More annual reports from K&S Corporation Limited:
2023 Report FINANCIAL CALENDAR
Final dividend payment
(3.0 cents per share) 31 October 2014
Annual General Meeting 25 November 2014
Half-year results and interim
dividend announcement 25 February 2015
Interim dividend payment 3 April 2015
Full-year result and final
dividend announcement 26 August 2015
Annual report mailed
to Shareholders 9 October 2015
Final dividend payment 31 October 2015
Annual General Meeting 24 November 2015
ABN 67 007 561 837
Contents Page
Highlights 1
Chairman’s Overview 2
Financial Overview 6
Managing Director’s Report 8
Board of Directors 19
Five-Year Financial History 22
Directors’ Report 24
Remuneration Report 34
Corporate Governance 44
Financial Report 63
Corporate Directory 124
To be the leading
provider of transport
and logistic solutions
within our target
markets in Australia
and New Zealand.
Highlights
(cid:129) Revenue increased 3.8% to
$586.2 million
(cid:129)
Profit after tax is $8.9 million
(cid:129) Completes acquisition of
Scott Corporation Limited
(cid:129) Operating cash flow is $47.3 million
(cid:129) We have significantly grown our
NZ business
(cid:129)
LTIFR reduced to 5.8
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“Management is
focused on finding
new growth
opportunities and
improving yield.”
On behalf of the Board of K&S Corporation, I am pleased to present the Company’s Annual Report.
This year has been a difficult and challenging one for the Company. We announced a net profit after tax of
$8.9 million, a reduction of 44.0% on the previous year.
Operating revenue for the year was $586.2 million, an increase of 3.8% on the previous corresponding period.
Earnings per share were 9.0 cents per share.
This result included a number of one off items related to re-organisation costs of $0.9 million and acquisition
costs related to the merger with Scott Corporation of $0.6 million.
Underlying profit after tax after allowing for these one off costs was $10.4 million.
During the year our Western Australian business was impacted by the continued slowing of the resource
sector. With declining commodity prices, the miners reduced their costs and scaled back projects. This had
a significant impact on profitability of our Regal business unit in Western Australia.
Chairman’s
Overview
The manufacturing sector
remained subdued as a result
of high labor costs and the
high Australian dollar. Imports
are still impacting the demand
for locally manufactured
goods and this in turn
reduces demand for long haul
transport services.
The loss of the Australian
Paper contract on 1 July 2013
also had a negative impact on
the year. This contract tradi-
tionally generated revenues in
excess of $30 million annually
and provided efficiencies
in our major branches that
were difficult to replace in the
short term.
This loss of revenue has
partially been offset with
Schweppes, Norske and
some synergies from the
Scott Corporation merger.
The volumes from the
NZ Steel contract which
commenced on 1 January
2014 has exceeded our
initial expectations.
On 24 February 2014, K&S
completed the acquisition of
Scott Corporation. This was
completed by way of an off
market takeover bid.
Scott Corporation is a
national carrier with expertise
in the transport of bulk solids,
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liquids, fuels and explosives. Scott Corporation has four operating divisions being Bulktrans, Energytrans,
Chemtrans and Hyde Park Tanks. The acquisition of Scott Corporation will enable K&S to grow in new
markets that are not as impacted by the decline in manufacturing.
The acquisition of Scott Corporation was completed with K&S offering $0.59 or 0.345 K&S shares for
each Scott Corporation share. The transaction was completed using both debt and equity components.
The majority of Scott Corporation shareholders, 95%, elected the scrip option.
Following the acquisition of Scott Corporation, we have already achieved annualized integration benefits
in excess of $3 million. These integration benefits have come from back office, administration and
equipment costs.
During the difficult year, we have continually reviewed our cost base and we have reduced fixed and variable
costs from operations. We have reduced subcontractor costs, labor, overtime and equipment costs as
volumes have declined.
We are focused on creating positive synergies and integration benefits from the Scott Corporation merger.
Capital expenditure on equipment has been reduced significantly during the course of the year.
Operating cash flow for the year was $47.3 million.
Our gearing at year end is 25.2%, which is well within our target range. Our net debt is $96.0 million.
On 22 April 2014, Paul Sarant was appointed as Managing Director and Chief Executive Officer following
the resignation of Greg Stevenson. Mr Stevenson held the position for approximately two years and under
his leadership the Scott Corporation merger was completed. We thank Greg for his service.
With the appointment of Paul Sarant as Managing Director and Chief Executive Officer and following the
merger with Scott Corporation, we have seen a number of changes to the Company’s Executive Team
in the last six months. The depth of the Executive Team has increased and we are excited by the collective
skills, expertise and energy of our reinvigorated Executive Team.
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Chairman’s
Overview
We have declared a fully
franked final dividend of
3.0 cents per share (last year
4.5 cents per share). This
follows the interim dividend of
3.0 cents per share. The final
dividend will be paid on 31
October 2014, with the date
for determining entitlements
being 17 October 2014.
The dividend reinvestment
plan (DRP) will once again
apply in respect of the fully
franked final dividend of
3.0 cents per share payable
on 31 October 2014.
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 20 October
2014 (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 in early 2012, 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.
I would also like to thank Bruce Grubb who retired from the Board on 22 October 2013 after six years as
a Director. Mr Grubb has a vast wealth of experience in the transport industry which enabled him to make a
positive contribution to the workings of the Board.
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
Paul Sarant, for their ongoing
commitment and dedication
under difficult and challenging
circumstances.
Tony Johnson
Chairman
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2014 2013 % change
Revenue $m 586.2 564.6 3.8
Operating profit before interest, $m 43.6 52.0 (16.2)
tax and depreciation
Operating profit before interest and tax $m 18.6 27.8 (33.1)
Operating profit before tax $m 12.4 22.4 (44.4)
Operating profit after tax $m 8.9 15.9 (44.0)
Dividends paid $m 6.9 11.3 (38.9)
Total assets $m 540.5 403.7 33.9
Net borrowings $m 96.0 51.1 (87.8)
Shareholders’ funds $m 287.2 239.6 19.9
Depreciation and amortisation $m 25.0 24.2 3.3
Earnings per share cents 9.0 17.6 (48.9)
Dividends per share cents 6.0 11.0 (45.5)
Net tangible assets per share $ 1.69 1.85 (8.6)
Cash flow per share $ 0.40 0.51 (21.6)
Return on Shareholders’ funds % 3.1 6.6 (53.0)
Gearing % 25.2 17.6 (43.2)
Employee numbers 2,050 1,751 17.8
Lost time injuries 25.0 47.0 46.8
Lost time injuries frequency rate 5.8 11.0 47.3
Financial
Overview
OPERATING REVENUE
OPERATING CASH FLOW
2014
2013
2012
2011
2010
$586.2m
$564.8m
$554.8m
$47.3m
$46.4m
$38.9m
$523.4m
$34.1m
$454.3m
$35.9m
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SHAREHOLDERS’ FUNDS
GEARING
2014
2013
2012
2011
2010
$287.2m
25.2%
$239.6m
17.6%
$224.9m
$213.6m
$179.1m
21.6%
26.4%
24.5%
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The 2013-14 financial year
has been significant for
K&S Corporation, with the
merger of Scott Corporation
and the introduction of a
new executive management
team. The merger, which
was finalised in February,
has created a company with
annual revenues in excess
of $720 million, more than
2,100 employees and a
market capitalisation that now
exceeds $185 million.
Scott Corporation has
traditionally concentrated
on the transport of bulk
commodities, fuel and
chemicals and has given
K&S Corporation a scale
and depth of capabilities
that now rivals that of our
larger competitors.
This, combined with our
national facilities infrastructure
expands our capability to
target new market segments.
Managing Director’s
Report
Sales revenues for the year reached $586.2 million and after tax profit for 2013-14 was $8.9 million compared
with $15.9 million last financial year.
This result was foreshadowed in April and follows continued soft domestic trading conditions and a slowdown
in the mining sector that particularly impacted on our Western Australian business.
Safety performance of the domestic operations continued to improve. Our Lost Time Injury Frequency Rate
reduced to 5.8, from 11.00 for the previous corresponding period.
Re-organisational costs and transaction costs associated with the merger with Scott Corporation amounted
to approximately $1.5 million on an after tax basis. Annualised integration benefits in excess of $3 million per
annum have been generated.
The integration benefits are being made in areas including back office, administrative and equipment
costs. We expect to realise further savings in 2014-15 as work to streamline properties and procurement
protocols continues.
“We will continue to
implement expansion
initiatives aimed
at profitable growth.”
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K&S FREIGHTERS K&S FREIGHTERS K&S FREIGHTERS K&S FREIGHTERS K&S FREIGHTERS K&S FREIGHTERS K&S FREIGHTERS
The traditional freight business
operated by K&S on the
east coast of Australia remains
subdued as a result of contin-
uing slow economic conditions
in the manufacturing sector.
Plant closures of major
manufacturing facilities
continue to dominate the
economic landscape and we
expect this to continue well
into the new financial year.
Whilst there is a potential
upside in major infrastructure
spending by the Federal
Government, there is by
no means any certainty that
these spending initiatives
will be passed and approved
before the end of the next
financial year.
In terms of our revenue
performance, the loss of
Australian Paper at the end of
the last financial year adversely
impacted the result in excess
of $30 million. The net
contribution of this has been
predominantly replaced with
new contracts and other site
related synergies derived from
the Scott Corporation merger.
The pleasing aspect this year
is that we have either
retained and or continued to
build on our existing long term
contractual arrangements with
companies such as OneSteel,
BlueScope, Air Liquide,
Caltex, CHEP and Fletcher
Building Products. These
contracts place us in a good
position to support increased
activity expected in the latter
half of the FY2015.
Norske Skog Australia
and New Zealand continues
to provide us with strong
opportunities. Whilst volumes
remain subdued consequent
to the ongoing reduction
of the domestic newsprint
market, they invested in a
major upgrade of their Boyer
mill including the conversion
of a paper machine to
produce lightweight coated
grades that are aligned
to the growing promotional
advertising market. We are
continuing to seek new and
more efficient ways of
supporting the transport of
these products.
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SCOTT SCOTT SCOTT SCOTT SCOTT SCOTT SCOTT SCOTT SCOTT SCOTT SCOTT SCOTT SCOTT SCOTT SCOTT SCOTT SCOTT SCOTT SCOTT SC
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Scott Corporation Limited
in the southern coal fields
significantly reduced coal
volumes in the second half
of 2013-14.
Strong upside is expected in
FY2015 including Northern
Territory sulphuric acid
transportation, two new
chemical distribution contracts
recently won with combined
annualised revenues in excess
of $8 million, and strong coal
transportation with a forecast
of 9 million tonnes to be
exported.
The NSW Roads Authority has
approved the commissioning
of a new A-double fleet for
coal haulage in the Illawarra
region. An application is
currently before the National
Heavy Vehicle Regulator
for an 85 tonne gross mass
permit, which is expected to
come into place early in
the first quarter of the new
financial year.
Scott Corporation clients
have generally welcomed the
merger of Scott Corporation
into K&S and expressed
strong interest in the
broader service offering that
is available, along with
opportunities to rationalise
service supplier numbers.
In the mining sector, volumes
transported have generally
remained stable. Price
pressures are evident when
contracts are being renegoti-
ated, which we seek to offset
with innovation benefits.
Volumes in the manufacturing
sector remain depressed and
this continues to affect our
traditional chemical and bulk
liquid business.
Specifically, operations in
northern Queensland in 2014
were affected by a prolonged
wet season which slowed
customer operations and
reduced the volume of fuel
and chemicals transported.
In our bulk commodities
business, scheduled long
wall changes to two mines
COTT SCOTT SCOTT SCOTT SCOTT SCOTT SCOTT SCOTT SCOTT SCOTT SCOTT SCOTT SCOTT SCOTT SCOTT SCOTT SCOTT
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Managing Director’s
Report
SERVICE ALL THE WAY
Regal Transport experienced
a tough 12 months as a
result of the downturn in the
mining and resources sector
in Western Australia.
Lower commodities prices
have resulted in fewer new
mines being developed, while
existing operations have
moved from infrastructure
development into production.
As a result, heavy haulage
activity across the state
reduced significantly. We
expect activity in FY2015
to improve.
Regal’s ongoing work with
Westrac was significantly
reduced, but was balanced
to some degree by work
secured with a number of
smaller customers.
REGAL TRANSPORT REGAL TRANSPORT REGAL TRANSPORT REGAL TRANSPORT REGAL TRANSPORT REGAL TRANSPORT
The general freight business
faced similar challenges.
There was minor total volume
growth, offset by competitive
market pressure which
effectively reduced rates.
New freight contracts
with Argyle Diamond and
Kimberley Diamond
commenced. This included
the establishment of a new
branch depot at Kununurra.
This will assist in the develop-
ment of new business in the
Darwin corridor.
Increased activity was realised
in the oil and gas sector.
A contract was won to service
a new supply depot in Broome,
while services to Onslow and
the Canning Basin operations
were expanded.
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The DTM business continued its strong growth of previous years, adding an additional 50 vehicles to its
national fleet to service new and expanded contracts.
In the past six years, DTM has organically grown revenues from $41 million to circa $80 million, despite
tough economic conditions. Innovation continues to be a strong driver of this.
This success has been based on DTM’s ability to tailor solutions based on purpose-built vehicles and
incorporating the latest in track-and-trace, GPS technology, as well as strong emphasis on chain of
responsibility (CoR), and health and welfare.
One of the principal areas of growth in 2014 was Western Australia, where a new distribution agreement
was signed with Caltex Oil and Lubricants.
DTM BUSINESS LOGISTICS DTM BUSINESS LOGISTICS DTM BUSINESS LOGISTICS DTM BUSINESS LOGISTICS DTM BUSINESS
In NSW, a new agreement was
signed with Fletcher Building
Limited to service iPLEX, and
an extension of work was
negotiated with equipment
handling specialist CHEP.
The development of
portable pallet repair plants
in conjunction with CHEP
in FY2013 has been an
outstanding success, resulting
in high quality outcomes and
significant cost savings for
the client.
DTM also increased its
pallet bulk storage business
for CHEP at Truganina in
Melbourne and Enfield in
Sydney, and commenced
storage operations in
Queensland.
A new contract with Air
Liquide was signed for the
transport of industrial gases
in metropolitan Brisbane
and far north Queensland,
adding to the other Air
Liquide contracts already
in place across Australia
in South Australia, Victoria
and New South Wales.
The distribution agreement
with Shell in Queensland has
expanded and volumes are
expected to increase in the
new financial year.
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Managing Director’s
Report
Business
Development
Business development activity was reasonably subdued in the
first half of the financial year. There has been a strong resurgence
towards the end of the year. Our sales pipeline remains strong.
In order to effectively manage our development activity and
cope with the increasing task of tendering and the winning
of new business, our sales team has been expanded
and efforts to realise synergies between all of our operating
divisions resulted in the central co-ordination of major tenders
and opportunities, particularly in the small to medium
business category.
Significant efforts are being made through this centralisation of
business development activity to ensure that customers are
fully aware of the transport solutions that K&S can offer through
the imaginative use of different transport modes and specialist
divisions within the Group.
By ensuring customers are fully aware of all services K&S offers,
the business has been able to win new work and value-add to
existing agreements.
K&S won a contract with a major provider of fast moving
consumer goods (FMCG) for warehousing at Truganina, and
a separate contract with another FMCG provider to transport
goods between Melbourne and Brisbane. K&S has also
continued to win new wharf cartage work.
In New Zealand, a new contract commenced in January with NZ Steel. It is now operating approximately
30% above initial expectations as a result of the buoyant NZ economy. This is expected to provide a strong
boost to NZ results in the next financial year.
The new financial year provides many opportunities in business development. The merger of Scott
Corporation with its strong emphasis on bulk logistics into K&S will provide even greater opportunities to
expand services to customers of both entities. In particular, transport of ore from the mine sites to port is
being targeted as an area for expansion together with the transport of bulk chemicals in the WA market.
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New Zealand
A continued strong focus on Occupational Health and Safety paid significant dividends for our New Zealand
business during 2013-14. K&S has now achieved tertiary accreditation under the Accident Compensation
Commission’s Workplace Safety Management Practices (WSMP), providing the Company with the highest
possible level of levy reduction and significant benefits for our clients.
K&S won new contracts with NZ Steel and Timberlands, with both contracts being awarded after extensive
safety audits of the K&S business as part of the tender process.
The Timberlands contract, which came into effect in January, involves the cartage of approximately 200,000
tonnes of woodchip a year from the Rotorua area, with deliveries undertaken on a 24/7 basis.
New contracts were also won during the year with Miraka, which doubled the tonnage carried, and Sequal
Lumber carting along the Eastern Bay of Plenty corridor to export port.
A strong focus has also been maintained on leveraging roads compliance changes, with new mass
regulations allowing appropriate vehicles to carry maximum loads of 50 or 58 tonnes on specified routes,
increasing from the previous 44 tonnes. Approximately 40% of our fleet now meets the vehicle design
specification pertaining to this change, which has allowed us to compete more effectively with the extensive
subcontractor base who predominantly still use older and less efficient vehicles. Heavier vehicles are now
able to access approximately 75% of the North Island roads and 15% of the South Island roads.
We continued to expand our fleet, with it increasing almost 15% to support new contracts.
The Company has developed a strong business in the timber, steel and dairy sectors, while the kiwifruit
industry has also bounced back after recovering from two years of viral infection and drought. With the
planting of new G3 variety fruit, this sector is expected to grow solidly in coming years.
