2020
ANNUAL
REPORT
CONTENTS
Overview
Pact at a Glance
Our Vision to Lead the Circular Economy
Financial and Operational Highlights
A View from the Chairman
A Message from the CEO
Sustainability
Innovation and Awards
Review of Operations and Financial Performance
Strategy Overview
Operational and Financial Summary
Governance
Corporate Governance Overview
Financial Reports
Directors' Report
— Remuneration Report
Auditor's Independence Declaration
Financial Statements
Directors' Declaration
Independent Auditor's Report
Shareholder Information
FY21 Shareholder Calendar
Corporate Directory
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3
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10
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38
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PACT 2020 ANNUAL REPORT OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION PACT AT A GLANCE
6,000
employees
7,000
customers
$1.8 billion
revenue in FY20
OUR VISION TO
LEAD THE CIRCULAR
ECONOMY
Packaging and
Sustainability
Materials
Handling and
Pooling
Contract
Manufacturing
Services
• Market leader in rigid plastic
• Largest provider of returnable
• A leading supplier of contract
packaging in Australia and
New Zealand, with a growing
platform in Asia
produce crate pooling services in
manufacturing services in Australia
Australia and New Zealand
for the home, hygiene, personal care
• Largest supplier of garment hanger
and health and wellness categories
• Leading supplier of recycling and
and accessory reuse services globally
• A diversified portfolio and broad
sustainability services in Australia and
• Leading supplier of plastic materials
manufacturing capability for liquid,
New Zealand
handling products and custom-
powder, aerosol and therapeutic
• Regional scale with extensive
moulded infrastructure products
nutraceutical products
manufacturing footprint supported
• Comprehensive service offerings and
• Strong customer relationships,
by innovation and a customer-centric
asset tracking technology
innovation and product development
structure
capability
FY20 revenue $1,144 million
FY20 revenue $316 million
FY20 revenue $394 million
operations in
15
countries
UK
China
Korea
Hong Kong
United States
Philippines
India
Sri Lanka
Nepal
Bangladesh
Singapore
Thailand
Indonesia
Australia
New Zealand
ASPIRATION
VISION
Pact will Lead the Circular Economy through reuse, recycling and packaging solutions
TARGET
Top quartile shareholder returns and 30% recycled content across portfolio by 2025
PRIORITIES
STRENGTHEN OUR CORE
EXPAND REUSE AND RECYCLING CAPABILITY
Focus
portfolio and
strengthen
balance sheet
Turnaround and
defend core
ANZ consumer
packaging
businesses
Lead plastics
recycling in ANZ
Scale-up
reuse solutions
Differentiate
industrial and
infrastructure
businesses
LEVERAGE
REGIONAL
SCALE
Grow Asian
packaging
platform
ENABLERS
Competitive
manufacturing
Safe, diverse
and
motivated
workforce
Segment
Differentiated
Circular
Disciplined
Data-driven
skilled
sales
capability
solutions
through
technical
expertise and
innovation
economy
capital
decision-
credentials
management
making
and
communication
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PACT 2020 ANNUAL REPORT PACT 2020 ANNUAL REPORT OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION FINANCIAL AND
OPERATIONAL
HIGHLIGHTS
Solid operating
performance, despite
COVID-19 challenges
Net debt reduced
and leverage
improved
• Group EBITDA and margins improved
• Net debt reduced by $70 million
• Solid organic growth in the Contract Manufacturing
• Gearing improved at 2.6x, down 0.4x (excluding
hygiene category and in crate pooling services
AASB16)
• Modest underlying growth in New Zealand and Asia
• Strong operating cash flows
• Tight cost control and disciplined cash
management
• ROIC improved at 12.6%, up 1.5% pts excluding
AASB16)
Dividends
resumed
• Final dividend of three cents per share,
65% franked
5 YEAR FINANCIAL HISTORY
1
8
3
1
5
7
4
1
4
7
6
1
4
3
8
1
9
0
8
1
FY16
FY17
FY18
FY19
FY20
0
2
2
3
3
2
7
3
2
1
3
2
4
3
2
2
0
3
FY16
FY17
FY18
FY19
FY20
Exc
AASB16
FY20
Inc
AASB16
3
6
1
9
6
1
5
6
1
8
4
1
1
5
1
6
6
1
FY16
FY17
FY18
FY19
FY20
Exc
AASB16
FY20
Inc
AASB16
4
9
0
0
1
5
9
7
7
1
8
3
7
FY16
FY17
FY18
FY19
FY20
Exc
AASB16
FY20
Inc
AASB16
1%
Revenue $m
1%
EBITDA1 $m
(exc AASB16)
1%
EBIT1 $m
(exc AASB16)
5%
NPAT1 $m
(exc AASB16)
4
1 Before significant items.
5
PACT 2020 ANNUAL REPORT PACT 2020 ANNUAL REPORT OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION A VIEW
FROM THE
CHAIRMAN
Dear Shareholder
On behalf of the Board of Directors of Pact Group, it is my pleasure
to present to you our 2020 Annual Report.
FY20 Overview
As we all know, FY20 was a period of unprecedented challenges
including the outbreak of the COVID-19 pandemic in the second
half of the year and the impact of devastating bushfires during the
Australian summer. Despite these adverse macro impacts, and
some underlying volume challenges, the Group was able to deliver
revenue of $1.8 billion, broadly in-line with the prior year, and
EBITDA of $301.8 million, up 1% on the prior year (on a comparable
basis). Group operating cash flows were also robust, our balance
sheet strengthened, and Group net debt and financing metrics
significantly improved.
Despite the significant challenges that we faced in the period, the
Group and our dedicated people have responded exceptionally
well, driving improvements in the business, capturing new business
opportunities and completing the strategic review that we
announced earlier in the year. We have also made excellent progress
in the first stages of the execution of that vision and strategy.
Importantly, we have also been able to support the communities
in which we operate during the COVID-19 pandemic through the
supply of hand sanitiser and hygiene products to emergency services
and the broader community, donations through local charities
and on an ongoing basis through our continued commitment to
sustainability and innovation.
Our Vision & Strategy
Pact’s vision is to Lead the Circular Economy through reuse, recycling
and packaging solutions. We will target top quartile shareholder
returns and 30% recycled content across our portfolio by 2025.
To achieve this vision our key priorities are:
• Strengthening our balance sheet and improving the
competitiveness of our core packaging business.
• Expanding our reuse and recycling capability, and leading plastics
recycling in Australia and New Zealand.
• Leveraging our regional scale and growing our Asian packaging
platform.
Pact has a special position in the circular economy which will enable
and creating hundreds of new jobs. Our crate pooling and hanger
us to lead change in the industry and deliver innovative, sustainable
reuse platforms are best-in-class and will also provide the platform
solutions to our customers and deliver a strong competitive
for us to drive deeper penetration of reuse solutions and further
advantage.
reduce single use packaging.
Our Commitment to Sustainability
Board Changes
Care for the environment and the communities in which we operate
On 21 April 2020, we welcomed Mr Michael Wachtel to the Board as
is central to our strategy. The new strategy established in FY20 is a
a Non-Executive Director and member of our Audit, Business Risk
natural extension of our Pact 2025 Promise. Launched in FY18, we
are committed to becoming our customers’ partner of choice for
sustainable packaging. Our targets are to reduce, reuse and recycle by:
and Compliance Committee. Michael is a Board member of Future
Fund, Seek Limited and St Vincent’s Medical Research Institute, and
has previously held a number of leadership roles in professional
• eliminating all non-recyclable packaging
that we produce;
• having solutions to reduce, reuse
and recycle all single use secondary
packaging; and
• offering 30% recycled content across our
packaging portfolio by 2025.
In pursuing these targets, we are actively
collaborating with our customers and
other stakeholders in product innovation
and investments in new manufacturing
technology, to improve the use of
recycled materials, and provide a range
of sustainability services. Examples of our
progress in FY20 include:
Reduce — Polystyrene is the most
significant non-recyclable resin consumed in
our products. We decreased consumption
of this resin by 181 tonnes in FY20 and are
working with customers to transition more
products to alternative substrates.
PACT’S VISION
IS TO LEAD
THE CIRCULAR
ECONOMY
THROUGH REUSE,
RECYCLING AND
PACKAGING
SOLUTIONS
services organisations, including as Chair
(Asia Pacific and Oceania) of EY. Michael
brings a strong professional background and
extensive global experience in governance,
risk management, finance and complex
international transactions to the role. I am
delighted that we have been able to attract
such a high calibre individual to complement
our Board of Directors.
Dividend
We appreciate the importance of dividend
income to our shareholders. The resilience of
our portfolio and the strength of our balance
sheet has enabled the Board to resume
dividends. The Board has determined to
pay a final dividend of three cents per share,
franked to 65%, in respect of the year ended
30 June 2020. Our medium-term target with
respect to dividends is a payout policy of
more than 40% of Group net profit after tax,
before significant items.
Reuse — We have enabled the growth in use of returnable produce
crates in Australia’s supermarket supply chain through the expansion
of our crate pooling operation, reducing single-use corrugate
secondary packaging by more than 2,000 tonnes since 2019.
Recycle — We have increased the number of products we
manufacture from recycled resin by 31% since 2019 and have won
contracts in FY20 to supply three Australian supermarket chains with
recycled PET meat trays.
Critically, we are also establishing the recycling capability to provide
recycled raw materials which promote the local circular economy.
We are pursuing a number of recycling initiatives, including a joint
venture with Cleanaway and Asahi, which will see us grow our
recycling capacity from 30,000 tonnes to more than 50,000 tonnes
by 2022, providing differentiation in the market, generating the
supply to help enable us to meet our 30% recycled content target
Thank You
On behalf of the Board of Directors, and myself, I would like to say
thank you to our shareholders and to all of our customers, suppliers
and other stakeholders for your support during this remarkable year.
I would also like to express my gratitude to the Group’s management
team and, most importantly, all of our people for your outstanding
contribution in delivering on our promises and driving results in such
difficult circumstances in FY20.
As a Group, we will continue to respond decisively to rapidly changing
economic conditions, the needs of our customers and the ongoing,
uncertain impact of COVID-19. I am excited by our vision and our
strategy and am confident that through our continued relentless
focus on innovation and sustainability we will deliver those targets.
Raphael Geminder
Non-Executive Chairman
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PACT 2020 ANNUAL REPORT PACT 2020 ANNUAL REPORT OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION A MESSAGE
FROM THE
CEO
Dear Shareholder
I am delighted to present to you my report for FY20, a year which
saw us establish our new vision and strategy for the Group and
deliver a solid financial and operating performance in a period of
significant market uncertainty.
Group Performance and Business Overview
I was very pleased with our financial performance in FY20. We
delivered improved earnings and margins, tightly managed pricing
and controllable costs, and significantly strengthened our balance
sheet. These results were delivered in a period where we faced the
uncertainty of the COVID-19 pandemic, along with challenges from
other macro events, and clearly demonstrated the resilience of our
diversified portfolio and customer base.
Our strong local manufacturing and service capabilities enabled us
to confidently manage these challenges, to provide security of supply
to our customers and quickly respond to their changing needs. The
business responded rapidly to meet strong demand and supply
shortages for hand sanitiser and other hygiene products, ensuring that
the needs of front line workers and the general community were met.
Demand in most consumer segments was resilient during the
COVID-19 impacted period, but we did experience a slow-down in
the industrial sector and our hanger reuse business was impacted by
significant weakness in the clothing retail sector in Australia.
Over the full year, underlying volumes in our Australian packaging
business and the health and wellness sector remained challenging,
but underlying volumes were ahead in our New Zealand and
Asian businesses, the latter beginning to leverage the benefits of
consolidating our regional closures platform. Pleasingly we also
generated solid organic growth in our Materials Handling segment,
through new contracts to expand crate pooling services in Australia
and hanger reuse services in the USA, and in the hygiene category in
our Contract Manufacturing segment.
We were also able to significantly improve the strength of our balance
sheet in FY20, generating strong cash flow, tightly managing capital
expenditure and consequently reducing net debt by $70 million and
improving our gearing ratio to 2.6x, well within our targeted levels.
Safety and Our People
I am incredibly saddened to report that a valued team member
at our Albany site in New Zealand died in a tragic incident in May.
We have supported detailed investigations into the incident and
implemented procedures to prevent similar incidents at any of our
facilities in the future.
THE BUSINESS HAS PERFORMED WELL IN FY20,
WE HAVE A CLEAR PLAN FOR THE FUTURE, AND
WE ARE VERY CONFIDENT IN PACT’S CAPABILITY
TO ACHIEVE ITS TARGETS AND VISION.
Whilst our Lost Time Injury Frequency Rate for FY20 was 4.0,
improved on 4.7 in the prior year, we remain committed to driving
continued improvement in our safety culture and processes.
I am extremely proud of how well our people responded to
the challenges presented by the COVID-19 pandemic and the
commitment they demonstrated in continuing the efficient operation
of our facilities across Australia, New Zealand and Asia. The Group
was able to swiftly react to the onset of the COVID-19 pandemic and
developed a response plan focused on protecting the health and
safety of our employees and the community, as well as supporting
our customers. I would like to thank all our people around the Group
for their outstanding resilience and dedication in FY20.
Strategic Review
As foreshadowed in our last Annual Report, the Group completed a
strategic review in FY20 and established a Vision to Lead the Circular
Economy through reuse, recycling and packaging solutions. Under
this strategy, our decision-making will be guided by targets and a
new capital allocation framework. I am delighted to report that we
are already progressing well in the execution of our new strategy and
are committed to maintaining this momentum.
We have completed the critical first phase of the turnaround of
our Australian packaging business and have clear plans for the
next stage of the process. Phase two will include the development
of targeted segment strategies to drive resource allocation,
differentiate in the marketplace, improve margins and sharpen our
focus on growth opportunities. This business is integral to delivering
value in the circular economy.
During the year we also formalised a joint venture with Cleanaway
and Asahi to expand our recycling capability by developing a new
recycling facility in Australia. This is expected to be operational by
2022. In addition, we have entered an agreement to acquire Flight
Plastics, a leading recycler and provider of sustainable packaging
solutions in New Zealand (subject to regulatory approval).
We also progressed our strategy through the expansion of our crate
pooling and hanger reuse operations as noted above. During FY20
we grew our pooling revenues by an impressive 27%.
As previously announced, and also in-line with this strategy, the
Group is pursuing its options with respect to the sale of the
businesses in our Contract Manufacturing segment. This process will
recommence in FY21 following a suspension in the second half of
FY20 due to the COVID-19 pandemic.
Outlook
In respect of the outlook for the Group, we expect our diversified
portfolio to be resilient with trading in the first quarter of FY21 in
most sectors to be generally in line with recent trends.
The duration and economic impact of COVID-19 is uncertain. An
update on trading will be provided at the AGM on 18 November 2020.
Notwithstanding the uncertainties associated with COVID-19, we
have a clear vision for Pact and are committed to our new strategy.
We have made good progress so far and believe that through the
execution of this strategy we can deliver significant long-term value
for all our stakeholders.
We have clearly defined targets to deliver by 2025:
• Top quartile shareholder returns.
• Return on invested capital above 15% (13.5% on a post AABS16
basis).
• Pact’s sustainability promise of 30% recycled content across its
portfolio.
• A strong balance sheet with gearing under 3x (excluding the
impact of AASB16).
• A focussed portfolio with investments and divestments clearly
aligned to strategy.
• The payment of dividends to shareholders in-line with our
dividend policy.
The business has performed well in FY20, we have a clear plan for
the future, and we are very confident in Pact’s capability to achieve
its targets and vision.
Finally, I would like to take this opportunity to thank our shareholders
for your continued support and confidence in the Company, and
reiterate my thanks to our management team and the wonderful
people across the business who have performed so well in such
challenging circumstances this year.
I look forward to updating you all on further progress in FY21.
Sanjay Dayal
Managing Director & Group CEO
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PACT 2020 ANNUAL REPORT PACT 2020 ANNUAL REPORT OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION
SUSTAINABILITY
Pact is committed to sustainability and this is embedded in the way
Our annual Sustainability Review is prepared based on the Global
we work. Our vision is to lead the circular economy through reuse,
Reporting Initiative (GRI) Sustainability Reporting Guidelines (G4
recycling and packaging solutions.
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:
version) and addresses the challenges and opportunities facing
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/
INNOVATION
AND AWARDS
Pact received numerous prestigious awards throughout
FY20 for the innovative design of products and services.
Corporate
• Australian Financial Review (AFR) BOSS Most Innovative
Companies List 2019, 2018, 2017, 2016, 2015, 2014, 2013.
• Wealth & Finance International Global Excellence Awards.
— 2019 Most Innovative Packaging Company of the Year Acquisition
International Leading Advisor Awards.
— 2020 Leading Creative Packaging Solutions Provider of the Year.
WE’RE PROUD TO HAVE BEEN
RECOGNISED FOR OUR WORK
IN SUSTAINABLE PACKAGING
INNOVATION IN SUPPORT
OF OUR VISION TO LEAD
THE CIRCULAR ECONOMY
THROUGH REUSE, RECYCLING
AND PACKAGING SOLUTIONS.
Industry
Packaging
• 2020 Winner World Packaging Organisation (WPO) — Sustainability
Special Award — Lewis Road’s 100% rPET Milk Bottle range.
• 2020 Winner Australasian Packaging Innovation & Design Awards
(PIDA) — Health, Beauty & Wellness Category — Glowlabs’ post-
consumer sourced (PCR) 100% rPET bottle range.
• 2020 Runner Up Australasian Packaging Innovation & Design Awards
(PIDA) — Sustainable Design Category — Earthwise’s PCR 75%
rHDPE household cleaning range.
Contract Manufacturing
• 2020 Canstar Awards — Atlas Crawling Insect Spray.
• 2020 Canstar Awards — Atlas Insect Kill Fly Spray.
• 2020 Canstar Awards — Atlas Multi Insect Spray.
• 2020 Canstar Awards — Powerforce Toilet Block Gel Five Ball 35g.
• 2020 Canstar Awards — Powerforce Active Gel Disks 75ml.
• 2020 Canstar Awards — Powerforce Anti-Bac Disinfectant Spray 300g.
• 2019 Choice Awards — ALDI Trimat Laundry Power.
DESIGN INNOVATION OF THE YEAR
HEALTH, BEAUTY & WELLNESS
GOLD WINNER
SUSTAINABLE PACKAGING DESIGN
SPECIAL AWARD - RETAIL PACK
SILVER WINNER
REVIEW OF
OPERATIONS
AND FINANCIAL PERFORMANCE
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O V E R V I E W
P E R F O R M A N C E
G O V E R N A N C E F I N A N C I A L R E P O R T S S H A R E H O L D E R I N F O R M AT I O N
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PACT 2020 ANNUAL REPORT PACT 2020 ANNUAL REPORT STRATEGY
OVERVIEW
During the year Pact undertook a detailed business strategy review
under the leadership of the Managing Director and Group CEO. The
review has clarified what is critical to Pact’s continued success and will
enable the Group to maximise long-term shareholder value. The Board
of Directors has endorsed this new strategy, which is focussed around
“Leading the Circular Economy” in plastic packaging.
Our Vision
Our Target
PACT WILL LEAD THE
CIRCULAR ECONOMY
THROUGH REUSE,
RECYCLING AND
PACKAGING SOLUTIONS
TOP QUARTILE
SHAREHOLDER RETURNS
AND 30% RECYCLED
CONTENT ACROSS THE
PORTFOLIO BY 2025
PACT'S SCALE AND CAPABILITY ACROSS
THE CIRCULAR ECONOMY VALUE CHAIN
We are a leading plastics recycler,
well positioned to lead the change
needed to “close the loop” on plastics
Leading recycling platform in ANZ
with growing capability in post-
consumer plastics recycling
End-of-life recycling of
pooling assets
We have solutions that meet the
growing need for alternatives to
single-use packaging
Best in class produce crate pooling
platform with a leading position in
Australia and New Zealand
Leading position globally in garment
hanger reuse services
Leading provider of drum and IBC reconditioning
services in Australia and New Zealand
We have industry leading capability to improve
plastics sustainability through innovation and
product design, and the scale and technical
know-how to provide a meaningful
offtake “sink” for recycled materials
Largest manufacturer of rigid
plastic packaging in Australia
and New Zealand
Regional leader in caps
and closures
Leading supplier of plastic
materials handling and
infrastructure products
Technical and innovation capability
to use recycled materials in product
design and provide sustainable
product choices
Priorities
The Group will seek to deliver long-term value focussing on three
core areas, with six key priorities:
• Strengthen the core
Strengthen the core
Expand reuse and recycling capability
To align our portfolio with strategy, strengthen the balance and
turnaround and defend our core packaging business in Australia
and New Zealand, the Group:
To leverage our unique position in the plastics value chain, to expand
our recycling capability and reuse platforms and to meet the growing
demand for sustainable supply chain solutions, the Group:
- Align the portfolio with strategy and strengthen the balance
• has commenced a sales process in respect of its Contract
• will collaborate with industry and Government to build local
sheet.
