Knight Therapeutics
Annual Report 2016

Plain-text annual report

Annual Report GUD Holdings Limited (ABN 99 004 400 891) Year Ended 30 June 2016 Table of Contents Directors’ Report ............................................................................................................................................................... 3 Operating and Financial Review ...................................................................................................................................... 10 Remuneration Report (Audited) ..................................................................................................................................... 24 Financial Statements ....................................................................................................................................................... 38 Additional Shareholder Information ............................................................................................................................. 100 Directors’ Report The Directors of GUD Holdings Limited (the Company) present their report on the consolidated entity, being the Company and its subsidiaries, for the year ended 30 June 2016. Directors The names of the Directors who held office during the financial year and details of their qualifications, experience and special responsibilities are as follows: R M Herron* FCA FAICD Appointed Non-Executive Director on 17 June 2004. Appointed Chairman on 1 January 2012. Mr Herron has been a Chartered Accountant since 1973. He is a former Deputy Chairman of Coopers & Lybrand (now PricewaterhouseCoopers) and retired as a partner of PricewaterhouseCoopers in December 2002. He is also a Non-Executive Director of Select Harvests Limited (since January 2005), Insurance Manufacturers Australia Ltd and Kinetic Superannuation Fund. Mr Herron is Immediate Past President and former Chairman of the Royal Automobile Club of Victoria (RACV) Ltd (retired December 2014). A L Templeman-Jones* BComm MRM EMBA CA FAICD Appointed Non-Executive Director on 1 August 2015. Ms Templeman-Jones is currently a Non-Executive Director of APN News & Media Limited, where she serves as Chair of the Audit and Risk Committee and a Non-Executive Director of Cuscal Limited, where she is Chair of the Risk Committee. She is also Non-Executive Director of Pioneer Credit Limited. Ms Templeman-Jones has considerable experience in institutional and commercial banking, wealth management and insurance, having previously held a number of senior executive roles within Westpac and ANZ. P A F Hay* LLB FAICD (Retired 1 August 2015) Appointed Non-Executive Director on 26 May 2009. Appointed Chairman of the Remuneration Committee on 22 June 2010. Mr Hay retired from the Board on 1 August 2015. Mr Hay is currently Chairman of Newcrest Limited (appointed January 2014) and Chairman of Vicinity Centres Limited (appointed June 2015). Mr Hay is a Director of the Australian Institute of Company Directors Ltd (appointed November 2012) and is a member of the Australian Government Takeovers Panel (since May 2009). Mr Hay is a former Director of Alumina Limited (retired December 2013), Australia and New Zealand Banking Group Limited (retired April 2014) and Myer Holdings Limited (retired July 2014). M G Smith* Dip. Business (Marketing) FAMI CPM FAIM FAICD Appointed Non-Executive Director on 26 May 2009. Mr Smith is Non-Executive Director and Chairman of Patties Foods Limited (since April 2013). He is a former Non- Executive Director of Toll Holdings Limited (retired May 2015), and a former Chairman of Food Holdings Limited (retired August 2011). Mr Smith was Managing Director of Cadbury Schweppes Australia and New Zealand (2003 to 2007) and a member of the Asia Pacific Regional Board. Over a 16-year career with the Cadbury Schweppes group he held senior management positions in Australia, the UK and North America. Prior to joining Cadbury Schweppes Mr Smith's career included senior management roles with Unilever and Uncle Toby's. G A Billings* BCom FCA MAICD Appointed Non-Executive Director on 20 December 2011. Appointed Chairman of Audit, Risk and Compliance Committee on 1 January 2012. Mr Billings retired from PricewaterhouseCoopers in 2011 after 34 years, where he was head of the Melbourne Assurance practice as well as heading the firm’s Australian and Global Industrial Products business. Mr Billings was appointed Chairman of Korvest Limited in September 2014 and a Non-Executive Director of Clover Corporation Limited on 20 May 2013. He was appointed Chairman of Azure Healthcare Ltd on 21 October 2015. 3 Directors’ Report D D Robinson* BSc MSc Appointed Non-Executive Director on 20 December 2011. Mr Robinson spent the past 22 years prior to joining the Board with global automotive parts, general industrial and consumer products manufacturer and marketing company Robert Bosch GmbH. In that time he has worked in the USA, Germany and Australia and had responsibility for sales, marketing, engineering, manufacturing, accounting and personnel. He was President of Robert Bosch Australia and Robert Bosch New Zealand. J P Ling BEng MBA FAICD Appointed Managing Director and Chief Executive Officer on 1 August 2013. Mr Ling was appointed as a Non- Executive Director of Pact Group Holdings Ltd on 28 April 2014. Mr Ling was previously CEO and Managing Director of Fletcher Building Limited (2006 to 2012). He has extensive management experience in competitive manufacturing businesses through his senior roles with Fletcher Building and prior roles with Pacifica, Visy and Nylex. Mr Ling is a former Non-Executive Director of Pacific Brands Limited (retired February 2014). * All Non-Executive Directors are independent. Corporate executive Chief Financial Officer M A Fraser B Bus, EMBA, GAICD, FCA Mr Fraser’s early career was with Coopers & Lybrand in Australia, followed by over 25 years in senior finance and operational roles in Asia and Europe with McIntosh Hamson Hoare Govett, Jardine Matheson Ltd and the Schindler Group. Company Secretary M G Tyler LLB BCom (Hons) MBA AGIA Mr Tyler is an associate of Governance Institute Australia, a former partner with Freehills and general counsel with Southcorp Limited. He has held a legal practicing certificate in Victoria for 30 years. General Manager Strategy & Planning D A Draycott Dip. Bus. Studies, Grad. Dip. Accounting Mr Draycott joined GUD in June 1997 as Corporate Development Manager. Prior to GUD he was with Bunge Australia in both operational and corporate roles, latterly as General Manager, Sunicrust Clayton Bakery. Mr Draycott commenced his career with Metal Box UK and then spent time in the marketing research profession at A C Nielsen. 4 Directors’ Report Directors’ attendances at meetings The Board held ten meetings during the year. Meetings are generally held monthly, with ad hoc meetings called to consider specific or urgent matters. Board Audit, Risk & Compliance Committee Remuneration Committee Nominations Committee Held Attended Held Attended Held Attended Held Attended 10 10 9 1 10 10 10 10 8 1 10 10 10 10 4 3 1 4 4 4 4 2 1 4 4 4 4 3 1 4 4 4 4 2 1 4 4 4 2 1 1 2 2 2 2 1 1 2 2 2 Directors R M Herron A L Templeman-Jones (appointed 1 August 2015) P A F Hay (retired 1 August 2015) M G Smith G A Billings D D Robinson J P Ling It is the Board’s practice that the Non-Executive Directors meet regularly without the presence of Management. Directors’ interests and benefits Directors are not required to hold any share qualification. The current shareholdings are shown in the table below. Directors R M Herron A L Templeman-Jones (appointed 1 August 2015) P A F Hay (retired 1 August 2015) M G Smith G A Billings D D Robinson J P Ling Shares held beneficially Own name Private company / trust Total 30 June 2016 Total 30 June 2015 10,768 34,455 45,223 25,223 540 2,752 3,292 - 4,828 - 4,828 4,828 - - - 116,894 30,373 11,250 13,000 26,528 30,373 11,250 13,000 14,753 2,250 3,000 143,422 114,011 Corporate Governance Statement The Corporate Governance Statement of the Directors, and the accompanying Appendix 4G, is separately lodged with ASX, and forms part of this Directors’ Report. It may also be found on the Company’s website at www.gud.com.au. 5 Directors’ Report Principal Activities The principal activities of the consolidated entity during the course of the financial year were the manufacture and importation, distribution and sale of cleaning products, household appliances, warehouse racking, industrial storage solutions, office storage products, automotive products, locking devices, pumps, pool and spa systems, and water pressure systems, with operations in Australia, New Zealand, France, Spain, China, Malaysia and Hong Kong. Other than as referred herein and in the Operating and Financial Review set out on pages 10 - 23, there were no significant changes in the nature of the activities of the consolidated entity during the year. Operating and Financial Review The Operating and Financial Review for the consolidated entity during the financial year forms part of this Directors’ Report. Significant Changes On 1 July, 2015 the Company acquired 100% of the shares and voting interests of Brown & Watson International Pty Limited (“Brown & Watson”) with businesses in the Australian and New Zealand. The acquisition provides the Group with an expanded presence in automotive aftermarket parts. Initial consideration paid was $198.0 million plus an estimated consideration payable at acquisition of $8.011 million based on an earn-out for the year ending 30 June 2016. Subsequent to initial recognition, management revalued the contingent consideration payable to a fair value of $19.4 million at 30 June 2016 based on Brown & Watson reported EBIT at 30 June 2016. This represents contingent consideration of $20.0 million, payable in October 2016. In relation to the acquisition of Brown & Watson, the Company incurred $5.5 million of acquisition related costs including equity raising fees, legal fees, due diligence and other advisory fees which were incurred in the year ended 30 June 2015. In the opinion of the Directors, other than referred to above, there were no significant changes in the state of affairs of the consolidated entity during the year. Share Capital At 30 June 2016, there were 85,327,114 ordinary shares on issue. Dividends During and since the end of the financial year, the following dividends have been paid or declared.  A final ordinary dividend of 22 cents per share in respect of the year ended 30 June 2015 was declared on 30 July 2015, and paid on 3 September 2015 amounting to $18,755,843. This dividend was fully franked.  An interim ordinary dividend of 20 cents per share in relation to the year ended 30 June 2016 was declared on 27 January 2016 and paid on 4 March 2016, amounting to $17,065,423. This dividend was fully franked.  A final ordinary dividend of 23 cents per share in respect of the year ended 30 June 2016 was determined on 28 July 2016, and is payable on 2 September 2016 to shareholders registered on 19 August 2016. This dividend will be fully franked. Shares will trade ex-dividend on 18 August 2016. The GUD Dividend Reinvestment Plan remains suspended for this dividend. Auditor Independence There is no current or former partner or director of KPMG, the Company’s auditors, who is or was at any time during the financial year an officer of the consolidated entity. The auditor’s independence declaration made under section 307C of the Corporations Act 2001 is set out on page 96 of the accompanying Financial Statements and forms part of this Report. 6 Directors’ Report Non-Audit Services Details of the amounts paid or payable to the Company’s auditors, KPMG, for non-audit services provided during the year are shown in Note 6 to the financial statements, which accompany this Directors’ Report. The Directors are satisfied that the provision of such non-audit services is compatible with the general standard of independence for auditors imposed by, and did not compromise the auditor independence requirements of, the Corporations Act 2001 in view of both the amount and the nature of the services provided, and that all non-audit services were subject to the corporate governance procedures adopted by the Company and have been reviewed by the Audit & Compliance Committee to ensure they do not impact the integrity and objectivity of the auditor. Options and rights During the year a total of 411,376 Performance Rights were granted to executives under the GUD Holdings 2018 Long Term Incentive Equity Plan. This included 62,762 Performance Rights granted to the Managing Director in October 2015 after receiving approval of shareholders at the 2015 Annual General Meeting. In addition, as a result of executives departing the Group during the year, a total of 122,461 Performance Rights were determined by the Board to have lapsed. As a result of meeting TSR targets, 258,384 performance rights granted in 2013 vested and 28,567 performance rights lapsed in relation to the GUD Holdings 2016 Long Term Incentive Equity Plan. Except as above, no options or rights were granted during the year and no options or rights have been granted since the end of the financial year. No options were exercised during the financial year. There are no unissued shares or interests under option as at the date of this Report. Details of the Performance Rights granted to key management personnel are included in the Remuneration Report, which forms part of this Directors’ Report. Special Incentives With the formation of a joint venture with Jarden Corporation in November 2014, the Company sold 49% of Sunbeam Corporation Limited and Sunbeam NZ Corporation Limited (collectively “Sunbeam ANZ”) for a price contingent on the financial performance of the business in the year ended 30 June 2015, and potentially in the years ending on or after 30 June 2018 if sale or purchase options are exercised by the Company or Jarden Corporation in respect of the Company’s remaining 51% interest in the joint venture. Consequent upon the transaction, the Remuneration Committee approved special incentives through the issue to Karen Hope of 73,283 performance rights related to the year ended 30 June 2015, and 146,565 performance rights in respect of the year ending 30 June 2018, to vest if performance triggers are achieved. For the year ended 30 June 2015, the trigger level was set at an EBITDA level of $10m on the EDITDA definition applied by Jarden Corporation, and excluding certain non-recurrent costs. The trigger level was achieved and endorsed by Jarden Corporation. Karen Hope was therefore issued 73,283 performance rights. An STI in respect of year ended 30 June 2015 of $186,099 would have been paid to Karen Hope had the performance rights not vested. Given that the performance rights did vest, Karen Hope did not receive this STI. As a consequence of the decision to sell the remaining 51% of the shares in Sunbeam ANZ in April 2016, the Remuneration Committee approved a special incentive for a key executive, Karen Hope, comprising up to 73,282 performance rights related to net proceeds received in consideration of the sale. The 146,565 performance rights previously granted to Karen Hope in respect of the year ending 30 June 2018 have lapsed as a result of the Sunbeam ANZ sale. For the year ended 30 June 2016, the EBITDA trigger level is subject to review and endorsement by Jarden Corporation by September 2016. At this stage it is uncertain whether the performance rights will vest. Details of the Special Incentives granted to key management personnel are included in the Remuneration Report, which forms part of this Directors’ Report. 7 Directors’ Report Derivatives and Other Financial Instruments It is the consolidated entity’s policy to use derivative financial instruments to hedge cash flows subject to interest rate and foreign exchange risk according to a policy approved by the Board. Derivative financial instruments are not held for speculative purposes. Exposures, including related derivative hedges, are reported to the Board on a monthly basis. Financial facilities and operating cash flows are managed to ensure that the consolidated entity is not exposed to any adverse liquidity risks. Adequate standby facilities are maintained to provide strategic liquidity to meet cash flows in the ordinary course of business. Environmental Regulation Some of the consolidated entity’s activities are subject to various environmental regulations under both Commonwealth and State legislation. The Directors are not aware of any breaches of those environmental regulations during the financial year. The consolidated entity endorses an Environmental Policy of compliance and open communication on environmental issues. Proceedings on behalf of the Company There were no proceedings brought on behalf of the Company, nor any persons applying for leave under section 237 of the Corporations Act 2001 to bring proceedings on behalf of the Company. Indemnity and Insurance The Company has, pursuant to contractual arrangements, agreed to indemnify the current and a number of former Directors of the Company against all liabilities to another person (other than the Company or a related body corporate) that may arise from their position as a Director of the Company and its subsidiaries, except where the liability arises out of conduct involving a lack of good faith. The agreement stipulates that the Company will meet the full amount of any such liabilities, including costs and expenses. The Company has also agreed to indemnify the current Directors of its subsidiaries, the Company Secretary and certain Senior Executives for all liabilities to another person (other than the Company or a related body corporate) that may arise from their position, except where the liability arises out of conduct involving a lack of good faith. The agreement stipulates that the Company will meet the full amount of any such liabilities, including costs and expenses. Pursuant to this indemnification, the Company has paid a premium for an insurance policy for the benefit of Directors, Secretaries and Executives of the Company and related bodies corporate of the Company. In accordance with common practice, the insurance policy prohibits disclosure of the nature of the liability covered and the amount of the premium. The Company has not otherwise, during or since the end of the financial year, indemnified or agreed to indemnify an officer or auditor of the Company or of any related body corporate against a liability incurred as such an officer or auditor. Remuneration Policy for Directors and Executives The policy for determining the nature and amount of remuneration for Directors and Executives is described in the Remuneration Report, which forms part of this Directors’ Report. Director and Executive Benefits Details of the benefits paid or provided to Directors and specified Executives are included in the Remuneration Report, which forms part of this Directors’ Report, and in summary in Note 36 to the financial statements. 8 Directors’ Report Rounding Off The Company is a company of the kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191 and, in accordance with that Rounding Instrument, amounts in this Report and the accompanying financial statements have been rounded off to the nearest one thousand dollars unless otherwise stated. Significant Events after Year End On the 14 April 2016, the Company entered into amended shareholders agreements that grant a put option to the Company, giving the Company the right but not the obligation to require Holmes Products (Far East) Limited (“HPFE”) , a subsidiary of Jarden Corporation, to acquire:  the Company’s remaining 51% of the shares in Sunbeam ANZ, comprising Sunbeam Corporation Limited and Sunbeam NZ Corporation Limited, to HPFE; and the Company’s 49% of shares in Jarden Consumer Solutions (Asia) Limited (“Jarden Asia”).  On the 1 July 2016, the Company exercised its rights under this put option such that HPFE acquired:  the remaining 51% of Sunbeam ANZ for an estimated $30.3 million, of which $29.5 million was received on 1 July 2016; and the remaining 49% of Jarden Asia for USD$2.9 million (A$4.0 million), which was received on 1 July 2016.  In addition, loans made by the Company to Sunbeam ANZ of approximately $1.9 million were repaid on 1 July 2016. In the opinion of the Directors, other than as described above, no matters or circumstances have arisen since the end of the year which significantly affected or may affect the operations of the consolidated entity which have not been outlined in this report. This Directors’ Statutory Report is signed on behalf of the Directors in accordance with a resolution of Directors made pursuant to section 298(2) of the Corporations Act 2001. 9 Operating and Financial Review OVERVIEW 2015-16 was a landmark year in the evolution of GUD. The acquisition of Brown & Watson International Pty Ltd (Brown & Watson) and the announcement of the sale of GUD’s remaining interest in the Sunbeam small appliances business marked the most significant shift in the composition of GUD’s business activity portfolio since the acquisition of the Sunbeam Victa company in 1996. In addition to these formative portfolio activities, the businesses in the Group continued to pursue the elements of strategy that have been outlined in previous years’ Operating and Financial Reviews. That is, each business continued to focus on the three areas targeted for improvement over recent years: 1. Actioning improvements in cost-to-serve and share of wallet that were identified in the profit by customer and profit by product analyses that were completed in 2013-14. For example, the Davey water products business has implemented an active sales force effectiveness program that continues to deliver savings in excess of $2 million annually. 2. Continued implementation of the high performance culture at each business unit to lower levels in the respective organisations. Last year the framework was active at the management team level and this has now cascaded down to middle management and supervisor level. 3. Instigating structured and intensive innovation programs across all businesses. This has involved the commencement of a far-reaching innovation capability-building program for which GUD is using the services of Australia’s leading innovation consultancy. This program is multi-layered and initially involves around 50 people from various functions in the businesses and follows the establishment of the Product Leadership Council in 2014-15. Following completion of the program in early calendar 2017, GUD will have a robust innovation process, will have the necessary tools and techniques embedded at each business and will have a broad base of people to apply those tools with the aim of conceiving and commercialising pipelines of breakthrough new products and services. As previously noted the objective of these three programs is to underpin more stable and satisfactory levels of profitability and economic return, through positioning GUD as a portfolio manager of a group of product leadership businesses that are managed for growth. When coupled with the sizeable portfolio initiatives that were undertaken during the year, these mark the first major steps in framing the structure of the GUD of the future. FINANCIAL PERFORMANCE REVIEW Prior to outlining the primary financial performance results for the 2015-16 financial year it is important to note that, following the announcement of the sale of GUD’s interests in the Sunbeam appliance business joint ventures, the accounts for both the current and the previous financial years have been restated to show Sunbeam as a discontinued operation. The remaining businesses have been classified as continuing operations for comparative purposes. Revenue Total revenue in 2015-16 increased over the prior year by 16% to just under $710 million. The increase of $98.4 million consisted of the full year contribution from the Brown & Watson business that was acquired on 1st July 2015, sales growth in the other automotive businesses as well as in Davey and Oates, flat revenue in Lock Focus and Sunbeam and a decline of $37 million at Dexion. Revenue for the continuing operations increased 20% to $596 million from $497 million in the prior year. 10 Operating and Financial Review The principal factors behind these revenue trends were: 1. The contribution of $117 million from Brown & Watson. This level exceed the revenue expectations held at the time of the acquisition and was the result of a number of factors including a continuation of the new product momentum that existed in the business at purchase and an additional boost to sales in the second half from new products introduced in the 2017 Narva brand product catalogue. 2. Revenue growth in the established Ryco and Wesfil automotive businesses from a combination of entry into new product categories, range extension in existing categories, growth in the workshop user base and implementation of a number of innovative marketing activation programs to support the new products. GUD Automotive’s filtration brand Ryco continued to lead the industry with new product activity. During the year it introduced a range of diesel particulate filters, the first aftermarket offering of this product type in Australia and New Zealand. In addition, it introduced a high performance filter program under the Syntec sub- brand and gained ranging for its Japanese truck filter program in specialist distributors. Ryco continued with its market-leading workshop conversion program over the year, growing its user base substantially. This will be reflected in increasing sales in future years as these workshops and mechanics establish regular usage of Ryco filters. Wesfil continued to add to its product offering with substantial sales growth reported in wiper blades, engine parts, globes and its traditional automotive filters as a consequence. 3. After some years of subdued revenue growth, Davey reported a 5% growth in revenue to $108 million in the year. Growth was recorded in Australia and in the European pool products distribution business, the former coming from a combination of a more structured approach to managing key accounts, continuation of the share of wallet element of the sales force effectiveness program and a consumer-directed promotional program implemented at the end of the year. The European business, which sells swimming pools products to a significant distributor in that region, increased sales by a third over the prior year as a result of broader ranging of Davey’s suite of pool products. Davey also reported that its pool products business returned to profitability in 2015-16. 4. The Oates cleaning products business enjoyed a record year of sales to its heartland commercial and industrial distributors, resulting in a 2% revenue growth in the year. Oates struggled to grow sales in the grocery and hardware sectors due to a combination of factors including uncertainty over the future of the Masters hardware chain and the increasing focus by supermarkets on lower cost, lower quality product offerings. 5. GUD’s smallest business unit, Lock Focus, reported a slight drop in revenue for the year as traditional markets continue to decline, while new product revenue gained momentum. 6. Dexion, a business that supplies warehouse racking and associated systems along with storage equipment for commercial markets, reported a 17% decline in revenue from the prior year, generating $176 million in sales in 2015-16. Two major factors influenced this result, the first being the reduction in demand for commercial storage products. The second factor was the lack of confirmed, new major warehouse racking projects in the Australian market as customers postponed decisions, for a variety of reasons. Conversely, the New Zealand racking business reported a record year with a contribution to revenue coming from a large automated warehouse project that commenced in the latter part of the year. 11 Operating and Financial Review Profitability Following a write-down in the value of GUD’s holding in the Dexion business the Group reported a net loss after tax of $43 million for the 2015-16 financial year. The write down, which consisted of impairment of goodwill, brand names, inventory and product development costs, totalled $75.7 million pre-tax. An impairment of Dexion was taken following a review of recent trading performance and its near term outlook. $19 million of the total Dexion impairment was recognised in the half-year accounts. In addition, the net result also included a $1 million impairment of Davey’s inventory, a charge that was included in the half-year accounts and an amount of $10.6 million relating to an earn-out payment to Brown & Watson’s previous shareholders, following that business reaching the maximum earn-out hurdle due to its exceptional financial performance in the year. Underlying net profit after tax from continuing operations, that is, before the impairment and one-off costs and excluding Sunbeam, increased by 36% to $44.4 million. Underlying EBIT from continuing operations was $78.6 million, a 52% increase on the prior year’s level. Growth in underlying EBIT at Automotive and Davey contrasted with declines at Dexion, Oates and Lock Focus. The profit growth in the Automotive business came from a combination of the inclusion of Brown & Watson along with higher contributions from both the Ryco and Wesfil businesses. The primary influences on the profit results from each of the reporting entities were: 1. Automotive – the sales growth, as previously noted, was a major factor behind the profit uplift in Ryco and Wesfil. In addition the EBIT contribution of $31 million from Brown & Watson underpinned the overall $34.4 million EBIT growth in this segment. 2. Whilst revenue growth also contributed to Davey’s 27% increase in EBIT, a more significant contribution came from internal efficiency improvements and lower costs. In particular savings from local freight costs, procurement activities covering both products and services and cost to serve benefits from the sales force effectiveness program all contributed. 3. Disappointingly Dexion reported an EBIT loss of nearly $4 million in the year following a profit of over $5 million in the prior year. This result was due to the lower level of sales as previously commented on. In addition, lower volumes processed through the Malaysian factory, as a result of the lower demand, led to the factory operating at below break-even levels, with the result that under-recovered overhead costs had a substantial effect on Dexion’s profit. It was anticipated at the interim results announcement that the factory would reach a break-even position over the course of the second half, but this did not eventuate as major projects were postponed. At the same time Dexion instigated a major drive on reducing inventories, which was particularly successful, and this further reduced demand on the factory. Despite the profit result, Dexion reported a strong recovery in cash generation, due to increased collections from customers and a sizeable reduction in its inventory level, especially over the second half. 4. Although it registered a growth in revenue Oates reported an 11% decline in EBIT, to $10.2 million from $11.5 million previously. The principal reason for this decline was the difficulty in achieving price increases in the grocery and hardware market segments, which were required to offset the higher cost of product due to currency effects. The extremely competitive nature of these sectors, where the focus is on price to gain and retain customers, underlies this difficulty. The Sunbeam small appliance business, classified as a discontinued operation for these accounts, contributed an underlying EBIT result of $2.2 million in the year compared with $7.3 million previously. 