ANNUAL
REPORT
2020
GUD HOLDINGS LIMITED
ABN 99 004 400 891
YEAR ENDED 30 JUNE 2020
8582_GUD_Holdings_Annual Report_2020_Mono.indd 1
8582_GUD_Holdings_Annual Report_2020_Mono.indd 1
9/9/20 1:25 pm
9/9/20 1:25 pm
Table of Contents
Directors’ Report…………………………………………………………………………………………………………………………………………..1
Operating and Financial Review……………………………………..……………………………………………………………………………….7
Sustainability Review…………………………………………………………………………………………………………………………….………………….…18
Remuneration Report………………………………………………………………………………………………………………………………………………….31
Consolidated Financial Statements………………………………………………………………………………………………………………………………43
Additional Shareholder Information…………………………………………………………………………………………………………………………..108
8582_GUD_Holdings_Annual Report_2020_Mono.indd 2
8582_GUD_Holdings_Annual Report_2020_Mono.indd 2
9/9/20 11:59 am
9/9/20 11:59 am
Directors’ Report
The Directors of GUD Holdings Limited (the Company) present their report on the consolidated entity, being the
Company and its subsidiaries, for the year ended 30 June 2020.
Directors
The names of the Directors who held office during the financial year and details of their qualifications, experience
and special responsibilities are as follows:
M G Smith*
Dip. Business (Marketing) FAMI CPM FIML FAICD
Appointed Non‐Executive Director on 26 May 2009, and Chairman on 15 November 2017
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
September 2017), 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).
Mr Smith was Managing Director of Cadbury Schweppes Australia and New Zealand (2003 to 2007) and a member
of the Asia Pacific Regional Board. Over a 16‐year career with the Cadbury Schweppes Group, he held senior
management positions in Australia, the UK and North America. Prior to joining Cadbury Schweppes, Mr Smith's
career included senior management roles with Unilever and Uncle Toby's.
G A Billings*
BComm FCA MAICD
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
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
that company in September 2014, a Non‐Executive Director and Chairman of Azure Healthcare Limited (appointed
21 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 he is Chair of the Audit Committee.
D D Robinson*
BSc MSc
Appointed Non‐Executive Director on 20 December 2011, and Chair of the Remuneration, People and Culture
Committee
Mr Robinson spent the past 22 years, prior to joining the Board, with global automotive parts, general industrial and
consumer products manufacturer and marketing company Robert Bosch GmbH.
In that time, he has worked in the USA, Germany and Australia and had responsibility for sales, marketing,
engineering, manufacturing, accounting and personnel. He was President of Robert Bosch Australia and Robert
Bosch New Zealand.
A L Templeman‐Jones*
BComm MRM EMBA CA FAICD
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
2018) and a Non‐Executive Director of Worley Parsons Limited (appointed 1 November 2017). Anne previously
served as a Non‐Executive Director of The Citadel Group Limited (retired May 2020), HT & E Limited (formerly APN
News & 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).
Ms Templeman‐Jones has considerable executive experience in institutional and commercial banking, wealth
management and insurance, having previously held senior executive roles within Westpac and ANZ.
J A Douglas*
BSc LLB(Hons) LLM MBA GAICD
Appointed Non‐Executive Director on 1 March 2020.
Ms Douglas is currently a Non‐Executive Director of Hansen Technologies Limited (appointed 15 February 2017), a
Non‐Executive Director of Opticomm Limited (appointed 21 August 2017) where she is Chair of the Remuneration
Committee and a Non‐Executive Director of Essential Energy (appointed 15 March 2018) where she is Chair of the
Regulatory Committee. She is also a Non‐Executive Director of St Kilda Football Club and Peter MacCallum Cancer
Foundation and a former Non‐Executive Director of Telstra SNP Monitoring (retired 2016), Family Life Inc (retired
2010), Pacific Access Superannuation Fund (retired 1999) and Kilvington Girls Grammar School (retired 1994).
Ms Douglas has considerable experience as an executive in the communications and technology sectors having held
a diverse range of executive roles at Telstra and Sensis from 1997 to 2016. Prior to this, Ms Douglas was a lawyer
with Mallesons and Allens where she specialised in intellectual property, communications and media law.
1
8582_GUD_Holdings_Annual Report_2020_Mono.indd 1
8582_GUD_Holdings_Annual Report_2020_Mono.indd 1
9/9/20 11:59 am
9/9/20 11:59 am
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.
* 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 BComm (Hons) MBA FGIA MAICD
Mr Tyler is a fellow 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 34 years.
Directors’ Attendances at Meetings
The Board held nine scheduled meetings during the year.
In addition, ad hoc meetings are called to consider specific or urgent matters. In FY20 this included seven ad hoc
meetings in relation to COVID 19, which were attended by all Directors.
Board
Audit Committee
Risk & Compliance
Committee
Nominations
Committee
Remuneration
Committee
Held
Attended
Held
Attended
Held
Attended
Held
Attended
Held
Attended
9
9
9
9
3
9
9
9
9
9
3
9
4
4
4
4
1
4
4
4
4
1
4
4
4
4
2
4
4
4
4
2
3
3
3
3
1
3
3
3
3
1
7
7
7
7
2
7
7
7
7
2
Directors
M G Smith
G A Billings
D D Robinson
A L Templeman‐
Jones
J A Douglas1
G Whickman
1 Ms Douglas joined the Board on 1 March 2020
It is the Board’s practice that the Non‐Executive Directors meet regularly without the presence of Management.
8582_GUD_Holdings_Annual Report_2020_Mono.indd 2
8582_GUD_Holdings_Annual Report_2020_Mono.indd 2
9/9/20 11:59 am
9/9/20 11:59 am
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
M G Smith
G A Billings1
D D Robinson1
A L Templeman‐Jones
J A Douglas2
G. Whickman
Own name
Private
company / trust
Total 30 June 2020 Total 30 June 2019
Shares held beneficially
‐
‐
‐
540
‐
27,000
66,000
11,250
13,000
7,102
‐
‐
66,000
11,250
13,000
7,642
‐
27,000
58,000
11,250
13,000
6,442
‐
2,000
1 Messrs Billings and Robinson are participants in the Non‐Executive Share Plan, and currently hold 656 and 1,664 Share Rights respectively under that plan, which will convert
into Restricted Shares six months after grant in September 2020 and December 2020
2 Ms Douglas joined the Board on 1 March 2020
Corporate Governance Statement
The Corporate Governance Statement of the Directors is separately lodged with the 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 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, and France.
Other than as referred herein and in the Operating and Financial Review set out on pages 7‐17, 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.
COVID 19 response
From late February 2020 until 30 June, the Board held seven ad hoc meetings which were attended by Management.
The purpose of these meetings were to inform, update and seek guidance and direction from Board members in
relation to COVID‐19 response strategies being adopted and implemented across the GUD Group with three
particular themes, those of people health, operational health and financial health. These responses are more
particularly outlined in the Operating and Financial Review.
Share Capital
At 30 June 2020, there were 86,701,174 (2019: 86,485,972) ordinary shares on issue.
The increase in shares on issue resulted from the vesting in July 2019 of 215,202 performance rights granted under
the GUD Holdings 2019 Long Term Incentive Equity Plan.
8582_GUD_Holdings_Annual Report_2020_Mono.indd 3
8582_GUD_Holdings_Annual Report_2020_Mono.indd 3
9/9/20 11:59 am
9/9/20 11:59 am
3
Directors’ Report
Dividends
During and since the end of the financial year, the following dividends have been paid or declared.
A final ordinary dividend of 31 cents per share in respect of the year ended 30 June 2019 was declared on
26 July 2019 and paid on 30 August 2019, amounting to $26,877,364. This dividend was fully franked.
An interim ordinary dividend of 25 cents per share in relation to the half year ended 31 December 2019 was
declared on 31 January 2020 and paid on 28 February 2020, amounting to $ 21,675,293. This dividend was
fully franked.
A final ordinary dividend of 12 cents per share in respect of the year ended 30 June 2020 was determined
on 28 July 2020 and is payable on 28 August 2020 to shareholders registered on 14 August 2020. This
dividend will be fully franked. Shares will trade ex‐dividend on 13 August 2020. The GUD Dividend
Reinvestment Plan will be available 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
102 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 408,451 Performance Rights were granted to executives under the GUD Holdings 2022
Long Term Incentive Equity Plan. This included 58,686 Performance Rights granted to the Managing Director in
October 2019, after receiving approval of shareholders at the 2019 Annual General Meeting.
As a result of failing to meet TSR targets, 206,792 performance rights granted in July 2017 lapsed in relation to the
GUD Holdings 2020 Long Term Incentive Equity Plan.
In addition, as a result of executives departing, or scaling back their working hours with, the Group during the year,
a total of 62,092 Performance Rights were determined by the Board to have lapsed.
Details of the Performance Rights outstanding in aggregate and granted to key management personnel, in particular,
are included in the Remuneration Report, which forms part of this Directors’ Report.
Except as above, and noted below, 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.
During the year, the Company established a Non‐Executive Director Equity Plan, pursuant to which non‐executive
directors may sacrifice some of the fees they were due to receive into Share Rights which six months later vest as
Restricted Shares (subject to restrictions on dealing) for a period of time nominated by the non‐executive director
at the time of making application). Shares to satisfy the vesting will be acquired on market. As at 30 June 2020, there
were 2,320 Share Rights on issue.
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
8582_GUD_Holdings_Annual Report_2020_Mono.indd 4
8582_GUD_Holdings_Annual Report_2020_Mono.indd 4
9/9/20 11:59 am
9/9/20 11:59 am
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 33 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
On 28 July 2020, the Board of Directors declared a fully franked interim dividend in respect of the 2020 financial year
of 12 cents per share. Record date is 14 August 2020 and the dividend will be paid on 28 August 2020.
On 1 July 2020, the Company secured additional banking facilities for $22.5 million. The maturity of this facility is 1
July 2021.
Other than the matters discussed above, there has not arisen in the interval between the end of the financial year
and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of
the directors of the Company, to affect significantly the operations of the Group, the results of those operations,
or the state of affairs of the Group, in future financial years.
8582_GUD_Holdings_Annual Report_2020_Mono.indd 5
8582_GUD_Holdings_Annual Report_2020_Mono.indd 5
9/9/20 11:59 am
9/9/20 11:59 am
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
Dated at Melbourne, 28 July 2020
G
Managing
Whickman
Director
8582_GUD_Holdings_Annual Report_2020_Mono.indd 6
8582_GUD_Holdings_Annual Report_2020_Mono.indd 6
9/9/20 11:59 am
9/9/20 11:59 am
6
Operating and Financial Review
In FY20, the year should be viewed in two parts. GUD’s performance was tracking to our previously announced
guidance throughout much of the year. However, it was clearly impacted by the well‐documented and challenging
COVID‐19 realities as we approached Q4. As sobering as these impacts were felt around Australia and the world, we
are thankful to be able to confirm actions taken to date have resulted in a relatively respectable and solid financial
result underpinned by careful and deliberate measures to protect the health of our people, operations and financial
stability.
The Management were clear from the outset of FY20 that the year was one of consolidation. We needed to manage
significant currency shifts, absorb domestic cost inflation, bed down the incremental costs in securing multi‐year
supply agreements, push hard on supplier cost reductions and deliver appropriate pricing increases. The team
identified and secured a ‘steady state’ on the differing financial inputs whilst architecting the refreshed Business
Unit strategies for future growth and keeping up the acquisition dialogue.
This approach was well advanced and then the COVID‐19 Pandemic hit the radar screens. GUD reacted early, and in
late January, the executive team started planning for both supply‐side, and then demand‐side impacts to the
business. GUD were, and remain, determined to act as a good partner to our suppliers, employees and customers
throughout this period. The leadership team and Board viewed the COVID‐19 impacts to be temporary in nature
with no significant longer‐term structural shift in the industries we serve. We will address a number of these COVID‐
19 related impacts and mitigating actions in detail in the next section of this report, where ‘controlling the
controllables’ was a clear mantra amongst the Group.
It should be noted we viewed the developing and ongoing COVID‐19 situation with a lens of both ‘defence’ and
‘offence’. Meaning that we put in place mitigation plans to ensure we could ‘weather the storm’, but also played
‘offence’ and actively managed opportunities to drive product development efforts, increase product cataloguing,
drive the operational fitness projects, refine our business unit strategies with a short to medium term focus and
reassess any acquisition targets that might re‐emerge.
GUD have been vigilant in ensuring we maintain a safe working environment. This was made increasingly more
difficult with the overlay of so many ‘off standard’ working practices brought about by the COVID‐19 situation. We
increased the level of attention, engagement and communication across all businesses and were relentless in
examining unforeseen hazards and risks. Consequently, the full year safety metrics improved over last year, and
importantly did not deteriorate through the 2nd half of the year. Encouragingly, the GUD LTIFR rate is substantially
less than half of the Safe Work Australia industry benchmark rate. GUD will not ‘sit still’ and has further plans for
ongoing health and safety enhancements, with details outlined in our Sustainability Review.
Revenue for the year increased 1% to $438 million despite second half COVID‐19 volume impacts.
Reported EBIT decreased 15% to $74.3 million reflecting $6.5 million of significant items of which $4.9 million were
non‐cash, and principally relate to implementing Davey’s Product Cycle Plan and organisational restructuring plan,
the impairment of the Monarch brand, as well as restructuring costs associated with AA Gaskets ceasing
manufacturing and relocating to the Ryco facility in Altona North.
Pre AASB 16 Underlying (excluding significant items) EBIT of $80.1 million was down 10% from the $88.9 million in
the prior corresponding period. The result principally reflects lower end‐user demand from partial or total lock
downs coupled with reseller destocking which resulted in negative operating leverage. Cost savings from
government COVID‐19 subsidies and internal cash conservation efforts were more than offset by higher operating
costs under COVID‐19, H2 factory load utilisation, and FX impacts given a significantly weaker AUD in much of second
half of the year, as well as appropriate group provisions considering the economic climate.
On a like‐for‐like basis, excluding AASB 16 impacts, underlying1 NPAT was down 16% to $50.9 million. Adjusting for
a one‐off tax provision release of $2.5 million in the prior corresponding period and $0.5 million in the current period,
underlying NPAT was down 14%. In addition, the current year’s result includes an interest expense of $1.1 million
reflecting the final earn‐out provision in relation to the acquisition of IM Group in July 2017.
Consequently, the reported basic earnings per share on a pre‐AASB 16 basis of 53cps was down from the prior year’s
result of 69 cps.
8582_GUD_Holdings_Annual Report_2020_Mono.indd 7
8582_GUD_Holdings_Annual Report_2020_Mono.indd 7
9/9/20 11:59 am
9/9/20 11:59 am
7
Operating and Financial Review
The final dividend payment to our shareholders is 12 cps bring the full year total to 37 cps, or 67% of underlying
NPAT.
Our balance sheet remained strong with gearing, being net debt against net debt and equity, of approximately 34%,
and robust interest cover. Pre‐tax cash conversion of 97% was achieved for the period which was well ahead of
internal targets. Our banking lines were renewed in January 2020 with staggered maturities over one, four and eight
years. At the reporting date, available unused banking lines were in excess of $57 million and further short‐term
facilities of $22.5 million were secured commencing July 2020. Hence, the Company is well placed to support both
organic growth and further bolt‐on acquisitions.
The team at GUD are working on three areas of strategic attention, being the Core, Growth and Acquisition
workstreams. As mentioned, 2019‐20 was a year of consolidation, to ensure we started to leverage the scale of the
GUD businesses, drive operational fitness actions, solidify our customer relationships and embark on the next stage
of planning for organic and acquisitive growth in the coming years.
At the time of writing, the business environment remains fluid with conflicting comments as to what the short‐term
future holds. GUD’s efforts to improve operational fitness, outlined in our 2018‐2019 review, certainly gave us a
head start before the emergence of COVID‐19. We have been working on the philosophy of ‘sovereignty with
strength’, leveraging the scale of our operations without threatening the decentralised, and very accountable
existing business unit culture. This gave rise to projects such as real estate footprint review, supplier cost reductions
and business restructuring in the first half.
In the short term, we expect to operate within a tough general economic environment. Naturally this might impact
parts of our businesses with products of a more discretionary nature. It is hard to accurately forecast any further
deterioration to the miles travelled due to social distancing and mobility restrictions. However, in the automotive
aftermarket, we note potential tailwinds in terms of ‘miles travelled’ with public transport and ridesharing usage
dropping and domestic tourism increasing. We recognise in general consumers were already showing signs of more
cautious, or frugal spending and we expect that to become more prevalent in the short term. This ’frugality’ could
also be viewed as a further tailwind, as the aftermarket will likely encounter higher used car volumes, increasing DIY
activity, increasing interest in repair and replacement of parts and potential migration from OEM service lanes to
independent repairers to stretch their dollars further.
New vehicle sales continued to drop in 2019‐20. Whilst this has had a moderate negative impact on some of our
businesses, the bigger positive impact will mean the natural scrappage rate will drop and increase the average fleet
age of the car parc, therefore, increasing the 15 million plus car parc of 5‐year‐old plus vehicles in Australia.
GUD’s position on the long‐term future electric and autonomous vehicles remains unchanged. GUD modelling
concludes the addressable market in 2030 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 age category. In
2019‐20, GUD generated just above 40% of its automotive revenue from products specific to ICE vehicles.
GUD’s view on our water business remains unchanged. The impacts of bushfires and longstanding droughts certainly
were felt across many geographies and sectors in Australia throughout the year. Davey moved quickly to support
the rural economy with donations of bore water pumping products in the stricken areas through their master dealer
network. As the bushfires abated, Davey experienced solid demand from rural infrastructure investment.
At the beginning of the year, we detailed our desire to build on the excellent existing stakeholder relationships, with
attention on Suppliers, Employees and Customers. This aspiration was of course tested through the 2nd half of the
year, and we will review the impacts of COVID‐19 to our stakeholders later in this Operating and Financial Review
(OFR).
We were pleased with the results of our recent FY20 employee satisfaction survey. This continued our recent trend
and placed GUD again in the top 25% of global companies measured in the Qualtrics study. Our leaders worked hard
to ensure our employees remained connected and engaged with our business objectives and purpose.
GUD were encouraged to see the same trend in customer satisfaction repeat from prior years and we were proud
to receive awards in FY20 from our customers. BWI won both the GPC Asia Pacific Supplier of the Year (the first time
this award has been given to a GUD business) and GPC’s Exceptional Support to the Store Network (AUS and NZ).
Ryco was awarded GPC’s Most Innovative Trade Campaign, and Supercheap Auto’s Most Innovative Trade Partner
awards.
8582_GUD_Holdings_Annual Report_2020_Mono.indd 8
8582_GUD_Holdings_Annual Report_2020_Mono.indd 8
9/9/20 11:59 am
9/9/20 11:59 am
8
Operating and Financial Review
Finally, in late 2019, Davey were excited to be awarded the overall Supplier of the Year by SPC, one the leading global
wholesale distributors of swimming pool supplies, equipment and leisure related products, recognising Davey’s great
traction in Europe.
The leadership team and Board remain convinced of the tangible link between employee satisfaction, customer
satisfaction and subsequent financial and non‐financial business deliverables.
GUD’s portfolio is centred on the automotive and water businesses. Throughout FY20, we have examined numerous
acquisition opportunities across a multitude of automotive product categories. We were careful with our analysis
on the strategic fit and valuation, using the common acquisition criteria developed and implemented over the last 2
years. Our prudent approach has served us well with the unexpected impacts of the pandemic. This has meant we
are not caught with an overvalued recent acquisition with high integration efforts and risk of impairment.
Nevertheless, as part of our ‘offence’ actions, we have been continuing to review and speak with vendors, even
throughout the COVID‐19 period. GUD remains clear that acquisition opportunities for the automotive portfolio are
still available and desirable, however, appropriate caution will be exercised with the prevailing uncertainty. As
always, the timing of opportunities will ultimately be dictated by the willingness of vendors.
In the FY19 OFR, we outlined a focus on five key topic areas of Customer relationships, Supplier Engagement, People
Cycle Planning, Product Cycle Planning and Operational Efficiency, all with a view to strengthen our business
foundations. The attention has continued, and further improvements have been made.
Customer Relationships – Building on our multi‐year preferred supplier agreements with two
of our critical automotive customer reseller groups, we have experienced positive growth in
a number of our own brands, seen the take up of new products and in a few cases, both in
automotive and water, customers turn to the respective business for house brand supply and
management. We have added further OEM customers in addition to Toyota and Paccar and
worked tirelessly through COVID‐19 to assist our customers in creative ways. FY20 was also a
proud year for Supplier of the Year recognition across BWI, Ryco and Davey.
Supplier Engagement – We continue to work with critical suppliers to confirm sourcing
security as a priority. Additionally, our project work on COG’s cost reductions became
incredibly important and proved to be successful. Utilising our Quality and Supplier Council,
we also embarked on the journey to drive better Environmental Social Governance (ESG)
outcomes with our supply base and announced the launch of the GUD Bronze, Silver and Gold
supplier program, which is detailed later in the Sustainability Review.
People Cycle Planning – We have been working diligently to develop future leaders for our
current businesses and future acquisitions to ensure the right balance and focus at the
executive leadership level. In late 2019, we launched a talent development program, a first
for GUD. This concentrates on emerging leaders across GUD and has two cohorts participating
in a two‐year program, facilitated by a selection of external leadership and business experts.
GUD remains an inclusive workplace and launched an enhanced Diversity and Inclusion
program with a clear charter and vision of success. Finally, we strengthened our Ryco and
BWI leadership team with a new Executive General Manager at Ryco and Chief Operating
Officer at BWI. Both leaders come with decades of aftermarket experience and are well
known and respected in the Australian and NZ markets.
Product Cycle Planning – We continue to bolster our innovation and product creation focus.
Throughout the year, GUD released hundreds of new SKU’s. Davey and BWI each had more
than 10% of revenue generated by products that did not exist 24 months ago. Amongst the
new launches were Lifeguard, a connected chemical control unit for swim‐ready pool water
year‐round, and Projecta’s Intelli‐RV range of plug‐and‐play, smart power management
systems. Narva won a Good Design Award, Projecta took home top honour for the most
innovative product at the Australian Auto Aftermarket Awards, and Ryco Filters ranked third
in the consumer goods and manufacturing category in the 2019 AFR BOSS Magazine Most
Innovative Companies List. Moreover, we were awarded four government grants under the
Automotive Innovation Lab Access Grants scheme, matching Research and Development
funding of ~$0.5 million. More details are outlined in the Sustainability Review.
9
8582_GUD_Holdings_Annual Report_2020_Mono.indd 9
8582_GUD_Holdings_Annual Report_2020_Mono.indd 9
9/9/20 11:59 am
9/9/20 11:59 am
Operating and Financial Review
Operational Fitness – As stated in last year's OFR, the need for operational efficiencies
remained paramount in a year of consolidation. This business foundation was modified to
increase its remit to review the broader operational fitness levels of the business units. Part
of the fitness work has been to look across the wider GUD group to achieve cost savings
through leveraging greater commonality and scale. In parallel, the opportunities to improve
operational fitness
in revenue management, sales, ordering and purchasing (SOP)
management and lean operating structures have also been embraced.
Taking the opportunity to summarise each business, it is clear GUD has been impacted by the COVID‐19 pandemic,
although not uniformly across the portfolio, or even within the Automotive Business Units. Each of GUD’s
automotive businesses continues to enjoy a strong and unique market position, with market‐leading brands and a
healthy track record of both product and service innovation and pricing power.
Our brands continue to be demanded by end users. We took the opportunity in our October Investor Day briefing
to outline information on the brand strength. As an example, our two filtration offerings, with Ryco and Wesfil
combined, had 81% of the 1st choice recommendation of workshops. 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.
Wesfil’s strong sales growth was supported by its well‐recognised value‐orientated brand proposition. This was
further supported by its comprehensive state‐based customer service and distribution strategies and the ongoing
momentum of newly launched incremental product categories.
Ryco maintained their FY19 sales level. However, the demand in the second half was quite variable from month to
month with the impacts of large destocking from our resellers and the NZ lockdown. Ryco maintained the ongoing
tempo of filter product releases and saw increasing growth from its catch can products which was the recipient of
the AFR Innovation award featured later in our Sustainability Review.
In FY20, the overall filter market was no less competitive, and collectively, Wesfil and Ryco remain proactive in
defending our strong market position.
BWI experienced contraction in the top‐line, as the most impacted of the automotive businesses with the shutdown
of its offshore markets and slippage in the more discretionary and OEM product channels in Australia. Encouragingly,
BWI were able to add new customers and helped some existing customers with their own house‐branding programs.
BWI were recognised for the new products with several awards and satisfyingly, BWI recorded more than 10% of its
revenue in products less than 12 months old.
Our smaller businesses of DBA, IMG and AAG all delivered strong revenue growth. IMG experienced an uptick in the
repair and remanufacturing demand, with record jobs per day. IMG also gained traction in distributing engine
management parts to the independent reseller channels, increased product cataloguing substantially and launched
a new website to enable better velocity in the repair process.
DBA’s performance was a result of primarily strong domestic sales with the COVID‐19 impact in Russia and other
European countries being mostly offset with strong growth in the USA. DBA expanded their product range with the
launch of a DBA branded disc pad program in pursuit of a larger share of the ‘wheel end’ market. DBA was delighted
to gain R90 certification, which is an important Economic Commission for Europe (ECE) automotive design standard
to enable further Western European market distribution.
AAG delivered strong growth, and in fact saw a stronger demand through the back end of the year as end customers
started to consider engine rebuilds with a greater intensity. The AAG integration and relocation proof of concept
project continued in the background, although delayed by 3 months due to practical impacts of COVID‐19. Other
than the timing delay, the scope remains unchanged.
The year also saw much activity around building a foundation within Davey for profitable mid‐term growth. While
revenue grew modestly, the EBIT was impacted through new product development costs, restructuring and the
significant impact of government lock downs and factory load recovery variance.
Davey’s farm trials of Modular Water Treatment products (MWT) continues. In addition, MWT sales have been
secured in new applications such as hospital and hospitality and other agricultural applications. Further, Davey sold
out its entire allocation in Europe of its new Nipper chlorinator and delivered the launch of the Tank Sense product.
10
8582_GUD_Holdings_Annual Report_2020_Mono.indd 10
8582_GUD_Holdings_Annual Report_2020_Mono.indd 10
9/9/20 11:59 am
9/9/20 11:59 am
Operating and Financial Review
Davey remains committed to its strategic plan and now is in execution mode. This focusses Management efforts
around the strategic pillars of supply chain optimisation, commercialisation of product innovation, diversifying
channels to market and improving people and culture outcomes as they roll out their strategy.
As the drought eased and fires abated, we certainly experienced the start of infrastructure rebuild, where
importantly, water pumping was high on the list of remedial repair or replacement.
1. COVID‐19 Pandemic
GUD’s Executive COVID‐19 task force was established in January, initially focussing on potential supply chain
disruptions. This quickly progressed to a response framework for wider business impacts in countries where GUD
has operations and staff such as Australia, New Zealand and Europe. Naturally, through this period, we commenced
COVID‐19 meetings with the Board which, at their height, were held weekly but now are held within the monthly
Board meetings.
We identified 20 key Defence and Offence actions in support of our COVID‐19 response framework, which focussed
on people health, operational health, financial health, and stakeholder management.
People Health
During the second half of the year, in response to COVID‐19, the Company implemented air travel bans, heightened
hygiene protocols and social distancing measures in the workplace including split shifts and staggered break times
in warehouses and production facilities. We activated business continuity plans to support working from home
wherever possible, consistent with the current Australian and/or New Zealand Government health advice.
In addition, where necessary, employees could access two weeks’ special COVID‐19 leave. This is to support those
who needed to be isolated but cannot work from home or as an income supplement for those experiencing scaled
back working days due to work hour reductions or government required lock downs.
