Annual Report
GUD Holdings Limited
(ABN 99 004 400 891)
Year Ended 30 June 2017
Table of Contents
Directors’ Report………………………………………………………………………………………………………………………………………….1
Operating and Financial Review……………………………………………………………………………………………………………………7
Remuneration Report (Audited)………………………………………………………………………………………………………………….21
Consolidated Financial Statements……………………………………………………………………………………………………………..35
Additional Shareholder Information and Services……………………………………………………………………………………..105
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 2017.
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). He was formerly Non‐Executive
Director of Insurance Manufacturers Australia Ltd (retired January 2017) and Kinetic Superannuation Fund (retired
February 2017). Mr Herron is Immediate Past President and former Chairman of the Royal Automobile Club of
Victoria (RACV) Ltd (retired December 2014).
Mr Herron was appointed to the Board of the Judicial Commission of Victoria effective February 2017.
A L Templeman‐Jones*
BComm MRM EMBA CA FAICD
Appointed Non‐Executive Director on 1 August 2015.
Ms Templeman‐Jones is currently the Chair of CBA Wealth Advice subsidiary licensee companies; a Non‐Executive
Director of HT & E Limited (formerly 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. Anne
previously served as a Non‐Executive Director of Pioneer Credit Limited (retired November 2016), Notre Dame
University (retired December 2016) and HBF Health Limited (retired October 2014).
Ms Templeman‐Jones has considerable executive experience in institutional and commercial banking, wealth
management and insurance, having previously held a number of senior executive roles within Westpac and ANZ.
M G Smith*
Dip. Business (Marketing) FAMI CPM FAIM FAICD
Appointed Non‐Executive Director on 26 May 2009.
Mr Smith is a former Non‐Executive Director and Chairman of Patties Foods Limited (retired September 2016). 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 appointed Chairman of Azure
Healthcare Ltd on 21 October 2015. He was appointed a Non‐Executive Director of Clover Corporation Limited on
20 May 2013, a Non‐Executive Director of Escala Partners Limited on 9 March 2016 and a Non‐Executive Director of
DomaCom Limited on 7 November 2016.
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.
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Directors’ Report
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 executives
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 31 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.
Directors’ attendances at meetings
The Board held nine 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
9
9
9
9
9
9
9
9
9
9
9
9
4
4
4
4
4
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4
4
4
4
4
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5
5
5
5
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5
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Directors
R M Herron
A L Templeman‐Jones
M G Smith
G A Billings
D D Robinson
J P Ling 1
1 Jonathan Ling attends committee meetings by invitation.
It is the Board’s practice that the Non‐Executive Directors meet regularly without the presence of Management.
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Directors’ Report
Directors’ interests and benefits
Directors are not required to hold any shares in the Company. Nevertheless, Directors do hold shares. The current
shareholdings are shown in the table below.
Directors
R M Herron
A L Templeman‐Jones
M G Smith
G A Billings
D D Robinson
J P Ling
Own name
Private
company / trust
Total 30 June 2017
Total 30 June
2016
Shares held beneficially
10,768
540
‐
‐
‐
189,745
34,455
4,502
35,373
11,250
13,000
26,528
45,223
5,042
35,373
11,250
13,000
45,223
3,292
30,373
11,250
13,000
216,273
143,422
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.
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 7‐20, 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
Acquisitions
The following acquisitions were completed during the year ended 30 June 2017 and are expected to provide the
Group with an expanded presence in automotive aftermarket parts.
GEL ANZ
On 1 October 2016, subsidiaries of the Company acquired the net assets of Griffiths Equipment Limited (“GEL NZ”)
and 100% of the shares and voting interests of Griffiths Equipment Pty Ltd (“GEL Aust”) with businesses in New
Zealand and Australia, respectively. The total estimated consideration for GEL NZ and GEL Aust (collectively “GEL
ANZ”) is $9.117 million.
Consideration of $7.323 million has been paid.
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Directors’ Report
The Company has also agreed to pay the selling shareholders contingent consideration based on the consolidated
earnings of GEL ANZ for the period from 1 October 2016 to 30 September 2017. Management estimated the present
value of the contingent consideration at acquisition to be $1.794 million. During the year ended 30 June 2017,
contingent consideration was revalued to $1.952 million and therefore $158,000 was recognised as unwinding of
discount and recorded in net finance costs.
During the period ended 30 June 2017, the Company incurred approximately $93,000 of acquisition related costs
including legal fees, due diligence and other advisory fees. This amount has been included in administrative
expenses.
IMG
On 1 June 2017, a subsidiary of the Company acquired 100% of the shares in Innovative Mechatronics Group Pty Ltd
(“IMG”) with business in Australia. The total estimated consideration for IMG is $10.247 million.
Initial consideration of $6.124 million was paid by 1 June 2017. Subsequent to acquisition an additional inventory
amount of $271,000 less a net cash adjustment of $99,000 was calculated, giving rise to an increase in the
consideration payable of $172,000.
The Company has also agreed to pay the selling shareholders contingent consideration based on the earnings of IMG
for the period from 1 July 2017 to 30 June 2020. Management estimated the present value of the contingent
consideration at 30 June 2017 to be $3.951 million.
During the period ended 30 June 2017, the Company incurred approximately $99,000 of acquisition related costs
including legal fees, due diligence and other advisory fees. This amount has been included in administrative
expenses.
Disposals
Sunbeam
Effective 1 July 2016, the Company disposed of:
Its remaining 51% shareholding in Sunbeam Australia and New Zealand (“Sunbeam ANZ”), comprising
Sunbeam Corporation Limited and Sunbeam NZ Corporation Limited, to Holmes Products (Far East) Limited
(“HPFE”), a subsidiary of Jarden Corporation. The Company therefore ceased control and has de‐
consolidated Sunbeam ANZ from 1 July 2016.
Its 49% shareholding in Jarden Consumer Solutions (Asia) Limited (“Jarden Asia”) to HPFE.
In respect of the sale of 51% of Sunbeam ANZ, consideration comprised:
An initial cash deposit of $29.522 million received by the Company on 1 July 2016; and
Completion consideration received of $1.006 million based on its fair value at disposal date and representing
the balance of the proceeds on sale.
In respect of the sale of 49% of Jarden Asia, consideration comprised cash of $3.993 million received by the Company
on 1 July 2016.
Lock Focus
On 1 December 2016, the Company disposed of the business of its subsidiary, Lock Focus Pty Ltd (“Lock Focus”) for
a total consideration of $4.92 million which was received on 30 November 2016.
During the year ended 30 June 2017, the Company incurred approximately $228,000 of disposal related costs
including legal fees, due diligence and other advisory fees, all of which have been included in administrative
expenses.
Dexion
On 1 June 2017, the Company disposed of the shares of its subsidiary, Dexion (Australia) Pty Ltd (“Dexion”) to Tech‐
Link Storage Engineering Pte Ltd (“Tech‐Link”). The total estimated consideration for Dexion is $12.166 million.
For the year ended 30 June 2017, Dexion contributed $141.7 million of revenue and $54.207 million of EBIT loss to
the Group’s results.
By 31 May 2017 consideration of $9.5 million had been received The Company estimates an additional cash
consideration of $2.666 million based on cash and debt balances as at 31 May 2017. The Company expects this to
be received by 30 September 2017.
During the year ended 30 June 2017, the Company incurred approximately $2.829 million of disposal related costs
including employee incentives, legal fees, due diligence and other advisory fees, all of which have been included in
administrative expenses.
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Directors’ Report
Share Capital
At 30 June 2017, there were 85,739,547 (2016: 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 23 cents per share in respect of the year ended 30 June 2016 was declared on
28 July 2016, and paid on 2 September 2016 amounting to $19,707,455. This dividend was fully franked.
An interim ordinary dividend of 21 cents per share in relation to the half year ended 31 December 2016 was
declared on 1 February 2017 and paid on 3 March 2017, amounting to $18,005,305. This dividend was fully
franked.
A final ordinary dividend of 25 cents per share in respect of the year ended 30 June 2017 was determined
on 27 July 2017, and is payable on 1 September 2017 to shareholders registered on 18 August 2017. This
dividend will be fully franked. Shares will trade ex‐dividend on 17 August 2017. 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
98 of the accompanying Financial Statements and forms part of this 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 461,759 Performance Rights were granted to executives under the GUD Holdings 2019
Long Term Incentive Equity Plan. This included 74,509 Performance Rights granted to the Managing Director in
October 2016 after receiving approval of shareholders at the 2016 Annual General Meeting. In addition, as a result
of executives departing the Group during the year, a total of 89,841 Performance Rights were determined by the
Board to have lapsed.
As a result of meeting TSR targets, 446,151 performance rights granted in August 2014 vested and no performance
rights lapsed in relation to the GUD Holdings 2017 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.
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.
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Directors’ Report
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 37 to the financial statements.
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
In the opinion of the Directors, 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.
R M Herron
Chairman of Directors
J P Ling
Managing Director
Dated at Melbourne, 27 July 2017
6
Operating and Financial Review
Overview
Following the pivotal change to the shape of GUD’s business portfolio in 2015‐16 with the acquisition of Brown &
Watson International, the 2016‐17 year was characterised by further noteworthy portfolio activities.
These include the disposal of the Group’s remaining interests in the Sunbeam businesses (which was described in
detail in last year’s Operating and Financial Review), sale of the Lock Focus security business (November 2016) and
the Dexion warehouse racking and systems business (June 2017) and two relatively small automotive acquisitions –
Griffiths Equipment (October 2016) and Innovative Mechatronics Group (June 2017).
The rationale behind each of these portfolio defining activities, along with the details of each transaction, are
described more fully in the following Strategy Review – Portfolio Management section of this Review.
It is important to appreciate that the overarching objectives for these activities have been twofold:
1. To remove businesses from the portfolio that have been underperforming and for which GUD is not the natural
owner and is not in the best position to optimise performance, and
2. To bolster GUD’s automotive investments, as the aftermarket provides a more stable, predictable and growing
profit stream for the creation of value.
While the effort at the GUD Holdings level has been on the portfolio reshaping, through this period all GUD’s
businesses have focused on improving their cost bases, particularly around cost‐to‐serve, and on growing revenues
through increasing share‐of‐wallet programs. The emphasis more recently has changed to a major push on product
and service innovation and on embedding an innovation culture in every business.
The formative activities for this commenced in the 2014‐15 year and in the ensuing period GUD has embarked on a
far‐reaching innovation capability‐building program, which was detailed in last year’s Operating and Financial
Review. This does not signal that the focus on costs is being ignored; indeed, in the industries and sectors in which
GUD operates a strong cost management culture is mandatory to ensuring long term survival.
However, a business can only cut costs so far and, ultimately, the true measure of success is the speed at which the
business can grow its sales through innovating products and services to meet the changing needs of diverse
consumer and end user cohorts. Hence the change in emphasis to generating sales and profit growth through
introducing breakthrough products and services.
Three businesses – GUD Automotive, Davey and Oates – are well progressed with their initial innovation missions.
Davey, especially, has introduced several products over the 2016‐17 financial year that have transited through GUD’s
innovation process. More details of these activities are provided in the Innovation and Product Development Section
of this Review.
As noted last year, the portfolio activities that commenced then and that flowed through into 2016‐17, marked the
first major steps in framing the structure of the GUD of the future. The portfolio activities of 2016‐17 continued in
the same vein and have now led to the Group being positioned with most of its profitability in the automotive
aftermarket, a sector that enjoys steady annual growth, due to the growing number of vehicles on the road and the
need to service, enhance and customise those vehicles.
In addition, each of GUD’s automotive businesses enjoys a strong and unique market position, with market‐leading
brands enjoying high brand equity and a healthy track record of both product and service innovation.
The stable and sizeable profit streams and cash flows from the automotive businesses, coupled with the
contributions from the Davey water products and the Oates janitorial products businesses, provide GUD with the
strategic flexibility to pursue future portfolio options both within the automotive sector and outside of it, where
appropriate.
Following these recent actions, GUD is now a more streamlined, focused portfolio of activities and is well positioned
to become the innovation leader in its respective sectors and segments.
7
Operating and Financial Review
Financial Performance Review
Prior to commenting on financial performance for the 2016‐17 year it is important to note that, following the sale
of the Lock Focus and Dexion businesses during the year, the relevant accounts for both the current and previous
financial years have been restated to show these businesses as discontinued operations. GUD’s businesses that
remain classified as continuing operations include all the automotive businesses, Davey and Oates.
The Sunbeam small appliances businesses, the remaining interests in which were sold on 1st July 2016, was previously
classified as a discontinued operation.
Revenue
Revenue from the continuing operations increased 4% on the prior year’s level with growth recorded in all
automotive businesses totalling 11% across the year. Both Davey and Oates reported small declines in revenue, the
reasons for which are outlined below.
Total Group revenue declined 19% to $573 million from $710 million in the prior year. The major factors behind this
reduction were the absence of Sunbeam revenue in 2016‐17 due to its sale and a reduction in Dexion revenues
stemming from reduced activity in the major warehouse projects market segment. The sale of Lock Focus in
December 2016 also led to seven months without a revenue contribution from this business, albeit relatively minor
compared to the Sunbeam and Dexion components.
The primary features of the continuing revenue trends in the year are detailed hereunder.
1. The combined automotive businesses reported double digit revenue growth, over the prior year with all business
units contributing. The automotive acquisitions made during the year ‐ Griffiths Equipment (GEL) and IM Group
(IMG) ‐ provided additional growth at the levels expected at the time of the respective purchases. GEL provided
nine months of revenue, while IMG was acquired late in the year and contributed one month’s revenue.
Price increases applied early in the financial year to offset the higher cost of product from offshore suppliers
partly underpinned the revenue performance in each automotive business unit.
In addition, there were also some specific initiatives taken to expand each business unit’s revenue including:
The continuation of Ryco’s successful customer acquisition program, whereby automotive workshops are
converted to using the market leading Ryco brand of automotive filters in preference to alternative offerings.
New product introductions in the Ryco brand including the Ryco FireGuardian range of air filters designed to
meet the very specific needs of customers in the emergency fire services market segment.
Ryco added to its range of tools designed for professional mechanics by developing and introducing the Ryco
Flexible Funnel tool which makes the job of draining oil filters much simpler, less messy and, hence, more
environmentally sympathetic.
Wesfil introduced a range of replacement spark plug products to its independent reseller customer base late
in the first half, thereby further expanding its product range to meet the needs of this unique market.
Brown & Watson (BWI) recorded the highest revenue growth over the prior year as a consequence of several
factors. These include the full annual effect of new products introduced concurrently with the 2016 Narva
brand catalogue publication, targeted growth in niche market segments, such as the emergency services
lighting market, and the contribution from new products launched in the 2016‐17 year.
The introduction of the next Projecta brand catalogue by BWI at the April 2017 Australian Automotive
Aftermarket Association Show in Melbourne. Like its Narva equivalent, the catalogue provides the platform
to introduce numerous new products in the brand, the full financial effect of which will not be seen until the
2017‐18 year.
2. After reporting a return to revenue growth in 2015‐16, Davey’s sales declined marginally in the year under
review. The primary factor behind this decline was the state of demand in the Australian water products market
which led to reduced revenues in most market segments. Empirical market data is non‐existent in the sectors in
which Davey operates but anecdotal evidence from the industry, including from adjacent and complementary
product markets, would suggest that demand has been subdued.
8
Operating and Financial Review
Davey also reported a slightly lower level of sales in its export business due to a variety of unrelated factors, while
sales in the European swimming pools business unit showed a small, expected increase on the prior year as the
market continues to improve in that region and as Davey benefits from a strengthened relationship with its major
customer in this market segment.
To counter the future effects of cyclical and climate‐driven market conditions Davey has been extremely active
in developing new products and services that are less subject to these factors. Davey’s innovation activities are
described in more detail in the Innovation and Product Development Section of this Review.
3. Similar to Davey, Oates reported a small decline in revenue on the prior year’s level. In Oates’ case this was due
to two influences – the closure of the Masters hardware chain midway through the first half of the year and the
decision to cease supplying Woolworths in the grocery segment which became effective late in the first half.
Revenue growth was reported in Oates’ heartland market, the commercial and industrial cleaning supply
channel, following the record result for this customer segment in the prior financial year.
Following the CEO change at Oates late in the first half, the strategic focus for this business has also broadened
to include fully exploiting the many opportunities that present themselves in specialised market segments in the
commercial/industrial cleaning sector. Typically, these market segments require a degree of expert applications
knowledge and connected product development, and are less price and margin sensitive than the
retail/consumer markets.
Profitability
Following the sale of the Sunbeam, Lock Focus and Dexion businesses, in which a total loss on sale of $50.7 million
was reported in the year, the Group reported a net loss after tax of $7.3 million. This compares with the prior year’s
result of a net loss after tax of $43.0 million, a period in which the result was materially affected by impairment costs
associated with Dexion’s goodwill, other intangibles and inventory.
In addition, in 2016‐17 the net result included costs of $3.0 million relating to portfolio transactions and $3.6 million
of restructuring costs which were primarily related to Dexion.
Underlying net profit after tax from the continuing operations, which include the automotive businesses, Davey and
Oates improved by 11% on the prior year to $51.8 million.
Underlying EBIT from the continuing businesses improved by 2% to $83.6 million, while EBIT expanded 18% to $83.2
million. The prior year’s EBIT result included a charge of over $10.6 million relating to the earn‐out for the prior
owners of Brown & Watson International.
This underlying EBIT result came about from strong growth of 11% in the automotive businesses, which was offset
by small EBIT declines in both Davey and Oates. The primary factors affecting the profitability of each of the reporting
entities are detailed below.
1. The 11% uplift in underlying EBIT in Automotive came from a combination of organic growth and profit
contributions from the two acquisitions. Both the Ryco and BWI businesses generated profit growth from market‐
related activities including new product introductions, expanding the customer base and entry into new market
segments.
BWI’s contribution to this result was impacted by costs associated with a product recall that occurred in the last
month of the financial year.
The acquisitions that were added to GUD’s Automotive activity base in the year – Griffiths Equipment and IM
Group – contributed a total of $7 million in revenue and $1.8 million in EBIT. On an annualised basis, it is expected
that the total contributions for these two bolt‐on acquisitions will add approximately $15 million in sales and $3
million in EBIT.
2. The 24% underlying EBIT decline in Davey came about through a combination of margin reduction due to lower
sales, and from inflationary overhead cost increases. Revenue was lower in Australia due principally to weaker
seasonal demand for products such as fire fighting pumps and swimming pool products. As noted this weakness
was apparent in both Davey’s active market segments and in adjacent and complementary segments, such as
irrigation equipment.
9
Operating and Financial Review
3. Oates registered a 15% decline in underlying EBIT due to a combination of lower sales in hardware stemming
from the closure of the Masters chain and a reduction in sales in grocery as Oates withdrew from supplying
products to Woolworths supermarkets. In addition, the previously noted inability of Oates to achieve price
increases in retail segments in response to higher product costs due to currency factors has affected both
revenue and gross profit margin.
As noted above, the discontinued operations generated a net loss of just under $59 million in the year. There were
three primary components to this. The first was a loss on sale of $50.7 million, consisting of contributions from
Dexion, Lock Focus and Sunbeam. Second, these businesses generated an EBIT loss for the year totalling just under
$3 million. The final element was costs associated with the transactions and restructuring costs, which totalled $6.7
million.
Foreign Exchange
GUD continues to source inputs or completed products from suppliers based predominately in Asia, usually priced
in 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. This has been a challenge for Dexion, in particular, due to its relatively thin profit
margins which meant movements in exchange rates had a greater impact on its profitability than in other businesses.
