ABN 67 007 561 837
CONTENTS Page
Highlights 1
Chairman’s Overview 3
Financial Overview 5
Managing Director’s Report 7
Board of Directors 14
Five-Year Financial History 16
Directors’ Report 17
Remuneration Report 24
Corporate Governance 31
Financial Report 43
Corporate Directory 106
To be the leading
K&S CORPORATION LIMITED
provider of
transport and
logistic solutions
within our
target markets
in Australia and
New Zealand.
(cid:129) Revenue growth of 6% to $554.8 million
(cid:129) Profit after tax increases by 10.9%
(cid:129) Appoints new Managing Director
(cid:129) Strong performance by
Western Australian business
(cid:129) Increased volume with CHEP
(cid:129) Organic growth in Steel Business
(cid:129) Balance Sheet further strengthened
with gearing at 21.6%
1
Management is
focused on
winning new
business
and reducing
operating costs.
On behalf of the Board of K&S Corporation, I am pleased to
present the Company’s annual report.
During the year we have seen first-hand the two speed economy in
our business.
The east coast operations have experienced the effects of the high
$A on the domestic manufacturers while on the west coast we have
seen the positive impacts of the mining industry.
Our strong second half performance has been underpinned by the
strength of our Western Australian operation and the stabilisation of
our east coast contract distribution business.
We still have a number of challenges in our east coast linehaul
business due to the depressed volumes available.
This year has been unlike any other in the Company’s recent
history as we have welcomed Greg Stevenson as Managing Director
following the retirement of Legh Winser in May.
Legh Winser’s career with K&S spans a period of over 40 years and
14 years as Managing Director. In that time, as Managing Director,
the Company’s revenues have doubled whilst profit after tax has
increased sixfold. The growth of the Company is in no small part due
to Legh’s passion, commitment and vision.
On behalf of the Board, I wish to publicly thank Legh and wish him
all the best in retirement.
Net profit after tax for 2011/12 was $16.4 million compared with
$14.8 million for the 2010/11 financial year, up 10.9%.
Operating revenue for the year was $554.8 million, an increase of
6.0% on the previous corresponding period.
Operating cash flow increased 14.1% to $38.9 million.
Earnings per share were 18.7 cents per share.
We have declared a fully franked final dividend of 6.0 cents per
share (last year 5.0 cents per share). This follows the interim
dividend of 5.0 cents per share paid in March 2012, making a total
dividend of 11.0 cents per share. The final dividend will be paid
on 31 October 2012, with the date for determining entitlements
being 17 October 2012.
The dividend reinvestment plan (DRP) will once again be part of
the October 2012 dividend. The DRP will apply in respect of the fully
franked final dividend of 6.0 cents payable on 31 October 2012.
3
The terms of the DRP will remain unchanged with
issue price under the DRP based on the weighted
average trading price for K&S shares in the five
business days ending on 17 October 2012 (the record
date of the final dividend) less a discount of 2.5%.
Our gearing now stands at 21.6%, which is well
within our target range.
Providing earnings guidance going forward remains
a difficult task.
The strong $A continues to impact on Australian
manufacturers.
Our Western Australian business looks set to
experience strong growth in the year ahead.
We see this as being an area of growth for the
Company.
We are well placed with a strong Balance Sheet, low
gearing and secure customer contracts.
We are confident of further growth in our existing
customer base and we will continue to bid strongly
on new tenders. We see the momentum from
our strong second half to continue into the first half
of 2012/13.
Opportunities for potential acquisitions will also be
closely evaluated where it makes strategic sense.
On behalf of the Board, I thank our customers,
suppliers and employees, who have contributed to
our continuing success. In particular, I thank the
senior management team, led by Greg Stevenson,
for their ongoing commitment and dedication in
what has been a difficult period.
Tony Johnson
Chairman
4
OPERATING REVENUE
2012
2011
2010
2009
2008
OPERATING CASH FLOW
2012
2011
2010
2009
2008
SHAREHOLDERS FUNDS
2012
2011
2010
2009
2008
GEARING
2012
2011
2010
2009
2008
$m
554.8
523.4
454.3
441.0
466.1
$m
38.9
34.1
35.9
39.2
31.3
$m
224.9
213.6
179.1
156.2
146.5
%
21.6
26.4
24.5
22.6
27.9
2012 2011 % movement
Revenue $m 554.8 523.4 6.0
Operating profit before interest, $m 55.0 54.7 0.5
tax and depreciation
Operating profit before interest $m 30.5 29.6 3.0
and tax
Operating profit before tax $m 23.4 21.2 10.4
Operating profit after tax $m 16.4 14.8 10.9
Dividends paid $m 5.6 8.4 (33.3)
Total assets $m 401.4 388.0 3.5
Net borrowings $m 62.0 76.7 (19.2)
Shareholders’ funds $m 224.9 213.6 5.3
Depreciation and amortisation $m 24.4 25.1 (2.8)
Earnings per share cents 18.7 18.3 2.2
Dividends per share cents 11.0 10.0 10.0
Net tangible assets per share $ 1.72 1.65 4.2
Cash flow per share $ 0.44 0.39 12.8
Return on Shareholders’ funds % 7.3 6.9 5.8
Gearing % 21.6 26.4 (18.2)
Lost time injuries 49.0 43.0 14.0
Lost time injuries frequency rate % 13.0 12.0 8.3
5
Trading conditions in 2011/12 were once again difficult, with the
high Australian dollar and soft economy significantly impacting
on the operations of our key customers.
Business along the east coast of Australia performed below
expectations, especially in the first half of the year. Whilst some
improvement was recorded in the second half, volumes overall
remained subdued. However, value added local storage and
distribution operations provided by DTM continued to perform
solidly despite the soft conditions.
The situation was different in Western Australia where Regal Transport
enjoyed solid growth based on mining expansion in the Pilbara and
Kimberley regions. The west offers further and significant opportunities
in the resources sector, including oil and gas.
We will continue
to implement a
number of
expansion initiatives
Our New Zealand operations improved on the back of some recovery
in the dairy and timber industries.
aimed mainly at
the oil, gas and
Ongoing work to reduce costs continues to provide benefits and
has helped K&S maintain a strong bottom line given the difficult
trading conditions.
resource sectors in
Western Australia.
Generally, business for our top 10 clients met expectations, while a
concentration by our sales team on growing revenue through
winning new, smaller contracts paid dividends. New work has also
been won by DTM for Chep in Victoria and for Air Liquide and
BP Castrol Australia.
The Federal Government's decision to reduce the diesel fuel rebate
by 2.5 cents per litre is expected to impact negatively on costs in the
year ahead.
Net profit after tax for 2011/12 was $16.4 million compared with
$14.8 million for the 2010/11 financial year, up 10.9%.
Operating revenue for the year was $554.8 million, an increase of
6.0% on the previous corresponding period.
Operating cash flow increased 14.1% to $38.9 million.
Earnings per share were 18.7 cents per share.
K&S Freighters
Whilst economic trading conditions for our east coast customers
continued to be subdued in the first half, new contracts and improved
volumes from specific contracted customers delivered an improved
performance during the second half.
During the year a number of major contracts were retained and in
some cases with additional volume commitments. Revenue was
also enhanced by the growth of our customer base in import/export
logistics, and smaller rail accounts.
7
Our steel haulage operations were impacted by
BlueScope's decision to close its No 6 blast furnace
at Port Kembla and the Western Port hot strip mill
at Hastings, east of Melbourne. However, we were
able to expand work for BlueScope between
Wollongong, North Queensland and Hastings for a
further 18 months. Volume expansion has also been
enhanced by both K&S and DTM winning work on
the back of the placing into liquidation of major steel
transporting businesses.
We were also successful in winning significant
additional work with OneSteel to transport steel
between Newcastle and Sydney, along with some
regional volumes and inter-plant work.
K&S moved into a new third-party warehouse at
Dardanup, south of Perth in October and has
entered a new five-year contract with Laminex for the
provision of warehouse services. This is in addition
to the transport services contract signed last year.
The Dardanup operation continued to have
lingering effects of the 2011 Japanese Tsunami with
reduced volumes generated for export timber
products, gradual recovery did start to occur in the
fourth quarter. The Dardanup business in general
performed to expectations with the new contracted
warehouse for the Laminex Group in Dardanup
commencing operation in May 2012, this
development will provide further synergy and
improve fleet utilisation.
The Bulk operation in Queensland again experienced
difficulties with QMag as a result of fluctuating
production levels and the effect of the high $A.
This contract is undergoing a strategic review due to
the recent change of ownership. On a positive, our
long standing contract with Isis Central Sugar Mill,
Bundaberg Sugar and Maryborough Sugar Factory,
has been extended for a further five years.
K&S continued its relationship with Tyco, which
has a number of new water infrastructure projects
underway, mainly in the mining and agricultural
sectors in Queensland.
In other areas:
(cid:129) K&S retained its Woolworths business in South
Australia for the next five years.
8
(cid:129) Volumes transported for Alcoa were as expected
although we remain watchful of events at the
Point Henry (Victoria) plant.
(cid:129) Work for Capral was steady.
(cid:129) Australian Paper volumes were steady, although
work improved in the second half of the year.
(cid:129) Norske Skog volumes were also steady.
(cid:129) Cement Australia operations from Gladstone
were as expected.
(cid:129) The Holden contract performed as expected
and we have been able to prove once
again our flexibility in meeting altered client
trading conditions.
(cid:129) We were successful in winning tenders for the
maintenance of support to Wesbeam and Pacific
Steel (NZ).
The Group continued to invest capital into the fleet
replacement program to ensure our vehicles emit the
lowest possible level of emission.
DTM
The DTM business has continued to generate solid
growth in revenues, profits and trading margins
during the year. This has been predominantly as a
consequence of increased activity with major clients
including Chep, Air Liquide Australia, BP Castrol
Australia, Caltex and BlueScope Steel.
The increased work for Air Liquide Australia follows a
series of disruptions to the production of commercial
carbon dioxide in Australia which significantly
impacted the industry. This in turn placed greater
demand on Australia’s remaining carbon dioxide
producers and rapidly increased road and rail
transport requirements across Australia, particularly
into New South Wales. This work is likely to continue
in the foreseeable future.
DTM’s ongoing relationship with Chep was enhanced
with the awarding of additional work being the bulk
storage of pallets at the Truganina facility in Victoria.
Pallet movements continued to grow in both
New South Wales and Western Australia where DTM
provides transport services.
New local Melbourne metropolitan and Victoria
country distribution commenced for Caltex oil
and lubricants. The distribution from Melbourne to
Adelaide for Caltex has continued to grow while
existing contracts to distribute lubricants for BP Castrol
were extended.
Steel reinforcing volumes for ARC in South Australia
have continued to increase. ARC was awarded the
supply of reinforcing products for the new Royal
Adelaide Hospital and Adelaide Oval redevelopment.
New contracts for the local bulk transport of Coca
Cola products in Queensland and Victoria were
extended, while new services commenced with
Bridgestone Australia to provide local transport in
both South Australia and Victoria.
The new Freight 2020 management system
introduced to DTM in October 2011 has provided
the expected internal and back office efficiency
improvements, assisting to reduce costs.
Our ongoing fleet replacement program continued
with the addition of an extra 25 vehicles.
Project Services/Oil and Gas Logistics
K&S continues to make inroads into Australia's
developing oil and gas industry.
Increased brand recognition and networking activity
is opening broader business opportunities and
significant background work has been completed
which places the Company in a position to win
future work.
Invitations to tender for work for Chevron, Total E&P
Australia, CJV, CKJV and Santos were received, while
expressions of interest (EOI) and prequalification
documents were also submitted with the prospect of
tendering, subject to Final Investment Decisions (FID).
An exhaustive EOI process was completed for
Woodside Energy's logistics functions and this will
place us in a strong position in tendering for the
upcoming work.
The road transport contract for Total E&P Australia
to Darwin was completed during the year, with the
success of the contract ensuring a contract extension
into Broome at the beginning of the third quarter
of 2012/13.
A long-term warehouse storage agreement for Inpex
was extended for a further 12 months. K&S also
provides warehouse storage for Woodside Energy.
Purpose-built casing racks for pipe storage have now
been installed at K&S' Broome supply base to provide
viable long-term storage options for companies
involved in the oil and gas industry.
9
The Company has participated in a competitive tender
for Total E&P Australia for supply base operations,
whilst Shell, GE Oil, ASCO, several service companies
and freight forwarders have also conducted site
inspections ahead of FID for the LNG plant at James
Price Point.
K&S recently entered into formal long term lease
arrangements with offshore container company
Ferguson Group Australia for onsite storage and
subleasing of office facilities. The commitment for
2,000 m2 of external and 500 m2 of undercover
storage will ensure a long lasting and mutually
beneficial relationship between the two companies.
In Victoria, the Portland Supply Base completed an
exhaustive six months servicing the Stenna Clyde
oilrig during its shutdown including crew changes.
The success of this campaign will ensure Portland
remains the supply base operation of choice within
the oil and gas industry in this region.
Regal Transport
Regal Transport's services grew strongly during the
year, underpinned by the continued growth of the
resources sector in Western Australia.
Heavy haulage operations in particular ran at
near capacity to meet the demands of the resources
and infrastructure projects in the Pilbara and
Kimberley regions.
Additional vehicles and trailers, including a 265-tonne
rated prime mover were added to the heavy haulage
fleet during the year with consideration being given
to further equipment purchases.
Regal now operates one of the largest heavy haulage
fleets in Western Australia and is the pre-eminent
provider of heavy transport services, which mainly
involves the road transport of heavy machinery
and infrastructure.
Major customers for the heavy haulage division
include Hitachi, BHP, NRW, BGC, HWE and FMG,
Regal's largest customer is Westrac, which almost
exclusively uses Regal for their port to Westrac
transfers and Westrac to customer minesite haulage.
While most of the heavy haulage work is mining
and construction driven, the expected development
of major oil and gas projects in the north west of
Australia will see demand for heavy haulage services
continue to grow.
Demand for general freight services, including the
transport of mining supplies, food and materials,
grew during the year. Despite strong customer
competition, particularly around Port Hedland and
Derby and labour competition from the mining
industry, the general freight division has managed to
capitalise on the demand to grow freight volumes.
Regal were also successful in winning linehaul
transport support to Coca Cola operations in the
north west of Western Australia.
Regal's reputation for providing reliable service has
enabled us to maintain key clients, including HWE,
Mount Gibson Iron, BHP, Macmahon, Consolidated
Minerals, Thiess, Coates Hire, Bunnings, Downer,
OTOC Australia and OneSteel.
New Zealand
Our New Zealand business benefited from
improved conditions in the dairy and timber industries
in particular.
K&S sold its 24.5% interest in Dairy Transport
Logistics (DTL) to Fonterra and now has a 10-year
strategic relationship in place with DTL. As part of
this relationship, the original cartage contract for
the transport of milk powder, butter and cheese was
extended for an additional 10 years.
The dairy industry has shown strong growth in the
past 12 months and this is expected to be reflected
in increased work during the winter months.
K&S has changed its mix of work in the forestry
industry and now carries greater volumes of wood
chip and timber following the emergence of South
Korea as a strong export market. At the same time,
a new three year contract was signed with Sequal
Lumber in the Bay of Plenty.
The log hauling business has ceased and specialist
vehicles which were used in this sector have
been sold.
11
Throughout the year K&S improved its induction and
training programs, moving to a more user friendly
e-learning platform, reducing paper based reading
material and improving comprehension of information
to participants.
Training and development of employees in
workplace health and safety and road compliance
continued to be a major focus and it was very
pleasing to see a positive participation to our
commitment to workplace safety and compliance
goals across our workforce.
Key workplace agreements were negotiated during
the year. This resulted in fair and reasonable
wage outcomes during the course of the year with
no industrial issues.
Environment
K&S continues to review ways of reducing emissions
and energy consumption.
During full year 2011, K&S generated a total of
121,000 tonnes of carbon dioxide equivalent, up on
the 94,000 tonnes for full year 2010.
The 2011 figures now include a full trading year of
the Regal Transport business. Regal's business
includes considerable heavy haulage work over the
long distances between Perth and the Pilbara and
Kimberley regions of Western Australia.
K&S completed and submitted its reporting
obligations under the National Greenhouse and
Energy Reporting Act and the Energy Efficiency
Opportunity Program, with reports submitted in
October and December of 2011 respectively.
The Energy Efficiency Opportunity compliance report
for June 2011 is available on the K&S website.
The Federal Government's decision to reduce its
diesel fuel rebate by 2.4 cents a litre from July 1, 2012
will have an impact on K&S. These costs will be
reflected in future freight costs.
The impact of the carbon tax on our customer base
when the new tax starts on July 1, 2012, is also
expected to have a minor impact, although the full
extent of this may not become apparent until well
into 2012/13.
The Kiwi fruit business suffered in 2011 as a result of
the bacterial infection PSA which devastated some
orchards near the Bay of Plenty. However the planting
of resistant fruit varieties will see a turnaround in
the industry in 2014. The 2012 harvest is expected
to be similar to 2010 levels.
Consolidation of the transport industry continues
with many smaller carriers looking to leave as new
compliance regulations take effect. This, combined
with many organisations now reviewing their
logistic services partners on a more frequent basis,
may provide further opportunities for growth in
the future.
New regulations have been introduced which allow
longer vehicles with heavier weight limits to be
used on NZ roads. K&S has invested in new trucks
and equipment to take advantage of these changes,
with more than a quarter of our fleet now meeting
the new limits. We are currently working with
customers to maximize tonnages, which will improve
overall efficiencies.
Fuel pricing remained stable throughout the year.
Human Resources
Further development of K&S' Indigenous Employment
Policy was one of the major areas of focus for Human
Resources Management during the year.
A key step was K&S joining the Australian
Employment Covenant, an industry-led initiative
which seeks to close the gap between indigenous
and non-indigenous Australians in employment
opportunities. This initiative aims to place and
retain 50,000 indigenous people into Covenant
employment within a two year period.
Under the Covenant, K&S guarantees support to
engage job-ready indigenous applicants within our
Group and increase our network opportunities within
this area. Progress was very pleasing and the initiative
gained positive support within our management
teams, which has enabled a number of participants
to progress within their roles.
Equally important has been our ongoing commitment
to equal opportunity employment across the Group,
with investment in management and development
programs and flexible work arrangements.
12
Safety
An external safety audit was undertaken across
K&S in October 2011, ahead of the renewal of K&S'
Comcare licence, which expired in June 2012.
This two week audit covered six sites in Victoria,
New South Wales and Western Australia, including
K&S and Regal Transport operations incorporating
112 safety criteria. Criteria’s were verified
on multiple occasions across nominated sites.
No non-conformances were recorded as part of this
audit process.
Additionally, Comcare audited K&S’ rehabilitation
and claims management systems in September 2011,
which K&S successfully passed.
On 4 July 2012 the Safety, Rehabilition and
Compensation Commission extended K&S’ self
insurance licence until 30 June 2016. As part of the
extension process K&S request to vary its licence
to handle claims management in-house was
also approved. In-house claims management will
commence from 1 September 2012.
With the introduction of new harmonised workplace
health and safety laws, introduced in January 2012
K&S have commenced reviewing and updating its
entire health & safety system. Extensive consultation
has been undertaken with all work groups across
the Company.
K&S took a leading role in the development of
Loading Unloading Exclusion Zones (LUEZ) guidelines
for industries within the supply chain which were
introduced last year.
A new e-learning package has now been developed
by K&S to cover LUEZ which has been made
available to industry participants through the K&S
website. An industry survey undertaken 12 months
after LUEZ was completed and which provided
positive feedback on the introduction of LUEZ.
A similar program is currently being developed to
cover Getting On and Off Mobile Plant and
Equipment Safely (GOOMPES). A similar industry
template to LUEZ is being used with the aim to
achieve industry best practice in this area. K&S is
working with Comcare and Worksafe Victoria with
other industry participants – OneSteel, Silk Logistics,
Border Express, TNT, Transport Workers Union and
John Holland – in development of this program.
K&S has also been asked by Worksafe Victoria to
re-examine whether a previous program designed to
improve safety at vehicle breakdowns could be
reviewed ultilising LUEZ as a model.
The Breakdown Events and Roadside Safety (BEARS)
program is backed by WorkSafe Victoria,
K&S Freighters, TWU, Silk Logistics, Ian Wright &
Associates and the Victorian Coroner's Office.
Compliance
K&S continues to be accredited to ISO 9001:2008
standards and has maintained accreditation under
the National Heavy Vehicle Accreditation Scheme for
Mass Management, Basic Fatigue and Maintenance
modules, TruckSafe, WA Heavy Vehicle Accreditation
and HACCP (food safety).
We continue to work with clients and peak industry
bodies to ensure compliance with relevant obligations
across other affected industries.
K&S remains a member of the ATA Council, and is
also part of the ATA working groups where it
is represented on the Safety Committee, the Skills
and Workforce Committee and the Transport
Economics Committee.
Conclusion
As this is my first report as Managing Director, I
would like to take this opportunity to thank everyone
who has welcomed me at K&S and in particular
I would like to thank Legh Winser for his vision and
dedication over the last 14 years, which has left me
in a strong position to expand on his work and take
further advantage of the opportunities that have
been presented to our Company.
In particular, I wish to thank our customers for their
continued support and the Board members for their
early guidance, the Management team for their
hard work and diligence and everyone else who has
helped make K&S one of the major transport firms
in Australia.
I wish everyone every success in the coming year.
Greg Stevenson
Managing Director
13
The Directors of the Company in office at the date of this report,
together with particulars of their qualifications, experience and
special responsibilities, are set out on page 15.
14
Tony Johnson Chairman
Bruce Grubb
Age 65, Director since 1986
Age 62, Director since 2007
Tony Johnson BA, LLB, LLM, FAICD (Companies &
Securities), is a lawyer and an accredited mediator.
Tony is a Partner of the national law firm Johnson
Winter & Slattery. He has worked extensively in
the corporate advisory and commercial disputes area.
Mr Johnson is also Chairman of AA Scott Pty Ltd,
listed entity Scott Corporation Limited and Director
of Adelaide Community Healthcare Alliance.
Member of:
(cid:129) Environmental Committee (Chairman)
(cid:129) Nomination and Remuneration Committee
Greg Stevenson Managing Director
Age 44, Appointed 28 May 2012
Greg Stevenson AssocDip(PerAdmin), MBus(Sys),
GradDip(BusSys), MBA(E) has extensive experience
in the transport and logistics sector. From 2007
to 2010, Mr Stevenson was Managing Director of
Kalari Pty Ltd (part of the Swire Group) during
a period of significant growth and transformation.
Member of:
(cid:129) Environmental Committee
Greg Boulton AM Deputy Chairman
Age 62, Director since January 1996
Greg Boulton BA(Accountancy), FCA, FCPA, FAICD
is Chairman of private equity fund Paragon Equity
Limited, Chairman of Southern Gold Limited,
Director of Statewide Superannuation and holds
board positions on a number of privately owned
companies. He has over 30 years experience in
transport related industry.
Member of:
(cid:129) Audit Committee
(cid:129) Nomination and Remuneration Committee
Bruce Grubb has over 30 years experience in the
transport industry and is the former Chief Executive
of Scott Transport Industries Pty Ltd. Mr Grubb
is also a Non-Executive Director of the listed entity
Scott Corporation Limited and a Director of DGL
(Aust) Pty Ltd.
Member of:
(cid:129) Environmental Committee
Ray Smith
Age 65, Director since 2008
Ray Smith FCPA, FAICD, Dip Com was Chief Financial
Officer of Smorgon Steel Group for 11 years. During
that period Smorgon Steel Group was at the forefront
of the rationalisation of the Australian Steel Industry.
Mr Smith is a Director of listed entity WHK Group Ltd
and Transpacific Industries Limited. He is a former
Director of Willmott Forests retiring in March 2011.
Mr Smith is a trustee of the Melbourne and Olympic
Parks Trust. Mr Smith brings a wealth of corporate
and financial experience in the areas of strategy,
acquisitions, treasury and capital raising.
Member of:
(cid:129) Audit Committee (Chairman)
Secretary
Chris Bright Secretary since 2005
Chris Bright BEc, LLB, Grad Dip CSPM, FCIS has held
the position of Group Legal Counsel for 10 years.
Mr Bright was admitted as a solicitor in South
Australia in 1997. He also has experience working in
private practice in Adelaide, principally in commercial
dispute resolution.
Retired Director
Richard Nicholson
Legh Winser Managing Director
Age 69, Director since 1986
Age 64, Director retired 25 May 2012
Richard Nicholson ACA, is a Chartered Accountant
in public practice. He was previously the Company
Secretary and Finance Officer of the Scott Group of
Companies and is a former Non-Executive Director
of that Group.
Member of:
(cid:129) Nomination and Remuneration Committee
(Chairman)
Legh Winser, has more than 40 years experience in
the transport industry. Prior to his appointment as
Managing Director in January 1998 he previously
held other Executive positions within the Company.
Member of:
(cid:129) Nomination and Remuneration Committee
(cid:129) Environmental Committee
15
($A Millions unless
otherwise indicated) 2012 Variation 2011 2010 2009 2008
%
. . . . . . . . . . . . . . . . . . . . . . . . . .
Group Revenue 554.8 6.0 523.4 454.3 441.0 466.1
Operating Profit before
Individually Significant
Items, Interest and Tax 30.5 3.0 29.6 32.5 27.9 33.4
Individually Significant
Items & Fraud - - - - 2.5 -
Operating Profit before
Interest and Income Tax 30.5 3.0 29.6 31.5 30.4 33.4
Interest Expense 7.1 (15.5) 8.4 5.2 5.3 5.4
Profit Before Tax 23.4 10.4 21.2 26.3 25.0 28.0
Income Tax Expense 7.0 11.1 6.3 7.6 6.9 8.3
Operating Profit
after Tax 16.4 10.9 14.8 18.7 18.2 19.7
Earnings per
Ordinary Share (cents) 18.7 2.2 18.3 26.3 26.1 28.6
Dividends per
Share (cents) 11.0 10.0 10.0 14.0 12.0 16.0
Return on
Shareholders Funds 7.3% 5.8 6.9% 10.5% 11.6% 13.4%
Paid Up Capital 97.7 3.6 94.3 64.5 57.4 55.4
Shareholders Funds 224.9 5.3 213.6 179.1 156.2 146.5
Total Assets 401.4 3.5 388.0 326.1 287.6 297.4
Net Tangible Assets
(book value) per Share $1.72 4.2 $1.65 $1.85 $1.87 $1.76
16
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Overview 2012 2011 % Movement
Operating revenue $m 554.8 523.4 6.0
Operating profit after tax $m 16.4 14.8 10.9
Net borrowings $m 62.0 76.7 (19.2)
Shareholders’ funds $m 224.9 213.6 5.3
Earnings per share (basic) cents 18.7 18.3 2.2
Dividends per share cents 11.0 10.0 10.0
Net tangible assets per share $ 1.72 1.65 4.2
Cash flow per share $ 0.44 0.39 12.8
Return on Shareholders’ funds % 7.3 6.9 5.8
Gearing % 21.6 26.4 (18.2)
Lost time injuries 49.0 43.0 14.0
Lost time injuries frequency rate % 13.0 12.0 8.3
The Directors’ present their report, together
with the consolidated financial report of
K&S Corporation Limited ("the Company")
and the consolidated entity, for the
year ended 30 June 2012 and the Auditor’s
Report thereon.
