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Pact Group Holdings Ltd
ABN 55 145 989 644
PACT GROUP HOLDINGS LTD 1
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Overview
Who We Are
Highlights
View from the Chairman
A Message from the CEO
Our Leadership Team
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Performance
Review of Operations and Financial Performance 8
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Growth Initiatives
Innovation Awards
Governance
Sustainability
Corporate Governance Overview
C O N T E N T S
Financial Reports
Directors' Report
- Remuneration Report
Auditor's Independence Declaration
Financial Statements
Directors' Declaration
Independent Auditor's Report
Shareholder Information
2017 Shareholder Calendar
Corporate Directory
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ANNUAL REPORT 2016
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W H O W E A R E
Pact is a leading provider of specialty
packaging solutions in Australasia, servicing
both consumer and industrial sectors.
Pact specialises in the manufacture
and supply of rigid plastic and metal
packaging, materials handling solutions,
co-manufacturing services and recycling
and sustainability services.
Innovation
Growth
Vision
Pact delivers
high quality
solutions to its
valued customers,
supported by
world-class
innovation
capability, and
global licencing
arrangements.
Our growth
strategy is focussed
on delivery of
growth through
three core pillars:
organic growth,
operational
excellence and
efficiency, and
disciplined M&A.
Our vision is
to enrich lives
everyday through
sustainable
packaging
solutions.
Scale and
Diversity
With operations
across seven
countries and
more than 4,000
team members,
Pact’s extensive
manufacturing and
supply network and
highly diversified
product portfolio
provide broad
end-market reach.
Pact delivers
products and
services to some
of the world’s
biggest and most
trusted brands.
* Excluding Fruit Case Company
PACT GROUP HOLDINGS LTD
ANNUAL REPORT 2016
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Sales revenue up 11%
NPAT up 11%1
Continued strong cash
generation and robust
balance sheet
Final ordinary dividend
of 11.0 cps, up 10%,
total dividend of 21.0
cps up 8%
Total Shareholder
Return of 34%2
H I G H L I G H T S O F F Y 1 6
Four acquisitions
completed
Announced acquisition
of crate pooling business
in New Zealand
Entered into a contract
to provide crate pooling
services in Australia
from FY18
FY15 Efficiency
Program savings
delivered
1 Before significant items
2 TSR measured as June 2016 30 day volume weighted average share price plus dividends received by
shareholders in FY2016, compared to June 2015 30 day volume weighted average share price.
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V I E W F R O M
T H E C H A I R M A N
“Our vision to enrich
lives through sustainable
packaging remains core
to our business. The
Group has a significant
sustainability operation
that enables ourselves and
our customers to reduce
environmental impacts.”
Raphael Geminder Chairman
Dear Shareholder
Welcome to Pact Group’s FY16 Annual
Report.
Overview
I am delighted that FY16 has been
another highly successful year for the
business.
Our broad and diversified enterprise
continues to demonstrate the defensive,
resilient and stable nature of the sector
we serve and we continue to grow and
solidify our competitive moat. We have a
well-defined three pillar growth strategy
that comprises organic growth, ongoing
efficiency and continued Mergers and
Acquisitions (M&A).
The Group has delivered growth in
sales, profit, cash flow and dividends
every year since listing. During FY16 the
Group remained focussed on its high
performance culture, its commitment
to efficiency and our disciplined M&A
strategy, which saw four acquisitions
completed during the year.
Our focus on organic growth coupled
with a strategic emphasis on innovation
is starting to deliver results. A much
improved focus on customer satisfaction
and quality, measured by Net Promoter
Score is being rolled out to the Group,
so that we can measure in a broader
sense what is going on with our
customers. A relentless focus on
reducing our cost base and improving
efficiency, remains a key priority for
the management team. This is not a
new theme, but remains a critical focus
for the Group and is fundamental to
any manufacturing enterprise. Our
diversification into materials handling
and co-manufacturing packaging has
developed new opportunities to grow in
near adjacencies.
We have continued to invest in the latest
technology to support our customers so
that they can deliver innovative products
and solutions. Our innovation culture
has once again been recognised by the
Australian Financial Review in their list
of Australia’s Top 50 Most Innovative
Companies, the only packaging company
to achieve this recognition this year and
proudly for four consecutive years.
Our vision to enrich lives through
sustainable packaging remains core
to our business. The Group has a
significant sustainability operation
that enables us and our customers to
reduce environmental impacts. We were
also delighted that our recycled and
recyclable Moisturelock meat tray won a
prestigious Green Ribbon Award from the
New Zealand Ministry of the Environment
in 2016.
Board Changes
I would like to take this opportunity
to highlight changes to your Board of
Directors since our last annual report. In
December 2015 we welcomed Malcolm
Bundey as our new Managing Director
and Chief Executive Officer. Mal, who
was formerly President and CEO of
Graham Packaging, a US$3 billion global
rigid packaging company, has brought
with him a wealth of experience in our
industry and has made an immediate and
positive impact on the business. In April
2016 our previous Managing Director
and CEO Brian Cridland retired. I want
to pay tribute to Brian who successfully
managed the Group from inception
in 2002, through its successful listing
in 2013 and who made an enormous
contribution to making Pact the
successful business it is today. In October
2015 we were also delighted to announce
the appointment of Ray Horsburgh
AM as a Non-Executive Director. Ray
has extensive management and Board
experience in manufacturing and in M&A.
Ray's appointment complements the
Board’s diverse mix of skills.
Dividends
The Board of Directors has declared a
final dividend of 11.0 cps, franked to
65%, up 10.0% on the prior year. Total
dividends declared for the year were
21.0 cps, up 7.7% on the prior year, and
in line with Group’s previously stated
payout range of 65%-75% of NPAT before
significant items.
On behalf of the Board I thank all
shareholders for their continued support
as well as our customers, suppliers
and other stakeholders. I would also
like to acknowledge the contribution of
our dedicated management team and
employees who have helped grow and
transform the business.
I remain confident that together we can
continue the journey to grow and reward
all of our stakeholders.
Raphael Geminder
Chairman
PACT GROUP HOLDINGS LTD 5
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“Since joining Pact I have been
extremely impressed by the
Group’s capabilities, particularly
in meeting the challenges of
the external environment.”
Malcolm Bundey Managing Director and CEO
Dear Shareholder
I am very pleased to be able to report to
you a strong set of results for FY16.
Strong Financial Performance
The Group has reported growth in all
key financial metrics in the financial year.
Sales revenue grew by an impressive
10.6% and EBIT before significant items
grew by 5.5%. NPAT before significant
items grew by a very pleasing 10.7% to
$94.3 million.
This growth was delivered by a
combination of acquisition benefits
and efficiency savings, which more than
offset the impact of lower underlying
sales volumes in some sectors. The
business delivered a strong cashflow
performance, generating cash to fund
our growth opportunities and to reward
shareholders, whilst maintaining a robust
balance sheet. Our financing metrics
remained well within targeted levels.
Pact Australia sales revenue increased
15.5% to $1,027.9 million with EBIT
growing 10.8% to $95.6 million. This
result benefitted from the acquisitions
of Jalco and other smaller acquisitions
completed during the year as well as
the continued high performance culture
in the business, driving efficiency and
improving underlying margins. These
benefits more than offset the impact
of some subdued underlying market
conditions, costs of management
transitions and a delayed facility start-up.
Pact International sales revenue was
down 1.6% to $353.4 million, but EBIT
increased 1.1% to $66.8 million with
the diversification of the business and
efficiency benefits delivering increased
earnings and improved margins despite
challenges in the dairy and industrial
sectors.
These results were delivered against
a backdrop of economic and market
challenges, once again demonstrating the
resilience of the business, the benefits
of diversification and management’s
relentless focus on efficiency and cash
management.
Focused on Growth
Our growth strategy remains focused on
generating long-term shareholder value
through:
• organic growth;
• efficiency; and
• disciplined M&A.
This year has been an exciting period of
growth for the Group which has seen us
generate opportunities across each of
these core growth pillars.
Our organic growth strategy has
been bolstered by an organisational
restructure, the introduction of a new
sales pipeline process and the contract
to establish a crate pooling business for a
key customer.
Our focus on operational excellence has
seen us complete the Efficiency Program
announced in 2015, delivering savings as
committed, and into the future seeking
further efficiency gains will be realised
through the implementation of lean
manufacturing techniques across our
manufacturing footprint.
Four acquisitions were also completed
in FY16, expanding our product and
customer portfolio. We also completed
the acquisition of the New Zealand
crate pooling business, The Fruit Case
Company, in July 2016.
Our People
Critical to the continued success of
the business are our people. Our core
value is that all employees “walk in our
customers' shoes to serve them better”
and we are committed to providing a
safe, sustainable, honest and respectful
working environment. Through our
Applause reward and recognition
program we also encourage employees
from across all areas of the business to
submit ideas for innovation and process
improvement – no idea is too big or
too small!
The safety of our people remains a
top priority and we continue to build
awareness and engagement through our
Towards Zero Harm campaign and various
other programs. Furthermore we expect
a positive impact on workplace health
and safety as an outcome of our ongoing
focus on lean manufacturing.
Outlook
The Group is strategically well positioned
for the future, with solid foundations,
a robust balance sheet and clear
opportunities for growth. We remain
confident that our strategy will drive
further growth and shareholder returns
in FY17. Our outlook for the FY17 is that
we expect to achieve higher revenue
and earnings (before significant items),
subject to global economic conditions.
Since joining Pact I have been extremely
impressed by the Group’s capabilities,
particularly in meeting the challenges of
the external environment. I would like
to take this opportunity to thank our
talented and committed people for their
outstanding performance during the
year that has contributed to the FY16
result and will help drive the business to
continued success in the future. I would
also like to acknowledge and thank the
contribution of our Chairman and the
Board of Directors, for their guidance
and our shareholders, for your continued
support.
Malcolm Bundey
Managing Director and CEO
ANNUAL REPORT 2016OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION 6
O U R L E A D E R S H I P T E A M
Malcolm Bundey
Richard Betts
Managing Director and CEO
Chief Financial Officer
Jim Barnes
Greg Beilby
Eric Kjestrup
Siobhan McCrory
General Manager –
Human Resources
Executive General Manager –
Consumer and Industrial
(Australia)
Executive General Manager –
Consumer and Industrial
(New Zealand)
General Manager –
Sales, Marketing and
Innovation
Mark Nothnagel
Andrew Smith
Jonathon West
Wayne Williams
Chief Technical Officer
General Manager –
Sustainability
Chief Legal Officer
and Company Secretary
Executive General Manager –
Materials Handling
PACT GROUP HOLDINGS LTD 7
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P E R F O R M A N C E
ANNUAL REPORT 20167 ANNUAL REPORT 2016
8
R E V I E W O F O P E R A T I O N S A N D
F I N A N C I A L P E R F O R M A N C E
The Group has reported statutory net profit after tax (NPAT)
for the year ended 30 June 2016 of $85.1 million, compared
to $67.6 million in the prior corresponding period (pcp).
NPAT before significant items3 for the year was $94.3 million
(pcp: $85.2 million).
Summary
Sales
revenue
up 10.6% to
$1,381.3 million
(pcp: $1,249.2 million)
EBITDA
before significant
items1 up 5.5% to
$220.2 million
(pcp: $208.7 million)
EBIT
NPAT
before significant
items2 up 6.6% to
$162.5 million
(pcp: $152.4 million)
before significant
items3 up 10.7% to
$94.3 million
(pcp: $85.2 million)
Efficiency
Program
announced
in FY15 is
substantially
complete, with
$6.6 million EBIT
benefits delivered
in the period
Group Results
Continued
strong cash
generation
Significant
growth
initiatives
Final
ordinary
dividend
Total
Shareholder
Return (TSR)
of 33.5%6
and a robust
balance sheet –
gearing4 of 2.3x
and interest cover5
of 7.2x
realised in the
period including
four acquisitions
and the entering
into a contract
to provide crate
pooling services in
Australia from FY18
of 11.0 cents per
share, delivering
total dividends for
the year of 21.0
cents per share,
up 7.7% (pcp: 19.5
cents per share)
Year ended 30 June
$’000
Sales revenue
Other revenue (excluding interest revenue)
Expenses
EBITDA (before significant items)1
EBITDA margin (before significant items)
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
NPAT
Minority interests
Net profit after tax attributable to shareholders
Foot notes within review of operations and financial performance are set out on page 14.
2016
2015
1,381,338
8,204
(1,169,385)
220,157
15.9%
(57,688)
162,469
11.8%
(11,506)
150,963
(30,511)
(37,655)
2,247
85,044
7
85,051
1,249,153
5,292
(1,045,767)
208,678
16.7%
(56,249)
152,429
12.2%
(23,547)
128,882
(33,034)
(34,122)
5,965
67,691
(59)
67,632
PACT GROUP HOLDINGS LTD 9
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Sales Revenue
EBIT (before significant items)
Significant Items
Group sales revenue increased 10.6%
($132.1 million) to $1,381.3 million,
compared to the pcp, with growth from
acquisitions delivering $203 million in
revenue. Contributions from acquisitions
made during the period included:
•
Jalco – a contract manufacturing,
filling and packing business based
in New South Wales, acquired in
September 2015;
• Stowers Containment Solutions –
a New Zealand based distributor
of containment solutions, acquired
February 2016;
• Power Plastics – a New South Wales
based manufacturer of rigid plastic
containers, acquired in March 2016;
and
• Ecopolymers – a plastics recycler
based in Queensland, acquired in
May 2016.
In addition, the full year impact of
acquisitions made in the last financial year
had a positive impact. Sales benefitted
slightly from favourable currency
translation and price increases largely
associated with inflationary impacts.
These benefits were partly offset by lower
underlying net sales volumes, particularly
in the dairy, agricultural and industrial
sectors, generally subdued demand
conditions across most other sectors, and
net contract losses in the period.
The Group reported EBIT (before
significant items) of $162.5 million, up
6.6% ($10.0 million) versus the pcp. EBIT
was favourably impacted by acquisitions
(+$10.3 million), the 2015 Efficiency
Program ($6.6 million) and benefits
delivered through property management,
including property sales ($4.1 million) and
lower lease related costs ($3.2 million).
These benefits were partly offset by the
EBIT impact of lower net sales volumes
(-$9.5 million), and other costs, largely
associated with facility start-up costs in
Australia (-$2.0 million) and Indonesia
(-$0.7 million) and management
transitions in the period (-$1.2 million).
Focus on lowering the Group’s overall
cost of production remains a key priority
and during the year the Efficiency Program
announced in 2015 was substantially
completed. EBIT growth, delivered in
challenging market conditions, once
again demonstrates the resilience
of the business and the benefits of
diversification.
EBIT margins in the underlying business
were improved. Although group margins
declined to 11.8% from 12.2%, this was
primarily due to lower margins in the
acquired businesses. Resin prices, in
Australian dollar terms, were steady and
costs were well controlled.
Pre-tax significant items for the year
were an expense of $11.5 million. This
related to costs associated with the
Efficiency Program announced in 2015
($8.6 million) and acquisition costs ($2.9
million). The pre-tax significant items of
$23.5 million in the prior year also related
to the Efficiency Program ($20.8 million)
and acquisition costs ($2.7 million).
Net Finance Costs
Net financing costs for the period were
$30.5 million. The decrease in financing
costs of $2.5 million compared to the
pcp reflects the beneficial impact of the
refinancing completed in June 2015, the
Securitisation Program, also established
in June 2015, and reductions in market
interest rates.
Income Tax Expense and Significant
Tax Items
The income tax expense for the year
was $37.7 million and represents 28.5%
of net profit before tax and significant
items, broadly in line with the statutory
tax rates payable across the Group’s
main operating locations. This compares
to $34.1 million in the pcp at a similar
effective tax rate.
The significant tax item for the year is
a benefit of $2.2 million relating to the
significant items noted above. In the
prior year the significant tax item was a
benefit of $6.0 million, also relating to the
Efficiency Program and acquisition costs.
Net Profit After Tax
Group net profit after tax attributable
to shareholders for the financial year
was $85.1 million compared to $67.6
million in the pcp. Excluding significant
items, net profit after tax attributable
to shareholders was $94.3 million, an
increase of $9.1 million over the pcp.
ANNUAL REPORT 2016
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R E V I E W O F O P E R A T I O N S A N D
F I N A N C I A L P E R F O R M A N C E ( C O N T I N U E D )
Balance Sheet
Net debt at the end of the financial year
was $509.6 million, $69.3 million higher
than the prior corresponding period.
The increase in net debt primarily reflects
funding requirements of $113.9 million
for acquisitions made during the year,
partly offset by the underlying cash
generation of the business.
The Group has retained a robust balance
sheet. At 30 June 2016 gearing (closing
net debt / EBITDA) was 2.3 times, up from
2.1 times in the pcp due to the funding
requirements for acquisitions. This
remains well within management’s
target range of less than three times.
Total debt facilities comprise of a A$590.0
million facility and a NZ$180.0 million
facility, each equally split between
tranches maturing in July 2018 and
July 2020. Average tenor is three years.
Unused facilities at 30 June 2016 were
$197.3 million.
Cashflow
Statutory operating cashflow including
proceeds from the Securitisation Program
was $160.8 million, $89.6 million
lower than the pcp. The inflow from
securitisation of trade debtors was $18.7
million in the financial year compared
to $96.9 million in the pcp. Excluding
securitisation inflows, statutory operating
cashflow was $11.4 million lower than the
pcp, primarily due to higher income tax
cash payments.
Payments for property, plant and
equipment were $52.1 million compared
to $43.4 million in the pcp. The increase
includes capital expenditure in acquired
businesses (mainly Jalco), expenditure
relating to the integration of acquisitions
and an initial $2.7 million in capital
expenditure relating to the establishment
of a crate pooling business in Australia.
Payments for purchase of businesses and
subsidiaries of $113.9 million includes
Jalco ($76.1 million), Power Plastics ($15.0
million), Stowers Containment Solutions
($13.9 million), Ecopolymers ($1.4 million)
and a $7.2 million deferred payment
relating to the Sulo acquisition from
2014.
Review of Operations
Pact Australia
Pact Australia comprises the Group’s
operations in Australia where it has
operating sites in New South Wales,
Victoria, Tasmania, Queensland and
Western Australia.
Pact International
Pact International comprises the Group’s
operations in New Zealand, China, the
Philippines, Indonesia, Singapore and
Thailand.
Pact Australia
contributed 74% of the Group’s
total sales revenue in the year
ended 30 June 2016
Pact International
contributed 26% of the Group’s
total sales revenue in the year
ended 30 June 2016
$’000
Sales Revenue
EBIT
EBIT Margin %
30 June 16
Actual
1,027,939
95,635
9.3%
30 June 15
Actual
889,911
86,313
9.7%
$’000
Sales Revenue
EBIT
EBIT Margin %
30 June 16
Actual
353,399
66,834
18.9%
30 June 15
Actual
359,242
66,116
18.4%
Pact Australia achieved growth in both sales
revenue and EBIT before significant items.