The scale back of employee remuneration naturally included senior management in each business, who have had
their salaries scaled back by between 10% and 15% if their business triggered JobKeeper, or if any subsidiary
company triggered JobKeeper in the case of Group staff. The scale back of salaries for Key Management Personnel
and Board members was 20%, subject to the same triggers.
These two initiatives reflected a desire to not only address cash conservation but to also, as far as possible, keep our
workforce intact and engaged for a post COVID‐19 recovery. To date, this approach has avoided termination and re‐
hire costs and addressed a desire to avoid employee financial hardship.
Significantly greater attention has been paid to the mental health and well‐being of our staff throughout this period.
We have heightened the counselling services available, developed and implemented mental health champions in
each business and rolled out wellbeing seminars across the business. Our strong employee communication with our
teams was enhanced with frequent one‐on‐one contact and enhanced use of digital mediums. Information bulletins
on topical matters such as ‘adjusting to our new normal’, working from home, and self‐care strategies were provided
to our people.
Operational Health
Through a combination of our pre‐existing safety stock levels, strong collaborative relationship with our suppliers
and early supplier engagement, we have been able to ensure a high rate of product supply throughout. In some
areas, we have selectively increased safety stock levels, seeing a run up in inventory which will normalise going
forward into the next fiscal year. Inventory actions also included the negotiation of deferrals of outstanding purchase
orders where practical, and in a responsible manner which would not put supplier financial viability at risk.
We needed to make significant operational changes to accommodate the COVID‐19 direction from the varying
government health agencies. Staggered shifts in warehouses across our businesses, split shifts in our manufacturing
and assembly operations and significant health and safety changes to all workplaces, whether in‐situ or in remote
places of work. This unparalleled series of changes come at a cost but measured only in dollars and not in safety
outcomes.
Customer demand impacts from COVID‐19 were not evident until late March and into April. In the Water business,
Australian demand was robust throughout much of the COVID‐19 period whilst virtually zero in countries
experiencing government‐mandated lock downs which included New Zealand, France, and some export countries.
8582_GUD_Holdings_Annual Report_2020_Mono.indd 11
8582_GUD_Holdings_Annual Report_2020_Mono.indd 11
9/9/20 11:59 am
9/9/20 11:59 am
11
Operating and Financial Review
Product demand increased strongly in all automotive businesses except Disc Brakes Australia from May, whilst Disc
Brakes Australia saw an increase in demand from June. The performance in June across all Automotive businesses
was satisfying as it grew compared to prior comparable period.
The New Zealand Automotive business experienced close to zero sales during the mandatory shut down period of 6
weeks. The NZ operations experienced an improving trend after lockdown, however the trajectory has been a slower
to return to prior levels.
Financial Health
An appropriate level of careful financial modelling was completed through this period and the Company is in solid
financial health. Debt facilities were renewed in January 2020 involving $150 million for the next four years, a further
$50 million for eight years and $25 million of short‐term facilities that are reviewed every January. On 1 July 2020,
the Company secured further short‐term facilities of $22.5 million. Although the existing borrowing facilities were
not fully used during the year, the additional facilities leave the Company better placed to respond to potential
organic or acquisition growth opportunities which may arise over the next year.
Although the Australian Dollar lost significant value against the US Dollar in much of the second half followed by a
recovery in June, we remained largely hedged through FY20. Steps were taken in late June to hedge the vast majority
of our FY21 foreign currency needs at the prevailing exchange rates. Given the hedges and a full year contribution
from supplier cost reductions achieved in FY20, the Company is better placed to manage deflationary pressures in
the coming year.
Financial health efforts also addressed cash conservation action plans in response to demand changes from COVID‐
19 impacts, many of which have been previously outlined under Operational Health which more than offset the
incremental costs of operating under COVID‐19 conditions. It is also worthy to note that some businesses have
qualified for JobKeeper, and its equivalent. The FY20 subsidies amount to $179,000 for the water business and
$2,771,000 for the automotive businesses.
Stakeholder Management
As part of our desire to be a good partner through this time, we put in place a strong stakeholder management plan.
This was primarily across our supply, employee, customer, and financier stakeholder bases. Our level of
communication naturally increased in frequency and intensity to ensure key messages and actions are not left open
to interpretation and therefore lacking in urgency, efficiency or effectiveness. We are satisfied with our efforts to
work with stakeholders ranging from our union partners and employees through to our investors and financiers, all
which have been well recognised and proven productive.
2. Financial Performance Review
Revenue
Total Group revenue increased 1% on the prior year’s level. The Automotive businesses reported a slight increase
while Davey’s revenue grew by 3%.
The primary drivers of the changes in revenue during the year reflect:
1.
2.
3.
4.
5.
6.
Strong growth in Davey’s Australian business from both existing and new products.
A significant fall away in Davey’s New Zealand and France sales during the government‐imposed lock down
periods.
A near collapse in the Automotive business’ sales in New Zealand during their government‐imposed lock
down periods.
Lower Automotive sales in the fourth quarter due to resellers destocking and end customer user demand
more than offsetting range expansions of several businesses.
Softer export demand in certain markets for Disc Brakes Australia in the fourth quarter.
Further range extensions in all automotive businesses achieving sell through.
Profitability
The Group reported a net profit after tax of $43.7 million. On a pre‐AASB 16, the NPAT result was $46.4 million which
compares with the prior year’s result of a net profit after tax of $59.6 million.
The result includes a tax provision write back of $0.5 million offset compared to a $2.5 million tax provision write
back in the prior comparable period. Excluding the above tax one‐off items in the respective years, the NPAT
decreased by 14% on a like for like basis. In addition, the current year’s NPAT result includes an interest expense of
$1.1 million in relation to the final earn‐out provision in relation to the acquisition of IM Group in July 2017.
12
8582_GUD_Holdings_Annual Report_2020_Mono.indd 12
8582_GUD_Holdings_Annual Report_2020_Mono.indd 12
9/9/20 11:59 am
9/9/20 11:59 am
Operating and Financial Review
During the year significant one‐off costs were incurred in relation to:
Non‐cash items related to the impairment of a Davey subsidiary brand Monarch of $2.1 million, the
impairment of Davey inventory of $2.5 million in line with a change to the approach to product
development and life cycle maintenance, and $0.3 million of inventory mark downs associated with
restructuring AA Gaskets manufacturing.
Cash costs associated with restructuring AA Gaskets manufacturing ($0.2 million) and $1.4 million
associated with Davey restructuring costs.
The reported underlying NPAT was $48.2 million, or $50.9 million on a pre AASB‐16 basis, compared to the prior
year’s result of $60.9 million representing a reduction of 16% or 14% excluding the one‐off tax impacts mentioned
earlier.
Reported underlying Earnings Before Interest and Tax (underlying EBIT) was $80.7 million, or $80.1 million on a pre
AASB‐16 basis compared to the prior year’s result of $88.9 million, a decrease of 10%. The result principally reflects
lower end‐user demand from partial or total lock downs coupled with reseller destocking which resulted in negative
operating leverage. Cost savings from government COVID‐19 subsidies and internal cash conservation efforts were
more than offset by higher operating costs under COVID‐19, H2 factory load utilisation, and FX impacts given a
significantly weaker AUD in much of second half of the year, as well as appropriate group provisions considering the
economic climate.
Dividends
The total dividend for FY20 was 37 cents per share consisting of an interim dividend of 25 cents per share and a final
dividend of 12 cents per share. Both dividends were fully franked and represent a 67% payout of full year underlying
NPAT. This compares with total dividends of 56 cents per share in the previous financial year. The lower final dividend
reflects uncertainty around prevailing trading conditions as the economy and user demand move through a recovery
from the COVID‐19 pandemic.
The Board considers such prudence appropriate and notes that it leaves the Company well positioned to fund organic
or acquired growth opportunities that may arise.
In line with the desire to position the Company for growth opportunities, the Board has reactivated the Dividend
Reinvestment Plan for the final dividend.
Cash Generation and Capital Management
Reported Cash flow from operating activities was $65.5 million, up $21.0 million from the $44.5 million reported in
FY19. On a pre‐AASB‐16 basis, which was the basis of the FY19 reported result, cash flow from operating activities
was $54.3 million. Measured on either a reported or pre AASB 16 basis, cash conversion result of 98% was achieved
compared to 78% in the prior year. Measured on either a reported or pre AASB 16 basis, cash conversion of 98% was
achieved compared to 78% in the prior year.
The cash conversion was well ahead of internal targets for the year due to the timing of supplier purchases in the
last quarter of the year. This yielded a higher level of payables than usual at year end alongside efforts to tightly
manage other net working capital elements.
Net debt was $142.17 million, an increase of $9.4 million over the prior year. The increased debt level is primarily
from a combination of higher tax payments, a slight increase in capital expenditure to support innovation and
renewal, and a loan to a key supplier to assist in building a new plant.
External Financing
During the year, the Company completed a refinancing of its debt facilities of $225.0 million. The new facilities, which
are dominated in AUD or NZD were executed in January 2020 on commercially compelling terms and involve:
A core debt facility with Westpac, National Australia Bank and Citibank for 4 years totalling $150 million.
Short term facilities with Westpac and National Australia Bank totalling $25 million which we expect to
renew annually, and,
An 8‐year fixed term loan of $50 million with Pricoa.
In addition, on 1 July 2020, the Company secured additional short‐term facilities of $22.5 million. While the
facilities are not immediately required and are available for general corporate purposes, the Board believes the
renewed and additional facilities will leave the Company well positioned to quickly respond to compelling organic
or acquisition growth opportunities which may arise over the coming financial year.
13
8582_GUD_Holdings_Annual Report_2020_Mono.indd 13
8582_GUD_Holdings_Annual Report_2020_Mono.indd 13
9/9/20 11:59 am
9/9/20 11:59 am
Operating and Financial Review
3. Strategy Overview
Overview
Throughout the year, the Board and Management continued to refresh and review individual business unit strategy
plans. We remain comfortable with the current businesses within the GUD Holdings portfolio and are willing to make
logical automotive acquisitions.
At an individual business level, we continue to apply the GUD high‐performance approach for both operational
fitness actions and broad strategy execution. In 2019, we introduced the Roger Martin “where to play and how to
win” framework to guide strategy development and continue to work with the Ignition Institute to embed the
associated strategy framework tools and approach in the businesses. This remains critical as we reinforce the need
to ‘futureproof’ our individual businesses.
We have previously mentioned the defence and offence actions guiding the businesses through the COVID‐19
period. Regardless of this period GUD continues to sharpen its strategic direction, at the GUD group‐wide, individual
business unit and future acquisition efforts, focussing on three pillars being:
CCOORREE
Group Wide Initiatives
GGRROOWWTTHH
Individual Business Unit Strategies
AACCQQUUIISSIITTIIOONN
Portfolio and Category Plans
• Leverage multi-year preferred supplier
agreements in select automotive categories
• Individual business unit competitive
strategies with appropriate Covid-19
overlays
• Established acquisition criteria and decision
thresholds including returns above the cost
of capital beyond initial integration
• Quality and logistics councils to leverage
scale and skills
• Internal management resources pivoted to
address operational fitness opportunities in
real estate, logistics, IT and revenue
management
• Increased emphasis on achieving supplier
costs
• First shared logistics facility opened in
Auckland, build capability which could be
applied elsewhere
• AAG integration proof of concept to
establish blueprint for the future
• Addressing new organic growth pathways
with existing customers and a focus on ‘low
touch’ exports
• Strengthened resources dedicated to
innovation and product development, under
our new Chief Innovation Officer
• Appropriate balance of opportunity and
caution through post-COVID-19 period
• Internally, developing a pool of potential
managers for acquired businesses under
the leadership of our new Chief People
Officer
• Securing new customers and categories
through acquisition
•Strong automotive acquisition and strategy
capacity of our dedicated acquisition and
strategy leader
Our belief is the focus on these three key pillars will 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 short to
medium term. Importantly, we have dedicated resources and continued to utilise cost‐efficient external expertise
to leverage the wider Group Management team to pursue results in the Core, Growth and Acquisition workstreams.
4. Risk Review
Overview
FY20 represented the second year since the Board created a separate Board committee to focus on Risk and
Compliance. This year’s risk reviews added to the foundation work of the prior year and saw fine tuning of risk
assessments and greater familiarity with the Alyne risk management tool.
The COVID‐19 pandemic provided an opportunity to test whether the risk mapping, reviews and action plans which
had been prepared in the prior year were realistic, complete and effective, which proved to be the case.
This is a significant observation, given the nature of the COVID‐19 pandemic which saw customer demand, supply
chain risks and cyber security risks occur in an overlapping time frame.
While we did not foresee the exact nature of the COVID‐19 event, the risk mitigation, business continuity and crisis
management plans responded appropriately. As noted earlier in this report, certain levels of disruption were
relatively high but at no time did the Company experience an unacceptable or undesirable liquidity event or solvency
position.
14
8582_GUD_Holdings_Annual Report_2020_Mono.indd 14
8582_GUD_Holdings_Annual Report_2020_Mono.indd 14
9/9/20 11:59 am
9/9/20 11:59 am
Operating and Financial Review
Consequently, there has not been a need to make any fundamental changes to risk themes, key risks or key
mitigating action plans. They were complemented by the COVID‐19 response framework and defence actions. The
enduring risk themes, key risks, and mitigating actions are:
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
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
Production and Supply
Chain risks
Over reliance on suppliers resulting
on a loss in supply with potential sales
impacts
Reputation risks
Disruptive Technology
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
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, modern slavery,
bullying and harassment, bribery and
corruption, amongst others
Product cycle plans, reduce over time the
share of internal combustion engine
component sales, and build capabilities in new
segments and technologies
Financial risks
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
Insufficient key personnel due to either
retirement, or departure or inability to
develop new talent
Legal & Compliance risks Failure to comply with product safety or
regulatory compliance requirements
leading to fines or product recalls
People cycle planning, employee engagement
surveys and action plans, diversity and
inclusion programmes, talent development
plans
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
physical and mental 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 in the 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
15
8582_GUD_Holdings_Annual Report_2020_Mono.indd 15
8582_GUD_Holdings_Annual Report_2020_Mono.indd 15
9/9/20 11:59 am
9/9/20 11:59 am
Operating and Financial Review
Reviews of financial risks tabled with Business Unit finance leaders in Financial Risk Management forums
Technology and cyber risks are reviewed regularly and monitored via both IT Council meetings and third‐party
IT security risk monitoring services
Workplace 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, including ethical sourcing
The key risk themes, key risks and mitigating actions are also periodically tabled with the Board Risk and Compliance
Committee.
5. Outlook
At this time, GUD would normally provide insights and thoughts on the coming year, with a view on expected
industry trends and company prospects. The current COVID‐19 situation and the ever‐changing social and economic
landscape gives us less certainty as to the backdrop we operate within.
That said, 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 is strongly
defensive. The Water division continues to increase its customer intimacy and product line up as pumping and
treating water remains an important societal challenge.
The short‐term prospects for GUD are still relatively positive. This is true of the automotive aftermarket, particularly
as you consider the potential industry level tailwinds and headwinds.
We need to be clear that things can change daily, and we are not forecasting a return to normality in the near future.
In the event the core markets of Australia and NZ don’t enter a prolonged series of lockdown levels, then we would
expect vehicle service and repair to still be needed. It should not be overlooked that other structurally attractive
drivers of the aftermarket industry were also at play pre‐COVID‐19. The overall car parc growth of the 5 year plus
vehicles, more SUVs and Pick‐ups, increased diesel engines and the ongoing proliferation of the vehicle car parc with
clearer customer access to the independent workshops through the right of repair legislation have not changed
through this period.
Davey continues with its rollout of the strategic vision. We experienced improvements in the first half of the year,
although clearly impacted in the latter part. We expect the plan to continue and will not relent on the 4 key strategy
execution pillars of People and Culture, Supply Optimisation, Product Innovation and Channels to Market. Our view
has remained unchanged as Davey progresses over the next 24 months and pulls through the potential value of the
water segment.
Last year, we detailed a series of operational fitness actions such as supply base cost reductions and operating leaner
in our businesses to offset large currency movements, domestic cost inflation and a tighter pricing environment. In
FY21, we plan for the same level of operational fitness intensity to support our margins going forward. However,
this doesn't signal any reduction in new product development or acquisition activity, as we remain committed to
ensuring we have the right mid‐term foundations in place for long‐term growth and shareholder value.
16
8582_GUD_Holdings_Annual Report_2020_Mono.indd 16
8582_GUD_Holdings_Annual Report_2020_Mono.indd 16
9/9/20 11:59 am
9/9/20 11:59 am
Operating and Financial Review
Trading and Guidance
We have seen recent Automotive sales in June and first part of July to be above prior comparable period and showing
strong double‐digit demand growth. Recent empirical and anecdotal feedback suggests workshop and end customer
demand coming back strongly. This is primarily from our Automotive businesses in Australia, more so than our NZ
operations. In parallel with this demand, there is a sense from customers this might moderate as the year progresses
and they are watching carefully on the changes in government stimulus in the middle to back end of the year. Much
of this sentiment is, of course, dependent on whether countries or indeed states are in various forms of lock down
or other mobility restrictions.
In this current environment with so many variables at play it is not prudent to put forward any guidance with
reliability at this stage. A further update will be provided at the Annual General Meeting on 27 October 2020.
8582_GUD_Holdings_Annual Report_2020_Mono.indd 17
8582_GUD_Holdings_Annual Report_2020_Mono.indd 17
9/9/20 11:59 am
9/9/20 11:59 am
17
Sustainability Review
Highlights
Four of GUD’s automotive businesses were successful in
Lab Access Grant
Innovation
their Automotive
applications, jointly securing more than $500k in funding
and accelerating their R&D efforts.
Scope 1 emissions were estimated to be slightly in
excess of 1 ktCO2e, well below reportable levels.
Fuel for transport purposes comprised the major
component at 80%.
Safety was rated very highly by employees. For the fourth
consecutive year, we received a score that was above the
global 75th percentile in our annual employee engagement
survey.
Employee engagement lifted by 2 percentage points
in our annual employee engagement survey and is
now in the Global 75th percentile.
About this Review
This Review covers GUD’s sustainability performance across our Australian and New Zealand operations for the year
ended 30 June 2020. Selected Global Reporting Initiative (GRI) Standards were leveraged to inform the content and
scope of the report and accordingly, this report is GRI‐referenced. GUD seeks to continuously improve its disclosures
utilising the GRI Standards to improve the comparability of our reporting. In that respect, we have sought and
received feedback on our first Sustainability Review, issued last year. This feedback reinforces our existing view that
we continue and deepen our consultation with stakeholders and that the impact of Climate Change on the economy
is increasingly important, not only to our business.
GUD’s Board commissioned Management to prepare this Sustainability Review. The Board 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
Last year, we undertook our first materiality assessment to identify, prioritise and validate the topics that matter
most to our stakeholders and our businesses. Whilst we have maintained for this year the list of topics considered,
in future, we intend to seek input from a broader range of stakeholders in compiling the topics of materiality. This
year we have introduced the topic of climate change.
As a holding company, GUD comprises 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.
We have identified and confirmed those environmental, social and governance topics that could impact upon GUD
and our stakeholders. In doing so we considered a range of factors, including regulatory and legislative changes, peer
benchmarking, GRI Standards, macroeconomic trends and stakeholder feedback on prior year disclosures.
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 restrict competition contrary to 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.
18
8582_GUD_Holdings_Annual Report_2020_Mono.indd 18
8582_GUD_Holdings_Annual Report_2020_Mono.indd 18
9/9/20 11:59 am
9/9/20 11:59 am
Sustainability Review
Water Management
Managing the impacts of water use.
Climate Change
Health and Safety
The impact of climate change on our businesses, and what we may contribute
towards improving the environment and society as a whole
At GUD, our culture is driven by a strong level of engagement, ownership and
accountability for health and safety. This year we continued to reinforce the
importance of safety leadership, enhanced business safety plans including key
performance indicators and consolidated use of the online reporting tool,
giving us greater insight into near miss incidents and recording a wider array of
metrics to improve the comparability of our safety performance. In addition,
we enhanced our internal WHS audit function with further training and a
simpler audit tool.
In addition, as the world headed into uncharted territory as a result of COVID‐
19 and its consequences, we made the health and safety of our employees a
key priority. This involved driving initiatives to ensure a steady flow of
information, communication and contact with all our employees whether
temporarily stood down, working from home or attending at their worksite.
This level of communication, the nature of which evolved weekly, ensured that
our employees were confident of continuing support from GUD throughout the
challenging times.
Case Study: Work Safe, Home Safe
“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
Safety matters. But how do you make it really matter so that it
becomes a personal priority for every employee? At Davey, the
Work Safe / Home Safe campaign was designed to do just that.
initiative used all‐hands on roadshows and
Originally designed to promote open conversation about fatal risks,
the
interactive
competitions and activities that promote safety reflections whilst
connecting teams. When COVID‐19 hit in March, the Work Safe / Home Safe campaign took on an entirely
different dimension. For some of the team, the separation between work and home disappeared entirely when
they started working from home. The campaign was adjusted to address relevant issues of working safely from
home, covering topics ranging from home office safety to wellness and mental health topics. For others, their
workplace looked entirely differently, and the support of those team members shifted towards reinforcing
workplace hygiene and safety protocols, in addition to promoting wellbeing strategies for all.
Taking safety into the home and personal lives of employees has transcended a focus on compliance and ‘at work’
risk mitigation. Work Safe / Home Safe has resulted in numerous examples of employees taking safety seriously
at a personal level and has created increased awareness, camaraderie and respect in the Davey team. Today, the
team at Davey continue to build a community of people who actively partake in challenges around specific risk
areas, who share personal safety stories, and who actively engage online and in‐person to make sure everyone
gets to work safe, home safe.
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, Executive Leadership
Group and monthly Business Review 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.
This year a comprehensive safety campaign around the importance of not being complacent and emphasis on
reporting of safety concerns was undertaken. A speaker, Alan Newey, shared his personal account of his workplace
accident and the years following with all employees. A key message being that the impact a workplace accident has
is not only on an individual, but on those around the person.
8582_GUD_Holdings_Annual Report_2020_Mono.indd 19
8582_GUD_Holdings_Annual Report_2020_Mono.indd 19
9/9/20 11:59 am
9/9/20 11:59 am
19
Sustainability Review
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 AS/NZ 4801, meeting 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 identifying key performance indicators and
comprehensive risk factors to be managed, responsible persons and timelines that have been committed to in
order to improve safety performance. Performance against these are reported on and reviewed with senior
management on a quarterly basis.
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.
Each business in the GUD group maintains risk registers and job safety analyses. To inform this process,
requirements for conducting risk assessments are contained within the management system.
Key personnel are trained on safety leadership, internal auditing and incident investigation.
We maintain and support the use of Vault, an online reporting system for workplace incidents and accidents.
Employees may report directly using the Vault app on mobile phones or workplace‐stationed iPads, or reporting
to their supervisors, or via a member of their workplace health and safety committee. All incidents or matters
reported via Vault are automatically forwarded to senior management in the business.
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. The
comprehensive internal audit schedule was updated and rationalised during the year. All businesses have
emergency preparedness procedures which are audited as part of the GUD internal audit programme and are
tested every six months. The provision of feedback is shared with the business being audited and with other
businesses as a learning opportunity.
GUD has a WHS Steering Committee comprising thirty to forty management personnel who meet monthly for
the purposes of sharing information and learnings across the Group and recommending initiatives.
A sub‐group of the WHS Steering Committee was formed in early January firstly to ensure that safety risks
around the Australian Bushfires and then latterly COVID‐19 received the concentrated focus required in these
extraordinary situations. The group, comprised of health, safety and wellbeing leaders from within our
businesses delivered the following since January:
o Communication campaigns on health and hygiene matters related to the Australian Bushfires and then
latterly COVID‐19;
o Tailored plans to ensure the needs of our people were met in returning to our workplaces; and
o A comprehensive mental health and wellbeing program to support our people in adapting to the
impacts of COVID‐19
Businesses are encouraged to introduce proactive programmes focussed on engaging the complete workforce.
These have seen the adoption of exercise programmes, smoking cessation and focus on healthy eating.
Focussing 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 the 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.
Training was undertaken throughout the year on the Incident Cause Analysis Method (ICAM) and on safety
auditing.
8582_GUD_Holdings_Annual Report_2020_Mono.indd 20
8582_GUD_Holdings_Annual Report_2020_Mono.indd 20
9/9/20 11:59 am
9/9/20 11:59 am
20
Sustainability Review
How we performed
GRI Indicator 403‐9
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
FY20
FY19
Number
Rate/1,000,000
hours worked
Number
Rate/1,000,000
hours worked
0
4
0
2.7
10
6.8
0
5
9
0
3.4
6.0
Manual handling, slips, trips and falls
Manual handling, slips, trips and falls
Number of hours worked
1,464,942
1,489,008
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
0
0
0
0
0
0
0
0
0
0
0
0
N/A
N/A
Number of hours worked
41,189
50,893
Work‐related hazards
FY20
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.
Forklift operations
We have developed controls which respond to identified high‐risk workplace
hazards in areas including:
Driving
Materials falling from heights
Electrical safety
Manual Handling
Individuals falling from heights
8582_GUD_Holdings_Annual Report_2020_Mono.indd 21
8582_GUD_Holdings_Annual Report_2020_Mono.indd 21
9/9/20 11:59 am
9/9/20 11:59 am
21
Sustainability Review
Celebrating our achievements
Later this year GUD will be holding its 6th 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.
Product Safety and Quality
Designing and manufacturing safe, reliable products that meet customers’ needs is a key priority for all GUD
businesses. 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 locally by each business
unit, which is expected to comply with applicable ISO standards.
GUD’s Quality & Supplier Council was 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.
Safety is held in very high regard at all GUD businesses and safety extends beyond company walls to those who
handle and use our products. One way we monitor our product safety record is by actively managing product recalls.
The table below shows GUD’s product recall track record compared to industry benchmarks as reported by the ACCC.
Industry sectors recalls*
GUD businesses
GUD % of total
2016
201
1
0.5%
2017
187
1
0.5%
2018
217
0
0.0%
2019
260
1
0.4%
* Relevant industry sectors to GUD are Cars (within Transport) and Pools and spas (within Outdoor) as reported online
at www.productsafety.gov.au/recalls.
Case Study: Unparalleled Quality Control and Testing at DBA
Stopping is the most critical function of a car. Poor brake performance or
product failure can have grave consequences. And so, ensuring products meet
the highest quality standards is of paramount importance.
Variations in brake disc rotor thickness can compromise product performance.
Disc Thickness Variation (DTV) can cause torque variation which may present itself
as pulsation of the brake pedal at low‐brake efforts, vibration through the floor of
the vehicle, or steering wheel oscillation. The problem is magnified as the rotor
gets hotter—e.g., when carrying greater loads or after travelling downhill with the
brakes on. Over time, this can result in poor brake performance, triggering safety concerns. However, disc
thickness variation is generally not visible to the human eye.
To test rotor thickness with certainty, the team at Disc Brakes Australia (DBA) have taken delivery and installed
a new Disc Thickness Variation (DVT) test facility. As the only test facility of its kind currently available anywhere
in Australia and New Zealand, DBA can ensure its Australian designed and manufactured products meet the
highest quality standards. In fact, all DBA products are subject to routine quality control and testing using the
latest and most advanced equipment. The leaders in automotive braking solutions are proud to be at the
forefront of providing quality products that are second to none.
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 relevant employees and
directors as a part of the suite of mandatory online compliance modules. The training exposes employees to the law,
creates awareness around this topic and articulates how we should deal with competitors, suppliers and customers.
22
8582_GUD_Holdings_Annual Report_2020_Mono.indd 22
8582_GUD_Holdings_Annual Report_2020_Mono.indd 22
9/9/20 11:59 am
9/9/20 11:59 am
Sustainability Review
We take this seriously and understand that mismanagement may result in regulatory and 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‐focussed
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.
Four of GUD’s
automotive businesses
were successful in their
Automotive Innovation
Lab Access Grant
applications, jointly
securing more than
$500k in funding and
accelerating their R&D
efforts.
