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K & S C O R P O R A T I O N L I M I T E D
SERVICE ALL THE WAY
FINANCIAL CALENDAR
Final dividend payment (4.5 cents per share) 31 October 2013
Annual General Meeting 26 November 2013
Half-year results and interim dividend announcement 26 February 2014
Interim dividend payment 3 April 2014
Full-year result and final dividend announcement 26 August 2014
Annual report mailed to Shareholders 7 October 2014
Final dividend payment 31 October 2014
Annual General Meeting 25 November 2014
ABN 67 007 561 837
CONTENTS Page
Highlights 1
Chairman’s Overview 2
Financial Overview 5
Managing Director’s Report 6
Board of Directors 17
Five-Year Financial History 19
Directors’ Report 20
Remuneration Report 29
Corporate Governance 36
Financial Report 53
Corporate Directory 112
K & S C O R P O R A T I O N L I M I T E D A N N U A L R E P O R T 2 0 1 3
To be the leading provider of transport
and logistic solutions within our target
markets in Australia and New Zealand.
(cid:129) Revenue increased 1.8% to $564.6 million
(cid:129) Achieves profit after tax of $15.9 million in difficult
trading environment
(cid:129) Acquires Collare Transport in Western Australia
(cid:129) Strong performance by Western Australian business
(cid:129) Generates record operating cash flow of
$46.4 million
(cid:129) Balance sheet further strengthened with gearing
at 17.6%
(cid:129) Lost time injury rate was reduced to 11
1
K & S C O R P O R A T I O N L I M I T E D A N N U A L R E P O R T 2 0 1 3
On behalf of the Board of K&S Corporation, I am pleased to
present the Company’s annual report.
This year we have seen two distinctly different half years.
The first half we had extremely strong demand for logistics and
transport services particularly in the resources sector, with demand
from manufacturers at a consistent level.
In the second half of the year we have seen reduced demand across
all sectors as the economy slowed.
Activity slowed in the resource sector with declining commodity
prices and as miners looked to reduce their costs and scale back a
number of expansionary projects.
The manufacturing sector was impacted by the continuing high
$A dollar with imports reducing demand for locally manufactured
goods. This in turn has reduced demand for transport services.
Net profit after tax for 2012/1213 was $15.9 million compared with
$16.4 for the 2011/12 financial year, down 3.0%.
Operating revenue for the year was $564.6 million, an increase of
1.8% on the corresponding period.
Operating cash flow increased 19.3% to $46.4 million. The strong
cash generation enabled gearing to be reduced to 17.6%.
2
T O N Y J O H N S O N
CHAIRMAN
K&S CORPORATION LIMITED
Earnings per share were 17.6 cents per share.
We have declared a fully franked final dividend of 4.5 cents per share (last year
6.0 cents per share). This follows the interim dividend of 6.5 cents per share.
The final dividend will be paid on 31 October 2013, with the date for determining
entitlements being 17 October 2013.
The dividend reinvestment plan (DRP) will once again apply in respect of the fully
franked final dividend of 4.5 cents payable on 31 October 2013.
The terms of the DRP will remain unchanged with the 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 2013 (the record date of the final dividend) less a discount
of 2.5%.
I would like to thank Richard Nicholson who retired from the Board in July after
27 years of service as a Director. Richard has been one of the longest serving Directors
of the Company and has at various times been Chairman of the Audit Committee
and of the Nomination and Remuneration Committee. We wish him well in his
retirement from the Board. I am sure he will continue to take an active interest in the
welfare of the Company.
Legh Winser has rejoined the Board as a Non Executive Director. Following the
announcement of Legh’s pending retirement as Managing Director early last year, we
foreshadowed that we would give favourable consideration to him rejoining the Board
at an appropriate time. Legh has enormous experience in transport and logistics which
will greatly strengthen the Board.
3
On behalf of the Board, I thank our customers, suppliers and employees, who have
contributed to the continuing success of the business.
In particular, I thank the senior management team, led by Greg Stevenson, for their
ongoing commitment and dedication under difficult circumstances.
Tony Johnson
Chairman
“Management is
focused on finding
new growth
opportunities and
improving yield.”
4
F
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2013 2012 % change
Revenue $m 564.6 554.8 1.8
Operating profit before $m 52.0 55.0 (5.4)
interest, tax and depreciation
Operating profit before $m 27.8 30.5 (8.9)
interest and tax
Operating profit before tax $m 22.3 23.4 (4.7)
Operating profit after tax $m 15.9 16.4 (3.0)
Dividends paid $m 11.3 8.7 29.9
Total assets $m 403.7 401.4 0.6
Net borrowings $m 51.1 62.0 (17.6)
Shareholders’ funds $m 239.6 224.9 6.5
Depreciation and amortisation $m 24.2 24.4 (1.0)
Earnings per share cents 17.6 18.7 (5.9)
Dividends per share cents 11.0 11.0 0.0
Net tangible assets per share $ 1.85 1.72 7.6
Cash flow per share $ 0.51 0.44 15.9
Return on Shareholders’ funds % 6.6 7.3 (9.6)
Gearing % 17.6 21.6 (18.5)
Lost time injuries 47.0 49.0 (4.1)
Lost time injuries % 11.0 13.0 (15.4)
frequency rate
OPERATING REVENUE
OPERATING CASH FLOW
$564.6m
$554.8m
$523.4m
$454.3m
$441.0m
$46.4m
$38.9m
$34.1m
$35.9m
$39.2m
SHAREHOLDERS FUNDS
GEARING
$239.6m
17.6%
$224.9m
$213.6m
$179.1m
$146.5m
21.6%
26.4%
24.5%
22.6%
2013
2012
2011
2010
2009
2013
2012
2011
2010
2009
5
K & S C O R P O R A T I O N L I M I T E D A N N U A L R E P O R T 2 0 1 3
K&S experienced a challenging year in 2012-13.
While the company enjoyed revenue growth of 8.0% and a profit
increase of 37.4% in the first half of the year, activity slowed
considerably after February in the face of tough global conditions and
uncertainty before the September Federal election.
Sales revenue for the year reached $564.6 million up 1.8% on the
previous year.
Profit after tax was $15.9 million compared to last year’s $16.4 million
or 3.0% lower.
Pleasing was the increase in operating cash flow to $46.4 million
up 19.3%
Earnings per share were 17.6 cents per share.
The slowdown particularly affected manufacturing on the east coast
of Australia, with volumes transported for our major customers falling
significantly.
In Western Australia, there has been a significant tightening in the
mining and resources sector, as miners seek to reduce costs.
One of the strategies K&S pursued during the year has been expansion
of its customer base. Sales and marketing staff have been recruited
to seek new opportunities from smaller, mid-size companies to help
offset reduced volumes from major clients.
6
G R E G S T E V E N S O N
MANAGING DIRECTOR
K&S CORPORATION LIMITED
By using our expertise in sea, rail and road transport, we have been successful in winning
new work. Not only has this provided us with immediate benefits, but it ensures
that when overall business conditions improve, we will be in a position to expand our
operations far more rapidly than would otherwise be the case.
Regal Transport enjoyed solid growth overall based on mining in the Pilbara and
Kimberley regions, although some slowdown was experienced in the second half.
The purchase of Bunbury-based Collare Transport, with its strong focus on the timber
industry in WA, has also been positive with significant operations synergies flowing
from the acquisition.
While we continue to look at further potential acquisition opportunities, any purchase
would need to meet our strategic requirements.
Our New Zealand business is expected to benefit from new contracts in the dairy sector
and greater efficiencies resulting from new heavier weight limits.
DTM also had a solid year, with some exciting developments in specialist transport
areas that are expected to provide good returns into the future.
Volumes carried for our east coast customer base, which is strongly aligned with the
manufacturing sector, were again subdued, especially in the second half of the year.
Both road and rail linehaul operations were depressed, but import/export operations
improved.
7
Steel haulage operations were mixed, with the slowdown in the housing market
affecting the volume of building product being transported, but solid activity in the
construction industry meaning structural steel transport remained steady.
Our paper business was steady in 2012/13.
However, our contract with Australian Paper expired on 30 June 2013. Despite a
competitive tender from the Company, the contract was not renewed. During the
2013 financial year, the Australian Paper contract generated revenue of approximately
$30 million. Steps have been taken to replace revenue from the warehousing
component of the services performed for Australian Paper with other customers at
our Truganina freight terminal.
The gradual recovery of the Japanese paper manufacturing industry following the 2011
tsunami has resulted in increased timber and wood chip volumes being exported, while
the purchase of Collare Transport in Bunbury has been positive.
8
K & S C O R P O R A T I O N L I M I T E D A N N U A L R E P O R T 2 0 1 3
“We will continue to implement
a number of expansion
initiatives aimed mainly at the
oil, gas and resource sectors.”
Regal Transport continued to deliver sound results in the heavy haulage and general
freight areas, driven largely by the mining and resources sector in the Pilbara and
Kimberley regions in the north of Western Australia.
After a strong first half, activity softened at Christmas, especially in the general freight
area, and it had not recovered by the end of the financial year.
The increased focus on sales and developing relationships has enabled us to capture
additional work at a time when many rivals are struggling.
New scheduled services were added to Onslow and Solomon in the Pilbara region to
meet the requirements of clients, while significant additional work was undertaken for
explosives group Dyno Nobel.
In the heavy haulage business, our activity for Westrac, which uses Regal for
port-to-Westrac and Westrac-to-customer minesite haulage, reduced as a result of the
slowdown in new mine development.
However, this reduction was offset by new heavy haulage work from a number of
existing clients and securing work with new customers. Regal has also taken on more
sales people to help boost activity, which has provided positive results.
While we have seen short term weakness, the future for heavy haulage remains positive
with major potential mine developments for Fortescue Metals Group, Rio Tinto and
Roy Hill in the wings and the expected expansion of a number of existing iron ore mines.
Increased gas exploration around Broome and the Canning Basin is also providing
additional opportunities for both the heavy haulage and general freight services.
As the largest provider of heavy haulage services in Western Australia, Regal is
well-positioned to take advantage of these developments.
SERVICE ALL THE WAY
9
K & S C O R P O R A T I O N L I M I T E D A N N U A L R E P O R T 2 0 1 3
The DTM business continued its solid growth pattern of the past five years, with new or
extended contracts signed with a number of established and new clients during the year.
The strong focus of the group continues to be aimed at developing and providing to
clients more tailored solutions which provide a unique value proposition. This has been
supported by ongoing development of management systems and IT infrastructure,
employee training and fleet upgrades.
Substantial advances in safety performance were made in the year. Lost time
injuries reduced by more than 60%, while improvements in other safety, health and
environmental performance indicators were also achieved.
The constant upgrade of company assets and fleet continued. Approximately 60 to 70
new vehicles were added to the DTM fleet as part of this program.
DTM is now recognised as a market leader in contract distribution and warehouse
services in Australia. It is a major provider of specialist services to the oils and lubricants,
cryogenic gas, steel and FMCG industry segments. Independent market research has
substantiated that the DTM customer net promoter score is at best-of-class levels.
This reputation was further expanded during the year with the group winning one of
six prestigious Coca Cola Amatil Supplier of the Year awards.
New contracts were won with BP Castrol Australia in Perth, MacKay and Port Hedland,
adding to the transport work already undertaken for petroleum and lubricant providers.
Distribution services with Caltex, Fuchs and Shell have continued to grow. Marine
bunkering services have also expanded. In all, distribution services in the petroleum
and lubrication market segment have increased by more than 20% year on year.
A new contract was signed with BlueScope for distribution of product from its
Auburn-based distribution centre, while a major contract for Air Liquide was renewed.
10
Significant additional work has been undertaken for equipment handling specialist
CHEP, which includes the bulk storage of pallets at the Truganina and Enfield facilities.
Late in the year, DTM reached agreement working closely with CHEP to design,
construct and commission two new market leading portable pallet repair plants. These
are the first of their type in the Australian market and will offer CHEP improved flexibility
and a strategic market advantage.
Our New Zealand business is looking to grow revenues and improve yield on the back
of high levels of service and customer satisfaction and as the impact of new regulations
allowing longer vehicles with heavier weight limits to operate on NZ roads comes
into effect.
Under the new regulations, appropriate vehicles can now transport maximum payloads
of up to 58 tonnes on specified routes, rather than the previous maximum of 44 tonnes,
reducing costs and improving efficiencies.
