
bonus
Annual
leave
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Post
employ-
ment
benefits
Super-
annua-
tion
9,543
6,073
5,205
5,205
26,026
2015
Directors
Peter Miller
Dr Frank Wolf
Salary &
fees
100,457
63,927
Julian Constable
54,795
Kevin Eley
54,795
Total Directors
273,974
Executives
Henrik Thorup
455,000 100,000
18,895
36,923
25,000
Julian Pidcock
278,749
42,000
Andrew Whittles(1)
184,144
–
Iain Thompson(2)
95,320
20,000
–
–
–
23,365
25,000
–
20,000
7,944
7,958
Long term benefits
Long
term
incen-
tives
Long
service
leave
Termi-
nation
payments
Percent-
age
variable
remune-
ration
Total
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
110,000
70,000
60,000
60,000
– 300,000
–
–
–
–
–
7,672
5,174
– 643,490
–
374,288
–
142,692 346,836
1,601
–
132,823
15.5
11.2
–
15.1
Total executives
1,013,213 162,000
18,895
68,232
77,958
– 14,447
142,692 1,497,437
1,287,187 162,000
18,895
68,232
103,984
– 14,447
142,692 1,797,437
(1) A Whittles ceased employment on 29 May 2015. Termination benefits include payment of accrued leave entitlements
(2) I Thompson commenced employment on 5 May 2015 and became KMP from 29 May 2015
2014
Directors
Peter Miller
Dr Frank Wolf
Salary &
fees
100,629
64,037
Julian Constable
54,889
Kevin Eley
54,889
Total Directors
274,444
Executives
Henrik Thorup
395,000
Julian Pidcock
270,000
Andrew Whittles(1)
269,167
Total executives
934,167
1,208,611
Short term benefits
Non
mone-
tary
benefits
Short
term
bonus
Annual
leave
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
23,013
–
–
23,013
23,013
–
–
–
–
–
–
–
–
–
–
Post
employ-
ment
benefits
Super-
annua-
tion
9,371
5,963
5,111
5,111
25,556
25,000
25,000
25,833
75,833
101,389
Long term benefits
Long
term
incen-
tives
Long
service
leave
Termi-
nation
payments
Percent-
age
variable
remune-
ration
Total
–
–
–
–
–
–
–
–
–
–
–
–
–
8,925
4,915
4,915
– 18,755
– 18,755
–
–
–
–
–
–
–
–
–
–
–
–
110,000
70,000
60,000
60,000
– 300,000
–
–
–
451,938
299,915
299,915
– 1,051,768
– 1,351,768
(1) A Whittles ceased employment on 29 May 2015. Termination benefits include payment of accrued leave entitlements
8
HGL Limited Annual Report 2015 Relationship between the Remuneration Policy and Company Performance
Short term incentives are largely determined by the profits of the Group, so aligning the incentive of the executive with the creation of
value for the HGL shareholders. No portion of any incentive schemes are solely linked to the HGL share price. Instead incentives are
based primarily on underlying profit as an increase in the underlying profit leads to an increase in the dividend. Underlying Profit is a
non-statutory measure designed to reflect statutory profit excluding the effect of irregular transactions that are not part of the core or
ongoing business operations. The Board is focused on increasing shareholder value through increasing dividends.
The following table shows a number of relevant measures of Group performance over the past five years. A detailed discussion on
the current year results is included in the review of operations and is not duplicated in full here, however an analysis of the figures
below illustrates the stabilisation of performance over the last four years, including the divestment of under-performing businesses.
The last two years particularly show a return to profitability for the group before non-underlying items. There were no incentive
payments made for the financial years ended 30 September 2012 to 2014, with the exception of a payment to Mr Thorup in 2013 for
the achievement of specific elements of the strategic plan.
Total Revenue ($’000)
Underlying profit ($’000)
Net profit after tax ($’000)
Share price at year end ($)
Underlying Earnings Per Share (cents)
Dividends – ordinary shares (cents)
2011
2012
2013
2014
2015
163,431
118,237
68,986
7,150
(57)
1.03
13.9
11.5
(457)
(4,601)
0.545
(0.9)
6.0
(421)
(8,772)
0.525
(0.8)
4.0
50,771
533
(21,430)
0.49
1.0
2.0
52,000
2,615
3,722
0.36
4.8
1.5
Non-executive Director Remuneration Arrangements
The remuneration of non-executive Directors is determined by the full Board after consideration of Group performance
and market rates for Directors’ remuneration. Non-executive Director fees are fixed each year, and are not subject to
performance-based incentives. Non-executive directors are not employed under employment contracts.
The maximum aggregate level of fees which may be paid to non-executive directors is required to be approved by
shareholders in a general meeting. This figure is currently $500,000, and was approved by shareholders at the Annual
General Meeting on 5 February 2008. Fees paid to non-executive directors have not increased since 1 October 2008.
Key Management Personnel Shareholdings
The key management personnel and their relevant interest in the fully paid ordinary shares of the Company as at year end
are as follows:
30 September 2015
Directors
Peter Miller
Dr Frank Wolf
Kevin Eley
Julian Constable
Senior executives
Henrik Thorup
Julian Pidcock
Iain Thompson(1)
Andrew Whittles(2)
Balance at
beginning of period
Purchases
Disposals(3)
Balance at
end of period
Balance
held indirectly
11,055,452
216,000
721,038
809,872
–
–
5,644,625
81,000
–
–
–
64,064
–
–
–
–
–
–
–
–
–
–
–
(64,064)
11,271,452
11,225,289
721,038
809,872
721,038
809,872
5,725,625
5,600,625
–
–
–
–
–
–
–
–
(1) Became a Key Management Person in May 2015
(2) Ceased to be a Key Management Person in May 2015
(3) Disposals includes no longer being designated as KMP
Employee Share Scheme
The HGL Ltd Employee Share Scheme, and the associated Loans, were cancelled during the 2014 financial year with no cash effects.
There was no share scheme in place during the 2015 financial year.
End of Remuneration Report
9
HGL Limited Annual Report 2015 DIRECTORS
REPORT
continued
Indemnification and Insurance of Directors and Officers
During the year, the Company purchased Directors’ and Officers’ Liability Insurance to provide cover in respect of claims
made against the directors and officers in office during the financial year and at the date of this report, as far as is allowable
by the Corporations Act 2001. The policy also covers the Company for reimbursement of directors’ and officers’ expenses
associated with such claims if the defence to the claim is successful. The total amount of insurance premium paid and the
nature of the liability are not disclosed due to a confidentiality clause within the agreement. As at the date of this report, no
amounts have been claimed or paid in respect of this indemnity and insurance, other than the premium referred to above.
The Company’s Rules provide for an indemnity of Directors, executive officers and secretaries where liability is incurred
in connection with the performance of their duties in those roles other than as a result of their negligence, default, breach
of duty or breach of trust in relation to the Company. The Rules further provide 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.
Indemnification of Auditors
To the extent permitted by law, the Company has agreed to indemnify its auditors, Deloitte Touche Tohmatsu, as part
of the terms of its audit engagement agreement against claims by third parties arising from the audit (for an unspecified
amount). No payment has been made to indemnify Deloitte Touche Tohmatsu during or since the financial year.
Auditor Independence and Non-Audit Services
The directors have received a declaration from the auditor of HGL Limited. This has been included on page 12.
No other material services were provided by the auditor during the year.
Options
During the year, options over 4,350 unissued ordinary shares in Nido Interiors Pty Ltd (Nido) were granted to CMK Home
Designs Pty Ltd (CMK). If the options are exercised, Nido will issue 4,350 ordinary shares at 10c per share to CMK. The
option expires in November 2019, and does not give rights to CMK to participate in any share issue or interest in another
group entity. All options remained outstanding at the date of this report.
No other options over unissued shares or interests in HGL Limited or a controlled entity were granted during or since the
end of the financial year and there were no other options outstanding at the date of this report. No shares or interests have
been issued during or since the end of the year as a result of the exercise of any option over unissued shares or interests
in HGL or any controlled entity.
Directors’ Meetings
The number of meetings of directors (including meetings of committees of directors) held during the year and the number
of meetings attended by each director were as follows:
Number of meetings held:
Number of meetings attended:
Peter Miller
Dr Frank Wolf
Kevin Eley
Julian Constable
Meetings of committees
Directors’
meetings
Audit
Nomination and
Remuneration
15
15
15
15
15
6
6
6
6
N/A
1
1
–*
N/A
1
*
Dr Wolf was appointed to the Nomination and Remuneration Committee on 25 August 2015. There were no Committee meetings
subsequent to his appointment.
10
HGL Limited Annual Report 2015 Corporate Governance
The Company’s Corporate Governance Statement for the year ended 30 September 2015 is effective 24th November 2015
and was approved by the Directors on 24th November 2015. The Corporate Governance Statement is available on the
HGL Ltd website at www.hgl.com.au/about/corporate-governance.
Rounding
The amounts contained in the financial report have been rounded to the nearest $1,000 (where rounding is applicable)
where noted ($’000) under the option available to the Company under ASIC CO 98/0100. The Company is an entity to
which the class order applies.
Signed in accordance with a resolution of the directors made pursuant to s.298(2) of the Corporations Act 2001.
On behalf of the Directors
Peter Miller
Chairman
Sydney, 24 November 2015
Dr Frank Wolf
Director
11
HGL Limited Annual Report 2015
AUDITOR’S
INDEPENDENCE
DECLARATION
Deloitte Touche Tohmatsu
Deloitte Touche Tohmatsu
ABN 74 490 121 060
ABN 74 490 121 060
Grosvenor Place
Grosv enor Place
225 George Street
225 George Street
Sy dney NSW 2000
Sydney NSW 2000
PO Box N250 Grosv enor Place
PO Box N250 Grosvenor Place
Sy dney NSW 1220 Australia
Sydney NSW 1220 Australia
Tel: +61 (0)2 9322 7000
Tel: +61 2 9322 7000
Fax: +61 (0)2 9322 7001
Fax: +61 2 9255 8303
www.deloitte.com.au
www.deloitte.com.au
The Board of Directors
HGL Limited
Level 2
68-72 Waterloo Road
MACQUARIE PARK NSW 2113
Independent Auditor’s Report
to the Shareholders of HGL Limited
Report on the Financial Report
24 November 2015
We have audited the accompanying financial report of HGL Limited, which comprises the statement
of financial position as at 30 September 2015, the statement of profit or loss, the statement of
comprehensive income, the statement of cash flows and the statement of changes in equity for the year
Dear Board Members
ended on that date, notes comprising a summary of significant accounting policies and other
explanatory information, and the directors’ declaration of the consolidated entity, comprising the
company and the entities it controlled at the year’s end or from time to time during the financial year
as set out on pages 13 to 46.
