GUD HOLDINGS LIMITED
ANNUAL REPORT 2019
ABN 99 004 400 891
YEAR ENDED 30 JUNE 2019
Table of Contents
Directors’ Report ............................................................................................................................................ 1
Operating and Financial Review ..................................................................................................................... 7
Sustainability Review .................................................................................................................................... 15
Remuneration Report ................................................................................................................................... 24
Consolidated Financial Statements .............................................................................................................. 35
Additional Shareholder Information .......................................................................................................... 102
Directors’ Report
Directors’ Report
The Directors of GUD Holdings Limited (the Company) present their report on the consolidated entity, being the
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 2019.
Company and its subsidiaries, for the year ended 30 June 2019.
Directors
Directors
The names of the Directors who held office during the financial year and details of their qualifications, experience
The names of the Directors who held office during the financial year and details of their qualifications, experience
and special responsibilities are as follows:
and special responsibilities are as follows:
M G Smith*
M G Smith*
Dip. Business (Marketing) FAMI CPM FIML FAICD
Dip. Business (Marketing) FAMI CPM FIML FAICD
Appointed Non‐Executive Director on 26 May 2009 and Chairman
Appointed Non‐Executive Director on 26 May 2009 and Chairman
Mr Smith is currently a Non‐Executive Director and Chairman of Australian Pharmaceutical Industries Limited
Mr Smith is currently a Non‐Executive Director and Chairman of Australian Pharmaceutical Industries Limited
(appointed 6 September 2017). He is a former Non‐Executive Director and Chairman of Patties Foods Limited (retired
(appointed 6 September 2017). He is a former Non‐Executive Director and Chairman of Patties Foods Limited (retired
September 2017), a former Non‐Executive Director of Toll Holdings Limited (retired May 2015), and a former Non‐
September 2016), a former Non‐Executive Director of Toll Holdings Limited (retired May 2015), and a former Non‐
Executive Director and Chairman of Food Holdings Limited (retired August 2011).
Executive Director and 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
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
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
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.
included senior management roles with Unilever and Uncle Toby's.
A L Templeman‐Jones*
A L Templeman‐Jones*
BComm MRM EMBA CA FAICD
BComm MRM EMBA CA FAICD
Appointed Non‐Executive Director on 1 August 2015, and Chair of the Risk and Compliance Committee
Appointed Non‐Executive Director on 1 August 2015, and Chair of the Risk and Compliance Committee
Ms Templeman‐Jones is currently a Non‐Executive Director of Commonwealth Bank of Australia (appointed 5 March
Ms Templeman‐Jones is currently a Non‐Executive Director of Commonwealth Bank of Australia (appointed 5 March
2018), a Non‐Executive Director of Worley Parsons Limited (appointed 1 November 2017) and a Non‐Executive
2018), a Non‐Executive Director of Worley Parsons Limited (appointed 1 November 2017) and a Non‐Executive
Director of The Citadel Group Limited (appointed 8 September 2017), where she is Chair of the Audit, Risk and
Director of The Citadel Group Limited (appointed 8 September 2017), where she is Chair of the Audit, Risk and
Compliance Committee. Anne previously served as a Non‐Executive Director of HT & E Limited (formerly APN News
Compliance Committee. Anne previously served as a Non‐Executive Director of HT & E Limited (formerly APN News
& Media Limited) (retired May 2018), Cuscal Limited (retired March 2018), Pioneer Credit Limited (retired November
& Media Limited) (retired May 2018), Cuscal Limited (retired March 2018), Pioneer Credit Limited (retired November
2016), Notre Dame University (retired December 2016) and HBF Health Limited (retired October 2014).
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
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.
management and insurance, having previously held a number of senior executive roles within Westpac and ANZ.
G A Billings*
G A Billings*
BCom FCA MAICD
BCom FCA MAICD
Appointed Non‐Executive Director on 20 December 2011, and Chair of the Audit Committee
Appointed Non‐Executive Director on 20 December 2011, and Chair of the Audit Committee
Mr Billings retired from PricewaterhouseCoopers in 2011 after 34 years, where he was head of the Melbourne
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.
Assurance practice as well as heading the firm’s Australian and Global Industrial Products business.
Mr Billings is currently a Non‐Executive Director of Korvest Limited (appointed May 2013) and became Chairman of
Mr Billings is currently a Non‐Executive Director of Korvest Limited (appointed May 2013) and became Chairman of
that company in September 2014, a Non‐Executive Director and Chairman of Azure Healthcare Ltd (appointed 21
that company in September 2014, a Non‐Executive Director and Chairman of Azure Healthcare Ltd (appointed 21
October 2015), a Non‐Executive Director of Clover Corporation Limited (appointed 20 May 2013) where he is Chair
October 2015), a Non‐Executive Director of Clover Corporation Limited (appointed 20 May 2013) where he is Chair
of the Audit Committee, and a Non‐Executive Director of DomaCom Limited (appointed 23 February 2015) where
of the Audit Committee, and a Non‐Executive Director of DomaCom Limited (appointed 23 February 2015) where
he is Chair of the Audit Committee.
he is Chair of the Audit Committee.
D D Robinson*
D D Robinson*
BSc MSc
BSc MSc
Appointed Non‐Executive Director on 20 December 2011, and Chair of the Remuneration Committee
Appointed Non‐Executive Director on 20 December 2011, and Chair of the Remuneration Committee
Mr Robinson spent the past 22 years prior to joining the Board with global automotive parts, general industrial and
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.
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,
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
engineering, manufacturing, accounting and personnel. He was President of Robert Bosch Australia and Robert
Bosch New Zealand.
Bosch New Zealand.
Directors’ Report
G Whickman
B Bus MAICD
Appointed Managing Director and Chief Executive Officer of the Company with effect from 1 October 2018. Mr
Whickman was previously President and Chief Executive Officer of Ford Australia and New Zealand (2015 – 2018).
He had a 20‐year career with Ford with senior executive roles in Asia Pacific, Europe and North America.
J P Ling
BEng MBA FAICD
Former Managing Director and Chief Executive Officer from 1 August 2013 to 30 September 2018.
Mr Ling is a Non‐Executive Director of Pact Group Holdings Ltd.
Mr Ling was previously CEO and Managing Director of Fletcher Building Limited (2006 to 2012).
* All Non‐Executive Directors are independent.
Corporate Executives
Chief Financial Officer
M A Fraser
B Bus EMBA GAICD FCA
Group.
Company Secretary
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
M G Tyler
LLB BCom (Hons) MBA AGIA MAICD
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 33 years.
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
Committee
Committee
Committee
Committee
Audit
Risk & Compliance
Nominations
Remuneration
Directors
Held Attended Held Attended
Held
Attended
Held Attended Held Attended
M G Smith
A L Templeman‐
Jones
G A Billings
D D Robinson
G Whickman1
J P Ling2
9
9
9
9
7
2
9
9
9
9
7
1
4
4
4
4
‐
‐
4
4
4
4
‐
‐
4
4
4
4
‐
‐
meetings by invitation
2 J P Ling retired as Managing Director on 30 September 2018
4
4
4
4
‐
‐
1
1
1
1
‐
‐
1
1
1
1
‐
‐
7
7
7
7
‐
‐
7
7
7
7
‐
‐
1 G Whickman joined the Board on 1 October 2018 on his appointment as Managing Director and Chief Executive Officer. He attends committee
It is the Board’s practice that the Non‐Executive Directors meet regularly without the presence of Management.
1
1
1
2
Directors’ Report
G Whickman
B Bus MAICD
Appointed Managing Director and Chief Executive Officer of the Company with effect from 1 October 2018. Mr
Whickman was previously President and Chief Executive Officer of Ford Australia and New Zealand (2015 – 2018).
He had a 20‐year career with Ford with senior executive roles in Asia Pacific, Europe and North America.
J P Ling
BEng MBA FAICD
Former Managing Director and Chief Executive Officer from 1 August 2013 to 30 September 2018.
Mr Ling is a Non‐Executive Director of Pact Group Holdings Ltd.
Mr Ling was previously CEO and Managing Director of Fletcher Building Limited (2006 to 2012).
* 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 MAICD
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 33 years.
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
Committee
Risk & Compliance
Committee
Nominations
Committee
Remuneration
Committee
Directors
Held Attended Held Attended
Held
Attended
Held Attended Held Attended
M G Smith
A L Templeman‐
Jones
G A Billings
D D Robinson
G Whickman1
J P Ling2
9
9
9
9
7
2
9
9
9
9
7
1
4
4
4
4
‐
‐
4
4
4
4
‐
‐
4
4
4
4
‐
‐
4
4
4
4
‐
‐
1
1
1
1
‐
‐
1
1
1
1
‐
‐
7
7
7
7
‐
‐
7
7
7
7
‐
‐
1 G Whickman joined the Board on 1 October 2018 on his appointment as Managing Director and Chief Executive Officer. He attends committee
meetings by invitation
2 J P Ling retired as Managing Director on 30 September 2018
It is the Board’s practice that the Non‐Executive Directors meet regularly without the presence of Management.
2
2
Directors’ Report
Directors’ Interests and Benefits
Directors are not required to hold shares in the Company. The current shareholdings are shown in the table below.
Directors
Own name
Private
company / trust
Total 30 June 2019 Total 30 June 2018
Shares held beneficially
A L Templeman‐Jones
540
M G Smith
G A Billings
D D Robinson
G. Whickman1
J P Ling2
‐
‐
‐
2,000
100,894
1 Appointed as director on 1 October 2018
2 Ceased as a director on 30 September 2018
Corporate Governance Statement
5,902
58,000
11,250
13,000
‐
‐
6,442
58,000
11,250
13,000
2,000
5,042
41,000
11,250
13,000
‐
100,894
306,532
The Corporate Governance Statement of the Directors, 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 automotive products, pumps, pool and spa systems, and water pressure
systems, with operations in Australia, New Zealand, France and Spain.
Other than as referred herein and in the Operating and Financial Review set out on pages 7‐14, there were no
significant changes in the nature of the activities of the consolidated entity during the year.
Operating and Financial Review
The Operating and Financial Review for the consolidated entity during the financial year forms part of this Directors’
Report.
Significant Changes
On 2 July 2018, the Company completed the acquisition of Disc Brakes Australia Pty Ltd (“DBA”) for $22.128 million.
The business will be positioned as a premium disc rotors and pads supplier across Australia, New Zealand, USA and
Europe.
3
3
Directors’ Report
Share Capital
At 30 June 2019, there were 86,485,972 (2018: 86,185,698) 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 28 cents per share in respect of the year ended 30 June 2018 was declared on 27 July
2018, and paid on 31 August 2018 amounting to $24,216,072. This dividend was fully franked.
An interim ordinary dividend of 25 cents per share in relation to the half year ended 31 December 2018
was declared on 30 January 2019 and paid on 1 March 2019, amounting to $ 21,514,275. This dividend was fully
franked.
A final ordinary dividend of 31 cents per share in respect of the year ended 30 June 2019 was determined on 26
July 2019, and is payable on 30 August 2019 to shareholders registered on 16 August 2019. This dividend will be
fully franked. Shares will trade ex‐dividend on 15 August 2019. The GUD Dividend Reinvestment Plan remains
suspended for this dividend.
Auditor Independence
There is no current or former partner or director of KPMG, the Company’s auditors, who is or was at any time during
the financial year an officer of the consolidated entity.
The auditor’s independence declaration made under section 307C of the Corporations Act 2001 is set out on page
96 of the accompanying Financial Statements and forms part of this Report.
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 Committee to ensure they do not impact the integrity and objectivity of the auditor.
Options and Rights
During the year a total of 253,762 Performance Rights were granted to executives under the GUD Holdings 2021
Long Term Incentive Equity Plan. This included 30,134 Performance Rights granted to the Managing Director in
October 2018 after receiving approval of shareholders at the 2018 Annual General Meeting.
As a result of meeting TSR targets, 215,202 performance rights granted in July 2016 vested and 101,346 performance
rights lapsed in relation to the GUD Holdings 2019 Long Term Incentive Equity Plan.
In addition, as a result of executives departing the Group during the year, a total of 84,221 Performance Rights were
determined by the Board to have lapsed.
Details of the Performance Rights granted to key management personnel are included in the Remuneration Report,
which forms part of this Directors’ Report.
Except as above, no options or rights were granted during the year and no options or rights have been granted or
lapsed 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.
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.
4
4
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 35 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.
5
5
Directors’ 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.
M G Smith
Chairman of Directors
G Whickman
Managing Director
Dated at Melbourne, 26 July 2019
6
6
Operating and Financial Review
1.
Overview
In 2018‐19, GUD’s performance was solid in the face of some challenging business conditions. Overall, GUD delivered
just over 9% revenue growth with an underlying EBIT growth from Continuing Operations of 6%, and NPAT
improvement of 13% excluding a beneficial tax provision release. As you examine the results in more detail, you will
notice the automotive divisional results set an all‐time record of Revenue, Underlying EBIT and NPAT. Separately our
Water segment grew modestly, however this should be set against a down domestic market in the broader Pool,
Spa and Home Water Pressure systems industry.
As a consequence, the overall basic earnings per share reached a record high of 69 cps. This was reflected in the final
dividend payment to our shareholders, who in respect of this financial year received a record high 56 cps (excluding
special dividends), which was 8% higher than the previous Financial year.
Our balance sheet remained strong with gearing, being net debt against net debt and equity, of approximately 32%,
robust interest cover and available banking lines well in excess of $80 million, which can fully support future bolt‐on
acquisitions.
2018 – 2019 was characterised as a year where the confluence of economic and industry challenges constrained the
larger automotive gains seen in previous years. Although robust growth was achieved it must also be recognised this
was led largely by the acquired businesses with a modest contribution from our continuing businesses.
As the year progressed it became clearer that further opportunities exist for operational efficiencies across our
businesses and must be pursued in the short to medium term to mitigate any continuing adverse business
conditions.
Whilst a slow‐down in the new vehicles sales has been reported, the Automotive Aftermarket is still a positive and
defendable position for GUD to operate within. The 5‐year‐old plus Car parc is in excess of 15 million vehicles and
the growing composition of SUVs and pick‐ups within the Car parc plays to some of the strengths of businesses such
as BWI and DBA.
GUD recognises the long‐term future change in terms of Electric and Autonomous vehicles. As part of the recent
national debate on electric vehicles, GUD modelled the potential adoption rates leading up to 2030. We concluded
the addressable market of 5‐year‐old plus vehicles with internal combustion engines (ICE) would remain largely
consistent with today’s 15 million units, as new vehicles continue to flow into this cohort range. GUD already
generates less than 50% of its automotive revenue from products discrete to ICE vehicles and can see a strong and
evolving aftermarket within the future EV landscape.
Importantly, GUD maintained a strong safety focus during the year and continued to develop and implement
initiatives intended to drive a strong level of engagement, ownership and accountability for health and safety. Across
all of GUD, we saw a small lift in the lost time injury frequency rate (LTIFR). This was due to an increase of 1 lost time
injury case (LTI) over the 4 experienced in 2018. Positively, the GUD LTIFR rate is less than half of the Safe Work
Australia industry benchmark rate. Naturally our attention remains focussed on further improvements with the
rollout of a safety reporting application (Vault), increased safety and wellbeing education and the outstanding
participation in the GUD safety and innovation awards. Additional detail is contained in our Sustainability Review.
We are proud of the latest employee satisfaction survey outcomes. We remain committed in our desire to improve;
similar to safety, we don’t feel the job is ever complete. The survey outcome in the key measure of ‘employee
engagement’ rated GUD in the top 30% of the global IBM Kenexa’s Normative Benchmarks and Survey Content.
As well as seeing employee outcomes as critical, we also know how customers view us is an important indicator of
future success. We were proud to continue to receive customer accolades in 2018 ‐ 2019 with Ryco being awarded
‘Exceptional Service to Store Network Award’ at Repco , ‘Outstanding Customer Solutions Award’ at Supercheap
Auto, BWI being awarded PACCAR Parts Supplier of the Year and Kenworth Supplier of the Year (Category B), Wesfil
being awarded Auto One Queensland Supplier of the Year and, finally Davey being awarded Taylex’s Supplier of the
year.
The portfolio is now centred on the core automotive and water businesses. Unlike the last two years, the current
year did not see further business portfolio disposals and now we have a core portfolio which we will
7
7
Operating and Financial Review
grow both organically and by acquisition. We completed the previously announced acquisition of Disc Brakes
Australia on 2 July 2018. In the remainder of the year, we have explored and evaluated other acquisitions without
finding opportunities at prices which would deliver compelling value for GUD shareholders. The acquisition appetite
hasn’t changed, nor has the funding availability or consolidation opportunities. Management remain committed to
automotive acquisitions, however, we will not choose to secure new businesses without a clear integration and
margin uplift pathway.
With the commencement of a new Managing Director and CEO on 1 October 2018, we outlined a focus on five key
topic areas to further strengthen the business foundation. We have achieved progress on all five areas being:
1.
2.
3.
4.
5.
Customer relationships – we have recently agreed multi‐year preferred supplier agreements across select
automotive categories with two of our critical automotive customer reseller groups securing considerable
revenue streams for the next three years. We also deepened our working relationship with original
equipment companies Toyota and Paccar and developed new customers and channels in select export
markets.
Supplier engagement – with the rapidly growing automotive aftermarket component sector in China and
a weakening Australian dollar, we worked with a number of critical suppliers to confirm sourcing security,
in many cases achieving prospective cost reductions to help defray currency impacts. We are also co‐
operating with one major China‐based supplier who is building a new factory in Vietnam to ensure supply
capacity.
People cycle planning – we are working diligently to develop future leaders for our current businesses
and future acquisitions and ensure we have the right balance and focus at the executive leadership level.
The early results are evident in a number of moves including our first leader of automotive Acquisition and
Strategy, the appointment of our first Group Logistics Manager, the appointment of our first Chief People
Officer, the promotion of the former Innovation Officer to run Ryco Filters, and the elevation of the leaders
of Ryco Filters, IM Group, AA Gaskets and Disc Brakes Australia to report directly to the Managing Director
and Chief Executive Officer. The previous position of the Ryco Group CEO has been disbanded effective 1
July 2019, and the number of Key Management Personnel has reduced but the Executive Leadership Team
has been expanded. The changes see a broader range of skills, more executive leadership team capacity,
and a flatter and more responsive structure.
Product cycle planning – we have complemented the existing innovation focus with a broader
engagement on the renewal or broadening of existing products. This has seen some exciting new products
come to market such as Davey’s Tank Sense product which remotely monitors water levels or Ryco’s Catch
Can which removes partially burnt fuel or other contaminants which would otherwise be recycled through
the engine, thus minimising potential engine damage and expensive repairs. Towards the end of the year,
our innovation pipeline was also acknowledged by two government grants matching the expenditure on
innovative initiatives on a dollar for dollar basis. More details of the recent innovation activities and outputs
are outlined in the separate Sustainability Review.
Operational Efficiency ‐ in light of an ever demanding competitive and customer landscape, the need for
increased operational efficiencies is clear. The need to further leverage the wider GUD group of businesses
is before us and we see potential to achieve cost savings through leveraging greater commonality and scale.
To this end, we have reallocated and appointed a key finance and operational leader in support of the
operational efficiency taskforce and further business transformation projects. We believe this can be
achieved, however not at the expense of customer service and satisfaction.
8
8
Operating and Financial Review
Each of GUD’s larger automotive businesses continues to enjoy 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 and
pricing power. That said, Ryco Filters has seen a long‐standing global competitor try to secure market share through
expanded distribution and price reductions which is setting a pricing ceiling in the near term for filtration. This is not
the first time we have seen a global brand try to penetrate the market, and we have a clear defensive plan to ensure
Ryco’s position in the market place is not materially impacted, as we did when we face a similar challenge several
years ago.
Two of the smaller acquisitions have experienced some notable headwinds as one of the major resellers launched
house brand products which has created volume challenges for IM Group and AA Gaskets. We have consequently
revised our business acquisition evaluation and integration criteria, and this has been applied successfully when
acquiring Disc Brakes Australia.
The recent acquisition of Disc Brakes Australia (DBA) has been a welcome addition to the growing automotive
portfolio. DBA have delivered an excellent year and exceeded our collective expectations. DBA’s performance is a
result of both domestic and international sales. The latter now sees DBA products being sold in Europe, the Middle
East, USA and other smaller countries around the world. In addition, DBA was delighted to receive the Australian
Automotive Aftermarket Association’s (AAAA) Silver Award for Exporter of the Year.
