More annual reports from K&S Corporation Limited:
2023 ReportK&S CORPORATION LIMITED
annual report
Financial Calendar
Annual General Meeting Tuesday, November 27, 2018
Half-year Result and
Interim Dividend Announcement Tuesday, February 26, 2019
Full-year Result and Final
Dividend Announcement Tuesday, August 27, 2019
Annual Report to Shareholders Wednesday, October 8, 2019
Annual General Meeting Tuesday, November 26, 2019
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Contents Page
Highlights 1
Chairman’s Overview 2
Financial Overview 3
Managing Director’s Report 4
Board of Directors 10
Five-Year Financial History 12
Directors’ Report 13
Remuneration Report 20
Corporate Governance 29
Financial Report 43
Corporate Directory 96
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highlights
2018
T O B E T H E L E A D I N G P R O V I D E R O F T R A N S P O R T
A N D L O G I S T I C S O L U T I O N S W I T H I N O U R TA R G E T
M A R K E T S I N A U S T R A L I A A N D N E W Z E A L A N D
• Revenue reaches $854 million
• Improved performance by contract logistics in
Australia and New Zealand
• New Energy contract with Caltex Australia
servicing the Bowen Basin
• Property rationalisation in Melbourne and Sydney
• Stage 3 of Truganina development completed
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chairman’s
overview
On behalf of the Board of K&S Corporation, I am
pleased to present the Company’s Annual Report.
Ongoing cost reduction initiatives have continued to have
a positive impact on our results.
The year has been demanding and challenging on many
levels. Operating revenues increased by 13.2% to $854.6
million. We achieved a statutory profit before tax of $24.6
million, an increase on the previous corresponding period
of 161.7%. Underlying profit before tax was $11.0 million,
an increase on the previous corresponding period of 1.8%.
The underlying profit after tax was $7.7 million, an increase
on the previous corresponding period of 2.0%.
Included in our statutory result was a $16.1 million receivable
relating to compensation arising out of the closure of
Aurizon’s intermodal business in December 2017. K&S’
claim has not yet been resolved. K&S is confident that it will
recover at least $16.1 million. Statutory profit also included
$1.4 million, in returns to creditors, paid by the administrators
of Arrium following completion of the sale of Arrium to the
Liberty Group.
Operating cashflow for the year was $40.8 million which
was 17.4% lower than the prior year. The major variation
being Liberty OneSteel reverting to their pre-Administration
payment terms following completion of the sale of Arrium
to the Liberty Group.
During the year we were successful in recovering $1.3 million
of fuel tax credits that related to the period from 1 July 2014
to 30 June 2017.
In Western Australia we were awarded a contract for
Roy Hill. Activity levels are expected to improve following
the recent announcement of new mine developments.
Trading margins in Western Australia remain under pressure
from high levels of competition.
South32 coal volumes have continued to fluctuate around
lower than historical levels as a consequence of on-going
mine issues experienced at the Appin colliery. We anticipate
that South32 coal volumes will increase in FY19.
The chemical transport division, Chemtrans, also realised
lower returns as a result of reduced market demand.
Both the DTM and New Zealand businesses, which are
predominantly aligned to contract logistics, have continued to
realise steady improvement with volumes and performance.
Despite reduced agricultural demand the specialist
aviation refueling business Aero Refuellers has performed
well realising further improvement. Similarly our fuel trading
business, K&S Agencies, has continued to expand and
realise soild financial results.
We continue to concentrate on cost reduction strategies,
property rationalisation and operational efficiencies.
During the course of the year, we acquired fixed assets
totaling $70.2 million. Funding of this equipment was
$46.9 million via hire purchase agreements and the
balance of $23.3 million was settled from our cash balance.
Safety
Safety remains a key focus for K&S. Our lost time injury
frequency rate has remained steady at 9.0. Our lost time
injury frequency rate in New Zealand has remained at 7.0,
consistent with the previous year.
Dividends
The Directors have declared a fully franked final dividend of
2.0 cents per share (2017 2.0 cents per share). This follows
the interim dividend of 2.0 cents per share paid in April 2018,
making a total dividend of 4.0 cents per share for FY18.
The final dividend will be paid on 2 November 2018, with the
date for determining entitlements being 19 October 2018.
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 2018. The last election date
for participation in the DRP is 22 October 2018.
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 2018 (the record date of the final dividend) less
a discount of 2.5%.
In May we appointed Graham Walters AM FCA to the
Board. Mr. Walters is a former Chairman of Partners South
Australia of KPMG and a former Chairman of Westpac
South Australia. He brings with him a wealth of experience
from his professional background and from acting as a
director and financial advisor to numerous public, private
and government entities.
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 difficult times.
Tony Johnson
Chairman
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financial
overview
2018 2017 % change
OPERATING REVENUE
Revenue $m 854.6 755.2 13.2
Operating profit before interest, tax and depreciation $m 74.0 55.3 33.8
Operating profit before interest and tax $m 31.6 16.2 95.1
$586.2m
$699.2m
$688.8m
$854.6m
$755.2m
Statutory profit before tax 1 $m 24.6 9.4 161.7
Less non-recurring legal settlement 2 $m (10.9) 1.5 (826.7)
Less Arrium recovery $m (1.4) 0.0 -
Less prior year cost recovery of Fuel Tax $m (1.3) 0.0 -
2014
2015
2016
2017
2018
Statutory profit after tax $m 17.1 6.5 163.1
Underlying profit before tax $m 11.0 10.8 1.8
OPERATING CASH FLOW
Underlying profit before interest and tax $m 18.0 17.7 2.0
$47.3m
$48.1m
$49.4m
Underlying profit before interest, tax and depreciation $m 60.4 56.8 6.3
$41.1m
$40.8m
Normalised operating profit after tax $m 7.7 7.5 2.0
Total assets $m 553.4 488.7 13.2
Net borrowings $m 130.0 109.2 19.0
Shareholders’ funds $m 220.9 205.4 7.5
2014
2015
2016
2017
2018
Depreciation and amortisation $m 42.4 39.1 8.4
Dividends per share cents 4.0 3.5 14.3
Net tangible assets per share $ 1.72 1.63 5.5
$287.2m
$294.6m
Operating cash flow 3 $m 40.8 49.4 (17.4)
SHAREHOLDERS’ FUNDS
Return on assets % 1.4 1.5 (6.7)
Gearing % 37.0 34.7 6.6
Employee numbers 2,814 2,345 20.0
Lost time injuries 55.0 32.0 71.9
Lost time injuries frequency rate 9.0 7.0 28.6
1 Includes $16.1m Aurizon settlement
2 Relates to the Aurizon claim after deducting the net profit and loss impact relating to FY18
3 Includes Liberty OneSteel reverting to their pre administration payment terms
$199.4m
$205.4m $220.9m
2014
2015
2016
2017
2018
GEARING
25.2%
25.0%
34.9%
34.7%
37.0%
2014
2015
2016
2017
2018
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managing director’s
REPORT
Operating revenues for the year increased by 13.2% to
$854.6 million.
We achieved an underlying profit before tax of $11 million,
an increase on the previous corresponding period of 1.8%.
Our Western Australian Heavy Haulage business is showing
signs of recovery. Southern timber volumes softened.
Port Kembla South32 coal volumes were lower than
expected, with ongoing mining related issues restricting
production.
Fuel transport has continued to increase with solid growth
experienced during the year.
New Zealand performed strongly across the key industry
segments of steel, dairy and timber.
The Lost Time Injury Frequency Rate (LTIFR) across the K&S
Group increased to nine (9).
Energy and Chemicals
Activity in K&S Energy increased in FY18, while Chemtrans
experienced challenging trading conditions.
The consolidation of the Chemtrans Victoria operations into
a new purpose-built facility at Truganina during the year was
completed. The new facility provides for Dangerous Goods
isotainer storage.
This development has been well received by customers and
offers K&S the opportunity to expand its’ service offering.
Sydney Chemtrans and K&S Energy relocated to the K&S
Enfield facility.
Fleet upgrades to improve operating efficiencies have
continued to be progressed with the addition of several new
23 metre fuel tankers, with steerable axles providing greater
manoeuvrability and allowing easier access to smaller sites
with greater payloads.
The Energy business was boosted by new fuel distribution
contracts in Darwin, Mackay and Carrapatenna.
K&S Freighters rail transport operations were impacted
during the busy December-January period when rail
provider Aurizon withdrew its services, closing its intermodal
business, less than 18 months after entering into a five-year
exclusive agreement.
This resulted in new arrangements being urgently negotiated
with Pacific National during the busy Christmas-New Year
period.
While some initial disruptions were experienced, by
March this year capacity across the network had reached
satisfactory levels.
The K&S Freighters road fleet continued to be upgraded,
with further new Scania prime movers added.
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Western Australia
Operations in Western Australia remain challenging although
the State’s mining sector is set to pick up.
K&S secured a major general freight contract for the Roy Hill
iron ore project in the Pilbara. The rebuild of the seawall
at Koolan Island for Mt Gibson Iron has resulted in increased
transportation of construction material during the second
half of the year.
Heavy Haulage is experiencing growth as mining companies
and vendors upgrade and refurbish specialist machinery
at mine sites. Increased lithium mining activity has also
provided new opportunities.
General freight operations were boosted by increased
volumes between Perth and Darwin. However, trading
margins remain under pressure.
Consequent to reduced market activity K&S South West
has down-sized its raw timber transport operations.
Waste transport performed well with extensions to existing
contracts being awarded.
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managing director’s
REPORT
New Zealand
New Zealand performed strongly, with new contracts
encompasssing the key industry segments of steel, dairy
and timber.
Steel cartage was strong increasing by 26%, resulting in
additional specialist vehicles being added to the fleet to
satisfy the higher volume.
Warehousing contracts for key customers were extended
by an additional three years.
Increased woodchip revenue was realised with new
agreements executed and existing contracts extended.
During the year, K&S continued to increase Intermodal
services to the South Island.
The Company retained Accident Compensation
Commission’s Workplace Safety Management Practices
accreditation and maintained NZ Transport Authority
certificate of fitness as a 5-star carrier.
The truck replacement program has continued with the
K&S Fleet now having an average age of 4.2 years.
An expansion into the agricultural sector highlighted a solid
year of activity for DTM.
Work commenced in April on a new contract with Ingham’s
Enterprises in Victoria for the transport of poultry from
Victorian farms to the processing plant in Somerville.
A separate contract to transport poultry feed from the new
Ingham’s feed mill at Murray Bridge to poultry farms across
South Australia has also been secured with first deliveries
scheduled in October 2018.
DTM also won a contract with Saputo to transport cheese
and protein powder between Cobram and Melbourne.
Warehousing activity in Victoria remained steady.
New warehousing work was also won in New South Wales
at the Enfield facility.
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K&S Fuels
In September 2017, K&S Fuels acquired the Caltex South
East business and relocated from the Mount Gambier
Margaret Street facility to the larger Graham Road depot.
Additional truck stops on Jubilee Highway West, Graham
Road and Dartmoor have been added to the network.
Diesel sales to the dairy, beef, fat lamb, vineyards and
fishing sectors all increased, while retail business improved.
Aero Refuellers revenues were impacted by hot, dry
conditions in regional New South Wales.
The near drought conditions in some locations resulted in
reduced general agricultural aviation work, such as crop
dusting and fertilising.
However, this was more than offset by increased
demand for refuelling services for helicopters and aircraft
fighting bushfires throughout the extended 2017-18 fire
season, particularly in north east Victoria and throughout
New South Wales.
Additional refuelling tankers will be added to the
Aero Refuellers fleet before the 2018-19 fire season.
managing director’s
REPORT
Safety
Preparation for the introduction of the Heavy Vehicle
National Laws which come into effect on 1 October 2018
has been a major focus during 2017-18.
The HVNL expands the chain of responsibility to all
parties involved in the transport of goods and deals with
mass/dimension/load restraint, fatigue, speed and
vehicle standards.
As part of its’ preparation, K&S hosted workshops for
customers to provide and update them on new laws and the
impact within supply chain participants. The workshops, in
Sydney and Melbourne, attracted around 150 representatives
of major clients and were held in conjunction with law
firm Corrs Chambers Westgarth and risk management
firm RiskCom.
K&S has also played a role in the National Heavy Vehicle
Regulator’s Safety Industry Operations Group and assisted
with input in development of an industry master code of
practice for heavy vehicle safety to underpin Heavy Vehicle
National Law.
The Lost Time Injury Frequency Rate (LTIFR) across the
K&S Group increased to nine (9).
Workplace drug and alcohol testing was further expanded.
During the past two years, drug and alcohol testing across
the Group has increased by almost 100%.
An audit of the safety, rehabilitation and claims
management system using the national self-insurer
audit tools was completed.
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Carbon dioxide generation for 2016-17 was 190,000 tonnes,
up from 162,000 tonnes the previous year. However, the
latest figures incorporate the merger of Scott’s Transport
Industries on 30 January 2017.
Environment
Compliance
Ongoing fleet upgrades have enabled K&S to continue its
emission improvements.
K&S successfully achieved ISO 9001:2015 accreditation
standards during the year.
During the year vehicle emissions reduction reached 71% of
2003 levels for NOx, up from 67%, and 88% for particulate
matter compared with 86% last year.
All other relevant accreditations were maintained, including
WA Main Roads, NHVAS Mass, Maintenance and Basic
Fatigue Management, accreditation for Food Safety/HACCP
and TruckSafe accreditation.
Human Resources
A program recognising employee achievements aligned
to our core values of Safety, Customer Service Excellence,
Cost Saving Initiatives, Our Community Involvement
and Milestones has been expanded and is being actively
promoted across the business.
The development of flexible employment contracts for
drivers and completing the integration of Scott’s Transport
Industries into K&S were key activities during the year.
The new flexible contracts move away from traditional
enterprise agreements and introduce rolling rosters that
better meet the 24/7 requirements of customers,
particularly in the fuels and chemicals businesses.
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Other Items
The exit of two externally leased properties was completed
during the year. The construction of a new purpose built
Chemtrans Victoria facility at our Truganina site was
completed In April. In Sydney the Chemtrans operations were
relocated to our Enfield site in February, with development
works planned to be completed in the short term.
I would like to take this opportunity to thank all employees
and supporters of K&S, who have collectively worked
exceptionally hard to continue to improve our Company.
Paul Sarant
Managing Director and CEO
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board of
DIRECTORS
Tony Johnson Chairman
Paul Sarant Managing Director
Legh Winser
Age 71, Director since 1986
Age 50, Director since 2014
Age 70, Director since 2013
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
Deputy Chairman 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.
Legh Winser is a former Managing
Director of the Company, a position
which he held for 16 years.
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 was former
General Manager at Spicer Stationery
Group.
Member of:
• Environmental Committee
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
Graham Walters AM
Age 71, Director since 2008
Age 76, Director since 22nd May 2018
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)
Graham Walters AM FCA is an
experienced chartered accountant
and director of successful public
and private companies and
associations, with extensive experience
in accounting, finance, audit, risk
management and corporate
governance. Mr Walters is a former
Chairman of Partners South Australia
of KPMG and a former Chairman of
Westpac South Australia.
Mr Walters is a Director of Adelaide
Community Healthcare Alliance,
Amtrade International Pty Ltd and
Adelaide Development Company Ltd.
• Nomination and Remuneration
Committee (Chairman)
Member of:
• Audit Committee
Secretary
Chris Bright
BEc, LLB, Grad Dip CSPM, FCIS
Age 47, Secretary since 2005
Chris Bright has held the position of
General Counsel for 16 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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five-year financial
HISTORY
($A Millions unless otherwise indicated) 2018 Variation % 2017 2016 2015 2014
Group Revenue 854.6 13.2 755.2 688.8 699.2 586.2
Operating Profit before Individually
Significant Items, Interest and Tax 31.6 78.5 17.7 12.5 26.1 18.6
Underlying Profit Before Tax 11.0 1.8 10.8 5.4 - -
Underlying Profit After Tax 7.7 2.0 7.5 3.9 - -
Individually Significant Items 16.1 973.3 1.5 115.3 - -
Statutory Operating Profit Before
Interest and Income Tax 31.6 95.1 16.2 (102.8) 26.1 18.6
Interest Expense 7.1 4.4 6.8 7.1 7.2 6.2
Statutory Profit Before Tax 24.6 161.7 9.4 (109.9) 18.8 12.4
Income Tax Expense 7.5 158.6 2.9 (5.7) 5.5 3.6
Statutory Operating Profit after Tax 17.1 163.1 6.5 (104.2) 13.3 8.9
Dividends per Share (cents) 4.0 14.3 3.5 1.5 7.0 6.0
Paid Up Capital 158.0 2.6 154.0 152.5 147.7 145.4
Shareholders Funds 220.9 7.5 205.4 199.4 294.6 287.3
Total Assets 553.4 13.2 488.7 445.0 536.3 540.6
Net Tangible Assets
(book value) per Share $1.72 5.5 $1.63 $1.59 $1.73 $1.69
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directors’
REPORT
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 2018 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 2018 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 2017.