In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following
declaration of independence to the directors of HGL Limited.
Directors’ Responsibility for the Financial Report
HGL Limited
As lead audit partner for the audit of the financial statements of HGL Limited for the financial year ended
The directors of the company are responsible for the preparation of the financial report that gives a
30 September 2015, I declare that to the best of my knowledge and belief, there have been no
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
contraventions of:
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
the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
(i)
fraud or error. In Note 2, the directors also state, in accordance with Accounting Standard AASB 101
any applicable code of professional conduct in relation to the audit.
(ii)
Presentation of Financial Statements,
the consolidated financial statements comply with
that
International Financial Reporting Standards.
Yours faithfully
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted
our audit in accordance with Australian Auditing Standards. Those standards require that we comply
DELOITTE TOUCHE TOHMATSU
with relevant ethical requirements relating to audit engagements and plan and perform the audit to
obtain reasonable assurance whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial report. The procedures selected depend on the auditor’s judgement, including the
Tara Hill
assessment of the risks of material misstatement of the financial report, whether due to fraud or error.
Partner
In making those risk assessments, the auditor considers internal control, relevant to the company’s
Chartered Accountants
preparation of the financial report that gives a true and fair view, 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 company’s internal control. An audit also includes evaluating the appropriateness
of accounting policies used and the reasonableness of accounting estimates made by the directors, as
well as evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Member of Deloitte Touche Tohmatsu Limited
Liability limited by a scheme approved under Professional Standards Legislation.
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Touche Tohmatsu Limited
62
12
HGL Limited Annual Report 2015 CONSOLIDATED STATEMENT
OF PROFIT OR LOSS
for the year ended 30 September 2015
Sales revenue
Cost of sales
Gross profit
Other income
Sales, marketing and advertising expenses
Occupancy expenses
Freight and distribution expenses
Administration and other expenses
Finance costs
Share of profit/(loss) of an associate
Profit/(loss) before tax
Income tax benefit/(expense)
Profit/(loss) for the year
Attributable to:
Equity holders of the Parent
Earnings per share
Basic
Diluted
Notes
4.1
4.4
4.3
5
Consolidated entity
2015
$’000
52,000
(28,781)
23,219
189
(7,522)
(1,266)
(2,301)
(9,706)
(211)
772
3,174
548
3,722
2014
$’000
50,771
(30,491)
20,280
134
(7,756)
(4,266)
(2,864)
(17,099)
(308)
(2,513)
(14,392)
(7,038)
(21,430)
3,722
(21,430)
Cents
Cents
7
7
6.9
6.9
(39.4)
(39.4)
These statements should be read in conjunction with the accompanying notes.
13
HGL Limited Annual Report 2015
CONSOLIDATED STATEMENT OF
OTHER COMPREHENSIVE INCOME
for the year ended 30 September 2015
Profit/(loss) for the year
Other comprehensive income
Other comprehensive income to be reclassified to profit or loss in subsequent
periods (net of tax):
Exchange differences on translation of foreign operations
Net other comprehensive income/(loss) to be reclassified to profit or loss
in subsequent periods
Consolidated entity
2015
$’000
3,722
2014
$’000
(21,430)
23
23
(83)
(83)
Total comprehensive income/(loss) for the year, net of tax
3,745
(21,513)
Total comprehensive income attributable to:
Equity holders of the Parent
3,745
3,745
(21,513)
(21,513)
These statements should be read in conjunction with the accompanying notes.
14
HGL Limited Annual Report 2015 BALANCE SHEET
as at 30 September 2015
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Prepayments
Total current assets
Non current assets
Investment in associates
Property, plant and equipment
Intangible assets
Deferred tax assets
Total non current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Interest bearing loans and borrowings
Provisions
Income tax payable
Total current liabilities
Non-current liabilities
Provisions
Total non current liabilities
Total liabilities
Net assets
Equity
Issued capital
Other capital reserves
Accumulated losses
Total equity
These statements should be read in conjunction with the accompanying notes.
Consolidated entity
2015
$’000
2014
$’000
Notes
19
8
9
10
11
12
5
13
14
15
15
16
18
4,683
7,954
5,223
1,451
4,985
8,763
4,101
1,370
19,311
19,219
4,444
918
10,166
611
16,139
35,450
8,763
–
2,606
63
4,172
1,016
10,166
–
15,354
34,573
8,473
2,800
2,385
–
11,432
13,658
1,469
1,469
12,901
22,549
36,802
(1,078)
(13,175)
22,549
2,111
2,111
15,769
18,804
36,802
1,341
(19,339)
18,804
15
HGL Limited Annual Report 2015
CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
for the year ended 30 September 2015
For the year ended
30 September 2015
Issued
capital
(Note 16)
$’000
Foreign
Currency
Reserve
(Note 18)
$’000
Attributable to the equity holders of the parent
Employee
Share
Scheme
Reserve
(Note 18)
$’000
Other
Reserve
(Note 18)
$’000
Retained
earnings
$’000
Total
$’000
Balance at beginning of year
36,802
(200)
2,442
(901)
(19,339)
18,804
Profit for the year
Translation of overseas
controlled entities
Total comprehensive income
Transfer (to) / from Retained
earnings
–
–
–
–
–
23
23
–
–
–
–
(2,442)
–
–
–
–
3,722
3,722
–
23
3,722
3,745
2,442
–
Balance at end of year
36,802
(177)
–
(901)
(13,175)
22,549
For the year ended
30 September 2014
Issued
capital
(Note 16)
$’000
Foreign
Currency
Reserve
(Note 18)
$’000
Attributable to the equity holders of the parent
Employee
Share
Scheme
Reserve
(Note 18)
$’000
Other
Reserve
(Note 18)
$’000
Retained
earnings
$’000
Total
$’000
Non-
controlling
interests
$’000
–
–
–
–
–
–
Total
equity
$’000
18,804
3,722
23
3,745
–
22,549
Non-
controlling
interests
$’000
Total
equity
$’000
Balance at beginning of year
36,624
(117)
2,442
(901)
4,254
42,302
885
43,187
Loss for the year
Translation of overseas
controlled entities
Total comprehensive income
Dividend paid (Note 6)
Disposal of controlled entities
ESS shares issued
Shares issued under DRP
ESS shares bought back and
cancelled
–
–
–
–
–
35
777
(634)
–
(83)
(83)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(21,430)
(21,430)
–
(83)
(21,430)
(21,513)
(2,163)
(2,163)
–
–
–
–
–
35
777
(634)
Balance at end of year
36,802
(200)
2,442
(901)
(19,339)
18,804
–
–
–
–
(21,430)
(83)
(21,513)
(2,163)
(885)
(885)
–
–
–
–
35
777
(634)
18,804
These statements should be read in conjunction with the accompanying notes.
16
HGL Limited Annual Report 2015
CONSOLIDATED STATEMENT
OF CASH FLOWS
for the year ended 30 September 2015
Operating activities
Cash receipts in the course of operations
Cash payments in the course of operations
Interest received
Interest paid
Dividends received from associates
Net cash flows from operating activities
Investing activities
Proceeds from sale of property, plant and equipment
Purchase of property, plant and equipment
Net proceeds from disposal of subsidiary
Net cash flows (used in)/from investing activities
Financing activities
(Repayments)/Proceeds from borrowings
Loans repaid to associates
Dividends paid
Net cash flows used in financing activities
Net (decrease)/increase in cash and cash equivalents
Net foreign exchange difference
Cash and cash equivalents at 1 October
Cash and cash equivalents at 30 September
Consolidated entity
2015
$’000
2014
$’000
Notes
58,675
59,333
(56,293)
(56,204)
99
(211)
555
32
(307)
550
2,825
3,404
–
(327)
–
(327)
(2,800)
–
–
(2,800)
(302)
–
4,985
4,683
130
(431)
710
409
50
(2,289)
(1,386)
(3,625)
188
1
4,796
4,985
19
11
19
19
These statements should be read in conjunction with the accompanying notes.
17
HGL Limited Annual Report 2015 NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
for the year ended 30 September 2015
1. Corporate Information
The consolidated financial statements of HGL Limited
and its subsidiaries (collectively, the Group) for the year
ended 30 September 2015 were authorised for issue
in accordance with a resolution of the directors on
24th November 2015.
HGL Limited (the Company or the parent) is a for profit
company limited by shares incorporated in Australia
whose shares are publicly traded on the Australian
Securities Exchange.
The Group is principally engaged in the importation and
distribution of market leading branded products. The
Group’s principal place of business is Level 2, 68-72
Waterloo Road, Macquarie Park, NSW, 2113. Further
information on the nature of the operations and principal
activities of the Group is provided in the directors’ report.
2. Summary of Significant Accounting Policies
2.1 Basis of Preparation
The financial report is a general purpose financial
report, which has been prepared in accordance
with the requirements of the Corporations Act 2001,
Australian Accounting Standards and other authoritative
pronouncements of the Australian Accounting Standards
Board. The financial report has also been prepared
on a historical cost basis, except for certain financial
instruments.
The financial report is presented in Australian dollars and
all values are rounded to the nearest thousand dollars
($’000) unless otherwise stated.
The consolidated financial statements provide comparative
financial information in respect of the previous period.
Certain comparative amounts have been reclassified to
conform with current years presentation.
The financial statements have been prepared on the
going concern basis, which contemplates continuity of
normal business activities and the realisation of assets and
discharge of liabilities in the normal course of business.
2.2 Compliance with International Financial Reporting
Standards (IFRS)
The financial report also complies with International
Financial Reporting Standards (IFRS) as issued by the
International Accounting Standards Board.
2.3 Changes in Accounting Policies, Disclosures,
Standards and Interpretations
(i) Changes in Accounting Policies, New and Amended
Standards and Interpretations
The accounting policies adopted are consistent with
those of the previous financial reporting period, and have
been consistently applied throughout the years presented
unless noted below.
The Group has adopted all of the new and revised
Standards and Interpretations issued by the Australian
Accounting Standards Board (the AASB) that are relevant
to their operations and effective for the current year.
There were no new and revised Standards that have had
a material impact on the financial statements beyond
changes in disclosures.
The Group has early adopted AASB2014-9 ‘Amendments
to Australian Accounting Standards - Equity method in
separate financial statements’, which allows the parent
entity to equity account its investment in Mountcastle
Pty Ltd. There is no change to the Consolidated financial
statements as a result of adopting this accounting
standard, as the Group already uses equity accounting for
associates on consolidation.
The impact of this standard at 30 September 2015
has been an increase in Non-current assets for the
parent (Note 20) of $710,000 (2014 $497,000), and a
corresponding increase in Equity of the same amount. Net
profit after tax for the parent has increased by $231,000
(2014 $497,000).
