More annual reports from K&S Corporation Limited:
2023 ReportANNUAL
REPORT
2021
OUR VISION
TO BE THE LEADING
PROVIDER OF TRANSPORT
AND LOGISTICS SOLUTIONS
WITHIN OUR TARGET
MARKETS IN AUSTRALIA
AND NEW ZEALAND.
CONTENTS
Chairman’s Report
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
14
21
64
23 November 2021
23 February 2022
24 August 2022
14 October 2022
29 November 2022
CHAIRMAN’S
REPORT
The New Zealand business produced a strong result,
with the domestic economy proving to be resilient
throughout the year. It continues to realise growth through
the provision of its integrated and value adding service
offering, with several key customer contracts extended
or renewed in the course of the year.
The fuel trading business has again provided sound
financial results, despite reduced demand for fuel
in FY2021 consequent to COVID-19. The fuel retailing
and wholesaling markets remain dynamic and continue
to exhibit high levels of competition. An expansion of our
network and the completion of several key projects to
enhance our retail offering are currently being progressed.
The implementation of cost reduction strategies continued
across the business, contributing strongly to improved
underlying profit. In particular, the Group has maintained
its focus on operational efficiencies, supplier renegotiations,
cessation of underperforming activities, and the rationalisation
and replacement of specific fleet assets that reduced
operating costs. Ongoing cost reductions are expected
to continue to be accretive in FY2022, although these may
be offset by possible COVID-19 related impacts.
On behalf of the Board of K&S Corporation Limited,
I am pleased to present the Group’s Annual Report for
the year ended 30 June 2021.
Trading conditions in the transport and logistics segments
and regions the Group trades in remain challenging.
Operating revenues for the year were $688.5 million,
12.9% lower than the prior corresponding period.
COVID-19
The Group reported a statutory profit after tax of
$18.1 million, 62.9% higher than the previous year
statutory profit after tax of $11.1 million.
Included in the Group’s statutory result for FY2021 was
$16.2 million (before tax) attributable to the JobKeeper
subsidy, which was received in the September 2020
quarter. The Group’s statutory result also included
$6.0 million of one-off costs treated as significant items.
These largely relate to the impairment of the carrying value
of buildings and land totalling $4.7 million and $0.9 million
in miscellaneous restructuring costs mainly associated
with the exiting of the Hyde Park Tank business.
After adjusting for the above significant items including
government wage subsidies, the current year underlying
profit before tax was $17.1 million, an increase of 44.4%
on the prior corresponding period. The underlying profit
after tax was $11.9 million, an increase of $3.7 million
to the prior corresponding period.
Operating cash flow was $75.5 million, 9.2% lower than
for the previous year.
Safety remains a key focus for the Group. The Group’s
lost time injury rate reduced from 6.6 at the end FY2020
to 4.9 in the current year.
Following strong FY2020 improvements, the Australian
transport segment continued to realise further consolidation
improvements to the majority of its operating divisions.
The reduction of $1.1 million in depreciation expenses
as a result of the change to the Group’s depreciation policy
partially offset the reduced contribution by our aviation
refuelling business, Aero Refuellers. Full year revenue
declined due to a combination of the cessation of
contracts, exiting of underperforming business units
and COVID-19 related reduced customer activity.
In FY2021 the Group experienced reduced revenues in
a number of business units in Australia and New Zealand
as a result of COVID-19. At a minimum, the Group expects
to continue to be adversely impacted by COVID-19 in the
first half of FY2022.
The Group’s operations have not been subject to any
Government mandated state border closures. However,
as evidenced by the lockdowns in New South Wales and
Victoria, COVID-19 continues to present a threat to the
Group’s operations and also to key industry sectors
serviced by the Group, such as construction.
The Group has enacted pandemic protocols to assist
manage the safety of employees. The Group has also
implemented measures to mitigate potential impacts
of COVID-19 upon its continued ability to fulfil core
managerial, administrative, and operational functions.
BALANCE SHEET
Notwithstanding the ongoing impacts of COVID-19, the
Group has significantly strengthened its balance sheet
in FY2021.
The Group’s debt profile carries long maturities and the
gearing ratio (excluding lease liabilities) reduced to 9.0%
at 30 June 2021, compared to 22.5% in the prior year.
The Group’s net debt reduced to $26.6 million, the lowest
since 2003.