Principal Activities
The principal activities of the consolidated
entity during the course of the financial year
were transport and logistics, contract
management, warehousing and distribution,
and fuel distribution.
There were no significant changes in the
nature of the activities of the consolidated
entity during the year.
Operating and Financial Review
The consolidated profit for the year attributable to
the members of K&S Corporation Limited is shown
above, along with comparative results for 2011.
The Directors of K&S Corporation Limited announced
a net profit after tax of $16.4 million, an increase of
10.9% on the previous year. Operating revenue for
the year was $554.8 million, an increase of 6.0% on
the previous corresponding period.
During the year we have seen first-hand the two
speed economy in our business.
The east coast operations have experienced the
effects of the high $A on the domestic manufacturers
while on the west coast we have seen the positive
impacts of the mining industry.
17
Our strong second half performance has been
underpinned by the strength of our Western
Australian operation and the stabilisation of our east
coast contract distribution business.
We still have a number of challenges in our
east coast linehaul business due to the depressed
volumes available.
Operating cash flow increased 14.1% to $38.9 million.
Earnings per share were 18.7 cents per share.
Our gearing now stands at 21.6%, which is well
within our target range.
Dividend
We have declared a fully franked final dividend of
6.0 cents per share (last year 5.0 cents per share).
This follows the interim dividend of 5.0 cents per
share paid in March 2012, making a total dividend of
11.0 cents per share. The final dividend will be paid
on 31 October 2012, with the date for determining
entitlements being 17 October 2012.
The dividend reinvestment plan (DRP) will once again
be part of the October 2012 dividend. The DRP will
apply in respect of the fully franked final dividend of
6.0 cents payable on 31 October 2012.
The terms of the DRP will remain unchanged with
issue price under the DRP based on the weighted
average trading price for K&S shares in the five
business days ending on 17 October 2012 (the record
date of the final dividend) less a discount of 2.5%.
Outlook
Providing earnings guidance going forward remains
a difficult task.
The strong Australian dollar continues to impact on
Australian manufacturers.
Our Western Australian business looks set to
experience strong growth in the year ahead. We see
this as being an area of growth for the Company.
We are well placed with a strong Balance Sheet, low
gearing and secure customer contracts.
We are confident of further growth in our existing
customer base and we will continue to bid strongly
on new tenders. We see the momentum from
our strong second half to continue into the first half
of 2012/13.
Opportunities for potential acquisitions will also be
closely evaluated where it makes strategic sense.
Significant Changes in the State of Affairs
Significant changes in the state of affairs of the
consolidated entity during the financial year were
as follows:
This year has been unlike any other in the Company’s
recent history as we have welcomed Greg Stevenson
as Managing Director following the retirement of
Legh Winser in May.
Legh Winser’s career with K&S spans a period of over
40 years and 14 years as Managing Director. In his
time as Managing Director, the Company’s revenues
doubled, whilst profit after tax has increased six-fold.
The Board wishes to publicly thank Legh and wish
him all the best in retirement.
Environmental Regulation
and Performance
The consolidated entity’s operations are subject to
environmental regulations under both Common-
wealth and State legislation in relation to its transport
and storage business and its fuel business.
The consolidated entity has a Board Committee
which monitors compliance with environmental
regulations. The Directors are not aware of any
significant breaches during the period covered by
this report.
Climate Change
Reporting under the National Greenhouse and Energy
Reporting Act (NGER) and the Energy Efficiency
Opportunity Program (EEOP) were completed and
submitted in October and December 2011.
The Energy Efficiency Opportunity compliance report
for June 2011 is available on the K&S website.
For details on the introduction of the carbon pricing
scheme, refer to ‘Likely Developments’ section on
page 20 of this report.
Transport and Warehousing
The transport and warehousing business is subject to
the Dangerous Goods Acts in Commonwealth and
State Legislation. The consolidated entity monitors
performance and recorded a number of minor
incidents during the year.
19
Fuel
The fuel business is subject to the South Australian
Environmental Protection Act 1993 and the South
Australian Dangerous Substances Act 1979.
The consolidated entity monitors performance and
recorded a number of minor fuel related incidents
during the year. In all cases, corrective actions have
been taken.
DIVIDENDS PAID TO SHAREHOLDERS
Interim (cents) Final (cents)
2012
2011
2010
2009
2008
5.0
5.0
6.0
5.0
7.0
7.0
7.0
5.0
11.0
10.0
14.0
12.0
8.0
8.0
16.0
Dividends
Events Subsequent to Balance Date
Dividends paid or declared by the Company to
members since the end of the previous financial
year were:
1 A final fully franked ordinary dividend (taxed to
30%) of 5.0 cents per share amounting to
$4,326,500 in respect of the year ended 30 June
2011 was declared on 18 August 2011 and paid
on 31 October 2011;
2 A fully franked preference dividend (taxed to
30%) of 4.0 cents per share amounting to
$4,800 in respect of the year ended 30 June 2011
was declared on 18 August 2011 and paid on
31 October 2011.
An interim fully franked ordinary dividend (taxed
to 30%) of 5.0 cents per share in respect of the year
ended 30 June 2012 was declared on 21 February
2012 and paid on 30 March 2012 amounting to
$4,394,682.
The final dividend declared by the Directors of
the Company on 21 August 2012 and payable on
31 October 2012 in respect of the year ended
30 June 2012 comprises:
1 A fully franked ordinary dividend (taxed to 30%)
of 6.0 cents per share amounting to $5,356,417;
and
2 A fully franked preference dividend (taxed
to 30%) of 4.0 cents per share amounting
to $4,800.
The preference share dividends are included as
interest expense in determining Net Profit.
20
On 21 August 2012, the Directors of K&S Corporation
Limited declared a final dividend on ordinary shares in
respect of the 2012 financial year. The total amount
of the dividend is $5,356,417, which represents a
fully franked dividend of 6.0 cents per share.
The dividend is payable on 31 October 2012 and has
not been provided for in the 30 June 2012 financial
statements. The Dividend Reinvestment Plan (DRP)
will apply to the final dividend and the issue price for
shares under the DRP will be based on the weighted
average trading price of K&S shares in the five
business days ending on 17 October 2012 (the record
date of the final dividend), less a discount of 2.5%.
Other than the matters above, there has not arisen in
the interval between the end of the financial year and
the date of this report any item, transaction or event
of a material and unusual nature likely, in the opinion
of the Directors of the Company, to affect significantly
the operations of the consolidated entity, the
results of those operations, or the state of affairs of
the consolidated entity in future financial years.
Likely Developments
It is anticipated that the consolidated entity will
continue to expand transport and logistics operations
during the next financial year by further extending
its services throughout Australia and adopting
the latest technology in the industry to contain costs
and enhance the services offered to customers.
The Federal Government’s recently introduced
carbon price legislation, commenced on 1 July 2012
in the form of a carbon tax. However, heavy on-road
transport activities are excluded from the carbon
pricing regime until 30 June 2014. From 1 July 2014
the amount of the business fuel tax credit (“FTC”)
claimed by K&S in respect of purchases of diesel fuel
will be reduced by the effective price on carbon.
Based on the carbon price of $25.40 per tonne to
apply in 2014/15, the effective price on carbon for
diesel fuel would be 6.858 cents per litre.
The carbon pricing regime is to move from a fixed
price to a market determined price on 1 July 2015.
From 1 July 2015, it is proposed that the effective
price on carbon would be adjusted six monthly in line
with that market determined price.
K&S currently anticipates that any reduction in the
FTC that it is able to claim in respect of diesel fuel
purchases for heavy on-road transport activities from
1 July 2014, will be passed through to customers via
fuel surcharges. In the intervening period from
1 July 2012 to 30 June 2014, K&S is likely to
experience some minor increases in its cost base as
a result of the introduction of a price on carbon.
K&S is also unable to predict what impact the
imposition of the proposed price on carbon may
have on its customer base generally, and the
manufacturing sector in particular.
General Disclosures
K&S Corporation Limited is a company limited by
shares that is incorporated and domiciled in Australia.
21
Directors
Directors’ Interests
The Directors of the Company in office at any time
during or since the end of the financial year are:
Tony Johnson (Chairman)
Greg Stevenson (Managing Director)
Greg Boulton AM (Deputy Chairman)
Richard Nicholson
Bruce Grubb
Ray Smith
Legh Winser
(Managing Director – retired 25 May 2012)
Secretary – Chris Bright
With the exception of Mr Stevenson and Mr Winser,
all Directors are Non-Executive Directors. Particulars
of Directors’ qualifications, experience, special
responsibilities and other relevant Directorships are
on pages 14 and 15 of the Annual Report.
The beneficial interest of each Director in their own
name in the share capital of the Company shown
in the Register of Directors' Shareholdings as at the
date of this report is:
Ordinary Shares
Mr R Nicholson 12,225
Mr B Grubb 17,034
Directors of the Company have relevant interests in
additional shares as follows:
Ordinary Shares
Mr T Johnson 281,066
Mr G Boulton 238,631
Mr R Smith 35,789
Mr R Nicholson 16,730
Mr B Grubb 108,171
Board of Directors
Back row l to r:
Chris Bright (Secretary)
Ray Smith,
Bruce Grubb,
Richard Nicholson,
Front row l to r:
Greg Boulton,
Tony Johnson,
Greg Stevenson
Directors’ Meetings
The number of Directors' meetings (including meetings of Committees of Directors) and number of meetings
attended by each of the Directors of the Company during the financial year were:
Director
Directors’ Meetings
Audit Committee
Meetings
Nomination and
Remuneration
Committee Meetings
Environmental
Committee Meetings
No. attended No. held No. attended No. held No. attended No. held No. attended No. held
Mr T Johnson 11 11 - - 3 3 4 4
Mr G Boulton 11 11 4 4 1 3 - -
Mr R Smith 11 11 4 4 - - - -
Mr B Grubb 11 11 - - - - 4 4
Mr R Nicholson 11 11 - - 3 3 - -
Mr L Winser 10 11 - - 2 3 3 4
Mr G Stevenson 1 11 - - - - 1 4
All Directors were eligible to all meetings held, except for Mr. L Winser who was eligible to attend ten
Directors’ meetings, two Nomination and Remuneration Committee meetings and three Environmental
Committee meetings and Mr. G Stevenson who was eligible to attend one Directors meeting and one
Environmental Committee meeting. In addition to the eleven regular meetings, there were ten other
special meetings of Directors held during the course of the year.
22
Indemnification and Insurance of
Directors and Officers
Indemnification
The Company indemnifies current and former
Directors, Executive Officers and the Secretaries of
the Company and its controlled entities against
all liabilities, costs and expenses to another person
(other than the Company or a related body
corporate) to the maximum extent permitted by
law that may arise from their position as Directors,
Executive Officers and Secretaries of the Company
and its controlled entities, except where the liability
arises out of conduct involving a lack of good faith.
Insurance Premiums
Since the end of the previous financial year, the
Company has paid insurance premiums of $39,972
in respect of Directors’ and Officers’ Liability insurance
contracts for current and former officers, including
Directors, Executive Officers and the Secretaries of
the Company and its controlled entities.
The insurance premiums relate to:
(cid:129) Costs and expenses incurred by the relevant
officers in successfully defending proceedings,
whether civil or criminal;
(cid:129) Other liabilities that may arise from their
position, with the exception of conduct
involving a wilful breach of duty or position
to gain a personal advantage.
The officers of the Company covered by the policy
include the current Directors; T Johnson, G Boulton,
R Nicholson, R Smith, B Grubb, G Stevenson and
former Director, L Winser.
Other Officers covered by the contract are Executive
Officers and the Secretaries of the Company and
Directors and the Secretaries of controlled entities
(who are not also Directors of the Company),
General Managers and other Executive Officers of
controlled entities.
Tax Consolidation
Effective 1 July 2002, for the purposes of income
taxation, K&S Corporation Limited and its domestic
based 100% owned subsidiaries formed a tax
consolidated group.
Members of the Group entered into a tax sharing
arrangement in order to allocate income tax expense
to the wholly owned subsidiaries on a pro-rata
basis. In addition, the agreement provides for the
allocation of income tax liabilities between the
entities should the head entity default on its tax
payment obligations.
Corporate Governance
In recognising the need for the highest standards of
corporate behaviour and accountability, the Directors
of K&S Corporation Limited support the principles of
corporate governance. The Company’s Corporate
Governance Statement commences on page 31 of the
Annual Report.
Rounding Off
The Company is of a kind referred to in ASIC Class
Order 98/100 dated 10 July 1998 and in accordance
with that Class Order, amounts in the Financial Report
and Directors’ Report have been rounded off to
the nearest thousand dollars, unless otherwise stated.
Auditor Independence and
Non-Audit Services
The entity’s Auditor, Ernst & Young has provided
the economic entity with an Auditor’s Independence
Declaration which is on page 102 of this report.
Non-Audit Services
The following non-audit services were provided
by the entity’s Auditor, Ernst & Young. The Directors
are satisfied that the provision of non-audit
services is compatible with the general standard of
independence for auditors imposed by the
Corporations Act. The nature and scope of each type
of non-audit service provided means that auditor
independence was not compromised.
Ernst & Young received or are due to receive
the following amounts for the provision of
non-audit services:
IT Disaster Recovery Review
$9,820
23
REMUNERATION REPORT (audited)
This remuneration report outlines the Director
and Executive remuneration arrangements of the
Company and the Group 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 Group are defined as
those persons having authority and responsibility
for planning, directing and controlling the major
activities of the Company and the Group, directly or
indirectly, including any Director (whether executive
or otherwise) of the parent company.
For the purposes of this report, the term executive
encompasses the Managing Director, Senior
Executives, General Managers and Secretaries of
the Parent and the Group. Details of the Key
Management Personnel are:
i) Directors
Mr T Johnson Non-Executive Chairman
Mr G Boulton Non-Executive Deputy Chairman
Mr R Smith Non-Executive
Mr R Nicholson Non-Executive
Mr B Grubb Non-Executive
Mr G Stevenson Managing Director – Appointed 28 May 2012
Mr L Winser Managing Director – Retired 25 May 2012
ii) Executives
Mr B Walsh Chief Financial Officer
Mr C Bright General Counsel & Company Secretary
Mr G Wooller Chief Operating Officer
Mr P Sarant Executive General Manager DTM
Mr G Everest Executive General Manager Regal Transport
Mr S Hine Executive General Manager Business Development
Ms K Evans General Manager Human Resources
Mr S Skazlic General Manager HS&E / Compliance
Remuneration Philosophy
The performance of the Company depends upon the
quality of its Directors and Executives. To prosper,
the Company must attract, motivate and retain highly
skilled Directors and Executives. To this end, the
Company adopts the following key principles in its
remuneration policy:
24
(cid:129) Remuneration is set at levels that will attract
and retain good performers and motivate and
reward them to continually improve business
performance.
(cid:129) Remuneration is structured to reward employees
for increasing Shareholder value.
(cid:129) Rewards are linked to the achievement of
business targets.
The Nomination and Remuneration Committee
The Nomination and Remuneration Committee of
the Board of Directors of the Company is responsible
for reviewing compensation arrangements for
the Directors, the Managing Director and the Senior
Management team.
The Nomination and Remuneration Committee
assesses the appropriateness of the nature and
amount of remuneration of Directors and Senior
Managers on a periodic basis by reference to relevant
employment market conditions, with the overall
objective of ensuring maximum stakeholder
benefit from the retention of a high quality Board
and Executives.
While the Nomination and Remuneration Committee
reviews the remuneration paid to Non-Executive
Directors and the Managing Director, and
the aggregate remuneration paid to the Senior
Management team, the Board of Directors has
ultimate responsibility for determining these amounts.
Remuneration Structure
In accordance with best practice corporate
governance, the structure of Non-Executive Director,
Executive Director and Senior Manager remuneration
is separate and distinct.
Non-Executive Director Remuneration
Objective
The Board seeks to set aggregate remuneration at a
level which provides the Company with the ability to
attract and retain quality Directors, whilst incurring
a cost which is acceptable to Shareholders.
Structure
The Constitution and the ASX Listing Rules specify
that the aggregate remuneration of Non-Executive
Directors’ shall be determined from time to time
by a general meeting of Shareholders.
The latest determination was at the Annual General
Meeting held on 18 November 2007 when
Shareholders approved an aggregate remuneration
of $500,000 per year.
The amount of aggregate remuneration sought to
be approved by Shareholders and the amounts
paid to Directors is reviewed annually. The Board
considers the fees paid to Non-Executive Directors
of comparable companies when undertaking the
annual review, as well as periodically taking advice
from external recruitment consultants. No advice
was taken from external recruitment consultants in
2011/12. Each Non-Executive Director receives a
fee for being a Director of the Company.
Non-Executive Directors have long been encouraged
by the Board to hold shares in the Company
(purchased by the Director on the market). It is
considered good corporate governance for Directors
to have a stake in the Company whose Board he or
she sits on.
The remuneration of Non-Executive Directors for the
period ended 30 June 2012 is detailed on page 29 of
this report.
Executive Director and
Senior Manager Remuneration
Objective
The Company aims to reward Executives with a level
and mix of remuneration commensurate with their
position and responsibilities within the Company to:
(cid:129) reward Executives for Company, business unit
and individual performance against targets
set by reference to appropriate benchmarks;
(cid:129) align the interests of Executives with those of
Shareholders;
(cid:129) link reward with the strategic goals and
performance of the Company; and
(cid:129) ensure total remuneration is competitive by
market standards.
Structure
In determining the level and make up of Executive
remuneration, the Nomination and Remuneration
Committee seeks external information detailing
market levels of comparable executive roles from
which the Committee makes its recommendation
to the Board.
For the Managing Director and the other Senior
Executives, remuneration programs are balanced with
a mix of fixed and variable rewards. The makeup
and eligibility criteria for short term incentives are
recommended to the Board by the Nomination and
Remuneration Committee prior to the commencement
of each financial year.
For the year ended 30 June 2012, the adoption of at
risk short term incentives comprising 20% and 10%
of the base emolument of the former Managing
Director (Mr Winser) and Executives respectively was
approved by the Board.
The payment of such short term incentives can either
be as a cash bonus or, subject to the applicable
superannuation laws, as superannuation contributions
and is in addition to the base emolument.
Payment of the short term incentive is conditional
upon the achievement by the Company of budgeted
profit after tax on a normalised basis and excluding
any one off or non-trading items (eg, profit on the
sale of real estate). Where budgeted profit after
tax on a normalised basis is not achieved, no short
term incentive is payable to the Managing Director
and Executives.
As the Company’s annual budget for operating profit
after tax is set with a view to increasing the profit
generated by the Company, growing earnings per
share, and improving the Company’s capacity to
pay dividends, the Board believes that aligning the
payment of short term incentives to the attainment
by the Company of budgeted profit after tax on
a normalised basis is appropriate and in the interests
of Shareholders.
For the year ended 30 June 2012, the eligibility
criteria for the payment of short term incentives were
not satisfied and no short term incentive payment
was made to the former (or current) Managing
Director or Executives.
The Board has approved the adoption of at risk short
term incentives comprising 20% and 10% of the base
emolument for the Managing Director and Executives
respectively for the year ended 30 June 2013 and in
all other respects on the same basis as outlined
above. The total short term incentives payable to the
Managing Director and Executives for the year
ended 30 June 2013, if eligibility criteria are met, will
be $325,000.
25
Employment Contracts
It is the Nomination and Remuneration Committee’s
current policy that fixed term contracts are only
entered into with the Managing Director and with
no other Executives.
The former Managing Director, Mr Winser, also had
a contract of employment with the Company.
His remuneration comprised a salary and allowances
package. On early termination, Mr Winser was
entitled to receive up to 12 months salary and benefits.
Mr Winser’s contract did not contain express terms
as to the duration of the contract, periods of notice
and required termination details.
The Managing Director, Mr Stevenson, has a contract
of employment, key terms of which are:
Employee Share Plan
(cid:129) A total remuneration package of $535,000 per
annum (excluding short term incentive (STI)).
(cid:129) Eligible for an STI of $90,000 (20% of base
salary) against annual performance criteria set
by the Board. For the year ended 30 June 2013,
payment of the STI is dependent upon the
achievement by the Company of its budgeted
profit after tax on a normalised basis and
excluding any one-off or non-trading items
(eg, profit on the sale of real estate).
(cid:129) If the Board introduces a long term incentive
scheme (LTI), Mr Stevenson will be eligible to
participate in that scheme. However, there is
not presently any LTI scheme in place.
(cid:129) In accordance with best practice, the Board may
require Mr Stevenson to repay all or part of any
bonus, STI or LTI paid in circumstances where
there has been a material misstatement in relation
to the financial statements of the Company in
any qualifying period relevant to the payment of
that bonus, STI or LTI.
(cid:129) Either of Mr Stevenson and the Company may
terminate Mr Stevenson’s employment on
the giving of six months notice or, in the case
of the Company, payment in lieu of that six
months notice.
At the Company’s Annual General Meeting on
21 November 2006, Shareholders approved the
introduction of an Employee Share Plan (“the Plan”).
Employees who have been with the Company for
more than one year are entitled to participate in the
Plan and the purpose of the Plan is to attract, retain
and motivate employees by giving them a stake in
the future growth of the Company. Non-Executive
Directors of the Company are not eligible to
participate in the Plan.
Offers were made to eligible employees on
1 September 2011 under the Plan. Acceptances
under the offer were 244,500 shares at $1.33
per share.
The issue price of the shares offered under the Plan
was the weighted average price of the Company’s
shares on the first 5 trading days immediately
following the announcement of the Company’s
preliminary final results on 19 August 2011.
Eligible employees’ annual entitlements to participate
in the Plan are currently set by the Company
Directors as follows, in line with the entitlements
notified to Shareholders at the Company’s Annual
General Meeting on 21 November 2006:
Annual Salary
Number of Shares
Less than $50,000
$50,000 to $100,000
$100,001 to $150,000
$150,001 to $200,000
1,000
2,000
5,000
7,000
Greater than $200,000
10,000
Directors will make offers to eligible employees under
the Plan in the year ended 30 June 2013.
26
The next graph highlights the performance of the
share price of K&S Corporation Limited against
the Australian Stock Exchange All Ordinaries Index
and the Australian Stock Exchange Industrials
Index over the past 5 years.
K&S CORPORATION SHARE PRICE 2007-2012
■ KSC ■ All Ords ■ Industrials Index
Directors’ Retirement Benefits
A change to the Non-Executive Directors’ Retirement
Benefits calculation was made in July 2004 to
freeze accumulation of years of service of Directors
as at 30 June 2004. No Non-Executive Director
commencing after 1 July 2004 is eligible for any
benefits under the retirement scheme.
The expenditure provided (not paid) during the
year ended 30 June 2012 is attributable only to the
method of calculation which involves the averaging
of the fees paid to Directors, as per the benefits
scheme in operation up to 30 June 2004.
The former Managing Director, Mr Winser, was given
a one-off ex-gratia cash payment of $55,000 in
connection with his retirement in recognition of past
services rendered by him to the Company. That cash
payment is included in the remuneration disclosures
on page 29 of this report.
Company Performance
The graph below shows the performance of the
Company, as measured by the Company’s
operating profit before individually significant items,
interest and tax (NEBIT), and operating profit before
individually significant after tax (NPAT).
NEBIT v NPAT
$m
■ NEBIT ■ NPAT
In addition, Dividends paid to Shareholders are
disclosed on page 20 of the Directors’ report.
28
Remuneration of Key Management Personnel of the Company and the Group
Remuneration for the year ended 30 June
Non-Executive
Directors
Salary &
Fees
$
Short-Term
Incentives
$
Non-Cash
Benefits
$
Other Long-Term
Long Service
Benefit
$
Post Employment
Total
Retirement
Benefits
$
Super
Contributions
$
Performance
Related
%
$
T Johnson 2012 110,000 - - - 20,000 12,100 142,100 -
2011 110,000 - - - 20,000 12,100 142,100 -
G Boulton 2012 65,000 - - - 6,500 7,150 78,650 -
2011 65,000 - - - 6,500 7,150 78,650 -
R Smith 2012 65,000 - - - - 7,150 72,150 -
2011 65,000 - - - - 7,150 72,150 -
B Grubb 2012 65,000 - - - - 7,150 72,150 -
2011 65,000 - - - - 7,150 72,150 -
R Nicholson 2012 65,000 - - - 13,000 7,150 85,150 -
2011 65,000 - - - 13,000 7,150 85,150 -
Total 2012 370,000 - - - 39,500 40,700 450,200
2011 370,000 - - - 39,500 40,700 450,200
Executive Director
L Winser # 2012 457,233 - 78,398 11,228 55,000 45,833 647,692 -
2011 479,133 - 78,452 11,625 - 50,000 619,210 -
G Stevensonˆ 2012 44,423 - 3,191 707 - 5,686 54,007 -
2011 - - - - - - - -
Other Key
Management Personnel
B Walsh 2012 265,000 - 27,608 6,625 - 34,885 334,118 -
2011 250,000 - 27,031 6,250 - 35,630 318,911
C Bright 2012 213,285 - 27,676 5,250 - 25,000 271,211 -
2011 206,193 - 27,545 5,000 - 25,000 263,738 -
G Wooller 2012 370,000 - 26,856 6,167 - 47,485 450,508 -
2011 320,679 - 26,298 5,334 - 50,000 402,311 -
P Sarant 2012 392,485 - 27,178 6,167 - 25,000 450,830 -
2011 329,451 - 28,804 5,167 - 25,000 388,422 -
G Everest** 2012 243,800 - 17,329 4,000 - 25,000 290,129 -
2011 173,846 - 9,531 2,882 - 20,862 207,121 -
K Evans 2012 190,000 - 17,179 3,167 - 22,800 233,146 -
2011 180,692 - 16,750 3,000 - 23,537 223,979 -
S Hine* 2012 258,084 - 27,165 4,167 - 25,000 314,416 -
2011 - - - - - - - -
S Skazlic* 2012 210,200 - 8,772 3,500 - 25,000 247,472 -
2011 - - - - - - - -
S Fanning+ 2012 - - - - - - - -
2011 62,097 - 3,063 980 - 6,061 72,201 -
C De Gois+ 2012 - - - - - - - -
2011 3,962 - 2,284 85 - 682 7,013 -
Total 2012 2,644,510 - 261,352 50,978 55,000 281,689 3,293,529
Executive KMP 2011 2,006,053 - 219,758 40,323 - 236,772 2,502,906
Totals 2012 3,014,510 - 261,352 50,978 94,500 322,389 3,743,729
2011 2,376,053 - 219,758 40,323 39,500 277,472 2,953,106
# Mr Winser retired on 25 May 2012.
ˆ Mr Stevenson was appointed Managing Director on 28 May 2012.
* S. Hine and S. Skazlic met the definition of a Key Management Person on 1 July 2011.