Manufacturing businesses;
recycling capability;
Progress in FY2020
During FY2020 the new business strategy has been established with
the following strategic initiatives progressed
• Phase one of the restructure of the ANZ packaging business is
complete, with a customer-centric structure implemented and
new senior leadership appointed.
- Turnaround and defend our core packaging business in
• has reaffirmed a target leverage ratio of less than 3x (excluding
• will expand its returnable crate pooling operations through
• Capital prioritisation framework embedded and FY21 priorities
the impact of AASB 16);
increased conversion of single-use packaging; and
agreed.
• will assess all new growth capital against a minimum target hurdle
• will expand its garment hanger reuse operations to support
- Lead plastics recycling in Australia and New Zealand.
of 15% ROIC and quality of returns;
- Scale up reuse solutions.
- Differentiate industrial and infrastructure businesses.
• Leverage regional scale
- Grow our Asian packaging platform.
• has set a target for ROIC to exceed 15% by 2025;
• will improve the competitiveness of its packaging platform
in Australia and New Zealand through focussed capital and
operational initiatives; and
• will leverage its technical and innovation capability and access to
recycled raw materials to differentiate in the market.
offshore growth.
Leverage regional scale
To grow our Asian packaging platform, the Group will optimise
its value chain through the consolidation of our regional closures
platform. The Group:
• has consolidated its regional closures network, which includes
assets in Australia, New Zealand and Asia;
• has invested in capacity expansion in Asia;
• will leverage the platform to deliver the lowest cost of
manufacture; and
• is supporting growth in our special closures capability within
Australia and New Zealand.
• Recycling capability to be expanded through strategic investments
— Agreement to acquire Flight Plastics Ltd in New Zealand, which
provides post-consumer recycling capability in New Zealand
(subject to approval by regulatory authorities).
— Formalised joint venture arrangements with Cleanaway
and Asahi to expand post-consumer recycling capability in
Australia, with the project moving into the construction phase.
• Active collaboration with Government to accelerate investment in
local recycling capability.
• Successful start-up of reuse services to support a new contract in
the USA.
• Consolidation of the closures business into Asia has commenced.
• Sale process in respect of Contract Manufacturing business to
recommence.
Australia and New Zealand.
• Expand reuse and recycling capability
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PACT 2020 ANNUAL REPORT OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATIONPACT 2020 ANNUAL REPORT ManufactureReuseRecycle Case Study
Establishing a
competitive advantage
through supply of
sustainable packaging
Consumers are increasingly demanding sustainable
• An arrangement with Cleanaway and Asahi to jointly
packaging and the use of recycled content which
develop recycling capability in Australia. Trading
supports the local circular economy. Capability to meet
as Circular Plastics Australia, the joint venture will
this need will be a competitive advantage.
construct a new recycling facility with capacity to
Pact is making great progress expanding its recycling
capability to support the needs of its customers.
Access to recycled raw materials will enable Pact to
differentiate in the market.
To meet Pact’s target of 30% recycled content across
its portfolio by 2025 the Group will require in excess
of 60,000 tonnes of recycled raw materials. Several
initiatives already underway will provide a significant
step in achieving this target, increasing recycling
capacity to around 50,000 tonnes by 2022. These
recycle the equivalent of one billion 600ml PET
plastic bottles each year. Expected to be operational
by 2022, the facility will lift Australia’s PET recycling
capacity by 50%. The recycled materials will be used
to produce new food and beverage packaging.
• An agreement to acquire Flight Plastics (subject to
approval by regulatory authorities) a leading provider
of packaging for the ANZ fresh food segment and
New Zealand’s only packaging manufacturer with
integrated recycling capability.
initiatives include:
• The acquisition of Australian Recycled Plastics
(51% share).
SIGNIFICANT PROGRESS HAS BEEN MADE
IN INCREASING PACT'S RECYCLING
CAPABILITY TO PROVIDE CUSTOMERS
WITH FOOD GRADE RECYCLED CONTENT
THAT WILL ESTABLISH AN IMPORTANT
COMPETITIVE ADVANTAGE
In FY20, Pact secured the contracts to supply three
Australian supermarket chains with recycled polyethylene
terephthalate (rPET) Moisturelock meat trays.
THE THREE CONTRACTS
COMBINED ARE FOR
APPROXIMATELY 35 MILLION
TRAYS PER ANNUM. EACH TRAY
CONTAINS AN AVERAGE OF
10–30% POST-CONSUMER
RECYCLED CONTENT.
This equates to approximately 150 tonnes of plastic that
has been reused and diverted from landfill.
In March 2021, Pact will have the capability to increase the
percentage of post-consumer recycled content in each tray;
the target being to approximately 50%–100%.
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PACT 2020 ANNUAL REPORT OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATIONPACT 2020 ANNUAL REPORT
OPERATIONAL
AND FINANCIAL
SUMMARY
The Group has reported revenue of $1,809.2 million for the year ended 30 June 2020, down 1% compared to the prior
corresponding period (pcp). The statutory net profit after tax (NPAT) for the year was $88.8 million, compared to a statutory net
loss after tax of $289.6 million in the pcp. NPAT before significant items3 for the year was $73.2 million. Excluding the impact of
AASB 16 Leases (adopted from 1 July 2019), NPAT before significant items3 was $80.8 million (pcp: $77.3 million).
Note:
Statutory financial results for the year reflect the adoption of AASB 16 Leases. Comparatives have not been restated. Results
excluding the impact of AASB 16 are included in this report for comparative purposes.
COVID-19
The Group’s COVID-19 response plan is focused on protecting the
health and safety of employees, supporting customers and the
Materials Handling and Pooling
• Crate pooling volumes were improved, with strong demand for
fresh produce.
community and safeguarding the balance sheet.
• Several bin and infrastructure projects were delayed.
Protecting our people
• Strict health and safety protocols implemented to protect
employees, customers, and the community.
• Demand from the clothing retail sector was weak, with hanger
reuse services well down.
• Net adverse impact to segment earnings of around $7 million.
— Gearing4 at 2.6x (excluding AASB 16) substantially improved
Supporting our customers and the community
Contract Manufacturing Services
Overview
• Revenue down 1.4% to $1,809.2 million (pcp: $1,834.1 million).
• EBITDA1 of $301.8 million (pcp: $230.7 million); excluding AASB
16 EBITDA up 1.3% to $233.7 million.
• EBIT2 of $166.3 million (pcp: $148.4 million); excluding AASB 16
EBIT up 1.5% to $150.6 million.
and well within targeted range.
• Execution of strategy to Lead the Circular Economy progressing well.
— Phase one of the turnaround of the ANZ packaging business
complete and new senior leadership appointed.
— Recycling capability to be expanded through strategic
investments.
• NPAT3 of $73.2 million (pcp: $77.3 million); excluding AASB 16
— Agreement to acquire Flight Plastics Ltd in New Zealand,
NPAT up 4.5% to $80.8 million.
• Solid operating performance despite COVID-19 challenges
— Group EBITDA and margins improved.
— Solid organic growth in the Contract Manufacturing
businesses (primarily in the hygiene category), and in
Materials Handling crate pooling services, along with modest
underlying growth in New Zealand and Asia.
investing in post-consumer recycling capability in New
Zealand (remains subject to regulatory approval).
— Formalised joint venture arrangements with Cleanaway
and Asahi to develop post-consumer recycling capability
in Australia (expected to be operational by 2022).
— Reuse platform expanded to support crate pooling services
into the ALDI fresh produce supply chain and the start-up of
— Lower underlying packaging volumes in Australia partly due
hanger reuse services to support a major contract in the USA.
to COVID-19 impacts to volume in the industrial and clothing
retail sectors.
— Consolidation of the closures business into Asia has
commenced.
— Lower resin costs and recovery of pricing lags, tight control of
— Sale process in respect of Contract Manufacturing business to
discretionary spend.
recommence following suspension due to COVID-19.
• Net debt reduced and leverage improved.
• Dividends resumed.
• Comprehensive business continuity plans supporting demand
and supply planning.
• Close regulatory engagement to reduce the impact of
government enforced lockdowns.
• Investment in resources and capacity to meet changing customer
needs.
Safeguarding the balance sheet
• Reduction in discretionary spend.
• Deferment of non-essential capital.
• Robust controls to manage working capital.
• Strong liquidity and debt capacity to support new business
opportunities.
The hygiene category outperformed. The business responded
rapidly to meet demand for hand sanitisers and other hygiene
products by expanding manufacturing capacity and establishing a
reliable localised raw material supply chain. Volumes in the period
were up significantly. Whilst demand in this category moderated
by the end of the period, demand is expected to remain above
historical levels going forward.
COVID-19 Financial Assistance and Other Support Initiatives
During the year, the Group received financial assistance from
government and other key stakeholders in various jurisdictions to
support business operations adversely impacted by the COVID-19
pandemic. This assistance included wages subsidies, property rent
relief, waiver of payroll tax obligations and other miscellaneous
subsidies with a total benefit to the Group of $2.8 million, of which
The Group’s strong local manufacturing and service capability
$0.7 million was in Australia. This benefit has been recognised in
has enabled it to provide security of supply to its customers and
other income within the Consolidated Statement of Comprehensive
respond rapidly to their changing needs. During the COVID-19
Income for the period. In addition, the Group received early
affected period in FY20, the resilience of the Group’s diversified
settlement of an income tax refund of $6.2 million, as a timing
portfolio was clearly demonstrated.
benefit through COVID-19 assistance.
— Reduction in net debt6 of $70.0 million (excluding AASB 16
— Final ordinary dividend of three cents per share (65% franked
Packaging and Sustainability
impact) through disciplined balance sheet and working capital
to be paid in October 2020).
management.
Key Financial Highlights – $millions
Revenue
Segment EBITDA1
Packaging & Sustainability
Materials Handling & Pooling
Contract Manufacturing Services
EBITDA1
EBIT2
NPAT3
Statutory Net (Loss)/Profit After Tax
Total Dividends — cents per share
Statutory 2020
1,809.2
Exc AASB 16 2020
1,809.2
2019
1,834.1
Change % Exc AASB 16
(1.4%)
181.3
73.0
47.5
301.8
166.3
73.2
88.8
3.0
137.8
56.0
40.0
233.7
150.6
80.8
91.8
3.0
154.6
51.1
25.1
230.7
148.4
77.3
(289.6)
(10.9%)
9.6%
59.5%
1.3%
1.5%
4.5%
131.7%
-
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 26 for definitions.
• Volumes in most consumer packaging sectors in Australia, New
Zealand and Asia were resilient. Higher supermarket demand
early in the period arising through panic-buying moderated by
the end of the period. Some categories outperformed, such as
hygiene and homecare, whilst others underperformed, including
kiwi fruit trays in New Zealand, where packing restrictions meant
that fruit was delivered loose to supermarkets. Beverages were
also lower, impacted by country lockdowns, particularly in Asia.
• Volumes into the industrial packaging sector were down.
• Net adverse impact to segment earnings of around $5 million.
16
17
PACT 2020 ANNUAL REPORT PACT 2020 ANNUAL REPORT OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION
Group Results
$’000
Revenue
Other income (excluding interest revenue)
Expenses
EBITDA1
EBITDA margin
Depreciation and amortisation
EBIT2
EBIT margin
Significant items (before tax)
EBIT after significant items
Net finance costs expense
Income tax expense
Tax on significant items and other significant tax items
Net profit / (loss) after tax
Revenue
Exc AASB 16 2020
1,809,158
17,276
(1,592,728)
233,706
12.9%
(83,122)
150,584
8.3%
1,993
152,577
(36,390)
(33,405)
9,065
91,847
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)
Exc AASB 16 Change %
(1.4%)
1.3%
1.5%
155.5%
131.7%
Statutory 2020
1,809,158
17,276
(1,524,627)
301,807
16.7%
(135,544)
166,263
9.2%
6,537
172,800
(62,754)
(30,264)
9,065
88,847
EBITDA
Group revenue for the year of $1,809.2 million was 1.4% lower than
EBITDA of $301.8 million was $71.1 million higher than the pcp
the pcp of $1,834.1 million. The full year included an incremental
including a positive impact of $68.1 million from the adoption of
four months of results from TIC Retail Accessories (“TIC”). Excluding
AASB 16 (which has the effect of reducing operating costs and
this impact of TIC ($34.2 million), revenue was 3.2% lower than
increasing depreciation and interest costs relating to right of use
the pcp. Lower overall net Group volumes and lower pricing
assets). Excluding the impact of AASB 16, EBITDA was $233.7 million,
(reflecting the partial pass through of lower raw material input
an increase of $3.0 million or 1.3% on the pcp. Earnings were
costs) were partly offset by favourable foreign exchange translation
favourably impacted by the incremental contribution of the TIC
benefits. Strong volume growth was delivered in the Contract
acquisition along with the partial recovery of prior period pricing lags
Manufacturing segment, driven by significantly increased demand
following lower resin input costs in the period. In addition, operating
in the hygiene category, partly offset by lower health and wellness
costs and overheads were tightly managed and the Group also
volumes. Revenue in the Materials Handling and Pooling segment
benefitted from generally favourable foreign exchange movements
was ahead through the expansion of crate pooling operations in
(as the New Zealand dollar and Asian currencies strengthened
Australia to support ALDI, and the incremental impact of the TIC
against the Australian dollar compared to the pcp). These benefits
acquisition, which more than offset the impact of COVID-19 on
were, however, largely offset by the adverse impact of overall lower
industrial demand and reuse services. Packaging and Sustainability
net Group volumes, as noted above, along with some increased costs
volumes were down due to the impact of COVID-19, mostly affecting
to serve during the COVID-19 impacted period.
industrial volumes, and lower underlying volumes in the Australian
packaging business. Underlying volumes were modestly improved in
New Zealand and Asia.
Excluding AASB 16, the EBITDA margin for the year was 12.9%, up
from 12.6% in the pcp.
EBIT
Net finance expense
EBIT of $166.3 million for the year was $17.9 million higher than
Net financing costs for the year were $62.8 million, an increase of
the pcp including a positive impact of $15.7 million relating to AASB
$23.8 million compared to the pcp, including $26.4 million related to
16. Excluding this impact, EBIT was $2.2 million (1.5%) up on the
the adoption of AASB 16. Underlying net financing costs were $2.6
pcp due primarily to the earnings impacts noted above. Underlying
million lower than the pcp due to lower net debt levels during the
depreciation and amortisation (excluding an additional $52.4 million
year and benefits from lower market interest rates.
relating to right of use assets under AASB 16) was $0.8 million
higher, primarily due to the full year impact of the TIC acquisition.
Excluding AASB 16, the EBIT margin for the year was 8.3%, up from
8.1% in the pcp.
Income tax expense and significant tax items
The income tax expense for the year (before significant items) was
$30.3 million, representing an average tax rate of 29.2% of net
profit before tax and significant items, in-line with the prior year and
Further detail on revenue and earnings in each of the Group’s
consistent with the statutory tax rates payable by the Group across
operating segments is contained in the Review of Operations below.
its main operating geographies. Tax expense includes a benefit
Significant items
of $3.1 million relating to the impact of AASB16. Tax on significant
items and other significant tax items were a benefit of $9.1 million
Pre-tax significant items for the year delivered net income of $6.5
(with no impact from AASB16).
million. This includes $4.5 million of benefits relating to a net gain
on lease modification (following the adoption of AASB 16), and $30.0
Net (loss)/profit after tax
million from the reversal of a contingent consideration obligation
The statutory net profit after tax for the year was $88.8 million
(relating to the acquisition of TIC). These items were partly offset by
compared to a statutory net loss after tax for the prior half year of
transaction costs of $4.0 million, expenses relating to the finalisation
$289.6 million. Excluding significant items, NPAT was $73.2 million
of acquisition consideration of $7.2 million, a write off expense of
compared to $77.3 million in the pcp. NPAT excluding the impact of
$11.8 million (relating to customer contract intangible assets in
AASB 16 was $80.8 million, an increase of $3.5 million or 4.5% on
the contract manufacturing business), and $5.0 million of costs
the pcp of $77.3 million.
associated with business restructuring.
Pre-tax significant items for the prior year were an expense of
$423.3 million. This represented an impairment expense of $368.8
million ($136.3 million fixed assets; $232.4 million intangible assets),
inventory write-downs of $13.0 million, costs associated with business
restructuring of $37.8 million and transaction costs of $3.7 million.
18
19
PACT 2020 ANNUAL REPORT PACT 2020 ANNUAL REPORT OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION Balance Sheet
$’000
Cash
Other current assets
Property plant and equipment
Intangible assets
Other assets
Total assets
Interest bearing liabilities
Other liabilities, payables and provisions
Total Liabilities
Net Assets
Statutory Net Debt6
Net Debt6 excluding AASB 16
2020
76,004
400,495
996,002
456,068
67,066
2019
49,950
384.349
638,542
477,054
47,295
1,995,635 1,597,190
733,490
1,144,389
541,105
478,597
1,622,986 1,274,595
322,595
683,540
683,540
372,649
1,068,385
613,526
Change %
52.2%
4.2%
56.0%
(4.4%)
41.8%
24.9%
56.0%
(11.6%)
27.3%
15.5%
56.3%
(10.2%)
Statutory net debt at 30 June 2020 was $1,068.4 million, an increase
The Group has several revolving debt facilities, two term facilities,
of $384.8 million from 30 June 2019, inclusive of the recognition
a subordinated term debt facility and a working capital facility with
of $454.9 million in interest-bearing lease liabilities following the
total commitments of $1,057.6 million, of which $340.7 million is
adoption of AASB 16. Excluding this impact, net debt was $613.5
undrawn at 30 June 2020. The facilities are spread across multiple
million, $70.0 million lower than 30 June 2019. The improvement
maturities, with the working capital facility revolving with an annual
has been driven by strong operating cash flows, lower outflows from
review. The debt facilities include: a $380.7 million loan facility
investing activities and no dividend payments in the period.
maturing in January 2022; a $184.6 million loan facility maturing in
The increase in property plant and equipment of $357.5 million
primarily reflects the recognition of $364.1 million in net book value
of right of use assets at 30 June 2020 following the adoption of
AASB16.
The decrease in intangible assets of $21.0 million includes $11.8
million relating to a write off of customer contracts in the Contract
Manufacturing business, with the balance of the reduction
attributable to amortisation and foreign exchange translation
movements.
January 2023; a $299.1 million loan facility maturing in March 2023;
a $120.0 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
$23.0 million at 30 June 2020. Average tenor is 2.6 years.
Financing metrics
Gearing4
Interest cover5
Statutory
2020
3.5x
4.8x
Exc AASB 16
2020
2.6x
6.4x
2019
3.0x
5.9x
Exc AASB 16
Change
0.4
0.5
The increase in other assets of $19.8 million mainly reflects
At 30 June 2020 gearing was 3.5x, an increase from 3.0x in the pcp,
increased deferred tax assets, along with increased investments in
impacted by the recognition of interest-bearing lease liabilities as
associates and joint ventures.
The decrease in other liabilities, payables and provisions of
$62.5 million mainly relates to $53.8 million in lower trade and
other payables along with $33.1 million in lower provisions
(including $32.8 million of fixed rent and restructuring provisions
derecognised on the adoption of AASB 16), partly offset by $18.3
million in higher tax liabilities.
part of net debt following the adoption of AASB 16. Excluding the
impact of AASB 16, gearing is 2.6x, a substantial improvement of 0.4x
on the prior year as a result of the strong cash flow performance
and disciplined balance sheet management. Interest cover at 4.8x
has been impacted by increased finance costs under AASB 16.
Interest cover excluding the AASB16 impact is 6.4x, also a significant
improvement on the pcp. Both metrics are well within targeted levels.
Cash Flow
Key items — $’000
Net cash flows provided by operating activities
Payments for property, plant and equipment
Payments for investments in associates and joint ventures
Purchase of businesses and subsidiaries, net of cash acquired
Repayment of lease liability principal (net of incentive received)
Payment of dividend
2020
192,131
(76,475)
(3,558)
-
(44,480)
-
2019
108,683
(69,455)
-
(78,725)
-
(38,236)
Change %
74.3%
(10.1%)
n/a
(100.0%)
n/a
(100.0%)
Statutory operating cash flow including proceeds from securitisation
was $192.1 million for the year, $83.4 million up on the pcp. The
outflow from securitisation of trade debtors was $6.8 million
for the year compared to an inflow of $13.6 million in the pcp.
Excluding securitisation cash flows, statutory operating cash flow
Outlook
We expect our diversified portfolio to be resilient, with trading in the
first quarter of FY2021 in most sectors to be generally in line with
recent trends.
was $103.9 million higher than the pcp. Operating cash flows have
The duration and economic impact of COVID-19 is uncertain. An
benefitted from the adoption of AASB 16, with principal lease liability
update on trading will be provided at the AGM on 18 November 2020.
repayments ($44.5 million) now classified as a financing activity.
