More annual reports from K&S Corporation Limited:
2023 ReportK&S CORPORATION LIMITED
ANNUAL REPORT 2019
OUR VISION
TO BE THE LEADING
PROVIDER OF TRANSPORT
AND LOGISTICS SOLUTIONS
WITHIN OUR TARGET
MARKETS IN AUSTRALIA
AND NEW ZEALAND.
CONTENTS
Chairman’s Overview
Financial Overview
Managing Director’s Report
Directors’ Report
Remuneration Report
Financial Report
Corporate Directory
FINANCIAL CALENDAR
Annual General Meeting
Half-year Result
Full-year Result
Annual Report to Shareholders
Annual General Meeting
1
3
4
6
13
19
64
26 November 2019
25 February 2020
27 August 2020
8 October 2020
24 November 2020
CHAIRMAN’S
OVERVIEW
On behalf of the Board of K&S Corporation Limited,
I am pleased to present the Company’s Annual Report
for the year ended 30 June 2019.
Trading conditions in the transport and logistics segments
and regions that the Company trades in remain challenging.
The Company reported a statutory profit after tax of
$2.3 million, down 86.4% on the previous year’s statutory
profit after tax of $17.1 million.
Operating revenues for the period were $905.2 million,
7.2% higher than the prior corresponding period.
After adjusting for a number of significant items including
the benefit from the finalisation of the Aurizon rail claim and
costs associated with several restructuring activities, the
current year underlying profit before tax was $3.2 million,
a decrease of 70.5% on the prior corresponding period.
Included in the Company’s statutory result for the year was
a $9.5 million (before tax) accounting gain relating to the
settlement of claims arising out of the closure of Aurizon’s
intermodal business in December 2017. The Company’s
statutory result also included $9.2 million of non-recurring
accounting charges including impairment costs, which
primarily relate to the Company’s exit from its WA General
Freight business.
Operating cashflow for the year was $61.8 million,
51.5% higher than for the previous year. Operating
cashflow benefitted from the receipt of $25 million
in settlement proceeds from Aurizon and a focus
on working capital management.
Safety remains a key focus for K&S. Our lost time
injury rate increased to ten as compared to nine
in the prior year. With injury frequency rates not
declining in the last two years, we are currently reviewing
opportunities for cultural change to drive improvement
in safety management.
The Australian Transport business has had a mixed year.
Our contract logistics business grew revenues and profit
contribution and steel volumes from our major customers
also remained strong. However, the chemical transport
division (Chemtrans), K&S Energy, the WA General Freight
division and the South West WA division all experienced
a disappointing year. As noted above, our intermodal
business has also incurred increased pre-tax costs of
approximately $6.4 million this year as a consequence
of the closure of Aurizon’s intermodal business.
The New Zealand business delivered another sound result,
with revenue and profits up on FY2018. Our strategy has
been to provide integrated and value adding service offerings
to our major customers. We also continue to strive to further
diversify our New Zealand business.
Our Fuel trading business, K&S Fuels, has again provided
sound financial results, with revenue and profits also up
on the prior year. However, the fuel retailing and wholesaling
markets are dynamic and continue to exhibit a high level
of competition.
Cost reduction strategies have continued to be implemented
across the business, in particular, operational efficiencies,
supplier re-negotiations, and the rationalisation and
replacement of specific fleet. Ongoing cost reduction
initiatives had a positive impact on the current year’s
financial result.
K&S CORPORATION LIMITED ANNUAL REPORT 2019 1
After 11 years of valued service to the Company, Ray Smith
has decided to not seek re-election at this year’s annual
general meeting.
In the next year or two we will continue a process of renewal
and succession.
The Company’s Chief Financial Officer for 16 years,
Bryan Walsh, retired from this position in October 2018.
Wayne Johnston commenced as Chief Financial Officer
in October 2018.
On behalf of my fellow board members I wish to thank
Ray and Bryan for their contribution over many years and
welcome Sallie and Wayne to the Company.
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
CHAIRMAN’S
OVERVIEW
SETTLEMENT OF RAIL SERVICES CLAIM
In November 2018 the Company announced that it had
settled its claim against its former rail services provider,
Aurizon Limited, relating to compensation arising out of the
closure of Aurizon’s intermodal business in 2017. Under the
terms of the settlement, Aurizon agreed to pay $25.0 million
and transfer ownership of 65 rail containers to the Company
without admission of liability.
REGAL GENERAL FREIGHT
On 28 August 2019, the Company announced that an
unconditional agreement was entered into with Centurion
Transport Co. Pty Ltd for the sale of the business and
certain assets of our Western Australia based Regal
General Freight business.
After considering various options in relation to Regal
General Freight, the Board elected to undertake this
transaction to realise improved shareholder returns and
provide ongoing certainty to the Regal General Freight
employees and customers. The transaction will allow the
Company to focus on its core competencies, including
its Regal Heavy Haulage business which will continue
to be operated and invested in by the Company. We will
redeploy (or sell) assets that were not generating an
adequate rate of return and also release working capital
of approximately $7 million.
DIVIDEND
Given the magnitude of the recent changes in relation to
the sale of the Regal General Freight business, the Directors
elected not to declare a final dividend for the year ending
30 June 2019. An interim dividend of 2.0 cents per share
was paid in April 2019.
BOARD COMPOSITION AND MANAGEMENT CHANGES
I am pleased to advise that Sallie Emmett was appointed
as a non-executive director with effect from 24 September
2019. Mrs Emmett is a lawyer with over 30 years’ experience
as a practising solicitor in both legal and management roles.
She has a broad range of commercial exposure, including
to the transport sector, and expertise in workplace relations.
2 K&S CORPORATION LIMITED ANNUAL REPORT 2019
FINANCIAL
OVERVIEW
OPERATING REVENUE ($M)
OPERATING CASH FLOW ($M)
905.2
844.1
61.8
699.2
688.8
755.2
586.2
47.3
48.1
49.4
41.1
40.8
2014
2015
2016
2017
2018
2019
2014
2015
2016
2017
2018
2019
UNDERLYING PROFIT AFTER TAX ($M)
GEARING (%)
13.3
8.9
7.5
7.7
25.2
25.0
3.9
2.3
34.9
34.7
37.0
35.4
2014
2015
2016
2017
2018
2019
2014
2015
2016
2017
2018
2019
K&S CORPORATION LIMITED ANNUAL REPORT 2019 3
MANAGING
DIRECTOR’S
REPORT
Company revenue increased from the prior corresponding
period by 7.2% to $905.2 million.
Difficult trading conditions, in particular in our Western
Australian Transport segment, saw Underlying Profit
before Tax decrease to $3.2 million from $11.0 million
in the prior year.
The current year was also significantly impacted by the
full year impact of increased rail network costs following
the closure of the Company’s rail provider Aurizon in
November 2017. The increased costs borne by the Group
in the current year are estimated at $6.4 million.
In relation to the rail network costs, during the current year
the Company settled a claim against Aurizon arising from
the termination of the services contract. The Company
received $25.0 million from Aurizon in November 2018.
In August 2019, we announced the sale of our Western
Australian general freight business, Regal. The sale was
completed on 30 August 2019. We have commenced
divesting surplus equipment and will also recover our
working capital investment in that business which is
approximately $10m.
The Lost Time Injury Frequency Rate (LTIFR) across the
K&S Group increased to ten from nine in the previous year.
Our improvement of our performance remains a priority.
AUSTRALIAN TRANSPORT
Intermodal and Import/Export
The road linehaul operations had a solid year on the
eastern seaboard. The division continues to work
very closely with its customer base to provide value
added benefits that differentiate our brand, a current
example being the impacts of the changes to the
Chain of Responsibility laws that were amended
in October 2018.
The rail transport operation has been able to consolidate
and meet customer service expectations despite major
network changes occurring in consequent to Aurizon
withdrawing their services, having decided to close their
intermodal operations. On 30 June 2019 the contract
with South32 ceased, however, the net impact is expected
to be minimal as the coal volumes over the previous
years were highly variable resulting in lower than desired
operational efficiencies.
4 K&S CORPORATION LIMITED ANNUAL REPORT 2019
The increase of volume transacted through our import/
export transport operations continued for the Eastern
seaboard business, especially steel imports for
infrastructure projects in NSW and Victoria.
Our domestic steel business volume was strong.
Some delays were encountered with infrastructure
projects initially in Sydney and Melbourne.
Contract Logistics
Our contract logistics business has experienced a solid
year, with revenue and profit increasing.
DTM has continued to expand into the agriculture sector,
with new contracts awarded and commenced in the year
in South East QLD, South Australia and the northern
regions of Victoria.
Other core business for DTM remained steady
year on year, providing consistent volume activity
and returns, underpinned by a concentrated focus
on cost management and fleet numbers.
DTM was successful in renewing a number of contracts
throughout the year, including in the resources sector.
Chemical and Fuel Transport
The Company’s chemical transport division, Chemtrans,
experienced a difficult year with reduced market demand.
While we currently do not anticipate revenue growth
in FY2020, the division has been focussing strongly
on realising improved operational efficiencies to improve
key financial metrics.
K&S Energy also experienced a disappointing year in
FY2019 with margins falling. K&S Energy has undergone
a strategic review of its customer arrangements to ensure
that acceptable returns on funds employed are being
achieved. Consequent to this review good progress
has been realised.
Aviation Services
Our specialised aviation refuelling business, Aero Refuellers,
has also provided another sound result despite strong
levels of competition and challenging market conditions.
The continuing drought in NSW and parts of Victoria
resulted in a notable reduction in aerial agriculture work,
as well as increased competition, that had a negative
impact on both margins and volumes.
On the positive side, the 2018/19 fire season provided
increased activity, particularly in Victoria. To the contrary
New South Wales incurred an average season, with
reduced activity compared to the previous year.
NEW ZEALAND
ENVIRONMENT
Our New Zealand operations delivered a sound result in
2019. Our strategy of providing integrated and value added
service offerings to our customers continues to realise
benefits. Industry segments such as dairy, steel and timber
performed strongly this year, underpinning consistency
in an overall performance.
Ongoing fleet upgrades have enabled the Company
to continue its emission improvements. During the year
vehicle emissions reduction reached 74% of 2003 levels
for NOx, up from 71%, and 91% for particulate matter
compared with 88% last year, even though the current
size of the fleet is substantially larger than it was in 2003.
Key customer contracts have been renewed and new
customers also added. Operating cashflow strengthened
with improved working capital management.
FUEL AGENCY
Our fuels agency division, largely based in south-east
South Australia, experienced growth in revenue and profit
margins in the year. Volumes in the farming, viticulture,
logging segments as well as on-road card business have
continued to increase.
SAFETY
Following worker survey and feedback from stakeholders,
the Company updated its “Everybody Safe, Everyday”
people behaviour training module. In the last financial year
close to 3,000 units of training were delivered through
induction and/or refresher training.
The Company invested heavily in many key HS&E
initiatives, including handling of chemicals, load restraint
training, and driver in-cab assessment (K&S developed
apps). We have taken steps to formulate and introduce
a mental health program across the business. Through our
membership of the Australian Trucking Association we have
encouraged the industry to formalise a “Key Results Area”
workgroup on this topic and we participate as a member
of this workgroup. We have additionally consulted with
Comcare specifically on the “People at Work” program
and have elected and commenced roll out of this program
across the business.
In the interest of improving overall health of our workers,
the Company has endorsed Assessing fitness to drive
medicals to be undertaken by all of our drivers, at intervals
set to TruckSafe standards (unless otherwise determined
by the medical examination). Medicals are arranged and
funded by the Company, through Company nominated
clinics approved to undertake medicals to the National
Transpose Commission standards.
During the year the business has continued to expand its
program of random drug and alcohol testing. This testing
is randomly applied to all categories of workers.
An audit of the safety, rehabilitation and claims
management system using the national self-insurer
audit tools was completed.
Carbon dioxide generation for 2017-18 was 199,000
tonnes, up from 190,000 tonnes the previous year reflecting
business activities for the year. However, the latest figures
incorporate the merger of Scott’s Transport Industries
on 30 January 2017.
K&S Corporation National Greenhouse Reporting
obligations were transferred under section 22X of the
National Greenhouse and Energy Reporting Act 2007
(NGER Act) between the controlling corporation, AA Scott
Pty Ltd, and the responsible member, K&S Corporation
Limited. The first report under subsection 22X(2)
of the NGER Act was for the 2017-18 financial year,
with the report being completed and submitted by
31 October 2018.
COMPLIANCE
K&S has maintained ISO 9001:2015 accreditation
standards, including other relevant accreditations which
included: WA Main Roads, NHVAS Mass, Maintenance and
Basic Fatigue Management, accreditation for Food Safety/
HACCP and TruckSafe accreditation.
HUMAN RESOURCES
Employee engagement and communications programs
continue to have a key focus across the business.
Employee engagement programs that recognise and
reward achievements of the Company’s core values
continues to be a key focus. Achievements of people in the
areas of Safety, Customer Service Excellence, Cost Saving
Initiatives, Our Community Involvement and Milestones
have delivered exceptional outcomes.
New communications programs have delivered regular
business information updates to the target audiences both
internally and externally. In addition to the core value focus,
these communications have increased business knowledge
and understanding, stimulating further interest and
awareness within the group.
We continue to align the structures to service the needs of
business units and customers during periods of operational
change. We maintain our strong focus on the retention and
development of skilled and qualified employees as K&S’
most valuable asset.
Paul Sarant
Managing Director and CEO
K&S CORPORATION LIMITED ANNUAL REPORT 2019 5
DIRECTORS’
REPORT
The Directors present their report, together with the consolidated financial report of
the Group comprising K&S Corporation Limited (the “Company”) and its subsidiaries,
for the year ended 30 June 2019 and the Auditor’s Report thereon.
DIRECTORS
The Directors of the Company in office at the date of this report, together with particulars of their qualifications,
experience and special responsibilities are set out below.
Tony Johnson Chairman
Age 72, Director since 1986
Tony Johnson BA, LLB, LLM (Companies & Securities) FAICD, 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 Chairman of Adelaide Community Healthcare Alliance.