** G. Everest met the definition of a Key Management Person on his appointment as Executive General Manager Regal Transport on 10 October 2010.
+ C. De Gois resigned on 9 July 2010. S. Fanning resigned on 27 August 2010.
Signed in accordance with a resolution of the Directors.
T Johnson
Chairman
21st August 2012
Greg Stevenson
Managing Director
21st August 2012
29
The Board of Directors of K&S Corporation
Limited is responsible for the governance of
the consolidated entity. The Board guides
and monitors the business and affairs of
K&S Corporation Limited on behalf of the
Shareholders by whom they are elected and
to whom they are accountable.
In keeping with the Australian Securities
Exchange Corporate Governance Council’s
updated Corporate Governance Principles
and Recommendations, this statement
outlines the Company’s compliance with the
ASX principles.
The K&S Corporation Limited Corporate
Governance Statement is structured with
reference to the Corporate Governance
Council’s principles and recommendations,
which are as follows:
Principle 1
Lay solid foundations for management oversight
Principle 2
Structure the board to add value
Principle 3
Promote ethical and responsible decision making
Principle 4
Safeguard integrity in financial reporting
Principle 5
The Roles of the Board and Management
The Board has a Charter which establishes the
relationship between the Board and Management
and describes their functions and responsibilities in
a manner which is consistent with ASX Principle 1.
The role of the Board is to oversee and guide
the Management of K&S Corporation Limited and
its businesses with the aim of protecting and
enhancing the interests of Shareholders while taking
into account the interests of employees, customers,
suppliers and the community at large.
The Board is responsible for setting and approving the
strategic direction of the Company, establishing goals
for Management and monitoring the achievement of
those goals.
The Managing Director is responsible to the Board
for the day to day management of the Company.
All Management, including the Managing Director,
have clear statements of roles and responsibilities.
The performance of Key Executives is reviewed not
less than annually by the Managing Director.
The review involves an open exchange of ideas
between the Managing Director and Key Executives.
The performance of Key Executives is reviewed
against matters including financial targets (eg,
budget), HS&E management, and achievement of
specific strategic and business objectives.
Make timely and balanced disclosure
Structure of the Board
Principle 6
Respect the rights of shareholders
Principle 7
Recognise and manage risk
Principle 8
Remunerate fairly and responsibly
The Board currently comprises five Non-Executive
Directors, including the Chairman, and one Executive
Director, namely, the Managing Director.
The qualifications, experience and periods of service
of each of the Directors is set out on pages 14-15 of
the Annual Report.
Directors are expected to bring independent
views and judgement to the Board’s deliberations.
Consistent with the ASX Principles, the Board
Charter requires the Board to include a majority of
Non-Executive Directors, a Non-Executive Chairman
and to have a different person filling the roles of
Chairman and Managing Director. The Chairman
of the Audit Committee cannot be Chairman of
the Board.
31
B Grubb Non-Executive Director
Mr Grubb is the former Chief Executive Officer of the
Scott Group of Companies. Mr Grubb is a Director of
Scott Corporation Limited, and a former Director of
a number of other companies within the Scott Group
of companies, one of which (AA Scott Pty Ltd) is
the largest Shareholder of K&S Corporation Limited.
Mr Grubb also remains a Director of some entities
within the Scott Group of Companies.
* L Winser retired as Managing Director on
25 May 2012 and was not considered by the
Board to be independent.
The Board structure is consistent with ASX Principle 2,
with the exception of:
(cid:129) Recommendation 2.1 which requires that the
majority of the Board be independent Directors.
The Board considers that the mix of skills
and experience of and the contributions by the
non-independent Non-Executive Directors
offsets the benefits to the Company of having
a majority of independent Non-Executive
Directors. However, as part of the review of
Board Performance (refer next page), Directors
have regard to the balance of independent and
non-independent Non-Executive Directors.
(cid:129) Recommendation 2.2 which requires that
the Chairman of the Board be an independent
Director. Mr Johnson is Chairman of the
Board and is not considered by Directors to be
independent. The Board considers that the
skills and experience that Mr Johnson brings
as Chairman add value to the deliberations
and functioning of the Board. Further, K&S
Corporation Limited’s Deputy Chairman,
Mr Boulton, is an experienced and independent
Non-Executive Director who is able to fulfil the
role of Chairman where and to the extent that
any conflicts of interest arise for Mr Johnson.
(cid:129) Recommendations 2.4 and 8.1 which require
that the Nomination and Remuneration
Committee have a majority of independent
Non-Executive Directors as members.
Mr Nicholson was the Chairman of the
Nomination and Remuneration Committee
during the course of the year and is considered
by Directors to be an independent Director.
However, for the majority of the year the other
current members of the Nomination and
Directors of the Company are considered to be
independent when they are independent of
management and free from any business or other
relationship that could materially interfere with or
could reasonably be perceived to materially interfere
with the exercise of their unfettered independent
judgement. Materiality of business and other
relationships held by a Director is considered from
both the Company and individual Director perspective.
The determination of materiality requires consideration
of both quantitative and qualitative elements.
Quantitative factors relate to the financial value of
the business or other relationship. Qualitative factors
considered include whether a relationship is
strategically important, the competitive context of
the relationship, the nature of the relationship and
the contractual or other arrangements governing it
or other factors which point to the actual ability
of the Director in question to influence the direction
of the Company other than in the best interests of
the Company as a whole.
The Board has reviewed the position of each of the
six Directors in office at the date of this report and
considers the following Directors of the Company to
be independent:
Name
Position
G Boulton
R Smith
R Nicholson
Non-Executive Director
Non-Executive Director
Non-Executive Director
The Board assesses the independence of new
Directors upon appointment and reviews their
independence, and the independence of the
other Directors, as appropriate.
The Board considers the following Directors as not
independent:
G Stevenson Managing Director
T Johnson Non-Executive Director (Chairman)
Mr Johnson is a Director of AA Scott Pty Ltd,
as well as Chairman of Scott Corporation Limited
(a company controlled by AA Scott Pty Ltd, the
largest Shareholder of K&S Corporation Limited).
32
Remuneration Committee (Messrs Johnson and
Winser) were not considered by Directors to be
independent. As the Nomination and
Remuneration Committee is only empowered to
make recommendations to the Board, Directors
were of the view that any decisions as to
nomination and remuneration were still subject to
an appropriate level of scrutiny by independent
Non-Executive Directors as those decisions were
reserved to the Board.
When Mr Winser retired as Managing Director
on 25 May 2012, he was replaced on the
Nomination and Remuneration Committee by
Mr Boulton. Mr Boulton is considered by the
Board to be independent and the Nomination
and Remuneration Committee is now comprised
exclusively of Non-Executive Directors and has a
majority of independent Directors.
The Company has a Diversity Policy which is
consistent with ASX Principle 2. The objective of the
Diversity Policy is to promote a corporate culture
within the Company where the diverse experiences,
perspectives and backgrounds of people are valued
and embraced and which is conducive to the
recruitment of well qualified and diverse employees,
senior management and Board members.
There are procedures in place, agreed by the Board,
to enable Directors, in furtherance of their duties,
to seek independent professional advice at the
Company’s expense.
The Board meets formally eleven times a year and
on other occasions as required. During the course
of the year, the Board’s sub-committees meet on a
number of occasions to deal with their specific
responsibilities in relation to the Company’s business.
Senior Management attend and are a vital ingredient
to the sub-committees, making presentations,
providing information and responding to questions
of the Directors. All Directors have unrestricted
access to all employees of the Group and, subject
to the law, access to all Company records and
information held by employees and external advisers.
The Board receives regular financial and operational
reports from Senior Management to enable it to
carry out its duties and responsibilities.
Retirement and Re-election of Directors
The Company’s Constitution requires one third of
the Directors, other than the Managing Director, to
retire from office at each Annual General Meeting.
Directors who have been newly appointed by the
Board during the year are also required to stand for
re-election at the next Annual General Meeting, but
are not taken into account in determining the
number of Directors retiring at that Annual General
Meeting. Retiring Directors are eligible for re-election
by Shareholders.
Review of Board Performance
The Board has implemented a process for the
regular review of its overall performance, consistent
with ASX Recommendation 2.5. Regular review
involves both analysis by the Board of the results
of a questionnaire completed by all Directors
and discussion between the Chairman and each of
the Directors.
The Board’s performance review departs from
Recommendation 2.5 as the review is conducted by
the full Board, and not the Nomination and
Remuneration Committee. As the Board is comprised
of only six Directors, the Board considers this the
most effective way to address its own performance.
Committees of the Board
Three standing Board Committees assist the Board in
the discharge of its responsibilities.
These committees are:
(cid:129) The Audit Committee
(cid:129) The Nomination and Remuneration Committee
(cid:129) The Environmental Committee
Audit Committee
The Board has an established Audit Committee, which
operates under a Charter approved by the Board.
It is the Board’s responsibility to ensure that an
effective internal control framework exists within the
entity. This includes internal controls to deal with
both the effectiveness and efficiency of significant
business processes, the safeguard of assets, the
maintenance of proper accounting records, and the
reliability of financial information.
The Board has delegated to the Audit Committee
the responsibility for the ongoing monitoring of a
framework of internal control and ethical standards
for the management of the consolidated entity,
consistent with ASX Principle 4.
33
The Audit Committee also provides the Board with
additional assurance regarding the reliability of the
financial information for inclusion in the financial
reports. All members of the Audit Committee are
currently independent Non-Executive Directors.
Among the specific responsibilities set out in the Audit
Committee Charter, the Audit Committee reviews all
published accounts of the Group, reviews the scope
and independence of external audits, monitors and
assesses the systems for internal compliance and
control, and risk management and advises on the
appointment, performance and remuneration of the
external auditors.
The members of the Audit Committee during the
year were:
Mr Smith (Chairman)
Mr Boulton
Mr Smith is Chairman of the Audit Committee.
The Board considers Mr Smith to be independent
using the ASX Council’s definition of independence.
The Board also considers Mr Boulton to be
independent using the ASX Council’s definition
of independence.
The ASX Council Recommendation 4.2 recommends
that the Audit Committee consist of at least three
members who are all Non-Executive and the
majority independent. The Board is of the view that
the current composition of the Audit Committee is
appropriate given the size of the business, the
extensive financial skills, and industry knowledge of
the current members of the Audit Committee.
The Managing Director, the Chief Financial Officer,
the Company Secretary, the Group Commercial
Manager, the external Auditors and any other persons
considered appropriate attend meetings of the
Audit Committee by invitation. The Committee also
meets from time to time with the external Auditors,
independent of management.
The Audit Committee met on four occasions during
the course of the year. Messrs Smith and Boulton
both attended all four meetings.
34
Nomination and Remuneration Committee
Consistent with ASX Principle 8, the Board has a
Nomination and Remuneration Committee with a
formal Charter. The role of the Committee is to
review and make recommendations to the Board
on remuneration packages and policies applicable to
the Managing Director, Senior Executives, Salaried
Staff and Directors themselves.
The Nomination and Remuneration Committee
does not make recommendations to the Board as to
the nomination and appointment of new Directors.
As the Board of K&S Corporation Limited is comprised
of only six Directors, Directors are of the view that
the nomination and appointment of new Directors
is most efficiently discharged by the Board.
When appointing new Directors, matters the Board
have regard to include the spread of skills and
qualifications, experience, and independence of both
the potential appointee and the existing members
of the Board. The Board is of the view that a good
depth of transport industry exposure and expertise is
an integral element of the skills to be represented
on the Board. The Board also views accounting and
legal expertise as important elements to allow it
effectively to discharge its duties and responsibilities.
The Board recognises that a diversity of backgrounds
and experience in its members will contribute to the
Board functioning at its optimum.
On 4 January 2012, the Company announced that
its then Managing Director, Mr Winser, intended to
retire. The Board engaged external recruitment
consultants, Sheldon Harris, to assist in finding the
best person to replace Mr Winser. As part of that
process, the Board provided a detailed scoping paper
to Sheldon Harris outlining the key attributes that
the Board considered essential for a new Managing
Director. Sheldon Harris then refined that scoping
paper in consultation with the Board.
An extensive search process was undertaken, with
both external and internal candidates considered by
the Board for the position of Managing Director.
The Board is confident that a rigorous and transparent
process was followed to find the best candidate.
Mr Stevenson was appointed as Managing Director
with effect on 28 May 2012.
Remuneration levels are competitively set to attract
and retain appropriately qualified and experienced
Directors and Senior Executives.
The Nomination and Remuneration Committee
periodically obtains independent advice on the
appropriateness of remuneration packages,
as well as benchmarking comparable company
remuneration data. It also plays a role in evaluation
of the performance of the Managing Director
and management succession planning. This role
includes the responsibility for incentive performance
packages, superannuation entitlements, retirement
and termination entitlements, fringe benefit policies,
professional indemnity and liability insurance policies.
The members of the Nomination and Remuneration
Committee during the year were:
Mr Nicholson (Chairman)
Mr Winser*
Mr Johnson
Mr Boulton*
* Mr Winser retired as Managing Director on 25 May 2012 and was
replaced on the Nomination and Remuneration Committee by Mr Boulton.
The Nomination and Remuneration Committee meets
at least twice a year and as required. The Committee
met formally three times, but also informally on several
other occasions during the year. Messrs Nicholson
and Johnson attended all three formal meetings of the
Committee. Mr Winser attended two of the formal
meetings of the Committee and Mr Boulton attended
the last of the formal meetings.
The Company’s Non-Executive Directors receive only
fees and superannuation for their services and the
reimbursement of reasonable expenses. The fees paid
to the Company’s Non-Executive Directors reflect the
demands on, and responsibilities of, those Directors.
The advice of independent remuneration consultants
is taken periodically, as well as benchmarking
against external remuneration data for comparable
companies to establish that the Directors’ fees are in
line with market standards. Non-Executive Directors
do not receive any shares, options or other securities
in addition to their remuneration.
A Directors’ fee pool limit of $500,000 for Non-
Executive Directors was approved by Shareholders at
the Annual General Meeting on 18 November 2007.
This fee pool is only available to Non-Executive
Directors. The Non-Executive Directors received
$65,000 each and the Chairman was paid $110,000
in 2011/12. Committee membership does not
entitle a Director to additional fees.
The Managing Director, Mr Stevenson, has a contract
of employment with the Company. Key terms of
Mr Stevenson’s contract of employment are:
(cid:129) A total remuneration package of $535,000 per
annum (excluding short term incentive (STI)).
(cid:129) Eligible for an STI of up to $90,000 (20% of
base salary) against annual performance criteria
set by the Board. For the 2012/13 financial
year, payment of the STI is dependent upon the
achievement by the Company of its budgeted
profit after tax (excluding any one off or
abnormal items such as profit on the sale of
a property).
(cid:129) If the Board introduces a long term incentive
scheme (LTI), Mr Stevenson will be eligible to
participate in that scheme. However, there is
not presently any LTI scheme in place.
(cid:129) In accordance with best practice, the Board
may require Mr Stevenson to repay all or part of
any bonus, STI, or LTI paid in circumstances
where there has been a material misstatement
in relation to the financial statements of the
Company in any qualifying period relevant to
the payment of that bonus, STI, or LTI.
The Non-Executive Directors’ retirement benefits
scheme entitlements were frozen in years of service
as at 30 June 2004 and will be paid on retirement.
Under the terms of the Non-Executive Directors’
retirement benefit scheme, participating Directors
are entitled to receive up to the total remuneration
paid to them in the last three years upon their
retirement in accordance with the following formula:
RB = TR x (Y ÷ 15)
where
RB = retirement benefit payable to the Director
on retirement
TR = the total remuneration paid to the Director in
the last three years
Y = the years of service of the Director prior
to 30 June 2004, provided that Y shall not
exceed 15
Non-Executive Directors appointed after 30 June 2004
are not eligible to participate in the retirement
benefits scheme.
The structure and disclosure of the Company’s
remuneration of Non-Executive Directors is consistent
with ASX Principle 8.
37
(cid:129) The Nomination and Remuneration Committee
is to review data re tenure and turnover levels
for women compared to men across all levels of
the Company’s workforce not less than annually
as part of seeking to understand the reasons for
differing participation rates for women and men.
Tenure and turnover data was reviewed by
the Committee in 2011/12. Again, as women
are over-represented in some areas of the
workforce and under-represented in others and
the Company’s operations are geographically
diverse, careful analysis is required to determine
underlying causes applicable to different
employee groups.
The proportion of women employees across the
Company is set out in the table below:
Category
Women
Men
Casual
%
Full Part
time time time time Women Men Staff Women Men
Full Part
Total
Board
Senior
Executives
Senior
Managers
0
1
12
Line Managers 16
0
0
0
0
0
10
68
140
Administration 142
21
53
Service Staff
14
0 1140
Total
185
21 1411
5
0
0
0
0
0
5
0
0
0
0
15
6
21
0
5
0.00
100
0
11
9.1
90.9
0
0
0
80
15.0
85.0
156
231
10.3
89.7
77.1
22.9
197 1357
1.5
98.5
197 1840
12.3
87.7
This data has historically also been reported by the
Company under the Equal Opportunity for Women
in the Workplace Act 1999 (Cth).
The Company notes that the transport and logistics
industry continues to have a stereotyped male
dominated environment, with a substantial proportion
of the Company’s workforce required to perform
labour intensive/manual handling tasks as well as
significant overtime in the course of their employment
duties. While the Company is committed to diversity,
the nature of the work undertaken by many employees
has made it challenging to attract women to
these roles.
The Company will review on an ongoing basis the
opportunities to overcome these impediments to
higher participation rates by women.
Further details of Directors’ remuneration,
superannuation and retirement payments are set
out in the Directors’ Report on pages 24 to 29.
Diversity
The measurable objectives for achieving gender
diversity set by the Board and progress towards
achieving those objectives is:
(cid:129) The Nomination and Remuneration Committee
must review participation rates for women across
all levels of the workforce not less than annually.
That review was undertaken by the Committee
in 2011/12.
(cid:129) The Nomination and Remuneration Committee
is to review pay parity data for women and
men across all levels of the workforce not less
than annually to determine whether there is
any unconscious bias. To the extent that the
review suggests that unconscious bias may
exist, Management is to investigate and report
to the Committee the causes of that bias, as
well as to develop recommendations to address
any bias. The Committee reviewed pay parity
data in 2011/12 and Management is currently
investigating whether unconscious bias exists.
As women are over-represented in some areas
of the Company’s workforce (eg, administration)
and under-represented in other areas of the
work-force (eg, operational), the data requires
careful analysis.
(cid:129) Management is required to report to the
Nomination and Remuneration Committee not
less than annually participation rates for women
compared to men in externally provided
training programs. A particular area of focus is
management training programs (eg, Australian
Institute of Management and equivalent) as it is
through these training programs that the pool
of future senior managers will be developed.
Management has reported to the Committee on
training participation rates in 2011/12.
38
Other diversity initiatives pursued by the
Company include:
(cid:129) The Company is a participant in the
indigenous employment program overseen by
the Commonwealth Department of Education,
Employment and Workplace Relations,
as well as a participant in the Australian
Employment Covenant which is also
designed to secure indigenous employment
opportunities. In support of these programs,
the Company has an Indigenous Recognition
Policy which outlines the Company’s
commitment to build relationships with local
and land-connected indigenous persons to
achieve mutually beneficial outcomes.
(cid:129) The Company’s Code of Conduct Employee
Agreement was updated in 2011 specifically to
address the issues of equal opportunity and
diversity. This is consistent with the Company’s
existing Equal Opportunity Employment Policy
and Workplace Behaviour Employee Agreement
which outline the Company’s commitment
to providing an equal opportunity and merit
based workplace free from discrimination,
including specifically discrimination in relation to
employment, training, remuneration, promotion
or advancement.
Environmental Committee
The Board has an Environmental Committee,
which operates under a Charter approved by the
Board. The role of the Committee is to monitor
environmental incidents, exposures and compliance
with environmental regulations.
The members of the Environmental Committee
during the year were:
Mr Johnson (Chairman)
Mr Winser*
Mr Grubb
Mr Stevenson*
* Mr Winser retired as Managing Director on 25 May 2012 and was
replaced on the Environmental Committee by Mr Stevenson. The Board
considers it appropriate that the Managing Director be a member of
the Environmental Committee.
The Company Secretary acts as Secretary to the
Environmental Committee.
The Environmental Committee is responsible for:
(cid:129) reviewing and recommending, as
appropriate, changes to the Company’s
environmental policies;
(cid:129) ensuring the adequacy of environmental
procedures and controls implemented
by Management;
(cid:129) reporting to the Board on Company
compliance with environmental procedures
and controls;
(cid:129) reviewing the adequacy and effectiveness of
resources devoted to informing employees
of their environmental obligations and to
training employees to operate within Company
guidelines and legal requirements;
(cid:129) monitoring conformance by the Company
with mandatory environmental reporting and
improvement regimes;
(cid:129) regular monitoring of licence requirements,
with performance against licence conditions
reported to the various State regulators on
a regular basis; and
(cid:129) reviewing any environmental incidents that
have occurred and monitoring actions taken
or to be taken.
To enable it to meet its responsibilities, the
Committee has established a regular internal
reporting process.
The Environmental Committee met four times during
the year. Messrs Johnson and Grubb attended all four
meetings of the Committee. Mr Winser attended
three meetings of the Committee, and Mr Stevenson
attended one meeting.
Financial Reporting
Consistent with the ASX Principle 4 and
Recommendation 7.3, the Company’s financial report
preparation and approval process for the financial
year ended 30 June 2012, involved both the
Managing Director and Chief Financial Officer
certifying that the Company’s financial reports present
a true and fair view, in all material respects, of
the Company’s financial condition and operational
results and are in accordance with relevant
accounting standards.
In accordance with Recommendation 7.2, this sign
off also includes assurances as to the Company’s risk
management processes and internal compliance and
control procedures.
39
Audit Governance and Independence
As part of the Company’s commitment to
safeguarding integrity in financial reporting, the
Company has implemented a review process to
monitor the independence and competence of
the Company’s external Auditor.
The Company’s current external Auditors are Ernst
& Young. The effectiveness, performance and
independence of the external Auditor is reviewed by
the Audit Committee at least annually. The format
of that review includes discussing the performance
of the external Auditors with Management while the
Auditors are not present. The Audit Committee also
met with senior members of Ernst & Young to review
the performance of the lead audit partner.
The management systems in place as part of the risk
management controls include:
(cid:129) Capital expenditure commitments above set
limits obtain prior Board approval.
(cid:129) Financial exposures are controlled and the use
of derivatives is limited to interest rate swaps.
(cid:129) Occupational health and safety standards
and management systems are monitored and
reviewed to achieve high standards of
performance and compliance with regulations.
(cid:129) Business transactions are properly authorised
and executed.
(cid:129) A comprehensive annual insurance programme,
including external risk management survey and
action plans.
If it becomes necessary to replace the external
Auditor for performance or independence reasons,
the Audit Committee will then formalise a process
for the selection and appointment of new Auditors.
(cid:129) Annual budgeting and monthly reporting
systems for all business units, which enable the
monitoring of progress against performance
targets and the evaluation of trends.
Ernst & Young has a policy for the rotation of the lead
audit partner for their clients. Under that policy, the
lead audit partner and the audit review partner for the
Company have been rotated following completion of
the audit for the year ended 30 June 2012.
The Audit Committee’s Charter requires the provision
of non-audit services to the Company or its business
units by the external audit firm to be approved by
the Audit Committee.
In accordance with sections 249V and 250T of the
Corporations Act 2001 (Cth), Ernst & Young
attend and are available to answer questions at the
Company’s Annual General Meetings.
Risk Management
Consistent with ASX Principle 7, the Company is
committed to the identification, monitoring and
management of material risks in the business.
Those material risks include a full spectrum of financial,
strategic, compliance, and operational risks.
While not wishing to stifle the entrepreneurial
endeavours of Senior Executives, the Board takes a
relatively conservative approach to risk.
The Board requires that Management have in
place a system to identify, monitor, and manage the
material business risks faced by the Company.
40
(cid:129) Appropriate due diligence procedures for
acquisitions and divestments.
(cid:129) Disaster management systems for key IT systems
and recovery plans.
(cid:129) Documentation and regular review of business
wide risk identification and mitigation strategies.
(cid:129) Review by the Audit Committee in conjunction
with Management of all findings and recommen-
dations in the Closing Report provided by the
Company’s external auditors, Ernst & Young, as
part of the full year audit and also half year review
of the Company’s accounts.
The Company has a Risk Management Policy
consistent with ASX Principle 7. The Company also
has a number of policies and internal documents
that are central to the management of risk. Those
documents include:
(cid:129) The Risk Review Statement that is designed to
comprehensively document and rate all
material business risks to which the Company
is exposed, as well as setting out the actions
being undertaken by Management to mitigate
those risks.
(cid:129) The Company’s Levels of Authority Statement
which sets out the different levels of authority
delegated to the Managing Director, General
Managers, and Branch Managers in relation to
financial and business matters such as capital
expenditure, acquisitions, entering into contracts,
treasury issues, and employment related issues.
(cid:129) The Company’s Administration Manual
which sets out the financial and administrative
protocols for all staff.
(cid:129) The Company’s HS&E Manual and supporting
documented policies and procedures which
are designed to minimise the risk of harm to
employees engaged in operational tasks.
(cid:129) The Company’s Quality Management System
coupled with its extensive documented operating
and compliance focused policies and procedures
which are designed to ensure that the Company’s
operations are conducted using industry best
practice and in accordance with the numerous
legislative regimes that apply.
(cid:129) The Company’s Disaster Recovery Manual which
sets out all of the protocols associated with the
Company’s externally hosted Disaster Recovery
Plan (DRP). The DRP solution was reviewed
by Ernst & Young as part of its full year audit
for 2011/12.
Management is responsible to the Board for the
Group’s system of internal control and risk
management. The Audit Committee through its
Charter assists the Board in monitoring this role.
The Risk Review Statement is designed to be a ‘living’
document and is regularly updated to address the
emergence of new risks and changes to the priority
of existing material business risks. The Risk Review
Statement is provided to both the Audit Committee
and the Board on a quarterly basis. In addition, a
summary of the status of key risk items identified in
the Risk Review Statement is provided to the Board
at its monthly meetings.
The Managing Director has reported to the Board
that Management believes that the Company
has in place an effective system of oversight and
management and internal controls. The Managing
Director and the Chief Financial Officer also certify
on an annual basis that the Company has a sound
system of risk management and internal control, and
that the system is operating effectively in all material
respects in relation to financial risks.
Continuous Disclosure
The Company understands and respects that timely
disclosure of price sensitive information is central
to the efficient operation of the Australian Securities
Exchange securities market and has adopted a
comprehensive policy covering announcements to
the Australian Securities Exchange.
The Company Secretary has the responsibility for
overseeing and co-ordinating disclosure of
information to the Australian Securities Exchange.
The Company Secretary also liaises with the
Managing Director, Chairman and Chief Financial
Officer in relation to continuous disclosure matters.
The Chairman, or in his absence the Deputy
Chairman, approves all price sensitive releases to
the Australian Securities Exchange prior to release.
The Company posts all price sensitive releases to
the Australian Securities Exchange and media on the
Company’s website.