During the course of the year, the Group acquired fixed
assets totalling $35.1 million, compared to $20.6 million
in the prior year, continuing the investment in a modern
operating fleet.
Based upon independent valuations, the Group increased
the carrying value of its freehold property portfolio by
$27.6 million. The Group’s property portfolio consists of
high quality industrial assets that have not been adversely
impacted by COVID-19.
K&S CORPORATION LIMITED ANNUAL REPORT 2021 1
CHAIRMAN’S
REPORT
DIVIDEND
BOARD COMPOSITION
The Group’s underlying earnings have improved
significantly compared to the prior year. The final dividend
declared was determined with reference to the underlying
net profit after tax, as opposed to the statutory profit after
tax, and specifically excludes any impact of government
wage subsidies from the dividend calculation.
The Directors have declared a fully franked final dividend
of 3.5 cents per share (2020: 3.0 cents per share). This
follows the fully franked interim dividend of 3.0 cents per
share paid in April 2021, making the total fully franked
dividend 6.5 cents per share in respect of the year ended
30 June 2021.
The final dividend will be paid on 3 November 2021,
with the date for determining entitlements being
19 October 2021.
While the Group achieved record low debt levels at the end
of FY2021, the Group has an extensive capital expenditure
program for FY2022 which includes the development of
a parcel of industrial land in Perth. Directors are of the view,
based on the ongoing uncertainty relating to the potential
impacts of COVID-19 on the economy that could adversely
impact the Group’s operations, that a conservative approach
to balance sheet management is appropriate. As such,
the Directors have elected to reinstate the dividend
reinvestment plan (DRP) in respect of the final dividend.
The issue price of shares under the DRP will be the volume
weighted average price for K&S shares in the five business
days ending on 19 October 2021 (the record date for the
final dividend), less a discount of 2.5%.
Robert Dalton was appointed as a non-executive director
with effect from 24 August 2021. Mr Dalton is considered
by the board to be independent.
Mr Dalton’s appointment continues a process
of board renewal.
OUTLOOK
Providing earnings guidance going forward remains
difficult, particularly having regard to ongoing uncertainties
created by COVID-19. It is not possible to predict with
any certainty the extent or duration of COVID-19 related
impacts on the Australian or New Zealand economies,
or upon the Group itself.
The Group has secure long term bank facilities and low
gearing levels, and will continue to take a conservative
approach to financial risk as well as maintaining a strong
focus on working capital management and underlying profit
improvement. The Group will continue to target organic
growth, particularly in market segments such as contract
logistics that will deliver stronger returns on investment.
On behalf of the Board, I thank our customers, suppliers
and employees, who have contributed to the continued
success of the Group.
In particular, I thank the senior management team, led by
Paul Sarant, for their ongoing commitment and dedication.
Tony Johnson
Chairman
2 K&S CORPORATION LIMITED ANNUAL REPORT 2021
FINANCIAL
OVERVIEW
OPERATING REVENUE ($M)
OPERATING CASH FLOW ($M)
905.2
844.1
755.2
688.8
790.6
688.5
83.1
75.5
61.8
49.4
41.1
40.8
2016
2017
2018
2019
2020
2021
2016
2017
2018
2019
2020
2021
UNDERLYING PROFIT AFTER TAX ($M)
GEARING (%)
12.0
34.9
34.7
37.0
35.4
7.5
7.7
8.3
3.9
2.3
22.5
9.0
2016
2017
2018
2019
2020
2021
2016
2017
2018
2019
2020
2021
K&S CORPORATION LIMITED ANNUAL REPORT 2021 3
MANAGING
DIRECTOR’S
REPORT
Operating revenues decreased by 12.9% to $688.5 million.
Underlying profit before tax increased to $17.1 million from
$12.0 million for the prior corresponding period, underpinned
by our strong ongoing continuous improvement initiatives
completed in FY2021 and FY2020.
The lost time injury frequency rate across the Group
decreased from 6.6 in the previous year to 4.9 in the
current year. In addition, whilst the total recordable injury
frequency rate increased by approximately 4.4% compared
to the previous year, the total number of recorded incidents
reduced by 12.4% from the previous year. The improvement
of all facets of safety performance remains a high priority
for the Group.
SAFETY
The global COVID-19 pandemic continues to present the
Group with a series of challenges concerning the ongoing
safety of our employees and sub-contractors, and those
who we interact with every day to provide transport and
logistics services for our customers and communities.