About 40% of our fleet is now compliant under the new regulations making K&S an
attractive and preferred haulage operator. K&S is continuing to invest in new trucks
and equipment to maximise the impact of these changes.
By concentrating on higher productivity vehicles, we plan to increase average payloads
by almost a third to 36 tonnes, which will enable us to reduce the total number of trips
each year by around 2,000, with resulting reductions in carbon emissions.
Activity in the timber industry expanded with K&S now running a 24 hour a day, five
day a week service in the Bay of Plenty, while other contracts have remained steady.
Higher exports levels on the back of improved log prices is expected to provide good
upside for K&S.
Strong progress was also made in the milk industry with a new contract for the haulage
of milk powder resulting in new equipment purchases, while an existing contract was
expanded. Negotiations are underway to further boost volumes in 2014.
The kiwifruit industry is continuing its recovery from the impact of a bacterial infection in
2011. This year’s harvest was delayed as a result of drought across NZ, but had almost
returned to normal levels by the end of the financial year.
Fuel prices remained steady throughout the year.
A renewed concentration on small to mid-tier businesses and diversification into new
areas of activity has paid dividends, especially as economic conditions tightened in the
second half of the year.
This was achieved by a significant investment in business development through the
employment of additional sales and marketing staff in our growth areas at a time when
many competitors have cut costs in these areas.
Strong emphasis has also been placed on working with procurement managers to
ensure we offer the most cost effective transport solution through the imaginative use
of different transport modes, whether it be rail, road or sea.
11
This has enabled K&S to increase its customer base in the SME market in Australia
and New Zealand by around 10%, with the additional work helping to offset reduced
volumes from larger blue-chip customers adversely affected by the economic downturn.
Considerable work has also been undertaken to capture new wharf cartage work to take
advantage of increased import/export activity in Australia and New Zealand.
The new work will help K&S through the economic downturn, as well as setting the
company up for a significant period of growth once economic conditions improve and
activity for larger customers recovers.
K&S Fuels recorded a steady result for the 2012-13 financial year. Total fuels sales
increased slightly to almost 80 million litres, while a further 33 million litres were
distributed for Caltex Fuels and Lubricants.
Approximately 40% of the fuel is used by the K&S transport fleet, with the remainder
servicing wholesale customers ranging from primary producers, professional fishing
fleets, retail and transport operators.
Sales from the four Caltex branded retail outlets operated by K&S Fuels in Mount
Gambier and Millicent, which includes two franchised outlets, were down in the face
of considerable discounting pressure from the major supermarket chains.
Fuel volumes transported from Adelaide and Melbourne into fuel depots in Mount
Gambier, Naracoorte and Millicent increased slightly with a new B-double added to the
K&S Fuels tanker fleet.
Diesel sales to the fishing fleet based along the Limestone Coast improved, as did
sales to farm customers as a result of increased irrigation during the year following a
dry summer.
One of the key aims of K&S Fuels is to provide the K&S road fleet with a reliable supply
of diesel at the best possible price.
To achieve this, fuel outlets have been installed in K&S freight depots throughout
Australia.
The K&S Fuels card system, which is co-ordinated through the Mount Gambier
headquarters, was further expanded to Port Hedland, Dardanup and Newcastle,
providing significant cost savings.
Sales of gas through autogas and bottle gas bottle refilling stations at Millicent and
Kingston continue to provide good returns.
12
K & S C O R P O R A T I O N L I M I T E D A N N U A L R E P O R T 2 0 1 3
Work on the development of a five year strategic initiatives was a key focus for Human
Resources management during the year. The scope, timeline and desired outcomes for
those initiatives have been rigorously reviewed and committed to by the business.
These initiatives cover areas ranging from employee benefits, career planning and
further opportunities for training and development. This work is ongoing and we believe
will result in a more motivated, productive and diverse workforce.
The roll out of a new online induction program was another highlight. The program
moved a large number of “read and sign” policies and safe operating practices online
with voice-activated software providing employees with the option of listening to rather
than reading material.
The process is designed to improve online induction and refresher training programs,
making them more user-friendly and easier to understand, resulting in a safer workplace.
Work was also undertaken in Perth to welcome and induct workers at Collare Transport
in Bunbury into the K&S organisation.
The HR Department has a dedicated team in Melbourne and Perth along with a HR
co-ordinator in New Zealand covering a full range of human resources management.
K&S has continued to look for ways to increase overall energy efficiency across the Group.
Under the National Greenhouse and Energy Reporting Act, K&S reported a total of
119,000 tonnes of carbon dioxide equivalent during 2011-12, slightly less than the
121,000 tonnes generated in 2010-11.
K&S also completed the Energy Efficiency Opportunity Assessment Plan, which covers
the whole Group through to 2016. The first public report is due by December 2013.
13
K & S C O R P O R A T I O N L I M I T E D A N N U A L R E P O R T 2 0 1 3
14
The introduction of the carbon tax on transport is scheduled to commence in July
2014. K&S anticipates that the costs of the carbon tax will largely be recovered via
fuel surcharges.
K&S has maintained its strong commitment to safety with a focus on loading, unloading
and truck exclusion zones, falls, fitness for work and incident reporting and investigation.
In September last year I attended a series of health and safety consultation meetings
across the nation to provide K&S health and safety representatives with the opportunity
to meet with me face-to-face and discuss safety.
The results of these meetings were then tabled at K&S’ annual national safety conference
held in October 2012.
We have identified a number of key strategic and tactical safety initiatives to be
implemented over the next five years, with the five main areas being:
1
Leadership and culture
2 Health and safety by design
3 Capabilities
4 Customer and supply chain networks
5
Regulatory framework
Work to review safety systems as part of the new harmonised workplace health and
safety laws has also continued.
Last year, K&S was granted approval by the Safety, Rehabilitation and Compensation
Commission to undertake in-house claims management as an extension to its
self-insurance licence.
In-house claims management commenced on September 1, 2012. The implementation
plan has been on track with service delivery improvements recorded. The claims
management department team is based in Mount Gambier.
Monthly tool box meetings have continued and a new e-learning program rolled-out.
This program uses voice recognition software as a tool to assist those workers with
literacy difficulties.
On an industry front, the Truck Emergency Breakdown and Roadside Safety program
(TEBARS), formerly known as Breakdown Events and Roadside Safety (BEARS), is near
completion with final guidelines delivered to the Victorian On Road Operators Group,
which has endorsed the project work to date.
The project will now be submitted to the Transport Industry Safety Group for adoption
and promotion as industry guidelines. The project is planned to be launched at Freight
Week in September, 2013.
K&S has been a member of the project team and a significant contributor to the project.
15
K&S continues to be accredited to ISO 9001 2008 standard while its accreditation
programs under the National Heavy Vehicle Accreditation Scheme are gradually being
transferred under the administration of the new National Heavy Vehicle Regulator.
The company remains a member of the ATA Council and remains represented on
the Safety Committee, Skills and Workforce Committee and the Transport Economics
Committee.
It also continues to work with clients and peak industry bodies to ensure compliance
with relevant obligations across other affected industries.
I wish to thank our customers for their continued support and the Board for their
guidance, the Management team and all employees 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
16
K & S C O R P O R A T I O N L I M I T E D A N N U A L R E P O R T 2 0 1 3
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 below.
Tony Johnson Chairman
Age 66, Director since 1986
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 45, Director since 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
17
Greg Boulton AM Deputy Chairman
Age 63, 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
Legh Winser
Age 65, Appointed 23 August 2013
Legh Winser is a former Managing Director of the Company, a position which he held for
14 years. He has extensive knowledge of the transport and logistics industry with more
than 40 years experience. Mr Winser is also an alternate director of several companies
with the Scott Group of Companies.
Member of: (cid:129) Nomination and Remuneration Committee
Bruce Grubb
Age 63, Director since 2007
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 Dangerous Goods
Logistics Pty Ltd.
Member of: (cid:129) Environmental Committee
Ray Smith
Age 66, 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 entities
Crowe Horwath Australasia Ltd, Warrnambool Cheese and Butter Factory Company
Holdings Limited and Transpacific Industries Limited. 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 BEc, LLB, Grad Dip CSPM, FCIS Secretary since 2005
Chris Bright has held the position of Group Legal Counsel for 11 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
Age 70, Retired 23 July 2013
Richard Nicholson ACA, is a Chartered Accountant in public practice. Mr Nicholson had
been a Director of the Company since 1986. 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)
18
K & S C O R P O R A T I O N L I M I T E D A N N U A L R E P O R T 2 0 1 3
($A Millions unless
otherwise indicated) 2013 Variation 2012 2011 2010 2009
%
Group Revenue 564.6 1.8 554.8 523.4 454.3 441.0
Operating Profit before
Individually Significant
Items, Interest and Tax 27.8 (8.9) 30.5 29.6 32.5 27.9
Individually Significant
Items & Fraud - - - - - 2.5
Operating Profit before
Interest and Income Tax 27.8 (8.9) 30.5 29.6 31.5 30.4
Interest Expense 5.5 (22.5) 7.1 8.4 5.2 5.3
Profit Before Tax 22.3 (4.7) 23.4 21.2 26.3 25.0
Income Tax Expense 6.4 (8.6) 7.0 6.3 7.6 6.9
Operating Profit after Tax 15.9 (3.0) 16.4 14.8 18.7 18.2
Earnings per
Ordinary Share (cents) 17.6 (5.9) 18.7 18.3 26.3 26.1
Dividends per Share (cents) 11.0 0.0 11.0 10.0 14.0 12.0
Return on
Shareholders Funds 6.6% (9.6) 7.3% 6.9% 10.5% 11.6%
Paid Up Capital 101.2 3.6 97.7 94.3 64.5 57.4
Shareholders Funds 239.6 6.5 224.9 213.6 179.1 156.2
Total Assets 403.7 0.6 401.4 388.0 326.1 287.6
Net Tangible Assets
(book value) per Share $1.85 7.6 $1.72 $1.65 $1.85 $1.87
19
K & S C O R P O R A T I O N L I M I T E D A N N U A L R E P O R T 2 0 1 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 2013 and the
Auditor’s Report thereon.
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.
The Board presents the 2013 Operating and Financial Review, which
has been designed to provide Shareholders with a clear and concise
overview of the Company’s operations, financial position, business
strategies and outlook.
The review complements the financial report and has been prepared
in accordance with recently released guidelines set out in RG247.
The consolidated profit for the year attributable to the members
of K&S Corporation Limited (“K&S”) is shown on page 21, along with
comparative results for 2012.
20
Financial Overview 2013 2012 % Change
Operating revenue $m 564.6 554.8
Operating profit after tax $m 15.9 16.4
Net borrowings $m 51.1 62.0
Shareholders’ funds $m 239.6 224.9
Earnings per share (basic) cents 17.6 18.7
Dividends per share cents 11.0 11.0
Net tangible assets per share $ 1.85 1.72
Cash flow per share $ 0.51 0.44
Return on Shareholders’ funds % 6.6 7.3
Gearing % 17.6 21.6
Lost time injuries 47.0 49.0
Lost time injuries frequency rate % 11.0 13.0
1.8
(3.0)
(17.6)
6.5
(5.9)
0.0
7.6
15.9
(9.6)
(18.5)
(4.1)
(15.4)
K&S is a mid-sized logistics company, recognised as the leader in customised logistics
solutions for customers who demand high levels of customer service. The Group
operates in Australian and New Zealand markets, our success is driven by our constant
focus on service, safety and continuous improvement.
The Directors announced a net profit after tax of $15.9 million, a reduction of 3.0%
on the previous year. Operating revenue for the year was $564.6 million, an increase
of 1.8% on the previous corresponding period.
This year the Company saw two distinctly different half years. The first half had
extremely strong demand for logistics and transport services increased revenues by
8.0% to $293.5 million. This was driven by the resources sector, with demand from
manufacturers at a consistent level. In the second half of the year there was a reduced
demand across all sectors as the economy slowed with revenues declining by 4.2%
to $271.1 million.
First half profit after tax recorded a 37.4% increase to $10.1 million while the second
half declined to $5.8 million.
Earnings per share were 17.6 cents per share.
Activity slowed in the resource sector with declining commodity prices and as miners
looked to reduce their costs and scale back a number of expansionary projects.
The manufacturing sector was impacted by the high Australian dollar with imports
reducing demand for locally manufactured goods. This in turn has reduced demand
for transport services.
