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2023 ReportANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2014 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 2014 OLDFIELDS HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN: 92 000 307 988 Financial Report For The Year Ended 30 June 2014 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 2 9 10 11 12 13 14 45 46 48 50 60 OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES APPENDIX 4E - FINANCIAL REPORT FOR THE YEAR ENDING 30 JUNE 2014 Results for announcement to the market Comparative period: Year ending 30 June 2013 Revenue from continuing operations Earnings before interest, taxes, depreciation and amortisation Profit/(loss) after tax Profit/(loss) after tax attributable to members of the parent entity Dividends No dividends have been paid or proposed during the year. 30-Jun-14 $'000 27,231 777 (2,576) (2,715) 30-Jun-13 $'000 26,644 929 4,640 4,487 % change 2.20% -16.29% N/A N/A Up Down Down Down Statement of profit and loss and other comprehensive income with notes to the statement Refer to page 11 of the 30 June 2014 financial report and accompanying notes for Oldfields Holdings Limited. Statement of financial position with notes to the statement Refer to page 12 of the 30 June 2014 financial report and accompanying notes for Oldfields Holdings Limited. Statement of changes in equity with notes to the statement Refer to page 13 of the 30 June 2014 financial report and accompanying notes for Oldfields Holdings Limited. Statement of cash flows with notes to the statement Refer to page 14 of the 30 June 2014 financial report and accompanying notes for Oldfields Holdings Limited. 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” section included within the directors’ report. Net tangible assets per share Net Assets Net Assets (cents per share) Net Tangible Assets Net Tangible Assets (cents per share) Investment in associates and joint ventures Material investments in associates and joint ventures are as follows: PT Ace Oldfields Enduring Enterprises Honeytree & Partners 30-Jun-14 $'000 30-Jun-13 $'000 6,042 7.35 4,997 6.08 7,634 9.29 6,458 7.86 % change Down -20.85% Down -22.62% Contribution to Result 30-Jun-14 $'000 151.6 (37.6) (5.1) 30-Jun-13 $'000 35.7 (48.9) 15.2 Percentage Held 30-Jun-14 30-Jun-13 0% 0% 0% 34% 34% 34% The Group disposed of it's share in the above investments on 10 March 2014. Refer to note 14 for details. Audit status The 30 June 2014 financial report and accompanying notes for Oldfields Holdings Limited and Controlled Entities have been audited. Refer to page 46 of the 30 June 2014 financial report and accompanying notes for Oldfields Holdings Limited. Gregory John Park (Company Secretary) Dated: 29-August-2014 1 OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES DIRECTORS' REPORT Your directors present their report on the consolidated entity (referred to herein as the Group) consisting of Oldfields Holdings Limited and its controlled entities for the financial year ended 30 June 2014. Directors The following persons were directors of Oldfields Holdings Limited during or since the end of the financial year up to the date of this report: Tony Joseph Grima (appointed 14/10/2013) William Lewis Timms Stephen Charles Hooper Christopher Michael Giles (resigned 30/04/2014) Principal Activities The principal activities of the consolidated group during the financial year were: ─ ─ ─ ─ manufacturing, importing and marketing of paint brushes, paint rollers, painters tools and accessories; manufacturing and marketing garden sheds, outdoor storage systems, avaries and pet homes; manufacturing and marketing of scaffolding and related equipment; and hire of scaffolding and related products. A large majority of our operations are conducted in Australia. Significant Changes to Activities There were no significant changes in the nature of the consolidated group's principal activities during the financial year. Operating Results The consolidated group revenue from continuing operations for the financial year ended 30 June 2014 was $27,230,905 (2013: $26,644,174) which was up 2.2% from prior year. The revenue increase was driven by both the scaffolding and paint equipment divisions and was primarily due to an increase in the building and construction industry which is expected to continue in 2015. The consolidated group net profit after tax was a loss of $2,575,835 (2013: profit of $4,639,752). The 2013 profit was attributable to other income of $5.5 million which related to the buy-back of senior debt. Gross profit (including depreciation and amortisation) decreased from 46.5% in 2013 to 44.8% in 2014 due to intense competition across all divisions, as well as cost increases from suppliers in Asia that were driven by labour increases in that region. The consolidated earnings before interest, taxes, depreciation and amortisation (EBITDA) excluding the one-off debt buy-back and gains/losses from the disposal of associated companies, decreased from $929,720 in 2013 to $777,396 in 2014. While not to expectation, the result reflects investments made in improving in-store presence in key national hardware retailers, launching new products to the paint specialist market and increasing awareness to improve revenue generation and growth in the scaffold division. These initiatives will continue in 2015 and are expected to support future growth of the business. Net cash provided by operating activities was $655,927 in 2014, compared to $1,064,247 in 2013. Improving operating cashflow continues to be a major focus for the group with increased emphasis on improving sales margins and reducing inventory levels in 2015. Statement of Profit and Loss Sales revenue Gross profit (before depreciation and amortisation) Operating expenses (before depreciation and amortisation) Other income Share of net profits of associated companies 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 disposal of associated companies *** Loss for the year from discontinued operations after tax Net profit/(loss) for the year Net cash provided by operating activities Loss per share (cents) ** Net assets per share (cents) 2014 $000's 27,231 12,812 (12,174) 30 109 777 (1,168) (391) (469) (147) (205) (1,212) 2013 $000's 26,644 12,969 (12,219) 177 2 929 (1,034) (106) (513) (167) (98) (884) - 5,500 (1,363) - (2,576) 656 (1.65) 7.35 23 - 4,640 1,064 (1.46) 9.29 Change % 2.2% -1.2% -0.4% -82.9% 5196.7% -16.3% 13.0% N/A -8.6% -11.8% 109.7% 37.2% N/A N/A N/A N/A -38.4% 13.0% -20.9% 2012 $000's 28,833 13,938 (13,308) 213 30 873 (1,089) (216) (1,328) (139) - (1,682) - - (61) (1,744) 114 (3.24) 1.34 * Calculations above are before the loss on disposal of associated companies, the one-off $5.5million debt buy back in 2013 and the revaluation of the derivative element of the deferred senior loan note ** Calculations of loss per share are based on the loss after tax from continuing operations attributable to the parent entity and a weighted average number of shares (refer note 9). The calculation for 2014 excludes the on-off $1.3million loss on disposal from associated companies and the calculation for 2013 excludes the one-off $5.5million debt buy-back. *** The loss for the year from disposal of associated companies includes recycled amounts from the foreign currency translation reserve of $1,445,360. 2 OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES DIRECTORS' REPORT Review of Operations (i) Consumer Products - Paint Equipment Division Revenue for the paint equipment division increased compared with the prior year. While benefiting from the changing landscape in the hardware retail market, revenue in the more traditional paint specialist market has declined. As the overall market shifts and competition intensifies, there is a renewed focus on differentiated products to ensure key customers can compete with their competitors while still maintaining a point of difference. With such changes in the overall market and the resulting variation in customer mix, the paint equipment division has experienced added pressure to maintain gross margins. As part of an ongoing review of operations, the Group disposed of it's remaining interest in the associated companies, PT Ace Oldfields, Enduring Enterprises and Honeytree and Partners, being the manufacturing arm of the paint equipment division. The Group is currently working towards formalising a strategic supplier agreement which will continue to provide market leadership into the future. The paint equipment division has spent the last twelve months consolidating, upgrading and rationalising it's range of products with the process of re-branding and repackaging near completion. Improvements have also been made to ensure that the supply chain is efficient, customer expectations are met, lead times are improved and inventory controls are enhanced in order to satisfy growing demand. The division is now focused on innovation, becoming the brand of choice in the market, best in class customer service, and improving internal business processes. In addition, by capitalising on the experience of recent new staff appointments, this division is well positioned to grow in the coming year. (ii) Consumer Products - Garden Sheds Division The garden shed division declined in 2014 which was predominately in the domestic market. Revenue growth in international markets remained strong with continued focus on new opportunities to expand our product offering. Efforts to grow domestically and generate additional revenue and profitability will continue in 2015. Potential growth opportunities are already being investigated which capitalise on relationships with customers of other divisions in order to further develop synergies across the group. (iii) Scaffolding Division A general increase in the building and construction industry supported the growth in the scaffold division in 2014 as revenues increased compared to the previous year. Despite a slight decrease in gross margins caused by intense competition, the scaffold division significantly improved it's EBITDA in 2014 through better labour utilisation on scaffolding services and other overhead reductions. The scaffold division is currently in the process of consolidating and relocating a number of its branches in order to further reduce costs, improve efficiency levels, In addition, newer buildings have been selected in highly populated areas to renew the and be better positioned in areas of building and construction growth. division’s image, encourage growth, and enhance brand recognition for the Group. The manufacturing operation in China continued to operate strongly during the year and will continue to support the expected growth of this division in 2015. International sales increased by 34% compared with the prior year, as customers in Japan and New Zealand expand. This is expected to continue in 2015 and new growth opportunities are also being investigated. Financial Position The net assets of the Group have decreased by $1,592,060 from $7,634,415 at 30 June 2013 to $6,042,355 at 30 June 2014. This decrease has largely resulted from the following factors: ─ ─ the disposal of the Group's interest in associated companies valued at $875,027 as at 30 June 2013; and a net loss from operations. A key area of focus for 2015 will be to reduce inventory levels back to sustainable levels as well as a concentration on profitable growth opportunities to improve the net asset position of the Group. Significant Changes in State of Affairs The following significant changes in the state of affairs of the Group occurred during the financial year: On 10 March 2014, the Group disposed it's interest in associated companies, being PT Ace Oldfields, Enduring Enterprises and Honeytree and Partners. Consideration received in relation to this sale was $827,932 and will be received in the form of an offset of trade payables owing to the associated companies over a period of approximately 12 months. The gain on disposal of these shares was $81,979. In accordance with Australian Accounting Standards, the foreign currency translation reserve (FCTR) was recycled through profit or loss on disposal of these investments. The amount recycled was a loss of $1,445,360 and hence the net disposal amounted to a loss of $1,363,381. Subsequent to year end, the Group entered into an arrangement with it's bank for the repayment of a portion of the proceeds on disposal of associated companies to commence from 1 January 2015. Repayments will be made in eight monthly instalments of $75,000. Events after the Reporting Period There have been no significant events after the end of the reporting period. Environmental Issues The Group’s operations are not subject to significant environmental regulation 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. 