Oldfields Holdings Limited
Annual Report 2013

Plain-text annual report

HOLDINGS LIMITED 54th Annual Report 2013 QUALITY PRODUCTS FOR YOUR NEEDS MADE EASY www.oldfields.com.au ABN 92 000 307 988 OLDFIELDS HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN: 92 000 307 988 Financial Report For The Year Ended 30 June 2013 OLDFIELDS HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN: 92 000 307 988 Financial Report For The Year Ended 30 June 2013 CONTENTS Appendix 4E Directors' Report Auditor's Independence Declaration Consolidated Statement of Profit or Loss and Other Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Financial Statements Directors' Declaration Independent Auditor's Report Additional Information for Listed Public Companies Corporate Governance Statement Risk Management Statement 1 3 9 10 11 12 13 14 41 42 44 45 55 Oldfields Holdings Limited ABN: 92 000 307 988 and Controlled Entities APPENDIX 4E –FINAL REPORT FOR THE YEAR ENDED 30 JUNE 2013 Results for announcement to market Key Information Revenue from continuing activities Earnings before interest, tax, depreciation and amortisation 2013 $000 26,644 954 Profit/(loss) after tax from continuing operations 4,640 Loss from discontinued operations after tax Profit/(loss) attributable to members of the parent entity - 4,487 Dividends paid and proposed There have been no dividends paid or proposed during the year. 2012 $000 28,833 873 (1,683) (61) (1,814) % Change -7.6% 9.3% N/A 100% N/A Statement of profit and loss and other comprehensive income with notes to the statement Refer to page 10 of the 30 June 2013 financial report and accompanying notes for Oldfields Holdings Limited. Statement of financial position with notes to the statement Refer to page 11 of the 30 June 2013 financial report and accompanying notes for Oldfields Holdings Limited. Statement of changes in equity with notes to the statement Refer to page 12 of the 30 June 2013 financial report and accompanying notes for Oldfields Holdings Limited. Statement of cash flows with notes to the statement Refer to page 13 of the 30 June 2013 financial report and accompanying notes for Oldfields Holdings Limited. Dividend reinvestment plan There was a dividend reinvestment plan in operation during the financial year. Net tangible assets per share Net assets Net assets per share 2013 $000 7,634 2012 $000 756 9.0 cents 1.0 cents % Change 909.7% Net tangible assets Net tangible assets per share 6,458 7.9 cents (393) (0.8) cents N/A Control gained or lost over entities during the year There were no changes in control over any associated or controlled entities during the year. Oldfields Holdings Limited ABN: 92 000 307 988 and Controlled Entities APPENDIX 4E –FINAL REPORT FOR THE YEAR ENDED 30 JUNE 2013 Investment in associates and joint ventures % held Value ($) Material investments in associates and joint ventures are as follows: 2013 2012 PT Ace Oldfields Enduring Enterprises Honeytree & Partners Brisbane Garden Sheds Pty Ltd 34% 34% 34% 0% 49% 49% 49% 50% 2013 774,066 (6,687) 107,648 - 2012 1,064,127 51,872 149,904 - As disclosed in the financial report, the consolidated entity has recognised an aggregated share of net profit from the associates and joint ventures listed above amounting to $2,057 (2012: $30,368). Commentary on the results for the period The commentary on the results for the period are contained in the “Operating Results and Review of Operations for the year” section included within the directors’ report. Status of audit The 30 June 2013 financial report and accompanying notes for Oldfields Holdings Limited and Controlled Entities have been audited. Refer to page 42 of the 30 June 2013 financial report and accompanying notes for Oldfields Holdings Limited. Christopher Giles Chief Executive Officer 29 August 2013 OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES DIRECTORS' REPORT Your directors present their report, together with the financial statements of the Group, being the Company and its controlled entities for the financial year ended 30 June 2013. Directors The names of directors in office at any time during or since the end of the year are: Christopher Michael Giles William Lewis Timms Stephen Charles Hooper Julie Garland McLellan Appointed Appointed Appointed Appointed 24 September 2010 18 December 2009 23 May 2013 1 March 2011 Principal Activities and Significant Changes in Nature of Activities Resigned 23 May 2013 The principal activities of the consolidated group during the financial year were: • manufacturing and marketing of paint brushes, paint rollers and painters tools; • manufacturing, marketing and exporting of garden sheds, outdoor storage systems, aviaries and pet homes; • manufacturing and marketing of scaffolding and related equipment; and • hire of scaffolding and related products to the building and construction industry. There were no significant changes in the nature of the consolidated group’s principal activities during the financial year. Operating Results and Review of Operations for the year Operating Results The consolidated group revenue from continuing operations for the financial year ended 30 June 2013 was $26,644,174 (2012: $28,832,631) which was down 7.6% from the prior year. The consolidated net profit after tax attributable to members of the parent entity was $4,486,973 (2012 loss $1,813,981). This result includes other income of $5.5million from the buy-back of senior debt where the Group purchased $8million of debt from its primary lender for a payment of $2.5million. Gross margins improved from 48.3% to 48.7%, which was primarily attributable to efficiency gains and improved labour utilisation in the scaffold division. Operating overhead cost savings of $1,090,943 were achieved during the year which helped offset the impact of lower revenue. Excluding other income from the debt buy-back, the Group made a net loss from continuing operations after tax of $860,247 (2012: $1,682,305). Whilst the loss was significantly lower than in the prior year, the result was still unsatisfactory, however investments were made during the year in new products, packaging, and marketing materials and efficiency improvements in business processes. These initiatives will drive profitable growth in the coming year which will accelerate when activity increases in the building and construction industry. Net debt has reduced substantially over the past 12 months as a result of the debt buy-back completed in December 2012, lower interest rates and asset sales in the prior year. Cash interest bearing debt reduced from $14,556,165 as at 30 June 2012 to $4,772,174 as at 30 June 2013. This reduction resulted in a decrease of $813,478 in borrowing costs for the year. Cash interest bearing debt comprises of: Cash and cash equivalents Bank overdraft Hire purchase liabilities Bank loans Loans from related parties Note 11 21 21 21 21 Consolidated Group 2013 $ (677,404) 855,184 531,282 3,919,902 143,750 2012 $ (384,321) 453,443 512,616 13,646,095 328,332 4,772,714 14,556,165 Cash inflow from operating activities was $1,064,247 for the year, compared to $114,294 in the prior year. Improving the operating cash flow has been a major area of focus for the Group over the last 12 months, with the improvement this year being primarily from more efficient working capital management and lower interest payments. In order to combat the slowdown in the building and construction industry, a continued focus on driving efficiencies needed to be made during the year. These efficiency initiatives resulted in reduced distribution expenses of $235,047 and was primarily from the scaffold division, which is still well positioned in the market to benefit from an uplift in activity in the building and construction industry when this occurs. Early in the year a full review was made of administrative costs and a number of efficiency savings were made. These savings are being reinvested back into the business to drive growth. The focus going forward will be achieving top line profitable growth through increasing the geographic coverage for our scaffolding business, the launch of a channel differentiated range of products for the paint applications business and the development of new sales channels for the garden sheds business. Financial Position The net assets of the consolidated group have increased by $6,878,315 from $756,100 as at 30 June 2012 to $7,634,415 as at 30 June 2013. This increase is largely due to the refinancing of the company's debt during the year, partially offset by the net loss from operations for the year. OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES DIRECTORS' REPORT Operating Results and Review of Operations for the year (continued) Statement of Profit and Loss Sales revenue Gross profit (excluding depreciation and amortisation) Gross Margin % Operating expenses (excluding depreciation and amortisation) Other Earnings before interest, tax, depreciation and amortisation (EBITDA) * Depreciation and amortisation Earnings before interest and tax (EBIT) * Interest expense Income tax expense Revaluation of deferred senior loan note Loss after tax from continuing operations Debt buy-back Loss for the year from discontinued operations after tax Net profit/(loss) for the year Net cash provided by operating activities Earnings per share (excluding debt buy-back)** Net assets per share 2013 $000's 26,644 12,969 48.7% (12,218) 202 954 (1,034) (80) (515) (167) (98) (860) 5,500 - 4,640 1,064 ($0.01) $0.09 2012 $000's 28,833 13,938 48.3% (13,308) 244 873 (1,089) (216) (1,328) (139) - Change % -7.6% -6.9% +40 bps -8.2% -17.1% 9.3% -5.0% -62.7% -61.3% 20.5% N/A 2011 $000's 30,588 15,081 49.3% (14,020) 788 1,849 (1,172) 677 (1,390) (561) - (1,682) -48.9% (1,274) - (61) (1,744) 114 ($0.03) $0.01 N/A -100.0% N/A 831.1% -54.9% 588.6% - (1,747) (3,021) (1,166) ($0.06) $0.05 * Calculations above exclude the one-off $5.5million debt buy back and revaluation of the derivative element of the deferred senior loan note ** Calculations of earnings per share are based on a weighted average number of shares (refer note 10) and exclude the one-off $5.5million debt buy-back. Review of Operations (i) Consumer Products Division Paint Applications Revenue for paint applications was in line with the prior year. Whilst the division has benefited from the new retail landscape in the hardware market, revenue declines have been experienced in the professional painting market and was impacted by the decline in new building approvals during the year. In addition to this, a private label contract was lost during the year which impacted top line revenue growth but with minimal impact on profitability. The division has benefited from investment in modernising the brand, new products, and new marketing materials. The division is also continuing to invest in creating channel differentiation amongst its product range, which will provide a point of difference between the professional and do-it-yourself (DIY) markets. New packaging and products launched to date have received excellent customer feedback and this is expected to continue in the coming year with more products being updated. Progress made during the year will provide a good base for future profitable growth. To support the new products launched during the year, a full marketing support program is in place to ensure the ongoing success of these products. A supplier rationalisation program was also undertaken, with the number of suppliers reduced. This has allowed the division to negotiate better costs, reduced logistics costs and improved inventory management. Staff training for all sales staff was completed during the year and new customer service initiatives were put in place for a telemarketing function to be implemented in the coming year. Treco Garden Sheds The garden shed division declined in the last year. Domestic sales reduced as a result of continued decline in discretionary consumer spending and the lack of distribution in major hardware retail outlets. Revenue growth in the international market was significantly impacted by the high Australian dollar, however subsequent to year end, there appears to be some uplift in sales in the European market following the decline of the Australian dollar. The garden shed division has recently undergone some management changes and a renewed focus is being made to generate increased revenue and profitability, particularly in the domestic market with a clear focus on gaining additional retail distribution. OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES DIRECTORS' REPORT Review of Operations (continued) (ii) Scaffold Division Total revenue in the scaffold division was down 9.6% compared to prior year, primarily due to a decline in sales of scaffolding equipment due to a large one off sale received in early 2012 which was not repeated in the current year. Gross margins from this division improved further this year and operating overheads were reduced which improved profitability considerably on an earnings before interest and tax (EBIT) basis. There was an increase in the demand for scaffolding hire in the second half of the year as activity showed signs of a recovery in some areas. The scaffolding division continues to focus on customer service, quality, and costs; the benefits of which are being seen as many new accounts have become regular customers. This year, the division was also impacted by a customer in South Australia being placed into administration which resulted in a bad debt of $83,647. Activity in the building and construction industry appears to have increased recently, particularly in south east Queensland, Sydney, and South Australia. Victoria, Western Australia and Newcastle remain stable. Construction activity, particularly in Victoria and Western Australia has been quiet for some time and competitive activity is intense in the scaffold hire and sales industry. Changes to Workplace, Health and Safety legislations in New South Wales and Queensland were expected to provide an uplift in sales of scaffolding for the financial year, however as a result of lower business activity these increased sales have not yet materialised. It is expected that when building activity increases further, the need for additional scaffolding to comply with the new legislation requirements from hire industry customers will eventuate. Future Developments, Prospects and Business Strategies To further improve the consolidated group’s profit and maximise shareholder wealth, the following developments are intended for implementation in the near future: • Continued investment in new products and branding in the paint applications division; • Development of a clearly differentiated product range of products for the paint specialist market; • Expansion of domestic coverage of the scaffold division with new distributors in areas not currently covered; • Increase the international footprint of the scaffold division by working closer with current distributors as they move into new countries; and • Leverage new landscape of the DIY hardware market to grow the garden sheds division domestically. Significant Changes in State of Affairs There were no significant changes in the state of affairs during the year. Dividends Paid or Recommended Dividends paid or declared for payment during the financial year are as follows: Dividends paid to non-controlling interest during the financial year ended 30 June 2013 were $148,512. Events after the Reporting Period There have been no significant events after the end of the reporting period. Information on Directors Christopher Michael Giles Qualifications Experience Interest in Shares and Options William Lewis Timms Qualifications Experience Interest in Shares and Options Special Responsibilities Stephen Charles Hooper Qualifications Experience Interest in Shares and Options Special Responsibilities Julie Garland McLellan Qualifications Experience Interest in Shares and Options Special Responsibilities Directorships held in other listed entities during the three years prior to the current year — — — — — — — — — — — — — — — — — — — — Executive Director and Chief Executive Officer (Appointed 29 February 2012) Bachelor of Commerce, CPA 25 years experience in senior financial and general management roles in the fast moving consumer goods industry. 1,400,000 shares held Non-executive Director and Chairman (Appointed 18 December 2009) Bachelor of Business (Accounting and Audit), Real Estate and Business Agent. 25 years experience in accounting and audit, 20 years experience in commercial real estate and project management 39,384,528 shares held Member of the Audit Committee and Member of the Remuneration Committee Non-executive Director (Appointed 23 May 2013) Bachelor of Science 20 years experience in senior executive roles in the fast moving consumer goods industry, with a focus on supply chain management Nil shares held Chairman of the Audit Committee and Chairman of the Remuneration Committee Non-executive Director and Chairman (Resigned 23 May 2013) FAICD, Diploma and Advanced Diploma in Company Directorship, Graduate Diploma in Finance and Investment, Exec MBA, BSC (hons) Civil Engineering 33 years experience in construction, engineering and resources industries. Nil shares held Former Chairman of the Audit Committee and Former Chairman of the Remuneration Committee Bounty Mining Ltd (Also a director of unlisted entities Kyoto Energy Park, Kimbriki Environmental Enterprises, Approva Inc. (USA Global Advisory Board), Australian Institute of Company Directors NSW Council, and Innovation Australia Engineering and Manufacturing Grants Committee) OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES DIRECTORS' REPORT Company Secretary The following person held the position of company secretary at the end of the financial year: Robert Allan Coleman - Bachelor of Commerce (Accounting), CPA. Robert has held various senior management roles in companies of all sizes. Meetings of Directors During the financial year, 15 meetings of directors (including committees of directors) were held. Attendances by each director during the year were as follows: Directors' Meetings Audit Committee Remuneration Committee Number eligible to attend Number attended Number eligible to attend Number attended Number eligible to attend Number attended 12 12 2 10 12 12 2 10 - 2 - 2 - 2 - 2 - 1 - 1 - 1 - 1 Christopher Michael Giles William Lewis Timms Stephen Charles Hooper Julie Garland McLellan Indemnifying Officers or Auditor During or since the end of the financial year, the company has given an indemnity or entered into an agreement to indemnify, or paid or agreed to pay insurance premiums as follows: ─ The company has paid premiums to insure all past, present and future directors against liabilities for costs and expenses incurred by them in defending legal proceedings arising from their conduct while acting in the capacity of directors of the company, other than conduct involving a wilful breach of duty in relation to the company. The contract of insurance prohibits disclosure of the nature of liability and the amount of the premium. Options At the date of this report, there were no unissued ordinary shares of Oldfields Holdings Limited under options. Proceedings on Behalf of Company No person has applied for leave of Court to bring proceedings on behalf of the company or intervene in any proceedings to which the company is a party for the purpose of taking responsibility on behalf of the company for all or any part of those proceedings. The company was not a party to any such proceedings during the year. Environmental Issues The consolidated group’s operations are not subject to significant environmental regulations under the law of the Commonwealth and State. The economic entity has established procedures whereby compliance with existing environmental regulations and new regulations are monitored continually. This process includes procedures to be followed should an incident adversely impact the environment. The directors are not aware of any breaches during the period covered by this report. Non-audit Services The Board of Directors, in accordance with advice from the audit committee, is satisfied that the provision of non-audit services during the year is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are satisfied that the services disclosed below did not compromise the external auditor’s independence for the following reasons: • all non-audit services are reviewed and approved by the audit committee prior to commencement to ensure they do not adversely affect the integrity and objectivity of the auditor; and • the nature of the services provided does not compromise the general principles relating to auditor independence in accordance with APES 110: Code of Ethics for Professional Accountants set by the Accounting Professional and Ethical Standards Board. The following fees were paid or payable to BDO East Coast Partnership for non-audit services provided during the year ended 30 June 2013: Taxation and related services Auditor’s Independence Declaration $ 26,080 26,080 The lead auditor’s independence declaration for the year ended 30 June 2013 is included on page 9 of the financial report. OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES DIRECTORS' REPORT AUDITED REMUNERATION REPORT Remuneration policy The remuneration policy of Oldfields Holdings Limited has been designed to align key management personnel (KMP) objectives with shareholder and business objectives by providing a fixed remuneration component and offering specific long-term incentives based on key performance areas affecting the consolidated group’s financial results. The board of Oldfields Holdings Limited believes the remuneration policy to be appropriate and effective in its ability to attract and retain the high-quality KMP to run and manage the consolidated group, as well as create goal congruence between directors, executives and shareholders. The Board’s policy for determining the nature and amount of remuneration for KMP of the consolidated group is as follows: • The remuneration policy is to be developed by the remuneration committee and approved by the Board after professional advice is sought from independent external consultants. • All KMP receive a base salary (which is based on factors such as length of service and experience), superannuation, fringe benefits, and performance incentives. • Performance incentives are generally only paid once predetermined key performance indicators (KPIs) have been met. • The remuneration committee reviews KMP packages annually by reference to the consolidated group’s performance, executive performance and comparable information from industry sectors. The performance of KMP is measured against criteria agreed annually with each executive and is based predominantly on the forecast growth of the consolidated group’s profits and shareholders’ value. All bonuses and incentives must be linked to predetermined performance criteria. The Board may, however, exercise its discretion in relation to approving incentives, bonuses and options, and can recommend changes to the committee’s recommendations. Any change must be justified by reference to measurable performance criteria. The policy is designed to attract the highest calibre of executives and reward them for performance results leading to long-term growth in shareholder wealth. KMP receive a superannuation guarantee contribution required by the government, which is currently 9% (9.25% from 1 July 2013) of the individual's average weekly ordinary time earnings (AWOTE), and do not receive any other retirement benefits. Some individuals, however, have chosen to sacrifice part of their salary to increase payments towards superannuation. Upon retirement, KMP are paid employee benefit entitlements accrued to the date of retirement. All remuneration paid to KMP is valued at the cost to the company and expensed. The Board's policy is to remunerate non-executive directors at market rates for time, commitment and responsibilities. The remuneration committee determines payments to the non-executive directors and reviews their remuneration annually, based on market practice, duties and accountability. Independent external advice is sought when required. The maximum aggregate amount of fees that can be paid to non-executive directors is subject to approval by shareholders at the Annual General Meeting. Engagement of Remuneration Consultants During the financial year, there were no consultants engaged by the remuneration committee to review