Our brands continue to be demanded by end users; in recent brand surveys, we saw many of our brands in the top
quartile of their respective segments. This is supported by a strong pull model, where in some businesses, an active
field force visits many thousands of workshops per annum to educate workshops and conquest competing brands.
The year also saw much activity around building a foundation within Davey for profitable mid‐term growth. We are
encouraged with the early progress at Davey . While Revenue and EBIT growth was modest, the EBIT result contained
a significant amount incurred in the commercialisation and market introduction of new products, signifying that we
have been reinvesting for future growth.
We have started to observe some early green shoots of the Davey product creation outcomes. Davey has now been
successful in securing farm trials of Modular Water Treatment products (MWT) at one of the world’s biggest dairy
cooperatives, sold out its entire allocation in Europe of its new Nipper chlorinator and delivered the launch of the
Tank Sense product.
Davey remains committed to its recently approved strategic plan and now is in execution mode. This focuses
management efforts around the strategic priorities of design for manufacture, supply chain optimisation,
commercialisation of product innovation, diversifying channels to market and improving people and culture
outcomes.
2.
Financial Performance Review
Prior to commenting on financial performance for 2018‐19, it is important to note that there were no business
portfolio sales in the year. The accounts for the previous financial year report the Oates contribution for that year
under discontinued operations and GUD’s remaining automotive and Davey businesses are classified as continuing
operations.
Revenue
Total group revenue from continuing operations increased 9% on the prior year’s level. The Automotive businesses
reported revenue growth of 12% of which 1% was organic and 11% through acquisition. Davey’s revenue grew by
3%, all organic.
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9
Operating and Financial Review
The primary features of the continuing revenue trends in the year are detailed below.
1.
2.
3.
4.
A full year of revenue contribution came from AAG compared with seven month’s revenue in the prior year.
Disc Brakes Australia, which was acquired on 2 July 2018, contributed a full twelve months of revenue.
All businesses except Davey, implemented price increases in 2018‐19 to offset the higher cost of products
from offshore suppliers.
There were also some specific initiatives taken to expand each automotive business unit’s revenue,
including:
Ryco introduced crankcase ventilator catch cans to catch potentially damaging particulates for modern
diesel vehicles and continued to broaden its range. Ryco continued with its successful customer
acquisition program which aims to convert service garages to using the market‐leading Ryco brand of
automotive filters.
AAG continued to expand its product offering, including into light duty truck applications.
Wesfil continued to broaden the product range it offers to its independent reseller customers.
BWI released the 3 yearly Narva catalogue featuring over 700 new products, although demand was
limited as resellers applied caution in committing to inventory or actively ran down their inventory
levels prior to year‐end.
Davey reported a 3% increase in sales revenue to $104.1 million in 2018‐19 driven by several factors
including:
A successful launch of their Nipper salt water chlorinator range in Europe. Davey is now working on
further product expansion in that category.
Field trials of its Modular Water Treatment equipment with a major dairy cooperative and meanwhile
found new applications for the product technology including hospitality, industrial, and commercial
applications – also actively exploring Modular Water Treatment technology in potable water
applications.
Pleasingly, growth was seen in all key geographic regions.
Profitability
The Group reported a net profit after tax of $59.6 million. This compares with the prior year’s result of a net profit
after tax of $101.8 million which included a contribution from the Oates business of $51.4 million of which $51.5
million was the gain on the sale of the Oates business. Excluding the Oates impact in FY18, reported net profit in
FY19 increased by $9.1 million or 18%. The taxation expense benefited from the release of a tax provision of $2.5
million which had been held over pending the final clarification of potential capital gains liabilities in relation to the
sale of the various businesses in recent years – excluding that release, net profit increased by 13%. The result
included Davey one‐off costs of $0.6 million after tax primarily related to outsourcing the Fire Fighter range
production to reduce both assembly costs and production overhead recovery variability.
Underlying net profit after tax from the continuing operations, which include the automotive businesses and Davey,
improved by 10% on the prior year to $60.9 million, or 6% excluding the tax provision release.
Underlying Earnings Before Interest and Tax (underlying EBIT) from the continuing businesses improved by 6% to
$88.9 million driven from organic growth of both the Davey and the automotive businesses and the acquisition of
Disc Brakes Australia.
The primary factors affecting the profitability of each of the reporting entities are detailed below:
1.
2.
The 12% revenue uplift in Automotive came from a combination of organic growth of 1% and 11% from
acquisitions. The headwinds noted earlier for IM Group and AA Gaskets masked the growth in the Ryco and
Wesfil businesses. Disc Brakes Australia also exceeded expectations adding to the acquired growth
contribution. Overall, Automotive Underlying EBIT grew by 5% over the prior year.
Davey reported a 3% growth in underlying EBIT driven by organic sales growth of 3%. This met expectations
given the resources committed concurrently to bringing some of Davey’s new product offerings through
commercialisation and market introduction.
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Operating and Financial Review
Dividends
The total dividend for 2018‐19 was 56 cents per share consisting of an interim dividend of 25 cents per share and a
final dividend of 31 cents per share. Both dividends were fully franked. This compares with total dividends of 52
cents per share in the previous financial year and is an increases of 8%
The Dividend Reinvestment Plan remains suspended.
Cash Generation and Capital Management
Cash flow from operating activities was $44.5 million, down from $59.4 million in the prior year, including an increase
of $11.6 million in tax payments. On a pre‐tax basis, the Operating cash flow was $71.7 million, representing a cash
conversion of 78% compared to the 2017‐18 result of $75.0 million or 86%. The lower cash conversion was driven
by higher inventory levels across several businesses to support growth and reflected the impact of a number of
resellers either destocking or holding back on orders and, finally also a level of pre‐production of Davey fire fighters
to give time for the contract manufacturer to ramp up production.
Net debt was $132.7 million, an increase of $40.3 million including acquisition and investment related payments of
$23.1 million net of cash acquired.
Net working capital as at 30 June 2019 increased by $30.4 million over prior year levels of which $7.9 million was
related to the net working capital acquired through the Disc Brakes Australia acquisition. The businesses continued
to address several themes in relation to managing net working capital in 2018‐19, including:
Further rebalancing inventory levels in Automotive and Davey by reducing the level of slower moving
inventory while ensuring the businesses were well positioned to support new product introductions.
Further supporting sales growth, especially in the automotive businesses, and, where necessary, extending
debtor days to selected resellers in exchange for broader ranging and sell‐through support.
Further improving BWI’s supplier terms, where historically a lower percentage of suppliers have provided
payment terms we are generally accustomed to receive.
As noted earlier, at a financial level the Group continued to demonstrate both organic and acquired growth in
revenues and profitability. We continued to produce robust cash flows although inventory levels finished well above
last year’s level. Cash conversion finished at 78% in line with internal targets.
Net 2018‐19 cash outflows associated with acquisition and investments included:
The purchase of Disc Brakes Australia $21.2 million.
An IM Group earn‐out of $1.6 million in respect of the 2017‐18 business performance which was the first of
three earn‐out measurement periods. The business failed to trigger a similar potential earn out for 2018‐2019
and is carried over to the potential 2019‐20 result.
A further non‐controlling interest investment in Liftango of $0.3 million where we exercised our rights in a
further equity raising round.
External Financing
The Company is now four years into a five‐year debt financing facility of $245.0 million involving Westpac, National
Australia Bank and the Commonwealth Bank which expires on 1 July 2020. This comprises a core tranche of $185
million, and an acquisition tranche of $60 million. The facility provides capacity for logical bolt‐on acquisitions
through the balance of the financing facility. We will commence a refinancing exercise during the first quarter of
2019‐20 and expect a commercially favourable outcome.
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Operating and Financial Review
3.
Strategy Review
Overview
The Board and Management have been engaged in a portfolio and individual business unit strategy review in the
second half of the year, including an overseas study tour to Israel to better understand the innovation approach
applied by companies and better understand the potential commercial application of technologies in both the Water
and Automotive segments. The review concluded that we remain comfortable with the current business portfolio
and remain willing to make logical automotive acquisitions.
At an individual business level, we continue to apply the GUD high‐performance approach for strategy execution. In
2019 we have introduced the Roger Martin “where to play and how to win” framework to guide strategy
development and are working with the Ignition Institute to embed the associated strategy framework tools and
approach in the businesses. This is critical as we reinforce the need to ‘futureproof’ our individual businesses.
Earlier we detailed our view on strengthening five business foundations. As this gains traction we are committed to
sharpening our strategic direction, at the GUD group‐wide, individual business unit and future acquisition efforts,
focussing on three pillars being:
CORE
Group Wide Initiatives
GROWTH
Individual Business Unit Strategies
ACQUISITION
Portfolio and Category Plans
Core:
Multi‐year preferred supplier agreements in select automotive categories implemented commencing
2019‐20.
Quality and logistics councils introduced to leverage scale and skills.
Internal management resources pivoting to address operational and leverage efficiencies in logistics and
information technology.
Increased emphasis on achieving supplier cost downs.
First shared logistics facility opening in Auckland, first quarter 2019‐20; will build capability which could be
applied elsewhere.
Growth:
Individual business unit competitive strategies.
Addressing new organic growth pathways, including a broader focus on exports.
Strengthened resources dedicated to innovation and product development, under our new Chief
Innovation Officer.
Acquisition:
Applying new acquisition criteria and decision thresholds including returns above the cost of capital
beyond initial integration.
Internally, developing a pool of potential managers for acquired businesses under the leadership of our
new Chief People Officer.
Securing customers but not at the expense customer and channel diversification.
Sufficient automotive acquisition and strategy capacity under the leadership of our acquisition and
strategy KMP.
We believe these key areas provide a good level of opportunity for further top and bottom‐line growth. These
are not overnight solutions and require a steady and thoughtful approach across the next 12 to 36 months.
Importantly we have reallocated resource, utilised cost‐efficient external expertise and commenced harvesting
the wider group management team to drive our ambitious plan with good speed.
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12
Operating and Financial Review
4.
Risk Review
Overview
2018‐19 represented the first full year since the Board created a separate Board committee to focus on Risk and
Compliance. Under the inaugural Committee Chair, a thorough review of risk appetite and the tools used to identify,
analyse, assess, manage and monitor risk throughout the Group was undertaken during the year. As a result, the
Group introduced a new cloud based interactive Risk Management tool using the software platform Alyne. The
platform acts as a key risk register, tracks whether risks potentially breach the risk appetite guidelines, whether
compensating controls are in place to mitigate the net risk to an acceptable level, acts as an action plan register, and
accommodates recording and following actual risk events.
A broad range of risk areas is covered within Alyne, including areas such as customer risks, production and supply
chain risks, reputations risks, IT and infrastructure risks, and other financial risks. As in the past, an evaluation of all
organisational risks at business unit level is performed regularly for presentation to the Board Risk and Compliance
Committee for review but is now aided by the Alyne tool.
In addition, there are established policies and processes in relation to specific risks, such as information technology,
workplace health and safety including bullying and harassment, ethical sourcing, anti‐competitive behaviour and
financial risk management.
The table below details some of the identified risks and mitigating actions. The list is representative of the increasing
risk management themes and efforts in GUD.
Risk Themes
Key Risks
Examples of Mitigating Actions
Customer risks
Over reliance on single customers, or
new entrants routes to market, or
potential disruptive existing customer
behaviour
Production and Supply
Chain risks
Over reliance on suppliers resulting on a
loss in supply with potential sales
impacts
Reputation risks
Disruptive Technology
risks
Financial risks
Loss of confidence by end user
customers or other stakeholders
triggered by an event which falls short
of community or stakeholder
expectations
Product technical obsolescence such as
electric vehicles, new technologies such
as autonomous vehicles and digital
disruption impacting market and
product segments
Maintain a portfolio of compelling
products, broad range of customers,
and continually assess both new
entrants or new routes to market for
GUD and respond accordingly
Multiple parallel sourcing for critical
items, utilisation of a broad range of
suppliers, supplier quality control
processes and Quality and Supplier
council
Policies, education and compliance
monitoring for work health and safety,
anti trust, ethical sourcing, bullying and
harassment, amongst others
Product cycle plans, reduce over time
the share of internal combustion engine
component sales, and build capabilities
in new segments and technologies
Variability of financial markets
impacting the value of foreign currency
to nominated assets and liabilities,
profits, or sustainability of debt
financing
An effective financial risk management
committee, long term debt financing
agreements, foreign currency
instruments and interest swap
agreements
People and Culture risks
Loss of key personnel due to retirement
or departure of key resources
People cycle planning, employee
engagement surveys and action plans,
learning and development growth plans
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13
Operating and Financial Review
Risk Themes
Key Risks
Examples of Mitigating Actions
Legal & Compliance risks
Failure to comply with product or
regulatory compliance requirements
leading to fines or product recalls
Maintenance of product compliance
certifications, standards and processes,
internal policy management reviews
and updates, management of regulatory
policies (e.g. privacy) and market
reporting requirements
Safety risks
Employee and contractor workplace
health and safety incidents leading to
injuries or death
Regular safety risks assessments and
audits, management of safety events or
incidents using Vault, safety KPI's
Information Technology
and Cyber risks
Continuity of business or loss or
reputation or other assets through
physical loss or cyber penetration
Security access controls, security
monitoring, business continuity
management, disaster recovery
processes and off site back up facilities
GUD Management acknowledges that risk environments are not static and need to be monitored with appropriate
responses to risk mitigating processes and action plans. GUD maintains a series of governance and compliance
forums, focussed on proactive and reactive risk mitigation initiatives. These forums include:
Regular risk reviews conducted with Business Unit Executive and Leadership team during the Monthly
Business Reviews
Reviews of financial risks tabled with Business Unit finance leaders in the monthly Financial Risk Management
forums
Technology and cyber risks reviewed regularly and monitored via the IT Council meetings
Workplace and safety risks and action plans reviewed during monthly WHS Steering Committee meetings
Quality and Supplier council with charter to monitor and mitigate emerging and longer‐term supply and
quality challenges
The key risk themes, key risks and mitigating actions are also periodically tabled with the Board Risk and Compliance
Committee.
5.
Outlook
GUD remains well positioned for the medium to long term horizon. The automotive division maintains strong brands,
products and customer service in support of a large and proliferated Car parc which GUD believes is strongly
defensible. We are also pleased with recent multi‐year preferred supplier agreements and will work to provide
strong partnership outcomes as we move forward.
Davey has a clear strategic vision which has been well communicated to all the critical stakeholders and will execute
its plan with urgency. We expect to see continuing green shoots as Davey progresses over the next 24 months and
pull through the potential value of the water segment.
In 2019‐20 we expect further revenue growth in both the automotive and water businesses, although economic
sentiment and recent demand suggests growth will be modest. With persistent domestic input inflation and a far
weaker dollar, in several businesses input cost inflation will exceed the price uplift we believe will be responsible in
2019‐20 without triggering a reseller or end user customer backlash, especially with Ryco filtration due to a new
entrant as noted previously.
We will not reduce our innovation, new product development or acquisition activity to compensate, as we remain
committed to ensuring we have the right mid‐term foundations in place for long‐term growth and shareholder value.
In this environment, and, while organic growth is expected from the automotive and Davey businesses, Underlying
EBIT growth for 2019‐20 is expected to be modest and operational efficiency, including achieving supplier cost
downs, will be a key compensating work stream. Therefore, and prior to applying the new accounting standard (AASB
16) regarding leases, we expect modest Underlying EBIT growth in 2019‐20 and continuing solid returns to
shareholders.
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14
Sustainability Review
Highlights
In taking a holistic view of the sustainability of GUD’s
business over the longer term, we conducted our first
materiality assessment seeking to ensure that our
sustainability disclosures remain relevant to the business
and stakeholders.
Safety was rated very highly by employees. We received a
score that was above the global 75th percentile in our
annual employee engagement survey.
Developed an Ethical Sourcing Code and
implemented this in partnership with our
suppliers.
GUD was awarded 9th most innovative company in
the 2018 Australian Financial Review Most
Innovative Companies List. GUD’s Ryco Filters
entered in 2019.
About this Review
This Review covers GUD’s sustainability performance for the year ended 30 June 2019 across our Australian and New
Zealand operations. Selected Global Reporting Initiative (GRI) Standards were leveraged to inform the content and
scope of the report, and accordingly this report is a GRI‐referenced claim. GUD intends to continuously improve its
disclosures utilising the GRI Standards to improve the comparability of our reporting.
GUD’s Board commissioned Management to prepare this Sustainability Review and sees this review as an
opportunity to outline and showcase the impact GUD has on the environment, its people and the communities we
operate in, as well as identifying and discussing some of the longer‐term sustainability consequences for the
Company.
Focussing on the topics that matter
This year, we undertook our first materiality assessment to identify, prioritise and validate the topics that matter
most to our stakeholders and our businesses. As a holding company, GUD comprises of a range of businesses that
produce diverse products. We recognise that some of our businesses are more advanced than others in terms of
their sustainability practices however, as an overarching entity we set minimum standards and expect all businesses
to achieve these.
1. Identification
2. Prioritisation
3. Validation
We identified environmental, social
and governance topics that could
impact upon GUD and our
stakeholders. An initial list of topics
and their definitions were drafted
using a range of factors, including:
Regulatory and legislative changes
GRI Standards
Macroeconomic trends
Stakeholder feedback on prior year
disclosures
Peer benchmarking
Following the materiality
workshop, the material topics were
confirmed and committed to by
senior management. These agreed
topics form the content of this
report.
A materiality assessment
workshop was held with a cross
section of employees including
leaders from the automotive
and water divisions, finance,
human resources and legal. The
initial list of topics was
discussed and prioritised by
rating the significance of
impacts and the substantive
influence on the decisions of
stakeholders.
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15
Sustainability Review
Our material topics
Definitions
Health and Safety
Embedding a positive health and safety culture in the workplace.
Product Safety and Quality
Ensuring our products are designed and manufactured to be safe and of a high
quality for their intended use.
Compliance and
Competitive Behaviour
Complying with relevant legal requirements and regulations including ensuring
that our practices are consistent with the values and policies of the Group and do
not limit competition against the law
Innovation
Change that adds value ‐ focussing on new ideas and processes that create value
for our customers.
Equality and Non‐
Discrimination
Promoting equality and non‐discrimination across our employees and wider
stakeholders.
Human Capital and Labour
Management
Investing in people and culture strategies to improve employee satisfaction and
retention.
Sustainable Procurement
Considering legal, environmental and social factors when making procurement
decisions.
Water Management
Managing the impacts of our water use.
Health and Safety
At GUD, our culture is driven by a strong level of engagement, ownership and
accountability for health and safety. This year we reinforced the importance of
safety leadership, enhanced business safety plans including key performance
indicators, introduced a new reporting tool and recorded a wider array of
metrics to improve the comparability of our safety performance.
Safety is driven by our leaders
Whilst health and safety is everyone’s responsibility, ultimate responsibility for
health and safety resides with the Managing Director and Board of Directors.
Health and safety is the lead item on every Board and Executive Leadership
Group meeting and forms part of the standing agenda. The Group Executive
and the Board conduct regular safety walks and receive a monthly report which
covers a range of leading and lagging indicators including training initiatives,
audits completed, corrective action plans implemented, number of work
injuries, near misses and number of other incidents.
“Each of you should recognise
and understand the
responsibility and actions
needed in the pursuit of safety
for yourself, your co‐workers
and anyone who comes into our
workplaces. You have my
commitment and support to
take the right actions to enable
a safe working environment,
regardless of any business
consequence.”
Graeme Whickman, Managing
Director and CEO
Over the last year our expectations with respect to safety leadership, and our
commitment to safe and healthy workplaces, was further reinforced when we
commissioned an externally recognised Health and Safety expert to train all personnel in leadership roles including
all supervisors and above concerning leaders’ responsibility with respect to safety.
Our health and safety management system
All workers and workplaces at GUD are covered by our workplace health and safety management system. Our
management system aligns to the ISO Standard 9001, meets the legislative requirements in Australia and New
Zealand; and has been regularly updated to reflect the shifting business context. Key elements prescribed in our
health and safety management system and implemented in our business activities include:
Each of our businesses have safety business plans in place where key performance indicators, responsible
persons and timelines have been committed to in order to improve safety performance.
Employees are involved in the safety decision making process through communication, consultation and
training. All businesses have health and safety committees comprising representatives of management and
workers, and individual sites or departments hold regular tool‐box meetings to ensure safety is top of mind.