3 OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES DIRECTORS' REPORT Future Developments, Prospects and Business Strategies Capitalising on the expected upturn in the building and construction industry continues to be a primary focus for the Group in 2015 with a concentration on sustainable and profitable growth across all divisions. The Group will continue to invest it's resources in ensuring that it is well positioned to benefit from the growth in this sector. Over the last 12 months, the management team have recently revisited and realigned the Group’s strategic direction for the future. As part of this process, the Group’s mission statement has been remodelled, new key financial measures have been identified, and key strategies for growth have been developed. In addition, four strategic pillars have been developed as part of the Group’s remodelled mission statement that aim to provide focus and direction going forward. These pillars are centered on; ─ Building profitable growth and driving innovation to the market by; Developing a new pipeline of business opportunities which equally grow revenue and margin levels; Developing a new innovation process and investigating potential new product lines; Expanding distribution networks in regional areas within the scaffold division; Identifying and developing a concise plan to grow the garden sheds division; Repositioning and strengthening the Oldfields brand; and Expanding distribution into growing markets internationally across all divisions. ─ Developing and investing in people and continuing to build a market leading culture by; Incorporating the Group’s mission statement and strategic pillars into recruitment processes, training programs, performance management procedures, talent and succession plans and remuneration reviews; Developing and renewing leadership capabilities across all divisions; and The development and rollout of an employee engagement program which aims to improve productivity, inspire and motivate employees, and promote goal congruence. ─ Improving on and ensuring that all areas of supply chain management are efficient by; Ensuring adequate stock levels are maintained to meet customer demand and customer satisfaction levels remain high; Reviewing and selecting key strategic suppliers; Reviewing and negotiating prices in order to reduce inventory costs and improve margins; Implementing sales and operational planning to optimise working capital and cash flow management; Developing and implementing a process of benchmarking scaffold branches to drive improvements; Continuing the review and optimising of scaffold branch locations; and Developing and implementing ongoing efficiency and cost reduction programs. ─ Improving mission-critical processes and systems by; Identifying and improving key business processes and functions; and Developing and implementing new reporting standards across all divisions. Each of these pillars will be supported by financial and operational measures to track the Group’s progress of these initiatives and monitor their success. The management team and the Board are excited about the Group’s future prospects and feel confident that these initiatives will improve the group’s results in 2015 and beyond. Due to the present uncertainty in world markets, it is not possible at this stage to predict future results of these operations. Information relating to Directors and Company Secretary Tony Joseph Grima 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 Christopher Michael Giles Qualifications Experience Interest in Shares and Options Company Secretary — — — — — — — — — — — — — — — — — — Executive Director and Chief Executive Officer (appointed 14 October 2013) Master of Commerce (Marketing) 15 years experience in general management roles in a large Fortune 500 company, both within Australia and overseas, with a number of years experience in the building products industry. 100,000 shares held Non-executive Director and Chairman (appointed 18 December 2009) Bachelor of Business (Accounting and Audit), Real Estate and Business Agent. 28 years experience in accounting, taxation and audit, 21 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 21 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 Executive Director and Chief Executive Officer (resigned 30 April 2014) Bachelor of Commerce, CPA 26 years experience in senior financial and general management roles in the fast moving consumer goods industry. 1,160,000 shares held Gregory John Park — Bachelor of Business, CA. Gregory was appointed as the Chief Financial Officer and Company Secretary on 28 April 2014. Gregory has more than 20 years experience in senior financial and general management roles in retailing, manufacturing and distribution in the fast moving consumer goods industry. Robert Allan Coleman - Bachelor of Commerce (Accounting), CPA. Resigned 9 January 2014. 4 OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES DIRECTORS' REPORT Meetings of Directors During the financial year, 14 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 9 11 11 9 Number eligible to attend 9 11 11 9 Number eligible to attend Number eligible to attend Number eligible to attend Number eligible to attend 1 2 2 2 1 2 2 2 - 1 1 - - 1 1 - Tony Joseph Grima (appointed 14 October 2014) William Lewis Timms Stephen Charles Hooper Christopher Michael Giles (resigned 30 April 2014) Dividends Paid or Recommended At this stage, the directors have not paid or declared payment of a dividend during or since the end of the financial year. Indemnifying Officers 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. 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. 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: Taxation and other services Auditor’s Independence Declaration The lead auditor’s independence declaration for the year ended 30 June 2014 has been received. Options At the date of this report, there were no unissued ordinary shares of Oldfields Holdings Limited under options. 2014 $ 2013 $ 18,725 26,080 5 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 it's 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. 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 biannually 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 high calibre executives and reward them for performance results leading to long-term growth in shareholder wealth. KMP receive at a minimum, a superannuation guarantee contribution required by the government, which is currently 9.25% (9.5% from 1 July 2014) of the individual's average weekly ordinary time earnings (AWOTE). 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 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. Position Held as at 30 June 2014 and any change during the year Contract details (duration & termination) Group Key Management Personnel Tony Joseph Grima William Lewis Timms Stephen Charles Hooper Christopher Michael Giles Robert Allan Coleman Gregory John Park Executive Director, appointed 14 October 2014 Non-executive Director Non-executive Director Executive Director, resigned 30 April 2014 Company Secretary and CFO, resigned 9 January 2014 Company Secretary and CFO, appointed 28 April 2014 Duration & termination unspecified. Duration & termination unspecified. Duration & termination unspecified. Duration & termination unspecified. Duration & termination unspecified. Duration & termination unspecified. 6 OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES DIRECTORS' REPORT AUDITED REMUNERATION REPORT (CONTINUED) Employment Details of Members of Key Management Personnel (continued) Proportions of elements of remuneration related to performance Shares/ Units % Non-salary cash based incentives Options/ Rights % Group Key Management Personnel Tony Joseph Grima William Lewis Timms Stephen Charles Hooper Christopher Michael Giles Robert Allan Coleman Gregory John Park - - - - - - - - - - - - Proportions of elements of remuneration not related to performance Fixed Salary/Fees % Total % - - - - - - 100 100 100 100 100 100 100 100 100 100 100 100 The employment terms and conditions of all KMP are formalised in contracts of employment. There are no pre-defined termination benefits payable to key management personnel, other than previously accrued leave entitlements. A period of at least 3 months notice is generally required to be given on termination of all key management personnel. Changes in Directors and Executives On 30 April 2014, Christopher Michael Giles resigned as a Director. On 14 October 2013, Tony Joseph Grima commenced as a Director. On 9 January 2014, Robert Allan Coleman resigned from the position of Company Secretary and Chief Financial Officer. On 28 April 2014, Gregory John Park commenced as Company Secretary and Chief Financial Officer. Remuneration Expense Details for the Year Ended 30 June 2014 The following table of benefits and payments represents the components of the current year and comparative year remuneration expenses for each member of KMP of the consolidated group. Such amounts have been calculated in accordance with Australian Accounting Standards: Table of Benefits and Payments for the year ended 30 June 2014 2014 Group Key Management Personnel Tony Joseph Grima William Lewis Timms Stephen Charles Hooper Christopher Michael Giles Robert Allan Coleman Gregory John Park Total KMP 2013 Group Key Management Personnel Tony Joseph Grima William Lewis Timms Stephen Charles Hooper Christopher Michael Giles Robert Allan Coleman Gregory John Park Julie Garland McLellan Raymond John Titman Total KMP Short-term benefits Post Employment Benefits Long-term benefits Termination benefits Total Salary, Fees and Leave $ Non-monetary $ Pension and superannuation $ LSL $ $ $ 146,411 60,000 45,872 150,790 119,288 29,361 551,722 7,280 - - 10,891 9,310 - 27,481 13,543 5,550 4,243 11,084 9,544 2,716 46,680 - - - - - - - - - - - - - - 167,234 65,550 50,115 172,765 138,142 32,077 625,883 Short-term benefits Salary, Fees and Leave $ Non-monetary $ Post Employment Benefits Pension and superannuation $ Long-term benefits Termination benefits Total LSL $ $ $ - 41,245 3,823 200,000 160,000 - 80,885 1,490 487,443 - - - 6,922 14,774 - - - 21,696 - 3,712 344 18,000 14,400 - 8,987 - 45,443 - - - - - - - 12,911 12,911 - - - - - - - 63,158 63,158 - 44,957 4,167 224,922 189,174 - 89,872 77,559 630,651 7 OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES DIRECTORS' REPORT AUDITED REMUNERATION REPORT (CONTINUED) Securities Received that are not Performance Related No members of KMP are entitled to receive securities that are not performance-based as part of their remuneration package. Cash Bonuses, Performance-Related Bonuses and Share-based Payments There were no cash bonuses, performance-related bonuses or share-based payments made to key management personnel during the year. Options and Rights Granted as Remuneration There were no options or rights granted as remuneration 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: Tony Joseph Grima William Lewis Timms Stephen Charles Hooper Christopher Michael Giles Robert Allan Coleman Gregory John Park Balance at Beginning of Year - 39,384,528 - 1,400,000 - - 40,784,528 Granted as Remuneration during the Year Issued on Exercise of Options during the Year Other Charges during the Year Balance at End of Year - - - - - - - - - - - - - - 100,000 - - (240,000) - - (140,000) 100,000 39,384,528 - 1,160,000 - - 40,644,528 Other transactions with KMP and/or their related parties There were no other transactions conducted between the Group and KMP or their related parties, other than those disclosed above relating to equity, compensation and loans, that were conducted other than in accordance with normal employee, customer or supplier relationships on terms no more favourable than those reasonably expected under arm’s length dealings with unrelated persons. END OF AUDITED REMUNERATION REPORT This Directors’ Report, incorporating the Remuneration Report, is signed in accordance with a resolution of the Board of Directors. Tony Joseph Grima Dated: 29-August-2014 8 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 2014, I declare that, to the best of my knowledge and belief, there have been: 1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and 2. No contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of Oldfields Holdings Limited and the entities it controlled during the period. Paul Bull Partner BDO East Coast Partnership Sydney, 29 August 2014 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. 9 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 2014 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 Share of net profits of associated companies (Loss)/gain on disposal of investment in associated companies (Loss)/profit before income tax Tax expense Net (loss)/profit for the year Other comprehensive income: Fair value loss 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 (loss)/income for the year Net (loss) profit attributable to: Members of the parent entity Non-controlling interest Total comprehensive (loss)/income attributable to: Members of the parent entity Non-controlling interest Note 3 3 14 4 5 5c 5c Consolidated Group 2014 2013 $ $ 26,644,174 27,230,905 (15,026,856) (14,246,765) 12,204,049 30,251 (7,923,428) (563,461) (1,416,393) (2,815,937) (484,505) (204,555) 108,953 (1,363,381) (2,428,407) 12,397,409 5,683,583 (8,134,875) (405,159) (1,372,407) (2,765,059) (524,584) (97,553) 2,057 23,410 4,806,822 (147,427) (167,070) (2,575,834) 4,639,752 (7,749) (235,324) (3,562) (34,164) (243,073) (37,726) (2,818,907) 4,602,026 (2,714,793) 138,959 4,486,972 152,780 (2,575,834) 4,639,752 (2,957,866) 138,959 4,449,246 152,780 (2,818,907) 4,602,026 Cents Cents (Loss)/Earnings per share for the year attributable to members of the parent entity: From continuing operations: Basic (loss)/earnings per share Diluted (loss)/earnings per share 9 9 (3.31) (3.31) 6.45 6.45 The accompanying notes form part of these financial statements. 