Cleaning
is easy with
White King
PENTAL LIMITED 2018 FINANCIAL REPORT 3
4
43
50
CONTENTS
Corporate
Governance
Statement
Directors’
Report
8
Remuneration
report -
audited
Auditor’s
Independence
Declaration
Chairman’s
Review
18
42
Independent
Auditors’
Report
Directors’
Declaration
34
47
Notes to the
Financial
Statements
54
Consolidated
statement of profit
or loss and other
comprehensive
income
48
Consolidated
Statement
of Financial
Position
Consolidated
Statement of Cash
Flows
52
Consolidated
Statement
of Changes in
Equity
Additional
Stock Exchange
Information
51
90
CHAIRMAN’S
REVIEW
On behalf of the Directors of Pental Ltd (the Company)
and its controlled entity (Pental and the Group), I am
pleased to present the 2018 Annual Report.
In the 2018 financial year, new entrants in Pental’s market segments caused significant
disruption in the Australian retail landscape in which Pental’s products compete.
Gross sales of $108.427 million were down 7.8% or $9.233 million on prior year, or 5.9%
or $6.853 million excluding the 53rd trading week in FY17. Trade spend of $32.760 million
was 0.7% higher than prior year (FY 17 Trade spend $32.536 million). The ratio of trade
spend to gross sales increased by 2.5% to 30.2% compared to the prior year of 27.7%. This
represents a significant increase of 9.0% in ratio of trade spend to gross sales.
Investing to defend its market share and shelf space in the Household cleaners (Toilet) and
Laundry (Liquid bleach) categories has allowed Pental to retain positions in the top 3 Aztec
rankings *
•
•
White King Power Toilet Gels, 700ml
- Lemon – FY18 2nd position, FY17 1st position
- Eucalyptus – FY18 3rd position, FY17 2nd position
White King Liquid Bleach Lemon
- 2.5 litre – FY18 1st position, FY17 1st position
- 1.5 litre – FY 18 2nd position, FY17 2nd position
*Aztec ranking report summary AUD$, FY 18 = MAT to 24/06/18 and FY 17 = MAT to 25/06/17
In response to the sustained change in market conditions, Pental reduced headcount across the
business in the second half of the year. The annualised savings of approximately $1.0 million will
be fully realised in FY19.
Pental maintains a focus on expenditure control while improving manufacturing efficiencies.
Profit delivery projects to the value of $0.401 million were achieved across various supply chain
and manufacturing facility initiatives in FY18.
Asia continues to be important to our strategic vision. Expansion into Asia continues to grow,
albeit slower than anticipated. Sales for FY18 were $1.909 million (FY17 $1.838 million). The
group’s realignment of our distribution network into the region during FY18 has simplified and
strengthen our position and will provide significant growth opportunities in the future.
Pental remains focused on driving long term profitable growth and generating solid total
shareholder returns. Whilst business fundamentals remain strong, the Board and executive
leadership team took the opportunity to review the five strategic pillars for growth in March 2018.
The review and realignment of Pental’s strategic objectives has allowed the Group to be in a
stronger position to respond to the external pressures and aggressive retail market environment
in which its products compete in.
White King Lemon
2.5L bleach maintains
#1 position in the
market for FY18.
PENTAL LIMITED 2018 FINANCIAL REPORT 5
Pental remains focused on driving
long term profitable growth and
generating solid total shareholder
returns. Whilst business
fundamentals remain strong, the
Board and executive leadership
team took the opportunity to
review the five strategic pillars for
growth in March 2018.
The review and realignment of
Pental’s strategic objectives has
allowed the Group to be in a
stronger position to respond to the
external pressures and aggressive
retail market environment in
which its products compete in.
CHAIRMAN’S REVIEW
Financial performance
As stated in market updates made throughout the 2018 financial year, in order for Pental to effectively compete, the
Group invested in marketing and price matching initiatives to protect and defend its markets share and shelf space.
These difficult trading conditions have resulted in a decline in Pental’s profitability in FY18 compared to FY17.
The Group’s underlying net profit after tax1 was $2.602 million for the year compared to $5.962 million in FY17.
Whilst the underlying EBIT2 of $3.783 million was disappointing, it was in line with the estimated underlying EBIT
reported in the ASX market trading update made by the Group on the 31 May 2018.
On a reported basis, the Group’s net loss after tax was $27.839 million for the year. The reported statutory result
was impacted by certain significant items including the non-deductible ACCC Penalty ($0.700 million) and related
legal fees ($0.295 million, net of tax) which were outlined in the market updates made throughout the year. In
addition, the Group has recognised an impairment of $29.446 million related to goodwill, which is a non-cash,
non-deductible expense arising from the impact of the sustained change in market conditions on the Group.
Notwithstanding the impairment of goodwill, impairment testing for the Group’s brand names continues to
support their recoverability, which reinforces the strength and health of Pental’s brands in the current disruptive
market environment.
Underlying EBITDA
Depreciation and amortisation
Underlying EBIT
Finance costs
Underlying profit before tax
Underlying income tax expense
Underlying net profit after tax
Significant items (net of tax):
Impairment of goodwill(ii)
ACCC Penatly and Costs(iii)
Reported (loss) / profit after tax
FY18 (i)
$’000
FY17 (i)
$’000
% Change
7,342
(3,559)
3,783
(40)
3,743
(1,141)
2,602
(29,446)
(995)
(27,839)
11,923
(3,376)
8,547
(44)
8,503
(2,541)
5,962
-
(112)
5,850
-38.4%
-55.7%
-56.0%
-56.4%
-100.0%
(i) Unaudited non-IFRS financial table (ii) Impaired of goodwill is not tax deductible (iii) Penalty of $700 thousand is not tax deductible
Following the approval by shareholders at the November 2016 Annual General Meeting, Pental exercised its option to
buy back the Shepparton property on 3 July 2017. The total acquisition cost inclusive of purchase price, stamp duty and
related costs was $7.312 million. Settlement of the property was completed on 2 August 2017.
Pental’s cash position continues to remain positive, with cash generated from operations of $7.310 million and net cash
of $7.045 million at the end of the financial year.
The Board has recommended payment of a fully franked final year dividend of 0.90 cents per ordinary share. This
brings the total dividend for the financial year to 1.50 cents per share (FY17: 3.25 cents per share), representing a
payout ratio of 78.5% on underlying net profit after tax. (2017: 74.3%).
1Underlying profit after tax represents reported statutory
profit after tax adjusted for significant items (net of related tax
effect) as referred to above. Refer to the table on this page for
reconciliation between underlying and reported statutory net
profit after tax.
2 Underlying EBIT represents profit before finance costs, income
tax and significant items as referred to above. Refer to the table
on this page for reconciliation between underlying EBIT and
reported statutory net profit after tax.
PENTAL LIMITED 2018 FINANCIAL REPORT 7
Looking forward
The price deflationary domestic retail market environment in which Pental’s products compete in, is expected to
continue into the foreseeable future.
Pental continues to investigate other initiatives to increase sales revenues and improve profitability. With the
success of the Unilever distribution partnership with the Pears Brand, Pental has embarked upon investigating
opportunities with other well established and recognised imported brands and products. Expansion of the
distribution segment of our business is a key element in our future growth strategy.
Pental has also invested in sales field support to further strengthen the presence of our products in store and on shelf.
The Pental product innovation pipeline has always been strong, demonstrated by the superior performance and
efficacy of our products, and is evolving to expand our product offering into new categories.
Pental will commence in conjunction with key customers to execute its brand realignment strategy. The brand
realignment strategy will focus on creating a power brand and sub brands within the household laundry liquid
wash segment.
To further realise growth opportunities within Asia, Pental is in the final stages of negotiating partnership
agreements with large established distributors in China and Vietnam.
Continuous improvement initiatives driving increased efficiencies and costs down and out of the business
remains a priority. The annualised benefit of the restructure that occurred in the second half of FY18 will be
realised in FY19. At the Shepparton manufacturing site, the current 20 plus year old boiler which runs on gas will
be replaced by 4 smaller boilers, significantly reducing the gas usage on the site.
The directors would like to thank all of our employees for their commitment and contribution during the year,
and in particular our executives and senior leadership teams within the business who have used their extensive
experience to navigate the dramatically changed market conditions. We also thank our shareholders, suppliers
and customers for their ongoing loyalty and support.
Peter Robinson
Chairman
CORPORATE
GOVERNANCE
STATEMENT
This Corporate Governance Statement sets out the
Company’s current compliance with the ASX Corporate
Governance Council’s Principles of Good Corporate
Governance and Best Practice Recommendations (Best
Practice Recommendations).
PENTAL LIMITED 2018 FINANCIAL REPORT 9
PENTAL LIMITED 2018 FINANCIAL REPORT 9
The Company’s website www.pental.com.au contains an Investor Section, which details the Company’s Corporate
Governance policies and procedures. This provides public access to all the information relevant to the Company
meeting its corporate governance obligations.
1.
1.1
BEST PRACTICE RECOMMENDATION
COMMENT
Lay solid foundations for management and oversight
A listed entity should disclose:
(a) the respective roles and responsibilities
of its board and management; and
(b) those matters expressly reserved to the board
and those delegated to management.
The Corporate Governance Policies include a Board Charter,
which discloses the specific responsibilities of the Board and
provides that the Board shall delegate responsibility for the
day-to-day operations and administration of the Company to
the Chief Executive Officer.
The responsibilities of the Board, which are reserved for the
Board and not delegated to management, include:
•
Oversight of the business and affairs of the Company;
•
Establishment of control and accountability systems;
•
•
•
Establishment with management of a strategic direction,
supporting strategies and operating performance objectives;
Appointing the Chief Executive Officer (CEO) and any
Executive Director; and
Reviewing and ratifying systems of risk management
and internal compliance and control, codes of conduct
and legal compliance.
The Board Charter is available on the Company’s website.
The Board has not established a Nominations Committee given
the size of the Board and the Company’s operations. The Board as
a whole performs the role of selection of potential new directors,
and appropriate checks are made before an appointment occurs.
The Company provides security holders with all material
information in its possession concerning the appointment
or re-appointment of a director in the Notice of Shareholder
Meeting concerning that appointment or re-appointment. A
recommendation of the Directors concerning that appointment
or re-appointment is also given.
1.2
A listed entity should:
(a) undertake appropriate checks before appointing
a person, or putting forward to security holders
a candidate for election, as a director; and
(b) provide security holders with all material
information in its possession relevant to a
decision on whether or not to elect or re-elect
a director.
CORPORATE GOVERNANCE STATEMENT
BEST PRACTICE RECOMMENDATION
COMMENT
1.3
1.4
A listed entity should have a written agreement with
each director and senior executive setting out the
terms of their appointment.
The company secretary of a listed entity should be
accountable directly to the board, through the chair,
on all matters to do with the proper functioning of the
board.
1.5
A listed entity should:
(a) have a diversity policy which includes requirements
for the board or a relevant committee of the board
to set measurable objectives for achieving gender
diversity and to assess annually both the objectives
and the entity’s progress in achieving them;
(b) disclose that policy or a summary of it; and
(c) disclose as at the end of each reporting period the
measurable objectives for achieving gender diversity
set by the board or a relevant committee of the
board in accordance with the entity’s diversity policy
and its progress towards achieving them and either:
(1) the respective proportions of men and women
on the board, in senior executive positions and
across the whole organisation (including how the
entity has defined “senior executive” for these
purposes); or
(2) if the entity is a “relevant employer” under the
Workplace Gender Equality Act, the entity’s most
recent “Gender Equality Indicators”, as defined
in and published under that Act.
1.6
A listed entity should:
(a) have and disclose a process for periodically
evaluating the performance of the board, its
committees and individual directors; and
(b) disclose, in relation to each reporting period,
whether a performance evaluation was undertaken
in the reporting period in accordance with
that process.
1.7
A listed entity should:
(a) have and disclose a process for periodically
evaluating the performance of its senior executives;
and
(b) disclose, in relation to each reporting period,
whether a performance evaluation was undertaken
in the reporting period in accordance with that
process.
The Company has a written agreement with each director and
senior executive setting out the terms of their appointment.
The company secretary is accountable directly to the Board,
through the chair, on all matters to do with the proper
functioning of the Board. The current company secretary is
a long-standing appointee and has direct contact with all
directors as and when required.
The Company does not have a specific policy or measurable
objectives for achieving gender diversity. The Board believes
the existing Code of Conduct anti-discrimination provisions
provides for this. The Company does not believe it is
appropriate to establish a quota system for measuring gender
diversity, and indeed such a quota system could itself lead to
discrimination.
As a “relevant employer” under the Workplace Gender Equality
Act, the company is compliant with the minimum requirements
of the act and intends to take appropriate action should it be
of the view that there is insufficient gender diversity within the
business.
As at 1 July 2018, there were 31 (2 July 2017, 29) women
employed representing 24.5% (2 July 2017, 21.82%) of total
employees, including a 1 female senior executive CEO -1
(2 July 2017, CEO -1, 0).
There was one female on the Board of Directors (2 July 2017,
1 female director).
The Company’s Corporate Governance Section includes the
Company’ 2018 Workplace Gender Equality public report and
the corresponding compliance notice issued to the company
on the 12th July 2018.
The Company does not have a formal policy for the periodic
evaluation of the Board. The Board does not consider that
a formal policy is necessary given the size of the Board and
operations of the Company.
The Board is responsible for assessing the performance of
the Chief Executive Officer. The Chief Executive Officer is
responsible for assessing the performance of all executives
within the Company, in conjunction with the Board.
Key performance indicators are set annually, and appraisals
are conducted at least biannually for all Pental employees.
A performance evaluation for the CEO and all executives has
taken place during the year under the process disclosed.
PENTAL LIMITED 2018 FINANCIAL REPORT 11
PENTAL LIMITED 2018 FINANCIAL REPORT 11
CORPORATE GOVERNANCE STATEMENT
BEST PRACTICE RECOMMENDATION
COMMENT
The Board has not established a Nominations Committee.
The Board as a whole carries out the functions of a
Nominations Committee, and Pental believes this is
appropriate for a Company of its size and business.
The Board seeks to ensure that it has an appropriate mix
of skills necessary to fulfil its obligations.
2.
2.1
Structure the board to add value
The board of a listed entity should:
(a) have a nomination committee which:
(1) has at least three members, a majority of
whom are independent directors; and
(2) is chaired by an independent director,
and disclose:
(3) the charter of the committee;
(4) the members of the committee; and
(5) as at the end of each reporting period, the
number of times the committee met throughout
the period and the individual attendances of
the members at those meetings; or
(b) if it does not have a nomination committee,
disclose that fact and the processes it employs to
address board succession issues and to ensure
that the board has the appropriate balance of
skills, knowledge, experience, independence and
diversity to enable it to discharge its duties and
responsibilities effectively.
2.2
A listed entity should have and disclose a board skills
matrix setting out the mix of skills and diversity that
the board currently has or is looking to achieve in its
membership.
Pental does not have a board skills matrix. The names and
details of Directors in office at the date of this Annual Report,
including skills, experience, term of office and expertise, are
included in the Directors’ Report Section of this Annual Report.
2.3
A listed entity should disclose:
(a) the names of the directors considered by the board
to be independent directors;
(b) if a director has an interest, position, association or
relationship of the type described in Box 2.3 but the
board is of the opinion that it does not compromise
the independence of the director, the nature of the
interest, position, association or relationship in
question and an explanation of why the board is of
that opinion; and
(c) the length of service of each director.
Directors of Pental are considered to be independent when they
are independent of management and free from any business
or other relationship that could materially interfere with the
exercise of their independent judgment. The following Directors
are considered to be Independent: Mr Peter Robinson, Mr John
Rishworth, Ms Kimberlee Wells and Mr John Etherington.
Mr Mel Sutton is not considered to meet the test of
independence as he has provided material consultancy services
to the Group during the previous three years.
Ms Wells is considered to be independent despite the fact that
her employer TBWA Group invoiced services valued at $81,840
during the period, as the value of service is not material to Ms
Wells as an employee of TBWA Group, or Pental.
The date of appointment of each Director is set out in the
Directors’ Report Section of this Annual Report.
2.4
2.5
2.6
A majority of the board of a listed entity should be
independent directors.
At the date of this report and during the period a majority of
directors were independent directors.
The chair of the board of a listed entity should be an
independent director and, in particular, should not be
the same person as the CEO of the entity.
The Chairman is an independent director. The Chief Executive
Officer is not the Chairman.
A listed entity should have a program for inducting
new directors and provide appropriate professional
development opportunities for directors to develop
and maintain the skills and knowledge needed to
perform their role as directors effectively.
The Company has an induction program for new directors.
The Company does not provide professional development
opportunities for Directors. Given the current skill sets of
each Director the Board considers that this is unnecessary.
PENTAL LIMITED 2018 FINANCIAL REPORT 13
3.
3.1
4.
4.1
4.2
BEST PRACTICE RECOMMENDATION
COMMENT
Promote ethical and responsible decision-making
A listed entity should:
(a) have a code of conduct for its directors,
senior executives and employees; and
(b) disclose that code or a summary of it.
Safeguard integrity in financial reporting
The board of a listed entity should:
(a) have an audit committee which:
(1) has at least three members, all of whom are non-
executive directors and a majority of whom are
independent directors; and
(2) is chaired by an independent director, who is not
the chair of the board,
and disclose:
(3) the charter of the committee;
(4) the relevant qualifications and experience of the
members of the committee; and
(5) in relation to each reporting period, the number of
times the committee met throughout the period and
the individual attendances of the members at those
meetings; or
(b) if it does not have an audit committee, disclose that fact
and the processes it employs that independently verify
and safeguard the integrity of its corporate reporting,
including the processes for the appointment and removal
of the external auditor and the rotation of the audit
engagement partner.
The board of a listed entity should, before it approves the
entity’s financial statements for a financial period, receive
from its CEO and CFO a declaration that, in their opinion,
the financial records of the entity have been properly
maintained and that the financial statements comply with
the appropriate accounting standards and give a true and
fair view of the financial position and performance of the
entity and that the opinion has been formed on the basis of
a sound system of risk management and internal control
which is operating effectively.
The Company has a formal Code of Conduct, which applies
to all Pental directors, employees, and contractors.
A summary of this policy is available on the Company
website within the Corporate Governance Section.
During the period, the Company adopted a Whistleblower
Policy. The Policy, which encourages reporting of
unethical, corrupt and illegal practices, and any breach
of Pental’s Code of Conduct, particularly concerning
compliance concerns around the Competition and
Consumer Act; the Australian Consumer Law, is also
available on the company website within the Corporate
Governance Section.
The Company’s Corporate Governance Section includes
the Securities Trading Policy, which regulates dealings by
directors, officers and employees in securities issued by
the Company.
The Board has established an Audit Committee. The Audit
Committee consisted of four members, the majority of
whom are independent directors.
The Chair of the Committee was and is not the Chair
of the Board during the period.
The names of the members of the Committee, details
of their qualifications and experience and details of the
number of meetings held during the period, are contained
in the Directors’ Report section of this Annual Report.
The Audit and Risk Committee operates under a Charter
which is available on the Company website within the
Corporate Governance Section.
The Board has obtained the relevant assurances
from management.
4.3
A listed entity that has an AGM should ensure that its
external auditor attends its AGM and is available to answer
questions from security holders relevant to the audit.
The external auditor attends its AGM and is available to
answer questions from security holders relevant to the
audit.