12 Operating and Financial Review Foreign Exchange GUD continues to source inputs or completed products from suppliers based predominately in Asia, usually priced in the foreign currency. As the inputs or products are typically on-sold to customers in Australia or New Zealand in the respective local currencies, movements in foreign currency values have the potential to substantially affect the Group’s financial result each year. To address these potential effects, GUD utilises hedges of up to 90% of the forecast foreign currency net purchases for up to twelve months. In assessing the level and period of forward cover for each business, the typical variability and seasonality of sales and the typical lead times required to review price lists and apply price changes in the markets or channels where the businesses participate are considered. Following its acquisition by GUD, Brown & Watson adopted the Group’s approach to foreign exchange management during the year. Currency hedging over the past year continued to be addressed predominately through forward exchange contracts, wherein the exchange rate is defined at the time of entering the contract. In most cases the businesses were successful in achieving price rises in response to weakening currencies. In addition, most businesses have put in place, or are finalising, price rises to take effect early in the 2016-17 financial year in light of current exchange rates and anticipated domestic cost inflation. However, in the case of Dexion, weakening steel prices largely offset the currency impacts, reducing the level of price increases sought from the market. Dividends The total dividend for the 2015-16 year was 43 cents per share consisting of an interim dividend of 20 cents per share and a final dividend of 23 cents per share. Both dividends were fully franked. This compares with total dividends of 42 cents per share in the previous financial year. The Dividend Reinvestment Plan remains suspended due to GUD’s continuing strong financial position. Cash Generation and Capital Management A group-wide initiative focusing on inventories and debtor collections resulted in cash flow more than doubling to $70 million from $30 million in the prior year, with a strong pick up in the second half. Debtors increased over the prior year, in part due to the robust sales performance in the last months of the year. In spite of the growth, the Group’s value of bad debts did not escalate and remain immaterial. With the exception of Brown & Watson concerted efforts were made to reduce net working capital in the current financial year. In the case of Dexion, attention was focused on improving the work-in-progress financed by customer down-payments and progress payments, whereas in other businesses action plans centred on inventory reduction. Brown & Watson’s priority was on improving fulfilment rates and ensuring sufficient inventory was on hand to support the launch of new product lines which were introduced with the release of the 2016 Narva catalogue. The major capital commitment for the year was the purchase of Brown & Watson, which involved an initial payment of $187.2 million on 1st July 2015 and true-up payments totalling $10.8 million during the year. A final tranche of $20.0 million will to be paid to the prior owners of Brown & Watson during the first quarter of the 2016- 17 financial year, representing an earn-out, which was linked to the year’s financial performance. In addition $35.4 million was received on 1st July 2016 as a payment for the sale of the Company’s remaining interest in the Sunbeam business. A final, small adjusting settlement is expected to be concluded in the first quarter of the 2016-17 financial year. As a consequence of the Brown & Watson purchase, the Company’s debt position swung from a net cash position of $0.6 million at the end of the prior year (which included cash received of $105m from an equity raising) to a net debt position of $168 million at 30th June 2016. Net debt reduced post balance date after receipt of the payment for Sunbeam. 13 Operating and Financial Review External Financing A new five-year debt financing facility agreement for a total of $300 million commenced on 1st July 2015 to support both the ongoing operations and the purchase of Brown & Watson. This facility involves Westpac, NAB and the Commonwealth Bank. The facility comprises two parts. The first is a five-year core debt facility of $185 million, while the second is a $115 million acquisition-related debt facility, which will reduce to $62.5 million over the life of the loan. The total facility capacity at the end of 2015-16 was $295 million and this will fall to $282.5 million at the end of 2016-17. It will reduce by a further $15 million each year thereafter until it expires on 1st July 2020 at a value of $247.5 million. Elsewhere minor additional facilities remain in place to support the working capital requirements of GUD’s Asian subsidiaries. STRATEGY REVIEW GUD’s primary objective is to generate long-term shareholder returns above the cost of capital, while maximising the value of its unique portfolio of market leading brands. Strategy development and execution is focused at the segment level. GUD’s businesses operate with a significant degree of autonomy. There is very little overlap between the businesses in respect of markets and customers served, hence the focus. This individual business approach is overlaid with strategic portfolio analysis, which addresses the structure of the GUD group in relation to the types of activities the Company should be active in to meet the long-term objective. The business unit and Group strategies are prepared and reviewed by the Board annually. The approach taken considers the competitive position of each business through assessing its market position, management capabilities and business culture, business fitness and scalability opportunities. In addition, the attractiveness of each industry sector is evaluated along with the long-term financial performance of each business unit. The latter analysis includes sales and profit trends along with shareholder return history. This approach provides a framework for assessing an activity and business unit’s prospects, from which the future portfolio structure is developed. Industrial, trade or commercial customer base From the strategy work completed in recent years a more clearly defined criteria for GUD’s portfolio structure has emerged. The overarching guidelines that frame the portfolio structure now and into the future are:   Business to business sales profile     Product leadership in niche markets with a strong innovation track record Predominantly and Australian and New Zealand footprint. Strong brands – either #1 or #2 in the category Sustainable and attractive returns At the individual business unit level the elements that frame the strategy are: 1. Investing in innovative product development to deliver breakthrough new products that address specific customer needs, through either distinctive product features, lower product costs and/or improved functional performance. 2. Investing in GUD’s brands through the full spectrum of marketing activities and programs to maintain leading positions with each brand’s selected audience. 3. Improving product and supply chain costs and efficiencies to enable each business to remain internationally competitive in its sector. 4. Improving efficiency and product unit costs in operations where GUD retains a manufacturing capability. 5. Actively managing the business portfolio to optimise shareholder returns. Actions taken on these elements of strategy during the 2015-16 financial year are detailed in the following sections. 14 Operating and Financial Review Innovation and new product development Innovation and new product development has been a fundamental component of activity across GUD’s businesses for many years. However, with increasing globalisation and growing disintermediation the need to continue innovating to provide the users of, and customers for, the Group’s various products with new features and benefits has become more paramount. Without new products and services GUD’s ability to compete over time will erode and the requirement, therefore, to accelerate the introduction of these through a well-defined innovation process is urgent. To that end, and with the objective of creating a consistent innovation approach and culture, a comprehensive innovation capability-building program commenced during the 2015-16 year. This year-long, structured program involves capability building across a group of people from a broad spectrum of disciplines in each business. The aim of the program is to embed a common innovation process, based broadly around principles that are complementary with design thinking concepts and that are resolutely focused on the existing or potential customer or user. From this each business has been tasked with developing a pipeline of breakthrough new products or services for introduction in the current and coming years. The ability to create new solutions to existing customer problems is critical for future sales growth, for margin protection and for maintaining the relevance of GUD and its brands with its disparate and complex customer bases. The program is about making innovation, and the unique approach to it, a way of doing business for GUD in coming years. Concurrent with the major innovation initiative, all businesses in the GUD Group have been active in introducing new or upgraded products to their respective market places. In particular the Ryco automotive filtration business has completed an exceptionally active year for new product introductions. Ryco has led the market with the launch of diesel particulate filters. These filters are now commonly found in the exhaust systems of diesel vehicles and, to date, there has not been an aftermarket offering of this type of product. With diesel vehicles growing in popularity the requirement for these filters as replacement parts is emerging and Ryco is now well positioned to service that market need. There is also a niche market for performance filters for a small number of vehicle types owned by high performance vehicle enthusiasts. Through identifying new filtration media Ryco was able to develop and introduce the SYNTEC™ high efficiency oil filter that meets the specific requirements of this market segment. The launch of this filtration program, through one of Australia’s leading retailers of automotive parts, was exceptionally successful as the range sold through at volumes well above initial estimates. Whilst engaged in these new product activities the Ryco business has also maintained its customary range extension program aimed at maintaining the relevance of its filtration offering to the changing nature of the vehicle population in Australia and New Zealand. This has included the introduction of filters specifically for Japanese-branded small trucks, an introduction that was complemented with a dedicated range catalogue to assist in part identification at the workshop and parts distributor levels. Ryco’s sister brand Goss, in the engine management market segment, has been equally active in expanding its range to include new technology ignition coils and complete replacement fuel pump modules. At the same time its traditional range of fuel pumps has been expanded to meet changing market needs. The newly acquired Brown & Watson business has been equally busy with new product introductions, especially those associated with the release of the 2016 Narva product catalogue. The introduction of an updated catalogue is a major event on the marketing calendar for Brown & Watson as the catalogue is typically the vehicle for a myriad of new product introductions. This was the case with the February 2016 release of the catalogue, which included around 500 new items across various product types including driving and fog lamps, emergency lighting, globes, fuses, cables, switches and LED truck and trailer lighting. In addition to the new product launches Brown & Watson upgraded many existing product lines and made performance improvements to many more. The net result of this activity has been a sizeable uplift in sales following the catalogue’s release. Brown & Watson has scheduled to follow up the recent Narva catalogue launch with one covering its battery and power products brand, Projecta, in the 2016-17 financial year. 15 Operating and Financial Review Following a period of significant investment in new product development, Davey introduced a number of innovative products to its various markets during the year. These include, in August 2015, the ProMaster® series swimming pool pump, offering users super quiet performance and substantial energy savings over competitive products. This was followed in September with the introduction of the Promatic® MKII chlorinator, incorporating unique self- cleaning features. The next month Davey’s Torrium2 “Plug-and-Play’ pump controller was released and this was followed by the EcoSalt Redox sanitisation system for swimming pools in November and with the multi-fit SureFlo pool pump in December. In calendar 2016 product release activity continued, principally aimed at the pool and spa market segments with products which have been incrementally improved on previous models. Davey’s innovation focus now turns to identifying and developing the product development opportunities for future breakthroughs across its other market segments, specifically household water pressure systems and farm and irrigation pumps and associated equipment, using the innovation process and tools introduced in the broader GUD innovation initiative. Consistent with its sister companies in the GUD group the Oates cleaning products business also has a dynamic new product program. During 2015-16 this resulted in Oates releasing a range of gardening tools with a unique unbreakable, flexible head and introducing a range of packaged, single use wipes designed for specific cleaning tasks. Following new product introduction activity in recent years Oates is benefiting from considerable sales growth in the modular janitors cart product range and from its unique Decitex microfiber mopping system. A number of new product opportunities remain in development at Oates, the majority of which are focused on the professional cleaning market, the market where Oates remains the market leader in its category and where it has exceptionally strong brand equity. Sunbeam continued to leverage its relationship with the US-based Jarden appliances business by sourcing relevant products from the Jarden portfolio to introduce to consumers in both Australia and New Zealand. Following the previous year’s introduction of Oster brand blender products Sunbeam accessed a range of UK-designed toasters and kettles from Jarden and introduced these in April 2016 as the London Collection. Sunbeam has been the leader in the electric blanket market in Australia and New Zealand over many years. In support of its leadership position the brand continues to innovate and in the year under review the Sleep Express range of blankets was introduced. These incorporate patented Boost technology that provides rapid heating of the blanket, compared with standard offerings. In addition, in recent years Sunbeam has collaborated with the internationally recognised Australian designer Marc Newson, with the result that a range of stylish, high-end kettles and toasters were released mid-way through the year, under the Sunbeam by Marc Newson label. Investing in Brands GUD’s portfolio consists of a number of businesses that own and operate the leading brands within each of their respective markets. Brands provide a unique connection to consumers and users and effective brand management has long been a fundamental platform and skill base required to ensure long-term financial success for each business. In addition to product-related activities, which have been outlined in the preceding section, each year the businesses embark on a number of brand communication and support programs aimed at reinforcing brand equity with existing users or building brand recognition and experience with new users or consumers. In addition, the diverse nature of GUD’s business portfolio opens up opportunities for cross-brand promotions; for example, offering products from one of the brand stables as rewards or prizes in another’s marketing programs. The addition of Brown & Watson to GUD has resulted in strong collaboration between it and the Ryco business across a number of marketing activities, especially where there are common customers. For example, a joint promotion was developed for implementation at one of the largest common customers in the automotive aftermarket trade channels, involving both the Narva and Ryco brands and staff and managers at the customer’s branch network. This initiative, which resulted in customer personnel winning a trip to China, was recognised as being one of the most successful joint brand promotions held with that customer. 16 Operating and Financial Review Further, similar activities around unique, joint promotions are being actioned in 2016-17. Cabin air filters is an emerging growth segments for Ryco and Wesfil. This market is under-developed compared with the standard engine oil and air filter markets and opportunities exist to use differentiated products to drive awareness and unit growth. To that end during the year the Ryco business developed and implemented a marketing campaign around a new range of cabin air filters that remove fine particles from air entering an automobile’s cabin. The comprehensive “Breathe Easier” campaign focused on the Ryco MicroShield filters incorporated trade and consumer advertising, social and digital media activities, a consumer and trade promotion and trade-directed educational content. The combination of these elements reinforced Ryco’s position as the leading aftermarket filtration brand in Australia and New Zealand as well as providing a substantial payback as represented by the sales unit growth of nearly 40% compared with the prior year. To support its new product development programs Sunbeam maintained a high level of activity on digital and social media platforms. As a consequence Sunbeam continues to lead the small appliance category on engagement across the various platforms. Supply Chain Efficiency With GUD having little residual involvement in manufacturing activities a major component of the cost structure of the various businesses in the Group is supply chain cost – the cost of sourcing products, transporting and storing them and ultimately delivering them to customers across the various regions where the businesses are active. Traditionally the approach to these costs has been to let each business manage their own supply chain, essentially because there is very little overlap between the businesses in relation to the customers served and the physical nature of the products handled. One exception to this has been the procurement of ocean freight services which has been managed on a Group- wide basis for the best part of a decade. By combining the requirement for shipping product from origin to market, GUD has benefited from its scale in achieving market-competitive ocean freight rates along with committed allocations on vessels. In recent years this approach has changed in that opportunities to streamline these costs between the businesses, outside of ocean freight, are now being more actively pursued. To that end a cross-business Supply Chain Council was established in the 2015-16 year with the aim of identifying these opportunities and to benchmark critical supply chain performance measures to ensure that efficiencies are being secured by understanding best practice across GUD. The formation of the Supply Chain Council resulted in the following benefits accruing in the year under review:  A reduction in Davey’s cost of freight, generating savings of over $1 million annually.   Creation of a group buying arrangement for trans-Nullarbor freight generating savings of $150k annually. Leveraging GUD’s freight rates in the acquired Brown & Watson business saving that operation around 20% of its freight costs.  Closed Davey’s Townsville warehouse delivering considerable savings with no detrimental effect on customer service levels. Although progress has been made, there are additional opportunities for further savings to be achieved. Perhaps the most potential lies in consolidating shipments at the point of origin and shipping directly to the relevant market. This avoids the additional costs of handling product through a national distribution centre and re- freighting to the ultimate point of demand. Apart from the cost benefits that this provides, shipping to the destination that is closer to the customer should result in improved customer service levels. 17 Operating and Financial Review Manufacturing Efficiency GUD maintains a manufacturing presence at three of its business units – Davey, Dexion and Lock Focus. All other businesses source their products from third party suppliers, the majority of which are located offshore, with a large number of these in China. Davey essentially assembles products at its Scoresby factory in Melbourne’s south eastern suburbs, from sourced components. Close by, Lock Focus engages in die casting, metal stamping and assembly processes to make its range of locks and associated products. Dexion has the most substantial manufacturing footprint of any business in the GUD group. Dexion operates factories in Malaysia and China to supply its market-facing functions in Australia, New Zealand, South East Asia, China and the Middle East. The Malaysian factory has undergone a substantial upgrade and reconfiguration in recent years as a result of the combination of investment in a new roll forming line and the relocation of the previous plant and equipment from the now closed Kings Park factory in Sydney’s west. The focus for manufacturing efficiency improvement in the 2015-16 year has necessarily been at the Malaysian site and has centred on optimising the operation of the plant relocated from Sydney. To some degree this process has been hindered by the relatively low volume requirement that has been placed on the factory due to lower demand for racking products in the Australian market. Simultaneously, the new Jumbo line, which was installed in mid-2014 has experienced demand growth for the product range that it produces, although substantial capacity remains untapped at present. The installation of automated container loading equipment has improved both the efficiency of despatch operations as well as reducing the workplace health and safety risks associated with these activities. A major factor that has hindered Dexion’s manufacturing efficiency improvement has been the lack of a robust sales and operational planning process in the business. This is now rectified and a robust forecasting process is in place for the 2016-17 year. The Malaysian factory has not performed to the levels expected at the time of the major investment and the relocation of the equipment from Sydney. Progress has been made and there is no doubt that Dexion’s cost to convert is significantly lower in Malaysia than it was in Sydney. This positions the Dexion business well for the future. The expected improvement in volume throughout in the coming year coupled with the robust demand planning regime and the improvements that will come from the experience of running the reconfigured factory, should result in a lower break-even point and an improved delivery performance from this crucial manufacturing facility. Portfolio Management During the 2015-16 year GUD undertook two significant activities that were aimed at framing GUD’s business portfolio structure for the future. Specifically these activities were:   The acquisition of Brown & Watson on 1st July 2015. The announcement that GUD is selling its remaining shareholding in the Sunbeam appliances joint venture effective from 1st July 2016. The Brown & Watson acquisition was detailed in last year’s Operating and Financial Review and its contribution to GUD’s financial performance in 2015-16 was outlined earlier in the Financial Performance Review section of this report. At the time of the acquisition GUD flagged that a number of specific initiatives would be actioned at Brown & Watson, these having been implemented across all other GUD businesses in recent years. To guide this activity and to provide the business with leadership following the retirement of its long standing Managing Director and part-owner, Steve Waterham, Bob Pattison transferred from his previous role heading GUD’s Ryco business. 18 Operating and Financial Review In the twelve months that Brown & Watson has been in GUD ownership the business has adopted most of the major elements of GUD’s performance culture, namely:  Commencing a profitability analysis by customer and by product to identify areas for improvement around cost-to-serve, product cost improvement and pricing opportunities.   Implementing the high performance framework at the management team level. At Brown & Watson this has also been taken to sales management and representative level with extremely positive results. Introducing the GUD-wide innovation program to embed structured and customer-focused innovation activities, with the aim of having a pipeline of breakthrough new products ready for market introduction in 12- 24 months’ time. Simultaneous to the introduction of these programs, a number of activities have occurred which have been aimed at improving Brown & Watson’s cost position by inclusion in GUD purchasing arrangements. The business is now included in such arrangements for insurance, domestic freight and container freight with benefits accruing from these. Apart from continuing its strong financial performance the focus now for the management team is to develop and implement a growth strategy for the next five years. The business is fortunate in that it is active in a myriad of market segments and has opportunities to grow organically in most of these. In addition rapid technological change in many of its product segment, particularly lighting and batteries, provide further avenues for sales growth and margin expansion. The current task is to identify which of these offers the best potential for growth and to act on those in conjunction with the established activities around product leadership and innovation. The evidence to date is that Brown & Watson has been a sensible acquisition for GUD. It complements the Group’s established activities in the automotive aftermarket while providing access to other market segments that offer good growth potential. The business is targeting a sustainable 8% per annum sales growth and a 30% EBIT to sales benchmark. At these levels this business will be a major contributor to value growth in GUD. In April 2016 GUD announced that it had entered into an agreement with Jarden Consumer Solutions (JCS) of the USA to sell its remaining interest in the Sunbeam appliances business. Previously GUD had entered into joint venture arrangements with JCS in October 2014 whereby it sold a 49% shareholding in Sunbeam Australia and New Zealand to JCS and acquired a 49% stake in Jarden’s Asian sales and marketing operations. The objective of the joint venture arrangement was to provide Sunbeam with some much-needed scale and to enable Sunbeam to benefit from access to Jarden’s broader product range and to provide product purchasing benefits through accessing JCS’s supplier network and procurement capabilities. While operating in the joint venture mode it became apparent quite rapidly that it was to Sunbeam’s long term benefit that it become a fully owned subsidiary of JCS sooner rather than later. The exit from the small appliance industry, which has rapidly globalised and left Sunbeam strategically disadvantaged as a result, comes after an involvement spanning 20 years, following GUD’s acquisition of Sunbeam Victa Corporation in 1996. JCS is an electrical appliance business with an international footprint. It owns the Sunbeam brand globally, with the exception of Australia and New Zealand where it has been owned by GUD and is the natural owner of Sunbeam Australia and New Zealand. GUD’s original intention was to sell its shareholdings in the joint ventures at a later date but circumstances changed such that an earlier exit was the best avenue to take for GUD’s shareholders. GUD received cash of $35.4 million from the sale of its remaining interest in the two joint ventures. The completion date for the transaction was 1st July 2016. The proceeds will be applied to reducing GUD’s borrowings. Following the divestment of Sunbeam, GUD’s activity base covers the automotive aftermarket, water products, cleaning products, warehouse and commercial storage products and systems and security products. The portfolio remains under regular review and there is likely to be further changes to the structure of the portfolio in coming years. These will be done to fulfil the strategic objectives already stated along with the intention to position GUD as the owner of three or four larger businesses each with sales of between $200 and $400 million, enjoying international scale. To achieve this position the businesses in the portfolio will need to be scalable and complementary businesses will be acquired as opportunities arise. 19 Operating and Financial Review CORPORATE SOCIAL RESPONSIBILITY People, Safety and Culture This year GUD continued with its broad-based employee satisfaction survey designed to understand how people across the businesses perceive a number of cultural and management effectiveness dimensions. As previously detailed the Company made significant changes to its business portfolio and within the businesses themselves, with the objective of achieving the best portfolio mix of high performing businesses. With these changes it continues to be important to understand how people cope with change, and how communication around the changes mitigates personal concerns. The responses to the survey shape the communication of plans and objectives of the Board and senior management. High performance is becoming embedded in the culture of the businesses, as programs have been conducted in each of the last three years. The approach offers individuals who have much to contribute, an opportunity to demonstrate their abilities and gain recognition for their achievements. GUD is cultivating the leaders of tomorrow’s business. Many cross-business projects and teams have been established in the last few years driving a greater understanding of the businesses, their risks and opportunities and creating an environment for sharing of knowledge and solutions. One example is the Information Technology Council, which brings together the relevant professionals from the businesses for the purpose of understanding and harmonising the approach to the many technology issues facing the business and jointly developing cohesive and comprehensive policies. A safety culture survey was not conducted during the year, as it was considered the previous survey gave clear guidance on what needs to be focused on. The priority has been to enhance safety leadership through a number of initiatives. The businesses have introduced programs and initiatives to enhance safety culture, where management effectively leads with safety and increases employee participation and trust. Additionally, businesses are developing safety campaigns to encourage staff to be more aware of their surroundings and engage in safety conversations if a potential issue is identified. During the year GUD introduced its Safety Excellence Awards to promote, encourage, recognise and reward businesses, teams and individuals who place a high value on accident prevention and promotion of safety in the workplace. The inaugural Safety Excellence Awards were held in August 2015. The winners were the Dexion Manufacturing business in China, the warehouse team at Davey Water Products (Melbourne) and George Jabbour in the warehouse at E D Oates in New South Wales. The Awards are being run again this year and strong submissions have been received from a number of the businesses competing to be the best and safest in the GUD Group. Along with the rewards and encouragement GUD is also providing comprehensive training in a number of areas complementary to the essential basic safety training. Recent programs have covered incident investigation and reporting, the objective being to properly investigate and understand the local factors that contribute to an incident and the latent hazards within the system and organisation, not just focussing on the errors and violations of operational personnel. Throughout the Group trained investigators form teams to carry out these investigations, and apply their ability to transfer the knowledge gained across the businesses. GUD has for many years run a comprehensive program of annual inspections of business sites by trained personnel from other businesses within the Group. This has worked well, however this year investment have been made in more training for a larger pool of internal auditors. Additionally, the internal audit checklist has been refreshed and renewed. This system allows the transfer of knowledge and experience across businesses and teams within the GUD Group. 