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Swiss Water Decaffeinated CoffeeDATE: 21 October 2014
2014 ANNUAL REPORT
Attached is a copy of the Company’s Annual Report for the year ended 30 June 2014, which
will dispatched to shareholders today.
The Company’s Annual Report in both interactive and pdf form is available for download
from the Company’s website at www.pactgroup.com.au/investors/investor-relations/reports.
For further information, contact:
NAME:
Penny Grau
POSITION:
Company Secretary
CONTACT NUMBER:
+613 8825 4100
2014
ANNUAL
REPORT
Pact Group
A Manufacturing Success Story
Our Products
The packaging product and
service solutions we offer.
See pages 7–13
Our Global Reach
The global markets
in which we operate.
See pages 15–16
Our Customers
The customers we serve.
See page 17
Our People
Our highly experienced
leadership team.
See page 19
Contents
OVERVIEW
Who We Are
Highlights
A Message from our Chairman
A Message from our CEO
Our Products
Manufacturing & Technology
Our Global Reach
Industry Overview
Our Customers & Markets
Our People
PERFORMANCE
Our Performance
Year in Review
Highlights
Performance
Earnings
Cash Flows
Balance Sheet
Dividend
Review of Operations
Australia
International
Innovation & Awards
Strategy & Future Focus
Aspiration
Growth Strategy
Innovation
Growth
Resilience
Mergers & Acquisitions
GOVERNANCE
Corporate Responsibility
Workplace Health & Safety
Company Commitments
Corporate Governance Statement
Directors’ Report
FINANCIAL STATEMENTS
FY14 Financial Statements
1
1
2
3
5
7
9
15
17
17
19
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21
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SHAREHOLDER INFORMATION
Shareholder Information
Corporate Directory
Glossary of Terms
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143
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Pact Group Holdings Ltd
ABN 55 145 989 644
ANNUAL REPORT 2014 c
Who We Are
pact Group is the
largest manufacturer
in Australasia of rigid
plastics packaging
– the fastest growing
packaging segment
globally.
the Group has 64 manufacturing
sites across five countries, primarily
converting plastic resin and steel into
packaging and related products that
service a diverse customer base across
a breadth of market sectors.
Our well-invested packaging technology,
sector know-how and global licences
enable us to continually deliver superior
design and functionality to our customers.
With a focus on innovation, resilience
and growth, our vision is to enrich
lives every day through sustainable
packaging solutions.
terminology:
A Glossary of terms is contained at page 143.
1 pACt Group HolDInGS ltD
key Facts
64
MAnuFACturInG
SIteS In 5 CountrIeS
3,500
WItH
over
eMploYeeS
trACk reCorD oF
GroWtH
AnD eArnInGS
DIVerSIFICAtIon
through acquisitions
and organic growth
(39 ACquISItIonS SInCe 2002)
lArGeSt Ipo
In tHe AuStrAlIAn
MArket
In 2013
operAtInG In oVer
100 MArket
SeGMentS
acrOss 22,000
proDuCt vArIAntS
proven
proDuCt
& proCeSS
InnoVAtor
A MArket
leADer
In AuStrAlIA &
neW ZeAlAnD
In rIGID plAStICS;
tHe HIGHeSt GroWtH
pACkAGInG SeGMent
lArGe,
DIVerSIFIeD
& lonG-terM
CuStoMer
BASe
(>5,000)
SeConD lArGeSt
pACkAGInG Ipo
ever completed
globally
oF reVenue
FroM DeFenSIve
ConSuMer enD uSeS
lISteD on tHe ASX
on 17 DeCeMBer 2013
Highlights
Profit Levels
Cash Flow Generation
StAtutorY npAt beFore SIGnIFICAnt IteMS oF
operAtInG CASH FloW up 11.8% on FY13 to
$59.7m $198.9m
pro-ForMA npAt beFore SIGnIFICAnt IteMS oF
ebItDA, ebIt AnD CASH FloW MArGInS StAble
$83.8m
Growth Momentum
Strategic Innovation
reCoGnISeD AS one oF AuStrAlIA’S MoSt
InnoVAtIVe CoMpAnIeS (brW 2013)
WInner oF nuMerouS AWArDS In
FY14 For DeSIGn AnD InnoVAtIon
Growth pipeline
StronG pIpelIne oF orGAnIC AnD
neW GroWtH opportunItIeS
DISCIplIneD FoCuS on ACquISItIonS to DelIVer
lonG-terM SHAreHolDer VAlue AnD returnS
YeAr-on-YeAr GroWtH In StAtutorY SAleS oF
3.6%
YeAr-on-YeAr GroWtH In pro-ForMA SAleS oF
3%
YeAr-on-YeAr GroWtH oF pro-ForMA
ebIt beFore SIGnIFICAnt IteMS
9%
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AnnuAl report 2014 2
A Message from our Chairman
Raphael Geminder
Dear Shareholder
It is with immense pride that I welcome you to Pact
Group’s 2014 annual report. Our first year’s results
following listing were pleasing, with the company
demonstrating continued growth momentum and
strong cash flow performance and delivering in
excess of profit forecasts. The Board has confirmed
an inaugural dividend of 9.5 cps franked to 65% in line
with the Prospectus. It is the Board’s current intention
to pay out approximately 65% – 75% of the Company’s
NPAT attributable to shareholders in dividends.
The 2014 financial year has been transformative,
as Pact has leveraged from its solid foundation as a
private company and migrated to public ownership
to better position the business for the next phase
of growth. The process of listing has reiterated
that the business, infrastructure, governance and
audit systems are robust. The heightened levels of
reporting requirements and public scrutiny have
been positive for the company. Importantly, this
has demonstrated that Pact remains nimble and
innovative. Both the Company and its people have
matured, and I am inspired by the ability of our
management team to rise to the challenge and
ascend to the next level of sophistication.
Pact has always been aspirational. We aspire to
be better, faster and more profitable, to walk
in our customers’ shoes to serve them better
and to achieve our vision to enrich lives every
day through sustainable packaging solutions.
If we keep doing those things well, we will
continue to create shareholder value.
Part of our success has been our opportunistic
and patient approach to acquisitions, coupled
with a tempered discipline and ability to say no.
The business has always been measured and
deliberate in its approach, and I believe that we
have a culture that encourages lateral thinking
and the ability to stand back and assess whether
opportunities stack up tactically, strategically
and commercially.
3 PACT GROUP HOLDINGS LTD
The 2014 financial year has been transformative, as Pact has
leveraged from its solid foundation as a private company and
migrated to public ownership to better position the business
for the next phase of growth.
This shared philosophy has enabled the development of
a robust and diverse business that has grown six-fold in
revenue since inception in 2002. Over the past 12 years,
we have enjoyed long and meaningful relationships
with many of our customers and have worked closely
with them to develop insights into their respective
markets. Our success is directly linked to the success of
our customers and relies on our ability to remain at the
forefront of rapidly changing industry technology. Pact
is an early adopter with access to leading technology,
global licence partnerships and a proven ability to
quickly commercialise products. These factors mean
that the Company is well placed to respond to and take
advantage of industry opportunities.
Our Company will continue to focus on delivering
operational excellence, innovation and efficiency to
deliver on Pact’s vision. I believe we have three core
growth platforms:
1. Organic growth in the base business; this has
historically been somewhat constrained by a silo
mentality. Through a reorganisation, these silos
have been broken, and we are already seeing
improvements from this. Pact will become easier
to do business with and, in turn, this will deliver
better returns to all our stakeholders in a
somewhat benign Australian market. There are
many niche growth opportunities, such as the
high value-add nutritional food and meat export
markets, and the business is well positioned to
leverage these opportunities. Asia continues to
grow at enviable rates, and the organic pipeline will
improve with a more holistic business approach.
2. Domestic ‘tuck in’ opportunities and adjacencies
such as sulo, which has almost doubled the
Company’s materials handling and infrastructure
offering. I remain optimistic that we have
substantial scope in this area. Pact’s DNA is well
wired for growth, we are in no hurry and don’t
need acquisitions to deliver growth. However,
acquisitions have been a material part of how
we have grown in the past, and I suspect they
will play just as big a role in the future. I want to
reiterate once again: we are patient, considered
and mindful of value, and our Board will consider
opportunities that create value and are in line with
our financial metrics and criteria.
3. Transformational opportunities, which will deliver
growth, value and expansion internationally,
ultimately delivering on our 5 cubed aspiration
to grow the business to $5 billion, with operations
in five regions in five years. This platform is the
hard-to-see, hard-to-quantify opportunity, it’s the
aspirational game changer which is not meant to
be prescriptive, but a call to action to define where
we are going.
Our vision to enrich lives every day through
sustainable packaging remains core to our business
ethos. We have a significant sustainability operation
that enables us to run a closed-loop operation
to reduce environmental impact and assist our
customers in meeting their own sustainability
targets. as we expand our geographic footprint,
we remain conscious of the impacts we have on
the regions and communities in which we operate,
and our CSR activity supports these activities.
On a personal note, this has been a very exciting year
for the company, and I want to thank all of our new
shareholders. I also want to thank our customers,
suppliers and other stakeholders for their ongoing
support. This story could not be told without them! I
want to also acknowledge the thousands of people
who have helped us grow this business over many
years; without our dedicated and loyal team, Pact
could not have achieved this extraordinary journey.
Pact has grown, our people have blossomed, the
business has delivered substantial value, and I am
confident that this will continue into the future.
Pact has a long history of transformation, and as
long as we remain focussed, diligent and innovative
that journey will continue.
Raphael Geminder
Chairman
ANNUAL REPORT 2014 4
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A Message from our CEO
Brian Cridland
Dear Shareholder
I’m pleased to report that Pact Group has continued
its positive growth momentum in our first year of
listing, exceeding Prospectus profit forecasts and
achieving solid year-on-year growth.
Highlights
The business has reported statutory NPaT, before
significant items, of $59.7 million, up 13.5% on
Prospectus forecasts. Growth momentum has continued
with year-on-year growth in statutory sales of 3.6%
and statutory EBIT before significant items of 4.8%.
The Directors have declared a dividend of 9.5 cps for the
six months ended 30 June 2014, franked at 65%.
Pact has demonstrated the ability to generate strong
cash flow, with operating cash flow of $198.9 million up
11.8% on FY13. The integration of the four companies
acquired at the time of the IPO, consistently
strong currencies, improved productivity through
automation, simplification and innovation have
contributed to this positive result.
Business Overview
Despite a challenging macroeconomic environment
attributed in part to subdued demand, Pact australia
sales revenue increased to $822.7 million compared to
$813.1 million in the prior year. Pact International sales
revenue was $320.5 million compared to $290.6 million
in the prior year due to growth in demand, the positive
effect of consistently strong currency translations and
the contribution of the three international businesses
acquired at the time of the IPO.
Merger and acquisition opportunities and flow-on
productivity gains have remained a focus for the
business. In august of this year, we acquired the
Sulo operations in Australia and New Zealand – the
39th acquisition for the Group. Sulo is the leading
manufacturer of plastic waste and recycling bins
in Australia and New Zealand and complements
our growing sustainability, materials handling and
infrastructure divisions.
We have continued to cement strong relationships
with our key customers, and our product and service
diversity offering across our broad base of customers
continues to provide resilience in earnings. An ongoing
trend towards modernisation of packaging continues
to lead to substrate conversion, particularly within our
‘everyday staple’ categories.
5 PACT GROUP HOLDINGS LTD
Our innovation credentials continue to receive industry recognition,
and across the Group we have secured multiple awards in FY14,
including customer-attributed supplier of choice awards.
A shift to alternative technologies continues to drive
expansion and defensive earning opportunities across
our customer base. We have introduced new products
within all segments across consumer staples, materials
handling and infrastructure, in response to customer
and market demand. Our new swing bar crate is in
the market, and we are supplying a major retailer.
We have also secured the supply contract for
revolutionary noisewall panels used in motorways.
People are integral to the business and safety
remains our number one priority. We have
undertaken an extensive review of the Group Safety
Management system. as a result, we have launched
the Towards Zero Harm campaign to enhance
our safety focus and performance by increasing
consistency of health and safety management across
all of our sites.
our global customers and delivering innovative closure
capability to the region. In china, we have secured
additional volumes for key customers through the
introduction of quality manufacturing systems.
Outlook
We are committed to achieving segment expansion
and regional growth. Our breadth of technology,
global licence partnerships, focus on innovation,
diverse customer base and disciplined approach to
M&A ensures that the business is well positioned to
realise growth against future varying macro-economic
and market conditions. We retain our mandate to
control costs and achieve productivity gains and
efficiency improvements across the business. Future
outlook includes operation rationalisation, further
automation of production lines and the integration of
synergistic acquisitions.
Pact is one of the largest recyclers of plastics in
Australasia and we remain committed to running a
sustainable operation that has minimal impact on the
environment. Our dedicated sustainability division
continues to offer solutions to assist customers in
meeting their own obligations through the recycling
and repurposing of manufacturing materials.
Innovation and Growth
We continue to invest in our customers, processes,
facilities and innovation to support our organic growth.
Within a relatively benign australian market,
the outlook is for an increasing shift towards
innovative packaging and a growing level of demand
for alternative technologies across all categories.
Within the International business, increasing levels
of disposable income, and GDP and population
growth will provide ongoing opportunities.
Current trading conditions are in line with
management expectations, and we are confident
that the business will continue to perform with free
cash flow generation and balance sheet strength.
I would like to take this opportunity to thank our
talented people for their discipline, commitment
and valued contribution to the business. I would like
to recognise the Board and our Chairman for their
enormous contribution during this transformational
period. And I’d like to thank our shareholders for
your investment as we undertake the next phase of
our journey in successfully growing our Company.
Brian Cridland
Managing Director & CEO
Innovation remains fundamental to our organic
and long-term growth strategy. Our innovation
credentials continue to receive industry recognition,
and across the Group we have secured multiple
awards in FY14, including customer-attributed
supplier of choice awards.
We have further invested in our technology and have
recently acquired an injection moulding machine
for the production of large-scale, materials handling
bins for the horticulture and other markets. The
machine will be located in New Zealand and is
scheduled to commence production in early 2015.
The construction of a new plant in Jakarta is underway
and is due to commence production in 2015.
The plant will produce personal care packaging and
will complement our existing Philippines operation.
We have executed a joint venture heads of agreement
for the manufacturing of high value-add proprietary
closures in Thailand, providing a regional offering for
ANNUAL REPORT 2014 6
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our products
Pact Group produces approximately 22,000
product variants for a diverse group of customers
across australia, New Zealand and asia.
Chilled Food, Dairy & beverages
Industrial packaging
Materials Handling & Infrastructure
the industrial and chemical sector is
expansive with highly varied packaging
requirements that demand durability,
reliability, safety and easy transit
and storage. We provide packaging
solutions for agricultural chemicals,
surface coatings, lubricants and other
petroleum products ranging from
large bulk sizes to very small handheld
packaging. these range from paint pails
through to oil and chemical containers.
We take a solution-oriented approach
to our partnerships with our industrial
clients to deliver robust packaging with
inherent design strength.
pact’s materials handling solutions
are focussed on the transportation
and storage of products using pallets,
crates and other containers. We assist
customers in reducing their supply
chain costs through improved storage
efficiency, lower store replenishment
costs and freight cost reduction. our
infrastructure solutions are focussed
on the telecommunications, gas and
electrical industries, as well as major road
and rail infrastructure projects providing
products, including communication pits,
hazard prevention products, noise walls,
industrial tanks and more.
Sustainability
We have a dedicated sustainability
division that includes one of Australasia’s
largest processors of plastic waste.
Every year, we convert significant
volumes of plastic waste into recycled
plastic resin, recycled slip sheets and
underground cable covers. this area of
our business focusses on the product
life cycle and closing the loop – meaning
we make it, take it, reflake it and
remake it. this provides a complete and
returnable packaging solution, reducing
environmental impacts and generating
efficiencies for our customers.
pact has a long history of delivering
sustainable and innovative packaging
solutions for the chilled food, dairy
and beverage sectors. our packaging
solutions cater for fresh food, chilled
meat, frozen food, ready meals, baked
goods, dairy products, juice and bottled
water, among others. This packaging can
be found on supermarket shelves, in your
local convenience store and in fast food
outlets. our businesses are renowned for
their relationships with the region’s most
successful food and beverage companies
to deliver unique designs that ensure
freshness and security (in production,
in transit, on shelf and in the home),
protect and enhance the product’s
quality, and differentiate the product on
the shelf. Many of these designs have
received industry recognition and enable
consumers to enjoy the diverse range of
food and beverage options available in
the supermarket today.
Ambient Food & other
Household Consumables
Ambient food relates to anything that
is shelf stable and for pact includes
packaging for sauces, edible oils, jams
and preserves, pancake mix, flour, dry
mixes, rice, fruit jars, and spreads. It also
includes popular household consumer
products from personal care and health
to the cleaning and laundry categories.
You will find our household consumer
products in supermarkets, pharmacies,
health and beauty shops and your
local hardware store. For personal care
and health products the aesthetics,
functionality, convenience and safety
are all critically important. We develop
packaging for oral hygiene products,
skin creams, haircare products and
pharmaceutical products. our products
distinguish themselves with the
latest decoration, patented designs
and world-leading medical dispensing
systems.
7 pACt Group HolDInGS ltD
We have a long history of
delivering sustainable and
innovative packaging solutions.
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AnnuAl report 2014 8
Manufacturing & Technology
Pact has made substantial and strategic
investment in a wide range of state-of-the-art
equipment and manufacturing platforms.
With more than 6,600 moulds, and bespoke manufacturing platforms, our technology
and access to global licences enables us to vigorously compete across all categories
within our chosen markets. The breadth of our technology offering and capability
positions us as a supplier of choice across australia, New Zealand and asia for most
forms of primary rigid packaging. Our high-tech manufacturing platforms enable us to
deliver quality lower risk outcomes in terms of performance, aesthetics, sustainability
and cost to our customers.
Global Licences
We have established exclusive licence partnerships and alliances with global leaders in
packaging design, material science and technology. These partnerships provide access to
world-leading technology and innovations, and enable us to rapidly commercialise new
ideas and take these to market. We are proud that our technology partners include:
9 PACT GROUP HOLDINGS LTD
Manufacturing Processes
THIN WALL >
THIN WALL >
CUSTOM MOULDING >
CUSTOM MOULDING >
CLOSURES >
CLOSURES >
EXTRUSION BLOW MOULDING >
EXTRUSION BLOW MOULDING >
INJECTION BLOW MOULDING >
INJECTION BLOW MOULDING >
INJECTION STRETCH BLOW MOULDING >
INJECTION STRETCH BLOW MOULDING >
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INJECTION
MOULDING
Injection-moulded packaging includes
thin wall packaging, closures, custom
mouldings and materials handling
solutions. This process enables a
high degree of customisation and
decoration where complex designs
are required.
Key features:
• High quality decoration
• Precision
• Functionality
• customisation
• smaller quantities
• aNZ and asia footprint
BLOW
MOULDING
We offer the full range of blow
moulding capabilities. This includes the
three forms of extrusion blow moulding
(continuous extrusion, accumulator
head and reciprocating), injection
blow moulding and injection stretch
blow moulding.
Key features:
• short run (customised)
• Long run (commodity)
• aNZ footprint
• Diverse capability
• Barrier materials
• customised preform capability
ANNUAL REPORT 2014 10
Manufacturing Processes
BARRIER >
FOAM >
RIGID >
ALUMINIUM LAMINATE >
EXTRUDED PLASTIC >
PLASTIC BARRIER LAMINATE >
STEEL DRUMS >
HYBRID >
TIN PLATE >
11 PACT GROUP HOLDINGS LTD
EXTRUSION &
THERMOFORMING
Extrusion and thermoforming includes foam
(open cell, closed cell, in line, tandem), rigid
(cPET, PP, PET, Ps) and barrier / MaP (Ps, PET,
PP) for low-cost, high-volume product lines.
Key features:
• short run (customised)
• Long run (commodity)
• In-house innovation
• Patented designs
• In-house extrusion of roll stock
• aNZ footprint
TUBES
Tube capability includes extruded plastic
tubes, plastic barrier laminate tubes and
aluminium laminate tubes. Our manufacturing
processes are extremely flexible to cater
for diverse customer needs.
Key features:
• aluminium and plastic barrier – protects the
contents of the package
• Multiple decoration options including metallic
• short run delivering a high degree of
customisation
• Very flexible manufacturing platforms
METAL &
HYBRID
PACKAGING
Metal and hybrid products are predominantly
supplied to the industrial sectors and include
the production of steel drums, tin plate pails
and cans, and hybrid solutions.
Key features:
• High quality decoration
• strength and barrier properties
• Plastic components are consumer friendly
and improve functionality due to their ease
of opening
Manufacturing processes
CAble CoVer >
reCYCleD reSIn >
DruMMuSter >
eCo Cube >
teleCoMMunICAtIonS >
tAnkS >
noISeWAll >
FloAtS >
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SuStAInABIlItY
proDuCtS
& SerVICeS
Sustainability is a growing and unique
area of our business. this supports and
complements our product offerings
and assists our customers in meeting
their sustainability commitments.
this includes:
• The collection and reprocessing of
post-industrial and post-consumer
waste materials
•
Industry programs including
drumMUsTEr, the australian
Institute of Petroleum (aIP) plastic
oil container recycling program and
the vMAX program
• conversion of post-industrial
and post-consumer materials
into second generation products
including underground cable covers,
piping and slip sheets
rotAtIonAl
MoulDInG &
InFrAStruCture
rotational moulding and infrastructure
spans a wide range of products
servicing a variety of industries including
tanks (sanitation and water storage),
safety products, infrastructure products
(telecommunication pits and covers)
and other infrastructure products like
noisewalls.
key features:
• Extreme customisation
• Low capital cost
• small order quantities
• australian footprint
AnnuAl report 2014 12
Manufacturing Processes
MATERIALS HANDLING >
HOT STAMPING >
SCREEN PRINTING >
SHRINK SLEEVING >
SELF-ADHESIVE >
GRAPHIC ENHANCED >
DIGITAL >
IML >
13 PACT GROUP HOLDINGS LTD
LARGE FORMAT
INJECTION
MOULDING
Large format injection-moulded
products include large bins for the
agricultural and horticultural sectors,
and crates, pallets and bins for various
consumer sectors. We focus strongly on
substrate conversion from timber and
corrugate to lower total cost returnable
plastic containers.
Key features:
• significant investment in
manufacturing capability
• substrate conversion
• aNZ footprint
DECORATION
We have the widest offering in ANZ in
terms of product decoration capabilities,
including the revolutionary digital direct
to container printing. Other capabilities
include in mould labelling (IML) for blow
and injection-moulded products, high
resolution offset decoration technology
for injection and thermoformed
products, screen printing and many
different labelling formats such as
pressure sensitive, self-adhesive,
shrink sleeving and hot stamping.
Key features:
• Premium look and feel
• customised solutions
• speed to market
• aNZ footprint
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PACT GROUP SIGNS
LONG-TERM LICENSING
EXTENSION WITH
RPC SUPERFOS
In april 2014, we renewed our two technology
licensing agreements with European packaging
manufacturer RPC Superfos. These licensing
agreements provide Pact with ongoing
exclusive access to Superfos’ leading edge
technology and know-how in thin wall injection
moulding for Australia and New Zealand.
In addition, we have recently entered into a
licensing agreement with RPC Superfos for
it to utilse, in the European marketplace, our
various technology offerings that eliminate
paint skinning in plastic containers.
ANNUAL REPORT 2014 14
ANATHOTH
JAMS
our Global reach
The company has 64 manufacturing sites across australia,
New Zealand and asia, supported by a regional procurement
office in singapore. The Group Head Office and the innovation
centre, Inpact Innovation, are located in Melbourne, australia.
pact Australia
pact Australia is a leading manufacturer
of rigid plastics and steel packaging
solutions and related products within
Australia. the business has established
a market-leading position through
organic growth and the integration of
numerous acquisitions over the past
12 years. In more recent years, the
rigid plastics industry in Australia has
seen a shift from what was previously
a highly fragmented model comprised
of numerous niche businesses, to a
significantly more consolidated industry.
pact International
pact International has a developing
presence in asia, which is expected to be
an area of revenue growth as the business
seeks to capitalise on the rising consumer
demand in this region. the Group currently
has five manufacturing plants located
within the high-growth markets of china,
the Philippines and Thailand, supported by
a regional procurement office in singapore,
with a plant in Jakarta scheduled to go
live in 2015. rigid plastics is one of the
most widely used packaging substrates
in asia, and the region is expected to
experience high growth.1 this is driven by
GDP growth, rising demand for consumer
discretionary items, a growing middle
income bracket, and global customers
seeking quality manufacturing providers
with acknowledged good manufacturing
practice (GMP) systems.
tHAIlAnD
SInGApore
1
MAnuFACturInG
plAnt
1
oFFICe
1 smithers Pira, “The Future of Global Packaging
to 2018”, Vlad savinov.
# to commence production in 2015.
15 pACt Group HolDInGS ltD
CHInA
3
MAnuFACturInG
plAntS
pHIlIppIneS
1
MAnuFACturInG
plAnt
InDoneSIA#
1MAnuFACturInG
plAnt#
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VICtorIA
Head Office &
Innovation Centre
17
MAnuFACturInG
plAntS
neW SoutH WAleS
13
MAnuFACturInG
plAntS
queenSlAnD
6
MAnuFACturInG
plAntS
neW ZeAlAnD
north Island
business Services
15
MAnuFACturInG
plAntS
neW ZeAlAnD
South Island
4
MAnuFACturInG
plAntS
AnnuAl report 2014 16
WeStern AuStrAlIA
3
MAnuFACturInG
plAntS
tASMAnIA
1MAnuFACturInG
plAnt
Industry Overview
Global Packaging Industry
ESTIMATED TOTAL GLOBAL PACKAGING
REVENUE BY PACKAGING TYPE (US$BN)2
according to smithers Pira (Pira) – the
worldwide authority on the Packaging,
Paper and Print industry supply chains,
the global packaging industry generated
approximately US$800 billion of revenue
in 2012. Pira forecasts this to increase
to approximately Us$1,002 billion by
2018. From a segment perspective, rigid
plastics is the leading growth segment,
with a demand compound annual growth
rate (caGr) of 5.3% over the 2012 – 2018
period.1
243.4
173.4
115.9
115.1
Paper and board
Rigid plastics
Flexible plastics
Metals
Glass
58.1
Flexible paper
43.1
Other
38.6
Flexible foil
12.6
Pact’s segments
Our Customers & Markets
A Diverse Customer Base
Competitive Markets
We have established and strong
relationships with a wide range of
blue chip customers across a breadth
of markets, particularly within the
consumer sector. Our top 30 customers
represented approximately 46% of
FY14 sales revenue.
A key highlight of our success has been
an ability to build deep and enduring
relationships with our customer base.
On average, our top 10 customers have
had relationships with our business in
excess of 10 years, demonstrating our
ability to develop strong, long-term
relationships. We have maintained
consistent relationships with our
customers, which has supported our
business growth over the past 12 years.
1 smithers Pira, “The Future of Global Packaging to 2018”, Vlad savinov.
2 smithers Pira, “The Future of Global Packaging to 2018”, Vlad savinov.
17 PACT GROUP HOLDINGS LTD
The sectors in which we operate are
subject to vigorous competition,
impacted by a range of factors including
price, service, product selection and
quality. We are constantly expanding our
diverse product portfolio across a variety
of packaging and product substrates to
minimise and, where possible, mitigate
competitive variables. Our product
diversity model creates earnings
resilience, with around 75% of revenue
generated from everyday consumer
staples with low volatility in demand and
robust growth. The remaining revenue is
generated from industrial products and
services. The breadth and diversity of our
customer base, sectors and geographies
in which we operate mean that we
are not reliant on any one customer.
This equates to a heightened level of
revenue and business stability in the
face of shifting market conditions.
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Consumer Packaging
END USE
Chilled food, dairy and beverages
TYPE OF
REVENUE
% OF FY14
REVENUE
Everyday
staple
45%
Within the consumer packaged goods
sector, key products we supply include
everyday consumer staples such
as milk, water, juice and detergent
bottles, ice cream containers, butter
and margarine tubs, meat trays, fruit
packaging trays, bakery containers,
and a variety of closures. These
products account for the majority of
our sales revenue and are relatively
stable with low volatility in annual
customer demand. This sector is
expected to experience steady growth
as a result of growing demand and a
shift towards rigid plastics packaging.
We continually improve our product
offering by developing innovative
packaging solutions.
Industrial Packaging
Key industrial packaging goods
we supply include lubricant bottles,
plastic and steel drums, paint pails,
shipping pallets and materials
handling containers servicing the
industrial, agricultural, construction
and other similar end use markets.
We have dedicated recycling and
manufacturing facilities across
Australia and New Zealand that convert
millions of kilograms of plastic waste
into recycled plastic resin, recycled
slip sheets and AS4702 underground
cable covers. For our customers,
this means that they are able to recycle
and redistribute their materials,
effectively closing the loop, assisting
them to meet their own sustainability
objectives.
Ambient food and other household consumables
Everyday
staple
24%
Industrial packaging
Industrial
22%
Materials handling
Industrial
6%
Sustainability
Industrial
3%
ANNUAL REPORT 2014 18
Our People
The Group is supported by a
highly experienced leadership
team which is focussed on
driving operational excellence
across all areas of the business.
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1. Raphael Geminder
Non-Executive Chairman
2. Brian Cridland
7. Penny Grau
12. Jim Barnes
General Counsel and Company
Secretary
General Manager – Human Resources
13. Paul Gedye
General Manager – Industrial
Products, New Zealand
14. Siobhan McCrory
General Manager – sales, Marketing
and Innovation
chief Executive Officer
8. Greg Beilby
3. Darren Brown
chief Financial Officer
General Manager – Shelf Stable
and Industrial
9. Brendon Chandulal
4. Mark Nothnagel
General Manager – Food and Beverage
General Manager – Technology
5. Wayne Williams
General Manager – Materials Handling
and Infrastructure
10. Eric Kjestrup
General Manager – Food Packaging,
New Zealand
6. Andrew Smith
General Manager – Sustainability
11. Raymond Purcell
General Manager – Sourcing
and Logistics
19 PACT GROUP HOLDINGS LTD
Performance
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ANNUAL REPORT 2014 20
Our Performance
Year in Review
Highlights
In the 2014
financial year,
Pact successfully
transitioned from
a private to a listed
public company.
The Company
continued its
positive growth
momentum in the
first year of listing
by exceeding
Prospectus
forecasts, achieving
solid year-on-year
growth, and
demonstrating
business diversity
and resilience.
13.5%
Exceeding Prospectus
profit forecasts
• statutory NPaT before significant items of $59.7 million, 13.5% ahead of Prospectus
• Pro-forma NPaT before significant items of $83.8 million, 0.3% ahead of Prospectus
CONTINUED GROWTH
MOMENTUM
• statutory EBIT before significant items of $147.0 million, up 4.8% on the prior year
• Pro-forma EBIT before significant items of $148.5 million, up 9.0% on the prior year
STRONG
CASH FLOW
PERFORMANCE
• Operating cash flow of $198.9 million, up 11.8% compared to the prior year
• Net debt reduced to $565.3 million, $9.7 million better than Prospectus
Successful transition
to listed public company
• With continued focus on innovation, resilience and growth
INAUGURAL
DIVIDEND
OF 9.5 CPS
• For the period ended 30 June 2014, franked to 65%, and in line
with the Prospectus forecast
21 PACT GROUP HOLDINGS LTD
Performance
Earnings
statutory sales for the financial year
were $1,143.2 million, up $39.5 million
or 3.6% compared to the prior year.
Pro-forma sales of $1,194.6 million
were up 3.0% on the prior year.
Sales were positively impacted by the
contribution of businesses acquired
at the time of the IPO, the effect of
favourable foreign currency translation
and the recouping of higher raw material
input costs. These were partially offset
by the loss of a major contract in the
second half of the 2013 financial year
and softer agricultural sales due to
drought conditions in Australia in the
first half of FY14.
statutory EBIT before significant items
was $147.0 million, up $6.7 million or
4.8% compared to the prior year, and
pro-forma EBIT before significant items
of $148.5 million was up 9.0% on the
prior year. Group EBIT was positively
impacted by growth in sales revenue,
the implementation of business
rationalisation savings, efficiency
improvements and lower depreciation.
These positive impacts were partially
offset by some contractual lags in
recouping higher raw material costs in
the first half of the year, along with costs
associated with businesses acquired at
the time of the IPO. Despite challenging
market conditions, EBIT margins also
remained stable year on year.
statutory net profit after tax (NPaT)
before significant items of $59.7 million
was 13.5% higher than the Prospectus
forecast of $52.6 million and up $25.8
million or 76.1% compared to the prior
year. statutory NPaT after significant
items of $57.7 million was also
significantly better than the Prospectus
forecast of $25.2 million and up
$12.6 million or 27.9% compared
to the prior year.
The major factors which contributed
to the improved NPaT after significant
items compared to the Prospectus
were lower than forecast post-IPO
financing costs, lower than forecast
swap termination costs associated with
the pre-IPO USD denominated loan
facility, and a tax benefit of $19.2 million
relating to a revaluation to market of
assets on the formation of a new tax
consolidation group.
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Pro-forma NPaT before significant
items of $83.8 million was also
better than the Prospectus forecast
of $83.5 million.
Cash Flows
Operating cash flow levels were strong
at $198.9 million, up 11.8% on the
prior year. cash flow margin (defined
as EBITDa less capital expenditure,
divided by sales revenue) was steady
at 14%.
Balance Sheet
strong cash flow resulted in lower
net debt compared to the Prospectus
and a continued robust balance sheet.
Net debt at 30 June 2014 was $565.3
million, which was $9.7 million lower
than the Prospectus forecast. Key
metrics also improved, with net debt
to pro-forma EBITDa before significant
items reducing to 2.8x and pro-forma
EBITDa before significant items to
pro-forma net interest at 6.0x.
Dividend
The Board has determined an
inaugural dividend of 9.5 cps for the
period ended 30 June 2014, franked to
65%, and in line with the Prospectus
forecast. The Board has a long-term
target payout ratio of 65% – 75% of
NPAT attributable to shareholders in
dividends. The Board intends to pay
an interim dividend in respect of the
half years ending 31 December and
final dividends in respect of full years
ending 30 June.
ANNUAL REPORT 2014 22
our performance
review of operations
AuStrAlIA – SAleS reVenue ($M)
InternAtIonAl – SAleS reVenue ($M)
pact successfully
achieved continued
revenue and eBIt
growth momentum
in the 2014
financial year.
the Company derives defensive
earnings through diversification across
geographies, customers and packaging
substrates, with proximity to customers a
strategic advantage. Approximately 75% of
revenue is derived from ‘everyday staple’
products, and Pact’s product diversity
provides resilience in earnings whilst its
innovation supports growth and ongoing
market leadership. the development and
fast commercialisation of new products,
underpinned by pact’s strong global
technology alliances have driven
an expansion in the customer base.
pact has a relentless focus on cost
control and driving productivity
gains and during the year continued
to improve productivity through
the automation of product lines and
consolidation of production sites across
the Group. A standalone It platform
was developed to drive additional
productivity benefits. The company also
has a proven track record in managing
resin price volatility, demonstrated in
year-on-year margin stability.
