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PAC T 2018 A NNUA L R EP OR T c
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION 2
11
27
Overview
3
6
10
A Message from the Chairman
About Pact Group
Financial and Operational Highlights
Performance
Review of Operations & Financial Performance
11
22 Growth Initiatives
26 Innovation and Awards
Governance
28 Sustainability
28 Corporate Governance Overview
Financial Reports
38 Directors' Report
— Remuneration Report
49 Auditor's Independence Declaration
50 Financial Statements
94 Directors' Declaration
95 Independent Auditor's Report
Shareholder Information
102 FY18 Shareholder Calendar
105 Corporate Directory
29
101
“The Group has a solid
platform for the future.
Our diversification
strategy has positioned
the business well to
take advantage of the
significant growth
opportunities we see
ahead of us.”
Raphael Geminder
Executive Chairman
PAC T 2018 A NNUA L R EP OR T 1
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION 2
A MESSAGE FROM
THE cHAIRMAN
Dear Shareholder
Dividends
On behalf of the Board of Directors of Pact Group, I am delighted
to present to you our 2018 Annual Report following what has been
another transformational but also challenging year.
Despite the challenges of the macro environment the Group has
continued to deliver strong operating cashflows and disciplined
balance sheet management, and consequently remains able to
deliver strong cash returns to our shareholders. The Board of
Group Performance and business Review
Directors has declared a final dividend of 11.5 cents per share,
Group sales revenue of $1.7 billion increased 13.5% compared to
the prior year, driven primarily by transformational growth initiatives
franked to 65%, in-line with the prior year. The total dividend
declared in respect of FY18 was 23.0 cents per share, also in-line
including the Group’s new crate pooling business in Australia and
with the equivalent from FY17.
the Asian acquisition completed in the second half of the year. Both
of these strategic initiatives are performing well. Underlying sales
were also ahead with organic growth in the contract manufacturing,
Executing Our Strategy
The Group’s strategy focusses on maximising long-term shareholder
sustainability and infrastructure sectors, along with improved
value through:
rigid packaging volumes in health and wellness. These were partly
• Organic growth — by protecting our core and growing
offset by lower materials handling volumes along with lower rigid
organically over the longer term;
packaging volumes in dairy and agriculture.
Group EBITDA before significant items of $237 million was 2%
• Efficiency — by embedding a culture of operational excellence
and targeting the lowest cost of production; and
ahead of the prior year.
• M&A — delivering growth through a disciplined approach
EBIT for the year of $165 million was 3% lower than the prior year
to M&A.
with higher depreciation and amortisation from acquisitions and
We have continued to deliver on this strategy in FY18.
the new crate pooling business. Net profit after tax (NPAT) before
significant items was $94.7 million, 5% lower than FY17, and statutory
NPAT was $74.5M compared to $90.3 million in the prior year
Through our organic growth pillar our new crate pooling business
in Australia was commissioned on schedule in August 2017 — the
largest organic growth project ever undertaken by the business.
Underlying volumes have been stable and we have remained
We also delivered stable underlying volumes in the period,
focussed on driving efficiency and improvements in our business
supported by our enhanced portfolio diversity.
through operational excellence. However, raw material and energy
input costs have been particularly challenging in FY18 and this is
Efficiency benefits continue to be delivered through our operational
reflected in our earnings for the year. Earnings were impacted by
excellence programs, and during FY18 we also commenced the
time lags in the recovery of those raw material price movements,
transformation of our Australian rigid packaging business.
with the impact exacerbated by significant and rapid movements
late in the year. Recovering sharply higher energy costs in the
second half of the year also proved difficult.
PAC T 2018 A NNUA L R EP OR T 3
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION Whilst we enjoy scale and geographic advantages in this sector,
We have a successful and growing business dedicated to recycling
the network includes a number of acquisitions completed over a
and assisting our customers to meet their sustainability targets. We
long period of time and as such it is critical that we are constantly
are also proud to have developed and manufactured a variety of
challenging ourselves to ensure that we are making the right
sustainable packaging solutions for our customers utilising recycled
products, in the right place and on the right equipment. The aim is to
materials.
create an integrated supply network with opportunities for improved
productivity, utilisation and quality driving significant cost benefits.
Through the Pact 2025 Promise, the Group intends to extend its
commitment to sustainability, by delivering on ambitious goals by
The Group has also continued to drive growth and transformation
2025 to:
through our disciplined approach to M&A. In the second half of the
1. Reduce — eliminate all non-recyclable packaging that we
year the Group completed the strategic acquisition of the Asian
packaging operations of Closure Systems International and the
Guangzhou China facility of Graham Packaging Company — the
largest acquisition undertaken by the Group since IPO — and
completed the acquisition of ECP Industries, building scale and
providing attractive growth opportunities in their sectors. The
acquisition of TIC Retail Accessories will further enhance those
opportunities. The TIC acquisition, which is expected to complete on
1 October 2018, adds further scale to the Group’s portfolio, expands
our Asian platform and leverages our capability in asset pooling and
plastics manufacturing. TIC has transformed the garment hanger
industry eliminating significant waste by providing a sustainable
and innovative service solution and furthers Pact’s sustainability
credentials.
Sustainability
Sustainability remains a core pillar of Pact’s commitment to its
customers, employees and the communities in which we operate.
Our vision is to enrich lives everyday through sustainable packaging
solutions, and through our long-standing War on Waste program we
have remained at the forefront with our commitment to reducing
waste throughout the supply chain.
produce
2. Reuse — have solutions to reduce, reuse and recycle all single
use secondary packaging in supermarkets
3. Recycle — offer 30% recycled content across all of our packaging
portfolio
Innovation
Innovation is a key advantage and our ability to differentiate
through innovation, deliver innovation excellence and provide
end-to-end customer solutions remains critical to our success.
We are Australasia’s most innovative packaging company, having
been included on the Australian Financial Review’s Most Innovative
Companies List for the sixth consecutive year — the only packaging
company to achieve such recognition. Our innovation team includes
award winning product development, process, technical and design
managers and market specialists. We are extremely proud of their
achievements.
Our People
The people across our businesses are also critical to our success.
Employees from across the organisation continue to submit
innovative and original ideas for process and productivity
improvements through our reward and recognition program
Applause. The program fosters a culture of engagement, motivates
and rewards employees and provides a central digital platform that
creates a knowledge sharing community.
We remain committed to providing a safe and sustainable work
environment for all our employees. Safety outcomes were improved
in the year, supported by our operational excellence programs
and through a variety of ongoing cultural change initiatives. We will
continue to focus on driving an improved safety culture across all
our sites through these initiatives, with further benefits expected as
we progress our rigid packaging network transformation.
4
board changes
Thank You
I would like to take this opportunity to highlight changes to your
Board of Directors since our last Annual Report.
In September we announced the resignation of Malcolm Bundey,
the Group’s Chief Executive Officer and Managing Director.
Mal achieved a great deal during his time with Pact, leading the
transition of the business into a more diversified Group and
overseeing our expansion into contract manufacturing, pooling
On behalf of the Board of Directors I would like to thank all
our shareholders for your continued support and to express
our appreciation also to our customers, suppliers and other
stakeholders. I would also like to convey our thanks to our
committed management team and employees across the business
for their dedication in driving results and the Group’s continued
transformation in what has been a challenging year.
services and Asia. The Board and I would like to extend our thanks
Notwithstanding these challenges, we are confident that we have
to Mal for his tireless efforts and contribution to the business and
the right platform and strategies in place to drive the business
we wish him well as he embarks on the next stage of his career.
forward, deliver growth in FY19 and continue to reward all of our
Whilst the Board conducts a search for a new Chief Executive, I have
stakeholders. I look forward to updating you on our progress.
Raphael Geminder
Executive Chairman
temporarily been appointed to the role of Executive Chairman until
such time as an appointment is made.
Following our recent acquisitions and growing presence in Asia,
the region has become more important to the Group and is likely
to continue to increase in significance with opportunities to grow
locally and also in relation to supply into our core markets in
Australia and New Zealand.
In order to be in a position to fully realise these exciting
opportunities, it was deemed critical to add someone with executive
and operational experience in Asia to the Board. In that context,
after an extensive search, we were delighted to confirm the
appointment of Carmen Chua as a Non-executive Director of Pact
from 1 September 2018.
Carmen is based in Hong Kong and has been the President of Laird
China since 2017. Prior to that Carmen was VP and GM Materials at
Avery Dennison Corporation from 2008 to 2017 and has also held
positions across sales, marketing and business development with
organisations such as Worldmark International, Dell Corporation,
Don Print and Adampak. We welcome Carmen to Pact and look
forward to the benefit of her energy, experience and insight across
China and South East Asia.
Outlook
The Group has a solid platform for the future. Our diversification
strategy has positioned the business well to take advantage of the
significant growth opportunities we see ahead of us. Our strategic
growth initiatives are performing in-line with expectations, we
remain focussed on efficiency and will continue to challenge cost
headwinds. The business today is more complex and of far greater
scale than it has ever been and we are undertaking a review of our
operating model to ensure that we have the correct management
structure, transparency and organisational capability in place to
deliver the greatest potential returns going forward.
PAC T 2018 A NNUA L R EP OR T 5
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION AbOUT
PAcT GROUP
Pact is a leading provider of
specialty packaging solutions
servicing both consumer and
industrial sectors.
Pact specialises in the manufacture and supply or rigid plastic and
metal packaging, materials handling solutions, contract manufacturing
services, recycling and sustainability services.
Diversity and Scale
The Group has a highly diversified product and service portfolio with
broad end-market reach and an attractive customer base, including
supply to major regional and global brand owners.
6%
59%
2018
Revenue1
by product
22%
13%
Rigid plastic and metal packaging
Materials handling products and solutions
Contract manufacturing services
Other2
Rigid plastic and
metal packaging
• Market leader in rigid plastic
Contract
manufacturing
services
packaging in Australia and
• A leading supplier of contract
Materials handling
and infrastructure
products
and solutions
Recycling and
sustainability
services
• Leading supplier of
New Zealand with a growing
position in Asia
• Leader in select rigid metals
packaging sectors in Australia
manufacturing services
in Australia for the home,
personal care and health and
wellness categories
and New Zealand
• Manufacturing capability for
liquid powder, aerosol and
therapeutic nutraceutical
products
• Leading supplier of polymer
sustainability, environmental,
materials handling products
reconditioning and recycling
services
• Largest provider of
returnable produce crate
(RPC) pooling services in
Australia and New Zealand
• Leading supplier of
custom moulded products
used in infrastructure and
other projects
1 Assumes full year contribution from Asia and ECP Acquisition.
2 Other includes recycling services, infrastructure and other custom moulded products.
6
OPERATIONS IN
10
COUNTRIES
China
South Korea
Nepal
Thailand
India
Singapore
Philippines
Indonesia
Australia
New Zealand
The Group benefits
from regional
scale, supported
by approximately
5,500 team members
and an extensive
manufacturing and
supply network
across Australia, New
Zealand and Asia.
AUSTRALASIA'S
MOST
INNOVATIVE
PACKAGING
COMPANY
Innovation
Pact differentiates through world class innovation, delivering high
quality solutions to customers, supported by global licencing
arrangements. Widely recognised for our innovation excellence,
Pact has been included on the Australian Financial Review’s (AFR)
Most Innovative Companies List for 6 consecutive years — the
only packaging company to receive such recognition.
Strategy
Our strategy is to deliver long-term value through focus on three key pillars:
Protect our core and grow
organically
Operational excellence and
efficiency
Growth through a disciplined
approach to M&A
PAC T 2018 A NNUA L R EP OR T 7
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION Vision
Our vision is to enrich lives everyday
through sustainable packaging and
manufacturing solutions.
Pact is committed to sustainable packaging and through its War on Waste program
targets waste reduction throughout the entire supply chain.
Pact’s 2025 Promise extends the Group’s commitment to become the number one
partner of sustainable choices for our customers.
T H E
PACT
2025
P R O M I S E
1 .
R E D U C E
2 .
R E U S E
3 .
R E C Y C L E
BY 2025 PACT GROUP
BY 2025 PACT GROUP
BY 2025 PACT GROUP WILL
WILL ELIMINATE ALL NON-
WILL HAVE SOLUTIONS
RECYCLABLE PACKAGING
TO REDUCE, REUSE AND
OFFER 30% RECYCLED
CONTENT ACROSS ITS
THAT WE PRODUCE
RECYCLE ALL SINGLE USE
PACKAGING PORTFOLIO
SECONDARY PACKAGING
IN SUPERMARKETS
8
8
Case Study
Reuse
Lewis Road’s
100% rPET milk
bottle range
Pact is proud to have designed and manufactured a range of
750ml and 1.5 litre milk bottles from 100% recycled polyethylene
terephthalate (rPET) for iconic New Zealand dairy brand – Lewis Road.
based on Lewis Road’s
current volumes, this
equates to saving
343.4 tonnes
of virgin PET
per annum.
PAC T 2018 A NNUA L R EP OR T 9
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION FINANcIAL AND
OPERATIONAL
HIGHLIGHTS
Strategic initiatives
delivering growth in-
line with expectations
— New crate
pooling business
commissioned
— Integration of Asian
Acquisition progressing
to schedule
Sales revenue up
13% to $1.7 billion
EBITDA1 up 2%
to $237 million
NPAT1 of $95 million,
5% lower than FY17
Earnings impacted by
significantly higher input
costs and higher
depreciation and
amortisation
Stable
Strong focus
on efficiency
Continued strong
cash generation
underlying volumes
and operational
and balance sheet
effectiveness
management
Total dividends
of 23.0 cps
TIC acquisition
announced
5 Year Financial History
3
4
1
1
9
4
2
1
1
8
3
1
5
7
4
1
4
7
6
1
8
9
1
9
0
2
0
2
2
3
3
2
7
3
2
FY14
FY15
FY16
FY17
FY18
FY14
FY15
FY16
FY17
FY18
Sales revenue $m
EBITDA1 $m
7
4
1
3
5
1
3
6
1
9
6
1
5
6
1
0
6
5
8
4
9
0
0
1
5
9
FY14
FY15
FY16
FY17
FY18
FY14
FY15
FY16
FY17
FY18
EBIT1 $m
NPAT1 $m
1 Before significant items.
10
E
c
N
A
M
R
O
F
R
E
P
PAC T 2018 A NNUA L R EP OR T 11
PAC T 2018 A NNUA L R EP OR T 11
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION REVIEW OF
OPERATIONS
AND FINANcIAL
PERFORMANcE
The Group has reported sales revenue of $1,674.2
million for the year ended 30 June 2018, up 13%
compared to the prior corresponding period (pcp).
Statutory net profit after tax (Statutory NPAT) for
the year was $74.5 million, compared to $90.3 million
in the pcp. NPAT before significant items (NPAT)3 for
the year was $94.7 million (pcp: $100.0 million).
Summary
• Sales revenue up 13.5% to $1,674.2 million (pcp: $1,475.3
million)
• EBITDA1 up 1.8% to $237.3 million (pcp: $233.1 million)
• EBIT2 of $164.5 million (pcp: $169.4 million) impacted by higher
depreciation and amortisation of $9.0 million
• Stable underlying volume supported by portfolio diversity
— Solid underlying revenue growth in the contract
manufacturing, sustainability and infrastructure sectors
— Lower materials handling volumes due to raw material
shortages and timing of government projects
— Lower rigid packaging volumes impacted by a major customer
• NPAT3 of $94.7 million (pcp: $100.0 million)
plant closure and drought conditions in Australia
• EBITDA impacts of $13.0 million from higher raw material input
• Strong focus on efficiency and operational effectiveness
costs and Australian energy costs in the second half, partially
— Transformation of the Australian rigid packaging network
mitigated by cost recovery in the market
commenced with two plants closed and management
• Strong revenue and earnings growth from strategic growth
structures realigned
initiatives, in-line with expectations
— Efficiency benefits from operational excellence programs
— Australian crate pooling business fully commissioned with
delivered
financial returns in line with expectations
• Adverse impact from foreign exchange movements
— Integration of Asian acquisition well advanced and
progressing to schedule
• Continued strong cash generation and a robust balance sheet —
gearing4 of 2.5x and interest cover5 of 7.4x
• Final ordinary dividend of 11.5 cents per share, franked to 65%
— total dividends for the year of 23.0 cents per share, in-line
with the pcp
Footnotes within Review of Operations and Financial Performance are set out on page 21.
