Managing Brands
Annual Report 2019
CONTENTS
10
Chairman’s
Review
44
Auditor’s
Independence
Declaration
14
Directors’
Report
45
Independent
Auditor’s Report
38
Corporate
Governance
Statement
49
Directors’
Declaration
50
Consolidated Statement
of Profi t or Loss & Other
Comprehensive Income
52
Consolidated
Statement of
Financial Position
53
Consolidated
Statement of
Changes in Equity
54
Consolidated
Statement of
Cash Flows
55
Notes to the Financial
Statements
88
Additional stock
exchange information
Managing trusted
brands that get
the job done.
We are a proud Australian company with a diverse portfolio of
iconic brands that are found in households across Australia,
New Zealand and Asia.
Our brands - White King, Janola, Sunlight, Country Life, Velvet,
Softly, Huggie, Pears, Duracell, Little Lucifer and Jiff y - have been
used by families for generations. All created to make everyday life
that much easier - that much simpler.
The Pental tradition of providing our customers with products of
superior quality continues with constant product innovation and
improvements.
We are the largest Australian manufacturer of bar soaps, liquid
bleach and fi relighter cubes. For more than 60 years we have
worked hard to stay true to our Australian heritage, investing in our
manufacturing plant in Shepparton, Victoria.
As an established full-service business, our dedicated team also
manages brands for other companies from manufacturing to
distribution, customer relations to sales and marketing success.
We call it partnership excellence.
Pental Annual Report 2019 | 5
MANAGING
BRANDS
Our
business
model
A consumer goods
powerhouse, we
leverage our fully
integrated supply
chain and expertise
to drive the growth of
consumer brands we
make and those we
distribute for others.
We manufacture and
distribute household,
fabric and personal
care, and commercial
products to service the
fast moving consumer
goods markets
in Australia, New
Zealand and Asia.
Brand strategy
Manufacturing
• Market sizing and feasibility
• Continuous 24/7 operation
• Category analysis
• Competitor evaluation
• Brand and product assessment
• Four production plants at
Shepparton site:
- Household cleaning liquids
- Bar soap
- Laundry and dishwashing
liquids
- Firelighters
• Contract manufacturing
• Quality certified ISO 9000 215
and HACCP
Warehousing
and logistics
Financial
administration
Marketing
and sales
• Secure, state-of-the-
art storage facilities at
Shepparton
•
Integrated end to end
Enterprise Resource Planning
system
• Third-party warehousing
• Comprehensive performance
in New Zealand
reporting
• Supply chain management
• Cost modelling review
• Brand and product
management
• Field sales and merchandising
• Above-the-line and
below-the-line marketing
• Data analysis and sales
• Electronic Data Interchange
for major customers
• Optimised paths and
intelligent top-up / put-away
routines
forecasting
• Our channels:
- Grocery
- Hardware
- Pharmacy
- Retail
- Food service
- E-commerce
Pental Annual Report 2019 | 7
YEAR AT A
GLANCE
AUG 18
SEP 18
NOV 18
JAN 19
Shepparton warehouse
and distribution centre
gets a special Duracell fi t
out, ready to handle
17 million consumer units
Three-year distributorship
with Duracell begins in
Australia
White King Toilet Gels
Lemon cleaner ranks+
No.1 from 2017
Softly welcomes two
iconic brands, Martha’s
and Lux Pure Soap
Flakes to the family
with a fresh new look
Huggie fabric softener
wins a Canstar Blue
Award for ‘Most satisfi ed
customers’
Duracell ranged in
Coles Express stores
Australia wide
FINANCIAL YEAR
ENDING 30 JUNE 2019
In a highly competitive market, our
brands remain well-placed enjoying
strong market shares and positive
customer feedback.
FEB 19
MAR 19
APR 19
MAY 19
JUN 19
First Tradies Bar Soaps
launched in Chemist
Warehouse
White King supports
junior club football
through the Muddy
Moments campaign
with the Western
Bulldogs and the
Western Regional
Football League
Janola, New
Zealand’s go-to
cleaning brand for
over 60 years, is voted
Highly Commended
in the Cleaning
Products category
for the Reader’s
Digest New Zealand
2019 Trusted Brands
awards
Pental brands hit the
shelves in Shanghai,
China following
partnerships with
strategic distributors
Softly wool wash
is Australia’s fi rst
Woolmark-certifi ed
detergent after it
passed rigorous
independent testing
Huggie adds new
formulations designed
to make laundry time
faster and easier -
quick dry, easy iron,
fast cycle and wrinkle
fast cycle and wrinkle
release
release
White King Bathroom
Cleaner and Pears
Hand Soap win Canstar
Blue Awards for ‘Most
satisfi ed customers’
Pental Annual Report 2019 | 9
CHAIRMAN’S
REVIEW
Underlying profit after tax1
of $3.451 million for the
2019 financial year.
On behalf of the Pental Board, I am pleased to
update our shareholders, employees, suppliers and
our customers on developments for the Company
over the last 12 months.
Pental has reported an underlying profit after
tax1 of $3.451 million for the 2019 financial year
in contrast to last year’s underlying profit after
tax1 of $2.602 million. Last year, we flagged the
importance of expanding our distribution business
and these results certainly validate our future
growth strategy is heading in the right direction.
The successful addition of Duracell distributorship
to the Pental stable of brands was instrumental in
achieving 2019 results.
The three-year strategic partnership which began
in September 2018 was quickly integrated, moving
Duracell products to supermarkets, pharmacies
and service stations across Australia within
weeks. It has enabled us to leverage our existing
infrastructure to gain scale and achieve better
recovery of our fixed costs, supporting sustainable
profit growth.
The potential of the partnership is reflected in our
The potential of the partnership is reflected in our
strong performance with gross sales of $153.986
strong performance with gross sales of $153.986
million, up 42.02% or $45.559 million on last year
driven predominantly by the 10 month contribution
of the Duracell business.
Trade spend (rebates and discounts) of $53.540
million was 63.43% higher than prior year
compared to FY 18 trade spend of $32.760
million. The ratio of trade spend to gross sales
increased by 4.56% to 34.77% compared to the
prior year of 30.21%. This increase is mainly due
to Duracell which attracts a higher trade spend
than Pental’s other products due to the category’s
rebate structure. As a result, net sales revenue
grew by 32.7% in total over the 2019 financial year
compared to prior year.
1Underlying profi t after tax represents reported
statutory profi t after tax adjusted for signifi cant
items (net of related tax eff ect) as referred to above.
Pental Annual Report 2019 | 11
CHAIRMAN’S REVIEW (CONTINUED)
FINANCIAL PERFORMANCE
Including non-cash signifi cant items, reported net profi t after tax was $1.921 million for the year (2018: net loss after
tax of $27.839 million). Underlying EBIT2 of $5.014 million was 32.54% up on prior year.
The Company executed its brand consolidation strategy by co-branding its Lux and Martha’s brand names under
the Softly umbrella to build a strong laundry care portfolio. This consolidation strategy enabled Pental to protect its
shelf space by increasing presence of Softly brand while supporting the brand more economically due to scale. Early
sales data supports this strategy as co-branded product sales have increased in the fi rst fi ve months. As per the
applicable accounting standards, the company has taken a non-cash impairment charge of $0.510 million (net of
tax) on Lux and Martha’s brand names in FY19. The company has also taken a further non-cash impairment charge
of $1.020 million (net of tax) on its Country Life and Hi Speed brand names refl ecting a sustained change in market
conditions and consumer behaviours.
Neither write down has a material impact on our operations and in the case of Country Life, we anticipate
Australian consumers to follow international trends which are seeing bar soap products return to favour because of
their ecofriendly packaging compared to liquid soaps.
Reconciliation of reported statutory
profit to underlying profit.
Underlying EBITDA
Depreciation and amortisation
Underlying EBIT
Finance costs
Underlying profi t before tax
Underlying income tax expense
Underlying net profi t after tax
Signifi cant items (net of tax):
Impairment of brandnames (net of tax)
Impairment of goodwill(ii)
ACCC penalty and costs(iii)
FY19 (i)
$’000
FY18 (i)
$’000
% Change
13.5%
32.5%
32.0%
32.6%
8,330
(3,316)
5,014
(73)
4,941
(1,490)
3,451
(1,530)
-
-
7,342
(3,559)
3,783
(40)
3,743
(1,141)
2,602
-
(29,446)
(995)
Reported (loss) / profi t after tax
1,921
(27,839)
+100.0%
(i) Non-IFRS fi nancial table
(ii) Impairment of goodwill in prior period is not tax deductible
(iii) Penalty of $700 thousand in prior period is not tax deductible
Pental’s cash position is positive with no debt and net cash of $0.246 million, despite funding the working capital
requirements of the additional Duracell business during the year.
The Board has recommended payment of a fully franked fi nal year dividend of 1.3 cents per ordinary share. This brings
the total dividend for the fi nancial year to 2.0 cents per share (vs FY18 1.5 cents per share), representing a payout ratio
of 79.0%, adjusted for non-cash brand impairment (2018: 78.5% adjusted for non-recurring items of ACCC fi ne, legal
fees and the goodwill impairment).
1Underlying profi t after tax represents reported statutory profi t
after tax adjusted for signifi cant items (net of related tax eff ect) as
referred to above.
2Underlying EBIT represents profi t before fi nance costs, income tax
and signifi cant items as referred to above. Refer to table above for
reconciliation between underlying EBIT and reported statutory net
profi t after tax.
MARKET OVERVIEW
LOOKING FORWARD
Pental is investing in marketing and price matching
initiatives to protect our market share and shelf space in
an increasingly aggressive competitive environment in key
categories & segments. As a result, sales grew in branded
bleach, cleaners and fi relighters compared to prior year. In
both toilet and dishwash, sales have been impacted as half
price promotions have become the norm and consumers
switch brands in response. Bar soap also experienced a
decline in sales compared to prior year due to heavy price
discounting and changing consumer preferences.
As private label grew driven by growth in bleach, fabric
softeners and fi relighters categories, Pental continued to
focus on smart ways to reduce production costs and remain
competitive, to better target the increasing share of private
label in that fast-moving consumer goods market.
In this highly competitive market, our brands remain well-
placed with Pental enjoying positive market shares in
categories such as toilet, household cleaning and dish
wash in New Zealand while in Australia White King bleach1
and White King Lemon toilet gel2 retain their #1 position
in grocery along with the Jiff y1 and Softly1 brands in their
segments.
More progress was made with our value generation strategy
through a new arrangement to supply Pears and Country
Life Tradie Soap to Australia’s largest pharmacy retail
chain, Chemist Warehouse. We also marked fi ve years
of partnership with Unilever as the exclusive Australian
distributor for Pears soaps and body washes, which
acknowledges our expertise in managing brands.
Our ability to develop new off erings from trusted and
established brands provides us with a faster track to winning
a share of household spending.
Four new innovative Huggie fabric softener choices were
released through Woolworths this year, each off ering time,
energy and water saving outcomes such as faster drying
of clothes, easy ironing, wrinkle release qualities and better
softening for clothes in fast wash cycles.
Other product innovations brought to market include a
Velvet bloom beauty bar, four new toilet cleaning products
in Metcash and the new Country Life Tradies Soap Bar
released through Chemist Warehouse and Metcash.
Four new Pears products were also stocked by Chemist
Warehouse providing consumers with more choice in a
trusted brand range.
Pental maintains a close watch on costs while improving
effi ciencies. A staff restructure undertaken in last fi nancial
year led to indirect wages being $0.542 million lower in
the current fi nancial year, despite absorbing the Duracell
business.
Asia remains an important part of our long-term growth
vision. Although sales remained in line with prior year,
margins were improved following the realignment of our
distribution network into the region.
1Based on Aztec data MAT 6/01/19
2Based on Aztec data MAT 22/07/19
Intense competition and price cutting in the consumer
goods market are expected to continue in the
medium to long term. Pental’s strategic distribution
partnership with Duracell and Pears will support
sustainable profi tability and we are now exploring
additional partnership opportunities. We continue to
support our own trusted brands such as White King,
Janola and Huggie with strong investment in fi eld and
merchandising support.