Member of:
– Environmental Committee (Chairman)
– Nomination and Remuneration Committee
– Audit Committee
Paul Sarant Managing Director and Chief Executive Officer
Age 51, Director since 2014
Paul Sarant B.Eng., has extensive experience in the transport and logistics sector. Mr Sarant held
the position of Executive General Manager DTM for seven years at K&S Corporation prior to his
appointment as Managing Director and Chief Executive Officer. 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
Sallie Emmett
Age 53, Director since 24 September 2019
Sallie Emmett LLB GDLP, is a lawyer with over 30 years’ experience as a practising solicitor in both legal
and management roles. Mrs Emmett is a former partner of national law firm Johnson Winter & Slattery.
Mrs Emmett has a broad range of commercial exposure including expertise in workplace relations.
Mrs Emmett operates her own legal and management consulting business and has advised the boards
and management of a variety of organisations including private and public companies, government,
and educational institutions. Mrs Emmett has significant transport sector experience, having acted
for a number of transport companies. Mrs Emmett also sits on the board of a number of not for
profit organisations.
6 K&S CORPORATION LIMITED ANNUAL REPORT 2019
Ray Smith (Independent Director)
Age 72, Director since 2008
Ray Smith FCPA, FAICD, Dip Com is a Director of listed entity Cleanaway Waste Management Ltd
and is a Director of Hy-Line Australia Pty Ltd. He is also a former Director of Warrnambool Cheese
and Butter Factory Company Holdings Limited and Crowe Horwath Australasia Ltd. Mr Smith
brings a wealth of corporate and financial experience in the areas of strategy, acquisitions, treasury
and capital raising.
Member of:
– Audit Committee (Chairman)
– Nomination & Remuneration Committee (Chairman)
Graham Walters AM (Independent Director)
Age 77, Director since 22 May 2018
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 AM is a Director of Adelaide Community Healthcare Alliance and Adelaide Development
Company Ltd.
Member of:
– Audit Committee
Legh Winser
Age 71, Director since 2013
Legh Winser is a former Managing Director of the Company, a position which he held for 16 years.
He has extensive knowledge of the transport and logistics industry with more than 40 years’ experience.
Mr Winser is also an alternate director of several companies with the Scott’s Group of Companies.
Member of:
– Environmental Committee
– Nomination and Remuneration Committee
SECRETARY
Chris Bright BEc, LLB, Grad Dip CSPM, FCIS
Age 48, Secretary since 2005
Chris Bright has held the position of General Counsel for 17 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.
K&S CORPORATION LIMITED ANNUAL REPORT 2019 7
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
Number of meetings held:
Number of meetings attended:
Mr T Johnson
Mr R Smith
Mr P Sarant
Mr L Winser
Mr G Walters AM
PRINCIPAL ACTIVITIES
Directors’
Meetings
Audit Committee
Meetings
Nomination &
Remuneration
Committee
Meetings
Environmental
Committee
Meetings
11
11
10
11
9
11
4
4
4
–
–
4
1
1
1
–
1
–
4
4
–
4
4
–
The principal activities of the Group 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 Group during the year.
OPERATING AND FINANCIAL REVIEW
The Board presents the 2019 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 in ASIC RG247.
The consolidated results for the year ended 30 June 2019 attributable to the members of K&S Corporation Limited (“K&S”)
is shown below, along with comparative results for the previous corresponding period:
Financial Overview
2019
2018 % Movement
Operating Revenue
Statutory profit after tax
Statutory profit before tax
Earnings before interest & tax (EBIT)
Earnings before interest, tax & depreciation (EBITDA)
Less non-recurring legal settlement
Less other non-recurring expenses/(income)
Underlying profit before interest, tax & depreciation
Underlying profit before interest & tax
Underlying profit before tax1
Underlying operating profit after tax1
Total assets
Net borrowings
Shareholders’ funds
Depreciation & amortisation
Dividend per share
Net tangible assets per share
Operating cash flow
Return on assets
Gearing
Employee numbers
Lost time injuries
Lost time injuries frequency rate
$’000
$’000
$’000
$’000
$’000
$’000
$’000
$’000
$’000
$’000
$’000
$’000
$’000
$’000
$’000
cents
$
$’000
%
%
905,207
2,321
3,197
11,158
60,515
(9,525)
9,572
60,562
11,205
3,244
2,354
579,778
131,605
240,331
49,357
2.0
1.84
61,833
0.4
35.4
2,749
57
10
844,136
17,124
24,600
31,656
74,023
(10,900)
(2,698)
60,425
18,058
11,002
7,605
553,369
129,964
220,867
42,367
4.0
1.72
40,812
1.4
37.0
2,814
55
9
7.2%
(86.4%)
(87.0%)
(64.8%)
(18.2%)
(12.6%)
(454.8%)
0.2%
(37.9%)
(70.5%)
(69.0%)
4.8%
1.3%
8.8%
16.5%
(50.0%)
7.0%
51.5%
(71.4%)
(4.3%)
(2.3%)
3.6%
11.1%
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 primarily include the Aurizon settlement, impairment and onerous lease 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.
8 K&S CORPORATION LIMITED ANNUAL REPORT 2019
DIRECTORS’ REPORT The Company is a tier one logistics provider, 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.
FY2019 has been demanding and challenging, with the
transport and logistics sector continuing to experience high
levels of competition and pressure on rates, the low growth
economic environment, and the concentration of bargaining
power in large and sophisticated buyers of transport and
logistics services.
Operating revenues increased by 7.2% to $905.2 million
in FY2019.
The Group achieved a statutory profit before tax of $3.2
million, a decrease of $21.4 million or 87% on the prior
corresponding period. The current year was significantly
impacted by the full year impact of increased rail network
costs following the closure of the Company’s rail provider
Aurizon in FY2018. The increased costs borne by the Group
in the current year are estimated at $6.4 million. The FY2018
statutory profit before tax of $24.6 million included significant
items for non-recurring benefits of $13.6 million.
After adjusting for a number of significant items including
the benefit from the finalisation of the Aurizon rail claim and
costs associated with several restructuring activities, the
current year underlying profit before tax was $3.2 million,
a decrease of 70.5% on the prior corresponding period.
The underlying profit after tax was $2.3 million, down on
the prior corresponding period by $5.3 million.
Included in the Company’s statutory result for FY2019 was
a $9.5 million (before tax) accounting gain relating to the
settlement of claims arising out of the closure of Aurizon’s
intermodal business in December 2017. The Company’s
statutory result also included $9.2 million of non-recurring
costs which primarily relate to the Company’s exit from its
WA General Freight business.
Operating cashflow for FY2019 was $61.8 million, 51.5%
higher than for the previous year. Operating cashflow
benefitted from the receipt of $25.6 million in settlement
proceeds from Aurizon and a focus on working capital
management.
Australian Transport
Steel volumes from our major customers remain strong,
with infrastructure projects undertaken by the various state
governments (particularly in Victoria) underpinning ongoing
activity levels despite the fall in domestic housing and
apartment construction. We expect steel volumes to be
a continuing source of strength for the K&S Freighters
eastern seaboard operations in FY2020.
Our contract logistics business has experienced a pleasing
FY2019, with revenues and profit contribution growing.
While the contract logistics model deployed can be capital
intensive, it provides the opportunity to share the benefits
and risks of asset utilisation with customers in a more
balanced and committed manner than is typically exhibited
in less differentiated sectors of the transport and logistics
industry. As a consequence of the pending loss of a long
term major contract following a recent tender process,
our contract logistics business revenue is likely to reduce
in FY2020 but its margins are expected to improve.
Our specialised aviation refuelling business, Aero Refuellers,
has also provided another sound result despite strong
levels of competition, a flat agricultural season and reduced
fire activity. Significant upgrades to Aero Refuellers’ tanker
fleet were completed in FY2019. Aero Refuellers will
continue to target growth opportunities in FY2020,
including new airport operations and customers.
Our Port Kembla Bulktrans coal cartage operation generated
improved returns in FY2019 on the back of stronger coal
volumes. While Bulktrans is currently providing some
transitional cartage services to the new incumbent provider
for the Illawarra Coal scope, our Illawarra Coal contract
expired on 30 June 2019 and we expect that this operation
will make a substantially reduced contribution in FY2020.
We continue to incur increased costs in our rail transport
operations under the arrangements entered into with
Pacific National following the closure of Aurizon’s
intermodal business. The Adelaide-Darwin corridor has also
experienced subdued market demand, albeit that we have
successfully migrated some road transport volumes to rail
on this corridor. We are actively targeting additional parcels
of rail volumes to complement our existing rail network
volume profile to improve efficiencies and returns.
The Company’s chemical transport division, Chemtrans,
experienced a difficult year with reduced market demand.
While we currently do not anticipate revenue growth in
FY2020, we are working towards greater operational
efficiencies and disciplines to improve returns by Chemtrans.
K&S Energy also experienced a disappointing year in
FY2019 with margins falling. K&S Energy has undergone a
strategic review of its customer arrangements to ensure that
acceptable returns on funds employed are being achieved.
Revenues increased modestly in our Western Australian
based General Freight and Heavy Haulage operations in
FY2019. Trading margins remained under pressure with the
north-west Western Australia transport and logistics market
continuing to exhibit sustained high levels of competition.
Cost reduction strategies continue to be implemented
across the business, in particular, operational efficiencies,
supplier renegotiations, and the rationalisation and
replacement of specific fleet. Ongoing cost reductions will
continue to have a positive impact on results in FY2020.
Fuel
Our fuel trading business, K&S Fuels, has again provided
sound financial results in FY2019. However, the fuel
retailing and wholesaling market are dynamic and continue
to exhibit a high level of competition.
K&S CORPORATION LIMITED ANNUAL REPORT 2019 9
Safety
Safety remains a key focus for K&S. Our lost time injury
rate increased to ten in FY2019 (nine in FY2018).
With our injury frequency rates not declining in the last
two years, we are currently reviewing opportunities for
cultural change to drive continuous improvement for
safety management at K&S.
FY2019 has also seen the introduction of the amended
National Heavy Vehicle Law (“HVML”) which implements
a risk based approach to the identification and elimination
of transport related risks and complements the legislative
approach taken in existing model work health and safety
laws. The amended HVML expands the chain of responsibility
to all parties involved in the transport of goods and deals
with mass, dimension, load restraint, speed, fatigue and
vehicle standards.
Dividend
Given the magnitude of the recent changes, the Directors
have elected not to declare a final dividend (2018: 2.0 cents
per share). The interim dividend of 2.0 cents per share was
paid in April 2019, making the total dividend 2.0 cents per
share in respect of the year ended 30 June 2019.
Board Composition and Management Changes
On 27 August 2019, K&S announced that Sallie Emmett
had been appointed as a non-executive director with effect
from 24 September 2019. Mrs Emmett is a lawyer with over
30 years’ experience as a practising solicitor in both legal
and management roles. Mrs Emmett has a broad range
of commercial exposure, including to the transport sector,
and expertise in workplace relations.
Mr Wayne Johnston joined the Company as Chief Financial
Officer on 2 October 2018, replacing Mr Bryan Walsh
who retired after 16 years in the position. Mr Johnston has
extensive commercial, ASX listed, capital and restructuring
experience encompassing multiple international and
domestic jurisdictions.
Outlook
Providing earnings guidance going forward remains difficult.
We will continue to focus on organic growth, particularly
in market segments such as contract logistics that will
deliver stronger returns on investment.
We continue to review the industry segments in which we
operate as well as the ways in which we offer our services
to the market. Our current focus includes the general
freight businesses in South Australia and the Northern
Territory. We are also reviewing customer accounts that
currently do not generate adequate returns.
New Zealand Transport
The New Zealand business delivered another sound result
in FY2019. Our strategy in New Zealand has been to
provide integrated and value adding service offerings
to our major customers. We also continue to strive to
further diversify our business.
Balance Sheet and Funding
In May 2019, the Company successfully extended the
terms of its existing $40 million multi-option finance facility
with Commonwealth Bank of Australia and its $25 million
multi-option facility with Westpac Banking Corporation
to April 2021 and February 2021, respectively.
During the course of the year, the Company acquired fixed
assets totalling $65 million. Funding of this equipment was
$50.7 million via hire purchase agreements and the balance
of $14.3 million was settled from cash facilities.
Based upon independent valuations, the Company
increased the carrying value of its freehold property
portfolio by $24.5 million. This reinforces the Company’s
strategy to own its main operational sites.
The Company’s net asset position increased by 8.8% to
$240.3 million in FY2019. As noted, the Asset Revaluation
Reserve increased by $17.1 million (net of tax) following
a revaluation of freehold property. The statutory profit after
tax of $2.3 million for FY2019 was offset by dividends paid
of $5.0 million (final FY2018 dividend and interim FY2019
dividend). Under the dividend reinvestment plan, $4.1 million
of new shares were issued in FY2019.
The Group’s gearing ratio also improved to 35.4%
at 30 June 2019 compared to 37.0% in the prior year.
Regal General Freight
On 28 August 2019, an unconditional agreement was
entered into by Centurion Transport Co. Pty Ltd
(“Centurion”), Regal Transport Group Pty Ltd (“Regal”) and
K&S Freighters Pty Ltd (“KSF”) for the sale of the business
and certain assets of the Group’s Western Australia based
Regal General Freight business.
Under the agreement, Regal will transfer to Centurion
its rights and entitlements under customer contracts and
Centurion will make offers of employment to the majority
of the employees of KSF working in the Regal General
Freight business.
The Company has agreed, amongst other things, to:
– a nominal purchase price for the assets of the Regal
General Freight business (largely customer contracts and
intangible assets) to be acquired under the agreement; and
– provide access to Centurion, at commercial rates,
to a number of its fleet to support the customer
contracts for a transitional period.
The parties are currently in the process of completing
the transaction.
The Company’s 30 June 2019 financial statements include
an after-tax charge of $5.1 million in relation to accounting
adjustments including impairment charges, as a result
of the transaction.
The Company will continue to operate and invest in its
Western Australia based Regal Heavy Haulage business.