CORPORATE GOVERNANCE STATEMENT
BEST PRACTICE RECOMMENDATION
COMMENT
5.
5.1
6.
6.1
6.2
6.3
6.4
Make timely and balanced disclosure
A listed entity should:
(a) have a written policy for complying with its continuous
disclosure obligations under the Listing Rules; and
(b) disclose that policy or a summary of it.
Respect the rights of shareholders
A listed entity should provide information about itself and its
governance to investors via its website.
A listed entity should design and implement an investor
relations program to facilitate effective two-way
communication with investors.
A listed entity should disclose the policies and processes
it has in place to facilitate and encourage participation at
meetings of security holders.
The Company has in place a Continuous Disclosure Policy,
which has been implemented across the Company.
The Policy is available on the Corporate Governance
section of the Company website.
The Company provides information about itself and its
governance on its website. All policies and charters
concerning governance issues are located within a
dedicated section headed Corporate Governance.
The Company has in place a Shareholder Communication
Policy, which promotes effective communication with
shareholders. The Policy is available on the Corporate
Governance section of the Company website.
The Company has in place a Shareholder Communication
Policy, which promotes effective communication with
shareholders. The Policy is available on the Corporate
Governance section of the Company website.
A listed entity should give security holders the option to
receive communications from, and send communications to,
the entity and its security registry electronically.
The Company gives security holders the option to receive
communications from, and send communications to, the
entity and its security registry electronically.
PENTAL LIMITED 2018 FINANCIAL REPORT 15
BEST PRACTICE RECOMMENDATION
COMMENT
The Audit Committee referred to in section 4 also
oversees risk as part of its Charter.
7.
7.1
Recognise and manage risk
The board of a listed entity should:
(a) have a committee or committees to oversee risk,
each of which:
(1) has at least three members, a majority of whom
are independent directors; and
(2) is chaired by an independent director,
and disclose:
(3) the charter of the committee;
(4) the members of the committee; and
(5) as at the end of each reporting period, the number
of times the committee met throughout the period
and the individual attendances of the members at
those meetings; or
(b) if it does not have a risk committee or committees that
satisfy (a) above, disclose that fact and the processes
it employs for overseeing the entity’s risk management
framework.
7.2
The board or a committee of the board should:
(a) review the entity’s risk management framework at least
annually to satisfy itself that it continues to be sound; and
(b) disclose, in relation to each reporting period, whether
such a review has taken place.
The Audit and Risk Committee reviews the Company’s
risk management framework annually and specific risks
at each meeting. Key risks are referred to the Board
periodically, and management reports on whether risk is
being effectively managed.
7.3
A listed entity should disclose:
(a) if it has an internal audit function, how the function is
structured and what role it performs; or
(b) if it does not have an internal audit function, that fact and
the processes it employs for evaluating and continually
improving the effectiveness of its risk management and
internal control processes.
The Company does not have an internal audit function.
The Board considers that this is unnecessary given the
size of the Company’s operations.
The Audit and Risk Committee reviews the Company’s
risk management framework and risks generally. Where
necessary the Company has requested external advisors
to review particular operations to ensure internal controls
are effective.
7.4
A listed entity should disclose whether it has any
material exposure to economic, environmental and social
sustainability risks and, if it does, how it manages or intends
to manage those risks.
The Company does not have any economic, environmental
and social sustainability risks over and above those of
every commercial organisation, and not already disclosed
to security holders.
BEST PRACTICE RECOMMENDATION
COMMENT
The Board has established a Remuneration Committee.
The Remuneration Committee operates under a Charter,
which is available on the Company’s website.
Memberships of the Committee, and details of meetings
held during the period, are contained in the Directors’
Report section.
8.
8.1
Remunerate fairly and responsibly
The board of a listed entity should:
(a) have a remuneration committee which:
(1) has at least three members, a majority of whom are
independent directors; and
(2) is chaired by an independent director,
and disclose:
(3) the charter of the committee;
(4) the members of the committee; and
(5) as at the end of each reporting period, the number of
times the committee met throughout the period and
the individual attendances of the members at those
meetings; or
(b) if it does not have a remuneration committee, disclose
that fact and the processes it employs for setting the
level and composition of remuneration for directors and
senior executives and ensuring that such remuneration is
appropriate and not excessive.
8.2
A listed entity should separately disclose its policies and
practices regarding the remuneration of non-executive
directors and the remuneration of executive directors and
other senior executives.
8.3
A listed entity which has an equity-based remuneration
scheme should:
(a) have a policy on whether participants are permitted
to enter into transactions (whether through the use of
derivatives or otherwise) which limit the economic risk of
participating in the scheme; and
(b) disclose that policy or a summary of it.
Remuneration policies are set out in the Remuneration
Report section of this Annual Report.
When thought desirable the Board utilises specialist
third parties to benchmark executive and non-executive
director remuneration.
The Company has established an Executive Performance
Rights Plan that may result in the issue of securities to
executives. As those securities will be ordinary shares
there is no policy on permitting participants to enter
into transactions limiting the risk of participation in the
scheme.
PENTAL LIMITED 2018 FINANCIAL REPORT 17
PENTAL LIMITED 2018 FINANCIAL REPORT 17
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DIRECTOR’S
REPORT
The directors of Pental Limited
submit herewith the annual
financial report of the company
for the year (52 weeks) ended
1 July 2018. In order to comply
with the provisions of the
Corporations Act 2001, the
directors report as follows:
INFORMATION ABOUT
THE DIRECTORS
The names and particulars of
the directors of the company
during or since the end of the
financial year are:
Mr Peter Robinson
B.Eco (Mon)
Non-Executive Independent Chairman
Peter has a wealth of experience
in the manufacturing sector within
Australia and internationally. He was
the Chief Executive of ACI Packaging
Group and Vice President of Owens-
Illinois Inc, the parent company of
ACI Packaging Group. Previous roles
include Chief Operating Officer and
Director of BTR Nylex Limited, and
General Manager of Bowater Scott,
where he held substantial
marketing roles.
Appointed Director on
29 November 2002.
Appointed Chairman on
5 March 2009.
Member of the Audit Committee and
Chairman of Remuneration Committee.
Mr Mel Sutton
B.Com
Non-Executive Vice-Chairman
Mel has extensive experience and a
diverse background across a number of
key sectors, including food-production,
wholesale and retail; facility services;
apparel and footwear - wholesale and
retail; consumer goods - beverage; and
sporting goods - wholesale and retail.
Mel was CEO and a Managing Director
of Nike Pacific, Globe International,
Colorado Group and a Divisional Chief
Executive of George Weston Foods
Limited and Spotless Group. Previous
roles also include senior executive
positions with Lion Nathan and
Foster’s.
Mel is currently the CEO of Associated
Retailers Limited, a Member owned
Retail Co Operative which operates
across a number of key categories,
including Toys, Sport, Fishing, Camping
and Textiles, clothing and Footwear.
Appointed Director on
2 October 2013.
Member of Audit Committee
and Member of Remuneration Committee.
PENTAL LIMITED 2018 FINANCIAL REPORT 19
Ms Kimberlee Wells
Non-Executive Independent Director
Kimberlee has spent her career
building the brands of large blue-chip
organisations including ANZ, NAB,
Medibank, Qantas and Myer. She has
written countless digital transition
strategies for her clients and works
in almost daily partnership with the
digital pioneers of our time including
Google and Facebook. Kimberlee also
lectures with RMIT University, the
Australian Direct Marketing Institute
and other industry bodies.
Kimberlee is currently the CEO of
Whybin\TBWA Group Melbourne - a
tier one global advertising and digital
agency. Previous roles included senior
management positions with BBDO,
Wunderman and M&C Saatchi.
Appointed Director on
19 November 2015.
Member of Remuneration Committee.
The above named directors held office
during the whole of the financial year
and since the end of the financial year.
Any directorships of other listed
companies held by directors in the three
years immediately before the end of the
financial year are indicated above under
“experience and responsibilities”.
Mr John Rishworth
Non-Executive Independent Director
John has worked in the Fast Moving
Consumer Goods sector for over
30 years. He held significant senior
positions within Woolworths before
founding his own successful retail
brokerage business in 1987. Since
selling that business he has taken on
a number of consultancy assignments
within the retail sector.
Appointed Director on
9 September 2004.
Member of Audit Committee and Member
of Remuneration Committee.
Mr John Etherington
B.Ec, FCA, FAICD
Non-Executive Independent Director
John is a former senior partner of
Deloitte, where he held both senior
leadership positions and provided
audit and advisory services to public,
private and not for profit organisations,
with a particular specialisation on
rapidly-growing Australian-listed
entities. He is also currently a non-
executive director on a range of public
and private organisations.
Appointed Director on
2 April 2013.
Chairman of Audit Committee
and Member of Remuneration
Committee.
DIRECTORS’ REPORT
DIRECTORS’ SHAREHOLDINGS
The following table sets out each director’s relevant interest in shares and options in shares of the company or a
related body corporate as at the date of this report.
Directors
Fully paid ordinary shares
Number
Share Options
Number
Peter Robinson
4,210,927
Mel Sutton
–
John Rishworth
13,207
John Etherington
160,000
Kimberlee Wells
–
–
–
–
–
–
SHARE OPTIONS GRANTED TO DIRECTORS AND SENIOR MANAGEMENT
During and since the end of the financial year no share options were granted to directors or senior management,
however senior management were issued Rights pursuant to the Executive Performance Rights Plan as detailed
in the Remuneration Report.
Mr Oliver Carton
B Juris LL.B
Company Secretary
Oliver is a qualified lawyer with over 30 years’ experience in a variety of
corporate roles. He currently runs his own consulting business and was
previously a Director of the Chartered Accounting firm KPMG where he
managed its Corporate Secretarial Group. Prior to that, he was a senior legal
officer with ASIC.
Oliver is an experienced company secretary and is currently company secretary
of a number of listed and unlisted companies, ranging from Pental Limited to
the not for profit Melbourne Symphony Orchestra Pty Ltd.
PRINCIPAL ACTIVITIES
The principal activities of the Group during the course of the financial year were the manufacturing and
distribution of personal care and home products.
PENTAL LIMITED 2018 FINANCIAL REPORT 21
COMPANY OVERVIEW - TRUSTED BRANDS THAT GET THE JOB DONE
Pental Limited has a portfolio of leading brands, which are household names in Australia and New Zealand. We
are a branded market leader and the largest local manufacturer of bar soaps, liquid bleach and firelighter cubes.
Pental has grown through a focussed dedication to customer service, efficiency and quality. This foundation
makes Pental a trusted manufacturer and distributor of personal, household and commercial products across
Australia and New Zealand with a growing presence in Asia.
For more than 60 years we have worked hard to stay true to our Australian heritage, investing in our
manufacturing plant in Shepparton, Victoria.
There are four distinctive production plants at the Shepparton site, comprising:
• Household Cleaning Liquids plant;
• Laundry and Dishwashing Liquids plant;
• Bar Soap plant;
• Firelighters plant.
Pentals Core Brands
Personal Care
Household Cleaning
Laundry
Fire needs
Kitchen
Pental most recognised brands include:
• White King in Australia;
• Country Life and Velvet in Australia;
• Softly in Australia and New Zealand;
• Little Lucifer in Australia and New Zealand;
• Janola and Sunlight in New Zealand;
• Jiffy in Australia;
Across Australia and New Zealand Pental’s products are stocked in all major grocery retailers and convenience
stores that sell personal care and household cleaning products.
Pental continues to expand into the commercial and industrial channels.
We continue to expand our distribution throughout Asia, through developing products and pack sizes that are suitable
for these new markets. The Group continues to invest and expand presence in China, Vietnam and Thailand.
This has been achieved mainly through creating partnerships with strategically aligned distributors. We are also
exploring opportunities around the e-commerce platform.
We will continue to investigate and explore other overseas markets to expand our business.
Recently, we have strengthened the research and development technical team at our manufacturing facility
recruiting chemists that specialise in the products and categories we develop for our markets.
DIRECTORS’ REPORT
REVIEW OF OPERATIONS
Underlying financial perfomance
FY18 (i)
FY17 (i)
Change
$’000
$’000
$’000
%
Gross Sales
108,427
117,660
(9,233)
-7.8%
Trade spend rebates & discounts
(32,760)
(32,536)
(224)
-0.7%
Net Sales Revenue
Trade spend to gross sales
Underlying EBITDA
EBITDA to gross sales
75,667
30.2%
7,342
6.8%
82,124
27.7%
11,923
10.1%
(9,457)
(4,581)
-11.1%
-2.5%
-38.4%
-3.3%
Depreciation & Amortisation
(3,559)
(3,376)
(183)
-5.4%
Underlying EBIT
EBIT to gross sales
Underlying net profit after tax
3,783
3.5%
2,602
8,547
7.3%
(4,764)
-55.7%
-3.8%
5,962
(3,360)
-56.4%
Reported Profit after tax
(27,839)
5,850
(33,689)
-100.0%
Shareholder metrics
Basic EPS - cents per share
Underlying Basic EPS - cents per share (iii)
Total Dividends declared - cents per share
Cashflow and capital management
(20.43)
1.91
1.50
4.29
4.38
3.25
-100.0%
-56.4%
-53.8%
Working Capital (ii)
Net Cash/(Debt)
14,003
7,045
16,668
11,660
(2,665)
16.0%
(4,615)
-39.6%
(i) Unaudited non-IFRS financial table
(ii) Receivables plus inventory less trade and other payables
(iii) Underlying Basic EPS represents underlying net profit after tax dividend by the number of ordinary shares on issue during FY18 and
FY17 of 136,250,633 used in the calculated of reported basic EPS.
PENTAL LIMITED 2018 FINANCIAL REPORT 23
Underlying financial performance
•
Gross sales of $108.427 million were down 7.8% or $9.233 million on prior year, or 5.9% or $6.853 million excluding the
53rd trading week in FY17.
•
•
•
•
•
•
The domestic retail market in which the Company’s products compete in Australia has seen some dramatic changes
in FY18. As a direct result the Company’s gross sale were down 9.2% or $8.706 million on last year, or $7.3% or $6.782
million excluding the 53rd trading week in FY17.
New Zealand market share in several categories such as Toilet, Household Cleaning and Dish Wash remains solid. Gross
sales revenue in NZD$ were down $0.124 million on prior year or 0.56%. Excluding the 53rd trading week in FY17 gross
sales revenue in NZD$ were up $0.329 million or 1.5%.
Expansion into Asia continues to grow, albeit slower than anticipated. Gross sales increased marginally on FY 17 by
$0.071 million to $1.909 million in FY18. The Group is in the final stages of finalising partnership agreements with large
established distributors based in China and Vietnam.
Trade spend (rebates, promotional activities and discounts) represented 30.2% of gross sales in FY18 compared to 27.7%
in FY17. The Group’s market announcements during FY18 consistently noted the highly disruptive market place caused
by new entrants and the Group’s strategic decision to defend its market share and shelf space particularly in the laundry
and toilet (household cleaners) categories. As a result of this decision trade spend investment increased significantly on
the prior year comparative period on a lower gross sales revenue base.
Net sales revenue (gross sales minus trade spend) of $75.667 million was down 11.1 % or $9.457 million on last year, or
9.2% excluding the 53rd trading week in FY17.
Underlying EBITDA (Earnings before Interest, Tax, Depreciation and Amortisation and significant items) of $7.342 million
was $4.581 million (or 38.4%) down on prior year. Underlying EBIT (Earnings before Interest and Tax and significant
items) of $3.783 million was $4.764 million (or 55.7%) down on prior year excluding non-operating significant items
below:
- ACCC related expenses: ACCC Penalty $0.700 million, ACCC legal costs $0.421 million and $0.160 million in the
prior year - refer “Proceedings Against the Company” section of the Directors’ Report,
- Impairment of goodwill (non-cash item) $29.446 million, refer to Note 14 “Goodwill” in the notes to the financial
statements section.
•
Underlying results exclude the effect of non-operating items that are unrelated to the underlying performance of
the business. The Group believes that presenting underlying results provides a better understanding of its financial
performance by facilitating a more representative comparison of financial performance between financial periods.
•
Underlying results have been presented with reference to the Australian Securities and Investment Commission
Regulatory Guide 230 “Disclosing non-IFRS financial information”.
DIRECTORS’ REPORT
A reconciliation between reported statutory profit and underlying profit is presented below:
Underlying EBITDA
Depreciation and amortisation
Underlying EBIT
Finance costs
Underlying profit before tax
Underlying income tax expense
Underlying net profit after tax
Significant items (net of tax):
Impairment of goodwill (ii)
ACCC Penalty Costs (iii)
FY17 (i)
$’000
FY16 (i)
$’000
% Change
-38.4%
-55.7%
-56.0%
-56.4%
7,342
(3,559)
3,783
(40)
3,743
(1,141)
2,602
(29,446)
(995)
11,923
(3,376)
8,547
(44)
8,503
(2,541)
5,962
-
(112)
Reported (loss) / profit after tax
(27,839)
5,850
-100.0%
(i) Unaudited non-IFRS financial table (ii) Impaired of goodwill is not tax deductible (iii) Penatly of $700 thousand is not tax deductible
•
While underlying EBIT was predominately driven by the disruptive domestic sales market, operational costs
continued to be driven down:
o occupancy expenses decreased by $0.599 million, driven predominantly by the acquisition of the
Shepparton site that was settled on 2nd August 2017.
o the decrease in tallow, a commodity based raw material used in Country Life soaps.
o profit delivery project savings of $0.576 million, with $0.401 million achieved across various supply chain
and the manufacturing facility initiatives and $0.175 million in sales and marketing.
However, these significant savings were offset by:
o increases in utility costs. The cost of electricity increased by 10% on the prior period whilst the cost of gas
increased by 126% on the prior period.
o freight out and distribution costs to gross sales increased by 0.15% to 5.57%, driven predominately by
increase in off location storage costs (freight costs as a % of gross sales remain in line with FY17). The
increase in cost as a % of gross sales was offset by lower sales volume which contributed to the favourable
expense movement of $0.336 million or 5.27% on the prior year.
o repairs and maintenance increased by $0.130 million on the prior year driven by an increased focus on
preventative maintenance work carried out through the year.
o an increase in depreciation and amortisation of $0.183 million, $0.170 million attributable to the acquisition
of the Shepparton site on 2nd of August 2017.
•
The consolidated net profit after tax and before goodwill impairment for the year (52 weeks) ended 1st July
2018 was $1.607 million (2018: $5.850 million). The consolidated net loss including goodwill impairment was
$27.839 million.
PENTAL LIMITED 2018 FINANCIAL REPORT 25
Shareholder metrics
•
Reported statutory basic loss per share of 20.43 cents decreased from earning per share of 4.29 cents in 2017. On
an underlying basis, (excluding significant items) basic earnings per share was 1.91 cents, a decrease of 2.47 cents
compared to underlying basic earnings per share in the prior period of 4.38 cents.
•
The total dividend for the 2018 financial year is 1.50 cents per ordinary share, representing 78.5% (2017: 74.3%) of the
full-year underlying net profit after tax and consists of :
– Interim fully franked dividend of 0.60 cents per ordinary share, which was paid 28 March 2018; and
– Proposed final fully franked dividend of 0.90 cents per ordinary share, payable to shareholders on 28 September
2018, with a record date of 10 September 2018.
Cash generation and capital management
Operating cash flow of $7.310 million increased by $0.695m on last year, due to lower taxes paid in the current year compared to
FY 17 and reduced working capital more than offsetting the reduction in operating profit.