The sale of Dexion will reduce the foreign currency transactional risk in the future.
To address the impact from exchange rate movements, GUD has in past years utilised hedges of up to 90% of the
forecast foreign currency net purchases for up to twelve months.
In the 2016‐17 year, the Group moved to a shorter period of forward cover more aligned to the period required for
our customers to observe that exchange rates have deteriorated to such an extent that a price rise may be logical.
The businesses then implement price adjustments in line with agreed customer notice periods. The hedging period
now differs between the Automotive business and Oates. Davey remains close to being naturally hedged between
imports and exports.
Currency hedging over the year continued to be addressed predominately through forward exchange contracts,
wherein the exchange rate is defined at the time of entering the contract. The cost of such instruments has trended
down in the past year. With the relatively low sales volatility in the continuing business, and the hedging approach
noted above, there is little need to hedge via options or similar instruments. Therefore, it is anticipated that
continuing to use forward instruments in 2017‐18 is a cost‐effective approach to managing currency transactional
risk.
In 2016‐17 the Automotive and Davey businesses were successful in achieving price rises in response to weakening
currencies, whereas the Oates business experienced difficulties in achieving offsetting price increases, especially in
the intensely competitive grocery and hardware market segments. Price rises have been implemented to take effect
early in the 2017‐18 financial year in light of both current exchange rates and anticipated domestic cost inflation.
Where price increases have not been possible, the businesses or product categories have other initiatives underway
to reduce cost and avoid profit erosion.
Dividends
The total dividend for the 2016‐17 year was 46 cents per share consisting of an interim dividend of 21 cents per
share and a final dividend of 25 cents per share. Both dividends were fully franked.
This compares with total dividends of 43 cents per share in the previous financial year.
The Dividend Reinvestment Plan remains suspended due to GUD’s continuing strong financial position.
10
Operating and Financial Review
Cash Generation and Capital Management
Cash flow from operating activities was $45.3 million, and this includes contributions from the discontinued
businesses.
After the progress made with net working capital in 2015‐16, the focus during the current year moved to supporting
sales growth, especially in the Automotive business. This is reflected in the sales growth seen in the year which has
driven growth in debtors, and in some cases further debtor days were granted to selected resellers in exchange for
broader ranging and sell‐through support.
There was also focus on rebalancing inventory levels in Automotive, Davey and Oates to improve each business’s
delivery performance and consequently minimise lost sales and this was reflected in the sales performance. This,
combined with inventory for new products, has seen inventory balances for continuing operations increase modestly
over the year.
The major cash commitments have been related to the automotive segment acquisitions and disposals where
payments were made for the final BWI earn‐out of $20 million, the purchase of Griffiths Equipment for an initial
cash payment of $7.3million and the purchase of IMG for an initial cash payment of $6.1 million. This is reflected in
the Consolidated Cash Flow Statement which reports:
Payments for investments of $33.2 million (adjusted for cash acquired); and
Proceeds from sale of investments of $38.3 million (net of cash disposed) from the sale of the Sunbeam ANZ,
Jarden Asia, Dexion and the Lock Focus businesses.
During the year, BWI’s income tax instalments were aligned to GUD’s instalment regime. In the prior year, the
instalment basis provided an effective deferral of tax payments which is no longer the case. This has driven a step
up in the income tax paid compared to the prior year.
The disappointing area in 2016‐17 was Dexion’s cash absorption. The business could not sustain the prior year’s net
working capital improvement due to an absence of new large projects which customarily feature substantial down
payments to offset the working capital intensive reseller and production activities. An underlying EBIT loss and costs
to support the business sale also added to Dexion’s negative cash generation.
External Financing
The company is now two years into a five‐year debt financing facility involving Westpac, National Australia Bank and
the Commonwealth Bank which expires on 1st July 2020. This comprises a fixed core facility of $185 million, and an
amortising acquisition related debt facility which currently stands at $97.5 million reducing by $15 million each year
to a balance of $62.5 million over the period of the loan.
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, denoting that GUD’s businesses operate with
a significant degree of autonomy in this regard. Traditionally, there has been very little overlap between the
businesses in respect of markets and customers served, hence the focus. However, in recent years, over which the
portfolio has become more concentrated on the automotive sector, there has been more coordination of strategy
development and execution across all the automotive businesses.
This resulted in the creation, in May 2017, of a head of all GUD’s automotive interests, with the CEOs of each
operating business reporting through to this position. Bob Pattison, who managed the GUD Automotive business
from 2004 and then BWI since GUD’s acquisition in 2015, has concurrently taken on this role as CEO of GUD’s
Automotive Division, encompassing GUD Automotive, IMG, Wesfil, BWI and GEL.
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Operating and Financial Review
The individual business or segment 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 its long‐
term objective.
The business unit and Group strategies are prepared and reviewed by the Board annually. The method adopted
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.
From the strategy work completed in recent years more clearly defined criteria for GUD’s portfolio structure have
emerged. The overarching guidelines that frame the portfolio structure now and into the future are:
Industrial, trade or commercial customer base.
Business‐to‐business sales profile.
Strong brands – either #1 or #2 in the category.
Product leadership in niche markets with a strong innovation track record.
An attractive industry structure driving sustainable returns.
Sustainable, robust market growth record and prospects.
The elements that frame the strategy are:
1. Investing in innovative product and service development to deliver breakthrough new products and/or services
that address specific customer needs, through either distinctive product features, lower overall cost 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.
Two of these have been the principal, singular focus for strategic activity in 2016‐17 – portfolio management and
innovation.
The activities aligned with each of these two are detailed in the following sections.
Portfolio Management
The 2016‐17 year was characterised by a substantial level of activity centred on reshaping GUD’s portfolio of
businesses. The rationale for this reshaping is manyfold and includes:
Strengthening GUD’s automotive interests as the automotive aftermarket provides steady, consistent
growth and relatively reliable profit streams through high market shares and strong brand positions.
Reducing GUD’s exposure to sectors that are not displaying the same growth potential, have a historical
record of volatile profitability and where the ability to build an internationally competitive business with
scale is not present.
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Operating and Financial Review
Bearing these two factors in mind the Group finalised the following portfolio adjustments in the 2016‐17 year:
1. GUD’s remaining interests in the Sunbeam appliance business joint ventures were sold to the joint venture
partner, Jarden Consumer Solution, on 1st July 2016.
2. Griffiths Equipment Limited, a New Zealand‐based business distributing and selling a range of automotive
accessories through, predominantly aftermarket channels, was acquired in October 2016.
3. The Lock Focus security products business, which had been part of GUD since 1993, was sold to Safecorp Group
Limited in November 2016.
4. Dexion, the warehouse racking systems business, was sold to Tech‐Link Storage Engineering of Singapore in June
2017.
5. A further automotive investment, the acquisition of Innovative Mechatronics Group, was completed on 1st June
2017.
The details of each of these transactions, with the exception of Sunbeam, follow. The reasoning behind and the
details of the Sunbeam divestment were described fully in last year’s Operating and Financial Review.
Griffiths Equipment (GEL) acquisition
GEL had maintained a long‐standing business relationship with BWI, being the New Zealand distributor for BWI’s
Narva and Projecta brands of automotive lighting and battery and power products.
GEL continued to operate its automotive accessories business separately since, but the benefits of bringing GEL into
the GUD stable became apparent in the ensuing period and negotiations commenced to acquire the balance of GEL’s
operations.
Griffiths has been active in the New Zealand market since 1960. It sells a broad range of automotive accessory
products to major customers such as Repco, Supercheap Auto and Mitre10 that it sources from numerous
international and local suppliers.
Its product range is marketed under brands that GEL owns, such as Wildcat, Antech and TypeS and those that it
distributes for other principals.
GEL has a small presence in the Australian market with the potential to grow substantially with BWI’s support. Its
sales turnover in Australia and New Zealand is currently around $8 million annually.
The total estimated consideration for this acquisition is $9.1 million, including $1.8 million contingent consideration
subject to business performance in the twelve months to 30 September 2017. During the nine months in which GEL
has been part of the GUD Group it contributed revenue of $6.1 million and EBIT of $1.7 million.
The transaction to acquire GEL was completed on 1st October 2016 and the business is now managed by BWI.
Lock Focus divestment
The Lock Focus security product business was GUD’s first acquisition when the Group decided in the early 1990s to
diversify from being solely an automotive filtration manufacturer and supplier. Lock Focus has been a steady, yet
relatively small, contributor to GUD’s financial performance since 1993, but in recent years, sales and profitability
had trended down as the business’s primary customer base – local original equipment manufacturers – either closed
or relocated offshore.
Therefore, with little scope to scale the business to the levels needed for it to be a material contributor to overall
profitability the decision was taken to divest this activity.
13
Operating and Financial Review
Lock Focus was sold to Safecorp Group Ltd, the owner of another niche business in the security industry, Australian
Lock Company. The transaction was completed on 1st December 2016 and GUD reported a net book loss of $3.9
million associated with this sale in the accounts.
Dexion divestment
The Dexion warehouse racking products and systems manufacturing business has been in GUD’s portfolio from
September 2010. Since acquiring Dexion GUD has applied immense effort to, and made significant investments in,
reshaping Dexion, with the objective of repositioning the business to compete on an international scale and to bring
it to satisfactory, sustainable and reliable levels of profitability and return.
Despite major progress being made, including the closure of Australian and New Zealand racking manufacturing
operations, considerable overhead restructuring and internal systems improvements, it became clear that the
achievement of returns required by GUD’s investors was still too far into the future.
As the pathway to acceptable return performance was too prolonged the decision to exit this activity was taken
early in 2016‐17 and a divestment program commenced. This concluded with the late May 2017 announcement that
Dexion had been sold to an existing industry participant – Tech‐Link Storage Engineering of Singapore – effective on
1st June 2017.
The total estimated consideration relating to this sale is $12.2 million, of which $9.5 million was received around the
end of May 2017. During the 2016‐17 year Dexion reported sales of $142 million and an underlying EBIT loss of
nearly $3 million.
Innovative Mechatronics Group (IMG) acquisition
The opportunity to acquire IMG arose during the year and the transaction was completed on 1st June 2017.
IMG is a business that is complementary to the Group’s GUD Automotive (GUDA) business. Apart from owning the
market leading Ryco brand of filters, GUDA also has a presence in the growing engine management replacement
parts category, through its long‐established Goss brand of electric fuel pumps, oxygen sensors and associated parts.
IMG also competes in the engine management replacement parts business and offers synergies to be captured by
combining the Goss brand and related activities with IMG.
The total estimated consideration paid for IMG is $10.2 million, of which nearly $4.0 million is contingent
consideration based on an earn‐out target to 30th June 2020. In the one month that IMG was a part of GUD’s
portfolio it generated sales of $0.8 million and an EBIT contribution of just under $100,000.
Although a relatively small transaction, this acquisition positions GUD as the major independent supplier of engine
management products to the Australian aftermarket.
Innovation and Product Development
Innovation and new product development has been a fundamental component of activity across all 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 and services 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 imperative.
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 and concluded in 2016‐17. This
structured program involved capability building across a group of people from a broad spectrum of disciplines in
every business.
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Operating and Financial Review
The aim of the program is to embed a common innovation process, based largely 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.
The business that has made the most progress in this area is Davey Water Products. Davey was early to embrace the
innovation process and has experienced many major learnings in relation to the process steps over the last two
years. Consequently, it has successfully introduced two new products to the market and has a number of other
potential ideas approaching commercialisation.
The first product to transit through the innovation process is the Remote Start Firefighter® pump. This product was
partially born in response to the recommendations coming from the Royal Commission covering the Black Saturday
bushfires in Victoria. The product allows homeowners to remotely start and stop their home fire fighting pumps
through utilising connectivity through the mobile telephone network. The product incorporates many features to
assist users and homeowners, including reporting on the pump’s operational status.
The second product commercialised after progressing through the innovation process was introduced to potential
customers at the May 2017 Design BUILD show in Sydney. This is the Monsoon IQ® pump set system that allows
users to smartly monitor and manage a variety of performance variables on their water infrastructure serviced by a
Davey pump set. Typical users include high rise building managers, golf course curators, farmers and irrigators.
Several other potential product break‐throughs are currently being assessed by Davey’s innovation teams and these
include water solutions for dairy farmers, for householders without mains water supply and for swimming pool
owners.
Following a year of intensive new product activity in 2015‐16, which included the launch of a diesel particulate filter
program and SYNTEC™ oil filters for high performance vehicles, the Ryco business continued with its innovation
initiatives in 2016‐17. The FireGuardian air filter product range was developed and introduced to the emergency
services sector and contributed to revenue growth in the year, as previously noted.
Additionally, numerous new product and service concepts were investigated, through the scan phase of GUD’s
innovation process, and these investigations led to decisions to terminate further activity. Whilst no innovative
products or services emanated from these investigations the knowledge accrued from them has proven useful in
providing a more complete understanding of user and customer issues which, in turn, have opened other
opportunities for exploration. This pattern is typical for any well‐structured innovation process.
Consequently, the Ryco business is currently exploring innovation opportunities in two market segments that
provide substantial revenue growth potential – high performance air filters and heavy‐duty filtration.
As reported last year, on acquisition by GUD the Brown & Watson business had a broad ranging new product
introduction program that fully utilised the product development resources in the business. This program supported
the new product introductions associated with the 2016 Narva and the 2017 Projecta catalogue updates. In excess
of 700 new products were introduced to the market in association with the catalogues’ publication.
Because of this intensive activity the decision was made to hold back on introducing the GUD innovation process
and tools at BWI until late in the 2016‐17 financial year. With capability building for BWI people occurring in the
third quarter of the year the business is now positioned to embark on its first strategic innovation missions, which
will complement the continuation of work occurring on the normal new product program.
These missions will focus on identified strategic opportunity areas for BWI, with activity to commence early in the
2017‐18 year.
Oates has been applying GUD’s innovation process and tools to numerous opportunities in both the consumer and
professional market segments over the course of the year. Investigations into user needs in some niche commercial
market segments have uncovered many points of frustration that potentially lead to the development of innovative
product and service solutions. In particular, potential exists in the aged/health care sector, in intense cleaning in
shopping centres and in the way that Oates services and manages smaller commercial accounts. At the time of
writing all these innovation missions are being actively pursued by the innovation team at Oates.
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Operating and Financial Review
In addition to the work described above, which is focused on the commercial cleaning market, Oates is pursuing
innovation opportunities in the way it presents its products to household customers in large retail outlets such as
supermarkets and hardware chains. This is essentially a product communication investigation rather than a product
solution, which exemplifies the scope of innovation at GUD – it is all encompassing involving products, services,
internal processes and marketing solutions.
The summary position with innovation is that all of the continuing businesses in the GUD portfolio, with the
exception of Brown & Watson, have now progressed through at least one cycle of the innovation process and,
through absorbing the learnings that have come through completing a cycle, are positioned to accelerate their
innovation activities in the 2017‐18 year. The result should be more new products and services, delivered faster,
contributing to revenue and margin growth across the year.
Corporate Social Responsibility
People, Safety and Culture
During the year, GUD conducted its third iteration of a broad‐based employee survey to understand how people
across the businesses were responding to management, leadership and the significant changes being made to the
Company’s business portfolio and within the businesses.
With these changes, it continues to be important to understand how people are coping, and how communication
around them mitigates personal concerns. The responses to the survey shape the approach to the communication
of plans and objectives of the Board and senior management, and identify where management might need to invest
more time with personnel.
High performance is part of the culture of the businesses, an expectation as much as a vision. Individuals who have
much to contribute, and show initiative, are given the opportunity to demonstrate their abilities and gain recognition
for their achievements. GUD is cultivating its leaders of tomorrow.
Cross‐business projects and teams continue to be a significant part of GUD. However, these are evolving in nature
and, where the immediate purpose has been addressed, some have been disbanded or scaled back, whilst new
project teams are established to tackle emerging risks and opportunities. These teams develop a broader cross‐
section of people having a greater understanding of the businesses, the risks and opportunities, create an
environment for sharing of knowledge and solutions, so creating a pool of talent with readily transferable skills
available to be applied where best utilised. GUD’s Information Technology Council, discussed last year, identified
the need for a corporate resource to lead the harmonisation of the approach to the many technology risks and
opportunities, develop cohesive and comprehensive policies and bring thought leadership on technology to the
Company.
GUD’s safety culture is well entrenched. With the recent sale of Dexion, the Group’s businesses are now
predominantly a common model of warehousing and distribution, with elements of manufacturing within Davey and
the recently acquired IM Group. The fundamental drivers of improved safety will remain, the focus being on safety
leadership, teamwork and individual accountability. The related programs and initiatives enhance safety culture,
with management leadership on visible safety and employee participation at all levels, in regular safety campaigns
and safety conversations.
The GUD Safety Excellence Awards promote, encourage, recognise and reward businesses, teams and individuals
who place a high value on accident prevention and promotion of safety in the workplace. At the second annual
Safety Excellence Awards held in August 2016, Ivan Kish from Davey Water Products was recognised in the individual
category for his initiative in electrical safety at the work site, whilst teams at GUD Automotive (for developing a
safety plan for an offsite event at a heavily trafficked customer site) and Brown and Watson (for significant
improvements in traffic management) were recognised, as was the Davey Water Products business with an
innovative approach to increasing the number of staff engaging in safety conversations.
16
Operating and Financial Review
The Awards are being run again this year and noteworthy submissions have been received from many of the
businesses competing to be the best and safest in the GUD Group.
Having invested considerably in pertinent training last year, this year GUD focused on implementing programs to
utilise that training, undertaking numerous incident causation investigations in order to understand and learn from
the factors that contribute to an incident and the latent hazards within the workplace system and organisation. The
knowledge gained was shared across the businesses.
For many years GUD has run a comprehensive program of annual inspections of the major sites by trained personnel
from other businesses within the Group. This year the focus turned to the smaller and remote branch warehouses
in the Group, of which there are fifteen, where a number of incidents had raised the prospect that previously safety
business plans were not addressing those sites and the common risks they faced.
In addition, the team started to focus on the reporting of safety incidents which, while they may not have resulted
in an injury, indicated that there had been a failure of some description. Analysis of these incidents provides further
opportunity for improvement.
The results on safety across the businesses are evident in the following table.
Measure
Total Recordable Injury Frequency Rate
Lost Time Injury Frequency Rate
2014
14.3
5.6
Year ended 30 June
2015
8.2
1.8
2016
7.1
4.5
2017
9.6
5.8
GUD recognises the tireless efforts of the many people who have actively contributed to improving safety culture
and outcomes.
GUD seeks to ensure equality and fairness in proposing and recommending salary and career decisions for all
employees. Doing so forms the basis of ensuring sustainability into the future, in areas such as recruiting, career and
succession planning, development planning and workforce planning. The objective is to grow the pool of talent
available and to ensure that personnel with the right skills and experience are best utilised, and that all personnel
are given opportunities to succeed.
GUD’s 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,
including the GUD policy, on diversity is included in the Corporate Governance Statement, which is available on the
website at http://www.gud.com.au/corporate‐governance.
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.
GUD’s businesses continue to be aware of and plan for sustainability risks of varying degrees found across the
businesses in product quality, labour, supply reliability, health and safety and the environment. Some businesses are
better prepared and more progressed in the identification, analysis and consideration, and planning and
implementing a response to these risks.
Ethical conduct in business is a key pillar of GUD’s sustainability. GUD has had a Code of Conduct for many years,
which includes provisions for the protection of ‘whistle‐blowers’. The Code of Conduct has been strengthened
recently through broad‐based training of staff in areas of privacy, anti‐bribery and corruption, 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. Because of their nature, 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.