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Sustainability Review
Our health and safety management system (continued)
The GUD group maintains each business’ risk registers and job safety analyses. To inform this process,
requirements for conducting risk assessments are contained within management system.
Key personnel are trained on safety leadership, internal auditing and incident investigation.
In FY19, we introduced Vault, an online reporting system for workplace incidents and accidents. Employees
may report directly using an app, by their supervisors or via a member of their workplace health and safety
committee.
Where there is an incident or other safety related concern, our safety escalation process enables an individual
to report a safety concern initially to his/her immediate supervisor, but if unresolved to progressively report to
higher levels of management.
Internal audits are conducted by trained personnel from within the businesses, on a rotational basis and
provide opportunity for an evaluation of the effectiveness of the health and safety management system. A
comprehensive internal audit schedule in place. All businesses have emergency preparedness procedures
which are audited as part of the GUD internal audit programme and is tested every six months. The provision
of feedback is shared with the business being audited and with other businesses as a learning opportunity. In
addition, GUD has a WHS Steering Committee for the purposes of sharing of information and learnings across
the Group and recommending initiatives.
Businesses are encouraged to introduce proactive programmes focused on engaging the complete workforce.
These have seen the adoption of exercise programmes, smoking cessation and focus on healthy eating.
Focusing beyond the core elements of a health and safety management system to ensure that wider wellbeing,
including mental health is included as a key area of focus.
Offering an employee assistance programme, provided on a confidential basis by an independent third party.
Employees are encouraged to make use of this assistance whether the matter is work‐related or personal.
Engaging an external provider (for example, Beyond Blue) in sessions designed to increase awareness and
understanding amongst employees, in areas of anxiety, depression and mental health, training in Mental
Health First Aid, the benefits of a mentally healthy workplace and the external resources available.
How we performed
GRI Indicator 403‐9
FY19
Number
Rate/1,000,000
hours worked
Number
FY18
Rate/1,000,000
hours worked
For employees
Fatalities as a result of work‐
related injury
High consequence work‐
related injuries (excluding
fatalities) – in this category
we include Lost Time
Injuries (LTIs)
Recordable work‐related
injuries – in this category we
include LTIs (from above)
plus Medically Treated
Injuries
Main types of work‐related
injuries
0
5
9
0
3.4
6.0
0
4
7
0
2.9
5.1
Manual handling, slips, trips and falls
Manual handling, slips, trips and falls
Number of hours worked
1,489,008
1,372,811
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17
Sustainability Review
How we performed (continued)
0
0
0
0
0
0
0
0
For all workers who are not employees but whose work and/or workplace is controlled by the organisation
(Contractors)
Fatalities as a result of work‐
related injury
High consequence work‐
related injuries (excluding
fatalities)
Recordable work‐related
injuries
Main types of work‐related
injuries
Number of hours worked
Work‐related hazards
The work‐related hazards that
pose a risk of high‐
consequence injury, including
actions taken or underway to
eliminate these hazards and
minimise risks using the
hierarchy of controls.
We have developed controls which respond to identified high risk workplace
hazards in areas including:
Forklift operations
Driving
Materials falling from heights
Individuals falling from heights
Electrical safety
Manual Handling
24,938
50,893
FY19
N/A
N/A
0
0
0
0
Celebrating our achievements
In August this year GUD will be holding its 5th annual Safety and Innovation Excellence Awards. The number and
quality of the nominations for these awards continues to grow. The awards are an opportunity to recognise and
celebrate individuals and teams from across the businesses who have demonstrated key attributes in safety
leadership.
The Safety winners at the 2018 Awards were:
Provin Reddy from AA Gaskets who demonstrated a commitment to safety by calmly, responsibly and pro‐
actively enforcing site traffic management rules with a third‐party truck driver;
The team at Wesfil for launching an innovative approach to ensuring safety and effectiveness of operations,
warding off complacency, developing an understanding of others’ tasks and identifying opportunities for
improvement
Through a commitment to safety and innovation IMG was able to eliminate manual handling and worker
exposure to hazardous chemicals in its remanufacturing process.
Product Safety and Quality
Ensuring safe, reliable products are being designed and manufactured to meet our customers’ needs is one of our
key priorities. All our products are developed and tested against stringent quality control and assurance processes.
Because of the diversity of our products, product safety and quality processes are managed at a local business unit
level which are expected to ensure compliance with applicable ISO standards.
GUD’s Quality & Supplier Council was recently established by Management to consider best practices and bring
thought leadership to the Group in all aspects of product safety and quality, ethical sourcing, supplier governance,
supplier risk management and sustainability. Cross‐business improvement initiatives are identified to enhance the
organisation system, supply chain processes, suppliers’ capabilities and the knowledge of Council members in these
aspects.
Our products are generally supplied to distribution agents, who then on‐sell these products to retailers including
workshops and trade dealers where the products are ultimately sold to the end customer. Whilst our approach to
understanding customer satisfaction varies, we have close relationships with our retailers to ensure customer
needs are being met.
18
18
In 2018, GUD was
acknowledged by the
Australian Financial
Review to be the 9th
most innovative
company and the only
manufacturing company
to feature in the top 10.
Sustainability Review
Compliance and Competitive Behaviour
The Board and senior management are committed to embedding compliance and competitive behaviour processes
across the Group. To support this, our people, governance structures and management systems help us ensure this
is part of the way we work.
For many years, online training on competitive behaviour has been undertaken by all employees as a part of the
suite of on‐line training offered to employees. The training exposes employees to the law, creates awareness around
this topic and articulates how this impacts how we deal with competitors, suppliers and customers.
We take this seriously and understand that mismanagement may result in regulatory, financial as well as
reputational impacts. In the past year, we have had no legal actions; hence our GRI Indicator 206‐1 is zero.
Innovation
GUD is committed to innovation. Our award‐winning innovation program delivers a
relentless focus on the customer. We tap into the creativity of our people to deliver
better customer experiences. From the smallest tweak to an existing process to brand‐
new business units that disrupt markets, innovation is instrumental in future‐proofing
our businesses.
Each business has its own innovation and product development framework, one that
is tailored to its specific needs. Several group‐wide initiatives tie these individual
programs together under a collective banner dedicated to collaboration and shared
learning. For example, teams of cross‐functional innovation specialists, known as
Innovation Champions internally, have all been trained in the same customer‐focused methodologies such as design
thinking and lean start‐up. The Innovation Community of Practice ties Innovation Champions from across all
businesses together. It promotes collaboration and sharing of new and emerging insights. Equally, at the leadership
level, GUD’s Innovation Council offers a forum for our senior team to drive innovation strategy and culture.
We have partnerships with external parties including academic institutions, industry bodies, innovation labs, start‐
ups and specialist agencies. This includes: Planet Innovation, Myriota, Australian Automotive Aftermarket
Association, Movus, University of Auckland and Callaghan Innovation.
GUD businesses conduct customer research and brand surveys, to assess the reliability, value and recognition of
GUD brands. We ask our customers questions to understand how we can improve our products and customer
service. When a new product is being developed, we test and experiment the idea with the customers to gauge
behaviour and improve our products accordingly.
Cranking Up the Catch Can
Ryco Filters is the leading brand for premium aftermarket filtration. The company takes pride in putting the
customer at the heart when delivering a comprehensive range of products that meet or exceed genuine
performance. So, when the team at Ryco Filters turned its visor to crankcase ventilation, they talked to
mechanics first.
What they learned in the field, set them up for engineering success. Whilst crankcase filtration systems are not
new, existing products were missing the mark—especially in the growing 4x4 diesel market. By observing
mechanics at work and though customer conversations, the team identified the mix of features that workshops
were looking for: easy to install, can be fitted to a large range of modern engines, effectively filters
contaminants, works reliably with emissions systems, and offers internal capacity large enough to last the
service interval.
Following in‐depth review of technical papers and standards, the team created a new technical standard and
specialised laboratory test to objectively measure and benchmark the system. Engineers took 3D‐printed
samples to mechanics to test ease and versatility of fitment, iterating designs along the way. As the product was
co‐designed with mechanics to Ryco’s premium performance standards, it was no surprise that market feedback
has been overwhelmingly positive. There is now strong demand to expand the Catch Can with customized
fitment kits for specific vehicles along with a smaller unit for small vehicles.
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19
Sustainability Review
We recognise and celebrate innovation. Innovation is key to our annual Safety and Innovation Excellence Awards.
Business units nominate candidates at the individual, team and business level who have exemplified innovation
throughout the year. Winners are announced at the Awards night. In addition to formal recognition, winners are
awarded prize money to dedicate to furthering their innovation skills or dedicate to innovation projects of their
choice.
Safety and Innovation Award Nominations
Our Davey Water business was nominated for a 2019 Safety and Innovation Excellence Award for work on the
Nipper and Lifeguard Project. Nipper is a clever and compact chlorinator which uses Davey’s intelligent controls
to keep pool water swim‐ready, all year long. The team at Davey worked closely with end users and distribution
partners to develop the next generation of chlorinators, all the while reducing product cost by one third and
halving product development lead times. Designed in Australia, the ergonomic Nipper is easy to install, energy
efficient, and has fully customisable chlorine outputs irrespective of the type of salt used. The product was first
launched to the European market with great success.
Building on the traction of Nipper and further market research, Davey continues to progress the pipeline of pool
products. The Lifeguard product will complement the Nipper chlorinator by automating the chemical control of
residential pools. The WiFi‐enabled chemical control unit will be launched with a companion mobile app that
enables remote monitoring and control. Roy Morgan research reveals that in Australia alone, nearly 2.7 million
people live in a house with a swimming pool. Nipper and Lifeguard will be available in Australia and all Davey
regions worldwide.
Equality and Non‐Discrimination
We promote equal opportunity and strive to provide an equitable, inclusive and diverse work environment. In line
with our Code of Conduct, this includes providing employees with a workplace free from any kind of discrimination,
harassment or intimidation.
We commit to promoting fair and equal treatment in employment that does not discriminate on the basis of age,
politics, ethnic background, family responsibilities, gender, physical appearance, irrelevant criminal record, marital
status, pregnancy or potential pregnancy, race, religious beliefs or activity, social origin, physical or mental disability,
trade union membership or activity, sexual preference or personal association with a person who is identified with
any of the above. Our Equal Employment Opportunity Policy highlights this and is intended to set a shared
understanding amongst all employees, temporary staff, independent contractors, volunteers and work experience
personnel of expectations in regard to acceptable and appropriate behaviour within the workplace.
We are proud to disclose that there have been no incidents of discrimination reported this year; hence our GRI
Indicator 406‐1 is zero. Where there is an incident, we will deal with this in line with best practice investigation
procedures.
Human Capital and Labour Management
Our highly engaged employees enable us to deliver positive outcomes to our stakeholders. GUD’s core values are
the principles which the company and individuals live by, and which guide our decisions.
Our values
Customer Focus – Our customers are important in our priorities; we aim to meet customers’ needs.
Professionalism and Respect – We encourage constructive, candid and open communications. We are
accessible. We always treat our people with fairness and equality. We trust our colleagues.
Highest Standards of Integrity – We always act honestly. We say what we mean.
High Performance and Business Success – Business success secures our future. Our profits permit us to
invest for long‐term customer satisfaction, a rewarding future for our people, and a return to the
shareholders. We have a bias for action, and for achieving results.
Innovation and Continual Improvement – We seek new ways of doing things, taking risks where necessary
in pursuing new opportunities.
Teamwork – We acknowledge our interdependence. We give recognition for a job well done.
20
20
Sustainability Review
Our focus over many years has been to ensure that our culture fosters a high‐performing and engaged workforce
within each of our businesses. Increasingly we are taking strides to bring together all employees to cross pollinate
ideas and share learnings. This helps bring a focus to teamwork when developing new products and bringing them
to existing and new channels.
Our workforce is made up of a range of full time, part time and temporary employees.
GRI Indicator 102‐8
FY19
FY18*
Number of full time employees
Number of part time employees
Number of temporary employees
Total number of employees
Male
550
14
21
585
Female
217
24
16
257
Male
448
7
24
479
Female
182
20
13
215
*GUD acquired AA Gaskets in November 2017 and DBA in July 2018; therefore AA Gaskets and DBA employees have not been included in FY18 data.
GRI Indicator 401‐1
FY19
FY18*
Employee new starters by gender
Male
Female
Employee new starters by age group
Under 30 years old
30 ‐ 50 years old
Over 50 years old
Employee new starters by region
Australia
New Zealand
Rate (% of
total
workforce)
Number
Rate (% of
total
workforce)
Number
91
32
27
70
26
114
9
11%
4%
3%
9%
3%
14%
1%
83
50
41
66
26
123
10
12%
7%
6%
10%
4%
18%
1%
*GUD acquired AA Gaskets in November 2017 and DBA in July 2018; therefore AA Gaskets and DBA employees have not been included in FY18 data.
Diversity is seen as a key driver of innovation and company performance. In the next year, we will develop and
implement a diversity and inclusion program that strengthens the businesses’ open culture by ensuring
inclusiveness, and the contribution of all employees by leveraging differences that exist.
Training and development is a critical element of our workforce planning. We support development by training our
employees within the workplace as well as supporting them to undertake further education. Courses delivered this
year have included topics such as safety, first aid, forklift, fire extinguisher, mobile equipment, contractor
management, evacuation, manual handling and mental health. This year, we continued to deliver our high‐
performance environmental systems program to tier two managers and below across our business.
We strive to provide our employees with market competitive pay rates. Annual salary reviews are conducted, and
multi‐tiered annual bonuses are paid across the workforce. There are five collective agreements in place across the
Group. Effective relationships exist between employees, unions and the organisation; and all agreements due for
renewal have successfully been renegotiated with the following agreements being in place:
Davey Water Products Enterprise Agreement dated 2017 (Production Agreement) – expires 30 June 2020
Davey Water Products Warehouse Enterprise Bargaining Agreement dated 2017 – expires 30 June 2020
Ryco Filters Australia Enterprise Bargaining Agreement 2018 – expires 31 March 2021
Ryco Filters NZ Employees Collective Agreement ‐ expires 30 April 2020
AA Gaskets Enterprise Bargaining Agreement 2018 – expires 30 June 2020
21
21
Sustainability Review
We conduct an annual employee engagement survey across the business. Seven of the seventeen areas measured
showed further increase against 2018 results. Safety is rated very highly by employees with the score rating above
the global 75th percentile.
The recruitment of a Chief People Officer in May 2019 will give focus to greater emphasis to talent development and
to realising the full potential of the human capital of GUD. Looking forward, we will focus on implementing the
following programmes over the upcoming year:
Talent and succession plans for critical roles and key talent
Learning and development plans to strengthen the effectiveness of leadership and leadership teams across the
businesses
Deployment of a Speak Up Policy in pursuit of an open culture where all employees feel able to, and do, raise
concerns where they exist
Sustainable Procurement
GUD is committed to sourcing products in a responsible manner and supporting our suppliers improve their social
and environmental practices. GUD’s businesses source products and services from a range of locations. Whilst 43%
of our products are supplied locally in Australia, we source from other locations including Europe, New Zealand,
Taiwan and China. Sourcing products from these regions creates shared economic benefits as well as allowing our
businesses to provide affordable products to consumers.
We worked to develop our Ethical Sourcing Policy and Ethical Sourcing Code throughout the year, and this was
approved by the Risk and Compliance Committee in December 2018. The policy articulates the minimum standards
suppliers should adhere to when conducting business with GUD to ensure that products and services are sourced in
a responsible and consistent manner. Our aspiration is to share our knowledge and business practices with our
suppliers in an endeavour to improve the lives of workers within our supplier base as well as quality of the product.
The Ethical Sourcing Code covers guidance and minimum expectations with respect to slavery practices, labour
standards, health and safety, discrimination, the environment and business ethics, and is available on the GUD
website.
This year, we sent a supplier self‐assessment checklist to our tier one suppliers to understand their level of
compliance with the minimum standards within the Ethical Sourcing Code. We are receiving responses from
suppliers and are assessing their alignment with our Code. For suppliers that may not meet our requirements, we
intend to investigate the key gaps and more importantly, work with them to improve their practices.
The suppliers who have conducted their operations in accordance with the Code are categorised as ‘gold’ suppliers
in our system and when making procurement decisions they are automatically identified as preferred suppliers.
With the introduction of Modern Slavery legislation in late 2018, GUD has taken steps to integrate initiatives to
understand the risk and mitigate the impacts of modern slavery. We are expecting to publish our first Modern
Slavery Statement in November 2020.
Water Management
We understand the challenge of water scarcity in Australian context, and through our Davey Water Products
business have the capability to impact this in a positive way. To inform our product development process, we
commissioned research to understand consumer attitudes toward water management and how these fit with their
lives of consumers. Stemming from this, we know that water management is important to a broad cross section of
our customers because of limited supply, particularly in remote areas of Australia. Water management for our
customers is about knowing how much water is being used and to protect water supply through detecting leaks.
We have a number of water‐saving products in our range and are continuously investing in new opportunities that
seek to meet the challenges faced by our customers.
22
22
Sustainability Review
Monsoon IQ
The Monsoon IQ booster system uses variable speed drives on Davey Pumps to control and cascade supply to
match changing water demands. The system reaches full optimisation when connected to the cloud allowing
access and peace of mind from anywhere in the world. The Monsoon IQ Cloud allows the consumer to
remotely control, optimise and monitor the system from any connected device.
Davey’s Monsoon IQ intelligent pump set was recently fitted at De Bortoli Wines, Yarra Valley. The vineyard
has 13 irrigation dams across 11 pumping systems. This has allowed De Bortoli Wines to precisely match water
needs to specific areas of a vineyard and detect temperature changes and faults. The remote monitoring
capability makes this easier to check flow and pressure at any time, to maximise water efficiency.
RainBank
The RainBank system is an automatic controller for rainwater harvesting. RainBank controls the water supply
for toilet and laundry applications by automatically selecting the water source. Rainwater is given priority
with mains water supplied seamlessly as a back up for when the tank is empty or in the event of a power
outage. RainBank can save up to 40% of a household’s mains water use, helping to conserve this precious
resource and lower water bills.
This year we also worked on understanding our water footprint across our 30 sites across Australia and New Zealand.
We are working with our business units to develop a consistent method of data collation for monitoring and
reporting purposes. Across our sites we endeavour to use Davey water products to provide water saving initiatives.
23
23
Remuneration Report
This report forms part of the Directors’ Report and has been audited as required by section 308(3C) of the
Corporations Act 2001 has been 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 2019:
Name
Role
Non‐Executive Directors
M G Smith
Non‐Executive Director and Chairman
A L Templeman‐Jones
Non‐Executive Director and Chair of Risk and Compliance Committee
G A Billings
Non‐Executive Director and Chair of Audit Committee
D D Robinson
Non‐Executive Director and Chair of Remuneration Committee
Managing Director
Role
G Whickman
Managing Director (Appointed on 1 October 2018)
J P Ling
Managing Director (Former Managing Director – ceased 30 September 2018)
Senior Executives
Role
Entity
M Fraser
G Davies
R Pattison
G Nicholls
D Worley
T Cooper
Chief Financial Officer
Chief Executive Officer
Brown & Watson International
Chief Executive Officer
GUD Automotive Division
Chief Executive Officer
Ryco Group (Ceased to be a KMP ‐ 6 May 2019)
Chief Executive Officer
Managing Director
Davey
Wesfil
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 four Non‐Executive Directors and is responsible for determining 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.
24
24
Remunera
A copy of the Remunera on
website.
Charter is available under the Governance
of the Company’s
The Senior Execu ves do not par cipate in any decision rel ng to their own remunera
3.
Senior Execu
mun
nd Structure
n Strategy
strategy is designed to
Our remunera
Execu ves. Our strategy ensures we are well posi
way that supports a clear performance focus and is aligned with the long-term goals of the Group.
appropriately qualified and experienced Senior
ve rewards in a
ed to deliver reasonable and market compe
retain and mo
In determining the Senior Exec
decision-making:
The remunera
understand.
remun
we have developed remunera
guiding principles to assist in
structure is relevant and simple for Senior E
and shareholders to
Our remunera on pra
s support the delivery of long-term business strategy and provide a clear link
between Group performance and remunera
utcomes.