Sales revenue grew by $138.0 million
compared to the pcp, or 15.5%, positively
impacted by acquisitions. Excluding
acquisitions, volumes were lower. Growth
in the materials handling sector was
more than offset by softer demand in
the agricultural and industrial sectors,
impacted by unfavourable weather
conditions, weaker mining markets, and
the impact of net contract losses.
EBIT (before significant items) of $95.6
million was up $9.3 million or 10.8%
compared to the pcp. Earnings growth
was delivered through acquisitions and
efficiency benefits, including benefits
delivered through the 2015 Efficiency
Program, property sales and lower lease
related costs. These benefits more than
offset the impact of lower underlying
volumes and costs associated with
management transition and facility start-
up costs in the period.
The EBIT margin of 9.3% was lower
than the prior year, negatively impacted
by lower margins in the acquired
businesses, partly impacted by the costs
of integration. Excluding acquisitions,
underlying margins improved.
Pact International achieved growth in
EBIT before significant items despite
slightly lower sales revenue.
Sales revenue of $353.4 million was down
$5.8 million, or 1.6%, versus the pcp.
The business achieved higher volumes
in the material handling sector, through
the supply of household bins and
industrial crates, and benefitted from the
acquisition of Stowers, as well as overall
favourable foreign exchange conditions
in the year. These positive impacts were
more than offset by lower volumes
from weaker demand in the dairy and
industrial sectors, and the impact to sales
from ownership changes in South East
Asia (from 100% owned to JV).
EBIT (before significant items) at $66.8
million was up $0.7 million, or 1.1%
compared to the pcp. Earnings growth
was delivered through the contribution
of the acquired Stowers business and
efficiency savings. These benefits more
than offset lower underlying sales volumes
and start-up costs relating to the new
Indonesian manufacturing facility, which
was commissioned in December 2015.
The EBIT margin of 18.9% improved from
18.4% in the pcp.
PACT GROUP HOLDINGS LTD Other Events of Significance
Crate Pooling
2017 Outlook
The outlook for the Group is for higher
revenue and earnings (before significant
items) in FY17, subject to global economic
conditions.
In the Directors’ opinion, any further
disclosure of information would likely
result in unreasonable prejudice to the
Group.
Acquisitions
On 1 September 2015 the Group
completed the acquisition of 100% of the
issued share capital of Jalco Group Pty
Limited (Jalco) and its controlled entities.
Jalco is a leading supplier of contract
manufacturing, filling and packing in the
non-food FMCG sector. This acquisition
is part of the Group’s overall strategy
to deepen its existing FMCG customer
relationships and to enter new areas of
growth serving customers in this sector.
Total purchase consideration was $80.1
million (including deferred settlement),
and the acquisition was funded through
Group debt facilities.
During the year the Group also completed
the acquisition of Power Plastics Pty
Ltd (1 March 2016) for total purchase
consideration of $25.2 million; the
business assets of Stowers Containment
Solutions Ltd (29 February 2016) for total
purchase consideration of $13.9 million;
and the business assets of Ecopolymers
Pty Ltd (3 May 2016) for total purchase
consideration of $2.9 million.
On 16 May 2016 the Group announced
that it had entered into an agreement
under which the Group will construct,
own and operate crate pooling,
washing and storage facilities to service
Woolworths. This is a natural extension
of the Group’s existing presence in the
materials handling sector and continues
the strategy of pursuing new revenue
streams through organic growth.
It is expected the establishment of the
business, including the construction
of crate washing facilities and the
manufacture of crates, will cost
approximately $70 million, with most
of the capital expenditure spent in the
FY17. The new business is expected to
commence operations early in FY18.
On 7 June 2016 the Group also
announced that it was to purchase the
assets, brands and trademarks of the
Fruit Case Company, a New Zealand
based crate pooling and hire company,
for $16.9 million, continuing the Group’s
strategic expansion into the materials
handling sector. The acquisition
completed on 1 July 2016.
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R E V I E W O F O P E R A T I O N S A N D
F I N A N C I A L P E R F O R M A N C E ( C O N T I N U E D )
Overview of Business Strategy
A key element of the Group’s strategy is to maximise
long-term shareholder value. The Group seeks to deliver
long-term value through focus on three core areas:
organic growth, efficiency and disciplined M&A.
OUR PEOPLE
VALUES
We walk in our
customers shoes
to serve them better
We are committed
to sustainability and
providing an honest,
safe, respectful
environment
We are passionate about
driving results
We pursue opportunities
for transformational
change
We act with speed
and purpose
ORGANIC
GROWTH
by protecting our
core and growing
with purpose
MERGERS &
ACQUISITIONS
growth through
disciplined M&A in core
sectors and close
adjacencies
G R O WTH
PACT
STRATEGY
T
O
T
A
L S
HAREH O L D E
R R E T U
N
R
EFFICIENCY
through operational
excellence and the
lowest cash cost
of production
VISION
To enrich lives
every day
through
sustainable
packaging
solutions
Organic Growth
The Group’s core business benefits from:
•
leading sector positions;
• a diverse customer base with long-
term relationships;
• a highly diversified product portfolio;
• broad end-market reach;
• an extensive manufacturing and
supply network; and
• world-class innovation.
Key to the Group’s ability to grow
organically is its ability to leverage these
differentiating characteristics to create a
competitive advantage. A core focus of
the Group is innovation. Pact supplies
some of the most innovative products
in the market, supported by in-house
innovation capability and extensive global
licencing arrangements. The Group’s
commitment to innovation has been
recognised through multiple industry and
customer awards (refer to page 16).
Efficiency
M&A
3 PILLARS
The Group is focussed on delivering
operational excellence and the lowest
Our People will Drive Growth through:
1) Organic Growth via Front Line Obsession & Innovation 2) OPEX & Efficiency & 3) Strategic M&A
cash cost of production.
While fixated on delivering total customer satisfaction and total shareholder return
In 2015 the Group announced an
Efficiency Program to eliminate excess
capacity and align the Group with
customers’ requirements and expected
long-term volumes. This program has
now been substantially completed
delivering benefits in the 2016 financial
year, with annual benefits of $15 million
expected in FY17.
The strategic focus on efficiency will be
enhanced going forward through the
implementation of lean manufacturing
techniques across the manufacturing
footprint in a systematic and staged
approach. In addition, the Group will
continue to review all areas of the
business for efficiency opportunities in
the pursuit of operational excellence.
The Group has a long track record of
success in identifying value accretive
acquisition opportunities, executing
transactions in a disciplined and
systematic manner, and delivering cost
synergies and operational efficiencies
through integration. Acquisitions have
provided both product and customer
diversity to the Group.
M&A opportunities must meet strict
assessment and evaluation criteria.
Opportunities must be low risk and
aligned with the Group’s core sectors or
close adjacencies, and expected returns
must meet a minimum financial hurdle of
20% return on investment by year three.
Discipline in deal execution is provided
by a centrally managed integration
process. A strict timeline for transition
and the centralisation of common
operational and back-office functions
ensures cost synergies and efficiencies
are realised early.
PACT GROUP HOLDINGS LTD Business Risks
People Risks
Competitor Risks
There are various internal and external
risks that may have a material impact on
the Group’s future financial performance
and economic sustainability. The Group
makes every effort to identify material
risks and to manage these effectively.
The material financial risks include:
Customer Risks
Customers are fundamental to the
success of the business and, in
recognition of this, Pact invests in the
quality of its relationships with key
material customers, and in producing
products to customers required
specification and standard. The loss of
key material customers, a reduction in
their demand for Pact’s products or a
claim for non-performance can have a
negative effect on the future financial
performance of the Group.
Future financial and operational
performance of the Group is significantly
dependant on the performance and
retention of key personnel, in particular
Senior Management. The unplanned
or unexpected loss of key personnel,
or the inability to attract and retain
high performing individuals to the
business may adversely impact the
Group’s future financial performance.
In line with the manufacturing industry,
Pact has an exposure to health and
safety management incidents in the
manufacturing operations. Failure to
comply with health and safety legislation
and industry good practice may result in
harm to a person or persons, which may
lead to negative operational, reputational
and financial impacts.
Pact operates in a highly competitive
environment due to factors including
actions by existing or new competitors,
price, 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 as a result of actions from
competitors may result in a decline
in sales revenue and margins, and an
adverse effect on the Group's future
financial performance.
Consumer Preferences
Changes in consumer preference for
Pact’s products or adverse activities in
key industry sectors which Pact and its
customers service may be influenced by
various factors. These industry sectors
include consumer goods (eg. food, dairy,
beverages, personal care and other
household consumables) and industrial
(eg. surface coatings, petrochemical,
agriculture and chemicals) industry
sectors. Factors which may influence
these sectors include climate conditions,
seasonality of foods, an increased
focus in Australian and New Zealand
supermarket chains on private brands,
and reputation of products, substrates
or technology in the wider industry
sector. Demand for Pact's products may
materially be affected by any of these
factors which could have an adverse
effect on the Group's future financial
performance.
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ANNUAL REPORT 2016
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R E V I E W O F O P E R A T I O N S A N D
F I N A N C I A L P E R F O R M A N C E ( C O N T I N U E D )
Strategic Acquisitions
Interruption to Operations
Pact operates across a diverse
geographical footprint and situations
may arise in which sites are not able
to operate. Factors include emergency
situations such as natural disasters,
failure of information technology systems
or security, or industrial disputes. Any of
these factors may lead to disruptions in
production or increase in costs, and may
have an adverse effect on the Group’s
financial performance.
Compliance Risks
Pact is required to comply with a range
of laws and regulations, and those of
particular significance to Pact are in
the areas of employment, work health
and safety, property, environmental,
competition, anti-bribery and corruption,
customs and international trade, taxation
and corporations.
Pact’s strong growth over time has been
aided by the acquisition of numerous
businesses and assets. This 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,
including identification of suitable
acquisition candidates and effective
management of integration costs 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.
Foreign Exchange Rates
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,
Chinese yuan, the Philippines peso, the
Indonesian rupiah and the Thai baht in
relation to Pact’s business operations.
Any depreciation of the Australian dollar
and adverse movement in exchange
rates would have an adverse effect on
the Group's future financial performance.
Supply Chain
The ability for the supply chain to meet
the Group’s requirements including the
sourcing of raw materials, is reliant on
key relationships with suppliers. The
price and availability of raw materials,
input costs, and future consolidation
in industry sectors could result in a
decrease in the number of suppliers or
alternative supply sources available to
Pact. Additionally 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.
Footnotes
This Report includes certain non-IFRS financial information which has not been subject to audit by the Company’s external auditor. This information is used by Pact, the
investment community and Pact’s Australian peers with similar business portfolios. Pact uses this information for its internal management reporting as it better reflects what
Pact considers to be its underlying performance.
(1) EBITDA before significant items is a non-IFRS financial measure which is calculated as earnings before significant items, finance costs (net of interest revenue), tax,
depreciation and amortisation.
(2) EBIT before significant items is a non-IFRS financial measure which is calculated as earnings before significant items, finance costs (net of interest revenue) and tax.
(3) NPAT before significant items is a non-IFRS financial measure which is calculated as net profit after tax before significant items.
(4) Gearing is a non-IFRS financial measures which is calculated as net debt divided by EBITDA before significant items. Net debt is calculated as current debt plus non-current
debt less cash.
(5) Interest cover is a non-IFRS financial measures which is calculated as EBITDA before significant items divided by interest expense.
(6) TSR measured as June 2016 30 day volume weighted average share price plus dividends received by shareholders in FY16, compared to June 2015 30 day volume weighted
average share price.
PACT GROUP HOLDINGS LTD G R O W T H I N I T I A T I V E S
Pact has been transformed from a rigid packaging business
generating $0.2 billion in sales revenue in 2002 to a diversified
provider of specialty packaging and manufacturing solutions
generating close to $1.4 billion in sales revenue in 2016, with
operations across seven countries.
Our Transformation
This transformation has been underpinned
by a disciplined approach to M&A, a core
pillar of the Group’s growth strategy.
Since inception Pact has successfully
integrated 47* acquisitions (including
four in FY16) delivering growth, synergies
and geographic expansion. Acquisitions
have also generated increased product
and customer diversification, providing
new growth sectors and resilience in the
Group’s earnings.
2002
$0.2 billion
turnover,
operating in
2 countries
2016
$1.4 billion
turnover,
operating in
7 countries
Expansion into
co-manufacturing
Establishing a leading
position in crate pooling
On 1 September 2015 Pact completed
the acquisition of Jalco Group Pty Ltd in
New South Wales. Jalco is Australia’s
pre-eminent FMCG contract
manufacturing service provider, a
contract filler and manufacturer of
personal care and household products.
The business has been successfully
integrated and is performing ahead of
expectations, generating revenues in
FY16 of $165 million and expanding the
Group’s product and customer portfolio.
Woolworths Contract
Fruit Case Company
On 1 July 2016 Pact purchased the assets,
brands and trademarks of the Fruit Case
Company, a leading crate pooling and hire
business in New Zealand. The business
has strong long-term relationships with
growers and retailers. The acquisition
aligns with the Group’s strategic intent
to expand within the materials handling
sector.
In May 2016 the Group announced
that it had entered into an agreement
to construct, own and operate crate
pooling, washing and storage facilities
to service Woolworths. This long-term
partnership will provide Pact with a
leading position in returnable produce
crate pooling services. The initiative is
also a natural extension of the Group’s
existing presence in the materials
handling sector and continues the
strategy of pursuing new revenue
streams through organic growth.
Crate pooling operations with
Woolworths will commence in
the first quarter of FY18.
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* Does not include the Fruit Case Company, completed in July 2016
ANNUAL REPORT 2016
16
I N N O V A T I O N
We are widely recognised for
our Group-wide innovation and
dedication to developing products
and processes that reflect
consumer insights.
The Company has won multiple
design and innovation awards
for products and services from
customers and industry bodies.
AUSTRALIA’S
MOST INNOVATIVE
PACKAGING COMPANY
A F R M O S T I N N O V A T I V E
C O M P A N I E S L I S T 2 0 13 ,
2 0 14 , 2 0 15 , 2 0 16
Indusry
Corporate
Customer
2015 WorldStar Winner – Murray
Goulburn Flip Top Cream Cap
AFR Top 50 Most Innovative Companies
List 2015 and 2016
2016 Blackmores’ Raising the Bar
(Supplier of the Year) Award
2015 Australian Packaging Design Awards
Winner – Footy Water Bottle
2015 Melbourne Design Awards (Silver)
Slurpee Stretch Cup
2016 Product of the Year – Aldi Trimat
Advanced Laundry Liquid Sensitive 1L
2016 Product of the Year – Anco Laundry
Softener
2016 Acquisition International Business
Excellence Awards – Best Packaging
Solutions Firm (Australia)
ACQ5 Global Awards 2016 - Australian
Game Changer of the Year (Packaging
Solutions)
ACQ5 Global Awards 2016 - Australia -
Company of the Year (Manufacturing)
2016 Sanofi – Most Innovative Supplier
Award
PACT GROUP HOLDINGS LTD ANNUAL REPORT 2016
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G O V E R N A N C E
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S U S T A I N A B I L I T Y
Sustainability is a consideration in all of
our business decisions. From our vision
to our corporate strategy, sustainability
underpins and shapes our core
philosophy and our day-to-day business
decisions.
Pact recognises that our business
activities have a direct impact on a
wide range of stakeholders and the
communities in which we operate.
For us, sustainability is an ongoing
process of considering our material
issues and seeking to improve our
sustainability performance.
It is with this in mind that our approach
to sustainability focuses on:
• People;
• Environment;
• Society; and
• Ethics and Governance.
Our annual Sustainability Report that
is based on Global Reporting Initiative
(GRI) G4 requirements, can be accessed
at http://pactgroup.com.au/investors/
corporate-governance/sustainability-
reports
C O R P O R A T E G O V E R N A N C E
O V E R V I E W
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 Corporate Governance Statement
outlines the key aspects of the Group’s
corporate governance framework and
is available on the Company’s website
at www.pactgroup.com.au/investors/
corporate-governance/corporate-
governance-statement.
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 (third
edition) (ASX Recommendations).
The Board considers that the Company’s
corporate governance framework and
practices have complied with the ASX
Recommendations for the financial
year, except as otherwise detailed in the
Corporate Governance Statement.
PACT GROUP HOLDINGS LTD 19
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ANNUAL REPORT 2016
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Financial Report
Full Year Consolidated Financial Report
For the year ended 30 June 2016
Introduction
This is the Consolidated Financial Report of Pact Group Holdings
Ltd (“Pact” or the “Company”) and its subsidiaries (together
referred to as the “Group”) and including the Group’s interest in
associates and jointly controlled entities at the end of, or during
the year ended 30 June 2016. This Consolidated Financial Report
was issued in accordance with a resolution of the Directors on 24
August 2016.
To make the Consolidated Financial Report less complex and
more useful to readers, note disclosures have been reorganised
into sections to allow readers to better understand the
performance of the Group and how this links to Pact’s strategy
outlined in the Operating and Financial Review.
Information is only included in the Consolidated Financial Report
to the extent the Directors consider it material and relevant to
the understanding of the financial statements. A disclosure is
considered material and relevant if, for example:
•
•
•
•
the dollar amount is significant in size and/or by nature;
the Group’s results cannot be understood without the
specific disclosure;
it is critical to allow a user to understand the impact of
significant changes in the Group’s business during the
period; and
it relates to an aspect of the Group’s operations that is
important to its future performance.
Developing this Financial Report requires management to make
a number of judgements, estimates and assumptions to apply
the Group’s accounting policies. Actual results may differ from
these judgements and estimates under different assumptions
and conditions and may materially affect financial results or the
financial position reported in future periods. Key judgements
and estimates, which are material to this report, are highlighted
in the following notes:
• Note 1.2 Taxation
• Note 2.1 Business acquired
• Note 2.2 Control and significant influence
• Note 3.2 Estimation of useful lives of assets
• Note 3.2 Recoverability of property, plant and equipment
• Note 3.2 Impairment of goodwill and other intangibles
• Note 3.4 Business reorganisation
To assist in identifying key accounting estimates and
judgements, they have been highlighted as follows:
Contents
Directors' Report
Auditor’s Independence Declaration
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Section 1: Our Performance
1.1 Group results
1.2
Taxation
1.3 Dividends
Section 2: Our Operational Footprint
2.1 Businesses acquired
2.2 Controlled entities
2.3 Associates and joint ventures
Section 3: Our Operating Assets
3.1 Working capital
3.2 Non-current assets
3.3 Commitments and contingencies
3.4 Other provisions
Section 4: Our Capital Structure
4.1 Net debt
4.2 Contributed equity and reserves
4.3 Managing our financial risks
Section 5: Remunerating Our People
5.1
5.2
5.3
Employee benefits expenses and provisions
Share based payments
Key management personnel
Section 6: Other Disclosures
6.1 Basis of preparation
6.2 Other gains / (losses)
6.3
Pact Group Holdings Ltd – Parent entity financial
statements summary
6.4 Auditor's remuneration
6.5 Deed of Cross Guarantee
6.6 Geographic sales
6.7
Subsequent events
Directors’ Declaration
Independent Auditor’s Report
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PACT GROUP HOLDINGS LTD
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 (collectively the “Group”) at the end of, or during, the year ended
30 June 2016.
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Left to right:
Jonathan Ling,
Lyndsey Cattermole,
Malcolm Bundey,
Peter Margin,
Raphael Geminder,
Ray Horsburgh.