12
Key Financial Highlights – $millions
$millions
Sales Revenue
EBITDA1
EBIT2
NPAT3
Statutory NPAT
Total Dividends — cents per share
2018
1,674.2
237.3
164.5
94.7
74.5
23.0
2017
1,475.3
233.1
169.4
100.0
90.3
23.0
Change %
13.5%
1.8%
(2.9%)
(5.3%)
(17.5%)
—
Note: EBITDA, EBIT and NPAT are non-IFRS financial measures and have not been subject to audit by the Company’s external auditor. Refer to page 21 for definitions.
business Highlights
• Strong revenue and earnings growth delivered from
transformational growth initiatives, including contributions
from the Asian Acquisition (acquired 15 February 2018, with
CSI Nepal completed on 25 May 2018); the acquisition of ECP
— Acquisition completed of ECP Industries, a West Australian
based intermediate bulk container (IBC) and tank
reconditioning business, providing national coverage and
attractive growth opportunities in the Group’s sustainability
businesses.
Industries (completed 30 November 2017); the new Australian
— Strategic growth in asset pooling with the announcement
crate pooling business supporting fresh produce supply to
of the acquisition of TIC Retail Accessories Pty Ltd (TIC), a
Woolworths (commissioned August 2017); and incremental
provider of innovative and sustainable closed loop plastic
contributions from the acquisition of contract manufacturers
garment hanger and accessories re-use services. This
APM and Pascoe’s made in the prior year.
• Continued diversification in the Group’s product and service
portfolio and geographic reach through acquisition:
— Enhancement of the Group geographic diversity following
the completion of the acquisition of the Asian packaging
acquisition leverages the Group’s demonstrated capability in
closed loop asset pooling and plastics manufacturing, adding
further scale to the Group’s portfolio and expanding its
Asian platform. The acquisition is expected to complete on 1
October 2018, subject to customary conditions.
operations (excluding Japan) of CSI and the Guangzhou China
• Organic growth delivered in Australia in the contract
facility of Graham Packaging Company. The acquisition is
manufacturing, sustainability and infrastructure sectors.
strongly aligned with the Group’s capability in rigid packaging,
builds scale to the existing footprint in Asia and significantly
enhances customer diversity, manufacturing, technology and
management capability to accelerate growth within the region.
• Despite challenging macro conditions, the Group demonstrated
disciplined management of significantly higher raw material and
energy costs in the second half of the year.
• Efficiency benefits delivered through operational excellence
programs in-line with expectation.
• Continued strong operating cash flow and disciplined balance
sheet management.
PAC T 2018 A NNUA L R EP OR T 13
PAC T 2018 A NNUA L R EP OR T 13
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION Group Results
$’000
Sales revenue
Other revenue (excluding interest revenue)
Expenses
EBITDA1
EBITDA margin
Depreciation and amortisation
EBIT2
EBIT margin
Significant items (before tax)
EBIT
Net finance costs
Income tax expense
Significant tax items
Statutory NPAT
2018
1,674,188
12,739
(1,449,676)
237,251
14.2%
(72,745)
164,506
9.8%
(23,305)
141,201
(32,076)
(37,769)
3,132
74,488
2017
1,475,336
9,621
(1,251,841)
233,116
15.8%
(63,700)
169,416
11.5%
(13,040)
156,376
(30,197)
(39,216)
3,378
90,341
Change %
13.5%
1.8%
(2.9%)
(9.7%)
(17.5%)
Sales Revenue
Group sales revenue of $1,674.2 million increased 13.5% ($198.9
million) compared to the pcp, driven by transformational growth
initiatives and higher underlying sales.
Acquisitions delivered $130.8 million. This included contributions
from the acquisitions of the Asia acquisition and ECP Industries
in FY18, along with incremental impacts from the acquisitions of
Pascoe’s and Australian Pharmaceutical Manufacturers (APM)
completed in FY17.
Excluding the contribution from acquisitions, sales revenue was
4.6% ahead of the pcp. Underlying sales growth was driven by the
new Australian crate pooling business, supporting fresh produce
supply for Woolworths, which was commissioned in August 2017. In
addition, solid volume growth was delivered in the Group’s contract
manufacturing, sustainability and infrastructure sectors.
Rigid packaging volumes were down. Improved demand in the health
and wellness sector was offset by lower volumes in the dairy, food
and beverage sector in Australia, adversely impacted by a major
customer plant closure, weakness in the agricultural sector due to
drought conditions in Australia and weak industrial demand in China.
Materials handling volumes were down on the prior year due to the
timing of government projects in New Zealand and raw material
shortages in Australia following a major supplier plant outage across
May and June.
from contract extensions in the prior year and foreign exchange.
Efficiency benefits from operational excellence programs and lower
costs following the start-up of new contracts in Jalco in the prior
year mitigated continued higher costs to serve in the Australian rigid
packaging businesses.
EBIT of $164.5 million for the year was $4.9 million or 2.9% lower
than the pcp with higher depreciation and amortisation from
acquisitions and the new crate pooling business.
EBIT margins of 9.8% were 1.7% lower than the pcp due to lower
margins from contract extensions, higher input costs and changes
in the portfolio mix following the Asia acquisition.
Significant Items
Pre-tax significant items for the year were an expense of $23.3
million. This included deferred settlement costs ($8.8 million) due
primarily to a higher earn-out for the Pascoe’s acquisition, which
performed ahead of expectations, acquisition costs ($4.4 million)
due mainly to the Asian acquisition, and business reorganisation
costs ($10.1 million) related primarily to the rigid packaging network
transformation and two site closures. The pre-tax significant items
of $13.0 million in the prior year related to costs associated with the
2015 Efficiency Program ($3.0 million), other business restructuring
activities completed in the year ($4.5 million), acquisition costs ($2.2
million) and start-up costs related to the new crate pooling business
in Australia ($3.3 million).
Pricing was generally higher in the period, due largely to the pass
Net Finance costs
through of higher input costs, partly offset by the impact of contract
extensions in the prior year.
EbIT
Group EBITDA of $237.3 million was 1.8% ahead of the pcp, with a
solid contribution from growth initiatives that was partially offset by
the adverse impact of time lags in recovering higher raw material
costs following a significant and rapid increase in input prices
in the second half, higher Australian energy costs, lower pricing
Net financing costs for the year of $32.1 million were $1.9 million
higher than the pcp. The net expense for FY18 excludes $0.1 million
in capitalised interest compared to $1.0 million in the pcp. Excluding
the impact of capitalised interest, net financing costs were $1.0
million higher. Underlying financing costs and debt levels were
stable, with the increase in the net expense primarily related to
higher losses on derecognition of financial assets (due to increased
utilisation of the securitisation program) along with higher sundry
interest costs.
14
Income Tax Expense and Significant Tax Items
balance Sheet
The income tax expense for the year of $37.8 million represents an
effective rate of 28.5% of net profit before tax and significant items,
broadly in line with statutory tax rates payable by the Group across
its main operating jurisdictions. This compares to $39.2 million in
the pcp at an effective tax rate of 28.2%.
The significant tax item for the year is a benefit of $3.1 million
relating to the significant items noted above. In the prior year the
significant tax item was a benefit of $3.4 million.
Net Profit After Tax
Statutory NPAT for the year was $74.5 million compared to $90.3
million in the pcp. Excluding significant items, NPAT was $94.7
million compared to $100.0 million in the pcp.
$’000
Cash
Other current assets
Property plant & equipment
Intangible assets
Other assets
Total assets
Interest bearing liabilities
Other liabilities, payables &
provisions
Total liabilities
Net assets
Net debt6
2018
67,980
385,636
755,413
584,193
57,365
2017
39,592
310,988
677,132
547,333
55,345
1,850,587 1,630,390
686,210
667,253
600,134
539,072
1,267,387 1,225,282
405,108
646,618
583,200
599,273
Change %
71.7%
24.0%
11.6%
6.7%
3.6%
13.5%
(2.8%)
11.3%
3.4%
44.0%
(7.3%)
2019 Outlook
The Group expects to achieve higher revenue and earnings (before
significant items) in FY19, subject to global economic conditions.
Net debt at the end of the financial year was $599.3 million, a
reduction of $47.3 million compared to the pcp. The reduction in
net debt was supported by continued strong underlying operating
cash flows and the proceeds of an equity raising of $176 million
The following is also relevant to earnings expectations in FY19.
completed in the first half of the year. Disciplined cash and balance
Including the impact to earnings from the acquisition of TIC, which is
sheet management have enabled the funding of successful
anticipated to complete on 1 October 2018, the Group expects:
acquisition and capital related growth initiatives.
• EBITDA (before significant items) between $270 million and $285
million;
The Group has several revolving debt facilities and a working capital
facility with total commitments of $1,001.1 million. The facilities are
• Depreciation and amortisation between $84 million and $86
spread across multiple maturities, with the working capital facility
million;
• Net finance costs between $38 million and $40 million, subject to
changes in market interest rates; and
• An effective tax rate (% of net profit before tax and significant
items) between 29.0% and 29.5%.
The completion of the acquisition of TIC remains subject to
customary conditions.
revolving with an annual review. The debt facilities include a $378.6
million loan facility maturing in July 2020, a $183.5 million loan facility
maturing in January 2023, a $297.6 million loan facility maturing in
March 2023 and a $120 million loan facility maturing in November
2024. Average tenor has been increased to 3.9 years.
The increase in the Group’s other current assets of $74.7 million
relates primarily to receivables and inventory held by newly acquired
businesses, along with underlying higher raw material inventory
levels impacted by higher raw material input costs. The increase
in property plant and equipment of $78.3 million predominantly
relates to acquisitions.
The increase in the Group’s intangible assets of $36.9 million is
due primarily to goodwill recognised on acquisitions arising in
FY18 ($46.4 million) less foreign exchange translation of $6.2
million relating to New Zealand dollar denominated goodwill and
amortisation of $3.5 million.
The increase in the Group’s other liabilities, payables and provisions
of $61.1 million relates primarily to increased trade and other
payables, impacted by acquisitions and higher input costs.
Financing metrics
Gearing4
Interest cover5
2018
2.5x
7.4x
2017
2.8x
7.7x
Change
(0.3)
(0.3)
The Group maintains robust financing metrics. As at 30 June 2018
gearing was 2.5x, an improvement from 2.8x in the pcp, driven by a
combination of EBITDA growth and lower net debt. Both gearing and
interest cover remain within the Group’s targeted levels.
PAC T 2018 A NNUA L R EP OR T 15
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION
cash Flow
$’000 — Key items
Net cash flow provided by operating activities
Payments for property, plant and equipment
Purchase of businesses and subsidiaries, net of cash acquired
Net proceeds from share issue
Payment of dividend
2018
150,423
(90,180)
(127,863)
172,573
(72,648)
2017
171,466
(116,390)
(138,245)
—
(67,056)
Change %
(12.3%)
(22.5%)
(7.5%)
—
8.3%
Statutory net cash flow provided by operating activities, including
proceeds from securitisation of trade debtors, was $150.4
million in FY18, $21.0 million lower than the pcp. The inflow from
securitisation of trade debtors was $3.2 million in the financial
year compared to $16.2 million in the pcp. Excluding securitisation
inflows, statutory operating cashflow was $7.8 million lower than the
pcp. Higher underlying operating cash flows were more than offset
by higher tax and interest cash payments in the period compared
to the pcp.
Payments for property, plant and equipment were $90.2 million
in the financial year compared to $116.4 million in the pcp. The
decrease of $26.2 million reflects lower capital expenditure relating
to the establishment of the crate pooling business in Australia,
and lower expenditure relating to the investment in a new health
and wellness packaging facility in Australia, which was largely
completed in the prior year. These reductions were partly offset by
an investment in facilities in New Zealand to support a new contract
with a key customer in the dairy sector, to be commissioned in FY19,
and investments in efficiency related projects.
Payments for purchase of businesses and subsidiaries, net of cash
acquired, in FY18 was $127.9 million. This includes $122.4 million
for the Asia acquisition (representing provisional cash consideration
paid of $142.5 million less $20.1 million cash acquired) and $10.3
million for the acquisition of ECP Industries, less final adjustments
relating to prior year acquisitions of $4.8 million.
Other key cash flows during the year were the receipt of net
proceeds from the share issues completed in the first half of the year
of $172.6 million and ordinary dividend payments of $72.6 million.
16
Review of operations
Pact Australia
Pact International
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 comprises
the Group’s operations in New
Zealand, china, the Philippines,
Indonesia, Singapore,
Thailand, South Korea, India,
Nepal and Hong Kong.
Pact Australia contributed 76% of the Group’s total sales revenue in
Pact International contributed 24% of the Group’s total sales revenue
the year ended 30 June 2018.
in the year ended 30 June 2018.
$’000
Sales revenue
EBIT2
EBIT margin %
2018
1,279,880
103,421
8.1%
2017
1,117,829
99,529
8.9%
Change %
14.5%
3.9%
(0.8%)
$’000
Sales revenue
EBIT2
EBIT margin %
2018
394,308
61,085
15.5%
2017
357,507
69,887
19.5%
Change %
10.3%
(12.6%)
(4.0%)
Pact Australia achieved growth in both sales revenue and EBIT in
Pact International delivered sales revenue growth in FY18, whilst
FY18.
EBIT and margins were lower than the pcp.
Sales revenue of $1,279.9 million was up $162.1 million or 14.5%
Sales revenue of $394.3 million was up $36.8 million, or 10.3%,
compared to the pcp. Sales benefitted from acquisition impacts of
compared to the pcp. The Asia acquisition, completed in February
$64.1 million relating to the acquisition of ECP Industries in FY18
2018, contributed $66.6 million. Excluding the acquisition, sales
and the full year effect of the acquisitions of Pascoe’s and APM.
were $29.8 million lower than the pcp, partly due to adverse foreign
Excluding acquisitions, underlying sales in the Australian segment
exchange translation impacts of $10 million.
were $98.0 million higher than the pcp, driven by crate pooling
Underlying sales were lower than the pcp due mostly to lower
revenues and organic growth in the contract manufacturing,
demand in the materials handling sector, impacted by the timing
sustainability and infrastructure sectors. Rigid packaging volumes
were down. Improved demand in the health and wellness sector
of government projects in New Zealand, and lower industrial
demand in China. Rigid packaging volumes were generally flat. Sales
was offset by lower volumes in the dairy, food and beverage sector,
were also adversely impacted by lower pricing following contract
adversely impacted by a major customer plant closure, and lower
extensions.
sales into the agricultural sector due to drought conditions. Materials
handling volumes, excluding crate pooling, were down, due to raw
material shortages following a major supplier plant outage in May
and June.
EBIT of $61.1 million was $8.8 million or 12.6% lower than the pcp,
with the Asia acquisition delivering an incremental $3.0 million to
EBIT. Earnings were bolstered by the realisation of benefits from
operational excellence programs and strong controllable cost
EBIT of $103.4 million was up $3.9 million or 3.9% compared to the
management, but these benefits were more than offset by the
pcp. Benefits from stronger volumes and efficiency improvements
short-term time lag in recovering raw material input costs, the
delivered through operational excellence programs were partly
impact of the lower volumes in China and New Zealand Government
offset by lower pricing following contract extensions in the prior
projects, lower pricing following contract extensions in the prior year
year, higher costs to serve in the rigid packaging businesses, and
and unfavourable foreign exchange impacts.
unrecovered energy and raw material costs. Disciplined pricing
actions partially mitigated the impact of significantly higher raw
material input costs in the period, but inherent time lags between
raw material cost movements and pricing actions adversely
impacted earnings following a rapid increase in input prices in
the second half. As anticipated only around 25% of energy cost
increases could be recovered in the market through pricing.
The EBIT margin of 8.1% was down 0.8% on the pcp.
The EBIT margin of 15.5% was down 4.0% on the pcp.
PAC T 2018 A NNUA L R EP OR T 17
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION On 15 August 2018, the Group announced that it had entered
into an agreement to acquire TIC Retail Accessories Pty Ltd (TIC),
a division of the TIC group of companies, for $122.5 million. TIC
is a closed loop plastic garment hanger and accessories re-use
business. In addition, the agreement contains provisions for
earn-out payments of up to $30 million, payable on the delivery
of specific financial hurdles for the 2019 and 2020 financial years.
Completion is expected to occur on 1 October 2018, subject to
customary conditions.
Other Events of Significance
Acquisitions
On 30 November 2017, the Group purchased the net assets of
ECP Industries Pty Ltd, a West Australian based intermediate
bulk container (IBC) and bulk liquid tank container reconditioning
business for a consideration of $10.7 million. The acquisition
provides the Group with the capability to offer national coverage
for these services and opportunities for further growth in the
sustainability sector.