20 Operating and Financial Review The results from the increased emphasis on safety across the businesses are evident in the following table. Measure 2012-13 2013-14 2014-15 2015-16 Total Recordable Injury Frequency Rate Lost Time Injury Frequency Rate Days Lost per 100 Employees Per Year* 16.8 3.7 25.4 14.3 5.6 27.8 8.2 1.8 17.1 7.1 4.5 47.0 *This measure for 2015-16 is significantly impacted by two long term cases where the injury occurred in a prior year; if those numbers were omitted the rate would be 12.3 The application of the AON Hewitt-assisted evaluation continued in the year and informed the grading of each role within the businesses. This allows the Group to ensure equality and fairness in proposing and recommending salary and career decisions for all GUD employees. It also forms the basis of ensuring sustainability into the future, in particular in areas such as recruiting, career and succession planning, development planning and workforce planning. The objective is to grow the pool of talent available to the Group and ensure that personnel with the right skills and experience are best utilised. GUD businesses offer an employee assistance programme, provided on a confidential basis by an independent third party. Employees and managers are encouraged to make use of this assistance whether the matter is work- related or personal. Diversity, in particular gender diversity, is at the forefront of Board and management thinking. GUD’s formal report on diversity is included in the Corporate Governance Statement, which is available on the website at http://www.gud.com.au/corporate-governance. A copy of GUD’s diversity policy is also available at the same location. Sustainability GUD manages its businesses to be responsive, ethical, open and accountable, promoting a relationship of respect and trust by and with shareholders, customers, government and community, and employees. During the year, GUD undertook a study across its businesses to identify sustainability risks. With the assistance of KPMG, the study identified sustainability risks of varying degrees found across the businesses in product quality, labour, supply reliability, health and safety and the environment. Each business was presented with the finding of the study as they applied across the Group, and to the individual business, and was asked to provide a response as to how it was addressing each of those risks. The responses demonstrate that some businesses are better prepared and more progressed in the identification, analysis and consideration and planning and implementing a response to these risks. For instance, a number of GUD businesses have for many years included in their contracts with overseas suppliers, requirements in relation to ethical labour practices. This now applies to all GUD businesses. Some businesses are going further and auditing their suppliers against these commitments. A second example is the treatment of waste. Where appropriate, businesses are signatories to the Australian Packaging Covenant and have undertaken an assessment of the areas where packaging can be minimised or re- used and have made commitments accordingly. All businesses are conscious of their impact on the environment and seek to minimise that impact by implementing cost-effective changes to practices. Initiatives such as ethical sourcing, responsible packaging, lower energy consumption, hazardous chemical reduction, waste recycling and storm water harvesting are ongoing programs in the Group. Ethical conduct in business is a key pillar of GUD’s sustainability. GUD has had a Code of Conduct for many years, including provisions for the protection of ‘whistle-blowers’. The Code of Conduct has been strengthened in recent years with broad-based training of staff in areas of privacy, bribery and corruption risks, harassment and bullying, anti-competitive conduct and consumer protection. GUD’s businesses have relatively minor impact on climate change through greenhouse gas emissions and energy consumption. GUD’s operations in total continue to be well beneath the reportable thresholds established by the National Greenhouse and Energy Reporting Act. 21 Operating and Financial Review RISK REVIEW It is the policy of GUD Holdings Limited to ensure that there is a systematic process to identify, analyse, assess, manage and monitor risk throughout the Group. During the year, this expanded to include the acquired Brown & Watson business. An evaluation of all organisational risks at business level is performed twice annually for presentation to the Board for review. In addition, there are established policies and processes in relation to specific risks, such as workplace health and safety and financial risk management. The twice annual business unit risk assessments are performed utilising a standard framework that is designed to ensure that strategic, operational, legal, reputational, product quality, brand and technological risks are identified, assessed, managed and monitored. The risk management framework highlights those risks that are classified as “extreme” or “high” and these become the priorities for mitigation actions. These risks are material business risks that could adversely affect achievement of GUD’s strategy outlined in the ‘Strategy’ section above and financial prospects described in the ‘Outlook’ section. The risks identified as “extreme” have not materially changed in the past year; these are detailed below.  Brand reputation risk due to poor product quality from external suppliers. GUD relies heavily on external manufacturers to supply products that comply with GUD’s brand quality standards. Any decline in quality could cause major reputational damage and a consequent degradation in brand equity.  Consolidation of the customer base. Further consolidation of corporate ownership of the customers served by GUD’s businesses could potentially lead to pressures to negotiate less favourable trading terms for GUD and to demands for additional promotional allowances and other margin-reducing activities. Whilst having reduced in perceived risk from “extreme” to “high” GUD still considers supply chain risk, which includes supplier failure and the inability to receive products sourced from offshore suppliers, to be a threat. GUD is heavily dependent on offshore suppliers for a substantial proportion of its product range. Oates, Sunbeam and the Automotive businesses import their full product needs while Davey, Dexion and Lock Focus produce product as well as source from external suppliers. There are a number of individual risks that could be categorized under this subject, including supplier financial failure and country risk through sourcing and shipping predominantly from one location. Monitoring and mitigation activities continue to reduce and manage the severity of these risks. Emerging risks include cyber risk and bribery and corruption. During the year, the Company assessed these risks and established policies and processes, including training of staff, to mitigate them. Foreign Exchange Risk Foreign currency fluctuations have been identified as material business risks that could adversely affect achievement of GUD’s strategy outlined in the ‘Strategy’ section above and financial prospects described in the following section headed ‘Outlook’. The nature of this risk has not fundamentally changed over the 2015-16 year. The significant foreign exchange exposures affecting GUD’s businesses arise from purchases of goods in foreign currencies that are translated back to the functional currency of the relevant subsidiary. This has increased somewhat with the relocation of Dexion manufacturing from Australia to Malaysia and the acquisition of Brown & Watson. In the case of Davey, exports from Australia provide a partial natural hedge against the purchases of imported components. Foreign exchange exposures will continue to be managed from a perspective of reducing the effects of volatility on the value of the foreign currency cash flows of the business. The GUD Group’s foreign exchange policy requires significant purchases in foreign currencies to be hedged using either foreign exchange contracts, options or collars. A Financial Risk Management Committee, consisting of finance staff from the subsidiaries and managers from the holding company, meets monthly in order to monitor foreign currency exposures. 22 Operating and Financial Review OUTLOOK Despite the absence of a contribution from the Sunbeam business, which was sold on 1st July 2016, as previously reported, underlying financial performance in 2016-17 is expected to improve on the level generated in 2015-16. This improvement is expected to come about as a result of a number of initiatives and programs, many of which have been outlined earlier in this Operating and Financial Review. Specifically, contributions are expected from the innovation projects commenced early in the financial year, following completion of the capability-building phase of the innovation initiative. Innovation missions are being progressed through GUD’s innovation process at Davey, Ryco and Oates, these being the first to complete the program. This will be followed by projects been commissioned at Brown & Watson, Lock Focus and Dexion. For GUD’s established business that have been through substantial reconfigurations over time, transitioning from manufacturing-intensive operations to design, develop, source and sell businesses, the ability to develop and introduce innovative products and services that meet real customer needs is critical to future success. The focus for these businesses, which span all with the exception of Dexion, is weighted to this activity. In Dexion, while new products and services are important, the main tasks are around internal process improvements, manufacturing efficiency progression in the Malaysian factory and rebuilding Dexion’s position in the local market. These actions are aimed at building a solid internal foundation to grow the business in future years. Simultaneously, the strategic options available for Dexion are being considered. Brown & Watson joined the GUD group on 1st July 2015 and made a substantial contribution to financial performance in the 2015-16 year. The business is part way through implementing GUD’s policies, processes and procedures and further progress on these will occur in the current year. In addition to any additional benefits that may flow from this, Brown & Watson should deliver profit growth as a result of a full-year contribution from the new products introduced in the 2016 Narva catalogue and a contribution from new Projecta brand products to be introduced with that brand’s new catalogue early in the 2017 calendar year. GUD Automotive, the foundation business in the GUD group, is expected to continue with the market momentum it generated in 2015-16, by focusing on optimising the benefits from its recent new product introductions, including its push into the heavy duty market segments and its launch of diesel particulate filters. In addition its market-leading customer acquisition program will contribute to market share growth as more workshop convert to using the Ryco brand as their first choice automotive filter. Davey’s financial performance has turned the corner after some years of stagnation. A less volatile trading performance should come about following Davey’s management team renewal and its changed approach to key account management. Davey is well advanced with its major innovation projects and these should make a contribution to financial performance as the year progresses. The 2016-17 year represents one in which GUD is not as exposed to consumer purchasing patterns and trends as it has been in the past. Sunbeam was the business with a significant exposure to the consumer market, and although Oates retains business to consumers through hardware and grocery channels its most important market is the commercial cleaning sector. GUD is transitioning to managing a group of business with trade and industrial customers as the core of the customer base. The brands remaining in the Group’s portfolio are all leaders in their respective markets to this customer profile. This transition is aimed at building a solid portfolio of consistently performing businesses, that aren’t subject to the variability of consumer markets. By being close to customer and framing product and service development around real customer needs GUD’s businesses are uniquely placed to organically grow and to deliver sustainable, high quality returns. 23 Remuneration Report (Audited) This report forms part of the Directors’ Report and has been audited as required by section 308(3C) of the Corporations Act 2001, and prepared in accordance with the Corporations Act 2001. The report is outlined in the following sections: 1. Who this report covers 2. Remuneration governance 3. Managing Director and Senior Executive remuneration strategy and structure 4. 5. 6. Remuneration for the Managing Director and Senior Executives Link between performance and remuneration outcomes Service agreements 7. Non-Executive Directors’ remuneration 1. Who this report covers This report outlines the remuneration arrangements for the Group’s key management personnel (KMP). The following individuals had authority and responsibility for planning, directing and controlling the activities of the Group for all or part of the financial year ended and 30 June 2016: Name Role Non-Executive Directors R M Herron Non-Executive Director and Chairman P A F Hay Non-Executive Director and Chairman of Remuneration Committee (resigned 1 August 2015) A L Templeman-Jones Non-Executive Director and Chairman of Remuneration Committee (appointed 1 August 2015) M G Smith G A Billings Non-Executive Director Non-Executive Director and Chairman of Audit, Risk & Compliance Committee D D Robinson Non-Executive Director Managing Director J P Ling Managing Director Senior Executives M Fraser K Hope D Birch R Pattison G Nicholls T Richards P O’Keefe D Worley T Cooper Chief Financial Officer Chief Executive Officer Sunbeam Chief Executive Officer E D Oates Chief Executive Officer Brown & Watson (appointed 1 July 2015) Chief Executive Officer GUD Automotive (appointed 1 July 2015) Chief Executive Officer Dexion (appointed 5 October 2015) Chief Executive Officer Dexion (resigned 2 October 2015) Chief Executive Officer Davey Managing Director Wesfil 24 Remuneration Report 2. Remuneration governance The Remuneration Committee is responsible for making recommendations to the Board on remuneration policies and packages applicable to the Managing Director and Senior Executives (collectively, “Senior Executives”). The Remuneration Committee consists of the five Non-Executive Directors and is responsible for determining and agreeing with the Board a framework and broad policy for remuneration. It advises the Board on remuneration policies and practices in general, and makes specific recommendations on fees, remuneration packages, incentives and other terms of employment for Senior Executives. A copy of the Remuneration Committee Charter is available under the Governance section of the Company’s website. The Senior Executives do not participate in any decision relating to their own remuneration. 3. Senior Executive remuneration strategy and structure Remuneration strategy Our remuneration strategy is designed to attract, retain and motivate appropriately qualified and experienced Senior Executives. Our strategy ensures we are well positioned to deliver reasonable and market competitive rewards in a way that supports a clear performance focus and is aligned with the long-term goals of the Group. In determining the Senior Executives’ remuneration, we have developed remuneration guiding principles to assist in decision-making:  The remuneration structure is relevant and simple for Senior Executives and shareholders to understand.  Our remuneration practices support the delivery of long-term business strategy and provide a clear link between Group performance and remuneration outcomes.  Remuneration levels are sufficient to attract and retain key talent and be competitive against relevant companies.  We have clearly defined and disclosed remuneration processes and structures that reflect shareholder views and objectives.  Our incentive plans are carefully designed to balance the twin imperatives of short-term performance and long-term enhancement of shareholder value, and are regularly reviewed to ensure alignment with corporate governance principles.  The Remuneration Committee is committed to continuing to review and refine the remuneration strategy to ensure it meets the changing needs of the Group and remains aligned to shareholder interests. Remuneration structure Fixed remuneration, and The remuneration framework provides a mix of fixed and variable remuneration and has four components:  and “at risk” remuneration including:    These, together with certain non-cash benefits, comprise the total remuneration paid to Senior Executives. Long-term incentives (LTI) and Short-term incentives (STI) Special incentives. Our approach is to position the maximum ”at risk” components of Senior Executives’ remuneration relative to total maximum remuneration, to around 45 per cent, and 50% in the case of the Managing Director. In the absence of any special incentives, the maximum remuneration mix for the Senior Executives is as follows: 25 Remuneration Report Fixed remuneration The remuneration packages for the Senior Executives contain a fixed amount that is not performance linked. The fixed component consists of salary and vehicle entitlements, as well as employer contributions to superannuation funds, salary continuance insurance premiums and certain employment related memberships. Fixed remuneration for Senior Executives is determined by reference to the scope of their positions and the knowledge, experience and skills required to perform their roles. Periodically, independent consultants provide analysis and advice to the Remuneration Committee to ensure the packages are competitive in the market with comparable roles. We have adopted a desired market positioning around the median of the peer group. The Company did not receive any remuneration recommendations from an independent consultant during the year ended 30 June 2016. The Remuneration Committee, through a process that considers individual, business unit and overall Group performance, reviews fixed remuneration annually. Fixed remuneration levels are generally not adjusted during the year unless the individual is promoted or there is a substantial change in market rates. STI The Board considers that basing the STI payments on Cash Value Added (CVA) performance aligns the interests of the Senior Executives with the interests of shareholders in the businesses being operated profitably. The current STI plan provides an annual cash bonus for achieving or exceeding an agreed CVA target and is paid following the announcement of the Group’s year-end results. For each financial year:  In respect of business unit executives – STI bonuses will only be paid where business unit CVA performance exceeds the CVA performance of the prior year and the CVA target for the relevant business unit.   In respect of Group executives – STI bonuses will only be paid where Group CVA performance exceeds the Group CVA performance of the prior year and the Group CVA target. CVA targets for each business unit and for the Group overall will be recommended to the Board by the Remuneration Committee in the first quarter of the financial year. The Remuneration Committee and Board will determine the Senior Executive actual STI bonuses after the conclusion of the financial year in accordance with the plan rules. The Board continues to view CVA as the most appropriate annual performance measure. It measures a true level of performance of the business by comparing trading profit performance (being reported profit adjusted for non- recurring items) with the return required on the net assets used by the businesses. This requires management to drive both trading profit and carefully manage the balance sheet. Acquisition costs are excluded from the CVA calculation due to their one-off nature, which can be difficult to budget with certainty and consequently including them could discourage growing the business through acquisitions. Newly acquired companies or business are typically excluded from the CVA target and evaluation process in the year of acquisition due to the impact of integration and restructuring activities, which typically occur after the acquisition. STI bonuses may be determined for these businesses based on other measures as approved by the Remuneration Committee. STI bonuses are calculated as a percentage of fixed remuneration. When the agreed CVA target is achieved, the STI bonus is paid in full. If the CVA target is exceeded, the STI bonus increases up to a ceiling of no more than 150 per cent of the base CVA incentive generally upon achieving 120 per cent of CVA target. No STI is paid where CVA falls below the CVA target. Bonuses as a percent of fixed remuneration Managing Director Senior Executives STI Threshold performance 26.7 35.0 STI Stretch performance 40.0 52.5 % of salary at LTI 60.0 30.0 Details of the CVA STI bonuses payable to the Senior Executives for the year ended 30 June 2016 are set out in section four of this Report. 26 Remuneration Report LTI The Board considers that measuring Executives’ performance for LTI purposes by reference to the Group’s total shareholder return (TSR) relative to a comparator group aligns the LTI component of their remuneration with the interests of shareholders. The comparator group is the Standard and Poor’s ASX Small Ordinaries index, of which the Group forms part, modified to exclude stocks in the mining, materials and energy industries. It was chosen on the basis that it is the most effective way to measure and reward the extent to which shareholder returns are generated relative to the performance of companies that compete with the Group for capital and employees. The comparator group typically comprises over 100 companies. LTI bonuses are provided as performance rights, granted at the commencement of the relevant three-year period, which will convert to an equivalent number of GUD shares if the performance hurdle is achieved over the relevant three-year performance period. No amount is payable for the issue of performance rights, or for the share received upon vesting of those performance rights. The plan is in line with market norms, supports the delivery of the Group’s long-term strategy and ensures that the Senior Executives hold an exposure to equity. The maximum number of performance rights will be set as a percentage of the Senior Executives’ fixed remuneration on grant, stated as a number of shares determined by applying the share price, being the VWAP over the month of June immediately prior to the commencement of the relevant year of grant. Participation in the plan is subject to Remuneration Committee recommendation and Board approval. In the case of the Managing Director, shareholder approval is also required, and is sought at the Annual General Meeting prior to the Board formally granting the performance rights to the Managing Director. After the cessation of employment of a participating executive, the Board has the discretion whether to allow a pro rata portion of the granted performance rights to remain ‘on foot’ subject to the plan rules and the performance criteria. The remaining performance rights of a departing Executive lapse in accordance with plan rules. Following the end of the performance period, the Board receives an independent assessment of the Company’s TSR performance against the comparator group over the performance period. The vesting schedule for performance rights equity-based awards is as follows: TSR performance % of LTI that vests TSR below 50th percentile TSR at 50th percentile Nil 50 TSR between 50th and 75th percentile Progressive vesting from 50 to 100 TSR at 75th percentile and above 100 Under prevailing accounting standards, the potential cost to the Company from issuing performance rights is fair valued and accrued over the three-year performance testing period. The rules of the LTI plan include provisions that prohibit participants entering into transactions (whether through the use of derivatives or otherwise) which limit the economic risk of participating in the scheme. 27 Remuneration Report Special Incentives From time to time the Remuneration Committee may approve special incentives to selected employees aligned to the attainment of particular outcomes which align with shareholder interests and value. With the formation of a joint venture with Jarden Corporation in November 2014, the Company sold 49% of Sunbeam Corporation Limited and Sunbeam NZ Corporation Limited (collectively “Sunbeam ANZ”) for a price contingent on the financial performance of the business in the year ended 30 June 2015, and potentially in the years ending on or after 30 June 2018 if put or call options are exercised by the Company or Jarden Corporation in respect of the Company’s remaining 51% interest in the joint venture. Consequent upon the transaction, the Remuneration Committee approved special incentives. On 15 November 2014, a Senior Executive, Karen Hope was issued for no consideration:   to vest into an equivalent number of ordinary shares in GUD if performance triggers are achieved. 73,283 performance rights related to the year ended 30 June 2015; and 146,565 performance rights in respect of the year ending 30 June 2018, For the year ended 30 June 2015, the trigger level was set at Sunbeam ANZ achieving an EBITDA level of $10m on the EDITDA definition applied by Jarden Corporation, and excluding certain non-recurrent costs. The trigger level was achieved and endorsed by Jarden Corporation. Karen Hope’s 73,283 performance rights therefore vested during the year ended 30 June 2016 and she was issued with 73,238 shares in the Company for no consideration. An STI in respect of year ended 30 June 2015 of $186,099 would have been paid to Karen Hope had the performance rights not vested. Given that the performance rights did vest, Karen Hope did not receive this STI payment. As a consequence of the sale of the Company’s remaining 51% of the shares in Sunbeam ANZ and 49% of the shares in Jarden Consumer Solutions (Asia) Limited (“Jarden Asia”), the Remuneration Committee approved special incentives for Karen Hope, and on 14 April 2016, she was granted 73,282 performance rights which will vest into an equivalent number of ordinary shares in GUD for no consideration subject to the following performance hurdles:  The first tranche of 36,641 performance rights vests upon the successful completion of the sale of Sunbeam ANZ and Jarden Asia effective 1 July 2016 and the receipt of minimum proceeds in consideration of the sale as agreed between the parties; and  The second tranche of up to 36,641 performance rights vests upon attainment of above the minimum proceeds in consideration of the sale based on certain targets being met. The attainment of targets by Sunbeam ANZ and Jarden Asia are subject to the review and endorsement of the acquirer, HPFE (a subsidiary of Jarden Corporation) by September 2016. With respect to the first tranche, the Remuneration Committee may approve the vesting of 36,641 performance rights to Karen Hope on the basis that the Company receives target proceeds of $34.5 million for the sale of the Company’s remaining interests in Sunbeam ANZ and Jarden Asia. At this stage it is not certain that these target proceeds will be received and consequently no cost has been accrued for those rights in preparing the financial statements for the year ended 30 June 2016. With respect to the second tranche, it is highly unlikely that the performance rights will vest. Proceeds above the minimum proceeds received in consideration of the sale are determined on the basis of:  Net cash and EBIT targets achieved by Sunbeam ANZ for the year ended 30 June 2016; and  Net cash targets achieved by Jarden Asia at 30 June 2016. Given the sale of Sunbeam ANZ, the previously reported 146,565 performance rights granted to Karen Hope in respect of the year ending 30 June 2018 have lapsed. In addition, during the year the Remuneration Committee approved the grant of 115,528 performance rights to Tim Richards if Dexion attains certain EBIT levels in the year ending 30 June 2017. The Board now believes the achievement of the target is unlikely and consequently no cost has been attributed to those rights in preparing the Financial Statements for the year ended 30 June 2016. 28 Remuneration Report 4.1 Remuneration of Senior Executives Details of the nature and amount of each major element of remuneration of the Executive Directors and Senior Executives are: Short-term employment benefits Long-term benefits Salary and fees STI cash bonus Leave entitle- m ents Incom e protection prem ium Car benefits Year $ $ $ $ $ Managing Director Equity fair value of perform ance rights 1 Long service leave Superan- nuation $ $ $ Total $ Proportion of total that risk related rem uneration Value of equity rem uneration as a proportion of total rem uneration % % Total $ J P Ling 2016 965,000 - (20,689) 4,360 - 948,671 18,558 223,748 35,000 1,225,977 18.3 18.3 2015 887,500 238,589 (5,937) 1,725 - 1,121,877 16,846 151,277 35,000 1,325,000 29 11.4 Senior Executives M Fraser K Hope 2 D Birch R Pattison G Nicholls T Richards 3 P O’Keefe 4 D Worley T Cooper 2016 494,882 - 3,679 903 29,411 528,875 9,195 70,126 35,000 643,196 10.9 10.9 2015 478,639 168,863 15,462 810 27,800 691,574 8,833 77,441 35,000 812,848 30.3 9.5 2016 440,000 - 2,096 482 - 442,578 8,925 41,997 30,000 523,500 8.0 8.0 2015 380,000 - 3,122 433 - 383,555 6,384 547,653 30,000 967,592 56.6 56.6 2016 354,155 - 1,132 - 24,200 379,487 7,606 48,852 33,645 469,590 10.4 10.4 2015 343,196 126,843 14,775 - 24,200 509,014 11,507 52,501 32,604 605,626 29.6 8.7 2016 445,000 233,625 44,460 2,539 - 725,624 7,410 54,910 35,000 822,944 35.1 6.7 2015 357,078 148,269 27,467 2,906 29,000 564,720 6,868 56,799 33,922 662,309 31.0 8.6 2016 330,000 154,713 7,114 296 - 492,123 5,512 33,917 30,000 561,552 33.6 6.0 2015 - - - - - - - - - - N/A N/A 2016 386,667 - 11,480 - - 398,147 - 20,610 22,500 441,257 4.7 4.7 2015 - - - - - - - - - - N/A N/A 2016 205,365 - 59,752 1,133 - 266,250 - 21,579 15,569 303,398 7.1 7.1 2015 477,500 - 29,385 1,011 - 507,896 8,264 38,814 35,000 589,974 6.6 6.6 2016 428,500 213,906 25,963 1,397 - 669,766 7,224 40,409 35,000 752,399 33.8 5.4 2015 415,000 - 15,944 1,599 - 432,543 7,704 23,192 35,000 498,439 4.7 4.7 2016 377,000 155,992 (5,171) 2,539 - 530,360 10,734 51,256 35,000 627,350 33.0 8.2 2015 365,297 142,468 10,788 3,318 - 521,871 22,062 54,277 34,703 632,913 31.1 8.6 Total rem uneration of the Managing Director and Senior Executives of the Group 2016 4,426,569 758,236 129,816 13,649 53,611 5,381,881 75,164 607,404 306,714 6,371,163 2015 3,704,210 825,032 111,006 11,802 81,000 4,733,050 88,468 1,001,955 271,229 6,094,701 29 Remuneration Report Salary and fees STI cash bonus Leave entitle- m ents Incom e protection prem ium Car benefits Year $ $ $ $ $ Equity fair value of perform ance rights 1 Long service leave Superan- nuation $ $ $ Total $ Proportion of total that risk related rem uneration Value of equity rem uneration as a proportion of total rem uneration % % Total $ Short-term employment benefits Long-term benefits Total rem uneration of Non-Executive Directors 2016 706,238 - - - - 706,238 - - 67,093 773,331 2015 686,250 - - - - 686,250 - - 63,650 749,900 Total rem uneration (com pensation of key m anagem ent personnel of the Group) 2016 5,132,807 758,236 129,816 13,649 53,611 6,088,119 75,164 607,404 373,807 7,144,494 2015 4,390,460 825,032 111,006 11,802 81,000 5,419,300 88,468 1,001,955 334,879 6,844,601 1 The fair value of performance rights granted under the 2016, 2017 and 2018 performance rights plans are subject to achievement of TSR hurdles and were calculated by independent experts using a Monte-Carlo simulation valuation. The fair value is allocated to each reporting period evenly from the date of grant to the vesting date. The value disclosed in the Remuneration table above is the portion of the fair value of the performance rights expensed during the year ended 30 June 2016. 2 In addition to the performance rights granted under the 2016, 2017 and 2018 performance rights plans, Karen Hope was issued performance rights by GUD Holdings Limited in line with the special incentives previously outlined in this report. The Company has recorded $nil with respect to both tranches of the June 2016 special incentive performance rights on the basis that at this time the satisfaction of the conditions required for exercise are not reasonably certain. 3 Tim Richards was appointed Chief Executive Officer of Dexion on 5 October 2015, replacing Paul O’Keefe (below). The table above discloses his remuneration proportional to the period he was a Senior Executives. In addition to the performance rights granted under the 2018 performance rights plans, Tim Richards was issued performance rights by GUD Holdings Limited in line with the special incentives previously outlined in this report. The Company has recorded nil value with respect to the June 2017 special incentive performance rights on the basis that satisfaction of the conditions required for exercise are uncertain or render the rights deeply out-of-the-money. 4 Paul O’Keefe resigned in accordance with the notice provisions of his contract outlined in paragraph 6 of this Report. He was relieved of his KMP responsibilities on 2 October 2015 and remained in an advisory role until his notice period ended on 30 November 2016. The table above discloses his remuneration for the period to 30 November 2016. 30 Remuneration Report 4.2 Non-statutory compensation received by Senior Executives The table on the previous page provides a breakdown of the Company’s Senior Executive remuneration in accordance with statutory obligations and accounting standards. However, the Board is aware that the format in which the Company is required to present this information may make it difficult for shareholders to understand the total remuneration actually earned by Senior Executives from the various components of their remuneration in respect of the year ended 30 June 2016. The following table represents non-IFRS information. It sets out fixed remuneration, non-monetary benefits, STI payable in relation to FY2016, as well as any LTI or special incentive that has been earned as a result of performance that vested during FY16 or shortly after 30 June 2016. As a general principle, the Australian Accounting Standards require the value of share based payments to be calculated at the time of grant and accrued over the performance period. This may not reflect what Senior Executives actually received or became entitled to during the financial year. The figures in the table below have not been prepared in accordance with the Australian Accounting Standards. They provide additional and different disclosures to the previous statutory table Fixed Rem uneration 1 Year $ STI cash bonus 2 $ Other non- m onetary benefits 3 Perform ance rights vested w ith respect to the year 4 Total rem uneration $ $ $ Managing Director J P Ling 2016 1,000,000 - 2,229 663,673 1,665,902 Senior Executives M Fraser K Hope D Birch R Pattison G Nicholls T Richards P O’Keefe D Worley T Cooper 2016 529,882 - 43,188 184,250 757,320 2016 470,000 - 11,503 735,806 1,217,309 2016 387,800 - 32,938 121,108 541,846 2016 480,000 233,625 54,409 133,917 901,951 2016 360,000 154,713 12,922 66,476 594,111 2016 409,167 - 11,480 - 420,647 2016 220,934 - 60,885 102,606 384,425 2016 463,500 213,906 34,584 - 711,990 2016 412,000 155,992 8,102 123,076 699,170 Total rem uneration of the Managing Director and Senior Executives of the Group 2016 4,733,283 758,236 272,240 2,130,912 7,894,671 2015 3,975,439 825,032 292,276 276,665 5,369,412 1. 2. 3. 