More annual reports from K&S Corporation Limited:
2023 Report Financial Calendar
Contents Page
Annual General Meeting 28 November 2017
Highlights 1
Half-year Result and Interim
Dividend Announcement 20 February 2018
Full-year Result and Final
Dividend Announcement 20 August 2018
Annual Report to Shareholders 10 October 2018
Annual General Meeting 27 November 2018
Chairman’s Overview 2
Financial Overview 4
Managing Director’s Report 5
Board of Directors 12
Five-Year Financial History 14
Directors’ Report 15
Remuneration Report 23
Corporate Governance 33
Financial Report 49
Corporate Directory inside back cover
TO BE THE LEADING PROVIDER
OF TRANSPORT AND LOGISTIC
SOLUTIONS WITHIN OUR TARGET
MARKETS IN AUSTRALIA AND
NEW ZEALAND
highlights
• Generates revenue of $755.2 million
• Completes merger of Scott’s Transport Industries
• Improved profitability
• Safety focus continues to deliver positive outcomes
• Operating cash flow exceeds $49.0 million
chairman’s
On behalf of the Board of K&S Corporation, I am pleased to present the
Company’s Annual Report.
The year has been a challenging but also successful year with our financial
performance improving.
Operating revenues increased by 9.6% to $755.2 million.
We achieved an underlying profit before tax of $10.9 million, an increase on the previous
corresponding period of 100.6%.
Our underlying profit after tax was $8.0 million, an increase on the previous
corresponding period of 106.5%.
In May 2017, we settled a legal matter that related to a DTM warehouse fire that
occurred in January 2007 for $1.5 million.
This legal settlement reduced our statutory profit before tax to $9.4 million.
Operating cashflow for the year was $49.4 million which was a 20.2% increase on the
prior year.
A pleasing aspect of the year was the improved performance of many business
units. Our intermodal, contract logistics and New Zealand businesses benefited from
higher volumes.
Our K&S Energy business achieved significant growth with the awarding of major new
contracts in Western Australia and South Australia.
Our Western Australian resource business is still impacted by the reduced infrastructure
activity levels in the mining industry. We do expect to see activity levels improve in this
new financial year based on mine depletion and higher commodity prices.
Scott’s Transport Industries (STI) Merger
In late January 2017, we merged with Scott’s Transport Industries via the transfer of
certain assets of STI to K&S Freighters Pty Ltd. The integration process is advanced
and is progressing extremely well.
STI was established by the late Allan Scott AO more than 60 years ago and was
one of Australia’s largest privately-owned transport companies. STI operates a general
freight business and fuel cartage operation and has several blue-chip customers.
Arrium Update
It was pleasing to hear the news that the GFG Alliance has entered into a contract
to purchase Arrium. This sale process was completed on 31 August 2017. We have
been advised by the Administrators that subject to the sale process being completed,
a return to creditors will be paid to Arrium creditors in September 2017. The size of
the return to creditors is not known at this time.
Dividends
We have declared a fully franked final dividend of 2.0 cents per share (last year no
final dividend was declared). This follows the interim dividend of 1.5 cents per share
paid in April 2017, making a total dividend of 3.5 cents per share. The final dividend
will be paid on 2 November 2017, with the date for determining entitlements being
19 October 2017.
The dividend reinvestment plan (DRP) will once again apply in respect of the fully
franked final dividend of 2.0 cents per share payable on 2 November 2017. The last
election date for participation in the DRP is 20 October 2017.
The terms of the DRP will remain unchanged with the issue price under the DRP
being the volume weighted average price for K&S shares in the five business days
ending on 19 October 2017 (the record date of the final dividend) less a discount
of 2.5%.
On behalf of the Board, I thank our customers, suppliers and employees, who have
contributed to the continued success of the business.
In particular, I thank the senior management team, led by Paul Sarant, for their ongoing
commitment and dedication in these challenging times.