Remunera
We have clearly defined and disclosed
t
views and objec ves.
act and retain key talent and be compe
ve.
n processes and structures that reflect shareholder
Our ince
ve plans are carefully designed to balance the twin imper
ves of short-term performance
and long-term enhancement of shareholder value, and are regularly reviewed to ensure alignment with
corporate governance principles.
The Remuner
n
strategy to ensure it meets the changing needs of the Group and remains aligned to shareholder
has undertaken a review in the current financial year, and resolved to make
interests. The
no change.
is commi ed to con nuing to review and refine the remuner
C
n Structure
The remunera
ramework provides a mix of fixed and variable remun
and has five components:
Fixed remuner
Other employment related benefits; and
“at risk” remu
Short-term inc
Long-term ince
Special incen ves.
including:
I);
and
These comprise the total rem
n paid to Senior Exec
.
Our approach i
maximum remunera
maximum “at risk” components of Sen
l
, to around 45 per cent, and 50 per cent in the case of the Managing Director.
l
In the absence of any special in
the
on mix for the Senior Execu ves is as follows:
Fixed Remune
The remunera
fixed remuner
nd Other Employment Related Benefits
packages for the Senior Execu
contain a fixed amount that is not performance linked. The
e salary, as well as employer contribu ons to superan
on funds.
for Senior Exec
is determined by reference to the scope of their posi ons and the
Fixed remuner
knowledge, experience and skills required to perform their roles. Periodically, independent consultants provide
benchmark inform
to ensure the packages are
g around the median
ons from an independent consultant
in the market with comparable roles. We have adopted a desired market pos
, analysis and/or advice to the Remunera on
re
of the peer group. The Company has not received remuner
during the year ended 30 June 2019.
25
25
Remuneration Report
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.
Senior Executives receive non‐cash benefits in the form of salary continuance insurance and other benefits, refer
table 4.1 for further information. In addition, Senior Executives receive annual and long service leave.
Short Term Incentive (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, generally
a measure of weighted average cost of capital. 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 established by the Remuneration
Committee in the first quarter of the financial year.
The Remuneration Committee determines 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. CVA targets and outcomes
are not published because the Board regards them as commercially sensitive. Part 5 identifies those KMPs heading
up businesses which exceeded the CVA target and hence received an STI bonus.
STI bonuses are calculated as a percentage of fixed remuneration. When the CVA target is achieved, the target 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 target STI bonus, generally upon achieving 120 per cent of CVA target. No STI is paid where CVA
performance falls below the CVA target.
Bonuses as a per cent 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 2019 are set out in
section four of this Report.
From and including the financial year commencing 1 July 2019, the Remuneration Committee and the Board have
included two qualifying performance thresholds for STI bonuses to be awarded. Firstly, the business CVA dollars
achieved must exceed the prior year, and secondly, the underlying EBIT dollars must grow over the prior year by
hurdle growth rates endorsed by the Board on an annual basis.
Long Term Incentive (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 closely 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
26
26
Remuneration Report
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
performance measurement period, which will convert to an equivalent number of GUD shares if the performance
hurdle is achieved over the relevant three‐year performance measurement 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 encourages the Senior Executives
to hold an exposure to equity. The maximum number of performance rights granted is 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 Volume Weighted Average Price 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 measurement period, the Board receives an independent calculation of the
Company’s TSR performance against the comparator group over the performance measurement 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 granting performance rights is
calculated as the fair value of those performance rights at grant and that amount is accrued over the three‐year
performance measurement 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.
In respect of LTI grants made from and including the financial year commencing 1 July 2019, the Remuneration
Committee and the Board have included an additional performance threshold: that the Company’s absolute TSR
performance over the performance measurement period must be positive.
Special Incentives
From time to time the Remuneration Committee may approve a special incentive to a selected employee 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. No special incentives were offered or paid to KMP in respect of financial
year ended 30 June 2019.
27
27
Remuneration Report
4.1 Remuneration for the Managing Director and Senior Executives
Details of the nature and amount of each major element of remuneration of the Executive Directors and Senior Executives are:
Salary 1 and
fees
STI bonus
Leave entitle-
m ents
Incom e
protection
prem ium 5
Other
benefits
Total
Long service
leave
Equity fair
value of
perform ance
rights 2
Superan-
nuation
Short-term employment benefits
Long-term benef its
Year
$
$
$
$
$
$
$
$
$
Proportion of
total risk
related
rem uneration
Value of equity
rem uneration as
a proportion of
total
rem uneration
%
%
Total
$
2019 712,500 -
(350)
1,490 -
713,640
11,799 59,410
25,000
809,849 7.3
7.3
2019 234,254 -
(24,850)
432 -
209,835
(90,766)
155,134
25,000
299,203 51.8
51.8
2018 1,108,000
414,541
(5,371)
4,122 -
1,521,292
21,273 395,919
25,000
1,963,484 41.3
20.2
-
2019 593,887 -
29,537
1,634 -
625,057
26,405 103,134
25,000
779,596 13.2
13.2
2018 564,416
283,047
(2,135)
1,094 -
846,422
(1,421)
93,472
25,000
963,473 39.1
9.7
2018 647,211
72,100 - - -
719,311
- 18,905
12,740
750,956 12.1
2.5
2019 575,000 -
13,460 - -
588,460
(39,271)
98,684
25,000
672,873 14.7
14.7
2018 535,000
279,332
21,580
2,204 -
838,116
11,308 84,918
25,000
959,342 38.0
8.9
2019 475,000 -
3,119
517 -
478,636
27,914 66,122
25,000
597,672 11.1
11.1
2018 395,000
209,939
24,945
353
34,470
664,707
(25,990)
41,739
25,000
705,456 35.7
5.9
2019 550,000 -
61,345
1,410 -
612,755
103,386 86,055
25,000
827,196 10.4
10.4
2018 475,000
235,107
(6,085)
353 -
704,375
20,934 71,863
25,000
822,172 37.3
8.7
2019 481,479 -
(1,851)
- -
479,628
11,695 85,572
25,000
601,895 14.2
14.2
2018 466,727 -
1,880
1,212 -
469,819
8,972 45,080
25,000
548,871 8.2
8.2
2019 490,000
183,314
41,398 - -
714,712
9,409 83,445
25,000
832,566 32.0
10.0
2018 475,000
197,652
36,209
2,204 -
711,065
3,654 74,007
25,000
813,726 33.4
9.1
Managing Director
G Whickman 3
J P Ling
Senior Executives
M Fraser
D Chin 4
R Pattison
G Davies
G Nicholls 6
D Worley
T Cooper
Total rem uneration of the Managing Director and Senior Executives of the Group
2019 4,112,120
183,314
121,807
5,482 -
4,422,723
60,571 737,556
200,000
5,420,850
2018 4,666,354
1,691,718
71,023
11,542
34,470
6,475,107
38,730 825,903
187,740
7,527,480
Total rem uneration of Non-Executive Directors
2019 705,493 - - - -
705,493
- -
64,684
770,177
2018 744,389 - - - -
744,389
- -
70,104
814,493
Total rem uneration (com pensation of key m anagem ent personnel of the Group)
2019 4,817,613
183,314
121,807
5,482 -
5,128,216
60,571 737,556
264,684
6,191,027
2018 5,410,743
1,691,718
71,023
11,542
34,470
7,219,496
38,730 825,903
257,844
8,341,973
1 Salary includes base and other salary.
2 The fair value of performance rights granted under the 2019, 2020 and 2021 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 2019.
3 Graeme Whickman was appointed Managing Director and Chief Executive officer on 1 October 2018, following the resignation of Jonathan Ling on 30 September 2018.
4 David Chin left the GUD Group as a result of the sale of Oates on 2 January 2018. The table above discloses his remuneration for the period to 2 January 2018. As a result of the sale of Oates on 2 January 2018 Mr Chin received a $450,000 incentive payment for
successfully completing the sale of the Oates business which occurred on 2 January 2018 (Note 33b). The incentive bonus was paid on 17 January 2018 and is reported as part of salary.
5 Income protection insurance is only offered to age 65.
6 Guy Nicholls ceased to be a KMP on 6 May 2019.
28
GUD Holdings Limited and Subsidiaries
4.2 Senior Executive take home remuneration prior to taxation
This section uses non‐IFRS financial information to detail realised pay earned by the CEO and Other Senior Executives
during FY19 together with prior year comparatives. This is a voluntary disclosure and is supplemental information
to the statutory remuneration disclosure contained in Section 4.1 of this Remuneration Report. Realised Pay
includes Base Salary, Retirement and other benefits including the market value of incentive payments earned. This
differs from the statutory amount as it excludes accruals and estimations and is thus a closer measure of take home
pay before taxation received in respect of the current year
Cash Settled Rem uneration
Fixed
rem uneration 1
Cash short term
incentives 2
Total cash
rem uneration
Year
Non cash rem uneration
Long term
incentives
vested w ith
respect to the
year 3
Other non-
m onetary
rem unertation 4
Total
rem uneration
$
$
$
2019 737,500 -
737,500
-
12,602
750,102
2019 259,254 -
259,254
380,380
(115,185)
524,449
2018 1,133,000
414,541
1,547,541
888,710
20,024
2,456,275
2019 618,887 -
618,887
131,912
57,575
808,374
2018 589,416
283,047
872,463
227,877
(2,462)
1,097,878
2018 659,951
72,100
732,051
- -
732,051
2019 600,000 -
600,000
113,974
(25,811)
688,163
2018 560,000
279,332
839,332
204,909
35,092
1,079,333
2019 500,000 -
500,000
58,378
31,550
589,928
2018 420,000
209,939
629,939
-
33,778
663,717
2019 575,000 -
575,000
96,817
166,141
837,958
2018 500,000
235,107
735,107
151,951
15,202
902,260
2019 506,479 -
506,479
110,050
9,844
626,373
2018 491,727 -
491,727
197,320
12,064
701,111
2019 515,000
183,314
698,314
97,828
50,807
846,949
2018 500,000
197,652
697,652
173,602
42,067
913,321
Managing Director
G Whickman
J P Ling
Senior Executives
M Fraser
D Chin
R Pattison
G Davies
G Nicholls
D Worley
T Cooper
Total rem uneration of the Managing Director and Senior Executives of the Group
2019 3,315,366
183,314
3,498,680
989,339
290,106
4,778,125
2018 4,854,094
1,691,718
6,545,812
1,844,369
155,765
8,545,946
1.
2.
3.
Salary and super includes base and other salary and employer superannuation contributions. In the case of David Chin, his
salary includes a special incentive paid as a consequence of the sale of Oates.
The STI bonus column reflects the STI cash bonus paid in respect of performance during the year ended 30 June 2019 and
paid in late July 2019 following the announcement of the Group’s year‐end results.
LTI performance rights granted in July and October 2016 vested as a result of the company meeting TSR targets on 30 June
2019. Refer section 5 for disclosure in respect of performance achievement. The Remuneration Committee approved the
partial vesting of the performance rights on 25 July 2019. The value assigned to the vested performance rights has been
calculated using the Company’s closing share price on 28 June 2019 of $10.01.
4. Non‐monetary benefits includes leave entitlements, income protection premiums, long service leave and certain personal
expenses.
29
29
GUD Holdings Limited and Subsidiaries
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 2019
Fair
value per
perform ance
right at
grant date
$
Fair value
of rights
granted
during the
year ended
30 June 2019
$
Grant
date
Vesting
date
30,134
25 October 2018
30 June 2021 5.92 178,393
13,261
30 July 2018
30 June 2021 6.69 88,716
12,857
30 July 2018
30 June 2021 6.69 86,013
10,714
30 July 2018
30 June 2021 6.69 71,677
12,321
30 July 2018
30 June 2021 6.69 82,427
10,853
30 July 2018
30 June 2021 6.69 72,607
11,035
30 July 2018
30 June 2021 6.69 73,824
101,175
653,657
Managing Director
G Whickman
Senior Executives
M Fraser
R Pattison
G Davies
G Nicholls
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
Price of
shares on
grant date
Estim ated
volatility
Risk free
interest
rate
Dividend
yield
25 October 2018
30 June 2021 5.92
12.64
28.00
30 July 2018
30 June 2021 6.69
14.15
28.00
$
$
%
%
2.01
2.08
%
5.0
5.0
Grant to Managing
Director
Grant to Senior
Executives
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 2018
Balance at
30 June 2019
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
-
30,134
30,134 - -
30,134
189,461 -
(62,762)
(49,071)
77,628
(38,000)
(17,882)
21,746
49,048
13,261
(16,093)
46,216
(13,178)
(6,202)
26,836
8,413 - -
8,413
(4,466)
(2,102)
1,845
44,112
12,857
(14,471)
42,498
(11,386)
(5,358)
25,754
9,672
10,714 -
20,386
(5,832)
(2,745)
11,809
36,470
12,321
(10,731)
38,060
(9,672)
(4,552)
23,836
41,428
10,853
(13,935)
38,346
(10,994)
(5,174)
22,178
38,147
11,035
(12,260)
36,922
(9,773)
(4,599)
22,550
416,751
101,175
(130,252)
(49,071)
338,603
(103,301)
(48,614)
186,688
Managing Director
G Whickman
J P Ling
Senior Executives
M Fraser
D Chin
R Pattison
G Davies
G Nicholls
D Worley
T Cooper
Total
1 Performance rights granted under the 2019 performance rights plan vested at 68% on the basis of the Company achieving the 59th percentile TSR
hurdle as at 30 June 2019. The vesting was approved by the Remuneration Committee on 25 July 2019 and the rights have therefore been included
in the table above as if the vesting were effective 30 June 2019.
30
30
GUD Holdings Limited and Subsidiaries
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 2018
Shares
purchased
Shares
sold
Balance at
30 June 2019
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 2019
Non-Executive Directors
M G Smith
41,000 - 17,000 - 58,000 - 58,000
A L Templeman-Jones
5,042 - 1,400 - 6,442 - 6,442
G A Billings
D D Robinson
11,250 - - - 11,250 - 11,250
13,000 - - - 13,000 - 13,000
For the year ended 30 June 2019
Managing Director
G Whickman
J P Ling 3 4
Senior Executives
M Fraser 3
R Pattison
G Davies
G Nicholls
D Worley
T Cooper
Shares
issued from
vested
perform ance
rights 1
Balance at
1 July 2018
Shares
purchased
Shares
sold
Balance at
30 June 2019
Number of shares
Shares to be
issued from
vested
perform ance
rights 2
Balance at
the date of
this report
- - 2,000 - 2,000 - 2,000
306,532 62,762 -
(268,400)
100,894 38,000 38,000
124,564 16,093 -
(30,000)
110,657 13,178 123,835
29,833 14,471 -
(5,000)
39,304 11,386 50,690
- - - - - 5,832 5,832
22,045 10,731 -
(32,776)
- 9,672 9,672
4,165 13,935 - - 18,100 10,994 29,094
38,935 12,260 -
(25,000)
26,195 9,773 35,968
596,366 130,252 20,400
(361,176)
385,842 98,835 383,783
1 Performance rights granted under the 2018 performance rights plan vested at the maximum on the basis of the Company exceeding the 75th
percentile TSR hurdle as at 30 June 2018. The issue of shares was approved by the Remuneration Committee on 26 July 2018 (as disclosed in the
Remuneration Report for the year ended 30 June 2018) and were allotted on 30 July 2018.
2 Performance rights granted under the 2019 performance rights plan vested at 68%. The vesting was approved by the Remuneration Committee on
25 July 2019 and the rights have therefore been included in the table above as if the vesting were effective 30 June 2019.
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 Subsequent to 30 June 2019, Jonathan Ling has sold 100,894 shares, therefore the balance as at the date of this report shows only the shares vesting
under the 2019 performance rights plan.
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 continues 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 business in the consolidated entity exceeded CVA targets: Wesfil. As a result, T
Cooper, CEO of Wesfil received an STI bonus payment based on achieving or exceeding the business unit CVA
performance. Corporate Executives, including the Managing Director and Chief Financial Officer, did not receive an
STI bonus as the Group failed to achieve its CVA target.
31
31
GUD Holdings Limited and Subsidiaries
STI bonus payable for the year ended 30 June 2019
$
$
%
%
Maxim um STI
opportunity
Actual STI
bonus
paym ent 1
Actual STI
bonus paym ent
as a % of
m axim um STI
Disentitled
Managing Director
G Whickman
J P Ling
Senior Executives
M Fraser
R Pattison
G Nicholls
G Davies
D Worley
T Cooper
295,000
-
- 100
-
-
- 100
324,916
-
- 100
315,000
-
- 100
301,875
-
- 100
262,500
-
- 100
265,900
-
- 100
270,375 183,314 68 32
1
A minimum level of performance, including exceeding the previous year’s CVA, must be achieved before any STI bonus is payable.
The payments relate to STI bonus earned in the year ended 30 June 2019, approved by the Remuneration Committee
on the 25 July 2019.
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.
The absolute TSR performance for the three years ending 30 June 2019 was 29.69%
Underlying
EBIT 1
Underlying
basic EPS 1 Total DPS
Opening
share
price
Closing
share
price
Dividend
yield
Financial year
$m
Cents
Cents
$
$
%
TSR percentile
rank for the
3 year period
ending
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
30 June 2018
83.4
67.2
52.0
12.91
14.16
3.7
80.0
30 June 2019
88.9
70.4
56.0
14.16
10.01
5.6
59.0
1 Underlying EBIT and underlying basic EPS are presented before significant one‐off items and are from continuing operations as reported in each year.
The TSR rank for the year ended 30 June 2019 was at the 59th percentile, that is above the median company of the
comparator group. In accordance with the plan rules, on 25 July 2019 the Board approved the vesting of 68% of
performance rights, and the lapsing of the balance of the performance rights, which were due to vest in respect of
the period ended 30 June 2019.
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:
32
32
GUD Holdings Limited and Subsidiaries
Name
Notice periods/termination payment
G Whickman
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 Whickman is entitled to receive his statutory entitlements of accrued annual
and long service leave.
Senior
Executives
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.
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 $1,300,000, approved by shareholders at the 2017
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 2019 are set out in the table below:
Board
Audit
Com m ittee
Risk and
Com pliance
Com m ittee
Rem uneration
Com m ittee
Nom inations
Com m ittee
Chairman of
287,752 15,000 15,000 15,000
Members of
114,247 5,000 5,000 5,000
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
33
GUD Holdings Limited and Subsidiaries
Remuneration
Details of the nature and amount of each element of the remuneration of Non‐Executive Directors for the year
ended 30 June 2019 are set out in the table below.
Non-Executive Directors
M G Smith
R M Herron
Directors’ Fees Superannuation 1
Year
$
$
Total
$
2019 287,752 25,000 312,752
2018 224,281 21,307 245,588
2019 -
- -
2018 116,101 10,417 126,518
A L Templeman-Jones
2019 139,247 13,228 152,475
G A Billings
D D Robinson
2018 135,919 12,912 148,831
2019 139,247 13,228 152,475
2018 135,919 12,912 148,831
2019 139,247 13,228 152,475
2018 132,169 12,556 144,725
Total Rem uneration of Non-Executive Directors
2019 705,493 64,684 770,177
2018 744,389 70,104 814,493
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 2019 (2018: 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 $448,444
excluding GST (2018: $432,930 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, KMPs 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
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
Basis of preparation ............................................................................................................................................... 41
1.
Results for the Year ......................................................................................................................................................... 47
Revenue .................................................................................................................................................................. 47
2.
3.
Expenses ................................................................................................................................................................. 48
4. Net finance costs .................................................................................................................................................... 49
Earnings per share .................................................................................................................................................. 50
5.
Auditors' remuneration .......................................................................................................................................... 50
6.
7.
Segment information ............................................................................................................................................. 51
Working Capital ............................................................................................................................................................... 54
Trade and other receivables ................................................................................................................................... 54
8.
9.
Inventories.............................................................................................................................................................. 55
10. Other assets ............................................................................................................................................................ 56
11. Trade and other payables ....................................................................................................................................... 56
12. Employee benefits .................................................................................................................................................. 56
13. Restructuring provisions ......................................................................................................................................... 57
14. Warranty provisions ............................................................................................................................................... 58
15. Other provisions ..................................................................................................................................................... 58
Tangible and Intangible Assets ........................................................................................................................................ 59
16. Goodwill ................................................................................................................................................................. 59
17. Other intangible assets ........................................................................................................................................... 59
18. Property, plant and equipment .............................................................................................................................. 61
19.