On 15 February 2018, the Group acquired shares and assets in
CSI International (CSI) and Graham Packaging Group (GPC) and
completed the acquisition of Closure Systems International Nepal
on 25 May 2018. For the total acquisition the Group recognised
gross consideration of $149.3 million. CSI is a leader in plastic
closure design, manufacturing, and high-speed capping equipment
and application systems. GPC produces plastic bottles via injection
blow moulding and extrusion blow moulding. The acquisition
complements Pact's existing capability and customer footprint in
Asia, and includes seven manufacturing sites across China, South
Korea, Nepal, India and the Philippines.
18
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 — by protecting our core and growing
organically over the longer-term;
• Efficiency — by embedding a culture of operational excellence
and targeting the lowest cash cost of production; and
• M&A — growth through disciplined, accretive M&A in existing
sectors and close adjacencies.
Mergers &
Acquisitions
Growth through
a disciplined
approach to
M&A
PACT
STRATEGY
Organic
Growth
Protecting our
core and growing
organically
Efficiencies
Operational excellence
and efficiency
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
The Group will continue to review all areas of the business for
efficiency opportunities in the pursuit of operational excellence.
In-line with this element of the Group’s strategy, the Board has
endorsed a broad program of work targeting transformational
change through an organisational redesign of the Group’s rigid
packaging network. The program is intended to comprise eight
interdependent workstreams targeting the creation of a single
integrated supply network. Initial phases of this program were
implemented in FY18 resulting in the closures of two plants and the
implementation of a more focussed management structure aligned
to an integrated supply network. The remaining workstreams
remain subject to further financial and stakeholder analysis.
competitive advantage. A core focus of the Group is innovation.
Pact is widely recognised for our dedication to supplying some
M&A
of the most innovative products in the market, supported by
our in-house innovation capability and extensive global licencing
arrangements. The Group’s commitment to innovation has been
recognised through multiple industry and customer awards. Pact
are the only packaging company to have achieved recognition
for six consecutive years on the Australian Financial Review’s (AFR)
prestigious Most Innovative Companies List, from 2013 to 2018.
During FY18 the Group delivered organic growth through the
successful commissioning of the new crate pooling business,
through strong demand in key contract manufacturing segments
The Group has a 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
driven earnings growth and enabled the Group to expand and
diversify its product and customer portfolio.
All 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
and with a stable rigid packaging portfolio, supported by contract
in year three.
extensions in the prior year.
Efficiency
The Group is committed to delivering operational excellence and
the lowest cost of production.
In the period, the Group continued to progress the implementation
of its operational excellence programs which focus on the adoption
of lean manufacturing techniques across the Group’s manufacturing
footprint. The program has delivered earnings benefits in-line with
expectations in FY18, mitigating higher input costs, and is expected
to drive further improvements in FY19 and beyond.
Discipline in deal execution is provided by a centrally managed
acquisition and 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.
The acquisition of CSI Asia (excluding Japan) and Graham Packaging
(China) has materially enhanced the Group’s Asian footprint and
customer diversity, providing the Group with a broader range
of opportunities to drive growth in the region. In addition, the
acquisition of TIC will expand the Group’s asset pooling capability
and geographic reach in the materials handling sector.
PAC T 2018 A NNUA L R EP OR T 19
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION business 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.
Material financial risks, not in order of significance, are listed below.
Details of the Group’s environmental and social sustainability risks
are reported in the Group’s Sustainability Review.
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.
People Risks
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.
Competitor Risks
Consumer Preferences
Changes in consumer preference for Pact’s products or adverse
Pact operates in a highly competitive environment due to factors
activities in key industry sectors which Pact and its customers
including actions by existing or new competitors, price, product
service may be influenced by various factors. These industry
selection and quality, manufacturing capability, innovation and
sectors include consumer goods (eg. food, dairy, beverages,
the ability to provide the customer with an appropriate range of
personal care and other household consumables) and industrial
products and services in a timely manner. Any deterioration in the
(eg. surface coatings, petrochemical, agriculture and chemicals)
Group's competitive position as a result of actions from competitors
industry sectors. Factors which may influence these sectors include
may result in a decline in sales revenue and margins, and an
climate conditions, seasonality of foods, an increased focus in
adverse effect on the Group's future financial performance.
Australian and New Zealand supermarket chains on private brands,
and reputation of products, substrates (eg. plastics, recycled and
recyclable materials) 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.
20
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, the Thai baht, the
South Korean won, the Indian rupee, the Nepalese rupee and the
Hong Kong dollar 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.
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, including modern slavery, work health and safety,
property, environmental, competition, anti-bribery and corruption,
customs and international trade, taxation and corporations.
Strategic Acquisitions
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. Large capital projects
are also scrutinised to ensure the associated risks are appropriately
managed to ensure return on capital investment and project
milestones are achieved.
Footnotes
This report includes certain non-IFRS financial information which have 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 refers to EBITDA before significant items and 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 refers to EBIT before significant items and is a non-IFRS financial measure which is calculated as earnings before significant items, finance costs (net of interest revenue) and tax.
(3) NPAT refers to NPAT before significant items and 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 rolling 12 months EBITDA. Net debt is calculated as interest bearing liabilities less cash and cash
equivalents
(5) Interest cover is a non-IFRS financial measures which is calculated as rolling 12 months EBITDA divided by rolling 12 months net interest expense.
(6) Net debt is a non-IFRS financial measure and is calculated as interest bearing liabilities less cash and cash equivalents.
PAC T 2018 A NNUA L R EP OR T 21
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION GROWTH
INITIATIVES
Pact has grown from a
rigid packaging business
generating $200 million
in sales revenue in 2002
to a diversified provider
of speciality packaging
and materials handling
solutions generating
almost $1.7 billion in sales
revenue in FY18.
In the last two years in particular, the Group has diversified its product
and service portfolio through transformational investments in areas
offering attractive growth opportunities. We have grown our contract
manufacturing portfolio through the acquisitions of Australian
Pharmaceutical Manufacturers (APM) and Pascoe’s and have
enhanced our materials handling platform, establishing leading closed
loop pooling positions in Australia and New Zealand for the supply
of returnable produce crates. During FY18 the Group continued to
pursue transformational growth initiatives, including:
•
the completion of a strategic acquisition in Asia, enhancing the
Group’s geographical footprint and providing a strong platform
for growth in the region;
•
further investment in Australia in the materials handling and
sustainability sectors through the acquisition of ECP Industries,
an intermediate bulk container (IBC) and tank reconditioning
business;
• an agreement to acquire TIC Retail Accessories, providing an
opportunity to further leverage the Group’s demonstrated
capability in asset pooling and plastics manufacturing; and
• a program to redesign our rigid packaging network, providing
opportunities to improve productivity, utilisation and quality and
to significantly reduce costs.
22
Expanding in Asia
In February 2018 the Group completed the acquisition of the
Asian packaging operations (excluding Japan) of Closure Systems
International (CSI)1 and the Guangzhou China facility of Graham
Packaging Company (GPC). This acquisition has expanded our
footprint in Asia and significantly enhances customer diversity,
manufacturing, technology and management capability in the region.
Other
International
22%
Australia
75%
Other
International
17%
Australia
70%
Asia
3%
2013
Revenue by
Geography
Asia
13%
Today
Revenue1 by
Geography
Investment highlights
Leading positions
Strong, long-
Multiple
Delivers a step
Strategic
Pact’s largest
in regions with
term customer
opportunities for
change in our
acquisition in
acquisition since
positive market
relationships with
future growth,
customer base and
complementary core
IPO — aligning
dynamics
large global FMCG
including:
scale in the Asia
competencies
with our strategy
customers and
— Provides a greater
region — from ~$50
emerging local
Asian platform for
million revenue to
manufacturers
expansion
~$200 million p.a.
to grow via
disciplined M&A
— New closures
opportunities in
water an dairy
sectors
1 Assumes full year contribution from Asia Acquisition and ECP Industries.
PAC T 2018 A NNUA L R EP OR T 23
PAC T 2018 A NNUA L R EP OR T 23
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION Growing our Asset Pooling Platform
• TIC RA’s re-use program is a global closed loop supply chain
In August 2017 the Group successfully commissioned, on schedule,
our new crate pooling business in Australia supporting fresh produce
supply to Woolworths. This has been the largest organic growth
initiative undertaken by the Group to date, complements existing
which supplies plastic garment hangers and accessories to
garment manufacturers. The hangers and accessories are
collected from retail stores after the sale of the garments,
sorted and then distributed back to the garment manufacturers
crate pooling operations in Australia and New Zealand and provides
for re-use
a significant opportunity to leverage the platform for future growth
• The re-use program provides customers with a sustainable
opportunities.
TIC Retail Accessories
In August 2018 the Group announced the acquisition of TIC Retail
Accessories, a provider of innovative and sustainable closed loop
plastic garment hanger and accessories re-use services. This strategic
acquisition expands the Group’s closed loop asset pooling capability,
adds scale to our portfolio and further enhances our Asian platform.
It is also strongly aligned with the Group’s commitment to provide
sustainable packaging and supply chain solutions to our customers.
Overview of TIC RA
• TIC RA, established in 1989, transformed the garment hanger
industry, eliminating significant waste from single-use plastic
hangers and accessories by pioneering a closed loop re-use
program. TIC RA is now the leading supplier of re-use services in
Australia
supply chain solution which significantly reduces waste, with re-
use rates of up to 80%
• Attractive client portfolio includes major retail brands and
leading department stores in Australia, New Zealand, UK and
USA supplied through garment manufacturers located largely in
Asia.
• Strong global team of over 800 employees supporting sales,
manufacturing, sorting and warehousing
• FY18 sales of $95 million
Today Pact enjoys leading positions not only in the supply of rigid
packaging, but also in materials handling, sustainability solutions and
contract manufacturing services across Australia, New Zealand and
Asia. The acquisition of TIC will complement our offering.
24
Transforming our Rigid Packaging Network
Pact’s business today is of greater scale than it has ever been. Rapid
growth through acquisition has created a complex rigid packaging
distribution network in Australia.
The Group is assessing opportunities for further transformational
changes through an organisational redesign of this network.
The first phase of this program was implemented in FY18, resulting
in the closures of two manufacturing facilities and the realignment of
management structures. Further workstreams are subject to financial
and operational analysis.
Investment and Returns Potential
•
Investment payback hurdle of <3.5 years
• Potential ongoing cash benefits of up to $50 million annually,
subject to financial and operational analysis
T H E F U T U R E : A N
I N T E G R A T E D S U P P L Y
N E T W O R K
T H E
O P P O R T U N I T Y
• Reduced manufacturing footprint
•
Improved operations management and higher asset
•
•
Integrated sales and operations planning
Increased automation
• Focussed centre of excellence
•
Import supply chain that leverages the Asian Acquisition
• A portfolio strategy driving future investment
• Period to achieve future state of 3–5 years
utilisation
•
•
Improved productivity
Improved quality
• Lower freight costs
•
Improved inventory control and reduced
warehousing costs
•
Improved training and safety
PAC T 2018 A NNUA L R EP OR T 25
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION INNOVATION
In 2018 Pact
Group was
honoured to
be recognised
as one of
Australasia’s
Most Innovative
Companies
for the sixth
consecutive
year.
The prestigious annual list, published by The Australian Financial Review, is based on a
rigorous assessment process. More than a thousand companies enter these awards
every year and Pact is honoured to be the only packaging company, and one of only three
companies in all of Australasia to make the prestigious list for the past six consecutive years.
Pact has invested in two dedicated Innovation Centres that comprise cross-functional
teams from industrial designers and engineers, to marketing and sustainability specialists.
They come together with the sole purpose of challenging conventional thinking and identify
opportunities that drive transformational change for our customers.
Awards
Our five strategic values are the backbone of our business and inform all our decisions and
the way we behave:
• We walk in our customers’ shoes to serve them better
• We are committed to sustainability and providing an honest, safe and respectful
environment
• We are passionate about driving results
• We pursue opportunities for transformational change
• We act with speed and purpose
We’re very proud that throughout the past year we’ve received awards and recognition for
the work that we’ve been done to reflect these priorities.
corporate
Industry
customer
Australian Financial Reviews (AFR’s) Most
Innovative Companies Lists — 2018, 2017,
2016, 2015, 2014, 2013
Wealth & Finance International Global
Excellence Awards — 2018 Most Innovative
Packaging Company of the Year
Acquisition International Leading Advisor
Awards 2018 — Leading Creative Packaging
Solutions Provider of the Year — Australia
2018 Worldstar Winner — Moisturelock rPET
Meat Tray
2018 Supplier of the Year — Blackmores
2018 Product of the Year — ALDI Almat
Laundry Liquid (Laundry)
2018 Product of the Year — ALDI Power
Force Pro Bath and Shower Cleaner
(Household Cleaning)
2018 Product of the Year ALDI Lacura
Naturals Verde Hand Wash (Hand and Body
Corporate USA Today Annual Awards —
2018 Company of the Year (Manufacturing)
Care)
Australia
26
E
c
N
A
N
R
E
V
O
G
PAC T 2018 A NNUA L R EP OR T 27
PAC T 2018 A NNUA L R EP OR T 27
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION SUSTAINAbILITY
Pact’s vision defines our behaviour,
shapes our culture, and guides the
way we do business. Sustainability is
a central part of our vision; to enrich
lives every day through sustainable
packaging and manufacturing solutions.
We recognise that our business operations impact many people, including our employees,
customers, shareholders, suppliers, and the broader communities in which we operate. Our
annual Sustainability Review sets out our performance across a range of indicators covering
the environmental, social, people and governance aspects of our business can be access
from: https://pactgroup.com.au/sustainability/
cORPORATE
GOVERNANcE
The board recognises the importance
of good corporate governance and its
role in ensuring the accountability
of the board and management to
shareholders.
The Board is concerned to ensure that the Group is properly managed to protect and
enhance shareholder interests and that the Company, its Directors, officers, and employees
operate in an appropriate environment of corporate governance.
The Board has adopted a corporate governance framework comprising principles and
policies that are consistent with the ASX Corporate Governance Council’s Corporate
Governance Principles and Recommendations (third edition) (ASX Recommendations).
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-statement.
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.
28
S
T
R
O
P
E
R
L
A
I
c
N
A
N
I
F
PAC T 2018 A NNUA L R EP OR T 29
PAC T 2018 A NNUA L R EP OR T 29
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION
FINANcIAL
REPORT
consolidated Financial Report
For the year ended 30 June 2018
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 jointly controlled
entities at the end of, or during the year ended 30 June 2018.
This Consolidated Financial Report was issued in accordance with
a resolution of the Directors on 15 August 2018.
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 year; and
•
it relates to an aspect of the Group’s operations that is important
to its future performance.
Preparing 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 restructuring
• Note 5.1 Defined benefit plans
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 Defined benefit plans
5.2
5.3
5.4
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
Auditors remuneration
6.5 Deed of Cross Guarantee
6.6
Segment assets and segment liabilities
6.7
Revenue from services rendered
6.8 Geographic sales
6.9
Subsequent events
Directors’ Declaration
Independent Auditor’s Report
31
49
50
51
52
53
54
56
57
58
60
62
64
66
71
72
73
75
76
82
84
85
85
87
90
90
91
91
93
93
93
93
94
95
30
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 2018.
DIREcTORS
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 Women’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 Melbourne Rebels Rugby Union Ltd, and the Florey Institute of Neuroscience and
Mental Health and several private companies.
Former listed company directorships in last three years
Non-Executive Director of Treasury Wine Estates Limited (2011–2017), Tatts Group Limited (2005–2017).
* The date of this report is August 15 2018. Since the date of this report Mr Malcolm Bundey has tendered his resignation and will depart the
Company after a period of leave. The Board has appointed Mr Raphael Geminder as Executive Chairman effective from 9 September 2018 until
such time as a new CEO has been appointed.
PAC T 2018 A NNUA L R EP OR T 31
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION Directors’ Report
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 DUniv, 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 AFL Victoria. He is also a Director of the Ricky Ponting Foundation.
Former listed company directorships in last three years
Chairman of Calibre Global Limited (2012–2015), Chairman of Toll Holdings Limited (2007–2016).
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. He is
currently the Executive Chairman of Asahi Beverages ANZ, and previously was Chief Executive Officer of Goodman
Fielder Limited. Prior to that Peter was Chief Executive Officer and Chief Operating Officer of National Foods Limited.
Peter has also held senior management roles in Simplot Australia Limited, Pacific Brands Limited (formerly known as
Pacific Dunlop Limited), East Asiatic Company and HJ Heinz Company Australia Limited.
Peter holds a Bachelor of Science from the University of New South Wales and a Master of Business Administration
from Monash University.