10 OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2014 Consolidated Group 2014 $ 2013 $ Note 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 Derivative liability TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES Borrowings Derivative liability Deferred tax liabilities Long-term provisions TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Issued capital Reserves Accumulated loss Parent interest Non-controlling interest TOTAL EQUITY The accompanying notes form part of these financial statements. 10 11 12 13 21 14 16 17 21 18 19 20 22 19 22 21 20 23 373,252 3,304,666 4,811,624 769,399 91,392 9,350,333 677,404 3,622,227 4,047,827 371,300 42,439 8,761,197 - 7,470,354 1,045,512 43,822 8,559,688 875,027 8,221,565 1,176,699 32,540 10,305,831 17,910,021 19,067,028 2,926,131 971,663 1,015,871 13,353 4,927,018 4,876,726 1,909,183 95,462 59,277 6,940,648 2,437,649 1,261,216 938,269 5,604 4,642,738 4,998,375 1,704,628 51,054 35,818 6,789,875 11,867,666 11,432,613 6,042,355 7,634,415 21,106,101 (39,574) (15,463,307) 5,603,220 21,176,101 (1,241,861) (12,748,513) 7,185,727 439,135 448,688 6,042,355 7,634,415 11 OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2014 Consolidated Group Balance at 1 July 2012 Profit for the year Other comprehensive loss for the year Transactions with owners, in their capacity as owners, and other transfers: Shares issued during the year Transaction costs Dividends recognised for the year Balance at 30 June 2013 Balance at 1 July 2013 (Loss)/profit for the year Other comprehensive loss for the year Transactions with owners, in their capacity as owners, and other transfers: Transaction costs relating to prior year share issue Dividends recognised for the year Realisation of foreign exchange differences on disposal of associated companies Note Issued Capital Retained Earnings Cash Flow Hedge Reserve $ $ $ Foreign Currency Translation Reserve $ Subtotal Non- controlling interests Total $ $ $ 18,751,301 (17,235,485) (2,042) (1,202,093) 311,681 444,420 756,101 - - 4,486,972 - - (3,562) - (34,164) 4,486,972 (37,726) 152,780 - 4,639,752 (37,726) 2,613,259 (188,459) - - - - - - - - - - 2,613,259 (188,459) - - - (148,512) 2,613,259 (188,459) (148,512) 21,176,101 (12,748,513) (5,604) (1,236,257) 7,185,727 448,688 7,634,415 21,176,101 (12,748,513) (5,604) (1,236,257) 7,185,727 448,688 7,634,415 - - (2,714,793) - - (7,749) - (235,324) (2,714,793) (243,073) 138,959 - (2,575,834) (243,073) (70,000) - - - - - - - - - - 1,445,360 (70,000) - 1,445,360 - (148,512) - (70,000) (148,512) 1,445,360 8 8 Balance at 30 June 2014 21,106,101 (15,463,306) (13,353) (26,221) 5,603,221 439,135 6,042,356 The accompanying notes form part of these financial statements. 12 OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2014 CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers Interest 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 investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of shares Proceeds from borrowings Payments relating to issue of additional shares Repayment of borrowings Loans from related parties - payments made - proceeds from borrowings Dividends paid by controlled entities to non-controlling interests Net cash used in financing activities Net decrease in cash held Cash and cash equivalents at beginning of financial year Note Consolidated Group 2014 2013 $ $ 29,984,624 228 (28,862,269) (343,549) (163,253) (2,172) 42,318 655,927 29,620,391 7,576 (28,235,358) (365,386) (145,144) (7,410) 189,578 1,064,247 27a 179,985 (411,040) - (231,055) - 359,280 (70,000) (632,868) (202,172) 200,000 (148,512) (494,272) 253,643 (485,823) (77,887) (310,067) 2,613,259 484,173 (188,459) (3,462,307) (160,992) - (148,512) (862,838) (69,400) (108,658) (177,780) (69,122) Cash and cash equivalents at end of financial year 10 (247,180) (177,780) The accompanying notes form part of these financial statements. 13 OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 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 2014 by the directors of the company. Note 1 Summary of Significant Accounting Policies Basis of Preparation These general purpose financial statements have been prepared in accordance with the Corporations Act 2001, Australian Accounting Standards and Interpretations of the Australian Accounting Standards Board and International Financial Reporting Standards as issued by the International Accounting Standards Board. The Group is a for- profit entity for financial reporting purposes under Australian Accounting Standards. Material accounting policies adopted in the preparation of these 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 it's subsidiaries guarantee the debts of each other. Going Concern As disclosed in the consolidated financial statements, the group generated a loss after tax of $2,575,834 for the year ended 30 June 2014. The group also breached a banking covenant during the year for which a waiver was obtained. Subsequent to year end, the Group renegotiated its covenants and repayment requirements with it's bankers (refer note 19). The combination of these circumstances represents a material uncertainty that may cast significant doubt upon the group's ability to continue as a going concern. The consolidated financial report does not include any adjustments relating to the amounts or classification of recorded assets or liabilities that might be necessary if the group is unable to continue as a going concern. Nevertheless, the Directors are confident that the group will be able to continue as a going concern and that it is appropriate to adopt the going concern basis in the preparation of the consolidated financial report for the following reasons: — — The group anticipates revenue growth over the next 12 months and has already begun implementing a strategic plan to achieve these objectives; Within the paint equipment division, inventory significantly increased during the year ensuring continuity of supply, particularly to a major customer undergoing strong growth. The projected return to normal inventory requirements over the coming year will free up working capital; The sale of the investment in the associate, PT Ace Oldfields, was in consideration for inventory. Hence, as the inventory is sold down it will be ultimately converted into cash and will assist with working capital liquidity; Revisions to arrangements with key suppliers and customers have been made to align terms of trade with the operating cycle of the group; and The forecast for 2015 suggests cash flows from operations will be positive and that renegotiated covenant terms and repayments will be met. — — — (a) Principles of Consolidation The consolidated financial statements incorporate all of the assets, liabilities and results of Oldfields Holdings Limited and all of the subsidiaries (including any structured entities). Subsidiaries are entities the Parent controls. The Parent controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. A list of the subsidiaries is provided in Note 15. The assets, liabilities and results of all subsidiaries are fully consolidated into the financial statements of the Group from the date on which control is obtained by the Group. The consolidation of a subsidiary is discontinued from the date that control ceases. Inter-company transactions, balances and unrealised gains or losses on transactions between Group entities are fully eliminated on consolidation. Accounting policies of subsidiaries have been changed and adjustments made where necessary to ensure uniformity of the accounting policies adopted by the Group. Equity interests in a subsidiary not attributable, directly or indirectly, to the Group are presented as ‘Non-controlling Interests’. The Group initially recognises non- controlling interests that are present ownership interests in subsidiaries and are entitled to a proportionate share of the subsidiary’s net assets on liquidation at either fair value or at the non-controlling interests’ proportionate share of the subsidiary’s net assets. Subsequent to initial recognition, non-controlling interests are attributed their share of profit or loss and each component of other comprehensive income. Non-controlling interests are shown separately within the equity section of the statement of financial position and statement of profit or loss and other comprehensive income. 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, other than those associated with the issue of a financial instrument, are recognised as expenses in the profit or loss and other comprehensive income statement when incurred. The acquisition of a business may result in the recognition of goodwill or a gain from a bargain purchase. 14 OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 Note 1 Summary of Significant Accounting Policies (continued) (a) Principles of Consolidation (continued) 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 (determined under either the full goodwill or proportionate interest method); and (iii) the acquisition date fair value of any previously held equity interest; over the acquisition date fair value of net identifiable assets acquired. 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. (b) (c) 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 that do not result in a loss of control are accounted for as equity transactions and do not affect the carrying amounts of goodwill. Operating Segments Operating segments are presented using the 'management approach', where the information presented is on the same basis as the internal reports provided to the Chief Operating Decision Makers ('CODM'). The CODM is responsible for the allocation of resources to operating segments and assessing their performance. 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. 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. 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 their funding arrangement are recognised as either a contribution by, or distribution to the head entity. 15 OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 Note 1 Summary of Significant Accounting Policies (continued) (d) 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 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. All revenue is stated net of the amount of goods and services tax. (e) (f) (g) (h) 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. 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(r) 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. (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(r) 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% 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. \ 16 OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 Note 1 Summary of Significant Accounting Policies (continued) (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. (k) Investments in Associates An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the entity but is not control or joint control of those policies. Investments in associates are accounted for in the consolidated financial statements by applying the equity method of accounting, whereby the investment is initially recognised at cost (including transaction costs) 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 is included in the Group’s profit or loss. The carrying amount of the investment includes, when applicable, 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 investments in associates are shown at Note 15. (l) (m) 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. (n) Employee Benefits Short-term employee benefits Provision is made for the Group’s obligation for short-term employee benefits. Short-term employee benefits are benefits (other than termination benefits) that are expected to be settled wholly before 12 months after the end of the annual reporting period in which the employees render the related service, including wages, salaries and sick leave. Short-term employee benefits are measured at the (undiscounted) amounts expected to be paid when the obligation is settled. The Group’s obligations for short-term employee benefits such as wages, salaries and sick leave are recognised as a part of current trade and other payables in the statement of financial position. The Group’s obligations for employees’ annual leave and long service leave entitlements are recognised as provisions in the statement of financial position. Other long-term employee benefits Provision is made for employees’ long service leave and annual leave entitlements not expected to be settled wholly within 12 months after the end of the annual reporting period in which the employees render the related service. Other long-term employee benefits are measured at the present value of the expected future payments to be made to employees. Expected future payments incorporate anticipated future wage and salary levels, durations of service and employee departures and are discounted at rates determined by reference to market yields at the end of the reporting period on government bonds that have maturity dates that approximate the terms of the obligations. Any remeasurements for changes in assumptions of obligations for other long-term employee benefits are recognised in profit or loss in the periods in which the changes occur. The Group’s obligations for long-term employee benefits are presented as non-current provisions in its statement of financial position, except where the Group does not have an unconditional right to defer settlement for at least 12 months after the end of the reporting period, in which case the obligations are presented as current provisions. Termination benefits When applicable, the Group recognises a liability and expense for termination benefits at the earlier of: (a) the date when the Group can no longer withdraw the offer for termination benefits; and (b) when the Group recognises costs for restructuring pursuant to AASB 137: Provisions, Contingent Liabilities and Contingent Assets and the costs include termination benefits. In either case, unless the number of employees affected is known, the obligation for termination benefits is measured on the basis of the number of employees expected to be affected. Termination benefits that are expected to be settled wholly before 12 months after the annual reporting period in which the benefits are recognised are measured at the (undiscounted) amounts expected to be paid. All other termination benefits are accounted for on the same basis as other long-term employee benefits. (o) 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. 