We have partnerships with external parties including academic institutions, industry bodies, innovation labs, start‐
ups and specialist agencies. This includes: Planet Innovation, Myriota, Automotive Innovation Centre, UNSW Sydney,
Movus, University of Auckland and Callaghan Innovation. In FY20, four of GUD’s automotive businesses were
successful in their applications for the Australian Innovation Lab Access Grants scheme.
Brown & Watson International secured grant funding for the design and development of innovative trailer safety
solutions.
Ryco Filters secured grant funding for the design and development of a wireless module that can transmit
information from sensors connected to various filters to a smartphone.
IM Group secured grant funding for the research and development of refurbished hybrid‐electric vehicle battery
technology.
Disc Brakes Australia secured grant funding for the development of a new range of rotors specifically designed
to improve the overall life and performance of brake disc rotors by substantially improving cooling performance
and outgassing.
Case Study: Circular Economy for Retired HEV Battery Packs
Since 1984, Injectronics has been providing supply solutions for electronic
and mechatronic components to the automotive aftermarket and original
equipment manufacturers. Today, the brand enjoys a market leadership
position in this market and much like those early days in 1984, the company
is looking towards the future for growth. With continued focus on R&D and
innovation, the team at Injectronics are turning to the next generation of
vehicles: hybrid electric vehicles.
As HEVs become more commonplace, so too does the need for HEV‐specific aftermarket products and services.
Notably, HEV battery packs deteriorate over time, resulting in longer charge times, lower mileage and a generally
lower performance profile. HEV owners have limited choice when it comes to replacing or repairing a retired
battery pack. Generical mechanics typically lack HEV‐specific knowledge and local specialist EV repairers cannot
access a reputable aftermarket alternative to the original equipment (OE) replacement product. OE products are
typically higher‐priced, such that it no longer warrants the investment in an ageing vehicle. As a result, there is no
viable, scalable HEV battery refurbishment and resource recovery program in Australia.
Injectronics wants to leverage its existing expertise in automotive component remanufacture and repair,
distribution and service to provide a quality aftermarket alternative for HEV owners. With federal grant funding
support under the Automotive Innovation Access Lab Grants scheme, the company will research and develop
testing and balancing equipment to create a circular economy for retired HEV battery packs.
8582_GUD_Holdings_Annual Report_2020_Mono.indd 23
8582_GUD_Holdings_Annual Report_2020_Mono.indd 23
9/9/20 11:59 am
9/9/20 11:59 am
23
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.
Innovation Award Nomination: Smart Power Management for RVs
Projecta is a leader in automotive power management solutions. When the
team at Projecta learned that manufacturers of recreational vehicles (RVs)
and caravans were asking for an all‐in‐one solution for all their power needs,
the team rose to the challenge.
Recognising the inefficiencies and complexities that new technologies have
brought to the electrical wiring stage of a caravan build, Projecta partnered
with supplier TBB to develop Intelli‐RV – a range of “plug and play” power
management systems. The partners vastly simplified wiring for builders,
cutting labour time by half. They also reduced electrical footprint by unifying
wiring to a safe and reliable access point, thus further reducing build cost so the savings may be passed onto the
end user.
What’s more, Intelli‐RV provides consumers with an advanced means of monitoring and controlling the electrical
circuits and appliances throughout their caravan or RV at the touch of a button, or via their smart phone. The
compact and universal install nature of an Intelli‐RV system allows users with even basic electrical knowledge to
retrofit these products to their own caravan or RV, enjoying the benefits of monitoring and controlling their
electricals with functionality previously seen only in proprietary factory systems featured in premium models.
Projecta won the Most Innovative New Aftermarket Product award at the prestigious Australian Auto Aftermarket
Awards in 2019.
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, 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 regarding 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.
8582_GUD_Holdings_Annual Report_2020_Mono.indd 24
8582_GUD_Holdings_Annual Report_2020_Mono.indd 24
9/9/20 11:59 am
9/9/20 11:59 am
24
Sustainability Review
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.
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
FY20
FY19
Number of full‐time employees
Number of part time employees
Number of temporary employees
Total number of employees
Male
545
6
13
564
Female
203
27
18
248
Male
550
14
21
585
Female
217
24
16
257
GRI Indicator 401‐1
FY20
FY19
Rate (% of
total
workforce)
Number
Rate (% of
total
workforce)
Number
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
76
24
25
58
17
79
21
9.4%
3.0%
3.1%
7.1%
2.1%
9.7%
2.6%
91
32
27
70
26
114
9
11%
4%
3%
9%
3%
14%
1%
Diversity is seen as a key driver of innovation and company performance. The Board is active in setting and guiding
the culture of GUD and brings focus to inclusion in doing so. This year saw the Board’s commitment in this regard
evidenced through the recruitment of a second female Director.
This year we developed a diversity and inclusion strategy covering the period 2019 to 2022. The strategy was shared
with employees through a diversity and inclusion statement signed in December by all business leaders. Our work
25
8582_GUD_Holdings_Annual Report_2020_Mono.indd 25
8582_GUD_Holdings_Annual Report_2020_Mono.indd 25
9/9/20 11:59 am
9/9/20 11:59 am
Sustainability Review
aims to strengthen the open culture of each business by ensuring inclusiveness and the contribution of all employees
by leveraging differences that exist. Importantly our work focusses on supporting our people to balance their work
and caring responsibilities. As an enabler to this we implemented a flexible work policy in December 2019.
Training and development are critical elements 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. Over the past year, we continued to deliver our high‐
performance systems education. A cohort of 16 employees from our businesses successfully completed the High‐
Performance Masterclass program.
This year saw us launch our inaugural Leadership Development Program (LDP). Running over two years, the program
contains twelve modules delivered by expert faculty members covering areas of personal and professional
development. In addition, open access self‐directed learning has been made available to all employees over the past
year.
Case Study: Narva Garage sparks DIY learning during lockdown
The team at Narva is passionate about delivering the world’s highest‐
quality vehicle lighting products that meet and exceed customer
in research and
expectations. This goes deeper than
development and providing outstanding customer service; it also
involves educating the customer about auto‐electronics safety and best‐
practice. When Australia and New Zealand went into lockdown, the team
launched an online video learning series entitled ‘NARVA Garage’ to do
just that.
investing
The straight‐to‐the‐point, short videos are hosted on Narva’s website,
Facebook page and YouTube channel. They are aimed at providing quick and informative answers to some of the
common auto‐electrical questions that the tech support team at Narva encounter from customers, as well as safe
and best‐practice DIY advice. The series has made customers feel more confident about working with auto‐
electrical products, whether it is the lux and lumens of an LED lightbar, the role relays play in a vehicle starting
system, or safe and simple soldering.
Since launch, the series has been hosted by workshop owner‐mechanic and 4WD specialist Adam Adler, who won
the ‘Face of Narva’ competition and with it the opportunity to host Narva Garage. With viewership growing rapidly
plus a rapidly expanding list of topics to cover, Adam needed some help and was soon joined by co‐presenter and
competition runner‐up Ross Watson, who himself has turned spanners at Nissan and Subaru and brings a wealth
of industry expertise to the series.
We strive to provide our employees with market‐competitive pay rates. Annual salary reviews are conducted and
multi‐tiered annual bonuses (where targets are met) are paid across the workforce. This year a comprehensive
review was undertaken to ensure that, where applicable, the provisions of relevant Modern Awards are at least met
through the annual salary paid. 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 are in the
process of being renegotiated, with the following agreements being in place:
Davey Water Products Enterprise Agreement dated 2017 (Production Agreement) – under negotiation
Davey Water Products Warehouse Enterprise Bargaining Agreement dated 2017 – under negotiation
Ryco Filters Australia Enterprise Bargaining Agreement 2018 – expires 31 March 2021
AA Gaskets Enterprise Bargaining Agreement 2018 – under negotiation
We conduct an annual employee engagement survey. Six of the seventeen areas measured showed further increase
against 2019 results and, whilst in some areas we retreated from a previous high, overall, the employee engagement
score improved from 75% to 77%, placing the organisation in the global 75th percentile. Safety is rated very highly
by employees with the score rating above the global 75th percentile, for the fourth consecutive year.
The recruitment of a Chief People Officer in May 2019 led greater emphasis on talent development and to realising
the full potential of the human capital of GUD. Looking forward, we will focus on the continued rollout of the
following programmes over the upcoming year:
26
8582_GUD_Holdings_Annual Report_2020_Mono.indd 26
8582_GUD_Holdings_Annual Report_2020_Mono.indd 26
9/9/20 11:59 am
9/9/20 11:59 am
Sustainability Review
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
In December 2019, we adopted a Speak Up Policy in pursuit of an open culture to enable employees and other
stakeholders to raise concerns about conduct on any level.
Case Study: Community Support
This year has seen Australians battling through the harshest bushfire and drought
conditions our country has ever seen. Davey Water Products has worked together
with our dealer network to provide support to impacted communities and
businesses.
Through February to May 2020, 18 businesses or individual recipients were helped
with the donation of a total of nearly $100,000 (RRP) worth of Davey product,
helping to provide clean water solutions and pumping options.
One such example, working in collaboration with PK Equipment in Sale, is the
support provided to the Jago Family ‐ the owners of Western Kangaroo Island Caravan Park. Kangaroo Island
suffered some of the worst damage in the 2019 bushfires. Davey were able to help by donating shallow well
pumps to the caravan park. The pumps are used to pump water to the office, the house, and the two camp
kitchens that were destroyed in the fire. They will also move water from the dam to the holding tanks that service
the caravan park.
Sustainable Procurement
GUD is committed to sourcing products in a responsible manner and to supporting our suppliers improve their social
and environmental practices. GUD’s businesses source products and services from a range of locations. Whilst
approximately 40% of our products are supplied locally in Australia, we source from many 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.
Last year we launched our Ethical Sourcing Policy and Ethical Sourcing Code. 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 received responses from many of our priority tier‐one suppliers to assess their level of alignment with
the minimum standards within the Ethical Sourcing Code. We also extended the scope of our coverage beyond our
initial priority suppliers, where priority was determined by geography, industry or materiality, to include less material
suppliers. 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 took steps to integrate its initiatives on Ethical
Sourcing into its programme for preparing our first Modern Slavery Statement, to be published in November 2020.
Water Management
We understand the challenge of water scarcity in the 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 several water management solutions in our range and are continuously investing in new opportunities that
seek to meet the challenges faced by our customers.
27
8582_GUD_Holdings_Annual Report_2020_Mono.indd 27
8582_GUD_Holdings_Annual Report_2020_Mono.indd 27
9/9/20 11:59 am
9/9/20 11:59 am
Sustainability Review
Case Study: Water Management Research for Drought Proofing
Davey Water Products has been manufacturing products that help protect and
enhance lives for 85 years. So, when a research farm was looking for a system
that allows scientists to test water management practices for drought proofing,
the team rose to the challenge.
The research farm had an ageing water infrastructure that was neither reliable,
nor flexible enough to meet the growing and varying demands of the researchers.
Davey delivered a sophisticated system for transferring water between dams and
tanks, and even mix water, around the site to where stock is kept. A series of
solar‐powered bore pumps and vertical multi‐stage pumps is tied together with a communication system that
allows scientists to monitor and control water management remotely.
Today, the farm has a water management system that is largely future‐proof, very flexible and expandable. It
allows scientists to study the impact of water quality on stock watering and feed quality for drought‐proofing
purposes. Water management information and practices are passed on to farmers so they may take the
opportunity to preserve the water resource on their farm sustainably. This is just one example of how Davey
leverages its expertise to improve water management practices throughout Australia and the world.
Case Study: Water Treatment in Hospitals
Acqua by Davey is Davey Water Products’ specialised water treatment
solutions business. Their team of expert water treatment engineers
develops systems to monitor and manage water quality in a range of
industries. Increasingly, Acqua by Davey is partnering with hospitals and
day surgeries in Australia and New Zealand to improve their water
management practices.
One example is how Acqua by Davey helps Central Sterile Services
Departments (CSSDs) become compliant with
impending water
standards. A hospital’s CSSD is responsible for cleaning, disinfecting and
sterilising reusable medical equipment. The water used in this process
must meet strict quality guidelines and standards, not in the least to
safeguard patient safety. As the medical sector readies itself to meet
impending regulations, many hospitals find that existing suppliers lack
the water treatment expertise required to deliver a solution that meets
their unique needs, and a one‐size‐fits‐all solution simply does not exist.
Acqua by Davey delivers engineered solutions to produce water quality that is compliant to the industry standard
and fit seamlessly into a CSSD’s operating rhythm and unique layout. Using high‐quality water helps reduce
corrosion, scale build‐up, and visible staining of instruments. This extends the useful life of these instruments by
reducing the risk of micro‐organism growth. IN FY20, Acqua by Davey commissioned water treatment solutions
for eight hospitals.
Energy Usage
At the instigation of the Board, this year we sought
assurance on the
level of energy usage and
greenhouse gas emissions across the businesses. A
study was undertaken and the Board received a
report confirming that based on the data analysed
for FY19, GUD did not meet the reporting
thresholds defined in the National Greenhouse and
Energy Reporting Regulations at either a facility or
corporate group level.
28
8582_GUD_Holdings_Annual Report_2020_Mono.indd 28
8582_GUD_Holdings_Annual Report_2020_Mono.indd 28
9/9/20 11:59 am
9/9/20 11:59 am
Sustainability Review
Scope 1 emissions, often referred to as ‘direct emissions’, are emissions released to the atmosphere as a direct result
of an activity, or series of activities, at a facility level. For GUD, scope 1 emissions were estimated to be slightly in
excess of 1 ktCO2e. Fuel for transport purposes comprised the major component at 80%.
Scope 2 emissions, often referred to as ‘indirect emissions’, are emissions released to the atmosphere from the
indirect consumption of an energy commodity. For GUD, scope 2 emissions were estimated to be slightly in excess
of 3 ktCO2e. These emissions originate from the aggregated electricity usage at each of the GUD sites.
The aggregated GUD’s scope 1 and scope 2 emissions were analysed against the reporting thresholds defined in the
NGER Regulations 2008. GUD is generating approximately 4.1 (scope 1 and scope 2) ktCO2e, well below the present
reporting thresholds at a facility level (25 ktCO2e) or at a corporate group level (50 ktCO2e).
In the absence of a significant acquisition or a reduction in the reporting thresholds, GUD does not envisage it will
need to report under the NGER Regulations.
Whilst this demonstrates that GUD is not a significant contributor to emissions, the Board nevertheless is cognisant
of the need to reduce emissions across the whole of industry and so continue with the monitoring of the GUD
emissions and encourage strategies within the businesses to reduce emissions in a sustainable way.
Addressing Climate Change
The GUD Board determined last year to develop a strategy integrating climate change considerations into its overall
strategic planning. Once approved, this will formalise the broad acknowledgment, held over the last three to five
years, of the fact of climate change and implications for the GUD businesses.
Some two years ago the Board, under questioning from investors and analysts alike, determined to maintain its
investment and reinvest in the water business rather than divest and become a single‐focus automotive aftermarket
company. Behind this decision lay two factors: first, a realisation that there was significant value upside in the water
business and that a strategy needed to be found to unlock that value for GUD shareholders; and, second, a conscious
acknowledgement that water was (is) an increasingly scarce commodity although under‐valued and that the water
business represented an opportunity for GUD to participate in that market. Investment over the last two years has
generated sizeable opportunities for the water business as have been described in the Operating and Financial
Review.
Whilst the Board develops its strategic policy around climate change, the potential for the water business gives the
Board a strong business on which to build one aspect of that strategy.
The Board has been well cognisant of the de‐carbonisation of many aspects of industry and with the introduction of
electric vehicles in the automotive industry in particular. GUD is well placed to take advantage of these changes and
extract value from the decline in new internal combustion engine vehicle sales over the coming decades by providing
replacement or wear parts to an ageing car parc of vehicles equipped with internal combustion engines. Further, the
Board has followed a strategic path for five years now of seeking to diversify GUD’s automotive businesses away
from, and dilute the impact of, exposure to the internal combustion engine. The acquisitions of Brown and Watson
International and Innovative Mechatronics Group are both in the automotive replacement or aftermarket industry,
but with lesser or minimal exposure to the internal combustion engine.
Exposure to the internal combustion engine is but one factor the Board considers when presented with an
acquisition opportunity. That does not mean the Board will not consider acquisitions of businesses wholly or largely
exposed to the internal combustion engine, particularly if there is an attractive rate of return to be earned from
what is regarded as a sunset industry or business.
The Board recognises these beginnings of a strategy to address the impact of climate change on the future existence
of GUD and now recognises it must begin to articulate a comprehensive strategy for the benefit of all stakeholders
in the Company, in particular its long‐term employees and shareholders.
Impact of COVID‐19 on GUD’s Material Sustainability Topics
As with all businesses, the impact of COVID‐19 has necessitated significant attention since early 2020. Very early on
we established a framework of People Health, Operational Health and Financial Health to guide our focussed efforts
around COVID‐19. Two response groups encompassing all businesses were established – an executive leadership
team and a planning and action team. These teams supported our regular updates to the Board of Directors and
ensured regular communication of material information and, importantly, determined the key actions to be
undertaken in a coordinated and cohesive way.
Our COVID‐19 response has been undertaken in a way that balances the needs of key stakeholders and with actions
to ensure the safety and wellbeing of our people. Key actions taken under our People Health, Operational Health,
Financial Health framework includes the following:
29
8582_GUD_Holdings_Annual Report_2020_Mono.indd 29
8582_GUD_Holdings_Annual Report_2020_Mono.indd 29
9/9/20 11:59 am
9/9/20 11:59 am
Sustainability Review
Increasing office and facility cleaning
People Health
Distribution of regular safety guidance bulletins on preventative measures and health & wellbeing information
Early on establishing a transparent and mutually agreed approach around continuity of work so that our people
had certainty of how they would be supported by our businesses
Regularly communicating with our people using a variety of mediums
Making additional sick leave available to staff during COVID‐19 period including carers leave
Provision of a comprehensive guide to travel and meeting protocols and employee support mechanisms in place
Enablement of flexible working arrangements where required along with support to ensure effective remote
working
Increasing our regular supplier communications and engagement
Implementing revised work processes and arrangements to ensure increased social distancing for warehouse
and sales staff
Operational Health
Activation of dual sourcing where necessary
Working closely with freight forwarders
Increasing regular customer communication and engagement and closely and actively managing customer
needs
Fast tracking the deployment of technology to support a remote workforce where needed
Implementing business continuity measures such that we could leverage common technology platforms to limit
impact to our customers in the event of a workforce disruption due to illness
Proactive Q&A dialogue with equity analyst and institutional investors
Financial Health
Conducting debt financier briefings
Undertaking financial modelling of potential impacts on demand, EBIT and cash flow
Consideration of impact on debt levels, borrowing capacity and debt covenants and acquisition funding capacity
Case Study: Mental Health and Wellbeing at Ryco Filters
As the COVID‐19 pandemic hit, the health and safety leaders of GUD’s
businesses
joined forces to develop mental health and well‐being
programmes to support their teams. At Ryco Filters, all senior managers were
assigned virtual teams of employees who did not include any of their direct
reports. During weekly check‐ins these teams talk about wellbeing and
discuss any concerns with the mental health first aider or an appropriate
senior manager. This has proven to be a positive initiative for both the leaders
and their teams in getting to know each other better as well as not feeling
isolated during unchartered times.
In addition, the Ryco Community Team was created, where all employees can engage in conversation and share
experiences with each other, both work and social. The Community started a Friday Clean‐up routine to ensure
work‐at‐homers followed a cleaning regime established at head office. Virtually together as a team, everyone
worked to music to create a clean, safe workplace for the next week.
Finally, the team at Ryco created a care package that was sent out to all staff in Australia and New Zealand. With
a personalised note from management, the package contained a limited‐edition mouse pad with an inspirational
safety message, pens, drink coasters and other ‘feel good’ components. The feedback on what seems a simple
gesture, in addition to staff support available through GUD Holdings, was very well received by the team. It was
important to show continuing efforts to maintain the Ryco Community. Not surprisingly, employee engagement
levels at Ryco, and other GUD businesses for that matter, rank in the top quartile globally.
8582_GUD_Holdings_Annual Report_2020_Mono.indd 30
8582_GUD_Holdings_Annual Report_2020_Mono.indd 30
9/9/20 11:59 am
9/9/20 11:59 am
30
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 and has been prepared in accordance with the Corporations Act 2001.
The report is outlined in the following sections:
1.
2.
3.
4.
5.
6.
7.
8.
Who this Report Covers
Remuneration Governance
Senior Executive Remuneration Strategy and Structure
Remuneration for the Managing Director and Senior Executives
Link between Performance and Remuneration Outcomes
Service Agreements
Non‐Executive Directors’ Remuneration
Other KMP Transactions
1. Who this Report Covers
The key management personnel (including Non‐Executive Directors) of GUD Holdings Ltd, and its subsidiaries, during
the year FY20 have been identified as the following persons:
M G Smith (Non‐executive)
A L Templeman‐Jones (Non‐executive)
G A Billings (Non‐executive)
D D Robinson (Non‐executive)
G Whickman (Managing Director)
M A Fraser (Chief Financial Officer)
J A Douglas (Non‐executive) – Appointed 1 March 2020
During the last quarter of FY19 in response to an overall strategic review and following changes in a number of
executive roles and responsibilities, the Managing Director reviewed how we would best move forward supporting
the five key topic areas of Customer Relationships, Supplier Engagement, People Cycle Planning, Product Cycle
Planning and Operational efficiency outlined in the prior year’s Annual report.
The review resulted in the Managing Director and Group CFO assuming a number of key responsibilities from the
individual business unit leaders and the establishment of a flatter leadership structure complemented with a number
of Group subject matter experts. This change has seen both leaders be more directly involved in key customer
relationship management and decision‐making including business unit strategy formulation and execution including
through group wide Councils they chair involving the topic areas of Innovation, Supply Chain, and IT. The changes
also see more direct involvement in the sign‐off of People or Product Cycle Plans together with business leaders and
Group subject matter experts.
As a consequence, the company has reviewed the senior leadership roles and determined that Key Management
Personnel (KMP) definition is now satisfied in the case of the Board, Managing Director, and the Group CFO. This
report refers to these KMP as Senior Executives.
For the prior financial year (FY19), the report discloses information relating to those personnel who met the KMP
definition in that year. The key management personnel (including Non‐Executive Directors) of GUD Holdings Ltd, and
its subsidiaries, in the prior financial year were the following persons:
M G Smith (Non‐executive)
A L Templeman‐Jones (Non‐executive)
G A Billings (Non‐executive)
D D Robinson (Non‐executive)
G Whickman (Managing Director from 1 October 2018)
J Ling (Managing Director until 30 September 2018)
M A Fraser (Chief Financial Officer)
R Pattison (General Manager Automotive Acquisition & Strategy)
D Worley (Chief Executive – Davey Water Products Pty Ltd)
T Cooper (Managing Director – Wesfil Australia Pty Ltd)
G Nicholls (Chief Executive ‐ Ryco Group until 6 May 2019)
G Davies (Chief Executive – Brown and Watson International Pty Ltd)
31
8582_GUD_Holdings_Annual Report_2020_Mono.indd 31
8582_GUD_Holdings_Annual Report_2020_Mono.indd 31
9/9/20 11:59 am
9/9/20 11:59 am
Remuneration Report
Remuneration Governance
2.
The Remuneration, People and Culture 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, People and Culture Committee consists of the five Non‐Executive Directors and is responsible
for determining a framework and broad policy for remuneration. Amongst other things, it advises the Board on
remuneration policies and practices in general, and makes specific recommendations on fees, remuneration
packages, incentives and other terms of employment for Senior Executives.
A copy of the Remuneration, People and Culture Committee Charter is available under the Governance section of
the Company’s website.
The Senior Executives do not participate in any decision relating to their own remuneration.
3.
Senior Executive Remuneration Strategy and Structure
Remuneration Strategy
Our remuneration strategy is designed to attract, retain and motivate appropriately qualified and experienced Senior
Executives. Our strategy ensures we are well positioned to deliver reasonable and market competitive rewards in a
way that supports a clear performance focus and is aligned with the long‐term goals of the Group.
In determining the Senior Executives’ remuneration, we have developed remuneration guiding principles to assist in
decision‐making:
The remuneration structure is relevant and simple for Senior Executives and shareholders to
understand.
Our remuneration practices support the delivery of long‐term business strategy and provide a clear link
between Group performance and remuneration outcomes.
Remuneration levels are sufficient to attract and retain key talent and be competitive.
We have clearly defined and disclosed remuneration processes and structures that reflect shareholder
views and objectives.
Our incentive plans are carefully designed to balance the twin imperatives of short‐term performance
and long‐term enhancement of shareholder value and are regularly reviewed to ensure alignment with
corporate governance principles.
The Remuneration, People and Culture Committee is committed to continuing to review and refine the
remuneration strategy to ensure it meets the changing needs of the Group and remains aligned to
shareholder interests.
The Committee has undertaken a review of the remuneration strategy in the current financial year and resolved to
make no structural change.
Remuneration Structure
The remuneration framework provides a mix of fixed and variable remuneration and has five components:
Fixed remuneration;
Other employment related benefits; and
Short‐term incentives (STI);
“at risk” remuneration including:
Special incentives.
Long‐term incentives (LTI); and
These comprise the total remuneration paid to Senior Executives.
Our approach is to position the maximum “at risk” components of Senior Executives’ remuneration relative to total
maximum remuneration, to around 45 per cent, and 50 per cent in the case of the Managing Director.
In the absence of any special incentives, the remuneration mix for the Senior Executives is as follows:
8582_GUD_Holdings_Annual Report_2020_Mono.indd 32
8582_GUD_Holdings_Annual Report_2020_Mono.indd 32
9/9/20 11:59 am
9/9/20 11:59 am
32
Remuneration Report
Fixed Remuneration and Other Employment Related Benefits
The remuneration packages for the Senior Executives contain a fixed amount that is not performance linked. The
fixed remuneration consists of base salary, as well as employer contributions to superannuation funds.
Fixed remuneration for Senior Executives is determined by reference to the scope of their positions and the
knowledge, experience and skills required to perform their roles. Periodically, independent consultants provide
benchmark information, analysis and/or advice to the Remuneration, People and Culture Committee to ensure the
packages are competitive in the market with comparable roles. We have adopted a desired market positioning
around the median of the peer group. The Company has not received remuneration recommendations from an
independent consultant during the year ended 30 June 2020.
The Remuneration, People and Culture 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.
COVID‐19 Impacts
As a result of COVID‐19, two principle changes have been enacted in respect of fixed remuneration:
1. Senior Executives and the Board agreed to temporary monthly fixed remuneration reductions of between 10 to
20% pro rata in the fourth quarter of the year ended 30 June 2020, which will extend into the first quarter of
the next financial year, subject to monthly review of trading performance.
2. A decision was made to defer annual remuneration reviews and any increases up to December 2020.
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 EBIT pre significant
items 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 key management personnel– 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,
People and Culture Committee in the first quarter of the financial year.
The Remuneration, People and Culture Committee determines 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.
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.
33
8582_GUD_Holdings_Annual Report_2020_Mono.indd 33
8582_GUD_Holdings_Annual Report_2020_Mono.indd 33
9/9/20 11:59 am
9/9/20 11:59 am
Remuneration Report
Bonuses as a per cent of fixed rem uneration
Managing Director
Chief Financial Officer
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 2020 are set out in
section four of this Report.
From and including the financial year commencing 1 July 2019, the Remuneration, People and Culture 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 EBIT pre significant items 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
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 130 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. The performance hurdle,
described in more detail below, means that no performance rights will vest as GUD shares unless the Company’s
Total Shareholder Return (TSR) is equal to or better than the TSR of the median company in the comparator group.
No amount is payable for the issue of performance rights, or for the shares received upon vesting of those
performance rights.