Other current directorships
Non-Executive Director of Bega Cheese Limited, 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
Limited (retired August 2016).
32
Directors’ Report
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 was 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).
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
Nil.
Executive
Malcolm Bundey
Former Managing Director and Chief Executive Officer
Member of the Board from 1 December 2015 to 9 September 2018.
Malcolm was the Managing Director and Chief Executive Officer of Pact. Malcolm resigned from the Board effective
9 September 2018. 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 global paper and packaging company. In 2011 he took on
the concurrent roles of President and CEO of Closure System International (CSI), a global closure packaging business
and Graham Packaging, a global rigid packaging and machinery business. Prior to this Malcolm was a partner at
Deloitte, where he worked from 1987 to 2003.
Other current directorships
No other external directorships
company Secretary
Jonathon West
Company Secretary
Jonathon West was appointed to the positions of General Counsel and Company Secretary as well as 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.
PAC T 2018 A NNUA L R EP OR T 33
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION Directors’ Report
Directors’ shareholding
As at the date of this report, the relevant interests of the Directors in the shares of the Company or a related
body corporate were as follows:
Raphael Geminder
Lyndsey Cattermole
Peter Margin
Jonathan Ling
Ray Horsburgh
Malcolm Bundey
Directors’ meetings
Relevant Interest
in Ordinary Shares
131,668,287
276,705
29,436
20,052
42,261
—
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:
Raphael Geminder
Lyndsey Cattermole
Peter Margin
Jonathan Ling
Ray Horsburgh
Malcolm Bundey
Directors’ Meetings
Audit, Business Risk and
Compliance Committee
Nomination and
Remuneration Committee
Meetings
held
11
11
11
11
11
11
Meetings
attended
11
11
11
11
9
11
Meetings
held
NM
6
6
NM
6
NM
Meetings
attended
NM
6
6
NM
6
NM
Meetings
held
4
4
4
4
NM
NM
Meetings
attended
4
4
4
4
NM
NM
NM — Not a member of the relevant committee
Principal activities
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, contract manufacturing services, recycling and sustainability services.
34
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
12 to 21 of this Annual Report.
Dividends
On 15 August 2018, the Directors determined to pay a final dividend of 11.5 cents per share partially franked to
65%. The dividend is payable on 4 October 2018. The record date for entitlement to the dividend is 23 August 2018.
The table below shows dividends paid (or payable) during the year ended 30 June 2018.
Dividends
current year to 30 June 2018
Final Dividend (per ordinary share)
Interim Dividend (per ordinary share)
Prior Year to 30 June 2017
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
11.50 cents
11.50 cents
7.48 cents
7.48 cents
4.02 cents
4.02 cents
4 October 2018
5 April 2018
11.50 cents
11.50 cents
7.48 cents
7.48 cents
4.02 cents
4.02 cents
5 October 2017
5 April 2017
The dividend pay out ratio of the Company’s net profit after tax before significant items attributable to shareholders
for the 12 months ended 30 June 2018 is 81% (2017 69%).
Other events of significance
Please refer to the Review of Operations and Financial Performance in the ASX announcement on 15 August 2018.
Significant events after balance date
On 15 August 2018 the Group announced it had entered into an agreement to acquire TIC Retail Accessories Pty
Ltd (TIC), a division of the TIC group of companies, for $122.5 million. TIC is a closed loop plastic garment hanger
and accessories reuse business. In addition, the agreement contains provisions for earn-out payments of up to $30
million, payable on the delivery of specific financial hurdles for the 2019 and 2020 financial years. Completion is
expected to occur on 1 October 2018, subject to customary conditions.
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 2018 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 used to ensure compliance and completion of all required actions.
On occasions, 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 ensures 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 in September 2018.
PAC T 2018 A NNUA L R EP OR T 35
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION Directors’ Report
Share options and rights
Refer to the Remuneration Report (Section 3) for further details on share rights on issue. There are no share options
on issue in the Company.
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 (the
Act) or any other applicable law. In addition, a wholly owned subsidiary of the Company has entered into deeds of
indemnity in 2015 for five years with its then current and former Directors and Secretaries involved in a transaction
which was being contemplated at the time, to 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 Act. 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 Director's and officer's 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.
Indemnification of auditors
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 Act.
Proceedings on behalf of the company
No person has applied to the court under section 237 of the Act 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 Act.
36
Directors’ Report
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:
$'000
Tax services
Other assurance related services
Total
2018
356
302
658
2017
538
573
1,111
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 Act.
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 Act 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.
PAC T 2018 A NNUA L R EP OR T 37
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION Directors’ Report — Remuneration Report
Remuneration report (audited)
This Remuneration Report for the year ended 30 June 2018 outlines the remuneration arrangements of the Group in
accordance with the requirements of 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 2018
5. Executive KMP contracts
6. Non-Executive Directors’ remuneration arrangements
7. Equity holdings of KMP
8. Related party transactions with KMP
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 Managing
Director and 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
Position
Term as KMP in 2018
Non-Executive Chairman
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Managing Director and CEO
Chief Financial Officer
Full Year
Full Year
Full Year
Full Year
Full Year
Full Year
Full Year
There have been no other changes to KMP after the reporting date and before the date the Financial Report was
authorised for issue.
38
Directors’ Report — Remuneration Report (cont.)
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 to:
•
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 Non-Executive Directors 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.
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
recommendations of the consultants are to be provided directly to the Chairman of the Committee.
During the year EY provided advice on the share acquisition rules for Directors to sacrifice fees, and also provided
guidance on the tax implications of the CEO’s LTIP offer letter. The Company paid EY $23,051 for these services.
The CEO or CFO had no involvement in the engagement or any ongoing instruction of EY. The Group did not
engage any other remuneration consultants during the year. Accordingly the Board is satisfied that remuneration
advice and recommendations received during the year were free from undue influence by the KMP to whom the
advice or recommendation relates. The appointment of EY for the provision of these services did not impact on the
independence of EY as auditors of the Company and the Group, because EY was not involved in the final design of
LTIP offer letters and share acquisition plan rules.
PAC T 2018 A NNUA L R EP OR T 39
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION Directors’ Report — Remuneration Report (cont.)
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) and a LTIP for both the CEO
and CFO.
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 to acquire fully paid ordinary
shares in the Company for nil consideration, 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.
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 2018 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 %
36%
35%
19%
10%
100%
Richard Betts %
65%
31%
4%
—
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 pages 42 and 45
in the Remuneration Report).
40
Directors’ Report — Remuneration Report (cont.)
Detail of Incentive Plans
STI
Both the CEO and CFO participate in a STI which is paid in cash and dependent on achieving agreed
performance targets for the following:
• EBITDA before significant items;
• cash conversion and working capital management; and
• non-financial measures that include safety, risk management, diversity targets and talent management.
Participation in the STI is dependent on the Group exceeding an EBITDA hurdle equal to 95% of target
EBITDA. If this hurdle is not achieved no rewards are required to be paid to the CEO and CFO under the STI.
The Board considers these measures to be appropriate as they are strongly aligned with the interests of
shareholders. Group EBITDA, cash conversion and working capital targets are key indicators of the underlying
growth of the business, enabling the payment of dividends to shareholders.
The table on page 43 provides additional information on these performance measures, including an overview
of performance versus target in the current year.
LTIP
Both the CEO and CFO participate in the LTIP, with an entitlement to performance rights to acquire fully
paid shares in the Company, equal to 100% of annual base salary (ABS) for the CEO and 30% of fixed annual
remuneration for the CFO with a vesting period of three years.
Key features of the LTIP are outlined below:
Grant Value
Performance rights are granted based on the volume weighted average price (VWAP) of the Pact Group
share price over the five day period following the Company’s announcement of its full year financial results.
The number of performance rights granted represents the CEO and CFO’s entitlement for that full year. For
details on the performance rights granted for the FY2017 LTIP and FY2016 LTIP please refer to the respective
Annual Reports.
Share based payments expense is based on the fair value of the performance rights over the performance
period.
Performance Period
The performance period for the FY2016 LTIP is from 1 December 2015 to 30 November 2018. For all
subsequent fiscal years, the performance period commences on the first day of that fiscal year and is
measured over three years.
PAC T 2018 A NNUA L R EP OR T 41
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION Directors’ Report — Remuneration Report (cont.)
Performance Hurdles
Vesting of each LTIP tranche will be subject to the Company achieving its relative Total Shareholder Return (TSR)
hurdle:
• This hurdle was selected by the Committee as it is clearly aligned with returns to shareholders. TSR is calculated
by measuring the return to shareholders based on the Company’s share price growth combined with the value
of dividends declared and paid over the three year performance period.
• The 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 sectors. The peer group has been
selected by the Board at the time of the grant.
• The percentage of rights 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
Vesting %
100%
Between the 50th and 75th percentile
pro rata vesting between 50% to 100%
At the 50th percentile
Below the 50th percentile
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 was entitled to receive an initial share grant of $1 million on his appointment as Managing Director
and CEO on 1 December 2015. This share grant was approved at the AGM on 16 November 2016, and 209,205
performance rights were granted to the CEO. These shares will vest after three years of employment, being
1 December 2018. Should the CEO cease employment during this time the shares will be forfeited.
42
Directors’ Report — Remuneration Report (cont.)
4. Executive remuneration outcomes for FY2018
Business performance in FY2018
The Group’s FY2018 financial performance reflects the execution of recent strategic growth initiatives and
disciplined management of a challenging input cost environment.
Over the last five financial years:
• compound growth in net profit after tax1 (before significant items) was 12%;
• compound earnings per share growth2 (before significant items) was 11%;
• an average of 19 cents per ordinary share per annum has been paid (or payable) to shareholders in dividends;
and
• cumulative Total Shareholder Return (TSR)3, which represents the movement in the Company’s share price plus
dividends received by shareholders, was 68.8%.
The table below summarises key indicators of the performance of the Company and relevant shareholder returns
over the past five financial years.
Performance measure
Statutory net profit after tax ($000)
Net profit after tax (NPAT)1 ($000)
NPAT growth %1
EBITDA1 ($000)
EBITDA1 growth %
Dividends per ordinary share (cps)
Closing share price (30 June)
Three month average share price (1 April to 30 June)
Earnings per share1, 2 (cps)
Earnings per share1 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
42.7%
208,678
5.3%
19.5
4.68
4.28
29
45.0%
17.6%
2016
85,051
94,310
10.7%
220,157
5.5%
21.0
6.03
5.46
32
10.3%
53.9%
2017
90,341
100,003
6.0%
233,116
5.9%
23.0
5.99
6.44
33
3.1%
85.7%
2018
74,488
94,661
(5.3%)
237,251
1.8%
23.0
5.27
5.57
30
(9.1%)
68.8%
(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.
STI Outcomes — Executive KMP
The table below outlines the components of the STI, and how performance has been measured in fiscal year 2018.
Performance measure Weighting
EBITDA
64%
Overview of performance v target
EBITDA growth of 1.8% compared to last year, minimum EBITDA hurdle of 95% of
Cash Conversion
8%
target was not achieved.
Cash conversion is defined as operating cash flow divided by EBITDA, with
Working Capital
8%
operating cash defined as EBITDA less the change in working capital, less changes
in other assets and liabilities. During the year target performance was achieved.
Working capital management is measured by rolling working capital as a
Management
Non-Financial
Measures
20%
percentage of sales. During the year target performance was partially achieved.
This measure is based on various safety, risk management, diversity and talent
management targets. During the year target performance was partially achieved.
The minimum EBITDA hurdle was not achieved, therefore the KMP did not participate in the STI for fiscal year 2018.
PAC T 2018 A NNUA L R EP OR T 43
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION Directors’ Report — Remuneration Report (cont.)
LTIP Outcomes — CEO and CFO
The table below outlines the performance rights granted to the CEO and CFO for participating in the LTIP, and the
relevant performance period for each fiscal year.
CEO
Grant date
Year
2016 LTIP 22 June 2016
2017 LTIP 16 November 2016
2018 LTIP 15 November 2017
CFO
Performance rights granted Fair value of right
146,444
192,376
228,705
$3.85
$3.54
$2.65
Performance period
1 December 2015 to 30 November 2018
1 July 2016 to 30 June 2019
1 July 2017 to 30 June 2020
Year
Grant date
2018 LTIP 15 November 2017
Performance rights granted Fair value of right
33,182
$2.65
Performance period
1 July 2017 to 30 June 2020
The performance measure for the LTIP is achievement of relative TSR targets. The vesting conditions have been outlined on page 42.
Executive KMP remuneration for the year ended 30 June 2018
Executive
Year
Short term benefits
Post-
employment
benefits
Long-
term
benefits
Salary
and fees
$
Mr Malcom Bundey
2018 1,230,000
1,200,000
2017
(CEO)
Mr Richard Betts
530,485
2018
498,750
2017
(CFO)
Total Executive KMP 2018 1,760,485
2017 1,698,750
remuneration
STI
$
Non-
monetary
benefits (1)
$
— 91,437
— 62,641
— 49,584
—
8,884
— 141,021
— 71,525
Other
Benefits (2)
Super-
annuation
$
(16,346)
84,676
10,351
11,887
(5,995)
96,563
$
25,000
25,000
25,000
25,000
50,000
50,000
Long
Service
Leave(3)
$
Share based
payments
LTIP (4)
Initial
Grant
Total Performance
related %
$
$
$
— 647,275 333,334 2,310,700
— 445,253 333,333 2,150,903
— 644,731
— 29,311
—
— 544,521
—
— 676,586 333,334 2,955,431
— 445,253 333,333 2,695,424
%
28%
21%
5%
—
23%
17%
(1) Non—monetary benefits includes motor vehicle lease payments and FBT payments made by the Company on behalf of Mr Bundey and Mr Betts.
(2) Other benefits is the movement in the annual leave provision for Mr Bundey and Mr Betts.
(3) The Company policy is to provide for long service leave entitlements after five years of continuous service.
(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.
The table above shows KMP remuneration in accordance with statutory obligations and accounting standards. The
following table, which is audited, provides additional voluntary disclosure as the Directors believe this information
is helpful to assist shareholders in understanding the benefits that the Executive KMP received during the financial
year ended 30 June 2018. The table below has not been prepared in accordance with Australian accounting
standards.
Mr Malcom Bundey
Mr Richard Betts
Fixed
Remuneration(1)
1,255,000
555,485
STI(2)
—
—
Other
Benefits(3)
75,091
59,935
Performance rights
vested in 2018
n/a (4)
n/a (5)
Total
1,330,091
615,420
(1) Fixed remuneration includes salary and fees, and superannuation contributions, calculated on the same basis as the remuneration table above.
(2) STI relates to the 2018 performance period and is shown on an accruals basis.
(3) Other benefits include motor vehicle lease payments and FBT payments made by the Company on behalf of Mr Bundey and Mr Betts, and movement in
the annual leave provision for Mr Bundey and Mr Betts, both shown on an accruals basis.
(4) Not applicable as the first opportunity for performance rights to vest for the CEO will be on 30 November 2018 (the vesting of the 2016 LTIP), therefore
no benefits were received during the current financial year.
(5) Not applicable as the first opportunity for performance rights to vest for the CFO will be on 30 June 2020 (the vesting of the 2018 LTIP), therefore no
benefits were received during the current financial year.
44
Directors’ Report — Remuneration Report (cont.)
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 consists of the following components:
• The CEO receives fixed remuneration of $1,255,000 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 participates in an LTIP, key features of the LTIP are outlined on page 42.
• The CEO received an initial share grant of $1 million (209,205 performance rights). These shares will vest after
three years of employment from a starting date of 1 December 2015.
• The CEO receives non-monetary benefits including motor vehicle lease payments and FBT payments made by
the Company on his behalf.
• 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 Betts’ remuneration package consists of the following components:
• The CFO receives fixed remuneration of $555,485 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.
• The CFO participates in an LTIP, key features of the LTIP are outlined on page 42.
• The CFO receives non-monetary benefits including motor vehicle lease payments and FBT payments made by
the Company on his behalf.
•
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.
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 sectors).
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.
PAC T 2018 A NNUA L R EP OR T 45
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION Directors’ Report — Remuneration Report (cont.)
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 payments made for NED fees.
Responsibility
Board Fees
Non-Executive Directors (excluding the Chairman)
Audit, Business Risk and Compliance Committee
Chair
Member
Nomination and Remuneration Committee
Chair
Member
2018
2017
$112,750
$110,000
$30,750
$7,688
$30,750
$7,688
$30,000
$7,500
$30,000
$7,500
NEDs do not participate in any incentive programs.