Financial Overview 2018 2017 % Movement
Revenue $m 854.6 755.2 13.2
Operating profit before interest, tax and depreciation $m 74.0 55.3 33.8
Operating profit before interest and tax $m 31.6 16.2 95.1
Statutory profit before tax $m 24.6 9.4 161.7
Statutory profit after tax $m 17.1 6.5 163.1
Less non-recurring Legal Settlement $m (10.9) 1.5 (826.7)
Less Arrium Recovery $m (1.4) -
Less Prior Year Cost Recovery of Fuel Tax $m (1.3) -
Underlying profit before interest, tax and depreciation 1 $m 60.4 56.8 6.3
Underlying profit before interest and tax 1 $m 18.0 17.7 2.0
Underlying profit before tax 1 $m 11.0 10.8 1.8
Underlying Operating profit after tax 1 $m 7.7 7.5 2.0
Total Assets $m 553.4 488.7 13.2
Net borrowings $m 130.0 109.2 19.0
Shareholders’ funds $m 220.9 205.4 7.5
Depreciation & amortisation $m 42.4 39.1 8.4
Dividend per share cents 4.0 3.5 14.3
Net tangible assets per share $ 1.72 1.63 5.5
Operating cash flow $m 40.8 49.4 (17.4)
Return on assets
% 1.4 1.5 (6.7)
Gearing
% 37.0 34.7 6.6
Employee numbers 2,814 2,345 20.0
Lost time injuries 55.0 32.0 71.9
Lost time injuries frequency rate 9.0 7.0 28.6
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 the Aurizon settlement and Arrium recovery and restructure costs. 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 audit or review by the auditor.
directors’
REPORT
K&S is a mid-sized logistics company, 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. The Group’s success
is underpinned by a strong focus on safety, service and
continuous improvement.
The year has been demanding and challenging.
Operating revenues increased by 13.2% to $854.6 million.
We achieved a statutory profit before tax of $24.6 million, an
increase on the previous corresponding period of 161.7%.
Underlying profit before tax was $11.0 million, an increase
on the previous corresponding period of 1.8%.
The underlying profit after tax was $7.7 million, an increase
on the previous corresponding period of 2.0%.
Included in our statutory resuilt was a $16.1 million receivable
relating to compensation arising out of the closure of
Aurizon’s intermodal business in December 2017. K&S’
claim has not yet been resolved. K&S is confident that it
will recover at least $16.1 million.
Statutory profit also included $1.4 million, in returns to
creditors, paid by the administrators of Arrium following
completion of the sale of Arrium to the Liberty Group.
Operating cashflow for the year was $40.8 million which
was 17.4% lower than the prior year. The major variation
being Liberty OneSteel reverting to their pre-Administration
payment terms following completion of the sale of Arrium
to the Liberty Group.
During the year we were successful in recovering $1.3 million
of fuel tax credits that related to the period 1 July 2014 and
30 June 2017.
Market activity in the Western Australian resource business
has started to gain momentum in the second half of the year.
In addition, we were also awarded a contract for Roy Hill.
Activity levels are expected to continue to improve following
the recent announcement of new mine developments.
Trading margins remain under pressure from high levels
of competition.
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South32 coal volumes have continued to fluctuate around
lower than historical levels as a consequence of on-going
mine issues experienced at the Appin colliery. We anticipate
that South32 coal volumes will increase in FY19,
The chemical transport division, Chemtrans, also realised
lower returns as a result of reduced market demmand.
Both the DTM and New Zealand businesses, which are
predominantly aligned to contract logistics, have continued to
realise steady improvement with volumes and performance.
Despite reduced agricultural demand the specialist aviation
refueling business Aero Refuellers has performed well
realising further improvement. Similarly our fuel trading
business, K&S Agencies, has continued to expand and
realise solid financial results.
We continue to concentrate on cost reduction strategies,
property rationalisation and operational efficiencies. Ongoing
cost reduction initiatives have continued to have a positive
impact on our results.
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The final dividend will be paid on 2 November 2018, with the
date for determining entitlements being
19 October 2018.
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 2018. The last election date
for participation in the DRP is 22 October 2018.
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 2018 (the record date of the final dividend) less
a discount of 2.5%.
Outlook
Providing earnings guidance going forward remains a
difficult task.
While debt levels increased in FY18, we have maintained a
sound balance sheet.
We will continue to focus on organic growth, particularly
in market segments that will deliver stronger returns on
investment.
Opportunities for potential acquisitions will also be closely
evaluated within strategic guidelines.
Significant Changes in the State of Affairs
There were no significant changes in the state of affairs of
the consolidated entity during the financial year.
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.
During the course of the year, we acquired fixed assets
totaling $70.2 million. Funding of this equipment was
$46.9 million via hire purchase agreements and the balance
of $23.3 million was settled from our cash balance.
Our net asset position increased by 7.5% to $220.9 million.
The Foreign Currency Reserve decreased in value by $0.67
million during the year. The profit after tax of $17.1 million for
FY18 was offset by dividends paid of $4.9 million (Final FY17
and Interim FY18). Under the Dividend Reinvestment Plan
$4.1 million of new shares were issued in FY18.
Safety
Safety remains a key focus for K&S. Our lost time injury
frequency rate increased to nine (9). Our lost time
injury frequency rate in New Zealand has remained at 7.0,
consistent with the previous year.
Dividend
The Directors have declared a fully franked final dividend
of 2.0 cents per share (2017: 2.0 cents per share).
This follows the interim dividend of 2.0 cents per share paid
in April 2018, making a total dividend of 4.0 cents per share
for FY18.
directors’
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Climate Change
Reporting under the National Greenhouse Energy Reporting
regime (NGER) was completed and submitted in 2017/18.
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.
1 A fully franked ordinary dividend (taxed to 30%) of
2.0 cents per share amounting to $2,490,578 (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
3.0
3.0
3.5
3.5
2.0
1.5
2.0
2.0
1.5
Dividends
Events Subsequent to Balance Date
The final dividend declared by the Directors of the Company.
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 2017 was declared on
21 August 2017 and paid on 2 November 2017;
2 An interim fully franked ordinary dividend (taxed to 30%)
of 2.0 cents per share in respect of the year ended
30 June 2018 was declared on 20 February 2018 and
paid on 4 April 2018 amounting to $2,465,132.
The final dividend declared by the Directors of the Company
on 23 August 2018 and payable on 2 November 2018 in
respect of the year ended 30 June 2018 comprises:
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.
Currently negotiations are continuing with our former rail
provider, Aurizon, for the resolution of claims made against
it by K&S in regards to the closure of Aurizon’s intermodal
business.
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.
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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
Graham Walters AM
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 10-11 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 41,984
Mr P Sarant 60,000
Directors of the Company have relevant interests in additional
shares as follows:
Ordinary Shares
Mr T Johnson 522,232
Mr L Winser 1,204,958
Mr R Smith 43,013
Mr P Sarant 126,603
directors’
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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 10 11 4 4 1 1 3 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
Mr G Walters * 2 11 1 4 - - - -
* Mr Walters was appointed a director on 22 May 2018.
In addition to the 11 regular meetings there was one additional directors’ meeting held outside the normal monthly
board meeting cycle. This was attended by all members of the board (excluding Mr Walters who was not a director at the
relevant time).
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 $117,747 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,
G Walters 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.
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Rounding
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.
Tax Consolidation
Auditor Independence and
Non-Audit Services
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 29 of the Annual Report.
The entity’s Auditor, Ernst & Young have provided the
economic entity with an Auditor’s Independence Declaration
which is on page 90 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:
AASB 15 / 16 Technical workshop $6,500
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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 R Smith Non-Executive
Mr L Winser Non-Executive
Mr G Walters Non-Executive (appointed 22 May 2018)
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.
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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
2017/18. Each Non-Executive Director receives a fee for
being a Director of the Company.
Any increase to the fees payable to Non-Executive Directors
in the 2017/18 financial year was deferred to 1 January 2018,
at which time those fees were increased by 3%.
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 2018 is detailed on page 25 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.
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. No advice was taken from
external recruitment consultants in relation to the fees paid
for Executive Director and Senior Manager remuneration in
2017/18.
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
remuneration
REPORT
AUDITED
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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.
The Board reviews and considers the fees paid to the
Managing Director and other Senior Executives 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 the
Managing Director and other Senior Executives in 2017/18.
For the year ended 30 June 2018, 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 2017/18
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 2017/18 financial year was achieved.
The total short term incentives payable to the Managing
Director and Executives for the year ended 30 June 2018 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
PROFIT
< Budget
Budget
Budget
Budget
Budget
Budget
Budget
Budget
Budget
Budget
Budget
Budget
AFTER
TAX
+0.5%
+2.0%
+4.0%
+6.0%
+8.0%
+10.0%
+12.0%
+14.0%
+16.0%
+18.0%
to
to
to
to
to
to
to
to
to
1.99%
3.99%
5.99%
7.99%
9.99%
11.99%
13.99%
15.99%
17.99%
STI
0%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
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The Company’s Managing Director, Mr Sarant, did not
qualify for the payment of any short term incentive in
respect of the 2017/18 financial year. If Mr Sarant had
satisfied all of the outperformance criteria for his short term
incentive, the maximum amount payable to him would have
been $121,584.
The Executive General Managers of the Company did not
qualify for the payment of any short term incentive in respect
of the 2017/18 financial year. If the Executive General
Managers had satisfied all of the outperformance criteria for
their short term incentive, the maximum aggregate amount
payable to them would have been $555,220.
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 normalized basis is appropriate and in the interests of
Shareholders.
The Board also believes that having all of the Company’s
Executive Team aligned to the common goal of achieving
budgeted operating profit after tax drives positive behaviors
amongst the Executive Team in maximizing Group wide
benefits from operating activities.
For the 2018/19 financial year, a new short term incentive
scheme will apply. The new short term incentive scheme
will be based upon both a safety and a financial metric.
In the case of the Managing Director, the Chief Financial
Officer and other ‘functional’ Executive General Managers
(ie, Executive General Managers who do not have profit and
loss accountability for trading divisions), the new short term
incentive scheme comprises:
• 2% of base salary up to 10% of base salary on a sliding
scale where a minimum 10% reduction (up to a 50%
reduction) in the total number of lost time injuries
sustained by employees of the Company is achieved in
accordance with the table set out below:
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LTI Reduction KSG KTI’s
10% Reduction 2%
20% Reduction 4%
30% Reduction 6%
40% Reduction 8%
50% Reduction 10%
% Base Payment
• 0.5% up to 20% of base salary on a sliding scale for
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) in line with the short term
incentive scheme in place in the 2017/18 financial year.
In the case of ‘divisional’ Executive General Managers
(ie, Executive General Managers with profit and loss account-
ability for trading divisions), the new short term incentive
scheme for the 2018/19 financial year will be consistent with
that for the Managing Director, the Chief Financial Officer and
‘functional’ Executive General Managers, save that:
• the safety and financial metrics used to calculate the
applicable short term incentive will be those for the
relevant trading division of the Company for which the
‘divisional’ Executive General Manager has operational
responsibility; and
• no short term incentive based upon divisional financial
metrics will be payable unless the Company also
achieves at least 100.5% 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 remains 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 will be paid in cash if relevant hurdles are
met. The total short term incentives payable to the Managing
Director and Executives for the year ended 30 June 2019 if
eligibility criteria are met will be $86,858, up to a maximum
of $1,042,290 if all outperformance criteria are met.
remuneration
REPORT AUDITED
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Employment Contracts
Directors’ Retirement Benefits
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 Managing Director, Mr Sarant, has a contract of
employment, key terms of which for 2017/18 were:
• A total remuneration package of $830,000 per annum
(excluding short term incentive (STI) but including long
service leave).
• Eligible for an STI of up to $121,584 (20% of base salary)
against annual performance criteria set by the Board.
For the year ended 30 June 2018, payment of the STI
was dependent upon the 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 were included in the
budget), with the amount of the STI determined in
accordance with the sliding scale set out in the table on
page 22 of the remuneration report. For the year ended
30 June 2019, payment of an STI is dependent 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 were
included in the budget) as to up to 20% of base salary
and safety metrics as to up to 10% of base salary.
• 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.
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. Mr Johnson is the only remaining
Non-Executive Director eligible to receive retirement
benefits under the scheme.
The expenditure provided (not paid) during the year
ended 30 June 2018 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 Underlying 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 items after
tax (NPAT).
■ EBIT ■ NPAT
$m
35
30
25
20
15
10
5
0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
In addition, Dividends paid to Shareholders are disclosed
on page 16 of the Directors’ report.
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The next graph highlights the performance of the share price
of K&S Corporation Limited against the Australian Securities
Exchange All Ordinaries Index, the Australian Securities
Exchange Industrials Index and Toll Holdings Limited* over
the past 5 years.
* Toll Holdings Limited securities ceased to be quoted on ASX on
29 May 2015.
Short term incentives have been paid only once to the
Executive Team (in respect of the 2009/10 financial year)
since the global financial crisis in 2008 as the Company’s
financial results have not achieved the targets set by
the Board.
The Board believes that short term incentives should
only be paid in circumstances of outperformance by the
Executive Team.
K&S Corporation Share Price 2013-2018
■ KSC ■ TOL ■ All Ords ■ Industrials Index
7000
$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-13 Jun-14 Jun-15 Jun-16 Jun-17 Jun-18
Remuneration of Key Management Personnel of the Company and the Group
Table 1: Remuneration for the year ended 30 June 2018
Salary &
Fees
$
127,617
75,705
75,705
6,609
285,636
Non-Executive
Directors
T Johnson
R Smith
L Winser
G Walters *
Total Non-Executive
Directors
Executive Director
P Sarant
711,872
Other Key
Management Personnel
B Walsh
C Bright
S Hine
336,485
265,925
321,588
Total Executive KMP
1,635,870
Totals
1,921,506
Short-Term
Incentives
$
Non-Cash
Benefit
$
Termination
$
Other Long-Term
Long Service
Benefit
$
Post Employment
Retirement
Benefit
$
Super
Contribution
$
Total
$
Performance
Related
%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
14,023
27,028
27,952
26,784
95,787
95,787
-
-
-
-
-
-
-
-
-
-
-
-
-
-
10,851
8,000
6,425
5,112
30,388
30,388
7,847
14,038
149,502
-
-
8,328
8,328
727
84,033
84,033
7,336
7,847
31,421
324,904
-
-
-
-
-
25,000
761,746
25,000
25,000
25,000
396,513
325,302
378,484
100,000
1,862,045
7,847
131,421
2,186,949
-
-
-
-
-
-
-
-
-
-
-
* Mr Walters was appointed a Director on 22 May 2018.
remuneration
REPORT
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Table 2: Remuneration for the year ended 30 June 2017
Salary &
Fees
$
121,540
72,100
72,100
265,740
Non-Executive
Directors
T Johnson
R Smith
L Winser
Total Non-Executive
Directors
Executive Director
P Sarant
643,416
Other Key
Management Personnel
B Walsh
C Bright
S Hine
315,285
249,725
305,388
Total Executive KMP
1,513,814
Totals
1,779,554
Short-Term
Incentives
$
Non-Cash
Benefit 2
$
Termination
$
Other Long-Term
Long Service
Benefit
$
Post Employment
Retirement
Benefit
$
Super
Contribution
$
Total
$
Performance
Related
%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
18,858
27,203
27,692
26,731
100,484
100,484
-
-
-
-
-
-
-
-
-
-
-
-
-
-
10,001
7,750
6,175
4,945
28,871
28,871
3,540
13,369
138,449
-
-
7,931
7,931
80,031
80,031
3,540
29,231
298,511
-
-
-
-
-
30,000
702,275
35,000
30,000
30,000
385,238
313,592
367,064
125,000
1,768,169
3,540
154,231
2,066,680
-
-
-
-
-
-
-
-
-
-
2 Non-cash benefits included are based on benefits paid in the form of fuel cards, citylink costs, car allowances and motor vehicles.