ANNUAL REPORT 2016SHAREHOLDER INFORMATION
22
Directors’ Report
The following persons were Directors of the Company from their date of appointment up to the date of
this Report:
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 this, 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 Masters of Business Administration in Finance from Syracuse University, New York.
Other current directorships
Director of several 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 2001,
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 Treasury Wine Estates Limited, Tatts Group Limited, and the Florey Institute of
Neuroscience and Mental Health and several private companies.
Ray Horsburgh AM
Independent Non-Executive Director
Member of the Board since 5 October 2015
Member of the Audit, Business Risk and Compliance Committee
Ray has extensive management experience in the glass and steel manufacturing sectors and in mergers
and acquisitions. He was Managing Director and Chief Executive Officer of Smorgon Steel Group Limited
(1993–2007) and held various senior roles in packaging company ACI Limited including Chief Executive Officer
of ACI Glass Group.
Ray has a Bachelor of Chemical Engineering, Hon D Univ, is a fellow of the Australian Institute of Company
Directors and a Fellow of the Institute of Engineers Australia.
Other current directorships
Ray is currently the Chairman of Toll Holdings Limited and AFL Victoria. He is also a Director of the Ricky
Ponting Foundation.
Former listed company directorships in last three years
Non-Executive Director of CSR Limited (2004–2013)
Chairman of Calibre Global Limited (2012–2015)
PACT GROUP HOLDINGS LTD 23
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Directors’ Report
Peter Margin
Independent Non-Executive Director
Member of the Board since 26 November 2013
Chairman of the Audit, Business Risk and Compliance Committee
Member of the Nomination and Remuneration 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, HJ Heinz Company Australia Limited and is currently Executive Chairman of
Asahi Beverages ANZ.
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, Nufarm Limited and Costa Group Holdings Limited.
Former listed company directorships in last three years
Non-Executive Director of Ricegrowers Limited (2012–2015), PMP Limited (retired August 2016), Huon
Aquaculture Ltd (retired August 2016).
Jonathan Ling
Independent Non-Executive Director
Member of the Board since 28 April 2014
Chairman of the Nomination and Remuneration Committee
Jonathan has extensive experience in complex manufacturing businesses. Jonathan is currently the Chief
Executive Officer and Managing Director of GUD Holdings Limited, and has previously held leadership roles
with Fletcher Building Limited, Nylex, Visy and Pacifica.
He was the Chief Executive Officer and Managing Director of Fletcher Building Limited (2006–2012),
New Zealand’s largest listed company.
Jonathan has a Bachelor of Engineering (Mechanical) from the University of Melbourne and a Masters of
Business Administration from the Royal Melbourne Institute of Technology.
Other current directorships
Director of GUD Holdings Limited and various GUD Holdings Limited subsidiary companies.
Former listed company directorships in last three years
Non-Executive Director of Pacific Brands Limited (2013–2014).
Executive
Malcolm Bundey
Managing Director and Chief Executive Officer
Member of the Board since 1 December 2015
Malcolm is the Managing Director and Chief Executive Officer of Pact. He joined Pact in December 2015.
Malcolm previously held several senior executive leadership positions for The Rank Group (a privately owned
NZ group), based in both Australia and the USA. After joining them as CFO of Goodman Fielder in 2003,
and then transferring to the United States as a Company Executive in 2007, he became the President and
CEO of Evergreen Packaging, a US$1.6 billion global paper and packaging company. In 2011 he took on the
concurrent roles of President and CEO of Closure System International (CSI), a US$1.3 billion global closure
packaging business and Graham Packaging, a US$3.3 billion global rigid packaging and machinery business.
Prior to this Malcolm was a partner at Deloitte, where he worked from 1987 to 2003.
Malcolm has a Bachelor of Business, Accounting from Monash University, undertook MBA studies at RMIT
and also Harvard Executive Programs in 2000 and 2001.
Other current directorships
No other external directorships
ANNUAL REPORT 2016
24
Directors’ Report
Company Secretary
Jonathon West
Company Secretary
Jonathon West was appointed to the position of Chief Legal Officer, Company Secretary and Head of
Corporate Development of Pact on 1 June 2016.
Prior to this appointment, Jonathon was most recently at Goodman Fielder Limited where he held a variety
of roles over a 10 year period, including Group Strategy and Corporate Development Officer, Group General
Counsel and Company Secretary and Group Commercial Director. Prior to that Jonathon worked in both
private practice and industry in Australia and the UK, including with Burns Philp Limited, Sportal.com, AOL
Europe, Linklaters and Herbert Smith Freehills.
Jonathon holds Bachelor of Laws (Honours) and Bachelor of Science degrees from the University of
Melbourne.
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
Peter Margin
Jonathan Ling
Ray Horsburgh
Malcolm Bundey
Directors’ Meetings
Relevant Interest
in Ordinary Shares
117,036,546
78,948
7,894
2,365
20,100
-
The table below shows the number of Directors’ meetings (including meetings of Board committees), and the
number of meetings attended by each Director in their capacity as a member during the year:
Directors’ Meetings
Audit, Business Risk and
Compliance Committee
Nomination and
Remuneration Committee
Meetings
held
8
8
8
2
8
6
4
4
Meetings
attended
8
8
8
2
8
5
4
4
Meetings
held
NM
4
4
1
NM
3
NM
NM
Meetings
attended
N/A
4
4
1
N/A
3
N/A
N/A
Meetings
held
4
4
4
NM
4
NM
NM
NM
Meetings
attended
4
4
4
N/A
4
N/A
N/A
N/A
Raphael Geminder
Lyndsey Cattermole
Peter Margin
Tony Hodgson(1)
Jonathan Ling
Ray Horsburgh(2)
Malcolm Bundey(3)
Brian Cridland(4)
NM – Not a member of the relevant committee
N/A – Not applicable
(1) Tony Hodgson retired as a Non-executive Director on 30 September 2015
(2) Ray Horsburgh was appointed as a Non-executive Director on 5 October 2015
(3) Malcom Bundey was appointed as an Executive Director on 1 December 2015
(4) Brian Cridland retired as an Executive Director on 10 April 2016
Principal Activities
The Group’s principal activities relate to the conversion of plastic resin and steel into rigid packaging and
other products that service customers in different sectors including: food and beverage, personal care,
household consumer, industrial and chemical, and materials handling and infrastructure. The Group
also provides a range of services including outsourced manufacturing, filling and packing and a range of
sustainability, recycling and environmental services to assist customers in reducing the environmental
impact of their product packaging and related processes.
PACT GROUP HOLDINGS LTD 25
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Directors’ Report
Operating and Financial Review
A review of the operations of the Group during the year and of the results of those operations is contained
on pages 8 to 14 of this Annual Report.
Dividends
On 24 August 2016, the Directors determined to pay a final dividend of 11.0 cents per share partially franked
to 65%. The dividend is payable on 6 October 2016. The record date for entitlement to the dividend is 2
September 2016.
The table below shows dividends paid (or payable) during the year ended 30 June 2016.
Dividends
Current year to 30 June 2016
Final Dividend (per ordinary share)
Interim Dividend (per ordinary share)
Prior Year to 30 June 2015
Final Dividend (per ordinary share)
Interim Dividend (per ordinary share)
Amount per
security
Franked amount
per security
Unfranked amount
per security sourced
from the conduit
foreign income
account Date paid / payable
11.00 cents
10.00 cents
7.15 cents
6.50 cents
3.85 cents 6 October 2016
6 April 2016
3.50 cents
10.00 cents
9.50 cents
6.50 cents
-
3.50 cents 5 October 2015
2 April 2015
9.50 cents
The Board’s current intention is to pay out approximately 65%–75% of the Company’s net profit before
significant items after tax attributable to shareholders in dividends.
Franking capacity in FY2016 has been favourably impacted by franking credits received through acquisitions.
Other Events of Significance
Please refer to the Review of Operations and Financial Performance in the Annual Report.
Significant Events After Balance Date
On 1 July 2016 the Group acquired the assets, brands and trademarks of the Fruit Case Company (FCC), for
a provisional consideration of $16.9 million. FCC’s principal activities include crate pooling and hire business
with operations in New Zealand.
In the opinion of the Directors, there have been no other material matters or circumstances which have
arisen between 30 June 2016 and the date of this Report that have significantly affected or may significantly
affect the operations of the Group, the results of those operations and the state of affairs of the Group in
subsequent financial periods.
Workplace Health, Safety and Environmental Regulation
The Group operates under an integrated Workplace Health, Safety and Environment (WHSE) Management
System, with a goal of Towards Zero Harm to both people and the planet. The system is aligned with ISO
14001 and operates under an Environmental Policy and a Workplace Health and Safety Policy. The system
is fundamental to achieving compliance with WHSE regulations in all jurisdictions in which we operate and is
implemented at all of our sites.
Where applicable, licences and consents are in place in respect of each site within the Group. An interactive
database is further used to ensure compliance and completion of all required actions.
On occasion, the Group receives notices from relevant authorities pursuant to local WHSE legislation and
in relation to the Group’s WHSE licences and consents. The Group takes all notices seriously, conducting
a thorough investigation into the cause and ensuring that there is no reoccurrence. Pact works with the
appropriate authorities to address any requirements and to proactively manage any obligations.
The Group is also subject to the reporting and compliance requirements of the Australian National
Greenhouse and Energy Reporting Act 2007 (Cth). The National Greenhouse and Energy Reporting Act 2007
requires that Pact reports 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 2016.
Share Options and Rights
A Long Term Incentive Plan (LTIP) for the CEO commenced on 1 December 2015. Please refer to the
Remuneration Report (section 3) for further details.
ANNUAL REPORT 2016PERFORMANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION
26
Directors’ Report
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 2001 or any other applicable law. In addition, a wholly owned subsidiary of the Company
has entered into deeds of indemnity with those of its current and former Directors and Secretaries involved
in a potential transaction which provide indemnities against losses incurred in the event of breaches of their
obligations under confidentiality deeds entered into by them for the purpose of such transaction, and in
the course of their employment, subject to certain exclusions including to the extent that such indemnity is
prohibited by the Corporations Act 2001. 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.
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.
Proceedings on Behalf of the Company
No person has applied to the court under section 237 of the Corporations Act 2001 for leave to bring
proceedings on 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 2001.
Non-audit Services
During the year, EY, the Company’s auditor, performed other assignments in addition to their statutory audit
responsibilities.
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
Total
30 June 16
($000’s)
472
528
1,000
30 June 15
($000’s)
507
543
1,050
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 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 auditor's 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.
PACT GROUP HOLDINGS LTD 27
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Directors’ Report
Remuneration Report (audited)
This Remuneration Report for the year ended 30 June 2016 outlines the remuneration arrangements of 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. Governance
3. Executive remuneration arrangements
4. Executive remuneration outcomes for 2016
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 non-executive Directors of the Board, the Chief
Executive Officer (CEO) and the Chief Financial Officer (CFO) of the Company and the Group.
Key Management Personnel
Name
Non-Executive Directors (NEDs)
Raphael Geminder
Lyndsey Cattermole
Peter Margin
Jonathan Ling
Ray Horsburgh
Other KMP
Malcolm Bundey
Richard Betts
Former KMP
Tony Hodgson
Brian Cridland
Position
Term as KMP in 2016
Non-Executive Chairman
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Full Year
Full Year
Full Year
Full Year
Appointed 5 October 2015
Managing Director and CEO
Chief Financial Officer
Appointed 1 December 2015
Full Year (appointed 1 July 2015)
Former Non-Executive Director
Former Managing Director and CEO Retired 10 April 2016
Retired 30 September 2015
There have been no other changes to KMP after the reporting date and before the date the Financial Report
was authorised for issue.
2. Governance
Nomination and Remuneration Committee
The Nomination and Remuneration Committee (the Committee) is delegated responsibility by the Board for
managing appropriate remuneration policy and governance procedures including:
•
•
•
•
•
review and recommend to the Board appropriate remuneration policies and arrangements including
incentive plans for the CEO and CFO;
review and approve short-term incentive plans, long-term incentive plans, performance targets and
bonus payments for the CEO and CFO;
review the performance of the CEO;
review the Senior Executives’ performance assessment processes to ensure they are structured and
operate to realise business strategy; and
review and recommend to the Board, remuneration arrangements for the Chairman and NEDs.
The Committee comprises four NEDS and meet as often as the Committee members deem necessary to
fulfil the Committee’s obligations. It is intended they meet no less than three times a year. A copy of the
Committee’s charter is available at www.pactgroup.com.au.
ANNUAL REPORT 2016PERFORMANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION
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Directors’ Report
Remuneration Report (audited) Cont.
Use of Remuneration Consultants
To ensure the Committee is fully informed when making remuneration decisions it will seek remuneration advice
where required.
Decisions to engage remuneration consultants are made by the Committee or the Board. Contractual
engagements and briefing of the consultants is undertaken by the Chairman of the Committee and the
remuneration recommendation is to be provided directly to the Chairman of the Committee.
EY was engaged during the financial year to provide recommendations to the Group on the development of a
Long-Term Incentive Plan (LTIP). EY provided recommendations on the structure of a LTIP including but not limited
to the following components:
•
timing of awards;
• quantum of grants;
• eligibility of employees;
•
• performance measures;
• vesting schedule; and
•
type of equity instrument as an award vehicle;
the performance period.
The CEO and CFO had no involvement in the engagement or instruction of EY. The Company complies with the
Act to ensure any remuneration advice or recommendation received is free from undue influence by the KMP
to whom the advice or recommendation relates. The appointment of EY for the provision of this service did not
impact on the independence of EY as auditors of the Company and the Group, as EY was not involved in the final
design and implementation of the plan. The Company paid EY $29,612 for this review.
3. Executive Remuneration Arrangements
Remuneration Principles and Strategy
Pact’s executive remuneration strategy is designed to attract, retain, reward and motivate high performing
individuals through remuneration arrangements that are based on performance and experience, are
competitive for companies of a similar size and nature, and are aligned with the interests of shareholders.
Remuneration for executive KMP includes fixed remuneration, and benefits that are at risk, awarded only on
the achievement of performance conditions. This includes a short-term incentive plan (STI) for the CEO and
CFO, and a LTIP for the CEO.
Fixed Remuneration
Comprises base salary and company superannuation contributions. The Group’s strategy is to provide
competitive fixed remuneration to attract high quality executives with the right experience, qualifications and
industry expertise to manage the business.
STI
An “at risk” component of remuneration paid in cash, awarded on the achievement of performance
conditions (financial and non-financial) over a 12 month period, that is intended to drive performance against
the Group’s short-term objectives.
LTIP
An “at risk” component of remuneration comprising the issue of Performance Rights awarded on the
achievement of performance conditions over a three year period, that is intended to drive performance
against the Group’s long-term objectives.
The LTIP was introduced in 2016 as a component of the CEO’s remuneration. The Committee believes the
LTIP appropriately incentivises and motivates the CEO in the achievement of longer term objectives which are
aligned with shareholders interests.
A review of whether broader participation in the LTIP, including participation by the CFO and other senior
executives, will be undertaken by the Committee at a later date.
PACT GROUP HOLDINGS LTD 29
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Directors’ Report
Remuneration Report (audited) Cont.
Approach to Setting Remuneration
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. The target remuneration mix for the 2016 year was as follows(1):
Executive KMP remuneration component at target
Fixed remuneration
Short-term incentives
Long-term incentives (LTIP)
Long-term incentives (Initial Share Grant) (2)
Total
Malcolm Bundey %
41%
41%
7%
11%
100%
Richard Betts %
68%
32%
-
-
100%
Brian Cridland %
68%
32%
-
-
100%
(1) Target remuneration is calculated as Fixed Remuneration, plus STI at target, plus long term incentives at target (based on the fair value of
Performance Rights at grant date).
(2) The initial share grant will form part of Mr Bundey’s total remuneration for the first three years of employment (refer to page 30 and 32 of
the Remuneration Report).
Detail of Incentive Plans
STI
The CEO has a maximum STI of 100% of Annual Base Salary (ABS). The CEO has achievement of Group
earnings before interest, tax, depreciation and amortisation (EBITDA), before significant items as a financial
performance measure, and will be entitled to receive up to 80% of his STI plan if he achieves target levels.
The CEO also has a component based on non-financial performance measures including risk management,
diversity targets and talent management that comprise 20% of the STI plan.
The CFO has a maximum STI of 50% of ABS. The CFO has achievement of Group EBITDA before significant
items as a financial performance measure, and will be entitled to receive up to 80% of his STI plan if he
achieves target levels. The CFO also has a component based on non-financial performance measures
including risk management, diversity targets and talent management that comprise 20% of the STI plan.
Group EBITDA before significant items is considered a financial measure which is strongly aligned with the
interests of shareholders. EBITDA is key indicator of the underlying growth of the business, and is strongly
aligned with cashflow, which enables the payment of dividends to shareholders. EBITDA can be reliably
measured.
LTIP
The CEO participates in the LTIP, with an entitlement to performance rights equal to 100% of annual base
salary with a vesting period of three years.
Key features of the LTIP are outlined below:
Grant Value
For the year ended 30 June 2016, 146,444 performance rights are expected to be granted based on the
volume weighted average price (VWAP) of $4.78. The VWAP was based on the Pact Group share price
over the five day period commencing 24 November 2015. The number of performance rights are on a pro
rata entitlement based on a commencement date of 1 December 2015. The fair value of each right at the
valuation date of 22 June 2016 is $3.85.
The 2015 LTIP has been granted as one tranche, commencing on 1 December 2015. Share based payments
expense for FY2016 has been recognised from 1 December 2015. The expense is based on the fair value of
the performance rights.
The implementation of the LTIP, including the issuing of entitlements to shares or the vesting of shares under
the plan, remains subject to the approval of the LTIP by shareholders at the Company’s AGM to be held in
November 2016. In the event that the LTIP as currently proposed and set out in this report is not approved
by shareholders at the AGM, it is the Board’s intention to replicate the LTIP, as closely as practicable, but
replacing the issuing of entitlements in shares with entitlements to cash payments that ‘shadow’ the value of
the shares that would otherwise have vested under the proposed plan.
Performance Period
The performance period for the LTIP is from 1 December 2015 to 30 June 2018.
ANNUAL REPORT 2016
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Directors’ Report
Remuneration Report (audited) Cont.
Performance Hurdles
Vesting of this tranche will be subject to the following:
• The Company achieving its relative Total Shareholder Return (TSR) target. This hurdle was elected by the
Committee as it is clearly aligned with returns to shareholders. TSR is calculated by measuring the return
to shareholders based on the share price growth combined with the dividends declared over the three
year performance period.
• TSR is then ranked on a relative basis with the TSR performance measured against the S&P/ASX 200
comparator group, excluding companies in the Financials, Metals and Mining sector. The peer group has
been selected by the Board at the time of the grant.