The engagement, commitment and leadership displayed
by all our workforce to ensure our workplace remained
safe during this pandemic has been of the highest order.
As an essential service provider, we have continued to
operate throughout the pandemic, albeit with ongoing
alterations to state and territory border crossing
controls, ensuring supply chains remain in place for
our customers and the broader community. Mandatory
vaccination requirements have also been announced
by authorities in several jurisdictions which apply
to various of our operations.
We have supported our employees who wish to access
vaccinations through the provision of paid leave. We thank
the many employees in our workforce who have elected
to support a national vaccination program.
Our primary concern remains the physical and mental
wellbeing of our employees and their extended families.
Sadly, the Group sustained two fatality accidents in
FY2021, as well as having a vehicle involved in a major
on-road incident in Melbourne in May 2021 in which five
pedestrians were injured. As with all safety incidents, the
Group undertakes comprehensive investigations and will
implement identified continuous improvement opportunities
arising out of these accidents. The Group recognises that
its social licence to operate is contingent upon achieving
4 K&S CORPORATION LIMITED ANNUAL REPORT 2021
industry leading on-road behaviours and safety outcomes,
for which we are respected as an industry leader.
The Group also rolled out its new online subcontractor
registration portal, KasSub, in FY2021. KasSub provides
a central portal to allow the Group to provide enhanced
visibility on the licensing, accreditation, induction and
insurance status of its subcontractors. We will continue
to proactively invest in this, and any other, technology
that assists to improve our performance.
ENVIRONMENT
Ongoing fleet upgrades have enabled the Group to
continue its emissions improvements. During the year
vehicle emissions reductions reached 79% of 2003 levels
for NOx (FY2020: 74%), and 94% of 2003 levels for
particulate matter (FY2020: 93%).
Carbon dioxide generation for 2019-20 was 156,780
tonnes, down from 180,866 tonnes in the previous year.
The Group will embark upon a major fleet upgrade in
FY2022, adopting the latest Euro 6 emissions standards
to further improve environmental performance.
COMPLIANCE
The Group has maintained ISO 9001:2015 accreditation
standards, including other relevant accreditations which
included: WA Main Roads, NHVAS Mass, Maintenance,
and Basic Fatigue Management, along with Food Safety/
HACCP and TruckSafe.
AUSTRALIAN TRANSPORT
Intermodal and Import/Export
The intermodal and import/export operations again
performed soundly, with eastern seaboard activity levels
remaining firm despite COVID-19 impacts. Improving asset
utilisation and the disposal of under-utilised or surplus
assets continues to be a key focus.
Intermodal steel and timber volumes from our major
customers were strong, with high activity levels in the
construction sector and major infrastructure projects
undertaken by the various state governments underpinning
ongoing activity levels.
We continue to incur increased costs in our rail transport
operations as a result of increased rail network costs.
We have focussed on securing parcels of rail volumes
that improve our rail network balance and performance.
Full year revenue declined due to a combination of the
cessation of contracts, exiting of underperforming business
units and COVID-19 related reduced customer activity.
However, the successful retention and renegotiation of
several customer contracts saw returns from the intermodal
and import/export operations improve in the second half
of FY2021.
Contract Logistics
Our contract logistics business unit continues to provide
a strong contribution to Group earnings.
The Western Australia based heavy haulage business
performed well with a strong year underpinned by record
commodity prices driving mine refurbishment activity.
FY2022 forward demand remains solid.
Chemical and Fuel Transport
Our chemical and energy transportation businesses
in FY2021 remain sound, despite the minimal activity in
the Hi-Ex explosives transport sector, and significantly
reduced fuel transport demand in the energy division
as a result of COVID-19 and adverse weather impacts
in central Queensland.
Chemtrans continues to develop and deploy a range
of systems and procedures that will reinforce Chemtrans
as the market leader in the transport of dangerous goods
with regards to environmental and safety performance,
while continuing to deliver efficiency benefits to its
customer base.
Aviation Services
Our specialised aviation refuelling business experienced
a significant fall in volumes as a consequence of COVID-19,
as our airport refuelling services materially declined.
Fire season activity was also minimal.
A focus on operational efficiencies sees this business
poised for a better FY2022 if there is a return to more
normal fire season activity levels.
The new Port Hedland International Airport refuelling
installation was commissioned in FY2021. We also
completed the redevelopment of Aero Refuellers’ main
operational base at Thurgoona in NSW.