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Table 3: Loans to Key Management Personnel
Details of aggregates of loans to Key Management Personnel are as follows:
Total
2018
2017
Balance at Beginning of Period
$’000
306
317
Write-off
$’000
-
-
Balance at End of Period
$’000
Number in Group
282
306
4
4
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 2018
Shares held in K&S Corporation Limited: 30 June 2018
Non-Executive Directors
Balance 1 July 2017
Ordinary
Net Change
Ordinary
Balance 30 June 2018
Ordinary
T Johnson
R Smith
L Winser
G Walters *
Executive Director
P Sarant
Other Key Management Personnel
B Walsh
C Bright
S Hine
Total
* Mr Walters was appointed a Director on 22 May 2018.
515,984
42,011
1,217,893
-
186,603
161,267
51,000
50,000
2,224,758
6,248
1,002
29,049
-
-
2,177
-
-
38,476
522,232
43,013
1,246,942
-
186,603
163,444
51,000
50,000
2,263,234
remuneration
REPORT AUDITED
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Table 5: Shareholding of Key Management Personnel at 30 June 2017
Shares held in K&S Corporation Limited: 30 June 2017
Balance 1 July 2016
Ordinary
Net Change
Ordinary
Balance 30 June 2017
Ordinary
Non-Executive Directors
T Johnson
R Smith
L Winser
Executive Director
P Sarant
Other Key Management Personnel
B Walsh
C Bright
S Hine
Totals
511,336
41,633
1,206,922
186,603
160,445
51,000
50,000
2,207,939
4,648
378
10,971
-
822
-
-
16,819
515,984
42,011
1,217,893
186,603
161,267
51,000
50,000
2,224,758
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
23 August 2018
Paul Sarant
Managing Director
23 August 2018
corporate
GOVERNANCE
The Board of Directors of K&S Corporation Limited is
responsible for the governance of the consolidated
entity. The Board guides and monitors the business
and affairs of K&S Corporation Limited on behalf of the
Shareholders by whom they are elected and to whom
they are accountable.
In keeping with the Australian Securities Exchange Corporate
Governance Council’s updated Corporate Governance
Principles and Recommendations, this statement outlines
the Company’s compliance with the ASX principles.
The K&S Corporation Limited Corporate Governance
Statement is structured with reference to the Corporate
Governance Council’s principles and recommendations,
which are as follows:
Principle 1
Lay solid foundations for management oversight
Principle 2
Structure the board to add value
Principle 3
Act ethically and responsibly
Principle 4
Safeguard integrity in corporate 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 Board is also responsible for appointing, overseeing and
evaluating the performance of, and ultimately for the removal
of, the Managing Director.
The Managing Director is responsible to the Board for the
day to day management of the Company. Matters delegated
to the Managing Director by the Board include:
• developing business plans, budgets and strategies for
consideration by the Board and (where approved by
the Board) the implementation of such business plans,
budgets and strategies;
• identifying and managing operational risks that could
have a material impact on the Company and its
operations and implementing internal controls and
procedures to ensure that the Company’s business
operates within legislative requirements and the
risk parameters approved by the Board from time to
time; and
• ensuring that transactions, commitments and
arrangements that exceed thresholds set by the Board
from time to time are approved by the Board.
The Company’s Board Charter which sets out the full
roles and responsibilities of the Board and Management
respectively is available on the Company’s website
(www.ksgroup.com.au).
Non-Executive Directors have written agreements with the
Company setting out the terms of their appointment.
corporate
GOVERNANCE
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The Company Secretary is accountable directly to the Board,
through the Chairman, for the proper administration and
functioning of the Board.
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.
Quantitative factors relate to the financial value of the
business or other relationship. Qualitative factors considered
include whether a relationship is strategically important, the
competitive context of the relationship, the nature of the
relationship and the contractual or other arrangements
governing it or other factors which point to the actual ability
of the Director in question to influence the direction of the
Company other than in the best interests of the Company as
a whole.
The Board has reviewed the position of each of the Directors
in office at the date of this report and considers the following
Directors of the Company to be independent:
Structure of the Board
The Board currently comprises of four Non-Executive
Directors, including the Chairman, and one Executive
Director, namely, the Managing Director.
The qualifications, experience and periods of service of each
Director is set out on pages 10-11 of the Annual Report.
Directors are expected to bring independent views and
judgment 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
judgment.
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.
Name
R Smith
G Walters
Position
Non-Executive Director
Non-Executive Director
The Board assesses the independence of new Directors
upon appointment and reviews their independence, and the
independence of the other Directors, as appropriate.
The Board considers the following Directors as not
independent:
P Sarant Managing Director
T Johnson Non-Executive Director (Chairman)
Mr Johnson is a Director of AA Scott Pty Ltd, the
largest Shareholder of K&S Corporation Limited.
L Winser Non-Executive Director
Mr Winser was appointed as a Director of the Company
on 23 August 2013. Mr Winser formerly occupied
the position of Managing Director of the Company until
his retirement on 25 May 2012. Mr Winser is also an
alternate director of several companies with the Scott
Group of Companies.
The date of appointment of each Director of the Company is
set out on pages 10-11 of the Company’s 2018 annual report.
The Board structure is consistent with ASX Principle 2, with
the exception of:
• Recommendation 2.4 which requires that the majority
of the Board be independent Directors. The Board
considers that the mix of skills and experience of and the
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contributions by the non-independent Non-Executive
Director offsets the benefits to the Company of having
a majority of independent Non-Executive Directors.
However, as part of the review of Board Performance,
Directors have regard to the balance of independent
and non-independent Non-Executive Directors.
• Recommendation 2.5 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. Mr Johnson however is
a non-executive Chairman and does not also share the
role of CEO. The Board considers that the skills and
experience that Mr Johnson brings as Chairman add
value to the deliberations and functioning of the Board.
The Company has a Diversity Policy which is consistent with
ASX Principle 1.
The objective of the Diversity Policy is to promote a corporate
culture within the Company where the diverse experiences,
perspectives and backgrounds of people are valued and
embraced and which is conducive to the recruitment of well
qualified and diverse employees, senior management and
Board members.
There are procedures in place, agreed by the Board, to
enable Directors, in furtherance of their duties, to seek
independent professional advice at the Company’s expense.
The Board meets formally eleven times a year and on other
occasions as required. During the course of the year, the
Board’s sub-committees meet on a number of occasions to
deal with their specific responsibilities in relation to the
Company’s business. Senior Management attend and are a
vital ingredient to the sub-committees, 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.
corporate
GOVERNANCE
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.
The Company will disclose all material information in its
possession relevant to the decision of Shareholders whether
to re-elect Directors in the explanatory notes to the
Company’s Notice of Annual General Meeting. In particular,
the Company will provide details of Directors’ relevant
experience and qualifications, tenure, other material director-
ships, independence, shareholding, and any associations
with and/or interests in the Company.
The Company will also include a recommendation to
Shareholders from the Board (excluding always the relevant
Director standing for re-election) on whether to vote in
favour of the re-election of Directors.
Review of Board Performance
The Board has implemented a process for the regular
review of its overall performance, consistent with ASX
Recommendation 1.6. 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 1.6 as the review is
conducted by the full Board, and not the Nomination and
Remuneration Committee. As the Board is comprised of
only four 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.
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These committees are:
• The Audit Committee
• The Nomination and Remuneration Committee
• The Environmental Committee
Audit Committee
The Board has an established Audit Committee, which
operates under a Charter approved by the Board.
It is the Board’s responsibility to ensure that an effective
internal control framework exists within the entity. This
includes internal controls to deal with both the effectiveness
and efficiency of significant business processes, the
safeguard of assets, the maintenance of proper accounting
records, and the reliability of financial information.
The Board has delegated to the Audit Committee the
responsibility for 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 Non-Executive Directors.
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The Managing Director, the Chief Financial Officer, the
Company Secretary, the Group Accountant, the Internal
Audit 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. Mr Smith and Mr Johnson both attended
all four meetings. Mr Walters attended the one meeting held
following his appointment.
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.
The Nomination and Remuneration Committee does not
comply with Recommendations 2.1 and 8.1 as only
Mr Smith was considered by Directors to be independent.
However, as the only Director on the Nomination and
Remuneration Committee considered to be independent,
Mr Smith was Chairman of that committee.
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 presence of a majority of Directors considered not to be
independent did not compromise the effectiveness of the
Nomination and 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.
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, advises on the appointment,
performance and remuneration of the external auditors,
and reviews the work program for and reports and
recommendations of the internal audit function.
The members of the Audit Committee during the year were:
Mr Smith (Chairman)
Mr Johnson
Mr Walters *
* Mr Walters was appointed as a Non-Executive Director and also as a member of the
Audit Committee on 22 May 2018.
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 does not consider Mr Johnson to be independent.
The ASX Council Recommendation 4.1 recommends that
the Audit Committee consist of at least three members who
are all Non-Executive and the majority independent.
corporate
GOVERNANCE
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The Board does not have a formalised skills matrix that it
uses when considering Board composition and the
appointment of new Directors. However, 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 Nomination and Remuneration Committee periodically
obtains independent advice on the appropriateness
of remuneration packages, as well as benchmarking
comparable Company remuneration data. No external advice
was sought in relation to remuneration in the course of the
2017/18 financial year.
The Board also views accounting and legal expertise as
important elements to allow it to effectively discharge
its duties and responsibilities. The Board also has regard to
whether a potential Director has contacts or networks that
may enable the Company to access new markets or industry
sectors and/or to generate new business opportunities.
The Board recognises that a diversity of backgrounds and
experience in its members will contribute to the Board
functioning at its optimum.
Where considered appropriate, prior to appointing new
Directors, the Board will arrange for appropriate background
and reference checks to be undertaken. These checks
may include the proposed Director’s character (via reference
checks), education and qualifications, and any criminal
convictions, bankruptcy or insolvency that may preclude the
proposed Director from appointment.
The Company currently does not have a formal induction
program for new Directors. The Company does however
make available to new Directors past Board papers and
Board minutes as well as the Company’s Constitution and
key policies and codes of practice.
When new appointments of Non-Executive Directors are
contemplated, the Company will review the desirability of a
more structured induction program.
In the case of ongoing development, the Company schedules
some monthly Board meetings at different operational sites
to enable Non-Executive Directors to familiarise themselves
with the Company’s business and activities. The Board also
receives regular presentations from members of the Executive
Team on the Company’s various business units.
Remuneration levels are competitively set to attract and
retain appropriately qualified and experienced Directors and
Senior Executives.
The Nomination and Remuneration Committee 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, and retirement and
termination entitlements.
The members of the Nomination and Remuneration
Committee during the year were:
Mr Smith (Chairman)
Mr Johnson
Mr Winser
The Nomination and Remuneration Committee meets as
required. The Committee met formally once in 2017/18, but
also informally on several other occasions during the year.
Messrs Winser, Smith and Johnson all attended the formal
meeting 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.
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The Non-Executive Directors received $75,705 each and
the Chairman was paid $127,617 in 2017/18. Consideration
of any increase in fees payable to Non-Executive Directors
in 2017/18 was deferred to 1 January 2018, at which time
fees payable to Non-Executive Directors were increased
by 3%. Committee membership does not entitle a Director
to additional fees.
Details of the employment contract of Mr Sarant can be
found in the Remuneration Report on page 24.
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. Mr Johnson is the only remaining Director 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 20 to 28.
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Diversity
The measurable objectives for achieving gender diversity
set by the Board and progress towards achieving those
objectives are:
rates for women and men. Tenure and turnover data
was reviewed by the Committee in 2017/18.
Turnover rates for men and women were equivalent
across different levels of the organisation.
• 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 2017/18.
The Company saw participation rates for women remain
static at all levels of the organisation.
The Company’s Workplace Gender Equality Act “Gender
Equality Indicators” report can be accessed via the
website of the Workplace Gender Equality Agency
(www.wgea.gov.au/public-reports). A summary of the
Company’s “Gender Equality Indicators” report is also
available on the Company’s website (www.ksgroup.com.au).
• 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 2017/18 and
Management has investigated 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 workforce (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
2017/18. 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
The Company notes that the transport and logistics
industry continues to have a stereotyped male dominated
environment, with a substantial proportion of the Company’s
workforce required to perform labour intensive/manual
handling tasks as well as significant overtime and remote
work 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 aimed at
attracting, developing and retaining female employees.
As part of that strategy, the Company is reviewing a
range of more flexible employment practices.
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Environmental Committee
The Board has an Environmental Committee, which operates
under a Charter approved by the Board. The role of the
Committee is to monitor environmental incidents, exposures
and compliance with environmental regulations.
The members of the Environmental Committee during the
year were:
Mr Johnson (Chairman)
Mr Winser
Mr 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.
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. Messrs Winser and Sarant attended all four meetings
of the Committee. Mr Johnson attended three of the four
meetings of the Committee.
Financial Reporting
Consistent with the ASX Recommendation 4.2, the
Company’s financial report preparation and approval process
for the financial year ended 30 June 2018, 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 4.2, 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.
The Company’s current external Auditors are Ernst & Young.
The effectiveness, performance and independence of the
external Auditor is reviewed by the Audit Committee at least
annually. The format of that review includes discussing
the performance of the External Auditors with Management
while the Auditors are not present. The Audit Committee
also met with senior members of Ernst & Young to review the
performance of the lead audit partner. The Audit Committee
also meets with the External Auditors in the absence of
Management to review the conduct of the half year review
and full year audit.
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 2017.
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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.
• Appropriate due diligence procedures for acquisitions
and divestments, with post-acquisition reviews also
provided to the Board.
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.
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.
• 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:
• 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.
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• 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 which 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 and the Chief Financial Officer also
certify on an annual basis that the Company has a sound
system of risk management and internal control, and that
the system is operating effectively in all material respects in
relation to financial risks.
The Company is of the view that risk management is a key
governance function. As the Board is comprised of only
five Directors (including the Managing Director), the Board
is of the view that the setting of risk parameters and the
oversight of risk management is best discharged by the
Board as a whole. Consequently, the Company does not
have a stand alone risk committee.
The Company has an internal audit function. The Internal
Audit Manager is independent of Management of the
Company and reports to both the Managing Director and
also the Chairman of the Audit Committee. A copy of the
Internal Audit Charter is available on the Company’s external
website (www.ksgroup.com.au).
A detailed draft internal audit work program was developed
by the Internal Audit Manager in conjunction with the
Managing Director, Company Secretary, and Chief Financial
Officer. That detailed internal audit work program was then
submitted to the Audit Committee for review and approval.
The Company has adopted a risk based approach in
identifying and prioritising internal audit activities.
The Company operates in a highly competitive industry
and has a material exposure to a range of economic
factors including competitive forces, the decline of the
domestic manufacturing sector, falling commodity prices,
and key customer contract exposure. The Company
seeks to mitigate these risks by differentiating itself from
its competitors, diversifying the nature and scope of its
activities across a number of sectors, geographic regions,
and customer groups, as well as staggering the expiry
dates of key customer contracts.
corporate
GOVERNANCE
The Company also faces material exposures around
compliance with legislative obligations (including transport
laws) and the potential that a serious incident or accident
could result in death, serious injury and/or environmental
harm, as well as major reputational damage and the loss of
key customer contracts.
The Company seeks to mitigate this exposure via policies,
procedures and training.
The Company’s comprehensive internal Risk Review
Statement catalogues key economic, environmental and
social sustainability risks in respect of which the Company
has identified a material exposure. The internal Risk
Review Statement documents risk mitigation strategies
employed by the Company.