23 pACt Group HolDInGS ltD
FY14 Actual
FY14 Prospectus (statutory)
$822.7m
$829.5m
FY14 Actual
$320.5m
FY14 Prospectus (statutory)
$322.1m
AuStrAlIA – ebIt beFore
SIGnIFICAnt IteMS ($M)
(EBIT MarGIN %)
FY14 Actual
FY14 Prospectus (statutory)
InternAtIonAl – ebIt beFore
SIGnIFICAnt IteMS ($M)
(EBIT MarGIN %)
FY14 Actual
$64.8m (20.2%)
FY14 Prospectus (statutory)
$62.6m (19.4%)
$82.2m
(10.0%)
$83.5m
(10.1%)
Australia
International
pact International comprises the Group’s
operations in New Zealand, china,
the Philippines, singapore and Thailand.
pact International accounted for 28% of
the Group’s total sales revenue in FY14.
Sales revenue for pact International
was $320.5 million compared to $290.6
million in the prior year, an increase
of 10.3%, due to continued growth
in demand, consistently favourable
currency translation movements and a
positive contribution from the three Asian
businesses acquired at the time of the Ipo.
Pact International’s EBIT before significant
items was up 37.6%, similarly positively
impacted by the contribution of the
businesses acquired at the time of the IPO,
favourable currency translation movements
and business rationalisation savings.
pact International’s sales and eBIt before
significant items were also both materially
in line with the Prospectus, with an
improved eBIt margin year-on-year.
pact Australia comprises the Group’s
operations across australia, with
manufacturing plants in new South
Wales, Victoria, Tasmania, Queensland
and Western Australia. pact Australia
accounted for 72% of the Group’s total
sales revenue in FY14.
Despite a challenging macroeconomic
environment, Pact australia’s sales
revenue increased 1.2 % to $822.7 million,
compared to $813.1 million in the prior
year. Sales were positively impacted by
the recouping of higher raw material and
input costs, and the contribution of the
Australian business acquired at the time of
the IPO. However, revenue was adversely
impacted by the loss of a major contract,
which occurred in the second half of the
prior financial year, and soft agricultural
sales during the first half of FY14 due
to drought conditions in rural Australia.
Pact australia’s EBIT before significant
items was down 11.8% year on year,
adversely impacted by lags in passing
on higher raw material input costs to
contracted customers and the effect
of the loss of the contract noted above.
these effects were partially offset by
business rationalisation savings and
efficiency improvement programs.
pact Australia’s sales and eBIt before
significant items for the financial year
were both materially in line with the
Prospectus, with an improved EBIT margin
in the second half of the financial year.
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THE LIGHT PROOF™ BOTTLE
A WORLD FIRST!
The Pact team worked with Fonterra Co-operative
Group Ltd (Fonterra) in New Zealand to develop
the world-first Light Proof™ milk bottle, part of its
Anchor dairy range. Even though opaque cartons
and bottles already exist, up to 25% of light still
finds its way through the packaging and into the
product. The engineering behind the Light Proof™
bottle is simple; it starts with an induction foil
sealed cap that keeps light out at the bottleneck and
finishes with three light-protective layers that make
up the body. A black layer is sandwiched between
two white layers to guarantee that the content of
the bottle is 100% shielded from light.
The Light Proof™ bottle is made from the same
plastic as normal milk bottles (high density
polyethylene), which means that it’s still recyclable.
Three layers don’t translate to three times the
amount of plastic either. Each layer is created
simultaneously, resulting in a single, featherweight
structure that’s less than one gram heavier than
standard milk bottles. We are not just proud of our
Light Proof™ bottle because it’s a world first, we’re
proud because it preserves both the nutritional
value and the freshness of milk.
The accolades:
• Finalist 2014 World Dairy Innovation awards
• World Tour by sial Product awards
– Best Product from New Zealand
• 2014 Good Design selection award
• 2013 supreme Vendor of the Year (Fonterra)
• 2013 Winner of Excellence in supporting New
Product Development
100%
SHIELDED FROM LIGHT
ANNUAL REPORT 2014 24
THE LIGHT PROOF™
BOTTLE
Innovation & Awards
our Innovation Model
We work with some of the world’s biggest brands,
building, designing and engineering innovative
packaging solutions. Our team of creative consultants,
and our hard-wired technical engineering and design
specialists are experienced in taking creative concepts
into the commercial world. We deliver a tailored solution
to every challenge – whether it be a small step that
kick-starts the journey to renewed revenue or game
changing innovation that drives competitive advantage.
Create
Source
engineer
Inspired thinking for Strategic
problem Solving
Access to World-leading
technologies
Seamless transition from
Concept through to reality
the innovation process starts with category
mapping to gain an insight into the
competitive environments in which our
customers operate. We identify and dissect
the key influences of brand, product,
packaging design and retail navigation.
Throughout the process, the consumer
remains the central focus so we can better
understand their behaviour and the
ways in which we can influence this. rich
insights are extracted and create the basis
for opportunity identification, which then
forms the platform for strategic innovation.
We have people dedicated to trawling
the globe securing rights to licences and
technologies so we can deliver access to
world-class solutions and designs. As part
of this process, we assess other ways in
which we can utilise these technologies to
develop bespoke solutions. our innovation
team works alongside our technical team
to establish the pathway to develop a
solution. this collaborative approach
ensures that we look at a challenge from
all angles to ensure that if we don’t already
hold the solution, we can find a way to
make it happen.
Concepts are transitioned from sketched
illustrations on a page to a full 3D
rendering and tool design. Having an
end-to-end process means that each
project has a constant and consistent
eye monitoring success, pressure testing
and identifying potential hurdles.
our engineers manage all of the steps
involved in taking the project from
the conceptual phase through to
implementation.
25 pACt Group HolDInGS ltD
Awards
We are widely recognised for our Group-wide
innovation and dedication to developing products
and processes that reflect consumer insights.
The Company won multiple design and innovation awards in the 2014 financial
year for products and services from customers and industry bodies.
ACQ Global Awards 2014
– company of the Year (Manufacturing)
Award for developing new aerosol
markets – Australian Aerosol Association
Acquisitions International 2014
Business Excellence Awards
– Manufacturing Team of the Year,
Australia
Aerosol Product of the Year 2014
– Australian Aerosol Association
BRW – Most Innovative Company list 2013
World Tour by Sial Product Awards
– Best Product from New Zealand
Supreme Vendor of the Year
– Fonterra 2013
2014 World Dairy Innovation Awards
(Finalist) – anchor’s Light Proof™ bottle
Winner of Excellence in Supporting New
Product Development – Fonterra 2013
Good Design Selection Award
– anchor’s Light Proof™ bottle
2013 Supplier of the Year
– Yates (Dulux Group)
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ANNUAL REPORT 2014 26
INNOVATION CASE STUDY
RMP NOISEWALLS
When Southern Way was awarded the
contract to construct the $759 million
Peninsula Link in Victoria, it approached
ARM Architecture to consider alternate
materials to standard timber, concrete
and hebel products. as a result,
rotational moulding polyethylene
(rMP) panels were selected. The rMP
panels had to meet strict design criteria
including wind loadings and noise
reduction.
Pact undertook extensive research,
prototyping and testing to meet the
numerous and rigorous specification
requirements of the project. The RMP
panels are heavy-duty rotary moulded
plastic panels supported by a patented
system including internal
steel reinforcement.
The lightweight panels are designed to
reduce noise as it passes through the
material by absorbing and reflecting
sound through a hollow core while the
polymer surfaces are supported by
galvanised steel beams and a unique
mounting system. The panels have an
extended design life.
Our patented and world-first
polyethylene noise panels led to the
success in winning the contract for a
27km stretch of Peninsula Link. Over a
12-month period, we produced over 5,000
panels (25,000 square metres). as a result
of our work on Peninsula Link, we have
been selected to supply panels to the
new M5 freeway in Sydney. Potential
future opportunities have been
identified in australia and overseas.
27 PACT GROUP HOLDINGS LTD
Strategy & Future Focus
Aspiration
the Group aspires to be a $5-billion
company with operations in five regions
within five years. This aspiration is a
light on the hill and signifies a desire
for growth and expansion and a
commitment to growing the business.
this is underpinned by a strategic focus
on innovation, resilience and growth.
pact has a robust current business
model that incorporates cutting
edge technology platforms, a diverse
product portfolio, and facilities that
can be expanded regionally and
through transformational merger
and acquisition activity.
Growth Strategy
Innovation
pact has a multi-tiered approach to
achieving organic growth through the
production of best-in-class products; by
driving increased substrate conversion
towards rigid plastics solutions; and
leveraging innovation capabilities to
continually improve products, processes
and costs. There is an intensified
focus on co-ordinated customer sales
management and cross-selling strategy
to maximise the breadth of product and
service offering to new
and existing customers.
GroWtH StrAteGY
i o n
v a t
o
In n
In 2010, a standalone innovation centre,
Inpact Innovation, was established
to assist pact customers to win in
their categories. Inpact comprises a
technical team of industrial designers
and engineers, inventors and marketing
specialists who investigate customer
sentiment, market trends, international
best practice, sustainable solutions and
the latest technology. since inception,
Inpact has worked alongside customers
to develop innovative solutions that
achieve tangible benefits across areas
including design and production to
achieve competitive advantage.
the increased demand for product
substitution is driven by consumer
demand for more sophisticated
packaging, particularly within the
consumer segment. producers of these
products are increasingly demanding
lower-cost, longer-life, recyclable
solutions that incorporate barrier and
closure systems, sophisticated designs
and enhanced graphics. pact’s leading
technology, access to global IP through
licence agreements and innovation
expertise mean that business is
well positioned to achieve organic
growth.
pact will continue to lead with innovation
and aggressively pursue opportunities
for growth through producing best-in-
class products and driving substitution
towards rigid plastics solutions
(substrate conversion).
Growth
there is a clear strategy to capitalise on
opportunities within the rigid plastics
and substrate conversion markets to
drive organic growth. rigid plastics’
share of market continues to increase
as rigid plastics replace traditional
materials such as glass, tin, timber, fibre,
paper and even concrete alternatives.
Pact has identified opportunities for
organic growth and has the technical
capability to deliver tailored packaging
solutions across multiple products
and substrates. Within the industrial
packaging sector, substrate conversion
opportunities continue to expand,
particularly with the introduction of
returnable plastic crates or multi-trip
shoppers. the Group is fully equipped to
service these end-to-end requirements.
In australia, Pact plans to leverage its
leadership in innovation to increase
sales to new and existing customers.
Customers are increasingly demanding
innovative packaging, labelling and
performance features. the Group is well
placed to benefit from these trends in
customer preferences and will also
seek to penetrate areas of the packaging
market where substrate substitution
is occurring.
In asia in FY15, Pact expects to complete
construction of a new manufacturing
plant in Jakarta, Indonesia to supply
personal care packaging to a
multi-national customer. the Company
has executed a joint venture heads of
agreement for the manufacturing of
high value-add proprietary closures in
Thailand, providing a regional offering
for its global customers and delivering
innovative closure capability to
the region.
AnnuAl report 2014 28
Future
focus
e silience
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resilience
the Group manufactures approximately
22,000 product variants to supply the
everyday staple and industrial markets,
with around 75% of revenue generated
from everyday consumer staples.
this ensures that there is no reliance on
any one customer or any one segment,
creating a high level of resilience
within the business.
this is underpinned by a disciplined
approach to achieving ongoing
efficiency benefits through
consolidation, simplification and
rationalisation across the Australian
and International operations.
the Company has a proven history of
achieving improved performance and
reduced cost of operations, primarily
through driving efficiencies across
the business. the future focus is on
driving efficiencies through achieving
procurement economies of scale,
investment in technology for increased
automation, locating manufacturing
plants strategically close to customers,
and streamlining the manufacturing
process to deliver products at a lower
cost and within shorter timeframes.
FootprInt optIMISAtIon
AnD plAnt rAtIonAlISAtIon
optimise manufacturing
footprint to best serve
customers
pursue plant consolidation
and greenfield site
development
proDuCtIVItY
SIMplIFICAtIon
Identification, promotion and
development of business leaders
Develop next generation
technology to retain and develop
new customer relationships
relentless focus on operational
and corporate efficiency
Identify and leverage
best practice systems
to provide lowest cost platform
Manufacturing technology
It platform
Centralised shared services
29 pACt Group HolDInGS ltD
Mergers & Acquisitions
Pact has undergone significant
transformational change, and deliberate
and strategic growth, since its inception
in 2002. originally comprised of
15 manufacturing plants and $223
million of sales revenue, Pact has
successfully integrated 39 acquisitions
over the past 12 years to become a
leader in the packaging industry with
64 manufacturing plants across five
countries. these acquisitions have
delivered significant synergies through
plant rationalisation and productivity
gains across the Group.
this exponential growth has been driven
by a highly experienced management
team which has maintained a strong
future focus to build a diverse yet
robust business. pact actively seeks out
synergistic acquisition opportunities
that complement the existing business
or that will drive product, customer or
geographic expansion.
pact takes a disciplined approach
to evaluating acquisitions to ensure
that they are value accretive and in
the best interests of shareholders.
Generally, acquisitions should meet an
aspirational 20% return on investment
within three years. Acquisitions fall
into three focus areas: adjacent and
overlapping industries; those that provide
geographical expansion; or those with
potential to drive transformational change.
Sulo has operated in Australia for
more than 30 years and has a diverse
customer base. Sulo in new Zealand
manufactures mobile garbage bins
(MGBs), primarily working to supply
MGB products, with a secondary
focus on the manufacture and supply
of custom moulded products. this
acquisition complements the Company’s
growing sustainability, materials
handling and infrastructure division.
latest Acquisition
In august 2014, Pact acquired sulo MGB
in Australia and Sulo in new Zealand.
Sulo is the leading manufacturer of
plastic waste and recycling bins in
australia and New Zealand, producing
approximately two million bins annually
and other similar products to service
local government and waste collection
companies.
391
ACquISItIonS
SuCCeSSFullY
InteGrAteD
Acquisition
of a plastic
packaging
company
in Australia
focussed on
the consumer
packaging
segment
Acquisition
of a plastic
consumer
packaging
company in
new Zealand
establishment
of a
procurement
office in
Singapore
establishment
of a thailand
greenfields
closures
manufacturing
plant
Acquisition
of a large
rigid plastics
packaging and
material handling
company
operating
in australia, New
Zealand and Asia
Acquisition
of leading
manufacturer
of mobile
garbage bins
in Australia
and new
Zealand
2002
2003
2004
2005 2006 2007 2008
2009
2010 2011 2012 2013 2014
2015
pact formed through
the acquisition of a
rigid plastics and steel
packaging company
predominantly focussed
on industrial markets
establishment
of a plastic
consumer
packaging
operation in
the philippines
Acquisition
of the largest
private
dairy bottle
manufacturer
in Australia
Acquisition
of a leading
consumer
goods
plastic
packaging
company
in Australia
Consolidation
of operations
through
acquisitions
at Ipo
1 Includes the acquisition of Sulo in August 2014.
AnnuAl report 2014 30
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Disciplined Approach to M&A
key Criteria for Assessing
Acquisitions Include:
unWAverInG
FoCuS
pact has an unwavering focus
on acquisitions, with the aim
of growing the footprint in
chosen geographies within
australia, New Zealand and
across Asia.
proVen
eXperIenCe
With a proven talent
in identifying unique
opportunities, Pact has had
undeniable success in the
integration of new businesses.
reSultS
DrIven
Supported by a focus on results
and rigorous performance
measurement, engendering full
accountability for each divisional
senior manager.
BeSt IntereStS
of shareholders
ASpIrAtIonAl
20% roI
within 3 years
WItHIn CHoSen GeoGrApHIeS
AuStrAlIA
neW ZeAlAnD
AnD ASIA
Core
business
and
adjacent
industries
31 pACt Group HolDInGS ltD
DIVerSe
CuStoMer BASe
Governance
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ANNUAL REPORT 2014 32
Corporate responsibility
resource Management
the Company is subject to the reporting
and compliance requirements of both the
Energy Efficiency Opportunities act 2006
(cth) and the national Greenhouse and
energy reporting Act 2007 (cth).
the Energy Efficiency Opportunities
Act 2006 requires the Group to
assess its energy usage, including the
identification, investigation and evaluation
of energy saving opportunities, and
to report publicly on the assessments
undertaken. as required under this act,
we have submitted all annual reports and
Government reports as required, and also
submitted our Assessment plan for the
second cycle. please note that as of 1 July
2014, the Energy Efficiency Opportunities
Act is under review by the Commonwealth.
the national Greenhouse and energy
reporting Act requires pact to report its
annual greenhouse gas emissions and
energy use. We have submitted all annual
reports, and are due to submit our next
report by 31 october 2014.
Improvements in environment
performance
pact is a signatory to the Australian
packaging Covenant. the Australian
packaging Covenant Action plan is a key
element in guiding decision-making and
activity across the business in relation to
ongoing improvements in the Company’s
environmental performance.
as part of our commitment to the covenant,
we have commenced assessment of our
products against the Sustainable packaging
Guidelines. the assessments are stored on
a database along with product information.
The database is designed to be used to find
a range of information about the products
including litter components, opportunities
for lightweighting, recyclability and
label information. this can be used in
discussion with our customers.
our other commitments include ensuring
that all sites have recycling programs in
place, and increasing the recycled content
of products, where appropriate.
our Commitment
to Sustainability
pact is committed to sustainability
and minimising the environmental
impacts of our operations. our vision
is ‘to enrich lives every day through
sustainable packaging solutions’.
this vision encompasses the entire
life cycle of our packaging, from our
suppliers through to our customers
and the end consumer. the Group
also provides a range of sustainability,
recycling and environmental services
to assist our customers in reducing the
environmental impact of their product
packaging and related processes.
Packaging plays a key role in society,
allowing us to transport, store and
consume a huge range of products.
at Pact, we look at how packaging is
used and try to find better ways of
producing more sustainable packaging.
A key factor in adopting a sustainable
approach is understanding the impact
packaging has on the environment.
We utilise a suite of dedicated tools to
help us assess our packaging against
sustainability criteria and determine
how best to reduce environmental
impacts, measure progress and
identify marketing opportunities.
these sustainability tools include:
• Environmental Life cycle
assessments (Lca)
• Packaging Impact Quick Evaluation
Tool (PIQET) assessments
• recycling assessments
• Packaging redesign to improve
environmental performance.
environment & Compliance
Management
pact operates under a Corporate
environmental Management System
(EMs) aligned with IsO 14001 and under
an environmental policy. the eMS is
fundamental to achieving compliance
with environmental regulations in all
jurisdictions in which we operate. We
intend to roll out similar environmental
practices and compliance procedures
for the Group’s Asian operations within
the next 12 months. Sites are audited
internally on an annual basis.
Where applicable, licences and consents
are in place in respect of each site.
An interactive database is further used
to ensure compliance and completion
of all required actions.
33 pACt Group HolDInGS ltD
Workplace Health & Safety
Working Towards Zero Harm
LOST TIME INJURY FREQUENCY RATE
28.8
The strategic initiative, Towards Zero
Harm, was developed and launched
during FY14 to improve Pact’s safety
program and performance by increasing
consistency and management of health
and safety across our sites.
Commencing with an extensive review
of the Group safety management
system with independent input from
Ernst & Young, implementation of the
comprehensive system and standards
has commenced and will continue at
each of Pact’s sites during FY15.
To provide further support for
implementation of the new standards
and assurance to management, a revised
audit program has been developed.
All Pact Group auditors have undergone
external accredited auditing training
to continue to build internal auditing
capability.
An online reporting system has been
implemented to ensure real-time
reporting, visibility and immediate
management of incidents and injuries.
To support the new safety management
system, an extensive training program
has been implemented and will continue
in FY15. In reviewing the enhancements
to the safety management system,
the Board of Directors has taken
into consideration the due diligence
responsibilities and duties under the
Australian Model Work Health and
Safety Act.
17
15.1
12.2
10.3
10.3
9.7
6.1
7.2
5.8
4.0
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
Workplace Health & Safety
Performance
Pact’s safety performance is traditionally
measured by the Lost Time Injury
Frequency rate (LTIFr), calculated as the
number of workplace injuries resulting
in at least one full work day lost per
million hours worked, over a rolling
12-month period.
The LTIFr for FY14 (as at 30 June 2014)
was a record low of 4.0 for the Group
and, as the above graph demonstrates,
reflects a sustained improvement.
With a comprehensive review
of workplace health and safety
systems across the business and our
implementation of the Towards Zero
Harm strategy, for FY15 we have
expanded the headline reporting
metric to include total recordable
incidents, calculated as lost time
injuries and medically treated injuries,
as measured by the Total Recordable
Injury Frequency rate (TrIFr).
Pact is committed to workplace health
and safety and treats any incidents
which occur seriously. We seek to
identify any lessons that can be learnt
from such incidents and apply them
across relevant sites within the Group.
ANNUAL REPORT 2014 34
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Company Commitments
Company ethics & Behaviour
pact aims to maintain and promote
an appropriate standard of ethical
behaviour in conducting business and to
behave with integrity in all dealings with
customers, shareholders, government,
employees, suppliers and the community.
the Code of Conduct outlines the
Company’s expectations of employees and
representatives as to how they behave
and conduct business in the workplace.
the Code of Conduct is available on our
website www.pactgroup.com.au.
During FY14, VIP Packaging and alto
brands were signatories to the united
Nations Global compact (UNGc).
the unGC seeks to align the operations
and strategies of companies with
10 universally accepted principles
in the areas of human rights, labour,
environment and anti-corruption.
Future commitment to these standards
of responsible business practice will
be reported under pact Group.
thirteen sites within the Group are
registered as B members with Supplier
Ethical Data Exchange (sedex) to enable
transparency and management of
responsible and ethical supply chain
activities for our customers. the intention
is to register the wider Group as a
member of Sedex.
reward & recognition
platform
In 2012, Pact launched applause –
our reward and recognition platform to
acknowledge and encourage behaviours
that drive innovation and best practice
within our business. Applause is designed
to recognise individuals from all parts of
the business, encourage people to voice
their great ideas and, more importantly,
provide the necessary resources to embed
those ideas into our business. Applause
was recognised by BrW Magazine in 2013
as instrumental in making pact one of
Australia’s top 50 companies for innovation
excellence. To date, we have awarded over
$120,000 to more than 100 employees.
Corporate Social responsibility
pact is enthusiastic about corporate social
responsibility (csr), and throughout the
past year we have supported a number
of programs and events across employee
health and wellbeing, the community,
employee engagement, diversity and
environment initiatives.
employee Development
& recognition
Community
training & Development
the implementation of a new It platform
will expand the access and use of the
online training programs by staff in
the business.
Further development and career
considerations are prompted as part
of the bi-annual performance appraisal
for all monthly staff (refer to the
Employee Engagement section).
a range of specific workplace training
and certification programs continue
to operate across all factories.
35 pACt Group HolDInGS ltD
pact respects the need to contribute to
the communities in which we operate.
It’s important to build a spirit of
generosity among employees and
support causes that are important to
our people and the broader organisation.
this builds a sense of community and
teamwork, and contributes to creating
a more rewarding and productive
workplace.
pact has a donation matching scheme
and actively participates in local
communities through corporate
investment, sponsorship, fundraising
and employee participation.
employee engagement
employee feedback is critical to
understanding the issues affecting
employees across any organisation.
pact commissions an annual employee
engagement survey where issues
are identified and worked through as
appropriate with a view to improving
levels of employee engagement.
the bi-annual performance appraisal for
monthly staff provides the opportunity
for a two-way conversation about career
and performance, whilst a range of
workplace committees operate in most
factories across the Group to keep
the dialogue open and ongoing with
employees at all levels.
Health & Wellbeing
In addition to workplace health and safety
programs aimed at incident and injury
prevention, the Group acknowledges
the overall health and wellbeing of our
employees as a significant contributing
factor to the culture and performance of
each workplace.
Over the past year, we have supported
a number of health and wellbeing
programs to promote healthy living
among our employees and their families.
these programs have targeted the
physical and social issues at specific
workplaces with programs initiated to
improve physical health and fitness,
diet and nutrition, as well as smoking
and alcohol management.
Corporate Governance Statement
the Board recognises the importance
of good corporate governance and its
role in ensuring the accountability of the
Board and management to shareholders.
the Board is concerned to ensure
that the Group is properly managed
to protect and enhance shareholder
interests and that the company,
its Directors, officers and employees
operate in an appropriate environment
of corporate governance.
the Board has adopted a corporate
governance framework comprising
principles and policies that are consistent
with the ASX Corporate Governance
Council’s Corporate Governance
principles and recommendations
with 2010 amendments (2nd edition)
(asX recommendations).
this Corporate Governance Statement:
• Outlines the key aspects of the Group’s
corporate governance framework;
•
•
Is structured and numbered in order
of the principles set out in the ASX
recommendations;
Includes cross references to other
relevant information in this Corporate
Governance Statement on the
company’s charters, policies and
codes, details of which are available in
the Corporate Governance section in
the Investors section of the Company’s
website www.pactgroup.com.au/
investors/corporate-governance; and
• should be read in conjunction
with the Directors’ report and the
remuneration report (contained
in the Directors’ report), as those
reports also contain information
required to be included by the ASX
recommendations.
noting that the Company was listed
on the asX on 17 December 2013,
the Board considers that, unless
otherwise stated, the company’s
corporate governance framework and
practices have complied with the ASX
recommendations from this date,
except as detailed in this Corporate
Governance Statement.
principle 1 –
lay solid foundations for
management and oversight
role of the board and management
the Board is responsible for the
corporate governance of the Company.
the Board provides strategic guidance
for the Company and effective oversight
of management.
the principal role of the Board is to:
• represent and serve the interests
of shareholders by overseeing and
appraising the company’s strategies,
policies and performance;
• Protect and optimise company
performance and build sustainable
value for shareholders in accordance
with any duties and obligations
imposed on the Board by law and
within a framework of prudent and
effective controls that enable risk to
be assessed and managed;
• set, review and ensure compliance
with the Company’s values and
governance framework; and
• Ensure that shareholders are
kept informed of the Company’s
performance and major developments
affecting its state of affairs.
AnnuAl report 2014 36
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Corporate Governance Statement
The Board’s key responsibilities /
functions include:
Matters which are specifically reserved
for the Board or its Committees include:
principle 2 – Structure
the Board to add value
• selecting, appointing and evaluating
the performance of, determining
the remuneration of, and planning for
succession of the Ceo;
• contributing to and approving
management development of
corporate strategy, including
setting performance objectives
and approving operating budgets;
• reviewing, ratifying and monitoring
systems of risk management and
internal control and ethical and legal
compliance;
• Monitoring corporate performance
and implementation of strategy and
policy; and
• approving major capital expenditure,
acquisitions and divestitures, and
monitoring capital management.
the Company has established the
functions reserved for the Board, and
these are contained in the Board Charter
and the Group’s ‘Matters reserved to the
Board and Delegated Authority limits
Policy’. The cEO and senior executives,
who are accountable to the Board,
are responsible for matters that are
not specifically reserved to the Board,
primarily being the day-to-day operations
and management of the Group.
• appointment of a chair;
• appointment and removal of the cEO
and the CFo;
• appointment of Directors to fill a
vacancy or as an additional Director;
• Establishment of Board committees,
their membership and delegated
authorities;
• approval of dividends;
• approval of major capital expenditure,
acquisitions and divestitures in excess
of authority levels delegated to
management;
• calling of meetings of shareholders; and
• any other specific matters nominated
by the Board from time to time.
Senior executive
performance evaluation
the performance of senior executives
is evaluated every six months by the
Ceo. this evaluation also includes the
establishment of their forward objectives.
at the mid-year review, a discussion takes
place between each senior executive and
the Ceo. the key purpose of the mid-year
review is to track progress against the
objectives and to determine action plans
to ensure achievement of objectives to the
extent considered necessary. the full-year
review, which occurs in July of each year,
assesses the full-year performance of the
senior executives against their objectives
as well as against the corporate values of
the Company.
performance evaluations for senior
executives, which accord with the process
described above, took place in July 2013
for the 2013 financial year and in July
2014 for the 2014 financial year.
board Composition
pact’s Constitution provides that the
Board not comprise more than seven
Directors. the Board currently comprises
six Directors, being five Non-Executive
Directors and the Ceo.
For more information on each Director
(including their experience, expertise,
qualifications and terms of office), see
the Directors’ report on pages 43 to 45.
the Board considers it important to
maintain an appropriate mix of skills,
experience, expertise and diversity in its
membership to ensure that it is able to
meet the present and future needs of
the Company. the Board has developed
a Board skills matrix. the skills that the
Board looks to achieve and maintain
include business and commercial expertise,
manufacturing industry experience,
strategy development, corporate
management, financial and accounting
expertise and good judgement.
It is the Board’s policy that there
should be a majority of independent,
non-executive Directors.
In general, Directors will be considered to
be ‘independent’ if they are not members
of management and they:
• are not material shareholders of the
company, or officers of, or otherwise
associated directly or indirectly with,
material shareholders of the Company;
• Have not within the last three years
been employed in an executive
capacity by the Company or another
Group member;
37 pACt Group HolDInGS ltD
Corporate Governance Statement
The Non-Executive chairman, Mr raphael
Geminder, holds approximately 40%
of the issued capital of the Company.
accordingly, the Non-Executive
Chairman is not an independent Director.
As outlined in the prospectus dated
27 November 2013, the Board believes
that Mr Geminder is the most appropriate
person to lead the Board as non-executive
Chairman and that he is able to and does
bring quality of judgement to all relevant
issues falling within the scope of the
role of Chairman and that the Group as
a whole benefits from his long-standing
experience of its operations and business
relationships.
the Board is conscious that there
are a number of related party dealings
between the Group and interests
associated with Mr raphael Geminder,
the non-executive Chairman.
these related party transactions were
disclosed in the prospectus dated
27 november 2013 and are also
disclosed in the Financial Statements
for the year ended 30 June 2014.
as a consequence, the Board has put
in place a related party protocol
policy to monitor and govern these
transactions and to ensure compliance
with the Corporations Act.
• Have not within the last three years
been a principal or employee of a
material professional adviser or
material consultant to the Company
or another Group member;
• are not a material supplier to or
customer of the Company or other
Group member or an officer of or
otherwise associated directly or
indirectly with a material supplier
or customer;
• Have no material contractual
relationship with the Company or
another Group member, other than
as a Director of the Company; and
• are free from any interest, business
or other relationship which could,
or could reasonably be perceived
to, materially interfere with the
Director’s ability to act in the best
interests of the Company.
the Board considers the materiality of any
given relationship on a case-by-case basis
and has adopted materiality guidelines
to assist in this regard which are set out
in attachment 1 to the Board charter,
which can be accessed in the Corporate
Governance section in the Investors
section at www.pactgroup.com.au/
investors/corporate-governance.
In general, the Board will consider
holding 5% or more of the Company’s
shares to be material.
The Board will also consider an affiliation
with a business which accounts for
less than 5% of the relevant base to
be immaterial for the purposes of
determining independence. the Board
views independence of each Director in
light of interests disclosed to the Board
from time to time.
board Committees
to assist the Board in meeting its
responsibilities, the Board currently
has established the following two
committees:
• The Nomination and remuneration
committee (Nrc); and
• The audit, Business risk and
compliance committee (aBrcc).
the members of these Committees are
set out below:
nrC
AbrCC
Chairman
peter
Margin
tony
Hodgson
Members
lyndsey
Cattermole
lyndsey
Cattermole
raphael
Geminder
peter
Margin
Jonathan
ling
each Committee is structured so that it:
• consists of a majority of independent
Directors;
•
Is chaired by an independent
Director; and
• Has at least three members.
the ABrCC is also structured so that it
consists only of non-executive Directors.
the Charters for each of the nrC and
the ABrCC can be accessed in the
Corporate Governance section in the
Investors section at www.pactgroup.
com.au/investors/corporate-governance.
AnnuAl report 2014 38
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Corporate Governance Statement
board & Committee Meetings
Independent professional Advice
As they relate to remuneration matters:
Details of the number of Board and
Committee meetings held during the
2014 financial year and the attendance
of Directors and members of the
Committees respectively are set out
in the Directors’ report on page 46.
board & Committee
performance evaluation
the evaluation of the Board and its
Directors and the evaluation of the
Committees will take place in alternating
years. Directors will provide written
feedback in relation to the performance
of the Board, individual Directors and
Committees against a set of agreed
criteria. each Committee will also be
required to provide feedback on its
own performance. Feedback will be
collected by the Chairman of the Board
via the Company Secretary or an external
facilitator and discussed by the Board.
As the majority of the members of
the current Board were appointed in
november shortly prior to the Company’s
listing in December 2013, it has been
agreed that the alternating Board and
Committee performance evaluation will
commence in the 2015 financial year.
39 pACt Group HolDInGS ltD
Independent professional advice may
be sought by a Director in accordance
with the terms of their appointment
agreement.
• review and recommend to the
Board remuneration and contractual
arrangements for the Ceo and
executives reporting to the Ceo;
each non-executive Director can seek
professional advice provided that:
•
It is advice in relation to the discharge
of the Director’s responsibilities to the
Company;
• The chairman must be notified before
advice is sought;
• any advice obtained may be given to
the Board if considered appropriate by
the Chairman; and
• The company will reimburse the
Director’s reasonable expenses where
the above procedures have been
followed.
nomination & remuneration Committee
the responsibilities of the nrC are
as follows:
As they relate to nomination matters:
• review, assess and make
recommendations to the Board on
the desirable size, composition,
competencies and attributes of
the Board;
• review and recommend to the Board
succession plans regarding the
Chairman and the Ceo;
• review and recommend to the Board
membership of the Board including
recommendations for the appointment
and re-election of Directors;
• Establish policies and procedures and
make recommendations to the Board
for the selection, appointment and
removal of the Ceo; and
• assist the Board in assessing the
performance of the Board, its
Committees and its members.
• review, at least annually, the
performance of the Ceo against
individual and Company targets;
• review the senior executives’
performance assessment processes
and results and review and approve
short-term incentive strategy,
performance targets and bonus
payments;
• review and recommend to the Board
the establishment of any employee
equity incentive plan; and
• review and recommend to the
Board remuneration arrangements
for the Chairman and non-executive
Directors.
principle 3 –
promote ethical and
responsible decision-making
Code of Conduct
the Company is committed to ethical
behaviour and operating with integrity
in all business practices. All Group
employees, Directors, contractors,
suppliers and volunteers, when providing
products or services to the Group,
must comply with the obligations
under the code of conduct (code).
the Code is central to the framework
of the Group’s compliance program.
the Code is complemented by a suite of
additional policies and procedures (e.g.
Whistleblower Policy, anti-bribery and
corruption Policy, Privacy Policy, Dealing
in securities Policy etc.).
the Code addresses how the Group
does business and focusses on ethics,
integrity and reputation; compliance
with laws and regulations; commitment
to quality; conflicts of interest; bribes,
gifts and commissions; privacy; and
public communications and disclosures.
Corporate Governance Statement
the Board set its measurable objectives
as required by the Diversity policy in April
2014. those measurable objectives are:
• Each monthly staff recruitment
assignment requires at least
one female candidate to be
recommended for interview and / or
job ready process;
• review the annual salary review
outcomes for monthly staff to
ascertain whether women receive,
on average, not less than the same
percentage increase in remuneration
as males across the Group; and
•
Include specific questions in the
next Group employee engagement
survey to identify whether gender
is a workplace issue for employees
across the Group.
• The Group lodged its annual public
report with the Workplace Gender
Equality agency (WGEa) including
detail on gender pay equity for the
first time. It has been advised by the
WGeA that it achieved compliance
status; and
• consideration is being given to the
nature of the questions which will
be included in the employment
engagement survey to identify
whether gender is a workplace issue
for employees across the Group.