NEW ZEALAND
The New Zealand business produced a strong result, with
the domestic economy proving to be resilient throughout
the year. The business continues to realise growth through
the provision of its integrated and value adding service
offering, with several key customer contracts extended
or renewed in the course of the year.
Industry segments such as dairy, steel and timber again
performed strongly in FY2021.
Operating cashflows were again strong and debt remains
at record low levels. Further growth and diversification
of the revenue base remain key priorities, leveraging the
strong and expandable infrastructure that has been put
in place over the last five years.
FUEL AGENCY
The fuel trading business has again provided sound
financial results, despite reduced demand for fuel
in FY2021 consequent to COVID-19. The fuel retailing
and wholesaling markets remain dynamic and continue
to exhibit high levels of competition.
An expansion of our network and the completion of
several projects to enhance our retail offering are currently
being progressed.
HUMAN RESOURCES
Employee engagement and communications
programs remain a high priority and area of focus
across our business.
With the ongoing challenges of COVID-19 and the
collective toll that the pandemic and lock downs have
taken upon the community, we have maintained a high
level of communication with our workforce. The physical
and mental well being of our workforce have been, and
remain, at the forefront of our engagement strategies.
We continue to align the operational and management
structures to service the needs of business units and
customers, while maintaining our strong focus on the
retention and development of skilled and qualified
employees as the Group’s most valuable asset.
OTHER ITEMS
The implementation of cost reduction strategies continued
across the business, contributing strongly to improved
underlying profit. In particular, the Group has maintained its
focus on operational efficiencies, supplier renegotiations,
cessation of underperforming activities, and the rationalisation
and replacement of specific fleet assets that reduced
operating costs.
Ongoing cost reductions are expected to continue
to be accretive in FY2022, although these may be offset
by possible COVID-19 related impacts.
On 27 July 2021, the Group acquired a strategically
located parcel of industrial land in Perth for approximately
$13.1 million. The land is currently being developed as a
transport terminal, with the Group intending to consolidate
operations presently undertaken on two externally leased
sites at the new transport terminal when practical
completion is achieved later in FY2022.
I would like to take this opportunity to thank our management
team, and all employees and supporters of the Group who
have collectively worked exceptionally hard to continue
to improve our company.
Paul Sarant
Managing Director and CEO
K&S CORPORATION LIMITED ANNUAL REPORT 2021 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
(the “Group”), for the year ended 30 June 2021 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 74, 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 53, 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. Prior to this, Mr Sarant occupied
a range of senior management roles, including general management and senior manufacturing,
engineering and 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
Legh Winser
Age 73, 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 a director of AA Scott Pty Ltd, the largest Shareholder of K&S Corporation Limited.
Member of:
– Environmental Committee
– Nomination and Remuneration Committee
6 K&S CORPORATION LIMITED ANNUAL REPORT 2021
Graham Walters AM (Independent Director)
Age 79, 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 AM 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.
Member of:
– Audit Committee (Chairman)
– Nomination and Remuneration Committee (Chairman)
Sallie Emmett GAICD
Age 56, Director since 24 September 2019
Sallie Emmett GAICD LLB GDLP, is a lawyer with over 30 years’ experience as a practising solicitor in both
legal and management roles. Mrs Emmett GAICD is a former partner of national law firm Johnson Winter
& Slattery. Mrs Emmett GAICD has a broad range of commercial exposure including in workplace relations.
Mrs Emmett GAICD 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 GAICD has significant transport sector experience, having acted
for a number of transport companies. Mrs Emmett GAICD also sits on the board of a number of not for
profit organisations.
Member of:
– Audit Committee
SECRETARY
Chris Bright BEc, LLB, Grad Dip CSPM, FCIS
Age 50, Secretary since 2005
Chris Bright has held the position of General Counsel for 19 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 2021 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 P Sarant
Mr L Winser
Mr G Walters AM
Mrs S Emmett GAICD
Directors’
Meetings1
Audit Committee
Meetings
Nomination &
Remuneration
Committee
Meetings
Environmental
Committee
Meetings
14
14
14
14
14
14
6
6
–
–
6
6
1
1
–
1
–
–
4
4
1
4
–
–
1. In addition to the eleven scheduled directors’ meetings, there were a further three directors’ meetings held in the course of FY2021.
PRINCIPAL ACTIVITIES
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 FY2021 Operating and Financial Review, which has been designed to provide Shareholders
with a clear and concise overview of the Group’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.