An evaluation of all organisational risks at business unit 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 the priorities for mitigation actions. These risks are
material business risks that could adversely affect achievement of GUD’s strategic objectives that are outlined in the
‘Strategy’ section above and financial prospects described in the ‘Outlook’ section.
The risks identified for priority are detailed below.
Brand reputation risk due to poor product quality. 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.
Growing risks to IT security. These risks have played out in business and government over the year, although
fortunately not impacting GUD adversely. GUD has dedicated significant resources to IT strategy, which includes
actions to mitigate the occurrence and potential impact of cyber risk, by developing a robust technology platform,
and alerting and training all staff on simple precautions and actions to reduce the risk.
Ethical business behaviour is key to GUD’s reputation. However, risks of bribery and corruption are a constant
threat, to both corporate and individual reputation, as well as financially and to personal liberty. The Company
assessed these risks and established policies and processes, including training of staff, to mitigate them.
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 and the Automotive businesses import their full product needs while Davey manufactures
and assembles, as well as sources from external suppliers. There are several individual risks that can be categorized
under this topic, 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.
Towards the end of the financial year the Group began a major review and updating of its risk management
methodology, with the aim of bringing fresh insights to, and engaging in, more rigour around the process.
Foreign Exchange Risk
The impact of foreign currency fluctuations on the purchases of goods in foreign currencies when translated back to
the functional currency of the relevant subsidiary remains a material business risk that could adversely affect
achievement of GUD’s strategy outlined in the ‘Strategy’ section above and financial prospects described in the
following ‘Outlook’ section, unless appropriate compensating controls and risk mitigation actions are in place.
As noted previously, the sale of the low margin and import dependent Dexion business has reduced the potential
financial impact of this risk in future years. In addition, the remaining businesses have a more stable profile of sales
and a stronger correlation between anticipated and actual foreign currency purchases. These two factors are
contributing to reduce the potential volatility around forecasting the foreign currency transactional risk in future
years.
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Operating and Financial Review
Nonetheless, foreign exchange exposures will continue to be managed from a perspective of minimising the effects
of volatility on the value of the foreign currency cash flows of the business and a foreign exchange policy will be
applied that requires significant purchases in foreign currencies to be hedged using either foreign exchange forward
contracts, options or collars.
A Financial Risk Management Committee, consisting of finance staff from the business units and managers from the
holding company, meets monthly to monitor foreign currency transaction exposures, outstanding hedging contracts
and determine additional hedging required to stay within policy guidelines.
The sale of the Dexion business has also removed the foreign currency financial statements translation risks inherent
from owning substantial production facilities and distribution networks in Asia.
The remaining financial statements accounts translation risk is predominately from New Zealand with a minor
exposure in Europe. The foreign currency accounts translation risk on foreign subsidiaries is not hedged.
Outlook
Due to the changes made to the structure of GUD’s business portfolio over the last two financial years, in which the
businesses with the most unpredictable and volatile profit histories have been disposed of, underlying financial
performance in 2017‐18 is expected to improve on the level generated in 2016‐17.
This improvement is expected not just because of the portfolio changes but will also come from initiatives and
programs that have been actioned at each of the remaining business units.
Specifically, GUD Automotive, the business that is active in the automotive and heavy‐duty filtration markets, will
continue with its long‐standing workshop conquest program, in which end users are converted to using the market
leading Ryco brand of air, fuel and oil filters. With its recent focus on growth opportunities in the heavy duty segment
the conquest activity is also covering truck workshops and service centres for the first time.
Each year Ryco introduce hundreds of new filters to ensure that the brand’s range maintains currency with the
changing nature of the automotive markets in Australia and New Zealand. In 2017‐18 GUD Automotive plans to
introduce around four hundred new filters in support of this objective.
Similar to the period after which GUD acquired Brown & Watson International, the 2017‐18 year for the recently
acquired Innovative Mechatronics Group will involve the introduction and implementation of GUD’s management
philosophies and structures. In addition, with the Goss brand moving to be managed in the IMG portfolio, several
brand management issues will be addressed with the objective of streamlining GUD’s presence in some major
product segments in the automotive aftermarket.
The Wesfil business, which services the independent reseller market segment in the automotive aftermarket with a
varied range of service parts based around a core filtration offer, is expected to continue its steady growth trajectory
as it introduces new parts in response to customer demand. For example, midway through the 2016‐17‐year Wesfil
introduced a spark plug program under the TriPower brand and will benefit from a full year’s sales and profit
contribution from this program in the current year.
Since being acquired by GUD on 1st July 2015, BWI has become a substantial contributor to GUD’s financial position
and performance. This has come about through new product introductions, momentum on which was evident at
the time of GUD’s purchase. This momentum continued in 2016‐17, supporting the publication of the latest Projecta
brand catalogue. A raft of new product activity is in progress for the current financial year, while the business expects
to reap the full year benefit from the products that were introduced part way through the previous year.
In addition to this new product activity, BWI has identified a number of market segments which offer growth
potential for the current year and support structures have been put in place to ensure this occurs. One such market
niche is the emergency services lighting market, in which BWI has had a presence in the “amber” product segment
but not in the “red and blue” (police, ambulance, etc.) segment. With access to an internationally recognised product
range and with specialised resources now in place BWI is expecting to grow market share and has, at the time of
writing, secured supply to a substantial customer active in this market.
19
Operating and Financial Review
Financial performance in BWI will also be bolstered by the full year contribution from the Griffiths Equipment
acquisition, along with additional benefits from this purchase. These benefits include the potential to expand
distribution of GEL’s products in the Australian market, where its presence has been limited, utilising the full
resources available through BWI.
Following the management change at Oates late in calendar 2016 this business has adopted a more focused
approach to its growth opportunities. Primarily these exist in the commercial and industrial market segments rather
than in retail/consumer, and these are being pursued in a structured manner using GUD’s innovation process as the
underlying framework for enquiry and action.
Additionally, through uncovering several internal efficiency improvement avenues, Oates is in the process of making
changes to the way it handles the order‐to‐delivery cycle. This has already resulted in marked improvement in the
business’s delivery performance and a substantial reduction in the occurrence of lost sales.
The Davey business is pursuing profit growth in three major directions. First, Davey has been the most advanced of
GUD’s businesses in its adoption and implementation of the innovation process, structure and framework.
Consequently, it stands to benefit from sales of product and services that have resulted from completed innovation
missions in the current financial year.
Complementing these top line initiatives are two projects aimed at, first, radically changing the way Davey goes to
market and second, overhauling Davey’s supply chain through product design and assembly simplification. These
two remain work‐in‐progress and are expected to make a contribution to Davey’s performance during the current
financial year.
In last year’s Operating and Financial Review, it was stated that GUD was transitioning to managing a group of
businesses with trade and industrial customers as the core of the customer base. With the sale of Dexion and Lock
Focus this transition is now effectively complete.
The brands remaining in the Group’s portfolio ‐ Ryco, Wesfil, Narva, Projecta, Goss, Davey, Oates and those acquired
with IMG ‐ are all leaders in their respective market segments to this customer profile.
The transition was aimed at building a solid portfolio of consistently and reliably performing businesses, that aren’t
subject to the variability of consumer markets or major economic cycles, such as building activity. By being close to
customers and framing product and service development around real customer needs GUD’s current businesses are
uniquely placed to organically grow and to deliver high quality returns over a prolonged period.
20
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.
3.
4.
5.
6.
Remuneration governance
Senior Executive remuneration strategy and structure
Remuneration for the Managing Director and Senior Executives
Link between performance and remuneration outcomes
Service agreements
7. Non‐Executive Directors’ remuneration
8. Other KMP transactions
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 30 June 2017:
Name
Role
Non‐Executive Directors
R M Herron
Non‐Executive Director and Chairman
A L Templeman‐Jones
Non‐Executive Director and Chairman of Remuneration Committee
M G Smith
Non‐Executive Director
G A Billings
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
Chief Financial Officer
K Hope
D Birch
D Chin
Chief Executive Officer
Sunbeam
(Sunbeam exited the GUD Group on 1 July 2016)
Chief Executive Officer
E D Oates
(resigned 28 February 2017)
Chief Executive Officer
E D Oates
(appointed 24 October 2016)
R Pattison
Chief Executive Officer GUD Automotive
(appointed 1 May 2017)
Division
Brown & Watson
International
(appointed 1 July 2015)
G Nicholls
T Richards
D Worley
T Cooper
Chief Executive Officer GUD Automotive
Chief Executive Officer Dexion
(Dexion exited the GUD Group on 1 June 2017)
Chief Executive Officer Davey
Managing Director
Wesfil
21
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
The remuneration framework provides a mix of fixed and variable remuneration and has five components:
Fixed remuneration;
Other employment related benefits; and
“at risk” remuneration including:
Short‐term incentives (STI);
Long‐term incentives (LTI); and
Special incentives.
These comprise the total remuneration paid to Senior Executives.
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 per cent in the case of the Managing Director.
In the absence of any special incentives, the remuneration mix for the Senior Executives is as follows:
22
Remuneration Report
Fixed remuneration
The remuneration packages for the Senior Executives contain a fixed amount that is not performance linked. The
fixed remuneration consists of base salary, and vehicle entitlements or allowances, as well as employer contributions
to superannuation funds.
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 has received remuneration recommendations from an independent consultant during the year ended 30
June 2017.
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.
Other employment related benefits
In addition Senior Executives receive annual and long service leave and salary continuance insurance.
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 bonus for achieving or exceeding an agreed CVA target and is paid following the
announcement of the Group’s year‐end results. CVA targets are set with reference to agreed underlying EBIT targets
and the weighted average cost of capital employed.
CVA 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 and disposal 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 shareholder value
through business portfolio changes.
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.
STI bonuses are calculated as a percentage of fixed remuneration. When the CVA target is achieved, the threshold
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 threshold STI bonus 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 rem uneration
Managing Director
Senior Executives
STI
STI
Threshold
perform ance
Stretch
perform ance
26.67
35.00
40.00
52.50
% of salary at
LTI
60.00
30.00
Details of the CVA STI bonuses payable to the Senior Executives for the year ended 30 June 2017 are set out in
section four of this Report.
23
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 shares 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, re‐stated as a
number of performance rights, 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.
24
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. Special incentives may be
paid as performance rights or other salary.
Sunbeam
In anticipation of the sale of the Company’s remaining 51% of the shares in Sunbeam Corporation Limited and
Sunbeam NZ Corporation Limited (collectively “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 were to 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 would vest 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 would vest 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 were 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 approved the vesting of 36,641 performance rights
to Karen Hope on the basis that the Company received target proceeds of $34.5 million for the sale of the Company’s
remaining interests in Sunbeam ANZ and Jarden Asia.
With respect to the second tranche, the required targets were not met and performance rights did not vest.
Dexion
During the year ended 30 June 2016 the Remuneration Committee had approved the grant of 115,528 performance
rights to Tim Richards if Dexion was to attain certain EBIT levels in the year ending 30 June 2017.
During the year ended 30 June 2017 the Board explored the potential sale of the Dexion business. In order to ensure
managerial continuity through the process, the previous performance rights were lapsed and replaced with:
A retention bonus of $250,000 to remain with the Dexion business until 1 January 2018; or in the alternative
If the Company was to successfully complete the sale of the Dexion business prior to 31 December 2017, an
incentive bonus of $500,000.
Completion of the Dexion sale occurred on 1 June 2017 (Note 33b). The incentive bonus was paid on 31 May 2017
and is included as other salary.
25
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 1 and
fees
STI bonus
Leave entitle-
m ents
Incom e
protection
prem ium Car benefits
Year
$
$
$
$
$
Managing Director
Equity fair
value of
perform ance
rights 2
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
2017 1,065,000
311,559
(24,846)
3,809 -
1,355,522
22,608 325,015
35,000
1,738,145 36.6
18.7
2016 965,000 -
(20,689)
4,360 -
948,671
18,558 223,748
35,000
1,225,977 18.3
18.3
Senior Executives
M Fraser
2017 537,249
212,705
30,623
1,011 -
781,588
12,129 80,030
35,000
908,747 32.2
8.8
K Hope 3
D Chin 4
D Birch 5
2016 494,882 -
3,679
903
29,411
528,875
9,195 70,126
35,000
643,196 10.9
10.9
2017 - - - - - -
- 20,050 -
20,050 100.0
100.0
2016 440,000 -
2,096
482 -
442,578
8,925 41,997
30,000
523,500 8.0
8.0
2017 251,961 -
14,954 - -
266,915
4,153 21,239
23,936
316,243 6.7
6.7
2016 - - - - - -
- - - -
N/A
N/A
2017 349,358 -
19,453 - -
368,811
8,852 30,351
33,189
441,203 6.9
6.9
2016 354,155 -
1,132 -
24,200
379,487
7,606 48,852
33,645
469,590 10.4
10.4
R Pattison 6
2017 470,363
265,316
23,455
2,035 -
761,169
5,083 66,689
35,000
867,941 38.3
7.7
2016 445,000
233,625
44,460
2,539 -
725,624
7,410 54,910
35,000
822,944 35.1
6.7
G Nicholls
2017 390,000
220,500
6,020
326 -
616,846
14,689 49,954
30,000
711,489 38.0
7.0
T Richards 7
2017 976,729 -
11,616
652 -
988,997
9,718 23,123
35,116
1,056,954 2.2
2.2
2016 330,000
154,713
7,114
296 -
492,123
5,512 33,917
30,000
561,552 33.6
6.0
2016 386,667 -
11,480 - -
398,147
- 20,610
22,500
441,257 4.7
4.7
D Worley
2017 442,405 -
(4,262)
1,119 -
439,262
7,859 68,272
35,000
550,393 12.4
12.4
2016 428,500
213,906
25,963
1,397 -
669,766
7,224 40,409
35,000
752,399 33.8
5.4
T Cooper
2017 389,360
182,984
434
2,035 -
574,813
12,036 60,329
35,000
682,178 35.7
8.8
2016 377,000
155,992
(5,171)
2,539 -
530,360
10,734 51,256
35,000
627,350 33.0
8.2
Total rem uneration of the Managing Director and Senior Executives of the Group
2017 4,872,425
1,193,064
77,447
10,987 -
6,153,923
97,127 745,052
297,241
7,293,343
2016 4,221,204
758,236
70,064
12,516
53,611
5,115,631
75,164 585,825
291,145
6,067,765
26
Remuneration Report
Salary 1 and
fees
STI bonus
Leave entitle-
m ents
Incom e
protection
prem ium Car benefits
Year
$
$
$
$
$
Total rem uneration of Non-Executive Directors
Equity fair
value of
perform ance
rights 2
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
2017 733,392 - - - -
733,392
- -
69,671
803,063
2016 696,607 - - - -
696,607
- -
66,178
762,785
Total rem uneration (com pensation of key m anagem ent personnel of the Group)
2017 5,605,817
1,193,064
77,447
10,987 -
6,887,315
97,127 745,052
366,912
8,096,406
2016 4,917,811
758,236
70,064
12,516
53,611
5,812,238
75,164 585,825
357,323
6,830,551
1 Salary includes base and other salary. In the case of Tim Richards, other salary includes a special incentive paid as a consequence of the sale of Dexion. In the case of David Birch, other salary includes a termination payment.
2 The fair value of performance rights granted under the 2017, 2018 and 2019 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 2017.
3 In addition to the performance rights granted under the 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
$249,892 with respect to the first tranche which vested. Karen Hope left the group as a result of the sale of Sunbeam on 1 July 2016.
4 David Chin appointed CEO of Oates on the 24 October 2016.
5 David Birch resigned in accordance with the notice provisions of his contract and left the Company on 28 February 2017.
6 Bob Pattison was appointed CEO of the Automotive segment on 1 May 2017 and was announced to the ASX on 9 May 2017.
7 Tim Richards left the GUD Group as a result of the sale of Dexion on 1 June 2017. The table above discloses his remuneration for the period to 1 June 2017. In addition to the performance rights granted under the 2018 and 2019 performance rights plans, Tim
Richards was issued performance rights by GUD Holdings Limited in line with the special incentives previously outlined in this report. These were lapsed as a result of the sale of Dexion on 1 June 2017 and replaced with a $500,000 incentive payment for
successfully completing the sale of the Dexion business which occurred on 1 June 2017 (Note 33b). The incentive bonus was paid on 31 May 2017 and is reported as part of salary.
27
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 2017.
The following table represents non‐IFRS information. It sets out fixed remuneration, non‐monetary benefits, STI
payable in relation to the year ended 30 June 2017, as well as any LTI or special incentive that has been earned as a
result of performance that vested during the year ended 30 June 2017 or shortly after 30 June 2017. 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
Not at risk
At risk
Year
Salary and
super 1
Other non-
m onetary
benefits 3
Perform ance
rights vested
w ith respect to
the year 4
Total
rem uneration
STI bonus 2
$
$
$
$
$
Managing Director
J P Ling
2017 1,100,000
1,571
311,559
1,165,244
2,578,374
Senior Executives
M Fraser
K Hope
D Chin
D Birch
R Pattison
G Nicholls
T Richards
D Worley
T Cooper
2017 572,249
43,763
212,705
314,216
1,142,933
2017 - -
-
500,106
500,106
2017 275,897
19,107
- -
295,004
2017 382,547
28,305
-
200,273
611,125
2017 505,363
30,573
265,316
234,407
1,035,659
2017 420,000
21,035
220,500
143,107
804,642
2017 1,011,845
21,986
- -
1,033,831
2017 477,405
5,685
-
272,440
755,530
2017 424,360
14,505
182,984
239,803
861,652
Total rem uneration of the Managing Director and Senior Executives of the Group
2017 5,169,666
186,530
1,193,064
3,069,596
9,618,856
2016 4,512,349
211,355
758,236
2,048,092
7,530,032
1.
2.
Salary and super includes base and other salary and employer superannuation contributions. In the case of Tim Richards, other
salary includes a special incentive paid as a consequence of the sale of Dexion.
The STI cash bonus column reflects the STI cash bonus paid in respect of performance during the year ended 30 June 2017 and
paid in August 2017 following the announcement of the Group’s year‐end results.
3. Non‐monetary benefits includes leave entitlements, income protection premiums and long service leave.
4.
LTI performance rights granted in July and November 2014 vested as a result of meeting TSR targets on 30 June 2017. The
Remuneration Committee approved vesting of the performance rights on 26 July 2017. The value assigned to the vested
performance rights has been calculated using the Company’s closing share price on 30 June 2017 of $12.91. In addition, special
incentive performance rights were granted to Karen Hope in 2016 in relation to the sale of Sunbeam. 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.
28
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 2017
Fair
value per
perform ance
right at
grant date
$
Fair value
of rights
granted
during the
year ended
30 June 2017
$
Grant
date
Vesting
date
74,509
25 October 2016
30 June 2019 6.12 455,995
19,380
27 July 2016
30 June 2019 5.17 100,195
14,093
27 July 2016
30 June 2019 5.17 72,861
13,546
24 October 2016
30 June 2019 6.14 83,172
16,744
27 July 2016
30 June 2019 5.17 86,566
14,224
27 July 2016
30 June 2019 5.17 73,538
18,906
27 July 2016
30 June 2019 5.17 97,744
16,168
27 July 2016
30 June 2019 5.17 83,589
14,372
27 July 2016
30 June 2019 5.17 74,303
201,942
1,127,963
Managing Director
J P Ling
Senior Executives
M Fraser
D Birch
D Chin
R Pattison
G Nicholls
T Richards
D Worley
T Cooper
Total
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.