10 K&S CORPORATION LIMITED ANNUAL REPORT 2019
DIRECTORS’ REPORT SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
There were no significant changes in the state of affairs
of the Group during the financial year.
ENVIRONMENTAL REGULATION AND PERFORMANCE
The Group’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 Group has a Board Committee which monitors
compliance with environmental regulations.
Climate Change
Reporting under the National Greenhouse Energy Reporting
regime (NGER) was completed and submitted in 2018/19.
Transport and Warehousing
The transport and warehousing business is subject to
the Dangerous Goods Acts in Commonwealth and State
Legislation. The Group 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 Group monitors
performance and recorded a number of minor fuel related
incidents during the year. In all cases, corrective actions
have been taken.
DIVIDENDS
Dividends paid or declared by the Company to members since the end of the previous financial year were:
1 A fully franked preference dividend (taxed to 30%) of 4.0 cents per share amounting to $4,800 in respect
of the year ended 30 June 2018 was declared on 23rd August 2018 and paid on 2nd November 2018; and
2 An interim fully franked ordinary dividend (taxed to 30%) of 2.0 cents per share in respect of the year ended
30 June 2019 was declared on 26th February 2019 and paid on 4th April 2019 amounting to $2,517,665.
No final dividend was declared for the year ended 30 June 2019.
DIVIDENDS PAID TO SHAREHOLDERS
15
12
9
6
3
0
7.0
4.5
5.0
6.0
3.0
3.5
7.0
5.0
5.0
6.5
3.0
3.5
1.5
2.0
1.5
2.0
2.0
2.0
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
■ Interim ■ Final
K&S CORPORATION LIMITED ANNUAL REPORT 2019 11
EVENTS SUBSEQUENT TO BALANCE DATE
On 1 July 2019, the Group acquired 175 trailers from
Scott’s Fleet Rentals Pty Ltd for $3.299 million.
On 28 August 2019, subsidiaries of the Group entered into
an unconditional agreement with Centurion Transport Co.
Pty Ltd for the sale of the business and certain assets
of the Group’s Western Australia based Regal Transport
General Freight business.
No other matters have arisen in the interval between the
end of the financial year and the date of this report,
including any item, transaction or event of a material and
unusual nature which, in the opinion of the Directors of
the Company, are likely to affect significantly the operations
of the Group, the results of those operations, or the state
of affairs of the Group in future financial years.
It is anticipated that the consolidated entity will continue
to provide transport and logistics operations during the
next financial year by further extending its services in
Australia and New Zealand and adopting technology-based
solutions to contain costs and enhance services offered
to customers.
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 $175,954 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 AM 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.
12 K&S CORPORATION LIMITED ANNUAL REPORT 2019
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.
TAX CONSOLIDATION
Effective 1 July 2002, for the purposes of income taxation,
K&S Corporation Limited and its domestic based 100%
owned subsidiaries formed a tax consolidated Group.
Members of the Group entered into a tax sharing
arrangement in order to allocate income tax expense to the
wholly owned subsidiaries on a pro-rata basis. In addition,
the agreement provides for the allocation of income tax
liabilities between the entities should the head entity default
on its tax payment obligations.
CORPORATE GOVERNANCE
In recognising the need for the highest standards of
corporate behaviour and accountability, the Directors of
K&S Corporation Limited support the principles of corporate
governance. The Company’s Corporate Governance
Statement can be found on this URL on our website:
http://www.ksgroup.com.au/corporate-governance/.
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.
AUDITOR INDEPENDENCE AND NON-AUDIT SERVICES
The entity’s Auditor, Ernst & Young have provided the
Group with an Auditors’ Independence Declaration which
is on page 58 of this 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 as at the date of this report is:
Mr L Winser
Mr P Sarant
Ordinary Shares
43,063
60,000
Directors of the Company have relevant interests in
additional shares as follows:
Mr L Winser
Mr T Johnson
Mr R Smith
Mr P Sarant
Mr G Walters AM
Ordinary Shares
1,235,919
535,651
44,119
126,603
5,252
DIRECTORS’ REPORT 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, executives, general
managers and secretaries of the Parent and the Group.
Details of the Key Management Personnel are:
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 executive 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, Managing Director
and other executive remuneration is separate and distinct.
i) Directors
Mr T Johnson
Mr P Sarant
Mr R Smith
Mr L Winser
Mr G Walters AM
ii) Key Management Personnel
Mr W Johnston
Mr B Walsh
Mr C Bright
Non-Executive Chairman
Managing Director and
Chief Executive Officer
Non-Executive Director
Non-Executive Director
Non-Executive Director
Chief Financial Officer
(appointed 2 October 2018)
Chief Financial Officer
(retired 2 October 2018)
Company Secretary
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 executives.
The Nomination and Remuneration Committee assesses the
appropriateness of the nature and amount of remuneration
of Directors and executives 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.
NON-EXECUTIVE DIRECTOR REMUNERATION
Objective
The Board seeks to set aggregate remuneration at a level
which provides the Company with the ability to attract
and retain quality Directors, whilst incurring a cost which
is acceptable to Shareholders.
Structure
The Constitution and the ASX Listing Rules specify that
the maximum aggregate remuneration of Non-Executive
Directors’ shall be determined from time to time
by a general meeting of Shareholders.
The latest determination was at the Annual General Meeting
held on 20 November 2012 when Shareholders approved
a maximum aggregate remuneration of $600,000 per year.
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 FY2019. 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 2018/19 financial year was deferred
to 1 January 2019, at which time those fees were
increased by 5%.
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 2019 is detailed on page 16 of this report.
K&S CORPORATION LIMITED ANNUAL REPORT 2019 13
REMUNERATION
REPORT
(AUDITED)
Directors’ Retirement Benefits
A change to the Non-Executive Directors’ retirement benefits
calculation was made in July 2004 to freeze accumulation
of years of service of Directors as at 30 June 2004. No
Non-Executive Director commencing after 1 July 2004
is eligible for any benefits under the retirement scheme.
Mr Johnson is the only remaining Non-Executive Director
eligible to receive retirement benefits under the scheme.
At 30 June 2019, the total retirement allowance payable
to Mr Johnson was $382,851 (30 June 2018: $370,697).
The expenditure provided (not paid) during the year
ended 30 June 2019 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.
EXECUTIVE DIRECTOR AND EXECUTIVE
REMUNERATION
Objective
The Company aims to reward executives with a level and
mix of remuneration commensurate with their position
and responsibilities within the Company to:
– reward executives for Company, business unit and
individual performance against targets set by reference
to appropriate benchmarks;
– align the interests of executives with those of Shareholders;
– link reward with performance of the Company; and
– ensure total remuneration is competitive by market standards.
Structure
In determining the level and make up of executive
remuneration, the Nomination and Remuneration
Committee seeks external information detailing market
levels of comparable executive roles from which the
Committee makes its recommendation to the Board.
For the Managing Director and the other 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
at the commencement of each financial year.
The Board reviews and considers the fees paid to the
Managing Director and other 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 executives for the year ended 30 June 2019.
As safety performance is a key organizational goal and
critical to the ongoing operations of the Company, the
Board believes that aligning the payment of short term
incentives to reducing lost time injuries is appropriate
and in the interests of Shareholders.
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 also
believes that aligning the payment of short term incentives
to the attainment of budgeted profit after tax on a normalised
basis is appropriate and in the interests of Shareholders.
The Board also believes that having all of the Company’s
executives aligned to the common goal of achieving
budgeted operating profit after tax drives positive behaviours
amongst the executives in maximising Group wide benefits
from operating activities.
For the year ended 30 June 2019, the Board approved
the adoption of at risk short term incentives of up to 30%
of the base remuneration of the Managing Director and
executives. The payment of such short term incentives was
to be settled 50% in cash and 50% in the Company’s shares.
Payment of the short term incentive in respect of the 2019
financial year was conditional upon:
– outperformance of budgeted profit after tax on a normalised
basis and excluding any one-off or non-trading items
(eg, profit on the sale of real estate) (but including any
one-off or non-trading items that have been included in
the budget) on a sliding scale up to a maximum of 20%
of base remuneration; and
– the reduction of lost time injuries sustained by
employees on a sliding scale up to a maximum of 10%
of base remuneration.
The Company’s Managing Director and executives did not
qualify for the payment of any short term incentive in respect
of the 2019 financial year.
Employment Contracts
It is the Nomination and Remuneration Committee’s current
policy that fixed term contracts are not entered into with
members of the executive team.
The Managing Director, Mr Sarant, has a contract of
employment with an open term. 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.
14 K&S CORPORATION LIMITED ANNUAL REPORT 2019
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).
UNDERLYING PERFORMANCE
35
30
25
20
15
10
5
0
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
■ EBIT ■ NPAT
In addition, Dividends paid to Shareholders are disclosed on page 11 of the Directors’ report.
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.
K&S CORPORATION SHARE PRICE 2014 – 2019
$9.5
$9.0
$8.5
$8.0
$7.5
$7.0
$6.5
$6.0
$5.5
$5.0
$4.5
$4.0
$3.5
$3.0
$2.5
$2.0
$1.5
$1.0
$0.5
$0.0
8000
7000
6000
5000
4000
3000
2000
1000
June-14
June-15
June-16
June-17
June-18
0
June-19
■ KSC ■ TOL ■ All Ords ■ Industrial Index
K&S CORPORATION LIMITED ANNUAL REPORT 2019 15
REMUNERATION
REPORT
(AUDITED)
REMUNERATION OF KEY MANAGEMENT PERSONNEL OF THE COMPANY AND THE GROUP
The remuneration amounts for the prior year have been updated to include the movements in the leave accruals as well
as capture all non-monetary benefits.
Other Long
Term
Movements
in Leave
Accruals 2
$
Total
Performance
Related
%
$
TABLE 1: REMUNERATION FOR THE YEAR ENDED 30 JUNE 2019
Short-Term
Post Employment
Salary
& Fees
$
Incentives
$
Non-
monetary
Benefit 1
$
T Johnson
R Smith
L Winser
G Walters AM
Total
P Sarant
W Johnston 3
C Bright
B Walsh 4
Total Executive KMP
Totals
133,694
79,310
79,310
79,310
371,624
727,889
265,000
258,743
114,978
1,366,610
1,738,234
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
25,524
19,657
25,309
9,732
80,222
80,222
TABLE 2: REMUNERATION FOR THE YEAR ENDED 30 JUNE 2018
Retirement
Benefit
$
Super
Contribution
$
12,154
14,706
–
–
–
12,154
–
–
–
–
–
8,724
8,724
8,724
40,878
25,000
25,000
25,000
10,340
85,340
–
–
–
–
–
69,215
21,692
28,903
(17,065)
102,745
160,554
88,034
88,034
88,034
424,656
847,628
331,349
337,955
117,985
1,634,917
12,154
126,218
102,745
2,059,573
Short-Term
Post Employment
Salary
& Fees
$
Incentives
$
Non-
monetary
Benefit 1
$
Retirement
Benefit
$
Super
Contribution
$
Total
Performance
Related
%
$
T Johnson
R Smith
L Winser
G Walters 5 AM
Total
P Sarant
B Walsh
C Bright
S Hine 6
127,617
75,505
75,505
6,609
285,236
686,014
320,023
269,983
327,125
Total Executive KMP
1,603,145
Totals
1,888,381
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
25,673
11,025
14,958
13,076
64,732
64,732
7,847
–
–
–
7,847
–
–
–
–
–
7,847
Other Long
Term
Movements
in Leave
Accruals 2
$
–
–
–
–
–
110,176
41,264
37,552
35,643
14,038
8,328
8,328
727
31,421
25,000
25,000
25,000
25,000
149,502
83,833
83,833
7,336
324,504
846,863
397,312
347,493
400,844
100,000
131,421
224,635
1,992,512
224,635
2,317,016
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1. Non-monetary benefits included are based on benefits paid in the form of fuel cards, tolls and motor vehicles.
2. Includes any net changes in the balance of annual leave and long service leave (i.e. leave entitlements that accrued during the year but were not used).
3. W Johnston was appointed as Chief Financial Officer on 2 October 2018.
4. B Walsh retired as Chief Financial Officer on 2 October 2018.
5. Mr Walters AM was appointed as a Director on 22 May 2018.
6. S Hine ceased to be a KMP on 30 June 2018.
16 K&S CORPORATION LIMITED ANNUAL REPORT 2019
TABLE 3: LOANS TO KEY MANAGEMENT PERSONNEL
Details of aggregates of loans to Key Management Personnel are as follows:
Total
2019
2018
Amount
at the start
of the year
$
Amounts
written off
in the year
$
Amount
at the end
of the year
$
282,285
305,645
–
–
148,940
282,285
Number in
Group
2
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
Shares held in K&S Corporation Limited:
30 June 2019
Non-Executive Directors
T Johnson
R Smith
L Winser
G Walters AM
Executive Director
P Sarant
Other Key Management Personnel
W Johnston
C Bright
Total
Balance
1 July 2018
Ordinary
Net Change
Ordinary
Balance
30 June 2019
Ordinary
522,232
43,013
1,246,942
–
186,603
–
51,000
13,419
1,106
32,040
5,252
–
–
–
535,651
44,119
1,278,982
5,252
186,603
–
51,000
2,049,790
51,817
2,101,607
K&S CORPORATION LIMITED ANNUAL REPORT 2019 17
REMUNERATION
REPORT
(AUDITED)
TABLE 5: SHAREHOLDING OF KEY MANAGEMENT PERSONNEL
Shares held in K&S Corporation Limited:
30 June 2018
Non-Executive Directors
T Johnson
R Smith
L Winser
G Walters AM *
Executive Director
P Sarant
Other Key Management Personnel
B Walsh
C Bright
S Hine
Total
* Mr Walters AM was appointed as a Director on 22 May 2018.