The Company’s Continuous Disclosure Policy is
consistent with ASX Principle 5.
41
Conflict of Interest
In accordance with the Corporations Act 2001 (Cth)
and the Company’s Constitution, Directors must
keep the Board advised, on an ongoing basis, of any
interest that could potentially conflict with those
of the Company. Where the Board believes that a
significant conflict exists, the Director concerned
does not receive the relevant Board papers and is not
present at the meeting whilst the item is considered.
Details of Director related entity transactions with
the Company and consolidated entity are set out in
Note 26.
Director Dealing in Company Shares
The Constitution permits Directors and Officers to
acquire shares in the Company, subject to very
limited exceptions contemplated in the Listing Rules.
Company policy prohibits Directors, Associates
and Officers from dealing in Company shares or
Executive options:
(cid:129) In the period of 60 days prior to the release of
the Company’s half year and annual results to
the Australian Securities Exchange.
(cid:129) Whilst in possession of price sensitive information.
In accordance with the provisions of the Corporations
Act 2001 and the Listing Rules of the Australian
Securities Exchange, the Company advises the
Exchange of any transactions conducted by Directors
in shares in the Company.
International Quality Standard ISO 9001
The consolidated entity strives to ensure that its
services are of the highest standard. Towards this
aim, it has achieved ISO 9001 accreditation for
its core business segment and is well advanced in
the implementation of Work Health & Safety systems
to meet the AS4801 Standard.
Ethical Standards
In accordance with Principle 3, the Board has adopted
the Code of Conduct produced by the Australian
Institute of Company Directors to guide the Directors
and promote high ethical and professional standards.
42
The Board acknowledges the need for continued
maintenance of the highest standards of Corporate
Governance practice and the ethical conduct by all
Directors and employees of the Company and has
approved the following policies:
Code of Conduct
The Company has a Code of Conduct for its
employees to act within the law, avoid conflicts of
interest, protect Company property, keep information
confidential and act honestly and ethically in all
business activities. The Code of Conduct is
complemented by a Whistle Blower Policy which
provides protection to employees who report
instances of malpractice, impropriety, misconduct, or
other unethical or illegal conduct involving the
Company or its employees.
Trade Practices
The Company has a Trade Practices Policy advising
employees on the legislative prohibitions on price
fixing and anti-competitive arrangements, as well as
other prohibited conduct.
Other Policies
Amongst other policies endorsed by the Board in
previous years are the Work Health & Safety,
Environment Protection, Electronic Communications
Policy and the Transport Law Compliance Policy.
The Group’s ethical standards are consistent with the
requirements of ASX Principle 3.
Communication with Shareholders
The Company places considerable importance on
communication with Shareholders.
The Company’s communication strategy promotes
the communication of information to Shareholders
through the distribution of the Annual Report,
announcements through the Australian Securities
Exchange and the media regarding changes to the
business, the Chairman’s and Managing Director’s
addresses at the Annual General Meeting, and actively
engaging the investment community.
K&S Corporation Limited posts all price sensitive
reports, Australian Securities Exchange releases and
media releases on the Company’s website.
The communication strategy is consistent with
ASX Principle 6. The Company’s Communication
Policy is available on the Company’s website:
www.ksgroup.com.au
ABN 67 007 561 837
Contents
Statement of Comprehensive Income 44
Statement of Financial Position 45
Statement of Changes in Equity 46
Statement of Cash Flows 47
Notes to the Financial Statements 48
Directors’ Declaration 101
Auditor’s Independence Declaration 102
Independent Auditor’s Report 103
Information on Shareholdings 105
43
Consolidated
2012 2011
Note $’000 $’000
Operating revenue 5(a) 554,803 523,364
Cost of goods sold (62,477)
(57,765)
Gross profit 492,326 465,599
Other income 5(b) 5,187 5,218
(157,475)
Contractor expenses (163,638)
Employee benefits expenses 5(e) (158,682)
(147,875)
Fleet expenses (94,269)
(90,983)
Depreciation and amortisation expense 5(d) (24,405) (25,089)
Finance costs 5 (c) (7,142)
(8,404)
Other expenses (26,077) (20,021)
Share of profits of associates 13 106 198
Profit before income tax 23,406 21,168
Income tax (expense)/benefit 6 (6,959) (6,340)
Profit after income tax 16,447 14,828
Other comprehensive income
Foreign currency translation 171 (588)
Other comprehensive income for the period, net of tax 171 (588)
Total comprehensive income for the period 16,618 14,240
Earnings per share (cents per share) 7
(cid:129) basic for profit for the year attributable to
ordinary equity holders of the parent 18.7 18.3
(cid:129) diluted for profit for the year attributable
to ordinary equity holders of the parent 18.7 18.3
Dividends per share (cents per share) 8 11.0 10.0
The above Statement of Comprehensive Income should be read
in conjunction with the accompanying notes.
44
Consolidated
2012 2011
Note $’000 $’000
ASSETS
Current assets
Cash and cash equivalents 9 21,038 9,747
Trade and other receivables 10 73,189 67,496
Inventories 11 2,927 2,981
Prepayments 5,192 5,277
Total current assets 102,346 85,501
Non-current assets
Other receivables 10 1,297 2,034
Investments in associates 13 158 199
Property, plant & equipment 14 219,448 221,968
Intangibles 15 71,108 71,569
Deferred tax assets 6 6,998 6,731
Total non-current assets 299,009 302,501
TOTAL ASSETS 401,355 388,002
LIABILITIES
Current liabilities
Trade and other payables 17 49,214 46,457
Interest bearing loans and borrowings 18 16,693 15,070
Income tax payable 1,700 894
Provisions 19 14,480 13,353
Derivatives - 712
Total current liabilities 82,087 76,486
Non-current liabilities
Other payables 17 6,358 4,929
Interest bearing loans and borrowings 18 66,345 71,331
Deferred tax liabilities 6 18,492 18,941
Provisions 19 3,139 2,709
Total non-current liabilities 94,334 97,910
TOTAL LIABILITIES 176,421 174,396
NET ASSETS 224,934 213,606
EQUITY
Contributed equity 20 97,707 94,276
Reserves 24,678 24,507
Retained earnings 102,549 94,823
TOTAL EQUITY 224,934 213,606
The above Statement of Financial Position should be read
in conjunction with the accompanying notes.
45
Asset Forex
Issued Retained Revaluation Translation Total
Capital Earnings Reserves Reserves Equity
$’000 $’000 $’000 $’000 $’000
CONSOLIDATED
At 1 July 2011 94,276 94,823 26,270 (1,763) 213,606
Profit for the year - 16,447 - - 16,447
Other comprehensive income - - - 171 171
Total comprehensive income
for the year - 16,447 - 171 16,618
Transactions with owners in
their capacity as owners:
Issue of share capital 3,431 - - - 3,431
Dividends paid - (8,721) - - (8,721)
At 30 June 2012 97,707 102,549 26,270 (1,592) 224,934
At 1 July 2010 64,528 89,446 26,270 (1,175) 179,069
Profit for the year - 14,828 - - 14,828
Other comprehensive income - - - (588) (588)
Total comprehensive income
for the year - 14,828 - (588) 14,240
Transactions with owners in
their capacity as owners:
Issue of share capital 29,748 - - - 29,748
Dividends paid - (9,451) - - (9,451)
At 30 June 2011 94,276 94,823 26,270 (1,763) 213,606
The above Statement of Changes in
Equity should be read in conjunction
with the accompanying notes.
46
Consolidated
2012 2011
Note $’000 $’000
CASH FLOWS FROM OPERATING ACTIVITIES
Cash receipts from customers 611,338 578,279
Cash payments to suppliers and employees (538,494) (513,036)
Interest received 242 89
Borrowing costs paid (7,142) (8,404)
Income taxes paid (6,871) (6,819)
Net goods and services tax paid (20,134) (15,979)
Net cash provided by/(used in) operating activities 9 38,939 34,130
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of non-current assets 4,889 3,907
Payments for property plant & equipment (5,749) (13,325)
Acquisition of business - (39,185)
Net cash provided by/(used in) investing activities (860) (48,603)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from share issue 325 25,870
77,000
Proceeds from borrowings -
Repayments of borrowings (5,486) (62,000)
(20,256)
Lease and hire purchase liability repayments (16,029)
(8,403)
Dividends paid, net of dividend reinvestment plan (5,615)
Net cash provided by/(used in) financing activities (26,805)
12,211
(2,262)
Net increase/(decrease) in cash held 11,274
Cash at the beginning of the financial year 9,747
12,042
Effects of exchange rate variances on cash 17 (33)
Cash at the end of the financial year 9 21,038
9,747
The above Statement of Cash Flows should be read
in conjunction with the accompanying notes.
47
1 Corporate Information
The financial report of K&S Corporation
Limited for the year ended 30 June 2012 was
authorised for issue in accordance with a
resolution of Directors on 21 August 2012.
K&S Corporation Limited is a company
limited by shares incorporated in Australia
whose shares are publicly traded on the
Australian Stock Exchange. The nature of
the operation and principal activities of the
Group are described in Note 4.
2 Summary of Significant
Accounting Policies
a) Basis of preparation
The financial report is a general purpose
financial report for a for-profit entity, which
has been prepared in accordance with the
requirements of the Corporation Act 2001 and
Australian Accounting Standards. The financial
report has also been prepared on a historical
cost basis, except for land and buildings which
have been measured at fair value.
Reference
Title
The carrying values of cash flow hedges are also stated at
fair value with the portion of the gain or loss on the
hedging instrument that is determined to be an effective
hedge recognised directly in equity and the ineffective
portion recognised in profit or loss.
The financial report is presented in Australian dollars and all
values are rounded to the nearest thousand dollars ($’000)
unless otherwise stated under the option available to the
Company under ASIC Class Order 98/0100. The Company
is an entity to which the class order applies.
b) Compliance with IFRS
The financial report complies with Australian Accounting
Standards and International Financial Reporting
Standards (IFRS) as issued by the International Accounting
Standards Board.
c) New Accounting Standards and Interpretations
i)
Changes in accounting policy and disclosures
The accounting policies adopted are consistent with those
of the previous financial year except as follows:
The Group has adopted the following new and amended
Australian Accounting Standards and AASB Interpretations
as of 1 July 2011.
Application
date of
standard
Application
date for
Group
1 Jan 2011
1 July 2011
AASB 124
(Revised)
The revised AASB 124 Related Party Disclosures (December 2009) simplifies
the definition of a related party, clarifying its intended meaning and eliminating
inconsistencies from the definition, including:
a) The definition now identifies a subsidiary and an associate with the same in-
vestor as related parties of each other.
b) Entities significantly influenced by one person and entities significantly influ-
enced by a close member of the family of that person are no longer related
parties of each other.
c) The definition now identifies that, whenever a person or entity has both joint
control over a second entity and joint control or significant influence over a
third party, the second and third entities are related to each other.
(cid:129) A partial exemption is also provided from the disclosure requirements
for government-related entities. Entities that are related by virtue of
being controlled by the same government can provide reduced related
party disclosures.
AASB 2009-12
Amendments to Australian Accounting Standards
[AASBs 5, 8, 108, 110, 112, 119, 133, 137, 139, 1023 & 1031 and Interpretations
2, 4, 16, 1039 & 1052]
1 Jan 2011
1 July 2011
Makes numerous editorial changes to a range of Australian Accounting Standards
and Interpretations.
In particular, it amends AASB 8 Operating Segments to require an entity to
exercise judgement in assessing whether a government and entities known to be
under the control of that government are considered a single customer for
the purposes of certain operating segment disclosures. It also makes numerous
editorial amendments to a range of Australian Accounting Standards and
Interpretations, including amendments to reflect changes made to the text of
IFRS by the IASB.
48
Reference
Title
Application
date of
standard
Application
date for
Group
AASB 2010-4
Amendments to Australian Accounting Standards arising from the Annual Improvements Project
1 Jan 2011
1 July 2011
[AASB 1, AASB 7, AASB 101, AASB 134 and Interpretation 13]
Emphasises the interaction between quantitative and qualitative AASB 7 disclosures and the nature
and extent of risks associated with financial instruments.
Clarifies that an entity will present an analysis of other comprehensive income for each component
of equity, either in the statement of changes in equity or in the notes to the financial statements.
Provides guidance to illustrate how to apply disclosure principles in AASB 134 for significant events
and transactions.
Clarifies that when the fair value of award credits is measured based on the value of the awards
for which they could be redeemed, the amount of discounts or incentives otherwise granted to
customers not participating in the award credit scheme, is to be taken into account.
AASB 2010-5
Amendments to Australian Accounting Standards
1 Jan 2011
1 July 2011
[AASB 1, 3, 4, 5, 101, 107, 112, 118, 119, 121, 132, 133, 134, 137, 139, 140, 1023 & 1038 and
Interpretations 112, 115, 127, 132 & 1042]
This Standard makes numerous editorial amendments to a range of Australian Accounting
Standards and Interpretations, including amendments to reflect changes made to the text of
IFRS by the IASB.
These amendments have no major impact on the requirements of the amended pronouncements.
AASB 1054
Australian Additional Disclosures
1 July 2011
1 July 2011
This standard is as a consequence of phase 1 of the joint Trans-Tasman Convergence project of
the AASB and FRSB.
This standard, with AASB 2011-1 relocates all Australian specific disclosures from other standards
to one place and revises disclosures in the following areas:
a) Compliance with Australian Accounting Standards
b) The statutory basis or reporting framework for financial statements
c) Whether the entity is a for-profit or not-for-profit entity
d) Whether the financial statements are general purpose or special purpose
e) Audit fees
f) Imputation credits
AASB 2010-6
Amendments to Australian Accounting Standards – Disclosures on Transfers of Financial Assets
[AASB 1 & AASB 7]
1 July 2011
1 July 2011
The amendments increase the disclosure requirements for transactions involving transfers of
financial assets but which are not derecognised and introduce new disclosures for assets that are
derecognised but the entity continues to have a continuing exposure to the asset after the sale.
AASB 2010-9
Amendments to Australian Accounting Standards – Severe Hyperinflation and Removal of Fixed
Dates for First-time adopters [AASB 1]
1 July 2011
1 July 2011
In respect of the removal of fixed dates, the amendments provide relief for first-time adopters
of Australian Accounting Standards from having to reconstruct transactions that occurred before
their date of transition to Australian Accounting Standards. The amendments in respect of
severe hyperinflation provide guidance for entities emerging from severe hyperinflation either to
resume presenting Australian Accounting Standards financial statements or to present Australian
Accounting Standards financial statements for the first time.
49
Application
date of
standard
1 Jan 2012
Impact on Group
financial report
The amendments are
not expected to have any
impact on the Group’s
financial report.
Application
date for
Group
1 July 2012
1 Jan 2013
The amendments are
not expected to have any
impact on the Group’s
financial report.
1 July 2013
ii) Accounting standards and interpretations issued
but not yet effective
Australian Accounting Standards and Interpretations that
have recently been issued or amended but are not yet
effective and have not been adopted by the Group for the
annual reporting period ending 30 June 2012, are outlined
in the table on the following pages:
Reference
Title
Summary
2010-8
Amendments to Australian
Accounting Standards –
Deferred Tax: Recovery
of Underlying Assets
[AASB 112]
AASB 10
Consolidated Financial
Statements
These amendments address the
determination of deferred tax
on investment property measured at
fair value and introduce a rebuttable
presumption that deferred tax on
investment property measured at
fair value should be determined on
the basis that the carrying amount
will be recoverable through sale.
The amendments also incorporate
SIC-21 Income Taxes – Recovery of
Revalued Non-Depreciable Assets
into AASB 112.
AASB 10 establishes a new control
model that applies to all entities.
It replaces parts of AASB 127
Consolidated and Separate Financial
Statements dealing with the
accounting for consolidated financial
statements and UIG-112
Consolidation – Special Purpose Entities.
The new control model broadens
the situations when an entity is
considered to be controlled by
another entity and includes new
guidance for applying the model to
specific situations, including when
acting as a manager may give
control, the impact of potential
voting rights and when holding less
than a majority voting rights may
give control.
a) Consequential amendments were
also made to other standards via
AASB 2011-7.
50
Reference
Title
Summary
AASB 11
Joint Arrangements
AASB 2011-9
Amendments to Australian
Accounting Standards –
Presentation of Other
Comprehensive Income
[AASB 1, 5, 7, 101, 112,
120, 121, 132, 133, 134,
1039 & 1049]
AASB 12
Disclosure of Interests in
Other Entities
AASB 13
(continued on
next page)
Fair Value Measurement
AASB 11 replaces AASB 131 Interests
in Joint Ventures and UIG-113 Jointly-
controlled Entities – Non-monetary
Contributions by Ventures.
AASB 11 uses the principle of control
in AASB 10 to define joint control,
and therefore the determination of
whether joint control exists may
change. In addition it removes the
option to account for jointly
controlled entities (JCEs) using
proportionate consolidation. Instead,
accounting for a joint arrangement is
dependent on the nature of the
rights and obligations arising from
the arrangement. Joint operations
that give the venturers a right to the
underlying assets and obligations
themselves is accounted for by
recognising the share of those assets
and obligations. Joint ventures that
give the venturers a right to the net
assets is accounted for using the
equity method.
Consequential amendments were
also made to other standards via
AASB 2011-7 and amendments to
AASB 128.
This Standard requires entities to
group items presented in other
comprehensive income on the basis
of whether they might be reclassified
subsequently to profit or loss and
those that will not.
AASB 12 includes all disclosures
relating to an entity’s interests in
subsidiaries, joint arrangements,
associates and structures entities.
New disclosures have been
introduced about the judgments
made by management to determine
whether control exists, and to require
summarised information about
joint arrangements, associates and
structured entities and subsidiaries
with non-controlling interests.
AASB 13 establishes a single source
of guidance for determining the fair
value of assets and liabilities.
AASB 13 does not change when
an entity is required to use fair
value, but rather, provides guidance
on how to determine fair value when
fair value is required or permitted.
Application of this definition may
result in different fair values being
determined for the relevant assets.
Application
date of
standard
1 Jan 2013
Impact on Group
financial report
The amendments are
not expected to have any
impact on the Group’s
financial report.
Application
date for
Group
1 July 2013
1 Jul 2012
The amendments are
not expected to have any
impact on the Group’s
financial report.
1 July 2012
1 Jan 2013
The amendments are
not expected to have any
impact on the Group’s
financial report.
1 July 2013
1 Jan 2013
The amendments are
not expected to have any
impact on the Group’s
financial report.
1 July 2013
51
Application
date of
standard
1 Jan 2013
Impact on Group
financial report
The amendments are
not expected to have any
impact on the Group’s
financial report.
Application
date for
Group
1 July 2013
1 Jan 2013
The amendments are
not expected to have any
impact on the Group’s
financial report.
1 July 2013
1 July 2013
The amendments are
not expected to have any
impact on the Group’s
financial report.
1 July 2013
1 July 2013
The amendments are
not expected to have any
impact on the Group’s
financial report.
1 July 2013
Reference
Title
Summary
AASB 13
(continued)
Fair Value Measurement
AASB 119
Employee Benefits
AASB 2011-4
Amendments to Australian
Accounting Standards to
Remove Individual Key
Management Personnel
Disclosure Requirements
[AASB 124]
AASB 1053
(continued on
next page)
Application of Tiers of
Australian Accounting
Standards
AASB 13 also expands the disclosure
requirements for all assets or liabilities
carried at fair value. This includes
information about the assumptions
made and the qualitative impact of
those assumptions on the fair value
determined.
Consequential amendments were
also made to other standards via
AASB 2011-8.
The main change introduced by this
standard is to revise the accounting
for defined benefit plans.
The amendment removes the options
for accounting for the liability, and
requires that the liabilities arising
from such plans is recognised in full
with actuarial gains and losses being
recognised in other comprehensive
income. It also revised the method of
calculating the return on plan assets.
The revised standard changes the
definition of short-term employee
benefits. The distinction between
short-term and other long-term
employee benefits is now based on
whether the benefits are expected to
be settled wholly within 12 months
after the reporting date.
This Amendment deletes from
AASB 124 individual key management
personnel disclosure requirements
for disclosing entities that are not
companies.
This Standard establishes a differential
financial reporting framework
consisting of two Tiers of reporting
requirements for preparing general
purpose financial statements:
a) Tier 1: Australian Accounting
Standards
b) Tier 2: Australian Accounting
Standards – Reduced Disclosure
Requirements
Tier 2 comprises the recognition,
measurement and presentation
requirements of Tier 1 and
substantially reduced disclosures
corresponding to those requirements.
52
Reference
Title
Summary
AASB 1053
(continued)
Application of Tiers of
Australian Accounting
Standards
AASB 2012-2
Amendments to Australian
Accounting Standards –
Disclosures – Offsetting
Financial Assets and
Financial Liabilities
The following entities apply Tier 1
requirements in preparing general
purpose financial statements:
a) For-profit entities in the private
sector that have public
accountability (as defined in this
Standard)
b) The Australian Government
and State, Territory and Local
Governments
The following entities apply either
Tier 2 or Tier 1 requirements in
preparing general purpose financial
statements:
a) For-profit private sector entities
that do not have public
accountability
b) All not-for-profit private sector
entities
c) Public sector entities other than
the Australian Government and
State, Territory and Local
Governments.
Consequential amendments to
other standards to implement the
regime were introduced by
AASB 2010-2, 2011-2, 2011-6,
2011-11 and 2012-1.
AASB 2012-2 principally amends
AASB 7 Financial Instruments:
Disclosures to require disclosure of
information that will enable users of
an entity’s financial statements to
evaluate the effect or potential effect
of netting arrangements, including
rights of set-off associated with the
entity’s recognised financial assets
and recognised financial liabilities, on
the entity’s financial position.
Application
date of
standard
1 July 2013
Impact on Group
financial report
The amendments are
not expected to have any
impact on the Group’s
financial report.
Application
date for
Group
1 July 2013
1 Jan 2013
The Group has not yet
determined the extent
of the impact of the
amendments, if any.
1 July 2013
AASB 2012-5
Amendments to Australian
Accounting Standards
arising from Annual
Improvements 2009–2011
Cycle
AASB 2012-5 makes amendments
resulting from the 2009-2011 Annual
Improvements Cycle. The Standard
addresses a range of improvements,
including the following:
1 Jan 2013
The Group has not yet
determined the extent
of the impact of the
amendments, if any.
1 July 2013
AASB 2012-3
Amendments to Australian
Accounting Standards –
Offsetting Financial Assets
and Financial Liabilities
(cid:129) repeat application of AASB 1 is
permitted (AASB 1); and
(cid:129) clarification of the comparative
information requirements when
an entity provides a third balance
sheet (AASB 101 Presentation of
Financial Statements).
AASB 2012-3 adds application
guidance to AASB 132 Financial
Instruments: Presentation to address
inconsistencies identified in applying
some of the offsetting criteria of
AASB 132, including clarifying the
meaning of “currently has a legally
enforceable right of set-off” and that
some gross settlement systems may
be considered equivalent to net
settlement.
1 Jan 2014
The Group has not yet
determined the extent
of the impact of the
amendments, if any.
1 July 2014
53
Application
date of
standard
1 Jan 2013
Impact on Group
financial report
The Group has not yet
determined the extent
of the impact of the
amendments, if any.
Application
date for
Group
1 July 2013
1 Jan 2015
The Group has not yet
determined the extent
of the impact of the
amendments, if any.
1 July 2015
Reference
Title
Summary
This standard sets out amendments to
International Financial Reporting
Standards (IFRSs) and the related
bases for conclusions and guidance
made during the International Ac-
counting Standards Board’s Annual
Improvements process. These amend-
ments have not yet been adopted by
the AASB.
The following items are addressed by
this standard:
IFRS 1 First-time Adoption of
International Financial Reporting
Standards
(cid:129) Repeated application of IFRS 1
(cid:129) Borrowing costs
IAS 1 Presentation of Financial
Statements
(cid:129) Clarification of the requirements
for comparative information
IAS 16 Property, Plant and Equipment
(cid:129) Classification of servicing
equipment
IAS 32 Financial Instruments:
Presentation
(cid:129) Tax effect of distribution to
holders of equity instruments
IAS 34 Interim Financial Reporting
Interim financial reporting and
segment information for total assets
and liabilities
AASB 9 includes requirements for
the classification and measurement
of financial assets. It was further
amended by AASB 2010-7 to reflect
amendments to the accounting for
financial liabilities.
These requirements improve and
simplify the approach for
classification and measurement of
financial assets compared with the
requirements of AASB 139. The main
changes are described below.
a) Financial assets that are debt
instruments will be classified
based on (1) the objective of
the entity’s business model for
managing the financial assets;
(2) the characteristics of the
contractual cash flows.
Annual
Improvements
2009–2011
Cycle
Annual Improvements to
IFRSs 2009–2011 Cycle
AASB 9
(continued on
next page)
Financial Instruments
54
Application
date of
standard
1 Jan 2015
Impact on Group
financial report
The Group has not yet
determined the extent
of the impact of the
amendments, if any.
Application
date for
Group
1 July 2015
Reference
Title
Summary
AASB 9
(continued)
Financial Instruments
b) Allows an irrevocable election on
initial recognition to present
gains and losses on investments
in equity instruments that
are not held for trading in other
comprehensive income. Dividends
in respect of these investments
that are a return on investment
can be recognised in profit or
loss and there is no impairment
or recycling on disposal of the
instrument.
c) Financial assets can be designated
and measured at fair value
through profit or loss at initial
recognition if doing so eliminates
or significantly reduces a measure-
ment or recognition inconsistency
that would arise from measuring
assets or liabilities, or recognising
the gains and losses on them, on
different bases.
d) Where the fair value option is used
for financial liabilities the change
in fair value is to be accounted for
as follows:
► The change attributable
to changes in credit risk
are presented in other
comprehensive income (OCI)
► The remaining change is
presented in profit or loss
If this approach creates or enlarges
an accounting mismatch in the profit
or loss, the effect of the changes in
credit risk are also presented in profit
or loss.
Consequential amendments were
also made to other standards as
a result of AASB 9, introduced by
AASB 2009-11 and superseded by
AASB 2010-7 and 2010-10.
d) Basis of consolidation
The consolidated financial statements comprise the financial
statements of K&S Corporation Limited and its subsidiaries
(“the Group”) as at 30 June each year.
The financial statements of subsidiaries are prepared for
the same reporting period as the parent company,
using consistent accounting policies. In preparing the
consolidated financial statements, all intercompany
balances and transactions, income and expenses and profit
and losses resulting from inter-group transactions, have
been eliminated in full.
Subsidiaries are fully consolidated from the date on which
control is transferred to the Group and cease to be
consolidated from the date on which control is transferred
out of the Group.
Investments in subsidiaries by K&S Corporation Limited are
accounted for at cost in the separate financial statements of
the parent less any impairment charges. Dividends received
from subsidiaries are recorded as a component of other
revenues in the separate statement of comprehensive
income of the parent entity, and do not impact the recorded
cost of the investment. Upon receipt of the dividend
payments from subsidiaries, the parent will assess whether
any indicators of impairment of the carrying value of the
investment in the subsidiary exists. Where such indicators
exist, to the extent that the carrying value of the investment
exceeds its recoverable amount, an impairment loss
is recognised.