Product innovation will be a key to Pental’s long
term success, and we are exploring opportunities to
introduce brand extensions, similar to the successful
Huggie variants released through Woolworths this year.
The Company is also working with key customers
to execute a brand realignment strategy within the
household laundry liquid wash segment, focused on
creating a power brand and sub brands.
In a further step towards export growth, we are
currently negotiating terms of trade with a large
distributor in China which will provide a large-scale
entrance into the market where high quality Australian
brands are well regarded. The Company is also
exploring opportunities in South Korea, Indonesia,
Thailand and Taiwan.
Continuous improvement initiatives will drive
increased effi ciencies and cost improvements. Keeping
costs down will be important to challenge growth in
private label products which are gaining momentum
in a cost-conscious consumer market. To support cost
control, production effi ciency and growth in contract
manufacturing opportunities, Pental will invest in
replacing one of its old liquid lines in the coming year.
This will be used for non-bleach liquids such as hand
soap and dishwashing detergent.
I acknowledge the eff orts of my fellow Directors over
the past year, thank departing Directors Mel Sutton
and Kimberlee Wells for their valuable contribution,
and warmly welcome new Directors Mark Hardgrave
and Jeff Miciulis. On behalf of the Board I sincerely
thank our people for their committed eff orts during
the year, including our executive team who have
used their extensive experience to lead the business
through challenging market conditions and constant
change. We again thank our shareholders, suppliers
and customers for their ongoing loyalty and support.
Peter Robinson
Chairman
Pental Annual Report 2019 | 13
DIRECTORS’
REPORT
The directors of Pental Limited submit
herewith the annual financial report
of the company for the year (52
weeks) ended 30 June 2019. In order
to comply with the provisions of the
Corporations Act 2001, the directors
report as follows:
PETER ROBINSON
JOHN RISHWORTH
Non-Executive
Independent Director
Experience and responsibilities
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 9 September 2004.
Member of Audit Committee and Member of
Remuneration Committee.
B.Eco (Mon)
Non-Executive Independent
Chairman
Experience and responsibilities
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.
MEL SUTTON
B.Com, Non-Executive Vice-Chairman (Resigned)
Experience and responsibilities
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.
Resigned 31 December 2018.
KIMBERLEE WELLS
Non-Executive Independent Director (Resigned)
Experience and responsibilities
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.
Resigned 21 March 2019.
JOHN ETHERINGTON
JEFF MICIULIS
MARK HARDGRAVE
B.Ec, FCA, FAICD
Non-Executive Independent
Director
Experience and responsibilities
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
private and not for profit organisations.
Appointed Director 2 April 2013.
Chairman of Audit Committee and Member of
Remuneration Committee.
Non-Executive
Independent Director
Experience and responsibilities
Jeff brings 35 years’ experience in
Sales, Marketing, Country Leadership,
and Regional Leadership at Energizer
in both Household Batteries, and
Personal Care Shaving Products.
He commenced his career as a Sales
Trainee with Eveready Australia
and rose to become National Sales
Manager before taking his career
overseas for the next 20 years. During
that time he held numerous leadership
roles of increasing responsibility across
multiple international markets.
Overseas roles included International
Marketing, General Manager South
Africa, Managing Director Malaysia,
Regional Vice President Middle
East, and Africa, and Regional Vice
President South Asia, and China.
Appointed 5 March 2019.
Member of the Audit Committee and Member
of Remuneration Committee.
B.Ec,
Non-Executive Independent
Director
Experience and responsibilities
Mark has over 35 years’ experience
having held previous positions in
corporate finance, funds management
and various C-suite roles. He is
currently a non-Executive Director
of ASX listed companies Traffic
Technologies Limited, Wingara AG
Limited and a Director of Reclink
Australia.
He is a co-founder and former joint
Managing Director of M&A Partners, a
Melbourne based boutique corporate
advisory group. Prior to that, Mark
was involved in funds management,
equity capital markets and mergers
& acquisitions in various roles at firms
such as Bennelong Group, Thorney
Investment Group, Merrill Lynch and
Taverners Group.
Appointed Director 1 May 2019
Member of Audit Committee and Member of
Remuneration Committee.
The above named directors held office
during the financial year. Refer above for
details of directors who did not hold a
position for the whole 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”.
Pental Annual Report 2019 | 15
DIRECTORS’ REPORT
(CONTINUED)
DIRECTORS’ SHAREHOLDINGS
The following table sets out each director’s relevant interest in shares, debentures, and rights or options in shares
or debentures 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
John Rishworth
13,208
John Etherington
160,000
Jeff Miciulis
800,000
Mark Hardgrave
–
–
–
–
–
–
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.
OLIVER CARTON
B Juris LL.B
Company Secretary
Experience and responsibilities
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 Annual Report 2019 | 17
DIRECTORS’ REPORT (CONTINUED)
Company overview:
Trusted brands that get the
job done
Pental Limited is a trusted manufacturer and
distributor of personal, household and commercial
products across Australia, New Zealand and Asia. The
company is based in Australia and has 126 employees.
The Company manages a portfolio of leading brands,
which are household names in Australia and New
Zealand - it is a branded market leader and the largest
local manufacturer of bar soaps, liquid bleach and
fi relighter cubes.
The Company also provides distributorship services to
brands and products that are non-perishable and have
a long shelf life.
Pental has grown through dedication to customer
service, efficiency and quality.
For more than 60 years we have worked hard to
stay true to our Australian heritage, investing in our
manufacturing plant in Shepparton, Victoria.
The production plant at Shepparton facilities
comprise of:
• Household Cleaning Liquids plant;
• Bar Soap plant;
• Laundry and Dishwashing Liquids plant;
• Firelighters plant.
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. We continue to expand
into commercial and industrial channels.
PENTAL’S CORE BRANDS
Pental’s core brands are household names:
• White King in Australia
• Softly in Australia and New Zealand
• Janola and Sunlight in New Zealand
• Country Life and Velvet in Australia
• Little Lucifer in Australia and New Zealand
• Jiffy in Australia.
Personal Care
Household Cleaning
Laundry
Fire needs
Kitchen
Pental is expanding distribution throughout Asia,
through developing products and pack sizes that are
suitable for these new markets. We currently export
into China, Vietnam and Thailand.
This has been achieved mainly through creating
partnerships with strategically aligned distributors.
We are also exploring opportunities around
e-commerce platforms and other overseas markets
to expand our business.
REVIEW OF OPERATIONS
Underlying financial performance
FY19 (i)
$’000
FY18 (i)
$’000
Change
$’000
%
Gross Sales
153,986
108,427
45,559
+42.0%
Trade spend rebates & discounts
(53,540)
(32,760)
(20,780)
-63.4%
Sales Revenue
Trade spend to gross sales
Underlying EBITDA
Underlying EBITDA to net sales
100,446
34.8%
8,330
8.3%
75,667
30.2%
7,342
9.7%
Depreciation & Amortisation
(3,316)
(3,559)
Underlying EBIT
Underlying EBIT to net sales
Underlying net profit after tax
5,014
5.0%
3,451
3,783
5.0%
2,602
24,779
988
243
1,231
32.7%
-4.6%
13.5%
-1.4%
6.8%
32.5%
0.0%
849
32.5%
Reported Profit / (loss) after tax
1,921
(27,839)
29,760
+100%
Shareholder metrics
Basic EPS - cents per share
1.41
(20.43)
Underlying Basic EPS - cents per share (iii)
Total Dividends declared - cents per share
2.53
2.00
1.91
1.50
+100%
32.5%
33.3%
Cashflow and capital management
Working Capital (ii)
Net Cash/(Debt)
Gearing (iv)
23,377
14,003
246
0.0%
7,045
0.0%
9,374
(6,799)
66.9%
-96.5%
(i) 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 FY19 and FY18
of 136,250,633 used in the calculated of reported basic EPS.
(iv) Net debt to equity. Net of cash at bank and overdraft facility utilised at 30 June 2019 was $0.246 million.
Refer to note 27 (a) of the financial statements.
Pental Annual Report 2019 | 19
DIRECTORS’ REPORT (CONTINUED)
promotional plans which generate healthy
uplifts with positive margins. Trade spend in NZ
increased marginally as a result of price matching
initiatives in dish wash category to protect market
share.
• Net sales (after trade spend) of $100.446 million
was up 32.75 % or $24.779 million on last year.
• Underlying EBIT (Earnings Before Interest and
-
Tax) of $5.014 million was $1.231 million (or 32.5%)
up on last year, excluding significant items below:
-
Non cash impairment charge of $2.185 million
($1.530 million net of tax) on brand names
ACCC related expenses in the prior period:
ACCC non-deductible Penalty $0.700
million and ACCC legal costs $0.421
million, as disclosed in 2018 annual report.
Impairment of Goodwill (non-cash item)
$29.446 million in the prior period, as
disclosed in 2018 annual report.
-
• 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”.
UNDERLYING FINANCIAL PERFORMANCE
• Gross sales of $153.986 million was up 42.0% or
$45.559 million on last year, driven by addition of
Duracell distributorship.
• Gross sales in Australia were up 53.9% or $46.446
million on last year predominantly due to addition
of Duracell batteries. Excluding Duracell, gross
sales were down $6.389 million or 7.4% compared
to prior year. Whilst branded gross sales grew in
bleach (+2.0%), cleaners (+2.0%), fabric softeners
(+39.1%) and firelighters (+2.5%), it declined in bar
soaps (-20.3%) & toilet (-17.5%) categories due
to competitive and price deflationary market
conditions. Private Label business grew by 2.6%
led by growth in bleach, fabric softeners and
firelighters.
• Gross sales revenue in New Zealand was down
$1.588 million on last year (in New Zealand
dollars) or 7.2% driven by persistent price
competition in manual dishwash (-11.5%) and toilet
(-7.6%) categories. However, sales remained firm
in bleach (+0.4%), cleaners (+1.8%) and firelighters
(+2.8%). Pental’s share in New Zealand market
in several categories such as Toilet, Household
Cleaning and Dish Wash remains strong.
• Exports to Asia remained in line with prior year
however consolidation of various small distributors
resulted in healthy margin improvements. Pental
continues to explore and make progress towards
partnerships with large established distributors
aiming to reach a large consumer base.
• Trade spend (trading terms, promotional activities
and discounts) represented 34.8% of gross sales
compared to 30.2% in the previous corresponding
period. This was predominantly a result of
additional Duracell business which attracts high
terms of trade compared to Pental’s own brands.
Excluding Duracell, ratio of trade spend to gross
sales improved in Australia as a result of focused
Gross sales of $153.986 million
up 42.0% or $45.559 million on
last year, driven by addition of
Duracell distributorship.
Gross sales
in Australia
up 53.9% or
$46.446 million
on last year.
Pental Annual Report 2019 | 21
DIRECTORS’ REPORT (CONTINUED)
A reconciliation between reported statutory profit and underlying profit is presented below:
Underlying EBITDA
Depreciation and amortisation
Underlying EBIT
Finance costs
Underlying profi t before tax
Underlying income tax expense
Underlying net profi t after tax
Signifi cant items (net of tax):
Impairment of brandnames (net of tax)
Impairment of goodwill (ii)
ACCC penalty costs (iii)
FY19 (i)
$’000
FY18 (i)
$’000
% Change
13.5%
32.5%
32.0%
32.6%
8,330
(3,316)
5,014
(73)
4,941
(1,490)
3,451
(1,530)
-
-
7,342
(3,559)
3,783
(40)
3,743
(1,141)
2,602
-
(29,446)
(995)
Reported (loss) / profi t after tax
1,921
(27,839)
++100.0%
(i) Non-IFRS fi nancial table
(ii) Impairment of goodwill in prior period is not tax deductible
(iii) Penalty of $700 thousand in prior period is not tax deductible
+
• Pental continued its focus on efficiency improvements whilst rationalising all costs. As a result:
o Gas costs were down $0.174 million in reduced usage delivered by replacement of old boiler with 4 smaller
energy efficient gas boilers during the year.
o Electricity costs remained in line with last year despite rates going up 7.5%. An initiative to change floor
lights to LED delivered cost savings which offset the impact of market price rise.
o A staff restructure undertaken in second half of 2018 financial year resulted in indirect wages being $0.542
million down on last year even after absorbing impact of additional Duracell business.
o Marketing and research expenses were down by $0.588 million compared to prior year driven by targeted
spend on major projects.
