t
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o
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20
19
Our vision is
to enrich lives
everyday through
sustainable
packaging and
manufacturing
solutions
Contents
Overview
A View from the Chairman
A Message from the CEO
About Pact Group
Financial and Operational Highlights
Performance
Review of Operations & Financial Performance
Strategic Priorities
Innovation
Awards
Governance
Sustainability Review
Corporate Governance Overview
2
4
6
12
14
26
32
34
36
36
39
46
57
58
108
109
116
119
Financial Reports
Directors' Report
— Remuneration Report
Auditor's Independence Declaration
Financial Statements
Directors' Declaration
Independent Auditor's Report
Shareholder Information
FY20 Shareholder Calendar
Corporate Directory
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION
A View
from the
Chairman
2
Dear Fellow Shareholders,
On behalf of the Board of Directors of Pact Group, I am delighted to
present to you our 2019 Annual Report.
Overview
FY19 was a challenging year for Pact, with earnings impacted
by higher raw material costs, energy costs and weaker demand
conditions in some sectors. Notwithstanding these challenges
however, the Group delivered 10% revenue growth and made
improvements on many fronts including the delivery of operating
efficiencies, securing long term customer agreements in our
pooling and reuse businesses and making further progress in the
pooling services in Australia, we have secured growth in our hanger
reuse business and have been successful in leveraging Government
support and partnership for several exciting initiatives to help
develop the recycling circular economy. Pact is the largest processor
and consumer of post-industrial recycled resin in Australasia. I am
proud of the progress we have made and reaffirm our commitment
to becoming the number one partner for sustainable choices in the
packaging industry.
Board Changes
I would like to take this opportunity to highlight some changes to our
Board of Directors since our last Annual Report.
transformation of our packaging network. The Group balance sheet
One of the Board’s top priorities in FY19 was to establish the right
was also well managed, operating cashflow was strong and leverage
leadership for the Group. In that context, and following a global
was improved in the second half. Debt facilities were extended,
search, we were delighted to announce the appointment of Sanjay
reducing near term financing risk, and a subordinated term loan
Dayal as our new Managing Director and Group Chief Executive
facility was established, increasing the Group’s funding flexibility.
Officer, effective from 3 April 2019. Sanjay brings to Pact extensive
Along with disciplined capital management, these measures will
operational, manufacturing and supply chain experience and
provide the capacity required for Pact to continue to progress
a strong focus on customers, quality, performance and driving
restructuring activities and complete existing growth projects.
opportunities for organic growth. Importantly for Pact, Sanjay has
“
Pact is Australia’s
most innovative
packaging
company. Our
technical, design
and engineering
experts challenge
conventional
thinking and
identify new
opportunities
through insight
led innovation
“
Innovation
led and managed complex major integration and restructuring
initiatives. Such experience will be extremely valuable as we progress
Pact is Australia’s most innovative
the optimisation of our packaging network and drive value from
packaging company. Our
the integration of our recent acquisitions and growth initiatives.
technical, design and engineering
Sanjay previously held senior executive positions at BlueScope Steel,
experts challenge conventional
including Chief Executive, Building Products, Corporate Strategy
thinking and identify new
and Innovation, following several other senior positions in Asia and
opportunities through insight led
Australia with the Company over a nine year period. Prior to that,
innovation. We continue to receive
Sanjay had a long and successful career with Orica and ICI.
prestigious industry awards and
customer recognition for our
innovative packaging solutions.
Following Sanjay’s appointment, I resumed my role as Non-Executive
Chairman of the Group.
We were thrilled to make the
In August of this year Peter Margin resigned from our Board. Peter
Australian Financial Review and
had been a director of Pact since our IPO and was Chairman of the
BOSS Magazine’s Most Innovative
Audit, Business Risk and Compliance Committee. Peter brought a
List for the seventh year in
wealth of knowledge and experience to Pact, but with expanded
succession, one of only three
executive duties outside of Pact he is unable to continue to commit
companies to do so. Pact ranked
the time required as a Director of the Group. On behalf of the Board
second on the Manufacturing and
I would like to thank Peter for his outstanding service to Pact and
Consumer Goods list from more
wish him the very best for the future.
than 800 organisations across
Australia and New Zealand. In
2019 we were recognised for
designing and manufacturing a
Thank you
On behalf of the Board of Directors I would like to express my
thanks and appreciation to our shareholders for your continued
household mobile garbage bin
support and to also thank all of our customers, suppliers and other
made from 60% recycled milk
stakeholders. I would also like to thank our dedicated management
bottles. It is particularly pleasing to note that five of our winning
team and employees across the Group for their commitment and
nominations from the past seven years have been for innovative
contribution throughout the year.
sustainability solutions that increase the reuse and recycling of
plastic material.
Sustainability
It has been a challenging year, but the Group remains committed
to driving business transformation and is focussed on delivering
improvements in its core business fundamentals. I am confident that
Sustainability lies at the heart of our Group vision, it shapes our
we have the platforms and leadership in place to drive sustainable
core values and is a consideration in all of our business decisions.
We recognise that our business activities have a direct impact on
and profitable growth in the business and maximise long-term
shareholder value.
the communities in which we operate, and our customers are
increasingly looking to us to deliver innovative solutions to support
their own sustainability targets. In FY19 we have built upon our
commitment to sustainability and have made significant progress
towards our 2025 End of Waste Sustainability Promise to reduce,
reuse and recycle. We have expanded our returnable produce crate
Raphael Geminder
Non-Executive Chairman
PAC T 2019 A NNUA L R EP OR T 3
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION A Message
from the
CEO
4
A Message
from the
CEO
Dear Shareholder,
I am very pleased to present to you my first report since joining Pact as
Managing Director and Group Chief Executive Officer in April 2019.
People and Safety
second half, and resin costs reduced. This enabled us to recover some
of the adverse pricing lags which had impacted earnings in recent
periods.
Recent acquisitions performed in-line with expectations and we
continued to manage our controllables, delivering significant
Since joining Pact, I have talked extensively to our people. I believe
efficiencies in our operations and reducing overheads.
that we have highly capable and dedicated employees across the
Group and a talented and experienced management team which it
Growth and Efficiency
is my privilege to lead. Our people are critical to Pact’s success and
It is pleasing to note that several important growth and efficiency
I would like to take this opportunity to recognise their outstanding
projects were delivered or progressed in the period despite the
contribution and thank them for their commitment, particularly in
challenges that we have faced in FY19.
what has been a challenging year.
The Group has :
We are committed to creating a high performance and collaborative
workplace culture and foster employee engagement through our
annual Applause reward and recognition program, which celebrates
innovative thinking, operational excellence, safety commitment and
sustainability initiatives.
• progressed our packaging network redesign — closing two
facilities, rationalising another, and establishing an import supply
model for some product categories;
• grown our asset pooling operations — securing a long-term
contract to supply returnable produce crate pooling services to
We also remain committed to providing a safe work environment for
ALDI, which commenced in August 2019; and
all of our employees. There is an ongoing focus on training, processes
and systems for our people and I have been pleased to see an
improvement in our safety metrics this year. Our Lost Time Injury
Frequency Rate (LTIFR) improved to 4.7 in FY19 compared to 5.5 in the
• delivered growth in reuse services — securing a long-term contract
to supply garment hanger reuse services to a large retailer in the
US, which is expected to commence in the second half of FY20.
prior year. However, there is still room for improvement and driving
Improving the Fundamentals and Strategic Review
improved engagement and safety outcomes will be one of my key
priorities in the year ahead. No injuries are ever acceptable, and Zero
Harm will remain our goal.
Change in Operating Model
In my first few months with Pact I have spent a significant amount of
time within our operations, understanding our business, products and
processes, and engaging with our customers. I have been impressed
by Pact’s market leading manufacturing and innovation capability and
the strong relationships that we have established with many leading
During FY19 we implemented a new operating model and changed
the Group’s reporting segments to align with our three key product
and trusted brands.
portfolios:
• Packaging and Sustainability
• Materials Handling and Pooling
• Contract Manufacturing Services
This change increases the transparency of performance at a product
level and will help drive improved decision-making across the business.
Group Performance and Business Overview
Yet our performance across a number of metrics does not reflect
our capability. Delivering further improvements in our fundamentals,
including safety, efficiency, quality and delivery is critical to enable
us to grow our core business and improve our capital returns. Our
customers must remain at the heart of everything we do. Our goal
will be to exceed their expectations in quality, service, value and
innovation.
Our future direction will be guided by the outcomes of a strategic
review that I have initiated. This review will clarify the activities and
The Group delivered revenue of $1.8 billion in FY19, 10% higher than
operations which are core to Pact’s continued success and will guide
the prior year, with growth driven by the Asian acquisition that was
future resource allocation and capital investment. Our industry is
completed in the second half of FY18 along with the acquisition of TIC
Retail Accessories completed in October 2018. Underlying revenues
going through change and we need to ensure that we are leveraging
our strengths to realise the opportunities of the future.
were generally in-line with the prior year. The impact of growth in
demand for packaging in Asia and growth in crate pooling volumes
Outlook
in Australia, together with higher pricing, reflecting the partial pass
Looking forward, we remain focussed on maximising long-term
through of higher input costs, was offset by lower underlying net
shareholder value. We will focus on developing clarity in our strategy,
volumes due to weaker demand conditions in some sectors.
improving the performance of the core business, seeking opportunities
In the Packaging and Sustainability segment we experienced subdued
demand in the dairy, food and beverage and agricultural sectors in
Australia and New Zealand, exacerbated by the drought conditions in
for organic growth and driving further efficiencies in our operations.
Our outlook for FY20 is that we expect EBITDA (before significant items)
to modestly improve, subject to global economic conditions.
Australia. Fewer available infrastructure projects adversely impacted
I look forward to updating you on our progress.
volume in the Materials Handling and Pooling segment, whilst weaker
demand in in the home care sector impacted volumes in the Contract
Thank you.
Manufacturing Services segment.
Group EBITDA of $231 million was 3% lower than the prior year.
Earnings were impacted by higher raw material and energy costs and
weaker underlying volumes. Pleasingly pricing was improved in the
Sanjay Dayal
Managing Director & Group CEO
PAC T 2019 A NNUA L R EP OR T 5
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION
About
Pact Group
6
Pact is a leading provider of
specialty packaging solutions,
servicing both consumer and
industrial sectors.
Pact specialises in the manufacture and supply of rigid plastic and
metal packaging, materials handling and pooling solutions, contract
manufacturing services, recycling and sustainability services.
Headquartered in Melbourne, Australia, Pact has an extensive
manufacturing and supply network across Australasia. Pact caters
to a diverse range of industries, including the food, dairy, beverage,
agricultural, chemical and industrial sectors. We deliver products and
services to a broad range of trusted global and regional brands.
The Group has more than 6,000 employees and generated revenues in
excess of $1.8 billion in FY19.
Our Product Portfolio
Packaging
and
Sustainability
Materials
Handling
and Pooling
Contract
Manufacturing
Services
FY19 revenue
$1,208M
FY19 revenue
$296M
FY19 revenue
$372M
• Packaging for
consumer and
industrial use
• Recycling and
sustainability services
• Closed loop pooling
• Integrated contract
services
• Plastic materials
handling products
• Infrastructure and
industrial products
manufacturing
services focused
on home, personal
care and health and
wellness sectors
Australia, New Zealand, China,
Indonesia, Philippines, Singapore,
Thailand, Hong Kong, South
Korea, Nepal, India
Australia, New Zealand,
China, Hong Kong, USA, India,
Bangladesh, UK, Sri Lanka
Australia
PAC T 2019 A NNUA L R EP OR T 7
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION Strong
regional
footprint with
operations
across 15
countries
China
Korea
Hong Kong
United States
Philippines
India
Sri Lanka
Nepal
Bangladesh
Singapore
Thailand
Indonesia
Australia
New Zealand
UK
8
Our Market Leading Platforms
Our Packaging and Sustainability platform
FY19 Revenue
Other 10%
Health and wellness 5%
Oils and lubricants 6%
Personal care 7%
Sustainability 8%
Chemicals 8%
Food, dairy and beverage 56%
• Market leader in rigid plastic
packaging in Australia and
New Zealand with a growing
position in Asia
• Leading supplier of sustainability
services
• Regional scale with extensive
manufacturing footprint
• Leading postions in
consumer and industrial
sectors supported by scale
and innovation
Our Materials Handling and Pooling platform
FY19 Revenue1
Infrastructure and
other industrial products
17%
Materials
handling other
10%
Environmental (garbage bins)
17%
• Largest provider of returnable
produce crate (RPC) pooling services
in Australia and New Zealand
• Comprehensive service
• Largest provider of garment hanger
offering
reuse services in Australia and
New Zealand with a growing
presence in the UK and the USA
• Asset tracking technology
• Extensive manufacturing and
product design capability
Pooling 56%
• Leading supplier of plastic materials
handling products
Our Contract Manufacturing platform
FY19 Revenue
Other 3%
• A leading supplier of contract
Oils and lubricants 7%
manufacturing services in Australia
• Broad manufacturing
Personal care 17%
for the home, personal care and
health and wellness categories
Health and wellness 19%
Home care 54%
capability for liquid, powder,
aerosol and therapeutic
nutraceutical products
• Strong innovation and product
development capability
• Strong customer relationships
1 Assumes a full year contribution from TIC Retail Accessories
PAC T 2019 A NNUA L R EP OR T 9
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION “
In FY19 we have
built upon our
commitment to
sustainability
and have made
significant
progress towards
our 2025
Sustainability
Promise to
reduce, reuse
and recycle
”Raphael Geminder
Non-Executive Chairman
10
Case study
Pact wins both
Sustainable Design and
Beverage Categories
in Australasia’s Peak
Packaging Awards
In FY19 Pact won both the Sustainable Packaging Design and
Beverage Category for Lewis Road’s post-consumer sourced
100% recycled plastic polyethylene terephthalate (rPET) milk
bottle range.
An Australasian first in its category,
Lewis Road’s rPET bottle range equates
to approximately 340 tonnes of plastic
per annum that has been reused and
diverted from landfill.
The Australasian Packaging Innovation & Design Awards (PIDA)
recognise companies and individuals making a significant
difference in their field across Australia and New Zealand. The
PIDAs, which are co-ordinated by the Australian Institute of
Packaging (AIP) and Packaging New Zealand, are the exclusive
feeder program for the prestigious WorldStar Packaging Awards.
PACKAGING INNOVATION
& DESIGN OF THE YEAR
GOLD
AWARD
GOLD
AWARD
PAC T 2019 A NNUA L R EP OR T 11
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION Financial and
Operational
Overview
FY19 Revenue up
10% to $1.834 billion
FY19 EBITDA1 down 3%
to $231 million
FY19 NPAT1 of $77 million,
18% lower than FY18
Earnings impacted by higher
raw material and energy
costs, along with lower
volumes in some sectors
Strong focus on efficiency
and overhead cost reduction
Transformation of
the Group’s packaging
network progressed
Crate pooling
operations expanded
TIC Retail Accessories
acquisition completed
5 Year Financial
History
9
4
2
1
1
8
3
1
5
7
4
1
4
7
6
1
4
3
8
1
FY15
FY16
FY17
FY18
FY19
Revenue $m
9
0
2
0
2
2
3
3
2
7
3
2
1
3
2
FY15
FY16
FY17
FY18
FY19
EBITDA1 $m
3
5
1
3
6
1
9
6
1
5
6
1
8
4
1
FY15
FY16
FY17
FY18
FY19
EBIT1 $m
Balance sheet capacity
improved and strong
operating cashflow
maintained
New Group CEO appointed
and review of business
strategy initiated
5
8
4
9
0
0
1
5
9
7
7
FY15
FY16
FY17
FY18
FY19
NPAT1 $m
1 Before significant items.
12
Performance
PAC T 2019 A NNUA L R EP OR T 13
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION Review of
Operations
and Financial
Performance
The Group has reported revenue1 of $1,834.1 million for the year ended 30 June 2019, up 10% compared to the prior
corresponding period (pcp). The statutory net loss after tax for the year was $289.6 million, compared to a statutory net profit
after tax (NPAT) of $74.5 million in the pcp. NPAT before significant items5 for the year was $77.3 million (pcp: $94.7 million).
Overview
• Revenue1 up 10% to $1,834.1 million (pcp: $1,674.2 million)
• TIC Retail Accessories acquisition completed on 31 October 2018
• EBITDA3 down 3% to $230.7 million (pcp: $237.3 million)
• EBIT4 down 10% to $148.4 million (pcp: $164.5 million)
• NPAT5 down 18% to $77.3 million (pcp: $94.7 million)
• Asset impairment expenses of $381.8 million (fixed assets,
goodwill and inventory) recognised in the period, reflecting
trading conditions and a moderated long-term outlook for
Australian packaging assets
• Earnings impacted by lags in recovering higher raw material
costs and Australian energy costs, and lower volumes in some
sectors
• Strong focus on efficiency and overhead cost reduction
• Transformation of the Group’s packaging network progressed
with two facilities closed in the period, another rationalised
and an import supply model for certain product categories
established
— recent acquisitions performing in line with expectations
• Crate pooling operations expanded, with services supporting
fresh produce supply into ALDI commencing in August 2019
following long-term contract win
• Long-term contract win with a major retailer in the USA will
expand reuse services in FY20
• Group operating model changed to improve focus on product
portfolio performance
• New Managing Director and Group CEO appointed, and review
of business strategy initiated
• Balance sheet capacity improved and near-term refinancing
risk reduced with extension of debt and establishment of a new
subordinated loan facility
• No ordinary dividends declared
Key Financial Highlights – $millions
Revenue1
Packaging & Sustainability
Materials Handling & Pooling
Contract Manufacturing Services
EBITDA3
EBIT4
NPAT5
Statutory Net (Loss)/Profit After Tax
Total Dividends – cents per share
2019
1,834.1
154.6
51.1
25.1
230.7
148.4
77.3
(289.6)
-
2018
1,674.2
152.8
44.6
40.0
237.3
164.5
94.7
74.5
23.0
Change %
9.6%
1.2%
14.5%
(37.2%)
(2.8%)
(9.8%)
(18.3%)
(488.8%)
(100.0%)
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 25 for definitions.
