Reliance Worldwide Corporation Limited
Annual Report 2021

Plain-text annual report

Reliance Worldwide Corporation Limited Annual Report 2021 Reliance Worldwide Corporation Limited Annual Report 2021 2021 has been a record year for RWC. The strengths of our products, brands, channel partner relationships and customer service have been essential factors in helping us deliver more products to more users than ever before. Making it happen has been the incredible team of people at RWC. Our value proposition A family of innovative, integrated products that saves customers’ time and makes their lives easier, while our unrivalled value creation delivers stronger returns for our distribution partners. Our core purpose Making our customers’ lives easier with clever solutions for the built environment. Contents Chairman’s Report Our 5 year performance Chief Executive Officer’s Report 2021: A year of challenges and triumphs Delivering our products John Guest marks a significant milestone Making a positive social impact Strategy overview Board Members Senior Leadership Team Operating and Financial Review Financial Reports and Statements Directors’ Report Shareholder Letter Remuneration Report Auditor’s Independence Declaration Consolidated Statement of Profit or Loss and Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Consolidated Financial Statements Directors’ Declaration Independent Auditor’s Report Shareholder Information Corporate Directory 4 8 10 14 20 22 24 28 30 31 32 44 54 56 84 85 86 87 88 89 129 130 134 136 2 3 3 Reliance Worldwide Corporation Limited Annual Report 2021 Chairman’s Report Chairman’s Report Dear fellow shareholders, It gives me great pleasure to present our annual report for 2021. This has been an extraordinary year for RWC. We The following report from Heath Sharp, Group Chief had to manage our way through COVID while at the Executive Officer, and the accompanying review of same time meeting much-elevated demand levels. operations provide more detailed commentary on These factors placed huge burdens on our people as performance and financial results. they worked to manage our supply chains, deal with the complexities and restrictions made necessary by the global pandemic and, most importantly, deliver for our customers. As a result of the extraordinary efforts of our people, we have delivered powerful revenue and earnings growth and consequently achieved a record result for the Company. Financial Performance Strong cash performance has further strengthened the balance sheet Our record earnings performance translated into a very strong cash result, with cash flow from operations up 20% to $334.3 million. This strong cash flow performance enabled a further reduction Reported Net Profit after Tax (“NPAT”) was of $128.3 million in borrowings and a decrease in the $188.2 million for the year ended 30 June 2021, leverage ratio (net debt to EBITDA) from 1.39 times which was 111% higher than the prior year. NPAT to 0.51 times. We finished the year in a particularly after adjustment for one-off restructuring costs strong financial position including headroom within and certain tax accounting treatments was $211.9 our borrowing facilities of $583 million. million, an increase of more than 60% over the same measure in the prior year. This exceptionally strong result was driven primarily by growth in sales in each of our regions, coupled with tight cost control. Reported sales were 15% higher than the prior year but when adjusted for exchange rate movements sales were up 25% on the prior year in constant dollar terms. On behalf of the Board, I congratulate the management team and everyone across the Company for delivering such an outstanding result. Meeting the significant increase in demand for our products while also delivering operational improvements during a global pandemic is an extraordinary achievement. Capital Management review During the year, we reviewed the company’s capital management approach. Following the review, we believe that RWC’s optimal capital structure will be achieved by maintaining a leverage ratio in the range of 1.5 to 2.5 times net debt to EBITDA. Maintaining a level of debt within this range will minimise our cost of capital whilst ensuring we are able to continue to borrow on acceptable terms. As I have noted above, we are well below this range at present due to the very strong cash performance in 2021. Investing in the business to support growth opportunities will continue to be a priority. Cash flows generated beyond this investment will continue to support distributions to shareholders through dividends. Our policy of distributing between 40% and 60% of annual NPAT by way of dividends each year remains unchanged. Dividend With the strong earnings performance recorded in FY2021 we’ve been able to substantially increase the dividend paid from last year. Total dividends declared for the year are 13.0 cents per share representing an earnings payout ratio of approximately 55% of Reported NPAT. This compares favourably with the 7.0 cents per share declared last year and 9.5 cents per share declared in respect of the 2019 financial year. Revised remuneration structure A review of RWC’s remuneration framework was completed during FY2021. The main purpose of the review was to enable the Company to implement a remuneration framework programme more closely aligned with current market practices. External consultants were engaged to assist with Beyond paying dividends, we have determined benchmarking analysis and design of the framework. that the purchase of RWC shares through on-market share buybacks would be the most effective means of distributing excess cash. A share buyback would be value-enhancing for shareholders as it would contribute to positive earnings accretion on an Earnings Per Share (EPS) basis as well as improve return on equity. We will consider share buybacks in the future having regard to our earnings performance, the economic outlook and other investment opportunities. We will continue to be very disciplined in our approach to capital investment. Early in the pandemic we prudently scaled back capital expenditure as we sought to preserve cash. We are now responding to the volume growth of the past year by investing appropriately in increased capacity in our manufacturing The review has been extensive and thorough, and the revised framework is being implemented across all those in leadership roles (approximately 215 people) in FY2022. Its design is largely US-referenced, reflecting the fact that over half of RWC’s executives are based in the US, and it is performance- based, with incentive pay linked to operational performance and shareholder value creation. We are confident that the framework will position us to compete to attract and retain the best talent for RWC, and that it is aligned with shareholder expectations, being comparable with appropriate industry and geographical peers and ensuring that remuneration is clearly linked to shareholder returns. You will find further details of the new framework operations. Investing in new product development in Section C of the Remuneration Report. and their commercial release also continues to be a priority. Finally, we remain keen to expand our product offering through acquiring complementary businesses, and we have an active programme to identify and assess opportunities. When assessing these opportunities, we continue to apply suitable levels of rigour and financial discipline. 4 5 Reliance Worldwide Corporation Limited Annual Report 2021 Chairman’s Report Board changes Outlook We were pleased to welcome Darlene Knight to the The outlook for our key markets in FY2022 is positive Board in April as an independent director. Darlene’s notwithstanding ongoing COVID restrictions and the background has been with global manufacturing emergence of new variants. Economic conditions in sector organisations where she held strategic our key markets look to be broadly favourable and and operations roles, including senior leadership are likely to be underpinned by ongoing government roles in the US and China. With her experience in stimulus measures. engineering, global manufacturing and quality, Darlene’s appointment is consistent with the Board’s aim of strengthening its capacity by adding members with relevant skills and experience. In the Americas, home remodelling activity is expected to remain strong given the positive fundamentals in core US residential segments, while weakness in non-residential activity is likely to Concurrent with Darlene’s appointment, Ross continue in FY2022. We expect that sales growth in Dobinson retired from the board after five years as the Americas will moderate significantly following a director, and I’d like to formally record here the the exceptionally strong levels recorded in FY2021. Board’s thanks to Ross for his contribution to the Company over that time. In Australia, increases in residential dwelling approvals should translate into a continuation I’d like to thank the chairs of the Nomination and of construction activity levels, and house price Remuneration Committee, Christine Bartlett, and appreciation and low interest rates should remain the Audit and Risk Committee, Russell Chenu, for supportive of the home remodelling sector. their work over the past year. The remuneration review has been a very significant undertaking and has been led skilfully and energetically by Christine. Similarly, the demands on the Audit and Risk Committee over the past year have been significantly higher than usual as we have navigated through COVID, and I thank Russell for his expertise and leadership. Social Impact Report During the year we released our second social In the UK, short-term housing demand and economic indicators remain favourable, pointing to continued strong demand for repair and remodelling activity. While the recovery in Continental Europe started later than the UK, it is anticipated that demand will continue to improve with increased vaccine availability and economies opening up further. I look forward to presenting to shareholders at the Annual General Meeting to be held on 28 October 2021. National and international border restrictions will likely dictate that our impact report which provides an update on our overseas based directors and management will progress across a range of environmental, only be able to join the meeting by video. It is social and governance practices. Two areas which unclear at this time whether restrictions in Victoria we highlight in the report where we made particular will be eased sufficiently to allow a hybrid virtual progress were in the development of a Diversity and physical meeting to be held for shareholders and Inclusion framework across the Group, who would like to attend in person. Full details will and the development of a work plan with short be outlined in the Notice of Meeting. and long-term goals to address modern slavery. This year we will be undertaking a thorough analysis of our greenhouse gas emissions and establishing emission reduction targets and an action plan to achieve them. The Board is actively engaged with management in working through our sustainability priorities and we are very appreciative of the progress that the Company has made over the past two years in addressing areas of highest relevance to RWC. Stuart Crosby Chairman The outlook for our key markets in FY2022 is positive 6 Roman Vejda Czech Republic 7 Reliance Worldwide Corporation Limited Annual Report Annual Report 2021 2021 Our 5 year performance RWC was listed on the ASX in April 2016 and, at the end of FY2021, we had completed 5 full years as a listed company. Over that time, we have delivered strong growth in sales and earnings, through a combination of organic growth and acquisitions. Net Sales A$m 5 Year CAGR: 22% 1341 1162 1104 769 602 1600 1400 1200 1000 800 600 400 200 0 400 350 300 250 200 150 100 50 0 349 212 277 251 158 130 151 121 79 66 250 200 150 100 50 0 Net Sales Adjusted EBITDA Adjusted NPAT FY17 FY18 FY19 FY20 FY21 400 Adjusted EBITDA A$m 5 Year CAGR: 30% 250 Adjusted NPAT A$m 5 Year CAGR: 34% Our 5 year performance Net Sales A$m 5 Year CAGR +22% Adjusted EBITDA A$m 5 Year CAGR 1600 +30% 1400 1200 1000 1162 1104 Adjusted NPAT A$m 5 Year CAGR 800 769 602 600 +34% 400 200 0 1341 350 1600 1600 349 300 1400 1400 1341 1341 277 251 1162 1104 1104 1162 1200 1200 1000 1000 800 800 769 769 151 602 602 600 121 600 400 400 200 200 250 200 150 100 50 400 400 200 350 350 300 300 150 250 200 100 250 200 150 150 100 50 100 50 50 0 0 0 212 250 250 349 349 212 212 158 277 277 251 251 130 151 79 151 66 121 121 Adjusted EBITDA Adjusted NPAT Adjusted EBITDA 200 200 150 150 100 100 50 50 0 0 158 158 130 130 79 79 66 66 Adjusted NPAT Adjusted NPAT Net Sales 0 0 0 Adjusted EBITDA Net Sales Net Sales 8 9 FY17 FY18 FY19 FY20 FY21 FY17 FY17 FY18 FY18 FY19 FY19 FY20 FY20 FY21 FY21 CAGR: compound annual growth rate Chief Executive Officer’s Report 1 EBITDA, Adjusted EBITDA, and Adjusted NPAT are non-IFRS measures used by RWC to assess operating performance. These measures have not been subject to audit or review. Refer to the Operating and Financial Review section for additional detail. Reliance Worldwide Corporation Limited Annual Report 2021 Chief Executive Officer’s Report I’m very pleased to report to you on our record performance for the year ended 30 June 2021. Trading Performance of each region At the start of the year, we faced great uncertainty across our markets due to the COVID pandemic. As the year has unfolded, our experience has been one of incredibly resilient repair and remodel markets, and of consistently higher demand for Group Result for FY2021 Americas EMEA The 2021 financial year set new records for the were 27% higher for the year and 31% higher in the year, with sales on a constant currency basis up Company for both sales and earnings. second half. Growth was driven by the strength 25% on the prior year. Sales volumes recovered Americas’ sales on a constant currency basis We recorded a strong rebound in EMEA sales this our products in all of our major markets. We recorded net sales for the year of $1,340.8 This unprecedented level of demand has at times tested our capacity and our capability, particularly during the height of the pandemic in the US and UK. Our ability to deliver for our channel partners and end user customers despite the disruption of COVID and the knock-on impacts to global supply million which were 15% higher than the prior year. Foreign currency exchange rates this year had a particularly marked impact on our reported sales and mask the true strength of our sales growth. Looking at net sales performance on a constant currency basis, the growth rate was 25%. chains and logistics activities, is testament to the All regions encountered increased demand commitment and dedication of everyone at RWC. throughout the year as a result of strong residential repair and remodel activity. COVID has had a major impact on the discretionary spending priorities of consumers around the world. With more time being spent at home, consumers have opted to invest in upgrading their houses and we saw this flow through to demand in all our key markets. New residential construction markets were also buoyant and drove volume growth, particularly in Australia where a substantial part of our business is exposed to new home building. This strong growth in sales translated to higher earnings. Reported EBITDA1 was $340.7 million, an increase of 56% on the prior year. During the year we commenced a rationalisation and expansion of our warehousing and logistics activities in the US and UK operations which incurred one-off costs of $8.5 million. Adjusting for these costs, and prior year restructuring and impairment charges, EBITDA was $349.2 million, 39% higher than the prior year. Reported Net Profit after Tax (“NPAT”) was $188.2 million for the year ended 30 June 2021, which was 111% higher than the prior year. Adjusted NPAT of $211.9 million reflected one-off restructuring of the residential repair and remodelling markets early in the year following the easing of government in the US and Canada. The trend for increased COVID restrictions in the UK and Continental Europe. spending on home improvement was first Sales growth was initially driven by pent-up demand evidenced immediately following the outbreak as channel partners rebuilt inventory levels, and of COVID and continued throughout FY2021. Our this was quickly followed by a recovery in activity in retail and hardware channel partners experienced repair and remodel markets. Sales in Continental strong sales growth throughout the year. Wholesale Europe also improved over the course of the year as channels saw an improving trend in sales growth, markets recovered from COVID impacts. with sales early in the year adversely impacted by shelter-in-place restrictions in certain parts of the US and a slower recovery in commercial construction activity. Sales in the US were boosted in the second half by a severe winter freeze impacting Texas and surrounding US states. This emergency caused a sudden and significant surge in demand for our products, and our teams responded magnificently over the ensuing days and weeks to respond to the needs of channel partners and their customers. It was RWC at its very best. We estimate that approximately US$42 million sales impact can be attributed to the freeze, which came on top of already strong demand due to COVID. APAC Sales in Asia Pacific were 13% higher for the year. External sales were up 11% reflecting stronger Australian new housing construction and remodel markets. Remodelling activity in Australia was consistently strong throughout the year, while new housing commencements in Australia increased by 7% in the year to 31 March 2021. Inter-company sales were 16% higher as a result of increased exports to the Americas and the strong demand conditions in Strong operational performance From an operational perspective, the strong growth in sales had us running hard at all our facilities. We have been able to keep all our facilities operational and this was particularly pleasing in the context of the US and the UK. We’ve had to do that whilst at the same time managing the COVID-19 impacts on our operations. Our people around the world have worked incredibly hard to keep our operations going and meet the requirements of our distributors and our end users, while at the same time looking after their own health and that of their colleagues. A pleasing aspect of this year’s result has been the way that the top line sales growth has translated into operational margin expansion and improved net earnings. Higher volumes have driven factory efficiencies and improved manufacturing overhead recoveries. On top of that, our own cost containment measures have borne fruit. At the start of the year we announced a cost reduction programme and a target of $25 million in annual savings. During the year we realised savings of $22.3 million and have met our goal of $25 million in annual savings on a run rate basis by the end of FY2021. costs and adjustments for certain tax accounting the US in particular. treatments. Adjusted NPAT for the prior comparable period was $130.3 million. 10 11 Investing for the future Health & Safety Reliance Worldwide Corporation Limited Annual Report 2021 Cost inflation has been a major challenge this year, and it has been necessary for us to increase prices across a range of products in order to recover input cost increases. The cost of copper, a key component of manufactured brass products, rose steeply in the second half of the year and we also saw increases in plastic resin and steel costs. Inflation pressures were also acute in freight and packaging costs. In the coming year we will be further investing in manufacturing capacity expansion and to enable the production of new products. We are forecasting capital expenditure in the range of $80 million to $90 million in FY2022, compared with $48.8 million in FY2021. The increase is partly due to our tight control of capital expenditure Looking ahead, we have finalised plans to reshape during the height of the pandemic, in addition to our warehouse and logistics activities in the US the need for more capacity. and the UK. In the US, we have leased a new purpose-built distribution centre in Alabama which will significantly expand our capacity and allow us to consolidate our warehousing operations onto one site. The expansion of manufacturing capacity of our core products in all three regions, including SharkBite and SpeedFit fittings, valves and pipe products, is a direct result of the very strong growth we experienced in FY2021. We are also In the UK, we have reached agreement to investing in production for new products. outsource our warehousing and logistics These will allow us to further expand our offering operations to a third-party logistics provider. to our core customers which continues to be This will enable the consolidation of our current a key component of our growth strategy. five warehouses into one centrally located distribution facility with future expansion capacity. We will also migrate our current truck and trailer fleet to a more efficient outsourced fleet of vehicles. These changes will provide a range of benefits including greater flexibility, efficiency, scalability, sustainability and enable cost savings. Importantly it will enable us to enhance the service we provide to our customers through real load time visibility and order tracking capability. In July 2021 we announced the acquisition of the business assets of LCL Pty Ltd for approximately A$37 million. LCL is one of Australia’s largest producers of high-quality copper-based alloys and produces a range of brass copper alloys from both new and recycled materials. LCL is the principal supplier of brass to RWC in Australia and its primary production facility in Moorabbin is immediately adjacent to our brass forging operations. The acquisition means that we will continue to have access to the supply of high-quality brass to support our future operations, and we have also secured a favourable long-term cost position for our brass requirements in Australia. We continue to actively look for business acquisition opportunities, particularly those that would allow us to add to our product portfolio and whose products we could leverage across our extensive network of channel partners. We have strong platforms in North America and the UK which we believe we can leverage further through selected acquisitions. Demand for quality businesses is particularly high at present and we are mindful of the need to remain disciplined around valuation and growth metrics. Chief Executive Officer’s Report What we do know for sure is that we have finished FY2021 in a very strong financial position, with our businesses in each of our regions bigger and stronger than a year ago. We are well placed to continue growing in each of our markets through a combination of new products, marketing programmes and ongoing plumber conversion to our range of fitting and pipe systems. Our success is also built on our customer service and channel partner relationships and we will continue to prioritise investment in these areas. Working with the incredible team at RWC Achieving a record year could not have happened without the commitment and dedication of everyone at RWC. Despite the enormous challenges of operating through COVID, RWC people have worked tirelessly to ensure we were able to meet the needs of our customers and channel partners. During the year, we received The well-being of RWC employees during COVID remained a priority throughout the year. At each of our facilities we continued to implement safety measures in accordance with local regulations and employed best practices to reduce the impact to our employees whilst at the facility. In addition, we have continued to monitor the impacts of COVID and respond as required when there are increases in positive case rates in any regional area in which we operate. Increasing employee ownership of health and safety outcomes at RWC has continued to be a priority. We experienced an increase in employee health and safety engagement across our operations, from 24% at the start of FY2021 to 41% at year end. We have achieved this through encouraging and supporting increased reporting. During FY2021, nearly 10,000 safety observations, near-miss events, and hazards were reported by employees. Each region has implemented global initiatives accolades from two of our North American such as site safety committees and the safety channel partners naming us a category supplier observations process. Our regional health and of the year. The awards, detailed elsewhere in safety leaders collaborate on a monthly basis this report, provide third party validation of what to share general knowledge and identify best everyone at RWC has achieved over the past year. practices that we can implement across the Being part of RWC and working with such company. This year, we started to implement a fantastic team has been the highlight of the additional internal audit processes led by first year for me, and I thank each and every one of level leaders in our manufacturing facilities. This our people for their efforts and contributions over process is allowing leaders to identify health and the past year. Heath Sharp Group Chief Executive Officer safety risks, assign corrective actions and track these tasks to completion. These regular “safety walks” by site managers will help to minimise risks in our manufacturing facilities as well as demonstrate our commitment to the safety of our people. In FY2022, these safety walks will expand to include regional and global executives each time they visit manufacturing and distribution locations. The year ahead After a record year, we are positive about FY2022 while at the same time realistic that the very high growth rates we achieved in FY2021 will moderate significantly. One of the factors we cannot know for certain is the extent to which potential changes in consumer spending away from home projects post-COVID will be offset by a longer-term trend of increased expenditure on homes. 12 13 Reliance Worldwide Corporation Limited Annual Report 2021 Challenges and Achievements 2021: A year of challenges and triumphs FY2021 was a year dominated by COVID-19, and the effects of the pandemic were felt in our operations around the world. But it was only part of the story of RWC in FY2021. This past year has been the biggest in our history: we’ve sold more products to more customers than ever before in each of our key markets. And we’ve done this while managing our way through lockdowns, workplace restrictions, supply chain disruptions, border closures, and the personal impacts of COVID-19 on the lives of our people. Our success in the past year is testimony to the quality of our people and our products, the strong relationships we have with our channel partners and the strength of our brands which ensures customers use our products again and again. Detailed on the following pages are just some of the highlights of the past year - a year of extraordinary challenges but also great achievements. Keeping our people safe The health and safety of RWC employees has affected employees to self-isolate, conducting always been our number one priority, even contact tracing to identify any possible interaction before the outbreak of COVID-19. Throughout with other RWC employees or contractors, the pandemic, RWC has worked to ensure all its and shutting down and deep cleaning all facilities adapted and continued to operate safely. impacted areas. For employees working at our manufacturing facilities, we adjusted processes to support social distancing in production areas and adapted our material handling processes. For employees working at our office locations in COVID-19 impacted regions, we implemented appropriate telecommuting options and office re-entry protocols. In cases where employees tested positive, RWC took appropriate actions, including requiring Beyond the need to keep employees safe, we have recognised a need to adapt the way we operate while preserving our culture and the spirit of teamwork in a dislocated world. Throughout COVID-19 we have sought to ensure that our people remain highly engaged and confident about the future of RWC. Lisa Markey & Corey Green Cullman, Alabama 14 15 Sam Acheampong Maidenhead, UK Reliance Worldwide Corporation Limited Annual Report 2021 Challenges and Achievements RWC is named a winner at the Atlanta Top Workplaces 2021 Awards Meeting the demands of our customers Managing through the pandemic and motivating and sustaining our people through many months of working differently, and often remotely, has been a challenge. We were especially pleased when RWC’s Atlanta office was awarded a Top Workplaces 2021 honour by Atlanta Journal-Constitution. The list is based solely on employee feedback, gathered through a third-party survey, which is administered by an employee engagement technology partner. Only 175 companies made this year’s list, so RWC was proud to be included, especially since this was our first time applying for this award. Our top scores were in three areas: execution, open-mindedness and innovation. Our manufacturing, distribution and supply chain In the US, elevated demand levels were pushed even teams have worked tirelessly to respond to the higher during the winter due to a significant freeze rapid, unforecast changes in demand since the event in Texas and surrounding US states. advent of COVID-19, to get as much product as possible into stores and available for our end-users. These efforts have required collaboration with each of our global divisions to meet the elevated demand, and our operations teams have made an incredible effort to meet the demands of our customers in a challenging working environment. Our ability to respond to changing market conditions and to meet increased demand was recognised by two significant awards given to RWC in the Americas over the past year. Even against the backdrop of the global pandemic, we proved that RWC is a manufacturer that cares deeply about its customers. We distinguished ourselves from The surge in demand arising from COVID-19 has household names in the building products category, been a feature of all our markets in the past year and that is something we are immensely proud of. and was driven by increased consumer spending on home improvements and higher wear and tear on bathrooms and kitchens. Texas, US Atlanta | Top Workplaces 2021 Awards 16 17 Reliance Worldwide Corporation Limited Annual Report 2021 RWC named one of Lowe’s 2020 Vendor Partners of the Year In the US, Lowe’s Home Improvement named RWC Winning this award was a huge testament to as one of its three distinguished vendor partners of our strength as an entire organisation to deliver 2020 in the building products category. RWC has innovation, value and service to our customers. always maintained a relentless focus on innovation It reflected the efforts required across the company and exceeding our customers’ expectations, to continue to grow the business, forge into new and our diligence has been recognised once again. categories and expand our footprint in stores For the second time in three years, Lowe’s has set RWC apart as a vendor that: • Continues to raise the bar in delivering during an incredibly challenging environment with increased demand. Accomplishing all of this in a normal environment is challenging enough, but to be able to do so during a global pandemic outstanding quality, innovation, value and service. and make it seamless for the customer is a • Goes above and beyond to meet customers’ needs. testament to the teamwork, culture and values within RWC. This year, Lowe’s also paid special attention to vendors that acted quickly to meet customers’ needs during the pandemic. RWC team members hold the Lowe’s 2020 Vendor Partners of the Year Award, US Challenges and Achievements RWC Canada Team RWC Canada wins 2020 The Home Depot Plumbing Partner of the Year Award RWC Canada was awarded the highly coveted The Home Depot Partner of the Year Award for the plumbing category for 2020, for our exceptional level of service and product innovation throughout the year. We’re thankful for our partnerships with all retailers and distributors, and it’s exciting to be acknowledged for our dedication to our craft. With the increased demand, new product launches and complexity of our business, our customer service teams have faced enormous challenges to respond to our customers. These teams have done an incredible job of responding to our customers and providing the best experience for our end users. Delivering for our customers is a genuine multi-departmental and multi-country effort These two awards in the Americas were earnt by all our US and Canadian teams who worked together to make this happen. The products on the shelves came from across our regions, such as SharkBite fittings from Australia and John Guest FluidTech fittings from the UK. These accolades are truly global RWC achievements. 