55
economic conditions, the Group’s operating or accounting
policies and other pertinent conditions as the acquisition
date. This includes the separation of embedded derivatives
in host contracts by the acquiree.
If the business combination is achieved in stages, the
acquisition date fair value of the acquirer’s previously held
equity interest in the acquiree is remeasured at fair value
as at the acquisition date through profit or loss.
Any contingent consideration to be transferred by the
acquirer will be recognised at fair value at the acquisition
date. Subsequent changes to fair value of the contingent
consideration which is deemed to be an asset or liability
will be recognised in accordance with AASB 139 either in
profit or loss in other comprehensive income. If the
contingent consideration is classified as equity, it shall not
be remeasured.
f) Operating segments
An operating segment is a component of an entity that
engages in business activities from which it may earn
revenues and incur expenses (including revenues and
expenses relating to transactions with other components
of the same entity), whose operating results are regularly
reviewed by the entity’s chief operating decision maker to
make decisions about resources to be allocated to the
segment and assess its performance and for which discrete
financial information is available. This includes start up
operations which are yet to earn revenues. Management
will also consider other factors in determining operating
segments such as the existence of a line manager and
the level of segment information presented to the board
of directors.
Operating segments have been identified based on the
information provided to the chief operating decision makers
– being the executive management team.
The Group aggregates two or more operating segments
when they have similar economic characteristics, and the
segments are similar in each of the following aspects:
(cid:129)
(cid:129)
Nature of the product or services;
Type or class of customer for the product or
services; and
(cid:129) Methods used to distribute the products or
provide services.
Information about other business activities and operating
segments that are below the quantitative criteria are
combined and disclosed in a separate category for “all other
segments”.
g) Revenue
Revenue is recognised to the extent that it is probable
that the economic benefits will flow to the Group and the
revenue can be reliably measured. The following specific
recognition criteria must also be met before revenue
is recognised:
The acquisition of subsidiaries is accounted for using the
acquisition method of accounting. The acquisition method
of accounting involves recognising at acquisition date,
separately from goodwill, the identifiable assets acquired,
the liabilities assumed and any non-controlling interest
in the acquiree. The identifiable assets and the liabilities
assumed are measured at their acquisition date fair values.
The difference between the above items and the fair value
of the consideration, (including the fair value of any
pre-existing investment in the acquiree), is goodwill or a
discount on acquisition. A change in the ownership interest
of a subsidiary that does not result in a loss of control, is
accounted for as an equity transaction.
Non-controlling interests are allocated their share of net
profit after tax in the Statement of Comprehensive Income
and are presented within equity in the Statement of
Financial Position, separately from the equity of the owners
of the parent.
Losses are attributed to the non-controlling interest even if
that results in a deficit balance.
If the Group loses control over a subsidiary, it:
(cid:129)
Derecognises the assets (including goodwill) and
liabilities of the subsidiary.
Derecognises the carrying amount of any
non-controlling interest.
Derecognises the cumulative translation differences,
recorded in equity.
Recognises the fair value of consideration received.
Recognises the fair value of any investment retained.
Recognises any surplus or deficit in profit or loss.
Reclassifies the parent’s share of components
previously recognised in other comprehensive income
to profit or loss.
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
e) Business combinations
Business combinations are accounted for using the
acquisition method. The consideration transferred in a
business combination shall be measured at fair value,
which shall be calculated as the sum of the acquisition date
fair values of the assets transferred to the acquirer, the
liabilities incurred by the acquirer to former owners of the
acquiree and the equity issued by the acquirer, and the
amount of any non-controlling interest in the acquiree.
For each business combination, the acquirer measures the
non-controlling interest in the acquiree either at fair value or
at the proportionate share of the acquiree’s identifiable net
assets. Acquisition related costs are expensed as incurred.
When the Group acquires a business, it assesses the financial
assets and liabilities assumed for appropriate classification
and designation in accordance with the contractual terms,
56
Sale of goods
i)
Revenue is recognised when the significant risks and rewards
of ownership of the goods have passed to the buyer and
can be measured reliably. Risks and rewards are considered
passed to the buyer at the time of delivery of the goods to
the customer.
Sales revenue comprises revenue earned (net of returns,
discounts and allowances) from the provision of fuel
products to entities outside the consolidated entity. Sales
revenue is recognised when fuel is provided.
Rendering of services
ii)
Service revenue from the distribution of customer
goods is recognised when delivered or when services are
fully provided.
Interest
iii)
Revenue is recognised as the interest accrues using the
effective interest method. This method calculates the
amortised cost of a financial asset and allocates the interest
over the relevant period using the effective interest rate,
which is the rate that exactly discounts estimated future
cash receipts through the expected life of the financial
instrument to the net carrying amount of the financial asset.
iv) Dividends
Revenue is recognised when the Group’s right to receive
the payment is established.
h) Cash and cash equivalents
Cash and cash equivalents in the Statement of Financial
Position comprise cash at bank and in hand and short-term
deposits with an original maturity of three months or less.
For the purposes of the Statement of Cash Flows, cash
and cash equivalents consist of cash and cash equivalents
as defined above, net of outstanding bank overdrafts.
i) Leases
Finance leases, which transfer to the Group substantially all
the risks and benefits incidental to ownership of the leased
item, are capitalised at the inception of the lease at the
fair value of the leased property or, if lower, at the present
value of the minimum lease payments.
Lease payments are apportioned between the finance
charges and reduction of the lease liability so as to
achieve a constant rate of interest on the remaining balance
of the liability. Finance charges are charged directly
against income.
Capitalised leased assets are depreciated over the shorter of
the estimated useful life of the asset and the lease term if
there is no reasonable certainty that the Group will obtain
ownership by the end of the lease term.
Leases where the lessor retains substantially all the risks
and benefits of ownership of the asset are classified as
operating leases.
Operating lease payments are recognised as an expense on
a straight-line basis over the lease term.
j) Trade and other receivables
Trade receivables, which generally have 30-90 day terms,
are recognised and carried at original invoice amount less an
allowance for any uncollectible amounts. An allowance for
doubtful debts is made when there is objective evidence that
the Group will not be able to collect the debts. Bad debts
are written off when identified.
k) Inventories
Inventories are valued at the lower of cost and net
realisable value.
Costs incurred in bringing each product to its present
location and condition are accounted for as follows:
Consumables – purchase cost on a first-in, first-out basis;
Finished goods – weighted average cost.
Net realisable value is the estimated selling price in the
ordinary course of business, less estimated costs necessary
to make the sale.
l) Derivative financial instruments
The Group uses derivative financial instruments such as
interest rate swaps to hedge its risks associated with interest
rate fluctuations. Such derivative financial instruments are
stated at fair value. The fair value of interest rate contracts
is determined by reference to market value for similar
instruments.
For the purposes of hedge accounting, hedges are classified
as either fair value hedges when they hedge the exposure
to changes in the fair value of a recognised asset or
liability; or cash flow hedges where they hedge exposure
to variability in cash flows that is either attributable to a
particular risk associated with a recognised asset or liability
or a forecasted transaction.
In relation to cash flow hedges (interest rate swaps) to
hedge firm commitments which meet the conditions for
special hedge accounting, the portion of the gain or loss on
the hedging instrument that is determined to be an effective
hedge is recognised directly in equity and the ineffective
portion is recognised in profit or loss.
When the hedged firm commitment results in the
recognition of an asset or a liability, then, at the time the
asset or liability is recognised, the associated gains or losses
that had previously been recognised in equity are included
in the initial measurement of the acquisition cost or other
carrying amount of the asset or liability.
For all other cash flow hedges, the gains or losses that are
recognised in equity are transferred to profit or loss in the
same year in which the hedged firm commitment affects
the net profit and loss, for example when the future sale
actually occurs.
For derivatives that do not qualify for hedge accounting, any
gains or losses arising from changes in fair value are taken
directly to profit or loss.
57
Financial liabilities
A financial liability is derecognised when the obligation
under the liability is discharged or cancelled or expires.
When an existing financial liability is replaced by another
from the same lender on substantially different terms or the
terms of an existing liability are substantially modified, such
an exchange or modification is treated as a derecognition
of the original liability and the recognition of a new liability,
and the difference in the respective carrying amounts is
recognised in profit or loss.
n) Impairment of financial assets
The Group assesses at each reporting date whether a
financial asset or group of financial assets is impaired.
Financial assets carried at amortised cost
If there is objective evidence that an impairment loss on
loans and receivables carried at amortised cost has been
incurred, the amount of the loss is measured as the difference
between the asset’s carrying amount and the present value
of estimated future cash flows (excluding future credit losses
that have not been incurred) discounted at the financial
asset’s original effective interest rate (i.e. the effective
interest rate computed at initial recognition). The carrying
amount of the asset is reduced either directly or through
use of an allowance account. The amount of the loss is
recognised in profit or loss.
The Group first assesses whether objective evidence of
impairment exists individually for financial assets that are
individually significant, and individually or collectively for
financial assets that are not individually significant. If it
is determined that no objective evidence of impairment
exists for an individually assessed financial asset, whether
significant or not, the asset is included in a group of financial
assets with similar credit risk characteristics and that group
of financial assets is collectively assessed for impairment.
Assets that are individually assessed for impairment and for
which an impairment loss is or continues to be recognised
are not included in a collective assessment of impairment.
If, in a subsequent period, the amount of the impairment
loss decreases and the decrease can be related objectively
to an event occurring after the impairment was recognised,
the previously recognised impairment loss is reversed. Any
subsequent reversal of an impairment loss is recognised in
profit or loss, to the extent that the carrying value of the
asset does not exceed its amortised cost at the reversal date.
Financial assets carried at cost
If there is objective evidence that an impairment loss has
been incurred on an unquoted equity instrument that is
not carried at fair value (because its fair value cannot be
reliably measured), or on a derivative asset that is linked to
and must be settled by delivery of such an unquoted equity
instrument, the amount of the loss is measured as the
difference between the asset’s carrying amount and the
present value of estimated future cash flows, discounted at
the current market rate of return for a similar financial asset.
Hedge accounting is discontinued when the hedging
instrument expires or is sold, terminated or exercised, or no
longer qualifies for hedge accounting. At that point in time,
any cumulative gain or loss on the hedging instrument
recognised in equity is kept in equity until the forecasted
transaction occurs.
If a hedged transaction is no longer expected to occur,
the net cumulative gain or loss recognised in equity is
transferred to profit or loss.
m) Derecognition of financial assets and liabilities
Financial assets
A financial asset (or, where applicable, a part of a financial
asset or part of a group of similar financial assets) is
derecognised when:
(cid:129)
(cid:129)
(cid:129)
The rights to receive cash flows from the asset
have expired;
The Group retains the right to receive cash flows from
the asset, but has assumed an obligation to pay them
in full without material delay to a third party under a
“pass-through” arrangement; or
The Group has transferred its rights to receive cash
flows from the asset and either (a) has transferred
substantially all the risks and rewards of the asset, or
(b) has neither transferred nor retained substantially all
the risks and rewards of the asset, but has transferred
control of the asset.
When the Group has transferred its rights to receive cash
flows from an asset and has neither transferred nor retained
substantially all the risks and rewards of the asset nor
transferred control of the asset, the asset is recognised to
the extent of the Group’s continuing involvement in
the asset. Continuing involvement that takes the form of
a guarantee over the transferred asset is measured at the
lower of the original carrying amount of the asset and the
maximum amount of consideration received that the Group
could be required to repay.
When continuing involvement takes the form of a written
and/or purchased option (including a cash-settled option or
similar provision) on the transferred asset, the extent of the
Group’s continuing involvement is the amount of the
transferred asset that the Group may repurchase, except that
in the case of a written put option (including a cash-settled
option or similar provision) on an asset measured at fair
value, the extent of the Group’s continuing involvement is
limited to the lower of the fair value of the transferred asset
and the option exercise price.
58
o) Foreign currency translation
Both the functional and presentation currency of K&S
Corporation Ltd and its Australian subsidiaries is Australian
dollars (A$).
Transactions in foreign currencies are initially recorded in
the functional currency at the exchange rates ruling at the
date of the transaction. Monetary assets and liabilities
denominated in foreign currencies are retranslated at the
rate of exchange ruling at the reporting date.
All exchange differences in the consolidated financial report
are taken to profit or loss with the exception of differences
on foreign currency borrowings that provide a hedge against
a net investment in a foreign entity. These are taken directly
to equity until the disposal of the net investment, at which
time they are recognised in profit or loss.
Tax charges and credits attributable to exchange differences
on those borrowings are also recognised in equity.
Non-monetary items that are measured in terms of historical
cost in a foreign currency are translated using the exchange
rate as at the date of the initial transaction.
Non-monetary items measured at fair value in a foreign
currency are translated using the exchange rates at the date
when the fair value was determined.
The functional currency of the overseas subsidiaries
(K&S Freighters Limited and Cochrane’s Transport Limited)
is New Zealand dollars (NZ$).
As at the reporting date, the assets and liabilities of these
overseas subsidiaries are translated into the presentation
currency of K&S Corporation Limited at the rate of
exchange ruling at the reporting date and the revenue and
expenses are translated at the weighted average exchange
rates for the period. The exchange differences arising on
the retranslation are taken directly to a separate component
of equity.
On disposal of a foreign entity, the deferred cumulative
amount recognised in equity relating of that particular
foreign operation is recognised in profit or loss.
p) Investment in associates
The Group’s investment in its associates is accounted for
under the equity method of accounting in the consolidated
financial statements and at cost in the parent. The associates
are entities in which the Group has significant influence and
that are neither a subsidiary nor a joint venture.
Under the equity method, investments in associates are
carried in the consolidated Statement of Financial Position at
cost plus post-acquisition changes in the Group’s share of
net assets of the associate. Goodwill relating to an associate
is included in the carrying amount of the investment and is
not amortised. After application of the equity method, the
Group determines whether it is necessary to recognise any
impairment loss with respect to the Group’s net investment
in associates. Goodwill included in the carrying amount
of the investment in associate is not tested separately, rather
the entire carrying amount of the investment is tested
for impairment as a single asset. If an impairment loss is
recognised, the amount is not allocated to the goodwill of
the associate.
The Group’s share of associates’ post-acquisition profits
or losses is recognised in the Statement of Comprehensive
Income, and its share of post-acquisition movements in
reserves is recognised in reserves. The cumulative post-
acquisition movements are adjusted against the carrying
amount of the investment. Dividends receivable from the
associates are recognised in the parent entity’s Statement of
Comprehensive Income as a component of other income.
When the Group’s share of losses in an associate equals or
exceeds its interest in the associate, including any unsecured
long-term receivables and loans, the Group 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 Group are
identical and the associates’ accounting policies conform to
those used by the Group for like transactions and events in
similar circumstances.
q) Income tax and other taxes
Current tax assets and liabilities for the current period and
prior periods are measured at the amount expected to be
recovered from or paid to the taxation authorities based
on the current period’s taxable income. The tax rates and
tax laws used to compute the amount are those that are
enacted or substantively enacted by the reporting date.
Deferred income tax is provided on all temporary
differences at the reporting date between the tax bases of
assets and liabilities and their carrying amounts for financial
reporting purposes.
Deferred income tax liabilities are recognised for all taxable
temporary differences except:
(cid:129)
(cid:129)
where the deferred income tax liability arises from the
initial recognition of an asset or liability in a transaction
that is not a business combination and, at the time
of the transaction, affects neither the accounting profit
nor taxable profit or loss; or
when the taxable temporary differences is associated
with investments in subsidiaries and associates and the
timing of the reversal of the temporary differences can
be controlled and it is probable that the temporary
differences will not reverse in the foreseeable future.
59
Deferred income tax assets are recognised for all deductible
temporary differences, carry-forward of unused tax credits
and unused tax losses, to the extent that it is probable that
taxable profit will be available against which the deductible
temporary differences, and the carry-forward of unused tax
credits and unused tax losses can be utilised, except:
(cid:129)
(cid:129)
when the deferred income tax asset relating to the
deductible temporary difference arises from the initial
recognition of an asset or liability in a transaction that
is not a business combination and, at the time of the
transaction, affects neither the accounting profit nor
taxable profit or loss; or
when the deductible temporary differences associated
with investments in subsidiaries, associates and
interests in joint ventures, deferred tax assets are only
recognised to the extent that it is probable that the
temporary differences will reverse in the foreseeable
future and taxable profit will be available against
which the temporary differences can be utilised.
The carrying amount of deferred income tax assets is
reviewed at each reporting date and reduced to the extent
that it is no longer probable that sufficient taxable profit will
be available to allow all or part of the deferred income tax
asset to be utilised.
Unrecognised deferred income tax assets are reassessed at
each reporting date and are recognised to the extent that it
has become probable that future taxable profits will allow
the deferred tax asset to be recovered.
Deferred income tax assets and liabilities are measured at
the tax rates that are expected to apply to the year when
the asset is realised or the liability is settled, based on tax
rates (and tax laws) that have been enacted or substantively
enacted at the reporting date.
Income taxes relating to items recognised directly in equity
are recognised in equity and not in the profit or loss.
Deferred tax assets and deferred tax liabilities are offset
only if a legally enforceable right exists to set off current tax
assets against current tax liabilities and the deferred tax
assets and liabilities relate to the same taxable entity and
the same taxable authority.
Other taxes
Revenues, expenses and assets are recognised net of the
amount of GST except:
(cid:129)
when the GST incurred on a purchase of goods and
services is not recoverable from the taxation authority,
in which case the GST is recognised as part of the cost
of acquisition of the asset or as part of the expense
item as applicable; and
60
(cid:129)
receivables and payables are stated with the amount
of GST included.
The net amount of GST recoverable from, or payable to,
the taxation authority is included as part of receivables or
payables in the Statement of Financial Position.
Cash flows are included in the Statement of Cash Flows on
a gross basis and the GST component of cash flows arising
from investing and financing activities, which is recoverable
from, or payable to, the taxation authority are classified as
operating cash flows.
Commitments and contingencies are disclosed net of
the amount of GST recoverable from, or payable to, the
taxation authority.
r) Property, plant and equipment
Plant and equipment is stated at cost less accumulated
depreciation and any impairment in value.
Land and buildings are measured at fair value less
accumulated depreciation on buildings and less any
impairment losses recognised after the date of the
revaluation.
Depreciation is calculated on a straight-line basis using the
following rates:
Land
Buildings
Motor vehicles
Plant and equipment
Not depreciated
2.5% p.a
5% – 40% p.a
5% – 27% p.a
i) Impairment
The carrying values of plant and equipment are reviewed
for impairment when events or changes in circumstances
indicate the carrying value may not be recoverable.
For an asset that does not generate largely independent
cash inflows, the recoverable amount is determined for the
cash-generating unit to which the asset belongs.
The recoverable amount of plant and equipment is the
greater of fair value less costs to sell and value in use.
In assessing value in use, the estimated future cash flows
are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset.
Impairment exists when the carrying values of an asset
or cash-generating unit exceeds its estimated recoverable
amount. The assets or cash-generating units are written
down to their recoverable amount. For plant and
equipment, impairment losses are recognised in profit or
loss. However, because land and buildings are measured at
revalued amounts, impairment losses on land and buildings
are treated as a revaluation decrement.
ii) Revaluations
Following initial recognition at cost, land and buildings
are carried at a revalued amount which is the fair value
at the date of the revaluation less any subsequent
accumulated depreciation on buildings and accumulated
impairment losses.
Fair value is determined by reference to market-based
evidence, which is the amount for which the assets could be
exchanged between a knowledgeable willing buyer and a
knowledgeable willing seller in an arm’s length transaction
as at the valuation date.
Any revaluation increment is credited to the asset revaluation
reserve included in the equity section of the Statement of
Financial Position unless it reverses a revaluation decrease of
the same asset previously recognised in profit or loss.
Any revaluation decrease is recognised in profit or loss unless
it directly offsets a previous revaluation increase for the same
asset debited directly to the asset revaluation reserve.
In addition, any accumulated depreciation as at revaluation
date is eliminated against the gross carrying amount of the
asset and the net amount is restated to the revalued amount
of the asset.
Upon disposal, any revaluation reserve relating to the
particular asset being sold is transferred to retained earnings.
Independent valuations are performed with sufficient
regularity to ensure that the carrying amount does not differ
materially from the asset's fair value at the reporting date.
iii) Derecognition and disposal
An item of property, plant and equipment is derecognised
upon disposal or when no future economic benefits
are expected to arise from the continued use of the asset.
Any gain or loss arising on derecognition of the asset
(calculated as the difference between the net disposal
proceeds and the carrying amount of the item) is included
in profit or loss in the period the item is derecognised.
s) Investments and other financial assets
Financial assets in the scope of AASB 139 Financial
Instruments: Recognition and Measurement are classified as
either financial assets at fair value through profit or loss,
loans and receivables, held-to-maturity investments, or
available-for-sale investments, as appropriate. When financial
assets are recognised initially, they are measured at fair
value, plus, in the case of investments not at fair value
through profit or loss, directly attributable transactions costs.
The Group determines the classification of its financial assets
after initial recognition and, when allowed and appropriate,
re-evaluates this designation at each financial year-end.
All regular way purchases and sales of financial assets are
recognised on the trade date i.e. the date that the Group
commits to purchase the asset. Regular way purchases or
sales are purchases or sales of financial assets under
contracts that require delivery of the assets within the
period established generally by regulation and convention
in the marketplace.
Financial assets at fair value through profit or loss
Financial assets classified as held for trading are included in
the category “financial assets at fair value through profit or
loss”. Financial assets are classified as held for trading if
they are acquired for the purpose of selling in the near term.
Derivatives are also classified as held for trading unless they
are designated as effective hedging instruments. Gains
or losses on investments held for trading are recognised in
profit or loss.
Held-to-maturity investments
Non-derivative financial assets with fixed or determinable
payments and fixed maturity are classified as held-to-maturity
when the Group has the positive intention and ability to
hold to maturity. Investments intended to be held for an
undefined period are not included in this classification.
Investments that are intended to be held-to-maturity, such
as bonds, are subsequently measured at amortised cost.
This cost is computed as the amount initially recognised
minus principal repayments, plus or minus the cumulative
amortisation using the effective interest method of any
difference between the initially recognised amount and the
maturity amount. This calculation includes all fees and
points paid or received between parties to the contract that
are an integral part of the effective interest rate, transaction
costs and all other premiums and discounts.
For investments carried at amortised cost, gains and
losses are recognised in profit or loss when the investments
are derecognised or impaired, as well as through the
amortisation process.
Loans and receivables
Loans and receivables are non-derivative financial assets
with fixed or determinable payments that are not quoted in
an active market. Such assets are carried at amortised cost
using the effective interest method. Gains and losses are
recognised in profit or loss when the loans and receivables
are derecognised or impaired, as well as through the
amortisation process.
The fair value of investments that are actively traded in
organised financial markets is determined by reference to
quoted market bid prices at the close of business on
the reporting date. For investments with no active market,
fair value is determined using valuation techniques.
Such techniques include using recent arm’s length market
transactions; reference to the current market value of
another instrument that is substantially the same; discounted
cash flow analysis and option pricing methods.
t) Goodwill and intangibles
Goodwill
Goodwill acquired in a business combination is initially
measured at cost of the business combination, being the
excess of the consideration transferred over the fair value
of the Group’s net identifiable assets acquired and liabilities
assumed. If this consideration transferred is lower than
the fair value of the net identifiable assets acquired, the
difference is recognised in profit or loss.
Following initial recognition, goodwill is measured at cost
less any accumulated impairment losses.
61
Intangible assets with indefinite lives are tested for impair-
ment annually either individually or at the cash-generating
unit level. Such intangibles are not amortised. The useful
life of an intangible asset with an indefinite life is reviewed
each reporting period to determine whether indefinite life
assessment continues to be supportable. If not, the change
in the useful life assessment from indefinite to finite is
accounted for as a change in an accounting estimate and
is thus accounted for on a prospective basis.
Development costs
An intangible asset arising from development expenditure
on an internal project is recognised only when the Group
can demonstrate the technical feasibility of completing the
intangible asset so that it will be available for use or sale, its
intention to complete and its ability to the use or sell the
asset, how the asset will generate future economic benefits,
the availability of resources to complete the development
and the ability to measure reliably the expenditure
attributable to the intangible asset during the development.
Following initial recognition of the development
expenditure, the cost model is applied requiring the asset
to be carried at cost less any accumulated amortisation
and accumulated impairment losses. Any expenditure so
capitalised is amortised over the period of expected
benefits from the related project.
The carrying value of an intangible asset arising from
development expenditure is tested for impairment annually
when the asset is not yet available for use, or more
frequently when an indication of impairment arises during
the reporting period.
u) Impairment of assets
The Group assesses at each reporting date whether there is
an indication that an asset may be impaired. If any such
indication exists, or when annual impairment testing for an
asset is required, the Group makes an estimate of the asset’s
recoverable amount. An asset’s recoverable amount is the
higher of its fair value less costs to sell or its value in use and
is determined for an individual asset, unless the asset does
not generate cash inflows that are largely independent
from other assets or groups of assets and the asset’s value
in use cannot be estimated to be close to its fair value.
In such cases the asset is tested for impairment as part of
the cash-generating unit to which it belongs. When the
carrying amount of an asset or cash-generating unit
exceeds its recoverable amount, the asset or cash-generating
unit is considered impaired and is written down to its
recoverable amount.
In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount
rate that reflects current market assessments of the
time value of money and the risks specific to the asset.
Impairment losses are recognised in those expense categories
consistent with the function of the impaired asset unless
the asset is carried at revalued amounts (in which case the
impairment loss is treated as a revaluation decrease).
Goodwill is reviewed for impairment, annually or more
frequently if events or changes in circumstances indicate
that the carrying value may be impaired.
For the purpose of impairment testing, goodwill acquired
in a business combination is, from the acquisition date,
allocated to each of the Group’s cash-generating units, or
groups of cash-generating units, that are expected to benefit
from the synergies of the combination, irrespective of
whether other assets or liabilities of the Group are assigned
to those units or groups of units. Each unit or group of units
to which goodwill is allocated represents the lowest level
within the Group at which goodwill is monitored for internal
management purposes, and is not larger than a operating
segment determined in accordance with AASB 8.
Impairment is determined by assessing the recoverable
amount of the cash-generating unit (group of
cash-generating units), to which the goodwill relates.
When the recoverable amount of the cash-generating unit
(group of cash-generating units) is less than the carrying
amount, an impairment loss is recognised. When goodwill
forms part of a cash-generating unit (group of cash-
generating units) and an operation within that unit
is disposed of, the goodwill associated with the operation
disposed of is included in the carrying amount of the
operation when determining the gain or loss on disposal
of the operation. Goodwill disposed of in this manner
is measured based on the relative values of the operation
disposed of and the portion of the cash-generating
unit retained.
Impairment losses recognised for goodwill are not
subsequently reversed.
Intangibles
Intangible assets are initially measured at cost. Following
initial recognition, intangible assets are carried at cost
less any accumulated amortisation and any accumulated
impairment losses.