(ii) Accounting Standards and Interpretations Issued but
not yet Effective
Certain Australian Accounting Standards and
Interpretations have recently been issued or amended
but are not yet effective and have not been adopted
by the Group for the annual reporting period ended
30 September 2015. The directors have not early adopted
any of these new or amended standards or interpretations.
The directors have not yet fully assessed the impact of
these new or amended standards (to the extent relevant
to the Group) and interpretations.
18
HGL Limited Annual Report 2015 2. Summary of Significant Accounting Policies (continued)
Effective for annual
reporting periods
beginning on or after
Expected to be initially
applied in the financial
year ending
AASB 9 ‘Financial Instruments’, and the relevant amending standards
1 January 2018
30 September 2019
AASB 15 ‘Revenue from Contracts with Customers’
1 January 2017
30 September 2018
AASB 2014-3 ‘Amendments to Australian Accounting Standards –
Accounting for Acquisitions of Interests in Joint Operations’
AASB 2015-2 ‘Amendments to Australian Accounting Standards –
Disclosure Initiative: Amendments to AASB 101’
AASB 2015-3 ‘Amendments to Australian Accounting Standards
arising from the withdrawal of AASB 1031 Materiality’
1 January 2016
30 September 2017
1 January 2016
30 September 2017
1 July 2015
30 September 2016
2.4 Significant Accounting Policies
(a) Basis of Consolidation
The consolidated financial statements comprise the financial statements of the Group and its subsidiaries as at
30 September 2015. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement
with the investee and has the ability to affect those returns through its power over the investee.
Specifically, the Group controls an investee if and only if the Group has:
– Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee)
– Exposure, or rights, to variable returns from its involvement with the investee
– The ability to use its power over the investee to affect its returns
Generally, there is a presumption that a majority of voting rights results in control. To support this presumption, and when
the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and
circumstances in assessing whether it has power over an investee, including:
– The contractual arrangement(s) with the other vote holders of the investee
– Rights arising from other contractual arrangements
– The Group’s voting rights and potential voting rights
The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes
to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over
the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a
subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the
Group gains control until the date the Group ceases to control the subsidiary.
Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders of the parent
of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into
line with the Group’s accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows
relating to transactions between members of the Group are eliminated in full on consolidation.
A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If
the Group loses control over a subsidiary, it derecognises the related assets (including goodwill), liabilities, non-controlling
interest and other components of equity while any resultant gain or loss is recognised in profit or loss. Any investment
retained is recognised at fair value.
(b) Business Combinations and Goodwill
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the
aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling
interest in the acquiree. For each business combination, the Group elects whether to measure the non-controlling interest
in the acquiree at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition related costs
are expensed as incurred and included in administrative expenses.
When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification
and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the
acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.
19
HGL Limited Annual Report 2015 NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
continued
2. Summary of Significant Accounting Policies
(continued)
If the business combination is achieved in stages, the
previously held equity interest is remeasured at its
acquisition date fair value and any resulting gain or loss is
recognised in profit or loss.
Any contingent consideration to be transferred by the
acquirer will be recognised at fair value at the acquisition
date. Contingent consideration classified as an asset or
liability that is a financial instrument and within the scope
of AASB 139 Financial Instruments: Recognition and
Measurement, is measured at fair value with changes
in fair value recognised either in either profit or loss or
as a change to other comprehensive income (OCI). If
the contingent consideration is not within the scope
of AASB 139, it is measured in accordance with the
appropriate Australian Accounting Standards. Contingent
consideration that is classified as equity is not remeasured
and subsequent settlement is accounted for within equity.
Goodwill is initially measured at cost, being the excess
of the aggregate of the consideration transferred and
the amount recognised for non-controlling interests,
and any previous interest held, over the net identifiable
assets acquired and liabilities assumed. If the fair value
of the net assets acquired is in excess of the aggregate
consideration transferred, the Group re-assesses whether
it has correctly identified all of the assets acquired and
all of the liabilities assumed and reviews the procedures
used to measure the amounts to be recognised at the
acquisition date. If the re-assessment still results in an
excess of the fair value of net assets acquired over the
aggregate consideration transferred, then the gain is
recognised in profit or loss.
After initial recognition, goodwill is measured at cost less
any accumulated impairment losses. For the purpose
of impairment testing, goodwill acquired in a business
combination is, from the acquisition date, allocated
to each of the Group’s cash-generating units that are
expected to benefit from the combination, irrespective
of whether other assets or liabilities of the acquiree are
assigned to those units.
Where goodwill has been allocated to a cash-generating
unit and part of the operation within that unit is disposed
of, the goodwill associated with the disposed operation
is included in the carrying amount of the operation
when determining the gain or loss on disposal. Goodwill
disposed in these circumstances is measured based
on the relative values of the disposed operation and the
portion of the cash-generating unit retained.
(c) Investment in Associates
An associate is an entity over which the Group has
significant influence. Significant influence is the power to
participate in the financial and operating policy decisions
of the investee, but is not in control or joint control over
those policies.
The Group’s investments in its associate are accounted
for using the equity method.
Under the equity method, the investment in an associate
is initially recognised at cost. The carrying amount of
the investment is adjusted to recognise changes in the
Group’s share of net assets of the associate since the
acquisition date. Goodwill relating to the associate is
included in the carrying amount of the investment and is
neither amortised nor individually tested for impairment.
The statement of profit or loss reflects the Group’s
share of the results of operations of the associate. Any
change in OCI of those investees is presented as part
of the Group’s OCI. In addition, when there has been a
change recognised directly in the equity of the associate,
the Group recognises its share of any changes, when
applicable, in the statement of changes in equity.
Unrealised gains and losses resulting from transactions
between the Group and the associate are eliminated to
the extent of the interest in the associate.
The aggregate of the Group’s share of profit or loss of
an associate is shown on the face of the statement of
profit or loss outside operating profit and represents
profit or loss after tax and non-controlling interests in
the subsidiaries of the associate.
After application of the equity method, the Group
determines whether it is necessary to recognise an
impairment loss on its investment in its associate or joint
venture. At each reporting date, the Group determines
whether there is objective evidence that the investment in
the associate or joint venture is impaired. If there is such
evidence, the Group calculates the amount of impairment
as the difference between the recoverable amount of
the associate or joint venture and its carrying value, then
recognises the loss as ‘Share of profit of an associate
and a joint venture’ in the statement of profit or loss.
Upon loss of significant influence over the associate or
joint control over the joint venture, the Group measures
and recognises any retained investment at its fair value.
Any difference between the carrying amount of the
associate or joint venture upon loss of significant influence
or joint control and the fair value of the retained investment
and proceeds from disposal is recognised in profit or loss.
20
HGL Limited Annual Report 2015 2. Summary of Significant Accounting Policies
(continued)
(d) Foreign Currency Translation
The Group’s consolidated financial statements are
presented in Australian dollars ($), which is also the
parent’s functional currency. For each entity the Group
determines the functional currency and items included in
the financial statements of each entity are measured using
that functional currency.
Transactions and Balances
Foreign currency transactions are translated into Australian
currency (the functional currency) at the rate of exchange
at the date of the transaction. Amounts receivable or
payable in foreign currencies are translated at the rates of
exchange ruling at balance date. The resulting exchange
differences are brought to account in determining the
profit or loss for the year.
Group Companies
On consolidation, the assets and liabilities of foreign
operations are translated into Australian dollars at
the rate of exchange prevailing at the reporting date
and their statements of profit or loss are translated at
average exchange rates during the year. The exchange
differences arising on translation for consolidation purpose
are recognised in other comprehensive income. On
disposal of a foreign operation, the components of other
Comprehensive Income relating to that particular foreign
operation is recognised in Profit or Loss.
(e) Revenue Recognition
Revenue is recognised to the extent that it is probable
that the economic benefits will flow to the Group and the
revenue can be reliably measured, regardless of when
the payment is received. Revenue is measured at the fair
value of the consideration received or receivable, taking
into account contractually defined terms of payment and
excluding taxes or duty.
Sale of Goods
Revenue from the sale of goods is recognised when the
significant risks and rewards of ownership of the goods
have passed to the buyer, usually on delivery of the goods.
Revenue from the sale of goods is measured at the fair
value of the consideration received or receivable, net
of returns and allowances, trade discounts and volume
rebates.
Rendering of Services
Service contract revenue is brought to account by
reference to the expired period of the contract. Amounts
received and receivable in relation to the unexpired period
of contracts at year end are treated as deferred revenue.
Interest Income
Interest revenue is recognised on a time proportionate
basis that takes into account the effective yield on the
financial asset.
Dividends
Revenue is recognised from dividends when the Group’s
right to receive the dividends payment is established,
which is generally when shareholders approve the
dividend.
(f) Taxes
Current Income Tax
Current income tax assets and liabilities for the current
period are measured at the amount expected to be
recovered from or paid to the taxation authorities. The tax
rates and tax laws used to compute the amount are those
that are enacted or substantively enacted, at the reporting
date in the countries where the Group operates and
generates taxable income.
Current income tax relating to items recognised directly in
equity is recognised in equity and not in the statement of
profit or loss.
Deferred Tax
Deferred tax is provided using the liability method on
temporary differences between the tax bases of assets
and liabilities and their carrying amounts for financial
reporting purposes at the reporting date.
Deferred tax assets and liabilities are not recognised if the
temporary differences giving rise to them arise from the
initial recognition of assets and liabilities (other than as a
result of a business combination) which affects neither
taxable income nor accounting profit. Furthermore, a
deferred tax liability is not recognised in relation to taxable
temporary differences arising from goodwill.
Deferred tax assets are recognised for all deductible
temporary differences, the carry forward of unused tax
credits and any unused tax losses, to the extent that it is
probable that taxable profit will be available for utilisation.
The carrying amount of deferred tax assets is reviewed
at each reporting date and reduced to the extent that it
is no longer probable that sufficient taxable profit will be
available to allow all or part of the deferred tax asset to be
utilised. Unrecognised deferred tax assets are reassessed
at each reporting date and are recognised to the extent
that it has become probable that future taxable profits will
allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax
rates that are expected to apply in the year when the asset
is realised or the liability is settled, based on tax rates (and
tax laws) that have been enacted or substantively enacted
at the reporting date.
Deferred tax assets and deferred tax liabilities are offset
if a legally enforceable right exists to set off current tax
assets against current tax liabilities and the deferred taxes
relate to the same taxable entity and the same taxation
authority.
21
HGL Limited Annual Report 2015 NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
continued
2. Summary of Significant Accounting Policies
(continued)
Tax benefits acquired as part of a business combination,
but not satisfying the criteria for separate recognition at
that date, are recognised subsequently if new information
about facts and circumstances change. The adjustment
is either treated as a reduction to goodwill (as long as it
does not exceed goodwill) if it was incurred during the
measurement period or recognised in profit or loss.