During the difficult second half of the year we have continually reviewed our cost base
and reduced variable costs from our operations. We have reduced our subcontractor
costs, casual labor and overtime costs as volumes have declined.
21
We have implemented a freeze on new employment as a measure to reduce costs.
Capital expenditure on non essential equipment has been reduced significantly in the
second half.
Operating cash flow for the year was a record of $46.4 million up 19.3%. This was
achieved by increasing the resources and focus on customer collections and working
capital management.
With the strong generation of cash we have been able to reduce our gearing to
17.6%, which is well within our target range. Our net debt has reduced by 17.6% to
$51.1 million.
On 31 October 2012, K&S acquired the business and assets of Collare Transport
(“Collare”) for $8.0 million. Collare is Bunbury based and has a strong focus on the
timber industry in Western Australia. The Collare business has been integrated into
our Bunbury based business which was formally known as Brookes.
During the course of the year K&S acquired prime movers and trailing equipment for
$24.0 million. Funding of this equipment was $17.3 million via Hire Purchase
Agreements and the balance of $6.7 million was settled from our cash balance.
K&S net asset position increased by 6.5% to $239.6 million. During the year we
completed a revaluation of freehold land and buildings that resulted in an increase of the
Asset Revaluation Reserve of $5.7 million. The Foreign Currency Reserve also increased
in value by $0.9 million during the year. Profit after tax of $15.9 million for FY13
were offset by dividends paid of $11.3 million (Final FY12 and Interim FY13). As part
of the Employee Share Scheme and the Dividend Reinvestment Scheme $3.5 million of
new shares were issued.
Dividend
We have declared a fully franked final dividend of 4.5 cents per share (last year 6.0 cents
per share). This follows the interim dividend of 6.5 cents per share paid in April 2013,
making a total dividend of 11.0 cents per share. The final dividend will be paid on
31 October 2013, with the date for determining entitlements being 17 October 2013.
The dividend reinvestment plan (DRP) will once again be part of the October 2013
dividend. The DRP will apply in respect of the fully franked final dividend of 4.5 cents
payable on 31 October 2013.
The terms of the DRP will remain unchanged with the 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 2013 (the record date of the final dividend) less a discount of 2.5%.
Outlook
Providing earnings guidance going forward remains a difficult task.
The lower Australian dollar and more accommodative setting of interest rates may in
time provide a positive stimulus for the domestic economy.
We are well placed with a strong balance sheet, low gearing and secure
customer contracts.
Opportunities for potential acquisitions will also be closely evaluated where it makes
strategic sense.
22
K & S C O R P O R A T I O N L I M I T E D A N N U A L R E P O R T 2 0 1 3
Significant changes in the state of affairs of the consolidated entity during the financial
year were as follows:
On 31 October 2012, the Company acquired the business and assets of Collare
Transport (“Collare”). Collare is Bunbury-based with a strong focus on the timber
industry in Western Australia, and at acquisition date had annual turnover of $12 million
and employed 35 staff. Collare has a complimentary customer profile, lane mix and
equipment base to K&S Dardanup based business (formerly known as Brookes Transport)
and further expands K&S’ footprint in Western Australia. The acquisition gives the
Group an excellent opportunity to generate operation synergies and to improve the
returns of the combined Dardanup and Collare businesses.
The consolidated entity’s operations are subject to environmental regulations under both
Commonwealth 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 2012. The Energy Efficiency Opportunity compliance report for June
2012 is available on the K&S website.
For details on the introduction of the carbon pricing scheme, refer to ‘Likely
Developments’ section on page 25 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.
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.
23
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 6.0 cents per share
amounting to $5,375,857 in respect of the year ended 30 June 2012 was declared
on 21 August 2012 and paid on 31 October 2012;
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 2012 was declared
on 21 August 2012 and paid on 31 October 2012.
An interim fully franked ordinary dividend (taxed to 30%) of 6.5 cents per share in
respect of the year ended 30 June 2013 was declared on 26 February 2013 and paid
on 3 April 2013 amounting to $5,882,295.
The final dividend declared by the Directors of the Company on 23 August 2013 and
payable on 31 October 2013 in respect of the year ended 30 June 2013 comprises:
1 A fully franked ordinary dividend (taxed to 30%) of 4.5 cents per share amounting
to $4,103,106; 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.
DIVIDENDS PAID TO SHAREHOLDERS
Interim (cents) Final (cents)
2013
2012
2011
2010
2009
5.0
5.0
6.5
7.0
7.0
4.5
6.0
5.0
11.0
11.0
10.0
7.0
14.0
5.0
12.0
On 23 July 2013, the Company announced that Mr Nicholson was retiring as a
Non-Executive Director. Mr Nicholson had been a Director of the Company since 1986.
On 19 August 2013, the Company completed the purchase of 14.6 hectares of land in
Bullsbrook, Western Australia for $13.3 million. The land on the Great Northern
Highway, north of Perth, will consolidate the Regal Transport General Haulage operation
and will be a bridging depot for the Regal Transport Heavy Haulage business, which
encounters curfew issues at its current South Guildford location. The Company’s
intention is to develop the site in stages, with initial construction of a workshop facility
and hardstand proposed throughout the second half of the 2014 reporting period.
On 23 August 2013, the former Managing Director of the Company, Mr Winser, was
appointed as a Non-Executive Director. The Board is of the view that with his extensive
knowledge of the transport and logistics industry generally and of the Company
specifically, Mr Winser is eminently well qualified to act as a Non-Executive Director
and will bring significant value to the Board.
24
On 23 August 2013, the Directors of K&S Corporation Limited declared a final dividend
on ordinary shares in respect of the 2013 financial year. The total amount of the
dividend is $4,103,106, which represents a fully franked dividend of 4.5 cents per share.
The dividend is payable on 31 October 2013 and has not been provided for in the
30 June 2013 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 2013 (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.
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 carbon price legislation, commenced during 2013 in the
form of a carbon tax. However, heavy on-road transport activities were 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.
Currently, 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.
K&S Corporation Limited is a company limited by shares that is incorporated and
domiciled in Australia.
25
K & S C O R P O R A T I O N L I M I T E D A N N U A L R E P O R T 2 0 1 3
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)
Legh Winser
Bruce Grubb
Ray Smith
Richard Nicholson (retired 23 July 2013)
(appointed 23 August 2013)
Secretary – Chris Bright
With the exception of Mr Stevenson, all Directors are Non-Executive Directors.
Particulars of Directors’ qualifications, experience, special responsibilities and other
relevant Directorships are on pages 17 and 18 of the Annual Report.
Board of Directors Back row l to r: Ray Smith, Bruce Grubb, Legh Winser, Chris Bright (Secretary)
Front row l to r: Greg Boulton, Tony Johnson, Greg Stevenson
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 13,049
Mr L Winser 39,194
Mr B Grubb 17,034
Directors of the Company have relevant interests in additional shares as follows:
Ordinary Shares
Mr T Johnson 300,021
Mr G Boulton 254,724
Mr L Winser 1,112,005
Mr R Smith 36,794
Mr R Nicholson 17,858
Mr B Grubb 108,171
26
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 - - 5 5 4 4
Mr G Boulton 10 11 4 4 5 5 - -
Mr R Smith 11 11 4 4 - - - -
Mr B Grubb 11 11 - - - - 4 4
Mr R Nicholson 11 11 - - 5 5 - -
Mr G Stevenson 11 11 - - - - 4 4
All Directors were eligible to attend all meetings held. In addition to the eleven regular
meetings, there were three other special meetings of Directors held during the course
of the year.
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 $42,766 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, L Winser, R Smith, B Grubb, G Stevenson.
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.
27
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.
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 36 of the Annual Report.
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.
The entity’s Auditor, Ernst & Young has provided the economic entity with an Auditor’s
Independence Declaration which is on page 108 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:
Information technology review
$25,480
28
K & S C O R P O R A T I O N L I M I T E D A N N U A L R E P O R T 2 0 1 3
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 L Winser Non-Executive – Appointed 23 August 2013
Mr R Nicholson Non-Executive – Retired 23 July 2013
Mr B Grubb Non-Executive
Mr G Stevenson Managing Director
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:
(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.
29
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 maximum 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 20 November
2012 when Shareholders approved a maximum aggregate remuneration of $600,000
per year, comprising an increase of $100,000 to the cap on the maximum aggregate
remuneration payable to non-Executive Directors. That previous cap on the maximum
aggregate payable to Non-Executive Directors of $500,000 had been in place since
the Company’s 2007 Annual General meeting.
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 relation to the fees paid to
Non-Executive Directors in 2012/13. Each Non-Executive Director receives a fee for
being a Director of the Company.
The Board has deferred any consideration of whether to increase the fees payable
to Non-Executive Directors in the 2013/14 financial year until December 2013.
If upon consideration in December 2013 the Board determines that it is appropriate to
increase the fees payable to Non-Executive Directors, that increase (if any) will apply
prospectively no earlier than from 1 January 2014. Pending any review in December
2013, the fees payable to Non-Executive Directors will remain at the level paid in the
2012/13 financial year.
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 2013 is
detailed on page 34 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.
30
K & S C O R P O R A T I O N L I M I T E D A N N U A L R E P O R T 2 0 1 3
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 2013, the adoption of at risk short term incentives
comprising 20% and 10% of the base emolument of the Managing Director
(Mr Stevenson) 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 in respect of the 2012/13 financial year was
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 2013, the eligibility criteria for the payment of short term
incentives were not satisfied and no short term incentive payment was made to the
Managing Director or Executives.
During the course of 2012/13, the Nomination and Remuneration Committee obtained
external advice from JWS Consulting in relation to the size and structure of remuneration
payable to the Managing Director and Senior Executives. In accordance with sections
260K and 260L of the Corporations Act 2001 (Cth), JWS Consulting was engaged
directly by, and reported to, the Nomination and Remuneration Committee.
The advice of JWS Consulting on the structure of remuneration payable to the Managing
Director and Senior Executives was that the at risk proportion of remuneration was
significantly below market.
With the assistance of JWS Consulting, the Nomination and Remuneration Committee
developed a revised short term incentive (“STI”) scheme for the Managing Director and
Key Management Personnel to apply for the 2013/14 financial year.
31
Full details of the new STI scheme for the 2013/14 financial year will be set out in the
Company’s 2014 annual report.
The total short term incentives payable to the Managing Director and Executives
for the year ended 30 June 2014 if eligibility criteria are met will be $127,000, up to
a maximum of $677,000 if all out-performance criteria are met.
The fees paid to JWS Consulting for the remuneration recommendations were $36,576.
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 Managing Director, Mr Stevenson, has a contract of employment, key terms of
which for 2012/13 are:
(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
was 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.
Employee Share Plan
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 31 August 2012 under the Plan.
Acceptances under the offer were 324,000 shares at $1.51 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 full year results for 2011/12 on 22 August 2012.
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:
32
K & S C O R P O R A T I O N L I M I T E D A N N U A L R E P O R T 2 0 1 3
Annual Salary
Less than $50,000
$50,000 to $100,000
$100,001 to $150,000
$150,001 to $200,000
Greater than $200,000
Number of Shares
1,000
2,000
5,000
7,000
10,000
Directors have approved the making of offers by the Company to eligible employees
under the Plan in the year ended 30 June 2014.
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. Following the retirement of Mr Nicholson on 23 July
2013, Messrs Johnson and Boulton are the only remaining Non-Executive Directors
eligible to receive retirement benefits under the 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.
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 (EBIT),
and net operating profit before individually significant after tax (NPAT).
Normalised EBIT
$m
35
30
25
20
15
10
5
0
2004
2005
2006
2007
2008
2009
■ NEBIT ■ NPAT
2010
2011
2012
2013
In addition, Dividends paid to Shareholders are disclosed on page 24 of the
Directors’ report.