18 19 Delivering our products Our SharkBite fittings travelled from Melbourne to Texas With sudden winter storms in Texas — which On the 2nd of March, RWC sent SharkBite product, brought about devastating plumbing emergencies which was produced in our manufacturing facility like frozen and burst pipes — demand for SharkBite in Melbourne, from Sydney to San Francisco via increased dramatically in Texas and surrounding US a chartered plane. The next day, the shipment flew states from February onwards. RWC’s team worked to Chicago before departing by freight to our facility overtime to make sure plumbers and homeowners in Cullman, Alabama. Finally, our team distributed had access to our emergency repair products, it to Texas. Quite a journey for RWC’s small but such as brass push fittings and PEX pipe. mighty fittings! However, even with increased production, it was proving difficult to keep products on the shelves in affected areas. To better serve our customers, we chartered a plane to transport large quantities of the most critical repair fittings from Australia to the US. Plane takes SharkBite products to the US Melbourne, Australia Challenges and Achievements Continuing product innovation Despite the impacts of COVID-19 on our operations, we also continued to innovate and bring new products to market. In the UK, we brought two of our world-leading brands together to transform installations. RWC launched a new range of valves that combine the control and reliability expected from our valves, with the speed and simplicity of JG Speedfit. Designed for domestic and light commercial applications, the valves range delivers ultimate control with fast and simple JG Speedfit push-fit connections. Our precision engineered valves with push-fit connectors allow both plastic and copper pipe to be fitted with ease. They’re perfect for tight spaces as no tools are required. Another example of product innovation was the launch of the SharkBite Air and Pneumatics range. Harnessing our market-leading large diameter 2XL brass push-fit plumbing technology from SharkBite in the US, we created brass push-fit fittings that simplify small to large commercial and industrial compressed air installations. This is a heavy- duty push-fit air piping system that solves many market challenges such as lengthy installation times, pipework corrosion, pressure drops and leaks that lead to higher energy costs. The new solution complements our existing John Guest lightweight plastic push-fit fittings and pipe range that is designed for small to mid-size applications such as garages and commercial systems. In the US we continued to bring new product ranges to market, the most notable being the launch of stop valves and pipe supports. Our sales teams have worked closely with our channel partners to increase shelf space for our core push-to-connect, and PEX pipe and fittings ranges. These projects have been executed seamlessly, on very tight timelines, through outstanding collaboration between our product management, engineering, sales, marketing and supply chain teams. We have also worked closely with the merchandising teams of our channel partners to ensure our products are merchandised correctly to ensure the best shopping experience for our customers. SharkBite stop valve display US 20 21 Annual Report 2021Reliance Worldwide Corporation LimitedReliance Worldwide Corporation Limited Annual Report 2021 Challenges and Achievements John Guest marks a significant milestone 2021 marks a very special year as John Guest celebrates its 60th anniversary - 60 years of trust, innovation and world-class product design. Opening his factory doors in 1961, John Guest was determined to create a brand where quality and excellence of service underpinned its ethos. One that would change the course of multiple industries forever and become an iconic plumbing brand. Inventing the world’s first push-fit technology, designed initially for compressed air in 1974, John Guest wanted to make installations faster and easier. That was only the beginning of the 60-year long journey, one that has been transforming industries such as plumbing and heating, automotive, drinks, water filtration, telecoms, air and OEM for decades. With a passion for simplicity and reliability, John Guest would go on to invent many more ground-breaking push-fit solutions. These included the first food grade connector in 1983, the first fibre optic fitting for BT, the first automotive push-fit for Ford in 1984 and the multi-seal Twist & Lock plumbing and heating range in 2005. Such innovations, and the pioneering spirit of our people, are the reasons why John Guest is a world-leading brand. We are proud of what the John Guest brand has achieved over the years. From the ingenuity of our engineering teams, through to the dedication of our shopfloor colleagues, to the passion of our technical sales and customer care teams. John Guest’s legacy lives on in RWC’s family of brands and within our teams, inspiring the next generation of push-fit solutions. 22 23 1961 TELECOMSDRINKS DISPENSEOEMCOMPRESSED AIRPLUMBING & HEATINGAUTOMOTIVEReliance Worldwide Corporation Limited Annual Report 2021 Social Impact Making a positive social impact Running our business responsibly is vital to our long-term success, as the decisions we make can have important consequences for the economy, society and the environment. Our approach to corporate social responsibility helps us to ensure that those consequences are positive, adding value for our customers, employees, wider communities and shareholders. Many of our products have a sustainability objective at their heart, including thermal mixing valves, temperature and pressure valves and push-to-connect technology. As well as designing products to improve safety, wellbeing and energy efficiency, we acknowledge the role we play in shaping a more sustainable, just and equal world. That includes sustainably sourcing raw materials, implementing lean manufacturing practices, ethical management of our supply chain and simply putting our minds together to help communities overcome challenges. We focus our efforts around Environmental, Social and Governance (ESG) factors through the lens of product leadership, operational excellence, supporting our people and robust governance. You can read more about RWC’s approach in our latest Social Impact Report on the RWC website: www.rwc.com/social-impact. Managing environmental impacts through the supply chain We recognise that environmental issues are increasingly important to our stakeholders and wider society, and we work to actively manage and minimise these impacts. RWC has an ethical code of practice for supply sites, which provides guidance on the minimum manufacturing standards acceptable for components and raw materials supplied to the group’s companies and for finished products. This year, we continued to raise our manufacturing standards by executing projects that will reduce our carbon footprint. These initiatives include: • Locating production centres closer to the end market to reduce transportation miles. • Sourcing raw materials and components from suppliers closer to production centres and in the regions that the finished product will be marketed and sold. In some cases, these criteria will become mandatory selection criteria for suppliers. As RWC remains committed to reducing our supply chain impacts, we also realise we have much to learn. We are engaging with experts to accelerate our education process, help create roadmaps and determine our goals. Tracy Hill Cullman, Alabama, US 24 25 Reliance Worldwide Corporation Limited Annual Report 2021 Social Impact Fostering Diversity and Inclusion To continue fostering a diverse and inclusive work environment across regions, RWC has focused on Diversity and Inclusion (D&I) education, employee feedback and the evaluation of current policies to further create a workplace where everyone feels welcome, supported and valued. We understand this focus requires ongoing education and engagement across the company. During the year, the Executive Leadership Team held workshops with an external firm to understand the context, requirements and benefits of a diverse and inclusive workforce. Additionally, education programmes ran which included training on diversity and inclusion practices. Another aspect of learning is listening to our people. During the year we conducted employee engagement surveys in all regions that included inclusion and diversity questions. Interviews with employees from all regions and levels of the organisation were held by an external firm to gather input for consideration in building RWC’s diversity and inclusion road map. In addition to listening and learning, we must deliver. At a base level, RWC maintains workplace policies that comply with local legislative requirements. The company supports flexible work arrangements for employees across all regions on a case-by-case basis and reviews parental leave data annually so that employees with children feel supported. We want to make sure various viewpoints are represented in the organisation. When hiring, we use local equal opportunity practices and aim for at least one diverse candidate to be included in the final candidate list. Guarding against Modern Slavery At RWC we are proactively seeking to mitigate the risk of any modern slavery within our operations and • An assessment of the inherent modern slavery risks in our supply chains and operations using a supply chains. We have implemented a broad set of globally benchmarked tool, and undertaken steps policies and procedures to identify modern slavery to understand residual risks for a selection of our risks which include: higher risk suppliers. • Incorporating our modern slavery commitment into existing policies that cover both operations and supply chains while committing to remediation. • Commencing an update of our key internal policies and extending the scope of these policies across our regions. • An analysis of our existing governance structure, strategy, policies and procedures to understand the strengths of our current approach and identify opportunities for improvement. • Taking steps to address the risks identified through improvements to our processes and controls, including updating our standard purchasing documentation to address modern slavery requirements. During the year we published our first Modern Slavery Statement and a copy can be found on our website: www.rwc.com/investors/corporate-governance ‘The programme offers employees the chance to benefit from the results of RWC’s success.’ Empowering employees through the RWC share plan We want everyone at RWC to feel invested in the long-term success of the company. During the year, we offered employees the opportunity to become a shareholder by participating in the organisation’s new Share Match Plan. The programme offers eligible employees the chance to benefit from the results of RWC’s success and is also a way for RWC to reward employees for the contribution they make to our performance. Employees can now build their shareholding gradually through regular post-tax salary deductions, which will be used to purchase shares during each plan year. Eligible employees can acquire up to $5,000 of shares in RWC from post- tax income. The company will match the shares acquired on a 1:2 basis up to a cap of $2,500 of purchased shares, subject to vesting. The 2020 offer was presented to RWC employees in Australia, Canada, New Zealand, the UK and the US. We intend to make participation available to employees in other countries in subsequent offers, subject to resolving local regulatory matters. Over 300 employees elected to participate in the plan in 2020. We hope that by participating, employees will build an even stronger personal connection with RWC and its future achievements. 26 27 Reliance Worldwide Corporation Limited Annual Report 2021 Stategic overview Strategy overview RWC is a global market leader and manufacturer of water delivery, control and optimisation systems for the modern built environment. Our unique end-to-end meter to fixture and floor to ceiling plumbing solutions target the repair and re-model, renovation service and new construction markets. The core end-user for our product is the professional plumber. RWC has three key drivers of growth. The first of these is offering smart product solutions which make the lives of our end customers easier and improves their productivity. This is particularly the case for the pro-plumber who is at the heart of our business, but it’s about enabling DIY customers too. Equally important are our channel partner relationships. In each of our three regions - the Americas, Asia Pacific and EMEA - we have extremely strong distributor networks. RWC put a lot of effort into ensuring that we are helping our channel partners grow value. We do this through expanding the product ranges that are available on their shelves, offering a high level of service and investing in our brands to ensure that they retain their strength and continue to attract end-users into their stores. The third element of our strategy focuses on operational excellence. This involves delivering the highest quality products via a strong logistics capability to ensure that our channel partners always have the right products in stock when they need them. A key aspect of operational excellence is delivering margin expansion through efficient and low-cost operations. Underpinning this is a great culture, sustained by our core values. We support and develop our people while also supporting and caring for the broader communities in which we operate. This has been particularly important over the past year as we have managed the impact of COVID-19. Creating Value through Product Leadership Create and deliver plumbing products that are the first choice for users Solutions for the end-user Distributor Relationships Operational Excellence Smart product solutions that improve contractor productivity, enable the DIYer, and make lives easier. Increasing value for the distributor while providing broadest access to our products for the end-user. Premium quality products and outstanding delivery performance, yielding margin expansion. End user insights Superior service Lean manufacturing New product development High value product Strategic sourcing Acquisitions Brand management Logistics capability Our Team Supporting and developing our people, supporting and caring for the broader community Our Values (our S.P.I.R.I.T.) Simplicity Passion Innovation Reliability Integrity Together we are one Team 28 29 Reliance Worldwide Corporation Limited Annual Report 2021 Board Members and Senior Leadership Team Board Members Senior Leadership Team Stuart Crosby Heath Sharp Christine Bartlett Russell Chenu Independent Non-executive Chairman Member of Nomination and Remuneration Committee Group CEO Managing Director Appointed: 19 February 2016 Appointed: 11 April 2016 Independent Non-executive Director Independent Non-executive Director Chair of Nomination and Remuneration Committee Chair of Audit and Risk Committee Appointed: 6 November 2019 Appointed: 11 April 2016 See Directors’ Report for further details on the Board Members. Darlene Knight Sharon McCrohan Ian Rowden Independent Non-executive Director Independent Non-executive Director Independent Non-executive Director Member of Nomination and Remuneration Committee Member of Audit and Risk Committee Member of Audit and Risk Committee Appointed: 14 April 2021 Member of Nomination and Remuneration Committee Appointed: 6 July 2020 Appointed: 27 February 2018 Heath Sharp Group CEO Andrew Johnson Group CFO Sandra Hall-Mulrain Group SVP and General Counsel Edwin de Wolf CEO EMEA Heath joined RWC in 1990 Andrew joined RWC in 2010 Sandra joined RWC in An experienced General and has worked in each as the CFO of the Americas October 2019. She is Manager with a proven international division of the and has led the division a seasoned corporate track record in the plastics, business, holding senior through rapid growth and generalist with 20 years packaging, security and management positions expansion. He has been of diverse in-house legal building industries, Edwin in Engineering, Product responsible for all aspects experience in Fortune 100 commenced his RWC Management, Sales and of accounting and finance as corporations and privately leadership position in 2017. Operations. Heath was well as various administrative held companies. Sandra With the acquisition of John General Manager of the Cash functions. Andrew has has played a key role as Guest in 2018, Edwin’s role is Acme facility in Alabama over 30 years of finance a member of the senior responsible for the successful after its acquisition in 2002. and accounting leadership leadership team helping to market positioning and He led the Australian division and a strong track record drive strategic initiatives and sustainable commercial from late 2004 and returned in both large and mid-size provide legal advice and development of the business to the US in 2007 to lead the international manufacturing guidance to various business in the UK, Spain, Germany, RWC business there. Heath organisations. activities. Prior to her in- France, Poland, Czech held the roles of President of the US business and global Chief Operating Officer prior to his current role. house counsel career Sandra Republic and Italy. was in private practice in New Jersey. Simon Woods Group SVP of Information Services Sean McClenaghan CEO Americas Brad Reid CEO APAC Simon has strategically led With over two decades Brad has been with RWC for the IT function of numerous of executive leadership nearly three decades. His banking and medical experience and strategic career at RWC commenced companies in the UK and involvement in operations, when he joined the North America. His leadership product development and Brisbane, Australia team as track record led him to engineering, Sean currently a Business Development become RWC’s Group SVP of spearheads RWC Americas, Manager. Currently leading Information Services in 2016. having assumed the position the company’s operation In his role as RWC’s Group of a CEO for that region in in the APAC (Asia-Pacific) SVP of Information Services, 2014. He is responsible for region, his role as CEO looks Simon leads the IT strategy RWC’s commercial success after the group’s business to transform and optimise and sustainable growth in US, development and growth the group’s technology Canada and Mexico. in Australia, New Zealand, architecture, infrastructure and capabilities. China, India and South Korea. 30 31 Operating and Financial Review OPERATING AND FINANCIAL REVIEW This Operating and Financial Review forms part of, and should be read in conjunction with, the statutory Directors’ Report for the Constant Currency Revenue, EBITDA and EBIT Performance year ended 30 June 2021 which commences on page 44. Defined Terms and non-IFRS measures EBITDA: Earnings before interest, tax, depreciation and amortisation EBIT: Earnings before interest and tax NPAT: Net profit after tax EBITDA, Adjusted EBITDA, Adjusted EBIT, Adjusted net profit after tax and Adjusted earnings per share are non-IFRS measures used by RWC to assess operating performance. These measures have not been subject to audit or review. Review of results for the financial period Year ended Net sales Reported EBITDA Adjusted for one-time items: – Restructuring and asset impairment charges Adjusted EBITDA Reported net profit before tax Tax Expense Reported net profit after tax Adjusted for specific tax items: – Cash tax benefit of goodwill amortisation for tax purposes – Prior years tax adjustment – Restructuring and asset impairment charges – CARES Act Benefit Adjusted net profit after tax Basic earnings per share Adjusted earnings per share Declared dividend per share n/m = not meaningful 30 June 2021 (A$ million) 30 June 2020 (A$ million) 1,340.8 340.7 8.5 349.2 272.3 (84.1) 188.2 15.2 – 8.5 – 211.9 1,162.4 217.9 33.4 251.3 135.9 (46.4) 89.4 16.9 4.9 25.7 (6.6) 130.3 24.0 cents 27.1 cents 13.0 cents 11.4 cents 16.6 cents 7.0 cents Variance 15% 56% n/m 39% 100% 81% 111% n/m n/m n/m n/m 63% 111% 63% 86% Year ended Net Sales Americas Asia Pacific EMEA Eliminations (inter-segment sales) RWC Group Adjusted EBITDA Americas Asia Pacific EMEA Corporate/Eliminations RWC Group Adjusted EBIT Americas Asia Pacific EMEA Corporate/Eliminations RWC Group 30 June 2021 A$ million 30 June 2020 Constant Currency A$ million Variance % 30 June 2021 Constant Currency A$ million Reported 936.1 289.8 404.2 (182.3) 1,447.8 182.2 66.6 136.4 (21.1) 364.1 157.4 53.7 116.0 (22.6) 304.5 739.1 244.8 324.3 (145.8) 1,162.4 118.2 44.3 93.0 (4.2) 251.3 92.0 30.1 72.8 (5.6) 189.3 27% 18% 25% 25% 25% 54% 50% 47% 403% 45% 71% 78% 59% 304% 61% 843.4 277.3 390.8 (170.7) 1,340.8 162.5 66.2 129.1 (8.6) 349.2 140.2 53.3 109.5 (10.1) 292.9 The variation between Reported Sales, EBITDA and EBIT and constant currency figures is explained by movements in foreign exchange rates for translation purposes. For example, the average Australian Dollar / US Dollar exchange rate for translation of Americas financial metrics in FY2021 was US$0.7468 compared with US$0.6708 in FY2020. 32 33 OPERATING AND FINANCIAL REVIEWAnnual Report 2021Reliance Worldwide Corporation LimitedOperating and Financial Review OPERATING AND FINANCIAL REVIEW Constant Currency Revenue, EBITDA and EBIT Performance Other major factors which impacted earnings were: Six months ended: Constant Currency A$ million 30 June 2021 A$ million 30 June 2020 Variance % 30 June 2021 Constant Currency A$ million Reported Net Sales Americas Asia Pacific EMEA Eliminations (inter-segment sales) RWC Group Adjusted EBITDA Americas Asia Pacific EMEA Corporate/Eliminations RWC Group Adjusted EBIT Americas Asia Pacific EMEA Corporate/Eliminations RWC Group 513.1 147.1 213.3 (92.6) 780.9 103.5 32.4 72.5 (18.3) 190.1 90.7 26.1 62.5 (19.2) 160.1 392.3 119.4 150.7 (69.3) 593.1 64.6 21.5 40.7 (1.8) 125.0 51.1 14.3 30.1 (2.6) 92.9 31% 23% 42% 34% 32% 60% 51% 78% 917% 52% 78% 82% 108% 639% 72% 442.6 139.1 201.9 (85.2) 698.4 86.7 36.3 66.5 (6.6) 182.9 75.8 30.0 57.1 (7.5) 155.4 Net sales for the year ended 30 June 2021 of $1,340.8 million were 15% higher than the prior year. On a constant currency basis, sales were up 25%, with strong growth recorded in all three regions. Sales growth was due to heightened levels of repair and remodel activity in all key markets, driven in part by increased consumer spending on home improvements during the COVID pandemic, and by increased new residential home building activity. In the Americas, constant currency sales were up 31% in the second half with significantly increased demand arising as a result of a winter freeze event in Texas and surrounding US states. Reported EBITDA for the year was $340.7 million, an increase of 56% on the prior year. Included in reported EBITDA are one-time costs of $8.5 million incurred to enable the expansion and consolidation of RWC’s warehousing and logistics activities in the US and the UK. Adjusting for these costs, EBITDA was $349.2 million, an increase of 39% on Adjusted EBITDA for the prior year. The increase in operating earnings was driven by double digit sales growth in each region for the year, with constant currency sales in the Americas up 27%, Asia Pacific up 18% and EMEA 25% higher. • Increased overhead recoveries due to higher manufacturing and sales volumes in all regions. • Carryover procurement and other continuous improvement savings of $7.0 million. • Adverse foreign exchange impacts of $14.9 million. • Savings in travel, entertainment, advertising and promotions of $7.0 million as a result of lower activity across these expenditure categories due to COVID. Reported net profit after tax (“NPAT”) was $188.2 million, an increase of 111% on the prior year. Adjusting for the restructuring charges and tax items referenced earlier, net profit after tax was $211.9 million, up 63% on the prior year. Segment Review Americas Year ended: Net sales Reported Segment EBITDA Margin Adjusted for one-time items: – Restructuring and asset impairment charges Adjusted EBITDA Adjusted Margin Six months ended: Net sales Reported Segment EBITDA Margin Adjusted for one-time items: – Restructuring and asset impairment charges Adjusted EBITDA Adjusted Margin 30 June 2021 30 June 2020 (A$ million) (A$ million) Variance 843.4 156.2 18.5% 6.3 162.5 19.3% 739.1 96.8 13.1% 21.4 118.2 16.0% 14% 61% 540 bps n/m 37% 330 bps 30 June 2021 30 June 2020 (A$ million) (A$ million) Variance 442.6 80.4 18.2% 6.3 86.7 19.6% 392.3 43.2 11.0% 21.4 64.6 16.5% 13% 86% 720 bps n/m 34% 310 bps Americas segment sales were up 14% for the year and 13% for the second half. Reported sales were negatively impacted by Australian dollar strength during the year. On a constant currency basis, sales were 27% higher for the year and 31% higher in the Cost savings from restructuring initiatives totalling $22.3 million were delivered in the year, and we achieved our targeted cost second half. reduction run rate at the end of the year of $25 million on an annualised basis. The strong sales growth was driven by the strength of the residential repair and remodelling markets in the US and Canada. Higher commodity prices for copper, resins and steel resulted in higher manufacturing input costs. The average copper cost in The trend for increased spending on home improvement was first evidenced following the outbreak of the COVID pandemic in FY2021 was US$6,600 per tonne compared with US$6,000 per tonne in the previous year, and was US$7,400 per tonne in the the fourth quarter of FY2020 and was aided by several government stimulus programs as well as a reduction in spending on other second half. These increased materials costs together with higher packaging and freight costs, negatively impacted earnings by discretionary activities. This trend continued throughout FY2021. All sales channels recorded strong growth for the year. Retail and $16.9 million. Price increases were implemented across a number of product categories during the second half in all regions to hardware channels experienced strong sales growth throughout the year, while wholesale channels saw an improving trend in mitigate the impact of these higher costs. sales growth with sales early in the year adversely impacted by shelter in place restrictions in certain parts of the US and a slower Disruptions arising from the incidence of COVID cases in the UK, Europe and the US put additional pressure on our operations due recovery in commercial construction activity. to increased employee sickness and absenteeism as well as supply chain and logistics disruptions. Factory layout and materials A winter freeze event in February 2021 in Texas and surrounding states in the US boosted sales significantly and partly explains the flow changes to ensure social distancing requirements were met adversely impacted efficiencies and delivery performance. very strong constant currency sales growth recorded in the second half of the year. We estimate that approximately 8.5 percentage It is estimated that $6.2 million in COVID-related costs were incurred during the year. All major RWC manufacturing sites were points of the constant currency sales growth of 27% in the Americas was due to the impact of the freeze (approximately US$42 operational throughout the year and a focus on execution enabled the Group to meet the heightened demand, particularly in the million sales impact). US following the winter freeze event. 