However, these significant savings were offset by:
o Freight out and distribution costs were up $0.700 million driven by additional Duracell volume. However,
due to high value, low space nature of batteries, ratio of freight out to gross sales improved from 4.91% in
prior year to 3.91% in reported period.
o Wages relating to warehousing & distribution went up by $0.114 million predominantly as a result of
additional Duracell volume.
• Reported net profit after tax (NPAT) for the year (52 weeks) ended 30 June 2019 was $1.921 million (2018: loss
of $27.839 million).
SHAREHOLDER METRICS
•
The total dividend for the 2019 financial year is 2.0 cents per ordinary share (2018: 1.5 cents), representing
79.0% (2018: 78.5%) of the full-year underlying net profit after tax and consists of:
– Interim fully franked dividend of 0.70 cents per ordinary share, which was paid 27 March 2019; and
– Proposed final fully franked dividend of 1.3 cents per ordinary share, payable to shareholders on 27
September 2019, with a record date of 9 September 2019.
• Basic earnings per share of 1.41 cents was a turnaround from loss of 20.43 cents per share in 2018. On an
underlying basis, (excluding significant items) basic earnings per share were 2.53 cents, an increase of 0.62
cents (or 32.6%) compared to underlying basic earnings per share in the prior period of 1.91 cents.
CASH GENERATION AND CAPITAL MANAGEMENT
Net cash used in operating activities was $2.430 million (2018: Net cash provided by operating activities $7.310
million) predominantly driven by working capital requirements of Duracell business. Excluding impact of Duracell
distributorship, total working capital improved on prior period by $1.451 million.
Net working capital (receivables, inventories less trade and other payables) of $23.377 million was higher than
last year by $9.374 million driven by Duracell distributorship.
Pental’s debtors’ position continues to be strong, with very minimal overdues as at the reporting date.
Capital investment of $2.189 million was $6.057 million lower than prior year. However, prior year capital
investment included acquisition of the Shepparton property which was settled on the 2nd August 2017 for $7.312
million. Major capital investment initiatives undertaken during the FY 19 year included replacement of an old
depreciated large boiler with 4 small energy efficient boilers that provide flexibility to adjust to production scale
resulting in significant gas savings. Replacement of one liquid filling line was also underway as at the reporting
date. The new liquids line will be used to service existing liquids business with greater speeds. The new filling line
will also enable Pental to target additional private label opportunities.
The company’s closing net cash position of $0.246 million was debt free. Please refer to note 27 (a) to the
financial statements for details.
Pental Annual Report 2019 | 23
DIRECTORS’ REPORT (CONTINUED)
2. NEW PRODUCTS AND CHANNELS
The combination of a trusted name with an innovative idea
encourages loyal consumers to stay with their preferred
brands while tempting other consumers to switch. Across
our main categories, Pental’s commitment to innovation
supported the performance of our brands through the year.
White King’s new range of Australian-made double strength
toilet gels has been a success based on both quality and
performance deliverables. We are now extending the range
by developing two new products for both the domestic and
export markets. The two new products to be launched in
second half of 2019 are a double strength toilet cleaning gel
that cleans and kills germs in 30 seconds.
Range extension into Costco continued through the year
with White King’s leading 700ml Toilet Gels and Mould
and Soap Scum Remover now available in both a three
and four pack.
In May 2019, the new innovative Huggie time saving
range of fabric softeners was released into Woolworths
supermarkets nationally. The New Huggie Easy Iron, Huggie
Quick Dry, Huggie Fast Cycle and Huggie Wrinkle Release
Fabric Softeners demonstrate Pental’s commitment to
innovation and high-quality Australian products.
Pental has developed three new Sunlight Dishwashing
variants - charcoal, bamboo and lemon anti-bacterial - to
be exported to the New Zealand market and launched into
IGA’s in the Australian market. In the bar soap category,
we launched a soap bar designed for “Tradies” in both
IGA Supermarkets and Chemist Warehouse. An all new
Pears 750ml three pack body wash innovation was added in
this category.
More opportunities for innovation will be supported by
the installation of an all new liquids production line in
Shepparton. It will create opportunities to launch into new
personal care segments, while enabling growth in third party
manufacturing, especially in the private label category.
The year saw further alignment between Pental’s brands
and the Australian Made Campaign. All new products
across four 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 goods.
Strategic objectives:
The five key pillars
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’s strategy supports its vision to be a leading supplier
of shelf stable (non-food) products to its chosen markets
through delivering quality, innovation and sustainability
to the satisfaction of customer needs while enhancing
shareholder value.
Our strategy has five pillars; domestic sales growth, new
products and channels, value added projects, exports and
continuous manufacturing improvement. These five pillars
support organic growth and are matched by our work to
establish new partnerships and distributorships that will
complement our product range, expertise, and leverage our
infrastructure while expanding into new channels.
This year saw promising progress across the five strategic
pillars as outlined here.
1. DRIVING SALES GROWTH
In common with our competitors, we operate in markets
which have changed dramatically. Brand loyalty is being
eroded by constant discounting which is training consumers
to make buying decisions based on promotional pricing.
Consequently, shoppers now have as many as four
preferred brands, with price often determining choice.
Retailer margin requirements, especially in supermarket
chains, are also resulting in lower gross margin returns
for manufacturers and suppliers. At the same time, major
retailers are developing their own private label brands.
It’s a challenging market for every brand and their suppliers,
with companies like Pental working hard to compete, but
not at any cost.
We are investing in price matching initiatives and field
support to protect our share of shelf space, our market
share and our brand equity in key categories. We constantly
review the effectiveness of promotions in driving sales and
margins, and the contribution made by products and their
variants to overall sales. This enables us to identify early
opportunities for the innovative product developments
which support sales growth and differentiate us from the
competition.
Despite challenging conditions, we have grown sales
in branded bleach, cleaners and firelighters. Our Jiffy
firelighter brand delivered year-on-year sales growth of 10%.
We also see opportunities to complement revenues from
our branded portfolio by manufacturing private label
products, where it makes commercial sense. Securing third
party accreditation for our manufacturing and supply chain
through ISO9002 and HACCP makes us an attractive
manufacturing partner with established credentials.
3. VALUE ADDED PROJECTS
Distribution partnerships, brand consolidation and securing
new agencies or new product segments all support the third
pillar of Pental’s strategy.
The year saw Pental become the official Australian and
New Zealand distributor for Duracell batteries following
the completion of the large strategic project to secure the
brand through negotiations with Duracell Asia. Duracell
has already made a valuable contribution to Pental’s
performance in its first 10 months under our watch.
More opportunities for efficiencies and growth were
secured through the finalisation of the brand consolidation
strategy to bring both Martha’s and Lux under the Softly
master brand. The strategy has ensured overall brand
revenue is not compromised while improving both product
formulations and packaging designs. Notably, Softly is the
first Woolmark certified detergent.
In a further step forward, Pental successfully ranged the
Pears brand of soaps and liquids into Chemist Warehouse
with five new products. In addition, Pental has opened new
channels, launching a core range of Pears products on
Amazon.com.au.
The Company is also partnering with Monash University’s
research and development team, ensuring all new product
development has a distinct point of competitive difference
in its respective category. The Monash partnership
enables Pental to support value adding projects through
collaboration on market leading innovation and technology.
5. CONTINUOUS MANUFACTURING
IMPROVEMENT
Pental’s final strategic pillar of continuous manufacturing
improvement seeks to support profitable growth through
capital investment, along with cost savings and delivering
high quality, trusted products.
In manufacturing, we have focused on improving labour
and line efficiency through labour reduction strategies,
CAPEX initiatives, reduced change over times, increased
line availability time, and preventative maintenance
programs.
As a result of capital investment this year, increased
production is being achieved in the soap plant, delivering
cost reductions and supporting future growth of single bar
soaps for supply in both local and export markets.
Pental has successfully integrated a quality management
system for both manufactured and purchased products. It
supports “right first time” high quality production.
Supply chain and procurement initiatives have replaced
road freight with expanding rail networks on the eastern
seaboard and re-negotiated sea freight costs for exports.
Pental works closely with raw material and packaging
suppliers on cost reduction opportunities to offset rising
commodity prices.
In preventive maintenance, an already robust system has
been enhanced with further development in computerised
maintenance management systems (CMMS) and
predictive tools and technologies.
PENTAL
NEW ZEALAND
TEAM
4. EXPORTS
Pental’s strong market presence in New Zealand across
several cleaning categories continues to be leveraged to
support export growth.
We enjoy a strong partnership with our Auckland-based
sales and distribution agent. To support growth through
innovation, we are updating all the Janola domestic
cleaning range packaging for the New Zealand market.
The installation of a new filling line at Pental’s Shepparton
manufacturing site is enabling the production and
development of products that are more earth friendly and
sustainable for the New Zealand market.
China and Vietnam are priority markets for export growth.
Pental has formed strong alliances with distributors in both
markets, including Silverstone, a family-owned distributor
of Australian brands in the province of Hangzhou. Terms of
trade are being negotiated with a distributor in China which
will provide a large-scale entrance into the market. The
Company is also exploring opportunities in South Korea,
Indonesia, Thailand and Taiwan.
Pental Annual Report 2019 | 25
DIRECTORS’ REPORT (CONTINUED)
OPERATIONAL RISKS
Pental faces specific and general operational risks 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.
Following is a summary of the most significant risks facing continuing business operations, as identified and assessed by a
risk management process carried out by the Audit and Risk Committee and Pental’s risk mitigation approaches:
Competition
Product sourcing
The majority of Pental’s branded products are sold in
supermarkets in Australia and New Zealand. In both
countries competition between retail chains is intense,
leading to aggressive reviews of product mixes as well as
increased moves towards own or private label products
to improve retail margins. This situation is not unique to
Pental and affects suppliers of the vast majority of products
stocked across supermarket chains.
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 impact performance. Pental is continually refining its
sourcing arrangements, including operating dual sourcing
arrangements to reduce risk.
New entrants into Pental’s market segment have the
potential to cause market disruption across ours and
competitors’ brands as they bid to secure shelf space.
This disruption has the potential to erode sales. Across
the supermarket sector in both countries, operators are
competing for shoppers’ share of wallet through discounting
and private label diversification. The competitive environment
is challenging when suppliers need to recover rising input
costs through prices rises and this impacts margins.
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.
Distributorship agreements
Pental currently has two significant distributorship
agreements with Unilever International (Pears brand) and
Berkshire Hathaway (Duracell brand). As a result, Pental
is the master distributor of these brands for the Australian
market and these agreements account for a significant
portion of Pental’s operating margins. These agreements
are renegotiated and renewed every three years and include
provisions that allow the contracts to be terminated on
a performance basis. Pental proactively manages the
performance of both distributorship agreements through
joint business plans and monthly business reviews.
Supply chain
Pental has an extensive and reliable supply chain that
enables us to efficiently procure and deliver products
to customers. 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 can effectively manage this risk.
Loss of key personnel
Pental’s future success depends to a significant extent
on the retention of key personnel, particularly in senior
management, who have extensive market and business
knowledge. 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 reviews the organisational
structure of the business to ensure the best people are
retained, whilst investing in developing other key people in
the business.
Damage to Pental’s brands
The reputation and value associated with Pental’s brand
names could be adversely impacted by various factors
including quality failures, 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 quality processes and systems, and proactive tracking
and management of any disputes, minimises this risk.
OUTLOOK
ENVIRONMENTAL REGULATIONS
The outlook for the Group is contained in the Chairman’s
report.
CHANGES IN THE STATE OF AFFAIRS
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.
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
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.
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 Trade
Waste 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 the Board.
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.
SHARES UNDER OPTION OR ISSUED ON
EXERCISE OF OPTIONS
There were no unissued shares under options as at the date
of this report.
DIVIDENDS
In respect of the year (52 weeks) ended 30 June 2019 an
interim fully franked dividend of 0.70 cents per ordinary
share was paid on 27 March 2019, and the directors have
declared the payment of a final fully franked dividend of
1.3 cents per ordinary share, payable to shareholders on 27
September 2019, with a record date of 9 September 2019.