K&S Fuels
The K&S Fuels card system,
which was expanded to Port
Hedland, Dardanup and
Newcastle last year, continues
to work well. Opportunities
to expand the system further
following the merger with Scott
Corporation will be pursued.
Additional cartage work for
Caltex for the supply of fuel to
mining sites and ship refuelling
bunkers as well the cartage
of biodiesel have been major
developments for K&S Fuels
in the past 12 months.
Diesel sales to the fishing
fleet along the Limestone
Coast were slightly down as
fishermen filled their lobster
quotas earlier, while sales to
farm customers were steady.
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Managing Director’s
Report
Human
Resources
The integration of Scott
Corporation into the K&S
business has been a key
human resources focus during
the latter part of the year.
Work to merge the human
resources functions of both
organisations has commenced
and will continue to evolve in
the first part of FY2015.
The organisations share a
common strong safety
focus and a commitment
to providing open and
transparent communication
across the Group and
encouraging and recognising
innovation and performance.
The merger not only provides
new business opportunities
for the Group by expanding
core competencies, but it
also opens up broader
prospects for employees to
expand development and
career opportunities.
K&S continues to benefit from
its commitment to people
safety though employee
engagement and participation
in programs and safe practices.
Environment
K&S also completed its
compliance obligations under
the Energy Efficiency
Opportunities Program.
This program has now been
closed by the Federal
Government and removes
future compliance obligations.
K&S continues to meet its
requirements under relevant
environmental reporting
protocols and continues to
search for ways to increase
overall energy efficiency.
Under the National
Greenhouse and Energy
Reporting Act, K&S reported
a total of 119,000 tonnes of
carbon dioxide equivalent
during 2012-13, in line with
the previous year’s figure.
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Safety
K&S maintained its strong
commitment to safety,
developing and implementing
programs focussing on
falls prevention, fit for work,
incident reporting and
investigation, manual handling
and load restraint.
A Safety Operating
Procedure strategy plan
was also developed and
has commenced operation.
The Lost Time Injury
Frequency Rate (LTIFR) figure
continued to improve, with
a rate at June 30 this year
of 5.8, compared with 11 on
June 30, 2013.
On the industry front, the
Truck Emergency Breakdown
and Roadside Safety Program
(TEBARS), of which K&S
was a significant contributor,
was completed and
launched at Freight Week in
September, 2013.
During the year, K&S
collaborated with the Victorian
Transport Commission and
Monash University in a heavy
vehicle speed variation study
to determine what safety
benefits may be achieved by
heavy vehicles operating at
different speeds.
Safe driving plans are required
to be completed by long
distance operators with
vehicles of 4.5 tonnes or more.
Following media reports of
vehicle maintenance issues by
competitors, K&S undertook
both internal and independent
external vehicle audits to
ensure vehicle compliance.
This showed that the fleet is
maintained at high levels.
The 22 week study, which
was conducted along Princes
Freeway between Melbourne
and Geelong, involved four
B-doubles operating at
different speeds, with traffic
responses being measured.
The results of the study have
not yet been published.
K&S introduced safe driving
plans as part of its obligations
under the Road Safety
Remuneration Tribunal, an
independent national tribunal
that has functions relating to
the road transport industry.
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Managing Director’s
Report
Compliance
K&S completed re-accreditation under the National Heavy
Vehicle Accreditation Scheme, with an audit confirming the
Company continues to meet required standards.
The Company remains a member of the ATA Council and on the
Safety Committee and the Transport Economics Committee.
It also continues to be accredited to ISO 9001 2008 standard.
Summary
In this, as my first year as Managing Director and CEO, I would
like to take this opportunity to express my sincere thanks to
all the employees and supporters of K&S that have remained
steadfast through difficult trading conditions over the past
12 months. We have a safe, hands on, accountable and service
orientated culture.
We will continue to focus on the improvement of our safety
performance, revenue growth and reduction of our operating
costs. A key component of this will include our ongoing
consolidation of operating sites, rationalisation of supporting
infrastructure and the exiting of leased properties in
locations where synergies are possible. These predominantly
currently reside on the eastern seaboard in capital cities.
We have maintained a strong balance sheet with low gearing.
Potential acquisition opportunities will be pursued within our
strategic guidelines.
Your continued support will be critical in ensuring that we
capture the benefits of our newly combined strengths and
continue to expand our service offering to support new
markets and to take advantage of anticipated improvements
in economic activity throughout FY2015 and beyond.
Paul Sarant
Managing Director
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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 67, Director since 1986
Tony Johnson BA, FAICD, LLB, LLM (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, the
largest Shareholder of K&S Corporation Limited and a Director
of Adelaide Community Healthcare Alliance.
Member of: • Environmental Committee (Chairman)
• Nomination and Remuneration Committee
Board of
Directors
Paul Sarant Managing Director
Age 45, Appointed 22 April 2014
Paul Sarant, Bachelor of Engineering (B.Eng.), has extensive
experience in the transport and logistics sector. Mr Sarant
has occupied the position of Executive General Manager
at DTM for the last seven years at K&S Corporation. Prior to
that, Mr Sarant occupied a range of senior management roles,
including general management and senior logistics roles,
in the course of his 15 years at Amcor Printing Paper Group/
PaperlinX and former General Manager Spicer Stationery Group.
Member of: • Environmental Committee
Greg Boulton AM Deputy Chairman
Age 64, 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 the transport related industry.
Member of: • Audit Committee
• Nomination and Remuneration Committee
(Chairman)
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Legh Winser
Age 66, 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: • Environmental Committee
• Nomination and Remuneration Committee
Ray Smith
Age 67, 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, Transpacific Industries
Limited and a former Director of Warrnambool Cheese and
Butter Factory Company Holdings 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: • Audit Committee (Chairman)
Secretary
Chris Bright BEc, LLB, Grad Dip CSPM, FCIS Secretary since 2005
Aged 43, Chris Bright has held the position of General Counsel
for 12 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.
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Retired Directors
Richard Nicholson
Age 71, 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: • Nomination and Remuneration Committee
Bruce Grubb
Age 64, Retired 22 October 2013
Bruce Grubb has over 30 years experience in the transport
industry and is the former Chief Executive Officer of Scott
Transport Industries Pty Ltd. Mr Grubb was also a Non-Executive
Director of the listed entity Scott Corporation Limited and a
Director of Dangerous Goods Logistics Pty Ltd.
Member of: • Environmental Committee
Greg Stevenson Managing Director
Age 46, Resigned 22 April 2014
Greg Stevenson AssocDip(PerAdmin), MBus(Sys),
GradDip(BusSys), MBA(E) had 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: • Environmental Committee
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Five-Year Financial History
($A Millions unless
otherwise indicated) 2014 Variation 2013 2012 2011 2010
%
Group Revenue 586.2 3.8 564.6 554.8 523.4 454.3
Operating Profit before
Interest and Income Tax 18.6 (33.1) 27.8 30.5 29.6 31.5
Interest Expense 6.2 12.7 5.5 7.1 8.4 5.2
Profit Before Tax 12.4 (44.4) 22.4 23.4 21.2 26.3
Income Tax Expense 3.5 (45.3) 6.4 7.0 6.3 5.2
Operating Profit after Tax 8.9 (44.0) 15.9 16.4 14.8 18.7
Earnings per
Ordinary Share (cents) 9.0 (48.9) 17.6 18.7 18.3 26.5
Dividends per Share (cents) 6.0 (45.5) 11.0 11.0 10.0 14.0
Return on
Shareholders Funds 3.1% (53.0) 6.6% 7.3% 6.9% 10.5%
Paid Up Capital 145.4 43.7 101.2 97.7 94.3 64.5
Shareholders Funds 287.2 19.9 239.6 224.9 213.6 179.1
Total Assets 540.5 33.9 403.7 401.0 388.0 326.1
Net Tangible Assets
(book value) per Share $1.69 (8.6) $1.85 $1.75 $1.65 $1.85
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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 2014
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.
Principal
Activities
Directors’
Report
Operating and Financial Review
The Board presents the 2014 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
ASIC RG247.
The consolidated profit for the year attributable to the members
of K&S Corporation Limited (“K&S”) is shown below, along with
comparative results for 2013
Financial Overview 2014 2013 % Change
Operating revenue $m 586.2 564.6 3.8
Operating profit after tax $m 8.9 15.9 (44.0)
Net borrowings $m 96.0 51.1 87.9
Shareholders’ funds $m 287.2 239.6 19.9
Earnings per share (basic) cents 9.0 17.6 (48.9)
Dividends per share cents 6.0 11.0 (45.5)
Net tangible assets per share $ 1.69 1.85 (8.6)
Cash flow per share $ 0.40 0.51 (21.6)
Return on Shareholders’ funds % 3.1 6.6 (53.0)
Gearing % 25.2 17.6 (43.2)
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K&S is a mid-sized logistics company, recognised as a 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 announce a net profit after tax of $8.9 million, a reduction of 44.0% on the previous year.
Operating revenue for the year was $586.2 million, an increase of 3.8% on the previous corresponding period.
Earnings per share were 9.0 cents per share.
This result included a number of one off items related to re-organisation costs of $0.9 million and acquisition
costs of $0.6 million.
Underlying profit after tax after allowing for these one off costs was $10.4 million.1
Reconciliation of statutory profit after tax to underlying profit
after tax:
$m
Statutory profit after tax 8.9
After tax adjustments
-
Reorganisation costs 0.9
Transaction cost of Scott Corporation merger 0.6
Underlying profit after tax 10.4
On 24 February 2014, K&S obtained control of Scott Corporation
Limited (“SCC”). This acquisition was completed by way of an
off market takeover bid.
SCC is a national carrier with expertise in the transport of bulk
solids, liquids, fuels and explosives. SCC has four operating
divisions: Bulktrans, Energytrans, Chemtrans and Hyde Park
Tanks. The acquisition of SCC will enable K&S to grow in new
markets that are not impacted by the decline in manufacturing.
1 Underlying earnings are categorised as non-IFRS financial information and therefore have been presented in compliance with ASIC Regulatory Guide 230 – Disclosing non-IFRS information,
issued in December 2011. Underlying adjustments have been considered in relation to their size and nature, and have been adjusted from the Statutory information for disclosure purposes
to assist readers to better understand the financial performance of the underlying business in each reporting period. These adjustments include reorganisation costs and transaction
costs associated with the current merger with Scott Corporation Limited. The exclusion of these items provides a result which, in the Directors’ view, is more closely aligned with the ongoing
operations of the Consolidated Group. The non-IFRS information has been subject to review by the auditor.
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Directors’
Report
Operating and Financial Review continued
The acquisition was completed with K&S offering $0.59 or 0.345 K&S shares for each SCC share.
The transaction was completed using both debt and equity components. The majority of SCC shareholders,
95% elected to receive the scrip option.
Following the acquisition of SCC we have already achieved annualized integration benefits in excess of
$3 million. These savings have come from back office, administrative and equipment costs.
During the year our Western Australian business was impacted by the continued slowing of the resource
sector with declining commodity prices the miners reduced their costs and scaled back projects.
The manufacturing sector remained subdued. Imports are still impacting the demand for locally manufactured
goods and this in turn reduces demand for long haul transport services.
The loss of the Australian Paper contract on 1 July 2013 also had a negative impact on the year. This contract
traditionally generated revenues in excess of $30 million annually and provided efficiencies in our major
branches that were difficult to replace in the short term.
This loss of revenues have partially been offset with Schweppes, Norske and some synergies from the Scott
Corporation merger.
The volumes from the NZ Steel contract which commenced on 1 January 2014 has exceeded our
initial expectations.
During the difficult year, we
have continually reviewed
our cost base and we have
reduced fixed and variable
costs from operations. We
have reduced subcontractor
costs, labour, overtime and
equipment costs as volumes
have declined.
We implemented a freeze on
new employment as a
measure to reduce costs.
Capital expenditure on non
essential equipment has been
reduced significantly during
the course of the year.
Operating cash flow for the
year was $47.3 million. This
was achieved by increasing
the resources and focus on
customer collections and
working capital management.
Our gearing at year end is
25.2%, which is well within
our target range. Our net
debt is $96.0 million.
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On 22 April 2014, Paul Sarant
was appointed as Managing
Director and Chief Executive
Officer following the
resignation of Greg Stevenson.
Mr. Stevenson held the
position for approximately
two years.
During the course of the year,
K&S acquired prime movers
and trailing equipment of
$32.5 million. Funding of this
equipment was $28.1 million
via hire purchase agreements
and the balance of
$4.4 million was settled from
our cash balance.
On 19 August 2013, we
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 be
developed to 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.
K&S’ net asset position
increased by 19.9% to
$287.2 million. The Foreign
Currency Reserve also
increased in value by
$1.3 million during the year.
Profit after tax of $8.9 million
for FY14 was offset by
dividends paid of $6.8 million
(Final FY13 and Interim FY14).
As part of the Employee
Share Scheme, Dividend
Reinvestment Plan and Scott
Corporation merger $44.2
million of new shares were
issued in FY14.
Dividend
We have declared a fully franked final dividend of 3.0 cents per share (last year 4.5 cents per share). This
follows the interim dividend of 3.0 cents per share paid in April 2014, making a total dividend of 6.0 cents per
share. The final dividend will be paid on 31 October 2014, with the date for determining entitlements being
20 October 2014.
The dividend reinvestment plan (DRP) will once again apply in respect of the fully franked final dividend of
3.0 cents payable on 31 October 2014.
The terms of the DRP will remain unchanged with the issue price under the DRP based on the volume
weighted average price for K&S shares in the five business days ending on 20 October 2014 (the record
date of the final dividend) less a discount of 2.5%.
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Directors’
Report
Operating and Financial Review continued
Outlook
Providing earnings guidance going forward remains a difficult task.
We are focused on creating positive synergies and integration benefits from the Scott Corporation merger.
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.
Significant
Changes
in the State
of Affairs
Significant changes in the
state of affairs of the
consolidated entity during the
financial year were as follows:
On 24 February 2014, the
Company obtained control of
Scott Corporation Limited, by
way of an off market takeover
bid. Scott Corporation
Limited is a national carrier,
specializing in the transport of
bulk solids, liquids, fuels and
explosives. These operate
under four divisions being
Bulktrans, Energytrans,
Chemtrans and Hyde Park
Tanks. Scott Corporation
Limited operates in different
functional and geographical
markets to K&S Corporation,
giving us the opportunity to
diversify our business.
in Commonwealth and State
Legislation. The consolidated
entity monitors performance
and recorded several incidents
during the year, none of which
has the potential to result in
any material restrictions being
placed upon the Company’s
ability to continue its opera-
tions in their current form.
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.
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.
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 2013 is available on
the K&S website.
Transport and Warehousing
The transport and ware-
housing business is subject
to the Dangerous Goods Acts
Environmental
Regulation
and
Performance
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Dividends
Dividends paid or declared by the Company to members since
the end of the previous financial year were:
• A final fully franked ordinary dividend (taxed to 30%) of
4.5 cents per share amounting to $4,112,153 in respect of
the year ended 30 June 2013 was declared on 23 August
2013 and paid on 31 October 2013;
• 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 2013 was declared on 23 August 2013
and paid on 31 October 2013.
• An interim fully franked ordinary dividend (taxed to 30%)
of 3.0 cents per share in respect of the year ended
30 June 2014 was declared on 26 February 2014 and paid
on 2 April 2014 amounting to $2,761,385.
The final dividend declared by the Directors of the Company on
25 August 2014 and payable on 31 October 2014 in respect of
the year ended 30 June 2014 comprises:
• A fully franked ordinary dividend (taxed to 30%) of
3.0 cents per share amounting to $3,482,774 (based on
the Company’s current total issued share capital); and
• 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.
Events Subsequent to Balance Date
On 25 August 2014, the
Directors of K&S Corporation
Limited declared a final
dividend on ordinary shares in
respect of the 2014 financial
year. The total amount of the
dividend is $3,482,774 (based
on the Company’s current
total issued share capital)
which represents a fully
franked dividend of 3.0 cents
per share. The dividend is
payable on 31 October 2014
and has not been provided for
in the 30 June 2014 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
volume weighted average
price of K&S shares in the
five business days ending on
20 October 2014 (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.
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Directors’
Report
Likely Developments
It is anticipated that the consolidated entity will continue
to expand transport and logistics operations during the next
financial year by further extending its services throughout
Australia and adopting the latest technology in the industry to
contain costs and enhance the services offered to customers.
General Disclosures
K&S Corporation Limited is a company limited by shares that is
incorporated and domiciled in Australia.
Directors
The Directors of the Company in office at any time during or
since the end of the financial year are:
Tony Johnson (Chairman)
Paul Sarant (Managing Director, appointed 22 April 2014)
Greg Boulton AM (Deputy Chairman)
Legh Winser (appointed 23 August 2013)
Ray Smith
Secretary – Chris Bright
Retired Directors – Richard Nicholson (retired 23 July 2013)
Bruce Grubb (retired 22 October 2013)
Greg Stevenson (Managing Director, resigned
22 April 2014)
With the exception of Mr Sarant, all Directors are Non-Executive
Directors. Particulars of Directors’ qualifications, experience,
special responsibilities and other relevant Directorships are on
pages 19 to 21 of the Annual Report.