It is currently proposed that that
survey will be issued in october.
the following table shows the
representation of men and women
at various levels within the Group
workforce as at 30 July 2014:
noting that the measurable objectives
were only set in april 2014, there
has been minimal progress towards
achieving the objectives. the focus
has been to establish the systems and
processes required to ensure that the
Group is able to manage, monitor and
achieve the objectives. Since setting the
measurable objectives:
• External recruiters are being
requested to source female
candidates for each monthly
staff recruitment assignment;
• The annual salary review now
includes gender detail to enable
the identification of any gender
pay equity imbalance, with a view
to correcting / minimising any
such imbalance as part of the final
approval process with the Ceo;
level
proportion
of women
%
proportion
of men
%
non-
executive
Directors
Senior
executives*
other
levels
total
20
15
31
30
80
85
69
70
* senior executives are defined as
the direct reports to the chief Executive Officer.
the Code also focusses on how the Group
behaves in the workplace and addresses
matters such as equal opportunity and
discrimination; workplace health and
safety; improper use or theft of Group
property and securities trading.
Finally, it deals with how the Group
interacts with the community and
addresses the Group’s contribution to
the community, the environment and
outside activities and public office.
the Code encourages employees and
others to report any behaviour or
situation where there is a genuine belief
that it may breach the code, Group
policies and procedures, or the law.
the Company is committed to
ensuring that those who do so are not
disadvantaged or discriminated against
when making reports in good faith. the
Company has a Whistleblower policy
which contains appropriate protections
for those who report such behaviour.
the Company’s Code can be accessed
in the Corporate Governance
section in the Investors section at
www.pactgroup.com.au/investors/
corporate-governance.
Diversity policy
the Company recognises that people are
its most important asset and is committed
to the maintenance and promotion of
workplace diversity. encouraging diversity
drives the company’s ability to attract,
retain and develop the best talent, create
an engaged workforce, deliver the highest
quality services to its customers and
continue to grow the business.
the Board approved a Diversity policy
in January 2014. the Company’s vision
for diversity incorporates a number
of different factors, including gender,
ethnicity, disability, age and educational
experience. at a Board, senior executive
and senior management level, gender
has been identified as a key area of
focus for the Company. the Company’s
Diversity policy can be accessed in the
Corporate Governance section in the
Investors section at www.pactgroup.com.
au/investors/corporate-governance.
AnnuAl report 2014 40
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Corporate Governance Statement
principle 5 – Make timely
and balanced disclosure
principle 6 – respect the
rights of shareholders
Continuous Disclosure policy
Communications policy
the Company is committed to complying
with its continuous disclosure obligations
to keep the market fully informed of
information which may have a material
effect on the price or value of the
Company’s securities. the Company
discharges these obligations by releasing
information in ASX announcements
and by disclosure of other relevant
documents to the ASX and to
shareholders (e.g. annual reports).
the Board has adopted a communications
strategy which aims to ensure that
shareholders, potential investors and
other interested stakeholders are kept
informed of all major developments
affecting the state of affairs of the
company. To achieve this, the company
communicates information regularly
to shareholders and other stakeholders
through a range of forums and
publications.
the Company’s Continuous Disclosure
policy is designed to ensure the timely
release of material price-sensitive
information to the market. this policy
establishes procedures to ensure that the
Directors and management are aware
of the Company’s disclosure obligations
and procedures, and have accountability
for the Company’s compliance with those
obligations.
the policy also sets up procedures that
must be followed in relation to the
release of announcements to the market
and discussions with analysts, the media
or shareholders.
the Company’s ASX announcements are
available in the Investor relations section
of the Company’s website after they are
released to the ASX.
one of the Company’s key
communication tools is the website
located at www.pactgroup.com.au.
Important information about the Company
can be found in the section marked
Corporate Governance on the Investors
section of the website. this includes all
announcements lodged with the ASX since
listing, the Board and Board committee
charters, the company’s constitution
and key corporate governance policies.
the website contains a facility for
shareholders to direct enquiries to
the Company and to elect to receive
communications from the Company
via email.
principle 4 –
Safeguard integrity in
financial reporting
Audit, business risk
and Compliance Committee
The Board has established an audit,
Business risk and Compliance Committee.
the responsibilities of the ABrCC are
to oversee:
• The company’s relationship with the
external auditor and the external audit
function generally;
• The company’s relationship with the
internal auditor and the internal audit
function generally;
• The preparation of the financial
statements and reports;
• The company’s financial controls
and systems;
• The company’s overall risk
management program including:
– operational and environmental risk
generally;
– the Company’s workplace health
and safety management, controls
and systems;
– the process of identification and
management of financial risk; and
– the effectiveness of the compliance
program to ensure that legal and
regulatory requirements are met.
external Auditor
It is the responsibility of the ABrCC
to review and approve the external
auditor’s arrangements for the rotation
and succession of audit and review
partners, including their approach to
managing the transition. the procedure
for the selection and appointment of the
external auditor and the Committee’s
policy for the rotation of external audit
engagement partners are outlined in
the Committee’s Charter.
41 pACt Group HolDInGS ltD
Corporate Governance Statement
principle 7 – recognise
and manage risk
the Company is in the process of
formalising its approach to overseeing
and managing material business risks.
The Board, through the aBrcc,
is responsible for overseeing the
Company’s overall risk management
program including:
• Operational and environmental
risk generally;
• The company’s workplace health
and safety management, controls
and systems; and
• The process of identification and
management of financial risk.
the ABrCC approved a risk Management
policy in May 2014 which provides
that the Company’s commitment is
to promoting a risk-aware culture in
decision-making and a commitment
to manage all risks that may materially
impact the business of the Group in
a proactive and effective manner.
A risk management framework
(Framework) has been designed by
management to formalise the risk
management approach. Management is
in the process of formalising an internal
control system to manage
the Company’s material business
risks. this Framework is based on
the australian/New Zealand risk
Management standard (as/NZ IsO
31000:2009) and details the process
for identifying, assessing, managing
and controlling risks.
For the most recent financial year,
management has developed a Group
risk register which identifies risks in
five core areas; financial, strategic,
operational, market, and compliance.
additionally, a process to ensure that
new risks are identified and existing
risks remain relevant has been
implemented.
Management has assessed the
effectiveness of the controls in place for
managing the Group’s material business
risks and has reported to the ABrCC and
the Board as to the effectiveness of the
Group’s management of those material
business risks.
The cEO and the chief Financial Officer
have provided assurance to the Board,
in accordance with ASX recommendation
7.3, 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 the system is operating
effectively in all material respects in
relation to financial reporting risks.
the Company’s risk Management policy
can be accessed from the Corporate
Governance section in the Investors
section at www.pactgroup.com.au/
investors/corporate-governance.
principle 8 – remunerate
fairly and responsibly
as described in Principle 2, the company
has a nomination and remuneration
Committee.
Details regarding the structure of
non-executive Directors’ remuneration
and executive Director and senior
executive remuneration are contained
in the remuneration report located at
pages 55 to 63.
the Company does not have any scheme
for retirement benefits, other than
superannuation, for Non-Executive
Directors.
the Company’s Dealing in Securities
Policy, which establishes procedures
for the buying and selling of shares in
the company (shares), also deals with
hedging of those shares. In summary,
Directors and employees and their
‘connected Persons’ (relevant Persons)
cannot deal in Shares when in possession
of price-sensitive or inside information
or the Company is in possession of
price-sensitive or inside information and
has notified them that they must not deal
in Shares.
In addition, no dealing in shares can
occur during a blackout period, being
from 1 July until the day following the
announcement to ASX of the full-year
results and from 1 January until the
day following announcement of the
half-yearly results or any other period
that the Board specifies from time to
time. Various approval and confirmation
processes are specified in the policy
for dealing in Shares at any time by
Directors, senior executives, senior
managers and their Connected persons.
Hedging, which includes entering
into transactions in financial products
that operate to limit the economic
risk associated with holding shares,
is subject to the following overriding
prohibitions:
• The hedge transaction must not be
entered into, renewed, altered or
closed out when the relevant person
is in possession of price-sensitive
or inside information.
• shares must never be hedged prior
to the vesting of those Shares.
Additional detail surrounds this
prohibition; however, noting that
the Company does not currently
have any employee equity incentive
schemes, it has no operation.
relevant persons are permitted to
hedge their vested and unrestricted
Shares provided the hedge transaction
is treated as a dealing in Shares for the
purpose of the policy, and the relevant
approval notifications are made and the
necessary confirmations are obtained.
AnnuAl report 2014 42
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Directors’ Report
The Directors present their report on the consolidated entity consisting of Pact Group Holdings Ltd (‘Pact’ or the
‘company’) and the entities it controlled at the end of, or during, the year ended 30 June 2014 (the ‘Group’).
1. Directors
The following persons were Directors of the Company from their date of appointment up to the date of this report:
(i) Non-Executive
Raphael Geminder
Non-Executive Chairman
Member of the Board since 19 October 2010
Member of the Nomination and Remuneration Committee
raphael founded Pact in 2002. Prior to founding Pact, raphael was the co-founder and chairman of Visy
recycling, growing it into the largest recycling company in australia. raphael was appointed Victoria’s first
Honorary Consul to the Republic of South Africa in July 2006. He also holds a number of other advisory and
board positions.
raphael holds a Master of Business administration in Finance from syracuse University, New York.
Other current directorships
Director of the Carlton Football Club and several other private companies.
Lyndsey Cattermole AM
Independent Non-Executive Director
Member of the Board since 26 November 2013
Member of the audit, Business risk and compliance committee
Member of the Nomination and Remuneration Committee
Lyndsey founded aspect computing Pty Limited and remained as Managing Director from 1974 to 2003,
before selling the business to KaZ Group Limited, where she served as a director from 2001 to 2004.
Lyndsey has held many board and membership positions including with the committee for Melbourne,
the Prime Minister’s science and Engineering council, the australian Information Industries association,
the Victorian Premier’s Round Table and the Woman’s and Children’s Health Care Network.
Lyndsey holds a Bachelor of Science from the University of Melbourne and is a Fellow of the Australian
Computer Society.
Other current directorships
Non-Executive Director of both Treasury Wine Estates Limited and Tatts Group Limited.
Director of the Victorian Major Events company, Melbourne Theatre company, Melbourne rebels rugby
Union Limited and directorships with several private companies.
Former ASX-listed company directorships in last three years
Non-Executive Director of Foster’s Group Limited (1999 – 2011) and Paperlinx Limited (2010 – 2012).
Tony Hodgson AM
Independent Non-Executive Director
Member of the Board since 26 November 2013
chairman of the audit, Business risk and compliance committee
Tony was the co-founder and former senior Partner of the chartered accounting firm Ferrier Hodgson,
from which he retired in 2000 after 24 years. He serves as a consultant to BRIFerrier Chartered Accountants
and has extensive experience serving on various board committees including audit, nomination, risk and
compliance committees.
43 PACT GROUP HOLDINGS LTD
Directors’ Report
Tony holds a certificate of commerce, and is a Fellow of the Institute of chartered accountants in australia
and a Fellow of the Australian Institute of Company Directors.
Other current directorships
Member of the advisory council of J.P. Morgan, Non-Executive Director and chair of the audit & risk
Committee of Racing NSW and a Non-Executive Director of the Waubra Foundation.
Peter Margin
Independent Non-Executive Director
Member of the Board since 26 November 2013
Chairman of the Nomination and Remuneration Committee
Member of the audit, Business risk and compliance committee
Peter has many years of leadership experience in major Australian and international food companies.
His most recent role was chief Executive Officer of Goodman Fielder Limited. Prior to that, Peter was
chief Executive Officer and chief Operating Officer of National Foods Limited. Peter has also held senior
management roles in simplot australia Limited, Pacific Brands Limited (formerly known as Pacific Dunlop
Limited), East asiatic company and HJ Heinz company australia Limited.
Peter holds a Bachelor of Science from the University of New South Wales and a Master of Business
Administration from Monash University.
Other current directorships
Non-Executive Director of Bega cheese Limited, PMP Limited, Nufarm Limited and of NsX listed company
Ricegrowers Limited.
Former ASX-listed company directorships in last three years
Executive Director of Goodman Fielder Limited (2005 – 2011).
Jonathan Ling
Independent Non-Executive Director
Member of the Board since 28 April 2014
Member of the Nomination and Remuneration Committee
Jonathan has extensive experience in complex manufacturing businesses from his current role as the
chief Executive Officer and Managing Director of GUD Holdings Limited and following a number of
leadership roles with Fletcher Building Ltd, Nylex, Visy and Pacifica.
Prior to Jonathan’s GUD role, he was the chief Executive Officer and Managing Director of Fletcher
Building Ltd (2006 – 2012), New Zealand’s largest listed company.
Jonathan has a Bachelor of Engineering (Mechanical) from the University of Melbourne and a Master
of Business Administration from the Royal Melbourne Institute of Technology.
Other current directorships
Chairman of Melbourne Rebels Rugby Union Limited.
Former ASX-listed company directorships in last three years
Non-Executive Director of Pacific Brands Limited (2013 – 2014).
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ANNUAL REPORT 2014 44
Directors’ Report
(ii) Executive
Brian Cridland
Managing Director and Chief Executive Officer
Member of the Board since 26 November 2013
Brian is the Managing Director and chief Executive Officer of Pact. He has been the chief Executive Officer at
Pact since its inception in 2002. Brian has been in the manufacturing industry for 41 years. He previously held
senior roles including General Manager of Visypak, Managing Director of rexel australia, Managing Director
of GEc australia, General Manager of rigid Packaging southcorp and many senior roles in rheem australia
Limited and other companies.
Brian has a Bachelor of chemical Engineering and Bachelor of commerce from the University of Queensland.
Other current directorships
No other external directorships.
(iii) Company Secretary
Penny Grau was appointed to the position of Company Secretary of Pact on 10 February 2014.
Prior to this appointment, Penny was General counsel and company secretary of listed
company, Tatts Group Limited, from april 2007 until July 2014. Prior to this, Penny practised as
a corporate lawyer for 18 years, the last eight as partner, with national law firm clayton Utz.
Penny holds Bachelors of Laws and commerce, a Masters of Laws, a Graduate Diploma in applied Finance
and Investment and is a Fellow of the Governance Institute of Australia.
2. Directors’ Shareholding
as at the date of this report, the relevant interests of the Directors in the shares of the company were as follows:
Raphael Geminder
Lyndsey Cattermole
Tony Hodgson
Peter Margin
Jonathan Ling
Brian Cridland
Relevant Interest in Ordinary Shares
117,036,546
78,948
50,000
7,894
-
50,000
45 PACT GROUP HOLDINGS LTD
Directors’ report
3. Directors’ Meetings
The table below shows the number of Directors’ meetings (including meetings of Board committees),
and the number of meetings attended by each Director during the year:
Directors’ Meetings
Audit, business risk &
Compliance Committee
nomination &
remuneration
Committee
Meetings
held
Meetings
attended
Meetings
held
Meetings
attended
Meetings
held
Meetings
attended
8
8
7
8
2
8
nM
N/a
3
3
3
nM
nM
3
3
3
N/a
N/a
2
2
nM
2
2
2
2
2
N/a
2
2
2
raphael Geminder
lyndsey Cattermole
tony Hodgson
peter Margin
Jonathan ling
Brian Cridland
8
8
8
8
2
8
nM – not a member of the relevant committee.
N/a – Not applicable.
4. principal Activities
the principal activities of the Group during the year were the conversion of plastic resin and steel into
rigid plastics and metals packaging and related products for customers in the food, dairy, beverage,
personal care, other household consumables, chemicals, agricultural, industrial and other sectors.
The Group also provides a range of sustainability, recycling and environmental services to assist its
customers in reducing the environmental impact of their product packaging and related processes.
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AnnuAl report 2014 46
Directors’ report
5. operating and Financial review
Financial performance
Despite challenging market conditions, the Group exceeded Prospectus statutory and pro-forma NPaT
and EBITDa forecasts, and EBITDa and EBIT margins were stable compared to FY13. Pleasingly, the Group
experienced statutory sales growth of 3.6% over the year, and EBIT (before significant items) growth of 4.8%.
the following table presents the statutory results of the Group for the year ended 30 June 2014 compared to
both the Prospectus forecasts and the prior financial year.
Year ended 30 June, A$ in millions
Sales revenue
Other revenue (excluding interest revenue)
total revenue (excluding interest revenue)
expenses
Depreciation and amortisation
EBIT (before significant items)(2)
EBIT margin (before significant items)
significant items (before tax)
ebIt
Net finance costs expense
Income tax expense
significant tax items
Net profit after tax
Minority interests
Net profit after tax attributable to shareholders
30 June 14
Actual
30 June 14
prospectus(1)
30 June 13
Actual
1,143.2
11.7
1,154.9
(956.7)
(51.2)
147.0
12.9%
(26.2)
120.8
(66.7)
(20.5)
24.2
57.8
(0.1)
57.7
1,151.6
10.1
1,161.7
(965.0)
(50.6)
146.1
12.7%
(30.1)
116.0
(72.4)
(20.9)
2.7
25.4
(0.2)
25.2
1,103.7
10.6
1,114.3
(916.9)
(57.1)
140.3
12.7%
4.8
145.1
(91.8)
(14.4)
6.4
45.3
(0.2)
45.1
(1) On 27 November 2013, Pact lodged with the australian securities and Investments commission (asIc)
a prospectus for an Initial Public Offering (IPO) to be listed on the australian securities Exchange (asX).
(2) EBIT before significant items is a non-IFrs financial measure which is calculated as earnings before finance costs, net of interest revenue, and tax.
Commentary
sales revenue increased by $39.5 million to $1,143.2 million, or 3.6% compared to the prior year. sales were
positively affected by the contribution of the businesses acquired at the time of the Ipo; consistently favourable
currency translation movements and recouping of higher raw material costs. these effects were partially
offset by the loss of a major contract, which occurred in the second half of the 2013 financial year, and softer
agricultural sales due to the drought conditions in Australia.
Expenses were predominantly higher as a result of increases in raw material prices, and costs associated with the
businesses acquired at the time of the Ipo. these increases were partially offset by business rationalisation savings
and efficiency improvements within the business, implemented to lower the Group’s overall cost of operations.
EBIT before significant items of $147.0 million exceeded the Prospectus statutory forecast by $0.9 million.
EBIT before significant items increased by 4.8% compared to the prior year. The increase compared to the
prior year was driven by the combination of sales and expense impacts noted above, as well as a lower
depreciation in FY14. EBIT margin improved by 0.2%, to 12.9%.
Pre-tax significant items for the year totalled $26.2 million in expenses. These related entirely to transactions
that occurred at the time of the Ipo. the equivalent value as estimated in the prospectus was $30.1 million.
the major item giving rise to the favourable result was in relation to favourable foreign exchange movements
and interest rates at the time of the close-out of the cross currency interest rate swaps. the cost of closing
out the interest rate swaps was $3.2 million less than forecast in the prospectus.
47 pACt Group HolDInGS ltD
Directors’ report
Net financing costs for the period of $66.7 million included gross financing costs of $73.2 million, and net
interest revenue of $6.5 million. Gross financing costs primarily comprised $17.5 million relating to the
current Syndicated Finance Agreement entered into at the time of the Ipo plus $55.7 million of interest
relating to the pre-Ipo capital structure.
pact announced to the ASX on 7 August 2014 that it would book a favourable $18-20 million tax impact
in the year ended 30 June 2014. Pact formed a new tax consolidation group effective on 1 January 2014,
which involved a revaluation to market of assets, including plant & equipment, which were $64 million
higher than book value. The final tax benefit included in the accounts for FY14 came to $19.2 million,
and has been classified as a significant item in the company’s consolidated Financial report. In addition,
the significant tax item includes a benefit of $5.0 million relating to the pre-tax significant items.
the announcement made on 7 August 2014 also referred to a potential adverse effect arising from
proposed changes in tax law relating to the formation of a new income tax consolidated group. As these
proposed changes in tax law have not been enacted, or substantially enacted, no amounts have been
recognised in the Financial report for 30 June 2014.
Net debt as at 30 June 2014 was $565.3 million, $9.7 million lower than the Prospectus forecast of $575.0
million with strong cash flow generation.
review of operations
pact is the leading supplier of rigid plastics packaging and related products in Australia and new Zealand
and has an emerging presence in Asia.
pact Australia comprises the Group’s operations across Australia where it has manufacturing plants in
New south Wales, Victoria, Tasmania, Queensland and Western australian. Pact australia is where the
Group sources the majority of its revenue, accounting for 72% of the Group’s total sales revenue in FY14.
Pact International comprises the Group’s operations in New Zealand, china, the Philippines, singapore
and Thailand. Together, revenue sourced from these regions contributes 28% of the Group’s total sales
revenue in FY14.
Whilst the majority of the Group’s sales and EBIT is derived from the australian segment, the relative size
of the International segment increased in the 2014 financial year.
the following table represents the results of segment operations during the year compared to the
prospectus and prior year.
A$ in millions
Sales revenue
pact Australia
pact International
total
EBIT (before significant items)(1)
pact Australia
pact International
total
30 June 14
Actual
30 June 14
prospectus
30 June 13
Actual
822.7
320.5
829.5
322.1
813.1
290.6
1,143.2
1,151.6
1,103.7
82.2
64.8
147.0
83.5
62.6
146.1
93.2
47.1
140.3
(1) EBIT before significant items is a non-IFrs financial measure which is used to measure segment performance and has been extracted from
the segment information disclosed in the consolidated Financial statements. EBIT is calculated as earnings before finance costs, net of
interest revenue, and tax.
AnnuAl report 2014 48
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Commentary
During the year, Pact australia sales were positively impacted by the pass-through of higher raw material and
other input costs, and a positive contribution from the cinqplast business which was acquired at the time
of the IPO. These effects were partially offset by the loss of a major contract, which occurred in the second
half of FY13, and softer agricultural sales due to the drought conditions in australia. Overall, Pact australia
experienced sales growth of 1.2% on the previous year.
Pact International sales were 10.3% higher in FY14, due to a combination of positive contributions from the
asian businesses acquired at the time of the IPO, the recouping of higher raw material costs and consistently
favourable currency translation movements. these effects were partially offset by the year-on-year effect of
businesses disposed of in FY13.
eBIt was down 11.8% in pact Australia due to the effect of increased raw material price increases and lags
in passing these costs on to contracted customers, primarily in the first half of the financial year. This was
in addition to the effect of losing a major contract as noted above. these adverse impacts were partially
offset by the contribution of the businesses acquired at Ipo as well as business rationalisation savings and
efficiency improvement programs implemented by the Group. Pact australia’s EBIT margin improved in the
second half of the year compared to the first half.
pact International eBIt increased by 37.6% as a result of the contribution of the Asian businesses acquired
at the time of the IPO, business rationalisation savings and consistently favourable currency translation
movements. pact International’s eBIt margin also improved year on year.
the Group’s long-term relationships across its blue-chip customer base are supported by its focus on
innovation. During the year, the Group won over 10 awards for design and innovation, including:
• australian Manufacturing company of the Year by acQ Global awards;
• Best Product from New Zealand at the ‘World Tour by sIaL Product’ awards;
• Good Design selection award from Good Designs australia;
• 2 awards from the aerosol association including aerosol Product of the Year in 2014
likely Developments and expected results from operations
The 2015 financial year will mark the Group’s first full year as a listed entity and will see a full year
contribution from the businesses acquired at the time of the IPO, as well as a contribution from the newly
acquired sulo business (completed on 8 august, 2014).
the outlook for the Group is for revenue growth consistent with overall increases in GDp in the International
segment and benign in Australia. Margins across the Group are expected to be in line with FY14 levels.
In the Directors’ opinion, any further disclosure of information would be likely to result in unreasonable
prejudice to the Group.
business Strategies and Future prospects
the Group’s long-term focus is to maximise value to stakeholders and deliver growth in the business. the Group
has an aspirational ‘5 cubed vision’ to be a $5 billion company, operating in five regions within five years.
the key strategic focus areas for the Group are:
Innovation – rolling-out a pipeline of leading edge products
resilience – rationalisation, productivity strategies, and simplification
Growth – focussing on driving organic growth, and growth via disciplined M&a
Innovation
the Group is focussed on rolling out a pipeline of leading edge products to underpin organic growth across
its business. Designing and supplying innovative products to the Group’s customers is key to the Group’s
success in increasing sales from new and existing customers. Customer retention is particularly strong where
the Group provides new products which create a competitive advantage for its customers.
49 pACt Group HolDInGS ltD
Directors’ report
For example, in FY14 the Group developed an innovative design for a customer who provides personal
care products in australasia. On the back of this innovation, Pact is investing in a Jakarta manufacturing
plant to supply these products to the customer for the Australasia region.
In australia, including through its licence partners, Pact is delivering new technologies to market.
combining global technologies and customised designs for local markets has enabled speed to market,
and the ability to offer leading edge technologies to Australian customers.
The Group is also seeing the benefits of continuing modernisation of product packaging and is focussed
on capturing new customers in segments of the market that previously were not users of rigid plastics
packaging. In FY14, the Group developed moulded plastic sound walls for the M5 in New south Wales,
replacing the previous concrete sound walls. the Group continues to seek opportunities to provide
innovative packaging solutions to customers in adjacent markets looking to modernise their products.
resilience
the Group’s long-term strategy is underpinned by maintaining resilience in the Group’s earnings.
the three key focus areas going forward are:
• rationalisation
• simplification
• Productivity
In FY15, the Group will focus on cost reduction through business rationalisation and production
consolidation which will include optimising its manufacturing footprint across its Australian and
International operations. The Group will also be reviewing areas of the business that can benefit from
simplification. This includes its manufacturing technology, IT platform and shared business services.
the Group’s business model involves servicing a large number of customers many of whom have multiple
contracts covering a variety of products in various geographies. During any financial year there are numerous
customer wins and losses, new business wins, volume increases and reductions, some of which may involve
a positive or negative margin impact. this continual change is constantly managed by the Company with the
aim to seek to improve overall, and avoid a material adverse impact on, financial performance.
The company values its relationship with its customers however, as part of its disciplined approach, it will not
enter into unsustainable contracts nor will it look to retain or win volume at any price. the Company considers
such changes to be a normal part of its business and such customer, geographic and product diversity is, and
will continue to be, sought to promote resilience.
Growth
the Group is focussed on driving organic growth within the business. these include ongoing investment
in innovation, fostering strong licence agreements to secure new technologies for the Group’s market,
focussing on best-in-class customer service, and leveraging customer relationships for entry into new
markets in Asia.
In australia, the Group plans to leverage its leadership in innovation to increase sales to new and existing
customers. customers are increasingly demanding innovative packaging, labelling and performance
features and the Group is well placed to benefit from these trends in customer preferences. The Group
will also seek to penetrate areas of the packaging market where it is seeing substrate substitution.
In asia in FY15, Pact expects to complete construction of a new manufacturing plant in Jakarta, Indonesia
to supply personal care packaging to a multi-national customer. the Group has executed a joint venture
heads of agreement for the manufacturing of high value-add proprietary closures in Thailand, providing
a regional offering for its global customers and delivering innovative closure capability to the region.
Global customers seeking innovative, quality manufacturing providers, with acknowledged good manufacturing
practice systems, offer a strong platform for future growth for the Group within the asian market.
AnnuAl report 2014 50
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the Group is also focussed on delivering growth through acquisition. pact has a long history of successfully
acquiring and integrating businesses, acquiring 39 businesses since Pact’s inception in 2002.
the Board takes a disciplined approach to evaluating acquisitions which must be value accretive and in the
best interests of shareholders. Acquisitions generally should meet an aspirational 20% return on investment
within three years and fall into three focus areas: adjacent and overlapping industries; those that provide
geographical expansion; or those with potential to drive transformational change.
In respect to the Dynapack acquisition, the Board has undertaken a preliminary review of this acquisition
opportunity and has some concern over the financial metrics of the proposed transaction in light of
the criteria outlined above. the Board has therefore requested for further due diligence to occur.
In the Directors’ opinion, any further disclosure of information would be likely to result in unreasonable
prejudice to the Group.
6. Dividends
On 27 august 2014, the Directors determined to pay a final dividend of 9.5 cents per share partially franked to 65%.
the dividend is payable on 3 october 2014. the record date for entitlement to the dividend is 5 September 2014.
no dividends have been paid during the year ended 30 June 2014.
The Board’s current intention is to pay out approximately 65% – 75% of the company’s net profit after tax
attributable to shareholders in dividends.
the Board’s current intention is to pay an interim dividend in respect of the half years ending 31 December
and a final dividend in respect of the full years ending 30 June.
There is a Dividend reinvestment Plan (DrP); however, the Directors have determined not to activate the DrP
for the final dividend.
7. Other Events of significance relating to the capital and Debt structure
significant events that occurred during the period in connection with the IPO are as follows:
(i) $648.8 million in cash was generated as a result of the share issue;
(ii) The Group repaid its existing Us dollar denominated Term Loan B and revolving credit Facilities and
closed out the associated cross currency interest rate swaps;
(iii) The Group entered into a new secured revolving credit facility with a syndicate of nine banks with
available committed lines totalling a$590 million and NZ$180 million. as at 30 June 2014, the net debt of
the Group was $565 million;
(iv) On 17 December 2013 the Group acquired 100% of the shares in Viscount Plastics (china) Pty Ltd, asia Peak
Pte Ltd, ruffgar Holdings Pty Ltd, and the remaining 49% interest in cinqplast Plastop australia Pty Ltd; and
(v) Pact repaid the outstanding promissory note owed to the former holding company of the Group.
8. significant Events after Balance Date
the Company made an ASX announcement on 1 August 2014 that it had signed an agreement to acquire the
australian and New Zealand operations of sulo MGB (australia) Pty Ltd including its subsidiary sulo (NZ) Ltd
from plastics Group pty ltd. the acquisition was completed on 8 August 2014.
sulo is the leading manufacturer of plastic waste and recycling bins in australia and New Zealand, with an
unaudited turnover of approximately $48 million in the year ended 30 June 2014.
51 pACt Group HolDInGS ltD
Directors’ report
9. risks
The company recognises that risk is an inherent part of the business, and has established a risk Management
Framework to deal with such threats. Set out below is a selection of some of the key risks that could have a
material impact on the future financial performance of the Group, including some which are industry specific:
• competitor risks – The sectors in which Pact operates are subject to vigorous competition, based on
factors including price, service, product selection and quality, manufacturing capability, innovation
and the ability to provide the customer with an appropriate range of products and services in a timely
manner. Any deterioration in the Group’s competitive position may result in a decline in sales revenue
and margins, which may have an adverse effect on the Group’s future financial performance.
• customer risks – Pact has strong relationships with key customers, which are fundamental to the success
of the business. The loss of key customers can have a negative effect on the future financial performance
of the Group.
• Growth through acquisitions – Pact has grown over time through the acquisition of a number of
businesses and assets. Pact’s growth has placed, and may continue to place, significant demands on
management, information reporting systems and financial and internal control systems. Effective
management of pact’s growth will be required on an ongoing basis. If this does not occur then there
may be an adverse effect on the Group’s future financial performance.
• change in consumer preferences – Pact and its customers service end-user markets in the consumer
sector (e.g. food, dairy, beverages, personal care and other household consumables) and the industrial
sector (e.g. surface coatings, petrochemical, agriculture and chemicals). Demand for Pact’s products
is impacted by various factors. some examples include climate conditions, seasonality of foods and an
increased focus in Australian and new Zealand supermarket chains on private brands. Any of these
factors may materially reduce demand for pact’s products which could have an adverse effect on the
Group’s future financial performance.
• Foreign exchange movements – Pact’s financial reports are prepared in australian dollars. However,
a substantial proportion of Pact’s sales revenue, expenditures and cashflows are generated in, and
assets and liabilities are denominated in, New Zealand dollars. Pact is also exposed to a range of other
currencies including the Us dollar, china’s yuan, the Philippines peso and the Thai baht in relation to
pact’s business operations. Any depreciation of the Australian dollar would have an adverse effect on
the Group’s future financial performance.
• relationships with key suppliers – Pact relies on various procurement relationships for the supply of
raw materials. risks include the availability and price of raw materials, input costs such as freight and
electricity, and future consolidation in industry sectors which could result in a decrease in the number
of suppliers or a decrease in the number of alternative supply sources available to pact. Further pact
may not always be able to pass on changes in input prices to its customers. Any of these factors may
have an adverse effect on the Group’s future financial performance.
• People retention – The success of Pact depends to a significant extent on the ability and performance of
key personnel, in particular senior management. This includes both the ability to retain key personnel,
and attract high calibre individuals to the business. unexpected or unplanned loss of key personnel or
the inability to recruit and retain high calibre individuals may adversely affect the Group’s future financial
performance.
• regulatory matters – Pact is required to comply with a range of laws and regulations. regulatory areas
of particular significance to Pact include employment, occupational health and safety, property and
environment, customs and international trade, competition and taxation. Pact announced to the asX
on 7 August 2014 that laws applying to the formation of a new tax consolidation group are subject to
various proposed changes by the Federal Government at the time of delivering its federal budget in
May 2013. Depending on the final form of the proposed changes they could have a one-off negative
impact on Pact’s financial performance.
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AnnuAl report 2014 52
Directors’ report
10. environmental regulation
the Group has a strong commitment to sustainability and minimising the environmental impacts of its operations
in all regions in which it operates.
In respect to its australian and New Zealand operations, the Group operates under a corporate Environmental
Management system (EMs) aligned with IsO 14001 and under an Environmental Policy. The EMs is
fundamental to achieving compliance with environmental regulations in all jurisdictions in which the Group
operates and is implemented at all of its sites.
Where applicable, licences and consents are in place in respect of each Group site. an interactive database is
used to ensure compliance and completion of all required actions occurs.
On occasion, the Group receives notices from relevant authorities pursuant to local environmental legislation and
in relation to the Group’s environmental licences and consents. The Group takes all notices seriously, conducting a
thorough investigation into the cause and ensuring that there is no re-occurrence. the Group endeavours to work
with appropriate authorities to address any requirements and to proactively manage any obligations.
It is intended to roll out similar environmental practices and compliance procedures for the Group’s Asian
operations within the next twelve months.
specifically in relation to australia, Pact is subject to the reporting and compliance requirements of both the
Energy Efficiency Opportunities act 2006 (cth) and the national Greenhouse and energy reporting Act 2007 (cth).
the Energy Efficiency Opportunities act 2006 requires Pact to assess energy usage, including the
identification, investigation and evaluation of energy saving opportunities, and to report publicly on the
assessments undertaken within the Group. as required under this act, Pact has submitted all annual reports
and Government reports as required, and also submitted its assessment Plan for the second cycle.
the national Greenhouse and energy reporting Act requires pact to report its annual greenhouse gas emissions
and energy use. Pact has submitted all annual reports, and is due to submit its next report by 31 October 2014.
11. Share options and rights
the Company does not have any options or rights over issued or unissued shares on issue.
12. Indemnification and Insurance of Officers
The company’s constitution requires the company to indemnify current and former Directors, alternate
Directors, executive officers and such other officers of the company as the Board determines on a full
indemnity basis and to the full extent permitted by law against all liabilities incurred as an officer of the
Group. Further, the company’s constitution permits the company to maintain and pay insurance premiums
for Director and officer liability insurance, to the extent permitted by law.
consistent with (and in addition to) the provisions in the company’s constitution outlined above, the
company has also entered into deeds of access, indemnity and insurance with all Directors of the company
and the Company Secretary which provide indemnities against losses incurred in their role as Directors or
company secretary, subject to certain exclusions, including to the extent that such indemnity is prohibited
by the Corporations Act or any other applicable law. the deeds stipulate that the Company will meet the full
amount of any such liabilities, costs and expenses (including legal fees).
