PWR Holdings Limited
Contents
2019 Highlights ......................................................................................................1
Chairman’s Year in Review ......................................................................................... 2
Managing Director’s Report ....................................................................................... 3
Directors’ Report ......................................................................................................... 5
Lead Auditors Independence Declaration ............................................................. 21
Consolidated Statement of Profit or Loss
and Other Comprehensive Income ........................................................................ 22
Consolidated Statement of Financial Position ...................................................... 23
Consolidated Statement of Changes in Equity ...................................................... 24
Consolidated Statement of Cash Flows ................................................................. 25
Notes to the Consolidated Financial Statements .................................................. 26
Section A About this Report .................................................................................... 26
Section B Business Performance ........................................................................... 27
Section C Operating Assets and Liabilities ............................................................ 30
Section D Employee Benefits .................................................................................. 34
Section E Taxation .................................................................................................... 35
Section F Capital Structure and Borrowings ......................................................... 36
Section G Group Structure ...................................................................................... 39
Section H Other Information .................................................................................. 43
Section I Significant Accounting Policies ............................................................... 49
Directors’ Declaration ............................................................................................... 55
Independent Auditor’s Report ................................................................................. 56
ASX Additional Information ..................................................................................... 60
Corporate Directory .................................................................................................. 62
ABN 85 105 326 850
2019 Highlights
REVENUE
NPAT
$65.4m
Increased by 26%
$14.2m
Increased by 29%
EARNINGS PER SHARE
DIVIDEND
14.2c
Increased by 29%
11.5cps
Increased by 57%
GLOBAL TEAM
291
Australia, Europe
and USA
PWR Holdings Limited Annual Report 2019
1
Chairman’s Review
Teresa Handicott
I am delighted to
present to you PWR’s
2019 annual report.
The solid performance of the Group has been made
possible by investments made in people and equipment
over the past 18 months. Despite a high capital investment
program, our return on equity has improved to 26.8%, up
from 23.7% in the prior comparative period.
Capitalising on this growth requires solid foundations and
an efficient corporate support structure. The Group has
already started investing in cyber security, IT infrastructure
and systems and processes to ensure ongoing growth is
both executed and managed effectively and efficiently.
The Group delivered a 29% increase in statutory net profit
after tax (NPAT) and a 17% increase in underlying NPAT
to $14.2m which was another record for PWR.
Improved working capital management has resulted in an
EBITDA to cash conversion ratio of 102.9% and a strong
cash balance at 30 June 2019 of over $20.2m with overall
net cash.
Considering these results and improved balance sheet
position, the Board has declared:
–
–
a final dividend of 6.9 cents per share which is an
increase of over 11% on the prior year final dividend
of 6.2 cents per share; and
a special dividend of 3.0 cents per share.
The full year dividend for FY19 increased to 11.5 cents per
share, up from 7.3 cents per share in the prior year, an
increase of 58%.
Managing growth efficiently is a central pillar for the
next two years as management execute the strategic
plan. This includes further investment in leading edge
manufacturing equipment and technologies including an
additive manufacturing machine, a 3D CT scanner and a
vacuum furnace.
Diversification has been a key focus of your Board and
this strategy appears to be coming to fruition with solid
progress being made in categories outside of motorsport.
Deliveries under our OEM contracts have commenced with
deliveries for the Ford GT500 program of 8,000 vehicles
under way. Micro matrix and cold plate technologies
are also showing encouraging sales in the emerging
technologies category.
The successes of the past year has been rewarding
for staff, management and directors and I take this
opportunity to thank all employees at PWR.
On behalf of your Board, I would like to thank all
shareholders for their continued support of PWR.
Teresa Handicott
Chairman
2
Annual Report 2019 PWR Holdings Limited
Managing Director’s Review
Kees Weel
The 2019 financial
year has been another
record year for PWR.
REVENUE
Group revenue for FY19 was up significantly at 26% with
Europe being the stand out performer whose growth
was over 40%. This significant increase was offset by
the reduction in revenue at C&R resulting from the exit
from non-cooling related operations whose revenue was
included in the prior year comparative period.
Favourable foreign currency movements during FY19
accounted for 5% of the revenue growth.
THIRD PARTY REVENUE BY CURRENCY
50,000
45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
39.6%
-7.4%
16.9%
AUD
GBP
USD
FY16 YTD
FY17 YTD
FY18 YTD
FY19 YTD
Conversion of source currency to Australian dollars based on average
exchange rate for each year
C&R is now a fully operational manufacturing facility which
successfully completed a significantly higher volume of
production throughput for the Group with inter segment
sales increasing from $0.38m in FY18 to $4.0m in FY19.
Leveraging this production capability and capacity for the
Group will be a key focus area in FY20 and beyond.
Motorsport has been a major driver of the higher revenue
in FY19 and further growth is expected albeit at a lower
rate of growth than that achieved in FY19. The OEM and
emerging technology segments are expected to see
continued sales increases in FY20.
Growth Rates
FY19
FY18
Change
Motorsports
$43,988
$33,850
Automotive Market
$10,387
$9,530
Emerging
Technologies
OEM
$2,513
$2,023
$6,229
$4,027
Industrial & Other
$2,294
$2,459
$65,411
$51,889
30%
9%
24%
55%
-7%
26%
PWR Holdings Limited Annual Report 2019
3
Managing Directors’ Report
continued
TECHNOLOGY DEVELOPMENTS
The introduction of advanced technologies into our
manufacturing processes will ensure we remain at the
forefront of manufacturing capability and complexity
for both existing customers as well as potential new
customers and industries.
Our new products have been extensively tested and
have recently been commercialised with initial sales
commencing. These new products provide compelling
solutions to new industries and initial sales have been
made to customers in both aerospace and military
segments.
THE FUTURE
Visibility of our growth potential for the next two to three
years is now better than what we have previously had
which allows us to invest with confidence.
PWR now has over 300 team members globally. Staff
numbers are expected to increase further, although at a
lower rate given our focus on productivity and efficiency.
Exchange rates will continue to affect results and this is
inherent in the nature of our business. Our treasury policy
has been further revised and, as at 30 June 2019, GBP
forward cover of £10.65m is in place through to June 2020,
thereby reducing the risk of foreign exchange fluctuations
materially impacting our FY20 financial results.
Staff go beyond what is expected of them on a regular
basis and I thank them for the dedication and commitment
which is so often demonstrated.
Thank you to shareholders, customers and staff for your
continued support and I am looking forward to working
with PWR and C&R staff this year with the objective of
making FY20 another record year on all fronts.
Kees Weel
Managing Director
$2,294
3.5%
(FY18 4.7%)
$6,229
9.5%
(FY18 7.8%)
$2,513
3.8%
(FY18 3.9%)
$10,387
15.9%
(FY18 18.4%)
$43,988
67.2%
(FY18 65.2%)
Motorsports
Automotive Aftermarket
Emerging Technologies
OEM
Industrial & Other
PWR AUSTRALIA AND EUROPE
PWR continues to supply the majority of motorsport
categories with cooling technology and this continues to
be our primary category as noted in the graphical analysis
above. The Australian and European operations have
performed exceptionally well in FY19 in this category.
OEM PROGRAMMES
The previously announced OEM programmes have
commenced production at C&R which has the capacity
to deliver current programs and future OEM growth.
OEM programmes are expected to be an important
source of growth for PWR.
CASHFLOW
Our working capital management has improved at 30 June
2019 which, combined with higher revenues, has resulted
in a cash balance of over $20m at 30 June 2019. Your
directors are conscious of the need to balance returning
funds to shareholders and retaining funds to finance
future growth plans and opportunities. We believe we have
achieved a balanced outcome for both shareholders and
expected future business requirements by declaring
a special dividend of 3.0 cents per share.
Our EBITDA to cash conversion ratio was 102.9% which
is a significant improvement over FY18.
4
Annual Report 2019 PWR Holdings Limited
Directors’ Report
For the year ended 30 June 2019
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 2019 (“Reporting Period”) 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
Teresa Handicott
Independent Chairman, Non-Executive Director
Chairman of Nomination and Remuneration Committee
Member of Audit and Risk Committee
Experience
Teresa is a former corporate lawyer, with over 30 years
experience in mergers and acquisitions, capital markets and
corporate governance. She was a partner of national law firm
Corrs Chambers Westgarth for 22 years, serving as a member
of its National Board for seven years including four years as
National Chairman.
Teresa is a director of ASX listed company Downer EDI
Limited and of Peak Services Holdings Pty Ltd, a subsidiary
of The Local Government Association of Queensland (LGAQ),
which is responsible for the LGAQ’s commercial operations.
She is also a director of Bangarra Dance Theatre Limited.
Teresa is a Divisional Councillor of the Queensland Division
of the Australian Institute of Company Directors (AICD) and
a member of the AICD’s National Law Committee. She is a
Member of Chief Executive Women (CEW), is a Senior Fellow
of Finsia and a Fellow of the AICD.
Teresa was previously a Member of the Queensland
University of Technology Council, 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.
Year of next scheduled re-election
2020
Current directorships of listed entities
Downer EDI Limited
Directorships of listed entities over last 3 years
Nil
PWR Holdings Limited Annual Report 2019
5
Chairman’s Review
Directors’ Report
For the year ended 30 June 2019
1. DIRECTORS (continued)
Director
Jeffrey Forbes
Independent, Non-Executive Director
Chairman of Audit and Risk Committee
Member of Nomination and Remuneration Committee
Experience
Jeff has over 30 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
Community Housing Ltd, and its subsidiaries Horizon Housing
Group and Australian Affordable Housing.
Year of next scheduled re-election
Current directorships of listed entities
2021
Cardno Limited
Directorships of listed entities over last 3 years
CMI Limited
Kees Weel
Managing Director and Chief Executive Officer
Kees has in excess of 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 leads 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.
Year of next scheduled re-election
Not applicable
Current directorships of listed entities
Directorships of listed entities over last 3 years
Nil
Nil
Roland Dane
Independent, Non-Executive Director
Member of Audit and Risk Committee
Member of Nomination and Remuneration Committee
Roland has extensive automotive business experience in
the UK, Asia and Australia. Roland was the founder of, and
remains the principle shareholder in, the Park Lane (UK)
vehicle acquisition business in the UK some 33 years ago.
He is also the Managing Director of the successful Triple Eight
Race Engineering team, winners of 8 out of the last 11 V8
Supercar championships.
Year of next scheduled re-election
Current directorships of listed entities
Directorships of listed entities over last 3 years
2019
Nil
Nil
6
Annual Report 2019 PWR Holdings Limited
Directors’ Report
For the year ended 30 June 2019
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 18 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
Kees Weel
Jeffrey Forbes
Teresa Handicott
Roland Dane
Board Meetings
Audit and
Risk Committee Meetings
Nomination and
Remuneration Committee
Meetings
Attended
Held
Attended
Held
Attended
Held
10
10
10
10
10
10
10
10
–
4
4
4
–
4
4
4
–
3
3
3
–
3
3
3
4. PRINCIPAL ACTIVITIES
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, prototyping, production, testing, validation and sales
of advanced 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.
