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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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
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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
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