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Directors’
Interests
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 L Winser 39,194
Mr P Sarant 40,000
Directors of the Company have relevant interests in additional
shares as follows:
Ordinary Shares
Mr T Johnson 472,358
Mr G Boulton 266,248
Mr L Winser 1,164,064
Mr R Smith 38,459
Mr P Sarant 56,603
Directors’ Meetings
The number of Directors' meetings (including meetings of Committees of Directors) and number of meetings
attended by each of the Directors of the Company during the financial year were:
Director
Directors’ Meetings
Scott
Corporation
Merger
Audit Committee
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 No. attended No. held
Mr T Johnson 11 11 - - - - 2 2 4 4
Mr G Boulton 11 11 19 19 4 4 2 2 - -
Mr R Smith 11 11 19 19 4 4 - - - -
Mr B Grubb 2 11 - - - - - - - -
Mr R Nicholson 1 11 - - - - - - - -
Mr G Stevenson 8 11 19 19 - - - - 3 4
Mr P Sarant 3 11 - - - - - - 1 4
Mr L Winser 10 11 - - - - 2 2 3 4
All Directors were eligible to attend all meetings held, except for Mr L Winser who was eligible to attend
ten Directors’ meetings, three Environmental Committee meetings and two Nomination & Remuneration
Committee meetings; Mr B Grubb who was eligible to attend three Directors’ meetings and one
Environmental Committee meeting; Mr R Nicholson who was eligible to attend one Directors’ meeting,
Mr P Sarant who was eligible to attend three Directors’ meetings and one Environmental Committee
meeting, and Mr G Stevenson who was eligible to attend eight Directors’ meetings and three Environmental
Committee meetings. In addition to the eleven regular meetings there were a further seven directors
meetings held outside the normal monthly board meeting cycle.
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Directors’
Report
Indemnification and Insurance of
Directors and Officers
Indemnification
The Company indemnifies
current and former Directors,
Executive Officers and the
Secretaries of the Company
and its controlled entities
against all liabilities, costs and
expenses to another person
(other than the Company or a
related body corporate) to
the maximum extent permitted
by law that may arise from
their position as Directors,
Executive Officers and
Secretaries of the Company
and its controlled entities,
except where the liability
arises out of conduct involving
a lack of good faith.
Insurance premiums
Since the end of the previous
financial year, the Company
has paid insurance premiums
of $42,986 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 insur-
ance premiums
relate to:
• Costs and expenses
incurred by the relevant
officers in successfully
defending proceedings,
whether civil or criminal;
and
• 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, P Sarant.
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.
Indemnification of Auditors
To the extent permitted by
law and excluding in circum-
stances of negligence, the
Company has agreed to
indemnify its auditors, Ernst &
Young, as part of the terms
of its audit engagement
agreement against claims by
third parties arising from the
audit (for an unspecified
amount). No payment has
been made to indemnify Ernst
& Young during or since the
financial year.
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Tax
Consolidation
Effective 1 July 2002, for the purposes of income taxation,
K&S Corporation Limited and its domestic based 100% owned
subsidiaries formed a tax consolidated group. Members of the
Group entered into a tax sharing arrangement in order to allocate
income tax expense to the wholly owned subsidiaries on
a pro-rata basis. In addition, the agreement provides for the
allocation of income tax liabilities between the entities should
the head entity default on its tax payment obligations.
Corporate
Governance
Rounding Off
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 44 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.
Auditor Independence and
Non-Audit Services
The entity’s Auditor, Ernst & Young have provided the economic
entity with an Auditor’s Independence Declaration which is on
page 119 of this report.
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:
Scott Corporation Limited acquisition assistance $137,355
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Remuneration Report (audited)
This remuneration report outlines the Director and Executive remuneration arrangements of the Company
and the Group in accordance with the requirements of the Corporations Act 2001 and its Regulations.
For the purposes of this report, Key Management Personnel (KMP) of the Group are defined as those
persons having authority and responsibility for planning, directing and controlling the major activities of the
Company and the Group, directly or indirectly, including any Director (whether executive or otherwise) of
the parent company.
For the purposes of this report, the term executive encompasses the Managing Director,
Senior Executives, General Managers and Secretaries of the Parent and the Group. Details of the
Key Management Personnel are:
i) Directors
Mr T Johnson Non-Executive Chairman
Mr G Boulton Non-Executive Deputy Chairman
Mr R Smith Non-Executive
Mr L Winser Non-Executive – Appointed 23 August 2013
Mr R Nicholson Non-Executive – Retired 23 July 2013
Mr B Grubb Non-Executive – Retired 22 October 2013
Mr G Stevenson Managing Director – Resigned 22 April 2014
Mr P Sarant Managing Director – Appointed 22 April 2014*
ii) Executives
Mr B Walsh Chief Financial Officer
Mr C Bright General Counsel & Company Secretary
Mr G Wooller Chief Operating Officer – Resigned 30 May 2014
Mr G Everest Executive General Manager Regal Transport
Mr S Hine Executive General Manager Business Development
Mr S Skazlic General Manager HS&E / Compliance
Ms K Evans General Manager Human Resources
Mr D Keane Executive General Manager Scott Corporation – Appointed 24 February 2014
Mr K Cope Executive General Manager Commercial – Appointed 24 February 2014
Mr M Kohne Executive General Manager DTM – Appointed 23 June 2014
Mr G Beurteaux Executive General Manager K&S Freighters – Appointed 14 July 2014
* Mr P Sarant previously held the position of Executive General Manager DTM.
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:
• Remuneration is set at levels that will attract and retain good performers and motivate and reward them
to continually improve business performance.
• Remuneration is structured to reward employees for increasing Shareholder value.
• 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.
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While the Nomination and Remuneration Committee reviews the remuneration paid to Non-Executive
Directors and the Managing Director, and the aggregate remuneration paid to the Senior Management team,
the Board of Directors has ultimate responsibility for determining these amounts.
Remuneration Structure
In accordance with best practice corporate governance, the structure of Non-Executive Director, Executive
Director and Senior Manager remuneration is separate and distinct.
Non-Executive Director Remuneration
Objective
The Board seeks to set aggregate remuneration at a level which provides the Company with the ability to
attract and retain quality Directors, whilst incurring a cost which is acceptable to Shareholders.
Structure
The Constitution and the ASX Listing Rules specify that the 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 2013/14. 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 2014/15 financial year until December 2014. If upon consideration in December 2014 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 2015. Pending any review in December 2014, the fees
payable to Non-Executive Directors will remain at the level paid in the 2012/13 financial year, which level was
frozen in the 2013/14 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 2014 is detailed on page 40 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:
• reward Executives for Company, business unit and individual performance against targets set by
reference to appropriate benchmarks;
• align the interests of Executives with those of Shareholders;
• link reward with the strategic goals and performance of the Company; and
• ensure total remuneration is competitive by market standards.
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Remuneration Report (audited) continued
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 2014, the adoption of at risk short term incentives comprising 22% and 20% of
the base emolument of the then Managing Director (Mr Stevenson) and Executives respectively was
approved by the Board. The payment of such short term incentives was to be 50% in cash and 50% in
shares in the Company. The share component of any short term incentives was to comprise new fully paid
up ordinary shares issued by the Company.
Payment of the short term incentive in respect of the 2013/14 financial year was conditional upon the
achievement of several metrics.
In the case of the former Managing Director (Mr Stevenson), the metrics for his short term incentive were
based upon:
• outperformance of the Company’s annual budget for operating profit after tax on a normalized basis and
excluding any one off or non trading items (eg, profit on the sale of real estate), with this criteria having a
36% weighting;
• growth in the average price of the Company’s shares in the 2013/14 financial year by comparison to the
average price of the Company’s shares in 2012/13, with the weighting for this criteria being 55%; and
• the Company’s lost time injury frequency rate, with this criteria having a 9% weighting.
Mr Stevenson did not qualify for the payment of any short term incentive in respect of the 2013/14 financial
year. If Mr Stevenson had satisfied all of the outperformance criteria for his short term incentive, the
maximum amount payable to him would have been $102,000.
In the case of the Executive General Managers of the Company with divisional profit and loss responsibility,
the metrics for their short term incentive were based upon:
• outperformance of the Company’s annual budget for operating profit after tax on a normalized basis and
excluding any one off or non trading items (eg, profit on the sale of real estate), with this criteria having a
45% weighting;
• outperformance of the applicable divisional budget for operating profit after tax on a normalized basis
and excluding any one off or non trading items (eg, profit on the sale of real estate), with this criteria
having a 45% weighting; and
• the Company’s lost time injury frequency rate, with this criteria having a 10% weighting.
The Executive General Managers of the Company with divisional profit and loss responsibility did not qualify
for the payment of any short term incentive in respect of the 2013/14 financial year. If the Executive General
Managers of the Company with divisional profit and loss responsibility had satisfied all of the outperformance
criteria for their short term incentive, the maximum aggregate amount payable to them would have been
$224,000.
In the case of other members of the Company’s Executive Team who did not have divisional profit and loss
responsibility, the metrics for their short term incentive were based upon:
• outperformance of the Company’s annual budget for operating profit after tax on a normalized basis and
excluding any one off or non trading items (eg, profit on the sale of real estate), with this criteria having a
45% weighting;
• growth in the average price of the Company’s shares in the 2013/14 financial year by comparison to the
average price of the Company’s shares in 2012/13, with the weighting for this criteria being 45%; and
• the Company’s lost time injury frequency rate, with this criteria having a 10% weighting.
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The other members of the Company’s Executive Team did not qualify for the payment of any short term
incentive in respect of the 2013/14 financial year. If the other members of the Company’s Executive Team
had satisfied all of the outperformance criteria for their short term incentive, the maximum aggregate
amount payable to them would have been $145,000.
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.
The Board also believes that growth in the Company’s average share price was an appropriate component
of the short term incentive scheme for the 2013/14 financial year. Share price appreciation is a key
component of total returns to Shareholders of the Company. As a metric, share price appreciation also
takes account of the potentially dilutive impact of capital raising by the Company if capital raised is not
productively deployed to generate an acceptable return on equity.
The Board places a high priority on safety, and accordingly is of the view that the adoption of a lost time
injury frequency rate component to the short term incentive scheme for 2013/14 was appropriate.
In the case of the Executive General Managers of the Company with divisional profit and loss responsibility,
the Board believes that outperformance of divisional budgeted net profit after tax on a normalized basis
comprised a key metric to underpin the attainment by the Company of the Company’s annual budgeted net
profit after tax for the 2013/14 financial year.
The Board is also of the view that aligning incentives with divisional financial performance provided the
opportunity to motivate and reward Executive General Managers for superior financial performance within
their own areas of operational responsibility at the Company.
The Company has elected to adopt a new short term incentive scheme for the 2014/15 financial year based
upon outperformance 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) (but including any one-off or non-trading
items that have been included in the budget).
The new short term incentive scheme is to be self funding (ie, amounts accrued to fund the payment of any
short term incentives will be expensed in the Company’s normalized net profit after tax) and no incentives will
be payable unless at least 100.5% of the Company’s budgeted net profit after tax on a normalized basis for
the 2014/15 financial year is achieved. The total short term incentives payable to the Managing Director and
Executives for the year ended 30 June 2015 if eligibility criteria are met will be $73,168, up to a maximum of
$731,680 if all out-performance criteria are met.
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Remuneration Report (audited) continued
Employment Contracts
It is the Nomination and Remuneration Committee’s current policy that fixed term contracts are not entered
into with members of the Executive Team.
The current Managing Director, Mr Sarant, has a contract of employment, key terms of which for
2013/14 were:
• A total remuneration package of $702,000 per annum (excluding short term incentive (STI)).
• No STI to be payable in respect of the year ended 30 June 2014, but eligible for an STI of $120,000
(20% of base salary) against annual performance criteria set by the Board in subsequent financial years.
For the year ended 30 June 2015, payment of the STI is dependent upon the achievement by the
Company of its budgeted profit after tax on a normalised basis and excluding any one-off or non-trading
items (eg, profit on the sale of real estate) (but including any one-off or non-trading items that were
included in the budget).
• If the Board introduces a long term incentive scheme (LTI), Mr Sarant will be eligible to participate in the
scheme. However, there is not presently any LTI scheme in place.
• In accordance with best practice, the Board may require Mr Sarant 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.
• Either of Mr Sarant and the Company may terminate Mr Sarant’s employment on the giving of three
months notice or, in the case of the Company, payment in lieu of the three months notice.
The former Managing Director, Mr Stevenson, also had a contract of employment, key terms of which for
2013/14 were:
• A total remuneration package of $550,000 per annum (excluding short term incentive (STI)).
• Eligible for an STI of $102,000 (22% of base salary) against annual performance criteria set by the Board.
For the year ended 30 June 2014, payment of the STI was based on performance determined against
three components, being 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) (36%
weighting), share price appreciation (55% weighting), and lost time injury performance (9% weighting).
• If the Board introduced a long term incentive scheme (LTI), Mr Stevenson would have been eligible to
participate in the scheme. However, there is not presently any LTI scheme in place.
• In accordance with best practice, the Board could require Mr Stevenson to repay all or part of any bonus,
STI or LTI paid in circumstances where there had 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.
• Either of Mr Stevenson and the Company could terminate Mr Stevenson’s employment on the giving of
six months notice or, in the case of the Company, payment in lieu of the 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 4 September 2013 under the Plan. Acceptances under the offer
were 201,000 shares at $1.77 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 2012/13 on 23 August 2013.
For the 2013/14 financial year, eligible employees’ annual entitlements to participate in the Plan were set
by the Company Directors as follow, in line with the entitlements notified to Shareholders at the Company’s
Annual General meeting on 21 November 2006.
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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 2015.
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 2014 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).
$m
35
30
25
20
15
10
5
0
■ EBIT ■ NPAT
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
In addition, Dividends paid to Shareholders are disclosed on page 27 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, the Australian Stock Exchange Industrials Index, Toll
Holdings Limited and McAleese Limited over the past 5 years.
K&S CORPORATION SHARE PRICE 2009-2014 ■ TOL ■ All Ords ■ MCS ■ Industrials ■ KSC
$9.00
$8.00
$7.00
$6.00
$5.00
$4.00
$3.00
$2.00
$1.00
$0.00
6000
5000
4000
3000
2000
1000
0
Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14
Notwithstanding the difficult trading conditions that have persisted since the onset of the global financial
crisis in 2008, the Company’s financial results and share price performance has not achieved the set targets.
In that context, the Board notes that short term incentives have been paid only once to the Executive Team
(in respect of the 2009/10 financial year) since the advent of the global financial crisis. The Board believes that
short term incentives should only be paid in circumstances of outperformance by the Executive Team.
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Remuneration Report (audited) continued
Remuneration of Key Management Personnel of the Company and the Group
Table 1: Remuneration for the year ended 30 June 2014
Non-Executive
Directors
T Johnson
G Boulton
R Smith
R Nicholson*
L Winser #
B Grubb §
Salary &
Fees
$
118,000
70,000
70,000
5,833
59,695
23,333
Total Non-Executive
Directors
346,861
Executive Director
G Stevenson>
P Sarant<
Other Key
Management Personnel
B Walsh
C Bright
G Wooller†
G Everest
K Evans
S Hine
S Skazlic
D Keane+
K Cope^
M Kohne**
G Beurteaux***
426,800
464,804
297,285
230,735
391,591
306,128
220,695
299,006
221,400
114,864
109,899
4,687
-
Total Executive KMP 3,087,894
Totals
3,434,755
Short-Term
Incentives
$
Non-Cash
Benefits
$
Termination
$
Other Long-Term
Long Service
Benefit
$
Post Employment
Retirement
Benefits
$
Super
Contributions
$
Total
%
Performance
Related
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
25,000
240,000
28,327
27,265
28,066
24,509
21,794
22,447
26,951
20,517
18,726
10,146
593
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6,084
7,226
7,125
5,625
6,112
4,745
3,334
4,745
3,667
1,979
2,201
-
-
254,341
240,000
52,843
8,000
2,500
-
-
-
-
12,980
138,980
7,700
7,700
642
6,566
2,567
80,200
77,700
6,475
66,261
25,900
10,500
38,155
395,516
-
-
-
-
-
-
-
-
-
-
-
-
-
-
25,000
25,000
722,884
525,357
25,000
25,000
24,526
25,000
25,000
25,000
25,000
7,614
7,438
634
-
356,675
289,426
446,738
357,667
271,476
355,702
270,584
143,183
129,684
5,914
-
240,212
3,875,290
254,341
240,000
52,843
10,500
278,367
4,270,806
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
* Mr Nicholson retired on 23 July 2013.
# Mr Winser was appointed Non-Executive Director on 23 August 2013.
§ Mr Grubb retired on 22 October 2013.
> Mr Stevenson resigned as Managing Director on 22 April 2014.
< Mr Sarant was appointed on 22 April 2014.
† Mr Wooller resigned on 30 May 2014.
* Mr Keane was appointed on 24 February 2014.
^ Mr Cope was appointed on 24 February 2014.
** Mr Kohne was appointed on 23 June 2014.
*** Mr Beurteaux was appointed on 14 July 2014.
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Table 2: 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 -
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
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Remuneration Report (audited) continued
Table 3: Loans to Key Management Personnel
Details of aggregates of loans to Key Management Personnel are as follows:
Total
2014
2013
Balance at Beginning of Period
$’000
Write-off
$’000
Balance at End of Period
$’000
Number in Group
346
291
-
-
290
346
6
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. Loans to Key Management Personnel under the Plan are required to be repaid in
full upon the cessation of the employment of the Key Management Personnel with 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.