Tony Johnson
Chairman
financial
2017 2016 % change
Revenue $m 755.2 688.8 9.6
Operating profit before interest, tax and depreciation $m 55.3 (63.9) 186.5
Operating profit before interest and tax $m 16.2 (102.8) 115.7
Statutory profit before tax $m 9.4 (109.9) 108.5
Less non-recurring legal settlement $m 1.5 0.0 -
Less impairments $m 0.0 115.3 -
Statutory profit after tax $m 6.5 (104.2) 106.2
Underlying profit before tax $m 10.9 5.4 101.9
Underlying profit before interest and tax $m 17.7 12.5 40.8
Underlying profit before interest, tax and depreciation $m 56.8 51.3 10.6
Normalised operating profit after tax $m 8.0 3.9 105.1
Total assets $m 489.0 445.0 9.9
Net borrowings $m 109.2 106.9 2.1
Shareholders’ funds $m 205.4 199.4 3.0
Depreciation and amortisation $m 39.1 38.9 (0.7)
Normalised earnings per shares cents 6.6 3.2 106.3
Dividends per share cents 3.5 1.5 133.3
Net tangible assets per share $ 1.63 1.59 2.5
Operating cash flow $m 49.4 41.1 20.2
Gearing % 34.7 34.9 0.6
Employee numbers 2,345 2,034 15.3
Lost time injuries 32.0 33.0
(3.0)
Lost time injuries frequency rate 8.0 7.0 14.3
OPERATING REVENUE
OPERATING CASH FLOW
$699.2m
$688.8m
$755.2m
$46.4m
$47.3m
$48.1m
$49.4m
$41.1m
$564.8m
$586.2m
2013
2014
2015
2016
2017
2013
2014
2015
2016
2017
SHAREHOLDERS’ FUNDS
GEARING
$287.2m
$294.6m
$239.6m
34.9%
34.7%
$199.4m $205.4m
25.2%
25.0%
17.6%
2013
2014
2015
2016
2017
2013
2014
2015
2016
2017
managing director’s
Whilst this year has been challenging, our results have shown significant
improvement on the prior year.
Operating revenues increased by 9.6% to $755.2 million. This was achieved through
both organic growth and acquisition.
We achieved an underlying profit before tax of $10.9 million, an increase on
the previous corresponding period of 101.9%.
Our underlying profit after tax was $8.0 million, an increase on the previous corresponding
period of 105.1%.
The strength of the eastern seaboard construction industry during the year had
a positive impact on our performance. Whilst Arrium has been in Administration
throughout the majority of this period, we have realised increased steel volumes
through a number of our major customers, servicing infrastructure and commercial
construction projects.
The growth of our K&S Energy business, servicing the major petroleum providers,
has continued throughout the year. Chemical volumes also firmed in the latter half of
the year.
Our Western Australian resource business is still impacted by the reduced infrastructure
activity levels in the mining industry. We have experienced a recent increase in mining
sector related activity and northwest general freight volumes. Heavy haulage activity has
also increased.
The Port Kembla South32 coal volumes were materially lower than expected
predominantly consequent to mining related issues that occurred during the year.
These issues will continue into the first quarter of FY18.
The New Zealand business once again recorded strong growth in revenues and
increased profitability.
Our Lost Time Injury Frequency Rate (LTIFR) is eight (8). Our existing Comcare self
insurance licence was extended to June 2024.
managing director’s
Scott’s Transport Industries (STI) Merger
The merger of the Scott’s Transport Industries business with K&S Corporation on
30 January 2017 has progressed smoothly.
STI was one of Australia’s largest privately owned transport companies and had a
national footprint. It operated a general freight division and fuel cartage division, and had
a number of blue chip customers in the manufacturing, Fast Moving Consumer Goods
(FMCG) and fuel sectors.
The merger has enabled K&S to expand both its fuel cartage operations and provide
additional volume to its existing intermodal and contract logistics divisions.