Excluding this impact, statutory operating cash flow was $59.4 million
up on the pcp. Net receipts and payments were $46.4 million higher
(net of the impact of AASB 16 lease liability repayments), tax cash
flow was $34.1 million improved (following the receipt of a prior year
related tax refund in the period), and net finance cost and interest
cash flows were $21.1 million higher (with improved underlying
finance cost cash flows more than offset by $26.4 million of interest
payments for lease liabilities in FY2020 under AASB 16).
Payments for property, plant and equipment were $76.5 million for
the year compared to $69.5 million in the pcp, an increase of $7.0
million. The Group continued to invest in growth projects, including
Other events of significance
Divestment of Contract Manufacturing segment
The Group is pursuing its options to sell the businesses in the
Contract Manufacturing segment. The process will recommence
following a suspension during the year due to COVID-19.
Joint Venture with Cleanaway and Asahi Holdings
Pact, Cleanaway and Asahi Holdings (Australia) have formalised
a joint arrangement to develop recycling capability in Australia,
expected to be operational by 2022.
expenditure on the contract win for TIC reuse services in the USA,
Acquisition of Flight Plastics NZ Ltd
investment in crate assets and facilities related to the provision of
crate pooling services to ALDI, a major upgrade to a steel plant in
New Zealand, automation in the Australian packaging business,
a variety of capacity initiatives in the Asian platform and several
recycling related projects. All these initiatives are strongly aligned
with the new business strategy to “Lead the Circular Economy”.
Payments for investments in associates and joint ventures of $3.6
million relate to the purchase of a 50.8% share in Australian Recycled
Plastics Pty Ltd (ARP), a kerbside collected plastics recycling business
located in New South Wales. Payments for purchase of businesses
and subsidiaries, net of cash acquired, in the pcp of $78.7 million
represented $46.3 million for the TIC acquisition (cash consideration
paid of $28.3 million and deferred consideration paid of $20.8
million, less $2.8 million cash acquired) and $32.4 million paid in
relation to the Asian acquisition and the acquisition of Pascoe’s
completed in prior years.
The Group has entered into an agreement to acquire New Zealand’s
only PET recycler, Flight Plastics NZ, a leading recycler and provider
of plastic trays and containers for grocery products in New Zealand,
for a purchase consideration of NZD $26 million. The transaction
remains conditional on approval by regulatory authorities.
Review of operations
The Group’s operating segments are:
— Packaging and Sustainability
— Materials Handling and Pooling
— Contract Manufacturing Services
Inter-segment revenue eliminations of $44.5 million (pcp: $43.0
million) are not included in the segment financial information below.
20
21
PACT 2020 ANNUAL REPORT PACT 2020 ANNUAL REPORT OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION
PACKAGING AND
SUSTAINABILITY
MATERIALS HANDLING
AND POOLING
The Packaging and Sustainability segment encompasses the
Group’s packaging and sustainability businesses. The business
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 and Sustainability contributed 63%
of the Group’s revenue in FY2020.
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 and includes TIC, a closed loop
plastic garment hanger and accessories re-use business
(acquired 31 October 2018) operating across several countries
in Asia as well as in Australia. Materials Handling and Pooling
contributed 17% of the Group’s revenue in FY2020.
$’000
Revenue
EBITDA1
EBITDA Margin %
EBIT2
EBIT Margin %
Statutory 2020
1,143,852
181,272
15.8%
90,806
7.9%
Exc AASB 16 2020
1,143,852
137,751
12.0%
79,913
7.0%
2019
1,208,468
154,577
12.8%
97,409
8.1%
Exc AASB 16 Change %
(5.3%)
(10.9%)
(0.8%)
(18.0%)
(1.1%)
$’000
Revenue
EBITDA1
EBITDA Margin %
EBIT2
EBIT Margin %
Statutory 2020
315,599
73,012
23.1%
44,200
14.0%
Exc AASB 16 2020
315,599
55,974
17.7%
40,528
12.8%
2019
296,386
51,054
17.2%
35,710
12.0%
Exc AASB 16 Change %
6.5%
9.6%
0.5%
13.5%
0.8%
Revenue for the Packaging and Sustainability segment of $1,143.9
adoption of AASB 16. Excluding this impact, EBITDA was $16.8
Revenue for the Materials Handling and Pooling segment of $315.6
adoption of AASB 16. Excluding this impact, EBITDA was $5.0 million
million was $64.6 million (5.3%) lower than the pcp. Revenue was
million (10.9%) lower. Earnings benefitted from modest underlying
million for the year was $19.2 million (6.5%) higher than the pcp. The
up on the pcp. The four-month incremental impact from the TIC
positively impacted by volume growth in New Zealand (in the dairy
growth in the New Zealand and Asian businesses, despite COVID-19
increase was driven by a full year contribution from the TIC garment
acquisition in the period was $6.5 million, with underlying segment
sector) along with benefits from favourable foreign exchange
related lockdowns in those regions, and from the net cost benefits
accessory reuse business (acquisition completed 31 October 2018,
earnings therefore $1.5 million lower. The favourable impact of
translation as the New Zealand, Chinese and Philippines currencies
of lower resin and other material input prices, allowing the partial
incremental impact $34.2 million). Excluding the acquisition impact,
net cost benefits from lower resin input prices, efficiency and cost
appreciated against the Australian dollar compared to the pcp.
recovery of prior period pricing across the segment. The segment
segment revenue was $15.0 million lower than the pcp. Pooling
reductions and higher pooling volumes were more than offset by
In the Asian closures business, performance was also pleasingly
also benefitted from disciplined cost management, overhead
revenues grew organically with the expansion of crate pooling
start-up costs relating to the new ALDI pooling contract in the first
resilient despite the challenges of pandemic related lockdowns
reductions, footprint consolidation in Asia and favourable foreign
services into the ALDI fresh produce supply chain. Operations began
half along with unfavourable product mix and lower volumes in the
and instability in the region. These benefits were more than
exchange translation. These benefits were however more than
on schedule in the first half of the year and have performed slightly
industrial and TIC reuse businesses.
offset however by continued underlying volume challenges in the
offset by the volume challenges noted above, the impact of
Australian business and the impact of COVID-19, mostly on the
unfavourable macro-economic conditions and some increased
industrial sector. Following a solid first half, sales in the sustainability
costs to serve during the COVID-19 impacted period.
businesses were lower in the second half, with a recovery in
agriculture related volumes more than offset by lower sales of
Excluding AASB 16, EBITDA margins were 0.8% lower at 12.0%.
recycled resin and infrastructure projects. Sales for the overall
EBIT for the segment of $90.8 million was $6.6 million lower than
segment were also impacted by lower pricing, reflecting the partial
the pcp. Excluding AASB 16, EBIT was $17.5 million lower. Reduced
pass through of lower raw material input costs, particularly in the
depreciation in the Australian business following asset impairments
Australian and Asian businesses, and by lower recycled resin prices.
was offset by increased depreciation from capital investment in the
EBITDA for the year of $181.3 million was $26.7 million higher
Asian closure businesses.
than the pcp including a positive impact of $43.5 million from the
Excluding AASB 16, EBIT margins were 1.1% lower at 7.0%
ahead of expectation. Pooling services also benefitted from higher
volumes in Australia as a result of increased COVID-19 related
supermarket demand in the second half. Organic growth in pooling
was more than offset by lower industrial volumes (as fewer bin and
infrastructure projects were available, impacted by COVID-19, and the
Excluding AASB 16, EBITDA margins were 0.5% higher at 17.7% due
to the relative impact of increased volumes in the higher margin
pooling business and benefits from lower input prices which more
than offset weaker margins in the TIC reuse business.
rollout of the NBN slowed as it nears completion) and lower volumes
EBIT for the half year of $44.2 million was $8.5 million up on the
in the TIC reuse business. This business was adversely affected in the
pcp. Excluding AASB 16, EBIT was $4.8 million (13.5%) higher.
second half by weak clothing retail sales in Australia and the impact of
The incremental period of TIC contributed $6.2 million, with
COVID-19 related lockdowns across Australia and Asia. These impacts
the underlying business depreciation in-line with the pcp, and
more than offset organic growth related to the start-up of reuse
services to support a new contract in the USA in the second half.
EBITDA for the segment of $73.0 million was $22.0 million higher
than the pcp including a positive impact of $17.0 million from the
consequently EBIT $1.4 million lower.
Excluding AASB 16, EBIT margins were 0.8% higher at 12.8%.
22
23
PACT 2020 ANNUAL REPORT PACT 2020 ANNUAL REPORT OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION CONTRACT
MANUFACTURING
SERVICES
The Contract Manufacturing Services segment is a leading
supplier of contract manufacturing 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 22% of the Group’s
revenue in FY2020. The Group has announced its intention to
divest the business and the sale process will recommence.
$’000
Revenue
EBITDA1
EBITDA Margin %
EBIT2
EBIT Margin %
Statutory 2020
394,188
47,523
12.1%
31,258
7.9%
Exc AASB 16 2020
394,188
39,981
10.1%
30,143
7.6%
2019
372,263
25,063
6.7%
15,285
4.1%
Exc AASB 16 Change %
5.9%
59.5%
3.4%
97.2%
3.5%
Revenue for the Contract Manufacturing Services segment of
Excluding AASB 16, EBITDA margins were 3.4% higher at 10.1% due
$394.2 million for the year was $21.9 million (5.9%) up on the pcp.
to increased volumes of higher margin products, with raw material
The business delivered solid organic growth in the hygiene category,
costs largely in line with the prior year.
meeting strong demand for hand sanitisers and other cleaning
products, as a result of the COVID-19 pandemic. The business
also benefitted from the diversification of its customer portfolio.
Demand in the health and wellness category was weak due to
EBIT for the segment of $31.3 million was $16.0 million higher
than the pcp. Excluding AASB 16, EBIT was $14.9 million up, with
underlying depreciation and amortisation in-line with the pcp.
customer destocking, with volumes well down on the pcp despite
Excluding AASB 16, EBIT margins for the segment were 3.5% higher
some COVID-19 related demand late in the period.
at 7.6%.
EBITDA for the year of $47.5 million was $22.5 million higher than
the pcp inclusive of a positive impact of $7.5 million from the
adoption of AASB 16. Excluding this impact, EBITDA was $15.0
million (59.5%) up on the pcp. The increase was driven primarily
by the higher net volumes and disciplined pricing, partly offset by
some inefficiency and higher costs to serve as a result of the swift
ramp up in production required to supply the elevated demand for
hygiene products in the second half.
BUSINESS
RISKS
There are various internal and external risks that may have a
Cyber risks
material impact on the Group’s future financial performance and
economic sustainability. The Group makes every effort to identify
material risks and to manage these effectively.
Material financial risks, not in order of significance, are listed below.
Details of the Group’s environmental and social sustainability risks
are reported in the Group’s Sustainability Report.
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
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.
There is an increasing risk of and sophistication to cyber-attacks and
crime, which may lead to systems and data breaches, interruption
to operations and an adverse effect on the Group’s future financial
performance.
Consumer demand
Changes in demand for Pact’s products or adverse activities in
key industry sectors which Pact and its customers service may
be influenced by various factors. These industry sectors include
consumer goods (eg. food, dairy, beverages, personal care and
other household consumables) and industrial (eg. surface coatings,
petrochemical, agriculture and chemicals) industry sectors.
Factors which may influence these sectors include: climate change;
seasonality of foods and edible oils production; an increased focus
in Australian and New Zealand supermarket chains on private
brands and different substrates; reputation of products, substrates
(eg. plastics, recycled and recyclable materials); or technology in the
wider industry sector. Demand for Pact's products may materially
be affected by any of these factors which could have an adverse
effect on the Group's future financial performance.
Strategic acquisitions
Pact’s growth over time has been aided by the acquisition of various
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, is required. 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
Group's competitive position as a result of actions from competitors
and project milestones are achieved.
may result in a decline in sales revenue and margins, and an
adverse effect on the Group's future financial performance.
24
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PACT 2020 ANNUAL REPORT PACT 2020 ANNUAL REPORT OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION Foreign exchange rates
Interruption to operations
Pact’s financial reports are prepared in Australian dollars. However,
Pact operates across a diverse geographical footprint and situations
a substantial proportion of Pact’s sales revenue, expenditures
may arise in which sites are not able to operate. Factors include
and cash flows are generated in, and assets and liabilities are
emergency situations such as natural disasters, failure of information
denominated in, New Zealand dollars. In relation to business
technology systems or security, or industrial disputes. Any of these
operations, Pact is also exposed to a range of other currencies
factors may lead to disruptions in production or increase in costs and
including; the US dollar; Chinese yuan; the Philippines peso; the
may have an adverse effect on the Group’s financial performance.
Indonesian rupiah; the Thai baht; the South Korean won; the Indian
rupee; the Nepalese rupee; the Hong Kong dollar; the UK pound;
Compliance risks
and the Bangladesh Taka. Any depreciation of the Australian dollar
Pact is required to comply with a range of laws and regulations,
and adverse movement in exchange rates would have an adverse
and those of particular significance to Pact are in the areas of
effect on the Group's future financial performance.
employment, including; modern slavery; work health and safety;
Supply chain
property; environmental; competition; anti-bribery and corruption;
customs and international trade; taxation; and corporations.
The ability for the supply chain to meet the Group’s requirements
Changes in Government policy may also have an adverse effect on
including the sourcing of raw materials, is reliant on key
the Group’s financial performance.
relationships with suppliers. The price and availability of raw
materials, input costs, including energy, and future consolidation
in industry sectors could result in a decrease in the number
of suppliers or alternative supply sources available to Pact.
Additionally, Pact may not always be able to pass on changes in
input prices to its customers. Any of these factors may have an
adverse effect on the Group's future financial performance.
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.
(1) EBITDA refers to EBITDA before significant items and is a non-IFRS financial measure
which is calculated as earnings before significant items, finance costs (net of interest
revenue), tax, depreciation and amortisation.
(2) EBIT refers to EBIT before significant items and is a non-IFRS financial measure which is
calculated as earnings before significant items, finance costs (net of interest revenue)
and tax.
(3) NPAT refers to NPAT before significant items and is a non-IFRS financial measure which
is calculated as net profit after tax before significant items.
(4) Gearing is a non-IFRS financial measure which is calculated as net debt divided by
rolling 12 months EBITDA. Net debt is calculated as interest bearing liabilities less cash
and cash equivalents
(5) Interest cover is a non-IFRS financial measure which is calculated as rolling 12 months
EBITDA divided by rolling 12 months net finance costs and losses on de-recognition of
financial assets.
(6) Net debt is a non-IFRS financial measure and is calculated as interest bearing liabilities
less cash and cash equivalents
GOVERNANCE
26
O V E R V I E W P E R F O R M A N C E
G O V E R N A N C E
F I N A N C I A L R E P O R T S S H A R E H O L D E R I N F O R M AT I O N
27
PACT 2020 ANNUAL REPORT PACT 2020 ANNUAL REPORT CORPORATE
GOVERNANCE
The Board recognises the importance of good corporate governance
The annual Corporate Governance Statement outlines the key
and its role in ensuring the accountability of the Board and
aspects of the Group’s corporate governance framework and
Management to shareholders. The Board’s role is to ensure that the
practices. The Board considers that the Company’s corporate
Group is properly managed to protect and enhance shareholder
governance framework and practices have complied with the
interests and that the Group, including the Company, Directors,
ASX recommendations for the financial year, except as otherwise
officers, and employees, operate in an appropriate environment
detailed in the Corporate Governance Statement. The 2020
of control and corporate governance. The corporate governance
framework adopted comprises of principles and policies that are
Corporate Governance Statement is available on the website:
www.pactgroup.com.au/investors/corporate-governance/corporate-
consistent with the ASX Corporate Governance Council’s Corporate
statement.
Governance Principles and Recommendations (fourth edition).
FINANCIAL
REPORTS
28
O V E R V I E W P E R F O R M A N C E G O V E R N A N C E
F I N A N C I A L R E P O R T S
S H A R E H O L D E R I N F O R M AT I O N
29
PACT 2020 ANNUAL REPORT PACT 2020 ANNUAL REPORT FINANCIAL
REPORT
CONSOLIDATED FINANCIAL REPORT
FOR THE YEAR ENDED 30 JUNE 2020
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 2020.
This Consolidated Financial Report was issued in accordance with
a resolution of the Directors on 19 August 2020.
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
Revenue from contracts with customers
1.3
Taxation
1.4 Dividends
Section 2: Our Operational Footprint
2.1 Businesses acquired
2.2 Controlled entities
2.3
Associates and joint ventures
Section 3: Our Operating Assets
3.1 Working capital
3.2 Non-current assets
3.3 Capital expenditure 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 1.3 Taxation
• 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
• Note 6.2 Incremental borrowing rate
To assist in identifying key accounting estimates and judgements,
they have been highlighted as follows:
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 New standards, interpretations and amendments
6.3 Other (losses)/gains
6.4
Pact Group Holdings Ltd — Parent entity
financial statements summary
6.5 Deed of Cross Guarantee
6.6
Auditor's remuneration
Segment assets and segment liabilities
6.7
6.8 Geographic revenue
31
49
50
51
52
53
54
56
58
61
62
62
64
67
69
74
75
76
79
80
87
90
90
91
92
92
98
99
100
101
102
102
6.9 COVID-19 financial assistance and other support initiatives 103
6.10 Subsequent events
Directors’ Declaration
Independent Auditor’s Report
103
104
105
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 2020.
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 Master 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 (from 1 July 2019 to 14 August 2019)
Chair of the Nomination and Remuneration Committee (from 15 August 2019 to 30 June 2020)
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).
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PACT 2020 ANNUAL REPORT PACT 2020 ANNUAL REPORT OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION DIRECTORS’ REPORT
Directors (continued)
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 Liberty Infrabuild.
Jonathan Ling
Independent Non-Executive Director
Member of the Board since 28 April 2014
Chair of the Nomination and Remuneration Committee (from 1 July 2019 to 14 August 2019)
Chair of the Audit, Business Risk and Compliance Committee (from 15 August 2019 to
30 June 2020)
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 Master of Business Administration from the Royal Melbourne Institute of Technology.
Other current directorships
Independent Non-Executive Director and Chairman of Pro Pac Packaging Ltd, and
Non-executive Director and Chairman of Planet Innovation Ltd.
DIRECTORS’ REPORT
Directors (continued)
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 2008–2016. 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.
Michael Wachtel
Independent Non-Executive Director
Member of the Board since 21 April 2020
Member of the Audit, Business Risk and Compliance Committee from 21 April 2020
Michael brings a strong professional background and extensive global experience in
governance, risk management, finance and complex international transactions to the
role. Through his Future Fund Board role he has a deep involvement in global markets
and monetary policy trends. Michael has previously held a number of leadership roles in
professional services organisations, including as Chair (Asia Pacific and Oceania) of EY.
Michael has a Bachelor of Laws and Commerce from the University of Cape Town and a
Master of Laws from the London School of Economics. Michael completed the Harvard
Business School Executive Program in 2011 and is a Fellow of the Australian Institute of
Company Directors.
Other current directorships
Michael is currently a Board member of Future Fund, Seek Limited and St Vincent’s Medical
Research Institute.
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PACT 2020 ANNUAL REPORT PACT 2020 ANNUAL REPORT 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 10-year period, including Group Strategy and Corporate
Development Officer, Group General Counsel and Company Secretary and Group
Commercial Director. Prior to that Jonathon worked in 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:
Raphael Geminder
Lyndsey Cattermole
Jonathan Ling
Ray Horsburgh
Carmen Chua
Michael Wachtel
Sanjay Dayal
Relevant Interest
in Ordinary Shares
152,252,175
529,879
48,786
80,971
150,000
-
40,000
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
Jonathan Ling
Ray Horsburgh
Carmen Chua
Michael Wachtel(1)
Sanjay Dayal
Former Directors
Peter Margin(2)
Directors’ Meetings
Audit, Business Risk and
Compliance Committee
Nomination and
Remuneration Committee
Meetings
held
9
9
9
9
9
1
9
Meetings
attended
9
9
9
8
8
1
9
Meetings
held
NM
5
3
5
NM
-
NM
Meetings
attended
NM
5
3
4
NM
-
NM
Meetings
held
4
4
4
NM
NM
NM
NM
Meetings
attended
4
4
4
NM
NM
NM
NM
1
0
2
2
1
1
NM — Not a member of the relevant committee
(1) Michael Wachtel was appointed as a Non-Executive Director on 21 April 2020.
(2) Peter Margin resigned as a Non-Executive Director and as the chair of the Audit, Business Risk and Compliance Committee on 14 August 2019.
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 presented on
pages 11 to 26 of this Report.
Dividends
The Directors have determined to pay a final dividend of three cents after the end of the financial year (2019: nil).