The useful lives of intangible assets are assessed to be either
finite or indefinite. Intangible assets with finite lives are
amortised over the useful life and assessed for impairment
whenever there is an indication that the intangible asset may
be impaired. The amortisation period and the amortisation
method for an intangible asset with a finite useful life is
reviewed at each financial year-end.
Changes in the expected useful life or the expected pattern
of consumption of future economic benefits embodied in the
asset are accounted for by changing the amortisation period
or method, as appropriate, which is a change in accounting
estimate. The amortisation expense on intangible assets
with finite lives is recognised in profit or loss in the expense
category consistent with the function of the intangible asset.
62
An assessment is also made at each reporting date as to
whether there is any indication that previously recognised
impairment losses may no longer exist or may have
decreased. If such indication exists, the recoverable amount
is estimated. A previously recognised impairment loss is
reversed only if there has been a change in the estimates
used to determine the asset’s recoverable amount since
the impairment loss was recognised.
If that is the case, the carrying amount of the asset is
increased to the recoverable amount. That increased
amount cannot exceed the carrying amount that would
have been determined, net of depreciation, had no
impairment loss been recognised for the assets in prior
years. Such reversal is recognised in the profit or loss unless
the asset is carried at revalued amount, in which case the
reversal is treated as a revaluation increase.
After such a reversal, the depreciation charge is adjusted in
future periods to allocate the asset’s revised carrying
amount, less any residual value, on a systematic basis over
its remaining useful life.
v) Interest-bearing loans and borrowings
All loans and borrowings are initially recognised at cost,
being the fair value of the consideration received net of
issue costs associated with the borrowing.
After initial recognition, interest-bearing loans and
borrowings are subsequently measured at amortised cost
using the effective interest method. Amortised cost is
calculated by taking into account any issue costs, and any
discount or premium on settlement.
Gains and losses are recognised in profit or loss when
the liabilities are derecognised, as well as through the
amortisation process.
w) Trade and other payables
Trade payables and other payables are carried at amortised
costs and represent liabilities for goods and services
provided to the Group prior to the end of the financial year
that are unpaid and arise when the Group becomes obliged
to make future payments in respect of the purchase of these
goods and services.
x) Provisions
Provisions are recognised when the Group has a present
obligation (legal or constructive) as a result of a past event,
it is probable that an outflow of resources embodying
economic benefits will be required to settle the obligation
and a reliable estimate can be made of the amount of
the obligation.
When the Group expects some or all of a provision to be
reimbursed, for example under an insurance contract, the
reimbursement is recognised as a separate asset but only
when the reimbursement is virtually certain. The expense
relating to any provision is presented in the profit or loss
net of any reimbursement.
If the effect of the time value of money is material, provisions
are discounted using a current pre-tax rate that reflects the
risks specific to the liability. When discounting is used,
the increase in the provision due to the passage of time is
recognised as a finance cost.
y) Employee leave benefits
i) Wages, salaries, annual leave and sick leave
Liabilities for wages and salaries, including non-monetary
benefits, annual leave and accumulating sick leave expected
to be settled within 12 months of the reporting date are
recognised in current provisions in respect of employees’
service up to the reporting date. They are measured at the
amounts expected to be paid when the liabilities are settled.
Liabilities for non-accumulating sick leave are recognised
when the leave is taken and are measured at the rates paid
or payable.
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 wages 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 currencies that match, as closely as possible,
the estimated future cash outflows.
iii) Defined contribution superannuation funds
The commitment to defined contribution plans is limited
to making contributions in accordance with the minimum
statutory requirements. The Group does not have any legal
or constructive obligation to pay further contributions if
the fund does not hold sufficient assets to pay all employee
benefits relating to current and past employee services.
Obligations for contributions to defined contribution
superannuation funds are recognised as an expense in profit
or loss as incurred.
iv) Directors retirement benefits
Directors commencing after 30 June 2004 are not eligible
for any benefit under the Directors Retirement Scheme.
However, Non-Executive Directors appointed before that
date are eligible to receive retirement benefits on retiring as
a Director. In July 2004, the Directors Retirement benefit
calculation changed, to freeze the accumulation of years of
service for each Director.
z) Contributed equity
Ordinary shares are classified as equity. Any transaction
costs arising on the issue of ordinary shares are recognised
directly in equity as a reduction of the proceeds received.
63
aa) Earnings per share
Basic earnings per share is calculated as net profit
attributable to members of the parent, adjusted to exclude
any costs of servicing equity (other than dividends), divided
by the weighted average number of ordinary shares.
Diluted earnings per share is calculated as net profit
attributable to members of the parent, adjusted for:
(cid:129)
(cid:129)
(cid:129)
Costs of servicing equity (other than dividends);
The after tax effect of dividends and interest associated
with dilutive potential ordinary shares that have been
recognised as expenses;
Other non-discretionary changes in revenues or
expenses during the period that would result from
dilution of potential ordinary shares;
divided by the weighted average number of ordinary shares
and dilutive potential ordinary shares.
bb) Significant account judgments, estimates
and assumptions
The preparation of the financial statements requires
management to make judgments, estimates and
assumptions that affect the reported amounts in the financial
statements. Management continually evaluates its
judgments and estimates in relation to assets, liabilities,
contingent liabilities, revenue and expenses. Management
bases its judgments and estimates on historical experience
and on other various factors it believes to be reasonable
under the circumstances, the result of which form the basis
of the carrying values of assets and liabilities that are not
readily apparent from other sources.
Management has identified the following critical accounting
policies for which significant judgments, estimates and
assumptions are made. Actual results may differ from these
estimates under different assumptions and conditions
and may materially affect financial results or the financial
position reported in future periods.
Further details of the nature of these assumptions and
conditions may be found in the relevant notes to the
financial statements.
i) Significant accounting judgments
Recovery of deferred tax assets
Deferred tax assets are recognised for deductible temporary
differences as management considers that it is probable
that future taxable profits will be available to utilise those
temporary differences. Significant management judgment
is required to determine the amount of deferred taxes that
can be recognised, based upon the likely timing and the
level of future taxable profits.
Taxation
The Group’s accounting policy for taxation requires
management judgment as to the types of arrangements
considered to be a tax on income in contrast to an operating
cost. Judgment is also required in assessing whether deferred
tax assets and certain deferred tax liabilities are recognised
on the Statement of Financial Position. Deferred tax assets
are recognised only where it is considered more likely than
not that they will be recovered, which is dependent on
sufficient future profits.
ii) Significant accounting estimates and assumptions
Impairment of goodwill
The Group determines whether goodwill is impaired at
least on an annual basis. This requires an estimation of the
recoverable amount of the cash generating units to which
the goodwill is allocated. The assumptions used in this
estimation of recoverable amount and the carrying amount
of goodwill are discussed in Note 16.
Make good provisions
Provision is made for anticipated costs of future restoration
of leased storage premises. The future cost estimates
are discounted to their present value. The related carrying
amounts are disclosed in Note 19.
Allowance for impairment loss on trade receivables
Where receivables are outstanding beyond normal trading
terms, the likelihood of recovery of these receivables is
assessed by management. This assessment is based on
supportable past collection history and historical write-offs
of bad debts. The allowance for impairment loss is outlined
in Note 10.
Long service leave provision
As discussed in Note 2 (y), the liability for long service is
recognised and measured at the present value of the
estimated future cash flows to be made in respect of all
employees at balance date. In determining the present
value of the liability, attrition rates and pay increases through
promotion and inflation have been taken into account.
Impairment of non-financial assets other than goodwill
The Group assesses impairment of all assets at each
reporting date by evaluating conditions specific to the
Group and to the particular asset that may lead to
impairment. If an impairment trigger exists the recoverable
amount of the asset is determined. This involves value
in use calculations, which incorporate a number of key
estimates and assumptions.
3 Financial Risk Management Objectives
and Policies
The Group’s principal financial instruments, other than
derivatives, comprise bank loans and overdrafts, finance
leases and hire purchase contracts, and cash deposits.
64
The main purpose of these financial instruments is to raise
finance for the Group’s operations. The Group has various
other financial assets and liabilities such as trade receivables
and trade payables, which arise directly from its operations.
The Group also enters into derivative transactions, principally
interest rate swap contracts. The purpose was to manage
the interest rate risk arising from the Group’s operations
and its sources of finance. The main risks arising from the
Group’s financial instruments are cash flow interest rate risk,
liquidity risk, foreign currency risk and credit risk.
The Board reviews and agrees policies for managing each
of these risks and they are summarised below.
Details of the significant accounting policies and methods
adopted, including the criteria for recognition, the basis of
measurement and the basis on which income and expenses
are recognised, in respect of each class of financial asset,
financial liability and equity instrument are disclosed in
Note 2 to the financial statements.
Risk exposures and responses
Fair Value
The Group uses various methods in estimating the fair value
of a financial instrument. The methods comprise:
Level 1 – the fair value is calculated using quoted prices in
active markets.
Level 2 – the fair value is estimated using inputs other than
quoted prices in level 1 that are observable for the asset
or liability, either directly (as prices) or indirectly (derived
from prices).
Level 3 – the fair value is estimated using inputs for the asset
or liability that are not based on observable market data.
The fair value of the financial instruments as well as the
methods used to estimate the fair values are summarised in
the table below.
For financial instruments not quoted in active market, the
Group uses valuation techniques such as present value
techniques, comparison to similar instruments for which
market observable prices exist and other relevant models
used by market participants. These valuation techniques
use both observable and unobservable market inputs.
There were no transfers between Level 1 and Level 2 during
the year.
Credit risk
Credit risk represents the loss that would be recognised if
counterparties failed to perform as contracted. It is the
Group’s policy that customers who wish to trade on credit
more than $1,000 per week are subject to credit verification
procedures including an assessment of their independent
credit rating, financial position, past experience and
industry reputation.
The consolidated entity also minimises concentrations of
credit risk by undertaking transactions with a large number
of customers and counterparties in various states. The
Group is not materially exposed to any individual customer
or individual state. Concentration of credit risk on trade
debtors due from customers are: Transport 94% (2011:
94%) and Fuel 6% (2011: 6%).
In addition, receivable balances are monitored on an
ongoing basis with the result that the Group’s exposure to
bad debts is not significant.
Foreign currency risk
The Group’s exposure to currency risk is minimal.
Interest rate risk
The Group’s exposure to the risk of changes in market
interest rates relates primarily to the Group’s long term debt
obligations with a floating interest rate. The level of debt
is disclosed in Note 18.
Year ended 30 June 2012
Year ended 30 June 2011
Quoted Valuation Valuation Quoted Valuation Valuation
market price technique technique market price technique technique
(Level 1) – market – non-market (Level 1) – market – non-market
observable observable observable observable
inputs inputs inputs inputs
(Level 2) (Level 3) (Level 2) (Level 3)
$’000 $’000 $’000 $’000 $’000 $’000
CONSOLIDATED
Financial liabilities
Derivative instruments
– Interest rate swaps - - - - (712) -
- - - - (712) -
65
At balance date, the Group had the following mix of
financial assets and liabilities exposed to variable interest
rate risk that are not designated in cash flow hedges:
Consolidated
2012 2011
$’000 $’000
Financial assets
– Cash and cash equivalents 21,038 9,747
Financial liabilities
– Bank loans (33,175) (38,621)
Net exposure (12,137) (28,874)
The Group’s policy is to manage its interest cost using a
mix of fixed and variable rate debt. To manage this mix in
a cost-efficient manner, the Group enters into interest rate
swaps, in which the Group agrees to exchange, at specified
intervals, the difference between fixed and variable rate
interest amounts calculated by reference to an agreed-upon
notional principal amount. These swaps are intended to
hedge underlying debt obligations, however derivatives held
by the Group do not qualify for hedge accounting and as a
result any gains or losses arising from changes in fair value
are taken directly to the Statement of Comprehensive
Income. The net gain is reported within other income and
the net loss is reported within other expenses. Interest rate
swap contracts are outlined in Note 21.
The Group constantly analyses its interest rate exposure.
Within this analysis consideration is given to potential
renewals of existing positions, alternative hedging positions
and the mix of fixed and variable interest rates.
The following sensitivity analysis is based on the interest
rate risk exposures in existence at the Balance Sheet date:
The movements in profit are due to higher/lower interest
costs from variable debt and cash balances.
Significant assumptions used in the interest rate sensitivity
analysis include:
(cid:129)
(cid:129)
Reasonably possible movements in interest rates were
determined based upon the Group’s current credit
rating and debt mix in Australia and New Zealand.
The net exposure at balance date is representative of
what the Group was and is expecting to be exposed
to in the next twelve months.
Liquidity risk
Liquidity risk arises from the financial liabilities of the Group
and the Group’s subsequent ability to meet their obligations
to repay their financial liabilities as and when they fall due.
The Group’s objective is to maintain a balance between
continuity of funding and flexibility through the use of bank
overdrafts, bank loans, finance leases and committed lines
of credit. The Group’s policy in managing liquidity risk is to
ensure the Group always has sufficient liquidity to meet its
financial obligations when due, as well as to accommodate
unforeseen cash requirements over both the short and
long term.
i) Non-derivative financial liabilities
The following liquidity risk disclosure reflect all contractually
fixed pay-offs, repayments and interest resulting from
recognised financial liabilities and financial guarantees as of
30 June 2012. For the other obligations the respective
undiscounted cash flows for the respective upcoming fiscal
years are presented. The timing of cash flows for liabilities
is based on the contractual terms of the underlying contract.
However, where the counterparty has a choice of when the
amount is paid, the liability is allocated to the earliest period
in which the Group can be required to pay. When the Group
is committed to make amounts available in instalments, each
instalment is allocated to the earliest period in which the
Group is required to pay. For financial guarantee contracts,
the maximum amount of the guarantee is allocated to the
earliest period in which the guarantee can be called.
Judgements of reasonably possible movements: Post Tax Profit Equity
Higher/(Lower) Higher/(Lower)
2012 2011 2012 2011
$’000 $’000 $’000 $’000
Consolidated
+ 1% (100 basis points) (85) (202) ( 85) (202)
– 0.5% (50 basis points) 42 101 42 101
66
The following table reflects a balanced view
of cash inflows and outflows of non-derivative
financial instruments:
Greater
Less than 1 to 2 2 to 5 than
1 year years years 5 years Total
$’000 $’000 $’000 $’000 $’000
Year ended 30 June 2012
Liquid financial assets
Cash and cash equivalents 21,038 - - - 21,038
Trade and other receivables 73,764 267 635 128 74,794
94,802 267 635 128 95,832
Financial liabilities
Interest bearing loans and borrowings (21,648) (16,930) (54,570) - (93,148)
Trade and other payables (49,214) (6,358) - - (55,572)
Financial guarantees (13,909) - - - (13,909)
(84,771) (23,288) (54,570) - (162,629)
Net inflow/(outflow) 10,031 (23,021) (53,935) 128 (66,797)
Year ended 30 June 2011
Liquid financial assets
Cash and cash equivalents 9,747 - - - 9,747
Trade and other receivables 68,299 1,324 365 - 69,988
78,046 1,324 365 - 79,735
Financial liabilities
Interest bearing loans and borrowings (20,888) (21,551) (58,730) - (101,169)
Trade and other payables (46,457) (4,929) - - (51,386)
Financial guarantees (13,613) - - - (13,613)
(80,958) (26,480) (58,730) - (166,168)
Net inflow/(outflow) (2,912) (25,156) (58,365) - (86,433)
The Group’s available credit facilities are outlined
in Note 18.
ii) Derivative financial liabilities
Due to the unique characteristics and risks inherent
to derivative instruments, the Group separately
monitors the liquidity risk arising from transacting
in derivative instruments.
The Group holds no derivative liabilities at balance date.
67
4 Operating Segments
Identification of reportable segments
The Group has identified its operating segments based on
the internal reports that are reviewed and used by the
Executive Management team in assessing performance and
in determining the allocation of resources.
The Executive Management team reviewed its operating
segments during the period and determined that the Group
has three operating segments. The Executive Management
team found the previous five operating segments were
inconsistent with the current business model the group
operates. Although the previous operating segment
brands remain, the Group’s internal management reporting
systems and business model, which monitors resource
allocation and working capital fall under the following
three segments:
(cid:129)
(cid:129)
(cid:129)
Australian Transport – The provision of logistical
services to customers within Australia.
Fuel – The distribution of fuel to fishing, farming
and retail customers within the South East of
South Australia.
New Zealand Transport – The provision of logistical
services to customers within New Zealand.
Accounting policies and inter-segment transactions
The accounting policies used by the Group in reporting
segments are the same as those contained in Note 2 to the
accounts and in the prior period except as detailed below:
Inter-entity sales
Inter-entity sales are recognised based on an internally
set transfer price. The price is set periodically and aims to
reflect what the business operations could achieve if
they sold their output and services to external parties at
arm’s length.
Corporate charges
Corporate charges are allocated to each operating segment
on a proportionate basis linked to segment revenue so as to
determine a segmental result.
Segment loans payable and loans receivable
Segment loans are initially recognised at the consideration
received excluding transaction costs. Intersegment loans
receivable and loans payable that earn or incur non-market
interest are not adjusted to fair value based on market
interest rates.
The following table presents revenue and profit information
for reportable segments for the years ended 30 June 2012
and 30 June 2011.
68
Australian New Zealand
Transport Fuel Transport Total
$’000 $’000 $’000 $’000
Year ended 30 June 2012
Revenue
External customers 466,961 66,311 21,289 554,561
Finance revenue 216 - 26 242
Inter-segment sales 352 40,981 - 41,333
Total segment revenue 467,529 107,292 21,315 596,136
Results
Depreciation and amortisation expense (21,641) (146) (2,618) (24,405)
Finance costs (6,420) - (722) (7,142)
Share of profits of associates 72 - 34 106
Segment net operating profit after tax 15,312 752 383 16,447
Operating assets 368,406 17,133 21,762 407,301
Operating liabilities 150,492 5,793 12,588 169,173
Other disclosures
Investments in an associate 158 - - 158
Capital expenditure (21,959) - (1,481) (23,440)
Inter-segment revenues of $41,333,000
are eliminated on consolidation
Year ended 30 June 2011
Revenue
External customers 439,293 61,719 22,263 523,275
Finance revenue 79 - 10 89
Inter-segment sales 337 38,929 - 39,266
Total segment revenue 439,709 100,648 22,273 562,630
Results
Depreciation and amortisation expense (22,576) (107) (2,406) (25,089)
Finance costs (7,795) - (609) (8,404)
Share of profits of associates 86 - 112 198
Segment net operating profit after tax 13,964 868 (4) 14,828
Operating assets 352,744 17,038 24,011 393,793
Operating liabilities 144,925 6,451 15,707 167,083
Other disclosures
Investments in an associate 86 - 113 199
Capital expenditure (27,603) - (6,638) (34,241)
Inter-segment revenues of $39,266,000
are eliminated on consolidation
69
Consolidated
2012 2011
$’000 $’000
i) Segment revenue reconciliation to the
Statement of Comprehensive Income
Total segment revenue 596,136 562,630
Inter-segment sales elimination (41,333) (39,266)
Total revenue 554,803 523,364
Revenue from external customers by geographical location is
detailed below. Revenue is attributed to geographic location
based on the location of the customers. The Company does
not have external revenues from external customers that are
attributable to any foreign country other than as shown.
Australia 533,488 501,101
New Zealand 21,315 22,263
Total revenue 554,803 523,364
ii) Segment assets reconciliation to the
Statement of Financial Position
Segment assets are those operating assets of the entity that
the Executive Management committee views as directly
attributing to the performance of the segment. These assets
include plant and equipment, receivables, inventory, intangibles
and excludes deferred tax assets.
Reconciliation of segment operating assets to total assets.
Segment operating assets 407,301 393,793
Inter-segment eliminations (12,944) (12,522)
Deferred tax assets 6,998 6,731
Total assets per the Statement of Financial Position 401,335 388,002
The analysis of location on non-current assets other than
financial instruments and deferred tax assets is as follows:
Australia 273,780 275,226
New Zealand 18,231 20,544
Total assets per the Statement of Financial Position 292,011 295,770
iii) Segment liabilities reconciliation to the
Statement of Financial Position
Segment liabilities include trade and other payables and
debt. The Group has a centralised finance function that is
responsible for raising debt and capital for the entire
operations. Each entity or business uses this central function
to invest excess cash or obtain funding for its operations.
The Executive Management committee reviews the level of
debts for each segment in the monthly meetings.
Reconciliation of segment operating liabilities to total liabilities.
Segment operating liabilities 169,173 167,083
Inter-segment eliminations (12,944) (12,522)
Deferred tax liabilities 18,492 18,941
Income tax payable 1,700 894
Total liabilities per the Statement of Financial Position 176,421 174,396
70
Regal /
K&S Aust Pacific K&S Fuels DTM K&S NZ Total
$’000 $’000 $’000 $’000 $’000 $’000
The following table presents corresponding
revenue and profit information for old
operating segments:
Year ended 30 June 2012
Revenue
External customers 306,959 86,465 66,311 73,537 21,289 554,561
Finance revenue 216 - - - 26 242
Inter-segment 620 403 40,981 123 - 42,127
Total segment revenue 307,795 86,868 107,292 73,660 21,315 596,930
Segment net operating profit after tax 7,794 4,563 752 2,955 383 16,447
Inter-segment revenues of $42,127,000
are eliminated on consolidation.
Year ended 30 June 2011
Revenue
External customers 312,384 72,381 61,719 54,528 22,263 523,275
Finance revenue 79 - - - 10 89
Inter-segment 504 850 38,929 433 - 40,716
Total segment revenue 312,967 73,231 100,648 54,961 22,273 564,080
Segment net operating profit after tax 8,664 3,599 868 1,701 (4) 14,828
Inter-segment revenues of $40,716,000
are eliminated on consolidation.
Consolidated
2012 2011
$’000 $’000
5 Revenue and Expenses
a) Operating revenue
– Rendering of services 488,250 461,556
– Sale of goods 66,311 61,719
– Finance revenue 242 89
Total operating revenue 554,803 523,364
b) Other income
– Net gains on disposal of property, plant and equipment 2,580 1,966
– Net gain on derivatives classified as held for trading 713 401
2,851
– Other
1,894
Total other income 5,187 5,218
c) Finance costs
– Related parties – other 5 5
– Other parties 3,681 4,772
– Finance charges on hire purchase contracts 3,456 3,627
Total finance costs 7,142 8,404
71
Consolidated
2012 2011
$’000 $’000
d) Depreciation and amortisation expense
Depreciation
– Buildings 2,374
– Motor vehicles
– Plant and equipment
1,920
18,739 20,081
2,627
2,754
Amortisation
461
– IT Development costs
538
Total depreciation and amortisation expenses
24,405
25,089
e) Employee benefits expense
– Wages and salaries 124,611 118,392
– Workers’ compensation costs 8,193 5,289
– Long service leave provision 1,337 1,493
– Annual leave provision 8,374 7,415
– Payroll tax 7,018 6,606
– Defined contribution plan expense 9,109 8,640
– Directors retirement scheme expense 40 40
Total employee benefits expense 158,682 147,875
f) Operating lease rental expense
– Property 10,913 10,148
– Plant and equipment 2,482 2,580
13,395 12,728
6 Income Tax
The major components of income tax expense are:
Statement of Comprehensive Income
Current income tax
– Current income tax charge 7,757 6,438
– Adjustments in respect of current income tax of previous years (82) 5
Deferred income tax
– Relating to origination and reversal of temporary differences (716) (103)
Income tax expense reported in the
Statement of Comprehensive Income 6,959 6,340
72
Consolidated
2012 2011
$’000 $’000
A reconciliation between tax expense and the product
of accounting profit before income tax multiplied
by the Group’s applicable income tax rate is as follows:
Accounting profit before income tax 23,406 21,168
At the Group’s statutory income tax rate of 30% (2011: 30%) 7,022 6,350
– Expenditure not allowable for income tax purposes 19 (15)
– Adjustments in respect of current income tax of previous years (82) 5
Income tax expense reported in the
Statement of Comprehensive Income 6,959 6,340
Consolidated
2012 2012 2011 2011
$’000 $’000 $’000 $’000
Current Deferred Current Deferred
Income Income
Income Income
Tax Tax Tax Tax
Recognised deferred tax assets and liabilities
Opening balance (894) (12,210) (1,270) (12,256)
Charged to income (7,675) 716 (6,443) 103
Charged to equity - - - 170
Acquisitions/Disposals - - - (227)
Other payments 6,869 - 6,819 -
Closing balance (1,700) (11,494) (894) (12,210)
Tax expense in Statement of Comprehensive Income 6,959 6,340
Amounts recognised in the Statement of Financial Position:
Deferred tax asset 6,998 6,731
Deferred tax liability (18,492) (18,941)
(11,494) (12,210)
73
Statement of Financial Position
2012 2011
$’000 $’000
Deferred income tax
Deferred income tax at 30 June relates to the following:
Consolidated
Deferred tax liabilities
– Accelerated depreciation for tax purposes (5,737) (6,100)
– Revaluations of land and buildings to fair value (11,258) (11,258)
– Trade and other receivables not derived for tax purposes (1,497) (1,583)
(18,492) (18,941)
Deferred tax assets
– Equity raising costs 102 136
– Accelerated depreciation for accounting purposes 811 633
– Trade and other payables not currently deductible 813 1,091
– Trade and other receivables not derived for tax purposes 93 89
– Employee entitlements not currently deductible 5,179 4,782
6,998 6,731
Tax consolidation
Effective 1 July 2002, for the purposes of income taxation, K&S Corporation Limited and its 100% owned Australian resident
subsidiaries formed a tax consolidated group. K&S Corporation Limited is the head entity of the tax consolidated group.
Members of the group entered into a tax sharing arrangement in order to allocate income tax expense to the wholly-owned
subsidiaries. In addition, the agreement provides for the allocation of income tax liabilities between the entities should the
head entity default on its tax payment obligations. At balance date, the possibility of default is remote.
K&S Corporation Limited formally notified the Australian Tax Office of its adoption of the tax consolidation regime when
lodging its 30 June 2003 consolidated tax return.
Tax effect accounting by members of the tax consolidated group
Members of the tax consolidated group have entered into a tax funding agreement. The tax funding agreement requires
members of the tax consolidated group to make contributions to the head company for tax liabilities and deferred tax
balances arising from transactions occurring after the implementation of tax consolidation. Contributions are payable
following the payment of the liabilities by K&S Corporation Limited. The assets and liabilities arising under the tax funding
agreement are recognised as intercompany assets and liabilities with a consequential adjustment to income tax expense
or benefit.
In addition, the agreement provides for the allocation of income tax liabilities between the entities should the head entity
default on its tax payment obligations or upon leaving the Group.
In preparing the accounts for K&S Corporation Ltd for the current year, the following amounts have been recognised as tax
consolidation adjustments:
Parent
2012 2011
$’000 $’000
Total increase/(reduction) to tax expense of
K&S Corporation Ltd (7,537) (6,712)
Total increase/(reduction) to inter-company assets of
K&S Corporation Ltd 7,537 6,712
74
Consolidated
2012 2011
$’000 $’000
7 Earnings per Share
Basic earnings per share amounts are calculated by dividing net profit after
tax 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 equity holders of the parent by the weighted average
number of ordinary shares outstanding during the year plus the weighted
average number of ordinary shares that would be issued on the conversion
of all the dilutive potential ordinary shares into ordinary shares.