Impairment testing ................................................................................................................................................. 62
20. Commitments for expenditure ............................................................................................................................... 63
Capital Structure and Financing Costs ............................................................................................................................. 65
21. Cash and cash equivalents ...................................................................................................................................... 65
22. Borrowings ............................................................................................................................................................. 66
23. Derivatives .............................................................................................................................................................. 68
24. Other financial instruments .................................................................................................................................... 70
25. Financial instruments ............................................................................................................................................. 71
26. Financial risk management ..................................................................................................................................... 75
27. Share Capital .......................................................................................................................................................... 79
28. Reserves ................................................................................................................................................................. 79
29. Retained earnings ................................................................................................................................................... 81
30. Dividends ................................................................................................................................................................ 81
Taxation .......................................................................................................................................................................... 82
31. Current tax ............................................................................................................................................................. 82
32. Deferred tax ........................................................................................................................................................... 83
Business Combinations ................................................................................................................................................... 86
33.
Investment in subsidiaries ...................................................................................................................................... 86
Other Notes .................................................................................................................................................................... 92
34. Superannuation commitments ............................................................................................................................... 92
35. Key management personnel ................................................................................................................................... 92
36. Related parties ....................................................................................................................................................... 93
37. Parent entity disclosures ........................................................................................................................................ 94
38. Contingent liabilities ............................................................................................................................................... 94
39. Subsequent events ................................................................................................................................................. 94
Directors’ Declaration ..................................................................................................................................................... 95
Lead Auditor’s Independence Declaration ...................................................................................................................... 96
Independent Auditor’s Report ........................................................................................................................................ 97
35
35
GUD Holdings Limited and Subsidiaries
Consolidated Income Statement
For the year ended 30 June 2019
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 of inventory, product development and tooling assets
Other
Results from operating activities
Net finance cost
Profit before tax
Income tax expense
Profit from continuing operations, net of income tax
Profit/(loss) from discontinued operation
Profit/(loss) from operations, net of income tax
Note
2
7
7
4
31
2019
$'000
434,077
(222,092)
211,985
490
(54,778)
(11,317)
(24,502)
(32,652)
‐
‐
(2,189)
87,037
(6,792)
80,245
(20,687)
59,558
‐
59,558
2018
$'000
396,689
(200,580)
196,109
321
(50,820)
(12,166)
(21,766)
(27,681)
(101)
(5,783)
(1,257)
76,856
(6,660)
70,196
(19,723)
50,473
51,372
101,845
Profit/(loss) attributable to owners of the Company
59,558
101,845
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)
Earnings per share:
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
5
5
5
5
5
5
68.9
68.4
‐
‐
58.6
58.1
59.6
59.1
68.9
68.4
118.2
117.2
^ The Group has initially applied AASB 15 using the cumulative effect method. Under this method, the comparative information is not restated (refer note 1).
The notes on pages 41 to 94 are an integral part of these consolidated financial statements.
36
36
GUD Holdings Limited and Subsidiaries
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2019
Note
2019
$'000
2018
$'000
Profit for the year from continuing operations
59,558
50,473
Other comprehensive income
Items that will not be reclassified to profit and loss
Equity investments at FVOCI – net change in fair value
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
Equity settled share based payment transactions
Income tax expense/(benefit) on items that may be reclassified
subsequently to profit or loss
Other comprehensive income / (loss) for the year, net of tax
25
28
28
28
28
31
Total comprehensive income from continuing operations, net of tax
Profit/(loss) from discontinued operation, net of tax
Total comprehensive Profit/(loss) attributable to owners of the Company
Total comprehensive Profit/(loss)
(598)
‐
539
1,077
(4,086)
1,761
903
(16)
5,228
(961)
1,823
(1,280)
(404)
4,794
59,154
‐
59,154
55,267
51,372
106,639
59,154
106,639
^ The Group has initially applied AASB 15 using the cumulative effect method. Under this method, the comparative information is not restated
(refer note 1).
All the above items may subsequently be recognised in the Income Statement.
The notes on pages 41 to 94 are an integral part of these consolidated financial statements.
37
37
GUD Holdings Limited and Subsidiaries
Consolidated Balance Sheet
As at 30 June 2019
Note
2019
$'000
2018
$'000
10
21
8
9
23
24
16
17
18
23
24
32
25
28,850
106,827
108,951
898
756
4
4,579
250,865
125,493
124,219
14,082
‐
1,978
7,801
1,734
275,307
526,172
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Derivative assets
Other financial assets
Current tax receivable
Other assets
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
Total current liabilities
Non‐current liabilities
Employee benefits
Borrowings
Derivative liabilities
Other financial 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
Total equity
^ The Group has initially applied AASB 15 using the cumulative effect method. Under this method, the comparative information is not restated (refer note 1).
57,636
11,164
1,189
580
617
3,787
247
1,625
9,319
86,164
1,281
157,784
1,468
802
34
161,369
247,533
278,639
112,880
9,981
155,778
278,639
278,639
11
12
13
14
15
22
23
24
12
22
23
24
27
28
29
50,610
96,687
87,500
3,677
516
4
4,685
243,679
115,396
119,410
10,638
10
1,284
7,927
2,021
256,686
500,365
56,398
10,127
‐
1,052
754
72
2
1,625
16,517
86,547
1,916
142,992
1,080
2,427
81
148,496
235,043
265,322
112,880
32,793
119,649
265,322
265,322
The notes on pages 41 to 94 are an integral part of these consolidated financial statements.
38
38
GUD Holdings Limited and Subsidiaries
Consolidated Statement of Changes in Equity
For the year ended 30 June 2019
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
Balance at the end of the period
Note
2019
$'000
2018
$'000
265,322
200,914
28
30
59,558
(2,165)
1,761
59,154
101,845
2,971
1,823
106,639
(45,837)
(45,837)
(42,231)
(42,231)
278,639
265,322
^ The Group has initially applied AASB 15 using the cumulative effect method. Under this method, the comparative information is not restated (refer note 1).
The amounts recognised directly in equity are net of tax.
The notes on pages 41 to 94 are an integral part of these consolidated financial statements.
39
39
GUD Holdings Limited and Subsidiaries
Consolidated Cash Flow Statement
For the year ended 30 June 2019
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
Acquisition of non‐controlling interests
Proceeds from sale of investments, net of cash disposed of
Proceeds from sale of property, plant and equipment
Payments for property, plant and equipment
Payments for intangible assets
Net cash provided by investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
(Advance)/Proceeds on other loans
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
2019
$'000
2018
$'000
21
33a
18
17
22
22
22
22
22
30
22
474,189
(402,447)
(27,218)
44,524
453,943
(378,942)
(15,642)
59,359
(22,809)
(312)
‐
285
(6,289)
(1,101)
(30,226)
46,605
(29,096)
(934)
126
(7,448)
(45,837)
(36,584)
(22,286)
50,610
526
(23,036)
(2,018)
83,771
‐
(3,605)
‐
55,112
82,479
(110,209)
3,182
132
(7,197)
(42,231)
(73,844)
40,627
10,238
(255)
21
28,850
50,610
The notes on pages 41 to 94 are an integral part of these consolidated financial statements.
40
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 2019 comprise the Company and its subsidiaries
(together referred to as the ‘Group’).
The Group is primarily involved in manufacture, importation, distribution and sale of automotive products, pumps,
pool, spa and water pressure systems, with operations in Australia, New Zealand, France and Spain (Note 7).
The consolidated annual financial statements of the Group as at and for the year ended 30 June 2019 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 26 July 2019.
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:
Revenue recognition (Note 2): whether revenue from water solutions project income is recognised over time
or at a point in time
Goodwill (Note 16) and other intangible assets (Notes 17, 33): impairment test of intangible assets and
goodwill
Inventories (Note 9): valuation of assets at net realisable value
Trade and other receivables (Note 8): measurement of ECL allowance for trade receivables and contract assets
Other financial instruments (Note 24): contingent consideration
Acquisition (Note 33a): acquisition of subsidiary: fair value of the consideration transferred and fair value of
Financial instruments (Note 25)
the assets acquired, and liabilities assumed.
41
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, interpretations and amendments adopted by the Group
The Group has initially applied AASB 15 (see a) and AASB 9 (see b) from 1 July 2018. A number of other new standards
are also effective from 1 July 2018 but they do not have a material effect on the Group’s financial statements. Due
to the transition methods chosen by the Group in applying these standards, comparative information throughout
these financial statements has not been restated to reflect the requirements of the new standards.
The effect of initially applying these standards is mainly attributed to the following:
– the Group reclassified the provision for the right of return from Trade and other payables to Refund liabilities and
the related return asset from Inventories to Right of return assets. (see a (i));
– the Group recognised Contract liabilities for the expected future rebates and derecognised the provision for
rebates included in Trade and other payables. (see a (i)); and
– an increase in impairment losses recognised on financial assets (see b (ii))
The net impact of adopting the new standards was recognised in retained earnings.
a) AASB 15 Revenue from Contracts with Customers
AASB 15 supersedes AASB 111 Construction Contracts, AASB 118 Revenue and related Interpretations and it applies
to all revenue arising from contracts with customers, unless those contracts are in the scope of other standards. The
new standard establishes a five-step model to account for revenue arising from contracts with customers. Under
AASB 15, revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled
in exchange for transferring goods or services to a customer.
The standard requires entities to exercise judgement, taking into consideration all the relevant facts and
circumstances when applying each step of the model to contracts with their customers. The standard also specifies
the accounting for the incremental costs of obtaining a contract and the costs directly related to fulfilling a contract.
The Group adopted AASB 15 using the cumulative effect method – i.e. by recognising the cumulative effect of initially
applying AASB 15 as an adjustment to the opening balance of retained earnings at 1 July 2018. Therefore, the
comparative information has not been restated and continues to be reported under AASB 118 and AASB 111. There
was no material impact to the financial statements of the Group as a result of adopting this standard. Key elements
of the Group’s transition assessment, new significant accounting policies and the nature of the changes to previous
accounting policies in relation to the Group’s goods and services are set out below.
Under AASB 15, revenue with customers is allocated between performance obligations and recognised as each
performance obligation is met. Determining the timing of the transfer of control – at a point in time or over time –
requires judgement.
42
42
GUD Holdings Limited and Subsidiaries
1.
Basis of preparation (continued)
a) AASB 15 Revenue from Contracts with Customers (continued)
Type of product or
service
(i) Sale of goods
timing
Nature,
performance
payment terms
of
obligations,
satisfaction
of
significant
The Group’s contracts with customers for
the sale of Automotive products, pumps,
pool and spa systems and water pressure
systems generally include one performance
obligation. Therefore, revenue from sale of
goods is recognised at the point in time when
control of the asset is transferred to the
customer, generally on delivery of the good.
Invoices are usually payable within 30 days,
and customers, contracts offer sales with
right of
rebates and
marketing rebates.
return, volume
Right of return
in
the
For contracts that permit the customer to
return an item, revenue is recognised to the
extent that it is probable that a significant
revenue
reversal
recognised will not occur. Therefore, the
amount of revenue is adjusted for expected
returns, the Group uses historical average
return rates to forecast expected future
returns from its customers.
cumulative
Nature of change in accounting policy
Right of return
Under AASB 118, revenue for these contracts
was recognised when a reasonable estimate
of the returns could be made, provided that
all criteria for revenue recognition were met.
If a reasonable estimate could not be made,
then revenue recognition was deferred until
the return period lapsed or a reasonable
estimate of return could be made.
recognised
Prior to the adoption of AASB 15, the amount
of revenue related to the expected returns
was deferred and
the
statement of financial position within Trade
and other payables and a corresponding
adjustment to Cost of sales. The initial
carrying amount of goods expected to be
returned was included within Inventories.
in
As a result of changes noted above, the
Group reclassified the provision for the right
of return from Trade and other payables to
Refund liabilities and the related return asset
from Inventories to Right of return assets.
There was no impact to retained earnings on
adoption of AASB 15.
Volume rebates
Volume rebates
The Group provides retrospective volume
rebates to some of its customers once the
quantity of products purchased reach a
specified volume. Retrospective volume
rebates give rise to variable consideration.
To estimate the variable consideration the
Group uses historical average volume
rebates to forecast expected volume rebates
payable to its customers.
Prior to the adoption of AASB 15, the Group
estimated volume rebates using historical
data and inputs from its customers, similar to
the expected value method, and included a
provision for rebates in Trade and other
payables. AASB 15, did not have a significant
impact on the Group’s accounting for
volume rebates.
On adoption, the Group recognised Contract
liabilities for the expected future rebates and
derecognised the provision for rebates
included in Trade and other payables. There
was no impact to profit.
43
43
GUD Holdings Limited and Subsidiaries
1.
Basis of preparation (continued)
a) AASB 15 Revenue from Contracts with Customers (continued)
(i) Sale of goods
(continued)
(ii) Water treatment
contract revenue
Marketing rebates
Marketing rebates
Prior to the adoption of AASB 15, the Group
would provide for the marketing rebate
based on the amount specified
in the
contract and either account as a reduction in
the transaction price or marketing and
selling costs. Under AASB 15, the nature of
the marketing activity will determine the
if
treatment of
marketing rebate is deemed to be a separate
performance obligation then
it will be
treated as a reduction in transaction price, if
not then it should be treated as marketing
expense. There will be no impact to profit.
transaction,
the
i.e.
AASB 15 did not have a significant impact on
the Group’s accounting policy.
It is common for the Group’s contracts to
designate specific amounts to be spent on
marketing and promotional activities. The
marketing rebate is treated as a reduction in
the transaction price when the Group pays
an agreed upon amount to the customer for
marketing activities, if the payment is in
relation to a distinct good or service, the
rebate is treated as a marketing expense.
The Group’s water business derives some of
its revenue from providing customers with
water treatment solutions. The Group has
concluded
from water
treatment solutions meets the criteria set
out in AASB 15 for revenue to be recognised
over time, the Group will measure progress
by using the inputs method.
revenue
that
b) AASB 9 Financial Instruments
AASB 9 Financial Instruments replaces AASB 139 Financial Instruments: Recognition and Measurement for annual
periods beginning on or after 1 January 2018. AASB 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 AASB 139.
The Group applied hedge accounting prospectively, on adoption no adjustments were made to retained earnings.
(i) Classification and measurement
Under AASB 139, the Group applied the classification of its hedge accounting and investment at fair value through
profit or loss or other comprehensive income (FVPL/FVOCI) and all other reported financial instruments at amortised
cost. Under AASB 9, the Group has determined that there is no change to classification and measurement of financial
instruments. Set out below is a table showing the accounting treatment under AASB 139 as compared to AASB 9:
Asset/Liability
Cash and cash equivalents
Trade and other receivables
Investments
Foreign currency forward contracts
Interest rate swaps
Loans receivable – third parties
Contingent consideration receivable
Contingent consideration payable
Other consideration payable
Borrowings and loans
Previous Accounting Treatment
(AASB 139)
New accounting Treatment (AASB
9)
Amortised cost
Amortised cost
Fair value through Other
Comprehensive Income
Fair value through Other
Comprehensive Income
Fair value through Other
Comprehensive Income
Amortised cost
Amortised cost
Amortised cost
Amortised cost
Amortised cost
Amortised cost
Amortised cost
Fair value through Other
Comprehensive Income
Fair value through Other
Comprehensive Income
Fair value through Other
Comprehensive Income
Amortised cost
Amortised cost
Amortised cost
Amortised cost
Amortised cost
44
44
GUD Holdings Limited and Subsidiaries
1.
Basis of preparation (continued)
b) AASB 9 Financial Instruments (continued)
(ii) Impairment
The adoption of AASB 9 has changed the Group’s accounting for impairment losses for Trade and other receivables
by replacing AASB 139’s incurred loss approach with a forward‐looking expected credit loss (ECL) approach.
AASB 9 requires the Group to record an allowance for ECLs for all loans and other debt financial assets (including
Trade and other receivables) not held at FVPL/FVOCI.
For Trade and other receivables, the Group has applied the standard’s simplified approach and has calculated ECLs
based on lifetime expected credit losses. The Group has established a provision matrix that is based on the Group’s
historical credit loss experience, adjusted for forward‐looking factors specific to the debtors and the economic
environment. AASB 9 did not have a significant impact on the Group’s accounting policy.
(iii) Hedge accounting
The Group applied hedge accounting prospectively. At the date of the initial application, all the Group’s existing
hedging relationships were eligible to be treated as continuing hedging relationships. Consistent with prior periods,
the Group has continued to designate the change in fair value of the entire forward contract in the Group’s cash
flow hedge relationships and, as such, the adoption of the hedge accounting requirements of AASB 9 had no
significant impact on the Group’s financial statements.
Under AASB 139, all gains and losses arising from the Group’s cash flow hedging relationships were eligible to be
subsequently reclassified to profit or loss. However, under AASB 9, gains and losses arising on cash flow hedges of
forecast purchases of non‐financial assets need to be incorporated into the initial carrying amounts of the non‐
financial assets. Therefore, upon adoption of AASB 9, the net gain or loss on cash flow hedges was presented under
‘Other comprehensive income not to be reclassified to profit or loss in subsequent periods’. This change only applies
prospectively from the date of initial application of AASB 9 and has no impact on the presentation of comparative
figures.
Standards issued but not yet effective
A number of new standards are effective for annual periods beginning after 1 January 2019 and earlier application
is permitted; however, the Group has not early adopted the new or amended standards in preparing these
consolidated financial statements.
Of those standards that are not yet effective, IFRS 16 is expected to have a material impact on the Group’s financial
statements in the period of initial application.
a) AASB 16 Leases
The new lease accounting standard AASB 16 is effective for the financial year beginning 1 July 2019. It requires all
leases to be recognised on the balance sheet with a right‐of‐use asset capitalised and depreciated over the estimated
lease term together with a corresponding liability that will reduce over the same period with an appropriate interest
charge recognised. AASB 117 Leases only requires leases categorised as finance leases to be recognised on the
balance sheet. The implementation team, which includes subject matter experts and members from business units
have completed the initial impact assessment and will concentrate ongoing efforts to implement the standard as
business as usual.
At 30 June 2019, the Group held operating leases with a future obligation of $44.649 million on a non‐discounted
basis as disclosed in note 20. The impact of AASB 16 will be as follows.
(i) Lease Liability
A lease liability of $88.190 million will be recognised, being the present value of the future payments, using the
Group’s incremental borrowing rate applicable to the location and term of each lease. This is incremental to the
existing finance lease liabilities of $37,000, resulting in a total liability of $88.227 million. The most significant lease
liabilities relate to property $83.751 million and motor vehicles $3.352 million.
Where leases are held in non‐Australian dollar currencies, the spot exchange rates on 1 July 2019 have been used to
value them. Lease liabilities will be revalued to spot exchange rates at each future balance sheet date.
(ii) Right of use asset
A right‐of‐use asset of $88.190 million will be recognised in addition to the existing $48,500 of property, plant and
equipment under finance lease contracts, resulting in a total asset of $88.238 million. The right‐of‐use asset has
been measured at an amount equal to the lease liability on transition. Where the lease liability is not in the functional
currency of the relevant entity it will be revalued for changes in foreign exchange rates, while the right‐of use‐asset
will not be revalued.
45
45
GUD Holdings Limited and Subsidiaries
1.
Basis of preparation (continued)
a) AASB 16 Leases (continued)
(iii) Transition
The Group is applying the modified retrospective transition method under which comparative information will not
be restated and has elected to use the following practical expedients permitted by the standard:
‐
‐
‐
‐
‐
on initial application, AASB 16 will be only been applied to contracts that were previously classified as leases;
lease contracts with a duration of less than 12 months will continue to be expensed to the income statement
on a straight‐line basis over the lease term;
lease contracts with an underlying asset value less than $10,000 will continue to be expensed to the income
statement on a straight‐line basis over the lease term; and
in measuring lease liabilities, apply a single discount rate to a portfolio of leases with similar characteristics (such
as leases with a similar remaining lease term for a similar class of underlying asset in a similar economic
environment);
the lease term has been determined with the use of hindsight where the contract contains options to extend
the lease.
b) Other Standards
The following amended standards and interpretations are not expected to have a significant impact on the Group’s
consolidated financial statements.
Effective date
New Standards or amendments
IFRIC 23 Uncertainty over Income Tax Treatments.
Prepayment Features with Negative Compensation (Amendments to IFRS 9).
1 July 2019
Long‐term Interests in Associates and Joint Ventures (Amendments to IAS 28).
Plan Amendment, Curtailment or Settlement (Amendments to IAS 19).