The table below shows dividends paid (or payable) during the year ended 30 June 2020 and the comparative year.
Dividends
Current year to 30 June 2020
Final dividend (per ordinary share)
Interim dividend (per ordinary share)
Prior year to 30 June 2019
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
3.00 cents
-
1.95 cents
-
1.05 cents
-
7 October 2020
-
-
-
-
-
-
-
-
-
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PACT 2020 ANNUAL REPORT PACT 2020 ANNUAL REPORT OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION DIRECTORS’ REPORT
Other events of significance
Please refer to the Review of Operations and Financial Performance in the ASX announcement on 19 August 2020.
Significant events after balance date
Divestment of Contract Manufacturing segment
The Group is pursuing its options to sell the businesses in the Contract Manufacturing segment. The process will
recommence following a suspension during the year due to COVID-19.
Joint Venture with Cleanaway and Asahi Holdings
Pact, Cleanaway and Asahi Holdings (Australia) have formalised a joint arrangement to develop recycling capability in
Australia, expected to be operational by 2022.
Acquisition of Flight Plastics Ltd
The Group has entered into an agreement to acquire New Zealand’s only PET recycler, Flight Plastics NZ, a
leading recycler and provider of plastic trays and containers for grocery products in New Zealand, for a purchase
consideration of NZD $26million. The transaction remains conditional on approval by regulatory authorities.
In the opinion of the Directors, other than the matters aforementioned, there have been no other material matters
or circumstances which have arisen between 30 June 2020 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.
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
DIRECTORS’ REPORT
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
policy that provides cover for the current and former Directors, alternate Directors, Secretaries, executive officers
and officers of the Group. The Directors have not included details of the nature of the liabilities covered in this
contract or the amount of the premium paid, as disclosure is prohibited under the terms of the contract.
Indemnification of auditors
Pursuant to the terms of the Company’s standard engagement letter with Ernst & Young (EY), it indemnifies EY
against all claims by third parties and resulting liabilities, losses, damages, costs and expenses (including reasonable
legal costs) arising out of, or relating to, the services provided by EY or a breach of the engagement letter. The
indemnity does not apply in respect of any matters finally determined to have resulted from EY’s negligent, wrongful
or wilful acts or omissions nor to the extent prohibited by applicable law including the Act.
Proceedings on behalf of the company
No person has applied to the court under section 237 of the Act for leave to bring proceedings on behalf of
the Company, or to intervene in any proceedings to which the Company is a party, for the purpose of taking
responsibility on behalf of the Company for all or part of those proceedings.
No proceedings have been brought or intervened in on behalf of the Company with the leave of the court under
section 237 of the Act.
Non-audit services
During the year, the Company's auditor EY, performed other assignments in addition to its 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
2020
252,000
2019
158,000
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.
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PACT 2020 ANNUAL REPORT PACT 2020 ANNUAL REPORT OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION DIRECTORS’ REPORT
Remuneration Report (audited)
This Remuneration Report for the year ended 30 June 2020 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 2020
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
Jonathan Ling
Ray Horsburgh
Carmen Chua
Michael Wachtel
Other KMP
Sanjay Dayal
Richard Betts
Former KMP
Peter Margin
Position
Term as KMP in 2020
Non-Executive Chairman
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Full Year
Full Year
Full Year
Full Year
Full Year
Appointed 21 April 2020
Managing Director and Group CEO
Chief Financial Officer
Full Year
Full Year
Former Non-Executive Director
Resigned 14 August 2019
There have been no other changes to KMP after the reporting date and before the date the financial report was
authorised for issue.
DIRECTORS’ REPORT
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.
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DIRECTORS’ REPORT
3. Executive remuneration arrangements
Remuneration principles and strategy
Pact’s executive remuneration strategy is designed to drive Group Strategy, organisational culture and long-term
shareholder value creation. It is underpinned by Pact’s governing reward principles that articulate the intent and
purpose of our executive reward framework.
The below diagram illustrates the remuneration framework for the CEO and CFO for the current year.
Pact Executive Remuneration Approach
Designed to drive Group Strategy, organisational culture and long-term shareholder value creation
Governing Principles Underpinning Our Reward Framework
Aligns with
shareholder value
creation
Attracts, retains and
motivates capable
talent
Reflects group
strategy and
organisational
culture
Drives high
performance culture
that recognises
outperformance
Simple and
transparent
Reward Framework Components
Fixed annual
remuneration
+
Short-term incentive
(at risk)
+
Long-term incentive
(at risk)
=
Total remuneration
Attract, retain and
engage high-calibre
executive talent
Reinforce short and
long-term objectives
to deliver sustainable
growth
Alignment with
organisation,
customer, employee
and shareholder
outcomes
Target ASX200
Market Median
(Excluding Financial
Services and Mining)
Purpose
Competitively set
to attract and
retain capable
talent reflecting
the role scope and
accountabilities
Performance link
Sustained
performance
and leadership in
executive role
Payment vehicle
and quantum
Base salary,
superannuation,
and may include
other benefits and
allowances
Target ASX200
Market Median
(excluding Financial
services and mining)
Reward for
the creation of
sustainable long-term
shareholder value
Focuses on leading
positive organisational
culture and
engagement with
customers, community
and people
Three-year relative
total shareholder
return (relative TSR)
performance against
selected ASX 200
companies
Annual performance
rights grant
Target opportunity
• CEO 100% FAR
• CFO 30% of FAR
• Subject to Board
discretion and
clawback provision
Reward for annual
performance to
deliver superior
business, customer
and shareholder value
Provides specific
focus on annual
strategic priorities
Annual performance
targets (from FY21)
• Group financial
and safety
• Key performance
indicators (KPI)
• Functional KPI
Annual cash incentive
Target opportunity
• CEO 100% FAR
• CFO 50% of Base
salary
• Maximum
opportunity
equivalent to 125%
of target
• Subject to Board
discretion and
clawback provision
DIRECTORS’ REPORT
3. Executive remuneration arrangements (continued)
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 2020 year was as follows(1):
Executive KMP remuneration component at target
Fixed Remuneration
Short-term incentives
Long-term incentives (LTIP)
Total
Sanjay Dayal %
46%
45%
9%
100%
Richard Betts %
62%
30%
8%
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).
Detail of incentive plans
FY20 Short-term incentive plan
Term
Purpose
Summary of FY20 arrangement
STI is an annual cash payment plan linked to short-term organisational and employee
performance outcomes.
Participation
Opportunity
It is designed to provide specific focus on annual strategic priorities to deliver superior
business, customer and shareholder value.
Executive KMP
Executives
CEO
CFO
Target
100% of FAR
50% of Base Salary
Maximum
125% of FAR
62.5% of Base Salary
Gateways
Group Financial Gateway: 95% of Group
Target EBITDA
In the event Group Financial Gateway is not
achieved, no STI award will be payable.
Individual Gateway: Adherence to Group
Code of Conduct, Compliance and Pact
values
Employees who do not meet the Individual
Gateway condition, will forfeit any STI award
payable.
Performance
Measures &
Weighting
STI is linked to a combination of Group EBITDA (excluding the impact of AASB 16, refer to
the table on page 43), and Functional KPI measures. Each measure will result in a payout
outcome in accordance with the payout model.
Executives
CEO
CFO
Group EBITDA
100%
50%
Functional KPI ^
-
50%
^ CFO Functional KPI include performance against cash conversion and capital management targets.
The Board considers these measures to be appropriate as they are strongly aligned with
the interests of shareholders. Group EBITDA is a key indicator of the underlying growth
of the business, enabling the payment of dividends to shareholders. The achievement of
these STIs in full is subject to the delivery of agreed safety objectives.
The table on page 43 provides additional information on these performance measures,
including an overview of performance versus target in the current year.
Payout calculation Performance vs Percentage Payout
Each performance measure will be assessed against a set target to determine the percentage
payout outcome (see below payout schedule). For instance, achieving the target will result in
100% payout of Target STI opportunity.
Percentage payout against Target schedule
• Below Threshold = Nil
• Threshold = 50% of Target
• Target = 100% of Target
• Stretch = 125% of Target
Straight-line sliding scale calculation applicable.
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DIRECTORS’ REPORT
3. Executive remuneration arrangements (continued)
FY21 Short-Term Incentive Plan Changes
The Board has approved the following changes to the Short-Term Incentive Plan:
• Change of core financial performance measure from EBITDA to EBIT to further strengthen the alignment of
executive reward with organisational performance. The change is also influenced by the Company’s increased
focus on capital returns.
• Addition of Group Safety Measure aligned to Pact’s Towards Zero Harm commitment.
• Addition of Strategic Initiative Measure aligned to Group Strategy applicable to participants.
FY20 Long-term incentive plan
Term
Purpose
Participation
Opportunity
LTI is an annual performance rights grant linked to achievement of long-term sustainable shareholder value creation.
It is designed to drive the delivery of long-term Group Strategy aligned with value creation to our customers,
community, people, and shareholders.
Executive KMP
Executives
CEO
CFO
Target as % of FAR
100%
30%
The minimum potential outcome is zero.
Performance rights (note: no dividend or dividend equivalent payments are provided on rights).
Instrument
Performance Period The performance period commences on the first day of that fiscal year and is measured over three years.
Allocation
approach
Maximum face value allocation approach based on five-day Volume Weighted Average Price (VWAP) following the
public announcement of the full Financial Year results (ie. typically AGM date).
FAR $ x LTI % opportunity
÷
Share price $
=
Number of rights granted
Gateways
Individual Gateway: Adherence to Group Code of
Conduct, Compliance and Pact values.
condition, the participant will forfeit any STI award payable.
Performance hurdle Vesting of rights is subject to relative Total Shareholder Return (rel. TSR) ^ hurdle over a three-year performance period.
Employees who do not meet the Individual Gateway
Peer Group: S&P/ASX 200 comparator group, excluding companies in the Financials, Metals and Mining sectors.
LTI Vesting Schedule
TSR relative to peer group
At or above 75th percentile
Between 50th and 75th percentile
At 50th percentile
Below 50th percentile
Vesting %
100%
Pro rata vesting between 50% and 100%
50%
Nil
^TSR measures a company’s share price movement, dividends paid and any return on capital over a specific period. Relative TSR compares the ranking
of Pact Group TSR over the performance period with the TSR of other companies in a peer group.
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.
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.
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.
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).
The Board has absolute discretion to determine that some or all of the LTI award lapse based on circumstances
where (but not limited to):
• The vesting of rights do not justify or support the performance of the business unit or function relevant to the
executive or the overall performance of the Group
• The vesting of rights will impact on the financial soundness of the Group.
Cessation of
Employment
Rights attaching to
performance rights
Clawback
Change of Control
Provisions
Board discretion
DIRECTORS’ REPORT
4. Executive remuneration outcomes for FY2020
Business performance in FY2020
The Group’s FY2020 financial performance reflects a solid operating performance given the challenging operating
environment, particularly during the COVID-19 pandemic which impacted the second half of the year.
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 / (loss) after tax ($000)
Net profit after tax (NPAT)1 ($000)
NPAT growth %1
EBITDA1 ($000)
EBITDA (pre-AASB 16)2 ($000)
EBITDA growth %
Dividends per ordinary share (cps)
Closing share price (30 June)
Three month average share price (1 April to 30 June)
Earnings per share1(cps)
Earnings per share1 growth %
Cumulative TSR %3
2016
85,051
94,310
10.7%
220,157
220,157
5.5%
21.0
6.03
5.46
32
10.3%
36.7%
2017
90,341
100,003
6.0%
233,116
233,116
5.9%
23.0
5.99
6.44
33
3.1%
64.8%
2018
74,488
94,661
(5.3%)
237,251
237,251
1.8%
23.0
5.27
5.57
30
(9.1%)
49.9%
2019
(289,587)
77,307
(18.3%)
230,694
230,694
(2.8%)
-
2.79
2.51
23
(23.3%)
(18.9%)
2020
88,847
73,245
(5.3%)
301,807
233,707
1.3%(2)
3.0
2.19
2.01
21
(8.7%)
(30.6%)
(1) Before significant items (refer to note 1.1 in the Consolidated Financial Report).
(2) EBITDA before significant items and excluding the impacts of AASB16 is $233.7 million, representing a 1.3% increase on the prior year.
(3) Cumulative TSR has been calculated using the same start date for each period (1 July 2015). The 3 month average share price has been used in all periods
(the 3 month average share price for the starting period was $4.28).
STI Outcomes — Executive KMP
The table below outlines the components of the STI, and how performance has been measured in fiscal year 2020.
Performance
measure
EBITDA(1)
CEO
weighting
100%
CFO
weighting
50%
Cash
-
50%
conversion
and capital
management
Overview of performance v target
EBITDA increase of 1.3% compared to last year, against a back drop of
COVID-19 the delivered EBITDA exceeded target. Achievement was reduced
to reflect a deduction for a failure to deliver agreed safety objectives following
the fatality in New Zealand.
Cash conversion is defined as operating cash flow divided by EBITDA, with
operating cash defined as EBITDA less the change in working capital, less
changes in other assets and liabilities. Capital management is assessed
as delivery of various working capital targets. During the year target
performance was partially achieved.
(1) The measure is EBITDA excluding the impacts of AASB 16 as reported in the table above.
LTIP Outcomes — CEO and CFO
The tables below outline 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
2020 LTIP 13 November 2019
2019 LTIP 27 March 2019
Performance
rights granted
538,189
69,784(1)
Fair value of rights
at Grant date
$721,173
$17,446
Value of rights included in
compensation for the year
$240,391
$7,721
Performance period
1 July 2019 to 30 June 2022
1 July 2018 to 30 June 2021
(1) The performance rights granted to Mr Dayal for the 2019 LTIP were on a pro rata basis aligning with his commencement date of 3 April 2019.
Richard Betts – CFO
Year
Grant date
2020 LTIP 13 November 2019
2019 LTIP 14 November 2018
2018 LTIP 15 November 2017
Performance
rights granted
87,952
43,301
33,182
Fair value of rights
at Grant date
$117,856
$32,909
$87,932
Value of rights included in
compensation for the year
$39,285
$10,970
$29,311
Performance period
1 July 2019 to 30 June 2022
1 July 2018 to 30 June 2021
1 July 2017 to 30 June 2020
The performance measure for the LTIP is achievement of relative TSR targets. The vesting conditions have been outlined on page 42.
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DIRECTORS’ REPORT
DIRECTORS’ REPORT
4. Executive remuneration outcomes for FY2020 (continued)
5. Executive KMP contracts
The table below outlines current year movements in relation to performance rights granted to the CEO and CFO.
Remuneration arrangements for Executive KMP are formalised in employment agreements.
KMP
Sanjay Dayal
Richard Betts
Balance at
1 July 2019
69,784
76,483
Number
granted
538,189
87,952
Number
lapsed
-
(33,182)
Balance at
30 June 2020
607,973
131,253
Vested at
30 June 2020
-
-
Unvested at
30 June 2020
607,973
131,253
Executive KMP remuneration for the year ended 30 June 2020
Executive
Year
Short term benefits
Salary
and fees
STI and
bonuses
Mr Sanjay Dayal
(CEO)
Mr Richard Betts
(CFO)
$
$
2020 1,200,000 1,111,198
2019
-
205,487
2020
59,000
2019
269,886
584,101
556,728
Non-
monetary
benefits (1)
$
-
-
-
50,558
$
22,441
22,677
(6,963)
2,802
Former Executive KMP
Mr Malcom Bundey 2020
-
2019
-
(Former CEO)
2020 1,784,101 1,316,685
Total Executive
59,000
KMP remuneration 2019 1,785,462
-
958,848
-
31,059
-
81,617
-
48,793
15,478
74,272
Post-
employment
benefits
Other
benefits (2)
Super-
annuation
Long-
term
benefits
Long
Service
Leave(3)
$
-
-
65,836
-
Share based payments
(equity settled)
Performance
related %
Total
LTIP (4)
Initial
Grant
$
248,112
2,025
79,566
40,281
$
$
- 2,606,751
319,588
-
953,027
-
734,369
-
%
52%
1%
30%
14%
-
-
65,836
-
-
-
(656,030)(5) 138,889
-
540,309
327,678
- 3,559,778
(613,724) 138,889 1,594,266
-
(121%)(5)
46%
(35%)
$
25,000
25,000
25,000
25,000
-
18,750
50,000
68,750
(1) Non-monetary benefits includes FBT payments made by the Company on behalf of Mr Betts and Mr Bundey in the prior year.
(2) Other benefits is the movement in the annual leave provision for Mr Dayal and Mr Betts, and Mr Bundey in the prior year.
(3) Long term benefits is the movement in the long service leave provision in relation to long service leave entitlements after 5 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) Following Mr Bundey’s cessation of employment in the prior year, 421,801 unvested LTIP rights were forfeited. Negative percentage is due to the
reversal of share based payment expense in the prior year.
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 2020. 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
Fixed
Remuneration(1)
$
1,225,000
609,101
STI and
bonuses(2)
$
1,111,198
205,487
Other
benefits(3)
$
22,441
(6,963)
Performance rights
vested in 2020
$
n/a (4)
- (5)
Total
$
2,358,639
807,625
(1) Fixed remuneration includes salary and fees, and superannuation contributions, calculated on the same basis as the remuneration table above.
(2) STI and bonuses attributable to the year ended 30 June 2020 are calculated on the same basis as the remuneration table above.
(3) Other benefits relates to the movement in the annual leave provision for Mr Dayal and Mr Betts 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) The 2018 LTIP tranche has not vested as the TSR hurdle measured at 30 June 2020 has not been reached, therefore no benefits were received during
the current financial year.
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 125% 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 page 42.
• 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 $609,101 per annum.
• The CFO has a maximum STI of 62.5% 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 page 42.
•
In the event a redundancy occurs, the CFO is entitled to receive a redundancy payment of three weeks for every
year of service which is capped at 52 weeks. The Company is not required to make any payment of a benefit which
is not permitted by Part 2D.2, Division 2 or Chapter 2E of the Act in the absence of shareholder approval or the ASX
Listing Rules. The Company must use its reasonable endeavours to try and obtain shareholder approval, if required.
6. Non-Executive Directors’ remuneration arrangements
Remuneration policy
The Committee seeks to set aggregate remuneration at a level that provides the Company with the ability to
attract and retain Non-executive Directors (NEDs) of the highest calibre, whilst incurring a cost that is acceptable to
shareholders.
The amount of aggregate remuneration sought to be approved by shareholders and the fee structure is reviewed
annually against fees paid to NEDs of comparable companies (S&P/ASX 200 comparator group, excluding
companies in the Financials, Metals and Mining sectors).
The Company’s Constitution and the ASX Listing Rules specify that the NED fee pool shall be determined from time
to time by a general meeting. Consistent with prior years, the total amount paid to NEDs must not exceed a fixed
sum of $1,000,000 per financial year in aggregate. Raphael Geminder does not receive a fee for his position as
Chairman and a NED of the Company.
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DIRECTORS’ REPORT
DIRECTORS’ REPORT
6. Non-Executive Directors’ remuneration arrangements (continued)
7. Equity holdings of KMP
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.
2020
2019
$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 2020 is detailed in the following table.
Non-Executive KMP remuneration for the year ended 30 June 2020
Non-Executive
Year
Short-term
benefits
Post-employment
benefits
Ms Lyndsey Cattermole
Mr Raphael Geminder
Mr Jonathan Ling
Mr Peter Margin
Mr Ray Horsburgh
Ms Carmen Chua
Mr Michael Wachtel
Total Non-Executive KMP remuneration
Fees
$
117,009
117,009
-
-
143,500
143,500
18,225
151,187
109,989
109,989
112,750
93,958
21,048
-
522,521
615,643
Superannuation
$
11,116
11,116
-
-
-
-
-
-
10,449
10,449
-
-
2,000
-
23,565
21,565
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
Total
$
128,125
128,125
-
-
143,500
143,500
18,225
151,187
120,438
120,438
112,750
93,958
23,048
-
546,086
637,208
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 2020:
KMP
Raphael Geminder
Lyndsey Cattermole
Jonathan Ling
Ray Horsburgh
Carmen Chua
Michael Wachtel
Sanjay Dayal
Richard Betts
Former KMP
Peter Margin
Balance
1 July 2019
133,951,614
391,329
31,179
44,971
30,000
-
40,000
9,284
Movements
18,300,561
138,550
17,607
36,000
120,000
-
-
-
Balance
30 June 2020
152,252,175
529,879
48,786
80,971
150,000
-
40,000
9,284
35,257
-
35,257(1)
(1) The final shareholding of Mr Peter Margin is at the 14 August 2019, the date he resigned as a Non-Executive Director.
8. Related party transactions with KMP
The following table provides the total amount of transactions with related parties for the year ended 30 June 2020:
$’000’s
Related parties — Directors' interests(1)
2020
2019
Sales
13,362
13,789
Purchases Other expenses
6,317
6,667
7,354
11,043
Net amounts
receivable
558
609
(1) Related parties — Directors' 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), ceased its business
operations in November 2019. P’Auer had a supply agreement to provide label products to Pact. Pact had a
Transitional Services and Support agreement with P’Auer to provide support services. These agreements were at
arm’s length. In addition, P’Auer provided Pact with periodic warehousing services.