Business Development
A record number of new customer contracts were signed by K&S during the year.
These contracts, which are now in the process of being implemented and operationally
bedded down, were across all market channels. They are highlighted by the new east
to west transport arrangements with Kimberly-Clark, a renewal of the Laminex business
and significant successes in the energy and chemical transport areas.
The integration of the former Scott’s Transport Industries business has also provided
new opportunities, particularly in the FMCG sector.
Energy and Chemicals
The Energy and Chemicals division of K&S was formed recently when the Energytrans
and Chemtrans businesses of Scott Corporation were integrated with the existing
K&S Energy business.
While the benefits of this consolidation are expected to become more apparent in later
years, the change has already realised potential growth by providing customers with a
broader service offering.
During the year, K&S Energy secured several new major contracts.
New services have been established to transport LPG and LNG in Western Australia
and transport fuel in Western Australia and South Australia.
Further energy opportunities are being sought in the Northern Territory as well as in
Queensland where coal developments in the Bowen Basin offer potential growth.
While the bulk transport of chemicals in Australia is a mature market, the transport and
warehousing of packaged products continues to provide strong opportunities that are
currently being pursued.
K&S Freighters realised stronger revenues, with increased intermodal volumes.
The integration of the STI general freight business into K&S Freighters in January this
year is now largely completed.
Importantly, this has provided new opportunities in the FMCG sector where STI had a
number of contracts with major customers.
SERVICE ALL THE WAY
Western Australia remains a difficult market, with the first half being especially challenging.
However, positive signs emerged late in the year with increased general freight and
heavy haulage activity.
The general freight business continues to be very competitive, but a continued focus on
service has enabled us to increase our market share.
Several new contracts were won within the Pilbara and Kimberley region.
The logging and woodchip haulage business in the south west of the state remains soft.
managing director’s
New Zealand
K&S was a major driver of the rapid escalation of intermodal services to the South
Island following the 2016 Kaikoura earthquake.
The major earthquake struck the northern end of the South Island in November 2016,
severing all rail services between Picton and Christchurch, and making the State Highway
impassable for an extended period.
Coastal shipping remains the only practical way to move goods from the North Island
to the South Island while repairs to rail and road infrastructure continue.
We are continuing to provide resources to further develop K&S’ intermodal services
in NZ.
Steel and timber volumes across New Zealand remained robust as the development of
new tourism infrastructure across NZ expands and the ongoing redevelopment of
Christchurch continues. K&S has also expanded warehousing capabilities for key clients.
During the year K&S was successful in expanding its steel cartage contract and has
extended existing contracts in the wood and dairy sectors.
The Company was re-accredited to the highest level under the Accident Compensation
Commission’s Workplace Safety Management Practices, and maintained NZ Transport
Authority certificate of fitness as a 5-star carrier.
A new Information Technology platform incorporating track and trace capabilities has
now been fully integrated and is delivering strong benefits to K&S and customers.
DTM recorded a solid performance during the financial year, gaining a number of new
contracts while maintaining existing agreements.
These new contracts were headed by Textor Technologies which involves the transport
of raw materials from wharf to Textor’s facility at Tullamarine for processing, and the
subsequent transport of goods to K&S at Truganina for warehousing, container packing
and export.
DTM was successful in consolidating and renewing its lubricants transport contracts
with Viva Energy Australia, and Caltex in Victoria and Western Australia. The contracts
are additional to work already undertaken for Viva and Caltex in Queensland, New
South Wales and South Australia, effectively giving us national coverage in this area.
CHEP storage volumes increased, especially in Victoria and New South Wales
throughout the year. CHEP transport volumes servicing regional Victoria and southern
New South Wales also increased.
The renewed transport contract with Air Liquide won last year has been fully embedded.
The merger with STI resulted in DTM acquiring contracts with Coca Cola in South
Australia and Big W in New South Wales.
DTM continues to seek diversification in its customer base and is actively exploring
alternative industries to those currently serviced.