4. Fixed remuneration includes salary, fees and superannuation contributions. The STI cash bonus column reflects the STI cash bonus paid in respect of performance during the year ended 30 June 2016 and paid in August 2016 following the announcement of the Group’s year-end results. Non-monetary benefits includes leave entitlements, income protection premiums, car benefits and long service leave. LTI performance rights granted in July and November 2013 vested as a result of meeting TSR targets on 30 June 2016. The Remuneration Committee approved vesting of the performance rights on 27 July 2016. The value assigned to the vested performance rights has been calculated using the Company’s closing share price on 30 June 2016 of $9.11. In addition, special incentive performance rights were granted to Karen Hope in 2015 and 2016 in relation to the sale of Sunbeam. The 2015 rights have vested. The value assigned to the vested performance rights has been calculated using the Company’s closing share price on 30 June 2015 of $8.84. At the date of this report the Remuneration Committee has not approved vesting of the 2016 incentives on the basis that the satisfaction of criteria for vesting is uncertain. 31 Remuneration Report 4.3 GUD Holdings Limited equity interests held by the Senior Executives Senior Executives have exposure to equity in GUD either directly in the form of shares, or indirectly through holding performance rights in the Company. Details of Senior Executives equity interests follow. Performance rights granted during the year Details of performance rights over ordinary shares in the Company that were granted to Senior Executives under the LTI plan during the reporting period are set out in the following table: Rights granted during the year ended 30 June 2016 Fair value per perform ance right at grant date $ Fair value of rights granted during the year ended 30 June 2016 $ Grant date Vesting date 62,762 27 October 2015 30 June 2018 3.46 217,157 16,093 29 July 2015 30 June 2018 3.71 59,705 14,308 29 July 2015 30 June 2018 3.71 53,083 11,517 29 July 2015 30 June 2018 3.71 42,728 14,471 29 July 2015 30 June 2018 3.71 53,687 10,731 29 July 2015 30 June 2018 3.71 39,812 17,886 27 October 2015 30 June 2018 3.46 61,886 16,028 29 July 2015 30 June 2018 3.71 59,464 13,935 29 July 2015 30 June 2018 3.71 51,699 12,260 29 July 2015 30 June 2018 3.71 45,485 Managing Director J P Ling Senior Executives M Fraser K Hope D Birch R Pattison G Nicholls T Richards P O’Keefe D Worley T Cooper Total 189,991 684,706 A minimum level of performance must be achieved before any performance rights vest. Therefore the minimum possible total value of the LTI for future financial years is nil. In addition, the following performance rights were granted under the Special Incentives plans: Rights granted during the year ended 30 June 2016 Fair value per perform ance right at grant date $ Fair value of rights granted during the year ended 30 June 2016 $ Grant date Vesting date K Hope 1 2016 Special Incentives - first tranche 2 36,641 14 April 2016 30 June 2016 7.17 262,734 2016 Special Incentives - second tranche 3 36,641 14 April 2016 30 June 2016 7.17 262,734 73,282 525,468 T Richards 2017 Special Incentives 1 115,528 21 October 2015 30 June 2017 7.84 905,197 Total 188,810 1,430,665 1 2 3 4 As a result of the sale of the remaining 51% of Sunbeam ANZ (Note 31), Karen Hope’s 2018 special incentives of 146,585 performance rights granted previously lapsed. Karen Hope was granted 2016 special incentives of 73,282 performance rights during the year as a consequence of the sale of the remaining 51% of Sunbeam ANZ (Note 31). The company has not accrued the cost associated with the first tranche of the 2016 Special Incentives on the basis that satisfaction of the conditions required for exercise are uncertain. The minimum possible total value of the special incentives for Karen Hope for the year ending 30 June 2017 is nil, if the applicable performance conditions are not met. The company has not accrued the cost associated with the second tranche of the 2016 Special Incentives as the vesting remains uncertain and in anticipation that they will not vest when they are fully determined in the first quarter of the coming financial year. The minimum possible total value of the special incentives for Tim Richards for the year ending 30 June 2017 is nil, if the applicable performance conditions are not met. The Company has recorded nil value with respect to the 2017 special incentive performance rights on the basis that the conditions required for exercise are uncertain or render the rights deeply out-of-the-money. The following factors were used in determining the fair value of performance rights granted during the year: Grant date Vesting period date Fair value per perform ance right Exercise price Price of shares on grant date Estim ated volatility Risk free interest rate Dividend yield Grant to Managing Director 27 October 2015 30 June 2018 3.46 - Grant to T Richards 27 October 2015 30 June 2018 3.46 - Grant to Senior Executives 29 July 2015 30 June 2018 3.71 - $ $ $ 8.42 8.42 8.46 Grant of Special Incentives 21 October 2015 30 June 2017 7.84 - 8.46 Grant of Special Incentives 14 April 2016 30 June 2016 7.17 - 7.92 % 29.00 29.00 29.00 29.00 40.00 % 1.79 1.79 1.88 1.79 1.97 % 5.9 5.9 5.9 5.9 6.2 32 Remuneration Report Performance rights holdings of Senior Executives The following table discloses changes in the performance rights holdings of Senior Executives in the Company. The related parties of Senior Executives do not hold any performance rights. Rights granted during the year Rights vested during the year Rights lapsed during the year Balance at 1 July 2015 Balance at 30 June 2016 Rights vested w ith respect to the year 1 Rights lapsed w ith respect to the year 1 Balance at the date of this report 168,932 62,762 - - 231,694 (72,851) (5,822) 153,021 46,180 16,093 - - 62,273 (20,225) (1,616) 40,432 249,601 87,590 (73,283) (146,565) 117,343 (9,658) (772) 106,913 31,808 11,517 - - 43,325 (13,294) (1,062) 28,969 34,032 14,471 - - 48,503 (14,700) (1,175) 32,628 18,965 10,731 - - 29,696 (7,297) (583) 21,816 - 133,414 - - 133,414 - - 133,414 39,380 16,028 - (29,553) 25,855 (11,263) (900) 13,692 21,103 13,935 - - 35,038 - - 35,038 33,165 12,260 - - 45,425 (13,510) (1,080) 30,835 Managing Director J P Ling Senior Executives M Fraser K Hope 2 D Birch R Pattison G Nicholls T Richards P O’Keefe 3 D Worley T Cooper Total 643,166 378,801 (73,283) (176,118) 772,566 (162,798) (13,010) 596,758 1 2 3 Performance rights granted under the 2016 performance rights plan partially vested on the basis of meeting TSR hurdles as at 30 June 2016. The vesting was approved by the Remuneration Committee on 27 July 2016 and the rights have therefore been included in the table above as if the vesting were effective 30 June 2016. The 73,283 performance rights held by Karen Hope in relation to the special incentives formally vested after the formal endorsement of the Sunbeam ANZ result for the year ended 30 June 2015 by Jarden Corporation. At the end of employment, a determination may be made by the Board to allow a pro-rata amount of performance rights granted to remain ‘on foot’ in accordance with plan rules. P O’Keefe resigned on 2 October 2015. GUD Holdings Limited shares held by the KMPs The following table discloses changes in the shareholdings of KMPs and their related parties in the Company. Shares issued from vested perform ance rights 1 Balance at 1 July 2015 Shares purchased Shares sold Balance at 30 June 2016 Number of shares Shares to be issued from vested perform ance rights 2 Balance at the date of this report For the year ended 30 June 2016 Non-Executive Directors R M Herron 25,223 - 20,000 - 45,223 - 45,223 A L Templeman-Jones - - 3,548 (256) 3,292 - 3,292 P A F Hay M G Smith G A Billings D D Robinson Managing Director J P Ling 3 Senior Executives M Fraser K Hope 4 D Birch R Pattison G Nicholls T Richards P O’Keefe D Worley T Cooper 4,828 - - - 4,828 - 4,828 14,753 - 15,620 - 30,373 - 30,373 2,250 - 9,000 - 11,250 - 11,250 3,000 - 10,000 - 13,000 - 13,000 114,011 - 29,411 - 143,422 72,851 216,273 42,013 10,254 27,733 - 80,000 20,225 100,225 - 73,283 - (36,641) 36,642 9,658 46,300 - 6,740 - (6,740) - 13,294 13,294 - 7,453 - - 7,453 14,700 22,153 - 3,663 - - 3,663 7,297 10,960 - - - - - - - - - - - - 11,263 11,263 1,562 - - - 1,562 - 1,562 - 6,850 - - 6,850 13,510 20,360 207,640 108,243 115,312 (43,637) 387,558 162,798 550,356 1 2 3 4 Performance rights granted under the 2015 performance rights plan partially vested on the basis of meeting TSR hurdles as at 30 June 2015. The issue of shares was approved by the Remuneration Committee on 29 July 2015 (as disclosed in the Remuneration Report for the year ended 30 June 2015) and were allotted on 5 August 2015.. Performance rights granted under the 2016 performance rights plan partially vested on the basis of meeting TSR hurdles as at 30 June 2016. The issue of shares was approved by the Remuneration Committee on 27 July 2016. The holdings above include shares held either directly by the executive, or through other entities in which the executive has a trustee role or controlling interest. Performance rights in relation to the special incentives of 73,283 granted to Karen Hope vested after the formal endorsement of the Sunbeam ANZ result for the year ended 30 June 2015 by Jarden Corporation. 33 Remuneration Report 5. Link between performance and remuneration outcomes STI In the current year, the following businesses in the consolidated entity exceeded CVA targets: GUD Automotive, Wesfil, Brown & Watson and Davey. As a result, Executives of those business units received an STI bonus payment based on achieving or exceeding the business unit CVA performance. Corporate Executives, including the Managing Director and Chief Financial Officer, did not receive a bonus reflecting the failure to achieve the Group CVA target. STI bonus payable for the year ended 30 June 2016 $ $ % % Maxim um STI opportunity Actual STI bonus paym ent 1 Actual STI bonus paym ent as a % of m axim um STI Forfeited Managing Director J P Ling Senior Executives M Fraser K Hope D Birch R Pattison 2 G Nicholls T Richards P O’Keefe 3 D Worley T Cooper 386,000 - - 100 259,813 - - 100 231,000 - - 100 185,931 - - 100 233,625 233,625 100 - 173,250 154,713 89 11 201,945 - - 100 258,759 - - 100 224,963 213,906 95 5 197,925 155,992 79 21 1 2 3 A minimum level of performance, including exceeding the previous year’s CVA, must be achieved before any STI bonus is payable. Therefore the minimum potential value of the STI that was awarded in respect of the year ended 30 June 2016 was nil. The Remuneration Committee agreed an STI bonus for Brown & Watson based on target EBIT for the year ending 30 June 2016. As a result of exceeding this EBIT target, R Pattison received an STI bonus. P O’Keefe resigned on 2 October 2015 and is therefore not entitled to STI for the year ended 30 June 2016. The payment relates to STI bonus earned in the year ended 30 June 2016, approved by the Remuneration Committee on the 27 July 2016. The Remuneration Committee periodically reviews the design and operation of the STI plans to ensure that they focus rewards on achieving targets that represent strong performance of the business units, which will ultimately support shareholder returns. The Board has tasked the Remuneration Committee to undertake such a review in the first quarter of the forthcoming financial year before any STI targets are confirmed for that year. The review will focus on the target setting and thresholds for minimum and maximum STI rewards rather than the quantum of potential rewards. Company performance and shareholder wealth The following table summarises key Company performance and shareholder wealth statistics over the past five years. TSR measures the return a shareholder obtains from ownership of shares in a company in a defined period, and takes into account various matters such as changes in the market value of the shares, as well as dividends on those shares. The remuneration and incentive framework, which has been put in place by the Board, has ensured that the Managing Director and Senior Executives are focused on both maximising short-term operating performance and long-term strategic growth. 34 Remuneration Report The Board will continue to review and monitor the remuneration and incentive framework to ensure that performance is fairly rewarded and encouraged, and to attract, motivate and retain a high quality Senior Executive team. EBIT 1 EPS 1 Total DPS 2 Opening share price Closing share price Dividend yield Financial year $m Cents Cents $ $ % TSR percentile rank for the 3 year period ending 30 June 2011 77.1 71.7 64.0 8.65 9.10 7.0 84.3 30 June 2012 70.3 62.9 65.0 9.10 8.60 7.6 71.7 30 June 2013 56.4 52.5 52.0 8.60 5.99 8.7 37.0 30 June 2014 49.0 43.5 36.0 5.99 6.22 5.8 35.6 30 June 2015 58.9 48.1 42.0 6.22 8.84 4.8 56.8 30 June 2016 78.6 50.3 43.0 8.84 9.11 4.7 71.3 1 EBIT and EPS are presented before significant one-off items. 2 The DPS presented does not include special dividends. The following special dividends have been paid in the five-year period: 35 cents paid on 16 August 2012, 10 cents paid on 6 March 2013 and 10 cents paid on 3 September 2013. 6. Service agreements Remuneration and other terms of employment for Executives are formalised in a service agreement. The essential terms of the Managing Director and Senior Executives’ contracts are shown below: Name J P Ling Senior Executives Notice periods/termination payment • Unlimited in term. • A notice period of six months by either party applies, except in the case of termination by the Company for cause. • On termination, Mr Ling is entitled to receive his statutory entitlements of accrued annual and long service leave, together with superannuation benefits. • Unlimited in term. • One or three months’ notice by either party (or payment in lieu), except as noted below. • On termination, Senior Executives are entitled to receive their statutory entitlements of accrued annual and long service leave, together with superannuation benefits. • Mr Cooper is employed under a contract entered into in September 1996. That contract provides for 12 months’ notice of termination by either party. Accordingly, if the employment were to be terminated without due notice, Mr Cooper would be entitled to a termination payment of 12 months’ salary package. Apart from Mr Cooper, no current Senior Executive contract includes termination benefits additional to the notice period and statutory entitlements described above. • 7. Non-Executive Directors’ remuneration Non-Executive Directors’ fees are not ‘at risk’, to reflect the nature of their responsibilities. Remuneration policy Non-Executive Director fees recognise the demands made on, and responsibilities of, Non-Executive Directors in performing their roles. Non-Executive Directors receive a base fee and a fee for chairing a Board Committee. The Chairman of the Board receives no extra remuneration for chairing committees. Fees payable to Non-Executive Directors are determined within the maximum aggregate amount that is approved by shareholders. The current maximum aggregate fee amount is $1,000,000, approved by shareholders at the 2013 Annual General Meeting. In determining the level of fees, external professional advice and available data on fees payable to non-executive directors of similar sized companies are taken into account. The Board, through its Remuneration Committee, will continue to review its approach to Non-Executive Director remuneration to ensure it remains in line with general industry practice and principles of good corporate governance. Non-Executive Directors do not receive bonuses or any other incentive payments, and are not eligible to participate in any of the Executive or employee share acquisition plans established by the Company. 35 Remuneration Report Fees Board and Committee fees are set with reference to advice from external advisers and market data, with regard to factors such as the responsibilities and risks associated with the role. The fees paid to Non-Executive Directors in the year ended 30 June 2016 are set out in the table below: Board Audit, Risk & Com pliance Com m ittee Rem uneration Com m ittee Nom inations Com m ittee Chairman of 263,938 10,000 10,000 Members of 105,575 Nil Nil Nil Nil In accordance with rule 36 of the Constitution, Directors are permitted additional fees for special services or exertions. No such fees were paid during the year. Directors are also entitled to be reimbursed for all business-related expenses, including travel on Company business, as may be incurred in the discharge of their duties. Equity participation Non-Executive Directors do not receive shares or options as part of their remuneration, and there is no provision for Non-Executive Directors to convert a percentage of their prospective fees into GUD shares. Nevertheless, all Directors hold shares, either directly or indirectly, in the Company. Details of Directors’ shareholdings may be found earlier in this Report. Superannuation The Company pays superannuation in line with statutory requirements to eligible Non-Executive Directors. Remuneration Details of the nature and amount of each element of the remuneration of Non-Executive Directors for the year ended 30 June 2016 are set out in the table below. Non-Executive Directors R M Herron Directors’ fees Superannuation 1 Year $ $ Total $ 2016 263,938 25,074 289,012 2015 256,250 23,750 280,000 A L Templeman-Jones 2016 105,944 10,065 116,009 P A F Hay M G Smith G A Billings 2015 - - - 2016 9,631 915 10,546 2015 112,500 10,450 122,950 2016 105,575 10,030 115,605 2015 102,500 9,500 112,000 2016 115,575 10,980 126,555 2015 112,500 10,450 122,950 D D Robinson 2016 105,575 10,030 115,605 2015 102,500 9,500 112,000 Total Rem uneration of Non-Executive Directors 2016 706,238 67,093 773,331 2015 686,250 63,650 749,900 1 Superannuation contributions on behalf of Non-Executive Directors to satisfy the Company’s obligations under applicable Superannuation Guarantee legislation. 36 Remuneration Report Loans to KMPs There were no loans to KMPs at 30 June 2016 (2015: nil). Other KMP transactions with the Group Wesfil Australia Pty Ltd leases its Sydney premises from an entity related to Terry Cooper, a Director of Wesfil Australia Pty Ltd on terms no less favourable than arm’s length commercial terms. Net rental expense was $436,000 excluding GST (2015: $411,000 excluding GST). Apart from the details disclosed in this Remuneration Report, no KMP has entered into a material contract with the company or entities in the Group since the end of the previous financial year and there were no material contracts involving a KMP's Interest at year end. A number of KMP, or their related parties, hold positions in other entities that result in them having control or significant influence over the financial or operating policies of those entities. A number of these entities transacted with the Company or its subsidiaries in the reporting period. The terms and conditions of the transactions with KMPs and their related parties were no more favourable than those available, or which might reasonably be expected to be available, on similar transactions to non-KMP related entities on an arms-length basis. From time to time, KMP of the Company or its subsidiaries, or their related parties, may purchase goods from the Group. These purchases are on the same terms and conditions as those entered into by other group employees or customers and are trivial or domestic in nature. 37 GUD Holdings Limited and subsidiaries Financial Statements Consolidated Income Statement ..................................................................................................................................... 39 Consolidated Statement of Comprehensive Income ....................................................................................................... 40 Consolidated Balance Sheet ............................................................................................................................................ 41 Consolidated Statement of Changes in Equity ................................................................................................................ 42 Consolidated Cash Flow Statement ................................................................................................................................ 43 1. Basis of preparation ............................................................................................................................................... 44 Results for the Year ......................................................................................................................................................... 46 2. Revenue .................................................................................................................................................................. 46 Expenses ................................................................................................................................................................. 46 3. 4. Net finance costs .................................................................................................................................................... 48 5. Earnings per share .................................................................................................................................................. 48 6. Auditors' remuneration .......................................................................................................................................... 49 7. Segment information.............................................................................................................................................. 49 Working Capital ............................................................................................................................................................... 52 Trade and other receivables ................................................................................................................................... 52 8. Inventories.............................................................................................................................................................. 53 9. 10. Other assets ............................................................................................................................................................ 54 11. Trade and other payables ....................................................................................................................................... 54 12. Employee benefits .................................................................................................................................................. 54 13. Restructuring provisions ......................................................................................................................................... 55 14. Warranty provisions ............................................................................................................................................... 56 Tangible and Intangible Assets ........................................................................................................................................ 57 15. Goodwill ................................................................................................................................................................. 57 16. Other intangible assets ........................................................................................................................................... 57 17. Property, plant and equipment .............................................................................................................................. 59 18. Impairment testing ................................................................................................................................................. 60 19. Commitments for expenditure ............................................................................................................................... 61 Capital Structure and Financing Costs ............................................................................................................................. 63 20. Cash and cash equivalents ...................................................................................................................................... 63 21. Borrowings ............................................................................................................................................................. 64 22. Derivatives .............................................................................................................................................................. 65 23. Other financial instruments .................................................................................................................................... 67 24. Financial instruments ............................................................................................................................................. 68 25. Financial risk management ..................................................................................................................................... 72 26. Share Capital........................................................................................................................................................... 76 27. Dividends ................................................................................................................................................................ 76 28. Reserves ................................................................................................................................................................. 77 Taxation .......................................................................................................................................................................... 79 29. Current tax.............................................................................................................................................................. 79 30. Deferred tax ........................................................................................................................................................... 80 Business Combinations ................................................................................................................................................... 83 31. Disposal group held for sale ................................................................................................................................... 83 Investment in subsidiaries ...................................................................................................................................... 85 32. 33. Non-controlling interests ........................................................................................................................................ 90 34. Equity-accounted investees .................................................................................................................................... 90 Other Notes ..................................................................................................................................................................... 92 35. Superannuation commitments ............................................................................................................................... 92 36. Key management personnel ................................................................................................................................... 92 37. Related parties ....................................................................................................................................................... 93 38. Parent entity disclosures ........................................................................................................................................ 93 39. Contingent liabilities ............................................................................................................................................... 94 40. Subsequent events ................................................................................................................................................. 94 Directors’ Declaration ..................................................................................................................................................... 95 Lead Auditor’s Independence Declaration ...................................................................................................................... 96 Independent Auditor’s Report ........................................................................................................................................ 97 38 GUD Holdings Limited and subsidiaries Consolidated Income Statement For the year ended 30 June 2016 Revenue Cost of goods sold Gross Profit Other income Marketing and selling Product development and sourcing Logistics expenses and outward freight Administration Other expenses: Loss on revaluation of contingent consideration payable Impairment Other Results from operating activities Net finance expense Profit before tax Income tax expense Profit from continuing operations, net of income tax Profit / (loss) from discontinued operation Profit from operations, net of income tax Non-controlling interests Profit attributable to owners of the Company Earnings per share from continuing operations: Basic earnings per share (cents per share) Diluted earnings per share (cents per share) Underlying basic earnings per share (cents per share) Underlying diluted earnings per share (cents per share) Earnings per share from discontinuing operations: Basic earnings per share (cents per share) Diluted earnings per share (cents per share) Underlying basic earnings per share (cents per share) Underlying diluted earnings per share (cents per share) 2016 $'000 595,513 (356,709) 238,804 829 (75,328) (8,591) (41,482) (34,963) (10,555) (76,697) (656) (8,639) (14,649) (23,288) (17,639) (40,927) (1,794) (42,721) (318) (43,039) (48.0) (47.4) 52.0 51.4 (2.5) (2.4) (1.7) (1.7) Note 2 2 3 3, 7 3, 7 4 29 31 5 5 5 5 5 5 5 5 ^ Prior year comparatives have been restated to be consistent with disclosures for 30 June 2016. The notes on pages 44 to 94 are an integral part of these consolidated financial statements. 2015^ Restated $'000 497,095 (310,749) 186,346 763 (54,125) (8,453) (38,286) (32,563) - - (3,728) 49,954 (7,152) 42,802 (11,686) 31,116 4,177 35,293 (2,048) 33,245 43.0 42.4 45.2 44.6 2.9 2.9 2.9 2.9 39 GUD Holdings Limited and subsidiaries Consolidated Statement of Comprehensive Income For the year ended 30 June 2016 2016 $'000 2015^ Restated $'000 (40,927) 31,116 1,110 2,362 (10,551) 1,399 355 2,350 (2,975) 1,974 14,075 (8,686) 1,532 2,929 (3,953) 7,871 (43,902) 38,987 (1,794) (45,696) (318) (46,014) 4,177 43,164 (2,048) 41,116 Profit for the year Other comprehensive income Items that may be reclassified subsequently to profit and loss Exchange differences on translating results of foreign operations Fair value adjustments recognised in the hedging reserve Net change in fair value of cash flow hedges transferred to inventory Equity settled share based payment transactions Revaluation of contingent receivable Income tax on items that may be reclassified subsequently to profit or loss Other comprehensive income for the year, net of income tax Total comprehensive income from continuing operations, net of income tax Profit / (loss) from discontinued operation, net of income tax Total comprehensive income attributable to owners of the Company Non-controlling interests Total comprehensive income 28 28 28 28 29 29 31 33 ^ Prior year comparatives have been restated to be consistent with disclosures for 30 June 2016. All of the above items may subsequently be recognised in the Income Statement. The notes on pages 44 to 94 are an integral part of these consolidated financial statements. 40 GUD Holdings Limited and subsidiaries Consolidated Balance Sheet As at 30 June 2016 Current assets Cash and cash equivalents Trade and other receivables Inventories Derivative assets Other financial assets Current tax receivable Other assets Assets held for sale Total current assets Non-current assets Goodwill Other intangible assets Property, plant and equipment Equity accounted investees Derivative assets Other financial assets Deferred tax assets Investments Total non-current assets Total assets Current liabilities Trade and other payables Employee benefits Restructuring provisions Warranty provisions Other provisions Borrowings Derivative liabilities Other financial liabilities Current tax payable Liabilities held for sale Total current liabilities Non-current liabilities Employee benefits Restructuring provisions Borrowings Derivative liabilities Deferred tax liabilities Other non-current liabilities Total non-current liabilities Total liabilities Net assets Equity Share Capital Reserves Retained earnings Total equity attributable to owners of the Company Non-controlling interests Total equity Note 20 8 9 22 23 10 31 15 16 17 34 22 23 30 11 12 13 14 21 22 23 31 12 13 21 22 30 26 28 33 The notes on pages 44 to 94 are an integral part of these consolidated financial statements. 