17 OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 Note 1 Summary of Significant Accounting Policies (continued) (p) 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. (q) 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. 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. 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) (ii) 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 amount being included in profit or loss. 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. 18 OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 Note 1 Summary of Significant Accounting Policies (continued) (p) Financial Instruments (continued) Derivative instruments 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 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. 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. (r) Fair Value of Assets and Liabilities The Group measures some of it's assets and liabilities at fair value on either a recurring or non-recurring basis, depending on the requirements of the applicable accounting standard. Fair value is the price the Group would receive to sell an asset or would have to pay to transfer a liability in an orderly (i.e. unforced) transaction between independent, knowledgeable and willing market participants at the measurement date. As fair value is a market-based measure, the closest equivalent observable market pricing information is used to determine fair value. Adjustments to market values may be made having regard to the characteristics of the specific asset or liability. The fair values of assets and liabilities that are not traded in an active market are determined using one or more valuation techniques. These valuation techniques maximise, to the extent possible, the use of observable market data. To the extent possible, market information is extracted from either the principal market for the asset or liability (i.e., the market with the greatest volume and level of activity for the asset or liability) or, in the absence of such a market, the most advantageous market available to the entity at reporting date (i.e., the market that maximises the receipts from the sale of the asset or minimises the payment made to transfer the liability, after taking into account transaction costs and transport costs). For non-financial assets, the fair value measurement also takes into account a market participant’s ability to use the asset in its highest and best use or to sell it to another market participant that would use the asset in its highest and best use. The fair value of liabilities and the entity’s own equity instruments (excluding those related to share based payment arrangements) may be valued, where there is no observable market price in relation to the transfer of such financial instruments, by reference to observable market information where such instruments are held as assets. Where this information is not available, other valuation techniques are adopted and where significant, are detailed in the respective note to the financial statements. 19 OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 Note 1 Summary of Significant Accounting Policies (continued) (s) 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: Property, Plant and Equipment). 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. (t) 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. Issued Capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Dividends Dividends are recognised when declared during the financial year and no longer at the discretion of the company. Earnings per Share Basic earnings per share Basic earnings per share is calculated by dividing the profit attributable to the owners of Oldfields Holdings Limited, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the financial year. Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. (u) (v) (w) (x) 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. (y) 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 retrospectively applies an accounting policy, makes a retrospective restatement or reclassifies items in it's financial statements, an additional (third) statement of financial position as at the beginning of the preceding period in addition to the minimum comparative financial statement is presented. 20 OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 Note 1 Summary of Significant Accounting Policies (continued) (z) 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(r). The recoverable amounts of cash generating units have been determined based 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 estimated future cash flows. (iv) Recovery of deferred tax assets Deferred tax assets are recognised for deductible temporary differences only if the consolidated entity considers it probably 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 31. Key judgments (i) 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. (ii) 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. (iii) 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. (aa) New and Amended Accounting Policies adopted by the Group Consolidated financial statements The Group adopted the following Australian Accounting Standards, together with the relevant consequential amendments arising from related Amending Standards, from the mandatory application date of 1 January 2013. AASB 10: Consolidated financial statements — AASB 10 provides a revised definition of ‘control’ and may result in an entity having to consolidate an investee that was not previously consolidated and/or deconsolidate an investee that was consolidated under the previous Accounting Pronouncements. The first-time application of AASB 10 has not resulted in changes to the Group’s financial statements. Employee benefits The Group adopted AASB 119: Employee Benefits (September 2011) and AASB 2011-10: Amendments to Australian Accounting Standards arising from AASB 119 (September 2011) from the mandatory application date of 1 January 2013. The Group has applied these Standards retrospectively in accordance with AASB 108 and the transitional provisions of AASB 119. Othan than additional disclosures, the adoption of these Standards has not resulted in a significant change in the Group’s financial statements. Fair value measurement The Group has applied AASB13 Fair Value Measurement and AASB 2011-8 Amendments to Australian Accounting Standards arising from AASB13 from 1 July 2013. The standard provides a single robust measurement framework, with clear measurement objectives, for measuring fair value using the 'exit price' and provides guidance on measuring fair value when a market becomes less active. The 'highest and best use' approach is used to measure non-financial assets whereas liabilities are based on transfer vale. The standard requires increased disclosures where fair value is use. 21 OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 Note 1 Summary of Significant Accounting Policies (continued) (ab) New Accounting Standards for Application in Future Periods Accounting Standards and Interpretations issued by the AASB that are not yet mandatorily applicable to the Group, together with an assessment of the potential impact of such pronouncements on the Group when adopted in future periods, are discussed below: — AASB 9: Financial Instruments and associated Amending Standards (applicable for annual reporting periods commencing on or after 1 January 2017). The Standards will be applicable retrospectively (subject to the comment on hedge accounting below) and include revised requirements for the classification and measurement of financial instruments, revised recognition and derecognition requirements for financial instruments and simplified requirements for hedge accounting. The key changes made to the Standard that may affect the Group on initial application include certain simplifications to the classification of financial assets, simplifications to the accounting of embedded derivatives, and the irrevocable election to recognise gains and losses on investments in equity instruments that are not held for trading in other comprehensive income. AASB 9 also introduces a new model for hedge accounting that will allow greater flexibility in the ability to hedge risk, particularly with respect to hedges of non-financial items. Should the entity elect to change its hedge policies in line with the new hedge accounting requirements of AASB 9, the application of such accounting would be largely prospective. The adoption of AASB 9 is unlikely to have an impact on 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 provides clarifying guidance relating to the offsetting of financial instruments, which is not expected to impact the Group’s financial statements. — Interpretation 21: Levies (applicable for annual reporting periods commencing on or after 1 January 2014). Interpretation 21 clarifies the circumstances under which a liability to pay a levy imposed by a government should be recognised, and whether that liability should be recognised in full at a specific date or progressively over a period of time. This Interpretation is not expected to significantly impact the Group’s financial statements. — AASB 2013–3: Amendments to AASB 136 – Recoverable Amount Disclosures for Non-Financial Assets (applicable for annual reporting periods commencing on or after 1 January 2014). This Standard amends the disclosure requirements in AASB 136: Impairment of Assets pertaining to the use of fair value in impairment assessment and is not expected to significantly impact the Group’s financial statements. — AASB 2013–4: Amendments to Australian Accounting Standards – Novation of Derivatives and Continuation of Hedge Accounting (applicable for annual reporting periods commencing on or after 1 January 2014). AASB 2013–4 makes amendments to AASB 139: Financial Instruments: Recognition and Measurement to permit the continuation of hedge accounting in circumstances where a derivative, which has been designated as a hedging instrument, is novated from one counterparty to a central counterparty as a consequence of laws or regulations. This Standard is not expected to significantly impact the Group’s financial statements. — AASB 2013–5: Amendments to Australian Accounting Standards – Investment Entities (applicable for annual reporting periods commencing on or after 1 January 2014). AASB 2013–5 amends AASB 10: Consolidated Financial Statements to define an "investment entity" and requires, with limited exceptions, that the subsidiaries of such entities be accounted for at fair value through profit or loss in accordance with AASB 9 and not be consolidated. Additional disclosures are also required. As neither the parent nor its subsidiaries meet the definition of an investment entity, this Standard is not expected to significantly impact the Group’s financial statements. 