• The percentage of rights subject to the relative TSR hurdle that vest, if any, will be determined by
the Committee with reference to the percentile ranking achieved by the Company over the relevant
performance period, compared to other entities in the relative TSR comparator peer group, as follows:
Vesting Schedule
TSR Relative to peer group
At or above the 75th percentile
Between the 50th and 75th percentile
At the 50th percentile
Below the 50th percentile
Vesting %
100%
pro rata vesting between 50% to 100%
50%
Nil
Cessation of Employment
If an executive resigns or is terminated for cause, any unvested LTIP awards are forfeited, unless otherwise
determined by the Board. A “good leaver” will retain a pro rata number of performance rights based on time
elapsed since the initial grant date. Any such Performance rights will be subject to the original terms and
conditions, and discretion of the Board.
Rights Attaching to Performance Rights
Performance rights do not carry any dividend or voting entitlements prior to vesting. Shares allocated upon
vesting of performance rights will carry the same rights as other ordinary shares.
Clawback
100% of the award can be forfeited where there has been any fraud, dishonesty, or breach of obligations,
including a material misstatement of the Financial Statements.
Change of Control Provisions
In the event of change of control, the performance period end date will be brought forward to the date of
change of control, and awards will vest based on performance over this shortened period (subject to Board
discretion).
Initial Share Grant
The CEO is entitled to receive an initial share grant of $1 million. The shares will be issued in 1/3 lots at
the conclusion of each anniversary from 1 December 2015 for the first three years of employment. These
shares are subject to escrow until the three years of service has been completed. Should the CEO cease
employment during this time the shares will be forfeited.
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Remuneration Report (audited) Cont.
4. Executive Remuneration Outcomes for 2016
Business Performance in 2016
In 2016, the Group delivered growth in all key financial metrics despite challenging market conditions,
positively impacted by efficiency benefits and growth through acquisitions.
Over the last three financial years:
• compound growth in net profit after tax (before significant items) was 21%;
• compound earnings per share growth(2) (before significant items) was 26%;
• an average of 16.7 cents per ordinary share per annum has been paid (or payable) to shareholders in
dividends; and
• cumulative Total Shareholder Return (TSR), which represents the movement in the Company’s share
price plus dividends received by shareholders was 53.9%.
The table below summarises key indicators of the performance of the Company and relevant shareholder
returns over the past three financial years.
Performance measure
Statutory net profit after tax ($000)
Net profit after tax (NPAT)1 ($000)
NPAT(1) growth %
EBITDA(1) ($000)
EBITDA(1) growth %
Dividends per ordinary share (cps)
Closing share price (30 June)
3 month average share price (1 April to 30 June)
Earnings per share(1), (2) (cps)
Earnings per share(1) growth %
Cumulative TSR %(3)
2014(4)
57,689
59,725
n/a
198,226
n/a
9.5
3.43
3.41
20
n/a
(10.3%)
2015
67,632
85,214
17.2%
208,678
5.3%
19.5
4.68
4.28
29
45.0%
17.6%
2016
85,051
94,310
25.9%
220,157
5.5%
21.0
6.03
5.46
32
10.3%
53.9%
(1) Before significant items (refer to Note 1.1 in the Consolidated Financial Report).
(2) Earnings per share in 2014 has been calculated assuming the post IPO share capital structure existed for the entire period. The basis for the
calculation is 294.1 million shares outstanding.
(3) Cumulative TSR in each year has been calculated using the share issue price at 17 December, 2013 of $3.80. The three month average share price
has been used in all periods.
(4) The Group was listed on the ASX on 17 December 2013.
Performance Against Targets - Executive KMP
The table below outlines the Group’s EBITDA performance for the year ended 30 June 2016, along with
comparatives to fiscal year 2015 and fiscal year 2014.
Performance measure
EBITDA before significant items
EBITDA before significant items
EBITDA before significant items
Target applicable to
Group
Group
Group
Year
2016
2015
2014
Actual ($000)
220,157
208,678
198,226
% Achieved
100.7%
101.3%
100.8%
STI Outcomes – Executive KMP
The table below outlines the STI outcomes for Executive KMP for the year ended 30 June 2016.
Executive KMP
Mr Malcolm Bundey(1)
Mr Richard Betts
Mr Brian Cridland(2)
Proportion of maximum STI earned in FY16
88%
87%
85%
Proportion of maximum STI forfeited in FY16
12%
13%
15%
(1) The maximum STI earned and forfeited for Mr Bundey is based on a period of service from 1 December 2015 to 30 June 2016.
(2) The maximum STI earned and forfeited for Mr Cridland is based on a period of service from 1 July 2015 to 10 April 2016
LTIP Outcomes – CEO
The performance measure for the LTIP is achievement of relative TSR targets. The vesting conditions have been outlined on page 30.
Formal testing of the performance hurdle will take place shortly after 30 June 2018.
ANNUAL REPORT 2016
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Directors’ Report
Remuneration Report (audited) Cont.
Executive KMP remuneration for the year ended 30 June 2016
Executive
Year
Short term benefits
Salary
and fees
Cash
bonus
Post-
employment
benefits
Long-term
benefits
Share based
payments
Total Performance
related %
Other
Benefits (2)
Super-
annuation
Long Service
Leave(3)
LTIP (4)
Initial
Grant (5)
Non-
monetary
benefits (1)
$
-
-
-
-
$
36,015
-
(3,669)
-
$
677,500
-
441,666
-
$
616,000
-
192,500
-
2016
2015
2016
2015
Mr Malcom Bundey
(CEO)
Mr Richard Betts
(CFO)
Former Executive KMP
Mr Brian Cridland (CEO)
2016
(retired 10 April 2016)
2015
-
-
Mr Darren Brown (CFO) 2016
2015
(retired 30 June 2015)
674,006 11,650
2016 1,885,263 1,133,896 67,251
Total Executive KMP
2015 1,428,740 1,510,416 53,968
remuneration
15,416
325,396 67,251
836,410 42,318 (10,854)
-
10,772
47,762
(82)
766,097
934,473
-
494,267
$
37,083
-
25,000
-
45,497
88,775
-
35,000
107,580
123,775
$
$
$
$
- 127,312 194,444 1,688,354
-
-
-
655,497
-
-
-
-
-
-
-
-
-
-
-
-
- 1,191,609
(28,048)
- 1,883,491
(7,631)
-
-
-
14,200
- 1,239,895
(28,048) 127,312 194,444 3,535,460
- 3,123,386
6,569
-
%
44%
-
29%
-
27%
44%
-
54%
36%
48%
(1) Non-monetary benefits includes motor vehicle lease payments and FBT payments made by the Company on behalf of Mr Cridland.
(2) Other benefits is the movement in the annual leave provision for Mr Bundey, Mr Betts and Mr Cridland.
(3) Long-term benefits is the movement in the long service leave provision for Mr Cridland and Mr Brown.
(4) An independent valuation of the performance rights was performed to establish the fair value in accordance with AASB2 Share Based Payments.
Valuation of the rights was done using Monte Carlo valuation simulations.
(5) Pro rata entitlement of the initial share grant for Mr Bundey based on a period of service from 1 December 2015 to 30 June 2016 (please refer
to sections 3 and 5 of the Remuneration Report for additional detail).
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:
Chief Executive Officer (CEO)
The CEO, Mr Malcolm Bundey, is employed under an employment contract with a notice period for
termination of six months. There is no fixed term. Mr Bundey’s remuneration package contains the following
components:
• The CEO receives fixed remuneration of $1,225,000 per annum.
• The CEO has a maximum STI of 100% of ABS. Please refer to section 3 of the Remuneration Report for
further details of the CEO’s STI plan.
• The CEO is entitled to 146,444 performance rights from participation in the LTIP, and a total of $127,312
has been disclosed as remuneration in relation to performance rights for the year ended 30 June 2016.
Key features of the LTIP are outlined on page 29.
• The CEO is entitled to receive an initial share grant of $1 million (209,205 shares) to be issued in 1/3 lots
over three years (69,735 shares) at 1 December 2016, 1 December 2017 and 1 December 2018. Please
refer to section 3 of the Remuneration Report for further details.
• There are no provisions for redundancy payments. 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 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.
Chief Financial Officer (CFO)
The CFO, Mr Richard Betts, is employed under an employment contract, with a notice period for termination
of three months. There is no fixed term. Mr Bett’s remuneration package contains the following components:-
• The CFO receives fixed remuneration of $500,000 per annum.
• The CFO has a maximum STI of 50% of ABS. Please refer to section 3 of the Remuneration Report for
further details of the CFO’s STI plan.
•
In the event a redundancy occurs, the CFO is entitled to receive a redundancy payment of three weeks
for every year of service which is capped at 52 weeks. 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 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.
PACT GROUP HOLDINGS LTD
33
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Directors’ Report
Remuneration Report (audited) Cont.
6. Non-Executive Directors’ Remuneration Arrangements
Remuneration Policy
The Committee seeks to set aggregate remuneration at a level that provides the Company with the ability
to attract and retain non-executive directors (NEDs) 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 (S&P/ASX 200 comparator group,
excluding companies in the Financials, Metals and Mining sector).
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. Consistent with prior years, 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.
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 FY16, which remains unchanged from FY15:
Responsibility
Board Fees
Non-Executive Directors (excluding the Chairman)
Audit, Business Risk and Compliance Committee
Chair
Member
Nomination and Remuneration Committee
Chair
Member
Fees
$
110,000
30,000
7,500
20,000
7,500
All NED fees are inclusive of 9.5% of superannuation. NEDs do not participate in any incentive programs.
The remuneration of NEDs for the year ended 30 June 2016 is detailed in the following table.
Non-Executive KMP remuneration for the year ended 30 June 2016
Ms Lyndsey Cattermole
Mr Raphael Geminder
Mr Jonathan Ling
Mr Peter Margin
Mr Ray Horsburgh
(appointed 5 October 2015)
Former Non Executive KMP
Mr Tony Hodgson
(retired 30 September 2015)
Total Non-executive KMP
remuneration
Short-term
benefits
Post-employment
benefits
Fees
$
114,416
114,155
-
-
115,726
107,306
132,307
125,570
80,479
-
32,036
127,854
474,964
474,885
Superannuation
$
10,870
10,845
-
-
10,994
10,194
12,569
11,930
7,646
-
3,043
12,146
45,122
45,115
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
Total
$
125,286
125,000
-
-
126,720
117,500
144,876
137,500
88,125
-
35,079
140,000
520,086
520,000
ANNUAL REPORT 2016
34
Directors’ Report
Remuneration Report (audited) Cont.
7. Equity Holdings of KMP
The following table shows the respective shareholdings of KMP (directly and indirectly) including their related
parties and any movements during the year ended 30 June 2016:
KMP
Raphael Geminder
Lyndsey Cattermole
Peter Margin
Jonathan Ling
Ray Horsburgh
Malcolm Bundey(1)
Richard Betts
Balance
1 July 2015
117,036,546
78,948
7,894
2,365
-
-
-
Movements
-
-
-
-
20,100
-
-
Balance
30 June 2016
117,036,546
78,948
7,894
2,365
20,100
-
-
(1) Mr Bundey is expected to be granted 146,444 shares under the LTIP. This is subject to shareholder approval at the 2016 Annual General Meeting.
8. Related party transactions
The following table provides the total amount of transactions with related parties for the year ended
30 June 2016:
$’000’s
Related parties – director's interests(1)
Sales to
related parties
Purchases from
related parties
Other (income)
/ expense with
related parties
Amounts
(owed to) /
receivable from
related parties
2016
2015
10,051
9,385
19,048
19,544
293
14
681
568
(1) Related parties - director’s interests includes the following group of entities: P’Auer Pty Ltd, Pro-Pac Packaging Limited, Centralbridge Pty Ltd
(as trustee for the Centralbridge Unit Trust), Centralbridge Two Pty Ltd, Centralbridge (NZ) Limited and Albury Property Holdings Pty Ltd.
P’Auer Pty Ltd (P’Auer)
P’Auer an entity controlled by Mr Raphael Geminder (the Non-Executive Chairman of Pact) 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.
Pro-Pac Packaging Limited (Pro-Pac)
Pro-Pac, an entity for which Mr Raphael Geminder owns approximately 49%, 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 fees under this arrangement are approximately $4.9 million (2015: $4.8
million) for the 12 months ended 30 June 2016. The supply arrangement is on arm’s length terms.
PACT GROUP HOLDINGS LTD Directors’ Report
Remuneration Report (audited) Cont.
Terms and Conditions of Property Leases with Related Parties
The Group leased 16 properties (13 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 Mr Raphael
Geminder and are therefore related parties of the Group (“Centralbridge Leases”). The aggregate annual rent
payable by Pact under the Centralbridge Leases for the year ended 30 June 2016 was $6.6 million (2015: $6.6
million). The rent payable under these leases was determined based on independent valuations and market
conditions at the time the leases were entered into.
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;
•
•
two of the leases contain 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.
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 ended 30 June 2016, the Group has not recorded any impairment of
receivables relating to amounts owed by related parties (2015: nil).
35
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Directors’ Report
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 37.
Rounding
Is presented in Australian dollars with all values rounded to the nearest $1,000, unless otherwise stated, in
accordance with the ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191 dated
1 April 2016.
Signed in accordance with a resolution of the Board of Directors:
Raphael Geminder
Chairman
Malcolm Bundey
Managing Director and Chief Executive Officer
Dated 24 August 2016
PACT GROUP HOLDINGS LTD
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ANNUAL REPORT 2016Pact Group Holdings Ltd19A member firm of Ernst & Young Global LimitedLiability limited by a scheme approved under Professional Standards LegislationAuditor’s Independence Declaration to the Directors of Pact GroupHoldings LtdAs lead auditor for the audit of Pact Group Holdings Ltd for the financial year ended 30 June 2016, Ideclare to the best of my knowledge and belief, there have been:a)no contraventions of the auditor independence requirements of theCorporations Act 2001inrelation to the audit;andb)no contraventions of any applicable code of professional conduct in relation to the audit.This declaration is in respect of Pact Group Holdings Ltd and the entities it controlled during the financialyear.Ernst & YoungGlenn CarmodyPartner24 August 20168 Exhibition StreetMelbourne VIC 3000 AustraliaGPO Box 67Melbourne VIC 3001Tel: +61 3 9288 8000Fax: +61 3 8650 7777ey.com/au
38
Financial Statements
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2016
$’000
Sales revenue
Raw materials and consumables used
Employee benefits expense
Occupancy, repair and maintenance, administration and selling expenses
Interest and other income
Other losses
Depreciation and amortisation expense
Finance costs and loss on de-recognition of financial assets
Share of profit in associates
Profit before income tax expense
Income tax expense
Net Profit for the year
Net Loss / (Profit) attributable to non-controlling interest
Net Profit attributable to equity holders of the parent entity
Notes
1.1
5.1
6.2
3.2
4.1
2.3
1.2
2016
2015
1,381,338 1,249,153
(534,522)
(590,049)
(291,137)
(340,767)
(218,776)
(241,581)
3,978
6,110
(24,879)
(8,494)
(56,249)
(57,688)
(33,096)
(30,644)
1,376
2,227
95,848
120,452
(28,157)
(35,408)
67,691
85,044
(59)
7
67,632
85,051
Items that will be reclassified subsequently to profit or loss
Cash flow hedges losses taken to equity
Foreign currency translation gains
Income tax on items in other comprehensive income
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Attributable to:
Equity holders of the parent entity
Non-controlling interests
Total comprehensive income for the Group
$
Basic earnings per share
Diluted earnings per share
(1,009)
6,806
301
6,098
91,142
(1,657)
7,036
497
5,876
73,567
91,149
(7)
91,142
73,508
59
73,567
1.1
1.1
0.29
0.29
0.23
0.23
The Consolidated Statement of Comprehensive Income should be read in conjunction with the
accompanying notes.
PACT GROUP HOLDINGS LTD 39
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Financial Statements
Consolidated Statement of Financial Position
As at 30 June 2016
$’000
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other current financial assets
Prepayments
Total current assets
Non-current assets
Trade and other receivables
Prepayments
Property, plant and equipment
Investments in associates and joint ventures
Intangible assets and goodwill
Deferred tax assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Employee benefits provisions
Other provisions
Other current financial liabilities
Total current liabilities
Non-current liabilities
Trade and other payables
Employee benefits provisions
Other provisions
Interest-bearing loans and borrowings
Other non-current financial liabilities
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained earnings
Parent entity interest
Non-controlling interests
Total equity
Notes
2016
2015
3.1
3.1
3.2
2.3
3.2
1.2
3.1
5.1
3.4
5.1
3.4
4.1
1.2
4.2
4.2
51,885
114,604
146,632
487
7,400
321,008
905
5,289
582,723
16,039
417,944
29,130
1,052,030
1,373,038
314,176
30,129
6,111
2,396
352,812
5,392
8,293
22,532
561,440
3,481
49,894
651,032
1,003,844
369,194
1,502,097
(903,361)
(229,542)
369,194
-
369,194
32,612
93,685
117,492
1,657
7,763
253,209
-
935
541,473
14,639
340,069
26,778
923,894
1,177,103
267,532
26,156
11,983
187
305,858
-
7,012
21,492
472,900
3,327
39,645
544,376
850,234
326,869
1,491,497
(909,781)
(255,157)
326,559
310
326,869
The Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.
ANNUAL REPORT 2016
40
Financial Statements
Consolidated Statement of Changes in Equity
For the year ended 30 June 2016
$’000
Year ended 30 June 2016
As at 1 July 2015
Profit / (Loss) for the year
Other comprehensive
income (loss)
Total comprehensive
income
Shares issued as
consideration for business
acquisitions
Acquisition of non-
controlling interest
Dividends paid
Share based payments
expense
Transactions with owners
in their capacity as owners
Year ended 30 June 2016
Year ended 30 June 2015
As at 1 July 2014
Profit / (Loss) for the year
Other comprehensive
income (loss)
Total comprehensive
income
Shares issued as
consideration for business
acquisitions
Dividends paid
Transactions with owners
in their capacity as owners
Attributable to equity holders of the Parent entity
Contributed
equity
Common
control
reserve
Cash flow
hedge
reserve
Foreign
currency
translation
reserve
Share based
payments
reserve
Retained
Earnings
Total
Non-
controlling
interest
Total equity
1,491,497 (928,385)
-
-
(1,790)
-
20,394
-
-
-
10,600
-
-
-
-
-
-
-
-
-
(708)
6,806
(708)
6,806
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(255,157)
85,051
326,559
85,051
310
(7)
326,869
85,044
-
6,098
-
6,098
85,051
91,149
(7)
91,142
-
10,600
-
10,600
(327)
(59,109)
(327)
(59,109)
-
(303)
(327)
(59,412)
322
-
322
-
322
10,600
-
1,502,097 (928,385)
-
(2,498)
-
27,200
322
(59,436)
322 (229,542)
(48,514)
369,194
(303)
-
(48,817)
369,194
1,489,597 (928,385)
-
-
(630)
-
13,358
-
-
-
1,900
-
1,900
-
-
-
-
-
(1,160)
7,036
(1,160)
7,036
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(266,906)
67,632
307,034
67,632
251
59
307,285
67,691
-
5,876
-
5,876
67,632
73,508
59
73,567
-
(55,883)
1,900
(55,883)
(55,883)
(53,983)
-
-
-
1,900
(55,883)
(53,983)
(255,157)
326,559
310
326,869
Year ended 30 June 2015
1,491,497 (928,385)
(1,790)
20,394
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
PACT GROUP HOLDINGS LTD
Financial Statements
Consolidated Statement of Cash Flows
For the year ended 30 June 2016
$’000
Cash flows from operating activities
Receipts from customers
Receipts from securitisation program(1)
Payments to suppliers and employees
Income tax paid
Interest received
Proceeds from securitisation of trade debtors
Borrowing, trade debtor securitisation and other finance costs paid
Net cash flows provided by operating activities
Cash flows from investing activities
Payments for property, plant and equipment
Purchase of businesses and subsidiaries, net of cash acquired
Proceeds from sale of property, plant and equipment
Sundry items
Net cash flows used in investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Payment of dividend
Payment of dividend to non-controlling interest
Net cash flows provided by / (used in) financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effect of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at the end of the year
Notes
2016
2015
4.1
2.1
562,383
984,549
(1,344,483)
(28,514)
133
18,745
(32,024)
160,789
1,352,244
65,471
(1,212,801)
(18,797)
62
96,855
(32,627)
250,407
(52,050)
(113,936)
8,554
(1,358)
(158,790)
348,705
(273,000)
(59,109)
(303)
16,293
18,292
32,612
981
51,885
(43,350)
(34,898)
243
407
(77,598)
176,537
(285,512)
(55,883)
-
(164,858)
7,951
24,227
434
32,612
(1) Represents receipts from customers paid into the securitisation program. In the prior year $65.5 million
has been reclassified from receipts from customers, which relates to the 8 days the program was in place
in 2015 (refer Note 3.1).
The Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
41
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ANNUAL REPORT 2016
42
Notes to the Financial Statements
Section 1 – Our Performance
A key element of Pact’s strategy is to maximise long-term shareholder
value. This section highlights the results and performance of the Group for
the year ended 30 June 2016.
1.1 Group Results
Sales revenue
$’000
Pact Australia
Pact International
TOTAL
2016
1,027,939
353,399
1,381,338
2015
889,911
359,242
1,249,153
Pact’s chief operating decision maker is the Managing Director and Chief Executive Officer (CEO). The CEO
monitors results by reviewing two reportable segments, Pact Australia (PA) and Pact International (PI),
focusing on reported EBIT (earnings before finance costs and loss on de-recognition of financial assets, net of
interest income, tax and significant items). As required by AASB 8 Operating Segments, the results above have
been reported on a consistent basis to that supplied to the CEO.
Reportable segments
Pact Australia
Countries of Operation
Australia
Pact International
New Zealand
China
Indonesia
Philippines
Singapore
United States of America
Products/services
Manufacture and supply of rigid plastic and
metal packaging and associated services
Contract manufacturing and packing
services
Manufacture and supply of materials
handling products and the provision of
associated services
Recycling and sustainability services
How Pact accounts for Revenue
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. Revenue from the sale of goods is 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.
PACT GROUP HOLDINGS LTD 43
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Notes to the Financial Statements
Section 1 – Our Performance
1.1 Group Results (continued)
EBIT
$’000
Pact Australia
Pact International
EBIT before significant items
Net profit after tax
2016
95,635
66,834
162,469
2015
86,313
66,116
152,429
The reconciliation of EBIT before significant items shown above and the net profit after tax disclosed in the
Consolidated Statement of Comprehensive Income is as follows:
$’000
EBIT before significant items (Pact Australia + Pact International)
Significant items
Acquisition costs(1)
Business Reorganisation Program(2)
restructuring costs
asset write downs
loss on partial disposal of subsidiary
Total significant items
EBIT after significant items
Finance costs(3)
Net profit before tax
Income tax expense
Net profit after tax
2016
162,469
2015
152,429
(2,913)
(2,691)
(7,759)
(834)
-
(8,593)
(11,506)
150,963
(30,511)
120,452
(35,408)
85,044
(6,788)
(12,582)
(1,486)
(20,856)
(23,547)
128,882
(33,034)
95,848
(28,157)
67,691
(1) Acquisition costs includes stamp duty, professional fees and all other costs associated with business
acquisitions.
(2) The business reorganisation program relates to the optimisation of business facilities across the Group
as announced in 2015.
(3) Net finance costs includes Interest income of $207,000 (2015: $62,000).
Basic and Diluted Earnings per share
Earnings per share (EPS) ($) – Basic
Earnings per share (EPS) ($) - Diluted
Calculated using:
• Net profit attributable to ordinary equity holders ($’000s)
• Weighted average of ordinary shares (shares) – Basic
• Weighted average of ordinary shares (shares) - Diluted
2016
0.29
0.29
2015
0.23
0.23
85,051
295,244,495
295,329,321
67,632
294,183,109
294,183,109
Earnings per share is calculated by dividing the net profit for the year attributable to ordinary equity holders
of Pact by the weighted average number of ordinary shares outstanding during the year.
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share
includes the weighted average number of additional ordinary shares that would have been outstanding
assuming the conversion of all dilutive shares. This would include items such as performance rights as
disclosed in Note 5.2.
ANNUAL REPORT 2016
44
Notes to the Financial Statements
Section 1 – Our Performance
1.2 Taxation
Reconciliation of tax expense
$’000
Accounting profit before tax
Income tax calculated at 30% (2015: 30%)
Adjustments in respect of income tax of previous years
Sundry items
Income tax expense / (benefit) reported in the Consolidated Statement of
Comprehensive Income
Comprising of:
• Current year income tax expense
• Deferred income tax expense
• Adjustments in respect of previous years income tax
2016
120,452
36,136
(302)
(426)
2015
95,848
28,755
(711)
113
35,408
28,157
23,655
12,055
(302)
20,780
8,088
(711)
Included in the above is a tax benefit on significant items of $2.3 million for the year ended 30 June 2016
(2015: $6.0 million), of which $2.0 million (2015: $5.8 million) related to Pact’s business reorganisation
program.
Recognised current and deferred tax assets and liabilities
$’000
Opening balance
Charged to income
Adjustments in respect of income tax of previous years
Charged to other comprehensive income
Payments
Acquisitions / disposals
Foreign exchange translation movement
Closing balance
Comprises of:
2016
Current
Income tax
(6,098)
(23,655)
(2,662)
-
28,712
(211)
(927)
(4,841)
2016
Deferred
Income tax
(12,867)
(12,055)
2,964
301
-
1,555
(662)
(20,764)
2015
Current
Income tax
(5,481)
(20,780)
1,140
-
18,797
(547)
773
(6,098)
Deferred tax assets
• Employee entitlements provision
• Provisions
• Hedges
•
IPO transaction costs
• Unutilised tax losses
• Other
Deferred tax liabilities
• Property, plant and equipment
• Other
13,040
8,678
1,614
2,803
680
2,315
29,130
(46,652)
(3,242)
(49,894)
2015
Deferred
Income tax
(6,874)
(8,088)
(428)
497
-
1,760
266
(12,867)
10,269
10,019
767
3,976
243
1,504
26,778
(37,753)
(1,892)
(39,645)
Key Estimates and Judgements – Taxation
Pact is subject to income tax in Australia and foreign jurisdictions. The calculation of the Group’s tax charge
requires management to determine whether it is probable that there will be sufficient future taxable profits
to recoup deferred tax assets.
Judgements and assumptions are subject to risk and uncertainty, hence if final tax determinations or future
actual results do not align with current judgements, this may have an impact to the carrying value of deferred
tax balances and corresponding credits or charges to the Consolidated Statement of Comprehensive Income
and Consolidated Statement of Financial Position.
PACT GROUP HOLDINGS LTD
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Section 1 – Our Performance
1.2 Taxation (continued)
How Pact accounts for taxation
1.2 Taxation (continued)
Income tax charges:
• Comprise of current and deferred income tax charges and represent the amounts expected to be
paid to and recovered from the taxation authorities in the jurisdictions that Pact operates.
• Are recorded in Equity when the underlying transaction that the tax is attributable to is recorded
within Other Comprehensive Income.
Pact uses the tax laws in place or those that have been substantively enacted at reporting date to calculate
income tax. For deferred income tax, Pact also considers whether these tax laws are expected to be in
place when the related asset is realised or liability is settled. Management periodically re-evaluate their
assessment of their tax positions, in particular where they relate to specific interpretations of applicable tax
regulation.
Deferred tax assets and liabilities are recognised on all assets and liabilities that have different carrying
values for tax and accounting, except for:
•
initial recognition of goodwill; and
• any undistributed profits of Pact’s subsidiaries, associates or joint ventures where either the
distribution of those profits would not give rise to a tax liability or the directors consider they have the
ability to control the timing of the reversal of the temporary differences.
Specifically for deferred tax assets:
• They are recognised only to the extent that it is probable that there is sufficient future taxable
amounts to be utilised against. This assessment is reviewed at each reporting date.
• They are offset against deferred tax liabilities in the same tax jurisdiction, when there is a legally
•
enforceable right to do so.
If acquired as part of a business combination, but not satisfying the criteria for separate recognition
at that date, would be recognised subsequently if new information about facts and circumstances
changed. The adjustment would either be treated as a reduction to goodwill (as long as it does not
exceed goodwill) if it was incurred during the measurement period or in the Consolidated Statement
of Comprehensive Income.
Australian tax consolidated group
Pact Group Holding Ltd and its wholly-owned Australian subsidiaries formed a tax consolidated group
(Australian tax consolidated group), effective January 2014. A tax funding agreement is also in place such
that Pact Group Holdings Ltd pays any taxes owed by the Group to the Australian Tax Office.
The operation of the previously announced amendments to the income tax consolidated group
legislation have been changed and deferred by the Government as outlined in the announcements in
the 2016-17 Budget. It is now intended that these rules should apply from 1 July 2016, rather than 13
May 2013, therefore eliminating any potential material negative impact on Pact’s financial position at 30
June 2016 but subject to the final form and content of the law if released.
There has been no further information regarding the proposed changes since the 2016-17 Budget
announcement.
1.3 Dividends
$’000
Dividends paid during the financial year
Proposed dividend(1)
2016
59,412
32,644
2015
55,883
29,456
(1) Since the end of the financial year the directors have determined payment of a 65% franked final dividend
of 11.0 cents per ordinary share (2015: 10 cents, 65% franked). The amount disclosed is based on the
number of shares on issue at reporting date. The final dividend is expected to be paid on 6 October 2016.
Franking credit balance
Franking account balance as at the end of the financial year at 30% (2015: 30%)
Franking (debits) / 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
Total franking credit available for the subsequent financial year
2016
6,832
2015
1,707
(1,033)
964
(9,094)
(3,295)
(8,206)
(5,535)
ANNUAL REPORT 2016
46
Notes to the Financial Statements
Section 2 – Our Operational Footprint
This section provides further details of acquisitions which the Group has
made in the period, as well as details of controlled entities and interests in
associates and joint ventures.
2.1 Businesses Acquired
Summary of 30 June 2016 acquisitions
$’000
Consideration paid
Comprising of:
• Cash consideration paid(3)
• Deferred settlement
• Shares issued as consideration
Fair value of identifiable net assets
Assets
• Cash(3)
• Trade and other receivables
•
• Property, plant & equipment
• Deferred tax asset
• Other assets
Inventory
Liabilities
• Trade Payables and other provisions
• Employee benefits provisions
• Deferred tax liability
Goodwill arising on acquisition
Jalco(1)
80,113
76,113
4,000
-
Other
acquisitions(2)
42,080
31,180
300
10,600
Total
122,193
107,293
4,300
10,600
36,189
18,384
54,573
62
30,001
16,103
24,044
2,738
391
(31,026)
(5,594)
(530)
43,924
854
6,964
3,064
11,360
-
165
(2,602)
(775)
(646)
23,696
916
36,965
19,167
35,404
2,738
556
(33,628)
(6,369)
(1,176)
67,620
(1) On 1 September 2015 the Group purchased 100% of the issued capital of Jalco Group Pty Limited and
the following controlled entities: Jalco Automotive Pty Limited, Jalco Powders Pty Limited, Jalco Plastics Pty
Ltd, Jalco Australia Pty Limited, Jalco Care Products Pty Limited, Packaging Employees Pty Limited, Jalco
Cosmetics Pty Limited, and Jalco Promotional Packaging Pty Limited (Jalco) for a purchase consideration
of $80.1 million. Jalco is a leading supplier of contract manufacturing, filling and packing in the non-food
FMCG sector. The acquisition is part of the Group’s overall strategy to deepen its existing FMCG customer
relationships and to enter new areas of growth.
Goodwill of $43.9 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 Australia reportable segment. This
goodwill will not be deductible for tax purposes.
The fair value of Jalco’s trade and other receivables acquired amounted to $30.0 million. This was net of an
immaterial impairment provision and it is expected that the stated fair value amount will be collected.
From the date of acquisition to 30 June 2016 Jalco contributed $165.4 million of revenue and $7.4 million
to the net profit before tax of the Group. If the combination had taken place at 1 July 2015, contributions
to revenue for the year ended 30 June 2016 would have been $38.0 million higher and the contribution to
profit before tax for the Group would have been $2.6 million higher.
(2) During the year, consistent with strategy to expand its customer and product portfolio, the Group acquired:
• The business assets, business records and contracts of Stowers Containment Solutions Ltd for $13.9
million (NZ$15.0 million) on 29 February 2016.
• 100% of the shares in Power Plastics Pty Ltd for $25.2 million, consisting of a $15.8 million cash payment
and the issue of $9.4 million shares in the Company on 1 March 2016 (refer Note 4.2).
• The business assets, business records and contracts of Ecopolymers Pty Ltd for $2.9 million, consisting
of a $1.4 million cash payment, $0.3m deferred consideration and the issue of $1.2 million shares in the
Company on 3 May 2016 (refer Note 4.2).
PACT GROUP HOLDINGS LTD
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Section 2 – Our Operational Footprint
2.1 Businesses Acquired (continued)
The provisional fair value of the trade and other receivables acquired through these acquisitions amounted
to $7.0 million. None of the trade receivables were impaired and it was expected that the full contractual
amounts would be collected.
In the Consolidated Statement of Financial Position provisional goodwill of $23.7 million has been
recognised as a result of these acquisitions. This goodwill will not be deductible for tax purposes.
From the dates of acquisition to 30 June 2016 the acquisitions contributed $11.7 million of revenue and
$0.6 million to the net profit before tax of the Group. If the combination of the acquisitions had taken place
at 1 July 2015, contributions to revenue for the 12 months would have been $29.1 million higher and the
contribution to profit before tax for the Group would have been $2.9 million higher.
(3) The difference between this balance and amounts recorded in the Consolidated Statement of Cash Flows
is the net cash acquired as part of the transaction, and a $7.2 million deferred payment made this financial
year relating to the Sulo acquisition, and a $0.3 million payment for a non-controlling interest in Vmax
Returnable Packaging Systems Pty Ltd.
Summary of 30 June 2015 acquisitions
$’000
Consideration paid
Comprising of:
• Cash consideration paid(3)
• Deferred settlement
• Shares issued as consideration
Fair value of identifiable net assets
Assets
• Cash(3)
• Trade and other receivables
•
• Property, plant & equipment
•
• Deferred tax asset
• Other assets
Intangibles
Inventory
Liabilities
• Trade Payables and other provisions
• Employee benefits provisions
• Deferred tax liability
Goodwill arising on acquisition
Sulo(1)
31,421
24,173
7,248
-
Other
acquisitions(2)
14,888
11,813
1,175
1,900
Total
46,309
35,986
8,423
1,900
20,961
8,127
29,088
1,088
4,954
5,312
19,677
85
1,915
154
(11,074)
(995)
(155)
10,460
-
-
1,420
4,675
2,061
-
-
-
(29)
-
6,761
1,088
4,954
6,732
24,352
2,146
1,915
154
(11,074)
(1,024)
(155)
17,221
(1) On 8 August 2014 the Group purchased 100% of the shares in 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 of $31.4 million. Details of the fair values of the assets and liabilities acquired and the
goodwill arising are disclosed above.
There have been no further adjustments to these amounts in the current period and final goodwill of $10.5
million has been recognised on acquisition.
(2) During the year ended 30 June 2015, the Group acquired the:
• drum recycling assets from Brazier Group Pty Ltd for $1.4 million on 23 December 2014.
• business assets from Brackley Industries Pty Ltd for $5.4 million on 6 May 2015. Brackley is a supplier of
consol games, computer software and other media packaging products.
• business assets from A&C Packers Pty Ltd for $4.7 million on 7 May 2015.
•
the drum business assets of NCI for $3.4 million on 15 May 2015 by a cash payment.
(3) The difference between this balance and amount recorded in the Consolidated Cash Flow Statement is the
net cash acquired as part of the transactions.
ANNUAL REPORT 2016
48
Notes to the Financial Statements
Section 2 – Our Operational Footprint
2.1 Businesses Acquired (continued)
Key Estimates and Judgements – Business combinations
Certain assets and liabilities either given up or acquired as part of a business combination may not be
normally traded in active markets, 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.
How Pact accounts for business acquisitions
When Pact acquires a business, if it satisfies the conditions of being a business combination under AASB 3
Business Combinations, then:
•
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;
• where settlement of any part of the consideration is deferred, and if the impact of discounting is
significant, 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;
• assets given, shares issued or liabilities incurred or assumed at the date of exchange are recorded at
fair value;
• acquisition related costs are expensed as incurred;
•
•
transaction costs arising on the issue of any equity instruments are recognised directly in equity;
if the cost of the business combination is in excess of the net fair value of the Group’s share of the
identifiable net assets acquired, the difference is recognised as goodwill. For impairment testing,
this goodwill has been allocated to and tested at the level of their respective cash generating units
(CGU’s), or group of CGU’s, in accordance with the level at which management monitors goodwill; and
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.