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 2008-2013
$3.50
$3.00
$2.50
$2.00
$1.50
$1.00
$0.50
$0.00
6000
5000
4000
3000
2000
1000
0
Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13
■ KSC ■ All Ords ■ Industrials Index
33
Remuneration of Key Management Personnel of the Company and the Group
Remuneration for the year ended 30 June 2013
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 118,000 - - - 28,000 12,980 158,980 -
G Boulton 70,000 - - - 9,000 7,700 86,700 -
R Smith 70,000 - - - - 7,700 77,700 -
L Winser # - - - - - - - -
B Grubb 70,000 - - - - 7,700 77,700 -
R Nicholson* 70,000 - - - 18,000 7,700 95,700
Total Non-Executive 398,000 - - - 55,000 43,780 496,780
Directors
Executive Director
G Stevenson 480,000 - 30,000 7,501 - 25,000 542,501 -
Other Key
Management Personnel
B Walsh 297,548 - 27,490 7,125 - 25,000 357,163 -
C Bright 230,186 - 27,952 5,500 - 25,000 288,638 -
G Wooller 428,425 - 27,273 6,501 - 25,000 487,199 -
P Sarant 426,265 - 27,257 6,501 - 25,000 485,023 -
G Everest 266,200 - 21,063 4,334 - 25,000 316,597 -
K Evans 200,010 - 18,538 3,334 - 24,082 245,964 -
S Hine 269,434 - 26,865 4,334 - 25,000 325,633 -
S Skazlic 221,400 - 17,579 3,667 - 25,000 267,646
Total executive KMP 2,819,468 - 224,017 48,797 - 224,082 3,316,364
Totals 3,217,468 - 224,017 48,797 55,000 267,862 3,813,144
* Mr Nicholson retired on 23 July 2013.
# Mr Winser was appointed Non-Executive Director on 23 August 2013. He received no remuneration during the 2013 reporting period.
34
Remuneration for the year ended 30 June 2012
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 110,000 - - - 20,000 12,100 142,100 -
G Boulton 65,000 - - - 6,500 7,150 78,650 -
R Smith 65,000 - - - - 7,150 72,150 -
B Grubb 65,000 - - - - 7,150 72,150 -
R Nicholson 65,000 - - - 13,000 7,150 85,150 -
Total Non-Executive 370,000 - - - 39,500 40,700 450,200
Directors
Executive Director
L Winser # 457,233 - 78,398 11,228 55,000 45,833 647,692 -
G Stevenson^ 44,423 - 3,191 707 - 5,686 54,007 -
Other Key
Management Personnel
B Walsh 265,000 - 27,608 6,625 - 34,885 334,118 -
C Bright 213,285 - 27,676 5,250 - 25,000 271,211 -
G Wooller 370,000 - 26,856 6,167 - 47,485 450,508 -
P Sarant 392,485 - 27,178 6,167 - 25,000 450,830 -
G Everest 243,800 - 17,329 4,000 - 25,000 290,129 -
K Evans 190,000 - 17,179 3,167 - 22,800 233,146 -
S Hine 258,084 - 27,165 4,167 - 25,000 314,416 -
S Skazlic 210,200 - 8,772 3,500 - 25,000 247,472 -
Total executive KMP 2,644,510 - 261,352 50,978 55,000 281,689 3,293,529
Totals 3,014,510 - 261,352 50,978 94,500 322,389 3,743,729
# Mr Winser retired as Managing Director on 25 May 2012.
^ Mr Stevenson was appointed Managing Director on 28 May 2012.
Signed in accordance with a resolution of the Directors.
T Johnson
Chairman
23rd August 2013
Greg Stevenson
Managing Director
23rd August 2013
35
K & S C O R P O R A T I O N L I M I T E D A N N U A L R E P O R T 2 0 1 3
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
Make timely and balanced disclosure
Principle 6
Respect the rights of shareholders
Principle 7
Recognise and manage risk
Principle 8
Remunerate fairly and responsibly
36
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.
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 17 and 18 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.
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.
37
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
* Mr Nicholson retired as a Director on 23 July 2013. Mr Nicholson was a Director of the Company throughout
2012/13 financial year and the Board considered him to be independent.
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).
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.
L Winser Non-Executive Director
Mr Winser was appointed as a Director of the Company on 23 August 2013.
Mr Winser formerly occupied the position of Managing Director of the Company until
his retirement on 25 May 2012. Mr Winser is also an alternate director of several
companies with the Scott Group of Companies.
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 page 37), 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.
38
K & S C O R P O R A T I O N L I M I T E D A N N U A L R E P O R T 2 0 1 3
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.
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.
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.
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.
39
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 overseeing the
financial reporting process of the consolidated entity and ensuring the competency and
independence of the Company’s external auditors, consistent with ASX Principle 4.
The Audit Committee 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, reviews any comments and recommendations by
the external auditors in relation to the company’s 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.
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.
40
K & S C O R P O R A T I O N L I M I T E D A N N U A L R E P O R T 2 0 1 3
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, the Board have regard to 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 to effectively 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 23 July 2013, the Company announced that Mr Nicholson was retiring as a
Non-Executive Director. Mr Nicholson had been a Director of the Company since 1986.
The former Managing Director of the Company, Mr Winser, was appointed as a
Non-Executive Director on 23 August 2013. The Board is of the view that with his
extensive knowledge of the transport and logistics industry generally and of the
Company specifically, Mr Winser is eminently well qualified to act as a Non-Executive
Director and will bring significant value to the Board.
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 Johnson
Mr Boulton
41
The Nomination and Remuneration Committee meets at least twice a year and as
required. The Committee met formally five times, but also informally on several other
occasions during the year. Messrs Nicholson, Boulton and Johnson attended all five
formal meetings of the Committee.
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.
An increase in the Directors’ fee pool limit of $100,000 to a total of $600,000 for
Non-Executive Directors was approved by Shareholders at the Annual General Meeting
on 20 November 2012. This fee pool is only available to Non-Executive Directors.
The Non-Executive Directors received $70,000 each and the Chairman was paid
$118,000 in 2012/13. Committee membership does not entitle a Director to
additional fees.
The Board has decided not to increase the fees payable to Non-Executive Directors in the
first half of the 2013/14 financial year. The Board has elected to defer any consideration
of the level of fees payable to Non-Executive Directors until December 2013.
During the course of 2012/13, the Nomination and Remuneration Committee obtained
external advice for JWS Consulting in relation the size and structure of the remuneration
payable to the Managing Director and Senior Executives. In accordance with
sections 260K and 260L of the Corporations Act 2001 (Cth), JWS Consulting was engaged
directly by, and responded to, the Nomination and Remuneration Committee.
The advice of JWS Consulting was that the proportion of at risk remuneration payable
to the Managing Director and Senior Executives was significantly below market.
With the assistance of JWS Consulting, the Nomination and Remuneration Committee
developed a revised short term incentive (“STI”) scheme for the Managing Director and
Senior Executives to apply in 2013/14. The new STI scheme will involve performance
hurdles linked to group net profit after tax, safety, share price, and divisional profit
contribution. Full details of the new STI scheme will be provided in the Company’s
remuneration report in relation to the 2013/14 financial year.
The adoption of the new STI scheme was ratified by the Board. The new STI scheme
will come into effect in the 2013/14 financial year. Directors are of the view that the
STI scheme is consistent with market practice, will align the interests of Management
and Shareholders, and will operate to attract, retain and motivate a strong senior
management team.
The Managing Director, Mr Stevenson, has a contract of employment with the
Company. Key terms of Mr Stevenson’s contract of employment for the 2012/13
financial year were:
42
K & S C O R P O R A T I O N L I M I T E D A N N U A L R E P O R T 2 0 1 3
(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.
(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.
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. Following the retirement of Mr Nicholson as a Director
on 23 July 2013, Messrs Johnson and Boulton are the only remaining Directors eligible
to participate in the retirement benefit scheme.
The structure and disclosure of the Company’s remuneration of Non-Executive Directors
is consistent with ASX Principle 8.
Further details of Directors’ remuneration, superannuation and retirement payments
are set out in the Directors’ Report on pages 29 to 35.
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 2012/13. The Company saw a modest increase in
participation rates for women at all levels of the organisation, with the exception
of at Board level.
43
(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 2012/13 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
2012/13. The proportion of women undertaking management training programs
exceeded the participation rate for women in the Company’s workforce.
(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 2012/13. Turnover rates for men and women
were equivalent across different levels of the organisation.
The proportion of women employees across the Company for 2012/13 is set out in the
table below:
Category
Women
Men
Casual
%
Full
time
Part
time
Full
time
Part
time
Women
Men
Board
Senior
Executives
Senior
Managers
Line Managers
0
1
15
18
Administration
139
Service Staff
Total
19
192
0
1
0
1
27
0
29
0
9
51
157
38
1,193
1,448
5
0
0
0
0
6
11
0
0
0
0
9
18
27
Total
Staff
5
11
67
174
214
0
0
0
0
0
114
114
1,350
1,821
Women Men
0
18
23
11
82
3
14
100
82
77
89
18
97
86
This data is also reported by the Company under the Workplace Gender Equality Act
2012 (Cth).
44
K & S C O R P O R A T I O N L I M I T E D A N N U A L R E P O R T 2 0 1 3
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.
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) A number of strategic and tactical initiatives being implemented under the
Company’s five year strategic plan aimed at attracting, developing and retaining
female employees. As part of that strategy, the Company is reviewing a range
of more flexible employment practices.
45
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 Grubb
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, Grubb
and Stevenson attended all four meetings of the Committee.
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 2013,
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.
46
K & S C O R P O R A T I O N L I M I T E D A N N U A L R E P O R T 2 0 1 3
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.
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
were most recently rotated following completion of the audit for the year ended
30 June 2012.
While the Directors had no concerns as to the independence or competence of its
external auditors, Ernst & Young, the audit of the accounts of the consolidated entity for
2013/14 financial year was put out to tender as a matter of good governance. Relevant
factors in the determination of the successful participant in that tender process included
competence, experience, independence, ability to add value to the company, and cost.
The tender process was overseen by the Audit Committee, with the ultimate decision
as to choice of external auditor made by the Board. The outcome of the tender process
for the selection of external auditor for the 2013/14 financial year was to retain the
services of Ernst & Young. The Board formed the view that it was appropriate to retain
Ernst & Young having regard, amongst other things, to:
(cid:129) past performance by Ernst & Young as auditor for the Company;
(cid:129) the fact that the lead audit partner and audit review partner had recently been
rotated providing a ‘fresh set of eyes’;
(cid:129) the depth of Ernst & Young’s understanding of the Company and its accounting
and internal control environment; and
(cid:129) value.
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), the
Company’s current auditor, Ernst & Young, attends and is available to answer questions
at the Company’s Annual General Meeting.
Consistent with ASX Principle 7, the Company is committed to the identification, moni-
toring 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.
47
K & S C O R P O R A T I O N L I M I T E D A N N U A L R E P O R T 2 0 1 3
48
The Board requires that Management have in place a system to identify, monitor, and
manage the material business risks faced by the Company. 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.
(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.
(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 recommendations 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.
49
(cid:129) The Company’s Disaster Recovery Manual 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 2012/13.
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.
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 Board 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.
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.
50
K & S C O R P O R A T I O N L I M I T E D A N N U A L R E P O R T 2 0 1 3
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.
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 Occupational Health & Safety systems
to meet the AS4801 Standard.
51
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.
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 Occupational
Health and Safety, Environment Protection, Electronic Communications policies and
the Transport Law Compliance Policy.
The Group’s ethical standards are consistent with the requirements of ASX Principle 3.
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 subsequently 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.
52
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K & S C O R P O R A T I O N L I M I T E D A N N U A L R E P O R T 2 0 1 3
ABN 67 007 561 837
Contents
Statement of Comprehensive Income 54
Statement of Financial Position 55
Statement of Changes in Equity 56
Statement of Cash Flows 57
Notes to the Financial Statements 58
Directors’ Declaration 107
Auditor’s Independence Declaration 108
Independent Auditor’s Report 109
Information on Shareholdings 111
53
Consolidated
2013 2012
Note $’000 $’000
Operating revenue 5(a) 564,580 554,803
Cost of goods sold (58,570)
(62,477)
Gross profit 506,010 492,326
Other income 5(b) 3,922 5,187
(168,554)
Contractor expenses (170,471)
Employee expenses 5(e) (168,750)
(158,682)
Fleet expenses (95,531)
(94,269)
Depreciation and amortisation expense 5(d) (24,166) (24,405)
(7,142)
Finance costs 5 (c) (5,467)
Other expenses (23,237) (21,161)
Share of profits of associates 13 42 106
Profit before income tax 22,352 23,406
Income tax (expense)/benefit 6 (6,448) (6,959)
Profit after income tax 15,904 16,447
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Foreign currency translation 887 171
Income tax effect - -
887 171
Items that may not be reclassified subsequently to profit or loss
Revaluation of land and buildings 8,125 -
Income tax effect (2,437) -
5,688 -
Other comprehensive income for the period, net of tax 6,575 171
Total comprehensive income for the period 22,479 16,618
Earnings per share (cents per share) 7
(cid:129) basic for profit for the year attributable to
ordinary equity holders of the parent 17.6 18.7
(cid:129) diluted for profit for the year attributable
to ordinary equity holders of the parent 17.6 18.7
Dividends per share (cents per share) 8 11.0 11.0
The above Statement of Comprehensive Income should be read
in conjunction with the accompanying notes.