During the financial year the company paid insurance premiums for a Directors and Officers liability insurance
contract that provides cover for the current and former Directors, alternate Directors, secretaries, executive
officers and officers of the Group. The Directors have not included details of the nature of the liabilities covered
in this contract or the amount of the premium paid, as disclosure is prohibited under the terms of the contract.
53 pACt Group HolDInGS ltD
Directors’ report
Pursuant to the terms of the company’s standard engagement letter with Ernst & Young (EY), it
indemnifies EY against all claims by third parties and resulting liabilities, losses, damages, costs and
expenses (including reasonable legal costs) arising out of, or relating to, the services provided by EY
or a breach of the engagement letter. The indemnity does not apply in respect of any matters finally
determined to have resulted from EY’s negligent, wrongful or wilful acts or omissions nor to the extent
prohibited by applicable law including the Corporations Act 2001.
13. proceedings on Behalf of the Company
no person has applied to the court under section 237 of the Corporations Act for leave to bring proceedings
on the behalf of the company, or to 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 part of those proceedings.
no proceedings have been brought or intervened in on behalf of the Company with the leave of the court
under section 237 of the Corporations Act.
14. non-audit Services
the Company may decide to engage eY on assignments additional to their statutory audit duties where
the auditor’s expertise and experience with the Group is important.
Details of the amounts paid or payable to eY for non-audit services provided in respect of the Group
during the year are as follows:
tax services
other assurance related services
other services relating to the Ipo
total
($’000’s)
178
78
2,932
3,188
The Board has considered the position and, in accordance with the advice received from the audit, Business
risk and compliance committee, is satisfied that the provision of the non-audit services is compatible with
the general standard of independence for auditors imposed by the Corporations Act 2001.
The Directors are satisfied that the provision of non-audit services by EY, given the amounts paid and
the type of work undertaken, did not compromise the auditor independence requirements of the
Corporations Act 2001 for the following reasons:
• all non-audit services have been reviewed by the audit, Business risk and compliance committee to
ensure they do not impact the impartiality and objectivity of the auditor; and
• None of the services undermine the general principles relating to auditor independence as set out in
aPEs 110 code of Ethics for Professional accountants, including reviewing or auditing the auditors own
work, acting in a management or decision-making capacity for the Group, acting as advocate for the
Group or jointly sharing economic risk and rewards.
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AnnuAl report 2014 54
Directors’ report
15. remuneration report (audited)
this remuneration report for the year ended 30 June 2014 outlines the remuneration arrangements of the
Company and the Group in accordance with the requirements of the Corporations Act 2001 (the act) and its
regulations. This information has been audited as required by section 308(3c) of the act.
the remuneration report is presented under the following sections:
1. Introduction
2. remuneration governance
3. executive remuneration arrangements
(i) remuneration principles and strategy
(ii) approach to setting remuneration
(iii) Details of incentive plans
4. Executive remuneration outcomes for 2014 (including linkage to performance)
5. executive kMp contracts
6. non-executive Directors’ remuneration arrangements
7. equity holdings of kMp
8. related party transactions
1. Introduction
The remuneration report details the remuneration arrangements for key management personnel (KMP)
who are defined as those persons having authority and responsibility for planning, directing and controlling
the major activities of the company and the Group, directly or indirectly, including any Director (whether
executive or otherwise) of the company.
For the purposes of this report, the term KMP includes all Directors of the Board (both executive and non-
executive) and the chief Financial Officer (cFO) of the company and the Group.
(i) non-executive Directors (neDs)
raphael Geminder chairman (non-executive)
Lyndsey cattermole aM (non-executive)
Tony Hodgson aM (non-executive)
Peter Margin (non-executive)
Jonathan Ling (non-executive)
(ii) Managing Director
Brian cridland (chief Executive Officer)
(iii) other kMp
Darren Brown (chief Financial Officer)
Appointed 26 november 2013
Appointed 26 november 2013
Appointed 26 november 2013
Appointed 28 April 2014
Appointed 26 november 2013
There have been no other changes to KMP after the reporting date and before the date the financial report
was authorised for issue.
55 pACt Group HolDInGS ltD
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2. remuneration Governance
(i) nomination and remuneration Committee
The Nomination and remuneration committee (committee) comprises four NEDs.
the responsibilities of the Committee which have a focus on remuneration include:
• review and recommend to the Board appropriate remuneration policies and arrangements including
incentive plans for the chief Executive Officer (cEO) and senior Executives & Managers;
• review and approve short term incentive plans, performance targets and bonus payments;
• review the performance of the cEO;
• review the senior Executives’ performance assessment processes to ensure they are structured and
operate in a manner to realise the business strategy; and
• review and recommend to the Board remuneration arrangements for the chairman and NEDs.
The committee will meet as often as the committee members deem necessary to fulfil the committee’s
obligations, and it is intended they will meet no less than three times a year. a copy of the committee’s
charter is available at www.pactgroup.com.au.
(ii) use of remuneration consultants
To ensure the committee is fully informed when making remuneration decisions, it may seek external
remuneration advice. During the financial year for the period subsequent to the company being listed on
the asX (‘IPO’) on 17 December 2013, the committee has not sought any remuneration recommendations
relating to kMp. In the event the Committee does seek remuneration advice which would require the
engagement of a consultant to follow the requirements prescribed in the act, the committee has resolved
to adopt a process which will comply with the Act to ensure any remuneration recommendation would be
free from undue influence by the KMP to whom the recommendation relates.
the decision on engagement of a remuneration consultant would be made by the Committee or the Board.
communication, contractual engagement and briefing of the consultant will be done by the committee
Chair. the consultant will provide the remuneration recommendation directly to the Committee Chair.
If the Committee decides that the remuneration recommendation should be shared with management
it can then be provided through the committee chair. The annual financial report would contain the
relevant disclosures required by the Act relating to the appointment of a remuneration consultant.
3. executive remuneration Arrangements
(i) remuneration principles and strategy
Pact’s executive remuneration strategy is designed to attract, retain, reward and motivate high performing
individuals so as to achieve the objectives of the company, in alignment with the interests of the company
and its shareholders.
the following table illustrates how the Company’s remuneration strategy aligns with its strategic direction
and links remuneration outcomes to performance. the table also illustrates how the Short term Incentive
(sTI) component is linked to the performance of both financial and non-financial measures.
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Attract, retain, reward and motivate
high performing individuals
Align remuneration with the interests
of shareholders
remuneration strategy
the remuneration arrangements are based on
performance and experience, and are competitive
for companies of a similar size and nature
the remuneration framework includes an StI
component, which motivates and rewards
management for the achievement of
performance measures
Performance is assessed against financial measures
for all participants in the StI program. the Ceo and
senior “Functional” Executives & Managers also have
various non-financial measures
these measures are a key driver in the achievement
of business objectives and the on going success of
the Group
remuneration component
purpose
link to performance measure
Ceo and Senior executives & Managers
Fixed remuneration
comprises base salary, company
superannuation contributions and
other fixed remuneration benefits
To provide competitive fixed
remuneration to attract high
calibre executives with the right
mix of experience, qualifications
and industry expertise
Group financial achievements
and individual performance
are considered during annual
remuneration reviews
StI and discretionary bonuses
paid in cash
to reward executives for their
role in the achievement of Group
financial performance measures,
their own individual performance
targets, and for performance in
relation to specific projects.
Group EBITDa as the key financial
measure is assessed against
budget on a quarterly basis.
Non-financial measures are
assessed on a semi annual basis
the Committee has recognised the need to review the current incentive arrangements adopted by the Group.
as part of this review, consideration will be given to the optimal arrangements to ensure KMP performance
is linked to the Group’s financial outcomes, which aim to drive growth in shareholder wealth. a process has
commenced to engage a remuneration consultant for this purpose. It is the intention of the Committee that this
review will be completed and relevant recommendations considered and implemented for FY16 if considered
appropriate. It is proposed that consultation may occur with key stakeholders as part of this process.
57 pACt Group HolDInGS ltD
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(ii) Approach to setting remuneration
In FY14, the executive remuneration framework consisted of a mix of both fixed remuneration and short
term incentives for executive kMp as outlined in the table below.
executive kMp remuneration component at target
Fixed remuneration
Short term incentives
total
%
74%
26%
100%
The percentages in this table are based on a split of fixed remuneration and short term incentives for
achieving 100% of EBITDa target, and excludes discretionary bonuses and retention awards which are
referred to in Executive KMP contracts (in section 5).
target remuneration is calculated as follows:
• Fixed remuneration plus sTI at target remuneration = Total Target
• Fixed remuneration at target divided by Total Target = 74% of remuneration
• sTI remuneration at target divided by Total Target = 26% of remuneration
The Group aims to reward executives with a level and mix of remuneration appropriate to their position,
responsibilities and performance within the Group and aligned with market.
remuneration levels are considered annually through a remuneration review that considers market
data, insights into remuneration trends, the performance of the Group and individual, and the broader
economic environment.
(iii) Detail of incentive plans
(a) kMp
The cEO and cFO have maximum sTI excluding discretionary bonuses of 50% of their fixed remuneration
if they achieve 110% of their stretch targets. Both the Ceo and CFo have achievement of Group eBItDA
as a financial performance measure as part of their sTI plans. The cEO also has a number of non-financial
measures, as disclosed under Executive KMP contracts in section 5.
On an annual basis, after consideration of performance against KPI’s, the committee, in line with its
responsibilities, approves the amount, if any, of the sTI including discretionary bonuses to be paid to
the Ceo and the CFo. the Committee will seek recommendations from the Ceo as appropriate when
approving the StI of the CFo.
the Ceo was paid a sign on bonus upon signing a new employment agreement. the Ceo and CFo were paid
a retention award on 30 June 2014, and are eligible for a further retention award to be paid at or around
1 July 2015 for remaining employed until 30 June 2015. These awards reflect the need to retain the executive
KMP in the years immediately following the IPO, to ensure stability and manage the transition to a public
company environment. Full details have been disclosed under executive kMp contracts in section 5.
the neDs do not have any incentive component as part of their remuneration arrangements.
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(b) Senior executives & Managers
the Group StI program for Senior executives & Managers rewards a cash bonus of up to 40% of their
annual base salary for the achievement of clearly defined targets. The committee, in line with its
responsibilities, approves the amount, if any, of the sTI’s to be paid to senior Executives & Managers, seeking
recommendations from the Ceo as appropriate.
senior ‘Operational’ Executives & Managers with direct profit and loss accountability are rewarded for their
achievement of eBItDA targets.
senior ‘Functional’ Executives & Managers whom do not have direct profit and loss responsibility are
rewarded for the achievement of both Group EBITDa performance and other non-financial targets relevant to
their functional areas of responsibility.
Examples of some of the non-financial components include:
•
•
•
•
Improved workplace health & safety performance;
Improved environmental performance;
Implementation of Group performance improvement programs;
Implementation of significant capital expenditure programs;
• successful implementation of business reorganisation programs; and
• successful integration of acquired businesses.
the StI program is predominantly focussed towards the achievement of eBItDA targets at all levels of the
organisation. the StI program also provides for Senior executives & Managers with functional responsibilities
to be assessed on achievement of various non-financial measures. To the extent bonuses are earnt at
the relevant measurement period, 50% of any bonus entitlement is withheld and only paid at year-end
conditional on achievement of full year targets.
4. executive remuneration outcomes for FY14 (Including linkage to performance)
(i) performance against targets – executive kMp and Senior executives & Managers
the table below outlines the Group’s eBItDA performance for the year ended 30 June 2014. Historical
information is not shown, as the Group only existed in its current structure following the IPO.
the table also illustrates the performance outcome against the eBItDA target for executive kMp and Senior
executives & Managers.
performance measure
target applicable to
EBITDa before significant items
Group
Actual
($m)
198.2
% Achieved
101%
(ii) StI outcomes – executive kMp
the table below outlines the StI outcomes for executive kMp for FY14.
executive kMp
Mr Brian cridland (cEO)
Mr Darren Brown (cFO)
proportion of maximum
StI earned in FY14
proportion of maximum
StI forfeited in FY14
80%
80%
20%
20%
59 pACt Group HolDInGS ltD
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table 1: executive kMp remuneration for the year ended 30 June 2014(1)
Short term benefits
Salary
& fees
Cash
bonus
non
monetary
benefits(2)
other
benefits(3)
post
employment
benefits
Superannuation
$
$
$
911,681
1,931,271(4)
41,780
$
1,256
$
84,330
long term
benefits
long
service
leave
$
total
$
23,957
2,994,275
475,195
1,244,624(4)
19,790
27,145
39,984
10,221
1,816,959
1,386,876
3,175,895
61,570
28,401
124,314
34,178
4,811,234
Ceo
Mr Brian Cridland
CFo
Mr Darren Brown
total executive
kMp remuneration
(1) No comparative has been disclosed for Executive KMP remuneration in FY13. In accordance with section 300a of the act, no comparative
information is required in the first period of reporting on a specific individual.
(2) Non monetary benefits includes motor vehicle lease payments made by the company on behalf of Mr cridland, and FBT payments made by
the Company on behalf of Mr Cridland and Mr Brown.
(3) Other benefits include the movement in the annual leave provision for the period for Mr cridland and Mr Brown, and a car allowance paid
to Mr Brown.
(4) In addition to the contracted amounts identified below the cEO and cFO were paid discretionary bonuses of $66,600 and $56,000 respectively
in relation to performance on other measures and projects.
5. executive kMp Contracts
remuneration arrangements for executive kMp are formalised in employment agreements.
the following outlines the key details of contracts relating to executive kMp:
(i) Chief Executive Officer (CEO)
The cEO, Mr Brian cridland, is employed under an agreement which is fixed for two years and will
automatically terminate on 10 October 2015 unless, the company in its sole discretion and on one month’s
notice extends the term by an additional year. As such there is no notice period for termination prior to
the expiry of the term. under the terms of his present contract as disclosed in the prospectus dated
27 November 2013, Mr cridland’s remuneration package contains the following components:
• The cEO receives fixed remuneration of $996,011 per annum including base salary of $911,681.
• The cEO is entitled to an incentive of up to 50% of his base salary if he achieves 110% of the target levels.
Lower percentages (40% and 10%) are payable if 100% of, or 95% of, the target, respectively, are achieved.
• The cEO has a financial performance measure based on the achievement of Group EBITDa. The cEO
also has a number of non-financial performance measures, including but not limited to successful
integration of acquired businesses, executing and delivering on business strategy, providing leadership
to the business, working capital management and improved workplace health & safety performance.
• The cEO was paid a sign on bonus of $500,000 within five days of him signing the employment
agreement, and was paid a discretionary bonus of $500,000 on 31 December 2013 in relation to the
successful Ipo of the Company.
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• The cEO was paid a retention award, on 30 June 2014 of $500,000 for remaining employed to 30 June
2014. He will be eligible for a further $500,000 to be paid on or around 1 July 2015 for remaining employed
to 30 June 2015.
•
In the event a redundancy occurs, the cEO is entitled to receive a redundancy payment of 3 weeks for
every year of service which is capped at 52 weeks. If the Ceo is terminated without cause he is entitled to
receive a payment equivalent to what he would have received if the agreement had not been terminated.
The company is not required to make any payment of a benefit which is not permitted by Part 2D.2, Division
2 or Chapter 2e of the Corporations Act in the absence of shareholder approval or the ASX listing rules.
The company must use its reasonable endeavours to try and obtain shareholder approval, if required.
(ii) Chief Financial Officer (CFO)
The cFO, Mr. Darren Brown, is employed under an agreement which is fixed for two years and will
automatically terminate on 16 october 2015.
under the terms of his present contract:
• The cFO receives fixed remuneration of $550,219 per annum, including base salary of $471,560.
• The cFO is entitled to an incentive of up to 50% of his base salary if he achieves 110% of the target levels
based on the achievement of Group EBITDa performance. Lower percentages (40% and 10%) are payable
if 100% of, or 95% of, the target, respectively, are achieved.
• The cFO was paid a discretionary bonus of $500,000 on 31 December 2013 in relation to the successful
Ipo of the Company.
• The cFO was paid a retention award, on 30 June 2014 of $500,000 for remaining employed to 30 June 2014.
He will be eligible for a further $500,000 to be paid on or around 1 July 2015 for remaining employed to
30 June 2015.
•
In the event a redundancy occurs, the cFO is entitled to receive a redundancy payment of 3 weeks for
every year of service which is capped at 60 weeks. If the CFo is terminated without cause he is entitled to
receive a payment equivalent to what he would have received if the agreement had not been terminated.
The company is not required to make any payment of benefit which is not permitted by Part 2D.2, Division
2 or Chapter 2e of the Corporations Act in the absence of shareholder approval or the ASX listing rules.
The company must use its reasonable endeavours to try and obtain shareholder approval, if required.
6. non-executive Directors’ remuneration Arrangements
(i) remuneration policy
the Committee seeks to set aggregate remuneration at a level that provides the Company with the ability
to attract and retain Directors of the highest calibre, whilst incurring a cost that is acceptable to shareholders.
the amount of aggregate remuneration sought to be approved by shareholders and the fee structure
is reviewed annually against fees paid to neDs of comparable companies (typically S&p ASX 200 listed
companies with market capitalisation of 50% to 200% of the company as well as similar sized industry
comparators). The Board may consider general advice from external consultants when undertaking the
annual review process.
the Company’s Constitution and the ASX listing rules specify that the neD fee pool shall be determined from
time to time by a general meeting. as disclosed in the Prospectus on 27 November 2013, the total amount
paid to NEDs must not exceed a fixed sum of $1,000,000 per financial year in aggregate. raphael Geminder
does not receive a fee for his position as Chairman and a neD of the Company.
61 pACt Group HolDInGS ltD
Directors’ report
(ii) Structure
the remuneration of neDs consists of Directors’ fees and committee fees. the payment of additional fees
for serving on a committee or being the Chair of a committee recognises the additional time commitment
required by neDs who serve on committees.
the table below summarises the neD fees for FY14:
responsibility
board fees
Directors
Audit, business risk & Compliance Committee
Chair
Member
nomination & remuneration Committee
Chair
Member
Fees
$
110,000
30,000
7,500
20,000
7,500
All neD fees are inclusive of 9.25% of superannuation. neDs do not participate in any incentive programs.
the remuneration of neDs for the year ended 30 June 2014 is detailed in the following table.
Ms lyndsey Cattermole
Mr raphael Geminder
Mr tony Hodgson
Mr Jonathan ling
Mr peter Margin
Short term
benefits
post employment
benefits
Fees
Superannuation
$
68,023
-
76,186
18,858
74,825
$
6,292
-
7,047
1,744
6,921
total
$
74,315
-
83,233
20,602
81,746
total non-executive kMp remuneration
237,892
22,004
259,896
no comparative has been disclosed for neD remuneration in FY13. In accordance with section 300A
of the act, no comparative information is required in the first period of reporting on a specific individual.
7. equity Holdings of kMp
During the year entities associated with Mr raphael Geminder acquired 117,036,544 shares in the company.
For all other KMP appointed as Directors during the year, there has been no movement in the shares that
they have held since the date of listing.
8. related party transactions
the Group has entered into some property leases with related parties. For those leases where there are
terms and conditions that are not at arm’s length, those terms and conditions have been shown below:
The Group leased 21 properties (18 in australia and 3 in New Zealand) from centralbridge Pty Ltd (as
trustee for the centralbridge Unit Trust), centralbridge Two Pty Ltd, centralbridge (NZ) Limited and albury
Property Holdings Pty Ltd (“centralbridge Entities”), which are each controlled by entities associated with
raphael Geminder (the Non-Executive chairman of Pact) and are therefore related parties of the Group
(“centralbridge Leases”). The rent payable under these leases was determined based on independent
valuations and market conditions at the time the leases were entered into.
AnnuAl report 2014 62
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As at 30 June 2014, 5 of the australian properties had been unconditionally sold by the centralbridge Entities
to third parties, these sales settled during July 2014.
Following the settlement of the property sales, the Group leases 16 properties (13 in australia and 3 in New
Zealand) from the centralbridge Entities. Of the 13 centralbridge Leases in australia:
• seven of the leases contain early termination rights in favour of the landlord to terminate the lease at the
expiry of the 6th and 9th term;
• One of the leases contains early termination rights in favour of the landlord to terminate the lease at the
expiry of the 5th and 8th term;
• One of the leases contains early termination rights in favour of the landlord to terminate the lease at the
expiry of the 8th term; and
• Two of the leases do not contain standard default provisions which give the landlord the right to terminate
the lease in the event of default.
Except as set out above, the centralbridge Leases in australia are on arm’s length terms.
Of the centralbridge Leases in New Zealand, three of the leases contain early termination rights in favour
of the landlord to terminate the lease at the expiry of the 6th and 9th term. With the exception of the early
termination right, the centralbridge Leases in New Zealand are on terms which are not uncommon for leases
of commercial premises.
all other related party transactions are on arm’s length terms, refer to note 24 of the Financial report for
further details.
16. Auditor’s Independence Declaration
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act
2001 is set out at page 64.
17. Rounding
The amounts contained in this report and in the financial report have been rounded to the nearest $1,000
(unless otherwise stated) under the option available to the company under asIc class Order 98/0100.
The Company is an entity to which the class order applies.
Signed in accordance with a resolution of the Board of Directors:
Raphael Geminder
chairman
Brian Cridland
Managing Director and chief Executive Officer
27 August 2014
63 PACT GROUP HOLDINGS LTD
Ernst & Young
8 Exhibition Street
Melbourne VIC 3000 Australia
GPO Box 67 Melbourne VIC 3001
Tel: +61 3 9288 8000
Fax: +61 3 8650 7777
ey.com/au
Auditor’s Independence Declaration to the Directors of Pact Group Holdings
Ltd
In relation to our audit of the financial report of Pact Group Holdings Ltd for the financial year ended
30 June 2014, to the best of our knowledge and belief, there have been no contraventions of the auditor
independence requirements of the Corporations Act 2001 or any applicable code of professional conduct.
Ernst & Young
Tim Wallace
Partner
27 August 2014
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
AnnuAl report 2014 64
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65 PACT GROUP HOLDINGS LTD
Financial Statements
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the full year consolidated Financial Report
Note 1. Corporate information
Note 2. summary of significant accounting policies
Note 3. Revenue and expenses
Note 4. Income tax
Note 5. Cash and cash equivalents
Note 6. Trade and other receivables
Note 7. Inventories
Note 8. Prepayments
Note 9. Property, plant and equipment
Note 10. Investments in associates and joint ventures
Note 11. Intangible assets and goodwill
Note 12. Trade and other payables
Note 13. Provisions
Note 14. Interest bearing loans and borrowings
Note 15. Contributed equity
Note 16. Reserves
Note 17. Retained earnings
Note 18. Dividends
Note 19. Commitments and contingencies
Note 20. cash flow information
Note 21. Business combinations
Note 22. Business divestments
Note 23. Financial assets and financial liabilities
Note 24. Related party disclosures
Note 25. Controlled entities
Note 26. Parent entity financial statements
Note 27. Deed of cross guarantee
Note 28. Auditor’s remuneration
Note 29. Earnings per share
Note 30. Segment information
Note 31. Subsequent events
Independent Auditors Report
67
68
69
70
71
71
71
86
89
93
93
94
94
94
96
98
100
101
102
104
105
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106
106
108
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113
114
123
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129
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133
135
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ANNUAL REPORT 2014 66
Consolidated Statement
of Comprehensive Income
For the year ended 30 June 2014
2014
notes
$’000’s
2013
$’000’s
1,143,219
1,103,707
Sales revenue
raw materials and consumables used
Employee benefits expense
Occupancy, repair and maintenance, administration and selling expenses
Interest & other income
Other gains / (losses)
Depreciation, amortisation and impairment
Finance costs expense
share of profit in associates
Profit before income tax expense
Income tax benefit / (expense)
Profit for the period
Profit attributable to non-controlling interests
3
3
3
3
3
3
10
4
(474,694)
(287,752)
(193,687)
16,797
(26,716)
(51,199)
(73,202)
1,351
54,117
3,680
57,797
(108)
Profit attributable to equity holders of the parent entity
17
57,689
other comprehensive income
Items that will be reclassified subsequently to profit or loss
cash flow hedges gains / (losses) taken to equity
Foreign currency translation
Income tax on items in other comprehensive income
other comprehensive income for the period, net of tax
total comprehensive income for the period
Attributable to:
equity holders of the parent entity
non-controlling interests
total comprehensive income for the Group
(2,280)
4,625
686
3,031
60,828
60,720
108
60,828
(444,820)
(277,405)
(194,822)
13,482
4,814
(57,079)
(95,429)
786
53,234
(7,964)
45,270
(145)
45,125
7,465
12,626
(2,273)
17,818
63,088
62,943
145
63,088
earnings per share
Basic/diluted earnings per share
$
$
29
0.35
3,760,416
the Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
67 pACt Group HolDInGS ltD
Consolidated Statement
of Financial position
As at 30 June 2014
2014
notes
$’000’s
Current ASSetS
Cash and cash equivalents
trade and other receivables
Inventories
Other current financial assets
prepayments
totAl Current ASSetS
non-Current ASSetS
other receivables
prepayments
Property, plant and equipment
Investments in associates and joint ventures
Intangible assets and goodwill
Other non-current financial assets
Deferred tax assets
totAl non-Current ASSetS
totAl ASSetS
Current lIAbIlItIeS
trade and other payables
Interest bearing loans and borrowings
provisions
Other current financial liabilities
totAl Current lIAbIlItIeS
non-Current lIAbIlItIeS
provisions
Interest bearing loans and borrowings
Other non-current financial liabilities
Deferred tax liabilities
totAl non-Current lIAbIlItIeS
totAl lIAbIlItIeS
5
6
7
23
8
6
8
9
10
11
23
4
12
14
13
23
13
14
23
4
2013
$’000’s
22,899
253,205
105,350
4,247
8,031
25,603
150,341
115,211
403
7,844
299,402
393,732
7
1,274
545,604
4,087
327,127
-
27,944
906,043
522
-
492,770
8,771
251,042
56,276
25,155
834,536
1,205,445
1,228,268
198,397
164,560
1,099
46,456
1,342
7,475
55,050
311
247,294
227,396
26,201
589,847
-
34,818
650,866
898,160
25,893
2,001,828
735
49,171
2,077,627
2,305,023
net ASSetS / (net lIAbIlItIeS)
307,285
(1,076,755)
equItY
Contributed equity
reserves
retained earnings
parent entity interest
non-controlling interests
totAl equItY
15
16
17
1,489,597
180,000
(915,657)
(266,906)
(932,303)
(324,595)
307,034
(1,076,898)
251
143
307,285
(1,076,755)
the Consolidated Statement of Financial position should be read in conjunction with the accompanying notes.
AnnuAl report 2014 68
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Consolidated Statement
of Changes in equity
For the year ended 30 June 2014
Attributable to equity holders of the parent entity
Contributed
equity
Common
control
reserve
Cash
flow
hedge
reserve
Foreign
currency
translation
reserve
retained
earnings(1)
total
non-
controlling
interest
total
equity
$’000’s
$’000’s
$’000’s
$’000’s
$’000’s
$’000’s
$’000’s
Year ended 30 June 2014
As at 1 July 2013
180,000
(942,000)
Profit for the period
other comprehensive
income/(loss)
total comprehensive
income
-
-
-
964
-
-
-
8,733
(324,595)
(1,076,898)
143
(1,076,755)
-
57,689
57,689
(1,594)
4,625
-
3,031
108
-
57,797
3,031
-
(1,594)
4,625
57,689
60,720
108
60,828
Issuance of share
capital
transaction costs
taken to equity
Tax benefit on
transaction costs
Acquisitions under
common control
Dividends paid
total equity
transactions
1,327,643
(25,285)
7,239
-
-
-
-
-
13,615
-
1,309,597
13,615
-
-
-
-
-
-
-
-
-
-
-
-
-
1,327,643
-
1,327,643
-
-
-
-
-
(25,285)
7,239
13,615
-
1,323,212
-
-
-
-
-
(25,285)
7,239
13,615
-
1,323,212
As at 30 June 2014
1,489,597
(928,385)
(630)
13,358
(266,906)
307,034
251
307,285
Year ended 30 June 2013
As at 1 July 2012
180,000
(942,000)
(4,228)
(3,893)
114,444
(655,677)
98
(655,579)
Profit for the period
other comprehensive
income
total comprehensive
income
Dividends paid
-
-
-
-
-
-
-
-
As at 30 June 2013
180,000
(942,000)
(1) Includes profits reserve of the parent entity.
-
-
45,125
5,192
12,626
-
45,125
17,818
145
-
45,270
17,818
5,192
12,626
45,125
62,943
145
63,088
-
964
-
(484,164)
(484,164)
(100)
(484,264)
8,733
(324,595)
(1,076,898)
143
(1,076,755)
the Consolidated Statement of Changes in equity should be read in conjunction with the accompanying notes.
69 pACt Group HolDInGS ltD
Consolidated Statement
of Cash Flows
For the year ended 30 June 2014
proceeds on sale of businesses and subsidiaries
22
CASH FloWS FroM operAtInG ACtIVItIeS
receipts from customers
payments to suppliers and employees
Income tax paid
Interest received
Borrowing and other finance costs paid
Net cash flows from operating activities
CASH FloWS FroM InVeStInG ACtIVItIeS
Payments for property, plant and equipment
Proceeds on sale of property, plant and equipment
Dividends received
purchase of shares in associates
purchase of businesses and subsidiaries(1)
Net cash flows used in investing activities
CASH FloWS FroM FInAnCInG ACtIVItIeS
proceeds from borrowings net of borrowing costs
repayment of borrowings
repayment of promissory note
proceeds from Ipo
Issuance of shares
Ipo transaction costs
Swap break costs
payment of dividend
2014
notes
$’000’s
2013
$’000’s
1,286,318
1,220,085
(1,109,717)
(1,061,965)
(22,023)
1,088
(65,953)
89,713
(36,397)
1,555
1,125
-
-
21
(47,617)
(81,334)
(27,543)
118
(42,498)
88,197
(43,810)
23,729
63
35,429
(4,648)
(104,313)
(93,550)
674,752
886,658
(1,007,564)
(374,819)
(549,407)
648,800
255,000
(24,204)
(6,407)
-
-
(9,030)
(651)
22,629
2,249
24,227
-
-
-
-
-
(484,264)
(1,184)
26,391
21,038
1,359
232
22,629
repayment of related-entity subordinated loan
Net cash flows from / (used in) financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
effect of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at end of year
20
(1) purchases of businesses and subsidiaries for the year ended 30 June 2014 includes a settlement of deferred consideration relating to an acquisition in
the year ended 30 June 2013 of $1,193,000.
The consolidated statement of cashflows should be read in conjunction with the accompanying notes.
AnnuAl report 2014 70
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notes to the Full Year
Consolidated Financial report
For the year ended 30 June 2014
note 1. CorporAte InForMAtIon
Pact Group Holdings Ltd (‘Pact’ or the ‘company’) is a for-profit company limited by shares, incorporated
and domiciled in australia, whose shares are publicly traded. This consolidated Financial report includes the
financial statements of the company and the entities it controlled at the end of, or during the year ended
30 June 2014 (the ‘Group’), and was issued in accordance with a resolution of the Directors on 27 august 2014.
The parent of the Group is Pact Group Holdings Ltd. In the comparative period, the ultimate parent of the
Group was salvage Pty Ltd, as trustee for the Geminder Family Trust, incorporated in australia.
pact’s primary activities relate to the conversion of plastic resin and steel into rigid plastics and metals
packaging and related products for customers in the food, dairy, beverage, personal care, other household
consumables, chemicals, agricultural, industrial and other sectors.
Pact also provides a range of sustainability, recycling and environmental services to assist its customers in
reducing the environmental impact of their product packaging and related processes.
The company’s registered office is at Level 16, como Towers, 644 chapel street, south Yarra, Victoria, australia.
note 2. SuMMArY oF SIGnIFICAnt ACCountInG polICIeS
(a) basis of preparation
The financial report is a general purpose financial report, which has been prepared in accordance with
the requirements of the Corporations Act 2001, australian accounting standards and other authoritative
pronouncements of the Australian Accounting Standards Board. the Financial report has also been prepared
on a historical cost basis, except for derivative financial instruments which have been measured at fair value,
(refer to section (u)).
The consolidated entity is of a kind referred to in asIc class Order 98/0100 dated 10 July 1998 and in
accordance with that class Order, amounts in the consolidated financial report have been rounded off
to the nearest $1,000, unless otherwise specifically stated.
(b) Statement of compliance
The financial report also complies with australian accounting standards and International Financial
reporting standards (IFrs) as issued by the International accounting standards Board.
(c) new Accounting Standards and Interpretations
Australian Accounting Standards and Interpretations that have recently been issued or amended are
outlined below, of which some of these amendments apply for the first time in the year ended 30 June 2014.
the Group has assessed whether there is a material impact on the consolidated Financial report for the current
financial year, and also whether there is a requirement to restate prior year comparatives. The outcomes of this
assessment are described below.
Accounting Standards and Interpretations which have been issued and are effective
AASb 10 Consolidated Financial Statements: AASB 10 establishes a new control model that applies to
all entities. It replaces parts of AASB 127 Consolidated and Separate Financial Statements dealing with the
accounting for consolidated financial statements and UIG-112 Consolidation – Special purpose entities.
the new control model broadens the situations when an entity is considered to be controlled by another
entity and includes new guidance for applying the model to specific situations, including when acting as a
manager may give control, the impact of potential voting rights and when holding less than a majority of
voting rights may give control. Consequential amendments were also made to this and other standards via AASB
2011–7 and AASB 2012–10.
The application date of the standard was 1 January 2013 and was applied by the Group for the financial year
commencing 1 July 2013. these amendments did not have a material impact on the Group.
71 pACt Group HolDInGS ltD
notes to the Full Year Consolidated
Financial report (continued)
For the year ended 30 June 2014
note 2. SuMMArY oF SIGnIFICAnt ACCountInG polICIeS (ContInueD)
AASb 11 Joint Arrangements: AASB 11 replaces AASB 131 Interests in Joint ventures and uIG-113 Jointly-
controlled entities – non-monetary Contributions by venturers.
aasB 11 uses the principle of control in aasB 10 to define joint control, and therefore the determination of whether
joint control exists may change. In addition it removes the option to account for jointly controlled entities (JcEs) using
proportionate consolidation principles. Instead, accounting for a joint arrangement is dependent on the nature of the
rights and obligations arising from the arrangement. Joint operations that give the venturers a right to the underlying
assets and obligations themselves is accounted for by recognising the share of those assets and obligations.
Joint ventures that give the venturers a right to the net assets is accounted for using the equity method.
consequential amendments were also made to this and other standards via aasB 2011-7, aasB 2010-10 and
amendments to AASB 128.
The application date of the standard was 1 January 2013 and was applied by the Group for the financial year
commencing 1 July 2013. The Group has historically used the equity method to account for joint ventures, so overall
there was no impact from these amendments.
AASb 12 Disclosure of Interests in other entities: AASB 12 includes all disclosures relating to an entity’s
interests in subsidiaries, joint arrangements, associates and structured entities. New disclosures have been
introduced about the judgements made by management to determine whether control exists, and to require
summarised information about joint arrangements, associates, structured entities and subsidiaries with
non-controlling interests.