•
2.2 Controlled Entities
Australian incorporated entities that are part to the Deed of Cross Guarantee at 30 June 2016:(1)
Pact Group Industries (ANZ) Pty Ltd
Pact Group Holdings (Australia) Pty Ltd
Pact Group Finance (Australia) Pty Ltd
Power Plastics Pty Ltd
Alto Packaging Australia Pty Ltd
Summit Manufacturing Pty Ltd
Astron Plastics Pty Ltd
Sunrise Plastics Pty Ltd
INPACT Innovation Pty Ltd
Cinqplast Plastop Australia Pty Ltd
Steri-Plas Pty Ltd
Sulo MGB Australia Pty Ltd
VIP Steel Packaging Pty Ltd
VIP Drum Reconditioners Pty Ltd
Vmax Returnable Packaging Systems Pty Ltd(2)
Viscount Plastics Pty Ltd
Viscount Plastics (Australia) Pty Ltd
Viscount Rotational Mouldings Pty Ltd
Viscount Logistics Services Pty Ltd
Viscount Pooling Systems Pty Ltd
Jalco Group Pty Ltd
Jalco Automotive Pty Ltd
Jalco Powders Pty Ltd
Jalco Plastics Pty Ltd
Jalco Australia Pty Ltd
Jalco Care Products Pty Ltd
Packaging Employees Pty Ltd
Jalco Cosmetics Pty Ltd
Jalco Promotional Packaging Pty Ltd
VIP Plastic Packaging Pty Ltd
Skyson Pty Ltd
Brickwood (VIC) Pty Ltd
Brickwood (Dandenong) Pty Ltd
Brickwood (NSW) Pty Ltd
Brickwood (QLD) Pty Ltd
Alto Manufacturing Pty Ltd
Baroda Manufacturing Pty Ltd
Salient Asia Pacific Pty Ltd
Plaspak Closures Pty Ltd
Plaspak Pty Ltd
MTWO Pty Ltd
Snopak Manufacturing Pty Ltd
Pact Group Industries (Asia) Pty Ltd
Viscount Plastics (China) Pty Ltd
Ruffgar Holdings Pty Ltd
PACT GROUP HOLDINGS LTD 49
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Notes to the Financial Statements
Section 2 – Our Operational Footprint
2.2 Controlled Entities (continued)
Entities that are not party to the Deed of Cross Guarantee, incorporated in the following jurisdictions:(1)
Australia
Plaspak Contaplas Pty Ltd(3)
Plaspak Management Pty Ltd(3)
Plaspak (PET) Pty Ltd(3)
Plaspak Minto Pty Ltd(4)
Sustainapac Pty Ltd
China
Guangzhou Viscount Plastics Co Ltd(5)
Langfang Viscount Plastics Co Ltd(5)
Changzhou Viscount Plastics Co Ltd(5)
Indonesia
PT Plastop Asia Indonesia(6)
PT Plastop Asia Indonesia Manufacturing(6)
New Zealand
Pact Group Holdings (NZ) Ltd
Pact Group Finance (NZ) Ltd
Pact Group (NZ) Ltd
VIP Steel Packaging (NZ) Ltd
VIP Plastic Packaging (NZ) Ltd
Alto Packaging Ltd
Auckland Drum Sustainability Services Ltd
Tecpak Industries Ltd
Astron Plastics Ltd
Pacific BBA Plastics (NZ) Ltd
Viscount Plastics (NZ) Ltd
Stowers Containment Solutions Ltd
Sulo NZ Ltd (10)
Philippines
Plastop Asia Inc(7)
Singapore
Asia Peak Pte Ltd(8)
United States of America
Pact Group (USA) Inc(9)
(1) All entities are wholly owned unless otherwise stated
(2) Equity interest at 30 June 2016: 100% (30 June 2015: 51%)
(3) Owned by Skyson Pty Ltd
(4) Owned by Snopak Manufacturing Pty Ltd
(5) Owned by Viscount Plastics (China) Pty Ltd
(6) Owned by Asia Peak Pte Ltd
(7) Owned by Ruffgar Holdings Pty Ltd
(8) Owned by Pact Group Industries (Asia) Pty Ltd
(9) Owned by Pact Group Industries (ANZ) Pty Ltd
(10) Owned by Sulo MGB Australia Pty Ltd
Key Estimates and Judgements – Control and significant influence
Determining whether Pact can control or exert significant influence over an entity can at times require
judgement. It requires management to consider whether Pact is exposed to, or has the rights to, variable
returns from its involvement with the investee and has the ability to affect those returns through its power
over the investee. In making such an assessment, a range of factors are considered, including if and only if
the Group has: power over the investee (i.e. existing rights that give it the current ability to direct the relevant
activities of the investee); exposure, or rights, to variable returns from its involvement with the investee; and
the ability to use its power over the investee to affect its returns.
How Pact accounts for controlled entities
Controlled entities are fully consolidated when the Group obtains control and cease to be consolidated
when control is transferred out of the Group. The Group controls an entity when it:
is exposed, or has the rights, to variable returns from its involvement with the investee; and
•
• has the ability to affect those returns through its power over the entity, for example has the ability to
direct the relevant activities of the entity, which could affect the level of profit the entity makes.
ANNUAL REPORT 2016
50
Notes to the Financial Statements
Section 2 – Our Operational Footprint
2.3 Associates and Joint Ventures
Pact has entered into a number of strategic partnering arrangements with third parties and / or associates and
jointly controlled entities. The following are entities that Pact have significant influence or joint control over:
Principal
place of
operation
China
Entity
$’000
Changzhou
Viscount Oriental
Mould Co Ltd
(Oriental Mould)
Spraypac Products
(NZ) Ltd (Spraypac)
New
Zealand
About
Is an associate company, which
is a manufacturer of moulds,
of which a proportion is
purchased by the local Chinese
subsidiaries of Viscount
Plastics (China) Pty Ltd.
Is an associate company
distributing plastic bottles and
related spray products.
Pact’s
ownership
interest(1)
40%
Carrying Value
2016
216
2015
240
50%
783
668
Philippines A joint venture with Weener
50%
3,570
3,495
Weener Plastop
Asia Inc (Weener)
Gempack Weener
(Gempack)
Thailand
Plastik GMBH which
manufactures plastic jars and
bottles for the Personal Care,
Food & Beverage and Home
Care markets.
A joint venture with Weener
Plastik GMBH which
manufactures plastic jars and
bottles for the Personal Care,
Food & Beverage and Home
Care markets.
50%
11,470
10,236
(1) Ownership interest at 30 June 2016 and 30 June 2015.
Summary of associates and joint venture financial information at 30 June
$’000
Carrying value of investment
Current assets
Non-current assets
Current liabilities
Net assets
Carrying amount of the Group’s investment
Group’s share of profit/(loss) for the year
Revenue
Expense
Net profit/(loss) after tax
Group’s share of profit/(loss) for the year
2016
2015
15,072
24,250
(7,899)
31,423
16,039
11,756
24,824
(7,891)
28,689
14,639
29,915
(25,461)
4,454
2,227
15,317
(12,565)
2,752
1,376
Dividends received from associates and joint ventures during the year was $1.7 million (2015: $0.4 million).
The joint ventures and associates had no contingent liabilities or significant capital commitments at 30 June
2016 (2015: nil).
PACT GROUP HOLDINGS LTD
Notes to the Financial Statements
Section 2 – Our Operational Footprint
2.3 Associates and Joint Ventures (continued)
How Pact accounts for investment in associates and joint ventures and jointly controlled entities
An associate is an entity over which the Group has significant influence. Significant influence is the power
to participate in the financial and operating policy decisions of the investee, but is not control or joint
control over those policies.
A joint venture is a type of joint arrangement whereby the parties that have joint control of the
arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed
sharing of control of an arrangement, which exists only when decisions about the relevant activities
require the unanimous consent of the parties sharing control.
The Group uses the equity method to account for their investments in associates and joint ventures,
where they consider they have significant influence but they do not have control. Generally significant
influence is deemed if Pact has over 20% of the voting rights.
Under the equity method:
•
Investments in the associates are carried at cost plus post-acquisition changes in the Group’s share of
associates’ net assets.
• Goodwill relating to an associate is included in the carrying amount of the investment and is not
tested for impairment separately.
• The Group’s share of its associates’ post-acquisition profits or losses is recognised in the Consolidated
Statement of Comprehensive Income, and its share of post-acquisition movements in reserves is
recognised in reserves.
• 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.
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 applies AASB 139 Financial Instruments:
Recognition and Measurement to determine whether there is an indicator that the Group’s net investment
in associates is 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.
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ANNUAL REPORT 2016
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Notes to the Financial Statements
Section 3 – Our Operating Assets
This section highlights the primary operating assets used and liabilities
incurred to support the Group’s operating activities.
Liabilities relating to the Group’s financing activities are disclosed in
Note 4.1 Net Debt, Deferred tax assets and liabilities are disclosed in
Note 1.2 Taxation and employee benefits provisions are disclosed in
Note 5.1 Employee Benefits Expenses and Provisions.
3.1 Working Capital
Trade and other receivables
Trade and other receivables at 30 June comprise of:
$’000
Trade receivables(1)
Allowance for impairment loss
Other receivables(2)
Total current trade and other receivables
(1) Below is a breakdown of the ageing of trade receivables:
9
3
7
7
3
,
5
8
4
6
3
,
2016
64,265
(191)
50,530
114,604
2015
50,559
(318)
43,444
93,685
2
4
6
2
2
,
6
2
9
9
,
7
8
2
2
,
2
8
3
2
,
6
0
4
1
,
8
4
4
1
,
Not due
< 30
31-60
> 61 Days
2016
2015
Days
(2) At 30 June 2016 $33.6 million (2015: $30.7 million) has been recognised as part of other receivables
representing the Group’s participation in the securitisation program. The program requires the Group
(or an entity other than the bank) to be a participant of the program. Given the short term nature of this
financial asset, the carrying value of the associated receivable approximates its fair value and represents
the Group’s maximum exposure to the receivables derecognised as part of the program.
At 30 June 2016, trade receivables with an invoice value of $0.2 million (2015: $0.3 million) were impaired and
fully provided for. The Group has a number of mechanisms in place which assist in minimising financial losses
due to customer non-payment. These include:
• all customers who wish to trade on credit terms are subject to strict credit verification procedures, which
may include an assessment of their independent credit rating, financial position, past experience and
industry reputation;
•
individual risks limits, which are regularly monitored in line with set parameters;
• monitoring receivable balances on an ongoing basis; and
• a debtors securitisation program. This is a three year program established in June 2015 which allows
Pact to sell receivables, at a discount, to a third party on a non-recourse basis.
PACT GROUP HOLDINGS LTD 53
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Notes to the Financial Statements
Section 3 – Our Operating Assets
3.1 Working Capital (continued)
How Pact accounts for trade and other receivables
Pact’s trade receivables are non-interest bearing, are recorded at the amount on the sales invoice and include
Goods and Services Tax (GST). Trade receivables generally have 30 day terms from the end of the month.
If there is a concern over the collectability of a specific receivable and objective evidence exists, then the
amount recorded may be reduced by management’s best estimate of the potential impairment loss.
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
Consolidated Statement of Comprehensive Income.
Under the debtors securitisation program:
• The Group transfers substantially all the risks and rewards of receivables within the program to a
third party.
• Receivables are sold at a discount under the debtors securitisation program and at the date of sale the
receivable is derecognised and the discount is included as part of the loss on derecognition of financial
assets in the Consolidated Statement of Comprehensive Income. The costs associated with establishing
the program are also recognised on a pro rata basis within the same account (refer to Note 4.1).
• The Group also acts as a servicer to the program to facilitate the collection of receivables. Income
received for being a servicer is recorded as an offset to the loss on derecognition of receivables.
• At balance date, a liability is recognised if received collections have not been paid to other participants
of the program.
Inventories
Inventories at 30 June comprise of:
$’000
Raw materials and stores
Work in progress
Finished goods
Total inventories
Examples
Plastic resin, steel and tinplate
Manufactured plastic, steel and tin packaging that
have not yet reached a full stage of completion
Manufactured plastic, steel and tin packaging that
are intended for sale to external customers
2016
64,625
2015
49,103
18,093
15,290
63,914
146,632
53,099
117,492
How Pact accounts for inventories
Inventories are recorded at cost, which for Pact includes:
• Raw materials: the invoice price of the product, net of any discount, rebates, duties and taxes, as well
as the cost of internal freight.
• Work in Progress and 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.
If the estimated selling price in the ordinary course of business, less estimated cost of completion and
making the sale, is less than the cost of the inventory, the carrying value of inventory is reduced to this
lower amount.
Trade and other payables
Current trade and other payables at 30 June comprise of:
Trade payables
Other payables
Income tax payable
Total current trade and other payables
248,339
60,996
4,841
314,176
188,969
72,465
6,098
267,532
How Pact accounts for trade and other payables
Trade and other payables are carried at their principal amounts, are not discounted and include GST.
They represent amounts owed for goods and services provided to the Group prior to, but were not paid
for, at the end of the financial year. The amounts are generally unsecured and are usually paid within 30 –
90 days of recognition.
ANNUAL REPORT 2016
54
Notes to the Financial Statements
Section 3 – Our Operating Assets
3.2 Non-Current Assets
The below outlines the geographical location of Pact’s property, plant and equipment, intangible assets and
goodwill.
$’000
Australia
New Zealand
Other
Total
2016
617,610
311,369
71,688
1,000,667
2015
559,663
251,429
70,450
881,542
Property, plant and equipment
The key movements in property, plant and equipment over the year were:
$’000
Estimated useful life
Year ended 30 June 2016
At 1 July 2015 net of accumulated depreciation
Additions and transfers
Acquisition of subsidiaries and businesses
Disposals
Asset write downs
Foreign exchange translation movement
Depreciation charge for the year
At 30 June 2016 net of accumulated depreciation
Represented by:
At cost
Accumulated depreciation
Year ended 30 June 2015
At 1 July 2014 net of accumulated depreciation
Additions and transfers
Acquisition of subsidiaries and businesses
Disposals
Asset write downs
Foreign exchange translation movement
Depreciation charge for the year
At 30 June 2015 net of accumulated depreciation
Represented by:
At cost
Accumulated depreciation
Property(1)
Plant and
equipment
Capital work
in progress
Total
Freehold: 40 – 50 years
Leasehold: 10 – 15 years
3 – 20 years
n/a
39,431
1,254
1,865
(4,082)
-
3,430
(2,982)
38,916
474,346
46,345
32,585
(1,892)
(834)
6,420
(54,281)
502,689
27,696
11,987
954
-
-
481
-
41,118
541,473
59,586
35,404
(5,974)
(834)
10,331
(57,263)
582,723
55,372
(16,456)
969,276
(466,587)
41,118 1,065,766
(483,043)
-
28,902
6,814
3,300
-
-
3,080
(2,665)
39,431
486,991
44,086
21,052
(9,482)
(12,582)
(2,337)
(53,382)
474,346
29,711
(728)
-
(1,623)
-
336
-
27,696
545,604
50,172
24,352
(11,105)
(12,582)
1,079
(56,047)
541,473
53,111
(13,680)
924,150
(449,804)
27,696 1,004,957
(463,484)
-
(1) Property consists of the following: leasehold improvements of $17.3 million (2015: $15.1 million) and
accumulated depreciation of $6.5 million (2015: $4.9 million), and freehold property of $38.1 million
(2015: $38.0 million) and accumulated depreciation of $10.0 million (2015: ($8.8 million).
Key Estimates and Judgements – Estimation of useful lives of assets
The estimation of the useful lives of assets has been based on historical experience and lease terms. 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.
Key Estimates and Judgements – Recoverability of property, plant and equipment
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.
PACT GROUP HOLDINGS LTD 55
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Notes to the Financial Statements
Section 3 – Our Operating Assets
3.2 Non-Current Assets (continued)
Property, plant and equipment (continued)
How Pact accounts for property plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation and any accumulated
impairment losses. Cost includes expenditure directly attributable to the acquisition of the item and
subsequent costs incurred to replace parts that are eligible for capitalisation. Depreciation is calculated
on a straight line basis over the estimated useful life of the assets. 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 are depreciated from this date.
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 the
Consolidated Statement of Comprehensive Income.
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.
Goodwill and other intangibles
The majority of Pact’s intangible assets and goodwill balance relates to Goodwill, with the remainder of
the other intangibles balance comprising the carrying value of patents, trademarks and licenses. Other
intangibles for the year were $2,472,000 (2015: $2,849,000) and includes amortisation charges of $425,000
(2015: $202,000). These are recognised at cost and amortised over their useful live.
The movements in goodwill over the year were:
$’000
Opening balance at 1 July net of impairment
Goodwill arising on acquisition
Foreign exchange translation movements
Closing balance at 30 June net of impairment(1)
Allocated to the following group of CGU’s and segments(2):
Pact Australia
Pact International
2016
337,220
67,620
10,632
415,472
2015
326,210
17,426
(6,416)
337,220
219,967
195,505
164,708
172,512
(1) There are $nil impairment charges against the goodwill balance at 30 June 2016 (2015: $nil).
(2) This is the lowest level where goodwill is monitored.
Key Estimates and Judgements – Impairment of goodwill and other intangibles
The recoverable amount of each of the CGU’s has been determined based on value in use calculations using
cash flow projections contained within next year’s financial budget approved by management and other
forward projections. Management have used their current expectations and what is considered reasonably
achievable when assigning values to key assumptions in their value in use calculations.
ANNUAL REPORT 2016
56
Notes to the Financial Statements
Section 3 – Our Operating Assets
3.2 Non-Current Assets (continued)
The calculations of value in use for both Pact Australia and Pact International CGU’s are sensitive to the
following assumptions:
• Gross margins and raw material price movement – Gross margins are based on average budgeted
(next years) margins which reflect current gross margins adjusted for any expected (and likely) efficiency
improvements or price changes.
• 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 2.3% -
6.0% (2015: 2.7% - 6.0%).
• Discount rates – The discount rates for each CGU are calculated using rates based on an external
assessment of the Group’s pre-tax weighted average cost of capital in conjunction with risk factors
specific to the countries in which the CGU’s operate. Foreign currency cash flows are discounted using
the functional currency of the CGU’s and then translated to Australian Dollars using the closing exchange
rate. The pre-tax discount rates applied to cash flow projections are in the range of 11.3% - 20.0% (2015:
11.0% -19.0%).
With regard to the assessment of value in use, management believes that no reasonable change in any of
the above key assumptions would cause the carrying value of the CGU to materially exceed its recoverable
amount.
How Pact accounts for goodwill
Goodwill 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;
• subsequently measured at cost less any accumulated impairment losses; and
•
reviewed for impairment annually or more frequently if events or changes in circumstances indicate
that the carrying value may be impaired.
Impairment is determined by assessing the recoverable amount of the CGU (or group of CGU’s), to which
the goodwill relates. When the recoverable amount of the CGU (or group of CGU’s) is less than the carrying
amount, an impairment loss is recognised.
When goodwill forms part of a CGU (or group of CGU’s) 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 CGU’s retained.
3.3 Commitments and Contingencies
Operating leases
$’000
Operating lease and rental expense(1)
2016
46,746
2015
44,033
(1) The Group leases buildings and plant and equipment such as office equipment and motor vehicles. The
Group has determined that it does not obtain all the significant risks and rewards of the buildings, office
equipment and motor vehicles and has thus classified the leases as operating leases. Rental payments
are generally fixed, but with inflation escalation clauses. These are accounted for through the fixed rent
provision. Property leases generally provide the Group with a right of renewal at which time terms are
renegotiated. There are no restrictions placed upon the lessee by entering into these leases.
PACT GROUP HOLDINGS LTD
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Notes to the Financial Statements
Section 3 – Our Operating Assets
3.3 Commitments and Contingencies (continued)
The future minimum lease payments under non-cancellable operating leases contracted for but not
capitalised in the financial statements are payable as follows:
$’000
Within one year
After one year but not more than five years
More than five years
Total lease expenditure commitments
2016
48,901
160,163
142,791
351,855
2015
36,466
105,031
79,336
220,833
How Pact accounts for Operating lease commitments
Operating lease payments are recognised as an expense in the Consolidated Statement of Comprehensive
Income 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.
Other expenditure commitments
Other expenditure commitments contracted for at reporting date, but not provided for are:
Payable within one year
Payable after one year but not more than five years
Total
29,913
4,792
34,705
3,720
1,124
4,844
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.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to the
taxation authority.