22 OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 Note 2 Parent Information 2014 $ 2013 $ 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 NET ASSETS EQUITY Issued Capital Accumulated Losses General Reserve TOTAL EQUITY Statement of Profit or Loss and Other Comprehensive Income Loss before tax Total comprehensive loss 211,563 2,292,222 2,503,785 241,228 2,313,087 2,554,315 525,821 7,052,001 7,577,822 (5,074,037) 1,387,057 5,999,921 7,386,978 (4,832,663) 21,106,101 (26,166,785) (13,353) (5,074,037) 21,176,101 (26,003,160) (5,604) (4,832,663) (270,736) (1,145,112) (278,485) (1,148,674) Loss for the year The loss for the year for Oldfields Holdings Limited includes the write back of subsidiary loan accounts of $390,042 (2013: $6,653,034) which are eliminated on consolidation. Guarantees Oldfields Holdings Limited and it's 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 2014 or 30 June 2013. Contractual commitments The parent entity did not have any contractual commitments as at 30 June 2014 or 30 June 2013. Note 3 Revenue and Other Income (a) Revenue from continuing operations Sales revenue — — sale of goods rental revenue Other income — — — — Total other income other income interest received from other persons debt buy-back remission of interest (b) Total revenue and other income from continuing operations — — Attributable to members of the parent entity Attributable to an entity with non-controlling interests Consolidated Group 2014 $ 2013 $ 15,738,243 11,492,662 27,230,905 15,672,617 10,971,557 26,644,174 30,023 228 - - 30,251 38,449 7,576 5,500,000 137,558 5,683,583 23,465,720 3,795,436 27,261,156 28,825,470 3,502,287 32,327,757 23 OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 Consolidated Group 2014 $ 2013 $ Note Note 4 Profit for the Year Profit before income tax from continuing operations includes the following specific expenses: Cost of sales Inventory recognised as an expense during the year Finance costs: Directors Associated companies Related parties Unrelated parties Hire purchase charges Unwinding of discount on deferred senior loan Other borrowing costs — — — — — — — Total finance cost Foreign currency translation losses Depreciation expense Amortisation expense Employee benefits expense Bad and doubtful debts Rental expense on operating leases Loss on disposal on investment in associated companies: — — reclassification of foreign currency exchange differences relating to associated companies gain on disposal/reduction of investment in associated companies Note 5 Tax Expense (a) (b) The components of tax expense/(income) comprise: Current tax Deferred tax Recoupment of prior year tax losses Loss on disposal of investment in associated companies Current year deferred tax assets not recognised Debt buy-back reducing prior year losses 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% (2013: 30%) Add tax effect of: — — — — — — non-allowable items under provision for income tax in prior year unwinding of discount on DSLN not deductible revaluation of derivative element of DSLN not deductible net difference between tax and book value on disposal of PPE exempt foreign loss from disposal on investment in associated companies Less tax effect of: — — — — — — share of net profits of associates and joint venture entities netted directly net tax effect profit/(loss) from overseas operations current year deferred tax assets not recognised debt buy-back reducing prior year losses current year losses not recognised loss on disposal of investment in associated companies Recoupment of prior year tax losses not previously brought to account Income tax attributable to entity The applicable weighted average effective tax rates are as follows: (c) Tax effects relating to each component of other comprehensive income: 29 21 15,026,856 14,246,765 8,349,143 7,766,433 2,172 - 12,884 302,473 54,838 97,138 15,000 484,505 82,980 1,015,860 152,504 7,410 5,685 27,240 379,545 55,738 46,325 2,641 524,584 (11,156) 984,015 50,377 9,145,339 9,082,823 42,151 81,780 1,236,581 1,198,426 1,445,360 (81,979) 1,363,381 - (23,410) (23,410) 114,300 33,126 - - - - 147,426 1,604,075 (53,131) 67,928 25,087 173,111 (1,650,000) 167,070 (728,522) 1,442,047 6,227 (26,662) 29,141 61,367 63,823 409,014 (185,612) 32,686 (12,574) (353,151) - - - - 147,427 -6.1% 6,354 - 13,898 29,265 - - 1,491,564 617 (110,171) - 1,650,000 (173,111) 25,087 (67,928) 167,070 3.5% Consolidated Group Gain on cash flow hedges Exchange differences on translating foreign operations Note 32 32 Before-tax amount $ (11,070) (235,324) (246,394) 2014 Tax (expense) benefit $ 3,321 - 3,321 Net-of-tax amount $ Before-tax amount $ (7,749) (5,089) (235,324) (243,073) (34,164) (39,253) 2013 Tax (expense) benefit $ Net-of-tax amount $ 1,527 - 1,527 (3,562) (34,164) (37,726) 24 OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 Note 6 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 2014. 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 Share-based payments Total KMP compensation 2014 $ 579,203 46,680 - - - 625,883 2013 $ 509,139 45,443 12,911 63,158 - 630,651 Short-term employee benefits – these amounts include fees and benefits paid to the non-executive chair and non-executive directors as well as all salary, paid leave benefits, fringe benefits and cash bonuses awarded to executive directors and other key management personnel. Post-employment benefits – these amounts are the current year’s estimated cost of providing for the Group's defined benefits scheme post-retirement, superannuation contributions made during the year and post-employment life insurance benefits. Other long-term benefits – Share-based payments – these amounts represent long service leave benefits accruing during the year, long-term disability benefits, and deferred bonus payments. these amounts represent the expense related to the participation of KMP in equity-settled benefit schemes as measured by the fair value of the options, rights and shares granted on grant date. Further information in relation to KMP remuneration can be found in the Director’s Remuneration Report. Note 7 Auditors’ Remuneration Remuneration of the auditors for: — — — auditing or reviewing the financial report taxation services other services Remuneration of auditors of subsidiaries for: — auditing or reviewing the financial statements of subsidiaries Remuneration of previous auditors of subsidiaries for: — auditing or reviewing the financial statements of subsidiaries Note 8 Dividends Consolidated Group 2014 $ 2013 $ 141,078 12,000 6,725 159,803 151,904 26,080 - 177,984 2,991 10,457 - 13,526 (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 808,627 772,951 (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 in the entity. Total dividends paid for the year were $148,512 (2013: $148,512). Note 9 Earnings per Share (a) Reconciliation of earnings to profit or loss (Loss) profit for the year Profit attributable to non-controlling equity interest Earnings used to calculate basic EPS (b) Weighted average number of ordinary shares outstanding during the year used in calculating basic EPS Note 10 Cash and Cash Equivalents Cash on hand Cash at bank (2,575,834) (138,959) (2,714,793) 4,639,752 (152,780) 4,486,972 No. No. 82,176,198 69,575,276 2,587 370,665 373,252 3,056 674,348 677,404 30 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 19 373,252 (620,432) (247,180) 677,404 (855,184) (177,780) A fixed and floating charge over cash and cash equivalents has been provided for certain debt. Refer to Note 19 for further details. An analysis of the Group's exposure to certain risks has been presented in Note 30. 25 OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 Note 11 Trade and Other Receivables CURRENT Trade receivables Provision for impairment Total current trade and other receivables Consolidated Group 2014 $ 2013 $ 3,348,853 (44,187) 3,304,666 3,641,250 (19,023) 3,622,227 (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 within the distribution expenses item in the consolidated statement of profit or loss and 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 01.07.13 $ (19,023) Opening Balance 01.07.12 $ (57,328) Charge for the Year Amounts Written Off Amounts Recovered $ (42,151) $ $ 18,744 (1,757) Charge for the Year Amounts Written Off Amounts Recovered $ (81,780) $ 135,720 $ (15,635) Closing Balance 30.06.14 $ (44,187) Closing Balance 30.06.13 $ (19,023) 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 11. 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 2014 Trade and term receivables Consolidated Group 2013 Trade and term receivables Gross Amount $ Past due and impaired $ 3,348,853 44,187 Gross Amount $ Past due and impaired $ 3,641,250 19,023 Past due but not impaired (days overdue) <30 $ 155,618 31-60 $ 128,998 61-90 $ Past due but not impaired (days overdue) <30 $ 194,031 31-60 $ 194,650 61-90 $ - - (b) Financial assets classified as loans and receivables Trade and other Receivables — Total current — Total non-current Financial assets Note 30 (c) Collateral pledged A fixed and floating charge over trade receivables has been provided for certain debt. Refer to Note 19 for further details. Note 12 Inventories CURRENT At cost: Raw materials and stores Work in progress Finished goods Goods in transit Less provisions >90 $ >90 $ Within initial trade terms $ - 3,020,050 Within initial trade terms $ - 3,233,546 Consolidated Group 2014 $ 2013 $ 3,304,666 - 3,304,666 3,622,227 - 3,622,227 841,336 433,398 3,241,154 510,148 (214,412) 4,811,624 744,929 429,555 2,713,457 431,356 (271,470) 4,047,827 26 OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 Note 13 Other Assets CURRENT Prepayments Other debtors Financial assets classified as loans and receivables Trade and other Receivables — Total current — Total non-current Financial assets Note 14 Associated Companies (a) Information about Associates Companies Name PT Ace Oldfields Enduring Enterprises Honeytree & Partners Principal activities Paint Equipment Manufacturer Hardware Reseller Hardware Marketer Place of incorporation Indonesia Singapore Singapore Note Consolidated Group 2014 $ 2013 $ 296,166 473,233 769,399 473,233 - 473,233 286,491 84,809 371,300 84,809 - 84,809 Carrying amount 2014 $ 2013 $ 774,066 (6,687) 107,648 875,027 - - - - 30 Proportion of interest 2014 2013 % % 34% 0% 34% 0% 34% 0% (i) (ii) On 10 March 2014, the Group disposed of it's interest in the associated companies PT Ace Oldfields, Enduring Enterprises and Honeytree and Partners. Consideration received in relation to this sale was $827,932 and will be received in the form of a write back of the trade payable balance owing to the associated companies (along with purchases of product) over an approximate 12 month period. At 30 June 2014, the balance owed was $399,989 and is included in other debtors in note 13 above. The net loss on the disposal of these investments was $1,363,381 which includes the realisation of foreign currency translation movements of $1,445,360. Subsequent to year end, the Group entered into an arrangement with it's bank for the repayment of a portion of the proceeds on disposal of associated companies to commence from 1 January 2015. Repayments will be made in eight monthly instalments of $75,000. 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 of 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 balances owing to the associated companies at the time the transaction occurred. The gain on the disposal of these shares was $23,410. (iii) 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. (b) Commitments and contingent liabilities in respect of associated companies As at 30 June 2013 and 30 June 2014, there were no significant commitments or contingent liabilities. (c) Summarised financial information for associated companies Set out below is the summarised financial information for the Group’s material investments in associates. Unless otherwise stated, the disclosed information reflects the amounts presented in the Australian-Accounting-Standards financial statements of the associates. The following summarised financial information, however, reflects the adjustments made by the Group when applying the equity method, including adjustments for any differences in accounting policies between the Group and the associates. The values presented for 2014 is based on financial information for the period ending 31 December 2013 (2013: period ending 31 May 2013) as there was no further information available at the time of preparing the financial report. Exchange rates used for items in the statement of financial performance were based on average rates for the period to 31 December 2013 (2013: average rates for period to 31 May 2013). Exchange rates used for items in the statement of financial position were based on closing rates at 10 March 2014, being the date at which the Group disposed it's interest in the associated companies (2013: closing rates at 30 June 2014). Summarised financial position Total current assets Total non-current assets Total current liabilities Total non-current liabilities Net assets Group's share (%) Group's share of associate's net assets Summarised financial performance Revenue Profit after tax Other comprehensive income Total comprehensive income Dividends paid Group's share of associates' profit after tax from continuing operations Group's share of associates' other comprehensive income Group's share of dividends paid Reconciliation to carrying amounts Group's share of associates' opening net assets Group's share of associates' profit after tax from continuing operations Group's share of dividends paid by associate Disposals during the period Foreign