Tax Consolidation Legislation
HGL Limited and its wholly-owned Australian controlled
entities have implemented tax consolidation, and entered
into tax funding and tax sharing agreements.
The head entity, HGL Limited and the controlled entities
in the tax consolidated group continue to account for
their own current and deferred tax amounts. These
tax amounts are measured as if each entity in the tax
consolidated group continues to be a stand alone
taxpayer in its own right, adjusted for intercompany
transactions.
In addition to the current and deferred tax amounts, HGL
Limited also recognises the current tax liabilities (or assets)
and the deferred tax assets from unused tax losses and
unused tax credits assumed from controlled entities in the
tax consolidated group.
Assets or liabilities, recorded at the tax equivalent
amount, arising under tax funding agreements with the
tax consolidated entities are recognised as amounts
receivable from or payable to other entities in the group.
Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the
amount of GST, except:
– When the GST incurred on a sale or purchase of assets
or services is not payable to or recoverable from the
taxation authority, in which case the GST is recognised
as part of the revenue or the expense item or as part of
the cost of acquisition of the asset, as applicable
– When receivables and payables are stated with the
amount of GST included
The net amount of GST recoverable from, or payable to,
the taxation authority is included as part of receivables or
payables in the statement of financial position.
Cash flows are included in the statement of cash flows
on a gross basis and the GST component of cash flows
arising from investing and financing activities, which is
recoverable from, or payable to, the taxation authority is
classified as part of operating cash flows.
(g) Cash Dividend and Non-cash Distribution to Equity
Holders of the Parent
The Company recognises a liability to pay cash or
make non-cash distributions to equity holders of the
parent when the distribution is authorised and the
distribution is no longer at the discretion of the Company.
A corresponding amount is recognised directly in equity.
22
(h) Property, Plant and Equipment
Plant and equipment, leasehold improvements and
equipment under finance lease are stated at cost less
accumulated depreciation and impairment losses. Cost
includes expenditure that is directly attributable to the
acquisition of the item.
The residual values, useful lives and methods of
depreciation of property, plant and equipment are
reviewed at each financial year end and adjusted
prospectively, if appropriate.
Depreciation
Items of plant and equipment are depreciated over
their estimated useful lives using the straight line and
reducing balance method. The estimated useful lives
and depreciation method is reviewed at the end of each
reporting period.
The cost of improvements to or on leasehold properties
is depreciated over the lesser of the period of the lease or
the estimated useful life of the improvement.
The following estimated useful lives are used in the
calculation of depreciation:
– Plant and equipment
–
Leased plant and equipment
3 to 10 years
the lease term
(typically 3 to 5 years)
Leased Assets
Finance leases, which effectively transfer to the Group
substantially all the risks and benefits incidental to
ownership of leased items, are capitalised at the lower of
fair value or present value of the minimum lease payments,
disclosed as property, plant and equipment and amortised
over the period during which the Group is expected to
benefit from use of the leased assets.
Operating lease payments, where the lessor effectively
retains substantially all the risks and benefits incidental to
ownership of the leased items, are charged to the profit or
loss statement in the period in which they are incurred.
(i) Leases
The determination of whether an arrangement is,
or contains, a lease is based on the substance of
the arrangement at the inception of the lease. The
arrangement is, or contains, a lease if fulfilment of the
arrangement is dependent on the use of a specific asset
or assets or the arrangement conveys a right to use the
asset or assets, even if that right is not explicitly specified
in an arrangement.
Group as a Lessee
A lease is classified at the inception date as a finance
lease or an operating lease. A lease that transfers
substantially all the risks and rewards incidental to
ownership to the Group is classified as a finance lease.
An operating lease is a lease other than a finance lease.
HGL Limited Annual Report 2015 2. Summary of Significant Accounting Policies
(continued)
Finance leases are capitalised at the commencement
of the lease at the inception date fair value of the leased
property or, if lower, at the present value of the minimum
lease payments. Lease payments are apportioned
between finance charges and reduction of the lease
liability so as to achieve a constant rate of interest on
the remaining balance of the liability. Finance charges
are recognised in finance costs in the statement of profit
or loss.
A leased asset is depreciated over the useful life of the
asset. However, if there is no reasonable certainty that the
Group will obtain ownership by the end of the lease term,
the asset is depreciated over the shorter of the estimated
useful life of the asset and the lease term.
Operating lease payments are recognised as an operating
expense in the statement of profit or loss on a straight-line
basis over the lease term.
(j) Borrowing Costs
Borrowing costs are expensed in the period in which they
occur. Borrowing costs consist of interest and other costs
that an entity incurs in connection with the borrowing of
funds.
(k) Intangible Assets
Intangible assets acquired separately are measured on
initial recognition at cost. The cost of intangible assets
acquired in a business combination is their fair value
at the date of acquisition. Following initial recognition,
intangible assets are carried at cost less any accumulated
amortisation and accumulated impairment losses.
The useful lives of intangible assets are assessed as either
finite or indefinite.
Intangible assets with finite lives are amortised over
the useful economic life and assessed for impairment
whenever there is an indication that the intangible
asset may be impaired. The amortisation period and
the amortisation method for an intangible asset with a
finite useful life are reviewed at least at the end of each
reporting period. Changes in the expected useful life or
the expected pattern of consumption of future economic
benefits embodied in the asset are considered to modify
the amortisation period or method, as appropriate,
and are treated as changes in accounting estimates
and adjusted on a prospective basis. The amortisation
expense on intangible assets with finite lives is recognised
in the statement of profit or loss as the expense category
that is consistent with the function of the intangible assets.
Intangible assets with indefinite useful lives are not
amortised, but are tested for impairment annually,
either individually or at the cash-generating unit level.
The assessment of indefinite life is reviewed annually
to determine whether the indefinite life continues to be
supportable. If not, the change in useful life from indefinite
to finite is made on a prospective basis.
(l) Financial Instruments - Initial Recognition and
Subsequent Measurement
A financial instrument is any contract that gives rise to a
financial asset of one entity and a financial liability or equity
instrument of another entity.
(i) Financial Assets
Initial Recognition and Measurement
Financial assets are classified, at initial recognition,
as financial assets at fair value through profit or loss,
loans and receivables, held-to-maturity investments,
Available for Sale (AFS) financial assets, or as derivatives
designated as hedging instruments in an effective hedge,
as appropriate.
Financial Assets at Fair Value through Profit or Loss
Financial assets at fair value through profit or loss include
financial assets held for trading and financial assets
designated upon initial recognition at fair value through
profit or loss. Financial assets are classified as held for
trading if they are acquired for the purpose of selling
or repurchasing in the near term. Derivatives, including
separated embedded derivatives are also classified as
held for trading unless they are designated as effective
hedging instruments as defined by AASB 139.
The Group has not designated any financial assets at fair
value through profit or loss.
Loans and Receivables
Loans and receivables are non-derivative financial assets
with fixed or determinable payments that are not quoted in
an active market. After initial measurement, such financial
assets are subsequently measured at amortised cost less
impairment.
This category generally applies to trade and other
receivables. For more information on receivables, refer to
Note 8.
Held-to-Maturity Investments
Non-derivative financial assets with fixed or determinable
payments and fixed maturities are classified as held-to-
maturity when the Group has the positive intention and
ability to hold them to maturity. After initial measurement,
held-to-maturity investments are measured at amortised
cost less impairment. The Group did not have any held-to-
maturity investments during the year.
AFS Financial Assets
AFS financial assets include equity investments and
debt securities. Equity investments classified as AFS
are those that are neither classified as held for trading
nor designated at fair value through profit or loss. Debt
securities in this category are those that are intended to be
held for an indefinite period of time and that may be sold in
response to needs for liquidity or in response to changes
in the market conditions.
The Group did not have AFS financial assets during
the year.
23
HGL Limited Annual Report 2015 NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
continued
2. Summary of Significant Accounting Policies
(continued)
Impairment of Financial Assets
The Group assesses, at each reporting date, whether
there is objective evidence that a financial asset or a
group of financial assets is impaired. An impairment exists
if one or more events that has occurred since the initial
recognition of the asset (an incurred ‘loss event’) has an
impact on the estimated future cash flows of the financial
asset or the group of financial assets that can be reliably
estimated. Evidence of impairment may include indications
that the debtor or a group of debtors is experiencing
significant financial difficulty, default or delinquency in
interest or principal payments, the probability that they
will enter bankruptcy or other financial reorganisation and
observable data indicating that there is a measurable
decrease in the estimated future cash flows, such as
changes in arrears or economic conditions that correlate
with defaults.
Financial Assets carried at Amortised Cost
For financial assets carried at amortised cost, the Group
first assesses whether impairment exists individually
for financial assets that are individually significant, or
collectively for financial assets that are not individually
significant. If the Group determines that no objective
evidence of impairment exists for an individually assessed
financial asset, whether significant or not, it includes the
asset in a group of financial assets with similar credit
risk characteristics and collectively assesses them for
impairment. Assets that are individually assessed for
impairment and for which an impairment loss is, or
continues to be, recognised are not included in a collective
assessment of impairment.
The amount of any impairment loss identified is measured
as the difference between the asset’s carrying amount
and the present value of estimated future cash flows
(excluding future expected credit losses that have not
yet been incurred). The present value of the estimated
future cash flows is discounted at the financial asset’s
original EIR.
(ii) Financial Liabilities
Initial Recognition and Measurement
Financial liabilities are classified, at initial recognition, as
financial liabilities at fair value through profit or loss, loans
and borrowings, payables, or as derivatives designated as
hedging instruments in an effective hedge, as appropriate.
All financial liabilities are recognised initially at fair value
and, in the case of loans and borrowings and payables,
net of directly attributable transaction costs.
The Group’s financial liabilities include trade and other
payables and loans and borrowings.
Subsequent Measurement
The measurement of financial liabilities depends on their
classification, as described below:
Loans and Borrowings
This is the category most relevant to the Group. After
initial recognition, interest bearing loans and borrowings
are subsequently measured at amortised cost using the
EIR method. Gains and losses are recognised in the profit
or loss when the liabilities are derecognised as well as
through the EIR amortisation process.
Amortised cost is calculated by taking into account any
discount or premium on acquisition and fees or costs that
are an integral part of the EIR. The EIR amortisation is
included in finance costs in the statement of profit or loss.
This category generally applies to interest-bearing loans
and borrowings. For more information refer Note 14.
De-recognition
A financial liability is de-recognised when the obligation
under the liability is discharged or cancelled, or expires.