5. OPERATING AND FINANCIAL REVIEW
Summary of financial results
Statutory Profit and Loss Summary
Revenue
EBITDA1
EBITDA1 margin
Net profit after tax (NPAT)
Operating cash flow
Earnings per share
FY19
A$’000
65,411
21,763
33.3%
14,206
22,397
FY18
A$’000
FY18 to FY19
%
51,889
16,336
31.5%
11,001
16,639
+26.1%
+ 33.2%
+ 29.1%
+ 34.6%
+ 29.1%
14.21 cents
11.00 cents
1 Earnings Before Interest, Tax, Depreciation and Amortisation (“EBITDA”) is a non-IFRS term which has not been subject to audit or review but has been
determined using information presented in the annual financial report.
PWR Holdings Limited Annual Report 2019
7
Directors’ Report
For the year ended 30 June 2019
5. OPERATING AND FINANCIAL REVIEW (continued)
Underlying Profit and Loss Summary
A reconciliation of underlying EBITDA1 to the reported profit before tax in the consolidated statement of profit or loss and
other comprehensive income is as follows:
Profit for the period before tax
Add: loss on sale and write down of assets held for sale
Add: settlement of distribution agreement dispute
Add: net finance costs
Add: depreciation & amortisation
Underlying EBITDA1
FY19
A$’000
FY18
A$’000
19,836
14,688
–
–
(543)
2,470
21,763
856
413
(18)
1,666
17,605
1 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 annual financial report.
The prior year (FY18) statutory profit and loss includes the C&R deferred tax adjustment and several items arising from the
restructuring and repositioning of the operations at C&R in the USA none of which are expected to reoccur. These items are
as follows:
–
–
–
$0.85 million ($0.63m after tax) for the loss on sale and write down in the carrying value of assets held for sale in the
USA the majority of which were disposed of in April 2018.
$0.41 million ($0.3m after tax) for the termination of a distribution agreement
$0.18 million charge to income tax expense for the decrease in the net deferred tax balance in the USA following their
reduction in their federal corporate tax rate from 35% to 21%.
Incorporating the above items, underlying results are as follows:
Underlying Profit and Loss Summary
Underlying revenue
Underlying EBITDA
Underlying EBITDA margin
Underlying net profit after tax
Underlying operating cash flow
Underlying earnings per share
FY19
A$’000
65,411
21,763
33.3%
14,206
22,397
FY18
A$’000
FY18
to FY19
51,889
17,605
33.9%
12,115
16,639
26.1%
23.6%
(1.8%)
17.3%
34.6%
17.3%
14.21 cents
12.11 cents
Revenue
The Group achieved overall revenue growth of 26.1% compared to the prior corresponding period. Organic revenue growth
of 21.5% was supplemented by exchange rate movements of 4.6%.
The above growth was primarily driven out of Europe where sales increased by 40%. Sales in the Australian and American
markets were static although activity at both these manufacturing operations increased significantly to support the
increased sales in Europe.
With reporting in Australian dollars, exchange rate fluctuations have seen the GB pound being 1.7% stronger at 30 June
2019 and the US dollar being 4.7% stronger compared to the prior period. In addition, average rates during the financial
year saw a US dollar being 7.7% stronger and the pound 4.2% stronger.
The net impact of exchange rate movements had a favourable impact on revenue for the year of $2,345,523 (2018: $615,395).
8
Annual Report 2019 PWR Holdings Limited
Directors’ Report
For the year ended 30 June 2019
5. OPERATING AND FINANCIAL REVIEW (continued)
EBITDA
In addition to the positive impact on revenue of foreign exchange rates mentioned above, the higher EBITDA in FY19
compared to the prior corresponding period was mainly due to:
– Overall revenue growth at consistent margins;
– Production and overhead costs increasing consistently with sales volume increases; and
– Administration and overhead costs increasing at a lower rate than sales and EBITDA increases supporting the higher
revenue and margins generated.
Net profit after tax
Net profit after tax of the Group for the year ended 30 June 2019 was $14.21 million. The 2018 NPAT of $11.00 million,
included the recognition of $1.1 million (after tax) of one-off expenses in relation to the changes to Federal corporate tax
rates in the USA, the loss on sale and write down of the C&R non core non cooling business and costs associated with the
termination of a distribution agreement at C&R.
Operating cash flow
The Group continued its strong cash conversion rate with FY19 operating cash flow of $22.4 million, a conversion of 102.9%
from EBITDA. This high EBITDA to cash conversion rate is due primarily to improved working capital management.
Foreign currency
The Group is exposed to movements in foreign exchange rates, with consolidated revenue generated in various currencies
(using average exchange rates through the reporting period) as outlined below:
British pounds (GBP)
US dollars (USD)
Australian dollars (AUD)
FY19
FY18
66.7%
20.7%
12.6%
57.6%
25.4%
17.0%
Balance sheet management
The balance sheet remains strong with cash of $20.2 million (2018: $12.1 million).
Working capital utilisation has improved with the working capital cycle reducing from 122 days at 30 June 2018 to 86 days at
30 June 2019 contributing to a higher year end cash balance.
Capital expenditure for the year was $5.9 million (FY18: $5.2 million) which completed the majority of the capital investment
program announced in April 2018.
Our strong balance sheet can support ongoing expected capital expenditure for potential future growth opportunities
whilst still having access to available financing facilities. With the improved working capital position, expected future capital
investment requirements and the ongoing strong contribution of EBITDA to operating cash flows, the Board has declared a
Special 2019 dividend of 3.00 cents per share in addition to the Final 2019 dividend of 6.90 cents per share.
Review of operating segments
The Group has two operating segments, PWR Performance Products which comprises its Australian and European
operations, and C&R which comprises its USA operations.
The PWR Performance Products segment generated external revenue of $52.50 million (2018: $39.07 million), primarily
arising from increased market penetration in the motorsports sector in the United Kingdom and Europe.
The C&R segment generated external revenue of $12.91 million (2018: $12.81 million). This is a positive development considering
FY18 revenue included $1.29 million of revenue for the now exited non-core, non cooling components of C&R’s business.
Review of principal businesses
During the year ended 30 June 2019, in addition to the items outlined above, the Group:
– Continued to be appointed cooling assembly supplier for additional OEM programs;
– Released our new Micro Matrix and cold plate technology products;
– Completed the majority of its capital program of works providing additional capacity;
– Was awarded a grant from the State Government of over $1m from the Made in Queensland program;
– Commenced prototype supplies into new industries including aerospace and the military.
PWR Holdings Limited Annual Report 2019
9
Directors’ Report
For the year ended 30 June 2019
5. OPERATING AND FINANCIAL REVIEW (continued)
Business risks
PWR recognises the importance of, and is committed to, the identification, monitoring and management of material risks
associated with its activities. The following information sets out the material risks of PWR which are kept under review and
actively managed within PWR’s risk management framework. These are not in any particular order.
Strategic
Operational
Loss of key management personnel
–
– Damage to or dilution of PWR brand
– Consequences of BREXIT
Loss of critical supply inputs or infrastructure
–
Threats from cyber security breaches
–
–
Loss of intellectual property protection
– Reduction in product quality standards
Loss of data security and integrity
–
Financial
– Currency volatility
Significant changes in the state of affairs
Other than as outlined in the operating and financial review, there were no significant changes in the state of affairs 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
Final 2018 ordinary
Interim 2019 ordinary
Total amount
Cents per
share
Total amount
$
Date of payment
6.20
1.60
6,200,000 14 September 2018
1,600,000
7,800,000
5 April 2019
Declared after end of year
The following dividend was declared by the Directors since the end of the financial year:
Final 2019 ordinary dividend
Special 2019 dividend
Total amount
Cents per
share
Total amount
$
Date of payment
6.90
3.00
6,900,000
19 September 2019
3,000,000
19 September 2019
9,900,000
The financial effect of these dividends have not been brought to account in the consolidated financial statements for the
year end 30 June 2019 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.
8. EVENTS SUBSEQUENT TO REPORTING DATE
The Board declared a fully franked final 2019 ordinary dividend of 6.90 cents per share and a special fully franked
2019 dividend of 3.00 cents per share. The financial effect of these dividends have not been brought to account in the
consolidated financial statements for the year ended 30 June 2019.
10
Annual Report 2019 PWR Holdings Limited
Directors’ Report
For the year ended 30 June 2019
8. EVENTS SUBSEQUENT TO REPORTING DATE (continued)
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. ROUNDING OF AMOUNTS
The Company is of a kind referred to in ASIC Corporations Instrument 2016/191 issued by the Australian Securities and
Investment Commission, relating to the “rounding off” of amounts in the Directors’ Report. Amounts in the Directors’ Report
have been rounded off in accordance with that Instrument to the nearest thousand dollars unless otherwise stated.
10. ENVIRONMENTAL REGULATION
The Group is not subject to any significant environmental regulations.
11. 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.
12. 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.
13. NON-AUDIT SERVICES
During the year KPMG, the Group’s auditor, has performed certain other services in addition to the audit and review of the
financial statements.
The Board has considered the non-audit services provided during the year by the auditor and in accordance with written
advice provided by resolution of the audit committee, is satisfied that the provision of those non-audit services during
the year by the auditor is compatible with, and did not compromise, the auditor independence requirements of the
Corporations Act 2001 for the following reasons:
–
–
all non-audit services were subject to the corporate governance procedures adopted by the Group and have been
reviewed by the audit committee to ensure they do not impact the integrity and objectivity of the auditor; and
the non-audit services provided do not undermine the general principles relating to auditor independence as set out
in APES 110 Code of Ethics for Professional Accountants, as they did not involve reviewing or auditing the auditor’s own
work, acting in a management or decision making capacity for the Group, acting as an advocate for the Group or jointly
sharing risks and rewards.
Details of the amounts paid to the auditor of the Group, KPMG, and its network firms for audit and non-audit services
provided during the year are set out below.
In dollars
Services other than audit and review of financial statements:
IT advisory services
Audit and review of financial statements
Total paid to KPMG
2019
39,607
147,500
187,107
14. LEAD AUDITOR’S INDEPENDENCE DECLARATION
The lead auditor’s independence declaration is set out on page 21 and forms part of the directors’ report for the financial
year ended 30 June 2019.
15. 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 2019.
PWR Holdings Limited Annual Report 2019
11
Directors’ Report
For the year ended 30 June 2019
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).
A. 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 that were KMP on 30 June 2019 or who were KMP during the
financial year ended 30 June 2019, their roles and appointment/cessation dates.