The application date of the standard was 1 January 2013 and was applied by the Group for the financial year
commencing 1 July 2013. These amendments did not have a significant impact on the Group.
AASb 13 Fair Value Measurement: AASB 13 establishes a single source of guidance for determining the fair
value of assets and liabilities. aasB 13 does not change when an entity is required to use fair value, but rather,
provides guidance on how to determine fair value when fair value is required or permitted. Application of this
definition may result in different fair values being determined for the relevant assets.
AASB 13 also expands the disclosure requirements for all assets or liabilities carried at fair value. this includes
information about the assumptions made and the qualitative impact of those assumptions on the fair
value determined.
Consequential amendments were also made to other standards via AASB 2011-8. the application date
of the standard was 1 January 2013 and was applied by the Group for the financial year commencing 1 July 2013.
AASB 119 Employee Benefits: the main change introduced by this standard is to revise the accounting for
defined benefit plans. The amendment removes the option for accounting for the liability, and requires that the
liability arising from such plans to be recognised in full whereby actuarial gains and losses are reported within
other comprehensive income. It also revised the method of calculating the return on plan assets.
The revised standard also changes the definition of short-term employee benefits. The distinction between
short-term and other long-term employee benefits is now based on whether the benefits are expected to be
settled wholly within 12 months of reporting date.
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AnnuAl report 2014 72
notes to the Full Year Consolidated
Financial report (continued)
For the year ended 30 June 2014
note 2. SuMMArY oF SIGnIFICAnt ACCountInG polICIeS (ContInueD)
Consequential amendments were also made to other standards through AASB 2011-10. the application
date of the standard was 1 January 2013 and was applied by the Group for the financial year commencing
1 July 2013. These amendments did not have a material impact on the Group as there were no defined
benefit funds and the revisions to definition of short term employee did not give rise to a material difference.
AASb 2011-4 Amendments to Australian Accounting Standards to remove Individual key Management
personnel Disclosure requirements: this amendment deletes from AASB 124 related parties disclosure
individual key management personnel (KMP) disclosure requirements for disclosing entities that are not
companies. It also removes the individual kMp disclosure requirements for all disclosing entities in relation
to equity holdings, loans and other related party transactions.
the application date of the standard was 1 July 2013 and was applied by the Group on the same date.
these amendments did not have a material impact on the Group.
AASb 2012-2 Amendments to Australian Accounting Standards – offsetting Financial Assets and
liabilities: principally amends AASB 7 Financial Instruments: Disclosures to require disclosure of the effect
or potential effect of netting arrangements, including rights of set-off associated with the entity’s recognised
financial assets and recognised financial liabilities, on the entity’s financial position, when all the offsetting
criteria of AASB 132 are not met.
The application date of the amendment was 1 January 2013 and was applied by the Group for the financial year
commencing 1 July 2013. these amendments did not have a material impact on the Group.
AASb 2013-3 Amendments to AASb 136 – recoverable Amount Disclosures for non Financial Assets:
AASB 2013-3 amends the disclosure requirements in AASB 136 Impairment of Assets. the amendments include
the requirement to disclose additional information about the fair value measurement when the recoverable
amount of impaired assets is based on fair value less costs of disposal.
the application date of the standard is 1 January 2014. the Group has early adopted this change in Accounting
Standards commencing 1 July 2013. these amendments did not have a material impact on the Group. pact has
adopted the value in use approach under AASB 136.
Accounting Standards and Interpretations which have been issued but not yet effective
AASb 1031 Materiality: the revised AASB 1031 is an interim standard that cross-references to other
accounting standards and the Framework (issued December 2013) that contain guidance on materiality.
AASB 1031 will be withdrawn when references to AASB 1031 in all other Accounting Standards and
Interpretations have been removed.
The application date of the standard is 1 January 2014 and will be applied by the Group for the financial year
commencing 1 July 2014. these amendments are not expected to have a material impact on the Group.
AASb 9 Financial Instruments: On 24 July 2014, the IasB issued the final version of IFrs 9 which replaces Ias 39
and includes a logical model for classification and measurement, a single, forward-looking ‘expected loss’
impairment model and a substantially-reformed approach to hedge accounting. IFrS 9 is effective for
annual periods beginning on or after 1 January 2018. However, the accounting standard is available for early
application. the ‘own credit’ changes can be early applied in isolation without otherwise changing the accounting
for financial instruments.
The final version of IFrs 9 introduces a new ‘expected-loss’ impairment model that will require more timely
recognition of expected credit losses. specifically, the new accounting standard requires entities to account
for expected credit losses from when financial instruments are first recognised and to recognise full lifetime
expected losses on a more timely basis.
73 pACt Group HolDInGS ltD
notes to the Full Year Consolidated
Financial report (continued)
For the year ended 30 June 2014
note 2. SuMMArY oF SIGnIFICAnt ACCountInG polICIeS (ContInueD)
The aasB is yet to issue the final version of aasB 9. a revised version of aasB 9 (aasB 2013-9) was issued
in December 2013 which included the new hedge accounting requirements, including changes to hedge
effectiveness testing, treatment of hedging costs, risk components that can be hedged and disclosures.
aasB 9 includes requirements for a simplified approach for classification and measurement of financial assets
compared with the requirements of AASB 139.
the main changes are described below.
(a) Financial assets that are debt instruments will be classified based on (1) the objective of the entity’s business
model for managing the financial assets; and (2) the characteristics of the contractual cash flows.
(b) allows an irrevocable election on initial recognition to present gains and losses on investments in equity
instruments that are not held for trading in other comprehensive income. Dividends in respect of these
investments that are a return on investment can be recognised in profit or loss and there is no impairment
or recycling on disposal of the instrument.
(c) Financial assets can be designated and measured at fair value through profit or loss at initial recognition
if doing so eliminates or significantly reduces a measurement or recognition inconsistency that would arise
from measuring assets or liabilities, or recognising the gains and losses on them, on different bases.
(d) Where the fair value option is used for financial liabilities the change in fair value is to be accounted for
as follows:
– the change attributable to changes in credit risk are presented in other comprehensive income; and
– The remaining change is presented in profit or loss.
aasB 9 also removes the volatility in profit or loss that was caused by changes in the credit risk of liabilities
elected to be measured at fair value. this change in accounting means that gains caused by the deterioration of
an entity’s own credit risk on such liabilities are no longer recognised in profit or loss.
consequential amendments were also made to other standards as a result of aasB 9, introduced by
aasB 2009-11 and superseded by aasB 2010-7, aasB 2010-10 and aasB 2014-1 – Part E.
these amendments are not expected to have a material impact on the Group.
AASb 2012–3 Amendments to Australian Accounting Standards – offsetting Financial Assets and Financial
liabilities: AASB 2012-3 adds application guidance to AASB 132 Financial Instruments: presentation to address
inconsistencies identified in applying some of the offsetting criteria of aasB 132, including clarifying the meaning
of “currently has a legally enforceable right of set-off” and that some gross settlement systems may be considered
equivalent to net settlement.
the application date of the standard is 1 January 2014 and will be applied by the Group commencing
1 July 2014. these amendments are not expected to have a material impact on the Group.
Amendments to IAS 16 and IAS 38 Clarification of Acceptable Methods of Depreciation and Amortisation:
IAS 16 and IAS 38 both establish the principle for the basis of depreciation and amortisation as being the
expected pattern of consumption of the future economic benefits of an asset. The IasB has clarified that the
use of revenue-based methods to calculate the depreciation of an asset is not appropriate because revenue
generated by an activity that includes the use of an asset generally reflects factors other than the consumption
of the economic benefits embodied in the asset. The IasB also clarified that revenue is generally presumed to
be an inappropriate basis for measuring the consumption of the economic benefits embodied in an intangible
asset. This presumption, however, can be rebutted in certain limited circumstances.
the application date of the amendment is 1 January 2016 and will be applied by the Group commencing
1 July 2016. these amendments are not expected to have a material impact on the Group.
AnnuAl report 2014 74
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notes to the Full Year Consolidated
Financial report (continued)
For the year ended 30 June 2014
note 2. SuMMArY oF SIGnIFICAnt ACCountInG polICIeS (ContInueD)
IFrS 15 revenue from Contracts with Customers: IFrS 15 establishes principles for reporting useful
information to users of financial statements about the nature, amount, timing and uncertainty of revenue
and cash flows arising from an entity’s contracts with customers.
IFrS 15 supersedes:
(a) Ias 11 construction contracts;
(b) Ias 18 revenue;
(c) IFrIc 13 customer Loyalty Programmes;
(d) IFrIc 15 agreements for the construction of real Estate;
(e) IFrIc 18 Transfers of assets from customers (f) sIc-31 revenue—Barter Transactions Involving
Advertising Services; and
(f) sIc-31 revenue—Barter Transactions Involving advertising services
the core principle of IFrS 15 is that an entity recognises revenue to depict the transfer of promised goods or
services to customers in an amount that reflects the consideration to which the entity expects to be entitled
in exchange for those goods or services. An entity recognises revenue in accordance with this core principle
by applying the following steps:
step 1: Identify the contract(s) with a customer;
Step 2: Identify the performance obligations in the contract;
Step 3: Determine the transaction price;
Step 4: Allocate the transaction price to the performance obligations in the contract; and
step 5: recognise revenue when (or as) the entity satisfies a performance obligation.
the application date of the amendment is 1 January 2017 and will be applied by the Group commencing
1 July 2017. Management is currently assessing the impact of IFrS 15.
(d) basis of consolidation
The consolidated financial statements comprise the financial statements of Pact Group Holdings Ltd and
its controlled entities as specified in note 25. Interests in associates are equity accounted (refer to note 2(y) below).
controlled entities are all those entities over which the Group has the power to govern the financial and
operating policies so as to obtain benefits from their activities. The existence and effect of potential voting
rights that are currently exercisable or convertible are considered when assessing whether the Group controls
another entity.
The financial reports of the subsidiaries are prepared for the same reporting period as the parent company,
using consistent accounting policies. In preparing the consolidated Financial report, all intercompany
balances, transactions, income and expenses and profit and losses resulting from intra-group transactions
have been eliminated in full.
Controlled entities are fully consolidated from the date on which control is obtained by the Group and cease
to be consolidated from the date on which control is transferred out of the Group.
75 pACt Group HolDInGS ltD
notes to the Full Year Consolidated
Financial report (continued)
For the year ended 30 June 2014
note 2. SuMMArY oF SIGnIFICAnt ACCountInG polICIeS (ContInueD)
(e) business combinations
the acquisition method of accounting is used to account for all business combinations regardless of whether
equity instruments or other assets are acquired. cost is measured as the fair value of the assets given, shares
issued or liabilities incurred or assumed at the date of exchange. Acquisition related costs are expensed as
incurred. Where equity instruments are issued in a business combination, the fair value of the instruments
is their published market price as at the date of exchange. transaction costs arising on the issue of equity
instruments are recognised directly in equity.
The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at
acquisition date fair value and the amount of any non-controlling interest in the acquiree. For each business
combination, the Group elects whether it measures the non-controlling interest in the acquiree either at fair
value or at the proportionate share of the acquirees identifiable net assets. However, acquisitions occurring
while under common control are accounted at the carrying amount of assets and liabilities of the acquiree
immediately before control over the acquiree is obtained. Any difference between the fair value of consideration
paid and the fair value net identifiable assets acquired is recognised in reserves.
Except for non-current assets or disposal groups classified as held for sale (which are measured at fair value
less costs to sell), all identifiable assets acquired and liabilities and contingent liabilities assumed in a business
combination are measured initially at their fair values at the acquisition date. the excess of the cost of the
business combination over the net fair value of the Group’s share of the identifiable net assets acquired is
recognised as goodwill. If the cost of acquisition is less than the Group’s share of the net fair value of the
identifiable net assets of the subsidiary, the difference is recognised as a gain in the income statement, but only
after a reassessment of the identification and measurement of the net assets acquired. Where settlement of any
part of the consideration is deferred, the amounts payable in the future are discounted to their present value.
The discount rate used is the entity’s incremental borrowing rate, being the rate at which a similar borrowing
could be obtained from an independent financier under comparable terms and conditions.
(f) Significant accounting judgements, estimates and assumptions
Management has identified the following critical accounting policies for which significant judgements, estimates and
assumptions are made. Actual results may differ from these estimates under different assumptions and conditions
and may materially affect financial results or the financial position reported in future periods. Further details of the
nature of these assumptions and conditions may be found in the relevant notes to the Financial report.
Significant accounting judgements
In the process of applying the Group’s accounting policies, Management has made the following judgements,
apart from those involving estimations, which have the most significant effect on the amounts recognised in
the notes to the Financial report:
(i) Taxation
The Group is subject to income taxes in australia and foreign jurisdictions and as a result significant judgement
is required in determining the Group’s provision for income tax. Deferred tax assets, including those arising from
un-recouped tax losses, capital losses and temporary differences, are recognised only where it is considered
more likely than not that they will be recovered, based upon the timing and generation of sufficient future
taxable profits.
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AnnuAl report 2014 76
notes to the Full Year Consolidated
Financial report (continued)
For the year ended 30 June 2014
note 2. SuMMArY oF SIGnIFICAnt ACCountInG polICIeS (ContInueD)
assumptions about the generation of future taxable profits and repatriation of retained earnings depend
on management’s estimates of future cash flows. These depend on estimates of future production and
sales volumes, operating costs, capital expenditure, dividends and other capital management transactions.
Judgements are also required about the application of income tax legislation. these judgements and
assumptions are subject to risk and uncertainty, hence there is a possibility that changes in circumstances
will alter expectations, which may impact the amount of deferred tax assets and deferred tax liabilities
recognised on the Statement of Financial position and the amount of other tax losses and temporary
differences not yet recognised. In such circumstances, some or all of the carrying amounts of recognised
deferred tax assets and liabilities may require adjustment, resulting in a corresponding credit or charge to
the profit or loss, or other comprehensive income.
(ii) Impairment of non-financial assets other than goodwill
The Group assesses impairment of all assets at each reporting date by evaluating conditions specific to the
Group and to the particular asset that may lead to impairment. these include product and manufacturing
performance, technology, social, economic and political environments and future product expectations.
If an impairment trigger exists the recoverable amount of the asset is assessed.
(iii) Impairment of net investment in associates
the Group applies AASB 139 Financial Instruments: recognition and Measurement to determine whether
there is an indicator that the Group’s net investment in associates are impaired, after first applying equity
accounting in accordance with AASB 128 Investments in Associates. the Group must apply judgement to
determine whether there is objective evidence that one or more events have had an impact on the estimated
future cash flows of its associates.
Significant accounting estimates and assumptions
the carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions
of future events. The key estimates and assumptions which have a significant risk of causing a material
adjustment to the carrying amounts of certain assets and liabilities within the next annual reporting period are:
(i) Impairment of goodwill
the Group determines whether goodwill is impaired at least on an annual basis. this requires an estimation
of the recoverable amount of cash-generating units, using a value in use discounted cash flow methodology,
to which the goodwill is allocated. the assumptions used in this estimation of recoverable amount and the
carrying amount of goodwill is discussed in note 2(m).
(ii) Make good provision on leased premises
A provision has been made for the present value of anticipated costs of future restoration of leased premises.
The provision includes future cost estimates associated with dismantling, closure and decontamination. The
calculation of this provision requires assumptions such as contractual obligations, application of environmental
legislation, plant closure dates, available technologies and engineering cost estimates. These uncertainties may
result in future actual expenditure differing from the amounts currently provided. the provision recognised
for each site is periodically reviewed and updated based on the facts and circumstances available at the time.
Changes to the estimated future costs for site exits are recognised in the Statement of Financial position by
adjusting both the expense and provision. the related carrying amounts are disclosed in note 13.
(iii) Estimation of useful lives of assets
the estimation of the useful lives of assets has been based on historical experience and lease terms
(for assets under finance leases). In addition, the condition of the assets is assessed at least once per
year and considered against the remaining useful life. Adjustments to useful lives are made when
considered necessary. Depreciation charges are included in notes 3 and 9.
(iv) Business reorganisation
Business reorganisation provisions are only recognised when a detailed plan has been approved and the
business reorganisation has either commenced or been publicly announced, or firm contracts relating to
the business reorganisation have been entered into. Costs related to ongoing activities are not provided for.
77 pACt Group HolDInGS ltD
notes to the Full Year Consolidated
Financial report (continued)
For the year ended 30 June 2014
note 2. SuMMArY oF SIGnIFICAnt ACCountInG polICIeS (ContInueD)
(v) Business combinations
the consolidated Financial report includes the information and results of each controlled entity from the date
on which the Group obtains control until such time as the Group ceases to control such entity (refer note 2e).
The determination as to the existence of control or significant influence over an entity necessarily requires
management judgement to assess the Group’s ability to govern the financial and operating activities of an
investee. In making such an assessment, a range of factors are considered including voting rights in an investee
and Board and management representation.
A business acquisition also requires judgement with respect to the determination of the fair value of purchase
consideration given and the fair value of identifiable net assets and liabilities acquired. Many of these assets
and liabilities either given up or acquired are not normally traded in active markets, and thus management
judgement is required in determining the fair values. Management judgement is also required in ascertaining
the assets and liabilities which should be recognised, in particular with respect to intangible assets such as
brand names, customer relationships, patents and trademarks and contingent liabilities.
(g) revenue and other income
revenue is recognised and measured at the fair value of the consideration received or receivable to the extent
that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured.
The following specific recognition criteria must also be met before revenue is recognised:
(i) sale of goods
revenue from the sale of goods is recognised when there has been a transfer of risks and rewards to the
customer (through the execution of a sales agreement at the time of delivery of the goods to the customer),
no further work or processing is required, the quantity and quality of the goods has been determined,
the price is determined and generally title has passed.
(ii) Interest income
Income is recognised as interest accrues using the effective interest method. this is a method of calculating the
amortised cost of a financial asset and allocating the interest income over the relevant period using the effective
interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of
the financial asset to the net carrying amount of the financial asset.
(iii) Dividend income
Income is recognised when the Group’s right to receive the payment is established.
(h) borrowing costs
Borrowing costs are recognised as an expense when incurred. Borrowing costs associated with qualifying
assets are capitalised.
(i) leases
the determination of whether an arrangement is or contains a lease is based on the substance of the arrangement
and requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific
asset or assets and the arrangement conveys a right to use the asset.
(i) Finance leases
Finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the
leased item, are capitalised at the inception of the lease at the fair value of the leased property or, if lower, at the
present value of the minimum lease payments. Lease payments are apportioned between the finance charges
and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the
liability. Finance charges are recognised as an expense in the profit or loss.
(ii) capitalised leased assets
Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease
term if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term.
AnnuAl report 2014 78
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notes to the Full Year Consolidated
Financial report (continued)
For the year ended 30 June 2014
note 2. SuMMArY oF SIGnIFICAnt ACCountInG polICIeS (ContInueD)
(iii) Operating lease commitments
The Group has entered into commercial property, office equipment and motor vehicles leases. The entity has
determined that it does not obtain all the significant risks and rewards of the properties, office equipment
and motor vehicles and has thus classified the leases as operating leases.
Operating lease payments are recognised as an expense in profit or loss on a straight-line basis over the
lease term. lease incentives are recognised as a liability when received and subsequently reduced by
allocating lease payments between rental expense and reduction of the liability.
(j) Cash and cash equivalents
Cash and cash equivalents in the Statement of Financial position comprise cash at bank and on hand and
short-term deposits with a maturity of three months or less that are readily convertible to known amounts
of cash and which are subject to an insignificant risk of changes in value.
For the purposes of the statement of cash Flows, cash and cash equivalents consist of cash and cash
equivalents as defined above, net of bank overdraft balances. Bank overdrafts are included within
interest-bearing loans and borrowings in current liabilities on the Statement of Financial position.
(k) property, plant and equipment
Property, plant and equipment is stated at historical cost less accumulated depreciation and any accumulated
impairment losses. All costs directly attributable to bringing the asset to the location and condition necessary
for it to be capable of operating in the manner intended by management are capitalised. Such costs include
the cost of replacing major parts that are eligible for capitalisation when the cost of replacing the parts is
incurred. similarly, when each major inspection is performed, the part’s cost is recognised in the carrying
amount of the plant and equipment as a replacement only if it is eligible for capitalisation.
Where assets are in the course of construction at the reporting date they are classified as capital works in
progress. Upon completion, capital works in progress are reclassified to plant and equipment and subject to
fair value assessments and depreciation from this date.
Depreciation is calculated on a straight line basis over the estimated useful life of the assets as follows:
Buildings Freehold
Buildings leasehold
plant and equipment
40 – 50 years
10 – 15 years
3 – 20 years
(l) trade and other receivables
Trade receivables, generally have 30 day terms and are non-interest bearing. They are recognised initially
at fair value and subsequently measured at amortised cost using the effective interest method, less an
allowance for impairment.
Collectability of trade receivables is reviewed on an ongoing basis. A provision for impairment of trade
receivables is recognised to reduce the carrying amount of accounts receivable when there is objective
evidence that the receivable will not be collected. Financial difficulties of the debtor, default payments or
debts more than 90 days overdue are considered objective evidence of impairment, subject to review of
the particular debtor. Impairment losses incurred which were specifically provided for in previous years are
eliminated against the provision for impairment. In all other cases, impairment losses are written off as an
expense in the profit or loss.
(m) Goodwill
Goodwill acquired in a business combination is initially measured at cost being the excess of the cost of
the business combination over the Group’s interest in the net fair value of the acquired identifiable assets,
liabilities and contingent liabilities.
Following initial recognition, goodwill is measured at cost less any accumulated impairment losses.
79 pACt Group HolDInGS ltD
notes to the Full Year Consolidated
Financial report (continued)
For the year ended 30 June 2014
note 2. SuMMArY oF SIGnIFICAnt ACCountInG polICIeS (ContInueD)
Goodwill is reviewed for impairment annually or more frequently if events or changes in circumstances indicate
that the carrying value may be impaired.
For the purposes of impairment testing, goodwill acquired in a business combination is, from the acquisition
date, allocated to each of the Group’s cash-generating units, or groups of cash-generating units, that are
expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities
of the Group are assigned to those units or groups of units.
Impairment is determined by assessing the recoverable amount of the cash-generating unit (or group of
cash-generating units), to which the goodwill relates. recoverable amount is determined by using a value
in use discounted cash flow methodology. When the recoverable amount of the cash-generating unit
(or group of cash-generating units) is less than the carrying amount, an impairment loss is recognised.
When goodwill forms part of a cash-generating unit (or group of cash-generating units) and an operation
within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying
amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed
of in this manner is measured based on the relative values of the operation disposed of and the portion of the
cash-generating units retained.
Impairment losses recognised for goodwill are not subsequently reversed.
(n) Intangible assets
Intangible assets acquired separately outside of a business combination are initially measured at cost. the cost
of an intangible asset acquired in a business combination is its fair value as at the date of acquisition. Following
initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated
impairment losses.
Intangible assets with finite lives are amortised over the useful life and assessed for impairment whenever
there is an indication that the intangible asset may be impaired. the amortisation period and the amortisation
method for an intangible asset is reviewed at least at each financial year end. changes in the expected useful life
or expected pattern of consumption of future economic benefits embodied in the asset are accounted for
by changing the amortisation period or method, as appropriate, which is a change in accounting estimate.
The amortisation expense for intangible assets with finite lives is recognised in the profit or loss.
(o) Impairment of non-financial assets other than goodwill
The Group assesses at each reporting date whether there is an indication that an asset with a finite life may be
impaired. If any such indication exists, the Group makes an estimate of the asset’s recoverable amount. an asset’s
recoverable amount is the higher of its fair value less costs to sell and its value in use and is determined for an
individual asset, unless the asset generates cash inflows that are largely dependent on those from other assets or
groups of assets and the asset’s value in use cannot be estimated to approximate its fair value. In such cases the
asset is tested for impairment as part of the cash-generating unit to which it belongs. When the carrying amount
of an asset or cash-generating unit exceeds its recoverable amount, the asset or cash-generating unit is considered
impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.
Impairment losses relating to continuing operations are recognised in profit or loss unless the asset is carried at a
revalued amount (in which case the impairment loss is treated as a revaluation decrement).
An assessment is also made at each reporting date as to whether there is any indication that previously recognised
impairment losses may no longer exist or may have decreased. If such an indication exists, the recoverable
amounts are estimated. A previously recognised impairment loss is reversed only if there has been a change in the
estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If this
is the case the carrying amount of the asset is increased to its recoverable amount. the increased amount cannot
exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been
recognised for the asset in prior years.
AnnuAl report 2014 80
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notes to the Full Year Consolidated
Financial report (continued)
For the year ended 30 June 2014
note 2. SuMMArY oF SIGnIFICAnt ACCountInG polICIeS (ContInueD)
(p) Income tax
Current tax assets and liabilities for the current and prior periods are measured at the amount expected to
be recovered from or paid to the relevant taxation authorities in each jurisdiction. the tax rates and tax laws
used to compute the amount are those that are enacted or substantively enacted at the reporting date.
Deferred income tax is provided on all temporary differences at the reporting date between the tax cost
bases of assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred tax liabilities are recognised for all taxable temporary differences except:
• when the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a
transaction that is not a business combination and that, at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss; or
• when the taxable temporary difference is associated with investments in subsidiaries, associates or
interests in joint ventures, and the timing of the reversal of the temporary difference can be controlled
and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax assets are recognised for all deductible temporary differences, carry-forward of unused tax credits
and unused tax losses, to the extent that it is probable that taxable profit will be available against which the
deductible temporary differences and the carry-forward of unused tax credits and unused tax losses can be
utilised, except:
• when the deferred tax asset relating to the deductible temporary difference arises from the initial recognition
of an asset or liability in a transaction that is not a business combination and, at the time of the transaction,
affects neither the accounting profit nor taxable profit or loss; or
• when the deductible temporary difference is associated with investments in subsidiaries, associates or
interests in joint ventures, in which case a deferred tax asset is only recognised to the extent that it is
probable that the temporary difference will reverse in the foreseeable future and taxable profit will be
available against which the temporary difference can be utilised.
the carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that
it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax
asset to be utilised.
unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent
that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when
the asset is to be realised or the liability is to be settled, based on the tax rates (and tax laws) that have been
enacted or substantively enacted at the reporting date.
Income taxes relating to items recognised directly in equity are recognised in equity and not in profit or loss.
Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off
current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same
taxable entity and the same taxation authority.
81 pACt Group HolDInGS ltD
notes to the Full Year Consolidated
Financial report (continued)
For the year ended 30 June 2014
note 2. SuMMArY oF SIGnIFICAnt ACCountInG polICIeS (ContInueD)
(q) Interest bearing loans and borrowings
All loans and borrowings are initially recognised at the fair value of the consideration received less directly
attributable transaction costs.
after initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost
using the effective interest method, which is calculated based on the principal borrowing amount less directly
attributable transaction costs.
Gains and losses are recognised in the Statement of Comprehensive Income when the liabilities are
derecognised.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of
the liability for at least 12 months after the reporting date.
(r) Inventories
Inventories have been classified as follows:
raw Materials:
Plastic resins, steel and tinplate.
Work in progress:
Manufactured plastic, steel and tin packaging that have not yet reached a full stage of completion.
Finished Goods:
Manufactured plastic, steel and tin packaging that are intended for sale to external customers.
Inventories are valued at the lower of cost and net realisable value, with directly attributable costs incurred
in bringing each product to its present location and condition being accounted for, on a full absorption basis,
as follows:
raw Materials:
Purchase cost of material, including discounts, rebates, duties, taxes and other inward transport costs,
on a moving average cost basis.
Work in progress & Finished Goods:
cost of raw materials, direct labour and a proportion of manufacturing overheads based on a normal level
of operating capacity, but excluding costs that relate to general administration, finance, marketing, selling
and distribution.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of
completion and the estimated costs necessary to make the sale.
(s) trade and other payables
trade and other payables are carried at amortised cost which due to the terms associated with these items
equates to their principal amounts and are not discounted. they represent liabilities for goods and services
provided to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes
obliged to make a future payment with respect to the purchase of these goods and services. the amounts are
generally unsecured and are usually paid within 30 – 90 days of recognition.
(t) Contributed equity
Issued and paid up capital is classified as contributed equity and recognised at the fair value of the consideration
received by the entity. Incremental costs directly attributable to the issue of new shares or options are shown in
contributed equity as a deduction, net of tax, from the proceeds.
AnnuAl report 2014 82
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notes to the Full Year Consolidated
Financial report (continued)
For the year ended 30 June 2014
note 2. SuMMArY oF SIGnIFICAnt ACCountInG polICIeS (ContInueD)
(u) Derivatives
The Group uses derivative financial instruments such as forward currency contracts, cross currency interest rate
swaps, and interest rate swaps to hedge its risks associated with foreign currency and interest rate fluctuations.
such derivative financial instruments are initially recognised at fair value on the date at which the derivative
contract is entered into and are subsequently remeasured to fair value at each reporting date. Derivatives are
classified as assets when their fair value is positive and as liabilities when their fair value is negative.
any gains or losses arising from changes in the fair value of derivatives, except for those that qualify as cash flow
hedges, are taken directly to profit or loss for the year.
the fair value of forward currency contracts is calculated by using valuation techniques such as present value
techniques, comparison to similar instruments for which market observable prices exist and other relevant
models used by market participants. these valuation techniques use both observable and unobservable market
inputs, which are not considered to be significant. The fair value of cross currency interest rate swaps and interest
rate swap contracts is determined by reference to market values for similar instruments.
For the purposes of hedge accounting, hedges are classified as:
• fair value hedges when they hedge the exposure to changes in the fair value of a recognised asset or liability;
• cash flow hedges when they hedge exposure to variability in cash flows that is attributable either to a
particular risk associated with a recognised asset or liability or a forecast transaction; or
• hedge of a net investment in a foreign operation.
at the inception of a hedge relationship, the Group formally designates and documents the hedge
relationship to which the Group wishes to apply hedge accounting and the risk management objective and
strategy for undertaking the hedge. The documentation includes identification of the hedging instrument,
the hedged item or transaction, the nature of the risk being hedged and how the entity will assess the
hedging instrument’s effectiveness in offsetting the exposure to changes in the hedged item’s fair value
or cash flows attributable to the hedged risk. such hedges are expected to be highly effective in achieving
offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that they
have actually been highly effective throughout the financial reporting period for which they were designated.
cash flow hedges are accounted for as follows:
cash flow hedges are hedges of the Group’s exposure to variability in cash flows that is attributable to a particular
risk associated with a recognised asset or liability or a highly probable forecast transaction and that could affect
profit or loss. The effective portion of the gain or loss on the hedging instrument is recognised directly in equity,
while the ineffective portion is recognised in profit or loss. The Group uses forward exchange contracts (FEcs) to
hedge foreign exchange purchases. The FEcs are accounted for as cash flow hedges. refer to note 23 for details.
In the prior year, the Group had cross currency interest rate swaps to hedge exposure against variable interest
rate and foreign exchange rates, there are none outstanding as at 30 June 2014.
amounts taken to equity are transferred to profit or loss when the hedge transaction affects profit or loss,
such as when hedged income or expenses are recognised or when a forecast sale or purchase occurs.
When the hedged item is the cost of a non-financial asset or liability, the amounts taken to equity are
transferred to the initial carrying amount of the non-financial asset or liability.
If the forecasted transaction is no longer expected to occur, amounts previously recognised in equity are
transferred to the profit or loss. If the hedging instrument expires or is sold, terminated or exercised without
replacement or rollover, or if its designation as a hedge is revoked, amounts previously recognised in
equity remain in equity until the forecast transaction occurs. If the related transaction to which the hedging
instrument relates is not expected to occur, the amount is taken to the profit or loss.
83 pACt Group HolDInGS ltD
notes to the Full Year Consolidated
Financial report (continued)
For the year ended 30 June 2014
note 2. SuMMArY oF SIGnIFICAnt ACCountInG polICIeS (ContInueD)
(v) Foreign currency translation
Both the functional and presentation currency of Pact Group Holdings Ltd is australian dollars (aUD).
transactions in foreign currencies are initially recorded in the functional currency of the individual entity by
applying the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in
foreign currencies are retranslated at the rate of exchange prevailing at reporting date.
the table below outlines the functional currencies that the Group has determined to apply for each country in
which the Group’s entities are domiciled.
Country
Australia
new Zealand
thailand
Singapore
China
philippines
Functional currency
AuD
nZD
tHB
uSD
rMB
pHp
non-monetary items that are measured in terms of historical cost in a foreign currency are translated using
the exchange rate as at the date of the initial transaction.
non-monetary items measured at fair value in a foreign currency are translated using the exchange rates
at the date when the fair value was determined.
As at the reporting date the assets and liabilities of the controlled entities with non-Australian dollar functional
currency are translated into the presentation currency of pact Group Holdings ltd at the rate of exchange at the
reporting date and their statements of comprehensive income are translated at the weighted average exchange
rate for the year (where appropriate).
the exchange rate differences arising on the translation to presentation currency are taken directly to the
foreign currency translation reserve, in equity.
On disposal of a foreign entity, the deferred cumulative amount recognised in equity relating to that particular
foreign operation is recognised in profit or loss.
(w) Goods and Services tax (GSt)
revenues, expenses and assets are recognised net of the amount of GsT except:
• where the GsT incurred on a purchase of goods and services is not recoverable from the taxation authority,
in which case the GSt is recognised as part of the cost of acquisition of the asset or as part of the expense
item to which it relates; and
• receivables and payables are stated as GsT inclusive amounts.
the net amount of GSt recoverable from or payable to the taxation authority is included as part of receivables
or payables in the Statement of Financial position.
cash flows are included in the statement of cash Flows on a gross basis and the GsT component of cash flows
arising from investing and financing activities which is recoverable from, or payable to, the taxation authority
are classified as operating cash flows.
commitments and contingencies are disclosed net of the amount of GsT recoverable from, or payable to the
taxation authority.
(x) provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event,
it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and
a reliable estimate can be made of the amount of the obligation. provisions are measured at the present value of
management’s best estimate of the expenditure required to settle the present obligation at the reporting date.
AnnuAl report 2014 84
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notes to the Full Year Consolidated
Financial report (continued)
For the year ended 30 June 2014
note 2. SuMMArY oF SIGnIFICAnt ACCountInG polICIeS (ContInueD)
When the Group expects some or all of the provision to be reimbursed, the reimbursement is recognised
as a separate asset but only when the reimbursement is virtually certain. the expense relating to any provision
is presented in the consolidated Statement of Comprehensive Income net of any reimbursement.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects
current market assessments of the time value of money and the risks specific to the liability. When discounting
is used, the increase in the provision due to the passage of time is recognised as a finance cost.
Employee benefits
Provision is made for employee benefits accumulated as a result of employees rendering services up to the
reporting date. These benefits include wages and salaries, annual leave and long service leave.
Liabilities arising in respect of wages and salaries, annual leave and any other employee benefits are recognised
for employees’ services up to the reporting date. Benefits expected to be settled within 12 months of the reporting
date are classified as current and are measured at their nominal amounts based on remuneration rates which are
expected to be paid when the liability is settled.
the liability for long service leave is recognised and measured as the present value of expected future payments
to be made in respect of services provided by employees up to the reporting date using the projected unit credit
method. Under this method consideration is given to expected future wage and salary levels, experience of employee
departures, and periods of service. Expected future payments are discounted using market yields at the reporting
date on national government bonds with terms to maturity and currencies that match, as closely as possible, the
estimated future cash outflows.