14
Group Results
$’000
Revenue1
Other income (excluding interest revenue)
Expenses
EBITDA3
EBITDA margin
Depreciation and amortisation
EBIT4
EBIT margin
Significant items (before tax)
EBIT after significant items
Net finance costs and loss on de-recognition of financial assets
Income tax expense
Significant tax items
Net (loss) / profit after tax
2019
1,834,076
12,709
(1,616,091)
230,694
12.6%
(82,290)
148,404
8.1%
(423,304)
(274,900)
(38,980)
(32,117)
56,410
(289,587)
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
Change %
9.6%
(2.8%)
(9.8%)
(294.7%)
(488.8%)
Revenue
EBITDA
Group revenue of $1,834.1 million increased 9.6% ($159.9 million)
EBITDA of $230.7 million was $6.6 million (2.8%) lower than the pcp.
compared to the pcp, driven primarily by a full year impact of the
Earnings were favourably impacted by the incremental contribution
acquisition of the Asian packaging operations (excluding Japan) of
from recent acquisitions along with lower costs from efficiency
Closure Systems International and the Guangzhou China facility of
improvements and overhead reduction initiatives. These benefits
Graham Packaging Company (the “Asian acquisition”, undertaken in
were more than offset by lower underlying volumes, the adverse
the second half of FY18) and the acquisition of TIC Retail Accessories
impact of lags in recovering higher resin costs, particularly in the
(“TIC”, completed 31 October 2018).
first half, higher raw material costs in the contract manufacturing
Excluding the contribution from acquisitions, revenue was generally
in line with the pcp. The impact of higher pricing, reflecting the
partial pass through of higher input costs, and benefits from
favourable foreign exchange translation were offset by lower net
volumes. Packaging volumes were adversely impacted by weak
business and significant increases in Australian energy costs
compared to the prior year. Energy costs were only partly
recoverable in the market. The second half improved with lower resin
costs and improved pricing in the contract manufacturing business,
allowing the recovery of some of the previously incurred lags.
agricultural demand due to continued drought conditions along
EBITDA margins at 12.6% were 1.6% lower than the pcp. Margins
with generally subdued demand in the dairy, food and beverage
were improved in the second half, compared to the first half of the
sectors in Australia and New Zealand. Underlying sales in Asia were
year, as a result of improved pricing, efficiency and higher relative
improved. Materials Handling volumes were impacted by fewer
margins in the acquired TIC business.
available infrastructure projects. Bin sales were generally in line with
the pcp following a stronger second half. Contract manufacturing
volumes were softer in the home care category. Volumes in the
health and wellness sector were flat following weaker demand
conditions in the second half.
PAC T 2019 A NNUA L R EP OR T 15
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION EBIT
Net Finance Costs and Loss on De-recognition
EBIT of $148.4 million for the year was $16.1 million or 9.8% lower
of Financial Assets
than the pcp with higher depreciation and amortisation from
Net financing costs for the year of $39.0 million were $6.9 million
acquisitions, the new crate pooling business and capital investment
higher than the pcp. The increase was due to the impact of higher
in growth and efficiency projects in the New Zealand packaging
average net debt during the period, following the funding of
business and the contract manufacturing business. The increase
acquisitions in both the current and prior years, along with higher
was mitigated by lower depreciation in the Australian packaging
interest costs on longer term debt due largely to a key facility being
business as a result of the impairment of fixed assets.
extended from three years to a seven year term. Interest cover of
EBIT margins of 8.1% were 1.7% lower than the pcp.
5.9x was lower than the pcp but remains well within targeted levels.
Further detail on revenue and earnings in each of the Group’s
Income Tax Expense and Significant Tax Items
operating segments is contained in the Review of Operations below.
The income tax expense for the year of $32.1 million represents an
Significant Items
effective rate of 29.4% of net profit before tax and significant items,
essentially in line with statutory tax rates payable by the Group
Pre-tax significant items for the year were an expense of $423.3
across its main operating jurisdictions. This compares to $37.8
million. This represents an impairment expense of $368.8 million
million in the pcp at an effective tax rate of 28.5%. The Group tax
($136.3 million fixed assets; $232.4 million intangible assets),
rate has increased due to higher effective Australian taxable income
inventory write-downs of $13.0 million, costs associated with
following the TIC acquisition.
business restructuring programs of $37.8 million and acquisition
costs of $3.7 million. Business restructuring costs were largely
related to the rigid packaging network transformation. Pre-tax
significant items in the prior year of $23.3 million related to costs
associated with business restructuring programs of $10.1 million,
acquisition costs of $4.4 million and deferred settlement costs of
$8.8 million. The latter represented revisions to earn-out provision
estimates, mostly due to stronger than expected earnings from
Pascoe’s.
The significant tax item for the year is a benefit of $56.4 million
relating to the significant items noted above. In the prior year the
significant tax item was a benefit of $3.1 million.
Net (Loss) / Profit after Tax
The statutory net loss after tax for the year was $289.6 million,
compared to a net profit after tax (NPAT) of $74.5 million in the pcp.
Excluding significant items, NPAT was $77.3 million compared to
$94.7 million in the pcp.
16
Balance Sheet
$’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 debt8
2019
49,950
384,349
638,542
477,054
71,563
2018
67,980
385,636
755,413
584,193
57,365
1,621,458 1,850,587
667,253
733,490
565,373
600,134
1,298,863 1,267,387
583,200
599,273
322,595
683,540
Change %
(26.5%)
(0.3%)
(15.5%)
(18.3%)
24.8%
(12.4%)
9.9%
(5.8%)
2.5%
(44.7%)
14.1%
Net debt at the end of the financial year was $683.5 million, an
increase of $84.3 million compared to the pcp. The increase was
primarily due to payments for acquisitions of $78.7 million.
The decrease in property plant and equipment of $116.9 million
relates primarily to the asset impairment write-down of $136.3
The group has several revolving debt facilities, two term facilities,
a subordinated term debt facility and a working capital facility with
total commitments of $1,062.2 million, of which of which $314.2
million is undrawn at 30 June 2019. The facilities are spread across
multiple maturities, with the working capital facility revolving with an
million, partly offset by increases from acquisitions of $25.3 million.
annual review. The debt facilities include a $383.5 million loan facility
Additions from capital expenditure and foreign exchange translation
maturing in January 2022, a $184.3 million loan facility maturing
in January 2023, a $301.1 million loan facility maturing in March
2023, a $120 million term facility maturing in December 2024, and a
subordinated term debt facility of USD 35 million, swapped into AUD
($50.3 million), maturing July 2025. The working capital facility is $23
million at 30 June 2019. Average tenor is 3.6 years.
Financing metrics
Gearing6
Interest cover7
2019
3.0x
5.9x
2018
2.5x
7.4x
Change
0.5
(1.5)
As at 30 June 2019 gearing was 3.0x, an increase from 2.5x in the pcp,
impacted by the funding of growth projects and acquisitions, including
TIC, along with EBITDA performance.
were offset by depreciation charges.
The decrease in the Group’s intangible assets of $107.1 million was
due primarily to the goodwill impairment expense of $232.4 million,
partly offset by $120.0 million goodwill arising on acquisitions and
an increase in foreign exchange translation. The goodwill arising
on acquisitions represents $127.8 million in provisional goodwill
relating to the TIC acquisition less a reduction of $7.8 million
recognised in the period in relation to the Asian acquisition from the
prior year.
The increase in the Group’s other assets of $14.2 million is largely
attributable to higher deferred tax assets. Similarly, the reduction in
other liabilities, payables and provisions of $34.8 million is primarily
a result of lower deferred tax liabilities, in addition to lower trade
and other payables, partly offset by a higher business restructuring
provision.
During the period the Group extended debt of $380 million from
July 2020 to January 2022 at competitive terms and also gained
approval from lenders for the establishment of a subordinated
debt facility. Following that approval, the Group entered into a $50
million, six year subordinated unsecured term loan. Funds from the
loan were used to pay down senior debt, providing the Group with
greater funding flexibility and balance sheet capacity to continue
planned rationalisation activities and complete existing growth
projects.
PAC T 2019 A NNUA L R EP OR T 17
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION
Cash Flow
$’000 — Key items
Net cash flows provided by operating activities
Payments for property, plant and equipment
Purchase of businesses and subsidiaries, net of cash acquired
Net proceeds from issuance of shares
Payment of dividend
2019
108,683
(69,455)
(78,725)
–
(38,236)
2018
150,423
(90,180)
(127,863)
172,573
(72,648)
Change %
(27.7%)
(23.0%)
(38.4%)
(100.0%)
(47.4%)
Statutory net cash flow provided by operating activities, including
Payments for purchase of businesses and subsidiaries, net of cash
proceeds from the securitisation of trade debtors, was $108.7
acquired, in FY19 was $78.7 million. This includes $46.3 million for
million in FY19, $41.7 million lower than the pcp. The inflow from
the TIC acquisition (representing cash consideration paid of $28.3
securitisation of trade debtors was $13.6 million in the financial year
million and deferred consideration paid of $20.8 million, less $2.8
compared to $3.2 million in the pcp. Excluding securitisation inflows,
million cash acquired) and $32.4 million paid in relation to the
statutory operating cashflow was $52.2 million lower than the pcp.
Asian acquisition and the acquisition of Pascoe’s completed in prior
Net receipts and payments were $41.4 million lower as a result of
years. The prior year outflow of $127.9 million related to $122.4
cash rationalisation costs of $26.1 million, lower earnings and higher
million for the Asia acquisition, $10.3 million for the acquisition
working capital requirements during the year, including increased
of ECP Industries and final adjustments relating to previous year
inventory levels and lower creditors following changes to the resin
acquisitions of $4.8 million.
sourcing model in Australia (which resulted in significant volumes
shifting from domestic supply to import). Tax cash flows were also
$5.3 million higher and interest cash flows $5.5 million higher, the
latter in line with the higher net interest expense noted above.
The dividend payment of $38.2 million in FY19 represents the final
dividend of 11.5 cents per share in relation to FY18.
Payments for property, plant and equipment were $69.5 million in
Review of operations
the financial year compared to $90.2 million in the pcp. The decrease
During the period the Group changed operating segments from
of $20.7 million reflects lower capital expenditure relating to the
Pact Australia and Pact International to:
establishment of crate pooling operations in Australia, and lower
- Packaging and Sustainability
expenditure relating to the investment in facilities in New Zealand
to support a new contract with a key customer in the dairy sector,
which was largely incurred in FY18. These reductions were partly
offset by increased efficiency related expenditure in the contract
- Materials Handling and Pooling
- Contract Manufacturing Services
Reporting and management structures have been realigned to
manufacturing business and the impact of acquisitions, notably a full
improve focus on the performance of these segments.
year contribution from the Asian acquisition.
Prior year comparatives have been restated on a consistent basis.
Inter-segment revenue eliminations of $43.0 million (pcp: $32.7
million) are not included in the segment financial information below.
18
Packaging
and
Sustainability
The Packaging and Sustainability segment is a market leader in rigid plastic packaging in
Australia and New Zealand with a growing presence in Asia. The business is also a leader in
select rigid metals packaging sectors in Australia and New Zealand and also a leading supplier
of sustainability, environmental, reconditioning and recycling services in Australia and
New Zealand. Packaging & Sustainability contributed 66% of the Group’s revenue in FY19.
$’000
Revenue1
EBITDA3
EBITDA Margin %
EBIT4
EBIT Margin %
2019
1,208,468
154,577
12.8%
97,409
8.1%
2018
1,101,971
152,796
13.9%
100,417
9.1%
Change %
9.7%
1.2%
(1.1%)
(3.0%)
(1.0%)
Revenue for the Packaging and Sustainability segment at
EBITDA for the segment of $154.6 million was $1.8 million
$1,208.5 million was $106.5 million (9.7%) higher than the
(1.2%) up on the pcp with the Asian acquisition and the
pcp. Revenue was positively impacted by a full year impact of
acquisition of ECP Industries contributing $10.5 million.
the acquisition of the Asian packaging operations of Closure
Excluding acquisitions, EBITDA was $8.7 million (5.7%) lower
Systems International (excluding Japan) and the Guangzhou
than the pcp due mainly to higher Australian energy costs
China facility of Graham Packaging Company (the “Asian
in the first half of the year, which could only be partially
acquisition”), completed in the second half of FY18, which
recovered in the market, and lags in the recovery of higher
contributed incremental revenue of $95.5 million in the
raw material costs. Lags from the first half of the year were
period. In addition, ECP Industries (acquired November 2018)
partly recovered in the second half with the remaining
contributed an incremental $2.4 million in revenue. Both
impact expected to be recovered in future periods. Earnings
acquisitions are performing in line with expectations.
benefitted from the continued focus on efficiency and
Excluding acquisitions, revenue for the segment was $8.6
million (0.8%) higher than the pcp. Revenue benefitted from
sell price increases to partly recover increased input costs and
restructuring activities in Australia, lowering costs to serve,
and favourable foreign exchange translation. These benefits
mitigated the impact of the lower net volumes noted above.
favourable foreign exchange translation. Overall underlying
EBIT of $97.4 million was $3.0 million (3.0%) lower than
volumes were around 4% lower. The segment experienced
the pcp. Increased depreciation and amortisation related
weaker volumes into the agricultural sector due to ongoing
primarily to the full year effect of the Asian acquisition, capital
drought conditions in Australia, and lower volumes into the
investment in growth projects, notably in New Zealand, partly
dairy, food and beverage sectors in Australia and New Zealand.
offset by lower depreciation relating to assets impaired in the
Underlying sales were ahead of the pcp in the Asian packaging
Australian Packaging business.
business, and in the Sustainability business which benefitted
from increased recycled resin and reconditioning volumes.
Margins were lower than the pcp as a result of higher input
costs and lower margins in the acquired Asian businesses.
Margins were, however, improved compared to the first half
of the year as a result of improved pricing and the partial
recovery of lags.
PAC T 2019 A NNUA L R EP OR T 19
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION Materials
Handling
and Pooling
The Materials Handling and Pooling segment is a leading Australian supplier of polymer
materials handling products and a leading supplier of custom moulded products for use
in infrastructure and other projects. The business is also the largest supplier of returnable
produce crate pooling services in Australia and New Zealand. From 31 October 2018 the
segment also includes TIC Retail Accessories (TIC), a closed loop plastic garment hanger
and accessories re-use business operating across multiple countries, including Australia.
Materials Handling and Pooling contributed 16% of the Group’s revenue in FY19.
$’000
Revenue1
EBITDA3
EBITDA Margin %
EBIT4
EBIT Margin %
2019
296,386
51,054
17.2%
35,710
12.0%
2018
220,134
44,575
20.2%
32,006
14.5%
Change %
34.6%
14.5%
(3.0%)
11.6%
(2.5%)
Revenue for the Materials Handling and Pooling segment
EBITDA for the segment of $51.5 million was $6.5 million
of $296.4 million was $76.3 million (34.6%) higher than
(14.5%) ahead of the pcp. The result includes $9.9 million from
the pcp. This included $76.3 million of revenue related to
TIC. Excluding TIC, EBITDA was $3.4 million lower than the
the acquisition of TIC, which has performed in line with
pcp. Earnings were adversely affected by lower net volumes
expectation to date.
Excluding TIC, revenue was flat compared to the pcp with
sell price increases to recover higher input costs offset
by marginally lower volumes. The Australian crate pooling
business, supporting fresh produce supply to Woolworths,
continued to perform well with revenue ahead of the prior
in the period, unfavourable product mix and higher energy
and input costs only partly recovered in the market. The
segment was also impacted by some higher costs associated
with the expansion of crate pooling operations in Australia to
support new volumes with ALDI in FY20. This new contract win
commenced on schedule in August.
year. Volumes into other sectors were mixed with growth in
EBIT of $35.7 million was $3.7 million (11.6%) higher than
industrial bin volumes, assisted by a large council project won
the pcp. The increased depreciation expense compared to
in the second half of the year, offset by fewer infrastructure
the pcp related primarily to the TIC acquisition and higher
projects available in the period. The business was also
depreciation for the Australian crate pooling business with all
adversely impacted by the drought conditions impacting
facilities and equipment fully commissioned in FY19.
agricultural demand in Australia and adverse weather
conditions affecting its New Zealand pooling business.
Margins were lower than the pcp as a result of unfavourable
product mix, higher input costs and lower margins in the
acquired TIC business relative to the rest of the segment.
Margins were improved compared to the first half of the year
as a result of improved pricing and the partial recovery of lags.
20
Contract
Manufacturing
Services
The Contract Manufacturing Services segment is a leading supplier of services for
the home, personal care and health and wellness categories in Australia. The business
includes manufacturing capability for liquid, powder, aerosol and nutraceutical products.
Contract Manufacturing Services contributed 20% of the Group’s revenue in FY19.
$’000
Revenue1
EBITDA3
EBITDA Margin %
EBIT4
EBIT Margin %
2019
372,263
25,063
6.7%
15,285
4.1%
2018
384,760
39,880
10.4%
32,083
8.3%
Change %
(3.2%)
(37.2%)
(3.6%)
(52.4%)
(4.2%)
Revenue for the Contract Manufacturing Services segment of
the lower net volumes noted above but also by lags in the
$372.3 million was $12.5 million (3.2%) lower than the pcp.
recovery of significantly higher USD denominated raw material
Volumes in the health and wellness sector weakened in the
prices, particularly in the first half, which were exacerbated
second half, impacted by changes in Chinese regulations and
by the decline in the Australian dollar relative to the US dollar
customer overstocking, and were flat for the full year versus
during that period. Improved pricing was delivered in the
the pcp. Sales into the home care sector were lower, adversely
second half to recover some of these adverse lags.
impacted by weaker demand for pest control products
following a dryer summer and by customer offshoring. Lower
net volumes were mitigated by higher pricing in the second half.
EBITDA for the segment of $25.1 million was $14.8 million
(37.2%) lower than the pcp. Earnings were impacted by
EBIT of $15.3 million was $16.8 million lower than the pcp,
with higher depreciation following the commissioning of
efficiency and capacity related asset programs.
Margins for the segment were lower than the pcp but
improved in the second half relative to the first half.
PAC T 2019 A NNUA L R EP OR T 21
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION Perspectives for FY20
Packaging & Sustainability
Other events of significance
Acquisitions
• Continue delivering benefits from network restructuring;
On 31 October 2018 the Group purchased 100% of the net assets
• Demand environment expected to remain subdued in Australia
and New Zealand;
• Contract wins expected to drive modest volume growth in Asia;
• Growth in recycling and sustainability services expected; and
of TIC Retail Accessories (‘TIC’) for a provisional consideration of
$160.8 million. Consideration comprised of cash consideration
paid at completion of $28.3 million, shares issued as consideration
of $60.0 million, deferred consideration of $42.5 million and
contingent consideration of $30.0 million. TIC is a closed loop plastic
• Resin input costs assumed to be in line with Q4 FY19, resulting in
garment hanger and accessories reuse business. The acquisition of
modest recovery of lags.
Materials Handling & Pooling
TIC expands the Group's closed loop pooling platform and provides
the opportunity for future growth in this market.
• Commencement of crate pooling services for ALDI from 1 August
Overview of Business Strategy
2019;
• EBITDA benefit from a full year contribution from TIC; and
• Expansion of reuse services to support a major retailer in USA
expected H2 FY20
Contract Manufacturing Services
• Lower volumes expected from customer destocking, in the first
half, and customer offshoring;
• Raw material input costs expected to remain high in line with
FY19;
• New management appointed; and
•
Increased focus on efficiency and reducing cost to serve.
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 cost of production; and
• M&A — growth through disciplined M&A in existing sectors and
close adjacencies.
