Annual Report
2016
PWR Holdings Limited
and its controlled entities
ACN:105 326 850
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Message from Managing Director and Chairman
Contents
Highlights
Message from the Chairman and Managing Director
Directors' Report
Remuneration Report
Lead Auditors’ Independence Declaration
Consolidated Financial Statements
Consolidated Statement of Profit or Loss and Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Directors' Declaration
Independent Auditor’s Report
Additional information
2016 Annual General Meeting
The details of the 2016 Annual General Meeting for PWR Holdings Limited are:
10am (Brisbane time), Friday, 21 October 2016
Offices of Corrs Chambers Westgarth
Level 42
One One One Eagle
111 Eagle Street
Brisbane QLD 4000
Key Dates for Shareholders
Date
1 September 2016
2 September 2016
19 September 2016
21 October 2016
31 December 2016
February 2017
April 2017
30 June 2017
August 2017
Event
Ex-dividend
Record date for final dividend
Payment of final dividend
Annual General Meeting
Half year-end
Half year results and investor presentation
Proposed payment of 2017 interim dividend
Full year-end
Annual results and investor presentation
1
Message from Managing Director and Chairman
Highlights
ü Pro forma NPAT $10.8 million
ü Statutory NPAT $8.7 million
ü Total fully franked dividend of 4.4 cents per share, representing 50% of statutory NPAT
ü Revenue, EBITDA and NPAT exceeded prospectus forecasts, despite the strengthening AUD in the second half
ü Organic growth exceeded expectations
ü Secured two new Original Equipment Manufacturer (“OEM”) contracts in Australia and Europe
ü Investment in engineering and production personnel and infrastructure to facilitate growth
ü Continued the C&R Racing integration and strengthened USA focus
ü Developed channels to the USA automotive aftermarket
ü Strong cash conversion
ü Zero core debt
The full year results are summarised below:
A$'000
Revenue
Pro forma EBITDA (i) (ii)
Pro forma EBITDA margin (ii)
FY16
Prospectus
forecast
Variance
47,348
16,903
35.7%
46,994
+ 0.8%
16,162
+ 4.6%
34.4%
+ 1.3%
Pro forma net profit after tax (ii)
10,766
10,462
+2.9%
Statutory net profit after tax
8,735
8,325
+4.9%
Pro forma free cash flow
10,452
11,748
- 11.0%
Pro forma earnings per share
10.8 cents
10.5 cents
+ 2.9%
Total dividend
4.4 cents
4.2 cents
+ 4.8%
(i) Earnings Before Interest, Tax, Depreciation and Amortisation (“EBITDA”) is a non-IFRS term which has not been subject to audit or review
but has been determined using information presented in the Company’s annual financial statements.
(ii) Pro forma adjustments relate to IPO costs ($2.7 million before tax) and interest costs ($0.2 million before tax) associated with bank
facilities repaid from IPO proceeds.
Outlook
After a strong initial full year result as a public company, PWR is well positioned to take advantage of future
growth opportunities globally as it continues to:
ü
Be “Resource Ready” to take advantage of growth opportunities through ongoing investment in
infrastructure and engineering and production personnel;
Develop channels to the USA automotive aftermarket;
Expand its product offering to capture greater customer spend;
Invest in R&D, including an electronic cooling test facility in the emerging technology sector;
Deliver new OEM contracts in Australia and Europe; and
Progress other OEM opportunities.
ü
ü
ü
ü
ü
2
Message from Managing Director and Chairman
Dear Fellow Shareholder,
On behalf of the Board and Management of PWR Holdings Limited (“PWR”), we are pleased to present our 2016
Annual Report, our first since listing on the ASX.
PWR listed on the ASX on 18 November 2015. PWR is a home grown Australian company that designs,
engineers, manufactures, tests, validates and sells customised cooling solutions for elite motorsports, high
performance automotive applications, automotive aftermarket and emerging sectors domestically and globally.
Your Board and management are focused on continuing to maintain revenue growth while building the
governance and operating platform to support future growth plans.
By leveraging off our track record in elite motorsports, coupled with PWR’s DNA of passion, winning and
results, the team has delivered strong revenue and profit growth above the forecast in our Prospectus, a credit to
the focus and dedication of our people.
Financial Performance
PWR achieved FY16 revenue of $47.3m, an increase of 45.6% on that achieved in FY15 (FY15: $32.5m).
Growth in revenue was driven by increased organic growth primarily in the motorsports and automotive
aftermarket sectors combined with a full year contribution of the C&R Racing business which was acquired in
late March 2015. This revenue outcome was achieved despite the strengthening of the Australian dollar in the
second half of FY16, which impacted revenue negatively by $1.1m.
Net profit after tax of $8.7m included the recognition of $2.7 million (pre-tax) of one-off expenses in relation to
listing. Excluding the impact of this amount, plus an additional pro forma interest adjustment of $0.2 million
(pre-tax), profit from ordinary activities after tax attributed to members was up 21% to $10.8 million on the prior
corresponding period (FY15: $8.9m). EBITDA for FY16 (excluding IPO costs of $2.7 million) was $16.9 million
(FY15: $13.0 million).
Financial Position
Operating cash flow for the year was strong at $12.5 million (2015: $8.1 million). The balance sheet remains
strong with cash of $8.8 million (2015: $1.0 million), net assets of $36.7 million (2015: $5.2 million) and no core
debt.
Dividends
The successful first period since listing on the stock exchange resulted in a total fully franked dividend to
shareholders of 4.4 cents per share, representing 50% of statutory NPAT, in line with the prospectus forecast. A
final dividend of 3.78 cents per share has been declared by the Directors following the interim dividend of 0.62
cents paid last April.
Outlook
FY17 will see a focus on PWR being “Resource Ready” to take advantage of growth opportunities. Key to this
will be continued investment in infrastructure, engineering, production, sales and human resources personnel and
research and development including an electronic cooling test facility in the emerging technology sector. To
leverage off our investment in C&R Racing, we will continue to develop channels to the USA automotive
aftermarket and expand our product offering to increase customer spend. In addition, delivering new OEM
contracts in Australia and Europe and progressing other OEM opportunities will also be on the agenda for what is
shaping up to be another exciting year for PWR.
On behalf of the Board, we would like to thank all our staff for their hard work and dedication over the last year
and commitment to achieving the goals outlined in our prospectus.
The Board would also like to express its gratitude to you, our shareholders, for your support and interest in PWR.
Kees Weel
Managing Director
Bob Thorn
Chairman
3
PWR Holdings Limited
and its controlled entities
Directors' report
For the year ended 30 June 2016
The Directors present their report together with the financial report of PWR Holdings Limited (the “Company")
and its controlled entities (the “Group”) for the year ended 30 June 2016 and the auditor's report thereon.
1. Directors
The Directors of the Company at any time during or since the end of the financial year are:
Director
Robert (Bob) Thorn
Independent Chairman, Non-
Executive Director
Appointed 7 August 2015
Member of Audit and Risk
Committee
Member of Nomination and
Remuneration Committee
Year of next scheduled re-
election
Current directorships of listed
entities
Directorships of listed entities
over last 3 years
Kees Weel
Managing Director and Chief
Executive Officer
Appointed 30 June 2003
Year of next scheduled re-
election
Current directorships of listed
entities
Directorships of listed entities
over last 3 years
Experience
Bob brings considerable board and senior management experience to PWR from
his thirteen years at Super Retail Group, including nine years as Managing
Director. During his time at the company Bob drove Australian and New
Zealand expansions and led the creation of the Boating Camping Fishing (BCF)
business, the market leader in camping and leisure.
In 2004, Bob was awarded the Ernst and Young Australian Entrepreneur of the
Year for Retailer, Consumer and Industrial Products. In that same year, he was
awarded the National Retailers’ Association Special Individual Achiever’s
Award.
He was previously General Manager at Lincraft, and held senior roles at other
major retailers including nine years with David Jones. Bob has also been the
Chairman of MotorCycle Holdings, Cutting Edge, and a Director at WOW Sight
and Sound, Babies Galore, and Unity Water.
Bob is currently a Non-Executive Director of Myer, a position he has held since
February 2014.
Bob is an active motorsports participant and is also a Member of the Australian
Institute of Company Directors.
2017
Myer Limited (appointed 6 February 2014)
MotorCycle Holdings Limited (8 March 2016 to 22 July 2016)
Kees has more than 30 years of experience in the automotive cooling industry.
He is a key relationship and business development manager for top tier local and
overseas customers. Kees also actively
the product development
management team.
Kees was a team principal of PWR Racing V8 Super Car Team 1998-2007 and
was a board member for Tega V8 Supercars in 2007.
Not applicable
leads
Nil
Nil
4
1. Directors (continued)
Director
Jeffrey Forbes
Independent, Non-Executive
Director
Appointed 7 August 2015
Chairman of Audit and Risk
Committee
Member of Nomination and
Remuneration Committee
Year of next scheduled re-
election
Current directorships of listed
entities
Directorships of listed entities
over last 3 years
Teresa Handicott
Independent, Non-Executive
Director
Appointed 1 October 2015
Chairman of Nomination and
Remuneration Committee
Member of Audit and Risk
Committee
PWR Holdings Limited
and its controlled entities
Directors' report
For the year ended 30 June 2016
Experience
Jeff has 34 years’ experience in senior finance and management roles with
extensive mergers and acquisitions experience. Jeff retired in March 2013 as
Chief Financial Officer, Executive Director and Company Secretary of Cardno,
an ASX-listed engineering consultancy company. Prior to joining Cardno, Jeff
was Chief Financial Officer and Executive Director at Highlands Pacific and has
previously held senior finance roles in the resources sector.
Jeff holds a Bachelor of Commerce from the University of Newcastle and is a
Graduate of the Australian Institute of Company Directors.
Jeff is a Non-Executive Director of Cardno and Chairman of Herron Todd White
Australia and Herron Todd White Consolidated. Jeff also sits on the board of
not-for-profit Horizon Housing Group and the AFSL company, Australian
Affordable Housing.
2016
Cardno Limited (appointed 27 January 2016)
CMI Limited (10 April 2014 to 29 February 2016)
Affinity Education Group Limited (6 November 2013 to 15 December 2015)
Exoma Energy Limited (1 July 2014 to 27 February 2015)
Talon Petroleum Limited (4 April 2013 to 3 November 2014)
Teresa spent over 30 years practicing as a corporate lawyer, specialising in
mergers and acquisitions, capital markets and corporate governance. She was a
partner of national law firm Corrs Chambers Westgarth for 22 years. She served
as a member of its National Board for seven years including four as National
Chairman prior to her retirement from the partnership in June 2015.
Teresa was recently appointed director of ASX listed company Downer EDI
Limited and of four subsidiaries of the Local Government Association of
Queensland (LGAQ), which are responsible for its commercial operations,
Propel Partnership JV, Local Buy Pty Ltd, Local Government Infrastructure
Services Pty Ltd and Resolute IT.
Teresa serves on the Queensland University of Technology (QUT) Council,
where she chairs the Audit and Risk Committee and is a member of the
Investment and Borrowings Committee. She is a director of Bangarra Dance
Theatre Limited and chairs its Remuneration Committee.
Teresa is a Divisional Councillor of the Queensland Division of the Australian
Institute of Company Directors (AICD) and is a member of the AICD’s National
Law Committee. She also serves on the Sunshine Coast Council’s Economic
Futures Board. Teresa is a Member of Chief Executive Women (CEW) where
she serves on the Scholarship Committee, is a Senior Fellow of Finsia and a
Graduate of the AICD.
Teresa’s previous positions include Member of the Takeovers Panel, Associate
Member of the Australian Competition and Consumer Commission (ACCC),
Member of the Finsia Queensland Regional Council, Director of CS Energy
Limited, Principal Law Lecturer for the Securities Institute of Australia (now
Finsia) and Tutor in Corporate Governance for the AICD Directors Course.
5
1. Directors (continued)
Director
Teresa Handicott (continued)
Year of next scheduled re-
election
Current directorships of listed
entities
Directorships of listed entities
over last 3 years
Former Director
Paul Anthony Weel
PWR Holdings Limited
and its controlled entities
Directors' report
For the year ended 30 June 2016
Experience
2018
Downer EDI Limited (appointed 24 June 2016, effective 21 September 2016)
Nil
Experience
Paul is a co-founder of PWR and started making specialist aluminium radiators
in 1997. Paul had extensive experience in managing key relationship customers
in the US, UK and Europe.
Paul resigned as an Executive Director of the Company on 24 September 2015
after serving 6 years as a Director. Paul remains a senior employee in the
business.
2. Company Secretary
Lisa Dalton (B.App. Sc., M.App. Sc., LLB (Hons), FAICD, FCIS) was appointed as Company Secretary on 7
August 2015. Lisa is an experienced governance professional having been company secretary of a number of
listed and unlisted companies over the past 16 years.
3. Directors’ meetings
The number of Directors’ meetings (including meetings of committees of Directors) and number of meetings
attended by each of the Directors of the Company during the financial year are:
Director
Bob Thorn
Kees Weel
Jeffrey Forbes
Teresa Handicott
Paul Weel (resigned 24 September 2015)
4. Principal activities
Board Meetings
Held
12
12
12
10
1
Attended
12
12
12
10
-
Audit and Risk
Committee Meetings
Attended
3
-
3
3
-
Held
3
-
3
3
-
Nomination and
Remuneration
Committee Meetings
Attended
4
-
4
3
-
Held
4
-
4
3
-
The Company’s registered office and principal place of business is 103 Lahrs Road, Ormeau, Queensland 4208.
The principal activities of the Group during the year were the design, engineering, production, testing, validation
and sales of customised aluminium cooling products and solutions to the motorsports, automotive original
equipment manufacturing (“OEM”), automotive aftermarket and emerging technologies sectors for domestic and
international markets.
Other than items outlined in the Operating and Financial review, there were no significant changes in the nature
of the activities of the Group during the year.