8 K&S CORPORATION LIMITED ANNUAL REPORT 2021
DIRECTORS’ REPORT The consolidated profit for the year ended 30 June 2021 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
Operating Revenue
Statutory profit after tax
Statutory profit before tax
Earnings before interest and tax (EBIT)
Earnings before interest, tax and depreciation (EBITDA)
Less JobKeeper income
Less bad debts recovered
Add other significant items
Underlying profit before interest, tax & depreciation1
Underlying profit before interest & tax1
Underlying profit before tax1
Underlying operating profit after tax1
Total assets
Net borrowings excluding lease liabilities
Shareholders’ funds
Finance costs
Depreciation
Dividend per share
Net tangible assets per share
Operating cash flow
Return on assets
Gearing ratio (excluding lease liabilities)
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
$’000
$’000
cents
$
$’000
%
%
2021
20202 % Movement
688,541
790,639
(12.9%)
18,123
27,541
30,917
83,336
(16,235)
(199)
6,001
72,903
20,484
17,108
11,976
525,837
26,566
268,717
3,376
52,419
6.5
2.04
11,128
15,934
26,254
82,426
(13,731)
–
9,648
78,343
22,171
11,851
8,296
540,140
69,608
239,157
10,320
56,172
5.0
1.61
75,454
83,074
3.5
9.0
1,972
22
4.9
2.1
22.5
2,161
31
6.6
62.9%
72.8%
17.8%
1.1%
18.2%
100.0%
(37.8%)
(6.9%)
(7.6%)
44.4%
44.4%
(2.7%)
(61.8%)
12.4%
(67.3%)
(6.7%)
30.0%
26.7%
(9.2%)
66.7%
(60.0%)
(8.7%)
(29.0%)
(25.8%)
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 Government wage subsidies received, bad debt recovery, redundancies,
asset impairment expenses and costs associated with the sale of Regal General Freight. 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.
2. FY2020 balances have been restated based on the impact of change in accounting policy for the treatment of the Group’s freehold buildings. Refer to relevant
statements and Note 2(aa) for further details.
The Group is a tier one logistics provider, recognised as a leader in the development and provision of specialist logistics
solutions for its customers. The Group operates in the Australian and New Zealand markets. The Group’s success is
underpinned by a strong focus on safety, service and continuous improvement.
The environment for the transport and logistics sector in FY2021 continued to be challenging. The transport and logistics
sector continues to experience high levels of competition and pressure on rates, a low growth economic environment
and the concentration of bargaining power in large and sophisticated buyers of transport and logistics services. In addition,
the COVID-19 pandemic has impacted economic activity and market sentiment, albeit that stimulus provided by federal
and state governments has under-pinned a level of consumer confidence in FY2021.
Operating revenues decreased by 12.9% to $688.5 million.
The Group achieved a statutory profit before tax of $27.5 million, an increase of $11.6 million or 72.8% on the prior
corresponding period.
K&S CORPORATION LIMITED ANNUAL REPORT 2021 9
Included in the Group’s statutory result for FY2021 was
$16.2 million (before tax) attributable to the JobKeeper
subsidy, which was received in the September 2020
quarter. The Group’s statutory result also included
$6.0 million of one off costs treated as significant items.
These largely relate to the impairment of the carrying value
of buildings and land totalling $4.7 million and $0.9 million
in miscellaneous restructuring costs mainly associated with
the exiting of the Hyde Park Tank business.
After adjusting for the above significant items including
government wage subsidies, the current year underlying
profit before tax was $17.1 million, an increase of 44.4%
to the prior corresponding period.
The underlying profit benefitted from a $1.1 million before
tax reduction in depreciation expenses realised through an
alignment in estimated residual values of the motor vehicle
assets to be consistent with their financial lifecycle.
Safety remains a key focus for the Group. The Group’s lost
time injury rate reduced from 6.6 at the end FY2020 to 4.9.
Australian Transport
Following strong FY2020 improvements, the overall segment
continued to realise further consolidation improvements
to the majority of its operating divisions. The reduction
of $1.1 million in depreciation expenses as a result of the
change to the Group’s depreciation policy more than offset
a reduced contribution by our aviation refuelling business,
Aero Refuellers.
Full year revenue declined due to a combination of the
cessation of contracts, exiting of underperforming business
units and COVID-19 related reduced customer activity.