K&S Fuels
The merger of STI into the business also significantly increased diesel sales through
K&S Fuels.
Diesel supply to the Limestone Coast fishing fleet remained strong, while retail volumes
in the South East of South Australia were steady.
Aero Refuellers was purchased by K&S in late 2015. It provides aviation refuelling
services and aviation fuel supply across regional New South Wales and Victoria with
customers including regional airports, bulk purchasers such as aerial agriculture
operators and flying schools, as well as the New South Wales, Victorian and South
Australian Governments for fire season aviation refuelling services.
Revenues this year were affected by a mild summer which resulted in lower than normal
demand for fire aviation refuelling services and aggressive market tactics by competitors
that reduced margins for jet fuel sales.
However, this was in part offset by stronger than normal aerial agricultural demand.
An upgrade of bowsers and facilities generally at our regional airports has largely been
completed, providing greater efficiencies for airport users.
managing director’s
Safety
Despite the challenges of integrating the operations of STI into K&S, the LTIFR for the
Group increased only slightly from the previous year.
Workplace drug and alcohol testing was further expanded.
While K&S Corporation’s self-insurance licence under the Australian Government’s
Safety Rehabilitation and Compensation Commission (Comcare) was extended by eight
years last year, significant changes to the regulatory model applying to self-insured
licensees were introduced on 1 July 2016.
These changes focus on licensee performance against set standards and measures in
the areas of Claims Management, Rehabilitation and Work Health and Safety.
New Licensee Key Performance Indicators were designed in part to better benchmark
against more relevant industry comparatives.
These changes mean K&S is now better able to compare its safety standards
performance against others in the Australian Road Freight sector.
K&S and self-insured licensees are currently in transition, moving into the new model,
refining the methodology, seeking improvements and consulting with key stakeholders.
An audit of the safety, rehabilitation and claims management systems using the national
self-insurer audit tools was successfully completed.
Environment
Further fleet upgrades have enabled K&S to continue its emission improvements.
During the year vehicle emissions reduction reached 67% of 2003 levels for NoX
(up from 65% last year) and 85% for particulate matter (up from 84% last year).
Despite an increased fleet, K&S was able to maintain its total carbon dioxide generation
at 162,000 tonnes, the same total as the previous year.
Compliance
K&S is working towards achieving ISO 9001:2015 accreditation, with new standards
expected to be in place by the second half of calendar year 2017.
The new ISO 9001 standards were introduced in 2015, providing organisations a
three-year transition period.
It comprises ten (10) sections compared with the previous version of eight (8), with
additional focus in the areas of leadership and risk-based thinking.
All other relevant accreditations were maintained, including WA Main Roads
accreditation, National Heavy Vehicle Accreditation Scheme (NHVAS), Mass,
Maintenance and Basic Fatigue Management, accreditation for Food Safety/HACCP
and TruckSafe accreditation.
In May this year, the Australian Logistics Council and the Australian Trucking Association
submitted joint notices of intention to the National Heavy Vehicle Regulator to develop
an industry-wide Master Code for heavy vehicle safety.
The Master Code will be developed by industry and designed to promote higher
standards for heavy vehicle safety for all road users.
K&S will be monitoring development in this area to ensure its systems are consistent
with any new Master Code.
Human Resources
The integration of STI staff into K&S has been a significant focus during the year.
The integration process has taken place smoothly with former STI transferees performing
roles within the K&S Group.
We have continued to focus on skills development and competency training, particularly
in the areas of safety and compliance.
This has been assisted by the development of a reward and recognition program
for safety, innovation and customer service achievements and innovations, which has
boosted employee engagement, aligned to our core values.
Other Items
The planned exit of a third party lease at Altona for Chemtrans will occur in September
2017 with completion of further development to accommodate the Victorian Chemtrans
operation at the Truganina site to be completed in the first half of FY18. Further Sydney
property rationalisation will be completed in early 2018.