Organic Growth
The Group’s core business benefits from:
•
leading sector positions in rigid plastic packaging, sustainability,
Depreciation, amortisation, net financing costs and tax
pooling services, materials handling and contract manufacturing
• Depreciation, amortisation and net financing costs, on a
services;
comparable basis2, expected to be slightly higher than FY19; and
• a diverse customer base with long-term relationships;
• The effective tax rate is expected to be between 29.0%-29.5%
• a highly diversified product portfolio;
Outlook
The Group expects EBITDA (before significant items) 2 in FY20 to
modestly improve, subject to global economic conditions.
•
regional scale and broad end-market reach;
• an extensive manufacturing capability and supply network; and
• world-class innovation.
22
Key to the Group’s ability to grow organically is its ability to leverage
M&A
differentiating characteristics to create a competitive advantage.
A core focus of the Group is innovation. Pact is widely recognised for
our dedication to supplying some of the most innovative products
in the market, supported by our in-house innovation capability and
extensive global licencing arrangements. The Group’s commitment
The Group has a track record of success in identifying acquisition
opportunities, executing transactions in a disciplined and systematic
manner, and delivering cost synergies and operational efficiencies
through integration. Acquisitions have driven growth and enabled
the Group to expand and diversify its product and customer
to innovation has been recognised through multiple industry and
portfolio.
customer awards.
Organic growth opportunities exist for the Group through
increasing demand for sustainable packaging solutions, increased
use of returnable packaging and materials handlings products and
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 in year
increased demand for private label products. In addition, the Group
three.
will seek to drive growth through utilisation of its Asian platform
The acquisition of TIC Retail Accessories in FY19 leveraged and
expanded the Group’s demonstrated capability in closed loop
asset pooling and added further scale to the Group’s portfolio,
expanding its geographic reach in the materials handling sector.
In the prior year the acquisition of CSI Asia (excluding Japan) and
Graham Packaging (China) also 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.
Whilst M&A remains a core pillar of the Group’s strategy, the
Group’s priority focus is to restore margins, with a focus on volume
and efficiency, within the business.
Strategic Review
A detailed business strategy review has commenced under the
leadership of the Group’s new Managing Director and Group CEO.
The review will clarify what is critical to Pact’s continued success and
will enable the Group to maximise long-term shareholder value.
and the expansion of pooling operations. Organic growth will be
supported in FY20 by the commencement of pooling operations to
support ALDI.
Efficiency
The Group is committed to delivering operational excellence and
the lowest cost of production.
In the period, the Group continued to drive the implementation
of its operational excellence programs, with a strong focus on
efficiency and overhead cost reduction, helping to mitigate higher
input costs. In addition, the Group continued to progress the
transformation of the packaging network with two facilities closed,
another rationalised and an import supply model for certain
product categories established. The network redesign is a program
of inter-dependent projects designed to create an integrated
regional supply network delivering efficiencies and improved
customer satisfaction through:
• a reduced manufacturing footprint;
•
•
integrated sales and operation planning;
increased automation;
• an import supply chain that leverages the Asia acquisition
The Group will continue to review all areas of the business for
efficiency opportunities in the pursuit of operational excellence to
deliver benefits in FY20 and beyond.
PAC T 2019 A NNUA L R EP OR T 23
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION Business Risks
Consumer demand
There are various internal and external risks that may have a
Changes in demand for Pact’s products or adverse activities in
material impact on the Group’s future financial performance and
key industry sectors which Pact and its customers service may
economic sustainability. The Group makes every effort to identify
be influenced by various factors. These industry sectors include
material risks and to manage these effectively.
consumer goods (eg. food, dairy, beverages, personal care and
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
Pact operates in a highly competitive environment due to factors
including actions by existing or new competitors, price, product
selection and quality, manufacturing capability, innovation and
the ability to provide the customer with an appropriate range of
products and services in a timely manner. Any deterioration in the
Group's competitive position as a result of actions from competitors
may result in a decline in sales revenue and margins, and an
adverse effect on the Group's future financial performance.
other household consumables) and industrial (eg. surface coatings,
petrochemical, agriculture and chemicals) industry sectors.
Factors which may influence these sectors include climate change,
seasonality of foods and edible oils production, an increased focus
in Australian and New Zealand supermarket chains on private
brands and different substrates, and reputation of products,
substrates (e.g. 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.
Strategic acquisitions
Pact’s 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.
Foreign exchange rates
Pact’s financial reports are prepared in Australian dollars. However,
a substantial proportion of Pact’s sales revenue, expenditures
and cash flows 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, the Hong Kong
dollar, the UK pound and the Bangladesh taka 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.
24
Supply chain
Compliance risks
The ability for the supply chain to meet the Group’s requirements
Pact is required to comply with a range of laws and regulations,
including the sourcing of raw materials, is reliant on key
and those of particular significance to Pact are in the areas of
relationships with suppliers. The price and availability of raw
employment, including modern slavery, work health and safety,
materials, input costs, including energy, and future consolidation
property, environmental, competition, anti-bribery and corruption,
in industry sectors could result in a decrease in the number
customs and international trade, taxation and corporations.
of suppliers or alternative supply sources available to Pact.
Changes in Government policy may also have an adverse effect on
Additionally, Pact may not always be able to pass on changes in
the Group’s financial performance.
input prices to its customers. Any of these factors may have an
adverse effect on the Group's future financial performance.
Information security
Interruption to operations
Pact operates across a diverse geographical footprint and
Data security is fundamental to protect privacy of information and
to protect critical intellectual property. Advances in technology have
resulted in an increased volume of data being stored electronically.
situations may arise in which sites are not able to operate. Factors
There is an increasing risk of and sophistication to cyber-attacks and
include emergency situations such as natural disasters, failure of
crime, which may lead to systems and data breaches, interruption
information technology systems or security, or industrial disputes.
to operations and an adverse effect on the Group’s future financial
Any of these factors may lead to disruptions in production or
performance.
increase in costs and may have an adverse effect on the Group’s
financial performance.
Footnotes
(1) AASB15: Revenue from Contracts with Customers was adopted in the period on a
modified retrospective basis. Refer to Note: 6.2 Accounting Policies in the Full Year
Consolidated Financial Report. The impact to revenue in the period has not been
material.
(2) On a comparable basis, excluding impacts which will arise in FY20 from the adoption of
AASB16 by the Group.
In addition, this report includes certain non-IFRS financial information which have not
been subject to audit by the Group’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.
(3) 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.
(4) 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.
(5) 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.
(6) 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
(7) Interest cover is a non-IFRS financial measures which is calculated as rolling 12 months
EBITDA divided by rolling 12 months net finance costs and losses on de-recognition of
financial assets.
(8) Net debt is a non-IFRS financial measure and is calculated as interest-bearing liabilities
less cash and cash equivalents
PAC T 2019 A NNUA L R EP OR T 25
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION Strategic
Priorities
Creating long-term value
Pact is a diversified provider of speciality packaging and materials handling solutions
generating over $1.8 billion in revenue in FY19. It has grown from a rigid packaging
business generating revenue of $200 million in 2002.
The Group has diversified its product and service portfolio through
The Group has broad-end market reach and an attractive and diverse
transformational investments in areas offering attractive growth
customer base, including supply to trusted major regional and global
opportunities. Today, Pact is:
• The largest manufacturer of rigid packaging products in Australasia,
with a growing presence in Asia.
• A leading supplier of recycling and reconditioning services.
• The leading supplier of returnable produce crate pooling services
in Australia and New Zealand. Pooling provides a sustainable
packaging alternative to single-use packaging for fresh produce.
• A leading global supplier of closed loop plastic garment hanger and
accessories reuse services. Reuse is an innovative and sustainable
supply chain solution which reduces plastic waste.
• A leading contract manufacturing services business for the home,
personal care and health and wellness categories in Australia.
brands.
Priorities
The Group is focused on delivering long-term value for all
stakeholders. Pact’s priorities are:
• Delivering improvements in core business fundamentals.
• Continuing progress towards our 2025 End of Waste Sustainability
Promise.
• Completing a detailed strategy review.
The review will define the strategic priorities for the next stage of the
Group’s evolution and enable the creation of long-term value for all
of its stakeholders.
26
Core Business Fundamentals —
Packaging Network Redesign
The restructuring of our packaging network is a priority. The
program targets the delivery of our scale advantage and will create
an integrated supply network, delivering efficiencies and improved
customer satisfaction.
The future: an integrated supply network
• Reduced manufacturing footprint
• 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 three to five years
The opportunity
• Improved operations management and higher asset utilisation
• Improved productivity
• Improved quality
• Lower freight costs
• Improved inventory control and reduced warehousing costs
• Improved training and safety
FY19
Outcomes
• Two facilities (food packaging)
closed in the second half of
FY19, including one of the
largest facilities in Australia
• A further facility (beverage
closure) has been rationalised
• Import supply chain established
for select product categories
• An additional two facilities
closed in FY18
PAC T 2019 A NNUA L R EP OR T 27
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION Progress towards our
2025 End of Waste Sustainability Promise
Sustainability is a core pillar of Pact’s commitment to its employees,
Reduce
customers and the communities in which it operates. Pact actively
reduces the impact of packaging on the environment through unique
and innovative sustainability services.
Pact is the largest processor and consumer of post-industrial resin in
Australia and New Zealand.
• Decreased consumption of Expanded Polystyrene (EPS) by 30%
(715 metric tonnes)
• Successfully transitioned 100% of New Zealand largest
supermarket’s EPS trays to recycled polyethylene terephthalate
(rPET) trays effectively diverting 107 million single-use EPS trays per
• We offer several schemes for hard to recycle packaging.
annum from landfill
• We launder, recondition and refurbish bulk packaging.
• We actively replace single-use packaging with pooling and reuse
solutions.
• We design products which minimise the impact on the
environment.
Reuse
• Grown the use of Returnable Produce Crates (RPC’s) in one of
Australia’s major supermarket’s supply chain by 4%, and in the
process reduced single use corrugate secondary packaging by 927
tonnes
In FY18 Pact launched its 2025 Promise. The Group made significant
progress towards achieving its 2025 promise in FY19 across its service
• Secured contract to provide major US retailer for the supply of
garment hanger reuse services in FY20
portfolio.
Recycle
In FY18, Pact launched its 2025 End of Waste Sustainability Promise. The
Group made significant progress towards achieving its 2025 Promise
• Grown recycling capability and leveraged government co-
investment support
in FY19 across its service portfolio.
• Increased our consumption of recycled resin by 2,712 tonnes
• Launched numerous new products that have been light-weighted
and/or contain recycled content
28
P A C T ' S
2 0 2 5
P R O M I S E
I S
We have made a promise to become
the number one partner of sustainable
choices for our customers.
OUR TARGETS
REDUCE
REUSE
RECYCLE
Eliminate all non recyclable
packaging that we produce
Have solutions to reduce,
reuse and recycle all single use
secondary packaging
Offer 30% recycled content
across our packaging portfolio
PAC T 2019 A NNUA L R EP OR T 29
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION Growth in Sustainability Services
Crate pooling
Pact has built a world class
produce crate pooling platform
for two of Australia’s largest
supermarkets delivering market
leading quality and efficiency.
Quality
- World standard in hygiene and food safety
- Unique grower interface providing extensive data analytics for
improved supply chain control has delivered market leading grower
satisfaction
- Low environmental footprint
- Innovation capability, supported by global technology partners, to
deliver tailored product and design solutions
Efficiency
- National crate pool delivers significant cost efficiencies to both
growers and retailers
- Low cycle times and improved asset availability
- Patented IntellicrateTM system
- Innovation and technology developments will further enhance asset
tracking and enable real time decision-making
Reuse services
Pact’s reuse platform is an
innovative and sustainable
supply chain solution which
reduces waste and cost.
A global leader in reuse services
- A long-term partnership with a major US retailer for the supply
of reuse services will establish Pact as the global leader in
garment hanger reuse
- Partnership reflects Pact’s proven capability in supporting
global retailers reduce waste and improve their
environmental footprint
- Provides a major step into the largest retail market in
the world
- Leverages established manufacturing and reuse operations
in Asia
- $30 million revenue from 300 million hangers annually
- $10 million cash investment, with operations expected to
commence H2 FY20
30
Shampoo bottles
made entirely
of recycled
content and
20% lighter
than the
previous
bottle
Dishwashing liquid bottles,
75% of each
made from
plastic sourced
from recycled
milk, juice and
water bottles
Personal care
bottles made from
100% recycled
content and
25% lighter
than the
previous bottles
PAC T 2019 A NNUA L R EP OR T 31
Recycling
Pact is partnering
with governments in
other jurisdictions to
expand the Group’s
local recycling
capability.
Support from the New Zealand Waste
Minimisation Fund will enable Pact to
produce an extensive range of 100%
recycled PET food grade packaging
products, including meat trays, bakery
trays, deli containers, food containers,
produce containers and beverage bottles.
A new plant in Auckland will have the
ability to process around 10,000 tonnes of
recycled PET every year. This new capability
will enable Pact to substitute imported
resin with recycled food-contact approved
resin, enhancing the circular economy.
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION Innovation
Pact Group ranked second
on the Manufacturing &
Consumer Goods category in
the 2019 Australian Financial
Review (AFR) BOSS Most
Innovative Companies list,
from more than 800 nominated
organisations across Australia
and New Zealand
In 2019 Pact Group named as one of Australasia’s Most Innovative
Companies for the seventh consecutive Year. Pact Group ranked
second on the Manufacturing & Consumer Goods list, from more
than 800 nominated organisations across Australia and New Zealand.
The assessment measures a top innovation implemented in the past
12 months. Specifically, the judges look at how valuable the problem
is that the innovation is solving, the quality and uniqueness of the
solution, and the level of impact that the innovation has had. Also
assessed are internal elements such as innovation culture, strategy,
resources and process, which demonstrate a sustainable and
repeatable approach to innovation.
32
Case study
250
used
milk
bottles
in landfill
R
O
250
recycled
milk bottles
to make a
wheelie bin
In Australia, there are approximately 70,000 tonnes of bailed post-
consumer milk bottles per annum destined for landfill. Pact’s 2019
Australian Financial Review BOSS Most Innovative Companies
nomination was for designing and manufacturing a household mobile
garbage bin (or wheelie bin) made from 60% recycled milk bottles.
Each bin is made using up to 4.8kg of
recycled milk bottle plastic, or 250
milk bottles — the average number
every Australian household consumes
each year.
Pact’s 2019 nomination forms part of the Group’s End of Waste strategy
to create large sinkholes for recycled content into innovative solutions
such as mobile garbage bins, telecommunication pits, freeway noisewalls
walls, slip sheets and underground cable covers that create a true
circular economy for packaging waste.
Of the seven years Pact has made the list, five of the Group’s winning
nominations have been for innovative sustainability initiatives that
increase the circularity of plastic material.
PAC T 2019 A NNUA L R EP OR T 33
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION Awards
We’re very proud that throughout FY19 we received
multiple awards and recognition for our unwavering
focus on sustainable packaging innovation.
Corporate
Australian Financial Review (AFR) BOSS Most Innovative Companies List
2019, 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
— 2019 Leading Creative Packaging Solutions Provider of the Year
Industry
2019 Winner Australasian Packaging Innovation & Design Awards (PIDA)
— Sustainable Packaging Design Category — Lewis Road’s 100% rPET Milk
Bottle Range
2019 Winner Australasian Packaging Innovation & Design Awards (PIDA)
— Beverage Category — Lewis Road’s 100% rPET Milk Bottle Range
2019 Runner Up Australasian Packaging Innovation & Design Awards (PIDA)
— Health, Beauty and Wellness Category — Essano 100% rPET
Shampoo and Conditioner bottle range
2019 Product of the Year — ALDI Green Action Cleaners 500ml
2019 Canstar Blue — ALDI Almat Laundry Liquid
2019 Choice Awards — ALDI Trimat Laundry Power
PACKAGING INNOVATION
& DESIGN OF THE YEAR
GOLD
AWARD
GOLD
AWARD
SILVER
AWARD
PACKAGING INNOVATION
& DESIGN OF THE YEAR
HEALTH, BEAUTY & WELLNESS
34
Governance
PAC T 2019 A NNUA L R EP OR T 35
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION Sustainability
Review
Pact is committed to sustainability and this is embedded in the way
we work. Our vision is to enrich lives everyday through sustainable
Our annual Sustainability Review is prepared based on the Global
Reporting Initiative (GRI) Sustainability Reporting Guidelines (G4
packaging and manufacturing solutions.
version) and, addresses the challenges and opportunities facing
At Pact we understand that our business operations have an impact
on many people, including our employees, customers, shareholders,
suppliers and the broader communities in which we operate. Our
sustainability framework is built around four pillars that provide the
business with a clear focus and drive our sustainability practices:
our business. The Review allows our stakeholders to see how we’ve
addressed our responsibilities and showcases examples of our
approach to sustainability in action. The Review is available on the
Company’s website: www.pactgroup.com/sustsainability/
People
Providing an honest,
safe and respectful
workplace with
highly motivated and
engaged talent
Environment
Reducing our
environmental impact
Society
Investing in programs
that positively impact
the societies in which
we operate
Ethics &
Governance
Conducting our
business responsibly
and with integrity
Corporate
Governance
The Board recognises the importance of good corporate
The annual Corporate Governance Statement outlines the key
governance and its role in ensuring the accountability of the Board
aspects of the Group’s corporate governance framework and
and Management to shareholders.
The Board’s role is to ensure that the Group is properly managed
to protect and enhance shareholder interests and that the Group,
including the Company, Directors, Officers, and Employees,
practices. 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.
operate in an appropriate environment of control and corporate
The 2019 Corporate Governance Statement is available on the
governance.
The corporate governance framework adopted comprises of
principles and policies that are consistent with the ASX Corporate
Governance Council’s Corporate Governance Principles and
Recommendations (fourth edition).
website: www.pactgroup.com.au/investors/corporate-governance/
corporate-statement.
36
Financial
Reports
PAC T 2019 A NNUA L R EP OR T 37
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION Financial
Report
Consolidated Financial Report
For the year ended 30 June 2019
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 2019.
This Consolidated Financial Report was issued in accordance with
a resolution of the Directors on 14 August 2019.
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 Consolidated 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
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
1.4
Revenue from contracts with customers
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
these judgements and estimates under different assumptions and
conditions and may materially affect financial results or the financial
Section 4: Our Capital Structure
4.1 Net debt
position reported in future periods. Key judgements and estimates,
4.2 Contributed equity and reserves
which are material to this report, are highlighted in the following notes:
4.3 Managing our financial risks
• Note 1.2 Taxation
• Note 2.1 Business combinations
• 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 Actuarial assessments
To assist in identifying key accounting estimates and judgements,
they have been highlighted as follows:
38
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
Accounting policies
6.3 Other (losses) / gains
6.4
Pact Group Holdings Ltd — Parent entity
financial statements summary
6.5 Deed of Cross Guarantee
6.6
Auditors remuneration
6.7
6.8
Segment assets and segment liabilities
Revenue from services rendered
6.9 Geographic revenue
6.10 Subsequent events
Directors’ Declaration
Independent Auditor’s Report
39
57
58
59
60
61
62
64
67
67
68
70
72
74
76
83
84
85
88
89
96
98
99
100
101
101
104
104
105
106
106
107
107
107
108
109
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 2019.