currency translation losses Group's share of associates' closing net assets (closing carrying amount of investment) 2014 $ 0% - - - - - - 2013 $ 8,302,000 827,712 3,429,418 3,126,685 2,573,609 34% 875,027 6,719,871 11,662,800 320,450 - 320,450 - 108,953 - - 875,027 108,953 - (700,003) (283,977) - 6,050 - 6,050 (57,376) 2,057 - (19,508) 1,265,903 2,057 (19,508) (368,411) (5,014) 875,027 27 OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 Note 15 Interests in Subsidiaries (a) Information about Principal Subsidiaries The subsidiaries listed below have share capital consisting solely of ordinary shares or ordinary units which are held directly by the Group. The proportion of ownership interests held equals the voting rights held by the Group. Each subsidiary’s principal place of business is also its country of incorporation. Name of subsidiary 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 Ownership interest Principal place of business Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia 2014 (%) 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Australia 60% Australia 100% Australia 75% New Zealand New Zealand USA Australia Australia Australia Australia Australia China 100% 100% 100% 100% 100% 100% 100% 100% 100% 2013 (%) 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 60% 100% 75% 100% 100% 100% 100% 100% 100% 100% 100% 100% Non-controlling interests 2014 2013 (%) (%) 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 40% 0% 25% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 40% 0% 25% 0% 0% 0% 0% 0% 0% 0% 0% 0% Subsidiary financial statements used in the preparation of these consolidated financial statements have also been prepared as at the same reporting date as the Group’s financial statements. There are no significant restrictions over the Group’s ability to access or use assets, and settle liabilities, of the Group. (b) Summarised financial information of subsidiaries with material non-controlling interests Set out below is the summarised financial information for Adelaide Scaffold Solutions Pty Ltd that has non-controlling interests that are material to the Group, before any intra-group eliminations. The entity's principal place of business is 12 OG Road, Klemzig, South Australia. Summarised financial position - material non-controlling interests Current assets Non-current assets Current liabilities Non-current liabilities NET ASSETS Carrying amount of non-controlling interests Summarised financial performance Revenue Profit after tax Other comprehensive income after tax Total comprehensive income Profit attributable to non-controlling interests Distributions paid to non-controlling interests Summarised cash flow information Net cash from/(used in) operating activities Net cash from /(used in) investing activities Net cash from/(used in) financing activities Net increase in cash and cash equivalents 2014 $ 785,241 1,824,561 (481,588) (680,850) 1,447,364 2013 $ 782,406 1,898,962 (416,529) (1,013,800) 1,251,039 437,711 448,288 3,797,309 344,838 - 344,838 137,935 148,512 434,069 (44,561) (350,218) 39,290 3,500,487 381,949 - 381,949 152,780 148,512 353,959 (26,964) (287,758) 39,237 28 OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 Note 16 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 Consolidated Group 2014 $ 2013 $ 12,895,861 (5,964,012) 6,931,849 12,833,902 (5,344,916) 7,488,986 348,979 (262,142) 86,837 384,657 (267,523) 117,134 1,995,916 (1,544,248) 451,668 2,275,560 (1,660,115) 615,445 7,470,354 8,221,565 Included in the plant and equipment balance is scaffold equipment for hire held by Oldfields Advance Scaffold Pty Ltd and Adelaide Scaffold Solutions Pty Ltd amounting to $6,272,369 (2013: $6,702,767). 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. Consolidated Group: Balance at 1 July 2012 Additions Disposals Depreciation expense Reclassification of assets Balance at 30 June 2013 Additions Disposals Depreciation expense Balance at 30 June 2014 Note 17 Intangible Assets Goodwill Cost Accumulated impaired losses Net carrying amount Trademarks and licences Cost Accumulated amortisation and impairment losses Net carrying amount Software and other intangibles at cost Accumulated amortisation Net carrying amount Total intangibles Plant and Equipment $ Leasehold Improvements $ Motor Vehicles $ 8,254,278 161,543 (255,657) (667,776) (3,402) 7,488,986 275,939 (124,982) (708,094) 6,931,849 120,758 44,217 - (51,587) 3,746 117,134 32,936 (3,354) (59,879) 86,837 605,141 322,140 (46,840) (264,652) (344) 615,445 100,075 (15,965) (247,887) 451,668 Total $ 8,980,177 527,900 (302,497) (984,015) - 8,221,565 408,950 (144,301) (1,015,860) 7,470,354 Consolidated Group 2014 $ 2013 $ 5,160,370 (4,181,376) 978,994 5,160,370 (4,181,376) 978,994 177,447 (157,164) 20,283 393,553 (347,318) 46,235 177,447 (144,090) 33,357 372,236 (207,888) 164,348 1,045,512 1,176,699 29 OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 Note 17 Intangible Assets (continued) Movements in Carrying Amounts Balance at 1 July 2012 Additions Disposals Amortisation charge Impairment losses Balance at 30 June 2013 Additions Amortisation charge Balance at 30 June 2014 Goodwill $ 978,994 - - - - 978,994 - - 978,994 Trademarks & Licences $ 46,431 - - (13,074) - 33,357 - (13,074) 20,283 Software & Other $ 123,764 77,887 (50,599) (37,303) 50,599 164,348 21,317 (139,430) 46,235 Total $ 1,149,189 77,887 (50,599) (50,377) 50,599 1,176,699 21,317 (152,504) 1,045,512 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 Consolidated Group 2014 $ 140,564 838,430 978,994 2013 $ 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 key assumptions were used in the value-in-use calculations: Growth Rate Year 1 Year 2-5 Terminal Value Discount Rate Excess of recoverable amount over carrying amount Consumer products segment Scaffold division segment 7.50% 6.10% 3.00% 2.50% 3.00% 3.00% 19.53% 17.30% 45,480 550,132 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 product segments. Note 18 Trade and Other Payables CURRENT Unsecured liabilities Trade payables Sundry payables and accrued expenses (a) Financial liabilities at amortised cost classified as trade and other payables Trade and other payables — Total current — Total non-current Financial liabilities as trade and other payables Note Consolidated Group 2014 $ 2013 $ 1,654,790 1,271,341 2,926,131 1,496,621 941,028 2,437,649 2,926,131 - 2,926,131 2,437,649 - 2,437,649 30 30 OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 Note 19 Borrowings CURRENT 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 Hire purchase liabilities Debt element of deferred senior loan note Note Consolidated Group 2014 $ 2013 $ 620,432 115,800 235,431 971,663 855,184 144,750 261,282 1,261,216 68,750 68,750 143,750 143,750 3,688,302 213,063 906,611 4,807,976 3,775,152 270,000 809,473 4,854,625 4,876,726 4,998,375 30 5,848,389 6,259,591 620,432 3,804,102 448,494 906,611 5,779,639 855,184 3,919,902 531,282 809,473 6,115,841 (b) The Group has a finance facility in place with the bank until 31 August 2015 which 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. During the year, the Group breached a covenant for which a waiver was received from the bank. Subsequent to year end, the Group negotiated a variation to it's banking facilities including having covenants reduced for a period of 9 months to 31 March 2015 and agreed to the repayment of a portion of the proceeds on disposal of the associate, PT Ace Oldfields, to commence from 1 January 2015. These repayments will be made in eight monthly instalments of $75,000. The carrying amount of borrowings which related to the breaches are as follows: Cash at bank Bank overdraft Bank loan Debt element of deferred senior loan note (c) (d) The carrying amounts of assets pledged as security are: Fixed and floating charge over total current and non-current assets 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 asset. Financial assets that have been pledged as part of the total collateral for the benefit of the bank debt are as follows: (370,665) 620,432 3,804,102 906,611 4,960,480 (674,348) 855,184 3,919,902 809,473 4,910,211 17,910,021 19,067,028 Cash and cash equivalents Trade receivables Total financial assets pledged 10 11 373,252 3,304,666 3,677,918 677,404 3,622,227 4,299,631 The collateral over cash and cash equivalents represents a fixed and floating charge. Assets cannot be disposed of without the consent of the Group's bankers. (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. 31 OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 Note 19 Borrowings (continued) (f) Deferred Senior Loan Note On 21 December 2012, the Group's bankers 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% p.a; 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. The core debt 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. Note 20 Provisions CURRENT Employee Benefits Opening balance at 1 July 2013 Additional provisions Amounts used Balance at 30 June 2014 NON CURRENT Employee Benefits Opening balance at 1 July 2013 Additional provisions Amounts used Balance at 30 June 2014 Analysis of Total Provisions Current Non-current Consolidated Group 2014 $ 2013 $ 938,269 602,997 (525,395) 1,015,871 1,000,245 611,625 (673,601) 938,269 35,818 23,459 - 59,277 1,015,871 59,277 1,075,148 81,801 1,777 (47,760) 35,818 938,269 35,818 974,087 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). Current leave obligations expected to be settled after 12 months 482,771 32 OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 Note 21 Tax CURRENT TAX ASSETS Income tax receivable NON-CURRENT Consolidated Group Deferred tax liability Other Balance at 30 June 2013 Other Balance at 30 June 2014 Deferred tax assets Provisions Balance at 30 June 2013 Provisions Balance at 30 June 2014 Consolidated Group 2014 $ 2013 $ 91,392 42,439 Opening Balance $ Charged to Income $ Closing Balance $ 6,812 6,812 51,054 51,054 41,429 41,429 32,540 32,540 44,242 44,242 44,408 44,408 (8,889) (8,889) 11,282 11,282 51,054 51,054 95,462 95,462 32,540 32,540 43,822 43,822 The amount of deductible temporary differences and unused tax losses (at tax effect amounts) for which no deferred tax assets have been brought to account: — — — temporary differences -$442,537 (2013: -$286,314) tax losses: operating losses $2,605,248 (2013: $2,095,915) tax losses: capital losses $81,908 (2013: $81,908) 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(d) occur. These amounts have no expiry date. Note 22 Derivatives CURRENT Forward exchange contracts NON-CURRENT Deriviative element of deferred senior loan note Consolidated Group 2014 $ 2013 $ 13,353 5,604 1,909,183 1,704,628 Forward exchange contracts (a) 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 profit or loss and other comprehensive income or the cost of assets. The statement of changes in equity includes transfers to and from the hedge reserve. Derivative Element - Deferred Senior Loan Note (capital appreciation, interest and dividend-triggered entitlement) (b) 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 31, 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% per annum. 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 liabilities 32 1,922,536 1,710,232 33 OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 Note 23 Issued Capital Fully paid ordinary shares 82,176,198 (2013: 82,176,198) 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 Consolidated Group 2014 $ 2013 $ 21,106,101 21,176,101 Consolidated Group 2014 No. 2013 No. 82,176,198 56,043,605 - 82,176,198 26,132,593 82,176,198 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 shares 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. (e) 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 19. The Group breached a covenant during the year, for which a waiver was received from the bank. 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 2014 and 30 June 2013 are as follows: Total borrowings Less cash and cash equivalents Net debt Total equity Total capital Gearing ratio Note 24 Capital and Leasing Commitments Finance Lease Commitments Payable — minimum lease payments not later than 12 months — between 12 months and five years — Minimum lease payments Less future finance charges Present value of minimum lease payments (a) (b) Note 18, 19 10 Note 19 Consolidated Group 2014 $ 5,848,389 (373,252) 5,475,137 6,042,355 2013 $ 6,259,591 (677,404) 5,582,187 7,634,415 11,517,492 13,216,602 48% 42% Consolidated Group 2014 $ 2013 $ 268,206 233,937 502,143 (53,649) 448,494 300,749 304,048 604,797 (73,515) 531,282 1,179,450 2,117,654 207,657 3,504,761 1,155,492 1,767,952 - 2,923,444 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 five years — later than five years — The property leases are non-cancellable leases with 1-5 year terms, with rent payable monthly in advance. Contingent rental provisions within the lease agreement require that minimum lease payments shall be increased by the lower of the change in the consumer price index 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. 