In May 2017, K&S reached a settlement over claims arising from a fire that destroyed a
warehouse operated by DTM at Dandenong in Victoria in January 2007.
The full terms of the agreement are confidential; K&S contributed $1.5 million towards
the settlement. Under the terms of the agreement DTM makes no admission of liability.
I would like to take this opportunity to express my sincere thanks to all the
employees, and supporters of K&S, who set against tough market conditions, have
worked exceptionally hard to continue the improvement of our Company.
Paul Sarant
Managing Director and CEO
directors
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
Paul Sarant Managing Director
Age 70, Director since 1986
Age 49, Director since 2014
Tony Johnson BA, FAICD, LLB, LLM
(Companies & Securities), is a lawyer and
an accredited mediator. Mr Johnson
is a founder and former Chairman 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
• Audit Committee
Paul Sarant, Bachelor of Engineering (B.Eng.),
has extensive experience in the transport
and logistics sector. Mr Sarant held the
position of Executive General Manager
DTM for seven years at K&S Corporation
prior to his appointment as Managing
Director.
Before that, Mr Sarant occupied a range
of senior management roles, including
general management and senior logistics
roles, in the course of his fifteen years
at Amcor Printing Paper Group/PaperlinX
and former General Manager at Spicer
Stationery Group.
Member of:
• Environmental Committee
Legh Winser
Ray Smith
Age 69, Director since 2013
Age 70, Director since 2008
Legh Winser is a former Managing Director
of the Company, a position which he held
for 15 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 FCPA, FAICD, Dip Com,
is a Director of listed entity Cleanaway
Waste Management Ltd. He is also a
former Director of Warrnambool Cheese
and Butter Factory Company Holdings
Limited and Crowe Horwath Australasia
Ltd. Mr Smith is a director of Hy-Line
Australia Pty Ltd.
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)
• Nomination and Remuneration
Committee (Chairman)
Secretary
Chris Bright
BEc, LLB, Grad Dip CSPM, FCIS
Age 46, Secretary since 2005
Chris Bright has held the position of
General Counsel for 15 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.
five-year financial
($A Millions unless otherwise indicated) 2017 Variation 2016 2015 2014 2013
%
Group Revenue 755.2 9.6 688.8 699.2 586.2 564.6
Operating Profit before Individually
Significant Items, Interest and Tax 17.7 41.6 12.5 26.1 18.6 27.8
Underlying Profit Before Tax 10.9 101.9 5.4 - - -
Underlying Profit After Tax 8.0 105.1 3.9 - - -
Individually Significant Items 1.5 (98.7) 115.3 - - -
Statutory Operating Profit Before
Interest and Income Tax 16.2 115.7 (102.8) 26.1 18.6 27.8
Interest Expense 6.8 (4.2) 7.1 7.2 6.2 5.5
Statutory Profit Before Tax 9.4 108.5 (109.9) 18.8 12.4 22.3
Income Tax Expense 2.9 150.0 (5.7) 5.5 3.6 6.4
Statutory Operating Profit after Tax 6.5 106.2 (104.2) 13.3 8.9 15.9
Dividends per Share (cents) 3.5 133.3 1.5 7.0 6.0 11.0
Paid Up Capital 154.0 0.9 152.5 147.7 145.4 101.2
Shareholders Funds 205.4 3.0 199.4 294.6 287.3 239.6
Total Assets 488.7 9.8 445.0 536.3 540.6 403.7
Net Tangible Assets
(book value) per Share $1.63 2.5 $1.59 $1.73 $1.69 $1.85
directors’
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 2017 and the Auditor’s Report thereon.
Principal Activities
The principal activities of the consolidated entity during the course of the financial
year were transport and logistics, contract management, warehousing and distribution,
and fuel distribution.
There were no significant changes in the nature of the activities of the consolidated
entity during the year.
Operating and Financial Review
The Board presents the 2017 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 the 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 2016.