Continuous Disclosure
The Company understands and respects that timely
disclosure of price sensitive information is central to the
efficient operation of the Australian Securities Exchange
securities market and has adopted a comprehensive
policy covering announcements to the Australian
Securities Exchange.
The Company Secretary has the responsibility for overseeing
and co-ordinating disclosure of information to the Australian
Securities Exchange. The Company Secretary also liaises
with the Managing Director, Chairman and Chief Financial
Officer in relation to continuous disclosure matters.
The 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.
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Conflict of Interest
In accordance with the Corporations Act 2001 (Cth) and
the Company’s Constitution, Directors must keep the Board
advised, on an ongoing basis, of any interest that could
potentially conflict with those of the Company. Where the
Board believes that a significant conflict exists, the Director
concerned does not receive the relevant Board papers and
is not present at the meeting whilst the item is considered.
Details of Director related entity transactions with the
Company and consolidated entity are set out in Note 26.
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The Company’s Occupational Health & Safety, return to work,
and claims management systems are audited by Comcare
against 108 criteria that are aligned to AS4801.
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:
Director Dealing in Company Shares
Code of Conduct
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.
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.
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
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Communication with Shareholders
The Company places considerable importance on
communication with Shareholders.
The Company’s communication strategy promotes the
communication of information to Shareholders through the
distribution of the Annual Report, announcements through
the Australian Securities Exchange and 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.
The Company actively invites, and responds to, questions
from Shareholders at the Annual General Meeting. As the
Company’s Annual General Meetings have a comparatively
small number of attendees, Shareholders have a good
opportunity to put any questions to Directors.
Shareholders also have good access to Directors and the
Executive Team following the formal business of the meeting.
Shareholders have the ability to receive communications
from the Company (eg, annual reports) and the Company’s
Share Registry, Computershare, (eg, dividend statements)
electronically.
K&S Corporation Limited posts all price sensitive reports,
Australian Securities Exchange releases and media releases
on the Company’s website.
The communication strategy is consistent with
ASX Principle 6.
The Company’s Communication Policy is available on the
Company’s website: www.ksgroup.com.au
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financial
REPORT
F O R T H E Y E A R E N D E D 2 0 1 8
Contents
Statement of Comprehensive Income 44
Statement of Financial Position 45
Statement of Changes in Equity 46
Statement of Cash Flows 47
Notes to the Financial Statements 48
Directors’ Declaration 89
Auditor’s Independence Declaration 90
Independent Auditor’s Report 91
Information on Shareholdings 95
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statement of
COMPREHENSIVE INCOME
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 8
Consolidated
2018 2017
Note $’000 $’000
Operating revenue 5(a) 854,643 755,232
Cost of goods sold (108,800)
(77,094)
Gross profit 745,843 678,138
5,007
Other income 5(b)
(193,131)
Contractor expenses (208,667)
(249,766)
Employee expenses 5(e) (281,016)
Fleet expenses (162,724)
(149,159)
Depreciation and amortisation expense 5(d) (42,367) (39,125)
Finance costs 5 (c) (7,056)
(6,796)
Other expenses (43,096) (35,926)
Share of profits of associates 13
123
Impairment of intangibles, land and buildings, plant and equipment, trade debtors - -
23,553
130
Profit/(loss) before income tax 24,600 9,365
Income tax (expense)/benefit 6 (7,476) (2,855)
Profit/(loss) after income tax 17,124 6,510
Items that may be reclassified subsequently to profit or loss:
Foreign currency translation
(25)
Income tax effect - -
(673)
(673)
(25)
Items not to be reclassified to profit or loss in subsequent periods:
Revaluation of land and buildings -
Income tax effect -
-
-
Other comprehensive income/(loss) for the period, net of tax (673)
(25)
Total comprehensive income/(loss) for the period 16,451 6,485
Earnings per share (cents per share) 7
• basic, profit for the year attributable to ordinary equity holders of the parent 13.9
• diluted, profit for the year attributable to ordinary equity holders of the parent 13.9
5.4
5.4
Dividends per share (cents per share) 8 4.0 3.5
The above Statement of Comprehensive Income should be read
in conjunction with the accompanying notes.
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statement of
FINANCIAL POSITION
A S AT 3 0 J U N E 2 0 1 8
Consolidated
2018 2017
Note $’000 $’000
ASSETS
Current assets
Cash and cash equivalents 9 15,946 13,985
Trade and other receivables 10 129,741 88,572
Inventories 11 5,856 4,848
Prepayments 10,071 8,894
Total current assets 161,614 116,299
Non-current assets
Other receivables 10 1,035 1,179
Investments in associate 13 398 368
Property, plant & equipment 14 373,552 350,998
Intangibles 15 6,070 6,301
13,544
Deferred tax assets 6
10,700
Total non-current assets 391,755 372,390
TOTAL ASSETS 553,369 488,689
LIABILITIES
Current liabilities
Trade and other payables 17 101,859 81,664
Interest bearing loans and borrowings 18 37,545 34,356
Income tax payable 6 686 444
Provisions 19 29,539 28,833
Total current liabilities 169,629 145,297
Non-current liabilities
Trade and other payables 17 770 -
Interest bearing loans and borrowings 18 108,365 88,780
Deferred tax liabilities 6 37,118 33,879
Provisions 19 16,620 15,377
Total non-current liabilities 162,873 138,036
TOTAL LIABILITIES 332,502 283,333
NET ASSETS 220,867 205,356
EQUITY
Contributed equity 20 158,099 153,951
Reserves 40,954 41,808
Retained earnings 21,814 9,597
TOTAL EQUITY 220,867 205,356
The above Statement of Financial Position should be read
in conjunction with the accompanying notes.
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statement of
CHANGES IN EQUITY
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 8
Note
CONSOLIDATED
Asset Forex Common
Issued Retained Revaluation Translation Control Total
Capital Earnings Reserves Reserves Reserves Equity
$’000 $’000 $’000 $’000 $’000 $’000
At 1 July 2017
153,951 9,597 40,885 1,055 (132) 205,356
Profit for the year
Other comprehensive income
- 17,124 - - 17,124
- - - (673) - (673)
Total comprehensive
income/(loss) for the year
Transactions with owners in
their capacity as owners:
- 17,124 - (673) - 16,451
Issue of share capital 20
Changes arising from STI 29
Dividends paid 8
4,148 - - - - 4,148
- - - - (181) (181)
- (4,907) - - - (4,907)
At 30 June 2018
158,099 21,814 40,885 382 (313) 220,867
At 1 July 2016
152,518 4,905 40,885 1,080 - 199,388
Profit for the year
Other comprehensive income
- 6,510 - - - 6,510
- - - (25) - (25)
Total comprehensive
income/(loss) for the year
Transactions with owners in
their capacity as owners:
- 6,510 - (25) - 6,485
Issue of share capital 20
Changes arising from STI 29
Dividends paid 8
1,433 - - - - 1,433
- - - - (132) (132)
- (1,818) - - - (1,818)
At 30 June 2017
153,951 9,597 40,885 1,055 (132) 205,356
The above Statement of Changes in Equity should be read
in conjunction with the accompanying notes.
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statement of
CASH FLOWS
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 8
Consolidated
2018 2017
Note $’000 $’000
CASH FLOWS FROM OPERATING ACTIVITIES
Cash receipts from customers 920,966 807,141
Cash payments to suppliers and employees (843,929) (727,962)
Interest received 24 20
Borrowing costs paid (7,056) (6,796)
Income taxes paid (931) 862
Net goods and services tax paid (28,262) (23,900)
Net cash provided by operating activities 9 40,812 49,365
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of non-current assets 5,705 6,151
Payments for property plant & equipment (22,663) (12,089)
Dividends received from Associates 100 150
Net cash used in investing activities (16,858) (5,788)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings 45,000
18,000
Repayments of borrowings (29,000) (19,000)
Repayment of lease and hire purchase liabilities (39,431)
Dividends paid, net of dividend reinvestment plan (774)
Cash received on assuming employee benefit liabilities 2,349
(37,135)
(385)
1,543
Net cash used in financing activities (21,856)
(36,977)
Net increase/(decrease) in cash held 2,098 6,600
7,392
Cash at the beginning of the financial year 13,985
Effects of exchange rate variances on cash (137) (7)
Cash at the end of the financial year 9 15,946
13,985
The above Statement of Cash Flows should be read
in conjunction with the accompanying notes.
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notes to the
FINANCIAL STATEMENTS
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 8
1 Corporate Information
The financial report of K&S Corporation Limited for the year
ended 30 June 2018 was authorised for issue in accordance with
a resolution of Directors on 23 August 2018.
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 operations 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 Corporations 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 Corporations (Rounding in Financial/Directors’ Reports)
Instrument 2016/191 dated 24 March 2016.
The Company is an entity to which the legislative instrument
applies.
The consolidated financial statements have been prepared on a
going concern basis.
As at 30 June 2018, the consolidated statement of financial
position reflected an excess of current liabilities over current assets
of $8.0m (2017: $29.0m). The deficit was primarily caused by the
acquisition of $23.3m in property, plant and equipment in the
current year funded through cash flow, resulting in a conversion of
current assets to non-current assets.
In the current year, the operating cash flows of the Group was
$40.8m (2017: $49.0m). The directors are satisfied the Group will
continue to generate sufficient operating cash flows for the next
12 months to fund the net current deficiency.
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 amended Australian
Accounting Standards and AASB Interpretations as of
1 January 2017.
Application
date for
Group
1 July 2017
1 July 2017
Pronouncement
Title
Summary
Application
date
Impact on Group
financial report
AASB 2016-1
AASB 2016-2
Amendments to
Australian Accounting
Standards – Recognition
of Deferred Tax Assets
for Unrealised Losses
Amendments to
Australian Accounting
Standards – Disclosure
Initiative: Amendments
to AASB 107
This Standard makes amendments to AASB 112 Income
Taxes to clarify the accounting for deferred tax assets
for unrealised losses on debt instruments measured at
fair value.
1 Jan 2017
1 Jan 2017
The amendments to AASB 107 Statement of Cash Flows
are part of the IASB’s Disclosure Initiative and help
users of financial statements better understand changes
in an entity’s debt. The amendments require entities to
provide disclosures about changes in their liabilities
arising from financing activities, including both changes
arising from cash flows and non-cash changes (such as
foreign exchange gains or losses).
These amendments
have not had
any impact on the
Group.
The Group has
adopted
amendments to
AASB 107 as part
of the AASB’s
Disclosure initiative.
Our disclosures
include:
(cid:129) Changes from
financing cash flows
(cid:129) Changes arising
from obtaining or
losing control of
subsidiaries or other
businesses
(cid:129) The effect of
changes is foreign
exchange rates
(cid:129) Changes in fair
values
(cid:129) Other Changes
The Group has
disclosed this
information in
Note 18.
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Pronouncement
Title
Summary
AASB 2017-2
Amendments to
Australian Accounting
Standards – Further
Annual Improvements
2014-2016 Cycle
This Standard clarifies the scope of AASB 12 Disclosure
of Interests in Other Entitiesby specifying that the
disclosure requirements apply to an entity’s interests
in other entities that are classified as held for
sale or discontinued operations in accordance with
AASB 5 Noncurrent Assets Held for Sale and
Discontinued Operations.
Application
date
Impact on Group
financial report
1 Jan 2017
These amendments
have not had
any impact on the
Group.
Application
date for
Group
1 July 2017
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 2018, are outlined in the table below and on the
following pages:
Application
date for
Group
1 July 2018
Pronouncement
Title
Summary
Application
date
Impact on Group
financial report
AASB 9, and
relevant amending
standards
Financial Instruments
1 Jan 2018
The Group does not
expect a significant
impact on its
balance sheet or
equity on applying
the classification
and measurement
requirements of
AASB 9. It expects
to continue
measuring at fair
value all financial
assets currently
held at fair value.
AASB 9 requires
the Group to record
expected credit
losses on all of its
debt securities,
loans and trade
receivables, either
on a 12-month or
lifetime basis.
AASB 9 replaces AASB 139 Financial Instruments:
Recognition and Measurement.
Except for certain trade receivables, an entity initially
measures a financial asset at its fair value plus, in the
case of a financial asset not at fair value through profit
or loss (FVTPL), transaction costs.
Debt instruments are subsequently measured at
FVTPL, amortised cost, or fair value through other
comprehensive income (FVOCI), on the basis of their
contractual cash flows and the business model under
which the debt instruments are held.
There is a fair value option (FVO) that allows financial
assets on initial recognition to be designated as FVTPL
if that eliminates or significantly reduces an
accounting mismatch. Equity instruments are generally
measured at FVTPL. However, entities have an
irrevocable option on an instrument-by-instrument basis
to present changes in the fair value of non-trading
instruments in other comprehensive income (OCI)
without subsequent reclassification to profit or loss.
For financial liabilities designated as FVTPL using the
FVO, the amount of change in the fair value of such
financial liabilities that is attributable to changes in
credit risk must be presented in OCI. The remainder of
the change in fair value is presented in profit or loss,
unless presentation in OCI of the fair value change in
respect of the liability’s credit risk would create or
enlarge an accounting mismatch in profit or loss.
All other AASB 139 classification and measurement
requirements for financial liabilities have been carried
forward into AASB 9, including the embedded derivative
separation rules and the criteria for using the FVO.
The incurred credit loss model in AASB 139 has been
replaced with an expected credit loss model in AASB 9.
The requirements for hedge accounting have been
amended to more closely align hedge accounting with
risk management, establish a more principle-based
approach to hedge accounting and address
inconsistencies in the hedge accounting model in
AASB 139.
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notes to the
FINANCIAL STATEMENTS
Application
date for
Group
1 July 2018
2 Summary of Significant Accounting Policies
ii)
Accounting standards and interpretations issued but not yet effective continued
Pronouncement
Title
Summary
Application
date
Impact on Group
financial report
AASB 15, and
relevant amending
standards
Revenue from Contracts
with Customers
1 Jan 2018
AASB 15 replaces all existing revenue requirements in
Australian Accounting Standards (AASB 111
Construction Contracts, AASB 118 Revenue,
AASB Interpretation 13 Customer Loyalty Programmes,
AASB Interpretation 15 Agreements for the Construction
of Real Estate, AASB Interpretation 18 Transfers of
Assets from Customersand AASB Interpretation 131
Revenue – Barter Transactions Involving Advertising
Services) and applies to all revenue arising from
contracts with customers, unless the contracts are in
the scope of other standards, such as AASB 117
Leases(or AASB 16 Leases, once applied).
The core principle of AASB 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 an entity expects to
be entitled in exchange for those goods or services.
An entity recognises revenue in accordance with the
core principle by applying the following steps:
► Step 1: Identify the contract(s) with a customer
► Step 2: Identify the performance obligations in
the contract
► Step 3: Determine the transaction price
► Step 4: Allocate the transaction price to the
performance obligations in the contract
► Step 5: Recognise revenue when (or as) the entity
At this point, the
Group has assessed
individual contracts,
which has indicated
the adoption of the
standard is not
expected to have a
material impact.
The Group will apply
the full retrospective
approach on
transition and
there will be no
adjustment to profit
and loss. Additional
disclosures on
contracts details
and performance
obligations will be
required and minor
presentation
changes of amounts
in the Statement
of Comprehensive
Income will arise.
AASB
Interpretation 22
Foreign Currency
Transactions and Advance
Consideration
AASB 16
Leases
satisfies a performance obligation.
The Interpretation clarifies that in determining the spot
exchange rate to use on initial recognition of the
related asset, expense or income (or part of it) on the
derecognition of a non-monetary asset or non-monetary
liability relating to advance consideration, the date of
the transaction is the date on which an entity initially
recognises the non-monetary asset or non-monetary
liability arising from the advance consideration. If there
are multiple payments or receipts in advance, then the
entity must determine a date of the transaction for each
payment or receipt of advance consideration.
AASB 16 requires lessees to account for all leases
under a single on-balance sheet model in a similar way
to finance leases under AASB 117 Leases. The standard
includes two recognition exemptions for lessees –
leases of ’low-value’ assets (e.g., personal computers)
and short-term leases (i.e., leases with a lease term
of 12 months or less). At the commencement date of
a lease, a lessee will recognise a liability to make
lease payments (i.e., the lease liability) and an asset
representing the right to use the underlying asset
during the lease term (i.e., the right-of-use asset).