When an existing financial liability is replaced by another
from the same lender on substantially different terms, or
the terms of an existing liability are substantially modified,
such an exchange or modification is treated as the
de-recognition of the original liability and the recognition
of a new liability. The difference in the respective carrying
amounts is recognised in the statement of profit or loss.
(m) Derivative Financial Instruments and Hedge
Accounting
Initial Recognition and Subsequent Measurement
The Group uses derivative financial instruments, such as
forward currency contracts to hedge its foreign currency
risks. Such derivative financial instruments are initially
recognised at fair value on the date on which a derivative
contract is entered into and are subsequently remeasured
at fair value. Derivatives are carried as financial assets
when the fair value is positive and as financial liabilities
when the fair value is negative.
Any gains or losses arising from changes in the fair value
of derivatives are taken directly to profit or loss.
(n) Inventories
Inventories are valued at the lower of cost and net
realisable value.
Cost is calculated with reference to purchase price,
including freight and other associated costs, and is
based on a weighted average cost. Net realisable value
represents the estimated selling price less all estimated
costs to be incurred in marketing, selling and distribution.
24
HGL Limited Annual Report 2015 2. Summary of Significant Accounting Policies
(continued)
(o) Impairment of Non-financial Assets
The Group assesses, at each reporting date, whether
there is an indication that an asset may be impaired. If any
indication exists, or when annual impairment testing for
an asset is required, the Group estimates the asset’s
recoverable amount. An asset’s recoverable amount is
the higher of an asset’s or cash-generating unit’s (CGU)
fair value less costs of disposal and its value in use.
Recoverable amount is determined for an individual asset,
unless the asset does not generate cash inflows that are
largely independent of those from other assets or groups
of assets. When the carrying amount of an asset or CGU
exceeds its recoverable amount, the asset is considered
impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows
are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset.
In determining fair value less costs to sell, recent market
transactions are taken into account.
Impairment losses of continuing operations, including
impairment on inventories, are recognised in the statement
of profit or loss in expense categories consistent with the
function of the impaired asset.
For assets excluding goodwill, an assessment is made
at each reporting date to determine whether there is any
indication that previously recognised impairment losses
may no longer exist or may have decreased. If such
indication exists, the Group estimates the asset’s or CGUs
recoverable amount. A previously recognised impairment
loss is reversed only if there has been a change in the
assumptions used to determine the asset’s recoverable
amount since the last impairment loss was recognised.
The reversal is limited so that the carrying amount of the
asset does not exceed its recoverable amount, nor exceed
the carrying amount that would have been determined, net
of depreciation, had no impairment loss been recognised
for the asset in prior years.
Goodwill is tested for impairment annually as at
30 September and when circumstances indicate that the
carrying value may be impaired.
Impairment is determined for goodwill by assessing the
recoverable amount of each CGU (or group of CGUs) to
which the goodwill relates. When the recoverable amount
of the CGU is less than its carrying amount, an impairment
loss is recognised in the statement of profit or loss.
Impairment losses relating to goodwill cannot be reversed
in future periods.
(p) Cash and Short-term Deposits
For purposes of the cash flow statement, cash includes
deposits at call which are readily convertible to cash
on hand and which are used in the cash management
function on a day-to-day basis, net of outstanding bank
overdrafts.
For the purpose of the consolidated statement of cash
flows, cash and cash equivalents consist of cash and
short-term deposits, as defined above, net of outstanding
bank overdrafts as they are considered an integral part of
the Group’s cash management.
(q) Provisions
General
Provisions are recognised when the Group has a present
obligation (legal or constructive) as a result of a past event,
it is probable that an outflow of resources embodying
economic benefits will be required to settle the obligation
and a reliable estimate can be made of the amount of
the obligation. When the Group expects some or all of
a provision to be reimbursed, for example, under an
insurance contract, the reimbursement is recognised as
a separate asset, but only when the reimbursement is
virtually certain. The expense relating to any provision
is presented in the statement of profit or loss net of any
reimbursement.
Restructuring Provisions
Restructuring provisions are recognised by the Group only
when a detailed formal plan identifies the business or part
of the business concerned, the location and number of
employees affected, a detailed estimate of the associated
costs, and an appropriate timeline and the employees
affected have been notified of the plan’s main features.
Onerous Contracts Provisions
Present obligations arising under onerous contracts are
recognised and measured as provisions. An onerous
contract is considered to exist where the Group has a
contract under which the unavoidable costs of meeting
the obligations under the contract exceed the economic
benefits expected to be received from the contract.
(r) Employee Benefits
Provision is made for benefits accruing to employees in
respect of wages and salaries, annual leave and long
service leave when it is probable that settlement will be
required and are capable of being measured reliably.
Employee benefits expected to be settled wholly within
12 months are measured at their nominal values using the
remuneration rate expected to apply at time of settlement.
Employee benefit provisions, which are not expected to
be settled wholly within 12 months, are measured at the
present value of the estimated future cash outflows to be
made by the Group in respect of services provided by
employees up to the reporting date.
Contributions to defined contribution superannuation
plans are expensed when incurred.
25
HGL Limited Annual Report 2015 NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
continued
2. Summary of Significant Accounting Policies
(continued)
(s) Fair Value Measurement
The Group measures financial instruments such as
derivatives at fair value at each balance sheet date.
Fair value is the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date.
The fair value measurement is based on the presumption
that the transaction to sell the asset or transfer the liability
takes place either:
–
–
In the principal market for the asset or liability; or
In the absence of a principal market, in the most
advantageous market for the asset or liability.
The principal or the most advantageous market must
be accessible to the Group.
The fair value of an asset or a liability is measured using
the assumptions that market participants would use
when pricing the asset or liability, assuming that market
participants act in their economic best interest.
A fair value measurement of a non-financial asset takes
into account a market participant’s ability to generate
economic benefits by using the asset in its highest and
best use or by selling it to another market participant that
would use the asset in its highest and best use.
The Group uses valuation techniques that are appropriate
in the circumstances and for which sufficient data are
available to measure fair value, maximising the use of
relevant observable inputs and minimising the use of
unobservable inputs.
All assets and liabilities for which fair value is measured
or disclosed in the financial statements are categorised
within the fair value hierarchy, described as follows, based
on the lowest level input that is significant to the fair value
measurement as a whole:
–
–
–
Level 1 – Quoted (unadjusted) market prices in active
markets for identical assets or liabilities
Level 2 – Valuation techniques for which the
lowest level input that is significant to the fair value
measurement is directly or indirectly observable
Level 3 – Valuation techniques for which the
lowest level input that is significant to the fair value
measurement is unobservable
There are no level 3 categorised items in the Group.
For assets and liabilities that are recognised in the financial
statements at fair value on a recurring basis, the Group
determines whether transfers have occurred between
levels in the hierarchy by re-assessing categorisation
(based on the lowest level input that is significant to the
fair value measurement as a whole) at the end of each
reporting period.
There were no transfers between category levels during
the current or prior financial year.
26
(t) Operating Segments
An operating segment is a component of an entity that
engages in business activities from which it may earn
revenues and incur expenses, and for which discrete
financial information is available. Operating segments are
based on products, having been identified based on the
information provided to the Board of Directors.
Segment EBIT represents the profit before interest and
tax earned by each segment after allocation of central
administration costs. This is the measure reported to the
Board of Directors for the purposes of resource allocation
and assessment of segment performance.
Some items which are not attributable to specific
segments, such as finance costs and some other
expenses, are listed separately in the segment note as
‘unallocated’ items.
The accounting policies used by the Group in reporting
segments internally are the same as those used by the
Group in these consolidated financial statements.
3. Significant Accounting Judgements,
Estimates and Assumptions
The preparation of the Group’s consolidated financial
statements requires management to make judgements,
estimates and assumptions about carrying values of
assets and liabilities that are not readily apparent from
other sources. The estimates and associated assumptions
are based on historical experience and various other
factors that are believed to be reasonable under the
circumstance, the results of which form the basis of
making the judgements.
Actual results may differ from these estimates. The
estimates and underlying assumptions are reviewed on
an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised
if the revision affects only that period, or in the period of
the revision and future periods if the revision affects both
current and future periods.
Information about significant areas of estimation,
uncertainty and critical judgements in applying accounting
policies for the Group are set out below:
Deferred Tax Assets (Note 5)
Determining the extent to which deferred tax asset
balances should be recognised requires an estimation
of future taxable profits. The key assumptions in the
estimation are future profitability and sales growth rates,
together with changes in margins and expenses. These
assumptions will be closely monitored and adjustments
made in future periods if such adjustments are
appropriate.
Inventories (Note 9)
The key assumptions in estimating the net realisable value
of inventories require the use of management judgement
and are reviewed annually. Analysis of the Group’s
inventories involves consideration of physical stock levels,
months in stock and future saleability.
HGL Limited Annual Report 2015 3. Significant Accounting Judgements, Estimates and Assumptions (continued)
Intangibles (Note 12)
Determining whether goodwill is impaired requires an estimation of the value in use of the cash generating units to which
goodwill has been allocated. The value in use calculation requires estimation of the future cash flows expected to arise
from the cash generating unit, and application of a suitable discount rate to calculate present value.
The key assumptions for the value in use calculations are those regarding discount rates, long term growth rates, expected
changes in margins and expenses. The assumptions regarding long term growth rates, together with changes in margins
and expenses are based on past experience and expectations of changes in the market. Note 12 (Intangible assets)
contains details of the specific assumptions made in calculating the value in use.
The key assumptions will be closely monitored and adjustments made in future periods if such adjustments are
appropriate.
Provisions (Note 15)
When assessing surplus lease space, key assumptions are the ability to sublet and the extent to which the business may
grow or reconfigure and so utilise the space. In the absence of a firm subletting proposal there is no benefit recognised for
any potential subletting income.