The plan has, for many years, been in line with market norms although in recent years, there has been
experimentation in the market with other performance measures. Nevertheless, the Board continues to believe the
LTI plan supports the delivery of the Group’s long‐term strategy and encourages the Senior Executives to hold an
exposure to equity. We have made changes recently that enhance this last aspect, by permitting Senior Executives
to defer exercise of performance rights that vest (and hence the receipt of the shares), for up to 15 years from the
date of grant. This change has potential taxation advantages (in the form of income deferral) for the Executive and
comes at only a slight increase in administrative cost to the Company.
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, People and Culture 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 three‐year 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:
8582_GUD_Holdings_Annual Report_2020_Mono.indd 34
8582_GUD_Holdings_Annual Report_2020_Mono.indd 34
9/9/20 11:59 am
9/9/20 11:59 am
34
Remuneration Report
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 2018, the Remuneration,
People and Culture 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. This additional
requirement will first take effect in respect of performance rights granted in July 2018, due to vest (if meeting the
performance threshold) in June 2021.
Special Incentives
From time to time, the Remuneration, People and Culture 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 2020.
8582_GUD_Holdings_Annual Report_2020_Mono.indd 35
8582_GUD_Holdings_Annual Report_2020_Mono.indd 35
9/9/20 11:59 am
9/9/20 11:59 am
35
%
%
$
$
$
$
y
t
i
u
q
e
f
o
e
u
l
a
V
l
a
t
o
t
d
e
t
a
l
e
r
f
o
n
o
i
t
r
o
p
o
r
p
a
k
s
i
r
l
a
t
o
t
s
a
n
o
i
t
a
r
e
n
u
m
e
r
f
o
n
o
i
t
r
o
p
o
r
P
n
o
i
t
a
r
e
n
u
m
e
r
n
o
i
t
a
r
e
n
u
m
e
r
l
a
t
o
T
f
o
e
u
l
a
v
r
i
a
f
y
t
i
u
q
E
n
o
i
t
a
u
n
-
n
a
r
e
p
u
S
3
s
t
h
g
i
r
e
v
a
e
l
e
c
n
a
m
r
o
f
r
e
p
e
c
i
v
r
e
s
g
n
o
L
$
l
a
t
o
T
$
$
$
$
$
r
e
h
t
O
s
t
i
f
e
n
e
b
e
m
o
c
n
I
n
o
i
t
c
e
t
o
r
p
2
i
m
u
m
e
r
p
s
t
n
e
m
s
u
n
o
b
I
T
S
s
e
e
f
-
e
l
t
i
t
n
e
e
v
a
e
L
d
n
a
1
y
r
a
l
a
S
s
t
i
f
e
n
e
b
m
r
e
t
-
g
n
o
L
s
t
i
f
e
n
e
b
t
n
e
m
y
o
p
m
e
m
r
e
t
-
t
r
o
h
S
l
i
:
e
r
a
s
e
v
i
t
u
c
e
x
E
r
o
n
e
S
d
n
a
s
r
o
t
c
e
r
i
D
e
v
i
t
u
c
e
x
E
e
h
t
f
o
n
o
i
t
a
r
e
n
u
m
e
r
l
j
f
o
t
n
e
m
e
e
r
o
a
m
h
c
a
e
f
o
t
n
u
o
m
a
d
n
a
e
r
u
t
a
n
e
h
t
f
o
s
l
i
a
t
e
D
i
s
e
v
i
t
u
c
e
x
E
r
o
n
e
S
d
n
a
r
o
t
c
e
r
i
D
g
n
i
g
a
n
a
M
e
h
t
r
o
f
n
o
i
t
a
r
e
n
u
m
e
R
1
.
4
t
r
o
p
e
R
n
o
i
t
a
r
e
n
u
m
e
R
6
.
3
1
3
.
7
8
.
1
5
4
.
3
1
2
.
3
1
7
.
4
1
1
.
1
1
4
.
0
1
2
.
4
1
0
.
0
1
6
.
3
1
3
.
7
8
.
1
5
4
.
3
1
2
.
3
1
7
.
4
1
1
.
1
1
4
.
0
1
2
.
4
1
0
.
2
3
9
4
8
,
9
0
8
0
4
7
,
9
0
2
,
1
0
0
0
,
5
2
0
0
0
,
5
2
2
6
3
,
4
6
1
0
1
4
,
9
5
7
1
4
,
6
1
9
9
7
,
1
1
0
4
6
,
3
1
7
1
6
9
,
3
0
0
,
1
4
0
2
,
9
9
2
0
0
0
,
5
2
4
3
1
,
5
5
1
)
6
6
7
,
0
9
(
6
3
8
,
9
0
2
3
3
7
,
0
7
7
7
9
5
,
9
7
7
3
7
8
,
2
7
6
2
7
6
,
7
9
5
6
9
1
,
7
2
8
5
9
8
,
1
0
6
6
6
5
,
2
3
8
0
0
0
,
5
2
0
0
0
,
5
2
0
0
0
,
5
2
0
0
0
,
5
2
0
0
0
,
5
2
0
0
0
,
5
2
0
0
0
,
5
2
0
1
3
,
3
0
1
4
3
1
,
3
0
1
4
8
6
,
8
9
2
2
1
,
6
6
5
5
0
,
6
8
2
7
5
,
5
8
5
4
4
,
3
8
8
5
6
,
1
1
5
0
4
,
6
2
)
1
7
2
,
9
3
(
4
1
9
,
7
2
6
8
3
,
3
0
1
5
9
6
,
1
1
9
0
4
,
9
3
7
4
,
0
8
9
,
1
0
0
0
,
0
5
2
5
8
,
0
2
4
,
5
0
0
0
,
0
0
2
2
7
6
,
7
6
2
6
5
5
,
7
3
7
5
7
0
,
8
2
1
7
5
,
0
6
5
9
3
,
9
1
8
7
7
1
,
0
7
7
5
4
6
,
9
6
4
8
6
,
4
6
-
-
-
-
9
6
8
,
9
9
7
,
2
9
2
0
,
1
9
1
,
6
5
4
6
,
9
1
1
4
8
6
,
4
6
2
2
7
6
,
7
6
2
6
5
5
,
7
3
7
5
7
0
,
8
2
1
7
5
,
0
6
5
6
7
,
0
3
6
8
5
0
,
5
2
6
0
6
4
,
8
8
5
6
3
6
,
8
7
4
5
5
7
,
2
1
6
8
2
6
,
9
7
4
2
1
7
,
4
1
7
6
2
7
,
4
3
6
,
1
5
2
7
,
2
2
4
,
4
1
5
7
,
9
4
7
3
9
4
,
5
0
7
7
7
4
,
4
8
3
,
2
8
1
2
,
8
2
1
,
5
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7
8
7
,
1
4
3
6
,
1
-
7
1
5
0
1
4
,
1
-
-
5
3
7
,
3
3
8
4
,
5
-
-
5
3
7
,
3
3
8
4
,
5
8
4
9
,
1
0
9
4
,
1
)
0
5
3
(
1
7
6
,
8
4
2
3
4
)
0
5
8
,
4
2
(
7
1
8
,
2
3
7
3
5
,
9
2
0
6
4
,
3
1
9
1
1
,
3
5
4
3
,
1
6
)
1
5
8
,
1
(
8
9
3
,
1
4
8
8
4
,
1
8
8
0
8
,
1
2
1
-
4
1
3
,
3
8
1
4
5
2
,
9
9
2
,
2
3
1
6
,
7
1
8
,
4
0
2
0
2
9
1
0
2
8
8
4
,
1
8
8
0
8
,
1
2
1
-
4
1
3
,
3
8
1
3
0
5
,
9
4
5
,
1
0
2
1
,
2
1
1
,
4
0
2
0
2
9
1
0
2
p
u
o
r
G
e
h
t
f
o
s
e
v
i
t
u
c
e
x
E
r
o
i
n
e
S
d
n
a
r
o
t
c
e
r
i
D
g
n
g
a
n
a
M
e
h
t
i
f
o
n
o
i
t
a
r
e
n
u
m
e
r
l
a
t
o
T
)
p
u
o
r
G
e
h
t
f
o
l
e
n
n
o
s
r
e
p
t
n
e
m
e
g
a
n
a
m
y
e
k
f
o
n
o
i
t
a
s
n
e
p
m
o
c
(
n
o
i
t
a
r
e
n
u
m
e
r
l
a
t
o
T
-
-
-
-
1
5
7
,
9
4
7
3
9
4
,
5
0
7
0
2
0
2
9
1
0
2
s
r
o
t
c
e
r
i
D
e
v
i
t
u
c
e
x
E
-
n
o
N
f
o
n
o
i
t
a
r
e
n
u
m
e
r
l
a
t
o
T
-
-
-
-
-
-
-
-
-
4
1
3
,
3
8
1
2
4
3
,
3
5
9
0
0
5
,
2
1
7
r
a
e
Y
0
2
0
2
9
1
0
2
r
o
t
c
e
r
i
D
g
n
g
a
n
a
M
i
n
a
m
k
c
h
W
G
i
n
a
m
k
c
h
W
G
i
4
5
2
,
4
3
2
9
1
0
2
i
4
g
n
L
P
J
r
o
t
c
e
r
i
D
g
n
g
a
n
a
M
i
r
e
m
r
o
F
1
6
1
,
6
9
5
7
8
8
,
3
9
5
0
0
0
,
5
7
5
0
0
0
,
5
7
4
0
0
0
,
0
5
5
9
7
4
,
1
8
4
0
0
0
,
0
9
4
0
2
0
2
9
1
0
2
9
1
0
2
9
1
0
2
9
1
0
2
9
1
0
2
9
1
0
2
r
e
c
i
f
f
O
i
l
a
i
c
n
a
n
F
f
e
i
h
C
r
e
s
a
r
F
M
r
e
s
a
r
F
M
'
s
P
M
K
r
a
e
Y
r
o
i
r
P
n
o
s
i
t
t
a
P
R
i
s
e
v
a
D
G
5
s
l
l
i
o
h
c
N
G
y
e
l
r
o
W
D
r
e
p
o
o
C
T
d
e
t
a
c
o
l
l
a
s
i
e
u
a
v
l
r
i
a
f
e
h
T
.
l
n
o
i
t
a
u
a
v
n
o
i
t
a
u
m
l
i
s
o
l
r
a
C
‐
e
t
n
o
M
a
g
n
i
s
u
s
t
r
e
p
x
e
t
n
e
d
n
e
p
e
d
n
i
l
l
y
b
d
e
t
a
u
c
l
a
c
e
r
e
w
d
n
a
s
e
d
r
u
h
R
S
T
f
o
t
n
e
m
e
v
e
h
c
a
o
t
i
j
t
c
e
b
u
s
e
r
a
l
s
n
a
p
s
t
h
g
i
r
e
c
n
a
m
r
o
f
r
e
p
2
2
0
2
d
n
a
1
2
0
2
,
0
2
0
2
e
h
t
r
e
d
n
u
d
e
t
n
a
r
g
s
t
h
g
i
r
e
c
n
a
m
r
o
f
r
e
p
f
o
e
u
a
v
l
r
i
a
f
e
h
T
3
.
5
6
e
g
a
o
t
d
e
r
e
f
f
o
y
l
n
o
s
i
e
c
n
a
r
u
s
n
i
n
o
i
t
c
e
t
o
r
p
e
m
o
c
n
I
2
.
r
a
e
y
l
a
i
c
n
a
n
i
f
0
2
0
2
e
h
t
r
o
f
s
t
n
e
m
j
t
s
u
d
a
9
1
D
V
O
C
f
o
t
e
n
I
,
y
r
a
a
s
l
r
e
h
t
o
d
n
a
e
s
a
b
s
e
d
u
l
c
n
i
y
r
a
a
S
l
1
.
0
2
0
2
e
n
u
J
0
3
d
e
d
n
e
r
a
e
y
e
h
t
g
n
i
r
u
d
d
e
s
n
e
p
x
e
s
t
h
g
i
r
e
c
n
a
m
r
o
f
r
e
p
e
h
t
l
f
o
e
u
a
v
r
i
a
f
e
h
t
f
o
n
o
i
t
r
o
p
e
h
t
s
i
l
e
v
o
b
a
e
b
a
t
n
o
i
t
a
r
e
n
u
m
e
R
e
h
t
n
i
l
d
e
s
o
l
c
s
i
d
e
u
a
v
e
h
T
.
e
t
a
d
g
n
i
t
s
e
v
e
h
t
o
t
t
n
a
r
g
f
o
e
t
a
d
e
h
t
m
o
r
f
y
l
n
e
v
e
d
o
i
r
e
p
g
n
i
t
r
o
p
e
r
h
c
a
e
o
t
8
1
0
2
r
e
b
m
e
t
p
e
S
0
3
n
o
P
M
K
a
e
b
o
t
d
e
s
a
e
c
g
n
i
L
n
a
h
t
a
n
o
J
4
.
9
1
0
2
y
a
M
6
n
o
P
M
K
a
e
b
o
t
d
e
s
a
e
c
s
l
l
o
h
c
i
N
y
u
G
5
8582_GUD_Holdings_Annual Report_2020_Mono.indd 36
8582_GUD_Holdings_Annual Report_2020_Mono.indd 36
9/9/20 12:00 pm
9/9/20 12:00 pm
Remuneration Report
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 Chief Financial Officer
during FY20 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 uneration 4
Total
rem uneration
$
$
$
2020 978,342 -
978,342
-
67,036
1,045,378
2019 737,500 -
737,500
-
12,939
750,439
Managing Director
G Whickman
G Whickman
Form er Managing Director
J P Ling
2019 259,254 -
259,254
380,380
(115,184)
524,450
Chief Financial Officer
M Fraser
M Fraser
Form er KMP's
R Pattison
G Davies
G Nicholls
D Worley
T Cooper
2020 621,161 -
621,161
-
46,262
667,423
2019 618,887 -
618,887
131,912
57,576
808,375
2019 600,000 -
600,000
113,974
(25,811)
688,163
2019 500,000 -
500,000
58,378
31,550
589,928
2019 575,000 -
575,000
96,817
166,141
837,958
2019 506,479 -
506,479
110,050
9,844
626,373
2019 515,000
183,314
698,314
97,828
50,807
846,949
Total rem uneration of the Managing Director and Senior Executives of the Group
2020 1,599,503 -
1,599,503 - -
113,298 -
1,712,801
2019 4,312,120
183,314
4,495,434 -
989,339
187,862 -
5,672,635
1.
2.
3.
Salary and super includes base and other salary and employer superannuation contributions.
The STI bonus column reflects the STI cash bonus paid in respect of performance during the year ended 30 June 2020 and
paid in late July 2020 following the announcement of the Group’s year‐end results.
LTI performance rights granted in July and October 2017 lapsed in full as a result of the company not meeting TSR targets on
30 June 2020. Refer section 5 for disclosure in respect of performance achievement.
4. Non‐monetary benefits include leave entitlements, income protection premiums, long service leave and certain personal
expenses.
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:
8582_GUD_Holdings_Annual Report_2020_Mono.indd 37
8582_GUD_Holdings_Annual Report_2020_Mono.indd 37
9/9/20 12:00 pm
9/9/20 12:00 pm
37
Remuneration Report
Managing Director
G Whickman
Chief Financial Officer
M Fraser
Total
Rights
granted
during
the year
ended
30 June 2020
Fair
value per
perform ance
right at
grant date
$
Fair value
of rights
granted
during the
year ended
30 June 2020
$
Grant
date
Vesting
date
58,686
24 October 2019
30 June 2022 5.37 315,144
18,635
25 July 2019
30 June 2022 5.41 100,815
77,321
415,959
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
Grant to Managing
Director
Grant to Senior
Executives
24 October 2019
30 June 2022 5.37
10.33
24.00
25 July 2019
30 June 2022 5.41
10.37
24.00
$
$
%
%
0.7
0.8
%
5.0
5.0
Performance Rights Outstanding
The following table discloses changes in the performance rights holdings of Senior Executive Key Management
Personnel 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 2019
Balance at
30 June 2020
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
58,686 - - 88,820 - -
88,820
46,216
18,635
(13,178)
(6,202)
45,471 -
(13,575)
31,896
76,350
77,321
(13,178)
(6,202)
134,291 -
(13,575)
120,716
Managing Director
G Whickman
Chief Financial Officer
M Fraser
Total
1 Performance rights granted under the 2020 performance rights plan lapsed in full on the basis of the Company not achieving the 50th percentile TSR
hurdle as at 30 June 2020.
Table of aggregate Performance Share Rights Outstanding as at 30 June 2020
Year of Grant
Year of Vesting
Num ber Granted Num ber Lapsed
Balance
Outstanding
2017
2018
2019
Total
2020 296,927 296,927 -
2021 256,578 36,542
220,036
2022 408,451 26,398
382,053
961,956 359,867
602,089
8582_GUD_Holdings_Annual Report_2020_Mono.indd 38
8582_GUD_Holdings_Annual Report_2020_Mono.indd 38
9/9/20 12:00 pm
9/9/20 12:00 pm
38
Remuneration Report
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 2019
Shares
purchased
Shares
sold
Balance at
30 June 2020
Number of shares
Shares to be
issued from
vested
perform ance
rights and
share plans 2
Shares to be
issued from
share plans 4
Balance at
the date of
this report
For the year ended 30 June 2020
Non-Executive Directors
M G Smith
58,000 - 8,000 - 66,000 - - 66,000
A L Templeman-Jones
6,442 - 1,200 - 7,642 - - 7,642
G A Billings
D D Robinson
J A Douglas5
11,250 - - - 11,250 - 656 11,906
13,000 - - - 13,000 - 1,664 14,664
- - - - - - -
-
Shares
issued from
vested
perform ance
rights 1
Balance at
1 July 2019
Shares
purchased
Shares
sold
Balance at
30 June 2020
Number of shares
Shares to be
issued from
vested
perform ance
rights and
share plans 2
Shares to be
issued from
share plans 4
Balance at
the date of
this report
2,000 - 25,000 - 27,000 - - 27,000
110,657 13,178 - - 123,835 - - 123,835
112,657 13,178 25,000 - 150,835 - - 150,835
For the year ended 30 June 2020
Managing Director
G Whickman
Chief Financial Officer
M Fraser 3
1 Performance rights granted under the 2019 performance rights plan vested at 68%. The issue of shares was approved by the Remuneration
Committee on 25 July 2019 (as disclosed in the Remuneration Report for the year ended 30 June 2019) and were allotted on 25 July 2019.
2 Performance rights granted under the 2020 performance rights plan lapsed in full on the basis of the Company not achieving the 50th percentile TSR
hurdle.
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 NED Share rights will after six months be satisfied by the Company purchasing shares on market.
5 Ms Douglas joined the Board on 1 March 2020
Link between Performance and Remuneration Outcomes
5.
The remuneration and incentive framework, which has been put in place by the Board, has ensured that the
Managing Director and Chief Financial Officer are focussed 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.
The Remuneration, People and Culture Committee considered the impact of COVID‐19 (felt most severely in the final
quarter of the financial year) but determined not to make any changes to the vesting in respect of any STI or LTI
incentives for the financial year ended 30 June 2020. No KMP was entitled to any STI or LTI in respect of FY20.
STI
The Managing Director and Chief Financial Officer, did not receive an STI bonus as the Group failed to achieve its
CVA target.
Maxim um STI
opportunity
Actual STI
bonus
paym ent 1
Actual STI
bonus paym ent
as a % of
m axim um STI
Disentitled
STI bonus payable for the year ended 30 June 2020
$
$
%
%
Managing Director
G Whickman
Chief Financial Officer
M Fraser
397,800
-
- 100
331,414
-
- 100
1
A minimum level of performance, including exceeding the previous year’s CVA, must be achieved before any STI bonus is payable.
39
8582_GUD_Holdings_Annual Report_2020_Mono.indd 39
8582_GUD_Holdings_Annual Report_2020_Mono.indd 39
9/9/20 12:00 pm
9/9/20 12:00 pm
Remuneration Report
The Remuneration, People and Culture 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, People and
Culture 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 ended 30 June 2020 was ‐1.2%, although this outcome is not
determinative of vesting for the grant vesting in FY20.
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
30 June 2020
82.3 56.6 37.0 10.01 11.51
3.2 47.2
1 EBIT pre significant items and basic EPS pre significant items 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 2020 was at the 47th percentile, that is below the median company of the
comparator group. In accordance with the plan rules, the Board noted the lapsing of the performance rights, which
were due to vest in respect of the period ended 30 June 2020.
Service Agreements
6.
Remuneration and other terms of employment for Executives are formalised in a service agreement.
The essential terms of the Managing Director and Chief Financial Officer contracts are shown below:
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.
M Fraser
Unlimited in term.
On termination, Mr Fraser is entitled to receive statutory entitlements of accrued annual and
Three months’ notice by either party (or payment in lieu).
long service leave.
Non‐Executive Directors’ Remuneration
7.
Non‐Executive Directors’ fees are not ‘at risk’, to reflect the nature of their responsibilities.
As a result of COVID‐19, and aligned with changes at executive level, two principal changes have been enacted in
respect of Non‐Executive Directors’ fees:
1. Non‐Executive Directors agreed to temporary fixed remuneration reductions of 20% per annum (pro‐rata) late
in the fourth quarter of the year ended 30 June 2020.
2. A decision was made to defer any increase in Directors’ fees up to December 2020.
40
8582_GUD_Holdings_Annual Report_2020_Mono.indd 40
8582_GUD_Holdings_Annual Report_2020_Mono.indd 40
9/9/20 12:00 pm
9/9/20 12:00 pm
Remuneration Report
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, People and
Culture 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 2020 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
289,107 15,000 15,000 15,000
Members of
114,664 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, however there is provision
for Non‐Executive Directors to convert a percentage of their prospective fees into GUD shares.
During the financial year, the Company introduced a Non‐Executive Director Equity Plan, permitting Non‐Executive
Directors to voluntarily sacrifice fees in return for Share Rights which vest as fully paid up ordinary shares in GUD
after six months. Share Rights are granted quarterly, the number being based upon dividing the accumulated amount
sacrificed over the immediately preceding three month period by the volume weighted average price of GUD shares
in the five trading days before grant. In future, Directors will need to make their election on the level of participation
and the percentage of fee sacrifice prior to the commencement of a financial year. As at 30 June 2020, two Non‐
Executive Directors have participated in the Plan.
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.
8582_GUD_Holdings_Annual Report_2020_Mono.indd 41
8582_GUD_Holdings_Annual Report_2020_Mono.indd 41
9/9/20 12:00 pm
9/9/20 12:00 pm
41
Remuneration Report
Remuneration
Details of the nature and amount of each element of the remuneration of Non‐Executive Directors for the year
ended 30 June 2020 are set out in the table below.
Non-Executive Directors
M G Smith
Directors’ Fees
Superannuation 1
Fees converted to
Equity2
Year
$
$
Total
$
2020 289,107
25,000
- 314,107
2019 287,752 25,000
- 312,752
A L Templeman-Jones
2020 139,664
13,493
-
153,157
G A Billings
D D Robinson
J Douglas3
2019 139,247 13,228
- 152,475
2020 139,664
13,493
(7,009)
146,148
2019 139,247 13,228
- 152,475
2020 139,664
13,493
(17,756)
135,401
2019 139,247 13,228
- 152,475
2020 41,652 4,166 -
45,818
Total Remuneration of Non-Executive Directors
2020 749,751
69,645
(24,765)
794,631
2019 705,493 64,684 - 770,177
1
2
3
Superannuation contributions on behalf of Non‐Executive Directors to satisfy the Company’s obligations under applicable Superannuation
Guarantee legislation.
The Company introduced a Non‐Executive Directors share plan during the year, and these represent the amounts sacrificed by the Non‐Executive
Directors during the year.
Ms Douglas joined the Board on 1 March 2020
8.
Other KMP Transactions
Loans to KMPs
The Company entered into an Equity Loan Agreement in the amount of $228,000 with the Managing Director and
CEO, Mr Graeme Whickman which enabled him to acquire 25,000 shares in the Company in September 2019. Mr
Whickman pays interest on the loan on a quarterly basis at a rate that is set at 25 basis points above the Company’s
average cost of borrowed funds.
There were no other loans to KMPs at 30 June 2020 (2019: nil).
Other KMP Transactions with the Group
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.
8582_GUD_Holdings_Annual Report_2020_Mono.indd 42
8582_GUD_Holdings_Annual Report_2020_Mono.indd 42
9/9/20 12:00 pm
9/9/20 12:00 pm
42
GUD Holdings Limited and Subsidiaries
Consolidated Financial Statements
Consolidated Income Statement ..................................................................................................................................... 44
Consolidated Statement of Comprehensive Income....................................................................................................... 45
Consolidated Balance Sheet ............................................................................................................................................ 46
Consolidated Statement of Changes in Equity ................................................................................................................ 47
Consolidated Cash Flow Statement ................................................................................................................................ 48
1.
Basis of preparation ............................................................................................................................................... 49
Results for the Year ......................................................................................................................................................... 53
Revenue .................................................................................................................................................................. 53
2.
Expenses ................................................................................................................................................................. 55
3.
4. Net finance costs .................................................................................................................................................... 56
5.
Earnings per share .................................................................................................................................................. 57
6. Auditors' remuneration .......................................................................................................................................... 57
Segment information ............................................................................................................................................. 58
7.
Working Capital ............................................................................................................................................................... 61
Trade and other receivables ................................................................................................................................... 61
8.
9.
Inventories.............................................................................................................................................................. 62
10. Trade and other payables ....................................................................................................................................... 63
11. Employee benefits .................................................................................................................................................. 63
12. Warranty provisions ............................................................................................................................................... 64
Tangible and Intangible Assets ........................................................................................................................................ 65
13. Goodwill ................................................................................................................................................................. 65
14. Other intangible assets ........................................................................................................................................... 65
15. Property, plant and equipment .............................................................................................................................. 67
16. Leases ..................................................................................................................................................................... 68
17.
Impairment testing ................................................................................................................................................. 69
18. Commitments for expenditure ............................................................................................................................... 70
Capital Structure and Financing Costs ............................................................................................................................. 71
19. Cash and cash equivalents ...................................................................................................................................... 71
20. Borrowings ............................................................................................................................................................. 72
21. Derivatives .............................................................................................................................................................. 74
22. Other financial instruments .................................................................................................................................... 76
23. Financial instruments ............................................................................................................................................. 77
24. Financial risk management ..................................................................................................................................... 82
25. Share capital ........................................................................................................................................................... 86
26. Reserves ................................................................................................................................................................. 86
27. Retained earnings ................................................................................................................................................... 88
28. Dividends ................................................................................................................................................................ 88
Taxation .......................................................................................................................................................................... 89
29. Current tax ............................................................................................................................................................. 89
30. Deferred tax ........................................................................................................................................................... 90
Business Combinations ................................................................................................................................................... 93
31.
Investment in subsidiaries ...................................................................................................................................... 93
Other Notes .................................................................................................................................................................... 97
32. Superannuation commitments ............................................................................................................................... 97
33. Key management personnel ................................................................................................................................... 97
34. Related parties ....................................................................................................................................................... 99
35. Parent entity disclosures ........................................................................................................................................ 99
36. Contingent liabilities ............................................................................................................................................. 100
37. Subsequent events ............................................................................................................................................... 100
Directors’ Declaration ................................................................................................................................................... 101
Lead Auditor’s Independence Declaration .................................................................................................................... 102
Independent Auditor’s Report ...................................................................................................................................... 103
8582_GUD_Holdings_Annual Report_2020_Mono.indd 43
8582_GUD_Holdings_Annual Report_2020_Mono.indd 43
9/9/20 12:00 pm
9/9/20 12:00 pm
43
GUD Holdings Limited and Subsidiaries
Consolidated Income Statement
For the year ended 30 June
Revenue
Cost of goods sold
Gross Profit
Other income
Government grants
Marketing and selling
Product development and sourcing
Logistics expenses and outward freight
Administration
Impairment of brand name
Other
Results from operating activities
Net finance cost
Profit before tax
Income tax expense
Profit from operations, net of income tax
Profit attributable to owners of the Company
Earnings per share:
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
Note
2
7
4
29
5
5
2020^
$'000
438,016
(234,981)
203,035
1,020
2,950
(53,685)
(12,555)
(24,558)
(35,011)
(2,115)
(4,820)
74,261
(10,614)
63,647
(19,969)
43,678
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
43,678
59,558
50.4
50.0
68.9
68.4
^ The Group has initially applied AASB 16 using the modified retrospective approach. Under this approach, comparative information is not restated and the cumulative
effect of initially applying AASB 16 is recognised in retained earnings (refer note 1).