Net working capital (receivables, inventories less trade and other payables) of $14.003 million was lower than prior year by $2.665
million. Inventory of $10.970 million increased by 6.5% or $0.673 million on FY 17, represented by a $0.200 million increase in
critical engineering spares and $0.415 million in finished goods inventory net of stock obsolesce provisions.
The net debtors and creditors position improved by $3.338 million compared to the prior year due to the combination of a
reduction in sales revenue and in the receivable days outstanding.
Capital investment of $8.246 million increased by $5.180 million on last year. The major capital investment initiatives undertaken
during the FY 18 year included the acquisition of the Shepparton property which was settled on 2nd August 2017 for $7.312 million
and $0.435 million invested in the soap plant. The soap plant investment focused on line integration and increasing production
output to deliver cost reductions and support future growth of single bar soaps for supply in both local and export markets.
The Company’s closing net cash position of $7.045 million with no debt will allow it to capitalise on future profit opportunities as
they arise.
CUSTOMER
Customer are
at the centre of
everything we do
INNOVATION
Embracing new
ideas, creating new
opportunities
VALUES
We always act
with Integrity
and Respect
QUALITY
Focused on Quality
& Continuous
Improvement
PEOPLE
A united
Team Pental
SAFETY
Must always
come first
DIRECTORS’ REPORT
STRATEGIC OBJECTIVES & ACTIVITIES - FIVE KEY PILLARS TO DRIVE GROWTH
Pental’s vision is to be a leading supplier of shelf stable (non-food) products to its chosen markets built around a reputation
of delivering quality, innovation and sustainability to the satisfaction of customer needs whilst enhancing shareholder value.
Pental remains focused on what we believe are the highest-value opportunities for driving long-term profitable growth and
generating solid total shareholder returns.
The five strategic pillars to drive growth were reviewed by the Board and the executive leadership team in March 2018.
The review and realignment of Pentals strategic objectives ensures that the company is well placed to face the external
pressures within the aggressive and highly competitive retail market that Pental’s product categories compete in.
A review of FY18 outcomes and progress follows:
Strategic Objective
Outcomes and progress in FY18
Driving Sales Growth
• Defending our position
• Investing in Field Support
• Promotional Effectiveness
• Review Product Contributions
• Building Strong Trade Support
FY18 has seen dramatic changes in the Domestic Market Place, with
Consumers trained to purchase General Household Products on Half
Price Promotional Activity. This has brought about One Brand Erosion,
with Consumers now having as many as 3 Brands in their shopping
repertoire of preferred products. This switching of brands has placed
a lot more emphasis on Manufacturers and Suppliers to place product
and packaging Innovation as their most important point of difference to
attract and maintain Customer Loyalty.
Brand alone does not hold Loyalty anymore as different manufacturers
and Brands are on deep price promotion each week.
Consistent with market announcements made throughout FY18, in
order to effectively compete in the dramatically changed domestic
retail trading conditions in which Pentals products compete in, Pental
invested heavily in marketing and price matching initiatives to protect
and defend its market share and shelf space.
PENTAL LIMITED 2018 FINANCIAL REPORT 27
Strategic Objective
Outcomes and progress in FY18
Develop New Products and
Sales Channels
• Launch New Products
• White King Abrasive Bathroom Wipes were developed throughout
the year, hitting Retail shelves in July 2018. White King’s tough new
bathroom wipes showcase scratch-free nodules meaning even the
toughest stains or dried on soap scum is no match for White King. The
wipes are impregnated with a bleach free solution the kills 99.99% of
Germs, smell great and leaves your whole bathroom hygienically clean.
Competitively priced to provide consumers with great value, the White
King Abrasive Bathroom Wipes will be an important contributor to the
growth of the brand within the Household Cleaning Category in FY19.
• White King’s range of Australian Made Toilet Gels have been a huge
success in FY18. The Eucalyptus and Lemon variants remain the 2nd
and 3rd best selling products on the market. The portfolio as a whole
maintained 17.5% Dollar Share of the Manual Toilet Cleaning Segment.
That strength is set to continue in FY19 with the incremental ranging
of a new Citrus variant, launching into Coles (June 2018) and Metcash
(Feb 2019).
• White King’s In-Bowl and In-Cistern Toilet products were re-launched
in a resealable upright pouch pack. This Segment first format enables
consumers to lock in the freshness when storing their remaining
In-cistern block or seal away the germs of their used Toilet Cage.
The all new packaging format also provided White King with a valuable
point of difference from its competitors.
•
•
•
The re-launch of Huggie’s Time Saving range of Fabric Softeners
enjoyed a steady start in Independent Retailers. The new Huggie
Easy Iron, Huggie Quick Dry and Huggie Fast Cycle Fabric Softeners
demonstrate Pental’s commitment to innovation and high-quality
Australian products
Little Lucifer’s foodie positioning was further solidified with the range
of 2 Ready-To-Use Smoking Wood Chips products in July 2017. The
Ready-To-Use format combined Australians love of BBQ with emerging
American food trends.
Similarly, the Jiffy brand, in the fire needs category, was repositioned
as the “outdoor living” firelighter brand, where Jiffy is the Number 1
selling product in grocery firelighters*. The July 2017 Launch of the Jiffy
Firesticks, a product, with a smaller footprint making them ideal for
camping, was a step in the right direction for this much loved brand.
DIRECTORS’ REPORT
Strategic Objective
Outcomes and progress in FY18
Fill the new product ideas
•
(ideation) pipeline
•
Brand Protection
•
•
•
•
•
FY18 saw the development of an in-depth product pipeline with
strategic focus on the Categories Pental’s products compete in. The
groundwork carried out in FY18 has laid the foundation for a large
scale push to enter major Segments such as Multi-Purpose Cleaners,
Automatic Dish Wash, Preimmunised Bar Soaps and Specialised
Fabric Care.
Complementing the push into new, major Segments is the re-
development and improvement of Pental’s products in existing
segments, ensuring Pental remains at the forefront of quality and
innovation. FY19 will see the re-launch of all new Toilet Cleaning
products within the In-Bowl and In-Cistern Segments as well as
Capital works to improve and bring innovation to our Toilet Gels.
FY18 delivered clear, strategic direction for Pental’s two Personal
Care Brands. Market research was conducted and centred around
re-positioning, strategic direction and product development. This
enabled the development of strategically focused Velvet and Country
Life Brand Plans for FY19 and beyond. The FY19 release of Premium
bar soaps and the re-development of the Brand’s two core ranges
will greatly improve brand presence, re-invigorate current consumer
perceptions, attract new consumers and increase profitability. All this
will be achieved whilst maintaining of quality that remains synonymous
with Pental’s two heritage Brands. Aligning to both Category and
Consumer trends, the new product development with feature fresh
new fragrances, value added inclusions, a unique, modern shape and
exciting packaging.
FY17 saw White King commence its biggest Brand Refresh in 4 years
aligning it with today’s consumer expectations, market trends, new
packaging technologies and the changing dynamic of the broader
FMCG industry. The packaging refresh uses vibrant colour, simplified
features and benefits and fragrance cues to position the Brand as
‘your everyday powerful clean’. The new look and feel provides strong
shelf presence ensuring our products are eye catching and have great
impact at the point of purchase.
FY18 saw further alignment between Pental’s Brands and the
Australian Made Campaign. 16 new products across 4 brands were
updated to include the green and gold logo. The on pack logo reinforces
our commitment to provide Australian consumers with high quality,
affordable, locally manufactured consumer good.
• Mass Reach Marketing Campaigns were actioned throughout FY18 for
the White King, Little Lucifer and Sunlight Brands. These campaigns
supported the launch of new product development (NPD) as well as
featured core products ensuring a halo effect was achieved across the
broader product mix.
•
•
Little Lucifer Firelighters and Wood Chips appeared on Network 10’s
My Market Kitchen and Ben’s Menu. Featured in over 15 different recipe
segments then amplified via social media the Little Lucifer campaign
resulted in a combined reach of over 5 million targeted Australians.
Sunlight launched into the Automatic Dish Wash Segment with the
release of Tri-layered Dish Wash Tablets and a Machine Cleaning
tablet. Digital and Print based campaigns, utilising Bauer’s mass reach
titles (NZ Woman’s Weekly and NZ Woman’s Day) and an effective
social media amplification strategy saw Sunlight Branded products
reach 1.2M New Zealanders.
• White King’s commitment to the 2017 Woolworths Spring Cleaning
campaign secured in-store sales activations such as off-location displays
and shelf ticketing. It also provided point of purchase marketing assets
and catalogue exposure. The campaign enjoyed a strong Sales ROI while
continuing a healthy relationship with a key customer.
PENTAL LIMITED 2018 FINANCIAL REPORT 29
Strategic Objective
Outcomes and progress in FY18
•
Grow Margin Contribution
•
Cost of Good reduction initiatives have been identified throughout FY18
and will form the base of a number of profit delivery projects in FY19.
• New Policy and Procedure standards pertaining to Margin Contribution
expectations have been put in place to ensure all divisions of Pental are
focused on driving GM Growth.
Value Added Projects
•
•
•
•
•
Creating Partnerships
Brand Consolidation
New Technology
New Agencies
New Segments
•
Pental has commenced the Brand Consolidation Strategy in
conjunction with key customers ensuring the overall Brand revenue is
not compromised. This strategy incorporates improving both product
formulations and packaging designs.
• We have recruited two Industrial Chemist to the Pental technical Team.
This team is focusing on the best available technology to improve the
performance and efficacy of our Products.
•
The expansion of the Product Innovation pipeline will give Pental the
opportunity to expand its products into New Categories.
Strategic Objective
Outcomes and progress in FY18
Export Market
•
•
•
Grow New Zealand
China Strategy
Vietnam
Pental continues the strong partnership with our Auckland based sales and
distribution agent.
After one year of planning and one year of testing the market, Pental is in
the final stages of finalising partnership agreements with large established
Distributors based in China and Vietnam.
Pental is actively exploring opportunities in neighbouring regions.
Strategic Objective
Outcomes and progress in FY18
Manufacturing Continuous
Improvement
• Cost Savings
• CAPEX to drive business growth
• Delivering on Quality Products
• Enhance preventative
maintenance processes
Manufacturing continuous improvement focused on improving labour
and line efficiency through labour reduction strategies, CAPEX initiatives,
reduced change over times increasing line availability time, and preventative
maintenance programs.
Supply chain and procurement initiatives focused on replacing road freight
with expanding rail networks on the eastern seaboard, re-negotiating sea
freight costs for exports and working closely with raw material and packaging
suppliers on cost reduction opportunities to offset inflationary impact of rising
commodity prices.
Capital investment completed in the soap plant focused on line integration
and increasing production output to deliver cost reductions and support future
growth of single bar soaps for supply in both local and export markets.
Integration of quality management system for both manufactured and
purchased products completed with focus on providing high quality products
delivered first time.
Preventative maintenance processes have improved with further development
in computerised maintenance management systems (CMMS) and predictive
tools and technologies being deployed to enhance an already robust system.
As the five pillars remain the cornerstone of our approach in organically growing the business, we also continue to search
for new partnerships, distributorships and acquisitions that will complement the Company’s product range/expertise, and
scope to leverage its infrastructure and/or provide the ability to expand into new channels.
DIRECTORS’ REPORT
OPERATIONAL RISKS
There are a number of operational risks, both specific to Pental and of a general nature, which may impact the future
operating and financial performance of the Group. There can be no guarantee that Pental will achieve its objectives or that
forward looking statements will be realised. The operating and financial performance is influenced by a variety of general
economic and business conditions including levels of consumer spending, inflation, interest and exchange rates, and certain
raw material prices such as tallow and/or sustainable palm noodles used in some soap products, and the price of resin
affecting the cost of bottles. The specific material business risks faced by the Group and how the Group manages these
risks are set out below:
•
Competition: The majority of Pental’s branded products
are sold in supermarkets in Australia and New Zealand,
which are dominated by two major participants in
Australia. These retailers continue to aggressively review
their product mix and move towards their own or private
label products. This has the potential to lead to the
delisting of Pental’s branded products by one or both of
those retailers, which could cause a significant drop in
sales of any product delisted. The two major participants
continue to engage in an aggressive campaign for market
share, primarily through product price reductions and
private label diversification. The current price deflationary
retail market environment does not allow Pental to pass
on price rises, despite rising input costs, thus impacting
margins. New entrants in Pental’s market segments has
also caused significant disruption in the Australian and
New Zealand retail landscape, exacerbating the already
aggressive competitive retail market environment in which
Pental competes in. Pental has made a strategic decision
to invest in and defend its market share and shelf position
in two key product categories. The investment through
promotional activity impacts margin. This situation is not
expected to change in the short to medium term. Pental
believes it can continue to successfully operate in the
Fast Moving Consumer Goods market through strong
product innovation and managing its product sourcing and
manufacturing costs;
•
Product sourcing: Pental relies on a range of parties
for its product-sourcing strategy. Any change in existing
relationships (including the termination of any key supply
arrangements) or any change in terms or conditions
of overseas/local suppliers and any change in the
political or economic environment may lead to material
adverse changes to Pental’s operational and financial
performance. Pental is continually refining its sourcing
arrangements and has in many instances dual sourcing
arrangements that facilitates in reducing this risk;
•
•
•
Supply chain: Pental has established an extensive and
reliable supply chain that allows it to procure and deliver
products to customers in a timely and efficient manner.
Disruption to any aspect of this supply chain could have
a material adverse impact on Pental’s operational and
financial performance. Pental’s ongoing review of supply
chain costs and the corresponding change of supply
chain arrangements with minimal disruption, shows that
Pental is able to effectively manage this risk;
Loss of key personnel: Pental’s future success depends
to a significant extent on the retention of key personnel,
in particular its management team. These individuals
have extensive experience in, and knowledge of the
market Pental operates in and Pental’s business. The
loss of key personnel and the time taken to recruit
suitable replacements or additional personnel could
adversely affect the Company’s future financial
performance. The Board has reviewed the organisational
structure of the business and will continue to do so to
ensure the best people are retained, whilst investing in
developing other key people in the business; and
Damage to Pental’s brands: the reputation and value
associated with Pental’s brand names could be adversely
impacted by a number of factors including failure to
provide customers with the quality of products they expect
and disputes with third parties such as suppliers or
customers or adverse media coverage. Significant erosion
in the reputation of, or value associated with, Pental’s
brands could have an adverse effect on Pental’s future
financial performance. Pental believes that its processes
and systems, and proactive tracking and management of
any disputes, minimises this risk.
PENTAL LIMITED 2018 FINANCIAL REPORT 31
CHANGES IN THE STATE OF AFFAIRS
ENVIRONMENTAL REGULATIONS
During the financial year there were no significant changes
in the state of affairs of the Group, other than as referred to
in this Annual Report.
The Shepparton manufacturing site is subject to the
Environmental Protection Act 1970, although due to current
practices Pental is not required to have an EPA license.
FUTURE DEVELOPMENTS
Information regarding likely developments in the operations
of the Group in future financial years is set out in the Review
of Operations and elsewhere in the Annual Report.
SUBSEQUENT EVENTS
Pental continues to investigate other initiatives to increase
sales revenues. With the success of the Unilever distribution
partnership with the Pears Brand, Pental has embarked
upon investigating opportunities with other well established
and recognised imported brands and products.
There has not been any matter or circumstance occurring
subsequent to the end of financial year that has significantly
affected, or may affect, the operations of the Group, the
results of those operations, or the state of affairs of the
Group in future financial years.
DIVIDENDS
In respect of the year (52 weeks) ended 1 July 2018 an
interim fully franked dividend of 0.60 cents per ordinary
share was paid on 28 March 2018, and the directors have
declared the payment of a final fully franked dividend of 0.90
cents per ordinary share, payable to shareholders on 28
September 2018, with a record date of 10 September 2018.
The total dividend for the FY18 financial year of 1.50 cents
per share represents a payout ratio of 78.5% of net profit
after tax and before significant items.
In the prior year ended 2 July 2017, the total dividend paid
was 3.25 cents per ordinary share, representing a payout ratio
of 74.3% of net profit after tax and before significant items.
Pental has a trade waste agreement with Goulburn Valley
Water which stipulates limits on volume and content of
our trade waste emissions. Pental proactively monitors the
trade waste discharged from site as part of that agreement.
Continuous improvement initiatives focussing on trade
waste system dilution capital improvements, internal hard
waste segregation management and compliance cleaning
programs are in progress.
Pental continues to be focussed on working with authorities
and waste service providers to implement sustainable
solutions.
Environmental performance is reported monthly to the site
management group and at Board meetings.
SHARES UNDER OPTION OR ISSUED
ON EXERCISE OF OPTIONS
There were no unissued shares under options as at the date
of this report.
INDEMNIFICATION OF OFFICERS
AND AUDITORS
During the financial year, the company paid a premium in
respect of a contract insuring the directors of the company
(as named above), the company secretary, Oliver Carton,
and all executive officers of the company and of any related
body corporate against a liability incurred by such a director,
secretary or executive officer to the extent permitted by the
Corporations Act 2001. The contract of insurance prohibits
disclosure of the nature of the liability and the amount of
the premium.
The company has not otherwise, during or since the end
of the financial year, except to the extent permitted by law,
indemnified or agreed to indemnify an officer or auditor
of the company or of any related body corporate against a
liability incurred as such an officer or auditor.
DIRECTORS’ REPORT
DIRECTORS’ MEETINGS
The following table sets out the number of directors’ meetings (including meetings of committees of directors) held during
the financial year and the number of meetings attended by each director (while they were a director or committee member).
During the financial year, 12 Board, 4 Audit Committee and 2 Remuneration Committee meetings were held.
Directors
Peter Robinson
Mel Sutton
John Rishworth
John Etherington
Kimberlee Wells
Board of Directors
Audit Committee
Remuneration Committee
Eligible to
Attend
Attended
Eligible to
Attend
Attended
Eligible to
Attend
Attended
12
12
12
12
12
10
11
11
11
10
4
4
4
4
–
3
3
3
4
-
2
2
2
2
2
0
2
2
2
2
PROCEEDINGS AGAINST THE COMPANY
On 13 December 2016 ACCC commenced proceedings
concerning claims made by Pental on the packaging for its
White King Bathroom Flushable Wipes and on its websites
that the wipes were flushable and/or that they disintegrate
like toilet paper, which the ACCC alleged to be false,
misleading or deceptive conduct.
The product packaging was inherited by Pental from
a major international company with a long history of
selling consumer products. Accordingly, Pental held the
belief that the labelling and packaging of the White King
Bathroom Wipes were in conformity with all relevant legal
requirements.
The ACCC issued proceedings despite Pental’s proactive
approach in removing the claims of concern to the ACCC
and the fact that other larger multinational companies
continued to sell similar products labelled as ‘flushable’
but were not subject to the same proceedings.
On the 9th and 10th April 2018 the Federal Court heard
the matter and, on the 10th April, handed down its
determination on penalty. The penalty imposed was
$700,000. Pental was also required to pay ACCC’s costs
of $195,000.
In addition to the penalty and incurring the ACCC’s costs,
Pental has agreed to the implementation of an ACCC
Compliance program to monitor Pental’s compliance with
Australian Consumer Law.
The penalty and the ACCC’s costs are included in the
2018 financial year statutory result and do not impact the
company’s underlying performance.
There are no other proceedings being brought against the
company.