The remuneration of NEDs for the year ended 30 June 2018 is detailed in the following table.
Non-Executive KMP remuneration for the year ended 30 June 2018
Ms Lyndsey Cattermole
Mr Raphael Geminder
Mr Jonathan Ling
Mr Peter Margin
Mr Ray Horsburgh
Total non-Executive KMP remuneration
Short-term
benefits
Post-employment
benefits
Fees
$
117,009
114,155
—
—
143,500
127,854
151,187
134,703
109,989
107,306
521,685
484,018
Superannuation
$
11,116
10,845
—
—
—
12,146
—
12,797
10,449
10,194
21,565
45,982
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
Total
$
128,125
125,000
—
—
143,500
140,000
151,187
147,500
120,438
117,500
543,250
530,000
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 2018:
Balance
1 July 2017
117,556,458
78,948
22,092
10,455
30,100
—
4,900
Movements
14,111,829
196,471
5,988
7,012
11,532
—
681
Balance
30 June 2018
131,668,287
275,419
28,080
17,467
41,632
—
5,581
KMP
Raphael Geminder
Lyndsey Cattermole
Peter Margin
Jonathan Ling
Ray Horsburgh
Malcolm Bundey
Richard Betts
46
Directors’ Report — Remuneration Report (cont.)
8. Related party transactions with KMP
The following table provides the total amount of transactions with related parties for the year ended
30 June 2017:
$’000’s
Related parties — Directors' interests(1)
Sales to
related
parties
11,469
11,061
Purchases
from related
parties
18,408
19,274
Other (income)
/ expense
with related
parties
(138)
547
Amounts
(owed to) /
receivable
from related
parties
2,573
766
2018
2017
(1) Related parties – Director’s interests includes the following 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, Albury Property Holdings Pty Ltd, Green’s General Foods Pty Ltd and Remedy
Kombucha 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 40% (2017 49%), is an exclusive supplier of certain raw
materials such as flexible film packaging, flexible plastic bags and tapes to Pact. The agreement was extended in
early 2017 through to 31 December 2021. Total value under this arrangement is approximately $4.3 million (2017:
$4.5 million). The supply arrangement is at arm’s length terms.
Terms and conditions of property leases with related parties
The Group leased 13 properties (10 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 2018 was $6.1 million (2017: $6.7 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:
• six of the leases contain early termination rights in favour of the landlord to terminate the lease at the expiry of
the ninth term;
•
two of the leases contain early termination rights in favour of the landlord to terminate the lease at the expiry of
the eighth 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.
The Centralbridge Leases in New Zealand, contain early termination rights in favour of the landlord to terminate the
lease at the expiry of the ninth term. With the exception of the early termination rights, the Centralbridge Leases in
New Zealand are on arm’s length terms.
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 2018, the Group has not recorded any impairment of receivables relating to amounts owed by
related parties (2017: nil).
PAC T 2018 A NNUA L R EP OR T 47
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION Directors’ Report — Remuneration Report (cont.)
Auditor's Independence Declaration
A copy of the Auditor's Independence Declaration as required under section 307C of the Act is set out
at page 49.
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
Malcolm Bundey
Chairman
Managing Director and Chief Executive Officer
15 August 2018
48
PAC T 2018 A NNUA L R EP OR T 49
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION Financial Report —
consolidated Statement Of comprehensive Income
For the year ended 30 June 2018
$’000
Sales revenue
Raw materials and consumables used
Employee benefits expense
Occupancy, repair and maintenance, administration and selling expenses
Interest and other income
Other gains/(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 profit attributable to equity holders of the parent entity
Notes
1.1
5.2
6.2
3.2
4.1
2.3
1.2
2018
2017
1,674,188 1,475,336
(623,818)
(734,260)
(364,377)
(410,018)
(265,162)
(306,299)
8,234
11,199
(11,524)
(22,404)
(63,700)
(72,745)
(30,818)
(32,695)
2,008
2,159
126,179
109,125
(35,838)
(34,637)
90,341
74,488
90,341
74,488
Other comprehensive income
Items that will be not be reclassified subsequently to profit or loss
Remeasurements of defined benefit liability/(asset)
Items that will be reclassified subsequently to profit or loss
Cash flow hedges gains/(losses) taken to equity
Foreign currency translation (losses)/gains
Income tax on items in other comprehensive income
Other comprehensive (loss)/income for the year, net of tax
Total comprehensive income for the year
Attributable to:
Equity holders of the parent entity
Total comprehensive income for the Group
125
—
2,293
(78)
(692)
1,648
76,136
1,451
(4,157)
(443)
(3,149)
87,192
76,136
76,136
87,192
87,192
cents
Basic earnings per share
Diluted earnings per share
1.1
1.1
23.4
23.3
30.2
30.2
The Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
50
Financial Report —
consolidated Statement of Financial Position
As at 30 June 2018
$’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
Total equity
Notes
2018
2017
3.1
3.1
3.2
2.3
3.2
1.2
3.1
5.2
3.4
5.2
3.4
4.1
1.2
4.2
4.2
67,980
161,734
210,956
2,683
10,263
453,616
2,570
4,284
755,413
19,507
584,193
31,004
1,396,971
1,850,587
437,259
36,932
4,424
79
478,694
17,594
7,549
28,817
667,253
616
66,864
788,693
1,267,387
583,200
39,592
132,735
168,906
155
9,192
350,580
1,798
4,528
677,132
18,501
547,333
30,518
1,279,810
1,630,390
383,484
35,587
3,084
2,155
424,310
18,694
6,425
24,932
686,210
1,421
63,290
800,972
1,225,282
405,108
1,690,476
(902,984)
(204,292)
583,200
1,517,097
(905,732)
(206,257)
405,108
The Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.
PAC T 2018 A NNUA L R EP OR T 51
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION Financial Report —
consolidated Statement of changes in Equity
For the year ended 30 June 2018
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 equity
1,517,097 (928,385)
—
—
(1,490)
—
23,043
—
1,100 (206,257)
74,488
—
405,108
74,488
—
—
175,559
(2,986)
806
173,379
—
—
—
—
—
—
—
—
—
—
1,601
(78)
1,601
(78)
—
—
125
1,648
74,613
76,136
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
— (72,648)
—
— 175,559
—
(2,986)
806
—
— 173,379
(72,648)
1,225
1,225
$’000
Year ended 30 June 2018
As at 1 July 2017
Profit for the year
Other comprehensive income/
(loss)
Total comprehensive income
/ (loss)
Issuance of share capital
Transaction costs taken to equity
Tax benefit on transaction costs
Total equity transactions
Dividends paid
Share based payments expense
Transactions with owners in
their capacity as owners
Year ended 30 June 2018
173,379
—
1,690,476 (928,385)
—
111
—
22,965
1,225
(72,648)
2,325 (204,292)
101,956
583,200
Year ended 30 June 2017
As at 1 July 2016
Profit for the year
Other comprehensive income/
(loss)
Total comprehensive income/
(loss)
Shares issued as consideration
for business acquisitions
Dividends paid
Share based payments expense
Transactions with owners in
1,502,097 (928,385)
—
—
(2,498)
—
27,200
—
322 (229,542)
90,341
—
369,194
90,341
—
—
15,000
—
—
—
—
—
—
—
1,008
(4,157)
1,008
(4,157)
—
—
—
(3,149)
90,341
87,192
—
—
—
—
—
—
—
—
— (67,056)
—
778
15,000
(67,056)
778
their capacity as owners
Year ended 30 June 2017
15,000
—
1,517,097 (928,385)
—
(1,490)
—
23,043
778
(67,056)
1,100 (206,257)
(51,278)
405,108
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
52
Financial Report —
consolidated Statement of cash Flows
For the year ended 30 June 2018
$’000
Cash flows from operating activities
Receipts from customers
Receipts from securitisation program
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
Net proceeds from share issue
Payment of dividend
Net cash flows provided by financing activities
Net (decrease)/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
2018
2017
4.1
2.1
998,426
874,417
(1,658,784)
(33,148)
151
3,181
(33,820)
150,423
860,480
785,898
(1,436,054)
(24,326)
180
16,209
(30,921)
171,466
(90,180)
(127,863)
5,844
546
(211,653)
529,715
(540,053)
172,573
(72,648)
89,587
28,357
39,592
31
67,980
(116,390)
(138,245)
9,785
4,289
(240,561)
515,217
(390,800)
—
(67,056)
57,361
(11,734)
51,885
(559)
39,592
The Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
PAC T 2018 A NNUA L R EP OR T 53
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION Financial Report —
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 2018.
1.1 Group results
Sales revenue
$’000
Pact Australia
Pact International
Total
2018
1,279,880
394,308
1,674,188
2017
1,117,829
357,507
1,475,336
Pact’s chief operating decision-maker is the Managing Director and Chief Executive Officer (CEO). The CEO monitors
results by reviewing two reportable segments, namely Pact Australia and Pact International, 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
Thailand
Hong Kong
South Korea
Nepal
India
Products/services
Manufacture and supply of rigid plastic and
metal packaging and associated services
Contract manufacturing and packing
services (Pact Australia only)
Manufacture and supply of materials
handling products and the provision of
associated services
Recycling and sustainability services
Supply of crate pooling 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 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.
Revenue from services rendered is recognised in income on a straight line basis over the lease term.
54
Financial Report —
Notes to the Financial Statements
1.1 Group results (continued)
EBIT
$’000
Pact Australia
Pact International
EBIT
Net profit after tax
2018
103,421
61,085
164,506
2017
99,529
69,887
169,416
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 (Pact Australia + Pact International)
Significant items
Acquisition costs(1)
Deferred settlement costs (earnout)(2)
New business start-up costs(2)
Business restructuring programs(3)
• restructuring costs
• asset write downs
Total significant items
EBIT after significant items
Finance costs(4)
Net profit before tax
Income tax expense
Net profit after tax
2018
164,506
2017
169,416
(4,411)
(8,781)
(2,206)
—
—
(3,335)
(8,524)
(1,589)
(10,113)
(23,305)
141,201
(32,076)
109,125
(34,637)
74,488
(6,711)
(788)
(7,499)
(13,040)
156,376
(30,197)
126,179
(35,838)
90,341
(1) Acquisition costs includes professional fees, stamp duty and all other costs associated with business acquisitions.
(2) Adjustments to contingent consideration provisions raised in relation to acquisitions made in the year ended 30
June 2017.
(3) The business restructuring programs relate to the optimisation of business facilities across the Group.
(4) Net finance costs includes interest income of $619,000 (2017: $621,000).
Basic and diluted earnings per share
Earnings per share (EPS) (cents) — basic
Earnings per share (EPS) (cents) — diluted
Calculated using:
• Net profit attributable to ordinary equity holders ($’000s)
• Weighted average of ordinary shares (shares) — basic
• Weighted average of ordinary shares (shares) — diluted
2018
23.4
23.3
2017
30.2
30.2
74,488
90,341
318,642,850
298,705,565
319,695,783
299,253,590
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 to include 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 5.3.
PAC T 2018 A NNUA L R EP OR T 55
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION
Financial Report —
Notes to the Financial Statements
1.2 Taxation
Reconciliation of tax expense
$’000
Accounting profit before tax
Income tax calculated at 30% (2017: 30%)
Adjustments in respect of income tax of previous years
Sundry items
Income tax expense reported in the Consolidated Statement of Comprehensive
Income
Comprising of:
• Current year income tax expense
• Deferred income tax expense/(benefit)
• Adjustments in respect of previous years income tax
2018
109,125
32,737
(345)
2,245
2017
126,179
37,854
(2,911)
895
34,637
35,838
35,303
(321)
(345)
35,967
2,782
(2,911)
Included in the above is a tax benefit on significant items of $3.1 million for the year ended 30 June 2018
(2017: $3.4 million).
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
Tax benefit on equity raising
Payments
Acquisitions/disposals
Foreign exchange translation movement
Closing balance
Comprises of:
Deferred tax assets
• Employee entitlements provision
• Provisions
• Hedges
•
IPO transaction costs
• Unutilised tax losses
• Lease incentives and rent free
• Other
Deferred tax liabilities
• Property, plant and equipment
•
Intangibles
• Other
2018
Current
Income tax
(16,913)
(35,303)
977
—
—
33,148
(1,073)
89
(19,075)
2018
Deferred
Income tax
(32,772)
321
(632)
(692)
806
—
(3,102)
211
(35,860)
12,517
9,813
—
1,319
87
5,071
2,197
31,004
(51,587)
(9,754)
(5,523)
(66,864)
2017
Current
Income tax
(4,841)
(35,967)
1,942
—
—
24,326
(2,359)
(14)
(16,913)
2017
Deferred
Income tax
(20,764)
(2,782)
969
(443)
—
—
(9,792)
40
(32,772)
12,420
9,503
625
1,684
—
4,334
1,952
30,518
(49,968)
(10,751)
(2,571)
(63,290)
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.
56
Financial Report —
Notes to the Financial Statements
1.2 Taxation (continued)
How Pact accounts for taxation
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.
• Are recorded in equity when associated with share issue costs
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 its 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 the existing facts and
circumstances at acquisition date became available. The adjustment would either be treated as a
reduction to goodwill (as long as it does not exceed goodwill) if it occurred 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.
1.3 Dividends
$’000
Dividends paid during the financial year
Proposed dividend(1)
2018
72,648
38,236
2017
67,056
34,412
(1) Since the end of the financial year the Directors have determined payment of a final dividend of 11.5 cents per
ordinary share 65% franked (2017: 11.5 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 4 October 2018.
Franking credit balance
Franking account balance as at the end of the financial year at 30% (2017: 30%)
Franking credits that will arise from the payment of income tax payable as at the end
of the financial year
Franking credits that will be utilised from the payment of dividends as at the end of
the financial year
Total franking credit available for the subsequent financial year
2018
5,038
2017
5,014
10,103
11,324
(10,651)
(9,586)
4,490 6,752
PAC T 2018 A NNUA L R EP OR T 57
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION
Financial Report —
Notes to the Financial Statements
Section 2 — Our operational footprint
This section provides details of acquisitions which the Group has made in the financial year, as well as details
of controlled entities and interests in associates and joint ventures.
2.1 businesses acquired
Summary of 30 June 2018 acquisitions:
$’000
Comprising of:
• Cash consideration paid
• Deferred consideration
• Contingent consideration
Gross consideration paid
Less: cash acquired
Net consideration paid
Assets
• Trade and other receivables
•
Inventory
• Property, plant & equipment
• Deferred tax assets
• Other assets
Liabilities
• Trade payables and other provisions
• Employee benefits provisions
• Deferred tax liabilities
Fair value of identifiable net assets
Provisional goodwill arising on acquisition
ECP Industries
Pty Ltd(1)
Asia
acquisition(2)
Total
10,281
142,453
152,734
—
406
10,687
—
10,687
—
234
1,128
184
—
(130)
(128)
—
1,288
9,399
6,839
—
149,292
(20,063)
129,229
29,772
20,977
75,011
16
1,230
6,839
406
159,979
(20,063)
139,916
29,772
21,211
76,139
200
1,230
(31,829)
(31,959)
(967)
(3,315)
90,895
38,334
(1,095)
(3,315)
92,183
47,733
(1) On 30 November 2017 the Group purchased the net assets of ECP Industries Pty Ltd (ECP), for a consideration of
$10.7 million. ECP is a Western Australian based intermediate bulk container (IBC) reconditioning business that
also deals in the reconditioning, repairing and leasing of bulk liquid tanks.
The acquisition provides Pact with the capability to offer national coverage for these services, and provides the
opportunity for future growth.
Provisional goodwill of $9.4 million has arisen as a result of the purchase consideration exceeding the fair value
of identifiable net assets acquired, and represents the synergistic value with the current business. Goodwill is
allocated to the Pact Australia reportable segment. This goodwill will not be deductible for tax purposes.
From the date of acquisition to 30 June 2018, ECP contributed $3.3 million of revenue and $0.7 million to net
profit before tax of the Group. If the combination had taken place at 1 July 2017, contributions to revenue for the
period ended 30 June 2018 would have been $2.7 million higher and the contribution to profit before tax for the
Group would have been $0.8 million higher.
(2) On 15 February 2018, Pact Group Holdings Pty Ltd acquired shares and assets in CSI International (CSI Asia) and
Graham Packaging Group (GPC Asia), and completed the acquisition of Closure Systems International Nepal on 25
May 2018. For the total acquisition (Asia acquisition) the Group recognised gross consideration of $149.3 million,
comprising cash of $142.5 million and deferred consideration of $6.8 million.