The notes on pages 49 to 100 are an integral part of these consolidated financial statements.
8582_GUD_Holdings_Annual Report_2020_Mono.indd 44
8582_GUD_Holdings_Annual Report_2020_Mono.indd 44
9/9/20 12:00 pm
9/9/20 12:00 pm
44
GUD Holdings Limited and Subsidiaries
Consolidated Statement of Comprehensive Income
For the year ended 30 June
Note
2020^
$'000
2019
$'000
Profit for the year from continuing operations
43,678
59,558
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
23
26
26
26
26
29
‐
(598)
(537)
3,237
(3,578)
1,796
102
539
1,077
(4,086)
1,761
903
Other comprehensive income / (loss) for the year, net of tax
1,020
(404)
Total comprehensive Profit attributable to owners of the Company
44,698
59,154
Total comprehensive Profit
44,698
59,154
^ The Group has initially applied AASB 16 using the modified retrospective approach. Under this approach, comparative information is not
restated and the cumulative effect of initially applying AASB 16 is recognised in retained earnings (refer note 1).
The notes on pages 49 to 100 are an integral part of these consolidated financial statements.
8582_GUD_Holdings_Annual Report_2020_Mono.indd 45
8582_GUD_Holdings_Annual Report_2020_Mono.indd 45
9/9/20 12:00 pm
9/9/20 12:00 pm
45
GUD Holdings Limited and Subsidiaries
Consolidated Balance Sheet
As at 30 June
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
Right of use assets1
Other financial assets
Investments
Total non‐current assets
Total assets
Current liabilities
Trade and other payables
Employee benefits
Restructuring provisions
Warranty provisions
Other provisions
Borrowings
Lease liabilities1
Derivative liabilities
Other financial liabilities
Current tax payable
Total current liabilities
Non‐current liabilities
Employee benefits
Borrowings
Lease liabilities1
Derivative liabilities
Other financial liabilities
Deferred tax liabilities
Other non‐current liabilities
Total non‐current liabilities
Total liabilities
Net assets
Note
19
8
9
21
22
13
14
15
16
22
23
10
11
12
20
21
22
11
20
16
21
22
30
2020
$'000
29,987
114,479
108,180
549
1,176
791
5,261
260,423
162,149
121,436
16,495
77,246
4,111
1,734
383,171
643,594
65,100
12,147
51
468
870
‐
10,058
1,284
3,250
3,714
96,942
1,308
172,139
69,904
758
‐
27,701
57
271,867
368,809
274,785
Restated^
2019
$'000
28,850
106,827
108,951
898
756
4
4,579
250,865
162,708
124,219
14,082
‐
1,978
1,734
304,721
555,586
57,636
11,164
1,189
580
617
3,787
‐
247
1,625
9,319
86,164
1,281
157,784
‐
1,468
802
29,414
34
190,783
276,947
278,639
Equity
Share Capital
Reserves
Retained earnings1
112,880
9,981
155,778
278,639
Total equity
1 The Group has initially applied AASB 16 using the modified retrospective approach. Under this approach, comparative information is not restated and the cumulative
112,880
11,001
150,904
25
26
27
274,785
effect of initially applying AASB 16 is recognised in retained earnings (refer note 1).
^ The Group has retrospectively applied IFRS Interpretations Committee (IFRIS IC) Multiple Tax Consequences of Recovering an Asset (IAS 12 Income taxes). As a result
of the change in accounting policy, additional Goodwill has been recognised and Deferred Tax Liabilities has increased (refer note 1).
The notes on pages 49 to 100 are an integral part of these consolidated financial statements.
46
8582_GUD_Holdings_Annual Report_2020_Mono.indd 46
8582_GUD_Holdings_Annual Report_2020_Mono.indd 46
9/9/20 12:00 pm
9/9/20 12:00 pm
GUD Holdings Limited and Subsidiaries
Consolidated Statement of Changes in Equity
For the year ended 30 June
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
2020^
$'000
2019
$'000
278,639
265,322
26
28
43,678
(776)
1,796
44,698
59,558
(2,165)
1,761
59,154
(48,552)
(48,552)
(45,837)
(45,837)
274,785
278,639
^The Group has initially applied AASB 16 using the modified retrospective approach. Under this approach, comparative information is not restated and the cumulative
effect of initially applying AASB 16 is recognised in retained earnings (refer note 1).
The amounts recognised directly in equity are net of tax.
The notes on pages 49 to 100 are an integral part of these consolidated financial statements.
8582_GUD_Holdings_Annual Report_2020_Mono.indd 47
8582_GUD_Holdings_Annual Report_2020_Mono.indd 47
9/9/20 12:00 pm
9/9/20 12:00 pm
47
GUD Holdings Limited and Subsidiaries
Consolidated Cash Flow Statement
For the year ended 30 June
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Income taxes paid
Receipt of Government grants
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 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
Payment of lease liabilities (2019: payment of finance lease liabilities)
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
Note
2020
$'000
2019
$'000
19
31a
15
14
20
20
20
20
20
16
28
20
470,974
(380,335)
(28,075)
2,950
65,514
474,189
(402,447)
(27,218)
‐
44,524
‐
‐
104
(6,489)
‐
(6,385)
175,805
(164,697)
(2,553)
94
(6,320)
(11,229)
(48,552)
(57,452)
1,677
28,850
(540)
(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
(255)
Cash at the end of the year
19
29,987
28,850
The notes on pages 49 to 100 are an integral part of these consolidated financial statements.
8582_GUD_Holdings_Annual Report_2020_Mono.indd 48
8582_GUD_Holdings_Annual Report_2020_Mono.indd 48
9/9/20 12:00 pm
9/9/20 12:00 pm
48
GUD Holdings Limited and Subsidiaries
1. Basis of preparation
This section sets out the Group’s accounting policies that relate to the consolidated 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 2020 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 and France (Note 7).
The consolidated annual financial statements of the Group as at and for the year ended 30 June 2020 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 28 July 2020.
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 consolidated 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 21)
Other financial instruments (Note 22)
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, and in the current year the
estimates and judgements incorporate the impact of uncertainties associated with COVID‐19 (where relevant).
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 13) and other intangible assets (Notes 14, 31): impairment test of intangible assets and
goodwill
Trade and other receivables (Note 8): measurement of Expected Credit Loss (ECL) allowance for trade
receivables and contract assets
Financial instruments (Note 23)
Inventories (Note 9): valuation of assets at net realisable value
Other financial instruments (Note 22): contingent consideration
Leases (Note 16): lease term “whether the Group is reasonably certain to exercise extension options”.
8582_GUD_Holdings_Annual Report_2020_Mono.indd 49
8582_GUD_Holdings_Annual Report_2020_Mono.indd 49
9/9/20 12:00 pm
9/9/20 12:00 pm
49
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 26), and
Exchange differences on translating foreign operations (Note 26).
New standards, interpretations and amendments adopted by the Group
The Group initially applied AASB 16 Leases from 1 July 2019. A number of other new standards are also effective
from 1 July 2019, which do not have a material effect on the Group’s financial statements.
The Group applied AASB 16 using the modified retrospective approach, under which the cumulative effect of initial
application is recognised in retained earnings at 1 July 2019. Accordingly, the comparative information presented
for 2019 is not restated – i.e. it is presented, as previously reported, under AASB 117 and related interpretations.
The details of the changes in accounting policies are disclosed below. Additionally, the disclosure requirements in
AASB 16 have not generally been applied to comparative information.
a) Definition of a lease
Previously, the Group determined at contract inception whether an arrangement was or contained a lease under
IFRIC 4 Determining whether an Arrangement contains a Lease. The Group now assesses whether a contract is or
contains a lease based on the new definition of a lease. Under AASB 16, a contract is, or contains, a lease if the
contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration.
On transition to AASB 16, the Group elected to apply the practical expedient to grandfather the assessment of which
transactions are leases. It applied AASB 16 only to contracts that were previously identified as leases. Contracts that
were not identified as leases under AASB 117 and IFRIC 4 were not reassessed for whether there is a lease under
AASB 16. Therefore, the definition of a lease under AASB 16 has been applied only to contracts entered into or
changed on or after 1 July 2019.
b) As a lessee
As a lessee, the Group leases many assets including property, motor vehicles, forklifts and IT equipment. The Group
previously classified leases as operating or finance leases based on its assessment of whether the lease transferred
significantly all of the risks and rewards incidental to ownership of the underlying asset to the Group. Under AASB
16, the Group recognises right‐of‐use assets and lease liabilities for most of these leases – i.e. these leases are on‐
balance sheet.
At commencement or on modification of a contract that contains a lease component, the Group allocates the
consideration in the contract to each lease component on the basis of its relative stand‐alone price. However, for
leases of property the Group has elected not to separate non‐lease components and account for the lease and
associated non‐lease components as a single lease component.
i. Leases classified as operating leases under AASB 117
Previously, the Group classified property leases as operating leases under AASB 117. On transition, for these leases,
lease liabilities were measured at the present value of the remaining lease payments, discounted at the Group’s
incremental borrowing rate as at 1 July 2019.
50
8582_GUD_Holdings_Annual Report_2020_Mono.indd 50
8582_GUD_Holdings_Annual Report_2020_Mono.indd 50
9/9/20 12:00 pm
9/9/20 12:00 pm
GUD Holdings Limited and Subsidiaries
1. Basis of preparation (continued)
New standards, interpretations and amendments adopted by the Group (continued)
b) As a lessee (continued)
Right‐of‐use assets are measured at an amount equal to the lease liability, adjusted by the amount of any prepaid
or accrued lease payments.
The Group has tested its right‐of‐use assets for impairment on the date of transition and has concluded that there
is no indication that the right‐of‐use assets are impaired.
The Group used a number of practical expedients when applying AASB 16 to leases previously classified as operating
leases under AASB 117. In particular, the Group:
did not recognise right‐of‐use assets and liabilities for leases for which the lease term ends within 12 months
of the date of initial application;
did not recognise right‐of‐use assets and liabilities for leases of low value assets (e.g. IT equipment);
excluded initial direct costs from the measurement of the right‐of‐use asset at the date of initial application;
and
Impact on financial statements
used hindsight when determining the lease term.
c)
i. Impact on transition
On transition to AASB 16, the Group recognised additional right of use assets, including property and additional lease
liabilities. The impact transition is summarised below.
Right of use assets
1 July 2019
‘000
88,957
88,957
Lease liabilities
When measuring lease liabilities for leases that were classified as operating leases, the Group discounted lease
payments using its incremental borrowing rate at 1 July 2019. The weighted average rate applied is 4.24%
Operating lease commitment at 30 June 2019 as disclosed in the Group’s consolidated financial statements
Discounted using the incremental borrowing rate at 1 July 2019
Recognition of exemption for leases with less than 12 months of lease term and low value assets at
transition
Extension options reasonably certain to be exercised
Lease liabilities recognised at 1 July 2019
1 July 2019
‘000
44,649
(9,917)
(421)
54,646
88,957
New interpretation adopted in the current year
Multiple Tax Consequences of Recovering an Asset (IAS 12)
In May 2020, IFRS Interpretations Committee (IFRS IC) published its final agenda decision ‘Multiple Tax
Consequences of Recovering an Asset (IAS 12 Income Taxes) which considers how an entity accounts for deferred
taxes on an asset that has two distinct tax consequences over its life that cannot be offset (taxable economic benefits
from use and capital gains on disposal or expiry). The IFRS IC concluded that in these circumstances, an entity
identifies separate temporary differences (and deferred taxes) that reflect these distinct and separate tax
consequences of recovering the assets carrying amount.
The Group’s accounting policy has been to consider these two tax consequences of recovering the assets carrying
amount together as they crystallised over the assets life, irrespective of how the asset was recovered. This
accounting policy does not align with the IFRS IC agenda decision. As a result of the IFRS IC agenda decision, GUD
Holdings Limited has changed its accounting policy, retrospectively adjusting the deferred tax accounting for
impacted assets and intangibles.
8582_GUD_Holdings_Annual Report_2020_Mono.indd 51
8582_GUD_Holdings_Annual Report_2020_Mono.indd 51
9/9/20 12:00 pm
9/9/20 12:00 pm
51
GUD Holdings Limited and Subsidiaries
1. Basis of preparation (continued)
New interpretation adopted in the current year (continued)
Multiple Tax Consequences of Recovering an Asset (IAS 12) (continued)
The impact of this change in accounting policy for the comparative reporting period and the beginning of the earliest
period presented are presented below:
Consolidated statement
of financial position (As at
30 June 2019)
Previously reported
$’000
Adjustments
$’000
Assets
Goodwill
Deferred tax assets
Non‐current assets
Total assets
Liabilities
Deferred tax liabilities
Non‐current liabilities
Total liabilities
125,493
7,801
275,307
526,172
‐
161,369
247,533
37,215
(7,801)
29,414
29,414
29,414
29,414
29,414
Consolidated statement
of financial position (As at
1 July 2018)
Previously reported
$’000
Adjustments
$’000
Assets
Goodwill
Deferred tax assets
Non‐current assets
Total assets
Liabilities
Deferred tax liabilities
Non‐current liabilities
Total liabilities
115,396
7,927
256,686
500,365
‐
148,496
235,043
37,215
(7,927)
29,288
29,288
29,288
29,288
29,288
Restated
$’000
162,708
‐
304,721
555,586
29,414
190,783
276,947
Restated
$’000
152,611
‐
285,974
529,653
29,288
177,784
264,331
This change in accounting policy had no impact on the consolidated income statement or the cash flows for the years
ended 30 June 2020 or 2019.
8582_GUD_Holdings_Annual Report_2020_Mono.indd 52
8582_GUD_Holdings_Annual Report_2020_Mono.indd 52
9/9/20 12:00 pm
9/9/20 12:00 pm
52
GUD Holdings Limited and Subsidiaries
Results for the Year
This section focusses 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 Earnings Before Significant Items, Interest and Tax (“EBIT pre
significant items”), 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
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).
For the year ended 30 June 2020
For the year ended 30 June 2019
Segments
Automotive
Davey
Total
Automotive
Davey
Total
Type of goods or services
$’000
$’000
$’000
$’000
$’000
$’000
Sale of goods
330,748
105,602
436,350
330,002
102,066 432,068
Water solutions project income
‐
1,666
1,666
‐
2,009
2,009
Total Revenue from contracts
with customers
Geographical markets
Australia
New Zealand
Other
Total revenue from contracts
with customers
Timing of revenue recognition
Goods transferred at a point in
time
330,748
107,268
438,016
330,002
104,075 434,077
298,978
88,334
387,312
297,053
83,646 380,699
31,770
11,987
43,757
32,949
13,825
46,774
‐
6,947
6,947
‐
6,604
6,604
330,748
107,268
438,016
330,002
104,075 434,077
330,748
105,602
436,350
330,002
102,066 432,068
Services transferred over time
‐
1,666
1,666
‐
2,009
2,009
Total Revenue from contracts
with customers
330,748
107,268
438,016
330,002
104,075 434,077
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 $444,000 and $220,000 for
the year ended 30 June 2020 and 2019 (estimated under AASB 9), 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
2020
2019
Automotive
Davey
Automotive
Davey
$’000
$’000
$’000
$’000
372,082
111,396
365,672
107,802
(41,334)
(4,128)
(35,670)
(3,727)
Total revenue from contracts with customers
330,748
107,268
330,002
104,075
53
8582_GUD_Holdings_Annual Report_2020_Mono.indd 53
8582_GUD_Holdings_Annual Report_2020_Mono.indd 53
9/9/20 12:00 pm
9/9/20 12:00 pm
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
2020
$'000
2019
$'000
389
883
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. The contract assets are transferred to receivables when the rights become
unconditional. This usually occurs when the Group issues an invoice to the customer.
b) Performance obligations and revenue recognition policies
Revenue is measured based on the consideration specified in a contract with a customer. The Group recognises
revenue when it transfers control over a good or service to a customer.
The following table provides information about the nature and timing of the satisfaction of performance obligations
in contracts with customers, including significant payment terms, and the related revenue recognition policies.
Type of product/service
(i) Sale of automotive
products, pumps, pool
and spa systems and
water pressure systems
Nature and timing of satisfaction
of performance obligations,
including significant payment
terms
Customers assume control of the
products, when the goods have
been delivered to, and have been
accepted at their premises. Invoices
are generated at that point in time.
Invoices are usually payable within
30 ‐ 180 days.
Customers contracts offer sales
with right of return, volume rebates
and marketing rebates.
Revenue recognition policies
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.
Right of return
For contracts that permit the customer to
return an item, revenue is recognised to the
extent that it is probable that a significant
reversal in the cumulative revenue 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. In these circumstances, a refund
liability and a right to recover returned goods
asset are recognised. The right to recover
returned goods asset is measured at the
former carrying amount of the inventory less
any expected costs to recover goods. The
refund liability is included in other payables
and the right to recover returned goods is
included in inventory. The Group reviews its
estimate of expected returns at each reporting
date and updates the amounts of the asset and
liability accordingly.
Volume rebates
Retrospective volume rebates give rise to
variable consideration. Therefore, the amount
of revenue is adjusted to reflect expected
volume rebates. To estimate the variable
consideration, the Group uses historical
average volume rebates to forecast expected
volume rebates payable to its customers.
Expected future rebates are recognised as
contract liabilities.
54
8582_GUD_Holdings_Annual Report_2020_Mono.indd 54
8582_GUD_Holdings_Annual Report_2020_Mono.indd 54
9/9/20 12:00 pm
9/9/20 12:00 pm
GUD Holdings Limited and Subsidiaries
2. Revenue (continued)
b) Performance obligations and revenue recognition policies (continued)
Nature and timing of satisfaction
of performance obligations,
including significant payment
terms
Type of product/service
(i) Sale of automotive
products, pumps, pool
and spa systems and
water pressure systems
(Continued)
Revenue recognition policies
Marketing rebates
The nature of the marketing activity will
determine the treatment of the transaction,
i.e. if a 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 would be treated as marketing
expense.
(ii) Water
contract revenue
treatment
Davey Water undertakes projects to
design, build and install custom
water systems for its customers.
Revenue from water treatment solutions is
recognised over time. The Group measures
progress by using the output method.
The length of the contract depends
on the complexity of the project but
usually does not extend beyond 6
months.
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
to 12 years
3
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
to 15 years
to 7 years
5
5
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.
8582_GUD_Holdings_Annual Report_2020_Mono.indd 55
8582_GUD_Holdings_Annual Report_2020_Mono.indd 55
9/9/20 12:00 pm
9/9/20 12:00 pm
55
GUD Holdings Limited and Subsidiaries
3. Expenses (continued)
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/short term or low value lease expense
Net foreign exchange (gain)/loss
Employee benefits:
Wages and salaries (including on‐costs)
Contributions to defined contribution plans
Movements in provisions for employee benefits
Equity settled share based payment expense
Depreciation and amortisation:
Amortisation of customer relationships
Amortisation of software
Amortisation of other intangibles
Amortisation of brand names
Depreciation of plant and equipment
Depreciation of leased plant and equipment
Total depreciation and amortisation
Product development and sourcing costs
Significant items:
Transaction expenses1
Redundancy costs1
Impairment of inventory1
Impairment of brand names
Total significant items
Note
26
14
14
14
14
15
16
7
7
17
2020
$'000
1,274
340
905
(3,336)
73,184
2,707
(1,020)
1,796
319
18
140
303
3,632
10,588
15,000
12,555
‐
1,594
2,750
2,115
6,459
2019
$'000
253
117
9,423
(4,217)
77,394
2,647
(344)
1,761
319
2
‐
‐
2,958
19
3,298
11,317
58
1,810
‐
‐
1,868
1.
These costs are included as administration expenses in the Consolidated Income Statement.
4. Net finance costs
Accounting policies
Finance income
Finance income is comprised of interest income, fair value gains on interest rate hedging instruments and gains on
disposals of available for sale financial assets. Interest income is recognised on a time proportionate basis that takes
into account the effective yield on the financial asset.
Finance costs
Finance costs are classified as expenses consistent with the balance sheet classification of the related debt or equity
instruments. Finance costs are comprised of interest expense on borrowings and fair value losses on interest rate
hedging instruments through the income statement. Interest expense on borrowings is recognised on an effective
interest basis. This table summarises net finance costs from continuing operations:
Finance costs:
Interest income
Interest expense
Interest on lease liabilities
Net foreign exchange (gain) / loss
Unwinding of discount on contingent consideration payable
Net finance costs
2020
$'000
(94)
6,320
3,360
(116)
1,144
10,614
The ineffective portion of cash flow hedges that is recognised in the income statement is nil (2019: nil).
2019
$'000
(126)
7,448
‐
(530)
‐
6,792
56
8582_GUD_Holdings_Annual Report_2020_Mono.indd 56
8582_GUD_Holdings_Annual Report_2020_Mono.indd 56
9/9/20 12:00 pm
9/9/20 12:00 pm
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.
Profit / (loss) for the period
Weighted average number of ordinary shares used as the denominator for basic EPS
Effect of balance of performance rights outstanding at 30 June
Weighted average number of ordinary shares used as the denominator for diluted
EPS
EPS
Basic EPS
Diluted EPS
Total
2020
$'000
43,678
Number
2019
$'000
59,558
Number
86,683,486 86,485,972
629,745
684,098
87,367,584 87,115,717
Cents per
share
Cents per
share
50.4
50.0
68.9
68.4
6. Auditors' remuneration
This table summarises auditors’ remuneration incurred in relation to continuing operations:
Audit and review services:
The auditor of GUD Holdings Limited
‐ audit and review of financial reports
Other services:
The auditor of GUD Holdings Limited
‐ in relation to taxation advice and compliance
2020
$
2019
$
518,422
518,422
573,000
573,000
247,363
247,363
264,595
264,595
57
8582_GUD_Holdings_Annual Report_2020_Mono.indd 57
8582_GUD_Holdings_Annual Report_2020_Mono.indd 57
9/9/20 12:00 pm
9/9/20 12:00 pm
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.
Geographical segments
The Group operates primarily in two geographical segments; Australia and New Zealand. Refer Note 2 for
geographical sales disclosure.
8582_GUD_Holdings_Annual Report_2020_Mono.indd 58
8582_GUD_Holdings_Annual Report_2020_Mono.indd 58
9/9/20 12:00 pm
9/9/20 12:00 pm
58
l
a
t
o
T
0
0
0
$
'
6
1
0
,
8
3
4
0
2
7
,
5
9
)
0
2
2
,
4
1
(
)
0
8
7
(
0
2
7
,
0
8
)
0
5
7
2
(
,
)
5
1
1
2
(
,
)
4
9
5
1
(
,
1
6
2
,
4
7
0
1
2
)
0
6
3
3
(
,
)
4
6
4
7
(
,
7
4
6
,
3
6
8
7
6
,
3
4
)
9
6
9
,
9
1
(
4
9
5
,
3
4
6
9
0
8
,
8
6
3
1
5
9
,
3
5
0
2
0
2
e
n
u
J
0
3
d
e
d
n
e
r
a
e
y
e
h
t
r
o
F
‐
0
0
0
$
'
)
1
(
)
1
1
7
(
)
8
7
2
,
8
(
)
0
9
9
,
8
(
‐
‐
‐
)
0
9
9
,
8
(
4
9
)
8
0
6
(
)
4
8
1
7
(
,
2
7
2
,
5
)
8
8
6
,
6
1
(
)
6
1
4
,
1
1
(
1
5
9
9
0
,
0
1
7
9
7
,
3
9
1
1
d
e
t
a
c
o
l
l
a
n
U
y
e
v
a
D
0
0
0
$
'
8
6
2
,
7
0
1
‐
6
0
0
,
3
1
)
4
7
2
4
(
,
2
3
7
,
8
)
0
0
5
2
(
,
)
5
1
1
2
(
,
)
2
9
3
1
(
,
5
2
7
,
2
6
1
1
)
5
1
3
(
)
7
5
1
(
9
6
3
,
2
1
8
0
,
1
)
8
8
2
1
(
,
8
9
0
,
7
0
9
2
,
9
2
7
4
7
,
1
2
1
0
0
0
$
'
8
4
7
,
0
3
3
e
v
i
t
o
m
o
t
u
A
‐
2
9
9
,
0
9
)
5
3
2
9
(
,
)
9
7
7
(
)
0
5
2
(
8
7
9
,
0
8
‐
)
2
0
2
(
6
2
5
,
0
8
)
3
2
1
(
)
7
3
4
2
(
,
6
6
9
,
7
7
)
3
5
9
,
3
2
(
3
1
0
,
4
5
8
4
7
,
1
1
5
2
2
7
,
5
4
1
2
0
8
,
6
4
t
h
g
i
r
n
o
i
l
l
i
.
m
0
6
4
6
8
$
d
e
s
i
n
g
o
c
e
r
p
u
o
r
G
e
h
t
,
t
l
u
s
e
r
a
s
A
.
s
e
s
a
e
l
g
n
i
t
a
r
e
p
o
s
a
d
e
i
f
i
s
s
a
l
c
y
l
s
u
o
i
v
e
r
p
e
r
e
w
t
a
h
t
s
t
c
a
r
t
n
o
c
e
s
a
e
l
r
o
f
s
e
i
t
i
l
i
b
a
i
l
e
s
a
e
l
d
n
a
s
t
e
s
s
a
e
s
u
f
o
t
h
g
i
r
f
o
n
o
i
t
i
n
g
o
c
e
r
e
h
t
s
e
r
i
u
q
e
r
h
c
i
h
w
6
1
B
S
A
A
d
e
i
l
p
p
a
y
l
l
a
i
t
i
n
i
s
a
h
p
u
o
r
G
e
h
t
,
9
1
0
2
y
l
u
J
1
t
A
^
y
n
a
p
m
o
C
e
h
t
l
f
o
s
r
e
n
w
o
o
t
e
b
a
t
u
b
i
r
t
t
a
)
s
s
o
l
(
/
t
i
f
o
r
P
x
a
t
e
r
o
f
e
b
)
s
s
o
l
(
/
t
i
f
o
r
P
e
s
n
e
p
x
e
x
a
T
e
r
u
t
i
d
n
e
p
x
e
l
a
t
i
p
a
c
t
n
e
m
g
e
S
^
s
e
i
t
i
l
i
b
a
i
l
t
n
e
m
g
e
S
^
s
t
e
s
s
a
t
n
e
m
g
e
S
i
s
e
i
r
a
d
i
s
b
u
S
d
n
a
d
e
t
i
m
i
L
i
l
s
g
n
d
o
H
D
U
G
)
d
e
u
n
i
t
n
o
c
(
n
o
i
t
a
m
r
o
f
n
i
t
n
e
m
g
e
S
.
7
)
l
a
n
r
e
t
x
e
(
e
u
n
e
v
e
r
t
n
e
m
g
e
s
l
a
t
o
T
s
t
n
e
m
g
e
s
s
s
e
n
i
s
u
B
s
m
e
t
i
t
n
a
c
i
f
i
n
g
i
s
‐
e
r
p
A
D
T
I
B
E
l
i
s
e
b
g
n
a
t
n
i
f
o
n
o
i
t
a
s
i
t
r
o
m
A
:
s
s
e
L
n
o
i
t
a
i
c
e
r
p
e
D
:
s
s
e
L
3
s
e
m
a
n
d
n
a
r
b
f
o
t
n
e
m
r
i
a
p
m
I
s
m
e
t
i
t
n
a
c
i
f
i
n
g
i
s
‐
e
r
p
T
I
B
E
2
y
r
o
t
n
e
v
n
i
f
o
t
n
e
m
r
i
a
p
m
I
)
T
I
B
E
(
t
l
u
s
e
r
t
n
e
m
g
e
S
4
s
t
s
o
c
g
n
i
r
u
t
c
u
r
t
s
e
R
y
t
i
l
i
b
a
i
l
e
m
o
c
n
i
t
s
e
r
e
t
n
I
e
s
a
e
l
n
o
t
s
e
r
e
t
n
I
e
s
n
e
p
x
e
t
s
e
r
e
t
n
I
e
v
i
t
c
e
p
s
o
r
t
e
r
d
e
i
f
i
d
o
m
e
h
t
g
n
i
s
u
6
1
B
S
A
A
d
e
i
l
p
p
a
s
a
h
p
u
o
r
G
e
h
T
.