6
PWR Holdings Limited
and its controlled entities
Directors' report
For the year ended 30 June 2016
5. Operating and financial review
Summary of financial results
Profit and loss summary
Revenue
EBITDA (excluding IPO costs)
EBITDA margin (excluding IPO costs)
Net profit after tax (including IPO costs)
Earnings per share
Revenue
FY16
A$’000
47,348
16,903
35.7%
8,735
9.31 cents
FY15
A$’000
32,526
13,025
40.0%
8,909
10.90 cents
FY15 to
FY16
%
+ 45.6%
+ 29.8%
- 4.3%
- 2.0%
Growth in revenue compared to the prior year was primarily due to:
• Increased organic growth primarily in the motorsports and automotive aftermarket sectors, arising from
increased market penetration and the introduction of product tanking capabilities; and
• A full year contribution of the C&R Racing business which was acquired on 27 March 2015.
EBITDA1
The lower EBITDA margin in 2016 compared to the prior year was primarily driven by:
The acquisition of C&R Racing which has lower operating margins;
•
• A higher margin OEM contract delivered in 2015;
•
Investment in new engineering and production personnel to ensure PWR is “resource ready” to take
advantage of future growth opportunities;
• Costs associated with being a public company; and
• Costs associated with the integration of C&R Racing.
Net profit after tax
Net profit after tax of the Group for the year ended 30 June 2016 included the recognition of $2.7 million
($1.9 million after tax) of one-off expenses in relation to the initial public offering of the Company as
outlined below.
Foreign currency
The Group is exposed to movements in foreign exchange rates, with approximately 48.6% of revenue
generated in British pounds (2015: 53.7%), 39.8% in US dollars (2015: 31.9%) and 11.6% in Australian
dollars (2015: 14.4%).
With the strengthening of the Australia dollar in the second half of the 2016 financial year, particularly
against the British pound, revenue was impacted negatively by $1.1 million compared to the prospectus
forecast issued by the Company during the year.
1 Earnings Before Interest, Tax, Depreciation and Amortisation (“EBITDA”) is a non-IFRS term and which has not been subject to
audit or review but has been determined using information presented in the Group’s annual financial report.
PWR Holdings Limited
and its controlled entities
Directors' report
For the year ended 30 June 2016
5. Operating and financial review (continued)
Review of operating segments
The Group has two operating segments, PWR Performance Products which comprises its Australian and
European operations, and C&R Racing which comprises its USA operations.
The PWR Performance Products segment generated external revenue of $30.7 million (2015: $23.8
million), with the growth from the prior year being the result of organic growth across the various sectors
in which PWR operates, primarily driven by the motorsports and automotive aftermarket sectors.
The C&R Racing segment generated external revenue of $16.6 million (2015: $8.7 million), with the
growth from the prior year being a full year contribution from C&R Racing which was acquired on 27
March 2015.
Review of principal businesses
During the year ended 30 June 2016, the Group:
• Secured two new OEM contracts in Australia and Europe in addition to other OEM development and
prototype work;
• Undertook capital investment to expand product tanking and production capabilities together with
investment in new engineering and production personnel to ensure capability to meet future growth,
resulting in global staff numbers increasing by 25 to 187 at 30 June 2016;
• Continued the integration of the C&R Racing business, which included implementing PWR’s ERP
system, development of a new website and online store, development of product knowledge, gaining of
production efficiencies, expansion of the sales representative network and development of avenues to
the USA automotive aftermarket via leading parts retailers;
• Finalised the development of cooling solutions for industrial replacements markets and commenced
sales to the mining and construction industry; and
• Declared and paid an interim dividend of $0.0062 per share (2015: nil).
Initial Public Offering
In October 2015, the Company issued a prospectus for the purposes of an initial public offering of 54.5
million shares at an offer price of $1.50 per share, comprising the sell down of 38.4 million existing shares
by existing shareholders and the issue of 16.1 million new shares. As a result of the initial public offering:
• The Company listed on the Australian Securities Exchange (ASX code: PWH) on 18 November 2015,
raising $24.2 million;
• The Group repaid debt of £7.2 million (A$13.8 million) and US$4.9 million (A$6.5 million); and
• The Company incurred $3.8 million before tax in costs in relation to the transaction, of which $1.1
million was allocated to equity and $2.7 million was recorded as an expense.
Capital management and liquidity
Operating cash flow for the year was strong at $12.5 million (2015: $8.1 million). The balance sheet
remains strong with cash of $8.8 million (2015: $1.0 million), net assets of $36.7 million (2015: $5.2
million) and no core debt.
Capital expenditure for the year was $2.4 million (2015: $1.0 million), including specific capital
expenditure to expand product tanking and production capabilities.
The Group also invested in new engineering and production personnel to ensure it is “resource ready” to
take advantage of future growth opportunities.
8
PWR Holdings Limited
and its controlled entities
Directors' report
For the year ended 30 June 2016
5. Operating and financial review (continued)
Business risks and opportunities
The following are key opportunities and risks that may impact the Group’s financial and operating results
in future periods:
Opportunities
Risks
• Leverage off reputation in elite motorsports to
increase penetration into existing and emerging
sectors
• Loss of key customers
• Loss of key employees
• Emergence of domestic
and
international
competitors
to capture
• Unfavourable movement
in foreign currency
• Pursue OEM opportunities
• Expansion of product offering
greater customer spend
• Continued intellectual property and product
development
• Continued globalisation and standardisation of
motorsports
• Global
investment
electric and hybrid engines
in
the development of
exchange rates
• Integration of the C&R Racing acquisition
• Manufacturing equipment failure
• Failure of supply chain
• Product defects or failure
• Workplace incidents
Significant changes in the state of affairs
Other than as outlined in the operating and financial review, there were no significant changes in the nature
of the activities of the Group during the year.
6. Dividends
Dividends paid or declared by the Company to members since the end of the previous financial year were:
Declared and paid during the year
Interim 2016 ordinary
Total amount
Declared after end of year
Amount per
share
$0.0062
Total amount
$
620,000
620,000
Date of payment
8 April 2016
The following dividends were declared by the Directors since the end of the financial year:
Final 2016 ordinary
Total amount
Amount per
share
$0.0378
Total amount
$
3,780,000
3,780,000
Date of payment
19 September 2016
The financial effect of this dividend has not been brought to account in the consolidated financial
statements for the year end 30 June 2016 and will be recognised in subsequent financial reports. There is
no Dividend Re-investment plan in operation.
7. Likely developments
The Group will continue its strategy of increasing profitability and market share within existing markets
and pursue opportunities in emerging markets during the next financial year.
Further information about likely developments in the operations of the Group and the expected results of
those operations in future financial years has not been included in this report because disclosure of the
information would be likely to result in unreasonable prejudice to the Group.
9
PWR Holdings Limited
and its controlled entities
Directors' report
For the year ended 30 June 2016
8. Events subsequent to reporting date
The Board declared a fully franked final dividend of 3.78 cents per share. The financial effect of this
dividend has not been brought to account in the consolidated financial statements for the year ended 30
June 2016.
Other than the matter noted above, there has not arisen in the interval between the end of the financial year
and the date of this report any item, transaction or event of a material and unusual nature likely, in the
opinion of the Directors of the Company, to affect significantly the operations of the Group, the results of
those operations, or the state of affairs of the Group, in future financial years.
9. Environmental regulation
The Group is not subject to any significant environmental regulations.
10. Indemnification and insurance of officers
The Group has indemnified the Directors’ and Executives’ for costs incurred, in their capacity as a Director
or Executive, for which they may be held personally liable, except where there is a lack of good faith.
During the financial year, the Group paid insurance premiums in respect of a contract to insure the
Directors and Executives of the Group against a liability to the extent permitted by the Corporations Act
2001. The insurance contract prohibits disclosure of the nature of liability and the amount of the premium.
11. Proceedings on behalf of the Company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring
proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party
for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings.
12. Non-audit services
During the year KPMG, the Group’s auditor, has not performed any services other than the audit and
review of the financial statements.
13. Lead auditor’s independence declaration
The lead auditor’s independence declaration is set out on page 20 and forms part of the directors’ report for
the financial year ended 30 June 2016.
14. Directors’ interests
Details of the Directors’ interests in the securities of the Company are disclosed in the remuneration report.
At the date of this report their holdings do not differ from the amount held at 30 June 2016.
15. Rounding
In accordance with the ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191
commencing 1 April 2016, amounts in the financial report and Directors’ report have been rounded to the
nearest dollar, unless otherwise stated.
10
PWR Holdings Limited
and its controlled entities
Directors' report
For the year ended 30 June 2016
16. Remuneration report – audited
The information provided in this Remuneration Report has been prepared in accordance with section 300A
of the Corporations Act 2001 (Cth).
Key Management Personnel
The remuneration report outlines remuneration for those people considered to be Key Management
Personnel (KMP) of the Group during the Reporting Period. KMP are persons having authority and
responsibility for planning, directing and controlling the activities of the Group.
KMP consist of:
• Non-Executive Directors; and
• Executive Directors and certain senior executives.
The table below summarises details of KMP of the Group for the financial year ended 30 June 2016, their
roles and appointment/cessation dates.
Key Management Personnel during the Reporting Period
Name
Role
Non-Executive Directors
Bob Thorn
Jeff Forbes
Teresa Handicott
Chairman, Non-Executive Director
Non-Executive Director
Non-Executive Director
Managing Director
Executive Director and Senior Executives
Current
Kees Weel
Matthew Bryson General Manager, Engineering
Adam Purss
Earle Roberts
Chris Jaynes
Former
Paul Weel
Chief Financial Officer
Chief Operating Officer
General Manager, USA
Executive Director
Production Manager
General Manager, USA
Chris Paulsen
Appointment Date / (Cessation Date)
7 August 2015
7 August 2015
1 October 2015
30 June 2003
11 April 2006
23 February 2015
19 April 2016
25 January 2016
9 January 2006/(24 September 2015)
9 January 2006/(31 May 2016)
27 March 2015/(25 January 2016)
Remuneration Governance
The following diagrammatic representation shows the framework the Board has in place to establish and
review remuneration for KMP and employees of the Group:
Board
Approves the overall remuneration framework and policy, ensuring it is fair,
transparent and aligned with long term outcomes
Nomination and
Remuneration
Committee
(“NRC”)
NRC is delegated to review and make recommendations to the Board on
remuneration policies for non-executive directors, senior executives and all
employees including incentive arrangements and awards. The NRC can appoint
remuneration consultants and other external advisors to provide independent
advice
Managing
Director
Provides all relevant information to the NRC to facilitate the NRC making
recommendations to the Board on remuneration decisions
11
PWR Holdings Limited
and its controlled entities
Directors' report
For the year ended 30 June 2016
16. Remuneration report – audited (continued)
Non-Executive Director Remuneration
Policy
A copy of the remuneration policy for Non-Executive Directors is available on the Group’s website.
The Board’s Non-Executive Director remuneration policy is to:
• Provide a clear fee arrangement that avoids potential conflicts of interest associated with
performance incentives,
• Remunerate Directors at market rates for their commitment and responsibilities, and
• Obtain independent external remuneration advice when required.
Non-Executive Directors receive remuneration for undertaking their role. They do not participate in
the Group’s incentive plans or receive any variable remuneration. Non-Executive Directors are not
entitled to retirement payments.
The aggregate Non-Executive Director remuneration cap approved by shareholders in 2015 is
$750,000 per annum (inclusive of superannuation contributions). The Board determines the
distribution of Non-Executive Director fees within the approved remuneration cap.
Remuneration of Non-Executive Directors during Reporting Period
The following table sets out the Board and Committee fees (inclusive of superannuation) as at the end
of the Reporting Period:
Non-Executive
Directors
Bob Thorn
Jeff Forbes
Teresa Handicott
Total
Board
Member
$ per
annum
Board
Chairman
$ per
annum
95,000
95,000
95,000
285,000
155,000
-
-
155,000
Audit &
Risk
Committee
Chairman
$ per
annum
Nomination &
Remuneration
Committee
Chairman
$ per
annum
-
20,000
-
20,000
-
-
20,000
20,000
Total
$ per
annum
250,000
115,000
115,000
480,000
Executive Director and Senior Executive Remuneration
Remuneration policy for senior executives
The Board’s policy for determining the nature and amount of remuneration for the Executive Director
and senior executives is:
• Provide for both fixed and performance based remuneration,
• Provide a remuneration package based on an annual review of employment market conditions, the
Group’s performance and individual performance, and
• Obtain independent external remuneration advice when required.
PWR Holdings Limited
and its controlled entities
Directors' report
For the year ended 30 June 2016
16. Remuneration report – audited (continued)
Executive Director and Senior Executive Remuneration (continued)
Components of remuneration
The remuneration framework for senior executives comprises two elements:
1. Fixed remuneration; and
2.
“At risk” or performance linked remuneration.
The Group’s mix of fixed and at risk remuneration for the Managing Director and other senior
executives as a total of remuneration for the 2016 financial year was as follows:
Fixed
remuneration
85.9%
94.6%
At risk
remuneration
14.1%
5.4%
Managing Director
Senior executives
Long-term incentive plan
The Board will recommend to shareholders the implementation of a long-term incentive plan
(“LTIP”) at the 2016 AGM. The LTIP vehicle proposed is a Performance Rights Plan. Eligible
participants will be the Managing Director, senior executives and key personnel nominated by the
Board.
The Managing Directors and senior executives did not receive equity based compensation under a
long term incentive plan during the year ended 30 June 2016 (2015: nil).
1. Fixed remuneration
Fixed remuneration is a function of size and complexity of the role, individual responsibilities,
experience, skills and market pay levels. This consists of cash salary, salary sacrifice items, employer
superannuation, annual leave provisions and any fringe benefits tax charges related to employee
benefits. Superannuation is paid at the relevant statutory contribution limit. The opportunity to salary
sacrifice superannuation benefits on a tax-compliant basis is available upon request.
The Board determines an appropriate level of fixed remuneration for the senior executives with
recommendations from the Nomination and Remuneration Committee.
Fixed remuneration is reviewed annually following performance reviews at the end of the financial
year and takes into account role and accountabilities, relevant market benchmarks and attraction,
retention and motivation of executives in the context of the talent market.
Upon the recommendation of the Nomination and Remuneration Committee and approval of the
Board, senior executives did not receive remuneration increases to their fixed remuneration from 1
July 2016.
2. Performance linked remuneration
Short-term incentive plan
The Managing Director and senior executives are eligible to participate in the Group’s short-term
incentive plan.