Pro-Pac Packaging Limited (Pro-Pac)
Pro-Pac, an entity for which Mr Raphael Geminder owns 49.7% (2019: 49.7%), is an exclusive supplier of certain
raw materials such as flexible film packaging, flexible plastic bags and tapes to Pact. Pact has a supply agreement
with Pro-pac that expires 31 December 2021. The total value of sales under this arrangement is approximately
$4.2 million (2019: $4.2 million). The supply arrangement is at arm’s length. Mr Jonathan Ling is also an Independent
Non-Executive Director and Chairman of Pro Pac.
Terms and conditions of transactions with related parties
The Group leased 11 properties (nine in Australia and two 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 2020 was $6.2 million (June 2019: $6.4 million). The rent
payable under these leases was determined based on independent valuations and market conditions at the time
the leases were entered into.
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.
46
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PACT 2020 ANNUAL REPORT PACT 2020 ANNUAL REPORT OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION DIRECTORS’ REPORT
Auditor's Independence Declaration
A copy of the auditor's independence declaration as required under section 307C of the Act is set out
at page 49.
Rounding
Is presented in Australian dollars with all values rounded to the nearest $1,000, unless otherwise stated, in
accordance with the ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191 dated
1 April 2016.
Signed in accordance with a resolution of the Board of Directors:
Raphael Geminder
Sanjay Dayal
Chairman
19 August 2020
Managing Director and
Group Chief Executive Officer
48
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PACT 2020 ANNUAL REPORT PACT 2020 ANNUAL REPORT OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION
FINANCIAL REPORT — CONSOLIDATED STATEMENT
OF COMPREHENSIVE INCOME
For the year ended 30 June 2020
FINANCIAL REPORT — CONSOLIDATED
STATEMENT OF FINANCIAL POSITION
For the year ended 30 June 2020
$’000
Revenue
Raw materials and consumables used
Employee benefits expense
Occupancy, repair and maintenance, administration and selling expenses
Interest and other income
Other gains / (losses)
Depreciation and amortisation expense
Impairment and write-off expense
Finance costs and loss on de-recognition of financial assets
Share of profit in associates
Profit / (loss) before income tax expense
Income tax (expense) / benefit
Net Profit / (loss) for the year
Net Profit / (loss) attributable to equity holders of the parent entity
Notes
1.1, 1.2
5.2
6.3
3.2
3.2
4.1
2.3
1.3
2020(1)
2019
1,809,158 1,834,076
(843,167)
(786,175)
(430,035)
(441,666)
(341,539)
(292,919)
11,068
14,828
(55,889)
14,463
(82,290)
(135,544)
(368,765)
(11,793)
(39,675)
(63,437)
2,336
3,131
(313,880)
110,046
24,293
(21,199)
(289,587)
88,847
(289,587)
88,847
Other comprehensive income
Items that will be not be reclassified subsequently to profit or loss
Loss on remeasurement of defined benefit liability
Items that will be reclassified subsequently to profit or loss
Loss on cash flow hedges taken to equity
Foreign currency translation (losses) / gains
Income tax on items in other comprehensive income
Other comprehensive (loss) / income for the year, net of tax
Total comprehensive income / (loss) for the year
Attributable to:
Equity holders of the parent entity
Total comprehensive income / (loss) income for the Group
(144)
(10)
(3,285)
(2,753)
1,088
(5,094)
83,753
(6,453)
10,932
1,762
6,231
(283,356)
83,753
83,753
(283,356)
(283,356)
cents
Basic earnings per share
Diluted earnings per share
1.1
1.1
25.8
25.7
(85.3)
(85.3)
(1) Reflects the adoption of AASB 16 Leases from 1 July 2019. Comparatives have not been restated.
The Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
$’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
Other non-current financial assets
Deferred tax assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Current tax liability
Employee benefits provisions
Other provisions
Lease liabilities
Other current financial liabilities
Total current liabilities
Non-current liabilities
Trade and other payables
Employee benefits provisions
Other provisions
Interest-bearing loans - bank borrowings
Lease liabilities
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
2020(1)
2019
4.1
3.1
3.1
1.3
3.2
2.3
3.2
1.3
3.1
1.3
5.2
3.4
4.1,6.2
5.2
3.4
4.1
4.1,6.2
1.3
76,004
149,679
223,698
12,349
-
784
13,985
476,499
7
2,925
996,002
30,876
456,068
111
33,147
1,519,136
1,995,635
378,124
21,175
38,638
-
69,203
4,313
511,453
-
8,127
9,967
689,530
385,656
8,457
9,796
1,111,533
1,622,986
372,649
49,950
145,282
211,846
8,895
3,360
349
14,617
434,299
718
4,392
638,542
24,353
477,054
-
17,832
1,162,891
1,597,190
365,615
-
36,292
13,914
-
2,369
418,190
66,313
7,270
32,358
733,490
-
4,296
12,678
856,405
1,274,595
322,595
4.2
4.2
1,750,476
(901,251)
(476,576)
372,649
1,750,476
(896,911)
(530,970)
322,595
(1) Reflects the adoption of AASB 16 Leases from 1 July 2019. Comparatives have not been restated.
The Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.
50
51
PACT 2020 ANNUAL REPORT PACT 2020 ANNUAL REPORT OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION FINANCIAL REPORT — CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
For the year ended 30 June 2020
FINANCIAL REPORT — CONSOLIDATED
STATEMENT OF CASH FLOWS
For the year ended 30 June 2020
Attributable to equity holders of the Parent entity
Contributed
equity
Common
control
reserve
Cash flow
hedge
reserve
Foreign
currency
translation
reserve
Share based
payments
reserve
Retained
earnings
Total equity
1,750,476 (928,385)
-
-
1,750,476 (928,385)
-
-
-
-
-
-
-
-
(4,580)
-
(4,580)
-
(2,197)
(2,197)
-
33,897
-
33,897
-
(2,753)
(2,753)
-
-
2,157 (530,970)
(34,309)
2,157 (565,279)
88,847
(144)
88,703
-
-
-
-
610
322,595
(34,309)
288,286
88,847
(5,094)
83,753
610
$’000
Year ended 30 June 2020
As at 1 July 2019
Adjustment on adoption of AASB 16
As at 1 July 2019 (adjusted)(1)
Profit for the year
Other comprehensive loss
Total comprehensive (loss) / income
Share based payments expense
Transactions with owners in their
capacity as owners
Balance as at 30 June 2020
-
-
1,750,476 (928,385)
-
(6,777)
-
31,144
610
-
2,767 (476,576)
610
372,649
Year ended 30 June 2019
As at 1 July 2018
Adjustment on adoption of AASB 15
As at 1 July 2018 (adjusted)
Loss for the year
Other comprehensive income/(loss)
Total comprehensive (loss) / income
Issuance of share capital
Total equity transactions
Dividends paid
Share based payments expense
Transactions with owners in their
-
1,690,476 (928,385)
-
1,690,476 (928,385)
-
-
-
-
-
-
-
-
-
-
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
(38,236)
(168)
2,157 (530,970)
(38,404)
322,595
(1) Reflects the adoption of AASB 16 Leases from 1 July 2019. Comparatives have not been restated.
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
$’000
Cash flows from operating activities
Receipts from customers
Receipts from securitisation program
Payments to suppliers and employees
Income tax paid
Interest received
(Payments to) / proceeds from securitisation of trade debtors
Borrowing, trade debtor securitisation and other finance costs paid(2)
Net cash flows provided by operating activities
Cash flows from investing activities
Payments for property, plant and equipment
Payments for investments in associates and joint ventures
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
Repayment of lease liability principal (net of incentive received)
Payment of dividend
Net cash flows (used in) / provided by financing activities
Net increase / (decrease) 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
2020(1)
2019
4.1
2.3
2.1
980,845
1,057,888
(1,775,178)
(4,315)
1,534
(6,840)
(61,803)
192,131
1,160,215
944,281
(1,931,802)
(38,438)
168
13,611
(39,352)
108,683
(76,475)
(3,558)
-
669
599
(78,765)
315,139
(357,599)
(44,480)
-
(86,940)
26,426
49,950
(372)
76,004
(69,455)
-
(78,725)
88
867
(147,225)
433,786
(376,630)
-
(38,236)
18,920
(19,622)
67,980
1,592
49,950
(1) Reflects the adoption of AASB 16 Leases from 1 July 2019. Comparatives have not been restated.
(2) In the current period net cash flows from operating activities includes an outflow of $26.4 million in relation to interest expense on lease liabilities
recognised in accordance with AASB 16.
The Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
52
53
PACT 2020 ANNUAL REPORT PACT 2020 ANNUAL REPORT 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 2020.
1.1 Group results
$’000
Year ended 30 June 2020
Revenue
EBITDA(1)(2)
EBIT(1)(3)
$’000
Year ended 30 June 2019
Revenue
EBITDA(2)
EBIT(3)
Packaging and
Sustainability
Materials
Handling and
Pooling
Contract
Manufacturing
Services
Eliminations
Total
1,143,852
181,272
90,806
315,599
73,012
44,200
394,188
47,523
31,257
(44,481) 1,809,158
301,807
166,263
-
-
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
-
-
(1) Reflects the adoption of AASB 16 Leases from 1 July 2019. Comparatives have not been restated.
(2) EBITDA — Earnings before finance costs and loss on de-recognition of financial assets, net of interest income, tax, depreciation and amortisation and
significant items.
(3) 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 Managing Director and CEO monitors 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.
Reportable segments
Packaging and
Sustainability
Products/services
Manufacture and supply of rigid plastic
Countries of Operation
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
FINANCIAL REPORT —
NOTES TO THE FINANCIAL STATEMENTS
1.1 Group results (continued)
Net profit / (loss) after tax
The reconciliation of EBIT before significant items shown above and the net profit / (loss) after tax disclosed in the
Consolidated Statement of Comprehensive Income is as follows:
$’000
EBITDA
Depreciation and Amortisation
EBIT
Significant items
Transaction costs(2)
Inventory write downs and related disposal costs
Net gain on lease modification(3)
Reversal of contingent consideration obligation(4)
Finalisation of acquisition consideration(5)
Impairment and write-off expenses
• Tangible asset write downs
•
Intangible assets
Business Restructuring Programs
•
• asset write downs
restructuring costs(6)
Total significant items
EBIT after significant items
Net finance costs(7)
Net profit / (loss) before tax
Income tax (expense) / benefit
Net profit / (loss) after tax
Notes
2020(1)
301,807
2019
230,694
(135,544)
166,263
(82,290)
148,404
3.2
(4,034)
-
4,544
30,000
(7,172)
(3,666)
(13,031)
-
-
-
-
(11,793)
(136,330)
(232,435)
(4,790)
(218)
(5,008)
6,537
172,800
(62,754)
110,046
(21,199)
88,847
(37,842)
-
(37,842)
(423,304)
(274,900)
(38,980)
(313,880)
24,293
(289,587)
(1) Reflects the adoption of AASB 16: Leases from 1 July 2019. Comparatives have not been restated.
(2) Transaction costs includes professional fees, stamp duty and all other costs associated with business acquisitions
and divestments.
(3) In relation to the lease contract previously subject to the onerous lease provision recognised as at 30 June 2019,
a net gain on lease modification was recognised as a difference between the gain on lease modification for $9.9
million and derecognition of ROU assets for $5.4 million in accordance with AASB 16: Leases.
(4) Reversal of contingent consideration obligation recognised on acquisition of TIC. The specific financial hurdles
required for payment were not achieved. In accordance with AASB 3: Business Combinations, changes to the fair
value of amounts payable for acquisitions is recorded in the consolidated statement of comprehensive income.
(5) Adjustments recognised following completion of accounting for acquisitions made in the year ended 30 June 2019.
(6) Business restructuring relates to the optimisation of business facilities across the Group.
(7) Net finance costs includes interest income of $683,000 (2019: $695,000).
54
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PACT 2020 ANNUAL REPORT PACT 2020 ANNUAL REPORT OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION
FINANCIAL REPORT —
NOTES TO THE FINANCIAL STATEMENTS
1.1 Group results (continued)
Basic and diluted earnings per share
Earnings per share (EPS) (cents) — basic
Earnings per share (EPS) (cents) — diluted
Calculated using:
• Net profit attributable to ordinary equity holders ($’000)
• Weighted average of ordinary shares (shares) — basic
• Weighted average of ordinary shares (shares) — diluted
2020
25.8
25.7
2019
(85.3)
(85.3)
88,847
(289,587)
343,993,595
339,600,703
345,329,618
340,687,214
Earnings per share is calculated by dividing the net profit / (loss) 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 Revenue from contracts with customers
Disaggregation of revenue from contracts with customers
$’000
Year ended 30 June 2020
Australia
New Zealand
Asia
Revenue from contracts with customers
Revenue from asset hire services(3)
Inter-segment revenue
Revenue
Packaging and
Sustainability(1)
Materials
Handling and
Pooling
Contract
Manufacturing
Services(2)
Eliminations
Total
617,973
292,954
191,851
1,102,778
-
41,074
1,143,852
162,882
138
57,026
220,046
92,203
3,350
315,599
394,131
-
-
394,131
-
57
394,188
- 1,174,986
293,092
-
-
248,877
- 1,716,955
92,203
-
(44,481)
-
(44,481) 1,809,158
(1) 0.2% of total revenue for Packaging and Sustainability is recognised over time.
(2) 2.5% of total revenue for Contract Manufacturing Services is recognised over time.
(3) Revenue from asset hire services is accounted for under AASB 16: Leases.
$’000
Year ended 30 June 2019
Australia
New Zealand
Asia
Revenue from contracts with customers
Revenue from asset hire services(3)
Inter-segment revenue
Revenue
Packaging and
Sustainability(1)
Materials
Handling and
Pooling
Contract
Manufacturing
Services(2)
Eliminations
Total
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) 0.4% of total revenue for Packaging and Sustainability is recognised over time.
(2) 5.7% of total revenue for Contract Manufacturing Services is recognised over time.
(3) Revenue from asset hire services is accounted for under AASB 117: Leases.
FINANCIAL REPORT —
NOTES TO THE FINANCIAL STATEMENTS
1.2 Revenue from contracts with customers (continued)
How Pact accounts for revenue
The core principle of AASB 15 Revenue from Contracts with Customers 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.
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.
56
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PACT 2020 ANNUAL REPORT PACT 2020 ANNUAL REPORT OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION
FINANCIAL REPORT —
NOTES TO THE FINANCIAL STATEMENTS
1.3 Taxation
Reconciliation of tax expense
$’000
Accounting profit / (loss) before tax
Income tax calculated at 30% (2019: 30%)
Adjustments in respect of income tax of previous years
Impairment of goodwill
Lease surrender
Tax on unremitted foreign income
Overseas tax rate differential
Finalisation of acquisition consideration
Sundry items
Income tax expense / (benefit) reported in the Consolidated Statement of
Comprehensive Income
Comprising of:
• Current year income tax expense
• Deferred income tax benefit
• Adjustments in respect of previous years income tax
(1) The comparatives have not been restated for AASB 16.
2020
110,046
33,014
(2,009)
-
(1,363)
2,258
(2,977)
(7,172)
(552)
2019(1)
(313,880)
(94,164)
(344)
69,340
-
1,879
(2,115)
-
1,111
21,199
(24,293)
28,933
(5,725)
(2,009)
17,065
(41,014)
(344)
Included in the above is a tax benefit on significant items and other significant tax items of $9.1 million for the
year ended 30 June 2020 (2019: $56.4 million).
FINANCIAL REPORT —
NOTES TO THE FINANCIAL STATEMENTS
1.3 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
Adjustment from adoption of AASB 16
Net payments
Acquisitions / (disposals)
Foreign exchange translation movement
Closing balance
Comprises of:
Deferred tax assets
• Employee entitlements provision
• Provisions
• Unutilised tax losses
• Lease incentives and rent free
• Lease liability
• Other
Offset with deferred tax liability
Net deferred tax asset
Deferred tax liabilities
• Property, plant and equipment
•
• Other
Intangibles
Offset with deferred tax asset
Net deferred tax liability
2020
Current
Income tax
Asset/(Liability)
3,360
(28,934)
(10,285)
2020
Deferred
Income tax
5,154
5,725
12,294
1,088
9,234
4,315
-
46
-
-
-
-
178
(21,176)
23,351
2019
Current
Income tax
Asset/(Liability)
(19,075)
(15,899)
(154)
-
-
38,438
188
(138)
3,360
16,824
3,838
1,037
-
132,872
8,303
162,874
(129,727)
33,147
(135,890)
(3,983)
350
(139,523)
129,727
(9,796)
2019
Deferred
Income tax
(35,860)
39,848
102
1,762
-
-
(390)
(308)
5,154
12,522
13,688
4,864
4,616
-
6,410
42,100
(24,268)
17,832
(23,730)
(8,659)
(4,557)
(36,946)
24,268
(12,678)
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. AASB Interpretation 23 Uncertainty over Income Tax Treatment addresses the
accounting for income taxes when tax treatments involve uncertainty that affects the application of the
recognition and measurement criteria in AASB 112: Income Taxes. 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. Refer Note 6.2 for further details.
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FINANCIAL REPORT —
NOTES TO THE FINANCIAL STATEMENTS
1.4 Dividends
$’000
Dividends paid during the financial year
Proposed dividend(1)
2020
-
10,320
2019
38,236
-
(1) The Directors have determined to pay a final dividend of 3.0 cents per ordinary share after the end of the financial
year (2019: Nil).
Franking credit balance(2)
Franking account balance as at the end of the financial year at 30% (2019: 30%)
Franking credits / (debits) that will arise from the payment / (refund) of income tax
payable as at the end of the financial year
Total franking credit available for the subsequent financial year
4,690
21,519
10,000
14,690
(16,829)
4,690
(2) Franking credits have not been utilised as no dividends were paid during the financial year (2019: $10.7 million).
FINANCIAL REPORT —
NOTES TO THE FINANCIAL STATEMENTS
1.3 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-evaluates its assessment
of its tax positions, in particular where they relate to specific interpretations of applicable tax regulation.
Deferred tax assets and liabilities are recognised on all assets and liabilities that have different carrying
values for tax and accounting, including those arising from a single transaction, 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 are 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 its 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.
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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 2020 acquisitions:
There have been no acquisitions for the year ended 30 June 2020.
Completion of prior year acquisition accounting
On 31 October 2019 the Group finalised the acquisition accounting of TIC Retail Accessories (‘TIC’). A decrease of $0.5
million to goodwill has been recognised in the period in relation to the TIC acquisition, which occurred in the prior
year.
2.2 Controlled entities
Australian incorporated entities that are party to the Deed of Cross Guarantee at 30 June 2020(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
Pact Group Industries (Asia) Pty Ltd
Viscount Plastics (China) Pty Ltd
Ruffgar Holdings Pty Ltd
Davmar Investments Pty Ltd
* There is currently an option granted to a third party to purchase 50% shares in this entity. This option has not been exercised.
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(2)
Plaspak Management Pty Ltd(2)
Plaspak (PET) Pty Ltd(2)
Plaspak Minto Pty Ltd(3)
Sustainapac Pty Ltd
Bangladesh
TIC Trading (Bangladesh) Ltd(11)
TIC Manufacturing (Bangladesh) Ltd(11)
TIC Industries (Bangladesh) Pty Ltd(11)
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(4)
TIC RA NZ Ltd(5)
China
Guangzhou Viscount Plastics Co Ltd(6)
Langfang Viscount Plastics Co Ltd(6)
Changzhou Viscount Plastics Co Ltd(6)
Pact Group Closure Systems (Guangzhou) Co. Ltd(7)
Pact Group Closure Systems (Tianjin) Co. Ltd(7)
Pact Group Packaging Systems (Guangzhou) Co. Ltd(9)
Dongguan Top Rise Trading Co. Ltd(10)
Regent Plastic Products Ltd(8)
Ningbo Xunxing Trade Co. Ltd(11)
Hong Kong
Pact Group Holdings (Hong Kong) Limited(12)
Roots Investment Holding Private Limited(7)
TIC Group (HK) Ltd(13)
TIC Group (Asia) Ltd(13)
Talent Group Development Ltd(13)
Fast Star International Holdings Ltd(13)
TIC Group Ltd(13)
India
Pact Closure Systems (India) Private Limited(12)
AMRS Business Services Private Limited(13)
Indonesia
PT Plastop Asia Indonesia(14)
PT Plastop Asia Indonesia Manufacturing(14)
Korea
Pact Group Closure Systems Korea Ltd(7)
Nepal
Pact Group Closure Systems Nepal Private Limited(12)
Philippines
Plastop Asia Inc(15)
Pact Closure Systems (Philippines), Inc(12)
Singapore
Asia Peak Pte Ltd(12)
United States of America
Pact Group (USA) Inc(16)
PGH Services LLC(13)
United Kingdom
TIC Group (Europe) Ltd(16)
(1) All entities are wholly owned
(2) Owned by Skyson Pty Ltd
(3) Owned by Snopak Manufacturing Pty Ltd
(4) Owned by Sulo MGB Australia Pty Ltd
(5) Owned by Pact Group Holdings (NZ) Ltd
(6) Owned by Viscount Plastics (China) Pty Ltd
(7) Owned by Pact Group Holdings (Hong Kong) Limited
(8) Owned by Talent Group Development Ltd
(9) Owned by Roots Investment Holding Private Limited
(10) Owned by TIC Group (Asia) Ltd
(11) Owned by Fast Star International Ltd
(12) Owned by Pact Group Industries (Asia) Pty Ltd
(13) Owned by Davmar Investments Pty Ltd
(14) Owned by Asia Peak Pte Ltd
(15) Owned by Ruffgar Holdings Pty Ltd
(16) 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.