PENTAL LIMITED 2018 FINANCIAL REPORT 33
NON-AUDIT SERVICES
Details of amounts paid or payable to the auditor for non-audit services provided during the year by the auditor are outlined
in Note 31 to the financial statements.
The directors are satisfied that the provision of non-audit services during the year, by the auditor (or by another person
or firm on the auditor’s behalf) is compatible with the general standard of independence for auditors imposed by the
Corporations Act 2001.
The directors are of the opinion that the services as disclosed in Note 31 to the financial statements do not compromise the
external auditor’s independence, based on advice received from the Audit and Risk Committee, for the following reasons:
• all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity
of the auditor, and
• none of the services undermine the general principles relating to auditor independence as set out in Code of Conduct
APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional & Ethical Standards
Board, including reviewing or auditing the auditor’s own work, acting in a management or decision-making capacity
for the company, acting as advocate for the company or jointly sharing economic risks and rewards.
AUDITOR’S INDEPENDENCE DECLARATION
The auditor’s independence declaration is included on page 42 of the annual report.
ROUNDING OFF OF AMOUNTS
The Company is a company of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument
2016/191 dated 24 March 2016, and in accordance with that Corporations Instrument, amounts in the Directors’ Report and
financial report are rounded off to the nearest hundred thousand dollars, unless otherwise indicated.
REMUNERATION
REPORT - AUDITED
This remuneration report details the nature and amount of
remuneration for each director and senior management personnel
of Pental Limited.
The directors and other members of key management personnel of
the Group during the year were:
Peter Robinson
Non-Executive
Independent Chairman
Mel Sutton
Non-Executive
Vice Chairman
John Rishworth
Non-Executive
Independent Director
John Etherington
Non-Executive
Independent Director
Kimberlee Wells
Non-Executive
Independent Director
Charlie McLeish
Chief Executive Officer
PENTAL LIMITED 2018 FINANCIAL REPORT 35
REMUNERATION POLICY
The remuneration policy of Pental Limited has been
designed to align director and executive objectives with
shareholder and business objectives by providing a fixed
remuneration component and offering specific short-term
and long-term incentives based upon key performance
areas affecting the Group’s financial results. The board
of Pental Limited believes the remuneration policy to be
appropriate and effective in its ability to attract and retain
the best executives and directors to run and manage the
Group as well as create goal congruence between directors,
executives and shareholders.
The Board’s policy for determining the nature and amount
of remuneration for board members and senior executives
of the Group is as follows:
The remuneration policy, setting the terms and conditions
for the executive directors and other senior executives,
was developed and approved by the Board. Executive
packages are reviewed annually by reference to the
Company’s performance, executive performance and
comparable information from industry sectors and other
listed companies in similar industries. The performance of
executives is measured regularly against agreed criteria
and is based predominantly on the forecast growth of the
Group’s profits and shareholders’ value. All bonuses and
incentives are linked to predetermined operational and
financial performance criteria. Executives are also entitled
to participate in a performance rights plan.
The directors and executives receive a superannuation
guarantee contribution required by the law, and do not
receive any other retirement benefits. Some individuals,
however, may choose to sacrifice part of their salary to
increase payments towards superannuation.
The Board policy is to remunerate non-executive directors
at market rates for comparable companies for time,
commitment and responsibilities. The Board determines
payments to the non-executive directors and reviews their
remuneration annually, based on market practice, duties
and accountability. The maximum aggregate amount of fees
that can be paid to non-executive directors is subject to
approval by shareholders at the Annual General Meeting.
The maximum aggregate amount of fees that can be paid
to non-executive directors at the last approval is $0.750
million. Fees for non-executive directors are not linked
to the performance of the Group. No shares or options
have been issued to non-executive directors, under the
performance rights plan or an option scheme, within the
last five years.
Key terms of employment contracts
Mr Charlie McLeish is employed by the Company under an
ongoing contract. The period of notice required by either
party to terminate the contract is twelve months without
cause. Mr McLeish is entitled to receive a maximum yearly
bonus of 35 per cent of his base salary plus superannuation.
He is also entitled to participate in the Executive
Performance Rights Plan (Rights Plan) as a long-term
incentive, which is aligned to the Company’s performance.
Ms Josephine De Marino is employed by the Group under an
ongoing contract which may be terminated on one months’
notice by either the Company or the executive.
Ms De Martino is entitled to receive a maximum yearly
bonus of 25 per cent of her base salary plus superannuation
and is also entitled to participate in the Executive
Performance Rights Plan.
REMUNERATION REPORT - AUDITED
RELATIONSHIP BETWEEN THE REMUNERATION POLICY
AND COMPANY PERFORMANCE
The remuneration policy has been tailored to increase goal congruence between shareholders, directors and executives.
This has been achieved through a performance-based bonus system based on key performance indicators.
The tables below set out summary information about the Group’s earnings and movements in shareholder wealth for the
five years to June 2018. It has been the focus of the Board of Directors to retain management personnel essential to the
profitable operations of the Group, and to attract suitable executives.
1 July
2018
2 July
2017
26 June
20162
28 June
20152
29 June
20142
$’000
$’000
$’000
$’000
$’000
Gross sales
108,427
117,660
109,980
111,150
109,376
Net profit/(loss) before tax
Net profit/(loss) after tax
Underlying net profit after tax1
(26,824)
(27,839)
2,602
8,343
5,850
5,962
8,218
5,628
5,628
7,035
5,087
5,087
7,338
5,336
5,336
1 Underlying net profit after tax has been adjusted to exclude goodwill impairment (FY18: $29,446 thousand, FY17: Nil), ACCC penalty (FY18: $700
thousand, FY 17: Nil), ACCC legal costs (FY18: $421 thousand, FY17: $160 thousand), and their respective income tax impact (FY18: $126 thousand,
FY17: $48 thousand). Refer to page 24 for a reconciliation between underlying net profit after tax and reported net (loss) / profit after tax.
2 No significant expense adjustments have been reflected in FY16, FY15 and FY14 underlying net profit after tax.
1 July
2018
2 July
2017
26 June
2016
28 June
2015
29 June4
2014
Share price at start of year 4
Share price at end of year
Interim dividend (cents) per share 1, 3
Final dividend (cents) per share 1, 2, 3
Basic (loss)/earnings cents per share 3
Diluted (loss)/earnings cents per share 3
$0.595
$0.280
0.60
0.90
(20.43)
(20.43)
$0.575
$0.595
1.15
2.10
4.29
4.18
$0.44
$0.575
1.00
1.95
4.13
4.04
$0.033
$0.44
0.85
1.80
4.08
4.02
$0.020
$0.033
-
0.12
0.34
0.33
1 Franked to 100% at 30% corporate income tax rate.
2 Declared after the balance date and not reflected in the financial statements of that year.
3 On 1 December 2014, ordinary shares and options on issue were consolidated on the basis of 15 to 1.
4 Information provided is prior to the 1 December 2014 share consolidation on the basis of 15 to 1.
REMUNERATION REPORT - AUDITED
PENTAL LIMITED 2018 FINANCIAL REPORT 37
The compensation of each member of the key management personnel of the Group for the current year is set out below:
2018
Short-term employee benefits
Post-
employment
benefits
Termination
benefits
Share–
based
payments
Salary
& fees
$
Bonus
$
Non-
monetary(i)
$
Super-
annuation
$
Lump
Sum(iv)
$
Rights
$
Total
$
Non Executive Directors
Peter Robinson
Mel Sutton
John Rishworth
John Etherington
Kimberlee Wells
91,324
73,059
54,795
54,795
60,000
Total Directors
333,973
Executives
Charlie McLeish
Albert Zago(ii)
413,980
74,872
Josephine De Martino(iii)
184,760
Total Executives
673,612
Total Remuneration
1,007,585
–
–
–
–
–
–
-
-
-
-
-
–
–
–
–
–
–
6,464
3,164
3,137
12,765
12,765
8,676
6,941
5,205
5,205
-
26,027
24,996
–
–
–
–
–
–
–
–
–
–
–
–
–
100,000
80,000
60,000
60,000
60,000
360,000
4,480
449,920
4,696
94,637
(31,173)
146,196
17,552
47,244
73,271
–
-
205,449
94,637
(26,693)
801,565
94,637
(26,693)
1,161,565
(i) Non-monetary benefits include car parking & motor vehicle toll tags.
(ii) Albert Zago’s employment was ceased on 27 September 2017. As a result all share-based payments were forfeited.
(iii) Josephine De Martino was appointed as a Chief Financial Officer on 2nd October 2017.
(iv) Lump sum includes payment in lieu of notice period, balance of accrued leave entitlements paid out on termination and applicable superannuation.
Correlated with the performance of the company, no bonuses will be paid in FY18 (as presented in the table).
REMUNERATION REPORT - AUDITED
The compensation of each member of the key management personnel of the Group for the prior year is set out below:
2017
Short-term employee benefits
Post-employment
benefits
Share–
based
payments
Salary
& fees
$
Bonus
$
Non-
monetary(i)
$
Superannuation
$
Rights
$
Total
$
Non Executive Directors
Peter Robinson
Mel Sutton
John Rishworth
John Etherington
Kimberlee Wells
91,325
73,060
54,795
54,795
60,000
Total Directors
333,975
Executives
–
–
–
–
–
–
–
–
–
–
–
–
Charlie McLeish
392,694
40,000
Albert Zago
298,335
12,500
Total Executives
691,029
52,500
Total Remuneration
1,025,004
52,500
5,873
6,946
12,819
12,819
(i) Non-monetary benefits include car parking & motor vehicle toll tags.
8,676
6,941
5,205
5,205
-
26,027
34,997
18,783
53,780
79,807
–
–
–
–
–
–
100,001
80,001
60,000
60,000
60,000
360,002
22,061
495,625
13,142
349,706
35,203
845,331
35,203
1,205,333
REMUNERATION REPORT - AUDITED
PENTAL LIMITED 2018 FINANCIAL REPORT 39
TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL
Ms Wells’ employer TBWA Group invoiced services valued at $81,840 during the period (2017: $0). The value of service is not
material to Ms Wells as an employee of TBWA Group, or Pental.
In the prior year, a director related entity of Mr Sutton was paid $8,600 plus GST for consultancy services provided to the Group.
SHARE-BASED PAYMENTS (RIGHTS PLAN)
The Company has an Executive Performance Rights Plan (Rights Plan) to provide Long Term Incentives (LTI) that are aligned
to the Group’s long-term strategy. LTI will be provided as Performance Rights granted at the commencement of the relevant
three year performance period. The Rights Plan was introduced on 18 December 2014 and provides selected executives
with a means of acquiring conditional Rights to acquire an ordinary share in Pental subject to the terms of the Plan, once
milestones are met.
The Rights issued and converting Rights to ordinary shares are at no consideration.
The Board may also offer options under the Rights Plan, whereby the option will have an exercise price, whilst the Right
does not. There were no options granted during the 2018 year (2017: nil).
The vesting of the Rights is conditional on:
a) the executive being employed by the Pental Group on the vesting date; and
b) Pental’s earnings per share for the financial year prior to the vesting date exceeding the target rate;
thereafter a percentage of the Rights will vest based on achieving the following strategic targets:
• Gross sales revenue growth (40% weighting of Rights)
• Earnings before interest and tax (EBIT) margin (40% weighting of Rights)
• Acquired business EBIT margin (20% weighting of Rights).
Under the Rights Plan, the executives can receive the following annualised remuneration from the vesting of
performance rights:
Percentage of fixed remuneration by achieving:
Threshold Targets
Strategic Targets
Stretch Strategic Targets
Charlie McLeish
12.5%
25.0%
50.0%
Details of performance Rights over ordinary shares in the Company that were granted in the current year to key
management personnel are set out in the following table:
Grant Date
Vesting Date
Minimum
earnings per
share target
Rights
granted
during 2018
Fair Value per
Right at grant
date
Fair value
of rights
granted
Cents
No.
$
$
Charlie McLeish
3 July 2017
1 July 2020
4.93
211,765
0.5246
111,092
The Rights are forfeited upon the earliest of the following:
a] if the employee ceases employment with the Group;
b) the Board determines the vesting conditions have not been satisfied; or
c) expiry date, being up to seven years after the grant date of the Rights.
REMUNERATION REPORT - AUDITED
The following factors were used in determining the fair value of the performance rights granted:
Grant Date
Vesting
Date
Fair value
per Right
Exercise
Price
Price of
shares on
grant date
Estimated
volatility
%
Risk free
Interest
Rate
%
Dividend
Yield
3 July 2017
1 July 2020
0.5246
$
$
-
$
0.6050
%
53.88
%
1.95
%
4.76
The following table discloses changes in the performance rights holdings of management personnel:
Grant
Date
Vesting
Date
Balance
at
2/7/2017
Rights
granted
Rights
vested
Rights
forfeited
Rights
lapsed
Balance
at
1/7/2018
No.
No.
No.
No.
No.
No.
Charlie McLeish (ii)
18/12/2014
3/7/2017
740,741
Albert Zago (ii)
18/12/2014
3/7/2017
444,444
Charlie McLeish
1/7/2015
1/7/2018
1,007,813
Albert Zago (i)
1/7/2015
1/7/2018
596,756
Charlie McLeish (ii)
1/7/2016
1/7/2019
209,302
Albert Zago (i)
1/7/2016
1/7/2019
125,581
–
–
–
–
–
–
Charlie McLeish
3/7/2017
1/7/2020
–
211,765
–
–
–
–
–
–
–
–
–
740,741
444,444
–
1,007,813
596,756
–
125,581
–
–
–
–
–
–
–
–
-
209,302
–
211,765
(i) Mr Zago departed 27th September 2017 forfeiting his Performance Rights.
(ii) Rights held by Mr McLeish and Mr Zago lapsed during the period as a result of the related performance conditions not being achieved.
There were no share options granted during the 2018 year (2017: nil).
REMUNERATION REPORT - AUDITED
PENTAL LIMITED 2018 FINANCIAL REPORT 41
KEY MANAGEMENT PERSONNEL EQUITY HOLDINGS
Fully paid ordinary shares of Pental Limited held by key management personnel:
Balance
at
26/6/16
Options
exercised
Net
change
other (i)
Balance
at
2/7/17
Options
exercised
Net
change
other (i)
Balance(iv)
at
1/7/18
Non-Executive Directors
Peter Robinson
3,972,926
Mel Sutton
John Rishworth
John Etherington
Kimberlee Wells
Executives
Charlie McLeish
Albert Zago (ii)
Josephine De Martino (iii)
-
13,207
-
-
–
–
–
–
–
–
–
–
–
–
–
-
-
-
3,972,926
-
13,207
160,000
160,000
-
–
–
–
-
–
–
–
–
–
–
–
–
–
–
–
238,001
4,210,927
-
-
-
-
–
–
–
-
13,207
160,000
-
–
–
–
(i) Net change other relates to shares purchased and sold during the financial year.
(ii) Mr Zago departed on 27th September 2017 and did not hold any shares on his departure date.
(iii) Josephine de Martino was appointed as a Chief Financial Officer on 2nd October 2017
(iv) There has been no change in shareholdings from the end of the financial year to the date of this report
KEY MANAGEMENT PERSONNEL SHARE OPTION HOLDINGS
Number of share options of Pental Limited held by key management personnel:
• During the financial year, no options were granted or exercised by key management personnel (2017: nil).
• Mr McLeish has been offered rights under an Executive Performance Rights Plan. No equity or options under the
Company performance rights plan were issued to Mr McLeish or Mr Zago (former CFO, departed 27th September
2017 forfeiting his Performance Rights) during the 2018 and 2017 financial years.
• Ms De Martino (incoming CFO, commenced 2nd October 2017) having successfully completed the 6 month
probationary period is eligible to be invited to participate in the Company’s Long-Term Incentive Programme (LTIP)
from the 1st July 2018.
This directors’ report is signed in accordance with a resolution of directors made pursuant to s.298 (2) of the
Corporations Act 2001.
On behalf of the Directors
Peter Robinson
Chairman
Melbourne, 24 August 2018
Deloitte Touche Tohmatsu
A.B.N. 74 490 121 060
550 Bourke Street
Melbourne VIC 3000
GPO Box 78
Melbourne VIC 3001 Australia
DX: 111
Tel: +61 (0) 3 9671 7000
Fax: +61 (0) 3 9671 7001
www.deloitte.com.au
Board of Directors
Pental Limited
Level 6, 390 St Kilda Road
MELBOURNE, VIC 3004
24 August 2018
Dear Board Members
Pental Limited
In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following
declaration of independence to the directors of Pental Limited.
As lead audit partner for the audit of the financial statements of Pental Limited for the financial
year ended 1 July 2018, I declare that to the best of my knowledge and belief, there have been
no contraventions of:
(i) the auditor independence requirements of the Corporations Act 2001 in relation to
the audit; and
(ii) any applicable code of professional conduct in relation to the audit.
Yours sincerely
DELOITTE TOUCHE TOHMATSU
Travis Simkin
Partner
Chartered Accountants
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Touche Tohmatsu Limited
29
PENTAL LIMITED 2018 FINANCIAL REPORT 43
Deloitte Touche Tohmatsu
ABN 74 490 121 060
550 Bourke Street
Melbourne VIC 3000
GPO Box 78
Melbourne VIC 3001 Australia
DX 111
Tel: +61 (0) 3 9671 7000
Fax: +61 (0) 3 9671 7001
www.deloitte.com.au
Independent Auditor’s Report
to the Members of Pental Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Pental Limited (the “Company”) and its subsidiaries (the
“Group”) which comprises the consolidated statement of financial position as at 1 July 2018, the
consolidated statement of profit or loss and other comprehensive income, the consolidated
statement of changes in equity and the consolidated statement of cash flows for the year then ended,
and notes to the financial statements, including a summary of significant accounting policies and
other explanatory information, and the directors’ declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations
Act 2001, including:
(i)
giving a true and fair view of the Group’s financial position as at 1 July 2018 and of its
financial performance for the year then ended; and
(ii)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report. We are independent of the Group in accordance with the auditor
independence requirements of the Corporations Act 2001 and the ethical requirements of the
Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have
also fulfilled our other ethical responsibilities in accordance with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has
been given to the directors of the Company, would be in the same terms if given to the directors as
at the time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Member of Deloitte Touche Tohmatsu Limited
Liability limited by a scheme approved under Professional Standards Legislation.
30
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report for the current period. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters.
Key Audit Matter
Carrying value of Consumer Products CGU
and the Country Life brand name
Refer to Note 14 Goodwill and Note 15 Other
Intangible Assets
As at 1 July 2018 the impairment assessment
for the Consumer Products cash generating
unit (CGU) indicated that the carrying value of
the CGU was greater than its recoverable
amount, resulting in an impairment expense of
$29.4 million as disclosed in Note 14.
As at 1 July 2018 the impairment assessment
for the Country Life brand indicated that no
impairment loss was required, however, the
recoverable amount was sensitive to achieving
performance in line with FY 2019 budget.
Management has assessed recoverable amount
using discounted cash flow models which
incorporate judgements about future cash
flows and growth rates, the discount rate
applied and other key assumptions used in
order to assess value-in-use.