(y) Investment in associates
the Group’s investment in its associates is accounted for using the equity method of accounting in the
consolidated financial statements and at cost in the parent. The associates are entities over which the Group has
significant influence and that are neither subsidiaries nor joint ventures. The Group generally deems they have
significant influence if they have over 20% of the voting rights.
Under the equity method, investments in the associates are carried in the consolidated statement of
Financial position at cost plus post-acquisition changes in the Group’s share of net assets of the associates.
Goodwill relating to an associate is included in the carrying amount of the investment and is not amortised.
after application of the equity method, the Group determines whether it is necessary to recognise any
impairment loss with respect to the Group’s net investment in associates. Goodwill included in the carrying
amount of the investment in associates is not tested separately, rather the entire carrying amount of the
investment is tested for impairment as a single asset.
The Group’s share of its associates’ post-acquisition profits or losses is recognised in the profit or loss, and its
share of post-acquisition movements in reserves is recognised in reserves. the cumulative post-acquisition
movements are adjusted against the carrying amount of the investment.
When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any
unsecured long-term receivables and loans, the Group does not recognise further losses, unless it has incurred
obligations or made payments on behalf of the associate.
(z) Comparatives
comparative figures have been adjusted to conform to changes in presentation for the current financial year
where required by accounting standards or as a result of changes in accounting policy.
85 pACt Group HolDInGS ltD
notes to the Full Year Consolidated
Financial report (continued)
For the year ended 30 June 2014
note 3. reVenue AnD eXpenSeS
(a) revenue
Sales revenue
Interest income
Interest income (external)
Interest income on related party loans
total interest income
other income
Management fees received
Sundry income items
total other income
total of interest & other income
2014
$’000’s
2013
$’000’s
1,143,219
1,103,707
1,089
5,388
6,477
1,650
8,670
10,320
16,797
118
3,550
3,668
3,570
6,244
9,814
13,482
total sales revenue, interest & other income
1,160,016
1,117,189
(b) expenses
Depreciation
Depreciation of buildings – freehold
Depreciation of buildings – leasehold
Depreciation of plant and equipment
total depreciation
Amortisation and impairment
amortisation of patents, trademarks and licences
total amortisation and impairment
110
1,671
49,323
51,104
115
1,095
55,712
56,922
96
96
157
157
total depreciation, amortisation and impairment expense
51,200
57,079
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AnnuAl report 2014 86
notes to the Full Year Consolidated
Financial report (continued)
For the year ended 30 June 2014
note 3. reVenue AnD eXpenSeS (ContInueD)
(b) expenses (continued)
Finance costs expense
2014
$’000’s
2013
$’000’s
Interest on A$750m Syndicated revolving loan Facility(1)
Interest on A$550m Syndicated revolving loan Facility
17,545
-
-
30,277
Interest on revolving Credit Facility
Interest on term loan B Facility
Interest on overdraft facility
Finance charges payable under finance lease and hire purchase contracts
Borrowing costs amortisation
Interest on promissory note & related parties loans
property make good provision discount adjustment
Total finance costs expense
Employee benefits expense
provision for employee entitlements
Wages and salaries
Defined contribution superannuation expense
Other employee benefits expense
Total employee benefits expense
other expense items
operating lease and rental expense
research and development costs
Fixed rent adjustment
Make good expense
provision for impairment of trade receivables
1,901
29,492
828
133
1,176
22,116
11
73,202
656
257,030
14,187
15,879
-
6,061
1,118
218
2,057
55,568
130
95,429
2,560
245,996
13,676
15,173
287,752
277,405
40,735
392
(2,209)
673
133
38,517
128
1,088
655
687
(1) On 17 December 2013 the Group entered into new 3 and 5 year syndicated debt facilities, together referred to as the a$750m syndicated revolving
loan Facility. Details of these borrowings are disclosed in note 14.
87 pACt Group HolDInGS ltD
notes to the Full Year Consolidated
Financial report (continued)
For the year ended 30 June 2014
note 3. reVenue AnD eXpenSeS (ContInueD)
(c) Significant items and other gains / (losses) before tax
Significant items(5)
reversal of unrealised revaluation gain on hedges associated
with the term loan B Facility
Swap break costs(1)
Gain on business acquisition(2)
Gain on disposal of businesses
Gain on disposal of shares in associate
Business reorganisation program(3)
Write-off of capitalised borrowing costs in relation to the term loan B Facility
Ipo transaction costs
Total significant items
other gains / (losses)
Unrealised gain / (losses) on revaluation of foreign exchange forward contracts
Gain / (loss) on sale of property, plant and equipment (4)
realised net foreign exchange gains / (losses)
total other gains / (losses)
2014
$’000’s
2013
$’000’s
(3,791)
3,791
(6,407)
10,834
-
-
-
(21,576)
(5,245)
(26,185)
(256)
34
(309)
(531)
-
21,103
3,072
1,853
(25,035)
-
-
4,784
36
107
(113)
30
4,814
Total significant items and other gains / (losses) before tax
(26,716)
(1) Swap break costs relate to the early termination of the cross currency interest rate swaps and other derivative instruments associated with the
Term Loan B Facility, refer to note 23.
(2) on 17 December 2013 the Group acquired the remaining 49% of Cinqplast plastop Australia pty ltd. In accordance with AASB 3 Business Combinations
the Group’s investment in the associate was remeasured at its acquisition date fair value. refer to note 21 for further details on the assets and
liabilities acquired as part of this business combination.
(3) the business reorganisation program relates to optimisation of business facilities.
(4) Profit / (loss) on sale of property, plant and equipment is determined as follows:
Proceeds on sale of property, plant and equipment
carrying amount of property, plant and equipment disposed
Profit / (loss) on disposal of property, plant and equipment
1,555
(1,521)
34
23,730
(23,623)
107
(5) Total significant items after tax are as follows:
significant items in other gains / (losses) before tax
Tax benefit on significant items in other gains / (losses) before tax
Tax benefit relating to reset of tax cost base (refer note 4)
Total significant items after tax
(26,185)
4,959
19,190
(2,036)
4,784
6,373
-
11,157
AnnuAl report 2014 88
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notes to the Full Year Consolidated
Financial report (continued)
For the year ended 30 June 2014
note 4. InCoMe tAX
Statement of Comprehensive Income
the major components of income tax expense are:
Current year income tax expense
Adjustments in respect of previous years income tax
Deferred income tax relating to origination and reversal of temporary differences
Income tax (benefit) / expense reported in the consolidated statement
of comprehensive income
2014
$’000’s
2013
$’000’s
13,633
(3,880)
(13,433)
(3,680)
8,539
(964)
389
7,964
Statement of Changes in equity
Deferred income tax relating to items charged directly to equity:
tax effect of Ipo transaction costs charged to equity
Net (gain) / loss on interest rate and foreign exchange hedging instruments
Income tax (expense) / benefit charged directly to equity
5,188
686
5,874
-
(2,273)
(2,273)
Tax on significant items before tax (refer note 3)
reversal of unrealised revaluation gain on hedges associated with the term
load B Facility
1,137
(1,137)
Swap break costs
Write-off of capitalised borrowing costs
Ipo transaction costs
Business reorganisation program
Total tax on significant items before tax (refer note 3)
Tax significant item relating to reset of tax cost base
Total tax on significant items
726
1,523
1,573
-
4,959
19,190
24,149
(i) A reconciliation between tax expense and the product of accounting profit before
income tax multiplied by the Group’s applicable income tax rate is as follows:
Accounting profit before tax
Income tax expense at 30% (2013: 30%)
Adjustments in respect of income tax of previous years
non assessable income
Difference between book and tax cost base
losses acquired unable to be utilised on formation of new tax consolidated group
non deductible expenses
Gains on acquisitions and disposals
non deductible swap break costs
non deductible write-off of capitalised borrowing costs
Tax benefit relating to reset of tax cost base
overseas tax rate differential
Income tax (benefit) / expense reported in the consolidated statement
of comprehensive income
54,117
16,235
(3,880)
(632)
756
672
117
(3,250)
1,196
4,949
(19,190)
(653)
(3,680)
-
-
-
7,510
6,373
-
6,373
53,234
15,970
(964)
-
1,280
-
414
(7,809)
-
-
(927)
7,964
89 pACt Group HolDInGS ltD
notes to the Full Year Consolidated
Financial report (continued)
For the year ended 30 June 2014
note 4. InCoMe tAX (ContInueD)
(ii) tax consolidation
Up until 17 December 2013, Pact Group Holdings Ltd, previously Pact Group Holdings Pty Ltd, and its 100% owned
Australian resident subsidiaries were members of a tax consolidated group which was formed on 1 July 2003.
Geminder Holdings Pty Ltd, the previous parent entity of Pact, was head of this tax consolidated group. as a result
of the initial public offering on 17 December 2013, Pact and its 100% owned australian resident subsidiaries exited
the Geminder Holdings tax consolidated group. Contribution amounts under the tax sharing agreement were
determined and paid by the exiting pact entities pursuant to the tax sharing agreement. Deeds of release were
entered into and executed by the pact entities and Geminder Holdings. these deeds together with the contributed
amounts above resulted in the exiting entities leaving the Geminder Holdings tax consolidated group clear from
any further income tax liability, relating to the period during which they were part of the Geminder Holdings tax
consolidated group.
From 17 December 2013, until the formation of the new tax consolidated group on 1 January 2014, each entity
was recognised as a stand alone tax payer.
The company has notified the aTO of its election to form a tax consolidated group with each of its wholly owned
Australian resident subsidiaries with effect from 1 January 2014. under the current income tax consolidation
rules, the tax cost of assets brought into the tax consolidated group by subsidiary members that join the group
is required to be reset under the tax cost setting process. Work performed to date is based on independent
expert valuations, and estimates that the effect of the tax cost setting process is a net increase in the tax cost of
the depreciable assets, inventory and certain other sundry assets which has resulted in a net income tax benefit
in the period of $19.2 million.
(iii) Members of the tax consolidated group and the tax sharing arrangement
The previous tax sharing arrangement provided for the allocation of income tax liabilities between the entities,
should the head entity default on its tax payment obligations. No amounts have been recognised in the financial
statements in respect of this agreement, due to the clear exit of the Pact entities from the Geminder Holdings tax
consolidated group.
(iv) tax effect accounting by members of the Australian tax consolidated group
Measurement method adopted under AASB Interpretation 1052 tax Consolidation Accounting
the head entity and the controlled entities in the Australian tax consolidated group accounted for their
own current and deferred tax amounts. The Group applied a modified “stand alone taxpayer” approach in
determining the appropriate amount of current taxes and deferred taxes to allocate to members of the tax
consolidated group – as if each member continued to be a taxpayer entity in its own right, subject to certain
adjustments. The current and deferred tax amounts were measured in a systematic manner, consistent with the
broad principles in AASB 112 Income taxes. the nature of the tax funding agreement is discussed further below.
In addition to its own current and deferred tax amounts, the head entity also recognised current tax liabilities
(or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from
controlled entities in the tax consolidated group.
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AnnuAl report 2014 90
notes to the Full Year Consolidated
Financial report (continued)
For the year ended 30 June 2014
note 4. InCoMe tAX (ContInueD)
nature of the tax funding agreement
The tax funding agreement requires payments to/from the head entity to be recognised via an inter-entity
receivable / payable at call. To the extent there is a difference between the amount charged under
the tax funding agreement and the allocation under aasB Interpretation 1052, the head entity would account
for these differences as equity transactions with the subsidiaries.
the new Australian tax consolidated group formed on 1 January 2014 is comprised of entities incorporated in
australia, with Pact Group Holdings Ltd as the parent. The accounting treatment for the new tax consolidated
Group is applicable for the period from 1 January 2014. During that period, the tax sharing arrangement provides
for the allocation of income tax liabilities between the entities, should the head entity default on its tax payment
obligations. No arrangements were recognised in the financial statements in respect of this agreement.
the head entity and the controlled entities accounted for their own current and deferred tax amounts during
the six months to 30 June 2014. In addition to its own current and deferred tax amounts, the head entity also
recognised current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and
unused tax credits assumed from controlled entities in the tax consolidated group.
the law applying to the formation of an income tax consolidated group is subject to various proposed
changes announced by the former federal Government at the time of delivering its federal budget in
May 2013. The current federal Government has confirmed its intention to proceed with the announced
amendments.
While the proposed changes in law were announced to apply from May 2013, limited information on their
exact application is available. Depending on the final form of the proposed law changes they could have a
material negative impact on Pact’s financial performance and position.
The estimation of liability will be subject to the final form and content of the law once released. as these
changes in law are not currently enacted or substantially enacted, in accordance with IFrs the potential
impact of this measure has not been taken into account in the 30 June 2014 Financial report. Assuming that
the relevant legislation is introduced prior to 30 June 2015 this item would be included in Pact’s financial
report for the 2015 financial year.
91 pACt Group HolDInGS ltD
notes to the Full Year Consolidated
Financial report (continued)
For the year ended 30 June 2014
note 4. InCoMe tAX (ContInueD)
(v) recognised current and deferred tax assets & liabilities
opening balance
Charged to income
Charged to other comprehensive income
receipt from head entity(1)
payments
Ipo transaction costs charged to equity
acquisitions / disposals
Foreign exchange translation movement
2014
2014
2013
2013
$’000’s
$’000’s
$’000’s
$’000’s
Current
income tax
Deferred
income tax
Current
income tax
Deferred
income tax
928
(24,016)
2,120
(21,479)
(9,753)
13,432
(7,575)
-
686
-
(20,024)
22,023
2,051
(78)
(627)
-
-
5,188
(1,642)
(522)
(19,564)
27,543
-
(498)
(1,098)
(389)
(2,273)
-
-
-
418
(293)
Closing balance
(5,480)
(6,874)
928
(24,016)
Amounts recognised in the Statement of Financial position:
Deferred tax asset
Deferred tax liability
net deferred tax assets / (liabilities)
Deferred tax assets & liabilities relate to the following:
27,944
(34,818)
(6,874)
25,155
(49,171)
(24,016)
Deferred tax assets
Doubtful debts provision
Business reorganisation provision
Make good on leased premises provision
Fixed rent provision
employee entitlements provision
Ipo transaction costs
other provisions
unrealised foreign currency losses
unutilised tax losses
other
Deferred tax assets
Deferred tax liabilities
Property, plant and equipment
unrealised foreign currency gains
other
Deferred tax liabilities
144
4,319
3,355
2,341
11,219
5,188
124
270
119
865
27,944
32,782
-
2,036
34,818
120
6,795
3,197
2,960
10,626
-
591
-
-
866
25,155
47,878
1,293
-
49,171
(1) represents a receipt from the head of the Geminder Holdings tax consolidated group. These receipts are reflected in the financing section of the statement
of Cash Flows.
AnnuAl report 2014 92
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Financial report (continued)
For the year ended 30 June 2014
note 5. CASH AnD CASH equIVAlentS
Cash at bank
note 6. trADe AnD otHer reCeIVAbleS
Current
trade receivables(1)
Allowance for impairment loss(2)
other receivables
receivable from Geminder Holdings(3)
Income tax receivable from head entity in tax group
total current trade and other receivables
non-Current
other receivables
(1) The ageing of trade receivables (net of allowance for impairment loss) is as follows:
2014
$’000’s
25,603
2013
$’000’s
22,899
2014
$’000’s
2013
$’000’s
137,438
126,274
(490)
13,393
-
-
150,341
(440)
10,674
112,595
4,102
253,205
2014
$’000’s
2013
$’000’s
7
522
total
not Due
< 30 days
30 – 60 days
61 – 90 days
> 90 days
2014
2013
136,948
125,834
108,118
99,155
25,364
24,160
2,564
1,474
533
651
369
394
(2) at 30 June 2014 trade receivables with an initial value of $490,000 (2013: $440,000) were impaired and fully provided for.
the movements in the allowance for impairment of receivables are as follows:
opening balance for the period
Charge for the year
utilised
Acquired
unused amounts reversed
Foreign exchange translation movement
Closing balance for the period
2014
$’000’s
(440)
(508)
344
(248)
375
(13)
(490)
2013
$’000’s
(376)
(691)
648
(25)
4
-
(440)
(3) During the period receivables owed by Geminder Holdings pty ltd to pact Group Holdings ltd were assigned in exchange for partial repayment of
the outstanding promissory note payable to Geminder Holdings pty ltd.
93 pACt Group HolDInGS ltD
notes to the Full Year Consolidated
Financial report (continued)
For the year ended 30 June 2014
note 7. InVentorIeS
raw materials and stores
Work in progress
Finished goods
total inventories
2014
$’000’s
45,105
14,368
55,738
2013
$’000’s
34,477
13,687
57,186
115,211
105,350
During the period the Group recognised a net release (whole dollars) of $15,279 with regard to the net
realisable value of inventories (2013: a net write down of $48,372). Both the expense and reversal have been
included in “raw materials and consumables used” in the consolidated statement of comprehensive Income.
note 8. prepAYMentS
Current
prepayments
non-Current
prepayments
2014
$’000’s
2013
$’000’s
7,844
8,031
1,274
-
note 9. propertY, plAnt AnD equIpMent
reconciliation of carrying amounts at the beginning and end of the period are as follows:
Year ended 30 June 2014
At 1 July 2013 net of accumulated depreciation
and impairment
Additions
acquisition of subsidiaries and businesses (note 21)
Disposals
property(i)
plant and
equipment
Capital
works in
progress
total
$’000’s
$’000’s
$’000’s
$’000’s
15,557
463,842
13,371
492,770
1,876
13,882
36,538
29,955
-
(1,521)
15,030
-
-
53,444
43,837
(1,521)
8,177
Foreign exchange translation movement
(633)
7,500
1,310
Depreciation charge for the year
(1,780)
(49,323)
-
(51,103)
At 30 June 2014 net of accumulated depreciation
and impairment
28,902
486,991
29,711
545,604
represented by:
At cost
Accumulated depreciation
net carrying amount
38,918
883,474
29,711
952,103
(10,016)
(396,483)
-
(406,499)
28,902
486,991
29,711
545,604
AnnuAl report 2014 94
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Financial report (continued)
For the year ended 30 June 2014
note 9. propertY, plAnt AnD equIpMent (ContInueD)
reconciliation of carrying amounts at the beginning and end of the period are as follows:
Year ended 30 June 2013
At 1 July 2012 net of accumulated depreciation
and impairment
Additions
acquisition of subsidiaries and business (note 21)
Divestment of subsidiary (note 22)
Disposals
Foreign exchange translation movement
property(1)
plant and
equipment
Capital
works in
progress
total
$’000’s
$’000’s
$’000’s
$’000’s
6,454
406,594
22,306
435,354
6,476
25,800
54,334
73,959
-
(20,897)
(22,200)
236
(653)
6,219
(9,346)
-
-
-
51,464
99,759
(20,897)
(22,853)
411
6,866
Depreciation charge for the year
(1,209)
(55,714)
-
(56,923)
At 30 June 2013 net of accumulated depreciation
and impairment
15,557
463,842
13,371
492,770
represented by:
At cost
Accumulated depreciation
net carrying amount
18,294
796,442
13,371
828,107
(2,737)
(332,600)
-
(335,337)
15,557
463,842
13,371
492,770
(1) property consists of the following:
leasehold improvements
Freehold property
less: accumulated depreciation
total property
2014
2013
$’000’s
$’000’s
13,703
25,215
(10,016)
28,902
11,575
6,719
(2,737)
15,557
95 pACt Group HolDInGS ltD
notes to the Full Year Consolidated
Financial report (continued)
For the year ended 30 June 2014
note 10. InVeStMentS In ASSoCIAteS AnD JoInt VentureS
Investments in associates and joint ventures
2014
2013
$’000’s
$’000’s
4,087
8,771
the Group accounts for its investments in associates and joint ventures using the equity method in the
consolidated financial statements. The following tables illustrate the summarised financial information of the
Group’s investments in associates and joint ventures at 30 June 2014, and the reconciliation to the carrying
amount of the investment:
Associate and joint venture summarised financial information
Current assets
non-current assets
Current liabilities
net assets
proportion of the Group’s ownership interest
Carrying amount of the investment
30 June 2014
$’000’s
Viscount
oriental
Mould(1)
Spraypac
products
(nZ)(2)
Weener
plastop(3)
total
590
142
(126)
606
40%
242
514
137
(84)
567
50%
687
3,245
4,382
(1,311)
6,316
50%
3,158
4,349
4,661
(1,521)
7,489
4,087
30 June 2014
$’000’s
Cinqplast(4)
15,230
(14,532)
698
356
Viscount
China
Spraypac
products
(nZ)
Weener
plastop
total
25
(118)
(93)
1,060
(770)
290
4,953
21,268
(3,178)
(18,598)
1,775
2,670
(37)
145
887
1,351
revenue
expenses
Net profit after tax
Group’s share of the profit for the year
(1) Changzhou Viscount oriental Mould Co ltd (oriental Mould)
The Group holds a 40% interest in Oriental Mould, which was acquired as part of the Viscount Plastics (china) Pty Ltd acquisition. Oriental Mould
manufactures moulds, of which a proportion is purchased by the local chinese subsidiaries of Viscount Plastics (china) Pty Ltd.
(2) Spraypac products (nZ) ltd (Spraypac)
the Group holds a 50% interest in Spraypac. Spraypac is a private company which distributes plastic bottles and related spray products.
the Group’s investments in Spraypac includes $0.4 million of goodwill.
(3) Weener plastop Asia Inc (Weener)
The Group acquired a 50% interest in Weener as part of its acquisition of ruffgar Holdings Pty Ltd (ruffgar) on 17 December 2013. Weener is a joint
venture, integrated with Plastop asia Inc operations which was also acquired as part of the ruffgar acquisition.
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AnnuAl report 2014 96
notes to the Full Year Consolidated
Financial report (continued)
For the year ended 30 June 2014
note 10. InVeStMentS In ASSoCIAteS AnD JoInt VentureS (ContInueD)
(4) Cinqplast plastop Australia pty ltd (Cinqplast)
On 30 June 2013, the Group held a 51% interest in the shares of cinqplast which is involved in the manufacture of specialty plastics products.
The Group assessed its 51% interest as an investment in an associate, as the Group did not control the relevant activities of the business due to the
existence of an option held by the other 49% shareholder. On 17 December 2013, the Group acquired the remaining interest in cinqplast and its
100% owned subsidiary Steri-plas pty ltd.
The Group has included its share of profit in associate for cinqplast and steri-Plas up until 16 December 2013 in its consolidated statement of
Comprehensive Income.
Information relating to the acquisitions of ruffgar, cinqplast, and Viscount Plastics (china) Pty Ltd is disclosed in note 21.
The joint ventures and associates had no contingent liabilities or significant capital commitments at 30 June 2014 and did not contribute significantly
to the revenue or net profit of the Group during the year.
Associate and joint venture summarised financial information
Current assets
non-current assets
Current liabilities
non-current liabilities
net assets
proportion of the Group’s ownership interest
Carrying amount of the investment
revenue
expenses
Net profit after tax
30 June 2013
$’000’s
Cinqplast
total
Spraypac
products
(nZ)
432
90
(84)
-
438
50%
604
8,394
13,516
(5,490)
(7,504)
8,916
51%
8,167
8,826
13,606
(5,574)
(7,504)
9,354
8,771
30 June 2013
$’000’s
Cinqplast
total
Spraypac
products
(nZ)
852
(698)
154
33,600
34,452
(32,210)
(32,908)
1,390
1,544
Group’s share of the profit for the year
77
709
786
The joint ventures and associates had no contingent liabilities or significant capital commitments at 30 June 2013
and did not contribute significantly to the revenue or net profit of the Group during the year.
The Group’s investment in cinqplast Plastop australia Pty Ltd and spraypac Products (NZ) Ltd contained
$3.6 million and $0.4 million of goodwill, respectively.
97 pACt Group HolDInGS ltD
notes to the Full Year Consolidated
Financial report (continued)
For the year ended 30 June 2014
note 11. IntAnGIble ASSetS AnD GooDWIll
reconciliation of carrying amounts at the beginning and end of period are as follows:
Year ended 30 June 2014
At 1 July 2013 net of accumulated amortisation and impairment
1,065
249,977
251,042
patents,
trademarks
and licences(1)
Goodwill
total
$’000’s
$’000’s
$’000’s
Additions
Intangible assets arising on acquisitions (note 21)
Disposals
Foreign exchange translation movements
Amortisation
At 30 June 2014 net of accumulated amortisation and
impairment
represented by:
At cost
Accumulated amortisation and impairment
net carrying amount
Year ended 30 June 2013
52
-
(178)
74
(96)
917
-
52
63,757
63,757
-
(178)
12,476
12,550
-
(96)
326,210
327,127
2,235
326,210
328,445
(1,318)
-
(1,318)
917
326,210
327,127
At 1 July 2012 net of accumulated amortisation and impairment
1,058
227,391
228,449
Additions
Intangible assets arising on acquisitions (note 21)
Disposals
Foreign exchange translation movements
Amortisation
At 30 June 2013 net of accumulated amortisation
and impairment
represented by:
At cost
Accumulated amortisation and impairment
net carrying amount
139
2,347
(2,181)
(141)
(157)
-
12,869
-
9,717
-
139
15,216
(2,181)
9,576
(157)
1,065
249,977
251,042
2,235
249,977
252,212
(1,170)
-
(1,170)
1,065
249,977
251,042
(1) patents, trademarks and licences
Patents, trademarks and licences are carried at cost less accumulated amortisation and accumulated impairment losses. They have a finite life and
are amortised using the straight line method over their useful life.
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AnnuAl report 2014 98
notes to the Full Year Consolidated
Financial report (continued)
For the year ended 30 June 2014
note 11. IntAnGIble ASSetS AnD GooDWIll (ContInueD)
Acquisition during the year
as a result of business acquisitions during the year, $63.8 million of goodwill has been recognised. Business
combinations are disclosed in note 21.
Goodwill acquired in a business combination is initially measured at cost being the excess of the consideration paid
over the Group’s interest in the net fair value of the acquired identifiable assets, liabilities and contingent liabilities.
Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is
reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the
carrying value may be impaired.
For the full year, there were no indicators of impairment and no impairment losses recognised.
Impairment tests for goodwill
For impairment testing purposes goodwill acquired through business combinations has been allocated to
and tested at the level of their respective cash generating units (or group of cGU’s) in accordance with the
level at which management monitors goodwill. For the Group, the lowest level where goodwill is monitored
is at its segments, being:
• Pact australia (Pa)
• Pact International (PI)
(i) Description of the cash generating units and other relevant information
the recoverable amount of each of the cash generating units has been determined based on value in use
calculations using cash flow projections contained within the current year’s financial budget approved by
management and other forward projections.
(ii) carrying amount of goodwill allocated to each of the cash generating units (cGU’s) or group of cGU’s
the carrying amounts of goodwill allocated to the pA and the pI segments are as follows:
Carrying amount of goodwill
pact Australia
pact International
2014
$’000’s
149,600
2013
2014
2013
$’000’s
$’000’s
$’000’s
119,835
176,610
130,142
99 pACt Group HolDInGS ltD
notes to the Full Year Consolidated
Financial report (continued)
For the year ended 30 June 2014
note 11. IntAnGIble ASSetS AnD GooDWIll (ContInueD)
(iii) Key assumptions used in Value in Use calculations
the calculations of value in use for both pA and pI CGu’s are most sensitive to the following assumptions:
• Gross margins
• cash flows
• Discount rates
• raw materials price movement
Gross margins – Gross margins are based on average margins achieved in the year preceding the current
budget period. These are increased over the budget period for any anticipated efficiency improvements.
Cash flows – cash flows beyond the one year period are extrapolated using growth rates which are a combination
of volume growth and price growth. rates are based on published industry research and economic forecasts
relating to GDP growth rates. The long-term growth rates are in the range of 2.7% – 6.5% (2013: 2.0% – 3.0%).
Discount rates – Discount rates represent the current market assessment of the risk specific to each cGU,
taking into consideration the time value of money and individual risks of the underlying assets. the discount
rate calculation is based on the specific circumstances of the Group and its operating segments and is
derived from its weighted average cost of capital (Wacc). The Wacc takes into account both debt and equity.
the cost of equity is derived from the expected return on investment by the Group’s shareholders. the cost
of debt is based on the cost of funds relating to the interest bearing loans of the Group. segment-specific risk
is incorporated by applying individual beta factors. the beta factors are evaluated annually based on publicly
available market data where applicable.
Discount rates applied are based on the pre-tax weighted average cost of capital applicable to the relevant CGu.
The pre-tax risk discount rates applied to these cash flow projections are in the range of 11.0% – 14.0% (2013: 12.0%).
raw material price movement – estimates are obtained from published indices for the countries from which
materials are sourced, as well as data relating to specific commodities. Forecast figures are used if data is
publicly available, otherwise past actual raw material price movements are used as an indicator of future
price movements.
(iv) sensitivity to changes in assumptions
the key estimates and assumptions used to determine the value in use of a CGu are based on management’s
current expectations and are considered to be reasonably achievable.
With regard to the assessment of Value in Use, management believes that no reasonable possible change
in any of the above key assumptions would cause the carrying value of the CGu to materially exceed its
recoverable amount.
note 12. trADe AnD otHer pAYAbleS
Current
trade payables
other payables
Income tax payable
total current trade and other payables
2014
$’000’s
2013
$’000’s
176,210
143,318
16,706
5,481
18,068
3,174
198,397
164,560
AnnuAl report 2014 100
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Financial report (continued)
For the year ended 30 June 2014
note 13. proVISIonS
Current
Annual leave
long service leave
Business reorganisation provision
other
total current provisions
non-Current
long service leave
Fixed rent provision
Make good on leased premises
total non-current provisions
(a) Movement in provisions
2014
2013
$’000’s
$’000’s
20,584
11,382
14,404
86
46,456
6,820
7,874
11,507
26,201
business
reorganisation
provision
Fixed rent
provision
Make good
on leased
premises
15,585
15,179
22,748
1,538
55,050
4,969
9,960
10,964
25,893
total
Year ended 30 June 2014
At 1 July 2013
Acquisition of a subsidiaries and businesses
provided for during the year
utilised
unutilised amounts reversed
Discount rate adjustments
Foreign exchange translation movement
At 30 June 2014
Year ended 30 June 2013
At 1 July 2012
Acquisition of subsidiaries and businesses
provided for during the year
utilised
Discount rate adjustments
Foreign exchange translation movement
22,748
9,960
10,964
43,672
-
-
(8,449)
-
-
105
14,404
10,810
1,518
25,873
(15,591)
-
138
-
1,784
(1,849)
(2,144)
-
123
274
673
274
2,457
-
(10,298)
(687)
(2,831)
11
272
11
500
7,874
11,507
33,785
7,986
789
1,088
-
-
97
10,274
29,070
537
655
2,844
27,616
(837)
(16,428)
130
205
130
440
At 30 June 2013
22,748
9,960
10,964
43,672
101 pACt Group HolDInGS ltD
notes to the Full Year Consolidated
Financial report (continued)
For the year ended 30 June 2014
note 13. proVISIonS (ContInueD)
(b) nature and timing of provisions
(i) Business reorganisation provisions
the business reorganisation program relates to optimisation of business facilities.
(ii) Fixed rent provision
annual rentals for some of the property operating leases increase annually by fixed increments. The provision
has been recognised to spread these increments on a straight line basis over the minimum non-cancellable
lease term.
(iii) Make good on leased premises
In accordance with the form of lease agreement, the Group may be required to restore the leased premises to
their original condition at the end of the lease term upon exiting the site. the provision is based on what costs
are expected to be incurred using historical estimates as a guide.
note 14. IntereSt beArInG loAnS AnD borroWInGS
2014
notes
$’000’s
Current
Bank overdraft
term loan B Facility
Capitalised borrowing costs
Obligations under finance leases and hire purchase contracts
total current interest bearing loans and borrowings
non-Current
a$750m syndicated revolving Loan Facility a Tranche 1 (aUD $295m)(1)
a$750m syndicated revolving Loan Facility a Tranche 2 (aUD $295m)(1)
a$750m syndicated revolving Loan Facility B Tranche 1 (NZD $90m)(1)
a$750m syndicated revolving Loan Facility B Tranche 2 (NZD $90m)(1)
term loan B Facility(1)
Obligations under finance leases and hire purchase contracts
Capitalised borrowing costs
Promissory note (including interest capitalised)(2)
23
23
23
23
23
23
23
24
1,376
-
(1,252)
975
1,099
295,000
130,000
83,534
83,534
2013
$’000’s
270
9,596
(3,244)
853
7,475
-
-
-
-
-
-
949,962
975
(2,221)
(18,541)
-
1,069,432
total non-current interest bearing loans and borrowings
589,847
2,001,828
(1) On 17 December 2013 the Group entered into new 3 and 5 year syndicated debt facilities. The drawdown of which, together with part proceeds
from the initial public offering, were used to repay the Term Loan B Facility.
at the time the Term Loan B Facility agreement was signed, the company and its 100% owned subsidiaries granted cross guarantees through a
security trust deed (which includes a fixed and floating charge over the assets of the Group). The security trust deed remained on foot after the
term loan B Facility repayment and the new lenders to the AuD$750m Syndicated revolving loan Facility became parties to this deed. Interest
on the new debt facilities is variable based on the relevant australian or New Zealand bank bill rate (BBsY and BKBM), plus a margin. The margins
are determined against a pricing grid by reference to pact’s leverage and the term of the relevant tranche of the facilities.
(2) The promissory note payable to Geminder Holdings Pty Ltd accrued interest quarterly at a rate based on the bank bill rate (BBsY) plus a margin
of 2%. on 26 november 2013 pact issued shares to Geminder Holdings pty ltd in exchange for $255.0 million in cash and a new promissory note.
after the assignment of loan receivable from Geminder Holdings Pty Ltd, the promissory note and any capitalised interest were then repaid in
full through the issue of shares to Geminder Holdings Pty Ltd and in cash, using part proceeds of the initial public offering.
AnnuAl report 2014 102
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Financial report (continued)
For the year ended 30 June 2014
note 14. IntereSt beArInG loAnS AnD borroWInGS (ContInueD)
(a) Fair values
Fair values of the Group’s interest-bearing loans and borrowings are determined by using a discounted cash
flow method, applying a discount rate that reflects the issuer’s borrowing rate at the end of the reporting
period. The Group’s own performance risk at 30 June 2014 was assessed to be insignificant.
the carrying amount and fair value of the Group’s current and non-current borrowings are as follows:
2014
$’000’s
2013
$’000’s
Average
Interest rate
Carrying
Value
-
Fair Value
Carrying
Value
Fair Value
-
959,558
976,082
4.44%
295,000
295,000
4.74%
130,000
130,000
4.84%
83,534
83,534
5.15%
83,534
83,534
-
-
-
-
-
-
-
-
592,068
592,068
959,558
976,082
term loan B Facility(1)
A$750m Syndicated
revolving loan Facility A
Tranche 1 (aUD $295m)
A$750m Syndicated
revolving loan Facility A
Tranche 2 (aUD $295m)
A$750m Syndicated
revolving loan Facility B
Tranche 1 (NZD $90m)
A$750m Syndicated
revolving loan Facility B
Tranche 2 (NZD $90m)
total borrowings
(1) the primary difference between the carrying value and the fair value of the term loan B Facility at 30 June 2013 arose as a result of the fair
value of an embedded lIBor floor of 1.00%.
(b) Interest rate, foreign exchange and liquidity risk
Details regarding interest rate, foreign exchange and liquidity risk are disclosed in note 23.