Financial Overview 2017 2016 % Movement
Operating revenue $m 755.2 688.8 9.6
Operating (loss)/profit after tax $m 6.5 (104.2) 106.2
Underlying profit before tax, excluding significant items 1 $m 10.9 5.4 101.9
Underlying profit after tax, excluding significant items $m 8.0 3.9 105.1
Net borrowings $m 109.2 106.9 2.2
Shareholders’ funds $m 205.4 199.4 3.0
Earnings per share (basic) cents 5.4 (87.0) 106.2
Earnings per share based on underlying profit after tax cents 6.6 3.2 106.3
Dividends per share cents 3.5 1.5 133.3
Net tangible assets per share $ 1.63 1.59 2.5
Cash flow per share $ 0.40 0.34 17.6
Return on Shareholders’ funds % 4.6 (52.0) 108.8
Gearing % 34.7 34.9 (0.6)
Operating revenue for the year was $755.2 million, an increase of 9.6% on the previous
corresponding period.
1 Underlying profits and earnings per share based on underlying profits 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 legal settlement of the long standing
DTM Warehouse Fire claim. 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 not been subject to review by the auditor.
directors’
Operating and Financial Review
Reconciliation of statutory profit before tax to underlying profit before tax for the year
ended 30 June 2017:
$m
Statutory profit before tax 9.4
Legal Settlement 1.5
Underlying profit before tax 10.9
Reconciliation of statutory loss before tax to underlying profit before tax, for the year
ended 30 June 2016:
$m
Statutory loss before tax (109.9)
Impairment of intangibles 86.6
Impairment of physical assets 16.9
Impairment of receivables (Arrium) 11.8
Underlying profit before tax 5.4
Our underlying profit after tax was $8.0 million, 105.1% higher than the
corresponding period.
We have recorded a statutory after tax profit of $6.5 million for the year ended 30 June
2017. The statutory profit before tax was $9.4 million.
We achieved an underlying profit before tax of $10.9 million, an increase on the previous
corresponding period of 101.9%.
Operating cashflow for the year was $49.4 million.
Our Lost Time Injury Frequency Rate is 8. Our existing Comcare self insurance licence
extends to June 2024.
K&S is recognised as a leader in the development and provision of specialist logistics
solutions for customers. The Group operates in the Australian and New Zealand
markets. Its success is underpinned by a strong focus on safety, service and
continuous improvement.
This year has been a challenging one but also a successful year with our financial
performance improving.
A pleasing aspect of the year has been the improved performance of many business
units; our intermodal, contract logistics and New Zealand businesses benefited from
higher volumes.
Our K&S Energy business achieved significant growth, through awarding of major new
contracts in Western Australia and South Australia.
Our Western Australian resource business continues to be impacted by the reduced
infrastructure activity levels in the mining industry. We anticipate improved activity
levels in the new financial year due to mine depletion and increased commodity prices.
In late January, we merged with Scott’s Transport Industries via the transfer of
certain assets of STI into K&S Freighters. The integration process is advanced and is
progressing well.
In May 2017, we settled a legal matter relating to a DTM warehouse fire which occurred
in January 2007. The settlement value was $1.5 million.
Also pleasing is the recent announcement that London-based GFG Alliance has
agreed to purchase the Arrium group of companies, with Administrators advising that
a dividend will be paid to Creditors in September 2017 subject to the sale process
being completed on 31 August 2017. The size of the dividend is unknown at this time.
Cost reduction strategies have continued to be implemented across the business.
These include property lease cost reductions, the rationalisation and replacement of
specified fleet, employee reductions, and IT solutions being developed and introduced
to support customer service, operational efficiencies and cost reduction initiatives.
Imports are still impacting the demand for locally manufactured goods, which
consequently decreases demand for long haul transport services. Our capital
expenditure program has been targeted to support new business growth, improve
productivity and reduce cost in our existing business.