Under the plan, participants have an opportunity to receive an annual cash bonus calculated as a
percentage of their total fixed remuneration (“TFR”) and conditional on the achievement of short-term
financial and non-financial performance measures at a corporate and individual level. For the year
ended 30 June 2016, short-term incentive payments were payable to participants if the Group
achieved or exceeded the EBITDA forecast as set out in the Forecast Financial Information included
in the Company’s Prospectus issued in October 2015.
13
PWR Holdings Limited
and its controlled entities
Directors' report
For the year ended 30 June 2016
16. Remuneration report – audited (continued)
Executive Director and Senior Executive Remuneration (continued)
Components of remuneration (continued)
2. Performance linked remuneration (continued)
Short-term incentive plan (continued)
Awards to be made under the short-term incentive plan were assessed by the Nomination and
Remuneration Committee and approved by the Board. The Board retains an overall discretion on
whether to pay all, a portion of, or no annual bonus.
Annual bonus
The executive director and senior executives are eligible for an annual bonus each financial year.
The annual bonus plan focuses attention on short-term non-financial and financial objectives at a
corporate and individual level. The quantum of the cash award varies based on the year’s
accomplishments, including the EBITDA of the Group which acts as a gate for the annual bonus plan
to operate. In addition, financial and non-financial targets were established by the Board at the
beginning of the Reporting Period and assessed at the end of the Reporting Period.
A summary of the FY16 achievements against the corporate objectives is outlined below:
Corporate key performance indicators for FY16
KPI
EBITDA Gate (i)
Safety
Profitability (i)
Gross Margin
Target
$16.2m
Zero Lost Time Injuries (LTIs)
NPAT >$10.3 million
PWR Consolidated gross margin >Target
(i) Amounts are prior to short-term incentive plan payments and IPO costs
(ii) These amounts have not been subject to audit or review
FY16 Outcome (ii)
$17.2m
Zero LTIs
$10.8 million
4.4% above Target
The Group EBITDA1 as set out in the Forecast Financial Information included in the Company’s
Prospectus issued in October 2015 was established by the Board as a gate to the operation of the short
term-incentive plan for the Reporting Period. The Group achieved an EBITDA of $17.2m (prior to
short-term incentive plan payments and excluding IPO costs) which equates to 6.1% above the
EBITDA target of $16.2m. This result triggered the operation of the short-term incentive plan with a
performance modifier of 33% contributing towards the annual cash bonus awarded to each senior
executive. To achieve the maximum annual cash bonus, the Managing Director and senior executives
had to exceed the EBITDA gate by 20%.
Assessment of these targets is subject to assessment made by the Nomination and Remuneration
Committee and approved by the Board. The Board retains an overall discretion on whether to pay all,
a portion of, or no annual bonus. Incentives may be granted, at the discretion of the Board, in cash.
1 Earnings Before Interest, Tax, Depreciation and Amortisation (“EBITDA”) is a non-IFRS term and which has not been
subject to audit or review but has been determined using information presented in the Group’s annual financial report.
14
PWR Holdings Limited
and its controlled entities
Directors' report
For the year ended 30 June 2016
16. Remuneration report – audited (continued)
Executive Director and Senior Executive Remuneration (continued)
Components of remuneration (continued)
2. Performance linked remuneration (continued)
Short-term incentive plan (continued)
Analysis of cash bonuses included in remuneration
The Board awarded the Managing Director and the following senior executives a cash bonus for the
reporting period, payable in September 2016, as follows:
Employed at
30 June 2016
Position
Managing Director
Kees Weel
Matthew Bryson General Manager, Engineering
Chief Financial Officer
Adam Purss
Chief Operating Officer
Earle Roberts (i)
Chris Jaynes (ii) General Manager, USA
Max
Potential
Bonus
% TFR
50%
30%
30%
30%
30%
Actual
Bonus
% TFR
14.1%
8.2%
8.8%
19.4%
9.8%
Bonuses included
in FY16
remuneration
$
61,213
27,101
21,247
13,613
8,440
(i) Commenced employment on 15 April 2016. Pro-rata award.
(ii) Employed by C&R Racing Inc and remunerated in USD. Commenced as KMP on 25 January 2016. Pro-rata award.
Company performance and remuneration outcomes
The various components of the way the Group remunerates key management personnel have been
structured to support the Group’s strategy and business objectives which in turn are designed to
generate shareholder wealth.
When setting targets and determining the quantum of the remuneration increases and the proportion of
fixed and performance linked remuneration components, the Board refers to remuneration
benchmarking reports provided by independent sources and remuneration consultants from time to
time. The Board retains an overarching discretion to award an annual bonus. In exercising that
discretion they have regard to the remuneration policy, market conditions and Group performance.
The at risk component (short-term incentive plan) of the remuneration structure intends to reward
achievement against Group and individual performance measures over one year and three-year
timeframes.
The table below summarises the Group’s performance for the 2016 financial year.
EBITDA (excluding IPO costs)
Statutory net profit after tax
Total dividends per share
Change in share price
Earnings per share
2016
$
16,903,003
2015
$
13,024,518
8,735,466
8,909,175
4.40 cents
1.28
$13.78
N/A
9.31 cents
10.90 cents
PWR Holdings Limited listed on the ASX on 18 November 2015.
15
Total
Remuneration
(TR)
• The maximum
amount of
remuneration
able to be
earned by key
management
personnel
PWR Holdings Limited
and its controlled entities
Directors' report
For the year ended 30 June 2016
16. Remuneration report – audited (continued)
Company performance and remuneration outcomes (continued)
Remuneration
Governance
Performance
Measures
Total Fixed
Remuneration (TFR)
Salary and other benefits
including statutory
superannuation
Personal Development Plans
• Performance to role
• PWR DNA
•
STI Guidelines
Component of
Remuneration
Guaranteed
Executive Employment
Agreement
Link to
performance
The objectives of the Group’s
remuneration policy are to:
• Align remuneration practices
with sustainable shareholder
value
• Provide fair, consistent and
competitive remuneration to
attract and retain the best
employees
• Motivate employees to
perform in the best interests
of the Group and our
stakeholders
• Ensure gender pay equity
Annual Bonus
Cash for targeted
performance above and
beyond role
• Profit gate – minimum EBITDA is to
be reached before operation of
the annual bonus plan
• Summarised on page 14 of the
Remuneration Report) = 40%,
personal goals relevant to area of
accountability and 60% linked to
Corporate goals
At risk
Managing Director up to 50% TFR
Other KMP up to 30% TFR
• Rewards corporate financial and
non-financial performance.
The EBITDA gate and financial
performance measures were
chosen principally because Group
earnings and gross margin should
drive dividends and share price
growth over time.
• Aligns to Group’s strategic goals.
Recognises and rewards
achievement of strategy
implementation relevant to area of
accountability
• Drives leadership performance and
behaviours consistent with the
Group’s values
16
PWR Holdings Limited
and its controlled entities
Directors' report
For the year ended 30 June 2016
16. Remuneration report – audited (continued)
Key Management Personnel Remuneration
Details of the nature and amount of each major element of remuneration of each Director and senior executive of
the Group for the Reporting Period are:
Post
Employ-
ment
Benefits
Super
benefits
$
Termin-
ation
benefits
$
Long-term
benefits
Long service
leave
$
Name
Year
Cash salary
& fees
$
Short-term benefits
Non-cash
benefits
$
Cash
Bonus
$
Non-executive Directors
Bob Thorn (i)
Chairman, Non-Executive
Director
Jeff Forbes (i)
Non-Executive Director
Teresa Handicott (ii)
Non-Executive Director
Total - Non-Executive
Directors’ Remuneration
2016
2015
2016
2015
2016
2015
2016
2015
212,900
-
87,519
-
78,767
-
379,186
-
321,154
184,616
239,423
149,808
200,000
149,311
48,296
-
74,698
-
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
Executive Directors and senior executives
Current
Kees Weel
Managing Director
Matthew Bryson
General Manager,
Engineering
Adam Purss
Chief Financial Officer
Earle Roberts (iii)
Chief Operating Officer
Chris Jaynes (iv)
General Manager, USA
Former
Paul Weel (v)
Production Manager
Chris Paulsen (vi)
General Manager, USA
Total – Executive
Directors’ and senior
executives’ Remuneration
Total - KMP
Remuneration
2016
2015
2016
2015
2016
2015
2016
2015
1,409,955
774,287
1,789,141
774,287
230,769
180,000
295,615
110,552
Total
$
212,900
-
87,519
-
78,767
-
379,186
-
398,330
184,616
294,140
174,751
226,102
150,790
65,624
-
85,741
-
239,326
180,000
300,132
110,552
16,267
-
8,314
-
7,483
-
32,064
-
29,399
17,538
22,639
14,232
19,000
6,577
4,588
-
741
-
20,812
17,100
975
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
61,213 15,963
-
-
27,101 27,616
- 24,943
4,855
1,479
3,715
-
2,603
-
21,247
-
13,613
-
8,440
-
-
-
-
-
8,557
-
4,517
-
131,614 67,826
- 26,422
131,614 67,826
- 26,422
1,609,395
800,709
1,988,581
800,709
98,154
55,447
130,218
55,447
Proportion of
remuneration
performance
related
%
-
-
-
-
-
-
14.1
-
8.2
-
8.7
-
19.4
-
9.8
-
-
-
-
-
Total
$
229,167
-
95,833
-
86,250
-
411,250
-
-
-
-
-
-
-
-
-
5,497
-
433,226
202,154
14,291
9,838
-
-
-
-
-
-
3,622
-
-
-
331,070
198,821
245,102
157,367
70,212
-
86,482
-
263,760
197,100
301,107
110,552
23,410 1,730,959
865,994
9,838
23,410 2,142,209
865,994
9,838
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(i) Appointed 7 August 2015. Prior to their appointment as Directors, consulting fees were paid to Bob Thorn ($20,833) and Jeff Forbes
($17,500) for their assistance with the IPO process. These consulting fees are not included in the amounts above.
(ii) Appointed 1 October 2015.
(iii) Appointed 19 April 2016.
(iv) Chris Jaynes was appointed General Manager, USA on 25 January 2016 and is remunerated in USD. Remuneration has been converted
to AUD using the average annual exchange rate.
(v) Resigned as Executive Director 7 August 2015. No longer considered KMP from 1 June 2016. Paul Weel did not participate in the
short term incentive plan.
(vi) Chris Paulsen was General Manager USA from 27 March 2015 to 25 January 2016 and was remunerated in USD. Remuneration has
been converted to AUD using the average annual exchange rate. Chris Paulsen did not participate in the short term incentive plan.
17
PWR Holdings Limited
and its controlled entities
Directors' report
For the year ended 30 June 2016
16. Remuneration report – audited (continued)
Other Information
Contract duration and termination requirements
The Company has contracts of employment with no fixed tenure requirements with the Managing Director and
senior executives. The notice period for each is outlined in the table below. Termination with notice may be
initiated by either party. The contracts contain customary clauses dealing with immediate termination for gross
misconduct, confidentiality and post-employment restraint of trade provisions.
Name
Executive Director
Kees Weel
Senior Executives
Matthew Bryson
Adam Purss
Earle Roberts
Chris Jaynes
Position
Notice Period
Managing Director
General Manager, Engineering
Chief Financial Officer
Chief Operating Officer
General Manager, USA
6 months
3 months
3 months
3 months
3 months
Other transactions with Key Management Personnel
Certain key management personnel, or their related parties, hold positions in other entities that result in them
having control, joint control or significant influence over the financial or operating policies of these entities.
A number of these entities transacted with the Group during the year. The terms and conditions of the transactions
with key management personnel and their related parties were no more favourable than those available, or which
might reasonably be expected to be available, on similar transactions to non-key management personnel related
entities on an arm’s length basis.
The aggregate value of transactions and outstanding balances relating to key management personnel and entities
over which they have control, joint control or significant influence were as follows:
Transaction values
during year
Balance outstanding
Receivable/(Payable)
Entity
PWR Property Holdings Pty Ltd (i)
PWR IP Trust (ii)
Redback Radiators Pty Ltd (iii)
Innotherm Pty Ltd (iv)
Transaction
Property rent
Purchase of trademark
Sales of goods
Sales of assets
Administrative services
Purchase of products
Sales of goods
Administrative services
Bayswater Road Radiators Pty Ltd (v) Sales of goods
Paulsen Properties LLC (vi)
JG Parker Properties LLC (vi)
Property rent
Property rent
2015
$
2016
$
2016
$
878,757
746,019
- 8,432,116
15,989
66,745
60,000
91,927
3,537
12,000
69,964
83,574
33,463
14,239
-
-
69,207
640
8,000
44,847
260,462
104,340
2015
$
(75,061)
-
1,895
-
5,500
(14,235)
-
1,100
2,744
-
-
-
-
-
-
-
-
704
-
11,004
-
-
(i) The Group leases its Australian head office and factory facilities from an entity associated with Kees and Paul Weel.
(ii) The Group acquired a trademark from an entity associated with Kees and Paul Weel. The purchase price was based on the fair value of
the trademark determined using the relief from royalty method.
(iii) Redback Radiators Pty Ltd is an entity that was associated with Kees Weel until 18 May 2016, which purchases goods and/or assets from
the Group and sells products to the Group. The Group provided administrative services to Redback Radiators Pty Ltd in the prior year.
(iv) Innotherm Pty Ltd is an entity that was associated with Kees Weel until 16 February 2016, which purchases goods from the Group. The
Group provided administrative services to Innotherm Pty Ltd.
(v) Bayswater Road Radiators Pty Ltd is an entity associated with Kees Weel, which purchases goods from the Group.
(vi) The Group leases its USA office and factory facilities from entities associated with Chris Paulsen, who was KMP until 25 January 2016.