The total dividend for the FY19 financial year of 2.0 cents
per share represents a payout ratio of 79.0% of net profit
after tax and before significant items.
In the prior year ended 1 July 2018, the total dividend paid
was 1.5 cents per ordinary share, representing a payout ratio
of 78.5% of net profit after tax and before significant non
cash items.
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.
Pental Annual Report 2019 | 27
DIRECTORS’ REPORT (CONTINUED)
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, 13 Board, 4 Audit Committee and 2 Remuneration Committee meetings were held.
Directors
Peter Robinson
John Rishworth
John Etherington
Jeff Miciulis (i)
Mark Hardgrave (ii)
Mel Sutton (iii)
Kimberlee Wells (iv)
Board of Directors
Audit Committee
Remuneration Committee
Eligible to
Attend
Attended
Eligible to
Attend
Attended
Eligible to
Attend
Attended
13
13
13
5
3
8
10
12
10
12
4
3
8
5
4
4
4
1
1
2
-
3
2
4
1
1
2
-
2
2
2
1
1
1
1
2
1
2
1
1
1
1
(i) Jeff Miciulis was appointed non-executive director on 5 March 2019.
(ii) Mark Hardgrave was appointed non-executive director on 1 May 2019.
(iii) Mel Sutton resigned as non-executive vice chairman on 31 December 2018.
(iv) Kimberlee Wells resigned as non-executive director on 21 March 2019.
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 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 44 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.
Pental Annual Report 2019 | 29
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:
Charlie McLeish
Chief Executive Offi cer
Neil Godara
Chief Financial Offi cer
(commencement date,
10 October 2018)
Josephine De Martino
Chief Financial Offi cer
(departure date,
5 October 2018)
Peter Robinson
Non-Executive
Independent Chairman
John Rishworth
Non-Executive
Independent Director
John Etherington
Non-Executive
Independent Director
Jeff Miciulis
Non-Executive
Independent Director
(commencement date,
5 March 2019)
Mark Hardgrave
Non-Executive
Independent Director
(commencement date,
1 May 2019)
Mel Sutton
Non-Executive
Vice-Chairman
(departure date,
31 December 2018)
Kimberlee Wells
Non-Executive
Independent Director
(departure date,
21 March 2019)
REMUNERATION POLICY
KEY TERMS OF EMPLOYMENT CONTRACTS
Mr Charlie McLeish is employed by the Group 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 participate in the Executive
Variable Incentive Plan (EVIP) which contains short term
cash bonuses as well as performance rights that vest at a
future date in 3 years. Eligibility criteria for EVIP is aligned to
the Company’s performance.
Mr Neil Godara is employed by the Group under an ongoing
contract which may be terminated on one months’ notice
by either the Company or the executive. Mr Godara was not
entitled to participate in EVIP for the reported period due to
serving probation period after new appointment in line with
the Company policy. Mr Godara is entitled to participate in
the EVIP from the financial year beginning 1 July 2019.
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 variable cash and
equity 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
Group’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 as per 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.
Pental Annual Report 2019 | 31
REMUNERATION
REPORT - AUDITED (CONTINUED)
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 following tables set out summary information about the Group’s earnings and movements in shareholder wealth for
the five years to June 2019. 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.
Gross sales
Net profit/(loss) before tax
Net profit/(loss) after tax
Underlying net profit after tax1
30 June
20191
1 July
20181
2 July
2017
26 June
20162
28 June
20152
$’000
$’000
153,986
108,427
2,756
1,921
3,451
(26,824)
(27,839)
2,602
$’000
117,660
8,343
5,850
5,962
$’000
109,980
8,218
5,628
5,628
$’000
111,150
7,035
5,087
5,087
1 Underlying net profit after tax has been adjusted to exclude brand impairment (FY19: $2,185 thousand, FY18: Nil), goodwill impairment (FY19: Nil, FY18:
$29,446 thousand), ACCC penalty (FY19: Nil, FY18: $700 thousand), ACCC legal costs (FY19: Nil, FY18: $421 thousand, FY17: $160 thousand), and their
respective income tax impact (FY19: $655 thousand, FY18: $126 thousand, FY17: $48 thousand). Refer to page 12 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 and FY15 underlying net profit after tax.
Share price at start of year
Share price at end of year
Interim dividend (cents) per share 1
Final dividend (cents) per share 1, 2
Basic earnings/(loss) cents per share
Diluted (loss)/earnings cents per share
30 June
2019
1 July
2018
2 July
2017
26 June
2016
28 June
2015
$0.280
$0.288
0.70
1.30
1.41
1.41
$0.595
$0.280
0.60
0.90
(20.43)
(20.43)
$0.575
$0.595
1.15
2.10
4.29
4.18
$0.440
$0.575
1.00
1.95
4.13
4.04
$0.033
$0.440
0.85
1.80
4.08
4.02
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.
The compensation of each member of the key management personnel of the Group for the current year is set out below:
2019
Short-term employee benefits
Post-
employment
benefits
Termination
benefits
Share–
based
payments
Salary
& fees
$
Bonus(x)
$
Non-
monetary(i)
$
Super-
annuation
$
Lump Sum(viii)
$
Rights(ix)
$
Non Executive Directors
Peter Robinson
John Rishworth
John Etherington
Jeff Miciulis(ii)
Mark Hardgrave(iii)
Mel Sutton(iv)
91,324
54,795
54,795
18,265
9,132
36,529
Kimberlee Wells(v)
45,000
Total Directors
309,840
Executives
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Charlie McLeish
421,692
40,000
Neil Godara(vi)
115,041
10,000
6,492
3,002
8,676
5,205
5,205
1,735
868
3,470
-
25,159
24,996
10,929
-
-
-
-
-
-
-
-
-
-
Josephine De
Martino(vii)
67,308
-
3,164
6,394
8,205
Total
$
100,000
60,000
60,000
20,000
10,000
39,999
45,000
334,999
-
-
-
-
-
-
-
-
(56,992)
436,188
-
-
138,972
85,071
Total Executives
604,041
50,000
12,658
42,319
8,205
(56,992)
660,231
Total
Remuneration
913,881
50,000
12,658
67,478
8,205
(56,992)
995,230
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
(ix)
(x)
Non-monetary benefits include car parking & motor vehicle toll tags.
Jeff Miciulis was appointed non-executive director on 5 March 2019.
Mark Hardgrave was appointed non-executive director on 1 May 2019.
Mel Sutton resigned as non-executive vice chairman on 31 December 2018.
Kimberlee Wells resigned as non-executive director on 21 March 2019.
Neil Godara was appointed as Chief Financial Officer on 10 October 2018.
Josephine De Martino resigned as Chief Financial Officer on 5 October 2018.
Lump sum includes payment of balance of accrued leave entitlements paid out on termination and applicable superannuation.
Performance rights issued to Mr McLeish in prior periods are deemed unlikely to vest.
The remuneration committee approved a one time special cash bonus for Mr McLeish and Mr Godara on 20 June 2019.
Pental Annual Report 2019 | 33
REMUNERATION
REPORT - AUDITED (CONTINUED)
The compensation of each member of the key management personnel of the Group for the prior year is set out below:
2018
Short-term employee benefits
Post-
employment
benefits
Termination
benefits
Share–
based
payments
Salary
& fees
$
Bonus
$
Non-mone-
tary(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)
Josephine De
Martino(iii)
413,980
74,872
184,760
Total Executives
673,612
Total
Remuneration
1,007,585
–
–
–
–
–
–
-
-
-
-
-
–
–
–
–
–
–
8,676
6,941
5,205
5,205
-
26,027
–
–
–
–
–
–
100,000
80,000
60,000
60,000
60,000
360,000
6,464
3,164
24,996
-
4,480
449,920
4,696
94,637
(31,173)
146,196
3,137
17,552
-
-
205,449
12,765
47,244
94,637
(26,693)
801,565
12,765
73,271
94,637
(26,693)
1,161,565
(i) Non-monetary benefits include car parking & motor vehicle toll tags.
(ii) Albert Zago’s employment ceased on 27 September 2017. As a result, all share-based payments on issue 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.
TRANSACTIONS WITH KEY MANAGEMENT
PERSONNEL
Ms Wells’ employer TBWA Group invoiced services valued
at $2,172.50 including GST during the period (2018: $81,840
including GST). The value of service is not material to Ms
Wells as an employee of TBWA Group, or Pental.
SPECIAL BONUS
In the 2019 Financial year, the remuneration committee
approved a one time special bonus for key members of the
management team including Mr McLeish and Mr Godara
in recognition of their efforts in securing and integrating
Duracell distributorship business into Pental’s existing
infrastructure.
EXECUTIVE VARIABLE INCENTIVE PLAN (EVIP)
During the year the Remuneration Committee reviewed the
executive remuneration framework in order to consider the
remuneration strategy that would be most appropriate in
the context of the rapidly changing and disruptive market
conditions facing the Group. As a consequence of this
review, the Board elected to discontinue the previous long
term incentive plan and introduce a new Executive Variable
Incentive Plan (EVIP).
Under Pental’s EVIP executives and selected senior
management employees are eligible for both a cash and
equity incentive upon the achievement of certain Group
level KPI’s and personal KPI’s set at the commencement
of each financial year, weighted as follows:
• Fifty percent of both the cash and equity incentive
KPIs relate to the achievement of a target EBIT for the
financial year.
• The remaining fifty percent are based on specific KPIs
relevant to the participants particular specialisation.
Both cash and equity incentives are only payable if the
Company’s target EBIT is achieved.
VARIABLE INCENTIVE – CASH
A portion of the variable cash incentive is paid shortly
after the release of audited full year results. The basis
of calculating this cash incentive is unchanged from
the previous short term cash incentive plan. The
maximum amount of remuneration under the variable
cash incentive plan ranges from 10 to 35 percent of the
individual executive/senior management employee’s total
employment cost.
VARIABLE INCENTIVE – EQUITY
The variable equity incentive is designed to reward
achievement of annual KPIs, assist the retention of key
high performing executives and align the rewards to
the company’s share price. The maximum amount of
remuneration under the variable equity incentive plan
varies from 30 to 40 percent of the individual executive /
senior management employee’s total employment cost.
The variable equity incentive is delivered as performance
rights, which will be granted under the existing Executive
Performance Rights Plan (Rights Plan) to enable the
subsequent acquisition of the share component. The Rights
will convert to ordinary shares after three years.
The vesting of the Rights is conditional on:
a) the executive being employed by the Group on the
vesting date; and
b) Pental’s volume-weighted average share price (VWAP)
for the last ten business days of the financial year three
years hence being equal to or greater than the VWAP for
the preceding 10 business days from the grant date.
In total, the Rights are held for three years. The value to the
executive therefore is not at the grant date, rather at the
conclusion of the 3 year vesting period.
As the variable incentive is based upon an assessment of
performance against respective KPIs in the year in which
it is granted, there are no additional performance hurdles
except for ongoing employment during the vesting period.
Dividends are not payable on the Rights. However, dividend
is payable on ordinary shares after conversion of the Rights
to ordinary shares.
Performance rights will be granted on a face value basis
using the last ten business days of the financial year
Volume Weighted Average Price (VWAP).
Under the EVIP, the executives/senior management
employees can receive the following annualised
remuneration from the vesting of performance rights:
Percentage of fixed
remuneration by achieving:
Charlie McLeish
Up to 40%
Pental Annual Report 2019 | 35
REMUNERATION
REPORT - AUDITED (CONTINUED)
EVIP – FY19 PERFORMANCE
No cash or equity incentives were provided to executives / senior management employees in the current financial year
under the EVIP as the Company did not achieve the plan’s EBIT hurdles.
SHARE-BASED PAYMENTS (RIGHTS PLAN)
The Company has an Executive Performance Rights Plan (Rights Plan), which has historically been used to provide Long Term
Incentives (LTI) to certain executives / senior management employees. LTI has historically been provided as performance
Rights granted at the commencement of the relevant three year performance period subject to eligibility criteria.
From 2 July 2018, the Group has discontinued the previous LTI plan and introduced a new Executive Variable Incentive Plan
(EVIP), the terms of which are described above.