the elements of KMP remuneration and provide recommendations. Performance-based Remuneration The KPIs are set annually, with a certain level of consultation with KMP. The measures are specifically tailored to the area each individual is involved in and has a level of control over. The KPIs target areas the Board believes hold greater potential for group expansion and profit, covering financial and non-financial as well as short and long-term goals. The level set for each KPI is based on budgeted figures for the Group and respective industry standards. Performance in relation to the KPIs is assessed annually, with bonuses being awarded depending on the number and deemed difficulty of the KPIs achieved. Following the assessment, the KPIs are reviewed by the remuneration committee in light of the desired and actual outcomes, and their efficiency is assessed in relation to the Group’s goals and shareholder wealth, before the KPIs are set for the following year. In determining whether or not a KPI has been achieved, Oldfields Holdings Limited bases the assessment on audited figures, however, where the KPI involves comparison of the Group or a division within the Group to the market, independent reports are obtained from organisations such as Standard & Poors. Employment Details of Members of Key Management Personnel The following table provides employment details of persons who were, during the financial year, members of KMP of the consolidated group. The table also illustrates the proportion of remuneration that was performance and non-performance based and the proportion of remuneration received in the form of options. Christopher Michael Giles William Lewis Timms Stephen Charles Hooper Julie Garland McLellan Robert Allan Coleman Service Agreements Position held as at 30 June 2013 and any change during the year Executive Director Non-executive Director Non-executive Director Non-executive Director, resigned 23 May 2013 Company Secretary and Chief Financial Officer Non-performance based remuneration 100% 100% 100% 100% 100% Remuneration and other terms of employment for key management personnel are set out below. There are no termination payment benefits other than the contracted notice periods. Christopher Michael Giles Robert Allan Coleman Base Salary 200,000 160,000 Term of agreement Unspecified - commenced 24 September 2010 12 months rolling - commenced 24 February 2010 Notice Period (either party) Unspecified 3 months, except within 1 month prior to extension date OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES DIRECTORS' REPORT AUDITED REMUNERATION REPORT Changes in Directors and Executives On 23 May 2013, Julie Garland McLellan resigned as a Director. On 23 May 2013, Stephen Hooper commenced as a Director. Remuneration Details for the Year Ended 30 June 2013 The following table of benefits and payments details, in respect to the 2013 and 2012 financial years, the components of remuneration for each member of KMP of the consolidated group: Table of Benefits and Payments for the year ended 30 June 2013 2013 Group Key Management Personnel Christopher Michael Giles William Lewis Timms Stephen Charles Hooper Julie Garland McLellan Raymond John Titman Robert Allan Coleman Total KMP 2012 Group Key Management Personnel Christopher Michael Giles William Lewis Timms Stephen Charles Hooper Julie Garland McLellan Raymond John Titman Robert Allan Coleman Christopher C Hext Total KMP Short-term benefits Post Employment Benefits Long-term benefits Salary, Fees and Leave $ Non-monetary $ Pension and superannuation $ LSL $ Termination benefits $ Total $ 200,000 41,245 3,823 80,885 1,490 160,000 487,443 6,922 - - - - 14,774 21,696 18,000 3,712 344 8,987 - 14,400 45,443 - - - - 12,911 - 12,911 - - - - 63,158 - 63,158 224,922 44,957 4,167 89,872 77,559 189,174 630,651 Short-term benefits Post Employment Benefits Long-term benefits Salary, Fees and Leave $ Non-monetary $ Pension and superannuation $ LSL $ Termination benefits $ Total $ 204,765 39,540 - 90,000 159,320 159,999 2,585 656,209 11,111 - - - 23,424 15,948 - 50,483 18,000 3,559 - 10,000 15,378 14,400 - 61,337 - - - - 11,551 - - 11,551 - - - - - - - - 233,876 43,099 - 100,000 209,673 190,347 2,585 779,580 Securities Received that are not Performance Related No members of KMP are entitled to receive securities which are not performance-based as part of their remuneration package. END OF AUDITED REMUNERATION REPORT Options and Rights Granted There have been no options or rights granted to key management personnel during the financial year. This Directors’ Report, incorporating the Remuneration Report, is signed in accordance with a resolution of the Board of Directors. Christopher Michael Giles Dated: 29 August 2013 Tel: 61 2 9251 4100 Fax: 61 2 9240 9821 www.bdo.com.au Level 11, 1 Margaret St Sydney NSW 2000 Australia DECLARATION OF INDEPENDENCE BY PAUL BULL TO THE DIRECTORS OF OLDFIELDS HOLDINGS LIMITED As lead auditor of Oldfields Holdings Limited for the year ended 30 June 2013, I declare that, to the best of my knowledge and belief, there have been: • • no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and no contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect Oldfields Holdings Limited and the entities it controlled during the period. Paul Bull Partner BDO Audit East Coast Partnership Sydney, 29 August 2013 BDO East Coast Partnership ABN 83 236 985 726 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO East Coast Partnership and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasmania. BDO is the brand name for the BDO network and for each of the BDO member firms. OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2013 Sales revenue Cost of sales Gross profit Other income Distribution expenses Marketing expenses Occupancy expenses Administrative expenses Finance costs Revaluation of deferred senior loan note derivative component Gain on reduction of investment in associated companies Share of profit from associates Impairment expense Profit/(loss) before income tax Tax expense Net profit/(loss) from continuing operations Profit/(loss) for the year from discontinued operations after tax Net profit/(loss) for the year Other comprehensive income: Items that may be reclassified subsequently to profit or loss: Fair value gains on cash flow hedges (effective portion), net of tax Exchange differences on translating foreign operations, net of tax Other comprehensive income for the year Total comprehensive income for the year Net profit/(loss) attributable to: Members of the parent entity Non-controlling interest Total comprehensive income attributable to: Members of the parent entity - From continuing operations - From discontinued operations Non-controlling interest Earnings per share From continuing and discontinued operations Basic earnings per share (cents) Diluted earnings per share (cents) From continuing operations: Basic earnings per share (cents) Diluted earnings per share (cents) From discontinued operations: Basic earnings/(loss) per share (cents) The accompanying notes form part of these financial statements. Consolidated Group 2013 2012 $ $ 28,832,631 26,644,174 (15,463,757) (14,246,765) 13,368,874 12,397,409 213,282 5,683,583 (8,379,591) (8,134,875) (531,045) (405,159) (1,347,037) (1,372,407) (3,488,444) (2,765,059) (1,352,062) (524,584) - (97,553) - 23,410 30,368 2,057 (58,325) - (1,543,980) 4,806,822 (138,648) (167,070) (1,682,628) 4,639,752 (61,407) - (1,744,035) 4,639,752 (3,562) (34,164) (37,726) 4,602,026 9,889 (204,291) (194,402) (1,938,437) 4,486,972 152,780 4,639,752 (1,813,981) 69,946 (1,744,035) 4,449,246 - 152,780 4,602,026 (1,946,976) (61,407) 69,946 (1,938,437) 6.45 6.45 6.45 6.45 (3.24) (3.24) (3.13) (3.13) - (0.11) Note 3 3 4 4 5 6 5c 10 10 10 10 10 OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2013 Consolidated Group 2013 2012 $ $ Note 11 12 13 14 23 15 18 19 23 20 21 22 23 24 21 22 23 24 25 33 677,404 3,622,227 4,047,827 371,300 42,439 8,761,197 384,321 3,832,690 4,313,525 581,168 14,907 9,126,611 875,027 8,221,565 1,176,699 32,540 10,305,831 19,067,028 1,265,903 8,980,177 1,149,189 41,429 11,436,698 20,563,309 2,437,649 1,261,216 938,269 - 5,604 4,642,738 3,773,092 14,542,163 1,000,245 2,731 2,042 19,320,273 4,998,375 35,818 51,054 1,704,628 6,789,875 11,432,613 7,634,415 398,323 81,801 6,812 - 486,936 19,807,209 756,100 21,176,101 (1,241,861) (12,748,513) 7,185,727 448,688 7,634,415 18,751,301 (1,204,135) (17,235,486) 311,680 444,420 756,100 ASSETS CURRENT ASSETS Cash and cash equivalents Trade and other receivables Inventories Other assets Current tax assets TOTAL CURRENT ASSETS NON-CURRENT ASSETS Investments accounted for using the equity method Property, plant and equipment Intangible assets Deferred tax assets TOTAL NON-CURRENT ASSETS TOTAL ASSETS LIABILITIES CURRENT LIABILITIES Trade and other payables Borrowings Short-term provisions Current tax liabilities Derivative liability TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES Borrowings Long-term provisions Deferred tax liabilities Derivative liability TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Issued capital Reserves Retained earnings Parent interest Non-controlling interest TOTAL EQUITY The accompanying notes form part of these financial statements. OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2013 Consolidated Group Balance at 1 July 2011 Loss attributable to members of parent entity Profit attributable to non-controlling interests Total other comprehensive income for the year Transactions with owners, in their capacity as owners, and other transfers De-recognition of non-controlling interest upon disposal of H&O Products Pty Ltd Balance at 30 June 2012 Balance at 1 July 2012 Profit attributable to members of parent entity Profit attributable to non-controlling interests Total other comprehensive income for the year Note Issued Capital Retained Earnings Cash Flow Hedge Reserve $ $ $ Foreign Currency Translation Reserve $ Non- controlling interests Total $ $ 18,751,301 (13,529,156) (11,931) (997,802) (1,517,875) 2,694,537 - - - - (1,813,981) - - - - 9,889 - - (204,291) - 69,946 - (1,813,981) 69,946 (194,402) (1,892,349) - - 1,892,349 - 18,751,301 (17,235,486) (2,042) (1,202,093) 444,420 756,100 18,751,301 (17,235,486) (2,042) (1,202,093) 444,420 756,100 - - - 4,486,972 - - - - (3,562) - - (34,164) - 152,780 - 4,486,972 152,780 (37,726) Transactions with owners, in their capacity as owners, and other transfers Shares issued during the year Transaction costs Dividends paid to non-controlling interests during the year 2,613,259 (188,459) - 9 - - - - - - - - - - - (148,512) 2,613,259 (188,459) (148,512) Balance at 30 June 2013 21,176,101 (12,748,514) (5,604) (1,236,257) 448,688 7,634,414 The accompanying notes form part of these financial statements. OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2013 Note Consolidated Group 2013 2012 $ $ 29,620,391 7,576 - (28,235,358) (365,386) (145,144) (7,410) 189,578 1,064,247 32,104,434 158 104,907 (30,970,780) (924,623) (199,802) - - 114,294 29a 253,643 (485,823) (77,887) (310,067) 4,027,693 (633,376) (132,497) 3,261,820 2,613,259 (188,459) 484,173 (3,462,307) (160,992) - (148,512) (862,838) (108,658) (69,122) (177,780) - - 582,269 (4,608,914) - 150,000 - (3,876,645) (500,531) 431,409 (69,122) 11 11 CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers Interest received Rent received Payments to suppliers and employees Finance costs Income tax paid Interest paid on director's loan Other income received Net cash provided by operating activities CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of property, plant and equipment Purchase of property, plant and equipment Purchase of intangibles Net cash (used in)/provided by investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of additional shares Payments relating to issue of additional shares Proceeds from borrowings Repayment of borrowings Loan from related parties - repayments made - proceeds from borrowings Dividends paid by controlled entities to non-controlling interests Net cash used in financing activities Net increase/(decrease) in cash held Cash and cash equivalents at beginning of financial year Cash and cash equivalents at end of financial year The accompanying notes form part of these financial statements. OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013 These consolidated financial statements and notes represent those of Oldfields Holdings Limited and Controlled Entities (the “consolidated group” or “group”). The separate financial statements of the parent entity, Oldfields Holdings Limited, have not been presented within this financial report as permitted by the Corporations Act 2001. The financial statements were authorised for issue on 29 August 2013 by the directors of the company. Note 1 Summary of Significant Accounting Policies Basis of Preparation The financial statements are general purpose financial statements that have been prepared in accordance with Australian Accounting Standards, Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001. The Group is a for-profit entity for financial reporting purposes under the Australian Accounting Standards. Australian Accounting Standards set out accounting policies that the Australian Accounting Standards Board has concluded would result in financial statements containing relevant and reliable information about transactions, events and conditions. Compliance with Australian Accounting Standards ensures that the financial statements and notes also comply with International Financial Reporting Standards as issued by the IASB. Material accounting policies adopted in the preparation of the financial statements are presented below and have been consistently applied unless stated otherwise. Except for cash flow information, the financial statements have been prepared on an accruals basis and are based on historical costs, modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities. Oldfields Holdings Limited and its Australian wholly-owned entities have entered into a deed of cross guarantee under which the company and its subsidiaries guarantee the debts of each other. Going Concern The financial report has been prepared on the going concern basis, which contemplates the continuity of normal business activity and the realisation of assets and the settlement of liabilities in the normal course of business. As at 30 June 2013, the Group had an accumulated deficit of $12,748,513 (2012: $17,235,486). Consolidated net profit for the 12 months ended 30 June 2013 was $4,639,753 (2012: loss of $1,744,035), after recognising other income of $5.5 million as result of the debt buy-back. Cash inflows from operating activities for the period ending 30 June 2013 was $1,064,247 (2012: $114,294). The directors believe the going concern assumption to be appropriate for the following reasons: (cid:1) (cid:1) (cid:1) (cid:1) On 21 December 2012, the Group signed a new facility agreement with its existing debt provider that will extend, subject to yearly reviews, to June 2015. As part of the agreement, the Group purchased $8million of debt from its primary lender for a payment of $2.5million. The Group has met it's debt covenants for the year. In addition, the debt provider swapped senior debt for a Deferred Senior Loan Note for $2,370,224 with a 10 year maturity; Continued improvement in operating results compared to prior years as a result of stringent cashflow management, supplier rationalisation and cost reduction programs which will continue into the coming year; The Group has in place a working capital facility of $1.25m which was not fully utilised as at 30 June 2013 and is regularly monitored; and The Groups debts are being paid as and when the fall due. Should the Group be unable to continue as a going concern it may be required to realise its assets and discharge its liabilities other than in the normal course of business and at amounts different to those stated in the financial statements. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amounts of liabilities that might result should the company be unable to continue as a going concern and meet its debts as and when they fall due. (a) Principles of Consolidation The consolidated financial statements incorporate the assets, liabilities and results of entities controlled by Oldfields Holdings Limited at the end of the reporting period. A controlled entity is any entity over which Oldfields Holdings Limited has the ability and right to govern the financial and operating policies so as to obtain benefits from the entity’s activities. Where controlled entities have entered or left the Group during the year, the financial performance of those entities is included only for the period of the year that they were controlled. A list of controlled entities is contained in Note 17 to the financial statements. In preparing the consolidated financial statements, all intragroup balances and transactions between entities in the consolidated group have been eliminated in full on consolidation. Non-controlling interests, being the equity in a subsidiary not attributable, directly or indirectly, to a parent, are reported separately within the equity section of the consolidated statement of financial position and statements showing profit or loss and other comprehensive income. The non-controlling interests in the net assets comprise their interests at the date of the original business combination and their share of changes in equity since that date. Business Combinations Business combinations occur where an acquirer obtains control over one or more businesses. A business combination is accounted for by applying the acquisition method, unless it is a combination involving entities or businesses under common control. The business combination will be accounted for from the date that control is attained whereby the fair value of the identifiable assets acquired and liabilities (including contingent liabilities) assumed is recognised (subject to certain limited exemptions). When measuring the consideration transferred in the business combination, any asset or liability resulting from a contingent consideration arrangement is also included. Subsequent to initial recognition, contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. Contingent consideration classified as an asset or liability is remeasured each reporting period to fair value, recognising any change to fair value in profit or loss, unless the change in value can be identified as existing at acquisition date. All transaction costs incurred in relation to business combinations are recognised as expenses in profit or loss when incurred. The acquisition of a business may result in the recognition of goodwill or a gain from a bargain purchase. Goodwill Goodwill is carried at cost less any accumulated impairment losses. Goodwill is calculated as the excess of the sum of: (i) the consideration transferred; (ii) any non-controlling interest; and (iii) the acquisition date fair value of any previously held equity interest; over the acquisition date fair value of net identifiable assets acquired. OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013 Note 1 Summary of Significant Accounting Policies (continued) (a) Principles of Consolidation (continued) The acquisition date fair value of the consideration transferred for a business combination plus the acquisition date fair value of any previously held equity interest shall form the cost of the investment in the separate financial statements. Fair value remeasurements in any pre-existing equity holdings are recognised in profit or loss in the period in which they arise. Where changes in the value of such equity holdings had previously been recognised in other comprehensive income, such amounts are recycled to profit or loss. The amount of goodwill recognised on acquisition of each subsidiary in which the Group holds less than a 100% interest will depend on the method adopted in measuring the non-controlling interest. The Group can elect in most circumstances to measure the non-controlling interest in the acquiree either at fair value (full goodwill method) or at the non-controlling interest's proportionate share of the subsidiary's identifiable net assets (proportionate interest method). In such circumstances, the Group determines which method to adopt for each acquisition and this is stated in the respective notes to these financial statements disclosing the business combination. Under the full goodwill method, the fair value of the non-controlling interests is determined using valuation techniques which make the maximum use of market information where available. Under this method, goodwill attributable to the non-controlling interests is recognised in the consolidated financial statements. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill on acquisition of associates is included in investments in associates. Goodwill is tested for impairment annually and is allocated to the Group's cash generating units or groups of cash generating units, representing the lowest level at which goodwill is monitored being not larger than an operating segment. Gains and losses on the disposal of an entity include the carrying amount of goodwill related to the entity disposed of. Changes in the ownership interests in a subsidiary are accounted for as equity transactions and do not affect the carrying amounts of goodwill. Discontinued Operations A discontinued operation is a component of the consolidated entity that has been disposed of or is classified as held for sale and that represents a separate major line of a business or geographical area of operations, is part of a single co-ordinated plan to dispose of such a line of business or area of operations, or is a subsidiary acquired exclusively with the view to resale. The results of discontinued operations are presented separately on the face of the statement of comprehensive income and in note 6. (b) Revenue and Other Income Revenue is measured at the fair value of the consideration received or receivable after taking into account any trade discounts and volume rebates allowed. When the inflow of consideration is deferred it is treated as the provision of financing and is discounted at a rate of interest that is generally accepted in the market for similar arrangements. The difference between the amount initially recognised and the amount ultimately received is interest revenue. Revenue from the sale of goods is recognised at the point of delivery as this corresponds to the transfer of significant risks and rewards of ownership of the goods and the cessation of all involvement in those goods. Interest revenue is recognised using the effective interest method. Dividend revenue is recognised when the right to receive a dividend has been established. Dividends received from associates and joint venture entities are accounted for in accordance with the equity method of accounting. Revenue recognition relating to the provision of services is determined with reference to the stage of completion of the transaction at the end of the reporting period where outcome of the contract can be estimated reliably. Stage of completion is determined with reference to the services performed to date as a percentage of total anticipated services to be performed. Where the outcome cannot be estimated reliably, revenue is recognised only to the extent that related expenditure is recoverable. Revenue recognised in relation to the debt buy back has been recognised at the time the transaction occurred and the liability forgiven. All revenue is stated net of the amount of goods and services tax. (c) Borrowing Costs Borrowing costs directly attributable to the acquisition, construction or production of assets that necessarily take a substantial period of time to prepare for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. All other borrowing costs are recognised in profit or loss in the period in which they are incurred. (d) Income Tax The income tax expense/(income) for the year comprises current income tax expense/(income) and deferred tax expense/(income). Current income tax expense charged to profit or loss is the tax payable on taxable income. Current tax liabilities/(assets) are measured at the amounts expected to be paid to/(recovered from) the relevant taxation authority. Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the year as well as unused tax losses. Current and deferred income tax expense/(income) is charged or credited outside profit or loss when the tax relates to items that are recognised outside profit or loss. Except for business combinations, no deferred income tax is recognised from the initial recognition of an asset or liability, where there is no effect on accounting or taxable profit or loss. Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled and their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability. With respect to non- depreciable items of property, plant and equipment measured at fair value and items of investment property measured at fair value, the related deferred tax liability or deferred tax asset is measured on the basis that the carrying amount of the asset will be recovered entirely through sale. Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised. Where temporary differences exist in relation to investments in subsidiaries, branches, associates, and joint ventures, deferred tax assets and liabilities are not recognised where the timing of the reversal of the temporary difference can be controlled and it is not probable that the reversal will occur in the foreseeable future. OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013 Note 1 Summary of Significant Accounting Policies (continued) (d) Income Tax (continued) Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax assets and liabilities are offset where: (a) a legally enforceable right of set-off exists; and (b) the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur in future periods in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled. (e) (f) (g) (h) Tax Consolidation Oldfields Holdings Limited and its wholly-owned subsidiaries have formed an income tax consolidated group under tax consolidation legislation. Each entity within the group recognises its own current and deferred tax assets and liabilities. Such taxes are measured using the 'stand-alone taxpayer' approach to allocation. Current tax liabilities (assets) and deferred tax assets arising from unused tax losses and tax credits in the subsidiaries are immediately transferred to the head entity. The Group notified the Australian Taxation Office (ATO) that it had formed an income tax consolidated group to apply from 1 July 2003. The tax consolidated group has also entered into a tax funding arrangement whereby each company in the group contributes to the income tax payable by the group in proportion to their contribution to the Group's taxable income. Differences between amounts of net tax assets and liabilities derecognised and the net amounts recognised pursuant to the funding arrangement are recognised as either a contribution by, or distribution to the head entity. Cash and Cash Equivalents Cash and cash equivalents include cash on hand and bank overdrafts. Bank overdrafts are reported within short-term borrowings in current liabilities in the statement of financial position. Trade and Other Receivables Trade and other receivables include amounts due from customers for goods sold and services performed in the ordinary course of business. Receivables expected to be collected within 12 months of the end of the reporting period are classified as current assets. All other receivables are classified as non-current assets. Trade and other receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any provision for impairment. Refer to Note 1(q) for further discussion on the determination of impairment losses. Inventories Inventories are measured at the lower of cost and net realisable value. The cost of manufactured products includes direct materials, direct labour and an appropriate proportion of variable and fixed overheads. Overheads are applied on the basis of normal operating capacity. Costs are assigned on the basis of weighted average costs. Investments in Associates Associates are companies in which the Group has significant influence through holding, directly or indirectly, 20% or more of the voting power of the Group. Investments in associates are accounted for in the financial statements by applying the equity method of accounting, whereby the investment is initially recognised at cost and adjusted thereafter for the post-acquisition change in the Group’s share of net assets of the associate company. In addition, the Group’s share of the profit or loss of the associate company is included in the Group’s profit or loss. The carrying amount of the investment includes goodwill relating to the associate. Any discount on acquisition whereby the Group’s share of the net fair value of the associate exceeds the cost of investment is recognised in profit or loss in the period in which the investment is acquired. Profits and losses resulting from transactions between the Group and the associate are eliminated to the extent of the Group’s interest in the associate. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, the Group discontinues recognising its share of further losses unless it has incurred legal or constructive obligations or made payments on behalf of the associate. When the associate subsequently makes profits, the Group will resume recognising its share of those profits once its share of the profits equals the share of the losses not recognised. Details of the Group’s investment in associates are shown at Note 16. (i) Property, Plant and Equipment Each class of property, plant and equipment is carried at cost or fair value as indicated less, where applicable, any accumulated depreciation and impairment losses. Plant and equipment Plant and equipment are measured on the cost basis and therefore carried at cost less accumulated depreciation and any accumulated impairment. In the event the carrying amount of plant and equipment is greater than the estimated recoverable amount, the carrying amount is written down immediately to the estimated recoverable amount and impairment losses are recognised either in profit or loss or as a revaluation decrease if the impairment losses relate to a revalued asset. A formal assessment of recoverable amount is made when impairment indicators are present (refer to Note 1(q) for details of impairment). The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the asset's employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts. The cost of fixed assets constructed within the consolidated group includes the cost of materials, direct labour, borrowing costs and an appropriate proportion of fixed and variable overheads. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are recognised as expenses in profit or loss during the financial period in which they are incurred. Depreciation The depreciable amount of all fixed assets including buildings and capitalised lease assets, but excluding freehold land, is depreciated on a straight-line basis over the asset's useful life to the company commencing from the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements. The depreciation rates used for each class of depreciable assets are: Class of Fixed Asset Leasehold improvements Plant and equipment Motor vehicles Depreciation Rate 20-33% 5-33% 18-20% OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013 Note 1 Summary of Significant Accounting Policies (continued) (i) Property, Plant and Equipment (continued) The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are recognised in profit or loss in the period in which they arise. When revalued assets are sold, amounts included in the revaluation surplus relating to that asset are transferred to retained earnings. (j) Intangibles Other than Goodwill Patents and trademarks Patents and trademarks are recognised at cost of acquisition. They have a finite life and are carried at cost less any accumulated amortisation and any impairment losses. Patents and trademarks are amortised over their useful lives ranging from 5 to 10 years. Research and development Expenditure during the research phase of a project is recognised as an expense when incurred. Development costs are capitalised only when technical feasibility studies identify that the project is expected to deliver future economic benefits and these benefits can be measured reliably. Capitalised development costs have a finite useful life and are amortised on a systematic basis based on the future economic benefits over the useful life of the project. Amortisation charges are included in distribution, administration and marketing expenses in the statement of comprehensive income. (k) (l) Trade and Other Payables Trade and other payables represent the liabilities for goods and services received by the entity that remain unpaid at the end of the reporting period. The balance is recognised as a current liability with the amounts normally paid within 30 days of recognition of the liability. Provisions Provisions are recognised when the group has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured. Provisions are measured using the best estimate of the amounts required to settle the obligation at the end of the reporting period. (m) Employee Benefits Provision is made for the Group’s liability for employee benefits arising from services rendered by employees to the end of the reporting period. Employee benefits that are expected to be settled within one year have been measured at the amounts expected to be paid when the liability is settled. Employee benefits payable later than one year have been measured at the present value of the estimated future cash outflows to be made for those benefits. In determining the liability, consideration is given to employee wage increases and the probability that the employee may satisfy any vesting requirements. Those cash flows are discounted using market yields on national government bonds with terms to maturity that match the expected timing of cash flows attributable to employee benefits. (n) Borrowings Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs. They are subsequently measured at amortised cost using the effective interest rate method. Where there is an unconditional right to defer settlement of the liability for at least 12 months after the reporting date, the loans or borrowings are classified as non- current. (o) Leases Leases of fixed assets, where substantially all the risks and benefits incidental to the ownership of the asset (but not the legal ownership) are transferred to entities in the consolidated group, are classified as finance leases. Finance leases are capitalised by recognising an asset and a liability at the lower of the amounts equal to the fair value of the leased property or the present value of the minimum lease payments, including any guaranteed residual values. Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the period. Leased assets are depreciated on a straight-line basis over the shorter of their estimated useful lives or the lease term. Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are recognised as expenses in the periods in which they are incurred. Lease incentives under operating leases are recognised as a liability and amortised on a straight-line basis over the lease term. \ (p) Financial Instruments Recognition and Initial Measurement Financial assets and financial liabilities are recognised when the entity becomes a party to the contractual provisions to the instrument. For financial assets, this is equivalent to the date that the company commits itself to either the purchase or sale of the asset (i.e. trade date accounting is adopted). Financial instruments are initially measured at fair value plus transactions costs except where the instrument is classified ‘at fair value through profit or loss’ in which case transaction costs are expensed to profit or loss immediately. Classification and Subsequent Measurement Financial instruments are subsequently measured at fair value, amortised cost using the effective interest method, or cost. Amortised cost is calculated as the amount at which the financial asset or financial liability is measured at initial recognition less principal repayments and any reduction for impairment, and adjusted for any cumulative amortisation of the difference between that initial amount and the maturity amount calculated using the effective interest method. Fair value is determined based on current bid prices for all quoted investments. Valuation techniques are applied to determine the fair value for all unlisted securities, including recent arm’s length transactions, reference to similar instruments and option pricing models. The effective interest method is used to allocate interest income or interest expense over the relevant period and is equivalent to the rate that discounts estimated future cash payments or receipts (including fees, transaction costs and other premiums or discounts) over the expected life (or when this cannot be reliably predicted, the contractual term) of the financial instrument to the net carrying amount of the financial asset or financial liability. Revisions to expected future net cash flows will necessitate an adjustment to the carrying amount with a consequential recognition of an income or expense item in profit or loss. OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013 Note 1 Summary of Significant Accounting Policies (continued) (p) Financial Instruments (continued) The Group does not designate any interests in subsidiaries, associates or joint venture entities as being subject to the requirements of accounting standards specifically applicable to financial instruments. (i) Financial assets at fair value through profit or loss Financial assets are classified at “fair value through profit or loss” when they are held for trading for the purpose of short-term profit taking, derivatives not held for hedging purposes, or when they are designated as such to avoid an accounting mismatch or to enable performance evaluation where a group of financial assets is managed by key management personnel on a fair value basis in accordance with a documented risk management or investment strategy. Such assets are subsequently measured at fair value with changes in carrying amounts being included in profit or loss. (ii) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are subsequently measured at amortised cost. Gains or losses are recognised in profit or loss through the amortisation process and when the financial asset is derecognised. (iii) Held-to-maturity investments Held-to-maturity investments are non-derivative financial assets that have fixed maturities and fixed or determinable payments, and it is the Group’s intention to hold these investments to maturity. They are subsequently measured at amortised cost. Gains or losses are recognised in profit or loss through the amortisation process and when the financial asset is derecognised. (iv) Available-for-sale investments Available-for-sale investments are non-derivative financial assets that are either not capable of being classified into other categories of financial assets due to their nature or they are designated as such by management. They comprise investments in the equity of other entities where there is neither a fixed maturity nor fixed or determinable payments. They are subsequently measured at fair value with any remeasurements other than impairment losses and foreign exchange gains and losses recognised in other comprehensive income. When the financial asset is derecognised, the cumulative gain or loss pertaining to that asset previously recognised in other comprehensive income is reclassified into profit or loss. Available-for-sale financial assets are classified as non-current assets when they are expected to be sold after 12 months from the end of the reporting period. All other available-for-sale financial assets are classified as current assets. (v) Financial Liabilities Non-derivative financial liabilities other than financial guarantees are subsequently measured at amortised cost. Gains or losses are recognised in profit or loss through the amortisation process and when the financial liability is derecognised. Derivative instruments Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently measured to their fair value at the end of each reporting period. Changes in their fair value are recognised in the profit or loss, unless they qualify for hedge accounting. The Group designates certain derivatives as either: (i) (ii) hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedge); or hedges of highly probable forecast transactions (cash flow hedge). At the inception of the transaction the relationship between hedging instruments and hedged items, as well as the group's risk management objective and strategy for undertaking various hedge transactions is documented. Assessments, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions have been and will continue to be highly effective in offsetting changes in fair values or cash flows of hedged items are also documented. (i) (ii) Fair value hedge Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recognised in profit or loss, together with any changes in the fair value of hedged assets or liabilities that are attributable to the hedged risk. Cash flow hedge The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is deferred to a hedge reserve in equity. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss. Amounts accumulated in the hedge reserve in equity are transferred to profit or loss in the periods when the hedged item affects profit or loss. Impairment At the end of each reporting period, the Group assesses whether there is objective evidence that a financial asset has been impaired. A financial asset (or a group of financial assets) is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events (a “loss event”) having occurred, which has an impact on the estimated future cash flows of the financial asset(s). In the case of available-for-sale financial assets, a significant or prolonged decline in the market value of the instrument is considered to constitute a loss event. Impairment losses are recognised in profit or loss immediately. Also, any cumulative decline in fair value previously recognised in other comprehensive income is reclassified to profit or loss at this point. In the case of financial assets carried at amortised cost, loss events may include: indications that the debtors or a group of debtors are experiencing significant financial difficulty, default or delinquency in interest or principal payments; indications that they will enter bankruptcy or other financial reorganisation; and changes in arrears or economic conditions that correlate with defaults. For financial assets carried at amortised cost (including loans and receivables), a separate allowance account is used to reduce the carrying amount of financial assets impaired by credit losses. After having taken all possible measures of recovery, if management establishes that the carrying amount cannot be recovered by any means, at that point the written-off amounts are charged to the allowance account or the carrying amount of impaired financial assets is reduced directly if no impairment amount was previously recognised in the allowance account. When the terms of financial assets that would otherwise have been past due or impaired have been renegotiated, the Group recognises the impairment for such financial assets by taking into account the original terms as if the terms have not been renegotiated so that the loss events that have occurred are duly considered. OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013 Note 1 Summary of Significant Accounting Policies (continued) (p) Financial Instruments (continued) (q) Derecognition Financial assets are derecognised when the contractual rights to receipt of cash flows expire or the asset is transferred to another party whereby the entity no longer has any significant continuing involvement in the risks and benefits associated with the asset. Financial liabilities are derecognised when the related obligations are discharged, cancelled or have expired. The difference between the carrying amount of the financial liability extinguished or transferred to another party and the fair value of consideration paid, including the transfer of non-cash assets or liabilities assumed, is recognised in profit or loss. Impairment of Assets At the end of each reporting period, the Group assesses whether there is any indication that an asset may be impaired. The assessment will include the consideration of external and internal sources of information including dividends received from subsidiaries, associates or jointly controlled entities deemed to be out of pre- acquisition profits. If such an indication exists, an impairment test is carried out on the asset by comparing the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, to the asset’s carrying amount. Any excess of the asset’s carrying amount over its recoverable amount is recognised immediately in profit or loss, unless the asset is carried at a revalued amount in accordance with another Standard (e.g. in accordance with the revaluation model in AASB 116). Any impairment loss of a revalued asset is treated as a revaluation decrease in accordance with that other Standard. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Impairment testing is performed annually for goodwill, intangible assets with indefinite lives and intangible assets not yet available for use. (r) Foreign Currency Transactions and Balances Functional and presentation currency The functional currency of each of the Group’s entities is measured using the currency of the primary economic environment in which that entity operates. The consolidated financial statements are presented in Australian dollars which is the parent entity's functional currency. Transaction and balances Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the year-end exchange rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined. Exchange differences arising on the translation of monetary items are recognised in profit or loss, except where deferred in equity as a qualifying cash flow or net investment hedge. Exchange differences arising on the translation of non-monetary items are recognised directly in other comprehensive income to the extent that the underlying gain or loss is recognised in other comprehensive income, otherwise the exchange difference is recognised in the profit or loss. Group companies The financial results and position of foreign operations whose functional currency is different from the group’s presentation currency are translated as follows: — — — assets and liabilities are translated at exchange rates prevailing at the end of the reporting period; income and expenses are translated at average exchange rates for the period; and retained earnings are translated at the exchange rates prevailing at the date of the transaction. Exchange differences arising on translation of foreign operations with functional currencies other than Australian dollars are recognised in other comprehensive income and included in the foreign currency translation reserve in the statement of financial position. The cumulative amount of these differences is reclassified into profit or loss in the period in which the operation is disposed of. (s) Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Taxation Office (ATO). Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the ATO is included with other receivables or payables in the statement of financial position. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to, the ATO are presented as operating cash flows included in receipts from customers or payments to suppliers. (t) Comparative Figures When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year. Where the Group has retrospectively applied an accounting policy, made a retrospective restatement or reclassified items in its financial statements, an additional statement of financial position as at the beginning of the earliest comparative period will be disclosed. (u) Critical Accounting Estimates and Judgments The directors evaluate estimates and judgments incorporated into the financial statements based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the Group. Key Estimates (i) Impairment - General The Group assesses impairment at the end of each reporting period by evaluating conditions and events specific to the Group that may be indicative of impairment triggers. Recoverable amounts of relevant assets are reassessed using value-in-use calculations which incorporate various key assumptions. (ii) Employee entitlement provisions - Long Service Leave As discussed in note 1(m), the liability for long service leave is recognised and measured at the present value of the estimated future cash flows to be made in respect of all employees at the reporting date. In determining the present value of the liability, estimates of attrition rates and pay increases through promotion and inflation have been taken into account. (iii) Goodwill and other indefinite life intangible assets The consolidated entity tests annually, or more frequently if events or changes in circumstances indicate impairment, whether goodwill and other indefinite life intangible assets have suffered any impairment, in accordance with the accounting policy stated in note 1(q). The recoverable amounts of cash generating units have been determined base on value-in-use calculations. These calculations require the use of assumptions, including estimated discount rates based on the current cost of capital and growth rates of the estimated future cash flows. OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013 Note 1 Summary of Significant Accounting Policies (continued) (u) Critical Accounting Estimates and Judgments (continued) Key Estimates (continued) (iv) Recovery of deferred tax assets Deferred tax assets are recognised for deductible temporary differences only if the consolidated entity considers it is probable that future taxable benefits will be available to utilise those temporary differences and losses. (v) Derivatives The Group uses valuation techniques to estimate the fair value of certain derivative financial instruments. Information on the key assumptions used in estimating the fair values of these instruments is found at note 24 and note 32. Key Judgments (vi) Provision for Impairment of Receivables The provision for impairment of receivables assessment required a degree of estimation and judgement. The level of provision is assessed by taking into account the recent sales experience, the ageing of the receivables, historical collection rates and specific knowledge of the individual debtors financial position. (vii) Provision for impairment of inventories The provision for impairment of inventories assessment requires a degree of estimation and judgement. The level of provision is assessed by taking into account the recent sales experience, the ageing of the inventories, and other factors that affect inventory obsolescence. (vii) Estimation of useful lives of assets The consolidated entity determined the estimated useful lives and related depreciation and amortisation charges for its property, plant and equipment and definite life intangible assets. The useful lives could change significantly as a result of technical innovations or some other event. The depreciation and amortisation charge will increase where the useful lives are less than previously estimated, or technically obsolete or non-strategic assets that have been abandoned or sold will be written off or down. (v) New Accounting Standards for Application in Future Periods The AASB has issued a number of new and amended Accounting Standards and Interpretations that have mandatory application dates for future reporting periods, some of which are relevant to the Group. The Group has decided not to early adopt any of the new and amended pronouncements. The Group’s assessment of the new and amended pronouncements that are relevant to the Group but applicable in future reporting periods is set out below: — AASB 9: Financial Instruments (December 2010) and AASB 2010–7: Amendments to Australian Accounting Standards arising from AASB 9 (December 2010). These Standards are applicable retrospectively and include revised requirements for the classification and measurement of financial instruments, as well as recognition and derecognition requirements for financial instruments. The key changes made to accounting requirements include: ─ ─ ─ ─ ─ ─ ─ simplifying the classifications of financial assets into those carried at amortised cost and those carried at fair value; simplifying the requirements for embedded derivatives; removing the tainting rules associated with held-to-maturity assets; removing the requirements to separate and fair value embedded derivatives for financial assets carried at amortised cost; allowing an irrevocable election on initial recognition to present gains and losses on investments in equity instruments that are not held for trading in other comprehensive income. Dividends in respect of these investments that are a return on investment can be recognised in profit or loss and there is no impairment or recycling on disposal of the instrument; requiring financial assets to be reclassified where there is a change in an entity’s business model as they are initially classified based on: (a) the objective of the entity’s business model for managing the financial assets; and (b) the characteristics of the contractual cash flows; and requiring an entity that chooses to measure a financial liability at fair value to present the portion of the change in its fair value due to changes in the entity’s own credit risk in other comprehensive income, except when that would create an accounting mismatch. If such a mismatch would be created or enlarged, the entity is required to present all changes in fair value (including the effects of changes in the credit risk of the liability) in profit or loss. These Standards were mandatorily applicable for annual reporting periods commencing on or after 1 January 2013. However, AASB 2012–6: Amendments to Australian Accounting Standards – Mandatory Effective Date of AASB 9 and Transition Disclosures (issued September 2012) defers the mandatory application date of AASB 9 from 1 January 2013 to 1 January 2015. In light of this change to the mandatory effective date, the Group is expected to adopt AASB 9 and AASB 2010–7 for the annual reporting period ending 31 December 2015. Although the directors anticipate that the adoption of AASB 9 and AASB 2010–7 may have a significant impact on the Group’s financial instruments, it is impracticable at this stage to provide a reasonable estimate of such impact. — AASB 10: Consolidated Financial Statements, AASB 11: Joint Arrangements, AASB 12: Disclosure of Interests in Other Entities, AASB 127: Separate Financial Statements (August 2011) and AASB 128: Investments in Associates and Joint Ventures (August 2011) (as amended by AASB 2012–10: Amendments to Australian Accounting Standards – Transition Guidance and Other Amendments ), and AASB 2011–7: Amendments to Australian Accounting Standards arising from the Consolidation and Joint Arrangements Standards (applicable for annual reporting periods commencing on or after 1 January 2013). AASB 10 replaces parts of AASB 127: Consolidated and Separate Financial Statements (March 2008, as amended) and Interpretation 112: Consolidation – Special Purpose Entities . AASB 10 provides a revised definition of "control" and additional application guidance so that a single control model will apply to all investees. This Standard is not expected to significantly impact the Group's financial statements. AASB 11 replaces AASB 131: Interests in Joint Ventures (July 2004, as amended). AASB 11 requires joint arrangements to be classified as either "joint operations" (where the parties that have joint control of the arrangement have rights to the assets and obligations for the liabilities) or "joint ventures" (where the parties that have joint control of the arrangement have rights to the net assets of the arrangement). AASB 12 contains the disclosure requirements applicable to entities that hold an interest in a subsidiary, joint venture, joint operation or associate. AASB 12 also introduces the concept of a "structured entity", replacing the "special purpose entity" concept currently used in Interpretation 112, and requires specific disclosures in respect of any investments in unconsolidated structured entities. This Standard will affect disclosures only and is not expected to significantly impact the Group's financial statements. To facilitate the application of AASBs 10, 11 and 12, revised versions of AASB 127 and AASB 128 have also been issued. The revisions made to AASB 127 and AASB 128 are not expected to significantly impact the Group's financial statements. OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013 Note 1 Summary of Significant Accounting Policies (continued) (v) New Accounting Standards for Application in Future Periods (continued) — AASB 13: Fair Value Measurement and AASB 2011–8: Amendments to Australian Accounting Standards arising from AASB 13 (applicable for annual reporting periods commencing on or after 1 January 2013). AASB 13 defines fair value, sets out in a single Standard a framework for measuring fair value, and requires disclosures about fair value measurement. AASB 13 requires: ─ ─ inputs to all fair value measurements to be categorised in accordance with a fair value hierarchy; and enhanced disclosures regarding all assets and liabilities (including, but not limited to, financial assets and financial liabilities) to be measured at fair value. These Standards are expected to result in more detailed fair value disclosures, but are not expected to significantly impact the amounts recognised in the Group’s financial statements. — AASB 2011–4: Amendments to Australian Accounting Standards to Remove Individual Key Management Personnel Disclosure Requirements (applicable for annual reporting periods beginning on or after 1 July 2013). This Standard makes amendments to AASB 124: Related Party Disclosures to remove the individual key management personnel disclosure requirements (including paras Aus29.1 to Aus29.9.3). These amendments serve a number of purposes, including furthering trans-Tasman convergence, removing differences from IFRSs, and avoiding any potential confusion with the equivalent Corporations Act 2001 disclosure requirements. This Standard is not expected to significantly impact the Group’s financial report as a whole because: ─ ─ some of the disclosures removed from AASB 124 will continue to be required under s 300A of the Corporations Act, which is applicable to the Group; and AASB 2011-4 does not affect the related party disclosure requirements in AASB 124 applicable to all reporting entities, and some of these requirements require similar disclosures to those removed by AASB 2011-4. — AASB 2012–2: Amendments to Australian Accounting Standards – Disclosures – Offsetting Financial Assets and Financial Liabilities (applicable for annual reporting periods commencing on or after 1 January 2013). AASB 2012–2 principally amends AASB 7: Financial Instruments: Disclosures to require entities to include information that will enable users of their financial statements to evaluate the effect or potential effect of netting arrangements, including rights of set-off associated with the entity’s recognised financial assets and recognised financial liabilities, on the entity’s financial position. This Standard is not expected to significantly impact the Group’s financial statements. — AASB 2012–3: Amendments to Australian Accounting Standards – Offsetting Financial Assets and Financial Liabilities (applicable for annual reporting periods commencing on or after 1 January 2014). This Standard adds application guidance to AASB 132: Financial Instruments: Presentation to address potential inconsistencies identified in applying some of the offsetting criteria of AASB 132, including clarifying the meaning of “currently has a legally enforceable right of set-off” and that some gross settlement systems may be considered equivalent to net settlement. This Standard is not expected to significantly impact the Group’s financial statements. — AASB 2012–5: Amendments to Australian Accounting Standards arising from Annual Improvements 2009–2011 Cycle (applicable for annual reporting periods commencing on or after 1 January 2013). This Standard amends a number of Australian Accounting Standards as a consequence of the issuance of Annual Improvements to IFRSs 2009–2011 Cycle by the International Accounting Standards Board, including: ─ ─ ─ ─ ─ AASB 1: First-time Adoption of Australian Accounting Standards to clarify the requirements in respect of the application of AASB 1 when an entity discontinues and then resumes applying Australian Accounting Standards; AASB 101: Presentation of Financial Statements and AASB 134: Interim Financial Reporting to clarify the requirements for presenting comparative information; AASB 116: Property, Plant and Equipment to clarify the accounting treatment of spare parts, stand-by equipment and servicing equipment; AASB 132 and Interpretation 2: Members’ Shares in Co-operative Entities and Similar Instruments to clarify the accounting treatment of any tax effect of a distribution to holders of equity instruments; and AASB 134 to facilitate consistency between the measures of total assets and liabilities an entity reports for its segments in its interim and annual financial statements. — AASB127 Separate Financial Statements (Revised) AASB128 Investments in Associates and Joint Ventures (Reissued) These standards are applicable to annual reporting periods beginning on or after 1 January 2013. They have been modified to remove specific guidance that is now contained in AASB10, AASB11 and AASB12. The adoption of these revised standards from 1 July 2013 will not have a material impact on the consolidated entity. This Standard is not expected to significantly impact the Group’s financial statements. — — — AASB 2011-7 Amendments to Australian Accounting Standards arising from the Consolidation and Joint Arrangements Standards The amendments are applicable to annual reporting periods beginning on or after 1 January 2013. The amendments make numerous consequential changes to a range of Australian Accounting Standards and Interpretations, following the issuance of AASB 10, AASB 11, AASB 12 and revised AASB 127 and AASB 128. The adoption of these amendments from 1 July 2013 will not have a material impact on the consolidated entity. AASB 2012 9 Amendment to AASB 1048 arising from the Withdrawal of Australian Interpretation 1039 This amendment is applicable to annual reporting periods beginning on or after 1 January 2013. The amendment removes reference in AASB 1048 following the withdrawal of Interpretation 1039. The adoption of this amendment will not have a material impact on the consolidated entity. AASB 2012-10 Amendments to Australian Accounting Standards – Transition Guidance and Other Amendments These amendments are applicable to annual reporting periods beginning on or after 1 January 2013. They amend AASB 10 and related standards for the transition guidance relevant to the initial application of those standards. The amendments clarify the circumstances in which adjustments to an entity’s previous accounting for its involvement with other entities are required and the timing of such adjustments. The adoption of these amendments will not have a material impact on the consolidated entity. OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013 Note 1 Summary of Significant Accounting Policies (continued) (w) New, revised or amending Accounting Standards and Interpretations adopted The consolidated entity has adopted all of the new, revised or amending Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period. Any new, revised or amending Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. Any significant impact on the accounting policies of the consolidated entity from the adoption of these Accounting Standards and Interpretations are disclosed below. The adoption of these Accounting Standards and Interpretations did not have any significant impact on the financial performance or position of the consolidated entity. The following Accounting Standards and Interpretations are most relevant to the consolidated entity: — AASB 2011-9 Amendments to Australian Accounting Standards - Presentation of Items of Other Comprehensive Income The consolidated entity has applied AASB 2011-9 amendments from 1 July 2012. The amendments requires grouping together of items within other comprehensive income on the basis of whether they will eventually be 'recycled' to the profit or loss (reclassification adjustments). The change provides clarity about the nature of items presented as other comprehensive income and the related tax presentation. The amendments also introduced the term 'Statement of profit or loss and other comprehensive income' clarifying that there are two discrete sections, the profit or loss section (or separate statement of profit or loss) and other comprehensive income section. Note 2 Parent Information The following information has been extracted from the books and records of the parent and has been prepared in accordance with Australian Accounting Standards. STATEMENT OF FINANCIAL POSITION ASSETS Current assets Non-current assets TOTAL ASSETS LIABILITIES Current liabilities Non-current liabilities TOTAL LIABILITIES EQUITY Issued capital Retained earnings Reserves TOTAL EQUITY STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME Loss before tax Total comprehensive income 2013 $ 2012 $ 241,228 2,313,087 2,554,315 27,592 2,615,099 2,642,691 1,387,057 5,999,921 7,386,978 5,252,604 - 5,252,604 21,176,101 (26,003,160) (5,604) (4,832,663) 18,751,301 (21,359,172) (2,042) (2,609,913) (1,145,112) (14,941,412) (1,148,674) (14,931,523) Loss for the year The loss for the year for Oldfields Holdings Limited includes the write back of subsidiary loan accounts of $6,653,034 (2012: $16,826,688) which are eliminated on consolidation. Guarantees Oldfields Holdings Limited and its Australian wholly-owned entities have entered into a deed of cross guarantee under which the company and its subsidiaries guarantee the debts of each other. Contingent liabilities The parent entity did not have any contingent liabilities as at 30 June 2013 or 30 June 2012. Contractual commitments The parent entity did not have any contractual commitments as at 30 June 2013 or 30 June 2012. OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013 Note 3 Revenue and Other Income (a) Revenue from continuing operations Sales revenue — — sale of goods rental revenue of scaffold equipment Other income debt buy-back — remission of interest — interest received from other persons — export market development grant — other income — Total other income (b) Total revenue and other income from continuing operations Attributable to members of the parent entity Attributable to non-controlling interests (c) Revenue and other income from discontinued operations Attributable to members of the parent entity (d) Income from continuing operations and discontinued operations Attributable to members of the parent entity Attributable to non-controlling interests Note 4 Profit/loss for the Year Profit/loss before income tax from continuing operations includes the following specific expenses: Expenses Cost of sales Inventory recognised as an expense during the year Interest expense on financial liabilities at fair value through profit or loss: — — — — — — — Total finance cost Directors Associated companies Related parties Other persons Hire purchase charges Unwinding of discount on deferred senior loan Other borrowing costs Foreign currency translation (loss)/profit Impairment of assets Employee benefits expense Depreciation expense Amortisation expense Bad and doubtful debts: trade receivables — Total bad and doubtful debts Rental expense on operating leases minimum lease payments — Note Consolidated Group 2013 $ 2012 $ 15,672,617 10,971,557 26,644,174 17,383,992 11,448,639 28,832,631 5,500,000 137,558 7,575 - 38,450 5,683,583 - - 158 32,895 180,229 213,282 28,825,470 3,502,287 32,327,757 25,566,554 3,479,359 29,045,913 6 - - 65,128 65,128 28,825,470 3,502,287 32,327,757 25,631,682 3,479,359 29,111,041 Note Consolidated Group 31 31 31 2013 $ 2012 $ 14,246,765 15,463,757 7,766,433 8,556,556 7,410 5,685 27,240 379,545 55,738 46,325 2,641 524,584 (11,156) - 3,582 45,828 13,035 1,207,570 57,870 - 24,177 1,352,062 56,814 58,325 8,490,889 8,662,812 984,015 1,032,131 50,377 56,544 81,780 81,780 (87,548) (87,548) 1,198,426 1,186,468 OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013 Note 5 Income Tax Expense (a) (b) The components of tax (expense)/income comprise: Current tax Deferred tax Loss on disposal of investment in associated companies Recoupment of prior year tax losses Debt buy-back reducing prior year losses Current year deferred tax assets not recognised The prima facie tax on profit from ordinary activities before income tax is reconciled to the income tax as follows: Prima facie tax payable on profit from ordinary activities before income tax at 30% (2012: 30%) Add: Tax effect of: — — — — other non-allowable items capital loss on disposal of investment in associate unwinding of discount on DSLN not assessable Revaluation of derivative element of DSLN not assessable Add/(Less): Tax effect of: — — — — — Recoupment of prior year tax losses not previously brought to account Income tax attributable to entity share of net profits of associates and joint venture entities netted directly net tax effect profit/(loss) from overseas operations debt buy-back reducing prior year losses current year losses not recognised loss on disposal of investment in associated companies Note 23 Consolidated Group 2013 $ 2012 $ 1,604,075 (53,131) 25,087 67,928 (1,650,000) 173,111 167,070 (385,837) (354) - (16,246) - 541,085 138,648 1,442,047 (463,194) 6,354 - 13,898 29,265 1,491,564 617 (110,171) 1,650,000 (173,111) 25,087 (67,928) 167,070 23,072 15,179 - - (424,943) 9,110 (47,862) - (541,085) - 16,246 138,648 The applicable weighted average effective tax rates are as follows: 3.5% -9.0% (c) Tax effects relating to each component of other comprehensive income: Consolidated Group Gain(loss) on cash flow hedges Note 24 Note 6 Discontinued Operations Before-tax amount $ 2013 Tax (expense) benefit $ Net-of-tax amount $ (5,089) (5,089) 1,527 1,527 (3,562) (3,562) Before-tax amount $ 14,127 14,127 2012 Tax (expense) benefit $ Net-of-tax amount $ (4,238) (4,238) 9,889 9,889 Brisbane Garden Sheds Pty Ltd (a) During 2012, the Group dissolved the joint venture entity Brisbane Garden Sheds Pty Ltd. The wind-down of this entity was completed by 30 September 2011. The profit for the year from this discontinued operation is as follows: Share of net profit of associates and joint ventures 2013 $ 2012 $ - - 3,633 3,633 Shed Holdings Pty Ltd (b) During 2012, the Group disposed of properties held by Shed Holdings Pty Ltd at Archerfield, Queensland and St Marys, New South Wales. The consideration from the sale of these properties was used to reduce the overall debt of the Group. The loss for the year from this discontinued operation is as follows: Other income Distribution expenses Occupancy expenses Administrative expenses Finance costs Loss before income tax Income tax expense Loss for the year The net cash flows of the discontinued division which have been incorporated into the statement of cash flows are as follows: Net cash inflow/(outflow) from operating activities Net cash inflow/(outflow) from investing activities Net cash inflow/(outflow) from financing activities Net cash decrease in cash generated by the discontinuing division 2013 $ 2012 $ - - - - - - - - - - - - 65,128 (52,109) (5,423) (857) (105,961) (99,222) 34,182 (65,040) 10,339 3,787,275 (3,797,670) (56) OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013 Note 7 Key Management Personnel Compensation Refer to the Remuneration Report contained in the Directors’ Report for details of the remuneration paid or payable to each member of the Group’s key management personnel (KMP) for the year ended 30 June 2013. The totals of remuneration paid to KMP of the company and the Group during the year are as follows: Short-term employee benefits Post-employment benefits Other long term benefits Termination benefits Total KMP compensation KMP Options and Rights Holdings There were no options or rights held by key management personnel during the year. KMP Shareholdings The number of ordinary shares in Oldfields Holdings Limited held by each KMP of the Group during the financial year is as follows: 2013 $ 509,139 45,443 12,911 63,158 630,651 2012 $ 706,692 61,337 11,551 - 779,580 Granted as remuneration during the year Issued on exercise of options during the year Other changes during the year 30 June 2013 Christopher Michael Giles William Lewis Timms Stephen Charles Hooper Julie Garland McLellan Raymond John Titman Robert Allan Coleman 30 June 2012 Christopher Michael Giles William Lewis Timms Stephen Charles Hooper Julie Garland McLellan Raymond John Titman Robert Allan Coleman Other