Lessees will be required to separately recognise
the interest expense on the lease liability and the
depreciation expense on the right-of-use asset.
Lessees will be required to remeasure the lease liability
upon the occurrence of certain events (e.g., a change
in the lease term, a change in future lease payments
resulting from a change in an index or rate used to
determine those payments). The lessee will generally
recognise the amount of the remeasurement of the
lease liability as an adjustment to the right-of-use asset.
Lessor accounting is substantially unchanged from
today’s accounting under AASB 117. Lessors will
continue to classify all leases using the same classifica-
tion principle as in AASB 117 and distinguish between
two types of leases: operating and finance leases.
1 Jan 2018
1 July 2018
These amendments
will not have
any impact on the
Group.
1 Jan 2019
1 July 2019
In 2018, the Group
will continue to
assess the potential
effect of AASB 16
on its consolidated
financial
statements. This
will have particular
impact in regards
to the Group’s
operating leases.
As at 30 June 2018
the Group had
undiscounted
commitments for
future lease
payments totalling
$38,287 million,
which is largely
reflected by leases
over premises
(Note 22).
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Reference
Title
Summary
AASB 2018-1
Annual Improvements
to IFRS Standards
2015-2017 Cycle
AASB 2018-2
Amendments to
Australian Accounting
Standards – Plan
Amendment, Curtailment
or Settlement
Uncertainty over Income
Tax Treatments
AASB
Interpretation
23, and
relevant
amending
standards
► AASB 112 Income Taxes- income tax consequences
of payments on financial instruments classified
as equity
► AASB 123 Borrowing Costs- borrowing costs
eligible for capitalisation.
This Standards amends AASB 119 Employee Benefits
to specific how an entity accounts for defined
benefit plans when a plan amendment, curtailment
or settlement occurs during a reporting period.
The amendments:
► Require entities to use the updated actuarial
assumptions to determine current service cost and
net interest for the remainder of the annual reporting
period after such an event occurs
► Clarify that when such an event occurs, an entity
recognises the past service cost or a gain or loss on
settlement separately from its assessment of the
asset ceiling.
The Interpretation clarifies the application of the
recognition and measurement criteria in AASB 112
Income Taxeswhen there is uncertainty over income
tax treatments. The Interpretation specifically addresses
the following:
► Whether an entity considers uncertain tax treatments
separately
► The assumptions an entity makes about the
examination of tax treatments by taxation authorities
► How an entity determines taxable profit (tax loss),
tax bases, unused tax losses, unused tax credits and
tax rates
► How an entity considers changes in facts and
circumstances.
Application
date of
standard
1 Jan 2019
1 Jan 2019
Application
date for
Group
1 July 2019
1 July 2019
Impact on Group
financial report
These amendments
will not have
any impact on the
Group.
These amendments
will not have
any impact on the
Group.
1 Jan 2019
1 July 2019
These amendments
will not have
any impact on the
Group.
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 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.
•
•
•
•
•
•
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notes to the
FINANCIAL STATEMENTS
2 Summary of Significant Accounting Policies
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.
When the Group acquires a business under common control, it
uses the Pooling of Interests method whereby assets and liabilities
shall be transferred at carrying value, with the difference between
consideration transferred and the net assets acquired is presented
separately in a common control reserve. The Group will reflect
a business combination under common control from the date of
the combination.
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 or in other comprehensive
income. If the contingent consideration is classified as equity, it
shall not be remeasured.
f) Operating segments
An operating segment is a component of an entity that engages
in business activities from which it may earn revenues and incur
expenses (including revenues and expenses relating to transactions
with other components of the same entity), whose operating results
are regularly reviewed by the entity’s chief operating decision maker
to make decisions about resources to be allocated to the segment
and assess its performance and for which discrete financial
information is available. This includes start up operations which
are yet to earn revenues. Management will also consider other
factors in determining operating segments such as the existence
of a line manager and the level of segment information presented
to the Board of Directors.
Operating segments have been identified based on the information
provided to the chief operating decision makers – being the
Executive Management team.
The Group aggregates two or more operating segments when they
have similar economic characteristics, and the segments are similar
in each of the following aspects:
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.
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.
For the purposes of the Statement of Cash Flows, cash and cash
equivalents consist of cash and cash equivalents as defined above,
net of outstanding bank overdrafts.
i) Leases
Finance leases, which transfer to the Group substantially all the
risks and benefits incidental to ownership of the leased item, are
capitalised at the inception of the lease at the fair value of the
leased property or, if lower, at the present value of the minimum
lease payments.
Lease payments are apportioned between the finance charges
and reduction of the lease liability so as to achieve a constant
rate of interest on the remaining balance of the liability. Finance
charges are recognised as finance costs in the Statement of
Comprehensive Income.
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Capitalised leased assets are depreciated over the shorter of the
estimated useful life of the asset and the lease term if there is no
reasonable certainty that the Group will obtain ownership by the
end of the lease term.
Leases where the lessor retains substantially all the risks
and benefits of ownership of the asset are classified as
operating leases.
Operating lease payments are recognised as an expense on a
straight-line basis over the lease term.
j) Trade and other receivables
Trade receivables, which generally have 30-90 day terms, are
recognised and carried at original invoice amount less an allowance
for any uncollectible amounts. An allowance for doubtful debts is
made when there is objective evidence that the Group will not be
able to collect the debts. Bad debts are written off when identified.
k) Inventories
Inventories are valued at the lower of cost and net realisable value.
Costs incurred in bringing each product to its present location and
condition are accounted for as follows:
Consumables – purchase cost on a first-in, first-out basis;
Finished goods – weighted average cost.
•
Net realisable value is the estimated selling price in the ordinary
course of business, less estimated costs necessary to make
the sale.
l) Derivative financial instruments
The Group uses derivative financial instruments such as interest
rate swaps to hedge its risks associated with interest rate
fluctuations. Such derivative financial instruments are stated at
fair value. The fair value of interest rate contracts is determined
by reference to market value for similar instruments.
For the purposes of hedge accounting, hedges are classified as
either fair value hedges when they hedge the exposure to
changes in the fair value of a recognised asset or liability; or cash
flow hedges where they hedge exposure to variability in cash
flows that is either attributable to a particular risk associated with
a recognised asset or liability or a forecasted transaction.
In relation to cash flow hedges (interest rate swaps) to hedge
firm commitments which meet the conditions for special
hedge accounting, the portion of the gain or loss on the
hedging instrument that is determined to be an effective hedge
is recognised directly in equity and the ineffective portion is
recognised in profit or loss.
When the hedged firm commitment results in the recognition of
an asset or a liability, then, at the time the asset or liability is
recognised, the associated gains or losses that had previously been
recognised in equity are included in the initial measurement of the
acquisition cost or other carrying amount of the asset or liability.
For all other cash flow hedges, the gains or losses that are
recognised in equity are transferred to profit or loss in the same
year in which the hedged firm commitment affects the net profit
and loss, for example when the future sale actually occurs.
For derivatives that do not qualify for hedge accounting, any
gains or losses arising from changes in fair value are taken directly
to profit or loss.
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 in-
cluded in a collective assessment of impairment.
If, in a subsequent period, the amount of the impairment loss
decreases and the decrease can be related objectively to an event
occurring after the impairment was recognised, the previously
recognised impairment loss is reversed. Any subsequent reversal
of an impairment loss is recognised in profit or loss, to the extent
that the carrying value of the asset does not exceed its amortised
cost at the reversal date.
Financial assets carried at cost
If there is objective evidence that an impairment loss has been
incurred on an unquoted equity instrument that is not carried at
fair value (because its fair value cannot be reliably measured), or
on a derivative asset that is linked to and must be settled by
delivery of such an unquoted equity instrument, the amount of
the loss is measured as the difference between the asset’s
carrying amount and the present value of estimated future cash
flows, discounted at the current market rate of return for a similar
financial asset.
o) Foreign currency translation
Both the functional and presentation currency of K&S Corporation
Ltd and its Australian subsidiaries is Australian dollars (A$).
Transactions in foreign currencies are initially recorded in the
functional currency at the exchange rates ruling at the date of the
transaction. Monetary assets and liabilities denominated in foreign
currencies are retranslated at the rate of exchange ruling at the
reporting date.
All exchange differences in the consolidated financial report are
taken to profit or loss with the exception of differences on foreign
currency borrowings that provide a hedge against a net investment
in a foreign entity.
These are taken directly to equity until the disposal of the net
investment, at which time they are recognised in profit or loss.
Tax charges and credits attributable to exchange differences on
those borrowings are also recognised in equity.
Non-monetary items that are measured in terms of historical cost
in a foreign currency are translated using the exchange rate as at
the date of the initial transaction.
Non-monetary items measured at fair value in a foreign currency
are translated using the exchange rates at the date when the fair
value was determined.
The functional currency of the overseas subsidiaries (K&S
Freighters Limited and Cochrane’s Transport Limited) is
New Zealand dollars (NZ$).
As at the reporting date, the assets and liabilities of these overseas
subsidiaries are translated into the presentation currency of K&S
Corporation Limited at the rate of exchange ruling at the reporting
date and the revenue and expenses are translated at the weighted
average exchange rates for the period.
The exchange differences arising on the retranslation are taken
directly to a separate component of equity.
On disposal of a foreign entity, the deferred cumulative amount
recognised in equity relating of that particular foreign operation is
recognised in profit or loss.
p) Investment in associates
The Group’s investment in its associates is accounted for under
the equity method of accounting in the consolidated financial
statements and at cost in the parent. The associates are entities
in which the Group has significant influence and that are neither
a subsidiary nor a joint venture.
Under the equity method, investments in associates are carried
in the consolidated statement of financial position at cost
plus post-acquisition changes in the Group’s share of net assets
of the associate. Goodwill relating to an associate is included
in the carrying amount of the investment and is not amortised.
After application of the equity method, the Group determines
whether it is necessary to recognise any impairment loss with
respect to the Group’s net investment in associates. Goodwill
included in the carrying amount of the investment in associate
is not tested separately, rather the entire carrying amount of the
investment is tested for impairment as a single asset. If an
impairment loss is recognised, the amount is not allocated to the
goodwill of the associate.
The Group’s share of associates’ post-acquisition profits or losses
is recognised in the statement of comprehensive income, and its
share of post-acquisition movements in reserves is recognised in
reserves. 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
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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.
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.
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
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.
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
IT Computers
Not depreciated
2.5 - 10% p.a.
7 - 20% p.a.
15 - 40% p.a.
25 - 33% 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.
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notes to the
FINANCIAL STATEMENTS
2 Summary of Significant Accounting Policies
r) Property, plant and equipment continued
i) Impairment
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 price that would be received to sell an asset or paid
to transfer a liability in an orderly transaction between market
participants at the measurement 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.
Financial assets at fair value through profit or loss
Financial assets classified as held for trading are included in the
category “financial assets at fair value through profit or loss”.
Financial assets are classified as held for trading if they are acquired
for the purpose of selling in the near term. Derivatives are also
classified as held for trading unless they are designated as effective
hedging instruments. Gains or losses on investments held for
trading are recognised in profit or loss.
Held-to-maturity investments
Non-derivative financial assets with fixed or determinable payments
and fixed maturity are classified as held-to-maturity when the
Group has the positive intention and ability to hold to maturity.
Investments intended to be held for an undefined period are not
ncluded 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.
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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 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.
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 an operating segment determined in accordance with AASB 8.
Impairment is determined by assessing the recoverable amount
of the cash-generating unit (group of cash-generating units), to
which the goodwill relates.
When the recoverable amount of the cash-generating unit (group
of cash-generating units) is less than the carrying amount, an
impairment loss is recognised. When goodwill forms part of a
cash-generating unit (group of cash-generating units) and an
operation within that unit is disposed of, the goodwill associated
with the operation disposed of is included in the carrying amount
of the operation when determining the gain or loss on disposal of
the operation. Goodwill disposed of in this manner is measured
based on the relative values of the operation disposed of and the
portion of the cash-generating unit retained.
Impairment losses recognised for goodwill are not subsequently
reversed.
Intangibles
Intangible assets are initially measured at cost. Following initial
recognition, intangible assets are carried at cost less any
accumulated amortisation and any accumulated impairment losses.
The useful lives of intangible assets are assessed to be either
finite or indefinite. Intangible assets with finite lives are amortised
over the useful life and assessed for impairment whenever
there is an indication that the intangible asset may be impaired.
The amortisation period and the amortisation method for
an intangible asset with a finite useful life are 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
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).
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notes to the
FINANCIAL STATEMENTS
2 Summary of Significant Accounting Policies
v) Impairment of assets continued
z) Employee leave benefits
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.
w) Interest-bearing loans and borrowings
All loans and borrowings are initially recognised at cost, being
the fair value of the consideration received net of issue costs
associated with the borrowing.
After initial recognition, interest-bearing loans and borrowings
are subsequently measured at amortised cost using the effective
interest method. Amortised cost is calculated by taking into
account any issue costs, and any discount or premium on
settlement.
Gains and losses are recognised in profit or loss when the
liabilities are derecognised, as well as through the amortisation
process.
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 and sick leave
Liabilities for wages and salaries, including non-monetary benefits
and accumulating sick leave are all measured at nominal values 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 and annual 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 yields in high quality corporate 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.
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);
The after tax effect of dividends and interest associated with
dilutive potential ordinary shares that have been recognised
as expenses; and
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.
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cc) Fair value measurement
Fair value is the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between market
participants at the measurement date. The fair value measurement
is based on the presumption that the transaction to sell the asset
or transfer the liability takes place either:
•
•
In the principal market for the asset or liability; or
In the absence of a principal market, in the most
advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible
by the Group.
The fair value of an asset or a liability is measured using the
assumptions that market participants would use when pricing the
asset or liability, assuming that market participants act in their
economic best interest.
A fair value measurement of a non-financial asset takes into
account a market participant's ability to generate economic
benefits by using the asset in its highest and best use or by
selling it to another market participant that would use the asset
in its highest and best use.
The Group uses valuation techniques that are appropriate in
the circumstances and for which sufficient data are available to
measure fair value, maximising the use of relevant observable
inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed
in the financial statements are categorised within the fair value
hierarchy, described as follows, based on the lowest level input that
is significant to the fair value measurement as a whole:
Level 1 – Quoted (unadjusted) market prices in active markets for
identical assets or liabilities
Level 2 – Valuation techniques for which the lowest level input
that is significant to the fair value measurement is directly
or indirectly observable
Level 3 – Valuation techniques for which the lowest level input
that is significant to the fair value measurement is
unobservable.
For assets and liabilities that are recognised in the financial
statements at fair value on a recurring basis, the Group determines
whether transfers have occurred between levels in the hierarchy by
re-assessing categorisation (based on the lowest level input that is
significant to the fair value measurement as a whole) at the end of
each reporting period.
dd) Significant accounting judgments, estimates
and assumptions
The preparation of the financial statements requires management
to make judgments, estimates and assumptions that affect the
reported amounts in the financial statements. Management
continually evaluates its judgments and estimates in relation to
assets, liabilities, contingent liabilities, revenue and expenses.
Management bases its judgments and estimates on historical
experience and on other various factors it believes to be reasonable
under the circumstances, the result of which form the basis
of the carrying values of assets and liabilities that are not readily
apparent from other sources.
Management has identified the following critical accounting policies
for which significant judgments, estimates and assumptions
are made. Actual results may differ from these estimates under
different assumptions and conditions and may materially affect
financial results or the financial position reported in future periods.
Further details of the nature of these assumptions and conditions
may be found in the relevant notes to the financial statements.
i) Significant accounting judgments
Recovery of deferred tax assets
Deferred tax assets are recognised for deductible temporary
differences as management considers that it is probable that
future taxable profits will be available to utilise those temporary
differences. Significant management judgment is required to
determine the amount of deferred taxes that can be recognised,
based upon the likely timing and the level of future taxable profits.