Key Management Personnel during the Reporting Period
Name
Role
Non-Executive Directors
Teresa Handicott
Non-Executive Director and Chairman
Jeff Forbes
Roland Dane
Non-Executive Director
Non-Executive Director
Executive Director and Senior Executives
Appointment Date
1 October 2015
19 October 2017
7 August 2015
1 March 2017
Kees Weel
Stuart Smith
Matthew Bryson
Jim Ryder1
Andy Burton1
Managing Director
30 June 2003
Chief Financial Officer
13 November 2017
General Manager, Engineering
11 April 2006
General Manager, USA
10 January 2017
General Manager, Europe
1 July 2017
1 Jim Ryder, General Manager USA and Andy Burton, General Manager Europe became KMP effective 1 January 2018 following an organisational
restructure. Mr Burton was a consultant to PWR Europe Ltd prior to his appointment date.
B. Remuneration Governance
The following shows the Board’s framework 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
12
Annual Report 2019 PWR Holdings Limited
Directors’ Report
For the year ended 30 June 2019
16. REMUNERATION REPORT – AUDITED (continued)
C. Non-Executive Director Remuneration
C1. 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 2016 is $750,000 per annum
(inclusive of superannuation contributions). The Board determines the distribution of Non-Executive Director fees within
the approved remuneration cap.
C2. Remuneration of Non-Executive Directors during Reporting Period
The following table sets out the annual Board and Committee fees (inclusive of superannuation) for Non-Executive Directors
during the reporting period.
Role
Chairman
Non-Executive Director
Audit and Risk Committee Chairman
Nomination and Remuneration Committee Chairman
Timeframe
Director Fees
per annum
Reporting Period
$150,000
Reporting Period
Reporting Period
Reporting Period
$95,000
$20,000
$20,000
D. Executive Director and Senior Executive Remuneration
D1. Remuneration policy for senior executives
The Board’s policy for determining the nature and amount of remuneration for the Managing Director and other 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.
The remuneration framework for senior executives comprises two elements:
1. Fixed remuneration; and
2. “At risk” or performance linked remuneration.
D1.1 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 rate. 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 the role and accountabilities, relevant market benchmarks and attraction, retention and motivation of executives in
the context of the talent market.
The Managing Director and senior executives did not receive increases to their fixed remuneration during the Reporting
Period.
PWR Holdings Limited Annual Report 2019
13
Directors’ Report
For the year ended 30 June 2019
16. REMUNERATION REPORT – AUDITED (continued)
D1.2 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 2019, the operation of the short
term-incentive plan had a NPAT target, established by the Board at the commencement of the Reporting Period, to
trigger its operation, which was achieved by PWR but not at C&R. Individual and corporate key performance measures
(KPI’s), established at the beginning of the reporting period, are then measured against actual performance for the
period. The corporate KPI’s include measures on revenue, profitability, safety and quality all of which are key metrics for
the Group’s collective success. Short-term incentives were awarded to the Managing Director and senior executives of
PWR (but not C&R) as outlined below.
Analysis of cash bonuses included in remuneration
The Board awarded the Managing Director and senior executives the following cash bonuses for the Reporting Period:
Employed at 30 June 2018
Position
Max Potential
Bonus % TFR
Actual Bonus
% TFR
Bonuses
included
in FY19
remuneration
Kees Weel
Stuart Smith
Matthew Bryson
Jim Ryder(i)
Andrew Burton(ii)
Managing Director
Chief Financial Officer
General Manager, Engineering
General Manager, USA
General Manager, Europe
50%
30%
30%
30%
20%
44%
26%
26%
–
$168,630
$72,270
$72,270
–
16%
$40,000
(i) Employed by C&R Racing Inc and remunerated in USD. The AUD equivalent is shown above.
(ii) Employed by PWR Europe and remunerated in GBP. The AUD equivalent is shown above.
Long-term incentive plan
Shareholders approved the implementation of a long-term incentive plan (“LTIP”) at the 2016 Annual General Meeting
(“AGM”).
The LTIP is an equity-based incentive designed to provide participants with the incentive to deliver growth in shareholder
value. Senior Executives receive performance rights (“Rights”) on an annual basis under the Performance Rights Plan,
subject to the approval of the Board. The Managing Director is entitled to receive Performance Rights on an annual basis
under the Performance Rights Plan, subject to approval of shareholders. A grant of Rights was made to Senior Executives in
the 2019 financial year. No Rights were issued to the Managing Director in the current or prior year.
Rights convert to ordinary shares in the Company on a one-for-one basis at the end of the three-year performance period
depending on the extent to which performance hurdles are achieved and service conditions met.
14
Annual Report 2019 PWR Holdings Limited
Directors’ Report
For the year ended 30 June 2019
16. REMUNERATION REPORT – AUDITED (continued)
The performance hurdles are the achievement of Total Shareholder Return (“TSR”) ranking criteria relative to the TSR of
constituents of the S&P/ASX300 (excluding mining and exploration entities) and growth in annual Earnings Per Share (“EPS”)
relative to a target set by the Board. Participants must remain continually employed with the Company until the date of
vesting. Vesting on each tranche is as follows:
TSR Ranking (50%)
EPS Growth (50%)
The percentage of Performance Rights linked to TSR will
be 50%. TSR is calculated by an independent third party,
comparing the TSR percentile rank that the Company holds
relative to all S&P ASX 300 constituent companies (excluding
Energy sector (oil, gas and coal)) for the relevant 3-year
Performance Period.
The percentage of the Performance Rights linked to the EPS
hurdle will be 50%. Vesting is determined by the growth in
EPS from the financial year immediately prior to the start of
the Performance Period (base year) to the end of the third
year of the Performance Period, measured against specific
EPS targets outlined below.
TSR Ranking
Vesting outcome
EPS
Vesting outcome
TSR is 50% or less
Nil vesting
EPS growth is 4% or less
Nil vesting
TSR is more than 50%
but less than 75%
Rateable vesting between
20% and 99%
EPS growth is more than
4% but less than 12%
Rateable vesting between
50% and 99%
TSR is 75% or more
100% vesting
EPS growth is 12% or more
100% vesting
Rights that do not vest at the end of the three-year period lapse, unless the Board in its discretion determines otherwise.
Upon cessation of employment prior to the vesting date, Rights will be forfeited and lapse. Rights do not entitle holders to
dividends that are declared during the vesting period. The Board believes that performance hurdles, in combination, serve
to align the interests of the individual senior executives with the interests of the Company’s shareholders.
E. 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 at risk component (short-term incentive plan and long-term incentive plan) of the remuneration structure intends
to reward achievement against Group and individual performance measures over one year and three-year timeframes,
respectively.
The table below summarises the Group’s performance in recent financial years ending 30 June:
EBITDA (2016 excludes IPO costs)
Net profit after tax (2016 excludes IPO costs)
Total dividends per share
Change in share price
Earnings per share
Note
2019
$’000
$21,763
$14,206
2018
$’000
$16,336
$11,001
2017
$’000
2016
$’000
$14,727
$16,903
$9,280
$8,735
11.50 cents
7.30 cents
5.60 cents
4.40 cents
1.41
0.36
(0.43)
1.28
B5
14.21 cents
11.00 cents
9.28 cents
9.31 cents
PWR Holdings Limited Annual Report 2019
15
Directors’ Report
For the year ended 30 June 2019
16. REMUNERATION REPORT – AUDITED (continued)
F. 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
Stuart Smith
Matthew Bryson
Andrew Burton
Jim Ryder
Position
Notice Period
Managing Director
6 months
Chief Financial Officer
General Manager, Engineering
General Manager, Europe
General Manager, USA
3 months
3 months
3 months
3 months
G. Services from remuneration consultants
The Nomination and Remuneration Committee (NRC) engaged Godfrey & Associates (Godfrey) as remuneration
consultant to the board to review the amount and elements of the key management personnel remuneration and provide
recommendations in relation thereto.
Godfrey was paid $10,000 for the remuneration recommendations in respect of reviewing the amount and elements of
remuneration. Godfrey did not provide any other services.
The engagement of Godfrey by the NRC was based on a documented set of protocols that would be followed by
Godfrey, members of the NRC, and members of the key management personnel for the way in which remuneration
recommendations would be developed by Godfrey and provided to the board.
The protocols included the prohibition of Godfrey providing advice or recommendations to key management personnel
before the advice or before Godfrey’s recommendations were given to members of the NRC and not unless Godfrey had
approval to do so from members of the NRC.
These arrangements were implemented to ensure that Godfrey would be able to carry out its work, including information
capture and the formation of its recommendations, free from undue influence by members of the key management
personnel about whom the recommendations may relate.
The board is satisfied that the remuneration recommendations were made by Godfrey free from undue influence by
members of the key management personnel about whom the recommendations may relate.
The board undertook its own inquiries and review of the processes and procedures followed by Godfrey during the course
of its assignment and is satisfied that its remuneration recommendations were made free from undue influence.
These inquiries included arrangements under which Godfrey was required to provide the board with a summary of the way
in which it carried out its work, details of its interaction with key management personnel in relation to the assignment and
other services and respond to questioning by members of the board after the completion of the assignment.
The results of this review have been implemented in the financial year beginning 1 July 2019 (FY20) and there is no impact
on the reported results for the Reporting Period.
16
Annual Report 2019 PWR Holdings Limited
Directors’ Report
For the year ended 30 June 2019
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18
Annual Report 2019 PWR Holdings Limited
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(
Directors’ Report
For the year ended 30 June 2019
16. REMUNERATION REPORT – AUDITED (continued)
I. 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
Non-executive Directors
Current
Jeff Forbes
Teresa Handicott
Roland Dane
Executive Directors and Senior Executives
Current
Kees Weel
Matthew Bryson
Stuart Smith
Jim Ryder
Andy Burton
Shareholdings of KMP
Opening
Balance
1 July 2018
Shares
acquired
during the
year
Shares
disposed of
during the
year
Closing
Balance
30 June 2019
Other
20,000
25,500
174,159
38,368,500(i)
3,773,308
10,000
–
92,739
–
–
–
–
–
–
–
–
–
–
(39,685)
–
–
–
20,000
25,500
134,474
(8,500,000)
(273,308)
–
–
–
– 29,868,500(i)
–
–
–
–
3,500,000
10,000
–
92,739
(i)
19,868,500 shares held by KPW Property Holdings Pty Ltd as trustee for the KPW Holdings Trust. At 30 June 2019 Kees Weel is a director of the
trustee and beneficiary of the trust.
10,000,000 shares held by Wagon Weel Pty Ltd as trustee for the Wagon Weel Trust. At 30 June 2019 Kees Weel is a director of the trustee and
beneficiary of the trust.
J. Voting and comments made as the Company’s 2018 Annual General Meeting
The Company received more than 75% of “yes” votes on its remuneration report for the 2018 financial year. The Company
did not receive any specific feedback at the 2018 AGM on its remuneration report.
PWR Holdings Limited Annual Report 2019
19
Directors’ Report
For the year ended 30 June 2019
16. REMUNERATION REPORT – AUDITED (continued)
K. Rights over equity instruments granted as remuneration
Details of performance rights over ordinary shares in the Company that were granted as remuneration to members of
KMP during the Reporting Period are included in the KMP remuneration report. There were no alterations to the terms and
conditions of performance rights granted as remuneration to KMP since their grant date.