All Rights issued are convertible to ordinary shares at no consideration, subject to achieving any performance or other
vesting conditions.
Grant
Date
Vesting
Date
Balance at
1/7/2018
No.
Rights
granted
No.
Rights
vested
No.
Rights
forfeited
No.
Rights
lapsed No
Balance at
36/6/2019 No.
Charlie McLeish(i)
1/7/2016
1/7/2019
209,302
Charlie McLeish
3/7/2017
1/7/2020
211,765
-
-
-
-
-
-
209,302
-
-
211,765
(i) Rights held by Mr McLeish lapsed during the period as a result of the related performance conditions not being achieved.
There were no share options granted during the 2019 year (2018: nil).
KEY MANAGEMENT PERSONNEL EQUITY HOLDINGS
Fully paid ordinary shares of Pental Limited held by key management personnel:
Balance
at
2/7/17
Options
exercised
Net
change
other (i)
Balance
at
1/7/18
Options
exercised
Net
change
other (i)
Balance(ix)
at
30/6/19
Non-Executive Directors
Peter Robinson
3,972,926
John Rishworth
John Etherington
Jeff Miciulis (ii)
Mark Hardgrave (iii)
Mel Sutton (iv)
Kimberlee Wells (v)
Executives
Charlie McLeish (vi)
Josephine De Martino (vii)
Neil Godara (viii)
13,208
160,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
238,001
4,210,927
-
-
-
-
-
-
-
-
13,208
160,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4,210,927
13,208
160,000
800,000
800,000
-
-
-
-
-
-
-
-
Jeff Miciulis was appointed non-executive director on 5 March 2019.
(i) Net change other relates to shares purchased and sold during the financial year.
(ii)
(iii) Mark Hardgrave was appointed non-executive director on 1 May 2019.
(iv) Mel Sutton resigned as non-executive vice chairman on 31 December 2018.
Kimberlee Wells resigned as non-executive director on 21 March 2019.
(v)
(vi) Mr McLeish has been issued rights under an Executive Performance Rights Plan in the prior year.
(vii) Ms De Martino resigned as Chief Financial Officer on 5th October 2018.
(viii) Mr Godara was appointed as Chief Financial Officer on 10th October 2018.
(ix) 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 (2018: nil).
• Mr McLeish has been offered rights under an Executive Performance Rights Plan in the prior period. No shares or
share options under the Company performance rights plan were issued to Mr McLeish or Ms De Martino (former CFO,
departed 5th October 2018) during the 2019 and 2018 financial years.
• Mr Godara (incoming CFO, commenced 10th October 2018) having successfully completed the 6 month probationary
period is eligible to be invited to participate in the Company’s Executive Variable Incentive Plan (EVIP) from the 1st
July 2019.
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, 27 August 2019
Pental Annual Report 2019 | 37
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).
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.
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.
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 30 June 2019, there were 34 (1 July 2018, 31) women
employed representing 26.0% (1 July 2018, 24.5%) of total
employees. There were no female senior executives as at the
reporting date (1 July 2018, 1). However, during the reported
period, 1 female senior executive resigned.
During the period there was one female on the Board of
Directors (1 July 2018, 1 female director). She resigned during
the period.
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 9th July 2019.
The Company does not have a formal policy for the periodic
evaluation of it Board. The Board does not consider that a
formal policy is necessary given the size of the Board and
operations of the Company.
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 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 Annual Report 2019 | 39
CORPORATE
GOVERNANCE STATEMENT
(CONTINUED)
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, Mr John
Etherington, Mr Jeff Miciulis and Mr Mark Hardgrave.
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 $1,975
during the period (2018: $81,840), as the value of service is
not material to Ms Wells as an employee of TBWA Group, or
Pental.
The date of appointment and resignation 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.
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.
The Company has 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 an Audit and Risk Committee. The Audit
and Risk Committee consisted of between four and five
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.
Pental Annual Report 2019 | 41
CORPORATE
GOVERNANCE STATEMENT (CONTINUED)
5.
5.1
6.
6.1
6.2
6.3
6.4
7.
7.1
BEST PRACTICE RECOMMENDATION
COMMENT
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.
The Audit Committee referred to in section 4 also oversees
risk as part of its Charter.
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
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.
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.
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 Annual Report 2019 | 43
Deloitte Touche Tohmatsu
ABN 74 490 121 060
550 Bourke Street
Deloitte Touche Tohmatsu
Melbourne, VIC, 3000
ABN 74 490 121 060
Australia
550 Bourke Street
Phone: +61 3 9671 7000
Melbourne, VIC, 3000
www.deloitte.com.au
Australia
Phone: +61 3 9671 7000
www.deloitte.com.au
Board of Directors
Pental Limited
Level 6, 390 St Kilda Road
Board of Directors
MELBOURNE, VIC 3004
Pental Limited
Level 6, 390 St Kilda Road
MELBOURNE, VIC 3004
27 August 2019
27 August 2019
Dear Board Members
Dear Board Members
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.
Pental Limited
Pental Limited
In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following
As lead audit partner for the audit of the financial statements of Pental Limited for the financial
declaration of independence to the directors of Pental Limited.
year ended 30 June 2019, I declare that to the best of my knowledge and belief, there have been
no contraventions of:
As lead audit partner for the audit of the financial statements of Pental Limited for the financial
year ended 30 June 2019, 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
(i) the auditor independence requirements of the Corporations Act 2001 in relation to
(ii) any applicable code of professional conduct in relation to the audit.
the audit; and
(ii) any applicable code of professional conduct in relation to the audit.
Yours sincerely
Yours sincerely
DELOITTE TOUCHE TOHMATSU
DELOITTE TOUCHE TOHMATSU
Travis Simkin
Partner
Chartered Accountants
Travis Simkin
Partner
Chartered Accountants
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Asia Pacific Limited and the Deloitte Network.
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Asia Pacific Limited and the Deloitte Network.
27
27
Deloitte Touche Tohmatsu
ABN 74 490 121 060
550 Bourke Street
Melbourne, VIC, 3000
Australia
Phone: +61 3 9671 7000
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 30 June 2019, 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 30 June 2019 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.
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.
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Asia Pacific Limited and the Deloitte Network.
Pental Annual Report 2019 | 45
28
Key Audit Matter
How the scope of our audit responded to the
Key Audit Matter
Carrying value of brand names
Refer to Note 15 Other Intangible Assets
As at 30 June 2019, the Group recognised
impairment losses of $2,185 thousand,
which reduced the carrying value of its
indefinite life brand names from $14,539
thousand to $12,354 thousand.
Management conducts impairment tests
annually (or more frequently if impairment
indicators exist) to assess the recoverability
of the carrying value of brand names.
The recoverable amount of the Group’s
brand names has been estimated using a
combination of value-in-use discounted
cash flows and, for certain brand names, an
estimate of fair value less costs to dispose
as determined by an independent valuation
specialist, using a ‘relief from royalty’
approach.
Determination of the recoverable amount
incorporated significant judgments and
estimates, specifically concerning factors
such as forecast cash flows, discounts rates,
royalty rates and terminal growth rates.
Our audit procedures included, but were not
limited to:
•
•
•
•
•
•
•
assessing the principles and integrity of the
model used by management to calculate
value-in-use for each brand name with
reference to relevant accounting standards;
assessing the competency, capability and
objectivity of the independent valuation
specialist engaged by management to
estimate the fair value for certain brand
names, including review of the terms and
scope of their engagement;
assessing the reasonableness of forecast cash
flows used in the value-in-use model to the
latest Board approved budget;
assessing the reasonableness of the
maintainable revenue estimates used to
estimate the fair value of certain brand
names;
assessing the historical budgeting accuracy of
the Group and, where appropriate,
challenging forecast cash flows with reference
to historical performance and our
understanding of market and economic
conditions;
performing sensitivity analysis around key
assumptions for both the value-in-use model
and fair value assessment.
engaged valuation specialists to assess the
reasonableness of the basis adopted by
management to estimate recoverable amount
for each brand name, including:
-
-
-
-
assessing management’s value-in-use
methodology and key assumptions;
evaluating the royalty rates and other key
inputs applied by management’s
independent valuation specialist in
estimating the fair value of certain brands
with reference to supporting analysis and
market data;
challenging key assumptions, including
forecast growth rates by comparing them
to historical results and economic
forecasts; and
evaluating the discount rate used for each
brand name against the cost of capital for
the Group and comparison to market
data.
We also assessed the appropriateness of the
disclosures included in Note 15 to the financial
statements.
29
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 30 June 2019, 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.
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.
Pental Annual Report 2019 | 47
30
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.
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 30 to 37 of the Directors’ Report for the
year ended 30 June 2019.
In our opinion, the Remuneration Report of Pental Limited, for the year ended 30 June 2019, 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, 27 August 2019
31
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, 27 August 2019
Pental Annual Report 2019 | 49
CONSOLIDATED STATEMENT OF
PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
for the year (52 weeks) ended 30 June 2019
2019
2018
Note
$’000
$’000
Continuing Operations
Gross sales revenue
Trading terms, promotional rebates and discounts
Revenue from the sale of goods
Other revenue and 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
Other expenses
Impairment of brand names
Impairment of goodwill
ACCC penalty and related legal expenses
Profi t/(Loss) before fi nance costs, income tax, depreciation and amortisation (EBITDA)
Depreciation and amortisation expense
Profi t/(Loss) before fi nance costs and income tax (EBIT)
Finance costs
Profit/(Loss) before tax
Income tax expense
Net Profi t/(Loss) for the year
Profi t/(Loss) 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/(loss) for the year
Profit attributable to equity holders of the parent
Total comprehensive income attributable to equity holders of the parent
Earnings/(Loss) per share Attributable to the Members of the Parent Entity
Basic (cents per share)
Diluted (cents per share)
Notes to the fi nancial statements are included on pages 55 - 87.
4
7
15
14
7
5
6
8
8
153,986
108,427
(53,540)
(32,760)
100,446
75,667
73
317
(11,807)
(53,716)
134
(47)
673
(41,941)
(12,347)
(12,864)
(6,736)
(1,855)
(1,129)
(1,148)
(1,064)
(2,704)
(2,185)
-
-
(6,037)
(2,443)
(1,089)
(1,100)
(1,046)
(2,565)
-
(29,446)
(1,121)
6,145
(23,225)
(3,316)
(3,559)
2,829
(73)
2,756
(835)
1,921
1,921
(256)
77
(179)
1,742
1,921
1,742
1.41
1.41
(26,784)
(40)
(26,824)
(1,015)
(27,839)
(27,839)
410
(122)
288
(27,551)
(27,839)
(27,551)
(20.43)
(20.43)
Pental Annual Report 2019 | 51
CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
as at 30 June 2019
30 June 2019
1 July 2018
Note
$’000
$’000
Current Assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other financial assets
Other
Total current assets
Non-current assets
Property, plant and equipment
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 55 - 87.
246
17,617
22,777
-
268
7,045
14,517
10,970
231
272
40,908
33,035
27(a)
9
10
11
16
13
15
17
18
6
20
6
20
22,588
12,501
35,089
75,997
17,017
26
336
1,961
19,340
3,344
129
3,473
22,813
53,184
21
90,658
(18)
(37,456)
53,184
23,688
14,728
38,416
71,451
11,484
-
48
1,755
13,287
4,357
100
4,457
17,744
53,707
90,658
246
(37,197)
53,707
CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
for the year (52 weeks) ended 30 June 2019
Issued
capital
Hedging
reserve
Equity settled
employee benefits
reserve
Accumulated
losses
Total
Note
$’000
$’000
$’000
$’000
$’000
Balance at 2 July 2017
90,658
Loss for the year
Gain on cash flow hedges
Deferred tax arising on hedges
6
Total comprehensive income
for the year
Dividend Payment
22(a)
Recognition of
share based payments
-
-
-
-
-
-
Balance at 1 July 2018
90,658
Balance at 1 July 2018
90,658
Profit for the year
Loss on cash flow hedges
Deferred tax arising on hedges
6
Total comprehensive income
for the year
Dividend Payment
22(a)
Recognition of share based
payments
-
-
-
-
-
-
(127)
-
410
(122)
288
-
-
161
161
-
(256)
77
(179)
-
-
Balance at 30 June 2019
90,658
(18)
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
85
(37,197)
53,707
-
-
-
-
-
(85)
-
1,921
-
-
1,921
1,921
(256)
77
1,742
(2,180)
(2,180)
-
(85)
(37,456)
53,184
Notes to the financial statements are included on pages 55 - 87.
