Joyce Corporation
Annual Report 2015

Plain-text annual report

JJooyyccee CCoorrppoorraattiioonn LLttdd AANNDD CCOONNTTRROOLLLLEEDD EENNTTIITTIIEESS AAnnnnuuaall RReeppoorrtt 22001155 CCeelleebbrraattiinngg 112299 YYeeaarrss iinn BBuussiinneessss Joyce Corporation Ltd AND CONTROLLED ENTITIES ABN: 80 009 116 269 Annual Report 2015 Joyce Corporation Ltd 2015 Annual Report I PAGE 1 Corporate Directory Directors Secretary D A Smetana Chairman M A Gurry T R Hantke A Mankarios K Gray Notice of annual general meeting The Annual General Meeting of Joyce Corporation Ltd will be held at: Bedshed Central Office Principal registered office Share register Auditors Solicitors Bankers 14 Collingwood Street Osborne Park 6017 Western Australia 10:00am 24 November 2015 time: date: 14 Collingwood Street, Osborne Park, WA, Australia, 6017 Tel: +61 8 9445 1055 Computershare Investor Services Pty Limited Level 11 172 St Georges Terrace Perth WA 6000 BDO Audit (WA) Pty Ltd 38 Station Street Subiaco WA 6008 Australia MDS Legal Level 2, 16 Irwin Street, Perth WA 6000 Australia St George Bank Level 2 Westralia Plaza 167 St Georges Terrace Perth WA 6000 Australia Stock exchange listings Joyce Corporation Ltd shares are listed on the Australian Securities Exchange (ASX : JYC). Website address www.joycecorp.com.au ABN: 80 009 116 269 Joyce Corporation Ltd 2015 Annual Report I PAGE 2 ANNUAL REPORT CONTENTS ANNUAL REPORT CONTENTS ........................................................................................................................ 3  CHAIRMAN’S REPORT ..................................................................................................................................... 4  DIRECTORS’ REPORT ...................................................................................................................................... 7  AUDITOR'S INDEPENDENCE DECLARATION .............................................................................................. 19  CORPORATE GOVERNANCE STATEMENT .................................................................................................. 20  CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME ............ 22  CONSOLIDATED STATEMENT OF FINANCIAL POSITION ........................................................................... 23  CONSOLIDATED STATEMENT OF CASHFLOWS ......................................................................................... 24  CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ........................................................................... 25  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ..................................................................... 26  CORPORATE INFORMATION ........................................................................................................... 26  1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ................................................................. 26  2.  FINANCIAL RISK MANAGEMENT ..................................................................................................... 40  3.  CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS ........................................................... 45  4.  SEGMENT INFORMATION ................................................................................................................ 45  5.  REVENUE, INCOME AND EXPENSES ............................................................................................. 48  6.  INCOME TAX ..................................................................................................................................... 49  7.  DISCONTINUED OPERATIONS ........................................................................................................ 53  8.  EARNINGS PER SHARE ................................................................................................................... 54  9.  CASH AND CASH EQUIVALENTS .................................................................................................... 55  10.  TRADE AND OTHER RECEIVABLES ............................................................................................... 56  11.  INVENTORIES ................................................................................................................................... 56  12.  OTHER ASSETS ................................................................................................................................ 57  13. NON-CURRENT ASSETS CLASSIFIED AS HELD FOR SALE ......................................................... 57  14.  OTHER FINANCIAL ASSETS ............................................................................................................ 57  15.  PLANT AND EQUIPMENT ................................................................................................................. 58  16.  INVESTMENT PROPERTY ................................................................................................................ 58  17.   INTANGIBLE ASSETS ....................................................................................................................... 59  18.  TRADE AND OTHER PAYABLES...................................................................................................... 60  19. INTEREST BEARING LOANS AND BORROWINGS ......................................................................... 61  20.  PROVISIONS ..................................................................................................................................... 63  21.  CONTRIBUTED EQUITY ................................................................................................................... 64  22 RESERVES ........................................................................................................................................ 65  23.  CAPITAL AND LEASING COMMITMENTS ....................................................................................... 65  24.  25.  FAIR VALUE MEASUREMENT OF FINANCIAL INSTRUMENTS ..................................................... 66 FAIR VALUE MEASUREMENT OF NON FINANCIAL INSTRUMENTS ............................................67 26. CONTINGENT LIABILITIES ............................................................................................................... 68  27.  RELATED PARTY DISCLOSURES ................................................................................................... 68  28.  INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD ............................................... 69  29.  EVENTS SUBSEQUENT TO REPORTING DATE ............................................................................. 71  30.  AUDITORS’ REMUNERATION .......................................................................................................... 71  31.  DIVIDENDS ........................................................................................................................................ 71 32. RECONCILIATION OF NET PROFIT AFTER TAX TO NET CASH FLOWS FROM OPERATIONS .. 72  33.  34.  NON-CASH INVESTING AND FINANCING ACTIVITIES .................................................................. 72 35 PARENT ENTITY DISCLOSURES ..................................................................................................... 73 DIRECTORS’ DECLARATION ......................................................................................................................... 74  INDEPENDENT AUDITOR’S REPORT ............................................................................................................ 75  ASX ADDITIONAL INFORMATION .................................................................................................................. 77  Joyce Corporation Ltd 2015 Annual Report I PAGE 3 CHAIRMAN’S REPORT It is with great pleasure to report that the Company has recorded a profit after tax attributable to members at 30th June 2015 of $5,221,000 compared to $1,570,000 for the comparable prior year, up +232.5%. The net profit before tax to 30th June 2015 was $8,195,000 up 258.3% from $2,287,000 at 30th June 2014. Revenues for the group were up +174% to $34.73 Million (excluding network sales from franchised stores). We are pleased to declare a final fully franked dividend of 3 cents per share payable on the 23rd of October 2015 with a record date of the 6th of October 2015. In addition, subject to the settlement of the Moorebank property sale, a special fully franked dividend of 5 cents per ordinary share will be paid. In total this will result in a (substantially franked) 10.5 cent per ordinary share dividend for the entire calendar year. The Company’s Net Assets per share was 94 cents as at 30th June 2015. The Earnings per share (EPS) is 16.0 cents compared to 5.6 cents last year on a fully diluted basis for this same period. I feel it is important to share the following information with shareholders. In order to adequately reward our existing shareholders for their continuing support of the Company. We plan to pay a franked special dividend of 5 cents each year for the next two years in addition to this year on top of our normal dividend. We feel that the strategic plans the Company has developed will allow this special dividend to be relatively sustainable in the next periods after the third payment subject to continued stable world economic and local trading conditions continuing. Given the current world economic and political climate, it is very positive that the Company is in a relatively impregnable financial position, with ample wherewithal to take advantage of growth opportunities into the near future with little downside risks. The Company announced during this period that it had sold its 40,800 square metre industrial property in Moorebank NSW for $25 Million and it is due to settle on or after the 30th September 2015. This result will allow the Group to be debt free with ample cash to ensure our plans are completed. We have already received a non refundable deposit of $2.5 Million regarding the Moorebank sale. Subsequently, as an after balance date event, we have also announced the purchase of a substantial commercial property of nearly 4,048, square metres in the highly sought after Osborne Park WA area for $4 Million plus GST. The Company plans to develop this site and has already reviewed initial development plans for the site. This will soon house our corporate offices and warehousing and provide for potential additional rental income streams allowing for an EBIT gain on our property in the near future. The Company’s business units Bedshed and KWB group performed well and above expectations. The Company continues to perform above our forecasts in the current period. I would like to thank the entire Management Team and staff, including Mr Anthony Mankarios our Executive Director and the Joyce and KWB Boards for a solid enviable performance and I have no hesitation commending the Company as highly secure and with significant wherewithal for growth We look forward to a positive future ahead. Dan Smetana Chairman Joyce Corporation Ltd 2015 Annual Report I PAGE 4 EXECUTIVE DIRECTOR’S REPORT Operational Review Director’s Operational Review The Company announced a statutory profit for the year after tax of $5.22M and a record EBITDA of $7.93M to 30th June 2015 compared with $2.8M in the prior period, up 183%. This result included provisions on Moorebank, one off costs and goodwill impairment charges with the resulting adjusted provisions and costs totalling $2.9M. Bedshed Franchising (“Bedshed”) The main cash flow generating business unit managed to improve the underlying like for like earnings on the previous year. Total network written sales maintained modest growth on a like for like basis in a challenging retail goods environment. The Bedshed company owned stores traded well up on last year and earnings growth was also up in double- digit growth. The company store at Bundall QLD was closed in this period due to the end of its lease. A new franchise store has now opened subsequent to year end in the Bundall area. Bedshed Franchising managed to secure a new franchise in the ACT late in the period. During the year two more stores were converted to the Bedshed “Evolution” store fit out and both stores have since performed very strongly. The company has plans to fast track “Evolution” upgrades for the next two years. KWB Group Pty Ltd (“KWB”) At the 30 June 2015 the company held 57% equity in the subsidiary KWB Group Pty Ltd. Total consolidated revenue and profit increased accordingly, with profit up in triple-digit growth. This has resulted substantially from restructuring initiatives. Kitchen Connection and Wallspan kitchen and wardrobes’ retail stores were upgraded and some stores were relocated during this year. The KWB stores have been fully upgraded to produce an inspiring contemporary kitchen showroom experience for our customers. KWB currently operates in QLD, NSW and SA with 12 stores. The Company is fully cash funded, with no bank debt and has considerable orders on its books. The cash position is strong and this subsidiary managed to pay its first cash dividend during this period. We anticipate this may produce better procurement opportunities. The focus now is on additional new stores and the introduction of new lines and benefits to our customers. The Company has already signed leases to open new stores in major centres for the next period. Moorebank The Company announced during the year it has secured a sale of its large industrial property at Moorebank NSW. This asset is currently held in our books as a current asset and the associated bank debt liability is likely to be repaid on settlement of this property. The Sale Price was $25 Million. The settlement will be on or after the 30th September 2015. The deposit of $2.5 Million was unconditionally released to Joyce prior to year end and the sale is unconditional. The property asset value has previously been carried in our books on the basis of the sub-economic rent valuations. Selling the property ensured net EBIT gain in our books of $6.6M. We have conservatively provided for any expenses and associated one off costs. Joyce Corporation Ltd 2015 Annual Report I PAGE 5 EXECUTIVE DIRECTOR’S REPORT (CONTINUED) Future Outlook The Company has concluded its recent restructure program of closing underperforming Bedshed Company owned stores. The last remaining discontinuing store recorded a loss of $95K in the year. The remaining company owned stores are all generating operating profits. Cash flow is anticipated to improve as the remaining store-exit payments conclude this coming year. These exit payments had a minor impact on cash in the fiscal 2015 year. This will have minor impact in the next year and these costs are provided for in the company books in prior years. The Company’s cash position has increased significantly and is due to increase with the pending settlement of the Moorebank property. The sale is for $25 Million and will allow for repayment of all current bank debt and will provide the opportunity for new business acquisitions to underpin the group’s activities and growth plans in the near future. The Company’s prospects are positive given the recent lift in activity in its core Bedshed business. Currently operations are all meeting profit expectations in a challenging retail environment. The Company has achieved successful earnings and cash flow development with its related company KWB Group Pty Ltd and there is potential for this to expand initially within its existing geographical operational areas. KWB commenced cash dividend payments which will commence to be franked in the year ahead. Joyce’s vision is to produce above market returns to its shareholders through partnering in various business opportunities; it aims to eventually enhance the group by assisting with the expansion across Australia. We anticipate that our retail footprint into the premium “do it for me” market of kitchen and wardrobe renovation will grow significantly in the coming years. The outlook remains positive whilst continuing to be subject to overall economic activity. After Balance Date Events The Company has announced that it has purchased a property in Osborne Park W.A. This is due to settle on 2nd of October 2015 for $4M plus GST. The Company is currently reviewing plans to develop this property. We aim to consolidate our corporate offices and W.A. warehouse facilities to this site. In the future this is likely to provide additional rental revenue streams and potential lifts in EBIT resulting from valuation gains and incoming rent. Anthony Mankarios Executive Director Joyce Corporation Ltd 2015 Annual Report I PAGE 6 DIRECTORS’ REPORT Your Directors present their report on the Consolidated Entity, consisting of Joyce Corporation Ltd (“the Company”) and the entities it controlled at the end of, or during, the year ended 30 June 2015. DIRECTORS The names of the Company’s Directors in office during the year ended 30 June 2015 and until the date of this report are as below. Directors were in office for this entire period unless otherwise stated. Chairman (non-executive) Non-executive Director Non-executive Director Executive Director Mr D A Smetana Mr T R Hantke Mr M A Gurry Mr A Mankarios SECRETARY Mr K Gray PRINCIPAL ACTIVITIES During the year the principal continuing activities of the Consolidated Entity consisted of being: (a) The franchisor of the Bedshed chain of retail bedding stores; (b) An owner of a number of Bedshed retail stores; (c) Property Investment; and (d) Majority owner of KWB Group Pty Ltd with 57% from October 2014. Other than the closure of a marginal store in Queensland in March 2015, the announced sale of the NSW Moorebank property and becoming a majority owner of KWB Group, no other significant changes in the nature of the activities of the Consolidated Entity occurred during the year. REVIEW AND RESULTS OF OPERATIONS During the year ended 30 June 2015 (“the Financial Year”) the Consolidated Entity, achieved revenue from continuing operations of $34.7m (2014: $12.7m) and a profit from continuing operations before tax of $0.91m (2014: $0.62m) and an overall net profit after tax of $5.22m (2014: $1.57m). The revenue increased significantly from the consolidation of KWB Group Pty Ltd from November 2015. Like for like sales reduced marginally on the closure of a Queensland company store due to the end of a lease term. A franchise store was subsequently opened in the vicinity of the company owned store. Profit was supported with revaluation of the investment property at Moorebank in NSW from an unconditional sale contract with settlement due 30 September 2015. . Financial Position At 30 June 2015 the Consolidated Entity had equity of $26.5m (2014: $22.7m); with dividend payments increasing from $835k in 2014 to $1,273k in 2015. Cash and cash equivalents increased to $5.96m (2014: $0.82m). Unutilised debt facilities were $3.5m (2014: $869k). Debt is likely to be fully repaid after settlement of the Moorebank property in September 2015. Bank Facility The Board is pleased to advise that the Consolidated Entity has successfully extended its longer term debt funding facility with St George Bank to 30 June 2019. The $1.24m multi option facility which is subject to annual review was also extended for another year to June 2016. Joyce Corporation Ltd 2015 Annual Report I PAGE 7 DIRECTORS’ REPORT (CONTINUED) FUTURE DEVELOPMENTS, PROSPECTS AND BUSINESS STRATEGIES The Consolidated Entity will look to further develop the Bedshed business through the expansion of its network of franchised stores whilst consolidating the improved financial performance of Company owned and operated stores. The Board is completing a strategic review of all businesses to ensure maximum return on shareholders’ funds and during the year converted convertible notes into to a majority equity stake in KWB Group Pty Ltd (KWB) a kitchen and wardrobe sales and installation company based in Queensland, South Australia and New South Wales. The KWB business is investing in additional stores and the expansion will see significant improvement in profits and an increase profit from the investment of 51% KWB after the final bonus equity earnings for the period ended 30 June 2015 reduces the Company interest in KWB from 57% from October 2015. DIVIDENDS Dividends declared or paid during the financial year are as follows: Distributions paid or payable Interim unfranked ordinary dividend of 1.0 (2012: 1.5 cents) cents per share (Paid – 24 July 2013) Final unfranked ordinary dividend of 2.0 (2013: 0.65) cents per share (Paid 21 November 2013) Interim unfranked dividend of 1.5 (2013: 1.0) cents per share (Paid 31 July 2014) Final unfranked ordinary dividend of 2.1 (2014: 2.0) cents per share (Paid 21 November 2014) Prior year dividends paid on partly paid shares (Paid 01 March 2015) Interim unfranked dividend of 2.5 (2014: 1.5) cents per share (Paid 31 March 2015) 2015 $000 2014 $000 - - 420 587 11 699 280 559 420 - - - 1,717 1,259 The Board will continue to review the Company’s ability to pay dividends and will continue with the payment of regular dividends as in line with the dividend policy and available liquidity. SIGNIFICANT CHANGES IN STATE OF AFFAIRS The Company converted the second tranche of convertible notes in KWB Group Pty Ltd from November 2014 to achieve majority ownership. The management of KWB continue to hold minority equity and resulting from strong performance to the 30 June 2015 their minority holding will increase to 49% in September 2015. The Company has previously announced that the investment property was not part of the longer term strategy and during the year negotiated a sale of the Moorebank property with an unconditional sale for $25 M which will settle on or after 30 September 2015. SIGNIFICANT AFTER REPORTING DATE EVENTS After the reporting date, a franked dividend was declared on 27 August 2015 of 3 cents per share payable 23 October 2015. A further special dividend of 5 cents per share fully franked will be paid on the same date subject to the settlement of the Moorebank property. Subsequent to year end the settlement date has been changed to 30 October 2015. A contract to purchase a property for use by the Company allowing consolidation of a number of sites was made on 2 July 2015 for $4M. Other than disclosed above no event has occurred since the reporting date to the date of this report that has significantly affected, or may significantly affect: the Consolidated Entity’s operations, or (a) the results of those operations, or (b) the Consolidated Entity’s state of affairs. (c) Joyce Corporation Ltd 2015 Annual Report I PAGE 8 INFORMATION ON DIRECTORS Mr D A Smetana Chairman - Non-executive. Age 71. Dip Comm FCPA FAIM FAICD Experience and expertise Mr Smetana has been Chairman of Joyce Corporation Ltd since 1984. He is also the Chairman of Bedshed Franchising Pty Ltd. He is a past President of the Industrial Foundation for Accident Prevention and remains a Director., Director of Poly Metallica Minerals Ltd, a Director of St John of God Foundation and Chairman of the St John of God Comprehensive Cancer Centre Fundraising Committee. Director of Korab Resources Limited. His past board memberships include: Director of Edge Employment Solutions Inc, Deputy Chairman of Youth Focus Inc (1998 - 2007), Deputy Chairman Western Power Corporation and Chairman of its Finance Committee until 2003, Chairman and National Councillor of the Defence Reserves Support Council - WA (1997 - 2006), Director of WA Symphony Orchestra until 2003. Vice President and Councillor of the WA Federation of Police and Community Youth Centres (Inc.) and Chairman of the Department of Training and Employment, Science & Technology Advisory Group. His awards include the 2003 Centenary Medal for Service to Commerce and the Community, the 2007 Ian Chisholm Award for Distinguished Service to Occupational Health & Safety and the 1998 WA Business Executive of the Year award. Other current Directorships of listed companies None Former Directorships of listed companies in last 3 years None Special responsibilities Chairman of the Board Member of the Audit Committee Interests in shares and options - - 9,850,696 beneficial fully paid ordinary shares in Joyce Corporation Ltd. 380,000 partly paid (issued at $1.955 and paid to $1.523) ordinary shares in Joyce Corporation Ltd. Mr M A Gurry. – Independent, Non-executive Director. Age 68. Bachelor of Science Dip AICD FAICD FAIM SF Fin Experience and expertise Mr Gurry was Managing Director of HBF from 1995 to 2007 and prior to that he was President Asia Pacific of the DMR Group Ltd, an international consulting firm. From 1996 to 1999 he was Vice President of the Asian Association of Management Organizations, from 1997 to 1999 National President of the Australian Institute of Management and from 1999 to 2008 Chairman of United Way WA Inc. Mr Gurry is currently Chairman of Foundation Housing Limited, former Chairman of the Forest Products Commission, and former Chairman of Reignite Pty Ltd, a councilor of HBF Ltd and has served on numerous Boards including the Australian Health Insurance Association, The Australian Information Industry Association, The West Australian Ballet and Integrated Group Ltd. Other current Directorships of listed companies None Former Directorships of listed companies in last 3 years None Special responsibilities Chairman of the Audit Committee Member of the Remuneration Committee Interests in shares and options None Joyce Corporation Ltd 2015 Annual Report I PAGE 9 DIRECTORS’ REPORT (CONTINUED) INFORMATION ON DIRECTORS (CONTINUED) Mr T R Hantke. – Independent, Non-executive Director. Age 67. Bachelor of Commerce, FAIM, FAICD Experience and expertise Mr Hantke is Managing Director of his own consulting practice, Franchising Solutions Pty Ltd. Prior to this he was the CEO of Snap Franchising from 1988 - 2001. He has been a Director of Bedshed Franchising Pty Ltd since February 2002 and was appointed to the Joyce Board in June 2006. He was a board member of the Franchise Council of Australia 1989 - 1996; Member of the Franchise Policy Council 1997 - 2002; is currently a Member of the ACCC's Franchise Consultative Committee; and Chairman of Central Purchasing Services Ltd, an Alternate non-executive Director of Mrs. Macs Pty Ltd and a non-executive Director of Bentech Assistive Technologies Inc. He also Chairs a peer group mentoring for CEO’s group for The Executive Connection and undertakes commercial mediations. Mr Hantke has extensive managerial experience in both small and large organizations and in various industries. Other current Directorships of listed companies None Former Directorships of listed companies in last 3 years None Special responsibilities Chairman of the Remuneration Committee Member of the Audit Committee Interests in shares and options None Mr A Mankarios. – Executive Director Age 48. MBA, FAICD, CFTP An Executive Director of Joyce Corporation Limited (JYC), Mr Mankarios is an experienced director and manager who has played a key role in Joyce's underlying business growth performance since 2010. He is also a non-executive director of KWB Group Pty Ltd, which is a fast growing Kitchen Connection and Wallspan business; and Chairman of Man Investments and Consultants as well as being involved in a number of other private companies. Mr Mankarios is currently a Non- Executive Director of Inventis Limited (IVT) and was the CEO of Oldfields Holdings Ltd (prior to 2010). His experience over the last 26 years spans a number of different sectors ranging from retail, wholesale and distribution, manufacturing as well as furniture retail / Importing and Franchise businesses in Australia and in Asia. Other current Directorships of listed companies Inventis Limited Former Directorships of listed companies in last 3 years None Special responsibilities Member of the Remuneration Committee. Member of the Audit Committee. Interests in shares and options 700,485 COMPANY SECRETARY The Company Secretary is Mr K Gray. Mr Gray was appointed to the position of Chief Financial Officer and Company Secretary on 19 January 2010. Mr Gray holds a Bachelor of Economics and is a qualified CPA. An experienced Chief Financial Officer and Company Secretary having acted in these roles with a number of listed companies in mining services, industrial wholesale and retail. Joyce Corporation Ltd 2015 Annual Report I PAGE 10 DIRECTORS’ REPORT (CONTINUED) MEETINGS OF DIRECTORS The numbers of meetings of the Company’s Board of Directors and of each Board committee held during the year ended 30 June 2015, and the numbers of meetings attended by each Director were: Full meeting of Directors A 11 11 11 11 B 10 9 9 11 Meetings of committees Audit Remuneration A 4 4 4 4 B 4 4 4 4 A - 4 4 4 B - 4 4 3 D A Smetana M A Gurry T R Hantke A Mankarios A = B = Number of meetings held Number of meetings attended during the time the Director held office or was a member of the committee during the year A Mankarios did not attend one meeting of the remuneration Committee as this meeting related to his contract and remuneration. REMUNERATION REPORT - AUDITED The remuneration report is set out under the following main headings: A. Principles used to determine the nature and amount of remuneration. B. Service agreements C. Details of remuneration D. Share-based compensation E. Link between remuneration policy and Company performance The information provided in this remuneration report is also included in the financial report which has been audited as required by section 308(3C) of the Corporations Act 2001. As well as the Directors previously mentioned in this Directors’ Report, other Key Management personnel of the Group include: G Culmsee Chief Operating Officer Bedshed Franchising Pty Ltd K Gray J Bourke Managing Director KWB Group Pty Ltd C Palin Chief Financial Officer Joyce Corporation Ltd Finance Director KWB Group Pty Ltd A. Principles used to determine the nature and amount of remuneration Remuneration Committee The Remuneration Committee Charter establishes the role of the Remuneration Committee which is to review and make recommendations on Board remuneration: senior management remuneration; executive share plan participation; human resource and remuneration policies; and senior management succession planning, appointments and terminations. The main responsibilities of the Remuneration Committee includes reviewing and making recommendations on remuneration policies for the company including, in particular, those governing the directors and senior management. The Remuneration Committee comprises a majority of non-executive directors and at least three members. The Chairman of the committee is appointed by the Board and must be a non-executive director. The Remuneration Committee is required to meet as and when required by the Chairman. The committee may invite persons deemed appropriate to attend meetings and may take such independent advice as it considers appropriate. Any committee member may request the Chairman call a meeting. Joyce Corporation Ltd 2015 Annual Report I PAGE 11 DIRECTORS’ REPORT (CONTINUED) REMUNERATION REPORT – AUDITED (CONTINUED) A. Principles used to determine the nature and amount of remuneration (continued) The Remuneration Committee is required to assess its effectiveness periodically. In addition the Charter is required to be revised annually and updated as required. Remuneration Policies The objective of the Consolidated Entity’s executive reward framework is to ensure reward for performance is competitive and appropriate for the results delivered. The framework aligns executive reward with achievement of strategic objectives and the creation of value for shareholders, and conforms to market practice for delivery of reward. The Board ensures that executive reward satisfies the following key criteria for good reward governance practices:  competitiveness and reasonableness;  acceptability to shareholders;  performance linkage / alignment of executive compensation;  transparency; and  capital management. In consultation with external remuneration consultants, where appropriate, the Consolidated Entity has structured an executive remuneration framework that is market competitive and complementary to the reward strategy of the organisation. Alignment to shareholders’ interests:  has economic profit as a core component of plan design;  focuses on sustained growth in shareholder wealth, consisting of dividends and growth in share price, and delivering constant return on assets as well as focusing the executive on key non-financial drivers of value; and  attracts and retains high calibre executives. Alignment to program participants’ interests:  rewards capability and experience;  reflects competitive reward for contribution to growth in shareholder wealth;  provides a clear structure for earning rewards; and  provides recognition for contribution. Non-executive Directors Fees and payments to non-executive Directors reflect the demands which are made on, and the responsibilities of, the Directors. Non-executive Directors’ fees and payments are reviewed annually by the Board. The Board considers, where appropriate, the advice of independent remuneration consultants to ensure non-executive Directors’ fees and payments are appropriate and in line with the market. The Chairman’s fees are determined independently to the fees of non-executive Directors based on comparative roles in the external market. The Chairman is not present at any discussions relating to determination of his own remuneration. The current base remuneration was last independently reviewed with effect from 30 June 2011. The remuneration of Directors was reduced in 2009 and has subsequently been reinstated without escalation during the 2013 to 2015 financial years. Executive Directors who are members of a committee do not receive additional yearly fees. Non-executive Directors’ fees are determined within an aggregate Directors’ fee pool limit, which is periodically recommended for approval by shareholders. The maximum currently stands at $500,000 per annum and was approved by shareholders at the Annual General Meeting on 22 November 2012. Joyce Corporation Ltd 2015 Annual Report I PAGE 12 DIRECTORS’ REPORT (CONTINUED) REMUNERATION REPORT - AUDITED (CONTINUED) Executive pay Fixed Remuneration The level of fixed remuneration is set so as to provide a base level of remuneration which is both appropriate to the position and is competitive in the market. Fixed remuneration is reviewed annually by the Remuneration Committee and the process involves the review of the Consolidated Entity and individual performance, and relevant comparative remuneration in the market. Variable Remuneration - Short Term Incentives The goals consist of a number of key performance indicators (KPI's) covering both financial and non-financial, corporate and individual measures of performance. Included in the measures are contributions to net profit before tax, cash targets and departmental functional KPI's. At the end of the financial year the remuneration committee assesses the actual performance of the Consolidated Entity, the relevant segment and individual against the KPIs set at the beginning of the financial year. Should the Consolidated Entity, or the relevant segment, achieve the set KPIs, the Board will reward the key management personnel with a bonus during the salary review. A percentage of a pre- determined maximum amount is awarded depending on results. No bonus is awarded where performance falls below the minimum. There are no long term incentives. B. Service Agreements This remuneration report outlines the director and executive remuneration arrangements of the Consolidated Entity in accordance with the requirements of the Corporations Act 2001 and its Regulations. For the purposes of this report, Key Management Personnel (“KMP”) of the Consolidated Entity are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Consolidated Entity, directly or indirectly, including any Director (whether executive or otherwise) of the Company. For the purposes of this report, the term "executive" encompasses the Executive Director, Senior Executives and Company Secretary of the Consolidated Entity. Details of key management personnel (including the Senior Executives of the Consolidated Entity): Mr D A Smetana Mr M A Gurry Mr T R Hantke Mr A Mankarios Non-Executive Director and Chairman Non-Executive Director - Chairman of Audit Committee Non-Executive Director - Chairman of Remuneration Committee Executive Director Mr G Culmsee Mr K Gray Chief Operating Officer Chief Financial Officer and Company Secretary The employment conditions of all Key Management Personnel are formalised in contracts of employment. Other than Directors, the Executive Director and the CFO, who were engaged by Joyce Corporation Ltd all other executives are permanent employees of Bedshed Franchising Pty Ltd. The Executive Director has a service contract which at the date of this report runs to 30 June 2016 at the rate current at 30 June 2015. This is a part time role which allows a Directors fee and hourly charge for work undertaken above this and paid monthly. All out of pocket expenses in connection with carrying out the role are reimbursable. Joyce Corporation Ltd 2015 Annual Report I PAGE 13 DIRECTORS’ REPORT (CONTINUED) REMUNERATION REPORT – AUDITED (CONTINUED) Other Executives All executives have rolling contracts. The Consolidated Entity can terminate each contract by providing from two months to six months written notice or providing payment in lieu of the notice period (based on the fixed component of the executives’ remuneration). The Consolidated Entity may terminate an executive for serious misconduct without notice. Where termination with cause occurs the executive is only entitled to that portion of remuneration that is fixed up to the date of termination. C. Details of remuneration Short-term Employment benefits Post- Employment benefits Salary & Fees Cash Bonus Non- Monetary benefits Superannuation Long- term benefits Term Benefits AL & LSL Total % relating to performance 161,761 59,821 61,741 283,323 - - - - 174,724 30,387 458,047 30,387 225,667 183,843 272,366 30,319 36,760 63,500 191,671 63,500 - - - - - - 622 675 - - 26,637 15,538 13,618 55,793 - 55,793 21,497 17,529 10,419 8,195 - - - - - - - - - - 188,398 75,359 75,359 339,116 205,111 544,227 278,105 238,807 346,285 263,366 - - - - 14.82% 10.90% 15.39% 18.34% 24.11% 873,547 194,079 1,297 57,640 - 1,126,563 1,331,594 224,466 1,297 113,433 - 1,670,790 13.43% 159,602 58,957 60,877 279,436 - - - - 133,569 67,925 413,005 67,925 219,697 54,520 - - - - - - - 178,046 43,937 1,098 26,007 15,286 13,366 54,659 54,659 20,322 16,570 397,743 98,457 1,098 36,892 - - - - - - - - - 185,609 74,243 74,243 334,095 201,494 535,589 294,539 239,651 - - - 33.71% 18.51% 18.33% 534,190 - 30-Jun-15 Non-Executive Directors Mr D A Smetana Mr T R Hantke Mr M A Gurry Total Non-Executive Directors Executive Director Mr A Mankarios1 Total Directors Mr G Culmsee2 Mr K Gray2 Mr J Bourke3 Mr C Palin3 Total Other Key Management personnel Total Remuneration: 30-Jun-14 Non-Executive Directors Mr D A Smetana Mr T R Hantke Mr M A Gurry Total Non-Executive Directors Executive Director Mr A Mankarios Total Directors Mr G Culmsee Mr K Gray Total Other Key Management personnel Total Remuneration: 810,748 166,382 1,098 91,551 - 1,069,779 15.56% Joyce Corporation Ltd 2015 Annual Report I PAGE 14   DIRECTORS’ REPORT (CONTINUED) C. Details of remuneration (continued) 1. Mr A Mankarios was paid a cash bonus based on key performance criteria which requires performance meets or exceeds the group budget and also achieves successful completion of predetermined events at the discretion of the Directors. He is contracted to 30 June 2016. 