How the scope of our audit responded to
the Key Audit Matter
In conjunction with valuation experts, our
procedures included, but were not limited to:
•
•
•
•
•
•
Obtaining an understanding of
management’s processes associated with
the preparation of the value-in-use
models;
Agreeing forecast cash flows to the latest
Board approved forecasts, and assessing
the historical accuracy of forecasting;
Challenging key assumptions included in
the ‘value in use’ discounted cash flow
model developed by management,
including:
•
•
•
forecast cash flows;
forecast short and long term
growth rates; and
the discount rate applied,
Assessing the sensitivity analysis
performed by management on these key
assumptions and performing independent
sensitivity analysis;
Testing the mathematical accuracy of the
discounted cash flow model;
Assessing the appropriateness of the
disclosures in Note 14 and Note 15 of the
financial statements.
Other Information
The directors are responsible for the other information. The other information comprises the information
included in the Group’s annual report for the year ended 1 July 2018, but does not include the financial
report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and we do not express any form
of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based
on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
31
PENTAL LIMITED 2018 FINANCIAL REPORT 45
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a true
and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for
such internal control as the directors determine is necessary to enable the preparation of the financial
report that gives a true and fair view and is free from material misstatement, whether due to fraud or
error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or has no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes
our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic decisions
of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
judgement and maintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial report, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
Conclude on the appropriateness of the director’s use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to
events or conditions that may cast significant doubt on the Group’s ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention in
our auditor’s report to the related disclosures in the financial report or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up
to the date of our auditor’s report. However, future events or conditions may cause the Group
to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and events
in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the financial report. We are
responsible for the direction, supervision and performance of the Group’s audit. We remain solely
responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of
the audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
32
We also provide the directors with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the directors, we determine those matters that were of most
significance in the audit of the financial report of the current period and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should
not be communicated in our report because the adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefits of such communication.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 34 to 41 of the Directors’ report for the
year ended 1 July 2018.
In our opinion, the Remuneration Report of Pental Limited, for the year ended 1 July 2018, complies
with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the Remuneration
Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an
opinion on the Remuneration Report, based on our audit conducted in accordance with Australian
Auditing Standards.
DELOITTE TOUCHE TOHMATSU
Travis Simkin
Partner
Chartered Accountants
Melbourne, 24 August 2018
33
PENTAL LIMITED 2018 FINANCIAL REPORT 47
DIRECTORS’
DECLARATION
The Directors declare that:
(a) in the Directors’ opinion, there are reasonable grounds to believe that the company will be able to pay its
debts as and when they become due and payable;
(b) in the Directors’ opinion, the attached financial statements and notes thereto are in accordance with the
Corporations Act 2001, including compliance with accounting standards and giving a true and fair view of
the financial position and performance of the Group;
(c) in the Director’s opinion the financial statements and notes thereto are in accordance with International
Financial Reporting Standards issued by the International Accounting Standards Board as stated in note 2
to the financial statements; and
(d) the Directors have been given the declarations required by s.295A of the Corporations Act 2001.
At the date of this declaration, the Company is within the class of companies affected by ASIC Class Order
98/1418. The nature of the deed of cross guarantee is such that each company which is party to the deed
guarantees to each creditor payment in full of any debt in accordance with the deed of cross guarantee.
In the Directors’ opinion, there are reasonable grounds to believe that the Company and the companies to
which the ASIC Class Order applies, as detailed in note 12 to the financial statements will, as a group, be able
to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross
guarantee.
Signed in accordance with a resolution of the directors made pursuant to s.295 (5) of the Corporations Act 2001.
On behalf of the Directors
Peter Robinson
Chairman
Melbourne, 24 August 2018.
CONSOLIDATED STATEMENT OF PROFIT
OR LOSS AND OTHER COMPREHENSIVE INCOME
for the year (52 weeks) ended 1 July 2018
2018
2017
Note
$’000
$’000
Continuing Operations
Gross sales revenue
Trading terms, promotional rebates and discounts (Trade Spend)
Sales revenue
Other income
Other gains and (losses)
Changes in inventory of finished goods and work in progress)
Raw materials, consumables used and utilities
Employee benefits expense
Freight out and distribution expense
Marketing expenses
Occupancy expenses
Selling expenses
Repairs and maintenance expense
Impairment of goodwill
ACCC penalty and related legal expenses
Other expenses
(Loss)/Profit before finance costs, income tax,
depreciation and amortisation (EBITDA)
Depreciation and amortisation expense
(Loss)/Profit before finance costs and income tax (EBIT)
Finance costs
(Loss)/Profit before tax
Income tax expense
Net (Loss)/Profit for the year
(Loss)/Profit Attributable to Members of the Parent Entity
Other comprehensive income
Items that may be classified subsequently to profit or loss:
Gain/(loss) on cash flow hedges taken to equity
Income tax relating to components of other comprehensive income
Other comprehensive income for the year (net of tax)
Total comprehensive income for the year
Profit attributable to equity holders of the parent
Total comprehensive income attributable to equity holders of the parent
(Loss)/Earnings per share Attributable to the Members of the Parent Entity
Basic (cents per share)
Diluted (cents per share)
Notes to the financial statements are included on pages 54 to 89.
3
3
7
14
7
5
6
8
8
108,427
(32,760)
75,667
134
(47)
673
(41,941)
(12,864)
(6,037)
(2,443)
(1,089)
(1,100)
(1,046)
(29,446)
(1,121)
(2,565)
117,660
(32,536)
85,124
306
(385)
(1,334)
(43,291)
(12,946)
(6,373
(2,462)
(1,688)
(1,227)
(916)
-
(160)
(2,885)
(23,225)
11,763
(3,559)
(3,376)
(26,784)
(40)
(26,824)
(1,015)
(27,839)
(27,839)
410
(122)
288
8,387
(44)
8,343
(2,493)
5,850
5,850
177
(53)
124
(27,551)
(5,974)
(27,839)
(27,551)
(20.43)
(20.43)
5,628
5,184
4.29
4.18
PENTAL LIMITED 2018 FINANCIAL REPORT 49
Notes to the financial statements are included on pages 54 to 89.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 1 July 2018
1 July 2018
2 July 2017
Note
$’000
$’000
Current Assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other financial assets
Other
Total current assets
Non-current assets
Plant and equipment
Goodwill
Other intangible assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Other financial liabilities
Current tax payables
Provisions
Total current liabilities
Non-current liabilities
Deferred tax liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Accumulated losses
Total equity
Notes to the financial statements are included on pages 54 to 89.
27(a)
9
10
11
16
13
14
15
17
18
6
20
6
20
21
7,045
19,280
10,970
231
272
11,660
23,613
10,297
-
335
37,798
45,905
23,688
-
14,728
38,416
76,214
18,865
29,446
14,865
63,176
109,081
16,247
17,242
-
48
1,755
18,050
4,357
100
4,457
22,507
53,707
90,658
246
(37,197)
53,707
182
551
1,569
19,544
4,446
131
4,577
24,121
84,960
90,658
(19)
(5,679)
84,960
PENTAL LIMITED 2018 FINANCIAL REPORT 51
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year (52 weeks) ended 1 July 2018
Issued
capital
Hedging
reserve
Equity settled
employee
benefits reserve
Accumulated
losses
Total
Note
$’000
$’000
$’000
$’000
$’000
Balance at 26 June 2016
90,658
(251)
75
(7,305)
83,177
(Loss)/Profit for the year
Gain/(loss) on cash flow hedges
Deferred tax arising on cash
flow hedges
6
Total comprehensive income
for the year
Dividend Payment
22(a)
Recognition of
share based payments
–
–
–
–
–
–
-
177
(53)
124
-
-
Balance at 2 July 2017
90,658
(127)
Balance at 2 July 2017
90,658
(Loss)/Profit for the year
Gain/(loss) on cash flow hedges
Deferred tax arising on cash
flow hedges
6
Total comprehensive income
for the year
Dividend Payment
22(a)
Recognition of
share based payments
–
–
–
–
–
–
(127)
-
410
(122)
288
-
-
Balance at 1 July 2018
90,658
161
-
-
-
-
-
33
108
5,850
5,850
-
-
177
(53)
5,850
5,974
(4,224)
(4,224)
-
33
(5,679)
84,960
108
(5,679)
84,960
-
-
-
-
-
(23)
85
(27,839)
(27,839)
-
-
410
(122)
(27,839)
(27,551)
(3,679)
(3,679)
-
(23)
(37,197)
53,707
Notes to the financial statements are included on pages 54 to 89.
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year (52 weeks) ended 1 July 2018
2018
2017
Note
$’000
$’000
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
Interest and other costs of finance paid
Income tax paid
Income tax refund
Net cash provided by operating activities
27(b)
Cash flows from investing activities
Payments for land
Payments for buildings
Payments for plant and equipment
Payments for intangible assets
Net cash used in investing activities
Cash flows from financing activities
Dividends paid
Net cash used in financing activities
13
13
13
15
22
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Cash and cash equivalents at the end of the financial year
27(a)
90,573
96,198
(81,772)
(85,411)
47
(40)
225
(44)
(1,516)
(4,353)
18
7,310
(1,732)
(5,580)
(880)
(54)
-
6,615
-
-
(2,932)
(134)
(8,246)
(3,066)
(3,679)
(4,224)
(3,679)
(4,615)
11,660
7,045
(4,224)
(675)
12,335
11,660
Notes to the financial statements are included on pages 54 to 89.
PENTAL LIMITED 2018 FINANCIAL REPORT 53
Cleaning made easy
for more than 60 years.
NOTES TO THE
FINANCIAL STATEMENTS
1. GENERAL INFORMATION
Basis of preparation
Pental Limited (the Company), incorporated and domiciled
in Australia, is a publicly listed company on the Australian
Stock Exchange, limited by shares.
Company Secretary
Mr Oliver Carton
Principal Registered office
Pental Limited
Level 6, 390 St. Kilda Road
Melbourne Victoria 3004
Telephone: (03) 9251 2311
Facsimile: (03) 9645 3001
www.pental.com.au
Share Registry
Boardroom Pty Limited
Grosvenor Place, Level 12,
225 George Street Sydney NSW 2000
Telephone within Australia: 1300 737 760
Telephone outside Australia: +61 2 9290 9600
Facsimile: +61 2 9279 0664
www.boardroomlimited.com.au
2. SIGNIFICANT ACCOUNTING POLICIES
Statement of compliance
These financial statements are general purpose financial
statements which have been prepared in accordance with
the Corporations Act 2001, Accounting Standards and
Interpretations, and comply with other requirements of
the law. The financial statements comprise consolidated
financial statements of the consolidated entity (the
“Group”). For the purposes of preparing the consolidated
financial statements, the Company is a for-profit entity.
Accounting Standards include Australian equivalents to
International Financial Reporting Standards (‘A-IFRS’).
Compliance with A-IFRS ensures that the financial
statements and notes of the Group comply with
International Financial Reporting Standards (‘IFRS’).
The financial statements were authorised for issue by the
directors on 24 August 2018.
The financial statements have been prepared on the basis
of historical cost, except for the revaluation of certain
financial instruments. Cost is based on the fair values of the
consideration given in exchange for assets. All amounts are
presented in Australian dollars, unless otherwise noted.
The Company is a company of a kind referred to in ASIC
Corporations (Rounding in Financial/Directors’ Reports)
Instrument 2016/191 dated 24 March 2016, and in
accordance with that Corporations Instrument, amounts in
the Directors’ Report and financial report are rounded off
to the nearest hundred thousand dollars, unless otherwise
indicated.
Critical accounting judgments and key sources of
estimation uncertainty
In the application of the Group’s accounting policies,
management is required to make judgments, estimates
and assumptions about carrying values of assets and
liabilities that are not readily apparent from other sources.
The estimates and associated assumptions are based on
historical experience and other factors that are considered
to be relevant. Actual results may differ from these
estimates.
The estimates and underlying assumptions are reviewed
on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised
if the revision affects only that period or in the period of
the revision and future periods if the revision affects both
current and future periods.
The following are the key assumptions concerning the
future, and other key sources of estimation uncertainty at
balance sheet date, that have a significant risk of causing a
material adjustment to the carrying amounts of assets and
liabilities within the next financial year:
Impairment of goodwill and brand names
Determining whether goodwill and brand names are
impaired requires an estimation of recoverable amount,
representing the higher of the fair value less costs to sell
and the value in use of the cash-generating units to which
goodwill and brand names have been allocated. The value
in use calculation requires the entity to estimate the future
cash flows expected to arise from the cash-generating unit
and a suitable discount rate in order to calculate present
value.
The carrying amount of goodwill at 1 July 2018 was Nil (2
July 2017: $29.446 million). Details of the impairment and
impairment testing are set out in Note 14.
PENTAL LIMITED 2018 FINANCIAL REPORT 55
The carrying amount of brand names at 1 July 2018 was
$14.539 million (2 July 2017: $14.539 million). Details
of movements are set out in Note 15. Details of the
impairment testing are set out in Note 15.
Adoption of new and revised
Accounting Standards
In the current year, the Group has adopted all of the
following new and revised Standards and Interpretations
issued by the Australian Accounting Standards Board
(the AASB) that are relevant to its operations and effective
for the current annual reporting period:
(i) AASB 2016-1 Amendments to Australian Accounting
Standards - Recognition of Deferred Tax Assets for
Unrealised Losses
(ii) AASB 2016-2 Amendments to Australian Accounting
Standards - Disclosure Initiative: Amendments to
AASB 107
is recognised as goodwill. If, after reassessment, the fair
values of the identifiable net assets acquired exceed the
cost of acquisition, the deficiency is credited to profit and
loss in the period of acquisition.
In preparing the consolidated financial statements, all
intercompany balances and transactions, and unrealised
profits arising within the Group are eliminated in full.
(b) Foreign currency
The presentation and functional currency of the Group is
Australian dollars.
Foreign currency transactions
All foreign currency transactions during the financial year
are brought to account using the exchange rate in effect
at the date of the transaction. Foreign currency monetary
items at reporting date are translated at the exchange rate
existing at reporting date.
(iii) AASB 2017-2 Amendments to Australian Accounting
Standards - Further Annual Improvements 2014-2016
Exchange differences are recognised in profit or loss in the
period in which they arise except that:
(iv) AASB 1048 Interpretation of Standards
The adoption of these new and revised Standards and
Interpretations did not have any material financial impact
on the amounts recognised and the disclosures presented
in the financial statements of the Group.
Accounting policies
The following significant accounting policies have been
adopted in the preparation and presentation of the financial
statements:
(a) Basis of consolidation
The consolidated financial statements are prepared by
combining the financial statements of all the entities that
comprise the consolidated entity, being the Company
(the parent entity) and its subsidiaries (referred to as
“the Group” in these financial statements) as defined in
Accounting Standard AASB 10 ‘Consolidated Financial
Statements’. A list of subsidiaries appears in Note 12 to
the financial statements. Consistent accounting policies
are employed in the preparation and presentation of the
consolidated financial statements.
On acquisition, the assets, liabilities and contingent
liabilities of a subsidiary are measured at their fair values at
the date of acquisition. Any excess of the cost of acquisition
over the fair values of the identifiable net assets acquired
• exchange differences on transactions entered into in order
to hedge certain foreign currency risks (refer Note 23); and
• exchange differences on monetary items receivable from
or payable to a foreign operation for which settlement is
neither planned or likely to occur, which form part of the
net investment in a foreign operation, are recognised in
the foreign currency translation reserve and recognised in
profit or loss on disposal of the net investment.
(c) Goods and services tax
Revenues, expenses and assets are recognised net of the
amount of goods and services tax (GST), except:
i. where the amount of GST incurred is not recoverable from
the taxation authority, it is recognised as part of the cost of
acquisition of an asset or as part of an item of expense; or
ii. for receivables and payables which are recognised
inclusive of GST.
The net amount of GST recoverable from, or payable to,
the taxation authority is included as part of receivables or
payables.
Cash flows are included in the cash flow statement on a
gross basis. The GST component of cash flows arising from
investing and financing activities which is recoverable from,
or payable to, the taxation authority is classified within
operating cash flows.
NOTES TO THE FINANCIAL STATEMENTS
(d) Revenue
Deferred tax
Revenues are recognised at fair value of the consideration
received net of the amount of goods and services tax (GST)
payable to the taxation authority.
Sales of goods
Revenue from the sale of goods is recognised (net of
returns, rebates, discounts and allowances) when the Group
has transferred to the buyer control and the significant risks
and rewards of ownership of the goods.
Interest revenue
Interest revenue is recognised on a time proportionate basis
that takes into account the effective yield on the financial
asset.
(e) Share based payment transactions
The Executive Performance Rights Plan grants shares
in the Company to certain employees. The fair value of
the performance rights granted under the Executive
Performance Rights Plan is recognised as an employee
expense with a corresponding increase in equity. The fair
value is measured at grant date and is spread over the
vesting period, which is the period from the grant date to
the end of the plan period. The fair value of the performance
rights granted is measured using Black-Scholes model,
taking into account the terms and conditions upon which
the performance rights were granted.
(f) Income tax
Current tax
Current tax is calculated by reference to the amount of
income taxes payable or recoverable in respect of the
taxable profit or tax loss for the period. It is calculated
using tax rates and tax laws that have been enacted or
substantively enacted by reporting date. Current tax for
current and prior periods is recognised as a liability (or
asset) to the extent that it is unpaid (or refundable).
Deferred tax is accounted for using the comprehensive
balance sheet liability method in respect of temporary
differences arising from differences between the carrying
amount of assets and liabilities in the financial statements
and the corresponding tax base of those items.
In principle, deferred tax liabilities are recognised for all
taxable temporary differences. Deferred tax assets are
recognised to the extent that it is probable that sufficient
taxable amounts will be available against which deductible
temporary differences or unused tax losses and tax offsets
can be utilised.
However, deferred tax assets and liabilities are not
recognised if the temporary differences giving rise to them
arise from the initial recognition of assets and liabilities
(other than as a result of a business combination) which
affects neither taxable income nor accounting profit.
Furthermore, a deferred tax liability is not recognised in
relation to taxable temporary differences arising from
goodwill.
Deferred tax liabilities are recognised for taxable temporary
differences arising on investments in subsidiaries, except
where the Group is able to control the reversal of the
temporary differences and it is probable that the temporary
differences will not reverse in the foreseeable future.
Deferred tax assets arising from deductible temporary
differences associated with these investments and interests
are only recognised to the extent that it is probable that
there will be sufficient taxable profits against which to
utilise the benefits of the temporary differences and they
are expected to reverse in the foreseeable future.
Deferred tax assets and liabilities are measured at the tax
rates that are expected to apply to the period(s) when the
asset and liability giving rise to them are realised or settled,
based on tax rates (and tax laws) that have been enacted or
substantively enacted by reporting date. The measurement
of deferred tax liabilities and assets reflects the tax
consequences that would follow from the manner in which
the Group expects, at the reporting date, to recover or settle
the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when they
relate to income taxes levied by the same taxation authority
and the Company/Group intends to settle its current tax
assets and liabilities on a net basis.
NOTES TO THE FINANCIAL STATEMENTS
PENTAL LIMITED 2018 FINANCIAL REPORT 57
Current and deferred tax for the period
(h) Financial assets
Current and deferred tax is recognised as an expense or
income in profit or loss, except when it relates to items
credited or debited directly to equity, in which case the
deferred tax is also recognised directly in equity, or
where it arises from the initial accounting for a business
combination, in which case it is taken into account in the
determination of goodwill or excess.