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
25 October 2016
30 June 2019 6.12 -
10.19
Grant to D Chin
24 October 2016
30 June 2019 6.14
-
Grant to Senior Executives
27 July 2016
30 June 2019 5.17 -
9.99
9.66
$
$
$
%
31.00
31.00
31.00
%
1.68
1.62
1.51
%
5.7
5.7
5.7
29
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 2016
Balance at
30 June 2017
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
231,694
74,509
(72,851)
(5,822)
227,530
(90,259)
-
137,271
62,273
19,380
(20,225)
(1,616)
59,812
(24,339)
-
35,473
117,343 -
(46,299)
(53,393)
17,651
(12,882)
-
4,769
43,325
14,093
(13,294)
(19,081)
25,043
(15,513)
-
9,530
13,546
13,546 - -
13,546
48,503
16,744
(14,700)
(1,175)
49,372
(18,157)
-
31,215
29,696
14,224
(7,297)
(583)
36,040
(11,085)
-
24,955
133,414
18,906 -
(135,116)
17,204 - -
17,204
35,038
16,168 - - 51,206
(21,103)
-
30,103
45,425
14,372
(13,510)
(1,080)
45,207
(18,575)
-
26,632
746,711
201,942
(188,176)
(217,866)
542,611
(211,913)
-
330,698
Managing Director
J P Ling
Senior Executives
M Fraser
K Hope 2
D Birch 3
D Chin
R Pattison
G Nicholls
T Richards 4
D Worley
T Cooper
Total
1 Performance rights granted under the 2017 performance rights plan fully vested on the basis of meeting TSR hurdles as at 30 June 2017. The vesting
was approved by the Remuneration Committee on 26 July 2017 and the rights have therefore been included in the table above as if the vesting were
effective 30 June 2017.
2 Of the 73,282 performance rights held by Karen Hope in relation to the special incentives, the Remuneration Committee approved the vesting of 36,641
with respect to the first tranche of performance rights to Karen Hope on the basis that the Company received target proceeds of $34.5 million for the
sale of the Company’s remaining interests in Sunbeam ANZ and Jarden Asia. With respect to the second tranche, the required targets were not met
and performance rights did not vest and were therefore lapsed. In addition, the Board allowed a pro‐rata amount of performance rights granted to
remain ‘on foot’ in accordance with plan rules.
3 At the end of employment, a determination was made by the Board to allow a pro‐rata amount of performance rights granted to remain ‘on foot’ in
accordance with plan rules. D Birch resigned on 28 February 2017.
4 During the year ended 30 June 2016 the Remuneration Committee approved the grant of 115,528 performance rights to Tim Richards if Dexion was to
attain certain EBIT levels in the year ending 30 June 2017. In anticipation of the sale of Dexion on 1 June 2017 these performance rights were lapsed.
In addition, the Board allowed a pro‐rata amount of performance rights granted to remain ‘on foot’ in accordance with plan rules. Tim Richards exited
the Group on 1 June 2017 with the sale of Dexion.
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 2016
Shares
purchased
Shares
sold
Balance at
30 June 2017
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
45,223 - - - 45,223 - 45,223
A L Templeman-Jones
3,292 - 1,750 - 5,042 - 5,042
M G Smith
G A Billings
D D Robinson
30,373 - 5,000 - 35,373 - 35,373
11,250 - - - 11,250 - 11,250
13,000 - - - 13,000 - 13,000
30
Remuneration Report
Shares
issued from
vested
perform ance
rights 1
Balance at
1 July 2016
Shares
purchased
Shares
sold
Balance at
30 June 2017
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
1 Performance rights granted under the 2016 performance rights plan partially vested based on meeting TSR hurdles as at 30 June 2016. The issue of
shares was approved by the Remuneration Committee on 27 July 2016 (as disclosed in the Remuneration Report for the year ended 30 June 2016) and
were allotted on 4 August 2016.
2 Performance rights granted under the 2017 performance rights plan fully vested on the basis of meeting TSR hurdles as at 30 June 2017. The issue of
shares was approved by the Remuneration Committee on 26 July 2017.
3 Some executives holdings include shares held either directly, or through other entities in which the executive has a trustee role or controlling interest.
4 Of the 73,282 performance rights held by Karen Hope in relation to the special incentives, the Remuneration Committee approved the vesting of 36,641
with respect to the first tranche of performance rights to Karen Hope on the basis that the Company received target proceeds of $34.5 million for the
sale of the Company’s remaining interests in Sunbeam ANZ and Jarden Asia. With respect to the second tranche, the required targets were not met
and performance rights did not vest and were therefore lapsed.
5.
Link between performance and remuneration outcomes
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.
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.
STI
In the current year, the following businesses in the consolidated entity exceeded CVA targets: GUD Automotive,
Wesfil and Brown & Watson International. 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, received a bonus upon achieving the Group CVA target.
STI bonus payable for the year ended 30 June 2017
$
$
%
%
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
D Chin 2
D Birch 3
R Pattison 4
G Nicholls
T Richards 5
D Worley
T Cooper
440,000 311,559 71 29
300,431 212,705 71 29
144,846
-
- 100
-
-
- 100
265,316 265,316 100
-
220,500 220,500 100
-
-
-
- 100
250,638
-
- 100
222,789 182,984 82 18
1
2
3
4
5
A minimum level of performance, including exceeding the previous year’s CVA, must be achieved before any STI bonus is payable.
D Chin joined Oates on 24 October 2016 and is entitled to a prorata maximum STI equivalent.
D Birch left Oates on 28 February 2017 and is not entitled to STI for the year ended 30 June 2017.
On 1 May 2017, R Pattison was appointed to the role of Chief Executive Officer of the GUD Automotive Division (comprising Ryco, Wesfil, Brown &
Watson, Griffiths Equipment, Goss and IMG) and is entitled to a prorata maximum STI equivalent.
T Richards left the GUD Group as a result of the sale of Dexion on 1 June 2017 and is therefore not entitled to STI for the year ended 30 June 2017.
31
Remuneration Report
The payments relate to STI bonus earned in the year ended 30 June 2017, approved by the Remuneration Committee
on the 26 July 2017.
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. As in prior years 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.
LTI
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.
Underlying
EBIT 1
Underlying
basic 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 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
51.6
45.2
42.0
6.22
8.84
4.8
56.8
30 June 2016
78.6
52.0
43.0
8.84
9.11
4.7
71.3
30 June 2017
83.6
60.5
46.0
9.11
12.91
3.6
91.2
1 Underlying EBIT and underlying basic EPS are presented before significant one‐off items and are from continuing operations as reported in each year.
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.
The TSR rank for the year ended 30 June 2017 is within the top quartile of the comparator group. Consequently, in
accordance with the plan rules, on 26 July 2017 the Board approved the full vesting of the performance rights which
were due to vest in respect of the period ended 30 June 2017.
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.
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.
Mr Cooper is employed under a contract entered into in September 1996. That contract
provides for 12 months’ notice of termination by either party.
Apart from Mr Cooper, no current Senior Executive contract includes termination benefits
additional to the notice period and statutory entitlements described above.
32
Remuneration Report
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.
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 2017 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
270,536 15,000 15,000
Members of
108,214
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.
33
Remuneration Report
Remuneration
Details of the nature and amount of each element of the remuneration of Non‐Executive Directors for the year
ended 30 June 2017 are set out in the table below.
Non-Executive Directors
R M Herron
Directors’ fees Superannuation 1
Year
$
$
Total
$
2017 270,536 25,701 296,237
2016 263,938 25,074 289,012
A L Templeman-Jones
2017 123,214 11,705 134,919
M G Smith
G A Billings
2016 105,944 10,065 116,009
2017 108,214 10,280 118,494
2016 105,575 10,030 115,605
2017 123,214 11,705 134,919
2016 115,575 10,980 126,555
D D Robinson
2017 108,214 10,280 118,494
2016 105,575 10,030 115,605
Total Rem uneration of Non-Executive Directors
2017 733,392 69,671 803,063
2016 696,607 66,178 762,785
1 Superannuation contributions on behalf of Non‐Executive Directors to satisfy the Company’s obligations under applicable Superannuation Guarantee
legislation.
8.
Other KMP transactions
Loans to KMPs
There were no loans to KMPs at 30 June 2017 (2016: 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 $432,368
excluding GST (2016: $419,567 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.
34
GUD Holdings Limited and subsidiaries
Consolidated Financial Statements
Consolidated Income Statement ..................................................................................................................................... 36
Consolidated Statement of Comprehensive Income....................................................................................................... 37
Consolidated Balance Sheet ............................................................................................................................................ 38
Consolidated Statement of Changes in Equity ................................................................................................................ 39
Consolidated Cash Flow Statement ................................................................................................................................ 40
1.
Basis of preparation ............................................................................................................................................... 41
Results for the Year ......................................................................................................................................................... 44
Revenue .................................................................................................................................................................. 44
2.
Expenses ................................................................................................................................................................. 44
3.
4. Net finance costs .................................................................................................................................................... 46
5.
Earnings per share .................................................................................................................................................. 46
6. Auditors' remuneration .......................................................................................................................................... 47
Segment information ............................................................................................................................................. 47
7.
Working Capital ............................................................................................................................................................... 50
Trade and other receivables ................................................................................................................................... 50
8.
9.
Inventories.............................................................................................................................................................. 51
10. Other assets ............................................................................................................................................................ 52
11. Trade and other payables ....................................................................................................................................... 52
12. Employee benefits .................................................................................................................................................. 52
13. Restructuring provisions ......................................................................................................................................... 53
14. Warranty provisions ............................................................................................................................................... 54
15. Other provisions ..................................................................................................................................................... 54
Tangible and Intangible Assets ........................................................................................................................................ 55
16. Goodwill ................................................................................................................................................................. 55
17. Other intangible assets ........................................................................................................................................... 55
18. Property, plant and equipment .............................................................................................................................. 57
19.
Impairment testing ................................................................................................................................................. 58
20. Commitments for expenditure ............................................................................................................................... 59
Capital Structure and Financing Costs ............................................................................................................................. 61
21. Cash and cash equivalents ...................................................................................................................................... 61
22. Borrowings ............................................................................................................................................................. 62
23. Derivatives .............................................................................................................................................................. 63
24. Other financial instruments .................................................................................................................................... 65
25. Financial instruments ............................................................................................................................................. 66
26. Financial risk management ..................................................................................................................................... 69
27. Share Capital .......................................................................................................................................................... 73
28. Reserves ................................................................................................................................................................. 73
29. Retained earnings ................................................................................................................................................... 75
30. Dividends ................................................................................................................................................................ 75
Taxation .......................................................................................................................................................................... 76
31. Current tax ............................................................................................................................................................. 76
32. Deferred tax ........................................................................................................................................................... 77
Business Combinations ................................................................................................................................................... 80
Investment in subsidiaries ...................................................................................................................................... 80
33.
34. Non‐controlling interests........................................................................................................................................ 91
35. Equity‐accounted investees.................................................................................................................................... 91
Other Notes .................................................................................................................................................................... 93
36. Superannuation commitments ............................................................................................................................... 93
37. Key management personnel ................................................................................................................................... 93
38. Related parties ....................................................................................................................................................... 94
39. Parent entity disclosures ........................................................................................................................................ 94
40. Contingent liabilities ............................................................................................................................................... 95
41. Subsequent events ................................................................................................................................................. 95
Directors’ Declaration ..................................................................................................................................................... 96
Lead Auditor’s Independence Declaration ...................................................................................................................... 97
Independent Auditor’s Report ........................................................................................................................................ 98
35
GUD Holdings Limited and subsidiaries
Consolidated Income Statement
For the year ended 30 June 2017
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
Loss from discontinued operation
Loss from operations, net of income tax
Non‐controlling interests
Loss 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)
Earnings per share from discontinuing operations:
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
2017
$'000
426,313
(228,423)
197,890
191
(55,219)
(9,621)
(24,509)
(24,909)
‐
‐
(652)
83,171
(10,440)
72,731
(21,192)
51,539
(58,883)
(7,344)
‐
(7,344)
60.1
59.5
(68.7)
(68.7)
2016^
Restated
$'000
409,326
(210,879)
198,447
799
(59,217)
(1,663)
(33,653)
(22,890)
(10,555)
(1,000)
(48)
70,220
(13,960)
56,260
(20,698)
35,562
(78,283)
(42,721)
(318)
(43,039)
41.7
41.2
(92.2)
(92.2)
Note
2
2
3
3, 7
3, 7
4
31
33b
5
5
5
5
^ Prior year comparatives have been restated in accordance with the requirements of Australian Accounting Standards to separately disclose the
contribution of businesses discontinued in the current year.
The notes on pages 41 to 95 are an integral part of these consolidated financial statements.
36
GUD Holdings Limited and subsidiaries
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2017
2017
$'000
2016^
Restated
$'000
Note
Profit for the year
51,539
35,562
Other comprehensive income
Items that may be reclassified subsequently to profit and loss
Exchange differences on translating results of foreign operations
Net fair value adjustments recognised in the hedging reserve
Net change in fair value of cash flow hedges transferred to inventory
Transfers within equity on disposal
Equity settled share based payment transactions
Revaluation of contingent consideration receivable
Income tax on items that may be reclassified subsequently to profit or loss
Other comprehensive income / (loss) for the year, net of tax
Total comprehensive income from continuing operations, net of tax
Loss from discontinued operation, net of tax
Total comprehensive loss attributable to owners of the Company
Non‐controlling interests
Total comprehensive loss
28
28
28
28
28
31
31
33
34
(1,085)
3,570
26
618
1,631
(3,284)
1,364
2,840
1,110
2,362
(10,551)
‐
1,399
355
2,350
(2,975)
54,379
32,588
(58,883)
(4,504)
‐
(4,504)
(78,283)
(45,696)
(318)
(43,039)
^ Prior year comparatives have been restated in accordance with the requirements of Australian Accounting Standards to separately disclose the
contribution of businesses discontinued in the current year.
All of the above items may subsequently be recognised in the Income Statement.
The notes on pages 41 to 95 are an integral part of these consolidated financial statements.
37
GUD Holdings Limited and subsidiaries
Consolidated Balance Sheet
As at 30 June 2017
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
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
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
21
8
9
23
24
10
16
17
18
23
24
32
11
12
13
14
15
22
23
24
12
22
23
32
27
28
29
34
The notes on pages 41 to 95 are an integral part of these consolidated financial statements.
2017
$'000
10,238
91,970
93,080
15
3,182
58
4,008
‐
202,551
119,438
118,099
13,075
48
1,800
6,284
3
258,747
461,298
55,311
11,022
38
1,214
1,750
15,092
878
6,075
9,485
‐
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
100,865
168,748
1,931
155,957
1,525
‐
106
159,519
260,384
200,914
112,880
26,591
61,443
200,914
‐
200,914
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
38
GUD Holdings Limited and subsidiaries
Consolidated Statement of Changes in Equity
For the year ended 30 June 2017
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
Dividends paid
Total transactions with owners
Non‐controlling interests
De‐recognition of non‐controlling interests with change in control
Profit for the period attributable to non‐controlling interests
Total changes in ownership interests
Balance at the end of the period
Note
2017
$'000
2016
$'000
274,641
356,158
28
29
34
34
(7,344)
1,209
1,631
(4,504)
(43,039)
(4,374)
1,399
(46,014)
(37,712)
(37,712)
(35,821)
(35,821)
(31,511)
‐
(31,511)
‐
318
318
200,914
274,641
The amounts recognised directly in equity are net of tax.
The notes on pages 41 to 95 are an integral part of these consolidated financial statements.
39
GUD Holdings Limited and subsidiaries
Consolidated Cash Flow Statement
For the year ended 30 June 2017
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
Acquisition of controlled entity, net of cash acquired
Proceeds from sale of investments, net of cash disposed of
Payments for property, plant and equipment
Proceeds from sale of property, plant and equipment
Payments for intangible assets and product development costs
Net cash (used in)/provided by investing activities
Cash flows from financing activities
Proceeds of borrowings
Repayment of borrowings
Proceeds on loans receivable
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
2017
$'000
2016
$'000
621,828
(556,540)
(19,982)
45,306
(33,198)
38,283
(5,363)
343
(22)
43
101,420
(111,508)
2,401
123
(9,723)
(37,712)
(54,999)
(9,650)
19,961
(73)
10,238
771,933
(692,415)
(9,326)
70,192
(194,323)
16,224
(7,483)
21
(3,345)
(188,906)
279,415
(133,877)
‐
730
(13,486)
(35,821)
96,961
(21,753)
42,947
(1,233)
19,961
21
33a
33b
18
17
29
21
The notes on pages 41 to 95 are an integral part of these consolidated financial statements.
40
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 2017 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,
automotive products, 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 2017 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 2017.
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 23)
Other financial instruments (Note 24)
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 16) and other intangible assets (Notes 17, 33)
Inventories (Note 9)
Financial instruments (Note 25)
Other financial instruments – contingent consideration (Note 24)
41
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.
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
2017 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
Summary of the requirement
IFRS 9 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
derecognition 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. It provides a five step model that applies
to all customer contracts and it aims to better reflect
the consideration that an entity expects to receive
from customers in exchange for its goods and services.
IFRS 15 is effective for annual reporting periods
beginning on or after 1 January 2018, with early
adoption permitted.
Possible impact on consolidated financial
statements
The group acknowledges that changes as a result
of IFRS 9 may result in earlier recognition of
impairment losses on receivables.
The group currently applies IAS 39 to account for
hedge accounting of foreign exchange exposures,
which the group predicts will qualify for hedge
accounting per IFRS 9. As a result, present hedge
relationships are expected to continue to be
treated as hedges.
The Group is assessing the potential impact on its
consolidated financial statements resulting from
the application of IFRS 15.
Following the sale of the Dexion business, which
was expected to be a key source of accounting
complexity under IFRS 15, the Group now expects
the focus of the transition project to be on the
accounting treatment applied to rebate and other
incentive arrangements provided to customers. As
part of the impact assessment, the Group is
evaluating various transition options provided in
the standard.
42
GUD Holdings Limited and subsidiaries
1. Basis of preparation (continued)
New standards and interpretations adopted in the year (continued)
New or
amended
standards
IFRS 16 Leases
Summary of the requirement
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 application date of this standard is 1 January
2019.
Early adoption is permitted but only in conjunction
with adopting IFRS 15.
The Group does not plan to adopt these standards early.
Possible impact on consolidated financial
statements
The Group has completed a preliminary
assessment of the potential impact on the
consolidated financial statements resulting from
the application of IFRS 16 with respect to existing
leases (primarily in relation to property and motor
vehicles) for continuing operations.
As part of the impact assessment, the Group is
evaluating the various transition options provided
in the standard.
The standard will have an impact on key financial
measures such as EBITDA, EBIT and net assets, due
to IFRS 16 replacing straight line operating lease
expenses with a depreciation charge for the lease
asset and interest expense for the lease liability.
The extent of the potential impact is under
evaluation in parallel to a number of lease
renegotiations.
43
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
2017
$'000
426,313
426,313
2016^
Restated
$'000
409,326
409,326
191
799
799
Total other income
^ Prior year comparatives have been restated in accordance with the requirements of Australian Accounting Standards to separately disclose
191
the contribution of businesses discontinued in the current year.