The following reflects the income and share data used in the basic and diluted
earnings per share computations:
Net profit attributable to ordinary equity holders of the parent
from continuing operations 16,447 14,828
Net profit attributable to ordinary equity holders of the parent 16,447 14,828
2012 2011
Thousands Thousands
Weighted average number of ordinary shares used in the calculation of the
basic earnings per share 87,720 80,849
Effect of dilution
– Ordinary Shares - -
Weighted average number of ordinary shares adjusted for the effect of dilution 87,720 80,849
Consolidated
2012 2011
$’000 $’000
8 Dividends Paid and Proposed
Declared and paid during the year:
Dividends on ordinary shares
Final franked dividend for 2011: 5.0 cents (2010: 7.0 cents) 4,327 5,148
Interim franked dividend for 2012: 5.0 cents (2011: 5.0 cents) 4,394 4,303
8,721 9,451
Proposed (not recognised as a liability as at 30 June):
Dividends on ordinary shares
Final franked dividend for 2012: 6.0 cents (2011: 5.0 cents) 5,356 4,327
Franking credit balance
The amount of franking credits available for the subsequent year are:
(cid:129) franking account balance as at the end of the financial year at 30% (2011: 30%) 44,708 41,493
(cid:129) franking credits that will arise from the payment of income tax payable as at
the end of the financial year 2,230 1,630
The amount of franking credits available for future reporting periods:
(cid:129) impact on franking account of dividends proposed but not recognised as a
distribution to equity holders during the period. (2,296) (1,849)
44,642 41,274
Tax rates
The tax rate at which dividends have been franked is 30% (2011: 30%).
Dividends proposed will be franked at the rate of 30% (2011: 30%).
75
Consolidated
2012 2011
$’000 $’000
9 Cash and Cash Equivalents
Cash 47
Cash deposits with banks 20,991
21,038
46
9,701
9,747
Cash at bank earns interest at floating rates based on daily bank deposit rates.
Reconciliation of net profit after income tax to net cash flows from operations
Net profit after income tax 16,447 14,828
Add/(less) items classified as investing/financing activities:
(1,966)
– (Profit)/loss on sale of non-current assets (2,580)
Add/(less) non-cash items:
– Amounts set aside to provisions 1,334 1,661
– Depreciation 24,405 25,089
– Share of associates’ net profit (106) (198)
– Dividends received from associates 148 -
Net cash provided by operating activities before changes in assets and liabilities 39,648 39,414
CHANGE IN ASSETS AND LIABILITIES
(286)
(Increase)/decrease in inventories 54
(686)
(Increase)/decrease in income tax benefit (264)
(262)
(Increase)/decrease in prepayments 90
(Increase)/decrease in receivables (4,944) (2,821)
(1,030)
(Decrease)/increase in trade creditors 4,000
(376)
(Decrease)/increase in income taxes payable 818
(Decrease)/increase in deferred taxes payable (465)
413
Exchange rate changes on opening cash balances 2 (236)
Net cash provided by/(used in) operating activities 38,939
34,130
Disclosure of financing facilities
Refer to Note 18.
Disclosure of non-cash financing and investing activities
Refer to Note 14(d).
76
Consolidated
2012 2011
$’000 $’000
10 Trade and Other Receivables
Current
64,751
Trade debtors 69,144
(292)
Allowance for impairment loss (a) (308)
68,836 64,459
3,037
Sundry debtors 4,353
73,189 67,496
Non-current
Sundry debtors - 776
Related party receivables
– Employee share plan loans 1,297 1,258
1,297 2,034
a) Allowance for impairment loss
Trade receivables are non-interest bearing and are generally
on 30-90 day terms. An allowance for doubtful debts is
made when there is objective evidence that a trade receivable
is impaired. The amount of the allowance/impairment loss
has been measured as the difference between the carrying
amount of the trade receivables and the estimated future cash
flows expected to be received for the relevant debtors.
Movements in the provision for impairment loss were as follows:
At 1 July 292 446
Charge for the year 250 2
Amounts written off (234) (156)
At 30 June 308 292
At 30 June, the aging analysis of trade receivables is as follows:
Consolidated Total 0-30 days 31-60 days 61-90 days 61-90 days +91 days +91 days
PDNI* CI** PDNI* CI**
2012 69,144 44,418 19,602 3,111 - 1,705 308
2011 64,751 41,281 16,374 6,075 - 729 292
* Past due not impaired (‘PDNI’)
** Considered impaired (‘CI’)
Receivables past due but not impaired payment terms have not been re-negotiated. 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.
b) Fair value and credit risk
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 Group’s
policy to transfer (on-sell) receivables to special purpose entities.
77
Consolidated
2012 2011
$’000 $’000
11 Inventories
Consumable stores – at cost 863 969
2,012
Finished goods – fuel at cost 2,064
Total inventories at the lower of cost and net realisable value 2,927 2,981
a) Inventory expense
Inventories recognised as an expense for the year ended
30 June 2012 totalled $62,477,000 (2011: $57,765,000)
for the Group. This expense has been included in the
cost of sales line item as a cost of inventories.
Parent
2012 2011
$’000 $’000
12 Other Financial Assets
Investments controlled entities
– Shares – unlisted at cost 32,418 32,418
32,418 32,418
Investment Carrying
Interest Owned Amount Consolidated
2012 2011 2012 2011
% % $’000 $’000
13 Investment in Associates
a) Investment details
Smart Logistics Pty Ltd 50 50 158
86
Dairy Transport Logistics Pty Ltd - 24.5 - 113
Investment in associates 158 199
Both Smart Logistics Pty Ltd and Dairy Transport Logistics Pty Ltd
are providers of distribution services and consultants in transport
and distribution. Smart Logistics Pty Ltd was incorporated in
Australia. Dairy Transport Logistics Pty Ltd was incorporated in
New Zealand.
b) Movements in the carrying amount of the
Group’s investment in associates
Consolidated
2012 2011
$’000 $’000
Dairy Transport Logistics Pty Ltd
At 1 July 113 -
Share of profit after income tax 34 112
Exchange rate changes on opening balances 1 1
Proceeds from the sale of shares (48) -
Dividend payment (100) -
At 30 June - 113
78
Consolidated
2012 2011
$’000 $’000
Smart Logistics Pty Ltd
At 1 July 86 -
Share of profit/(loss) after income tax 72 113
Dividend payment - -
Recovery of prior share losses not equity accounted - (27)
At 30 June 158 86
c) Share of associates’ commitments
Share of associates’ finance lease commitments:
Within one year 118 208
One year or later and no later than five years - 105
Minimum lease payments 118 313
Less: Future finance charges - (19)
Total lease liability 118 294
d) Summarised financial information
The following table illustrates summarised financial
information relating to the Group’s associates:
Extract from the associates’ Statement of Financial Position:
Current assets 6,385 9,329
Non-current assets 106 277
6,491 9,606
Current liabilities (6,172) (8,766)
Non-current liabilities (3) (204)
(6,175) (8,970)
Net assets/(liabilities) 316 636
Share of associates net assets/(liabilities) 158 226
Adjustments arising from equity accounting
– Recovery of prior share losses not equity accounted - (27)
158 199
Extract from the associates’
Statement of Comprehensive Income:
Revenue 80,409 118,618
Net profit 144 685
79
Consolidated
Freehold Land Motor Plant &
and Buildings Vehicles Equipment Total
$’000 $’000 $’000 $’000
14 Property, Plant and Equipment
a) Reconciliation of carrying amounts at the
beginning and end of the period:
Year ended 30 June 2012
As at 1 July 2011
net of accumulated depreciation and impairment 99,024 110,839 12,105 221,968
Additions 643 21,616 1,181 23,440
Disposals - (2,307) (2) (2,309)
Depreciation charge for the year (2,374) (18,739) (2,754) (23,867)
Exchange adjustment 6 208 2 216
At 30 June 2012
net of accumulated depreciation and impairment 97,299 111,617 10,532 219,448
At 30 June 2012
Cost or fair value 103,512 230,475 37,678 371,665
Accumulated depreciation and impairment (6,213) (118,858) (27,146) (152,217)
Net carrying amount 97,299 111,617 10,532 219,448
Year ended 30 June 2011
As at 1 July 2010
net of accumulated depreciation and impairment 90,618 95,062 11,489 197,169
Additions 10,346 21,335 2,560 34,241
Additions – Regal Transport - 17,065 692 17,757
Disposals - (1,941) - (1,941)
Depreciation charge for the year (1,920) (20,081) (2,627) (24,628)
Exchange adjustment (20) (601) (9) (630)
At 30 June 2011
net of accumulated depreciation and impairment 99,024 110,839 12,105 221,968
At 30 June 2011
Cost or fair value 102,862 223,150 45,777 371,789
Accumulated depreciation and impairment (3,838) (112,311) (33,672) (149,821)
Net carrying amount 99,024 110,839 12,105 221,968
b) Revaluation of freehold land and buildings
The freehold land and buildings are included in the
financial statements at fair value, except for capital
expenditure subsequent to the valuation which is recorded
at cost. The fair value of land and buildings in 2012 was
determined based on an independent valuation undertaken
in March 2010 by Jones Lang LaSalle on the basis of open
market values of properties for the highest and best use.
Directors have adopted this independent valuation as fair
value. This resulted in an increase to the Asset Revaluation
Reserve of $5,314,000.
80
Consolidated
Freehold Land Freehold Land
and Buildings and Buildings
2012 2011
$’000 $’000
c) Carrying amounts if land and buildings were measured
at cost less accumulated depreciation and impairment
If land and buildings were measured using the cost
model the carrying amounts would be as follows:
Cost 70,840 70,235
Accumulated depreciation and impairment (8,877) (7,510)
Net carrying amount 61,963 62,725
d) Property, plant and equipment pledged as security
for liabilities
The carrying value of motor vehicles held under hire purchase
contracts at 30 June 2012 is $66,335,014 (2011: $64,451,196).
Hire purchase liabilities are secured by the relevant asset.
Included in the balances of freehold land and buildings are
assets on which mortgages have been granted as security over
bank loans. The terms of the mortgages preclude the assets
being sold or used as security for further mortgages without
the permission of the mortgage holder. The mortgage
also requires buildings that form part of the security to be fully
insured at all times.
Consolidated
IT Development
Costs Goodwill Total
$’000 $’000 $’000
15 Intangible Assets and Goodwill
Year ended 30 June 2012
At 1 July 2011
net of accumulated amortisation and impairment 3,368 68,201 71,569
Amortisation (538) - (538)
Exchange adjustment - 77 77
At 30 June 2012
net of accumulated amortisation and impairment 2,830 68,278 71,108
At 30 June 2012
Cost (gross carrying amount) 3,953 68,278 72,231
Accumulated amortisation and impairment (1,123) - (1,123)
Net carrying amount 2,830 68,278 71,108
81
Consolidated
IT Development
Costs Goodwill Total
$’000 $’000 $’000
Year ended 30 June 2011
At 1 July 2010
net of accumulated amortisation and impairment 3,829 40,932 44,761
Additions – Regal Transport - 27,528 27,528
Amortisation (461) - ( 461)
Exchange adjustment - (259) (259)
At 30 June 2011
net of accumulated amortisation and impairment 3,368 68,201 71,569
At 30 June 2011
Cost (gross carrying amount) 3,953 68,201 72,154
Accumulated amortisation and impairment (585) - (585)
Net carrying amount 3,368 68,201 71,569
IT development costs have been capitalised at cost and relate
to the development of the Group’s new core freight system
(Panorama).
As from 1 July 2005, goodwill is no longer amortised but is
now subject to annual impairment testing (see Note 16).
No impairment loss was recognised for continuing operations
in the 2012 financial year.
16 Impairment Testing of Goodwill
Cash generating units
For the purpose of undertaking impairment testing, the
Group identify cash generating units (CGU’s) according to the
smallest group of assets that generate cash inflows that are
largely independent of the cash inflows from the other assets
or groups of assets.
Goodwill acquired through business combinations have been
allocated across three individual cash generating units as follows: Goodwill
2012 2011
$’000 $’000
Australian Transport 62,929 62,929
Fuel 165 165
New Zealand Transport 5,184 5,107
68,278 68,201
Impairment testing
The Group’s impairment testing compares the carrying value of each CGU with its recoverable amount as determined using
a value in use calculation.
The assumptions for determining the recoverable amount of each CGU are based on past experience and Senior
Management’s expectations for the future. The cash flow projections are based on financial budgets approved by Senior
Management covering a five-year period.
82
The Group has used the following key assumptions in determining
the recoverable amount of each CGU to which goodwill has
been allocated:
Terminal Value
Discount Rate Growth Rate
2012 2011 2012 2011
% % % %
Australian Transport 13.42 13.75 3.0 3.0
Fuel 13.42 13.75 3.0 3.0
New Zealand Transport 13.25 13.18 2.5 3.0
Discount rate
The discount rate represent the current market assessment of the risks specific to each CGU, taking into consideration the
time value of money and individual risks of the underlying assets that have not been incorporated in the cash flow estimates.
The discount rate calculation is based on the specific circumstances of the Group and its operating segments and is derived
from its weighted average cost of capital (WACC). The WACC takes into account both debt and equity. The cost of equity
is derived from the expected return on investment by the Group’s investors. The cost of debt is based on the interest
bearing borrowings the Group is obliged to service. Segment specific risk is incorporated by applying individual beta factors.
The beta factors are evaluated annually based on publicly available market data.
In determining impairment, management has considered any potential impact of the Clean Energy Bill 2011 (the “Bill” or
“Scheme”) will have on the Group. Management has initially estimated there will only be some minor increases in its cost
base as a result of the price on carbon. However, from July 2014, heavy on-road transport activities are to be included in the
carbon pricing regime, through a reduction in business fuel tax credits (“FTC”). Management anticipates that any reduction
in the FTC, will be passed through to customers via fuel surcharges. Accordingly, management have not adjusted any cash
flows. Also, given the level of uncertainty about the impact the Scheme will have, if any, management is unable to predict
what impact the imposition of the price on carbon may have on the Australian economy and its customer base generally.
Terminal growth rate
The terminal growth rate represents the growth rate applied to the extrapolated cash flows beyond the five year forecast
period. This is based on Senior Management expectations of the cash generating units’ long term performance in their
respective markets.
i) Sensitivity to changes in assumptions
With regard to the assessment of the carrying amount of each of the cash generating units, Management believe that
no reasonably possible change in any of the key assumptions would cause the carrying value to materially exceed its
recoverable amount.
Consolidated
2012 2011
$’000 $’000
17 Payables
Current
Trade creditors and payables 46,439 43,894
Self insured workers compensation liability 2,775 2,563
49,214 46,457
Non-current
Self insured workers compensation liability 6,358 4,929
6,358 4,929
i) Trade payables are non-interest bearing and are
normally settled on 30 day terms
83
Consolidated
2012 2011
$’000 $’000
18 Interest Bearing Loans and Borrowings
Current
Hire purchase liabilities – secured 16,693 15,070
16,693 15,070
Non-current
Non redeemable preference shares 60 60
Hire purchase liabilities – secured 33,110 32,650
Bank loans – secured 33,175 38,621
66,345 71,331
Commitments in respect of hire purchase agreements are payable as follows:
Not later than one year 19,683 18,195
Later than one year but not later than five years 36,360 36,274
56,043 54,469
Deduct: future finance charges (6,240) (6,749)
Total hire purchase liability 49,803 47,720
Current 16,693 15,070
Non-current 33,110 32,650
49,803 47,720
Fair value disclosures
The carrying amount of the Group’s current and non-current borrowings, approximate their fair value.
Details of the fair value of the Group’s interest bearing liabilities are set out in Note 3.
Hire purchase contracts
The consolidated entity leases plant and equipment under hire purchase agreements for periods of one to five years. At the
end of the term, the consolidated entity has the option to purchase the equipment at the agreed residual value.
Hire purchase liabilities are secured by the relevant asset.
The written down value of assets secured by hire purchase agreements is $66,335,014 (2011: $64,451,196). The weighted
average cost of these facilities was 7.27% (2011: 7.76%).
Bank loans
All bank loans are denominated in Australian dollars. Bank loans are secured by fixed and floating charges over the assets of
the consolidated entity. Bank loans are also secured by registered mortgages over a number of properties of the consolidated
entity to the extent of $87,870,000 (2011: $89,325,000). The non-current bank loans are subject to annual review.
The Group has bank loan facilities available for a period beyond June 2014. Maturity dates for the Group’s facilities are:
Facility amount ($‘000) Expiry
40,000 30 June 2014
40,000 4 July 2014
20,000 30 June 2015
The facilities bear interest at 5.93% (2011: 7.41%).
84
Consolidated
2012 2011
$’000 $’000
Financing facilities available
Total facilities available:
Bank overdrafts 4,000 4,000
86,387
Bank loans 86,091
13,613
Standby letters of credit 13,909
104,000 104,000
Standby letters of credit
The Group has the following guarantees at 30 June 2012:
(cid:129) Bank guarantee of $11,830,000 has been provided by the Westpac Banking
Corporation to Comcare for the due discharge of its liabilities to pay compensation
and other amounts under the Safety Rehabilitation and Compensation Act 1988;
(cid:129) A bank guarantee of $741,000 has been provided by the Westpac Banking
Corporation to the Victorian WorkCover Authority;
(cid:129) Other bank guarantees of $1,338,250 have been provided by the Westpac
Banking Corporation Limited to suppliers.
Facilities utilised at balance date:
Bank overdrafts - -
Bank loans 33,175 38,621
13,613
Standby letters of credit 13,909
47,084
52,234
Facilities not utilised at balance date:
Bank overdrafts 4,000 4,000
Bank loans 52,916 47,766
Standby letters of credit - -
56,916
51,766
Total facilities 104,000 104,000
Facilities used at balance date 47,084 52,234
Facilities unused at balance date 56,916 51,766
Bank overdrafts
The bank overdrafts within the consolidated entity are secured by a guarantee from
the Company. The bank overdraft is secured by fixed and floating charges over the
assets of the consolidated entity. The facilities are subject to annual review by the
banks concerned and have been extended to after 30 June 2014.
85
Consolidated
2012 2011
$’000 $’000
Assets pledged as security
Included in the balances of freehold land and buildings are assets on which mortgages
have been granted as security over bank loans. The terms of the mortgages preclude
the assets being sold or used as security for further mortgages without the permission
of the mortgage holder. The mortgage also requires buildings that form part of the
security to be fully insured at all times.
The carrying amount of assets pledged as security for current and non-current interest
bearing liabilities are:
Non-current
First mortgage
– Freehold land and buildings 86,637 87,800
– Plant and equipment 1,233 1,525
Total non-current assets pledged as security 87,870 89,325
Non-cash financing and investment activities
During the financial year, the economic entity acquired property, plant and
equipment with an aggregate fair value of $18,551,000 (2011: $21,094,000)
and disposed of property, plant and equipment with an aggregate fair value of
$nil (2011: $nil) by means of finance lease or hire purchase arrangements.
These acquisitions and disposals are not reflected in the Statement of Cash Flows.
19 Provisions
Current
Employee benefits 14,480 13,353
14,480
13,353
Non-current
Employee benefits 2,200
2,044
Make good provision 356 121
544
Directors’ retirement allowance 583
3,139
2,709
No dividends have been provided for the year ended 30 June 2012. The extent
to which dividends were franked, details of the franking account balance at balance
date and franking credits available for the subsequent financial year are disclosed
in Note 8.
86
Directors’
Make Good Retirement
Provision Allowance Total
$’000 $’000 $’000
a) Movements in provisions
Movements in each class of provision during the financial
year, other than provisions relating to employee benefits,
are set out below:
CONSOLIDATED
At 1 July 2011 121 544 665
Arising during the year 235 39 274
Utilised - - -
At 30 June 2012 356 583 939
Current 2012 - - -
Non-Current 2012 356 583 939
356 583 939
Current 2011 - - -
Non-Current 2011 121 544 665
121 544 665
b) Nature and timing of provisions
i) Make good provision
In accordance with various lease agreements, the Group
must restore leased premises in Western Australia, Victoria
and New South Wales to their original condition at the
end of the leases.
Because of the long-term nature of the liability, the greatest
uncertainty in estimating the provisions is the costs that will
ultimately be incurred.
ii) Long service leave
Refer to Note 2(y) and Note 2(bb) for the relevant
accounting policy and a discussion of the significant
estimates and assumptions applied in the measurement
of this provision.
iii) Directors retirement allowance
Refer to Note 2(y) for the relevant accounting policy and
a discussion of the significant estimates and assumptions
applied in the measurement of this provision.
87
Consolidated
2012 2011
$’000 $’000
20 Contributed Equity and Reserves
a) Ordinary shares
Contributed equity
89,273,615 (2011: 86,285,496) ordinary shares fully paid 97,707 94,276
97,707 94,276
Effective 1 July 1998, the Corporations legislation abolished the concepts of
authorised capital and par value shares. Accordingly the Company does not have
authorised capital nor par value in respect of its issued capital.
Fully paid ordinary shares carry one vote per share, either in person or by proxy, at
a meeting of the Company and carry the right to receive dividends as declared.
Thousands $’000
Movements in ordinary shares on issue
At 1 July 2010 72,593 64,528
Issued to acquire Regal Transport – 950,000 ordinary shares at $2.80 950 2,660
Issued through Dividend Re-investment Plan – 225,552 ordinary shares at $2.68 225 604
Issued through Rights Issue – 12,295,560 ordinary shares at $2.15 12,296 26,435
Issued through Dividend Re-investment Plan – 221,883 ordinary shares at $2.00 222 444
Transaction costs – Rights Issue - (395)
At 30 June 2011 86,286 94,276
Issued through Employee Share Plan – 244,500 ordinary shares at $1.33 244 325
Issued through Dividend Re-investment Plan – 1,363,639 ordinary shares at $1.14 1,364 1,561
Issued through Dividend Re-investment Plan – 1,379,980 ordinary shares at $1.12 1,380 1,545
At 30 June 2012 89,274 97,707
b) Capital management
When managing capital, the Group’s objective is to ensure the entity continues as
a going concern as well as to maintain optimal returns to Shareholders and benefits
to other stakeholders. Management also aims to maintain a capital structure that
ensures the lowest cost of capital available to the entity. The Group is not subject
to any externally imposed capital requirements.
During 2012, the Group paid dividends of $8,721,000 (2011: $9,451,000).
88
Consolidated
2012 2011
$’000 $’000
Management monitor capital through the gearing ratio
(net debt/net debt + Shareholders funds). The gearing ratios based
on continuing operations at 30 June were as follows:
Total interest bearing loans and borrowings 83,038 86,401
Less cash and cash equivalents (21,038) (9,747)
Net debt 62,000 76,654
Net debt + Shareholders funds 286,934 290,260
Gearing ratio 21.6% 26.4%
Nature and purpose of reserves
Asset revaluation reserve
The asset revaluation reserve is used to record increases in the fair value of land and
buildings and decreases to the extent that such decreases relate to an increase on the
same asset previously recognised in equity.
Foreign currency translation reserve
The foreign currency translation reserve is used to record exchange differences arising
from the translation of the financial statements of foreign operations.
21 Derivative Financial Instruments
a) Hedging activities
During the year, derivative financial instruments were used by the Group to hedge exposure to fluctuations in interest rates.
The Group had the following interest rate swap agreements that expired throughout 2012:
– with a notional amount of $20,000,000 whereby it received a variable rate equal to the AUS-BBR-BBSW and paid a fixed
interest rate of 7.68% on the notional amount. This agreement commenced in April 2009 and expired in March 2012.
– with a notional amount of $4,000,000 NZD whereby it received a variable rate equal to the NZD-BBR-BID and
paid a fixed interest rate of 7.97% on the notional amount. This agreement commenced in April 2009 and expired
in March 2012.
The Group has no interest rate swap agreements in place at 30 June 2012.
b) Interest rate risk
Information regarding interest rate risk exposure is set out in Note 3.
89
Consolidated
2012 2011
$’000 $’000
22 Commitments
The estimated maximum amount of commitments not
provided for in the accounts as at 30 June 2012 are:
Capital expenditure commitments
The aggregate amount of contracts for capital expenditure
on plant and equipment due no later than one year 12,254
3,253
Lease rental commitments
Operating lease and hire commitments:
– Not later than one year 10,147 9,980
24,220
– Later than one year but not later than five years 24,875
17,228
– Later than five years 14,495
49,517 51,428
The consolidated entity leases property under non-cancellable
operating leases expiring from one to fiftenn years.
Leases generally provide the consolidated entity with a right
of renewal, at which time all terms are renegotiated.
Lease payments comprise a base amount plus an incremental
contingent rental. Contingent rentals are based on either
movements in the Consumer Price Index or operating criteria.
Finance lease commitments are disclosed in Note 18.
23 Contingent Liabilities
Guarantees
Cross guarantees given by the Company and its wholly owned
controlled entities are described in Note 24.
Legal claim
There are a number of minor legal actions pending against
companies within the consolidated entity.
Liability has not been admitted and the claims will be defended.
The Directors do not believe these actions will result in any
significant cost to the consolidated entity.
90
24 Deed of Cross Guarantee
Pursuant to ASIC Class Order 98/1418 (as amended) dated 13 August 1998, the
wholly owned subsidiaries listed below are relieved from the Corporations Act 2001
requirements for preparation, audit and lodgement of financial reports, and
Directors' reports. It is a condition of the Class Order that the Company and each
of the subsidiaries enter into a Deed of Cross Guarantee. The effect of the Deed is
that the Company guarantees to each creditor payment in full of any debt in
the event of winding up of any of the subsidiaries under certain provisions of the
Corporations Act 2001. If a winding up occurs under other provisions of the Act,
the Company will only be liable in the event that after six months any creditor has
not been paid in full. The subsidiaries have also given similar guarantees in the
event that the Company is wound up.
The subsidiaries subject to the Deed are:
Reid Bros Pty Ltd
Kain & Shelton Pty Ltd
K&S Freighters Pty Ltd
K&S Group Administrative Services Pty Ltd
Kain & Shelton (Agencies) Pty Ltd
K&S Transport Management Pty Ltd
Blakistons-Gibb Pty Ltd
K&S Logistics Pty Ltd
K&S Project Services Pty Ltd
K&S Integrated Distribution Pty Ltd
K&S Group Pty Ltd
DTM Holdings (No. 2) Pty Ltd
Alento Pty Ltd
DTM Holdings Pty Ltd
DTM Pty Ltd
Regal Transport Group Pty Ltd
Strategic Transport Pty Ltd
Vortex Nominees Pty Ltd
K&S Freighters Limited *
Cochrane’s Transport Limited *
* Both K&S Freighters Limited and Cochrane’s Transport Limited are
New Zealand entities.