KMP Transactions Balance at beginning of year 700,000 19,692,264 - - 43,924 - 20,436,188 Balance at beginning of year 700,000 19,692,264 - - 43,924 - 20,436,188 Granted as remuneration during the year - - - - - - - - - - - - - - - - - - - - - 700,000 19,692,264 - - (20,000) - 20,372,264 Balance at end of year 1,400,000 39,384,528 - - 23,924 - 40,808,452 Issued on exercise of options during the year Other changes during the year Balance at end of year - - - - - - - - - - - - - - 700,000 19,692,264 - - 43,924 - 20,436,188 There have been no other transactions involving equity instruments other than those described in the tables above. For details of other transactions with KMP, refer to Note 31: Related Party Transactions. For details of loans to KMP, refer to Note 31: Related Party Transactions. Note 8 Auditors’ Remuneration Remuneration of the current auditor (BDO) of the parent entity for: — — auditing or reviewing the financial report taxation services Remuneration of the previous auditor (Hall Chadwick) of the parent entity for: — taxation services Remuneration of current auditors (BDO Hong Kong) of subsidiaries for: auditing or reviewing the financial statements of subsidiaries — Remuneration of previous auditors (PKF Hong Kong) of subsidiaries for: auditing or reviewing the financial statements of subsidiaries — Note 9 Dividends (a) Since the start of the financial year, no dividends have been paid or declared by the parent entity. (b) Balance of franking account at year end Consolidated Group 2013 $ 2012 $ 151,904 26,080 177,984 - - 161,163 50,900 212,063 11,663 11,663 10,457 - 13,526 12,642 Consolidated Group 2013 $ 2012 $ 772,951 728,013 (c) During the year, fully franked dividends were paid by Adelaide Scaffold Solutions Pty Limited (subsidiary of Oldfields Holdings Limited) to Sibley Investments Pty Limited, being the minority interest holder of the entity. Total dividends paid for the year were $148,512. OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013 Note 10 Earnings per Share (a) (b) (c) (d) (e) Reconciliation of earnings to profit or loss Profit (loss) for the year Profit attributable to non-controlling equity interest Earnings used to calculate basic EPS Reconciliation of earnings to profit or loss from continuing operations Profit (loss) from continuing operations Profit attributable to non-controlling equity interest in respect of continuing operations Earnings used to calculate basic EPS from continuing operations Reconciliation of earnings to profit or loss from discontinued operations Profit (loss) from discontinued operations Profit attributable to non-controlling equity interest Earnings used to calculated basic EPS from discontinued operations Weighted average number of ordinary shares outstanding during the year used in calculating basic EPS Diluted earnings per share is not reflected for discontinued operations as the result is anti-dilutive in nature. Note 11 Cash and Cash Equivalents Cash on hand Cash at bank Reconciliation of cash Cash at the end of the financial year as shown in the statement of cash flows is reconciled to items in the statement of financial position as follows: Cash and cash equivalents Bank overdrafts A floating charge over cash and cash equivalents has been provided for certain debt. Refer to Note 21 for further details. Note 12 Trade and Other Receivables CURRENT Trade receivables Provision for impairment Total current trade and other receivables Consolidated Group 2013 $ 2012 $ 4,639,752 (152,780) 4,486,972 (1,744,035) (69,946) (1,813,981) 4,639,752 (152,780) 4,486,972 (1,682,628) (69,946) (1,752,574) - - - (61,407) - (61,407) No. No. 69,575,276 56,043,605 Note Consolidated Group 2013 $ 3,056 674,348 677,404 2012 $ 3,159 381,162 384,321 677,404 (855,184) (177,780) 384,321 (453,443) (69,122) 32 21 Note Consolidated Group 2013 $ 2012 $ 12a 3,641,250 (19,023) 3,622,227 3,890,018 (57,328) 3,832,690 (a) Provision For Impairment of Receivables Current trade and term receivables are non-interest bearing loans and generally on 30-day terms. A provision for impairment is recognised when there is objective evidence that an individual trade or term receivable is impaired. These amounts have been included in the distribution expenses item in the consolidated statement of comprehensive income. Movement in the provision for impairment of receivables is as follows: Consolidated Group Current trade receivables Consolidated Group Current trade receivables Opening balance 01.07.11 $ (247,019) (247,019) Opening balance 01.07.12 $ (57,328) (57,328) Charge for the year Amounts written off Amounts recovered $ 87,548 87,548 $ 102,143 102,143 $ - - Charge for the year Amounts written off Amounts recovered $ (81,780) (81,780) $ 135,720 135,720 $ (15,635) (15,635) Closing balance 30.06.12 $ (57,328) (57,328) Closing balance 30.06.13 $ (19,023) (19,023) OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013 Note 12 Trade and Other Receivables (continued) (a) Provision For Impairment of Receivables (continued) Credit risk The Group has no significant concentration of credit risk with respect to any single counter party or group of counter parties other than those receivables specifically provided for and mentioned within Note 12. The class of assets described as Trade and Other Receivables is considered to be the main source of credit risk related to the Group. The following table details the Group’s trade and other receivables exposed to credit risk (prior to collateral and other credit enhancements) with ageing analysis and impairment provided for thereon. Amounts are considered as ‘past due’ when the debt has not been settled with the terms and conditions agreed between the Group and the customer or counter party to the transaction. Receivables that are past due are assessed for impairment by ascertaining solvency of the debtors and are provided for where there are specific circumstances indicating that the debt may not be fully repaid to the Group. The balances of receivables that remain within initial trade terms (as detailed in the table) are considered to be of high credit quality. Consolidated Group 2013 Trade and term receivables Total Consolidated Group 2012 Trade and term receivables Total Gross Amount $ 3,641,250 3,641,250 Gross Amount $ 3,890,018 3,890,018 Past due and impaired $ 19,023 19,023 Past due and impaired $ 57,328 57,328 (b) Financial Assets Classified as Loans and Receivables — Total current — Total non-current Financial assets Past due but not impaired (days overdue) <30 $ 194,031 194,031 31-60 $ 194,650 194,650 61-90 $ Past due but not impaired (days overdue) <30 $ 351,961 351,961 31-60 $ 3,009 3,009 61-90 $ Note 32 - - - - >90 $ >90 $ Within initial trade terms $ 3,233,546 3,233,546 Within initial trade terms $ 3,477,720 3,477,720 - - - - Consolidated Group 2013 $ 3,622,227 - 3,622,227 2012 $ 3,832,690 - 3,832,690 (c) Collateral Pledged A fixed and floating charge over trade receivables has been provided for certain debt. Refer to Note 21 for further details. Note 13 Inventories CURRENT At cost: Raw materials and stores Work in progress Finished goods Goods in transit Less: provisions Note 14 Other Assets CURRENT Prepayments Other debtors Assets in progress Financial Assets Classified as Loans and Receivables Trade and other Receivables — Total current — Total non-current Consolidated Group 2013 $ 2012 $ 744,929 429,555 2,713,457 431,356 4,319,297 (271,470) 4,047,827 885,723 615,037 2,711,999 443,299 4,656,058 (342,533) 4,313,525 Note Consolidated Group 2013 $ 2012 $ 286,491 84,809 - 371,300 425,406 148,462 7,300 581,168 32 84,809 - 84,809 148,462 - 148,462 OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013 Note 15 Investments Accounted for Using the Equity Method Associated companies Note 16 Associated Companies Interests are held in the following associated companies Name Principal activities Country of incorporation Note Consolidated Group 16 2013 $ 875,027 875,027 2012 $ 1,265,903 1,265,903 Shares Ownership interest Carrying amount of investment Unlisted: PT Ace Oldfields Enduring Enterprises Honeytree & Partners Brisbane Garden Sheds Paint Brush Manufacturer Hardware Reseller Hardware Marketing Garden Shed Supplier Indonesia Singapore Singapore Australia Ordinary Ordinary Ordinary Ordinary 2013 % 34.00% 34.00% 34.00% 0.00% 2012 % 49.04% 49.00% 49.00% 50.00% 2013 $000 2012 $000 774,066 (6,687) 107,648 - 875,027 1,064,127 51,872 149,904 - 1,265,903 (i) (ii) (iii) On 17 October 2012, the Group reduced it's interest in the associated companies PT Ace Oldfields, Enduring Enterprises and Honeytree and Partners. This resulted in a decrease in the ownership interest of the investments from 49% to 34%. Consideration received in relation to this sale was $391,820 and was received in the form of a write back of the trade payable balance owing to the associated companies at the time the transaction occurred. The gain on the disposal of these shares was $23,410. During 2012, the Group dissolved the joint venture entity Brisbane Garden Sheds Pty Ltd. The wind-down of this entity was completed by 30 September 2011. With exception to Brisbane Garden Sheds, all associated companies listed above report on a financial year ending 31 December in accordance with the laws and regulations of the country of incorporation. (a) Movements during the year in equity accounted investment in associated companies Note Consolidated Group Balance at beginning of the financial year Share of associated company’s profit after income tax Foreign currency translation losses Dividend revenue from associated company Disposals during the year Balance at end of the financial year (b) Equity accounted profits of associates are broken down as follows: Share of associate’s profit before income tax expense Share of associate’s income tax expense Share of associate’s profit after income tax (c) Summarised presentation of aggregate assets, liabilities and performance of associates 16b 31(b) Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Net assets Revenues Profit after income tax of associates 2013 $ 1,265,903 2,057 (5,014) (19,508) (368,411) 875,027 2012 $ 1,491,089 30,368 (255,554) - - 1,265,903 2,057 - 2,057 30,368 - 30,368 2,822,681 281,422 3,104,103 1,166,002 1,063,073 2,229,075 3,853,896 333,376 4,187,272 1,766,467 1,154,902 2,921,369 875,028 1,265,903 3,965,352 5,574,830 2,057 30,368 OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013 Note 17 Controlled Entities Subsidiaries of Oldfields Holdings Limited: Oldfields Pty Limited Oldfields Advance Scaffold Pty Limited Oldfields Administration Pty Limited Oldfields International Pty Limited Advantage Contracting Pty Limited Advantage Scaffolding Pty Limited Shed Holdings Pty Limited Advance Scaffold Solutions Pty Limited NOST Investments Pty limited Subsidiaries of Oldfields Pty Limited: Midco Pty Limited Subsidiaries of Oldfields Advance Scaffold Pty Limited: Adelaide Scaffold Solutions Pty Limited Subsidiaries of Oldfields Administration Pty Limited: National Office Service Trust Subsidiaries of NOST Investments Pty Limited: H & O Products Pty Limited Subsidiaries of Oldfields International Pty Limited: Oldfields (NZ) Limited Oldfields Paint Applications (NZ) Limited Oldfields USA Incorporated Scaffold Management Systems Pty Limited Subsidiaries of Shed Holdings Pty Limited: Backyard Installations Pty Limited Sheds Plus Pty Limited Adelaide Garden Sheds Pty Limited Subsidiaries of Advance Scaffold Solutions Pty Limited: Scaffold The World Pty Limited Foshan Advcorp Scaffold Limited * Percentage of voting power is in proportion to ownership Note 18 Property, Plant and Equipment Plant and equipment: At cost Accumulated depreciation Leasehold improvements At cost Accumulated amortisation Motor vehicles At cost Accumulated depreciation Total property, plant and equipment Country of Incorporation Percentage Owned (%)* 2013 2012 Australia Australia Australia Australia Australia Australia Australia Australia Australia 100% 100% 100% 100% 100% 100% 100% 100% 100% Australia 100% Australia 60% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 60% Australia 100% 100% Australia 75% New Zealand New Zealand USA Australia Australia Australia Australia Australia China 100% 100% 100% 100% 100% 100% 100% 100% 100% 75% 100% 100% 100% 100% 100% 100% 100% 100% 100% Consolidated Group 2013 $ 2012 $ 12,833,902 (5,344,916) 7,488,986 13,092,857 (4,838,579) 8,254,278 384,657 (267,523) 117,134 340,404 (219,646) 120,758 2,275,560 (1,660,115) 615,445 2,496,987 (1,891,846) 605,141 8,221,565 8,980,177 Included in plant and equipment balance is scaffold equipment for hire held by Oldfields Advance Scaffold Pty Ltd and Adelaide Scaffold Solutions Pty Ltd amounting to $6,702,767 (2012: $7,354,305). Movements in Carrying Amounts Movements in carrying amounts for each class of property, plant and equipment between the beginning and the end of the current financial year. Balance at 1 July 2011 Additions Disposals Revaluation increments Depreciation expense Reclassification of assets Balance at 30 June 2012 Additions Disposals Depreciation expense Reclassification of assets Balance at 30 June 2013 Leasehold Improvements $ 145,999 18,738 - - (43,979) - 120,758 44,217 - (51,587) 3,746 117,134 Plant and Equipment $ 8,868,061 369,417 (291,817) 5,701 (668,817) (28,267) 8,254,278 161,543 (255,657) (667,776) (3,402) 7,488,986 Motor Vehicles $ 642,184 258,603 (1,544) 2,489 (324,858) 28,267 605,141 322,140 (46,840) (264,652) (344) 615,445 Total $ 9,656,244 646,758 (293,361) 8,190 (1,037,654) - 8,980,177 527,900 (302,497) (984,015) - 8,221,565 OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013 Note 19 Intangible Assets Goodwill Cost Accumulated impairment losses Trademarks and licences Cost Accumulated amortisation and impairment losses Software and other intangibles at cost Accumulated amortisation Impairment Total intangibles Movements in Carrying Amounts Balance at 1 July 2011 Additions Disposals Amortisation charge Impairment losses Balance at 30 June 2012 Additions Disposals Amortisation charge Impairment losses Balance at 30 June 2013 Consolidated Group 2013 $ 2012 $ 5,160,370 (4,181,376) 978,994 5,160,370 (4,181,376) 978,994 177,447 (144,090) 33,357 372,236 (207,888) - 164,348 237,264 (190,833) 46,431 421,730 (247,367) (50,599) 123,764 1,176,699 1,149,189 Goodwill $ 978,994 - - - - 978,994 - - - - 978,994 Trademarks & Licences $ 64,768 - - (18,337) - 46,431 - - (13,074) - 33,357 Software & Other $ 76,227 132,497 (1,675) (32,686) (50,599) 123,764 77,887 (50,599) (37,303) 50,599 164,348 Total $ 1,119,989 132,497 (1,675) (51,023) (50,599) 1,149,189 77,887 (50,599) (50,377) 50,599 1,176,699 Intangible assets, other than goodwill, have finite useful lives. The current amortisation charges for intangible assets are included under depreciation and amortisation expense per the statement of profit or loss. Goodwill has an indefinite useful life. Impairment disclosures Goodwill is allocated to cash-generating units which are based on the group’s reporting segments. Consumer products segment Scaffold division segment Total 2013 $ 140,564 838,430 978,994 2012 $ 140,564 838,430 978,994 The recoverable amount of each cash-generating unit above is determined based on value-in-use calculations. Value-in-use is calculated based on the present value of cash flow projections over a 5 year period. The following assumptions were used in the value-in-use calculations: Consumer products segment Scaffold segment Year 1 7.50% 4.00% Growth Rate Years 2 - 5 3.00% 4.00% Discount Rate Terminal Value 3.00% 3.00% 19.57% 17.33% Management has based the value-in-use calculations on budgets for each reporting segment. These budgets use historical weighted average growth rates to project revenue. Costs are calculated taking into account historical gross margins as well as estimated weighted average inflation rates over the period which are consistent with inflation rates applicable to the locations in which the segments operate. Discount rates are pre-tax and are adjusted to incorporate risks associated with a particular segment. The calculation of value in use is most sensitive to changes in the discount rate. As disclosed in Note 1, the directors have made judgements and estimates in respect of impairment testing of goodwill and intangible assets. Should these estimates not occur the resulting goodwill and intangible assets may vary in carrying amount. If the discount rate was to increase by 3%, goodwill would not need to be impaired with all other assumptions remaining constant, for both the scaffold and consumer products segments. Note 20 Trade and Other Payables CURRENT Unsecured liabilities Trade payables Trade finance facility Sundry payables and accrued expenses Amounts payable to associated companies Financial liabilities at amortised cost classified as trade and other payables — Total current Consolidated Group 2013 $ 2012 $ 1,496,621 - 941,028 - 2,437,649 1,997,321 986,027 788,802 942 3,773,092 2,437,649 2,437,649 3,773,092 3,773,092 OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013 Note 21 Borrowings CURRENT Unsecured liabilities Directors' loan Secured liabilities Bank overdrafts Bank loans Hire purchase liabilities Total current borrowings NON-CURRENT Unsecured liabilities Other related parties Secured liabilities Bank loans Hire purchase liabilities Debt element of deferred senior loan note Total non-current borrowings Total borrowings (a) Total current and non-current secured liabilities: Bank overdraft Bank loan Debt element of deferred senior loan note Hire purchase liabilities Note Consolidated Group 2013 $ 2012 $ 21a,d 21a,d 26 21a,d 26 - - 153,582 153,582 855,184 144,750 261,282 1,261,216 1,261,216 453,443 13,646,095 289,043 14,388,581 14,542,163 143,750 143,750 3,775,152 270,000 809,473 4,854,625 4,998,375 174,750 174,750 - 223,573 - 223,573 398,323 6,259,591 14,940,486 855,184 3,919,902 809,473 531,282 6,115,841 453,443 13,646,095 - 512,616 14,612,154 (b) On 21 December 2012, the Group renewed its facility agreement with the bank for an additional 2 years 6 months. As part of this agreement, the Group bought back $8 million of debt for a consideration of $2.5 million which was funded through capital raising which involved the issue of new equity. The current facility agreement includes normal commercial terms and conditions which are subject to such covenants as interest cover ratios; capital expenditure limits; gearing ratios; and the Group cannot create or acquire a new subsidiary unless that subsidiary becomes a party to the agreement. In addition, the bank swapped senior debt for a Deferred Senior Loan Note (DSLN) for $2,370,224 with a 10 year maturity. The main terms of the loan note are as follows: — — — — — — — — The DSLN is secured against assets of the Group; Interest will be capitalised and paid either on termination or early payment; If the DSLN is repaid or partially repaid within the first 5 years, it will attract interest at 12% p.a; If the DSLN is repaid or partially repaid after the first 5 years, the amount of interest paid will be dependent upon the share price of the Group, but capped at 12% per annum; In the event that the weighted average share price of the company is the same or below the issue price of the capital raised at the time of the repayment after the first 5 years, the only payment due will be the original debt; The DSLN noteholder will also be entitled to receive a payment to the equivalent value of any dividend payment made by the Group; Entitlement to a dividend-triggered payment will be based on the face value of the DSLN divided by the issue price upon commencement of the facility agreement; and Other normal conditions apply in respect to meeting gearing and interest cover ratios. Accordingly, the DSLN has been identified as containing two main components: the core debt and a derivative element capturing the capital appreciation payment, interest and dividend-triggered entitlement (refer note 24). The core debt is the residual after calculating the fair value of the embedded derivative and has been discounted by 12% to net present value over the expected term of the DSLN (being 10 years) and is included in non-current borrowings. As at 30 June 2012, all bank loans were classified as current in the financial report in accordance with the requirements of AASB101 Presentation of Financial Statements. Under AASB101, unless the Group had an "unconditional right to defer settlement for at least twelve months after the reporting date", the borrowings must be classified as current. The carrying amounts of non-current assets pledged as security are: Floating charge over total current and non-current assets 19,067,028 20,563,309 Collateral provided The bank overdrafts and bank loans of the Group are secured by a floating charge over the assets of the Group. Hire purchase liabilities are secured by the underlying hire purchased assets. Financial assets that have been pledged as part of the total collateral for the benefit of bank debt are as follows: Cash and cash equivalents Trade receivables Total financial assets pledged The collateral over cash and cash equivalents represents a floating charge. 