CSI Asia is a leader in plastic closure design, manufacturing, and high-speed capping equipment and application
systems. GPC Asia produces plastic bottles via injection blow moulding and extrusion blow moulding. The
acquisition complements Pact's existing capability and customer footprint in Asia, and includes seven
manufacturing sites across China, South Korea, Nepal, India and the Philippines.
58
Financial Report —
Notes to the Financial Statements
2.1 businesses acquired (continued)
The fair value of trade and other receivables acquired amounts to $29.8 million. Provisional goodwill of $38.3
million has arisen as a result of the purchase consideration exceeding the fair value of identifiable net assets
acquired, and represents the value attributed to the networks and customer relationships established within the
Asia region. Goodwill is allocated to the Pact International reportable segment. This goodwill will not be deductible
for tax purposes.
From the date of acquisition the Asia acquisition has contributed $66.6 million of revenue and a net profit before
tax of $3.0 million to the Group. If the combination had taken place at 1 July 2017, contributions to revenue for the
period ended 30 June 2018 would have been $95.1 million higher and the contribution to profit before tax for the
Group would have been $3.7 million higher.
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 CGUs, or group of CGUs, 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.
PAC T 2018 A NNUA L R EP OR T 59
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION
Financial Report —
Notes to the Financial Statements
2.2 controlled entities
Australian incorporated entities that are party to the Deed of Cross Guarantee at 30 June 2018(1)
Pact Group Industries (ANZ) Pty Ltd
Australian Pharmaceutical Manufacturers Pty Ltd(2)
Pact Group Holdings (Australia) Pty Ltd
Jalco Powders Pty Ltd
Jalco Group Pty Ltd
Jalco Automotive Pty Ltd
Pact Group Finance (Australia) Pty Ltd
Power Plastics Pty Ltd
Pascoes Pty Ltd(2)
Bidware Pty Ltd(2)
Middleton Asset Financing & Leasing Pty Ltd(2)
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
Viscount Plastics Pty Ltd
Viscount Plastics (Australia) 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
Viscount Rotational Mouldings Pty Ltd
Snopak Manufacturing Pty Ltd
Viscount Logistics Services Pty Ltd
Viscount Pooling Company Pty Ltd
Viscount Pooling Systems Pty Ltd
Pact Group Industries (Asia) Pty Ltd
Viscount Plastics (China) Pty Ltd
Ruffgar Holdings Pty Ltd
60
Financial Report —
Notes to the Financial Statements
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
Hong Kong
Pact Group Holdings (Hong Kong) Limited(2) (8)
Roots Investment Holding Private Limited(2) (11)
India
Closure Systems International (I) Private Limited(2) (8)
Indonesia
PT Plastop Asia Indonesia Inc(6)
PT Plastop Indonesia Manufacturing Inc(6)
Korea
Closure Systems International (Korea), Ltd(2) (11)
Nepal
CSI Nepal Private Limited(2)
Philippines
Plastop Asia Inc(7)
Closure System International (Philippines), Inc(2) (8)
Singapore
Asia Peak Pte Ltd(8)
United States of America
Pact Group (USA) Inc(9)
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
Viscount FCC Ltd
Tecpak Industries Ltd
Astron Plastics Ltd
Pacific BBA Plastics (NZ) Ltd
Viscount Plastics (NZ) Ltd
Stowers Containment Solutions Ltd
Sulo NZ Ltd(10)
China
Guangzhou Viscount Plastics Co., Ltd(5)
Langfang Viscount Plastics Co., Ltd(5)
Changzhou Viscount Oriental Mould Co., Ltd(5)
Closure Systems International (Guangzhou) Co., Ltd(2) (11)
CSI Closure Systems (Tianjin) Co., Ltd(2) (11)
Graham Packaging (Guangzhou) Co., Ltd(2) (12)
(1) All entities are wholly owned unless otherwise stated
(2) Entities acquired in the 2018 financial year (see Note 2.1)
(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
(11) Owned by Pact Group Holdings (Hong Kong) Limited
(12) Owned by Roots Investment Holding Private Limited
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 (ie. 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.
PAC T 2018 A NNUA L R EP OR T 61
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION Financial Report —
Notes to the Financial Statements
2.2 controlled entities (continued)
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.
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 has significant influence or joint control over:
Entity
$’000
Principal
place of
operation
About
Pact’s
ownership
interest
Carrying Value
2018
2017
Changzhou
Viscount Oriental
Mould Co Ltd
(Oriental Mould)(1)
Spraypac Products
(NZ) Ltd
(Spraypac)(1)
China
New
Zealand
Weener Plastop
Asia Inc (Weener)(1)
Philippines
Gempack Weener
(Gempack)(1)
Thailand
Weener Plastop
Indonesia Inc(2)
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.
A joint venture with Weener Plastik
GMBH which manufactures plastic jars
and bottles for the personal care, food
and beverage and home care markets.
A joint venture with Weener Plastik
GMBH which manufactures plastic jars
and bottles for the personal care, food
and beverage and home care markets.
A joint venture with Weener Plastik
GMBH which manufactures closures
and roll-on balls for the personal care
40%
202
188
50%
694
861
50%
1,997
2,909
50%
15,552
13,538
Indonesia
and home care markets.
50%
1,063
1,005
(1) Ownership interest at 30 June 2018 and 30 June 2017.
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 for the year
Revenue
Expense
Net profit after tax
Group’s share of profit for the year
2018
2017
18,604
27,351
(7,575)
38,380
19,507
34,745
(30,426)
4,319
2,159
15,396
25,942
(5,004)
36,334
18,501
30,666
(26,656)
4,010
2,008
Dividends received from associates and joint ventures during the year was $2.0 million (2017: $2.8 million).
The joint ventures and associates had no contingent liabilities or significant capital commitments at 30 June 2018
(2017: nil).
62
Financial Report —
Notes to the Financial Statements
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 its investments in associates and joint ventures, where
it considers they have significant influence but they do not have control. Generally significant influence is
deemed if Pact has more than 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.
PAC T 2018 A NNUA L R EP OR T 63
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION Financial Report —
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 5.2
Employee Benefits Expenses and Provisions.
3.1 Working capital
Trade and other receivables
Trade and other receivables at 30 June comprise of:
$’000
Trade receivables(1)
Allowance for impairment loss
Other receivables(2)
Total current trade and other receivables
(1) Below is a breakdown of the ageing of trade receivables:
Ageing of trade receivables as at 30 June ($’000)
1
8
2
6
6
,
1
6
9
9
4
,
2018
107,951
(605)
54,388
161,734
2017
77,981
(117)
54,871
132,735
1
3
9
6
3
,
1
0
5
1
2
,
4
3
1
3
,
2
6
3
3
,
0
0
0
1
,
0
4
0
3
,
Not due
< 30
31–60
> 61 Days
2018
2017
Days
(2) At 30 June 2018 $32.4 million (2017: $31.2 million) has been recognised as part of other receivables representing
the Group’s participation in a 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 2018, trade receivables with an invoice value of $0.6 million (2017: $0.1 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 which allows Pact to sell receivables, at a discount to a third party on a non-
recourse basis. The securitisation program has a committed facility limit of $115.0 million (2017: $125.0 million).
64
Financial Report —
Notes to the Financial Statements
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 Group’s debtors securitisation programs:
• The Group transfers substantially all the risks and rewards of receivables within the programs to a third party.
• Receivables are sold at a discount 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 may act as a servicer to the programs 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 programs.
Inventories
Inventories at 30 June comprise of:
$’000
Raw materials and stores
Work in progress
Finished goods
Total inventories
2018
98,886
22,844
89,226
210,956
2017
75,421
18,944
74,541
168,906
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.
PAC T 2018 A NNUA L R EP OR T 65
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Financial Report —
Notes to the Financial Statements
3.1 Working capital (continued)
Trade and other payables
Current trade and other payables at 30 June comprise of:
$’000
Trade payables
Other payables
Income tax payable
Total current trade and other payables
2018
341,077
77,107
19,075
437,259
2017
294,100
72,471
16,913
383,484
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 to 90 days of recognition.
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
2018
851,994
303,205
2017
848,504
304,234
184,407
1,339,606
71,727
1,224,465
66
Financial Report —
Notes to the Financial Statements
3.2 Non-current assets (continued)
Property, plant and equipment
The key movements in property, plant and equipment over the year were:
$’000
Estimated useful life
Year ended 30 June 2018
At 1 July 2017 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 2018 net of accumulated depreciation
Represented by:
At cost
Accumulated depreciation
Year ended 30 June 2017
At 1 July 2016 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 2017 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
33,193
—
15,882
(3,376)
—
1,371
(3,218)
43,852
517,662
108,067
58,098
(1,602)
(1,551)
(2,750)
(66,023)
611,901
126,277
(28,578)
2,159
—
—
(198)
—
99,660
677,132
79,489
76,139
(4,978)
(1,551)
(1,577)
(69,241)
755,413
79,882
(36,030)
1,325,056
(713,155)
99,660 1,504,598
— (749,185)
38,916
5,506
778
(7,832)
—
(1,008)
(3,167)
33,193
502,689
50,534
23,931
(289)
(788)
(719)
(57,696)
517,662
41,118
84,018
1,259
—
—
(118)
582,723
140,058
25,968
(8,121)
(788)
(1,845)
— (60,863)
677,132
126,277
52,234
(19,041)
1,035,590
(517,928)
126,277 1,214,101
— (536,969)
(1) Property consists of the following: leasehold improvements of $20.6 million (2017: $19.0 million) and accumulated
depreciation of $9.9 million (2017: $8.4 million), and freehold property of $59.3 million (2017: $33.2 million) and
accumulated depreciation of $26.1 million (2017: $10.6 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.
PAC T 2018 A NNUA L R EP OR T 67
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Notes to the Financial Statements
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 CGU to which it
belongs. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset or CGU 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.
68
Financial Report —
Notes to the Financial Statements
3.2 Non-current assets (continued)
Goodwill and other intangibles
Intangible assets are comprised of the following:
$’000
Year ended 30 June 2018
At 1 July 2017 net of accumulated amortisation and impairment
Additions
Intangible asset arising on acquisition(2)
Foreign exchange translation movements
Amortisation
At 30 June 2018 net of accumulated amortisation and
impairment(3)
Represented by:
At cost
Accumulated amortisation and impairment
Customer
contracts(1)
Other
intangibles(1)
Goodwill
Total
25,881
—
—
—
(2,811)
10,395
145
—
(4)
(693)
511,057 547,333
145
46,392
(6,173)
— (3,504)
—
46,392
(6,169)
23,070
9,843
551,280
584,193
28,106
(5,036)
12,684
(2,841)
551,280
592,070
— (7,877)
(1) Customer contracts are recognised at cost and amortised over 10 years. Other intangibles includes a balance of
$1.8m which has an indefinite life and is not amortised, all other intangibles are recognised at cost and amortised
over their useful lives.
(2) Refer to Note 2.1 for goodwill recognised in the current financial year. A decrease of $4.9 million in goodwill has been
recognised during the year in relation to contingent consideration adjustments on prior year acquisitions, and a
$3.6m increase in goodwill has been recognised on the finalisation of fair values acquired on prior year acquisitions.
(3) There are $nil impairment charges against the goodwill balance at 30 June 2018 (2017: $nil).
$’000
Year ended 30 June 2017
Customer
contracts(1)
Other
intangibles (1)
Goodwill
Total
At 1 July 2016 net of accumulated amortisation and impairment
Intangible asset arising on acquisition
Foreign exchange translation movements
Amortisation
At 30 June 2017 net of accumulated amortisation and impairment(3)
Represented by:
At cost
Accumulated amortisation and impairment
—
28,106
—
(2,225)
25,881
2,472
8,544
(9)
(612)
10,395
415,472 417,944
95,760 132,410
(184)
— (2,837)
511,057 547,333
(175)
28,106
(2,225)
12,554
(2,159)
511,057 551,717
— (4,384)
$’000
Goodwill and intangible assets with indefinite lives are allocated to the
following group of CGUs and segments(4):
Pact Australia
Pact International
2018
2017
310,834
242,208
304,460
208,359
(4) 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 CGUs 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 up to a period of five years. Management has used its current expectations and what is considered
reasonably achievable when assigning values to key assumptions in their value in use calculations.
PAC T 2018 A NNUA L R EP OR T 69
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Financial Report —
Notes to the Financial Statements
3.2 Non-current assets (continued)
Goodwill and other intangibles (continued)
The calculations of value in use (VIU) for both Pact Australia and Pact International CGUs are sensitive to the
following assumptions:
• Gross margins and raw material price movement — Gross margins are based on average budgeted
(next year’s) 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 2.1%–7.7% (2017: 2.0%–5.6%).
• 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 CGUs operate. Foreign currency cash flows are discounted using the functional currency of the CGUs
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 9.8%–20.5% (2017: 11.8%–19.8%).
At 30 June 2018 the recoverable amount of Pact Australia was 1.11 times the carrying amount of $1.08 billion,
including non-current assets and net working capital. This CGU is most sensitive to assumptions in relation to GDP
growth rates and discount rates.
Using external forecasts, the Group expects the Australian long-term growth rate to be 2.2% per annum, and pre-
tax VIU cash flows are discounted utilising a 12.0% pre-tax discount rate over the projection period, however these
assumptions are uncertain. To illustrate sensitivity to these assumptions, if they were to differ such that the expected
growth rates for Pact Australia were to decrease by 0.7% or discount rates were to increase by 1.0%, across the forecast
period, without implementation of mitigation plans, the recoverable amount would be equal to the carrying amount.
For the prior year, no reasonable possible change in key assumptions used in the determination of recoverable
amounts for Pact Australia would have resulted in an impairment.
No reasonable possible change in key assumptions used in the determination of recoverable amounts for Pact
International would result in an impairment for both the current year and prior year.
How Pact accounts for goodwill and intangibles
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 CGUs), to which the
goodwill relates. When the recoverable amount of the CGU (or group of CGUs) is less than the carrying amount, an
impairment loss is recognised.
When goodwill forms part of a CGU (or group of CGUs) 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 CGUs retained.
Intangible assets with:
• finite lives are amortised over the useful economic life and assessed for impairment whenever there is an
indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an
intangible asset with a finite useful life are reviewed at least at the end of each reporting period.
•
indefinite useful lives are not amortised, but are tested for impairment annually, either individually or at the cash-
generating unit level. The assessment of indefinite life is reviewed annually to determine whether the indefinite life
continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis.
70
Financial Report —
Notes to the Financial Statements
3.3 commitments and contingencies
Operating leases
$’000
Operating lease and rental expense(1)
2018
61,501
2017
51,991
(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 leased property and has thus
classified the leases as operating leases. Rental payments are generally fixed, but with inflation escalation clauses.
Where the escalation clauses are fixed they 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.
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
59,774
180,773
125,712
366,259
56,184
179,364
151,532
387,080
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:
$’000
Payable within one year
Payable after one year but not more than five years
Total
Contingencies
17,061
16
17,077
11,887
27
11,914
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.
PAC T 2018 A NNUA L R EP OR T 71
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Financial Report —
Notes to the Financial Statements
3.4 Other provisions
Total other provisions at 30 June comprise of:
$’000
Current
Business restructuring
Total current provisions
Non-current
Fixed rent
Make good on leased premises
Total non-current provisions
Movement in provisions
$’000
Year ended 30 June 2018
At 1 July 2017
Acquisition of subsidiaries and businesses
Provided for during the year
Utilised
Transfers
Foreign exchange translation movement
At 30 June 2018
2018
2017
4,424
4,424
19,233
9,584
28,817
Business
restructuring(1)
Fixed rent
provision(2)
Make good
on leased
premises(3)
3,084
—
8,524
(7,290)
106
—
4,424
16,169
—
3,175
—
—
(111)
19,233
8,763
170
885
(70)
(106)
(58)
9,584
3,084
3,084
16,169
8,763
24,932
Total
28,016
170
12,584
(7,360)
—
(169)
33,241
(1) Business restructuring — The business restructuring programs relate to the optimisation of business facilities
across the Group.
(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 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.
Key estimates and judgements — business restructuring
Business restructuring provisions are only recognised when a detailed plan has been approved and the
business restructuring has either commenced or been publicly announced, or contracts relating to the business
restructuring 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.
72
Financial Report —
Notes to the Financial Statements
Section 4 — Our capital structure
This section details specifics of the Group's 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
Non- current
Pact has the following non-current interest bearing loans and borrowings at 30 June 2018:
$’000
Syndicated Facility Agreements(1)
Capitalised borrowing costs
Total non-current interest bearing loans and borrowings
2018
671,279
(4,026)
667,253
2017
688,500
(2,290)
686,210
(1) The Group has several revolving debt facilities and a working capital facility with total commitments of $1,001.1
million. The facilities are spread across multiple maturities, with the working capital facility revolving with an annual
review. The debt facilities include a $378.6 million loan facility maturing in July 2020, a $183.5 million loan facility
maturing in January 2023, a $297.6 million loan facility maturing in March 2023 and a $120 million loan facility
maturing in November 2024.