Balance
1 July 2017
Ordinary
Net Change
Ordinary
Balance
30 June 2018
Ordinary
515,984
42,011
1,217,893
–
186,603
161,267
51,000
50,000
6,248
1,002
29,049
–
–
2,177
–
–
522,232
43,013
1,246,942
–
186,603
163,444
51,000
50,000
2,224,758
38,476
2,263,234
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
30 August 2019
P Sarant
Managing Director
30 August 2019
18 K&S CORPORATION LIMITED ANNUAL REPORT 2019
FINANCIAL
REPORT
FOR THE YEAR ENDED 2019
CONTENTS
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Financial Statements
Directors’ Declaration
Auditor’s Independence Declaration
Auditor’s Report to the Members
20
21
22
23
24
57
58
59
K&S CORPORATION LIMITED ANNUAL REPORT 2019 19
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2019
Revenue and other income
Operating revenue
Other income
Expenses
Changes in inventories of fuel
Consumption of fuel held for sale
Contractor expenses
Employee expenses
Fleet expenses
Depreciation expense
Finance costs
Impairment expense
Other expenses
Share of profits of associates
Profit before income tax
Income tax expense
Profit after income tax
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign subsidiaries
Items not to be reclassified to profit or loss in subsequent periods:
Revaluation of freehold land and buildings, net of tax
Other comprehensive income for the period, net of tax
Total comprehensive income for the period
Earnings per share (cents per share)
Basic, profit for the year attributable to ordinary equity holders of the parent
Diluted, profit for the year attributable to ordinary equity holders of the parent
Dividends per share (cents per share)
Consolidated
2019
$’000
2018
$’000
905,207
17,645
922,852
286
(121,861)
(218,258)
(299,016)
(176,111)
(49,357)
(7,961)
(4,460)
(43,040)
(919,778)
123
3,197
(876)
2,321
977
977
17,112
17,112
18,089
20,410
1.8
1.8
2.0
844,136
23,553
867,689
1,008
(99,301)
(208,667)
(281,016)
(162,724)
(42,367)
(7,056)
–
(43,096)
(843,219)
130
24,600
(7,476)
17,124
(673)
(673)
–
–
(673)
16,451
13.9
13.9
4.0
Note
5(a)
5(b)
5(e)
5(d)
5(c)
5(g)
6
7
8
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
20 K&S CORPORATION LIMITED ANNUAL REPORT 2019
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2019
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Prepayments
Total current assets
Non-current assets
Other receivables
Investments in associate
Property, plant & equipment
Intangibles
Deferred tax assets
Total non-current assets
TOTAL ASSETS
LIABILITIES
Current liabilities
Trade and other payables
Interest bearing loans and borrowings
Income tax payable
Provisions
Total current liabilities
Non-current liabilities
Trade and other payables
Interest bearing loans and borrowings
Deferred tax liabilities
Provisions
Total non-current liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Reserves
Retained earnings
TOTAL EQUITY
Note
9
10
11
6
13
6
14
13
6
14
15
Consolidated
2019
$’000
2018
$’000
16,564
116,737
6,142
10,185
149,628
4,933
421
405,939
6,324
12,533
430,150
579,778
95,920
39,743
1,596
33,332
170,591
650
108,426
41,342
18,438
168,856
339,447
240,331
162,408
59,043
18,880
240,331
15,946
129,741
5,856
10,071
161,614
1,035
398
373,552
6,070
10,700
391,755
553,369
101,859
44,170
686
29,539
176,254
770
101,740
37,118
16,620
156,248
332,502
220,867
158,099
40,954
21,814
220,867
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.
K&S CORPORATION LIMITED ANNUAL REPORT 2019 21
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2019
Note
Issued
Capital
$’000
Retained
Earnings
$’000
Asset
Revaluation
Reserves
$’000
Forex
Translation
Reserves
$’000
Common
Control
Reserves
$’000
Total Equity
$’000
CONSOLIDATED
At 1 July 2018
158,099
21,814
40,885
Effect of adoption of new
accounting standards
2(c) (i)
–
At 1 July 2018 (restated)
158,099
Profit for the year
Other comprehensive income
Total comprehensive income
for the year
Transactions with owners
in their capacity as owners:
–
–
–
Issue of share capital
15
4,309
Changes arising from
acquisition of assets in Scott’s
Transport Industries
Dividends paid
At 30 June 2019
At 1 July 2017
Profit for the year
Other comprehensive income
Total comprehensive income
for the year
Transactions with owners in
their capacity as owners:
8
–
–
162,408
153,951
–
–
–
Issue of share capital
15
4,148
–
Changes arising from
acquisition of assets in Scott’s
Transport Industries
Dividends paid
At 30 June 2018
8
–
–
158,099
–
(4,907)
21,814
382
–
382
–
977
(247)
21,567
2,321
–
40,885
–
–
17,112
2,321
17,112
977
–
–
(5,008)
18,880
9,597
17,124
–
17,124
–
–
–
57,997
40,885
–
–
–
–
–
–
–
–
–
1,359
1,055
–
(673)
(673)
–
–
–
40,885
382
(313)
220,867
–
(247)
(313)
220,620
–
–
–
–
–
–
(313)
(132)
–
–
–
–
2,321
18,089
20,410
4,309
–
(5,008)
240,331
205,356
17,124
(673)
16,451
4,148
(181)
–
(313)
(181)
(4,907)
220,867
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
22 K&S CORPORATION LIMITED ANNUAL REPORT 2019
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2019
CASH FLOWS FROM OPERATING ACTIVITIES
Cash receipts from customers
Cash payments to suppliers & employees
Interest received
Borrowing costs paid
Income taxes paid
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of non-current assets
Payments for property plant & equipment
Dividends received from associates
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings
Repayments of borrowings
Repayment of lease & hire purchase liabilities
Dividend paid net of reinvestment plan
Cash received on assuming employee benefit liabilities
Net cash used in financing activities
Net increase in cash held
Cash at the beginning of the financial year
Effects of exchange rate variances on cash
Cash at the end of the financial year
Consolidated
2019
$’000
2018
$’000
Note
1,043,051
(968,369)
42
(7,952)
(4,939)
9
61,833
6,211
(17,768)
100
(11,457)
–
(5,625)
(43,485)
(701)
–
(49,811)
565
15,946
53
16,564
9
909,224
(860,605)
24
(6,900)
(931)
40,812
5,705
(22,663)
100
(16,858)
16,000
–
(39,431)
(774)
2,349
(21,856)
2,098
13,985
(137)
15,946
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
K&S CORPORATION LIMITED ANNUAL REPORT 2019 23
1. CORPORATE INFORMATION
This is the financial report of K&S Corporation Limited
(the “Company”) and its controlled entities (together,
the “Group”). The financial report for the year ended
30 June 2019 was authorised for issue in accordance
with a resolution of Directors on 30 August 2019.
K&S Corporation Limited is a company limited by shares
incorporated in Australia whose shares are publicly traded
on the Australian Securities Exchange. The nature of the
operations and principal activities of the Group are
described in Note 4.
Registered Office:
141-147 Jubilee Highway West
Mount Gambier SA 5290
PO Box 567
Mount Gambier SA 5290
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Basis of preparation
The financial report is a general purpose financial report for
a for-profit entity, which has been prepared in accordance
with the requirements of the Corporations Act 2001 and
Australian Accounting Standards. The financial report has
also been prepared on a historical cost basis, except for
freehold land and buildings which have been measured
at fair value.
The financial report is presented in Australian dollars and all
values are rounded to the nearest thousand dollars ($’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 2019, the Consolidated Statement of
Financial Position reflected an excess of current liabilities
over current assets of $21.0m (2018: $14.6m). The amount
of the deficit is fully covered by the Group’s undrawn
banking facilities at 30 June 2019.
A number of prior year disclosures have been updated in
the current year to align with the current year disclosures.
b) Compliance with IFRS
The financial report complies with the International
Financial Reporting Standards (IFRS) 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 described below.
In relation to the new accounting standards, the comparative
figures have been restated in accordance with the
respective transition provisions:
24 K&S CORPORATION LIMITED ANNUAL REPORT 2019
AASB 15 – Revenue from Contracts with Customers
(effective from 1 July 2018)
The Group has adopted AASB 15 using the full
retrospective method of application from 1 July 2018.
AASB 15 replaced AASB 118 Revenue and AASB 111
Construction Contracts and other related interpretations.
Under AASB 15, revenue is recognised when a customer
obtains control of the goods and services. There was
no impact upon transition to AASB 15.
Under AASB 15, the Group measures revenue using
the following accounting policies:
Provision of transportation services – These services
are provided individually on a per-run basis to customers.
The performance obligation related to transport revenue
is satisfied over time as the goods are delivered and the
service is provided to the customer based on the agreed
transaction price.
Sale of fuel – The Group’s contracts with customers for the
sale of fuel generally include one performance obligation.
The Group recognises revenue from the sale of fuel at
the point in time when control of the fuel is transferred
to the customer, generally on delivery of the fuel product.
Commission from fuel sales – Commission earned
from fuel sales under agency arrangements is recognised
on a net basis when the fuel is delivered to customers.
Rental income – Rental income is recognised as other
income on a straight-line basis over the lease term.
Interest income – Interest income is recognised using the
effective interest method.
AASB 9 – Financial Instruments (effective from 1 July 2018)
The Group has implemented AASB 9 Financial Instruments
(2014) effective 1 July 2018, replacing AASB 139 Financial
Instruments: Recognition and Measurement. Upon transition,
the adoption of the Expected Credit Loss (‘ECL’) method
resulted in a decrease in Trade Receivables, and retained
earnings amounting to $0.247 million. The adoption of AASB
9 did not have any impact to the classification of the Group’s
financial assets or liabilities on the date of transition.
Accounting policy: Financial instruments
Initial Recognition
Financial Assets
Trade receivables are initially recognised when there is an
unconditional right to receive consideration. Other financial
assets/liabilities are recognised when the Group becomes
a party to the contractual provisions of the instrument.
Trade receivables are initially measured at the transaction
price as defined in AASB 15. Financial assets/liabilities
are initially measured at fair value (together with any
transaction costs which are directly attributable to the
acquisition of the asset, or cost of the liability).
Financial Liabilities
Financial liabilities are classified as measured at amortised
cost or FVTPL.
All financial liabilities are recognised initially at fair value
and, in the case of loans and borrowings and payables,
net of directly attributable transaction costs.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 2019 Classification and subsequent measurement
Financial Assets
The categories of ‘held to maturity’, ‘loans and receivables’ and ‘available for sale’ which existed under AASB 139,
are no longer relevant. AASB 9 contains three principal classification categories for financial assets:
(i) Measured at amortised cost
(ii) Fair value other comprehensive income (FVOCI); and
(iii) Fair value through profit or loss (FVTPL)
The following table illustrates the measurement requirements of AASB 9:
Initial recognition
Subsequent measurement
Amortised cost
Measured at fair value plus transaction
costs directly attributable to the
acquisition of the asset.
Measured at amortised cost using the effective interest rate
method and reduced by any impairment losses. Interest income,
foreign exchange gains and losses and impairment are recognised
in profit or loss.
FVTPL
FVOCI
Measured at fair value. Any transaction
costs of acquisition are recognised in the
profit or loss.
These assets are subsequently measured at fair value. Net gains
or losses, including any interest or dividend income, are
recognised in profit or loss.
Measured at fair value plus transaction
costs directly attributable to the acquisition
of the asset.
Measured at fair value. Net gains and losses are recognised in
other comprehensive income (‘OCI’). For equity instruments, these
are never reclassified to profit or loss. For debt instruments, they
are reclassified to profit or loss upon de-recognition of the asset.
Financial Liabilities
Financial liabilities at fair value through profit or loss include
financial liabilities held for trading and financial liabilities
designated upon initial recognition as at fair value through
profit or loss.
Gains or losses on liabilities held for trading are recognised
in the statement of profit or loss.
Financial liabilities designated upon initial recognition at fair
value through profit or loss are designated at the initial date
of recognition, and only if the criteria in AASB 9 are
satisfied. The Group has not designated any financial
liability at fair value through profit or loss.
Interest-bearing loans and borrowings are subsequently
measured at amortised cost using the effective interest
rate (‘EIR’) method. The ‘effective interest rate’ is the rate
that exactly discounts estimated future cash payments
or receipts through the expected life of the financial
instrument to:
– the gross carrying amount of the financial asset; or
– the amortised cost of the financial liability.
Interest expense and foreign exchange gains and losses
are recognised in profit or loss. Borrowings are classified
as current liabilities unless the Group has an unconditional
right to defer settlement of the liability for at least
12 months after the reporting period.
Amortised cost is calculated by taking into account any
discount or premium on acquisition and fees or costs that
are an integral part of the EIR. The EIR amortisation is
included as finance costs in the statement of profit or loss.
Impairment
AASB 9 replaces the incurred loss model from AASB 139
with an expected credit loss (ECL) model. The ECL model
applies to financial assets measured at amortised cost,
contract assets and debt instruments at FVOCI.
Measurement under ECLs is based on the anticipated
impact of default events arising either in the 12 months
after reporting date or the entire lifetime of the asset.
For trade receivables and contract assets, the Group
applies a simplified approach in calculating ECLs.
Therefore, the Group does not track changes in credit risk,
but instead recognises a loss allowance based on lifetime
ECLs at each reporting date. The Group has established
a provision matrix that is based on its historical credit loss
experience, adjusted for forward-looking factors specific
to the debtors and the economic environment.
The Group considers a financial asset in default when
contractual payments are 120 days past due. However,
in certain cases, the Group may also consider a financial
asset to be in default when internal or external information
indicates that the Group is unlikely to receive the outstanding
contractual amounts in full before taking into account any
credit enhancements held by the Group. A financial asset
is written off when there is no reasonable expectation
of recovering the contractual cash flows.
K&S CORPORATION LIMITED ANNUAL REPORT 2019 25
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONTINUED
Derecognition
Financial Assets
The Group derecognises a financial asset when the
contractual rights to the cash flows from the financial asset
expire, or it transfers the rights to receive the contractual
cash flows in a transaction in which substantially all of the
risks and rewards of ownership of the financial asset are
transferred or in which the Group neither transfers nor
retains substantially all of the risks and rewards of ownership
and it does not retain control of the financial asset.