11 12 677,404 3,622,227 4,299,631 384,321 3,832,690 4,217,011 (c) (d) (e) Deed of cross guarantee Oldfields Holdings Limited and its Australian wholly-owned entities have entered into a deed of cross guarantee under which the company and its subsidiaries guarantee the debts of each other. OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013 Note 22 Provisions CURRENT Short-term Employee Benefits Opening balance at 1 July 2012 Additional provisions Amounts used Balance at 30 June 2013 NON CURRENT Long-term Employee Benefits Opening balance at 1 July 2012 Additional provisions Unused amounts reversed Balance at 30 June 2013 Analysis of Total Provisions Current Non-current Consolidated Group 2013 $ 2012 $ 1,000,245 611,625 (673,601) 938,269 985,191 654,476 (639,422) 1,000,245 81,801 1,777 (47,760) 35,818 65,253 16,548 - 81,801 938,269 35,818 974,087 1,000,245 81,801 1,082,046 Provision for Employee Benefits Provision for employee benefits represents amounts accrued for annual leave and long service leave. The current portion for this provision includes the total amount accrued for annual leave entitlements and the amounts accrued for long service leave entitlements that have vested due to employees having completed the required period of service. Based on past experience, the Group does not expect the full amount of annual leave or long service leave balances classified as current liabilities to be settled within the next 12 months. However, these amounts must be classified as current liabilities since the Group does not have an unconditional right to defer the settlement of these amounts in the event employees wish to use their leave entitlement. The non-current portion for this provision includes amounts accrued for long service leave entitlements that have not yet vested in relation to those employees who have not yet completed the required period of service. The probability of long service leave being taken is based on historical data. The measurement and recognition criteria relating to employee benefits have been included in Note 1(m). Note 23 Tax Balances CURRENT ASSETS Income tax receivable CURRENT LIABILITIES Income tax payable NON-CURRENT Deferred tax liability Other Balance at 30 June 2012 Other Balance at 30 June 2013 Deferred tax assets Provisions Balance at 30 June 2012 Provisions Balance at 30 June 2013 Consolidated Group 2013 $ 2012 $ 42,439 42,439 - - 14,907 14,907 2,731 2,731 Opening Balance $ Charged to Income $ Closing Balance $ 359 359 6,812 6,812 35,330 35,330 41,429 41,429 6,453 6,453 44,242 44,242 6,099 6,099 (8,889) (8,889) 6,812 6,812 51,054 51,054 41,429 41,429 32,540 32,540 The amount of deductible temporary differences and unused tax losses (at tax effected amounts) for which no deferred tax assets have been brought to account: — — — temporary differences -$286,314 (2012: -$80,599) tax losses: operating losses $2,095,915 (2012: $3,250,345) tax losses: capital losses $81,908 (2012: nil) The benefits of the above temporary differences and unused tax losses will only be realised if the conditions for deductibility set out in Note 1(b) occur. These amounts have no expiry date. OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013 Note 24 Derivatives CURRENT Forward exchange contracts NON CURRENT Derivative element of deferred senior loan note Note Consolidated Group 2013 $ 2012 $ 32 32 5,604 5,604 1,704,628 1,704,628 2,042 2,042 - - (a) Forward exchange contracts Forward exchange contracts are used to hedge cash flow risk associated with future transactions. Gains and losses arising from changes in the fair value of these derivatives are initially recognised directly in a hedge reserve in the equity section of the statement of financial position. At the date of the transaction, amounts included in the hedge reserve are transferred from equity and included in either the statement of comprehensive income or the cost of assets. The statement of changes in equity includes transfers to and from the hedge reserve. (b) Derivative Element - Deferred Senior Loan Note (capital appreciation, interest and dividend-triggered entitlement) The capital appreciation, interest and dividend-triggered entitlement components of the Deferred Senior Loan Note, the details of which have been set out in note 21, have been accounted for as a derivative financial instrument liability on the basis that interest payments are indexed to the value of issued capital, but capped at 12% p.a. The assessed fair value of the derivative takes into account the expected cashflows incorporating the term (10 years) and discount rate used (12%). (c) Total current and non-current secured liabilities: Derivative element of deferred senior loan note Note 25 Issued Capital Fully paid ordinary shares 82,176,198 (2012: 56,043,605) The company has authorised share capital amounting to 82,176,198 ordinary shares. (a) Ordinary Shares At the beginning of the reporting period Shares issued during the year — 24 December 2012 At the end of the reporting period 1,704,628 1,704,628 - - Consolidated Group 2013 $ 2012 $ 21,176,101 21,176,101 18,751,301 18,751,301 Consolidated Group 2013 No. 2012 No. 56,043,605 56,043,605 26,132,593 82,176,198 - 56,043,605 On 24 December 2012, the company issued 26,132,593 ordinary shares at $0.10 each to shareholders on the basis of 1 share for every 1 share held. Ordinary shares participate in dividends and the proceeds on winding up of the parent entity in proportion to the number of shares held. At the shareholders meetings each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has one vote on a show of hands. Ordinary shares have no par value and the company does not have a limited amount of authorised capital. (b) Capital Management Management controls the capital of the Group in order to maintain a sustainable debt to equity ratio, generate long-term shareholder value and ensure that the Group can fund its operations and continue as a going concern. The Group’s debt and capital include ordinary share capital and financial liabilities, supported by financial assets. The Group is subject to financing covenants as detailed in Note 21. The Group has complied with these covenants for the financial year. Management effectively manages the Group’s capital by assessing the Group's financial risks and adjusting its capital structure in response to changes in these risks and in the market. These responses include the management of debt levels, distributions to shareholders and share issues. There have been no changes in the strategy adopted by management to control the capital of the Group since the prior year. This strategy is to identify opportunities to reduce the Group's gearing ratio. The gearing ratios for the year ended 30 June 2013 and 30 June 2012 are as follows: Total borrowings Less cash and cash equivalents Net debt Total equity Total capital Gearing ratio Note 21 11 Consolidated Group 2013 $ 6,259,591 (677,404) 5,582,187 7,634,415 13,216,602 2012 $ 14,940,486 (384,321) 14,556,165 756,100 15,312,265 42% 95% OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013 Note 26 Capital and Leasing Commitments (a) (b) Finance Lease Commitments Payable — minimum lease payments not later than 12 months — between 12 months and 5 years — later than 5 years — Minimum lease payments Less: future finance charges Present value of minimum lease payments Consolidated Group 2013 $ 2012 $ 300,749 304,048 - 604,797 (73,515) 531,282 324,105 252,008 - 576,113 (63,497) 512,616 Note 21 Included in finance lease commitments are hire purchase liabilities that are secured by a charge over the hire purchase assets. Operating Lease Commitments Non-cancellable operating leases contracted for but not recognised in the financial statements Payable — minimum lease payments not later than 12 months — between 12 months and 5 years — later than 5 years — 1,155,492 1,767,952 - 2,923,444 782,548 923,843 - 1,706,391 The property leases are non-cancellable leases with 1-5 year terms, with rent payable monthly in advance. Contingent rental provisions within the lease agreements require that minimum lease payments shall be increased by the lower of the change in the consumer price index (CPI) or 3-5% per annum. Options exist to renew certain leases at the end of the term for an additional term of 1-5 years. Note 27 Contingent Liabilities and Contingent Assets The Group does not have any significant contingent liabilities or contingent assets as 30 June 2013 or 30 June 2012. Note 28 Operating Segments General Information Identification of reportable segments The Group has identified its operating segments based on the internal reports that are reviewed and used by the board of directors in assessing performance and in determining the allocation of resources. The Group is managed primarily on the basis of product category and service offerings as the diversification of the Group's operations inherently have notably different risk profiles and performance assessment criteria. Operating segments are therefore determined on the same basis. Reportable segments disclosed are based on aggregating operating segments where the segments are considered to have similar economic characteristics and are also similar with respect to the following: — — — — — the products sold and/or services provided by the segment; the manufacturing process; the type or class of customer for the products or service; the distribution method; and any external regulatory requirements. Types of products and services by segment (i) Consumer Products The consumer products segment manufactures and markets paint brushes, paint rollers, painters tools, Treco garden sheds, outdoor storage systems, aviaries and pet homes. (ii) Scaffolding The scaffolding segment manufactures and markets scaffolding and related equipment. In addition, this segment is engaged in hiring scaffolding related products to the building and construction industry. Basis of accounting for purposes of reporting by operating segments (a) Accounting policies adopted Unless stated otherwise, all amounts reported to the Board of Directors, being the chief operating decision makers with respect to operating segments, are determined in accordance with accounting policies that are consistent with those adopted in the annual financial statements of the Group. (b) Inter-segment transactions All inter-segment transactions are eliminated on consolidation of the Group's financial statements. Corporate charges are allocated to reporting segments based on the segment's overall proportion of revenue generation within the Group. The Board of Directors believes this is representative of likely consumption of head office expenditure that should be used in assessing segment performance and cost recoveries. Inter-segment loans payable and receivable are initially recognised at the consideration received/to be received net of transaction costs. If intersegment loans receivable and payable are not on commercial terms, these are not adjusted to fair value based on market interest rates. This policy represents a departure from that applied to the statutory financial statements. (c) (d) Segment assets Where an asset is used across multiple segments, the asset is allocated to the segment that receives the majority of the economic value from the asset. In most instances, segment assets are clearly identifiable on the basis of their nature and physical location. Segment liabilities Liabilities are allocated to segments where there is direct nexus between the incurrence of the liability and the operations of the segment. Borrowings and tax liabilities are generally considered to relate to the Group as a whole and are not allocated. Segment liabilities include trade and other payables and certain direct borrowings. OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013 Note 28 Operating Segments (continued) (i) Segment performance 30 June 2013 Continuing operations: Revenue Sales revenue Inter-segment sales Other income Inter-segment other income Total segment revenue Reconciliation of segment result to group net profit/loss before tax Segment net profit/(loss) loss before tax Inter-segment elimination Net profit before tax from continuing operations Share of net profit from associates after tax Finance costs Depreciation and amortisation expense Income tax expense 30 June 2012 Continuing operations: Revenue Sales revenue Inter-segment sales Other income Inter-segment other income Total segment revenue Reconciliation of segment result to group net profit/loss before tax Segment net loss before tax Inter-segment elimination Net profit before tax from continuing operations Share of net profit from associates after tax Impairment losses Finance costs Depreciation and amortisation expense Income tax expense Discontinued operations: Revenue Other income Total segment revenue Segment net loss before tax from discontinued operations (ii) Revenue by geographical region Consumer Products $ Scaffolding $ Property $ Corporate / Unallocated $ Total $ - - - - - - - - - - - - - - - - - - - - - - 8,258,183 - 8,258,183 26,695,358 (51,184) 26,644,174 8,411,608 (2,728,025) 5,683,583 8,258,183 32,327,757 5,424,300 4,719,299 87,524 4,806,823 - 2,057 (51,701) 387,026 53,996 1,034,388 - 167,070 Corporate / Unallocated $ Total $ - - - 3,666,247 - 3,666,247 28,910,756 (78,125) 28,832,631 3,928,881 (3,715,599) 213,282 3,666,247 29,045,913 (7,073) (1,547,250) 3,270 (1,543,980) - (58,325) 215,921 1,351,904 53,147 34,182 1,088,675 138,648 - - - - - 11,720,000 - 11,720,000 14,975,358 - 14,975,358 53,700 - 53,700 99,725 - 99,725 11,773,700 15,075,083 (670,300) (34,701) 2,057 250,842 209,526 (942) Consumer Products $ - 187,885 770,866 168,012 Scaffolding $ Property $ 12,373,978 - 12,373,978 16,536,778 - 16,536,778 194,110 - 194,110 68,524 - 68,524 12,568,088 16,605,302 (587,410) (952,767) (50,599) 654,638 833,982 104,466 (7,726) 481,345 201,546 - - - 3,633 - - - 65,128 65,128 (99,222) - - 65,128 65,128 (95,589) Revenue, including other income and revenue from discontinued operations, attributable to external customers is disclosed below, based on the location of the external customer: 30 June 2013 Domestic International Intersegment eliminations Total revenue 30 June 2012 Domestic International Intersegment eliminations Total revenue Consumer Products $ Scaffolding $ Property $ 10,449,916 1,323,784 14,340,318 734,765 11,773,700 15,075,083 Consumer Products $ 11,329,583 1,238,505 - 12,568,088 Scaffolding $ Property $ 16,014,038 591,264 - 16,605,302 Corporate / Unallocated $ 8,258,183 - 8,258,183 Corporate / Unallocated $ 3,666,247 - - 3,666,247 - - - - - - - Total $ 33,048,417 2,058,549 (2,779,209) 32,327,757 Total $ 31,009,868 1,829,769 (3,793,724) 29,045,913 OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013 Note 28 Operating Segments (continued) (iii) Segment assets 30 June 2013 Segment assets Intersegment eliminations Total group assets Included in segment assets are: — Equity accounted associates and joint ventures 30 June 2012 Segment assets Intersegment eliminations Total group assets Included in segment assets are: — Equity accounted associates and joint ventures (iv) Segment liabilities 30 June 2013 Segment liabilities Intersegment eliminations Total group liabilities 30 June 2012 Segment liabilities Intersegment eliminations Total group liabilities Consumer Products $ Scaffolding $ Property $ 6,757,001 12,928,854 875,027 - Consumer Products $ Scaffolding $ Property $ 7,276,341 13,971,350 1,265,903 - - - - - Corporate / Unallocated $ 4,013,820 Total $ 23,699,675 (4,632,647) 19,067,028 - 875,027 Corporate / Unallocated $ 4,475,839 Total $ 25,723,530 (5,160,221) 20,563,309 - 1,265,903 Consumer Products $ Scaffolding $ Property $ Corporate / Unallocated $ 1,932,328 1,474,258 - 7,386,978 Consumer Products $ Scaffolding $ 6,497,946 4,312,328 Property $ (66,605) Corporate / Unallocated $ 7,120,605 Total $ 10,793,564 639,049 11,432,613 Total $ 17,864,274 1,942,935 19,807,209 (v) Non-current assets by geographical region The location of non-current segment assets by geographical location is disclosed below: Domestic International Non-current assets Note 29 Cash Flow Information (a) Reconciliation of Cash Flow from Operations with Profit after Income Tax Profit after income tax Non-cash flows in profit Debt buy-back Restructure of trade finance facility to borrowings Depreciation and amortisation Accrued interest charges Non-cash acquisitions of property, plant and equipment Net (gain)/loss on disposal of property, plant and equipment Net (gain)/loss on disposal of investments in associated companies Non-cash proceeds on disposal of investments in associated companies Non-cash dividend received from associated companies Unrealised exchange gains/losses Unrealised (gain)/loss on investments and derivatives Impairment loss Share of associated companies' net profit after income tax and dividends Changes in assets and liabilities, net of the effects of purchase and disposal of subsidiaries: (Increase)/decrease in trade and term receivables (Increase)/decrease in prepayments and other current assets (Increase)/decrease in inventories Increase/(decrease) in trade payables and accruals Increase/(decrease) in income taxes payable Increase/(decrease) in deferred taxes payable Increase/(decrease) in provisions Cash flow from operations 30 June 2013 $ 30 June 2012 $ 9,255,698 1,017,593 10,273,291 10,038,254 1,357,015 11,395,269 Consolidated Group 2013 $ 2012 $ 4,639,752 (1,744,035) (5,500,000) 1,011,778 1,034,388 105,463 (34,777) 53,607 (23,410) 391,820 19,508 (29,153) 143,878 - (2,057) 210,462 202,567 265,697 (1,339,244) (31,205) 53,131 (107,958) 1,064,247 - - 1,091,092 525,186 - 130,843 - - 44,751 - 58,325 (34,001) 471,282 (153,905) 808,750 (1,020,260) (95,690) 354 31,602 114,294 OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013 Note 29 Cash Flow Information (continued) (b) Non-cash Investing Activities Reduction of investment in associated companies On 17 October 2012, the Group reduced it's interest in associated companies, being PT Ace Oldfields, Enduring Enterprises and Honeytree and Partners. This resulted in a decrease in the ownership interest of the investments from 49% to 34%. Consideration received in relation to this sale was $391,820 and was received in the form of an offset of the trade payable balance owing to the associated companies at the time the transaction occurred. The gain on the disposal of these shares was $23,410. (c) Non-cash Financing Activities Restructure of Trade Finance Facility to Borrowings In February 2013, the trade finance facility of $1,011,778 was converted to core debt as part of the renewed facility agreement with the Group's bankers on 21 December 2012. Note 30 Events After the Reporting Period There have been no significant events occurring after 30 June 2013. Note 31 Related Party Transactions Related Parties (a) The Group's main related parties are as follows: Entities exercising control over the Group: The ultimate parent entity that exercises control over the Group is Oldfields Holdings Limited, which is incorporated in Australia. Key Management Personnel: Any person(s) having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director (whether executive or otherwise) of that entity are considered key management personnel. For details of disclosures relating to key management personnel, refer to Note 7: Interests of Key Management Personnel Compensation. Entities subject to significant influence by the Group: An entity which has the power to participate in the financial and operating policy decisions of an entity, but does not have control over those policies is an entity which holds significant influence. Significant influence may be gained by share ownership, statute or agreement. For details of interests held in associated companies, refer to Note 16: Associated Companies. Other Related Parties Other related parties include entities controlled by the ultimate parent entity and entities over which key management personnel have joint control. Transactions with related parties: Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated. The following transactions occurred with related parties: Associated Companies Purchase of paint application products by Oldfields Pty Ltd from Enduring Enterprises Interest paid to Enduring Enterprises Dividends received from Honeytree & Partners Other Related Parties Administration service fee paid to Sibley Investments Pty Ltd, being the holder of a minority interest in Adelaide Scaffold Solutions Pty Ltd Interest paid to Sibley Investments Pty Ltd, being the holder of a minority interest in Adelaide Scaffold Solutions Pty Ltd Dividends paid to Sibley Investments Pty Ltd, being the holder of a minority interest in Adelaide Scaffold Solutions Pty Ltd iii. Loans from Other Related Parties Loan payable to Sibley Investments Pty Ltd, being the holder of a minority interest in Adelaide Scaffold Solutions Pty Ltd. Beginning of the year Loans advanced Loan repayment paid End of the year Sibley Investments Pty Ltd have agreed that the balance of the loan will not be called in over the next 12 months. Loan payable to Timms & Timms Superannuation Fund, being a related party of William Lewis Timms (non- executive director) Beginning of the year Loans advanced Loan repayment paid Interest accrued End of the year Consolidated Group 2013 $ 2012 $ 1,070,569 5,685 19,508 787,466 45,828 - - 233,376 27,240 37,767 148,512 - 174,750 - (31,000) 143,750 139,750 60,000 (25,000) 174,750 153,582 - (160,992) 7,410 - - 150,000 - 3,582 153,582 i. ii. iii. iv. (b) i. ii. OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013 Note 32 Financial Risk Management The Group’s financial instruments consist mainly of deposits with banks, local money market instruments, short-term investments, accounts receivable and payable, loans to and from subsidiaries, bills, leases, preference shares and derivatives. The totals for each category of financial instruments, measured in accordance with AASB 139 as detailed in the accounting policies to these financial statements, are as follows: Financial Assets Cash and cash equivalents Loans and receivables Total Financial Assets Financial Liabilities Financial liabilities at amortised cost Trade and other payables — Trade finance facility — Borrowings — Financial liabilities at fair value through profit or loss — Total Financial Liabilities derivative instruments Note 11 12 20 21 24 Consolidated Group 2013 $ 2012 $ 677,404 384,321 3,707,036 3,981,152 4,384,440 4,365,473 2,437,649 - 6,259,591 2,787,065 986,027 14,940,486 1,710,232 10,407,472 2,042 18,715,620 Specific Financial Risk Exposures and Management The main risks the Group is exposed to through its financial instruments are credit risk, liquidity risk and market risk consisting of interest rate risk and foreign currency risk. There have been no substantive changes in the types of risks the Group is exposed to, how these risks arise, or the Board’s objectives, policies and processes for managing or measuring the risks from the previous period. a. Credit risk Exposure to credit risk relating to financial assets arises from the potential non-performance by counterparties of contract obligations that could lead to a financial loss to the Group. Credit risk is managed through the maintenance of procedures (such procedures include the utilisation of systems for the approval, granting and renewal of credit limits, regular monitoring of exposures against such limits and monitoring of the financial stability of significant customers and counterparties), ensuring to the extent possible, that customers and counterparties to transactions are of sound credit worthiness. Such monitoring is used in assessing receivables for impairment. Depending on the division within the Group, credit terms are generally 30 to 45 days from the invoice date. Credit Risk Exposures The maximum exposure to credit risk by class of recognised financial assets at the end of the reporting period, excluding the value of any collateral or other security held is equivalent to the carrying amount and classification of those financial assets (net of any provisions) as presented in the statement of financial position. Credit risk also arises through the provision of financial guarantees, as approved at Board level, given to parties securing the liabilities of certain subsidiaries (refer Note 21(e) for details). Collateral held by the Group securing receivables is detailed in Note 12. The Group has no significant concentration of credit risk with any single counterparty or group of counterparties. Details with respect to credit risk of Trade and Other Receivables is provided in Note 12. Trade and other receivables that are neither past due or impaired are considered to be of high credit quality. Aggregates of such amounts are as detailed at Note 12. b. Liquidity risk Liquidity risk arises from the possibility that the Group might encounter difficulty in settling its debts or otherwise meeting its obligations related to financial liabilities. The Group manages this risk through the following mechanisms: • preparing forward-looking cash flow analysis in relation to its operational, investing and financing activities • monitoring undrawn credit facilities • maintaining a reputable credit profile • managing credit risk related to financial assets The tables below reflect an undiscounted contractual maturity analysis for financial liabilities. The bank does however maintain the right to review the facilities annually with the next annual review date being 31 December 2013. Cash flows realised from financial assets reflect management’s expectation as to the timing of realisation. Actual timing may therefore differ from that disclosed. The timing of cash flows presented in the table to settle financial liabilities reflect the earliest contractual settlement dates and do not reflect management’s expectations that banking facilities will be rolled forward. - - - - - - - - - - - - - 7,145,310 14,099,538 1,704,628 2,437,649 - 3,773,092 195,500 391,242 604,797 576,113 5,604 2,042 12,093,488 (855,184) 18,842,027 (453,443) 11,238,304 18,388,584 Total 2013 $ 2012 $ 677,404 384,321 3,707,036 3,981,152 4,384,440 4,365,473 (6,853,864) (14,023,111) OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013 Note 32 Financial Risk Management (continued) Financial liability and financial asset maturity analysis Within 1 Year 1 to 5 years Over 5 years Total 2012 $ 2013 $ 2012 $ 2013 $ 2012 $ 2013 $ 2012 $ 2013 $ Consolidated Group Financial liabilities due for payment Bank overdrafts and loans Derivative element of DSLN Trade and other payables Amounts payable to related parties Financial lease liabilities Forward exchange contracts Total contractual outflows Less bank overdrafts Total expected outflows 999,934 - 2,437,649 25,875 300,749 5,604 3,769,811 (855,184) 2,914,627 2013 $ Consolidated Group Financial Assets - cash flows realisable Cash and cash equivalents Trade and other receivables 677,404 3,707,036 14,099,538 3,775,152 - 3,773,092 - - - - - 2,370,224 1,704,628 - 185,037 169,625 206,205 324,105 304,048 252,008 2,042 - - - - - 18,383,814 (453,443) 4,248,825 - 458,213 - 4,074,852 - 17,930,371 4,248,825 458,213 4,074,852 Within 1 Year 1 to 5 years Over 5 years 2012 $ 2013 $ 2012 $ 2013 $ 2012 $ 384,321 3,981,152 - - - - - - - - - Total anticipated inflows 4,384,440 4,365,473 Net (outflow) / inflow on financial instruments 1,469,813 (13,564,898) (4,248,825) (458,213) (4,074,852) Certain financial assets have been pledged as security for debt and their realisation into cash may be restricted subject to terms and conditions attached to the relevant debt contracts. Refer to Note 21(c) for further details. In the above table, the derivative element of the DSLN has been shown at face value due to significant uncertainty regarding the capital appreciation, interest and divdend- triggered entitlement, as disclosed in note 21(b), within the