Left to right:
Jonathan Ling, Peter Margin, Ray Horsburgh,
Raphael Geminder, Lyndsey Cattermole,
Sanjay Dayal, Carmen Chua
PAC T 2019 A NNUA L R EP OR T 39
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION Directors’ Report
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 Myer Holdings Ltd, 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).
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 and Libery
Infrabuild.
Former listed company directorships in last three years
Chairman of Calibre Global Limited (2012–2015), Chairman of Toll Holdings Limited (2007–2016).
40
Directors’ Report
Peter Margin
Independent Non-Executive Director
Member of the Board since 26 November 2013
Chairman of the Audit, Business Risk and Compliance Committee
Member of the Nomination and Remuneration Committee
Peter has many years of leadership experience in major Australian and international food companies. 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 Nufarm Limited and Costa Group Holdings Limited.
Former listed company directorships in last three years
Non-Executive Director of PMP Limited (retired August 2016), Huon Aquaculture Limited (retired August 2016) and
Bega Cheese Limited (retired January 2019).
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. He was the Chief Executive Officer
and Managing Director of GUD Holdings Limited from 2013 to 2018, and Chief Executive Officer and Managing
Director of Fletcher Building Limited during the period 2006 to 2012. He also held leadership roles with Nylex,
Visy and Pacifica.
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
Independent Non-Executive Director and Chairman of Pro Pac Packaging Ltd.
Carmen Chua
Independent Non-Executive Director
Member of the Board since 1 September 2018.
Carmen is based in Hong Kong and has broad base management experience in the packaging and material science
industry. Carmen was most recently the Global President for Laird PLC. Previously she held position of VP and GM
of Materials Group at Avery Dennison Corporation from 2008 to 2016. Carmen has also held leadership positions
across sales, marketing and business development with organisations such as Worldmark International, Dell
Corporation and Adampak.
Carmen has a Bachelor of Arts (Hons) from University Science Malaysia, a Master of Business Administration from
the University of Portsmouth, UK and Advanced Management Program from Wharton School of Business.
PAC T 2019 A NNUA L R EP OR T 41
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION Directors’ Report
Executive
Sanjay Dayal
Managing Director and Group Chief Executive Officer
Member of the Board since 3 April 2019.
Sanjay joined Pact Group from BlueScope Steel where he held the position of Chief Executive, Building Products,
Corporate Strategy and Innovation. This followed several other senior positions in Asia and Australia over a
nine year period with the company. Prior to BlueScope, Sanjay had a very successful career with Orica and ICI,
including Regional General Manager for Manufacturing and Supply Chain and General Manager for the DynoNobel
Integration, based out of London.
Sanjay holds a Bachelor of Technology (Chemical Engineering) from Indian Institute of Technology, Delhi.
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 ten year period, including Group Strategy and Corporate Development Officer, Group General Counsel
and Company Secretary and Group Commercial Director. Prior to that Jonathon worked in both private practice
and industry in Australia and the UK, including with Burns Philp Limited, Sportal.com, AOL Europe, Linklaters and
Herbert Smith Freehills.
Jonathon holds Bachelor of Laws (Honours) and Bachelor of Science degrees from the University of Melbourne.
Directors’ shareholding
As at the date of this report, the relevant interests of the Directors in the shares of the Company or a related
body corporate were as follows:
Relevant Interest
in Ordinary Shares
133,951,614
391,329
35,257
31,179
44,971
30,000
40,000
Raphael Geminder
Lyndsey Cattermole
Peter Margin
Jonathan Ling
Ray Horsburgh
Carmen Chua
Sanjay Dayal
42
Directors’ Report
Directors’ meetings
The table below shows the number of Directors’ meetings (including meetings of Board committees), and the
number of meetings attended by each Director in their capacity as a member during the year:
Raphael Geminder
Lyndsey Cattermole
Peter Margin
Jonathan Ling
Ray Horsburgh
Carmen Chua(1)
Sanjay Dayal(2)
Former Director’s
Malcolm Bundey(3)
Directors’ Meetings
Audit, Business Risk and
Compliance Committee
Nomination and
Remuneration Committee
Meetings
held
12
12
12
12
12
10
2
Meetings
attended
12
11
12
12
12
10
2
Meetings
held
NM
6
6
NM
6
NM
NM
Meetings
attended
NM
6
6
NM
6
NM
NM
Meetings
held
4
4
4
4
NM
NM
NM
Meetings
attended
4
4
4
4
NM
NM
NM
1
1
NM
NM
NM
NM
NM — Not a member of the relevant committee
(1) Carmen Chua was appointed as a Non-executive Director on 1 September 2018
(2) Sanjay Dayal was appointed as an Executive Director on 3 April 2019
(3) Malcom Bundey resigned as an Executive Director on 10 September 2018
Principal activities
Pact is a leading provider of specialty packaging solutions, 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 and recycling and sustainability services.
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
page 14.
Dividends
The Directors have determined to not pay a final dividend after the end of the financial year (2018: 11.5 cents,
65% franked).
The table below shows dividends paid (or payable) during the year ended 30 June 2019 and the comparative year.
Dividends
Current year to 30 June 2019
Final Dividend (per ordinary share)
Interim Dividend (per ordinary share)
Prior year to 30 June 2018
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 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
PAC T 2019 A NNUA L R EP OR T 43
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION Directors’ Report
Other events of significance
Please refer to the Review of Operations and Financial Performance on page 14.
Significant events after balance date
In the opinion of the Directors, there have been no other material matters or circumstances which have arisen
between 30 June 2019 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 occasion, the Group receives notices from relevant authorities pursuant to local WHSE legislation and in
relation to the Group’s WHSE licences and consents. The Group takes all notices seriously, conducting a thorough
investigation into the cause and 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 2019.
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 Directors' and Officers' liability insurance
contract that provides cover for the current and former Directors, alternate Directors, secretaries, executive officers
and officers of the Group. The Directors have not included details of the nature of the liabilities covered in this
contract or the amount of the premium paid, as disclosure is prohibited under the terms of the contract.
44
Directors’ Report
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.
Non-audit services
During the year, EY, the Company’s auditor, performed other assignments in addition to it's statutory audit
responsibilities.
Details of the amounts paid or payable to EY for non-audit services provided in respect of the Group during the year
are as follows:
$
Tax services
2019
158,000
2018
356,000
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 auditors own work, acting in
a management or decision-making capacity for the Group, acting as advocate for the Group or jointly sharing
economic risk and rewards.
PAC T 2019 A NNUA L R EP OR T 45
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION Directors’ Report — Remuneration Report
Remuneration report (audited)
This Remuneration Report for the year ended 30 June 2019 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 2019
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 Group 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
Carmen Chua
Other KMP
Sanjay Dayal
Richard Betts
Other KMP
Malcolm Bundey
Position
Term as KMP in 2019
Non-Executive Chairman
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Full Year(1)
Full Year
Full Year
Full Year
Full Year
Appointed 1 September 2018
Managing Director and Group CEO
Chief Financial Officer
Appointed 3 April 2019
Full Year
Former Managing Director and CEO
Resigned 10 September 2018
(1) Mr Geminder held the position of Executive Chairman from 10 September 2018 to 3 April 2019. For the remainder of the year he held
the position of non-Executive Chairman.
There have been no other changes to KMP after the reporting date and before the date the financial report was
authorised for issue.
46
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.
The Group did not engage any remuneration consultants during the year.
PAC T 2019 A NNUA L R EP OR T 47
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 twelve 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 2019 year was as follows(1):
Executive KMP remuneration component at target
Fixed Remuneration
Short term incentives
Long Term incentives (LTIP)
Total
Sanjay Dayal %
51%
49%
-
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).
48
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.
The CEO’s participation in the current year has been assessed on a pro rata basis from his commencement
of employment on 3 April 2019. Participation in the STI for both the CEO and CFO 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 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 51 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 fixed annual remuneration for the CEO and 30% of fixed annual
remuneration for the CFO.
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 the prior year’s full year financial
results. The number of performance rights granted to the CEO are on a pro rata entitlement based on a
commencement date of 3 April 2019. The number of performance rights granted to the CFO represents the
entitlement for that full year. For details on the performance rights granted for the FY2018 LTIP and FY2017
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 commences on the first day of that fiscal year and is measured over 3 years.
PAC T 2019 A NNUA L R EP OR T 49
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).
50
Directors’ Report — Remuneration Report (cont.)
4. Executive remuneration outcomes for FY2019
Business performance in FY2019
The Group’s FY2019 financial performance reflects a challenging operating environment with earnings impacted by
higher raw material and energy costs and weaker demand conditions in some sectors.
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)
3 month average share price (1 April to 30 June)
Earnings per share1(cps)
Earnings per share1 growth %
Cumulative TSR %2
2015
67,632
85,214
42.7%
208,678
5.3%
19.5
4.68
4.28
29
45.0%
31.1%
2016
85,051
94,310
10.7%
220,157
5.5%
21.0
6.03
5.46
32
10.3%
71.6%
2017
90,341
100,003
6.0%
233,116
5.9%
23.0
5.99
6.44
33
3.1%
106.9%
2018
74,488
94,661
(5.3%)
237,251
1.8%
23.0
5.27
5.57
30
(9.1%)
88.1%
2019
(289,587)
77,307
(18.3%)
230,694
(2.8%)
-
2.79
2.51
23
(23.3%)
1.8%
(1) Before significant items (refer to note 1.1 in the Consolidated Financial Report).
(2) Cumulative TSR has been calculated using the same start date for each period (1 July 2014). The three month average share price has been used in all
periods (the three month average share price for the starting period was $3.41).
STI Outcomes — Executive KMP
The table below outlines the components of the STI, and how performance has been measured in fiscal year 2019.
Performance measure Weighting
EBITDA
64%
Overview of performance v target
EBITDA decrease of 2.8% compared to last year, minimum EBITDA hurdle of 95%
Cash Conversion
8%
of 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 2019.
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.
Sanjay Dayal – CEO
Year
Grant date
2019 LTIP 27 March 2019
Performance
rights granted
69,7841
Fair value
of right
$17,446
Value of rights included in
compensation for the year
$2,025
Performance period
1 July 2018 to 30 June 2021
(1) The performance rights granted to Mr Dayal were on a pro-rata basis aligning with his commencement date of 3 April 2019.
Richard Betts – CFO
Year
Grant date
Performance
rights granted
2018 LTIP 15 November 2017 33,182
2019 LTIP 14 November 2018 43,301
Fair value
of right
$87,932
$32,909
Value of rights included in
compensation for the year
$29,311
$10,970
Performance period
1 July 2017 to 30 June 2020
1 July 2018 to 30 June 2021
The performance measure for the LTIP is achievement of relative TSR targets. The vesting conditions have been outlined on page 50. All performance rights
granted to the former CEO Mr Bundey were forfeited following his departure from the company.
PAC T 2019 A NNUA L R EP OR T 51
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION Directors’ Report — Remuneration Report (cont.)
Executive KMP remuneration for the year ended 30 June 2019
Executive
Year
Short term benefits
Salary
and fees
STI and
bonuses
$
269,886
-
$
-
-
556,728 59,000(5)
-
530,485
Non-
monetary
benefits (1)
$
-
-
50,558
49,584
Mr Sanjay Dayal
(CEO)
Mr Richard Betts
(CFO)
2019
2018
2019
2018
Former Executive
$
22,677
-
2,802
10,351
KMP
Mr Malcom Bundey 2019 958,848(6)
2018 1,230,000
(Former CEO)
Total Executive
2019 1,785,462
KMP remuneration 2018 1,760,485
-
-
59,000
31,059
48,793
91,437 (16,346)
74,272
81,617
(5,995)
- 141,021
Post-
employment
benefits
Other
Benefits (2)
Super-
annuation
Long-
term
benefits
Long
Service
Leave(3)
$
-
-
-
-
-
-
-
-
Share based
payments
LTIP (4)
Initial Grant
Performance
related %
Total
$
2,025
-
40,281
29,311
$
-
-
-
-
$
319,588
-
734,369
644,731
(656,030)(7) 138,889(8)
540,309
647,275 333,334 2,310,700
138,889 1,594,266
333,334 2,955,431
(613,724)
676,586
%
1%
-
14%
5%
(121%)(7)
28%
(35%)(9)
23%
$
25,000
-
25,000
25,000
18,750
25,000
68,750
50,000
(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 are the movement in the annual leave provision for Mr Dayal, Mr Betts and Mr Bundey.
(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.
(5) Mr Betts received a discretionary bonus for duties performed following the departure of the former CEO.
(6) Mr Bundey received a motor vehicle allowance as part of his salary and fees.
(7) Following Mr Bundey’s cessation of employment 421,801 unvested LTIP rights were forfeited. Negative percentage is due to the reversal of share based
payment expense in the current year.
(8) The initial share grant was approved at the AGM on 16 November 2016, where shares totalling $1 million will be issued to Mr Bundey on 3 December
2018. Mr Bundey ceased to be a KMP on 10 September 2018, but continued to be employed until 8 March 2019.
(9) Negative percentage is due to the reversal of share based payment expense in the current year (refer footnote 7).
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 2019. The table below has not been prepared in accordance with Australian accounting
standards. The benefits disclosed below excludes the expense for options that are unvested.
Mr Sanjay Dayal
Mr Richard Betts
Former KMP
Mr Malcolm Bundey
Fixed
Remuneration(1)
$
294,886
581,728
STI and
bonuses(2)
$
-
59,000
Other
Benefits(3)
$
22,677
53,360
Performance rights
vested in 2019
$
n/a (4)
n/a (5)
Initial
share grant
$
-
-
Total
$
317,563
694,088
977,598
-
79,852
n/a (6)
1,000,000 (7)
2,057,450
(1) Fixed remuneration includes salary and fees, and superannuation contributions, calculated on the same basis as the remuneration table above.
(2) Mr Betts received a discretionary bonus for duties performed following the departure of the former CEO.
(3) Other benefits includes motor vehicle lease payments and FBT payments made by the Company on behalf of Mr Betts and Mr Bundey, and movement
in the annual leave provision for Mr Dayal, Mr Betts and Mr Bundey, both shown on an accruals basis.
(4) Not applicable as the first opportunity for performance rights to vest for My Dayal will be on 30 June 2021 (the vesting of the 2019 LTIP), therefore no
benefits were received during the current financial year.
(5) Not applicable as the first opportunity for performance rights to vest for Mr Betts will be on 30 June 2020 (the vesting of the 2018 LTIP), therefore no
benefits were received during the current financial year.
(6) All performance rights granted to Mr Bundey are no longer eligible to vest following his departure from the company.
(7) On 3 December 2018 Mr Bundey was issued 209,205 shares at $4.78 per share in relation to an initial share grant at the commencement of his
employment on 1 December 2015.
52
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 Sanjay Dayal, is employed under an employment contract with a notice period for termination of three
months. There is no fixed term. Mr Dayal’s remuneration package consists of the following components:
• The CEO receives fixed remuneration of $1,225,000 per annum.
• The CEO has a maximum STI of 100% of fixed annual remuneration. 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 pages 49 and 50.
• 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 $581,728 per annum.
• The CFO has a maximum STI of 50% of annual base salary (fixed remuneration excluding superannuation).
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 pages 49 and 50.
• 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 3 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 2019 A NNUA L R EP OR T 53
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
NEDs do not participate in any incentive programs.
2019
2018
$112,750
$112,750
$30,750
$7,688
$30,750
$7,688
$30,750
$7,688
$30,750
$7,688
The remuneration of NEDs for the year ended 30 June 2019 is detailed in the following table.
Non executive KMP remuneration for the year ended 30 June 2019
Ms Lyndsey Cattermole
Mr Raphael Geminder
Mr Jonathan Ling
Mr Peter Margin
Mr Ray Horsburgh
Ms Carmen Chua
Total non-Executive KMP remuneration
Short-term
benefits
Post-employment
benefits
Fees
$
117,009
117,009
-
-
143,500
143,500
151,187
151,187
109,989
109,989
93,958
-
615,643
521,685
Superannuation
$
11,116
11,116
-
-
-
-
-
-
10,449
10,449
-
-
21,565
21,565
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
Total
$
128,125
128,125
-
-
143,500
143,500
151,187
151,187
120,438
120,438
93,958
-
637,208
543,250
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 2019:
KMP
Raphael Geminder
Lyndsey Cattermole
Peter Margin
Jonathan Ling
Ray Horsburgh
Carmen Chua
Sanjay Dayal
Richard Betts
Former KMP
Malcolm Bundey(1)
Balance
1 July 2018
131,668,287
275,419
28,080
17,467
41,632
-
-
5,581
Movements
2,283,327
115,910
7,177
13,712
3,339
30,000
40,000
3,703
Balance
30 June 2019
133,951,614
391,329
35,257
31,179
44,971
30,000
40,000
9,284
-
-
-
(1) Equity holdings for Mr Bundey in the above table is for his tenure during the year as a KMP (from 1 July 2018 to 10 September 2018). Mr Bundey was
issued 209,205 shares on 3 December 2018, which he still holds at 30 June 2019.
54
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 2019:
$’000’s
Related parties — Directors' interests(1)
2019
2018
Sales
13,789
11,469
Purchases Other expenses
6,667
5,958
11,043
12,312
Net amounts
receivable
609
2,573
(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 49.8% (2018 40%), 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 of sales under this arrangement is approximately $4.2 million
(2018: $4.3 million). The supply arrangement is at arm’s length terms.
Mr Jonathan Ling was appointed as an Independent non-Executive Director and Chairman of Pro-Pac on 8 April 2019.
Terms and conditions of transactions with related parties
The Group leased 13 properties (10 in Australia and three 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 2019 was $6.4 million (2018: $6.1 million). The rent payable
under these leases was determined based on independent valuations and market conditions at the time the leases
were entered into, and are therefore at arm’s length.
Terms and conditions of transactions with related parties
As detailed above, all transactions with related parties are made at arm’s length. 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.
PAC T 2019 A NNUA L R EP OR T 55
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 57.