Pental Annual Report 2019 | 53
CONSOLIDATED STATEMENT
OF CASH FLOWS
for the year (52 weeks) ended 30 June 2019
Net cash provided by operating activities
27(b)
(2,430)
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
Cash flows from investing activities
Payments for property, 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
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)
Notes to the financial statements are included on pages 55 - 87.
2019
2018
Note
$’000
$’000
109,669
90,573
(110,570)
(81,772)
28
(73)
(1,484)
-
47
(40)
(1,516)
18
7,310
(8,192)
(54)
13
15
(2,112)
(77)
(2,189)
(8,246)
22
(2,180)
(3,679)
(2,180)
(6,799)
7,045
246
(3,679)
(4,615)
11,660
7,045
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 27 August 2019.
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 brand names
Determining whether 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 brand names have been
allocated. The estimation of recoverable amount 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 brand names at 30 June 2019 was
$12.354 million (1 July 2018: $14.539 million). Details of
movements are set out in Note 15. Details of the impairment
testing are set out in Note 15.
Pental Annual Report 2019 | 55
NOTES TO THE
FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
amount that reflects the consideration, which the entity
expects to be entitled in exchange for those goods, or services.
Trade spend accounting judgement
Trade receivables are disclosed net of rebates payable.
The Group has the legal right to offset such balances as
they are with the same customers and it is the Group’s
intention to net settle any outstanding items. The main
judgement related to accruals for customer rebates is the
timing and extent to which temporary promotional activity
has occurred prior to year-end. Customer rebates consist
primarily of customer pricing allowances and promotional
allowances, which are governed by agreements with
our trade customers (retailers and distributors). Accruals
are recognised under the terms of these agreements, to
reflect the expected promotional activity and our historical
experience.
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) AAASB 9 Financial Instruments and related amending
Standards
The Group has adopted AASB 9 Financial Instruments from
2 July 2018 which replaces AASB 139 Financial Instruments:
Recognition and Measurement. The impact on the Group
from the adoption of AASB 9 is set out below.
Credit losses on trade receivables
The Group has measured expected credit losses,
using the lifetime expected loss allowance for all trade
receivables. To measure the expected credit losses, trade
receivables have been grouped based on shared credit risk
characteristics and the days past due. A provision matrix is
then determined based on the historic credit loss rate for
each group, adjusted for any material expected changes
to the future credit risk for that group. There has been no
material adjustment from the adoption of this expected
credit loss model.
Hedge accounting
The Group has applied the AASB 9 hedge accounting
requirements prospectively from the date of initial application
on 2 July 2018. There has been no change in the Groups
transactions that are subject to hedge accounting from
the adoption of AASB 9, being foreign currency exchange
contracts. Accordingly, there has been no impact on the
hedging reserve from the adoption of AASB 9.
(ii) ASB 15 Revenue from Contracts with Customers
The Group has adopted AASB 15 Revenue from Contracts
with Customers from 2 July 2018, which replaces AASB
118 Revenue. AASB 15 establishes a single comprehensive
model for entities to use to account for revenue arising
from contracts with customers. The core principle of AASB
15 is that an entity should recognise revenue to depict the
transfer of promised goods or services to customers at an
As previously disclosed, the application of AASB 15
did not result in any material changes to the Group’s
financial statements or require material adjustment to the
comparative financial information.
Details regarding the Group’s accounting policy for the sale
of goods under AASB 15 is set out in Note 4.
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
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.
Exchange differences are recognised in profit or loss in the
period in which they arise except that:
• 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
Deferred 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.
(d) Revenue
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. Refer to Note 4 for further
details on the accounting policy for revenue from the sale
of goods.
(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.
Pental Annual Report 2019 | 57
NOTES TO THE
FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Current and deferred tax for the period
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.
(h) Financial assets
Trade 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.
Trade receivables
Trade receivables are initially recognised at fair value
and subsequently measured at amortised cost using the
effective interest method, less any expected credit losses.
Provision for Expected Credit Loss
The Group applies the simplified approach to the
measurement of expected credit losses, using the lifetime
expected loss allowance for all trade receivables. To measure
the expected credit losses, trade receivables are group based
on credit risk characteristics and the days past due.
A provision matrix is then determined based on historical
credit loss rate for each group, adjusted for any material
expected changes to the future credit risk for that group.
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
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
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.
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.
(o) 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.
(n) Impairment of assets
(p) Provisions
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.
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.
Pental Annual Report 2019 | 59
NOTES TO THE
FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
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 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.
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 30 June 2019, the Group is reporting on the 52 week
period that began 2 July 2018 and ended 30 June 2019. 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.
(t) Standards and Interpretations issued
not yet effective
(i) AASB 16 Leases (effective FY 2020)
At the date of authorisation of the financial report, the
Standards and Interpretations listed below were in issue but
not yet effective.
The Group is required to adopt AASB 16 Leases from 1 July
2019. AASB 16 replaces existing leases guidance, including
AASB 117 Leases and related Interpretations. The Group has
assessed the estimated impact that initial application of
AASB 16 will have on its consolidated financial statements,
as described below.
AASB 16 introduces a single, on-balance sheet lease
accounting model for lessees. A lessee recognises a right
of use asset representing its right to use the underlying
asset and a lease liability representing its obligation to
make lease payments. There are recognition exemptions for
short-term leases and leases of low-value items.
The Group will recognise new assets and liabilities for
its operating leases of warehouse, machinery and office
facilities. The nature of expenses related to those leases will
now change because the Group will recognise a depreciation
charge for right-of-use assets and interest expense on lease
liabilities. Previously, the Group recognised operating lease
expense on a straight-line basis over the term of the lease,
and recognised assets and liabilities only to the extent
that there was a timing difference between actual lease
payments and the expense recognised.
At the end of the reporting period, the Group had non-
cancellable undiscounted operating leases commitments
of $2,705 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 has now completed its assessment
of all leases that will be subject to the new standard and
collated all data associated with these leases. The Group
has also elected to transition to the new standard using the
modified retrospective approach. Therefore, the cumulative
effect of adopting AASB 16 will be recognised as an
adjustment to the opening balance of retained earnings as at
1 July 2019, with no restatement of comparative information.
A reliable estimate of the financial impact on the Group’s
consolidated results is dependent on a number of
unresolved areas:
•
•
Finalisation of approach to incremental borrowing
rates; and
Estimates of lease-term for leases with options.
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.
3. SEGMENT INFORMATION
The Group’s business activities are based in Australia and
encompass the manufacturing, marketing and distribution
of goods targeted at the household essentials market in
Australia, New Zealand and Asia.
The Group is organised into one operating segment,
consistent with the centralised nature of its operations
in Australia and management reporting provided to the
Group’s Chief Executive Officer (the chief operating decision
maker), which is used to manage the business and allocate
resources.
Accordingly, the information provided in this Annual Report
reflects the one operating and reporting segment.
4. REVENUE
The Group generates revenue from the sale of goods on a
point in time basis as follows:
2019
2018
$’000
$’000
Revenue from the sale of goods
100,446
75,667
The Group’s Top 6 customers (Woolworths Limited,
Coles Group Ltd , Metcash Ltd, Foodstuffs (Auckland) Ltd,
Costco Wholesale Corporation and Battery specialists
group) generated 79.8% of the Group’s revenue for the year
ended 30 June 2019 (2018: 70.7% from top four customers
- Woolworths Limited, Coles Ltd , Metcash Ltd and
Foodstuffs (Auckland) Ltd).
Pental Annual Report 2019 | 61
NOTES TO THE
FINANCIAL STATEMENTS (CONTINUED)
Geographical analysis
Summarised below is a geographical analysis of revenue based on the geographical location of the Group’s customers:
Geographical sales
Australia
New Zealand
Asia
Total geographical sales
2019
2018
$’000
$’000
86,298
60,952
12,244
12,806
1,904
1,909
100,446
75,667
Segment assets, liabilities and expenses located in Australia are unable to be allocated to individual geographical
segments by customer location on a reasonable basis.
Accounting policy for revenue from the sale of goods:
The Group manufactures, markets and distributes a range of products targeted at the household essential market in
Australia, New Zealand and Asia. Revenue from the sale of goods is recognised when control of the goods has transferred,
being when the goods are delivered to the customer, the customer has full discretion over the channel and price to sell
the goods, and there is no unfulfilled obligation that could affect the customer’s acceptance of the good. Delivery occurs
when the goods have been shipped to the specific location, the risks of obsolescence and loss have been transferred to
the customer, and either the customer has accepted the goods in accordance with the terms of the sale or the Group
has objective evidence that all criteria for acceptance has been satisfied. A receivable is recognised when the goods are
delivered as this is the point in time that the consideration is unconditional because only the passage of time is required
before the payment is due.
Goods are often sold with rebates and discounts related to trading terms and promotional activities (“Trade Spend”).
Revenue from these sales is recognised net of the estimated value of Trade Spend. Accumulated experience is used to
estimate and provide for Trade Spend, using the expected value method, and revenue is only recognised to the extent that
it is highly probable that a significant reversal will not occur. A accrual for Trade Spend is recognised in relation to sales
made up to the end of the reporting period.
No element of financing is deemed present as the sales are made with an average credit term of 30 days from invoice
month end, consistent with market practice.
5. FINANCE COSTS
Interest paid on borrowings
Other borrowing costs
Total interest expense
2019
2018
$’000
$’000
21
52
73
-
40
40
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
2019
2018
$’000
$’000
1,771
(936)
-
835
1,218
(211)
8
1,015
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 from operations
Tax at the Australian tax rate of 30%
Non Deductible / (Assessable) items
Adjustments recognised in relation to the current tax of prior years
Income tax expense
2019
2018
$’000
$’000
2,756
(26,824)
826
(8,047)
9
-
9,054
8
835
1,015
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.
Income tax recognised in other comprehensive income
Deferred tax
Arising on amounts recognised in other comprehensive income:
Changes in the fair value of cash flow hedges
2019
2018
$’000
$’000
77
77
(122)
(122)
Pental Annual Report 2019 | 63
NOTES TO THE
FINANCIAL STATEMENTS (CONTINUED)
6. INCOME TAXES (CONTINUED)
Deferred tax balances
Deferred tax assets/(liabilities) arise from the following:
2019
Opening
balance
Charged
to income
Recognised in other
comprehensive
income
Charged
to
equity
Closing
Balance
$’000
$’000
$’000
$’000
$’000
Deferred tax assets
Provision for expected credit losses
Provisions
Share issue costs
Foreign currency items
Inventory obsolescence
Accruals
Deferred tax liabilities
Property, plant and equipment
Intangibles
Foreign currency items
Other
Net deferred tax asset / (liability)
-
606
4
-
125
4
739
(630)
(4,362)
(101)
(3)
(5,096)
(4,357)
9
68
(4)
(73)
49
-
49
130
656
101
-
887
936
-
-
-
77
-
-
77
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
9
674
-
4
174
4
865
(500)
(3,706)
-
(3)
(4,209)
77
–
(3,344)
Deferred tax balances
Deferred tax assets/(liabilities) arise from the following:
2018
Opening
balance
Charged
to income
Recognised in other
comprehensive
income
Charged
to
equity
Closing
Balance
$’000
$’000
$’000
$’000
$’000
Deferred tax assets
Provision for expected credit losses
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
Current tax liabilities
Income tax payable
-
-
-
(21)
-
-
(21)
-
-
(101)
-
(101)
(122)
-
-
-
-
-
-
–
-
-
-
-
–
–
-
606
4
-
125
4
739
(630)
(4,362)
(101)
(3)
(5,096)
(4,357)
2019
2018
$’000
$’000
336
336
48
48
Pental Annual Report 2019 | 65
NOTES TO THE
FINANCIAL STATEMENTS (CONTINUED)
6. INCOME TAXES (CONTINUED)
Tax consolidation
The company and its wholly-owned Australian resident entities have formed a tax-consolidated group, and are therefore
taxed as a single entity. 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
Share based payments expense
Other employee benefits
Operating lease minimum payments
2019
2018
$’000
$’000
77,017
52,770
3,197
119
3,316
973
(85)
11,459
12,347
781
3,368
191
3,559
1,033
(23)
11,854
12,864
947
Cost of goods sold includes cost of products or raw materials, including inbound freight; direct labour costs for production
and factory overhead expenses where applicable.