terms and conditions of the instrument without consideration for future cash outflows of interest. c. Market Risk i. Interest rate risk Exposure to interest rate risk arises on financial assets and financial liabilities recognised at the end of the reporting period whereby a future change in interest rates will affect future cash flows or the fair value of fixed rate financial instruments. Interest rate risk is managed using a mix of fixed and floating rate debt. ii. Foreign exchange risk The board and senior management regularly monitor foreign currency movements and has undertaken to use hedging contracts where appropriate to the value of up to 100% of it's US dollar requirements over a maximum 6 week period. Sensitivity Analysis The following table illustrates sensitivities to the Group’s exposures to changes in interest rates, exchange rates and commodity and equity prices. The table indicates the impact on how profit and equity values reported at the end of the reporting period would have been affected by changes in the relevant risk variable that management considers to be reasonably possible. These sensitivities assume that the movement in a particular variable is independent of other variables. Year ended 30 June 2013 +/- 2% in interest rates +/- 5% in $A/$US Year ended 30 June 2012 +/- 2% in interest rates +/- 5% in $A/$US Consolidated Group Profit $ 114,649 278,897 Equity $ 114,649 278,897 325,266 223,285 325,266 223,285 There have been no changes in any of the methods or assumptions used to prepare the above sensitivity analysis from the prior year. Fair Values Fair value estimation The fair values of financial assets and financial liabilities are presented in the following table and can be compared to their carrying amounts as presented in the statement of financial position. Fair value is the amount at which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction. OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013 Note 32 Financial Risk Management (continued) Fair Values (continued) Fair values derived may be based on information that is estimated or subject to judgment, where changes in assumptions may have a material impact on the amounts estimated. Areas of judgment and the assumptions relating to the derivative liability include the discount rate used and the expected term of funding. Where possible, In this valuation information used to calculate fair value is extracted from the market, with more reliable information available from markets that are actively traded. regard, fair values for listed securities are obtained from quoted market bid prices. Where securities are unlisted and no market quotes are available, fair value is obtained using discounted cash flow analysis and other valuation techniques commonly used by market participants. Differences between fair values and carrying amounts of financial instruments with fixed interest rates are due to the change in discount rates being applied by the market since their initial recognition by the Group. Most of these instruments, which are carried at amortised cost (ie term receivables, held-to-maturity assets, loan liabilities), are to be held until maturity and therefore the fair value figures calculated bare little relevance to the Group. Consolidated Group Financial assets Cash and cash equivalents Trade and other receivables Investments in associated entities Total financial assets Financial liabilities Trade and other payables Hire purchase liabilities Derivative liabilities - Forward exchange contracts - Derivative element of DSLN Other related parties Bank overdraft Bank loans Debt element of DSLN Total financial liabilities 2013 2012 Carrying Amount $ Fair Value $ Carrying Amount $ Fair Value $ 677,404 3,707,036 875,027 5,259,467 677,404 3,707,036 875,027 5,259,467 384,321 3,981,152 1,265,903 5,631,376 384,321 3,981,152 1,265,903 5,631,376 2,437,649 531,282 2,437,649 604,797 3,773,092 512,616 3,773,092 576,113 5,604 1,704,628 143,750 855,184 3,919,902 809,473 5,604 1,704,628 143,750 855,184 3,919,902 2,370,224 2,042 - 328,332 453,443 13,646,095 - 2,042 - 328,332 453,443 13,646,095 - 10,407,472 12,041,738 18,715,620 18,779,117 The derivative element of the DSLN of $1,704,628 has been valued using Level 2 inputs in accordance with AASB13 Fair Value Measurement which are included in the terms and conditions of this instrument as disclosed in Note 21(b). The forward exchange derivative liability of $5,064 (2012: $2,042) has been valued using Level 2 inputs in accordance with AASB13 Fair Value Measurement by reference to quoted prices in active markets. There have been no transfers between levels during or since the end of the financial year. Note 33 Reserves a. b. Foreign Currency Translation Reserve The foreign currency translation reserve records exchange differences arising on translation of a foreign controlled subsidiary. Cash Flow Hedge Reserve The hedge reserve records revaluations of items designated as cash flow hedges. Note 34 Company Details The registered office of the company is: Oldfields Holdings Limited 8 Farrow Road, Campbelltown, NSW, 2560 The principal place of business is: Oldfields Holdings Limited 8 Farrow Road, Campbelltown, NSW, 2560 OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES DIRECTORS’ DECLARATION In accordance with a resolution of the directors of Oldfields Holdings Limited, the directors of the company declare that: 1. 2. 3. the financial statements and notes are in accordance with the Corporations Act 2001 and: (a) comply with Accounting Standards, which, as stated in accounting policy note 1 to the financial statements, constitutes compliance with International Financial Reporting Standards (IFRS); and give a true and fair view of the financial position as at 30 June 2013 and of the performance for the year ended on that date of the consolidated group; (b) in the directors' opinion there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable; the directors have been given the declarations required by section 295A of the Corporations Act 2001 from the Chief Executive Officer and Chief Financial Officer. The company and all its wholly-owned subsidiaries have entered into a deed of cross guarantee under which the company and its subsidiaries guarantee the debts of each other. At the date of this declaration, there are reasonable grounds to believe that the companies which are party to this deed of cross guarantee will be able to meet any obligations or liabilities to which they are, or may become subject to, by virtue of the deed. Director Christopher Michael Giles Dated this 29th day of August 2013 Tel: +61 2 9251 4100 Fax: +61 2 9240 9821 www.bdo.com.au Level 11, 1 Margaret St Sydney NSW 2000 Australia INDEPENDENT AUDITOR’S REPORT To the members of Oldfields Holdings Limited Report on the Financial Report We have audited the accompanying financial report of Oldfields Holdings Limited, which comprises the consolidated statement of financial position as at 30 June 2013, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration of the consolidated entity comprising the company and the entities it controlled at the year’s end or from time to time during the financial year. Directors’ Responsibility for the Financial Report The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements comply with International Financial Reporting Standards. Auditor’s Responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance about whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the company’s preparation of the financial report that gives a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. BDO East Coast Partnership ABN 83 236 985 726 is a member of a national association of independent entities which are all members of BDO (Australia) Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO East Coast Partnership and BDO (Australia) Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasmania. Independence In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of Oldfields Holdings Limited, would be in the same terms if given to the directors as at the time of this auditor’s report. Opinion In our opinion: (a) the financial report of Oldfields Holdings Limited is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2013 and of its performance for the year ended on that date; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and (b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 1. Report on the Remuneration Report We have audited the Remuneration Report included in pages 7 to 8 of the directors’ report for the year ended 30 June 2013. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Opinion In our opinion, the Remuneration Report of Oldfields Holdings Limited for the year ended 30 June 2013 complies with section 300A of the Corporations Act 2001. BDO East Coast Partnership Paul Bull Partner Sydney, 29 August 2013 OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES ADDITIONAL INFORMATION FOR LISTED PUBLIC COMPANIES The following information is current as at 30 June 2013: 1. Shareholding a. b. c. Distribution of Shareholders Category (size of holding) 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 – and over The number of shareholdings held in less than marketable parcels is nil. The names of the substantial shareholders listed in the holding company’s register are: Shareholder Randell Management Services Lymgrange/Chris Hext/Nepean Car Dixson Trust Pty Limited Starball/Chiara Mankarios/Man Inv/Tovekin Mr Rodney Boyce Hass Ordinary 68 80 28 85 45 306 Number Redeemable Nil Nil Nil Nil Nil Nil Number Ordinary 39,384,528 4,499,369 4,000,000 3,395,484 3,082,782 Preference Nil Nil Nil Nil Nil d. Voting Rights The voting rights attached to all ordinary shares are as follows: – Each ordinary share is entitled to one vote when a poll is called, otherwise each member present at a meeting or by proxy has one vote on a show of hands. e. 20 Largest Shareholders — Ordinary Shares Name 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. Randell Management Services Lymgrange/Chris Hext/Nepean Car Dixson Trust Pty Limited Starball/Chiara Mankarios/Man Inv/Tovekin Mr Rodney Boyce Hass Ufba Pty Ltd Benger Super/Susan Benger Mr Brian Garfield Benger/Shandora Luton Pty Ltd Dr Gordon Bradley Elkington Mr Warwick Every-Burns & Myall Resources Pty Ltd Mr Christopher Michael Giles Oceanridge Limited Mr Paul John Simpson Locope Pty Ltd Nejeka Pty Ltd The Genuine Snake Oil Company Mr Mark Sheffield Hancock & Sanperez Pty Ltd Number of Ordinary Fully Paid Shares Held 39,384,528 4,499,369 4,000,000 3,395,484 3,082,782 3,000,000 2,355,000 1,795,614 1,579,887 1,527,108 1,500,000 1,450,000 1,400,000 1,350,000 1,200,000 800,000 573,962 527,560 500,000 500,000 74,421,294 % Held of Issued Ordinary Capital 47.93% 5.48% 4.87% 4.13% 3.75% 3.65% 2.87% 2.19% 1.92% 1.86% 1.83% 1.76% 1.70% 1.64% 1.46% 0.97% 0.70% 0.64% 0.61% 0.61% 90.56% 2. 3. 4. 5. The name of the company secretary is Robert Allan Coleman. The address of the principal registered office in Australia is 8 Farrow Road, Campbelltown NSW 2560. Telephone (02) 4627 0777. Registers of securities are held at the following addresses Boardroom Pty Limited Level 7, 207 Kent Street, Sydney NSW 2000 Stock Exchange Listing Quotation has been granted for all the ordinary shares of the company on all Member Exchanges of the Australian Securities Exchange Unquoted Securities There are no unquoted or unissued securities as at 30 June 2013. OLDFIELDS HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 02 000 307 988 CORPORATE GOVERNANCE STATEMENT The board of directors of Oldfields Holdings Limited is committed to high standards of corporate governance and adopts wherever possible the principles outlined in the Corporate Governance Principles and Best Practice Recommendations with 2010 amendments, published by the ASX Corporate Governance Council. The recommendations are written in a principles based fashion and individual boards are able to choose whether to follow the recommended practices or to adopt other practices that are better suited to the individual circumstances of the Group. Given the size and specific circumstances of Oldfields Holdings Limited the Board recognises that some of the best practice recommendations are not suited to obtaining the best shareholder outcomes at the present time. This situation is monitored by the Board and the recommendations will be adopted as and when the Group’s circumstances allow. All relevant best practice recommendations of the ASX Corporate Governance Council have been applied for the financial year ended 30 June 2013 unless specifically disclosed below. Where a recommended practice has not been followed a detailed description of the practices adopted in its stead is provided together with a commentary on how the risks of non-adoption of the recommended practice are mitigated. Recommendation Recommended Practice Oldfields’ Practice Recommendation 1.1 Establish functions reserved for the board and for senior management. The recommended practice is adopted. Recommendation 1.2 Disclose executives. the process for evaluation of senior The recommended practice is adopted. Recommendation 1.3 Provide information indicated in the Guide. The indicated information is provided. Recommendation 2.1 Recommendation 2.2 Recommendation 2.3 Recommendation 2.4 Recommendation 2.5 Recommendation 2.6 the board should be Majority of directors. The chairman should be an independent director. independent The chairman and the CEO should not be the same person. The board should establish a nominations Committee. Disclose the process for evaluation of the performance of the Board, its committees and individual directors. Provide information indicated in the Guide. The majority of the Board is not independent and the risk management process is disclosed. The chairman is not an independent director. The recommended practice is adopted. Nominations are considered by the whole board. The process is disclosed. No formal evaluation was undertaken in the reporting period. The indicated information is provided. Recommendation 3.1 Establish and disclose a code of conduct. The recommended practice is adopted. Recommendation 3.2 Establish a diversity policy. The recommended practice is adopted. Recommendation 3.3 Recommendation 3.4 Adopt measurable diversity targets. Report on the proportion of women. The recommended practice is adopted. The recommended practice is adopted. Recommendation 3.5 Provide information indicated in the guide. The recommended practice is adopted. Recommendation 4.1 The board should establish an audit committee. The recommended practice is adopted. Recommendation 4.2 Recommendation 4.3 The audit committee should be structured to: • consist only of non-executive directors; • consist of a majority of independent directors; • be chaired by an independent chair, who is not chair of the board; and have at least three members. • The audit committee should have a formal charter. is not independent. The committee has only two members, one of whom The committee consists only of non-executive directors and is chaired by an independent chair, who is not chair of the board. The recommended practice is adopted. Recommendation 4.4 Provide the information indicated in the guide. The information is disclosed. Recommendation 5.1 to ensure Establish written policies designed compliance with ASX Listing Rule disclosure requirements and to ensure accountability at a senior executive level for that compliance and disclose those policies or a summary of those policies. The recommended practice policy is disclosed. is adopted. The OLDFIELDS HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 02 000 307 988 CORPORATE GOVERNANCE STATEMENT Recommendation Recommended Practice Oldfields’ Practice Recommendation 5.2 Provide the information indicated in the guide. The information is provided. Recommendation 6.1 Recommendation 6.2 Recommendation 7.1 Recommendation 7.2 Recommendation 7.3 Recommendation 7.4 Recommendation 8.1 Recommendation 8.2 Recommendation 8.3 Recommendation 8.4 Design a communications policy for promoting effective communication with shareholders and encouraging their participation at general meetings and disclose their policy or a summary of that policy. Provide the information indicated in the guide. Establish policies for the oversight and management of material business risks and disclose a summary of those policies. The board should require management to design and implement the risk management and internal control system to manage the Group's material business risks and report to it on whether those risks are being managed effectively. The board should disclose that management has reported to it as to the effectiveness of the Group's management of its material business risks. Companies should establish policies for the oversight and management of material business risks and disclose a summary of those policies. Provide the information indicated in the guide. consists of a majority of independent directors is chaired by an independent chair has at least three members. The board should establish a remuneration committee. The remuneration committee should be structured so that it: • • • Companies should clearly distinguish the structure of non-executive directors’ remuneration from that of executive directors and senior executives. Provide the information indicated in the guide. The recommended practice policy is disclosed. is adopted. The The recommended practice is adopted. The recommended practice is adopted. The Risk Management Statement is disclosed. The recommended practice is adopted. The recommended practice is adopted. The indicated information is provided. The recommended practice is adopted. The committee does not have a majority of independent directors, is chaired by the an independent chair and has only two members. The recommended practice is adopted. The indicated information is provided. Up-to-date information is available on the Group’s website which contains a clearly marked corporate governance section. OLDFIELDS HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 02 000 307 988 CORPORATE GOVERNANCE STATEMENT Principle 1. LAY SOLID FOUNDATIONS FOR MANAGEMENT & OVERSIGHT Recommendation 1.1 – Establish functions reserved for the board and for senior management and disclose those functions. The board of directors are accountable to the shareholders for the performance of the Group. The board sets the strategic direction and delegate’s responsibility for the management of the Group to the chief executive officer. A copy of the Board Charter, which promotes a culture within the Group of accountability, integrity and transparency, is available from the Group’s website. Each board member must, at all times, act honestly, fairly and diligently in all respects in accordance with the Group’s Code of Conduct and all laws that apply to the Group. Key matters reserved for the board include: • • • • • • • • Oversight of the Group, including its control, accountability and compliance systems; Appointment, monitoring, managing performance and if necessary removal of the chief executive officer, chief financial officer and company secretary; Input, assessment, appraisal and final approval of management’s development of corporate strategy and performance objectives; Monitoring risk management; Approving and monitoring the progress of major capital expenditure, capital management and acquisitions and divestitures; Approval and monitoring financial and other reporting; Ensuring the market and shareholders are fully informed of material developments; and Recognising the legitimate interests of stakeholders. The expectations of directors are outlined in a formal Letter of Appointment which details the term of appointment, fees, power and duties and other information pertinent to their roles. Responsibility for the day-to-day management of the Group and its operations is delegated to senior executive management. The expectations of senior executive management are outlined in Board decisions which are communicated to the chief executive officer and recorded in the board minutes and also in the position descriptions and KPI’s for each senior executive role. The board holds a minimum of six formal meetings a year, but usually ten. Additional meetings are held as required. Details of current members of the board are disclosed in the Directors’ Report. Recommendation 1.2 – Disclose the process for evaluation of senior executives. Senior executive management are evaluated each year on their performance against stated objectives, goals and key performance indicators (KPI’s). Overall performance is reviewed by the particular senior executive’s direct supervisor and ultimately by the chief executive officer and/or board of directors. Recommendation 1.3 – Provide information indicated in the Guide to reporting on Principle 1. • • There are no departures from Recommendations 1.1, 1.2 or 1.3; Senior executive performance evaluations have taken place during the reporting period as detailed in Recommendation 1.2. OLDFIELDS HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 02 000 307 988 CORPORATE GOVERNANCE STATEMENT Principle 2. STRUCTURE THE BOARD TO ADD VALUE The board currently has three directors, comprising two non-executive directors, including the chairman, and one executive director. The board has adopted the following principles: • • • The same individual should not exercise the roles of chairman and chief executive officer; The board should not comprise a majority of executive directors; and The board should comprise persons with a broad range of skills and experience appropriate to the needs of the Group. Recommendation 2.1 – Majority of the board should be independent directors. Independent directors are those who are independent of management and free of any business or other relationship that could materially interfere with, or could reasonably be perceived to materially interfere with, the exercise of their unfettered and independent judgment. In assessing the independence of directors, an independent director is a non-executive director and: • • • • Is not a substantial shareholder, as defined in section 9 of the Corporations Act, of the Group or an officer of, or otherwise associated directly with, a substantial shareholder of the Group; Has not within the last three years been employed in an executive capacity by the Group or another group member, and there has been a period of at least three years between ceasing such employment and serving on the board; Has not within the last three years been a principal of a material professional advisor or a material consultant to the Group or another group member, or an employee materially associated with the service provided; and Is not a material supplier or customer of the Group or other group member, or an officer of or otherwise associated directly or indirectly with a material supplier or customer; At the date of this report only Stephen Charles Hooper is an independent director. The following directors do not meet the independence criteria listed above: • • William Lewis Timms: appointed 18th December 2009, currently a non-executive director and substantial shareholder; Christopher Giles: appointed 24th September 2010, currently an executive director and shareholder; and The board manages the risk of having a majority of non-independent directors through the provision of a well-qualified independent chairman, restrictions on trading in shares, restrictions on related party transactions, a close relationship with the principal provider of debt funding and a strong independent audit with a focus on controls. Recommendation 2.2 – The chair should be an independent director. The current chairman, William Lewis Timms is not an independent director. Recommendation 2.3 – The chairman and the CEO should not be the same person. The duties and responsibilities of the Chair and Chief Executive Officer are separate and each position is held by a different individual. Recommendation 2.4 – The board should establish a Nomination Committee. Given the size and requirements of the Group, the board has decided that a nomination committee is not required at this point in time. At present all members of the board consider the composition of the board and appointment of new directors. Recommendation 2.5 – Disclose the process for evaluation of the performance of the board, its committees and individual directors. The board has undergone a significant change in composition during the reporting period and has not