The Group enters into transactions whereby it transfers
assets recognised in its Consolidated Statement of
Financial Position, but retains either all or substantially
all of the risks and rewards of the transferred assets. In
these cases, the transferred assets are not derecognised.
Financial Liabilities
The Group derecognises a financial liability when its
contractual obligations are discharged or cancelled or
expire. The Group also derecognises a financial liability
when its terms are modified and the cash flows of the
modified liability are substantially different, in which case
a new financial liability based on the modified terms is
recognised at fair value.
On derecognition of a financial liability, the difference between
the carrying amount extinguished and the consideration
paid (including any non-cash assets transferred or liabilities
assumed) is recognised in profit or loss.
(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 2019, outlined
below. Of these standards, AASB 16 Leases is expected to
have a material impact on the Group’s financial statements
in the period of initial recognition.
AASB 16 Leases
The Group is required to adopt AASB 16 from 1 July 2019.
The Group has assessed the estimated impact that initial
application of AASB 16 will have on its consolidated
financial statements, as described below. The actual
impacts of adopting the standard on 1 January 2019
may change because:
– the Group has not finalised the testing and assessment
of controls over its new IT systems; and
– the new accounting policies are subject to change until
the Group presents its first financial statements that
include the date of initial application.
26 K&S CORPORATION LIMITED ANNUAL REPORT 2019
AASB 16 introduces a single, on-balance sheet lease
accounting model for lessees. A lessee recognises a
right-of-use asset representing its right to use the
underlying asset and a lease liability representing its
obligation to make lease payments. There are recognition
exemptions for short-term leases and leases of low-value
items. Lessor accounting remains substantially unchanged
compared to the current standard – i.e. lessors continue
to classify leases as finance or operating leases.
AASB 16 replaces existing leases guidance, including
AASB 117 Leases and Interpretation 4 Determining whether
an Arrangement contains a Lease.
Leases where the Group is a lessee
The Group will recognise new assets and liabilities for its
operating leases of warehouse and office facilities and
equipment (see Note 16). The nature of expenses related
to those leases will now change because the Group will
recognise a depreciation charge for right-of-use assets
and interest expense on lease liabilities.
Previously, the Group recognised operating lease expense
on a straight-line basis over the term of the lease, and
recognised assets and liabilities only to the extent that
there was a timing difference between actual lease
payments and the expense recognised.
In addition, the Group will no longer recognise provisions
for operating leases that it assesses to be onerous. Instead,
the right-of-use asset will be assessed for impairment.
This will replace the previous accounting for onerous leases.
No significant impact is expected for the Group’s
finance leases.
Based on the information currently available, the Group
estimates that it will recognise additional lease liabilities and
right-of-use assets in the range of $31m – $38m as at 1 July
2019. The Group does not expect the adoption of AASB 16
to impact its ability to comply with the financial covenants.
Leases where the Group is a lessor
There is no expected impact from transition to AASB 16
from leases in which the Group is a lessor.
Transition
The Group will apply AASB 16 initially on 1 July 2019,
using the modified retrospective approach (whereby the
right-of-use asset is equal to the lease liability, subject
to certain adjustments). Therefore, the cumulative effect
of adopting AASB 16 will be recognised as an adjustment
to the opening balance of retained earnings at 1 July 2019,
with no restatement of comparative information.
The Group plans to apply the practical expedient to
grandfather the definition of a lease on transition.
This means that it will apply AASB 16 to all contracts
entered into before 1 January 2019 and identified as
leases in accordance with AASB 117 and Interpretation 4.
The Group will also elect to use the exemptions proposed
by the standard on lease contracts for which the lease
terms ends within 12 months as of the date of initial
application, and lease contracts for which the underlying
asset is of low value. The Group has leases of certain
office equipment such as personal computers that are
considered to be low value.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 2019 Other standards
The following amended standards and interpretations are
not expected to have a significant impact on the Group’s
consolidated financial statements.
– IFRIC 23 Uncertainty over Tax Treatments.
– Prepayment Features with Negative Compensation
(Amendments to IFRS 9).
– Long-term Interests in Associates and Joint Ventures
(Amendments to IAS 28).
– Plan Amendment, Curtailment or Settlement
(Amendments to IAS 19).
– Annual Improvements to IFRS Standards 2015–2017
Cycle – various standards.
– Amendments to References to Conceptual Framework
in IFRS Standards.
– IFRS 17 Insurance Contracts.
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. The Group ‘controls’ an
entity when it is exposed to, or has rights to, variable
returns from its involvement with the entity and has
the ability to affect those returns through its power over
the entity.
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 Consolidated
Statement of Financial Position, separately from the equity
of the owners of the parent.
Losses are attributed to the non-controlling interest even
if that results in a deficit balance.
If the Group loses control over a subsidiary, it:
– Derecognises the assets (including goodwill) and liabilities
of the subsidiary;
– Derecognises the carrying amount of any non-controlling
interest;
– Derecognises the cumulative translation differences,
recorded in equity;
– Recognises the fair value of consideration received;
– Recognises the fair value of any investment retained;
– Recognises any surplus or deficit in profit or loss;
– Reclassifies the parent’s share of components previously
recognised in other comprehensive income to profit or loss.
e) 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.
f) Cash and cash equivalents
Cash and cash equivalents in the Consolidated Statement
of Financial Position comprise cash at bank and in hand
and short-term deposits with an original maturity of three
months or less which are subject to an insignificant risk
of changes in value.
For the purposes of the Consolidated Statement of Cash
Flows, cash and cash equivalents consist of cash and
cash equivalents as defined above, net of outstanding
bank overdrafts.
K&S CORPORATION LIMITED ANNUAL REPORT 2019 27
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONTINUED
g) Leases
Group as a lessee
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.
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.
Group as a lessor
Leases in which the Group does not transfer substantially
all the risks and rewards of ownership of an asset are
classified as operating leases. Rental income arising is
accounted for on a straight-line basis over the lease terms
and is included in revenue in the statement of profit or loss
due to its operating nature. Initial direct costs incurred
in negotiating and arranging an operating lease are added
to the carrying amount of the leased asset and recognised
over the lease term on the same basis as rental income.
Contingent rents are recognised as revenue in the period
in which they are earned.
h) Trade and other receivables
For trade receivables, the Group has adopted a simplified
approach when calculating an ECL provision by establishing
a provision matrix that is based on its historical credit loss
experience, adjusted for forward-looking factors specific
to the debtors and the economic environment.
i) 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.
28 K&S CORPORATION LIMITED ANNUAL REPORT 2019
j) 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.
k) 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.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 2019 The Group’s share of associates’ post-acquisition profits
or losses is recognised in the statement of comprehensive
income, and its share of post-acquisition movements in
reserves is recognised in reserves. The cumulative post-
acquisition movements are adjusted against the carrying
amount of the investment. Dividends receivable from the
associates are recognised in the parent entity’s statement
of comprehensive income as a component of other income.
When the Group’s share of losses in an associate equals
or exceeds its interest in the associate, including any
unsecured long-term receivables and loans, the Group
does not recognise further losses, unless it has incurred
obligations or made payments on behalf of the associate.
The reporting dates of the associate and the Group are
identical and the associates’ accounting policies conform
to those used by the Group for like transactions and events
in similar circumstances.
l) Income tax and other taxes
Current tax assets and liabilities for the current period and
prior periods are measured at the amount expected to be
recovered from or paid to the taxation authorities based
on the current period’s taxable income. The tax rates and
tax laws used to compute the amount are those that are
enacted or substantively enacted by the reporting date.
Deferred income tax is provided on all temporary
differences at the reporting date between the tax bases
of assets and liabilities and their carrying amounts for
financial reporting purposes.
Deferred income tax liabilities are recognised for all taxable
temporary differences except:
– where the deferred income tax liability arises from the
initial recognition of an asset or liability in a transaction
that is not a business combination and, at the time of
the transaction, affects neither the accounting profit nor
taxable profit or loss; or
– when the taxable temporary differences is associated
with investments in subsidiaries and associates and
the timing of the reversal of the temporary differences
can be controlled and it is probable that the temporary
differences will not reverse in the foreseeable future.
Deferred income tax assets are recognised for all
deductible temporary differences, carry-forward of unused
tax credits and unused tax losses, to the extent that it
is probable that taxable profit will be available against
which the deductible temporary differences, and the
carry-forward of unused tax credits and unused tax
losses can be utilised, except:
– when the deferred income tax asset relating to the
deductible temporary difference arises from the initial
recognition of an asset or liability in a transaction that
is not a business combination and, at the time of the
transaction, affects neither the accounting profit nor
taxable profit or loss; or
– when the deductible temporary differences associated
with investments in subsidiaries, associates and interests
in joint ventures, deferred tax assets are only recognised
to the extent that it is probable that the temporary
differences will reverse in the foreseeable future and
taxable profit will be available against which the
temporary differences can be utilised.
The carrying amount of deferred income tax assets is
reviewed at each reporting date and reduced to the extent
that it is no longer probable that sufficient taxable profit will
be available to allow all or part of the deferred income tax
asset to be utilised.
Unrecognised deferred income tax assets are reassessed
at each reporting date and are recognised to the extent that
it has become probable that future taxable profits will allow
the deferred tax asset to be recovered.
Deferred income tax assets and liabilities are measured
at the tax rates that are expected to apply to the year when
the asset is realised or the liability is settled, based on tax
rates (and tax laws) that have been enacted or
substantively enacted at the reporting date.
Income taxes relating to items recognised directly in equity
are recognised in equity and not in the profit or loss.
Deferred tax assets and deferred tax liabilities are offset
only if a legally enforceable right exists to set off current
tax assets against current tax liabilities and the deferred
tax assets and liabilities relate to the same taxable entity
and the same taxable authority.
Other taxes
Revenues, expenses and assets are recognised net of the
amount of GST except:
– when the GST incurred on a purchase of goods and
services is not recoverable from the taxation authority,
in which case the GST is recognised as part of the cost
of acquisition of the asset or as part of the expense item
as applicable; and
– receivables and payables are stated with the amount
of GST included.
The net amount of GST recoverable from, or payable to,
the taxation authority is included as part of receivables or
payables in the Consolidated Statement of Financial Position.
Cash flows are included in the Consolidated 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.
K&S CORPORATION LIMITED ANNUAL REPORT 2019 29
n) 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.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONTINUED
m) Property, plant and equipment
i) Initial measurement and depreciation
Plant and equipment is stated at cost less accumulated
depreciation and any impairment in value.
Freehold 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 equipment
Not depreciated
2.5 –10% p.a.
7–20% p.a.
15 –40% p.a.
25 –33% p.a.
ii) Revaluations
Following initial recognition at cost, freehold 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
Consolidated 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.
30 K&S CORPORATION LIMITED ANNUAL REPORT 2019
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 2019 o) Impairment of non-financial 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). Fair value is determined in accordance with
AASB 13 Fair Value Measurement.
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.
p) Interest-bearing loans and borrowings
All loans and borrowings are initially recognised at fair value
net of directly attributable costs.
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. Interest expense is recorded in
profit or loss. Borrowings are classified as current liabilities
unless the Group has an unconditional right to defer
settlement of the liability for at least 12 months after the
reporting period.
q) 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.
r) 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.
s) Employee leave benefits
i) Wages and salaries
Liabilities for wages and salaries, including non-monetary
benefits 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. Expenses for non-accumulating sick
leave are recognised when the leave is taken and are
measured at the rates paid or payable.
ii) Long service 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.
K&S CORPORATION LIMITED ANNUAL REPORT 2019 31
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.
w) 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.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONTINUED
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.
t) 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.
u) 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.
v) 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.
32 K&S CORPORATION LIMITED ANNUAL REPORT 2019
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 2019 Significant accounting judgments
Impairment testing
The Group determines whether goodwill and other non-
current assets are 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
or where there is an impairment trigger. The assumptions
used in this estimation of recoverable amount and the
carrying amount of goodwill are discussed in Note 12.
Risk exposures and responses
Credit risk
Credit risk is the risk that a counterparty will not meet its
obligations under a financial instrument or customer
contract, leading to a financial loss. It is the Group’s policy
that all customers who wish to trade on credit are subject
to credit verification procedures including an assessment
of their independent credit rating, financial position, past
experience and industry reputation.
The Group is exposed to credit risk from its operating
activities (primarily trade receivables) and from its
financing activities, including deposits with banks
and financial institutions.
While the Group 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 92%
(2018: 93%) and Fuel 8% (2018: 7%). The carrying
amounts of financial assets and contract assets represent
the maximum credit exposure.
Trade receivables are non-interest bearing and are
generally on 14-90 day terms. The allowance for
impairment is measured using the simplified expected
credit loss model, using an average loss rate %. Set
out below is the ageing of receivables at the end of the
reporting date that were not impaired:
Workers’ compensation provision
The Group maintains a self-insurance provision for future
workers’ compensation claims. The provision is determined
based on actuarial estimates of future claim rates and is
discounted back to its present value. The related carrying
amounts are disclosed in Note 14.
Valuation of freehold land and buildings
The Group’s policy is to carry its freehold land and buildings
at their fair values. Determining the fair values requires
significant estimation and judgements including on current
market rental rates etc. Refer to Note 11 for further information.
3. FINANCIAL RISK MANAGEMENT OBJECTIVES
AND POLICIES
The Group’s principal financial instruments, other than 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 main risks arising from the Group’s
financial instruments are interest rate risk, liquidity risk and
credit risk. The Group’s exposure to currency risk is minimal.
The Board reviews and agrees policies for managing each
of these risks and they are summarised below.
Neither past due nor impaired
Past due 0 – 30 days
Past due 31 – 60 days
Past due 61 – 90 days
Past due 91 days
Movements in the provision for impairment loss were as follows:
At 1 July
Charge for the year
Amounts written off
At 30 June
2019
$’000
69,894
26,051
5,476
4,011
2,138
2019
$’000
235
275
–
510
2018
$’000
68,596
24,178
4,688
2,001
1,866
2018
$’000
490
11
(266)
235
K&S CORPORATION LIMITED ANNUAL REPORT 2019 33
3. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES CONTINUED
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes
in market interest rates. 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 13. The Group’s hire-purchase
liabilities are at a fixed rate.