Table 4: Shareholding of Key Management Personnel at 30 June 2014
Shares held in K&S Corporation Limited: 30 June 2014
Balance 1 July 2013
Ordinary
Net Change
Ordinary
Balance 30 June 2014
Ordinary
Non-Executive Directors
T Johnson
G Boulton
R Smith
L Winser#
R Nicholson*
B Grubb §
Executive Director
G Stevenson>
P Sarant<
Other Key Management Personnel
B Walsh
C Bright
G Wooller†
G Everest
S Hine
K Evans
S Skazlic
D Keane+
K Cope^
M Kohne**
G Beurteaux***
Total
300,021
254,724
36,794
1,151,199
30,907
125,205
-
96,603
120,687
41,000
60,069
10,000
20,000
22,000
3,205
-
-
-
-
2,272,414
172,337
11,524
1,665
12,865
-
-
-
-
13,333
-
(46,408)
-
10,000
-
-
-
-
-
-
175,316
472,358
266,248
38,459
1,164,064
30,907
125,205
-
96,603
134,020
41,000
13,661
10,000
30,000
22,000
3,205
-
-
-
-
2,447,730
* Mr Nicholson retired on 23 July 2013.
# Mr Winser was appointed Non-Executive Director on 23 August 2013.
§ Mr Grubb retired on 22 October 2013.
> Mr Stevenson resigned as Managing Director on 22 April 2014.
< Mr Sarant was appointed on 22 April 2014.
† Mr Wooller resigned on 30 May 2014.
* Mr Keane was appointed on 24 February 2014.
^ Mr Cope was appointed on 24 February 2014.
** Mr Kohne was appointed on 23 June 2014.
*** Mr Beurteaux was appointed on 14 July 2014.
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Table 5: Shareholding of Key Management Personnel at 30 June 2013
Shares held in K&S Corporation Limited: 30 June 2013
Balance 1 July 2012
Ordinary
Net Change
Ordinary
Balance 30 June 2013
Ordinary
Non-Executive Directors
T Johnson
G Boulton
R Smith
L Winser#
R Nicholson
B Grubb
Executive Director
G Stevenson
Other Key Management Personnel
B Walsh
C Bright
G Wooller
P Sarant
G Everest
S Hine
K Evans
S Skazlic
Total
281,066
238,631
35,789
1,151,199
28,955
125,205
18,955
16,093
1,005
-
1,952
-
300,021
254,724
36,794
1,151,199
30,907
125,205
-
-
-
106,032
31,000
49,244
84,603
-
10,000
15,000
3,205
14,655
10,000
10,825
12,000
10,000
10,000
7,000
-
120,687
41,000
60,069
96,603
10,000
20,000
22,000
3,205
2,159,929
112,485
2,272,414
# Appointed Non-Executive Director on 23 August 2013.
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.
Signed in accordance with a resolution of the Directors.
T Johnson
Chairman
25 August 2014
Paul Sarant
Managing Director
25 August 2014
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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.
Corporate
Governance
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
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The Roles of the Board
and Management
The Board has a Charter which establishes the relationship between the Board and Management and
describes their functions and responsibilities in a manner which is consistent with ASX Principle 1.
The role of the Board is to oversee and guide the Management of K&S Corporation Limited and its businesses
with the aim of protecting and enhancing the interests of Shareholders while taking into account the interests
of employees, customers, suppliers and the community at large.
The Board is responsible for setting and approving the strategic direction of the Company, establishing goals
for Management and monitoring the achievement of those goals.
The Managing Director is responsible to the Board for the day to day management of the Company.
All Management, including the Managing Director, have clear statements of roles and responsibilities.
The performance of Key Executives is reviewed not less than annually by the Managing Director.
The review involves an open exchange of ideas between the Managing Director and Key Executives.
The performance of Key Executives is reviewed against matters including financial targets (eg, budget), HS&E
management, and achievement of specific strategic and business objectives.
Structure of the Board
The Board currently comprises
four 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 19 to 21 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 arrange-
ments 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.
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Corporate
Governance
Structure of the Board continued
The Board has reviewed the position of each of the 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.
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:
P Sarant** Managing Director
** Mr Sarant was appointed as Managing Director on 22 April 2014.
T Johnson Non-Executive Director (Chairman)
Mr Johnson is a Director of 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
former Director of a number of other companies within the Scott Group of companies, one of which
(AA Scott Pty Ltd) is the largest Shareholder of K&S Corporation Limited.
*** Mr Grubb retired as a Director on 22 October 2013.
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.
G Stevenson**** Managing Director
**** Mr Stevenson occupied the position of Managing Director until 22 April 2014.
The Board structure is consistent with ASX Principle 2, with the exception of:
• 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 45), Directors have regard to the balance of independent and non-independent
Non-Executive Directors.
• 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.
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.
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The Board meets formally eleven times a year and on other occasions as required. During the course of the
year, the Board’s sub-committees meet on a number of occasions to deal with their specific responsibilities
in relation to the Company’s business. Senior Management attend and are a vital ingredient to the
sub-committees, making presentations, providing information and responding to questions of the Directors.
All Directors have unrestricted access to all employees of the Group and, subject to the law, access to all
Company records and information held by employees and external advisers. The Board receives regular
financial and operational reports from Senior Management to enable it to carry out its duties and responsibilities.
Retirement and Re-election
of Directors
The Company’s Constitution requires one third of the Directors,
other than the Managing Director, to retire from office at each
Annual General Meeting. Directors who have been newly
appointed by the Board during the year are also required to
stand for re-election at the next Annual General Meeting, but are
not taken into account in determining the number of Directors
retiring at that Annual General Meeting. Retiring Directors are
eligible for re-election by Shareholders.
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Corporate
Governance
Review of Board Performance
The Board has implemented a
process for the regular review
of its overall performance,
consistent with ASX Recom-
mendation 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 five
Directors, the Board considers
this the most effective way to
address its own performance.
Committees of the Board
Three standing Board Committees assist the Board in the
discharge of its responsibilities.
These committees are:
• The Audit Committee
• The Nomination and Remuneration Committee
• The Environmental Committee
In addition, a special purpose subcommittee of the Board
comprised of Messrs Boulton, Smith, and Stevenson was
established to preside over the merger with Scott Corporation
Limited. That special purposes subcommittee met on nineteen
occasions in the course of the year ended 30 June 2014.
As the merger with Scott Corporation Limited is complete, this
subcommittee has been disbanded.
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Audit Committee
The Board has an established Audit Committee, which operates
under a Charter approved by the Board.
It is the Board’s responsibility to ensure that an effective internal
control framework exists within the entity. This includes internal
controls to deal with both the effectiveness and efficiency of
significant business processes, the safeguard of assets, the
maintenance of proper accounting records, and the reliability of
financial information.
The Board has delegated to the Audit Committee the
responsibility 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 Principles 2 and 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.
Following the retirement of Mr Nicholson as a Director on 23 July 2013, the Nomination & Remuneration
Committee does not comply with Recommendations 2.4 and 8.1 as only Mr Boulton is considered by
Directors to be independent.
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Corporate
Governance
Committees of the Board
Nomination and Remuneration Committee continued
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 five Directors, Directors are of the view that the nomination and appointment of new Directors is
most efficiently discharged by the Board. For this reason, Directors are of the view that the lack of an
independent chairman and the presence of a majority of Directors considered not to be independent does
not compromise the effectiveness of the Nomination & Remuneration Committee or the integrity of
the decision making process by the Board as a whole on matters relating to nomination and remuneration.
When appointing new Directors, the Board has 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.
On 22 October 2013, Mr Grubb resigned as a Non-Executive Director. Mr Grubb had been a Director
of the Company for six years. The casual vacancy created by Mr Grubb’s retirement has not been filled by
the Board.
On 22 April 2014, Mr Stevenson resigned as Managing Director and Chief Executive Officer. Mr Stevenson
had occupied that position for approximately two years.
On 22 April 2014, Mr Sarant was appointed as Managing Director and Chief Executive Officer.
Prior to the appointment of Mr Stevenson as Managing Director and Chief Executive Officer in 2012, an
extensive search process was undertaken using external recruitment consultants. The search process was
rigorous and transparent, with both external and internal candidates considered by the Board. At the time,
Mr Sarant was considered by the Board to be the leading internal candidate. Over the past two years,
Mr Sarant’s continued strong performance as Executive General Manager – DTM gave the Board confidence
that he had the necessary skills and attributes to drive the Company in his new role as Managing Director
and Chief Executive Officer. In those circumstances, Directors were of the view that the time, expense and
potential disruption associated with engaging external recruitment consultants to oversee another executive
search process was not warranted.
Remuneration levels are competitively set to attract and retain appropriately qualified and experienced
Directors and Senior Executives.
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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 (Chairman)
Mr Winser**
* Mr Nicholson retired as a Director on 23 July 2013.
** Mr Winser was appointed as a Director on 23 August 2013.
The Nomination and Remuneration Committee meets at least twice a year and as required. The Committee
met formally two times, but also informally on several other occasions during the year. Messrs Winser,
Boulton and Johnson attended both 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 2013/14, unchanged from the
2012/13 financial year. Committee membership does not entitle
a Director to additional fees.
The Board has again decided not to increase the fees payable
to Non-Executive Directors in the first half of the 2014/15
financial year. The Board has elected to defer any consideration
of the level of fees payable to Non-Executive Directors until
December 2014.
Details of the employment contracts of Mr Sarant and
Mr Stevenson can be found on page 38 of the Remuneration
Report.
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Corporate
Governance
Committees of the Board
Nomination and Remuneration Committee continued
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 34 to 43.
Diversity
The measurable objectives for achieving gender diversity set by the Board and progress towards achieving
those objectives is:
• 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 2013/14.
The Company saw participation rates for women remain static at all levels of the organisation.
• 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 2013/14 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.
• 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 2013/14. Participation
rates in management training do not reveal any bias.
• 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 2013/14. Turnover rates for men and women were equivalent across
different levels of the organisation.
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The proportion of women employees across the Company for 2013/14 is set out in the table below:
Employment Status
No. of Employees
Non-Manager
Occupational
Categories
CEO/Head
of Business in
Australia
Full-time permanent
Full-time contract
Part-time permanent
Part-time contract
Casual
Key management
Full-time permanent
personnel (KMP)
Full-time contract
Part-time permanent
Part-time contract
Casual
Other executives/
Full-time permanent
General managers
Full-time contract
Part-time permanent
Part-time contract
Casual
Senior managers
Full-time permanent
Full-time contract
Part-time permanent
Part-time contract
Casual
F
0
0
0
0
0
1
0
1
0
0
0
0
0
0
0
0
0
0
0
0
Other managers
Full-time permanent
22
Full-time contract
Part-time permanent
Part-time contract
Casual
0
1
0
0
M
1
0
0
0
0
Total Employees
1
0
0
0
0
10
11
0
0
0
0
0
0
0
0
0
29
0
0
0
0
59
0
0
0
0
0
1
0
0
0
0
0
0
0
29
0
0
0
0
81
0
1
0
0
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Corporate
Governance
Committees of the Board
Nomination and Remuneration Committee continued
Employment
Status
No. of Employees
(excluding graduates
and apprentices)
No. of Graduates
(if applicable)
No. of Apprentices
(if applicable)
Total
Employees
Technicians and trade
Full-time permanent
Non-Manager
Occupational
Categories
Professionals
Community and
personal service
Clerical and
administrative
Sales
Full-time permanent
Full-time contract
Part-time permanent
Part-time contract
Casual
Full-time contract
Part-time permanent
Part-time contract
Casual
Full-time permanent
Full-time contract
Part-time permanent
Part-time contract
Casual
F
12
0
2
0
0
1
0
0
0
0
0
0
0
0
0
M
27
0
0
0
0
167
0
2
0
1
0
0
0
0
0
Full-time permanent
111
23
Full-time contract
Part-time permanent
Part-time contract
Casual
Full-time permanent
Full-time contract
Part-time permanent
Part-time contract
Casual
0
24
0
12
1
0
0
0
9
0
0
0
0
2
0
0
0
9
Machinery operators
Full-time permanent
10
1059
and drivers
Labourers
Full-time contract
Part-time permanent
Part-time contract
Casual
Full-time permanent
Full-time contract
Part-time permanent
Part-time contract
Casual
0
0
0
5
0
0
0
0
0
0
2
0
227
0
0
0
0
0
Other
Full-time permanent
30
165
Full-time contract
Part-time permanent
Part-time contract
Casual
0
0
0
0
0
0
0
0
Total: All non-managers
217
1684
F
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
M
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
F
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
M
0
0
0
0
0
39
0
2
0
0
26
194
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
2
0
1
0
0
0
0
0
134
0
24
0
12
3
0
0
0
18
1069
0
2
0
232
0
0
0
0
0
195
0
0
0
0
26
1927
This data is also reported by the Company under the Workplace Gender Equality Act 2012 (Cth) (“WGEA”)
and the categorizations adopted are consistent with the reporting format for the WGEA.
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The Company notes that the
transport and logistics industry
continues to have a stereo-
typed 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:
• 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.
• 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.
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 Winser*
Mr Sarant**
Mr Stevenson**
* Mr Grubb retired as a Director on 22 October 2014 and was replaced on the Environmental Committee by Mr Winser.
** Mr Stevenson resigned as Managing Director on 22 April 2014 and was replaced on the Environmental Committee by Mr Sarant.
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.
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Corporate
Governance
Committees of the Board
Environmental Committee continued
The Environmental Committee is responsible for:
• reviewing and recommending, as appropriate, changes to the Company’s environmental policies;
• ensuring the adequacy of environmental procedures and controls implemented by Management;
• reporting to the Board on Company compliance with environmental procedures and controls;
• 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;
• monitoring conformance by the Company with mandatory environmental reporting and
improvement regimes;
• regular monitoring of licence requirements, with performance against licence conditions reported to
the various State regulators on a regular basis; and
• 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. Mr Johnson attended all four meetings of
the Committee. Messrs Winser and Stevenson (three meetings) and Mr Sarant (one meeting) attended all
meetings convened while they were members of the Environmental Committee.
Financial Reporting
Consistent with the ASX Principle 4 and Recommendation 7.3,
the Company’s financial report preparation and approval
process for the financial year ended 30 June 2014, 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.
Audit Governance and
Independence
As part of the Company’s commitment to safeguarding integrity
in financial reporting, the Company has implemented a review
process to monitor the independence and competence of the
Company’s external Auditor.
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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:
• past performance by Ernst & Young as auditor for the Company;
• the fact that the lead audit partner and audit review partner had recently been rotated providing a
‘fresh set of eyes’;
• the depth of Ernst & Young’s understanding of the Company and its accounting and internal
control environment; and
• 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.
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Risk Management
Consistent with ASX Principle 7, the Company is committed to the
identification, monitoring and management of material risks in the business.
Those material risks include a full spectrum of financial, strategic, compliance,
and operational risks.
While not wishing to stifle the entrepreneurial endeavours of Senior
Executives, the Board takes a relatively conservative approach to risk.
The Board requires that Management have in place a system to identify,
monitor, and manage the material business risks faced by the Company.
The management systems in place as part of the risk management
controls include:
• Capital expenditure commitments above set limits obtain prior
Board approval.
• Financial exposures are controlled and the use of derivatives is limited
to interest rate swaps.
• Occupational health and safety standards and management systems
are monitored and reviewed to achieve high standards of performance
and compliance with regulations.
• Business transactions are properly authorised and executed.
• A comprehensive annual insurance programme, including external risk
management survey and action plans.
• Annual budgeting and monthly reporting systems for all business units,
which enable the monitoring of progress against performance targets
and the evaluation of trends.
• Appropriate due diligence procedures for acquisitions and divestments.
• Disaster management systems for key IT systems and recovery plans.
• Documentation and regular review of business wide risk identification
and mitigation strategies.
• The completion by executive managers and divisional managers of
‘representation letters’ in connection with the certification by the
Managing Director and Chief Financial Officer 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.
• 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:
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• 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.
• 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.
• The Company’s Administration Manual which sets out the financial
and administrative protocols for all staff.
• 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.
• 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.
• The Company’s Disaster Recovery Manual sets out all of the protocols
associated with the Company’s externally hosted disaster recovery
plan (DRP).
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.
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Corporate
Governance
Continuous
Disclosure
Conflict of
Interest
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.
Director Dealing in
Company Shares
The Constitution permits Directors and Officers to acquire shares
in the Company, subject to very limited exceptions contemplated
in the Listing Rules. Company policy prohibits Directors,
Associates and Officers from dealing in Company shares or
Executive options:
• In the period of 60 days prior to the release of the
Company’s half year and annual results to the Australian
Securities Exchange.
• 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.
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Ethical
Standards
In accordance with Principle 3, the Board has adopted the Code
of Conduct produced by the Australian Institute of Company
Directors to guide the Directors and promote high ethical and
professional standards.
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.
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Corporate
Governance
International Quality Standard
ISO 9001
The consolidated entity strives to ensure that its services are of the highest standard. Towards this aim, it has
achieved ISO 9001 accreditation for its core business segment and is well advanced in the implementation of
Occupational Health & Safety systems to meet the AS4801 Standard.
Communication with Shareholders
The Company places
considerable importance
on communication with
Shareholders.
The Company’s communica-
tion 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 Communica-
tion Policy is available on the
Company’s website:
www.ksgroup.com.au.