34 35 OPERATING AND FINANCIAL REVIEWAnnual Report 2021Reliance Worldwide Corporation LimitedOperating and Financial Review 30 June 2021 30 June 2020 (A$ million) (A$ million) Variance 277.3 66.2 23.9% 66.2 23.9% 244.8 44.3 18.1% 44.3 18.1% 13% 50% 580 bps 50% 580 bps 30 June 2021 30 June 2020 (A$ million) (A$ million) Variance 139.1 36.3 26.1% 36.3 26.1% 119.4 21.5 18.0% 21.5 18.0% 17% 69% 810 bps 69% 810 bps OPERATING AND FINANCIAL REVIEW Constant currency sales growth excluding the freeze is estimated to have been 19% for the year, from a combination of overall growth in market activity, increased demand due to COVID, new customer and product initiatives, and market share gains. Reported EBITDA for the Americas segment was $156.2 million, 61% higher than the prior year. Reported EBITDA included one-off costs relating to the expansion and rationalisation of warehouse and logistics operations in the US of $6.3 million. The lease of a new purpose-built distribution centre in Alabama will significantly expand our capacity and allow us to consolidate our warehousing operations in Alabama onto one site. This will align our distribution network with our long-term growth needs, Segment Review Asia Pacific Year ended: Net sales improve operational efficiencies and further lower the fixed cost base. Excluding these costs, and $21.4 million of restructuring Reported Segment EBITDA costs and impairment charges included in prior year EBITDA, Adjusted EBITDA was 38% higher than the prior year. The principal drivers of EBITDA performance are summarised in the following table: Americas Year Ended: (A$ million) Gross Profit 30 June 2021 prior year Commentary $ Change over 303.1 43.0 $71.9 million: volume growth impact ($34.4 million): foreign currency translation impact ($10.7 million): higher materials costs $12.8 million: continuous improvement initiatives Other impacts: higher freight costs, wage inflation, depreciation and amortisation charges Product development expenses 9.4 9.7 Savings due to restructuring in FY20 resulting in lower employee costs, marketing and product development costs and amortisation Selling and 100.6 3.1 $15.8 million: foreign currency translation impacts Other impacts: increased marketing costs associated with higher volumes (1.5) $3.3 million: foreign currency translation impacts marketing expenses Administration expenses Other expenses 54.0 6.4 Margin Adjusted EBITDA Adjusted Margin Six months ended: Net sales Reported Segment EBITDA Margin Adjusted EBITDA Adjusted Margin Asia Pacific sales were 13% higher for the year and up 18% on a constant currency basis. External sales were up 11% reflecting stronger Australian new housing construction and remodel markets and inter-company sales were up 29% on a constant currency basis due to the strength of demand in the Americas. New housing commencements in Australia increased 7% in the year to 31 March 2021 with new detached commencements up 20%, while multi-family commencements were 11% lower. A significant proportion of RWC’s external net sales in Australia are made in the more cyclical new residential construction market. Asia Pacific Reported EBITDA for the year was $66.2 million, an increase of 50% on the prior year. EBITDA was impacted by higher volumes in the Australian market and higher sales to the Americas segment, with favourable impacts on overhead recoveries. EBITDA was also positively impacted by $10.9 million from the realisation of profit in stock, of which $1.8 million related to inventory 7.7 Prior year included impairment of intangible assets and costs associated with Tennessee plant closure realisation and $9.1 million to foreign exchange translation impacts. The principal drivers of EBITDA performance are summarised in the following table: Asia Pacific Year Ended: (A$ million) Gross Profit Administration expenses 30 June 2021 prior year Commentary $ Change over 92.2 23.8 $14.0 million: volume growth impact $9.1 million: foreign currency translation impact $2.8 million: continuous improvement initiatives $1.8 million: realisation of profit in stock Other impacts: higher overhead recoveries, higher input costs 14.3 3.8 $2.5 million: lower corporate charges 36 37 OPERATING AND FINANCIAL REVIEWAnnual Report 2021Reliance Worldwide Corporation LimitedOperating and Financial Review OPERATING AND FINANCIAL REVIEW Europe, Middle East and Africa (EMEA) EBITDA performance drivers are summarised below: Year ended: Net sales Reported Segment EBITDA Margin Adjusted for one-time items: – Restructuring and asset impairment charges Adjusted EBITDA Adjusted Margin Six months ended: Net sales Reported Segment EBITDA Margin Adjusted for one-time items: – Restructuring and asset impairment charges Adjusted EBITDA Adjusted Margin 30 June 2021 30 June 2020 (A$ million) (A$ million) Variance 390.8 126.8 32.4% 2.2 129.0 33.0% 324.3 81.1 25.0% 11.9 93.0 28.7% 21% 56% 740 bps n/m 39% 430 bps 30 June 2021 30 June 2020 (A$ million) (A$ million) Variance 201.9 64.3 31.8% 2.2 66.5 32.9% 150.7 28.8 19.1% 11.9 40.7 27.0% 34% 123% 1,270 bps n/m 63% 590 bps EMEA Year Ended: (A$ million) Gross Profit 30 June 2021 prior year Commentary $ Change over 195.1 46.3 $44.0 million: Impact of higher volumes ($8.0 million): foreign currency translation impact $7.5 million: continuous improvement initiatives ($1.3 million): higher raw materials (4.0) $1.6 million: foreign currency translation impact 2.8 Prior year included $5.9 million for impairment of Spain plant and equipment Selling and marketing expenses Other expenses 40.8 3.8 Group performance review Dividend A partially franked final dividend of 7.0 cents per share has been declared. Total dividends declared for the year ended 30 June 2021 are 13.0 cents per share totalling $102.7 million which represents 55% of Reported NPAT and 48% of Adjusted NPAT. The company’s intended pay-out range remains between 40% and 60% of annual NPAT. Both FY21 interim and final dividends are 20% franked. As previously disclosed, future dividends are also likely to be only partially franked given recent changes in the company’s geographic mix of earnings following acquisitions. It is currently expected that future Reported net sales in EMEA were up 21% to $390.8 million, while sales in constant currency were up 25%. dividends will be less than 30% franked. Sales volumes recovered early in the year following easing of government COVID restrictions in the UK and Continental Europe, with sales growth initially driven by pent-up demand as channel partners rebuilt inventory levels. In the UK, the recovery in sales activity was driven in particular by the strength of the repair and remodel market. Sales in Continental Europe also improved through the course of the year as markets recovered from COVID impacts. Reported EBITDA was $126.8 million, up 56% on the prior year. EBITDA included $2.2 million of restructuring costs for the outsourcing of warehousing and logistics operations to a third-party logistics provider. This will enable the consolidation of five warehouses into one centrally located distribution facility with future expansion capacity. We will also migrate our current truck and trailer fleet to a more efficient outsourced fleet of vehicles. The prior year included $11.9 million of restructuring costs and asset impairment charges related to RWC’s Spanish manufacturing operations. Adjusting for these items, EBITDA was 39% higher than for the prior year. The record date for entitlement to the final dividend is 10 September 2021. The payment date is 8 October 2021. Year ended: Interim Final Amount payable or paid Capital expenditure 30 June 2021 30 June 2020 % Franked % Franked 30 June 2021 30 June 2020 6.0cps 7.0cps $102.7m 4.5cps 2.5cps $55.3m 20% 20% 20% 20% Capital expenditure payments for property, plant and equipment acquired during the year totalled $48.8 million compared with $43.4 million in the prior year. Growth capital expenditure was $26.3 million with projects oriented primarily to increase Adjusted EBITDA margin increased by 430 basis points to 33.0% for the year. The increase was due to higher volumes, better manufacturing capacity in the Americas and EMEA. $22.5 million was incurred on maintenance capital expenditure. operational leverage, the positive impact of synergies continuing to be delivered through the integration of the John Guest and RWC businesses since acquisition, along with the restructure of both manufacturing and administrative and support functions in the UK Working capital and cash flow undertaken at the start of the FY21 year. Reported net cash inflow from operating activities for the year was $334.3 million, an increase of 20% on the prior year as a result of higher sales and operating earnings. Cash flow conversion1 was 98% of Reported EBITDA, ahead of the 90% target and reflecting continuing tight working capital management. 38 39 1 FY21: Cash flow from operations to Reported EBITDA of $340.7 million. OPERATING AND FINANCIAL REVIEWAnnual Report 2021Reliance Worldwide Corporation LimitedOperating and Financial Review OPERATING AND FINANCIAL REVIEW Balance sheet Health and safety Net cash generation during the year has enabled RWC to maintain a strong balance sheet and conservative financial position. The well-being of RWC employees continued to be the priority during COVID. Every RWC facility continued to implement safety Net debt at 30 June 2021 was $173.9 million, a reduction of $128.3 million during the year (30 June 2020 – $302.2 million). Net debt to Reported EBITDA was 0.51 times2 at 30 June 2021 compared with 1.39 times at the end of the prior year. RWC continues to have significant funding lines available, with cash on deposit and undrawn committed debt funding of $583 million available as of 30 June 2021. The group’s principal source of funding is a $750 million syndicated facility agreement. During measures in accordance with local regulatory requirements and employed best practice to reduce the impact on employees whilst at the facility. Facilities maintained practices established at the onset of the pandemic including telecommuting, on-site social distancing, distribution of hand sanitisers and personal protective equipment. Each region continues to monitor the impacts of COVID and respond as required to changes in positive case rates. the year, the maturity date of a $250 million tranche of this facility was extended by two years. As a result, this facility has one Health and safety ownership throughout RWC at all levels in the operations functions has increased through leaders and tranche of $250 million with a maturity date of 30 September 2022 and two tranches totalling $500 million having a maturity employees reporting of hazardous conditions, near-miss events, and peer to peer safety conversations through the implementation date of 30 September 2023. Group companies in the US and Australia also have access to committed overdraft facilities of US$15 of behaviour-based safety activities. Facilities have increased employee health and safety engagement from 24% at the start of million and A$15 million respectively. RWC expects that it will remain in compliance with all financial covenants in the syndicated facility agreement. Capital management FY2021 to 41% at year end. These activities are led by the manufacturing and distribution facilities in all regions. During FY2021 nearly 10,000 safety observations, near-miss events, and hazards were reported by employees directly impacting the incident rate improvements. RWC had a reportable incident rate of 1.21 per 100 employees at the end of FY2021 year compared to 1.23 in FY2020. Regions RWC’s balance sheet has been strengthened considerably over the past two years due to strong operating cash flow generation. continue to support global initiatives by increasing employee engagement activities such as site safety committees and the safety The Company has assessed that its optimal capital structure will be achieved by maintaining its net debt levels to achieve a observations process. Health and safety leaders from each region collaborate monthly to share general knowledge and identify leverage ratio (net debt to EBITDA) in the range of 1.5 to 2.5 times. Sustaining a level of debt within this range over the long term best practices to implement. will ensure the Company minimises its cost of capital whilst at the same time continues to have investment grade equivalent credit metrics. This will ensure it is continually able to access long term debt markets and have acceptably low refinancing risk of its debt facilities. RWC’s leverage is currently below this range as a result of very strong cash generation over the past two financial years. The Company continues to look for future investment opportunities both for organic growth and M&A and is comfortable maintaining a lower level of debt while these opportunities are being explored. To the extent that the Company is generating excess cash flows beyond what is required to fund maintenance and growth capital expenditure and pursue M&A and other inorganic growth opportunities, RWC’s principal means of distributing cash to shareholders will be through dividends. The Company will continue to pursue its policy of distributing between 40% and 60% of annual NPAT by way of dividends each year. It is noted that the Company is only able to pay partially franked dividends for Australian taxation purposes due to the geographic mix of its earnings beyond Australia. Operations have started to implement additional internal audit processes led by first level leaders in the manufacturing facilities. This audit process is allowing leaders to identify health and safety risks, assign corrective actions and track these tasks to completion. These regular “safety walks” by site managers will help to minimise risks in the manufacturing facilities as well as demonstrate our commitment to the safety of our people. In FY2022, these safety walks will expand to include regional and global executives each time they visit manufacturing and distribution locations. Regional and global executives review reportable and lost time injuries monthly, together with details of specific incidents. Findings of injury inquiries are shared globally to increase learnings and adoption of best practices. Data is regularly reviewed by the Board. In addition to metrics such as reportable injury rate and lost time injury rate, all regions monitor leading indicator reporting and employee engagement each month. Beyond paying dividends to shareholders, the Company has determined that the purchase of RWC shares through an on-market FY2022 outlook share buyback has the potential to be the most effective means of distributing excess cash. The Company believes a share The outlook for RWC’s key markets in FY2022 is positive, with market fundamentals currently signalling steady demand. Economic buyback would be value enhancing for shareholders as it would contribute to positive earnings accretion on an Earnings Per Share conditions look to be broadly favourable, underpinned by significant government stimulus measures. (EPS) basis as well as improve return on equity. The Company will consider share buybacks in the future having regard to its level of earnings, operating performance, economic outlook, and its capital requirements to support organic growth and other investment opportunities including M&A. Taxation COVID has undoubtedly prompted a step change in remodelling activity in RWC’s major markets, and it is uncertain the extent to which potential changes in consumer spending away from home projects post-COVID will be offset by a longer-term trend of increased expenditure on homes. Despite this uncertainty, however, it is expected that a backlog of work with plumbing contractors is likely to have a smoothing effect on overall activity levels, thereby helping to prolong current demand levels. The accounting effective tax rate for the period was 30.9%. This rate excludes RWC’s entitlement to claim amortisation of certain Managing cost inflation, and commodity input costs in particular, will remain a challenge in FY2022 and a dynamic pricing intangibles for taxation purposes under longstanding tax concessions available in the US. Goodwill is not amortised for accounting environment is likely to ensure any cost increases can be offset with commensurate price adjustments. As a result of price purposes under accounting standards. The benefit arising from the amortisation of goodwill for cash tax purposes in the period increases on a range of products announced in FY2021, average prices in FY2022 are forecast to be 6% higher than FY2021. was $15.2 million. Price increases may be margin dilutive by up to 1% where they are applied to offset equivalent cost increases with no net Adjusting for this item, tax expense for the period was $68.9 million, representing an Adjusted effective tax rate of 25.3%. Adjusted contribution to gross margins. effective tax rate best represents the rate of tax paid by the Group. RWC expects that the Adjusted effective rate will be in the While RWC expects its core end-markets to remain resilient, given that repair and maintenance activities are essential services that range 24% to 26% in FY2022. 2 Excludes leases 40 are not significantly impacted by economic cycles, the operational and financial performance of the business could be adversely affected by COVID-related factors. These include potential disruptions to our supply chain, government restrictions on plumbing and construction works and the economic performance of the key countries in which we operate. The duration of the pandemic and its impact on the business remains uncertain. 41 OPERATING AND FINANCIAL REVIEWAnnual Report 2021Reliance Worldwide Corporation LimitedOperating and Financial Review OPERATING AND FINANCIAL REVIEW Americas Earnings guidance The US economy has been relatively healthy with a COVID recovery positively impacting segments and consumer behaviour, Due to the ongoing uncertainty surrounding market conditions and any potential impacts of further COVID outbreaks, RWC will not although recent increases in COVID cases represent an ongoing risk to economic performance. Home remodelling activity is provide earnings guidance for FY2022 at this time. We will update investors each quarter on trading conditions in the three regions, expected to remain strong given the fundamentals in core US residential segments. The ongoing strength in existing and new including sales and operating earnings. The next scheduled update on trading conditions will be at the annual general meeting on home sales, house price appreciation, and new residential construction activity, together with positive consumer sentiment and 28 October 2021. In terms of specific cost items, the following key assumptions are provided for FY2022: a low-interest rate environment should remain supportive of demand levels in FY2022. Weakness in non-residential activity is likely to continue in FY2022 with lower investment in retail shopping malls, commercial office space, hospitality, healthcare, educational facilities and high-rise multi-family developments. • Capital expenditure is expected to be approximately US$60 million to US$70 million (A$78 million to A$90 million). • Further cost reduction initiatives are expected to deliver US$12 million (A$16 million) in cost savings. • Depreciation and amortisation expense is expected to be in the range of US$46 million to US$48 million. In Canada, the vaccine roll-out has alleviated fear of long-term economic impact of lockdown restrictions experienced in FY2021. (A$59 million to A$62 million). Looking forward, the levers of growth for the Americas remain unchanged from those we have presented in recent years. The first element will be market growth. Sales growth rates are expected to moderate significantly following the exceptionally strong levels recorded in FY2021. For FY2022, the market growth rate will be determined primarily by the sustainability of the COVID volume uplift of the last twelve months. We cannot know for certain the extent to which the increase in demand brought about by COVID will be sustained. Beyond market growth, we will be aiming to deliver customer and product initiatives in FY2022 to drive sales growth. Sales activity will also be partly determined by winter weather conditions, as evidenced in FY2021 with the strong demand generated by the US winter freeze event. • Net interest expense is expected to be in the range of US$7 million to US$9 million (A$9 million to A$12 million). • We expect an adjusted effective tax rate in the range of 24% to 26%. • The average copper price is assumed to be US$10,000 per tonne. RWC estimates that its earnings sensitivity to changes in the cost of copper is such that a US$100 per tonne movement in the copper price would impact EBITDA by US$1.1 million p.a. • The average Australian Dollar/ US Dollar exchange rate in FY2021 for earnings translation was US$ 0.7468. • The average Australian Dollar / Pound Sterling rate in FY21 for earnings translation was GBP 0.5547. Variations in economic conditions, trading conditions or other circumstances may cause these key assumptions to change. Key indicators for the year ahead we will be tracking include trends in channel sales volume and inventory levels, and any signs that Commentary on trading conditions since 30 june 2021 current buoyant conditions are easing, trends in non-residential construction activity, and changes in US consumer sentiment. Asia Pacific In Australia, current economic indicators signal a stable demand outlook for FY2022 with increases in residential dwelling approvals expected to translate into ongoing strong construction activity levels. House price appreciation and low interest rates should remain supportive of continued momentum in the repair and remodelling sector. Longer term, the removal of specific government stimulus programmes and lower immigration levels and foreign student enrolments, may adversely impact the demand outlook. EMEA In EMEA, economic signals continue to indicate positive demand conditions amid the easing of COVID restrictions. In the UK, short-term housing demand and economic indicators remain favourable, pointing to continued strong demand. Repair and remodel activity has been the strongest performing sector within the UK residential construction segment, with the level of activity higher than pre-pandemic levels. As in other markets, however, there is uncertainty around post-COVID consumer behaviour and the potential for a shift in spending from home improvement to entertainment and leisure. While the recovery in Continental Europe started later than the UK, it is anticipated that demand will continue to improve with increased vaccine availability and economies opening up further. Change in reporting currency RWC has changed its reporting currency from Australian dollars to US dollars with effect from 1 July 2021. Consolidated financial results for the 2022 financial year, including half year earnings, will be reported in US dollars. This change better reflects RWC’s business revenue, cost base and earnings mix, with the US market the largest in terms of sales revenue and operating earnings. In July, positive sales growth over the same month in the prior year was experienced in all three regions, with reported net sales up 9% overall and 6% on a constant currency basis. The rate of growth was lower than for FY2021, reflecting the very strong sales growth in the Americas at the start of FY2021 and the strong recovery in volumes experienced in the UK from July 2021 onwards. Australian sales maintained their growth momentum supported by growth in residential construction activity. These trends have continued broadly in August. Underlying demand remains strong but sales are being constrained by ongoing supply chain disruptions including raw materials availability, shipping delays and a shortage of labour in plumbing trades. Trading results can vary month by month and care should be taken not to extrapolate one month’s performance. 42 43 OPERATING AND FINANCIAL REVIEWAnnual Report 2021Reliance Worldwide Corporation LimitedDirectors' Report DIRECTORS’ REPORT For the year ended 30 June 2021 The Directors present their report together with the Financial Report comprising Reliance Worldwide Corporation Limited Christine Bartlett (“the Company”) and its controlled entities (together “RWC” or “the Group”) for the financial year ended 30 June 2021 (“reporting period”) and the Auditor’s report thereon. Independent Non-Executive Director Chair of Nomination and Remuneration Committee The following sections, which are presented separately, form part of and are to be read in conjunction with this Directors’ Report: • Operating and Financial Review (page 32); and • Remuneration Report (page 56) Directors The Directors of the Company at any time during or since the end of the reporting period were: Ms. Bartlett is an experienced CEO and senior executive with extensive line management experience gained through roles with IBM, Jones Lang LaSalle and National Australia Bank Limited. Her executive career has included Australian, regional and global responsibilities based in Australia, the USA and Japan. She is currently a Non-Executive Director of Mirvac Group, Sigma Healthcare Limited and TAL; and was previously a director of GBST Holdings Limited, PropertyLook, National Nominees Ltd, the Australian Custodial Services Association, icare and The Smith Family. She is a member of the UNSW Australian School of Business Advisory Council, Chief Executive Women and the Australian Institute of Company Directors. Ms. Bartlett holds a Bachelor of Science from the University of Sydney and has completed senior executive management programs at INSEAD. Stuart Crosby (Chairman) Heath Sharp (Group Chief Executive Officer and Managing Director) Christine Bartlett Russell Chenu Darlene Knight Sharon McCrohan Ian Rowden Appointed 11 April 2016 19 February 2016 6 November 2019 11 April 2016 14 April 2021 27 February 2018 6 July 2020 Ross Dobinson was a Director of the Company during the reporting period until 14 April 2021 when he retired from the Board. Details of the experience and qualifications of Directors in office at the date of this report are: Stuart Crosby Independent Non-Executive Chairman Member of Nomination and Remuneration Committee Mr. Crosby was appointed Chairman on 4 March 2019. Mr. Crosby was the Chief Executive Officer and President of Computershare Limited for nearly eight years until June 2014. Mr. Crosby previously held a number of senior executive positions across the Computershare business. Prior to joining Computershare, Mr. Crosby worked for the Australian National Companies and Securities Commission, the Hong Kong Securities and Futures Commission and at ASX Limited. Mr. Crosby is Chair of AMES Australia. Other listed company directorships in the past 3 years: None Heath Sharp Group Chief Executive Officer and Managing Director Mr. Sharp was appointed Group Chief Executive Officer in 2015. He joined RWC in 1990 as a Design Engineer in the Brisbane based Product Development team. He has worked in each international division of the business throughout his career, holding senior Other listed company directorships in the past 3 years: Mirvac Group (since December 2014) Sigma Healthcare Limited (since March 2016) GBST Holdings Limited (July 2015 until November 2019) Russell Chenu Independent Non-Executive Director Chair of Audit and Risk Committee Mr. Chenu is an experienced corporate and finance professional who held senior finance and management positions with a number of ASX listed companies. His last executive role was Chief Financial Officer of James Hardie Industries plc from 2004 to 2013. He is currently a Non-executive Director of CIMIC Group Limited and Vulcan Steel Limited. Mr. Chenu holds a Bachelor of Commerce from University of Melbourne and an MBA from Macquarie Graduate School of Management, Australia. Other listed company directorships in the past 3 years: CIMIC Group Limited (since June 2014) James Hardie Industries plc (August 2014 until November 2020) Metro Performance Glass Limited (July 2014 until August 2021) Darlene Knight Independent Non-Executive Director Member of Nomination and Remuneration Committee Ms. Knight’s operational experience was gained with multi-national manufacturing businesses, primarily in the automotive sector, where she held strategic and operations focused roles. Darlene has held senior leadership roles at both supplier and OEM organisations, including General Motors Corporation, EDSCHA GmbH, Johnson Controls, Inc. and Adient, Plc. She has experience in engineering, global manufacturing and quality. Her roles have included P&L responsibility. Ms. Knight holds a Master of Science in Engineering Science from Rensselaer Polytechnic Institute and a Bachelor of Science in Industrial Administration from Kettering University. Ms Knight is based in the USA. management positions in Engineering, Product Management, Sales and Operations. He was appointed General Manager of the Other listed company directorships in the past 3 years: None Cash Acme facility in Alabama following its acquisition by RWC in 2002. He returned to lead the Australian division in late 2004, the largest operation at the time. Mr Sharp moved back to the USA in 2007 to re-join the US business and steer its rapid growth in RWC’s largest market. Mr. Sharp held the roles of President of the USA business and Group Chief Operating Officer prior to his current role as Group Chief Executive Officer. Mr. Sharp holds a Bachelor of Mechanical Engineering degree from the University of Southern Queensland. Other listed company directorships in the past 3 years: None 44 45 DIRECTORS’ REPORTFor the year ended 30 June 2021Annual Report 2021Reliance Worldwide Corporation LimitedDIRECTORS’ REPORT For the year ended 30 June 2021 Sharon McCrohan Independent Non-Executive Director Member of Audit and Risk Committee Member of Nomination and Remuneration Committee Ms. McCrohan is an experienced media and strategic communications consultant with a career spanning almost 30 years. Ms. McCrohan has been an advisor to Federal and State government leaders and cabinets, private sector boards, sporting bodies, statutory authorities, charities and government agencies. Ms. McCrohan has extensive experience in media and communications, policy development, government and stakeholder relations and executive team leadership. Ms. McCrohan is a non-executive director of Racing Victoria Limited, the Ovarian Cancer Research Foundation Board and the Transport Accident Commission (Victoria). Ms. McCrohan holds a Bachelor of Arts (Journalism) from Royal Melbourne Institute of Technology and is a Graduate member of The Australian