0
2
0
2
e
n
u
J
0
3
t
a
s
a
s
t
n
e
m
g
e
s
d
e
t
a
c
o
l
l
a
n
U
d
n
a
y
e
v
a
D
,
e
v
i
t
o
m
o
t
u
A
e
h
t
n
i
d
e
d
u
l
c
n
i
e
r
a
s
e
i
t
i
l
i
b
a
i
l
d
n
a
s
t
e
s
s
a
e
h
T
.
s
t
c
a
r
t
n
o
c
e
s
a
e
l
e
s
o
h
t
m
o
r
f
s
e
i
t
i
l
i
b
a
i
l
f
o
n
o
i
l
l
i
m
6
5
7
7
8
$
.
d
n
a
s
t
e
s
s
a
e
s
u
f
o
.
)
1
e
t
o
n
e
e
s
(
d
e
t
a
t
s
e
r
t
o
n
s
i
n
o
i
t
a
m
r
o
f
n
i
e
v
i
t
a
r
a
p
m
o
c
h
c
i
h
w
r
e
d
n
u
,
h
c
a
o
r
p
p
a
.
n
o
i
t
a
m
r
o
f
n
i
r
e
h
t
r
u
f
r
o
f
7
1
e
t
o
n
r
e
f
e
r
,
l
n
a
p
e
l
c
y
c
t
c
u
d
o
r
p
e
h
t
m
o
r
f
s
t
c
u
d
o
r
p
w
e
n
s
e
c
u
d
o
r
t
n
i
t
i
l
s
a
d
n
a
r
b
e
g
n
i
s
a
n
o
s
e
t
a
r
t
n
e
c
n
o
c
y
e
v
a
D
s
a
d
n
a
r
B
h
c
r
a
n
o
M
e
h
t
f
o
t
n
e
m
r
i
a
p
m
I
.
s
s
e
n
i
s
u
b
y
e
v
a
D
e
h
t
f
o
t
n
e
m
n
g
i
l
a
e
r
d
n
a
s
t
e
k
s
a
G
A
A
t
a
g
n
i
c
r
u
o
s
t
u
o
t
c
u
d
o
r
p
h
t
i
w
d
e
t
a
i
c
o
s
s
A
l
.
s
n
a
p
e
l
c
y
c
t
c
u
d
o
r
p
g
n
i
t
n
e
m
e
p
m
l
i
h
t
i
w
d
e
t
a
i
c
o
s
s
a
g
n
i
r
u
t
c
a
f
u
n
a
m
d
n
a
n
o
i
t
c
u
d
o
r
t
n
i
t
c
u
d
o
r
p
w
e
n
h
t
i
w
d
e
t
a
i
c
o
s
s
A
l
.
s
e
c
n
a
a
b
x
a
t
d
e
r
r
e
f
e
d
d
n
a
,
s
g
n
w
o
r
r
o
b
e
t
a
r
o
p
r
o
c
i
,
x
a
t
,
t
s
e
r
e
t
n
i
,
s
e
s
n
e
p
x
e
e
t
a
r
o
p
r
o
c
,
s
t
e
s
s
a
e
t
a
r
o
p
r
o
c
i
f
o
y
l
n
a
m
e
s
i
r
p
m
o
c
s
m
e
t
i
d
e
t
a
c
o
l
l
a
n
U
.
1
.
2
.
3
.
4
8582_GUD_Holdings_Annual Report_2020_Mono.indd 59
8582_GUD_Holdings_Annual Report_2020_Mono.indd 59
9/9/20 12:00 pm
9/9/20 12:00 pm
l
a
t
o
T
0
0
0
$
'
7
7
0
,
4
3
4
3
0
2
,
2
9
)
7
7
9
2
(
,
)
1
2
3
(
5
0
9
,
8
8
)
8
5
(
)
0
1
8
1
(
,
7
3
0
,
7
8
5
7
6
)
7
6
4
7
(
,
5
4
2
,
0
8
8
5
5
,
9
5
)
7
8
6
,
0
2
(
8
5
5
,
9
5
9
8
2
,
6
2
7
1
,
6
2
5
3
3
5
,
7
4
2
9
1
0
2
e
n
u
J
0
3
d
e
d
n
e
r
a
e
y
e
h
t
r
o
F
‐
0
0
0
$
'
)
2
(
)
7
1
(
)
2
1
9
,
7
(
)
1
3
9
,
7
(
)
6
(
9
3
4
2
1
)
8
9
8
,
7
(
)
4
7
0
7
(
,
)
8
4
8
,
4
1
(
4
9
8
,
7
)
4
5
9
,
6
(
)
4
5
9
,
6
(
9
3
6
0
2
,
2
3
4
1
,
5
7
1
4
d
e
t
a
c
o
l
l
a
n
U
y
e
v
a
D
0
0
0
$
'
5
7
0
,
4
0
1
)
1
0
9
(
4
2
3
,
0
1
‐
‐
3
2
4
,
9
)
6
7
7
(
7
4
6
,
8
9
4
5
)
4
7
1
(
2
2
0
,
9
2
2
4
,
6
)
0
0
6
2
(
,
2
2
4
,
6
2
5
4
,
2
6
9
4
,
0
2
0
5
4
,
0
1
1
0
0
0
$
'
2
0
0
,
0
3
3
e
v
i
t
o
m
o
t
u
A
1
9
7
,
9
8
)
9
5
0
2
(
,
)
9
1
3
(
3
1
4
,
7
8
)
2
5
(
)
3
7
0
1
(
,
8
8
2
,
6
8
2
)
9
1
2
(
1
7
0
,
6
8
)
1
8
2
,
5
2
(
0
9
0
,
0
6
0
9
0
,
0
6
8
9
7
,
3
4
9
8
,
1
5
6
1
5
,
3
1
4
i
s
e
i
r
a
d
i
s
b
u
S
d
n
a
d
e
t
i
m
i
L
i
l
s
g
n
d
o
H
D
U
G
)
d
e
u
n
i
t
n
o
c
(
n
o
i
t
a
m
r
o
f
n
i
t
n
e
m
g
e
S
.
7
)
l
a
n
r
e
t
x
e
(
e
u
n
e
v
e
r
t
n
e
m
g
e
s
l
a
t
o
T
s
t
n
e
m
g
e
s
s
s
e
n
i
s
u
B
1
s
m
e
t
i
t
n
a
c
i
f
i
n
g
i
s
‐
e
r
p
A
D
T
I
B
E
i
l
s
e
b
g
n
a
t
n
i
f
o
n
o
i
t
a
s
i
t
r
o
m
A
:
s
s
e
L
n
o
i
t
a
i
c
e
r
p
e
D
:
s
s
e
L
y
n
a
p
m
o
C
e
h
t
l
f
o
s
r
e
n
w
o
o
t
e
b
a
t
u
b
i
r
t
t
a
)
s
s
o
l
(
/
t
i
f
o
r
P
e
r
u
t
i
d
n
e
p
x
e
l
a
t
i
p
a
c
t
n
e
m
g
e
S
s
e
i
t
i
l
i
b
a
i
l
t
n
e
m
g
e
S
s
t
e
s
s
a
t
n
e
m
g
e
S
s
m
e
t
i
t
n
a
c
i
f
i
n
g
i
s
‐
e
r
p
T
I
B
E
2
s
t
s
o
c
g
n
i
r
u
t
c
u
r
t
s
e
R
1
s
t
s
o
c
n
o
i
t
c
a
s
n
a
r
T
)
T
I
B
E
(
t
l
u
s
e
r
t
n
e
m
g
e
S
e
m
o
c
n
i
t
s
e
r
e
t
n
I
e
s
n
e
p
x
e
t
s
e
r
e
t
n
I
x
a
t
e
r
o
f
e
b
)
s
s
o
l
(
/
t
i
f
o
r
P
3
e
s
n
e
p
x
e
x
a
T
)
s
s
o
l
(
/
t
i
f
o
r
P
.
)
n
o
i
l
l
i
.
m
3
3
0
1
$
(
d
n
a
l
k
c
u
A
n
i
l
x
e
p
m
o
c
e
s
u
o
h
e
r
a
w
d
n
a
e
c
i
f
f
o
w
e
n
a
h
t
i
w
d
e
t
a
i
c
o
s
s
a
s
t
s
o
c
g
n
i
v
o
m
d
n
a
e
s
a
e
l
s
u
o
r
e
n
o
o
t
e
t
a
e
r
l
t
n
e
m
g
e
s
e
v
i
t
o
m
o
t
u
A
e
h
t
n
i
s
t
s
o
c
g
n
i
r
u
t
c
u
r
t
s
e
R
.
a
i
l
a
r
t
s
u
A
s
e
k
a
r
B
c
s
i
D
f
o
n
o
i
t
i
s
i
u
q
c
a
e
h
t
o
t
e
t
a
e
r
l
t
n
e
m
g
e
s
e
v
i
t
o
m
o
t
u
A
e
h
t
n
i
s
t
s
o
c
n
o
i
t
c
a
s
n
a
r
T
.
l
a
s
o
p
s
i
d
m
a
e
b
n
u
S
e
h
t
o
t
d
e
t
a
e
r
n
o
l
i
l
l
i
.
m
8
4
5
2
$
f
o
d
n
u
f
e
r
T
G
C
a
s
e
d
u
l
c
n
i
t
n
e
m
g
e
s
d
e
t
a
c
o
l
l
a
n
U
e
h
t
n
i
e
s
n
e
p
x
e
x
a
T
l
.
s
e
c
n
a
a
b
x
a
t
d
e
r
r
e
f
e
d
d
n
a
,
s
g
n
w
o
r
r
o
b
e
t
a
r
o
p
r
o
c
i
,
x
a
t
,
t
s
e
r
e
t
n
i
,
s
e
s
n
e
p
x
e
e
t
a
r
o
p
r
o
c
,
s
t
e
s
s
a
e
t
a
r
o
p
r
o
c
i
f
o
y
l
n
a
m
e
s
i
r
p
m
o
c
s
m
e
t
i
d
e
t
a
c
o
l
l
a
n
U
1
2
3
4
8582_GUD_Holdings_Annual Report_2020_Mono.indd 60
8582_GUD_Holdings_Annual Report_2020_Mono.indd 60
9/9/20 12:00 pm
9/9/20 12:00 pm
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.
Current
Trade receivables
Less: Allowance for doubtful debts
Net trade receivables
2020
$'000
115,438
(959)
114,479
2019
$'000
107,385
(558)
106,827
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). 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
Doubtful debts recognised
Amounts written off as uncollectible
Balance at the end of the year
2020
$'000
(558)
(436)
35
(959)
2019
$'000
(685)
(213)
340
(558)
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.
8582_GUD_Holdings_Annual Report_2020_Mono.indd 61
8582_GUD_Holdings_Annual Report_2020_Mono.indd 61
9/9/20 12:00 pm
9/9/20 12:00 pm
61
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.
2020
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
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
Gross
$'000
Impairment
$'000
96,957
14,331
2,734
1,018
398
115,438
(68)
(96)
(191)
(356)
(248)
(959)
Gross
$'000
Impairment
$'000
94,659
9,563
2,417
589
157
107,385
(70)
(27)
(99)
(324)
(38)
(558)
Net
$'000
96,889
14,235
2,543
662
150
114,479
Net
$'000
94,589
9,536
2,318
265
119
106,827
Additional information relating to credit risk is included in Note 24.
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.
Current
Raw materials and stores
Work in progress
Finished goods
Inventory – at cost
Less: Provision for slow moving inventory
Total inventory
2020
$'000
18,151
459
100,061
118,671
(10,491)
108,180
2019
$'000
15,456
429
99,182
115,067
(6,116)
108,951
Inventories disclosed above are net of the provision for slow moving inventory. Increases or write‐backs of the
provision are recognised in cost of goods sold (Note 3).
62
8582_GUD_Holdings_Annual Report_2020_Mono.indd 62
8582_GUD_Holdings_Annual Report_2020_Mono.indd 62
9/9/20 12:00 pm
9/9/20 12:00 pm
GUD Holdings Limited and Subsidiaries
10. Trade and other payables
Accounting policies
Payables
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.
Current
Accrued expenses
Trade payables
Trade payables and accrued expenses
No interest is incurred on trade payables.
11. Employee benefits
Accounting policies
Employee benefits
2020
$'000
20,439
44,661
65,100
2019
$'000
14,798
42,838
57,636
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.
Current
Non‐current
Accrued wages and salaries
Total employee benefits
Accrued wages and salaries are included in accrued expenses in Note 10.
2020
$'000
12,147
1,308
542
13,997
2019
$'000
11,164
1,281
675
13,120
63
8582_GUD_Holdings_Annual Report_2020_Mono.indd 63
8582_GUD_Holdings_Annual Report_2020_Mono.indd 63
9/9/20 12:00 pm
9/9/20 12:00 pm
GUD Holdings Limited and Subsidiaries
12. 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.
Carrying amount at beginning of year
Provisions recognised
Provisions reversed
Payments made during the year
Net foreign currency difference arising on translation of foreign
operations
Carrying amount at end of year
2020
$'000
580
‐
(13)
(97)
(2)
468
2019
$'000
1,052
(15)
(352)
(107)
2
580
8582_GUD_Holdings_Annual Report_2020_Mono.indd 64
8582_GUD_Holdings_Annual Report_2020_Mono.indd 64
9/9/20 12:00 pm
9/9/20 12:00 pm
64
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.
13. 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:
Note
2020
$'000
Restated
2019
$'000
Gross carrying amount
Balance at the beginning of the year
Addition due to IFRIC agenda decision ‘Multiple Tax
Consequences of Recovering an Asset (IAS 12 Income Taxes) 2
Liquidation of GEL Australia
Acquisitions through business combinations1
Net foreign currency difference arising on translation of
493
financial statements of foreign operations
162,708
Balance at the end of the year
1 On 2 July 2018 the Company acquired 100% of the shares in Disc Brakes Australia Pty Ltd (“DBA”), this transaction resulted in the recognition of Goodwill. For further
details of the DBA acquisition refer to Note 31a.
2 As a result of the IFRS IC agenda decision, GUD Holdings Limited has changed its accounting policy, retrospectively adjusting the deferred tax accounting for impacted
assets and intangibles. For further details refer to Note 1.
37,215
‐
9,604
‐
(290)
‐
(269)
162,149
162,708
115,396
31a
14. Other intangible assets
Accounting policies
Product development costs
Expenditure on research activities is recognised as an expense in the Income Statement in the 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).
65
8582_GUD_Holdings_Annual Report_2020_Mono.indd 65
8582_GUD_Holdings_Annual Report_2020_Mono.indd 65
9/9/20 12:00 pm
9/9/20 12:00 pm
GUD Holdings Limited and Subsidiaries
14. Other intangible assets (continued)
Brand names and trademarks
Acquired brand names and trademarks are recorded at cost. The carrying values are tested on a stand‐alone basis,
based on its fair value (Note 17).
The Group holds several 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 17).
$'000
Gross carrying amount
Balance at 30 June 2018
Additions from business combinations
Acquisition of brand name
Foreign currency movements
Balance at 30 June 2019
Acquisition of patents and software
Foreign currency movements
Balance at 30 June 2020
Accumulated amortisation
Balance at 30 June 2018
Amortisation expense
Foreign currency movements
Balance at 30 June 2019
Amortisation expense
Foreign currency movements
Impairment
Balance at 30 June 2020
Carrying amount
As at 30 June 2019
Brand,
Business
Names &
Trademarks
Patents,
Licences &
Distribution
Rights
Software
Customer
Relationships
Total
115,559
2,664
1,101
(83)
119,241
‐
(4)
119,237
‐
‐
‐
‐
(303)
‐
(2,115)
(2,418)
119,241
411
1,457
‐
8
1,876
47
(8)
1,915
(391)
‐
(17)
(408)
(140)
7
‐
(541)
149
‐
‐
‐
149
70
‐
219
(145)
(2)
‐
(147)
(18)
‐
‐
(165)
4,441 120,560
4,121
1,101
(75)
‐
‐
‐
4,441 125,707
117
(12)
‐
‐
4,441 125,812
(614)
(319)
‐
(933)
(319)
‐
‐
(1,150)
(321)
(17)
(1,488)
(780)
7
(2,115)
(1,252)
(4,376)
1,468
1,374
2
54
3,508 124,219
3,189 121,436
As at 30 June 2020
Amortisation is recognised as an expense in Note 3.
Refer to Note 7 for allocation of the carrying amount of brand names to segments.
116,819
8582_GUD_Holdings_Annual Report_2020_Mono.indd 66
8582_GUD_Holdings_Annual Report_2020_Mono.indd 66
9/9/20 12:00 pm
9/9/20 12:00 pm
66
GUD Holdings Limited and Subsidiaries
15. 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 plant and equipment (classified as finance lease under AASB 117)
As at 30 June 2020, the net carrying amount of leased equipment held under finance lease was $Nil.
This table summarises the movement in gross carrying amount, accumulated amortisation and written down value
of property, plant and equipment:
Note
31a
Gross carrying amount
Balance at 30 June 2018
Additions from business combinations
Additions
Disposals
Foreign currency movements
Balance at 30 June 2019
Additions
Disposals
Foreign currency movements
Balance at 30 June 2020
Accumulated depreciation and
amortisation
Balance at 30 June 2018
Additions from business combinations
Depreciation expense
Disposals
Foreign currency movements
Balance at 30 June 2019
Depreciation expense
Disposals
Foreign currency movements
Balance at 30 June 2020
Carrying amount
As at 30 June 2019
As at 30 June 2020
Depreciation is recognised as an expense in Note 3.
Leased assets
$'000
Plant and
Equipment
$'000
113
‐
‐
(113)
‐
‐
‐
‐
‐
‐
(25)
‐
(19)
44
‐
‐
‐
‐
‐
‐
‐
‐
42,013
6,491
6,289
(2,127)
91
52,757
6,489
(3,917)
(87)
55,242
(31,463)
(6,025)
(2,958)
1,796
(25)
(38,675)
(3,632)
3,528
32
(38,747)
14,082
16,495
Total
$'000
42,126
6,491
6,289
(2,240)
91
52,757
6,489
(3,917)
(87)
55,242
(31,488)
(6,025)
(2,977)
1,840
(25)
(38,675)
(3,632)
3,528
32
(38,747)
14,082
16,495
67
8582_GUD_Holdings_Annual Report_2020_Mono.indd 67
8582_GUD_Holdings_Annual Report_2020_Mono.indd 67
9/9/20 12:00 pm
9/9/20 12:00 pm
GUD Holdings Limited and Subsidiaries
16. Leases
Leases as a Lessee (AASB 16)
The Group leases warehouse and office facilities. On average the leases typically run for a period of 10 years, with
an option to renew the lease after that date. Lease payments are renegotiated every 3 years to reflect market
rentals. Some leases provide for additional rent payments that are based on changes in local price indices. For certain
leases, the Group is restricted from entering into any sub‐lease arrangements.
The warehouse and office facilities leases were entered into many years ago as combined leases of land and
buildings. Previously, these leases were classified as operating leases under AASB 117.
The Group leases motor vehicle and forklift leases, which were previously classified as operating leases under AASB
117. On average, the leases typically run for a period of 4 years and do not have options to extend or vary lease
terms.
The Group leases IT equipment with contract terms of one to three years. These leases are short term and/or leases
of low‐value items. The Group has elected not to recognise right‐of‐use assets and lease liabilities for these leases.
Information about leases for which the Group is a lessee is presented below.
i.
Right of use assets
Land and
buildings
Motor
vehicles and
forklifts
Office
equipment
$’000
84,561
(8,516)
(3,039)
536
73,542
$’000
4,062
(1,877)
(80)
1,316
3,421
$’000
334
(195)
‐
144
283
Balance at 1 July 2019
Depreciation charge for the
year
Lease reassessments
Additions to right‐of‐use
assets
Balance at 30 June 2020
ii.
Amounts recognised in profit and loss
2020 – Leases under AASB 16
Interest on lease liabilities
Expenses relating to short‐term leases and low value assets
2019 – Operating leases under AASB 117
Lease expense
iii.
Amounts recognised in statement of cash flows
Total cash outflows for leases
Total
$’000
88,957
(10,588)
(3,119)
1,996
77,246
2020
$‘000
3,360
905
9,423
2020
$‘000
(11,229)
68
8582_GUD_Holdings_Annual Report_2020_Mono.indd 68
8582_GUD_Holdings_Annual Report_2020_Mono.indd 68
9/9/20 12:00 pm
9/9/20 12:00 pm
GUD Holdings Limited and Subsidiaries
16. Leases (continued)
Extension options
iv.
Some property leases contain extension options exercisable by the Group up to one year before the end of the non‐
cancellable contract period. Where practicable, the Group seeks to include extension options in new leases to
provide operational flexibility. The extension options held are exercisable only by the Group and not by the lessors.
The Group assesses at lease commencement date whether it is reasonably certain to exercise the extension options.
The Group reassesses whether it is reasonably certain to exercise the options if there is a significant event or
significant change in circumstances within its control. The Group has included all extension options available in
determining its lease liability calculations.
17. Impairment testing
Accounting policies
Impairment of property, plant, equipment and intangible assets
Tangible and intangible assets are tested for impairment annually and whenever there is an indication that the asset
may be impaired. If any such indication exists, the recoverable amount of the asset is estimated in order to
determine the extent of the impairment loss (if any).
Assets that cannot be tested individually are grouped together into cash‐generating units (CGUs) which are the
smallest group of assets that generate cash inflows from continuing use that are largely independent of the cash
flows of other assets or CGUs. Subject to an operating segment ceiling test, CGUs, to which goodwill has been
allocated, are aggregated so that the level at which impairment testing is performed reflects the lowest level at
which goodwill is monitored for internal reporting purposes. Goodwill acquired in a business combination is
allocated to groups of CGUs that are expected to benefit from the synergies of the combination.
The recoverable amount is the higher of fair value less costs 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.
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). We note the recoverable amount for brand names has been tested on a stand‐
alone basis, based on its fair value.
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 projections for the 2021 (2019: based on
2020 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 3.0% 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
2020 and 2019:
Automotive
Davey
2020
9.3 – 9.6%
8.9 – 9.5%
2019
9.3 – 9.6%
8.9 – 9.5%
8582_GUD_Holdings_Annual Report_2020_Mono.indd 69
8582_GUD_Holdings_Annual Report_2020_Mono.indd 69
9/9/20 12:00 pm
9/9/20 12:00 pm
69
GUD Holdings Limited and Subsidiaries
17. Impairment (continued)
Results (continued)
The Directors have assessed, that except as described in the impairment section below, no impairment charge is
required in relation to the tangible or intangible assets for the year ended 30 June 2020.
Monarch brand name
The recoverable amount of this brand name was based on fair value less costs of disposal, estimated using
discounted cash flows. The fair value measurement was categorised as a Level 3 fair value based on the inputs in the
valuation technique used (see Note 1). In line with Davey’s product cycle plan, products which were sold primarily
using the Monarch brand name, have been replaced with the new generation of product being sold under the Davey
brand name. Consequently, the Monarch brand is no longer actively used and therefore the total value of $2.115
million has been impaired.
18. Commitments for expenditure
Plant & equipment
Future contracted capital expenditure not provided for and payable are as follows:
$'000
Within 1 year
Between 1 and 5 years
Later than 5 years
Total plant and equipment capital expenditure
2020
746
‐
‐
746
Operating leases
Future non‐cancellable operating lease commitments not provided for and payable are as follows:
$'000
Within 1 year
Between 1 and 5 years
Later than 5 years
Total operating leases commitments
2020
Buildings
2020
Other
2019
Buildings
‐
‐
‐
‐
885
‐
‐
885
6,475
18,584
15,623
40,682
2019
1,417
‐
‐
1,417
2019
Other
1,514
2,453
‐
3,967
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.
8582_GUD_Holdings_Annual Report_2020_Mono.indd 70
8582_GUD_Holdings_Annual Report_2020_Mono.indd 70
9/9/20 12:00 pm
9/9/20 12:00 pm
70
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.
19. 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
23
Reconciliation of profit after income tax to net cash provided by operating activities
Profit/(loss) from operations, net of income tax
Depreciation and amortisation
Impairment of brand names
Impairment of inventory
Impairment of capitalised product development costs
Unwind of discount on contingent consideration payable
Interest received
Interest paid
Interest lease liability
(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
2020
$'000
29,987
29,987
2020
$'000
43,678
15,000
2,115
2,750
‐
1,144
(94)
6,320
3,360
340
(8,105)
(1,979)
(7,652)
(682)
(1,131)
8,754
1,696
65,514
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
71
8582_GUD_Holdings_Annual Report_2020_Mono.indd 71
8582_GUD_Holdings_Annual Report_2020_Mono.indd 71
9/9/20 12:00 pm
9/9/20 12:00 pm
GUD Holdings Limited and Subsidiaries
20. 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.
Banking facility
On 28 January 2020, the Company completed the refinancing of existing borrowing facilities. The new arrangement
resulted in the existing borrowing facilities being renewed for four years and the introduction of an eight‐year fixed
term loan element.
A summary of the new and expired facilities follows in the sections below.
Unsecured bank loans
The unsecured bank loans in accordance with the Common Terms Deed are summarised as follows:
Bank borrowings – 5‐year facility
Bank borrowings – 4‐year facility
Fixed term loan
Short‐term facilities
Overdraft
Total
Facilities as at 30 June 2020
Facilities as at 30 June 2019
Amount
$ million
‐
Maturity
Amount
$ million
Maturity
‐
245.0
1/07/2020
150.0
28/01/2024
23/01/2028
28/01/2021
28/01/2024
50.0
25.0
4.9
229.9
‐
‐
‐
10.0
255.0
‐
‐
‐
1/07/2020
Overdrafts and short‐term facilities
The unsecured bank overdraft and short term facilities are subject to annual review. As part of these facilities, GUD
Holdings Limited and its Australian 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
2020 is 4.44% (30 June 2019: 4.45%).
This table summarises Borrowings relating to all operations at 30 June 2020 and 30 June 2019:
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 15).