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Financial
Report
ABN 67 007 561 837
Contents
Statement of Comprehensive Income 64
Statement of Financial Position 65
Statement of Changes in Equity 66
Statement of Cash Flows 67
Notes to the Financial Statements 68
Directors’ Declaration 118
Auditor’s Independence Declaration 119
Independent Auditor’s Report 120
Information on Shareholdings 122
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Statement of
Comprehensive Income
Consolidated
2014 2013
Note $’000 $’000
Operating revenue 5(a) 586,226 564,580
Cost of goods sold (63,545)
(58,570)
Gross profit 522,681 506,010
Other income 5(b) 5,103 3,922
(170,471)
Contractor expenses (151,184)
(168,750)
Employee expenses 5(e) (185,218)
Fleet expenses (118,008)
(95,531)
Depreciation and amortisation expense 5(d) (25,006) (24,166)
Finance costs 5 (c) (6,177)
(5,467)
Other expenses (29,867) (23,237)
Share of profits of associates 13 103 42
Profit before income tax 12,427 22,352
Income tax (expense)/benefit 6 (3,574) (6,448)
Profit after income tax 8,853 15,904
Items that may be reclassified subsequently to profit or loss
Foreign currency translation 1,315 887
Income tax effect - -
1,315 887
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 1,315 6,575
Total comprehensive income for the period 10,168 22,479
Earnings per share (cents per share) 7
• basic for profit for the year attributable to
ordinary equity holders of the parent 9.0 17.6
• diluted for profit for the year attributable
to ordinary equity holders of the parent 9.0 17.6
Dividends per share (cents per share) 8 6.0 11.0
The above Statement of Comprehensive Income should be read
in conjunction with the accompanying notes.
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Statement of
Financial Position
Consolidated
2014 2013
Note $’000 $’000
ASSETS
Current assets
Cash and cash equivalents 9 23,532 15,935
Trade and other receivables 10 82,263 64,076
Inventories 11 3,730 3,040
Prepayments 8,542 5,266
Total current assets 118,067 88,317
Non-current assets
Other receivables 10 1,307 1,379
Investments in associates 13 303 200
Property, plant & equipment 14 319,515 234,750
Intangibles 15 90,607 71,176
Deferred tax assets 6 10,680 7,849
Total non-current assets 422,412 315,354
TOTAL ASSETS 540,479 403,671
LIABILITIES
Current liabilities
Trade and other payables 17 70,482 46,840
Interest bearing loans and borrowings 18 36,169 16,332
Income tax payable 6 1,677 555
Provisions 19 22,704 16,741
Total current liabilities 131,032 80,468
Non-current liabilities
Other payables 17 8,604 8,471
Interest bearing loans and borrowings 18 83,406 50,726
Deferred tax liabilities 6 27,150 21,352
Provisions 19 3,129 3,019
Total non-current liabilities 122,289 83,568
TOTAL LIABILITIES 253,321 164,036
NET ASSETS 287,158 239,635
EQUITY
Contributed equity 20 145,415 101,187
Reserves 32,558 31,243
Retained earnings 109,185 107,205
TOTAL EQUITY 287,158 239,635
The above Statement of Financial Position should be read
in conjunction with the accompanying notes.
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Statement of
Changes in Equity
Asset Forex
Issued Retained Revaluation Translation Total
Capital Earnings Reserves Reserves Equity
$’000 $’000 $’000 $’000 $’000
CONSOLIDATED
At 1 July 2013 101,187 107,205 31,948 (705) 239,635
Profit for the year - 8,853 - - 8,853
Other comprehensive income - - - 1,315 1,315
Total comprehensive income for the year - 8,853 - 1,315 10,168
Transactions with owners in their
capacity as owners:
Issue of share capital 44,228 - - - 44,228
Dividends paid - (6,873) - - (6,873)
At 30 June 2014 145,415 109,185 31,948 610 287,158
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
The above Statement of Changes in Equity should be read
in conjunction with the accompanying notes.
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Statement of
Cash Flows
Consolidated
2014 2013
Note $’000 $’000
CASH FLOWS FROM OPERATING ACTIVITIES
Cash receipts from customers 653,983 634,513
Cash payments to suppliers and employees (580,471) (556,007)
Interest received 263 198
Borrowing costs paid (6,177) (5,466)
Income taxes paid (2,992) (8,045)
Net goods and services tax paid (17,295) (18,767)
Net cash provided by/(used in) operating activities 9 47,311 46,426
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of non-current assets 5,477 4,636
Payments for property plant & equipment (18,609) (6,737)
Acquisition of business (4,106) 8,041
Net cash provided by/(used in) investing activities (17,238) (10,142)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from share issue 1,177 488
4,000
Proceeds from borrowings 19,625
Repayments of borrowings (13,409) (18,843)
Lease and hire purchase liability repayments (24,193)
Dividends paid, net of dividend reinvestment plan (5,786)
(18,844)
(8,266)
Net cash provided by/(used in) financing activities (22,586)
(41,465)
Net increase/(decrease) in cash held 7,487 (5,181)
Cash at the beginning of the financial year 15,935
21,038
Effects of exchange rate variances on cash 110 78
Cash at the end of the financial year 9 23,532
15,935
The above Statement of Cash Flows should be read
in conjunction with the accompanying notes.
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Notes to the
Financial Statements
1 Corporate Information
The financial report of K&S Corporation Limited for
the year ended 30 June 2014 was authorised for
issue in accordance with a resolution of Directors on
25 August 2014.
K&S Corporation Limited is a company limited by shares
incorporated in Australia whose shares are publicly
traded on the Australian Securities 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 2014
Application
date of
standard*
1 Jan 2013
Application
date for
Group*
1 July 2013
Impact on Group
financial report
Application of the
amendments has
not had any impact
on the Group’s
financial report.
Reference
Title
AASB 10
Consolidated Financial Statements
AASB 10 establishes a new control model that applies to all
entities. It replaces parts of AASB 127 Consolidated and
Separate Financial Statementsdealing 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.
1 July 2013
Application of the
amendments has
not had any impact
on the Group’s
financial report.
AASB 11
Joint Arrangements
1 Jan 2013
AASB 11 replaces AASB 131 Interests in Joint Venturesand
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. Amendments made by the IASB in May 2014 add
guidance on how to account for the acquisition of an interest in
a joint operation that constitutes a business*****.
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Reference
Title
AASB 12
Disclosure of Interests in Other Entities
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.
Application
date of
standard*
1 Jan 2013
Application
date for
Group*
1 July 2013
Impact on Group
financial report
Application of the
amendments has
not had any impact
on the Group’s
financial report.
AASB 13
Fair Value Measurement
1 Jan 2013
1 July 2013
Application of the
amendments has
not had any impact
on the Group’s
financial report.
1 Jan 2013
1 July 2013
1 July 2013
1 July 2013
Application of the
amendments has
not had any impact
on the Group’s
financial report.
Application of the
amendments has
not had any impact
on the Group’s
financial report.
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.
AASB 119
Employee Benefits
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.
Amendments to Australian Accounting Standards to
Remove Individual Key Management Personnel Disclosure
Requirements[AASB 124]
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 2011-4
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 2014, are outlined
in the table on the following pages:
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Notes to the
Financial Statements
Application
date of
standard*
1 Jan 2014
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 2014
1 Jan 2014
1 Jan 2018
The amendments
are not expected
to have any impact
on the Group’s
financial report.
The amendments
are not expected
to have any impact
on the Group’s
financial report.
1 July 2014
1 July 2018
2 Summary of Significant Accounting Policies
ii)
Accounting standards and interpretations issued
but not yet effective continued
Reference
Title
Summary
AASB 2012-3
Amendments to Australian
Accounting Standards –
Offsetting Financial Assets
and Financial Liabilities
Interpretation 21
Levies
AASB 9
Financial Instruments
AASB 2012-3 adds application
guidance to AASB 132 Financial
Instruments: Presentationto 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 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.
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.
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.
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 measurement or recognition
inconsistency that would arise from
measuring assets or liabilities, or
recognising the gains and losses on
them, on different bases.
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
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Application
date of
standard*
1 Jan 2018
Application
date for
Group*
1 July 2018
Impact on Group
financial report
The amendments
are not expected
to have any impact
on the Group’s
financial report.
1 Jan 2014
The amendments
are not expected
to have any impact
on the Group’s
financial report.
1 July 2014
1 July 2014
The amendments
are not expected
to have any impact
on the Group’s
financial report.
1 July 2014
Reference
Title
Summary
AASB 9
continued
Financial Instruments
AASB 2013-3
Amendments to
AASB 136 – Recoverable
Amount Disclosures for
Non-Financial Assets
Annual
Improvements
2010-2012
Cycle
AASB 2014-1
Annual Improvements to
IFRSs 2010-2012 Cycle
If this approach creates or enlarges an
accounting mismatch in the profit or
loss, the effect of the changes in credit
risk are also presented in profit or loss.
Consequential amendments were also
made to other standards as a result of
AASB 9, introduced by AASB 2009-11
and superseded by AASB 2010-7 and
2010-10.
The AASB issued a revised version of
AASB 9 (AASB 2013-9) during
December 2013. The revised standard
incorporates three primary changes:
1 New hedge accounting requirements
including changes to hedge
effectiveness testing, treatment of
hedging costs, risk components that
can be hedged and disclosures.
2 Entities may elect to apply only the
accounting for gains and losses from
own credit risk without applying the
other requirements of AASB 9 at the
same time.
In February 2014, the IASB tentatively
decided that the mandatory
effective date for AASB 9 will be
1 January 2018.
AASB 2013-3 amends the disclosure
requirements in AASB 136 Impairment
of Assets. The amendments include
the requirement to disclose additional
information about the fair value
measurement when the recoverable
amount of impaired assets is based on
fair value less costs of disposal.
This standard sets out amendments to
International Financial Reporting
Standards (IFRS) and the related
bases for conclusions and guidance
made during the International
Accounting Standards Board’s Annual
Improvements process. These
amendments have been adopted by
the AASB.
The following items are addressed by
this standard:
(cid:129) AASB 2 – Clarifies the definition of
'vesting conditions' and 'market
condition' and introduces the
definition of 'performance condition'
and 'service condition'.
(cid:129) AASB 3 – Clarifies the classification
requirements for contingent
consideration in a business
combination by removing all
references to AASB 137.
(cid:129) AASB 8 – Requires entities to
disclose factors used to identify the
entity's reportable segments when
operating segments have been
aggregated. An entity is also
required to provide a reconciliation
of total reportable segments' asset
to the entity's total assets.
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Notes to the
Financial Statements
2 Summary of Significant Accounting Policies
ii)
Accounting standards and interpretations issued
but not yet effective continued
Reference
Title
Summary
Annual
Improvements
2010-2012
Cycle
continued
AASB 2014-1
Annual Improvements to
IFRSs 2010-2012 Cycle
Annual
Improvements
2011-2013
Cycle
AASB 2014-1
Annual Improvements to
IFRSs 2011-2013 Cycle
AASB 1031
Materiality
(cid:129) AASB 116 & AASB 138 – Clarifies
that the determination of
accumulated depreciation does not
depend on the selection of the
valuation technique and that it is
calculated as the difference between
the gross and net carrying amounts.
(cid:129) AASB 124 – Defines a management
entity providing KMP services as a
related party of the reporting
entity. The amendments added
an exemption from the detailed
disclosure requirements in
paragraph 17 of AASB 124 for KMP
services provided by a management
entity. Payments made to a
management entity in respect of
KMP services should be separately
disclosed.
This standard sets out amendments to
International Financial Reporting
Standards (IFRS) and the related
bases for conclusions and guidance
made during the International
Accounting Standards Board’s Annual
Improvements process. These
amendments have been adopted by
the AASB.
The following items are addressed by
this standard:
(cid:129) AASB 13 – Clarifies that the portfolio
exception in paragraph 52 of AASB
13 applies to all contracts within the
scope of AASB 139 or AASB 9,
regardless of whether they meet
the definitions of financial assets
or financial liabilities as defined
in AASB 132.
(cid:129) AASB 140 – Clarifies that judgment
is needed to determine whether an
acquisition of investment property is
solely the acquisition of an
investment property or whether it is
the acquisition of a group of assets
or a business combination in the
scope of AASB 3 that includes an
investment property. That judgment
is based on guidance in AASB 3.
The revised AASB 1031 is an interim
standard that cross-references to other
Standards and the Framework (issued
December 2013) that contain guidance
on materiality.
AASB 1031 will be withdrawn when
references to AASB 1031 in all
Standards and Interpretations have
been removed.
Application
date of
standard*
1 July 2014
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 2014
1 July 2014
The amendments
are not expected
to have any impact
on the Group’s
financial report.
1 July 2013
1 Jan 2014
The amendments
are not expected
to have any impact
on the Group’s
financial report.
1 July 2014
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Reference
Title
Summary
Application
date of
standard*
Impact on Group
financial report
AASB 2013-9
Amendments to Australian
Accounting Standards –
Conceptual Framework,
Materiality and Financial
Instruments
The Standard contains three main
parts and makes amendments to a
number Standards and Interpretations.
^ ^
Part A of AASB 2013-9 makes
consequential amendments arising
from the issuance of AASB CF 2013-1.
The amendments
are not expected
to have any impact
on the Group’s
financial report.
Application
date for
Group*
^ ^
Part B makes amendments
to particular Australian Accounting
Standards to delete references to
AASB 1031 and also makes minor
editorial amendments to various
other standards.
Part C makes amendments to a
number of Australian Accounting
Standards, including incorporating
Chapter 6 Hedge Accountinginto
AASB 9 Financial Instruments.
Amendments
to IAS 16 and
IAS 38
Clarification of Acceptable
Methods of Depreciation
and Amortisation
(Amendments to IAS 16
and IAS 38)
IAS 16 and IAS 38 both establish the
principle for the basis of depreciation
and amortisation as being the expected
pattern of consumption of the future
economic benefits of an asset.
1 Jan 2016
The amendments
are not expected
to have any impact
on the Group’s
financial report.
1 July 2016
IFRS 15
Revenue from Contracts
with Customers
The IASB has clarified that the use of
revenue-based methods to calculate
the depreciation of an asset is not
appropriate because revenue
generated by an activity that includes
the use of an asset generally reflects
factors other than the consumption of
the economic benefits embodied in
the asset.
The IASB also clarified that revenue is
generally presumed to be an
inappropriate basis for measuring the
consumption of the economic benefits
embodied in an intangible asset. This
presumption, however, can be rebutted
in certain limited circumstances.
IFRS 15 establishes principles for re-
porting useful information to users of fi-
nancial statements about the nature,
amount, timing and uncertainty of rev-
enue and cash flows arising from an
entity’s contracts with customers.
IFRS 15 supersedes:
a) IAS 11 Construction Contracts
b) IAS 18 Revenue
c) IFRIC 13 Customer Loyalty
Programmes
d) IFRIC 15 Agreements for the
Construction of Real Estate
e) IFRIC 18 Transfers of Assets from
Customers
f) SIC-31 Revenue – Barter
Transactions Involving Advertising
Services
The core principle of IFRS 15 is that an
entity recognises revenue to depict the
transfer of promised goods or services
to customers in an amount that reflects
the consideration to which the entity
expects to be entitled in exchange for
those goods or services.
1 Jan 2017
The amendments
are not expected
to have any impact
on the Group’s
financial report.
1 July 2017
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Notes to the
Financial Statements
Application
date of
standard*
1 Jan 2017
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 2017
1 Jan 2018
The amendments
are not expected
to have any impact
on the Group’s
financial report.
1 July 2018
2 Summary of Significant Accounting Policies
ii)
Accounting standards and interpretations issued
but not yet effective continued
Reference
Title
Summary
IFRS 15
continued
Revenue from Contracts
with Customers
IFRS 9
Financial
Instruments
(2014)
An entity recognises revenue in
accordance with that core principle by
applying the following steps:
a) Step 1: Identify the contract(s) with
a customer
b) Step 2: Identify the performance
obligations in the contract
c) Step 3: Determine the
transaction price
d) Step 4: Allocate the transaction
price to the performance obligations
in the contract
e) Step 5: Recognise revenue
when (or as) the entity satisfies a
performance obligation
Early application of this standard
is permitted.
A finalised version of IFRS 9 which
contains accounting requirements for
financial instruments, replacing IAS 39
Financial Instruments: Recognition and
Measurement. The standard contains
requirements in the following areas:
Classification and measurement.
Financial assets are classified by
reference to the business model
within which they are held and their
contractual cash flow characteristics.
The 2014 version of IFRS 9
introduces a 'fair value through other
comprehensive income' category for
certain debt instruments. Financial
liabilities are classified in a similar
manner to under IAS 39, however there
are differences in the requirements
applying to the measurement of an
entity's own credit risk.
Impairment. The 2014 version of
IFRS 9 introduces an 'expected credit
loss' model for the measurement of
the impairment of financial assets, so
it is no longer necessary for a credit
event to have occurred before a credit
loss is recognised.
Hedge accounting. Introduces a
new hedge accounting model that is
designed to be more closely aligned
with how entities undertake risk
management activities when hedging
financial and non-financial risk
exposures.
Derecognition. The requirements for
the derecognition of financial assets
and liabilities are carried forward from
IAS 39.
^ ^ The application dates of AASB 2013-9 are as follows:
Part A – periods ending on or after 20 December 2013
Part B – periods beginning on or after 1 January 2014
Part C – reporting periods beginning on or after 1 January 2015
Application date for the Group: period ending 30 June 2014
Application date for the Group: period beginning 1 July 2014
Application date for the Group: period beginning 1 July 2015
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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:
•
Derecognises the assets (including goodwill) and
liabilities of the subsidiary;
Derecognises the carrying amount of any
non-controlling interest;
Derecognises the cumulative translation differences,
recorded in equity;
•
•
•
•
•
•
Recognises the fair value of consideration received;
Recognises the fair value of any investment retained;
Recognises any surplus or deficit in profit or loss;
Reclassifies the parent’s share of components
previously recognised in other comprehensive income
to profit or loss.