8. EARNINGS PER SHARE
Basic earnings/(loss) per share
Diluted earnings/(loss) per share
2019
2018
Cents
Per Share
Cents
Per Share
1.41
1.41
(20.43)
(20.43)
The earnings and weighted average number of ordinary shares used in the calculation of basic and diluted earnings per
share are as follows:
Net profit/(loss)
Earnings/(loss) used in the calculation of basic EPS
Earnings/(loss) used in the calculation of diluted EPS
2019
2018
$’000
1,921
1,921
1,921
$’000
(27,839)
(27,839)
(27,839)
2019
2018
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.
2019
2018
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
-
-
Weighted average number of ordinary shares for the purposes of diluted earnings per share
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.
Diluted loss per share
In the prior period, diluted loss per share is the same as basic loss per share. Potential ordinary shares were anti-dilutive
as their conversion to ordinary shares would 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.
Pental Annual Report 2019 | 67
NOTES TO THE
FINANCIAL STATEMENTS (CONTINUED)
9. TRADE AND OTHER RECEIVABLES
Current
Trade receivables(i)
Other(ii)
Allowance for doubtful debts
2019
2018
$’000
$’000
17,298
14,380
349
(30)
137
-
17,617
14,517
(i) The average credit period on sales of goods is approximately 60 days. No interest is charged on trade receivables. An
allowance has been made for expected credit losses using a provision matrix based on historical credit loss rates. Trade
receivables are recognised at amortised cost less provision for credit losses.
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 $14.348 million is due from top six customers (2018: $9.945 million from top four customers) and these six customers
account for 79.8% of total sales revenue for the year (2018: 75.4% from top four customers). 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. 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. These amounts
are predominantly reimbursements sought from suppliers for rebates and payments made in advance to suppliers for goods
subsequently reclassified as receivables. Collateral is generally not obtained.
Ageing of past due
Overdue 31 to 60 days
Overdue 61 to 90 days
Overdue 91 days and beyond
Total
2019
2018
$’000
$’000
401
134
122
657
63
45
1,049
1,157
Movement in the allowance for expected credit losses
Balance at the beginning of the year
Re-measurement of loss allowance
Balance at the end of the year
2019
2018
$’000
$’000
-
30
30
-
-
-
Under the expected credit Loss methodology, the provision for impairment of receivables is not considered to be material as
a result of the historically low level of bad debt. At 30 June 2019, the amount of provision for expected credit losses was $30
thousand (2018: $0).
The amount of the expected credit losses is recognised in profit or loss within other expenses. Subsequent recoveries of
amounts previously written off are credited against the same line item.
10. INVENTORIES
Raw materials
Work in progress
Goods in transit
Finished goods
11. OTHER FINANCIAL ASSETS
Current
Foreign currency forward contracts
2019
2018
$’000
3,735
1
3,274
15,767
22,777
$’000
3,026
7
-
7,937
10,970
2019
2018
$’000
$’000
-
-
231
231
Pental Annual Report 2019 | 69
NOTES TO THE
FINANCIAL STATEMENTS (CONTINUED)
12. SUBSIDIARIES
Name of subsidiary
Country of incorporation
Ownership interest
2019 %
2018 %
Parent Entity
Pental Limited (i)
Controlled Entities
Australia
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 parent entity and all the controlled entities 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 2 July 2017
Additions
Disposals
Transfer from capital works
-
1,732
-
-
-
5,580
-
-
31,698
692
(20)
64
Balance at 1 July 2018
1,732
5,580
32,434
Additions
Disposals
Transfer from capital works
-
-
-
48
-
-
1,829
(72)
188
Balance at 30 June 2019
1,732
5,628
34,379
Accumulated depreciation
Balance at 2 July 2017
Depreciation expense
Disposals
Balance at 1 July 2018
Depreciation expense
Disposals
Balance at 30 June 2019
-
-
-
-
-
-
-
Net book value as at 1 July 2018
Net book value as at 30 June 2019
1,732
1,732
-
(170)
-
(170)
(190)
-
(360)
5,410
5,268
(12,897)
(3,198)
19
(16,076)
(3,007)
57
(19,026)
16,358
15,353
64
188
-
(64)
188
235
-
(188)
235
-
-
-
-
-
-
-
188
235
31,762
8,192
(20)
-
39,934
2,112
(72)
-
41,974
(12,897)
(3,368)
19
(16,246)
(3,197)
57
(19,386)
23,688
22,588
14. GOODWILL
As disclosed in the Group’s 2018 annual report, the Group experienced challenging market conditions in the prior period,
which impacted its financial performance. As a result, in the prior period, the Group recognised a non-cash impairment
of $29.4 million in the statement of profit or loss, which represented the full carrying value of goodwill allocated to the
Consumer Products CGU.
Pental Annual Report 2019 | 71
NOTES TO THE
FINANCIAL STATEMENTS (CONTINUED)
15. OTHER INTANGIBLE ASSETS
Gross carrying amount
Balance at 2 July 2017
Additions
Balance at 1 July 2018
Additions
Balance at 30 June 2019
Accumulated Impairment/Amortisation
Balance at 2 July 2017
Amortisation expense
Balance at 1 July 2018
Amortisation expense
Impairment
Balance at 30 June 2019
Net book value as at 1 July 2018
Net book value as at 30 June 2019
Brand Names
at cost
Software
at cost
Total
$’000
$’000
$’000
19,000
-
19,000
-
1,875
54
1,929
77
20,875
54
20,929
77
19,000
2,006
21,006
(4,461)
(1,549)
(6,010)
-
(191)
(191)
(4,461)
(1,740)
(6,201)
-
(2,185)
(6,646)
14,539
12,354
(119)
-
(119)
(2,185)
(1,859)
(8,505)
189
147
14,728
12,501
Brand names - Useful life assessment
The Group has historically assessed its brand names as having indefinite useful lives. This assessment has reflected
management’s intention to continue to utilise the brand names within its portfolio for the foreseeable future.
Each period, the useful lives of the Group’s brand names are reviewed to determine whether events and circumstances continue
to support an indefinite useful life assessment for the assets.
In the current year, the Group has made a decision to consolidate its brand portfolio, which will see products traditionally sold
under the “Martha’s” and “Lux” brand names, rebranded as “Softly”. Accordingly, these brands have been impaired in full
resulting in an impairment charge of $0.729 million (after tax $0.510 million).
The Group continue to believe that its remaining brand names have indefinite useful lives, as there is no foreseeable limit to the
period over which they intend to utilise the brand names.
Impairment testing - Indefinite life brand names
Indefinite life brand names are not subject to amortisation and are tested annually for impairment, or more frequently if events or
changes in circumstances indicate that they might be impaired. An impairment loss is recognised for the amount by which the
asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s value in use and fair
value less costs to sell. Brand names that have incurred an impairment in previous periods are reviewed for possible reversal of
the impairment at the end of each reporting period.
At 30 December 2018, impairment indicators were identified for the Huggie and Country Life brand names. An impairment test
was undertaken by the Group using its value-in-use model. No impairment charge was recognised pending the outcome of
ongoing growth initiatives in their respective markets, the sensitivity to which was disclosed in the Company’s financial report for
the half year ended 30 December 2018.
For the purposes of impairment testing as at 30 June 2019, the Group engaged an independent valuation specialist to assess
the fair value of certain brand names, including Country Life and Huggie, using a ‘relief from royalty’ method, which the Group
considered in combination with its value-in-use assessment. The results of this assessment resulted in an impairment loss being
identified for Country Life of $1.376 million (after tax $0.963 million), which reduced the carrying value of the brand to $0.500
million. This impairment loss reflects the realisation of the risks disclosed for Country Life in the Company’s financial report for the
half year ended 30 December 2018. In addition, the Group fully impaired its Hi-Speed brand resulting in an impairment loss of
$0.081 million (after tax $0.057 million). The impairment testing results for Huggie supported the recoverability of its carrying value.
The recoverable amount for all other brand names exceeded their carrying value. The key assumptions made were as follows:
Fair value less costs to sell
• An estimate of maintainable sales with reference to the FY20 budget and historic financial performance
• Royalty rates ranging between 2% - 4.5%
• Discount rate of 10% post-tax
• Long term growth rates of between 0% - 3%
• An estimate of costs to sell equivalent to 2% of the estimated recoverable amount for each brand name.
Fair value was measured using Level 3 inputs under AASB 13.
Value-in-use
• FY20 budget
• Discount rate of 10% post-tax (2018: 10%)
• Long term growth rate of 2% (2018: 2.5%)
The key assumptions used are based on the judgement and experience of the Group, taking into account current market and
economic conditions, risks, uncertainties and opportunities for improvement for each brand respectively.
A material change in current market or economic conditions may increase the risk of impairment in future periods.
16. OTHER ASSETS
Prepayments
2019
2018
$’000
$’000
268
272
Pental Annual Report 2019 | 73
NOTES TO THE
FINANCIAL STATEMENTS (CONTINUED)
17. TRADE AND OTHER PAYABLES
Trade payables
Trade spend liabilities
Sundry payables
2019
2018
$’000
$’000
11,976
8,033
139
257
4,902
3,194
17,017
11,484
The average credit period on the purchases of goods ranges from 7 to 60 days. No interest is charged on the trade payables.
The Group has financial risk management policies in place to ensure that, as often as possible, all payables are paid within a
reasonable timeframe.
18. OTHER FINANCIAL LIABILITIES
Current
Foreign currency forward contracts
2019
2018
$’000
$’000
26
26
-
-
19. BANKING FACILITIES
Summary of financing arrangements
Facilities utilised at reporting date:
Multi option loan facility
- Bank Guarantee
- Bank overdraft
Facilities not utilised at reporting date:
Multi option loan facility
- Bank overdraft
- Bank Guarantee
Multi option loan facility limit
Multi option loan facility
2019
2018
$’000
$’000
177
1,177
1,354
177
-
177
3,633
4,795
13
28
3,646
4,823
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 (2018: $5,000,000). The multi option facility bears an interest
rate of 2.07% plus a line fee of 0.8% (2018: 2.87% plus a line fee of 0.8%) as at 30 June 2019. 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. As at the reporting date, negotiations for a new
loan facility beyond expiration date were well advanced. The Directors expect to renew the banking facility for a further 12
months (through to 31 October 2020) prior to the expiry date of the existing facility.
Pental Annual Report 2019 | 75
NOTES TO THE
FINANCIAL STATEMENTS (CONTINUED)
20. PROVISIONS
Current
Employee benefits
Non-current
Employee benefits
Total Provisions
2019
2018
$’000
$’000
1,961
1,961
129
129
1,755
1,755
100
100
2,090
1,855
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
2019
2018
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.
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
2019
2018
Cents per
Share
Total
$’000
Cents per
Share
Total
$’000
0.90
0.70
1.60
1,226
954
2,180
2.10
0.60
2.70
2,861
818
3,679
2019
2018
$’000
1,771
$’000
1,226
In respect of the year (52 weeks) ended 30 June 2019 the Company declared a full year fully franked dividend of 1.3 cents per
ordinary share, payable on 27 September 2019, with a record date of 9 September 2019 (2018: 0.9 cents per ordinary share).
Adjusted franking account balance
Impact on franking account balance of dividends not recognised
23. FINANCIAL INSTRUMENTS
(a) Capital risk management
2019
2018
$’000
18,426
759
$’000
17,305
526
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while
maximising the return to stakeholders 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, comprising issued capital (as disclosed in note 21), reserves and retained earnings/(accumulated losses).
Operating cash flows and a multi option bank facility are used in combination as required 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.
Refer to Note 19 for details of the banking facility.
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 30 June 2019, the Group was debt free and had no debt in the prior financial year.