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
Sanjay Dayal
Chairman
14 August 2019
Managing Director and
Group Chief Executive Officer
56
PAC T 2019 A NNUA L R EP OR T 57
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION Financial Report —
Consolidated Statement Of Comprehensive Income
For the year ended 30 June 2019
$’000
Revenue
Raw materials and consumables used
Employee benefits expense
Occupancy, repair and maintenance, administration and selling expenses
Interest and other income
Other (losses) / gains
Depreciation and amortisation expense
Impairment expense
Finance costs and loss on de-recognition of financial assets
Share of profit in associates
(Loss) / profit before income tax expense
Income tax benefit / (expense)
Net (Loss) / profit for the year
Net (Loss) / profit attributable to equity holders of the parent entity
Notes
1.1, 1.4
5.2
6.3
3.2
3.2
4.1
2.3
1.2
2019(1)
2018
1,834,076 1,674,188
(734,260)
(843,167)
(410,018)
(430,035)
(306,299)
(341,539)
11,199
11,068
(22,404)
(55,889)
(72,745)
(82,290)
-
(368,765)
(32,695)
(39,675)
2,159
2,336
109,125
(313,880)
(34,637)
24,293
74,488
(289,587)
74,488
(289,587)
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 (losses) / gains taken to equity
Foreign currency translation gains / (losses)
Income tax on items in other comprehensive income
Other comprehensive income for the year, net of tax
Total comprehensive (loss) / income for the year
Attributable to:
Equity holders of the parent entity
Total comprehensive (loss) / income for the Group
(10)
125
(6,453)
10,932
1,762
6,231
(283,356)
2,293
(78)
(692)
1,648
76,136
(283,356)
(283,356)
76,136
76,136
cents
Basic earnings per share
Diluted earnings per share
1.1
1.1
(85.3)
(85.3)
23.4
23.3
(1) Reflects the adoption of AASB 15 Revenue from contracts with customers from 1 July 2018. Comparatives have not been restated.
The Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
58
Financial Report —
Consolidated Statement of Financial Position
As at 30 June 2019
$’000
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Contract assets
Current tax assets
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
Current tax liability
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
2019(1)
2018
4.1
3.1
3.1
1.2
3.2
2.3
3.2
1.2
3.1
1.2
5.2
3.4
5.2
3.4
4.1
1.2
49,950
145,282
211,846
8,895
3,360
349
14,617
434,299
718
4,392
638,542
24,353
477,054
42,100
1,187,159
1,621,458
365,615
-
36,292
13,914
2,369
418,190
66,313
7,270
32,358
733,490
4,296
36,946
880,673
1,298,863
322,595
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
418,184
19,075
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
4.2
4.2
1,750,476
(896,911)
(530,970)
322,595
1,690,476
(902,984)
(204,292)
583,200
(1) Reflects the adoption of AASB 15 Revenue from contracts with customers from 1 July 2018. Comparatives have not been restated.
The Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.
PAC T 2019 A NNUA L R EP OR T 59
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION Financial Report —
Consolidated Statement of Changes in Equity
For the year ended 30 June 2019
$’000
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
Year ended 30 June 2019
1,690,476 (928,385)
As at 1 July 2018
Adjustment on adoption of AASB 15
-
-
Restated balance as at 1 July 2018 1,690,476 (928,385)
Loss for the period
-
Other comprehensive income / (loss)
-
-
Total comprehensive income
Issuance of share capital
-
-
Total equity transactions
Dividends paid
-
Share based payments expense
-
Transactions with owners in their
-
-
-
60,000
60,000
-
-
111
-
111
-
(4,691)
(4,691)
-
-
-
-
22,965
-
22,965
-
10,932
10,932
-
-
-
-
-
2,325 (204,292)
1,155
2,325 (203,137)
(289,587)
(10)
(289,597)
-
-
(38,236)
-
-
-
-
-
-
-
(168)
583,200
1,155
584,355
(289,587)
6,231
(283,356)
60,000
60,000
(38,236)
(168)
capacity as owners
Balance as at 30 June 2019
-
-
1,750,476 (928,385)
-
(4,580)
-
33,897
(168)
(38,236)
2,157 (530,970)
(38,404)
322,595
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
Balance as at 30 June 2018
1,517,097 (928,385)
-
-
-
-
-
-
-
-
-
-
-
-
-
175,559
(2,986)
806
173,379
-
-
173,379
(1,490)
-
1,601
1,601
-
-
-
-
-
-
-
23,043
-
(78)
(78)
-
-
-
-
-
-
-
1,100 (206,257)
74,488
125
74,613
-
-
-
-
(72,648)
-
(72,648)
-
-
-
-
-
-
-
-
1,225
1,225
405,108
74,488
1,648
76,136
175,559
(2,986)
806
173,379
(72,648)
1,225
101,956
1,690,476 (928,385)
111
22,965
2,325 (204,292)
583,200
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
60
Financial Report —
Consolidated Statement of Cash Flows
For the year ended 30 June 2019
$’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
2019
2018
4.1
2.1
1,160,215
944,281
(1,931,802)
(38,438)
168
13,611
(39,352)
108,683
998,426
874,417
(1,658,784)
(33,148)
151
3,181
(33,820)
150,423
(69,455)
(78,725)
88
867
(147,225)
433,786
(376,630)
-
(38,236)
18,920
(19,622)
67,980
1,592
49,950
(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
The Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
PAC T 2019 A NNUA L R EP OR T 61
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 2019.
1.1 Group results
$’000
Year ended 30 June 2019
Revenue
EBITDA(1)
EBIT(2)
$’000
Year ended 30 June 2018
Revenue
EBITDA(1)
EBIT(2)
Packaging and
Sustainability
Materials
Handling and
Pooling
Contract
Manufacturing
Services
Eliminations
Total
1,208,468
154,577
97,409
296,386
51,054
35,710
372,263
25,063
15,285
(43,041) 1,834,076
230,694
148,404
-
-
Packaging and
Sustainability
Materials
Handling and
Pooling
Contract
Manufacturing
Services
Eliminations
Total
1,101,971
152,796
100,417
220,134
44,575
32,006
384,760
39,880
32,083
(32,677) 1,674,188
237,251
164,506
-
-
(1) EBITDA - Earnings before finance costs and loss on de-recognition of financial assets, net of interest income, tax, depreciation and amortisation and
significant items.
(2) EBIT - Earnings before finance costs and loss on de-recognition of financial assets, net of interest income, tax and significant items.
Pact’s chief operating decision maker is the Managing Director and CEO, who has a focus on the financial measures
reported in the above table. As required by AASB 8: Operating Segments, the results above have been reported on a
consistent basis to that supplied to the Managing Director and CEO.
The Group has adopted a new operating model in the current year. The Managing Director and CEO monitor results
by reviewing the reportable segments based on a product perspective as outlined in the table below. The resource
allocation to each segment, and the aggregation of reportable segments is based on that product portfolio. Prior
year comparatives have been restated on a consistent basis.
Reportable segments
Packaging and
Sustainability
Products/services
Manufacture and supply of rigid plastic
Australia
and metal packaging and associated
New Zealand
services
Recycling and sustainability services
China
Indonesia
Philippines
Singapore
Materials Handling
Manufacture and supply of materials
Australia
and Pooling
handling products and the provision of
New Zealand
associated services
Pooling services
China
Hong Kong
United States of America
Contract Manufacturing
Contract manufacturing and packing
Australia
Services
services
Thailand
Hong Kong
South Korea
Nepal
India
India
Bangladesh
United Kingdom
Sri Lanka
62
Financial Report —
Notes to the Financial Statements
1.1 Group results (continued)
Net (loss) / profit after tax
The reconciliation of EBIT before significant items shown above and the net (loss) / profit after tax disclosed in the
Consolidated Statement of Comprehensive Income is as follows:
$’000
EBITDA
Depreciation and Amortisation
EBIT
Significant items
Acquisition costs(1)
Deferred settlement costs (earn-out)(2)
Inventory write downs and related disposal costs
Impairment expenses
• Tangible asset write downs
•
Intangible assets
Business Restructuring Programs(3)
•
restructuring costs
• asset write downs
Total significant items
EBIT after significant items
Net finance costs(4)
Net (loss) / profit before tax
Income tax benefit / (expense)
Net (loss) / profit after tax
Notes
2019
230,694
2018
237,251
(82,290)
148,404
(72,745)
164,506
3.1, 3.2
(3,666)
-
(13,031)
(136,330)
(232,435)
(37,842)
-
(37,842)
(423,304)
(274,900)
(38,980)
(313,880)
24,293
(289,587)
(4,411)
(8,781)
-
-
-
(8,524)
(1,589)
(10,113)
(23,305)
141,201
(32,076)
109,125
(34,637)
74,488
(1) Acquisition costs include professional fees, stamp duty and all other costs associated with business acquisitions.
(2) Adjustments to contingent consideration provisions raised in the comparative year relate 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 $695,000 (2018: $619,000).
PAC T 2019 A NNUA L R EP OR T 63
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION Financial Report —
Notes to the Financial Statements
1.1 Group results (continued)
Basic and diluted earnings per share
Earnings per share (EPS) (cents) — basic
Earnings per share (EPS) (cents) — diluted
Calculated using:
• Net profit attributable to ordinary equity holders ($’000s)
• Weighted average of ordinary shares (shares) — basic
• Weighted average of ordinary shares (shares) — diluted
2019
(85.3)
(85.3)
2018
23.4
23.3
(289,587)
74,488
339,600,703
318,642,850
340,687,214
319,695,783
Earnings per share is calculated by dividing the net (loss) / 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.
1.2 Taxation
Reconciliation of tax expense
$’000
Accounting (loss) / profit before tax
Income tax calculated at 30% (2018: 30%)
Adjustments in respect of income tax of previous years
Impairment of goodwill
Tax on unremitted foreign income
Overseas tax rate differential
Sundry items
Income tax (benefit) / expense reported in the Consolidated Statement of
Comprehensive Income
Comprising of:
• Current year income tax (benefit) / expense
• Deferred income tax (benefit) / expense
• Adjustments in respect of previous years income tax
2019
(313,880)
(94,164)
(344)
69,340
1,879
(2,115)
1,111
2018
109,125
32,737
(345)
-
443
(1,300)
3,102
(24,293)
34,637
17,065
(41,014)
(344)
35,303
(321)
(345)
Included in the above is a tax benefit on significant items of $56.4 million for the year ended 30 June 2019
(2018: $3.1 million).
64
Financial Report —
Notes to the Financial Statements
1.2 Taxation (continued)
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
Net payments / (receipts)
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
•
• Other
Intangibles
2019
Current
Income tax
Asset/(Liability)
(19,075)
(15,899)
(154)
-
-
38,438
188
(138)
3,360
2019
Deferred
Income tax
(35,860)
39,848
102
1,762
-
-
(390)
(308)
5,154
12,522
13,688
1,694
533
4,864
4,616
4,183
42,100
(23,730)
(8,659)
(4,557)
(36,946)
2018
Current
Income tax
Asset/(Liability)
(16,913)
2018
Deferred
Income tax
(32,772)
(35,303)
977
-
-
33,148
(1,073)
89
321
(632)
(692)
806
-
(3,102)
211
(19,075)
(35,860)
12,517
9,813
-
1,319
87
5,071
2,197
31,004
(51,587)
(9,754)
(5,523)
(66,864)
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.
PAC T 2019 A NNUA L R EP OR T 65
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION 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.
Pact uses the tax laws in place or those that have been substantively enacted at reporting date to calculate
income tax. For deferred income tax, Pact also considers whether these tax laws are expected to be in place
when the related asset is realised or liability is settled. Management periodically re-evaluate their assessment
of their tax positions, in particular where they relate to specific interpretations of applicable tax regulation.
Deferred tax assets and liabilities are recognised on all assets and liabilities that have different carrying
values for tax and accounting, except for:
•
initial recognition of goodwill; and
• any undistributed profits of Pact’s subsidiaries, associates or joint ventures where either the distribution
of those profits would not give rise to a tax liability or the Directors consider they have the ability to
control the timing of the reversal of the temporary differences.
Specifically for deferred tax assets:
• They are recognised only to the extent that it is probable that there is sufficient future taxable amounts
to be utilised against. This assessment is reviewed at each reporting date.
• They are offset against deferred tax liabilities in the same tax jurisdiction, when there is a legally
enforceable right to do so.
•
If acquired as part of a business combination, but not satisfying the criteria for separate recognition
at that date, would be recognised subsequently if new information about facts and circumstances
changed. The adjustment would either be treated as a reduction to goodwill (as long as it does not
exceed goodwill) if it was incurred during the measurement period or in the Consolidated Statement of
Comprehensive Income.
Australian tax consolidated group
Pact Group Holdings Ltd (the head entity) and its wholly-owned Australian subsidiaries formed a tax
consolidated group (Australian tax consolidated group), effective January 2014.
The Australian tax consolidated group continues to account for their own current and deferred tax amounts.
The Group has applied the Group allocation approach in determining the appropriate amount of current
and deferred taxes to allocate to members of the tax consolidated group. The head entity also recognises
the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused
tax credits assumed from controlled entities in the tax consolidated group.
A tax funding agreement is in place such that Pact Group Holdings Ltd pays/receives any taxes owed by/
owed to the Group to/from the Australian Tax Office. Assets or liabilities arising under this tax funding
agreement are recognised as amounts receivable from or payable to the head entity. Any difference
between the amounts assumed and amounts receivable or payable under the tax funding agreement are
recognised as a contribution to (or distribution from) wholly owned tax consolidated entities.
66
Financial Report —
Notes to the Financial Statements
1.3 Dividends
$’000
Dividends paid during the financial year
Proposed dividend(1)
2019
38,236
-
2018
72,648
38,236
(1) The Directors have determined to not pay a final dividend after the end of the financial year (2018: 11.5 cents,
65% franked).
Franking credit balance
Franking account balance as at the end of the financial year at 30% (2018: 30%)
Franking credits / (debits) that will arise from the payment / (refund) 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
2019
21,519
2018
5,038
(16,829)
10,103
-
4,690
(10,651)
4,490
1.4 Revenue from contracts with customers
The Group has adopted AASB 15: Revenue from Contracts with Customers from 1 July 2018. AASB 15 replaces all
revenue recognition requirements under AASB 111: Construction Contracts and AASB 118: Revenue, and it applies to
all revenue arising from contracts with customers, unless those contracts or transactions are captured in the scope
of other standards (refer Note 6.2 Accounting policies).
Disaggregation of revenue from contracts with customers
$’000
Year ended 30 June 2019
Australia
New Zealand
Asia
Revenue from contracts with customers
Revenue from asset hire services(4)
Inter-segment revenue
Revenue
Packaging and
Sustainability(1)
Materials
Handling and
Pooling
Contract
Manufacturing
Services(1)
Eliminations
Total(3)
664,215
294,482
210,024
1,168,721
-
39,747
1,208,468
178,148
-
42,296
220,444
72,704
3,238
296,386
372,207
-
-
372,207
-
56
372,263
- 1,214,570
294,482
-
252,320
-
- 1,761,372
72,704
-
-
(43,041)
(43,041) 1,834,076
(1) 0.2% of total revenue for Packaging and Sustainability is recognised over time, while 99.8% is recognised at a
point in time.
(2) 2% of total revenue for Contract Manufacturing Services is recognised over time, while 98% is recognised at a
point in time.
(3) If revenue from contracts with customers continued to be measured and disclosed under the previous revenue
standard AASB 118, revenue would have been $1,752.5 million in the current year.
(4) Revenue from asset hire services is accounted for under AASB 117: Leases.
PAC T 2019 A NNUA L R EP OR T 67
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 2019 acquisitions:
$’000
Consideration paid or payable
Comprising of:
• Cash consideration paid
• Shares issued as consideration
• Contingent consideration
• Deferred consideration(1)
• Assets
Inventory
- Cash
- Trade and other receivables
-
- Property, plant & equipment
-
Intangibles
- Other assets
• Liabilities
- Trade payables and other provisions
- Employee benefits provisions
- Deferred tax liability
Fair value of identifiable net assets
Provisional goodwill arising on acquisition
TIC Retail
Accessories
160,794
28,333
60,000
30,000
42,461
2,814
19,432
16,502
8,571
1,300
3,330
(17,749)
(780)
(390)
33,030
127,764
(1) On 26 April 2019 the Group paid $20.8 million deferred consideration to the vendor. The remaining deferred
consideration of $21.7 million is payable on 31 October 2020.
On 31 October 2018 the Group purchased 100% of the net assets of TIC Retail Accessories (TIC) for a provisional
consideration of $160.8 million. TIC is a closed loop plastic garment hanger and accessories re-use business.
The acquisition of TIC expands the Group's closed loop pooling platform and provides the opportunity for future
growth in this market.
Provisional goodwill of $127.8 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 TIC’s reputation for quality and
service. Goodwill is allocated to the Materials Handling and Pooling reportable segment. This goodwill will not
be deductible for tax purposes. The assessment of separately identifiable intangible assets is ongoing and is
expected to be completed by 31 October 2019.
The fair value of TIC’s trade and other receivables acquired amounted to $19.4 million. It is expected that the
stated fair value amount will be collected.
From the date of acquisition to 30 June 2019 TIC contributed $77.3 million of revenue and other income, and
$8.6 million to net profit before tax of the Group. If the combination had taken place at 1 July 2018, contributions
to revenue for the period ended 30 June 2019 would have been $36.7 million higher and the contribution to profit
before tax for the Group would have been $6.2 million higher.
68
Financial Report —
Notes to the Financial Statements
2.1 Businesses acquired (continued)
The fair value contingent consideration is dependent on EBITDA hurdles over the two years ending 31 October 2020,
with a range of outcomes from $0-$30.0 million. The contingent consideration represents managements best estimate.
Included within the Consolidated Statement of Comprehensive Income are acquisition-related costs of $1.3 million.
The costs include advisory, legal, accounting and other professional fees.
Completion of prior year acquisition accounting
During the period a total amount of $32.4 million was paid in relation to the Pascoe’s Group and CSI International and
Graham Packaging Group acquisitions made in prior years.
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 CGU’s, or group of CGU’s, in
accordance with the level at which management monitors goodwill; and
•
if the cost of acquisition is less than the Group’s share of the net fair value of the identifiable net assets of
the subsidiary, the difference is recognised as a gain in the income statement.
PAC T 2019 A NNUA L R EP OR T 69
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Notes to the Financial Statements
2.2 Controlled entities
Australian incorporated entities that are party to the Deed of Cross Guarantee at 30 June 2019(1)
Pact Group Industries (ANZ) Pty Ltd
Jalco Group Pty Ltd
Australian Pharmaceutical Manufacturers Pty Ltd
Jalco Automotive Pty Ltd
Pact Group Holdings (Australia) Pty Ltd
Pact Group Finance (Australia) Pty Ltd
Power Plastics Pty Ltd
Pascoes Pty Ltd
Bidware Pty Ltd
Jalco Powders Pty Ltd
Jalco Plastics Pty Ltd
Jalco Australia Pty Ltd
Jalco Care Products Pty Ltd
Packaging Employees Pty Ltd
Middleton Asset Financing & Leasing Pty Ltd
Jalco Cosmetics Pty Ltd
Alto Packaging Australia Pty Ltd
Summit Manufacturing Pty Ltd
Astron Plastics Pty Ltd
Sunrise Plastics Pty Ltd
Inpact Innovation Pty Ltd
Cinqplast Plastop Australia Pty Ltd
Steri-Plas Pty Ltd
Sulo MGB Australia Pty Ltd
VIP Steel Packaging Pty Ltd
VIP Drum Reconditioners Pty Ltd
Vmax Returnable Packaging Systems Pty Ltd
Viscount Plastics Pty Ltd
Viscount Plastics (Australia) 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
TIC RA AU Pty Ltd(2)
Pact Group Industries (Asia) Pty Ltd
Viscount Plastics (China) Pty Ltd
Ruffgar Holdings Pty Ltd
Davmar Investments Pty Ltd(2)
* There is currently an option granted to a 3rd party to purchase 50% shares in this entity.