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.
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Notes to the
Financial Statements
2 Summary of Significant Accounting Policies
f) Operating Segments continued
Operating segments have been identified based on
the information provided to the chief operating decision
makers – being the executive management team.
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.
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:
•
•
Nature of the product or services;
Type or class of customer for the product or
services; and
• 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.
ii) Rendering of services
Service revenue from the distribution of customer goods
is recognised when goods are dispatched.
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.
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.
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For the purposes of hedge accounting, hedges are
classified as either fair value hedges when they hedge the
exposure to changes in the fair value of a recognised asset
or liability; or cash flow hedges where they hedge exposure
to variability in cash flows that is either attributable to a
particular risk associated with a recognised asset or liability
or a forecasted transaction.
•
•
•
In relation to cash flow hedges (interest rate swaps) to
hedge firm commitments which meet the conditions for
special hedge accounting, the portion of the gain or
loss on the hedging instrument that is determined to be
an effective hedge is recognised directly in equity and
the ineffective portion is recognised in profit or loss.
When the hedged firm commitment results in the
recognition of an asset or a liability, then, at the time the
asset or liability is recognised, the associated gains or
losses that had previously been recognised in equity
are included in the initial measurement of the acquisition
cost or other carrying amount of the asset or liability.
For all other cash flow hedges, the gains or losses that
are recognised in equity are transferred to profit or loss in
the same year in which the hedged firm commitment
affects the net profit and loss, for example when the future
sale actually occurs.
For derivatives that do not qualify for hedge accounting,
any gains or losses arising from changes in fair value are
taken directly to profit or loss.
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:
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.
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Notes to the
Financial Statements
2 Summary of Significant Accounting Policies
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
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equity method, the Group determines whether it is
necessary to recognise any impairment loss with respect
to the Group’s net investment in associates. Goodwill
included in the carrying amount of the investment in
associate is not tested separately, rather the entire carrying
amount of the investment is tested for impairment as a
single asset. If an impairment loss is recognised, the
amount is not allocated to the goodwill of the associate.
•
•
The Group’s share of associates’ post-acquisition profits
or losses is recognised in the statement of comprehensive
income, and its share of post-acquisition movements
in reserves is recognised in reserves. The cumulative
post-acquisition movements are adjusted against the
carrying amount of the investment. Dividends receivable
from the associates are recognised in the parent entity’s
statement of comprehensive income as a component of
other income.
When the Group’s share of losses in an associate equals
or exceeds its interest in the associate, including
any unsecured long-term receivables and loans, the Group
does not recognise further losses, unless it has incurred
obligations or made payments on behalf of the associate.
The reporting dates of the associate and the Group are
identical and the associates’ accounting policies conform
to those used by the Group for like transactions and
events in similar circumstances.
q) Income tax and other taxes
Current tax assets and liabilities for the current period and
prior periods are measured at the amount expected to be
recovered from or paid to the taxation authorities based
on the current period’s taxable income. The tax rates and
tax laws used to compute the amount are those that
are enacted or substantively enacted by the reporting date.
Deferred income tax is provided on all temporary
differences at the reporting date between the tax bases
of assets and liabilities and their carrying amounts for
financial reporting purposes.
Deferred income tax liabilities are recognised for all
taxable temporary differences except:
•
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.
•
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
deductible temporary difference arises from the initial
recognition of an asset or liability in a transaction that
is not a business combination and, at the time of the
transaction, affects neither the accounting profit nor
taxable profit or loss; or
when the deductible temporary differences associated
with investments in subsidiaries, associates and
interests in joint ventures, deferred tax assets are only
recognised to the extent that it is probable that the
temporary differences will reverse in the foreseeable
future and taxable profit will be available against
which the temporary differences can be utilised.
The carrying amount of deferred income tax assets is
reviewed at each reporting date and reduced to the extent
that it is no longer probable that sufficient taxable profit
will be available to allow all or part of the deferred income
tax asset to be utilised.
Unrecognised deferred income tax assets are reassessed
at each reporting date and are recognised to the extent
that it has become probable that future taxable profits will
allow the deferred tax asset to be recovered.
Deferred income tax assets and liabilities are measured
at the tax rates that are expected to apply to the year
when the asset is realised or the liability is settled, based
on tax rates (and tax laws) that have been enacted or
substantively enacted at the reporting date.
Income taxes relating to items recognised directly in equity
are recognised in equity and not in the profit or loss.
Deferred tax assets and deferred tax liabilities are offset
only if a legally enforceable right exists to set off current
tax assets against current tax liabilities and the deferred
tax assets and liabilities relate to the same taxable entity
and the same taxable authority.
Other taxes
Revenues, expenses and assets are recognised net of the
amount of GST except:
•
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.
•
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.
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Notes to the
Financial Statements
2 Summary of Significant Accounting Policies
r) Property, plant and equipment
Plant and equipment is stated at cost less accumulated
depreciation and any impairment in value.
Land and buildings are measured at fair value less
accumulated depreciation on buildings and less any
impairment losses recognised after the date of the
revaluation.
Depreciation is calculated on a straight-line basis using
the following rates:
Land
Buildings
Motor vehicles
Plant and equipment
Not depreciated
2.5% p.a
5% – 40% p.a.
5% – 27% p.a.
i) Impairment
The carrying values of plant and equipment are reviewed
for impairment when events or changes in circumstances
indicate the carrying value may not be recoverable.
For an asset that does not generate largely independent
cash inflows, the recoverable amount is determined for
the cash-generating unit to which the asset belongs.
The recoverable amount of plant and equipment is the
greater of fair value less costs to sell and value in use.
In assessing value in use, the estimated future cash flows
are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset.
Impairment exists when the carrying values of an asset
or cash-generating unit exceeds its estimated recoverable
amount. The assets or cash-generating units are written
down to their recoverable amount. For plant and
equipment, impairment losses are recognised in profit or
loss. However, because land and buildings are measured
at revalued amounts, impairment losses on land and
buildings are treated as a revaluation decrement.
ii) Revaluations
Following initial recognition at cost, land and buildings
are carried at a revalued amount which is the fair
value at the date of the revaluation less any subsequent
accumulated depreciation on buildings and accumulated
impairment losses.
Fair value is determined by reference to market-based
evidence, which is the amount for which the assets could
be exchanged between a knowledgeable willing buyer
and a knowledgeable willing seller in an arm’s length
transaction as at the valuation date.
Any revaluation increment is credited to the asset
revaluation reserve included in the equity section of the
Statement of Financial Position unless it reverses
a revaluation decrease of the same asset previously
recognised in profit or loss.
Any revaluation decrease is recognised in profit or loss
unless it directly offsets a previous revaluation increase for
the same asset debited directly to the asset revaluation
reserve.
In addition, any accumulated depreciation as at revaluation
date is eliminated against the gross carrying amount of
the asset and the net amount is restated to the revalued
amount of the asset.
Upon disposal, any revaluation reserve relating to the
particular asset being sold is transferred to retained
earnings.
Independent valuations are performed with sufficient
regularity to ensure that the carrying amount does
not differ materially from the asset's fair value at the
reporting date.
iii) Derecognition and disposal
An item of property, plant and equipment is derecognised
upon disposal or when no future economic benefits
are expected to arise from the continued use of the asset.
Any gain or loss arising on derecognition of the asset
(calculated as the difference between the net disposal
proceeds and the carrying amount of the item) is included
in profit or loss in the period the item is derecognised.
s) Borrowing costs
Borrowing costs directly attributable to the acquisition,
construction or production of an asset that necessarily
takes a substantial period of time to get ready for its
intended use or sale are capitalised as part of the cost of
the asset. All other borrowing costs are expensed in the
period in which they occur. Borrowing costs consist of
interest and other costs that an entity incurs in connection
with the borrowing of funds.
t) 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.
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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.
acquired and liabilities assumed. If the fair value of the net
assets acquired is in excess of the aggregate consideration
transferred, the Group re-assesses whether it has correctly
identified all of the assets acquired and all of the liabilities
assumed and reviews the procedures used to measure the
amounts to be recognised at the acquisition date. If the
re-assessment still results in an excess of the fair value
of net assets acquired over the aggregate consideration
transferred, then the gain is recognised in profit or loss.
Held-to-maturity investments
Non-derivative financial assets with fixed or determinable
payments and fixed maturity are classified as held-to-
maturity when the Group has the positive intention and
ability to hold to maturity. Investments intended to be
held for an undefined period are not included in this
classification. Investments that are intended to be held-to-
maturity, such as bonds, are subsequently measured at
amortised cost.
This cost is computed as the amount initially recognised
minus principal repayments, plus or minus the cumulative
amortisation using the effective interest method of any
difference between the initially recognised amount and the
maturity amount. This calculation includes all fees and
points paid or received between parties to the contract that
are an integral part of the effective interest rate, transaction
costs and all other premiums and discounts.
For investments carried at amortised cost, gains and losses
are recognised in profit or loss when the investments
are derecognised or impaired, as well as through the
amortisation process.
Loans and receivables
Loans and receivables are non-derivative financial assets
with fixed or determinable payments that are not quoted
in an active market. Such assets are carried at amortised
cost using the effective interest method. Gains and
losses are recognised in profit or loss when the loans and
receivables are derecognised or impaired, as well as
through the amortisation process.
The fair value of investments that are actively traded in
organised financial markets is determined by reference to
quoted market bid prices at the close of business on
the reporting date. For investments with no active market,
fair value is determined using valuation techniques.
Such techniques include using recent arm’s length market
transactions; reference to the current market value
of another instrument that is substantially the same;
discounted cash flow analysis and option pricing methods.
u) Goodwill and intangibles
Goodwill
Goodwill is initially measured at cost, being the excess of
the aggregate of the consideration transferred and the
amount recognised for non-controlling interests, and any
previous interest held, over the net identifiable assets
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.
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.
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Notes to the
Financial Statements
2 Summary of Significant Accounting Policies
t) Goodwill and intangibles
Intangibles continued
The useful lives of intangible assets are assessed to be
either finite or indefinite. Intangible assets with finite
lives are amortised over the useful life and assessed
for impairment whenever there is an indication that the
intangible asset may be impaired. The amortisation
period and the amortisation method for an intangible
asset with a finite useful life is reviewed at each financial
year-end.
Changes in the expected useful life or the expected
pattern of consumption of future economic benefits
embodied in the asset are accounted for by changing the
amortisation period or method, as appropriate, which is a
change in accounting estimate. The amortisation expense
on intangible assets with finite lives is recognised in
profit or loss in the expense category consistent with the
function of the intangible asset.
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.
v) 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).
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.
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w) Interest-bearing loans and borrowings
y) Employee leave benefits
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.
x) 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.
y) 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.
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.
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Notes to the
Financial Statements
2 Summary of Significant Accounting Policies
aa) 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.
bb) 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; and
(cid:129)
Other non-discretionary changes in revenues or
expenses during the period that would result from
dilution of potential ordinary shares;
divided by the weighted average number of ordinary shares
and dilutive potential ordinary shares.
cc) 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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Management has identified the following critical accounting
policies for which significant judgments, estimates and
assumptions are made. Actual results may differ from these
estimates under different assumptions and conditions and
may materially affect financial results or the financial position
reported in future periods.
Further details of the nature of these assumptions and
conditions may be found in the relevant notes to the
financial statements.
i) Significant accounting judgments
Recovery of deferred tax assets
Deferred tax assets are recognised for deductible
temporary differences as management considers that it is
probable that future taxable profits will be available to
utilise those temporary differences. Significant management
judgment is required to determine the amount of deferred
taxes that can be recognised, based upon the likely timing
and the level of future taxable profits.
Taxation
The Group’s accounting policy for taxation requires
management judgment as to the types of arrangements
considered to be a tax on income in contrast to an
operating cost. Judgment is also required in assessing
whether deferred tax assets and certain deferred tax
liabilities are recognised on the Statement of Financial
Position. Deferred tax assets are recognised only where
it is considered more likely than not that they will be
recovered, which is 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 organized 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.
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Notes to the
Financial Statements
3 Financial Risk Management Objectives and Policies
Risk exposures and responses continued
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.
While 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 materially exposed to counterparty risk
with several of its major customers. However, those major
customers are blue chip organisations with sound
balance sheets and they are not considered to comprise
a significant credit risk. Concentration of credit risk on
trade debtors due from customers are: Transport 94%
(2013: 93%) and Fuel 6% (2013: 7%).
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
2014 2013
$’000 $’000
Financial assets
– Cash and cash equivalents 23,532 15,935
Financial liabilities
– Bank loans (24,625) (18,379)
Net exposure (1,093) (2,444)
The following sensitivity analysis is based on the interest
rate risk exposures in existence at the Balance Sheet date:
Judgements
Post Tax Profit Equity
of reasonably
Higher/(Lower) Higher/(Lower)
possible
2014 2013 2014 2013
movements:
$’000 $’000 $’000 $’000
Consolidated
+ 1% (100 basis points) (8) (17) (8) (17)
– 0.5% (50 basis points) 4 9 4 9
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:
•
Reasonably possible movements in interest rates were
determined based upon the Group’s current credit
rating and debt mix in Australia and New Zealand.
The net exposure at balance date is representative of
what the Group was and is expecting to be exposed
to in the next twelve months.
Liquidity risk
Liquidity risk arises from the financial liabilities of the
Group and the Group’s subsequent ability to meet
their obligations to repay their financial liabilities as and
when they fall due.
The Group’s objective is to maintain a balance between
continuity of funding and flexibility through the use of bank
overdrafts, bank loans, finance leases and committed lines
of credit. The Group’s policy in managing liquidity risk is to
ensure the Group always has sufficient liquidity to meet its
financial obligations when due, as well as to accommodate
unforeseen cash requirements over both the short and
long term.
i) Non-derivative financial liabilities
The following liquidity risk disclosure reflect all contractually
fixed pay-offs, repayments and interest resulting from
recognised financial liabilities and financial guarantees as
of 30 June 2014. 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.
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3 Financial Risk Management Objectives and Policies Liquidity risk continued
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 2014
Liquid financial assets
Cash and cash equivalents 23,532 - - - 23,532
Trade and other receivables 82,580 316 632 156 83,684
106,112 316 632 156 107,216
Financial liabilities
Interest bearing loans and borrowings (41,862) (42,077) (45,861) - (129,800)
Trade and other payables (70,482) (8,604) - - (79,086)
Financial guarantees (19,579) - - - (19,579)
(131,923) (50,681) (45,861) - (228,465)
Net inflow/(outflow) (25,811) (50,365) (45,229) 156 (121,249)
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)
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.
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Notes to the
Financial Statements
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:
•
•
•
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 2014
and 30 June 2013.
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4 Operating Segments
Australian New Zealand
Transport Fuel Transport Total
$’000 $’000 $’000 $’000
Year ended 30 June 2014
Revenue
External customers 491,769 68,259 25,935 585,963
Finance revenue 251 - 12 263
Inter-segment sales 661 45,164 - 45,825
Total segment revenue 492,681 113,423 25,947 632,051
Results
Depreciation and amortisation expense (22,150) (153) (2,703) (25,006)
Finance costs (5,585) - (592) (6,177)
Share of profits of associates 103 - - 103
Segment net operating profit after tax 7,934 642 277 8,853
Operating assets 495,267 19,640 29,160 544,067
Operating liabilities 217,234 6,896 14,632 238,762
Other disclosures
Investments in an associate 303 - - 303
Capital expenditure (40,412) - (6,794) (47,206)
Inter-segment revenues of $45,825,000
are eliminated on consolidation
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
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Notes to the
Financial Statements
4 Operating Segments
Consolidated
2014 2013
$’000 $’000
i) Segment revenue reconciliation to the
Statement of Comprehensive Income
Total segment revenue 632,051 608,008
Inter-segment sales elimination (45,825) (43,428)
Total revenue 586,226 564,580
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 560,291 545,202
New Zealand 25,935 19,378
Total revenue 586,226 564,580
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 544,067 409,423
Inter-segment eliminations (14,268) (13,601)
Deferred tax assets 10,680 7,849
Total assets per the Statement of Financial Position 540,479 403,671
The analysis of location on non-current assets other than
financial instruments and deferred tax assets is as follows:
Australia 387,103 288,662
New Zealand 24,629 18,843
Total assets per the Statement of Financial Position 411,732 307,505
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. Managing Director, Chief
Financial Officer and Directors review the level of debts for each
segment in the monthly board meetings.
Reconciliation of segment operating liabilities to total liabilities.