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K & S C O R P O R A T I O N L I M I T E D A N N U A L R E P O R T 2 0 1 3
Consolidated
2013 2012
Note $’000 $’000
ASSETS
Current assets
Cash and cash equivalents 9 15,935 21,038
Trade and other receivables 10 64,076 73,189
Inventories 11 3,040 2,927
Prepayments 5,266 5,192
Total current assets 88,317 102,346
Non-current assets
Other receivables 10 1,379 1,297
Investments in associates 13 200 158
Property, plant & equipment 14 234,750 219,448
Intangibles 15 71,176 71,108
Deferred tax assets 6 7,849 6,998
Total non-current assets 315,354 299,009
TOTAL ASSETS 403,671 401,355
LIABILITIES
Current liabilities
Trade and other payables 17 46,840 49,214
Interest bearing loans and borrowings 18 16,332 16,693
Income tax payable 6 555 1,700
Provisions 19 16,741 14,480
Total current liabilities 80,468 82,087
Non-current liabilities
Other payables 17 8,471 6,358
Interest bearing loans and borrowings 18 50,726 66,345
Deferred tax liabilities 6 21,352 18,492
Provisions 19 3,019 3,139
Total non-current liabilities 83,568 94,334
TOTAL LIABILITIES 164,036 176,421
NET ASSETS 239,635 224,934
EQUITY
Contributed equity 20 101,187 97,707
Reserves 31,243 24,678
Retained earnings 107,205 102,549
TOTAL EQUITY 239,635 224,934
The above Statement of Financial Position should be read
in conjunction with the accompanying notes.
55
Asset Forex
Issued Retained Revaluation Translation Total
Capital Earnings Reserves Reserves Equity
$’000 $’000 $’000 $’000 $’000
CONSOLIDATED
At 1 July 2012 97,707 102,549 26,270 (1,592) 224,934
Profit for the year - 15,904 - - 15,904
Other comprehensive income - - 5,688 887 6,575
Total comprehensive income
for the year - 15,904 5,688 887 22,479
Transactions with owners in
their capacity as owners:
Disposal transfer of land
and buildings - 10 (10) - -
Issue of share capital 3,480 - - - 3,480
Dividends paid - (11,258) - - (11,258)
At 30 June 2013 101,187 107,205 31,948 (705) 239,635
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
The above Statement of Changes in
Equity should be read in conjunction
with the accompanying notes.
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K & S C O R P O R A T I O N L I M I T E D A N N U A L R E P O R T 2 0 1 3
Consolidated
2013 2012
Note $’000 $’000
CASH FLOWS FROM OPERATING ACTIVITIES
Cash receipts from customers 634,513 611,338
Cash payments to suppliers and employees (556,007) (538,494)
Interest received 198 242
Borrowing costs paid (5,466) (7,142)
Income taxes paid (8,045) (6,871)
Net goods and services tax paid (18,767) (20,134)
Net cash provided by/(used in) operating activities 9 46,426 38,939
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of non-current assets 4,636 4,889
Payments for property plant & equipment (6,737) (5,749)
Acquisition of business (8,041) -
Net cash provided by/(used in) investing activities (10,142) (860)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from share issue 488 325
Proceeds from borrowings 4,000
-
Repayments of borrowings (18,843) (5,486)
(16,029)
Lease and hire purchase liability repayments (18,844)
(5,615)
Dividends paid, net of dividend reinvestment plan (8,266)
Net cash provided by/(used in) financing activities (41,465)
(26,805)
11,274
Net increase/(decrease) in cash held (5,181)
Cash at the beginning of the financial year 21,038
9,747
Effects of exchange rate variances on cash 78 17
Cash at the end of the financial year 9 15,935
21,038
The above Statement of Cash Flows should be read
in conjunction with the accompanying notes.
57
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K & S C O R P O R A T I O N L I M I T E D A N N U A L R E P O R T 2 0 1 3
1 Corporate Information
The financial report of K&S Corporation Limited
for the year ended 30 June 2013 was authorised
for issue in accordance with a resolution of
Directors on 23 August 2013.
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.
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 2012.
Reference
Title
AASB 2010-8
Amendments to Australian Accounting Standards – Deferred Tax: Recovery of
Underlying Assets [AASB 112]
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.
Application
date of
standard
Application
date for
Group
1 Jan 2012
1 July 2012
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]
1 July 2012
1 July 2012
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.
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 2013, are outlined
in the table on the following pages:
58
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 Jan 2013
The amendments
are not expected
to have any impact
on the Group’s
financial report.
1 July 2013
Reference
Title
Summary
AASB 10
Consolidated Financial
Statements
AASB 11
Joint Arrangements
AASB 12
Disclosure of Interests in
Other Entities
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.
Consequential amendments
were also made to this and other
standards via AASB 2011-7 and
AASB 2012-10.
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 this and other
standards via AASB 2011-7,
AASB 2010-10 and amendments
to AASB 128.
AASB 12 includes all disclosures
relating to an entity's interests in
subsidiaries, joint arrangements,
associates and structured 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,
structured entities and subsidiaries
with non-controlling interests.
59
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
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
Reference
Title
Summary
AASB 13
Fair Value Measurement
AASB 119
Employee Benefits
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.
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.
Consequential amendments were
also made to other standards via
AASB 2011-10.
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 amendments
are not expected
to have any impact
on the Group’s
financial report.
1 July 2013
(cid:129) Repeat application of AASB 1 is
permitted (AASB 1)
(cid:129) Clarification of the comparative
information requirements when
an entity provides a third balance
sheet (AASB 101 Presentation of
Financial Statements).
60
Application
date of
standard
1 Jan 2013
1 Jul 2013
1 Jan 2015
Application
date for
Group
1 July 2013
1 July 2013
1 July 2015
Impact on Group
financial report
The amendments
are not expected
to have any impact
on the Group’s
financial report.
The amendments
remove the
disclosures from
the financial report
and is transferred to
the Remuneration
report by amend-
ments to the
Corporations Act.
The Group has not
yet determined the
extent of the impact
of the amendments,
if any.
K & S C O R P O R A T I O N L I M I T E D A N N U A L R E P O R T 2 0 1 3
Reference
Title
Summary
AASB 2012-9
Amendment to AASB 1048
arising from the withdrawal
of Australian Interpretation
1039
AASB 2011-4
Amendments to Australian
Accounting Standards to
Remove Individual Key
Management Personnel
Disclosure Requirements
[AASB 124]
AASB 9
(continued on
next page)
Financial Instruments
AASB 2012-9 amends AASB 1048
Interpretation of Standards to
evidence the withdrawal of
Australian Interpretation 1039
Substantive Enactment of Major Tax
Bills in Australia.
This amendment deletes from AASB
124 individual key management
personnel disclosure requirements
for disclosing entities that are
not companies. It also removes
the individual KMP disclosure
requirements for all disclosing entities
in relation to equity holdings, loans
and other related party transactions.
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.
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:
(cid:129) The change attributable
to changes in credit risk
are presented in other
comprehensive income (OCI)
(cid:129) The remaining change is
presented in profit or loss.
61
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
Application
date of
standard
1 Jan 2015
Application
date for
Group
1 July 2015
Impact on Group
financial report
The Group has not
yet determined the
extent of the impact
of the amendments,
if any.
1 Jan 2014
The amendments
are not expected
to have any impact
on the Group’s
financial report.
1 July 2014
1 Jan 2014
1 July 2014
The Group has not
yet determined the
extent of the impact
of the amendments,
if any.
1 Jan 2013
The amendments
are not expected
to have any impact
on the Group’s
financial report.
1 July 2013
Reference
Title
Summary
AASB 9
(continued)
Financial Instruments
AASB 2012-3
Amendments to Australian
Accounting Standards –
Offsetting Financial Assets
and Financial Liabilities
Interpretation 21
Levies
AASB 2012-2
Amendments to Australian
Accounting Standards –
Disclosures – Offsetting
Financial Assets and
Financial Liabilities
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.
Further amendments were made
by AASB 2012-6 which amends the
mandatory effective date to annual
reporting periods beginning on or
after 1 January 2015. AASB 2012-6
also modifies the relief from restating
prior periods by amending AASB 7
to require additional disclosures on
transition to AASB 9 in some
circumstances.
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.
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.
This Interpretation confirms
that a liability to pay a levy is only
recognised when the activity
that triggers the payment occurs.
Applying the going concern
assumption does not create a
constructive obligation.
AASB 2012-2 principally amends
AASB 7 Financial Instruments:
Disclosures to require disclosure of
the effect or potential effect of
netting arrangements. This includes
rights of set-off associated with the
entity's recognised financial assets
and liabilities on the entity's financial
position, when the offsetting criteria
of AASB 132 are not all met.
62
K & S C O R P O R A T I O N L I M I T E D A N N U A L R E P O R T 2 0 1 3
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.
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.
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
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.
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, 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.
63
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
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:
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.
64
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.
(cid:129)
(cid:129)
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.
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)
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.
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.
65
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
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.
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.
66
K & S C O R P O R A T I O N L I M I T E D A N N U A L R E P O R T 2 0 1 3
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.
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.
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.
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.
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)
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.
(cid:129)
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:
when the deferred income tax asset relating to the
(cid:129)
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.
(cid:129)
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
receivables and payables are stated with the amount
of GST included.
(cid:129)
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.
67
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
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.
68
K & S C O R P O R A T I O N L I M I T E D A N N U A L R E P O R T 2 0 1 3
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.
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.
69
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
t) Goodwill and intangibles
Intangibles continued
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.
Intangible assets with indefinite lives are tested for
impairment 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 estimated useful life for the current and comparative
periods are as follows:
Software and technology
7 years
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).
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K & S C O R P O R A T I O N L I M I T E D A N N U A L R E P O R T 2 0 1 3
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.
71
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
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:
Costs of servicing equity (other than dividends);
(cid:129)
The after tax effect of dividends and interest
(cid:129)
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;
(cid:129)
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.
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K & S C O R P O R A T I O N L I M I T E D A N N U A L R E P O R T 2 0 1 3
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 manage-
ment 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 dependant 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.
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 entered 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 net values of receivables, bank overdraft, trade
creditors, accruals, lease liabilities, hire purchase liabilities,
credit facilities and other loans, approximated their book
value. The net fair value of unlisted investments where
there is no organised financial market has been based
on a reasonable estimation of the underlying net assets.
This approximates the book value.
For other assets and liabilities the net fair value
approximates their book value.
No financial assets and liabilities are readily traded on
organized markets in standardised form.
73
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
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)
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.
(cid:129)
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 2013. 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.
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 93%
(2012: 94%) and Fuel 7% (2012: 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.
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
2013 2012
$’000 $’000
Financial assets
– Cash and cash equivalents 15,935 21,038
Financial liabilities
– Bank loans (18,379) (33,175)
Net exposure (2,444) (12,137)
The following sensitivity analysis is based on the interest
rate risk exposures in existence at the Balance Sheet date:
Judgements of reasonably possible movements: Post Tax Profit Equity
Higher/(Lower) Higher/(Lower)
2013 2012 2013 2012
$’000 $’000 $’000 $’000
Consolidated
+ 1% (100 basis points) (17) (85) (17) (85)
– 0.5% (50 basis points) 9 42 9 42
74
K & S C O R P O R A T I O N L I M I T E D A N N U A L R E P O R T 2 0 1 3
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 2013
Liquid financial assets
Cash and cash equivalents 15,935 - - - 15,935
Trade and other receivables 64,434 358 728 50 65,570
80,369 358 728 50 81,505
Financial liabilities
Interest bearing loans and borrowings (19,963) (34,428) (18,975) - (73,366)
Trade and other payables (46,840) (8,471) - - (55,311)
Financial guarantees (15,872) - - - (15,872)
(82,675) (42,899) (18,975) - (144,549)
Net inflow/(outflow) (2,306) (42,541) (18,247) 50 (63,044)
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)
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.