18
PWR Holdings Limited
and its controlled entities
Directors' report
For the year ended 30 June 2016
16. Remuneration report – audited (continued)
Other Information (continued)
Share holdings of Key Management Personnel
The movement during the year in the number of ordinary shares in PWR Holdings Limited held, directly, indirectly
or beneficially, by each member of the Key Management Personnel, including their related parties, is as follows:
Name
Opening
Balance
1 July 2015 (ii)
Shares
acquired
during the
year
Shareholdings of KMP
Shares
disposed of
during the year
Other (iv)
Closing
Balance
30 June 2016
400,000
20,000
13,500
38,368,500 (i)
4,209,000
13,330
21,800
-
-
-
-
Non-executive Directors
Bob Thorn
Jeff Forbes
Teresa Handicott
Executive Directors and Senior Executives
Current
Kees Weel
Matthew Bryson
Adam Purss
Earle Roberts
Chris Jaynes
Former
Paul Weel
Chris Paulsen
76,768,500
4,195,000
-
-
-
76,768,500
2,936,500
400,000
20,000
13,500
-
-
-
-
14,000
13,330
21,800
-
(38,400,000) (iii)
-
-
-
-
-
-
(38,400,000)
-
(iii) (38,368,500) (i)
(2,936,500)
N/A
N/A
(i)
38,368,500 shares held by KPW Property Holdings Pty Ltd as trustee for the KPW Holdings Trust. At 30 June 2016 Kees and Paul
Weel are directors of the trustee and beneficiaries of the trust.
(ii) Shares held at 1 July 2015 represent shares held prior to the IPO. Pre-IPO shares were subject to pre-IPO share split in the ratio of
1:83.9. The opening balance represents the number of shares post the share split which occurred on 9 October 2015.
(iii) Shares disposed represent shares sold by KPW Property Holdings Pty Ltd into the IPO.
(iv) Shares no longer held in capacity as KMP.
Remuneration consultants
The Board did not retain remuneration consultants during the Reporting Period.
Employee Share Plans
There were no employee share plans in place during the Reporting Period.
This report is made with a resolution of the directors:
Bob Thorn
Chairman
Dated at Brisbane, this 25th day of August 2016. Dated at Brisbane, this 25th day of August 2016.
Kees Weel
Managing Director
19
ABCD
Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001
To: the directors of PWR Holdings Limited
I declare that, to the best of my knowledge and belief, in relation to the audit for the financial
year ended 30 June 2016 there have been:
i.
no contraventions of the auditor independence requirements as set out in the Corporations
Act 2001 in relation to the audit; and
ii.
no contraventions of any applicable code of professional conduct in relation to the audit.
KPMG
Jason Adams
Partner
Brisbane
25 August 2016
20
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Professional Standards Legislation.
PWR Holdings Limited
and its controlled entities
Consolidated Statement of Profit or Loss
and Other Comprehensive Income
For the year ended 30 June 2016
Revenue
Other income
Raw materials and consumables used
Changes in inventories of finished goods and work in
progress
Employee expenses
Depreciation and amortisation
Occupancy expenses
Initial public offering costs
Other expenses
Results from operating activities
Finance income
Finance costs
Net finance income/(costs)
Profit before income tax
Income tax expense
Profit for the year attributable to equity holders of the
parent
Other comprehensive income
Items that are or may be reclassified to profit or loss:
Exchange differences on translating foreign operations
Total comprehensive income for the year
Note
B2
2016
$
2015
$
47,347,604
81,155
32,525,689
88,908
(12,266,756)
(7,794,931)
930,454
(15,011,543)
(1,198,326)
(1,553,364)
(2,665,936)
(2,624,547)
13,038,741
16,531
(595,283)
(578,752)
355,421
(9,297,028)
(813,656)
(1,080,553)
-
(1,772,988)
12,210,862
713,926
(406,465)
307,461
12,459,989
(3,724,523)
12,518,323
(3,609,148)
8,735,466
8,909,175
B3
B4
E1
28,997
8,764,463
374,769
9,283,944
Basic and diluted earnings per share
B5
9.31 cents
10.90 cents
The accompanying notes are an integral part of these financial statements.
21
PWR Holdings Limited
and its controlled entities
Consolidated Statement of Financial Position
At 30 June 2016
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Current tax assets
Other assets including derivatives
Total current assets
Non-current assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Loans and borrowings
Employee benefits
Provisions
Current tax liabilities
Total current liabilities
Non-current liabilities
Loans and borrowings
Employee benefits
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained earnings
Total equity
Note
2016
$
2015
$
C1
C2
C3
E2
C4
C5
C6
E2
C7
F1
D1
C8
E2
F1
D1
8,796,805
4,089,710
6,743,778
-
631,403
20,261,696
1,005,861
4,314,617
5,106,744
170,388
1,411,715
12,009,325
5,909,144
14,174,350
1,821,995
21,905,489
42,167,185
4,727,525
14,125,891
656,145
19,509,561
31,518,886
2,662,196
396,621
969,807
119,009
408,648
4,556,281
1,849,531
5,579,444
868,600
99,688
-
8,397,263
763,641
123,765
887,406
5,443,687
36,723,498
17,794,203
115,960
17,910,163
26,307,426
5,211,460
F2
F2
25,920,826
514,065
10,288,607
36,723,498
2,553,251
485,068
2,173,141
5,211,460
The accompanying notes are an integral part of these financial statements.
22
23
PWR Holdings Limited
and its controlled entities
Consolidated Statement of Changes in Equity
For the year ended 30 June 2016
Share
Capital
$
Note
Foreign
currency
translation
reserve
$
Retained
earnings
$
Total equity
$
Balance at 1 July 2015
2,553,251
485,068
2,173,141
5,211,460
Total comprehensive income for
the year
Profit for the year
Other comprehensive income
Total comprehensive income
Transactions with owners, recorded
directly in equity
Share issued during the year, net of costs F2
F3
Dividends paid
Total transactions with owners
Balance at 30 June 2016
-
-
-
-
28,997
28,997
8,735,466
-
8,735,466
8,735,466
28,997
8,764,463
23,367,575
-
23,367,575
25,920,826
-
-
-
514,065
-
(620,000)
(620,000)
10,288,607
23,367,575
(620,000)
22,747,575
36,723,498
Balance at 1 July 2014
1
110,299
6,563,966
6,674,266
Total comprehensive income for the year
Profit for the year
Other comprehensive income
Total comprehensive income
Transactions with owners, recorded
directly in equity
Share issued during the year F2
Dividends paid
F3
Total transactions with owners
Balance at 30 June 2015
-
-
-
-
374,769
374,769
8,909,175
-
8,909,175
8,909,175
374,769
9,283,944
2,553,250
-
2,553,250
2,553,251
-
-
-
485,068
-
(13,300,000)
(13,300,000)
2,173,141
2,553,250
(13,300,000)
(10,746,750)
5,211,460
The accompanying notes are an integral part of these financial statements.
23
PWR Holdings Limited
and its controlled entities
Consolidated Statement of Cash Flows
For the year ended 30 June 2016
Cash flows from operating activities
Cash receipts from customers
Cash paid to suppliers and employees
Cash generated from operating activities
Interest paid
Income tax paid
Net cash from operating activities
Cash flows from investing activities
Government grant income received
Interest received
Acquisition of subsidiary, net of cash acquired
Payments for intangible assets
Proceeds from sale of property, plant and equipment
Payments for property, plant and equipment (net of asset finance)
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of shares
Payments for costs of initial public offering
Dividends paid
Proceeds from borrowings
Repayment of borrowings
Loans to related parties
Payment of finance lease liabilities
Net cash used in financing activities
Note
C1
G1
2016
$
47,887,825
(31,288,555)
16,599,270
(316,235)
(3,787,377)
12,495,658
2015
$
35,016,101
(20,951,635)
14,064,466
(265,845)
(5,688,109)
8,110,512
81,155
16,531
-
-
51,718
(1,271,513)
(1,122,109)
63,691
33,625
(6,894,095)
(3,293,761)
79,413
(996,919)
(11,008,046)
24,150,000
(3,783,685)
(620,000)
-
(22,451,143)
-
(901,163)
(3,605,991)
-
-
(13,300,000)
22,696,483
(1,168,746)
(5,197,808)
(762,972)
2,266,957
Net increase in cash and cash equivalents
Cash and cash equivalents at 1 July
Effect of exchange rate fluctuations on cash held
Cash and cash equivalents at 30 June
7,767,558
1,005,861
23,386
8,796,805
(630,577)
1,638,984
(2,546)
1,005,861
C1
The accompanying notes are an integral part of these financial statements.
24
PWR Holdings Limited
and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2016
Section A About this Report
A1 Reporting entity
PWR Holdings Limited (the “Company”) is a Company domiciled in Australia.
The consolidated financial statements of the Company as at and for the year ended 30 June 2016 comprise
the Company and its subsidiaries (together referred to as the “Group” and individually as “Group Entities”).
The Group is involved in the design, engineering, production, testing, validation and sales of customised
aluminium cooling products and solutions to the motorsports, automotive original equipment manufacturing,
automotive aftermarket and emerging technologies sectors for domestic and international markets.
The Company’s registered office and principal place of business is 103 Lahrs Road, Ormeau, Queensland
4208.
The Group is a for-profit entity for the purposes of preparing these financial statements.
Rounding
In accordance with the ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191
commencing 1 April 2016, amounts in the financial report and Directors’ report have been rounded to the
nearest dollar, unless otherwise stated.
A2 Basis of preparation
(a) Statement of compliance
The consolidated financial statements are general purpose financial statements which have been
prepared in accordance with Australian Accounting Standards (AASBs) adopted by the Australian
Accounting Standards Board (AASB) and the Corporations Act 2001. The consolidated financial
statements comply with International Financial Reporting Standards (IFRS) adopted by the
International Accounting Standards Board (IASB).
The financial statements were approved by the Board of Directors on 25 August 2016.
(b) Basis of measurement
The consolidated financial statements have been prepared on the historical cost basis except for any
derivative financial instruments which are recognised at fair value.
(c) Functional and presentation currency
These consolidated financial statements are presented in Australian dollars, which is the Company's
functional currency.
(d) Use of estimates and judgements
The preparation of consolidated financial statements requires management to make judgements,
estimates and assumptions that affect the application of accounting policies and the reported amounts
of assets, liabilities, income and expenses. The estimates and associated assumptions are based on
historical experience and various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis of making judgments about carrying values of the
entities within the Group. Actual results may differ from these estimates.
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 and in any future periods
affected.
25
PWR Holdings Limited
and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2016
Section A About this Report (continued)
A2 Basis of preparation (continued)
(d) Use of estimates and judgements (continued)
Information about critical judgements, estimates and assumptions in applying accounting policies that
have the most significant effect on the amounts recognised in the consolidated financial statements is
included in the following notes:
• Note C3 – Inventories
• Note C6 – Intangible assets
•
Section E – Taxation
A3 Significant accounting policies
• Note C8 – Provisions
• Note G1 – Business combinations
The accounting policies set out in the individual notes to the consolidated financial statements have been
applied consistently to all periods presented in these consolidated financial statements.
A4 Foreign currency transactions and operations
Transactions in foreign currencies are translated to the respective functional currencies of Group entities at
exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign
currencies are translated to the functional currency at the exchange rate at that date.
Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated to the
functional currency at the exchange rate when the fair value was determined. Non-monetary items that are
measured based on historical cost in a foreign currency are translated using the exchange rate at the date of
the transaction.
Foreign currency differences are generally recognised in profit or loss.
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on
acquisition are translated to the functional currency at exchange rates at the reporting date. The income and
expenses of foreign operations are translated to the functional currency at exchange rates at the dates of the
transactions.
Foreign currency translation differences are recognised in other comprehensive income and presented in the
foreign currency translation reserve in equity.
A5 Determination of fair values
A number of the Group’s accounting policies and disclosures require the determination of fair value, for both
financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or
disclosure purposes based on the following methods. Where applicable, further information about the
assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.
Non-derivative financial liabilities
Fair value, which is determined for disclosure purposes, is calculated based on the present value of future
principal and interest cash flows, discounted at the market rate of interest at reporting date.
Derivative financial instruments
Fair value, which is determined for recognition and disclosure purposes, is calculated based on valuation
techniques using observable market inputs.
26
PWR Holdings Limited
and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2016
Section B Business Performance
B1 Operating segments
The Group determines its operating segments based on information presented to the Managing Director
being the chief operating decision maker. During the period, the Group changed its internal reporting
structure which resulted in a change to the composition of its reportable segments. Operating segments are
now based on the Group’s operating divisions as opposed to their geographical location.
Intersegment revenues are determined based on cost plus margin. Segment profit before interest and tax is
determined after elimination of intercompany transactions.
PWR Performance
Products
C&R Racing
Total
2016
$
30,726,192
2015
$
23,805,801
2016
$
16,621,412
2015
$
8,719,888
2016
$
47,347,604
2015
$
32,525,689
4,510,909
4,836,781
359,262
-
4,870,171
4,836,781
35,237,101
28,642,582
16,980,674
8,719,888
52,217,775
37,362,470
14,866,113
12,130,010
1,213,003
158,120
16,079,116
12,288,130
821,083
1,972,565
698,862
980,516
377,243
440,868
114,794
16,403
1,198,326
2,413,433
813,656
996,919
External revenues
Inter-segment
revenues
Segment revenue
Segment profit/(loss)
before interest and tax
Depreciation and
amortisation
Capital expenditure
Reconciliation of reportable segment profit or loss
Revenues
Total revenue for reportable segments
Elimination of inter-segment revenue
Consolidated revenue
Profit before tax
Profit before tax for reportable segments
Elimination of inter-segment profit
Net finance income/(costs)
Unallocated corporate expenses – IPO costs
Consolidated profit before tax
2016
$
2015
$
52,217,775
(4,870,171)
47,347,604
37,362,470
(4,836,781)
32,525,689
16,079,116
(374,439)
(578,752)
(2,665,936)
12,459,989
12,288,130
(106,907)
307,461
29,639
12,518,323
Revenue from one major customer in the PWR Performance Products segment represents approximately
8.64% (2015: 13.98%) of the Group’s total revenue.
27
PWR Holdings Limited
and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2016
Section B Business Performance (continued)
B1 Operating segments (continued)
Geographic information
The Group operates manufacturing facilities and/or sales offices in Australia, the UK and the USA, and sells
its products to customers in various countries throughout the world. The information below is an analysis of
the Group’s revenue on the basis of the location of the Group’s customers.