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:
Plant and equipment
Equipment under finance lease
3 to 12 years
3 to 12 years
44
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
3 to 5 years
Customer relationships
Software
Operating leases
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 customer relationships
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
Restructuring expenses
Impairment of inventory
Loss on revaluation of contingent consideration
Note
27
17
17
17
18
18
33a
9
2017
$'000
454
344
9,087
2,389
71,460
3,345
(907)
1,453
283
222
49
3,543
11
4,108
9,621
192
190
‐
‐
2016^
Restated
$'000
736
68
8,360
(3,366)
60,759
3,235
82
1,163
107
‐
48
3,552
19
3,726
1,663
‐
‐
1,000
10,555
11,555
Total non‐underlying costs
^ Prior year comparatives have been restated in accordance with the requirements of Australian Accounting Standards to separately disclose the
382
contribution of businesses discontinued in the current year.
45
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
2017
$'000
(122)
9,177
548
73
764
2016^
Restated
$'000
(593)
12,383
812
557
801
13,960
Net finance costs
^ Prior year comparatives have been restated in accordance with the requirements of Australian Accounting Standards to separately disclose the
10,440
contribution of businesses discontinued in the current year.
The ineffective portion of cash flow hedges that is recognised in the income statement is nil (2016: 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.
Profit / (loss) 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 2017
Weighted average number of ordinary shares used as
the denominator for diluted EPS
EPS
Continuing operations
2016^
Restated
$'000
2017
$'000
Discontinuing operations
2016^
Restated
$'000
2017
$'000
51,539
Number
35,562
Number
(58,883)
Number
(78,601)
Number
85,692,094
85,290,956
85,692,094
85,290,956
939,951
1,028,185
939,951
1,028,185
86,632,045
86,319,141
86,632,045
86,319,141
Cents per share Cents per share Cents per share Cents per share
(92.2)
Basic EPS
Diluted EPS
(92.2)
^ Prior year comparatives have been restated in accordance with the requirements of Australian Accounting Standards to separately disclose the
(68.7)
(68.7)
41.7
41.2
60.1
59.5
contribution of businesses discontinued in the current year.
46
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, taxation and due diligence services 1
Other auditors:
‐ in relation to other assurance, advisory, taxation and due diligence services 2
2017
$
2016
$
690,038
733,632
21,860
711,898
21,602
755,234
422,778
372,313
‐
422,778
15,000
387,313
1
In relation to services rendered in conjunction with the acquisitions of GEL ANZ and IMG (Note 33a) and the disposal of Lock Focus (Note 33b).
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
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.
Discontinued operations
Discontinued operations consist of the Sunbeam business sold on 1 July 2016, the Lock Focus business sold on 1
December 2016 and the Dexion business sold on 1 June 2017.
Geographical segments
The Group operates primarily in one geographical segment: Australasia.
47
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
Transaction costs 1
Losses on sale of subsidiaries 2
Restructuring
Segment result (EBIT)
Net finance costs
Share of loss of equity‐accounted investees
Profit / (loss) before tax
Tax expense
Profit / (loss)
Non‐controlling interest
Profit / (loss) 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 2017
Oates
$'000
69,447
Automotive
$'000
254,423
Davey
$'000
102,462
Unallocated
$'000
(19)
Continuing
operations
$'000
426,313
Discontinued
operations
$'000
146,301
9,483
(776)
(19)
8,688
‐
‐
(151)
8,537
(100)
‐
8,437
5,166
8,900
‐
27,400
41,466
11,769
168
75,711
(1,645)
(222)
73,844
(192)
‐
(39)
73,613
(620)
‐
72,993
78,636
99,682
4,219
136,907
319,444
42,659
1,783
10,522
(1,129)
(264)
9,129
‐
‐
‐
9,129
(221)
‐
8,908
35,636
3,215
‐
62,260
101,111
16,239
1,262
(8,055)
(4)
(49)
(8,108)
‐
‐
‐
(8,108)
(9,499)
‐
(17,607)
‐
‐
‐
(1,347)
(1,347)
189,563
16
87,661
(3,554)
(554)
83,553
(192)
‐
(190)
83,171
(10,440)
‐
72,731
(21,192)
51,539
‐
51,539
119,438
111,797
4,219
225,220
460,674
260,230
3,229
(373)
(2,069)
(289)
(2,731)
(3,057)
(50,683)
(3,643)
(60,114)
(449)
3,993
(56,570)
(2,313)
(58,883)
‐
(58,883)
‐
‐
‐
624
624
154
2,156
Total
$'000
572,614
87,288
(5,623)
(843)
80,822
(3,249)
(50,683)
(3,833)
23,057
(10,889)
3,993
16,161
(23,505)
(7,344)
‐
(7,344)
119,438
111,797
4,219
225,844
461,298
260,384
5,385
1
2
Transaction costs in the Automotive segment relate to the acquisitions of GEL ANZ and IMG (Note 33a). Transaction costs incurred in discontinued operations relate to the disposals of Dexion and Lock Focus (Note 33b).
Losses on sale of subsidiaries comprises a losses on sale of Dexion ($45.252 million), Lock Focus of ($3.935 million) and Sunbeam ANZ ($1.496 million).
48
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 / (loss) before tax
Tax expense
Profit / (loss)
Non‐controlling interest
Profit / (loss) attributable to owners of the Company
Segment goodwill
Segment brand names
Segment customer relationships
Segment other assets
Segment assets
Segment liabilities
For the year ended 30 June 2016
Automotive
$'000
229,859
Davey
$'000
107,526
Unallocated
$'000
(17)
Continuing
operations
^ Restated
$'000
409,326
Discontinued
operations
^ Restated
$'000
300,619
68,195
(1,523)
‐
66,672
‐
‐
‐
66,672
(1,384)
‐
65,288
64,287
99,500
4,441
112,931
281,159
32,629
13,368
(1,244)
(65)
12,059
(1,000)
‐
‐
11,059
(309)
‐
10,750
35,641
3,215
‐
61,293
100,149
16,734
(7,092)
(11)
(48)
(7,151)
‐
(10,555)
‐
(17,706)
(12,252)
‐
(29,958)
‐
‐
‐
(1,936)
(1,936)
207,457
85,501
(3,571)
(155)
81,775
(1,000)
(10,555)
‐
70,220
(13,960)
‐
56,260
(20,698)
35,562
‐
35,562
105,094
111,615
4,441
200,810
421,960
267,677
6,301
(3,877)
(3,400)
(960)
(75,697)
‐
(966)
(77,623)
(1,108)
(2,329)
(81,060)
2,777
(78,283)
(318)
(78,601)
5,300
25,402
‐
165,504
196,206
75,848
Oates
$'000
71,958
11,030
(793)
(42)
10,195
‐
‐
‐
10,195
(15)
‐
10,180
5,166
8,900
‐
28,522
42,588
10,857
Segment capital expenditure
6,673
^ Prior year comparatives have been restated in accordance with the requirements of Australian Accounting Standards to separately disclose the contribution of businesses discontinued in the current year.
1,826
1,409
4,171
932
2
Total
$'000
709,945
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 ($59.5 million, Note 16), brandnames ($10.3 million, Note 17), inventory ($4 million, Note 9), product development costs
($1.9 million, Note 17) 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.
49
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 2017 and all
operations at 30 June 2016:
Current
Trade receivables
Less: Allowance for doubtful debts
Net trade receivables
Accrued revenue
Other receivables
2017
$'000
92,667
(697)
91,970
‐
‐
2016
$'000
110,316
(829)
109,487
9,326
9,326
91,970
118,813
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
Disposed through business combinations
Doubtful debts recognised
Amounts written off as uncollectible
Balance at the end of the year
2017
$'000
(829)
‐
161
(508)
479
(697)
2016
$'000
(879)
(101)
‐
(19)
170
(829)
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.
50
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.
2017
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
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
Gross
$'000
80,024
11,077
1,308
157
101
92,667
Gross
$'000
71,039
29,698
5,847
3,329
403
110,316
Impairment
$'000
(25)
(465)
(115)
(12)
(80)
(697)
Impairment
$'000
(169)
(137)
(139)
(271)
(113)
(829)
Net
$'000
79,999
10,612
1,193
145
21
91,970
Net
$'000
70,870
29,561
5,708
3,058
290
109,487
Additional information relating to credit risk is included in Note 26.
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 2017 and all operations at 30 June
2016:
Current
Raw materials and stores
Work in progress
Finished goods
Total inventory
2017
$'000
10,669
908
81,503
93,080
2016
$'000
16,588
2,161
90,123
108,872
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).
51
GUD Holdings Limited and subsidiaries
10. Other assets
This table summarises other assets related to continuing operations at 30 June 2017 and all operations at 30 June
2016:
Current
Prepayments
Other
11. Trade and other payables
Accounting policies
Payables
2017
$'000
3,026
982
4,008
2016
$'000
3,868
1,620
5,488
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 2017 and all operations
at 30 June 2016:
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
2017
$'000
20,174
35,137
‐
55,311
2016
$'000
17,710
58,090
5,491
81,291
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.
52
GUD Holdings Limited and subsidiaries
12. Employee benefits (continued)
This table summarises employee provisions related to continuing operations at 30 June 2017 and all operations at
30 June 2016:
Current
Non‐current
Accrued wages and salaries
Accrued wages and salaries are included in accrued expenses in Note 11.
2017
$'000
11,022
1,931
12,953
642
13,595
2016
$'000
13,741
2,039
15,780
945
16,725
13. Restructuring provisions
Accounting policies
Restructuring
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:
starting to implement the plan; or
announcing its main features to those affected by it.
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 2017 and all operations
at 30 June 2016:
Current
Non‐current
Carrying amount at beginning of year
Provisions recognised
Payments made during the year
Disposed through divestments
Net foreign currency difference arising on translation of foreign operations
Carrying amount at end of year
Note
33b
2017
$'000
38
‐
38
37
38
‐
(37)
‐
38
The payments made against the provision for restructuring represents the costs of redundancies.
2016
$'000
37
‐
37
276
‐
(251)
12
37
53
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 2017 and all operations at 30
June 2016:
Carrying amount at beginning of year
Provisions recognised
Payments made during the year
Reclassification as liabilities held for sale
Disposed through divestments
Net foreign currency difference arising on translation of foreign operations
Carrying amount at end of year
Note
33b
2017
$'000
731
4,364
(3,839)
‐
(40)
(2)
1,214
2016
$'000
1,921
2,502
(2,483)
(1,216)
7
731
15. Other provisions
Accounting policy
Other
Other provisions are recognised at the date a commitment is made, at the Directors’ best estimate of the future
sacrifice of economic benefits that will be required under that commitment.
This table summarises other provisions related to continuing operations at 30 June 2017 and all operations at 30
June 2016:
Carrying amount at beginning of year
Provisions recognised
Payments made during the year
Carrying amount at end of year
Note
2017
$'000
16
1,750
(16)
1,750
2016
$'000
107
‐
91
16
54
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.
16. 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 the movement in goodwill:
Gross carrying amount
Balance at the beginning of the year
Acquisitions through business combinations
Disposed through divestments
Impairment
Net foreign currency difference arising on translation of
financial statements of foreign operations
Balance at the end of the year
17. Other intangible assets
Accounting policies
Product development costs
Note
33a
33b
2017
$'000
110,394
14,371
(5,300)
‐
(27)
119,438
2016
$'000
106,787
62,791
‐
(59,509)
325
110,394
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 technical feasibility of completing the intangible asset so that it will be available for use or sale;
the intention to complete the intangible asset and use or sell it;
the ability to use or sell the intangible asset;
how the intangible asset will generate probable future economic benefits;
the availability of adequate technical, financial and other resources to complete the development and to use
or sell the intangible asset; and
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).
55
GUD Holdings Limited and subsidiaries
17. 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 19).
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 19).
This table summarises other intangible assets related to continuing operations at 30 June 2017 and all operations at
30 June 2016:
Product
Development
Costs
Note
Brand,
Business
Names &
Trademarks
Patents,
Licences &
Distribution
Rights
Software
Customer
Relationships
Total
$'000
Gross carrying amount
Balance at 30 June 2015
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
Additions from business combinations
Disposed through divestments
Additions from internal developments
Additions
Transfers
Foreign currency movements
Balance at 30 June 2017
Accumulated amortisation
Balance at 30 June 2015
Amortisation expense
Disposals
Impairment
Reclassification to assets held for sale
Transfers
Foreign currency movements
Balance at 30 June 2016
Amortisation expense
Disposed through divestments
Foreign currency movements
Balance at 30 June 2017
Carrying amount
As at 30 June 2016
31,298
‐
351
‐
(2,619)
335
(22,190)
‐
7,175
‐
(4,422)
4
‐
144
‐
2,901
(20,373)
(745)
2,537
(1,917)
15,922
(319)
‐
(4,895)
(289)
4,227
‐
(957)
2,280
33a
33b
33b
50,249
98,500
‐
‐
‐
‐
(25,062)
255
123,942
182
(12,323)
‐
‐
‐
(4)
111,797
(1,886)
‐
‐
(10,332)
‐
‐
(109)
(12,327)
‐
12,323
4
‐
111,615
111,797
1,240
‐
‐
‐
(10)
‐
(958)
‐
272
139
‐
‐
‐
‐
‐
411
7,424
‐
‐
76
(5)
‐
‐
49
7,544
‐
(7,388)
‐
18
‐
(29)
145
1,449
4,441
‐
‐
‐
‐
‐
‐
5,890
‐
(1,449)
‐
‐
‐
‐
4,441
(1,225)
(5,707)
(1,376)
‐
10
‐
943
‐
‐
(634)
5
‐
‐
‐
(66)
(73)
‐
‐
‐
‐
‐
(272)
(6,402)
(1,449)
‐
‐
‐
(272)
‐
139
(332)
6,575
14
(145)
1,142
‐
(222)
1,449
‐
(222)
4,441
4,219
91,660
102,941
351
76
(2,634)
335
(48,210)
304
144,823
321
(25,582)
4
18
144
(33)
119,695
(30,567)
(1,452)
2,552
(12,249)
16,865
(319)
(175)
(25,345)
(843)
24,574
18
(1,596)
119,478
118,099
As at 30 June 2017
1,944
Amortisation is recognised as an expense in Note 3.
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.
56
GUD Holdings Limited and subsidiaries
18. 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, accumulated amortisation and written down value
of property, plant and equipment:
Note
Leased assets
$'000
Plant and Equipment
$'000
Gross carrying amount
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
Additions from business combinations
Disposed through divestments
Additions
Disposals
Transfers
Foreign currency movements
Balance at 30 June 2017
33a
33b
100
‐
‐
‐
‐
‐
‐
100
113
‐
‐
‐
(100)
‐
113
91,209
7,201
6,380
(1,694)
(16,306)
(335)
(527)
85,928
1,726
(40,986)
5,363
(3,974)
100
(242)
47,915
Total
$'000
91,309
7,201
6,380
(1,694)
(16,306)
(335)
(527)
86,028
1,839
(40,986)
5,363
(3,974)
‐
(242)
48,028
57
GUD Holdings Limited and subsidiaries
18. Property, plant and equipment (continued)
Note
Leased assets Plant and Equipment
$'000
$'000
Accumulated depreciation and amortisation
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
Additions from business combinations
Disposed through divestments
Depreciation expense
Disposals
Transfers
Foreign currency movements
Balance at 30 June 2017
Carrying amount
As at 30 June 2016
As at 30 June 2017
33a
33b
(23)
‐
(19)
‐
‐
‐
‐
(42)
(15)
‐
(11)
‐
53
‐
(15)
58
98
Total
$'000
(57,267)
(4,553)
(6,035)
1,348
13,396
319
59
(52,733)
(1,055)
21,223
(5,623)
3,143
‐
92
(57,244)
(4,553)
(6,016)
1,348
13,396
319
59
(52,691)
(1,040)
21,223
(5,612)
3,143
(53)
92
(34,938)
(34,953)
33,237
12,977
33,295
13,075
Depreciation is recognised as an expense in Note 3.
Acquisitions include the acquisition of GEL ANZ and IMG (Note 33a). Disposals include the sales of Dexion and Lock
Focus (Note 33b).
19. Impairment testing
Accounting policies
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.
58
GUD Holdings Limited and subsidiaries
19. 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 2018 (2016: based on 2017
budget) year and forecasts for a further 4 years which are extrapolated in perpetuity using a long term average
growth rate of 3% 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
2016 and 2017:
Automotive
Oates
Davey
2017
13.2‐14.0%
12.2‐13.0%
13.0‐13.9%
2016
13.2‐14.0%
12.9‐13.7%
14.1‐15.0%
With regards to all the CGU’s, management have determined that, given the significant excess of future cash flows
over asset carrying value (headroom), there are no reasonable possible changes in key assumptions which could
occur to cause the carrying amount of these CGU’s to exceed its recoverable amount.
The directors have assessed that no impairment charge is required in relation to the intangible assets for the year
ended 30 June 2017.
20. 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
2017
$'000
722
‐
‐
722
2016
^Restated
$'000
‐
‐
‐
‐
^ Prior year comparatives have been restated in accordance with the requirements of Australian Accounting Standards to separately disclose the
contribution of businesses discontinued in the current year.
Operating leases
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
2017
Buildings
$'000
8,684
26,674
13,640
48,998
2017
Other
$'000
1,438
1,876
‐
3,314
2016
^Restated
Buildings
$'000
7,365
23,840
18,274
49,479
2016
^Restated
Other
$'000
1,227
1,805
316
3,348
^ Prior year comparatives have been restated in accordance with the requirements of Australian Accounting Standards to separately disclose the
contribution of businesses discontinued in the current year.
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.
59
GUD Holdings Limited and subsidiaries
20. 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:
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
2017
$'000
2016
^Restated
$'000
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
2
‐
‐
2
‐
2
2
‐
‐
2
^ Prior year comparatives have been restated in accordance with the requirements of Australian Accounting Standards to separately disclose the
contribution of businesses discontinued in the current year.
Lease liabilities provided for in the consolidated financial statements are disclosed in Note 22.
60
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.
21. 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
Note
25
Reconciliation of profit after income tax to net cash provided by operating activities
Profit / (loss) from operations, net of income tax
Share of loss of equity accounted investees
Losses on sale of subsidiaries
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
2017
$'000
10,238
‐
10,238
2017
$'000
(7,344)
(3,993)
50,683
6,466
‐
‐
‐
‐
‐
764
(123)
9,723
488
3,522
(7,564)
(4,403)
128
675
(2,263)
(1,453)
45,306
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
61
GUD Holdings Limited and subsidiaries
22. 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 2017 is 4.44% (2016: 4.17%).
Unsecured bank loans
The two tranches of the unsecured bank loan in accordance with the Common Terms Deed are summarised below:
Tranche A – 5 year facility
Tranche B – 5 year facility
Facilities as at 30 June 2017
Facilities as at 30 June 2016
Amount
$ million
185.0
97.5
Maturity
1 July
2020
2020
Amount
$ million
185.0
110.0
Maturity
1 July
2020
2020
The Tranche B facility amortises from 31 March 2016 to maturity. The facility has amortised $12.5 million during
the year ended 30 June 2017 (2016: $5 million).
Both tranches are subject to variable interest rates which as at 30 June 2017 are 4.12% and 4.34%, respectively
(2016: 4.08% and 4.21%, 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).
During the year the Group sold Dexion (Note 33 b). Subsidiaries of Dexion held unsecured bank facilities in Malaysia
and China of $25 million to assist with funding their operations. Remaining loans in China are RMB 4.0 million, and
Bank Guarantees are RMB 300,000 on which GUD Holdings has a parent entity guarantee obligation. These facilities
remain in place for a period not exceeding 30 November 2017 and are secured by stand‐by letters of credit of equal
value issued to the Company by the acquirer’s Bank, United Overseas Bank of Singapore (Note 33b).