Tax consolidation
The Company and all its wholly-owned Australian
resident entities are part of a tax consolidated group
under Australian taxation law. Pental Limited is the head
entity in the tax-consolidated group. Tax expense/income,
deferred tax liabilities and deferred tax assets arising
from temporary differences of the members of the tax
consolidated group are recognised in the separate financial
statements of the members of the tax-consolidated group
using the ‘separate taxpayer within group’ approach.
Current tax liabilities and assets and deferred tax assets
arising from unused tax losses and tax credits of the
members of the tax-consolidated group are recognised by
the company (as head entity in the tax-consolidated group).
Due to the existence of a tax funding arrangement between
the entities in the tax consolidated group, amounts are
recognised as payable to or receivable by the company and
each member of the group in relation to the tax contribution
amounts paid or payable between the parent entity and the
other members of the tax-consolidated group in accordance
with the arrangement.
Where the tax contribution amount recognised by each
member of the tax-consolidated group for a particular
period is different to the aggregate of the current tax
liability or asset and any deferred tax asset arising from
unused tax losses and tax credits in respect of that period,
the difference is recognised as a contribution from (or
distribution to) equity participants.
(g) Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, cash in
banks and investments in money market instruments, net
of outstanding bank overdrafts. Bank overdrafts are shown
within borrowings in current liabilities in the statement of
financial position.
Loans and receivables, and investments in subsidiaries are
recognised and derecognised on trade date where purchase
or sale of an investment or a loan and receivable is under
a contract whose terms require delivery of the asset within
the timeframe established by the market concerned, and
are initially measured at fair value, net of transaction costs.
Subsequent to initial recognition, investments are measured
at cost.
Loans and receivables
Trade receivables are initially recognised at fair value
and subsequently measured at amortised cost using the
effective interest method, less any provision for impairment.
Other financial assets
For the accounting policy on derivatives – refer Note 2(r)
and Note 23.
(i) Inventories
Inventories are carried at the lower of cost and net
realisable value.
Cost includes direct materials, direct labour, other
direct variable costs and allocated production overheads
necessary to bring inventories to their present location
and condition, based on normal operating capacity of the
production facilities.
Manufacturing activities
The cost of manufacturing inventories and work-in-progress
are assigned on a first-in first-out basis. Costs arising from
exceptional wastage are expensed as incurred.
Net realisable value
Net realisable value represents the estimated selling price
for inventories less estimated costs of completion and
costs necessary to make the sale. Net realisable value is
determined on the basis of each inventory line’s normal
selling pattern.
(j) Property, plant and equipment
The carrying amount of property, plant and equipment is
valued on the cost basis.
Depreciation is calculated on a straight line basis so as to
write off the net cost of each asset over its expected useful
life to its estimated residual value. Leasehold improvements
NOTES TO THE FINANCIAL STATEMENTS
are depreciated over the period of the lease or estimated
useful life, whichever is the shorter, using the straight line
method. The estimated useful lives, residual values and
depreciation method are reviewed at the end of each annual
reporting period. Plant and equipment estimated useful
life used in the calculation of depreciation is 3 to 20 years.
Buildings are depreciated over a period of 30 years on a
straight line basis. Land is not depreciated.
(k) Borrowing costs
Borrowing costs include interest, amortisation of discounts
or premiums relating to borrowings, amortisation of
ancillary costs incurred in connection with arrangement
of borrowings, foreign exchange differences net of hedged
amounts on borrowings, including trade creditors and lease
finance charges.
Ancillary costs incurred in connection with the arrangement
of borrowings are capitalised and amortised over the life of
the borrowings. Borrowing costs are expensed as incurred.
(l) Operating leases
Operating lease payments are recognised as an expense on
a straight line basis over the lease term.
(m) Intangible assets
Goodwill
Goodwill is not amortised, but tested for impairment
annually and whenever there is an indication that the
goodwill may be impaired. Any impairment is recognised
immediately in the profit or loss and is not subsequently
reversed. Refer also to Note 14.
Brand names
Brand names are not amortised as the Directors believe
the brands have an indefinite useful life. Brand names with
indefinite useful lives are tested for impairment annually
and whenever there is an indication that the asset may be
impaired. Brand names are recorded at fair value at the time
of acquisition, less any impairment subsequently recorded.
Computer Software
All costs directly incurred in the purchase or development
of major computer software or subsequent upgrades and
material enhancements, which can be reliably measured
and are not integral to a related asset, are capitalised as
intangible assets. Costs capitalised include external direct
costs of materials, services and travel. Costs incurred
on computer maintenance or during planning phase are
expensed as incurred. Computer software is amortised over
the period of time during which the benefits are expected to
arise being 3 to 5 years.
(n) Impairment of assets
At each reporting date, the Group reviews the carrying
amounts of its tangible and intangible assets to determine
whether there is any indication that those assets have
suffered an impairment loss. If any such indication exists,
the recoverable amount of the asset is estimated in order to
determine the extent of the impairment loss (if any). Where
the asset does not generate cash flows that are independent
from other assets, the Group estimates the recoverable
amount of the cash-generating unit to which the asset
belongs. Intangible assets with indefinite useful lives are
tested for impairment at least annually and whenever there is
an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs
to sell and value in use. 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 for which the estimates of future cash
flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating
unit) is estimated to be less than its carrying amount, the
carrying amount of the asset (or cash-generating unit) is
reduced to its recoverable amount. An impairment loss
is recognised in the profit or loss immediately, unless the
relevant asset is carried at fair value, in which case the
impairment loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the
carrying amount of the asset (or cash-generating unit) is
increased to the revised estimate of its recoverable amount,
but only to the extent that the increased carrying amount
does not exceed the carrying amount that would have been
determined had no impairment loss been recognised for the
asset (or cash-generating unit) in prior years. A reversal of an
impairment loss is recognised in profit or loss immediately,
unless the relevant asset is carried at fair value, in which
case the reversal of the impairment loss is treated as a
revaluation increase.
NOTES TO THE FINANCIAL STATEMENTS
PENTAL LIMITED 2018 FINANCIAL REPORT 59
PENTAL LIMITED 2018 FINANCIAL REPORT 59
(0) Employee benefits
Short-term and long-term employee benefits
Provision is made for benefits accruing to employees in
respect of wages and salaries, annual leave, long service
leave, and sick leave when it is probable that settlement
will be required and they are capable of being measured
reliably. Provisions made in respect of employee benefits
are measured as the present value of estimated future cash
outflows to be made by the Group in respect of services
provided by employees up to reporting date.
(p) Provisions
Provisions are recognised when the Group has a present
obligation (legal or constructive) as a result of a past event,
it is probable that the Group will be required to settle the
obligation, and a reliable estimate can be made of the amount
of the obligation.
The amount recognised as a provision is the best estimate of
the consideration required to settle the present obligation at
reporting date, taking into account the risks and uncertainties
surrounding the obligation. Where a provision is measured
using the cash flows estimated to settle the present
obligation, its carrying amount is the present value of those
cash flows.
When some or all of the economic benefits required to settle
a provision are expected to be recovered from a third party,
the receivable is recognised as an asset if it is virtually certain
that reimbursement will be received and the amount of the
receivable can be measured reliably.
Dividends
A provision for dividends payable is recognised in the
reporting period in which the dividends are declared, for
the entire undistributed amount, regardless of the extent to
which they will be paid in cash.
(q) Financial instruments issued
by the company
Debt and equity instruments
Debt and equity instruments are classified as either
liabilities or as equity in accordance with the substance of
the contractual arrangement.
Transaction costs on the issue of equity instruments
Transaction costs arising on the issue of equity instruments
are recognised directly in equity as a reduction of the
proceeds of the equity instruments to which the costs relate.
Transaction costs are the costs that are incurred directly in
connection with the issue of those equity instruments and
which would not have been incurred had those instruments
not been issued.
Interest and dividends
Interest and dividends are classified as expenses or as
distributions of profit consistent with the statement of
financial position classification of the related debt or equity
instruments or component parts of compound instruments.
(r) Derivative financial instruments
The Group is exposed to changes in interest rates and foreign
exchange rates from its activities. The Group uses forward
foreign exchange contracts to hedge these risks. Derivative
financial instruments are not held for speculative purposes.
The Group uses derivative financial instruments, being
forward foreign currency contracts to hedge the risk
associated with interest rate and foreign currency
fluctuations. Such derivatives are stated at fair value. The
fair value of forward exchange contracts is calculated by
reference to current forward exchange rates for contracts
with similar maturity profiles.
Derivatives are initially recognised at fair value on the date
a derivative contract is entered into and are subsequently
remeasured to their fair value at each reporting date. For
derivatives that do not qualify for hedge accounting, any gains
or losses arising from changes in fair value are taken directly
to profit or loss for the year.
NOTES TO THE FINANCIAL STATEMENTS
For derivatives that qualify for hedge accounting, the method
for recognising gains and losses on changes in fair value
depends on whether the derivative is classified as a fair value
hedge or a cash flow hedge. Derivatives are classified as
fair value hedges when they hedge the exposure to changes
in the fair value of a recognised asset or liability and as
cash flow hedges when they hedge exposure to variability
in cash flows that are attributable to either a particular
risk associated with a recognised asset or liability or to a
forecast transaction. The Group documents at inception of
the hedge the relationship between the hedging instruments
(derivatives) and the hedged items, as well as the risk
management objective and strategy for undertaking the
hedge transaction.
The Group also documents, both at inception of the hedge
and on an ongoing basis whether the derivatives that are
used in the hedging transactions have been, and will continue
to be, highly effective in offsetting changes in fair values or
cash flows of hedged items.
Changes in the fair value of derivatives that are designated
and qualify as fair value hedges are recorded in the profit or
loss for the year, together with any changes in the fair value
of the hedged asset or liability that are attributable to the
hedged risk.
The effective portion of changes in the fair value of
derivatives that are designated and qualify as cash flow
hedges is recognised in equity in the hedging reserve and
transferred to profit or loss when the hedged item affects
profit or loss. The gain or loss relating to the ineffective
portion is recognised immediately in the profit or loss.
However, when the cash flow hedge relates to a forward
foreign exchange contract to hedge a highly probable forecast
transaction or firm commitment that results in a non-
financial asset (e.g. inventory) or a non-financial liability, the
gains and losses previously deferred in equity are transferred
from equity and included in the initial measurement of the
initial cost or carrying amount of the asset or liability.
Hedge accounting is discontinued when the hedging
instrument expires, or is sold, terminated or exercised, or no
longer qualifies for hedge accounting. At that point in time,
any cumulative gains or losses on the hedging instrument
recognised in equity is kept in equity until the forecast
transaction occurs. If the forecast transaction is no longer
expected to occur, the net cumulative gain or loss recognised
in equity is transferred to profit or loss for the year.
(s) Financial year
As allowed under Section 323D (2) of the Corporations Act
2001, the Directors have determined the financial year to be
a fixed period of 52 calendar or 53 calendar weeks. For the
period to 1 July 2018, the Group is reporting on the 52 week
period that began 3 July 2017 and ended 1 July 2018. For the
period to 2 July 2017, the Group is reporting on the 53 week
period commencing 27 June 2016 and ended 2 July 2017.
(t) Standards and Interpretations issued
not yet effective
At the date of authorisation of the financial report, the
Standards and Interpretations listed below were in issue but
not yet effective.
(i) AASB 15 Revenue from Contracts with Customers
(effective FY 2019)
AASB 15 Revenue from Contracts with Customers
establishes a principle based approach for goods and
services and construction contracts which requires
identification of discrete performance obligations within
a transaction and an associated transaction price
allocation to these obligations. Revenue is recognised
only when the performance obligation is satisfied and the
control of goods and services is transferred. The Group
will apply AASB 15 in FY19, commencing from 2 July
2018.
Based on the assessment performed by management, it
is not expected that AASB 15 will have a material impact
on the Group’s financial statements as the majority of
sales are for goods where there is a single performance
obligation and revenue is recognised at the point of sale
or, where later, delivery to the end customer.
(ii) AASB 9 Financial Instruments, and the relevant
amending standards (effective FY 2019)
AASB 9 replaces AASB 139 Financial Instruments:
Recognition and Measurement. AASB 9 introduces new
requirements for the classification and measurement of
financial assets and financial liabilities, a new model for
recognising impairment provisions based on expected
credit losses and new hedge accounting requirements.
The Group will apply AASB 9 in FY19, commencing from
2 July 2018.
With respect to credit losses, the primary change relates
to provisioning for potential future credit losses related
to financial assets. Management do not expect this
will have a significant impact on the Group’s financial
statements with reference to its historical bad debt
experience.
NOTES TO THE FINANCIAL STATEMENTS
PENTAL LIMITED 2018 FINANCIAL REPORT 61
3. REVENUE
An analysis of the Group’s revenue for the year is as follows:
2018
2017
$’000
$’000
Sales revenue
Revenue from the sale of goods
75,667
85,124
Other revenue and income
Interest on bank deposits
Other revenue and income
Total revenue from
continuing operations
75,667
85,124
47
87
134
225
81
306
75,801
85,430
With respect to hedge accounting, the Group does not
expect any impact on existing hedge relationships. The
Group will align its hedge accounting documentation
with the new standard in FY19.
(iii) AASB 16 Leases (effective FY 2020)
AASB 16 distinguishes leases and service contracts on
the basis of whether an identified asset is controlled
by a customer. Distinctions of operating leases (off
balance sheet) and finance leases (on balance sheet)
are removed for lessee accounting, and is replaced by a
model where a right-of-use asset and a corresponding
liability have to be recognised for all leases by lessees
(i.e. all on balance sheet) except for short-term leases
and leases of low value assets. The Group will apply
AASB 16 in FY20.
At the end of the reporting period, the Group had
non-cancellable undiscounted operating leases
commitments of $2,671 thousand, as disclosed in
note 28. These commitments predominately relate to
the lease of office space (corporate office) and leased
equipment which will require recognition of right of use
assets and associated liabilities. The Group is currently
assessing the impact of the new requirements in order
to determine the likely impact on the financial report,
the transition approach it will adopt and its long term
information system requirements.
At the date of authorisation of the financial statements,
there have been no IASB Standards and IFRIC
Interpretations that are issued but not yet effective.
The Directors have not yet assessed the impact the
adoption of these Standards and Interpretations in
future periods will have on the financial statements of
the Group.
These Standards and Interpretations will be first applied
in the financial statements of the Group that relates
to the annual reporting period beginning after the
effective date of each pronouncement. In addition to
the standards issued above, other standards have been
issued by the Australian Accounting Standards Board
(the AASB), these standards are not relevant to the
operations of the Group.
NOTES TO THE FINANCIAL STATEMENTS
4. SEGMENT INFORMATION
Pental manufactures and distributes personal care and home products in Australia, New Zealand and Asia.
The Group is viewed as being a single reporting segment which is consistent with the Group’s internal reporting provided to
the chief operating decision maker, being the Chief Executive Officer.
The Chief Executive Officer assesses the performance of the reporting segment based on its Underlying EBITDA which
represents profit or loss before finance costs, tax expense, depreciation and amortisation and the effects of non-operating
expenses such as impairment charges as well as non-deductible penalties and related legal costs.
A reconciliation of the Group’s reported statutory net profit after tax and Underlying EBITDA is presented on page 24 of the
Directors Report.
The Group’s segment revenue is geographically as follows, based on the geographical location of the Group’s customers:
Geographical Location
Products
Australia
Soaps, detergents, fire needs and bleach
New Zealand
Soaps, detergents, fire needs and bleach
Asia
Soaps and detergents
Geographical sales
Australia
New Zealand
Asia
Total geographical sales
2018
2017
$’000
$’000
60,952
69,658
12,806
13,628
1,909
1,838
75,667
85,124
The top four customers account for 75.4% of total sales revenue for the year (2017: 81.5%). These top four customers
individually represent greater than 8% of total sales revenue.
Segment assets and liabilities are located in Australia and are unable to be allocated to individual geographical segments by
location of customers on a reasonable basis.
5. FINANCE COSTS
Other borrowing costs
Total interest expense
2018
2017
$’000
$’000
40
40
44
44
NOTES TO THE FINANCIAL STATEMENTS
PENTAL LIMITED 2018 FINANCIAL REPORT 63
6. INCOME TAXES
Income tax recognised in profit or loss
Tax expense comprises:
Current tax expense in respect of the current year
Deferred tax expense relating to the origination and reversal of temporary differences
Adjustments recognised in the current year in relation to the current tax of prior years
Total tax expense
2018
2017
$’000
$’000
1,218
(211)
8
2,658
(161)
(4)
1,015
2,493
The prima facie income tax expense on pre-tax accounting profit reconciles to the income tax expense in the financial
statements as follows:
(Loss)/Profit before income tax
Income tax expense calculated at 30%
Non deductible / (assessable) items
- Impairment of goodwill
- Penalty
- Other
Adjustments recognised in the current year in relation to the current tax of prior years
2018
2017
$’000
$’000
(26,824)
(8,047)
8,343
2,502
8,834
210
10
8
-
-
(5)
(4)
Income tax expense recognised in profit
1,015
2,493
Comprising of:
Income tax expense
1,015
1,015
2,493
2,493
The tax rate used in the above reconciliation is the corporate tax rate of 30% payable by Australian corporate entities on
taxable profits under Australian tax law. There has been no change in the corporate tax rate when compared with the
previous reporting period.
NOTES TO THE FINANCIAL STATEMENTS
6. INCOME TAXES (CONTINUED)
Income tax recognised in other comprehensive income
Deferred tax
Arising on income and expenses recognised in other comprehensive income:
Revaluations of financial instruments treated as cash flow hedges
Deferred tax balances
Deferred tax assets/ (liabilities) arise from the following:
2018
2017
$’000
$’000
(122)
(122)
(53)
(53)
2018
Opening
balance
Charged to
income
Recognised in other
comprehensive
income
Charged
to
equity
Closing
Balance
$’000
$’000
$’000
$’000
$’000
Deferred tax assets
Doubtful debts
Provisions
Share issue costs
Foreign currency items
Inventory obsolescence
Accruals
Deferred tax liabilities
Property, plant and equipment
Intangibles
Foreign currency items
Other
-
557
16
73
71
4
721
(802)
(4,362)
-
(3)
(5,167)
Net deferred tax asset / (liability)
(4,446)
-
49
(12)
(52)
54
-
39
172
-
-
-
172
211
-
-
-
(21)
-
-
(21)
-
-
(101)
-
(101)
(122)
–
–
–
–
–
–
–
–
–
–
–
–
–
-
606
4
-
125
4
739
(630)
(4,362)
(101)
(3)
(5,096)
(4,357)
PENTAL LIMITED 2018 FINANCIAL REPORT 65
2017
Opening
balance
Charged to
income
Recognised in other
comprehensive
income
Charged
to
equity
Closing
Balance
$’000
$’000
$’000
$’000
$’000
15
493
132
107
38
31
816
(972)
(4,362)
(33)
(3)
(5,370)
(4,554)
(15)
64
(116)
19
33
(27)
(42)
170
-
33
-
203
161
Deferred tax assets
Doubtful debts
Provisions
Share issue costs
Foreign currency items
Stock obsolescence
Accruals
Deferred tax liabilities
Property, plant and equipment
Intangibles
Foreign currency items
Other
Net deferred tax asset /(liability)
Current tax liabilities
Income tax payable
-
-
-
(53)
-
-
(53)
–
–
–
–
–
(53)
–
–
–
–
–
–
–
–
–
–
–
–
–
-
557
16
73
71
4
721
(802)
(4,362)
-
(3)
(5,167)
(4,446)
2018
2017
$’000
$’000
48
48
551
551
NOTES TO THE FINANCIAL STATEMENTS
6. INCOME TAXES (continued)
Tax consolidation
Relevance of tax consolidation to the Group
The Company and its wholly-owned Australian resident entities have formed a tax-consolidated group, and are therefore
taxed as a single entity from that date. The head entity within the tax-consolidated group is Pental Limited. The members of
the tax-consolidated group are identified at Note 12.