2016
2015
Revenues
$
5,082,377
18,652,236
10,452,855
6,669,487
4,006,646
988,756
427,076
216,187
851,984
47,347,604
Non-current
assets (i)
$
17,430,603
2,619,466
33,425
-
-
-
-
-
-
20,083,494
Revenues
$
4,484,734
10,293,827
7,337,615
3,945,505
4,398,916
1,168,419
354,623
150,358
391,692
32,525,689
Non-current
assets (i)
$
16,349,281
2,455,711
48,424
-
-
-
-
-
-
18,853,416
2016
$
46,016,960
711,937
618,707
47,347,604
2015
$
30,813,347
1,267,476
444,866
32,525,689
Australia
USA
UK
Italy
Germany
France
Switzerland
Japan
Other countries
(i)
Excluding deferred tax assets.
B2 Revenue
Sales of goods
Rendering of services
Other revenue
Recognition and measurement
Sale of goods
Revenue from the sale of goods in the course of ordinary activities is measured at the fair value of the
consideration received or receivable, net of returns and trade discounts. Revenue is recognised when the
significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration
is probable, the associated costs and possible return of goods can be estimated reliably, there is no
continuing management involvement with the goods, and the amount of revenue can be measured reliably.
Rendering of services
Revenue from rendering of services is recognised in profit or loss in proportion to the stage of completion of
the transaction at the reporting date.
28
PWR Holdings Limited
and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2016
Section B Business Performance (continued)
B3 Expenses
Significant items
During the year, the Company incurred $3.8 million before tax in one-off costs in relation to the initial
public offering undertaken by the Company, of which $1.12 million was allocated to equity and $2.7 million
was recorded as an expense. These non-recurring expenses are included in “Initial Public Offering
Expenses” in the Consolidated Statement of Profit or Loss and Other Comprehensive Income.
B4 Finance income and expense
Interest income
Net foreign exchange gain
Interest expense
Borrowing costs
Net foreign exchange loss
Net finance costs
Recognition and measurement
2016
$
16,531
-
16,531
(316,235)
-
(279,048)
(595,283)
(578,752)
2015
$
33,625
680,301
713,926
(265,845)
(140,620)
-
(406,465)
307,461
Finance income comprises interest income on funds invested and changes in the fair value of derivative
financial instruments at fair value through profit or loss. Interest income is recognised as it accrues in profit
or loss, using the effective interest method.
Finance costs comprise interest expense on borrowings and changes in the fair value of derivative financial
instruments at fair value through profit or loss. Borrowing costs that are not directly attributable to the
acquisition, construction or production of a qualifying asset are recognised in profit or loss using the
effective interest method.
Foreign currency gains and losses on monetary assets and liabilities are reported on a net basis as either
finance income or finance costs depending on whether foreign currency movements are in a net gain or net
loss position.
29
PWR Holdings Limited
and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2016
Section B Business Performance (continued)
B5 Earnings per share
2016
2015
Basic and diluted earnings per share
9.31 cents
10.90 cents (i)
(i) Restated to include impact of share split in October 2015, refer note F2.
Profit attributable to ordinary shareholders
The calculation of both basic and diluted earnings per share was based on profit attributable to equity holders
of the Company of $8,735,466 (2015: $8,909,175).
Weighted average number of ordinary shares
Issued ordinary shares at 1 July (restated for effect of 1,000,000
shares split into 83,900,000 shares in October 2015)
Effect of shares issued in March 2015 (restated)
Effect of initial public offering on 18 November 2015
Weighted number of ordinary shares at 30 June
2016
No.
2015
No.
83,900,000
-
9,968,767
93,868,767
80,963,500
748,220
-
81,711,720
The Group has not issued any equity instruments or potential equity instruments which are considered to be
dilutive.
30
PWR Holdings Limited
and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2016
Section C Operating Assets and Liabilities
C1 Cash and cash equivalents
Bank balances
Cash on hand
Cash and cash equivalents in the statement of cash flows
Recognition and measurement
2016
$
8,757,445
39,360
8,796,805
2015
$
997,986
7,875
1,005,861
Cash and cash equivalents comprise cash balances and call deposits with original maturities of three months
or less, that are subject to an insignificant risk of changes in their fair value, and are used by the Group in the
management of its short term commitments.
Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are
included as a component of cash and cash equivalents for the purpose of the statement of cash flows.
Reconciliation of cash flows from operating activities
Cash flows from operating activities
Profit for the year
Adjustments for:
Depreciation and amortisation
Net foreign exchange loss/(gain)
Initial public offering costs classified as financing activities
(Profit)/Loss on sale of property, plant and equipment
Changes in:
Trade and other receivables
Inventories
Other assets
Trade and other payables
Employee benefits
Tax balances
Net cash from operating activities
C2 Trade and other receivables
Trade receivables
Trade receivables due from related parties (refer note H2)
GST refund due
8,735,466
8,909,175
1,198,326
279,048
2,665,936
(40,856)
813,656
(680,301)
-
2,248
224,907
(1,637,034)
780,312
831,985
109,013
(651,445)
12,495,658
781,653
510,303
(1,280,432)
961,680
171,491
(2,078,961)
8,110,512
4,078,002
11,708
-
4,089,710
3,165,881
11,239
1,137,497
4,314,617
Recognition and measurement
Trade and other receivables are initially recognised as fair value and subsequently measured at amortised
cost less provision for doubtful debts. Trade receivables are due for settlement no more than 30-60 days from
the date of recognition.
31
PWR Holdings Limited
and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2016
Section C Operating Assets and Liabilities (continued)
C2 Trade and other receivables (continued)
Recognition and measurement (continued)
Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be
uncollectible are written off. A provision for doubtful receivables is established when there is objective
evidence that the Group will not be able to collect all amounts due according to the original terms of the
receivable.
The amount of the provision is the difference between the assets carrying amount and the present value of
the estimated cash flows, discounted at the effective interest rate. The amount of the provision is recognised
in the statement of comprehensive income. The amount of the impairment loss is recognised in the profit and
loss when a trade receivable for which an impairment allowance has been recognised becomes uncollectible
in a subsequent period, it is written off against the allowance created. Subsequent recovery of amounts
previously written off are credited against other expenses in the profit or loss.
Information about the Group’s exposure to credit and market risks for trade and other receivables is disclosed
in Note H1.
C3 Inventories
Raw materials
Work in progress
Finished goods
Consumables
Allowance for inventory obsolescence
2016
$
2,014,449
595,679
4,899,453
191,627
(957,430)
6,743,778
2015
$
1,437,239
382,165
4,182,513
99,834
(995,007)
5,106,744
Recognition and measurement
Inventories are measured at the lower of cost and net realisable value.
The cost of inventories is based on the first-in first-out principle, and includes expenditure incurred in
acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their
existing location and condition. In the case of manufactured inventories and work in progress, cost includes
an appropriate share of production overheads based on normal operating capacity.
Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs
of completion and selling expenses.
The cost of inventories sold and recognised as an expense during the year ended 30 June 2016 was
$22,156,338 (2015: $14,677,481).
C4 Other assets
Current
Prepayments
Deposits
Other assets
Forward exchange contracts at fair value through profit or loss
319,122
167,609
144,672
-
631,403
5,823
368,426
36,542
1,000,924
1,411,715
32
PWR Holdings Limited
and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2016
Section C Operating Assets and Liabilities (continued)
C5 Property, plant and equipment
Plant and equipment – at cost
Accumulated depreciation
Motor vehicles – at cost
Accumulated depreciation
Under construction
2016
$
10,628,238
(5,055,810)
5,572,428
419,860
(229,662)
190,198
146,518
5,909,144
2015
$
8,428,985
(3,978,333)
4,450,652
449,389
(191,541)
257,848
19,025
4,727,525
Reconciliations
Reconciliations of the carrying amounts for each class of property, plant and equipment are set out below:
2016
Cost
Opening balance
Additions
Disposals
Effect of movements in exchange rates
Closing balance
Accumulated depreciation
Opening balance
Disposals
Depreciation
Effect of movements in exchange rates
Closing balance
Net carrying amount
Plant and
equipment
Motor
vehicles
Under
construction
Total
8,428,985
2,285,940
(89,600)
2,913
10,628,238
(3,978,333)
32,611
(1,136,339)
26,251
5,055,810
5,572,428
449,389
-
(28,981)
(548)
419,860
(191,541)
16,528
(61,987)
7,338
229,662
190,198
19,025
127,493
-
-
146,518
-
-
-
-
-
146,518
8,897,399
2,413,433
(118,581)
2,365
11,194,616
(4,169,874)
49,139
(1,198,326)
33,589
5,285,472
5,909,144
33
PWR Holdings Limited
and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2016
Section C Operating Assets and Liabilities (continued)
C5 Property, plant and equipment
Reconciliations (continued)
2015
Cost
Opening balance
Additions
Acquired through business combination
Transfers
Disposals
Effect of movements in exchange rates
Closing balance
Accumulated depreciation
Opening balance
Disposals
Depreciation
Effect of movements in exchange rates
Closing balance
Net carrying amount
Plant and
equipment
Motor
vehicles
Under
construction
Total
6,469,499
982,028
1,041,894
40,512
(130,999)
26,051
8,428,985
(3,297,505)
92,792
(751,528)
(22,092)
(3,978,333)
4,450,652
599,447
14,891
152,196
-
(321,264)
4,119
449,389
(307,847)
184,963
(62,128)
(6,529)
(191,541)
257,848
59,537
-
-
(40,512)
-
-
19,025
7,128,483
996,919
1,194,090
-
(452,263)
30,170
8,897,399
-
-
-
-
-
19,025
(3,605,352)
277,755
(813,656)
(28,621)
(4,169,874)
4,727,525
The plant and equipment balance as at 30 June 2016 includes assets with carrying amounts of $1,937,418
under finance lease (2015: $1,057,901). The motor vehicles balance as at 30 June 2016 includes no assets
under finance lease (2015: $50,295). During the year, the Group acquired assets of $1,138,910 under finance
lease (2015: nil).
Recognition and measurement
Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated
impairment losses.
Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of
self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to
bringing the assets to a working condition for their intended use, and the costs of dismantling and removing
the items and restoring the site on which they are located, and capitalised borrowing costs. Cost also may
include transfers from other comprehensive income of any gain or loss on qualifying cash flow hedges of
foreign currency purchases of property, plant and equipment. Purchased software that is integral to the
functionality of the related equipment is capitalised as part of that equipment.
When parts of an item of property, plant and equipment have different useful lives, they are accounted for as
separate items (major components) of property, plant and equipment.
Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the
proceeds from disposal with the carrying amount of property, plant and equipment and are recognised net
within other income in profit or loss.
Subsequent costs
Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with
the expenditure will flow to the Group. Ongoing repairs and maintenance are expensed as incurred.
34
PWR Holdings Limited
and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2016
Section C Operating Assets and Liabilities (continued)
C5 Property, plant and equipment (continued)
Depreciation
Depreciation is calculated to write off the cost of property, plant and equipment less their estimated residual
values using the straight-line and/or diminishing value basis over their estimated useful lives, and is
generally recognised in profit or loss. Leased assets are depreciated over the shorter of the lease term and
their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease
term.
The estimated useful lives are as follows:
Plant and equipment
•
• Motor vehicles
2016
2-7 years
4-6 years
2015
2-7 years
4-6 years
Depreciation methods, useful lives and residual values are reviewed at each financial year-end and adjusted
if appropriate.
C6 Intangible assets
2016
Cost
Accumulated amortisation
2015
Cost
Accumulated amortisation
Reconciliations
2016
Carrying amount at beginning of year
Purchased
Acquisition through business combination
Amortisation
Effect of movements in exchange rates
Balance at the end of the year
2015
Carrying amount at beginning of year
Purchased
Acquisition through business combination
Amortisation
Effect of movements in exchange rates
Balance at the end of the year
Note
Goodwill Trademarks
Total
3,188,984
-
3,188,984
10,985,366
-
10,985,366
14,174,350
-
14,174,350
3,140,525
-
3,140,525
10,985,366
-
10,985,366
14,125,891
-
14,125,891
3,140,525
-
-
-
48,459
3,188,984
10,985,366
-
-
-
-
10,985,366
14,125,891
-
-
-
48,459
14,174,350
-
-
3,112,145
-
28,380
3,140,525
-
8,432,116
2,553,250
-
-
10,985,366
-
8,432,116
5,665,395
-
28,380
14,125,891
G1
G1
35
PWR Holdings Limited
and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2016
Section C Operating Assets and Liabilities (continued)
C6 Intangible assets (continued)
Recognition and measurement
Goodwill
Goodwill on acquisition is initially measured at cost, being the excess of the cost of the business
combination over the acquirer’s interest in the net fair value of the identifiable assets, liabilities and
contingent liabilities. At the acquisition date, any goodwill acquired is allocated to each of the cash-
generating units expected to benefit from the combination’s synergies. Goodwill is not amortised.
Trademarks
Separately acquired trademarks are measured initially at cost of acquisition. Trademarks acquired in a
business combination are recognised at fair value at the acquisition date. Fair value is determined using the
relief from royalty method.
The Group’s trademarks are subsequently carried at cost less impairment losses and are not amortised as
they are considered to have an indefinite useful life.
Impairment
Non-financial assets
The carrying amounts of the Group’s non-financial assets, other than inventories and deferred tax assets, are
reviewed at each reporting date to determine whether there is any indication of impairment. If any such
indication exists then the asset’s recoverable amount is estimated. Goodwill and trademarks with an
indefinite life are tested annually for impairment.
An impairment loss is recognised if the carrying amount of an asset or its related cash-generating unit (CGU)
exceeds its estimated recoverable amount. The recoverable amount of an asset or CGU is the greater of its
value in use and its fair value less costs to sell. 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 or CGU. For the purpose of impairment testing, assets
that cannot be tested individually are grouped together into the smallest group of assets that generates cash
inflows from continuing use that largely independent of the cash inflows of other assets or CGU.
Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are
allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the
carrying amounts of other assets in the CGU on a pro rata basis. An impairment loss in respect of goodwill is
not reversed. For other assets, an impairment loss is reversed only to the extent that the asset’s carrying
amount does not exceed the carrying amount that would have been determined, net of depreciation or
amortisation, if no impairment loss had been recognised.