The Group uses interest rate swaps to manage interest rate risk.
(a) Fair values
All loans and borrowings are initially recognised at the fair value of the consideration received less directly
attributable transaction costs.
Fair values of the Group’s interest-bearing loans and borrowings are determined by using a discounted cash flow
method, applying a discount rate that reflects the issuer’s borrowing rate at the end of the reporting period. 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 2018 was assessed to be insignificant.
The computation of the fair value of borrowings is derived using significant observable inputs (Fair Value Hierarchy Level 2).
The carrying amount and fair value of the Group’s non-current borrowings are as follows:
Syndicated Facility Agreements
Total borrowings
(b) Defaults and breaches
2018
$’000s
2017
$’000s
Carrying Value
671,279
671,279
Fair Value
671,279
671,279
Carrying Value
688,500
688,500
Fair Value
688,500
688,500
During the current period, there were no defaults or breaches on any of the loan terms and conditions.
Pact has incurred the following finance costs during the year ending 30 June:
$’000
Interest expense
Capitalised interest
Borrowing costs amortisation
Amortisation of securitisation program costs
Sundry items
Total finance costs
Loss on de-recognition of financial assets
Total finance costs & loss on de-recognition of financial assets
2018
26,152
(110)
1,260
333
1,521
29,156
3,539
32,695
2017
26,403
(1,046)
1,249
461
861
27,928
2,890
30,818
PAC T 2018 A NNUA L R EP OR T 73
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION Financial Report —
Notes to the Financial Statements
4.1 Net Debt (continued)
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; and
• 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 2018 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.
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 on sale of property, plant and equipment
Share of net profit in associates
Share based payments expense
Other
Changes in assets and liabilities:
(Increase)/decrease in trade and other receivables
Increase in inventory
Increase in deferred tax assets
Increase in trade and other payables
Increase in employee entitlement provisions
Increase/(decrease) in other provisions
Increase in current tax liabilities
Increase in deferred tax liabilities
Net cash flow provided by operating activities
Non-cash activities
2018
74,488
2017
90,341
72,745
(866)
(2,159)
1,225
(1,510)
(3,684)
(21,892)
(196)
22,951
1,698
5,315
1,809
499
150,423
63,700
(1,664)
(2,008)
778
140
8,941
(9,625)
(508)
8,724
1,897
(1,329)
9,766
2,313
171,466
$’000
Acquisition of assets, liabilities and business via issue of shares
Notes
2.1
2018
—
2017
15,000
74
Financial Report —
Notes to the Financial Statements
4.1 Net Debt (continued)
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.
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 period(1)
Transaction costs taken to equity
Tax benefit on transaction costs
End of the period
(1) Shares issued during the year include:
2018
Number of
shares
2017
$’000s
Number of
shares
$’000s
299,234,086
33,249,804
—
—
332,483,890
1,517,097 296,760,880
2,473,206
—
—
1,690,476 299,234,086
175,559
(2,986)
806
1,502,097
15,000
—
—
1,517,097
• On 27 November 2017 28,642,023 shares were issued for $5.28 as part of an institutional offer. On 11
December 2017 a further 4,607,781 shares were issued for $5.28 as part of a retail offer.
• Details of the movement in shares issued during the comparative period are disclosed in the 30 June 2017
Pact Group Annual Report.
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.
PAC T 2018 A NNUA L R EP OR T 75
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION Financial Report —
Notes to the Financial Statements
4.2 contributed equity and reserves (continued)
Reserves
$’000
Foreign currency translation reserve(1)
Cash flow hedge reserve(2)
Common control transaction reserve(3)
Share based payments reserve(4)
Total reserves
2018
22,965
111
(928,385)
2,325
(902,984)
2017
23,043
(1,490)
(928,385)
1,100
(905,732)
(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.
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
How does Pact manage this risk?
• Utilises interest rate
Impact at 30 June 2018
At 30 June 2018, the Group hedge cover is 37% (2017: 36%) of
interest rate debt,
swaps to lock in the
its long-term variable debt excluding working capital facilities.
and therefore
if interest rates
amount of interest that
Pact will be required to
increase, the amount
pay.
Sensitivity analysis performed by the Group showed that a
+1 percentage point movement in AUD interest rates would
reduce net profit after tax by $1.2 million and increase equity
of interest Pact is
required to pay
would also increase.
• Considers alternative
by $0.2 million (2017: $1.8 million reduction in net profit after
financing and mix of fixed
tax and increase equity by $1.0 million).
and variable debt, as
appropriate.
Sensitivity analysis performed by the Group showed that a
+1 percentage point movement in NZD interest rates would
reduce net profit after tax and equity by $1.3 million (2017:
$1.4 million reduction).
Sensitivity analysis performed by the Group showed that a
+1 percentage point movement in USD interest rates would
reduce net profit after tax and equity by $0.6 million (2017: nil).
(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.
76
Financial Report —
Notes to the Financial Statements
4.3 Managing our financial risks (continued)
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 10 countries outside of Australia, with the following functional currencies:
Country of
New
Hong
South
domicile
Functional
Zealand
Thailand
Singapore
China
Philippines
Indonesia
Kong
Nepal
India
Korea
currency
NZD
THB
USD
RMB
PHP
IDR
USD
NPR
INR
KRW
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.
What is the risk?
If transactions are
How does Pact manage this risk?
Utilises forward foreign currency
Impact at 30 June 2018
The Group has a significant exposure to the USD
denominated in
contracts to eliminate or reduce
against the AUD and NZD from USD purchase
currencies other
currency exposures of individual
commitments, while the Group’s exposure to sales
than the functional
transactions once the Group has
denominated in currencies other than the functional
currency of the
entered into a firm commitment for
currency of the operating entity is less than 1%.
operating entity,
a sale or purchase.
there is a risk of
an unfavourable
financial impact to
earnings if there is
an adverse currency
movement.
As Pact’s overseas
Pact utilises borrowing in the
At 30 June 2018, the Group has the majority of its
foreign currency committed purchase orders hedged.
Sensitivity analysis of the foreign currency net
transactional exposures (including hedges) 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.
Sensitivity analysis performed by management showed
entities do not have
functional currency of the
that a 10% +/- movement in its major translational
an Australian dollar
overseas entity to naturally hedge
currencies as at 30 June 2018 would have the following
(AUD) functional
offshore entities where considered
impact on equity:
currency, if currency
appropriate. The foreign currency
rates move adversely
debt provides a balance sheet
AUDNZD ($9.0) million to $11.0 million
compared to the
hedge of the asset, while the
AUDCNY ($11.0) million to $14.0 million
AUD, then the
foreign currency interest cost
AUDPHP Immaterial
amount of AUD-
provides a natural hedge of the
AUDUSD Immaterial
equivalent profit
offshore profit.
would decrease and
the balance sheet
net investment value
would decline.
Sensitivity analysis performed by management showed
that a 10% +/- movement in its major translational
currencies during the year, would have the following
impact on net profit after tax:
AUDNZD ($3.0) million to $4.0 million
AUDCNY Immaterial
AUDPHP Immaterial
AUDUSD Immaterial
PAC T 2018 A NNUA L R EP OR T 77
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION
Financial Report —
Notes to the Financial Statements
4.3 Managing our financial risks (continued)
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 currencies 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.
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
How does Pact manage this risk?
• Having access to an
Impact at 30 June 2018
The Group is in a net current asset deficiency of $25.1 million
cannot meet its
adequate amount of
at balance date, however it has:
obligations to
committed credit facilities.
• $308.4 million of unused credit within its syndicated
repay its financial
liabilities as and
when they fall due.
• Maintains a balance between
facilitates; and
continuity of funding and
• $21.4 million unused overdraft facility.
flexibility through the use of
bank overdrafts, loans and
debtor securitisation.
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.
78
Financial Report —
Notes to the Financial Statements
4.3 Managing our financial risks (continued)
Managing liquidity risk (continued)
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 2018
Financial assets(1)
Cash and cash equivalents
Trade and other receivables
Foreign exchange forward contracts
Interest rate swaps
Total inflows
Financial liabilities(1)
Trade and other payables
Foreign exchange forward contracts
Interest rate swaps
Syndicated Facility Agreement(2)
Total outflows
Net outflow
Year ended 30 June 2017
Financial assets(1)
Cash and cash equivalents
Trade and other receivables
Foreign exchange forward contracts
Interest rate swaps
Total inflows
Financial liabilities(1)
Trade and other payables
Foreign exchange forward contracts
Interest rate swaps
Syndicated Facility Agreement(2)
Total outflows
Net outflow
≤ 6 months
6–12 months
1–5 years
> 5 years
Total
67,980
161,734
84,439
—
314,153
(418,184)
(81,824)
(266)
(12,132)
(512,406)
(198,253)
39,592
132,735
72,414
—
244,741
(351,592)
(74,250)
(1,068)
(11,232)
(438,142)
(193,401)
—
—
1,597
—
1,597
—
2,570
—
—
2,570
—
—
—
—
—
67,980
164,304
86,036
—
318,320
— (17,594)
—
(176)
(610,055)
(627,825)
(625,255)
(1,608)
(198)
(11,934)
(13,740)
(12,143)
— (435,778)
(83,432)
—
(640)
—
(758,649)
(124,528)
(1,278,499)
(124,528)
(960,179)
(124,528)
—
—
5,348
—
5,348
—
1,798
—
18
1,816
(14,979)
(5,512)
(452)
(11,049)
(31,992)
(26,644)
(18,694)
—
(53)
(713,659)
(732,406)
(730,590)
—
—
—
—
—
39,592
134,533
77,762
18
251,905
— (385,265)
(79,762)
—
(1,573)
—
— (735,940)
— (1,202,540)
— (950,635)
(1) The Group’s principal financial instruments comprise cash, receivables, payables, bank loans, bank overdrafts and
derivative instruments.
(2) When the Group is committed to make amounts available in instalments, each instalment is allocated to the
earliest period in which the Group is required to pay.
The following table represents the changes in financial liabilities arising from financing activities:
$’000
Non-current interest-bearing loans and borrowings
Issue of shares
Total liabilities from financing activities
1 July 2017
(688,500)
—
(688,500)
Cash flows
13,200
(172,573)
(159,373)
Foreign
exchange
movement
4,021
30 June 2018
(671,279)
— (172,573)
(843,852)
4,021
PAC T 2018 A NNUA L R EP OR T 79
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION Financial Report —
Notes to the Financial Statements
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 debtors' securitisation programs 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 changes in the price of raw materials and other input costs, including energy. In managing
this risk the Group seeks to pass on price risk contractually through pricing adjustments. This can be subject to timing
differences. In periods of significant price volatility the Group may not adequately recover input cost movements through
pricing. The Group manages this risk through improving efficiency and reducing consumption of both raw materials and
energy through the use of recycled materials, new technologies and automation.
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.
80
Financial Report —
Notes to the Financial Statements
4.3 Managing our financial risks (continued)
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.
PAC T 2018 A NNUA L R EP OR T 81
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION Financial Report —
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 Group 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 Defined Benefit Plans
The Group has Defined Benefit Plans in the following four entities:
• Closure Systems International India Pvt Ltd (CSI India)
• Closure Systems International Philippines Inc (CSI Philippines)
• Closure Systems International Korea Ltd (CSI Korea)
• Plastop Asia Inc (Plastop Asia)
Under the Group’s Defined Benefit Plans, the amount of pension benefit that an employee will receive on retirement
is defined by reference to the employee’s length of service and final salary. The legal obligation for any benefits
remains with the Group, even if plan assets for funding the Defined Benefit Plan have been set aside. Plan assets
may include assets specifically designated to a long-term benefit fund as well as qualifying insurance policies.
The liability recognised in the statement of financial position for Defined Benefit Plans is the present value of the
Defined Benefit Obligation (DBO) at the reporting date less the fair value of plan assets.
Management uses independent actuaries to estimate the DBO annually. Estimates reflect standard rates of inflation,
salary growth and mortality in those countries.
Re-measurement gains and losses arising from experience adjustments and changes in actuarial assumptions are
recognised directly in other comprehensive income. They are included as a separate component of equity in the
Statement of Financial Position and in the Statement of Changes in Equity. Net interest expense on the net defined
benefit liability is included in finance costs.
Measurement assumptions
The principal assumptions used in the valuation are shown in the table below
Discount rate
Salary increase rate
India
2018
CSI India
7.75%
12.00%
CSI Philippines
7.98%
6.50%
CSI Korea
3.51%
5.00%
Plastop Asia
7.79%
5.00%
The discount rate assumption is based upon the market yields available on Government bonds at the accounting
date with a term that matches that of the liabilities.
The salary rate assumption takes into account the inflation seniority, promotion and other relevant factors.
Philippines
The discount rate assumption is based on the theoretical spot yield curve calculated from the Philippine Dealing
Exchange market yields by stripping the coupons from government bonds to create virtual zero coupon bonds at
the valuation date.
The salary rate assumption is based on the actual salary increment during the financial year.
82
Financial Report —
Notes to the Financial Statements
5.1 Defined Benefit Plan (continued)
Korea
The discount rate assumption is based on yields available on high quality AA- corporate bonds of suitable duration
at the valuation date.
The salary rate assumption is based on long-term expectations of salary increases for the employees within the
plan.
Plastop Asia
The discount rate assumption represents the single weighted average discount rate based on Philippine Dealing
Exchange rates at various tenors on valuation date.
The salary rate assumption is based on expected long-term average rate of salary increase for the employees within
the plan.
Movement in net defined benefit liability/(asset)
The following table show a reconciliation of the movement in the net defined benefit liability/(asset) and its
components:
$’000
Present value of the defined benefit obligation
At 1 July 2017
Acquisition of subsidiaries
Current service cost
Net interest cost
Actuarial (gains)/ losses:
Changes in financial assumptions
Changes in experience assumptions
Benefits paid
Employer contributions
Foreign exchange translation movements
Present value of Defined Benefit obligation at end of the year
Total
89
971
92
16
(126)
1
(70)
(5)
68
1,036
The following table shows a reconciliation of the DBO and the fair value of plan assets that comprises the net
defined benefit liability/(asset):
$’000
Defined Benefit Obligation
Fair Value of plan assets
Present value of net defined benefit obligation at end of the year
Total
1,653
(617)
1,036
Sensitivity analysis
The present value of the DBO is based on the assumptions detailed on page 82. Changes at the reporting date to one
of the assumptions, holding other assumptions constant, would have affected the DBO by the amounts shown below:
$’000
Discount rate
Salary increase rate
Increase by 1 percentage point
Reduction by 1 percentage point
Increase by 1 percentage point
Reduction by 1 percentage point
Total
(145)
169
159
(141)
PAC T 2018 A NNUA L R EP OR T 83
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION
Financial Report —
Notes to the Financial Statements
5.1 Defined Benefit Plans (continued)
Key estimate and judgements — actuarial assessments
In accordance with AASB 119 (Employee Benefits), Defined Benefit Obligations are recognised to cover
obligations arising from current and future pension entitlements of active and (after the vesting period has
expired) former employees of the Group. For each geographic location, the discount rate used to calculate the
Defined Benefit Obligations at each reporting date is determined on the basis of current capital market data
and long-term assumptions of future salary increases. These assumptions vary depending on the economic
conditions affecting the currency in which benefit obligations are denominated and in which fund assets are
invested, as well as capital market expectations. Benefit Obligations are calculated on the basis of current
biometric probabilities as determined in accordance with actuarial principles. The calculations also include
assumptions about future employee turnover based on employee age and years of service, probability of
retirement and mortality rate.
5.2 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
The current employee benefits provisions as at 30 June comprise of the following:
Annual leave
Long service leave
Total current provisions
2018
367,699
19,439
21,655
1,225
410,018
2017
324,080
17,412
22,107
778
364,377
20,602
16,330
36,932
19,149
16,438
35,587
The Group’s non-current employee benefits provisions of $7.5 million relate to long service leave entitlements of
$6.5 million (2017: $6.4 million), and a Defined Benefit net liability of $1.0 million (2017: nil)
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 12 months of the reporting date are classified as current and are
measured at their nominal amounts based on remuneration rates which are expected to be paid when the
liability is settled.