Annual Improvements to IFRS Standards 2015–2017 Cycle – various standards.
Amendments to References to Conceptual Framework in IFRS Standards.
IFRS 17 Insurance Contracts.
1 July 2020
1 July 2021
46
46
GUD Holdings Limited and Subsidiaries
Results for the Year
This section focuses on the Group’s performance. Disclosures in this section includes analysis 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.
In the segment information, the Group reports Underlying Earnings Before Interest and Tax (“EBIT”), which is EBIT
before exceptional items. This is a non IFRS measure of performance which reflects how the business is managed
and how the Directors assess the performance of the Group.
2. Revenue
The effect of initially applying AASB 15 on the Group’s revenue from contracts with customers is described in Note
1. Due to the transition method chosen in applying AASB 15, comparative information has not been restated to
reflect the new requirements.
a) Revenue streams
The Group generates revenue primarily from the sale of automotive products (Automotive segment), pumps, pool
and spa systems and water pressure systems (Davey segment).
Segments
Type of goods or services
Sale of goods
Water solutions project income
Total Revenue from contracts with customers
Geographical markets
Australia
New Zealand
Other
For the year ended 30 June 2019
Automotive
$’000
330,002
‐
330,002
297,053
32,949
‐
Davey
$’000
102,066
2,009
104,075
83,646
13,825
6,604
Total
$’000
432,068
2,009
434,077
380,699
46,774
6,604
Total revenue from contracts with customers
330,002
104,075
434,077
Timing of revenue recognition
Goods transferred at a point in time
Services transferred over time
Total Revenue from contracts with customers
330,002
‐
330,002
102,066
2,009
104,075
432,068
2,009
434,077
^ The Group has initially applied AASB 15 using the cumulative effect method. Under this method, the comparative information is not restated (refer note 1).
The Group recognised impairment losses on receivables and contract assets arising from contracts with customers,
included under Administrative expenses in the statement of profit or loss, amounting to $ 220,000 and $ 149,000
for the year ended 30 June 2019 (estimated under AASB 9) and 2018 (estimated under AASB 139), respectively.
Set out below, is the reconciliation of the revenue from contracts with customers with the amounts disclosed in the
segment information:
Revenue
External customer
Rebates
For the year ended 30 June 2019
2019
2018
Automotive
Davey
Automotive
Davey
$’000
$’000
$’000
$’000
365,672
107,802
322,488
104,234
(35,670)
(3,727)
(26,886)
(3,147)
Total revenue from contracts with customers
330,002
104,075
295,602
101,087
47
47
GUD Holdings Limited and Subsidiaries
2.
Revenue (continued)
The following table provides information about receivables, contract assets and contract liabilities from contracts
with customers.
Receivables, which are included in trade and other receivables
Contract assets
2019
$'000
2018
$'000
883
1,034
The contract assets primarily relate to the Group’s rights to consideration for work completed but not billed at the
reporting date on water solution projects. There was no impact on contract assets as a result of an acquisition of the
subsidiary (see Note 33a). The contract assets are transferred to receivables when the rights become unconditional.
This usually occurs when the Group issues an invoice to the customer.
3. Expenses
Accounting policies
Depreciation & Amortisation
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
The value of intangible assets, except for 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, Product development and distribution rights
Customer relationships
Software
3 to 5 years
5 to 15 years
5 to 7 years
Operating leases
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:
Increase/(decrease) in 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
Note
2019
$'000
253
117
9,423
(4,217)
77,394
2,647
2018
$'000
607
1,539
8,334
247
72,865
2,618
48
48
GUD Holdings Limited and Subsidiaries
3.
Expenses (continued)
Expenses by nature (continued)
Movements in provisions for employee benefits
Equity settled share based payment expense
Depreciation and amortisation:
Amortisation of customer relationships
Amortisation of software
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
Impairment of product development costs
Impairment of tooling assets
Loss on revaluation of contingent consideration
Total non‐underlying costs
4. Net finance costs
Accounting policies
Finance income
28
17
17
18
18
(344)
1,761
319
2
2,958
19
3,298
11,317
58
1,810
‐
‐
‐
‐
1,868
(1,040)
1,823
392
1
3,491
11
3,895
12,166
289
450
2,373
1,726
1,684
101
6,623
Finance income is comprised of interest income, fair value gains on interest rate hedging instruments and gains on
disposals of available for sale financial assets. Interest income is recognised on a time proportionate basis that takes
into account the effective yield on the financial asset.
Finance costs
Finance costs are classified as expenses consistent with the balance sheet classification of the related debt or equity
instruments. Finance costs are comprised of interest expense on borrowings and fair value losses on interest rate
hedging instruments through the income statement. Interest expense on borrowings is recognised on an effective
interest basis.
This table summarises net finance costs from continuing operations:
Finance costs:
Interest income
Interest expense
Financial assets / (liabilities) measured at fair value through the profit
and loss
Net foreign exchange (gain) / loss
Unwinding of discount on contingent consideration payable
Net finance costs
2019
$'000
(126)
7,448
‐
(530)
‐
6,792
The ineffective portion of cash flow hedges that is recognised in the income statement is nil (2018: nil).
49
2018
$'000
(132)
7,156
(208)
(201)
45
6,660
49
GUD Holdings Limited and Subsidiaries
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 the Group’s commitments to issue shares in the future, such as issued upon vesting of
performance rights.
Continuing operations Discontinuing operations
2018
$'000
2019
$'000
2019
$'000
2018
$'000
Total
2019
2018
Profit / (loss) for the period
59,558
Number
50,473
Number
‐
Number
51,372
Number
59,558
Number
101,845
Number
Weighted average number of ordinary
shares used as the denominator for
basic EPS
Effect of balance of performance
rights outstanding at 30 June 2019
Weighted average number of ordinary
shares used as the denominator for
diluted EPS
EPS
Basic EPS
Diluted EPS
6. Auditors' remuneration
86,485,972 86,149,028
‐ 86,149,028 86,485,972 86,149,028
629,745
738,745
‐
738,745
629,745
738,745
87,115,717 86,887,773
Cents per
share
Cents per
share
‐ 86,887,773 87,115,717 86,887,773
Cents per
share
Cents per
share
Cents per
share
Cents per
share
68.9
68.4
58.6
58.1
‐
‐
59.6
59.1
68.9
68.4
118.2
117.2
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 services:
The auditor of GUD Holdings Limited
‐ in relation to other assurance, advisory, taxation and due diligence services
2019
$
2018
$
483,350
483,350
573,020
573,020
295,707
295,707
409,900
409,900
50
50
GUD Holdings Limited and Subsidiaries
7.
Segment information
Segment reporting is presented in respect of the Group’s business and geographical segments. Operating segments
are presented using the ‘management approach’, where the information presented is on the same basis as the
internal reports provided to the Managing Director (Chief Operating Decision Maker ‐ ‘CODM’). The CODM is
responsible for the allocation of resources to operating segments and assessing their performance. Segment results,
assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a
reasonable basis.
Business segments
The following summary describes the operations in each of the Group’s reportable segments:
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
In the prior financial year, discontinued operations consisted of the Oates business sold 2 January 2018.
Geographical segments
The Group operates primarily in two geographical segments; Australia and New Zealand, refer note 2 for
geographical sales disclosure.
51
51
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
Restructuring costs2
Segment result (EBIT)
Interest income
Interest expense
Profit / (loss) before tax
Tax expense3
Profit / (loss)
Profit / (loss) attributable to owners of the Company
Segment assets
Segment liabilities
Segment capital expenditure
Automotive
$'000
330,002
89,791
(2,059)
(319)
87,413
(52)
(1,073)
86,288
2
(219)
86,071
(25,281)
60,090
60,090
413,516
51,894
3,798
For the year ended 30 June 2019
Davey
$'000
104,075
10,324
(901)
‐
9,423
‐
(776)
8,647
549
(174)
9,022
(2,600)
6,422
6,422
110,450
20,496
2,452
Unallocated4
$'000
‐
(7,912)
(17)
(2)
(7,931)
(6)
39
(7,898)
124
(7,074)
(14,848)
7,894
(6,954)
Total
$'000
434,077
92,203
(2,977)
(321)
88,905
(58)
(1,810)
87,037
675
(7,467)
80,245
(20,687)
59,558
(6,954)
59,558
2,206
175,143
39
526,172
247,533
6,289
Transaction costs in the Automotive segment relate to the acquisition of Disc Brakes Australia (Note 33a).
Restructuring costs in the Automotive segment relate to onerous lease and moving costs associated with a new office and warehouse complex in Auckland ($1.033 million).
Tax expense in the Unallocated segment includes a CGT refund of $2.548 million related to the Sunbeam disposal.
1
2
3
4 Unallocated items comprise mainly of corporate assets, corporate expenses, interest, tax, corporate borrowings, and deferred tax balances.
52
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
Loss of revaluation of contingent consideration payable
Transaction costs1
Profit on sale of subsidiary2
Integration of Oates sale incentives
Impairment of inventory, product development and
tooling assets
Segment result (EBIT)
Interest income
Interest expense
Profit / (loss) before tax
Tax expense
Profit / (loss)
Automotive
$'000
295,602
85,431
(1,729)
(518)
83,184
(141)
‐
(92)
‐
82,951
214
(92)
83,073
(24,926)
58,147
Davey
$'000
101,087
10,581
(1,410)
‐
9,171
‐
‐
‐
(5,783)
3,388
196
(150)
3,434
(1,441)
1,993
For the year ended 30 June 2018
Unallocated3
$'000
Continuing
operations
$'000
Discontinued
operations
$'000
Total
$'000
‐
396,689
36,060
432,749
(8,866)
(9)
(1)
(8,876)
(101)
(148)
‐
(358)
‐
(9,483)
‐
(6,828)
(16,311)
6,644
(9,667)
87,146
(3,148)
(519)
83,479
(101)
(289)
‐
(450)
(5,783)
76,856
410
(7,070)
70,196
(19,723)
50,473
5,003
(354)
(8)
4,641
(2,442)
51,536
(930)
‐
52,805
16
(43)
52,778
(1,406)
51,372
92,149
(3,502)
(527)
88,120
(101)
(2,731)
51,536
(1,380)
(5,783)
129,661
426
(7,113)
122,974
(21,129)
101,845
Profit / (loss) attributable to owners of the Company
58,147
1,993
(9,667)
50,473
51,372
101,845
Segment assets
Segment liabilities
Segment capital expenditure
366,688
51,563
1,866
103,063
19,150
1,675
30,342
164,217
163
500,093
234,930
3,704
272
113
59
500,365
235,043
3,763
Transaction costs in the Automotive segment relate to the acquisition of AA Gaskets. Transaction costs incurred in discontinued operations relate to the disposal of Oates (Note 33b) and Dexion ($0.232 million).
1
2 Gain on sale of Oates ($51.536 million) (Note 33b)
3 Unallocated items comprise mainly of corporate assets, corporate expenses, interest, tax, corporate borrowings, and deferred tax balances.
53
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. After 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 all operations at 30 June 2019 and continuing
operations at 30 June 2018:
Current
Trade receivables
Less: Allowance for doubtful debts
Net trade receivables
2019
$'000
107,385
(558)
106,827
2018
$'000
97,372
(685)
96,687
An allowance has been made for estimated irrecoverable amounts from the sale of goods and services, determined
with reference to forward looking expected credit loss (ECL) (2018: determined by a specific review of debtors). The
movement in the allowance for doubtful debts was recognised in the income statement in the current financial year.
Movement in allowance for doubtful debts
Balance at the beginning of the year
Acquisitions through business combinations
Doubtful debts recognised
Amounts written off as uncollectible
Balance at the end of the year
2019
$'000
(685)
‐
(213)
340
(558)
2018
$'000
(697)
(6)
(145)
163
(685)
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.
54
54
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.
2019
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
2018
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
Impairment
$'000
94,659
9,563
2,417
589
157
107,385
Gross
$'000
82,061
10,422
3,757
977
155
97,372
(70)
(27)
(99)
(324)
(38)
(558)
Impairment
$'000
(35)
(169)
(105)
(333)
(43)
(685)
Net
$'000
94,589
8,978
1,793
801
666
106,827
Net
$'000
82,026
10,253
3,652
644
112
96,687
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 all operations at 30 June 2019 and continuing operations at 30 June
2018:
Current
Raw materials and stores
Work in progress
Finished goods
Inventory – at cost
Less: Provision for slow moving inventory
Total inventory
2019
$'000
15,456
429
99,182
115,067
(6,116)
108,951
2018
$'000
11,219
677
83,015
94,911
(7,411)
87,500
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).
55
55
GUD Holdings Limited and Subsidiaries
10. Other assets
This table summarises other assets related to all operations at 30 June 2019 and continuing operations at 30 June
2018:
Current
Prepayments
Other
Total other assets
11. Trade and other payables
Accounting policies
Payables
2019
$'000
3,621
958
4,579
2018
$'000
2,874
1,811
4,685
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 all operations at 30 June 2019 and continuing operations
at 30 June 2018:
Current
Accrued expenses
Trade payables
Trade payables and accrued expenses
No interest is incurred on trade payables.
12. Employee benefits
Accounting policies
Employee benefits
2019
$'000
14,798
42,838
57,636
2018
$'000
15,164
41,234
56,398
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. Expected future payments are discounted using market yields at the
reporting date on corporate bonds with terms to maturity and currency that match, as closely as possible, the
estimated future cash outflows.
Defined contribution plans
Contributions to defined contribution superannuation plans are expensed when incurred.
56
56
GUD Holdings Limited and Subsidiaries
12. Employee benefits (continued)
This table summarises employee provisions related to all operations at 30 June 2019 and continuing operations at
30 June 2018:
Current
Non‐current
Accrued wages and salaries
Total employee benefits
Accrued wages and salaries are included in accrued expenses in Note 11.
13. Restructuring provisions
Accounting policies
Restructuring
2019
$'000
11,164
1,281
675
13,120
2018
$'000
10,127
1,916
2,253
14,296
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 all operations at 30 June 2019 and continuing operations
at 30 June 2018:
Current
Non‐current
Total restructuring provisions
Carrying amount at beginning of year
Provisions recognised
Payments made during the year
Carrying amount at end of year
Note
2019
$'000
1,189
‐
1,189
‐
1,189
‐
1,189
2018
$'000
‐
‐
‐
38
‐
(38)
‐
The payments made against the provision for restructuring represents the costs of redundancies, onerous lease costs
and moving costs.
57
57
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 all operations at 30 June 2019 and continuing operations at 30
June 2018:
Carrying amount at beginning of year
Provisions recognised
Provisions reversed
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
15. Other provisions
Accounting policy
Other
2019
$'000
1,052
(15)
(352)
(107)
‐
‐
2
580
2018
$'000
1,214
‐
‐
(158)
‐
‐
(4)
1,052
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 all operations at 30 June 2019 and continuing operations at 30
June 2018:
Carrying amount at beginning of year
Provisions recognised
Payments made during the year
Carrying amount at end of year
2019
$'000
754
10
(147)
617
2018
$'000
1,750
‐
(996)
754
58
58
GUD Holdings Limited and Subsidiaries
Tangible and Intangible Assets
The following section shows the tangible and 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 represents 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
Transfer to brand names and other intangible assets (AA
Gaskets)
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
33a
2019
$'000
115,396
9,604
-
2018
$'000
119,438
14,072
(5,166)
-
(12,629)
493
125,493
(319)
115,396
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 5 years (Note 3).
59
59
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).
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.
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 all operations at 30 June 2019 and continuing operations at
30 June 2018:
Product
Development
Costs
Note
Brand,
Business
Names &
Trademarks
Patents,
Licences &
Distribution
Rights
Software
Customer
Relationships
Total
2,901
111,797
411
145
4,441 119,695
$'000
Gross carrying amount
Balance at 30 June 2017
Additions from business combinations
Disposed through divestments
Additions from business combinations
Impairment
Foreign currency movements
Balance at 30 June 2018
Additions from business combinations
Acquisition of brand name
Foreign currency movements
Balance at 30 June 2019
Accumulated amortisation
Balance at 30 June 2017
Amortisation expense
Disposed through divestments
Foreign currency movements
Balance at 30 June 2018
Amortisation expense
Disposed through divestments
Foreign currency movements
Impairment
Balance at 30 June 2019
Carrying amount
As at 30 June 2018
33a
33a
‐
(676)
‐
(2,225)
‐
‐
‐
‐
‐
‐
(957)
‐
672
285
‐
‐
‐
‐
‐
‐
‐
As at 30 June 2019
Amortisation is recognised as an expense in Note 3.
Refer to Note 7 for allocation of the carrying amount of brand names to segments.
‐
3,698
(8,900)
8,979
‐
(15)
115,559
2,664
1,101
(83)
119,241
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
411
1,457
‐
8
1,876
(272)
(127)
‐
8
(391)
‐
‐
(17)
‐
‐
‐
4
‐
‐
‐
‐
‐
‐
‐
3,698
(9,576)
8,983
(2,225)
(15)
149
4,441 120,560
‐
‐
‐
‐
‐
‐
4,121
1,101
(75)
149
4,441 125,707
(145)
(222)
(1,596)
‐
‐
‐
(392)
‐
‐
(519)
672
293
(145)
(614)
(1,150)
(2)
‐
‐
‐
(319)
‐
‐
‐
(321)
‐
(17)
‐
(408)
(147)
(933)
(1,488)
115,559
119,241
20
1,468
4
2
3,827 119,410
3,508 124,219
60
60
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 2017
Additions from business combinations
Disposed through divestments
Additions
Disposals
Foreign currency movements
Balance at 30 June 2018
Additions from business combinations
Additions
Disposals
Foreign currency movements
Balance at 30 June 2019
33a
113
‐
‐
‐
‐
‐
113
‐
‐
(113)
‐
‐
47,915
407
(7,145)
3,605
(2,693)
(76)
42,013
6,491
6,289
(2,127)
91
52,757
61
Total
$'000
48,028
407
(7,145)
3,605
(2,693)
(76)
42,126
6,491
6,289
(2,240)
91
52,757
61
GUD Holdings Limited and Subsidiaries
18. Property, plant and equipment (continued)
Note
Leased assets
$'000
Plant and
Equipment
$'000
Accumulated depreciation and
amortisation
Balance at 30 June 2017
Disposed through divestments
Depreciation expense
Disposals
Foreign currency movements
Balance at 30 June 2018
Additions from business combinations
Depreciation expense
Disposals
Foreign currency movements
Balance at 30 June 2019
Carrying amount
As at 30 June 2018
As at 30 June 2019
33a
Depreciation is recognised as an expense in Note 3.
Acquisitions include the acquisition of Disc Brakes Australia Pty Ltd (Note 33a).
19. Impairment testing
Accounting policies
(15)
‐
(10)
‐
‐
(25)
‐
(19)
44
‐
‐
88
‐
(34,938)
5,821
(3,491)
1,071
74
(31,463)
(6,025)
(2,958)
1,796
(25)
(38,675)
10,550
14,082
Total
$'000
(34,953)
5,821
(3,501)
1,071
74
(31,488)
(6,025)
(2,977)
1,840
(25)
(38,675)
10,638
14,082
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 of disposal 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.
62
62
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 2020 (2018: based on 2019
budget) year and forecasts for a further 4 years which are extrapolated in perpetuity using a long term average
growth rate (average of next five years) and terminal value 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 post‐tax discount rates applied to cash flows of each CGU for the years ended 30 June
2019 and 2018:
Automotive
Davey
2019
9.3 – 9.6%
8.9 – 9.5%
2018
9.0 – 9.3%
8.9 – 9.5%
The directors have assessed that no impairment charge is required in relation to the tangible or intangible assets for
the year ended 30 June 2019.
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
Total plant and equipment capital expenditure
Operating leases
2019
$'000
1,417
‐
‐
1,417
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
Total operating leases commitments
2019
Buildings
$'000
6,475
18,584
15,623
40,682
2019
Other
$'000
1,514
2,453
‐
3,967
2018
Buildings
$'000
6,538
24,331
12,292
43,161
2018
$'000
2,048
1,156
472
3,676
2018
Other
$'000
1,996
4,916
4,450
11,362
The Group leases a number of premises throughout Australia, New Zealand and Europe. The rental period of each
individual lease agreement varies between one and ten years with renewal options ranging from one to ten 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.
63
63
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
Total finance lease
Lease liabilities provided for in the consolidated financial statements are disclosed in Note 22.