2016 $'000 18,235 118,813 108,872 144 2,358 515 5,488 88,927 343,352 110,394 119,478 33,295 - 62 2,359 9,215 11 274,814 618,166 81,291 13,741 37 731 16 18,550 3,545 19,367 9,342 22,128 2015 $'000 42,947 108,579 125,018 4,870 16,519 110 9,536 - 307,579 106,787 61,093 34,042 2,329 - 2,596 907 10 207,764 515,343 93,690 13,734 230 1,921 107 22,188 796 - 3,025 - 168,748 135,691 2,039 - 167,483 3,649 1,515 91 174,777 343,525 274,641 286,160 1,910 (44,940) 243,130 31,511 274,641 1,484 46 20,168 804 935 57 23,494 159,185 356,158 286,160 5,133 33,672 324,965 31,193 356,158 41 GUD Holdings Limited and subsidiaries Consolidated Statement of Changes in Equity For the year ended 30 June 2016 Balance at the beginning of the period Comprehensive Income Profit for the period attributable to owners of the Company Other Comprehensive Income attributable to owners of the Company Equity settled share based payment transactions Total Comprehensive Income attributable to owners of the Company Transactions with owners recognised in equity Issue of shares Issue costs Dividends paid Total transactions with owners Non-controlling interests Recognition of non-controlling interests without a change in control Profit for the period attributable to non-controlling interests Total changes in ownership interests Note 2016 $'000 2015 $'000 356,158 209,275 28 26 26 27 33 33 (43,039) (4,374) 1,399 (46,014) - - (35,821) (35,821) - 318 318 33,245 6,339 1,532 41,116 105,346 (3,815) (26,957) 74,574 29,145 2,048 31,193 Balance at the end of the period 274,641 356,158 The amounts recognised directly in equity are net of tax. The notes on pages 44 to 94 are an integral part of these consolidated financial statements. 42 GUD Holdings Limited and subsidiaries Consolidated Cash Flow Statement For the year ended 30 June 2016 Cash flows from operating activities Receipts from customers Payments to suppliers and employees Income taxes paid Net cash provided by operating activities Cash flows from investing activities Payments for intangible assets and product development costs Payments for property, plant and equipment Proceeds from sale of property, plant and equipment Acquisition of controlled entity, net of cash acquired Proceeds from sale of investments Acquisition of equity accounted investee Net cash (used in)/provided by investing activities Cash flows from financing activities Net proceeds from issue of shares Net proceeds / (repayment) of borrowings Interest received Interest paid Dividends paid Net cash used in financing activities Net increase in cash held Cash at the beginning of the year Effects of exchange rate changes on the balance of cash held in foreign currencies Cash at the end of the year Note 2016 $'000 2015 $'000 771,933 (692,415) (9,326) 70,192 (3,345) (7,483) 21 (194,323) 16,224 - (188,906) - 145,538 730 (13,486) (35,821) 96,961 (21,753) 42,947 (1,233) 19,961 645,787 (609,334) (6,304) 30,149 (540) (10,350) 122 - 16,205 (3,402) 2,035 101,531 (79,388) 227 (7,788) (26,957) (12,375) 19,809 23,301 (163) 42,947 20 16 17 32 34 26 27 20 The notes on pages 44 to 94 are an integral part of these consolidated financial statements. 43 GUD Holdings Limited and subsidiaries 1. Basis of preparation This section sets out the Group’s accounting policies that relate to the financial statements as a whole. Where an accounting policy is specific to one note, the policy is described in the note to which it relates. Reporting Entity GUD Holdings Limited (the ‘Company’) is a for profit company domiciled in Australia. The consolidated financial statements of the Company as at and for the year ended 30 June 2016 comprise the Company and its subsidiaries (together referred to as the ‘Group’). The Group is primarily involved in manufacture and importation, distribution and sale of cleaning products, household appliances, warehouse racking, industrial storage solutions, office storage products, automotive products, locking devices, pumps, pool and spa systems, and water pressure systems, with operations in Australia, New Zealand, France, Spain, China, Malaysia and Hong Kong (Note 7). The consolidated annual financial statements of the Group as at and for the year ended 30 June 2016 are available on request from the Company’s registered office at 29 Taras Avenue, Altona North, Victoria, 3025 or at www.gud.com.au. Basis of Accounting The consolidated financial statements are general purpose financial statements which have been prepared in accordance with the Australian Accounting Standards adopted by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001. The consolidated financial statements comply with International Financial Reporting Standards (IFRS) adopted by the International Accounting Standards Board (IASB). The consolidated financial statements were authorised for issue by the Directors on 27 July 2016. Rounding off The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191 and in accordance with the Rounding Instrument, amounts in the financial statements have been rounded off to the nearest thousand dollars, unless otherwise stated. Basis of measurement The consolidated financial statements have been prepared on the historical cost basis, except for the following items which have been measured at fair value:  Derivatives (Note 22)  Other financial instruments (Note23) Use of estimates and judgements In preparing these consolidated financial statements, management has made judgements, estimates and assumptions that affect the application of the Group’s accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised prospectively. Information about estimation, uncertainty and critical judgements in applying accounting policies that have the most significant effects on the amounts recognised in the consolidated financial statements is included in the following notes:  Goodwill (Note 15) and other intangible assets (Notes 16, 32)    Other financial instruments – contingent consideration (Note 24) Financial instruments (Note 24) Inventories (Note 9) 44 GUD Holdings Limited and subsidiaries 1. Basis of preparation (continued) Foreign currency Functional and presentation currency These consolidated financial statements are presented in Australian dollars which is the Company’s functional currency and the functional currency of the majority of the Group. The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191 and in accordance with that Rounding Instrument, all financial information presented in Australian dollars has been rounded to the nearest thousand unless otherwise stated. Foreign currency transactions Transactions in foreign currency are translated to the respective functional currencies of Group companies at the exchange rate at the date of the transaction. Monetary assets and liabilities denominated in foreign currency are translated to the functional currency at the exchange rates prevailing at the reporting date. Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated to the functional currency at the exchange rate when the fair value was determined. Foreign currency differences are generally recognised in profit or loss. Non-monetary items that are measured based on historical cost in a foreign currency are not translated. However, foreign currency differences arising from the translation of the following items are recognised in other comprehensive income:  Qualifying cash flow hedges to the extent the hedges are effective (Note 28), and  Exchange differences on translating foreign operations (Note 28). New standards and interpretations adopted in the year A number of new standards and amendments to standards are effective for annual periods beginning after 1 July 2015 and earlier application is permitted. However the Group has not applied the following new or amended standards in preparing these consolidated financial statements. New or amended standards IFRS 9 Financial instruments IFRS 15 Revenue from Contracts with Customers IFRS 16 Leases Summary of the requirement IFRS 9, published in July 2014, replaces the existing guidance in IAS 39 Financial Instruments; Recognition and Measurement. IFRS 9 includes revised guidance on the classification and measurement of financial instruments, including a new expected credit loss model for calculating impairment on financial assets, and the new general hedge accounting requirements. It also carries forward the guidance on recognition and de- recognition of financial instruments from IAS 39. IFRS 9 is effective for annual reporting periods beginning on or after 1 January 2018, with early adoption permitted. IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaces existing revenue recognition guidance, including IAS 18 Revenue, IAS 11 Construction Contracts and IFRIC 13 Customer Loyalty Programmes. IFRS 15 is effective for annual reporting periods beginning on or after 1 January 2017, with early adoption permitted. The standard removes the classification of leases as either operating leases or finance leases for the lessee, effectively treating all leases as finance leases. This will effectively move all off-balance sheet operating leases onto the balance sheet that is similar to current finance lease accounting. The Group is currently assessing the impact of this standard. The application date of this standard is 1 January 2019. Possible impact on consolidated financial statements The Group is assessing the potential impact on its consolidated financial statements resulting from the application of IFRS 9. The Group is assessing the potential impact on its consolidated financial statements resulting from the application of IFRS 15. The Group is assessing the potential impact on its consolidated financial statements resulting from the application of IFRS 16. The Group does not plan to adopt these standards early. 45 GUD Holdings Limited and subsidiaries Results for the Year This section focuses on the Group’s performance. Disclosures in this section include analyses of the Group’s profit before tax by reference to the activities performed by the Group and analysis of key revenues and operating costs, segmental information, net finance costs and earnings per share. Underlying earnings before interest, tax (“EBIT”) and before exceptional items remain the Group’s key profit indicators. This reflects how the business is managed and how the Directors assess the performance of the Group. 2. Revenue Accounting policies Sale of goods Revenue is recognised when the significant risks and rewards of ownership have been transferred to the customer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods, and the amount of the revenue can be measured reliably. Revenue is measured net of returns and allowances, trade discounts and volume rebates. Contract revenue Contract revenue includes the initial amount agreed in the contract plus any variations in contract work to the extent that it is probable that they will result in revenue and can be measured reliably. When the outcome of a contract can be estimated reliably, contract revenue is recognised in the income statement in proportion to the stage of completion of the contract. Otherwise, contract revenue is recognised only to the extent of contract costs incurred that are likely to become recoverable. Contract expenses are recognised as incurred unless they create an asset related to future contract activity. An expected loss on a contract is recognised immediately in profit or loss. Dividend income Dividend income is not part of finance income and is recognised when the right to receive payment is established. Goods and services tax Revenues are recognised net of the amount of goods and services tax (GST). This table summarises revenue from continuing operations: Revenue Sale of goods Total revenue Other income Other 2016 $'000 595,513 595,513 829 829 2015^ Restated $'000 497,095 497,095 763 763 ^ Prior year comparatives have been restated to be consistent with disclosures for 30 June 2016. 3. Expenses Accounting policies Depreciation Depreciation is charged to the income statement to reflect annual wear and tear and the reduced value of the asset over time. Depreciation is provided on property, plant and equipment, including freehold buildings but excluding land. Depreciation is calculated on a straight line basis over the estimated useful life of each asset to its estimated residual value. Leasehold improvements are depreciated over the period of the lease or estimated useful life, whichever is the shorter, using the straight line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each annual reporting period. The following estimated useful lives for current and prior periods used in the calculation of depreciation:   Equipment under finance lease 3 to 12 years Plant and equipment 3 to 12 years 46 GUD Holdings Limited and subsidiaries 3. Expenses (continued) Amortisation The value of intangible assets, with the exception of goodwill, and indefinite life intangible assets reduces over the number of years the Group expects to use the asset, via an amortisation charge. Amortisation is recognised in the income statement over the following number of years: Patents, licences and distribution rights Customer relationships Software Operating leases 3 to 5 years 5 to 15 years 5 to 7 years Operating lease payments are recognised as an expense on a straight-line basis over the lease term. Goods and services tax Expenses are recognised net of the amount of goods and services tax (GST), except where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as part of an item of expense. Expenses by nature This table summarises expenses by nature from continuing operations: Profit before income tax has been arrived at after charging the following expenses: Write-Up/(write-back) to value of inventory obsolescence provision Loss/(gain) on sale of plant and equipment Operating lease rental expense: Minimum lease payments Net foreign exchange (gain)/loss Employee benefits: Wages and salaries (including on-costs) Contributions to defined contribution plans Movements in provisions for employee benefits Equity settled share based payment expense Depreciation and amortisation: Amortisation and impairment of product development costs Amortisation of other intangibles Depreciation of plant and equipment Depreciation of leased plant and equipment Total depreciation and amortisation Product development and sourcing costs Non-underlying costs: Transaction expenses Impairment of goodwill Impairment of brand names Impairment of product development Impairment of inventory Loss on revaluation of contingent consideration Note 9 17 26 16 16 17 17 32 15 16 16 9 Total non-underlying costs ^ Prior year comparatives have been restated to be consistent with disclosures for 30 June 2016. 2016 $'000 1,034 98 12,400 (1,058) 84,518 5,652 117 1,221 745 707 6,016 19 707 8,591 - 59,448 10,332 1,917 5,000 10,555 87,252 2015^ Restated $'000 353 2,442 10,894 (2,454) 74,171 3,726 (1,434) 1,149 658 1,690 4,362 11 6,721 8,453 1,674 - - - - - 1,674 47 GUD Holdings Limited and subsidiaries 4. Net finance costs Accounting policies Finance income Finance income is comprised of interest income, fair value gains on interest rate hedging instruments and gains on disposals of available for sale financial assets. Interest income is recognised on a time proportionate basis that takes into account the effective yield on the financial asset. Finance costs Finance costs are classified as expenses consistent with the balance sheet classification of the related debt or equity instruments. Finance costs are comprised of interest expense on borrowings and fair value losses on interest rate hedging instruments through the income statement. Interest expense on borrowings is recognised on an effective interest basis. This table summarises net finance costs from continuing operations: Finance costs: Interest income Interest expense Financial assets / liabilities measured at fair value through the profit and loss Net foreign exchange (gain) / loss Unwinding of discount on contingent consideration payable Net finance costs ^ Prior year comparatives have been restated to be consistent with disclosures for 30 June 2016. 2016 $'000 (696) 13,033 889 622 801 14,649 2015^ Restated $'000 (187) 7,339 - - - 7,152 The ineffective portion of cash flow hedges that is recognised in the income statement is nil (2015: nil). 5. Earnings per share Earnings per share ('EPS') is the amount of profit attributable to each share. Basic EPS is calculated on the Group profit for the year attributable to equity shareholders divided by the weighted average number of shares on issue during the year. Diluted EPS reflects any commitments the Group has to issue shares in the future, such as issued upon vesting of performance rights. Underlying EPS is EPS adjusted in order to more accurately show the underlying business performance of the Group and reflect how the business is managed and measured. Non-underlying items include acquisition related costs (professional fees, financing costs and contingent payments) and impairment of intangible assets. Profit for the period Add back: acquisition, restructuring, impairment costs and loss on contingent consideration payable Tax effect on above items Underlying profit for the period Weighted average number of ordinary shares used as the denominator for basic EPS Effect of balance of performance rights outstanding at 30 June 2015 Weighted average number of ordinary shares used as the denominator for diluted EPS EPS Basic EPS Diluted EPS Underlying EPS Basic underlying EPS Diluted underlying EPS Continuing operations 2016 2015 $'000 $'000 Discontinuing operations 2015 $'000 2016 $'000 (40,927) 31,116 (2,112) 2,129 87,252 (1,957) 44,368 Number 1,674 (109) 32,681 Number 966 (288) (1,434) Number - - 2,129 Number 85,290,956 72,326,914 85,290,956 72,326,914 1,028,185 1,004,969 1,028,185 1,004,969 86,319,141 73,331,883 86,319,141 73,331,883 Cents per share Cents per share Cents per share Cents per share (48.0) (47.4) 43.0 42.4 (2.5) (2.4) 2.9 2.9 Cents per share Cents per share Cents per share Cents per share 52.0 51.4 45.2 44.6 (1.7) (1.7) 2.9 2.9 48 GUD Holdings Limited and subsidiaries 6. Auditors' remuneration This table summarises auditors’ remuneration incurred in relation to continuing operations: Audit and review services: The auditor of GUD Holdings Limited - audit and review of financial reports Other auditors: - audit and review of financial reports Other services: The auditor of GUD Holdings Limited - in relation to other assurance, advisory and taxation services - in relation to taxation and due diligence services 1 Other auditors: - in relation to other assurance, advisory and taxation services 2016 $ 2015 $ 733,632 639,264 21,602 755,234 22,413 661,677 372,313 - 15,000 387,313 313,193 505,570 - 818,763 1 In relation to services rendered in conjunction with the sale of 49% of Sunbeam ANZ (Note 33), acquisition of 49% of Jarden Asia (Note 34) and acquisition of Brown & Watson (Note 32). 7. Segment information Segment reporting is presented in respect of the Group’s business and geographical segments. The primary format business segments are reported based on the way information is reviewed by the Group’s Managing Director. Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate expenses, interest and tax, corporate borrowings, and deferred tax balances. Business segments The following summary describes the operations in each of the Group’s reportable segments: Oates Importer and distributor of cleaning products to retail and commercial customers Automotive (Ryco, Wesfil, Goss) Automotive and heavy duty filters for cars, trucks, agricultural and mining equipment, fuel pumps and associated products for the automotive after-market. Davey Pumps and pressure systems for household and farm water, water transfer pumps, swimming pool products, spa bath controllers and pumps and water purification equipment. Dexion Manufacturer and provider of industrial storage and automation solutions Lock Focus Manufacturer of disc tumbler locks for furniture, doors and safe locking systems. Sunbeam (discontinued operations) Importer and distributor of small electrical appliances Geographical segments The Group operates primarily in one geographical segment: Australasia. 49 GUD Holdings Limited and subsidiaries 7. Segment information (continued) Business segments Total segment revenue (external) Underlying EBITDA pre impairment costs Less: Depreciation Less: Amortisation and impairment of intangibles Underlying EBIT pre impairment costs Impairment costs1 Loss on revaluation of contingent consideration payable2 Restructuring Segment result (EBIT) Net finance costs Share of loss of equity-accounted investees Profit before tax Income tax expense Profit Non-controlling interest Profit attributable to owners of the Company Segment goodwill Segment brand names Segment customer relationships Segment other assets Segment assets Segment liabilities Segment capital expenditure For the year ended 30 June 2016 Oates $'000 Automotive $'000 Davey $'000 71,958 229,859 107,526 Dexion $'000 175,558 Lock Focus $'000 Unallocated $'000 Continuing operations $'000 Discontinued operations $'000 Total $'000 10,629 (17) 595,513 114,432 709,945 11,030 (793) (42) 10,195 - - - 10,195 (15) - 10,180 5,166 8,900 - 28,522 42,588 10,857 932 68,195 (1,523) - 66,672 - - - 66,672 (1,384) - 65,288 13,368 (1,244) (65) 12,059 (1,000) - - 11,059 (309) - (588) (1,919) (1,287) (3,794) (75,697) - - (79,491) (679) - 10,750 (80,170) 64,287 99,500 4,441 112,931 281,159 32,629 1,826 35,641 3,215 - 61,293 100,149 16,734 1,409 - - - 95,553 95,553 52,138 2,194 1,187 (545) (10) 632 - - - 632 (10) - 622 5,300 - - 6,426 11,726 1,582 444 (7,092) (11) (48) (7,151) - (10,555) - (17,706) (12,252) - (29,958) - - - (1,936) (1,936) 207,457 2 86,100 (6,035) (1,452) 78,613 (76,697) (10,555) - (8,639) (14,649) - (23,288) (17,639) (40,927) - (40,927) 110,394 111,615 4,441 302,789 529,239 321,397 6,807 5,718 (1,413) (2,103) 2,202 - - (966) 1,236 (419) (2,329) (1,512) (282) (1,794) (318) (2,112) - 25,402 - 63,525 88,927 22,128 4,035 91,818 (7,448) (3,555) 80,815 (76,697) (10,555) (966) (7,403) (15,068) (2,329) (24,800) (17,921) (42,721) (318) (43,039) 110,394 137,017 4,441 366,314 618,166 343,525 10,824 1 2 Impairment costs relate to costs recognised in profit or loss attributable to impairment of Dexion goodwill ($59.4 million, Note 15), impairment of Dexion brand names ($10.3 million, Note 16), impairment of Dexion inventory ($4 million, Note 9) , impairment of Dexion product development costs ($1.9 million) and impairment of Davey inventory ($1 million, Note 9). Loss on contingent consideration payable relates to loss recognised on earn-out payable for the acquisition of Brown & Watson (Note 32) 50 GUD Holdings Limited and subsidiaries 7. Segment information (continued) Business segments Total segment revenue (external) Underlying EBITDA pre transaction costs Less: Depreciation Less: Amortisation and impairment of intangibles Underlying EBIT pre transaction costs Transaction costs2 Segment result (EBIT) Net finance costs Share of loss of equity-accounted investees Profit before tax Income tax expense Profit Non-controlling interest Profit attributable to owners of the Company Segment goodwill Segment brand names Segment other assets Segment assets Segment liabilities Segment capital expenditure For the year ended 30 June 2015 Automotive $'000 Davey $'000 101,446 102,623 Dexion $'000 212,180 Lock Focus $'000 Unallocated $'000 Continuing operations $'000 Discontinued operations $'000 Total $'000 10,678 (45) 497,095 114,420 611,515 Oates $'000 70,213 12,205 (642) (57) 11,506 - 32,850 (546) - 32,304 - 10,939 (1,371) (49) 9,519 - 9,519 - - 8,788 (1,238) (2,194) 5,356 - 5,356 (451) - 4,905 1,366 (570) - 796 - 796 - - (7,799) (6) (48) (7,853) (1,674) (9,527) (6,701) - 796 (16,228) 11,506 32,304 - - - - 11,506 32,304 9,519 58,349 (4,373) (2,348) 51,628 (1,674) 49,954 (7,152) - 42,802 (11,686) 31,116 - 31,116 106,787 23,301 290,533 420,621 131,493 11,665 13,037 (2,269) (3,450) 7,318 - 7,318 (409) (1,073) 5,836 (1,659) 4,177 (2,048) 2,129 - 25,062 69,660 94,722 27,692 5,374 71,386 (6,642) (5,798) 58,946 (1,674) 57,272 (7,561) (1,073) 48,638 (13,345) 35,293 (2,048) 33,245 106,787 48,363 360,193 515,343 159,185 17,039 51 5,166 8,900 28,537 42,603 10,740 978 1,497 1,000 51,921 54,418 14,740 572 35,315 3,215 65,296 103,826 19,507 1,461 59,509 10,186 118,830 188,525 60,716 8,045 5,300 - 6,578 11,878 1,658 605 - - 19,371 19,371 24,132 4 2 Transaction costs relate to costs recognised in profit or loss attributable to the sale of 49% of Sunbeam ANZ and acquisition of Brown & Watson. GUD Holdings Limited and subsidiaries Working Capital Working capital represents the assets and liabilities the Group generates through its trading activity. The Group therefore defines working capital as inventory, trade and other receivables, trade and other payables and provisions. Careful management of working capital ensures that the Group can meet its trading and financing obligations within its ordinary operating cycle. This section provides further information regarding working capital management and analysis of the elements of working capital. 8. Trade and other receivables Accounting policies Trade receivables Trade and other receivables are non-derivative financial instruments that are initially recognised at fair value plus any directly attributable costs. Subsequent to initial recognition, they are measured at amortised cost using the effective interest method, less identified impairment. Goods and services tax Trade receivables are recognised inclusive of the amount of goods and services tax (GST) which is payable to taxation authorities. The net amount of GST payable to the taxation authority is included as part of payables. This table summarises trade and other receivables related to continuing operations at 30 June 2016 and all operations at 30 June 2015: Current Trade receivables Less: Allowance for doubtful debts Net trade receivables Accrued revenue Other receivables 2016 $'000 110,316 (829) 109,487 9,326 9,326 118,813 2015 $'000 89,262 (879) 88,383 20,196 20,196 108,579 An allowance has been made for estimated irrecoverable amounts from the sale of goods and services, determined by a specific review of debtors. The movement in the allowance for doubtful debts was recognised in the income statement in the current financial year. Movement in allowance for doubtful debts Balance at the beginning of the year Acquisitions through business combinations Doubtful debts recognised Amounts written off as uncollectible Balance at the end of the year 2016 $'000 (879) (101) (19) 170 (829) 2015 $'000 (807) - (157) 85 (879) Amounts are written off as uncollectible only after it is determined that the debts are no longer collectible either by notification from an administrator to the debtor or because the debtor has demonstrated an inability to pay. Where applicable, insurance proceeds are received to partially mitigate the loss and the net uncollectible amount is reflected above. 52 GUD Holdings Limited and subsidiaries 8. Trade and other receivables (continued) Receivables that are past due but not impaired are those receivables the Directors believe to be fully recoverable and as a result, have not recognised any amount in the doubtful debt provision for them. 2016 Ageing of trade receivables Not past due Past due 1 - 60 days Past due 61 - 120 days Past due 121 - 365 days Past due more than one year Total trade receivables 2015 Ageing of trade receivables Not past due Past due 1 - 60 days Past due 61 - 120 days Past due 121 - 365 days Past due more than one year Total trade receivables Gross $'000 71,039 29,698 5,847 3,329 403 110,316 Gross $'000 71,429 12,798 2,673 2,011 351 89,262 Impairment $'000 (169) (137) (139) (271) (113) (829) Impairment $'000 (213) (82) (89) (144) (351) (879) Net $'000 70,870 29,561 5,708 3,058 290 109,487 Net $'000 71,216 12,716 2,584 1,867 - 88,383 Additional information relating to credit risk is included in Note 25. 9. Inventories Accounting policies Inventories Inventories are valued at the lower of cost and net realisable value. Costs, including an appropriate portion of fixed and variable overhead expenses, are assigned to inventory by the method most appropriate to each particular class of inventory, with the majority being valued on a weighted average basis. Net realisable value represents the estimated selling price less all estimated costs of completion and selling costs. Goods and services tax Non-financial assets such as inventories are recognised net of the amount of goods and services tax (GST), except where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as part of the cost of acquisition of the asset. This table summarises inventories related to continuing operations at 30 June 2016 and all operations at 30 June 2015: Current Raw materials and stores Work in progress Finished goods Total inventory 2016 $'000 16,588 2,161 90,123 108,872 2015 $'000 17,033 2,848 105,137 125,018 Inventories disclosed above are net of the provision for obsolescence. Increases or write-backs of the provision are recognised in cost of goods sold (Note 3). 53 GUD Holdings Limited and subsidiaries 10. Other assets This table summarises other assets related to continuing operations at 30 June 2016 and all operations at 30 June 2015: Current Prepayments Other 11. Trade and other payables Accounting policies Payables 2016 $'000 3,868 1,620 5,488 2015 $'000 6,247 3,289 9,536 Trade payables and other accounts payable are non-derivative financial instruments measured at cost. Goods and services tax Trade payables are recognised inclusive of the amount of goods and services tax (GST) which is recoverable from taxation authorities. The net amount of GST recoverable from the taxation authority is included as part of receivables. This table summarises trade and other payables related to continuing operations at 30 June 2016 and all operations at 30 June 2015: Current Accrued expenses Trade payables Deferred income Trade payables and accrued expenses No interest is incurred on trade payables. 12. Employee benefits Accounting policies Employee benefits 2016 $'000 17,710 58,090 5,491 81,291 2015 $'000 18,190 72,266 3,234 93,690 Provision is made for benefits accruing to employees in respect of wages and salaries, annual leave, long service leave, and sick leave when it is probable that settlement will be required and they are capable of being measured reliably. Provisions made in respect of employee benefits expected to be settled within 12 months, are measured at their nominal values using the remuneration rate expected to apply at the time of settlement and including on-costs associated with employment. Provisions made in respect of employee benefits which are not expected to be settled within 12 months are measured as the present value of the estimated future cash outflows to be made by the Group in respect of services provided by employees up to reporting date. Defined contribution plans Contributions to defined contribution superannuation plans are expensed when incurred. 54 GUD Holdings Limited and subsidiaries 12. Employee benefits (continued) This table summarises employee provisions related to continuing operations at 30 June 2016 and all operations at 30 June 2015: Current Non-current Accrued wages and salaries Accrued wages and salaries are included in accrued expenses in Note 11. 13. Restructuring provisions Accounting policies Restructuring 2016 $'000 13,741 2,039 15,780 945 16,725 2015 $'000 13,734 1,484 15,218 866 16,084 A provision for restructuring is recognised when the Group has developed a detailed formal plan for the restructuring and has raised a valid expectation in those affected that it will carry out the restructuring by:   announcing its main features to those affected by it. starting to implement the plan; or Onerous contracts An onerous contract is considered to exist where the Group has a contract under which the unavoidable cost of meeting the contractual obligations exceed the economic benefits estimated to be received. Present obligations arising under onerous contracts are recognised as a provision to the extent that the present obligations exceed the economic benefits estimated to be received. When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that recovery will be received and the amount of the receivable can be measured reliably. This table summarises restructuring provisions related to continuing operations at 30 June 2016 and all operations at 30 June 2015: Current Non-current Carrying amount at beginning of year Provisions recognised Payments made during the year Net foreign currency difference arising on translation of foreign operations Carrying amount at end of year 2016 $'000 37 - 37 276 - (251) 12 37 2015 $'000 230 46 276 8,219 - (7,929) (14) 276 The payments made against the provision for restructuring represents the costs of redundancies and closures of manufacturing facilities. The balance represents the present value of the Directors’ best estimate of the costs required to complete the restructure. 55 GUD Holdings Limited and subsidiaries 14. Warranty provisions Accounting policy Warranties Provisions for warranty costs are recognised at the date of sale of the relevant products, at the Directors’ best estimate of the expenditure required to settle the Group’s liability. The provision for warranty claims represents the present value of the Directors' best estimate of the future sacrifice of economic benefits that will be required under the Group's warranty program. The estimate has been made on the basis of historical warranty trends and may vary as a result of new materials, altered manufacturing processes or other events affecting product quality. Warranty provisions are all current. This table summarises warranty provisions related to continuing operations at 30 June 2016 and all operations at 30 June 2015: Carrying amount at beginning of year Provisions recognised Payments made during the year Reclassification as liabilities held for sale Net foreign currency difference arising on translation of foreign operations Carrying amount at end of year 2016 $'000 1,921 2,502 (2,483) (1,216) 7 731 2015 $'000 2,028 9,853 (9,985) - 25 1,921 56 GUD Holdings Limited and subsidiaries Tangible and Intangible Assets The following section shows the physical tangible and non-physical intangible assets used by the Group to operate the business. Intangible assets include brands, customer relationships, patents, licences, software development, distribution rights and goodwill. This section explains the accounting policies applied and the specific judgements and estimates made by the Directors in arriving at the net book value of these assets. 