4. Profit from Operations
4.1 Revenue
Sales revenue
4.2 Expenses
Depreciation
Plant and equipment
Employee benefit expenses
Salary and wages
Defined contribution superannuation expense
Bad and doubtful debts – trade debtors
Write down of inventories to net realisable value
Operating lease expenses – minimum lease payments
Foreign exchange loss/(gain)
4.3 Finance Costs
Financial institutions
Associates
Total finance costs
Consolidated entity
2015
$’000
2014
$’000
52,000
50,771
288
929
13,371
873
14,244
16
(39)
1,433
(100)
211
–
211
14,109
944
15,053
153
2,687
1,966
86
275
33
308
27
HGL Limited Annual Report 2015 NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
continued
4. Profit from Operations (continued)
4.4 Other Income
Interest
Associate (Note 10)
Financial Institutions
Employee share scheme – key management personnel
Total interest
Dividends
Other income
Other income
Total other income
Consolidated entity
2015
$’000
2014
$’000
16
83
–
99
55
35
90
19
65
50
134
–
–
–
189
134
4.5 Significant Items
The board manages the business using underlying profit, which is a non-statutory measure designed to reflect statutory
profit excluding the effect of irregular transactions that are not part of the core or ongoing business operations. Underlying
profit is a key consideration used by the board when determining short term incentive payments for key management
personnel, and also when determining the level of any dividends declared. A summary of the items considered to be
non-underlying is as follows:
Non-underlying items
Impairment of goodwill (1)
Inventory provisions (2)
Surplus lease provisions (3)
Impairment of fixed assets (1)
Loss and impairment of equity accounted associate (1, 4)
Restructuring costs (1)
Other non-underlying items (1)
Total non-underlying items before tax
Recognition/(derecognition) of deferred tax assets
Total non-underlying items after tax
(1) Disclosed in “Administration expenses” in statement of profit and loss
(2) Disclosed in “Cost of goods sold” in statement of profit and loss
(3) Disclosed in “Occupancy expenses” in statement of profit and loss
(4) Disclosed in “Share of associates profit/(loss)” in statement of profit and loss
–
–
200
–
728
(432)
–
496
611
(5,516)
(2,358)
(2,300)
(1,555)
(2,658)
(133)
(14)
(14,534)
(7,429)
1,107
(21,963)
28
HGL Limited Annual Report 2015 5. Income Tax
The major components of income tax expense for the years ended 30 September 2015 and 2014 are:
Consolidated statement of profit or loss
Current income tax:
Current income tax charge
Prior year under/(over) provision
Derecognition/(Re-recognition) of deferred tax assets
Prima facie income tax benefit on profit/(loss) from ordinary activities at 30% (2014: 30%)
Differences in overseas tax rates
Equity accounted investments
Impairment of associate
(Recognition)/Derecognition of deferred tax assets
Current year temporary differences not brought to account
Impairment of goodwill
Income on scheme loans recognised directly in equity
Tax effect on disposal of controlled entities
Non allowable expenses
Prior year under/(over) provision
Recognition of previously unrecognised tax losses
Current tax assets
Income tax payable attributable to:
Parent entity
Entities in the tax consolidated group
Other entities not in the tax consolidated group
Income tax payable
Deferred tax
Deferred tax assets comprises
Employee benefits
Consolidated entity
2015
$’000
2014
$’000
63
–
(611)
(548)
948
4
(232)
–
(611)
(627)
–
–
–
137
–
(167)
(548)
–
–
–
(63)
(63)
611
611
(436)
45
7,429
7,038
(4,318)
–
754
60
7,429
1,298
1,655
29
77
9
45
–
7,038
–
–
–
–
–
–
–
29
HGL Limited Annual Report 2015 NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
continued
5. Income Tax (continued)
Consolidated entity
2015
Opening balance
Charged to income
Charged to equity
Total
Consolidated entity
2014
Opening balance
Charged to income
Charged to equity
Total
Employee
provisions
$’000
–
611
–
611
Employee
Provisions
$’000
Other
provisions
$’000
Tax losses -
capital
realised
$’000
Tax losses -
revenue
realised
$’000
804
(804)
–
–
1,946
(1,946)
–
–
95
(95)
–
–
4,584
(4,584)
–
–
Accounting standards require probable use for deferred tax assets. In view of trading results, $1.9 million of additional
deferred tax assets in respect of temporary differences have not been recognised in the financial statements. In addition,
the Group has approximately $18.0 million of gross revenue losses and $11.0 million of gross capital losses which have not
been brought to account at 30 September 2015.
30
HGL Limited Annual Report 2015 6. Dividends Paid and Proposed
Cash dividend on ordinary shares declared and paid:
Final dividend for 2014: nil cents per share (2013: 2.0 cents per share)
Interim dividend for 2015: nil cents per share (2014: 2.0 cents per share)
Dividends paid in cash or satisfied by the issue of shares under the Dividend Reinvestment Plan:
Paid in Cash
Satisfied by issue of shares
Dividends paid
Proposed dividends on ordinary shares:
Consolidated entity
2015
$’000
2014
$’000
–
–
–
–
–
–
1,073
1,090
2,163
1,386
777
2,163
Proposed final dividend of 1.5 cents per share not recognised as a liability as at 30 September
(2014: Nil)
809
–
Franking credit balance
The amount of franking credits available for the subsequent financial year are:
Franking account balance as at the end of the financial year at 30% (2014: 30%)
10,168
9,930
Franking credits that arise from the payment of income tax payable as at the end of the
financial year
Franking debits that will arise from the payment of dividends subsequent to the end of the
financial year
Franking credits that will arise from the receipt of dividends recognised as receivables at the
reporting date
–
(347)
–
–
–
–
9,821
9,930
Dividend Reinvestment Plan
Brief details of the Plan are:
shareholders are eligible to participate, except where local legislation prevents it;
–
– participation is optional;
–
– payment is made through the allotment of shares, rather than cash, at a discount of up to 7.5% on the average market
full or partial participation is available;
price of the Company’s ordinary shares;
no brokerage, commission, stamp duty, or administration costs are payable by shareholders; and
–
– participants may withdraw from the plan at any time by notice in writing to the Registry.
31
HGL Limited Annual Report 2015 NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
continued
7. Earnings Per Share (EPS)
The following reflects the income and share data used in the basic and diluted EPS computations:
Profit attributable to ordinary equity holders of basic EPS
Profit attributable to ordinary equity holders for diluted EPS
Weighted average number of ordinary shares for basic EPS
Weighted average number of ordinary shares for diluted EPS
Basic Earnings per Share
Diluted Earnings per Share
8. Trade and Other Receivables
Trade receivables
Allowance for doubtful debts
Net trade receivables
Other debtors
Total receivables
Movement in allowance for doubtful debts
Opening balance
Additional provisions
Amounts written off
Transfers to/(from) other provisions
Disposal of controlled entities
Trade receivables past due
Not yet due
Past due 0-30 days
Past due 31-60 days
Past due 61-90 days
Past due greater than 90 days
32
Consolidated entity
2015
$’000
3,722
3,722
2014
$’000
(21,430)
(21,430)
53,956,011
54,433,050
53,956,011
54,433,050
Consolidated entity
2015
Cents
6.9
6.9
2014
Cents
(39.4)
(39.4)
Consolidated entity
2015
$’000
7,816
(302)
7,514
440
7,954
(329)
(16)
43
–
–
(302)
6,527
818
208
101
162
2014
$’000
8,542
(329)
8,213
550
8,763
(424)
(153)
82
106
60
(329)
6,656
1,277
243
253
113
7,816
8,542
HGL Limited Annual Report 2015 8. Trade and Other Receivables (continued)
Trade receivables and other debtors have carrying amounts that reasonably approximate fair value.
Trade receivables are non-interest bearing and are generally on terms of 30 days.
An allowance for doubtful debts is recognised when there is objective evidence that the customer will not be able to pay.
As the concentration of credit risk is limited due to the customer base being large and unrelated, there is no further credit
provision required in excess of the allowance for doubtful debts.
9. Inventories
Finished goods (at lower of cost or net realisable value)
10. Investment in Associates
2015
Mountcastle Pty Ltd
Createc Pty Ltd
2014
Mountcastle Pty Ltd
Createc Pty Ltd
Mountcastle Pty Ltd
The principal activity of Mountcastle was headwear and uniform distribution.
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net Assets
Ownership interest
Carrying amount of the investment
Consolidated entity
2015
$’000
5,223
2014
$’000
4,101
Ownership
interest
%
Carrying
value
$’000
Profit
contribution
$’000
50
50
50
50
4,444
–
4,444
4,172
–
4,172
772
–
772
725
(3,238)
(2,513)
Consolidated entity
2015
$’000
10,176
749
(1,833)
(203)
8,889
50%
4,444
2014
$’000
9,344
757
(1,582)
(175)
8,344
50%
4,172
33
HGL Limited Annual Report 2015
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
continued
10. Investment in Associates (continued)
The above amounts of assets and liabilities include the following:
Cash and cash equivalent
Current financial assets
Non-current financial assets
Revenues
Profit after income tax from continuing operations
Dividends received
The above profit for the year includes the following:
Depreciation and amortisation
Interest expenses
Interest income
Income tax expense
Consolidated entity
2015
$’000
2014
$’000
497
(272)
–
13,154
1,544
500
75
16
5
640
615
(274)
(174)
11,983
1,450
550
79
16
8
621
There were no capital or lease commitments, and no contingent liabilities incurred at balance date.
Createc Pty Ltd
The principal activity of Createc was wide format printing distribution. In September 2014 Createc sold its business and
most of its assets. No cash was received by HGL at that time. During the year, HGL received $55,000 in cash following
release of warranties in relation to the sale. The balance of warranties provided at the time of the sale will be released
over the next twelve months, with a further $0.2 million of deferred consideration (HGL share $0.1 million) payable over
that period.
Current assets
Current liabilities
Non-current liabilities
Net Liabilities
Ownership Interest
Carrying amount of the investment
(2)
(18)
–
(20)
50%
–
2,602
(1,990)
(1,270)
(658)
50%
–
34
HGL Limited Annual Report 2015 10. Investment in Associates (continued)
The above amounts of assets and liabilities include the following:
Cash and cash equivalent
Currrent financial liabilities
Non-current financial liabilities
Revenues
Loss after income tax from continuing operations
Dividends received
The above profit for the year includes the following:
Depreciation and amortisation
Interest expenses
Interest income
Income tax expense
There were no capital or lease commitments, and no contingent liabilities incurred at balance date.
11. Property, Plant and Equipment
Plant and equipment
At cost
Accumulated depreciation
Net carrying value
Consolidated entity
2015
$’000
2014
$’000
7
–
–
–
–
55
–
–
–
–
962
(897)
(35)
16,712
(6,476)
–
261
29
36
2,071
1,704
(786)
918
1,617
(601)
1,016
Reconciliation of carrying amounts at the beginning and the end of the year
Plant and equipment
Written down value
Net book value at the beginning of the financial year
1,016
3,491
Additions
Disposals
Depreciation expense
Disposal of controlled entities
Impairment of Fixed Assets
Net book value at the end of the financial year
327
(137)
(288)
–
–
918
430
(247)
(929)
(174)
(1,555)
1,016
35
HGL Limited Annual Report 2015 NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
continued
12. Intangible Assets
Goodwill
At cost
Accumulated impairment
Reconciliation of carrying amounts at the beginning and the end of the year
Goodwill
Net book value at the beginning of the financial year
Impairment of health & beauty segment goodwill
Impairment of retail marketing segment goodwill
Impairment of homewares segment goodwill
Consolidated entity
2015
$’000
2014
$’000
10,166
–
10,166
15,682
(5,516)
10,166
10,166
15,682
–
–
–
(2,408)
(2,815)
(293)
10,166
10,166
Allocation of Goodwill
The carrying value remaining of goodwill is allocated to the building products segment. The original cost of goodwill for all
other segments has been fully written down in prior periods.