This option has not been exercised.
70
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(13)
Roots Investment Holding Private Limited(8)
TIC Group (HK) Ltd(2) (14)
TIC Group (Asia) Ltd(2) (14)
Talent Group Development Ltd(2) (14)
Fast Star International Holdings Ltd(2) (14)
TIC Group Ltd(2) (14)
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(5)
TIC RA NZ Ltd(2) (6)
China
Guangzhou Viscount Plastics Co Ltd(7)
Langfang Viscount Plastics Co Ltd(7)
Changzhou Viscount Plastics Co Ltd(7)
Pact Group Closure Systems (Guangzhou) Co. Ltd(8)
Pact Group Closure Systems (Tianjin) Co. Ltd)(8)
Graham Packaging (Guangzhou) Co. Ltd)(10)
Dongguan Top Rise Trading Co. Ltd(2) (11)
Regent Plastic Products Ltd(2) (9)
Ningbo Xunxing Trade Co. Ltd(2) (12)
India
Closure System International (I) Private Limited(13)
AMRS Business Services Private Limited(2) (14)
Indonesia
PT Plastop Asia Indonesia(15)
PT Plastop Asia Indonesia Manufacturing(15)
Korea
Closure System International (Korea), Ltd (8)
Nepal
CSI Nepal Private Limited(13)
Philippines
Plastop Asia Inc(16)
Closure System International (Philippines), Inc(13)
Singapore
Asia Peak Pte Ltd(13)
United States of America
Pact Group (USA) Inc(17)
United Kingdom
TIC Group (Europe) Ltd(2) (17)
(1) All entities are wholly owned unless otherwise stated
(2) Entities acquired in the 2019 financial year
(see Note 2.1)
(3) Owned by Skyson Pty Ltd
(4) Owned by Snopak Manufacturing Pty Ltd
(5) Owned by Sulo MGB Australia Pty Ltd
(6) Owned by Pact Group Holdings (NZ) Ltd
(7) Owned by Viscount Plastics (China) Pty Ltd
(8) Owned by Pact Group Holdings (Hong Kong) Limited
(9) Owned by Talent Group Development Ltd
(10) Owned by Roots Investment Holding Private Limited
(11) Owned by TIC Group (Asia) Ltd
(12) Owned by Fast Star International Ltd
(13) Owned by Pact Group Industries (Asia) Pty Ltd
(14) Owned by Davmar Investments Pty Ltd
(15) Owned by Asia Peak Pte Ltd
(16) Owned by Ruffgar Holdings Pty Ltd
(17) Owned by Pact Group Industries (ANZ) Pty Ltd
Key estimates and judgements — control and significant influence
Determining whether Pact can control or exert significant influence over an entity can at times require
judgement. It requires management to consider whether Pact is exposed to, or has the rights to, variable returns
from its involvement with the investee and has the ability to affect those returns through its power over the
investee. In making such an assessment, a range of factors are considered, including if and only if the Group has:
power over the investee (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 2019 A NNUA L R EP OR T 71
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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 have significant influence or joint control over:
Entity
$’000
Principal
place of
operation
About
Pact’s
ownership
interest
Carrying Value
2019
2018
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(1)
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%
205
202
50%
732
694
50%
1,256
1,997
50%
19,323
15,552
Indonesia
and home care markets.
50%
2,837
1,063
(1) Ownership interest at 30 June 2019 and 30 June 2018.
72
Financial Report —
Notes to the Financial Statements
2.3 Associates and joint ventures (continued)
Summary of associates and joint venture financial information at 30 June
$’000
Summarised statement of financial position
Current assets
Non-current assets
Current liabilities
Net assets
Carrying amount of the Group’s investment
Summarised statement of comprehensive income
Revenue
Expense
Net profit after tax
Group’s share of profit for the year
2019
2018
24,984
34,978
(11,918)
48,044
24,353
39,470
(34,812)
4,658
2,336
18,604
27,351
(7,575)
38,380
19,507
34,745
(30,426)
4,319
2,159
Dividends received from associates and joint ventures during the year was $0.9 million (2018: $1.6 million).
The joint ventures and associates had no contingent liabilities or significant capital commitments at 30 June 2019
(2018: nil).
How Pact accounts for investment in associates and joint ventures and jointly controlled entities
An associate is an entity over which the Group has significant influence. Significant influence is the power to
participate in the financial and operating policy decisions of the investee, but is not control or joint control
over those policies.
A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement
have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control
of an arrangement, which exists only when decisions about the relevant activities require the unanimous
consent of the parties sharing control.
The Group uses the equity method to account for their investments in associates and joint ventures, where
they consider they have significant influence but they do not have control. Generally significant influence is
deemed if Pact has 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. At each reporting date, the Group
determines whether there is objective evidence that the investment in the associate is impaired. If there is
such evidence, the Group calculates the amount of impairment as the difference between the recoverable
amount of the associate and its carrying value, and then recognises the loss within ‘Share of profit in
associates’ in the Consolidated Statement of Comprehensive Income.
PAC T 2019 A NNUA L R EP OR T 73
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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:
$’000
Trade receivables(1)
Allowance for expected credit losses
Other receivables(2)
Total current trade and other receivables
(1) Below is a breakdown of the ageing of trade receivables:
Ageing of trade receivables as at 30 June ($’000)
0
1
2
4
6
,
1
8
2
6
6
,
2019
103,812
(993)
42,463
145,282
2018
107,951
(605)
54,388
161,734
1
3
9
6
3
,
0
4
9
0
3
,
0
7
7
3
,
4
3
1
3
,
9
9
8
3
,
0
0
0
1
,
Not due
< 30
31–60
> 61 Days
2019
2018
Days
(2) At 30 June 2019 $26.3 million (2018: $32.4 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. 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 2019, trade receivables with an invoice value of $1.0 million (2018: $0.6 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
• debtors securitisation programs which allow Pact to sell receivables, at a discount to a third party on a non-
recourse basis. The securitisation programs have a committed facility limit of $130.0 million (2018: $115.0 million).
Expected credit loss model
Information about the credit risk exposure on the Group’s trade receivables using a provision matrix has not been
disclosed due to the immaterial amount of expected credit losses as at 30 June 2019.
74
Financial Report —
Notes to the Financial Statements
3.1 Working capital (continued)
Trade and other receivables (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.
For trade and other receivables and contract assets, the Group applies a simplified approach in calculating
expected credit losses (ECLs). Therefore, the Group does not track changes in credit risk, but instead
recognises a loss allowance based on lifetime ECLs at each reporting date. The Group has established a
provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors
specific to the debtors and the economic environment. A financial asset is written off when there is no
reasonable expectation of recovering the contractual cash flows.
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 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
2019
98,216
21,448
92,182
211,846
2018
98,886
22,844
89,226
210,956
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 2019 A NNUA L R EP OR T 75
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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
Total current trade and other payables
2019
304,602
61,013
365,615
2018
341,077
77,107
418,184
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
2019
669,175
310,225
2018
851,994
303,205
136,196
1,115,596
184,407
1,339,606
76
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 2019
At 1 July 2018 net of accumulated depreciation
Additions and transfers
Acquisition of subsidiaries and businesses
Disposals
Asset write downs(2)
Foreign exchange translation movement
Depreciation charge for the year
At 30 June 2019 net of accumulated depreciation
Represented by:
At cost
Accumulated depreciation
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 and impairment
Property(1)
Plant and
equipment
Capital work
in progress
Total
Freehold: 40–50 years
Leasehold: 10–15 years
3–20 years
n/a
43,852
11,936
1,119
-
-
1,245
(4,777)
53,375
611,901
62,988
24,194
(357)
(136,330)
7,272
(73,481)
496,187
99,660
(11,706)
-
-
-
1,026
-
88,980
755,413
63,218
25,313
(357)
(136,330)
9,543
(78,258)
638,542
79,625
(26,250)
1,227,245
(731,058)
88,980 1,395,850
(757,308)
-
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)
-
(1) Property consists of the following: leasehold improvements of $28.8million (2018: $20.6 million) and accumulated
depreciation of $11.6 million (2018: $9.9 million), and freehold property of $50.8 million (2018: $59.3 million) and
accumulated depreciation of $14.6 million (2018: $26.1 million).
(2) The impairment loss of $136.3 million represented the write-down of certain property, plant and equipment
in the Pact Australia segment as a result of challenging trading conditions and a moderated long-term outlook.
The recoverable amount was based on value in use and was determined at the level of the CGU. The CGU
consisted of the Australian packaging assets. In determining value in use, cash flows were discounted at a rate of
14.3% (2018: 12.1%) on a pre-tax basis.
The decrease in the recoverable amount reflects challenging trading conditions and a moderated long-term outlook.
The recoverable amount of Australian packaging assets is $178.9 million.
PAC T 2019 A NNUA L R EP OR T 77
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Notes to the Financial Statements
3.2 Non-current assets (continued)
Property, plant and equipment (continued)
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.
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.
78
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 2019
At 1 July 2018 net of accumulated amortisation and impairment
Additions
Intangible asset arising on acquisition(2)
Impairment expense
Foreign exchange translation movements
Amortisation
At 30 June 2019 net of accumulated amortisation
and impairment
Represented by:
At cost
Accumulated amortisation and impairment
Customer
contracts(1)
Other
intangibles(1)
Goodwill
Total
23,070
-
-
-
-
(2,810)
9,843
2,332
-
(1,303)
(64)
(1,222)
551,280
-
119,983
(231,132)
7,077
-
584,193
2,332
119,983
(232,435)
7,013
(4,032)
20,260
9,586
447,208
477,054
28,106
(7,846)
14,949
(5,363)
678,340
(231,132)
721,395
(244,341)
(1) Customer contracts are recognised at cost and amortised over their useful lives. 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) Includes the goodwill arising on acquisition of TIC RA AU Pty Ltd and a reduction of $7.8 million goodwill which
has been recognised in the period in relation to the prior period acquisition of CSI International and Graham
Packaging Group acquisition (Asia acquisition).
$’000
Year ended 30 June 2018
Customer
contracts(1)
Other
intangibles (1)
Goodwill
Total
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
Represented by:
At cost
Accumulated amortisation and impairment
25,881
-
-
-
(2,811)
23,070
28,106
(5,036)
10,395
145
-
(4)
(693)
9,843
511,057
-
46,392
(6,169)
-
551,280
547,333
145
46,392
(6,173)
(3,504)
584,193
12,684
(2,841)
551,280
-
592,070
(7,877)
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Financial Report —
Notes to the Financial Statements
3.2 Non-current assets (continued)
Goodwill and other intangibles (continued)
$’000
Goodwill and intangible assets with indefinite lives are allocated
to the following group of CGU’s and segments(1):
Packaging and Sustainability
Contract Manufacturing Services
Materials Handling and Pooling
2019
258,628
21,031
169,311
448,970
The table below shows the allocation of goodwill and intangible assets to CGU’s and segments in the comparative
period, prior to the change in operating segments for the current year:
$’000
Goodwill and intangible assets with indefinite lives are allocated
to the following group of CGU’s and segments(1):
Pact Australia
Pact International
(1) This is the lowest level where goodwill is monitored.
Change in Operating Segments and impairment
2018
310,834
242,208
During the year, the Group changed operating segments (refer Note 1.1). Operating segments represents the group
of Cash Generating Units (CGU) at which goodwill is allocated and monitored. Immediately after the reallocation of
goodwill, impairment testing was performed on the new operating segments, being Packaging and Sustainability,
Contract Manufacturing Services and Materials Handling and Pooling.
Australian Accounting Standards require that when operating segments containing goodwill are reorganised, an
entity must undertake detailed impairment testing immediately prior to and post the reorganisation. When there
are indicators of impairment of fixed assets contained within the CGUs in the operating segments, an entity must
also complete detailed impairment testing of fixed assets prior to impairment testing for goodwill (refer Note 3.2 for
the impairment of fixed assets).
Immediately prior to the reallocation of goodwill, impairment testing was performed on the previous operating
segments, being Pact Australia and Pact International. The calculation of value in use for both Pact Australia and
Pact International are sensitive to the following assumptions:
• Gross margins and raw material price movement – Gross margins reflect current gross margins adjusted for
any expected (and likely) efficiency improvements or price changes.
• Cash Flows – Cash flows are forecast for a period of five years. 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.
• Discount rates – The discount rates are 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 within the
operating segments operate. Foreign currency cash flows are discounted using the functional currency of the
CGUs within the operating segments, and then translated to Australian Dollars using the closing exchange rate.
80
Financial Report —
Notes to the Financial Statements
3.2 Non-current assets (continued)
Goodwill and other intangibles (continued)
The discount rates and terminal growth rates applied to cashflow projections are detailed below.
Pact Australia
Pact International
Discount rate (pre-tax)
Terminal growth rate
2019
15.0%-18.6%
1.0%
2019
2018
2018
12.0% 9.8%-20.5% 9.8%-20.5%
2.1%-7.7%
1.2%-7.7%
2.2%
Impairment testing identified the carrying value of goodwill within Pact Australia exceeded the recoverable amount.
A $231.1 million impairment expense was recognised in the current period. The decrease in the recoverable
amount reflects challenging trading conditions and a moderated long-term outlook.
Goodwill (net of the impairment) was allocated to the new operating segments on a relative fair value basis.
Annual impairment testing
The discount rates and terminal growth rates applied to cashflow projections are detailed below. The calculation of
value in use for the segments below are sensitive to the following assumptions:
• Gross margins and raw material price movement — Gross margins reflect current gross margins adjusted for
any expected (and likely) efficiency improvements or price changes.
• Cash Flows — Cash flows are forecast for a period of five years. 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.
• Discount rates — The discount rates are 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 within the
operating segments operate. Foreign currency cash flows are discounted using the functional currency of the CGUs
within the operating segments, and then translated to Australian Dollars using the closing exchange rate.
Discount rate (pre-tax)
Terminal growth rate
Packaging and
Sustainability
Materials
Handling and
Pooling
9.8%-20.5% 11.8%-14.3%
1.0%-1.2%
1.0%-7.2%
Contract
Manufacturing
Services
14.3%
1.0%
PAC T 2019 A NNUA L R EP OR T 81
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION Financial Report —
Notes to the Financial Statements
3.2 Non-current assets (continued)
Goodwill and other intangibles (continued)
The recoverable amount of Packaging and Sustainability was 1.08 times the carrying amount of $896.1 million,
including non-current assets and net working capital. To illustrate sensitivity to these assumptions in the table
above, if they were to differ such that the expected growth rates for Packaging and Sustainability were to decrease
by 1.0% or discount rates increase by 0.7%, across the forecast period, without implementation of mitigation plans,
the recoverable amount would be equal to the carrying amount.
The recoverable amount of Materials Handling and Pooling was 1.14 times the carrying amount of $342.9 million,
including non-current assets and net working capital. To illustrate sensitivity to these assumptions in the table
above, if they were to differ such that the expected growth rates for Materials Handling and Pooling were to
decrease by 2.0% or discount rates increase by 1.1%, across the forecast period, without implementation of
mitigation plans, the recoverable amount would be equal to the carrying amount.
The recoverable amount of Contract Manufacturing Services was 1.05 times the carrying amount of $149.4 million,
including non-current assets and net working capital. To illustrate sensitivity to these assumptions in the table
above, if they were to differ such that the expected growth rates for Contract Manufacturing were to decrease by
0.7% or discount rates increase by 0.4%, across the forecast period, without implementation of mitigation plans, the
recoverable amount would be equal to the carrying amount.
How Pact accounts for goodwill
Goodwill is:
•
initially measured at cost, being the excess of the cost of the business combination over the Group’s
interest in the net fair value of the acquired identifiable assets, liabilities and contingent liabilities;
• subsequently measured at cost less any accumulated impairment losses; and
•
reviewed for impairment annually or more frequently if events or changes in circumstances indicate that
the carrying value may be impaired.
Impairment is determined by assessing the recoverable amount of the CGU (or group of CGU’s), to which
the goodwill relates. When the recoverable amount of the CGU (or group of CGU’s) is less than the carrying
amount, an impairment loss is recognised.
When goodwill forms part of a CGU (or group of CGU’s) and an operation within that unit is disposed of, the
goodwill associated with the operation disposed of is included in the carrying amount of the operation when
determining the gain or loss on disposal of the operation. Goodwill disposed of in this manner is measured
based on the relative values of the operation disposed of and the portion of the CGU’s retained.
Key estimates and judgements — impairment of goodwill and other intangibles
The recoverable amount of each of the CGU’s has been determined based on value in use calculations using
cash flow projections contained within next year’s financial budget approved by management and other
forward projections up to a period of five years. Management have used their current expectations and what is
considered reasonably achievable when assigning values to key assumptions in their value in use calculations.
82
Financial Report —
Notes to the Financial Statements
3.3 Commitments and contingencies
Operating leases
$’000
Operating lease and rental expense(1)
2019
73,923
2018
61,501
(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:
Within one year
After one year but not more than five years
More than five years
Total lease expenditure commitments(2)
66,096
185,458
148,731
400,285
59,774
180,773
125,712
366,259
(2) Excludes commitments for option periods. Including option periods for leases where the exercise of the option to
extend the lease term is reasonably certain applying the Group’s AASB 16 accounting policy, would increase the
lease expenditure commitments by $278.1 million (refer Note 6.2).
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.
Capital expenditure commitments
Capital expenditure commitments contracted for at reporting date, but not provided for are:
Payable within one year
Payable after one year but not more than five years
Total
Contingencies
7,395
449
7,844
17,061
16
17,077
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 2019 A NNUA L R EP OR T 83
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION Financial Report —
Notes to the Financial Statements
3.4 Other provisions
Total other provisions at 30 June comprise of:
$’000's
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 2019
At 1 July 2018
Provided for during the year
Utilised
Transfers
Foreign exchange translation movement
At 30 June 2019
2019
2018
13,914
13,914
22,765
9,593
32,358
4,424
4,424
19,233
9,584
28,817
Business
restructuring(1)
Fixed rent
provision(2)
Make good
on leased
premises(3)
4,424
37,842
(28,907)
548
7
13,914
19,233
4,284
(669)
(235)
152
22,765
9,584
395
(146)
(313)
73
9,593
Total
33,241
42,521
(29,722)
-
232
46,272
(1) Business restructuring – The business restructuring programs relate to the optimisation of business facilities
across the Group.