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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:
Principal
place of
operation
About
Entity
$’000
Pact’s
ownership
interest
Carrying Value
2020
2019
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
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
Weener Plastop
Indonesia Inc(1)
Australian Recycled
Plastics Pty Ltd(2)
Indonesia
and home care markets.
A joint venture which processes
kerbside collected recyclable plastic
materials to produce PET flake and
40%
220
205
50%
976
732
50%
2,133
1,256
50%
20,632
19,323
50%
3,012
2,837
Australia
HDPE flake simultaneously.
50.8%
3,903
-
FINANCIAL REPORT —
NOTES TO THE FINANCIAL STATEMENTS
2.3 Associates and joint ventures (continued)
In accordance with AASB 12: Disclosure of Interests in Other Entities, given the material carrying value of the Group’s invest-
ment in Gempack, the table below shows the summarised financial information and the carrying amount of the Group’s
investment:
$’000
Summarised statement of financial position
Cash and cash equivalents
Other current assets
Non current assets
Other current liabilities
Net assets
Carrying amount of the Group’s investment
Summarised statement of comprehensive income
Interest expense
Depreciation and amortisation
Income tax expense
Summary of associates and joint venture financial information at 30 June(1)
$’000
Summarised statement of financial position
Current assets
Non-current assets
Current liabilities
Non-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
(1)
Includes the Group’s investment in Gempack
2020
11,072
13,973
25,281
(9,061)
41,265
20,632
1,100
2,358
455
2020
2019
42,930
36,261
24,984
34,978
(16,401)
(11,918)
(1,337)
61,453
30,876
51,890
(45,664)
6,226
3,131
-
48,044
24,353
39,470
(34,812)
4,658
2,336
Dividends received from associates and joint ventures during the year was $0.7 million (2019: $0.9 million).
The joint ventures and associates had no contingent liabilities or material capital commitments at 30 June 2020 (2019: Nil).
(1) Ownership interest at 30 June 2020 and 30 June 2019.
(2) On 14 November 2019 the Group purchased 50.8% of the net assets of ARP, a plastics recycling business located
in NewSouth Wales. Management has assessed that the interest held in ARP satisfies the criteria of a joint venture
as per AASB 11: Joint Arrangements, and therefore have equity accounted for this investment in accordance with
AASB 128: Investment in associates and joint ventures.
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FINANCIAL REPORT —
NOTES TO THE FINANCIAL STATEMENTS
FINANCIAL REPORT —
NOTES TO THE FINANCIAL STATEMENTS
How Pact accounts for investment in associates and joint ventures and jointly controlled entities
Section 3 — Our operating assets
An associate is an entity over which the Group has significant influence. Significant influence is the power to
participate in the financial and operating policy decisions of the investee, but is not control or joint control
over those policies.
A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement
have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control
of an arrangement, which exists only when decisions about the relevant activities require the unanimous
consent of the parties sharing control.
The Group uses the equity method to account for its investments in associates and joint ventures, where
it considers it has significant influence, but but it does not have control. Generally significant influence is
deemed if Pact has over 20% of the voting rights.
Under the equity method:
•
investments in the associates are carried at cost plus post-acquisition changes in the Group’s share of
associates’ net assets;
• goodwill relating to an associate is included in the carrying amount of the investment and is not tested for
impairment separately;
•
the Group’s share of its associates’ post-acquisition profits or losses is recognised in the Consolidated
Statement of Comprehensive Income, and its share of post-acquisition movements in reserves is
recognised in reserves; and
• 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.
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 1.3 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)
2020
113,354
(450)
36,775
149,679
2019
103,812
(993)
42,463
145,282
2
9
0
0
0
1
,
0
1
2
4
6
,
0
4
9
0
3
,
5
8
5
6
,
Not due
< 30
8
3
9
2
,
0
7
7
3
,
31–60
9
8
2
3
,
9
9
8
3
,
> 61
Days
2020
2019
(2) At 30 June 2020 $26.7 million (2019: $26.3 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.
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NOTES TO THE FINANCIAL STATEMENTS
3.1 Working capital (continued)
Trade and other receivables (continued)
At 30 June 2020, the Group had expected credit losses of $0.4 million (2019: $1.0 million). 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;
• Debtors securitisation program which allows Pact to sell receivables, at a discount to a third party on a non-recourse
basis. The securitisation program has a committed facility limit of $120.0 million (2019: $130.0 million); and
• Receivables finance program which allows Pact to sell selected receivables at a discount to a third party on a non-
recourse basis. This program has an uncommitted facility limit of $35.0 million (2019 : $35.0 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 2020.
In assessing expected credit losses, the Group has considered the current and potential impact of COVID-19 and
related economic conditions. Management considers the credit risks associated with the pandemic to be sufficiently
mitigated due to the diversity and credit standing of the Group’s customers. Accordingly, the Group has not
experienced a significant increase in expected credit losses.
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 lease receivables, 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; and
• at balance date, a liability is recognised if received collections have not been paid to other participants of the
programs.
FINANCIAL REPORT —
NOTES TO THE FINANCIAL STATEMENTS
3.1 Working capital (continued)
Inventories
Inventories at 30 June comprise of:
$’000
Raw materials and stores
Work in progress
Finished goods
Total inventories
2020
109,989
22,943
90,766
223,698
2019
98,216
21,448
92,182
211,846
How Pact accounts for inventories
Inventories are recorded at cost, which for Pact includes:
• Raw materials: the invoice price of the product, net of any discount, rebates, duties and taxes, as well as
the cost of internal freight.
• Work in Progress and Finished Goods: cost of raw materials, direct labour and a proportion of
manufacturing overheads based on a normal level of operating capacity, but excluding costs that relate
to general administration, finance, marketing, selling and distribution.
If the estimated selling price in the ordinary course of business, less estimated cost of completion and making
the sale, is less than the cost of the inventory, the carrying value of inventory is reduced to this lower amount.
Trade and other payables
Current trade and other payables at 30 June comprise of:
$’000
Trade payables
Other payables
Total current trade and other payables
2020
261,405
116,719
378,124
2019
304,602
61,013
365,615
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
2020
851,812
362,007
2019
669,175
310,225
238,251
1,452,070
136,196
1,115,596
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FINANCIAL REPORT —
NOTES TO THE FINANCIAL STATEMENTS
3.2 Non-current assets (continued)
Property, plant and equipment(1)
The key movements in property, plant and equipment over the year were:
$’000
Estimated useful life
Year ended 30 June 2020
Property(2)
Plant and
equipment
Assets for
hire(4)
Right of
use asset
Capital work
in progress
Total
Freehold: 40–50 years
Leasehold improvements: 10 – 15 years
3–20 years
10 years
3 – 20 years
n/a
At 1 July 2019 net of accumulated depreciation
Adoption of AASB 16
Additions and transfers
Acquisition of subsidiaries and businesses
Receipt of lease incentive
Disposals
Derecognition of ROU assets
Foreign exchange translation movement
Depreciation charge for the year
At 30 June 2020 net of accumulated depreciation
Represented by:
At cost
Accumulated depreciation
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(3)
Foreign exchange translation movement
Depreciation charge for the year
At 30 June 2019 net of accumulated depreciation
Represented by:
At cost
Accumulated depreciation and impairment
53,375
-
8,515
-
-
-
-
(433)
(4,385)
57,072
471,609
-
84,974
524
-
(1,552)
-
(2,798)
(71,122)
481,635
24,578
-
12,605
-
-
-
-
-
(3,631)
33,552
-
377,077
47,183
-
(2,909)
-
(5,379)
592
(52,422)
364,142
88,980
-
(29,263)
-
-
-
-
(116)
-
59,601
638,542
377,077
124,014
524
(2,909)
(1,552)
(5,379)
(2,755)
(131,560)
996,002
85,821
(28,749)
1,202,980
(721,345)
42,031
(8,479)
416,564
(52,422)
59,601 1,806,997
(810,995)
-
43,852
11,936
1,119
-
-
1,245
(4,777)
53,375
580,991
63,796
24,194
(357)
(136,330)
7,272
(67,957)
471,609
30,910
(808)
-
-
-
-
(5,524)
24,578
79,625
(26,250)
1,197,819
(726,210)
29,426
(4,848)
-
-
-
-
-
-
-
-
-
-
99,660
(11,706)
-
-
-
1,026
-
88,980
755,413
63,218
25,313
(357)
(136,330)
9,543
(78,258)
638,542
88,980 1,395,850
(757,308)
-
(1) Reflects the adoption of AASB 16: Leases from 1 July 2019. Comparatives have not been restated.
(2) Property consists of the following: leasehold improvements of $34.7 million (2019: $28.8 million) and accumulated
depreciation of $13.8 million (2019: $11.6 million), and freehold property of $51.1 million (2019: $50.8 million) and
accumulated depreciation of $14.9 million (2019: $14.6 million).
(3) The impairment loss of $136.3 million represented the write-down of certain property, plant and equipment 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.
(4)
In accordance with AASB 16: Leases, assets for hire has been disclosed separately to comply with the requirements
of AASB 116: Property, Plant and Equipment.
FINANCIAL REPORT —
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, excluding the ROU assets, has been based on historical experience.
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.
The estimation of the useful lives of ROU assets has been based on the non-cancellable period of the lease plus
renewal options when the exercise of the option is considered to be reasonably certain.
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 determined to assess if any impairment is required.
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.
70
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PACT 2020 ANNUAL REPORT PACT 2020 ANNUAL REPORT OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION FINANCIAL REPORT —
NOTES TO THE FINANCIAL STATEMENTS
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 2020
Notes
Customer
contracts(1)
Other
intangibles(1)
Goodwill
Total
At 1 July 2019 net of accumulated amortisation and impairment
Additions
Transfer to Property, Plant and Equipment
Intangible asset arising on acquisition
Write-off expense(2)
Foreign exchange translation movements
Amortisation
At 30 June 2020 net of accumulated amortisation
2.1
and impairment
Represented by:
At cost
Accumulated amortisation and impairment
20,260
-
-
-
(11,793)
-
(2,810)
9,586
4
(520)
-
-
(23)
(1,174)
447,208
-
-
(595)
-
(4,075)
-
477,054
4
(520)
(595)
(11,793)
(4,098)
(3,984)
5,657
7,873
442,538
456,068
28,106
(22,449)
14,410
(6,537)
673,670
(231,132)
716,186
(260,118)
(1) Customer contracts are recognised at cost and amortised on a straight-line basis over a period of 10 years (useful
life). Other intangibles includes a balance of $1.8 million which has an indefinite life and is not amortised, all other
intangibles are recognised at cost and amortised over their useful lives.
(2) During the year, a customer contract acquired in a previous business combination was written down due to
reduced future economic benefits expected.
$’000
Year ended 30 June 2019
Customer
contracts
Other
intangibles
Goodwill
Total
At 1 July 2018 net of accumulated amortisation and impairment
Additions
Intangible asset arising on acquisition(1)
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
23,070
-
-
-
-
(2,810)
20,260
28,106
(7,846)
9,843
2,332
-
(1,303)
(64)
(1,222)
9,586
551,280
-
119,983
(231,132)
7,077
-
447,208
584,193
2,332
119,983
(232,435)
7,013
(4,032)
477,054
14,949
(5,363)
678,340
(231,132)
721,395
(244,341)
(1)
In the prior year, 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).
3.2 Non-current assets (continued)
Goodwill and other intangibles (continued)
$’000
Goodwill and intangible assets with indefinite lives are allocated
to the following group of CGUs and segments(1):
Packaging and Sustainability
Contract Manufacturing Services
Materials Handling and Pooling
(1) This is the lowest level where goodwill is monitored.
Annual impairment testing
2020
2019
254,623
21,030
168,647
444,300
258,628
21,031
169,311
448,970
The discount rates and terminal growth rates applied to cash flow projections are detailed below. The calculation of
value in use for the segments below are sensitive to the following assumptions:
• Gross margins and raw material price movement — Gross margins reflect current gross margins adjusted for
any expected (and likely) efficiency improvements or price changes.
• Cash Flows — Cash flows are forecast for a period of five years. Cash flows beyond the one year period are
extrapolated using growth rates which are a combination of expected volume growth and price growth. Rates
are based on published industry research and economic forecasts relating to GDP growth rates, adjusted for
management’s view on customer performance.
• Discount rates — The discount rates are based on an external assessment of the Group’s pre-tax weighted
average cost of capital in conjunction with risk factors specific to the CGUs within the operating segment.
2020
Discount rate (pre-tax)(1)
Terminal growth rate(1)
2019
Discount rate (pre-tax)(1)
Terminal growth rate(1)
Packaging and
Sustainability
Materials
Handling and
Pooling
Contract
Manufacturing
Services
9.4% - 17.0% 11.8% - 14.3%
1.0% - 1.2%
1.0% - 5.9%
9.8% - 20.5% 11.8% - 14.3%
1.0% - 1.2%
1.0% - 7.2%
13.6%
1.0%
14.3%
1.0%
(1) The % range of the discount rate and terminal growth rate is representative of the different countries within each CGU.
The below table shows the carrying amount and headroom analysis across the segments:
Carrying amount ($’000)
Headroom (times)
Breakeven analysis(1)
Terminal growth rate; and
Discount rate
Packaging and
Sustainability
820,382
1.14
Materials
Handling and
Pooling
326,448
1.21
Contract
Manufacturing
Services
124,279
1.49
0.5%
1.0%
1.0%
3.0%
1.0%
1.0%
(1) This is the level at which the recoverable amount would be equal to the carrying amount.
72
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PACT 2020 ANNUAL REPORT PACT 2020 ANNUAL REPORT OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION
FINANCIAL REPORT —
NOTES TO THE FINANCIAL STATEMENTS
FINANCIAL REPORT —
NOTES TO THE FINANCIAL STATEMENTS
3.2 Non-current assets (continued)
Goodwill and other intangibles (continued)
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 CGUs), to which
the goodwill relates. When the recoverable amount of the CGU (or group of CGUs) is less than the carrying
amount, an impairment loss is recognised. When goodwill forms part of a CGU (or group of CGUs) and an
operation within that unit is disposed of, the goodwill associated with the operation disposed of is included
in the carrying amount of the operation when determining the gain or loss on disposal of the operation.
Goodwill disposed of in this manner is measured based on the relative values of the operation disposed of
and the portion of the CGUs retained.
Key estimates and judgements — impairment of goodwill and other intangibles
The recoverable amount of each of the CGUs has been determined based on value in use calculations using
cash flow projections contained within next year’s financial budget approved by management and other forward
projections up to a period of five years. Management has used its current expectations and what is considered
reasonably achievable when assigning values to key assumptions in their value in use calculations. In the current
period, Management’s estimates and judgement also specifically considered the potential risks arising from the
COVID-19 pandemic. Management considers the risks associated with the pandemic to be sufficiently mitigated
due to the diversity of the Group’s customers and products such that any prolonged impact from a pandemic
will not result in a material change to any of the assumptions adopted for impairment testing purposes.
3.3 Capital expenditure commitments and contingencies
Capital expenditure commitments
Capital expenditure commitments contracted for at reporting date, but not provided for are:
$’000
Payable within one year
Payable after one year but not more than five years
Total
Contingencies
2020
24,139
6,419
30,558
2019
7,395
449
7,844
From time to time, the Group may be involved in litigation relating to claims arising out of its operations. The Group
is not party to any legal proceedings that are expected, individually or in the aggregate, to have a material adverse
effect on its business, financial position or operating results.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to the
taxation authority.
3.4 Other provisions
Total other provisions at 30 June comprise of:
$’000's
Current
Business restructuring
Total current provisions
Non-current
Fixed rent(1)
Make good on leased premises(1)
Total non-current provisions
2020
2019
-
-
-
9,967
9,967
13,914
13,914
22,765
9,593
32,358
(1) On adoption of AASB 16: Leases, the Group applied the modified retrospective approach to transition, under
which the cumulative effect of initial application was recognised in retained earnings at 1 July 2019. Refer Note 6.2
for further details.
Movement in provisions
$’000
Year ended 30 June 2020
At 1 July 2019
Adoption of AASB 16
Provided for during the year
Utilised
Foreign exchange translation movement
At 30 June 2020
Business
restructuring(1)
Fixed rent
provision
Make good on
leased premises
13,914
(10,357)
4,790
(8,354)
7
-
22,765
(22,765)
-
-
-
-
9,593
-
1,277
(859)
(44)
9,967
Total
46,272
(33,122)
6,067
(9,213)
(37)
9,967
(1) Business restructuring - The business restructuring programs relate to the optimisation of business facilities
across the Group.
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.
74
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PACT 2020 ANNUAL REPORT PACT 2020 ANNUAL REPORT OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION
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 interest-bearing loans and borrowings as at 30 June 2020:
Current
$’000
Lease liabilities
Total current interest-bearing loans and borrowings
Non-current
$’000
Syndicated Facility Agreements(2)
Subordinated Debt Facility(2) (3)
Capitalised borrowing costs
Total bank borrowings (including capitalised borrowing costs)
Lease liabilities
Total non-current interest-bearing loans and borrowings
$’000
Total interest-bearing loans - bank borrowings
Cash and cash equivalents
Net debt before lease liabilities
Lease liabilities
Net debt
Notes
6.2
Notes
6.2
Notes
6.2
2020(1)
69,203
69,203
2019
-
-
2020(1)
643,700
50,991
(5,161)
689,530
385,656
1,075,186
2020(1)
689,530
(76,004)
613,526
454,859
1,068,385
2019
689,232
50,287
(6,029)
733,490
-
733,490
2019
733,490
(49,950)
683,540
-
683,540
(1) Reflects the adoption of AASB 16: Leases from 1 July 2019. Comparatives have not been restated.
(2) The Group has several revolving debt facilities, two-term facilities, a subordinated term debt facility and a working
capital facility with total commitments of $1,057.6 million, of which $340.7 million is undrawn at 30 June 2020. The
facilities are spread across multiple maturities, with the working capital facility revolving with an annual review. The
debt facilities include a $380.7 million loan facility maturing in January 2022, a $184.6 million loan facility maturing
in January 2023, a $299.1 million loan facility maturing in March 2023, a $120.0 million term facility maturing in
December 2024, and a subordinated term debt facility of USD 35.0 million, swapped into AUD ($50.3 million),
maturing July 2025. The working capital facility is $23.0 million at 30 June 2020.
(3) This facility is denominated in USD and was translated to AUD using the AUD/USD spot rate as at 30 June 2020.
The foreign currency exchange differences is fully hedged with a cross currency swap. The fair value of this swap of
$0.7 million is disclosed as a hedge asset.
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 2020 was assessed to be insignificant.
The computation of the fair value of borrowings is derived using significant observable inputs (Fair Value Hierarchy Level 2).
FINANCIAL REPORT —
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
Lease liabilities
Total borrowings
(b) Defaults and breaches
2020
$’000
2019
$’000
Carrying Value
643,700
50,991
454,859
1,149,550
Fair Value
643,700
50,991
454,859
1,149,550
Carrying Value
689,232
50,287
-
739,519
Fair Value
689,232
50,287
-
739,519
During the year, 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 on bank loans and borrowings
Borrowing costs amortisation
Amortisation of securitisation program costs
Sundry items
Total interest expense on borrowings
Interest expense on unwinding of provisions
Interest expense on lease liabilities
Total finance costs
Loss on de-recognition of financial assets
Total finance costs and loss on de-recognition of financial assets
2020
28,852
3,416
654
819
33,741
536
26,364
60,641
2,796
63,437
2019
32,250
1,499
266
1,149
35,164
432
-
35,596
4,079
39,675
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 2020 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.