75
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
4 Operating Segments
Accounting policies and inter-segment transactions
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 determined that the Group
has three operating segments.
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.
Fuels – 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.
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. Inter-segment 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 2013
and 30 June 2012.
76
K & S C O R P O R A T I O N L I M I T E D A N N U A L R E P O R T 2 0 1 3
Australian New Zealand
Transport Fuel Transport Total
$’000 $’000 $’000 $’000
Year ended 30 June 2013
Revenue
External customers 481,618 63,403 19,361 564,382
Finance revenue 181 - 17 198
Inter-segment sales 366 43,062 - 43,428
Total segment revenue 482,165 106,465 19,378 608,008
Results
Depreciation and amortisation expense (21,636) (160) (2,370) (24,166)
Finance costs (5,004) - (463) (5,467)
Share of profits of associates 42 - - 42
Segment net operating profit after tax 15,127 756 21 15,904
Operating assets 368,900 18,286 22,237 409,423
Operating liabilities 137,622 6,185 11,923 155,730
Other disclosures
Investments in an associate 200 - - 200
Capital expenditure (21,803) - (2,195) (23,998)
Inter-segment revenues of $43,428,000
are eliminated on consolidation
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 150,792 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
77
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
Consolidated
2013 2012
$’000 $’000
i) Segment revenue reconciliation to the
Statement of Comprehensive Income
Total segment revenue 608,008 596,136
Inter-segment sales elimination (43,428) (41,333)
Total revenue 564,580 554,803
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 545,202 533,488
New Zealand 19,378 21,315
Total revenue 564,580 554,803
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 409,423 407,301
Inter-segment eliminations (13,601) (12,944)
Deferred tax assets 7,849 6,998
Total assets per the Statement of Financial Position 403,671 401,335
The analysis of location on non-current assets other than
financial instruments and deferred tax assets is as follows:
Australia 288,662 273,780
New Zealand 18,843 18,231
Total assets per the Statement of Financial Position 307,505 292,011
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 155,730 169,173
Inter-segment eliminations (13,601) (12,944)
Deferred tax liabilities 21,352 18,492
Income tax payable 555 1,700
Total liabilities per the Statement of Financial Position 164,036 176,421
78
K & S C O R P O R A T I O N L I M I T E D A N N U A L R E P O R T 2 0 1 3
Consolidated
2013 2012
$’000 $’000
5 Revenue and Expenses
Revenue
a) Rendering of services 500,979 488,250
Sale of goods 63,403 66,311
Finance revenue 198 242
Total revenue 564,580 554,803
b) Other income
– Net gains on disposal of property, plant and equipment 2,422 2,580
– Net gain on derivatives classified as held for trading - 713
1,894
– Other
1,500
Total other income 3,922 5,187
c) Finance costs
– Related parties – other 5 5
– Other parties 2,111 3,681
– Finance charges on hire purchase contracts 3,351 3,456
Total finance costs 5,467 7,142
d) Depreciation and amortisation expense
Depreciation
– Buildings 2,018 2,374
– Motor vehicles 18,989 18,739
– Plant and equipment
2,602
2,754
Amortisation
– IT Development costs 557 538
Total depreciation and amortisation expenses 24,166 24,405
e) Employee expense
– Wages and salaries 132,210 124,611
– Workers’ compensation costs 8,645 8,193
– Long service leave provision 1,291 1,337
– Annual leave provision 9,229 8,374
– Payroll tax 7,508 7,018
– Defined contribution plan expense 9,812 9,109
– Directors retirement scheme expense 55 40
Total employee expense 168,750 158,682
f) Operating lease rental expense
– Property 11,493 10,913
– Plant and equipment 2,023 2,482
13,516 13,395
79
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
Consolidated
2013 2012
$’000 $’000
6 Income Tax
The major components of income tax expense are:
Statement of Comprehensive Income
Current income tax
– Current income tax charge 7,280 7,757
– Adjustments in respect of current income tax of previous years (327) (82)
Deferred income tax
– Relating to origination and reversal of temporary differences (505) (716)
Income tax expense reported in the
Statement of Comprehensive Income 6,448 6,959
Statement of Changes in Equity
Deferred income tax related to items charged or
credited directly to equity
– Net gain on revaluation of land and buildings 2,437 -
Income tax expense reported in equity 2,437 -
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 22,352 23,406
At the Group’s statutory income tax rate of 30% (2012: 30%) 6,705 7,022
– Expenditure not allowable for income tax purposes 70 19
– Adjustments in respect of current income tax of previous years (327) (82)
Income tax expense reported in the
Statement of Comprehensive Income 6,448 6,959
Consolidated
2013 2013 2012 2012
$’000 $’000 $’000 $’000
Current Deferred Current Deferred
Income Income
Income Income
Tax Tax Tax Tax
Recognised deferred tax assets and liabilities
Opening balance (1,700) (11,494) (894) (12,210)
Charged to income (6,953) 505 (7,675) 716
Charged to equity - (2,438) - -
Other payments 8,045 - 6,869 -
Exchange rate 53 (76) - -
Closing balance (555) (13,503) (1,700) (11,494)
Tax expense in Statement of Comprehensive Income 6,448 6,959
Amounts recognised in the Statement of Financial Position:
Deferred tax asset 7,849 6,998
Deferred tax liability (21,352) (18,492)
(13,503) (11,494)
80
K & S C O R P O R A T I O N L I M I T E D A N N U A L R E P O R T 2 0 1 3
Statement of Financial Position
2013 2012
$’000 $’000
Deferred income tax
Deferred income tax at 30 June relates to the following:
Consolidated
Deferred tax liabilities
– Accelerated depreciation for tax purposes (6,146) (5,737)
– Revaluation of land and buildings to fair value (13,696) (11,258)
– Trade and other receivables not derived for tax purposes (1,510) (1,497)
(21,352) (18,492)
Deferred tax assets
– Equity raising costs 68 102
– Accelerated depreciation for accounting purposes 885 811
– Trade and other payables not currently deductible 968 813
– Trade and other receivables not derived for tax purposes 107 93
– Employee entitlements not currently deductible 5,821 5,179
7,849 6,998
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 inter-company 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:
2013 2012
$’000 $’000
Parent
Total increase/(reduction) to tax expense of
K&S Corporation Ltd (7,079) (7,537)
Total increase/(reduction) to inter-company assets of
K&S Corporation Ltd 7,079 7,537
81
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
Consolidated
2013 2012
$’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 15,904 16,447
Net profit attributable to ordinary equity holders of the parent 15,904 16,447
2013 2012
Thousands Thousands
Weighted average number of ordinary shares used in the calculation of the
basic earnings per share 90,269 87,720
Effect of dilution
– Ordinary Shares - -
Weighted average number of ordinary shares adjusted for the effect of dilution 90,269 87,720
Consolidated
2013 2012
$’000 $’000
8 Dividends Paid and Proposed
Declared and paid during the year:
Dividends on ordinary shares
Final franked dividend for 2012: 6.0 cents (2011: 5.0 cents) 5,376 4,327
Interim franked dividend for 2013: 6.5 cents (2012: 5.0 cents) 5,882 4,394
11,258 8,721
Proposed (not recognised as a liability as at 30 June):
Dividends on ordinary shares
Final franked dividend for 2013: 4.5 cents (2012: 6.0 cents) 4,103 5,376
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% (2012: 30%) 47,919 44,708
(cid:129) franking credits that will arise from the payment of income tax payable as at
the end of the financial year 1,104 2,230
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 (1,758) (2,296)
47,265 44,642
Tax rates
The tax rate at which dividends have been franked is 30% (2012: 30%).
Dividends proposed will be franked at the rate of 30% (2012: 30%).
82
K & S C O R P O R A T I O N L I M I T E D A N N U A L R E P O R T 2 0 1 3
Consolidated
2013 2012
$’000 $’000
9 Cash and Cash Equivalents
Cash 47 47
Cash deposits with banks 15,888 20,991
15,935
21,038
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 15,904 16,447
Add/(less) items classified as investing/financing activities:
(2,580)
– (Profit)/loss on sale of non-current assets (2,422)
Add/(less) non-cash items:
– Amounts set aside to provisions 2,089 1,334
– Depreciation 24,167 24,405
– Share of associates’ net profit (42) (106)
– Dividends received from associates - 148
Net cash provided by operating activities before changes in assets and liabilities 39,696 39,648
CHANGE IN ASSETS AND LIABILITIES
(Increase)/decrease in inventories (113)
(Increase)/decrease in income tax benefit (843)
(Increase)/decrease in prepayments 15
(Increase)/decrease in receivables 9,044 (4,944)
4,000
(Decrease)/increase in trade creditors (634)
818
(Decrease)/increase in income taxes payable (1,090)
(Decrease)/increase in deferred taxes payable 347
(465)
Exchange rate changes on opening cash balances 4 2
54
(264)
90
Net cash provided by/(used in) operating activities 46,426
38,939
Disclosure of financing facilities
Refer to Note 18.
Disclosure of non-cash financing and investing activities
Refer to Note 18.
83
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
Consolidated
2013 2012
$’000 $’000
10 Trade and Other Receivables
Current
69,144
Trade debtors 61,485
(308)
Allowance for impairment loss (a) (355)
61,130 68,836
4,353
Sundry debtors 2,946
64,076 73,189
Non-current
Sundry debtors - -
Related party receivables
– Employee share plan loans 1,379 1,297
1,379 1,297
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 308 292
Charge for the year 280 250
Amounts written off (233) (234)
At 30 June 355 308
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**
2013 61,485 41,569 15,020 3,681 - 860 355
2012 69,144 44,418 19,602 3,111 - 1,705 308
* 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.
84
K & S C O R P O R A T I O N L I M I T E D A N N U A L R E P O R T 2 0 1 3
Consolidated
2013 2012
$’000 $’000
11 Inventories
Consumable stores – at cost 795 863
2,064
Finished goods – fuel at cost 2,245
Total inventories at the lower of cost and net realisable value 3,040 2,927
a) Inventory expense
Inventories recognised as an expense for the year ended
30 June 2013 totalled $58,570,000 (2012: $62,477,000)
for the Group. This expense has been included in the
cost of sales line item as a cost of inventories.
Parent
2013 2012
$’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
2013 2012 2013 2012
% % $’000 $’000
13 Investment in Associate
a) Investment details
Smart Logistics Pty Ltd 50 50 200
158
Investment in associates 200 158
Smart Logistics Pty Ltd is a provider of distribution services
and consultant in transport and distribution. Smart Logistics
Pty Ltd was incorporated in Australia.
During the 2012 reporting period, the Company sold its 24.5%
holding in Dairy Transport Logistics Pty Ltd (“DTL”). DTL is
a provider of distribution services and consultant in transport
and distribution and was incorporated in New Zealand.
b) Movements in the carrying amount of the
Group’s investment in associates
Consolidated
2013 2012
$’000 $’000
Dairy Transport Logistics Pty Ltd
At 1 July - 113
Share of profit after income tax - 34
Exchange rate changes on opening balances - 1
Proceeds from the sale of shares - (48)
Dividend payment - (100)
At 30 June - -
85
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
Consolidated
2013 2012
$’000 $’000
Smart Logistics Pty Ltd
At 1 July 158 86
Share of profit/(loss) after income tax 42 72
Dividend payment - -
At 30 June 200 158
c) Share of associates’ commitments
Share of associates’ finance lease commitments:
Within one year - 118
One year or later and no later than five years - -
Minimum lease payments - 118
Less: Future finance charges - -
Total lease liability - 118
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 5,632 6,385
Non-current assets 81 106
5,713 6,491
Current liabilities (5,309) (6,172)
Non-current liabilities (4) (3)
(5,313) (6,175)
Net assets/(liabilities) 400 316
Share of associates net assets/(liabilities) 200 158
200 158
Extract from the associates’
Statement of Comprehensive Income:
Revenue 77,007 80,409
Net profit 72 144
86
K & S C O R P O R A T I O N L I M I T E D A N N U A L R E P O R T 2 0 1 3
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 2013
As at 1 July 2012
net of accumulated depreciation and impairment 97,299 111,617 10,532 219,448
Additions 1,100 19,787 3,111 23,998
Additions – Collare Transport - 8,388 - 8,388
Revaluation 8,125 - - 8,125
Disposals (418) (2,032) (11) (2,461)
Depreciation charge for the year (2,018) (18,989) (2,602) (23,609)
Transfer 272 - (272) -
Exchange adjustment 30 824 7 861
At 30 June 2013
net of accumulated depreciation and impairment 104,390 119,595 10,765 234,750
At 30 June 2013
Cost or fair value 108,981 247,732 39,719 396,432
Accumulated depreciation and impairment (4,591) (128,137) (28,954) (161,682)
Net carrying amount 104,390 119,595 10,765 234,750
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
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 2013 was
determined based on an independent valuation undertaken
in March 2013 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 $5,688,000.