The liability for long service leave is recognised and measured as the present value of expected future
payments to be made in respect of services provided by employees up to the reporting date using the
projected unit credit method. Under this method consideration is given to expected future wage and
salary levels, experience of employee departures, and periods of service. Expected future payments are
discounted using market yields at the reporting date on national government bonds (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.
84
Financial Report —
Notes to the Financial Statements
5.3 Share based payments
Long-term Incentive Plan (LTIP)
A LTIP was introduced in 2016 as a component of the CEO’s remuneration. The CEO is entitled to Performance
Rights equal to 100% of annual base salary with a vesting period of three years. In the current financial year the
LTIP was extended to select senior executives of the Company. Performance rights issued to these executives have
performance hurdles and vesting conditions consistent with those of the CEO.
Under the 2018 LTIP scheme 228,705 Performance Rights were granted to the CEO (approved by resolution at
the Annual General Meeting on 15 November 2017), and 276,941 Performance Rights were granted to senior
executives. These rights were independently valued to establish the fair value in accordance with AASB 2: Share
Based Payments. The fair value of each right at the valuation date of 15 November 2017 is $2.65.
A total share based payment expense for the Company of $892,000 (2017: $445,000) has been recognised in the
current period in relation to the 2016–2018 LTIP schemes.
The key assumptions in the independent valuation in relation to 2018 LTIP 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
$5.81
25.0%
4.5%
1.9%
36 months
Monte Carlo Simulation Model
The share based payments expense in relation to the initial share grant recognised in the current year was
$334,000 (2017: $333,000), refer to page 44 of the 2018 Directors' Report.
5.4 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 year relating to KMP:
$’000
Short-term employee benefits
Post-employment benefits
Share based payments expense
Total compensation
2018
2,417
72
1,010
3,499
2017
2,351
96
778
3,225
PAC T 2018 A NNUA L R EP OR T 85
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION Financial Report —
Notes to the Financial Statements
5.4 Key management personnel (continued)
The following table provides the total amount of transactions with related parties for the year ended 30 June 2018:
$’000
Related parties — Directors' interests(1)
Sales to
related
parties
11,469
11,061
Purchases
from related
parties
18,408
19,274
2018
2017
Other
(income)/
expense
with related
parties
(138)
547
Amounts
(owed to)/
receivable
from related
parties
2,573
766
(1) Related parties — Director’s interests includes the following 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, Albury Property Holdings Pty Ltd, Green’s General Foods Pty Ltd and Remedy Kombucha 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 40% (June 2017 49%), is an exclusive supplier of certain
raw materials such as flexible film packaging, flexible plastic bags and tapes to Pact. The agreement was extended in
early 2017 through to 31 December 2021. Total value under this arrangement is approximately $4.3 million (2017:
$4.5 million). The supply arrangement is at arm’s length terms.
Terms and conditions of property leases with related parties
The Group leased 13 properties (10 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 2018 was $6.1 million (2017: $6.7 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:
• six of the leases contain early termination rights in favour of the landlord to terminate the lease at the expiry of
the ninth term;
•
two of the leases contain early termination rights in favour of the landlord to terminate the lease at the expiry of
the eighth 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.
The Centralbridge Leases in New Zealand, contain early termination rights in favour of the landlord to terminate the
lease at the expiry of the ninth term. With the exception of the early termination rights, the Centralbridge Leases in
New Zealand are on arm’s length terms.
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, except as detailed above. Outstanding balances at the end of the year 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 2018, the Group has not recorded any impairment of
receivables relating to amounts owed by related parties (2017: nil).
86
Financial Report —
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 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 (2017: $345,000).
•
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 2018 that have had a material impact
on the Group. The Group applied for the first time an amendment to AABS 107: Statement of Cash Flows. The
amendment requires the Group to provide a disclosure of changes in their liabilities arising from financing activities,
including both changes arising from cash flows and non-cash changes. The Group has provided this information for
the current year in Note 4.3 on page 79.
PAC T 2018 A NNUA L R EP OR T 87
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION Financial Report —
Notes to the Financial Statements
6.1 basis of preparation and compliance (continued)
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 2018. The following has been identified as those which may impact
the Group in the period of initial application:
New standards, interpretations
or amendments
AASB 15: Revenue from
Contracts with Customers
(will replace AASB 118:
Revenue and AASB 111:
Construction Contracts)
Pact financial year that it is
effective if not early adopted
Commencing 1 July 2018 During the current year a detailed review of AASB 15 and
Impact on Pact financial results
customer contracts was undertaken by the Group’s internal
project team and revenue subject matter specialists. One
of the most significant changes identified to date in the way
revenue is recognised will be for products manufactured for
customers that are branded goods and with no alternative
use. Under AASB 15, revenue is expected to be recognised
earlier as the over-time revenue recognition model will apply.
Under current guidance, the Group currently recognises
revenue when the established criteria of revenue recognition
have been met, generally upon shipment or delivery of goods.
Under the new guidance, revenue for products that follow an
over-time revenue recognition model will be recognised prior
to delivery dependent upon contract-specific terms.
The full financial impact of AASB 15 will be presented in the
financial statements for the six months ended 31 December
2018. The Group will adopt the standard on a modified
retrospective basis effective from 1 July 2018.
AASB 16: Leases
Commencing 1 July 2019 During the year, the Group established an internal project
team supported by external subject matter specialists to
undertake a high-level impact assessment of AASB 16. The
Group is currently reviewing the findings. A decision whether
to apply the standard using either a full retrospective or a
modified retrospective approach and the implementation
changes to processes, systems and controls will be considered
during the year ended 30 June 2019.
The AASB16 standard sets out the principles for the
recognition, measurement, presentation and disclosures of
leases and requires lessees to account for all leases under
a single on-balance sheet model similar to accounting for
finance leases under AASB17. It will require a lessee to
recognise a liability to make the payments (ie. the lease
liability) and an asset representing the right to use the
underlying asset during the lease term (i₧e. the right-of-use
asset). Lessees will be required to separately recognise the
interest expense on the lease liability and the depreciation
expense on the right-of-use asset. The principle component
of lease payments will be reclassified in the Statement of Cash
Flows from operating to financing activities.
88
Financial Report —
Notes to the Financial Statements
6.1 basis of preparation and compliance (continued)
New standards, interpretations
or amendments
AASB 9: Financial
Instruments
Pact financial year that it is
effective if not early adopted
Commencing 1 July 2018 AASB 9 replaces AASB 139: Financial Instruments: Recognition
Impact on Pact financial results
and Measurement, and simplifies the classification and
measurement of financial instruments, introduces a new
expected credit loss model for calculating the impairment of
financial assets, and aligns hedge accounting more closely with
an entity’s risk management practices.
The adoption of AASB 9 will not have a material impact on
the financial statements of the Group. The impacts from the
adoption of AASB 9 will result in the following changes in the
Group’s accounting and reporting:
• The calculation of the discount arising on sale of trade
and other receivables (securitisation) will be brought
forward to balance date. The treatment will continue to
be recognised through profit and loss.
• Hedge effectiveness testing will now be performed on
a prospective basis with no defined numerical range of
effectiveness applied in this testing.
• For the Group’s financial liabilities that are measured at
fair value through profit or loss (FVTPL), the element of
gains or losses attributable to changes in the Group’s own
credit risk will now be recognised in other comprehensive
income (OCI) instead of profit or loss.
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.
Where necessary, comparatives have been reclassified and repositioned for consistency with current year
disclosure. No material reclassifications have been made to prior year disclosures.
PAC T 2018 A NNUA L R EP OR T 89
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION Financial Report —
Notes to the Financial Statements
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
Deferred settlement costs (earnout)
New business start-up costs
Business restructuring programs
• restructuring costs
• asset write downs
Business restructuring programs total
Total significant items before tax
Other gains/(losses)
Unrealised (losses)/gains on revaluation of foreign exchange forward contracts
Gain on sale of property, plant and equipment
Realised net foreign exchange gains/(losses)
Total other gains
Total losses before tax
6.3 Pact Group Holdings Ltd — Parent Entity Financial Statements Summary
$’000
Current assets
Total assets
Net assets
Issued capital
Reserves
Retained earnings
Profit reserve
Total equity
Profit of the parent entity
Total comprehensive income of the parent entity
2018
2017
(4,411)
(8,781)
—
(8,524)
(1,589)
(10,113)
(23,305)
(81)
866
116
901
(22,404)
(2,206)
—
(3,335)
(6,711)
(788)
(7,499)
(13,040)
3
1,664
(151)
1,516
(11,524)
2018
367,809
2017
162,307
1,653,344 1,377,543
1,653,344 1,377,543
1,510,477 1,337,098
1,100
64
39,281
1,653,344 1,377,543
70,317
70,317
2,325
64
140,478
173,845
173,845
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 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.
90
Financial Report —
Notes to the Financial Statements
6.4 Auditors remuneration
During the year, 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
Retained earnings at end of the year
2018
2017
1,614
302
1,916
140
216
356
2,272
1,267
573
1,840
136
402
538
2,378
2018
2017
57,964
(20,252)
37,712
60,797
37,712
(36,856)
61,653
63,529
(17,427)
46,102
34,920
46,102
(20,225)
60,797
PAC T 2018 A NNUA L R EP OR T 91
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION Financial Report —
Notes to the Financial Statements
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
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
2018
2017
25,829
88,894
147,691
80,539
2,684
15,592
361,229
19,728
85,676
134,279
78,671
156
12,073
330,583
1,319
511,852
569,658
17,581
340,143
31,831
1,798
509,830
363,322
16,700
338,673
27,637
1,472,384 1,257,960
1,833,613 1,588,543
279,392
80,311
9,655
32,871
695
402,924
17,593
34,174
473,374
54,368
579,509
982,433
851,180
261,887
77,010
12,668
31,587
3,576
386,728
18,694
29,288
498,000
49,999
595,981
982,709
605,834
1,760,773 1,517,097
(972,060)
(971,246)
60,797
61,653
605,834
851,180
Pact has a number of Australian entities that are party 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 to Note 4.3 Managing our liquidity risks).
92
Financial Report —
Notes to the Financial Statements
6.6 Segment assets and segment liabilities
Segment assets
$’000
Pact Australia
Pact International
Total segment assets
Segment liabilities
$’000
Pact Australia
Pact International
Total segment liabilities
2018
2017
1,175,138 1,140,472
489,918
1,850,587 1,630,390
675,449
2018
924,907
342,480
2017
926,877
298,405
1,267,387 1,225,282
6.7 Revenue from services rendered
Revenue from services rendered of $70.3 million was recognised for the year ended 30 June 2018 (2017 $30.7
million), which is included in Group sales of $1,674.2 million for the year ended 30 June 2018 (2017 $1,475.3 million).
6.8 Geographic sales
Australia is Pact’s largest sales region with $1,279.9 million sales made to Australian based customers during the
year ended 30 June 2018 (2017: $1,117.8 million). Pact’s second largest region is New Zealand, with $285.3 million
sales made to New Zealand based customers during the year ended 30 June 2018 (2017: $286.0 million). Pact’s
other remaining region is Asia with $109.0 million sales made to Asian based customers during the year ended 30
June 2018 (2017: $71.5 million).
6.9 Subsequent events
On 15 August 2018 the Group announced it had entered into an agreement to acquire TIC Retail Accessories Pty
Ltd (TIC), a division of the TIC group of companies, for $122.5 million. TIC is a closed loop plastic garment hanger
and accessories re-use business. In addition, the agreement contains provisions for earn-out payments of up to
$30 million, payable on the delivery of specific financial hurdles for the 2019 and 2020 financial years. Completion is
expected to occur on 1 October 2018, subject to customary conditions.
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 2018 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.
PAC T 2018 A NNUA L R EP OR T 93
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION 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 2018 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 2018.
This Declaration is made in accordance with a resolution of the Directors.
Raphael Geminder
Chairman
Malcolm Bundey
Managing Director and Chief Executive Officer
Dated 15 August 2018
94
PAC T 2018 A NNUA L R EP OR T 95
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION 96
PAC T 2018 A NNUA L R EP OR T 97
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION 98
PAC T 2018 A NNUA L R EP OR T 99
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION 100
R
E
D
L
O
H
E
R
A
H
S
N
O
I
T
A
M
R
O
F
N
I
PAC T 2018 A NNUA L R EP OR T 101
PAC T 2018 A NNUA L R EP OR T 101
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION
SHAREHOLDER
INFORMATION
The shareholder information set out below is based on the information in the Pact Group
Holdings Ltd share register as at 10 September 2018.
Ordinary shares
Pact has on issue 332,483,890 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 10 September 2018:
Name
Kin Group Pty Ltd
Investors Mutual Ltd
Ubiqe Asset Management Pty Ltd
Date of interest
17/12/13
29/02/16
28/08/18
Number of
ordinary shares
128,032,358
31,413,888
17,666,421
% of issued
capital
38.51
9.45
5.31
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
1,524,733
9,171,677
5,495,239
12,178,357
304,113,884
332,483,890
2,943
3,609
751
535
42
7880
There were 281 holders of less than a marketable parcel of ordinary shares (minimum of
$500 which is equivalent to 132 ordinary shares based on a market price of $3.81 at the
close of trading on 10 September, 2018).
102
Top 20 largest shareholders
The names of the 20 largest quoted equity security holders as they appear on the Pact Group Holdings Ltd share
register are listed below:
Name
Kin Group Pty Ltd
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Limited
National Nominees Limited
Citicorp Nominees Pty Limited
Citicorp Nominees Pty Limited
Argo investments limited
Salvage pty ltd
Custodial Services Limited
S&J Capital Pty Limited
HSBC Custody Nominees (Australia) Limited
MR Russell Stanley Barber
Sandhurst Trustees Ltd
Gaja Consolidated PTY LTD
BNP Paribas Noms (NZ) Ltd
BNP Paribas Noms Pty Ltd
BNP Paribas Nominees Pty Ltd
BKI Investment Company Limited
Perpetual Corporate Nominees Pty Ltd
Australian Executor Trustees Limited
Total: Top 20 holders of fully paid ordinary shares (Total)
Total Remaining Holders Balance
Ordinary Shares
Number of shares % of total shares
38.51
24.09
10.06
5.01
4.56
1.11
1.10
1.09
0.62
0.46
0.46
0.44
0.43
0.38
0.36
0.32
0.26
0.26
0.25
0.19
89.96
10.04
128,032,358
80,110,342
33,456,877
16,665,982
15,149,964
3,690,570
3,672,314
3,635,929
2,048,675
1,514,339
1,513,245
1,476,520
1,439,000
1,250,482
1,193,729
1,051,985
878,713
867,000
847,073
623,121
299,118,218
33,365,672
Unquoted equity securities
There are no unquoted equity securities on issue.
Restricted equity securities
There are no restricted equity securities in the Company. However, there are 1,236,603 ordinary shares which are
subject to voluntary escrow. The 1,236,603 shares will cease to be subject to voluntary escrow on 16 September 2018.
Manage your shareholding online
To view and update your details online and access all your holdings and other valuable information, visit the
Computershare Investor Centre www.investorcentre.com.
PAC T 2018 A NNUA L R EP OR T 103
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION FY18
SHAREHOLDER
cALENDAR
Event
Half-year results announcement
Ex-dividend
Record date
Dividend payment
Full year results announcement
Ex-dividend
Record date
Dividend payment
Annual General Meeting
All dates may be subject to change.
Dates
20 February 2019
28 February 2019
1 March 2019
4 April 2019
14 August 2019
21 August 2019
22 August 2019
3 October 2019
20 November 2019
104
cORPORATE
DIREcTORY
Registered and Principal Administrative office in Australia
Pact Group Holdings Limited
Level 1, Building 6, 650 Church Street
Richmond, Victoria 3121, Australia
Telephone: + 61 3 8825 4100
ABN: 55 145 989 644
Website Address
www.pactgroup.com.au
Australian Securities Exchange (ASX) Listing
Pact Group Holdings Ltd shares are listed on the ASX under the code PGH.
Directors
Refer to profiles on pages 31–33.
General counsel, company Secretary & Head of corporate Development
Jonathon West
Auditor
Ernst & Young
8 Exhibition Street
Melbourne, Victoria 3000, Australia
Share Registry
Computershare Investor Services Pty Limited
Yarra Falls
452 Johnston Street
Abbotsford, Victoria 3067, Australia
Telephone within Australia: 1300 850 505
Telephone outside of Australia: +61 3 9415 5000
Fax: +61 3 9473 2500
PAC T 2018 A NNUA L R EP OR T 105
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION www.pactgroup.com.au
6/650 Church Street, Richmond VIC 3121 Australia
Telephone +61 3 8825 4100
106