Dexion’s subsidiaries based in Australia, New Zealand and Malaysia were transaction parties to the Common Terms
Deed. Consent is required from the banks to remove these Dexion entities as transaction parties from the 1 June
2017. Consents have been received from all banks.
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 2017 and all operations at 30 June
2016:
Current
Unsecured bank loans
Secured finance lease liabilities (1)
Non‐current
Unsecured bank loans
(1) Secured by the assets leased (Note 18).
Note
25
25
2017
$'000
15,092
‐
15,092
2016
$'000
18,548
2
18,550
155,957
155,957
167,483
167,483
62
GUD Holdings Limited and subsidiaries
22. Borrowings (continued)
Financing facilities
This table summarises facilities available, used and not utilised related to continuing operations at 30 June 2017 and
all operations at 30 June 2016:
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
23. Derivatives
Accounting policies
Derivative financial instruments
2017
$'000
5,001
282,500
5,000
292,501
2016
$'000
5,338
320,272
15,000
340,610
‐
‐
171,049
186,033
‐
‐
171,049
186,033
5,001
111,451
5,000
121,452
5,338
134,239
15,000
154,577
To manage its exposure to interest rate and foreign exchange rate risk, the Group may enter into a variety of
derivatives including forward foreign exchange contracts, 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 and effective 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.
63
GUD Holdings Limited and subsidiaries
23. 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 2017 and all operations at 30
June 2016:
Current
Derivatives ‐ Foreign currency forward contracts
Current derivative assets
Non‐current
Derivatives ‐ Foreign currency forward contracts
Derivatives ‐ Interest rate swaps
Non‐current derivative assets
Derivative liabilities
Note
25
25
2017
$'000
15
15
4
44
48
2016
$'000
144
144
62
62
This table summarises derivative liabilities related to continuing operations at 30 June 2017 and all operations at 30
June 2016:
Current
Derivatives ‐ Foreign currency forward contracts
Derivatives ‐ Interest rate swaps at fair value
Current derivative liabilities
Non‐current
Derivatives ‐ Foreign currency forward contracts
Derivatives ‐ Interest rate swaps at fair value
Non‐current derivative liabilities
Note
25
25
25
25
2017
$'000
850
28
878
‐
1,525
1,525
2016
$'000
2,964
581
3,545
829
2,820
3,649
64
GUD Holdings Limited and subsidiaries
24. 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 2017 and all operations at
30 June 2016:
Current
Loans receivable ‐ related parties
Loans receivable ‐ third parties
Contingent consideration receivable
Other current financial assets
Non‐current
Loans receivable ‐ third parties
Other non‐current financial assets
Note
25
25
25
25
2017
$'000
‐
516
2,666
3,182
1,800
1,800
2016
$'000
1,885
473
‐
2,358
2,359
2,359
Loans receivable from related parties relate to loans by the Company to Sunbeam ANZ which were repaid on 1 July
2016.
65
GUD Holdings Limited and subsidiaries
24. Other financial instruments (continued)
Other financial liabilities
This table summarises other financial liabilities at 30 June 2017 and all operations at 30 June 2016:
Current
Contingent consideration payable
Other consideration payable
Total other financial liabilities
Note
25
2017
$'000
5,902
173
6,075
2016
$'000
19,637
‐
19,367
Contingent consideration payable included in other financial liabilities is measured at fair value. Consideration
payable at 30 June 2017 includes the contingent consideration payable to the vendors of GEL ANZ and IMG (Note
33a). Consideration payable at 30 June 2016 represents the contingent consideration payable to the vendors of
Brown & Watson (Note 25).
25. 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 1: quoted prices (unadjusted) in active markets for identical assets or liabilities
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 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 payable
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 earnings to 30 June 2017 for GEL ANZ and IMG.
There were no transfers between any of the levels of the fair value hierarchy during the years ended 30 June 2017
or 2016.
Contingent consideration payable
Changes in fair value of the contingent consideration payable is summarised below:
Opening balance
Contingent consideration (paid) / payable – acquisition of 100% of Brown & Watson
Contingent consideration payable – acquisition of 100% of GEL ANZ
Contingent consideration payable – acquisition of 100% of IMG
Unwinding of discount
Unrealised fair value loss included in profit and loss
Closing balance
Note
33a
33b
33a
2017
$'000
19,367
(20,000)
1,794
3,951
790
‐
5,902
2016
$'000
‐
8,011
‐
‐
801
10,555
19,367
Upon acquiring 100% of GEL ANZ on 1 October 2016, the Company recorded a contingent consideration payable of
$1.794 million representing its fair value at acquisition date. On 30 June 2017, this contingent consideration was
revalued to $1.952 million and $158,000 was recorded as an unwinding of the discount in net finance costs.
Upon acquisition of 100% of IMG, effective 1 June 2017, the Company recorded a contingent consideration payable
of $3.951 million representing its fair value at acquisition date.
The Company recorded a contingent consideration payable of $8.0 million with respect to the acquisition of Brown
& Watson which was subsequently revalued to $19.4 million 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 $790,000 million were
recorded in profit and loss. On 26 August 2016 contingent consideration of $20 million was paid to the vendors of
Brown & Watson which gave rise to an unwinding of discount of $632,000.
66
GUD Holdings Limited and subsidiaries
25. Financial instruments (continued)
As at 30 June 2017
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 a
Trade and other receivables a
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 a
Total financial liabilities not measured at fair value
Carrying value
Non‐current
$'000
Current
$'000
15
‐
2,666
2,681
10,238
91,970
516
102,724
105,405
850
28
6,075
6,953
15,092
15,092
4
44
‐
48
‐
‐
1,800
1,800
1,848
‐
1,525
‐
1,525
155,957
155,957
Total
$'000
19
44
2,666
2,729
10,238
91,970
2,316
104,524
107,253
850
1,553
6,075
8,478
171,049
171,049
Level 1
$'000
Level 2
$'000
Level 3
$'000
Fair value
Total
$'000
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
19
44
‐
63
‐
‐
‐
‐
63
850
1,553
‐
2,403
‐
‐
‐
‐
2,666
2,666
‐
‐
‐
‐
19
44
2,666
2,729
‐
‐
‐
‐
2,666
2,729
‐
‐
6,075
6,075
‐
‐
Total financial liabilities
a.
157,482
The Group has not disclosed the fair values for financial instruments such as cash and cash equivalents, short term trade receivables and payables, because their carrying amounts are a reasonable approximation of fair value
179,527
22,045
6,075
2,403
‐
850
1,553
6,075
8,478
‐
‐
8,478
67
GUD Holdings Limited and subsidiaries
25. Financial instruments (continued)
Financial assets measured at fair value
Derivatives ‐ Foreign currency forward contracts
Derivatives ‐ Interest rate swaps at fair value
Total financial assets measured at fair value
Financial assets not measured at fair value
Cash and cash equivalents a
Trade and other receivables a
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 a
Total financial liabilities not measured at fair value
Carrying value
Non‐current
$'000
Current
$'000
144
‐
144
18,235
118,813
2,358
139,406
139,550
2,964
581
19,367
22,912
18,550
18,550
‐
62
62
‐
‐
2,359
2,359
2,359
829
2,820
‐
3,649
167,483
167,483
Total
$'000
144
62
206
18,235
118,813
4,717
141,765
141,971
3,793
3,401
19,367
26,561
186,033
186,033
As at 30 June 2016
Level 1
$'000
Level 2
$'000
Level 3
$'000
Fair value
Total
$'000
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
144
62
206
‐
‐
‐
‐
206
3,793
3,401
‐
7,194
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
19,368
19,368
‐
‐
144
62
206
‐
‐
‐
‐
206
3,793
3,401
19,367
26,561
‐
‐
26,561
68
Total financial liabilities
a.
171,132
The Group has not disclosed the fair values for financial instruments such as cash and cash equivalents, short term trade receivables and payables, because their carrying amounts are a reasonable approximation of fair value
212,594
19,368
41,462
7,194
‐
GUD Holdings Limited and subsidiaries
26. 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.
The Group has exposure to the following risks from their financial instruments:
credit risk
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 Group’s exposure to credit risk is characterised by the following:
the majority of customer sales transactions are domestic in nature,
trade receivables are non‐interest bearing and domestic trade receivables are generally on 30 to 90 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.
69
GUD Holdings Limited and subsidiaries
26. 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 21), the total value of trade
debtors and other receivables (Note 8) and other financial assets (Note 24). 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:
prepare budgeted annual and monthly cash flows;
measurement of actual Group cash flows on a regular basis with comparison to budget on a monthly 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:
2017
Financial liabilities
Trade and other payables
Derivatives
Unsecured bank loans
2016
Financial liabilities
Trade and other payables
Derivatives
Unsecured bank loans
Secured finance lease liabilities
Carrying
amount
$'000
Contractual
cash flows
$'000
Less than
1 year
$'000
55,311
2,403
171,857
229,571
55,311
2,403
181,920
239,634
55,311
878
18,354
74,543
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
1 to 2
years
$'000
‐
1,525
18,354
19,879
1 to 2
years
$'000
‐
3,649
16,557
‐
20,206
2 to 5
years
$'000
Beyond 5
years
$'000
‐
‐
145,212
145,212
2 to 5
years
$'000
‐
‐
87,333
‐
87,333
‐
‐
‐
‐
Beyond 5
years
$'000
‐
‐
‐
‐
‐
70
GUD Holdings Limited and subsidiaries
26. 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 2017, the Group is exposed to $3.3 million (2016: $5.4 million) of US$ denominated net trade liabilities,
$6.5 million of NZ$ net trade receivables (2016: $12.4 million) and $2.4 million of Euro net trade receivables (2016:
$1.2 million of 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
2017
Foreign Currency
2016
2017
FC'000
FC'000
Contract Value
2016
$'000
2017
$'000
United States Dollars
Chinese Renminbi
European Euro
Australian Dollars (NZ entities)
0.7517
5.2312
‐
0.9555
0.7162
4.2931
0.6091
0.9279
35,525
5,940
‐
1,435
67,152
46,848
2,788
5,912
47,263
1,135
‐
1,502
93,762
10,912
4,517
6,371
49,900
115,622
1 Represents weighted average hedge exchange rates in the foreign currency contracts
Fair Value
2016
$'000
(2,703)
(519)
(408)
(163)
(3,793)
2017
$'000
(837)
(3)
‐
5
(835)
Sensitivity Analysis ‐ foreign exchange AUD/USD
For every 1c decrease in AUD:USD rate, total exposures increase by:
Income statement
Equity
2017
$'000
545
92
2016
$'000
83
311
71
GUD Holdings Limited and subsidiaries
26. 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. These hedges are treated as cash flow hedges.
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
2017
$'000
(1,607)
‐
2016
$'000
(1,661)
‐
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
2017
%
‐
‐
2.91
2016
%
3.65
4.58
2.91
2017
$'000
‐
‐
80,000
80,000
2016
$'000
34,700
11,400
80,000
126,100
Fair value
2016
$'000
(581)
(29)
(2,791)
(3,401)
2017
$'000
‐
‐
(1,481)
(1,481)
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 2016 and 2017
financial years.
There were no changes to the Group’s approach to capital management during the year.
72
GUD Holdings Limited and subsidiaries
27. 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.
2017
$'000
2017
Number
2016
$'000
2016
Number
Balance at the beginning of the year
286,160
85,327,114
286,160
85,079,850
Capital restructure
Performance share rights vested
Balance at the end of the year
(173,280)
‐
‐
412,433
‐
‐
‐
247,264
112,880
85,739,547
286,160
85,327,114
During the year, the Company issued 412,433 shares (2016: 247,264 shares) as a result of the vesting of performance
rights as follows:
357,471 shares issued pursuant to the vesting component of the 2016 performance rights plan;
36,641 shares issued to Karen Hope (executive of Sunbeam ANZ) for meeting EBITDA targets the year ended
30 June 2016. Details of special incentives is disclosed in Note 37 and the Remuneration Report; and
18,321 shares issued to a senior management personnel of Sunbeam ANZ for meeting EBITDA targets the
year ended 30 June 2016.
During the year no shares were bought back on market and cancelled by the Group (2016: 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.
Following the disposal of Sunbeam ANZ, Lock Focus and Dexion, in accordance with company policy, $173.280 million
was reclassified from retained earnings to share capital to address the permanent diminution in equity arising from
those business (Note 29).
28. Reserves
Accounting policies
Hedging reserve
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.
73
GUD Holdings Limited and subsidiaries
28. Reserves (continued)
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.
Dividend reserve
The Company may from time to time set aside amounts in the dividend reserve for dividends. Any amounts set aside
which are not applied to dividends are carried forward and may be applied to future dividends.
This table summarises the movement in reserves:
Hedging Reserve
Balance at the beginning of the year
Transfers within equity on disposal
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
Dividend Reserve
Balance at the beginning of the year
Amounts set aside for dividends
Balance at the end of the year
Reserves at the end of the year
2017
$'000
(4,679)
618
2,499
18
(1,544)
4,280
1,631
5,911
2,309
(1,085)
1,224
‐
21,000
21,000
26,591
2016
$'000
1,053
‐
1,653
(7,385)
(4,679)
2,881
1,399
4,280
1,199
1,110
2,309
‐
‐
‐
1,910
During the year, the company set aside a dividend reserve. In accordance with company policy, any balance in the
reserve may be considered to be applied to dividends as and when declared by the board.
74
GUD Holdings Limited and subsidiaries
29. Retained earnings
This table summarises the movement in retained earnings:
Balance at the beginning of the year
Profit for the period
Capital restructure
Transfer to dividend reserve
Transactions with owners, net of tax
Dividends paid
Balance at the end of the year
2017
$'000
(44,940)
(7,344)
173,280
(21,000)
(841)
(37,712)
61,443
2016
$'000
33,079
(43,039)
‐
‐
841
(35,821)
(44,940)
Following the disposal of Sunbeam ANZ, Lock Focus and Dexion, in accordance with company policy, $173.280 million
was reclassified from retained earnings to share capital to address the permanent diminution in equity arising from
the sale of those business (Note 27).
30. 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
2017
Final dividend in respect of the 2016 financial year
Interim dividend in respect of the 2017 financial year
Total dividends
2016
Final dividend in respect of the 2015 financial year
Interim dividend in respect of the 2016 financial year
Total dividends
Unrecognised amounts
Cents
per
share
23
21
22
20
Total
amount
Percentage
$'000
Date of payment
Tax rate
franked
2 September 2016
3 March 2017
3 September 2015
4 March 2016
19,707
18,005
37,712
18,756
17,065
35,821
30%
30%
30%
30%
100%
100%
100%
100%
Fully Paid Ordinary Shares
2017
Final dividend in respect of the 2017
financial year
Cents Total amount
$'000
per share
Date of payment
Tax rate
Percentage
franked
25
21,435
1 September 2017
30%
100%
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.
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.
30% (2016: 30%) franking credits available to shareholders of
GUD Holdings Limited for subsequent financial years
2017
$'000
2016
$'000
46,121
44,476
75
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.
31. 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 33c.
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% (2016: 30%) on profit
Increase/(decrease) in income tax expense / (benefit) 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 / (benefit) 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
2017
$'000
2016
^Restated
$'000
21,819
16,878
1,331
(256)
(457)
(448)
(797)
3,952
886
(818)
(200)
‐
21,192
20,698
21,938
(256)
(490)
21,192
21,350
886
(1,538)
20,698
^
Prior year comparatives have been restated in accordance with the requirements of Australian Accounting Standards to separately disclose
the contribution of businesses discontinued in the current year.
76
GUD Holdings Limited and subsidiaries
31. Current tax (continued)
Income tax expense recognised in other comprehensive income
2017
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
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
Before tax
Tax (expense)
/ benefit
Net of tax
(1,085)
3,570
26
(3,284)
(773)
‐
(1,071)
(8)
2,443
1,364
(1,085)
2,499
18
(841)
591
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)
32. Deferred tax
Accounting policies
Deferred tax
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.
77
GUD Holdings Limited and subsidiaries
32. Deferred tax (continued)
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
4,722
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
124
‐
‐
‐
‐
‐
‐
‐
‐
‐
124
‐
‐
‐
‐
‐
‐
(612)
13
137
(28)
(304)
(625)
(323)
(99)
40
(4)
(350)
(11)
9
7
(218)
330
(317)
‐
‐
(610)
(1,805)
(1,160)
(1,387)
(673)
511
(347)
(398)
(2,294)
(212)
2
‐
‐
‐
(210)
‐
‐
‐
‐
‐
‐
(775)
‐
‐
‐
(775)
‐
‐
‐
304
‐
304
3,884
12
363
224
1,360
934
720
41
1,128
364
9,030
(2,746)
6,284
147
870
1,553
19
157
2,746
(2,746)
‐
6,284
2017
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)
The disposals of Sunbeam ANZ, Lock Focus and Dexion have given rise to estimated net capital tax losses of $85.787 million (before tax) or $25.736 million (a net tax benefit).
These have not been recognised as a deferred tax asset on the basis that it is not probable that taxable capital profits will arise and it will be utilized (Note 33b). These capital gains
and losses have been offset on the basis they relate to income taxes levied by the same taxation authority and the Company intends to settle on a net basis.
78
GUD Holdings Limited and subsidiaries
32. Deferred tax (continued)
Opening balance
$'000
Acquisition
through business
combinations
$'000
Recognised
in Profit or Loss from
Continuing
operations
^Restated
$'000
Discontinuing
operations
^Restated
$'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
240
9
(313)
(71)
123
95
4
140
(72)
(3,957)
(3,802)
(380)
(2,177)
(3,198)
475
(59)
(5,340)
(130)
(75)
(39)
8
579
714
405
‐
72
3,471
5,005
926
189
‐
(663)
615
1,068
‐
‐
‐
‐
‐
‐
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
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)
^
Prior year comparatives have been restated in accordance with the requirements of Australian Accounting Standards to separately disclose the contribution of businesses discontinued in the current year.
79
GUD Holdings Limited and subsidiaries
Business Combinations
This section outlines the Group’s structure and changes thereto.
33. Investment in subsidiaries
Accounting policies
Business combinations
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 19). 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.
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.
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:
represents a separate major line of business or geographic area of operations;
is part of a single co‐ordinated plan to dispose of a separate major line of business or geographic area of
operations; or
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.
80
GUD Holdings Limited and subsidiaries
33. Investments in subsidiaries (continued)
33a Acquisitions
Acquisition of GEL
On 1 October 2016, subsidiaries of the Company acquired the net assets of Griffiths Equipment Limited (“GEL NZ”)
and 100% of the shares and voting interests of Griffiths Equipment Pty Ltd (“GEL Aust”) with businesses in New
Zealand and Australia, respectively. The total estimated consideration for GEL NZ and GEL Aust (collectively “GEL
ANZ”) is $9.117 million.
The acquisition is expected to provide the Group with an expanded presence in automotive aftermarket parts.
For the year ended 30 June 2017, GEL ANZ contributed $6.097 million of revenue and $1.690 million of EBIT to the
Group’s results. If the acquisition had occurred on 1 July 2016, management estimated that GEL ANZ would have
contributed $8.070 million of revenue and $2.149 million of EBIT to the Group’s results for the year ended 30 June
2017.
Consideration paid
As at 30 June 2017, the total consideration for the acquisition of GEL ANZ was $9.117 million:
A$'000
Intangible asset amount
Target net assets down payment
Net assets adjustment amount
Consideration
paid
Net assets
adjustment
amount received
Estimated
contingent
consideration at
acquistion
Acqusition value
of Investment
5,137
2,311
‐
7,448
‐
‐
(125)
(125)
1,794
‐
‐
1,794
6,931
2,311
(125)
9,117
Of the initial consideration, $7.448 million was paid on 1 October 2016, representing the initial consideration
with respect to the intangible asset amount of $5.137 million and the target net assets down payment of
$2.311 million.