87
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
Consolidated
2013 2012
Freehold Land Freehold Land
and Buildings and Buildings
$’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 71,941 70,840
Accumulated depreciation and impairment (10,253) (8,877)
Net carrying amount 61,688 61,963
d) Property, plant and equipment pledged as security
for liabilities
The carrying value of motor vehicles held under hire purchase
contracts at 30 June 2013 is $68,692,406 (2012: $66,335,014).
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 2013
At 1 July 2012
net of accumulated amortisation and impairment 2,830 68,278 71,108
Additions 237 - 237
Amortisation (557) - (557)
Exchange adjustment - 388 388
At 30 June 2013
net of accumulated amortisation and impairment 2,510 68,666 71,176
At 30 June 2013
Cost (gross carrying amount) 4,190 68,666 72,856
Accumulated amortisation and impairment (1,680) - (1,680)
Net carrying amount 2,510 68,666 71,176
88
K & S C O R P O R A T I O N L I M I T E D A N N U A L R E P O R T 2 0 1 3
Consolidated
IT Development
Costs Goodwill Total
$’000 $’000 $’000
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
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 2013 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
2013 2012
$’000 $’000
Australian Transport 62,929 62,929
Fuel 165 165
New Zealand Transport 5,572 5,184
68,666 68,278
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.
89
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
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
2013 2012 2013 2012
% % % %
Australian Transport 13.95 13.42 3.0 3.0
Fuel 13.95 13.42 3.0 3.0
New Zealand Transport 13.96 13.25 2.5 2.5
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 the impact of the Clean Energy Act 2011 (the “Act” or
“Scheme”) on the Group. Management has estimated there are 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.
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
The recoverable amount of the New Zealand Transport CGU currently exceeds its carrying value by $1.2m. This excess
in recoverable amount could be reduced should changes in the following key assumptions occur:
(cid:129) Discount rate – an increase in the discount rate of over 0.68% would result in a reduction of the recoverable amount
to below the carrying value.
(cid:129) Terminal growth rate – a decrease in the growth rate of over 0.66% would result in a reduction of the recoverable
amount to below the carrying value.
(cid:129) Terminal cash flow – a decrease in terminal cash flow of over 8.8% would result in a reduction of the recoverable
amount to below the carrying value.
Consolidated
2013 2012
$’000 $’000
17 Payables
Current
Trade creditors and payables 43,853 46,439
Self insured workers compensation liability 2,987 2,775
46,840 49,214
Non-current
Self insured workers compensation liability 8,471 6,358
8,471 6,358
i) Trade payables are non-interest bearing and are
normally settled on 30 day terms
90
K & S C O R P O R A T I O N L I M I T E D A N N U A L R E P O R T 2 0 1 3
Consolidated
2013 2012
$’000 $’000
18 Interest Bearing Loans and Borrowings
Current
Hire purchase liabilities – secured 16,332 16,693
16,332 16,693
Non-current
Non redeemable preference shares 60 60
Hire purchase liabilities – secured 32,287 33,110
Bank loans – secured 18,379 33,175
50,726 66,345
Commitments in respect of hire purchase agreements are payable as follows:
Not later than one year 19,006 19,683
Later than one year but not later than five years 35,024 36,360
54,030 56,043
Deduct: future finance charges (5,411) (6,240)
Total hire purchase liability 48,619 49,803
Current 16,332 16,693
Non-current 32,287 33,110
48,619 49,803
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 $68,692,406 (2012: $66,335,014).
The weighted average cost of these facilities was 6.19% (2012: 7.27%).
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 $94,905,000 (2012: $87,870,000). The non-current bank loans are subject
to annual review.
The Group has bank loan facilities available for a period beyond June 2014. Maturity dates for the Group’s facilities are:
Facility amount ($‘000) Expiry
40,000 30 June 2014
40,000 4 July 2014
20,000 30 June 2015
The facilities bear interest at 5.21% (2012: 5.93%).
91
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
Consolidated
2013 2012
$’000 $’000
Financing facilities available
Total facilities available:
Bank overdrafts 4,000 4,000
86,091
Bank loans 84,128
13,909
Standby letters of credit 15,872
104,000 104,000
Standby letters of credit
The Group has the following guarantees at 30 June 2013:
(cid:129) Bank guarantee of $14,543,000 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) 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 18,379 33,175
13,909
Standby letters of credit 15,872
34,251
47,084
Facilities not utilised at balance date:
Bank overdrafts 4,000 4,000
Bank loans 65,749 52,916
Standby letters of credit - -
69,749
56,916
Total facilities 104,000 104,000
Facilities used at balance date 34,251 47,084
Facilities unused at balance date 69,749 56,916
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 30 June 2014.
92
K & S C O R P O R A T I O N L I M I T E D A N N U A L R E P O R T 2 0 1 3
Consolidated
2013 2012
$’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 93,852 86,637
– Plant and equipment 1,053 1,233
Total non-current assets pledged as security 94,905 87,870
Non-cash financing and investment activities
During the financial year, the economic entity acquired property, plant and
equipment with an aggregate fair value of $17,261,000 (2012: $18,551,000)
and disposed of property, plant and equipment with an aggregate fair value of
$nil (2012: $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 16,741 14,480
16,741
14,480
Non-current
Employee benefits 2,025
2,200
Make good provision 356 356
583
Directors’ retirement allowance 638
3,019
3,139
No dividends have been provided for the year ended 30 June 2013. 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.
93
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
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 2012 356 583 939
Arising during the year - 55 55
Utilised - - -
At 30 June 2013 356 638 994
Current 2013 - - -
Non-Current 2013 356 638 994
356 638 994
Current 2012 - - -
Non-Current 2012 356 583 939
356 583 939
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.
94
K & S C O R P O R A T I O N L I M I T E D A N N U A L R E P O R T 2 0 1 3
Consolidated
2013 2012
$’000 $’000
20 Contributed Equity and Reserves
a) Ordinary shares
Contributed equity
91,180,135 (2012: 89,273,615) ordinary shares fully paid 101,187 97,707
101,187 97,707
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 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
Issued through Employee Share Plan – 324,000 ordinary shares at $1.51 324 489
Issued through Dividend Re-investment Plan – 899,273 ordinary shares at $1.57 899 1,410
Issued through Dividend Re-investment Plan – 683,283 ordinary shares at $2.31 683 1,581
At 30 June 2013 91,180 101,187
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 2013, the Group paid dividends of $11,258,000 (2012: $8,721,000).
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 67,058 83,038
Less cash and cash equivalents (15,935) (21,038)
Net debt 51,123 62,000
Net debt + Shareholders funds 290,749 286,934
Gearing ratio 17.6% 21.6%
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.
95
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
21 Derivative Financial Instruments
a) Hedging activities
The Group has no interest rate swap agreements in place at 30 June 2013.
b) Interest rate risk
Information regarding interest rate risk exposure is set out in Note 3.
Consolidated
2013 2012
$’000 $’000
22 Commitments
The estimated maximum amount of commitments not
provided for in the accounts as at 30 June 2013 are:
Capital expenditure commitments
The aggregate amount of contracts for capital expenditure
on plant and equipment due no later than one year 17,450
12,254
Lease rental commitments
Operating lease and hire commitments:
– Not later than one year 9,900 10,147
24,875
– Later than one year but not later than five years 22,349
14,495
– Later than five years 11,844
44,093 49,517
The consolidated entity leases property under non-cancellable
operating leases expiring from one to fifteen 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
The Company and all its subsidiaries have interlocking guarantees in support of the Company’s banking facilities with
Westpac Banking Corporation (“WBC”) and Commonwealth Bank of Australia (“CBA”). Details are:
(cid:129) Interlocking guarantee and indemnity between WBC and the Company and its wholly owned subsidiaries dated
23 September 2002, pursuant to which the Company and its wholly owned subsidiaries jointly and severally
guarantee to WBC the performance by the Company and its wholly owned subsidiaries of their respective obligations
under the WBC multi-currency multiple option facility agreement.
(cid:129) Guarantee and indemnity between CBA and the Company and its wholly owned subsidiaries dated 15 June 2007,
pursuant to which the Company and its wholly owned subsidiaries jointly and severally guarantee to CBA the
performance by the Company and its wholly owned subsidiaries of their respective obligations under the CBA
multiple option facility agreement.
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.
96
K & S C O R P O R A T I O N L I M I T E D A N N U A L R E P O R T 2 0 1 3
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:
K&S Group Pty Ltd
Reid Bros Pty Ltd
DTM Holdings (No. 2) Pty Ltd
Kain & Shelton Pty Ltd
Alento Pty Ltd
K&S Freighters Pty Ltd
DTM Holdings Pty Ltd
K&S Group Administrative Services Pty Ltd
DTM Pty Ltd
Kain & Shelton (Agencies) Pty Ltd
Regal Transport Group Pty Ltd
K&S Transport Management Pty Ltd
Strategic Transport Pty Ltd
Blakistons-Gibb Pty Ltd
Vortex Nominees Pty Ltd
K&S Logistics Pty Ltd
K&S Freighters Limited *
K&S Project Services Pty Ltd
Cochrane’s Transport Limited *
K&S Integrated Distribution Pty Ltd
* 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 2013 is set out below:
Closed Group
2013 2012
$’000 $’000
Statement of Comprehensive Income
Profit before income tax 22,352 23,406
Income tax expense (6,448) (6,959)
Profit after income tax 15,904 16,447
Retained profits at the beginning of the year 102,549 94,823
Transfer asset revaluation reserve 10 -
(8,721)
Dividends provided for or paid (11,258)
Retained earnings at the end of the year 107,205 102,549
97
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
Closed Group
2013 2012
$’000 $’000
Statement of Financial Position
Cash 15,935 21,038
Trade and other receivables 64,076 73,189
Inventories 3,040 2,927
Prepayments 5,266 5,192
Total current assets 88,317 102,346
Other receivables 1,379 1,297
Investment in associates 200 158
Property, plant and equipment 234,750 219,448
Intangibles 71,176 71,108
6,998
Deferred tax assets 7,849
Total non-current assets 315,354
299,009
Total assets 403,671
401,355
Trade and other payables 46,840
Interest bearing loans and borrowings 16,332
Current tax liabilities 555
Provisions 16,741
Total current liabilities 80,468
49,214
16,693
1,700
14,480
82,087
Other payables 8,471 6,358
66,345
Interest bearing loans and borrowings 50,726
18,492
Deferred tax liabilities 21,352
3,139
Provisions 3,019
Total non-current liabilities 83,568
94,334
Total liabilities 164,036
176,421
Net assets 239,635
224,934
Contributed equity 101,187
Reserves 31,243
Retained earnings 107,205
97,707
24,678
102,549
Total equity 239,635 224,934
98
K & S C O R P O R A T I O N L I M I T E D A N N U A L R E P O R T 2 0 1 3
Class of Country of % Equity Interest
2013 2012
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, L Winser, G Boulton, B Grubb,
R Smith, and G Stevenson.
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 Winser has an interest as an alternate Director of several companies within the Scott Group.
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. 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 2013 was $388,350 (2012: $376,249).
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 2013 included sales of $24,907 (2012: $235,025)
and purchase of transport related services totalling $1,561,231 (2012: $1,797,971).
99
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
2013 2012 2013 2012
$ $ $ $
Purchases Sales
The aggregate amount of dealings with these companies
during 2013 were as follows:
Ascot Haulage (NT) Pty Ltd 3,015,978 1,078,919 - -
Northern Territory Freight Services Pty Ltd 18,814 3,485 85,033 26,888
Scott’s Transport Industries Pty Ltd 122,662 156,110 932,480 1,124,324
Scott’s Agencies Pty Ltd 424,844 2,348,825 - 305
The Border Watch Pty Ltd 11,066 4,224 -
-
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 2013 was $30,145 (2012: $1,191) in
professional service fees.