completed a formal evaluation process within that period. The chairman performs an informal evaluation of individual directors and also of each board meeting. OLDFIELDS HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 02 000 307 988 CORPORATE GOVERNANCE STATEMENT During the course of the year the following meetings were held and attended: Director Julie Garland McLellan Christopher Michael Giles William Lewis Timms Stephen Charles Hooper Eligible to Attend 10 12 12 2 Meetings Attended 10 12 12 2 Information is supplied to the board in advance of the scheduled board meetings so that each director may make independent assessment of the data and the Board as a whole may discharge its duties effectively. Directors are entitled to seek additional information where considered necessary to make informed decisions. The company secretary supports the board in coordinating the timely completion and dispatch of the board agenda and board papers. The appointment and removal of the company secretary is governed by the board as a whole. Recommendation 2.6 – Provide information recommended in the Guide on Principal 2. • • • • • • • • The skills, experience and relevant position of each director are detailed in the Directors’ Report; The names of the independent and non-executive directors and the materiality threshold are discussed in Recommendation 2.1; Any relationships between a director and the Group which may affect independence are stated in Recommendation 2.1; The Group acknowledges directors require high quality information and advice on which to base their decisions and considerations. All directors have the right to seek advice and clarification from the Group’s auditors, financial and legal advisors on any matter relating to the performance of the Group or the Board; Directors additionally have the right to seek independent professional advice to help them carry out their responsibilities. Expenses will need to be approved in advance by the chairman. If the chairman is unable or unwilling to give approval, then board approval will be sufficient. Any costs incurred will be borne by the Group; The period of office held by each director in office at the date of the Annual Report is disclosed in the Directors’ Report; A performance review as disclosed in Recommendation 2.5 was performed during the reporting period; and Any departures from recommendations relating to Principal 2 have been disclosed in the discussion of the relevant recommendation. Principle 3. PROMOTE ETHICAL AND RESPONSIBLE DECISION – MAKING Recommendation 3.1 – Establish and disclose a Code of Conduct and disclose the code or a summary of the code as to the practices necessary to maintain confidence in the company’s integrity, the practices necessary to take into account their legal obligations and the reasonable expectations of their stakeholders and the responsibility and accountability of individuals for reporting and investigat- ing reports of unethical practices. The board has a code of conduct for directors and Group officers and employees. The key elements of the code are: • • • • • • • Conflicts of interest; Corporate opportunities; Confidentiality; Fair dealing; Protection of assets; Compliance with laws and regulations; and Promotion of ethical and lawful behavior. Recommendation 3.2 – Establish a Diversity Policy and disclose the policy or a summary of that policy. The policy should include requirements for the board to establish measurable objectives for achieving gender diversity for the board to assess annually both the objectives and progress in achieving them. During the year, the board adopted a diversity policy. The policy includes requirements for the board to establish measurable objec- tives for achieving gender diversity for the board to assess annually both the objectives and progress in achieving them. OLDFIELDS HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 02 000 307 988 CORPORATE GOVERNANCE STATEMENT Recommendation 3.3 –Disclose in each annual report the measurable objectives for achieving gender diversity set by the board in accordance with the diversity policy and progress towards achieving them. The current objectives for achieving gender diversity are as follows: Measurable Objectives Progress All job advertisements to specify that Oldfields is an and welcomes equal applications irrespective of the applicants’ gender, race, etc. opportunity employer All shortlists for employment positions in the top three levels of management and for board positions to include at least one female applicant, where possible. All shortlisted applicants to be interviewed by a female as well as a male staff member prior to a final decision on employment, where possible. Develop online diversity training module (including for all discrimination, bullying and harassment) employees by June 14. During the review process for June 2013 it was identified that not all advertisements specified that Oldfields is an equal opportunity employer. It is the Groups intention that all future advertisements will now clearly state that we are an equal opportunity employer. Where possible, shortlisted applicants that have been put forward, included at least one female applicant. The review process identified that applicants are interviewed by a female and male staff member. All staff currently trained through induction face to face and paper based training. Recommendation 3.4 –Disclose in each annual report the proportion of women employees in the whole organisation, women in senior executive positions and women on the board. The current proportion of women as at 30 June 2013 is: full time % part-time % casual % total % female male female female male female female male female female male female Board Senior executive Senior management Line managers Skilled w orkers - - 1 2 3 Administration Staff 10 Distribution staff Shop floor staff TOTAL 6 1 23 1 1 5 12 27 8 4 18 75 - - 17 14 10 56 60 5 23 - - 2 - - 1 - 1 4 2 - - - - 1 - 1 2 - - 100 - - 50 - 50 67 - - - - - 1 - 1 2 - - - - 13 - - 13 26 - - - - - 100 - 7 7 - - 3 2 3 12 6 3 29 3 1 5 12 40 9 4 32 103 - - 38 14 7 57 60 9 22 Recommendation 3.5 - Provide information recommended in the Guide on Principal 3. A copy of the Code of Conduct can be obtained from the Corporate Governance section of the Group’s website. A copy of the Diversity Policy can be obtained from the Corporate Governance section of the Oldfields website. A copy of the Workplace Gender Equality report can be obtained from the Corporate Governance section of the Oldfields website. The proportion of women within the company is disclosed. OLDFIELDS HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 02 000 307 988 CORPORATE GOVERNANCE STATEMENT Principle 4. THE BOARD SAFEGUARDS THE INTEGRITY OF FINANCIAL REPORTING The chief executive officer and the chief financial officer state, in writing, to the board that the Group’s financial reports present a true and fair view, in all material respects, of the Group’s financial position and operational results and are in accordance with relevant accounting standards. Recommendation 4.1 – the board should establish an audit committee. The board has an audit committee, which: • • • Has two members who are non-executive directors; Has a written charter which can be obtained from the Corporate Governance section of the Group’s website; and Includes members who are all financially literate. Details of the members are disclosed in the Director’s Report. The board recognises that an independent audit committee is an important feature of good corporate governance. Recommendation 4.2 – The audit committee should be structured so that it consists only of non-executive directors, consists of a majority of independent directors, is chaired by an independent chair, who is not chair of the board, and has at least three members. The audit committee: • • • consists only of non-executive directors, however all directors are entitled to receive the papers of the committee and to attend meetings of the committee and to meet with the auditors; is chaired by an independent chairman, who is not chair of the board; has two members. Given the size and structure of the board, as discussed in Recommendation 2.1, the board feels that two members both of whom are financially literate, is sufficient at this time. The risk with a small committee is that the members will lack the diversity to raise and recognise issues. Risk is managed through specific working arrangements with the auditors having access to the full board at any time upon their request and through ensuring that the chairman of the audit committee is a well-qualified independent director. It is intended to review this arrangement and adopt the recommended practice if and when the board composition changes. Recommendation 4.3 – Audit committee should have a formal charter. The audit committee has a formal charter, the key elements of the charter are: • • • • • • • Role of the committee; Membership; Meetings; Responsibilities; Authority; Independence; and Non-audit work. The board and audit committee closely monitor the independence of the external auditor. The audit committee meets a minimum of twice a year. The committee also meets in private, with management without the external auditor and, at a separate time, with the external auditor without management. Recommendation 4.4 - Provide information recommended in the Guide on Principal 4. The members of the audit committee are: • • Stephen Charles Hooper (Chairman); and William Lewis Timms. The details of the qualifications of the audit committee members are disclosed in the Directors’ Report. The details of the number of audit committee meetings held are contained in the Directors’ Report. Departures from recommendations included in Principle 4 have been disclosed in the discussion of the relevant recommendations. OLDFIELDS HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 02 000 307 988 CORPORATE GOVERNANCE STATEMENT Principle 5. THE BOARD MAKES TIMELY AND BALANCED DISCLOSURE Recommendation 5.1 – Establish policy on ASX Listing Rule disclosure requirements and ensure accountability at a senior executive level for that compliance and disclose those policies or a summary of those policies. The Group has established procedures to ensure compliance with ASX Listing Rules which require that when an entity becomes aware of any information concerning it that a reasonable person would expect to have a material effect on the price or value of the entity’s securities, the entity must immediately tell ASX that information. A Continuous Disclosure Policy and Procedure has been prepared and is available from the Corporate Governance section of the Group’s website. Recommendation 5.2 - Provide information recommended in the Guide on Principal 5. The information is provided above. Principle 6. RESPECT THE RIGHTS OF SHAREHOLDERS Recommendation 6.1 – Companies should design a communications policy for promoting effective communication with shareholders and encouraging their participation at general meetings and disclose their policy or a summary of that policy. The Group has developed and implemented a shareholder communication strategy. The Group promotes effective communication with shareholders and encourages effective participation at the Group’s general meetings. Shareholders and other parties will be able to access the following information from the Group’s website: • • • • Copies of all announcements given to the ASX; Press releases and copies of letters to shareholders; Copies of annual and half year financial reports; and Details of notices of shareholders meetings including information on general meetings. The requirements of continuous disclosure ensure that the Group discloses relevant information to the shareholders and the market in a timely and full manner. Recommendation 6.2: Companies should provide the information indicated in the Guide to reporting on Principle 6. The Shareholder Communication Strategy is available on the Oldfields website. Principle 7. RECOGNISE AND MANAGE RISK Recommendation 7.1 – Companies should establish policies for the oversight and management of material business risks and disclose a summary of those policies. The board recognises that there are a number of complex operational, commercial, financial and legal risks and has in place procedures to safeguard the Group’s assets and interests. A Work Health and Safety Committee has been established to monitor and recommend changes to safe working practices and a safe working environment. The chairman is not a director, and the committee comprises the managing director, senior executive officers and employee representatives. The board has developed a risk management policy the purpose of which is: • • • • • • • Identify, access, monitor and manage risk; Inform investors of material changes to the Group’s risk profile; Enhance the environment for capitalising on value creation opportunities; Ensure compliance with the Corporations Act; Consider the reasonable expectations of its stakeholders; The measures and procedures in place to comply with these regulations; and How compliance with those measures and procedures will be monitored. A summary of these policies is contained in the Risk Management Statement which is disclosed on the Oldfields website. OLDFIELDS HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 02 000 307 988 CORPORATE GOVERNANCE STATEMENT Recommendation 7.2 – The board should require management to design and implement the risk management and internal control system to manage the Group's material business risks and report to it on whether those risks are being managed effectively. The board should disclose that management has reported to it as to the effectiveness of the Group's management of its material business risks. The Group’s risk management policy is designed and implemented by the board of directors’ which meet regularly to identify all major risks, ensure appropriate risk management plans are in place and to monitor the effectiveness of the implementation of the risk management plans. The chief executive officer and the chief financial officer are required to state in writing to the board that the Group’s risk management and internal compliance and control system is operating effectively and efficiently in all material aspects. In March 2011, the board changed its formal reporting requirement such that each line of business and the corporate head office are required to disclose to the board at each regular meeting a statement regarding the level and nature of the key risks facing the business. Recommendation 7.3 – The board should disclose whether it has received assurance from the chief executive officer (or equivalent) and the chief financial officer (or equivalent) that the declaration provided in accordance with section 295A of the Corporations Act is founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to financial reporting risks. Written declarations are provided each year by the CEO, CFO and company secretary to the board, stating that the Group’s financial reports are based on a sound system of risk oversight and management and internal control. These statements are discussed by the board with the auditor. Recommendation 7.4 - Provide information recommended in the Guide on Principal 7. • • • The board has received written declarations under Recommendation 7.2; The board has received written declarations under Recommendation 7.3; The Risk Management Policy is available on the Group website. Principle 8. REMUNERATE FAIRLY AND RESPONSIBLY Recommendation 8.1 – The board should establish a remuneration committee. The board has established a remuneration committee. The remuneration committee is responsible for developing and recommending to the board: • • • • • • • Remuneration policies for non-executive directors; Remuneration policies for the chief executive officer and chief financial officer; Remuneration policies for executive management; All aspects of any executive share option or acquisition scheme; Superannuation policies; Policies which motivate senior executives to pursue the long term growth and success of the Group; and Policies which show a clear relationship between senior executives’ performance and remuneration. Recommendation 8.2 – The remuneration committee should be structured so that it consists of a majority of independent directors, is chaired by an independent chair, and has at least three members. The board has a remuneration committee which has two members and a documented charter. The members and qualification of the remuneration committee are disclosed in the Directors’ Report. Due to the size and nature of the board as discussed in recommendation 2.1 the following items of recommendation 8.1 are not followed: • • consists of a majority of independent directors; and has at least three members. The remuneration of non-executive directors is by way of director’s fees in the form of cash, non-cash benefits and superannuation benefits. OLDFIELDS HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 02 000 307 988 CORPORATE GOVERNANCE STATEMENT The total annual remuneration paid to non-executive directors may not exceed the limit set by shareholders at the annual general meeting. Non-executive directors do not receive options unless approved by shareholders. Recommendation 8.3 - Companies should clearly distinguish the structure of non-executive directors’ remuneration from that of executive directors and senior executives. The Group has clearly differentiated the remuneration structure of executive and non-executive directors. The key elements of the remuneration philosophy are disclosed in the Remuneration Committee Charter which is available on the Oldfields website. Recommendation 8.4: Companies should provide the information indicated in the Guide to reporting on Principle 8. • • • • The members of the remuneration committee and their attendance at meetings are disclosed in the Directors’ Report; Non-executive directors are not provided with retirement benefits other than superannuation; A copy of the Remuneration Committee Charter can be obtained from the Group’s web site; and Departures from recommendations included in Principle 8 have been disclosed in the discussion of the relevant recommendations. OLDFIELDS HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 02 000 307 988 RISK MANAGEMENT STATEMENT 1. Introduction This statement provides an overview of the Group's risk management policies and internal compliance and control systems in accordance with Principle 7 of the ASX Principles of Good Corporate Governance. 2. Responsibility The board of directors are responsible for oversight on a regular basis of the Group's procedures and risk management policies. The responsibility of the board is codified under the Board Charter, which is available on the Group’s website. The Group also has an audit committee, the responsibilities of which are documented in the Audit Committee Charter which is also available on the Group’s website. 3. Risk Management Monitoring The board has implemented a combination of internal policies and procedures and use of external audits to monitor risk management and its effectiveness. 3.1. Standard Operating Procedures (SOP's) The board has implemented risk management policies covering areas of business risk such as: • • • • • Work health and safety; Finance and treasury; Human resources; Asset protection (insurance); and Codes of conduct. The policies referred to are regularly reviewed and an internal mechanism exists whereby the board and committee members have access to these reports on an internal intranet site. The board manages these risks appropriately with reference to identification, implementation and review of these risks and procedures. 3.2. External Audits The external audit of the Group is conducted annually. There is also a formal review at least once every year. Both the audit and review are conducted by an external auditor. The Group has a Work Health and Safety Committee which has received training and certification by external OH&S providers. The Group engages with qualified external advisors annually in relation to asset protection. Where possible the board adopts the most practical and affordable insurance policies suitable to protect major assets of the Group. In general an external qualified auditor and or valuers are engaged by the board in determining large asset values on acquisition of assets. An external valuation is obtained to determine and verify carrying values of investment property by an external independent registered property valuer at least every three years. 3.3. Risk Management Statements The integrity of the Group's financial reports relies on sound business and risk control systems. Annually, the chief executive officer (CEO) and the chief financial officer (CFO) are required to sign a Risk Management Statement that is provided to the audit committee in writing. The CEO and CFO sign a statement regarding the adequacy of financial controls in accordance with section 295a of the Corporations Act 2001. The board requires management to report on the key business risks for each area of the business at each board meeting. 3.4 Internal Audit Given the Group's size, an internal auditor is not practical. In addition the presence of executive directors on the board allows for detailed oversight of risks within each business by managers who are familiar with the risk environment but not directly involved in the management of that particular business. OLDFIELDS HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 02 000 307 988 RISK MANAGEMENT STATEMENT 3.5 External Covenants The Group has voluntarily associated itself with the following self-regulated authorities: • • WGE (Workplace Gender Equality Act): The Group reports annually on targets and policy to an external agency in regards to Equal Opportunity Guidelines and Policy within the work force. The board receives and reviews this annually; and Australian Packaging Covenant: The Group sets targets to reduce packaging waste and environmental impact of packaging waste. Targets are set and guidelines adopted and where possible administered by management. The board reviews these targets annually. The Group has also entered into an agreement with its principal lender (Westpac Banking Corporation) which provides external overview of financial risks by a representative of the bank. 4. Formal Risk Management Practices The Group operates a formal process for risk management which includes: • • • • • • Risk identification; Risk analysis; Risk evaluation; Risk mitigation; Risk monitoring and reporting; and Risk communication. The risk management process meets appropriate professional standards and is reviewed annually by the board of directors. The process meets, but is not limited to the requirements of Principle 7 of the ASX Principles for Good Corporate Governance. 5. Risk Reporting and Communication Risks are reported and their monitoring and management are communicated in accordance with the diagram below: Material Risks General Reporting Accountabilities Direct risk response or accept material risk Review and approve strategies or accept risk risk mitigation Oversight of framework and sufficiency of reporting Board of Directors Implement risk response or escalate to board of directors Review and approve risk reporting and mitigation strategies Oversight of corporate risks and adequacy of framework Chief Executive Officer (CEO) Recommend material risk escalation to CEO or board of directors Consolidate risk assessments and prepare summary reporting Implement and monitor ERM framework and ERM system Chief Financial Officer (CFO) Identify and report material risks as they arise Prepare risk assessments in accordance with ERM framework Operationally manage risks and escalate issues Finance Department Communication Effective risk management is reliant on the timely and open communication of actual or potential risk events across the organisation. Free and frank communication is at the heart of the Group's risk management approach, and where the processes and accountabilities described in these standards may not support a suitably rapid response to any risk, then communication should be undertaken using whatever means to achieve the best outcome for the Group. For the avoidance of doubt, Oldfields Holdings Limited has a policy of ‘not shooting the messenger’ and encourages all staff to report risks of which they are aware. 

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