The following sensitivity analysis is based on the interest rate risk exposures in existence at the Balance Sheet date:
Judgements of reasonably possible movements:
Consolidated
+ 1% (100 basis points)
- 0.5% (50 basis points)
Post- tax Higher/(Lower)
2019
$’000
(94)
47
2018
$’000
(138)
69
Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial
liabilities that are settled by delivering cash or another financial asset. The Group’s approach to managing liquidity
is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both
normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.
In addition, the Group maintains access to short and long term funding facilities which are drawn upon as required.
These are disclosed in Note 13.
Exposures to liquidity risk
The following liquidity risk disclosure reflects all contractually fixed repayments and interest resulting from recognised
financial liabilities and financial guarantees as of 30 June 2019. 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.
Year ended 30 June 2019
Financial liabilities
Interest bearing loans and borrowings
Trade and other payables
Year ended 30 June 2018
Financial liabilities
Interest bearing loans and borrowings
Trade and other payables
Less than
1 year
$’000
1 to 2
years
$’000
2 to 5
years
$’000
Greater than
5 years
$’000
(44,838)
(95,920)
(140,758)
(64,954)
–
(64,954)
(48,461)
–
(48,461)
(49,476)
(101,859)
151,335
(61,798)
–
(61,798)
(44,601)
–
(44,601)
–
–
–
–
–
–
Total
$’000
(158,253)
(95,920)
(254,173)
(155,875)
(101,859)
(257,734)
34 K&S CORPORATION LIMITED ANNUAL REPORT 2019
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 2019 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 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 logistics 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 logistics
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.
The entity has one customer which contributes greater
than 10% of total revenue ($90.5m) and falls within the
Australian Transport Segment.
The following table presents revenue and profit information
for reportable segments for the years ended 30 June 2019
and 30 June 2018.
Year ended 30 June 2019
Revenue
External customers
Finance revenue
Inter-segment sales
Total segment revenue
Results
Depreciation and amortisation expense
Finance costs
Share of profits of associates
Segment net operating profit/(loss) after tax
Operating assets
Operating liabilities
Other disclosures
Investments in associate
Capital expenditure*
Inter-segment revenues of $92,432,000 are eliminated on consolidation.
* Capital expenditure includes assets acquired through hire-purchase arrangements.
Australian
Transport
$’000
Fuel
$’000
New Zealand
Transport
$’000
723,059
30
1,593
724,682
(44,014)
(7,232)
123
(3,489)
511,238
296,792
421
(58,924)
130,275
–
90,839
221,114
–
–
–
3,220
39,692
15,177
51,831
12
–
51,843
(5,343)
(729)
–
2,590
44,198
12,423
Total
$’000
905,165
42
92,432
997,639
(49,357)
(7,961)
123
2,321
595,128
324,392
–
–
–
421
(6,073)
(64,997)
K&S CORPORATION LIMITED ANNUAL REPORT 2019 35
4. OPERATING SEGMENTS CONTINUED
Year ended 30 June 2018
Revenue
External customers
Finance revenue
Inter-segment sales
Total segment revenue
Results
Depreciation and amortisation expense
Finance costs
Share of profits of associates
Segment net operating profit after tax
Operating assets
Operating liabilities
Other disclosures
Investments in associate
Capital expenditure
Australian
Transport
$’000
Fuel
$’000
New Zealand
Transport
$’000
95,056
–
80,390
175,446
–
–
–
2,884
36,182
14,887
45,803
9
–
45,812
(4,586)
(948)
–
2,050
42,028
12,379
Total
$’000
844,112
24
81,346
925,482
(42,367)
(7,056)
130
17,124
569,544
321,573
–
–
–
398
(3,540)
(70,181)
703,253
15
956
704,224
(37,781)
(6,108)
130
12,190
491,334
294,307
398
(66,641)
Inter-segment revenues of $81,346,000 are eliminated on consolidation.
36 K&S CORPORATION LIMITED ANNUAL REPORT 2019
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 2019 i) Segment assets reconciliation to the Consolidated Statement of Financial Position
Segment assets are those operating assets of the entity that the executive 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
Inter-segment eliminations
Deferred tax assets
Total assets per the Consolidated Statement of Financial Position
The analysis of location of non-current assets excluding deferred tax asset are as follows:
Australia
New Zealand
Total non-current assets per the Consolidated Statement of Financial Position
ii) Segment liabilities reconciliation to the Consolidated 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 debt for each segment in the monthly Board meetings.
Reconciliation of segment operating liabilities to total liabilities.
Segment operating liabilities
Inter-segment eliminations
Deferred tax liabilities
Income tax payable
Total liabilities per the Consolidated Statement of Financial Position
Consolidated
2019
$'000
595,128
(27,883)
12,533
579,778
2018
$'000
569,544
(26,875)
10,700
553,369
382,395
35,222
417,617
347,012
34,043
381,055
324,392
(27,883)
41,342
1,596
339,447
321,573
(26,875)
37,118
686
332,502
K&S CORPORATION LIMITED ANNUAL REPORT 2019 37
5. REVENUE AND EXPENSES
a) Revenue
Rendering of services
Sale of goods
Agency commission from fuel sales
Finance revenue
Total revenue
Consolidated
2019
$’000
2018
$’000
765,709
139,138
318
42
905,207
729,844
113,875
393
24
844,136
Key information relating to the Group’s financial performance is detailed below. In accordance with AASB 15 Revenue from
Contracts with Customers, the table disaggregates revenue by operating segments that correspond to the internal reports
reviewed by management.
For the year ended 30 June 2019
Australian
Transport
$’000
New Zealand
Transport
$’000
Fuels
$’000
Total
$’000
713,878
9,181
723,059
723,059
–
723,059
723,059
–
723,059
51,831
–
51,831
–
51,831
51,831
51,831
–
51,831
–
130,275
130,275
130,275
–
130,275
765,709
139,456
905,165
853,334
51,831
905,165
–
130,275
130,275
774,890
130,275
905,165
For the year ended 30 June 2018
Australian
Transport
$’000
New Zealand
Transport
$’000
684,041
19,212
703,253
703,253
–
703,253
703,253
–
703,253
45,803
–
45,803
–
45,803
45,803
45,803
–
45,803
Fuels
$’000
–
95,056
95,056
95,056
–
95,056
–
95,056
95,056
Total
$’000
729,844
114,268
844,112
798,309
45,803
844,112
749,056
95,056
844,112
Segments
Type of service
Transport services
Sale of fuel (including agency commissions)
Total revenue from contracts with customers
Geographical markets
Australia
New Zealand
Total revenue from contracts with customers
Timing of revenue recognition
Services transferred over time
Goods transferred at a point in time
Total revenue from contracts with customers
Segments
Type of service
Transport services
Sale of fuel (including agency commissions)
Total revenue from contracts with customers
Australia
New Zealand
Total revenue from contracts with customers
Timing of revenue recognition
Services transferred over time
Goods transferred at a point in time
Total revenue from contracts with customers
38 K&S CORPORATION LIMITED ANNUAL REPORT 2019
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 2019 b) Other income
– Net gains on disposal of property, plant & equipment
– Other
Total other income
c) Finance costs
– Other parties
– Finance charges on hire purchase contracts
Total finance costs
d) Depreciation expense
Depreciation
– Buildings
– Motor vehicles
– Plant and equipment
Total depreciation expense
e) Employee expenses
– Wages and salaries
– Workers’ compensation costs
– Long service leave provision
– Annual leave provision
– Payroll tax
– Defined contribution plan expense
– Directors retirement scheme expense
Total employee expenses
f) Operating lease rental expense
– Property
– Plant & equipment
Total operating lease rental expense
g)
Individually significant items
– Aurizon legal settlement
– Arrium recovery
– Prior year indirect tax matters
– Impairment expense 2
– Onerous lease provisions
– Other non-recurring site closure costs
Total significant items pre-tax
Tax impact on significant items
Total significant items, net of tax
Consolidated
2019
$’000
2018
$’000
2,709
14,936 1
17,645
2,598
5,363
7,961
2,649
41,936
4,772
2,152
21,4011
23,553
2,016
5,040
7,056
2,302
35,691
4,374
49,357
42,367
240,325
12,325
1,514
14,443
13,451
16,954
4
299,016
17,052
13,515
30,567
9,525
–
(375)
(4,460)
(2,884)
(1,853)
(47)
14
(33)
227,117
9,659
1,185
14,376
12,635
16,036
8
281,016
16,238
14,388
30,626
10,900
1,429
1,269
–
–
–
13,598
(4,079)
9,519
1. Included within other income is a $9.5m (30 June 2018: $16.1m) from the Group’s former rail provider, Aurizon, for the resolution of claims against it by the Group
arising out of the closure of Aurizon’s intermodal business in December 2017. This claim was settled in the period and no further monies are owed to the Group
relating to this matter.
2. Following a strategic review of the Company’s Western Australian general freight business, an assessment of the carrying value of the motor vehicle and plant and
equipment assets specific to this business was performed. The recoverable amount of motor vehicles was determined from market prices from auctions and then cost
to dispose. The recoverable amount of plant and equipment was based on the highest and best use (fair value) and expected to be obsolete. As a result, the Directors
elected to raise an impairment in relation to these assets of $4.460m. Refer to note 21 for further information in relation to the sale of the Group’s Western Australian
general freight business in August 2019.
K&S CORPORATION LIMITED ANNUAL REPORT 2019 39
6. INCOME TAX
The major components of income tax expense are:
Consolidated Statement of Comprehensive Income
Current income tax
– Current income tax charge
– Adjustments in respect of current income tax of previous years
Deferred income tax
– Relating to origination and reversal of Income tax expense reported in the Statement
of Comprehensive Income temporary differences
Income tax expense reported in the Consolidated Statement of Comprehensive Income
Consolidated Statement of Changes in Equity
Deferred income tax related to items charged or credited directly to equity
– Net gain on revaluation of freehold land and buildings
– Common control (Scott’s Transport Industries acquisition)
Income tax expense reported in equity
A reconciliation between tax expense and the product of accounting profit before income
tax multiplied by the Group’s applicable income tax rate is as follows:
Accounting profit before income tax
At the Group’s statutory income tax rate of 30% (2018: 30%)
– Permanent differences
– Adjustments in respect of current income tax of previous years
Income tax expense reported in the Consolidated Statement of Comprehensive Income
Consolidated
2019
$’000
2018
$’000
6,008
(190)
(4,942)
876
7,333
–
7,333
1,032
128
6,316
7,476
–
(134)
(133)
3,197
24,600
959
107
(190)
876
7,380
(32)
128
7,476
40 K&S CORPORATION LIMITED ANNUAL REPORT 2019
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 2019 Recognised deferred tax assets and liabilities
Opening balance
Charged to income
(Under) provision in relation to prior year
Deferred tax asset recognised on losses
Charged to equity
Payments
Other movements
Closing balance
Tax expense in Consolidated Statement of Comprehensive Income
Amounts recognised in the Consolidated Statement
of Financial Position:
Deferred tax assets
Deferred tax liabilities
Consolidated
2019
$’000
Current
income tax
2019
$’000
Deferred
income tax
2018
$’000
Current
income tax
2018
$’000
Deferred
income tax
(686)
(6,008)
190
–
–
4,842
66
(1,596)
(26,418)
4,942
–
–
(7,333)
–
–
(28,809)
–
876
(444)
(1,032)
(128)
–
–
918
–
(686)
–
12,533
(41,342)
(28,809)
(20,335)
(5,991)
–
(325)
134
–
99
(26,418)
7,476
10,700
(37,118)
(26,418)
Deferred income tax
Deferred income tax at 30 June relates to the following:
Deferred tax liabilities
– Property, plant and equipment
– Trade and other receivables not derived for tax purposes
Deferred tax assets
– Deferred tax asset recognised on losses
– Accelerated depreciation for accounting purposes
– Trade and other payables not currently deductible
– Provisions not currently deductible
Consolidated Statement
of Financial Position
2019
$’000
2018
$’000
(33,662)
(7,680)
(41,342)
(28,609)
(8,509)
(37,118)
–
–
2,683
9,850
1,586
62
1,341
7,711
12,533
10,700
K&S CORPORATION LIMITED ANNUAL REPORT 2019 41
6. INCOME TAX CONTINUED
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 Consolidated 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:
Total (reduction) to tax expense of K&S Corporation Ltd
Total increase to inter-company assets of K&S Corporation Ltd
Parent
2019
$’000
(6,350)
6,350
2018
$’000
(3,340)
3,340
42 K&S CORPORATION LIMITED ANNUAL REPORT 2019
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 2019 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:
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
Net profit attributable to ordinary equity holders of the parent
Consolidated
2019
$
$0.018
$0.018
2018
$
$0.139
$0.139
2,321,641
17,124,000
2019
Thousands
2018
Thousands
Weighted average number of ordinary shares used in the calculation of the basic earnings per share
125,760
123,160
Effect of dilution
– Ordinary shares
Weighted average number of ordinary shares adjusted for the effect of dilution
8. DIVIDENDS PAID AND PROPOSED
Declared and paid during the year:
Dividends on ordinary shares
Final franked dividend for 2018: 2.0 cents (2017 2.0 cents)
Interim franked dividend for 2019: 2.0 cents (2018: 2.0 cents)
Proposed (not recognised as a liability as at 30 June):
Dividends on ordinary shares
Final franked dividend for 2019: $Nil (2018: 2.0 cents)
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% (2018: 30%)
– 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
Tax rates
– The tax rate at which dividends have been franked is 30% (2018: 30%).
– Dividends proposed will be franked at the rate of 30% (2018: 30%).