Nature of tax funding arrangements and tax sharing agreements
Entities within the tax-consolidated group have entered into a tax funding arrangement and a tax-sharing agreement
with the head entity. Under the terms of the tax funding arrangement, Pental Limited and each of the entities in the tax-
consolidated group has agreed to pay a tax equivalent payment to or from the head entity, based on the current tax liability
or current tax asset of the entity. Such amounts are reflected in amounts receivable from or payable to other entities in the
tax-consolidated group. The tax sharing agreement entered into between members of the tax-consolidated group provides
for the determination of the allocation of income tax liabilities between the entities should the head entity default on its tax
payment obligations or if an entity should leave the tax-consolidated group. The effect of the tax sharing agreement is that
each member’s liability for tax payable by the tax-consolidated group is limited to the amount payable to the head entity
under the tax funding arrangement.
Unrecognised taxable temporary differences associated with investments and interests
In accordance with AASB112.81, there are no taxable temporary differences in relation to investments in subsidiaries for
which deferred tax assets or liabilities have not been recognised.
7. PROFIT FOR THE YEAR
(a) Profit for the year has been arrived at after charging the following expenses:
Expenses
Cost of goods sold
Depreciation: Property, plant and equipment
Amortisation: Software
Total depreciation and amortisation
Employee benefits expense:
Post-employment benefits – defined contribution plans
Other employee benefits
Operating lease minimum payments
2018
2017
$’000
$’000
52,770
56,287
3,368
191
3,559
1,033
11,831
12,864
947
3,016
360
3,376
1,077
11,869
12,946
1,457
NOTES TO THE FINANCIAL STATEMENTS
PENTAL LIMITED 2018 FINANCIAL REPORT 67
8. (LOSS)/EARNINGS PER SHARE
Basic (loss)/earnings per share
Diluted (loss)/earnings per share
2018
2017
Cents
Per Share
Cents
Per Share
(20.43)
(20.43)
4.29
4.18
The earnings and weighted average number of ordinary shares used in the calculation of basic and diluted earnings
per share are as follows:
Net (loss)/profit
(Loss)/earnings used in the calculation of basic EPS
(Loss)/earnings used in the calculation of diluted EPS
2018
2017
$’000
(27,839)
(27,839)
(27,839)
$’000
5,850
5,850
5,850
2018
2017
No.
No.
Weighted average number of ordinary shares for the purposes of basic earnings per share
136,250,633
136,250,633
The weighted average number of ordinary shares for the purposes of diluted earnings per share reconciles to the weighted
average number of ordinary shares used in the calculation of basic earnings per share as follows.
2018
2017
No.
No.
Weighted average number of ordinary shares for the purposes of basic earnings per share
136,250,633
136,250,633
Shares deemed to be issued for no consideration in respect of:
- Performance rights over ordinary shares
-
3,625,244
Weighted average number of ordinary shares for the purposes of diluted EPS
136,250,633
139,875,877
Classification of securities as potential ordinary shares
Performance rights over ordinary shares in the Company that were granted to key management personnel have been
classified as potential ordinary shares and are included in the calculation of diluted earnings per share.
NOTES TO THE FINANCIAL STATEMENTS
Diluted loss per share
Diluted loss per share is the same as basic loss per share for the year ended 1 July 2018. Potential ordinary shares are
anti-dilutive as their conversion to ordinary shares will result in a decrease of loss per share. The calculation of diluted loss
per share does not assume conversion, exercise or other issue of potential ordinary shares that would have an anti-dilutive
effect on loss per share.
9. TRADE AND OTHER RECEIVABLES
Current
Trade receivables (i) and Other (ii)
Allowance for doubtful debts
2018
2017
$’000
$’000
19,280
23,613
-
-
19,280
23,613
(i) The average credit period on sales of goods is 60 days. No interest is charged on trade receivables. An allowance is
made for estimated irrecoverable trade receivable amounts arising from the past sale of goods, determined by reference
to specific customers where receipt is in doubt. During the current financial year, any doubtful debt movements were
recognised in profit/ (loss) for the year (refer to movement in the allowance for doubtful debts below)
Before accepting any new customers, the Group will perform a credit check to assess the potential customer’s credit quality
and defines credit limits by customer. Limits are reviewed as necessary. Of the trade receivables balance at the end of the
year $15.789 million is due from four customers (2017: $19.723 million) and these four customers account for 75.4% of total
sales revenue for the year (2017: 81.5%). There are no other customers who represent more than 5% of the total balance of
trade receivables or total sales revenues from continuing operations for the year. Debtors who are past due at the end of the
reporting period have not been provided for on the whole, as there has not been a significant change in credit quality and the
amounts are still considered recoverable. The Group does not hold any collateral over these balances.
(ii) Other receivables generally arise from transactions outside the usual operating activities of the Group. Collateral is
generally not obtained.
Ageing of past due but not impaired
Overdue 31 to 60 days
Overdue 61 to 90 days
Overdue 91 days and beyond
Total
2018
2017
$’000
$’000
63
45
1,049
1,157
429
617
19
1,065
As at 12 August 2018, $84 thousand remains outstanding from the overdue amount of $1,157 thousand. The balance has
been collected by the Group. All amounts overdue as at end of prior period were collected during the reporting period.
NOTES TO THE FINANCIAL STATEMENTS
PENTAL LIMITED 2018 FINANCIAL REPORT 69
Movement in the allowance for doubtful debts
Balance at the beginning of the year
Amounts written back to profit
Balance at the end of the year
2018
2017
$’000
$’000
-
-
-
49
(49)
-
In determining the recoverability of a trade receivable, the Group considers any change in the credit quality of the trade
receivable from the date credit was initially granted up to the reporting date. As highlight above, $15.789 million of trade
receivables is due from four customers. Outside of these four customers, the customer base of the Group is large and
unrelated.
10. INVENTORIES
Raw materials
Finished goods
11. OTHER FINANCIAL ASSETS
Current
Foreign currency forward contracts
2018
2017
$’000
3,033
7,937
$’000
3,007
7,290
10,970
10,297
2018
2017
$’000
$’000
231
231
-
-
NOTES TO THE FINANCIAL STATEMENTS
12. SUBSIDIARIES
Name of subsidiary
Country of incorporation
Parent Entity
Pental Limited (i)
Controlled Entities
Australia
Ownership interest
2018
2017
%
%
Pental Products Pty Ltd (ii) (iii)
Australia
100%
100%
(i) Pental Limited is the head entity within the tax-consolidated group.
(ii) Pental Products Pty Ltd is a member of the tax-consolidated group.
(iii) Pental Products Pty Ltd has entered into a deed of cross guarantee with Pental Limited pursuant to ASIC Class Order 98/1418 and are relieved
from the requirement to prepare and lodge an audited financial report.
The Company and Pental Products Pty Ltd are party to the deed of cross guarantee therefore the consolidated statement
of profit or loss and other comprehensive income and statement of financial position reflects the statement of profit or loss
and other comprehensive income and statement of financial position of the parties to the deed of cross guarantee.
13. PROPERTY, PLANT AND EQUIPMENT
Land at cost
Buildings at
cost
Plant and
equipment at
cost
Construction in
progress at cost
Total
$’000
$’000
$’000
$’000
$’000
Gross carrying amount
Balance at 26 June 2016
Additions
Transfer from capital works
Balance at 2 July 2017
Additions
Disposal of assets
Transfer from capital works
-
-
-
-
-
-
-
-
1,732
5,580
-
-
-
-
27,809
2,868
1,021
31,698
692
(20)
64
Balance at 1 July 2018
1,732
5,580
32,434
Accumulated depreciation
Balance at 26 June 2016
Depreciation expense
Balance at 2 July 2017
Depreciation expense
Disposal of assets
Balance at 1 July 2018
Net book value as at 2 July 2017
-
-
-
-
-
-
-
-
-
-
(170)
-
(170)
-
Net book value as at 1 July 2018
1,732
5,410
(9,881)
(3,016)
(12,897)
(3,198)
19
(16,076)
18,801
16,358
1,021
28,830
64
2,932
(1,021)
-
64
188
-
(64)
188
-
-
-
-
-
-
64
188
31,762
8,192
(20)
-
39,934
(9,881)
(3,016)
(12,897)
(3,368)
19
(16,246)
18,865
23,688
NOTES TO THE FINANCIAL STATEMENTS
14. GOODWILL
Cost
Accumulated impairment losses
PENTAL LIMITED 2018 FINANCIAL REPORT 71
2018
2017
$’000
74,778
(74,778)
-
$’000
74,778
(45,332)
29,446
Impairment testing
The carrying amount of goodwill has been allocated to the Consumer Products cash generating unit (CGU) for impairment
testing purposes.
As originally announced to the market on 21 November 2017, and reiterated in our market announcements for the Group’s
half year financial results on 23 February 2018 and the Group’s trading update on 31 May 2018, the Group has experienced
challenging market conditions in the current financial year, which have impacted its financial performance.
The directors have since concluded that, as a result of the sustained change in the competitive environment, the goodwill
associated with the Consumer Products CGU of $29.4 million is impaired. This conclusion was reached with reference to
management’s best estimate of the discounted future cash flows for the Group (value in use), taking into account the risks
and uncertainties present in the market. As a result, the Group has recognised a non-cash impairment of $29.4 million in
the statement of profit or loss, which represents the carrying value of goodwill allocated to the Consumer Products CGU.
The Group has separately assessed the carrying value of the Group’s other assets, including property, plant and equipment
and brand name intangible assets, and concluded that that no further impairment is required.
NOTES TO THE FINANCIAL STATEMENTS
15. OTHER INTANGIBLE ASSETS
Gross carrying amount
Balance at 26 June 2016
Additions
Disposal of assets
Balance at 2 July 2017
Additions
Balance at 1 July 2018
Accumulated Impairment/Amortisation
Balance at 26 June 2016
Amortisation expense
Disposal of assets
Balance at 2 July 2017
Amortisation expense
Balance at 1 July 2018
Net book value as at 2 July 2017
Net book value as at 1 July 2018
Impairment testing
Brand Names
at cost
Software
at cost
Total
$’000
$’000
$’000
19,000
1,764
20,764
-
-
134
(23)
134
(23)
19,000
1,875
20,875
-
54
54
19,000
1,929
20,929
(4,461)
(1,212)
(5,673)
-
-
(360)
23
(360)
23
(4,461)
(1,549)
(6,010)
-
(191)
(191)
(4,461)
(1,740)
(6,201)
14,539
14,539
326
189
14,865
14,728
No factors have been identified in the period that would alter the Group’s assumption of indefinite useful life for its brand names.
The Group annually tests its indefinite life brand names for impairment in accordance with its accounting policy stated in Note 2.
The recoverable amount for each brand name is estimated based on value-in-use calculations. These calculations require use of
cash flow projections based on FY19 budgets approved by the board, extrapolated to cover a five-year period. Management have
consistently applied two key assumptions in the value-in-use analysis across each brand, a pre-tax discount rate of 13.7% (2017:
14.4%) and terminal growth rate of 2.5% (2017: 2.5%).
Notwithstanding the impairment of goodwill, impairment testing for the Group’s brand names continues to support their
recoverability, which reinforces the strength and health of Pental’s brands in the current disruptive market environment.
NOTES TO THE FINANCIAL STATEMENTS
PENTAL LIMITED 2018 FINANCIAL REPORT 73
2018
2017
$’000
$’000
272
335
2018
2017
$’000
$’000
8,033
5,020
3,194
9,108
4,952
3,182
16,247
17,242
16. OTHER ASSETS
Prepayments
17. TRADE AND OTHER PAYABLES
Trade payables
Trade spend liabilities
Sundry payables
The average credit period on the purchases of goods ranges from 7 to 35 days. No interest is charged on the trade payables.
The Group has financial risk management policies in place to ensure that, all payables are paid within a reasonable timeframe.
18. OTHER FINANCIAL LIABILITIES
Current
Foreign currency forward contracts
2018
2017
$’000
$’000
-
-
182
182
NOTES TO THE FINANCIAL STATEMENTS
19. BANKING FACILITIES
Summary of financing arrangements
Facilities utilised at reporting date:
Multi option loan facility
- Bank Guarantee
Facilities not utilised at reporting date:
Multi option loan facility
- Bank overdraft
- Bank Guarantee
Multi option loan facility limit
Multi option loan facility
2018
2017
$’000
$’000
177
177
4,795
28
4,823
340
340
4,450
210
4,660
5,000
5,000
The Group has a multi option loan facility with the ANZ bank that allows the Group to choose the appropriate type of
funding facility to suit its business needs under one interest rate. The multi option facility can be used as a bank overdraft,
variable rate fully drawn advance, cash advance, standby letter of credit/guarantee and/or trade finance facility.
The multi option facility has a facility limit of $5,000,000 (2017: $5,000,000). The multi option facility bears an interest
rate of 2.87% plus a line fee of 0.8% (2017: 2.46% plus a line fee of 0.8%) as at 1 July 2018. The financing arrangement is
secured by the Group’s assets through first ranking fixed and floating charges over the Company and its subsidiaries (with
corresponding cross guarantee). The facility expires 31 October 2019.
PENTAL LIMITED 2018 FINANCIAL REPORT 75
2018
2017
$’000
$’000
1,755
1,755
100
100
1,569
1,569
131
131
1,855
1,700
20. PROVISIONS
Current
Employee benefits
Non-current
Employee benefits
Total Provisions
The provision for employee benefits represents annual leave, rostered days off and vested long service leave entitlements
accrued by employees. The increase in the carrying amount of the provision for the current year results from more benefits
being accrued than paid in the current year. The provision is discounted using high quality Australian corporate bond rates.
21. ISSUED CAPITAL
(a) Fully paid ordinary shares
Share Capital
Opening balance of ordinary shares, fully paid
Balance at end of financial year
Fully paid ordinary shares
Balance at beginning of financial year
Balance at end of financial year
2018
2017
No.
No.
136,250,633
136,250,633
136,250,633
136,250,633
$’000
$’000
90,658
90,658
90,658
90,658
Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per
share at shareholders’ meetings.
In the event of winding up of the Company, ordinary shareholders rank after all creditors and are fully entitled to any
proceeds of liquidation.
Changes to the then Corporations Law abolished the authorised capital and par value concept in relation to share capital
from 1 July 1998. Therefore, the company does not have a limited amount of authorised capital and issued shares do not
have a par value.
NOTES TO THE FINANCIAL STATEMENTS
22. DIVIDENDS
(a) Recognised Amounts
Fully paid ordinary shares
Final dividend: Fully franked at 30% tax rate
Interim dividend: Fully franked at 30% tax rate
(b) Unrecognised Amounts
Final dividend
2018
2017
Cents per
Share
Total
$’000
Cents per
Share
Total
$’000
2.10
0.60
2.70
2,861
818
3,679
1.95
1.15
3.10
2,657
1,567
4,224
2018
2017
$’000
1,226
$’000
2,861
In respect of the year (52 weeks) ended 1 July 2018 the Company declared a full year fully franked dividend of 0.90 cents per
ordinary share, payable on 28 September 2018, with a record date of 10 September 2018 (2017: 2.10 cents per ordinary share).
Adjusted franking account balance
Impact on franking account balance of dividends not recognised
23. FINANCIAL INSTRUMENTS
(a) Capital risk management
2018
2017
$’000
17,305
526
$’000
17,159
1,226
The Group manages its capital to ensure that the Group will be able to continue as a going concern while maximising the
return to shareholders through the optimisation of the debt and equity balance.
The capital structure of the Group consists of cash and short term deposits, and equity attributable to equity holders of the
parent entity, comprising issued capital (as disclosed in note 21) and, reserves, net of accumulated losses.
Operating cash flows are used to maintain and expand the Group’s assets, as well as to make the routine outflows of
payables, tax, dividends and pay for other financial instruments.
Gearing ratio
The Board of Directors reviews the capital structure on an ongoing basis. As a part of this review the Board considers the
cost of capital and the risks associated with each class of capital. Based on recommendations of the Board, the Group will
balance its overall capital structure through the payment of dividends, new share issues, and the issue or repayment of debt
to execute its strategic plans. As at 1 July 2018, the Group was debt free and had no debt in the prior financial year.
NOTES TO THE FINANCIAL STATEMENTS
PENTAL LIMITED 2018 FINANCIAL REPORT 77
PENTAL LIMITED 2018 FINANCIAL REPORT 77
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NOTES TO THE FINANCIAL STATEMENTS
23. FINANCIAL INSTRUMENTS (continued)
(b) Categories of financial instruments
At the reporting date there are no significant concentrations of credit risk relating to loans and receivables at amortised
cost. The carrying amount reflected in the statement of financial position represents the Group’s maximum exposure to
credit risk for such loans and receivables. Of the trade receivables balance at the end of the year $15.789 million is due from
four customers (2017: $19.723 million) and these four customers account for 75.4% of total sales revenue for the year (2017:
81.5%). There are no other customers who represent more than 5% of the total balance of trade receivables or total sales
revenues from continuing operations for the year.
Financial assets
Cash and cash equivalents
Trade and other receivables (Loans and receivables)
Derivative instruments in designated hedge accounting relationships
Financial liabilities
Trade and other payables (amortised cost)
Derivative instruments in designated hedge accounting relationships
(c) Financial risk management objectives
2018
2017
$’000
$’000
7,045
19,280
231
16,247
-
11,660
23,613
-
17,242
182
The Group’s finance function provides services to the business by monitoring and managing the financial risks relating to
the operations through internal risk reports which analyse exposures by degree and magnitude of risk.
The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates. The Group
enters into forward foreign currency contracts to manage its exposure to foreign currency exchange rate fluctuations where
it has entered into fixed price contracts.
The Group does not enter into or trade financial instruments, including derivative financial instruments, for speculative
purposes. The use of financial instruments is governed by the Group’s policies approved by the Board of Directors. The Chief
Financial Officer is responsible for managing the Group’s treasury requirements in accordance with this policy.
(d) Market risk
The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates. The Group
enters into derivative financial instruments to manage its exposure to foreign currency risk, including forward foreign
currency contracts to manage its exposure to foreign currency exchange rate fluctuations (refer notes 23(c) and 23(e).
NOTES TO THE FINANCIAL STATEMENTS
PENTAL LIMITED 2018 FINANCIAL REPORT 79
(e) Foreign currency risk management
The Group undertakes transactions denominated in foreign currencies; consequently, exposures to exchange rate
fluctuations arise. Where appropriate, exchange rate exposures are managed within approved policy parameters utilising
forward exchange contracts or by offsetting import and export currency exposures.
The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities at the end of
the reporting period are as follows:
Currency of USA
Currency of New Zealand
Currency of Fiji
Currency of Europe
Currency of China
Assets
Liabilities
2018
2017
2018
2017
$’000
-
1,855
18
-
155
$’000
-
2,272
15
-
-
$’000
$’000
190
454
-
51
-
45
471
-
23
-
Forward foreign exchange contracts
The Group enters into forward foreign exchange contracts to hedge a proportion of anticipated sales and purchase
commitments denominated in foreign currencies (principally US Dollars and New Zealand Dollars) expected in each month.