34 OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 Note 25 Contingent Liabilities and Contingent Assets The Group does not have any significant contingent liabilities or contingent assets as 30 June 2014 or 30 June 2013. Note 26 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. 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. 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. 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. 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. In most (ii) (b) (c) (d) 35 OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 Note 26 Operating Segments (continued) (i) Segment performance 30 June 2014 Revenue Sales Revenue Inter-segment sales Total segment revenue Other revenue Corporate Total other revenue Total revenue Reconciliation of segment result to group net profit/(loss) before tax Segment net profit/(loss) before tax Corporate Inter-segment elimination Net profit/(loss) before tax Income tax expense Total profit/(loss) after tax Finance costs Corporate Inter-segment elimination Total finance costs Depreciation and amortisation expense Corporate Total depreciation and amortisation expense 30 June 2013 Revenue Sales Revenue Inter-segment sales Total segment revenue Other revenue Corporate Total other revenue Total revenue Reconciliation of segment result to group net profit/(loss) before tax Segment net profit/(loss) before tax Corporate Inter-segment elimination Net profit/(loss) before tax Income tax expense Total profit/(loss) after tax Finance costs Corporate Inter-segment elimination Total finance costs Depreciation and amortisation expense Corporate Total depreciation and amortisation expense Consumer Products $ Scaffolding $ Total $ 11,499,005 - 11,499,005 15,795,112 - 15,795,112 27,294,117 (63,212) 27,230,905 20,159 - 20,159 10,092 - 10,092 30,251 - 30,251 11,519,164 15,805,204 27,261,156 (856,369) 452,184 (856,369) - (856,369) 452,184 (147,427) 304,757 14,430 139,202 14,430 139,202 260,470 825,701 260,470 825,701 (404,185) (954,019) (1,070,203) (2,428,407) (147,427) (2,575,834) 153,632 395,810 (64,937) 484,505 1,086,171 82,193 1,168,364 11,720,000 - 11,720,000 14,975,358 - 14,975,358 26,695,358 (51,184) 26,644,174 53,700 99,725 53,700 99,725 153,425 5,530,158 5,683,583 11,773,700 15,075,083 32,327,757 (670,300) (34,701) (670,300) - (670,300) (34,701) (167,070) (201,771) 275,842 258,351 275,842 258,351 209,526 770,870 209,526 770,870 (705,001) 5,424,300 87,523 4,806,822 (167,070) 4,639,752 534,193 (6,536) (3,073) 524,584 980,396 53,996 1,034,392 36 OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 Note 26 Operating Segments (continued) (ii) Segment assets 30 June 2014 Segment assets Corporate Intersegment eliminations Total group assets Included in segment assets are: — Equity accounted associates and joint ventures 30 June 2013 Segment assets Corporate Intersegment eliminations Total group assets Included in segment assets are: — Equity accounted associates and joint ventures (iii) Segment liabilities 30 June 2014 Segment liabilities Corporate Intersegment eliminations Total group liabilities 30 June 2013 Segment liabilities Corporate Intersegment eliminations Total group liabilities (iv) Revenue by geographical region Consumer Products $ Scaffolding $ Total $ 6,134,183 12,156,653 6,134,183 12,156,653 18,290,836 2,984,755 (3,365,570) 17,910,021 - - - 6,757,001 12,928,854 6,757,001 12,928,854 19,685,855 4,013,820 (4,632,647) 19,067,028 875,027 - 875,027 1,753,823 1,303,643 1,753,823 1,303,643 1,932,328 1,474,258 1,932,328 1,474,258 3,057,466 7,619,218 1,190,982 11,867,666 3,406,586 7,386,978 639,049 11,432,613 Revenue, including revenue from discontinued operations, attributable to external customers is disclosed below, based on the location of the external customer: 30 June 2014 Domestic International Inter-segment elimination Total revenue 30 June 2013 Domestic International Corporate Inter-segment elimination Total revenue (v) Non-current assets by geographical region The location of non-current segment assets by geographical location of the assets is disclosed below: Domestic International Total Assets 10,086,984 1,432,180 14,817,151 988,053 11,519,164 15,805,204 10,449,916 1,323,784 14,340,318 734,765 11,773,700 15,075,083 24,904,135 2,420,233 (63,212) 27,261,156 24,790,234 2,058,549 5,530,158 (51,184) 32,327,757 Consolidated Group 2014 $ 8,448,458 111,230 8,559,688 2013 $ 9,288,238 1,017,593 10,305,831 37 OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 Note 27 Cash Flow Information (a) Reconciliation of cash flow from operating activities with profit after income tax Profit after income tax Non-cash flows in profit Depreciation and amortisation Accrued interest charges Non-cash acquisitions of property, plant and equipment Net (gain)/loss on disposal of property, plant and equipment Realisation of foreign exchange movements on disposal of investments in associated companies Net loss on disposal of investments in associate companies Non-cash proceeds on disposal of investments in associated companies Unrealised exchange gains/losses Unwinding of discount on deferred senior loan note Revaluation of deferred senior loan note to fair value through profit or loss Debt buy-back Restructure of trade finance facility to borrowings Non-cash dividend received from associated companies 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: 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 Decrease in income taxes payable Increase in deferred taxes payable Increase/(decrease) in provisions Cash flow from operating activities Consolidated Group 2014 $ 2013 $ (2,575,834) 4,639,752 1,168,364 26,646 (19,227) (40,434) 1,445,360 (81,979) 823,379 48,653 97,138 204,555 - - - (108,953) 317,561 (380,225) (763,795) 409,486 (48,953) 33,126 101,060 655,928 1,034,388 105,463 (34,777) 53,607 - (23,410) 391,820 (29,153) 46,325 97,553 (5,500,000) 1,011,778 19,508 (2,057) 210,462 202,567 265,697 (1,339,244) (31,205) 53,131 (107,958) 1,064,247 (b) Non-cash financing and investing activities (i) Disposal of investment in associated companies On 10 March 2014, the Group disposed of it's interest in the associated companies PT Ace Oldfields, Enduring Enterprises and Honeytree and Partners. Consideration received in relation to this sale was $827,932 and will be received in the form of a write back of the trade payable balance owing to the associated companies over an approximate 12 month period. The loss on the disposal of these investments was $1,363,381 which includes the realisation of foreign currency translation movements of $1,445,360. (ii) Prior year 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 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 disposal of these shares was $23,410. (iii) 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 28 Events After the Reporting Period There have been no significant events occurring since 30 June 2014. 38 (a) i. ii. iii. iv. (b) i. ii. OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 Note 29 Related Party Transactions Related Parties 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 6. Entities subject to significant influence by the Group: An entity that 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 14. 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 Purchases of paint application products by Oldfields Pty Ltd from Enduring Enterprises Interest paid to Enduring Enterprises Dividends received from Honeytree & Partners Other related parties 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 Loan repayment received 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 Loan repayment received Interest charged End of the year Loan payable to Timms Realty, being a related party of William Lewis Timms (non-executive director) Beginning of the year Loans advanced Loan repayment received Interest charged End of the year Consolidated Group 2014 $ 2013 $ 1,187,290 - - 1,070,569 5,685 19,508 19,663 27,240 148,512 148,512 143,750 (75,000) 68,750 174,750 (31,000) 143,750 - - - - 153,582 (160,992) 7,410 - - 200,000 (202,172) 2,172 - - - - - - 39 OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 Note 30 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 related parties, bills, leases, 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 — Borrowings — Financial liabilities at fair value through profit or loss — Total Financial Liabilities derivative instruments Financial risk management policies Note 10 11,13 18 19 22 Consolidated Group 2014 $ 2013 $ 373,252 677,404 3,777,899 3,707,036 4,151,151 4,384,440 2,926,131 5,848,389 2,437,649 6,259,591 1,922,536 10,697,056 1,710,232 10,407,472 The Board of Directors are responsible for managing financial risk policies and exposures of the Group. commodity price risk, counterparty credit risk, currency risk, liquidity risk and interest rate risk. It also reviews the effectiveness of internal controls relating to The overall risk management strategy seeks to assist the consolidated group in meeting its financial targets, while minimising potential adverse effects on financial performance. This includes the review of the use of hedging derivative instruments, credit risk policies and future cash flow requirements. 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. Collateral held by the Group securing receivables is detailed in Note 11(c). 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 11. 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 11. (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 analyses in relation to its operating, investing and financing activities; • monitoring undrawn credit facilities; • maintaining a reputable credit profile; and • managing credit risk related to financial assets. The table below reflects 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 August 2015. 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. 40 OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 Note 30 Financial Risk Management (continued) Financial liability and financial asset maturity analysis Within 1 Year 1 to 5 years Over 5 years Total 2014 $ Consolidated Group Financial liabilities due for payment Bank overdrafts and loans Derivative element of DSLN Trade and other payables Amounts payable to related parties Finance lease liabilities Forward exchange contracts Total contractual outflows 736,232 - 2,926,131 12,375 268,206 13,353 3,956,297 2013 $ 2014 $ 2013 $ 2014 $ 2013 $ 2014 $ 2013 $ 999,934 3,688,302 3,775,152 2,370,224 2,370,224 6,794,758 7,145,310 - 2,437,649 - - - - 1,909,183 - 1,704,628 - 1,909,183 2,926,131 1,704,628 2,437,649 25,875 81,125 169,625 300,749 233,937 304,048 5,604 - - - - - - - 93,500 195,500 502,143 604,797 13,353 5,604 3,769,811 4,003,364 4,248,825 4,279,407 4,074,852 12,239,068 12,093,488 Less bank overdrafts Total expected outflows (620,432) (855,184) - - - - (620,432) (855,184) 3,335,865 2,914,627 4,003,364 4,248,825 4,279,407 4,074,852 11,618,636 11,238,304 Financial Assets - cash flows realisable Cash and cash equivalents Trade and other receivables 373,252 3,777,899 677,404 3,707,036 Total anticipated inflows Net (outflow) / inflow on financial instruments 4,151,151 4,384,440 - - - - - - - - - - - - 373,252 677,404 3,777,899 3,707,036 4,151,151 4,384,440 815,286 1,469,813 (4,003,364) (4,248,825) (4,279,407) (4,074,852) (7,467,485) (6,853,864) 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 19(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 dividend- triggered entitlement, as disclosed in note 19, 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 its 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 2014 +/- 2% in interest rates +/- 5% in $A/$US Year ended 30 June 2013 +/- 2% in interest rates +/- 5% in $A/$US There have been no changes in any of the methods or assumptions used to prepare the above sensitivity analysis from the prior year. Consolidated Group Profit $ Equity $ 93,469 298,992 93,469 298,992 114,649 278,897 114,649 278,897 41 OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 Note 30 Financial Risk Management (continued) 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. Refer to Note 31 for detailed disclosures regarding the fair value measurement of the group’s financial assets and financial liabilities. 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 bear little relevance to the Group. 