Note
23
23
2020
$'000
‐
‐
‐
2019
$'000
3,750
37
3,787
172,139
172,139
157,784
157,784
72
8582_GUD_Holdings_Annual Report_2020_Mono.indd 72
8582_GUD_Holdings_Annual Report_2020_Mono.indd 72
9/9/20 12:00 pm
9/9/20 12:00 pm
GUD Holdings Limited and Subsidiaries
20. Borrowings (continued)
Financing facilities
This table summarises facilities available, used and not utilised related to all operations at 30 June 2020 and 30 June
2019:
Total facilities available:
Unsecured bank overdrafts
Unsecured bank loans
Short term facilities
Unsecured money market facilities
Balance at 30 June
Facilities used at balance date:
Unsecured bank overdrafts
Unsecured bank loans
Short term facilities
Unsecured money market facilities
Balance at 30 June
Facilities not utilised at balance date:
Unsecured bank overdrafts
Unsecured bank loans
Short term facilities
Unsecured money market facilities
Balance at 30 June
2020
$'000
4,934
200,000
25,000
‐
229,934
‐
172,139
‐
‐
2019
$'000
4,956
245,000
‐
5,000
254,956
165
161,534
‐
‐
172,139
161,699
4,934
27,861
25,000
‐
57,795
4,791
83,466
5,000
93,257
Reconciliation of movements of liabilities to cash flows arising from financing activities
Other
loans and
borrowings
Lease
liabilities
N
o
t
e
Bank
overdrafts
used for
cash
manage‐
ment
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 2019
165
158,837
898
1,836
9,981
155,778
327,495
Proceeds from loans and
borrowings
Repayment of borrowings
Payment of lease liability
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
(165)
Interest received
Interest expense
Total other changes
Balance at 30 June 2020
‐
‐
(165)
173,252
(164,697)
‐
‐
94
(6,320)
‐
‐
‐
(11,229)
‐
‐
‐
2,329
(11,229)
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
173,252
(164,697)
(11,229)
(48,552)
(48,552)
‐
‐
94
(6,320)
(48,552)
(57,452)
‐
(282)
(540)
(264)
(349)
871
‐
‐
(94)
6,320
6,226
88,095
‐
‐
3,360
91,455
‐
‐
‐
‐
‐
(665)
1,020
43,678
132,128
‐
‐
‐
‐
‐
‐
‐
‐
‐
(165)
(94)
9,680
(665)
1,020
43,678
141,549
‐
166,852
79,962
549
2,042
11,001
150,904
411,310
73
8582_GUD_Holdings_Annual Report_2020_Mono.indd 73
8582_GUD_Holdings_Annual Report_2020_Mono.indd 73
9/9/20 12:00 pm
9/9/20 12:00 pm
GUD Holdings Limited and Subsidiaries
20. Borrowings (continued)
Reconciliation of movements of liabilities to cash flows arising from financing activities (continued)
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
Payment of lease liability
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
21. Derivatives
Accounting policies
‐
‐
‐
‐
‐
‐
‐
‐
‐
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
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.
8582_GUD_Holdings_Annual Report_2020_Mono.indd 74
8582_GUD_Holdings_Annual Report_2020_Mono.indd 74
9/9/20 12:00 pm
9/9/20 12:00 pm
74
GUD Holdings Limited and Subsidiaries
21. Derivatives (continued)
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.
Derivative assets
This table summarises derivative assets related to all operations at 30 June 2020 and at 30 June 2019:
2020
$'000
2019
$'000
Current
Derivatives ‐ Foreign currency forward contracts
Current derivative assets
Non‐current
Derivatives ‐ Interest rate swaps
Non‐current derivative assets
Note
23
23
549
549
‐
‐
Derivative liabilities
This table summarises derivative liabilities related to all operations at 30 June 2020 and at 30 June 2019:
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
23
23
23
2020
$'000
1,235
49
1,284
758
758
898
898
‐
‐
2019
$'000
243
4
247
1,468
1,468
75
8582_GUD_Holdings_Annual Report_2020_Mono.indd 75
8582_GUD_Holdings_Annual Report_2020_Mono.indd 75
9/9/20 12:00 pm
9/9/20 12:00 pm
GUD Holdings Limited and Subsidiaries
21. Derivatives (continued)
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.
2020
2019
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
Interest rate
swaps
Assets
Liabilities
Forward
exchange
contracts
Assets
Liabilities
Total
‐
‐
‐
‐
‐
‐
(807)
(807)
(49)
‐
(758)
(1,472)
(1,472)
‐
(4)
549
549
549
1,235
1,235
1,235
‐
‐
‐
‐
898
243
898
243
898
243
977
977
1,735
‐
(758)
(331)
(331)
1,137
‐
‐
‐
‐
‐
More
than
one
year
(1,468)
‐
‐
(1,468)
22. 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.
8582_GUD_Holdings_Annual Report_2020_Mono.indd 76
8582_GUD_Holdings_Annual Report_2020_Mono.indd 76
9/9/20 12:00 pm
9/9/20 12:00 pm
76
GUD Holdings Limited and Subsidiaries
22. Other financial instruments (continued)
Other financial assets
This table summarises other financial assets related to all operations at 30 June 2020 and at 30 June 2019:
Current
Loans receivable ‐ third parties
Other current financial assets
Non‐current
Loans receivable ‐ third parties
Other non‐current financial assets
Note
23
23
2020
$'000
1,176
1,176
4,111
4,111
2019
$'000
756
756
1,978
1,978
Other financial liabilities
This table summarises other financial liabilities at 30 June 2020 and at 30 June 2019:
Current
Contingent consideration payable
Non‐current
Contingent consideration payable
Note
2020
$'000
2019
$'000
3,250
1,625
‐
802
Total other financial liabilities
Contingent consideration payable included in other financial liabilities is measured at fair value. Consideration
payable at 30 June 2020 includes the contingent consideration payable to the vendors of Innovative Mechatronics
Group.
3,250
23
2,427
23. 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.
8582_GUD_Holdings_Annual Report_2020_Mono.indd 77
8582_GUD_Holdings_Annual Report_2020_Mono.indd 77
9/9/20 12:00 pm
9/9/20 12:00 pm
77
GUD Holdings Limited and Subsidiaries
23. Financial instruments (continued)
Type
Valuation technique
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.
Interest rate
swaps
Foreign
exchange
contracts
Contingent
consideration
Significant unobservable
inputs
Inter‐relationship between
significant unobservable
inputs and fair value
Not applicable.
Not applicable.
Not applicable.
Not applicable.
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 probability attached
to each scenario
‐ Forecast EBIT growth
(2020: 0‐30%,2019: 0‐
30%)
‐ Risk adjusted discount
rate (2020: 8.0%,2019:
8.0%)
The estimated fair value
would increase (decrease)
if:
‐ The EBITDA growth is
lower/ (higher)
‐ The risk adjusted discount
rate moves lower (higher).
Investments
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.
‐ Recent capital raises
Not applicable.
‐ Internal management
information
8582_GUD_Holdings_Annual Report_2020_Mono.indd 78
8582_GUD_Holdings_Annual Report_2020_Mono.indd 78
9/9/20 12:00 pm
9/9/20 12:00 pm
78
GUD Holdings Limited and Subsidiaries
23. 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 2020.
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 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
2020
$'000
693
(321)
‐
‐
1,144
‐
1,516
2019
$'000
2,032
(1,625)
(312)
598
‐
‐
693
8582_GUD_Holdings_Annual Report_2020_Mono.indd 79
8582_GUD_Holdings_Annual Report_2020_Mono.indd 79
9/9/20 12:00 pm
9/9/20 12:00 pm
79
9
4
5
9
2
2
4
3
7
,
1
2
1
5
,
2
‐
‐
‐
‐
‐
9
2
2
4
3
7
,
1
3
6
9
,
1
‐
‐
‐
‐
‐
‐
9
4
5
9
4
5
‐
‐
‐
‐
2
1
5
,
2
3
6
9
,
1
9
4
5
7
0
8
5
3
2
1
0
5
2
,
3
2
9
2
,
5
‐
‐
‐
‐
0
5
2
,
3
0
5
2
,
3
‐
‐
‐
7
0
8
5
3
2
,
1
2
4
0
,
2
‐
‐
2
9
2
,
5
0
5
2
,
3
2
4
0
,
2
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
l
a
t
o
T
0
0
0
$
'
l
e
u
a
v
r
i
a
F
0
0
0
$
'
3
l
e
v
e
L
0
0
0
$
'
2
l
e
v
e
L
0
0
0
$
'
1
l
e
v
e
L
l
e
u
a
v
r
i
a
f
l
f
o
n
o
i
t
a
m
i
x
o
r
p
p
a
e
b
a
n
o
s
a
e
r
a
e
r
a
s
t
n
u
o
m
a
g
n
i
y
r
r
a
c
r
i
e
h
t
e
s
u
a
c
e
b
l
a
t
o
T
0
0
0
$
'
9
4
5
9
2
2
4
3
7
,
1
2
1
5
,
2
8
5
0
,
5
7
8
9
9
2
,
,
9
7
4
4
1
1
4
2
5
,
9
4
1
6
3
0
,
2
5
1
7
0
8
5
3
2
,
1
0
5
2
,
3
2
9
2
,
5
,
9
3
1
2
7
1
9
3
1
,
2
7
1
1
3
4
,
7
7
1
l
e
u
a
v
g
n
i
y
r
r
a
C
0
0
0
$
'
0
0
0
$
'
t
n
e
r
r
u
c
‐
n
o
N
t
n
e
r
r
u
C
‐
9
2
2
4
3
7
,
1
3
6
9
,
1
‐
‐
2
8
8
,
3
2
8
8
,
3
5
4
8
,
5
‐
‐
8
5
7
8
5
7
,
9
3
1
2
7
1
9
3
1
,
2
7
1
7
9
8
,
2
7
1
‐
‐
9
4
5
9
4
5
6
7
1
,
1
7
8
9
9
2
,
,
9
7
4
4
1
1
2
4
6
,
5
4
1
1
9
1
,
6
4
1
9
4
5
3
2
,
1
0
5
2
,
3
4
3
5
,
4
‐
‐
4
3
5
,
4
s
t
c
a
r
t
n
o
c
d
r
a
w
r
o
f
y
c
n
e
r
r
u
c
n
g
e
r
o
F
‐
i
s
e
v
i
t
a
v
i
r
e
D
l
e
u
a
v
r
i
a
f
t
a
d
e
r
u
s
a
e
m
s
t
e
s
s
a
l
a
i
c
n
a
n
i
F
t
n
e
m
t
s
e
v
n
I
l
e
u
a
v
r
i
a
f
t
a
d
e
r
u
s
a
e
m
s
t
e
s
s
a
l
a
i
c
n
a
n
i
f
l
a
t
o
T
l
e
u
a
v
r
i
a
f
t
a
d
e
r
u
s
a
e
m
t
o
n
s
t
e
s
s
a
l
a
i
c
n
a
n
i
F
s
t
e
s
s
a
l
a
i
c
n
a
n
i
f
r
e
h
t
O
a
l
s
e
b
a
v
i
e
c
e
r
r
e
h
t
o
d
n
a
e
d
a
r
T
a
l
s
t
n
e
a
v
i
u
q
e
h
s
a
c
d
n
a
h
s
a
C
a
s
t
e
s
s
a
l
a
i
c
n
a
n
i
f
r
e
h
t
O
l
e
u
a
v
r
i
a
f
t
a
d
e
r
u
s
a
e
m
t
o
n
s
t
e
s
s
a
l
a
i
c
n
a
n
i
f
l
a
t
o
T
s
t
e
s
s
a
l
a
i
c
n
a
n
i
f
l
a
t
o
T
s
t
c
a
r
t
n
o
c
d
r
a
w
r
o
f
y
c
n
e
r
r
u
c
n
g
e
r
o
F
‐
i
s
e
v
i
t
a
v
i
r
e
D
e
u
a
v
l
r
i
a
f
t
a
s
p
a
w
s
e
t
a
r
t
s
e
r
e
t
n
I
‐
s
e
v
i
t
a
v
i
r
e
D
l
e
u
a
v
r
i
a
f
t
a
d
e
r
u
s
a
e
m
s
e
i
t
i
l
i
b
a
i
l
l
a
i
c
n
a
n
i
F
s
e
i
t
i
l
i
b
a
i
l
l
a
i
c
n
a
n
i
f
r
e
h
t
O
l
e
u
a
v
r
i
a
f
t
a
d
e
r
u
s
a
e
m
t
o
n
s
e
i
t
i
l
i
b
a
i
l
l
a
i
c
n
a
n
i
f
l
a
t
o
T
l
e
u
a
v
r
i
a
f
t
a
d
e
r
u
s
a
e
m
s
e
i
t
i
l
i
b
a
i
l
l
a
i
c
n
a
n
i
f
l
a
t
o
T
l
e
u
a
v
r
i
a
f
t
a
d
e
r
u
s
a
e
m
t
o
n
s
e
i
t
i
l
i
b
a
i
l
l
a
i
c
n
a
n
i
F
a
s
n
a
o
l
d
n
a
s
g
n
w
o
r
r
o
B
i
s
e
i
t
i
l
i
b
a
i
l
l
a
i
c
n
a
n
i
f
l
a
t
o
T
l
,
s
e
b
a
y
a
p
d
n
a
s
e
b
a
v
i
e
c
e
r
e
d
a
r
t
l
m
r
e
t
t
r
o
h
s
l
,
s
t
n
e
a
v
i
u
q
e
h
s
a
c
d
n
a
h
s
a
c
s
a
h
c
u
s
s
t
n
e
m
u
r
t
s
n
i
l
a
i
c
n
a
n
i
f
r
o
f
l
s
e
u
a
v
r
i
a
f
e
h
t
d
e
s
o
l
c
s
i
d
t
o
n
s
a
h
p
u
o
r
G
e
h
T
.
a
0
2
0
2
e
n
u
J
0
3
t
a
s
A
)
d
e
u
n
i
t
n
o
c
(
s
t
n
e
m
u
r
t
s
n
i
l
a
i
c
n
a
n
i
F
.
3
2
i
s
e
i
r
a
d
i
s
b
u
S
d
n
a
d
e
t
i
m
i
L
i
l
s
g
n
d
o
H
D
U
G
8582_GUD_Holdings_Annual Report_2020_Mono.indd 80
8582_GUD_Holdings_Annual Report_2020_Mono.indd 80
9/9/20 12:00 pm
9/9/20 12:00 pm
‐
‐
‐
‐
8
9
8
4
3
7
,
1
2
3
6
,
2
‐
‐
‐
‐
‐
4
3
7
,
1
4
3
7
,
1
‐
8
9
8
8
9
8
‐
‐
‐
‐
2
3
6
,
2
4
3
7
,
1
8
9
8
3
4
2
2
7
4
,
1
7
2
4
,
2
2
4
1
,
4
‐
‐
‐
‐
7
2
4
,
2
7
2
4
,
2
‐
‐
‐
3
4
2
2
7
4
,
1
5
1
7
,
1
‐
‐
2
4
1
,
4
7
2
4
,
2
5
1
7
,
1
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
l
a
t
o
T
0
0
0
$
'
l
e
u
a
v
r
i
a
F
0
0
0
$
'
3
l
e
v
e
L
0
0
0
$
'
2
l
e
v
e
L
0
0
0
$
'
1
l
e
v
e
L
l
e
u
a
v
r
i
a
f
l
f
o
n
o
i
t
a
m
i
x
o
r
p
p
a
e
b
a
n
o
s
a
e
r
a
e
r
a
s
t
n
u
o
m
a
g
n
i
y
r
r
a
c
r
i
e
h
t
e
s
u
a
c
e
b
l
a
t
o
T
0
0
0
$
'
8
9
8
4
3
7
,
1
2
3
6
,
2
4
3
7
,
2
0
5
8
8
2
,
,
7
2
8
6
0
1
1
1
4
,
8
3
1
1
4
6
,
1
4
1
3
4
2
2
7
4
,
1
7
2
4
,
2
2
4
1
,
4
,
6
3
7
1
6
1
6
3
7
,
1
6
1
8
7
8
,
5
6
1
l
e
u
a
v
g
n
i
y
r
r
a
C
0
0
0
$
'
0
0
0
$
'
t
n
e
r
r
u
c
‐
n
o
N
t
n
e
r
r
u
C
‐
4
3
7
,
1
4
3
7
,
1
‐
‐
8
7
9
,
1
8
7
9
,
1
0
1
3
,
4
‐
2
0
8
8
6
4
,
1
0
7
2
,
2
,
4
3
5
1
6
1
4
3
5
,
1
6
1
4
0
8
,
3
6
1
8
9
8
8
9
8
6
5
7
0
5
8
8
2
,
,
7
2
8
6
0
1
3
3
4
,
6
3
1
1
3
3
,
7
3
1
4
3
4
2
5
2
6
,
1
2
7
8
,
1
2
0
2
2
0
2
4
7
0
,
2
9
1
0
2
e
n
u
J
0
3
t
a
s
A
i
s
e
i
r
a
d
i
s
b
u
S
d
n
a
d
e
t
i
m
i
L
l
i
s
g
n
d
o
H
D
U
G
s
t
c
a
r
t
n
o
c
d
r
a
w
r
o
f
y
c
n
e
r
r
u
c
n
g
e
r
o
F
‐
i
s
e
v
i
t
a
v
i
r
e
D
l
e
u
a
v
r
i
a
f
t
a
d
e
r
u
s
a
e
m
s
t
e
s
s
a
l
a
i
c
n
a
n
i
f
l
a
t
o
T
l
e
u
a
v
r
i
a
f
t
a
d
e
r
u
s
a
e
m
t
o
n
s
t
e
s
s
a
l
a
i
c
n
a
n
i
F
l
e
u
a
v
r
i
a
f
t
a
d
e
r
u
s
a
e
m
s
t
e
s
s
a
l
a
i
c
n
a
n
i
F
t
n
e
m
t
s
e
v
n
I
a
l
s
e
b
a
v
i
e
c
e
r
r
e
h
t
o
d
n
a
e
d
a
r
T
a
l
s
t
n
e
a
v
i
u
q
e
h
s
a
c
d
n
a
h
s
a
C
a
s
t
e
s
s
a
l
a
i
c
n
a
n
i
f
r
e
h
t
O
l
e
u
a
v
r
i
a
f
t
a
d
e
r
u
s
a
e
m
t
o
n
s
t
e
s
s
a
l
a
i
c
n
a
n
i
f
l
a
t
o
T
s
t
e
s
s
a
l
a
i
c
n
a
n
i
f
l
a
t
o
T
s
t
c
a
r
t
n
o
c
d
r
a
w
r
o
f
y
c
n
e
r
r
u
c
n
g
e
r
o
F
‐
i
s
e
v
i
t
a
v
i
r
e
D
e
u
a
v
l
r
i
a
f
t
a
s
p
a
w
s
e
t
a
r
t
s
e
r
e
t
n
I
‐
s
e
v
i
t
a
v
i
r
e
D
l
e
u
a
v
r
i
a
f
t
a
d
e
r
u
s
a
e
m
s
e
i
t
i
l
i
b
a
i
l
l
a
i
c
n
a
n
i
F
)
d
e
u
n
i
t
n
o
c
(
s
t
n
e
m
u
r
t
s
n
i
l
a
i
c
n
a
n
i
F
.
3
2
s
e
i
t
i
l
i
b
a
i
l
l
a
i
c
n
a
n
i
f
r
e
h
t
O
l
e
u
a
v
r
i
a
f
t
a
d
e
r
u
s
a
e
m
t
o
n
s
e
i
t
i
l
i
b
a
i
l
l
a
i
c
n
a
n
i
f
l
a
t
o
T
l
e
u
a
v
r
i
a
f
t
a
d
e
r
u
s
a
e
m
s
e
i
t
i
l
i
b
a
i
l
l
a
i
c
n
a
n
i
f
l
a
t
o
T
l
e
u
a
v
r
i
a
f
t
a
d
e
r
u
s
a
e
m
t
o
n
s
e
i
t
i
l
i
b
a
i
l
l
a
i
c
n
a
n
i
F
a
s
n
a
o
l
d
n
a
s
g
n
w
o
r
r
o
B
i
s
e
i
t
i
l
i
b
a
i
l
l
a
i
c
n
a
n
i
f
l
a
t
o
T
l
,
s
e
b
a
y
a
p
d
n
a
s
e
b
a
v
i
e
c
e
r
e
d
a
r
t
l
m
r
e
t
t
r
o
h
s
l
,
s
t
n
e
a
v
i
u
q
e
h
s
a
c
d
n
a
h
s
a
c
s
a
h
c
u
s
s
t
n
e
m
u
r
t
s
n
i
l
a
i
c
n
a
n
i
f
r
o
f
l
s
e
u
a
v
r
i
a
f
e
h
t
d
e
s
o
l
c
s
i
d
t
o
n
s
a
h
p
u
o
r
G
e
h
T
.
a
8582_GUD_Holdings_Annual Report_2020_Mono.indd 81
8582_GUD_Holdings_Annual Report_2020_Mono.indd 81
9/9/20 12:00 pm
9/9/20 12:00 pm
GUD Holdings Limited and Subsidiaries
24. 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 focusses 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.
82
8582_GUD_Holdings_Annual Report_2020_Mono.indd 82
8582_GUD_Holdings_Annual Report_2020_Mono.indd 82
9/9/20 12:00 pm
9/9/20 12:00 pm
GUD Holdings Limited and Subsidiaries
24. 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 19), the total value of trade
debtors and other receivables (Note 8) and other financial assets (Note 22). 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:
2020
Financial liabilities
Trade and other payables
Derivatives
Unsecured bank loans
Contingent consideration
Total financial liabilities
2019
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
65,100
2,042
172,139
3,250
242,531
65,100
2,042
196,676
3,250
267,068
65,100
1,284
4,861
3,250
74,495
Carrying
amount
$'000
Contractual
cash flows
$'000
Less than
1 year
$'000
1 to 2
years
$'000
‐
758
4,861
‐
5,619
1 to 2
years
$'000
2 to 5
years
$'000
Beyond 5
years
$'000
‐
‐
133,464
‐
133,464
‐
‐
53,490
‐
53,490
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
68,499
‐
1,468
158,095
802
160,365
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
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.
83
8582_GUD_Holdings_Annual Report_2020_Mono.indd 83
8582_GUD_Holdings_Annual Report_2020_Mono.indd 83
9/9/20 12:00 pm
9/9/20 12:00 pm
GUD Holdings Limited and Subsidiaries
24. Financial risk management (continued)
As disclosed in Note 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.
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 2020, the Group is exposed to $8.2 million (2019: $9.7 million) of USD denominated net trade liabilities,
$2.1 million of NZD net trade receivables (2019: $8.8 million net trade receivables), $2.3 million of Euro net trade
receivables (2019: $2.4 million) and $1.8 million of CNY net trade liabilities (2019: $1.9 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
2019
2020
Foreign Currency
2019
FC'000
2020
FC'000
0.6708
4.7057
0.7096
4.7969
53,250
23,350
46,550
36,000
Contract Value
2020
$'000
79,385
4,962
2019
$'000
65,600
7,505
Fair Value
2020
$'000
2019
$'000
(511)
(202)
778
(123)
83,812
73,105
(713)
655
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
2020
$'000
1,120
65
2019
$'000
1,029
(91)
84
8582_GUD_Holdings_Annual Report_2020_Mono.indd 84
8582_GUD_Holdings_Annual Report_2020_Mono.indd 84
9/9/20 12:00 pm
9/9/20 12:00 pm
GUD Holdings Limited and Subsidiaries
24. 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
2020
$'000
(1,422)
‐
2019
$'000
(1,327)
‐
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
Average contracted
Fixed interest rate
2019
%
2020
%
2.91
‐
‐
‐
2.91
‐
Notional principal
amount
2019
$'000
2020
$'000
80,000
‐
‐
80,000
‐
80,000
‐
80,000
Fair value
2019
$'000
‐
(1,482)
‐
(1,482)
2020
$'000
(379)
‐
‐
(379)
Capital management
The Board’s policy is to maintain a strong capital base for the Group. This policy is predicated on the need to continue
to present the Group favourably to various stakeholders including investors, employees, banks, suppliers and
customers. This enables the Group to access capital markets, attract talented staff and negotiate favourable terms
and conditions with suppliers and customers. Capital is defined as total debt and equity of the Group.
The Group uses a Cash Value Added (CVA) approach when measuring returns achieved by each business. This
approach involves comparing the cash profit achieved to the cost of the capital utilised by each business. This cost
of capital represents a weighted average cost of debt and equity and allows a single measure to assess business
performance. The Group has consistently achieved CVA returns in excess of its weighted average cost of capital
resulting in positive shareholder returns.
The Group is not subject to any externally imposed capital requirements. The terms and the conditions of the main
debt facilities contain four financial covenants: minimum interest cover, maximum debt to earnings, and Australia
and NZ subsidiaries to Group asset and earnings ratios. All covenants have been satisfied during the 2020 and 2019
financial years.
There were no changes to the Group’s approach to capital management during the year.
85
8582_GUD_Holdings_Annual Report_2020_Mono.indd 85
8582_GUD_Holdings_Annual Report_2020_Mono.indd 85
9/9/20 12:00 pm
9/9/20 12:00 pm
GUD Holdings Limited and Subsidiaries
25. 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
2020
$'000
112,880
‐
112,880
2020
Number
86,485,972
215,202
86,701,174
2019
$'000
112,880
‐
112,880
2019
Number
86,185,698
300,274
86,485,972
During the year, the Company issued 215,202 shares (2019: 300,274 shares).
During the year, no shares were bought back on market and cancelled by the Group (2019: nil). 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.
26. 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.
8582_GUD_Holdings_Annual Report_2020_Mono.indd 86
8582_GUD_Holdings_Annual Report_2020_Mono.indd 86
9/9/20 12:00 pm
9/9/20 12:00 pm
86
GUD Holdings Limited and Subsidiaries
26. 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
2020
$'000
(663)
2,266
(2,505)
(902)
9,495
1,796
11,291
(598)
‐
(598)
1,747
(537)
1,210
‐
‐
‐
‐
11,001
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
87
8582_GUD_Holdings_Annual Report_2020_Mono.indd 87
8582_GUD_Holdings_Annual Report_2020_Mono.indd 87
9/9/20 12:00 pm
9/9/20 12:00 pm
GUD Holdings Limited and Subsidiaries
27. Retained earnings
This table summarises the movement in retained earnings:
Balance at the beginning of the year
Profit for the period
Transfer from dividend reserve
Dividends paid
Balance at the end of the year
28. Dividends
Accounting policies
Dividends
2020
$'000
155,778
43,678
‐
(48,552)
150,904
2019
$'000
119,649
59,558
22,408
(45,837)
155,778
Dividends paid are classified as distributions of profit consistent with the balance sheet classification of the related
debt or equity instruments.
Recognised amounts
2020
Final dividend in respect of the 2019 financial
year
Interim dividend in respect of the 2020 financial
year
Total dividends
2019
Final dividend in respect of the 2018 financial
year
Interim dividend in respect of the 2019 financial
year
Total dividends
Unrecognised amounts
Fully Paid Ordinary Shares
2020
Final dividend in respect of the 2020 financial
year
Cents per
share
Total
amount
$'000 Date of payment Tax rate
Percentage
franked
31
25
56
28
25
53
Cents per
share
26,877
30 August 2019
30%
100%
21,675 28 February 2020
30%
100%
48,552
24,216
31 August 2018
30%
100%
21,621
1 March 2019
30%
100%
45,837
Total
amount
$'000 Date of payment Tax rate
Percentage
franked
12
10,404
28 August 2020
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. In furtherance of cash conservation
measures, the GUD Dividend Reinvestment Plan will be available for this dividend.
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% (2019: 30%) franking credits available to shareholders of
GUD Holdings Limited for subsequent financial years
2020
$'000
2019
$'000
40,295
50,121
88
8582_GUD_Holdings_Annual Report_2020_Mono.indd 88
8582_GUD_Holdings_Annual Report_2020_Mono.indd 88
9/9/20 12:00 pm
9/9/20 12:00 pm
GUD Holdings Limited and Subsidiaries
Taxation
This section outlines the tax accounting policies, current and deferred tax impacts, a reconciliation of profit before
tax to the tax charge and the movements in deferred tax assets and liabilities.
29. Current tax
Accounting policies
Current and deferred tax expense
Current tax is calculated by reference to the amount of income taxes payable or recoverable in respect of the taxable
profit or loss for the period. It is calculated using tax rates and tax laws that have been enacted or substantively
enacted by the reporting date. Current and deferred tax is recognised as an expense or income in the Income
Statement, except when it relates to items credited or debited directly to equity, in which case the deferred tax is
also recognised directly in equity, or where it arises from the initial accounting for a business combination, in which
case it is taken into account in the determination of goodwill. Current tax for current and prior periods is recognised
as a liability (or asset) to the extent that it is unpaid (or refundable).
Tax consolidation
The Company and its wholly‐owned Australian resident subsidiaries have formed a tax‐consolidated group under
Australian taxation law and are 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 31c.