(c) Defaults and breaches
During the current and prior year, there were no defaults or breaches on any of the loan terms & conditions.
103 pACt Group HolDInGS ltD
notes to the Full Year Consolidated
Financial report (continued)
For the year ended 30 June 2014
note 15. ContrIbuteD equItY
Issued and paid up capital
ordinary shares fully paid
Movements in contributed equity
ordinary shares
Beginning of the period
Issued during the period(1)
transaction costs taken to equity
Tax benefit on transaction costs
2014
$’000’s
2013
$’000’s
1,489,597
180,000
2014
2013
number
of shares
$’000’s
number
of shares
$’000’s
12
180,000
12
180,000
294,097,949
1,327,643
-
-
(25,285)
7,239
-
-
-
-
-
-
end of the period
294,097,961
1,489,597
12
180,000
(1) Shares issued during the year include:
Shares issued on 7 november 2013 to Geminder Holdings pty ltd in exchange for cash
Shares issued on 26 november 2013 to Geminder Holdings pty ltd in exchange for partial
repayment of the promissory note
number
of shares
10
113,764,188
Shares issued for the acquisitions of ruffgar Holdings pty ltd and Cinqplast Australia pty ltd
9,596,909
Shares issued as part of the initial public offering
total number of shares issued during the year
170,736,842
294,097,949
(a) terms and conditions of contributed equity
ordinary shares participate in dividends and the proceeds on winding up of the Company in proportion to
the number of shares held.
(b) Capital management
When managing capital, management’s objective is to ensure the entity continues as a going concern as well
as to provide optimal returns to shareholders. Management also aims to maintain a capital structure that
ensures the lowest cost of capital available to the entity.
Management is constantly assessing the capital structure to take advantage of favourable costs of capital or
high returns on assets. as the market is constantly changing, management may recommend to the Board the
amount of dividends (if any) to be paid to shareholders, return capital to shareholders, issue new shares or sell
assets to reduce debt.
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notes to the Full Year Consolidated
Financial report (continued)
For the year ended 30 June 2014
note 16. reSerVeS
Foreign currency translation reserve
cash flow hedge reserve
Common control reserve
total reserves
nature and purpose of reserves:
2014
$’000’s
13,358
(630)
2013
$’000’s
8,733
964
(928,385)
(942,000)
(915,657)
(932,303)
(a) Foreign currency translation reserve
The foreign currency translation reserve is used to record foreign exchange fluctuations arising from the
translation of the financial statements of foreign subsidiaries.
(b) Cash flow hedge reserve
this reserve records the portion of the gain or loss on a hedging instrument and the related transaction in a
cash flow hedge that are determined to be an effective relationship.
refer to note 23 for further disclosure on forward exchange contracts designated in cash flow hedge
relationships.
(c) Common control reserve
The opening common control reserve arose through a Group restructure in the financial year ended 30 June
2011. It represented the difference between the historical cost of the net assets of the Group compared to
the consideration paid to acquire the transferred entities.
On 17 December 2013 the Group acquired Viscount Plastics (china) Pty Ltd and asia Peak Pte Ltd. These
acquisitions have been accounted for using the AASB 3 Business Combinations common control exemption.
the movement of $13.6 million in the common control reserve relates to the difference between the
consideration paid and the identifiable net assets acquired.
note 17. retAIneD eArnInGS
Retained (losses) / earnings at the beginning of the financial year
Net (loss) / profit attributable to members of the Group
Dividend paid
retained losses at the end of the reporting period
2014
$’000’s
(324,595)
57,689
2013
$’000’s
114,444
45,125
-
(484,164)
(266,906)
(324,595)
105 pACt Group HolDInGS ltD
notes to the Full Year Consolidated
Financial report (continued)
For the year ended 30 June 2014
note 18. DIVIDenDS
(a) Dividends paid
Dividends on ordinary shares
2014
$’000’s
2013
$’000’s
-
484,164
(b) Dividends not recognised at year end
since year end the Directors have recommended payment of a final dividend
of 9.5 cents, 65% franked (2013: nil). The final dividend is expected to be paid
on 3 october 2014.
Based on the number of shares on issue at reporting date, the aggregate
amount of the proposed dividend would be:
27,939
(c) Franking credit balance
The amount of franking credits available for the subsequent financial year are:
Franking account balance as at the end of the financial year at 30% (2013 30%)
Franking credits that will arise from the payment of income tax payable as at
the end of the financial year.
Franking debits that will arise from the payment of dividends as at the end of
the financial year.
2,196
1,940
(7,783)
-
-
-
-
total franking credit balance
(3,647)
-
note 19. CoMMItMentS AnD ContInGenCIeS
(a) lease expenditure commitments
the future minimum lease payments under non-cancellable operating leases
contracted for but not capitalised in the financial statements are payable as follows:
Within one year
after one year but not more than five years
More than five years
total lease expenditure commitments
2014
$’000’s
2013
$’000’s
39,265
109,735
90,902
34,960
99,669
74,822
239,902
209,451
The Group leases buildings and plant and equipment. rental payments are generally fixed, but with inflation
escalation clauses on which contingent rentals are determined. property leases generally provide the Group
with a right of renewal at which time all terms are renegotiated. there are no restrictions placed upon the
lessee by entering into these leases.
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AnnuAl report 2014 106
notes to the Full Year Consolidated
Financial report (continued)
For the year ended 30 June 2014
note 19. CoMMItMentS AnD ContInGenCIeS (ContInueD)
(b) Finance lease and hire purchase commitments
The Group has finance leases and hire purchase contracts for various items as follows:
notes
2014
$’000’s
2013
$’000’s
Minimum lease payments are as follows:
Within one year
after one year but not more than five years
More than five years
total minimum lease payments
Less amounts representing finance charges
present value of minimum lease payments
Current
non current
total
1,022
-
-
1,022
(47)
975
975
-
975
986
1,022
-
2,008
(180)
1,828
853
975
1,828
15
15
(c) other expenditure commitments
Other expenditure commitments contracted for at reporting date, but not provided for are:
Capital expenditure projects
6,551
9,029
these are payable as follows:
Within one year
after one year but not more than five years
total
6,441
110
6,551
8,706
323
9,029
(d) Contingencies
From time to time, the Group may be involved in litigation relating to claims arising out of its operations.
The Group is not party to any legal proceedings that are expected, individually or in the aggregate,
to have a material adverse effect on its business, financial position or operating results.
107 pACt Group HolDInGS ltD
notes to the Full Year Consolidated
Financial report (continued)
For the year ended 30 June 2014
note 20. CASH FloW InForMAtIon
notes
2014
$’000’s
2013
$’000’s
(a) reconciliation of cash and cash equivalents
cash at the end of the financial year as shown in the statement of cash flows is reconciled
to the related items in the statement of financial position as follows:
Cash on hand and at bank
Bank overdraft
total net cash
5
14
25,603
(1,376)
24,227
22,899
(270)
22,629
(b) Reconciliation of net profit before income tax to net cash flow from operations
Net profit before income tax
54,117
53,234
Adjustments to reconcile profit before tax to net cash flow:
Depreciation and amortisation
employee entitlement provisions
trade receivables impairment provision
Business reorganisation provision
Fixed rent provision
property make good provision
Profit on sale of property, plant and equipment
Gain on business acquisition
Gain on disposal of businesses and associate
share of net profit in associates
unrealised gain on revaluation of cross currency swaps
Loss / (gain) on revaluation of foreign exchange contracts
Swap break costs
IPO transaction costs (recorded against profit for the year)
Write-off capitalised borrowing costs in relation to the term loan B Facility
Finance costs expense
Interest income
Changes in assets and liabilities:
(Increase) / decrease in trade and other receivables
(Increase) / decrease in prepayments
(Increase) / decrease in inventory
Decrease in trade and other payables
Decrease in provisions
Cash flow from operating activities
Interest income received
Finance costs paid
Income tax paid
51,199
11,098
165
-
(2,209)
(14)
(34)
57,080
11,939
678
25,035
1,088
652
(107)
(10,834)
(21,103)
-
(1,351)
3,791
280
6,407
5,245
21,576
73,202
(6,477)
18,458
(639)
(1,259)
(23,394)
(22,726)
176,601
1,088
(65,953)
(22,023)
(4,925)
(786)
(4,025)
(37)
-
-
-
95,429
(3,668)
(4,485)
(5,013)
(1,678)
(10,684)
(30,505)
158,120
118
(42,498)
(27,543)
Net cash flow from operating activities
89,713
88,197
During the year a non-cash repayment of a promissory note amounting to $387.3 million was recorded as a
result of the issue of shares.
AnnuAl report 2014 108
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notes to the Full Year Consolidated
Financial report (continued)
For the year ended 30 June 2014
note 21. buSIneSS CoMbInAtIonS
The fair values of the identifiable assets and liabilities of the acquisitions as of the date of the acquisition are:
Summary of 30 June 2014 acquisitions
Date acquired
Fair value of net assets acquired
Cash
Trade and other receivables (net of provision)
prepayments
Inventory
Property, plant & equipment
equity method investments
Deferred tax asset
total assets
payables and provisions
employee provisions
Interest bearing liabilities
Deferred tax liability
total liabilities
Asia peak(1)
$’000’s
17/12/2013
Viscount
China(2)
$’000’s
17/12/2013
ruffgar(3)
Cinqplast(4)
total
$’000’s
17/12/2013
$’000’s
17/12/2013
$’000’s
378
15,802
-
-
15
-
-
16,195
16,070
-
92
-
16,162
1,238
16,605
921
3,374
19,662
300
127
42,227
10,073
72
-
-
10,145
554
3,553
134
1,680
6,711
4,062
34
16,728
1,746
62
11
829
2,648
106
5,195
102
3,707
17,449
-
421
26,980
6,026
929
10,440
1,396
18,791
2,276
41,155
1,157
8,761
43,837
4,362
582
102,130
33,915
1,063
10,543
2,225
47,746
Fair value of identifiable net assets
33
32,082
14,080
8,189
54,384
Cash consideration paid
Shares issued as consideration paid
total consideration paid
Common control reserve
Goodwill arising on acquisition
net difference between fair value
and consideration paid
500
-
500
(467)
-
(467)
18,000
-
18,000
14,082
-
14,082
23,200
24,870
48,070
-
33,990
33,990
7,000
11,599
18,599
-
29,767
29,767
48,700
36,469
85,169
13,615
63,757
77,372
reconciliation of cash paid to Statement of Cash Flows
net cash acquired
Cash paid
net cash consideration paid
378
500
122
1,238
18,000
16,762
554
23,200
22,646
106
7,000
6,894
2,276
48,700
46,424
(1) Asia peak pte ltd (Asia peak)
On 17 December 2013, the Group purchased 100% of the shares in asia Peak for cash. asia Peak is incorporated in singapore and was associated with Geminder Holdings
Pty Ltd, the Group’s former parent entity. asia Peak acts as a procurement office for the Group. The Group acquired asia Peak due to the integrated nature of asia Peak’s
activities with those of the Group.
as asia Peak was acquired by way of the common control exemption under aasB 3 Business combinations, the difference between the fair value of the identifiable net
assets acquired and the cash consideration paid of $0.5 million has been recorded in the common control reserve, refer to Note 16.
the trade and other receivables acquired amounted to $15.8 million of which $15.3 million was with Group entities. none of the trade receivables have been impaired
and it is expected that the full contractual amounts will be collected.
From the date of acquisition asia Peak has contributed $2.8 million of revenue and $0.7 million to the net profit before tax of the Group. If the combination had taken
place at the beginning of the year, revenue from continuing operations would have been $4.4 million higher and the profit from continuing operations for the Group
would have been $0.1 million higher.
109 pACt Group HolDInGS ltD
notes to the Full Year Consolidated
Financial report (continued)
For the year ended 30 June 2014
note 21. buSIneSS CoMbInAtIonS (ContInueD)
Summary of 30 June 2014 acquisitions (continued)
(2) Viscount plastics (China) pty ltd (Viscount China)
On 17 December 2013 the Group acquired 100% of the shares in Viscount china. Viscount china holds three manufacturing plants changzhou
Viscount Plastics co. Ltd, Guangzhou Viscount Plastics co. Ltd, Langfang Viscount Plastics co. Ltd. and a 40% interest in changzhou Viscount
Oriental Mould co Ltd. Viscount china manufactures and distributes injection moulded plastic products, bottles and rotationally moulded rigid
plastic products. the Group acquired viscount China as part of the Group’s overall growth strategy to expand its presence in the Asian markets.
as Viscount china was acquired by way of the common control exemption under aasB 3 Business combinations, the difference between the
fair value of the net assets acquired of $32.1 million and the cash consideration paid of $18.0 million has been recorded in the common control
reserve, refer to note 16.
the fair value of trade and other receivables acquired amounted to $16.6 million. none of the trade receivables have been impaired and it is
expected that the full contractual amounts will be collected.
the deferred tax asset of $0.1 million mainly comprised the tax effect of provisions acquired.
From the date of acquisition viscount China has contributed $22.4 million of revenue and a net loss
before tax of $0.1 million to the Group. If the combination had taken place at the beginning of the year, revenue from continuing operations
would have been $23.6 million higher and the profit from continuing operations for the Group would have been $0.1 million lower.
(3) ruffgar Holdings pty ltd (ruffgar)
On 17 December 2013 the Group acquired 100% of the shares in ruffgar. ruffgar owns 100% of Plastop asia Inc (Plastop asia) and a 50% interest
in Weener Plastop asia Inc (Weener Plastop). Plastop asia and Weener Plastop manufacture personal care injection moulded plastic products. The
Group acquired ruffgar as part of its overall growth strategy within the Asian region. ruffgar shares were purchased for cash of $23.2 million and
shares with a fair value of $24.9 million at the date of acquisition. the goodwill of $34.0 million has arisen as a result of the purchase consideration
exceeding the fair value of identifiable net assets acquired. Goodwill is allocated to the Pact International operating segment.
the fair value of ruffgar’s trade receivables acquired amounted to $3.6 million. none of the trade receivables were impaired and it was expected
that the full contractual amounts would be collected.
From the date of acquisition ruffgar contributed $8.8 million of revenue and $1.9 million to the net profit before tax of the Group. If the
combination had taken place at the beginning of the year, contributions to revenue from continuing operations would have been $7.2 million
higher and the contribution to profit from continuing operations for the Group would have been $0.6 million higher.
(4) Cinqplast plastop Australia pty ltd (Cinqplast)
on 17 December 2013 the Group acquired the remaining shares in Cinqplast including its controlled entity Steri-plas pty ltd for cash of $7.0 million
and shares with a fair value of $11.6 million at the date of acquisition. Cinqplast is involved in the manufacture of speciality plastic products. the
Group acquired the remaining shares in Cinqplast as part of the Group’s overall strategy to diversify its presence in plastic related industries. the
goodwill of $29.8 million has arisen as a result of the purchase consideration exceeding the fair value of assets acquired. Goodwill is allocated to
the pact Australia operating segment.
the carrying value of the equity interest in Cinqplast immediately prior to the acquisition was $8.5 million. A gain of $10.8 million was
recognised from remeasuring the equity interest in Cinqplast held by the Group to fair value in accordance with AASB 3 Business Combinations.
the gain is disclosed in note 3.
the fair value of trade and other receivables acquired amounted to $5.2 million. the gross amount of trade receivables was $5.3 million.
the deferred tax asset mainly comprises the tax effect of provisions acquired.
From the date of acquisition cinqplast contributed $13.7 million of revenue and a net profit before tax of $1.7 million to the Group. If the
combination had taken place at the beginning of the year, revenue from continuing operations would have been $15.2 million higher and the
profit from continuing operations for the Group would have been $0.6 million higher.
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AnnuAl report 2014 110
notes to the Full Year Consolidated
Financial report (continued)
For the year ended 30 June 2014
note 21. buSIneSS CoMbInAtIonS (ContInueD)
Sulo MGb (Australia) pty ltd and Sulo (nZ) ltd
On 8 august 2014, Pact completed the acquisition of sulo MGB (australia) Pty Ltd and sulo (NZ) Ltd. Details of the
assets and liabilities acquired have not been disclosed as it is impracticable to do so, as the audit of the acquisition
has not been completed.
Summary of 30 June 2013 acquisitions
Date acquired
Fair value of net assets acquired
receivables (net of provision)
prepayments
Inventory
Property, plant & equipment
Intangible assets
Deferred tax asset
total assets
payables and provisions
Business reorganisation
employee provisions
total liabilities
Viscount(1) nSW Drum(2)
$’000’s
1/11/2012
$’000’s
1/08/2012
Sunrise(3)
$’000’s
1/12/2012
total
$’000’s
34,704
1,330
11,866
99,759
2,347
5,227
3,923
122
1,132
6,636
-
160
11,973
155,233
(2,777)
-
(534)
(3,311)
(31,258)
(1,529)
(8,710)
(41,497)
29,329
1,195
10,461
90,599
2,347
5,067
138,998
(28,035)
(1,529)
(7,986)
(37,550)
1,452
13
273
2,524
-
-
4,262
(446)
-
(190)
(636)
Fair value of identifiable net assets
101,448
3,626
8,662
113,736
Cash outflow on acquisition
Cash
repayment of debt like items
Deferred settlement
net consideration paid
91,923
10,113
14,115
116,151
-
-
-
-
(812)
2,001
(812)
2,001
91,923
10,113
15,304
117,340
(Discount)/goodwill arising on acquisition
(21,103)
6,487
6,382
(8,234)
reconciliation of cash paid to Statement of Cash Flows
net cash acquired
Cash paid
net cash consideration paid
11,578
91,923
80,345
-
10,113
10,113
260
14,115
13,855
11,838
116,151
104,313
111 pACt Group HolDInGS ltD
notes to the Full Year Consolidated
Financial report (continued)
For the year ended 30 June 2014
note 21. buSIneSS CoMbInAtIonS (ContInueD)
Summary of 30 June 2013 acquisitions (continued)
(1) Viscount plastics pty ltd (Viscount)
On 1 august 2012, the Group acquired 100% of the shares in Viscount. The business manufactures and distributes injection moulded plastic
products, bottles and rotationally moulded rigid plastic products. The business is located in Victoria (australia), New south Wales (australia),
Queensland (australia), Western australia (australia), auckland (New Zealand), christchurch (New Zealand), changzhou (china), Langfang
(china), Guangzhou (china) and selangor (Malaysia). The Group acquired Viscount as part of the Group’s overall growth strategy to expand
its presence in the Australian and new Zealand markets and develop entry points into the emerging Asian market.
the fair value of the trade receivables acquired amounts to $27.4m. the gross amount of trade receivables was $27.5m and none of
the trade receivables were impaired as it was expected that the full contractual amounts will be collected. the deferred tax asset mainly
comprises the tax effect of provisions acquired.
From the date of acquisition Viscount has contributed $161.2 million of revenue and $13.5 million to the net profit before tax of the Group. If the
combination had taken place at the beginning of the year, revenue from continuing operations would have been $14.0 million higher and the
profit from continuing operations for the Group would have been $0.7 million lower.
(2) Drum reconditioners (nSW) pty ltd (nSW Drum)
On 1 November 2012, the Group acquired the business assets of NsW Drum. The business is based in New south Wales and provides
a comprehensive service for the collection, reconditioning and disposal of industrial containers. The Group acquired the business to
expand its sustainability business. the goodwill of $6.5 million arose as a result of the purchase consideration exceeding the fair value of
identifiable net assets acquired. Goodwill was allocated to the Pact australia operating segment.
the fair value of the trade receivables acquired amounted to $1.5 million and none of the trade receivables were impaired as it was
expected that the full contractual amounts would be collected.
From the date of acquisition NsW Drum has contributed $7.9 million of revenue and $1.3 million to the net profit before tax of the Group. If
the combination had taken place at the beginning of the year, revenue from continuing operations would have been $3.2 million higher and
the profit from continuing operations for the Group would have been $0.6 million higher.
(3) Sunrise plastics pty ltd (Sunrise)
On 1 December 2012, Pact Group Pty Ltd acquired 100% of the shares in sunrise. The business is based in Victoria and manufactures a variety
of thin wall plastic containers and lids. the Group acquired the business as part of the Group’s on going growth strategy. the goodwill of $6.4
million arose as a result of the valuation of the purchase consideration exceeding the fair value of assets acquired. Goodwill was allocated to
the pact Australia operating segment.
the fair value of the trade receivables acquired amounted to $3.9 million and none of the trade receivables were impaired as it was
expected that the full contractual amounts would be collected.
as part of the sale and purchase agreement with the previous owner of sunrise, a contingent consideration was agreed. an amount of $2.0
million was provided and during FY14 this liability was settled for the amount of $1.2 million.
From the date of acquisition sunrise has contributed $9.4 million of revenue and $1.5 million to the net profit before tax of the Group. If the
combination had taken place at the beginning of the year, revenue from continuing operations would have been $7.7 million higher and the
profit from continuing operations for the Group would have been $1.1 million higher.
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AnnuAl report 2014 112
notes to the Full Year Consolidated
Financial report (continued)
For the year ended 30 June 2014
note 22. buSIneSS DIVeStMentS
Summary of 30 June 2014 divestments
For the year ended 30 June 2014 the Group has not sold any of its subsidiaries.
Summary of 30 June 2013 divestments
Date divested
31/01/2013
28/05/2013
Viscount plastics
(Malaysia)
Sdn bhd(1)
Viscount plastics
(China) pty ltd(2)
total
$’000’s
$’000’s
$’000’s
Written down value of net assets sold
receivables (net of provision)
prepayments and other receivables
Inventory
Property, plant & equipment (Note 9)
Intangible assets
Deferred tax asset
total assets
payables and provisions
Employee benefits
total liabilities
2,463
109
847
1,793
2,181
-
7,393
(1,530)
(20)
(1,550)
11,695
1,686
3,243
19,104
-
458
36,186
(8,671)
(229)
(8,900)
14,158
1,795
4,090
20,897
2,181
458
43,579
(10,201)
(249)
(10,450)
Fair value of identifiable net assets
5,843
27,286
33,129
net cash consideration received
6,745
28,684
35,429
Gain on disposal
Foreign currency translation gain / (loss)
realised on disposal
Impact on net profit before tax
902
(546)
356
1,398
1,319
2,717
2,300
773
3,073
(1) Divestment of Viscount plastics (Malaysia) Sdn bhd
On 31 January 2013, the Group sold its shares in Viscount Plastics (Malaysia) sdn Bhd to Dynapack asia Pte Ltd, an associated entity.
(2) Divestment of Viscount plastics (China) pty ltd
On 28 May 2013, the Group sold its shares in Viscount Plastics (china) Pty Ltd to Bennamon Pty Ltd, a related entity.
113 pACt Group HolDInGS ltD
notes to the Full Year Consolidated
Financial report (continued)
For the year ended 30 June 2014
note 23. FInAnCIAl ASSetS AnD FInAnCIAl lIAbIlItIeS
Other current financial assets
Cross currency interest rate swaps(1)
Foreign exchange forward contracts(2)
Total other current financial assets
Other non-current financial assets
Cross currency interest rate swaps(1)
Other current financial liabilities
Foreign exchange forward contracts(2)
Other non-current financial liabilities
Cross currency interest rate swaps(1)
2014
$’000’s
2013
$’000’s
-
403
403
684
3,563
4,247
-
56,276
1,342
311
-
735
(1) Cross currency interest rate swaps (CCIrS)
On 17 December 2013, the Group’s 7 year Us$885 million Term Loan B was repaid using part proceeds from the initial public offering as well as
drawdowns on the new a$750m syndicated revolving Loan Facility. as a result, the cross currency interest rate swap positions were terminated.
Further details on the Group’s borrowings are disclosed in note 14.
(2) Foreign exchange forward contracts – cash flow hedges
To protect against exchange rate movements, the Group has entered into forward currency contracts to purchase foreign currency. These contracts
are hedging highly probable forecasted purchases or payment obligations and their terms reflect those of the underlying payment obligations.
at 30 June 2014, the Group hedged 88% (2013: 96%) of its foreign currency purchases for which highly probable forecasted transactions existed
at the reporting date.
For purchases of inventory, the cash flows are expected to occur within six months of balance date and the cost of sales within profit or loss will be
affected over the following period as the inventory is either used in production or sold. For the purchases of capital goods the cashflows are expected
to occur over a period of up to two years.
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AnnuAl report 2014 114
notes to the Full Year Consolidated
Financial report (continued)
For the year ended 30 June 2014
note 23. FInAnCIAl ASSetS AnD FInAnCIAl lIAbIlItIeS (ContInueD)
as the Group does not seek security from the counterparties with whom it enters into derivative financial instruments, the Group also
considers the risk of counterparty non-performance. as at 30 June 2014 the Group assessed this risk to be insignificant.
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
(i) level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities;
(ii) level 2: other techniques for which all inputs that have a significant effect on the recorded fair value are observable,
either directly or indirectly; and
(iii) level 3: techniques that use inputs that have a significant effect on the recorded fair value that are not based on
observable market data.
the following table provides the fair value measurement hierarchy for assets and liabilities.
Fair value measurement using
quoted prices in
active markets
Significant
observable inputs
Significant
unobservable inputs
level 1
$’000’s
level 2
$’000’s
level 3
$’000’s
total
$’000’s
Year ended 30 June 2014
Assets measured at fair value
Foreign exchange forward contracts
liabilities measured at fair value
Foreign exchange forward contracts
Year ended 30 June 2013
Assets measured at fair value
Cross currency interest rate swaps
Foreign exchange forward contracts
total
liabilities measured at fair value
Cross currency interest rate swaps
Foreign exchange forward contracts
total
-
-
-
-
-
-
-
-
403
1,342
56,960
3,563
60,523
735
311
1,046
-
-
-
-
-
-
-
-
403
1,342
56,960
3,563
60,523
735
311
1,046
there are no differences between the fair value and the book value of the assets and liabilities for the current or comparative period.
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines whether transfers
have occurred between levels in the hierarchy by reassessing categorisation (based on the lowest level input that is significant to the
fair value measurement as a whole) at the end of each reporting period.
115 pACt Group HolDInGS ltD
notes to the Full Year Consolidated
Financial report (continued)
For the year ended 30 June 2014
note 23. FInAnCIAl ASSetS AnD FInAnCIAl lIAbIlItIeS (ContInueD)
Financial risk Management
The Group’s principal financial instruments comprise cash, receivables, payables, bank loans, bank overdrafts,
finance leases and derivative instruments.
(a) Fair value
The fair value of the financial assets and liabilities is included at the amount at which the instrument could be
exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.
The Group’s financial instruments measured at fair value are comprised of derivatives only. The Group enters into
derivative financial instruments with various counterparties, principally financial institutions with investment grade
or better credit ratings. these derivatives are not quoted in active markets. the Group therefore uses valuation
techniques such as present value techniques, comparison to similar instruments for which market observable prices
exist and other relevant models used by market participants. these valuation techniques use both observable and
unobservable market inputs, of which the unobservable market inputs are considered to be insignificant.
(b) risk exposures and responses
The Group’s activities expose it to a variety of financial risks: market risk (including foreign currency risk,
interest rate risk, and commodity price risk), liquidity risk and credit risk. This note describes information
about the Group’s exposure to these risks as well as the objectives, policies and processes for measuring and
managing risk.
The Group enters into derivative transactions, principally interest rate swaps, forward currency contracts
and cross currency interest rate swaps as deemed appropriate. the purpose is to manage the interest and
currency risks arising from the Group’s operations and its financing activities. The Group uses different
methods to measure and manage risk to which it is exposed. these include monitoring levels of exposure
to interest rate and foreign exchange risk and assessments of market forecasts for interest rate and foreign
exchange levels. ageing analyses and monitoring of specific credit allowances are undertaken to manage
credit risk. Liquidity risk is monitored through rolling cash flow forecasts.
Primary responsibility for identification and control of financial risks rests with the Treasury risk Management
Committee.
(i) Market risk
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate due to
changes in market prices. Market risk comprises the following types of risk: interest rate risk, currency risk
and commodity price risk. Financial instruments affected by market risk include loans and borrowings and
derivative financial instruments.
Interest rate risk
The Group is exposed to interest rate risk as it borrows funds at floating rates. Interest rate risk is the risk
that the Group will be adversely affected by movements in floating interest rates that will increase the cost of
floating rate debt.
The Group seeks to manage its finance costs by assessing and, where appropriate, utilising a mix of fixed and
variable rate debt. Borrowings at fixed rates are carried at amortised cost and it is acknowledged that fair
value exposure is a by-product of the Group’s attempt to manage its cash flow volatility arising from interest
rate changes.
the Group constantly analyses its interest rate exposure. Within this analysis consideration is given to
potential renewals of existing positions, alternative financing, alternative hedging positions and the mix of
fixed and variable interest rates.
as discussed in note 14, the Us dollar Term Loan B Facility and related cross currency interest rate swaps
were terminated during the period and new variable rate debt facilities have been utilised.
AnnuAl report 2014 116
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Financial report (continued)
For the year ended 30 June 2014
note 23. FInAnCIAl ASSetS AnD FInAnCIAl lIAbIlItIeS (ContInueD)
the following sensitivity analysis is based on the interest rate risk exposures in existence at the reporting date.
For the Group, no financial assets or liabilities that are subject to interest rate risk have been designated
at fair value through other comprehensive income or as available-for-sale, therefore, there is no impact on
equity at 30 June 2014 (30 June 2013: nil). at 30 June 2014, if interest rates had moved with all other variables
held constant, net profit after tax would have been higher / (lower) as follows:
Interest rate increase +1%
Interest rate decrease -1%
Impact on net profit after tax
australian Dollar (aUD)
United states Dollar (UsD)
New Zealand Dollar (NZD)
Basis swap
Impact on equity
australian Dollar (aUD)
United states Dollar (UsD)
New Zealand Dollar (NZD)
Basis swap
2014
$’000’s
(2,975)
-
(1,203)
-
(2,975)
-
(1,203)
-
2013
$’000’s
(12,786)
3,496
(1,097)
(559)
(12,786)
3,496
(1,097)
559
2014
$’000’s
2,975
-
1,203
-
2,975
-
1,203
-
2013
$’000’s
12,786
(1,330)
1,097
559
12,786
(1,330)
1,097
559
significant assumptions used in the interest rate sensitivity analysis include:
• The impact of a +/- 1% movement in interest rates was determined based on the Group’s mix of debt,
credit standing with finance institutions, the level of debt that is expected to be renewed and economic
forecasters’ expectations.
Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate
because of changes in foreign exchange rates. the Group’s exposure to the risk of changes in foreign
exchange rates relates to the Group’s (i) operating activities (when revenue, expense or capital expenditure is
denominated in a different currency from an entity’s functional currency); (ii) financing activities and (iii) net
investments in foreign subsidiaries.
less than 2% of the Group’s sales are denominated in currencies other than the functional currency of the
operating entity making the sale, whilst approximately 85% (2013: 81%) of costs are denominated in the
operating entities functional currencies.
at reporting date, the Group had significant exposure to the UsD and NZD currencies which are not
designated as cash flow hedges. The Group utilises forward foreign currency contracts to eliminate or reduce
currency exposures of individual transactions once the Group has entered into a firm commitment for a
sale or purchase. It is the Group’s policy not to enter into forward foreign currency contracts until a firm
commitment is in place and to structure the terms of the hedge derivatives to match the terms of the hedged
item to maximise hedge effectiveness.
During the year to 30 June 2014 the Group entered into a new syndicated facility arrangement with available
tranches denominated in both aUD and NZD. The Group mitigates its exposure to fluctuations in the
exchange rate of its nZD borrowings by borrowing funds through entities with nZD functional currencies.
117 pACt Group HolDInGS ltD
notes to the Full Year Consolidated
Financial report (continued)
For the year ended 30 June 2014
note 23. FInAnCIAl ASSetS AnD FInAnCIAl lIAbIlItIeS (ContInueD)
the following table illustrates the sensitivity of the foreign currency contracts of the Group to movements
in the value of the australian dollar against the relevant foreign currencies, with all other variables held
constant, taking into account all underlying exposures and related hedges.
Net profit after tax
equity
2014
2013
2014
2013
$’000’s
$’000’s
$’000’s
$’000’s
Judgements of reasonably possible movements:
aUD to UsD + 10%
AuD to uSD - 10%
NZD to UsD + 10%
nZD to uSD - 10%
(40)
35
66
(94)
2
(2)
(33)
40
1,256
(1,534)
649
(792)
(550)
672
(314)
384
significant assumptions used in the foreign currency exposure sensitivity analysis include:
• reasonably possible movements in foreign exchange rates were determined based on economic forecast
expectations.
The reasonably possible movements were calculated by taking the UsD and NZD spot rate as at reporting date,
moving this spot rate by the reasonably possible movements and then re-converting the UsD, NZD into aUD
with the ‘new spot-rate’. This methodology reflects the translation methodology undertaken by the Group.
• a price sensitivity of derivatives has been based on reasonably possible movements of spot rates at
reporting dates rather than forward rates.
• The effect on other comprehensive income is the effect on the cash flow hedge reserve.
• The sensitivity does not include financial instruments that are non-monetary items as these are not considered
to give rise to currency risk.
A sensitivity of 10% has been selected based on the reasonably possible movements given recent and
historical levels of volatility and exchange rates and economic forecast expectations.
Commodity price risk
the Group is exposed to price risk in relation to a number of raw materials. this risk is partially mitigated by
‘rise and fall’ clauses in contracts with customers. In managing commodity price risk, the Group ordinarily
seeks to pass on commodity price risk to both contracted and uncontracted customers. As the Group has
historically passed on the movement risk associated with commodity prices, no sensitivity analysis has been
performed. However the speed, magnitude and competitive dynamics of end markets can adversely impact
the Group’s ability to fully pass on commodity price changes.
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AnnuAl report 2014 118
notes to the Full Year Consolidated
Financial report (continued)
For the year ended 30 June 2014
note 23. FInAnCIAl ASSetS AnD FInAnCIAl lIAbIlItIeS (ContInueD)
(ii) counterparty credit risk
Credit risk arises from the potential failure of counterparties to meet their obligations at the maturity of
contracts. the Group is exposed to credit risk arising from its operating activities (primarily from customer
receivables) and financing activities, including deposits with banks and financial institutions, foreign exchange
transactions and other financial instruments. The maximum exposure to credit risk arising from potential
default of the counterparty is equal to the carrying amount of the financial assets. There have been no
significant changes in relation to financial guarantees and trade finance credit arrangement utilised by the
Group compared to the previous period.
The Group does not hold any credit derivatives to offset its credit exposures and there is no significant
concentration of credit risk.
trade receivables
The Group generally trades only with recognised, creditworthy third parties, and as such collateral is not
requested nor is it the Group’s policy to securitise its trade and other receivables.
It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verification
procedures which may include an assessment of their independent credit rating, financial position, past
experience and industry reputation. risk limits are set for each individual customer in accordance with set
parameters. These risk limits are regularly monitored. In addition, receivable balances are stringently monitored
on an ongoing basis with the result that the Group’s bad debt experience has not been significant.
Financial instruments
credit risks relating to financial instruments entered into with banks and financial institutions are managed by
Group Treasury in accordance with the approved policies. such policies only allow financial instruments to be
entered into with high credit quality financial institutions.
The maximum exposure to credit risk by class of recognised financial assets at the end of the reporting
period is equivalent to the carrying amount as presented in the Statement of Financial position.