Institute of Company Directors. Other listed company directorships in the past 3 years: None Ian Rowden Independent Non-Executive Director Member of Audit and Risk Committee Mr. Rowden’s experience was gained in high profile global roles focused on commercial, marketing and operational activities with an emphasis on developing and executing strategic plans for business growth. Mr. Rowden worked for over 20 years with The Coca-Cola Company, including senior leadership roles based in Hong Kong and Atlanta, Georgia. This included roles as Worldwide Director of Consumer Communication, Region President for the China Division and Director of Marketing for South East Asia. He has also held roles as chief marketing officer for The Callaway Golf Company and Wendy’s International; and was a Partner at The Virgin Group. Mr. Rowden was Chairman and CEO, Asia Pacific of Saatchi and Saatchi from 2008 to 2011. Mr. Rowden is currently a non-executive director of Enero Group Limited (ASX: EGG) and was formerly a director of QMS Media Limited (ASX listed until February 2020) and Virgin Galactic (NYSE: SPCE). He is a partner and investment advisory board member of Innovate Partners, a US based venture capital company. He is also non-executive Chairman of Brightguard LLC., a director of The Miami Ad School, a non-profit organisation, and a senior advisor to Bowery Capital and DuluxGroup. Mr. Rowden is based in the USA. Other listed company directorships in the past 3 years: Enero Group Limited (since November 2018) QMS Media Limited (February 2019 to February 2020) Company Secretary David Neufeld Mr. Neufeld has been Company Secretary since April 2016. He has over 35 years’ experience in chartered accounting and corporate organisations, including over 15 years’ experience as Chief Financial Officer and/or Company Secretary of ASX listed companies. Mr. Neufeld has extensive experience in financial and management reporting, corporate compliance, governance and risk management, audit and business acquisitions and divestments. Mr. Neufeld holds a Bachelor of Commerce (Honours) from University of Melbourne and is a member of Chartered Accountants - Australia & New Zealand and a Graduate member of The Australian Institute of Company Directors. Directors' Report Director meetings The number of Board meetings and meetings of Board Committees held and the number of meetings attended by each of the Directors of the Company during the reporting period are listed below. Director Board Meetings Committee Meetings Committee Meetings Held¹ Attended¹ Held¹ Attended¹ Held¹ Attended¹ Audit and Risk Nomination and Remuneration Christine Bartlett Russell Chenu Stuart Crosby Ross Dobinson² Darlene Knight3 Sharon McCrohan Ian Rowden4 Heath Sharp 12 12 12 8 4 12 12 12 12 11 12 8 4 12 12 12 – 13 – 12 – 13 12 – – 12 – 12 – 13 12 – 9 – 9 6 1 9 – – 9 – 9 6 1 9 – – Directors who are not members of Board Committees have a standing invitation to attend Committee meetings and do attend from time to time. The above table only reflects attendance at Committee meetings by members of the relevant Committees. Environmental regulation and performance RWC’s manufacturing operations have to date not been adversely affected by environmental laws and regulations. Manufacturing operations primarily involve brass forging and machining, PEX extrusion, plastic moulding and product assembly. Historically, the environmental impact of these processes has been minimal and RWC believes it meets current environmental standards in all material respects. Environmental and social sustainability are core to RWC’s operations and important to its strategy. We understand that running our business responsibly is vital to our long-term sustainability and the decisions we make have consequences for the economy, society and the environment. RWC published Social Impact Reports in 2020 and 2021. A copy of each report can be viewed on the Company’s website at www.rwc.com. The reports provide information on our approach to sustainability, identifies our material topics and how they are currently managed, our achievements and areas for improvement. Global macro trends related to water are creating challenges for the built environment that RWC can help to solve. There are opportunities for RWC to make a positive contribution through the products we design and manufacture. We have existing solutions that we can provide and are also continually investing in new products and solutions. These may have different applications across the regions in which we operate. In particular, RWC has a clear role in the provision of clean water and sanitation and also in developing sustainable and resilient infrastructure, particularly in the context of cities. Since water and energy are closely connected, water efficiency also contributes to energy efficiency. As a manufacturer and distributor, we also recognise that our operations have an environmental footprint and that we need to manage the social and environmental impacts of our supply chain. We continue to assess our risks and opportunities arising from climate impacts. Principal activities The principal activities of RWC are the design, manufacture and supply of high quality, reliable and premium branded water flow, control and monitoring products and solutions for the plumbing and heating industry. 1 Number of meetings held and attended during the period the Director was a member of the Board or Committee. 2 Retired as a Director on 14 April 2021. 3 Appointed as a Director on 14 April 2021; Appointed to the Nomination and Remuneration Committee on 30 April 2021. 4 Appointed as a Director on 6 July 2020; Appointed to the Audit and Risk Committee on 21 July 2020. 46 47 DIRECTORS’ REPORTFor the year ended 30 June 2021Annual Report 2021Reliance Worldwide Corporation Limited Directors' Report Significant changes in the state of affairs The operations of the Group have been impacted, and continue to be impacted, by the COVID-19 pandemic. The COVID-19 outbreak was declared a pandemic by the 'World Health Organisation' in March 2020. The responses of governments across the world in dealing with the pandemic have impacted business activity levels in countries and markets where the Group operates. The Group took actions to minimise negative impacts on its operations and financial position. Despite the challenges presented by the COVID-19 pandemic, the Group kept all its manufacturing facilities operating and a focus on execution enabled increased demand to be met. The Operating and Financial Review contains additional information. In preparing the consolidated financial statements in conformity with Australian Accounting Standards, due consideration has been given to the judgements, estimates and assumptions that affect the application of accounting policies and 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 judgements about carrying values of assets and liabilities that are not readily apparent from other sources. The ongoing COVID-19 pandemic continues to impact the estimation uncertainty in the preparation of the consolidated financial statements. At 30 June 2021, the Group has reassessed all significant judgements, assumptions and critical estimates included in the consolidated financial statements, including but not limited to, provisions against trade debtors and inventory and impairment of non-current Risk Loss of customer risk • There can be no guarantee that key customers will Description continue to purchase the same or similar quantities of Management plans • Maintain connections with, and deliver ongoing business opportunities, to key RWC’s products as they have historically. Competition, customers. including the price of competing products relative to RWC’s products, could impact upon demand for RWC’s products. • The loss of any of RWC’s key customers or a significant reduction in the volume of products purchased by one or more key customers may adversely impact RWC’s financial performance. • Continuing focus on differentiated products and solutions as well as customer service. • Investment in research and development to provide innovative products and remain the supplier of choice. • Plans are in place to continue to diversify the customer base and reduce the potential impact of this risk. Materials supply • Any adverse change in RWC’s ability to procure raw • RWC aims to have appropriate assets. Actual results may differ from these estimates. Details of the main judgements, estimates and assumptions applied are set and price risk materials, a material increase in the cost of raw materials agreements in place with major suppliers. out in the notes to the consolidated financial statements. There were no significant changes in the affairs of the Group during the reporting period other than as set out above. Material business risks RWC continues to evolve its risk management policies and processes. Set out in the table below are: • a summary of specific material business risks which could impact upon RWC’s ability to achieve its business objectives and/or its financial results and position; and • management plans to mitigate against each business risk listed. The information is provided as a guide to RWC’s current risk management focus. The COVID-19 pandemic shifted our risk profile resulting in some plans to monitor and manage these risks being updated. The list is provided in no particular order and is not exhaustive. Risk RWC is exposed to changes in general Description • RWC’s financial performance is largely dependent on activity in the residential and commercial repair and Management plans • Processes in place to be able to respond to changes in conditions and adjust economic conditions, renovation and new construction end-markets in the production, delivery and raw materials legislation and North American, Asia Pacific and European regions. purchasing requirements as well as regulation which may Activities in these end-markets are impacted by changes manage operating and overhead costs as impact activity in in general economic conditions; and to legislation and considered necessary and appropriate. RWC’s end-markets. regulation (for example, changes to plumbing codes; RWC’s systems and processes are tariff rates and import duties; and post Brexit trade supported by audit protocols and and regulatory arrangements). Activities in the repair end-market may also be impacted by the occurrence of extreme weather events. • A prolonged downturn in general economic conditions either globally or in any geographic region in which RWC operates may impact demand for plumbing services in RWC’s end-markets, thereby decreasing demand for RWC’s products and services. The COVID-19 pandemic is an example of an event which caused and continues to cause significant impact on general economic conditions. The impact and uncertainty caused by COVID-19 is expected to continue for some time into the future. • Any such downturn may have a material adverse impact on RWC’s operations and financial results. monitoring of key performance indicators. • Key economic indicators are monitored for data which will assist the business in being proactive in its decision making. • The COVID-19 pandemic resulted in a review of the inputs and methodologies of our forecasting and financial planning systems to improve reaction and response times to abnormal events. or any increase in indirect production costs would result in an increase in RWC’s overall costs. RWC’s profitability could be adversely impacted if it is unable to pass on such cost increases to its customers. For example, a US$100/tonne change in the cost of copper is estimated to impact EBITDA by approximately US$1.1 million. Foreign currency risk • RWC’s results are impacted by exchange rate movements. In particular, exposure to USD, AUD, GBP, Euro and Yuan. • Furthermore, as RWC expands globally, it becomes exposed to additional currencies and a higher proportion of its net sales, profitability, cash flows and financial position will be affected by exchange rate movements. • Movements in exchange rates can impact profitability and cash flows. • Active management of procurement processes. • Continuing program to “dual source” key materials and components to enable price verification, quality control management and reduce risk of supplier concentration. • RWC periodically benchmarks prices for key material/product supply. • RWC does not typically hedge its foreign exchange exposures. RWC currently benefits from several "natural hedges" against currency movements. For example, the impact of foreign currency denominated purchases against foreign currency sales. RWC Australia's sales to RWC USA are denominated in US dollars and the majority of raw materials and components purchased by Australia for use in production for the USA are denominated in US dollars. • Foreign currency risk is monitored and analysed with consideration given to alternative strategies to manage foreign exchange risk as the business expands and exposure to other currencies increases. • Where appropriate, transaction timings are optimised to minimise impacts. • RWC will report its financial results in US dollars from FY2022. This is expected to reduce the impact of foreign currency movements on reported results. 48 49 DIRECTORS’ REPORTFor the year ended 30 June 2021DIRECTORS’ REPORTFor the year ended 30 June 2021Annual Report 2021Reliance Worldwide Corporation LimitedRisk Events affecting Description • The equipment and management systems necessary Management plans • RWC had 14 manufacturing facilities Risk Impact of product Description • RWC is exposed to the risk of product recalls and Management plans • Continuing investment in production manufacturing or for the operation of RWC’s manufacturing facilities may located in five countries at 30 June 2021. recalls, product product liability claims where a defect in a product technology and quality control processes Directors' Report delivery capability break down, perform poorly, fail or be impacted by a fire This geographic dispersion reduces the liability claims or sold or supplied by RWC or incorrectly installed by a or major weather event (such as a snow storm, tornado, impact on total production output if an claims against RWC third-party contractor could result in, results in or cyclone or flood) resulting in manufacturing delays, adverse event occurs at one or more of where a product is alleged to have resulted in, personal injury or increased manufacturing costs or an inability to meet the sites. has not been property damage. customer demand. • Events could also arise which impact upon RWC’s ability to ship and deliver product from its facilities in a timely manner. The COVID-19 pandemic resulted in significant market and supply chain disruption leading to increased risk around business planning and management. • Any significant or sustained interruption to RWC’s manufacturing or delivery processes may adversely impact RWC’s net sales and profitability. Climate related risks and impacts • As a manufacturer and distributor, we recognise that our operations have an environmental footprint and that we • RWC has established long term machine maintenance support programs with key suppliers. • RWC carries stores of key maintenance spare parts to support timely repairs to and maintenance of its production equipment and facilities. • Investment in high quality machinery and extensive operator training to enable machine/operator substitution in the event of machinery breakdown. • RWC’s response to the operational impacts of COVID-19 together with existing risk management controls minimised the impact of the pandemic on manufacturing capacity and output. • Safety hazard training undertaken and appropriate onsite procedures in place. • Business interruption insurance in place. • Continuing to assess our climate related business risks and how best need to manage the social and environmental impacts to mitigate these. of our supply chain. • There may be climate related factors which impact our operations in both the near and longer term. For • An ongoing project to identify and capture emissions information and then set appropriate, practical targets and plans to example, these impacts could be in areas such as achieve these. availability and cost of materials used in our products or manufacturing processes, transport and/or occurrence of extreme weather events. Any significant or sustained impacts could adversely affect RWC’s financial performance and/or financial position. • Material climate related risks identified will be incorporated into RWC’s enterprise risk management processes. • RWC’s published Social Impact Reports provide information on our approach to managing and mitigating climate related risks and impacts. correctly installed by a third party. • RWC may suffer loss as a result of claims for which it is not insured or if cover is denied or exceeds available limits. Key personnel risk • RWC’s success depends on the continued active participation of its key personnel. • If RWC were to lose any of its key personnel or if it were unable to employ additional or replacement to minimise the risk of product defects. • RWC maintains rigorous quality assurance accreditation in all its manufacturing/ distribution locations. These quality systems are regularly audited by external third parties. • Investment in training of professional contractors on correct installation and use of products. • Maintain appropriate insurance policies. • RWC seeks to employ high quality personnel who are remunerated by market competitive arrangements. • Historically, there is a good record of personnel, its operations and financial results could retaining key staff. be adversely affected. • Succession planning is a focus of the Board and managed on its behalf by the Nomination and Remuneration Committee. Information Technology • Technological advancements and risks of cyber-crime can impact the integrity of RWC’s IT systems and • IT security policies and recovery plans in place. (including cyber make them vulnerable to attack if appropriate security security) measures are not in place. • Ongoing system monitoring and testing, including review of security protocols. • Appropriate insurance policies. • Alerts and reminders sent to employees. • Fully maintained hardware and software security measures provide a high watch status on illegal attempts to penetrate our systems. 50 51 DIRECTORS’ REPORTFor the year ended 30 June 2021DIRECTORS’ REPORTFor the year ended 30 June 2021Annual Report 2021Reliance Worldwide Corporation LimitedDirectors' Report Dividends Audit and Non-Audit Services An interim dividend for the financial year ended 30 June 2020 of 4.5 cents per share, franked to 20%, was declared by directors Fees paid or payable by RWC for services provided by KPMG, the Company’s auditor, during the reporting period were: on 24 February 2020 with an expected payment date of 9 April 2020. On 25 March 2020, the Company announced that, in view of the need to prudently manage cash resources during a period of uncertainty caused by the COVID-19 pandemic, payment of this interim dividend would be deferred. This interim dividend was paid to eligible shareholders on 9 October 2020. A final dividend for the financial year ended 30 June 2020 of 2.5 cents per share, franked to 20%, was paid to eligible shareholders on 9 October 2020. An interim dividend for the financial year ended 30 June 2021 of 6.0 cents per share, franked to 20%, was paid to eligible shareholders on 9 April 2021. Since the end of the reporting period, the Directors have resolved to declare a final dividend for the financial year ended 30 June 2021 of 7.0 cents per share. The dividend will be franked to 20%. The record date for entitlement to the dividend is 10 September 2021. The dividend is payable to eligible shareholders on 8 October 2021. The aggregate dividends paid or declared for the financial year ended 30 June 2021 total $102.7 million (2020 - $55.3 million). The Company does not have a dividend reinvestment plan. Events subsequent to reporting date KPMG Australia Audit services Other assurance and non-audit services • Tax services Total fees paid or payable to KPMG Australia Overseas KPMG offices Audit services Other assurance and non-audit services • Tax services Total fees paid or payable to overseas KPMG offices On 20 July 2021, the Company announced it had entered into an agreement to acquire the business assets of LCL Pty Ltd (“LCL”). Total fees paid or payable to KPMG 2021 $ 699,500 43,750 743,250 328,119 127,861 455,980 1,199,230 The acquisition completed on 2 August 2021. The final purchase price was $36.7 million. The acquisition was funded through existing committed borrowing facilities. LCL is one of Australia’s largest producers of high-quality copper-based alloys and processes both new and recycled non-ferrous materials to produce a range of brass copper alloys. In addition to being the principal supplier of brass to RWC in Australia, LCL also recycles excess brass (swarf) arising from RWC’s product manufacturing activities. The Directors are not aware of any other matter or circumstance that has occurred since the end of the reporting period that has significantly affected or may significantly affect the operations of RWC, the results of those operations or the state of affairs of RWC in subsequent financial reporting periods which has not been covered in this report or the financial statements. Likely developments and prospects Details of likely developments for RWC and prospects for future financial reporting periods are contained in the Operating and Financial Review. Share options The Directors, in accordance with advice from the Audit and Risk Committee which has considered the non-audit services provided by KPMG during the financial year ended 30 June 2021, are satisfied that the provision of those non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001 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 Company and have been reviewed by the Audit and Risk 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’s independence as set out in APES110 – 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 Company, acting as an advocate for the Company or jointly sharing risks and rewards. Lead auditor’s independence declaration under Section 307C of the Corporations Act 2001 Details of options granted under the Company’s Equity Incentive Plan are set out in the Remuneration Report and Note 17 of the The lead auditor’s independence declaration set out on page 84 forms part of this Directors’ Report. financial statements. No other share options have been granted by the Company at the date of this report. Rounding off Directors’ interests Details of Directors’ interests in the Company’s issued securities are set out in the Remuneration Report. In accordance with the Australian Securities and Investments Commission Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191 values are rounded to the nearest thousand dollars, unless otherwise stated. Where an amount is $500 or less Corporate Governance Statement The Company’s Corporate Governance Statement can be viewed at www.rwc.com/investors/corporate-governance. Indemnification and Insurance of Officers The Company’s Constitution provides that the Company may indemnify any current or former Director, Secretary or executive officer of the Company or of a subsidiary of the Company out of the property of the Company against every liability incurred by a person in that capacity whether civil or criminal or of an administrative or investigatory nature in which the person becomes involved because of that capacity. In accordance with the provisions of the Corporations Act 2001, the Company has a Directors’ and Officers’ Liability policy which covers all past, present or future Directors, Secretaries and executive officers of the Company and its controlled entities. The terms of the policy specifically prohibit disclosure of details of the amount of the insurance cover and the premium paid. The indemnification and insurances are limited to the extent permitted by law. the amount is rounded to zero, unless otherwise stated. This report is made in accordance with a resolution of the Directors. Stuart Crosby Chairman Melbourne 23 August 2021 Heath Sharp Group Chief Executive Officer and Managing Director 52 53 DIRECTORS’ REPORTFor the year ended 30 June 2021DIRECTORS’ REPORTFor the year ended 30 June 2021Annual Report 2021Reliance Worldwide Corporation LimitedReliance Worldwide Corporation Limited Annual Report 2021 SHAREHOLDER LETTER Dear Shareholders, Shareholder Letter On behalf of the Board, I am pleased to present RWC’s Remuneration Report for the year ended 30 June 2021. The report contains information on remuneration outcomes for FY2021 and a summary of key details of the revised remuneration framework which applies from 1 July 2021. Company performance Outstanding financial results were achieved in FY2021. Net sales for FY2021 were $1,340.8 million, up 15% on the prior year. On a constant currency basis, net sales were up by 25%, with strong growth recorded in all three regions. Sales growth resulted from heightened levels of repair and remodel activity in all key markets, driven in part by increased consumer spending on home improvements during the COVID pandemic, and by increased new residential home building activity. In the Americas, constant currency sales were up 31% in the second half with significantly increased demand arising during a winter freeze event in Texas and surrounding US states. Reported EBITDA for the year was $340.7 million, an increase of 56% on the prior year. Adjusted EBIDTA was $349.2 million, an increase of 39% over the prior year. Reported net profit after tax was $188.2 million an increase of 111% on the prior year. Adjusted net profit after tax ($211.9 million) increased by 63% over the prior year. FY2021 remuneration outcomes Key considerations in developing and implementing the revised remuneration framework included that it be: • Capable of being implemented consistently across the Group; • Market competitive and US-referenced (as greater than 50% of RWC’s executives are based in the USA); • Performance based with a focus on incentive pay linked to operational performance and shareholder value creation; and • Aligned with shareholder expectations. Key outcomes from the review include: • Alignment of total remuneration for the CEO and some other senior roles will require a downward adjustment of fixed annual pay. This will be achieved by implementing a downward adjustment of fixed remuneration by approximately 20% over a transition period of 3 years with a corresponding increase in STI and LTI opportunities; • STI awards will be 100% cash based. This is consistent with USA practice. It also allows an opportunity for impacted executives to earn back the fixed cash pay being foregone. This represents a change to the current STI Plan for executive Key Management Personnel where 50% of STI awards were deferred into shares. We believe this change is acceptable in the overall context of the revised remuneration framework and the required transition; • LTI awards will contain two performance vesting conditions as well as a service period requirement. The performance conditions are relative total shareholder return and earnings per share accretion. Both will be assessed over a 3 year Section B of the Remuneration Report provides details on FY2021 remuneration outcomes for Senior Executives. performance horizon commencing 1 July each year. It is intended that LTI awards be made annually; and Two outcomes to highlight are: • The Board did not approve a Budget for FY2021 for the purpose of assessing and determining STI awards for Senior Executives owing to the uncertainties created by COVID-19. Rolling forecasts were prepared by management and reviewed by the Board to assess the financial performance of the business. With no approved Budget, the Board elected to exercise its discretion in determining STI awards to Senior Executives for FY2021 and considered both the Group’s financial performance and assessment of non-financial key performance indicators for each executive. The assessment resulted in STI awards to both the Group CEO and Group CFO equal to 113% and 77% of fixed remuneration respectively; and • Seventy per cent of the options awarded to our CEO following the IPO in 2016 were subject to a relative Total Shareholder Return (“TSR”) condition. The performance measurement period ended on 30 June 2021. The number of these options remaining eligible to vest was determined in July following independent testing of achievement against the hurdle conditions. The Company’s relative TSR ranking for the performance measurement period was at the 77th percentile. This results in all these options remaining eligible to vest subject to satisfaction of a service period requirement which ends on 30 June 2022. The Board is extremely pleased with this outcome as a reward for our CEO. Revised remuneration structure As a Board, we have a responsibility to implement and oversee a remuneration framework which is structured to be equitable and aligned with the long term interests of the Company and shareholders. The remuneration framework should adequately balance the need to attract and retain the best people to run RWC’s business while ensuring that remuneration is linked clearly to shareholder returns and remains comparable with appropriate industry and geographical peers. A review of RWC’s remuneration framework was completed during FY2021. The main purpose of the review was for RWC to implement a remuneration framework program more closely aligned with current market practices. We engaged with several major investors and their advisors as part of the process. External consultants were engaged to assist with benchmarking analysis and design of the framework. • Alignment with industry practice in the USA which includes a focus on “target” variable remuneration and “maximum” incentive values at 200% of target for both STI and LTI outcomes. Please refer to Section C of the Remuneration Report for further details. I am pleased to advise that both our CEO and CFO have entered into new employment agreements. These agreements reflect the revised remuneration framework. The Company has also introduced a minimum shareholding policy which applies to all Key Management Personnel and certain other senior executives. The policy requires a minimum number of RWC’s ordinary shares to be acquired and held. Please refer to Section C of the Remuneration Report for further details. Christine Bartlett Chair, Nomination and Remuneration Committee 54 55 Introduction A. Governance and principles The Directors present the Remuneration Report for Reliance Worldwide Corporation Limited (“the Company”) and its The Board believes that the Company’s success depends upon the performance of all employees and that remuneration policies controlled entities (together “RWC” or “the Group”) for the financial year ended 30 June 2021 (“FY2021” or “the reporting period”). should be structured to deliver positive benefits for the Company, shareholders and employees. Remuneration Report This Remuneration Report forms part of the Directors’ Report and has been audited in accordance with the requirements of the Corporations Act 2001 (Cth). This Remuneration Report contains the following sections: A. Governance and principles B. FY2021 remuneration arrangements and outcomes C. Details of the new remuneration framework which applies from 1 July 2021 D. Other required disclosures The Remuneration Report sets out remuneration arrangements for the Key Management Personnel (“KMP”) of RWC for the reporting period. KMP for the reporting period are listed below. KMP are determined in accordance with accounting standard AASB 124: Related Party Disclosures (“AASB 124”). Under Australian Accounting Standards, the term KMP refers to directors (both non-executive directors and executive directors) and those persons having the authority and responsibility for planning, directing and controlling the activities of RWC, directly or indirectly. All KMP held their positions for the entire reporting period Executive Role unless otherwise stated. Name Non-executive Directors Christine Bartlett Russell Chenu Stuart Crosby Ross Dobinson1 Darlene Knight2 Sharon McCrohan Ian Rowden3 Senior Executives Heath Sharp Andrew Johnson For the remainder of this Remuneration Report and when appropriate, KMP are referred to as either Non–Executive Directors or Senior Executives as set out above. Only the Group Chief Executive Officer (“CEO”) and Group Chief Financial Officer (“CFO”) were considered executive KMP in FY2021 having regard to the Group’s management structure and the criteria in AASB 124. This assessment is consistent with prior years. There have been no changes to KMP since the end of the reporting period to the date of this report. 