Segment operating liabilities 238,762 155,730
Inter-segment eliminations (14,268) (13,601)
Deferred tax liabilities 27,150 21,352
Income tax payable 1,677 555
Total liabilities per the Statement of Financial Position 253,321 164,036
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Consolidated
2014 2013
$’000 $’000
5 Revenue and Expenses
Revenue
a) Rendering of services 517,704 500,979
Sale of goods 68,259 63,403
Finance revenue 263 198
Total revenue 586,226 564,580
b) Other income
– Net gains on disposal of property, plant and equipment 2,927 2,422
1,500
– Other
2,176
Total other income 5,103 3,922
c) Finance costs
– Related parties – other 5 5
– Other parties 1,991 2,111
– Finance charges on hire purchase contracts 4,181 3,351
Total finance costs 6,177 5,467
d) Depreciation and amortisation expense
Depreciation
– Buildings 2,064
2,018
– Motor vehicles 19,400 18,989
– Plant and equipment
2,602
– Amortisation 89 -
– IT Development costs 536 557
2,917
Total depreciation and amortisation expense
25,006 24,166
e) Employee expense
– Wages and salaries 147,254
132,210
– Workers’ compensation costs 7,337 8,645
– Long service leave provision 1,110 1,291
– Annual leave provision 10,057 9,229
– Payroll tax 8,428 7,508
– Defined contribution plan expense 11,021 9,812
– Directors retirement scheme expense 11 55
Total employee expense 185,218 168,750
f) Operating lease rental expense
– Property 12,592 11,493
– Plant and equipment 2,095 2,023
Total operating lease rental expense 14,687 13,516
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Notes to the
Financial Statements
Consolidated
2014 2013
$’000 $’000
6 Income Tax
The major components of income tax expense are:
Statement of Comprehensive Income
Current income tax
– Current income tax charge 3,403 7,280
– Adjustments in respect of current income tax of previous years (214) (327)
Deferred income tax
– Relating to origination and reversal of temporary differences 385 (505)
Income tax expense reported in the
Statement of Comprehensive Income 3,574 6,448
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 12,427 22,352
At the Group’s statutory income tax rate of 30% (2013: 30%) 3,728 6,705
– Expenditure not allowable for income tax purposes 60 70
– Adjustments in respect of current income tax of previous years (214) (327)
Income tax expense reported in the
Statement of Comprehensive Income 3,574 6,448
Consolidated
2014 2014 2013 2013
$’000 $’000 $’000 $’000
Current Deferred Current Deferred
Income Income Income Income
Tax Tax Tax Tax
Recognised deferred tax assets and liabilities
Opening balance (555) (13,503) (1,700) (11,494)
Charged to income (3,189) (385) (6,953) 505
Scott Corporation Limited opening balance (922) (1,772) - -
Eliminations - (726) - -
Charged to equity - - - (2,438)
Other payments 2,932 - 8,045 -
Exchange rate 57 (84) 53 (76)
Closing balance (1,677) (16,470) (555) (13,503)
Tax expense in Statement of Comprehensive Income 3,574 6,448
Amounts recognised in the Statement of Financial Position:
Deferred tax asset 10,680 7,849
Deferred tax liability (27,150) (21,352)
(16,470) (13,503)
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6 Income Tax
Statement of Financial Position
2014 2013
$’000 $’000
Deferred income tax
Deferred income tax at 30 June relates to the following:
Consolidated
Deferred tax liabilities
– Accelerated depreciation for tax purposes (9,499) (6,146)
– Revaluation of land and buildings to fair value (14,193) (13,696)
– Trade and other receivables not derived for tax purposes (2,450) (1,510)
– Intangibles Brands and Customer Contracts (1,008) -
(27,150) (21,352)
Deferred tax assets
– Equity raising costs 34 68
– Accelerated depreciation for accounting purposes 840 885
– Trade and other payables not currently deductible 1,965 968
– Trade and other receivables not derived for tax purposes 217 107
– Employee entitlements not currently deductible 7,624 5,821
10,680 7,849
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:
Parent
2014 2013
$’000 $’000
Total increase/(reduction) to tax expense of
K&S Corporation Ltd (1,853) (7,079)
Total increase/(reduction) to inter-company assets of
K&S Corporation Ltd 1,853 7,079
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Notes to the
Financial Statements
Consolidated
2014 2013
$’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 8,853 15,904
Net profit attributable to ordinary equity holders of the parent 8,853 15,904
2014 2013
Thousands Thousands
Weighted average number of ordinary shares used in the calculation of the
basic earnings per share 98,275 90,269
Effect of dilution
– Ordinary Shares - -
Weighted average number of ordinary shares adjusted for the effect of dilution 98,275 90,269
Consolidated
2014 2013
$’000 $’000
8 Dividends Paid and Proposed
Declared and paid during the year:
Dividends on ordinary shares
Final franked dividend for 2013: 4.5 cents (2012: 6.0 cents) 4,112 5,376
Interim franked dividend for 2014: 3.0 cents (2013: 6.5 cents) 2,761 5,882
6,873 11,258
Proposed (not recognised as a liability as at 30 June):
Dividends on ordinary shares
Final franked dividend for 2014: 3.0 cents (2013: 4.5 cents) 3,483 4,112
Franking credit balance
The amount of franking credits available for the subsequent year are:
• franking account balance as at the end of the financial year at 30% (2013: 30%) 49,170 47,919
• franking credits that will arise from the payment of income tax payable as at
the end of the financial year 844 1,104
The amount of franking credits available for future reporting periods:
• impact on franking account of dividends proposed but not recognised as a
distribution to equity holders during the period (1,493) (1,758)
48,521 47,265
Tax rates
The tax rate at which dividends have been franked is 30% (2013: 30%).
Dividends proposed will be franked at the rate of 30% (2013: 30%).
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Consolidated
2014 2013
$’000 $’000
9 Cash and Cash Equivalents
Cash 53 47
Cash deposits with banks 23,479 15,888
23,532 15,935
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 8,853 15,904
Add/(less) items classified as investing/financing activities:
– (Profit)/loss on sale of non-current assets (2,972)
(2,422)
Add/(less) non-cash items:
– Amounts set aside to provisions 366 2,089
– Depreciation 25,006 24,167
– Share of associates’ net profit (103) (42)
– Dividends received from associates - -
Net cash provided by operating activities before changes in assets and liabilities 31,150 39,696
CHANGE IN ASSETS AND LIABILITIES
(113)
(Increase)/decrease in inventories 42
(843)
(Increase)/decrease in income tax benefit (393)
15
(Increase)/decrease in prepayments 119
(Increase)/decrease in receivables 8,754 9,044
(634)
(Decrease)/increase in trade creditors 6,678
(1,090)
(Decrease)/increase in income taxes payable 1,266
(Decrease)/increase in deferred taxes payable (288)
347
Exchange rate changes on opening cash balances (17) 4
Net cash provided by/(used in) operating activities 47,311
46,426
Disclosure of financing facilities
Refer to Note 18.
Disclosure of non-cash financing and investing activities
Refer to Note 18.
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Notes to the
Financial Statements
Consolidated
2014 2013
$’000 $’000
10 Trade and Other Receivables
Current
Trade debtors 77,379
61,485
Allowance for impairment loss (a) (660) (355)
76,719 61,130
Sundry debtors 5,544 2,946
82,263 64,076
Non-current
Related party receivables
– Employee share plan loans 1,307 1,379
1,307 1,379
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 355 308
Charge for the year 533 280
Amounts written off (228) (233)
At 30 June 660 355
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**
2014 77,379 53,141 18,284 3,894 - 1,400 660
2013 61,485 41,569 15,020 3,681 - 860 355
* 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.
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Consolidated
2014 2013
$’000 $’000
11 Inventories
Consumable stores – at cost 1,071 795
2,245
Finished goods – fuel at cost 2,659
Total inventories at the lower of cost and net realisable value 3,730 3,040
a) Inventory expense
Inventories recognised as an expense for the year ended
30 June 2014 totalled $63,545,000 (2013: $58,570,000)
for the Group. This expense has been included in the
cost of sales line item as a cost of inventories.
Parent
2014 2013
$’000 $’000
12 Other Financial Assets
Investments controlled entities
– Shares – unlisted at cost 78,552 32,418
78,552 32,418
Investment Carrying
Interest Owned Amount Consolidated
2014 2013 2014 2013
% % $’000 $’000
13 Investment in Associate
a) Investment details
Smart Logistics Pty Ltd 50 50 303
200
Investment in associate 303 200
Smart Logistics Pty Ltd is a provider of distribution services
and consultant in transport and distribution. Smart Logistics
Pty Ltd was incorporated in Australia.
b) Movements in the carrying amount of the
Group’s investment in associate
Consolidated
2014 2013
$’000 $’000
Smart Logistics Pty Ltd
At 1 July 200 158
Share of profit/(loss) after income tax 103 42
Dividend payment - -
At 30 June 303 200
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Notes to the
Financial Statements
13 Investment in Associate
Consolidated
2014 2013
$’000 $’000
c) Summarised financial information
The following table illustrates summarised financial
information relating to the Group’s associates:
Extract from the associates’ Statement of Financial Position:
Current assets 6,429 5,632
Non-current assets 54 81
6,483 5,713
Current liabilities (5,868) (5,309)
Non-current liabilities (9) (4)
(5,877) (5,313)
Net assets/(liabilities) 606 400
Proportion of Group’s ownership 50.0% 50.0%
Share of associates net assets/(liabilities) 303 200
Carry amount of the Investment 303 200
Extract from the associates’ Statement of Comprehensive Income:
Revenue 75,279 77,007
Net profit 201 72
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 2014
As at 1 July 2013
net of accumulated depreciation and impairment 104,390 119,595 10,765 234,750
Additions 13,448 32,579 1,179 47,206
Additions – Scott Corporation Limited 2,265 57,984 3,834 64,083
Disposals - (3,440) (7) (3,447)
Depreciation charge for the year (2,064) (19,400) (2,917) (24,381)
Exchange adjustment - 1,294 10 1,304
At 30 June 2014
net of accumulated depreciation and impairment 118,039 188,612 12,864 319,515
At 30 June 2014
Cost or fair value 124,781 386,982 54,742 566,505
Accumulated depreciation and impairment (6,742) (198,370) (41,878) (246,990)
Net carrying amount 118,039 188,612 12,864 319,515
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14 Property, Plant and Equipment
Consolidated
Freehold Land Motor Plant &
and Buildings Vehicles Equipment Total
$’000 $’000 $’000 $’000
a) Reconciliation of carrying amounts at the
beginning and end of the period: continued
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
b) Capitalised borrowing costs
The Group is currently working through the planning approval process with the City of Swan in Western Australia in
relation to property purchased at Bullsbrook, WA, in August 2013. We expect that the approval process should be
completed by December 2014 and development would commence shortly after that date. The carrying amount of the
facility at 30 June 2014 was $13.3 million (2013: $Nil). The amount of borrowing costs capitalised during the year
ended 30 June 2014 was $409,000 (2013: $Nil). The rate used to determine the amount of borrowing costs eligible
for capitalisation was 3.60%, which is the effective interest rate of the specific borrowing.
c) 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 2014 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.
The valuation technique used on valuing the freehold land and buildings consists of direct Comparison Approach and
Capitalisation of Net Income Approach. The adjustments to the methodology used will be based on location of each
premises and age of buildings. As the freehold land and buildings measured at fair value above are categorised as
level 3, the valuation contains unobservable level 3 price inputs. The most significant unobservable input is dollar per
square metre. The quantitative range, subject to location for the calculation is based on a dollar per metre between
$90 and $350.
Significant increases (decreases) in any of the signficant unobservable valuation inputs under both the Direct Comparison
Approach and the Capitalisation of Net Income Approach in isolation would result in a significantly lower (higher) fair value
measurement. There has been no material change in fair value of land and buildings since the last independent valuation.
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Notes to the
Financial Statements
14 Property, Plant and Equipment
Consolidated
2014 2013
Freehold Land Freehold Land
and Buildings and Buildings
$’000 $’000
d) 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 86,969 71,941
Accumulated depreciation and impairment (11,656) (10,253)
Net carrying amount 75,313 61,688
e) Property, plant and equipment pledged as security
for liabilities
The carrying value of motor vehicles held under hire purchase
contracts at 30 June 2014 is $120,074,111 (2013: $68,692,406).
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.
f) Depreciation charges
During the period the Company reviewed the depreciable amounts
and useful lives of its prime movers and trailing equipment in line
with customer demand for services and equipment utilisation.
The revised estimate had the impact of decreasing depreciation
expense by $2,250,000, increasing after tax profit by $1,575,000
and increasing net assets by $1,575,000 in the current period.
Consolidated
IT Development Customer
Costs Goodwill Brands Contracts Total
$’000 $’000 $’000 $’000 $’000
15 Intangible Assets and Goodwill
Year ended 30 June 2014
At 1 July 2013
net of accumulated amortisation and impairment 2,510 68,666 - - 71,176
Additions - 10,764 6,209 2,418 19,391
Amortisation (536) - - (89) (625)
Exchange adjustment - 665 - - 665
At 30 June 2014
net of accumulated amortisation and impairment 1,974 80,095 6,209 2,329 90,607
At 30 June 2014
Cost (gross carrying amount) 4,190 80,095 6,209 2,418 92,912
Accumulated amortisation and impairment (2,216) - - (89) (2,305)
Net carrying amount 1,974 80,095 6,209 2,329 90,607
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15 Intangible Assets and Goodwill
Consolidated
IT Development
Costs Goodwill Total
$’000 $’000 $’000
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
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 2014 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
2014 2013
$’000 $’000
Australian Transport 73,782 62,929
Fuel 165 165
New Zealand Transport 6,148 5,572
80,095 68,666
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.
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Notes to the
Financial Statements
16 Impairment Testing of Goodwill
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
2014 2013 2014 2013
% % % %
Australian Transport 13.71 13.95 3.0 3.0
Fuel 13.71 13.95 3.0 3.0
New Zealand Transport 13.38 13.96 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.
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 Australian Transport CGU currently exceeds its carrying value by $45.30m. This excess in
recoverable amount could be reduced should changes in the following key assumptions occur:
• Discount rate – an increase in the discount rate of over 0.85% would result in a reduction of the recoverable amount
to below the carrying value.
• Terminal growth rate – a decrease in the growth rate of over 1.20% would result in a reduction of the recoverable
amount to below the carrying value.
• Terminal cash flow – a decrease in terminal cash flow of over 16.0% would result in a reduction of the recoverable
amount to below the carrying value.
The recoverable amount of the New Zealand Transport CGU currently exceeds its carrying value by $2.06m. This excess
in recoverable amount could be reduced should changes in the following key assumptions occur:
• Discount rate – an increase in the discount rate of over 0.67% would result in a reduction of the recoverable amount
to below the carrying value.
• Terminal growth rate – a decrease in the growth rate of over 0.90% would result in a reduction of the recoverable
amount to below the carrying value.
• Terminal cash flow – a decrease in terminal cash flow of over 12.0% would result in a reduction of the recoverable
amount to below the carrying value.
Consolidated
2014 2013
$’000 $’000
17 Payables
Current
Trade creditors and payables 66,881 43,853
Self insured workers compensation liability 3,601 2,987
70,482 46,840
Non-current
Self insured workers compensation liability 8,604 8,471
8,604 8,471
i) Trade payables are non-interest bearing and are
normally settled on 30 day terms
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Consolidated
2014 2013
$’000 $’000
18 Interest Bearing Loans and Borrowings
Current
Hire purchase liabilities – secured 36,169 16,332
36,169 16,332
Non-current
Non redeemable preference shares 60 60
Hire purchase liabilities – secured 58,721 32,287
Bank loans – secured 24,625 18,379
83,406 50,726
Commitments in respect of hire purchase agreements are payable as follows:
Not later than one year 40,976 19,006
Later than one year but not later than five years 63,315 35,024
104,291 54,030
Deduct: future finance charges (9,393) (5,411)
Total hire purchase liability 94,898 48,619
Current 36,177 16,332
Non-current 58,721 32,287
94,898 48,619
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 $120,074,111 (2013: $68,692,406).
The weighted average cost of these facilities was 5.84% (2013: 6.19%).
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 $108,932,000 (2013: $94,905,000). The non-current bank loans are subject
to annual review.
The Group has bank loan facilities available for a period beyond June 2014. Maturity dates for the Group’s facilities are:
Facility amount ($‘000) Expiry
25,000 26 November 2015
35,000 26 November 2017
40,000 26 November 2016
The facilities bear interest at 3.60% (2013: 5.21%).
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Notes to the
Financial Statements
18 Interest Bearing Loans and Borrowings
Consolidated
2014 2013
$’000 $’000
Financing facilities available
Total facilities available:
Bank overdrafts 4,000 4,000
84,128
Bank loans 80,421
15,872
Standby letters of credit 19,579
104,000 104,000
Standby letters of credit
The Group has the following guarantees at 30 June 2014:
• Bank guarantee of $16,877,000 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;
• Other bank guarantees of $1,338,250 have been provided by the
Westpac Banking Corporation Limited to suppliers.
• Other bank guarantees of $385,000 have been provided by the
Commonwealth Bank of Australia to suppliers.
• Other bank guarantees of $979,551 have been provided by Bank SA
to suppliers.
Facilities utilised at balance date:
Bank overdrafts - -
Bank loans 24,624 18,379
15,872
Standby letters of credit 19,579
44,203 34,251
Facilities not utilised at balance date:
Bank overdrafts 4,000 4,000
Bank loans 55,797 65,749
Standby letters of credit - -
59,797 69,749
Total facilities 104,000 104,000
Facilities used at balance date 44,203 34,251
Facilities unused at balance date 59,797 69,749
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 2015.
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.
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18 Interest Bearing Loans and Borrowings
Consolidated
2014 2013
$’000 $’000
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 107,943 93,852
– Plant and equipment 989 1,053
Total non-current assets pledged as security 108,932 94,905
Non-cash financing and investment activities
During the financial year, the economic entity acquired property, plant and
equipment with an aggregate fair value of $29,300,000 (2013: $17,261,000)
and disposed of property, plant and equipment with an aggregate fair value of
$nil (2013: $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 22,704 16,741
22,704
16,741
Non-current
Employee benefits 2,261 2,025
Make good provision 419 356
683
Directors’ retirement allowance 449
3,129 3,019
No dividends have been provided for the year ended 30 June 2014. 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.