36
PWR Holdings Limited
and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2016
Section C Operating Assets and Liabilities (continued)
C6 Intangible assets (continued)
Impairment
During the period, the Group restructured its internal reporting and completed the allocation of goodwill
recognised in the acquisition of C&R Racing to the group’s CGU’s expected to benefit from the synergies of
the acquisition. Comparative information below has been restated to maintain consistency with the current
year allocation.
For the purpose of impairment testing, goodwill and trademarks are allocated to the Group’s cash generating
units (CGUs) as follows:
Goodwill
Trademarks
PWR Performance
Products
2016
$
1,931,000
8,432,116
10,363,116
2015
$
1,931,000
8,432,116
10,363,116
C&R Racing
2016
$
1,257,984
2,553,250
3,811,234
2015
$
1,209,525
2,553,250
3,762,775
The recoverable amount of each CGU was based on its value in use, determined by discounting the future
cash flows to be generated from the continuing use of each CGU. The carrying amount of each CGU was
determined to be less than its recoverable amount and accordingly, no impairment loss was recognised.
Value in use is calculated based on the present value of the cashflow projections over a five year period and
include a terminal value at the end of year five. The cashflow projections over the five year period are based
on the Group’s budget for 2017 and year on year revenue growth rates over the forecasted periods based on
management’s estimates of the impacts of underlying economic conditions, past performance and other
factors on each CGU’s financial performance. The long term growth rate used in calculating the terminal
value is based on long term inflation estimates for the country and industry in which each CGU operates.
The cash flows are discounted to their present value using a pre-tax discount rate based on a weighted
average cost of capital adjusted for country and industry specific risks associated with each CGU.
Key assumptions used in the estimation of value in use were:
PWR Performance Products
Discount rate – pre tax
Terminal value growth rate
Annual revenue growth rate p.a.
C&R Racing
Discount rate – pre tax
Terminal value growth rate
Annual revenue growth rate p.a.
2016
%
16.5%
2.0%
5.0%
15.5%
2.0%
2.0%
2015
%
N/A
N/A
N/A
15.3%
2.0%
5.0%
No impairment testing was undertaken for the PWR Performance Products CGU at 30 June 2015 given the
trademark was acquired at its fair value on 30 June 2015 and the allocation of goodwill from the acquisition
of C&R Racing was completed during the year ended 30 June 2016.
37
PWR Holdings Limited
and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2016
Section C Operating Assets and Liabilities (continued)
C7 Trade and other payables
Trade and other payables are carried at amortised cost.
Trade payables
Trade payable to related parties (refer note H2)
Other payables
Recognition and measurement
Trade and other payables are carried at amortised cost.
2016
$
940,174
-
1,722,022
2,662,196
2015
$
707,191
89,296
1,053,044
1,849,531
Information about the Group’s exposure to currency and liquidity risk is disclosed in Note H1.
C8 Provisions
Warranties
Carrying amount at beginning of year
Acquisition through business combination
Provisions made during the year
Provisions used during the year
Provisions reversed during the year
Effect of movements in exchange rates
Balance at the end of the year
Recognition and measurement
Provisions
G1
99,688
-
17,693
-
-
1,628
119,009
-
38,545
61,143
-
-
-
99,688
A provision is recognised if, as a result of a past event, the Group has a present legal or constructive
obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be
required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a
pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the
liability. The unwinding of the discount is recognised as finance cost.
Warranties
A provision for warranties is recognised when the underlying products are sold, based on historical warranty
data and a weighting of possible outcomes against their assumed possibilities.
Provision for warranties relates to products sold during the current and prior financial years. The provision is
based on estimates made from historical warranty data. The Group expects to settle the majority of the
liability over the next year.
38
PWR Holdings Limited
and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2016
Section D Employee Benefits
D1 Employee benefits
Current
Annual leave liability
Long service leave liability
Non-current
Long service leave liability
2016
$
744,724
225,083
969,807
2015
$
727,048
141,552
868,600
123,765
115,960
During the year ended 30 June 2016, the Group contributed $711,406 (2015: $480,789) to defined
contribution plans. These contributions are included in employee expenses in the statement of profit or loss
and other comprehensive income.
Recognition and measurement
Short-term employee benefits
Short-term employee benefits are expensed as the related service is provided. A liability is recognised for the
amount expected to be paid if the Group has a present legal or constructive obligation to pay this amount as a
result of past services provided by the employee and the obligation can be estimated reliably.
Long-term employee benefits
The Group’s net obligation in respect of long-term employee benefits is the amount of future benefits that
employees have earned in return for their service in the current and prior periods. That benefit is discounted
to determine its present value. Re-measurements are recognised in profit or loss in the period in which they
arise.
Termination benefits
Termination benefits are expensed at the earlier of when the Group can no longer withdraw the offer of those
benefits and when the Group recognises costs for a restructuring. If benefits are not expected to be settled
wholly within 12 months of the reporting date, then they are discounted.
Defined contribution funds
Obligations for contributions to defined contribution plans are expensed as the related service is provided.
D2 Key management personnel compensation
Key management personnel compensation comprised the following:
Short-term employee benefits
Post-employment benefits
Other long term benefits
1,988,581
130,218
23,410
2,142,209
800,709
55,447
9,838
865,994
39
PWR Holdings Limited
and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2016
Section E Taxation
E1 Income tax expense
Current tax expense
Current period
(over)/under provision in prior period
Deferred tax expense
Origination and reversal of temporary differences
Over provision in prior period
Total income tax expense
Numerical reconciliation between tax expense and
pre-tax accounting profit
Profit for the period
Total income tax expense
Profit excluding income tax
Income tax using the Company’s domestic tax rate of 30%
Research and development expenses
Effect of tax rates in foreign jurisdictions
Other
2016
$
4,585,616
-
4,585,616
(861,093)
-
(861,093)
3,724,523
2015
$
3,619,717
47,986
3,667,703
(55,330)
(3,225)
(58,555)
3,609,148
8,735,466
3,724,523
12,459,989
8,909,175
3,609,148
12,518,323
3,737,997
(50,000)
(43,296)
79,822
3,724,523
3,755,497
(134,541)
(56,570)
44,762
3,609,148
Recognition and measurement
Income tax on the profit or loss for the year comprises current and deferred tax. Current and deferred tax is
recognised in the statement of comprehensive income except to the extent that it relates to items recognised
directly in equity, or in other comprehensive income.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or
substantively enacted at the balance date, and any adjustments to tax payable in respect of previous years.
Current tax payable also includes any tax liability arising from the declaration of dividends.
Deferred tax is provided using the balance sheet liability method, providing for temporary differences
between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used
for taxation purposes. The following temporary differences are not provided for: initial recognition of
goodwill, the initial recognition of assets and liabilities that affect neither accounting nor taxable profit, and
difference relating to investments in subsidiaries to the extent that they will probably not reverse in the
foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or
settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at
the balance sheet date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to
offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on
the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets
on a net basis or their tax assets and liabilities will be realised simultaneously.
40
PWR Holdings Limited
and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2016
Section E Taxation (continued)
E1 Income tax expense (continued)
Recognition and measurement (continued)
In determining the amount of current and deferred tax the Group takes into account the impact of uncertain
tax positions and whether additional taxes and interest may be due. The Group believes that its accruals for
tax liabilities are adequate for all open tax years based on its assessment of many factors, including
interpretations of tax law and prior experience. This assessment relies on estimates and assumptions and
may involve series judgements about future events. New information may become available that causes the
Group to change its judgement regarding the adequacy of existing tax liabilities; such changes to tax
liabilities will impact tax expense in the period that such a determination is made.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be
available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no
longer probable that the related tax benefit will be realised.
Additional income taxes that arise from the distribution of dividends are recognised at the same time as the
liability to pay the related dividend.
E2 Tax assets and liabilities
Current tax assets and liabilities
The current tax liability of $408,648 (2015: asset of $170,388) represents the amount of income tax
receivable/payable in respect of current and prior periods to the relevant tax authority.
Movement in deferred tax balances
2016
Property, plant and
equipment
Employee benefits
Accruals
Inventories
Unrealised foreign
exchange
Tax losses
Capital raising costs
Other items
Net tax assets/(liabilities)
2015
Property, plant and
equipment
Employee benefits
Accruals
Inventories
Unrealised foreign
exchange
Tax losses
Other items
Net tax assets/(liabilities)
Net
balance
at 1 July
$
Recognised
in profit or
loss
$
(86,549)
318,885
150,222
282,566
(70,070)
94,672
-
(33,581)
656,145
(70,598)
167,159
6,506
-
-
-
6,178
109,245
86,549
(19,238)
135,439
44,331
23,284
(94,672)
639,825
45,575
861,093
(15,951)
52,159
92,149
(75,759)
(48,956)
94,672
(39,759)
58,555
-
-
-
-
-
-
335,324
-
335,324
-
-
-
-
(21,114)
-
-
(21,114)
41
Recognised
in equity
$
Acquired in
business
combination
$
Exchange
rate
movements
$
Deferred
tax assets
$
Deferred
tax
liabilities
$
-
285,377
273,329
322,932
-
-
-
-
Net
$
-
285,377
273,329
322,932
(46,786)
-
975,149
11,994
1,821,995
-
-
975,149
11,994
1,868,781
(46,786)
-
-
-
(46,786)
-
-
-
-
-
-
-
-
-
-
(14,270)
(12,332)
(3,965)
-
-
-
-
(30,567)
-
97,231
50,357
349,917
-
-
-
497,505
-
2,336
1,210
8,408
-
-
-
11,954
(86,549)
318,885
150,222
282,566
(70,070)
94,672
(33,581)
656,145
-
318,885
150,222
282,566
-
94,672
-
846,345
(86,549)
-
-
-
(70,070)
-
(33,581)
(190,200)
PWR Holdings Limited
and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2016
Section F Capital Structure and Borrowings
F1 Loans and borrowings
Current
Secured bank loans
Finance lease liability
Non-current
Secured bank loans
Finance lease liability
2016
$
-
396,621
396,621
2015
$
4,726,556
852,888
5,579,444
-
763,641
763,641
17,724,587
69,616
17,794,203
During the year, the Group repaid in full its domestic foreign currency debt facilities of £7.2 million (A$13.8
million) and US$4.9 million (A$6.5 million). The repayment was funded by the proceeds of the initial public
offering undertaken by the Company during the year.
Finance facilities
The terms and conditions of the Group’s finance facilities are as follows:
2016
2015
Facility
Trade finance
Corporate credit card
Domestic foreign
currency
Domestic foreign
currency
Finance lease
Finance lease
Currency
AUD
AUD
GBP
USD
AUD
AUD
Nominal
interest
rate Maturity
Variable
Variable
LIBOR+
2.25%
LIBOR+
2.25%
-
-
2018
2018
5.4%-8.2% 2015-2017
-
-
Facility
limit
$
500,000
50,000
Carrying
amount
$
-
-
Facility
limit
$
234,000
50,000
Carrying
amount
$
-
-
-
- 15,628,213 15,628,213
-
5,000,000
-
5,550,000
-
1,160,262
-
6,822,930
6,822,930
2,500,000
922,504
2,000,000
-
1,160,262 27,235,143 23,373,647
Finance facilities are secured by charges over the Group’s assets. Under the terms of the agreements, the
Company and several of its wholly owned subsidiaries jointly and severally guarantee and indemnify the
lender in relation to the borrower’s obligations.
Finance leases
Finance lease liabilities are payable as follows:
Less than one year
Between one and five years
More than five years
Future minimum
lease payments
2015
2016
$
$
893,901
71,672
-
965,573
440,337
822,956
-
1,263,293
Interest
Present value of
minimum lease payments
2016
$
43,716
59,315
-
103,031
2015
$
2016
$
41,013
2,056
-
396,621
763,641
-
43,069 1,160,262
2015
$
852,888
69,616
-
922,504
The Group leases operating equipment used in the manufacturing process and motor vehicles under finance
leases.
42
PWR Holdings Limited
and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2016
Section F Capital Structure and Borrowings (continued)
F1 Loans and borrowings (continued)
Recognition and measurement
Non-derivative financial liabilities
The Group initially recognises debt securities issued and subordinated liabilities on the date that they are
originated. All other financial liabilities are recognised initially on the trade date at which the Group
becomes a party to the contractual provisions of the instrument.
The Group derecognises a financial liability when its contractual obligations are discharged or cancelled or
expire.
The Group classifies non-derivative financial liabilities into the other financial liabilities category. Such
financial liabilities are recognised initially at fair value less any directly attributable transaction costs.
Subsequent to initial recognition, these financial liabilities are measured at amortised cost using the effective
interest rate method.
Interest-bearing loans and liabilities are recognised initially at fair value less attributable transaction costs.
Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost with any difference
between cost and redemption value being recognised in the income statement over the period of the
borrowings on an effective interest basis.
Derivative financial instruments
The Group may use derivative financial instruments to manage its foreign currency exposures. Embedded
derivatives are separated from the host contract and accounted for separately if certain criteria are met.
Derivatives are recognised initially at fair value, any directly attributable transaction costs are recognised in
profit or loss as they are incurred. Subsequent to initial recognition, derivatives are measured at fair value,
and changes therein are generally recognised in profit or loss.
43
PWR Holdings Limited
and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2016
Section F Capital Structure and Borrowings (continued)
F2 Capital and reserves
Share capital
Ordinary shares
Balance at beginning of year
Issued for business combination (i)
Share subdivision (ii)
Issued for initial public offering (iii)
Transaction costs recognised during the year,
net of tax
Balance at end of year
(i) Business combination
2016
$
No. of
shares
2015
$
No. of
shares
1,000,000
-
82,900,000
16,100,000
2,553,251
-
-
24,150,000
965,000
35,000
-
-
1
2,553,250
-
-
-
100,000,000
(782,425)
25,920,826
-
1,000,000
-
2,553,251
In March 2015, the Company issued 35,000 shares as partial consideration for a business combination,
see note G1.
(ii) Share subdivision
In October 2015, the Company subdivided its shares, with the existing 1,000,000 shares split into
83,900,000 shares.