3.4 Other Provisions
Total other provisions at 30 June comprise of:
$’000
Current
Business reorganisation
Other
Total current provisions
Non-Current
Fixed rent
Make good on leased premises
Total non-current provisions
2016
2015
6,082
29
6,111
12,635
9,897
22,532
11,224
759
11,983
9,882
11,610
21,492
ANNUAL REPORT 2016
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Notes to the Financial Statements
Section 3 – Our Operating Assets
3.4 Other Provisions (continued)
Movement in provisions
$’000
Year ended 30 June 2016
Business
reorganisation(1)
Fixed rent
provision(2)
Make good
on leased
premises(3)
At 1 July 2015
Acquisition of subsidiaries and businesses
Provided for during the year
Utilised
Unutilised amounts reversed
Transfer to unearned income
Foreign exchange translation movement
At 30 June 2016
11,224
-
7,759
(12,926)
-
-
25
6,082
9,882
-
4,041
(205)
-
(1,189)
106
12,635
11,610
778
1,317
-
(4,017)
-
209
9,897
Other
Total
759
-
-
-
(732)
-
2
29
33,475
778
13,117
(13,131)
(4,749)
(1,189)
342
28,643
(1) Business reorganisation - The business reorganisation program (announced in 2015) relates to the
optimisation of business facilities by eliminating excess capacity. That program is expected to be completed
in 2017.
(2) Fixed rent - Annual rentals for some of the property operating leases increase annually by fixed increments.
The provision has been recognised to apportion these increments on a straight line basis over the
minimum non-cancellable lease term.
(3) Make good on leased premises - In accordance with the form of lease agreements, the Group may be
required to restore leased premises to their original condition at the end of the lease term and upon exiting
the site. The provision is based on the costs which are expected to be incurred using historical costs as a
guide. During the year, the Group reduced its property make good provisions by $4.0m following a review of
contractual obligations, actual make good expenditure incurred and the renegotiation of existing leases.
Key Estimates and Judgements – 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 contracts relating to the
business reorganisation have been entered into. Costs related to ongoing activities are not provided for.
How Pact accounts for other provisions
Provisions are recognised when the following three criteria are met:
•
•
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. The discount rate used to determine the present
value 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
financing cost.
PACT GROUP HOLDINGS LTD 59
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Notes to the Financial Statements
Section 4 – Our Capital Structure
This section details specifics of the Groups’ capital structure. When
managing capital, management’s objective is to ensure that the entity
continues as a going concern as well as to provide optimal returns to
shareholders and other stakeholders.
Management also aims to maintain a capital structure that ensures the
lowest cost of capital available to the entity. Primary responsibility for
identification and control of capital and financial risks rests with the Treasury
Risk Management Committee.
4.1 Net Debt
Debt profile
Pact has the following non-current interest bearing loans and borrowings at 30 June:
$’000
Syndicated Facility Agreement A Tranche 1(1)
Syndicated Facility Agreement A Tranche 2(1)
Syndicated Facility Agreement B Tranche 1(1)
Syndicated Facility Agreement B Tranche 2(1)
Capitalised borrowing costs
Total non-current interest bearing loans and borrowings
Term
3 years
5 years
3 years
5 years
Average
interest rate
3.28%
3.48%
4.10%
4.38%
2016
295,000
112,000
71,473
85,767
(2,800)
561,440
2015
295,000
22,000
79,766
79,766
(3,632)
472,900
(1) The Group has a A$590.0 million facility (loans A above with total drawn debt: $407.0 million; 2015: $317.0
million) and a NZ$180.0 million facility (loans B above with total drawn debt: $157.2 million; 2015: $159.5
million). Each facility is split between a 3 year tranche maturing July 2018 and a 5 year tranche maturing
in July 2020. The Group uses interest rate swaps to manage interest rate risk. As a result of utilising these
swaps the average interest rate in the 3 year tranche is 3.84%.
Pact has incurred the following finance costs during the year ending 30 June:
$’000
Interest on Syndicated Facility Agreement
Borrowing costs amortisation
Interest rate swaps
Sundry items
Total finance costs
Loss on de-recognition of financial assets
Total finance costs & loss on de-recognition of financial assets
Notes
3.1
2016
23,748
1,446
1,695
392
27,281
3,363
30,644
2015
31,169
1,046
89
750
33,054
42
33,096
During the current and prior year, there were no defaults or breaches on any of the loan terms and conditions.
How Pact accounts for loans and borrowings
All loans and borrowings are:
Initially recognised at the fair value of the consideration received less directly attributable transaction costs.
•
• Subsequently measured at amortised cost using the effective interest method, which is calculated
based on the principal borrowing amount less directly attributable transaction costs.
• 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.
Fair value 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. As the underlying debt has a floating interest rate (excluding the impact of the separate
interest rate swaps), the Group’s own performance risk at 30 June 2016 was assessed to be insignificant.
The carrying amount of the Group’s current and non-current borrowings materially approximates fair
value. The computation of the fair value of borrowings is derived using significant observable inputs (Fair
Value Hierarchy Level 2).
Finance costs are recognised as an expense when incurred. Finance costs which are directly attributable
to the acquisition of, or production of, a qualifying asset are capitalised as part of the cost of that asset
using the weighted average cost of borrowings.
ANNUAL REPORT 2016
60
Notes to the Financial Statements
Section 4 – Our Capital Structure
4.1 Net Debt (continued)
Reconciliation of net profit after tax to net cash flows from operations
$’000
Net profit for the year
Non cash flows in operating profit:
Depreciation and amortisation
(Gain) / loss on sale of property, plant and equipment
Share of profit in associates
Share based payments expense
Other
Changes in assets and liabilities:
Decrease in trade and other receivables
(Increase) / decrease in inventory
Decrease in deferred tax assets
Increase in trade and other payables
Decrease in employee entitlement provisions
(Decrease) / increase in other provisions
(Decrease) / increase in current tax liabilities
Increase in deferred tax liabilities
Net cash flow provided by operating activities
Non-cash activities
2016
85,044
2015
67,691
57,688
(2,580)
(2,227)
382
2,367
16,985
(7,550)
2,050
9,889
(453)
(6,498)
(581)
6,273
160,789
56,249
1,511
(1,376)
-
2,134
62,245
3,795
1,020
38,113
(1,168)
12,543
699
6,951
250,407
$’000
Acquisition of assets, liabilities and business via issue of shares
Notes
2.1
2016
10,600
2015
1,900
How Pact accounts for cash and cash equivalents
Cash and cash equivalents in the Consolidated 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 change in value.
For the purposes of the Consolidated 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 Consolidated Statement of
Financial Position. Cash flows are included in the Consolidated 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.
PACT GROUP HOLDINGS LTD 61
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Notes to the Financial Statements
Section 4 – Our Capital Structure
4.2 Contributed Equity and Reserves
Terms, conditions and movements of contributed equity
Ordinary shares are classified as equity. Ordinary shares entitle the holder to participate in dividends and the
proceeds on winding up of the Company in proportion to the number of shares held.
Movements in contributed equity
Ordinary shares:
Beginning of the year
Issued during the year(1)
End of the year
(1) Shares issued during the year include:
2016
Number of
shares
2015
$’000’s
Number of
shares
$’000’s
294,555,855
2,205,025
296,760,880
1,491,497 294,097,961
457,894
1,502,097 294,555,855
10,600
1,489,597
1,900
1,491,497
• On 1 March 2016, 1,970,650 shares in the Company were issued as part of the acquisition of Power
Plastics Pty Ltd (refer Note 2.1), 985,325 shares are subject to voluntary escrow for 12 months and will
be released from escrow on 1 March 2017. The remaining 985,325 shares are subject to voluntary
escrow for 24 months and will be released from escrow on 1 March 2018.
• On 3 May 2016, 234,375 shares in the Company were issued as part of the acquisition of the assets of
EcoPolymers Pty Ltd (refer Note 2.1), the shares are subject to voluntary escrow for 12 months and will
be released from escrow on 4 May 2017.
How Pact accounts for 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.
Reserves
$’000
Foreign currency translation reserve(1)
Cash flow hedge reserve(2)
Common control transaction reserve(3)
Share based payments reserve(4)
Total reserves
2016
27,200
(2,498)
(928,385)
322
(903,361)
2015
20,394
(1,790)
(928,385)
-
(909,781)
(1) The foreign currency translation reserve is used to record foreign exchange fluctuations arising from the
translation of the financial statements of foreign subsidiaries.
(2) 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.
(3) The common control reserve of $928.4 million includes a balance of $942.0 million that arose through a
Group restructure in the financial year ended 30 June 2011, less $13.6 million in relation to the acquisition
of Viscount Plastics (China) Pty Ltd and Asia Peak Pte Ltd in the year ended 30 June 2014.
(4) The share based payments reserve records items recognised as expenses on the valuation of employee
rights issues.
ANNUAL REPORT 2016
62
Notes to the Financial Statements
Section 4 – Our Capital Structure
4.3 Managing Our Financial Risks
There are a number of financial risks the Group is exposed to that could adversely affect the achievement
of future business performance. The Group’s risk management program seeks to mitigate risks and reduce
volatility in the Group’s financial performance. Financial risk management is managed centrally by the
Treasury Risk Management Committee.
The Group’s principal financial risks are:
•
Interest rate risk;
• Foreign currency risk;
• Liquidity risk;
• Credit risk; and
• Commodity price risk.
Managing interest rate risk
Pact seeks to manage its finance costs by assessing and, where appropriate, utilising a mix of fixed and
variable rate debt. When variable debt is utilised it exposes the Group to interest rate risk.
What is the risk?
Pact has variable
interest rate debt,
and therefore
if interest rates
increase, the amount
of interest Pact is
required to pay
would also increase.
How does Pact manage this risk?
• Utilises interest rate swaps to
lock in the amount of interest
that Pact will be required to pay.
Impact at 30 June 2016
At 30 June 2016, the Group hedge cover is 44%
(2015: 52%) of its long term variable debt
excluding working capital facilities.
• Considers alternative financing
and mix of fixed and variable
debt, as appropriate.
Sensitivity analysis performed by management
showed that a +1% in AUD interest rates would
reduce net profit after tax by $1.1 million and
reduce equity by $0.5m (2015: $0.5 million
reduction in net profit after tax and $1.8m
increase in equity).
Sensitivity analysis performed by management
showed that a +1% in NZD interest rates would
reduce net profit after tax and equity by $1.1
million (2015: $1.1 million reduction).
(1) 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.
Managing foreign currency risk
The Group’s exposure to the risk of changes in foreign exchange rates relates to the Group’s (i) operating
activities which are denominated in a different currency from the entities functional currency, (ii) financing
activities, and (iii) net investments in foreign subsidiaries.
The Group currently operates in six countries outside of Australia, with the following functional currencies:
Country of domicile
Functional Currency
New Zealand
NZD
Thailand
THB
Singapore
USD
China
RMB
Philippines
PHP
Indonesia
IDR
PACT GROUP HOLDINGS LTD 63
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Notes to the Financial Statements
Section 4 – Our Capital Structure
4.3 Managing Our Financial Risks (continued)
As Pact has an Australian dollar (AUD) presentation currency, which is also the functional currency of its
Australian entities, this exposes Pact to foreign exchange rate risk.
Impact at 30 June 2016
The Group has a significant exposure to the USD
against the AUD and NZD from USD purchase
commitments, while the Group’s exposure to
sales denominated in currencies other than the
functional currency of the operating entity is less
than 1%.
At 30 June 2016, the Group has the majority of
its foreign currency committed purchase orders
hedged.
Sensitivity analysis of the foreign currency
contracts was performed to movements in the
Australian dollar against the relevant foreign
currencies, with all other variables held constant,
taking into account all underlying exposures and
related hedges.
This analysis showed that a 10% movement in
its major trading currencies would not materially
impact net profit after tax or equity.
There is no material impact from a change in FX
rates in other functional currencies on net profit
after tax or equity, if the movement was within
+/- 10%.
How does Pact manage this risk?
• 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.
What is the risk?
If transactions are
denominated in
currencies other
than the functional
currency of the
operating entity,
there is a risk of
an unfavourable
financial impact to
earnings if there is
an adverse currency
movement.
• Pact utilises borrowing in the
functional currency of the
overseas entity to naturally
hedge offshore entities where
considered appropriate. The
foreign currency debt provides
a balance sheet hedge of
the asset, while the foreign
currency interest cost provides
a natural hedge of the offshore
profit.
As Pact’s overseas
entities do not have
an Australian dollar
(AUD) functional
currency, if currency
rates move adversely
compared to the
AUD, then the
amount of AUD-
equivalent profit
would decrease and
the balance sheet
net investment value
would decline.
How Pact accounts for foreign currency transactions
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.
Non-monetary items that are measured at:
• Historical cost in a foreign currency are translated using the exchange rate as at the date of the initial
transaction.
• 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 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 the Consolidated Statement of Comprehensive Income.
ANNUAL REPORT 2016
64
Notes to the Financial Statements
Section 4 – Our Capital Structure
4.3 Managing Our Financial Risks (continued)
Managing liquidity risk
Liquidity risk arises from the financial liabilities of the Group and the Group’s ability to meet its obligations to
repay these financial liabilities as and when they fall due. Pact has a range of liabilities at 30 June that will be
required to be settled at some future date.
What is the risk?
The risk that Pact
cannot meet its
obligations to repay
its financial liabilities
as and when they
fall due.
How does Pact manage this risk?
• Having access to an adequate
amount of committed credit
facilities.
Impact at 30 June 2016
The Group is in a net current asset deficiency of
$31.8 million at balance date, however it has:
• $197.3 million of unused credit within its
• Maintains a balance between
continuity of funding and
flexibility through the use of
bank overdrafts, loans and
debtor securitisation.
syndicated facilitates; and
• $20.2 million unused overdraft facility.
The Directors have assessed that due to the
Group’s access to undrawn facilities and forecast
positive cash flows into the future they will be able
to pay their debts as and when they fall due, and
therefore it is appropriate the financial statements
are prepared on a going concern basis.
The maturity profile of the Group’s assets and liabilities based on contractual undiscounted receipt /
payments terms is as follows:
$’000
Year ended 30 June 2016
Financial assets(1)
Cash and cash equivalents
Trade and other receivables
Foreign exchange forward contracts(2)
Total inflows
Financial liabilities(1)
Trade and other payables
Foreign exchange forward contracts(2)
Interest rate swaps
Syndicated Facility Agreement(3)
Total outflows
Net inflow/(outflow)
Year ended 30 June 2015
Financial assets(1)
Cash and cash equivalents
Trade and other receivables
Foreign exchange forward contracts(2)
Total inflows
Financial liabilities(1)
Trade and other payables
Foreign exchange forward contracts(2)
Interest rate swaps
Syndicated Facility Agreements(3)
Total outflows
Net inflow/(outflow)
≤ 6 months
6–12 months
1–5 years
> 5 years
Total
51,885
114,604
87,255
253,744
-
-
1,723
1,723
-
905
455
1,360
(309,335)
(88,728)
(1,226)
(9,932)
(409,221)
(155,477)
-
(2,024)
(1,394)
(9,824)
(13,242)
(11,519)
(5,392)
(590)
(956)
(601,481)
(608,419)
(607,059)
32,612
93,685
66,553
192,850
-
-
260
260
-
-
1,283
1,283
-
-
-
-
-
-
-
-
-
-
-
-
-
-
51,885
115,509
89,433
256,827
(314,727)
(91,342)
(3,576)
(621,237)
(1,030,882)
(774,055)
32,612
93,685
68,096
194,393
(261,434)
(65,105)
(898)
(11,039)
(338,476)
(145,626)
-
(264)
(896)
(10,919)
(12,079)
(11,819)
-
(1,257)
(1,652)
(433,385)
(436,294)
(435,011)
-
-
-
(102,234)
(102,234)
(102,234)
(261,434)
(66,626)
(3,446)
(557,577)
(889,083)
(694,690)
(1) The Group’s principal financial instruments comprise cash, receivables, payables, bank loans, bank
overdrafts, finance leases and derivative instruments.
(2) Foreign exchange forward contracts are recorded as a net balance in the Consolidated Statement of Financial
Position, where in this table the contractual maturities are the gross undiscounted cash flows.
(3) 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.
PACT GROUP HOLDINGS LTD 65
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Notes to the Financial Statements
Section 4 – Our Capital Structure
4.3 Managing Our Financial Risks (continued)
Managing credit risk
Credit risk represents the loss that would be recognised if counterparties failed to meet their obligations under a
contract or arrangement. The Group is exposed to credit risk arising from its operating activities (primarily from
customer receivables) and financing activities. The Group manages this risk through the following measures:
• Operating activities: The Group has in place a number of mechanisms to manage its exposure to customer
credit risk, discussed in Note 3.1, including a debtor’s securitisation program where substantially all the
risks and rewards of the receivables within the program are transferred to a third party.
• Financial activities: Restricting dealings to counterparties with high credit ratings and limiting
concentration of credit risk.
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 Consolidated Statement of Financial Position.
Commodity price risk
The Group is exposed to commodity price risk from a number of commodities, mainly resin. In managing this risk
the Group is generally able to pass on the price risk contractually with customers through rise and fall adjustments.
Utilising hedging contracts to manage risk
As discussed above, the Group utilises interest rate swaps and foreign exchange forward contracts to hedge
its risks associated with interest rate and foreign currency fluctuations. All of Pact’s hedging instruments are
designated in cash flow hedging relationships, providing increased certainty over future cash flows associated
with foreign currency purchases or interest payments on variable interest rate debt facilities.
How Pact accounts for derivative financial instruments in a cash flow hedge relationship
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; and
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.
Derivative financial instruments are:
• Recorded at fair value at inception and every subsequent reporting date.
• Classified as assets when their fair value is positive and as liabilities when their fair value is negative.
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 (Fair value hierarchy level 2).
• Cross currency interest rate swaps and interest rate swap contracts is determined by reference to
market values for similar instruments.
The effective portion of the gain or loss on the hedging instrument is recognised directly in equity, while
the ineffective portion is recognised in the Consolidated Statement of Comprehensive Income.
Amounts taken to equity are transferred to the Consolidated Statement of Comprehensive Income
when the hedge transaction affects the Consolidated Statement of Comprehensive Income, 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 forecast transaction is no longer expected to occur, amounts previously recognised in equity are
transferred to the Consolidated Statement of Comprehensive Income. 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 Consolidated Statement of Comprehensive Income.
ANNUAL REPORT 2016
66
Notes to the Financial Statements
Section 5 – Remunerating Our People
This section provides financial insight into employee reward and recognition
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.
This section should be read in conjunction with the Remuneration Report,
contained within the Directors Report, which provides specific details on the
setting of remuneration for Key Management Personnel.
5.1 Employee Benefits Expenses and Provisions
The Group’s employee benefits expenses for the year ended 30 June were as follows:
$’000
Wages and salaries
Defined contribution superannuation expense
Other employee benefits expense
Share based payments expense
Total employee benefits expense
2016
300,414
16,197
23,834
322
340,767
2015
262,217
14,014
14,906
-
291,137
The Group’s non-current employee benefits provisions, $8,293,000 (2015: $7,012,000) relate to long serve
leave entitlements, while the current employee benefits provisions as at 30 June comprise of the following:
Annual leave
Long service leave
Total current provisions
16,807
13,322
30,129
14,397
11,759
26,156
How Pact accounts for 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.