Taxation
The Group’s accounting policy for taxation requires management
judgment as to the types of arrangements considered to be a tax
on income in contrast to an operating cost. Judgment is also
required in assessing whether deferred tax assets and certain
deferred tax liabilities are recognised on the Statement of Financial
Position. Deferred tax assets are recognised only where it is
considered more likely than not that they will be recovered, which
is 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 (z), 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.
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FINANCIAL STATEMENTS
3 Financial Risk Management Objectives
and Policies
The Group’s principal financial instruments, other than derivatives,
finance leases and hire purchase contracts, comprise bank loans,
overdrafts 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.
Significant accounting judgments
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. Concentration of credit risk on trade debtors
due from customers are: Transport 93% (2017: 95%) and Fuel
7% (2017: 5%).
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. This risk is in
the form of NZD exposure from subsidiaries.
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
2018 2017
$’000 $’000
Financial assets
– Cash and cash equivalents 15,946 13,985
Financial liabilities
– Bank loans (35,625) (19,625)
Net exposure (19,679) (5,640)
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
2018 2017 2018 2017
movements:
$’000 $’000 $’000 $’000
Consolidated
+ 1% (100 basis points) (138) (40) (138) (40)
– 0.5% (50 basis points) 69 20 69 20
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.
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i) Non-derivative financial liabilities
The following liquidity risk disclosure reflect all contractually fixed
repayments and interest resulting from recognised financial
liabilities and financial guarantees as of 30 June 2018. 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.
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 2018
Liquid financial assets
Cash and cash equivalents 15,946 - - - 15,946
Trade and other receivables 130,001 260 520 83 130,864
145,947 260 520 83 146,810
Financial liabilities
Interest bearing loans and borrowings (42,851) (61,798) (51,226) - (155,875)
Trade and other payables (101,859) (770) - - (102,629)
Financial guarantees (597) - - - (597)
(145,307) (62,568) (51,226) - (259,101)
Net inflow/(outflow) 640 (62,308) (50,706) 83 (112,291)
Year ended 30 June 2017
Liquid financial assets
Cash and cash equivalents 13,985 - - - 13,985
Trade and other receivables 88,874 301 603 101 89,879
102,859 301 603 101 103,864
Financial liabilities
Interest bearing loans and borrowings (38,936) (44,720) (48,348) - (132,004)
Trade and other payables (81,664) - - - (81,664)
Financial guarantees (848) - - - (848)
(121,448) (44,720) (48,348) - (214,516)
Net inflow/(outflow) (18,589) (44,419) (47,745) 101 (110,652)
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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FINANCIAL STATEMENTS
4 Operating Segments
Identification of reportable segments
The Group has identified its operating segments based on the
internal reports that are reviewed and used by the Executive
Management team in assessing performance and in determining
the allocation of resources.
The Executive Management 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.
Accounting policies and inter-segment transactions
The accounting policies used by the Group in reporting segments
are the same as those contained in Note 2 to the accounts and
in the prior period except as detailed below:
Inter-entity sales
Inter-entity sales are recognised based on an internally set transfer
price. The price is set periodically and aims to reflect what the
business operations could achieve if they sold their output and
services to external parties at arm’s length.
Corporate charges
Corporate charges are allocated to each operating segment on a
proportionate basis linked to segment revenue so as to determine
a segmental result.
Segment loans payable and loans receivable
Segment loans are initially recognised at the consideration received
excluding transaction costs. 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 entity has one customer which contributes greater than
10% of total revenue ($92.9m) and falls within the Australian
Transport Segment.
The following table presents revenue and profit information
for reportable segments for the years ended 30 June 2018 and
30 June 2017.
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4 Operating Segments
Australian New Zealand
Transport Fuel Transport Total
$’000 $’000 $’000 $’000
Year ended 30 June 2018
Revenue
External customers 703,254 105,563 45,802 854,619
Finance revenue 15 - 9 24
Inter-segment sales 956 80,390 - 81,346
Total segment revenue 704,225 185,953 45,811 935,989
Results
Depreciation and amortisation expense (37,781) - (4,586) (42,367)
Finance costs (6,108) - (948) (7,056)
Share of profits of associates 130 - - 130
Segment net operating (loss)/profit after tax 12,190 2,884 2,050 17,124
Operating assets 491,334 36,182 42,028 569,544
Operating liabilities 294,307 14,887 12,379 321,573
Other disclosures
Investments in associate 398 - - 398
Capital expenditure (66,641) - (3,540) (70,181)
Inter-segment revenues of $81,346,000
are eliminated on consolidation
Year ended 30 June 2017
Revenue
External customers 641,963 69,652 43,597 755,212
Finance revenue 6 - 14 20
Inter-segment sales 15 69,108 - 69,123
Total segment revenue 641,984 138,760 43,611 824,355
Results
Depreciation and amortisation expense (34,929) - (4,196) (39,125)
Finance costs (5,635) - (1,161) (6,796)
Share of profits of associates 123 - - 123
Segment net operating (loss)/profit after tax 1,979 2,065 2,466 6,510
Operating assets 423,063 28,718 45,542 497,323
Operating liabilities 249,430 10,307 11,451 271,188
Other disclosures
Investments in associate 368 - - 368
(53,858) - (5,154) (59,012)
Capital expenditure
Inter-segment revenues of $69,123,000
are eliminated on consolidation
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FINANCIAL STATEMENTS
4 Operating Segments
Consolidated
2018 2017
$’000 $’000
i) Segment revenue reconciliation to the
Statement of Comprehensive Income
Total segment revenue 935,989 824,355
Inter-segment sales elimination (81,346) (69,123)
Total revenue 854,643 755,232
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 808,832 711,621
New Zealand 45,811 43,611
Total revenue 854,643 755,232
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 deferred tax assets.
Reconciliation of segment operating assets to total assets:
Segment operating assets 569,544 497,323
Inter-segment eliminations (26,875) (22,178)
Deferred tax assets 10,700 13,544
Income tax receivable - -
Total assets per the Statement of Financial Position 553,369 488,689
The analysis of location of non-current assets excluding deferred tax assets
are as follows:
Australia 347,012 313,304
New Zealand 34,043 45,542
Total assets per the Statement of Financial Position 381,055 358,846
iii) Segment liabilities reconciliation to the
Statement of Financial Position
Segment liabilities include trade and other payables and debt. The Group has
a centralised finance function that is responsible for raising debt and capital
for the entire operations. Each entity or business uses this central function to
invest excess cash or obtain funding for its operations. The 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 321,573 271,188
Inter-segment eliminations (26,875) (22,178)
Deferred tax liabilities 37,118 33,879
Income tax payable 686 444
Total liabilities per the Statement of Financial Position 332,502 283,333
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Consolidated
2018 2017
$’000 $’000
5 Revenue and Expenses
a) Revenue
– Rendering of services 729,844 664,521
– Sale of goods 124,775 90,691
– Finance revenue 24 20
Total revenue 854,643 755,232
b) Other income
– Net gains on disposal of property, plant and equipment 2,152 2,852
2,155
– Other
21,4012
Total other income 23,553 5,007
c) Finance costs
– Other parties 2,016 2,219
– Finance charges on hire purchase contracts 5,040 4,577
Total finance costs 7,056 6,796
d) Depreciation and amortisation expense
Depreciation
– Buildings 2,302
2,296
– Motor vehicles 35,691 32,466
4,363
– Plant and equipment
4,374
Total depreciation and amortisation expense
42,367
39,125
e) Employee expenses
201,063
– Wages and salaries 227,117
– Workers’ compensation costs 9,659 7,886
– Long service leave provision 1,185 2,054
– Annual leave provision 14,376 13,050
– Payroll tax 12,635 11,071
– Defined contribution plan expense 16,036 14,638
– Directors retirement scheme expense 8 4
Total employee expenses 281,016 249,766
f) Operating lease rental expense
– Property 16,238 15,102
– Plant and equipment 1,231 2,404
Total operating lease rental expense 17,469 17,506
2
Included within other income is a $16.1m offer from our former rail provider, Aurizon, for the resolution of claims against it by K&S arising out of the closure of Aurizon’s
intermodal business in December 2017. Negotiations are continuing for the resolution of these claims.
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FINANCIAL STATEMENTS
Consolidated
2018 2017
$’000 $’000
6 Income Tax
The major components of income tax expense are:
Statement of Comprehensive Income
Current income tax
– Current income tax charge 1,032 622
– Adjustments in respect of current income tax of previous years 128 61
Deferred income tax
– Relating to origination and reversal of income tax expense reported in
the Statement of Comprehensive Income temporary differences 6,316 2,172
Income tax expense/(benefit) reported in the Statement of Comprehensive Income 7,476 2,855
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 - -
– Common control (STI) (133) -
Income tax expense reported in equity (133) -
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/(loss) before income tax 24,600 9,365
At the Group’s statutory income tax rate of 30% (2017: 30%) 7,380 2,810
– Permanent differences (32) (16)
– Adjustments in respect of current income tax of previous years 128 61
Income tax expense reported in the Statement of Comprehensive Income 7,476 2,855
Consolidated
2018 2018 2017 2017
$’000 $’000 $’000 $’000
Current Deferred Current Deferred
Income Income Income Income
Tax Tax Tax Tax
Recognised deferred tax assets and liabilities
Opening balance (444) (20,335) 897 (17,954)
Charged to income (1,032) (5,991) (2,786) (69)
True up (128) - - -
DTA recognised on losses - (325) 2,178 (2,178)
Charged to equity - 134 - -
Other payments 918 - (733) -
Exchange rate - 99 - (134)
Closing balance (686) (26,418) (444) (20,335)
Tax (benefit)/expense in Statement of Comprehensive Income 7,476 2,855
Amounts recognised in the Statement of Financial Position:
Deferred tax asset 10,700 13,544
Deferred tax liability (37,118) (33,879)
(26,418) (20,335)
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6 Income Tax
Statement of Financial Position
2018 2017
$’000 $’000
Deferred income tax
Deferred income tax at 30 June relates to the following:
Consolidated
Deferred tax liabilities
– Accelerated depreciation for tax purposes (10,586) (12,707)
– Revaluation of land and buildings to fair value (18,023) (18,023)
– Trade and other receivables not derived for tax purposes (8,509) (3,149)
– Intangibles (brands and customer contracts) - -
(37,118) (33,879)
Deferred tax assets
– DTA recognised on losses 1,586 1,692
– Accelerated depreciation for accounting purposes 62 214
– Trade and other payables not currently deductible 1,341 2,380
– Trade and other receivables not derived for tax purposes - 146
– Employee entitlements not currently deductible 7,711 9,112
10,700 13,544
Tax consolidation
i) Members of the tax consolidated group and the tax sharing arrangement
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.
ii) Tax effect accounting by members of the tax consolidated group
Members of the tax consolidated group have entered into a tax funding agreement. The tax funding agreement requires members of the
tax consolidated group to make contributions to the head company for tax liabilities and deferred tax balances arising from transactions
occurring after the implementation of tax consolidation. Contributions are payable following the payment of the liabilities by K&S
Corporation Limited. The assets and liabilities arising under the tax funding agreement are recognised as intercompany assets and
liabilities with a consequential adjustment to income tax expense or benefit. The Group has applied the group allocation approach in
determining the appropriate amount of current taxes and deferred taxes to allocate to members of the tax consolidation group.
The current and deferred tax amounts are measured in a systematic manner that is consistent with the broad principles in AASB 112
Income Taxes. In addition to its own current and deferred tax amounts, the head entity also recognises current and deferred tax assets
and liabilities arising from unused tax losses and unused tax credits assumed from controlled entities within the tax consolidated group.
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. A Deferred Tax Asset / Liability is recognised when there is a deductible / taxable
temporary difference between the tax base of an asset or liability and its carrying amount in the statement of financial position.
In preparing the accounts for K&S Corporation Limited for the current year, the following amounts have been recognised as tax
consolidation adjustments:
Parent
2018 2017
$’000 $’000
Total increase/(reduction) to tax expense of K&S Corporation Ltd (3,340) (2,155)
Total increase/(reduction) to inter-company assets of K&S Corporation Ltd (3,340) 2,155
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FINANCIAL STATEMENTS
Consolidated
2018 2017
$’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 (loss)/profit attributable to ordinary equity holders of the parent
from continuing operations 17,124 6,510
Net (loss)/profit attributable to ordinary equity holders of the parent 17,124 6,510
2018 2017
Thousands Thousands
Weighted average number of ordinary shares used in the calculation of the
basic earnings per share 123,160 121,411
Effect of dilution
– Ordinary shares - -
Weighted average number of ordinary shares adjusted for the effect of dilution 123,160 121,411
Consolidated
2018 2017
$’000 $’000
8 Dividends Paid and Proposed
Declared and paid during the year:
Dividends on ordinary shares
Final franked dividend for 2017: 2.0 cents (2016 Nil) 2,442 -
Interim franked dividend for 2018: 2.0 cents (2017: 1.5 cents) 2,465 1,818
4,907 1,818
Proposed (not recognised as a liability as at 30 June):
Dividends on ordinary shares
Final franked dividend for 2018: 2.0 cents (2017: 2.0 cents) 2,491 2,424
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% (2017: 30%) 42,873 43,930
• franking credits that will arise from the payment of income tax payable as at
the end of the financial year - -
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 (2,491) (2,424)
40,382 41,506
Tax rates
The tax rate at which dividends have been franked is 30% (2017: 30%).
Dividends proposed will be franked at the rate of 30% (2017: 30%).
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Consolidated
2018 2017
$’000 $’000
9 Cash and Cash Equivalents
Cash 57 55
Cash deposits with banks 15,889 13,930
15,946 13,985
Cash at bank earns interest at floating rates based on daily bank deposit rates.
Reconciliation of net profit/(loss) after income tax to net cash flows from operations
Net profit/(loss) after income tax 17,124 6,510
Add/(less) items classified as investing/financing activities:
– (Profit)/loss on sale of non-current assets (2,152)
(2,852)
Add/(less) non-cash items:
– Impairment of intangibles/non-current assets - -
– Amortisation - -
– Amounts set aside to provisions (400) 4,304
– Depreciation 42,367 39,125
– Share of associates’ net profit (130) (123)
– Dividends received from associates - -
Net cash provided by operating activities before changes in assets and liabilities 56,809 46,964
CHANGE IN ASSETS AND LIABILITIES
(619)
(Increase)/decrease in inventories (1,008)
563
(Increase)/decrease in income tax benefit 2,844
(Increase)/decrease in prepayments (1,177)
277
(Increase)/decrease in receivables (41,025) (21,669)
20,702
(Decrease)/increase in trade creditors 20,965
1,341
(Decrease)/increase in income taxes payable 242
(Decrease)/increase in deferred taxes payable 3,239
1,818
Exchange rate changes on opening cash balances (77) (12)
Net cash provided by operating activities 40,812
49,365
Disclosure of financing facilities
Refer to Note 18.
Disclosure of non-cash financing and investing activities
Refer to Note 18.
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FINANCIAL STATEMENTS
Consolidated
2018 2017
$’000 $’000
10 Trade and Other Receivables
Current
Trade debtors 101,096 80,854
Allowance for impairment loss (a) (235) (490)
100,861 80,364
Sundry debtors 28,880 3 8,208
129,741 88,572
Non-current
Related party receivables
– Employee share plan loans 1,035 1,179
1,035 1,179
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 490 437
Charge for the year 11 194
Amounts written off (b) (266) (141)
At 30 June 235 490
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**
2018 101,096 68,471 24,072 4,687 - 3,631 235
2017 80,854 49,929 22,521 5,389 - 2,525 490
* 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.
3
Included within sundry debtors is a $16.1m offer from our former rail provider, Aurizon, for the resolution of claims against it by K&S arising out of the closure of
Aurizon’s intermodal business in December 2017. Negotiations are continuing for the resolution of these claims.
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Consolidated
2018 2017
$’000 $’000
11 Inventories
Consumable stores – at cost 2,673 2,556
2,292
Finished goods – fuel at cost 3,183
Total inventories at the lower of cost and net realisable value 5,856 4,848
a) Inventory expense
Inventories recognised as an expense for the year ended 30 June 2018
totalled $108,800,000 (2017: $77,094,000) for the Group. This expense relates
to fuel sold and has been included in the cost of goods sold line item.