2. Bonuses paid to other key management personnel were at the discretion of the Directors. 3. Mr J Bourke and Mr C Palin were Directors of KWB Group Pty Ltd prior to KWB Group Pty Ltd becoming a subsidiary of Joyce Corporation Ltd in November 2014, they continue as Directors of KWB Group Pty Ltd at the date of this report. Their remuneration above is for the entire 2015 financial year. Other Key Management Personnel were paid a cash bonus based on key performance criteria which requires performance meets or exceeds the group budget and also achieves successful completion of predetermined events. D. Share-based compensation There was no share-based compensation of Key Management Personnel during the year ended 30 June 2015 (2014: Nil). E. Equity instrument disclosures relating to key management personnel i. Option and rights holdings granted as compensation During the financial year ended 30 June 2015 no options (2014: Nil) were granted or vested as equity compensation benefits to any director or executive of the Consolidated Entity. ii. Option holdings There were no options on issue to key management personnel during the year ended 30 June 2015 (2014: Nil). iii. Share Holdings The number of shares in the company held during the financial year by each director of the company and the other key management personnel of the Group, including their personally related parties, are set out below. There were no shares granted during the reporting period as compensation (2014: Nil). 2015 Mr D A Smetana* Mr T R Hantke Mr M A Gurry Mr A Mankarios Mr G Culmsee Mr K Gray Mr C Palin Mr J Bourke Total Balance 01-Jul-14 Ord Granted as Remuneration Ord On Exercise of Options Net Change Other Ord Ord Balance 30-June-15 Ord 9,850,696 - - 697,286 - - - - 10,547,982 - - - - - - - - - - - - - - - - - - - - - 3,199 - - - - 3,199 9,850,696 - - 700,485 - - - - 10,551,181 * Beneficial holding only. Mr Smetana controls 10,893,438 fully-paid ordinary shares (2014 10,893,438). Joyce Corporation Ltd 2015 Annual Report I PAGE 15 DIRECTORS’ REPORT (CONTINUED) iv. Partly Paid Ordinary Shares Share Holding The number of partly paid ordinary shares in the company held during the financial year by each director of the company and the other key management personnel of the Group, including their personally related parties, are set out below. There were no shares granted during the reporting period as compensation (2014: Nil). 2015 Mr D A Smetana1 Mr T R Hantke Mr M A Gurry Mr A Mankarios Mr G Culmsee Mr K Gray Mr C Palin Mr J Bourke Total Granted as Remuner ation Ord Balance 01-Jul-14 Ord On Exercise of Options Net Change Other Ord Ord Balance 30-June-15 Ord 380,000 - - - - - - - 380,000 - - - - - - - - - - - - - - - - - - - - - - - - - - - 380,000 - - - - - - - 380,000 All equity transactions with specified directors and specified executives have been entered into under terms and conditions no more favourable than those the entity would have adopted if dealing at arm’s length. (1) Mr D A Smetana holds 380,000 partly paid (issued at $1.955 and paid to $1.523) (2014 paid to: $1.432) ordinary shares of the Company. Partly paid shares are unquoted until they become fully paid. Partly paid shares carry voting rights and rights to participate in entitlement issues although any shares acquired under a rights issue cannot be quoted until the partly paid shares become fully paid. Joyce Corporation Ltd 2015 Annual Report I PAGE 16 DIRECTORS’ REPORT (CONTINUED) F. Link between remuneration policy and Company performance The Consolidated Entity provided executives with variable remuneration in the form of short-term incentives as described in Part A of the Remuneration Report. These incentives are payable upon the achievement of certain goals covering both financial and non-financial, corporate and individual measures of performance. Included in the measures are contributions to net profit before tax, cash targets and departmental functional KPI's. The following table shows the gross revenue, profits and dividends for the last five years for the Consolidated Entity, as well as the share price at the end of the respective financial years. Revenue (a) Net Profit after tax Share Price at Year-end $ Dividends (Cents) Paid Dividend payout ratio % 2015 $000 36,544 4,472 1.05 6.10 38.2 2014 $000 15,056 1,570 0.52 3.00 52.6 2013 $000 18,921 668 0.40 2.15 90.0 2012 $000 19,956 3,035 0.42 2.00 18.2 2011 $000 24,441 2,914 0.45 2.00 14.0 (a) Revenue and net profit in respect of the 2015, 2014 and 2013 financial years include discontinued operations. The 2013 financial performance was impacted by a non-recurring provision for stores that are to be closed during the financial year ending the 30 June 2013 and 2014 financial years. G. Voting at the 2014 Annual General Meeting on the Remuneration report The Remuneration report in the 2014 Annual Report to shareholders was approved by 99.9% of shareholders at the 2014 Annual General Meeting. No specific feedback was received at the Annual General Meeting or throughout the year. H. Independent Salary and Incentive Review During the 2012 financial year the company undertook an independent management salary and incentive review so as to benchmark existing salary and incentive policies and levels. The Review was undertaken by the independent professional firm of Gerard Daniels Australia. In general the company policies and remuneration levels were found to be consistent with the markets in which we operate, although some changes have been made to ensure greater consistency in some aspects of our remuneration practices. During the financial year ended 30 June 2015 the Company did not engage any remuneration consultants. LOANS OR OTHER TRANSACTIONS TO DIRECTORS AND EXECUTIVES There were no loans outstanding to Directors and executives as at 30 June 2015 (2014: nil). There were no other transactions with key management personnel. The Executive directors fees for Mr A Mankarios are paid to Starball Pty Ltd, a company in which Mr Mankarios has significant influence - $205,111 (2014: $201,495). As at year end the amount owing to this related party was $19,437 (2014: $9,825). A receivable from Pynland Pty Ltd, a company with shares held in trust by Dan Smetana for the suspended employee share scheme, for $26,131 owing to Joyce Corporation Ltd for amounts paid on behalf of Pynland Pty Ltd (2014: $26,131). End of Audited Remuneration Report. Joyce Corporation Ltd 2015 Annual Report I PAGE 17 DIRECTORS’ REPORT (CONTINUED) INSURANCE OF OFFICERS During the financial year, Joyce Corporation Ltd paid a premium to insure the Directors and secretaries of the Company and its Australian-based controlled entities, and senior executives of the Consolidated Entity. A clause in the relevant insurance policy prevents the disclosure of the amount of the premium. The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as officers of entities in the Consolidated Entity, and any other payments arising from liabilities incurred by the officers in connection with such proceedings. This does not include such liabilities that arise from conduct involving a willful breach of duty by the officers or the improper use by the officers of their position or of information to gain advantage for themselves or someone else or to cause detriment to the Company. It is not possible to apportion the premium between amounts relating to the insurance against legal costs and those relating to other liabilities. PROCEEDINGS ON BEHALF OF THE COMPANY No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party, for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings. No proceedings have been brought or intervened in on behalf of the Company with leave of the Court under section 237 of the Corporations Act 2001. PERFORMANCE IN RELATION TO ENVIRONMENTAL REGULATION Joyce Corporation is party to licences issued by the Environmental Protection Authority and various other authorities throughout Australia. These licences regulate the management of air and water quality, the storage and carriage of hazardous materials and disposal of wastes associated with the Consolidated Entity’s properties. There have been no new or material known breaches associated with the Consolidated Entity’s licence conditions. NON-AUDIT SERVICES There were no fees paid or payable to the auditors for non-audit services for the year ended 30th June 2015. AUDITOR'S INDEPENDENCE DECLARATION A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 19. ROUNDING OF AMOUNTS The Company has applied the relief available to it under ASIC Class Order 98/100 and accordingly, amounts in the financial report have been rounded off to the nearest $1,000. Signed in accordance with a resolution of the Directors made pursuant to s.298(2) of the Corporations Act 2001. D A Smetana Chairman Perth, 30 September 2015 Joyce Corporation Ltd 2015 Annual Report I PAGE 18 Tel: +61 8 6382 4600 Fax: +61 8 6382 4601 www.bdo.com.au 38 Station Street Subiaco, WA 6008 PO Box 700 West Perth WA 6872 Australia DECLARATION OF INDEPENDENCE BY GLYN O'BRIEN TO THE DIRECTORS OF JOYCE CORPORATION LIMITED As lead auditor of Joyce Corporation Limited for the year ended 30 June 2015, I declare that, to the best of my knowledge and belief, there have been: 1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and 2. No contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of Joyce Corporation Limited and the entities it controlled during the period. Glyn O'Brien Director BDO Audit (WA) Pty Ltd Perth, 30 September 2015 Joyce Corporation Ltd 2015 Annual Report I PAGE 19 CORPORATE GOVERNANCE STATEMENT Joyce Corporation Ltd (“the Company”) and the Board are committed to achieving and demonstrating a high standard of corporate governance. Joyce Corporation Ltd have reviewed its corporate governance practices against the Corporate Governance Principles and Recommendations (3rd edition) published by the ASX Corporate Governance Council. The 2015 corporate governance policy and statement reflects the corporate governance practices in place throughout the 2015 financial year. A description of the Company’s current corporate governance practices is set out in the Company’s corporate governance statements which can be viewed at www.joycecorp.com.au Joyce Corporation Ltd 2015 Annual Report I PAGE 20 ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2015 Joyce Corporation Ltd 2015 Annual Report I PAGE 21 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2015 Continuing operations Revenue Cost of sales Gross Profit Other income Share of net profit of associate Expenses from continuing operations Administration expenses Distribution expenses Marketing expenses Occupancy expenses Finance costs Impairment of intangible assets Other expenses Profit from continuing operations before income tax Income tax (expense) / benefit Profit from continuing operations after tax Discontinued operations Profit for the year from discontinued operations Profit for the year Profit is attributable : Ordinary equity holders of the company Non-controlling interests Total Comprehensive Income for the year Earnings per share for profit attributable to the members of Joyce Corporation Ltd Basic earnings per share (cents per share) Diluted earnings per share (cents per share) Earnings per share for profit from continuing operations attributable to members of Joyce Corporation Ltd Basic earnings per share (cents per share) Diluted earnings per share (cents per share) Notes Consolidated 30 June 2015 $000 30 June 2014 $000 6 6 29 6 6 7 8 9 9 9 9 34,737 (17,478) 17,259 97 215 (10,492) (850) (1,273) (2,366) (262) (1,375) (45) 908 (782) 126 5,095 5,221 12,657 (4,103) 8,554 141 255 (5,138) (948) (488) (1,307) (341) (150) (36) 617 (243) 374 1,196 1,570 4,472 749 1,570 - 5,221 1,570 16.2 16.0 0.5 0.5 5.7 5.6 1.4 1.3 The consolidated statement of profit or loss and other comprehensive income is to be read in conjunction with the notes to the consolidated financial statements set out on pages 26 to 73. Joyce Corporation Ltd 2015 Annual Report I PAGE 22 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2015 Notes Consolidated 30 June 2015 $000 30 June 2014 $000 ASSETS Current Assets Cash and cash equivalents Trade and other receivables Inventories Other assets Other financial assets Total Current Assets Non-Current Assets Trade and other receivables Investments accounted for using the equity method Deferred tax asset Plant and equipment Inventories Investment property Intangible assets Total Non-Current assets TOTAL ASSETS LIABILITIES Current liabilities Trade and other payables Interest-bearing loans and borrowings Provisions Provision for income tax Total Current Liabilities Non-Current Liabilities Interest bearing loans and borrowings Deferred tax liabilities Provisions Total Non-Current Liabilities TOTAL LIABILITIES NET ASSETS EQUITY Contributed equity Reserves Non-controlling interests Retained earnings/(Accumulated losses) TOTAL EQUITY 10 11 12 13 15 11 29 7 16 12 17 18 19 20 21 20 7 21 22 23 5,962 577 2,185 22,890 1,252 32,866 558 - 918 1,294 558 - 9,620 12,948 45,814 8,771 22 814 3,769 13,376 5,300 317 371 5,988 19,364 26,450 17,926 2,699 511 5,314 26,450 816 416 2,108 232 1,892 5,464 335 755 2,280 497 - 17,315 9,972 31,154 36,618 3,464 102 401 - 3,967 6,923 2,765 233 9,921 13,888 22,730 17,891 5,321 - (482) 22,730 The consolidated statement of financial position is to be read in conjunction with the notes to the consolidated financial statements set out on pages 26 to 73. Joyce Corporation Ltd 2015 Annual Report I PAGE 23 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2015 Notes Consolidated 30 June 2015 $000 30 June 2014 $000 Cash flows from operating activities Receipts from customers Payments to suppliers and employees Interest received Interest paid Operating cash flow Store closure costs Net cash flows from operating activities Cash flows from investing activities Proceeds from sale of property, plant and equipment Proceeds from sale of other assets Proceeds from security deposit Secured loan Purchase of non-current assets Cash acquired from business combination, net of cash consideration Payment to trust account Net cash from / (used in) investing activities Cash flows from financing activities Proceeds from borrowings Repayment of borrowings Dividends paid Net cash (used in) financing activities Net increase / (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period Reconciliation of cash Cash at bank and in hand 33 32 10 42,195 (37,714) 86 (262) 4,305 (137) 4,168 1 2,508 1,100 76 (564) 2,587 - 5,708 - (2,803) (1,927) (4,730) 5,146 816 5,962 19,025 (17,631) 129 (341) 1,182 (665) 517 19 59 600 (240) (51) - (716) (329) 50 (69) (835) (854) (666) 1,482 816 5,962 5,962 816 816 The consolidated statement of cash flows is to be read in conjunction with the notes to the consolidated financial statements set out on pages 26 to 73. Joyce Corporation Ltd 2015 Annual Report I PAGE 24 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2015 Contributed Equity Reserves Note $’000 17,845 $’000 5,321 Retained Earnings / (Accumulated Losses) $’000 (1,033) (6) 1,570 - 531 (34) (979) (482) (482) 2,622 4,472 - 6,612 Non- controlling Interest Total Equity $’000 $’000 - - - - - - - - - - - 749 749 22,133 (6) 1,570 - 23,697 12 (979) 22,730 22,730 - 4,472 749 27,951 - - - - - - 17,845 5,321 46 - - - 17,891 5,321 17,891 5,321 - - - (2,622) - - 17,891 2,699 35 - - - 17,926 2,699 (11) (1,287) 5,314 - 24 (238) (1,525) 511 26,450 Balance at 1 July 2013 Transfers to and from retained earnings Total comprehensive income for the period Profit attributable to members of the parent entity Profit attributable to non- controlling interests Subtotal Transactions with owners in their capacity as owners Payment partly paid shares Dividends paid or provided for 32 Balance at 30 June 2014 Balance at 1 July 2014 Transfers to and from retained earnings Total comprehensive income for the period Profit attributable to members of the parent entity Profit attributable to non- controlling interests Subtotal Transactions with owners in their capacity as owners Payment partly paid shares Dividends paid or provided for 32 Balance at 30 June 2015 The consolidated statement of changes in equity is to be read in conjunction with the notes to the consolidated financial statements set out on pages 26 to 73. Joyce Corporation Ltd 2015 Annual Report I PAGE 25           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. CORPORATE INFORMATION The consolidated financial statements of Joyce Corporation Ltd (“the Company”) for the year ended 30 June 2015 were authorised for issue in accordance with a resolution of the directors of the Company dated 30 September 2015. Joyce Corporation Ltd is a Company incorporated in Australia and limited by shares which are publicly traded on the Australian Securities Exchange. The nature of the operation and principal activities of the Company and its controlled entities are described in note 5. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The consolidated financial statements comprise the financial statements of Joyce Corporation Ltd and its controlled subsidiaries (‘the Consolidated Entity’). (a) Basis of preparation These general purpose financial statements for the year ended 30 June 2015 have been prepared in accordance with requirements of the Corporations Act 2001 and Australian Accounting Standards. Joyce Corporation Ltd is a for-profit entity for the purpose of preparing the Financial Statements. Compliance with IFRS Australian Accounting Standards include Australian equivalents to International Financial Reporting Standards (“AIFRS”). Compliance with AIFRS ensures that the financial report of the Consolidated Entity complies with International Financial Reporting Standards (“IFRS”). New and amended standards adopted by the Group The Group has applied the following standards and amendments for the first time for their annual reporting period commencing 1 July 2014: Interpretation 21 Accounting for Levies   AASB 2013-3 Amendments to AASB 136 – Recoverable Amount Disclosures for Non-Financial Assets  AASB 2013-4 Amendments to Australian Accounting Standards – Novation of Derivatives and Continuation of Hedge Accounting  AASB 2014-1 Amendments to Australian Accounting Standards None of the new Standards and amendments to Standards that are mandatory for the first time for the financial year beginning 1 July 2014 affected any of the amounts recognised in the current period or any prior period and is not likely to affect future periods. Additionally, they did not significantly affect the entity’s accounting policies or any of the disclosures. Historical cost convention These financial statements have been prepared under the historical cost convention. Critical accounting estimates The preparation of financial statements in conformity with AIFRS requires the use of certain critical accounting estimates. It also requires Management to exercise judgement in the process of applying the Consolidated Entity’s accounting policies. Areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in note 4. Functional and presentation currency Items included in the financial statements of each of the Consolidated Entity’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in Australian Dollars, which is the Consolidated Entity’s presentation currency. Joyce Corporation Ltd 2015 Annual Report I PAGE 26 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) New standards and interpretations not yet adopted AASB 9 Financial Instruments AASB 9 Financial Instruments (AASB 9) addresses the classification, measurement and derecognition of financial assets and financial liabilities. Since December 2013 it also sets out new rules for hedge accounting. When adopted, the standard will affect the Group's accounting for its available-for-sale financial assets, since AASB 9 only permits the recognition of fair value gains and losses in other comprehensive income if they relate to equity investments that are not held for trading. The Group does not have any such assets. There will be no impact on the Group's accounting for financial liabilities, as the new requirements only affect the accounting for financial liabilities that are designated at fair value through profit or loss and the Group does not have any such liabilities. The new hedging rules align hedge accounting more closely with the Group's risk management practices. As a general rule it will be easier to apply hedge accounting going forward. The new standard also introduces expanded disclosure requirements and changes in presentation. Adoption of AASB 9 is only mandatory for the year commencing 1 January 2017. AASB 15 Revenue from Contracts with Customers The AASB has issued a new standard for the recognition of revenue. This will replace AASB 118 which covers contracts for goods and services and AASB 111 which covers construction contracts. The new standard is based on the principle that revenue is recognised when control of a good or service transfers to a customer - so the notion of control replaces the existing notion of risks and rewards. The standard permits a modified retrospective approach for the adoption. Under this approach entities will recognise transitional adjustments in retained earnings on the date of initial application (eg 1 July 2017), ie without restating the comparative period. They will only need to apply the new rules to contracts that are not completed as of the date of initial application. The Group does not anticipate there will be a material effect on the financial statements from the adoption of this standards. Adoption of AASB 15 is only mandatory for the year commencing 1 January 2018. There are no other standards that are not yet effective and that would be expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions. Joyce Corporation Ltd 2015 Annual Report I PAGE 27 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Principles of consolidation (b) The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its investment with the entity and has the ability to affect those returns through its power to direct the activities of the entity. All controlled entities have a 30 June financial year end. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Consolidated Entity controls another entity. A list of controlled entities is contained in Note 28 to the financial statements. The consolidation accounting method used for the consolidated financial statements that include the financial statements made up to the reporting date each year of the Company and its subsidiaries is disclosed under the note on 'Business Combinations' below. Consolidated financial statements are the financial statements of the Consolidated Entity presented as those of a single economic entity. The consolidated financial statements are prepared using uniform accounting policies for like transactions and other events in similar circumstances. All significant intra-Consolidated Entity balances and transactions, including income, expenses and dividends, are eliminated in full on consolidation. The results of the investees acquired or disposed of during the financial year are accounted for from the respective dates of acquisition or up to the dates of disposal. On disposal, the attributable amount of goodwill, if any, is included in the determination of the gain or loss on disposal. Minority interests, being that portion of the profit or loss and net assets of subsidiaries attributable to equity interests held by persons outside the group, are shown separately within the Equity section of the consolidated Statement of Financial Position and in the consolidated Statement of Profit or Loss and Other Comprehensive Income. KWB Group Pty Ltd became a related party and has been consolidated into the Consolidated Entity from 1 November 2014. Up to this date KWB was accounted for on an equity accounting basis. (c) Segment reporting Operating segments are identified on the basis of internal reports about components of the Consolidated Entity that are regularly reviewed by the chief operating decision makers in order to allocate resources to the segments and to assess their performance. (d) Foreign currency translation Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation, at year end exchange rates, of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of profit or loss and other comprehensive income, except when they are deferred in equity as qualifying cash flow hedges and qualifying net investment hedges or are attributable to part of the net investment in a foreign operation. Translation differences on non-monetary financial assets and liabilities are reported as part of the fair value gain or loss. Translation differences on non-monetary financial assets and liabilities such as equities held at fair value through profit or loss are recognised in profit or loss as part of the fair value gain or loss. Translation differences on non-monetary financial assets such as equities classified as available for sale financial assets are included in the fair value reserve in equity. All companies of the Consolidated Entity have Australian Dollars as a functional currency. Joyce Corporation Ltd 2015 Annual Report I PAGE 28 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Revenue recognition (e) Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Consolidated Entity and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised: Sale of goods Revenue from the sale of goods is recognised at the point of delivery as this corresponds to the transfer of significant risks and rewards of ownership of the goods and the cessation of all involvement in those goods. Rendering of services Revenue from the rendering of a service is recognised upon completion of the service to customers. Interest income Interest income is recognised using the effective interest rate method, which, for floating rate financial assets is the rate inherent in the instrument. Dividend income Dividend income is recognised when the right to receive a dividend has been established. Franchise revenue Revenue from franchising activities is recognised based on business written sales from franchised stores. Rental revenue Rental revenue is recognised monthly as defined in the relevant lease agreements. All revenue is stated net of the amount of goods and services tax (GST). Joyce Corporation Ltd 2015 Annual Report I PAGE 29 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Income tax (f) The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the national income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses. Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting, nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the reporting date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity. Tax Consolidation Joyce Corporation Ltd and its wholly-owned Australian subsidiaries have formed an income tax consolidated group under tax consolidation legislation. Each entity in the group recognises its own current and deferred tax assets and liabilities. Such taxes are measured using the ‘stand-alone taxpayer’ approach to allocation. Current tax liabilities (assets) and deferred tax assets arising from unused tax losses and tax credits in the subsidiaries are immediately transferred to the head entity. The group notified the Australian Tax Office that it had formed an income tax consolidated group to apply from 1 July 2003. The tax consolidated group has entered a tax funding arrangement whereby each company in the group contributes to the income tax payable by the group in proportion to their contribution to the group’s taxable income. Differences between the amounts of net tax assets and liabilities derecognised and the net amounts recognised pursuant to the funding arrangement are recognised as either a contribution by, or distribution to the head entity. Joyce Corporation Ltd 2015 Annual Report I PAGE 30 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Hire purchases and leases (g) Hire purchases and leases of property, plant and equipment where the Consolidated Entity, as lessee, has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lease’s inception at the fair value of the leased property or, if lower, the present value of the minimum lease payments. The corresponding rental obligations, net of finance charges, are included in other short term and long term payables. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to the statement of profit or loss and other comprehensive income over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases are depreciated over the shorter of the asset’s useful life and the lease term. Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Consolidated Entity as lessee are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the statement of profit or loss and other comprehensive income on a straight line basis over the period of the lease. Lease income from operating leases where the Consolidated Entity is a lessor is recognised as income on a straight line basis over the lease term. Impairment of non-financial assets (h) Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date. Cash and cash equivalents (i) Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the statement of financial position. Trade receivables (j) Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less a provision for impairment. Trade receivables are generally due for settlement within 30 days. Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. A provision for impairment of trade receivables is established when there is objective evidence that the Consolidated Entity will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 30 days overdue) are considered indicators that the trade receivable is impaired. Joyce Corporation Ltd 2015 Annual Report I PAGE 31 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Trade receivables (Continued) (j) The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows relating to short term receivables are not discounted if the effect of discounting is immaterial. The amount of the provision is recognised in the statement of profit or loss and other comprehensive income in other expenses. Inventories (k) Inventories are stated at the lower of cost and net realisable value. Cost comprises expenditure incurred in acquiring the inventories and in bringing them to their existing condition and location. Costs are assigned to individual items of inventory on a basis of weighted average costs. Costs of purchased inventory are determined after deducting rebates and discounts. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. Fair value estimation (l) The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes. The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values due to their short term nature. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Consolidated Entity for similar financial instruments. (m) Investments and other financial assets Classification The Consolidated Entity classifies its financial assets in the following categories: financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments and available-for-sale financial assets. The classification depends on the purpose for which the investments were acquired. Management determines the classification of its investments at initial recognition and, in the case of assets classified as held-to-maturity, re-evaluates this designation at each reporting date. (i) Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term. Derivatives are classified as held for trading unless they are designated as hedges. Assets in this category are classified as current assets. (ii) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for those with maturities greater than 12 months after the reporting date which are classified as non-current assets. Loans and receivables are included in trade and other receivables in the statement of financial position. (iii) Held-to-maturity investments Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Consolidated Entity’s management has the positive intention and ability to hold to maturity. If the Consolidated Entity were to sell other than an insignificant amount of held-to-maturity financial assets, the whole category would be tainted and reclassified as available-for-sale. Held-to- maturity financial assets are included in non-current assets, except for those with maturities less than 12 months from the reporting date, which are classified as current assets. Joyce Corporation Ltd 2015 Annual Report I PAGE 32 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (m) Investments and other financial assets (Continued) (iv) Available-for-sale financial assets Available-for-sale financial assets, comprising principally marketable equity securities, are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the reporting date. Investments are designated as available-for-sale if they do not have fixed maturities and fixed or determinable payments and management intends to hold them for the medium to long term. Recognition and derecognition Regular purchases and sales of financial assets are recognised on trade-date - the date on which the Consolidated Entity commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss, are initially recognised at fair value and transaction costs are expensed in the statement of profit or loss and other comprehensive income. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Consolidated Entity has transferred substantially all the risks and rewards of ownership. When securities classified as available-for-sale are sold, the accumulated fair value adjustments recognised in equity are included in the statement of profit or loss and other comprehensive income as gains and losses from investment securities. Subsequent measurement Loans and receivables and held-to-maturity investments are carried at amortised cost using the effective interest method. Available-for-sale financial assets and financial assets at fair value through profit and loss are subsequently carried at fair value. Gains or losses arising from changes in the fair value of the 'financial assets at fair value through profit or loss' category are presented in the statement of profit or loss and other comprehensive income within other income or other expenses in the period in which they arise. Dividend income from financial assets at fair value through profit and loss is recognised in the statement of profit or loss and other comprehensive income as part of revenue from continuing operations when the Consolidated Entity’s right to receive payments is established. Changes in the fair value of monetary securities denominated in a foreign currency and classified as available-for-sale are analysed between translation differences resulting from changes in amortised cost of the security and other changes in the carrying amount of the security. The translation differences related to changes in the amortised cost are recognised in profit or loss, and other changes in carrying amount are recognised in equity. Changes in the fair value of other monetary and non-monetary securities classified as available-for-sale are recognised in equity. Impairment The Consolidated Entity assesses at each reporting date whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of equity securities classified as available-for-sale, a significant or prolonged decline in the fair value of a security below its cost is considered as an indicator that the securities are impaired. If any such evidence exists for available-for- sale financial assets, the cumulative loss - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss - is removed from equity and recognised in the statement of profit or loss and other comprehensive income. Impairment losses recognised in the statement of profit or loss and other comprehensive income on equity instruments classified as available-for-sale are not reversed through the statement of profit or loss and other comprehensive income. Joyce Corporation Ltd 2015 Annual Report I PAGE 33 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (m) Investments and other financial assets (Continued) Financial Guarantees Where material, financial guarantees issued, which requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due, are recognised as a financial liability at fair value on initial recognition. The guarantee is subsequently measured at the higher of the best estimate of the obligation and the amount initially recognised less, when appropriate, cumulative amortisation in accordance with AASB 118: Revenue. Where the entity gives guarantees in exchange for a fee, revenue is recognised under AASB 118. The fair value of financial guarantee contracts has been assessed using a probability weighted discounted cash flow approach. The probability has been based on: – – – the likelihood of the guaranteed party defaulting in a year period; the proportion of the exposure that is not expected to be recovered due to the guaranteed party defaulting; and the maximum loss exposed if the guaranteed party were to default. (n) Non-current assets (or disposal groups) held for sale and discontinued operations Non-current assets (or disposal groups) are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable. They are measured at the lower of their carrying amount and fair value less costs to sell, except for assets such as deferred tax assets, assets arising from employee benefits, financial assets and investment property that are carried at fair value and contractual rights under insurance contracts, which are specifically exempt from this requirement. An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs to sell. A gain is recognised for any subsequent increases in fair value less costs to sell of an asset (or disposal group), but not in excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the sale of the non- current asset (or disposal group) is recognised at the date of derecognition. Non-current assets (including those that are part of a disposal group) are not depreciated or amortised while they are classified as held for sale. Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale continue to be recognised. Non-current assets classified as held for sale and the assets of a disposal group classified as held for sale are presented separately from the other assets in the Statement of Financial Position. The liabilities of a disposal group classified as held for sale are presented separately from other liabilities in the Statement of Financial Position. A discontinued operation is a component of the entity that has been disposed of or is classified as held for sale and that represents a separate major line of business or geographical area of operations, is part of a single co-ordinated plan to dispose of such a line of business or area of operations, or is a subsidiary acquired exclusively with a view to resale. The results of discontinued operations are presented separately in the Statement of Profit or Loss and Other Comprehensive Income. Derivatives and hedging activities (o) Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value at each reporting date. The accounting for subsequent changes in fair value depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Consolidated Entity designates certain derivatives as either:  hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedges),  hedges of the cash flows of recognised assets and liabilities and highly probable forecast transactions (cash flow hedges), or  hedges of a net investment in a foreign operation (net investment hedges). Joyce Corporation Ltd 2015 Annual Report I PAGE 34 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (p) Derivatives and hedging activities (continued) The Consolidated Entity documents at the inception of the hedging transaction the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The Consolidated Entity also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions have been and will continue to be highly effective in offsetting changes in fair values or cash flows of hedged items. Property, plant and equipment (q) Land and buildings are shown at fair value, based on periodic, but at least triennial, valuations by external independent valuers, less subsequent depreciation for buildings. Any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. All other property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Consolidated Entity and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the statement of profit or loss and other comprehensive income during the reporting period in which they are incurred. Depreciation is calculated over the estimated useful life of the asset as follows:  Plant and equipment - 1 to 20 years;  Leased plant and equipment - over 5 to 6 years; and  Leasehold improvements – 3 to 20 years. The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These are included in the statement of profit or loss and other comprehensive income. When revalued assets are sold, it is the Consolidated Entity’s policy to transfer the amounts included in other reserves in respect of those assets to retained earnings. Investment property (r) Investment property, which is property held to earn rentals and/or for capital appreciation (including property under construction for such purposes), is measured initially at its cost, including transaction costs. Subsequent to initial recognition, investment property is measured at fair value. Gains and losses arising from changes in the fair value of investment property are included in profit or loss in the period in which they arise. Joyce Corporation Ltd 2015 Annual Report I PAGE 35 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (s) Intangible assets Acquired both separately and from a business combination Intangible assets acquired separately are capitalised at cost. Following initial recognition, the cost model is applied to the class of intangible assets. Where amortisation is charged on assets with finite lives, this expense is taken to the statement of profit or loss and other comprehensive income through the ‘amortisation expenses’ line item. Intangible assets, excluding development costs, created within the business are not capitalised and expenditure is charged against profits in the period in which the expenditure is incurred intangible assets are tested for impairment where an indicator of impairment exists and in the case of indefinite lived intangibles annually, either individually or at the cash generating unit level. Useful lives are also examined on an annual basis and adjustments, where applicable, are made on a prospective basis. (i) Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the Consolidated Entity’s share of the net identifiable assets of the acquired subsidiary/associate at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill on acquisitions of associates is included in investments in associates. Goodwill is not amortised. Instead, goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is allocated to cash-generating units for the purpose of impairment testing. Each of those cash- generating units represents the Consolidated Entity’s investment in each country of operation by each operating segment. Cash-generating units to which goodwill is allocated is as follows:  Bedshed Franchising cash generating unit  Bedshed Stores cash generating unit  KWB Group Pty Ltd cash generating unit (ii) IT development and software Costs incurred in developing products or systems and costs incurred in acquiring software and licenses that will contribute to future period financial benefits through revenue generation and/or cost reduction are capitalised to software and systems. Costs capitalised include external direct costs of materials and service, direct payroll and payroll related costs of employees’ time spent on the project. Amortisation is calculated on a straight-line basis over periods generally ranging from 3 to 5 years. IT development costs include only those costs directly attributable to the development phase and are only recognised following completion of technical feasibility and where the Consolidated Entity has an intention and ability to use the asset. Joyce Corporation Ltd 2015 Annual Report I PAGE 36 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Trade and other payables (t) These amounts represent liabilities for goods and services provided to the Consolidated Entity prior to the reporting date which are unpaid. The amounts are unsecured and are usually paid within 45 days of recognition. Provisions (u) Provisions for legal claims, service warranties and make good obligations are recognised when the Consolidated Entity has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. Provisions are not recognised for future operating losses. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small. Provisions are measured at the present value of Management’s best estimate of the expenditure required to settle the present obligation at the reporting date. The discount rate used to determine the present value reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognised as interest expense. Employee benefits (v) (i) Wages and salaries and annual leave and sick leave Liabilities for wages and salaries, including non-monetary benefits, and annual leave expected to be settled within 12 months of the reporting date are recognised in other payables in respect of employees' services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled. (ii) Long service leave The liability for long service leave is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows. (iii) Profit-sharing and bonus plans The Consolidated Entity recognises a liability and an expense for bonuses and profit-sharing based on a formula that takes into consideration the profit attributable to the Company’s shareholders after certain adjustments. The Consolidated Entity recognises a provision where contractually obliged or where there is a past practice that has created a constructive obligation. (iv) Termination benefits Termination benefits are payable when employment is terminated before the normal retirement date, or when an employee accepts voluntary redundancy in exchange for these benefits. The Consolidated Entity recognises termination benefits when it is demonstrably committed to either terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal or providing termination benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due more than 12 months after reporting date are discounted to present value. Joyce Corporation Ltd 2015 Annual Report I PAGE 37 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Borrowings (w) Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in the statement of profit or loss and other comprehensive income over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities, which are not an incremental cost relating to the actual draw-down of the facility, are recognised as prepayments and amortised on a straight-line basis over the term of the facility. Bank loans are carried at amortised cost. Transaction costs are deducted against the outstanding principal amount at amortised cost using the effective interest rate method. Contributed equity (x) Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue of new shares or options for the acquisition of a business are not included in the cost of the acquisition as part of the purchase consideration. If the entity reacquires its own equity instruments, e.g. as the result of a share buy-back, those instruments are deducted from equity and the associated shares are cancelled. No gain or loss is recognised in the profit or loss and the consideration paid including any directly attributable incremental costs (net of income taxes) is recognised directly in equity. Dividends (y) Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the entity, on or before the end of the financial year but not distributed at reporting date. (z) Earnings per share (i) Basic earnings per share Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year. (ii) Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares. Comparatives (aa) When required by applicable accounting standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year. (bb) Rounding of Amounts The Company has applied the relief available to it under ASIC Class Order 98/100 and accordingly, amounts in the financial report have been rounded off to the nearest $1,000. Joyce Corporation Ltd 2015 Annual Report I PAGE 38 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (cc) Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The Statement of Cash Flows includes cash flows on a gross basis. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the statement of financial position. (dd) Investments in associates Investments in associates are accounted for using the equity method of accounting in the consolidated financial statements. Under the equity method, the investment in the associate is carried in the consolidated statement of financial position at cost plus post-acquisition changes in the Consolidated Entity’s share of net assets of the associate. After application of the equity method, the Consolidated Entity determines whether it is necessary to recognise any additional impairment loss with respect to the Consolidated Entity’s net investment in the associate. The Consolidated Entity's share of the associate post-acquisition profits or losses is recognised in the statement of profit or loss and other comprehensive income. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Consolidated Entity's share of losses in the associate equals or exceeds its interest in the associate, including any unsecured long-term receivables and loans, the Consolidated Entity does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate. The reporting dates of the associate and the Consolidated Entity are identical and the associate’s accounting policies conform to those used by the Consolidated Entity for like transactions and events in similar circumstances. (ee) Business Combinations The acquisition method of accounting is used to account for all business combinations, regardless whether equity instruments or other assets are acquired. The consideration transferred for the acquisi of a subsidiary comprises the   fair values of the assets transferred liabilities incurred  equity interests issued by the group   fair value of any asset or liability resulting from a contingent consideration arrangement, and fair value of any pre-existing equity interest in the subsidiary. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. The group recognises any non-controlling interest in the acquired entity on an acquisition-by-acquisition basis either at fair value or at the non-controlling interest’s proportionate share of the acquired entity’s net Identifiable assets. Acquisition-related costs are expensed as incurred. The excess of the consideration transferred, amount of any non-controlling interest in the acquired entity, and acquisition-date fair value of any previous equity interest in the acquired entity over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the subsidiary acquired, the difference is recognised directly in profit or loss as a bargain purchase. Joyce Corporation Ltd 2015 Annual Report I PAGE 39 Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions. Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value with changes in fair value recognised in profit or loss. AASB3(42) If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in the acquire is remeasured to fair value at the acquisition date. Any gains or losses arising from such remeasurement are recognised in profit or loss. 3. FINANCIAL RISK MANAGEMENT The Consolidated Entity's activities expose it to a variety of financial risks: market risk (including currency risk and interest rate risk), credit risk and liquidity risk. The Consolidated Entity's overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Consolidated Entity. The Consolidated Entity makes occasional use of derivative financial instruments such as foreign exchange contracts to manage foreign currency risk. Derivatives are exclusively used for hedging purposes, i.e. not as trading or other speculative instruments. The Consolidated Entity uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate, foreign exchange and other price risks and aging analysis for credit risk. Risk management is carried out by the CFO under the supervision of the Board of Directors. The Board provides principles for overall risk management, as well as policies and supervision covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity. The Consolidated Entity holds the following financial instruments: Financial assets Cash and cash equivalents Trade and other receivables Other financial assets Financial liabilities Trade and other payables Interest-bearing loans and borrowings Notes Consolidated 30 June 2015 $000 30 June 2014 $000 10 11 15 19 20 5,962 1,135 1,252 8,349 8,771 5,322 14,093 816 751 1,892 3,459 3,464 7,024 10,488 Joyce Corporation Ltd 2015 Annual Report I PAGE 40 3. FINANCIAL RISK MANAGEMENT (CONTINUED) (a) Market risk (i) Foreign exchange risk The Consolidated Entity makes purchases some of which are exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US dollar, in the ordinary course of business. Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency that is not the Consolidated Entity’s functional currency. The risk is measured using sensitivity analysis and cash flow forecasting. Management has a standard policy for dealing with foreign currency risk in the purchasing function of the Consolidated Entity in order to manage foreign exchange risk against the Consolidated Entity’s functional currency. Material purchase contracts which are denominated in foreign currency are regularly reviewed by management and when it is considered necessary the currency risk exposure may be managed via the use of foreign currency contracts. The current policy is to forward buy USD contracts equivalent to fifty percent of six months forward US dollar denominated orders. The Consolidated Entity’s had exposure to foreign currency risk with respect to the US Dollar at the at 30 June 2015 of US$200k. (ii) Cash flow interest rate risks The Consolidated Entity's main interest rate risk arises from long-term borrowings. Borrowings issued at variable rates expose the Consolidated Entity to cash flow interest rate risk. The Consolidated Entity policy is to manage both risks as appropriate in conjunction with considerations about minimising the Consolidated Entity’s liquidity risk (see below), the current state of the yield curve and expectations about interest rates in the medium term and the need for flexibility so as to minimise the Consolidated Entity’s interest expense. As at the reporting date, all of the Consolidated Entity had the following variable and fixed rate financial instruments: Weighted Average Interest rate % Weighted Average Interest rate % 30 June 2015 $000 30 June 2014 $000 Financial assets Cash and cash equivalents 0.03% 5,962 4.14% Financial liabilities Overdraft – secured (i) Commercial bill –secured – variable Commercial bill –secured – variable (ii) n/a n/a 3.72% 5,962 - - 5,300 5,300 n/a n/a 3.84% 816 816 - - 6,900 6,900 (i) The overdraft facility pays interest at variable interest rates plus a line fee and is renewed annually. (ii) The Commercial bill facility is approved to 30 June 2019. This debt facility is bank bill based and incurs a line fee on use. An analysis by maturities is provided in (c) below. Joyce Corporation Ltd 2015 Annual Report I PAGE 41 3. FINANCIAL RISK MANAGEMENT (CONTINUED) (a) Market risk (continued) The Consolidated Entity analyses its interest rate exposure on a dynamic basis. Various scenarios are modelled taking into consideration refinancing, renewal of existing positions, alternative financing and hedging. Based on these scenarios, the Consolidated Entity calculates the impact on profit and loss of a defined interest rate shift. The scenarios are run only for liabilities that represent the major interest- bearing positions. Based on the various scenarios, the Consolidated Entity manages its cash flow interest rate risk adopting an appropriate mix of fixed versus variable rate debt and also an appropriate mix of debt maturities to provide it with flexibility to repay debt as quickly as possible whilst having liquidity available to take advantage of business opportunities as they arise. Consolidated Entity sensitivity The major debt facility drawn at 30 June 2015 is at a variable interest rate (see above). Variable interest rates apply to the overdraft and cash and cash equivalents. On balances at 30 June 2015, if interest rates had changed by -/+ 100 basis points from the year-end rates with all other variables held constant, post- tax profit for the year would have been $53k/$53k higher/lower (2014 - $69k/69k higher/lower), mainly as a result of a higher/lower interest expense arising from borrowings offset by lower/higher interest income from cash and cash equivalents. Equity would have been $53k/$53k higher/lower (2014 - $69k/$69k higher/lower) for the same reasons as above. (b) Credit risk Credit risk is limited to high credit quality financial institutions with which deposits are held and high credit quality wholesale customers with which the Consolidated Entity trades. Credit risk is managed on a Consolidated Entity basis. Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, as well as credit exposures to wholesale customers, including outstanding receivables and committed transactions. For banks and financial institutions, only independently rated parties with a minimum rating of 'A' are accepted. If wholesale customers are independently rated, these ratings are used. Otherwise, if there is no independent rating, risk control assesses the credit quality of the customer, taking into account its financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set internally. The compliance with credit limits by wholesale customers is regularly monitored by line management. The maximum exposure to credit risk at the reporting date is the carrying amount of the financial assets as summarised in each applicable note. For wholesale customers without credit rating the Consolidated Entity generally retains title over the goods sold until full payment is received. For some trade receivables the Consolidated Entity may also obtain security in the form of guarantees, deeds of undertaking or letters of credit which can be called upon if the counterparty is in default under the terms of the agreement. The Consolidated Entity does not hold any credit derivatives to offset its credit exposure. The Consolidated Entity trades only with recognised, creditworthy third parties, and as such collateral is not requested nor is it the Consolidated Entity's policy to securitise its trade and other receivables. The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit ratings (if available) or to historical information about counterparty default rates: Cash and cash equivalents AA Trade and other receivables Non-rated Other financial assets Non-rated CONSOLIDATED 2015 $000 5,962 1,135 2014 $000 816 751 1,252 1,892 8,349 3,459 Joyce Corporation Ltd 2015 Annual Report I PAGE 42 3. FINANCIAL RISK MANAGEMENT (CONTINUED) (c) Liquidity risk Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. The Consolidated Entity manages liquidity risk by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. Due to the dynamic nature of the underlying businesses, the Consolidated Entity aims at maintaining flexibility in funding by keeping committed credit lines available and, where possible, with a variety of counterparties. Surplus funds are generally only invested in overnight deposits or used to repay debt. Maturities of financial assets and financial liabilities The tables below analyse the Consolidated Entity’s financial liabilities, net and gross settled derivative financial instruments into relevant maturity groupings based on the remaining period at the reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. Consolidated disclosures Year ended 30 June 2015 Consolidated financial assets Cash and cash equivalents Trade and other receivables Other financial assets Consolidated financial liabilities Trade and other payables Interest bearing loans & borrowings Net maturity Year ended 30 June 2014 Consolidated financial assets Cash and cash equivalents Trade and other receivables Other financial assets Consolidated financial liabilities Trade and other payables Interest bearing loans & borrowings Net maturity ≤ 6 months $000 6-12 months $000 1-5 years $000 >5 years $000 5,962 1,114 1,252 8,328 8,771 22 8,793 (465) - - - - - - - - - 21 - 21 - 5,300 5,300 (5,279) - - - - - - - - ≤ 6 months $000 6-12 months $000 1-5 years $000 >5 years $000 816 730 1,892 3,438 3,464 76 3,540 (102) - - - - - 21 - 21 - 26 26 (26) - 6,923 6,923 (6,902) - - - - - - - - Total $000 5,962 1,135 1,252 8,349 8,771 5,322 14,093 (5,744) Total $000 816 751 1,892 3,459 3,464 7,025 10,489 (7,030) Joyce Corporation Ltd 2015 Annual Report I PAGE 43 3. FINANCIAL RISK MANAGEMENT (CONTINUED) (c) Liquidity risk (continued) Financing arrangements The Consolidated Entity had access to the following undrawn bank borrowing facilities at the reporting date: 30 June 2014 Consolidated 30 June 2015 Consolidated Facility limit $000 7,768 Used $000 6,900 Available $000 868 8,900 5,300 3,600 The Consolidated Entity had $3,500,000 of available overdraft and bank bill facilities to manage its liquidity as at 30 June 2015 (2014: $868,000) represented by a $8,900,000 bank bill facility and overdraft facility The consolidated entity had $5,962,000 (2014 $816,000) cash at bank as at the reporting date including funds held in trust set out at note 10. In addition the Consolidated Entity had a net investment in inventories of $2,185,000 as at 30 June 2015 (2014: $2,108,000). The Consolidated Entity has the ability to draw additional bank guarantees against the available undrawn facility. (d) Fair value estimation The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes. The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values due to their short-term nature. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Consolidated Entity for similar financial instruments. The fair value of forward exchange contracts is determined using forward exchange market rates at the reporting date. (e) Capital risk management Management controls the capital of the Consolidated Entity in order to maintain a good debt to equity ratio, provide the shareholders with adequate returns and ensure that the Consolidated Entity can fund its operations and continue as a going concern. The Consolidated Entity’s debt and capital includes ordinary share capital and financial liabilities, supported by financial assets. The Consolidated Entity is not subject to any externally imposed capital requirements other than as disclosed in note 20 (e). Management effectively manages the Consolidated Entity’s capital by assessing the Consolidated Entity’s financial risks and adjusting its capital structure in response to changes in these risks and in the market. These responses include the management of debt levels, distributions to shareholders and share issues. There have been no changes in the strategy adopted by management to control the capital of the Consolidated Entity since the prior year. This strategy is to ensure that the Consolidated Entity’s gearing ratio remain below 40%. The gearing ratio for the year ended 30 June 2015 and 30 June 2014 is as follows: Bank Debt Less Cash and cash equivalents Plus cash held on trust Gearing Ratio to Total Equity CONSOLIDATED 2015 $000 5,300 (5,962) 1,252 590 2.2% 2014 $000 6,900 (816) 1,483 7,565 33.3% Joyce Corporation Ltd 2015 Annual Report I PAGE 44 4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances. The Consolidated Entity makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. Impairment testing of goodwill The Consolidated Entity assesses impairment at each reporting date by evaluating conditions specific to the Consolidated Entity that may lead to impairment of assets. Where an impairment trigger exists, the recoverable amount of the asset is determined. Value-in-use calculations performed in assessing recoverable amounts incorporate a number of key estimates. Impairment of $1,375,000 (2014: $150,000) has been recognised in respect of goodwill for the year ended 30 June 2015. See note 18 for further details. Recognition of deferred taxation assets The Consolidated Entity has deferred tax assets at 30 June 2015 of Nil (2014: Nil) which were not brought to account, associated with tax losses arising in Australia the benefits of which will only be realised if the conditions for deductibility are met. Sale of investment property An unconditional sale contract for the Moorebank property for $25M was entered into in March 2015. The purchaser has paid a non-refundable $2.5M deposit directly to the Company. Settlement is due after 30 June 2015.As the contract is unconditional it is recorded as a sale in the year ended 30 June 2105 and shown as a receivable 5. SEGMENT INFORMATION (a) AASB 8 Operating segments Operating Segments are identified on the basis of internal reports about components of the Consolidated Entity that are regularly reviewed by the chief operating decision makers (The Board of Directors) in order to allocate resources to the segments and to assess their performance. The operating businesses are organised and managed separately according to the nature of the products and services provided, with each segment representing a strategic business unit that offers different products and serves different markets. The Consolidated Entity has the following three operating segments:  The Bedshed retail bedding franchise operation;  The operation of Consolidated Entity owned Bedshed stores in Western Australia, Victoria, New South Wales and Queensland; and  The operation of retail kitchen stores Refer to note 8 for a description of discontinued operations. Transfer prices between operating segments are set at an arms-length basis in a manner similar to transactions with third parties. Joyce Corporation Ltd 2015 Annual Report I PAGE 45 5. SEGMENT INFORMATION (CONTINUED) Operating segments The following table presents revenue and profit information and certain asset and liability information regarding operating segments for the year ended 30 June 2015. Continuing Operations Discontinued Operations Bedshed Franchise $’000 Retail Bedding Stores $’000 Retail Kitchen Stores $’000 Invest Prop / Joyce $’000 Total ‘$000 Store Closures $’000 Invest Prop $’000 Total $’000 Year ended 30 June 2015 Revenue Sales to external customers 4,591 8,801 21,306 39 34,737 2,159 754 37,650 Inter-segment sales - - - - - - - - Total segment revenue 4,591 8,801 21,306 39 34,737 2,159 754 37,650 Unallocated revenue Total consolidated revenue Result 97 - - 97 34,834 2,159 754 37,747 Segment result 1,230 696 1,715 (1,352) 2,289 (95) 742 2,936 Unallocated expenses net of unallocated income Unallocated share of net profit of associate Profit before tax and finance costs Unallocated finance costs Profit before income tax Income tax expense Net Profit for the year Assets and liabilities - - - - (1,334) 215 - - 6,640 5,306 - 215 1,170 (95) 7,382 8,457 (262) 908 - - (262) (95) 7,382 8,195 (782) - (2,192) (2,974) 126 (95) 5,190 5,221 Segment assets 13,492 932 7,598 334 22,356 - 22,540 44,896 Unallocated assets Total assets 918 23,274 Segment liabilities 2,329 939 5,385 5,577 14,230 Unallocated liabilities Total liabilities Other segment information Capital expenditure Depreciation and amortisation Other non-cash segment expenses / revaluation 4,086 18,316 - - - 684 302 - 10 23 - 313 146 361 133 - - - - - - - - 12 - - 918 22,540 45,814 1,048 15,278 - 4,086 1,048 19,364 684 314 - - - Joyce Corporation Ltd 2015 Annual Report I PAGE 46 5. SEGMENT INFORMATION (CONTINUED) Operating segments (continued) The following table presents revenue and profit information and certain asset and liability information regarding operating segments for the year ended 30 June 2014. Continuing Operations Bedshed Franchise $’000 Retail Bedding Stores $’000 Retail Kitchen Stores $’000 Discontinued Operations Invest Prop / Joyce $’000 Total ‘$000 Store Closures $’000 Invest Prop $’000 Total $’000 Year ended 30 June 2014 Revenue Sales to external customers 4,551 8,093 Inter-segment sales - - Total segment revenue 4,551 8,093 1,542 - 398 - Inter-segment elimination Unallocated revenue Total consolidated revenue Result Segment result Unallocated expenses net of unallocated income Share of net profit of associate Profit before tax and finance costs Finance costs Profit before income tax Income tax expense Net Profit (loss)for the year Assets and liabilities - - - - - 14 12,658 2,818 788 16,264 - - - - - 14 12,658 2,818 788 16,264 129 - - 129 12,787 3,606 788 16,393 (1,377) - 563 140 255 958 (341) 617 (243) 374 (50) 1,720 2,233 - - - - 140 255 (50) 1,720 2,628 - - (341) (50) 1,720 2,287 - (474) (717) (50) 1,246 1,570 Segment assets 11,633 2,207 - 2,820 16,660 363 17,315 34,338 Unallocated assets Total assets 2,280 18,940 - - 2,280 363 17,315 36,618 Segment liabilities 2,477 762 - 3,767 7,006 233 3,884 11,123 Unallocated liabilities Total liabilities Other segment information Capital expenditure Depreciation and amortisation Other non-cash segment expenses / revaluation 2,765 9,771 - - 2,765 233 3,884 13,888 17 10 - 34 132 - - - - - - - 51 142 949 - 12 - - 51 154 - 949 949 Joyce Corporation Ltd 2015 Annual Report I PAGE 47 (b) Geographic segments The Consolidated Entity operates in one principal geographical area namely that of Australia (country of domicile). (c) Information about major customers No single customer of the Consolidated Entity generated more than 10% of the Consolidated Entity’s revenue during the year ended 30 June 2015 (2014: None). 6. REVENUE, INCOME AND EXPENSES (a) Revenue, Income and Expenses from Continuing Operations CONSOLIDATED Revenue Sale of goods Provision of services Total revenue Other income Interest received Profit on disposal of assets Other Total other income Finance costs Bank loans and overdrafts Finance charges payable under finance leases and hire purchase contracts Total finance costs 2015 $000 30,680 4,057 34,737 97 - - 97 (259) (3) (262) 2014 $000 8,654 4,003 14,832 129 10 1 140 (334) (7) (341) Depreciation and other significant items of expenditure included in statement of profit or loss and other comprehensive income Included in expenses: Depreciation and amortisation Impairment of goodwill 1 Includes depreciation for continued and discontinued operations. (315)1 (1,375) (154)1 (150) (b) Lease payments and other expenses included in the statement of profit or loss and other comprehensive income – continuing operations Minimum lease payments - operating lease (c) Employee benefits expense – continuing operations Management bonus (admin) Wages and salaries (admin costs) Wages and salaries (included in distribution costs) Defined contribution superannuation expense Superannuation (included within distribution costs) Other employee benefits expense (admin) Other (included within distribution costs) CONSOLIDATED 2015 $000 2,325 197 5,216 380 673 35 634 72 7,207 2014 $000 2,770 289 2,577 465 296 36 229 49 3,941 Joyce Corporation Ltd 2015 Annual Report I PAGE 48 7. INCOME TAX The major components of income tax expense for the year ended 30 June 2015 are: Consolidated Statement of comprehensive income – continuing operations Current Income tax Current income tax expense Deferred income tax Relating to origination and reversal of temporary differences Utilisation of unused tax losses Expense/(over) provision in respect of prior years CONSOLIDATED 2015 $000 2014 $000 836 (1,661) 52 (9) - (239) 4 Income tax (expense)/benefit relating to continuing operations (782) (243) Consolidated Statement of Profit or loss and Other Comprehensive Income – discontinued operations Income tax (expense)/benefit relating to discontinued operations (2,192) (474) Income tax (expense)/benefit relating to overall operations (2,974) (717) A reconciliation of income tax expense applicable to accounting profit before income tax at the statutory income tax rate to income tax expense at the Consolidated Entity’s effective income tax rate for the years ended 30 June 2015 and 30 June 2014 is as follows: CONSOLIDATED Profit before income tax Income tax (expense)/benefit calculated at the statutory income tax rate of 30% (2014: 30%) Expenditure not allowable for income tax purposes Impairment of stores not allowable for income tax purposes Deferred tax asset losses not previously brought to account, now brought to account Under provision in respect of prior years 2015 $000 908 (272) (141) (412) 52 (9) 2014 $000 617 (185) (62) - - 4 (782) (243) Income tax (expense)/benefit recognised in profit or loss – continuing operations (782) (243) Joyce Corporation Ltd 2015 Annual Report I PAGE 49 7. INCOME TAX (CONTINUED) Tax consolidation Joyce Corporation Ltd and its 100% Australian owned subsidiaries are a tax Consolidated Entity. Members of the Consolidated Entity have not entered into any tax sharing or tax funding arrangements. At the reporting date, the possibility that the head entity will default on its tax payment obligations is remote. The head entity of the tax Consolidated Entity is Joyce Corporation Ltd. Measurement method adopted under UIG 1052 Tax Consolidation Accounting The head entity and the controlled entities in the tax Consolidated Entity continue to account for their own current and deferred tax amounts. The Consolidated Entity has applied the Consolidated Entity allocation approach in determining the appropriate amount of current taxes and deferred taxes to allocate to members of the tax Consolidated Entity. The current and deferred tax amounts are measured in a systematic manner that is consistent with the broad principles in AASB 112 Income Taxes. In addition to its own current and deferred tax amounts, the head entity also recognises current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax Consolidated Entity. Tax consolidation contributions/ (distributions) The Consolidated Entity has recognised no consolidation contribution adjustments. Taxation of financial arrangements (TOFA) Legislation is in place which changes the tax treatment of financial arrangements including the tax treatment of hedging transactions. The Consolidated Entity has assessed the potential impact of these changes on the Consolidated Entity's tax position. No impact has been recognised and no adjustments have been made to the deferred tax and income tax balances at 30 June 2015 (2014: Nil). Joyce Corporation Ltd 2015 Annual Report I PAGE 50 7. INCOME TAX (CONTINUED) Deferred income tax Deferred income tax at 30 June 2015 relates to the following: Deferred tax liabilities Investment property Fair value gain Other Opening balance Charged to income Recognised in Business Combination Closing balance, 30 June 15 $000 $000 $000 $000 (2,425) (260) (80) 2,425 - (28) - - 51 - (260) (57) Balance at 30 June 2015 (2,765) 2,397 51 (317) Deferred tax assets Plant and equipment Trade and other receivables Pensions and other employer obligations Provisions Other Unused tax losses $000 $000 $000 $000 74 1 128 183 279 1,615 (3) 11 100 52 (146) (1,615) 65 - 125 49 - - 136 12 353 284 133 - 918 Balance at 30 June 2015 2,280 (1,601) 239 The Consolidated Entity has deferred tax assets and liabilities of $Nil (2014: $Nil) which were not brought to account. Joyce Corporation Ltd 2015 Annual Report I PAGE 51 7. INCOME TAX (CONTINUED) Deferred income tax at 30 June 2014 relates to the following: Deferred tax liabilities Investment property Fair value gain Other Balance at 30 June 2014 Deferred tax assets Plant and equipment Trade and other receivables Pensions and other employer obligations Provisions Other Unused tax losses Opening balance Charged to income Closing balance, 30 June 14 $000 $000 $000 (2,130) (260) (9) (295) - (71) (2,425) (260) (80) (2,399) (366) (2,765) $000 $000 $000 55 5 91 347 345 1,786 19 (4) 37 (164) (66) (171) 74 1 128 183 279 1,615 Balance at 30 June 2014 2,629 (349) 2,280 Joyce Corporation Ltd 2015 Annual Report I PAGE 52 8. DISCONTINUED OPERATIONS (a) Closure of Company owned store A store in Queensland came to the end of a lease. The profit performance including all closure costs resulted in a $95k loss during the year. Subsequently a franchise store commenced within the locality of the closed store. (b) Investment property sale The investment property was contracted for unconditional sale in March 2015. As this business will cease from 30 September 2015 the operation has been included as a discontinuing operation. (c) Analysis of loss for the year from discontinued operations The combined results of the discontinued operations (i.e. all the stores committed to the closure) included in the statement of profit or loss and other comprehensive income are set out below. Profit/(loss) for the year from discontinued operations Revenue Cost of sales Gross profit Other income Sale of Investment Property Revaluation of Investment Property 2015 Stores  Property  $000 1,807 (1091) 716 352 - - $000 - - - 753 6,640 - 2014 Stores  Property  Total  $000 1,807 $000 2,399 (1,091) (1,451) 716 948 1,105 6,640 - 419 ‐  ‐  Total  $000 2,399 (1,451) 948 1,207 - 949 $000 - - - 788 ‐  949 Expenses (1,163) (11) (1,174) (1,417) (17) (1,434) from discontinued operations Profit before tax (95) 7,382 7,287 (50) Attributable income tax benefit - (2,192) (2,192) - 1,720 (474) (95) 5,190 5,095 (50) 1,246 Other comprehensive income - - - - - 1,670 (474) 1,196 - for Profit/(loss) from discontinued operations (attributable to owners of Joyce Corporation Ltd) year the (95) 5,190 5,095 (50) 1,246 1,196 Cash flows from discontinued operations Net cash flows from operating activities Net cash flows from investing activities Net cash flows from financing activities Net cash flows 2015 $000 (76) - - (76) 2014 $000 (38) - - (38) Joyce Corporation Ltd 2015 Annual Report I PAGE 53   9. EARNINGS PER SHARE Basic earnings per share amounts are calculated by dividing net profit for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share amounts are calculated by dividing the net profit attributable to ordinary shareholders (after deducting interest on the convertible redeemable preference shares) by the weighted average number of ordinary shares outstanding during the year (adjusted for the effects of dilutive options and dilutive convertible non-cumulative redeemable preference shares). The following reflects the income and share data used in the total operations basic and diluted earnings per share computations: Net profit/(loss) attributable to equity holders from continuing operations for basic earnings per share Effect of dilutive equity instruments Net profit attributable to equity holders from continuing operations for diluted earnings per share Profit/(loss) attributable to equity holders from discontinued operations Profit for year Non-controlling interests Net profit attributable to ordinary shareholders for basic earnings per share Effect of dilutive equity instruments Net profit attributable to ordinary shareholders for diluted earnings per share CONSOLIDATED 2015 $000 126 - 126 5,095 5,221 (749) 4,472 - 2014 $000 374 - 374 1,196 1,570 - 1,570 - 4,472 1,570 Number of shares Number of shares Weighted average number of ordinary shares for basic earnings per share including partly paid 27,968,255 27,968,255 Adjusted weighted average number of ordinary shares for diluted earnings per share including partly paid 27,968,255 27,968,255 Weighted average number of converted, lapsed or cancelled potential ordinary shares included in diluted earnings per share - - Weighted average number of partly paid ordinary shares (issued at $1.955 and paid to $1.523) (2014:$1.432) included in basic and diluted earnings per share. 