The implementation of cost reduction strategies continued
across the business, contributing strongly to improved
underlying profit. In particular, the Group has maintained
its focus on operational efficiencies, supplier renegotiations,
cessation of underperforming activities, and the rationalisation
and replacement of specific fleet assets that reduced
operating costs. Ongoing cost reductions are expected
to continue to be accretive in FY2022, although these may
be offset by possible COVID-19 related impacts.
Intermodal steel and timber volume from our major
customers were strong, with major infrastructure projects
undertaken by the various state governments underpinning
ongoing activity levels.
We continue to incur increased costs in our rail transport
operations as a result of increased rail network costs.
We have focussed on securing parcels of rail volumes
that improve our rail network balance and performance.
Our contract logistics business unit again experienced
a pleasing FY2021.
Our chemical and energy transportation businesses
in FY2021 were sound, despite the Chemtrans business
enduring a number of weather impacts, minimal activity
in the Hi-Ex explosives cartage division, and the energy
business seeing fuel demand decline significantly
as a result of COVID-19.
The Western Australia based heavy haulage business
enjoyed a strong year in FY2021 on the back of record
commodity prices driving mine refurbishment activity
in north-west Western Australia.
Our specialised aviation refuelling business experienced
a significant fall in volumes as a consequence of COVID-19
as our airport refuelling services materially declined.
Fire season activity was also minimal. A focus on cost
reductions and efficiencies sees this business poised
for a better FY2022 if there is a return to more normal
fire season activity levels.
Fuel Agency
The fuel trading business has again provided sound
financial results, despite reduced demand for fuel in
FY2021 consequent to COVID-19. The fuel retailing and
wholesaling markets remain dynamic and continue to
exhibit high levels of competition. An expansion of our
network and the completion of several projects to enhance
our retail offering are currently being progressed.
New Zealand Transport
The New Zealand business produced a strong result, with
the domestic economy to be resilient throughout the year.
It continues to realise growth through the provision of its
integrated and value adding service offering, with several
key customer contracts extended or renewed in the course
of the year.
Balance Sheet and Funding
Notwithstanding the ongoing impacts of COVID-19, the
Group has significantly strengthened its balance sheet in
FY2021, mainly driven by improved trading performance,
JobKeeper subsidies and increased property valuations.
The Group’s debt profile carries long maturities and the
gearing ratio (excluding lease liabilities) reduced to 9.0%
at 30 June 2021, compared to 22.5% in the prior year.
The Group’s net debt reduced to $26.6 million, the lowest
since 2003.
During the course of the year, the Group acquired fixed
assets totalling $35.1 million, compared to $20.6 million
in the prior year, continuing the investment in modern
operating fleet.
Based upon independent valuations, the Group increased
the carrying value of its freehold property portfolio by
$27.6 million. The Group’s property portfolio consists of
high quality industrial assets that have not been adversely
impacted by COVID-19.
COVID-19
It is not possible to forecast with any certainty the
magnitude of the COVID-19 impact on the Australian
and New Zealand economies or upon the Group itself.
In FY2021 the Group experienced reduced revenues in
a number of business units in Australia and New Zealand
as a result of COVID-19. At a minimum, the Group expects
to continue to be adversely impacted by COVID-19 in the
first half of FY2022.
10 K&S CORPORATION LIMITED ANNUAL REPORT 2021
DIRECTORS’ REPORT The Group’s operations have not been subject to any
Government mandated state border closures. However,
as evidenced by the current lockdown in New South Wales,
COVID-19 continues to present a threat to the Group’s
operations and also to key industry sectors serviced
by the Group, such as construction.
The Group has enacted pandemic protocols to assist the
safety of employees. The Group has also implemented
measures to mitigate potential impacts of COVID-19 upon
its continued ability to fulfil core managerial, administrative,
and operational functions.
Safety
The Group achieved a significant reduction in lost time
injuries in FY2021, with the LTIFR falling from 6.6 at the
end of FY2020 to 4.9 at the end of the current financial year.
Sadly, the Group sustained two fatality accidents in
FY2021, as well as having a vehicle involved in a major
on-road incident in Melbourne in May 2021 in which five
pedestrians were injured. As with all safety incidents, the
Group undertakes comprehensive investigations and will
implement identified continuous improvement opportunities
arising out of these accidents. The Group recognises that
its social licence to operate is contingent upon achieving
industry leading on-road behaviours and safety outcomes.
Managing COVID-19 required considerable resourcing.