1 Until 14 April 2021. 2 From 14 April 2021. 3 From 6 July 2020. 56 The Nomination and Remuneration Committee is responsible for reviewing and recommending to the Board the remuneration arrangements for the CEO, the Chairman and Non-Executive Directors. The Committee is responsible for reviewing and approving the remuneration arrangements of the CEO’s direct reports. The Committee also oversees the operation of the Company’s Equity Incentive Plan (“Plan”) and makes recommendations to the Board about whether or not offers are made under the Plan. In discharging its responsibilities, the Nomination and Remuneration Committee must have regard to the following policy objectives: • remuneration structures are to be equitable and aligned with the long term interests of the Company and its shareholders; • attract and retain skilled executives, especially in the main markets where RWC operates (North America, Asia Pacific and Europe). Benchmarking is undertaken periodically to confirm that arrangements are market competitive; and • structure short term and long term incentives that are challenging and linked to the creation of sustainable shareholder returns. The Committee conducts regular reviews and monitors the implementation of the Company’s remuneration framework to confirm it: • encourages and sustains a culture aligned with the Company’s values; • supports the Company’s strategic objectives and long-term financial soundness; and • is aligned with the Company’s risk management framework and risk appetite. The Nomination and Remuneration Committee comprises only Non-Executive Directors and is chaired by an independent Director. The Committee’s Charter is available on the Company’s website at www.rwc.com and further information regarding the Committee is set out in the Company’s Corporate Governance Statement. Remuneration consultants and other advisors The Nomination and Remuneration Committee may seek independent advice from remuneration consultants and other advisors on various remuneration related matters to assist it in performing its duties and in making recommendations to the Board. Remuneration consultants and other advisors are required to engage directly with the Chair of the Nomination and Remuneration Committee as the first point of contact. During FY2021, consultants continued to be engaged to assist with the remuneration framework review project which commenced during FY2020. Section C sets out the results of this review and provides a summary of the remuneration framework which applies from 1 July 2021. Disclosures required by the Corporations Act 2001 (Cth) for any remuneration consultants or other advisors who Principles used to determine the nature and amount of remuneration Non-Executive Director remuneration The remuneration of Non-Executive Directors is not linked to Company performance and is comprised solely of cash fees (including applicable superannuation). This arrangement allows the Board to focus on governance and both short and long-term strategy free from any potential independence concerns. The Company’s remuneration policy for Non-Executive Directors aims to attract and retain suitably qualified and experienced Non-Executive Directors having regard to: • the level of fees paid to non-executive directors of other ASX listed companies; • the size and complexity of RWC’s multi-national operations; and • the responsibilities and work requirements of Board members. Section B contains further details on fees and arrangements for Non-Executive Directors. 57 Managing Director and Group Chief Executive Officer provided remuneration recommendations are presented in section D. Group Chief Financial Officer REMUNERATION REPORTFor the year ended 30 June 2021 (audited)REMUNERATION REPORTFor the year ended 30 June 2021 (audited)Annual Report 2021Reliance Worldwide Corporation LimitedSenior Executive remuneration B. FY2021 remuneration arrangements and outcomes The Board, through the Nomination and Remuneration Committee, is responsible for designing and reviewing remuneration policies which align the remuneration of executives with the long term interests of shareholders. Remuneration packages for (a) Company performance Senior Executives are set to properly reflect a Senior Executive’s duties and responsibilities and to be competitive in attracting, The following table shows the financial performance of the Group during the last five financial years. Remuneration Report Key performance indicators FY2021 FY2020 FY2019 FY2018 FY2017 retaining and motivating appropriately qualified and experienced people capable of managing the Group’s operations and achieving its business objectives. Remuneration arrangements are regularly reviewed having regard to various factors, including key performance objectives, an appraisal process and relevant comparable information. Senior Executive remuneration packages comprise: • fixed remuneration, represented by a base salary, applicable contributions to superannuation or pension funds and other approved benefits; • eligibility for short term incentive (“STI”) awards subject to approved criteria being met, with the Board retaining a discretion to adjust the award outcome based on achievements during a reporting period; and • ‘at risk’ long term incentives (“LTI”). Section B provides further details on remuneration arrangements for Senior Executives for FY2021. Section C provides details on remuneration arrangements for Senior Executives for FY2022. Sales revenue ($m) Reported EBITDA ($m)1 Adjusted EBITDA ($m)2 Operating profit (“EBIT”) ($m) Net profit before tax ($m) Net profit after tax (“NPAT”) ($m) Adjusted net profit after tax ($m)3 Share price at beginning of year ($)4 Share price at end of year ($)4 The Company has introduced a Minimum Shareholding Policy which applies to Directors and Senior Executives. Financial year interim and final dividends declared ($m) A summary of the policy is provided in Section C. Total dividends declared / NPAT ratio (%) Basic earnings per share (cents)5 Adjusted earnings per share (cents)5,6 1,340.8 1,162.4 1,104.0 340.7 349.2 284.3 272.3 188.2 211.9 2.94 5.26 102.7 54.6 24.0 27.1 217.9 251.3 155.9 135.9 89.4 130.3 3.52 2.94 55.3 61.9 11.4 16.6 242.5 277.07 199.2 176.7 133.0 158.37 5.36 3.52 71.1 53.5 17.0 20.2 769.4 135.4 150.9 111.1 99.3 66.0 78.6 3.34 5.36 42.1 63.8 12.3 15.8 601.7 120.7 120.7 101.3 96.3 65.6 65.6 3.09 3.34 31.5 48.0 12.5 12.4 Net sales for FY2021 were $1,340.8 million, up 15% on the prior year. On a constant currency basis8, net sales were up 25%, with strong growth recorded in all three regions (Americas – 27% growth, Asia Pacific – 18% growth and EMEA – 25% growth). Sales growth resulted from heightened levels of repair and remodel activity in all key markets, driven in part by increased consumer spending on home improvements during the COVID pandemic, and by increased new residential home building activity. In the Americas, constant currency sales were up 31% in the second half with significantly increased demand arising during a winter freeze event in Texas and surrounding US states. Reported EBITDA for the year was $340.7 million, an increase of 56% on the prior year. Included in Reported EBITDA are one-time costs of $8.5 million incurred to enable the expansion and consolidation of RWC’s warehousing and logistics activities in the USA and the UK. Adjusting for these costs, EBITDA was $349.2 million, an increase of 39% on Adjusted EBITDA for the prior year. The increase in operating earnings was mainly driven by double digit sales growth in each region for the year as described above. 1 EBITDA means earnings before interest, tax, depreciation and amortisation. For FY2021 it reconciles as earnings ($188.2m) before interest ($12.0m), tax ($84.1m) depreciation and amortisation ($56.4m). EBITDA is a non-IFRS measure used by RWC to assess operating performance and enhance comparability from period to period. EBITDA has not been subject to audit or review. 2 Adjusted EBITDA for FY2021 is Reported EBITDA ($340.7m) before restructuring and asset impairment charges ($8.5m). Adjusted EBITDA for FY2020 is Reported EBITDA ($217.9m) before restructuring and asset impairment charges ($33.4m). Adjusted EBITDA for FY2019 is Reported EBITDA before John Guest one-time integration/synergies costs incurred, final unwinding of a fair value adjustment made at acquisition date to John Guest inventory and the impact in connection with adopting AASB 16: Leases; Adjusted EBITDA for FY2018 is Reported EBITDA before John Guest contribution and transaction costs expensed. Adjusted EBITDA is a non-IFRS measure used by RWC to assess operating performance and enhance comparability from period to period. Adjusted EBITDA has not been subject to audit or review. 3 Adjusted Net profit after tax reflects the reconciliation items (tax effected) which determine Adjusted EBITDA for each reporting period as applicable. Adjusted NPAT for FY2021 is NPAT ($188.2m) adjusted for the reconciliation items (tax effected) which determine Adjusted EBITDA ($8.5m) and other specific tax related adjustments ($15.2m). Adjusted NPAT is a non-IFRS measure used by RWC to assess operating performance and enhance comparability from period to period. Adjusted Net profit after tax has not been subject to audit or review. 4 790,094,765 issued ordinary shares at the end of each of FY2018, FY2019, FY2020 and FY2021; 525,000,000 issued ordinary shares at the beginning and end of FY2017. 5 Based on weighted average number of shares for the reporting period. 6 Adjusted earnings per share is a non-IFRS measure used by RWC to assess operating performance and enhance comparability from period to period. Adjusted earnings per share has not been subject to audit or review. 7 Numbers restated for comparative purposes. 8 Constant currency numbers are non-IFRS measures which have not been subject to audit or review. 58 59 REMUNERATION REPORTFor the year ended 30 June 2021 (audited)REMUNERATION REPORTFor the year ended 30 June 2021 (audited)Annual Report 2021Reliance Worldwide Corporation LimitedRemuneration Report Cost savings from restructuring initiatives totalling $22.3 million were delivered in FY2021 and the target of a cost reduction run (c) Senior Executive remuneration structure for FY2021 rate at the end of FY2021 of $25.0 million on an annualised basis has been achieved1. Price increases were implemented across a number of product categories during the second half in all regions to mitigate the impact of higher input costs and other Fixed Remuneration inflationary pressures. Disruptions arising from COVID-19 cases in the UK, Europe and the US put additional pressure on our operations due to increased employee sickness and absenteeism as well as supply chain and logistics disruptions. Factory layout and materials flow changes to ensure social distancing requirements were met, adversely impacted efficiencies and delivery performance. All major RWC manufacturing sites were operational throughout the year and a focus on execution enabled the Group to meet the heightened demand, particularly in the USA following the winter freeze event. The Board considers that these challenges continue to be very well managed by the leadership team and employees. Total dividends declared for the year ended 30 June 2021 are 13.0 cents per share ($102.7 million) which represents 55% of Reported NPAT and 48% of Adjusted NPAT (FY2020 – 7.0 cents per share, $55.3 million). Total dividends declared for FY2021 are 86% higher than that for FY2020 reflecting the financial performance for the reporting period. The Company’s intended payout range remains between 40% and 60% of annual NPAT. Senior Executives received an STI award for FY2021. Refer section (c) below. (b) Non-Executive Directors’ fees and arrangements The Board, in accordance with the terms of the Company’s Constitution, determines the remuneration to which each Non-Executive Director is entitled for services as a Director. The aggregate amount provided to all Non-Executive Directors for their services as Directors in any financial year must not exceed the amount fixed by the Company at a general meeting of shareholders. This maximum aggregate amount is presently fixed at $1,500,000 as approved by shareholders at the 2018 Annual General Meeting. Non-executive Directors' fees for FY2021 were: Role Chair Non-Executive Directors (other than Committee Chairs) Chair of Audit and Risk Committee Chair of Nomination and Remuneration Committee All fees include applicable superannuation. Annual base fees $300,000 $130,000 $130,000 $130,000 Additional fees for Total Committee Chair annual fees - - $50,000 $25,000 $300,000 $130,000 $180,000 $155,000 The fees set out above will continue to apply in FY2022, subject to any further review and recommendation by the Nomination and Remuneration Committee which is accepted by the Board. Any Non–Executive Director who performs extra services, makes any special exertions for the benefit of the Company or who otherwise performs services which, in the opinion of the Board, are outside the scope of the ordinary duties of a Non-Executive Director, may, as determined by the Board, be remunerated for those services out of funds of the Company. No such fees were paid The terms of employment for Senior Executives contain: • a fixed remuneration component comprising base salary and applicable superannuation or pension fund contributions; and • other approved benefits (which may include items such as motor vehicles or vehicle allowances, mobile phone, travel allowances and health cover). Senior Executives are offered competitive fixed remuneration which seeks to ensure that RWC can both attract and retain a leadership team capable of managing the complex issues facing the Group while maintaining remuneration within comparable market ranges. The Board considers the USA to be the most comparable market for benchmarking remuneration arrangements for Senior Executives as the Group’s operational headquarters are in the USA and Senior Executives are based there. Consideration is also given to the multinational nature of RWC’s operations, the industry in which RWC operates and the size of the business. Short-term incentive STI for Senior Executives is designed to be evaluated based on the achievement of agreed key performance measures. The key performance measures applicable for FY2021 are outlined below and relate to the overall performance of the Group and relevant individual performance. Following the end of the financial year, the Nomination and Remuneration Committee reviews and makes recommendations to the Board as to whether or not STI awards should be made to Senior Executives. Objective Nature STI awards are determined by the Board following satisfaction of specific performance conditions. 50% payable in cash after release of the audited annual results and 50% deferred into shares in the Company. Shares will be acquired on-market after release of the audited annual results and will be subject to a holding lock for 12 months, with dividends accruing to the employee. On Target Opportunity1 CEO: 60.0% of fixed remuneration (40.0% measured against RWC financial performance and 20.0% measured against personal Key Performance Indicators (“KPIs”), both as described below). CFO: 40.0% of fixed remuneration (26.7% measured against RWC financial performance and 13.3% measured against personal KPIs, both as described below). Maximum Opportunity1 CEO: 120.0% of fixed remuneration (80.0% measured against RWC financial performance and 40.0% measured against personal KPIs, both as described below). CFO: 80% of fixed remuneration (53.4% measured against RWC financial performance and 16.6% measured against personal KPIs, both as described below). Scaling criteria apply to move from On Target to Maximum entitlements. Performance criteria Budgeted EBITDA The relevant portion of the STI award subject to financial performance is usually measured by reference to constant dollar performance against budgeted EBITDA (adjusted to exclude non- budgeted material changes (for example, acquisitions) (“Budget”). The Board retains a discretion to adjust the award outcome based on achievements during a reporting period. The Board exercised discretion for FY2021 for the reasons set out below this table. or are payable for FY2021. Non-Executive Directors may also be reimbursed for travel and other expenses incurred in attending The following scale applies for the financial metric: to the Company’s affairs, including attending and returning from general meetings of the Company or meetings of the Board or committees of the Board. There are no retirement benefit schemes for Non-Executive Directors other than applicable statutory superannuation contributions. % of Budget achieved Payout (% of Target) 0-95% of Budget Nil Between 95% and 100% of Budget Straight line pro-rating from Nil to On Target Opportunity 100% of Budget 100% of On Target Opportunity Between 100% and 120% of Budget Straight line pro-rating from On Target Opportunity to Maximum Opportunity 120% of Budget 100% of Maximum Opportunity 1 Non-IFRS measures. Not subject to audit or review. 1 On Target and Maximum Entitlements for the CFO reflect new employment agreement entered into during the year and align with the new remuneration framework. 60 61 REMUNERATION REPORTFor the year ended 30 June 2021 (audited)REMUNERATION REPORTFor the year ended 30 June 2021 (audited)Annual Report 2021Reliance Worldwide Corporation LimitedRemuneration Report The Board considers the disclosure of the Budget set for the STI grant to be commercially sensitive information and that disclosure of this Budget would not be in the Company’s and shareholders’ best interests. EBITDA was chosen as the financial performance condition as it is monitored by the Board to measure the operating performance of the business as well as being clearly defined and measurable. Actual EBITDA and Budget are compared on a like for like basis. The Board did not approve a Budget for FY2021 for the purpose of assessing and determining STI awards for Senior Executives owing to the uncertainties created by COVID-19. Rolling forecasts were prepared by management and reviewed by the Board to assess the financial performance of the business. With no approved Budget, the Board elected to exercise its discretion in determining FY2021 STI awards for Senior Executives. Personal KPIs STI awards to Senior Executives for FY2021 Financial Criteria Due to the uncertainties created by COVID-19, the Board did not approve a Budgeted EBITDA for FY2021 for the purpose of assessing and determining STI awards. Rolling forecasts were prepared by management and reviewed by the Board to assess the financial performance of the business. With no approved Budget, the Board elected to exercise its discretion for FY2021. The Board took into consideration the following financial performance factors: • FY2021 financial results compared with the prior year; • FY2021 financial results measured against rolling forecasts presented to the Board for review and consideration; and • Comparing FY2021 financial results with consensus forecasts of sell side analysts at various times throughout the financial year. The Group’s financial results exceeded each comparative measure quite significantly. After due consideration, the Board elected to The relevant portion of the STI award subject to personal KPIs is measured by scorecard award Senior Executives their Maximum Opportunity amount for achievement of the financial performance outcome, being: performance against role specific objectives to be settled with each Senior Executive annually. Non-financial objectives are set to measure Senior Executive performance against RWC’s business strategies and core values. Examples of role specific objectives which may apply are team development, business development, product development, risk management, cost control, culture, safety and diversity. CEO CFO Proportion of fixed remuneration (%) 80.0 53.4 Non-financial KPIs are chosen to encourage the achievement of personal business goals consistent with the Group’s overall objectives including succession planning and management Personal KPIs Criteria bench strength, ensuring a safe working environment with a diverse workforce, strategic growth Achievement of Personal KPIs was measured against the following criteria with a score out of 5 for each: and the expansion of RWC’s business activities and product development. A combination of financial and non-financial performance criteria were chosen because the Board believes that there should be a balance between short term financial measures and more strategic non-financial measures which, in the medium to longer term, will ultimately drive future growth and returns for shareholders. Following the end of the financial year, performance against Budget is assessed by the Living RWC’s values and culture Talent and leadership development Personal objectives Average CEO 4.5 4.5 4.5 4.5 CFO 4.5 5.0 4.5 4.67 Nomination and Remuneration Committee based on the Company’s audited financial results. Percentage of base achieved 33.33% 23.64% As noted above and further explained below, the Board elected to exercise its discretion in determining FY2021 STI awards to Senior Executives. These scores reflect the Board’s view that the personal performance of both Senior Executives during the year was exceptional. Assessment of performance Performance against personal KPIs is assessed annually as part of the broader performance Total STI award review process for Senior Executives. These KPIs are assessed quantitatively against The total STI award to Senior Executives for FY2021 is: pre-determined benchmarks, where appropriate. These methods of assessing performance are chosen as they are, as far as practicable, objective, measurable and capable of being independently audited. Clawback Defined criteria are in place to prevent inappropriate benefits being paid. In such circumstances, the Board may determine that allocated shares may be forfeited and/or require the Senior Executive to pay as a debt any part of the net proceeds of a sale of awarded shares, cash payment or dividends provided in respect of an STI award. CEO CFO Financial Criteria (%) Personal KPIs (%) remuneration (%) Proportion of fixed 80.00 53.40 33.33 23.64 113.33 77.04 The STI award is 50% payable in cash and 50% deferred into shares and subject to a holding lock for 12 months. Further details of the STI award amounts are provided in section (h). Long term incentive The Company established an Equity Incentive Plan to assist in the motivation, retention and reward of eligible employees. The Plan is designed to align the interests of employees with the interests of shareholders by providing an opportunity for eligible employees to receive an equity interest in the Company. The Plan provides flexibility for the Company to grant rights, options and/or restricted shares as incentives, subject to the terms of individual offers and the satisfaction of performance conditions approved by the Board from time to time. 62 63 REMUNERATION REPORTFor the year ended 30 June 2021 (audited)REMUNERATION REPORTFor the year ended 30 June 2021 (audited)Annual Report 2021Reliance Worldwide Corporation LimitedA summary of the terms of Options granted to Senior Executives are set out below in (d). Details of Share Rights which have or had been granted to Senior Executives are summarised below in (e). (d) LTI Options Grants The following table summarises details of the options granted to Heath Sharp, Group Chief Executive Officer (“CEO”) in FY2016. No other options have been granted to the CEO. Type of award 4,000,000 options (“CEO Options”). Each of the CEO Options entitles the CEO to acquire an ordinary share in the Company subject to meeting specific vesting conditions and payment of the exercise price. The CEO Options were granted for nil consideration as they form part of the CEO’s remuneration. Vesting Period From 29 April 2016 (date of listing on the ASX) until 30 June 2022. Vesting conditions The CEO Options will vest and become exercisable subject to the satisfaction of a gateway hurdle and two and assessment performance conditions. The Board considers these vesting conditions to be an appropriate combination of stretch financial hurdles directly linked to the Group’s performance and reflecting shareholder interests; and as a mechanism which assists in the retention of the CEO. 1. Gateway hurdle The Gateway hurdle will be satisfied if the CEO remains employed by the Group at 30 June 2022, subject to the terms and conditions of the grant. None of the CEO Options will vest if this condition is not met. 2. Performance conditions The CEO Options were also subject to two performance conditions both of which have now been tested. All of the CEO Options remain eligible to vest following assessment of the performance conditions. Details of the performance conditions are: • 30% of the CEO Options (“NPAT Options”) were subject to a net profit after tax (“NPAT”) performance condition, which was based on the Company meeting or exceeding its pro forma NPAT forecast for the year ended 30 June 2017 of $62.6 million, as stated in the Prospectus dated 18 April 2016 (“NPAT Hurdle”). This condition has been satisfied. Calculation of NPAT and achievement against the NPAT Hurdle was determined based on the audited FY2017 financial results. NPAT was chosen as a performance condition for the NPAT Options as it measures the net profit of the business and is used to determine the earnings per share achieved for the relevant reporting period; and • 70% of the CEO Options (“CEO TSR Options”) were subject to a relative total shareholder return (“TSR”) performance condition, which compares the TSR performance of the Company since listing with the TSR performance of each of the entities in a comparator group over the period from 29 April 2016 to 30 June 2021 (“TSR Hurdle”). TSR measures the growth in the Company’s share price together with the value of dividends over the measurement period (assuming that all those dividends are reinvested into new shares) against the Company’s chosen comparator group, being companies comprising the ASX200 index, excluding mining and energy companies. The comparator group may be adjusted by the Board or Nomination and Remuneration Report The number of CEO TSR Options eligible to vest was determined shortly after the end of the Performance Period applying the above criteria. The outcome of independent testing of the TSR Hurdle is that the Company’s Relative TSR Ranking for the Performance Period was at the 77th percentile. This means all TSR Options remain eligible to vest. The percentage of CEO TSR Options retained in relation to the TSR Hurdle was determined by reference to the following schedule: Relative TSR Ranking Below 50th percentile 50th percentile % of CEO TSR Options retained Nil 50% Between 50th and 75th percentile Pro rata straight line vesting between 50th and 75th percentile 75th percentile or above 100% Exercise of Options Voting and dividend rights Cessation of employment Vesting of the CEO Options remains subject to the Gateway hurdle condition being satisfied. The CEO Options will vest and become exercisable if the relevant vesting conditions have been met. The CEO may exercise any vested CEO Options by 30 June 2031. After 30 June 2031, any unexercised CEO Options will lapse. Options do not carry any voting or dividend rights prior to vesting and exercise. If the CEO ceases to be employed by the Group, any unvested CEO Options will lapse unless the Board determines otherwise in its absolute discretion. If CEO Options have vested but are unexercised: • Where the CEO is terminated for cause, the vested CEO Options will lapse unless the Board determines otherwise; and • Where the CEO ceases employment for any other reason, the vested CEO Options will remain on foot for the original exercise period. Change of control Where there is likely to be a change of control, the Board has the discretion to accelerate vesting of some or all of the CEO