15. Goodwill Accounting policies Goodwill Goodwill, representing the excess of the cost of acquisition over the fair value of the identifiable assets, liabilities and contingent liabilities acquired. Goodwill is recognised as an asset and not amortised, but tested for impairment annually and whenever there is an indication that the goodwill may be impaired. Any impairment is recognised immediately in the income statement and is not subsequently reversed. This table summarises employee provisions related to continuing operations: Gross carrying amount Balance at the beginning of the year Acquisitions through business combinations Impairment Net foreign currency difference arising on translation of financial statements of foreign operations Balance at the end of the year 16. Other intangible assets Accounting policies Product development costs 2016 $'000 106,787 62,791 (59,509) 325 110,394 2015 $'000 106,998 - - (211) 106,787 the technical feasibility of completing the intangible asset so that it will be available for use or sale; Expenditure on research activities is recognised as an expense in the income statement period in which it is incurred. Where no internally-generated intangible asset can be recognised, development expenditure is recognised as an expense in the income statement in the period as incurred. An intangible asset arising from development (or from the development phase of an internal project) is recognised if, and only if, all of the following are demonstrated:      the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and how the intangible asset will generate probable future economic benefits; the intention to complete the intangible asset and use or sell it; the ability to use or sell the intangible asset; the ability to measure reliably the expenditure attributable to the intangible asset during its development.  The expenditure capitalised includes the cost of materials, direct labour and overhead costs that are directly attributable to preparing the asset for its intended use. Product development assets are stated at cost less accumulated amortisation and impairment, and are amortised on a straight-line basis over their useful lives, which is up to a maximum of 3 years (Note 3). 57 GUD Holdings Limited and subsidiaries 16. Other intangible assets (continued) Brand names and trademarks Acquired brand names and trademarks are recorded at cost. The carrying value is tested annually for impairment as part of the annual testing of cash generating units (Note 18). Other intangible assets Other intangible assets that are acquired by the Group, which have finite lives, are measured at cost less accumulated amortisation (Note 3) and accumulated impairment losses. The carrying value is tested for impairment as part of the annual testing of cash generating units (Note 18). This table summarises other intangible assets related to continuing operations at 30 June 2016 and all operations at 30 June 2015: $'000 Gross carrying amount Balance at 30 June 2014 Product Development Costs Brand, Business Names & Trademarks Patents, Licences & Distribution Rights Software Customer Relationships Total 25,570 50,631 1,271 6,868 1,449 85,789 Additions from internal developments Additions Disposals Foreign currency movements 6,149 - (421) - - - - (382) Balance at 30 June 2015 31,298 50,249 - - (31) - 1,240 - - - (10) - (958) - 272 - 351 - (2,619) 335 (22,190) - 7,175 98,500 - - - - (25,062) 255 123,942 (16,693) (1,956) (1,105) (3,765) 300 (215) - (20,373) (745) 2,537 (1,917) 15,922 (319) - - - - 70 (1,886) - - (10,332) - - (109) (128) 8 - - (1,225) - 10 - 943 - - - 540 (79) 95 7,424 - - 76 (5) - - 49 7,544 (4,260) (1,422) - - (25) (5,707) (634) 5 - - - (66) - - - - 1,449 4,441 - - - - - - 5,890 6,149 540 (531) (287) 91,660 102,941 351 76 (2,634) 335 (48,210) 304 144,823 (1,108) (25,122) (268) - - - (5,583) 308 (215) 45 (1,376) (30,567) (73) - - - - - (1,452) 2,552 (12,249) 16,865 (319) (175) Additions from business combinations Additions from internal developments Additions Disposals Transfers Reclassification to assets held for sale Foreign currency movements Balance at 30 June 2016 Accumulated amortisation Balance at 30 June 2014 Amortisation expense Disposals Impairment Foreign currency movements Balance at 30 June 2015 Amortisation expense Disposals Impairment Reclassification to assets held for sale Transfers Foreign currency movements Balance at 30 June 2016 (4,895) (12,327) (272) (6,402) (1,449) (25,345) Carrying amount As at 30 June 2015 As at 30 June 2016 10,925 48,363 2,280 111,615 15 - 1,717 1,142 73 61,093 4,441 119,478 Amortisation is recognised as an expense in Note 3. 58 GUD Holdings Limited and subsidiaries 16. Other intangible assets (continued) The Group holds a number of brand names that are considered to have an indefinite useful life. The indefinite useful life reflects the Directors' view that these brands are assets that provide ongoing market access advantages for both new and existing product sales in the markets that the businesses operate. The current understanding of the industries and markets that the businesses operate in indicates that demand for products will continue in a sustainable manner, that changes in technology are not seen as a major factor impacting the brands future value, and, the brands have proven long lives in their respective markets. Refer to Note 7 for allocation of the carrying amount of brand names to segments. 17. Property, plant and equipment Accounting policies Property, plant and equipment Property, plant and equipment and leasehold improvements are stated at cost less accumulated depreciation (Note 3) and impairment. Cost includes expenditure that is directly attributable to the acquisition of the item. If there has been a technological change or decline in business performance the Directors review the value of the assets to ensure they have not fallen below their depreciated value. If an asset's value falls below its depreciated value an additional one-off impairment charge is made against profit. Leased assets Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. Assets held under finance leases are initially recognised at their fair value or, if lower, at amounts equal to the present value of the minimum lease payments, each determined at the inception of the lease. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly to the income statement. Subsequent to their initial recognition, finance leased assets are amortised over their estimated useful life. This table summarises the movement in gross carrying amount of property, plant and equipment: Equipment under finance lease at cost $'000 Plant and Equipment at cost $'000 Gross carrying amount Balance at 30 June 2014 Additions Disposals Foreign currency movements Balance at 30 June 2015 Additions from business combinations Additions Disposals Reclassification to assets held for sale Transfers Foreign currency movements Balance at 30 June 2016 100 - - - 100 - - - - - - 100 85,118 10,350 (5,725) 1,466 91,209 7,201 6,380 (1,694) (16,306) (335) (527) 85,928 Total $'000 85,218 10,350 (5,725) 1,466 91,309 7,201 6,380 (1,694) (16,306) (335) (527) 86,028 59 GUD Holdings Limited and subsidiaries 17. Property, plant and equipment (continued) This table summarises the movement in accumulated depreciation of property, plant and equipment: Equipment under finance lease at cost $'000 Plant and Equipment at cost $'000 Accumulated depreciation and amortisation Balance at 30 June 2014 Depreciation expense Disposals Foreign currency movements Balance at 30 June 2015 Additions from business combinations Depreciation expense Disposals Reclassification to assets held for sale Transfers Foreign currency movements Balance at 30 June 2016 Carrying amount As at 30 June 2015 As at 30 June 2016 Depreciation is recognised as an expense in Note 3. 18. Impairment testing Accounting policies (12) (11) - - (23) - (19) - - - - (42) 77 58 Total $'000 (54,087) (6,642) 3,447 15 (57,267) (4,553) (6,035) 1,348 13,396 319 59 (54,075) (6,631) 3,447 15 (57,244) (4,553) (6,016) 1,348 13,396 319 59 (52,691) (52,733) 33,965 33,237 34,042 33,295 Impairment of property, plant, equipment and intangible assets Tangible and intangible assets are tested for impairment annually and whenever there is an indication that the asset may be impaired. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Assets that cannot be tested individually are grouped together into cash-generating units (CGUs) which are the smallest group of assets that generate cash inflows from continuing use that are largely independent of the cash flows of other assets or CGUs. Subject to an operating segment ceiling test, CGUs to which goodwill has been allocated are aggregated so that the level at which impairment testing is performed reflects the lowest level at which goodwill is monitored for internal reporting purposes. Goodwill acquired in a business combination is allocated to groups of CGUs that are expected to benefit from the synergies of the combination. The recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (or CGU) is reduced to its recoverable amount. An impairment loss is recognised in the income statement immediately. Where an impairment loss subsequently reverses, the carrying amount of the asset (or CGU) is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or CGU) in prior years. A reversal of an impairment loss (other than goodwill) is recognised in the income statement immediately. Any impairment of goodwill is not subsequently reversed. 60 GUD Holdings Limited and subsidiaries 18. Impairment testing (continued) Results The Group’s CGUs comprise the operating segments disclosed in Note 7. All intangible assets with indefinite lives (goodwill and brand names), have been allocated for impairment testing purposes to CGUs (or groups of units). Each CGU's recoverable amount has been tested on the basis of its value in use. The value in use calculation uses assumptions including cash flow projections based on Board approved budgets for the 2017 (2015: based on 2016 budget) year and forecasts for a further 4 years which are extrapolated in perpetuity using a long term average growth rate consistent with the sectors in which the CGUs operate. The values assigned reflect past experience or, if appropriate, are consistent with external sources of information. The following summarises the pre-tax discount rates applied to cash flows of each CGU for the years ended 30 June 2015 and 2016: Automotive Lock Focus Oates Davey Dexion 13.2-14.0% 13.7-14.5% 12.9-13.7% 14.1-15.0% 15.2-16.0% As a result of Dexion CGU value in use calculation being less than the carrying value, an impairment was recognised as disclosed in Note 7. 19. Commitments for expenditure Plant & equipment Future contracted capital expenditure not provided for and payable are as follows: Within 1 year Between 1 and 5 years Later than 5 years Operating leases 2016 $'000 66 - - 66 Future non-cancellable operating lease commitments not provided for and payable are as follows: Within 1 year Between 1 and 5 years Later than 5 years 2016 Buildings $'000 9,773 26,957 18,338 55,068 2016 Other $'000 1,428 2,225 316 3,969 2015 Buildings $'000 10,890 18,218 4,441 33,549 2015 $'000 48 - - 48 2015 Other $'000 1,633 1,495 131 3,259 The Group leases a number of premises throughout Australia and New Zealand. The rental period of each individual lease agreement varies between one and ten years with renewal options ranging from one to five years. The majority of lease agreements are subject to rental adjustments in line with movements in the Consumer Price Index or market rentals. The leases do not include an option to purchase the leased assets at the expiry of the lease period. The Group leases the majority of its motor vehicles from external suppliers over a lease period of up to four years with monthly payments. At the end of the lease period there are a number of options available with respect to the motor vehicles, none of which include penalty charges. 61 GUD Holdings Limited and subsidiaries 19. Commitments for expenditure (continued) Finance leases The Group leases production plant and equipment under finance leases expiring from three to five years. At the end of the lease term, the Group has the option to purchase the equipment at the agreed residual amount or renegotiate an extension to the finance lease. Future non-cancellable finance lease commitments not provided for and payable are as follows: 2016 $'000 2015 $'000 Minimum future lease payments: Within 1 year Between 1 and 5 years Later than 5 years Total finance lease commitment Less: Future finance lease charges Finance lease liability Present value of minimum future lease payments: Within 1 year Between 1 and 5 years Later than 5 years 14 11 - 25 - 25 14 11 - 25 Lease liabilities provided for in the consolidated financial statements are disclosed in Note 21. 27 3 - 30 - 30 27 3 - 30 62 GUD Holdings Limited and subsidiaries Capital Structure and Financing Costs This section outlines how the Group manages its capital structure and related financing costs, including its balance sheet liquidity and access to capital markets. The directors determine the appropriate capital structure of the Group, how much is realised from shareholders and how much is borrowed from financial institutions to finance the Group’s activities now and in the future. This section details the interest income generated on the Group's cash and other financial assets and the interest expense incurred on borrowings and other financial assets and liabilities. The presentation of these net financing costs in this note reflects income and expenses according to the classification of the financial instruments. 20. Cash and cash equivalents Accounting policies Cash and cash equivalents Cash and cash equivalents comprise cash on hand, cash in banks and investments in money market instruments, net of outstanding bank overdrafts and non-derivative financial instruments. Bank overdrafts, where they occur, are included as a component of cash and cash equivalents for the purpose of the statement of cash flows. Cash flows are included in the cash flow statement on a gross basis inclusive of GST. The GST component of cash flows arising from investing and financing activities which is recoverable from, or payable to, the taxation authority is classified as operating cash flows. Current Cash and cash equivalents in the balance sheet Cash and cash equivalents reclassified as held for sale Total cash and cash equivalents Reconciliation of cash flows from operating activities Note 24 Reconciliation of profit after income tax to net cash provided by operating activities Profit from operations, net of income tax Share of loss of equity accounted investees Depreciation and amortisation Impairment of goodwill Impairment of brand names Impairment of inventory Impairment of product development Loss on revaluation of contingent consideration payable Unwind of discount on contingent consideration payable Interest received Interest paid Loss on sale of property, plant and equipment Changes in working capital assets and liabilities: Increase/(decrease) in net tax liability (Increase)/decrease in inventories (Increase)/decrease in trade receivables (Increase)/decrease in other assets Increase/(decrease) in provisions Increase/(decrease) in payables Increase/(decrease) in derivatives Net cash provided by/(used in) operating activities 2016 $'000 18,235 1,726 19,961 2016 $'000 (42,721) 2,329 11,003 59,448 10,332 5,000 1,917 10,555 801 (730) 13,486 38 6,901 2,574 (9,372) 4,643 (976) (8,167) 3,131 70,192 2015 $'000 33,237 9,710 42,947 2015 $'000 35,293 1,073 12,225 - - - - - 215 (227) 7,788 (2,444) 7,041 (13,537) (16,707) (2,508) (9,552) 13,972 (2,483) 30,149 63 GUD Holdings Limited and subsidiaries 21. Borrowings Accounting policies Borrowings Borrowings are recorded initially at fair value, net of transaction costs. Subsequent to initial recognition, borrowings are measured at amortised cost with any difference between the initial recognised amount and the redemption value being recognised in the income statement over the period of the borrowing using the effective interest rate method. Bank overdrafts The unsecured bank overdraft facilities are subject to annual review. As part of these facilities, GUD Holdings Limited and all of its subsidiaries (excluding Sunbeam Corporation Limited and Sunbeam NZ Corporation Limited) have entered into a deed of cross guarantee. GUD Holdings Limited has a contingent liability to the extent of the bank overdraft debt incurred by its controlled entities. Interest on bank overdrafts is charged at prevailing market rates. The weighted average interest rate for all overdrafts as at 30 June 2016 is 4.17% (2015: 4.68%). Unsecured bank loans The main unsecured bank loan and Common Terms Deed were revised in June 2015 for the purposes of debt funding of the acquisition of Brown & Watson (Note 32), effective 1 July 2015. The total facility was increased from $150 million to $300 million consisting of two tranches summarised below: Facilities as at 30 June 2016 Facilities from 1 July 2015 Facilities as at 30 June 2015 Amount Maturity Amount Maturity Amount Maturity $ million 1 July $ million 1 July $ million 29 October Tranche A – 5 year facility Tranche B – 5 year facility 185 110 2020 2020 185 115 2020 2020 50 100 2016 2018 The Tranche B facility amortises from 31 March 2016 to maturity. The facility has amortised $5 million during the year ended 30 June 2016. Both tranches are subject to variable interest rates which as at 30 June 2016 are 4.08% and 4.21%, respectively (2015: 4.15% and 5.38%, respectively). Tranche B reduces over the term to maturity in accordance with facility agreements entered into in conjunction with the Common Terms Deed (as amended). There are also unsecured facilities in Malaysia and China of $25 million, of which $22.5 million is renewed annually and $2.5 million amortises to 2020. Money market facility The unsecured money market facilities are payable on demand and may be withdrawn unconditionally. Interest on draw-downs is charged at prevailing market rates. This table summarises Borrowings relating to continuing operations at 30 June 2016 and all operations at 30 June 2015: Current Unsecured bank overdrafts Unsecured bank loans Unsecured loans from a subsidiary of Jarden Corporation Secured finance lease liabilities (1) Non-current Unsecured bank loans Secured finance lease liabilities (1) (1) Secured by the assets leased (Note 17). Note 2016 $'000 - 18,548 - 2 24 18,550 167,483 - 167,483 24 2015 $'000 - 15,857 6,304 27 22,188 20,165 3 20,168 64 GUD Holdings Limited and subsidiaries 21. Borrowings (continued) Financing facilities This table summarises facilities available, used and not utilised related to continuing operations at 30 June 2016 and all operations at 30 June 2015: Total facilities available: Unsecured bank overdrafts Unsecured bank loans Unsecured money market facilities Facilities used at balance date: Unsecured bank overdrafts Unsecured bank loans Unsecured money market facilities Facilities not utilised at balance date: Unsecured bank overdrafts Unsecured bank loans Unsecured money market facilities 22. Derivatives Accounting policies Derivative financial instruments 2016 $'000 5,338 320,272 15,000 340,610 - 186,033 - 186,033 5,338 134,239 15,000 154,577 2015 $'000 4,996 189,957 15,000 209,953 - 36,022 - 36,022 4,996 153,935 15,000 173,931 To manage its exposure to interest rate and foreign exchange rate risk, the Group enters into a variety of derivatives including forward foreign exchange contracts, options, collars, and, interest rate swaps, options and collars. Derivatives are recognised initially at fair value and any directly attributed transaction costs are recognised in profit or loss as they are incurred. Subsequent to initial recognition, derivatives are recognised at fair value, and changes are generally recognised in profit or loss unless designated as cash flow hedging instruments. Cash flow hedges The Group designates certain derivatives as hedges of highly probable forecast transactions (cash flow hedges). When a derivative is designated as a cash flow hedge, the effective portion of changes in the fair value of derivatives is recognised in other comprehensive income and accumulated in the hedging reserve. Any ineffective portion of changes in fair value of the derivative is recognised immediately in the profit or loss. The amounts are accumulated in other comprehensive income and reclassified in the profit or loss in the same period when the impact of the hedged item affects profit or loss. When the forecast transaction that is hedged results in the recognition of a non-financial asset or a non-financial liability, gains and losses previously deferred in equity are transferred from equity and included in the initial measurement of the cost of the asset or liability. Hedge accounting is discontinued on a prospective basis when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. At this time, gain or losses accumulated in other comprehensive income are reclassified to profit or loss. An interest rate swap is an instrument to exchange a fixed rate of interest for a floating rate, or vice versa, or one type of floating rate for another. 65 GUD Holdings Limited and subsidiaries 22. Derivatives (continued) Derivatives that do not qualify for hedge accounting Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative instruments that do not qualify for hedge accounting are recognised immediately in the income statement. A derivative is a type of financial instrument typically used to manage risk. A derivative's value changes over time in response to underlying variables such as exchange rates or interest rates and is entered into for a fixed period. A hedge is where a derivative is used to manage an underlying exposure. The Group is exposed to changes in interest rates on its net borrowings and to changes in foreign exchange rates on its foreign currency transactions and net assets. In accordance with Board approved policies. The Group uses derivatives to hedge these underlying exposures. Derivative financial instruments are initially included in the balance sheet at their fair value, either as assets or liabilities, and are subsequently remeasured at fair value or 'marked to market' at each reporting date. Movements in instruments measured at fair value are recorded in the income statement in net finance costs. Analysis of the derivatives used by the Group to hedge its exposure and the various methods used to calculate their respective fair values are detailed in this section. Derivative assets This table summarises derivative assets related to continuing operations at 30 June 2016 and all operations at 30 June 2015: Current Derivatives - Foreign currency forward contracts, options and collars Current derivative assets Non-current Derivatives - Interest rate swaps Non-current derivative assets Derivative liabilities Note 24 24 2016 $'000 144 144 62 62 2015 $'000 4,870 4,870 - - This table summarises derivative liabilities related to continuing operations at 30 June 2016 and all operations at 30 June 2015: Current Derivatives - Foreign currency forward contracts and collars Derivatives - Interest rate swaps at fair value Current derivative liabilities Non-current Derivatives - Foreign currency forward contracts and collars Derivatives - Interest rate swaps at fair value Non-current derivative liabilities Note 24 24 24 24 2016 $'000 2,964 581 3,545 829 2,820 3,649 2015 $'000 501 295 796 - 804 804 66 GUD Holdings Limited and subsidiaries 23. Other financial instruments Accounting policies Other financial instruments Financial assets and liabilities are recognised on the date when they are originated or at trade date. A financial instrument is recognised if the Group becomes a party to the contractual provisions of the instrument. Financial assets are derecognised if the Group’s contractual rights to the cash flows from the financial assets expire or if the Group transfers the financial asset to another party without retaining control or substantially all risks and rewards of the asset. Financial liabilities are derecognised if the Group’s obligations specified in the contract are discharged, expire or are cancelled. Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously. Loans receivable Loans receivable are non-derivative financial instruments and are initially recognised at fair value plus any directly attributable costs. Subsequent to initial recognition, they are measured at amortised cost using the effective interest method, less identified impairment. Contingent consideration Any contingent consideration receivable or payable is measured at fair value at the acquisition date. If the contingent consideration is classified as equity, then it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes in the fair value of the contingent consideration are recognised in profit or loss. Other financial assets This table summarises other financial assets related to continuing operations at 30 June 2016 and all operations at 30 June 2015: Current Consideration receivable Loans receivable - related parties Loans receivable - third parties Other financial assets Non-current Loans receivable - third parties Note 24 24 24 24 2016 $'000 - 1,885 473 2,358 2,359 2,359 2015 $'000 15,869 650 16,519 2,596 2,596 Consideration receivable included in other financial assets measured at fair value represents the contingent consideration receivable from Jarden Corporation in relation to the sale of 49% of the Sunbeam Corporation Limited and Sunbeam NZ Corporation Limited (collectively “Sunbeam ANZ”) businesses (Note 31). Loans receivable from related parties relate to loans by the Company to Sunbeam ANZ which were repaid in 1 July 2016. 67 GUD Holdings Limited and subsidiaries 23. Other financial instruments (continued) Other financial liabilities This table summarises other financial liabilities related to continuing operations at 30 June 2016 and all operations at 30 June 2015: Current Consideration payable Note 2016 $'000 2015 $'000 24 19,367 - Consideration payable included in other financial liabilities measured at fair value represents the contingent consideration payable to the vendors of Brown & Watson (Note 32). 24. Financial instruments Fair value hierarchy below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:   Level 2: inputs other than quoted prices included within Level 1 that are observable market values for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices) Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities  Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs). Derivative financial instruments Level 2 fair values for simple over-the-counter derivative financial instruments are based on valuations from banks. These are tested for reasonableness by discounting expected future cash flows using market interest rate for a similar instrument at the measurement date. Other financial assets - Contingent consideration Level 3 fair values are based on the present value of expected receipt discounted using a risk adjusted discount rate. The expected payment has been determined based on forecast EBITDA to 30 June 2015 for Sunbeam ANZ. There were no transfers between any of the levels of the fair value hierarchy during the years ended 30 June 2016 or 2015. Contingent consideration payable Changes in fair value of the contingent consideration payable balance from the acquisition of Brown & Watson is summarised below: Opening balance Contingent payable – acquisition of 100% of Brown & Watson Unwinding of discount Unrealised fair value loss included in profit and loss Closing balance Note 32 32 32 32 2016 $'000 - 8,011 801 10,555 19,367 2015 $'000 - - - - - Upon acquisition of 100% of Brown & Watson, effective 1 July 2015, the Company recorded a contingent consideration payable of $8.0 million representing its fair value at acquisition date. Subsequent to initial recognition, the contingent consideration payable was revalued to $19.4 million at 30 June 2016 based on Brown & Watson reported EBIT at 30 June 2016. Consequently a fair value loss of $10.6 million and an unwinding of discount of $0.8 million were recorded in profit and loss (Note 32). 68 GUD Holdings Limited and subsidiaries 24. Financial instruments (continued) Contingent consideration receivable Changes in fair value of the contingent consideration receivable balance from the sale of Sunbeam ANZ is summarised below: Opening balance Contingent receivable – balance of the sale of 49% of Sunbeam ANZ Unrealised fair value gain included in OCI Receipt of consideration Closing balance Note 33 33 33 33 2016 $'000 15,869 - 355 (16,224) 2015 $'000 - 12,940 2,929 - 15,869 Upon sale of 49% of Sunbeam ANZ, effective 1 November 2014, the Company recorded a contingent consideration receivable of $12.9 million representing its fair value at sale date. Subsequent to initial recognition, the contingent consideration receivable was revalued to $15.9 million at 30 June 2015 based on Sunbeam ANZ reported EBITDA and cash at 30 June 2015, changes in working capital from acquisition date to 30 June 2015 and other adjustments reflected in the sale agreement. Consequently a fair value gain of $2.9 million was recorded in other comprehensive income ($2.1 million net of tax) (Note 33). Between 30 June 2015 and settlement, both parties to the sale agreement reviewed Sunbeam ANZ EBITDA, cash, changes in working capital from acquisition date to 30 June 2015 and other adjustments reflected in the sale agreement. As a result the consideration was revised to $16.2 million and a fair value gain of $0.4 million was recorded in other comprehensive income ($0.2 million net of tax) (Note 33). This was settled on 1 October 2015. Options Pursuant to the Share Sale Agreements between the Company and Holmes Products (Far East) Limited (“HPFE”, a subsidiary of Jarden Corporation, Notes 33 and 34), the parties also entered into Shareholders Agreements. Under these agreements, the parties agreed to put and call options that give option holders the right but not the obligation to transfer additional equity to HPFE subject to future dates, meeting earnings targets or both. The option agreement between the parties was amended in April 2016. As a result, the Company exercised it’s put option in April 2016 to effect the sale of the Company’s remaining interests in Sunbeam ANZ and Jarden Consumer Solutions (Asia) Limited (“Jarden Asia”) to HPFE on 1 July 2016. 