No performance rights vested during the Reporting Period. Total Performance Rights issued at 30 June 2019 are as follows:
Fair Value per Right
at Grant Date
Description
of Rights
Number
of Rights
granted
TSR
Component
$
EPS
Component
$
Grant
Date
Vesting
Date
Expiry Date
FY17 LTIP
FY17 LTIP
FY18 LTIP
FY19 LTIP
FY18 LTIP
FY19 LTIP
FY18 LTIP
FY19 LTIP
Kees Weel
Managing Director
Matthew Bryson
General Manager,
Engineering
Stuart Smith
Chief Financial Officer
Jim Ryder
General Manager, USA
Total on issue to
KMP
Non KMP
Total on issue at
30 June 2019
64,958
27,839
37,330
31,417
24,886
31,417
25,909
15,101
258,857
114,185
373,042
0.86
0.86
0.87
1.82
0.87
1.82
0.87
1.82
2.37
2.37
2.43
2.68
2.43
2.68
2.43
2.68
21/10/16
6/12/16
24/11/17
22/8/18
24/11/17
22/8/18
24/11/17
22/8/18
1/9/19
1/9/19
1/9/20
1/9/21
1/9/20
1/9/21
1/9/20
1/9/21
1/3/20
1/3/20
1/3/21
1/3/22
1/3/21
1/3/22
1/3/21
1/3/22
L. Key management personnel transactions
KMP, or their related parties, may hold positions in other entities that result in them having control, or joint control, over the
financial or operating policies of those entities.
These entities may transact with the Group. The terms and conditions of the transactions with KMP 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.
From time to time, directors of the Group, or their related entities, may purchase goods from the Group. These purchases
are on the same terms and conditions as those entered into by other Group employees or customers and are trivial or
domestic in nature.
This report is made with a resolution of the directors:
_______________________________
______________________________
Teresa Handicott
Chairman
Brisbane
29th August 2019
Kees Weel
Managing Director
Brisbane
29th August 2019
20
Annual Report 2019 PWR Holdings Limited
Lead Auditors Independence Declaration Under Section
307C of the Corporations Act 2001
For the year ended 30 June 2019
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 2019 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.
PAR_SIG_01
PAR_NAM_01
PAR_POS_01
PAR_DAT_01
PAR_CIT_01
KPMG
Jason Adams
Partner
Brisbane
29 August 2019
22
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 Annual Report 2019
21
Consolidated Statement of Profit or Loss
and Other Comprehensive Income
For the year ended 30 June 2019
Revenue
Other income
Raw materials and consumables used
Employee expenses
Occupancy expenses
Other expenses
Loss on disposal of assets held for sale
Profit before depreciation, net finance costs and income tax
Depreciation and amortisation
Profit before net finance costs and income tax
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
B2
2019
$’000
2018
$’000
65,411
51,889
600
665
B3
B4
E1
(13,928)
(9,934)
(24,942)
(20,746)
(2,084)
(3,294)
–
(1,885)
(2,937)
(716)
21,763
16,336
(2,470)
19,293
(1,666)
14,670
614
(71)
543
45
(27)
18
19,836
(5,630)
14,206
14,688
(3,687)
11,001
(103)
14,103
237
11,238
Basic and diluted earnings per share
B5
14.21 cents
11.00 cents
The accompanying notes are an integral part of these financial statements.
22
Annual Report 2019 PWR Holdings Limited
Consolidated Statement of Financial Position
At 30 June 2019
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other assets
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
Current tax liabilities
Provisions
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
The accompanying notes are an integral part of these financial statements.
Note
2019
$’000
2018
$’000
C1
C2
C3
C4
C5
C6
E2
C7
F1
D1
E2
F1
D1
20,223
4,689
7,194
1,563
12,110
4,054
6,785
1,734
33,669
24,683
15,350
14,237
1,721
31,308
64,977
4,812
119
1,907
1,293
139
8,270
3,523
187
3,710
11,980
52,997
11,573
14,102
2,114
27,789
52,472
3,397
155
1,624
278
115
5,569
328
100
428
5,997
46,475
F2
25,921
25,921
581
26,495
52,997
465
20,089
46,475
PWR Holdings Limited Annual Report 2019
23
Consolidated Statement of Changes in Equity
For the year ended 30 June 2019
Balance at 1 July 2018
Total comprehensive income for the year
Note
Profit for the year
Other comprehensive income
Total comprehensive income
Transactions with owners, recorded directly in equity
Employee share-based payments
Dividends paid
Total transactions with owners
Balance at 30 June 2019
Balance at 1 July 2017
D3
F3
Total comprehensive income for the year
Profit for the year
Other comprehensive income
Total comprehensive income
Transactions with owners, recorded directly in equity
Employee share-based payments
Dividends paid
F3
Total transactions with owners
Balance at 30 June 2018
Foreign
currency
translation
reserve
$’000
Share based
payments
reserve
Retained
earnings
$’000
Total equity
$’000
340
125
20,089
46,475
Share
Capital
$’000
25,921
–
–
–
–
–
–
25,921
25,921
–
–
–
–
–
–
–
(103)
(103)
–
–
–
237
103
–
237
237
–
–
–
–
–
–
219
–
219
344
49
–
–
–
76
–
76
14,206
14,206
–
(103)
14,206
14,103
–
(7,800)
(7,800)
219
(7,800)
(7,581)
26,495
52,997
14,888
40,961
11,001
11,001
–
237
11,001
11,238
–
(5,800)
(5,800)
76
(5,800)
(5,724)
25,921
340
125
20,089
46,475
The accompanying notes are an integral part of these financial statements.
24
Annual Report 2019 PWR Holdings Limited
Consolidated Statement of Cash Flows
For the year ended 30 June 2019
Cash flows from operating activities
Cash receipts from customers
Cash paid to suppliers and employees
Cash generated from operating activities
Interest paid
Income tax refund – prior year over payment
Income tax paid
Net cash from operating activities
Cash flows from investing activities
Government grant income received
Interest received
Proceeds from sale of property, plant and equipment
Payments for property, plant and equipment
Net cash used in investing activities
Cash flows from financing activities
Dividends paid
Proceeds from borrowings
Payment of finance lease liabilities
Net cash used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at 1 July
Effect of exchange rate fluctuations on cash held
Note
2019
$’000
2018
$’000
65,295
51,243
(42,898)
(34,604)
22,397
16,639
C1
(71)
–
(3,675)
18,651
–
49
11
(5,985)
(5,925)
(7,800)
3,503
(257)
(4,554)
8,172
12,110
(59)
(27)
1,258
(3,858)
14,012
65
33
225
(5,199)
(4,876)
(5,800)
–
(281)
(6,081)
3,055
9,064
(9)
Cash and cash equivalents at 30 June
C1
20,223
12,110
The accompanying notes are an integral part of these financial statements.
PWR Holdings Limited Annual Report 2019
25
Notes to the Consolidated Financial Statements
For the year ended 30 June 2019
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 2019 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,
testing, production, validation and sale of customised
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.
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 Company is of a kind referred to in ASIC Corporations
(Rounding in Financial/Directors’ Reports) Instrument
2016/191 and in accordance with that instrument,
amounts in the Financial Report and Directors’ Report
have been rounded off to the nearest thousand dollars,
unless otherwise stated.
The financial statements were approved by the Board of
Directors on 29 August 2019.
(b) Functional and presentation currency
These consolidated financial statements are presented
in Australian dollars, which is the Company’s functional
currency.
(c) 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.
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
Notes C3 (Inventories) and C6 (Intangible assets).
A3 Significant accounting policies
Apart from the first time adoption of AASB 9 and AASB 15
as described in Note H5, the accounting policies set out
in Section I to the consolidated financial statements have
been applied consistently to all periods presented in these
consolidated financial statements.
26
Annual Report 2019 PWR Holdings Limited
Notes to the Consolidated Financial Statements
For the year ended 30 June 2019
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, with operating segments based on the Group’s operating divisions.
Intersegment pricing is determined based on cost plus a margin.
PWR Performance Products
2019
$’000
2018
$’000
C&R
2019
$’000
2018
$’000
Total
2019
$’000
Revenue from sale of
manufactured products
Revenue from services
External revenues
Inter-segment revenues
Segment revenue
Operating EBITDA1
Significant Items (refer to Note B3)
Depreciation and amortisation
Segment profit/(loss) before
interest and tax
Capital expenditure
52,070
38,678
12,691
12,679
64,761
433
52,503
1,676
54,179
20,399
–
(1,433)
18,966
5,038
396
39,074
2,856
41,930
17,856
–
(993)
16,863
1,841
217
12,908
3,994
16,902
1,487
–
(1,037)
450
941
136
12,815
379
13,194
(630)
(1,269)
(673)
(2,572)
2,965
650
65,411
5,670
71,081
21,886
–
(2,470)
19,416
5,979
1 Operating EBITDA is the segment’s profit from operations before interest, taxation, depreciation and amortisation.
2018
$’000
51,357
532
51,889
3,235
55,124
17,226
(1,269)
(1,666)
14,291
4,806
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)/loss
Net finance income/(costs)
Consolidated profit before tax
2019
$’000
2018
$’000
71,081
(5,670)
65,411
55,124
(3,235)
51,889
19,416
14,291
(123)
543
379
18
19,836
14,688
PWR Holdings Limited Annual Report 2019
27
Notes to the Consolidated Financial Statements
For the year ended 30 June 2019
SECTION B BUSINESS PERFORMANCE (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. Three customers in the PWR Performance segment comprise 27% of
Group’s revenue for the year ended 30 June 2019.
The information below is an analysis of the Group’s revenue on the basis of the location of the Group’s customers.
Australia
USA
UK
Italy
Germany
Other Countries
(i) Excluding deferred tax assets.
B2 Revenue and other income
Revenue from contracts with customers
Sales of goods
Rendering of services
Other income
R&D tax incentive
Government grant
B3 Expenses
2019
2018
Revenue
$’000
Non-current
assets(i)
$’000
Revenue
$’000
Non-current
assets(i)
$’000
6,836
13,268
22,703
8,827
7,044
6,733
20,511
9,294
11
–
–
–
6,286
14,622
16,081
7,091
3,217
4,592
16,700
8,959
16
–
–
–
65,411
29,816
51,889
25,675
2019
$’000
2018
$’000
64,761
650
65,411
600
–
600
51,309
580
51,889
600
65
665
Significant items
During the prior year, the Group disposed of non-core, non cooling components of the business at C&R in the USA. This
disposal and write down comprised:
Loss on sale of assets disposed
Write down of other assets
Impact on profit before tax
Income tax benefit
Impact on profit after tax
$’000
$’000
–
–
–
–
–
716
140
856
(223)
633
In addition, during the prior year, C&R settled a dispute with a distributor resulting in an expense of $412,693 being
recognised in 2018 profit before tax ($305,393 after tax).
28
Annual Report 2019 PWR Holdings Limited
Notes to the Consolidated Financial Statements
For the year ended 30 June 2019
SECTION B BUSINESS PERFORMANCE (continued)
Research and Development
The Group recognised $8,985,006 (2018: $8,127,787) as an expense in relation to its research and development activities.