2019
$'000
2018
$'000
37
‐
‐
37
‐
37
37
‐
‐
37
72
‐
‐
72
‐
72
72
‐
‐
72
64
64
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 and are principally held with the same
financial institutions who provide borrowing facilities to the company.
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
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
Profit / loss on sale of subsidiaries
Depreciation and amortisation
Impairment of capitalised product development costs
Unwind of discount on contingent consideration payable
Interest received
Interest paid
(Gain)/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
65
2019
$'000
28,850
28,850
2019
$'000
59,558
‐
3,298
(410)
‐
(126)
7,448
49
(6,532)
(14,082)
(6,448)
136
(670)
(1,314)
3,617
44,524
2018
$'000
50,610
50,610
2018
$'000
101,845
(51,536)
3,896
1,932
45
(132)
7,197
(1,508)
5,443
5,580
(4,717)
(677)
(2,107)
(957)
(4,945)
59,359
65
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 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 2019 is 4.45% (2018:
4.44%).
Unsecured bank loans
The two tranches of the unsecured bank loan in accordance with the Common Terms Deed are summarised below:
Facilities as at 30 June 2019
Maturity
1 July
Amount
$ million
Facilities as at 30 June 2018
Maturity
1 July
Amount
$ million
Tranche A – 5 year facility
Tranche B – 5 year facility
185.0
60.00
2020
2020
185.0
60.0
2020
2020
The Tranche B facility amortises from 31 March 2016 to maturity. The facility has not amortised during the year
ended 30 June 2019 (2018: $41.25 million).
Both tranches are subject to variable interest rates which as at 30 June 2019 are 2.97% and 2.85%, respectively
(2018: 3.80% and 3.78%, respectively). Tranche B reduces by a further $3.75 million in July 2020 in accordance with
facility agreements entered into in conjunction with the Common Terms Deed (as amended). The facilities expire in
July 2020.
Money market facility
The unsecured money market facilities are payable on demand and may be withdrawn unconditionally. Interest on
draw‐downs is charged at prevailing market rates.
This table summarises Borrowings relating to all operations at 30 June 2019 and continuing operations at 30 June
2018:
Current
Unsecured bank loans
Secured finance lease liabilities (1)
Total current borrowings
Non‐current
Unsecured bank loans
Total non‐current borrowings
(1) Secured by the assets leased (Note 18).
Note
25
25
2019
$'000
3,750
37
3,787
2018
$'000
‐
72
72
157,784
157,784
142,992
142,992
66
66
GUD Holdings Limited and Subsidiaries
22. Borrowings (continued)
Financing facilities
This table summarises facilities available, used and not utilised related to all operations at 30 June 2019 and
continuing operations at 30 June 2018:
Total facilities available:
Unsecured bank overdrafts
Unsecured bank loans
Unsecured money market facilities
Balance at 30 June
Facilities used at balance date:
Unsecured bank overdrafts
Unsecured bank loans
Unsecured money market facilities
Balance at 30 June
Facilities not utilised at balance date:
Unsecured bank overdrafts
Unsecured bank loans
Unsecured money market facilities
Balance at 30 June
2019
$'000
4,956
245,000
5,000
254,956
165
161,534
‐
161,699
4,791
83,466
5,000
93,257
2018
$'000
4,917
245,000
5,000
254,917
155
142,992
‐
143,147
4,762
102,008
5,000
111,770
Reconciliation of movements of liabilities to cash flows arising from financing activities
Other
loans and
borrowings
Note
Bank
overdrafts
used for
cash
manageme
nt
purposes
Interest
Rate
Swaps /
Forward
exchange
contracts
used for
hedging ‐
asset
Interest
Rate Swaps
/ Forward
exchange
contracts
used for
hedging ‐
Liabilities
Reserves
Retained
Earnings
Total
Balance at 1 July 2018
155
141,264
3,687
1,082
32,793
119,649
298,630
Changes from financing cash
flows
Proceeds
borrowings
from
loans and
Repayment of borrowings
Dividend paid
Interest received
Interest paid
Total changes from
financing cash flows
The effect of changes in
foreign exchange rates
Other changes
Change in bank overdraft
Interest received
Interest expense
Total other changes
Balance at 30 June 2019
67
‐
‐
‐
‐
‐
‐
‐
‐
‐
10
‐
‐
10
165
‐
45,671
(29,096)
‐
126
(7,448)
9,253
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
45,671
(29,096)
(45,837)
(45,837)
‐
‐
126
(7,448)
(45,837)
(36,584)
998
(2,779)
364
539
‐
(878)
‐
‐
(126)
7,448
7,322
158,837
(10)
390
(22,753)
82,688
60,315
‐
‐
‐
(10)
898
‐
‐
‐
‐
‐
‐
‐
‐
‐
10
(126)
7,448
390
(22,753)
82,688
67,647
1,836
10,579
156,500
328,815
67
GUD Holdings Limited and Subsidiaries
23. Derivatives
Accounting policies
Derivative financial instruments
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.
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.
68
68
GUD Holdings Limited and Subsidiaries
23. Derivatives (continued)
Derivative assets
This table summarises derivative assets related to all operations at 30 June 2019 and continuing operations at 30
June 2018:
Current
Derivatives ‐ Foreign currency forward contracts
Current derivative assets
Non‐current
Derivatives ‐ Interest rate swaps
Non‐current derivative assets
Derivative liabilities
Note
25
25
2019
$'000
898
898
‐
‐
2018
$'000
3,677
3,677
10
10
This table summarises derivative liabilities related to all operations at 30 June 2019 and continuing operations at 30
June 2018:
Current
Derivatives ‐ Foreign currency forward contracts
Derivatives ‐ Interest rate swaps at fair value
Current derivative liabilities
Non‐current
Derivatives ‐ Interest rate swaps at fair value
Non‐current derivative liabilities
Note
25
25
25
2019
$'000
243
4
247
1,468
1,468
2018
$'000
‐
2
2
1,080
1,080
The following table indicates the periods in which the cash flows associated with cash flow hedges are expected to
occur and impact profit or loss and the carrying amounts of the related hedging instruments.
2019
2018
Expected cash flow and impact to profit or loss
Expected cash flow and impact to profit or loss
Carrying
amount
Total
1‐6
months
6‐12
months
Carrying
amount
Total
1‐6
months
6‐12
months
More
than
one
year
More
than
one
year
Interest rate
swaps
Assets
‐
‐
Liabilities
(1,472)
(1,472)
‐
(4)
898
243
898
243
898
243
(331)
(331)
1,137
Forward
exchange
contracts
Assets
Liabilities
Total
69
‐
‐
‐
‐
‐
10
10
(1,468)
(1,082)
(1,082)
‐
(2)
‐
‐
10
(1,080)
‐
‐
3,677
3,677
3,203
‐
‐
‐
474
‐
‐
‐
(1,468)
2,605
2,605
3,201
474
(1,070)
69
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 all operations at 30 June 2019 and continuing operations at
30 June 2018:
Current
Loans receivable ‐ third parties
Other current financial assets
Non‐current
Loans receivable ‐ third parties
Other non‐current financial assets
Note
25
25
2019
$'000
756
756
1,978
1,978
2018
$'000
516
516
1,284
1,284
Other financial liabilities
This table summarises other financial liabilities at 30 June 2019 and at 30 June 2018:
Current
Contingent consideration payable
Non current
Contingent consideration payable
Note
2019
$'000
2018
$'000
1,625
1,625
802
2,427
Total other financial liabilities
Contingent consideration payable included in other financial liabilities is measured at fair value. Consideration
payable at 30 June 2019 includes the contingent consideration payable to the vendors of IMG.
2,427
25
4,052
70
70
GUD Holdings Limited and Subsidiaries
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).
The following tables show the valuation techniques used in measuring Level 2 and Level 3 fair values for financial
instruments measured at fair value in the statement of financial position, as well as the significant unobservable
inputs used.
Type
Valuation technique
Interest rate
swaps
Foreign
exchange
contracts
Contingent
consideration
Investments
Swap models: The fair value calculated as
the present value of the estimated future
cash flows. Estimates of future floating‐
rate cash flows are based on quoted swap
rates, futures prices and interbank
borrowing rates. Estimated cash flows are
discounted using a yield curve constructed
from similar sources and which reflects the
relevant benchmark interbank rate used
by market participants for this purpose
when pricing interest rate swaps. The fair
value estimate is subject to a credit risk
adjustment that reflects the credit risk of
the Group and of the counterparty; this is
calculated based on credit spreads derived
from current credit default swap or bond
prices.
Forward pricing: The fair value is
determined using quoted forward
exchange rates at the reporting date and
present value calculations based on high
credit quality yield curves in the respective
currencies.
Discounted cash flows: The valuation
model considers the present value of the
expected future payments, discounted
using a risk‐adjusted discount rate. The
expected payment is determined by
considering the possible scenarios of
forecast revenue and EBITDA, the amount
to be paid under each scenario and the
probability of each scenario.
The fair values of the non‐listed equity
investments have been estimated by
benchmarking against the latest round of
capital raises completed in the financial
year.
Significant unobservable
inputs
Inter‐relationship between
significant unobservable
inputs and fair value
Not applicable.
Not applicable.
Not applicable.
Not applicable.
‐The probability attached
to each scenario
‐ Forecast EBIT growth
(2018: 0‐30%)
‐ Risk adjusted discount
rate (2018: 8.0%)
The estimated fair value
would increase (decrease)
if:
‐ The EBITDA growth is
lower/ (higher)
‐ The risk adjusted discount
rate moves lower (higher).
‐ Recent capital raises
Not applicable.
‐ Internal management
information
71
71
GUD Holdings Limited and Subsidiaries
25. Financial instruments (continued)
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.
There were no transfers between any of the levels of the fair value hierarchy during the year ended 30 June 2019.
Level 3 fair value reconciliation
Changes in fair value of the level 3 financial instruments is summarised below:
Opening balance1
Contingent consideration payable – acquisition of 100% of GEL ANZ
Contingent consideration payable – acquisition of 100% of IMG
Investments acquired
Total gains/losses recognised in the period on OCI
Unwinding of discount
Unrealised fair value loss included in profit and loss
Closing balance
1. Opening balance includes Investments and Contingent consideration
2019
$'000
2,032
‐
(1,625)
(312)
598
‐
‐
693
2018
$'000
5,902
(2,022)
101
(2,021)
‐
72
‐
2,032
72
72
GUD Holdings Limited and Subsidiaries
25.
Financial instruments (continued)
As at 30 June 2019
Carrying value
Current Non‐current
$'000
$'000
898
898
28,850
106,827
756
136,433
137,331
243
4
1,625
1,872
1,734
‐
1,734
‐
‐
1,978
1,978
4,310
‐
1,468
802
2,270
Total
$'000
1,734
898
2,632
28,850
106,827
2,734
138,411
141,641
243
1,472
2,427
4,142
Level 1
$'000
Level 2
$'000
Level 3
$'000
Fair value
Total
$'000
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
898
898
‐
‐
‐
‐
898
243
1,472
‐
1,715
1,734
‐
1,734
‐
‐
‐
‐
1,734
‐
‐
2,427
2,427
Financial assets measured at fair value
Investment
Derivatives ‐ Foreign currency forward contracts
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 a
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
Total financial liabilities
a.
161,534
161,534
163,804
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
161,736
161,736
165,878
‐
‐
2,427
‐
‐
1,715
202
202
2,074
‐
‐
‐
1,734
898
2,632
‐
‐
‐
‐
2,632
243
1,472
2,427
4,142
‐
‐
4,142
73
GUD Holdings Limited and Subsidiaries
25. Financial instruments (continued)
As at 30 June 2018
Carrying value
Current Non‐current
$'000
$'000
3,677
‐
3,677
50,610
96,687
516
147,813
151,490
2
1,625
1,627
‐
10
10
‐
‐
1,284
1,284
1,294
1,080
2,427
3,507
Total
$'000
3,677
10
3,687
50,610
96,687
1,800
149,097
152,784
1,082
4,052
5,134
Level 1
$'000
Level 2
$'000
Level 3
$'000
Fair value
Total
$'000
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
3,677
10
3,687
‐
‐
‐
‐
3,687
1,082
‐
1,082
‐
‐
‐
‐
‐
‐
‐
‐
‐
4,052
4,052
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
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
Total financial liabilities
a.
142,992
142,992
146,499
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
143,064
143,064
148,198
‐
‐
1,082
‐
‐
4,052
72
72
1,699
‐
‐
‐
3,677
10
3,687
‐
‐
‐
‐
3,687
1,082
4,052
5,134
‐
‐
5,134
74
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 120 day
terms,
the Group as a whole is exposed in a material way to several large Automotive parts resellers who are
members of publicly listed companies and a number of significant customers with individual businesses in the
water 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.
75
75
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,
are 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:
2019
Financial liabilities
Trade and other payables
Derivatives
Unsecured bank loans
Contingent consideration
Total financial liabilities
2018
Financial liabilities
Trade and other payables
Derivatives
Unsecured bank loans
Contingent consideration
Total financial liabilities
Carrying
amount
$'000
Contractual
cash flows
$'000
Less than
1 year
$'000
1 to 2
years
$'000
2 to 5
years
$'000
Beyond 5
years
$'000
58,667
1,715
161,571
2,427
224,380
58,667
1,715
166,055
2,427
228,864
58,667
247
7,960
1,625
-
1,468
158,095
802
68,499
160,365
-
-
-
-
-
-
-
-
-
-
Carrying
amount
$'000
Contractual
cash flows
$'000
Less than
1 year
$'000
56,398
1,082
142,992
4,052
204,524
56,398
1,082
149,387
4,875
211,742
56,398
2
2,308
1,625
60,333
1 to 2
years
$'000
-
1,080
2,308
3,250
6,638
2 to 5
years
$'000
Beyond 5
years
$'000
-
-
144,771
-
144,771
-
-
-
-
-
The inflows/(outflows) disclosed in the above table represent the contractual undiscounted cash flows relating to
derivative financial liabilities held for risk management purposes and which are not usually closed out before
contractual maturity. The disclosure shows net cash flow amounts for derivatives that are net cash-settled and gross
cash inflow and outflow amounts for derivatives that have simultaneous gross cash settlement.
As disclosed in Notes 22, the Group has an unsecured bank loan that contains a loan covenant. A future breach of
covenant may require the Group to repay the loan earlier than indicated in the above table. Under the agreement,
the covenant is monitored on a regular basis by the treasury department and regularly reported to management to
ensure compliance with the agreement.
76
76
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 2019, the Group is exposed to $9.7 million (2018: $6.3 million) of US$ denominated net trade liabilities,
$8.8 million of NZ$ net trade receivables (2018: $3.1 million net trade receivables), $2.4 million of Euro net trade
receivables (2018: $1.8 million) and $1.9 million of CNY net trade liabilities (2018: $2.4 million).
Forward foreign exchange contracts
The following table summarises the significant forward foreign currency contracts outstanding as at the reporting
date:
Buy
United States Dollars
Chinese Renminbi
Total forward foreign
exchange contracts
Average
Exchange Rate 1
2018
2019
Foreign Currency
2018
FC'000
2019
FC'000
0.7096
4.7969
0.7995
5.1733
46,550
36,000
33,800
13,500
Contract Value
2019
$'000
65,600
7,505
2018
$'000
42,376
2,610
Fair Value
2019
$'000
2018
$'000
778
(123)
3,541
136
73,105
44,986
655
3,677
1 Represents weighted average hedge exchange rates in the foreign currency contracts
Sensitivity Analysis ‐ foreign exchange AUD/USD
For every 1c decrease in AUD:USD rate, total exposures increase by:
Income statement
Equity
2019
$'000
1,029
(91)
2018
$'000
919
(382)
77
77
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
2019
$'000
(1,327)
‐
2018
$'000
(924)
‐
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
Total floating for fixed contracts
Capital management
Average contracted
Fixed interest rate
2018
%
2019
%
‐
2.91
‐
‐
‐
2.91
Notional principal
amount
2018
$'000
2019
$'000
‐
80,000
‐
80,000
‐
‐
80,000
80,000
2019
$'000
‐
(1,482)
Fair value
2018
$'000
‐
‐
(1,174)
(1,174)
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 2019 and 2018
financial years.
There were no changes to the Group’s approach to capital management during the year.
78
78
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.
Balance at the beginning of the year
Performance share rights vested
Balance at the end of the year
2019
$'000
112,880
-
112,880
2019
Number
86,185,698
300,274
86,485,972
2018
$'000
112,880
-
112,880
2018
Number
85,739,547
446,151
86,185,698
During the year, the Company issued 300,274 shares (2018: 446,151 shares) as a result of the vesting of performance
rights as follows:
300,274 shares issued pursuant to the vesting component of the 2018 performance rights plan;
During the year no shares were bought back on market and cancelled by the Group (2018: 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, hence the $ values above represent historical amounts contributed (if any) on the new
issue of shares, amounts allocated to or from retained earnings, and any amount paid on the repurchase (buy back)
of ordinary shares. Fully paid ordinary shares carry one vote per share and carry the right to dividends.
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.
79
79
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
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
Fair Value Reserve
Balance at the beginning of the year
Fair value adjustments
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
Transfer to retained earnings
Amounts set aside for dividends
Balance at the end of the year
Reserves at the end of the year
2019
$'000
1,443
754
(2,860)
(663)
7,734
1,761
9,495
‐
(598)
(598)
1,208
539
1,747
22,408
(22,408)
‐
‐
9,981
2018
$'000
(1,544)
3,660
(673)
1,443
5,911
1,823
7,734
‐
‐
‐
1,224
(16)
1,208
21,000
(21,000)
22,408
22,408
32,793
80
80
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
Transfer to dividend reserve
Transfer from dividend reserve
Dividends paid
Balance at the end of the year
30. Dividends
Accounting policies
Dividends
2019
$'000
119,649
59,558
‐
22,408
(45,837)
155,778
2018
$'000
61,443
101,845
(22,408)
21,000
(42,231)
119,649
Dividends paid are classified as distributions of profit consistent with the balance sheet classification of the related
debt or equity instruments.
Recognised amounts
2019
Final dividend in respect of the 2018 financial
year
Interim dividend in respect of the 2019 financial
year
Total dividends
2018
Final dividend in respect of the 2017 financial
year
Interim dividend in respect of the 2018 financial
year
Total dividends
Unrecognised amounts
Fully Paid Ordinary Shares
2019
Final dividend in respect of the 2019 financial
year
Cents per
share
Total
amount
$'000 Date of payment Tax rate
Percentage
franked
28
25
53
25
24
24,216
31 August 2018
30%
100%
21,621
1 March 2019
30%
100%
45,837
21,546 1 September 2017
30%
100%
20,685
2 March 2018
30%
100%
42,231
Total
amount
$'000 Date of payment Tax rate
Percentage
franked
Cents per
share
31
26,811
31 August 2019
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% (2018: 30%) franking credits available to shareholders of
GUD Holdings Limited for subsequent financial years
81
2019
$'000
2018
$'000
50,121
44,619
81
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% (2018: 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
2019
$'000
2018
$'000
24,073
21,059
685
(873)
(255)
(1,050)
(1,893)
20,687
20,737
(873)
823
20,687
3,972
(416)
(310)
(490)
(4,092)
19,723
22,664
(416)
(2,525)
19,723
82
82
GUD Holdings Limited and Subsidiaries
31. Current tax (continued)
Income tax expense recognised in other comprehensive income
2019
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
Income tax expense recognised in other comprehensive income
2018
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
Income tax expense recognised in other comprehensive income
Before tax
Tax (expense)
/ benefit
Net of tax
539
1,267
(4,086)
(2,280)
‐
(323)
1,226
903
539
944
(2,860)
(1,377)
Before tax
Tax (expense)
/ benefit
Net of tax
(16)
5,228
(961)
4,251
‐
(1,568)
288
(1,280)
(16)
3,660
(673)
2,971
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.