Pental Annual Report 2019 | 77
NOTES TO THE
FINANCIAL STATEMENTS (CONTINUED)
23. FINANCIAL INSTRUMENTS (CONTINUED)
(b) Categories of financial instruments
Financial assets
Cash and cash equivalents
Trade and other receivables (amortised cost)
Derivative instruments in designated hedge accounting relationships
Financial liabilities
Trade and other payables (amortised cost)
Derivative instruments in designated hedge accounting relationships
2019
2018
$’000
$’000
246
17,617
-
17,017
26
7,045
14,517
231
11,484
-
The carrying amount reflected in the statement of financial position represents the Group’s maximum exposure to credit risk
for financial assets.
The Group has significant credit risk exposure with the Woolworths Limited, Coles Group Ltd, Metcash Ltd, Costco,
Foodstuffs (Auckland) Ltd and Battery Specialists Groups which represent 81.43% of the total trade receivables.
(c) Financial risk management objectives
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)).
(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
2019
2018
2019
2018
$’000
$’000
$’000
$’000
-
2,017
18
-
15
-
1,855
18
-
155
312
266
-
51
-
190
454
-
51
-
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
2019
2018
2019
2018
2019
2018
2019
2018
Buy USD – less than one year
-
0.7763
-
3,561
-
4,587
Sell NZD – less than one year
1.0563
1.0890
3,000
2,000
2,840
1,837
-
(26)
(26)
227
4
231
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.
Pental Annual Report 2019 | 79
NOTES TO THE
FINANCIAL STATEMENTS (CONTINUED)
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
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
$’000
$’000
$’000
$’000
$’000
$’000
$’000
$’000
$’000
$’000
Profit
Equity
30
-
19
316
7
-
7
-
82
179
62
241
-
-
-
-
-
-
-
-
(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.
2019
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
0.29%
246
-
Non-interest bearing
Financial liabilities
Non-interest bearing
-
-
9,602
8,015
9,848
8,015
8,516
8,501
8,516
8,501
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
246
17,617
17,863
17,017
17,017
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
-
-
8,268
6,249
15,313
6,249
5,761
5,723
5,761
5,723
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7,045
14,517
21,562
11,484
11,484
(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, New Zealand and Asia.
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, Coles Group Ltd, Metcash Ltd, Foodstuffs
(Auckland) Ltd and Battery Specialists Groups which represent 76.1% 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.
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 facility expires 31 October 2019. As at the reporting
date, negotiations for a new loan facility beyond expiration date were well advanced. The Directors expect to renew the
banking facility for a further 12 months (through to 31 October 2020) prior to the expiry date of the existing facility.
Pental Annual Report 2019 | 81
NOTES TO THE
FINANCIAL STATEMENTS (CONTINUED)
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
Executive Variable Incentive Plan (EVIP)
During the year the Remuneration Committee reviewed the executive remuneration framework in order to consider the
remuneration strategy that would be most appropriate in the context of the rapidly changing and disruptive market
conditions facing the Group. As a consequence of this review, the Board elected to discontinue the previous long term
incentive plan and introduce a new Executive Variable Incentive Plan (EVIP).
Under Pental’s EVIP executives and selected senior management employees are eligible for both a cash and equity
incentive upon the achievement of certain Group level KPI’s and personal KPIs set at the commencement of each financial
year, weighted as follows:
• Fifty percent of both the cash and equity incentive KPIs relate to the achievement of a target EBIT for the financial year.
• The remaining fifty percent are based on specific KPIs relevant to the participants particular specialisation.
Both cash and equity incentives are only payable if the Company’s target EBIT is achieved.
Variable Incentive – equity
The variable equity incentive is designed to reward achievement of annual KPIs, assist the retention of key high performing
executives and align the rewards to the company’s share price. The maximum amount of remuneration under the variable
equity incentive plan varies from 30 to 40 percent of the individual executive / senior management employee’s total
employment cost. The variable equity incentive is delivered as performance rights, which will be granted under the existing
Executive Performance Rights Plan (Rights Plan) to enable the subsequent acquisition of the share component. The Rights
will convert to ordinary shares after three years.
The vesting of the Rights is conditional on:
c) the executive being employed by the Group on the vesting date; and
d) Pental’s volume-weighted average share price (VWAP) for the last ten business days of the financial year three years
hence being equal to or greater than the VWAP for the preceding 10 business days from the grant date.
In total, the Rights are held for three years. The value to the executive therefore is not at the grant date, rather at the
conclusion of the 3 year vesting period.
As the variable incentive is based upon an assessment of performance against respective KPIs in the year in which it is
granted, there are no additional performance hurdles except for ongoing employment during the vesting period.
Dividends are not payable on the Rights. However, dividend is payable on ordinary shares after conversion of the Rights to
ordinary shares.
Performance rights will be granted on a face value basis using the last ten business days of the financial year Volume
Weighted Average Price (VWAP)
PENTAL LIMITED 2018 FINANCIAL REPORT 83
Under the EVIP, the executives / senior management employees can receive the following annualised remuneration from
the vesting of performance rights:
Charlie McLeish
Up to 40%
Percentage of fixed remuneration by achieving:
EVIP – FY19 Performance
No cash or equity incentives were provided to executives / senior management employees in the current financial year
under the EVIP as the Company did not achieve the plan’s EBIT hurdles.
Share-based payments (Rights Plan)
The Company has an Executive Performance Rights Plan (Rights Plan), which has historically been used to provide Long Term
Incentives (LTI) to certain executives / senior management employees. LTI has historically been provided as performance
Rights granted at the commencement of the relevant three year performance period subject to eligibility criteria.
From 2 July 2018, the Group has discontinued the previous LTI plan and introduced a new Executive Variable Incentive Plan
(EVIP), the terms of which are described above.
All Rights issued are convertible to ordinary shares at no consideration, subject to achieving any performance or other
vesting conditions.
The following table discloses changes in the performance rights holdings of management personnel:
Grant
Date
Vesting
Date
Balance
at
1/7/2018
No.
Rights
granted
No.
Rights
vested
No.
Rights
forfeited
No.
Rights
lapsed
No.
Balance
at
30/6/2019
No.
Charlie McLeish (i)
1/7/2016
1/7/2019
209,302
Charlie McLeish
3/7/2017
1/7/2020
211,765
-
-
-
-
-
-
209,302
-
-
211,765
(i) Rights held by Mr McLeish lapsed during the period as a result of the related performance conditions not being achieved.
As highlighted in the “EVIP – FY19 Performance” section above, there were no Rights issued in the current financial year
under the EVIP as the Company did not achieve its target EBIT.
There were no share options granted during the 2019 year (2018: nil).
Pental Annual Report 2019 | 83
NOTES TO THE
FINANCIAL STATEMENTS (CONTINUED)
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
2019
2018
$
$
976,539
1,020,350
(56,992)
(26,693)
8,205
67,478
94,637
73,271
995,230
1,161,565
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 $2,173 (inclusive of GST) during the period (2018: $81,840
inclusive of GST). The value of service was not material to Ms Wells as an employee of TBWA Group, or Pental. Ms Wells
resigned as non-executive director on 21 March 2019.
There were no other services performed by key management personnel outside of normal business operations.
Equity interests in subsidiaries
Details of interests in subsidiaries are set out in note 12.
Sales to and purchases from related parties in the normal course of business are made in arm’s length transactions on
normal terms and conditions.
27. CASH AND CASH EQUIVALENTS
(a) Reconciliation of cash and cash equivalents
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 on hand and at bank
Bank overdraft
Cash and cash equivalents
2019
2018
$’000
1,423
(1,177)
246
$’000
7,045
-
7,045
(b) Reconciliation of Profit for the year to net cash flows from operating activities
2019
2018
Profit/(Loss) for the year
Depreciation and amortisation expense
Impairment of goodwill
Impairment of brand names
Loss on disposal of assets
Equity settled employee benefits expense
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 and hedging reserve
Current and deferred tax liabilities
Other liabilities
Net cash from operating activities
$’000
1,921
3,316
-
2,185
15
(85)
(3,100)
(11,807)
235
5,533
56
(725)
26
(2,430)
$’000
(27,839)
3,559
29,446
-
1
(23)
4,333
(673)
(168)
(995)
443
(592)
(182)
7,310
Pental Annual Report 2019 | 85
NOTES TO THE
FINANCIAL STATEMENTS (CONTINUED)
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
2019
2018
$’000
$’000
881
1,824
-
2,705
705
1,966
-
2,671
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
2019
2018
$’000
255
$’000
515
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.
2019
2018
$’000
$’000
177
177
To the best knowledge of the Directors aside from the Bank Guarantees disclosed, no other contingent liabilities exist for
the reporting period ending 30 June 2019.
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.
32. PARENT ENTITY INFORMATION
2019
2018
$’000
$’000
190,150
27,974
147,425
45,052
218,124
192,477
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 summary of the significant
accounting policies relating to the Group.
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
2019
2018
$’000
$’000
1
53,851
53,852
356
-
356
90,658
(37,162)
53,496
1
57,391
57,392
68
-
68
90,658
(33,334)
57,324
2019
2018
(3,827)
(20,022)
-
-
(3,827)
(20,022)
In respect of the year (52 weeks) ended 30 June 2019 the Company will pay final fully franked dividend of 1.3 cents per ordinary
share, payable to shareholders on 27 September 2019, with a record date of 9 September 2019.
Pental Annual Report 2019 | 87
ADDITIONAL
STOCK EXCHANGE
INFORMATION
as at 21 August 2019
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 1,357 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
252
472
208
351
74
1,357
357
Substantial shareholders
Ordinary shareholders
Alan Johnstone(i)
John Rostyn Homewood
BNP Paribas Noms (NZ) Ltd(ii)
Citicorp Nominees Pty Limited(iii)
Fully paid ordinary shares
Number
Percentage
27,603,617
19,400,000
10,300,001
9,415,225
20.26%
14.24%
7.56%
6.91%
66,718,843
48.97%
(i) Alan Johnstone has a relevant interest in Pental shares held by Western Park Holdings Pty Ltd and PMSF Company Pty Ltd +Penfold Motors Burwood
Super Fund+.
(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 12.14% of the total issued capital of Pental Ltd.
TWENTY LARGEST HOLDERS OF QUOTED EQUITY SECURITIES
Ordinary shareholders
WESTERN PARK HOLDINGS PTY LTD +JOHNSTONE FAMILY A/C+
MR JOHN ROSTYN HOMEWOOD
BNP PARIBAS NOMS (NZ) LTD +DRP+
CITICORP NOMINEES PTY LIMITED
MR GARRY GEORGE JOHNSON
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
DALLMOUNT CUSTODIANS PTY LTD
P M S F COMPANY PTY LIMITED +PENFOLD MTR BURWOOD S/F A/C+
DALLMOUNT PTY LTD +LABELMAKERS SUPER FUND A/C+
W A PEATT PTY LTD +THE PEATT SUPER FUND A/C+
NATIONAL NOMINEES LIMITED
RATHVALE PTY LIMITED
ONE MANAGED INVT FUNDS LTD +1 A/C+
VANWARD INVESTMENTS LIMITED
DALLMOUNT PTY LTD +LABELMAKERS S/F A/C+
BUDUVA PTY LTD
BARKING DOG PTY LTD +NETTLEFOLD SUPER FUND A/C+
DIXSON TRUST PTY LIMITED
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
MRS JOY DOROTHY JOHNSTONE
Fully paid ordinary shares
Number
Percentage
27,603,617
19,400,000
10,300,001
9,415,225
6,670,739
4,911,786
4,739,429
3,000,000
2,857,431
2,666,668
2,400,000
2,387,686
2,209,759
2,000,000
1,438,294
1,204,761
1,000,000
983,530
855,000
834,092
20.26%
14.24%
7.56%
6.91%
4.90%
3.60%
3.48%
2.20%
2.10%
1.96%
1.76%
1.75%
1.62%
1.47%
1.06%
0.88%
0.73%
0.72%
0.63%
0.61%
106,878,018
78.44%
Pental Annual Report 2019 | 89
CORPORATE
DIRECTORY
DIRECTORS
Peter Robinson
John Rishworth
John Etherington
Jeff Miciulis
Mark Hardgrave
COMPANY SECRETARY
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