–
–
125,760
123,160
Consolidated
2019
$’000
2018
$’000
2,491
2,517
5,008
2,442
2,465
4,907
–
2,491
44,617
42,873
1,596
–
–
46,213
(2,491)
40,382
K&S CORPORATION LIMITED ANNUAL REPORT 2019 43
Consolidated
2019
$’000
54
16,510
16,564
2018
$’000
57
15,889
15,946
2,321
17,124
(1,899)
(2,152)
4,460
5,611
49,357
(123)
59,727
(286)
(1,832)
(114)
13,746
(6,060)
910
(3,109)
(1,149)
61,833
–
(400)
42,367
(130)
56,809
(1,008)
2,844
(1,177)
(41,025)
20,965
242
3,239
(77)
40,812
Consolidated
2019
$’000
2018
$’000
107,740
(510)
107,230
9,507
116,737
101,096
(235)
100,861
28,880
129,741
9. CASH AND CASH EQUIVALENTS
Cash
Cash deposits with banks
Cash deposits with banks earn interest at floating rates based on daily bank deposit rates.
Reconciliation of net profit after income tax to net cash flows from operations
Net profit after income tax
Less items classified as investing/financing activities:
– Profit on sale of non-current assets
Add/(less) non-cash items:
– Impairment of non-current assets
– Amounts set aside to provisions
– Depreciation expense
– Share of associates’ net profit
Net cash provided by operating activities before changes in assets and liabilities
CHANGE IN ASSETS AND LIABILITIES
(Increase) in inventories
(Increase)/decrease in future income tax benefit
(Increase) in prepayments
(Increase)/decrease in receivables
(Decrease)/increase in trade creditors
Increase in income taxes payable
(Decrease)/increase in deferred taxes payable
Exchange rate differences
Net cash provided by operating activities
10. TRADE AND OTHER RECEIVABLES
Current
Trade debtors
Allowance for impairment loss
Sundry debtors
Total trade and other receivables
44 K&S CORPORATION LIMITED ANNUAL REPORT 2019
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 2019 11. PROPERTY, PLANT AND EQUIPMENT
a) Reconciliation of carrying amounts at the beginning
and end of the period:
Year ended 30 June 2019
As at 1 July 2018, net of accumulated depreciation and impairment
Additions
Disposals
Revaluation
Transfers
Impairment
Depreciation charge for the year
Exchange adjustment
At 30 June 2019, net of accumulated depreciation and impairment
At 30 June 2019
Cost or fair value
Accumulated depreciation and impairment
Net carrying amount
Year ended 30 June 2018
As at 1 July 2017, net of accumulated depreciation and impairment
Additions
Disposals
Depreciation charge for the year
Exchange adjustment
At 30 June 2018, net of accumulated depreciation and impairment
At 30 June 2018
Cost or fair value
Accumulated depreciation and impairment
Net carrying amount
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.
A revaluation was performed in the current year by an
independent valuer, Jones Lang LaSalle resulting in an
increase to the asset revaluation reserve of $24.5 million
(pre-tax).
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 in the nature, location
or condition of the specific property.
Freehold
Land and
Buildings
$’000
Motor
Vehicles
$’000
Plant &
Equipment
$’000
Total
$’000
121,291
6,731
–
24,471
(56)
–
(2,649)
1
149,789
156,269
(6,480)
149,789
117,266
6,328
–
(2,302)
(1)
121,291
131,886
(10,595)
121,291
235,077
52,482
(4,202)
–
570
(3,500)
(41,936)
980
239,471
512,087
(272,616)
239,471
217,295
58,729
(4,117)
(35,691)
(1,139)
235,077
486,492
(251,415)
235,077
17,184
5,784
(77)
(27)
(516)
(960)
(4,772)
61
16,679
77,708
(61,029)
16,679
16,437
5,124
(57)
(4,374)
54
17,184
71,809
(54,625)
17,184
373,552
64,997
(4,279)
24,444
–
(4,460)
(49,357)
1,042
405,939
746,064
(340,125)
405,939
350,998
70,181
(4,174)
(42,367)
(1,086)
373,552
690,187
(316,635)
373,552
As the freehold land and buildings measured at fair value
contains unobservable price inputs, they are designated
as a Level 3 valuation. The most significant unobservable
inputs are:
– Rental capitalisation rates between 6.5% and 9.5%; and
– Future rental growth rates ranging from 2.5% – 3.5%.
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.
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.
K&S CORPORATION LIMITED ANNUAL REPORT 2019 45
11. PROPERTY, PLANT AND EQUIPMENT CONTINUED
c) Carrying amounts if freehold land and buildings were measured at cost less accumulated depreciation
and impairment
If freehold land and buildings were measured using the cost model the carrying amounts would be as follows:
Cost
Accumulated depreciation and impairment
Net carrying amount
12. IMPAIRMENT TESTING OF ASSETS
Consolidated
2019
$’000
104,050
(19,590)
84,460
2018
$’000
97,319
(17,809)
79,510
Cash generating units
For the purpose of impairment testing, goodwill is allocated to cash-generating units (‘CGUs’) which equate to the Group’s
reportable segments being Australian Transport, Fuels and New Zealand Transport. The Group’s goodwill balance of
$6.3 million is solely allocated to the New Zealand Transport CGU.
Impairment testing
Following an impairment assessment at 30 June 2019, the recoverable amount for all CGUs exceeded their carrying values
and no impairment was recognised (2018: Nil). The recoverable amounts were determined through a fair value less costs
of disposal calculation. Key estimates and judgements included:
Cashflow forecasts
The cash flow forecasts are based on financial budgets approved by the Board for FY2020 and then projected over
a five-year period using short and long-term growth rates specific to market and economic conditions.
Terminal growth rates and discount rates
The Group applied post-tax discount rates to post-tax cashflows as this approximates applying pre-tax discount rates
to pre-tax cashflows. The discount rates incorporate a risk adjustment relative to the risks associated with the net post-tax
cashflows being achieved.
The following discount and terminal growth rates were applicable for each CGU:
Australian Transport
Fuel
New Zealand Transport
Pre-Tax Discount Rate
Terminal Growth Rate
2019
%
12.33
12.33
11.82
2018
%
13.93
13.71
13.38
2019
%
2.5
2.5
2.5
2018
%
3.0
3.0
2.5
Sensitivity analysis
Increases in discount rates or changes in other assumptions such as operating performance may cause the recoverable
amount to fall below carrying value. Based on current economic conditions and CGU performances, there were no
reasonably possible changes to key assumptions used in the determination of CGU recoverable amounts that would result
in a material impairment to the Group.
46 K&S CORPORATION LIMITED ANNUAL REPORT 2019
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 2019
13. INTEREST BEARING LOANS AND BORROWINGS
Current
Hire purchase liabilities – secured
Bank loans – secured
Non-current
Non redeemable preference shares
Hire purchase liabilities – secured
Bank loans – secured
2019
$’000
2018
$’000
39,743
–
39,743
60
78,366
30,000
37,545
6,625
44,170
60
72,680
29,000
108,426
101,740
Summary of financing arrangements
Credit facilities are provided as part of the overall debt funding structure of the Group. During the year, the Group extended
its bank bill facilities. The revised maturity dates as well as the drawn component of each facility is shown below:
Facility and limit
Maturity
$25m bank bill facility 1, 2
$33m bank bill facility 1
$40m bank bill facility 1
$7m bank overdraft facility 1
Hire purchase facility 3
Total interest bearing liabilities
February 2021
November 2020
April 2021
On demand
1–60 months
Interest rate
BBSY + margin
BBSY + margin
BBSY + margin
BBSY + margin
4.57%4
Amounts Drawn
2019
$’000
24,000
6,000
–
–
118,109
148,109
2018
$’000
–
29,000
6,625
–
110,225
145,850
1. The bank loans are secured by fixed and floating charges over the assets of the Group. Bank loans are also secured by registered mortgages over a number of freehold
properties of the Group. In addition, the Company and all its subsidiaries have the following interlocking guarantees in support of the Company’s banking facilities:
– Interlocking guarantee and indemnity between Westpac Banking Corporation (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 facility agreement.
– Guarantee and indemnity between Commonwealth Bank of Australia (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 facility agreement.
2. $1m of this facility is a bank guarantee facility.
3. Hire purchase liabilities are secured by the relevant assets.
4. This represents the weighted average interest rate across all of the Group’s hire purchase liabilities.
The carrying values of the bank bill facilities approximate the fair values as they bear a fully variable interest rate.
K&S CORPORATION LIMITED ANNUAL REPORT 2019 47
13. INTEREST BEARING LOANS AND BORROWINGS CONTINUED
Hire purchase commitments
Within one year
After one year but not more than five years
Greater than 5 years
Total minimum lease payments
Fair value of hire purchase liabilities
30-Jun-19
2019
2018
Minimum
payments
$’000
Present value
of payments
$’000
Minimum
payments
$’000
Present value
of payments
$’000
44,208
83,416
–
127,624
117,981
39,743
78,366
–
118,109
–
41,819
77,398
–
119,217
108,575
37,545
72,680
–
110,225
–
1 July 2018
$’000
Cash Flows
$’000
For. Ex.
Movement
$’000
New Leases
$’000
Other
$’000
30 June 2019
$’000
Hire purchase liabilities
110,225
(43,485)
681
50,688
Non-redeemable preference shares
Bank Loans
60
35,625
–
(5,625)
–
–
–
–
Total Liabilities from financing activities
145,910
(49,110)
681
50,688
–
–
–
–
118,109
60
30,000
148,169
30-Jun-18
1 July 2017
$’000
Cash Flows
$’000
For. Ex.
Movement
$’000
New Leases
$’000
Other
$’000
30 June 2018
$’000
Hire purchase liabilities
103,451
(39,431)
(711)
46,916
Non-redeemable preference shares
60
–
Bank Loans – secured
Total Liabilities from financing activities
19,625
123,136
16,000
(23,431)
–
–
–
–
(711)
46,916
–
–
–
–
110,225
60
35,625
145,910
Non-cash financing and investment activities
During the financial year, the economic entity acquired property, plant and equipment with an aggregate fair value of
$50,688,000 (2018: $46,916,000) by means of finance lease or hire purchase arrangements. These acquisitions and
disposals are not reflected in the Consolidated Statement of Cash Flows.
48 K&S CORPORATION LIMITED ANNUAL REPORT 2019
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 2019 14. PROVISIONS
Current
Employee benefits
Self insured workers’ compensation liability
Onerous lease provision
Non-current
Employee benefits
Make good provision
Directors’ retirement allowance
Self insured workers’ compensation liability
Consolidated
2019
$’000
2018
$’000
26,156
4,292
2,884
33,332
5,805
290
383
11,960
18,438
25,702
3,837
–
29,539
6,361
149
371
9,739
16,620
a) Movements in provisions
Movements in each class of provision during the financial year, other than provisions relating to employee benefits and
make good provisions, are set out below:
Onerous
Lease
Provision
$’000
Directors
Retirement
Allowance
$’000
Self Insured
Workers’
Compensation
Liability
$’000
–
2,884
–
2,884
371
12
–
383
13,576
12,325
(9,649)
16,252
Total
$’000
13,947
15,221
(9,649)
19,519
iv) Self Insured Workers Compensation
Workers compensation self insurance liability is based
on actuarial assessments prepared in accordance with
the Group’s self insurance licence.
v) Onerous lease provision
The onerous lease provision relates to some of the Group’s
property rental arrangements in Western Australia. These
have been recognised where the contractual costs to fulfil
the rental obligations exceed the economic benefits
derived from those rental properties.
CONSOLIDATED
At 1 July 2018
Arising during the year
Utilised
At 30 June 2019
b) Nature and timing of provisions
i) Make good provision
In accordance with various lease agreements, the Group
must restore leased premises 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 2s(ii) for the relevant accounting policy
applied in the measurement of this provision.
iii) Directors retirement allowance
Refer to Note 2s(iv) for the relevant accounting policy
applied in the measurement of this provision.
K&S CORPORATION LIMITED ANNUAL REPORT 2019 49
15. CONTRIBUTED EQUITY AND RESERVES
a) Ordinary shares
Contributed equity
127,279,339 (2018: 124,528,908) ordinary shares fully paid
Consolidated
2019
$'000
2018
$'000
162,408
162,408
158,099
158,099
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.
Movements in ordinary shares on issue
At 1 July 2017
Issued through Dividend Re-investment Plan – 1,187,065 ordinary shares at $1.7240
Issued through Dividend Re-investment Plan – 1,272,302 ordinary shares at $1.6516
At 30 June 2018
Issued through Dividend Re-investment Plan – 1,354,321 ordinary shares at $1.5806
Issued through Dividend Re-investment Plan – 1,396,110 ordinary shares at $1.5530
At 30 June 2019
Thousands
$’000
122,070
153,951
1,187
1,272
2,047
2,101
124,529
158,099
1,354
1,396
2,141
2,168
127,279
162,408
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 2019, the Group paid dividends of $5,008,243 (2018: $4,906,523).
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
2019
$’000
148,169
(16,564)
131,605
371,936
2018
$’000
145,910
(15,946)
129,964
350,832
35.4%
37.0%
Common control reserve
The common control reserve was created to record
a gain in relation to a transaction with the Group’s
major shareholder.
Total interest bearing loans and borrowings
Less cash and cash equivalents
Net debt
Net debt + Shareholders funds
Gearing ratio
Nature and purpose of reserves
Asset revaluation reserve
The asset revaluation reserve is used to record increases in
the fair value of freehold 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.
50 K&S CORPORATION LIMITED ANNUAL REPORT 2019
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 2019 16. COMMITMENTS
The estimated maximum amount of commitments not provided for in the accounts as at 30 June 2019 are:
Capital expenditure commitments
The aggregate amount of contracts for capital expenditure on plant and equipment due
no later than one year
Lease rental commitments
Operating lease and hire commitments:
– Not later than one year
– Later than one year but not later than five years
– Later than five years
Consolidated
2019
$’000
2018
$’000
4,286
28,849
16,819
27,126
1,830
45,775
14,025
20,394
3,868
38,287
The Group leases property under non-cancellable operating leases expiring from one month to fifteen years. Leases
generally provide the Group 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.