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NOTES TO THE FINANCIAL STATEMENTS
4.1 Net Debt (continued)
Reconciliation of net profit / (loss) after tax to net cash flows from operations
$’000
Net profit / (loss) for the year
Non cash flows in operating profit / (loss):
Depreciation and amortisation(2)
Loss on sale of property, plant and equipment
Share of net profit in associates
Share based payments expense
Impairment and write-off expense
Other
Changes in assets and liabilities:
(Increase) / decrease in trade and other receivables
(Increase) / decrease in inventory
Decrease / (increase) in current tax assets
(Increase) / decrease in deferred tax assets
(Decrease) / increase in trade and other payables
Increase / (decrease) in employee entitlement provisions
(Decrease) / increase in other provisions
Increase / (decrease) in current tax liabilities
Increase / (decrease) in deferred tax liabilities
Net cash flow provided by operating activities
2020
88,847
2019
(289,587)
135,544
883
(3,131)
610
11,793
208
(3,104)
(10,322)
3,360
19,353
(40,666)
2,998
(6,089)
18,939
(27,092)
192,131
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
(2)
In the current period depreciation expense in non cash flows in operating profit / (loss) includes an amount of
$52.4 million in relation to Right of use assets.
Non-cash activities
$’000
Acquisition of assets, liabilities and business via issue of shares
Notes
2.1
2020
-
2019
60,000
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.
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
End of the year
There were no shares issued during the period.
2020
Number of
shares
2019
$’000s
Number of
shares
$’000s
343,993,595
-
343,993,595
1,750,476 332,483,890
11,509,705
1,750,476 343,993,595
-
1,690,476
60,000
1,750,476
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
2020
31,144
(6,777)
(928,385)
2,767
(901,251)
2019
33,897
(4,580)
(928,385)
2,157
(896,911)
(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.
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PACT 2020 ANNUAL REPORT PACT 2020 ANNUAL REPORT OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION FINANCIAL REPORT —
NOTES TO THE FINANCIAL STATEMENTS
FINANCIAL REPORT —
NOTES TO THE FINANCIAL STATEMENTS
4.3 Managing our financial risks
4.3 Managing our financial risks (continued)
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 2020
At 30 June 2020, the Group hedge cover is 36%
interest rate debt,
swaps to lock in the
(2019: 51%) of its long-term variable debt excluding
and therefore
if interest rates
amount of interest that
working capital facilities.
Pact will be required
increase, the amount
to pay.
of interest Pact is
required to pay
would also increase.
Sensitivity analysis performed by the Group showed that a
+1 percentage point movement in AUD interest rates would
• Considers alternative
reduce net profit after tax by $2.5 million and increase equity
financing and mix of fixed
by $1.2 million (2019: $0.9 million reduction in net profit after
and variable debt, as
tax and increase equity by $0.3 million).
appropriate.
Sensitivity analysis performed by the Group showed that a
+1 percentage point movement in NZD interest rates would
reduce net profit after tax by $1.1 million and reduce equity
by $0.2 million (2019: $0.9 million reduction in net profit after
tax and increase equity by $0.3 million). (2019: $1.4 million
reduction in net profit after tax and equity).
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 $0.5 million
(2019: $0.4 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.
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
Impact at 30 June 2020
The Group has a significant exposure to the USD against the
denominated in
currency contracts to
AUD and NZD from USD purchase commitments, while the
currencies other
eliminate or reduce currency
Group’s exposure to sales denominated in currencies other
than the functional
exposures of individual
than the functional currency of the operating entity is less
currency of the
transactions once the Group
than 1%.
operating entity,
has entered into a firm
there is a risk of
commitment for a sale or
an unfavourable
purchase.
financial impact to
earnings if there is
an adverse currency
movement.
As Pact has entities
Pact utilises borrowing in
At 30 June 2020, 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 and would have the following impact on equity for the
largest hedging position AUDUSD ($2.0) million to $2.0 million.
Sensitivity analysis performed by management showed that a
that do not have
the functional currency
10% +/- movement in its major translational currencies as at
an Australian dollar
of the overseas entity to
30 June 2020 would have the following impact on equity:
(AUD) functional
naturally hedge offshore
currency, if currency
entities where considered
rates move adversely
appropriate. The foreign
compared to the
currency debt provides a
AUD, then the
balance sheet hedge of
AUDNZD ($9.0) million to $11.0 million
AUDCNY ($12.0) million to $15.0 million
AUDUSD ($1.5) million to $2.0 million
AUDPHP ($2.5) million to $3.0 million
amount of AUD-
the asset, while the foreign
Sensitivity analysis performed by management showed that a
equivalent profit
currency interest cost
10% +/- movement in its major translational currencies during
would decrease, and
provides a natural hedge of
the year, would have the following impact on net profit after tax:
the balance sheet
the offshore profit.
net investment value
would decline.
AUDNZD ($2.5) million to $3.0 million
AUDUSD ($1.0) million to $1.0 million
80
81
PACT 2020 ANNUAL REPORT PACT 2020 ANNUAL REPORT OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION FINANCIAL REPORT —
NOTES TO THE FINANCIAL STATEMENTS
4.3 Managing our financial risks (continued)
The following table represents the changes in financial liabilities arising from financing activities:
$’000
Lease liabilities
Non-current interest-bearing loans and bank borrowings
Total liabilities from financing activities
1 July 2019 Cash flows
70,845
42,460
(1,205,668) 113,305
(466,149)
(739,519)
Non-cash
changes(1)
(60,101)
-
(60,101)
Foreign
exchange
30 June 2020
movement
(454,859)
546
2,369
(694,690)
2,915 (1,149,549)
(1) Refer details at Note 6.2 (AASB 16: Leases).
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. The Group also manages
commodity price risk using resin forward contracts in circumstances where contractual rise and fall adjustments are
not in place to minimise the variability of cash flows arising from price movements.
Utilising hedging contracts to manage risk
As discussed above, the Group utilises interest rate swaps, foreign exchange forward contracts and resin forward
contracts to hedge its risks associated with fluctuations in interest rates, foreign currency and resin prices. 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.
FINANCIAL REPORT —
NOTES TO THE FINANCIAL STATEMENTS
4.3 Managing our financial risks (continued)
Managing liquidity risk
Liquidity risk arises from the financial liabilities of the Group and the Group’s ability to meet its obligations to repay
these financial liabilities as and when they fall due. Pact has a range of liabilities at 30 June that will be required to be
settled at some future date.
What is the risk?
The risk that Pact
How does Pact manage this risk?
• Having access to an adequate
Impact at 30 June 2020
The Directors have assessed that due to the Group’s
cannot meet its
amount of committed credit facilities.
access to undrawn facilities and forecast positive cash
obligations to
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.
flows into the future they will be able to pay their
debts as and when they fall due, and therefore it is
appropriate the financial statements are prepared on
a going concern basis.
The maturity profile of the Group’s assets and liabilities based on contractual undiscounted receipt / payments
terms is as follows:
$’000
Year ended 30 June 2020
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)
Resin forward contracts
Interest rate swaps
Interest bearing loans and bank borrowings(3)(4)
Total outflows
Net outflow
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 bank borrowings(3)(4)
Total outflows
Net outflow
≤ 6 months
6–12 months
1–5 years
> 5 years
Total
76,004
149,679
74,818
300,501
(378,124)
(78,986)
(12)
(1,348)
(8,508)
(466,978)
(166,477)
49,950
145,282
63,183
258,415
(417,285)
(63,334)
(1,814)
(14,891)
(497,324)
(238,909)
-
-
2,760
2,760
-
7
348
355
-
(2,809)
-
(1,477)
(8,369)
(12,655)
(9,895)
-
(351)
-
(5,632)
(726,261)
(732,244)
(731,889)
-
-
72
72
-
718
-
718
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
76,004
149,686
77,926
303,616
(378,124)
(82,146)
(12)
(8,457)
(743,138)
(1,211,877)
(908,261)
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) 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. These commitments include cash flows associated with the
cross currency swap.
(4) Refer Note 6.2 for details on lease maturity analysis.
82
83
PACT 2020 ANNUAL REPORT PACT 2020 ANNUAL REPORT OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION
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 instruments;
the hedged items or transactions; and
the nature of the risks being hedged; and how the entity will assess the hedging instruments 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; and
• 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 are 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); and
• 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.
FINANCIAL REPORT —
NOTES TO THE FINANCIAL STATEMENTS
4.3 Managing our financial risks (continued)
Effect on financial position and performance — hedging instruments
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 2020
Foreign exchange
forward contracts
Resin forward contracts
Cross currency swaps
Interest Rate Swaps
Year ended 30 June 2019
Foreign exchange
forward contracts
Interest rate swaps
Hedged item
Notional
amount
Carrying
amount Asset/
(Liability)
Change in
fair value(5)
Cash flow
hedge
reserve
Committed purchases
79,746
Committed purchases
FX component of debt
Floating component of debt
234
50,991
246,716
Committed purchases
65,910
Floating component of debt
350,000
74(1)
(4,301)(3)
(12)(3)
814(2)
(8,457)(4)
349(1)
(556)(3)
(1,774)(3)
(4,296)(4)
(4,020)
(679)
(12)
814
(2,387)
-
77
(5,944)
(2,655)
(93)
(5,453)
(4,248)
(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 non-current financial assets in the consolidated statement of financial
position. The carrying amount recognised is the fair value of the cross currency swap, which is used to hedge the
USD loan. The impact from movements in foreign currency rates was $0.7million. This amount fully offsets the
translation of the USD loan.
(3) The carrying amount is included in other current financial liabilities in the consolidated statement of financial position.
(4) The carrying amount is included in other non-current financial liabilities in the consolidated statement of financial
position.
(5) The change in fair value represents the difference between the current and previous period carrying amount of
hedge assets and hedge liabilities The Group notes no ineffectiveness for the hedges undertaken.
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 2020
Committed purchases
Floating component of debt
Cross currency swap
Resin forward contracts
Year ended 30 June 2019
Committed purchases
Floating component of debt
Total hedging
gain/(loss)
recognised
in OCI
Amount
reclassified
from OCI to
profit or loss
(679)
(5,944)
77
-
(93)
(4,248)
(3,265)
-
-
(12)
(73)
-
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
-
Interest rate swaps
- Cross currency swap
Reversal of prior year cash flow hedge reserve
Tax effect
Closing balance of cash flow hedge reserve
2020
(4,580)
(679)
(5,944)
77
4,580
(231)
(6,777)
2019
111
(93)
(4,248)
-
(111)
(239)
(4,580)
84
85
PACT 2020 ANNUAL REPORT PACT 2020 ANNUAL REPORT 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; and
•
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.
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 five entities:
• Pact Closure Systems (India) Private Ltd
• Pact Closure Systems (Philippines) Inc
• Pact Group Closure Systems Korea Ltd
• Plastop Asia Inc
• PT Plastop Indonesia Manufacturing
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 rate
At 1 July 2019
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
Transfer from provisions
Foreign exchange translation movements
Present value of defined benefit
obligation at 30 June 2020
Pact Closure
Systems
(India)
Private Ltd(1)
7.90%
12.0%
97
32
7
Pact Closure
Systems
(Philippines)
Inc
5.12%
Pact Group
Closure
Systems
Plastop
Korea Ltd
Asia Inc
4.29%
2.6%
6.0% 4.5% 4.0%
178
747
41
273
11
32
250
33
16
PT Plastop
Indonesia
Manufacturing
8.75%
5.0%
-
54
11
(2)
11
-
(2)
34
-
(71)
106
43
(11)
-
-
-
-
27
358
101
23
(28)
(182)
-
-
17
20
(5)
-
-
-
-
15
(15)
6
-
-
-
182
(1)
983
260
237
1,944
Total
1,272
433
77
147
24
(28)
(184)
34
182
(13)
86
87
(1) Defined benefit obligations for CSI India comprises of Gratuity liability and Leave encashment liability.
PACT 2020 ANNUAL REPORT PACT 2020 ANNUAL REPORT OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION FINANCIAL REPORT —
NOTES TO THE FINANCIAL STATEMENTS
5.1 Defined Benefit Plans (continued)
$’000
Present value of the defined benefit obligation
Discount rate
Salary 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
Measurement assumptions
Pact Closure Systems (India) Private Ltd
Pact Closure
Systems (India)
Private Ltd(1)
7.70%
12.0%
96
26
6
Pact Closure
Systems
(Philippines) Inc
6.24%
6.0%
164
17
10
Pact Group
Closure
Systems Korea
Ltd
3.10%
4.0%
703
199
19
2
4
-
(2)
(40)
5
97
47
(8)
-
-
-
20
250
(58)
(61)
15
(81)
-
11
747
Plastop
Asia Inc
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
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.
Pact Closure Systems (Philippines) ,Inc
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.
Pact Group Closure Systems Korea Ltd
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 Inc
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.
PT Plastop Indonesia Manufacturing
The discount rate assumption is based on market yields at the end of the reporting period based on high quality
corporate bonds. The spot price used is released by Indonesia Bond Pricing Agency.
The salary rate assumption is based on the prevailing inflation rate and company policy.
FINANCIAL REPORT —
NOTES TO THE FINANCIAL STATEMENTS
5.1 Defined Benefit Plans (continued)
Reconciliation of DBO and Fair Value of Plan Assets (continued)
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
At 30 June 2020
Defined Benefit Obligation
Fair value of plan assets
Present value of net defined benefit
Pact Closure
Systems (India)
Private Ltd(1)
174
(68)
Pact Closure
Systems
(Philippines)
Inc
358
-
Pact Group
Closure
Systems
Korea Ltd(3)
1,590
(607)
Plastop
Asia Inc(2)
260
-
Plastop
Indonesia
Manufacturing(2)
237
-
Total
2,619
(675)
obligation at end of the year
106
358
983
260
237
1,944
(1) The plan assets for Pact Closure Systems (India) Private Ltd relating to the gratuity liability comprises of
investments in 100% insurance policies.
(2) The plan assets for Pact Closure Systems (Philippines), Inc and Plastop Asia Inc and PT Plastop Indonesia
Manufacturing are held in the companies own bank accounts.
(3) The plan assets for Pact Group Closure Systems Korea Ltd comprises of investments in 100% fixed interest securities.
$’000
At 30 June 2019
Defined Benefit Obligation
Fair value of plan assets
Present value of net defined benefit
Pact Closure
Systems (India)
Private Ltd(1)
130
(33)
Pact Closure
Systems
(Philippines)
Inc(2)
250
-
Pact Group
Closure
Systems
Korea Ltd(3)
1,358
(611)
Plastop
Asia Inc(2)
178
-
Plastop
Indonesia
Manufacturing(2)
-
-
Total
1,916
(644)
obligation at end of the year
97
250
747
178
-
1,272
Sensitivity analysis
The present value of the DBO is based on the assumptions detailed on page 88. 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
2020
(260)
305
294
(256)
2019
(194)
228
220
(191)
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.
88
89
PACT 2020 ANNUAL REPORT PACT 2020 ANNUAL REPORT OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION
FINANCIAL REPORT —
NOTES TO THE FINANCIAL STATEMENTS
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
2020
396,029
19,614
25,413
610
441,666
2019
387,922
20,604
21,677
(168)
430,035
21,465
17,173
38,638
19,976
16,316
36,292
The Group’s non-current employee benefits provisions of $8.1 million relate to long service leave entitlements of
$6.2 million (2019: $6.0 million), and a defined benefit net liability of $1.9 million (2019: $1.3 million).
How Pact accounts for employee benefits
Provision is made for employee benefits accumulated as a result of employees rendering services up to the
reporting date. These benefits include wages and salaries, annual leave and long service leave.
Benefits expected to be settled within twelve months of the reporting date are classified as current and are
measured at their nominal amounts based on remuneration rates which are expected to be paid when the
liability is settled.
The liability for long service leave is recognised and measured as the present value of expected future
payments to be made in respect of services provided by employees up to the reporting date using the
projected unit credit method. Under this method consideration is given to expected future wage and salary
levels, experience of employee departures, and periods of service. Expected future payments are discounted
using market yields at the reporting date on national government bonds (except for Australia where high
quality corporate bond rates are used in accordance with the standards) with terms to maturity and
currencies that match, as closely as possible, the estimated future cash outflows.
5.3 Share based payments
Long term incentive plan (LTIP)
Under the 2020 LTIP scheme 538,189 performance rights were granted to the CEO (approved by resolution at the
Annual General Meeting on 13 November 2019), and 676,398 performance rights were granted to senior executives.
These performance rights have performance hurdles and vesting conditions consistent with those outlined in the
2020 Remuneration Report. The rights were independently valued to establish the fair value in accordance with
AASB 2: Share Based Payments. The fair value of each right at the valuation date of 13 November 2019 is $1.34.
The share based payments expense recognised in the current period was $610,000 (2019: $168,000 net
income). The prior period included a reversal of $655,000 in share based payments expense due to the lapsing of
performance rights following the resignation of the former CEO.
The key assumptions in the independent valuation in relation to the 2020 LTIP were as follows:
Share price at valuation date
Annualised volatility
Annual dividend yield
Risk free rate
Expected life of performance right
Model used
$2.57
35.0%
3.4%
0.8%
36 months
Monte Carlo Simulation Model
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
Long-term employee benefits
Share-based payments expense
Total compensation
2020
3,639
73
66
328
4,106
2019
2,616
90
-
(475)
2,231
The following table provides the total amount of transactions with related parties for the year ended 30 June 2020:
$’000
Related parties — Directors' interests(1)
2020
2019
Sales
13,362
13,789
Purchases
7,354
11,043
Other
expenses
6,317
6,667
Net amounts
receivable
558
609
(1) Related parties — Directors' 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), ceased its business
operations in November 2019. P’Auer had a supply agreement to provide label products to Pact. Pact had a
Transitional Services and Support agreement with P’Auer to provide support services. These agreements were at
arm’s length. In addition, P’Auer provided Pact with periodic warehousing services.
Pro-Pac Packaging Limited (Pro-Pac)
Pro-Pac, an entity for which Mr Raphael Geminder owns 49.7% (2019: 49.7%), is an exclusive supplier of certain
raw materials such as flexible film packaging, flexible plastic bags and tapes to Pact. Pact has a supply agreement
with Pro-pac that expires 31 December 2021. The total value of sales under this arrangement is approximately $4.2
million (2019: $4.2 million). The supply arrangement is at arm’s length. Mr Jonathan Ling is also an Independent Non-
Executive Director and Chairman of Pro Pac.
Property leases with related parties
The Group leased 11 properties (9 in Australia and 2 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 2020 was $6.2 million (June 2019: $6.4 million). The rent
payable under these leases was determined based on independent valuations and market conditions at the time
the leases were entered.
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.
90
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PACT 2020 ANNUAL REPORT PACT 2020 ANNUAL REPORT OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION 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 expenses of $415,000 (2019: $427,000);
•
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; and
• 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.
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.
6.2 New standards, interpretation and amendments
AASB Interpretation 23 Uncertainty over Income Tax Treatment addresses the accounting for income taxes when tax
treatments involve uncertainty that affects the application of the recognition and measurement criteria in AASB 112
Income Taxes. The Interpretation specifically addresses the following:
• Whether an entity considers uncertain tax treatments separately.
• The assumptions an entity makes about the examination of tax treatments by taxation authorities.
• How an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates.
• How an entity considers changes in facts and circumstances.
FINANCIAL REPORT —
NOTES TO THE FINANCIAL STATEMENTS
6.2 New standards, interpretation and amendments (continued)
The Group has assessed whether the interpretation had an impact on its consolidated financial statements. Upon
adoption of the interpretation, the Group considered whether it had any uncertain tax positions. The Group
determined, based on its tax compliance and governance procedures, that it is probable that its tax treatments will
be accepted by the taxation authorities. The Interpretation did not have an impact on the consolidated financial
statements of the Group.
AASB 16 supersedes AASB 117 Leases, Interpretation 4 Determining Whether an Arrangement Contains a Lease,
Interpretation 115 Operating Leases-Incentives and Interpretation 127 Evaluating the Substance of Transactions Involving
the Legal Form of a Lease. The standard sets out the principles for the recognition, measurement, presentation and
disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model.
Except for changes below, the Group has consistently applied the accounting policies in the Group’s consolidated
financial statements as at and for the year ending 30 June 2020.
AASB 16 Leases
The Group applied AASB 16 Leases with a date of initial application of 1 July 2019. As a result, the Group has
changed its accounting policy for lease contracts as detailed below.
AASB 16 introduced a single, on-balance sheet accounting model for lessees. As a result, the Group, as a lessee, has
recognised right of use assets representing its rights to use the underlying assets and lease liabilities representing
its obligation to make lease payments.
The Group applied AASB 16 using the modified retrospective approach to transition, under which the cumulative
effect of initial application is recognised in retained earnings at 1 July 2019. Accordingly, the comparative information
presented has not been restated — ie. it is presented, as previously reported, under AASB 117: Leases and related
interpretations. Where relevant information is available, on a lease-by-lease basis, the Group applied AASB 16 to
measure the right of use assets as if the Standard had been applied since the commencement date of that lease
using the incremental borrowing rates at 1 July 2019.