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 have little relevance to the Group. Consolidated Group Financial assets Cash and cash equivalents Trade and other receivables - non-related parties - trade and other receivables Total 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 Note 2014 2013 Carrying Amount $ Fair Value $ Carrying Amount $ Fair Value $ 10 11 14 18 24 22 22 19 19 19 19 373,252 373,252 677,404 677,404 3,304,666 3,304,666 - 3,677,918 3,304,666 3,304,666 - 3,677,918 3,707,036 3,707,036 875,027 5,259,467 3,707,036 3,707,036 875,027 5,259,467 2,926,131 448,494 2,926,131 448,494 2,437,649 531,282 2,437,649 531,282 13,353 1,909,183 68,750 620,432 3,804,102 906,611 10,697,056 13,353 1,909,183 68,750 620,432 3,804,102 906,611 10,697,056 5,604 1,704,628 143,750 855,184 3,919,902 809,473 10,407,472 5,604 1,704,628 143,750 855,184 3,919,902 809,473 10,407,472 Note 31 Fair Value Measurements The Group measures and recognises the following assets and liabilities at fair value on a recurring basis after initial recognition: — derivative financial instruments; The Group does not subsequently measure any liabilities at fair value on a non-recurring basis. (a) Fair value hierarchy AASB 13 requires the disclosure of fair value information by level of the fair value hierarchy, which categorises fair value measurements into one of three possible levels based on the lowest level input that is significant to the measurement can be categorised into as follows: Level 1 Measurements based on quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. Level 2 Measurements based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 Measurements based on unobservable inputs for the asset or liability. The fair values of assets and liabilities that are not traded in an active market are determined using one or more valuation techniques. These valuation techniques maximise, to the extent possible, the use of observable market data. If all significant inputs required to measure fair value are observable, the asset or liability is included in Level 2. If one or more significant inputs are not based on observable market data, the asset or liability is included in Level 3. Valuation techniques The Group selects a valuation technique that is appropriate in the circumstances and for which sufficient data is available to measure fair value. The availability of sufficient and relevant data primarily depends on the specific characteristics of the asset or liability being measured. The valuation techniques selected by the Group are consistent with one or more of the following valuation approaches: ● ● ● Market approach: valuation techniques that use prices and other relevant information generated by market transactions for identical or similar assets or liabilities. Income approach: valuation techniques that convert estimated future cash flows or income and expenses into a single discounted present value. Cost approach: valuation techniques that reflect the current replacement cost of an asset at its current service capacity. Each valuation technique requires inputs that reflect the assumptions that buyers and sellers would use when pricing the asset or liability, including assumptions about risks. When selecting a valuation technique, the Group gives priority to those techniques that maximise the use of observable inputs and minimise the use of unobservable inputs. Inputs that are developed using market data (such as publicly available information on actual transactions) and reflect the assumptions that buyers and sellers would generally use when pricing the asset or liability are considered observable, whereas inputs for which market data are not available and therefore are developed using the best information available about such assumptions are considered unobservable. 42 OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 Note 31 Fair Value Measurements (continued) The following tables provide the fair values of the Group’s assets and liabilities measured and recognised on a recurring basis after initial recognition and their categorisation within the fair value hierarchy. Recurring fair value measurements Liabilities Derivatives: — Forward exchange contracts — Derivative element of DSLN Total liabilities recognised at fair value Recurring fair value measurements Liabilities Derivatives: — Forward exchange contracts — Derivative element of DSLN Total liabilities recognised at fair value Note 22 22 Note 22 22 30 June 2014 Level 1 $ Level 2 $ Level 3 $ Total $ Level 1 $ - - - - - - 13,353 1,909,183 1,922,536 30 June 2013 Level 2 $ Level 3 $ 5,604 1,704,628 1,710,232 - - - - - - 13,353 1,909,183 1,922,536 Total $ 5,604 1,704,628 1,710,232 There were no transfers between levels for assets or liabilities measured at fair value on a recurring basis during the reporting period (2013: no transfers). (b) Valuation techniques and inputs used to measure Level 2 fair values The forward exchange derivative liability of $13,353 (2013: 5,604) has been valued using Level 2 inputs by reference to quoted market prices in active markets. — — — — — The derivative element of the DSLN of $1,909,183 (2013: 1,704,628) has been valued using Level 2 inputs which are included in the terms and conditions of this instrument. 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% p.a; 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. The core debt 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. The assessed value of the derivative takes into account the expected cashflows incorporating the term (10 years) and discount rate 12%. — — There were no changes during the period in the valuation techniques used by the Group to determine Level 2 fair values. Due to their short-term natures, the carrying amounts of current receivables, current trade and other payables and current interest bearing liabilities is assumed to approximate their fair value. Note 32 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 cash flow hedge reserve records revaluations of items designated as cash flow hedges. Analysis of items of other comprehensive income by each class of reserve Foreign currency translation reserve Exchange differences on translation of foreign operations Movement in foreign currency translation reserve Cash flow hedge reserve Foreign exchange contracts — Revaluations to fair value - effective portion Movement in hedge reserve Other comprehensive income for the year attributable to members of the parent entity Non-controlling interests Total Note 5c Consolidated Group 2014 $ 2013 $ (235,324) (235,324) (34,164) (34,164) (7,749) (7,749) (243,073) - (243,073) (3,562) (3,562) (37,726) - (37,726) 43 OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 Note 33 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 44 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 Australian 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 2014 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; and 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. Oldfields Holdings Limited and its Australian wholly-owned entities have entered into a deed of cross guarantee under which the company and it's 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 Tony Joseph Grima Dated this 29-August-2014 45 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 2014, 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. 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. 46 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 2014 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. Emphasis of Matter Without modifying our opinion, we draw attention to Note 1 in the financial report which indicates that the consolidated entity incurred a loss after tax of $2,575,834 for the year ended 30 June 2014 and breached a loan covenant. These conditions, along with other matters as set forth in Note 1, give rise to a material uncertainty which may cast significant doubt about the ability of the consolidated entity to continue as a going concern, and therefore the consolidated entity may be unable to realise its assets and discharge its liabilities in the normal course of business. Report on the Remuneration Report We have audited the Remuneration Report included in pages 6 to 8 of the directors’ report for the year ended 30 June 2014. 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 2014 complies with section 300A of the Corporations Act 2001. BDO East Coast Partnership Paul Bull Partner Sydney, 29 August 2014 47 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 2014: 1. Shareholding a. b. c. d. 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 Ordinary 66 78 27 80 45 296 Number Redeemable Nil Nil Nil Nil Nil Nil 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 Pty Limited/Chris Hext Dixson Trust Pty Limited Mr Rodney Boyce Hass/Copy That Pty Ltd Starball Pty Ltd/Man Invest/Chiara Mankarios Number Ordinary 39,384,528 4,449,369 4,000,000 3,676,207 3,395,484 Preference Nil Nil Nil Nil Nil Voting Rights The voting rights attached to each class of equity security are as follows: Ordinary shares – 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 Randell Management Services Lymgrange Pty Limited/Chris Hext Dixson Trust Pty Limited Mr Rodney Boyce Hass/Copy That Pty Ltd Starball Pty Ltd/Man Invest/Chiara Mankarios Ufba Pty Ltd Benger Superannuation Pty/Brian Benger Mr Brian Garfield Benger/Shandora Luton Pty Ltd Dr Gordon Bradley Elkington Name 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. Mr Warwick Every-Burns & Mrs Kathryn Every-Burns 12. Myall Resources Pty Ltd 13. 14. Mr Paul John Simpson 15. Mr Christopher Michael Giles 16. 17. 18. 19. Mr Mark Sheffield Hancock & Brig Ian Denis Westwood 20. Locope Pty Ltd Nejeka Pty Ltd The Genuine Snake Oil Company Oceanridge Limited Sanperez Pty Ltd Number of Ordinary Fully Paid Shares Held 39,384,528 4,449,369 4,000,000 3,676,207 3,395,484 2,948,000 2,405,269 1,950,614 1,579,887 1,527,108 1,500,000 1,450,000 1,350,000 1,200,000 1,160,000 690,000 573,962 527,560 500,000 500,000 74,767,988 % Held of Issued Ordinary Capital 47.93% 5.41% 4.87% 4.47% 4.13% 3.59% 2.93% 2.37% 1.92% 1.86% 1.83% 1.76% 1.64% 1.46% 1.41% 0.84% 0.70% 0.64% 0.61% 0.61% 90.98% 48 OLDFIELDS HOLDINGS LIMITED ABN: 92 000 307 988 AND CONTROLLED ENTITIES ADDITIONAL INFORMATION FOR LISTED PUBLIC COMPANIES The name of the company secretary is Gregory John Park. 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 Ltd 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 Limited. Unquoted Securities There are no unquoted or unissued securities as at 30 June 2014. 2. 3. 4. 5. 6. 49 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 50 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. 51 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. 52 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 there were no independent directors. 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: resigned 30 April 2014, previously an executive director and shareholder; Tony Joseph Grima: appointed 14 October 2013, currently an executive director and shareholder; and Stephen Charles Hooper: appointed 23 May 2013, currently a non-executive director and shareholder. The board manages the risk of having a majority of non-independent directors through restrictions on trading in shares, restrictions on related party transactions, a close relationship with the principal provider of debt funding and a strong independent auditor 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. 53 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 Tony Joseph Grima Christopher Michael Giles William Lewis Timms Stephen Charles Hooper Eligible to Attend 9 9 11 11 Meetings Attended 9 9 11 11 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. 54 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 2014 is: Non-manager occupational categories Professionals Technicians and trade Community and personal service Clerical and administrative Sales Machinery operators and drivers Labourers Other CEO/Head of Business in Australia Other Executives/ General managers Senior managers Other managers Full-time permanent Full-time contract Part-time permanent Part-time contract Casual F 4 0 0 6 1 1 6 0 M 0 3 0 9 % female 100% 0% 0% 40% 14 7% 5 17 8 17% 26% 0% F M 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 % female 100% 0% 0% 0% 0% 0% 0% 0% F M 2 0 0 1 0 0 1 0 0 0 0 0 0 0 1 0 % female 100% 0% 0% 100% 0% 0% 50% 0% F M % female F M % female 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0% 0% 0% 0% 0% 0% 0% 0% 0 0 0 2 0 0 4 0 0 0 0 0 0 0 17 12 0% 0% 0% 100% 0% 0% 19% 0% 0 1 0% 0 0 0% 0 0 0% 0 0 0% 0 0 0% 0 3 2 5 5 9 0% 38% 18% 0 0 0 1 0 0 0 0 0% 0% 0% 100% 0 0 0 4 0 0 0 1 0% 0% 0% 80% 0 0 0 0 0 0 0 0 0% 0% 0% 0% 0 0 0 6 0 0 0 0% 0% 0% 29 17% Total 23 76 23% 55 OLDFIELDS HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 02 000 307 988 CORPORATE GOVERNANCE STATEMENT 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. 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. 56 OLDFIELDS HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 02 000 307 988 CORPORATE GOVERNANCE STATEMENT Recommendation 4.4 - Provide information recommended in the Guide on Principal 4. The members of the audit committee are: • Stephen Charles Hooper; and • William Lewis Timms (Chairman). 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. 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. 57 OLDFIELDS HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 02 000 307 988 CORPORATE GOVERNANCE STATEMENT 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. 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. 58 OLDFIELDS HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 02 000 307 988 CORPORATE GOVERNANCE STATEMENT 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. 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. 59 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 an executive director 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. 60 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. 61
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