Impairment Testing
Impairment testing is conducted at Cash Generating Unit (CGU) level, and considers both value in use and fair value less
costs of disposal calculations.
Impairment Charges
There were no impairment charges in the current financial year.
Prior period impairments of $5.5 million were recognised for the health & beauty, retail marketing, and homewares CGUs,
as forecast sales and cash flows were insufficient to support the carrying value of goodwill.
Key Assumptions
The value in use calculations use cash flow projections based on the financial budgets approved by the board for the
following year, and extrapolated over five years using a combination of reasonably anticipated revenue and cost changes
in year two, and future growth rates appropriate for the markets in which the businesses operate. These forecasts are
extrapolated beyond five years based on estimated long term growth rates.
A post tax discount rate, based on the pre-tax WACC, of 14.8% (2014: 14.8%) was applied to the cash flow projections.
Long term growth rates used were between 2.5% (sales) and 5% (costs) (2014: 1% and 3%).
There are no reasonably foreseeable changes in assumptions which would result in an impairment to the carrying value
of goodwill.
13. Trade and Other Payables
Trade payables and accruals
Payables have carrying amounts that reasonably approximate fair value.
The average credit period on purchases is generally 30-60 days.
8,763
8,473
36
HGL Limited Annual Report 2015 14. Financial Assets and Financial Liabilities
14.1 Borrowings
Current
Secured at amortised cost
Variable rate bank loans
Consolidated entity
2015
$’000
2014
$’000
–
2,800
Secured Bank Loan
The borrowing facility is a $2.8 million cash advance facility with an annual review in January each year, secured under a
fixed and floating charge over all present and future assets, undertakings and unpaid or uncalled capital of the Group.
Interest is payable based on floating rates determined with reference to the BBR rate at each drawdown.
The carrying amounts of borrowings reasonably approximate fair value.
14.2 Financial Risk Management Objectives and Policies
Capital Management
HGL manages its capital to ensure that the underlying business units will have funding to expand through organic growth
and acquisitions. The capital structure is reviewed regularly and is balanced through the payment of dividends and
on-market share buy backs as well as the level of debt.
The capital structure consists of net debt, which includes borrowings (Note 14.1) less cash and cash equivalents, and total
equity, which includes issued capital (Note 16), reserves (Note 18) and accumulated losses/retained earnings.
Financial Risk Management
The activities of the Group expose it to a variety of financial risks, primarily to the risk of changes in foreign exchange
rates, and to a lesser extent credit risk of third parties with which the underlying businesses trade. HGL’s risk management
program works to minimise material potential negative impacts on the financial performance of the Group.
Foreign exchange contracts are used to manage currency risk, but must be used within the scope of the policy approved
by the Board. The policy prohibits the use of financial instruments for speculative purposes.
Significant Accounting Policies
A summary of the significant accounting policies adopted in relation to financial instruments are disclosed in Note 2 to the
financial statements. Information regarding the significant terms and conditions of each significant category of financial
instruments are included within the relevant note for that category.
Categories of Financial Instruments
Details of consolidated financial assets and liabilities contained in the financial statements are as follows:
Financial assets
Cash at bank and on hand
Trade receivables
Financial liabilities
Trade and other payables
Borrowings - Variable rate loans
Notes
19
8
13
14.1
4,683
7,816
4,985
8,542
12,499
13,527
8,763
–
8,473
2,800
8,763
11,273
Fair values of financial assets and liabilities are disclosed in the notes to the accounts where those items are listed.
37
HGL Limited Annual Report 2015
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
continued
14. Financial Assets and Financial Liabilities (continued)
Liquidity Risk
The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by
continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.
Ultimate responsibility for liquidity risk management rests with the board of directors, who have built an appropriate
risk management framework for the management of the Group’s short, medium and long term funding and liquidity
management requirements.
Details of credit facilities available to the Group, and the amounts utilised under those facilities, are as follows:
Credit facilities
Amount utilised
Unused credit facility
Consolidated entity
2015
$’000
2,800
–
2,800
2014
$’000
2,800
2,800
–
The Group has a $2.8 million (2014: $2.8 million) cash advance facility with the Australia and New Zealand Banking Group
Limited (ANZ), which is subject to an annual review. The facility is subject to covenant testing at specific measurement
dates.
The following table details the Group’s remaining contractual maturity for its financial liabilities. The tables have been drawn
up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be
required to pay, and includes both principal and interest cash flows.
Maturing in 1 year or less
Trade payables and accruals
Borrowings - Variable rate loans
Weighted average interest rate
Trade payables and accruals
Borrowings - Variable rate loans
8,763
–
8,473
2,814
8,763
11,287
%
–
–
%
–
2.68
Currency Risk
The Group undertakes certain transactions denominated in foreign currencies, hence exposures to exchange rate
fluctuations arise.
Exchange rate exposure is managed utilising forward foreign exchange contracts and foreign exchange bank accounts.
At year end the Group has $3,080,000 (2014: $2,318,000) of foreign currencies monetary liabilities mainly in USD and Euro.
The Group has $1,207,000 (2014: $1,482,000) of foreign currencies monetary assets mainly in USD and EUR.
In addition the Group has $623,000 (2014: $1,178,000) of foreign currency forward contracts outstanding at balance date,
with fair values of $14,000 (2014: $25,000) that were classed as level 2 financial instruments.
The Group used a 10% sensitivity analysis and concluded there was no material impact on the 2015 and 2014 net
outstanding foreign currency exposure.
38
HGL Limited Annual Report 2015 14. Financial Assets and Financial Liabilities (continued)
Credit Risk
The Group has adopted the policy of only dealing with creditworthy counterparties and obtaining sufficient collateral, or
other security where appropriate, as a means of mitigating the risk of financial loss from defaults. The Group measures
credit risk on a fair value basis. The Group does not have any significant credit risk exposure to any single counterparty or
any group of counterparties having similar characteristics.
Interest Rate Risk
The Group is exposed to interest rate risk as funds are borrowed at floating interest rates. The Group manages interest rate
risk by maintaining an appropriate mix between fixed and floating rate borrowings.
If interest rates had been +/- 1% per annum throughout the year, with all other variables held constant, the operating profit
after income tax would have been $28,000 higher or lower respectively (2014: $28,000).
15. Provisions
Current
Employee benefits
Surplus lease provisions
Non current
Employee benefits
Surplus lease provisions
Balance at beginning of financial year
Additional lease provisions recognised
Reductions arising from payments
Unused amounts reversed
Balance at the end of financial year
Consolidated entity
2015
$’000
2014
$’000
2,135
471
2,606
202
1,267
1,469
1,907
478
2,385
166
1,945
2,111
Surplus
lease
provisions
2015
$’000
2,423
10
(495)
(200)
1,738
39
HGL Limited Annual Report 2015
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
continued
16. Issued Capital
Ordinary shares issued and fully paid
Number
$’000
Number
$’000
Balance at the beginning of the financial year
53,956,011
36,802
53,647,751
36,624
2015
2014
Allotted pursuant to HGL dividend
reinvestment plan
Shares issued to employee share scheme
participants
ESS Shares bought back and cancelled
–
–
–
–
–
–
1,481,126
63,152
(1,236,018)
777
35
(634)
Balance at the end of the financial year
53,956,011
36,802
53,956,011
36,802
During the current and prior year no ordinary shares were purchased pursuant to the on market share buy back.
Details of the HGL Limited Dividend Reinvestment Plan are disclosed in Note 6 on page 31.
17. Non Controlling Interests
Balance at beginning of financial year
Disposal of non controlling interest
18. Reserves
Employee share scheme reserve
Foreign currency translation reserve
Other reserve
Consolidated entity
2015
$’000
–
–
–
–
(177)
(901)
(1,078)
2014
$’000
855
(855)
–
2,442
(200)
(901)
1,341
The Foreign currency translation reserve arises on the retranslation of the opening net assets of overseas subsidiaries, at
year end rates of exchange, net of tax.
The Other reserve represents the excess of the purchase consideration over the share of net assets acquired on the
increase in equity interests, classified as common controlled transactions under AASB 3 Business Combinations.
The Employee Share Scheme (ESS) reserve balance was transferred to retained earnings during the year following
cancellation of the ESS in the 2014 financial year. The reserve initially arose from the vesting of ESS shares issued in
prior years.
40
HGL Limited Annual Report 2015
19. Cash Flow Information
For the purpose of the consolidated statement of cash flows, cash and cash equivalents comprise the following
at 30 September:
Cash at banks and on hand
Cash and cash equivalents
Consolidated entity
2015
$’000
4,683
4,683
2014
$’000
4,985
4,985
Reconciliation of cash flow from operations with operating profit after income tax
Reconciliation of net profit after tax to net cash flows from operations:
Profit before tax from continuing operations
3,722
(21,430)
Adjustments to reconcile profit before tax to net cash flows:
Depreciation
Write down of plant & equipment to recoverable value
Losses / (profits) on sale of property, plant and equipment
Impairment of goodwill
Profit on disposal of controlled entity
Share of profits of associates not received as dividends
Changes in assets and liabilities
(Increase) / decrease in trade and term debtors
(Increase) / decrease in inventories
(Increase) / decrease in prepayments
(Increase) / decrease in deferred taxes
Increase / (decrease) in trade creditors and accruals
Increase / (decrease) in provision for income tax
Increase / (decrease) in other current provisions
Increase / (decrease) in other non-current provisions
Net cash flows from operating activities
288
–
137
–
–
(272)
809
(1,122)
(81)
(611)
(395)
63
928
(641)
2,825
929
1,555
117
5,516
(53)
3,262
2,220
3,972
–
7,429
(618)
–
(593)
1,098
3,404
41
HGL Limited Annual Report 2015 NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
continued
20. Information Relating to HGL Limited (parent)
Current assets
Non current assets
Total assets
Current liabilities
Non current liabilities
Total liabilities
Net assets
Issued capital
Reserves
Accumulated losses
Retained earnings
Total equity
Total comprehensive income of the Parent entity
Parent entity
2015
$’000
2014
$’000
233
15,651
15,884
544
2,316
2,860
13,024
36,802
380
4,224
15,381
19,605
3,742
7,839
11,581
8,024
36,802
2,822
(58,030)
(60,471)
33,872
13,024
5,001
28,871
8,024
(55,498)
The negative comprehensive income in the prior year arose from the parent entity applying consistent impairment
principles with the consolidated group, resulting in non-cash charges of $55.1 million. $50.1 million of this amount was
eliminated on consolidation and hence had no impact on group profit.