This is included in employee expenses, raw materials, consumables and overheads in the income statement.
B4 Finance income and finance costs
Interest income
Net foreign exchange gain
Finance income
Interest expense
Finance costs
Net finance income/(costs)
B5 Earnings per share
Basic and diluted earnings per share
2019
$’000
2018
$’000
49
565
614
(71)
(71)
543
33
12
45
(27)
(27)
18
2019
2018
14.21 cents
11.00 cents
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 $14,205,702 (2018: $11,001,600).
Weighted average number of ordinary shares
Issued ordinary shares at 1 July
Weighted number of ordinary shares at 30 June
2019
No.
2018
No.
100,000,000 100,000,000
100,000,000 100,000,000
The impact of the performance rights issued by the Group during the year and in prior years was not material to the
calculation of the Group’s diluted earnings per share.
PWR Holdings Limited Annual Report 2019
29
Notes to the Consolidated Financial Statements
For the year ended 30 June 2019
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
Reconciliation of cash flows from operating activities
Cash flows from operating activities
Profit for the year
Adjustments for:
Depreciation and amortisation
Research & development tax credit
Unrealised foreign exchange loss/(gain)
Share based remuneration
Loss on disposal of assets held for sale
(Profit)/Loss on sale of property, plant and equipment
Changes in:
Trade and other receivables
Inventories
Trade and other payables
Other assets
Employee benefits
Other
Tax balances
Net cash from operating activities
C2 Trade and other receivables
Trade receivables
Trade receivables due from related parties (refer Note H2)
C3 Inventories
Raw materials
Work in progress
Finished goods
Consumables
Allowance for inventory obsolescence
2019
$’000
2018
$’000
20,223
12,107
–
3
20,223
12,110
14,206
11,001
2,470
1,666
600
(342)
(219)
–
(4)
(635)
(406)
920
297
370
(14)
1,408
18,651
4,688
1
4,689
2,721
683
4,283
320
(813)
7,194
601
(12)
(76)
716
(11)
(609)
495
476
(1,233)
215
76
707
14,012
4,051
3
4,054
3,330
812
3,658
42
(1,057)
6,785
The cost of inventories sold and recognised as an expense during the year end 30 June 2019 was $31,147,358
(2018: $24,021,000).
30
Annual Report 2019 PWR Holdings Limited
Notes to the Consolidated Financial Statements
For the year ended 30 June 2019
SECTION C OPERATING ASSETS AND LIABILITIES (continued)
C4 Other assets
Prepayments
Deposits
Other assets
C5 Property, plant and equipment
Plant and equipment – at cost
Accumulated depreciation
Motor vehicles – at cost
Accumulated depreciation
Under construction
2019
$’000
1,252
311
–
1,563
24,844
(10,125)
14,719
349
(292)
57
574
2018
$’000
1,241
444
49
1,734
18,640
(7,656)
10,984
375
(286)
89
500
15,350
11,573
Reconciliations
Reconciliations of the carrying amounts for each class of property, plant and equipment are set out below:
2019
Cost
Opening balance
Additions
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
$’000
Motor
vehicles
$’000
Under
construction
$’000
Total
$’000
19,515
5,979
–
(85)
358
500
5,951
(5,886)
–
9
574
25,767
–
–
–
–
–
574
7,942
(79)
2,472
82
10,417
15,350
18,640
28
5,886
(54)
344
24,844
7,656
(54)
2,446
77
10,125
14,719
375
–
–
(31)
5
349
286
(25)
26
5
292
57
PWR Holdings Limited Annual Report 2019
31
Notes to the Consolidated Financial Statements
For the year ended 30 June 2019
SECTION C OPERATING ASSETS AND LIABILITIES (continued)
Plant and
equipment
$’000
Motor
vehicles
$’000
Under
construction
$’000
2018
Cost
Opening balance
Additions
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
Total
$’000
14,114
4,806
–
(99)
694
2,085
–
(1,585)
–
–
500
19,515
–
–
–
–
–
500
6,224
(37)
1,666
89
7,942
11,573
11,651
4,769
1,585
(55)
690
18,640
5,981
(33)
1,623
85
7,656
10,984
378
37
–
(44)
4
375
243
(4)
43
4
286
89
The plant and equipment balance as at 30 June 2019 includes assets with carrying amounts of $226,635 under finance lease
(2018: $483,516). During the year, the Group did not acquire any assets under finance lease (2018: NIL).
C6 Intangible assets
2019
Cost
Accumulated amortisation
2018
Cost
Accumulated amortisation
Reconciliations
2019
Carrying amount at beginning of year
Amortisation
Effect of movements in exchange rates
Balance at the end of the year
2018
Carrying amount at beginning of year
Amortisation
Effect of movements in exchange rates
Balance at the end of the year
32
Annual Report 2019 PWR Holdings Limited
Note
Goodwill
$’000
Trademarks
$’000
Total
$’000
3,252
10,985
14,237
–
–
–
3,252
10,985
14,237
3,117
10,985
14,102
–
–
–
3,117
10,985
14,102
3,117
10,985
14,102
–
135
–
–
–
135
3,252
10,985
14,237
3,144
10,985
14,129
–
(27)
–
–
–
(27)
3,117
10,985
14,102
Notes to the Consolidated Financial Statements
For the year ended 30 June 2019
SECTION C OPERATING ASSETS AND LIABILITIES (continued)
Impairment
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
C&R
2019
$’000
1,904
8,432
2018
$’000
1,904
8,432
10,336
10,336
2019
$’000
1,348
2,553
3,901
2018
$’000
1,213
2,553
3,766
For the purpose of impairment testing, 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 cash flow projections over a five year period and include a
terminal value at the end of year five. The cash flow projections over the five year period are based on the Group’s budget
for 2020 and growth over the forecast periods based on the Group’s business plans and management’s assessment of the
impacts of underlying economic conditions, past performance and other factors on each CGU’s financial performance. For
the C&R CGU, the cashflow projections include management’s estimate of the expected growth from C&R’s involvement in
OEM programs as a cooling assembly supplier as well as growth into the automotive aftermarket. 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
Revenue – compound annual growth rate
Average EBITDA margin
C&R
Discount rate – pre tax
Terminal value growth rate
Revenue – compound annual growth rate
Average EBITDA margin
C7 Trade and other payables
Trade and other payables are carried at amortised cost.
Trade payables
Other payables
2019
%
2018
%
14.6%
2.0%
2.0%
35.7%
13.5%
2.0%
5.5%
15.1%
2019
$’000
2,383
2,429
4,812
16.4%
2.0%
2.0%
35.7%
13.7%
2.0%
5.6%
17.3%
2018
$’000
1,324
2,073
3,397
PWR Holdings Limited Annual Report 2019
33
Notes to the Consolidated Financial Statements
For the year ended 30 June 2019
SECTION D EMPLOYEE BENEFITS
D1 Employee benefits
Current
Annual leave liability
Long service leave liability
Non-current
Long service leave liability
2019
$’000
2018
$’000
1,487
420
1,907
1,269
355
1,624
187
100
During the year ended 30 June 2019, the Group contributed $1,151,394 (2018: $932,853) to defined contribution plans.
These contributions are included in employee expenses in the statement of profit or loss and other comprehensive income.
D2 Key management personnel compensation
Key management personnel compensation comprised the following:
Short-term employee benefits
Termination benefits
Post-employment benefits
Share based payments
Other long term benefits
2019
$’000
2,067
–
132
155
9
2018
$’000
1,955
129
125
84
9
2,363
2,302
D3 Share based payments
During the year the Board granted performance rights to employees under the terms of the Performance Rights Plan (the
Plan) approved at the Company’s Annual General Meeting on 21 October 2016.
Under the Plan, the Board may issue employees conditional performance rights for no consideration. Subject to the
achievement of vesting conditions, the performance rights entitle the employee to receive ordinary shares in the Company
at no cost.
Vesting of the performance rights approved during the year is subject to meeting a 3 year service condition and
achievement of performance hurdles (based on either an EPS growth target or total shareholder return (TSR) ranking). The
performance period for the rights issued is from 1 July 2018 to 30 June 2021.
162,790 (2018: 158,364) performance rights were issued to key management personnel during the year with 50% subject
to the EPS performance hurdle and 50% subject to the TSR performance hurdle. At 30 June 2019, all of these performance
rights remain on issue.
In accordance with the Group’s accounting policy, the grant date fair values of the rights issued will be recognised as an
expense over the vesting period. An expense of $219,000 (2018: $75,518) was recognised during the year and included in
“employee expenses” in the statement of profit or loss and other comprehensive income.
34
Annual Report 2019 PWR Holdings Limited
Notes to the Consolidated Financial Statements
For the year ended 30 June 2019
SECTION D EMPLOYEE BENEFITS (continued)
Measurement of fair values
The fair value of the TSR component of the performance rights has been measured using a Monte Carlo simulation. The fair
value of the EPS component of the performance rights has been measured using the Black Scholes formula.
The inputs used in the measurement of the fair values at grant date of the equity-settled share-based payments were as
follows:
Fair value at grant date
Share price at grant date
Exercise price
Expected volatility
Risk free rate
Expected life
Expected dividends
2019
2018
TSR
component
EPS
component
TSR
component
EPS
component
$1.82
$2.90
Nil
34%
2.03%
3 years
2.66%
$2.68
$2.90
N/A
N/A
N/A
$0.87
$2.20
Nil
40%
1.90%
$2.43
$2.20
N/A
N/A
N/A
3 years
2.77 years
2.77 years
2.66%
2.20%
2.20%
Expected volatility has been based on an evaluation of the historical volatility of the Company’s share price prior to the grant
date.
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
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%
Tax effect of R&D benefit
Effect of tax rates in foreign jurisdictions
Other
2019
$’000
2018
$’000
5,238
(1)
5,237
393
5,630
3,923
(145)
3,778
(91)
3,687
14,206
5,630
19,836
11,001
3,687
14,688
5,951
4,406
(180)
(212)
71
(180)
(216)
(323)
5,630
3,687
PWR Holdings Limited Annual Report 2019
35
Notes to the Consolidated Financial Statements
For the year ended 30 June 2019
SECTION E TAXATION (continued)
E2 Tax assets and liabilities
Current tax assets and liabilities
The current tax liability of $1,293,174 (2018: $278,242) represents the amount of income tax payable in respect of current
and prior periods to the relevant tax authority.