83
83
GUD Holdings Limited and Subsidiaries
32. Deferred tax (continued)
2019
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
Total deferred tax asset
Set off of tax
Net deferred tax asset
Deferred tax liabilities
Property, plant and equipment
Capitalised product
development
Other intangible assets
Derivative assets
Other
Total deferred tax liabilities
Set off of tax
Net deferred tax
assets/(liabilities)
Opening balance
$'000
Acquisition
through business
combinations
$'000
Recognised
in Profit or Loss
$'000
Recognised
in Equity
$'000
Closing balance
$'000
187
‐
‐
‐
350
15
‐
‐
‐
‐
552
‐
‐
‐
‐
‐
‐
(69)
356
(140)
(36)
(764)
(25)
(819)
(211)
‐
(795)
(2,502)
78
‐
2
(938)
(61)
(919)
‐
‐
‐
‐
‐
‐
1,005
‐
‐
‐
1,005
‐
‐
‐
100
‐
100
3,607
‐
314
219
2,358
866
324
241
2,245
470
10,644
(2,717)
7,927
37
15
1,398
1,107
160
2,717
(2,717)
7,927
3,725
356
174
183
1,944
856
510
30
2,245
(324)
9,699
(1,898)
7,801
115
15
1,400
269
99
1,898
(1,898)
7,801
84
GUD Holdings Limited and Subsidiaries
32. Deferred tax (continued)
2018
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
Total deferred tax asset
Set off of tax
Net deferred tax asset
Deferred tax liabilities
Property, plant and equipment
Capitalised product
development
Other intangible assets
Derivative assets
Other
Total deferred tax liabilities
Set off of tax
Net deferred tax
assets/(liabilities)
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
Recognised
in Profit or Loss from
Opening balance
$'000
Acquisition
through business
combinations
$'000
Continuing
operations
$'000
Discontinuing
operations
$'000
Recognised
in Equity
$'000
580
‐
‐
‐
‐
‐
‐
‐
‐
‐
(860)
(12)
(49)
(4)
947
(98)
(378)
200
1,117
181
3
‐
‐
(1)
51
30
‐
‐
‐
(75)
580
1,044
8
‐
‐
‐
‐
‐
‐
(18)
‐
‐
‐
(18)
(110)
‐
‐
37
‐
‐
‐
‐
‐
‐
(855)
(153)
(174)
3
(1,289)
0
(2)
‐
‐
‐
‐
1,262
‐
(2)
1,262
Closing balance
$'000
3,607
‐
314
219
2,358
866
324
241
2,245
470
10,644
(2,717)
7,927
15
1,398
1,107
160
2,717
(2,717)
‐
7,927
85
The disposals of Oates have given rise to estimated net capital gain of $48.998 million. These gains have been offset by capital losses derived in prior years.
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 as 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.
86
86
GUD Holdings Limited and Subsidiaries
33. Investments in subsidiaries (continued)
33a Acquisitions
Acquisition of Disc Brakes Australia
On 2 July 2018 the Company acquired 100% of the shares in Disc Brakes Australia Pty Ltd (“DBA”). The total
consideration for DBA was $22.128 million.
The Group has focussed on improving DBA’s market presence by expanding and refining its product offering in the
automotive aftermarket segment.
For the financial year ended 30 June 2019, DBA contributed $ 24.734 million of revenue and $ 4.581 million of EBIT
to the Group’s results.
Acquisition‐related costs
During the financial year ended 30 June 2019, the Company incurred approximately $ 0.052 million of acquisition
related costs including legal fees, due diligence and other advisory fees. This amount has been included in
administrative expenses.
Fair values of acquired assets and liabilities
The following table summarises the recognised amounts of assets acquired, and liabilities assumed at the date of
acquisition with subsequent adjustment for identified intangible assets arising from the purchase price allocation
exercise:
Cash and cash equivalents
Trade and other receivables
Inventories
Property, plant and equipment
Brand names
Intellectual property
Leased assets
Deferred tax assets
Trade and other payables
Income tax payable
Finance lease
Provisions
Total identifiable net assets acquired
2 July 2018
$'000
944
3,723
6,958
303
‐
‐
163
552
(2,817)
(660)
(69)
(621)
8,476
Fair value
adjustments
$'000
‐
‐
‐
‐
2,664
1,457
‐
‐
‐
‐
‐
(73)
4,048
30 June 2019
$'000
944
3,723
6,958
303
2,664
1,457
163
552
(2,817)
(660)
(69)
(694)
12,524
Goodwill
Goodwill arising from the acquisition has been recognised as follows:
Total consideration
Less Fair value of identifiable net assets
Goodwill
$'000
22,128
12,524
9,604
The goodwill is largely attributable to DBA’s knowledge in brake rotor development and manufacturing, and the
anticipated synergies available from incorporating the DBA business into the Group’s existing portfolio of
Automotive products.
Acquisition of AA Gaskets
On 1 December 2017 subsidiaries of the Company acquired the business and net assets of AA Gaskets Pty Ltd and
its New Zealand operation (“AAG Group”). The total consideration for AA Group was $21.013 million.
Fair values of acquired assets and liabilities
The following table summarises the recognised amounts of assets acquired, and liabilities assumed at the date of
acquisition with subsequent adjustment for identified intangible assets arising from the purchase price allocation
exercise:
87
87
GUD Holdings Limited and Subsidiaries
33. Investments in subsidiaries (continued)
33a Acquisitions (continued)
selbaviecer rehto dna edarT
seirotnevnI
tnempiuqe dna tnalp ,ytreporP
seman dnarB
stessa xat derrefeD
selbayap rehto dna edarT
snoisivorP
deriuqca stessa ten elbaifitnedi latoT
1 December
2017
$'000
537,3
592,3
704
-
085
)763(
)907(
149,6
Fair value
adjustments
$'000
-
-
-
979,8
-
-
-
979,8
31 December
2018
$'000
537,3
592,3
704
979,8
085
)763(
)907(
029,51
Goodwill
Goodwill has been adjusted because of the identified intangible assets as follows:
Total estimated consideration
Less Fair value of identifiable net assets
lliwdooG
$'000
21,013
15,920
390,5
As per the requirements of AASB 3 Business Combinations the fair value adjustments have been reflected in the
balance sheet as at 30 June 2018.
33b Disposals
Disposal of Oates
On 2 January 2018, the Company disposed of the shares of its subsidiary, E D Oates Pty Ltd (“Oates”) to Freudenberg
Household Products Pty Ltd (“Freudenberg”). The total consideration for the Oates sale was $80 million plus net
working capital adjustments.
For the year ended 30 June 2018, Oates contributed $36.061 million of revenue and $ 53.257 million of PBT gain to
the Group’s results, comprising $4.706 million PBT before significant items, $51.536 million of gain on sale, $2.210
million of transaction costs and $0.775 million of restructuring costs.
Consideration
Consideration is made up of $80 million plus a net cash adjustment of $ 3.771 million.
Consideration received
Total consideration of 83.771 million was received as follows:
Proceeds of $80 million was received on 2 January 2018; and
Net cash adjustment of $3.771 million was received on 8 February 2018.
Disposal-related costs
During the year ended 30 June 2018, the Company incurred approximately $2.210 million of disposal related costs
for Oates, and $232,000 for Dexion, including legal fees, due diligence and other advisory fees.
88
88
GUD Holdings Limited and Subsidiaries
33. Investments in subsidiaries (continued)
33b Disposals (continued)
Results of discontinued operation
Revenue
Cost of goods sold
Gross Profit
Other income
Transaction costs
Gain/ (loss) on sale of subsidiary
Restructuring
Expenses
Results from operating activities
Net finance expense
Share of profit of equity accounted investees
Profit before tax
Income tax expense
Profit / (loss) from discontinued operations, net
of income tax
Cash flows from (used in) discontinued operation
For the year ended
30 June 2019
For the year ended
30 June 2018
$'000
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
$'000
36,060
(21,926)
14,134
18
(2,442)
51,536
(930)
(9,511)
52,805
(27)
52,778
(1,406)
51,372
Net cash from operating activities
Net cash used in investing activities
Net cash used in financing activities
Net cash flows for the period
For the year ended
30 June 2019
For the year ended
30 June 2018
$'000
‐
‐
‐
‐
$'000
2,742
(52)
(961)
1,729
89
89
GUD Holdings Limited and Subsidiaries
33. Investments in subsidiaries (continued)
33c Shareholdings
Country of incorporation
% ownership interest
2018
2019
Parent entity
GUD Holdings Limited (1)
Subsidiaries
ACN 006 864 848 Pty Ltd (formerly Appliance and
Homewares International Pty Ltd) (2) (3) (4)
AA Gaskets Pty Ltd(2) (3)
Brown & Watson International Pty Ltd (2) (3)
Davey Water Products Pty Ltd (2) (3)
GUD (HK) Limited (4)
Griffiths Equipment Limited
Griffiths Equipment Pty Ltd (2) (3)
Ryco Group Pty Ltd (2) (3)
GUD Europe Limited
GUD NZ Holdings Limited
Innovative Mechatronics Group Pty Ltd (2) (3)
ACN 004 930 385 Pty Ltd (formerly Lock Focus Pty Ltd) (2)
(3) (4)
Davey Water Products S.A.S. (formerly Monarch Pool
Systems Europe S.A.S.)
Davey Water Products S.L. (formerly Monarch Pool
Systems Iberica S.L.)
Narva New Zealand Limited
Wesfil Australia Pty Ltd (2) (3)
Disc Brakes Australia Pty Ltd(2) (3)
Australia
Australia
Australia
Australia
Australia
Hong Kong
New Zealand
Australia
Australia
United Kingdom
New Zealand
Australia
Australia
France
Spain
New Zealand
Australia
Australia
‐
100
100
100
‐
100
100
100
100
100
100
‐
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
‐
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.
The entities have been deregistered or dissolved.
(4)
90
90
GUD Holdings Limited and Subsidiaries
33. Investments in subsidiaries (continued)
33d 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
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
91
2019
$'000
405,449
(6,012)
(320,117)
79,320
(19,878)
59,442
‐
59,442
86,220
(45,837)
99,825
27,478
97,176
5,676
95,142
2018
$'000
368,445
(5,909)
(297,222)
65,314
(18,163)
47,151
51,372
98,523
72,166
(19,830)
‐
(22,408)
(42,231)
86,220
50,265
89,075
7,708
76,075
225,472
223,123
34,757
12,246
8,695
101,680
124,022
281,400
506,872
53,704
37
8,896
11,969
1,861
76,467
141,700
3,979
1,281
146,960
223,427
283,445
112,880
70,740
99,825
283,445
33,762
10,099
7,211
102,020
110,243
263,335
486,458
53,887
72
15,688
11,365
4,052
85,064
127,400
1,087
1,878
130,365
215,429
271,029
112,880
71,929
86,220
271,029
91
GUD Holdings Limited and Subsidiaries
Other Notes
34. Superannuation commitments
The Group contributes to several 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 which have been settled on time.
35. 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:
J.P. Ling (Former Managing Director – through to 30 September 2018)
M.G. Smith (Appointed Chairman on 15 November 2017), Non-executive)
A. L. Templeman-Jones (Non-executive)
G.A. Billings (Non-executive)
D.D. Robinson (Non-executive)
G. Whickman (Managing Director – Appointed Managing Director on 1 October 2018)
M.A. Fraser (Chief Financial Officer)
G. Nicholls (Chief Executive – Ryco Group Pty Ltd – Resigned 6 May 2019)
R. Pattison (Chief Executive – GUD Automotive Division)
D. Worley (Chief Executive – Davey Water Products Pty Ltd)
T. Cooper (Managing Director – Wesfil Australia Pty Ltd)
G. Davies (Chief Executive – Brown and Watson International Pty Ltd)
Key management personnel compensation policy
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
Total key management personal compensation
2019
$
5,128,216
60,571
264,684
737,556
6,191,027
2018
$
7,219,471
38,730
257,844
825,903
8,341,948
Compensation of the Group’s key management personnel includes salaries, short term and long-term incentives,
and contributions to post-employment defined contribution superannuation plans.
Performance rights arrangements
Long Term Incentive bonuses are provided as performance rights, granted at the commencement of the relevant
three-year performance measurement period, which will convert to an equivalent number of GUD shares if the
performance hurdle is achieved over the relevant three-year performance measurement period. No amount is
payable for the issue of performance rights, or for the shares received upon vesting of those performance rights.
The grant-date fair value of performance rights granted to employees is generally recognised as an expense, with a
corresponding increase in equity, over the vesting period of the awards. The amount recognised as an expense is
adjusted to reflect the number of awards for which the related service and non-market performance conditions are
expected to be met, such that the amount ultimately recognised is based on the number of awards that meet the
related service and non-market performance conditions at the vesting date. The valuation of rights was completed
by an independent consultant using a hybrid trinomial option pricing model with a relative TSR hurdle.
92
92
GUD Holdings Limited and Subsidiaries
35. Key management personnel (continued)
The inputs used in the measurement of the fair values at grant date of the equity‐settled share‐based payment plans
were as follows.
Fair value at grant date
Share price at grant date
Performance rights programme
Managing Director
Senior Executives
2019
5.92
12.64
2018
5.68
12.00
2019
6.69
14.15
2018
8.89
12.18
Expected volatility (weighted average)
28.00%
28.00%
28.00%
28.00%
Expected dividends
Risk free interest rate (based on government
bonds)
5.00%
2.01%
6.00%
1.94%
5.00%
2.08%
6.00%
1.94%
Expected volatility has been based on an evaluation of the historical volatility of the Company’s share price,
particularly over the historical period commensurate with the expected term. The expected term of the instruments
has been based on historical experience and general option holder behaviour.
The number of performance rights outstanding as at 30 June 2019 under the performance rights programme were
as follows:
Expense recognised in profit or loss
For details of the related employee benefit expenses, see Note 3.
36. Related parties
Directors
Details of Directors' compensation is disclosed in Note 35.
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 2019, key management personnel held directly, indirectly or beneficially 385,842 ordinary shares (2018:
596,366) in the Group. Performance rights issued under the 2019 plan will partially vest and, as a result, key
management personnel will be issued an additional 101,175 (2018: 132,178) shares.
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 33b.
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 $ 448,444 excluding GST (2018: $432,930 excluding GST). The Group's policy is that related
party lease arrangements are undertaken with commercial terms and conditions.
93
93
GUD Holdings Limited and Subsidiaries
37. Parent entity disclosures
As at and for the financial year ending 30 June 2019 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
2019
$'000
(3,949)
‐
(3,949)
815
309,241
27,371
170,394
138,847
112,880
17,350
8,617
138,847
2018
$'000
55,301
‐
55,301
51,888
337,605
22,043
150,573
187,032
112,880
44,728
29,424
187,032
The profit for the prior year includes transaction costs and gains on disposal of Oates. The results of these disposals
in the parent entity profit for the year ended 30 June 2018 differ to the consolidated income statement as
investments were impaired in previous periods in the parent entity.
GUD Holdings Limited
Parent entity contingencies
Contingent liabilities
2019
$'000
2018
$'000
53,033
64,856
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.
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 2019.
38. Contingent liabilities
The Group had no material contingent liabilities at 30 June 2019 (2018: Nil).
39. Subsequent events
Other than the final dividend for the year being declared, no matters or circumstances have arisen since the end of
the financial period that have significantly affected or may significantly affect the operating results or state of affairs
of the Group.
94
94
GUD Holdings Limited and Subsidiaries
Directors’ Declaration
In the opinion of the Directors of GUD Holdings Limited (the “Company”):
(a) the consolidated financial statements and notes and the remuneration disclosures that are contained in the
Remuneration Report included in the Directors’ report are in accordance with the Corporations Act 2001,
including:
1. giving a true and fair view of the financial position of the Group as at 30 June 2019 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 2019.
Signed in accordance with a resolution of the Directors pursuant to section 295(5) of the Corporations Act 2001.
On behalf of the Directors
M G Smith
Chairman
G Whickman
Managing Director
Melbourne, 26 July 2019
95
95
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 for
the financial year ended 30 June 2019 there have been:
i.
ii.
no contraventions of the auditor independence requirements as set out in the
Corporations Act 2001 in relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the audit.
KPMG
Chris Sargent
Partner
26 July 2019
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Professional Standards Legislation.
96
96
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 2019 and of its financial
performance for the year ended on
that date; and
complying with Australian Accounting
Standards and the Corporations
Regulations 2001.
Basis for opinion
The Financial Report comprises:
Consolidated Balance Sheet as at 30 June 2019
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 including a summary of significant accounting
policies
Directors' Declaration
The Group consists of the GUD Holdings Limited (the
Company) and the entities it controlled at the year-end or
from time to time during the financial year.
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.
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Key Audit Matters
The Key Audit Matters we identified
are:
• Recoverability of goodwill and other
intangible assets
• Valuation of inventory
Key Audit Matters are those matters that, in our
professional judgement, 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 ($125.49 million) and other intangible assets ($124.22 million)
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 Units (CGUs) or individual
assets (as applicable).
The recoverability of these assets is a
key audit matter due to the inherent
complexity associated with auditing the
forward
assumptions
incorporated in the Group’s “value in
use” (VIU) models.
looking
The Group’s VIU models are internally
developed, and use a range of internal
and external data as inputs. Forward-
looking 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 or
asset 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 models
against accounting standard 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
applied increased scepticism to forecasts in the
areas where previous forecasts were not achieved;
and
assessing the reasonableness of the discount rates
by considering comparable market information and
evaluating the economic assumptions relating to
cost of debt and cost of equity. We also evaluated
the scope, competence and objectivity 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
or inconsistency in application. We also assessed the
related impairment breakeven points for these
assumptions in order to identify those assets at higher
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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.
Valuation of inventory ($108.95 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 2019, the Group held
inventory with a net carrying value of
$108.95 million.
The audit of inventory valuation is a key
audit matter due to the extent of
judgement involved in assessing 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 business
units within the Group against the requirements of
accounting standards;
understanding processes and testing key 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, by comparing
inventory listings against historical sales information to
identify any additional at-risk items;
comparing individual inventory carrying values against
current selling prices to identify individual products at risk
of being recorded in excess of their net realisable value;
and
challenging the Group's judgements relating to the
provision for stock obsolescence (including slow moving
or excess stock), by comparing current inventory 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, the Group’s business
strategy with respect to maintaining a wide range of
products and from further inquiries with key personnel.
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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.
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 and Company's ability to continue as a going concern and whether the use of the
going concern basis of accounting is appropriate. 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 and Company 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 the 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_responsibilities/ar1.pdf.
This description forms part of our Auditor’s Report.
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Report on the Remuneration Report
Opinion
Directors’ responsibilities
In our opinion, the Remuneration
Report of GUD Holdings Limited for
the year ended 30 June 2019
complies with Section 300A of the
Corporations Act 2001.
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
Directors’ Report for the year ended 30 June 2019.
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
26 July 2019
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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 16 August 2019
Shares held
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
No. of Shareholders
3,752
5,126
1,142
664
21
%
35.05
47.88
10.67
6.20
0.20
Shares
1,906,086
12,952,208
8,189,125
13,201,069
50,452,686
There are 441 shareholders holding less than a marketable parcel of shares. A marketable parcel is $500.00.
Twenty Largest Shareholders as at 16 August 2019
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Pty Limited
Citicorp Nominees Pty Limited
National Nominees Limited
Argo Investments Limited
BNP Paribas Nominees Pty Ltd
HSBC Custody Nominees (Australia) Limited‐GSCO ECA
Woodross Nominees Pty Ltd
BNP Paribas Noms Pty Ltd
National Nominees Limited
Warbont Nominees Pty Ltd
Citicorp Nominees Pty Limited
Australian Executor Trustees Limited
UBS Nominees Pty Ltd
HSBC Custody Nominees (Australia) Limited
HSBC Custody Nominees (Australia) Limited
Tabudan Pty Limited
Merrill Lynch (Australia) Nominees Pty Limited
Kerway Investments Pty Ltd
Kulandra Pty Limited
No. of Shares
23,376,738
11,256,648
5,169,244
3,815,479
2,066,508
678,580
615,252
569,849
548,903
364,848
323,241
278,678
238,332
171,771
165,416
157,748
150,000
136,455
136,000
132,749
%
2.20
14.94
9.45
15.23
58.18
%
26.96
12.98
5.96
4.40
2.38
0.78
0.71
0.66
0.63
0.42
0.37
0.32
0.27
0.20
0.19
0.18
0.17
0.16
0.16
0.15
Total Twenty Largest Shareholders of Ordinary Fully Paid Shares
Total Remaining Holders Balance
50,352,439
36,348,735
58.08
41.92
Substantial Shareholders of GUD Holdings Limited
As at 16 August 2019, the current notices of substantial shareholders were:
Marathon Asset Management LLP
Vanguard Group
No. of Shares
7,768,031
4,389,624
%
8.98
5.07
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Shareholder Services
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.
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
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