42
HGL Limited Annual Report 2015 21. Segment Information
2015
Revenue from sales to external
customers
Depreciation
Segment EBIT
2014
Revenue from sales to external
customers
Depreciation
Segment EBIT
Reconciliation of Profit or Loss
Retail
marketing
$’000
Homewares
$’000
Collectables
$’000
Building
products
$’000
Health &
beauty
$’000
Aggregated
segments
$’000
10,066
9,537
5
520
1
83
5,411
50
168
19,761
197
1,904
7,225
52,000
12
51
265
2,726
12,613
10,636
5,443
15,267
6,812
50,771
4
(147)
1
(34)
25
262
181
840
8
7
219
928
Segment Earnings Before Interest and Tax (EBIT)
Unallocated items of income and expenditure
Share of profit from equity accounted investments
Finance costs (Note 4.3)
Significant items
Other unallocated expenses
Profit before tax
2015
$’000
2,726
772
(112)
496
(708)
2014
$’000
928
(54)
(175)
(14,534)
(557)
3,174
(14,392)
– Retail marketing segment (SPOS) provides standard and customised shelving product solutions to brand owners and
retailers
– Homewares segment (Leutenegger and Nido) distributes homewares and traditional sewing and crafts supplies
– Collectables segment (Biante) distributes collectable model cars
– Building product segment (JSB Lighting) distributes architectural lighting for the commercial market
– Health & beauty segment (BLC Cosmetics) distributes cosmetics and skincare products through salon, spa and retail
markets
The Group has a large number of customers to which it provides products. There are no individual customers that account
for more than 10% of external revenues. The Group operates predominately in Australia with some operations in New
Zealand. Total revenues from sales outside Australia for the financial year were $3.2 million (2014: $3.3 million).
22. Related Party Disclosures
Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, have
been eliminated on consolidation and are not disclosed in this note.
There were no loans to other related parties at any time during the financial year.
Directors and their related entities are able, with all staff members, to purchase goods distributed by the Group on terms
and conditions no more favourable than those available to other customers.
There were no other transactions with key management personnel during the period.
43
HGL Limited Annual Report 2015 NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
continued
22. Related Party Disclosures (continued)
Compensation of key management personnel of the Group
Short-term employee benefits
Post-employment benefits
Other long-term benefits
Termination benefits
Total compensation paid to key management personnel
Consolidated entity
2015
$
2014
$
1,536,314
1,231,624
103,984
101,389
14,447
142,692
18,755
–
1,797,437
1,351,768
The amounts disclosed in the table are the amounts recognised as an expense during the reporting period related to key
management personnel.
23. Employee Share Scheme
There was no Employee Share Scheme in place during the 2015 Financial Year.
In August 2014 the Board made the decision to call all remaining Employee Share Scheme Loans (Scheme Loans).
Subsequently in accordance with the Employee Share Scheme (Scheme) rules the Scheme Shares were bought back
by the company and cancelled with no cash effects.
At 30 September 2015 there were no Scheme Shares or Scheme Loans (2014: nil).
Buy back and Cancellation of Scheme Shares
Following the decision by the Board to call in all remaining Scheme Loans in August 2014, and in accordance with
the Scheme rules, 3,625,857 shares at the market price of $0.5130 per share were bought back by the Company
and cancelled with no cash effects. The proceeds were insufficient to discharge the limited recourse Scheme Loans
consequently $3,206,000 equity settled options were derecognised with no effect on profit or equity.
The market values of two scheme loans were below the carrying value of the security at the point they were called in.
Accordingly, these loans were impaired and a provision of $14,000 was raised during the 2014 Financial Year to record
them at their fair value.
24. Commitments and Contingencies
Operating Lease Commitments - Group as Lessee
Within one year
After one year but not more than five years
1,386
2,362
3,748
1,459
3,303
4,762
The operating leases are in respect of warehouses and offices occupied by Group companies. The leases expire at various
future dates and a number contain option provisions.
Capital Commitments
There are no significant capital expenditure commitments at balance date.
Contingent Liabilities
There are no significant contingent liabilities at balance date.
25. Events after the Reporting Period
There have been no significant events occurring after the balance date which may affect either the Group’s operations or
results of those operations or the Group’s state of affairs.
44
HGL Limited Annual Report 2015 26. Auditors’ Remuneration
The auditor of HGL Limited is Deloitte Touche Tohmatsu.
Amounts received or due and receivable by Deloitte Touche Tohmatsu for:
An audit or review of the financial report of the entity and any other entity in the
consolidated group
Other non-audit services in relation to the entity and any other entity in the consolidated
group *
Amounts received by other audit firms:
Audit and review of the financial report
Consolidated entity
2015
$
2014
$
244,600
277,400
–
90,000
244,600
367,400
–
14,740
* In September 2014 Deloitte Touche Tohmatsu were engaged to provide strategic review services. These services were carried out
during the 2015 financial year and the value of these services was $85,000.
27. Investment in Controlled Entities
Significant controlled entities
Ownership interest
Country of
incorporation
2015
%
2014
%
Baker & McAuliffe Holdings Pty Limited (trading as JSB Lighting)
Biante Pty Limited
BLC Cosmetics Pty Limited
Hamlon Pty Limited (trading as SPOS)
J Leutenegger Pty Limited
Nido Interiors Pty Ltd*
Australia
Australia
Australia
Australia
Australia
Australia
The Point-of-Sale Centre (New Zealand) Limited
New Zealand
* Incorporated 11 June 2015
100
100
100
100
100
100
100
100
100
100
100
100
N/A
100
Certain immaterial entities have not been disclosed in the above listing of controlled entities. All wholly owned entities within
the Group have been consolidated into these financial statements.
Controlled Entities Acquired
There were no business acquisitions during the current or prior period.
Controlled Entities Disposed of
In October 2013 HGL Limited disposed of its 50% interests in Kinsole Pty Ltd and BOC Ophthalmic Instruments Unit Trust.
Total proceeds on disposal of $1.560 million were received in cash. A profit on disposal of $53,000 was recognised for the
year ended 30 September 2014.
45
HGL Limited Annual Report 2015 DIRECTOR’S
DECLARATION
In accordance with a resolution of the directors of HGL Limited, we state that:
1. In the opinion of the directors:
a. the consolidated financial statements and notes of HGL Limited for the financial year ended 30 September 2015 are
in accordance with the Corporations Act 2001, including:
i. giving a true and fair view of the consolidated entity’s financial position as at 30 September 2015 and of its
performance for the year ended on that date; and
ii. complying with Accounting Standards and the Corporations Regulations 2001;
b. the consolidated financial statements and notes also comply with International Financial Reporting Standards as
disclosed in Note 2.2; and
c. 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. This declaration has been made after receiving the declarations required to be made to the directors by the chief
executive officer and chief financial officer in accordance with section 295A of the Corporations Act 2001 for the financial
year ended 30 September 2015.
On behalf of the board
Peter Miller
Chairman
Sydney, 24 November 2015
Dr Frank Wolf
Director
46
HGL Limited Annual Report 2015
INDEPENDENT
AUDITOR’S REPORT
to the members of HGL Limited
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Grosvenor Place
225 George Street
Sydney NSW 2000
PO Box N250 Grosvenor Place
Sydney NSW 1220 Australia
Tel: +61 2 9322 7000
Fax: +61 2 9255 8303
www.deloitte.com.au
Independent Auditor’s Report
to the Shareholders of HGL Limited
Report on the Financial Report
We have audited the accompanying financial report of HGL Limited, which comprises the statement
of financial position as at 30 September 2015, the statement of profit or loss, the statement of
comprehensive income, the statement of cash flows and the statement of changes in equity for the year
ended on that date, notes comprising a summary of significant accounting policies and other
explanatory information, and the directors’ declaration of the consolidated entity, comprising the
company and the entities it controlled at the year’s end or from time to time during the financial year
as set out on pages 13 to 46.
Directors’ Responsibility 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 Note 2, the directors also state, in accordance with Accounting Standard AASB 101
Presentation of Financial Statements,
the consolidated financial statements comply with
that
International Financial Reporting Standards.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted
our audit in accordance with Australian Auditing Standards. Those standards require that we comply
with relevant ethical requirements relating to audit engagements and plan and perform the audit to
obtain reasonable assurance whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial report. The procedures selected depend on the auditor’s judgement, including the
assessment of the risks of material misstatement of the financial report, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control, relevant to the company’s
preparation of the financial report that gives a true and fair view, 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 company’s internal control. An audit also includes evaluating the appropriateness
of accounting policies used and the reasonableness of accounting estimates made by the directors, as
well as evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Member of Deloitte Touche Tohmatsu Limited
Liability limited by a scheme approved under Professional Standards Legislation.
62
47
HGL Limited Annual Report 2015 INDEPENDENT
AUDITOR’S REPORT
to the members of HGL Limited continued
Auditor’s Independence Declaration
In conducting our audit, we have complied with the independence requirements of the Corporations
Act 2001. We confirm that the independence declaration required by the Corporations Act 2001,
which has been given to the directors of HGL Limited, would be in the same terms if given to the
directors as at the time of this auditor’s report.
Opinion
In our opinion:
(a) the financial report of HGL Limited is in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the consolidated entity’s financial position as at 30 September
2015 and of its performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and
(b) the consolidated financial statements also comply with International Financial Reporting
Standards as disclosed in Note 2.
Report on the Remuneration Report
We have audited the Remuneration Report included in pages 6 to 9 of the directors’ report for the
year ended 30 September 2015. 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.
Opinion
In our opinion the Remuneration Report of HGL Limited for the year ended 30 September 2015,
complies with section 300A of the Corporations Act 2001.
DELOITTE TOUCHE TOHMATSU
Tara Hill
Partner
Chartered Accountants
Sydney, 24 November 2015
48
63
HGL Limited Annual Report 2015 ASX ADDITIONAL
INFORMATION
Additional information required by the Australian Stock Exchange Ltd and not shown elsewhere in this report is as follows.
The information is current as at 30 October 2015.
(a) Distribution of Equity Securities
(i) Ordinary Share Capital
Range
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
– 53,956,011 fully paid ordinary shares are held by 1,792 individual shareholder.
– Number of shareholders holding less than a marketable parcel (1,389 shares) is 743.
All issued ordinary shares carry one vote per share and carry the rights to dividends.
(b) Twenty Largest Holders of Quoted Equity Securities
Ordinary shareholders
Sery Pty Limited
IJV Investments Pty Ltd
JP Morgan Nominees Australia Limited
LPO Investments Pty Ltd
ANZ Trustees Limited
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