For other leases, the right of use asset was measured at an amount equal to the lease liability, adjusted by the
amount of any prepaid or accrued lease payments as at 1 July 2019. The details of the changes in accounting
policies are disclosed below.
Definition of a lease
Previously, the Group determined at contract inception whether an arrangement was or contained a lease under
Interpretation 4 Determining whether an Arrangement contains a Lease. Under AASB 16, the Group assesses whether
a contract is or contains a lease based on the new definition of a lease. Under AASB 16, a contract is, or contains
a lease if the contract conveys a right to control the use of an identified asset for a period of time in exchange for
consideration.
On transition to AASB 16, the Group elected to apply the practical expedient to grandfather the assessment
of which transactions are leases. It applied AASB 16 only to contracts that were previously identified as leases.
Contracts that were not identified as leases under AASB 117 and Interpretation 4 were not reassessed for whether
there is a lease. Therefore, the definition of a lease under AASB 16 was applied to contracts entered into or changed
on or after 1 July 2019.
At inception or on reassessment of a contract that contains a lease component, the Group allocates the
consideration in the contract to each lease component on the basis of their relative stand-alone prices. However,
for leases of property in which it is a lessee, the Group has applied the practical expedient to not separate non-
lease components and will instead account for the lease and non-lease components as a single lease component.
92
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PACT 2020 ANNUAL REPORT PACT 2020 ANNUAL REPORT OVERVIEWPERFORMANCEGOVERNANCEFINANCIAL REPORTSSHAREHOLDER INFORMATION FINANCIAL REPORT —
NOTES TO THE FINANCIAL STATEMENTS
6.2 New standards, interpretation and amendments (continued)
AASB 16 Leases (continued)
As a lessee
The Group leases many assets, including property, forklifts, motor vehicles, photocopiers and IT equipment. More
than 95% of the total lease portfolio is represented by property leases.
As a lessee, the Group previously classified leases as operating leases based on its assessment of whether the lease
transferred significantly all of the risks and rewards incidental to ownership of the underlying asset. Upon adoption
of AASB 16, the Group recognises right of use assets and lease liabilities for most leases — ie. these leases are on
balance sheet.
The Group applied the recognition exemptions for short-term leases and low value assets as detailed in the
significant accounting policies below. The Group also early adopted the exemption to not assess the rent
concessions occurring as a direct consequence of COVID-19 pandemic as a lease modification.
The Group presents right of use assets that do not meet the definition of an investment property in ‘property, plant
and equipment, the same line item as it presents underlying assets of the same nature that it owns.
As a lessor
Where the Group is a lessor, the accounting treatment on the adoption of AASB 16 is consistent with the accounting
treatment under AASB 117: Leases.
Significant accounting policies
Right of use assets
The Group recognises a right of use asset and a lease liability at the lease commencement date. The right of use
asset is initially measured at cost and subsequently at cost less any accumulated depreciation and impairment
losses and adjusted for certain remeasurements of the lease liability. The cost of right-of-use assets includes
the amount of lease liabilities recognised, initial direct costs incurred, make good estimate and lease payments
made at or before the commencement date less any lease incentives received. Unless the Group is reasonably
certain to obtain ownership of the leased asset at the end of the lease term, the recognised right of use assets are
depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. Right of use
assets are subject to impairment.
Lease liabilities
The lease liability is initially measured at the present value of the lease payments that are not paid at the
commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily
determined, the Group‘s incremental borrowing rate. After the commencement date, the amount of lease liabilities
is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying
amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the
in-substance fixed lease payments or if the Group changes its assessment of whether it will exercise a purchase,
extension or termination option.
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of
the right of use asset, or is recorded in the consolidated statement of comprehensive income if the carrying amount
of the right of use asset has been reduced to zero.
The Group has applied judgement to determine the lease term for some lease contracts in which it is a lessee that
include renewal options. The assessment of whether the Group is reasonably certain to exercise such options
impacts the lease term and the amount of lease liabilities and right of use assets recognised. The Group evaluates
all relevant factors that create an economic incentive for it to exercise the renewal. After the commencement date,
the Group reassesses the lease term if there is a significant event or change in circumstances that is within its
control and affects its ability to exercise (or not to exercise) the option to renew (eg. a change in business strategy).
FINANCIAL REPORT —
NOTES TO THE FINANCIAL STATEMENTS
6.2 New standards, interpretation and amendments (continued)
Short-term leases and leases of low value assets
For lessees only, AASB 16 provides a practical expedient to disregard the recognition of ROU assets and lease
liabilities for short-term leases with less than 12 months remaining lease term and leases of low-value assets. The
Group has elected to apply the practical expedients on selected leases. The lease payments associated with these
leases are recognised as an expense on a straight-line basis over the lease term in the consolidated statement of
comprehensive income.
The assessment of low-value is based on assets that are not integral to the Group’s business. The Group will apply the
low-value exemption and alleviate the recognition requirements in AASB 16 for the aforementioned lease categories.
The practical expedient for short term leases has been applied by class of underlying asset.
Transition
At transition date, lease liabilities were measured at the present value of the remaining lease payments, discounted
using the incremental borrowing rate as at 1 July 2019. Right of use assets were measured at either:
•
their carrying amount as if AASB 16 had been applied since the lease commencement date, but discounted using
the incremental borrowing rate as at 1 July 2019; or
• an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments.
The latter method was applied for all leases where sufficient documentation was not available to permit the
measurement using the former method.
The Group used the following practical expedients when applying AASB 16 to leases previously classified as
operating leases under AASB 117:
• grandfathered the assessment of which transactions are leases;
• applied a single discount rate to a portfolio of leases with reasonably similar characteristics;
• adjusted the right of use assets by the amount of onerous contract provisions applying AASB 137 Provisions,
Contingent Liabilities and Contingent Assets immediately before the date of initial application, as an alternative to
an impairment review;
• applied the exemption not to recognise right of use assets and liabilities for leases with less than 12 months
remaining lease term at 1 July 2019 and those lease contracts for which the underlying asset is of low-value;
• excluded initial direct costs from measuring the right of use asset at the date of initial application;
• applied the exemption not to separate the lease and non-lease components of the contract, and instead account
for each lease and associated non-lease components as a single lease component;
• used hindsight when determining the lease term if the contract contains options to extend or terminate the lease.
94
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NOTES TO THE FINANCIAL STATEMENTS
6.2 New standards, interpretation and amendments (continued)
Impacts on financial statements
FINANCIAL REPORT —
NOTES TO THE FINANCIAL STATEMENTS
6.2 New standards, interpretation and amendments (continued)
Impacts on financial statements (continued)
The impacts on the Statement of Financial Position of the Group on transition to AASB 16 at 1 July 2019 were as
The maturity analysis of contractual undiscounted cash flows for lease liabilities are:
follows:
$’000
Right of use assets
Deferred tax assets (1)
Total assets
Lease liabilities
Unearned incentives
Fixed rent provisions
Onerous lease provision
Other
Total liabilities
Retained earnings
1 July 2019
377,077
8,587
385,664
(466,149)
15,450
22,765
10,357
(2,396)
(419,973)
34,309
(1) The tax effect accounting on the adoption of AASB 16 for right of use assets and lease liabilities is consistent with
the accounting policy.
The carrying amounts of the Group’s right of use assets and lease liabilities and the movements during the period are
as below:
$’000
Adoption of AASB 16
Additions
Receipt of lease incentive
Depreciation expense
Derecognition of ROU assets
Lease modification
Settlement obligation for remaining onerous leases
Interest expense
Payments
Foreign exchange translation movement
Balance as at 30 June 2020
Property
370,636
39,523
(2,909)
(48,743)
(5,379)
-
-
-
-
397
353,525
Plant and
equipment
6,441
7,660
-
(3,679)
-
-
-
-
-
195
10,617
Total Right
of use assets
377,077
47,183
(2,909)
(52,422)
(5,379)
-
-
-
-
592
364,142
Total
Lease
liabilities
466,149
46,404
-
-
-
(9,923)
(2,744)
26,364
(70,845)
(546)
454,859
In addition to the expenses detailed above, the consolidated statement of comprehensive income also includes
the following lease related expenses:
$’000
Expenses relating to short-term leases
Expenses relating to low-value leases
Variable lease payments
Property outgoings(1)
2020
2,907
176
633
12,014
(1)
Includes council rates, taxes, insurance and other lease related payments. Outgoings are 19.7% of the Group’s
property lease payments in the financial year.
The lease liabilities included in the consolidated statement of financial position are:
$’000
Current
Non-current
96
2020
69,203
385,656
Less than one year
One to five years
More than five years
Total undiscounted liabilities
The amounts recognised in the statement of cash flows are:
$’000
Repayment of lease liability principal (net of incentive received)(1)
Interest payments(1)
Expenses relating to short-term leases
Expenses relating to low-value leases
Variable lease payments
Property outgoings
Onerous lease payments
2020
70,826
228,965
347,813
647,604
2020
44,480
26,364
2,907
176
633
7,201
2,744
(1) Of the total lease payments, 13.9% relates to property leases that exclude renewal options in the assessment
of the lease term. This includes warehouses, offices and shopfronts where the exercise of the option is not
reasonably certain.
The reconciliation of operating lease commitments at 30 June 2019 and the lease liabilities recognised at 1 July
2019 is detailed below. When measuring lease liabilities for leases that were classified as operating leases, the
Group discounted lease payments using relevant incremental borrowing rates at 1 July 2019. In performing this
assessment, the Group used a weighted-average incremental borrowing rate of 5.8%.
$’000
Operating lease commitments at 30 June 2019 as disclosed in the Group’s consolidated financial statements
Add: Extension options reasonably certain to be exercised
1 July 2019
400,285
302,201
Less: Recognition exemption for:
• Short-term leases expensed
• Low-value leases expensed
Total operating lease commitments before discounting
Less: Discounted using the incremental borrowing rate at 1 July 2019
Lease liabilities recognised at 1 July 2019
Of which are:
• Current lease liabilities
• Non-current lease liabilities
(14,394)
(2,150)
685,942
(219,793)
466,149
54,877
411,272
Key Estimate and Judgement — Incremental borrowing rate
Where the Group cannot readily determine the interest rate implicit in the lease, it uses its incremental
borrowing rate (IBR) to measure lease liabilities. The IBR is the rate of interest that the Group would have to pay
to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value
to the right of use asset in a similar economic environment. The IBR therefore reflects what the Group ‘would
have to pay’, which requires estimation when no observable rates are available or when they need to be adjusted
to reflect the terms and conditions of the lease. The Group estimates the IBR using observable inputs (such as
market interest rates) when available.
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FINANCIAL REPORT —
NOTES TO THE FINANCIAL STATEMENTS
6.2 New standards, interpretation and amendments (continued)
Impacts on financial statements (continued)
Key Estimate and Judgement – Determining the lease term of contracts with renewal and
termination options
The Group determines the lease term as the non-cancellable term of the lease, together with any periods
covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by
an option to terminate the lease, if it is reasonably certain not to be exercised.
6.3 Other gains / (losses)
FINANCIAL REPORT —
NOTES TO THE FINANCIAL STATEMENTS
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
2020
8,895
2019
389,861
1,680,353 1,675,353
1,680,353 1,675,353
1,570,477 1,570,477
2,157
64
102,655
1,680,353 1,675,353
413
413
2,767
64
107,045
1
1
The amounts disclosed in the table below are the amounts recognised in the Statement of Comprehensive Income:
The above is a summary of the individual financial statements for Pact Group Holdings Ltd at 30 June. Pact Group
$’000
Significant items (excluding impairment expenses)
Transaction costs
Inventory write downs and related disposal costs
Net gain on lease modification
Reversal of contingent consideration obligation
Finalisation of acquisition consideration
Business restructuring programs
• restructuring costs
• asset write downs
Business restructuring programs total
Total significant items (excluding impairment expenses) before tax
Other (losses) / gains
Unrealised losses on revaluation of foreign exchange forward contracts
Loss on sale of property, plant and equipment
Realised net foreign exchange gains / (losses)
Total other losses
Total gains / (losses) before tax
2020
2019
(4,034)
-
4,544
30,000
(7,172)
(3,666)
(13,031)
-
-
-
(4,790)
(218)
(5,008)
18,330
(37,842)
-
(37,842)
(54,539)
(3,083)
(883)
99
(3,867)
14,463
(306)
(269)
(775)
(1,350)
(55,889)
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.
98
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FINANCIAL REPORT —
NOTES TO THE FINANCIAL STATEMENTS
6.5 Deed of Cross Guarantee
$’000
Closed group consolidated income statement
Profit / (loss) before income tax
Income tax (expense) / benefit
Net profit / (loss) for the year
Retained earnings at beginning of the year
Net profit / (loss) for the year
Dividends provided for or paid
Adjustment on adoption of AASB 16
Accumulated losses at end of the year
Closed group consolidated balance sheet
2020(1)
2019
32,412
(3,503)
28,909
(280,571)
28,909
49,156
(27,696)
(230,202)
(363,219)
36,665
(326,554)
61,653
(326,554)
(15,670)
-
(280,571)
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Contract Assets
Loans to related parties
Current tax assets
Other financial assets
Prepayments
Total current assets
Non-current assets
Trade and other receivables
Prepayments
Property, plant and equipment
Investments in subsidiaries
Investments in associates
Intangible assets and goodwill
Deferred tax assets
Other financial 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
Interest-bearing loans and borrowings
Other current financial liabilities
Total current liabilities
Non-current liabilities
Trade and other payables
Provisions
Interest bearing loans and bank borrowings
Other non-current financial liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Accumulated losses
Total equity
(1) Reflects the adoption of AASB 16 Leases from 1 July 2019. Comparatives have not been restated.
31,895
57,967
136,703
11,737
130,078
-
738
8,502
377,620
-
77,422
129,442
8,337
84,492
17,488
349
16,912
334,442
-
2,640
632,853
509,486
26,887
231,513
32,491
111
695
-
366,386
507,924
20,809
235,456
15,309
-
1,435,981 1,146,579
1,813,601 1,481,021
-
240,830
142,574
10,535
34,037
48,887
3,608
480,471
-
13,537
773,274
7,275
794,086
1,274,557
539,044
2,937
231,596
80,937
-
32,141
-
6,666
354,277
66,312
45,469
530,209
65
642,055
996,332
484,689
1,750,476 1,750,476
(985,216)
(981,230)
(280,571)
(230,202)
484,689
539,044
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 ‘Managing our liquidity risk’ at Note 4.3).
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:
$
Fees to Ernst & Young (Australia)
2020
2019
Fees for auditing the statutory financial report of the parent covering the group and
auditing the statutory financial reports of any controlled entities.
Fees for assurance services that are required by legislation to be provided by the auditor.
Fees for other assurance and agreed upon procedure services under other legislation or
1,467,675 1,443,221
-
15,000
contractual arrangements where there is discretion as to whether the service is provided
by the auditor or another firm.
Fees for other services:
Tax compliance
Tax advisory
Total fees to Ernst & Young (Australia)
54,806
169,222
86,245
109,000
113,000
45,000
1,732,726 1,770,443
1,732,726
1,770,443
Fees to other overseas member firms of Ernst & Young (Australia)
Fees for auditing the financial report of any controlled entities.
Fees for other assurance and agreed upon procedure services under other legislation or
539,213
505,000
contractual arrangements where there is discretion as to whether the service is provided
by the auditor or another firm.
Fees for other services:
Tax compliance
Tax advisory
Due diligence
Total Fees to other overseas member firms of Ernst & Young (Australia)
Total auditor’s remuneration
7,876
30,731
26,196
-
-
-
612,824
588,722
8,808
612,824
83,722
588,722
2,345,550 2,359,165
100
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NOTES TO THE FINANCIAL STATEMENTS
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
Inter-segment eliminations
Total Assets
Segment liabilities
$’000
Packaging and Sustainability
Materials Handling and Pooling
Contract Manufacturing Services
Total Segment Liabilities
Reconciliation to total liabilities(1):
Interest-bearing liabilities
Income tax payable
Deferred tax liabilities
Inter-segment eliminations
Total Liabilities
2020
1,256,413
457,840
248,189
2019
996,020
383,608
197,324
1,962,442 1,576,952
-
33,147
46
3,360
17,832
(954)
1,995,635 1,597,190
2020
629,491
150,668
122,280
902,439
2019
388,788
67,338
73,255
529,381
689,530
21,175
9,796
46
733,490
-
12,678
(954)
1,622,986 1,274,595
FINANCIAL REPORT —
NOTES TO THE FINANCIAL STATEMENTS
6.9 COVID-19 financial assistance and other support initiatives
During the year, the Group received financial assistance from Government and other key stakeholders in various
jurisdictions to support business operations adversely impacted by the COVID-19 pandemic. This assistance
included wages subsidies, property rent relief, waiver of payroll tax obligations and other miscellaneous subsidies
with a total benefit to the Group of $2.8 million, of which $0.7 million was in Australia. This benefit has been
recognised in other income within the Consolidated Statement of Comprehensive Income for the period. In
addition, the Group received early settlement of an income tax refund of $6.2 million, as a timing benefit through
COVID-19 assistance.
6.10 Subsequent events
Divestment of Contract Manufacturing segment
The Group is pursuing its options to sell the businesses in the Contract Manufacturing segment. The process will
recommence following a suspension during the year due to COVID-19.
Joint Venture with Cleanaway and Asahi Holdings
Pact, Cleanaway and Asahi Holdings (Australia) have formalised a joint arrangement to develop recycling capability in
Australia, expected to be operational by 2022.
Acquisition of Flight Plastics Ltd
The Group has entered into an agreement to acquire New Zealand’s only PET recycler, Flight Plastics NZ, a
leading recycler and provider of plastic trays and containers for grocery products in New Zealand, for a purchase
consideration of NZD $26million. The transaction remains conditional on approval by regulatory authorities.
In the opinion of the Directors, other than the matters aforementioned, there have been no other material matters
or circumstances which have arisen between 30 June 2020 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.
(1) These reconciling items are managed centrally and not allocated to reportable segments.
6.8 Geographic revenue
The table below shows revenue recognised in each geographic region that Pact operates in.
$’000
Australia
New Zealand
Asia
Total
2020
2019
1,270,816 1,291,238
289,258
253,580
1,809,158 1,834,076
287,329
251,013
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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 2020 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 2020.
This Declaration is made in accordance with a resolution of the Directors.
Raphael Geminder
Chairman
Dated 19 August 2020
Sanjay Dayal
Managing Director and
Group Chief Executive Officer
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47
SHAREHOLDER
INFORMATION
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PA C T 2 0 2 0 A N N UA L R E P O R T
O V E R V I E W P E R F O R M A N C E G O V E R N A N C E F I N A N C I A L R E P O R T S
S H A R E H O L D E R I N F O R M AT I O N
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PACT 2020 ANNUAL REPORT SHAREHOLDER
INFORMATION
The shareholder information set out below is based on the information in the Pact Group Holdings Ltd
Top 20 largest shareholders
share register as at 30 June 2020.
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 30 June 2020:
Name
Investors Mutual Ltd
Kin Group Pty Ltd
On market buy-back
Date of interest
5/6/2020
12/3/2020
Number of
ordinary shares
29,852,425
152,252,175
% of issued
capital
8.68%
44.26%
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
2,470,028
15,911,524
12,379,126
27,858,448
285,374,469
343,993,595
4,630
6,029
1,658
1,235
56
13,608
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).
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 Pty Ltd
Citicorp Nominees Pty Ltd
Manipur Nominees Pty Ltd
Stanningfield Pty Ltd
Argo Investments Limited
Salvage Pty Ltd
CS Third Nominees Pty Ltd
Citicorp Nominees Pty Ltd
National Nominees Limited
BNP Paribas Nominees Pty Ltd
Sandurst Trustees Limited
Neweconomy Com AU Nominees Pty Limited <900 Account>
S&J Capital Pty Limited
Gaja Consolidated Pty Ltd
Custodial Services Limtied
Mr Russell Stanley Barber
Warbont Nominees Pty Ltd
Forum Investments 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
40.26
21.92
4.30
3.49
1.64
1.64
1.21
1.06
0.94
0.89
0.78
0.42
0.39
0.33
0.29
0.26
0.26
0.23
0.22
0.17
80.71
19.29
138,499,371
75,402,416
14,785,986
12,001,980
5,650,250
5,650,250
4,172,314
3,635,929
3,219,107
3,066,107
2,699,375
1,434,025
1,331,000
1,124,704
1,014,339
911,569
898,295
793,213
753,617
600,000
277,643,847
66,349,748
There are no restricted equity securities in the Company. However, there are 1,883,417 ordinary shares which
are subject to voluntary escrow. These shares will cease to be subject to voluntary escrow 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.
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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
17 February 2021
25 February 2021
26 February 2021
7 April 2021
18 August 2021
26 August 2021
27 August 2021
7 October 2021
17 November 2021
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 31.
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
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