A consolidated Statement of Comprehensive Income and consolidated Statement
of Financial Position, comprising the Company and subsidiaries which are a party to
the Deed, after eliminating all transactions between parties to the Deed of Cross
Guarantee, at 30 June 2012 is set out below:
Closed Group
2012 2011
$’000 $’000
Statement of Comprehensive Income
Profit before income tax 23,406 21,168
Income tax expense (6,959) (6,340)
Profit after income tax 16,447 14,828
Retained profits at the beginning of the year 94,823 89,446
(9,451)
Dividends provided for or paid (8,721)
Retained earnings at the end of the year 102,549 94,823
91
Closed Group
2012 2011
$’000 $’000
Statement of Financial Position
Cash 21,038 9,747
Trade and other receivables 73,189 67,496
Inventories 2,927 2,981
Prepayments 5,192 5,277
Total current assets 102,346 85,501
Other receivables 1,297 2,034
Investment in associates 158 199
Property, plant and equipment 219,448 221,968
Intangibles 71,108 71,569
6,731
Deferred tax assets 6,998
Total non-current assets 299,009
302,501
Total assets 401,355
388,002
46,457
Trade and other payables 49,214
15,070
Interest bearing loans and borrowings 16,693
894
Current tax liabilities 1,700
Provisions 14,480
13,353
Derivatives - 712
Total current liabilities 82,087
76,486
Other payables 6,358 4,929
71,331
Interest bearing loans and borrowings 66,345
18,941
Deferred tax liabilities 18,492
2,709
Provisions 3,139
Total non-current liabilities 94,334
97,910
Total liabilities 176,421
Net assets 224,934
Contributed equity 97,707
Reserves 24,678
Retained earnings 102,549
174,396
213,606
94,276
24,507
94,823
Total equity 224,934 213,606
92
Class of Country of % Equity Interest
2012 2011
Share Incorporation
25 Controlled Entities
Particulars in relation to controlled entities
Name
K&S Corporation Limited
Controlled Entities
Reid Bros Pty Ltd Ord Australia
Kain & Shelton Pty Ltd Ord Australia
K&S Freighters Pty Ltd Ord Australia
K&S Group Administrative Services Pty Ltd Ord Australia
Kain & Shelton (Agencies) Pty Ltd Ord Australia
K&S Transport Management Pty Ltd Ord Australia
Blakistons-Gibb Pty Ltd Ord Australia
K&S Logistics Pty Ltd Ord Australia
K&S Integrated Distribution Pty Ltd Ord Australia
K&S Group Pty Ltd Ord Australia
DTM Holdings (No. 2) Pty Ltd Ord Australia
Alento Pty Ltd Ord Australia
DTM Holdings Pty Ltd Ord Australia
DTM Pty Ltd Ord Australia
K&S Project Services Pty Ltd Ord Australia
Regal Transport Group Pty Ltd Ord Australia
Strategic Transport Services Pty Ltd Ord Australia
Vortex Nominees Pty Ltd Ord Australia
K&S Freighters Limited Ord New Zealand
Cochrane’s Transport Limited Ord New Zealand
100 100
100 100
100 100
100 100
100 100
100 100
100 100
100 100
100 100
100 100
100 100
100 100
100 100
100 100
100 100
100 100
100 100
100 100
100 100
100 100
26 Related Party Disclosures
DIRECTORS
The names of each person holding the position of Director of K&S Corporation Limited during the financial year and up
to the date of signing the financial report are Messrs. T Johnson, R Nicholson, G Boulton, B Grubb, R Smith, G Stevenson
and L Winser.
Apart from the details disclosed in this note, no Director has entered into a material contract with the Company or
the consolidated entity since the end of the previous financial year and there were no material contracts involving Directors'
interests subsisting at year end.
Other transactions with the Company or its Controlled Entities
The estate of Mr A A Scott, the major Shareholder of the following entities which provide goods and services to the
economic entity.
AA Scott Pty Ltd Scott’s Agencies Pty Ltd
Ascot Haulage (NT) Pty Ltd Scott’s Management Pty Ltd
The Border Watch Pty Ltd Scott’s Transport Industries Pty Ltd
Scott Corporation Limited First Radio Pty Ltd
Northern Territory Freight Services Pty Ltd
Mr Grubb is the former Chief Executive Officer of the Scott Group of Companies and is a former Director of a number of other
Companies within the Scott Group, one of which (AA Scott Pty Ltd) is the largest Shareholder of K&S Corporation Limited.
Mr Grubb also remains a Director of some entities within the Scott Group of Companies. Transactions with these companies
include sale and purchase of cartage services, advertising services, sale and purchase of fuel and other related products.
First Radio Pty Ltd has an interest in a transport facility in Adelaide which the Company rents on a commercial basis.
Rent in 2012 was $376,249 (2011: $362,861).
Mr Johnson has an interest as a Director of AA Scott Pty Ltd.
Mr Johnson has an interest as Chairman and Mr Grubb as Non-Executive Director in the publicly listed company Scott
Corporation Limited. Transactions with this company during 2012 included sales of $235,025 (2011: $12,200) and purchase
of transport related services totalling $1,797,971 (2011: $5,060,208).
93
2012 2011 2012 2011
$ $ $ $
Purchases Sales
The aggregate amount of dealings with these companies
during 2012 were as follows:
Ascot Haulage (NT) Pty Ltd 1,078,919 1,137,414 - -
Northern Territory Freight Services Pty Ltd 3,485 13,397 26,888 9,270
Scott’s Transport Industries Pty Ltd 156,110 190,398 1,124,324 1,987,179
Scott’s Agencies Pty Ltd 2,348,825 3,016,382 305 64,258
The Border Watch Pty Ltd 4,224 5,261 -
-
Mr Johnson has an interest as a partner in Johnson, Winter &
Slattery, a firm of solicitors. This firm renders legal advice to
the economic entity. The aggregate amount of dealings with
this firm during 2012 was $1,191 (2011: $1,879) in professional
service fees.
Mr L Winser had an interest as Director of Smart Logistics Pty Ltd
(an associated entity). Transactions with this company included the
sale of cartage. The aggregate amount of sales to this company
during 2012 was $28,742,000 (2011: $30,521,000).
Mr R Smith has an interest as Director of Transpacific Industries
Limited. Transactions with this company during 2012 were sales
of $246,167 and purchases of $37,792.
Consolidated
2012 2011
$’000 $’000
Amounts payable to and receivable from Directors and
their Director related entities at balance date arising from
these transactions were as follows:
Current receivables (included within trade debtors)
Scott’s Transport Industries Pty Ltd 32 196
Northern Territory Freight Services Pty Ltd -
2
Smart Logistics Pty Ltd 1,996
2,078
Dairy Transport Logistics Ltd 284 95
No provision for doubtful debts has been
recognised in respect of these balances as they
are considered recoverable.
Current payables (included within trade payables)
78
Ascot Haulage (NT) Pty Ltd 404
17
Scott’s Transport Industries Pty Ltd 5
508
Scott Corporation Ltd 177
Wholly-owned Group
Details of interests in wholly-owned controlled entities
are set out at Note 25.
94
Parent
2012 2011
$’000 $’000
Details of dealings with these entities are set out below:
Balances with entities within the wholly-owned group
The aggregate amounts receivable from, and payable to,
wholly-owned controlled entities by the Company at balance date:
Receivables
– Current 102,106 110,690
– Non-current 17,961 17,961
120,067 128,651
Payables – Current
– Other loans - 10,967
- 10,967
Terms and conditions of transactions within
the wholly-owned group
Sales to and purchases from within the wholly-owned group
are made at arm’s length. Terms and conditions of the
tax funding agreement are set out in Note 6. Outstanding
balances at year-end are unsecured and interest free.
Dividends
Dividends received or due and receivable by the
Company from wholly-owned controlled entities amount
to $10,000,000 (2011:$10,000,000).
Consolidated
2012 2011
DIRECTORS’ SHARE TRANSACTIONS
Shareholdings
Aggregate number of shares held by Directors and their
Director-related entities at balance date:
– Ordinary shares 709,646 1,707,740
– Preference shares - -
All share transactions were with the parent Company,
K&S Corporation Limited.
$’000 $’000
Dividends
Aggregate amount of dividends paid in respect of shares held
by Directors or their Director-related entities during the year:
– Ordinary shares 178 122
– Preference shares - -
Directors' transactions in shares and share options
Purchases of shares by Directors and Director-related entities
are set out in Note 27.
Ultimate parent entity
The immediate parent entity and ultimate controlling entity of
K&S Corporation Ltd is AA Scott Pty Ltd, a company incorporated
in South Australia.
95
27 Key Management Personnel
a) Details of Key Management Personnel
i) Directors
Mr T Johnson Non-Executive Chairman
Mr G Boulton Non-Executive Deputy Chairman
Mr R Smith Non-Executive
Mr R Nicholson Non-Executive
Mr B Grubb Non-Executive
Mr L Winser Managing Director – Retired 25 May 2012
Mr G Stevenson Managing Director – Appointed 28 May 2012
ii) Executives
Mr B Walsh Chief Financial Officer
Mr C Bright General Counsel & Company Secretary
Mr G Wooller Chief Operating Officer
Mr P Sarant Executive General Manager DTM
Mr G Everest Executive General Manager Regal Transport
Mr S Hine Executive General Manager Business Development
Ms K Evans General Manager Human Resources
Mr S Skazlic General Manager HS&E /Compliance
Consolidated
2012 2011
$ $
b) Compensation for Key Management Personnel
Short-term 3,275,862 2,595,811
Long-term 50,978 40,323
Post employment 416,889 316,972
3,743,729 2,953,106
c) Loans to Key Management Personnel
Details of aggregates of loans to Key Management
Personnel are as follows:
Balance at Balance at Number
Beginning of Period Write-off End of Period in Group
$’000 $’000 $’000
2012 247 - 291 6
2011 346 - 247 5
There are no loans to any Key Management Personnel
above $100,000 in the reporting period.
Loans to Key Management Personnel are made
pursuant to the K&S Corporation Limited Employee
Share Plan (“Plan”). As part of the Plan, loans are
interest free with K&S Corporation, to fund the
purchase of shares in the Company. Shares issued
under the Plan are subject to a holding lock until the
loan is repaid in full. Non-Executive Directors are
not eligible to participate in the Plan.
No other loans are made to any Key
Management Personnel.
d) Remuneration options: granted and vested during
the year
K&S Corporation Limited does not operate any
option based schemes for its executives, employees
or Directors.
96
e) Shareholding of Key Management Personnel
Balance Balance
1 July 2011 Net Change 30 June 2012
Shares held in K&S Corporation Limited: Ordinary Ordinary Ordinary
30 June 2012
Non-Executive Directors
T Johnson 257,789 23,277 281,066
G Boulton 184,375 54,256 238,631
R Smith 20,789 15,000 35,789
R Nicholson 26,558 2,397 28,955
B Grubb 125,205 - 125,205
Executive Director
L Winser 1,093,024 58,175 1,151,199*
G Stevenson - - -
Other Key Management Personnel
B Walsh 85,332 20,700 106,032
C Bright 21,000 10,000 31,000
G Wooller 38,229 11,015 49,244
P Sarant 38,000 46,603 84,603
G Everest - - -
S Hine - 10,000 10,000
K Evans 15,000 - 15,000
S Skazlic 2,205 1,000 3,205
Total 1,907,506 252,423 2,159,929
* Shareholding balance as at date of retirement (25 May 2012)
Balance Balance
1 July 2010 Net Change 30 June 2011
Shares held in K&S Corporation Limited: Ordinary Ordinary Ordinary
30 June 2011
Non-Executive Directors
T Johnson 210,088 47,701 257,789
G Boulton 150,258 34,117 184,375
R Smith 17,819 2,970 20,789
R Nicholson 21,642 4,916 26,558
B Grubb 107,317 17,888 125,205
Executive Director
L Winser 460,471 632,553 1,093,024
Other Key Management Personnel
B Walsh 73,860 11,472 85,332
C Bright 19,000 2,000 21,000
G Wooller 32,392 5,837 38,229
P Sarant 20,000 18,000 38,000
G Everest - - -
K Evans 15,000 - 15,000
Total 1,127,847 777,454 1,905,301
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.
97
28 Events Subsequent to Balance Date
On 21 August 2012, the Directors of K&S Corporation Limited
declared a final dividend on ordinary shares in respect of the 2012
financial year. The total amount of the dividend is $5,356,417,
which represents a fully franked dividend of 6.0 cents per share.
The dividend is payable on 31 October 2012 and has not been
provided for in the 30 June 2012 financial statements.
The Dividend Reinvestment Plan (DRP) will apply to the final
dividend and the issue price for shares under the DRP will be
based on the weighted average trading price of K&S shares in the
five business days ending on 17 October 2012 (the record date
of the final dividend), less a discount of 2.5%.
Other than the matters above, there has not arisen in the interval
between the end of the financial year and the date of this report
any item, transaction or event of a material and unusual nature
likely, in the opinion of the Directors of the Company, to affect
significantly the operations of the consolidated entity, the results
of those operations, or the state of affairs of the consolidated
entity in future financial years.
Consolidated
2012 2011
$ $
29 Auditor’s Remuneration
The auditor of K&S Corporation Limited is Ernst & Young.
Audit services:
Audit and review of the statutory financial reports 185,500 179,000
185,500 179,000
Other services:
Other services – Ernst & Young:
– IT Disaster Recovery Review 9,820 -
9,820 -
98
30 Business Combinations
Acquisitions in 2012
No acquisitions were completed in 2012.
Acquisitions in 2011
Acquisition of Regal Transport
On 8 July 2010, K&S Corporation Limited acquired the Perth-based Regal Transport Group (“Regal”). Regal was formed in
March 2009 with the merger of N&L Transport and Strategic Transport Services Pty Ltd. At the time of acquisition, Regal
generated annual revenues of $50 million and employed over 120 people.
The consideration transferred was $41,845,000 and comprised an issue of equity instruments and cash. The Group issued
950,000 ordinary shares with a fair value of $2.80 each. The provisional fair value of identifiable net assets is $14,317,000.
Key factors contributing to the $27,528,000 of goodwill are the synergies existing within the acquired business and synergies
expected to be achieved as a result of combining Regal Transport with Pacific Transport and the rest of the Group. The Regal
acquisition will extend the footprint achieved by the Pacific Transport acquisition to the oil, gas and resources sectors of
Western Australia.
The provisional fair values of identifiable assets and liabilities is as follows:
Fair Value at
Acquisition Date Carrying Value
$’000 $’000
Trade and other receivables 7,715 7,715
Plant & equipment 17,757 15,608
Prepayments 206 67
Deferred tax assets 269 -
25,947 23,390
Trade and other payables (3,110) (3,110)
Interest bearing loans and borrowings (7,048) (7,048)
Income tax payable (80) (80)
Provision for employee entitlements (896) (747)
Deferred tax liability (496) -
(11,630) (10,985)
Provisional fair value of identifiable net assets 14,317
Goodwill arising on acquisition 27,528
41,845
Acquisition-date fair-value of consideration transferred
Shares issued 2,660
Cash paid 39,185
Consideration transferred 41,845
Direct costs relating to the acquisition 150
Cash outflow on acquisition is as follows:
Cash paid (39,185)
Cash outflow on acquisition (39,185)
The consolidated Statement of Comprehensive Income includes
sales revenue and net profit before tax for the year ended
30 June 2011 of $60,450,000 and $4,329,000 respectively, as
a result of the acquisition of Regal Transport.
99
Parent
2012 2011
$’000 $’000
31 Parent Entity Information
Current assets 102,106 110,690
Total assets 154,094 162,627
Current liabilities (2,419) (12,695)
Total liabilities (35,132) (48,367)
Issued capital 97,707 94,276
Asset revaluation reserve 161 161
Retained earnings 21,094 19,823
Total Shareholders’ equity 118,962 114,260
Profit after tax of the Parent entity 9,992 10,000
Total comprehensive income of the Parent entity 9,992 10,000
Guarantees
Cross guarantees given by the Company and its wholly owned
controlled entities are described in Note 24.
Contingent liabilities
Contingent liabilities of the Company and its wholly owned
controlled entities are outlined in Note 23.
100
In accordance with a resolution of the Directors of K&S Corporation Limited,
we state that:
In the opinion of the Directors:
a) the financial report of the Company and of the consolidated entity is
in accordance with the Corporations Act 2001, including:
i) giving a true and fair view of the Company’s financial position
as at 30 June 2012 and of its performance for the year ended on
that date; and
ii) complying with Accounting Standards (including the Australian
Accounting Interpretations) and the Corporations Regulations 2001.
b) the financial statements and notes also comply with International
Financial Reporting Standards as disclosed in Note 2 (b).
c) there are reasonable grounds to believe that the Company will be able
to pay its debts as and when they become due and payable.
d) this declaration has been made after receiving the declarations required
to be made to the Directors in accordance with section 295A of the
Corporations Act 2001 for the financial period ending 30 June 2012.
e) as at the date of this declaration, there are reasonable grounds to
believe that the members of the Closed Group identified in Note 24 will
be able to meet any obligations or liabilities to which they are or may
become subject to, by virtue of the Deed of Cross Guarantee.
Dated at Melbourne this 21st day of August 2012.
On behalf of the Board:
Tony Johnson
Chairman
Greg Stevenson
Managing Director
101
In relation to our audit of the financial report of K&S Corporation
Limited for the financial year ended 30 June 2012, to the best
of my knowledge and belief, there have been no contraventions
of the auditor independence requirements of the Corporations
Act 2001 or any applicable code of professional conduct.
Ernst & Young
David Sanders
Partner
Adelaide
21 August 2012
Liability Limited by a scheme approved under Professional
Standards Legislation
102
Report on the Financial Report
We have audited the accompanying financial report of K&S Corporation Limited, which comprises
the consolidated statement of financial position as at 30 June 2012, the consolidated statement
of 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 controls as the directors determine are necessary to
enable the preparation of the financial report that is free from material misstatement, whether
due to fraud or error. In Note 2, the directors also state, in accordance with Accounting Standard
AASB 101 Presentation of Financial Statements, 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 controls relevant to the entity’s preparation and fair presentation of the financial
report 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 entity’s internal controls.
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.
Independence
In conducting our audit we have complied with the independence requirements of the Corporations
Act 2001. We have given to the directors of the company a written Auditor’s Independence
Declaration, a copy of which is included in the directors’ report.
Liability Limited by a scheme approved under Professional Standards Legislation
103
Opinion
In our opinion:
a. the financial report of K&S 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 at 30 June 2012
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.
Report on the Remuneration Report
We have audited the Remuneration Report included in pages 24 to 29 of the directors’ report for the year
ended 30 June 2012. 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 K&S Corporation Limited for the year ended 30 June 2012,
complies with section 300A of the Corporations Act 2001.
Ernst & Young
David Sanders
Partner
Adelaide
21 August 2012
Liability Limited by a scheme approved under Professional Standards Legislation
104
DISTRIBUTION OF SHAREHOLDINGS
Ordinary Shares
Number of Shareholders
1-1,000 Shares 421
1,001 - 5,000 Shares 885
5,001 - 10,000 Shares 390
10,001 - 100,000 Shares 490
100,001 and more Shares 47
2,233
134 shareholders hold less than a marketable parcel (336 shares).
TWENTY LARGEST SHAREHOLDERS
Name Number of Ordinary Shares Held %
1 AA Scott Pty Ltd 44,976,960 50.38
2 Citicorp Nominees Pty Limited 5,901,817 6.61
3 Bell Potter Nominees Ltd 2,726,732 3.05
4 Ascot Media Investments Pty Ltd 1,963,630 2.20
5 National Nominees Limited 1,462,567 1.64
6 Oakcroft Nominees Pty Ltd 1,013,268 1.14
7 Diversified United Investment Limited 975,000 1.09
8 Zena Kaye Winser 922,708 1.03
9 HSBC Custody Nominees Australia 919,063 1.03
10 J P Morgan Nominees Australia Limited 887,424 0.99
11 Winscott Investments Pty Ltd 875,992 0.98
12 Sabadin Petroleum Pty Ltd 827,254 0.93
13 Tribridge Holdings Pty Ltd 750,000 0.84
14 Mr Eric Joseph Roughana 700,000 0.78
15 Mr Barry William Page & Mrs Janice Mary Page 530,876 0.59
16 Mr William Clifton Anderson 424,275 0.48
17 Mr John Irving Stepnell & Mrs Valerie Iris Stepnell 421,500 0.47
18 Dixson Trust Pty Ltd 364,430 0.41
19 J P Morgan Nominees Australia Limited 361,478 0.40
20 Mr Adrian Keith Crook & Mrs Samantha Jane Crook 300,000 0.34
20 DeBruin Nominees Pty Ltd 300,000 0.34
67,604,974 75.73
AA Scott Pty Limited is the registered holder of all the 6% Non Redeemable Cumulative Preference Shares,
participating to 8%.
The 20 largest Shareholders hold 75.73% of the ordinary shares of the Company, and 100% of the
preference shares.
The following is an extract from the Company’s Register of Substantial Shareholders as at 17th September 2012:
Number % of Class
Estate of Mr A A Scott 44,976,960 50.38
Commonwealth Bank of Australia 4,514,321 5.06
VOTING RIGHTS
The voting rights are as follows:
Preference Shares: Nil
Ordinary Shares: 1 vote per share
105
HEAD OFFICE
Ballarat
Napier
Perth
16-30 Sheffield Road
Kewdale,
Western Australia 6105
Phone: (08) 6466 6646
Facsimile: (08) 6466 6697
Regal Transport
Perth
5 Kalamunda Road
South Guildford,
Western Australia 6935
Phone: (08) 9376 9600
Facsimile: (08) 9376 9666
Broome
18 McDaniel Road
Broome,
Western Australia 6725
Phone: (08) 9192 6599
Facsimile: (08) 9192 6588
Derby
23 Rodgers Street
Derby, Western Australia 6728
Phone: (08) 9193 1771
Facsimile: (08) 9191 2880
Karratha
Lot 102 Mooligun Road
Karratha,
Western Australia 6714
Phone: (08) 9144 1151
Facsimile: (08) 9144 1122
Newman
Lot 1583 Woodstock Street
Newman,
Western Australia 6753
Phone: (08) 9175 2300
Facsimile: (08) 9175 2878
Port Hedland
Lot 2521 Miller Street
Port Hedland,
Western Australia 6725
Phone: (08) 9140 2778
Facsimile: (08) 9140 2740
K&S Project Services
Perth
Lot 1 Kewdale Freight Precinct
Off Fenton Street, Kewdale
Western Australia 6105
Phone: (08) 6466 6650
Facsimile: (08) 6466 6699
591 Boundary Road
Truganina, Victoria 3029
Phone: (03) 8744 3500
Facsimile: (03) 8744 3599
REGISTERED OFFICE
141-147 Jubilee Highway West
Mount Gambier
South Australia 5290
Phone: (08) 8721 1700
Facsimile: (08) 8721 1799
STOCK EXCHANGE
The Company is on the official
list of the Australian Stock
Exchange Limited. The Company’s
Home Exchange is Australian Stock
Exchange (Adelaide) Limited.
SHARE REGISTRY
c/o Computershare Investor
Services Pty Ltd
Level 5, 115 Grenfell Street
Adelaide, South Australia 5000
Phone: (08) 8236 2300
Facsimile: (08) 8236 2305
GPO Box 1903
Adelaide SA 5001
Enquiries within Australia:
1300 556 161
Enquiries outside Australia:
61 3 9415 5000
Email:
web.queries@computershare.com.au
Website: www.computershare.com
WEBSITE
www.ksgroup.com.au
OPERATIONS
ROAD, RAIL AND SEA
Melbourne
591 Boundary Road
Truganina, Victoria 3029
Phone: (03) 8744 3700
Facsimile: (03) 8744 3799
Portland
53 Fitzgerald Street
Portland, Victoria 3305
Phone: (03) 5523 4144
Facsimile: (03) 5523 5647
Geelong
325 Thompson Road
North Geelong, Victoria 3215
Phone: (03) 5278 5777
Facsimile: (03) 5278 5230
c/o Laminex Industries
16 Trewin Street
Wendouree, Victoria 3355
Phone: (03) 5338 1710
Facsimile: (03) 5338 1136
Sydney
1 Hope Street
Enfield, New South Wales 2136
Phone: (02) 9735 2400
Facsimile: (02) 9735 2499
Brisbane
34 Postle Street
Coopers Plains, Queensland 4108
Phone: (07) 3137 4400
Facsimile: (07) 3137 4441
Bundaberg
Old Qunaba Mill, Grange Road
Bundaberg, Queensland 4670
Phone: (07) 4159 2150
Facsimile: (07) 4159 1825
Perth
Lot 1 Kewdale Freight Precinct
Off Fenton Street
Kewdale, Western Australia 6105
Phone: (08) 6466 6600
Facsimile: (08) 6466 6699
Bunbury
91 Moore Road
Dardanup, Western Australia 6236
Phone: (08) 9725 4400
Facsimile: (08) 9725 4949
Adelaide
Cnr Bedford Street
and Kapara Road
Gillman, South Australia 5013
Phone:(08) 7224 5400
Facsimile:(08) 7224 5497
Mount Gambier
141-147 Jubilee Highway West
Mount Gambier,
South Australia 5290
Phone: (08) 8721 1700
Facsimile: (08) 8721 1799
New Zealand
Cambridge
3847 Te Awamutu Road
Cambridge, New Zealand
Phone: (07) 827 6002
Facsimile: (07) 827 5606
Mount Maunganui
35 Portside Drive
Mount Maunganui,
New Zealand
Phone: (07) 575 8265
Facsimile: (07) 575 8480
31 Pandora Road
Ahuriri, Napier, New Zealand
Phone: (06) 835 0162
Facsimile: (06) 835 0192
Auckland
4 Tinley Street
Auckland, New Zealand
Phone: (09) 307 0061
Facsimile: (09) 307 0027
PAPER SERVICES
Maryvale
Maryvale Road
Maryvale via Morwell,
Victoria 3840
Phone: (03) 5134 1211
Facsimile: (03) 5136 0217
Shoalhaven
340 Bolong Road
Bomaderry,
New South Wales 2541
Phone: (02) 4428 6473
Facsimile: (02) 4428 6493
Townsville
121 Hubert Street
South Townsville,
Queensland 4810
Phone: (07) 4772 5651
Facsimile: (07) 4772 7433
Fisherman Islands
67-68 Bishop Drive
Fisherman Islands,
Queensland 4178
Phone: (07) 3137 4480
Facsimile: (07) 3137 4489
DTM
Sydney
2 Hope Street
Enfield,
New South Wales 2136
Phone: (02) 9735 2300
Facsimile: (02) 9735 2399
Melbourne
2-10 Gaine Road
Dandenong Sth, Victoria 3175
Phone: (03) 9215 4700
Facsimile: (03) 9215 4799
Adelaide
Cnr Bedford Street
and Kapara Road
Gillman, South Australia 5013
Phone: (08) 7224 5480
Facsimile: (08) 7224 5496
Brisbane
34 Postle Street
Coopers Plains,
Queensland 4108
Phone: (07) 3137 4406
Facsimile: (07) 3137 4441
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www.ksgroup.com.au