Our key priority was, and remains, the safety and welfare
of our employees and their families. Cognisant of the
Group’s large and mobile workforce which provides
services to a substantial number of customer sites,
it is pleasing that to date the Group has had nil employee
COVID-19 cases. Our employees’ proactive engagement
and support underpinning this outcome has been excellent.
We continue to invest in our safety management system
and in the training of our employees.
Dividend
The Group’s underlying earnings have also improved
significantly compared to the prior year. The final dividend
declared was determined with reference to the underlying
net profit after tax, as opposed to the statutory profit after
tax, and specifically excludes any impact of government
wage subsidies from the dividend calculation.
The Directors have declared a fully franked final dividend of
3.5 cents per share (2020: 3.0 cents per share). This follows
the fully franked interim dividend of 3.0 cents per share paid
in April 2021, making the total fully franked dividend 6.5
cents per share in respect of the year ended 30 June 2021.
The final dividend will be paid on 3 November 2021, with the
date for determining entitlements being 19 October 2021.
While the Group achieved record low debt levels at the end
of FY2021, the Group has an extensive capital expenditure
program for FY2022 which includes the development of a
parcel of industrial land in Perth. Directors are of the view,
based on the ongoing uncertainty relating to the potential
impacts of COVID-19 on the economy that could impact
the Group’s operations, that a conservative approach
to balance sheet management is appropriate. As such,
the Directors have elected to reinstate the Dividend
Reinvestment Plan (DRP) in respect of the final dividend.
In accordance with the terms of the DRP rules, previous
DRP elections made by Shareholders will remain in force
in respect of the resumed DRP. Accordingly, Shareholders
who previously elected to participate in the DRP will once
again participate in the resumed DRP in respect of the final
dividend of 3.5 cents per share in respect of the year ended
30 June 2021.
Should any shareholder wish to change their DRP setting,
notices to change DRP elections need to be received at
least fourteen days before the date upon which the final
dividend is to be paid to be effective in respect of the
final dividend.
The issue price of shares under the DRP will be the volume
weighted average price for K&S shares in the five business
days ending on 19 October 2021 (the record date for the
final dividend), less a discount of 2.5%.
Board Composition
Robert Dalton was appointed as a non-executive director
with effect from 24 August 2021. Mr Dalton is considered
by the board to be independent.
Mr Dalton has been a registered company auditor for over
twenty-five years and is a former Managing Partner of the
Ernst & Young Melbourne Accounting and Assurance
Practice. Mr Dalton also has a wealth of entrepreneurial
knowledge and experience having previously run Ernst &
Young’s entrepreneurship initiatives across the Oceania
region, as well as being a Regional Director of Ernst &
Young’s Asia Pacific Entrepreneur management team.
Mr Dalton has worked with a variety of public, private, and
start up organisations advising on strategy, commercialisation
and global expansion, as well as providing audit and
assurance services. Mr Dalton has also held many
volunteer director roles in the not for profit sector.
Mr Dalton’s appointment continues a process
of board renewal.
Outlook
Providing earnings guidance going forward remains
difficult, particularly having regard to ongoing uncertainties
created by COVID-19. It is not possible to predict with
any certainty the extent or duration of COVID-19 related
impacts on the Australian or New Zealand economies
or upon the Group itself.
The Group has secure long term bank facilities and low
gearing levels, and will continue to take a conservative
approach to financial risk as well as maintaining a strong
focus on working capital management and underlying profit
improvement. The Group will continue to target organic
growth, particularly in market segments such as contract
logistics that will deliver stronger returns on investment.
The Group continues to review the industry segments
in which it operates as well as the ways it offers services
to the market.
K&S CORPORATION LIMITED ANNUAL REPORT 2021 11
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 FY2021.
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 Group’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 ordinary dividend (taxed to 30%) of 3.0 cents per share amounting to $3,863,563 in respect of the year
ended 30 June 2020 was declared on 28 August 2020 and paid on 3 November 2020; and
2 An interim fully franked ordinary dividend (taxed to 30%) of 3.0 cents per share in respect of the year ended 30 June 2021
was declared on 24 February 2021 and paid on 1 April 2021 amounting to $3,863,563.
The final dividend declared by the Company for the year ended 30 June 2021 and payable on 3 November 2021 in respect
of the year ended 30 June 2021 comprises:
1 A fully franked ordinary dividend (taxed to 30%) of 3.5 cents per share amounting to $4,507,490 (based on the Company’s
current issued share capital); and
2 A fully franked preference dividend (taxed to 30%) of 4.0 cents per share amounting to $4,800.
The preference share dividends are included as interest expense in determining net profit.