Subsequent to acquisition the net asset adjustment was agreed, giving rise to a reduction in total
consideration payable of $125,000.
Contingent consideration payable
The Company has also agreed to pay the selling shareholders contingent consideration based on the consolidated
earnings of GEL ANZ for the period from 1 October 2016 to 30 September 2017. Management estimated the present
value of the contingent consideration at acquisition to be $1.794 million. During the year ended 30 June 2017,
contingent consideration was revalued to $1.952 million and therefore $158,000 was recognised as unwinding of
discount and recorded in net finance costs.
Acquisition‐related costs
During the period ended 30 June 2017, the Company incurred approximately $93,000 of acquisition related costs
including legal fees, due diligence and other advisory fees. This amount has been included in administrative
expenses.
Identifiable assets acquired and liabilities assumed
The following table summarises the recognised amounts of assets acquired and liabilities assumed at the date of
acquisition.
Trade and other receivables
Inventories
Goodwill
Other intangible assets
Property, plant and equipment
Deferred tax assets
Trade and other payables
Provisions
Total identifiable net assets acquired
GEL NZ
$'000
1,243
1,176
6,297
321
204
23
(479)
(80)
8,705
GEL Aust
$'000
70
76
290
‐
‐
‐
(24)
‐
412
GEL ANZ
$'000
1,313
1,252
6,587
321
204
23
(503)
(80)
9,117
81
GUD Holdings Limited and subsidiaries
33. Investments in subsidiaries (continued)
33a Acquisitions (continued)
Fair values measured on a provisional basis
All assets and liabilities acquired have been determined based on an assessment of fair value for specific assets and
liabilities.
If new information obtained within one year of the date of acquisition about facts and circumstances that existed at
the date of acquisition identifies adjustments to the above amounts, or any additional provisions that existed at the
date of acquisition, then the accounting for the acquisition will be revised.
Goodwill
Goodwill arising from the acquisition has been recognised as follows:
Total estimated consideration
Fair value of identifiable net assets
Goodwill
$'000
9,117
2,530
6,587
The goodwill is attributable mainly to the skills and talent of GEL ANZ’s workforce and potential synergies from the
Group’s combined automotive businesses.
Acquisition of IMG
On 1 June 2017, a subsidiary of the Company acquired 100% of the shares in Innovative Mechatronics Group Pty Ltd
(“IMG”) with business operations in Australia. The total estimated consideration for IMG is $10.247 million.
The acquisition is expected to provide the Group with an expanded presence in automotive aftermarket parts.
For the year ended 30 June 2017, IMG contributed $780,000 of revenue and $97,000 of EBIT to the Group’s results.
If the acquisition had occurred on 1 July 2016, management estimated that IMG would have contributed $7.43
million of revenue and $550,000 of EBIT to the Group’s results for the year ended 30 June 2017.
Consideration paid
As at 30 June 2017, the total estimated consideration for the acquisition of IMG was $10.247 million:
A$'000
Initial consideration
Escrow amount
Loan amount
Additional Inventory Purchase Price
Net cash adjustment
Contingent consideration
Initial
consideration
Additional
Inventory
Purchase Price
Net cash
adjustment
Estimated
contingent
consideration at
acquistion
Acqusition value
of Investment
6,000
500
(376)
‐
‐
‐
6,124
‐
‐
‐
271
‐
‐
271
‐
‐
‐
‐
(99)
‐
(99)
‐
‐
‐
‐
‐
3,951
3,951
6,000
500
(376)
271
(99)
3,951
10,247
Initial consideration of $6.124 million was paid by 1 June 2017, representing the initial consideration of $6.0
million, $500,000 deposited into an escrow account less an amount of $375,750 representing payment of a
loan amount to IMG so it could settle existing loans with external banks.
Subsequent to acquisition an additional inventory amount of $271,000 less a net cash adjustment of $99,000
was estimated, giving rise to an increase in the consideration payable of $172,000. It is expected these
amounts will be agreed and settled by 30 September 2017.
82
GUD Holdings Limited and subsidiaries
33. Investments in subsidiaries (continued)
33a Acquisitions (continued)
Contingent consideration payable
The Company has also agreed to pay the selling shareholders contingent consideration based on the earnings of IMG
for the period from 1 July 2017 to 30 June 2020. Management estimated the present value of the contingent
consideration at 1 June 2017 to be $3.951 million.
Acquisition‐related costs
During the period ended 30 June 2017, the Company incurred approximately $99,000 of acquisition related costs
including legal fees, due diligence and other advisory fees. This amount has been included in administrative
expenses.
Identifiable assets acquired and liabilities assumed
The following table summarises the recognised amounts of assets acquired and liabilities assumed at the date of
acquisition.
Cash and cash equivalents
Trade and other receivables
Inventories
Goodwill
Property, plant and equipment
Leased assets
Deferred tax assets
Trade and other payables
Income tax payable
Finance lease
Provisions
Borrowings
Total identifiable net assets acquired
Fair values measured on a provisional basis
$'000
249
1,066
2,496
7,784
482
98
101
(1,213)
(12)
(92)
(336)
(376)
10,247
All assets and liabilities acquired have been determined on a provisional basis and the Company is in the process of
finalising the assessment of fair value for specific assets and liabilities.
If new information obtained within one year of the date of acquisition about facts and circumstances that existed at
the date of acquisition identifies adjustments to the above amounts, or any additional provisions that existed at the
date of acquisition, then the accounting for the acquisition will be revised.
Goodwill
Goodwill arising from the acquisition has been recognised as follows:
Total estimated consideration
Fair value of identifiable net assets
Goodwill
$'000
10,247
2,463
7,784
The goodwill is attributable mainly to the skills and talent of IMG’s workforce and potential synergies from the
Group’s combined automotive businesses.
33b Disposals
Disposal of Sunbeam ANZ and Jarden Asia
Effective 1 July 2016, the Company disposed of:
Its remaining 51% shareholding in Sunbeam Australia and New Zealand (“Sunbeam ANZ”), comprising
Sunbeam Corporation Limited and Sunbeam NZ Corporation Limited, to Holmes Products (Far East) Limited
(“HPFE”), a subsidiary of Jarden Corporation. The Company therefore ceased control and has de‐
consolidated Sunbeam ANZ from 1 July 2016.
Its 49% shareholding in Jarden Consumer Solutions (Asia) Limited (“Jarden Asia”) to HPFE.
83
GUD Holdings Limited and subsidiaries
33. Investments in subsidiaries (continued)
33b Disposals (continued)
Consideration received
In respect of the sale of 51% of Sunbeam ANZ, consideration comprised:
An initial cash deposit of $29.522 million received by the Company on 1 July 2016; and
Completion consideration received of $1.006 million based on its fair value at disposal date and representing
the balance of the proceeds on sale.
In respect of the sale of 49% of Jarden Asia, consideration comprised cash of $3.993 million received by the Company
on 1 July 2016.
Non‐controlling 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
Share of comprehensive income
De‐recognition of non‐controlling interests with change in control
Non‐controlling interests at the end of the period
Net assets of the disposal group
2017
$'000
31,511
‐
(31,511)
‐
2016
$'000
31,193
318
‐
31,511
The carrying amount of Sunbeam ANZ’s net assets disclosed as assets and liabilities held for sale in the Group’s
financial statements on the date of sale was $66.799 million.
Results of discontinued operation
Revenue
Cost of goods sold, including restructuring costs
Gross Profit
Other income
Expenses
Results from operating activities
Net finance expense
Share of profit / (loss) of equity accounted investees, net of income tax
Loss on sale of subsidiary
Restructuring
Profit before tax
Income tax expense
Loss from discontinued operations, net of tax
2017
$'000
‐
‐
‐
‐
‐
‐
‐
3,993
(1,496)
(93)
2,404
(2,417)
(13)
2016
$'000
114,432
(77,998)
36,434
355
(35,553)
1,236
(419)
(2,329)
‐
‐
(1,512)
(282)
(1,794)
Prior to the sale of the remaining 51% share in Sunbeam ANZ, the Group had deferred $3.284 million of profit on
sale of the initial 49% interest in other comprehensive income on the basis that the Group retained control. As a
result of losing control of Sunbeam ANZ on 1 July 2016, the Group has released this profit on sale from other
comprehensive income and recognised it in profit on sale of discontinued operations in profit or loss for the year
ended 30 June 2017.
In respect of the income tax expense:
Prior to the sale of the remaining 51% share in Sunbeam ANZ, the Group had recognised $2.443 million of
tax expense in other comprehensive income on the basis that it retained control. As a result of losing control
of Sunbeam ANZ on 1 July 2016, the Group has released this tax expense from other comprehensive income
and recognised it in tax expense in profit or loss for the year ended 30 June 2017.
For the period ended 30 June 2017, the Group has recognised in profit or loss:
‐ $1.575 million of tax expense arising from the disposal of the remaining 51% share in Sunbeam ANZ; and
‐ $177,000 of tax expense arising from the disposal of the 49% share in Jarden Asia.
84
GUD Holdings Limited and subsidiaries
33. Investments in subsidiaries (continued)
33b Disposals (continued)
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
Tax capital gain
2017
$'000
‐
‐
‐
‐
2016
$'000
899
(4,021)
(4,862)
(7,984)
The disposal of the Sunbeam ANZ and Jarden Asia businesses gives rise to a $5.840 million (before tax) or $1.752
million (tax expense) capital gain for the Company which has been offset against capital losses on the disposal of
Lock Focus (below) on the basis that they relate to income taxes levied by the same taxation authority and the
Company intends to settle on a net basis. (Note 32).
Disposal of Lock Focus
On 1 December 2016, the Company disposed of the business and certain net assets of its subsidiary, Lock Focus Pty
Ltd (“Lock Focus”).
The disposal excluded trade receivables, trade creditors and certain employee liabilities which have been retained
by Lock Focus until they are finally settled.
For the year ended 30 June 2017, Lock Focus contributed $4.578 million of revenue and $4.318 million of EBIT loss
to the Group’s results, comprising $161,000 EBIT before significant items, $3.935 million of loss on sale, $228,000 of
transaction costs and $316,000 of restructuring costs.
Consideration received
Total consideration of $4.92 million was received on 30 November 2016.
Disposal‐related costs
During the year ended 30 June 2017, the Company incurred approximately $228,000 of disposal related costs
including legal fees, due diligence and other advisory fees, all of which have been included in administrative
expenses.
Identifiable assets acquired and liabilities disposed
The following table summarises the net assets disposed and retained as at 30 November 2016:
Net assets as at
30 November 2016
$'000
Disposed
$'000
Retained
$'000
Cash
Trade receivables
Inventory
Other debtors and prepayments
Goodwill
Property, plant and equipment
Other intangibles
Deferred tax asset
Trade creditors
Provisions
Total identifiable net assets disposed
588
1,946
2,471
106
5,300
1,358
56
264
(1,134)
(716)
10,239
‐
‐
2,471
46
5,300
1,358
56
240
‐
(637)
8,834
588
1,946
‐
60
‐
‐
‐
24
(1,134)
(79)
1,405
85
GUD Holdings Limited and subsidiaries
33. Investments in subsidiaries (continued)
33b Disposals (continued)
Results of discontinued operation
Year ended 30 June
Revenue
Cost of goods sold
Gross Profit
Expenses
Results from operating activities
Net finance expense
Transaction costs
Loss on sale of subsidiary
Restructuring
(Loss) / profit before tax
Income tax expense / (benefit)
(Loss) / profit from discontinued operations, net of tax
Cash flows from (used in) discontinued operation
Year ended 30 June
Net cash used in operating activities
Net cash from investing activities
Net cash from financing activities
Net cash flows for the year
Tax capital loss
2017
$'000
4,578
(2,855)
1,723
(1,562)
161
(8)
(228)
(3,935)
(316)
(4,326)
126
(4,200)
2017
$'000
(16)
(321)
‐
(337)
2016
$'000
10,629
(6,869)
3,760
(3,128)
632
(10)
‐
‐
‐
622
(140)
482
2016
$'000
498
(444)
(550)
(496)
The disposal of the Lock Focus business gives rise to a $10.791 million (before tax) or $3.237 million (tax benefit)
capital loss for the Company which has not been recognised in the balance sheet at 30 June 2017 on the basis that
it is not probable that taxable profits will be available against which these capital losses can be utilised, other than
in respect of capital gains arising on the sale of Sunbeam ANZ (Note 33b).
Disposal of Dexion
On 1 June 2017, the Company disposed of the shares of its subsidiary, Dexion (Australia) Pty Ltd (“Dexion”) to Tech‐
Link Storage Engineering Pte Ltd (“Tech‐Link”). The total estimated consideration for Dexion is $12.166 million.
For the year ended 30 June 2017, Dexion contributed $141.7 million of revenue and $54.207 million of EBIT loss to
the Group’s results, comprising $2.892 million EBIT loss before significant items, $45.252 million of loss on sale,
$2.829 million of transaction costs and $3.234 million of restructuring costs.
Consideration
Consideration is made up of $7.5 million plus a net cash adjustment calculated with reference to cash, debt, tax
receivable and payable at 31 May 2017 and an agreed provision of $500,000 for restructuring Dexion’s Middle East
operations.
Consideration received
Total consideration of $9.5 million was received as follows:
A deposit of $750,000 was received on 29 May 2017;
Additional proceeds of $6.75 million were received on 31 May 2017; and
An estimated net cash amount of $2.0 million was received on 31 May 2017.
86
GUD Holdings Limited and subsidiaries
33. Investments in subsidiaries (continued)
33b Disposals (continued)
Contingent consideration
The Company estimates the net cash amount of $4.666 million based on cash and debt balances at 31 May 2017
which increases the net cash amount received by $2.666 million. This receivable is contingent upon agreement
between the Company and Tech‐Link and is expected to be received by 30 September 2017.
Disposal‐related costs
During the year ended 30 June 2017, the Company incurred approximately $2.829 million of disposal related costs
including employee incentives, legal fees, due diligence and other advisory fees, all of which have been included in
administrative expenses.
Results of discontinued operation
Year ended 30 June
Revenue
Cost of goods sold
Gross Profit
Impairment
Transaction costs
Loss on sale of subsidiary
Restructuring
Expenses
Results from operating activities
Net finance expense
(Loss) before tax
Income tax expense
(Loss) from discontinued operations, net of tax
2017
$'000
141,723
(111,584)
30,139
‐
(2,829)
(45,252)
(3,234)
(33,031)
(54,207)
(441)
(54,648)
1,728
(52,920)
2016
$'000
175,558
(138,323)
37,235
(71,697)
‐
(45,029)
(79,491)
(679)
(80,170)
3,199
(76,971)
Cumulative income or expenses in other comprehensive income
There were no cumulative income and expenses included in other comprehensive income relating to the disposal
group.
Cash flows from (used in) discontinued operation
Year ended 30 June
Net cash used in operating activities
Net cash from investing activities
Net cash from financing activities
Net cash flows for the year
2017
$'000
(6,090)
(1,082)
6,787
(385)
2016
$'000
12,742
(2,194)
(17,688)
(7,140)
87
GUD Holdings Limited and subsidiaries
33. Investments in subsidiaries (continued)
33b Disposals (continued)
Assets and liabilities disposed
The following table summarises the net assets disposed as at 1 June 2017:
Cash and cash equivalents
Trade and other receivables
Inventories
Tax receivable
Investments
Other intangible assets
Property, plant and equipment
Deferred tax assets
Other assets
Assets disposed
Trade and other payables
Tax payable
Employee benefits
Warranty provisions
Borrowings
Deferred tax liabilities
Liabilities disposed
Net assets disposed
1 June 2017
$'000
8,932
34,028
25,324
1,550
10
952
18,405
1,974
1,352
92,527
(25,228)
(292)
(2,772)
(40)
(5,024)
(1,752)
(35,108)
57,419
Borrowings of RMB 4.0 million, and Bank Guarantees of RMB 300,000, on which GUD Holdings has a parent entity
guarantee obligation, remain in place for a period not exceeding 30 November 2017 and are secured by stand‐by
letters of credit of equal value issued to the Company by the acquirer’s Bank, United Overseas Bank of Singapore
(Note 22).
Tax capital loss
The disposal of the Dexion business gives rise to an estimated capital losses of $80.836 million (before tax) or $24,251
million (tax benefit) for the Company. Capital losses not utilised in the year ended 30 June 2017 will be available to
offset future capital gains to the extent that they arise. However unutilised capital losses remaining at 30 June 2017
have not been recognised in the balance sheet on the basis that it is not probable that taxable profits will be available
against which these capital losses can be utilised.
88
GUD Holdings Limited and subsidiaries
33. Investments in subsidiaries (continued)
33c Shareholdings
Country of incorporation
% ownership interest
2017
2016
Australia
Australia
Parent entity
GUD Holdings Limited (1)
Subsidiaries
ACN 006 864 848 Pty Ltd (formerly Appliance and Homewares
International Pty Ltd) (2) (3)
Brown & Watson International Pty Ltd (2) (3)
Australia
Australia
Carsmart Workshop Pty Ltd
Davey Water Products Pty Ltd (2) (3)
Australia
Dexion (Australia) Pty Limited (2) (3) (6)
Australia
Dexion (Shanghai) Logistics Equipment Co. Ltd (6)
Peoples' Republic of China
Dexion Asia Limited (6)
Hong Kong
Dexion Asia Sdn Bhd (6)
Malaysia
Dexion Asia Services Sdn Bhd (8)
Malaysia
Dexion Commercial (Australia) Pty Limited (2) (3) (6)
Australia
Dexion Integrated Systems Pty Limited (2) (3) (6)
Australia
Dexion (New Zealand) Limited (6) (7)
New Zealand
ED Oates Pty Ltd (2) (3)
Australia
Hong Kong
GUD (HK) Limited
New Zealand
Griffiths Equipment Limited
Griffiths Equipment Pty Ltd (2) (3)
Australia
GUD Automotive Pty Ltd (2) (3)
Australia
United Kingdom
GUD Europe Limited
New Zealand
GUD NZ Holdings Limited
Innovative Mechatronics Group Pty Ltd (2) (3)
Australia
ACN 004 930 385 Pty Ltd (formerly Lock Focus Pty Ltd) (2) (3) (5) Australia
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 (2) (3)
France
Spain
New Zealand
Australia
New Zealand
Australia
100
100
100
100
‐
‐
‐
‐
‐
‐
‐
‐
100
100
100
100
100
100
100
100
100
100
100
100
‐
‐
100
100
100
100
100
100
100
100
100
100
100
100
‐
100
100
‐
‐
100
100
100
‐
100
100
100
100
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) GUD Holdings Limited is the head entity within the Australian Tax Consolidated group.
(2) Member of the Australian Tax Consolidated group while 100% owned directly or indirectly by GUD Holdings Limited.
(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, while 100% owned directly or indirectly by GUD Holdings Limited.
(4) Sunbeam Corporation Limited and Sunbeam NZ Corporation Limited (collectively “Sunbeam ANZ”) were sold on 1 July 2016 (Note 33b).
(5) The net assets and business of ACN 004 930 385 Pty Ltd (formerly Lock Focus Pty Ltd) were sold on 1 December 2016, however the legal
entity has been retained and will be wound up in due course (Note 33b).
(6) All Dexion entities were sold on 1 June 2017 (Note 33b).
(7) During the year ended 30 June 2017, Dexion (New Zealand) Limited was established as a 100% owned subsidiary of Dexion (Australia) Pty
Limited and acquired the businesses and net assets of GUD NZ Holdings Limited that related to the Dexion businesses trading in New Zealand
on 1 May 2017. Dexion (New Zealand) Limited was sold on 1 June 2017 as part of the Dexion sale process (Note 33b).