During the course of the year, we acquired fleet totaling $59.0 million. Funding of
this equipment was $47.0 million via hire purchase agreements and the balance of
$12.0 million was settled from our cash balance.
Our net asset position increased by 3.0% to $205.4 million. The Foreign Currency
Reserve decreased in value by $0.03 million during the year. The profit after tax of
$6.5 million for FY17 was offset by dividends paid of $1.8 million (Final FY17 and
Interim FY17). Under the Dividend Reinvestment Plan $1.4 million of new shares were
issued in FY17.
Dividend
The Directors have declared a final dividend of 2.0 cents per share (last year no final
dividend was declared). This follows the interim dividend of 1.5 cents per share paid
in April 2017, making a total dividend of 3.5 cents per share for FY17. This represents
an annualised yield of 3.5%.
Outlook
Providing earnings guidance going forward remains a difficult task.
We are well placed with a sound balance sheet and secure customer contracts.
Opportunities for potential acquisitions will also be closely evaluated within
strategic guidelines.
directors’
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 30 January 2017, K&S Corporation Limited merged with the business of Scott’s
Transport Industries Pty Ltd (STI) via the transfer of certain assets into K&S Corporation’s
subsidiary K&S Freighters Pty Ltd. STI operates a general freight and fuel cartage
division, having several blue chip customers within the manufacturing, Fast Moving
Consumer Goods and fuel sectors. K&S Corporation views this as an excellent
opportunity to further expand its K&S Energy division through increased fuel cartage
operations and provide additional volume and competitiveness in its existing intermodal
and contract logistics divisions.
Environmental Regulation and Performance
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 Energy Reporting regime (NGER) was
completed and submitted in 2016/17.
Transport and Warehousing
The transport and warehousing business is subject to the Dangerous Goods Acts in
Commonwealth and State Legislation. The consolidated entity monitors performance
and recorded 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
operations 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.
Dividends
Dividends paid or declared by the Company to members since the end of the previous
financial year were:
1 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 2016 was declared on
23 August 2016 and paid on 2 November 2016;
2 An interim fully franked ordinary dividend (taxed to 30%) of 1.5 cents per share in
respect of the year ended 30 June 2017 was declared on 21 February 2017 and
paid on 4 April 2017 amounting to $1,818,020.
The final dividend declared by the Directors of the Company on 21 August 2017 and
payable on 2 November 2017 in respect of the year ended 30 June 2017 comprises:
1 A fully franked ordinary dividend (taxed to 30%) of 2.0 cents per share amounting to
$2,424,027 (based on the Company’s current total issued share capital); and
2 A fully franked preference dividend (taxed to 30%) of 4.0 cents per share amounting
to $4,800.
The preference share dividends are included as interest expense in determining
Net Profit.
Dividends paid to Shareholders
4.5
6.5
3.0
3.0
3.5
3.5
1.5
2.0
1.5
Events Subsequent to Balance Date
In the interval between the end of the financial year and the date of this report no items,
transactions or events of a material and unusual nature are likely, in the opinion of
the Directors of the Company, to affect significantly the operations of the consolidated
entity, the results of those operations, or the state of affairs of the consolidated entity
in future financial years.
It is anticipated that the consolidated entity will continue to expand transport and
logistics operations during the next financial year by further extending its services
throughout Australia and adopting the latest technology in the industry to contain
costs and enhance the services offered to customers.
directors’
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 the date of this report are:
Tony Johnson Chairman
Paul Sarant Managing Director
Legh Winser
Ray Smith
Secretary – Chris Bright
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 12-13 of the Annual Report.