Movement in deferred tax balances
Net balance
at 1 July
$’000
Recognised in
profit or loss
$’000
Recognised
in equity
$’000
2019
Property, plant and equipment
Employee benefits
Accruals
Inventories
Unrealised foreign exchange
Tax losses
Capital raising costs
Other items
Net tax assets/(liabilities)
2018
Property, plant and equipment
Employee benefits
Accruals
Inventories
Unrealised foreign exchange
Tax losses
Capital raising costs
Other items
(312)
595
24
418
(211)
1,200
454
(54)
2,114
(450)
662
63
770
–
362
681
(65)
Net tax assets/(liabilities)
2,084
(748)
86
(24)
(14)
(273)
998
(227)
(191)
(393)
138
(67)
(39)
(352)
(211)
838
(227)
(50)
30
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Net
$’000
(1,060)
681
–
404
(484)
2,198
227
(245)
1,721
(312)
595
24
418
(211)
1,200
454
(54)
2,114
Deferred
tax assets
$’000
Deferred
tax liabilities
$’000
–
681
–
555
1
2,198
227
182
3,844
–
595
24
499
–
1,200
454
177
2,949
(1,060)
–
–
(151)
(485)
–
–
(427)
(2,123)
(312)
–
–
(81)
(211)
–
–
(231)
(835)
The Group’s tax losses recognised as a deferred tax asset arise from its US operations. Management considers that based
on the Group’s plans for this business, it is probable that future taxable profits will be generated against which the tax
losses can be recovered.
SECTION F CAPITAL STRUCTURE AND BORROWINGS
F1 Loans and borrowings
Current
Finance lease liability
Non-current
Finance lease liability
Foreign currency loan
2019
$’000
2018
$’000
119
155
108
3,415
3,523
328
–
328
The foreign currency loan is denominated in GBP and interest is based on GBP 3 month LIBOR rates plus a margin.
36
Annual Report 2019 PWR Holdings Limited
Notes to the Consolidated Financial Statements
For the year ended 30 June 2019
SECTION F CAPITAL STRUCTURE AND BORROWINGS (continued)
Reconciliation of movements in liabilities to cash flows arising from financing activities
Long term borrowings
Lease liabilities
Total liabilities from financing facilities
2018
Carrying
Value
$’000
–
483
483
Non cash
changes
Foreign
exchange
movements
$’000
(88)
1
(87)
Cash
flows
$’000
3,503
(257)
3,246
2019
Carrying
Value
$’000
3,415
227
3,642
Finance facilities
The terms and conditions of the Group’s finance facilities at 30 June 2019 were as follows:
Facility
Trade finance
Corporate credit card
Finance lease
Multi currency facility
Foreign currency
advance facility
Currency
Nominal
interest rate
Maturity
2019
Facility
limit
$’000
Carrying
amount
$’000
2018
Facility
limit
$’000
Carrying
amount
$’000
AUD
AUD
USD
AUD
AUD
USD
Variable
Variable
Variable
5.4%–8.2%
Varies
2023
2023
–
2023
2023
750
100
100
7,500
10,000
–
–
–
227
3,415
500
100
100
5,000
–
N/A
N/A
–
–
4,000
–
2
38
483
–
–
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
Future minimum lease
payments
2019
$’000
2018
$’000
Interest
2019
$’000
Present value of minimum
lease payments
2018
$’000
2019
$’000
2018
$’000
131
110
241
172
344
516
12
2
14
17
16
33
119
108
227
155
328
483
The Group leases operating equipment used in the manufacturing process under finance leases.
PWR Holdings Limited Annual Report 2019
37
Notes to the Consolidated Financial Statements
For the year ended 30 June 2019
SECTION F CAPITAL STRUCTURE AND BORROWINGS (continued)
F2 Capital and reserves
Share capital
Ordinary shares
Balance at beginning of year
Balance at end of year
2019
No. of
shares
$’000
2018
No. of
shares
100,000,000
25,921 100,000,000
100,000,000
25,921 100,000,000
$’000
25,921
25,921
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.
F3 Dividends
Dividends recognised by the Company are:
2019
Interim 2019 ordinary
Final 2018 ordinary
Total amount
2018
Interim 2018 ordinary
Final 2017 ordinary
Total amount
Cents
per share
$
Total
amount
$
Franked/
unfranked
Date of
payment
1.60
1,600,000
Franked
5 April 2019
6.20
6,200,000
Franked
7,800,000
14 September
2018
1.10
4.70
1,100,000
Franked
6 April 2018
4,700,000
Franked 18 September 2017
5,800,000
Franked dividends declared or paid during the year were fully franked at the tax rate of 30 percent.
Dividend franking account
30 percent franking credits available to shareholders of PWR Holdings Limited
1,483,687
1,132,457
2019
2018
At 30 June 2019, the franking credits of the Group were 5,172,544 (2018: 5,280,419).
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.
38
Annual Report 2019 PWR Holdings Limited
Notes to the Consolidated Financial Statements
For the year ended 30 June 2019
SECTION F CAPITAL STRUCTURE AND BORROWINGS (continued)
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
2019
$’000
2018
$’000
2,038
7,609
2,124
1,805
7,002
3,383
11,771
12,190
The Group leases its office and factory facilities under operating leases. During the financial year ended 30 June 2019 an amount
of $2,084,474 was recognised as an expense in the income statement in respect of operating leases (2018: $1,885,328).
Other commitments
At 30 June 2019, the Group had agreed to purchase plant and equipment for $2.0 million (2018: $2.5 million) within
12 months.
SECTION G GROUP STRUCTURE
G1 Parent entity information
As at and throughout the financial year ended 30 June 2019, 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
Reserves
Retained earnings
Total equity
2019
$’000
11,244
11,244
23
31,137
31,160
163
–
163
2018
$’000
5,445
5,445
21
27,678
27,699
203
–
203
30,997
27,496
25,921
25,921
344
4,732
124
1,451
30,997
27,496
PWR Holdings Limited Annual Report 2019
39
Notes to the Consolidated Financial Statements
For the year ended 30 June 2019
SECTION G GROUP STRUCTURE (continued)
Contingent liabilities
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 2019.
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the Group, as disclosed in the notes.
G2 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 EU B.V.
Country of
incorporation
Australia
Australia
UK
USA
Netherlands
Ownership interest
2019
%
100
100
100
100
100
2018
%
100
100
100
100
–
G3 Deed of cross guarantee
Pursuant to ASIC Corporations (wholly-owned companies) Instrument 2016/785, the wholly owned subsidiaries listed below
are relieved from the Corporations Act 2001 requirements for the preparation, audit and lodgement of financial reports, and
Directors’ reports.
It is a condition of the Instrument that the Company and each of the subsidiaries enter into a Deed of Cross Guarantee. The
effect of the Deed is that the Company guarantees to each creditor, payment in full of any debt in the event of winding up of
any of the subsidiaries under certain provisions of the Corporations Act 2001. If a winding up occurs under other provisions
of the Act, the Company will only be liable in the event that after six months any creditor has not been paid in full. The
subsidiaries have also given similar guarantees in the event that the Company is wound up.
The subsidiaries subject to the Deed are:
PWR Performance Products Pty Ltd
PWR IP Pty Ltd
Both subsidiaries became a party to the Deed on 18 May 2017.
40
Annual Report 2019 PWR Holdings Limited
Notes to the Consolidated Financial Statements
For the year ended 30 June 2019
SECTION G GROUP STRUCTURE (continued)
A consolidated statement of comprehensive income and consolidated statement of financial position, comprising the
Company and controlled entities which are a party to the Deed, after eliminating all transactions between parties to the
Deed of Cross Guarantee, for the year ended 30 June 2019 is set out below.
Statement of profit or loss and other comprehensive income
Revenue
Other income
Raw materials and consumables used
Employee expenses
Occupancy expenses
Other expenses
Profit before depreciation, net finance costs and income tax
Depreciation and amortisation
Profit before net finance costs and income tax
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
Total comprehensive income for the year
2019
$’000
2018
$’000
46,659
36,955
600
876
(7,012)
(5,997)
(17,574)
(14,280)
(1,459)
(2,153)
19,061
(1,423)
17,638
2,955
(1,536)
1,419
19,057
(5,609)
13,448
13,448
(1,212)
(1,529)
14,813
(980)
13,833
810
(29)
781
14,614
(3,902)
10,712
10,712
PWR Holdings Limited Annual Report 2019
41
Notes to the Consolidated Financial Statements
For the year ended 30 June 2019
SECTION G GROUP STRUCTURE (continued)
Statement of financial position
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other assets
Total current assets
Non-current assets
Property, plant and equipment
Intangible assets
Related party loans
Investments in subsidiaries
Deferred tax assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Loans and borrowings
Employee benefits
Tax liabilities
Provisions
Total current liabilities
Non-current liabilities
Loans and borrowings
Deferred tax liabilities
Employee benefits
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained earnings
Total equity
42
Annual Report 2019 PWR Holdings Limited
2019
$’000
2018
$’000
14,571
11,191
4,120
–
10,380
5,812
4,363
1,195
29,882
21,750
9,526
10,985
9,471
1,944
1,362
33,288
63,170
1,876
119
1,790
800
99
4,684
3,523
1,511
187
5,221
9,905
53,265
5,917
10,985
7,687
1,944
1,425
27,958
49,708
1,942
155
1,549
467
81
4,194
328
–
100
428
4,622
45,086
25,921
25,921
382
26,962
53,265
394
18,771
45,086
Notes to the Consolidated Financial Statements
For the year ended 30 June 2019
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 managing 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.
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
Note
C1
C2
Carrying amount
2019
$’000
20,223
4,689
24,912
2018
$’000
12,110
4,054
16,164
Cash and cash equivalents
The Group held cash and cash equivalents of $20,223,016 at 30 June 2019 (2018: $12,110,095), 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 A to AA-, based on independent rating agency ratings.
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.
PWR Holdings Limited Annual Report 2019
43
Notes to the Consolidated Financial Statements
For the year ended 30 June 2019
SECTION H OTHER INFORMATION (continued)
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:
Carrying amount
Australia
UK
USA
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
Provision for impairment
2019
$’000
647
2,574
1,468
4,689
3,487
1,148
34
20
2018
$’000
1,084
2,091
879
4,054
3,228
801
22
3
4,689
4,054
–
–
4,689
4,054
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 during the year (2018: Nil).
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: (refer Note F1)
– A$10,000,000 foreign currency advance facility (multicurrency);
– A$7,500,000 asset finance facility;
– A$750,000 trade finance facility;
– A$100,000 corporate credit card facility; and
– USD$100,000 corporate credit card facility.
44
Annual Report 2019 PWR Holdings Limited
Notes to the Consolidated Financial Statements
For the year ended 30 June 2019
SECTION H OTHER INFORMATION (continued)
The following are the remaining contractual maturities at the end of the reporting period of financial liabilities, including
estimated interest payments.
2019
Trade and other payables
Foreign currency loan
Finance lease liabilities
2018
Trade and other payables
Finance lease liabilities
Carrying
amount
$’000
Note
C7
F1
F1
C7
F1
4,812
3,415
227
8,454
3,397
483
3,880
Total
$’000
(4,812)
(3,756)
(241)
(8,809)
(3,397)
(516)
(3,913)
Contractual cash flows
12 months
$’000
1-5 years
$’000
(4,812)
(68)
(131)
–
(3,688)
(110)
(5,011)
(3,798)
(3,397)
(172)
(3,569)
–
(344)
(344)
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 its financial assets and liabilities arising from sales, purchases and borrowings
that are denominated in a currency other than the respective functional currencies of Group entities, being the Australian
dollar (AUD), Pound Sterling (GBP) and US dollar (USD). The currencies in which these transactions are denominated are
primarily AUD, GBP and USD.