Options. If a change of control occurs before the Board exercises its discretion, a pro-rata portion of the options (equal to the portion of the relevant Performance Period that has elapsed up to the change of control) will vest. The Board retains a discretion to determine whether the remaining unvested options will vest or lapse. Clawback Defined criteria are in place to prevent inappropriate benefits being paid. In such circumstances, the Board may determine that: • unvested options and/or vested but unexercised options will lapse; • shares allocated upon exercise of options will be forfeited; and/or • require the CEO to pay as a debt any part of the net proceeds of a sale of awarded shares, cash payment or dividends provided in respect of an award made under the Plan. Remuneration Committee in their reasonable discretion to take into account corporate actions, including Exercise Price for Options Granted but not limited to takeovers, mergers, de-mergers or de-listings. Relative TSR was chosen because, in the opinion of the Board, it provides the most direct link to shareholder return. No reward is achieved unless the Company’s TSR is higher than the median of this comparator group. For the CEO TSR Options, the starting point for measuring the Company’s TSR performance was the $2.50 issue price for the shares issued under the Prospectus for the IPO in 2016. Option holder Heath Sharp Original Exercise Price per Option Adjusted Exercise Price per Option1 $2.50 $2.32 64 65 1 Exercise price adjusted in accordance with ASX Listing Rule 6.22 and the terms of issue of the Options following the 1 for 1.98 pro rata Entitlement Offer which completed in June 2018. The calculations were independently verified. REMUNERATION REPORTFor the year ended 30 June 2021 (audited)REMUNERATION REPORTFor the year ended 30 June 2021 (audited)Annual Report 2021Reliance Worldwide Corporation Limited Remuneration Report Movements in Options held by CEO The following table sets out the movement during the reporting period of Options held by the CEO (including related parties). None of the Options granted to the CEO are presently capable of being exercised. Granted Granted during during Lapsed Lapsed Lapsed Balance Balance at the year the year Vested Vested Exercised Exercised Forfeited Forfeited Forfeited at 30 June Name 1 July 2020 number $ value number $ value number $ value number $ value % 2021 In 2018, 1,810,200 Rights were granted which were also subject to performance conditions to be eligible to vest (“2018 Performance Rights”). The number of 2018 Performance Rights eligible to vest was determined at the end of a two year performance period on the Performance Period Measurement Date (30 June 2020) by reference to the applicable performance conditions (refer 2020 Remuneration Report for details). The number of 2018 Performance Rights to be retained by eligible participants following assessment of the performance conditions at the Performance Period Measurement Date was 1,088,007. The total number of 2018 Performance Rights which lapsed or were forfeited is 722,193 (which also reflects pro rating for eligible departed employees). Details in respect of Senior Executives are set out below. Any 2018 Performance Rights which do not vest will automatically lapse. The retained 2018 Performance Rights will vest at the end of the continuous service period subject to the terms of the award. Heath 4,000,000 – – – – – – – – – 4,000,000 During FY2021, 331,263 Rights were granted to Andrew Johnson, Group Chief Financial Officer and a member of KMP. These Rights Sharp No options were granted to Senior Executives during FY2021 and none were held by any other Senior Executives during the reporting period. (e) Share Rights contain two vesting conditions, being a continuous service period and a performance condition. Details of these conditions are set out below in the section on “Rights granted to Senior Executives”. Other key terms of the Rights grants Cessation of employment Unless the Board determines otherwise, if a participant ceases employment with the Group prior to the Vesting Date and any of the The Board has approved that nominated, eligible executives and employees, including Senior Executives, be invited to participate following has occurred, then a pro rata portion of the unvested Rights may remain on foot and vest in the ordinary course as though in the Plan as a means of attracting, retaining and motivating key employees in the Group. Participants are granted rights to be the participant had not ceased employment: awarded fully paid ordinary shares in the Company (“Rights”) in accordance with the rules of the Plan and subject to the offer terms (“Offer”). Each Right entitles the participant to one ordinary share in the Company on vesting. An Offer constitutes a long term incentive component of the participant’s remuneration from the grant date until the end of the vesting period. Rights are granted at no cost and there will be no amount payable on vesting. There are no voting or dividend rights attaching to Rights prior to vesting. The number of unvested Rights which had been granted by the Company to all participants at 30 June 2021 was 6,364,864 (30 June 2020 – 6,394,624). Details of Rights granted to Senior Executives are set out below. The opening and closing balances of all unvested Rights granted are reconciled for the reporting period as follows: Granted and unvested at 30 June 2020 Granted during FY2021 with the following vesting dates: 23 December 2022 1 January 2024 6 May 2024 1 July 2025 Total granted during FY2021 Forfeited, Cancelled or Lapsed during FY2021 Unvested at 30 June 2021 Number of Rights 6,394,624 110,620 331,263 12,100 150,000 603,983 (633,743) 6,364,864 No Rights vested during the reporting period or have subsequently vested. A further 196,546 Rights lapsed or have been forfeited or cancelled subsequent to 30 June 2021 through to the date of this report (none of which were granted to Senior Executives). No Rights have been granted subsequent to 30 June 2021 to the date of this report. Vesting conditions for all grants of Rights include a continuous service period ranging between two and five years. • The participant’s employment is terminated by RWC without cause; or • The participant terminates employment for a defined good reason. The remainder of the Rights will lapse. Change of control In summary, in the event of a takeover bid or other transaction, event or state of affairs that in the Board’s opinion is likely to result in a change in control of the Company or should otherwise be treated as a change of control event in accordance with rule 9 of the Company’s Equity Incentive Plan Rules, the Board has a discretion to determine how the Rights should be treated for the purpose of vesting. Rights granted to Senior Executives Senior Executives have been granted Rights. These Rights contain a continuous service period vesting condition. Each Right entitles the participant to one ordinary share in the Company on vesting. Rights are granted at no cost and there will be no amount payable on vesting. There are no voting or dividend rights attaching to Rights prior to vesting. Rights granted to Mr. Sharp Mr. Sharp received a grant of 987,800 Rights in 2018. The grant was subject to the Performance Conditions attached to the 2018 Performance Rights. The number of Rights retained by Mr. Sharp following assessment of the Performance Conditions was determined during the reporting period. The overall outcome achieved was 61.875% of Rights (611,201) retained based on the following assessment: In relation to the financial conditions: • FY2019 EBITDA of the John Guest group excluding synergies – below 95% of target – all 12.5% of the opportunity lapsed; • FY2020 EBITDA of the John Guest group excluding synergies – below 95% of target – all 12.5% of the opportunity lapsed; and • Run rate synergies achieved by the end of FY2020 – target: $24.3 million; actual run rate achieved $31.3 million – all 25% of the opportunity remains eligible to vest. In relation to the non-financial conditions, the Board took the view that the adverse financial impacts of Brexit (materially greater than anticipated at the time of the acquisition) and COVID-19 were already reflected in the outcome for the financial conditions and should therefore carry less weight than might otherwise have been the case. 66 67 REMUNERATION REPORTFor the year ended 30 June 2021 (audited)REMUNERATION REPORTFor the year ended 30 June 2021 (audited)Annual Report 2021Reliance Worldwide Corporation LimitedReliance Worldwide Corporation Limited Annual Report 2021 REMUNERATION REPORT For the year ended 30 June 2021 (audited) Remuneration Report The Board assessed each of the four factors on a scale of 1 to 10 as follows: The movement in the number of Rights granted to Senior Executives is shown in the following table. Non-Financial Metric Rating Score (1–10) Cultural integration Exceptionally strong European market penetration Integrated business strength Cost to achieve synergies, financial and organisational An early assessment was made that this should be a lower priority than originally envisaged – neutral Strong Strong 9.0 5.0 7.5 8.0 This assessment produced a total rating of 29.5/40, meaning 36.875% out of the maximum 50% opportunity which related to non-financial conditions remain eligible to vest. Rights granted to Mr. Johnson in FY2021 Grant Date Vesting Date Heath Sharp 30 October 2018 30 October 2023 Andrew Johnson 1 July 2017 1 July 20224 Andrew Johnson 27 August 2018 27 August 20234 Andrew Johnson 1 January 2021 1 January 2024 Number of Rights Granted 987,800 165,000 86,400 331,263 Number of Rights Number Fair value of Rights per Right at Lapsed1 Retained² Grant Date³ 376,599 – – – 611,201 165,000 86,400 331,263 $4.29 $3.00 $5.17 $2.99 1,570,463 376,599 1,193,864 No other Rights granted to Senior Executives were forfeited, cancelled or lapsed during FY2020 or subsequently to the date of this report. Mr. Johnson received a grant of 331,263 Rights during FY2021 following confirmation of his appointment as Group CFO. The number Shares purchased to meet vesting obligations was determined based on an independently assessed fair value of a Right at the start of the Performance Measurement Period. The Company has established a subsidiary, Reliance Employee Share Investments Pty Ltd (“Trustee”), to act as trustee of the Each Right entitles Mr. Johnson to one ordinary share in the Company on vesting. Rights are granted at no cost and there will be no Reliance Employee Share Investments Trust. The Trustee will acquire RWC shares on-market on behalf of the Trust to meet any amount payable on vesting. There are no voting or dividend rights attaching to Rights prior to vesting. Vesting of these Rights are obligations to deliver shares to a participant in the Plan where the applicable vesting conditions are met. The Trustee is also entitled subject to a continuous service period and a performance condition. Details are: to participate on behalf of the Trust in certain equity raisings undertaken by the Company. Continuous Service 3 years from 1 January 2021 Period Condition Performance 1 July 2020 to 30 June 2023 Measurement Period Performance conditions A relative total shareholder return (“TSR”) hurdle, which compares the TSR performance of the Company with the TSR performance of each of the entities in a comparator group (“TSR Hurdle”) The movement in the number of shares held during the reporting period is: Shares held at 30 June 2020 Acquired during FY2021 (at an average cost of $3.88 per share) Allocated property transferred to participants over the Performance Measurement Period. TSR measures the growth in the Company’s share price Shares held at 30 June 2021 together with the value of dividends over the Performance Measurement Period (assuming that all those dividends are reinvested into new shares) against the Company’s chosen comparator group, being Vesting obligations will be met in accordance with the terms of the Plan rules. companies comprising the ASX200 index, excluding mining and energy companies. The comparator (f) Share Match Plan Number 6,913,644 71,327 (130,612) 6,854,359 group may be adjusted by the Board or Nomination and Remuneration Committee in their reasonable discretion to take into account corporate actions, including but not limited to takeovers, mergers, de-mergers or de-listings. The share prices used to calculate the TSR of a company for the TSR Hurdle will be measured as follows: • the opening share price will be the volume weighted average price on the ASX of that company for the 5 trading days commencing on 1 July 2020; and • the closing share price will be the volume weighted average price on the ASX of that company for the 5 trading days ending on 30 June 2023. The percentage of Rights subject to the TSR Hurdle that Vest, if any, will be determined by reference to the percentile ranking achieved by the Company over Performance Measurement Period compared to the other entities in the comparator group as follows: Relative TSR Ranking Below 50th percentile 50th percentile Between 50th and 75th percentile % of Rights retained Nil 50% Pro rata straight line vesting between 50th and 75th percentile 75th percentile or above 100% As summarised earlier in this section (e). Other key terms and conditions 68 A share match plan was introduced during the reporting period to encourage employees to own shares in the Company. Eligible employees can acquire up to $5,000 of shares in RWC per plan year from post tax income with contributions made via a regular salary deduction (“Purchased Shares”). The Company will match the shares acquired on a 1:2 basis up to a cap $2,500 of Purchased Shares subject to the terms of the Share Match Plan (“Matching Rights”). There is a minimum holding period for Purchased Shares of 2 years and a continuous service obligation for Matching Rights to convert into shares on a 1:1 basis. There are no performance conditions. Participants receive dividends and have voting rights on their Purchased Shares. Matching Rights have no voting or dividend entitlements prior to vesting. 307 employees were participating in this plan at 30 June 2021. The total number of Matching Rights granted at 30 June 2021 was 42,884. Details of Purchased Shares and Matching Rights held by Senior Executives under the Share Match Plan are shown in following table. Purchased Shares Balance at 1 July 2020 – – Matching Balance at Rights Balance at Fair value Net 30 June Balance at Net 30 June per Right at Change 2021 1 July 2020 Change 2021 Grant Date3 – 512 – 512 – – – 256 – 256 – $4.16 Heath Sharp Andrew Johnson Mr. Sharp is not a participant in this plan. 1 Lapsed after assessment of applicable performance conditions. 2 These Rights will vest at the end of the continuous service period (being the Vesting Date) subject to the terms of the award (including achievement of any performance conditions). 3 Based on an independent valuation which used Black Scholes and/or Monte Carlo models and complies with the requirements of AASB2. 4 Only a continuous service period vesting condition applies to these grants which were made prior to Mr. Johnson becoming a Senior Executive. 69 REMUNERATION REPORTFor the year ended 30 June 2021 (audited)(g) Remuneration Mix The remuneration mix for Senior Executives for FY2021, based on statutory remuneration as set out in section (h), was: Senior Executive Fixed remuneration and benefits (%) STI (%) LTI (%) Heath Sharp Andrew Johnson 39.7 48.5 41.6 32.8 18.7 18.7 Senior Executive Cash (%) Non-cash(%) Heath Sharp Andrew Johnson 60.5 64.9 39.5 35.1 (h) KMP remuneration Details of the remuneration of each member of KMP are set out below. The table includes the statutory disclosures required under the Corporations Act and is in accordance with Australian Accounting Standards. All figures are in Australian dollars and relate to the period of the year in which the person was a KMP. 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Revised remuneration framework applying from 1 July 2021 (i) Review of remuneration framework and strategy The Nomination and Remuneration Committee and the Board believe that the remuneration framework should adequately balance the need to attract and retain the best people to run RWC’s business while ensuring that remuneration is linked clearly to shareholder returns and remains comparable with appropriate industry and geographical peer groups. During this reporting period, the Nomination and Remuneration Committee completed its review of the overall remuneration The Nomination and Remuneration Committee’s expects its primary focus in FY2022 will be on monitoring the implementation of the revised remuneration framework. This will include: • continuing to review remuneration arrangements of executives, including Senior Executives, to confirm that market competitive remuneration packages are in place to attract and retain high calibre executives; • confirming ‘at risk’ variable remuneration arrangements remain appropriately aligned with business strategies and outcomes; and • overseeing the processes being introduced to manage and administer the revised STI and LTI plans. framework of the Group. The main purpose of the review was for RWC to implement a remuneration framework more closely (j) Principles of revised remuneration framework aligned with current market practices. In reviewing the framework, the Committee considered several factors including: • The Company listed on the ASX in 2016 with a classic private company remuneration structure which included: - Relatively high, largely fixed cash remuneration for senior staff; - Significant discrepancies between people with similar roles; - No structured STI award program. Awards were mainly discretionary. For Senior Executives, more structured STI criteria were introduced from FY2019; and - An Equity Incentive Plan was implemented concurrent with listing. Under the Plan, an Options grant was made to the CEO at the time of listing. A Share Rights program was introduced in FY2017, mainly with a service vesting condition only although some grants did have performance conditions related to the John Guest acquisition. The Share Rights program has been the main LTI award program for eligible employees. Grants have been made to selected executives and employees when appropriate but without an annual award program in place. • International expansion has resulted in RWC’s operating activities being less Australian based. The majority of senior executives are now US based with greater than 50% of executive roles now based in the USA and less than 15% of executive roles based in Key elements of the revised remuneration framework are summarised below. The framework will initially encompass approximately 215 current leadership roles across the Group, being less than 10% of the Group’s employees at 30 June 2021. General principles, considerations and outcomes Key considerations in developing and implementing the revised remuneration framework included that it be: • Capable of being implemented consistently across the Group; • Market competitive and US-referenced (as greater than 50% of RWC’s executives are based in the USA); • Performance based with a focus on incentive pay linked to operational performance and shareholder value creation; and • Aligned with shareholder expectations. Key outcomes from the review include: • Alignment of total remuneration for the CEO and some other senior executives with market benchmarks will require adjusting fixed and variable remuneration. This will be achieved by implementing a downward adjustment of fixed remuneration by approximately 20% over a transition period of 3 years with a corresponding increase in STI and LTI opportunities. This is Australia. RWC mostly competes for talent in the USA market, where remuneration is quite transparent and competitive in our discussed further below under “Transition considerations for senior employees”; sector and has established paradigms for the size, shape and description of remuneration packages that are different from usual ASX practice. The Committee focused its review on developing a remuneration framework which is: • Market competitive and capable of being implemented across the business in a consistent manner; • Established with a target remuneration mix focused on incentive pay linked to operational performance and shareholder value creation; • Referenced primarily against USA peers to recognise that over 50% of senior executives and other leaders are based there; • Performance based; and • Aligned with shareholder expectations. External consultants were engaged to assess the current remuneration framework, including the short term and long term incentive plans, and to provide insights on potential changes to align the framework with current market practices. The process included competitive benchmarking, peer group analysis and identifying any gaps with prevalent market practice. Recommendations were presented to the Committee for consideration. The recommendations of the Nomination and Remuneration Committee have been approved by the Board. The revised remuneration framework came into effect on 1 July 2021. The key principles are summarised below in section (j). The Board expects there will be a transition period of three years before all intended changes are finally completed. This transition period reflects an appropriate timeframe to phase in changes being made to remuneration arrangements of various senior executives. This includes annual downward revisions of fixed remuneration and phased increases in STI and LTI opportunities for the CEO and some senior executives over this period. • STI awards will be 100% cash based. This is consistent with USA practice. It also allows an opportunity for impacted executives to earn back the fixed remuneration being foregone. This represents a change to the current STI Plan for Senior Executives where 50% of STI awards were deferred into shares. The change is justified in the overall context of the revised remuneration framework and the required transition. Further details are provided below; • Vesting of LTI awards will be subject to two performance conditions and a service period requirement. The performance conditions are relative total shareholder return and earnings per share accretion. Both will be assessed over a 3 year performance horizon commencing 1 July each year. It is intended that LTI awards be made annually. Further details are provided below; and • Alignment with industry practice in the USA includes a focus on “target” remuneration and plan design maximum incentive values at 200% of target for both STI and LTI. Transition considerations for senior executives Several transition matters arising from the review have been considered and addressed, including: • Fixed remuneration: - For those with above market fixed remuneration, annual reductions over 3 years will occur. For the CEO, the aggregate downward adjustment of fixed remuneration will be approximately 20% over this transition period. This is to bring fixed remuneration within the benchmarked market range. There is no downward adjustment of fixed remuneration required for the CFO; - For other senior executives, any changes to fixed remuneration are in line with the benchmarked market median for the associated role. Most changes to total remuneration are directed to the variable remuneration structures; • STI: - For those with reductions in fixed remuneration, STI target level increases as fixed remuneration reduces to broadly maintain on-target total cash compensation in relevant cases. As noted above, STI would be all cash (no deferral), consistent with USA practice and reflecting that some executives are giving up a portion of fixed remuneration. 72 73 REMUNERATION REPORTFor the year ended 30 June 2021 (audited)REMUNERATION REPORTFor the year ended 30 June 2021 (audited)Annual Report 2021Reliance Worldwide Corporation Limited• LTI: - CEO – target annual grants with “fair value” starting at about 30% of total target remuneration and moving to greater than 40% over a three year period. - CFO – target annual grants with “fair value” of about 35% of total target remuneration. - Other CEO direct reports – target annual grants with “fair value” of between 30% and 35% of total target remuneration. The target remuneration mix by the end of FY2024 for each of the CEO and CFO is: Performance Metrics Financial Metric – Earnings before Interest and Tax (“EBIT”) The relevant portion of the STI award subject to financial performance is intended to be measured by reference to budgeted Group or Region EBIT, as applicable (“Budget”). The Board retains a discretion to adjust the award outcome based on achievements during a reporting period. For Senior Executives, this is a change from the previous financial metric of EBITDA. The Board considers EBIT to be a more appropriate measure of operational management of the business. The EBIT metric may be adjusted at the Board’s discretion to exclude the effects of significant events deemed not appropriate to assess actual employee performance. These significant events CEO CEO CFO CFO may include: Remuneration Report 28% 28% 43% 43% 35% 35% 45% 45% 29% 29% 25% 25% Base LTI STI Base LTI STI Base LTI STI Base LTI STI STI Plan The STI plan is designed to reward eligible participants, including Senior Executives, for achieving fiscal year financial and strategic goals. The revised STI plan has the following design features: Objective Nature STI awards are determined by the Board following satisfaction of specific performance conditions 100% cash. Payment of 100% cash STI is consistent with USA market practice which for the Company is the main market in which executives are based. For Senior Executives, this represents a change from the nature of the STI award applying for FY2021 as explained above. Target Opportunity CEO: 80% of fixed remuneration CFO: 40% of fixed remuneration Other eligible participants: 10% to 40% of fixed remuneration depending on tier level Entitlement measured against the Performance Metrics and scaling criteria below. Maximum Opportunity CEO: 160% of fixed remuneration CFO: 80% of fixed remuneration Other eligible participants: 20% to 80% of fixed remuneration Entitlement measured against the Performance Metrics and scaling criteria below. Performance Metrics Mix The mix of financial and non-financial criteria to be applied is: Group participants (including CEO and CFO) Group EBIT – 70% Region participants Personal KPI goals – 30% Group EBIT – 30% Region EBIT – 40% Personal KPI goals – 30% 74 • Acquisition related charges and other items; • Restructuring and other charges; • Non-cash impairments; • Impacts resulting from material changes in foreign currency exchange rates; and • Any other significant items deemed appropriate by the Board. The following scale applies for the financial metric: % of Budget achieved Less than 90% of Budget Between 90% and less than 100% of Budget 100% of Budget Payout (% of Target) Nil Straight line pro-rating from Nil to Target Opportunity 100% of Target Opportunity Above 100% and less than Straight line pro-rating from 115% of Budget Target Entitlement to Maximum Opportunity 115% of Budget and greater 100% of Maximum Opportunity (200% x Target Opportunity) 250 200 150 100 50 g n i t s e V I T S f o % 0 80 250 200 150 100 50 g n i t s e V s t h g i R R S T f o % 0 0 Vesting Schedule - Budget Vesting Schedule - Personal KPI Score 115% of Budget: 200% Vesting Personal KPI Score 5.0 200% Vesting 100% of Budget: 100% Vesting Personal KPI Score 3.5 100% Vesting <90% of Budget: 0% Vesting Personal KPI Score <2.0 0% Vesting 85 90 95 100 105 110 115 120 125 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 % of Budget Achieved Personal KPI Score Vesting Schedule - TSR Rights Vesting Schedule - EPS Rights 80th percentile: 200% Vesting 75 60th percentile: 100% Vesting 40th percentile: 50% Vesting 8% EPS CAGR: 100% Vesting 4% EPS CAGR: 0% Vesting 0 0.0 15% EPS CAGR: 200% Vesting 10 20 30 40 50 60 70 80 90 100 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 Relative TSR Rank (percentile) % EPS 3 year CAGR 250 200 150 100 50 g n i t s e V I T S f o % 0 0 250 200 150 100 50 g n i t s e V s t h g i R S P E f o % REMUNERATION REPORTFor the year ended 30 June 2021 (audited)REMUNERATION REPORTFor the year ended 30 June 2021 (audited)Annual Report 2021Reliance Worldwide Corporation Limited 250 g n i t s e V I T S f o % 150 100 g n i t s e V s t h g R R S T f o % i 150 100 The Board considers the disclosure of the Budget set for the STI grant to be commercially sensitive Vesting Schedule - Budget information and that disclosure of this Budget would not be in the Company’s and shareholders’ best interests. EBIT was chosen as the financial performance condition as it is monitored by the Board to measure the operating performance of the business as well as being clearly defined and 200 measurable. Actual EBIT and Budget will be compared on a like for like basis. The thresholds below which no payout for the financial metric occurs and above which the maximum payout is triggered have been reduced from prior year levels so as to make the target level a better reflection of the fair value of the STI opportunity. This was an important element in 100% of Budget: 100% Vesting the shift from fixed remuneration to variable. Personal KPI goals 50 115% of Budget: 200% Vesting The relevant portion of the STI award subject to personal KPIs is intended to be measured by scorecard performance against role specific objectives to be settled with eligible participants <90% of Budget: 0% Vesting annually. Non-financial objectives are set to measure the participant’s performance against 85 90 95 100 105 110 115 120 125 0 80 Criteria Target % Examples RWC values and culture 10% Living our values, culture, safety, leadership (SPIRIT) Business leadership Personal objectives 10% 10% diversity and inclusion, ESG Team management, talent development, Vesting Schedule - TSR Rights 250 succession planning, training 200 Business development, product development, cost control, strategic growth, expansion of RWC’s business activities, ESG goals 80th percentile: 200% Vesting Assessment of performance Non-financial KPIs are chosen to encourage the achievement of personal business goals consistent with the Group’s overall objectives. The following scale applies for the personal KPI goals: 60th percentile: 100% Vesting Average personal KPI score Less than 2 Payout (% of Target) 40th percentile: 50% Vesting 50 Nil Clawback Between 2 and less than 3.5 Straight line pro-rating from Nil to Target 3.5 Above 3.5 and less than 5 0 0 100% of Target 10 Straight line pro-rating from Target 40 30 20 5 100% of Maximum (200% x Target) to Maximum Relative TSR Rank (percentile) Remuneration Report 250 200 150 100 50 g n i t s e V I T S f o % 0 0 Vesting Schedule - Personal KPI Score Personal KPI Score 5.0 200% Vesting Personal KPI Score 3.5 100% Vesting Personal KPI Score <2.0 0% Vesting 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 A combination of financial and non-financial performance criteria were chosen because the Board believes that there should be a balance between short term financial measures and more strategic non-financial measures which, in the medium to longer term, will ultimately drive future growth and returns for shareholders. 