Mr R Smith has an interest as Director of Transpacific
Industries Limited. Transactions with this company during
2013 were sales of $310,372 (2012: $246,167) and
purchases of $44,732 (2012: $37,792).
Consolidated
2013 2012
$’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 38 32
-
Transpacific Industries Limited 56
No provision for doubtful debts has been
recognised in respect of these balances as they
are considered recoverable.
Current payables (included within trade payables)
404
Ascot Haulage (NT) Pty Ltd 493
5
Scott’s Transport Industries Pty Ltd 5
177
Scott Corporation Ltd 156
-
Transpacific Industries Limited 3
Wholly-owned Group
Details of interests in wholly-owned controlled entities
are set out at Note 25.
100
K & S C O R P O R A T I O N L I M I T E D A N N U A L R E P O R T 2 0 1 3
Parent
2013 2012
$’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 89,425 102,106
– Non-current 17,961 17,961
107,386 120,067
Payables – Current
– Other loans - -
- -
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 (2012:$10,000,000).
Consolidated
2013 2012
DIRECTORS’ SHARE TRANSACTIONS
Shareholdings
Aggregate number of shares held by Directors and their
Director-related entities at balance date:
– Ordinary shares 747,651 709,646
– 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 90 178
– 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.
101
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
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 L Winser Non-Executive – Appointed 23 August 2013
Mr R Nicholson Non-Executive – Retired 23 July 2013
Mr B Grubb Non-Executive
Mr G Stevenson Managing Director
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
2013 2012
$ $
b) Compensation for Key Management Personnel
Short-term 3,441,485 3,275,862
Long-term 48,797 50,978
Post employment 322,862 416,889
3,813,144 3,743,729
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
Total $’000 $’000 $’000
2013 291 - 346 6
2012 247 - 291 6
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.
102
K & S C O R P O R A T I O N L I M I T E D A N N U A L R E P O R T 2 0 1 3
e) Shareholding of Key Management Personnel
Balance Balance
1 July 2012 Net Change 30 June 2013
Shares held in K&S Corporation Limited: Ordinary Ordinary Ordinary
30 June 2013
Non-Executive Directors
T Johnson 281,066 18,955 300,021
G Boulton 238,631 16,093 254,724
R Smith 35,789 1,005 36,794
L Winser # 1,151,199 - 1,151,199
R Nicholson 28,955 1,952 30,907
B Grubb 125,205 - 125,205
Executive Director
G Stevenson - - -
Other Key Management Personnel
B Walsh 106,032 14,655 120,687
C Bright 31,000 10,000 41,000
G Wooller 49,244 10,825 60,069
P Sarant 84,603 12,000 96,603
G Everest - 10,000 10,000
S Hine 10,000 10,000 20,000
K Evans 15,000 7,000 22,000
S Skazlic 3,205 - 3,205
Total 2,159,929 112,485 2,272,414
# Appointed Non-executive Director 23 August 2013
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 as Managing Director of the Company (25 May 2012)
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.
103
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
28 Events Subsequent to Balance Date
On 23 July 2013, the Company announced that Mr Nicholson was retiring as a Non-Executive Director. Mr Nicholson
had been a Director of the Company since 1986.
On 19 August 2013, the Company completed the purchase of 14.6 hectares of land in Bullsbrook, Western Australia for
$13.3 million. The land on the Great Northern Highway, north of Perth, will consolidated the Regal Transport General
Haulage operation and will be a bridging depot for the Regal Transport Heavy Haulage business, which encounters
curfew issues at its current South Guildford location. The Company’s intention is to develop the site in stages, with initial
construction of a workshop facility and hardstand proposed throughout the second half of the 2014 reporting period.
On 23 August 2013, the former Managing Director of the Company, Mr Winser, was appointed as a Non-Executive
Director. The Board is of the view that with his extensive knowledge of the transport and logistics industry generally and
of the Company specifically, Mr Winser is eminently well qualified to act as a Non-Executive Director and will bring
significant value to the Board.
On 23 August 2013, the Directors of K&S Corporation Limited declared a final dividend on ordinary shares in respect of
the 2013 financial year. The total amount of the dividend is $4,103,106, which represents a fully franked dividend of
4.5 cents per share. The dividend is payable on 31 October 2013 and has not been provided for in the 30 June 2013
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 2013 (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.
104
K & S C O R P O R A T I O N L I M I T E D A N N U A L R E P O R T 2 0 1 3
29 Business Combinations
Acquisitions in 2013
Acquisition of Collare Transport
On 31 October 2012, K&S Corporation Limited (K&S) acquired the business and assets of Collare Transport (“Collare”).
Collare is Bunbury based with a strong focus on the timber industry in Western Australia.
The cash consideration transferred was $8,221,000. No goodwill has been recorded.
Collare has a complimentary customer profile, lane mix and equipment base to K&S Dardanup based business
(formerly known as Brookes Transport) and further expands K&S’ footprint in Western Australia. The acquisition gives
the Group an excellent opportunity to generate operation synergies and to improve the returns of the combined
Dardanup and Collare.
The provisional fair values of identifiable assets and liabilities is as follows:
Fair Value at
Acquisition Date Carrying Value
$’000 $’000
Plant & equipment 8,388 8,388
Prepayments 66 66
Deferred tax assets 23 23
8,477 8,477
Provision for employee entitlements (76) (76)
Interest bearing loans and borrowings (341) (341)
Deferred tax liability (20) (20)
(437) (437)
Provisional fair value of identifiable net assets 8,040
8,040
Acquisition-date fair-value of consideration transferred
Cash paid 8,040
Consideration transferred 8,040
Direct costs relating to the acquisition 181
Cash outflow on acquisition (8,221)
As the K&S Dardanup and Collare businesses are integrated, it is impractical to segregate and isolate the revenue and
profit impact of the Collare business on the Statement of Comprehensive Income for the reporting period (1 July 2012
to 30 June 2013) and the period from the date of acquisition (31 October 2012 to 30 June 2013).
Acquisition costs relating to the acquisition of Collare are reported within Other expenses in the Statement of
Comprehensive Income.
Acquisitions in 2012
No acquisitions were completed in 2012.
105
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
Consolidated
2013 2012
$ $
30 Auditor’s Remuneration
The auditor of K&S Corporation Limited is Ernst & Young.
Audit services:
Audit and review of the statutory financial reports 188,500 185,500
188,500 185,500
Other services:
Other services – Ernst & Young:
– Information Technology Review 24,580 -
– IT Disaster Recovery Review - 9,820
24,580 9,820
Parent
2013 2012
$’000 $’000
31 Parent Entity Information
Current assets 89,425 102,106
Total assets 141,477 154,094
Current liabilities (1,104) (2,419)
Total liabilities (19,871) (35,132)
Issued capital 101,187 97,707
Asset revaluation reserve 161 161
Retained earnings 20,258 21,094
Total Shareholders’ equity 121,606 118,962
Profit after tax of the Parent entity 10,422 9,992
Total comprehensive income of the Parent entity 10,422 9,992
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.
106
DIRECTORS’
DECLARATION
FOR THE YEAR ENDED 30 JUNE 2013
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 2013 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 2013.
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 23rd day of August 2013.
On behalf of the Board:
Tony Johnson
Chairman
Greg Stevenson
Managing Director
107
AUDITOR’S
INDEPENDENCE
DECLARATION
TO THE DIRECTORS OF K&S CORPORATION LIMITED
In relation to our audit of the financial report of K&S Corporation Limited for the
financial year ended 30 June 2013, 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
Mark Phelps
Partner
Adelaide
23 August 2013
A member of Ernst & Young Global Limited
Liability Limited by a scheme approved under Professional Standards Legislation
108
INDEPENDENT AUDIT
REPORT
TO THE MEMBRS OF K&S CORPORATION LIMITED
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 2013,
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.
A member of Ernst & Young Global Limited
Liability Limited by a scheme approved under Professional Standards Legislation
109
INDEPENDENT AUDIT REPORT
FOR THE YEAR ENDED 30 JUNE 2013
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.
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 2013 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 29 to 35 of the directors’
report for the year ended 30 June 2013. 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 2013, complies with section 300A of the Corporations Act 2001.
Ernst & Young
Mark Phelps
Partner
Adelaide
23 August 2013
A member of Ernst & Young Global Limited
Liability Limited by a scheme approved under Professional Standards Legislation
110
K & S C O R P O R A T I O N L I M I T E D A N N U A L R E P O R T 2 0 1 3
INFORMATION
ON SHAREHOLDINGS
INFORMATION RELATING TO SECURITY HOLDERS AS AT 5 SEPTEMBER 2013
DISTRIBUTION OF SHAREHOLDINGS
Ordinary Shares
Number of Shareholders
1-1,000 Shares 484
1,001 - 5,000 Shares 977
5,001 - 10,000 Shares 419
10,001 - 100,000 Shares 559
100,001 and more Shares 46
2,485
136 shareholders hold less than a marketable parcel (283 shares).
TWENTY LARGEST SHAREHOLDERS
Name Number of Ordinary Shares Held %
1 AA Scott Pty Ltd 45,971,922 50.42
2 Citicorp Nominees Pty Limited 5,810,492 6.37
3 Bell Potter Nominees Ltd 2,726,732 2.99
4 Ascot Media Investments Pty Ltd 2,096,056 2.30
5 National Nominees Limited 1,635,454 1.79
6 Oakcroft Nominees Pty Ltd 1,013,268 1.11
7 Zena Kaye Winser 922,708 1.01
8 Sabadin Petroleum Pty Ltd 883,044 0.97
9 Winscott Investments Pty Ltd 875,992 0.96
10 Tribridge Holdings Pty Ltd 750,000 0.82
11 Mr Eric Joseph Roughana 700,000 0.77
12 Mr Barry William Page & Mrs Janice Mary Page 568,813 0.62
13 Mr William Clifton Anderson 424,275 0.47
14 JP Morgan Nominees Australia Limited 421,951 0.46
15 Mr John Irving Stepnell & Mrs Valerie Iris Stepnell 421,500 0.46
16 HSBC Custody Nominees Australia 412,054 0.45
17 Dixson Trust Pty Ltd 364,430 0.40
18 DeBruin Nominees Pty Ltd 310,000 0.34
19 Tirroki Pty Ltd 300,021 0.33
20 Angueline Capital Pty Limited 300,000 0.33
20 Mr Adrian Keith Crook & Mrs Samantha Jane Crook 300,000 0.33
67,208,712 73.71
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 73.71% 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 5th September 2013:
Number % of Class
Estate of Mr A A Scott 49,016,492 53.76
Commonwealth Bank of Australia 4,735,537 5.19
VOTING RIGHTS
The voting rights are as follows:
Preference Shares: Nil
Ordinary Shares: 1 vote per share
111
HEAD OFFICE
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) 9473 2102
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
CORPORATE DIRECTORY
OPERATIONS
ROAD, RAIL AND SEA
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
Napier
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
DTM
Sydney
2 Hope Street
Enfield,
New South Wales 2136
Phone: (02) 9735 2300
Facsimile: (02) 9735 2399
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
Melbourne
Port Hedland
2-10 Gaine Road
Dandenong Sth, Victoria 3175
Phone: (03) 9215 4700
Facsimile: (03) 9215 4799
Adelaide
128-138 Bedford Street
Gillman, South Australia 5013
Phone: (08) 7224 5480
Facsimile: (08) 7224 5496
Brisbane
34 Postle Street
Coopers Plains,
Queensland 4108
Phone: (07) 3137 4400
Facsimile: (07) 3137 4441
Perth
Lot 1 Kewdale Freight Precinct
Off Fenton Street, Kewdale,
Western Australia 6105
Phone: (08) 6466 6646
Facsimile: (08) 6466 6697
Lot 2521 Miller Street
Port Hedland,
Western Australia 6725
Phone: (08) 9140 2778
Facsimile: (08) 9140 2740
Onslow
558 Beadon Creek Road
Onslow,
Western Australia 6710
Phone: (08) 9144 1151
Kununurra
33 Poinciana Street
Kununurra,
Western Australia 6743
Phone: (08) 9169 3333
K&S Project Services
Perth
72 Hyne Road
South Guildford
Western Australia 6055
Phone: (08) 9376 9656
Facsimile: (08) 9477 6877
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
Ballarat
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 Quanaba 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
112
ABN 67 007 561 837
www.ksgroup.com.au