Under the Group’s financial risk management policies, the Group may use derivative financial instruments to manage its
foreign currency risks. At 30 June 2019, the Group had entered into participating forward contracts to manage its exposure
to sales denominated in GBP. These contracts, which settle monthly until 30 June 2020, have a total notional amount of
£10.65m and have been accounted for at fair value through the profit and loss. The fair value at year end was an asset of
$258,036 (2018: NIL).
During the year ended 30 June 2019, the Group recognised $218,960 in realised gains and $341,904 in unrealised gains on
derivatives (2018: $236,000 loss). This has been included in finance income or costs in the income statement.
Exposure to currency risk
A summary of quantitative data about the Group’s exposure to currency risk on financial assets and liabilities at year end is
as follows:
Trade receivables
Trade payables
Foreign currency loan
Net statement of
financial position
exposure
Notional amount
of foreign currency
derivatives
30 June 2019
GBP
£’000
1,757
(812)
(2,000)
AUD
$’000
324
(433)
–
USD
$’000
829
(306)
–
30 June 2018
GBP
£’000
1,230
(280)
–
AUD
$’000
470
(684)
–
USD
$’000
1,076
(201)
–
Note
C2
C7
F1
(109)
(1,055)
523
(214)
950
875
–
10,650
–
–
–
–
PWR Holdings Limited Annual Report 2019
45
Notes to the Consolidated Financial Statements
For the year ended 30 June 2019
SECTION H OTHER INFORMATION (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 2018, using consistent foreign exchange rate variances, as indicated below.
30 June 2019
GBP (10% movement)
USD (10% movement)
30 June 2018
GBP (10% movement)
USD (10% movement)
Profit or loss (net of tax)
Equity (net of tax)
Strengthening
$’000
Weakening
$’000
Strengthening
$’000
Weakening
$’000
133
(52)
108
76
(29)
47
(118)
(83)
133
(52)
108
76
(29)
47
(118)
(83)
Interest rate risk
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 liabilities
Variable rate instruments
Financial assets
Financial liabilities
Nominal amount
2019
$’000
(227)
(227)
20,223
(3,415)
16,808
2018
$’000
(483)
(483)
12,110
–
12,110
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.
Profit or loss (net of tax)
Equity (net of tax)
100bp
increase
$’000
100bp
decrease
$’000
100bp
increase
$’000
100bp
decrease
$’000
117
117
84
84
(117)
(117)
(84)
(84)
117
117
84
84
(117)
(117)
(84)
(84)
30 June 2019
Variable rate instruments
Cash flow sensitivity (net)
30 June 2018
Variable rate instruments
Cash flow sensitivity (net)
46
Annual Report 2019 PWR Holdings Limited
Notes to the Consolidated Financial Statements
For the year ended 30 June 2019
SECTION H OTHER INFORMATION (continued)
Fair values
The fair values of the Group’s financial assets and liabilities approximate their carrying amounts recognised in the
statement of financial position.
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:
Entity
Transaction
Transaction values
during the year
Balance outstanding
Receivable/(Payable)
2019
$’000
2018
$’000
2019
$’000
2018
$’000
Bayswater Road Radiators Pty Ltd(i)
Sales of goods
Triple Eight Race Engineering Pty Ltd(ii)
Sales of goods
30
4
36
13
1
–
3
–
(i) Bayswater Road Radiators Pty Ltd is an entity associated with Kees Weel, which purchases goods from the Group.
(ii) Triple Eight Race Engineering Pty Ltd is an entity associated with Roland Dane, which purchases goods from the Group.
H3 Auditor 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
IT Advisory services
Accountability GB
Taxation services
2019
$
2018
$
147,500
142,500
14,000
14,157
39,607
–
2,407
1,598
PWR Holdings Limited Annual Report 2019
47
Notes to the Consolidated Financial Statements
For the year ended 30 June 2019
SECTION H OTHER INFORMATION (continued)
H4 Subsequent events
The Board declared a fully franked final ordinary dividend of 6.90 cents per share and a special FY19 dividend of 3.00 cents
per share. The financial effect of the 2019 declared final and special dividend has not been brought to account in the
consolidated financial statements for the year ended 30 June 2019.
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
Changes in accounting policies -new standards and interpretations adopted
Effective from 1 July 2018, AASB 9 Financial Instruments and AASB 15 Revenue from Contracts with Customers have been
adopted by the Group. The nature and effect of these standards being adopted are disclosed below.
AASB 9 Financial Instruments
AASB 9 replaces AASB 139 Financial Instruments: Recognition and Measurement and includes revised guidance on the
classification and measurement of financial instruments, a new ‘expected credit loss’ (“ECL”) model for calculating
impairment on financial assets and new general hedge accounting requirements.
As the Group does not hold complex financial instruments or long dated receivables, there was no material impact of
adopting AASB 9 on the Group’s financial statements in the current or comparative period.
New standards and interpretations adopted
AASB 15 Revenue from Contracts with Customers
AASB 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised.
It replaces existing revenue recognition guidance, including AASB 118 Revenue (AASB 118). AASB 15 is a significant change
from the revenue recognition requirements under AASB 118 and will involve more judgements and estimates as it requires
revenue to be recognised when control of a good or service transfers to a customer, or on satisfaction of performance
obligations, which replaced the previous recognition concept of transfer of risks and rewards.
The application of AASB 15 has not had a material impact on the Group in the current or comparative period including
the timing of recognition of the Group’s key revenue streams. For the sale of manufactured products, revenue will be
recognised at the point in time that the performance obligation is satisfied which is generally on shipment of the goods to
the customer from the Group’s warehouse. For services, including wind tunnel testing and freight, revenue is recognised
over time as those services are provided.
New standards and interpretations not yet adopted
AASB 16 Leases
The Group has not early adopted AASB 16 Leases. The Group will apply AASB 16 initially in its financial statements for the
year ending 30 June 2020.
AASB 16 introduces a single, on-balance sheet lease accounting model for lessees. A lessee recognises a right-of-use asset
representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments.
There are optional exemptions for short-term leases and leases of low value items.
The Group has started an initial assessment of the potential impact on its consolidated financial statements, with the most
significant impact identified so far being that the Group will recognise new assets and liabilities for its operating leases of
factory and office facilities. In addition, the nature of expenses related to those leases will now change as AASB 16 replaces
the straight-line operating lease expense with a depreciation charge for right-of-use assets and interest expense on lease
liabilities. The Group has not yet decided whether it will use the optional exemptions. No significant impact is expected for
the Group’s finance leases.
Although the Group has not yet fully quantified the impact on its reported assets and liabilities of adoption of AASB 16,
based on an initial assessment the impact on the net profit after tax is not expected to be significant. The quantitative effect
will depend on, inter alia, the transition method chosen, the extent to which the Group uses the practical expedients and
recognition exemptions, and any additional leases that the Group enters into.
48
Annual Report 2019 PWR Holdings Limited
Notes to the Consolidated Financial Statements
For the year ended 30 June 2019
Income tax
Inventories
SECTION I SIGNIFICANT ACCOUNTING POLICIES
1. Basis of consolidation
2. Foreign currency
3. Revenue
4. Employee benefits
5. Finance income and finance costs
6.
7.
8. Property, plant and equipment
9.
Intangible assets and goodwill
10. Share capital
11. Impairment
12. Provisions
13. Leases
14. Financial instruments
15. Fair value measurement
1 Basis of consolidation
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 on which
control commences until the date on which control ceases.
Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions,
are eliminated. Unrealised gains arising from transactions with equity-accounted investees are eliminated against the
investment to the extent of the Group’s interest in the investee. Unrealised losses are eliminated in the same way as
unrealised gains, but only to the extent that there is no evidence of impairment.
2 Foreign currency
Transactions in foreign currencies are translated to the respective functional currencies of the Groups’ 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.
3 Revenue
Sale of goods
For the sale of manufactured products, revenue is recognised at the point in time that the performance obligation is
satisfied which is generally on shipment of the goods to the customer from the Group’s warehouse.
Rendering of services
For services, including wind tunnel testing and freight, revenue is recognised over time as those services are provided.
PWR Holdings Limited Annual Report 2019
49
Notes to the Consolidated Financial Statements
For the year ended 30 June 2019
SECTION I SIGNIFICANT ACCOUNTING POLICIES (continued)
4 Employee benefits
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.
Share based payment transactions
The grant-date fair value of share-based payment awards granted to employees is recognised as an expense, with a
corresponding increase in equity, over the period that the employees become unconditionally entitled to the awards. The
amount recognised as an expense is adjusted to reflect the number of awards for which the related service and non-market
performance conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the
number of awards that meet the related service and non-market performance conditions at the vesting date.
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.
5 Finance income and finance costs
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. Interest expense is recognised 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.
Income Tax
6
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.
50
Annual Report 2019 PWR Holdings Limited
Notes to the Consolidated Financial Statements
For the year ended 30 June 2019
SECTION I SIGNIFICANT ACCOUNTING POLICIES (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 a series of 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 as 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.
Inventories
7
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.
8 Property, plant and equipment
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.
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
2019
2018
2-7 years
2-7 years
4-6 years
4-6 years
Depreciation methods, useful lives and residual values are reviewed at each financial year-end and adjusted if appropriate.
PWR Holdings Limited Annual Report 2019
51
Notes to the Consolidated Financial Statements
For the year ended 30 June 2019
SECTION I SIGNIFICANT ACCOUNTING POLICIES (continued)
9
Intangible assets and goodwill
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.
Research and development
Research expenditure is recognised as an expense as incurred. Concessional tax benefits and incentives receivable are
recognised as other income based on an estimate of the eligible research and development expenditure incurred during
the financial year. Costs incurred on development projects are recognised as intangible assets only when it is probable
that a project will, after assessment of its commercial and technical feasibility, be completed and generate future economic
benefits and can be measured reliably.
Impairment of 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 are 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.
10 Share capital
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.
Share based payments reserve
The share based payments reserve comprises the grant-date fair value of share-based payment awards granted to
employees.
52
Annual Report 2019 PWR Holdings Limited
Notes to the Consolidated Financial Statements
For the year ended 30 June 2019
SECTION I SIGNIFICANT ACCOUNTING POLICIES (continued)
11 Provisions
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.
12 Leases
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.
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.
13 Financial instruments
Non-derivative financial instruments
Trade and other receivables are initially recognised as fair value and subsequently measured at amortised cost less
impairment. Trade receivables are due for settlement no more than 30-60 days from the date of recognition.
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. 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.
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.
PWR Holdings Limited Annual Report 2019
53
Notes to the Consolidated Financial Statements
For the year ended 30 June 2019
SECTION I SIGNIFICANT ACCOUNTING POLICIES (continued)
14 Fair value measurements
The consolidated financial statements have been prepared on the historical cost basis except for any derivative financial
instruments which are recognised at fair value.