(iii) Initial public offering
In October 2015, the Company issued a prospectus or the purposes of an initial public offering of 54.5
million shares at an offer price of $1.50 per share, comprising the sell down of 38.4 million existing
shares by existing shareholders and the issue of 16.1 million new shares. As a result:
• The Company listed on the Australian Securities Exchange (ASX code PWH) on 18 November
2015, raising $24.2 million;
• The Group repaid debt of £7.2 million (A$13.8 million) and US$4.9 million (A$6.5 million);
• The Company incurred $3.8 million before tax in costs in relation to the transaction, of which $1.1
million was allocated to equity and $2.7 million was recorded as an expense.
Recognition and measurement
Ordinary shares
Ordinary shares are classified as equity. Incremental costs directly attributable to issue of ordinary shares are
recognised as a deduction from equity, net of any related income tax benefit.
The Company does not have authorised capital or par value in respect of its issued shares. All shares are
fully paid. The holders of ordinary shares are entitled to receive dividends as declared from time to time and
are entitled to one vote per share at meetings of the Company.
Foreign currency translation reserve
The foreign currency translation reserve comprises all foreign currency differences arising from the
translation of the financial statements of foreign operations, as well as the effective portion of any foreign
currency differences arising from hedges of a net investment in a foreign operation.
44
PWR Holdings Limited
and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2016
Section F Capital Structure and Borrowings (continued)
F3 Dividends
Dividends recognised in the current year by the Company are:
2016
Interim 2016 ordinary
Total amount
2015
Final 2015 ordinary (i)
Total amount
Dollars per
share
$
0.0062
Total
amount
$
620,000
620,000
Franked/
unfranked
Franked
Date of
payment
8 April 2016
13.78
13,300,000
13,300,000
Franked
31 March 2015
(i) Dividends per share are stated post the impact of a 965,000 to 1 share split in March 2015
Franked dividends declared or paid during the year were franked at the tax rate of 30 percent.
Dividend franking account
30 percent franking credits available to shareholders of
PWR Holdings Limited
2016
2015
832,804
27,090
The ability to utilise the franking credits is dependent upon the ability to declare dividends.
Recognition and measurement
Dividends are recognised as a liability in the period in which they are declared.
F4 Commitments
Operating leases
Non-cancellable operating leases are payable as follows:
Less than one year
Between one and five years
More than five years
2016
$
1,443,038
5,892,379
4,896,929
12,232,346
2015
$
1,438,180
6,046,582
6,188,293
13,673,055
The Group leases its office and factory facilities under operating leases from related parties (refer note H2) as
well as from non-related entities. During the financial year ended 30 June 2016 $1,404,746 was recognised
as an expense in the income statement in respect of operating leases (2015: $974,480).
Recognition and measurement
Leased assets
Assets held by the Group under leases that transfer to the Group substantially all the risks and rewards of
ownership are classified as finance leases. The leased assets are measured initially at an amount equal to the
lower of its fair value and the present value of the minimum lease payments. Subsequent to initial
recognition, the assets are accounted for in accordance with the accounting policy applicable to that asset.
Assets held under other leases are classified as operating leases and are not recognised in the Group’s
statement of financial position.
45
PWR Holdings Limited
and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2016
Section F Capital Structure and Borrowings (continued)
F4 Commitments (continued)
Operating leases (continued)
Recognition and measurement (continued)
Lease payments
Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term
of the lease. Lease incentives received are recognised as an integral part of the total lease expense, over the
term of the lease.
Minimum lease payments made under finance leases are apportioned between the finance expense and the
reduction of the outstanding liability. The finance expense is allocated to each period during the lease term
so as to produce a constant periodic rate of interest on the remaining balance of the liability.
Other commitments
At 30 June 2016, the Group had agreed to purchase plant and equipment for $764,280 (2015: $723,000).
46
PWR Holdings Limited
and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2016
Section G Group Structure
G1 Business combinations
There were no business combinations during the 2016 financial year.
On 27 March 2015 the Group acquired the business assets and undertakings of C&R Racing Inc. (“C&R
Racing”), a manufacturer of cooling systems, specialised chassis components and drivetrain packages for
professional motorsports in the USA.
The acquisition enabled the Group to expand its operations and pursue opportunities in the USA.
In the period 28 March 2015 to 30 June 2015, C&R Racing contributed revenue of $3.1 million and net loss
after tax of $0.2 million to the Group’s results. If the acquisition had occurred on 1 July 2014, management
estimates that consolidated revenue would have been $41.5 million and consolidated profit for the year
would have been $9.1 million. In determining these amounts, management have assumed that the fair value
adjustments, determined provisionally, that arose on the acquisition date would have been the same if the
acquisition had occurred on 1 July 2014.
The following summarises the consideration transferred and recognised amounts of assets acquired and
liabilities assumed at the acquisition date.
Consideration transferred
Cash
Equity instruments issued (35,000 ordinary shares)
Equity instruments issued
Note
F2
2015
$
6,894,615
2,553,250
9,447,865
The value ascribed to the ordinary shares issued was based on management’s estimation of the fair value of
the shares issued as at the acquisition date. The valuation approach was based on a capitalisation of forecast
earnings adjusted for the size of the shareholding issued and the effect of the non-marketability of the
Company’s shares.
Identifiable assets acquired and liabilities assumed
Cash and cash equivalents
Trade receivables
Inventories
Property, plant and equipment
Deferred tax assets
Trademark
Trade and other payables
Employee entitlements
Finance lease liabilities
2015
$
520
1,210,200
2,780,792
1,194,089
497,505
2,553,250
(1,391,899)
(255,872)
(252,865)
6,335,720
47
PWR Holdings Limited
and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2016
Section G Group Structure (continued)
G1 Business combinations (continued)
Goodwill
Goodwill was recognised as a result of the acquisition as follows:
Total consideration transferred
Fair value of identifiable net assets
Goodwill was allocated to the following CGUs for impairment testing:
PWR Performance Products
C&R Racing
2015
$
9,447,865
6,335,720
3,112,145
1,931,000
1,181,145
3,112,145
During the period, the Group completed the allocation of goodwill recognised in the acquisition of C&R
Racing to the group’s CGU’s expected to benefit from the synergies of the acquisition, refer note C6.
The goodwill is attributable mainly to the skills and technical talent of C&R Racing’s workforce and the
synergies expected to be achieved from integrating the business into the Group’s existing operations. None
of the goodwill is expected to be deductible for tax purposes.
Acquisition-related costs
The Group incurred acquisition-related costs of $100,750 related to external legal fees and due diligence
costs. These costs have been included in “Professional Fees” in other expenses in the Group’s consolidated
statement of profit or loss and other comprehensive income.
Recognition and measurement
Basis of consolidation
The Group accounts for business combinations using the acquisition method when control is transferred to
the Group. The consideration transferred in the acquisition is generally measured at fair value, as are the
identifiable net assets acquired. Any goodwill that arises is tested annually for impairment. Any gain on a
bargain purchase is recognised in profit or loss immediately. Transaction costs are expensed as incurred,
except if related to the issue of debt or equity securities.
Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has
rights to, variable returns from its involvement with the entity and has the ability to affect those returns
through its power over the entity. The financial statements of subsidiaries are included in the consolidated
financial statements from the date that control commences until the date that control ceases.
Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group
transactions, are eliminated in preparing the consolidated financial statements.
48
PWR Holdings Limited
and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2016
Section G Group Structure (continued)
G2 Parent entity information
As at and throughout the financial year ended 30 June 2016, the parent and ultimate parent entity of the
Group was PWR Holdings Limited.
Statement of profit or loss and other comprehensive income
Profit/(Loss) after income tax
Total comprehensive income
Statement of financial position
Total current assets
Total non-current assets
Total assets
Total current liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Retained earnings
Total equity
Contingent liabilities
2016
$
2015
$
617,316
13,283,712
617,316
13,283,712
68,363
25,537,525
25,605,888
52,214
13,811,170
13,863,384
78,038
-
78,038
3,694
11,361,407
11,365,101
25,527,850
2,498,283
25,585,502
(57,652)
25,527,850
2,553,251
(54,968)
2,498,283
The parent entity is party to a cross guarantee and indemnity in relation to the Group’s borrowing
arrangements, refer note F1. The parent had no other contingent liabilities at 30 June 2016.
Capital commitments
The parent entity had no capital commitments for property, plant and equipment at 30 June 2016.
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the Group, as disclosed in the notes.
49
PWR Holdings Limited
and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2016
Section G Group Structure (continued)
G3 Controlled entities
The following entities are subsidiaries of the parent entity, the results of which are included in the
consolidated financial statements of the Group.
PWR Performance Products Pty Ltd
PWR IP Pty Ltd
PWR Europe Limited
C&R Racing Inc
PWR UK Holdings Pty Ltd (i)
PWR USA Holdings Pty Ltd (i)
PWR USA Inc (i)
(i) Deregistered in the 2016 financial year
Country of
incorporation
Australia
Australia
UK
USA
Australia
Australia
USA
Ownership interest
2015
2016
%
%
100
100
100
100
-
-
-
100
100
100
100
100
100
100
50
PWR Holdings Limited
and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2016
Section H Other Information
H1 Financial risk management
The Group has exposure to the following risks arising from financial instruments:
credit risk
liquidity risk
•
•
• market risk
The note presents information about the Group’s exposure to each of the above risks, the Group’s objectives,
policies and processes for measuring and management risk, and the Group’s management of capital.
Risk management framework
The Company’s Board of Directors has overall responsibility for the establishment and oversight of the
Group’s risk management framework.
The Group’s risk management activities are established to identify and analyse the risks faced by the Group,
to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management
activities are reviewed to reflect changes in market conditions and the Group’s operations. The Group aims
to develop a disciplined and constructive control environment in which all employees understand their roles
and obligations.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument
fails to meet its contractual obligations, and arises principally from the Group’s receivables from customers.
The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer.
However, management also considers the factors that may influence the credit risk of its customer base,
including the default risk of the industry and country in which customers operate. Further details of
concentration of revenue are included in Note B1.
Management assesses each new customer for creditworthiness before the Group’s standard payment and
delivery terms and conditions are offered.
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to
credit risk at the end of the reporting period was as follows.
Cash and cash equivalents
Trade and other receivables
Derivative financial assets
Cash and cash equivalents
Note
C1
C2
C4
Carrying amount
2015
2016
$
$
1,005,861
8,796,805
4,314,617
4,089,710
1,000,924
-
6,321,402
12,886,515
The Group held cash and cash equivalents of $8,796,805 at 30 June 2016 (2015: $1,005,861), which
represents its maximum credit exposure on these assets. The cash and cash equivalents are held with bank
and financial institution counterparties, which are rated AA- to AA+, based on independent rating agency
ratings.
51
PWR Holdings Limited
and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2016
Section H Other Information (continued)
H1 Financial risk management (continued)
Credit risk (continued)
Trade and other receivables
The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer.
However, management also considers the demographics of the Group’s customer base, including the default
risk of the country in which customers operate, as these factors may have an influence on credit risk.
Exposure to credit risk
The maximum exposure to credit risk for trade and other receivables at the end of the reporting period by
geographic region was as follows.
Australia
UK
USA
Carrying amount
2015
2016
$
$
2,467,678
1,135,783
847,658
1,620,964
1,332,963
999,281
4,314,617
4,089,710
The ageing of the Group’s trade and other receivables at the end of the reporting date was as follows:
Not past due
Past due 1-30 days
Past due 31-60 days
Past due > 61 days
3,136,387
771,742
157,088
24,493
4,089,710
3,371,168
685,694
102,338
155,417
4,314,617
Management believes that the unimpaired amounts that are past due by more than 30 days are still collectible
in full, based on historic payment behaviour and analysis of customer credit risk.
No impairment losses were recognised in respect of trade and other receivables in the current or prior year.
Revenue from one major customer represents approximately 8.64% (2015: 13.98%) of the Group’s total
revenue and 5.5% (2015: 5.9%) of trade and other receivables.
Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with
its financial liabilities that are settled by delivering cash or another financial asset. The Group’s approach to
managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its
liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or
risking damage to the Group’s reputation.
In addition, the Group maintains the following lines of credit, see note F1:
•
•
•
$500,000 trade finance facility;
$5,000,000 asset finance facility; and
$50,000 corporate credit card facility.
52
PWR Holdings Limited
and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2016
Section H Other Information (continued)
H1 Financial risk management (continued)
Liquidity risk (continued)
The following are the remaining contractual maturities at the end of the reporting period of financial
liabilities, including estimated interest payments.
Note
C7
F1
C7
F1
F1
Contractual cash flows
Carrying
amount
$
2,662,196
1,160,262
3,822,458
Total
$
(2,662,196)
(1,263,293)
(3,925,489)
12 months
$
(2,662,196)
(440,337)
(3,102,533)
1-5 years
$
-
(822,956)
(822,956)
1,849,531
922,504
22,451,143
25,223,178
(1,849,531)
(965,573)
(23,925,297)
(26,740,401)
(1,849,531)
(893,901)
(5,277,339)
(8,020,771)
-
(71,672)
(18,647,958)
(18,719,630)
More than
5 years
$
-
-
-
-
-
-
2016
Trade and other payables
Finance lease liabilities
2015
Trade and other payables
Finance lease liabilities
Secured bank loans
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates, will
affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk
management is to manage and control market risk exposures within acceptable parameters, while optimising
the return.
Currency risk
The Group is exposed to currency risk on sales, purchases and borrowings that are denominated in a
currency other than the respective functional currencies of Group entities, primarily the Australian dollar
(AUD), but also Pound Sterling (GBP) and US dollar (USD). The currencies in which these transactions are
denominated are primarily AUD, GBP and USD.
Currency risks related to the principal amounts of the Group’s GBP and USD bank loans, taken out by
Group entities with an AUD functional currency, were hedged using forward exchange contracts. Interest on
the borrowings is denominated in the currency of the borrowing. All foreign currency bank loans were
repaid during the year.