(8) Dexion Asia Services Sdn Bhd was struck off on 9 January 2017.
89
GUD Holdings Limited and subsidiaries
33. 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
Capital restructure
Transfer to dividend reserve
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
2017
$'000
413,351
(9,286)
(406,758)
(2,693)
(24,224)
(26,917)
(207)
(27,124)
(47,548)
32,270
173,280
(21,000)
(37,712)
72,166
2016
$'000
488,476
(12,846)
(528,172)
(52,542)
(15,555)
(68,097)
(2,329)
(70,426)
58,699
‐
‐
‐
(35,821)
(47,548)
9,037
85,610
6,751
82,343
10,037
87,580
7,563
83,629
183,741
188,809
32,294
12,616
5,900
96,764
117,778
265,352
449,093
52,635
15,092
9,113
13,534
4,957
95,331
139,100
1,631
1,931
142,662
237,993
211,100
112,880
26,054
72,166
211,100
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
90
GUD Holdings Limited and subsidiaries
34. 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
De‐recognition of non‐controlling interests with change in control
2017
$'000
31,511
‐
‐
(31,511)
2016
$'000
31,193
‐
318
‐
Non‐controlling interests at the end of the period
‐
31,511
35. Equity‐accounted investees
Accounting policies
Interest in equity accounted investees
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.
91
GUD Holdings Limited and subsidiaries
35. 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
Share of loss and total comprehensive income of equity accounted
investees, net of tax 1
2017
$'000
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
2016
$'000
13,213
842
985
15,135
(2,065)
49%
‐
‐
‐
25,028
(7,490)
49%
(2,329)
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.
92
GUD Holdings Limited and subsidiaries
Other Notes
36. 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.
37. Key management personnel
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)
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. Chin (Chief Executive – E D Oates Pty Ltd, appointed 24 October 2016)
D. Birch (Chief Executive – E D Oates Pty Ltd, resigned 28 February 2017)
G. Nicholls (Chief Executive – GUD Automotive Pty Ltd)
R. Pattison (Chief Executive – GUD Automotive Division, appointed 9 May 2017 and Brown & Watson
K. Hope (Chief Executive – Sunbeam Corporation Ltd, left the Group upon sale of Sunbeam on 1 July 2016)
International Pty Ltd)
D. Worley (Chief Executive – Davey Water Products Pty Ltd)
T. Cooper (Managing Director – Wesfil Australia Pty Ltd)
T. Richards (Chief Executive – Dexion Limited, left the Group upon sale of Dexion on 1 June 2017)
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
2017
$
2016
$
6,887,315
6,088,119
97,127
366,912
745,052
75,164
373,807
607,404
8,096,406
7,144,494
93
GUD Holdings Limited and subsidiaries
38. Related parties
Directors
Details of Directors' compensation is disclosed in Note 37 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 2017, key management personnel held directly, indirectly or beneficially 486,249 ordinary shares (2016:
387,558) in the Group. Performance rights issued under the 2017 plan will fully vest and, as a result, key
management personnel will be issued an additional 211,913 (2016: 162,798) shares issued pursuant to full vesting
of the 2017 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 33c.
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 $432,368 excluding GST (2016: $419,567 excluding GST). The Group's policy is that related
party lease arrangements are undertaken with commercial terms and conditions.
39. Parent entity disclosures
As at and for the financial year ending 30 June 2017 the parent company of the Group was GUD Holdings Limited.
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
2017
$'000
(37,364)
‐
(37,364)
46,455
344,785
32,107
172,967
171,818
112,880
33,066
25,872
171,818
2016
$'000
(63,161)
841
(62,320)
71,219
440,531
41,895
196,956
243,575
286,160
(44,138)
1,553
243,575
The profit for the year includes transaction costs and losses on disposal of Sunbeam ANZ, Lock Focus and Dexion.
The results of these disposals in the parent entity profit for the year ended 30 June 2017 differ to the consolidated
income statement as investments were impaired in previous periods in the parent entity.
Total permanent losses with respect to these disposals of $173.280 million were recapitalised from retained earnings
to share capital during the year ended 30 June 2017 to address the permanent diminution in retained earnings from
those business (Note 27).
During the year, the company set aside $21.0 million from retained earnings to a dividend reserve (Note 28).
94
GUD Holdings Limited and subsidiaries
39. Parent entity disclosures (continued)
GUD Holdings Limited
Parent entity contingencies
Contingent liabilities
2017
$'000
2016
$'000
65,026
68,452
The parent entity is party to two guarantees relating to subsidiaries. The bank borrowing facility described in Note
22 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.
Subsequent to the disposal of Dexion on 1 June 2017, Dexion has remaining loans of RMB 4.0 million, and Bank
Guarantees of RMB 300,000 on which GUD Holdings has a parent entity guarantee obligation. These facilities remain
in place for a period not exceeding 30 November 2017 and are secured by stand‐by letters of credit of equal value
issued to the parent entity by the acquirer’s Bank, United Overseas Bank of Singapore (Note 33b).
The parent entity is also party to a deed of cross guarantee as described in Note 33c. 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 2017.
40. Contingent liabilities
The Group had no material contingent liabilities at 30 June 2017 (2016: Nil).
41. Subsequent events
Other than 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.
95
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 2017 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 33c 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 2017.
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, 27 July 2017
96
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 of GUD Holdings Limited
(the “Company”) for the financial year ended 30 June 2017 there have been:
i. no contraventions of the auditor independence requirements as set out in the Corporations Act 2001
in relation to the audit; and
ii. no contraventions of any applicable code of professional conduct in relation to the audit.
KPM_INI_01
KPMG
Chris Sargent
Partner
Melbourne
27 July 2017
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.
97
Independent Auditor’s Report
To the shareholders of GUD Holdings Limited
Report on the audit of the Financial Report
Opinion
We have audited the Financial Report of
GUD Holdings Limited (the Company).
In our opinion, the accompanying Financial
Report of the Company is in accordance
with the Corporations Act 2001, including:
• giving a true and fair view of the
Group’s financial position as at 30
June 2017 and of
financial
performance for the year ended on
that date; and
its
The Financial Report comprises:
• Consolidated Balance Sheet as at 30 June 2017
• Consolidated
Income Statement, Consolidated
Statement of Comprehensive Income, Consolidated
Statement of Changes in Equity and Consolidated
Cash Flow Statement for the year then ended
• Notes 1 to 41, including a summary of significant
accounting policies and other explanatory information
• Directors’ Declaration.
•
complying with Australian Accounting
the Corporations
Standards
Regulations 2001.
and
The Group consists of the Company and the entities it
controlled at the year-end or from time to time during the
financial year.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for the
audit of the Financial Report section of our report.
We are independent of the Group in accordance with the Corporations Act 2001 and the ethical
requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics
for Professional Accountants (the Code) that are relevant to our audit of the Financial Report in Australia.
We have fulfilled our other ethical responsibilities in accordance with the Code.
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.
98
Key Audit Matters
The Key Audit Matters we identified are:
• Recoverability of goodwill and other
intangible assets
• Acquisition accounting
• Disposal of businesses
• Valuation of inventory
Key Audit Matters are those matters that, in our
professional judgment, were of most significance in our
audit of the Financial Report of the current period.
These matters were addressed in the context of our audit
of the Financial Report as a whole, and in forming our
opinion thereon, and we do not provide a separate
opinion on these matters.
Recoverability of goodwill ($119.4 million) and other intangible assets ($118.1million)
Refer to Note 16 Goodwill, Note 17 Other intangible assets and Note 19 Impairment testing to the
Financial Report.
The key audit matter
How the matter was addressed in our audit
The carrying value of goodwill and other
intangible assets is considered with reference to
the Group’s analysis of future cash flows for the
respective Cash Generating Unit
(CGU) or
individual asset (as applicable).
to
The recoverability of these assets is a key audit
matter due
inherent complexity
associated with auditing the forward looking
assumptions incorporated in the Group’s “value
in use” (VIU) models.
the
The Group’s VIU models are
internally
developed, and use a range of internal and
inputs. Forward-looking
external data as
assumptions may be prone to greater risk for
potential bias, error and inconsistent application.
Significant judgement is involved in establishing
these assumptions. The key assumptions in the
VIU models include forecast cash flows, terminal
values, growth rates and discount rates. Where
the Group has not met prior year forecasts in
relation to a specific CGU we factor this into our
assessment of forecast assumptions.
Our procedures included:
• assessing the Group’s VIU models and key
assumptions by:
- evaluating the appropriateness of the VIU
standard
accounting
against
model
requirements;
- comparing inputs into the relevant cash flow
forecasts to the Board approved budgets;
- comparing forecast cash flows to historical
trends and performance and assessing the
impact of business changes;
- using our industry knowledge to challenge
and assess the reasonableness of key
assumptions. We
increased
scepticism to forecasts in the areas where
previous forecasts were not achieved; and
applied
- assessing
the
reasonableness of
information and evaluating
the
discount rates by considering comparable
the
market
economic assumptions relating to cost of
debt and cost of equity and evaluating the
expertise and independence of the valuation
specialist engaged by the Group.
• considering the sensitivity of the models by
varying key assumptions, such as forecast
growth rates, terminal values and discount
rates, within a reasonably possible range to
identify those assumptions at higher risk of bias
in application. We also
or
inconsistency
99
assessed the related impairment breakeven
points for these assumptions in order to identify
those CGUs at higher risk of impairment and to
focus our further procedures; and
• considering the disclosures in the financial
report using our understanding of
the
recoverability assessment obtained from our
testing and against the requirements of the
accounting standards.
Acquisition accounting
Refer to Note 33a Investments in Subsidiaries (Acquisitions) to the Financial Report.
The key audit matter
How the matter was addressed in our audit
During the year the Group completed the
acquisition of:
• Griffiths Equipment Limited ; and
•
Innovation Mechatronics Group Pty Ltd.
The audit of acquisitions, including the purchase
price accounting, is a key audit matter due to the
extent of judgement and complexity involved in
establishing the fair value of the assets and
liabilities acquired and
for
contingent or deferred consideration. Key
acquisition
assumptions
accounting include forecast revenue, profit and
margins, royalty rates and discount rates.
in accounting
the Group’s
in
Our procedures included:
•
the
transaction documents
reading
to
understand the terms and conditions of the
acquisitions
• evaluating the substance of the acquisition,
using the terms and conditions of the Purchase
and Sale Agreement, against the criteria for
business combinations
the accounting
standards;
in
• assessing the measurement of contingent or
the
deferred consideration by evaluating
Group’s assessment of achievement of
significant contracted hurdles. We assessed
the likelihood and magnitude of forecasted
performance against trends from current year
and previous performance, adjusted for the
Group’s integration strategy;
• evaluating the methodology used to fair value
assets and liabilities acquired. This included
expertise
consideration
and
of
independence of
the valuation specialist
engaged by the Group (where applicable), and
comparing methodologies with accepted
market valuation practices;
the
assets
liabilities
• assessing the calculated fair value of the
acquired
through
and
evaluation of the key assumptions applied by
the Group and the valuation specialist. We
challenged these assumptions via comparison
against results achieved prior to acquisition
(available to us from legacy systems) and
performance for the period post acquisition,
100
and used our knowledge of the business, the
Group’s strategic plans for the acquisition and
industry trends to challenge and assess the
reasonableness of forecasts; and
• assessing the disclosure in the Financial Report
the
relating
the acquisitions against
requirements of the accounting standards.
to
Accounting for business disposals
Refer to and Note 33b Investment in Subsidiaries (Disposals) to the Financial Report.
The key audit matter
How the matter was addressed in our audit
During the year the Group completed the
disposal of:
• Sunbeam
(classified as a discontinued
operation at 30 June 2016);
the Lock Focus segment; and
the Dexion segment.
•
•
The audit of the accounting for these disposals,
the profit/loss on sale and
in particular
presentation of discontinued versus continuing
operations in the profit and loss, is a key audit
matter due to the quantum and scale of
disposals during the period. The Group disposed
of three of their six segments.
We focused on the areas where additional
complexity exists in the measurement and
accounting for the disposals, including:
•
taxation
the
implications, noting
transactions impact multiple jurisdictions
and interpreting the local taxation legislation
requires specialist knowledge; and
that
•
the restatement of financial information into
continuing and discontinuing operations.
Our procedures included:
•
the
transaction documents
reading
to
understand the terms and conditions of the
disposals;
• evaluating the substance of the disposals, using
the terms and conditions of the transaction
documents, against the criteria for discontinued
operations in the accounting standards;
• assessing the identification of assets and
liabilities disposed of, comparing to transaction
documents and underlying financial records at
the point of disposal;
• checking the calculation of consideration by
comparing relevant amounts to bank records
and the transaction documents;
• assessing the identification and treatment of
costs relating to the disposals for compliance
with relevant accounting standards;
• using our tax specialists, we evaluated the
respective tax implications in the individual
jurisdictions against the requirements of the tax
legislation and industry positions;
• checking the individual calculations of profit and
loss on disposal for each segment; and
to
• assessing the disclosure in the Financial Report
the
the disposals,
relating
restatement of prior period information to
reflect the impact of the disposals, against the
requirements of the accounting standards.
including
101
Valuation of Inventory ($93.1 million)
Refer to Note 9 Inventories to the Financial Report.
The key audit matter
How the matter was addressed in our audit
At 30 June 2017, the Group held inventory with
a net carrying value of $93.1 million.
The audit of inventory valuation is a key audit
matter due to the extent of judgement involved
in determining the recoverable value, particularly
in relation to any slow moving or excessive
stock.
The Group has a diverse and broad product
range, and sells to different market segments,
which increases the amount of judgement
required in assessing the carrying value of
inventory.
Our procedures included:
• assessing the appropriateness of inventory
valuation accounting policies applied by the
different segments in the Group against the
requirements of accounting standards;
• examining processes and testing controls
relating to inventory movements, standard
costing and valuation;
• evaluating the completeness of at-risk slow
moving or excess stock items identified by the
Group, comparing inventory listings against
historical sales information to identify any
additional at-risk items;
• comparing inventory values against current
selling prices for products to identify any items
selling for less than their carrying value; and
• challenging the Group's judgements relating to
the provision for stock obsolescence (including
slow moving or excess stock), by comparing
current
levels to historical and
forecast sales. We assessed the level of
provision in light of our knowledge of the
industry and businesses the Group operates in,
further discussions with key
from
and
personnel.
inventory
102
Other Information
Other Information is financial and non-financial information in GUD Holdings Limited’s annual reporting
which is provided in addition to the Financial Report and the Auditor's Report. The Directors are
responsible for the Other Information.
The Other Information we obtained prior to the date of this Auditor’s Report was the Directors’ Report
and the Remuneration Report.
Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not
express an audit opinion or any form of assurance conclusion thereon, with the exception of the
Remuneration Report and our related assurance opinion.
In connection with our audit of the Financial Report, our responsibility is to read the Other Information.
In doing so, we consider whether the Other Information is materially inconsistent with the Financial
Report or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
We are required to report if we conclude that there is a material misstatement of this Other Information,
and based on the work we have performed on the Other Information that we obtained prior to the date
of this Auditor’s Report we have nothing to report.
Responsibilities of the Directors for the Financial Report
The Directors are responsible for:
• preparing the Financial Report that gives a true and fair view in accordance with Australian
Accounting Standards and the Corporations Act 2001;
•
implementing necessary internal control to enable the preparation of a Financial Report that gives
a true and fair view and is free from material misstatement, whether due to fraud or error; and
• assessing the Group’s ability to continue as a going concern. This includes disclosing, as applicable,
matters related to going concern and using the going concern basis of accounting unless they either
intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the Financial Report
Our objective is:
•
•
to obtain reasonable assurance about whether the Financial Report as a whole is free from material
misstatement, whether due to fraud or error; and
to issue an Auditor’s Report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with Australian Auditing Standards will always detect a material misstatement when it
exists.
Misstatements can arise from fraud or error. They are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on
the basis of this Financial Report.
A further description of our responsibilities for the audit of the Financial Report is located at the Auditing
and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_files/ar2.pdf. This
description forms part of our Auditor’s Report.
103
Report on the Remuneration Report
Opinion
•
In our opinion, the Remuneration
Report of GUD Holdings Limited for
the year ended 30 June 2017 complies
with Section 300A of the Corporations
Act 2001; and
• The non-statutory compensation for
the Senior Executives set out
in
section 4.2 of
the Remuneration
Report for the year ended 30 June
2017 presents fairly, in all material
respects, in accordance with the basis
of preparation set out in section 4.2 of
the Remuneration Report
Directors’ responsibilities
The Directors of the Company are responsible for the
preparation and presentation of the Remuneration Report
in accordance with Section 300A of the Corporations Act
2001.
Our responsibilities
We have audited the Remuneration Report included in
the Directors’ Report for the year ended 30 June 2017.
Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
KPMG
Chris Sargent
Partner
Melbourne
27 July 2017
104
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 15 August 2017
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
3,173
4,265
1,094
627
20
%
34.57
46.46
11.92
6.83
0.22
Shares
1,541,054
10,874,064
7,801,097
12,090,267
53,879,216
%
1.78
12.62
9.05
14.03
62.52
9,179
100.00
86,185,698
100.00
There are 394 shareholders holding less than a marketable parcel of shares. A marketable parcel is $500.00.
Twenty Largest Shareholders as at 15 August 2017
Number of Shares
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Limited
Citicorp Nominees Pty Limited
National Nominees Limited
Argo Investments Limited
BNP Paribas Noms Pty Ltd
BNP Paribas Nominees Pty Ltd
HSBC Custody Nominees (Australia) Limited
AMP Life Limited
Citicorp Nominees Pty Limited
Morgan Stanley Australia Securities (Nominee) Pty Limited
HSBC Custody Nominees (Australia) Limited-GSCO ECA
Mr Jonathan Peter Ling
Marich Nominees Pty Ltd
Sandhurst Trustees Ltd
National Nominees Limited (DB A/C>
Kulandra Pty Limited
HSBC Custody Nominees (Australia) Limited – A/C 2
Australian Executor Trustees Limited
Mr Timothy Theodore Byard
23,054,458
11,699,010
7,944,771
3,165,517
1,772,013
1,408,371
1,056,530
647,507
479,086
458,694
405,906
388,161
280,004
266,600
197,135
176,624
132,749
125,072
120,741
100,247
%
26.75
13.57
9.22
3.67
2.06
1.63
1.23
0.75
0.56
0.53
0.47
0.45
0.32
0.31
0.23
0.20
0.15
0.15
0.14
0.12
Total Twenty Largest Shareholders of Ordinary Fully Paid Shares
Total Remaining Holders Balance
53,879,216
32,306,482
62.52
37.48
Substantial Shareholders of GUD Holdings Limited
As at 15 August 2017, the current notices of substantial shareholders were:
Marathon Asset Management LLP
Vinva Investment Management
Number of Shares
6,019,359
4,417,016
%
7.02
5.15
105
Shareholder Services and Information
Dividends/Dividend Reinvestment Plan (DRP)
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.
Shareholding 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.
106
Shareholder Services and Information
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
Postal Address – GPO Box 2975, Melbourne Vic 3001
Yarra Falls, 452 Johnston Street, Abbotsford Vic 3067
Enquiries Within Australia – 1300 850 505
Enquiries Outside Australia – 61 3 9415 4000
Investor Enquiries Facsimile Number – 61 3 9473 2500
Website – www.investorcentre.com
Email – www.investorcentre.com/contact
107