17. CONTINGENT LIABILITIES
From time to time the Group is party to claims from customers and suppliers arising from operations in the ordinary course
of business. At the date of this report there are no claims or contingent liabilities that are expected to materially impact,
either individually or in aggregate, the Group’s financial position or results from operations.
18. DEED OF CROSS GUARANTEE
Pursuant to ASIC Corporations (Wholly-owned Companies) Instrument 2016/785 dated 17 December 2016, the wholly
owned subsidiaries disclosed in Note 19 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.
K&S CORPORATION LIMITED ANNUAL REPORT 2019 51
18. DEED OF CROSS GUARANTEE CONTINUED
The subsidiaries have also given similar guarantees in the event that the Company is wound up. The entities within
the Deed of Cross Guarantee are referred to in Note 19. 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 2019 is set out below:
Closed Group
2019
$’000
2018
$’000
(264)
(5)
(269)
11,279
(248)
(5,008)
5,754
13,985
110,801
6,142
9,724
140,652
4,933
10,046
377,041
12,533
404,553
545,205
98,884
34,353
993
25,434
21,665
(6,592)
15,073
1,289
(176)
(4,907)
11,279
13,602
124,313
5,856
9,859
153,630
1,035
10,022
346,374
10,393
367,824
521,454
102,507
30,989
–
25,020
159,664
158,516
650
100,133
39,895
18,498
159,176
318,840
226,365
162,408
58,203
5,754
226,365
797
99,893
35,250
16,620
152,560
311,076
210,378
158,099
41,000
11,279
210,378
Consolidated Statement of Comprehensive Income
Profit/(loss) before income tax
Income tax benefit/(expense)
Profit/(loss) after income tax
Retained profits at the beginning of the year
Transfer from reserves
Dividends provided or paid
Retained earnings at the end of the year
Consolidated Statement of Financial Position
Cash
Trade and other receivables
Inventories
Prepayments
Total current assets
Other receivables
Investment in associate
Property, plant and equipment
Deferred tax assets
Total non-current assets
Total assets
Trade and other payables
Interest bearing loans and borrowings
Current tax liabilities
Provisions
Total current liabilities
Trade and other payables
Interest bearing loans and borrowings
Deferred tax liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Contributed equity
Reserves
Retained earnings
Total equity
52 K&S CORPORATION LIMITED ANNUAL REPORT 2019
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 2019 19. CONTROLLED ENTITIES
Particulars in relation to controlled entities
Name
K&S Corporation Limited
Controlled Entities 1
Reid Bros Pty Ltd
Kain & Shelton Pty Ltd
K&S Freighters Pty Ltd
K&S Group Administrative Services Pty Ltd
Kain & Shelton (Agencies) Pty Ltd
K&S Transport Management Pty Ltd
Blakistons-Gibb Pty Ltd
K&S Logistics Pty Ltd
K&S Integrated Distribution Pty Ltd
K&S Group Pty Ltd
DTM Holdings (No. 2) Pty Ltd
Alento Pty Ltd
DTM Holdings Pty Ltd
DTM Pty Ltd
K&S Project Services Pty Ltd
Regal Transport Group Pty Ltd
Strategic Transport Services Pty Ltd
Vortex Nominees Pty Ltd
K&S Freighters Limited
Cochrane’s Transport Limited
Scott Corporation Pty Ltd
Bulktrans Pty Ltd
Chemtrans Pty Ltd
Hyde Park Tank Depot Pty Ltd
Energytrans Pty Ltd
1. All wholly owned Australian entities in this table are part of the Deed of Cross Guarantee.
Class of
Share
Country of
Incorporation
% Equity Interest
2019
2018
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
New Zealand
Australia
Australia
Australia
Australia
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
K&S CORPORATION LIMITED ANNUAL REPORT 2019 53
20. 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 AM and P Sarant.
Apart from the details disclosed in this note, no Director
has entered into a material contract with the Company or
the Group since the end of the previous financial year and
there were no material contracts involving Directors’
interests subsisting at year end.
A number of key management personnel, or their related
parties, hold positions in other companies that result in
them having control or significant influence over these
companies as noted below:
– Mr Winser is an alternate Director of several companies
(including AA Scott Pty Ltd, The Border Watch Pty Ltd,
Scott’s Fleet Rentals Pty Ltd, Sneaths Freightlines Pty
Ltd, and Northfuels Pty Ltd);
– Mr Johnson has an interest as a Director of AA Scott
Pty Ltd;
– Mr Smith is a Director of Cleanaway Waste Management
Ltd; and
– Mr Sarant is a Director of Smart Logistics Pty Ltd.
A number of these companies transacted with the Group
during the year. The terms and conditions of these
transactions were no more favourable than those available,
or which might reasonably be expected to be available, in
similar transactions with non-key management personnel
related companies on an arm’s length basis.
From time to time Directors of the Group, or their related
entities, may buy goods from the Group. These purchases
are on the same terms and conditions as those entered into
by other Group employees or customers.
The aggregate amount of dealings with these companies
during 2019 were as follows:
Purchases
Sales
Receivables
Payables
AA Scott Pty Ltd
The Border Watch Pty Ltd 1
Smart Logistics Pty Ltd
Scott’s Fleet Rentals Pty Ltd
Ray Scott Pastoral Pty Ltd 1
Raymond Scott Pty Ltd 1
Ascot Cartage Contractors
Pty Ltd1
Ascot Haulage NT Pty Ltd 1
Sneaths Freightlines Pty Ltd
Fairfield Industries Pty Ltd 1
Northfuels Pty Ltd
Cleanaway Waste
Management Ltd
2019
$
2018
$
2019
$
2018
$
2019
$
2018
$
2,179,181
19,401
–
2,389,189
25,240
8,247,277 10,429,898
–
798,115
–
592,337
5,195
65,458
3,985
63,003
– 15,601,436 16,253,946
204,100
–
–
1,472,865
881
256,294
2,537
5,422
1,026,582
685,189
969
134,532
1,113
50,327
1,443,049
98,858
–
–
1,098,280
348,879
41,246
1,770
28,457
565,729
159,267
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
235,803
183,659
1,034,471
985,045
122,606
–
–
–
–
–
–
2019
$
75,559
1,764
–
978,213
–
–
28,835
8,647
–
–
–
44,796
2018
$
260,930
3,102
–
1,006,125
–
73.455
24,420
15,707
–
–
–
20,724
1. These entities are related parties of the Group’s majority shareholder.
No provision for doubtful debts has been recognised in respect of these balances as they are considered recoverable.
Other related party arrangements
The Group also has an agreement to rent equipment from Scott’s Fleet Rentals Pty Ltd which expires in February 2022.
Under this agreement, the amounts payable to Scott’s Fleet Rentals Pty Ltd are determined on the number of kilometres
travelled during the year. In addition, the Group also has the option to de-hire at its sole discretion, any equipment by
providing 30 days’ notice to Scott’s Fleet Rentals Pty Ltd. The amounts paid in 2019 and 2018 are noted in the table above.
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.
54 K&S CORPORATION LIMITED ANNUAL REPORT 2019
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 2019 Directors’ Share Transactions
Shareholdings
Aggregate number of shares held by Directors and their Director-related entities at balance date:
– Ordinary shares
– Preference shares
All share transactions were with the parent Company, K&S Corporation Limited.
Dividends
Aggregate amount of dividends paid in respect of shares held by Directors or their
Director-related entities during the year:
– Ordinary shares
Consolidated
2019
$’000
2018
$’000
1,864,004
1,812,187
–
–
$’000
$’000
73
71
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.
Compensation for Key Management Personnel
Short-term
Long-term
Post employment
Consolidated
2019
$
1,818,456
102,745
138,372
2018
$
1,953,113
224,635
139,268
2,059,573
2,317,016
Loans with Key Management Personnel
Details of aggregates of loans to Key Management Personnel are as follows:
Total
2019
2018
Amount at the
start of the year
$
Amounts written off in
the year
$
Amount at the
end of the year
$
Number in Group
$
282,285
305,645
–
–
148,940
282,285
2
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.
K&S CORPORATION LIMITED ANNUAL REPORT 2019 55
21. EVENTS SUBSEQUENT TO BALANCE DATE
On 1 July 2019, the Group acquired 175 trailers from
Scott’s Fleet Rentals Pty Ltd for $3,298,920.
On 28 August 2019, subsidiaries of the Group entered into
an unconditional agreement with Centurion Transport Co.
Pty Ltd for the sale of the business and certain assets
of the Group’s Western Australia based Regal Transport
General Freight business.
Other than this, 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.
22. AUDITORS’ REMUNERATION
The auditor of K&S Corporation Limited is Ernst & Young.
It is anticipated that the consolidated entity will continue
to provide transport and logistics operations during the
next financial year by further extending its services in
Australia and New Zealand and adopting technology-based
solutions to contain costs and enhance services offered
to customers.
No other matters have arisen in the interval between
the end of the financial year and the date of this report,
including any item, transaction or event of a material and
unusual nature which, in the opinion of the Directors of the
Company, are likely to affect significantly the operations
of the Group, the results of those operations, or the state
of affairs of the Group in future financial years.
Audit services:
Audit and review of the statutory financial reports
Other services:
AASB 15/16 technical workshop
23. PARENT ENTITY INFORMATION
Current assets
Total assets
Current liabilities
Total liabilities
Issued capital
Retained earnings
Total Shareholders’ equity
Loss after tax of the parent entity
Total comprehensive loss of the parent entity
Consolidated
2019
$
2018
$
295,721
295,721
197,400
197,400
–
–
6,500
6,500
2019
$’000
99,148
197,246
(1,073)
(31,577)
162,408
3,261
165,669
(6)
(6)
2018
$’000
101,158
199,215
(3,340)
(32,840)
158,099
8,276
166,375
(4)
(4)
Guarantees
Cross guarantees given by the Company and its wholly owned controlled entities are described in Note 18.
Contingent liabilities
Contingent liabilities of the Company and its wholly owned controlled entities are outlined in Note 17.
56 K&S CORPORATION LIMITED ANNUAL REPORT 2019
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 2019 DIRECTORS’
DECLARATION
FOR THE YEAR ENDED 30 JUNE 2019
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 Group 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 2019 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 2019.
e) As at the date of this declaration, there are reasonable grounds to believe that the members of the Closed Group
identified in Note 18 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 30th day of August 2019.
On behalf of the Board:
Tony Johnson
Chairman
Paul Sarant
Managing Director
K&S CORPORATION LIMITED ANNUAL REPORT 2019 57
AUDITOR’S INDEPENDENCE
DECLARATION
Ernst & Young
121 King William Street
Adelaide SA 5000 Australia
GPO Box 1271 Adelaide SA 5001
Tel: +61 8 8417 1600
Fax: +61 8 8417 1775
ey.com/au
Auditor’s Independence Declaration to the Directors of K&S
Corporation Limited
As lead auditor for the audit of the financial report of K&S Corporation Limited for the financial year
ended 30 June 2019, 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
30 August 2019
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
58
58 K&S CORPORATION LIMITED ANNUAL REPORT 2019
AUDITOR’S REPORT
TO THE MEMBERS
Ernst & Young
121 King William Street
Adelaide SA 5000 Australia
GPO Box 1271 Adelaide SA 5001
Tel: +61 8 8417 1600
Fax: +61 8 8417 1775
ey.com/au
Independent Auditor's Report to the Members of K&S Corporation Limited
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 2019, 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)
b)
giving a true and fair view of the consolidated financial position of the Group as at 30 June
2019 and of its consolidated financial performance for the year ended on that date; and
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. 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.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
59
K&S CORPORATION LIMITED ANNUAL REPORT 2019 59
AUDITOR’S REPORT
TO THE MEMBERS
Impairment assessment of intangible assets and property, plant and equipment
Why significant
How our audit addressed the key audit matter
As at 30 June 2019, 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 12 of the
financial report using a fair value less costs to
sell approach. This required the Group to apply
judgments in relation to forecast cash flows, long
term growth rates, the allocation of corporate
costs to the Group’s cash generating units
(CGUs) and the application of an appropriate
discount rate.
Given the uncertainties involved in the forecast
of future results used in the impairment
assessment, we considered this to be a key audit
matter.
Freehold land and buildings are recorded in the
financial statements at fair value. A valuation
was performed in the current year by an
independent valuation specialist, which resulted
in an increase to the asset revaluation reserve of
$24.47 million, before tax.
An impairment charge of $4.46 million was
recognised at 30 June 2019 for motor vehicles
and plant and equipment following a strategic
review of the Group’s Western Australia general
freight business.
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 rates, long term 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 considered the qualifications, competency
and objectivity of the Group’s independent
valuation specialist. Our real estate specialists
assessed the work of the valuer.
We assessed the appropriateness of the
recognition of the impairment expense and
increase to the asset revaluation reserve and
associated disclosures at 30 June 2019.
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 2019 Annual Report other than the financial report and our
auditor’s report thereon. We obtained the Directors’ Report that is 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 accordingly we do 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.
60
A member firm of Ernst & Young Global Limited
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60 K&S CORPORATION LIMITED ANNUAL REPORT 2019
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.
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 related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting
and, based on the 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.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
61
K&S CORPORATION LIMITED ANNUAL REPORT 2019 61
AUDITOR’S REPORT
TO THE MEMBERS
•
•
Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and events
in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities
or business activities 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.
Report on the Audit of the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 13 to 18 of the directors' report for the
year ended 30 June 2019.
In our opinion, the Remuneration Report of K&S Corporation for the year ended 30 June 2019,
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
30 August 2019
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
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62 K&S CORPORATION LIMITED ANNUAL REPORT 2019
INFORMATION ON
SHAREHOLDINGS
Information relating to security holders as at 3rd October 2019
DISTRIBUTION OF SHAREHOLDINGS
Ordinary Shares
1–1,000 Shares
1,001– 5,000 Shares
5,001–10,000 Shares
10,001–100,000 Shares
100,001 and more Shares
152 shareholders hold less than a marketable parcel (275 shares).
TWENTY LARGEST SHAREHOLDERS
Name
Linfox Australia Pty Ltd
1 AA Scott Pty Ltd
2
3 Bell Potter Nominees Ltd
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