(2) Fixed rent provision – Annual rentals for some of the property operating leases increase annually by fixed
increments. The provision has been recognised to apportion these increments on a straight line basis over the
minimum non-cancellable lease term.
(3) Make good on leased premises – In accordance with the form of lease agreements, the Group may be required to
restore leased premises to their original condition at the end of the lease term and upon exiting the site.
The provision is based on the costs which are expected to be incurred using historical costs as a guide.
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.
84
Financial Report —
Notes to the Financial Statements
Section 4 — Our capital structure
This section details specifics of the Groups’ capital structure. When managing capital, Management’s
objective is to ensure that the entity continues as a going concern as well as to provide optimal returns to
shareholders and other stakeholders. Management also aims to maintain a capital structure that ensures
the lowest cost of capital available to the entity. Primary responsibility for identification and control of capital
and financial risks rests with the Treasury Risk Management Committee.
4.1 Net debt
Debt profile
Pact has the following non-current interest bearing loans and borrowings at 30 June 2019:
$’000
Syndicated Facility Agreements(1)
Subordinated Debt Facility(1)
Capitalised borrowing costs
Total non-current interest bearing loans and borrowings
2019
689,232
50,287
(6,029)
733,490
2018
671,279
-
(4,026)
667,253
(1) The group has several revolving debt facilities, two term facilities, a subordinated term debt facility and a working
capital facility with total commitments of $1,062.2 million, of which of which $314.2 million is undrawn at 30 June
2019. The facilities are spread across multiple maturities, with the working capital facility revolving with an annual
review. The debt facilities include a $383.5 million loan facility maturing in January 2022, a $184.3 million loan
facility maturing in January 2023, $301.1 million loan facility maturing in March 2023, a $120 million term facility
maturing in December 2024, and a subordinated term debt facility of USD 35 million, swapped into AUD ($50.3
million), maturing July 2025. The working capital facility is $23 million at 30 June 2019.
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 2019 was assessed to be insignificant.
The computation of the fair value of borrowings is derived using significant observable inputs (Fair Value Hierarchy
Level 2).
PAC T 2019 A NNUA L R EP OR T 85
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Notes to the Financial Statements
4.1 Net Debt (continued)
The carrying amount and fair value of the Group’s non-current borrowings are as follows:
Syndicated Facility Agreements
Subordinated Debt Facility
Total borrowings
(b) Defaults and breaches
2019
$’000s
2018
$’000s
Carrying Value
689,232
50,287
739,519
Fair Value
689,232
50,287
739,519
Carrying Value
671,279
-
671,279
Fair Value
671,279
-
671,279
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
Finance costs are recognised as an expense when incurred.
2019
32,250
-
1,499
266
1,581
35,596
4,079
39,675
2018
26,152
(110)
1,260
333
1,521
29,156
3,539
32,695
How Pact accounts for loans and borrowings
All loans and borrowings are:
•
initially recognised at the fair value of the consideration received less directly attributable transaction costs.
• subsequently measured at amortised cost using the effective interest method, which is calculated based on
the principal borrowing amount less directly attributable transaction costs.
• are classified as current liabilities unless the Group has an unconditional right to defer settlement of the
liability for at least 12 months after the reporting date.
Fair value of the Group’s interest-bearing loans and borrowings are determined by using a discounted cash
flow method, applying a discount rate that reflects the issuer’s borrowing rate at the end of the reporting
period. As the underlying debt has a floating interest rate (excluding the impact of the separate interest rate
swaps), the Group’s own performance risk at 30 June 2019 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.
86
Financial Report —
Notes to the Financial Statements
4.1 Net Debt (continued)
Reconciliation of net profit after tax to net cash flows from operations
$’000
Net (loss) / profit for the year
Non cash flows in operating (loss) / profit:
Depreciation and amortisation
Loss / (gain) on sale of property, plant and equipment
Share of net profit in associates
Share based payments expense
Impairment expense
Other
Changes in assets and liabilities:
Decrease / (increase) in trade and other receivables
Decrease / (increase) in inventory
Increase in current tax assets
Decrease / (increase) in deferred tax assets
(Decrease) / increase in trade and other payables
(Decrease) / increase in employee entitlement provisions
Increase in other provisions
(Decrease) / increase in current tax liabilities
(Decrease) / increase in deferred tax liabilities
Net cash flow provided by operating activities
Non-cash activities
2019
(289,587)
2018
74,488
82,290
269
(2,336)
(168)
368,765
2,794
39,961
11,977
(3,360)
(11,076)
(54,468)
(1,921)
12,809
(20,037)
(27,229)
108,683
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
$’000
Acquisition of assets, liabilities and business via issue of shares
Notes
2.1
2019
60,000
2018
-
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 twelve 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.
PAC T 2019 A NNUA L R EP OR T 87
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION Financial Report —
Notes to the Financial Statements
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)(2)
Transaction costs taken to equity
Tax benefit on transaction costs
End of the year
(1) Shares issued as consideration
2019
Number of
shares
2018
$’000s
Number of
shares
$’000s
332,483,890
11,509,705
-
-
343,993,595
1,690,476 299,234,086
33,249,804
-
-
1,750,476 332,483,890
60,000
-
-
1,517,097
175,559
(2,986)
806
1,690,476
On 14 November 2018, 11,300,500 shares in the Company were issued for $5.31 as consideration for the acquisition
of TIC Retail Accessories (refer Note 2.1). This includes 3,766,834 shares that are divided into four tranches. Each
of these tranches are subject to contractual trading restrictions from the date of issue to the dates as follows; 31
January 2019, 30 April 2019, 31 July 2019 and 31 October 2019.
The remaining 7,533,666 shares are subject to customary voluntary escrow restrictions across four tranches, and are
required to be held in escrow from the date of issue to the dates as follows; 31 January 2020, 30 April 2020, 31 July
2020 and 31 October 2020.
(2) Employee share issue
On 3 December 2018, 209,205 shares were issued to the former CEO, Mr Malcolm Bundey, as part of his
employment arrangements. The associated share based reserve has not been transferred out to contributed equity.
How Pact accounts for contributed equity
Issued and paid up capital is classified as contributed equity and recognised at the fair value of the
consideration received by the entity. Incremental costs directly attributable to the issue of new shares or
options are shown in contributed equity as a deduction, net of tax, from the proceeds.
Reserves
$’000
Foreign currency translation reserve(1)
Cash flow hedge reserve(2)
Common control transaction reserve(3)
Share based payments reserve(4)
Total reserves
2019
33,897
(4,580)
(928,385)
2,157
(896,911)
2018
22,965
111
(928,385)
2,325
(902,984)
(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 representing the fair value of employee
rights.
88
Financial Report —
Notes to the Financial Statements
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 2019
At 30 June 2019, the Group hedge cover is 51%
interest rate debt,
swaps to lock in the
and therefore
if interest rates
amount of interest that
Pact will be required
(2018: 37%) of its long term variable debt excluding working
capital facilities.
increase, the amount
to pay.
Sensitivity analysis performed by the Group showed that a
of interest Pact is
required to pay
would also increase.
• Considers alternative
financing and mix of fixed
and variable debt, as
appropriate.
+1 percentage point movement in AUD interest rates would
reduce net profit after tax by $0.9 million and increase equity
by $0.3 million (2018: $1.2 million reduction in net profit after
tax and increase equity by $0.2 million).
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 $1.4 million (2018:
$1.3 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 $0.4 million (2018:
$0.6 million).
(1) The impact of a +/- 1% movement in interest rates was determined based on the Group’s mix of debt, credit standing
with finance institutions, the level of debt that is expected to be renewed and economic forecasters’ expectations.
Managing foreign currency risk
The Group’s exposure to the risk of changes in foreign exchange rates relates to the Group’s (i) operating activities
which are denominated in a different currency from the entity’s functional currency, (ii) financing activities, and (iii) net
investments in foreign subsidiaries.
PAC T 2019 A NNUA L R EP OR T 89
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Notes to the Financial Statements
4.3 Managing our financial risks (continued)
The Group currently operates in twelve countries outside of Australia, with the following functional currencies(1):
Country of domicile
New Zealand
Thailand
Singapore
China
Philippines
Indonesia
Hong Kong
Nepal
India
South Korea
Bangladesh
United Kingdom
Functional currency
NZD
THB
USD
RMB
PHP
IDR
HKD / USD
NPR
INR
KRW
BDT
GBP
(1) TIC RA AU Pty Ltd is domiciled in Australia and has USD as its functional currency.
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 2019
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 5%.
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 has entities
Pact utilises borrowing in the
At 30 June 2019, 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
that 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 2019 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
compared to the
hedge of the asset, while the
AUD, then the
foreign currency interest cost
amount of AUD-
provides a natural hedge of the
AUDNZD ($10.0) million to $12.0 million
AUDCNY ($13.0) million to $16.0 million
AUDUSD ($2.0) million to $2.0 million
AUDPHP ($2.0) million to $2.0 million
equivalent profit
offshore profit.
Sensitivity analysis performed by management showed
would decrease and
the balance sheet
net investment value
would decline.
90
that a 10% +/- movement in its major translational
currencies during the year, would have the following
impact on net profit after tax:
AUDNZD ($2.0) million to $3.0 million
AUDUSD ($1.0) million to $1.5 million
Financial Report —
Notes to the Financial Statements
4.3 Managing our financial risks (continued)
Effect on financial position and performance – hedging instruments
Pact Group has entered into foreign exchange forward contracts to minimise the variability of cash flows relating
to stock and capital purchases denominated in foreign currencies. Furthermore, the Group has also entered into
Interest rate swaps to minimise the variability of cash flows relating to the floating component of debt.
The impact of hedged instrument and hedged item on the consolidated statement of financial position of the Group
is as follows:
$’000
Year ended 30 June 2019
Foreign exchange forward contracts
Interest rate swaps
Hedged item
Committed
purchases
Floating
component
of debt
65,910
350,000
Year ended 30 June 2018
Foreign exchange forward contracts
Committed
81,239
Interest rate swaps
purchases
Floating
component
of debt
250,000
Notional
amount
Carrying
amount Asset/
(Liability)
Change in
fair value for
measuring
ineffectiveness
for the period
Cash flow
hedge
reserve
349(1)
(556)(2)
(1,774)(2)
(4,296)(3)
2,683(1)
(79) (2)
(616) (3)
(2,655)
(93)
(5,453)
(4,248)
448
543
(805)
(431)
(1) The carrying amount is included in Other current financial assets in the consolidated statement of financial position.
(2) The carrying amount is included in Other current financial liabilities in the consolidated statement of financial
position.
(3) The carrying amount is included in Other non-current financial liabilities in the consolidated statement of financial
position.
The effect of cash flow hedge noted in Other (losses)/gains line item in the consolidated statement of
comprehensive income is as follows:
$’000
Year ended 30 June 2019
Committed purchases
Floating component of debt
Year ended 30 June 2018
Committed purchases
Floating component of debt
Total hedging
gain/(loss)
recognised in
OCI
Amount
reclassified from
OCI to profit or
loss
(93)
(4,248)
543
(431)
(73)
-
1,829
-
The impact of hedging on cash flow hedge reserve contained within the other comprehensive income/(loss) is as
follows:
$’000
Opening balance of cash flow hedge reserve
Effective portion of changes in fair value arising from:
- Foreign exchange forward contracts
-
Reversal of prior year cash flow hedge reserve
Tax effect
Closing balance of cash flow hedge reserve
Interest rate swaps
2019
111
(93)
(4,248)
(111)
(239)
(4,580)
2018
(1,490)
543
(431)
1,490
(1)
111
PAC T 2019 A NNUA L R EP OR T 91
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 2019
The Directors have assessed that due to the Group’s access
cannot meet its
adequate amount of
to undrawn facilities and forecast positive cash flows into the
obligations to
committed credit facilities.
future they will be able to pay their debts as and when they fall
repay its financial
liabilities as and
when they fall due.
• Maintains a balance between
continuity of funding and
flexibility through the use of
bank overdrafts, loans and
debtor securitisation.
due, and therefore it is appropriate the financial statements
are prepared on a going concern basis.
92
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 2019
Financial assets(1)
Cash and cash equivalents
Trade and other receivables
Foreign exchange forward contracts(2)
Total inflows
Financial liabilities(1)
Trade and other payables
Foreign exchange forward contracts(2)
Interest rate swaps
Interest bearing loans and borrowings(3)
Total outflows
Net outflow
Year ended 30 June 2018
Financial assets(1)
Cash and cash equivalents
Trade and other receivables
Foreign exchange forward contracts(2)
Total inflows
Financial liabilities(1)
Trade and other payables
Foreign exchange forward contracts(2)
Interest rate swaps
Interest bearing loans and borrowings(3)
Total outflows
Net outflow
≤ 6 months
6–12 months
1–5 years
> 5 years
Total
49,950
145,282
63,183
258,415
(417,285)
(63,334)
(1,814)
(14,891)
(497,324)
(238,909)
67,980
161,734
84,439
314,153
(418,184)
(81,824)
(266)
(12,132)
(512,406)
(198,253)
-
-
72
72
-
718
-
718
-
-
-
-
49,950
146,000
63,255
259,205
-
(72)
(1,238)
(14,648)
(15,958)
(15,886)
(14,643)
-
(3,183)
(643,184)
(661,010)
(660,292)
-
-
-
(181,559)
(181,559)
(181,559)
(431,928)
(63,406)
(6,235)
(854,282)
(1,355,851)
(1,096,646)
-
-
1,597
1,597
-
2,570
-
2,570
-
-
-
-
67,980
164,304
86,036
318,320
-
(1,608)
(198)
(11,934)
(13,740)
(12,143)
(17,594)
-
(176)
(610,055)
(627,825)
(625,255)
-
-
-
(124,528)
(124,528)
(124,528)
(435,778)
(83,432)
(640)
(758,649)
(1,278,499)
(960,179)
(1) The Group’s principal financial instruments comprise cash, receivables, payables, bank loans, bank overdrafts,
finance leases and derivative instruments.
(2) Foreign exchange forward contracts are recorded as a net balance in the Consolidated Statement of Financial
Position, where in this table the contractual maturities are the gross undiscounted cash flows.
(3) When the Group is committed to make amounts available in instalments, each instalment is allocated to the
earliest period in which the Group is required to pay.
The following table represents the changes in financial liabilities arising from financing activities:
$’000
Non-current interest-bearing loans and borrowings
Total liabilities from financing activities
1 July 2018
(671,279)
(671,279)
Cash flows
(57,156)
(57,156)
Foreign
exchange
movement
(11,084)
(11,084)
30 June 2019
(739,519)
(739,519)
PAC T 2019 A NNUA L R EP OR T 93
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 debtor’s 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 commodity price risk from a number of commodities, including resin. The Group manages these
risks through customer pricing, including contractual rise and fall adjustments.
Utilising hedging contracts to manage risk
As discussed above, the Group utilises interest rate swaps and foreign exchange forward contracts to hedge its risks
associated with interest rate and foreign currency fluctuations. All of Pact’s hedging instruments are designated
in cash flow hedging relationships, providing increased certainty over future cash flows associated with foreign
currency purchases or interest payments on variable interest rate debt facilities.
94
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 2019 A NNUA L R EP OR T 95
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.
Movement in net defined benefit liability/(asset)
The following table shows a reconciliation of the movement in the net defined benefit liability/(asset) and its
components for each entity:
$’000
Present value of the defined benefit obligation
Discount rate
Salary increase rate
At 1 July 2018
Current service cost
Net interest cost
Actuarial (gains) / losses:
Changes in financial assumptions
Changes in experience assumptions
Changes in demographic assumptions
Benefits paid
Employer contributions
Foreign exchange translation movements
Present value of defined benefit
obligation at 30 June 2019
CSI India(1)
7.70%
CSI Philippines
6.24%
CSI Korea
3.10%
12.0% 6.0% 4.0%
703
199
19
164
17
10
96
26
6
2
4
-
(2)
(40)
5
97
47
(8)
-
-
-
20
250
(58)
(61)
15
(81)
-
11
747
Plastop Asia
5.93%
5.0%
73
23
6
42
1
21
-
-
12
Total
1,036
265
41
33
(64)
36
(83)
(40)
48
178
1,272
(1) Defined benefit obligations for CSI India comprises of Gratuity liability and Leave encashment liability.
96
Financial Report —
Notes to the Financial Statements
5.1 Defined Benefit Plans (continued)
$’000
Present value of the defined benefit obligation
Discount rate
Salary increase rate
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 30 June 2018
Measurement assumptions
India
CSI India
7.75%
CSI Philippines
7.98%
CSI Korea
3.51%
12.0% 6.50% 4.0%
-
663
50
4
-
210
14
6
-
98
4
1
(2)
-
-
(5)
-
96
(82)
6
-
-
10
164
-
1
(70)
-
55
703
Plastop Asia
7.79%
5.0%
89
-
24
5
(42)
(6)
-
-
3
73
Total
89
971
92
16
(126)
1
(70)
(5)
68
1,036
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 Bankers Association
of the Philippines (BAP) benchmark reference curve for the government securities market by stripping the coupons
from government bonds to create virtual zero coupon bonds.
The salary rate assumption is based on the actual salary increment during the financial year.
Korea
The discount rate assumption is based on yields available on high quality AA- corporate bonds.
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 is based on approximated zero-coupon yield of government bonds with remaining
period to maturity approximating the estimated average duration of benefit payment, as published by the Philippine
Dealing Exchange.
The salary rate assumption is based on the prevailing inflation rate and company policy.
Reconciliation of DBO and Fair Value of Plan Assets
The following table shows a reconciliation of the DBO and the fair value of plan assets that comprises the net
defined benefit liability/(asset) for each entity:
$’000
Defined Benefit Obligation
Fair value of plan assets
Present value of net defined benefit
CSI India(1) CSI Philippines(2)
250
-
130
(33)
2019
CSI Korea(3)
1,358
(611)
Plastop Asia(2)
178
-
Total
1,916
(644)
obligation at end of the year
97
250
747
178
1,272
(1) The plan assets for CSI India relating to the gratuity liability comprises of investments in 100% insurance policies
(2) The plan assets for CSI Philippines and Plastop Asia are held in the companies own bank accounts
(3) The plan assets for CSI Korea comprises of investments in 100% fixed interest securities
PAC T 2019 A NNUA L R EP OR T 97
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION
Financial Report —
Notes to the Financial Statements
5.1 Defined Benefit Plans (continued)
Reconciliation of DBO and Fair Value of Plan Assets (continued)
$’000
Defined Benefit Obligation
Fair Value of plan assets
Present value of net defined benefit
CSI India
116
(20)
CSI Philippines
164
-
2018
CSI Korea
1,300
(597)
Plastop Asia
73
-
Total
1,653
(617)
obligation at end of the year
96
164
703
73
1,036
Sensitivity analysis
The present value of the DBO is based on the assumptions detailed on pages 96 and 97. 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
2019
(194)
228
220
(191)
2018
(145)
169
159
(141)
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
2019
387,922
20,604
21,677
(168)
430,035
2018
367,699
19,439
21,655
1,225
410,018
19,976
16,316
36,292
20,602
16,330
36,932
The Group’s non-current employee benefits provisions of $7.3 million relate to long service leave entitlements of
$6.0 million (2018: $6.5 million), and a defined benefit net liability of $1.3 million (2018: $1.0 million)
98
Financial Report —
Notes to the Financial Statements
5.2 Employee benefits expenses and provisions (continued)
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.