Benefits expected to be settled within twelve 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 (except for Australia
where high quality corporate bond rates are used in accordance with the standards) with terms to
maturity and currencies that match, as closely as possible, the estimated future cash outflows.
PACT GROUP HOLDINGS LTD 67
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Section 5 – Remunerating Our People
5.2 Share Based Payments
Long Term Incentive Plan (LTIP)
An LTIP was introduced in 2016 as a component of the CEO’s remuneration, comprising the issue of
Performance Rights. The CEO is the sole participant in the LTIP for the current period and is entitled to
performance rights equal to 100% of annual base salary with a vesting period of three years. The LTIP scheme
commenced on 1 December 2015. Details of the LTIP can be found on page 29 of the Directors Report.
For the year ended 30 June 2016, 146,444 performance rights are expected to be granted to the CEO. These
rights were independently valued to establish the fair value in accordance with AASB2 Share Based Payments.
The fair value of each right at the valuation date of 22 June 2016 is $3.85. A total share based payment
expense of $127,312 in relation to the LTIP has been recognised in the current year.
The key assumptions in the independent valuation were as follows:
Share price at valuation date
Annualised volatility
Annual dividend yield
Risk free rate
Expected life of performance right
Model used
Initial Share Grant
$5.79
25.0%
4.0%
1.7%
31 months
Monte Carlo Simulation Model
The CEO is entitled to receive an initial share grant of $1 million in shares to be issued evenly at the
conclusion of each anniversary from 1 December 2015 for the first three years of employment. These
shares are subject to escrow until the three years of service has been completed. Should the CEO cease
employment during this time the shares will be forfeited.
The share based payments expense in relation to the initial share grant recognised in the current year was
$194,444.
The total share based payments expense arising from the LTIP and the initial share grant in the current year
was $321,756.
Employee Benefits Expense
The Group’s employee benefits expenses for the year ended 30 June were as follows:
$’000
Wages and salaries
Defined contribution superannuation expense
Other employee benefits expense
Share based payments expense
2016
300,414
16,197
23,834
322
2015
262,217
14,014
14,906
-
5.3 Key Management Personnel
Compensation of Key Management Personnel (KMP) of the Group
The amounts disclosed in the table below are the amounts recognised as an expense during the period
relating to KMP:
$’000
Short-term employee benefits
Post-employment benefits
Long-term benefits
Share based payments expense
Total compensation
2016
3,609
153
(28)
322
4,056
2015
3,468
169
6
-
3,643
ANNUAL REPORT 2016
68
Notes to the Financial Statements
Section 5 – Remunerating Our People
5.3 Key Management Personnel (continued)
The following table provides the total amount of transactions with related parties for the year ended
30 June 2016:
$’000
Related parties – director’s interests(1)
Sales to
related
parties
Purchases
from related
parties
Other
(income)
/ expense
with related
parties
Amounts
(owed to) /
receivable
from related
parties
2016
2015
10,051
9,385
19,048
19,544
293
14
681
568
(1) Related parties – director’s interests includes the following group of entities: P’Auer Pty Ltd, Pro-Pac
Packaging Limited, Centralbridge Pty Ltd (as trustee for the Centralbridge Unit Trust), Centralbridge Two Pty
Ltd, Centralbridge (NZ) Limited and Albury Property Holdings Pty Ltd.
P’Auer Pty Ltd (P’Auer)
P’Auer an entity controlled by Mr Raphael Geminder (the Non-Executive Chairman of Pact) 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.
Pro-Pac Packaging Limited (Pro-Pac)
Pro-Pac, an entity for which Mr Raphael Geminder owns approximately 49%, 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 fees under this arrangement are approximately $4.9 million (2015: $4.8
million) for the twelve months ended 30 June 2016. The supply arrangement is on arm’s length terms.
Terms and conditions of property leases with related parties
The Group leased 16 properties (13 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 Mr Raphael
Geminder and are therefore related parties of the Group (“Centralbridge Leases”). The aggregate annual rent
payable by Pact under the Centralbridge Leases for the year ended 30 June 2016 was $6.6 million (2015: $6.6
million). The rent payable under these leases was determined based on independent valuations and market
conditions at the time the leases were entered into.
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;
two of the leases contain 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.
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 ended 30 June 2016, the Group has not recorded any impairment of
receivables relating to amounts owed by related parties (2015: nil).
PACT GROUP HOLDINGS LTD 69
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Notes to the Financial Statements
Section 6 – Other Disclosures
This section includes additional financial information that is required by the
accounting standards and the Corporations Act 2001.
6.1 Basis of Preparation
Basis of preparation and compliance
This financial report:
• Comprises the financial statements of Pact Group Holdings Ltd, being the ultimate parent entity, and its
controlled entities as specified in Note 2.2.
Is a general purpose financial report.
•
• Has been prepared in accordance and complies with the requirements of the Corporations Act 2001,
Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting
Standards Board.
• Complies with International Financial Reporting Standards (IFRS) and Interpretations as issued by the
International Accounting Standards Board.
• Has been prepared on a historical cost basis except for derivative financial instruments, which are
measured at fair value.
• Has revenues, expenses and assets 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 GST
is recognised as part of the acquisition of the asset or as part of the expense item to which it relates.
The net amount of GST recoverable from or payable to the taxation authority is included as part of
receivables or payables in the Consolidated Statement of Financial Position.
• Has Research and development costs of $430,000 (2015: $392,000).
•
Is presented in Australian dollars with all values rounded to the nearest $1,000, unless otherwise
stated, in accordance with the ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument
2016/191 dated 1 April 2016.
• Has all intercompany balances, transactions, income and expenses and profit and losses resulting from
intra-group transactions eliminated in full.
The financial statements of the subsidiaries are prepared for the same reporting period as the Company, using
consistent accounting policies.
New Accounting Standards and Interpretations
There were no standards that were adopted during the year ended 30 June 2016 that have had a material
impact on the Group.
There are a number of Australian Standards and Interpretations that have been issued but are not yet
effective and have not been adopted by the Group at 30 June 2016. The following has been identified as those
which may impact the Group in the period of initial application:
New Standards, Interpretations or Amendments
AASB 2015-2 Amendments to Australian Accounting
Standards – Disclosure Initiative: Amendments to AASB 101
AASB 9 Financial Instruments(1)
Pact financial year that it is
effective if not early adopted
Commencing 1 July 2016 Not expected to have a
Impact on Pact financial results
material impact
Commencing 1 July 2018 Not expected to have a
material impact
AASB 15 Revenue from Contracts with Customers(1)
Commencing 1 July 2018 Management have
commenced an
assessment, which will be
completed in FY2017
AASB 16 Leases(1)
Commencing 1 July 2019 Management are currently
assessing the impact
(1) Including the associated amendments issued by the AASB that would need to be adopted upon adopting
this standard.
Comparatives
Comparative figures can be 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.
ANNUAL REPORT 2016
70
Notes to the Financial Statements
Section 6 – Other Disclosures
6.2 Other Gains / (Losses)
The amounts disclosed in the table below are the amounts recognised in the Statement of Comprehensive
Income:
$’000
Significant items
Acquisition Costs
Business Reorganisation Program
•
•
•
Business Reorganisation Program Total
Total significant items
restructuring costs
asset write downs
loss on partial disposal of subsidiary
Other gains / (losses)
Unrealised (losses) / gains on revaluation of foreign exchange forward contracts
Gain / (loss) on sale of property, plant and equipment
Realised net foreign exchange gains / (losses)
Total other gains / (losses)
Total significant items and other gains / (losses) before tax
6.3 Pact Group Holdings Ltd – Parent Entity Financial Statements Summary
$’000
Current assets
Total assets
Current liabilities
Total liabilities
Net assets
Issued capital
Retained earnings
Profit reserve
Total equity
Profit / (Loss) of the Parent entity
Total comprehensive income / (Loss) of the Parent entity
2016
2015
(2,913)
(2,691)
(7,759)
(834)
-
(8,593)
(11,506)
(49)
2,580
481
3,012
(8,494)
(6,788)
(12,582)
(1,486)
(20,856)
(23,547)
39
(1,511)
140
(1,332)
(24,879)
-
-
2016
346,944
2015
337,780
1,358,503 1,350,326
234
6,968
1,358,503 1,343,358
1,322,097 1,311,497
64
31,797
1,358,503 1,343,358
52,680
52,680
513
35,893
63,205
63,205
The above is a summary of the individual financial statements for Pact Group Holdings Ltd at 30 June. Pact
Group Holdings Ltd:
is the ultimate parent of the Group;
is a for-profit company limited by shares;
is incorporated and domiciled in Australia;
•
•
•
• has its registered office is at Level 1, Building 6, 650 Church Street, Richmond, Victoria, Australia; and
•
is listed on the Australian Stock Exchange (ASX) and its shares are publicly traded.
How Pact accounted for information within parent entity financial statements
The financial information for the Company has been prepared on the same basis as the consolidated
financial statements, except as set out below:
•
Investments in subsidiaries are accounted for at cost in the financial statements of Pact Group
Holdings Ltd.
PACT GROUP HOLDINGS LTD
Notes to the Financial Statements
Section 6 – Other Disclosures
6.4 Auditors Remuneration
During the period, the following fees were paid or payable for services provided by Pact Group Holdings Ltd’s
external auditors Ernst & Young:
$’000
Ernst & Young
Audit and Assurance Services
Audit and review of financial statements
Other assurance related services
Total remuneration for audit and other assurance services
Other Services
Tax compliance services and reviewing of company income tax returns
Tax consulting services and advice
Total remuneration for other services
Total auditor’s remuneration of Ernst & Young
6.5 Deed of Cross Guarantee
$’000
Closed group consolidated income statement
Profit before income tax
Income tax expense
Net profit for the year
Retained earnings at beginning of the year
Net profit for the year
Dividends provided for or paid
Transfers (to) / from reserves
Retained earnings at end of the year
2016
2015
1,300
528
1,828
138
334
472
2,300
1,300
543
1,843
248
259
507
2,350
2016
2015
65,894
(18,356)
47,538
8,120
47,538
(20,738)
-
34,920
47,595
(11,981)
35,614
(14,163)
35,614
(9,279)
(4,052)
8,120
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ANNUAL REPORT 2016
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Notes to the Financial Statements
Section 6 – Other Disclosures
6.5 Deed of Cross Guarantee (continued)
$’000
Closed group consolidated balance sheet
Current Assets
Cash and cash equivalents
Trade and other receivables
Inventories
Loans to related parties
Current tax assets
Other financial assets
Prepayments
Total Current Assets
Non-Current Assets
Trade and other receivables
Property, plant and equipment
Investments in subsidiaries
Investments in associates
Intangible assets and goodwill
Deferred tax assets
Total Non-Current Assets
Total Assets
Current Liabilities
Trade and other payables
Loans from related parties
Current tax liabilities
Provisions
Other current financial liabilities
Total Current Liabilities
Non-Current Liabilities
Trade and other payables
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
2016
2015
29,247
70,620
116,274
88,780
837
488
10,198
316,444
12,711
58,399
90,649
31,351
-
1,657
9,110
203,877
-
905
392,349
422,472
363,322
363,322
13,971
15,256
167,009
221,995
24,177
25,932
960,828
1,049,882
1,366,326 1,164,705
216,851
73,804
-
26,307
5,877
322,839
5,392
31,935
407,000
37,036
481,363
804,202
562,124
176,999
52,431
706
22,904
3,514
256,554
1,555
35,098
317,000
27,927
381,580
638,134
526,571
1,502,097 1,491,497
(973,046)
(974,893)
8,120
34,920
526,571
562,124
Pact has a number of Australian entities that are part to a Deed of Cross Guarantee (Deed), representing the
‘Closed Group’, entered into in accordance with ASIC Class Order 98/1418. This Deed grants these entities
relief from preparing and lodging audited financial statements under the Corporations Act 2001.
The Closed Group is in a net current asset deficiency at balance date, however the Directors have assessed
that due to the Group’s access to undrawn facilities and forecast positive cash flows into the future they will
be able to pay their debts as and when they fall due (refer Note 4.3 Managing our financial risks).
PACT GROUP HOLDINGS LTD Notes to the Financial Statements
Section 6 – Other Disclosures
6.6 Geographic Sales
Australia is Pact’s largest sales region with $1,027.9 million sales made to Australian based customers during
the year ended 30 June 2016 (2015: $905.4 million). Pact’s second largest region is New Zealand, with
$288.2 million sales made to New Zealand based customers during the year ended 30 June 2016
(2015: $280.4 million).
6.7 Subsequent Events
On 1 July 2016 the Group acquired the assets, brands and trademarks of the Fruit Case Company (FCC),
for a provisional consideration of $16.9 million. FCC operates crate pooling and hire in New Zealand.
The acquisition aligns with the Group’s strategic intent to expand within the materials handling sector.
The acquisition includes the following:
$’000
Provisional Consideration paid
Provisional Fair value of identifiable net assets
Provisional Goodwill arising on acquisition
AUD
16,930
3,178
13,752
Goodwill represents the provisional value attributed to established networks and strong long term
relationships that FCC currently enjoys with growers and retailers.
Other than the matter mentioned above, in the opinion of the Directors, there have been no other material
matters or circumstances which have arisen between 30 June 2016 and the date of this report that have
significantly affected or may significantly affect the operations of the Group, the results of those operations
and the state of affairs of the Group in subsequent financial periods.
The accounting for this acquisition is preliminary and therefore the Group is currently unable to make further
disclosures as required by the relevant Accounting Standards.
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ANNUAL REPORT 2016
74
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 2016 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 6.1;
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; and
3. As at the date of this Declaration, there are reasonable grounds to believe that the members of the
Closed Group identified in Note 6.5 will be able to meet any obligations or liabilities to which they are or
may become subject by virtue of the Deed of Cross Guarantee described in Note 6.5.
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 2016.
This Declaration is made in accordance with a resolution of the Directors.
Raphael Geminder
Chairman
Malcolm Bundey
Managing Director and Chief Executive Officer
Dated 24 August 2016
PACT GROUP HOLDINGS LTD
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ANNUAL REPORT 2016Pact Group Holdings Ltd55A member firm of Ernst & Young Global LimitedLiability limited by a scheme approved under Professional Standards LegislationIndependent auditor’s report to the members of Pact Group HoldingsLtdReport on the financial reportWe have audited the accompanying financial report of Pact Group Holdings Ltd, which comprises theConsolidated Statement of Financial Position as at 30 June 2016, the Consolidated Statement ofComprehensive Income, the Consolidated Statement of Changes in Equity and the ConsolidatedStatement of Cash Flows for the year then ended, notes comprising a summary of significantaccounting policies and other explanatory information, and the directors' declaration of theconsolidated entity comprising the company and the entities it controlled at the year's end or fromtime to time during the financial year.Directors' responsibility for the financial reportThe directors of the company are responsible for the preparation of the financial report that gives atrue and fair view in accordance with Australian Accounting Standards and theCorporations Act 2001and for such internal controls as the directors determine are necessary to enable the preparation ofthe financial report that is free from material misstatement, whether due to fraud or error. In Note 6.1,the directors also state, in accordance with Accounting Standard AASB 101Presentation of FinancialStatements, that the financial statements comply with International Financial Reporting Standards.Auditor's responsibilityOur responsibility is to express an opinion on the financial report based on our audit. We conducted ouraudit in accordance with Australian Auditing Standards. Those standards require that we comply withrelevant ethical requirements relating to audit engagements and plan and perform the audit to obtainreasonable 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 inthe financial report. The procedures selected depend on the auditor's judgement, including theassessment 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'spreparation and fair presentation of the financial report in order to design audit procedures that areappropriate in the circumstances, but not for the purpose of expressing an opinion on the effectivenessof the entity's internal controls. An audit also includes evaluating the appropriateness of accountingpolicies used and the reasonableness of accounting estimates made by the directors, as well asevaluating the overall presentation of the financial report.We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis forour audit opinion.IndependenceIn conducting our audit we have complied with the independence requirements of theCorporations Act2001. We have given to the directors of the company a written Auditor’s Independence Declaration, acopy of which is included in the Directors’ Report.Ernst & Young8 Exhibition StreetMelbourne VIC 3000 AustraliaGPO Box 67 Melbourne VIC 3001Tel: +61 3 9288 8000Fax: +61 3 8650 7777ey.com/au
76
PACT GROUP HOLDINGS LTD Pact Group Holdings Ltd56A member firm of Ernst & Young Global LimitedLiability limited by a scheme approved under Professional Standards LegislationOpinionIn our opinion:a.the financial report of Pact Group Holdings Ltd is in accordance with theCorporations Act2001, including:igiving a true and fair view of the consolidated entity's financial position as at 30 June2016 and of its performance for the year ended on that date; andiicomplying with Australian Accounting Standards and theCorporations Regulations2001; andb.the financial report also complies withInternational Financial Reporting Standards asdisclosed in Note 6.1.Report on the remuneration reportWe have audited the Remuneration Report included in the Directors’ Report for the year ended 30June 2016. The directors of the company are responsible for the preparation and presentation of theRemuneration Report in accordance with section 300A of theCorporations Act 2001. Ourresponsibility is to express an opinion on the Remuneration Report, based on our audit conducted inaccordance with Australian Auditing Standards.OpinionIn our opinion, the Remuneration Report of Pact Group Holdings Ltd for the year ended 30 June 2016,complies with section 300A of theCorporations Act 2001.Ernst & YoungGlenn CarmodyPartnerMelbourne24 August 2016 77
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I N F O R M AT I O N
ANNUAL REPORT 2016OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTS
78
S H A R E H O L D E R
I N F O R M A T I O N
The shareholder information set out below is based on the information in the Pact
Group Holdings Ltd share register as at 20 September 2016.
Ordinary shares
Pact has on issue 299,234,086 fully paid ordinary shares.
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 current substantial shareholders in the Company
pursuant to notices lodged with the ASX in accordance with section 671B of the
Corporations Act as at 20 September 2016:
Name
Geminder Holdings Pty Ltd
Mondrian Investment Partners Limited
(in the capacity of Fund Manager)
Investors Mutual Ltd
Date of interest
17/12/13
06/06/14
Number of
ordinary shares
117,036,546
24,716,860
% of issued
capital
39.11
8.26%
29/02/16
15,025,300
5.02%
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 and over
Total
Ordinary Shares
Number of holders Number of securities
573,774
4,447,255
4,306,702
9,850,470
280,055,885
299,234,086
1,213
1,612
579
408
47
3,859
There were 80 holders of less than a marketable parcel of ordinary shares (minimum
of $500 which is equivalent to 79 ordinary shares based on a market price of $6.32 at
the close of trading on 20 September, 2016).
PACT GROUP HOLDINGS LTD 79
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Top twenty largest shareholders
The names of the twenty largest quoted equity security holders as they appear on the Pact Group Holdings
Ltd share register are listed below:
Name
Geminder Holdings Pty Ltd
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Limited
National Nominees Limited
Citicorp Nominees Pty Limited
RBC Investor Services Australia Nominees Pty Limited
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