(iii) Liquidity risk
Liquidity risk arises from the financial liabilities of the Group and the Group’s subsequent ability to meet its
obligations to repay these financial liabilities as and when they fall due. Liquidity risk management involves
maintaining available funding and ensuring the Group has access to an adequate amount of committed
credit facilities. The Group’s objective is to maintain a balance between continuity of funding and flexibility
through the use of bank overdrafts, loans and finance leases.
The Group manages its liquidity risk by monitoring the total cash inflows and outflows expected on an
ongoing basis.
119 pACt Group HolDInGS ltD
notes to the Full Year Consolidated
Financial report (continued)
For the year ended 30 June 2014
note 23. FInAnCIAl ASSetS AnD FInAnCIAl lIAbIlItIeS (ContInueD)
Credit facilities
the table below summarises the outstanding and unused credit facilities available to the Group:
term
note
2014
$’000’s
2013
$’000’s
3 years
5 years
3 years
5 years
7 years
5 years
Available credit facilities
A$750m Syndicated revolving loan Facility A tranche 1
(aUD $295m)
A$750m Syndicated revolving loan Facility A tranche 2
(aUD $295m)
A$750m Syndicated revolving loan Facility B tranche 1
(NZD $90m)
A$750m Syndicated revolving loan Facility B tranche 2
(NZD $90m)
term loan B Facility
revolving Credit Facility
promissory note
overdraft facility
Multi option Interchangeable Working Capital Facility(1)
Trade finance facility(1)
total available credit facilities
Credit facilities utilised
A$750m Syndicated revolving loan Facility A tranche 1
(aUD $295m)
A$750m Syndicated revolving loan Facility A tranche 2
(aUD $295m)
A$750m Syndicated revolving loan Facility B tranche 1
(NZD $90m)
A$750m Syndicated revolving loan Facility B tranche 2
(NZD $90m)
term loan B Facility
promissory note
overdraft facility
Multi option Interchangeable Working Capital Facility(1)
Trade finance facility(1)
total credit facilities utilised
net unused credit facilities
Cash and cash equivalents
net unused facilities and cash and cash equivalents
295,000
295,000
83,534
83,534
-
-
-
20,105
15,175
4,000
-
-
-
-
959,558
100,402
1,069,415
17,500
15,175
4,000
796,348
2,166,050
295,000
130,000
83,534
83,534
-
-
-
-
-
-
959,558
1,069,432
1,376
11,463
-
270
7,620
2,798
604,907
2,039,678
191,441
126,372
25,603
22,899
217,044
149,271
14
14
14
14
14
24
14
(1) these facilities allow the Group to procure goods and services on credit whereby the initial payment obligation rests with the facility provider.
the liability attaching to these transactions is recognised in the Statement of Financial position when title or risk associated these goods and
services passes to the Group or an event occurs which causes the liability to be crystallised in accordance with normal accounting principles.
Up until such time, any obligation attaching to the procurement of these goods and services does not represent a liability and therefore has not
been recognised in the Statement of Financial position.
AnnuAl report 2014 120
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notes to the Full Year Consolidated
Financial report (continued)
For the year ended 30 June 2014
note 23. FInAnCIAl ASSetS AnD FInAnCIAl lIAbIlItIeS (ContInueD)
Derivative and non-derivative financial assets and liabilities
The following liquidity risk disclosures reflect all contractually fixed payments, repayments and interest resulting
from recognised financial liabilities as of 30 June 2014. For the other obligations the respective undiscounted cash
flows for the respective upcoming fiscal years are presented. The timing of cash flows for assets and liabilities is
based on the contractual terms of the underlying contract.
When the Group is committed to make amounts available in instalments, each instalment is allocated to the
earliest period in which the Group is required to pay.
The risk implied from the values shown in the table below reflects a balanced view of cash inflows and outflows of
financial instruments. Leasing obligations, trade payables and other financial liabilities mainly originate from the
financing of assets used in the Group’s ongoing operations such as property, plant, equipment and investments in
working capital.
Included in the Statement of Financial position are loans and receivables consisting of trade and other receivables
of $150.3 million (2013: $253.7 million).
liquid non-derivative assets comprising cash and receivables are considered in the Group’s overall liquidity risk.
The Group ensures that sufficient liquid assets are available to meet all the required short-term cash payments.
The table below summarises the maturity profile of the Group’s assets and liabilities based on contractual
undiscounted payments:
≤ 6 months
6–12 months
1–5 years
> 5 years
$’000’s
$’000’s
$’000’s
$’000’s
Year ended 30 June 2014
Financial assets
Cash and cash equivalents
trade and other receivables
Foreign exchange
forward contracts
Total inflows
Financial liabilities
Bank overdraft
trade and other payables
Foreign exchange forward
contracts
A$750m Syndicated revolving
loan Facility
Finance leases
Total outflows
25,603
150,341
-
174,741
(1,376)
(192,916)
(1,087)
-
-
194
194
-
-
-
-
-
-
-
-
-
(45)
(14,739)
(14,499)
(655,588)
(975)
-
-
(213,889)
(14,499)
(655,633)
Net inflow/(outflow)
(39,148)
(14,305)
(655,633)
-
-
-
-
-
-
-
-
-
-
-
total
$’000’s
25,603
150,341
194
174,935
(1,376)
(192,916)
(1,132)
(684,826)
(975)
(884,021)
(709,086)
121 pACt Group HolDInGS ltD
notes to the Full Year Consolidated
Financial report (continued)
For the year ended 30 June 2014
note 23. FInAnCIAl ASSetS AnD FInAnCIAl lIAbIlItIeS (ContInueD)
≤ 6 months
6–12 months
1–5 years
> 5 years
$’000’s
$’000’s
$’000’s
$’000’s
Year ended 30 June 2013
Financial assets
Cash and cash equivalents
trade and other receivables
Foreign exchange
forward contracts
Total inflows
Financial liabilities
Bank overdraft
trade and other payables
Secured loan Syndicated
Finance Facility
promissory notes
total
$’000’s
22,899
253,205
3,940
280,044
(270)
(161,316)
22,899
253,205
3,101
279,205
(270)
(154,918)
(23,366)
-
-
474
474
-
-
365
365
-
(6,092)
-
(306)
-
-
-
-
-
-
(22,776)
(275,856)
(945,796)
(1,267,794)
-
-
-
(1,573,728)
(1,573,728)
Cross currency interest rate swaps
(13,022)
(11,149)
(41,906)
Finance leases
Total outflows
(493)
(493)
(1,022)
(192,069)
(40,510)
(319,090)
(2,519,524)
(3,071,193)
-
-
(66,077)
(2,008)
Net inflow/(outflow)
87,136
(40,036)
(318,725)
(2,519,524)
(2,791,149)
In addition to maintaining sufficient liquid assets to meet short term payments, at reporting date, the Group
has available $191.4 million (2013: $126.4 million) of unused credit facilities available for its immediate use.
refer to note 23(c)(i) for details.
Due to the unique characteristics and risks inherent to derivative instruments, the Group, through the Group
Treasury Function, separately monitors the liquidity risk arising from transacting in derivative instruments.
The disclosed financial derivative instruments in the above table are the gross undiscounted cash flows
however these amounts may be settled gross or net.
the following table shows the corresponding reconciliation of those amounts to their carrying amounts:
Year ended 30 June 2014
Derivative liabilities – gross settled
Inflows
Outflows
net maturity
Year ended 30 June 2013
Derivative liabilities – gross settled
Inflows
Outflows
net maturity
≤ 6 months
6–12 months
1–5 years
> 5 years
$’000’s
$’000’s
$’000’s
$’000’s
47,275
(48,362)
(1,087)
2,650
(2,456)
194
824
(869)
(45)
79,529
(89,450)
(9,921)
28,888
1,120,081
(39,563)
(1,161,622)
(10,675)
(41,541)
-
-
-
-
-
-
total
$’000’s
50,749
(51,687)
(938)
1,228,498
(1,290,635)
(62,137)
AnnuAl report 2014 122
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Financial report (continued)
For the year ended 30 June 2014
note 24. relAteD pArtY DISCloSureS
parent entity
The parent of the Group is Pact Group Holdings Ltd. In the comparative period, the ultimate parent of the
Group was salvage Pty Ltd, as trustee for Geminder Family Trust, incorporated in australia. Geminder Holdings
pty ltd owned 100% of the Group up until the date of the listing on the Australian Securities exchange.
terms and conditions of transactions with related parties
the purchases from and sales to related parties are made on terms equivalent to those that prevail in
arm’s length transactions. outstanding balances at the end of the period are unsecured and interest free
and settlement occurs in cash. there have been no guarantees provided or received for any related party
receivables or payables. For the year ending 30 June 2014, the Group has not recorded any impairment of
receivables relating to amounts owed by related parties (June 2013: Nil).
terms and conditions of loans from related parties
the promissory note payable to Geminder Holdings pty ltd was repaid in full on 17 December 2013.
This promissory note accrued interest quarterly at a rate based on the bank bill swap bid rate (BBsY) plus a
margin of 2%. Interest was capitalised annually on the anniversary of the promissory note.
terms and conditions of property leases with related parties
The Group leased 21 properties (18 in australia and 3 in New Zealand) from centralbridge Pty Ltd (as
trustee for the centralbridge Unit Trust), centralbridge Two Pty Ltd, centralbridge (NZ) Limited and albury
Property Holdings Pty Ltd (“centralbridge Entities”), which are each controlled by entities associated with
raphael Geminder (the Non-Executive chairman of Pact) and are therefore related parties of the Group
(“centralbridge Leases”). The aggregate annual rent payable by Pact under the centralbridge Leases for FY14
was $10.2m. the rent payable under these leases was determined based on independent valuations and
market conditions at the time the leases were entered into.
as at 30 June 2014, 5 of the australian properties had been unconditionally sold by the centralbridge Entities
to third parties, these sales settled during July 2014.
Following the settlement of the property sales, the Group leases 16 properties (13 in australia and 3 in New
Zealand) from the centralbridge Entities. Of the centralbridge Leases in australia:
• seven of the leases contain early termination rights in favour of the landlord to terminate the lease at the
expiry of the 6th and 9th term;
• One of the leases contains early termination rights in favour of the landlord to terminate the lease at the
expiry of the 5th and 8th term;
• One of the leases contains early termination rights in favour of the landlord to terminate the lease at the
expiry of the 8th term; and
• Two of the leases do not contain standard default provisions which give the landlord the right to terminate
the lease in the event of default.
Except as set out above, the centralbridge Leases in australia are on arm’s length terms.
Of the centralbridge Leases in New Zealand, three of the leases contain early termination rights in favour
of the landlord to terminate the lease at the expiry of the 6th and 9th term. With the exception of the early
termination right, the centralbridge Leases in New Zealand are on terms which are not uncommon for leases
of commercial premises.
123 pACt Group HolDInGS ltD
notes to the Full Year Consolidated
Financial report (continued)
For the year ended 30 June 2014
note 24. relAteD pArtY DISCloSureS (ContInueD)
(a) transactions with related parties
the following table provides the total amount of transactions with related parties for the year ended 30 June 2014:
Sales to
related
parties
purchases
from
related
parties
other
(income)
/ expense
with related
parties
Amounts
(owed to) /
receivable
from related
parties
$’000’s
$’000’s
$’000’s
$’000’s
entity which previously controlled the Group:
Geminder Holdings pty ltd (1)
Associates and joint ventures:
Cinqplast plastop Australia pty ltd (2)
Steri-plas pty ltd (2)
spraypac Products (NZ) Ltd
Weener plastop Asia Inc (5)
other related parties – other Director’s interests:
Albury property Holdings pty ltd
Asia peak pte ltd (2)
BB&M Holdings pty ltd (3)
centralbridge (NZ) Ltd (6)
Centralbridge pty ltd as trustee for
Centralbridge unit trust (6)
Centralbridge two pty ltd (6)
Closed loop environmental Solutions pty ltd
Dynapack Asia pte ltd (4)
p’Auer pty ltd (8)
plastop Asia Inc (2)
pro-pac packaging ltd (7)
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
-
-
268
543
-
-
-
57
-
-
-
-
-
-
-
-
-
-
-
-
-
-
485
1,720
-
-
640
-
-
-
8,274
8,066
-
-
458
580
-
-
-
-
-
-
2,773
2,671
31,846
49,689
-
-
1,709
2,806
667
641
5,086
3,795
20
13
-
-
7,533
4,804
-
-
5,225
2,021
(1,650)
(7,850)
(72)
116,697
-
-
(48)
(115)
-
-
(30)
(26)
-
-
(1,482)
(1,311)
(68)
(134)
-
-
-
-
-
-
-
-
-
128
458
(104)
(55)
(71)
-
-
-
163
-
(441)
-
-
-
-
10
(245)
-
(17,098)
100
231
-
156
-
(59)
(12)
(512)
29
124
15
(21)
-
4
-
-
870
423
AnnuAl report 2014 124
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notes to the Full Year Consolidated
Financial report (continued)
For the year ended 30 June 2014
note 24. relAteD pArtY DISCloSureS (ContInueD)
(a) transactions with related parties (continued)
(1) as a result of the initial public offering on 17 December 2013, Geminder Holdings Pty Ltd no longer owns 100% of the Group. Geminder Holdings
pty ltd remains a substantial shareholder and related party of the Group. transactions disclosed above relate to transactions with Geminder
Holdings pty ltd during the twelve months ended 30 June 2014 and the comparative twelve month period. the amount of fees received from
Geminder Holdings Pty Ltd for the period from 17 December 2013 to 30 June 2014 was $250,000.
In addition to the transactions disclosed above, Viscount Plastics (china) Pty Ltd (Viscount china) has entered into a call option deed with respect of
each of the relevant premises in china to which it holds a “granted land use right”. Under these deeds, Geminder Holdings Pty Ltd (or its nominee) has
the option to acquire the relevant premises in China for the book value as at 30 June 2013 plus any applicable purchaser taxes or duties. the term of
the option is approximately three years from 17 December 2013. the effect of the call option is that any of the premises in China may be acquired by
Geminder Holdings Pty Ltd (or its nominee) for less than market value.
(2) On 17 December 2013, cinqplast Plastop australia Pty Ltd, steri-Plas Pty Ltd, asia Peak Pte Ltd, Plastop asia Inc and Viscount Plastics (china) Pty
Ltd were acquired by the Group (refer note 10). related party transactions disclosed above relate to the period up to the acquisition date of 17
December 2013 for financial year 2014, the comparatives are for the 12 month period ending 30 June 2013.
(3) During the period an entity controlled by raphael Geminder held a significant influence over BB&M Holdings Pty Ltd through a 43% equity
interest in the entity.
(4) a memorandum of understanding has been entered into with the shareholders of Dynapack asia Pte Ltd giving Pact Group Holdings Ltd, or its
nominee, the exclusive opportunity to negotiate the acquisition of all the shares in Dynapack asia Pte Ltd at any time up to 12 months after
17 December 2013. Dynapack Asia pte ltd is currently owned 50% by entities controlled by the Hambali family of Indonesia and 50% by an entity
controlled by Geminder Holdings Pty Ltd, Pact’s former parent. Geminder Holdings Pty Ltd acquired its interest in Dynapack asia Pte Ltd in 2011.
(5) On 17 December 2013, as a result of acquiring ruffgar Pty Ltd, the Group acquired a 50% interest in Weener Plastop asia Inc. Weener Plastop asia
Inc. (refer note 10) was established by an entity controlled by raphael Geminder in 2007. Transactions disclosed above relate to any transactions
with the associate during the twelve months ended 30 June 2014 and the comparative twelve month period.
(6) payments to the entities represent lease payments for rental of sites.
(7) Pro-Pac Packaging Limited (Pro-Pac)
Pro-Pac, an entity controlled by raphael Geminder, is an exclusive supplier of certain raw materials such as flexible film packaging, flexible plastic
bags and tapes to pact for an initial term that expires on 1 october 2016. total annual fees under this arrangement are approximately $5.2 million
per annum. the supply arrangement is on arm’s length terms.
(8) P’auer Pty Ltd (P’auer)
P’auer, an entity controlled by raphael Geminder has a supply agreement to provide label products to Pact. Pact has a Transitional services and
support agreement with P’auer to provide support services. agreements are on arm’s length terms. In addition, P’auer provides Pact with periodic
warehousing services.
(b) loans from related parties
entity which previously controlled the Group:
Geminder Holdings pty ltd (1)
Interest
income
Interest
expense
promissory
note owed
to related
parties
2014
2013
$’000’s
5,388
$’000’s
22,116
$’000’s
-
-
55,534
(1,069,432)
(1) During the period, Pact issued shares to Geminder Holdings Pty Ltd in exchange for cash of $255.0 million and a new promissory note.
after assignment of a receivable owed by Geminder Holdings to Pact, the balance of the new interest bearing promissory note was repaid
in full through the issue of shares together with part proceeds of the public offering.
125 pACt Group HolDInGS ltD
notes to the Full Year Consolidated
Financial report (continued)
For the year ended 30 June 2014
note 24. relAteD pArtY DISCloSureS (ContInueD)
(c) Divestment of businesses to related parties
The Group made the following disposals of businesses to related parties during the financial year ended
30 June 2013:
(i) Viscount Plastics (Malaysia) sdn Bhd was sold to Dynapack asia Pte Ltd (refer note 22).
(ii) Viscount Plastics (china) Pty Ltd was sold to Bennamon Pty Ltd (refer note 22).
Country of
Incorporation
equity Interest
2014
2013
(d) transactions with key Management personnel
entity
other Director’s interests
Albury property Holdings pty ltd
BB&M Holdings pty ltd
Centralbridge pty ltd as trustee for Centralbridge unit trust
Centralbridge two pty ltd
Cinqplast plastop Australia pty ltd(1)
Closed loop environmental Solutions pty ltd
Geminder Holdings pty ltd
p’Auer pty ltd
pro-pac packaging ltd
Steri-plas pty ltd(1)
centralbridge (NZ) Ltd
plastop Asia Inc(1)
Weener plastop Asia Inc(1)
Asia peak pte ltd(1)
Dynapack Asia pte ltd
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
new Zealand
philippines
philippines
Singapore
Singapore
100%
43%
100%
100%
–
26%
100%
100%
51%
–
100%
–
50%
–
50%
(1) subsidiaries became controlled entities on 17 December 2013 (refer note 21).
Compensation of key Management personnel of the Group
short-term employee benefits
Post-employment benefits
Long-term benefits
total compensation
2014
$’000’s
4,653
124
34
4,811
100%
43%
100%
100%
51%
26%
100%
100%
51%
51%
100%
50%
25%
100%
50%
2013
$’000’s
1,916
123
37
2,076
the amounts disclosed in the table are the amounts recognised as an expense during the reporting period
related to key Management personnel.
AnnuAl report 2014 126
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notes to the Full Year Consolidated
Financial report (continued)
For the year ended 30 June 2014
note 25. ControlleD entItIeS
(a) The following entities are controlled entities that are party to the Deed of cross Guarantee (note 27):
entity
Alto Manufacturing pty ltd(2)
Alto packaging Australia pty ltd(2)
Astron plastics pty ltd(2)
Baroda Manufacturing pty ltd(2)
Brickwood (NsW) Pty Ltd (formerly Full View Plastics Pty Ltd) as trustee
for the Full view plastics unit trust(2)
Brickwood (QLD) Pty Ltd (formerly Logan Moulders Pty Ltd)(2)
Brickwood (VIc) Pty Ltd (formerly Brickwood Holdings Pty Ltd)(2)
Cinqplast plastop Australia pty ltd (1)
Inpact Innovation pty ltd(2)
MtWo pty ltd(2)
Pact Group Holdings (australia) Pty Ltd (formerly Pact Group Pty Ltd)(2)
Pact Group Industries (aNZ) Pty Ltd(2) (formerly Pact Group Industries Pty Ltd)
Pact Group Industries (asia) Pty Ltd
plaspak pty ltd(2)
plaspak Closures pty ltd(2)
plaspak peteron pty ltd(2)
ruffgar Holdings pty ltd(1)
salient asia Pacific Pty Ltd(2)
Skyson pty ltd(2)
Snopak Manufacturing pty ltd(2)
Steri-plas pty ltd(1)
Summit Manufacturing pty ltd(2)
Sunrise plastics pty ltd(2)
vIp Drum reconditioners pty ltd(2)
vIp plastic packaging pty ltd(2)
vIp Steel packaging pty ltd(2)
viscount logistics Services pty ltd(2)
viscount plastics pty ltd(2)
Viscount Plastics (australia) Pty Ltd(2)
viscount rotational Mouldings pty ltd(2)
Viscount Plastics (china) Pty Ltd(1)
Country of
Incorporation
equity Interest
2014
2013
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
-
100
100
100
100
100
100
100
100
-
100
100
100
-
100
100
100
100
100
100
100
100
100
-
(1) subsidiaries became controlled entities on 17 December 2013 (refer note 21)
(2) Subsidiaries that comprise A$750m Syndicated revolving loan Facility along with pact Group Holdings ltd as executed on 17 December 2013
(refer note 14)
127 pACt Group HolDInGS ltD
notes to the Full Year Consolidated
Financial report (continued)
For the year ended 30 June 2014
note 25. ControlleD entItIeS (ContInueD)
(b) The following entities are controlled entities of the Group, however they are not party to the Deed
of Cross Guarantee:
entity
pact Group transaction Services pty ltd(2)
plaspak Contaplas pty ltd(2)
plaspak Management pty ltd(2)
plaspak Minto pty ltd(2)
Plaspak (PET) Pty Ltd(2)
Sustainapac pty ltd(2)
vmax returnable packaging Systems pty ltd
Alto packaging ltd(2)
Astron plastics ltd(2)
Auckland Drum Sustainability Services ltd(2)
Pacific BBa Plastics (NZ) Ltd(2)
Pact Group (NZ) Ltd(2)
Pact Group Holdings (NZ) Ltd(2)
tecpak Industries ltd(2)
VIP Plastic Packaging (NZ) Ltd(2)
VIP steel Packaging (NZ) Ltd(2)
Viscount Plastics (NZ) Ltd(2)
Pact Group (Usa) Inc.
Gempack Asia ltd
Asia peak pte ltd(1)
plastop Asia Inc(1)
Guangzhou Viscount Plastics co Ltd(1)
langfang viscount plastics Co ltd(1)
changzhou Viscount Plastics co Ltd(1)
Country of
Incorporation
equity Interest
2014
2013
Australia
Australia
Australia
Australia
Australia
Australia
Australia
new Zealand
new Zealand
new Zealand
new Zealand
new Zealand
new Zealand
new Zealand
new Zealand
new Zealand
new Zealand
united States of
America
thailand
Singapore
philippines
China
China
China
100
100
100
100
100
100
51
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
51
100
100
100
100
100
100
100
100
100
100
100
100
-
-
-
-
-
(1) subsidiaries became controlled entities on 17 December 2013 (refer note 21)
(2) Subsidiaries that comprise A$750m Syndicated revolving loan Facility along with pact Group Holdings ltd as executed on 17 December 2013
(refer note 14)
AnnuAl report 2014 128
OverviewPerformanceGovernanceFinancial statementsShareholder information notes to the Full Year Consolidated
Financial report (continued)
For the year ended 30 June 2014
note 26. pArent entItY FInAnCIAl StAteMentS
Current assets
total assets
Current liabilities
total liabilities
net assets
Issued capital
retained earnings
Profits reserve
total equity
2014
$’000’s
354,137
2013
$’000’s
127,600
1,362,707
1,069,600
-
-
-
1,069,432
1,362,707
1,327,643
64
35,000
1,362,707
168
-
168
-
168
Profit of the Parent entity
total comprehensive income of the parent entity
34,895
34,895
476,651
476,651
note 27. DeeD oF CroSS GuArAntee
On 28 May 2014, a Deed of cross Guarantee (Deed) was executed between Pact Group Holdings Ltd and some
of its wholly owned entities (refer to note 25(a)). Under this Deed, each company guarantees the debts of the
other subsidiaries that form part of the Deed. Pursuant to class Order 98/1418, for those entities that enter into
the Deed relief has been granted from the Corporations Act 2001 requirements to prepare and lodge audited
financial statements.
the entities that are parties to the Deed represent a ‘Closed Group’ for the purposes of the Class order.
the consolidated income statement and balance sheet of the entities that are members of the Closed Group
are as follows:
Closed group consolidated income statement
Profit before income tax
Income tax expense
Net profit for the period
retained losses at beginning of the period
Net profit for the period
Dividends provided for or paid
retained losses at end of the period
129 pACt Group HolDInGS ltD
2014
$’000’s
45,168
16,612
61,780
(75,943)
61,780
-
(14,163)
notes to the Full Year Consolidated
Financial report (continued)
For the year ended 30 June 2014
Closed group consolidated balance sheet
Current ASSetS
trade and other receivables
Inventories
loans to related parties
prepayments
totAl Current ASSetS
non-Current ASSetS
other receivables
Property, plant and equipment
Investments in subsidiaries and associates
Intangible assets and goodwill
Deferred tax assets
totAl non-Current ASSetS
totAl ASSetS
Current lIAbIlItIeS
trade and other payables
Interest bearing loans and borrowings
loans from related parties
Current tax liabilities
provisions
Other current financial liabilities
totAl Current lIAbIlItIeS
non-Current lIAbIlItIeS
provisions
Interest bearing loans and borrowings
Deferred tax liabilities
totAl non-Current lIAbIlItIeS
totAl lIAbIlItIeS
net ASSetS
equItY
Contributed equity
reserves
retained earnings
totAl equItY
2014
$’000’s
106,514
81,905
25,699
8,935
223,053
13
399,139
371,233
149,795
25,154
945,334
1,168,387
129,902
1,220
18,487
1,830
27,588
938
179,965
35,622
425,975
23,256
484,853
664,818
503,569
1,489,597
(971,865)
(14,163)
503,569
AnnuAl report 2014 130
OverviewPerformanceGovernanceFinancial statementsShareholder information notes to the Full Year Consolidated
Financial report (continued)
For the year ended 30 June 2014
note 28. AuDItor’S reMunerAtIon
the auditor of pact Group Holdings ltd is ernst & Young. Amounts received or due and receivable by
ernst & Young are as follows:
Audit or review of the Consolidated Financial report of the Group and audit or
review of other entities in the consolidated Group
tax services
other assurance related services
other services relating to the Ipo
note 29. eArnInGS per SHAre
2014
2013
$’000’s
$’000’s
1,490
178
78
2,932
4,678
895
105
679
-
1,679
Basic and diluted earnings per share amounts are calculated by dividing the net profit for the period attributable to
ordinary equity holders of pact by the weighted average number of ordinary shares outstanding during the period.
The following reflects the income and share data used in the basic and diluted earnings per share computations:
Net profit attributable to ordinary equity holders of Pact from continuing
operations
Net profit attributable to ordinary equity holders of Pact for basic earnings
Net profit attributable to ordinary equity holders of Pact adjusted for the
effect of dilution(1)
2014
$’000’s
57,689
57,689
57,689
Weighted average number of ordinary shares for basic earnings per share
164,471,919
$
2013
$’000’s
45,125
45,125
45,125
12
$
earnings per share
0.35
3,760,417
(1) there is no dilutive impact as the Group does not have options over shares as at 30 June 2014.
there have been no other transactions involving ordinary shares or potential ordinary shares between the
reporting date and the date of authorisation of these financial statements.
Earnings per share for the comparative period was calculated using the net profit for the period attributable
to ordinary equity holders of Geminder Holdings Pty Ltd, Pact’s parent entity until 17 December 2013.
131 pACt Group HolDInGS ltD
notes to the Full Year Consolidated
Financial report (continued)
For the year ended 30 June 2014
note 30. SeGMent InForMAtIon
An operating segment is a component of the Group that engages in business activities from which it may earn revenues
and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components.
Operating segments have been identified based on the information provided to the executive decision maker, being the
chief Executive Officer (cEO). The cEO provides strategic direction and management oversight to the day to day activities
of the Group in terms of monitoring results and approving strategic planning.
Description of segments
The cEO monitors results by reviewing two operating segments, Pact australia (Pa) and Pact International (PI),
focussing on earnings before net finance costs and tax (EBIT) before significant items as a segment result. EBIT is
calculated as earnings before finance costs, net of interest revenue, and tax.
Geographic segments
The Group operates in the following significant countries, australia, New Zealand, china, Philippines, Malaysia and
thailand. revenues have been allocated to the individual countries stated above based on the location of the customers
to which the revenue relates.
comparative information has been presented in conformity with the identified reporting segments of the Group as at
the reporting date in accordance with AASB 8 operating Segments.
(a) Segment results
2014
$’000’s
2013
$’000’s
pact
Australia
pact
International
total
pact
Australia
pact
International
total
Sales revenue
EBIT before significant items
822,671
82,249
320,548 1,143,219
813,118
290,589 1,103,707
64,776
147,027
93,223
47,106
140,329
(b) Reconciliation from EBIT before significant items to net profit after tax
EBIT before significant items
Significant items
reversal of unrealised revaluation gain
on hedges
Swap break costs
Ipo transaction costs
Write-off of capitalised borrowing costs
Gain on business acquisition
Gain on disposal of shares in associate
Gain on disposal of business
Business reorganisation program
Total significant items
EBIT after significant items
Finance costs
Net profit before tax
Income tax (expense) / benefit
Net profit after tax
2014
$’000’s
147,027
(3,791)
(6,407)
(5,245)
(21,576)
10,834
-
-
-
(26,185)
120,842
(66,725)
54,117
3,680
57,797
2013
$’000’s
140,329
3,791
-
-
-
21,103
1,853
3,072
(25,035)
4,784
145,113
(91,879)
53,234
(7,964)
45,270
AnnuAl report 2014 132
OverviewPerformanceGovernanceFinancial statementsShareholder information
notes to the Full Year Consolidated
Financial report (continued)
For the year ended 30 June 2014
note 30. SeGMent InForMAtIon (ContInueD)
(c) Geographical information
Sales revenue from external customers
Australia
new Zealand
Asia
uSA
2014
$’000’s
824,448
276,919
38,032
3,820
total sales revenue per Statement of Comprehensive Income
1,143,219
the sales revenue information above is based on the location of the customers.
(d) non-current assets
non-current assets
Australia
new Zealand
Asia
total non-current assets
2014
$’000’s
549,217
255,907
67,607
872,731
2013
$’000’s
825,953
232,848
39,500
5,406
1,103,707
2013
$’000’s
501,951
233,337
8,524
743,812
Non-current assets for this purpose consists of property, plant and equipment, goodwill and intangible assets.
note 31. SubSequent eVentS
the Company made an ASX announcement on 1 August 2014 that it had signed an agreement to acquire
the australian and New Zealand operations of sulo MGB (australia) Pty Ltd including its subsidiary sulo (NZ) Ltd
from Plastics Group Pty Ltd for a total consideration (including potential earnout) of up to $34.8 million which
will be funded through the Group’s existing debt facilities. the acquisition was completed on 8 August 2014.
sulo is the leading manufacturer of plastic waste and recycling bins in australia and New Zealand,
with a unaudited turnover of approximately $48 million in the year ended 30 June 2014.
133 pACt Group HolDInGS ltD
Directors’ Declaration
In the Directors’ opinion:
1. The consolidated financial statements and notes, and the remuneration report included in the Directors’
report are in accordance with the Corporations Act 2001 including:
(a) giving a true and fair view of the Group’s financial position as at 30 June 2014 and of its performance
for the year ended on that date;
(b) complying with australian accounting standards and the corporations regulations 2001; and
(c) complying with International Financial reporting standards as disclosed in note 2(b); and
2. There are reasonable grounds to believe that the Company will be able to pay its debts as and when
they become due and payable.
3. as at the date of this Declaration, there are reasonable grounds to believe that the members of the
closed Group identified in note 27 will be able to meet any obligations or liabilities to which they are or
may become subject to, by virtue of the Deed of cross Guarantee dated 28 May 2014.
This declaration has been made after receiving the declarations required to be made to the Directors by
the chief Executive Officer and chief Financial Officer in accordance with section 295a of the Corporations
Act 2001 for the financial year ended 30 June 2014.
This Declaration is made in accordance with a resolution of the Directors.
Raphael Geminder
chairman
Dated 27 August 2014
Brian Cridland
Managing Director and chief Executive Officer
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ANNUAL REPORT 2014 134
Ernst & Young
8 Exhibition Street
Melbourne VIC 3000 Australia
GPO Box 67 Melbourne VIC 3001
Tel: +61 3 9288 8000
Fax: +61 3 8650 7777
ey.com/au
Independent auditor's report to the members of Pact Group Holdings Ltd
Report on the financial report
We have audited the accompanying financial report of Pact Group Holdings Ltd, which comprises the
consolidated statement of financial position as at 30 June 2014, the consolidated statement of
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 controls as the directors determine are necessary to enable the preparation of the financial
report that is free from material misstatement, whether due to fraud or error. In Note 2, 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 judgment, 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 controls relevant to the entity's preparation and
fair presentation of the financial report 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 entity's
internal controls. 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 have given to the directors of the company a written Auditor’s Independence Declaration, a
copy of which is included in the directors’ report.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
135 pACt Group HolDInGS ltD
Opinion
In our opinion:
a.
the financial report of Pact Group Holdings Ltd is in accordance with the Corporations Act 2001,
including:
i
ii
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
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 2.
Report on the remuneration report
We have audited the Remuneration Report included in 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 Pact Group Holdings Ltd for the year ended 30 June 2014,
complies with section 300A of the Corporations Act 2001.
Ernst & Young
Tim Wallace
Partner
Melbourne
27 August 2014
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
AnnuAl report 2014 136
OverviewPerformanceGovernanceFinancial statementsShareholder information 137 pACt Group HolDInGS ltD
Shareholder Information
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ANNUAL REPORT 2014 138
Shareholder Information
The shareholder information set out below, unless otherwise stated, is based on the information in the
pact Group Holdings ltd share register as at 19 September 2014.
voting rights
The voting rights attaching to the only class of equity securities, being fully paid ordinary shares, are on a
show of hands; every member present at a meeting in person or by proxy, attorney or representative has
one vote and on a poll has one vote for each fully paid ordinary share held.
Substantial Shareholders
the following is a summary of the substantial shareholders in the Company pursuant to notices lodged
with the ASX in accordance with section 671B of the Corporations Act as at 30 September 2014:
name
Date
of interest
number of
ordinary shares
% of issued
capital
Geminder Holdings pty ltd
17/12/13
117,036,546
Mondrian Investment partners limited
(in the capacity of Fund Manager)
6/6/14
25,484,653
39.80
8.67
on Market Buy-back
there is no current on-market buy-back in respect of the Company’s ordinary shares.
Distribution of Securities Held
analysis of number of ordinary shareholders by size of holding:
range
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – 9,999,999,999
total
ordinary shares
number of
holders
354
1,692
1,055
648
48
number of
securities
190,305
5,318,483
7,771,638
14,474,925
266,342,610
3,797
294,097,961
There were 63 holders of less than a marketable parcel of ordinary shares ($500 or more, equivalent to
130 ordinary shares based on a market price of $3.86 at the close of trading on 19 september 2014).
139 pACt Group HolDInGS ltD
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top 20 largest Shareholders
the names of the 20 largest quoted equity security holders as they appear on the pact Group Holdings ltd
share register are listed below:
rank name
ordinary shares
number of
shares
% of total
shares
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
Geminder Holdings pty ltd
HSBC custody Nominees (australia) Limited
J p Morgan nominees Australia limited
national nominees limited
Citicorp nominees pty limited
113,764,210
37,176,797
27,728,814
26,206,020
12,577,907
rBC Investor services australia Nominees Pty Limited
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