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% (2019: 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
2020
$'000
2019
$'000
19,094
24,073
987
(122)
(253)
‐
263
19,969
21,033
(122)
(942)
19,969
685
(873)
(255)
(1,050)
(1,893)
20,687
20,737
(873)
823
20,687
89
8582_GUD_Holdings_Annual Report_2020_Mono.indd 89
8582_GUD_Holdings_Annual Report_2020_Mono.indd 89
9/9/20 12:00 pm
9/9/20 12:00 pm
GUD Holdings Limited and Subsidiaries
29. Current tax (continued)
Income tax expense recognised in other comprehensive income
2020
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
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
30. Deferred tax
Accounting policies
Deferred tax
Before tax
Tax (expense)
/ benefit
Net of tax
(535)
3,237
(3,578)
(876)
‐
(971)
1,073
102
(535)
2,266
(2,505)
(774)
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)
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.
8582_GUD_Holdings_Annual Report_2020_Mono.indd 90
8582_GUD_Holdings_Annual Report_2020_Mono.indd 90
9/9/20 12:00 pm
9/9/20 12:00 pm
90
0
0
0
$
'
5
1
9
3
1
2
0
3
6
2
0
,
4
7
2
4
,
3
2
3
5
,
1
4
2
5
1
7
1
2
8
1
7
,
1
‐
1
3
3
9
1
9
,
1
1
)
9
1
9
,
1
1
(
4
6
1
3
0
6
3
9
1
5
,
8
3
0
2
6
,
9
3
)
9
1
9
,
1
1
(
)
1
0
7
,
7
2
(
e
c
n
a
l
a
b
g
n
i
s
o
C
l
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
0
0
0
$
'
y
t
i
u
q
E
n
i
d
e
s
i
n
g
o
c
e
R
0
0
0
$
'
1
0
3
)
1
4
3
(
)
5
3
(
9
1
1
3
8
4
1
,
6
7
6
5
0
2
)
6
(
5
4
3
)
7
2
5
(
0
2
2
2
,
6
1
2
)
2
1
(
)
6
9
(
)
5
0
1
(
4
0
5
7
0
5
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
0
0
0
$
'
0
0
0
$
'
6
5
3
4
7
1
3
8
1
5
2
7
3
,
4
4
9
1
,
6
5
8
0
1
5
0
3
‐
5
4
2
2
,
)
4
2
3
(
9
9
6
9
,
)
9
9
6
9
(
,
5
1
1
9
9
9
6
2
5
1
5
1
6
8
3
,
3
1
1
9
3
,
)
9
9
6
9
(
,
)
4
1
4
9
2
(
,
s
n
o
i
s
i
v
o
r
p
t
i
f
e
n
e
b
e
e
y
o
p
m
E
l
s
t
e
s
s
a
x
a
t
d
e
r
r
e
f
e
D
s
n
o
i
s
i
v
o
r
p
g
n
i
r
u
t
c
u
r
t
s
e
R
s
n
o
i
s
i
v
o
r
p
y
t
n
a
r
r
a
W
0
2
0
2
s
e
i
t
i
l
i
b
a
i
l
e
v
i
t
a
v
i
r
e
D
s
e
s
n
e
p
x
e
d
e
u
r
c
c
A
s
t
b
e
d
l
u
f
t
b
u
o
D
y
r
o
t
n
e
v
n
I
i
t
n
e
m
p
u
q
e
d
n
a
t
n
a
p
l
,
y
t
r
e
p
o
r
P
s
t
e
s
s
a
e
b
g
n
a
t
n
i
l
i
r
e
h
t
O
r
e
h
t
O
t
e
s
s
a
x
a
t
d
e
r
r
e
f
e
d
l
a
t
o
T
t
e
s
s
a
x
a
t
d
e
r
r
e
f
e
d
t
e
N
s
e
i
t
i
l
i
b
a
i
l
x
a
t
d
e
r
r
e
f
e
D
x
a
t
f
o
f
f
o
t
e
S
i
t
n
e
m
p
u
q
e
d
n
a
t
n
a
p
l
,
y
t
r
e
p
o
r
P
s
t
e
s
s
a
e
b
g
n
a
t
n
i
l
i
r
e
h
t
O
t
c
u
d
o
r
p
d
e
s
i
l
a
t
i
p
a
C
t
n
e
m
p
o
e
v
e
d
l
s
e
i
t
i
l
i
b
a
i
l
s
t
e
s
s
a
e
v
i
t
a
v
i
r
e
D
r
e
h
t
O
x
a
t
d
e
r
r
e
f
e
d
l
a
t
o
T
x
a
t
f
o
f
f
o
t
e
S
)
s
e
i
t
i
l
i
b
a
i
l
(
/
s
t
e
s
s
a
x
a
t
d
e
r
r
e
f
e
d
t
e
N
d
e
s
i
n
g
o
c
e
R
n
o
i
t
i
s
i
u
q
c
A
s
s
e
n
i
s
u
b
h
g
u
o
r
h
t
s
s
o
L
r
o
t
i
f
o
r
P
n
i
s
n
o
i
t
a
n
b
m
o
c
i
e
c
n
a
l
a
b
g
n
n
e
p
O
i
)
d
e
u
n
i
t
n
o
c
(
x
a
t
d
e
r
r
e
f
e
D
.
0
3
i
s
e
i
r
a
d
i
s
b
u
S
d
n
a
d
e
t
i
m
i
L
l
i
s
g
n
d
o
H
D
U
G
8582_GUD_Holdings_Annual Report_2020_Mono.indd 91
8582_GUD_Holdings_Annual Report_2020_Mono.indd 91
9/9/20 12:00 pm
9/9/20 12:00 pm
0
0
0
$
'
6
5
3
4
7
1
3
8
1
5
2
7
,
3
4
4
9
,
1
6
5
8
0
1
5
0
3
‐
5
4
2
,
2
)
4
2
3
(
9
9
6
,
9
)
9
9
6
,
9
(
5
1
1
9
9
9
6
2
5
1
5
1
6
,
8
3
3
1
1
,
9
3
)
3
1
1
,
9
3
(
)
4
1
4
,
9
2
(
d
e
t
a
t
s
e
R
e
c
n
a
l
a
b
g
n
i
s
o
C
l
‐
‐
‐
‐
‐
‐
‐
‐
‐
5
0
0
1
,
5
0
0
1
,
‐
‐
‐
‐
0
0
1
0
0
1
0
0
0
$
'
y
t
i
u
q
E
n
i
d
e
s
i
n
g
o
c
e
R
0
0
0
$
'
)
9
6
(
6
5
3
)
6
3
(
)
0
4
1
(
)
4
6
7
(
)
5
2
(
)
9
1
8
(
)
1
1
2
(
‐
)
4
9
7
(
)
2
0
5
2
(
,
8
7
‐
2
)
1
6
(
)
8
3
9
(
)
9
1
9
(
0
0
0
$
'
7
8
1
‐
‐
‐
5
1
0
5
3
‐
‐
‐
‐
2
5
5
‐
‐
‐
‐
‐
‐
0
0
0
$
'
‐
4
1
3
9
1
2
7
0
6
3
,
8
5
3
2
,
6
6
8
4
2
3
1
4
2
0
7
4
5
4
2
2
,
4
4
6
0
1
,
)
4
4
6
0
1
(
,
‐
7
3
5
1
0
6
1
7
0
1
1
,
3
1
6
8
3
,
2
3
9
9
3
,
)
4
4
6
0
1
(
,
)
8
8
2
9
2
(
,
n
o
i
t
i
s
i
u
q
c
A
d
e
s
i
n
g
o
c
e
R
s
s
e
n
i
s
u
b
h
g
u
o
r
h
t
d
e
t
a
t
s
e
R
s
s
o
L
r
o
t
i
f
o
r
P
n
i
s
n
o
i
t
a
n
b
m
o
c
i
e
c
n
a
l
a
b
g
n
n
e
p
O
i
i
t
n
e
m
p
u
q
e
d
n
a
t
n
a
p
l
,
y
t
r
e
p
o
r
P
s
n
o
i
s
i
v
o
r
p
t
i
f
e
n
e
b
e
e
y
o
p
m
E
l
s
t
e
s
s
a
x
a
t
d
e
r
r
e
f
e
D
s
n
o
i
s
i
v
o
r
p
g
n
i
r
u
t
c
u
r
t
s
e
R
s
n
o
i
s
i
v
o
r
p
y
t
n
a
r
r
a
W
9
1
0
2
s
e
i
t
i
l
i
b
a
i
l
e
v
i
t
a
v
i
r
e
D
s
e
s
n
e
p
x
e
d
e
u
r
c
c
A
s
t
b
e
d
l
u
f
t
b
u
o
D
y
r
o
t
n
e
v
n
I
)
d
e
u
n
i
t
n
o
c
(
x
a
t
d
e
r
r
e
f
e
D
.
0
3
i
t
n
e
m
p
u
q
e
d
n
a
t
n
a
p
l
,
y
t
r
e
p
o
r
P
t
c
u
d
o
r
p
d
e
s
i
l
a
t
i
p
a
C
t
n
e
m
p
o
e
v
e
d
l
t
e
s
s
a
x
a
t
d
e
r
r
e
f
e
d
l
a
t
o
T
t
e
s
s
a
x
a
t
d
e
r
r
e
f
e
d
t
e
N
s
e
i
t
i
l
i
b
a
i
l
x
a
t
d
e
r
r
e
f
e
D
x
a
t
f
o
f
f
o
t
e
S
s
t
e
s
s
a
e
b
g
n
a
t
n
i
l
i
r
e
h
t
O
s
t
e
s
s
a
e
b
g
n
a
t
n
i
l
i
r
e
h
t
O
r
e
h
t
O
s
e
i
t
i
l
i
b
a
i
l
s
t
e
s
s
a
e
v
i
t
a
v
i
r
e
D
r
e
h
t
O
x
a
t
d
e
r
r
e
f
e
d
l
a
t
o
T
x
a
t
f
o
f
f
o
t
e
S
)
s
e
i
t
i
l
i
b
a
i
l
(
/
s
t
e
s
s
a
x
a
t
d
e
r
r
e
f
e
d
t
e
N
i
s
e
i
r
a
d
i
s
b
u
S
d
n
a
d
e
t
i
m
i
L
i
l
s
g
n
d
o
H
D
U
G
8582_GUD_Holdings_Annual Report_2020_Mono.indd 92
8582_GUD_Holdings_Annual Report_2020_Mono.indd 92
9/9/20 12:00 pm
9/9/20 12:00 pm
GUD Holdings Limited and Subsidiaries
Business Combinations
This section outlines the Group’s structure and changes thereto.
31. 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 16). 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 Other
Comprehensive Income is re‐presented as if the operation had been discontinued from the start of the comparative
year.
8582_GUD_Holdings_Annual Report_2020_Mono.indd 93
8582_GUD_Holdings_Annual Report_2020_Mono.indd 93
9/9/20 12:00 pm
9/9/20 12:00 pm
93
GUD Holdings Limited and Subsidiaries
31. Investments in subsidiaries (continued)
31a 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
Deferred tax liability1
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
(1,219)
(2,817)
(660)
(69)
(621)
7,257
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
(1,219)
(2,817)
(660)
(69)
(694)
11,305
Goodwill
Goodwill arising from the acquisition has been recognised as follows:
Total consideration
Less Fair value of identifiable net assets
Goodwill
$'000
22,128
11,305
10,823
1 As a result of the IFRS IC agenda decision, GUD Holdings Limited has changed its accounting policy, retrospectively adjusting the deferred tax
accounting for impacted assets and intangibles. For further details refer to Note 1.
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.
8582_GUD_Holdings_Annual Report_2020_Mono.indd 94
8582_GUD_Holdings_Annual Report_2020_Mono.indd 94
9/9/20 12:00 pm
9/9/20 12:00 pm
94
GUD Holdings Limited and Subsidiaries
31. Investments in subsidiaries (continued)
31b Shareholdings
Country of incorporation
% ownership interest
2019
2020
Parent entity
GUD Holdings Limited (1)
Subsidiaries
AA Gaskets Pty Ltd(2) (3)
Brown & Watson International Pty Ltd (2) (3)
Davey Water Products Pty Ltd (2) (3)
Disc Brakes Australia Pty Ltd(2) (3)
Griffiths Equipment Pty Ltd (2) (3)(4)
Innovative Mechatronics Group Pty Ltd (2) (3)
Ryco Group Pty Ltd (2) (3)
Wesfil Australia Pty Ltd (2) (3)
Griffiths Equipment Limited
GUD NZ Holdings Limited
NZ Gaskets Limited
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.) (4)
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
New Zealand
New Zealand
France
Spain
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 Davey Water Products S.A.S. and Davey Water Products S.L. 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)
8582_GUD_Holdings_Annual Report_2020_Mono.indd 95
8582_GUD_Holdings_Annual Report_2020_Mono.indd 95
9/9/20 12:00 pm
9/9/20 12:00 pm
95
GUD Holdings Limited and Subsidiaries
31. Investments in subsidiaries (continued)
31c 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
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
2020
$'000
411,508
(9,238)
(340,237)
62,033
(19,865)
42,168
‐
42,168
99,825
(48,552)
93,441
2019
$'000
405,449
(6,012)
(320,117)
79,320
(19,878)
59,442
‐
59,442
86,220
(45,837)
99,825
24,940
109,937
6,731
92,839
234,447
40,055
77,490
10,641
138,606
121,548
388,340
622,787
62,058
11
4,106
12,976
12,593
91,744
154,854
97,452
1,291
253,597
345,341
277,446
112,880
71,125
93,441
277,446
27,478
97,176
5,676
95,142
225,472
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
96
8582_GUD_Holdings_Annual Report_2020_Mono.indd 96
8582_GUD_Holdings_Annual Report_2020_Mono.indd 96
9/9/20 12:00 pm
9/9/20 12:00 pm
GUD Holdings Limited and Subsidiaries
Other Notes
32. 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.
33. Key management personnel
During the last quarter of FY19 in response to an overall strategic review and following changes in a number of
executive roles and responsibilities, the Managing Director reviewed how we would best move forward supporting
the five key topic areas of Customer Relationships, Supplier Engagement, People Cycle Planning, Product Cycle
Planning and Operational efficiency outlined in the prior year’s Annual report.
The review resulted in the Managing Director and Group CFO assuming a number of key responsibilities from the
individual business unit leaders and the establishment of a flatter leadership structure complemented with a number
of Group subject matter experts. This change has seen both leaders be more directly involved in key customer
relationship management and decision‐making including business unit strategy formulation and execution including
through group wide Councils they chair involving the topic areas of Innovation, Supply Chain, and IT. The changes
also see more direct involvement in the sign‐off of People or Product Cycle Plans together with business leaders and
Group subject matter experts.
As a consequence, the company has reviewed the senior leadership roles and determined that Key Management
Personnel (KMP) definition is now satisfied in the case of the Board, Managing Director, and the Group CFO. For the
prior financial year, the report discloses details of those personnel who met the KMP definition in that year. 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:
M G Smith (Chairman) (Non‐executive)
A L Templeman‐Jones (Non‐executive)
G A Billings (Non‐executive)
D D Robinson (Non‐executive)
G Whickman (Managing Director)
M A Fraser (Chief Financial Officer)
J A Douglas (Non‐executive) – Appointed 1 March 2020
The key management personnel including Non‐Executive Directors of GUD Holdings Ltd, and its subsidiaries, in the
prior financial year were the following persons:
M G Smith (Chairman) (Non‐executive)
A L Templeman‐Jones (Non‐executive)
G A Billings (Non‐executive)
D D Robinson (Non‐executive)
G Whickman (Managing Director)
M A Fraser (Chief Financial Officer)
R Pattison (General Manager Automotive Acquisition & Strategy)
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)
G Nicholls (Former Chief Executive – Ryco Group) ‐ Ceased to be KMP – 6 May 2019
J P Ling (Managing Director (Former Managing Director) – ceased 30 September 2018
8582_GUD_Holdings_Annual Report_2020_Mono.indd 97
8582_GUD_Holdings_Annual Report_2020_Mono.indd 97
9/9/20 12:00 pm
9/9/20 12:00 pm
97
GUD Holdings Limited and Subsidiaries
33. Key management personnel (continued)
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
2020
$
2,384,476
28,075
119,645
267,672
2,799,868
2019
$
5,128,216
60,571
264,684
737,556
6,191,027
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.
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
2020
5.37
10.33
2019
5.92
12.64
2020
5.41
10.37
2019
6.69
14.15
Expected volatility (weighted average)
24.00%
28.00%
24.00%
28.00%
Expected dividends
Risk free interest rate (based on government
bonds)
5.00%
0.70%
5.00%
2.01%
5.00%
0.80%
5.00%
2.08%
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.
Expense recognised in profit or loss
For details of the parent employee benefit expenses, see Note 3.
8582_GUD_Holdings_Annual Report_2020_Mono.indd 98
8582_GUD_Holdings_Annual Report_2020_Mono.indd 98
9/9/20 12:00 pm
9/9/20 12:00 pm
98
GUD Holdings Limited and Subsidiaries
34. Related parties
Directors
Details of Directors' compensation is disclosed in Note 33.
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 2020, key management personnel held directly, indirectly or beneficially 150,835 ordinary shares (2019:
385,842) in the Group. Performance rights issued under the 2020 plan will not vest. Key management personnel
were issued 77,321 (2019: 101,175) shares for performance rights issued under the 2020 plan.
Loans to KMPs
The Company entered into an Equity Loan Agreement in the amount of $228,000 with the Managing Director and
CEO, Mr Graeme Whickman which enabled him to acquire 25,000 shares in the Company in September 2019. Mr
Whickman pays interest on the loan on a quarterly basis at a rate that is set at 25 basis points above the Company’s
average cost of borrowed funds.
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 31b.
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 $455,944 excluding GST (2019: $448,444 excluding GST). The Group's policy is that related
party lease arrangements are undertaken with commercial terms and conditions.
35. Parent entity disclosures
As at and for the financial year ending 30 June 2020 the parent company of the Group was GUD Holdings Limited.
GUD Holdings Limited
Results of the parent entity
Profit/(loss) for the period
Other comprehensive income
Total comprehensive income/(loss) 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
2020
$'000
12,873
‐
12,873
1,036
315,219
17,437
210,191
105,028
112,880
(18,326)
10,474
105,028
2019
$'000
(3,949)
‐
(3,949)
815
309,241
27,371
170,394
138,847
112,880
17,350
8,617
138,847
99
8582_GUD_Holdings_Annual Report_2020_Mono.indd 99
8582_GUD_Holdings_Annual Report_2020_Mono.indd 99
9/9/20 12:00 pm
9/9/20 12:00 pm
GUD Holdings Limited and Subsidiaries
35. Parent entity disclosures (continued)
GUD Holdings Limited
Parent entity contingencies
Contingent liabilities
2020
$'000
2019
$'000
167,710
53,033
The parent entity is party to two guarantees relating to subsidiaries. The bank borrowing facility described in Note
20 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 31c. 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 2020.
36. Contingent liabilities
The Group had no material contingent liabilities at 30 June 2020 (2019: Nil).
37. Subsequent events
Dividends declared
On 28 July 2020, the Board of Directors declared a fully franked interim dividend in respect of the 2020 financial year
of 12 cents per share. Record date is 14 August 2020 and the dividend will be paid on 28 August 2020.
Borrowing facilities
On 1 July 2020, the Company secured additional banking facilities for $22.5 million. The maturity of this facility is 1
July 2021.
Other
Other than the items discussed above, 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.
8582_GUD_Holdings_Annual Report_2020_Mono.indd 100
8582_GUD_Holdings_Annual Report_2020_Mono.indd 100
9/9/20 12:00 pm
9/9/20 12:00 pm
100
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 2020 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 31c 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 2020.
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, 28 July 2020
8582_GUD_Holdings_Annual Report_2020_Mono.indd 101
8582_GUD_Holdings_Annual Report_2020_Mono.indd 101
9/9/20 12:00 pm
9/9/20 12:00 pm
101
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 2020 there have been:
i.
no contraventions of the auditor independence requirements as set out in the Corporations Act
2001 in relation to the audit; and
ii.
no contraventions of any applicable code of professional conduct in relation to the audit.
Chris Sargent
Partner
28 July 2020
KPMG
KPM_INI_01
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Professional Standards Legislation.
102
8582_GUD_Holdings_Annual Report_2020_Mono.indd 102
8582_GUD_Holdings_Annual Report_2020_Mono.indd 102
9/9/20 12:00 pm
9/9/20 12:00 pm
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).
The Financial Report comprises:
Consolidated Balance Sheet as at 30 June 2020
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 2020 and of
financial
performance for the year ended on
that date; and
its
complying with Australian Accounting
the Corporations
Standards
Regulations 2001.
and
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 GUD Holdings Limited (the
Company) and the entities it controlled at the year-end or
from time to time during the financial year.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for the
audit of the Financial Report section of our report.
We are independent of the Group in accordance with the Corporations Act 2001 and the ethical
requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics
for Professional Accountants (the Code) that are relevant to our audit of the Financial Report in Australia.
We have fulfilled our other ethical responsibilities in accordance with the Code.
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Professional Standards Legislation.
103
8582_GUD_Holdings_Annual Report_2020_Mono.indd 103
8582_GUD_Holdings_Annual Report_2020_Mono.indd 103
9/9/20 12:00 pm
9/9/20 12:00 pm
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 ($162.15 million) and other intangible assets ($121.44 million)
Refer to Note 13 Goodwill, Note 14 Other intangible assets and Note 17 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).
to
The recoverability of these assets is a key audit
matter due
inherent complexity
associated with auditing the forward looking
assumptions incorporated in the Group’s “value
in use” (VIU) models.
the
inputs. Forward
The Group’s VIU models are
internally
developed, and use a range of internal and
looking
external data as
assumptions may be prone to greater risk for
potential bias, error and inconsistent application.
Significant judgement is involved in establishing
these assumptions. Where the Group has not
met prior year forecasts in relation to a specific
CGU or individual asset we factor this into our
assessment of forecast assumptions.
The key assumptions in the VIU models include
forecast cash flows, forecast growth rates
during the forecast period, terminal growth rates
and discount rates. The VIU models for individual
include assumptions
intangible assets also
relating to royalty rates applicable to specific
brand names.
We involved valuation specialists to supplement
our senior audit team members in assessing this
key audit matter
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 and projections;
assessing the accuracy of previous Group
forecasts to inform our evaluation of
forecasts
in the models,
including assessing the impact of business
changes;
incorporated
-
applied
using our industry knowledge to challenge
and assess the reasonableness of key
increased
assumptions. We
scepticism to forecasts in the areas where
previous forecasts were not achieved; and
- working with our valuation specialists, we
independently developed a discount rate
comparable using
range
publicly
for
comparable entities, adjusted by risk
factors specific to the Group.
available market data
considered
considering the sensitivity of the models by
varying key assumptions, such as forecast
growth rates, terminal growth rates and
discount rates, within a reasonably possible
range, to identify those assumptions at higher
risk of bias or inconsistency in application. We
also
impairment
breakeven points for these assumptions in
assessed
related
the
8582_GUD_Holdings_Annual Report_2020_Mono.indd 104
8582_GUD_Holdings_Annual Report_2020_Mono.indd 104
9/9/20 12:00 pm
9/9/20 12:00 pm
104
order to identify those assets at higher risk of
impairment
further
procedures;
focus our
and
to
working with our valuation specialists we
compared the implied multiples from the
Group’s models to multiples derived from
comparable companies;
assessing the Group’s valuation of its brand
names, including recalculating the impairment
charge recorded against specific intangible
assets, and the appropriateness of an indefinite
useful life assumption; 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 ($108.18 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 2020, the Group held inventory with
a net carrying value of $108.18 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
requirements of accounting
standards;
the
understanding processes and testing key
inventory movements,
controls relating to
standard costing, weighted average costing
and valuation;
attending cycle or year-end inventory counts to
ascertain the existence and condition of
inventory;
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
identify
against current selling prices
individual products at risk of being recorded in
excess of their net realisable value; and
to
challenging the Group's judgements relating to
the provision for stock obsolescence (including
slow moving or excess stock), by comparing
current
levels to historical and
forecast sales. We assessed the level of
inventory
105
8582_GUD_Holdings_Annual Report_2020_Mono.indd 105
8582_GUD_Holdings_Annual Report_2020_Mono.indd 105
9/9/20 12:00 pm
9/9/20 12:00 pm
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, the aging
of inventory and from further inquiries with key
personnel.
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
8582_GUD_Holdings_Annual Report_2020_Mono.indd 106
8582_GUD_Holdings_Annual Report_2020_Mono.indd 106
9/9/20 12:00 pm
9/9/20 12:00 pm
106
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.
Report on the Remuneration Report
Opinion
Directors’ responsibilities
In our opinion, the Remuneration Report of
GUD Holdings Limited for the year ended
30 June 2020 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
the Directors’ Report for the year ended 30 June 2020.
Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
PAR_NAM_01
PAR_POS_01
PAR_DAT_01
PAR_SIG_01
KPMG
Chris Sargent
Partner
Melbourne
28 July 2020
8582_GUD_Holdings_Annual Report_2020_Mono.indd 107
8582_GUD_Holdings_Annual Report_2020_Mono.indd 107
9/9/20 12:00 pm
9/9/20 12:00 pm
107
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 21 August 2020
Shares held
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
No. of Shareholders
3,483
4,520
1,004
557
17
%
36.35
47.18
10.48
5.81
0.18
Shares
1,706,951
11,370.807
7,182,089
10,955,794
55,485,533
There are 427 shareholders holding less than a marketable parcel of shares. A marketable parcel is $500.00.
Twenty Largest Shareholders as at 21 August 2020
HSBC Custody Nominees (Australia) Limited
Citicorp Nominees Pty Limited
J P Morgan Nominees Australia Pty Limited
Argo Investments Limited
National Nominees Limited
BNP Paribas Nominees Pty Ltd
BNP Paribas Noms Pty Ltd
AMP Life Limited
National Nominees Limited
Citicorp Nominees Pty Limited
Australian Executor Trustees Limited
HSBC Custody Nominees (Australia) Limited
Kulandra Pty Limited
BNP Paribas Nominees Pty Ltd
HSBC Custody Nominees (Australia) Limited
HSBC custody Nominees (Australia) Limited – GSCO ECA
Mr Timothy Theodore Byard
BNP Paribas Nominees Pty Ltd HUB24 Custodial Serv Ltd
Mrs Jillian Anita Cobcroft
Powerwrap Limited
Total Twenty Largest Shareholders of Ordinary Fully Paid Shares
Total Remaining Holders Balance
Substantial Shareholders of GUD Holdings Limited
As at 21 August 2020, the current notices of substantial shareholders were:
Marathon Asset Management LLP
Perpetual Limited
Franklin Resources Inc
Vanguard Group
No. of Shares
28,442,301
9,994,194
9,307,047
2,066,508
1,635,843
1,476,008
651,453
353,750
328,572
255,269
208,124
167,109
132,749
131,836
120,927
113,596
100,247
98,895
98,000
93,360
55,775,788
30,925,386
No. of Shares
8,835,825
6,342,689
5,050,661
4,389,624
%
1.97
13.11
8.28
12.64
64.00
%
32.80
11.53
10.73
2.38
1.89
1.70
0.75
0.41
0.38
0.29
0.24
0.19
0.15
0.15
0.14
0.13
0.12
0.11
0.11
0.11
64.31
35.69
%
10.19
7.32
5.83
5.07
108
8582_GUD_Holdings_Annual Report_2020_Mono.indd 108
8582_GUD_Holdings_Annual Report_2020_Mono.indd 108
9/9/20 12:00 pm
9/9/20 12:00 pm
Shareholder Services
Dividends/Dividend Reinvestment Plan (DRP)
The GUD Holdings Limited DRP Plan was reinstated on 29 July 2020.
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
8582_GUD_Holdings_Annual Report_2020_Mono.indd 109
8582_GUD_Holdings_Annual Report_2020_Mono.indd 109
9/9/20 12:00 pm
9/9/20 12:00 pm
109
8582_GUD_Holdings_Annual Report_2020_Mono.indd 110
8582_GUD_Holdings_Annual Report_2020_Mono.indd 110
9/9/20 12:00 pm
9/9/20 12:00 pm