380,000 380,000 Earnings per share are included at the foot of the Statement of Profit or Loss and Other Comprehensive Income. Joyce Corporation Ltd 2015 Annual Report I PAGE 54 10. CASH AND CASH EQUIVALENTS For the purposes of the statement of cash flows, cash and cash equivalents are comprised of the following: Cash at bank and in hand (a) CONSOLIDATED 2015 $000 5,962 5,962 2014 $000 816 816 (a) Amounts held in trust for the Bedshed Approved Purposes funds Included within the cash and cash equivalents balance are funds allocated for the specific use of operating the Approved Purposes Fund activities on behalf of the Company’s franchisees. At 30 June 2015 the total of this balance of the Bedshed Approved Purposes fund was $1,252,349 (30 June 2014: $1,483,138) and the bank account holding these funds are excluded from and released from the registered charges and claims of Joyce Corporation Ltd bankers, St. George Bank. The fund has a net balance that is taken up as commitment in the current liabilities of $1.35M. 11. TRADE AND OTHER RECEIVABLES Current Trade receivables* Allowance for impairment loss (a) Non-current Trade receivables Other receivables (a) Allowance for impairment loss 616 (39) 577 21 537 558 419 (3) 416 21 314 335 Trade receivables are non-interest bearing and are generally on 30 day terms. A provision for impairment loss is recognised when there is objective evidence that an individual trade receivable is impaired. An impairment provision of $39k (2014: $3k) has been recognised by the Consolidated Entity. At 30 June, the ageing analysis of current trade receivables is as follows: Total $000 616 0-30 Days $000 419 31-60 Days $000 119 61-90 Days PDNI* $000 18 61-90 Days CI* $000 - +91 Days PDNI* $000 21 +91 Days CI* $000 39 2015 Consolidated 2014 Consolidated 419 270 90 13 - 43 3 * Past due not impaired ('PDNI') Considered impaired ('CI') Receivables past due but not considered impaired are: Consolidated Entity: $39,500 (2013: $56,066). Payment terms on these amounts have not been re-negotiated however credit has been stopped until full payment is made. Each operating unit has been in direct contact with the relevant debtor and is satisfied that payment will be received in full. Other balances within trade and other receivables do not contain impaired assets and are not past due. It is expected that these other balances will be received when due. Joyce Corporation Ltd 2015 Annual Report I PAGE 55 11. TRADE AND OTHER RECEIVABLES (CONTINUED) Movement in the provision for impairment of receivables is as follows: Opening balance at 1 July Charge for the year Amounts written-off Closing balance at 30 June (b) Fair value and credit risk CONSOLIDATED 2015 $000 3 36 - 39 2014 $000 41 - (38) 3 Due to the short term nature of these receivables, their carrying value is assumed to approximate their fair value. The maximum exposure to credit risk is the fair value of receivables. Collateral is not held as security, nor is it the Consolidated Entity's policy to transfer (on-sell) receivables to special purpose entities. (c) Foreign exchange and interest rate risk Detail regarding foreign exchange and interest rate risk exposure is disclosed in note 3. 12. INVENTORIES Current Stock on hand at cost Provision for impairment (a) (a) Provision for impairment CONSOLIDATED 2015 $000 2,325 (140) 2,185 2014 $000 2,208 (100) 2,108 Write-downs of inventories to net realisable value recognised as an expense during the year ended 30 June 2015 amounted to $140,091 (2014: $99,647). The reduction in provision has been written back to cost of goods sold as losses were realised. Non-current Stock on hand at cost Provision for impairment (a) (a) Provision for impairment 647 (89) 558 - - - Write-downs of inventories to net realisable value recognised as an expense during the year ended 30 June 2015 amounted to $89,592 (2014: Nil). The reduction in provision has been written back to cost of goods sold as losses were realised. Joyce Corporation Ltd 2015 Annual Report I PAGE 56 13. OTHER ASSETS Current Accrued revenue Prepayments Other receivables Other receivables include $22,500 being the balance receivable on sale of the Moorebank investment property 14. NON-CURRENT ASSETS CLASSIFIED AS HELD FOR SALE Current At 1 July Plant and equipment additions Disposals At 30 June 15. OTHER FINANCIAL ASSETS Current Investment in convertible notes Funds held in trust Investments in listed shares at fair value through profit or loss CONSOLIDATED 2015 $000 52 183 22,655 22,890 2014 $000 35 87 110 232 CONSOLIDATED 2015 $000 - - - - 2014 $000 41 - (41) - CONSOLIDATED 2015 $000 - 1,252 - 1,252 2014 $000 400 1,483 9 1,892 Joyce Corporation Ltd 2015 Annual Report I PAGE 57 16. PLANT AND EQUIPMENT Year ended 30 June 2014 At 1 July 2013, Net of accumulated depreciation Additions Disposals Transfer to assets held for sale Transfers Depreciation charge for the year At 30 June 2014, Net of accumulated depreciation At 30 June 2014 Cost Accumulated depreciation and impairment Net carrying amount Year ended 30 June 2015 At 1 July 2014 Net of accumulated depreciation Acquired from business combination net of accumulated depreciation Additions Disposals Depreciation charge for the year At 30 June 2015 Net of accumulated depreciation At 30 June 2015 Cost Accumulated depreciation and impairment Net carrying amount CONSOLIDATED Leasehold improvements $000 Plant and equipment $000 Leased Plant and Equipment $000 245 4 - - - (57) 192 284 (92) 192 192 460 422 - (160) 357 48 (5) - - (95) 305 1,164 (859) 305 305 118 138 (26) (155) 914 380 1,154 (240) 914 1,374 (994) 380 10 - (8) - - (2) - - - - - - - - - - - - - Total $000 612 52 (13) - - (154) 497 1,448 (951) 497 497 578 560 (26) (315) 1,294 2,528 (1,234) 1,294 The carrying value of plant and equipment held under finance leases and hire purchase contracts at 30 June 2015 is $124,006 (2014: $177,152). Leased assets and assets under hire purchase contracts are pledged as security for the related finance lease and hire purchase liabilities. For assets pledged as collateral for the Consolidated Entity’s banking facilities refer to note 20. 17. INVESTMENT PROPERTY CONSOLIDATED Year ended 30 June Balance at 1 July Additions Disposal Fair value adjustments Balance at 30 June 2015 $000 2014 $000 17,315 - (17,315) - 16,283 83 949 - 17,315 The investment property was contracted for sale in March 2015 unconditionally with a settlement date of 30 September 2015. Joyce Corporation Ltd 2015 Annual Report I PAGE 58 18. INTANGIBLE ASSETS Goodwill (a) CONSOLIDATED 2015 $000 2014 $000 9,620 9,972 9,620 9,972 An analysis of intangible assets is presented below: CONSOLIDATED Year ended 30 June 2015 At 1 July 2014 net of accumulated impairment Acquired goodwill from business combination Impairment At 30 June 2015, net of accumulated impairment At 1 July 2014 Cost (gross carrying amount) Accumulated impairment Net carrying amount At 30 June 2015 Cost (gross carrying amount) Accumulated impairment Net carrying amount (a) Goodwill 2015 $000 2014 $000 9,972 1,023 (1,375) 10,122 - (150) 9,620 9,972 10,569 (597) 9,972 10,995 (1,375) 9,620 10,569 (347) 10,222 10,569 (597) 9,972 Intangible assets as at 30 June 2015 reflects the value of the Bedshed activities for the Bedshed Joondalup store which was purchased in May 2007, the Bedshed Claremont store that was purchased in October 2008, the remaining 51% of Bedshed Franchising Pty Ltd purchased in 2006 and the 57% interest in KWB Group purchased 31 October 2014. (b) Impairment Disclosures Goodwill is allocated to cash-generating units which are based on the Consolidated Entity’s operating segments CONSOLIDATED Bedshed Franchising segment Bedshed Stores segment Kitchen Stores segment Total 2015 $000 6,307 2,290 1,023 9,620 2014 $000 6,307 3,665 - 9,972 The recoverable amount of each cash-generating unit above is determined based on value-in-use calculations. Value-in-use is calculated based on the present value of cash flow projections over a 5-year period with the period extending beyond existing budgets for the 2014/15 and 2015/16 financial years extrapolated using estimated growth rates. The cash flows are discounted using risk-adjusted pre-tax discount rates. Joyce Corporation Ltd 2015 Annual Report I PAGE 59 18. INTANGIBLE ASSETS (CONTINUED) (b) Impairment Disclosures (continued) The following assumptions were used in the value-in-use calculations: Bedshed Franchising segment Bedshed Stores segment Pre –tax Discount Rate Sales Growth Rate Expense Growth Rate 11% 11% 3% 3-5% 3-5% 3-5% The Consolidated Entity’s value-in-use calculations incorporated a terminal value component beyond the 5 year projection period for both the Bedshed Franchising and Bedshed Stores operating segments. The principal assumption used to estimate the terminal value of each operating segment was a multiple of one times earnings before interest, taxation, depreciation and amortisation for the year ended 30 June 2016 budget discounted at a rate of 11% per annum. Impairment of Goodwill for the year ended 30 June 2015 was $1,375,000 (2014: $150,000), due to changes in the estimates of future results and terminal value for the Bedshed stores segment. (c) Impact of possible changes in key assumptions Sensitivity analysis was conducted on the Bedshed stores segment: - - If budgeted sales growth rate used in the value in use calculation has been 10% lower than management’s estimates, the Consolidated Entity would have recognised further impairment of $356,000. If pre-tax discount rate applied was 10% higher than used in management’s estimates, then the Consolidated Entity would have recognised further impairment of $26,000. 19. TRADE AND OTHER PAYABLES Current Unsecured liabilities Trade payables Accruals and other payables Amounts held in trust for Bedshed marketing and other funds (a) (a) Amounts held in trust for Bedshed marketing and other funds CONSOLIDATED 2015 $000 1,748 5,673 1,350 8,771 2014 $000 534 1,408 1,522 3,464 Included within the cash and cash equivalents balance are funds allocated for the specific use of the Bedshed Approved Purposes fund on behalf of the Consolidated Entity’s franchisee-owned and Company-owned stores. Refer to note 10 for further information. (b) Risk exposure Information about the Consolidated Entity's exposure to foreign exchange risk is provided in note 3. Joyce Corporation Ltd 2015 Annual Report I PAGE 60 20. INTEREST BEARING LOANS AND BORROWINGS Interest bearing loans and borrowings are comprised of the following: Current Finance leases Shareholders Loan Bank overdrafts – secured (a) Non-current Secured liabilities Finance leases Bank loans – secured (b) Convertible Notes CONSOLIDATED 2015 $000 22 - - 22 - 5,300 - 5,300 5,322 2014 $000 52 50 - 102 23 6,900 - 6,923 7,025 (a) Bank overdraft - secured The overdraft facility attracts interest at variable interest rates plus a line fee is renewed annually. The loan is drawn to nil at 30 June 2015 with $400,000 undrawn (2014: $486,669). The overdraft facility was reduced late in the financial year and transferred to the longer term Commercial bill facility. (b) Bank loans - secured The Commercial bill facility debt attracts interest at a variable interest rate and has a term which expires on 30 June 2019. The outstanding is $5,300,000 (2014: $6,900,000) with $3,100,000 undrawn at 30 June 2015 (2014: $400,000). (c) Collateral provided The available St George bank multi option overdraft and guarantee facility is $1,240,000 (2014: $1,340,000). The unused cash facility at 30 June 2015 is $400,000 (2014: $468,000) with as cash and cash equivalents held of $5,962,000. Further details on the facility are provided in note 3. There is first registered real property mortgage over the investment property owned by the Consolidated Entity, together with a fixed and floating charge over the Consolidated Entity assets and cross guarantees from operating subsidiaries as security over the facility. On settlement of the investment property the commercial bill facility is likely to be repaid in full. The carrying amounts of non-current assets pledged as security are: Freehold land and buildings Other current receivables Plant and equipment CONSOLIDATED 2015 $000 - 8,540 1,294 9,834 2014 $000 17,315 - 497 17,812 Joyce Corporation Ltd 2015 Annual Report I PAGE 61 20. INTEREST BEARING LOANS AND BORROWINGS (CONTINUED) (e) Debt covenants The covenants with St George bank includes:  an interest rate cover ratio of a minimum of 2.00 times where the cover is earnings before interest, tax, depreciation, amortisation divided by interest charged.  a gearing ratio of a maximum of 2.0 times where gearing is Total Liabilities divided by Total Equity; and  a limit on dividend payments made where these cannot be greater than 60% of net profit before interest, tax, depreciation, amortisation and abnormal or one off transactions. Lease liabilities are secured by the underlying leased assets. Financial assets that have been pledged as part of the total collateral for the benefit of the bank debt are as follows: Cash and cash equivalents Trade receivables Other assets (f) Debt classification CONSOLIDATED 2015 $000 5,962 577 22,500 29,039 2014 $000 816 416 - 1,232 There was no breach of the Company’s interest cover and gearing ratio debt covenants at 30 June 2015. As a result, the Consolidated Entity’s bank debt which is due on 30 June 2019 has been classified as non- current at 30 June 2015, in accordance with applicable accounting standards. A $1,240,000 facility is available for issue of bank guarantees and overdraft. At the reporting date the overdraft component was $400,000 with nil drawn. (g) Risk exposure Details of the Consolidated Entity's exposure to risks arising from current and non-current borrowings are set out in note 3. (h) Fair values The carrying amount of the Consolidated Entity’s current and non-current borrowings approximate their fair value. Joyce Corporation Ltd 2015 Annual Report I PAGE 62 21. PROVISIONS Provisions are comprised of the following: Current Employee benefits (a) Sub-lease rental shortfall (b) Store lease termination (c) Total Current Non-current Employee benefits (a) Sub-lease rental shortfall (b) Environmental testing (d) Total Non-Current CONSOLIDATED 2015 $000 2014 $000 641 59 113 813 359 10 3 372 1,185 265 136 - 401 161 69 3 233 634 (a) Provision for employee benefits A provision has been recognised for employee benefits relating to long service leave and annual leave. In calculating the present value of future cash flows in respect of long service leave, the probability of long service leave being taken is based on historical data. The measurement and recognition criteria relating to employee benefits have been included in note 2 to this report. (b) Provision for rental shortfall A provision continues for the payment of rental shortfalls following the closure of a company owned store as at 30 June 2013 which continues to August 2016. (c) Provision for store lease termination costs At the 30 June 2015, the Consolidated Entity provisioned for the estimated cost of repairs and maintenance upon termination of store leases. (d) Provision for environmental testing As part of the ongoing testing of Joyce Corporation owned sites it was found that traces of a chemical used by the lease, Joyce Foam Products, was detected in the groundwater at the South Australian and New South Wales properties. The levels found were not high and to be prudent the Department of Environment and Conservation were notified. The Department of Environment and Protection has not required any remediation work due to the low level of risk. An an ongoing monitoring program has been established to monitor the nature, extent and movement of the chemical found. The trace level of chemical found has generally been decreasing according to independent environmental reports. The costs of ongoing testing have been allowed for in the costs of sale of property. . Joyce Corporation Ltd 2015 Annual Report I PAGE 63 21. PROVISIONS (CONTINUED) Sub-let Provision Store Lease Termination Employee Benefits Other Total $000 $000 $000 $000 $000 Consolidated Group Opening balance at 1 July 2014 205 Additional provisions Provisions acquired from business combination Amounts used Balance at 30 June 2015 - - (136) 69 - 29 84 - 113 426 599 418 (443) 1,000 3 - - - 3 634 628 502 (579) 1,185 22. CONTRIBUTED EQUITY Ordinary shares carry one vote per share and carry the right to dividends. 27,588,255 (2014: 27,588,255) Issued and fully paid ordinary shares 17,347 17,347 CONSOLIDATED 2015 $000 2014 $000 380,000 (2014: 380,000) Partly paid ordinary shares, issued at $1.955 and paid to $1.523 (2014: $1.432) (a) Movement in ordinary shares on issue At 1 July 2014 Issued shares: Payment partly paid shares At 30 June 2015 (a) Partly-paid ordinary shares 579 544 17,926 17,891 2015 Number 27,588,255 - - 27,588,255 2015 $000 17,891 - 35 17,926 Partly paid ordinary shares are unquoted until they become fully paid. Partly paid ordinary shares carry voting rights and rights to participate in entitlement issues although any ordinary shares acquired under a rights issue cannot be quoted until the partly paid ordinary shares become fully paid. Joyce Corporation Ltd 2015 Annual Report I PAGE 64 23. RESERVES Financial assets reserve Asset revaluation reserve Balance at 30 June Asset revaluation reserve Opening Balance Transfer to retained earnings upon sale of investment property CONSOLIDATED 2015 $000 2,698 - 2014 $000 2,698 2,623 2,698 5,321 2,698 (2,698) 2,698 - Balance at 30 June - 2,698 24. CAPITAL AND LEASING COMMITMENTS (a) Finance lease and hire purchase commitments The Consolidated Entity has finance leases and hire purchase contracts for various items of plant and machinery, these leases have no terms of renewal or purchase options and escalation clauses. Future minimum lease payments under finance leases and hire purchase contracts together with the present value of the net minimum lease payments are as follows: CONSOLIDATED Within one year After one year but not more than five years Total minimum lease payments Less amounts representing finance charges Present value of minimum lease payments 2015 2014 Minimum payments $000 Present value of payments $000 Minimum payments $000 Present value of payments $000 23 - 23 (1) 22 - - - - 22 56 23 79 (4) 75 - - - - 75 (b) Property lease receivable – Consolidated Entity as lessor Within one year After one year but not more than five years More than five years CONSOLIDATED 2015 $000 662 721 45 2014 $000 1,095 688 - 1,428 1,783 Joyce Corporation Ltd 2015 Annual Report I PAGE 65 24. CAPITAL AND LEASING COMMITMENTS (CONTINUED) The property leases are non-cancellable leases expiring 2015 for a property New South Wales, with rent receivable monthly in advance. Contingent rental provisions within the lease agreement require the minimum lease payments to be increased by CPI per annum and or in accordance with a formula linked to turnover of the lessee. (c) Property lease payable – Consolidated Entity as lessee Within one year After one year but not more than five years More than five years CONSOLIDATED 2015 $000 3,415 10,014 2,373 2014 $000 2,206 4,302 2,672 15,802 9,180 Property leases are non-cancellable leases and have remaining terms of up to five years, with rent payable monthly in advance. Provisions within the lease agreements require that the minimum lease payments shall be increased by the CPI per annum. An option exists for most of the leases to renew the lease at the end of the lease term for an additional term equal to the period of the original lease. If the lease is renewed the rental rate is adjusted to market value. (d) Motor vehicle lease payable – Consolidated Entity as lessee Within one year After one year but not more than five years More than five years CONSOLIDATED 2015 $000 2014 $000 11 - - 11 11 - - 11 Motor vehicle leases are non-cancellable leases for Consolidated Entity motor vehicles. 