250 Vesting Schedule - EPS Rights 15% EPS CAGR: 200% Vesting Following the end of the financial year, performance against Budget will be assessed by the 150 200 Nomination and Remuneration Committee based on the Company’s audited financial results. g n Performance against personal KPIs will be assessed annually as part of the broader performance i t s e review process for Senior Executives. These KPIs are assessed quantitatively against V s pre-determined benchmarks, where appropriate. t 8% EPS CAGR: h g 100% Vesting These methods of assessing performance are chosen as they are, as far as practicable, objective, R S measurable and capable of being independently audited. P E f Defined criteria are in place to prevent inappropriate benefits being paid. In such circumstances, o % the Board may determine that allocated shares may be forfeited and/or require the Senior 100 50 i Executive to pay as a debt any part of the net proceeds of a sale of awarded shares, cash payment 4% EPS CAGR: 0% Vesting RWC’s business strategies and core values. KPIs will be set based on: % of Budget Achieved Personal KPI Score 50 60 70 80 90 100 0 or dividends provided in respect of an STI award. 8.0 0.0 6.0 4.0 2.0 10.0 12.0 14.0 16.0 18.0 LTI Plan % EPS 3 year CAGR The LTI plan is designed to assist in the motivation, retention and reward of eligible employees and align the interests of employees with the interests of shareholders by providing an opportunity for eligible employees to receive an equity interest in the Company. The revised LTI plan has the following design features: Nature Annual grants of Rights. Each Right entitles the participant to one ordinary share in the Company on vesting. An Offer constitutes a long term incentive component of the participant’s remuneration from the grant date until the end of the vesting period. Rights are granted at no cost and there will be no amount payable on vesting. Eligible Participants Senior Executives and other eligible executives and employees subject to Board approval. Vesting Criteria Subject to Board approval: • Continuous service period. For FY2022 grants, the continuous service period will be 3 years from grant date; and • Performance conditions will apply for all grants, to Senior Executives and Tier 2 and Tier 3 executives. Performance conditions for FY2022 grants are described below. Any Rights which do not vest will immediately lapse. 76 77 REMUNERATION REPORTFor the year ended 30 June 2021 (audited)REMUNERATION REPORTFor the year ended 30 June 2021 (audited)Annual Report 2021Reliance Worldwide Corporation Limited Number of Rights to be granted The number of Rights to be granted will be calculated using an independently assessed fair value. The assessment will be made at the commencement of the Performance Period Measurement date (1 July). Performance Conditions Rights granted to Senior Executives and Tier 2 and Tier 3 executives will be subject to performance and assessment conditions in addition to a continuous service period. The Board considers these vesting conditions to be an appropriate combination of stretch financial hurdles directly linked to the Group’s performance and reflecting shareholder interests. The two performance conditions are: • 50% of the Rights (“TSR Rights”) will be subject to a relative total shareholder return (“TSR”) performance condition, which will compare the TSR performance of the Company with the TSR performance of each of the entities in a comparator group over the Performance Measurement Period (“TSR Hurdle”). Vesting Schedule - Budget TSR measures the growth in the Company’s share price together with the value of dividends 250 over the measurement period (assuming that all those dividends are reinvested into new shares) against the Company’s chosen comparator group, being companies comprising the 200 ASX200 index, excluding mining and energy companies. The comparator group may be adjusted 115% of Budget: 200% Vesting by the Board or Nomination and Remuneration Committee in their reasonable discretion to take 250 into account corporate actions, including but not limited to takeovers, mergers, de-mergers Vesting Schedule - Budget 150 or de-listings. 115% of Budget: 200% Vesting Relative TSR was chosen because, in the opinion of the Board, it provides the most direct 200 link to shareholder return. 100% of Budget: 100% Vesting 100 I g n i t s e V T S f o % The number of TSR Rights which will be eligible to vest in relation to the TSR Hurdle will be 150 determined by reference to the following schedule: 100% of Budget: 100% Vesting <90% of Budget: 0% Vesting 50 g n i t s e V I 100 T S Relative TSR Ranking f o % Below 40th percentile 40th percentile 50 <90% of Budget: Above 40th and less than 60th percentile 0% Vesting 0 80 60th percentile 85 90 95 Above 60th and less than 80th percentile % of Budget Achieved 250 80th percentile or above 200% (Maximum Amount) 0 80 % TSR Rights eligible to vest 90 85 95 100 105 110 115 Nil 50% % of Budget Achieved Pro rata straight line vesting between 40th and 60th percentile 100 105 110 115 120 125 100% (Target Amount) Vesting Schedule - TSR Rights Pro rata straight line vesting between 60th and 80th percentile g n i t s e V I T S f o % 250 200 150 100 120 50 0 0 250 200 150 100 50 g n i t s e V s t h g R R S T f o % i 0 0 200 150 g n i t s e Vesting Schedule - TSR Rights V s t h g R R S T f o % 100 50 i 60th percentile: 100% Vesting 80th percentile: 200% Vesting 40th percentile: 50% Vesting 60th percentile: 100% Vesting 0 0 40th percentile: 50% Vesting 10 20 30 40 50 60 70 Relative TSR Rank (percentile) 10 20 30 40 50 60 70 80 90 100 Relative TSR Rank (percentile) Remuneration Report 50% of the Rights (“EPS Rights”) will be subject to an earnings per share compound average growth rate performance condition (“EPS Hurdle”). This condition measures earnings per share growth over the Performance Measurement Period. It was chosen as a performance condition because, in the opinion of the Board, it is a measure of the success of Senior Executives and other participants in generating continued business growth. Earnings per share is determined by dividing net profit after tax (“NPAT”) into the weighted average number of issued shares. The EPS compound average growth rate will be measured on a point to point basis over the Performance Measurement Period. NPAT may be adjusted at the Board’s discretion to exclude the effects of significant events deemed not appropriate to assess actual employee performance. These significant events may include: Vesting Schedule - Personal KPI Score 250 200 Vesting Schedule - Personal KPI Score • Acquisition related charges and other items; • Restructuring and other charges; • Non-cash impairments; • Impacts resulting from material changes in foreign currency exchange rates; • Impact of statutory tax rate changes enacted during the performance period; and • Any other significant items deemed appropriate by the Board. Personal KPI Score 5.0 200% Vesting Personal KPI Score 3.5 100% Vesting 150 g n i t s e V I 100 T The number of EPS Rights which will be eligible to vest in relation to the EPS Hurdle will be S f determined by reference to the following schedule: o % % Growth 50 % EPS Rights eligible to vest Personal KPI Score 5.0 200% Vesting 4% (Threshold) Personal KPI Score 3.5 100% Vesting Personal KPI Score <2.0 0% Vesting Above 4% and less than 8% 0 125 8% (Target) 0 0.5 1.0 1.5 2.0 Nil Pro rata straight line vesting from Nil to Target 3.0 2.5 100% (Target Amount) 4.0 4.5 3.5 5.0 Above 8% and less than 15% Personal KPI Score Pro rata straight line vesting from Personal KPI Score <2.0 0% Vesting 15% (Maximum) Target to Maximum 200% 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 250 Personal KPI Score Vesting Schedule - EPS Rights 80th percentile: 200% Vesting g n i t s e V s t h g R S P 80 E f o % i 250 200 150 100 90 50 0 0.0 15% EPS CAGR: 200% Vesting 8% EPS CAGR: 100% Vesting 15% EPS CAGR: 200% Vesting 200 i 150 g n i t s e Vesting Schedule - EPS Rights V s t h g R S P E f o % 50 8% EPS CAGR: 100% Vesting 0 4% EPS CAGR: 0% Vesting 100 100 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 4% EPS CAGR: 0% Vesting 2.0 4.0 Assessment of each performance condition will occur after the end of the Performance Measurement Period. 10.0 8.0 6.0 12.0 14.0 16.0 18.0 These methods of assessing performance are chosen as they are, as far as practicable, objective, measurable and capable of being independently audited. % EPS 3 year CAGR % EPS 3 year CAGR 78 79 REMUNERATION REPORTFor the year ended 30 June 2021 (audited)REMUNERATION REPORTFor the year ended 30 June 2021 (audited)Annual Report 2021Reliance Worldwide Corporation Limited Performance Three years commencing 1 July each year. For FY2022, the Performance Measurement Measurement Period Period commences on 1 July 2021 and ends on 30 June 2024. Assessment of performance Performance Conditions will be independently assessed following the end of the Performance Measurement Period. Voting and dividend rights Rights do not carry any voting or dividend rights prior to vesting. Clawback Defined criteria are in place to prevent inappropriate benefits being paid. (k) Senior Executive remuneration for FY2022 D. Other disclosures (m) New Service Agreements with Senior Executives Employment and remuneration arrangements of the Senior Executives are formalised in written service agreements between the Senior Executive and a member of the Group. New service agreements have been entered into with each Senior Executive during 2021. The key terms and conditions of the employment contracts for Senior Executives are set out below, excluding remuneration arrangements which are presented in other sections of this report. Remuneration arrangements were set after having regard to arrangements for comparable companies considered by size, industry and geography and reflect the revised remuneration framework effective from 1 July 2021. The remuneration arrangements for Senior Executives reflect the revised remuneration framework summarised Heath Sharp, Managing Director and Group Chief Executive Officer Remuneration Report Term Mr. Sharp is employed by Reliance Worldwide Corporation (a company in the Group which carries above in sections (i) and (j) and include: Fixed remuneration CEO: US$ 1,250,000, a decrease of 7% from FY2021 fixed remuneration for the reasons set out previously; and CFO: US$ 600,000, representing no change from the current amount. STI Opportunity The STI opportunity for FY2022 will be cash only for the reasons set out previously. The key criteria are set out in section (j). Notice LTI award for FY2022 The Company intends offering: • 315,990 Rights (target opportunity) to the CEO subject to shareholder approval. The maximum opportunity is 631,980 Rights for which approval is intended to be sought at the 2021 Annual General Meeting; and • 100,315 Rights (target opportunity) to the CFO. The maximum opportunity is 200,630 Rights. The Performance Measurement Period will be for the three years commencing on 1 July 2021. Key conditions are summarised in section (j). (l) Minimum Shareholding Policy The Company has approved a Minimum Shareholding Policy which applies to all KMP and certain other senior executives. The policy came into effect on 1 July 2021. The policy requires KMP and other senior executives to hold and maintain a minimum number of RWC’s ordinary shares based on: • Non-executive Directors – 100% of annual base fees (excluding additional Committee fees); • Group CEO – 100% of Total Fixed Remuneration; and • Other members of the senior executive team – 50% of Total Fixed Remuneration. The minimum holding is required to be obtained within 5 years from the later of the date the policy commences or appointment as either a director or member of the senior executive team. Termination payments1 Restraint on operations in the USA) The new agreement has an initial term of five years from 1 July 2021. Thereafter, automatically extended for one year rolling terms unless and until either party gives notice of an intention not to renew. The employer shall give any such non-renewal notice at least 90 days prior to the end of the then applicable term. Mr. Sharp shall give any such non-renewal notice at least 12 months prior to the end of the then applicable term. Termination by the employer • Mr. Sharp’s employment may be terminated by the employer without cause (excluding due to death or disability) upon giving 90 days’ written notice; and • may be terminated by the employer for cause at any time. Termination by Heath Sharp • Mr. Sharp may terminate his employment with good reason upon giving 90 days written notice and allowing a cure period. • Where he terminates without good reason, 12 months written notice is required to be provided. • Where Mr. Sharp’s employment is terminated by the employer without cause or by Mr. Sharp with good reason, he is entitled to 12 months’ severance pay (in addition to any notice period) plus accrued entitlements (comprising accrued but unpaid annual base salary, accrued unused vacation pay and unreimbursed properly incurred business expenses) plus he remains eligible for a pro rata bonus for the days he was employed during the applicable fiscal year and payment of certain health insurance premiums. • Where his employment is terminated due to death or disability, Mr. Sharp is entitled to accrued entitlements, remains eligible for a pro rata bonus for the days he was employed during the applicable fiscal year and to a continuation of applicable welfare and health benefits entitlements. • Where the employment agreement is terminated by the employer for cause or by Mr. Sharp without good reason, then the employer shall have no further payment obligations other than for accrued entitlements and continuation of applicable welfare and health benefits entitlements. • Where Mr. Sharp provides notice of non-renewal, then no severance amount will be payable. Mr. Sharp’s employment agreement contains a restraint of trade, which operates for a maximum period of 24 months following cessation of employment. 80 81 1 The Corporations Act restricts the termination benefits that can be provided to KMP on cessation of their employment, unless shareholder approval is obtained. The shareholders of the Company and of Reliance Worldwide Corporation, as applicable, have approved the giving of benefits to all current and future members of KMP in connection with that person ceasing to hold a managerial or executive office (as defined in section 200AA of the Corporations Act) in the Company or a related body corporate. REMUNERATION REPORTFor the year ended 30 June 2021 (audited)REMUNERATION REPORTFor the year ended 30 June 2021 (audited)Annual Report 2021Reliance Worldwide Corporation LimitedRemuneration Report Andrew Johnson, Group Chief Financial Officer (n) KMP shareholdings Andrew Johnson was appointed Interim Group Chief Financial Officer on 11 March 2020 and was confirmed as Group Chief Financial Movements in the number of shares held by Non-Executive Directors and Senior Executives directly, indirectly (through personally Officer on 6 July 2020. A revised employment agreement came into effect from 1 January 2021 with the key terms set out below, related entities) or nominally during FY2021 are set out below. excluding remuneration arrangements which are presented in other sections of this report. Previously, Mr. Johnson was employed on a standard RWC employment arrangement which includes no fixed term, appropriate benefits and statutory entitlements upon termination. Term Notice Termination payments1 Mr. Johnson is employed by Reliance Worldwide Corporation (a company in the Group which carries on operations in the USA). The employment agreement contains no fixed term. Termination by the employer • Mr. Johnson’s employment may be terminated by the employer without cause (excluding due to death or disability) upon giving 3 months written notice; and • may be terminated by the employer for cause at any time. Termination by Andrew Johnson • Mr. Johnson may terminate his employment with good reason upon giving 3 months written notice and allowing a cure period. • Where he terminates without good reason, 3 months written notice is required to be provided. • Where Mr. Johnson’s employment is terminated by the employer without cause or by Mr. Johnson with good reason, he is entitled to 9 months’ severance pay (in addition to any notice period) plus accrued entitlements (comprising accrued but unpaid annual base salary, accrued unused vacation pay and unreimbursed properly incurred business expenses) plus he remains eligible for a pro rata bonus for the days he was employed during the applicable fiscal year and payment of certain health insurance premiums. • Where his employment is terminated due to death or disability, Mr. Johnson is entitled to accrued entitlements, remains eligible for a pro rata bonus for the days he was employed during the applicable fiscal year and to a continuation of applicable welfare and health benefits entitlements. • Where the employment agreement is terminated by the employer for cause or by Mr. Johnson without good reason, then the employer shall have no further payment Name Christine Bartlett Russell Chenu2 Stuart Crosby2 Ross Dobinson Darlene Knight Sharon McCrohan Ian Rowden Heath Sharp Andrew Johnson3 Held at 1 July 2020 Net change1 Held at 30 June 2021 20,000 155,217 150,506 32,457 - - - 1,204,041 - - - - (32,457) - - 10,000 71,327 512 20,000 155,217 150,506 - - - 10,000 1,275,368 512 (o) Remuneration Consultants or other advisors The Company engaged a consultant, JAL Executive HR Consulting (“Consultant”), to provide a range of services, including assisting with the design, recommendations, implementation of the revised remuneration framework, talent management and succession planning and undertaking an assessment of the Group’s human resources structure (“Services”). The Consultant provided a remuneration recommendation for Senior Executives. Fees paid to the Consultant for Services provided during the reporting period were approximately US$288,000. The Company estimates that US$259,200 (90%) relates to the remuneration recommendation services (including review and design of the framework) and US$28,800 (10%) to other services. The Board is satisfied that appropriate arrangements were implemented to ensure the Consultant would be free to carry out its work free from undue influence by members of KMP about whom the recommendations may relate. The arrangements included requiring the Consultant to: • regularly meet with the Chair of the Nomination and Remuneration Committee (“NRC Chair”) to report on progress with the Services, including any remuneration recommendations; • obtain prior approval to interact with executive KMP in relation to the Services and keep the NRC Chair informed of those obligations other than for accrued entitlements and con-tinuation of applicable welfare interactions; and Restraint Mr. Johnson’s employment agreement contains non-compete and non-solicitation clauses which operate for a period of 12 months following his ceasing to work for RWC. and health benefits entitlements. • present reports and recommendations directly to the Nomination and Remuneration Committee for approval. The Board is satisfied these arrangements were appropriately followed and that remuneration recommendations made by the Consultant were free of any undue influence. (p) Material contracts with Related Parties New employment agreements have been entered into with Senior Executives. Key terms and conditions are summarised throughout this report. There were no other material contracts between a KMP or a related party and the Company or any of its subsidiaries entered into during the reporting period. (q) Loans with KMP No KMP has entered into a loan made, guaranteed or secured, directly or indirectly, with or by the Company or any of its subsidiaries during the reporting period. 1 The Corporations Act restricts the termination benefits that can be provided to KMP on cessation of their employment, unless shareholder approval is obtained. The shareholders 1 Includes the purchase (sale) of shares during the reporting period and transfers in (out) upon becoming or ceasing to be a member of KMP. of the Company and of Reliance Worldwide Corporation, as applicable, have approved the giving of benefits to all current and future members of KMP in connection with that 2 Includes 20,000 shares received in April 2016 under specific arrangements for Non-Executive Directors in connection with the IPO, as disclosed in the Prospectus. person ceasing to hold a managerial or executive office (as defined in section 200AA of the Corporations Act) in the Company or a related body corporate. 3 Acquired as a participant in the Company’s Share Match Plan. 82 83 REMUNERATION REPORTFor the year ended 30 June 2021 (audited)REMUNERATION REPORTFor the year ended 30 June 2021 (audited)Annual Report 2021Reliance Worldwide Corporation LimitedFinancial Statements CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME For the year ended 30 June 2021 Revenue from sale of goods Cost of sales Gross profit Other income Product development expenses Selling, warehousing and marketing expenses Administration expenses Other expenses Operating profit Finance income Finance costs Net finance costs Profit before tax Income tax expense Profit for the period attributable to the Owners of the Company Other comprehensive profit Items that may be classified to profit or loss: Foreign currency translation differences Total comprehensive profit for the period attributable to the Owners of the Company Earnings per share Basic earnings per share attributable to ordinary equity holders Diluted earnings per share attributable to ordinary equity holders Note 3 6 5 5 7 4 4 2021 A$000 1,340,813 (750,449) 590,364 2,266 (16,098) (161,663) (116,375) (14,146) 284,348 180 (12,207) (12,027) 272,321 (84,072) 2020 A$000 1,162,411 (685,140) 477,271 1,464 (25,916) (161,285) (114,313) (21,324) 155,897 645 (20,675) (20,030) 135,867 (46,426) 188,249 89,441 43,313 231,562 (7,397) 82,044 Cents Cents 24.0 23.9 11.4 11.4 84 85 The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes. KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under Professional Standards Legislation. Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001 To the Directors of Reliance Worldwide Corporation Limited I declare that, to the best of my knowledge and belief, in relation to the audit of Reliance Worldwide Corporation Limited for the financial year ended 30 June 2021 there have been: i. no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and ii. no contraventions of any applicable code of professional conduct in relation to the audit. KPMG Tony Romeo Partner Melbourne 23 August 2021 Reliance Worldwide Corporation Limited Annual Report 2021 Financial Statements CONSOLIDATED STATEMENT OF FINANCIAL POSITION At 30 June 2021 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended 30 June 2021 Assets Current Assets Cash and cash equivalents Trade and other receivables Inventories Current tax assets Other current assets Total Current Assets Non-current Assets Property, plant and equipment Right-of-use assets Deferred tax assets Goodwill Other intangible assets Other non-current assets Total Non-current Assets Total Assets Liabilities Current Liabilities Trade and other payables Current tax liabilities Employee benefits Dividend payable1 Other current liabilities Total Current Liabilities Non-current Liabilities Borrowings Deferred tax liabilities Employee benefits Other non-current liabilities Total Non-current Liabilities Total Liabilities Net Assets Equity Share capital Reserves Retained earnings Total Equity Note 2021 A$000 2020 A$000 12 8 8 9 10 7 11 11 8 16 24 13 12 7 16 14 15 28,427 293,220 260,395 8,547 15,799 82,166 263,205 215,450 9,671 16,066 606,388 586,558 266,898 91,114 34,335 914,885 320,463 – 1,627,695 2,234,083 239,984 11,924 12,071 – 34,806 298,785 202,333 66,479 6,782 68,425 344,019 642,804 264,965 99,969 36,973 897,350 325,660 2,052 1,626,969 2,213,527 168,426 5,256 16,665 35,554 15,335 241,236 384,377 68,184 6,693 93,546 552,800 794,036 1,591,279 1,419,491 2,330,408 (1,034,327) 295,198 1,591,279 2,330,533 (1,084,228) 173,186 1,419,491 Foreign Currency Share- based Share Translation Merger Payment Hedging Retained Total Capital Reserve Reserve Reserve Reserve Profits Equity Note A$000 A$000 A$000 A$000 A$000 A$000 A$000 Balance at 30 June 2019 2,329,126 21,726 (1,100,943) 8,923 (10,767) 158,434 1,406,499 Profit for the period Foreign currency translation reserve Total comprehensive income Transactions with owners of the Company Purchase of treasury shares Share-based payments Capital raising costs Dividends paid Total transactions with owners of the Company 15 14 17 – – – – (7,397) (7,397) 1,407 – – – 1,407 – – – – – – – – – – – – – – – – – 4,230 – – – – – – – – – 89,441 89,441 – (7,397) 133,017 82,044 – – – 1,407 4,230 – (74,689) (74,689) 4,230 – (74,689) (69,052) Balance at 30 June 2020 2,330,533 14,329 (1,100,943) 13,153 (10,767) 173,186 1,419,491 Balance at 30 June 2020 2,330,533 14,329 (1,100,943) 13,153 (10,767) 173,186 1,419,491 Profit for the period Foreign currency translation reserve Total comprehensive income Transactions with owners of the Company Treasury shares Share-based payments Dividends paid or provided Total transactions with owners of the Company 15 14 17 – – – – 43,313 43,313 (125) – – (125) – – – – – – – – – – – – – – – 6,588 – – – 188,249 188,249 – 43,313 – 188,249 231,562 – – – – – (125) 6,588 (66,237) (66,237) 6,588 – (66,237) (59,774) Balance at 30 June 2021 2,330,408 57,642 (1,100,943) 19,741 (10,767) 295,198 1,591,279 1 The payment of the interim dividend for the financial year ended 30 June 2020 of 4.5 cents per share ($35.6 million), declared on 24 February 2020, was deferred to 9 October 2020. The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes. The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes. 86 87 Reliance Worldwide Corporation Limited Annual Report 2021 Financial Statements CONSOLIDATED STATEMENT OF CASH FLOWS For the year ended 30 June 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2021 Note 2021 A$000 2020 A$000 1. Basis of preparation (a) Reporting entity Cash flows from operating activities Receipts from customers Payments to suppliers and employees and for customer rebates Cash generated from operations Income taxes paid Net cash inflow from operating activities Cash flows from investing activities Payments for purchase of property, plant and equipment Proceeds from sale of property, plant and equipment Payments for intellectual property and other intangible assets acquired Net cash used in investing activities Cash flows from financing activities Purchase of treasury shares Proceeds from borrowings Repayment of borrowings Interest received Interest paid Dividends paid Lease payments 1,303,822 (969,564) 334,258 (59,269) 274,989 (47,355) 1,405 (1,215) 1,134,085 (855,747) 278,338 (37,493) 240,845 (28,048) 4,940 (15,384) (47,165) (38,492) (125) 69,000 (223,853) 180 (7,155) (101,791) (15,780) - 59,000 (179,612) 645 (14,705) (39,135) (16,390) 9 11 12 12 10 Net cash outflow from financing activities (279,524) (190,197) Net change in cash and cash equivalents Cash and cash equivalents at 1 July Effects of movements in exchange rates on cash held Cash and cash equivalents at 30 June Represented by: Cash at bank Cash and cash equivalents at the end of the year 12 (51,700) 82,166 (2,039) 28,427 28,427 28,427 12,156 69,279 731 82,166 82,166 82,166 Reliance Worldwide Corporation Limited (the “Company“ or “Reliance”) is a limited liability company which was incorporated on 19 February 2016 and is domiciled in Australia. The consolidated financial statements comprise the Company and its subsidiaries (together referred to as the “Group”). The Company’s registered office is at 28 Chapman Place, Eagle Farm, Queensland 4009, Australia. The principal activities of the Group are the design, manufacture and supply of high quality, reliable and premium branded water flow, control and monitoring products and solutions for the plumbing and heating industry. (b) 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) and interpretations adopted by the International Accounting Standards Board (IASB). The Company is a for-profit entity. The consolidated financial statements were authorised for issue by the Board of Directors on 23 August 2021. (c) Basis of preparation These consolidated financial statements: • comprise the Company and its subsidiaries, together referred to as the “Group”, for the reporting period ended 30 June 2021; • have been prepared on a going concern basis using historical cost conventions; • are presented in Australian dollars and in accordance with the Australian Securities and Investments Commission Corporations (Rounding in Financial / Directors’ Reports) Instrument 2016/191, values are rounded to the nearest thousand dollars, unless otherwise stated; • adopt all new and amended AASBs and Interpretations issued by the AASB that are relevant to the operations of the Group and effective for reporting periods beginning on or before 1 July 2020; and • do not early adopt any AASBs and Interpretations that have been issued or amended but are not yet effective. Financial statements of subsidiaries are prepared using consistent accounting policies. This note and Note 25 set out details of accounting policies which aid the understanding of the financial statements as a whole. (d) Use of estimates and judgements The preparation of consolidated financial statements in conformity with Australian Accounting Standards requires management to make judgements, estimates and assumptions that affect the application of policies and 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 judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes. 88 89 Reliance Worldwide Corporation Limited Annual Report 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2021 1. Basis of preparation (continued) Information about judgements and estimates made in applying accounting policies that may have a significant effect on amounts recognised in the consolidated financial statements is included in the following notes: • Recognition of deferred tax assets and availability of future taxable profits against which carry forward tax losses and timing differences can be used (Note 7); • Recoverability of trade and other receivables (Note 8); • Estimation of net realisable value and possible obsolescence of inventories (Note 8); • Recoverability of goodwill and other indefinite life intangible assets (Note 11); and • Assessment of lease term extension options to be taken into account in the present value of the remaining lease payments (Note 10). (e) New accounting standards, interpretations and amendments adopted by the Group The Group has adopted all amendments to Australian Accounting Standards which became applicable from 1 July 2020. (f) New accounting standards, interpretations and amendments not yet applicable to the Group AASB standards not yet applicable are not expected to have a material impact on the RWC Group. (g) COVID-19 Impacts The global COVID-19 pandemic and the ongoing restrictions imposed by governments across the world have impacted business activity levels in countries and markets where the Group operates. The Group has managed, and continues to manage, the risks arising from COVID-19 to minimise negative impacts on its operations and financial position. During FY2021, the Group has also taken proactive measures to manage liquidity including: • Extending the maturity of its syndicated bank Facility A of $250 million from 30 September 2021 to 30 September 2023; • Prudently managing selling, general and administration costs; and • Appropriately allocating capital expenditures given continuing uncertainty. As at 30 June 2021, the Group had cash and cash equivalents of $28 million and committed undrawn borrowing facilities of $583 million. The ongoing COVID-19 pandemic has increased the estimation uncertainty in the preparation of these financial statements. At 30 June 2021, the Group has reassessed all significant judgements, assumptions and critical estimates included in the consolidated financial statements, including but not limited to, provisions against trade debtors and inventory and impairment of non-current assets. These financial statements have been prepared on a going concern basis. In the context of the COVID-19 pandemic, the review of the current financial forecasts and the consideration of the financial position summarised above support the conclusion on going concern, including that there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due and payable. 