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 at the date of this report is:
Ordinary Shares
Mr L Winser 41,006
Mr P Sarant 60,000
Directors of the Company have relevant interests in additional shares as follows:
Ordinary Shares
Mr T Johnson 515,984
Mr L Winser 1,176,887
Mr R Smith 42,011
Mr P Sarant 126,603
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
Audit Committee
Meetings
Nomination and
Remuneration
Committee Meetings
Environmental Committee
Meetings
No. attended No. held No. attended No. held No. attended No. held No. attended No. held
Mr T Johnson 11 11 4 4 1 1 4 4
Mr R Smith 11 11 4 4 1 1 - -
Mr P Sarant 11 11 - - - - 4 4
Mr L Winser 11 11 - - 1 1 4 4
In addition to the 11 regular meetings there were a further three Directors’ meetings
held outside the normal monthly board meeting cycle. These were attended by all
members of the Board.
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 $117,539 in respect of Directors’ and Officers’ Liability insurance contracts for
current and former officers, including Directors, Executive Officers and the Secretaries
of the Company and its controlled entities.
The insurance premiums relate to:
• 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, L Winser, R Smith and 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 circumstances 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.
directors’
Tax Consolidation
Effective 1 July 2002, for the purposes of income taxation, K&S Corporation Limited
and its domestic based 100% owned subsidiaries formed a tax consolidated group.
Members of the Group entered into a tax sharing arrangement in order to allocate
income tax expense to the wholly owned subsidiaries on a pro-rata basis. In addition,
the agreement provides for the allocation of income tax liabilities between the entities
should the head entity default on its tax payment obligations.
Corporate Governance
In recognising the need for the highest standards of corporate behaviour and
accountability, the Directors of K&S Corporation Limited support the principles of
corporate governance. The Company’s Corporate Governance Statement
commences on page 33 of the Annual Report.
Rounding Off
The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/
Directors’ Reports) Instrument 2016/191 dated 24 March 2016 and in accordance with
that legislative instrument, 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 97 of this report.
Non-Audit Services
The following non-audit services were provided by the entity’s Auditor, Ernst & Young.
The Directors are satisfied that the provision of non-audit services is compatible with
the general standard of independence for auditors imposed by the Corporations Act.
The nature and scope of each type of non-audit service provided means that auditor
independence was not compromised.
Ernst & Young received or are due to receive the following amounts for the provision of
non-audit services:
Taxation software implementation $14,911
remuneration
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 R Smith Non-Executive
Mr L Winser Non-Executive
Mr P Sarant Managing Director
ii) Executives
Mr B Walsh Chief Financial Officer
Mr C Bright General Counsel & Company Secretary
Mr S Hine Executive General Manager Business Development
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.
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
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.
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 2016/17. Each Non-Executive Director receives a fee for
being a Director of the Company.
The fees payable to Non-Executive Directors in the 2016/17 financial year were not
increased and remained at the level paid in the second half of the 2015/16 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 2017 is
detailed on page 30 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 performance of the Company; and
• ensure total remuneration is competitive by market standards.
Structure
In determining the level and make up of Executive remuneration, the Nomination and
Remuneration Committee seeks external information detailing market levels of
comparable executive roles from which the Committee makes its recommendation to
the Board.
For the Managing Director and the other Senior Executives, remuneration programs are
balanced with a mix of fixed and variable rewards. The makeup and eligibility criteria for
short term incentives are approved by the Board prior to the commencement of each
financial year.
For the year ended 30 June 2017, the adoption of at risk short term incentives of up
to 20% of the base emolument of the Managing Director and Executives 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 2016/17 financial year was
conditional 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 short term incentive scheme is self funding (ie, amounts accrued
to fund the payment of any short term incentives will be expensed in the Company’s
normalised net profit after tax) and no incentives were payable unless at least 100.5%
of the Company’s budgeted net profit after tax on a normalised basis for the 2016/17
financial year was achieved.
The total short term incentives payable to the Managing Director and Executives for the
year ended 30 June 2017 if eligibility criteria were met was $67,522, up to a maximum
of $675,220 if all outperformance criteria were met.
The short term incentives available to the Managing Director and the Executives as a
percentage of their base salary were based on the following scale of outperformance
to budgeted profit after tax on a normalised basis:
PERFORMANCE TARGET
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