5.3 Share based payments
Long-term Incentive Plan (LTIP)
Under the 2019 LTIP scheme 69,784 performance rights were granted to Sanjay Dayal (CEO), with a fair value of
$0.25 for each right at the valuation date of 27 March 2019. Senior executives were granted 354,742 performance
rights during the year, with a fair value of $0.76 for each right at the valuation date of 14 November 2018. The rights
were independently valued to establish the fair value in accordance with AASB 2: Share Based Payments.
The key assumptions in the independent valuation in relation to the 2019 LTIP were as follows:
Share price at valuation date
Annualised volatility
Annual dividend yield
Risk free rate
Expected life of performance right
Model used
CEO
$2.68
30.0%
5.0%
1.4%
36 months
Monte Carlo Simulation Model
Senior Executives
$3.25
30.0%
5.5%
2.1%
36 months
Monte Carlo Simulation Model
Initial share grant
At the Annual General Meeting on 16 November 2016, a resolution was approved for a grant of 209,205
performance rights in relation to the initial share grant to the former CEO, Mr Malcolm Bundey. The shares were
held in escrow until 1 December 2018, and were issued to Mr Bundey on 3 December 2018.
PAC T 2019 A NNUA L R EP OR T 99
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION Financial Report —
Notes to the Financial Statements
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
2019
2,616
90
(475)
2,231
2018
2,417
72
1,010
3,499
The following table provides the total amount of transactions with related parties for the year ended 30 June 2019:
$’000
Related parties — Directors' interests(1)
2019
2018
Sales
13,789
11,469
Purchases
11,043
12,312
Other
expenses
6,667
5,958
Net amounts
receivable
609
2,573
(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 49.8% (2018: 40%), 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. The total value of sales under this arrangement is approximately $4.2
million (2018: $4.3 million). The supply arrangement is at arm’s length terms.
Mr Jonathan Ling was appointed as an Independent Non Executive Director and Chairman of Pro-Pac on 8 April 2019.
Property leases with related parties
The Group leased 13 properties (10 in Australia and three 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 period ended 30 June 2019 was $6.4 million (June 2018: $6.1 million). The rent
payable under these leases was determined based on independent valuations and market conditions at the time
the leases were entered into, and are therefore at arm’s length.
Terms and conditions of transactions with related parties
As detailed above, all transactions with related parties are made at arm’s length. 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.
100
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 $427,000 (2018: $430,000).
•
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.
6.2 Accounting policies
The table below includes standards that were adopted during the period:
New Standards, Interpretations
or Amendments
AASB 15: Revenue from
Contracts with Customers
Pact financial year
that it is adopted
Adopted on 1 July 2018 AASB 15: Revenue from Contracts with Customers replaces AASB
118: Revenue and AASB 111: Construction Contracts. The Group
adopted AASB 15 based on a modified retrospective basis
Impact on Pact financial results
AASB 9: Financial
Instruments
effective from 1 July 2018. The Group has assessed where
branded goods are manufactured for customers with no
alternate use, revenue is recognised using an overtime revenue
model. As such, an adjustment of $1,155,000 to opening
retained earnings has been recognised on adoption of AASB 15.
Adopted on 1 July 2018 AASB 9: Financial Instruments replaces AASB 139: Financial
Instruments: Recognition and Measurement and introduces a
new approach for classification and measurement of financial
instruments, impairment of financial assets and hedge
accounting. The impact to the Group results on the adoption of
AASB 9 is immaterial.
PAC T 2019 A NNUA L R EP OR T 101
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION Financial Report —
Notes to the Financial Statements
6.2 Accounting policies (continued)
There are also 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 2019. The following table includes those standards that have
been identified as those which may impact the Group in the period of initial application:
New Standards, Interpretations
or Amendments
AASB 16: Leases(1)
Pact financial year
that it is adopted
Commencing 1 July 2019 The Group plans to adopt AASB 16 on a modified retrospective
Impact on Pact financial results
basis to contracts that were previously identified as leases
applying AASB 117 and AASB Interpretation 4. Where
applicable, the Group will elect to use the exemptions
proposed by the standard on lease contracts for which the
lease terms end within 12 months as of the date of initial
application, and lease contracts for which the underlying asset
is of low value. On adoption of AASB 16, the Group EBITDA is
expected to increase, however there will also be an increase in
depreciation and interest expense as a result.
(1)
Including the associated amendments issued by the AASB that would need to be adopted upon adopting this
standard.
Comparatives
Comparative figures can be adjusted to conform to changes in presentation for the current financial period 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 period
disclosure. No material reclassifications have been made to prior period disclosures.
AASB 15: Revenue from Contracts with Customers
The Group has adopted AASB 15 using a modified retrospective approach. The Group did not apply any of the
practical expedients available on transition. A cumulative catch-up adjustment relating to the transition to AASB 15
of $1.1 million was recognised as an adjustment to opening retained earnings on 1 July 2018. The core principle of
AASB 15 is that an entity recognises revenue to depict the transfer of promised goods or services to customers in
an amount that reflects the consideration to which an entity expects to be entitled to in exchange for those goods
and services.
A key judgement applied by management is whether the goods or products manufactured have an alternate use to
Pact, including whether these goods or products can be repurposed and sold without significant economic loss to
the Group.
Pact recognises revenue on the following basis:
(a) Delivery of goods or products
Where the goods or products are not branded and can be sold to more than one specific customer, the
performance obligation is the delivery of finished goods or product to the customer. The performance obligation is
satisfied when control of the goods or products has transferred to the customer.
(b) Manufacture of goods or products
Where the goods or products are manufactured for a specific customer which have no alternate use and at all
times throughout the contract Pact has the enforceable right to payment for performance completed to date, a
performance obligation is the service of manufacturing the specific goods or products. This performance obligation
is satisfied as the goods and products are manufactured. An output method has been adopted to recognise
revenue for performance obligations satisfied over time. This method reflects Pact’s short manufacturing period.
In addition, Pact has obligations to store and deliver manufactured goods or products. These obligations are
satisfied as the goods or products are stored (on an over time basis) and when and as delivery occurs.
102
Financial Report —
Notes to the Financial Statements
6.2 Accounting policies (continued)
Contract assets are recognised for the manufacture and storage of goods or products as the performance
obligations are satisfied. Upon completion of delivery of the goods or products and acceptance by the customer, the
amounts recognised as contract assets are reclassified to trade receivables.
The Group allocates the transaction price to each performance obligation on a stand-alone selling price basis. The
stand-alone selling price of the products is based on list prices or a cost plus margin approach, which is determined
by the Group’s expertise in the market and also taking into consideration the length and size of contracts.
Some contracts for sale of goods have variable consideration including items such as volume rebates. Variable
consideration is estimated at contract inception using the expected value method based on forecast volumes and is
subject to the constraint on estimates. This estimate is reassessed at each reporting date.
AASB 9: Financial Instruments
The new accounting standard AASB 9: Financial Instruments became effective for the Group on 1 July 2018.
The Group adopted AASB 9 retrospectively except for hedge accounting which has been applied prospectively.
Classification and Measurement
(a) Financial assets
AASB 9 classifies financial assets based on an entity’s business model for managing the financial assets (whether
they are held to collect or held to sell) and the contractual terms of the cash flows (whether the contractual cash
flows to be received relate only to principal and interest or contain other features). The changes in classification of
the Group’s financial assets under AASB 9 have not materially impacted their carrying values.
Under AASB 139, all trade and other receivables were subsequently measured at amortised cost. Derivatives were
recognised at fair value through profit and loss, except for designated and effective hedging instruments.
Under AASB 9, unsecuritised trade receivables and other receivables are subsequently measured at amortised cost.
Trade receivables to be sold into the securitisation program is subsequently measured at fair value through profit or
loss. Derivative assets are subsequently measured at fair value.
(b) Financial liabilities
The requirements for the Group’s financial liabilities under AASB 9 remain largely the same as AASB 139. Financial
liabilities are classified at amortised cost or at fair value through profit and loss.
Under AASB 9, the Group’s trade and other payables and interest-bearing loans and borrowings are subsequently
measured at amortised cost. Derivative liabilities are subsequently measured at fair value.
(c) Impairment
AASB 9 replaces the ‘incurred loss’ impairment model of AASB 139 with a new ‘expected credit loss’ (ECL)
impairment model. The objective of the ECL model is to recognise debtor provisions on a forward-looking basis,
rather than when there is historical evidence of an impairment occurring.
The Group assessed that the impact of adopting the ECL approach to impairment was not material.
The Group assess the ECLs on trade and other receivables (other than those subsequently measured at fair
value), contract assets and loan receivable from joint ventures. The Group has applied the simplified approach to
calculating ECLs which requires the lifetime ECLs to be recognised from initial recognition. Lifetime ECLs represent
ECLs that arise from all possible default events over the expected life of the financial asset and are a probability
weighted estimate of a range of possible outcomes. To calculate ECLs the Group utilises a provision matrix which
incorporates historical debt write off information as well as considering forward indicators. Individual debts that are
known to be uncollectible are written off when identified.
(d) Hedge accounting
The Group applied hedge accounting prospectively. At the date of the initial application, all the Group’s existing
hedging relationships were eligible to be treated as continuing hedging relationships. Consistent with prior periods,
the Group has continued to designate the change in fair value of the derivatives in the Group’s cash flow hedge
relationships to other comprehensive income and, as such, the adoption of the hedge accounting requirements of
AASB 9 had no significant impact on the Group’s financial statements.
PAC T 2019 A NNUA L R EP OR T 103
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION Financial Report —
Notes to the Financial Statements
6.3 Other (losses) / gains
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)
Inventory write downs and related disposal costs
Business restructuring programs
• restructuring costs
• asset write downs
Business restructuring programs total
Total significant items before tax
Other gains/(losses)
Unrealised losses on revaluation of foreign exchange forward contracts
(Loss) / Gain on sale of property, plant and equipment
Realised net foreign exchange (losses) / gains
Total other (losses) / gains
Total losses before tax
6.4 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
2019
2018
(3,666)
-
(13,031)
(37,842)
-
(37,842)
(54,539)
(306)
(269)
(775)
(1,350)
(55,889)
(4,411)
(8,781)
-
(8,524)
(1,589)
(10,113)
(23,305)
(81)
866
116
901
(22,404)
2019
389,861
2018
367,809
1,675,353 1,653,344
1,675,353 1,653,344
1,570,477 1,510,477
2,325
64
140,478
1,675,353 1,653,344
173,845
173,845
2,157
64
102,655
413
413
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 Building 3, 658 Church Street, Cremorne, 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.
104
Financial Report —
Notes to the Financial Statements
6.5 Deed of Cross Guarantee
$’000
Closed group consolidated income statement
(Loss) / Profit before income tax
Income tax benefit /(expense)
Net (loss) / profit for the year
Retained earnings at beginning of the year
Net (loss) / profit for the year
Dividends provided for or paid
(Accumulated losses) / Retained earnings at end of the year
$’000
Closed group consolidated balance sheet
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Loans to related parties
Current tax assets
Other financial assets
Prepayments
Total current assets
Non-current assets
Trade and other receivables
Property, plant and equipment
Investments in subsidiaries
Investments in associates
Intangible assets and goodwill
Deferred tax assets
Total non-current assets
Total assets
Current liabilities
Cash and cash equivalents
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
Other non-current financial liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
(Accumulated losses) / Retained earnings
Total equity
2019
2018
(363,219)
36,665
(326,554)
61,653
(326,554)
(15,670)
(280,571)
57,964
(20,252)
37,712
60,797
37,712
(36,856)
61,653
2019
2018
-
77,422
137,779
84,492
17,488
349
16,912
334,442
25,829
88,894
147,691
80,539
-
2,684
15,592
361,229
695
366,386
507,924
20,809
235,456
39,482
1,319
511,852
507,924
17,581
340,143
31,831
1,170,752 1,410,650
1,505,194 1,771,879
2,937
231,596
80,937
-
32,141
6,666
354,277
66,312
45,469
530,209
24,173
65
666,228
1,020,505
484,689
-
287,955
80,311
9,655
32,871
695
411,487
17,593
34,174
473,374
54,368
-
579,509
990,996
780,883
1,750,476 1,690,476
(971,246)
(985,216)
61,653
(280,571)
780,883
484,689
PAC T 2019 A NNUA L R EP OR T 105
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION Financial Report —
Notes to the Financial Statements
6.5 Deed of Cross Guarantee (continued)
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 Note 4.3 Managing our liquidity risks).
6.6 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:
$
Ernst & Young
Audit and audit related services
Audit services
Audit related services
Total audit and audit related services
Other Services
Tax compliance
Tax advisory
Total other services
Total auditor’s remuneration of Ernst & Young
6.7 Segment assets and segment liabilities
Segment assets
$’000
Packaging and Sustainability
Materials Handling and Pooling
Contract Manufacturing Services
Total Segment Assets
Reconciliation to total assets(1):
Current tax assets
Deferred tax assets
Total Assets
Segment liabilities
$’000
Packaging and Sustainability
Materials Handling and Pooling
Contract Manufacturing Services
Total Segment Liabilities
Reconciliation to total assets(1):
Interest-bearing liabilities
Deferred tax liabilities
Total Liabilities
(1) These reconciling items are managed centrally and not allocated to reportable segments.
106
2019
2018
1,931,000 1,614,000
302,000
2,182,000 1,916,000
251,000
113,000
45,000
158,000
140,000
216,000
356,000
2,340,000 2,272,000
2019
1,297,798
154,432
123,768
1,575,998
3,360
42,100
1,621,458
2019
373,755
78,311
76,361
528,427
733,490
36,946
1,298,863
Financial Report —
Notes to the Financial Statements
6.7 Segment assets and segment liabilities (continued)
The table below shows segment assets and liabilities for the comparative period, prior to the change in operating
segments:
Segment assets
$’000
Pact Australia
Pact International
Total segment assets
Segment liabilities
$’000
Pact Australia
Pact International
Total segment liabilities
2018
1,175,138
675,449
1,850,587
2018
924,907
342,480
1,267,387
6.8 Revenue from services rendered
Revenue from asset hire services of $72.7 million was recognised for the year ended 30 June 2019 (2018 $70.3 million),
which is included in the Group revenue number of $1,834.1 million for the year ended 30 June 2019 (2018 $1,674.2
million).
6.9 Geographic revenue
The table below shows revenue recognised in each geographic region that Pact operates in.
$’000
Australia
New Zealand
Asia
Total
6.10 Subsequent events
2019
2018
1,291,238 1,279,857
285,296
109,035
1,834,076 1,674,188
289,258
253,580
In the opinion of the Directors, there have been no material matters or circumstances which have arisen between
30 June 2019 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 2019 A NNUA L R EP OR T 107
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 2019 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 Group
Chief Executive Officer and Chief Financial Officer in accordance with section 295A of the Corporations Act 2001 for
the financial year ended 30 June 2019.
This Declaration is made in accordance with a resolution of the Directors.
Raphael Geminder
Chairman
Dated 14 August 2019
Sanjay Dayal
Managing Director and
Group Chief Executive Officer
108
PAC T 2019 A NNUA L R EP OR T 109
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION 110
PAC T 2019 A NNUA L R EP OR T 111
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION 112
PAC T 2019 A NNUA L R EP OR T 113
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION 114
Shareholder
Information
PAC T 2019 A NNUA L R EP OR T 115
PAC T 2019 A NNUA L R EP OR T 115
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 31 August 2019.
Ordinary shares
Pact has on issue 343,993,595 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 2019:
Name
Kin Group Pty Ltd
Investors Mutual Ltd
On market buy-back
Date of interest
17/12/13
29/02/16
Number of
ordinary shares
141,932,367
40,753,173
% of issued
capital
41.26%
11.85%
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
2,611,499
16,944,102
13,109,632
26,554,732
284,773,630
343,993,595
4,871
6,484
1,737
1,167
63
14,322
There were 749 holders of less than a marketable parcel of ordinary shares (minimum of $500 which
is equivalent to 97,579 ordinary shares based on a market price of $2.43 at the close of trading on
31 August 2019).
116
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) Ltd
JP Morgan Nominees Australia Ltd
Citicorp Nominees Pty Ltd
Manipur Nominees Pty Ltd
Stanningfield Pty Ltd
Argo Investments Limited
Citicorp Nominees Pty Ltd
Salvage Pty Limited
National Nominees Limited
Sandurst Trustees Limited
S&J Capital Pty Limited
Mr Russell Stanley Barber
Custodial Services Limtied
BNP Paribas Nominees Pty Ltd
Total: Top 20 holders of fully paid ordinary shares (Total)
Total Remaining Holders Balance
Unquoted equity securities
There are no unquoted equity securities on issue.
Restricted equity securities
Ordinary Shares
Number of shares % of total shares
40.20
19.16
6.68
3.81
1.64
1.64
1.50
1.10
1.06
0.55
0.47
0.44
0.43
0.40
0.33
0.30
0.26
0.18
0.17
0.15
80.48
19.52
138,296,438
65,905,446
22,963,197
13,118,300
5,650,250
5,650,250
5,172,314
3,771,338
3,635,929
1,885,651
1,600,000
1,514,339
1,476,520
1,376,725
1,143,877
1,040,000
911,569
629,334
587,446
500,346
276,829,269
67,164,326
There are no restricted equity securities in the Company. However, there are 8,475,375 ordinary shares which
are subject to voluntary escrow. These shares will cease to be subject to voluntary escrow as follows: 941,708
on 31 October 2019; 1,883,417 on 31 January 2020; 1,883,417 on 30 April 2020; 1,883,417 on 31 July 2020 and
1,883,417 on 31 October 2020.
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 2019 A NNUA L R EP OR T 117
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION FY20
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 and events may be subject to change.
Dates
19 February 2020
27 February 2020
28 February 2020
3 April 2020
19 August 2020
27 August 2020
28 August 2020
2 October 2020
18 November 2020
118
Corporate
Directory
Registered and Principal Administrative office in Australia
Pact Group Holdings Limited
Building 3, 658 Church Street
Richmond, Victoria 3121, Australia
Telephone: + 61 3 8825 4100
ABN: 55 145 989 644
Website Address
www.pactgroup.com.
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 39.
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 2019 A NNUA L R EP OR T 119
OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION www.pactgroup.com.au
120