The amount of anticipated future sales is forecast in light of current conditions in foreign markets, commitments from
customers and experience.
The following table sets out the gross contract value to be received/paid under forward foreign currency contracts, the
weighted average contracted exchange rates and settlement periods of outstanding contracts for the Group.
Weighted average
exchange rate
Foreign currency
FC’000
Contract value
$’000
Fair value
gain/(loss)
$’000
2018
2017
2018
2017
2018
2017
2018
2017
Buy USD – less than one year
0.7763
0.7476
3,561
2,981
4,587
3,987
Sell NZD – less than one year
1.0890
1.0666
2,000
5,500
1,837
5,156
227
4
(105)
(77)
231
(182)
As at reporting date, the aggregate amount of unrealised gains/(losses) under forward foreign currency contracts relating to
anticipated future contracts is $0.231 million gain - tax effected $0.161 million gain (2017: $0.181 million loss - tax effected
$0.127 million loss). In the current year, these unrealised gains/ (losses) have been deferred in the hedging reserve to the
extent the hedge is effective.
NOTES TO THE FINANCIAL STATEMENTS
23. FINANCIAL INSTRUMENTS (continued)
Foreign currency sensitivity analysis
The Group is mainly exposed to USD and NZD currencies. The following table details the Group’s sensitivity to a 5 cent
increase and decrease in the Australian dollar against the relevant foreign currencies. The analysis includes derivative
instruments in designated hedge accounting relationships, all trade receivables and trade payables outstanding at year end.
USD Impact
EUR Impact
NZD Impact
FJD Impact
CNY Impact
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
$’000
$’000
$’000
$’000
$’000
$’000
$’000
$’000
$’000
$’000
Profit
Equity
19
316
4
286
7
-
-
-
62
241
87
435
-
-
-
-
-
-
-
-
(f) Interest rate risk management
The Group has been exposed to interest rate risk during the period as it invests cash on call at floating interest rates
and cash in short term deposits at fixed interest rates. The Directors consider that the Group’s sensitivity to a reasonably
possible change in interest rates would not have a material impact on profit or equity.
The following table details the Group’s exposure to interest rate and liquidity risk. The table includes both interest and
principal cash flows.
2018
Weighted
average
interest
rate
Less than
1 month
1-3
months
3 months to
1 year
1-5
years
5+
years
Total
%
$’000
$’000
$’000
$’000
$’000
$’000
Financial assets
Variable interest rate instruments
0.95%
7,045
-
Non-interest bearing
Financial liabilities
Non-interest bearing
-
-
12,721
6,559
19,766
6,559
8,921
7,326
8,921
7,326
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7,045
19,280
26,325
16,247
16,247
NOTES TO THE FINANCIAL STATEMENTS
PENTAL LIMITED 2018 FINANCIAL REPORT 81
2017
Weighted
average
interest
rate
Less than
1 month
1-3
months
3 months to
1 year
1-5
years
5+
years
Total
%
$’000
$’000
$’000
$’000
$’000
$’000
Financial assets
Variable interest rate instruments
1.58%
11,660
-
Non-interest bearing
Financial liabilities
Non-interest bearing
-
-
13,574
10,039
25,234
10,039
8,993
8,249
8,993
8,249
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
11,660
23,613
35,273
17,242
17,242
(g) Credit risk management
Credit risk management refers to the risk that a counterparty will default on its contractual obligations resulting in financial
loss to the Group. The Group has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient
collateral, where appropriate, as a means of mitigating the risk of financial loss from defaults. The Group’s exposure and
the credit ratings of its counterparties are continuously monitored and the aggregate values of transactions concluded are
spread amongst approved counterparties. The Group measures credit risk on a fair value basis.
Trade accounts receivable consist of a number of customers supplying the retail sector in Australia and New Zealand.
Ongoing credit evaluation is performed on the financial condition of accounts receivable and, where appropriate, credit
guarantees are obtained.
The Group has significant credit risk exposure with the Woolworths Limited, Wesfarmers Ltd, Metcash Ltd and Foodstuffs
(Auckland) Ltd Groups which represent 69.8% of the total trade receivables less related allowances and rebates of the
Consumer Products business.
The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks with
high credit-ratings assigned by international credit-rating agencies.
The carrying amount of financial assets recorded in the financial statements, net of any allowances for losses, represents
the Group’s maximum exposure to credit risk without taking accounts of the value of any collateral obtained.
(h) Liquidity risk management
The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by
continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.
NOTES TO THE FINANCIAL STATEMENTS
23. FINANCIAL INSTRUMENTS (continued)
(i) Fair value of financial instruments
The directors consider that the carrying amounts of financial assets and liabilities recorded in the financial statements
approximate their fair values.
The fair values and net fair values of financial assets and liabilities are determined as follows:
• the fair value of financial assets and financial liabilities with standard terms and conditions and traded on active liquid
markets are determined with reference to quoted market prices;
• the fair value of other financial assets and liabilities are determined in accordance with generally accepted pricing
models based on discounted cash flow analysis; and
• the fair value of derivative instruments, included in hedging assets and liabilities, are calculated using quoted prices,
which is a Level 2 fair value measurement. Where such prices are not available use is made of discounted cash flow
analysis using the applicable yield curve for the duration of the instruments.
24. SHARE-BASED PAYMENTS
The Company has an Executive Performance Rights Plan (Rights Plan) to provide Long Term Incentives (LTI) that are aligned
to the Group’s long-term strategy. LTI will be provided as performance rights granted at the commencement of the relevant
three-year performance period. The Rights Plan was introduced on 18 December 2014 and provides selected executives
with a means of acquiring conditional rights to acquire an ordinary share in Pental subject to the terms of the plan, once
milestones are met.
The rights issued and converting rights to ordinary shares are at no consideration.
The Board may also offer options under the Rights Plan, whereby the option will have an exercise price, whilst the right
does not. There were no options granted during the 2018 year (2017: nil).
The vesting of the rights is conditional on:
a) the executive being employed by the Pental Group on the vesting date; and
b) Pental’s earnings per share for the financial year prior to the vesting date exceeding the target rate;
thereafter a percentage of the rights will vest based on achieving the following strategic targets:
• Gross sales revenue growth (40% weighting of rights)
• Earnings Before Interest and Tax (EBIT) margin (40% weighting of rights)
• Acquired business EBIT margin (20% weighting of rights).
Under the Rights Plan, the executives can receive the following annualised remuneration from the vesting of performance rights:
Percentage of fixed remuneration by achieving:
Threshold Targets
Strategic Targets
Stretch Strategic Targets
12.5%
25.0%
50.0%
NOTES TO THE FINANCIAL STATEMENTS
PENTAL LIMITED 2018 FINANCIAL REPORT 83
Details of performance Rights over ordinary shares in the Company that were granted in the current year to executives are
set out in the following table:
Grant Date
Vesting
Date
Minimum earnings
per share target
Cents
Rights granted
during 2018
No.
Fair Value per
Right at grant date
$
3 July 2017
1 July 2020
4.93
211,765
0.5246
Fair value of rights
granted
$
111,092
The Rights are forfeited upon the earliest of the following:
a) if the employee ceases employment with the Group;
b) the Board determines the vesting conditions have not been satisfied; or
c) expiry date, being up to seven years after the grant date of the Rights.
The following factors were used in determining the fair value of the performance rights granted:
Grant Date
Vesting
Date
Fair value
per Right
$
Exercise
Price
$
Price of shares
on grant date
$
Estimated
volatility
%
Risk free
Interest Rate
%
Dividend
Yield
%
3 July 2017
1 July 2020
0.5246
-
0.6050
53.88
1.95
4.76
The following table discloses changes in the performance rights holdings of management personnel:
Vesting Date
Balance at
2/7/2017
No.
Rights
granted
No.
Rights
vested
No.
Granted 18 December 2014
3 July 2017
1,185,185
Granted 1 July 2015
1 July 2018
2,067,661
Granted 1 July 2016
1 July 2019
436,045
-
-
-
Granted 3 July 2017
1 July 2020
-
314,118
There were no share options granted during the 2018 year (2017: nil).
Rights
lapsed/
forfeited
No.
Balance
at
1/7/2018
No.
1,185,185
2,067,661
125,581
-
-
-
-
-
-
310,464
314,118
NOTES TO THE FINANCIAL STATEMENTS
25. KEY MANAGEMENT PERSONNEL COMPENSATION
The aggregate compensation of the key management personnel of the Group is set out below:
Short-term employee benefits
Share based payments
Termination benefits
Post-employment benefits
2018
2017
$
$
1,020,350
1,090,323
(26,693)
35,203
94,637
73,271
-
79,807
1,161,565
1,205,333
26. RELATED PARTY TRANSACTIONS
The compensation of each member of the key management personnel of the Group is set out in the Remuneration Report.
Transactions with key management personnel
Ms Wells’ employer TBWA Group invoiced services valued at $81,840 (inclusive of GST) during the period (2017: $0). The
value of service is not material to Ms Wells as an employee of TBWA Group, or Pental.
In the prior year, a director related entity of Mr Sutton was paid $8,600 plus GST for consultancy services provided
to the Group.
There were no other services performed by key management personnel outside of normal business operations.
Transactions with other related party
Following approval by shareholders at the November 2016 Annual General Meeting, Pental exercised its option to buy back
the Shepparton manufacturing site on 3 July 2017 from a director related entity of Mr Johnstone (retired director on 19
November 2015). The acquisition cost (including stamp duty and related costs) was $7.312 million, with settlement of the
property completed on 2 August 2017.
Equity interests in subsidiaries
Details of interests in subsidiaries are set out in note 12.
The Company purchase services from, and sells services to, its controlled entity Pental Products Pty Ltd in the normal
course of business and on normal terms and conditions. No interest is charged on the loans made to the controlled entity.
The aggregate amount receivable from and payable to, wholly owned group entities by the Company at balance date are as
follows:
Non-current loans to subsidiaries
Provision for doubtful debts
2018
2017
$
$
77,430,077
77,258,133
(20,039,183)
-
57,390,894
77,258,133
NOTES TO THE FINANCIAL STATEMENTS
PENTAL LIMITED 2018 FINANCIAL REPORT 85
PENTAL LIMITED 2018 FINANCIAL REPORT 85
NOTES TO THE FINANCIAL STATEMENTS
27. CASH AND CASH EQUIVALENTS
(a) Reconciliation of cash and cash equivalents
For the purposes of the cash flow statement, cash includes cash on hand and at bank. Cash and cash equivalents at the
end of the financial year as shown in the cash flow statement is reconciled to the related items in the statement of financial
position as follows:
Cash and bank balances
Net Cash and Cash Equivalents
2018
2017
$’000
7,045
7,045
$’000
11,660
11,660
(b) Reconciliation of Profit for the year to net cash flows from operating activities
2018
2017
(Loss) / profit for the year
Depreciation and amortisation expense
Impairment of goodwill
Loss on disposal of assets
Share based payment expense
Movement in cash flow hedges
Changes in net assets and liabilities, net of effects from acquisition of businesses:
(Increase)/decrease in assets:
Trade and other receivables
Inventories
Other assets
Increase/(decrease) in liabilities and reserves:
Trade and other payables
Provisions
Current and deferred tax liabilities
Other liabilities
Net cash from operating activities
$’000
(27,839)
3,559
29,446
1
(23)
288
4,333
(673)
(168)
(995)
155
(592)
(182)
7,310
$’000
5,850
3,376
-
-
33
124
(31)
(1,431)
(75)
583
194
(1,832)
(176)
6,615
NOTES TO THE FINANCIAL STATEMENTS
PENTAL LIMITED 2018 FINANCIAL REPORT 87
28. OPERATING LEASE ARRANGEMENTS
Non-cancellable operating lease expenses
Not later than 1 year
Later than 1 year and not later than 5 years
Later than 5 years
2018
2017
$’000
$’000
705
1,966
-
2,671
932
775
-
1,707
The non-cancellable operating leases relate to leases for the:
1. Melbourne support office: term of 5 years, with rental increasing annually by 3.75%;
2. Warehouse storage facility: remaining term of 0.5 years with a two-year option and rental to increase
annually by 3.5%;
3. Other leases: forklifts, motor vehicles and photo copiers for terms between 1 and 5 years.
29. CAPITAL EXPENDITURE COMMITMENT
Plant and equipment
2018
2017
$’000
515
$’000
-
The Group has entered into various contracts to purchase manufacturing equipment for the upgrade and modernisation of
Shepparton manufacturing facility.
30. CONTINGENT LIABILITIES
(a) Bank guarantees to third parties in respect of property lease obligations.
The bank guarantees are held by the parent entity, Pental Limited.
2018
2017
$’000
$’000
177
340
To the best knowledge of the Directors aside from the Bank Guarantees disclosed, no other contingent liabilities exist for
the reporting period ending 1st July 2018.
NOTES TO THE FINANCIAL STATEMENTS
31. REMUNERATION OF AUDITORS
Auditor of the parent entity
Audit or review of the financial report
Non-audit services – tax and other services
The auditor of Pental Limited is Deloitte Touche Tohmatsu.
2018
$’000
147,425
45,052
2017
$’000
140,425
61,070
192,477
201,495
NOTES TO THE FINANCIAL STATEMENTS
32. PARENT ENTITY INFORMATION
The accounting policies of the parent entity, which have been applied in determining the financial information shown below,
are the same as those applied in the consolidated financial statements. Refer to Note 2 for a su/mmary of the significant
accounting policies relating to the Group.
PENTAL LIMITED 2018 FINANCIAL REPORT 89
Financial position
Assets
Current assets
Non current assets
Total assets
Liabilities
Current liabilities
Non current liabilities
Total liabilities
Equity
Issued capital
Accumulated losses
Total equity
Financial performance
Loss for the year
Other comprehensive income
Total comprehensive income
33. SUBSEQUENT EVENTS
Dividends
2018
$’000
1
57,391
57,392
68
-
68
90,658
(33,334)
57,324
2018
(20,022)
-
(20,022)
2017
$’000
1
77,943
77,944
592
-
592
90,658
(13,306)
77,352
2017
-
-
-
In respect of the year (52 weeks) ended 1 July 2018 the Company will pay final fully franked dividend of 0.90 cents per
ordinary share, payable to shareholders on 28 September 2018, with a record date of 10 September 2018.
Other
Pental continues to investigate other initiatives to increase sales revenues. With the success of the Unilever distribution
partnership with the Pears Brand, Pental has embarked upon investigating opportunities with other well established and
recognised imported brands and products.
ADDITIONAL
STOCK EXCHANGE
INFORMATION
as at 22 August 2018
Additional information required by the Australian Stock Exchange Limited Listing Rules and not disclosed elsewhere in this
report is set out below.
Ordinary share capital
136,250,633 fully paid ordinary shares are held by 1,499 individual shareholders.
The voting rights attaching to the fully paid ordinary share, set out in clause 43 of the Company’s Constitution are:
“Subject to any rights or restrictions attaching to any class of shares:
(a)
(b)
(c)
every member may vote;
on a show of hands every member has one vote;
on a poll every member has:
(i) for each fully paid share held by the member, one vote; and
(ii) for each partly paid share held by the member, a fraction of a vote equivalent to the proportion which the
amount paid (not credited) is of the total amounts paid and payable (excluding amounts credited to) on the share.”
Performance Share Rights
There are no voting rights attached to performance share rights.
On-market buy-back
There is no current on-market buy-back.
Distribution of holders of equity securities
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Holding less than a marketable parcel
Fully paid ordinary shares
262
534
231
401
71
1,499
402
Substantial shareholders
Ordinary shareholders
Alan Johnstone(i)
John Rostyn Homewood
BNP Paribas Noms (NZ) Ltd(ii)
Citicorp Nominees Pty Limited(iii)
TWENTY LARGEST HOLDERS OF QUOTED EQUITY SECURITIES
Ordinary shareholders
WESTERN PARK HOLDINGS PTY LTD
MR JOHN ROSTYN HOMEWOOD
BNP PARIBAS NOMS (NZ) LTD
CITICORP NOMINEES PTY LIMITED
MR GARRY GEORGE JOHNSON
J P MORGAN NOMINEES AUSTRALIA LIMITED
PJR SUPERANNUATION PTY LTD
NATIONAL NOMINEES LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
DALLMOUNT CUSTODIANS PTY LTD
DALLMOUNT PTY LTD
P M S F COMPANY PTY LIMITED
RATHVALE PTY LIMITED
ONE MANAGED INVT FUNDS LTD <1 A/C>
VANWARD INVESTMENTS LIMITED
DALLMOUNT PTY LTD
W A PEATT PTY LTD
BARKING DOG PTY LTD
BUDUVA PTY LTD
DIXSON TRUST PTY LIMITED
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
PENTAL LIMITED 2018 FINANCIAL REPORT 91
Fully paid ordinary shares
Number
Percentage
29,849,050
18,300,000
11,280,002
10,050,347
21.91%
13.47%
8.28%
7.38%
69,479,399
51.04%
Fully paid ordinary shares
Number
Percentage
27,191,619
18,350,000
11,280,002
10,050,348
6,670,739
4,739,429
4,210,927
3,506,299
3,304,487
3,000,000
2,666,668
2,657,431
1,832,759
1,695,639
1,438,294
1,204,761
1,050,000
933,530
879,009
855,000
19.96%
13.47%
8.28%
7.38%
4.90%
3.48%
3.09%
2.57%
2.43%
2.20%
1.96%
1.95%
1.35%
1.24%
1.06%
0.88%
0.77%
0.69%
0.65%
0.63%
(i)
Alan Johnstone has a relevant interest in Pental shares held by Western Park Holdings Pty Ltd and PMSF Company Pty Ltd .
(ii) Elevation Capital Management Ltd. has a relevant interest in shares held by BNP Paribas Noms (NZ) Ltd.
(iii)
Allan Gray Australia Pty Ltd has a relevant interest in shares held by a number of investment institutions including Citicorp Nominees Pty
Limited, JP Morgan Nominees Australia Limited and National Nominees Limited amounting to 13.43% of the total issued capital of Pental Ltd.
105,516,941
78.94%
CORPORATE
DIRECTORY
DIRECTORS
Mr Peter Robinson, Chairman
Mr Mel Sutton, Vice Chairman
Mr John Etherington
Mr John Rishworth
Ms Kimberlee Wells
COMPANY SECRETARY
Mr Oliver Carton
REGISTERED OFFICE
Level 6, 390 St Kilda Road
Melbourne VIC 3004
Telephone: +61 3 9251 2311
MANUFACTURING AND DISTRIBUTION
18-22 Drummond Road
Shepparton VIC 3630
Telephone: +61 3 5820 5200
SHAREHOLDER ENQUIRIES:
SHARE REGISTER
Boardroom Pty Limited
Grosvenor Place, Level 12,
225 George Street
Sydney NSW 2000
Telephone within Australia: 1300 737 760
Telephone outside Australia: +61 2 9290 9600
Facsimile: +61 2 9279 0664
www.boardroomlimited.com.au
AUDITORS
Deloitte Touche Tohmatsu
550 Bourke Street
Melbourne VIC 3000
Telephone: +61 3 9671 7000
SECURITIES EXCHANGE LISTING
Pental Limited (PTL) shares are listed
on the Australian Securities Exchange (ASX)
WEBSITE
www.pental.com.au
ABN
29 091 035 353