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Notes to the
Financial Statements
19 Provisions
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 2013 356 638 994
Arising during the year - 11 11
Utilised - (200) (200)
Scott Corporation Limited 63 - 63
At 30 June 2014 419 449 868
Current 2014 - - -
Non-Current 2014 419 449 868
419 449 868
Current 2013 - - -
Non-Current 2013 356 638 994
356 638 994
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.
Consolidated
2014 2013
$’000 $’000
20 Contributed Equity and Reserves
a) Ordinary shares
Contributed equity
116,092,472 (2013: 91,180,135) ordinary shares fully paid 145,415 101,187
145,415 101,187
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20 Contributed Equity and Reserves
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 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 $1.5683 899 1,410
Issued through Dividend Re-investment Plan – 683,283 ordinary shares at $2.3126 683 1,581
At 30 June 2013 91,180 101,187
Issued through Employee Share Plan – 201,000 ordinary shares at $1.77 201 356
Issued through Dividend Re-investment Plan – 665,300 ordinary shares at $1.6384 665 1,090
Issued through Scott Corporation Limited Purchase – 23,573,818 ordinary shares at $1.78 23,574 41,961
Issued through Dividend Re-investment Plan – 433,984 ordinary shares at $1.7345 434 753
Issued through Scott Corporation Limited Purchase – 38,505 Ordinary shares at $1.78 39 68
At 30 June 2014 116,093 145,415
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 2014, the Group paid dividends of $6,873,000 (2013: $11,258,000).
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:
Consolidated
2014 2013
$’000 $’000
Total interest bearing loans and borrowings 119,583 67,058
Less cash and cash equivalents (23,532) (15,935)
Net debt 96,051 51,123
Net debt + Shareholders funds 383,201 290,749
Gearing ratio 25.2% 17.6%
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.
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Notes to the
Financial Statements
21 Derivative Financial Instruments
a) Hedging activities
The Group has no interest rate swap agreements in place at 30 June 2014.
b) Interest rate risk
Information regarding interest rate risk exposure is set out in Note 3.
Consolidated
2014 2013
$’000 $’000
22 Commitments
The estimated maximum amount of commitments not
provided for in the accounts as at 30 June 2014 are:
Capital expenditure commitments
The aggregate amount of contracts for capital expenditure
on plant and equipment due no later than one year 16,206
17,450
Lease rental commitments
Operating lease and hire commitments:
– Not later than one year 16,812 9,900
22,349
– Later than one year but not later than five years 30,668
11,844
– Later than five years 12,478
59,958 44,093
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:
• 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.
• 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
DTM Pty Ltd (“DTM”), a subsidiary of the Company, was served with legal proceedings out of the Supreme Court of
Victoria in December 2013. Those claims relate to property damage sustained in a fire at a DTM warehouse in 2007.
The quantum of the claims against DTM is $8.65 million. Liability has not been admitted and the claims against DTM
will be defended.
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24 Deed of Cross Guarantee
Pursuant to ASIC Class Order 98/1418 (as amended) dated 13 August 1998, the
wholly owned subsidiaries listed below are relieved from the Corporations Act 2001
requirements for preparation, audit and lodgement of financial reports, and
Directors' reports. It is a condition of the Class Order that the Company and each
of the subsidiaries enter into a Deed of Cross Guarantee. The effect of the Deed is
that the Company guarantees to each creditor payment in full of any debt in
the event of winding up of any of the subsidiaries under certain provisions of the
Corporations Act 2001. If a winding up occurs under other provisions of the Act,
the Company will only be liable in the event that after six months any creditor has
not been paid in full. The subsidiaries have also given similar guarantees in the
event that the Company is wound up.
The subsidiaries subject to the Deed are:
Reid Bros Pty Ltd
K&S Group Pty Ltd
Kain & Shelton Pty Ltd
DTM Holdings (No. 2) Pty Ltd
K&S Freighters Pty Ltd
Alento Pty Ltd
K&S Group Administrative Services Pty Ltd
DTM Holdings Pty Ltd
Kain & Shelton (Agencies) Pty Ltd
DTM Pty Ltd
K&S Transport Management Pty Ltd
Regal Transport Group Pty Ltd
Blakistons-Gibb Pty Ltd
Strategic Transport Pty Ltd
K&S Logistics Pty Ltd
Vortex Nominees Pty Ltd
K&S Project Services Pty Ltd
K&S Freighters Limited *
K&S Integrated Distribution Pty Ltd
Cochrane’s Transport Limited *
Scott Corporation Pty Ltd
Hyde Park Tank Depot Pty Ltd
Bulktrans Pty Ltd
Energytrans Pty Ltd
Chemtrans 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 2014 is set out below:
Closed Group
2014 2013
$’000 $’000
Statement of Comprehensive Income
Profit before income tax 12,427 22,352
Income tax expense (3,574) (6,448)
Profit after income tax 8,853 15,904
Retained profits at the beginning of the year 107,205 102,549
Transfer asset revaluation reserve - 10
(11,258)
Dividends provided or paid (6,873)
Retained earnings at the end of the year 109,185 107,205
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Notes to the
Financial Statements
24 Deed of Cross Guarantee
Closed Group
2014 2013
$’000 $’000
Statement of Financial Position
Cash 23,532 15,935
Trade and other receivables 82,263 64,076
Inventories 3,730 3,040
Prepayments 8,542 5,266
Total current assets 118,067 88,317
Other receivables 1,307 1,379
Investment in associates 303 200
Property, plant and equipment 319,515 234,750
Intangibles 90,607 71,176
Deferred tax assets 10,680 7,849
Total non-current assets 422,412
315,354
Total assets 540,479 403,671
Trade and other payables 70,482
Interest bearing loans and borrowings 36,169
Current tax liabilities 1,677
Provisions 22,704
46,840
16,332
555
16,741
Total current liabilities 131,032
80,468
Other payables 8,604 8,471
50,726
Interest bearing loans and borrowings 83,406
21,352
Deferred tax liabilities 27,150
3,019
Provisions 3,129
Total non-current liabilities 122,289
83,568
Total liabilities 253,321
164,036
Net assets 287,158
239,635
Contributed equity 145,415
101,187
Reserves 32,558 31,243
107,205
Retained earnings 109,185
Total equity 287,158 239,635
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Class of Country of % Equity Interest
Share Incorporation
2014 2013
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
Scott Corporation Pty Ltd Ord Australia
Bulktrans Pty Ltd Ord Australia
Chemtrans Pty Ltd Ord Australia
Hyde Park Tank Depot Pty Ltd Ord Australia
Energytrans Pty Ltd Ord Australia
26 Related Party Disclosures
DIRECTORS
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
100 -
100 -
100 -
100 -
100 -
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, G Stevenson and P Sarant.
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 are:.
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 – prior to 24 February 2014 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.
First Radio Pty Ltd has an interest in a transport facility in Adelaide which the Company rents on a commercial basis.
Rent in 2014 was $402,000 (2013: $388,350).
Mr Johnson has an interest as a Director of AA Scott Pty Ltd.
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Notes to the
Financial Statements
26 Related Party Disclosures
Purchases Sales
2014 2013 2014 2013
$ $ $ $
The aggregate amount of dealings with these companies
during 2014 were as follows:
Ascot Haulage (NT) Pty Ltd 3,368,267 3,015,978 - -
Northern Territory Freight Services Pty Ltd 188,338 18,814 - 85,033
Scott’s Transport Industries Pty Ltd 108,327 122,662 713,598 932,480
Scott’s Agencies Pty Ltd 480,559 424,844 - -
The Border Watch Pty Ltd 17,462 11,066 -
-
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 2014 was
$76,812 (2013: $30,145) in professional service fees.
Mr R Smith has an interest as Director of Transpacific
Industries Limited. Transactions with this company
during 2014 were sales of $72,788 (2013: $310,372)
and purchases of $40,252 (2013: $44,732).
Consolidated
2014 2013
$’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 34 38
56
Transpacific Industries Limited -
No provision for doubtful debts has been
recognised in respect of these balances as they
are considered recoverable.
Current payables (included within trade payables)
493
Ascot Haulage (NT) Pty Ltd 157
5
Scott’s Transport Industries Pty Ltd -
3
Transpacific Industries Limited 3
Wholly-owned Group
Details of interests in wholly-owned controlled entities
are set out at Note 25.
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26 Related Party Disclosures
Parent
2014 2013
$’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 88,643 89,425
– Non-current 17,961 17,961
106,604 107,386
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 $15,000,000 (2013:$10,000,000).
Consolidated
2014 2013
DIRECTORS’ SHARE TRANSACTIONS
Shareholdings
Aggregate number of shares held by Directors and their
Director-related entities at balance date:
– Ordinary shares 1,941,129 747,651
– Preference shares - -
All share transactions were with the parent Company,
K&S Corporation Limited.
2014 2013
$’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 82 90
– 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.
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Notes to the
Financial Statements
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 (Retired 22 October 2013)
Mr G Stevenson Managing Director (Resigned 22 April 2014)
Mr P Sarant Managing Director (Appointed 22 April 2014)
ii) Executives
Mr B Walsh Chief Financial Officer
Mr C Bright General Counsel & Company Secretary
Mr G Wooller Chief Operating Officer (Resigned 30 May 2014)
Mr G Everest Executive General Manager Regal Transport
Mr S Hine Executive General Manager Business Development
Mr S Skazlic General Manager HS&E / Compliance
Ms K Evans General Manager Human Resources
Mr D Keane Executive General Manager Scott Corporation (Appointed 24 February 2014)
Mr K Cope Executive General Manager Commercial (Appointed 24 February 2014)
Mr M Kohne Executive General Manager DTM (Appointed 23 June 2014)
Mr G Beurteaux Executive General Manager K&S Freighters (Appointed 14 July 2014)
Consolidated
2014 2013
$’000 $’000
b) Compensation for Key Management Personnel
Short-term 3,929,096 3,441,485
Long-term 52,843 48,797
Post employment 288,867 322,862
4,270,806 3,813,144
28 Events Subsequent to Balance Date
On 25 August 2014, the Directors of K&S Corporation Limited declared a final dividend on ordinary shares in respect of
the 2014 financial year. The total amount of the dividend is $3,482,774, which represents a fully franked dividend of
3.0 cents per share. The dividend is payable on 31 October 2014 and has not been provided for in the 30 June 2014
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
20 October 2014 (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.
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29 Business Combinations
Acquisitions in 2014
Acquisition of Scott Corporation Limited
On 24 February 2014, K&S Corporation Limited (K&S) obtained control of Scott Corporation Limited via an off-market
takeover bid. Scott Corporation Limited is a national carrier with expertise in the transport of bulk solids, liquids and
explosives by road, rail and sea via four operating divisions catering to a diverse range of transport and logistic needs,
Scott Corporation Limited has a blue chip contracted customer base.
The consideration transferred was a combination of scrip at 0.345 K&S Shares or $0.59 per Scott Corporation Limited share.
Scott Corporation Limited operates in different functional and geographic markets to K&S and expands the scope, scale
and diversity of our business. With its exposure to the resources sector, the Scott Corporation Limited business is highly
complementary to K&S.
The provisional fair values of identifiable assets and liabilities is as follows:
Fair Value at
Acquisition Date Carrying Value
$’000 $’000
Cash 3,719 3,719
Debtors 26,802 26,802
Inventories 732 732
Prepayments 3,374 3,374
Plant & equipment 64,831 64,831
Deferred tax assets 2,446 2,446
101,904 101,904
Trade creditors (16,972) (16,972)
Hire purchase – current (16,762) (16,762)
Provision for dividend (3,772) (3,772)
Provision for employee entitlements (6,247) (6,247)
Provision for Income tax payable (588) (588)
Hire purchase – non current (25,738) (25,738)
Deferred tax liability (5,081) (5,081)
75,160 75,160
Provisional fair value of identifiable net assets 26,744
Goodwill arising on acquisition 10,764
Brands 6,209
Customer contracts 2,418
Purchase consideration transferred 46,135
Acquisition-date fair-value of consideration transferred
Shares issued at fair value 42,029
Cash paid 4,106
Consideration transferred 46,135
Analysis of cash flows on acquisition
Direct costs relating to the acquisition (804)
Net cash acquired with the purchase 3,719
Cash paid (4,106)
Cash outflow on acquisition (1,191)
The initial accounting for the business combination requires the identification of fair values to be assigned to Scott
Corporation Limited’s identifiable assets, liabilities and contingent liabilities. Due to the acquisition occurring in the second
half of the year, the fair values assigned to Scott Corporation Limited’s assets are provisional. In accordance with Australian
Accounting Standards, K&S will recognize any adjustments to these provisional values as a result of completing the initial
accounting within 12 months of the acquisition date.
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Notes to the
Financial Statements
29 Business Combinations
Acquisition of Scott Corporation Limited continued
The fair value of the trade receivables amounts to $26,802,000. The gross amount of trade receivables is $26,875,000.
However, none of the trade receivables have been impaired and it is expected that the full contractual amounts can
be collected.
The goodwill of $10,764,000 (total less brands less contracts) comprises the value of expected synergies arising from the
acquisition. Goodwill is allocated entirely to the Australian Transport segment.
Transaction costs of $804,000 have been expensed and are included in other expenses.
From the date of acquisition, Scott Corporation has contributed $66,894,000 of revenue and $3,066,000 to the profit
before tax from continuing operations of the Group. If the combination had taken place at the beginning of the year,
revenue from continuing operations would have been $199,357,000 and the profit before tax from continuing operations
for the Group would have been $5,292,000.
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 businesses.
The 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)
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.
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Consolidated
2014 2013
$ $
30 Auditor’s Remuneration
The auditor of K&S Corporation Limited is Ernst & Young.
Audit services:
Audit and review of the statutory financial reports 160,000 188,500
160,000 188,500
Other services:
Other services – Ernst & Young:
– Scott Corporation Limited acquisition assistance 137,355 -
– Information Technology Review - 24,580
137,355 24,580
Parent
2014 2013
$’000 $’000
31 Parent Entity Information
Current assets 88,643 89,425
Total assets 186,669 141,477
Current liabilities (142) (1,104)
Total liabilities (12,719) (19,871)
Issued capital 145,415 101,187
Asset revaluation reserve 161 161
Retained earnings 28,374 20,258
Total Shareholders’ equity 173,950 121,606
Profit after tax of the Parent entity 14,993 10,422
Total comprehensive income of the Parent entity 14,993 10,422
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.
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K&S CORPORATION LIMITED
Directors’
Declaration
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 2014 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 2014.
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 Adelaide this 25th day of August 2014.
On behalf of the Board:
Tony Johnson
Chairman
Paul Sarant
Managing Director
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Auditor’s
Independence
Declaration
In relation to our audit of the financial report of K&S Corporation
Limited for the financial year ended 30 June 2014, to the best of
my knowledge and belief, there have been no contraventions of
of the auditor independence requirements of the Corporations Act
2001 or any applicable code of professional conduct.
Ernst & Young
Mark Phelps
Partner
Adelaide
25 August 2014
A member firm of Ernst & Young Global Limited
Liability Limited by a scheme approved under Professional Standards Legislation
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Independent Audit
Report
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 2014, the consolidated statement of
comprehensive income, the consolidated statement of changes in equity and the consolidated statement
of cash flows for the year then ended, notes comprising a summary of significant accounting policies
and other explanatory information, and the directors’ declaration of the consolidated entity comprising the
company and the entities it controlled at the year’s end or from time to time during the financial year.
Directors’ Responsibility for the Financial Report
The directors of the company are responsible for the preparation of the financial report that gives a true and
fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such
internal controls as the directors determine are necessary to enable the preparation of the financial report
that is free from material misstatement, whether due to fraud or error. In Note 2, the directors also state, in
accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the financial
statements comply with International Financial Reporting Standards.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our
audit in accordance with Australian Auditing Standards. Those Standards require that we comply
with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain
reasonable assurance about whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
financial report. The procedures selected depend on the auditor’s judgement, including the assessment of
the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk
assessments, the auditor considers internal controls relevant to the entity’s preparation and fair presentation
of the financial report in order to design audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the entity’s internal controls. An audit also
includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates made by the directors, as well as evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.
Independence
In conducting our audit we have complied with the independence requirements of the Corporations Act
2001. We have given to the directors of the company a written Auditor’s Independence Declaration, a copy
of which is included in the directors’ report.
A member firm of Ernst & Young Global Limited
Liability Limited by a scheme approved under Professional Standards Legislation
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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 2014 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 34 to 43 of the directors’ report for the year
ended 30 June 2014. 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 2014,
complies with section 300A of the Corporations Act 2001.
Ernst & Young
Mark Phelps
Partner
Adelaide
25 August 2014
A member firm of Ernst & Young Global Limited
Liability Limited by a scheme approved under Professional Standards Legislation
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Information
on
K&S CORPORATION LIMITED
Shareholdings
DISTRIBUTION OF SHAREHOLDINGS
Ordinary Shares
Number of Shareholders
1-1,000 Shares 504
1,001 - 5,000 Shares 1,028
5,001 - 10,000 Shares 451
10,001 - 100,000 Shares 598
100,001 and more Shares 51
2,632
156 shareholders hold less than a marketable parcel (348 shares).
TWENTY LARGEST SHAREHOLDERS
Name
Number of Ordinary Shares Held
%
1 AA Scott Pty Ltd 64,935,929 55.93
2 Citicorp Nominees Pty Limited 6,925,342 5.97
3 Bell Potter Nominees Ltd 2,726,732 2.35
4 Ascot Media Investments Pty Ltd 2,190,877 1.89
5 JP Morgan Nominees Australia Limited 2,000,942 1.72
6 P Whitehead Nominees Pty Ltd
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