Parent
2018 2017
$’000 $’000
12 Other Financial Assets
Investments controlled entities
– Shares – unlisted at cost 78,552 78,552
78,552 78,552
Investment Carrying
Interest Owned Amount Consolidated
2018 2017 2018 2017
% % $’000 $’000
13 Investment in Associate
a) Investment details
Smart Logistics Pty Ltd 50 50 398
368
Investment in associate 398 368
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
2018 2017
$’000 $’000
Smart Logistics Pty Ltd
At 1 July 368 395
Share of profit/(loss) after income tax 130 123
Dividend payment (100) (150)
At 30 June 398 368
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FINANCIAL STATEMENTS
13 Investment in Associate
Consolidated
2018 2017
$’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 6,039 5,380
Non-current assets 33 33
6,072 5,413
Current liabilities (5,252) (4,656)
Non-current liabilities (24) (21)
(5,276) (4,677)
Net assets 796 736
Proportion of Group’s ownership 50.0% 50.0%
Share of associate net assets/(liabilities) 398 368
Carry amount of the Investment 398 368
Extract from the associates’ Statement of Comprehensive Income:
Revenue 57,255 58,821
Net profit 264 251
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 2018
As at 1 July 2017 net of accumulated depreciation and impairment 117,266 217,295 16,437 350,998
Additions 6,328 58,729 5,124 70,181
Disposals - (4,117) (57) (4,174)
Depreciation charge for the year (2,302) (35,691) (4,374) (42,367)
Exchange adjustment (1) (1,139) 54 (1,086)
At 30 June 2018 net of accumulated depreciation and impairment 121,291 235,077 17,184 373,552
At 30 June 2018
Cost or fair value 131,886 486,492 71,809 690,187
Accumulated depreciation and impairment (10,595) (251,415) (54,625) (316,635)
Net carrying amount 121,291 235,077 17,184 373,552
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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 2017
As at 1 July 2016 net of accumulated depreciation and impairment 118,856 198,123 17,386 334,365
Additions 723 54,822 3,467 59,012
Disposals (17) (3,133) (20) (3,170)
Depreciation charge for the year (2,296) (32,466) (4,363) (39,125)
Exchange adjustment - (51) (33) (84)
At 30 June 2017 net of accumulated depreciation and impairment 117,266 217,295 16,437 350,998
At 30 June 2017
Cost or fair value 125,559 456,852 67,174 649,585
Accumulated depreciation and impairment (8,293) (239,557) (50,737) (298,587)
Net carrying amount 117,266 217,295 16,437 350,998
b) Revaluation of freehold land and buildings
The freehold land and buildings are included in the financial statements at fair value, except for capital expenditure subsequent to the
valuation which is recorded at cost. No revaluation of land and buildings was performed in the current financial year as it is believed their
fair value does not differ materially from their carrying value. The last revaluation was performed by Jones Lang LaSalle in 2016 on the
basis of open market values of properties for the highest and best use, which resulted in an increase to the asset revaluation reserve of
$8.9 million.
Fair value of the properties was determined using the market comparable method. This means that valuations performed by the
valuer are based on active market prices, significantly adjusted for differences it the nature, location or condition of the specific property.
As at the date of revaluation, the properties fair values are based on valuations performed by Jones Lang LaSalle, an accredited
independent valuer.
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.
The Group determines the policies and procedures for both recurring fair value measurement, such as land and buildings. External
valuers are involved for valuation of land and buildings. External valuations are performed every three years or less if determined
appropriate by the Group. Selection criteria include market knowledge, reputation, independence and whether professional standards
are maintained. The Group decides, after discussions with the Group’s external valuers, which valuation techniques and inputs to use
for each case.
At each valuation, the Group analyses the movements in the values of land and buildings which are required to be remeasured or
re-assessed as per the Group’s accounting policies. For this analysis, the Group verifies the major inputs applied in the latest valuation
by agreeing the information in the valuation computation to contracts and other relevant documents.
The Group, in conjunction with the Group’s external valuers, also compares the change in the fair value of land and buildings with
relevant external sources to determine whether the change is reasonable.
Significant increases (decreases) in estimated rental value and rent growth per annum in isolation would result in a significantly higher
(lower) fair value of the properties. Significant increases (decreases) in the long-term vacancy rate and discount rate in isolation would
result in a significantly lower (higher) fair value.
Generally, a change in the assumption made for the estimated rental value is accompanied by a directionally similar change in the rent
growth per annum and discount rate, and an opposite change in the long term vacancy rate.
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FINANCIAL STATEMENTS
14 Property, Plant and Equipment
Consolidated
2018 2017
Freehold Land Freehold Land
and Buildings and Buildings
$’000 $’000
c) Carrying amounts if land and buildings were measured
at cost less accumulated depreciation and impairment
If land and buildings were measured using the cost model the
carrying amounts would be as follows:
Cost 93,808 87,480
Accumulated depreciation and impairment (17,087) (15,718)
Net carrying amount 76,721 71,762
d) Property, plant and equipment pledged as security for liabilities
The carrying value of motor vehicles held under hire purchase contracts at 30 June 2017 is $178,702,389 (2017: 162,934,451).
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.
Goodwill Total
$’000 $’000
15 Intangible Assets and Goodwill
Year ended 30 June 2018
At 1 July 2017 net of accumulated amortisation and impairment 6,301 6,301
Exchange adjustment (231) (231)
At 30 June 2018 net of accumulated amortisation and impairment 6,070 6,070
At 30 June 2018
Cost (gross carrying amount) 6,301 6,301
Accumulated amortisation and impairment (231) (231)
Net carrying amount 6,070 6,070
Year ended 30 June 2017
At 1 July 2016 net of accumulated amortisation and impairment 6,307 6,307
Exchange adjustment (6) (6)
At 30 June 2016 net of accumulated amortisation and impairment 6,301 6,301
At 30 June 2017
Cost (gross carrying amount) 6,307 6,307
Accumulated amortisation and impairment (6) (6)
Net carrying amount 6,301 6,301
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16 Impairment Testing of Goodwill
Cash generating units
The Group performs an impairment assessment when there is an indication of a possible impairment of its non-current assets and, in
addition, performs an impairment review of goodwill and indefinite life intangibles assets at least annually. The Group considers the
relationship between its market capitalisation and its book value, among other factors, when reviewing for indicators of impairment.
As at 30 June 2018, the market capitalisation of the Group was below the book value of its equity, indicating a potential impairment of
goodwill and impairment of the assets of the operating segments. An impairment review was undertaken at 30 June 2018.
For the purpose of impairment testing, goodwill is allocated to cash-generating units (‘CGUs’) which equate to the Group’s reportable
segments. CGUs are the smallest group of assets that generate cash inflows that are largely independent of the cash flows from
other assets or groups of assets. Impairment testing has been undertaken on a value-in-use basis whereby the net present value of
the future cash flows are compared against the carrying amount of net operating assets. Cash flow projections are based on five year
financial forecasts.
The aggregate carrying amounts of goodwill allocated to each CGU after impairment are as follows:
Goodwill
2018 2017
$’000 $’000
Australian Transport - -
Fuel - -
New Zealand Transport 6,070 6,301
6,070 6,301
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.
The Group has used the following key assumptions in the impairment assessment of each CGU:
Discount Rate Terminal Value Growth Rate
2018 2017 2018 2017
% % % %
Australian Transport 13.93 13.93 3.0 3.0
Fuel 13.71 13.71 3.0 3.0
New Zealand Transport 13.38 13.38 2.5 2.5
Discount rate
The discount rate represents 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.
Sensitivity analysis
i) Sensitivity to changes in assumptions
Whilst there are a range of possible outcomes, the modelling shows the recoverable amount of the Australian Transport CGU exceeds its
carrying value by $13.1m. 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 0.29% 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 0.36% 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 5.30% would result in a reduction of the recoverable amount to below
the carrying value.
• Budget revenue – a decrease in budget revenue of over 2.76% would result in a reduction of the recoverable amount to below the
carrying value.
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FINANCIAL STATEMENTS
16 Impairment Testing of Goodwill
Whilst there are a range of possible outcomes, the modelling shows the recoverable amount of the New Zealand Transport CGU exceeds
its carrying value by $8.3m. This excess in recoverable amount could be reduced in the unlikely event the following key assumptions occur:
• Discount rate – an increase in the discount rate of over 1.67% 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 2.27% 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 25.76% would result in a reduction of the recoverable amount to below
the carrying value.
• Budget revenue – a decrease in budget revenue of over 1.48% would result in a reduction of the recoverable amount to below the
carrying value.
Consolidated
2018 2017
$’000 $’000
17 Payables
Current
Trade creditors and payables 101,859 81,664
101,859 81,664
Non-current
Trade creditors and payables 770 -
770 -
i) Trade payables are non-interest bearing and are normally settled on 30 day terms
18 Interest Bearing Loans and Borrowings
Current
Hire purchase liabilities – secured 37,545 34,356
37,545 34,356
Non-current
Non-redeemable preference shares 60 60
Hire purchase liabilities – secured 72,680 69,095
Bank loans – secured 35,625 19,625
108,365 88,780
Commitments in respect of hire purchase agreements are payable as follows:
Not later than one year 41,819 38,448
Later than one year but not later than five years 77,398 73,443
119,217 111,891
Deduct: future finance charges (8,992) (8,440)
Total hire purchase liability 110,225 103,451
Current 37,545 34,356
Non-current 72,680 69,095
110,225 103,451
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18 Interest Bearing Loans and Borrowings
Fair value disclosures
The fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. The fair values of the Group’s interest-bearing borrowings and loans are determined
by using the DCF method using a discount rate that reflects the Group’s borrowing rate as at the end of the reporting period.
The own non-performance risk as at 30 June 2018 was assessed to be insignificant.
The carrying amount of the Group’s current and non-current borrowings is $145,910,000, the fair value of these is $129,017,000.
Details of the fair value of the Group’s interest bearing liabilities are set out in Note 3.
1 July Cash For. Ex. New 30 June
2017 Flows Acquisitions movement Leases Other 2018
$’000 $’000 $’000 $’000 $’000 $’000 $’000
30 June 2018
Hire Purchase Liabilities 103,451 (39,431) - (711) 46,916 - 110,225
Non-redeemable
preference shares 60 - - - - - 60
Bank Loans – secured 19,625 16,000 - - - - 35,625
Total Liabilities from
financing activities 123,136 (23,431) - (711) 46,916 - 145,910
1 July Cash For. Ex. New 30 June
2016 Flows Acquisitions movement Leases Other 2017
$’000 $’000 $’000 $’000 $’000 $’000 $’000
30 June 2017
Hire Purchase Liabilities 93,622 (37,135) - (30) 46,994 - 103,451
Non-redeemable
preference shares 60 - - - - - 60
Bank Loans – secured 20,625 (1,000) - - - - 19,625
Total Liabilities from
financing activities 114,307 (38,135) - (30) 46,994 - 123,136
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 $178,702,389 (2017: $162,934,451). The weighted average
cost of these facilities was 4.25% (2017: 4.41%).
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 $112,919,000 (2017: $108,640,000). The non-current bank loans are subject to annual review.
The Group has bank loan facilities available for a period beyond June 2018. Maturity dates for the Group’s facilities are:
Facility amount ($‘000) Expiry
25,000 4 January 2020
33,000 26 November 2020
40,000 26 November 2019
The facilities bear interest at 2.90% (2017: 2.49%).
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FINANCIAL STATEMENTS
18 Interest Bearing Loans and Borrowings
Consolidated
2018 2017
$’000 $’000
Financing facilities available
Total facilities available:
Bank overdrafts 7,000 7,000
Bank loans 84,000
84,000
Standby letters of credit 597 848
91,597
91,848
Standby letters of credit
The Group has the following guarantees at 30 June 2018:
• Bank guarantees of $597,884 have been provided by Westpac to suppliers.
Facilities utilised at balance date:
Bank overdrafts - -
Bank loans 35,625 19,625
848
Standby letters of credit 597
36,222
20,473
Facilities not utilised at balance date:
Bank overdrafts 7,000 7,000
Bank loans 48,375 64,375
Standby letters of credit - -
55,375
71,375
Total facilities 91,597 91,848
Facilities used at balance date (36,222) (20,473)
Facilities unused at balance date 55,375 71,375
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 2018.
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.
Consolidated
2018 2017
$’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 112,607 108,224
– Plant and equipment 312 416
Total non-current assets pledged as security 112,919 108,640
Non-cash financing and investment activities
During the financial year, the economic entity acquired property, plant and equipment with an aggregate fair value of $46,916,000
(2017: $46,994,000) and disposed of property, plant and equipment with an aggregate fair value of $nil (2017: $nil) by means of finance
lease or hire purchase arrangements. These acquisitions and disposals are not reflected in the Statement of Cash Flows.
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Consolidated
2018 2017
$’000 $’000
19 Provisions
Current
Employee benefits 25,702 25,050
Self insured workers’ compensation liability 3,837 3,783
29,539
28,833
Non-current
Employee benefits 6,361
6,213
Make good provision 149 694
363
Directors’ retirement allowance 371
8,107
Self insured workers’ compensation liability 9,739
16,620
15,377
No dividends have been provided for the year ended 30 June 2018. 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.
Directors’ Self Insured workers’
Make Good Retirement Compensation
Provision Allowance Liability Total
$’000 $’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 2017 694 363 11,890 12,947
Arising during the year - 8 1,686 1,694
Utilised (545) - - (545)
At 30 June 2018 149 371 13,576 14,096
Current 2018 - - 3,837 3,837
Non-current 2018 149 371 9,739 10,259
149 371 13,576 14,096
Current 2017 - - 3,783 3,783
Non-current 2017 694 363 8,107 9,164
694 363 11,890 12,947
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, South Australia, Victoria,
Queensland, New South Wales and the Northern Territory 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(z) and Note 2(cc) 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(z) for the relevant accounting policy and a discussion of the significant estimates and assumptions applied in the
measurement of this provision.
iv) Self insured workers compensation
Workers compensation self insurance liability is based on Actuaries reports prepared in accordance with the K&S Comcare self
insurance licence.
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FINANCIAL STATEMENTS
Consolidated
2018 2017
$’000 $’000
20 Contributed Equity and Reserves
a) Ordinary shares
Contributed equity
124,528,908 (2017: 122,069,541) ordinary shares fully paid 158,099 153,951
158,099 153,951
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 or 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 2016 121,202 152,518
Issued through Dividend Re-investment Plan – 868,185 ordinary shares at $1.6501 868 1,433
At 30 June 2017 122,070 153,951
Issued through Dividend Re-investment Plan – 1,187,065 ordinary shares at $1.7240 1,187 2,047
Issued through Dividend Re-investment Plan – 1,272,302 ordinary shares at $1.6516 1,272 2,101
At 30 June 2018 124,529 158,099
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 2018, the Group paid dividends of $4,906,523 (2017: $1,818,000).
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
2018 2017
$’000 $’000
Total interest bearing loans and borrowings 145,910 123,136
Less cash and cash equivalents (15,946) (13,985)
Net debt 129,964 109,151
Net debt + Shareholders funds 350,832 314,507
Gearing ratio 37.0% 34.7%
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.
Common control reserve
Scott’s Transport Industries Pty Ltd (STI) merger (313) (132)
The movement in the common control reserve relates to the post tax difference between the cash received for the additional take
up of STI employee accrued leave entitlements that occurred during the year. Refer to Note 29 for initial acquisition entries under
common control.
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21 Derivative Financial Instruments
a) Hedging activities
The Group has no interest rate swap agreements in place at 30 June 2018.
b) Interest rate risk
Information regarding interest rate risk exposure is set out in Note 3.
Consolidated
2018 2017
$’000 $’000
22 Commitments
The estimated maximum amount of commitments not
provided for in the accounts as at 30 June 2018 are:
Capital expenditure commitments
The aggregate amount of contracts for capital expenditure
on plant and equipment due no later than one year 28,849
31,163
Lease rental commitments
Operating lease and hire commitments:
– Not later than one year 14,025 13,305
21,281
– Later than one year but not later than five years 20,394
5,488
– Later than five years 3,868
38,287 40,074
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 movement in the Consumer Price Index or
operating criteria.