‘Fair value’ is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date in the principal or, in its absence, the most advantageous market to which the
Group has access at that date. The fair value of a liability reflects its non-performance risk.
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.
When one is available, the Group measures the fair value using the quoted price in an active market for that asset or liability.
A market is regarded as active if transactions for the asset or liability take place with sufficient frequency and volume to
provide pricing information on an ongoing basis. When an active market is not available, the Group uses observable market
data as far as possible.
Further information about the methods and assumptions made in determining fair values for measurement and/or
disclosure purposes is included in the following notes:
– Note I14 – financial instruments
– Note D3 – share based payments.
54
Annual Report 2019 PWR Holdings Limited
Directors’ Declaration
For the year ended 30 June 2019
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 22 to 54 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 2019 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.
3.
4.
There are reasonable grounds to believe that the Company and the group entities identified in Note G3 will be able to
meet any obligations or liabilities to which they are or may become subject to by virtue of the Deed of Cross Guarantee
between the Company and those group entities pursuant to ASIC Corporations (Wholly-owned Companies) Instrument
2016/785.
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 2019.
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
Director
Brisbane
29th August 2019
PWR Holdings Limited Annual Report 2019
55
Independent Auditor’s Report to the
Members of PWR Holdings Limited
For the year ended 30 June 2019
Report on the Remuneration Report
Opinion
Directors’ responsibilities
In our opinion, the Remuneration Report of
PWR Holdings Limited for the year ended 30
June 2019 complies with Section 300A of the
Corporations Act 2001.
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 responsibilities
We have audited the Remuneration Report included in
pages 12 to 20 of the Directors’ Report for the year ended
30 June 2019.
Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
KPMG
Jason Adams
Partner
Brisbane
29 August 2019
65
56
Annual Report 2019 PWR Holdings Limited
Independent Auditor’s Report to the
Members of PWR Holdings Limited
For the year ended 30 June 2019
Other Information
Other Information is financial and non-financial information in PWR Holdings Limited’s annual reporting
which is provided in addition to the Financial Report and the Auditor’s Report. The Directors are responsible
for the Other Information.
The Other Information we obtained prior to the date of this Auditor’s Report was the Directors’ Report and
ASX Additional Information. The Chairman’s Letter and Managing Director’s Report are expected to be
included in the Annual Report, and made available to us after the date of the Auditor's Report.
Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not and
will not express an audit opinion or any form of assurance conclusion thereon, with the exception of the
Remuneration Report and our related assurance opinion.
In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In
doing so, we consider whether the Other Information is materially inconsistent with the Financial Report or
our knowledge obtained in the audit, or otherwise appears to be materially misstated.
We are required to report if we conclude that there is a material misstatement of this Other Information,
and based on the work we have performed on the Other Information that we obtained prior to the date of
this Auditor’s Report we have nothing to report.
Responsibilities of the Directors for the Financial Report
The Directors are responsible for:
•
•
•
preparing the Financial Report that gives a true and fair view in accordance with Australian Accounting
Standards and the Corporations Act 2001;
implementing necessary internal control to enable the preparation of a Financial Report that gives a true
and fair view and is free from material misstatement, whether due to fraud or error; and
assessing the Group and Company’s ability to continue as a going concern. This includes disclosing, as
applicable, matters related to going concern and using the going concern basis of accounting unless
they either intend to liquidate the Group and Company or to cease operations, or have no realistic
alternative but to do so.
Auditor’s responsibilities for the audit of the Financial Report
Our objective is:
•
•
to obtain reasonable assurance about whether the Financial Report as a whole is free from material
misstatement, whether due to fraud or error; and
to issue an Auditor’s Report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with Australian Auditing Standards will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of the
Financial Report.
A further description of our responsibilities for the audit of the Financial Report is located at the Auditing and
Assurance Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf . This
description forms part of our Auditor’s Report.
64
PWR Holdings Limited Annual Report 2019
57
Independent Auditor’s Report to the
Members of PWR Holdings Limited
For the year ended 30 June 2019
Valuation of goodwill and intangible assets $14.2m
Refer to Note C6 to the Financial Report
The key audit matter
How the matter was addressed in our audit
A key audit matter for us was the Group’s
annual testing of goodwill and intangible assets
for impairment given the size of the balance
(being 21.9% of total assets).
We focused on the significant forward-looking
assumptions the Group applied in its value in
use models, including forecast cash flows,
growth rates and discount rates.
The Group uses complex models in performing
its annual impairment testing. These models
use forward looking assumptions based on the
Group’s budgeting and business plans and a
range of other internal and external sources as
inputs to the assumptions. Complex modelling
using forward-looking assumptions tend to be
prone to greater risk for potential bias, error
and inconsistent application. These conditions
necessitate additional scrutiny by us, in
particular to address the objectivity of sources
used for assumptions, and their consistent
application.
We involved valuation specialists to
supplement our senior audit team members in
assessing this key audit matter.
Our procedures included:
• We considered the appropriateness of the value in
use method applied by the Group to perform the
annual impairment testing against the requirements
of the accounting standards.
• We assessed the integrity of the value in use models
used, including the accuracy of the underlying
calculation formulas.
• We considered the Group’s determination of its
CGUs based on our understanding of the Group’s
operations and how independent cash inflows were
generated, against the requirements of the
accounting standards.
• We compared the forecast cash flows contained in
the value in use model to Board approved budgets
and the Group’s business plans.
• We assessed the accuracy of previous Group
forecasts to inform our evaluation of forecasts
incorporated in the models.
• We considered the sensitivity of the models by
varying key assumptions, such as forecast growth
rates, terminal growth rates and discount rates,
within a reasonably possible range, to identify those
CGUs at higher risk of impairment and to focus our
further procedures.
• We challenged the Group’s significant forecast cash
flow and growth assumptions using our knowledge
of the Group, its past performance and our
understanding of factors impacting the business and
customers in which the CGUs operate in.
• Working with our valuation specialists, we
independently developed a discount rate range
considered comparable using publicly available
market data for comparable entities, adjusted by risk
factors specific to the CGU and the industry it
operates in.
• We assessed the disclosures in the financial report
using our understanding obtained from our testing
and the requirements of the accounting standards.
63
58
Annual Report 2019 PWR Holdings Limited
Independent Auditor’s Report to the
Members of PWR Holdings Limited
For the year ended 30 June 2019
Independent Auditor’s Report
To the shareholders of PWR Holdings Limited
Report on the audit of the Financial Report
Opinion
We have audited the Financial Report of PWR
Holdings Limited (the Company).
In our opinion, the accompanying Financial
Report of the Company is in accordance with
the Corporations Act 2001, including:
•
•
giving a true and fair view of the Group’s
financial position as at 30 June 2019 and of
its financial performance for the year
ended on that date; and
complying with Australian Accounting
Standards and the Corporations
Regulations 2001.
Basis for opinion
The Financial Report comprises:
• Consolidated statement of financial position as at 30
June 2019;
• 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 then ended;
• Notes including a summary of significant accounting
policies; and
• Directors’ Declaration.
The Group consists of the Company and the entities it
controlled at the year-end or from time to time during the
financial year.
We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit
of the Financial Report section of our report.
We are independent of the Group in accordance with the Corporations Act 2001 and the ethical
requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for
Professional Accountants (the Code) that are relevant to our audit of the Financial Report in Australia. We
have fulfilled our other ethical responsibilities in accordance with the Code.
Key Audit Matters
The Key Audit Matter we identified was the
valuation of goodwill and intangible assets.
Key Audit Matters are those matters that, in our
professional judgement, were of most significance in our
audit of the Financial Report of the current period.
These matters were addressed in the context of our audit
of the Financial Report as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion
on these matters.
62
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 Annual Report 2019
59
ASX Additional Information
Shareholdings as at 9 September 2019
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
62 shareholders hold less than a marketable parcel of ordinary shares of 120 shares.
TWENTY LARGEST SHAREHOLDERS
Name
1 KPW Property Holdings Pty Ltd
2 HSBC Custody Nominees (Australia) Limited
3 JP Morgan Nominees Australia Pty Ltd
4 Wagon Weel Co Pty Ltd
5 Citicorp Nominees Pty Limited
6 National Nominees Limited
7 Mamlec Pty Ltd
8 Accbell Nominees Pty Ltd
9 BNP Paribas Noms Pty Ltd
10 Merrill Lynch (Australia) Nominees Pty Limited
11 BNP Paribas Nominees Pty Ltd
12 Sandhurst Trustees Ltd
13 ECapital Nominees Pty Ltd
14 Wask Management Pty Ltd
15 UBS Nominees Pty Ltd
16 Citicorp Nominees Pty Limited
17 Neweconomy Com Au Nominees Pty Ltd
18 Invia Custodian Pty Ltd
19 Citicorp Nominees Pty Ltd
20 UQ Endowment Fund Ltd
Top 20 holders of ordinary fully paid shares
Total remaining holders balance
60
Annual Report 2019 PWR Holdings Limited
Number of
Ordinary
shares
Number of
Security
Holders
459,609
4,918,118
4,530,225
8,420,419
81,671,629
883
1,720
606
392
28
100,000,000
3,629
Number of
ordinary
shares held
Percentage
of capital
held %
17,368,500
13,757,739
11,124.386
10,000,000
7,999,086
7,053,867
3,500,000
2,500,000
1,498,864
1,284,235
1,274,445
846,853
631 919
364,575
363,865
286,895
254,992
238,975
174,971
160,000
17.37
13.76
11.12
10.00
8.00
7.05
3.50
2.50
1.50
1.28
1.27
0.85
0.63
0.36
0.36
0.29
0.26
0.24
0.18
0.16
80,684,167
19,315,833
80.68
19.32
ASX Additional Information
Shareholdings as at 9 September 2019
SUBSTANTIAL SHAREHOLDERS
The number of shares held by substantial shareholders and their associates are set out below:
Shareholder
KPW Property Holdings Pty Ltd
IOOF Holdings Ltd
Wagon Weel Co Pty Ltd
Tribeca Investment Partners Pty Ltd
RIGHTS
The number of performance rights on issue are set out below:
Number of rights holders
Number of rights on issue
9
373,042
VOTING RIGHTS
Ordinary shares
Refer to Note I 11 in the financial statements
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.
Number
17,368,500
11,310,765
10,000,000
7,759,412
PWR Holdings Limited Annual Report 2019
61
Corporate Directory
PWR Holdings Limited
ABN 85 105 326 850
OFFICES AND OFFICERS
Directors
Teresa Handicott
Jeffrey Forbes
Roland Dane
Kees Weel
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
Level 1, 200 Mary Street
Brisbane 4000
Queensland
62
Annual Report 2019 PWR Holdings Limited
www.pwr.com.au
PWR Holdings Limited
103 Lahrs Road, Ormeau, 4208 Queensland
Phone: 07 5547 1600
www.pwr.com.au