DIVIDENDS PAID TO SHAREHOLDERS
(cents per share)
12
10
8
6
4
2
0
4.5
6.0
3.5
3.0
5.0
6.5
3.0
3.5
1.5
2.0
3.0
3.5
2.0
2.0
2.0
3.0
2.0
1.5
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
■ Interim ■ Final
12 K&S CORPORATION LIMITED ANNUAL REPORT 2021
DIRECTORS’ REPORT EVENTS SUBSEQUENT TO BALANCE DATE
On 24 August 2021, the Directors of K&S Corporation
Limited declared a final dividend on ordinary shares
in respect of the 2021 financial year. The total amount
of the dividend is $4,507,490 which represents a fully
franked dividend of 3.5 cents per share. The dividend
has not been provided for in the 30 June 2021 financial
statements and is payable on 3 November 2021.
Directors have elected to reinstate the application
of the DRP in respect of the final dividend.
On 27 July 2021, the Group acquired a parcel of industrial land
in Perth for approximately $13.1 million. The land is currently
being developed as a transport terminal, with the Group
intending to consolidate operations presently undertaken
on two externally leased sites at the new transport terminal
when practical completion is achieved later in FY2022.
On 24 August 2021, K&S announced that Robert Dalton
had been appointed as a non-executive director with effect
from 24 August 2021. Robert is currently the acting CEO
of Sports Australia and has served as a Senior Partner of
EY for 25 years. He is also a former non-Executive Director
of the Richmond Football Club, a position he held for
15 years, and Chair of Hockey Victoria.
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.
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 $254,100 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,
S Emmett GAICD, 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.
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
43,651
60,000
Directors of the Company have relevant interests in additional
shares as follows:
Mr L Winser
Mr T Johnson
Mr P Sarant
Mr G Walters AM
Ordinary Shares
1,252,799
542,967
126,603
5,252
K&S CORPORATION LIMITED ANNUAL REPORT 2021 13
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.
While the Nomination and Remuneration Committee may
review the remuneration paid to Non-Executive Directors
and the Managing Director, and the aggregate remuneration
paid to the executive team where requested by the Board,
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.
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 FY2021. Each Non-Executive Director receives
a fee for being a Director of the Company.
There was a 2% increase in fees payable to Non-Executive
Directors in FY2021, with that increase being effective from
1 September 2020.
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 2021 is detailed on page 17 of this report.
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:
i) Directors
Mr T Johnson
Mr P Sarant
Non-Executive Chairman
Managing Director and Chief
Executive Officer
Mr L Winser
Non-Executive Director
Mr G Walters AM
Non-Executive Director
Mrs S Emmett GAICD
Non-Executive Director
ii) Key Management Personnel
Mr R Parikh
Mr C Bright
Chief Financial Officer
Company Secretary
REMUNERATION PHILOSOPHY
The performance of the Group depends upon the quality
of its Directors and executives. To prosper, the Group
must attract, motivate and retain highly skilled Directors
and executives.
To this end, the Group 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
From time to time, the Nomination and Remuneration
Committee may be delegated by the Board of Directors
of the Company responsibility for reviewing compensation
arrangements for the Directors, the Managing Director and
executives. However, the Company has a small Board of
Directors and the review of compensation arrangements
can efficiently be discharged by the Board itself.
Where requested by the Board, the Nomination and
Remuneration Committee will assess the appropriateness
of the nature and amount of remuneration of Directors and
executives 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.
14 K&S CORPORATION LIMITED ANNUAL REPORT 2021
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 2021.
As safety performance is a key organisational goal and
critical to the ongoing operations of the Group, 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
before 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 before
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 before tax drives
positive behaviours amongst the executives in maximising
Group wide benefits from operating activities.
For the year ended 30 June 2021, 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
is to be settled in cash.
Payment of the short term incentive in respect of the 2021
financial year was conditional upon:
– outperformance of budgeted Group and divisional
(where applicable) profit before tax on an underlying
basis and excluding any non-trading items (e.g.,
government wage subsidies or restructuring charges)
(but including any non-trading items that have been
included in the budget) on a sliding scale up to a
maximum of 20% of base remuneration:
Profit
Before
Tax
STI
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