Exposure to currency risk
A summary of quantitative data about the Group’s exposure to currency risk is as follows:
Trade receivables
Trade payables
Secured bank loans
Net statement of financial
position exposure
Forward exchange contracts
Net exposure
Note AUD
C2
C7
F1
518,034
(336,161)
-
USD
30 June 2016
GBP
914,775 1,410,291
(94,307)
-
(177,850)
-
AUD
116,487
(299,094)
(922,504)
30 June 2015
GBP
900,282
(98,883)
(15,628,213)
USD
2,149,112
(309,214)
(6,822,930)
181,873
-
181,873
736,925 1,315,984
-
736,925 1,315,984
-
(1,105,111)
-
(1,105,111)
(14,826,814)
14,805,676
(21,138)
(4,983,032)
7,182,032
2,199,000
53
PWR Holdings Limited
and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2016
Section H Other Information (continued)
H1 Financial risk management (continued)
Market risk (continued)
Currency risk (continued)
Sensitivity analysis
A strengthening (weakening) of the GBP or USD against the AUD at 30 June would have affected the
measurement of financial instruments denominated in a foreign currency and increased or (decreased) equity
and profit or loss by the amounts shown below. This analysis is based on foreign currency exchange rate
variances that the Group considered to be reasonably possible at the end of the reporting period. The analysis
assumes that all other variables, in particular interest rates, remain constant and ignores any impact of
forecast sales and purchases. The analysis is performed on the same basis for 2015, albeit that the reasonably
possible foreign exchange rate variances were different, as indicated below.
30 June 2016
GBP (10% movement)
USD (10% movement)
30 June 2015
GBP (10% movement)
USD (10% movement)
Interest rate risk
Profit or loss (net of tax)
Strengthening Weakening
Equity (net of tax)
Strengthening Weakening
$
84,909
113,737
$
(93,400)
(125,111)
$
84,909
113,737
$
(93,400)
(125,111)
1,345
(139,936)
(1,480)
153,930
1,345
(139,936)
(1,480)
153,930
At the end of the reporting period the interest rate profile of the Group’s interest-bearing financial
instruments as reported to the management of the Group was as follows.
Fixed rate instruments
Financial assets
Financial liabilities
Variable rate instruments
Financial assets
Financial liabilities
Nominal amount
2016
$
-
(1,160,262)
(1,160,262)
2015
$
-
(922,504)
(922,504)
8,796,805
-
8,796,805
1,005,861
(22,451,143)
(21,445,282)
54
PWR Holdings Limited
and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2016
Section H Other Information (continued)
H1 Financial risk management (continued)
Market risk (continued)
Interest rate risk (continued)
Cash flow sensitivity analysis for variable rate instruments
A change of 100 basis points in interest rates at the end of reporting period would have increased or
(decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other
variables, in particular foreign currency rates, remain constant.
30 June 2016
Variable rate instruments
Cash flow sensitivity (net)
30 June 2015
Variable rate instruments
Cash flow sensitivity (net)
Fair values
Profit or loss (net of tax)
100bp
increase
$
62,499
62,499
100bp
decrease
$
(62,499)
(62,499)
Equity (net of tax)
100bp
100bp
decrease
increase
$
$
(62,499)
62,499
(62,499)
62,499
(150,117)
(150,117)
150,117
150,117
(150,117)
(150,117)
150,117
150,117
The fair values of the Group’s financial assets and liabilities approximate their carrying amounts recognised
in the statement of financial position. The fair value of the derivative financial assets at 30 June 2015 of
$1,000,924 was measured using valuation techniques based on observable market inputs and is considered to
be Level 2 in the fair value hierarchy. The Group has no derivatives at 30 June 2016.
At 30 June 2016, the fair value of financial instruments approximate their carrying value.
Capital management
The Board aims to maintain a strong capital base so as to maintain investor, creditor and market confidence
and to sustain future development of the business. The Board of Directors monitors the capital base as well
as the level of dividends to ordinary shareholders.
There were no changes in the Group’s approach to capital management during the year.
55
PWR Holdings Limited
and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2016
Section H Other Information (continued)
H2 Related party information
Certain key management personnel, or their related parties, hold positions in other entities that result in them
having control, joint control or significant influence over the financial or operating policies of these entities.
A number of these entities transacted with the Group during the year. The terms and conditions of the
transactions with key management personnel and their related parties were no more favourable than those
available, or which might reasonably be expected to be available, on similar transactions to non-key management
personnel related entities on an arm’s length basis.
The aggregate value of transactions and outstanding balances relating to key management personnel and entities
over which they have control, joint control or significant influence were as follows:
Transaction values
during year
Balance outstanding
Receivable/(Payable)
Entity
PWR Property Holdings Pty Ltd (i)
PWR IP Trust (ii)
Redback Radiators Pty Ltd (iii)
Innotherm Pty Ltd (iv)
Transaction
Property rent
Purchase of trademark
Sales of goods
Sales of assets
Administrative services
Purchase of products
Sales of goods
Administrative services
Bayswater Road Radiators Pty Ltd (v) Sales of goods
Paulsen Properties LLC (vi)
JG Parker Properties LLC (vi)
Property rent
Property rent
2015
$
2016
$
2016
$
878,757
746,019
- 8,432,116
15,989
66,745
60,000
91,927
3,537
12,000
69,964
83,574
33,463
14,239
-
-
69,207
640
8,000
44,847
260,462
104,340
2015
$
(75,061)
-
1,895
-
5,500
(14,235)
-
1,100
2,744
-
-
-
-
-
-
-
-
704
-
11,004
-
-
(i) The Group leases its Australian head office and factory facilities from an entity associated with Kees and Paul Weel.
(ii) The Group acquired a trademark from an entity associated with Kees and Paul Weel. The purchase price was based on the fair value of
the trademark determined using the relief from royalty method.
(iii) Redback Radiators Pty Ltd is an entity that was associated with Kees Weel until 18 May 2016, which purchases goods and/or assets from
the Group and sells products to the Group. The Group provided administrative services to Redback Radiators Pty Ltd in the prior year.
(iv) Innotherm Pty Ltd is an entity that was associated with Kees Weel until 16 February 2016, which purchases goods from the Group. The
Group provided administrative services to Innotherm Pty Ltd.
(v) Bayswater Road Radiators Pty Ltd is an entity associated with Kees Weel, which purchases goods from the Group.
(vi) The Group leases its USA office and factory facilities from entities associated with Chris Paulsen, who was KMP until 25 January 2016.
H3 Auditors’ Remuneration
Audit services
Auditors of the Group
KPMG
Audit of financial reports
Accountability GB
Audit of financial reports
Other services
Auditors of the Group
KPMG
Accountability GB
Taxation Services
56
2016
$
2015
$
135,969
129,276
16,273
13,190
-
-
1,633
1,837
PWR Holdings Limited
and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2016
Section H Other Information (continued)
H4 Subsequent events
The Board declared a fully franked final dividend of 3.78 cents per share. The financial effect of the 2016
declared final dividend has not been brought to account in the consolidated financial statements for the year
ended 30 June 2016.
Other than the matter noted above, there has not arisen in the interval since the end of the financial year and
the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of
the Directors of the Group, to affect significantly the operations of the Group, the results of those operations,
or the state of affairs of the Group in future financial years.
H5 New accounting standards
New standards and interpretations not yet adopted
A number of new standards, amendments to standards and interpretations are effective for annual periods
beginning after 1 July 2015, and have not been applied in preparing these consolidated financial statements.
AASB 9 (2014) Financial Instruments
AASB 9 replaces the existing guidance in AASB 139 Financial Instruments: Recognition and Measurement.
AASB 9 includes revised guidance on the classification and measurement of financial instruments including
a new expected credit loss model for calculating impairment on financial assets and the new general hedge
accounting requirements. AASB 9 is effective for annual financial reporting periods beginning on or after 1
January 2018. The Group has not determined the extent of the impact of the new standard and does not
currently plan to adopt it early.
AASB 15 Revenue from Contracts with Customers
AASB 15 establishes principles for reporting the nature, amount, timing and uncertainty of revenue and cash
flows arising from an entity’s contracts with customers. AASB 15 is effective for annual financial reporting
periods beginning on or after 1 January 2018. The Group has not determined the extent of the impact of the
new standard and does not currently plan to adopt it early.
AASB 16 Leases
AASB 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases.
AASB 16 is effective for annual financial reporting periods beginning on or after 1 January 2019. The
Group has not determined the extent of the impact of the new standard and does not currently plan to adopt it
early.
57
PWR Holdings Limited
and its controlled entities
Directors’ declaration
For the year ended 30 June 2016
Directors’ declaration
1.
In the opinion of the directors of PWR Holdings Limited (the “Company”):
(a)
the consolidated financial statements and notes that are set out on pages 21 to 57 and the
Remuneration report in section 16 in the Directors’ report, are 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 2016 and of its
performance for the financial year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001;
(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when
they become due and payable.
2. The directors have been given the declarations required by Section 295A of the Corporations Act 2001
from the Chief Executive Officer and Chief Financial Officer for the financial year ended 30 June 2016.
3. The directors draw attention to Note A2 to the consolidated financial statements, which includes a
statement of compliance with International Financial Reporting Standards.
Signed in accordance with a resolution of directors.
Kees Weel
Managing Director
Bob Thorn
Chairman
Dated at Brisbane this 25th day of August 2016
58
ABCD
Independent auditor’s report to the members of PWR Holdings Limited
Report on the financial report
We have audited the accompanying financial report of PWR Holdings Limited (the company),
which comprises the consolidated statement of financial position as at 30 June 2016, and the
consolidated statement of profit or loss and other comprehensive income, consolidated statement
of changes in equity and consolidated statement of cash flows for the year ended on that date,
notes A to H5 comprising a summary of significant accounting policies and other explanatory
information and the directors’ declaration of the Group comprising the company and the entities
it controlled at the year’s end or from time to time during the financial year.
Directors’ responsibility 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 is free from material misstatement whether due to fraud or
error. In note A2, the directors also state, in accordance with Australian Accounting Standard
AASB 101 Presentation of Financial Statements, that the financial statements of the Group
comply with International Financial Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We
conducted our audit in accordance with Australian Auditing Standards. These Auditing
Standards require that we comply with relevant ethical requirements relating to audit
engagements and plan and perform the audit to obtain reasonable assurance whether the financial
report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial report. The procedures selected depend on the auditor’s judgement,
including the assessment of the risks of material misstatement of the financial report, whether
due to fraud or error. In making those risk assessments, the auditor considers internal control
relevant to the entity’s preparation of the financial report that gives a true and fair view 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 entity’s internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates made by the directors, as well as evaluating the overall presentation of the financial
report.
We performed the procedures to assess whether in all material respects the financial report
presents fairly, in accordance with the Corporations Act 2001 and Australian Accounting
Standards, a true and fair view which is consistent with our understanding of the Group’s
financial position and of its performance.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinion.
59
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Professional Standards Legislation.
ABCD
Independence
In conducting our audit, we have complied with the independence requirements of the
Corporations Act 2001.
Auditor’s opinion
In our opinion:
(a)
the financial report of the Group is in accordance with the Corporations Act 2001,
including:
(i)
(ii)
giving a true and fair view of the Group’s financial position as at 30 June 2016 and
of its performance for the year ended on that date; and
complying with Australian Accounting Standards and the Corporations Regulations
2001; and
(b)
the financial report also complies with International Financial Reporting Standards as
disclosed in note A2.
Report on the Remuneration Report
We have audited the Remuneration Report included in Section 16 of the Directors’ Report for
the year ended 30 June 2016. 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 auditing standards.
Auditor’s opinion
In our opinion, the Remuneration Report of PWR Holdings Limited for the year ended 30 June
2016 complies with Section 300A of the Corporations Act 2001.
KPMG
Jason Adams
Partner
Brisbane
25 August 2016
60
ASX additional information
Shareholdings as at 19 August 2016
Substantial shareholders
The number of shares held by substantial shareholders and their associates are set out below:
Shareholder
PWR Holdings Limited1
KPW Property Holdings Pty Ltd
Number
45,514,000
38,368,500
1. Relevant interest in own Shares as a result of voluntary escrow deeds with shareholders which gives it the power to control the exercise of
the power to dispose of those securities.
Voting rights
Ordinary shares
Refer to Note F1 in the financial statements
Distribution of equity security holders
Category
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Number of
Ordinary
shares
174,488
5,753,047
7,791,227
11,540,143
74,741,095
100,000,000
Number of
Security
Holders
267
1,847
1,041
532
25
3,712
The number of shareholders holding less than a marketable parcel of ordinary shares is 22.
Securities Exchange
The Company is listed on the Australian Securities Exchange. The Home exchange is Sydney.
Other information
PWR Holdings Limited, incorporated and domiciled in Australia, is a publicly listed company limited by
shares.
On-market buy-back
There is no current on-market buy-back.
61
Number of
ordinary shares
held
38,368,500
5,435,844
5,136,428
4,991,405
4,209,000
4,039,944
2,936,500
2,500,599
1,771,477
978,579
938,908
554,474
400,000
360,000
300,000
296,243
270,121
244,173
175,000
164,384
74,071,579
25,928,421
Percentage of
capital held
%
38.37
5.44
5.14
4.99
4.21
4.04
2.94
2.50
1.77
0.98
0.94
0.55
0.40
0.36
0.30
0.30
0.27
0.24
0.18
0.16
74.07
25.93
ASX additional information
Twenty largest shareholders
Rank Name
KPW Property Holdings Pty Ltd
Citicorp Nominees Pty Limited
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Limited
MAMLEC Pty Ltd
National Nominees Limited
Mr Chris Bryan Paulsen
RBC Investor Services Australia Nominees Pty Limited
UBS Nominees Pty Ltd
BNP Paribas Noms Pty Ltd
RBC Investor Services Australia Pty Limited
BNP Paribas Nominees Pty Ltd
RT Developments Pty Ltd
Truebell Capital Pty Ltd
Dr David John Ritchie + Dr Gillian Joan Ritchie
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16 Ms Deslea Mary Sneddon
17
18
19
20
Citicorp Nominees Pty Limited
Bond Street Custodians Limited
Hampton Pty Ltd
AMP Life Limited
Top 20 holders of ordinary fully paid shares
Total remaining holders balance
Offices and officers
Directors
Bob Thorn
Kees Weel
Jeffrey Forbes
Teresa Handicott
Company Secretary
Lisa Dalton
Principal Registered Office
PWR Holdings Limited
103 Lahrs Road
Ormeau, 4208
Queensland
Locations of Share Registry
Computershare Investor Services Pty Ltd
117 Victoria Street
West End, 4101
Queensland
62