69 GUD Holdings Limited and subsidiaries 24. Financial instruments (continued) Carrying value Non-current $'000 Current $'000 Not at fair value $'000 Level 1 $'000 Level 2 $'000 Level 3 $'000 Fair value Total $'000 As at 30 June 2016 Financial assets measured at fair value Derivatives - Foreign currency forward contracts Derivatives - Interest rate swaps at fair value Other financial assets Total financial assets measured at fair value Financial assets not measured at fair value Cash and cash equivalents Trade and other receivables Other financial assets Total financial assets not measured at fair value Total financial assets Financial liabilities measured at fair value Derivatives - Foreign currency forward contracts Derivatives - Interest rate swaps at fair value Other financial liabilities Total financial liabilities measured at fair value Financial liabilities not measured at fair value Borrowings and loans Total financial liabilities not measured at fair value Total financial liabilities 144 - - 144 18,235 118,813 2,358 139,406 139,550 2,964 581 19,368 22,913 16,665 16,665 39,578 - 62 - 62 - - 2,359 2,359 2,359 829 2,820 - 3,649 - - - - 18,235 118,813 4,717 141,765 141,765 - - - - 167,483 167,483 171,132 184,148 184,148 184,148 - - - - - - - - - - - - - - - - 144 62 - 206 - - - - 206 3,793 3,401 - 7,194 - - - - - - - - - - - - - 19,368 19,368 - - 144 62 - 206 - - - - 206 3,793 3,401 - 7,194 - - 7,194 19,368 7,194 70 GUD Holdings Limited and subsidiaries 24. Financial instruments (continued) Carrying value Non-current $'000 Current $'000 Not at fair value $'000 Level 1 $'000 Level 2 $'000 Level 3 $'000 As at 30 June 2015 Financial assets measured at fair value Derivatives - Foreign currency forward contracts Derivatives - Interest rate swaps at fair value Other financial assets Total financial assets measured at fair value Financial assets not measured at fair value Cash and cash equivalents Trade and other receivables Other financial assets Total financial assets not measured at fair value Total financial assets Financial liabilities measured at fair value Derivatives - Foreign currency forward contracts Derivatives - Interest rate swaps at fair value Total financial liabilities measured at fair value Financial liabilities not measured at fair value Borrowings and loans Total financial liabilities not measured at fair value Total financial liabilities 4,870 - 15,869 20,739 42,947 108,579 650 152,176 172,915 501 295 796 22,188 22,188 22,984 - - - - - - 2,596 2,596 2,596 - 804 804 20,168 20,168 20,972 - - - - 42,947 108,579 3,246 154,772 154,772 - - - 42,356 42,356 42,356 - - - - - - - - - - - - - - - Fair value Total $'000 4,870 - 15,869 20,739 - - - - 4,870 - - 4,870 - - - - - - 15,869 15,869 - - - - 4,870 15,869 20,739 501 1,099 1,600 - - 1,600 - - - - - - 501 1,099 1,600 - 1,600 71 GUD Holdings Limited and subsidiaries 25. Financial risk management Overview The Group's activities expose it to a variety of financial risks: market risks (including currency risk, interest rate risk and price risk), credit risk and liquidity risk. The Group's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's financial performance. The Group uses derivative financial instruments within its policies described below as hedges to manage certain risk exposures. Treasury policies have been approved by the Board for managing each of these risks including levels of authority on the type and use of financial instruments. Transactions are only undertaken if they relate to underlying exposures, i.e. the Group does not use derivatives to speculate. The treasury function reports regularly to the Audit Committee and treasury operations are subject to periodic reviews. credit risk The Group has exposure to the following risks from their financial instruments:   liquidity risk  market risk This note provides additional information about the Group’s exposures to the above risks, its objectives, policies and processes for measuring and managing the identified risk. It also outlines the objectives and approach to capital management. Financial risk management objectives The Group's Corporate Treasury function provides services to the business, co-ordinates access to domestic and international markets, and manages the financial risks relating to the operations of the Group. The Group does not enter into or trade in financial instruments, including derivative financial instruments, for speculative purposes. The use of financial derivatives is governed by the Group's policies approved by the Board of Directors, which provide written principles on the use of financial derivatives. Compliance with policies and exposure limits is reviewed by the Financial Risk Management committee chaired by the Chief Financial Officer. Each month the Chief Financial Officer provides the Board of Directors with a report outlining financial exposures, hedging levels, and, financial risk management policy compliance. The Group's activities expose it primarily to the financial risks associated with changes in foreign currency exchange rates, interest rates and commodity prices. There has not been any change to the objectives, policies and processes for managing risk during the current year. Credit risk Credit risk refers to the risk that a financial loss may be experienced by the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Group’s risk is primarily in relation to receivables from customers and hedging transactions with third party counterparties. the majority of customer sales transactions are domestic in nature, The Group’s exposure to credit risk is characterised by the following:    trade receivables are non-interest bearing and domestic trade receivables are generally on 30 to 60 day terms, the Group as a whole is not exposed in a material way to any single customer however there are significant customers with individual businesses in the retail, hardware and automotive aftermarket sectors,  new customers are subjected to credit assessment by the specific business within the Group that they wish to transact with and are allocated credit limits which are managed according to the needs of the customer and the risk assessment of the relevant business,  most businesses within the Group maintain credit insurance to lessen the credit risk,  ageing of customer receivables is reviewed in detail each month by businesses within the Group and by the Company in an oversight capacity. 72 GUD Holdings Limited and subsidiaries 25. Financial risk management (continued) In order to manage credit risk, goods are sold subject to retention of title clauses and where considered appropriate registered under the Personal Properties Securities Act, so that in the event of non-payment, the Group may have a secured claim. The Group maintains a provision account, described in the consolidated financial statements as an allowance for doubtful debts, which represents the estimated value of specific trade receivables that may not be recovered. A general provision for doubtful debts is not maintained. Uncollectible trade receivables are charged to the allowance for doubtful debts account. Identified bad debts are submitted to the Board of Directors for approval for write off in December and June of each year. Credit insurance is maintained to partially mitigate uncollectable amounts. The maximum exposure to credit risk is the sum of cash and cash equivalents (Note 20), the total value of trade debtors and other receivables (Note 8) and other financial assets (Note 23). The majority of credit risk is within Australia and New Zealand. A material exposure arises from forward exchange contracts, options and collars that are subject to credit risk in relation to the relevant counterparties. The maximum credit risk exposure on foreign currency contracts, options and collars is the full amount of the foreign currency the Group pays when settlement occurs should the counterparty fail to pay the amount which it is committed to pay the Group. To address this risk the Group restricts its dealings to financial institutions with appropriate credit ratings. Liquidity risk Liquidity risk refers to the risk that the Group will not be able to meet its financial obligations as they fall due. The Group undertakes the following activities to ensure that there will be sufficient funds available to meet obligations:   measurement of actual cash flows of the Group on a regular basis with comparison to budget on a monthly prepare budgeted annual and monthly cash flows, basis,  maintenance of standby money market facilities, and  maintenance of a committed borrowing facility in excess of budgeted usage levels. The contractual maturities of financial liabilities, including estimated interest payments on bank loans, are as follows: 2016 Financial liabilities Trade payables Derivatives Unsecured bank loans Secured finance lease liabilities 2015 Financial liabilities Trade payables Derivatives Unsecured bank loans Loans from related parties Secured finance lease liabilities Carrying amount $'000 Contractual cash flows $'000 Less than 1 year $'000 81,291 7,194 186,031 2 274,518 81,291 7,194 194,278 2 282,765 81,291 3,545 90,389 2 175,227 Carrying amount $'000 Contractual cash flows $'000 Less than 1 year $'000 93,690 1,600 36,022 6,304 30 137,646 93,690 1,600 38,208 6,304 30 139,832 93,690 796 34,636 6,304 27 135,453 1 to 2 years $'000 - 3,649 16,557 - 20,206 1 to 2 years $'000 - 804 123 3 930 2 to 5 years $'000 - - 87,333 - 87,333 Beyond 5 years $'000 - - - - - 2 to 5 years $'000 Beyond 5 years $'000 - - 369 - - 369 - - 3,080 - - 3,080 73 GUD Holdings Limited and subsidiaries 25. Financial risk management (continued) Market risk Market risk for the Group refers to the risk that changes in foreign exchange rates or interest rates will affect the Group’s income or equity value. The Group enters into a variety of derivative financial instruments to manage its exposure to interest rates and foreign currency risk, including:  forward foreign exchange contracts, options and collars to hedge the exchange risk arising from the importation and sale of goods purchased in foreign currency (principally US dollars); and  interest rate swaps, options and collars to partially mitigate the risk of rising interest rates. Foreign exchange risk management The Group undertakes transactions denominated in foreign currencies, hence exposures to exchange rate fluctuations arise. Exchange rate exposures are managed within approved policy parameters utilising forward foreign exchange contracts, options and collars. The Board of Directors reviews the Group’s foreign currency exposure on a monthly basis. The process includes a review of a rolling 12 month estimate of foreign currency exposure, an analysis of financial instruments contracted, an analysis of positions in relation to policy compliance and an analysis of the Group’s sensitivity to movements in the exchange rates on an annualised basis. Forward foreign exchange contracts provide certainty as specific rates are agreed at the time the contract is agreed. Purchased foreign currency options require a premium to be paid and provide a minimum (or maximum) rate at which the entity transacting will purchase (or sell) foreign currency. Foreign currency collars, being a combination of bought call and sold put options, provide the transacting entity with a minimum rate of exchange (call) and a maximum rate of exchange (put). The Group’s policy is to enter into forward foreign exchange contracts, options and collars to cover specific and anticipated purchases, specific and anticipated sales and committed capital expenditure, principally in US dollars. The terms of the Group's commitments are rarely more than one year. At 30 June 2016, the Group is exposed to $5.4 million (2015: $14.2 million) of US$ denominated net liabilities. Forward foreign exchange contracts The following table summarises the significant forward foreign currency contracts outstanding as at the reporting date: Buy Average Exchange Rate 1 2016 2015 Foreign Currency 2016 2015 FC'000 FC'000 United States Dollars Chinese Renminbi European Euro Australian Dollars (NZ entities) 0.7162 4.2931 0.6091 0.9279 0.7866 4.4119 0.6310 0.9372 67,152 46,848 2,788 5,912 99,786 48,511 1,786 990 1 Represents weighted average hedge exchange rates in the foreign currency contracts Contract Value 2015 $'000 2016 $'000 93,762 10,912 4,517 6,371 126,857 10,995 2,830 1,056 115,622 141,738 Fair Value 2015 $'000 3,988 325 (2) 58 4,369 2016 $'000 (2,703) (519) (408) (163) (3,793) Sensitivity Analysis - foreign exchange AUD/USD For every 1c decrease in AUD:USD rate, total exposures increase by: Income statement Equity 2016 $'000 83 311 2015 $'000 176 1,037 74 GUD Holdings Limited and subsidiaries 25. Financial risk management (continued) Interest rate risk management The Group is exposed to interest rate risk as it borrows funds at variable interest rates. The risk is managed by maintaining an appropriate mix between fixed and floating interest rates through the use of interest rate derivatives, swap contracts, options and forward interest rate swap contracts. The Group, from time to time, enters into interest rate swaps and options, with expiration terms ranging out to three years, to protect part of the loans from exposure to increasing interest rates. Interest rate swaps allow the Group to swap floating rate borrowings into fixed rates. Maturities of swap contracts are principally between one and three years. The Group determines the level of hedging required each year based on an estimate of the underlying core debt which is represented by forecast June debt levels. The core debt level is hedged to levels ranging from a maximum of 80% in year one to a minimum of 20% in year three. The hedging of the core debt level is reviewed monthly by the Financial Risk Management committee. Under interest rate swap contracts, the Group agrees to exchange the difference between fixed and floating rate interest amounts calculated on agreed notional principal amounts. These contracts enable the Group to partially mitigate the risk of changing interest rates. The fair values of interest rate swaps are based on counterparty exit values at the reporting date. The following table summarises the sensitivity of the Group as at the reporting date to movements in interest rates and does not take into account the offsetting impact of any hedging in place. It is important to note that this interest rate sensitivity analysis assumes that all other economic variables remain constant. The information presented includes the type of sensitivity analysis used when reporting to the Board of Directors. The table illustrates the impact of a change in rates of 100 basis points, a level that management believes to be a reasonably possible movement. Sensitivity Analysis - interest rates For every 100 basis points increase in interest rates: Income statement Equity 2016 $'000 (1,661) - 2015 $'000 6 - The following table details the notional principal amounts and remaining terms of interest rate swap and option contracts outstanding at the reporting date. Outstanding floating for fixed contracts Less than 1 year 1 to 2 years 2 to 5 years Average contracted Fixed interest rate Notional principal amount 2016 % 3.65 4.58 2.91 2015 % 3.06 3.73 4.58 2016 $'000 34,700 11,400 80,000 126,100 2015 $'000 32,842 34,313 10,625 77,780 Fair value 2015 $'000 (295) (494) (310) (1,099) 2016 $'000 (581) (29) (2,791) (3,401) Capital management The Board’s policy is to maintain a strong capital base for the Group. This policy is predicated on the need to continue to present the Group favourably to various stakeholders including investors, employees, banks, suppliers and customers. This enables the Group to access capital markets, attract talented staff and negotiate favourable terms and conditions with suppliers and customers. Capital is defined as total debt and equity of the Group. The Group uses a Cash Value Added (CVA) approach when measuring returns achieved by each business. This approach involves comparing the cash profit achieved to the cost of the capital utilised by each business. This cost of capital represents a weighted average cost of debt and equity and allows a single measure to assess business performance. The Group has consistently achieved CVA returns in excess of its weighted average cost of capital resulting in positive shareholder returns. The Group is not subject to any externally imposed capital requirements. The terms and the conditions of the main debt facilities contain four financial covenants: minimum interest cover, maximum debt to earnings, and Australia and NZ subsidiaries to Group asset and earnings ratios. All covenants have been satisfied during the 2015 and 2016 financial years. There were no changes to the Group’s approach to capital management during the year. 75 GUD Holdings Limited and subsidiaries 26. Share Capital Accounting policies Share capital The Company’s fully paid ordinary shares are classified as equity. Incremental costs directly attributable to the issue of or repurchase (buy-back) of ordinary shares are recognised as a deduction from equity, net of any tax effects. Ordinary shares bought back by the Company are cancelled in accordance with the law. 2016 $'000 2016 Number 2015 $'000 2015 Number Balance at the beginning of the year 286,160 85,079,850 184,629 70,939,492 Share issue Issue costs Performance share rights vested Balance at the end of the year - - - - - 247,264 105,346 14,140,358 (3,815) - - - 286,160 85,327,114 286,160 85,079,850 During the year, the Company issued 247,264 shares as a result of the vesting of performance rights as follows:   173,981 shares issued pursuant to the vesting component of the 2015 performance rights plan; and 73,283 shares issued to Karen Hope (executive of Sunbeam ANZ) for meeting EBITDA targets the year ended 30 June 2015. Details of special incentives is disclosed in Note 36 and the Remuneration Report. During the year no shares were bought back on market and cancelled by the Group (2015: nil). The dividend reinvestment plan has been suspended from the 2013 financial year. The Company does not have par value in respect of its issued shares. Fully paid ordinary shares carry one vote per share and carry the right to dividends. 27. Dividends Accounting policies Dividends Dividends paid are classified as distributions of profit consistent with the balance sheet classification of the related debt or equity instruments. Recognised amounts 2016 Final dividend in respect of the 2015 financial year Interim dividend in respect of the 2016 financial year Total dividends 2015 Final dividend in respect of the 2014 financial year Interim dividend in respect of the 2015 financial year Total dividends Unrecognised amounts Cents Total amount $'000 per share Date of payment Tax rate Percentage franked 22 20 18 20 18,756 3 September 2015 17,065 4 March 2016 35,821 12,769 3 September 2014 14,188 6 March 2015 26,957 30% 30% 30% 30% 100% 100% 100% 100% Fully Paid Ordinary Shares per share $'000 Date of payment Tax rate franked Cents Total amount Percentage 2016 Final dividend in respect of the 2016 financial year 23 19,625 2 September 2016 30% 100% 76 GUD Holdings Limited and subsidiaries 27. Dividends (continued) Dividend franking account The available amounts are based on the balance of the dividend franking account at the reporting date adjusted for franking credits that will arise from the payment of the current tax liability. The Company operates a Dividend Reinvestment Plan (DRP) which allows eligible shareholders to elect to invest dividends in ordinary shares which rank equally with GUD ordinary shares. This has been suspended for all dividends from the 2013 interim dividend onwards. 30% (2015: 30%) franking credits available to shareholders of GUD Holdings Limited for subsequent financial years 28. Reserves Accounting policies Hedging reserve GUD Holdings Limited 2016 $'000 2015 $'000 44,476 4,111 The effective portion of changes in the fair value (net of tax) of derivatives designated as hedges of highly probable forecast transactions (cash flow hedges) is recognised in other comprehensive income and accumulated in the hedging reserve and reclassified to the profit or loss in the same period when the impact of the hedged item affects profit or loss. When the forecast transaction that is hedged results in the recognition of a non-financial asset or a non-financial liability, gains and losses previously deferred in the hedging reserve are transferred and included in the initial measurement of the cost of the asset. Gains or losses accumulated in the hedging reserve are reclassified to profit or loss on a prospective basis when hedge accounting is discontinued, when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. Equity compensation reserve The Performance Rights Plan grants shares in the Company to certain employees. The fair value of performance rights granted under the Performance Rights Plan is recognised as an employee expense with a corresponding increase in the equity compensation reserve. The fair value is measured at grant date and is spread over the vesting period which is the period from the grant date to the end of the plan period. The fair value of the performance rights granted is measured using a Monte Carlo simulation model, taking into account the terms and conditions upon which the performance rights were granted. Translation reserve Assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated into the Group’s reporting currency at exchange rates at the reporting date. The income and expenses of foreign operations are translated into the Group’s reporting currency at exchange rates at the dates of the transactions. Foreign currency differences are recognised in other comprehensive income and accumulated in the translation reserve, except to the extent that the translation difference is allocated to non-controlling interests. When a foreign operation is disposed of in its entirety such that control or significant influence is lost, the cumulative amount in the translation reserve related to the foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. If the Group disposes of part of its interest in a subsidiary but retains control, then the relevant proportion of the cumulative amount is reattributed to non-controlling interests. When the Group disposes of only part of an associate while retaining significant influence, the relevant proportion of the cumulative amount is reclassified to profit or loss. If settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely to occur in the foreseeable future, then foreign currency differences arising from such items form part of the net investment in the foreign operation. Accordingly, such differences are recognised in other comprehensive income and accumulated in the translation reserve. 77 GUD Holdings Limited and subsidiaries 28. Reserves (continued) This table summarises the movement in reserves: Hedging Reserve Balance at the beginning of the year Fair value adjustments transferred to equity - net of tax Amounts transferred to inventory - net of tax Balance at the end of the year Equity Compensation Reserve Balance at the beginning of the year Equity settled share based payment transactions Balance at the end of the year Translation Reserve Balance at the beginning of the year Exchange differences on translating foreign operations Balance at the end of the year Reserves at the end of the year 2016 $'000 1,053 1,653 (7,385) (4,679) 2,881 1,399 4,280 1,199 1,110 2,309 1,910 2015 $'000 (2,719) 9,853 (6,081) 1,053 1,349 1,532 2,881 (775) 1,974 1,199 5,133 78 GUD Holdings Limited and subsidiaries Taxation This section outlines the tax accounting policies, current and deferred tax impacts, a reconciliation of profit before tax to the tax charge and the movements in deferred tax assets and liabilities. 29. Current tax Accounting policies Current and deferred tax expense Current tax is calculated by reference to the amount of income taxes payable or recoverable in respect of the taxable profit or loss for the period. It is calculated using tax rates and tax laws that have been enacted or substantively enacted by the reporting date. Current and deferred tax is recognised as an expense or income in the income statement, except when it relates to items credited or debited directly to equity, in which case the deferred tax is also recognised directly in equity, or where it arises from the initial accounting for a business combination, in which case it is taken into account in the determination of goodwill. Current tax for current and prior periods is recognised as a liability (or asset) to the extent that it is unpaid (or refundable). Tax consolidation The Company and its wholly-owned Australian resident subsidiaries have formed a tax-consolidated group under Australian taxation law and taxed as a single entity with effect from 1 July 2003. The head entity within the tax- consolidated group is GUD Holdings Limited. The members of the tax consolidated group are identified in Note 32. Nature of tax funding arrangements and tax sharing agreements Entities within the tax-consolidated group have entered into a tax funding arrangement and a tax-sharing agreement with the head entity. Under the terms of the tax funding arrangement, GUD Holdings Limited and each of the entities in the tax consolidated group have agreed to pay a tax equivalent payment to or from the head entity, based on the current liability or current asset of the entity. The tax sharing agreement entered into between members of the tax-consolidated group provides for the determination of the allocation of income tax liabilities between the entities should the head entity default on its payment obligations. No amounts have been recognised in the consolidated financial statements in respect of this agreement as payment of any amounts under the tax sharing agreement is considered remote. Income tax expense recognised in the income statement Prima facie income tax expense calculated at 30% (2015: 30%) on profit Increase/(decrease) in income tax expense due to : Non-deductible expenditure (Over)/under provision of income tax in prior year Research and development incentives Tax incentives not recognised in profit or loss Non-assessable income Income tax expense Tax expense comprises: Current tax expense Adjustments recognised in the current year in relation to tax of prior years Deferred tax expense from origination and reversal of temporary differences Total tax expense ^ Prior year comparatives have been restated to be consistent with disclosures for 30 June 2016. 2016 $'000 (6,986) 25,993 104 (1,116) (356) - 2015^ Restated $'000 12,841 1,401 (212) (1,111) (524) (709) 17,639 11,686 22,720 104 (5,185) 17,639 8,224 (212) 3,674 11,686 79 GUD Holdings Limited and subsidiaries 29. Current tax (continued) Income tax expense recognised in other comprehensive income 2016 Income tax on items that may be subsequently reclassified to profit or loss: Exchange differences on translating results of foreign operations Fair value adjustments transferred to hedging reserve Net change in fair value of cash flow hedges transferred to inventory Revaluation of contingent receivable 2015 Income tax on items that may be subsequently reclassified to profit or loss: Exchange differences on translating results of foreign operations Fair value adjustments transferred to hedging reserve Net change in fair value of cash flow hedges transferred to inventory Revaluation of contingent receivable Other 30. Deferred tax Accounting policies Deferred tax Before tax Tax (expense) / benefit Net of tax 1,110 2,362 (10,551) 355 (6,724) - (709) 3,166 (107) 2,350 1,110 1,653 (7,385) 248 (4,374) Before tax Tax (expense) / benefit Net of tax 1,974 14,075 (8,686) 2,929 - 10,292 - (4,222) 2,606 (879) (1,458) (3,953) 1,974 9,853 (6,080) 2,050 (1,458) 6,339 Deferred tax is recognised in respect of temporary differences between the carrying amount of assets and liabilities in the consolidated financial statements and the corresponding tax base of those items. Deferred tax assets are recognised to the extent that it is probable that sufficient taxable amounts will be available against which deductible temporary differences or unused tax losses and tax offsets can be utilised. However, deferred tax assets and liabilities are not recognised if the temporary differences giving rise to them arise from the initial recognition of assets and liabilities (other than as a result of a business combination) which affect neither taxable income nor accounting profit. Furthermore, a deferred tax liability is not recognised in relation to taxable temporary differences arising from goodwill. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period(s) when the asset and liability giving rise to them are realised or settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by reporting date. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company/subsidiary expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities. Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Company/subsidiary intends to settle its current tax assets and liabilities on a net basis. 80 GUD Holdings Limited and subsidiaries 30. Deferred tax (continued) 2016 Deferred tax assets Employee benefit provisions Restructuring provisions Warranty provisions Doubtful debts Inventory Accrued expenses Derivative liabilities Property, plant and equipment Other intangible assets Other Set off of tax Deferred tax liabilities Property, plant and equipment Capitalised product development Other intangible assets Derivative assets Other Set off of tax Net deferred tax assets/(liabilities) Recognised in Profit or Loss from Opening balance $'000 Acquisition through business combinations $'000 Continuing operations $'000 Discontinuing operations $'000 Recognised in Equity $'000 Closing balance $'000 4,612 76 569 308 1,180 420 480 - - 1,464 9,109 1,200 3,529 2,947 1,461 - 9,137 - - - - - - - - 1,088 - 1,088 - - 1,293 - - 1,293 229 (66) (320) (63) 843 577 104 140 (72) (595) 777 546 (1,988) (3,198) 291 (59) (4,408) (119) - (32) - (141) 232 305 - 72 109 426 - - - (479) 614 135 - - - - - - 1,246 - - - 1,246 - - - (1,211) - (1,211) 4,722 10 217 245 1,882 1,229 2,135 140 1,088 978 12,646 (3,431) 9,215 1,746 1,541 1,042 62 555 4,946 (3,431) 1,515 7,700 81 GUD Holdings Limited and subsidiaries 30. Deferred tax (continued) 2015 Deferred tax assets Employee benefit provisions Restructuring provisions Warranty provisions Doubtful debts Inventory Accrued expenses Derivative liabilities Other Set off of tax Deferred tax liabilities Property, plant and equipment Capitalised product development Other intangible assets Derivative assets Set off of tax Net deferred tax assets/(liabilities) Opening balance $'000 Recognised in Profit or Loss from Continuing operations $'000 Discontinuing operations $'000 Recognised in Equity $'000 Closing balance $'000 5,001 3,574 601 300 1,081 150 1,386 1,078 13,171 1,265 3,099 2,943 5 7,312 (394) (3,498) 4 8 16 298 666 120 (2,780) (65) 430 4 525 894 5 - (36) - 83 (28) (393) 266 (103) - - - 493 493 - - - - - - (1,179) - (1,179) - - - 438 438 4,612 76 569 308 1,180 420 480 1,464 9,109 (8,202) 907 1,200 3,529 2,947 1,461 9,137 (8,202) 935 (28) 82 GUD Holdings Limited and subsidiaries Business Combinations This section outlines the Group’s structure and changes thereto. 31. Disposal group held for sale Accounting policies Discontinued operation A discontinued operation is a component of the Group’s business, the operations and cash flows of which can be clearly distinguished from the rest of the Group and which:   is part of a single co-ordinated plan to dispose of a separate major line of business or geographic area of operations; or represents a separate major line of business or geographic area of operations; is a subsidiary acquired exclusively with a view to re-sale.  Classification as a discontinued operation occurs at the earlier of disposal or when the operation meets the criteria to be classified as held-for-sale. When an operation is classified as a discontinued operation, the comparative statement of profit or loss and OCI is re-presented as if the operation had been discontinued from the start of the comparative year. Assets held for sale Non-current assets, or disposal groups comprising assets and liabilities, are classified as held-for-sale if it is highly probable that they will be recovered primarily through sale rather than through continuing use. Such assets, or disposal groups, are generally measured at the lower of their carrying amount and fair value less costs to sell. Any impairment loss on a disposal group is allocated first to goodwill, and then to the remaining assets and liabilities on a pro rata basis, except that no loss is allocated to inventories, financial assets, deferred tax assets, employee benefit assets, investment property or biological assets, which continue to be measured in accordance with the Group’s other accounting policies. Impairment losses on initial classification as held-for-sale or held-for distribution, and subsequent gains and losses on re-measurement are recognised in profit or loss. Once classified as held-for-sale, intangible assets and property, plant and equipment are no longer amortised or depreciated. The transaction On the 14 April 2016, the Company entered into amended shareholders agreements that grant put options to the Company, giving the Company the right but not the obligation to require Holmes Products (Far East) Limited (“HPFE”) , a subsidiary of Jarden Corporation, to acquire the disposal group comprising:  the Company’s remaining 51% of the shares in Sunbeam ANZ comprising Sunbeam Corporation Limited and Sunbeam NZ Corporation Limited, to HPFE; and the Company’s 49% of shares in Jarden Asia. Jarden Asia for USD$2.8 million (A$3.9 million). Sunbeam ANZ for an estimated $30.3 million; and  The option agreement between the parties was amended in April 2016. As a result, the Company exercised it’s put option in April 2016 to effect the sale of the Company’s remaining interests in Sunbeam ANZ and Jarden Asia to HPFE on 1 July 2016. Total estimated consideration is comprised of:   Of the total estimated consideration, $33.5 million was received on 1 July 2016 made up as follows:   USD$2.9 million (A$4.0 million) for Jarden Asia. An additional amount of consideration will be paid in the first quarter of the following year once the Company and Jarden Corporation formally agree the final results and balance sheets of Sunbeam ANZ and Jarden Asia at 30 June 2016. $29.5 million for Sunbeam ANZ; and In addition, loans made by the Company to Sunbeam ANZ of approximately $1.9 million were repaid on 1 July 2016. 83 GUD Holdings Limited and subsidiaries 31. Disposal group held for sale (continued) The comparative consolidated statement of profit or loss and other comprehensive income has been restated to show the discontinued operation separately from continuing operations. Assets and liabilities of the disposal group have been reclassified to assets held for sale and liabilities held for sale, respectively. Results of the discontinued operation Revenue Cost of goods sold, including impairment and restructuring costs Gross Profit Other income Expenses Results from operating activities Net finance expense Share of loss of equity accounted investees, net of income tax Profit before tax Income tax expense Profit from discontinued operations, net of income tax 2016 $'000 114,432 (77,998) 36,434 355 (35,553) 1,236 (419) (2,329) (1,512) (282) (1,794) 2015 $'000 114,420 (73,053) 41,367 396 (34,445) 7,318 (409) (1,073) 5,836 (1,659) 4,177 Of the loss from discontinuing operations of $1.8 million (2015: profit of $4.2 million):  The loss of equity accounted investees, net of income tax of $2.3 million (2015: $1.1 million) is attributable entirely to the owners of the Company;  An amount of $0.3 million (2015: $2.7 million) is attributable to the owners of the Company. Cumulative income or expenses in other comprehensive income Cumulative income and expenses included in other comprehensive income relating to the disposal group were: Items that may be reclassified subsequently to profit or loss: Cash flow hedges, net change in fair value, net of tax Cash flow hedges, fair value of cash flow hedges transferred to inventory, net of tax Other comprehensive income from discontinued operations Cash flows from (used in) discontinued operation Net cash used in operating activities Net cash from investing activities Net cash from financing activities Net cash flows for the year 2016 $'000 1,994 (3,218) (1,224) 2016 $'000 899 (4,021) (4,862) (7,984) 2015 $'000 (4,517) 2,953 (1,564) 2015 $'000 84 (5,073) 10,750 5,761 84 GUD Holdings Limited and subsidiaries 31. Disposal group held for sale (continued) Assets and liabilities of disposal group held for sale At 30 June 2016, the disposal group was stated at carrying value and comprised the following assets and liabilities: Cash and cash equivalents Trade and other receivables Inventories Derivative assets Other intangible assets Property, plant and equipment Deferred tax assets Other assets Assets held for sale Trade and other payables Employee benefits Warranty provisions Borrowings Derivative liabilities Deferred tax liabilities Other non-current liabilities Liabilities held for sale 32. Investment in subsidiaries Accounting policies Business combinations 2016 $'000 1,726 20,599 28,672 49 32,480 2,589 2,149 663 88,927 9,287 1,408 1,110 1,943 1,111 5,248 2,021 22,128 The Group accounts for business combinations using the acquisition method when control is transferred to the Group. The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for impairment (Note 18). Any gain on a bargain purchase is recognised in profit or loss immediately. Transaction costs are expensed an incurred, except if related to the issue of debt or equity securities. The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in profit or loss. Any contingent consideration is measured at fair value at the date of acquisition. If an obligation to pay contingent consideration that meets the definition of a financial instrument is classified as equity, then it is not remeasured and settlement is accounted for within equity. Otherwise, other contingent consideration is remeasured at fair value at each reporting date and subsequent changes in the fair value of the contingent consideration are recognised in profit or loss. Basis of consolidation These consolidated financial statements are the financial statements of all the entities that comprise the Group, being the Company and its subsidiaries as defined in Accounting Standard AASB 10 Consolidated Financial Statements. Subsidiaries Subsidiaries are entities controlled by 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. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases. 85 GUD Holdings Limited and subsidiaries 32. Investments in subsidiaries (continued) Transactions eliminated on consolidation Intra-group balances and transactions arising from intra-group transactions are eliminated. Loss of control When the Group loses control over a subsidiary, it derecognises the assets and liabilities of the subsidiary, and any related non-controlling interest and other components of equity. Any resulting gain or loss is recognised on profit or loss. Any interest retained in the former subsidiary is measured at fair value when the control is lost. Acquisition Effective 1 July, 2015, the Company acquired 100% of the shares and voting interests of Brown & Watson International Pty Limited (“Brown & Watson”) with businesses in the Australian and New Zealand. The acquisition is expected to provide the Group with an expanded presence in automotive aftermarket parts. Since the acquisition occurred on 1 July 2015, Brown & Watson contributed a full year of results to the Group’s results for year ended 30 June 2016 with contributed revenue of $117.4 million, EBIT of $30.8 million and profit of $20.6 million. In determining these amounts, management has applied fair value adjustments from the date of acquisition for a full year. Consideration paid Consideration paid and payable for the acquisition of Brown & Watson is made up as follows: $'000 Consideration paid Initial consideration 1 Jul 2015 Revision to net asset adjustm ent am ount Net cash adjustm ent Total initial consideration Estim ated contingent consideration at acquistion Acqusition value of Investm ent Unw inding of discount of contingent consideration at acquisition Revaluation of contingent consideration subsequent to acquisition Total estim ated consideration Intangible asset amount Target net assets dow n payment Net assets adjustment amount Net cash Contingent consideration 157,000 30,200 12,800 - - - - (4,325) - - - 2,369 157,000 30,200 8,475 2,369 - 200,000 (4,325) 2,369 198,044 157,000 30,200 8,475 2,369 8,011 206,055 8,011 8,011 157,000 30,200 8,475 2,369 19,367 217,411 801 801 10,555 10,555 Of the initial consideration, $187.2 million was paid on 1 July 2015, representing the initial consideration with respect to the intangible asset amount of $157 million and the target net assets down payment of $30.2 million.  The Company estimated an additional $12.8 million payable with respect to estimated completion net asset amount capped at $41 million. Of this $8 million was paid on 7 December 2015.   Subsequent to acquisition the completion net asset amount of $38.7 million was agreed, giving rise to a reduction in the net assets adjustment amount payable of $4.3 million. There is net cash of $2.4 million which relates to completion adjustments. Contingent consideration payable The Company agreed to pay the selling shareholders contingent consideration if the Brown & Watson EBIT exceeded $26.6 million for the year ending 30 June 2016. Management initially estimated contingent consideration of $9.1 million, payable upon completion of an earn-out statement based on the audited financial statements for the year ending 30 June 2016. The Brown & Watson EBIT for 30 June 2016 exceeded the estimated EBIT. The contingent consideration payable was therefore revalued to $19.4 million with $20 million payable upon agreement of the transaction parties by October 2016. 86 GUD Holdings Limited and subsidiaries 32. Investments in subsidiaries (continued) Acquisition-related costs During the year ended 30 June 2016, the Company did not incur acquisition related costs including equity raising fees, legal fees, due diligence and other advisory fees (2015: $5.126 million). In the year ended 30 June 2015, equity raising fees of $3.8 million were recognised in equity and $1.3 million were included in administrative expenses and no further fees have been recognised in the year ended 30 June 2016. Identifiable assets acquired and liabilities assumed Cash and cash equivalents Trade and other receivables Inventories Tax receivable Other assets Goodwill Other intangible assets Property, plant and equipment Net deferred tax asset Investment Trade and other payables Provisions Total identifiable net assets Measurement of fair values Note 1 July 2015 $'000 15 16 17 30 3,721 20,875 20,100 2,064 1,844 62,791 102,941 2,648 1,204 1 (9,598) (2,536) 206,055 The valuation techniques used for measuring the fair value of material assets acquired were as follows. Assets acquired Property, plant and equipment Intangible assets Inventories Valuation technique Market comparison technique and cost technique: The valuation model considers quoted market prices for similar items when they are available, and depreciated replacement cost when appropriate. Depreciated replacement cost reflects adjustments for physical deterioration as well as functional and economic obsolescence. Relief-from-royalty method and multi-period excess earnings method: The relief- from-royalty method considers the discounted estimated royalty payments that are expected to be avoided as a result of the patents or trademarks being owned. The multi-period excess earnings method considers the present value of net cash flows expected to be generated by the customer relationships, by excluding any cash flows related to contributory assets. Market comparison technique: The fair value is determined based on the estimated selling price in the ordinary course of business less the estimated costs of completion and sale, and a reasonable profit margin based on the effort required to complete and sell the inventories. The trade receivables comprise gross contractual amounts due of $20.9 million, of which $71,000 was expected to be uncollectible at the date of acquisition. 87 GUD Holdings Limited and subsidiaries 32. Investments in subsidiaries (continued) Goodwill Goodwill arising from the acquisition has been recognised as follows. Consideration transferred Fair value of identifiable net assets Goodwill Note 15 1 July 2015 $'000 206,055 143,264 62,791 The goodwill is attributable mainly to the skills and technical talent of Brown & Watson’s work force, and the synergies expected to be achieved from integrating the company into the Group’s existing automotive business. None of the goodwill recognised is expected to be deductible for tax purposes. Shareholdings Parent entity GUD Holdings Limited (2) Subsidiaries Appliance and Homewares International Pty Ltd (1) (3) Brown & Watson International Pty Ltd Carsmart Workshop Pty Ltd (1) Davey Water Products Pty Ltd (1) (3) Dexion (Australia) Pty Limited (1) (3) Dexion (Shanghai) Logistics Equipment Co. Ltd Dexion Asia Limited Dexion Asia Sdn Bhd Dexion Asia Services Sdn Bhd Dexion Commercial (Australia) Pty Limited (1) (3) Dexion Integrated Systems Pty Limited (1) (3) ED Oates Pty Ltd (1) (3) GUD (HK) Limited GUD Automotive Pty Ltd (1) (3) GUD Europe Limited GUD NZ Holdings Limited Lock Focus Pty Ltd (1) (3) Monarch Pool Systems Europe S.A.S. Monarch Pool Systems Iberica S.L. Narva New Zealand Limited Sunbeam Corporation Limited (4) Sunbeam NZ Corporation Limited (4) Wesfil Australia Pty Ltd (1) (3) Country of incorporation Australia Australia Australia Australia Australia Australia Peoples' Republic of China Hong Kong Malaysia Malaysia Australia Australia Australia Hong Kong Australia United Kingdom New Zealand Australia France Spain New Zealand Australia New Zealand Australia % ownership interest 2016 2015 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 51 51 100 100 - 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 - 51 51 100 All overseas subsidiaries except for GUD (HK) Limited, Monarch Pool Systems Europe and Monarch Pool Systems Iberica are audited by an associate firm of KPMG Australia. All entities carry on business only in the country of incorporation. (1) Member of the Australian Tax Consolidated group. (2) GUD Holdings Limited is the head entity within the Australian Tax Consolidated group. (3) Relieved from the need to prepare audited financial reports under Australian Securities Commission Class Order 98/1418 as party to a deed of cross guarantee with GUD Holdings Limited, the ‘closed group’. (4) Sunbeam Corporation Limited and Sunbeam NZ Corporation Limited (collectively “Sunbeam ANZ”) are part of the disposal group (Note 31) sold on 1 July 2016. 88 GUD Holdings Limited and subsidiaries 32. Investments in subsidiaries (continued) Deed of Cross Guarantee Set out below are the financial statements for the group entities which form the 'closed group' under the Deed of Cross Guarantee: Income Statement Revenue Net finance costs Other expenses Profit before income tax Income tax expense Profit Loss from discontinued operations, net of tax Profit for the year Retained earnings at the beginning of the year Retained earnings of members leaving the group Dividends paid Retained earnings at the end of the year Balance Sheet Current assets Cash and cash equivalents Trade and other receivables Other assets Inventories Total current assets Non-current assets Other financial assets Property, plant and equipment Deferred tax assets Goodwill Other intangible assets Total non-current assets Total assets Current liabilities Trade and other payables Borrowings Current tax payables Provisions Other financial liabilities Total current liabilities Non-current liabilities Borrowings Other financial liabilities Provisions Total non-current liabilities Total liabilities Net assets Share Capital Reserves Retained earnings Total equity 2016 $'000 488,476 (12,846) (528,172) (52,542) (15,555) (68,097) (2,329) (70,426) 58,699 - (35,821) (47,548) 2015 $'000 450,527 (5,197) (378,363) 66,967 (9,375) 57,592 (1,073) 56,519 15,447 13,690 (26,957) 58,699 10,037 87,580 7,563 83,629 20,156 56,493 32,090 68,456 188,809 177,195 76,647 16,852 7,451 93,989 119,617 314,556 503,365 51,020 12,502 8,270 13,807 22,824 108,423 152,300 2,646 2,039 156,985 265,408 237,957 286,160 (655) (47,548) 237,957 122,512 13,573 3,599 75,188 26,758 241,630 418,825 47,735 27 1,284 12,041 - 61,087 6,503 506 1,368 8,377 69,464 349,361 286,160 4,502 58,699 349,361 89 GUD Holdings Limited and subsidiaries 33. Non-controlling interests Accounting policies Non-controlling interests For each business combination, the Group elects to measure any non-controlling interests in the acquiree either:  At fair value; or  At their proportionate share of the acquiree’s identifiable net assets, which are generally at fair value. Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions with owners in their capacity as owners. Adjustments to non-controlling interests are based on a proportionate amount of the net assets of the subsidiary. No adjustments are made to goodwill and no gain or loss is recognised in profit or loss. Ownership interests The following table summarises the changes in the group’s ownership interest in Sunbeam ANZ. Non-controlling interests at the beginning of the period Recognition of non-controlling interests without change in control Share of comprehensive income Non-controlling interests at the end of the period 34. Equity-accounted investees Accounting policies Interest in equity accounted investees 2016 $'000 31,193 - 318 31,511 2015 $'000 - 29,145 2,048 31,193 The Group’s interest in equity-accounted investees comprises interests in associates. Associates are those entities in which the Group has significant influence, but not control or joint control, over the financial and operating policies. Investments in associates are accounted for using the equity method. They are initially recognised at cost, including transaction costs. Subsequent to initial recognition, the consolidated financial statements include the Group’s share of the profit or loss and other comprehensive income of equity accounted investees, until the date that significant influence ceases. Transactions eliminated on consolidation Unrealised gains arising from transactions with equity-accounted investees are eliminated against the investment to the extent of the Group’s interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment. Assets held for sale Non-current assets are classified as held-for-sale if it is highly probable that they will be recovered primarily through sale rather than through continuing use. Such assets are generally measured at the lower of their carrying amount and fair value less costs to sell and gains and losses on re-measurement are recognised in profit or loss. Once classified as held-for-sale any equity-accounted investee is no longer equity accounted. 90 GUD Holdings Limited and subsidiaries 34. Equity-accounted investees (continued) Summary financial information The following table summarises the financial information of Jarden Asia as included in its own financial statements and reconciles the summarised financial information to the carrying amount of the Group’s interest in Jarden Asia. Current assets Non-current assets Current liabilities Non-current liabilities Net assets (100%) Group’s share of net assets Net assets (49%) 1 Foreign currency translation Carrying amount of interest in associate Revenue Loss and total comprehensive income (100%) Group’s share of loss and total comprehensive income 2016 $'000 13,213 842 985 15,135 (2,065) 49% - - - 25,028 (7,490) 49% 2015 $'000 12,918 861 1,404 6.645 5,731 49% 2,808 (479) 2,329 8,078 (2,190) 49% Share of loss and total comprehensive income of equity accounted investees, net of tax 1 (2,329) (1,073) 1 After the Group’s interest was reduced to zero, equity accounting ceased as the Group has no legal or constructive obligation to make payments on behalf of the investee. 91 GUD Holdings Limited and subsidiaries Other Notes 35. Superannuation commitments The Group contributes to a number of defined contribution superannuation funds (the accumulating benefit type) for which no actuarial assessments are required to be made and which were established to provide benefits for employees or their dependants on retirement, resignation, disablement or death. Benefits are provided in the form of lump sum payments subject to applicable preservation rules. The Group contributes a percentage of individual employees' gross income and employees may make additional contributions on a voluntary basis. The Group has no further obligations beyond the payment of the contributions. 36. Key management personnel P.A.F. Hay (Non-executive, resigned 1 August 2015) The key management personnel (including Non-Executive Directors) of GUD Holdings Ltd, and its subsidiaries, during the year have been identified as the following persons:  R.M. Herron (Chairman, Non-executive)  A. L. Templeman-Jones (Non-executive, appointed 1 August 2015)   M.G. Smith (Non-executive)  G.A. Billings (Non-executive)  D.D. Robinson (Non-executive)  J.P. Ling (Managing Director)  M.A. Fraser (Chief Financial Officer)   D. Birch (Chief Executive – E D Oates Pty Ltd)  G. Nicholls (Chief Executive – GUD Automotive Pty Ltd, appointed 1 July 2015)  R. Pattison (Chief Executive – Brown & Watson International Pty Ltd, appointed 1 July 2015)  D. Worley (Chief Executive – Davey Water Products Pty Ltd)  T. Cooper (Managing Director – Wesfil Australia Pty Ltd)   T. Richards (Chief Executive – Dexion Limited, appointed on 5 October 2015) P. O’Keefe (Chief Executive – Dexion Limited, resigned on 2 October 2015) K. Hope (Chief Executive – Sunbeam Corporation Ltd) Key management personnel compensation policy The compensation policy and disclosure of compensation relating to key management personnel is detailed within the Remuneration Report contained in the Directors' Report. Key management personnel compensation The aggregate compensation of the key management personnel of the Group is set out below: Short-term employment benefits Long-term benefits Post-employment benefits Share based payments 2016 $ 2015 $ 6,088,119 5,637,181 75,164 373,807 607,404 7,144,494 88,468 341,590 1,032,531 7,099,770 92 GUD Holdings Limited and subsidiaries 37. Related parties Directors Details of Directors' compensation is disclosed in Note 36 and the Remuneration Report. Transactions with key management personnel and their related parties The Group's policy is that the sale and purchase of goods and services with key management personnel are made under normal customer and supplier relationships and on normal commercial terms and conditions. The sale of goods to key management personnel are on terms no more favourable than made available to other employees. At 30 June 2016, key management personnel held directly, indirectly or beneficially 387,558 ordinary shares (2015: 207,640) in the Group. Performance rights issued under the 2016 plan will partially vest and, as a result, key management personnel will be issued an additional 162,798 (2015: 31,297 shares issued pursuant to partial vesting of the 2015 plan). Transactions with entities in the wholly-owned Group GUD Holdings Limited is the ultimate parent entity in the wholly-owned group comprising the Company and its wholly-owned subsidiaries, as disclosed in Note 32. Entities in the wholly-owned group advanced and repaid loans, paid and received dividends, provided marketing, product sourcing, accounting and administrative assistance and sold and purchased goods to other group companies during the current and previous financial years. The Group's policy is that these transactions are on commercial terms and conditions with the exception of loans between Australian entities and loans between New Zealand entities which are not interest bearing. Loans between entities in the wholly-owned group are repayable on demand. Other related party transactions with entities in the wholly-owned Group Wesfil Australia Pty Ltd leases its Sydney premises from an entity related to a Director of Wesfil Australia Pty Ltd. Net rental expense was $436,000 excluding GST (2015: $411,000 excluding GST). The Group's policy is that related party lease arrangements are undertaken with commercial terms and conditions. 38. Parent entity disclosures As at and throughout the financial year ending 30 June 2016 the parent company of the Group was GUD Holdings Limited. Results of the parent entity Profit for the period Other comprehensive income Total comprehensive income for the period Financial position of the parent entity at the year end Current assets Total assets Current liabilities Total liabilities Net assets Total equity of the parent entity comprising of: Share capital Retained earnings / (accumulated losses) Other reserves Total equity GUD Holdings Limited 2016 $'000 2015 $'000 (63,161) 841 (62,320) 71,219 440,531 41,895 196,956 243,575 286,160 (44,138) 1,553 243,575 41,064 (593) 40,471 106,186 354,989 13,377 12,460 342,529 286,160 54,003 2,366 342,529 93 GUD Holdings Limited and subsidiaries 38. Parent entity disclosures (continued) Parent entity contingencies Contingent liabilities GUD Holdings Limited 2016 $'000 2015 $'000 68,452 57,004 The parent entity is party to two guarantees relating to subsidiaries. The bank borrowing facility described in Note 21 requires the parent entity to guarantee the bank borrowings of GUD NZ Holdings Limited which in turn guarantees the obligations of the parent entity, i.e. a cross guarantee. No liability is recognised by the parent entity as GUD NZ Holdings Limited is expected to be able to meet its debts as they fall due. The parent entity is also party to a deed of cross guarantee as described in Note 32. There is no expectation of a liability to the parent entity as a result of this guarantee. As a result of the above assessments, the fair value has been deemed to be nil and no liability has been recorded. Other than noted above the parent entity has no material contingent liabilities at 30 June 2016. 39. Contingent liabilities The Group had no material contingent liabilities at 30 June 2016 (2015: Nil). 40. Subsequent events On 1 July 2016 the Company disposed of its remaining interests in Sunbeam ANZ and Jarden Asia for estimated consideration of $34.2 million (Note 31). Other than the sale of the remaining interests in Sunbeam ANZ and Jarden Asia as described above, and the final dividend for the year being declared, no matters or circumstances have arisen since the end of the financial year that have significantly affected or may significantly affect the operating results or state of affairs of the Group. 94 GUD Holdings Limited and subsidiaries Directors’ Declaration In the opinion of the directors of GUD Holdings Limited (the “Company”): (a) the consolidated financial statements and notes and the remuneration disclosures that are contained in the Remuneration Report included in the Directors’ report are in accordance with the Corporations Act 2001, including: 1. giving a true and fair view of the financial position of the Group as at 30 June 2016 and of its performance for the financial year ended on that date; 2. complying with Australian Accounting Standards and the Corporations Regulations 2001; and (b) there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due and payable. There are reasonable grounds to believe that the Company and the group entities identified in Note 32 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 between the Company and those group entities pursuant to ASIC Class order 98/1418. The Directors’ draw attention to the basis of preparation (Note 1) of the consolidated financial statements, which includes a statement of compliance with International Financial Reporting Standards. The Directors have been given the declarations required by section 295A of the Corporations Act 2001 from the Managing Director and the Chief Financial Officer for the financial year ended 30 June 2016. Signed in accordance with a resolution of the Directors pursuant to section 295(5) of the Corporations Act 2001. On behalf of the Directors R.M. Herron Director J.P. Ling Director Melbourne, 28 July 2016 95  ABCD Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001 To: the directors of GUD Holdings Limited I declare that, to the best of my knowledge and belief, in relation to the audit for the financial year ended 30 June 2016 there have been: (i) (ii) no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit/review; and no contraventions of any applicable code of professional conduct in relation to the audit. KPMG Suzanne Bell Partner Melbourne 28 July 2016 KPM_INI_01 PAR_SIG_01 PAR_NAM_01 PAR_POS_01 PAR_DAT_01 PAR_CIT_01 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Liability limited by a scheme approved under Professional Standards Legislation. 96  ABCD Independent auditor’s report to the members of GUD Holdings Limited Report on the financial report We have audited the accompanying financial report of GUD Holdings Limited (the “Company”), which comprises the consolidated balance sheet as at 30 June 2016, consolidated income statement and consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated cash flow statement for the year ended on that date, notes 1 to 40 comprising a summary of significant accounting policies and other explanatory information and the directors' declaration of the Group comprising the Company and the entities it controlled at the year's end or from time to time during the financial year. Directors’ responsibility for the financial report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that is free from material misstatement whether due to fraud or error. In the note 1, the directors also state, in accordance with Australian Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements of the Group comply with International Financial Reporting Standards. Auditor’s responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of the financial report that gives a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. We performed the procedures to assess whether in all material respects the financial report presents fairly, in accordance with the Corporations Act 2001 and Australian Accounting Standards, a true and fair view which is consistent with our understanding of the Group’s financial position and of its performance. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Liability limited by a scheme approved under Professional Standards Legislation. 97 ABCD Independence In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. Auditor’s opinion In our opinion: (a) the financial report of the Group is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the Group’s financial position as at 30 June 2016 and of its performance for the year ended on that date; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001. (b) the financial report also complies with International Financial Reporting Standards as disclosed in note 1. Report on the remuneration report We have audited the Remuneration Report included in the directors' report for the year ended 30 June 2016. 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 auditing standards. Auditor’s opinion In our opinion, the remuneration report of GUD Holdings Limited for the year ended 30 June 2016 complies with Section 300A of the Corporations Act 2001. Report on non-IFRS financial information We have audited the non-IFRS financial information comprising the Non-statutory compensation received by Senior Executives disclosure set out in section 4.2 of the Remuneration Report for the year ended 30 June 2016. The directors of the Company are responsible for the preparation and presentation of the non-IFRS financial information in accordance with the basis of preparation set out in Section 4.2, Non-statutory compensation received by Senior Executives, of the Remuneration Report for the year ended 30 June 2016. Our responsibility is to express an opinion on the non-IFRS financial information, based on our audit conducted in accordance with auditing standards. 98 ABCD Auditor’s opinion In our opinion, the non-IFRS financial information comprising the Non-statutory compensation received by Senior Executives disclosure set out in section 4.2 of the Remuneration Report for the year ended 30 June 2016 is prepared, in all material respects, in accordance with the basis of preparation set out in section 4.2, Non-statutory compensation received by Senior Executives, of the Remuneration Report for the year ended 30 June 2016. KPMG Suzanne Bell Partner Melbourne 28 July 2016 99 GUD Holdings Limited and subsidiaries Additional Shareholder Information The issued shares of the Company are of the one class with equal voting rights and are all quoted on the ASX. Distribution of Shareholdings as at 17 August 2016 Shares held 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over Total No. of shareholders 3,167 4,692 1,229 713 28 9,829 % 32.22 47.74 12.50 7.25 0.29 100 Shares 1,573,911 11,858,035 8,704,278 13,635,188 49,913,173 % 1.84 13.84 10.16 15.91 58.25 85,684,585 100.00 There are 411 shareholders holding less than a marketable parcel of shares. A marketable parcel is $500.00. The Twenty Largest Shareholders as at 17 August 2016 HSBC Custody Nominees (Australia) Limited J P Morgan Nominees Australia Limited Citicorp Nominees Pty Limited National Nominees Limited BNP Paribas Noms Pty Ltd < DRP > Argo Investments Limited Citicorp Nominees Pty Limited < Colonial First State Inv A/C > RBC Investor Services Australia Nominees P/L < PI Pooled A/C > BNP Paribas Nominees Pty Ltd < Agency Lending DRP A/C > RBC Investor Services Australia Nominees Pty Limited < BK Cust A/C > AMP Life Limited RBC Investor Services Australia Nominees Pty Ltd < BK Mini A/C > Warbont Nominees Pty Ltd < Unpaid Entrepot A/C > Australian Executor Trustees Limited < No 1 Account > HSBC Custody Nominees (Australia) Limited - GSCO ECA BNP Paribas Nominees Pty Ltd < Agency Lending Collateral > HSBC Custody Nominees (Australia) Ltd < NT-Comnwlth Super Corp A/C > Mr Jonathan Peter Ling Powerwrap Limited < Scheme – IML Trades A/C > Sandhurst Trustees Ltd < JMFG Consol A/C > Number of Shares 12,824,918 11,453,099 7,212,466 6,663,696 3,307,161 1,772,013 965,427 824,947 536,467 536,153 488,540 474,184 425,897 290,791 228,795 221,000 211,008 189,745 173,421 161,741 % 14.97 13.37 8.42 7.78 3.86 2.07 1.13 0.96 0.63 0.63 0.57 0.55 0.50 0.34 0.27 0.26 0.25 0.22 0.20 0.19 Totals: The Twenty Largest Shareholders of Ordinary Fully Paid Shares 48,961,469 57.14 Substantial Shareholder of GUD Holdings Limited As at 17 August 2016, the current notices of substantial shareholders were: Legg Mason Asset Management Australia Limited Number of Shares 5,465,704 % 6.40 100 SHAREHOLDER SERVICES AND INFORMATION Dividends/Dividend Reinvestment Plan The GUD Holdings Limited DRP Plan is currently suspended. Direct Payments to a Bank, Building Society or Credit Union Shareholders are encouraged to have cash dividends paid directly into any bank, building society or credit union account in Australia. You can update your account details by accessing the share registry Investor Centre at www.investorcentre.com Uncertificated Issuer Sponsored Holdings The Company register contains uncertificated holdings under the Australian Securities Exchange (“ASX”) CHESS system. Share certificates are not issued and shareholders receive regular statements of their holdings under the Company- sponsored scheme. Stock Exchange Listing GUD is listed on the ASX under the name GUD Holdings Limited and under the code GUD. Change of Address or Name It is important that shareholders notify the share registry or their broker in writing immediately when there is a change in their address or name. For issuer sponsored holdings: please notify the share registry in writing and indicate the details of your new/previous name, your new/previous address and your security reference number (“SRN”), or change the details online at their website at www.investorcentre.com. For CHESS/broker sponsored holdings: please notify your broker in writing if you change your name and/or address. Share Holding Consolidation Shareholders are encouraged to consolidate shareholding into one name and identification number. Please download a ‘Request to Consolidate Holdings’ form from the share registry Investor Centre at www.investorcentre.com under Company Information. Alternatively, an application should be made to the share registry – Computershare Investor Services Pty Limited (see address below). Shareholders with broker sponsored holdings must contact their broker. Annual Report Mailing List Shareholders are encouraged to access and view the Company’s Annual Report online at www.gud.com.au. Shareholders who do not wish to receive reports should advise the share registry in writing or by accessing the share registry Investor Centre at www.investorcentre.com. Shareholders can select the method by which they receive shareholder information, including dividend advice, Notice of Annual General Meeting and Proxy. Tax File Number (“TFN”) While it is not compulsory for shareholders to provide a TFN, the Company is obliged to deduct tax from non-fully franked dividends paid to residents in Australia who have not supplied such information. Shareholders can update their TFN by accessing the share registry Investor Centre at www.investorcentre.com Continuous Disclosure The Company complies with the requirements of the ASX Listing Rules. Shareholders may view all Company announcements at www.asx.com.au . Shareholders may also obtain updated information and recent announcements concerning the Company by visiting the Company’s website at www.gud.com.au . Enquiries Shareholders with questions about their shareholding should contact Computershare Investor Services Pty Limited who maintains the share register on behalf of the Company. Enquiries should be addressed to: Computershare Investor Services Pty Limited Enquiries Within Australia - 1300 850 505 Enquiries Outside Australia – 61 3 9415 4000 Investor Enquiries Facsimile Number – 61 3 9473 2500 Yarra Falls, 452 Johnston Street, Abbotsford Vic 3067 Postal Address – GPO Box 2975 Melbourne Vic 3001 Website – www.investorcentre.com Email: www.investorcentre.com/contact 101 

Continue reading text version or see original annual report in PDF format above