25. FAIR VALUE MEASUREMENT OF FINANCIAL INSTRUMENTS The Group has a number of financial instruments which are not measured at fair value in the Statement of Financial Position. Current Receivables Loan Non-current Receivables Loan Deposit Non-current Borrowings Carrying Amount in $’000 Fair Value Amount in $’000 77 186 50 77 186 50 Interest bearing loans & borrowings 5,322 5,322 Due to their short term nature, the carrying amount of the current receivables, current financial assets, current assets and current borrowings are assumed to approximate their fair value. Joyce Corporation Ltd 2015 Annual Report I PAGE 66 26. FAIR VALUE MEASUREMENT OF NON-FINANCIAL INSTRUMENTS (i) Fair value hierarchy This note explains the judgements and estimates made in determining the fair values of the non-financial assets that are recognised and measured at fair value in the financial statements. To provide an indication about the reliability of the inputs used in determining fair value, the group has classified its non- financial assets and liabilities into the three levels prescribed under the accounting standards. Level 1: The fair value is based on quoted market prices (unadjusted) in active markets for identical assets or liabilities at the end of the reporting period. Level 2: The fair value is determined using valuation techniques which maximise the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2. Level 3: If one or more of the significant inputs is not based on observable market data, the asset is included in level 3. There were no assets measured using level 2 or level 3 fair value valuation techniques. (ii) Valuation techniques used to determine level 3 fair values The Consolidated Entity obtains independent valuations for its investment property at least every three years. (iii) Fair value measurements using significant unobservable inputs (level 3) The following table presents the changes in level 3 items for the period ended 30 June 2015 for recurring fair value measurements: Investment Property $’000 Total $’000 Opening balance 1 July 2014 Adoption of AASB 13 Disposals Gains recognised in other income Closing balance 30 June 2015 17,315 - (17,315) - - - 17,315 (17,315) - - (iv) Valuation inputs and relationships to fair value The following table summarises the quantitative information about the significant unobservable inputs used in recurring level 3 fair value measurement. See (ii) above for the valuation techniques adopted. Description Fair value at 30 June 2014 $’000 Unobservable inputs Range of inputs Relationship of unobservable inputs to fair value Investment property 17,315 Discount rate Terminal yield Capitalisation rate Expected vacancy rate Rental growth rate 10% The higher the n/a discount rate and terminal yield, the lower the fair value 9.25% The higher the 0% capitalisation rate and expected vacancy rate, the lower the fair value 4.12% The higher the rental growth rate, the higher the fair value Joyce Corporation Ltd 2015 Annual Report I PAGE 67 27. CONTINGENT LIABILITIES (a) Rental Guarantees Joyce Corporation Ltd has provided guarantees to third parties in relation to property leases for Bedshed Company owned stores. These guarantees will be required while the stores remain company operated and currently total $826,589 (2014: $871,330). 28. RELATED PARTY DISCLOSURES The consolidated financial statements include the financial statements of Joyce Corporation Ltd and the subsidiaries listed in the following table. Joyce Rural Pty Ltd Bedding Investments Pty Ltd Joyce Industries Pty Ltd Furniture World Marketing Pty Ltd Sierra Bedding Pty Ltd Joyce Indpac Limited Votraint No. 611 Pty Ltd Bedshed Franchising Pty Ltd Joyce International Pty Ltd KWB Group Pty Ltd Furniture World (HK) Pty Ltd Country of incorporation % Equity interest 2014 2015 Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Hong Kong 100 100 100 100 100 100 100 100 100 57 50 100 100 100 100 100 100 100 100 100 32 50 Joyce Corporation Ltd is the ultimate parent of the Consolidated Entity. Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated. Transactions with related parties: (i) Disclosures relating to KMP:- Those Directors or their Director-related entities received dividend payments, which were made on the same basis as those made to other shareholders, during the year ended 30 June 2015. (ii) (iii) Transactions entered into during the year between the Company and its controlled entities and Directors of the Company and their Director-related entities were within normal customer or employee relationships on terms and conditions no more favourable than those available to other customers or employees. The Executive directors fees for Mr A Mankarios are paid to Starball Pty Ltd, a company in which Mr Mankarios has significant influence - $205,112 (2014: $201,495). As at year end the amount owing to this related party was $19,437 (2014: $9,825). (iv) A receivable from Pynland Pty Ltd, a company owned by Dan Smetana, for $26,131 owing to Joyce Corporation Ltd for amounts paid on behalf of Pynland Pty Ltd (2014: $26,131). (v) Key management personnel compensation Short Term Benefits Post Employment Benefits Share Based Payment 2015 $000 1,557 113 - 1,670 2014 $000 978 92 - 1,070 Detailed remuneration disclosures are provided in the remuneration report on pages 11 to 17. Joyce Corporation Ltd 2015 Annual Report I PAGE 68 28. RELATED PARTY DISCLOSURES (CONTINUED) (vi) Loans to key management personnel At 30 June 2015 or at any time during the financial year there were no loans (2014: Nil) outstanding to specified directors and specified executives. 29. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD The Company acquired 32% of KWB Group Pty Ltd as of February 2014 by converting $500K of $900K of two tranches of convertible notes. The second tranche of the convertible notes of $400K was converted as of November 2014. Total equity in KWB Group Pty Ltd increased to 57%. The total profit reported by KWB Group Pty Ltd for the five months to 30 June 2014, after the first conversion, was $796K of which 32% share represents $255K. The total profit reported KWB Group Pty Ltd for the four months to 31 October 2014 was $672K of which 32% share represents $215K. KWB Group Pty Ltd has surplus carried forward tax losses to absorb the current year income tax expense. From November 2014 KWB Group Pty Ltd has been accounted for as a subsidiary of Joyce Corporation Ltd. Name of Entity Place of Business/Country of Incorporation % of Ownership Interest 2015 2014 % % Nature of Relationship Measurement method Quoted Fair Value Carrying Amount 2015 2014 $’000 $’000 2015 2014 $’000 $’000 Australia 57 32 Associate** Equity *n/a *n/a - 755 method - 755 KWB Group Pty Ltd Total equity accounted investments * Private entity – no quoted price available. ** Until 31 October 2014, from which KWB Group was treated as a subsidiary. (i) Contingent liabilities in respect of associate Contingent liabilities - associate Share of contingent liabilities incurred jointly with other investors of the associate Contingent liabilities relating to liabilities of the associate for which the company is severally liable 2015 $’000 2014 $’000 - - - - - - Joyce Corporation Ltd 2015 Annual Report I PAGE 69 29.INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD (CONTINUED) Summarised financial information for associate (ii) The tables below provide summarised financial information for the associate which is material to the group. The information disclosed reflects the amounts presented in the financial statements of the former associate and not Joyce Corporation Ltd. Summarised statement of financial position Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Net assets Reconciliation to carrying amounts Opening net assets 1 July 2013 Issued shares Profit for the period Dividends paid Closing net assets Group’s share in % Group’s share in $ Summarised statement of profit and loss and other comprehensive income Revenue Profit from continuing operations Profit for the period Total comprehensive income (iii) Movement in Investment in Associate Opening balance – 1 July 2014 32% equity interest on conversion of convertible note (tranche 1) Fair value gain on acquisition* 25% equity interest on conversion of convertible note (tranche 2) Dividends on 32% equity interest prior to 31 October 2014 Share of net profit of associate – 4 months to 31 October 2014 Closing balance – 31 October 2014 KWB Group Pty KWB Group Pty Ltd 2015 $’000 Ltd 2014 $’000 - - - - - - - - - - - - - - 2,167 1,866 4,033 4,211 133 4,344 (311) (1,210) 500 474 (75) (311) 32% (100) KWB Group Pty KWB Group Pty Ltd 2015 $’000 - - - - 2015 $’000 755 12 400 (128) 215 1,254 Ltd 2014 $’000 25,086 474 474 474 2014 $’000 - 500 - - - 255 755 * On acquisition date, the Directors reviewed the existing interest in KWB at fair value. This resulted in a $0.012m fair value gain, included within Administration Expenses in the Statement of Profit or Loss and Other Comprehensive Income. From November 2014 KWB Group Pty Ltd has been accounted for as a subsidiary of Joyce Corporation Ltd. Joyce Corporation Ltd 2015 Annual Report I PAGE 70 30. EVENTS SUBSEQUENT TO REPORTING DATE A franked dividend of 3 cents per share was declared on 27 August 2015 and payable 23 October 2015. A further special dividend of 5 cents per share fully franked will be paid subject to the settlement of the Moorebank property. The settlement date has been changed to 30 October 2015. A contract to purchase a property for use by the Company allowing consolidation of a number of sites was made on 2 July 2015 for $4M. Other than disclosed above no event has occurred since the reporting date to the date of this report that has significantly affected, or may significantly affect: (a) (b) (c) the Consolidated Entity’s operations, or the results of those operations, or the Consolidated Entity’s state of affairs. 31. AUDITORS’ REMUNERATION Amounts received or due and receivable by the auditor’s for: • • an audit or review of the financial report of the Consolidated Entity other services in relation to the Parent Entity and any other entity in the Consolidated Entity (a) assurance related 32. DIVIDENDS Distributions paid or payable Interim unfranked ordinary dividend of 1.0 (2012: 1.5 cents) cents per share (Paid – 24 July 2013) Final unfranked ordinary dividend of 2.0 (2013: 0.65) cents per share (Paid 21 November 2013) CONSOLIDATED 2015 $000 2014 $000 132 82 - 132 - 82 2015 $000 2014 $000 - - 280 559 Interim unfranked dividend of 1.5 (2013: 1.0) cents per share (Paid 31 July 2014) 420 420 Final unfranked ordinary dividend of 2.1 (2014: 2.0) cents per share (Paid 21 November 2014) Prior year dividends paid on partly paid shares (Paid 01 March 2015) Interim unfranked dividend of 2.5 (2014: 1.5) cents per share (Paid 31 March 2015) 587 11 699 - - - 1,717 1,259 To date the directors have not declared the payment of a final dividend out of retained profits at 30 June 2015 and will continue to monitor performance and review resources and liquidity to determine when a dividend will be paid. Dividends Paid 2015 $000 2014 $000 Cash payments in relation to dividends paid in the financial year 1,927 835 Joyce Corporation Ltd 2015 Annual Report I PAGE 71 33. RECONCILIATION OF NET PROFIT AFTER TAX TO NET CASH FLOWS FROM OPERATIONS Reconciliation of net profit (loss) after tax to the net cash flows from operations CONSOLIDATED Net profit after taxation Adjustments for: Depreciation and amortisation Interest receivable Other income Goodwill – tax effect Non-controlling interest Impairment of goodwill Revaluations of investment properties Net loss / (profit) on disposal of plant and equipment (Profit) on disposal of investment property Share of net profit of associate Changes in assets and liabilities (increase)/decrease in inventories (increase)/decrease in trade and other receivables (increase)/decrease in other assets (increase)/decrease in net deferred tax assets and liabilities (decrease)/increase in trade and other payables (decrease)/increase in provisions Net cash flows used in operating activities 34. NON-CASH INVESTING AND FINANCING ACTIVITIES Contributed equity – partly paid shares 2015 $000 4,472 315 11 (12) 231 511 1,375 - 56 (6,640) (215) 121 6 689 2,683 697 (132) 4,168 2014 $000 1,570 154 - - - - 150 (949) (10) - (255) (148) 62 79 715 (192) (659) 517 CONSOLIDATED 2015 $000 23 23 2014 $000 12 12 Joyce Corporation Ltd 2015 Annual Report I PAGE 72 35. PARENT ENTITY DISCLOSURES a. Financial position Assets Current assets Non-current assets Total assets Liabilities Current liabilities Non-current liabilities Total liabilities Net Assets Equity Issued capital Retained earnings Net Equity b. Financial performance Profit/(Loss) for the year Other comprehensive income Total comprehensive profit/(loss) As at 30 June 2015 $000 2014 $000 375 22,203 22,578 4,023 5,323 9,346 169 22,676 22,845 692 6,960 7,652 13,232 15,193 17,926 (4,694) 13,232 17,891 (2,698) 15,193 Year ended 30 June 2015 $000 (699) - (699) 2014 $000 (980) - (980) c. Guarantees entered into by the parent entity in relation to the debts of its subsidiaries No such guarantees existed at 30 June 2015, other than security arrangement with St George Bank in respect of interest bearing liabilities discussed in note 20. d. Contingent liabilities of the parent entity. No contingent liabilities existed within the parent entity as at 30 June 2015 (30 June 2014: Nil). e. Commitments for the acquisition of property plant and equipment by the parent entity Commitments for the acquisition of property plant and equipment by the parent entity existed as at 30 June 2015 for the value of $Nil (30 June 2014: Nil). Joyce Corporation Ltd 2015 Annual Report I PAGE 73 DIRECTORS’ DECLARATION In accordance with a resolution of the Directors of Joyce Corporation Ltd, I state that: (a) in the Directors’ opinion the financial statements and notes thereto of the Consolidated Entity has been prepared in accordance with the Corporations Act 2001, including that they: (i) comply with Australian Accounting Standards and Corporations Regulations 2001; and (ii) give a true and fair view of the financial position of the Consolidated Entity as at 30 June 2015 and of its performance as represented by the results of its operations and its cash flows for the year ended on that date; and (b) the Directors have been given the declarations by the Executive Director and Chief Financial Officer required by Section 295A; (c) in the Directors’ opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; and (d) the financial report also complies with International Financial Reporting Standards as disclosed in note 2(a). Signed in accordance with a resolution of the Directors made pursuant to s.295 (5) of the Corporations Act 2001. D A Smetana Chairman Perth, 30 September 2015 Joyce Corporation Ltd 2015 Annual Report I PAGE 74 Tel: +61 8 6382 4600 Fax: +61 8 6382 4601 www.bdo.com.au 38 Station Street Subiaco, WA 6008 PO Box 700 West Perth WA 6872 Australia INDEPENDENT AUDITOR’S REPORT To the members of Joyce Corporation Limited Report on the Financial Report We have audited the accompanying financial report of Joyce Corporation Limited, which comprises the consolidated statement of financial position as at 30 June 2015, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, 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. 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(a), the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements comply with 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 about 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. BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation other than for the acts or omissions of financial services licensees Joyce Corporation Ltd 2015 Annual Report I PAGE 75 Independence 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 Joyce Corporation 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 Joyce Corporation 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 June 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 financial report also complies with International Financial Reporting Standards as disclosed in Note 2(a). Report on the Remuneration Report We have audited the Remuneration Report included in the directors’ report for the year ended 30 June 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 Joyce Corporation Limited for the year ended 30 June 2015 complies with section 300A of the Corporations Act 2001. BDO Audit (WA) Pty Ltd Glyn O'Brien Director Perth, 30 September 2015 Joyce Corporation Ltd 2015 Annual Report I PAGE 76 ASX ADDITIONAL INFORMATION AS AT 28 SEPTEMBER 2015 Additional information required by the Australian Securities Exchange Limited‘s Listing Rules and not disclosed elsewhere in this report. The information is provided below: (a) Distribution of Shareholders Category As at 28 September 2015 Holders Fully Paid Ordinary Shares 1 - 1,000 1,001 – 5,000 5,001 - 10,000 10,001 – 100,000 100,001 – and over Total 207 169 61 141 33 611 % 0.25 1.51 1.78 19.02 77.44 66,863 415,851 492,011 5,247,159 21,363,371 27,588,255 100.00 (b) Shareholdings - Substantial Shareholdings The number of shares held or controlled at the report date by substantial shareholders was as follows: Ordinary Shareholder 1. Mr D A Smetana* (including partly paid) 2. John Roy Westwood Total Fully Paid Ordinary Shares 10,829,326 2,350,000 % 38.7 8.4 13,179,326 47.1 * Mr Smetana has beneficial interest in 9,850,696 fully-paid ordinary shares (2014: 9,850,696) and 380,000 partly paid shares. (c) Voting Rights The voting rights attached to each class of equity security are as follows: Ordinary shares Each ordinary share is entitled to one vote when a poll is called, otherwise each member present at a meeting or by proxy has one vote on a show of hands. Joyce Corporation Ltd 2015 Annual Report I PAGE 77 ASX ADDITIONAL INFORMATION (CONTINUED) AS AT 28 September 2015 (d) Shareholdings - Twenty Largest Holders of Quoted Equity Securities - ungrouped The number of shares held at the report date by the twenty largest holders of quoted equity securities: Ordinary Shareholder 1. ADAMIC PTY LTD 2. UFBA PTY LTD 3. PEDUNCLE PTY LTD 4. SANDHURST TRUSTEES LTD 5. MCNEIL NOMINEES PTY LIMITED 6. MR DONALD TEO 7. MR DANIEL ALEXANDER SMETANA 8. STARBALL PTY LTD 9. TREASURE ISLAND HIRE BOAT COMPANY PTY LTD 10. MOAT INVESTMENTS PTY LTD 11. MR DAN SMETANA 12. CONARD HOLDINGS PTY LTD 13. BT PORTFOLIO SERVICES LIMITED 14. P B L INVESTMENTS PTY LTD 15. ASB NOMINEES LIMITED <208357 - ML A/C> 16. EPIC TRUSTEES LIMITED 17. BELLPAM PTY LIMITED

18. JET INVEST PTY LTD 19. MAST FINANCIAL PTY LTD 20. MAN INVESTMENTS (NSW) PTY LTD Fully paid Ordinary Shares 7,711,568 2,328,000 1,948,312 1,373,803 1,000,000 990,000 563,726 430,029 425,291 419.000 354,022 347,940 324,700 270,203 248,120 220,245 207,500 188,364 175,000 167,456 % 27.95 8.44 7.06 4.98 3.62 3.59 2.04 1.56 1.54 1.52 1.28 1.26 1.18 0.98 0.90 0.80 0.75 0.68 0.63 0.61 Totals: Top 20 holders of ORDINARY FULLY PAID SHARES Total Remaining Holders Balance 19,693,279 7,894.976 71.38 28.62 (e) Unquoted Partly Paid Shares holdings greater than 20% Ordinary Shareholder Mr D A Smetana Total Partly Paid Ordinary Shares 380,000 380,000 % 100 100 Partly paid shares are unquoted until they become fully paid. Partly paid shares carry voting rights and rights to participate in entitlement issues although any shares acquired under a rights issue cannot be quoted until the partly paid shares become fully paid. Joyce Corporation Ltd 2015 Annual Report I PAGE 78 ASX ADDITIONAL INFORMATION (CONTINUED) AS AT 25 SEPTEMBER 2015 (f) Company Secretary Mr Keith Gray (g) Registered Office 14 Collingwood Street, Osborne Park, WA, AUSTRALIA, 6017 Tel: +61 8 9445 1055 (h) Share Registry Computershare Investor Services Pty Limited Level 11, 172 St Georges Terrace Perth, WA 6000 Tel: 1300 557 010 Joyce Corporation Ltd 2015 Annual Report I PAGE 79