Lease Rental Commitments
The Group has entered into commercial leases to finance the purchase of its fleet, with lease terms between here and five years.
The Group had finance leases and hire purchase contracts for various items of plant and machinery. The Group’s obligations under
finance leases are secured by the lessor’s title to the leased assets. Future minimum lease payments under finance leases and hire
purchase contracts together with the present value of the net minimum lease payment are, as follows:
Minimum Present value Minimum Present value
payments of payments payments of payments
$’000 $’000 $’000 $’000
2018
2017
Hire Purchase lease commitments
Within one year 41,819 37,545 38,448 34,356
After one year but not more than five years 77,398 72,680 73,443 69,095
Total minimum lease payments 119,217 110,225 111,891 103,451
Less amounts representing finance charges (8,992) - (8,440) -
Present value of minimum lease payments 110,225 110,225 103,451 103,451
Hire purchase and finance lease commitments are disclosed in Note 18.
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FINANCIAL STATEMENTS
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
There are a number of minor legal actions pending against companies within the consolidated entity. Liability has not been admitted and
claims will be defended. The Directors do not believe these actions will result in any significant cost to the consolidated entity.
24 Deed of Cross Guarantee
Pursuant to ASIC Corporations (Wholly-owned Companies) Instrument 2016/785 dated 17 December 2016, 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 legislative instrument that the Company and each of the subsidiaries enter into
a Deed of Cross Guarantee. The effect of the Deed is that the Company guarantees to each creditor payment in full of any debt in
the event of winding up of any of the subsidiaries under certain provisions of the Corporations Act 2001. If a winding up occurs under
other provisions of the Act, the Company will only be liable in the event that after six months any creditor has not been paid in full.
The subsidiaries have also given similar guarantees in the event that the Company is wound up.
The subsidiaries subject to the Deed are:
K&S Group Pty Ltd
Reid Bros Pty Ltd
DTM Holdings (No. 2) Pty Ltd
Kain & Shelton Pty Ltd
Alento Pty Ltd
K&S Freighters Pty Ltd
DTM Holdings Pty Ltd
K&S Group Administrative Services Pty Ltd
DTM Pty Ltd
Kain & Shelton (Agencies) Pty Ltd
Regal Transport Group Pty Ltd
K&S Transport Management Pty Ltd
Strategic Transport Pty Ltd
Blakistons-Gibb Pty Ltd
Vortex Nominees Pty Ltd
K&S Logistics Pty Ltd
K&S Freighters Limited *
K&S Project Services Pty Ltd
Cochrane’s Transport Limited *
K&S Integrated Distribution Pty Ltd
Hyde Park Tank Depot Pty Ltd
Scott Corporation Pty Ltd
Energytrans Pty Ltd
Bulktrans 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 2018 is set out below:
Closed Group
2018 2017
$’000 $’000
Statement of Comprehensive Income
Profit/(loss) before income tax 24,600 9,365
Income tax benefit/(expense) (7,476) (2,855)
Profit/(loss) after income tax 17,124 6,510
Retained profits at the beginning of the year 9,597 4,905
Transfer asset revaluation reserve - -
(1,818)
Dividends provided or paid (4,907)
Retained earnings at the end of the year 21,814 9,597
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24 Deed of Cross Guarantee
Closed Group
2018 2017
$’000 $’000
Statement of Financial Position
Cash 15,946 13,985
Trade and other receivables 129,741 88,572
Inventories 5,856 4,848
Prepayments 10,071 8,894
Total current assets 161,614 116,299
Other receivables 1,035 1,179
Investment in associate 398 368
Property, plant and equipment 373,552 350,998
Intangibles 6,070 6,301
Deferred tax assets 10,700 13,544
Total non-current assets 391,755
372,390
Total assets 553,369
488,689
Trade and other payables 101,859
Interest bearing loans and borrowings 37,545
Current tax liabilities 686
Provisions 29,539
81,664
34,356
444
28,833
Total current liabilities 169,629
145,297
Trade and other payables 770
Interest bearing loans and borrowings 108,365
Deferred tax liabilities 37,118
Provisions 16,620
-
88,780
33,879
15,377
Total non-current liabilities 162,873
138,036
Total liabilities 332,502
283,333
Net assets 220,867
205,356
Contributed equity 158,099
153,951
Reserves 40,954 41,808
9,597
Retained earnings 21,814
Total equity 220,867
205,356
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notes to the
FINANCIAL STATEMENTS
Class of Country of % Equity Interest
Share Incorporation
2018 2017
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
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
100 100
100 100
100 100
26 Related Party Disclosures
DIRECTORS
The names of each person holding the position of Director of K&S Corporation Limited during the financial year and up to the date of
signing the financial report are Messrs. T Johnson, L Winser, R Smith, G Walters 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.
Mr Winser has an interest as an alternate Director of several companies within the Scott Group.
Mr Johnson has an interest as a Director of AA Scott Pty Ltd.
Purchases Sales
2018 2017 2018 2017
$ $ $ $
The aggregate amount of dealings with these companies during
2018 were as follows:
AA Scott Pty. Ltd
2,029,814 2,051,396 3,985 2,037
The Border Watch Pty Ltd 25,364 20,269 63,003 779
Scott’s Transport Industries Pty Ltd - 273,484 - 601,892
Scott’s Fleet Rentals Pty Ltd 10,944,564 3,638,706 204,100 1,008,100
Mr R Smith has an interest as Director of Cleanaway Waste
Management Ltd. Transactions with this company during 2018
were sales of $985,045 (2017: $7,629 and purchases of
$173,720 (2017: $193,907).
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26 Related Party Disclosures
Consolidated
2018 2017
$’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 Fleet Rentals Pty Ltd 87 610
The Border Watch 49 -
1,443 1,347
Smart Logistics Australia Pty 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)
7
Cleanaway Waste Management Ltd 21
AA Scott Pty Ltd 261
127
The Border Watch 3 -
Smart Logistics Australia Pty Limited 16
2
Scott’s Fleet Rentals Pty Ltd 1,006 61
Wholly-owned Group
Details of interests in wholly-owned controlled entities are set out at Note 25.
Parent
2018 2017
$’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 101,807 79,751
– Non-current 17,961 17,961
119,768 97,712
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.
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FINANCIAL STATEMENTS
26 Related Party Disclosures
Consolidated
2018 2017
DIRECTORS’ SHARE TRANSACTIONS
Shareholdings
Aggregate number of shares held by Directors and their Director-related
entities at balance date:
– Ordinary shares 1,812,187 1,775,888
– Preference shares - -
All share transactions were with the parent Company, K&S Corporation Limited.
2018 2017
$’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 36 27
– Preference shares - -
Directors' transactions in shares and share options
Purchases of shares by Directors and Director-related entities are
set out in the Directors’ Report.
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.
27 Key Management Personnel
a) Details of Key Management Personnel
i) Directors
Mr T Johnson Non-Executive Chairman
Mr R Smith Non-Executive
Mr L Winser Non-Executive
Mr G Walters 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
Consolidated
2018 2017
$ $
b) Compensation for Key Management Personnel
Short-term 2,017,293 1,880,038
Long-term 30,388 28,871
Termination payments - -
Post employment 139,268 157,771
2,186,949 2,066,680
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28 Events Subsequent to Balance Date
No matters have 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.
Currently negotiations are continuing with our former rail provider, Aurizon, for the resolution of claims made against it by K&S in
regards to the closure of Aurizon’s intermodal business.
29 Business Combinations
Acquisitions during the period ended 30 June 2018
There were no acquisitions made in 2018.
Acquisitions during the period ended 30 June 2017
On 30 January 2017, Scott’s Transport Industries (STI) Pty Ltd was merged into K&S Corporation Limited via the transfer of certain
assets into K&S Corporation’s subsidiary, K&S Freighters Pty Ltd. Under the agreement, STI transferred to K&S Freighters its rights
and entitlements under its customer contracts and K&S Freighters made offers of employment to transferring employees of STI, also
recognising prior periods of service and the value of accured leave entitlements.
As this transaction involved entities under common control, the Directors have elected for the respective assets and liabilities of STI to
be recognised at book value as at 30 January 2017 in the accounts of K&S Corporation Limited. This approach will not give rise to
any goodwill on consolidation within the K&S Group or a gain/loss on the transaction, rather this approach resulted in the recognition
of a Common Control Reserve within equity of the K&S Corporation Limited consolidated financial statements.
STI was established more than 60 years ago by the late Allan Scott AO and is recognised as one of Australia’s largest privately
owned transport companies. 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.
K&S took on the employees and their related employee entitlements. The following payments were received by K&S in relation to
the employees:
Book value recognised
on acquisition
$’000
Assets
Cash 1,675
Customer contracts -
1,675
Liabilities
Employee entitlements 1,807
1,807
Common control reserve arising on merger 132
Purchase consideration transferred -
From the date of merger, STI has contributed $45,783,399 of revenue and $1,248,710 to the profit before tax from continuing
operations of the Group.
Transaction costs of $60,000 have been expensed and are included in other expenses in the statement of profit or loss and are part
of operating cash flows in the statement of cash flows.
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FINANCIAL STATEMENTS
Consolidated
2018 2017
$ $
30 Auditor’s Remuneration
The auditor of K&S Corporation Limited is Ernst & Young.
Audit services:
Audit and review of the statutory financial reports 197,400 186,000
197,400 186,000
Other services:
Tax software implementation - 14,911
AASB 15/16 Technical workshop 6,500 -
6,500 14,911
Parent
2018 2017
$ $
31 Parent Entity Information
Current assets 101,158 79,751
Total assets 199,215 180,629
Current liabilities (3,340) -
Total liabilities (32,840) (13,492)
Issued capital 158,099 153,951
Asset revaluation reserve 161 161
Retained earnings 8,115 13,025
Total Shareholders’ equity 166,375 167,137
Profit after tax of the parent entity (3,764) (5,502)
Total comprehensive income of the parent entity (3,764) (5,502)
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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directors’
DECLARATION
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 8
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 2018 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 2018.
e) as at the date of this declaration, there are reasonable grounds to believe that the members of the Closed
Group identified in Note 24 will be able to meet any obligations or liabilities to which they are or may become
subject to, by virtue of the Deed of Cross Guarantee.
Dated at Melbourne this 23rd day of August 2018.
On behalf of the Board:
Tony Johnson
Chairman
Paul Sarant
Managing Director
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auditor’s independence
DECLARATION
T O T H E D I R E C T O R S O F K & S C O R P O R AT I O N L I M I T E D
As lead auditor for the audit of K&S Corporation Limited for the financial year ended 30 June 2018,
I declare to the best of my knowledge and belief, there have been:
a) no contraventions of the auditor independence requirements of the Corporations Act 2001
in relation to the audit; and
b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of K&S Corporation Limited and the entities it controlled during the
financial year.
Ernst & Young
David Sanders
Partner
Adelaide
23 August 2018
A member firm of Ernst & Young Global Limited. Liability Limited by
a scheme approved under Professional Standards Legislation.
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independent auditor’s
REPORT
T O T H E M E M B E R S O F K & S C O R P O R AT I O N L I M I T E D
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of K&S Corporation Limited (the Company) and its subsidiaries (collectively the
Group), which comprises the consolidated statement of financial position as at 30 June 2018, the consolidated
statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash
flows for the year then ended, notes to the financial statements, including a summary of significant accounting policies,
and the directors' declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001,
including:
a giving a true and fair view of the consolidated financial position of the Group as at 30 June 2018 and of its
consolidated financial performance for the year ended on that date; and
b complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards
are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report.
We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act
2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of
Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia.
We have also fulfilled our other ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the
financial report of the current year. These matters were addressed in the context of our audit of the financial report
as a whole, and in forming our opinion thereon, but we do not provide a separate opinion on these matters. For each
matter below, our description of how our audit addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the Financial Report
section of our report, including in relation to these matters. Accordingly, our audit included the performance of
procedures designed to respond to our assessment of the risks of material misstatement of the financial report.
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independent auditor’s
REPORT
The results of our audit procedures, including the procedures performed to address the matters below, provide the basis
for our audit opinion on the accompanying financial report.
Impairment assessment of intangible assets and property, plant and equipment
Why significant
How our audit addressed the key audit matter
As at 30 June 2018, the value of the Group’s net assets
exceeded its market capitalisation. This was considered by
the Group to be an indicator of impairment.
An impairment assessment of intangible assets and property,
plant and equipment was carried out by the Group as disclosed
in Note 16 of the financial report. This required the Group to
apply judgment around, forecast cash flows, long term growth
rates, the allocation of corporate costs to the Groups cash
generating units (CGUs) and the application of an appropriate
discount rate.
Given the uncertainty involved in the forecast of future results
used in the impairment assessment, we considered this to be
a key audit matter.
No impairment was recorded following the impairment
assessment.
We assessed the appropriateness of the key assumptions
used by the Group in their impairment testing model.
Specifically, we assessed the cash flow projections, discount
rate, perpetuity growth rates and sensitivities used, with the
assistance of our valuation specialists where appropriate.
We considered external market data and assessed the
historical accuracy of the Group’s forecasting and ensured that
the forecast cash flows were consistent with the most recent
board-approved cash flow forecasts.
We also assessed the adequacy of the disclosures associated
with the impairment assessment.
Information Other Than the Financial Report and Auditor’s Report Thereon
The directors are responsible for the other information. The other information comprises the information included in the
Company’s 2018 Annual Report other than the financial report and our auditor’s report thereon. We obtained the
Directors’ Report and the Corporate Governance Statement that are to be included in the Annual Report, prior to the
date of this auditor’s report, and we expect to obtain the remaining sections of the Annual Report after the date of this
auditor’s report.
Our opinion on the financial report does not cover the other information and we do not and will not express any form of
assurance conclusion thereon, with the exception of the Remuneration Report and our related assurance opinion.
In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in
the audit or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information obtained prior to the date of this auditor’s report,
we conclude that there is a material misstatement of this other information, we are required to report that fact. We have
nothing to report in this regard.
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view
in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as
the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and
is free from material misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the Group’s ability to continue as a
going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic
alternative but to do so.
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Auditor's Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian
Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgment and
maintain professional scepticism throughout the audit.
We also:
· Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design
and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate
to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher
than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations,
or the override of internal control.
· Obtain an understanding of internal control relevant to the audit 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
Group’s internal control.
· Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and
· Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the
related disclosures made by the directors.
audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast
significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty
exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if
such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained
up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to
continue as a going concern.
· Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether
· Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities
the financial report represents the underlying transactions and events in a manner that achieves fair presentation.
within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and
performance of the Group audit. We remain solely responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and other matters that may reasonably be thought to
bear on our independence, and where applicable, related safeguards.
From the matters communicated to the directors, we determine those matters that were of most significance in
the audit of the financial report of the current year and are therefore the key audit matters. We describe these matters
in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely
rare circumstances, we determine that a matter should not be communicated in our report because the adverse
consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
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independent auditor’s
REPORT
Report on the Audit of the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 23 to 32 of the directors' report for the year ended
30 June 2018.
In our opinion, the Remuneration Report of K&S Corporation Limited for the year ended 30 June 2018, complies with
section 300A of the Corporations Act 2001.
Responsibilities
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.
Ernst & Young
David Sanders
Partner
Adelaide
23 August 2018
A member firm of Ernst & Young Global Limited. Liability Limited by a scheme approved under Professional Standards Legislation.
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information on
SHAREHOLDINGS
I N F O R M AT I O N R E L AT I N G T O S E C U R I T Y H O L D E R S A S AT 6 S E P T E M B E R 2 0 1 8
DISTRIBUTION OF SHAREHOLDINGS
Ordinary Shares Number of Shareholders
1-1,000 Shares 424
1,001 - 5,000 Shares 772
5,001 - 10,000 Shares 282
10,001 - 100,000 Shares 374
100,001 and more Shares 46
1,898
169 shareholders hold less than a marketable parcel (348 shares).
TWENTY LARGEST SHAREHOLDERS
Name Number of Ordinary Shares Held %
1 AA Scott Pty Ltd 74,434,913 59.77
2 Linfox Australia Pty Ltd 15,729,194 12.63
3 Bell Potter Nominees Ltd
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