2. Segment reporting Segment information is presented in a manner which is consistent with the internal reporting to the Group Chief Executive Officer, who is the chief operating decision maker in the allocation of resources and assessing the performance of the operating segments of the Group. The Group’s regionally based segments are based on geographic operation of the business and comprise: • Asia Pacific, including Australia and New Zealand, Korea and China • Americas, including the United States of America and Canada • EMEA, including the United Kingdom, Spain, Italy, Germany, France, Czech Republic and Poland Segment revenues, expenses, assets and liabilities are reported on a gross basis. 90 0 2 0 2 0 0 0 $ 1 2 0 2 0 0 0 $ 0 2 0 2 0 0 0 $ 1 2 0 2 0 0 0 $ 0 2 0 2 0 0 0 $ 1 2 0 2 0 0 0 $ 0 2 0 2 0 0 0 $ 1 2 0 2 0 0 0 $ 0 2 0 2 0 0 0 $ 1 2 0 2 0 0 0 $ 0 2 0 2 0 0 0 $ 1 2 0 2 0 0 0 $ l a t o T n o i t a n m i i l E r e h t O / e t a r o p r o C A E M E c i f i c a P a i s A s a c i r e m A ) d e u n i t n o c ( g n i t r o p e r t n e m g e S . 2 1 2 0 2 e n u J 0 3 d e d n e r a e y e h t r o F I I S T N E M E T A T S L A C N A N F D E T A D L O S N O C E H T O T S E T O N I , 1 7 2 7 7 4 , 4 6 3 0 9 5 – ) 5 8 2 , 1 6 1 ( ) 3 6 6 , 1 6 1 ( ) 3 1 3 4 1 1 ( , ) 5 7 3 6 1 1 ( , ) 4 2 3 , 1 2 ( ) 6 4 1 , 4 1 ( 6 9 8 5 5 1 , 8 4 3 4 8 2 , – – – - ) 6 1 9 5 2 ( , ) 8 9 0 6 1 ( , 9 7 1 , 2 4 6 4 , 1 6 6 2 2 , ) 9 7 1 , 2 ( – – – – – – - , 1 1 4 2 6 1 , 1 , 3 1 8 0 4 3 , 1 – – – – , ) 1 6 7 5 4 1 ( ) 7 4 6 0 7 1 ( , ) 0 4 1 , 5 8 6 ( ) 9 4 4 0 5 7 ( , , 1 6 7 5 4 1 7 4 6 0 7 1 , , 1 1 4 2 6 1 , 1 , 3 1 8 0 4 3 , 1 , ) 1 6 7 5 4 1 ( ) 7 4 6 0 7 1 ( , – – – – – – – – – – – – – – 4 9 3 0 8 2 , 0 4 8 8 3 3 , 6 3 5 5 4 1 , 6 3 7 , 1 6 1 , 1 8 4 6 3 7 , 7 3 2 0 4 8 s r e m o t s u c l a n r e t x e m o r F e u n e v e R 5 0 9 3 4 , 8 4 9 , 1 5 0 2 2 9 9 , 8 1 5 5 1 1 , 6 3 6 2 , 1 8 1 , 3 9 9 2 4 2 3 , , 8 8 7 0 9 3 , 6 5 7 4 4 2 4 5 2 7 7 2 , 7 1 1 , 9 3 7 , 8 1 4 3 4 8 ) 3 5 4 5 7 1 ( , ) 0 7 6 5 9 1 ( , ) 1 6 3 6 7 1 ( , ) 3 8 0 5 8 1 ( , ) 7 8 0 9 7 4 ( , , ) 3 4 3 0 4 5 ( 6 4 8 8 4 1 , 8 1 1 , 5 9 1 5 9 3 8 6 , 1 7 1 , 2 9 0 3 0 0 6 2 , , 5 7 0 3 0 3 – 2 5 6 9 9 5 3 , 0 2 3 4 4 4 9 2 , 1 s t n e m g e s r e h t o m o r F s e u n e v e r t n e m g e S l s e a s f o t s o C t i f o r p s s o r G e m o c n i r e h t O ) 0 9 4 4 ( , ) 9 6 4 3 ( , ) 2 5 5 4 ( , ) 6 2 2 3 ( , ) 3 5 0 9 1 ( , ) 3 0 4 9 ( , s e s n e p x e t n e m p o e v e d t c u d o r P l ) 1 6 4 , 1 ( ) 5 4 3 , 1 ( ) 3 1 8 6 3 ( , ) 4 8 7 0 4 ( , ) 3 1 3 9 1 ( , ) 9 3 9 8 1 ( , ) 8 9 6 3 0 1 ( , ) 4 9 5 0 0 1 ( , ) 0 5 7 3 ( , ) 5 9 5 7 ( , ) 1 3 9 9 3 ( , ) 2 6 4 0 4 ( , ) 8 6 0 8 1 ( , ) 9 7 2 4 1 ( , ) 4 6 5 2 5 ( , ) 8 3 0 4 5 ( , s e s n e p x e g n i t e k r a m d n a g n i l l e S s e s n e p x e n o i t a r t s n m d A i i ) 0 4 5 ( ) 6 5 1 , 1 ( ) 0 6 6 6 ( , ) 3 2 8 3 ( , – ) 4 5 7 2 ( , ) 4 2 1 , 4 1 ( ) 3 1 4 6 ( , s e s n e p x e r e h t O ) 1 5 7 5 ( , ) 7 9 0 0 1 ( , 2 5 9 0 6 , 2 3 2 7 0 1 , 0 6 0 0 3 , 3 9 2 3 5 , 5 3 6 0 7 , 1 2 9 3 3 1 , ) s s o l ( / t i f o r p g n i t a r e p o t n e m g e S 7 2 5 3 1 2 , , 2 3 8 0 4 3 2 , , 2 , ) 4 9 7 8 3 4 , 1 ( ) 3 9 1 , 2 2 3 , 1 ( 0 4 1 , 0 3 4 , 1 , 5 4 8 3 5 2 , 1 , 6 9 9 3 4 1 , 1 , 3 1 2 5 6 1 , 1 , 1 8 9 2 6 3 , 6 5 4 6 0 3 4 0 2 5 1 7 , , 2 6 7 0 3 8 6 3 0 4 9 7 , 4 0 8 2 4 6 , , ) 4 9 7 8 3 4 , 1 ( ) 3 9 1 , 2 2 3 , 1 ( , 0 2 9 2 4 7 , 1 , 9 5 4 0 8 4 , 1 1 8 3 4 7 , 8 9 5 3 0 1 , 0 0 3 7 6 1 , 4 4 0 9 9 , , 9 2 2 8 4 2 6 9 8 , 1 8 2 s e i t i l i b a i l t n e m g e S s t e s s a t n e m g e S 5 2 9 7 1 2 , , 3 5 6 0 4 3 ) 2 8 5 3 5 ( , ) 0 6 7 8 4 ( , 5 4 6 0 8 1 ) 6 4 4 8 ( , ) 5 4 5 7 ( , ) 8 6 8 8 1 ( , ) 7 1 6 8 ( , ) 5 7 6 0 2 ( , ) 7 0 2 , 2 1 ( ) 6 2 4 6 4 ( , ) 2 7 0 4 8 ( , 8 4 0 8 2 , 5 5 3 7 4 , , 6 9 9 9 8 5 , 1 , 0 6 3 3 9 5 , 1 – – – – – – – – – – – – – – – – – – ) 1 9 1 , 4 ( ) 0 3 5 8 ( , 6 6 0 , 1 8 , 1 1 8 6 2 1 3 6 2 4 4 , 5 8 1 , 6 6 7 8 7 6 9 , 8 8 1 , 6 5 1 ) 2 0 2 ( ) 8 4 2 ( ) 7 1 0 9 1 ( , ) 5 8 6 7 1 ( , ) 0 8 1 , 3 1 ( ) 4 0 9 , 1 1 ( ) 3 8 1 , 1 2 ( ) 4 2 9 8 1 ( , ) 8 5 3 , 1 ( ) 9 1 3 , 1 ( ) 7 9 0 , 1 ( ) 4 9 8 , 1 ( ) 2 2 0 , 1 ( ) 9 8 9 ( ) 9 6 9 4 ( , ) 3 4 3 3 ( , – 7 6 – 4 4 3 7 1 ) 1 7 8 5 ( , ) 3 1 2 2 ( , – 1 – 6 4 7 5 4 1 1 ) 7 9 9 2 1 ( , ) 4 0 4 6 ( , ) 0 8 3 7 ( , ) 0 8 2 6 ( , ) 4 0 4 ( ) 4 6 3 ( ) 4 5 5 , 1 ( ) 7 3 4 , 1 ( ) 7 3 3 , 1 1 ( ) 6 2 1 , 4 ( i l t n e m p u q e d n a t n a p y t r e p o r p f o n o i t a c e r p e D i 1 A D T B E I s t e s s a e b g n a t n l i i f o n o i t a s i t r o m A s t e s s a f o t n e m r i a p m I e m o c n i e c n a n F i s t s o c e c n a n F i ) 9 6 2 5 1 ( , ) 9 5 3 4 ( , ) 8 6 0 0 1 ( , ) 9 0 7 0 2 ( , ) 5 9 4 8 ( , ) 7 1 5 2 1 ( , ) 4 9 5 2 1 ( , ) 8 8 4 6 4 ( , e s n e p x e x a t e m o c n I – – 2 6 0 4 , 0 3 8 4 2 , 1 1 7 4 , 6 9 8 8 , 5 7 2 9 1 , 9 2 6 3 1 , 1 8 3 6 , 2 9 0 6 , 0 3 1 , 7 8 9 , 9 9 4 7 1 0 , 1 8 7 2 0 7 1 , 4 9 6 7 6 1 , , 7 0 2 6 2 4 , 5 7 0 2 0 4 i l 2 t n e m p u q e d n a t n a p y t r e p o r p o t s n o i t i d d A l i a c n a n i f i r e h t o g n d u l c x e s t e s s a t n e r r u c - n o N s t e s s a x a t d e r r e f e d d n a s t e s s a . s t e s s a e s a e l e s U i f o t h g R f o n o i t i d d a e h t s e d u l c x E 2 . n o i t a s i t r o m a d n a n o i t a c e r p e d i , x a t , t s e r e t n i , e r o f e b t fi o r p g n i t a r e p o s i A D T B E I 1 91 Reliance Worldwide Corporation Limited Annual Report 2021 Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2021 3. Revenue Accounting Policy 4. Earnings per share Accounting Policy Revenue is recognised when a customer obtains control of the goods or services. Group revenue is derived from the sale of Earnings Per Share (EPS) is the amount of profit/(loss) attributable to each share. Basic EPS is calculated on the Group’s profit/ products. Under the terms of sale, the Group generally transfers control when the goods leave a distribution centre. In some (loss) for the reporting period attributable to ordinary shareholders divided by the weighted average number of shares on issue cases, control does not pass until the goods are received by the customer or delivered to the agreed point of delivery. For sales during the year. Diluted EPS reflects any commitments the Group has to issue shares in the future. made with a right of return, the amount of revenue recognised is adjusted for an estimate of the expected returns based on historical experience. (a) Basic earnings per share From time to time the Group may provide rebates to customers in certain geographies, which gives rise to variable consideration. Where rebates are based on the quantity or value of products sold, the Group uses historical data to estimate the rebate accrual, which is classified as “contract liabilities” and presented within trade and other payables. The major products from which the aforementioned segments derive revenue are: • Push to Connect Fittings – brass and plastic push-to-connect plumbing fittings (primarily sold under the SharkBite and JG Speedfit brands) for the installation and repair of water reticulation systems in both domestic and commercial applications; • Other Fittings – brass and plastic crimp fittings, expansion fittings and accessories; • Pipe – coiled and straight length tubing manufactured from cross-linked polyethylene and designed for high temperature and pressure domestic and commercial applications; polybutylene pipe for domestic water and central heating systems; LLDPE tubing for fluid control applications; rigid nylon and aluminium piping for air and pneumatic systems; • Valves – temperature and pressure relief valves, pressure regulation valves and thermostatic mixing valves that protect and safeguard hot water systems; • Fluid Tech – plastic push-to-connect technologies for drink dispense, pure water, air and pneumatics, blown fibre, automotive, and OEM solutions; • Integrated Installation Solutions – engineered plumbing and mechanical solutions that support the delivery of water and firestop solutions; and Profit attributable to ordinary shareholders Weighted average number of ordinary shares at 30 June (basic) – Issued ordinary shares (weighted average) – Treasury shares (weighted average) Basic earnings per share (b) Diluted earnings per share • Other Products – including backflow preventers, expansion vessels, underfloor heating components and kit systems, water Profit attributable to ordinary shareholders meters, and water mains connection fittings and repair sleeves. Revenue by product group for the year ended 30 June 2021 is: Push to Connect Fittings Other Fittings Pipes Valves Fluid Tech Integrated Installation Solutions Other Products 2021 $000 615,272 131,699 160,084 154,305 137,833 122,087 19,533 2020 $000 517,383 111,803 128,482 137,077 130,449 118,349 18,867 1,340,813 1,162,411 Weighted average number of ordinary shares at 30 June (diluted) – Issued ordinary shares (weighted average) – Effect of share options on issue – Treasury shares (weighted average) Diluted earnings per share The Group had two significant customers each representing greater than 10% of the Group’s revenue in the 2021 financial year. Both customers are in the Americas segment and contributed a combined $432.9 million of the Group’s revenue in the financial year. Revenue by geography Australia United Kingdom United Sates of America Other 92 2021 $000 138,706 251,536 789,765 160,806 1,340,813 2020 $000 127,752 205,807 691,645 137,207 1,162,411 2021 $000 188,249 Number of shares 2021 2020 $000 89,441 Number of shares 2020 790,094,765 790,094,765 (6,897,564) (7,366,351) 783,197,201 782,728,414 Cents 24.0 2021 $000 188,249 Number of shares 2021 Cents 11.4 2020 $000 89,441 Number of shares 2020 790,094,765 790,094,765 4,500,000 4,567,320 (6,897,564) (7,366,351) 787,697,201 787,295,734 Cents 23.9 Cents 11.4 93 Reliance Worldwide Corporation Limited Annual Report 2021 Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2021 5. Net finance costs The Group’s finance income and finance costs include: • Interest income • Interest expense 7. Income tax expense Accounting Policy Income tax expense comprises current and deferred tax. It is recognised in the Consolidated Statement of Profit or Loss and Other Comprehensive Income except to the extent that it relates to a business combination or items recognised directly in equity. The Group records interest income and accrues interest expense for amounts receivable and payable at reporting date. Interest income is recognised in the income statement on an accrual basis, using the effective interest method. (i) Current tax Interest income from cash and cash equivalents Interest and borrowing expenses Interest expense on lease liabilities Total Finance costs 6. Other expenses Impairment expenses on specific property, plant, equipment and right-of-use assets Impairment expenses on specific intangible assets Other Total Other Expenses 2021 $000 180 (8,696) (3,511) 2020 $000 645 (16,360) (4,315) (12,207) (20,675) 2021 $000 (8,617) - (5,529) (14,146) 2020 $000 (6,952) (11,916) (2,456) (21,324) The tax currently payable is based on taxable profit for the reporting period. Taxable profit differs from profit before tax as reported in the Consolidated Statement of Profit or Loss and Other Comprehensive Income because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Group’s current tax is calculated using tax rates that have been enacted or substantively enacted at the end of the reporting period. (ii) Deferred tax Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from the initial recognition (other than in a business combination) of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be used. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse using tax rates enacted or substantively enacted at the end of the reporting period. The measurement of deferred tax reflects the tax consequences that would follow the manner in which the Group expects, at the reporting date, to recover or settle the carrying Impairment expenses of $7.6 million were recorded during the year as a result of the finalisation of plans to expand and rationalise amount of its assets and liabilities. distribution and logistics operations in the US and the UK. These were mainly impairment of right-of-use property assets in the context of the realignment of warehousing/distribution centre footprints. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its Net restructuring and severance costs of $0.6 million relating to the UK distribution operations have been reported in in the current tax assets and tax liabilities on a net basis. Consolidated Statement of Profit or Loss and Other Comprehensive Income. A further $0.3 million in lease and asset modification costs also relating to the above consolidation of warehousing and distribution facilities in the US and the UK have been reported in (iii) Australian tax consolidated group Other expenses. The Company and its Australian incorporated wholly owned subsidiaries have formed a tax consolidated group with effect from 3 May 2016 whereby the members of that group are taxed as a single entity. The head entity of the tax consolidated group is Reliance Worldwide Corporation Limited. The head entity and each subsidiary member of the tax consolidated group is party to a Tax Sharing Agreement and a Tax Funding Agreement whereby each member of that group is only liable for its contribution amount calculated in accordance with the Agreement rather than being jointly and severally liable for group tax liabilities. At 30 June 2021, the Australian tax consolidated group has $11.4 million (2020: $2.6 million) franking credits available for subsequent reporting periods. Critical accounting estimates and assumptions The Group is subject to income taxes in Australia and jurisdictions where it has foreign operations. Significant judgement is required in determining the Group’s provision for income taxes. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. Where the final tax outcome of these matters is different from the amounts that were initially recorded such differences will impact the current and deferred tax provisions in the period in which such determination is made. 94 95 Reliance Worldwide Corporation Limited Annual Report 2021 Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2021 7. Income tax expense (continued) 7. Income tax expense (continued) (a) Reconciliation of prima facie tax expense to income tax expense recognised in the consolidated income statement The major components that reconcile the expected income tax expense based on the Australian statutory rate of tax of the Group at 30% to the reported actual income tax expense in the consolidated profit or loss statement are as follows: Profit before income tax Prima facie income tax expense at 30% Tax effect of items which (increase)/decrease tax expense: Effect of tax rates in foreign jurisdictions Benefits arising from US tax concessions Non-deductible expenses Net (under)/over provision from prior years1 Foreign income subject to US tax Other 2021 $000 272,321 2020 $000 135,867 (81,696) (40,760) 18,762 - (3,667) (346) (20,326) 3,201 3,777 6,631 (5,139) (5,892) (7,482) 2,439 Actual income tax expense reported in the consolidated statement of profit or loss (84,072) (46,426) (b) Components of income tax: Current tax Deferred tax (c) Deferred tax balances 2021 Deferred tax assets Employee benefits Other provisions and accruals Other items giving rise to deferred tax assets Total Deferred tax liabilities Property, plant and equipment Unrealised foreign exchange movements Other items giving rise to a deferred tax liability Total 2021 $000 (80,267) (3,805) 2020 $000 (24,328) (22,098) (84,072) (46,426) Opening Recognised in Balance Profit or loss $000 $000 Foreign Exchange $000 4,856 10,270 21,847 36,973 (17,410) (14,936) (35,838) (68,184) 248 2,116 (3,152) (788) 935 13,588 (17,540) (3,017) (78) (548) (1,224) (1,850) 955 1,204 2,563 4,722 Closing Balance $000 5,026 11,838 17,471 34,335 (15,520) (144) (50,815) (66,479) Opening Recognised in Balance Profit or loss $000 $000 Foreign Exchange $000 3,215 5,865 1,208 5,090 15,378 (11,558) (3,323) (10,112) 1,690 4,396 (1,208) 16,704 21,582 (6,047) (11,521) (26,112) (24,993) (43,680) (49) 9 – 53 13 195 (92) 386 489 Closing Balance $000 4,856 10,270 – 21,847 36,973 (17,410) (14,936) (35,838) (68,184) 2020 Deferred tax assets Employee benefits Other provisions and accruals IPO costs deductible in future periods Other items giving rise to deferred tax assets Total Deferred tax liabilities Property, plant and equipment Unrealised foreign exchange movements Other items giving rise to a deferred tax liability Total 8. Working Capital (a) Trade and other receivables Accounting Policy Trade and other receivables are initially recognised at fair value and subsequently at cost less any provision for doubtful debts. Trade receivables are generally due for settlement within 30 days, depending on the nature of the transaction and in line with industry practice. Collectability of trade receivables is reviewed on an ongoing basis. The carrying amount of trade receivables is reduced through the use of an allowance account and the amount of the loss is recognised in the Consolidated Statement of Profit or Loss and Other Comprehensive Income. The Group has adopted the Expected Credit Loss (‘ECL’) model under AASB 9 Financial Instruments to determine its allowance for doubtful debts calculation. This takes into consideration management’s assessment of the likely level of bad debts (based on historical experience and forward-looking information) as well as any known ‘at risk’ receivables. The recoverability of debtors at 30 June 2021 has been assessed to consider the impact of the COVID-19 pandemic and no material recoverability issues have been identified. Trade debtors Less: provision for doubtful debts Other debtors Tax receivable 2021 $000 265,603 (2,276) 263,327 14,015 15,878 2020 $000 229,927 (2,236) 227,691 18,255 17,259 293,220 263,205 1 FY2020 primarily relates to the derecognition of foreign tax credits partially offset by the recognition of R&D tax credits and US state tax credits. 96 97 Reliance Worldwide Corporation Limited Annual Report 2021 Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2021 8. Working Capital (continued) At 30 June, the ageing of trade and other receivables that were not impaired is as follows: Neither past due nor impaired Past due 1 to 30 days Past due 31 to 60 days Over 60 days Total (b) Inventories Accounting Policy 2021 $000 272,069 16,425 3,052 1,674 2020 $000 245,179 14,086 1,483 2,457 9. Property, plant and equipment Accounting Policy Recognition and measurement Each class of property, plant and equipment is measured at cost less, where applicable, accumulated depreciation and impairment losses. Any gain or loss on disposal of an item of property, plant and equipment is included in the Consolidated Statement of Profit or Loss and Other Comprehensive Income. Subsequent expenditure Subsequent expenditure is only capitalised when it is probable that the future economic benefits associated with the expenditure 293,220 263,205 will flow to the Group. Depreciation Inventories are measured at the lower of cost and net realisable value. Cost includes all expenses directly attributable to the manufacturing process as well as an appropriate portion of related fixed and variable production overheads, based on normal operating capacity. Costs are assigned on the basis of weighted average costs. Net realisable value is the estimated selling price in the ordinary course of business less estimated costs of completion and any applicable selling expenses. . At cost Raw materials and stores Work in progress Finished goods Less: provision for diminution (c) Trade and other payables Current: Trade payables Other creditors, accruals and provision for employee bonuses 2021 $000 94,866 25,421 161,171 281,458 (21,063) 260,395 2021 $000 112,624 127,360 2020 $000 98,241 21,860 113,110 233,211 (17,761) 215,450 2020 $000 75,711 92,715 239,984 168,426 Depreciation is recognised so as to write off the cost of property, plant and equipment (other than freehold land and properties under construction) less their residual values over their useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. The estimated useful lives of property, plant and equipment are as follows: 20-40 years • Buildings • Leasehold improvements • Plant and equipment Property, plant and equipment are tested for impairment, at least annually. Any impairment losses are recognised in the statement 5-40 years 3-20 years of profit or loss and other comprehensive income. Carrying amounts of: Freehold land1 Buildings Leasehold improvements Plant and equipment 2021 $000 36,659 52,823 3,708 173,708 2020 $000 19,128 66,627 8,451 170,759 266,898 264,965 98 99 1 As of July 2020, the land element of several UK freehold properties has been reclassified from ‘Buildings’ to ‘Freehold Land’ for a value of $12.1 million Reliance Worldwide Corporation Limited Annual Report 2021 Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2021 9. Property, plant and equipment (continued) 10. Leases Freehold Land Buildings Improvements Leasehold Plant and Equipment Total 2021 $000 2020 $000 2021 $000 2020 $000 2021 $000 2020 $000 2021 $000 2020 $000 2021 $000 2020 $000 Cost The Group leases various properties, equipment and vehicles. Property leases typically are for a period of 5 to 10 years and often have extension options. Equipment and vehicle leases are typically for a period of 3 to 5 years. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Group. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to the statement of financial performance over the lease period. The right-of-use asset is depreciated over the shorter of the asset’s useful life and Opening balance 19,128 215 79,768 108,104 12,471 8,768 329,479 325,404 440,845 442,491 the lease term on a straight-line basis. (235) (362) (625) (11,445) (24,995) (11,851) (25,854) less) and leases of low-value assets. Payments relating to these items are recognised on a straight-line basis as an expense in the Transfers/ reclassification 16,837 19,620 (10,770) (28,514) (1,270) 4,031 (4,796) 2,619 - (2,244) - 63 257 46,724 27,791 47,355 28,048 Additions Disposals Net effect of change in - - - - 568 (45) exchange rates 694 (707) (1,639) 413 (183) 40 (5,508) (1,341) (6,636) (1,595) Closing balance at 30 June 36,659 19,128 67,882 79,768 10,719 12,471 354,454 329,479 469,713 440,845 Accumulated depreciation and impairment Opening balance Depreciation Disposals Impairment Net effect of change in exchange rates Closing balance at 30 June Net carrying – – – – – – – – – – – (13,141) (10,993) (4,020) (3,513) (158,720) (138,496) (175,881) (153,002) (2,045) (2,611) (724) (1,118) (31,972) (34,897) (34,740) (38,626) 45 (20) 23 362 621 9,565 21,569 9,971 22,213 - (2,598) - (1,027) (6,952) (3,645) (6,952) 102 440 (31) (10) 1,408 56 1,479 486 – (15,059) (13,141) (7,011) (4,020) (180,746) (158,720) (202,815) (175,880) value at 30 June 36,659 19,128 52,823 66,627 3,708 8,451 173,708 170,759 266,898 264,965 Assets and liabilities arising from a lease are initially measured at present value. The lease payments are discounted using the interest rate implicit in the lease, if that rate can be determined, or the Group’s incremental borrowing rate. The Group has elected not to recognise right of use assets or lease liabilities for payments associated with short-term leases (with a term of 12 months or statement of financial performance. Critical accounting estimates and assumptions Extension options are included in most property leases across the Group. These options are included to maximise operational flexibility in terms of managing lease contracts. Extension options are only included in the assessed lease term if the lease is reasonably certain to be extended. The assessment is reviewed if a significant event or change in circumstance occurs which affects this assessment and that is within the control of the lessee. Right-of-use assets Balance at 1 July 2020 Depreciation charge for the year Addition to right-of-use assets Lease modifications Foreign exchange impact Balance at 30 June 2021 Additions at 1 July 2019 on transition to AASB16 Depreciation charge for the year Foreign exchange impact Balance at 30 June 2020 Properties Equipment Vehicles $000 96,117 (12,184) 3,991 3,445 (3,249) 88,120 111,073 (13,029) (1,927) 96,117 $000 2,854 (1,159) 45 116 (130) 1,726 4,065 (1,137) (74) 2,854 $000 998 (678) 1,000 – (52) 1,268 1,676 (639) (39) 998 Total $000 99,969 (14,021) 5,036 3,561 (3,431) 91,114 116,814 (14,805) (2,040) 99,969 100 101 Reliance Worldwide Corporation Limited Annual Report 2021 Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2021 10. Leases (continued) 11. Goodwill and other intangible assets (continued) Amounts recognised in the statement of financial performance Asia Pacific Americas Depreciation charge for right-of-use assets Properties Equipment Vehicles Total depreciation charge for right-of-use assets Expense relating to short-term and low value leases Interest expense on lease liabilities Finance income on a property sub-lease 2021 $000 12,184 1,159 678 14,021 2,651 3,511 (78) 2020 $000 13,029 1,137 639 14,805 2,739 4,315 (321) The statement of cash flows for 30 June 2021 includes cash outflows for lease payments of $15.8 million (30 June 2020 – $16.4 million) within Cash flows from financing activities. Goodwill John Guest acquisition (2018) Holdrite acquisition (2017) Pre IPO-acquisitions Total $000 41,386 – 44,444 85,830 $000 165,542 42,731 – EMEA $000 620,782 – – Total $000 827,710 42,731 44,444 208,273 620,782 914,885 Indefinite life intangible assets – – 225,337 225,337 Goodwill and other intangible assets in respect of the Asia Pacific, Americas and EMEA CGUs have been tested for impairment at period end. The recoverable amount of the Group’s CGUs has been assessed utilising value in use methodologies, which is determined by discounting the future cash flows expected to be generated from the continuing use of the CGUs. As at 30 June 2020, given the high degree of uncertainty due to the COVID-19 pandemic, the cash flow projections used for the impairment assessments at the time were formed on the basis of a probability weighted view of a number of potential future scenarios for each CGU (Base, Upside and Downside case scenarios). Given that the level of certainty on future macroeconomic outlooks in all three CGUs/regions has improved year on year, with the impacts of COVID-19 now better understood, management Some property leases contain extension options exercisable by the Group up to the end of the non-cancellable contract period. has reverted to the use of a single set of cash flow projections in the 30 June 2021 impairment testing rather than considering The Group has estimated that the potential future lease payments, should it exercise all available extension options, would result in multiple scenarios as was done at 30 June 2020. The Asia Pacific, Americas and EMEA CGUs all achieved stronger earnings and an increased lease liability of $41.2 million. 11. Goodwill and other intangible assets (a) Goodwill Accounting Policy Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired entity at the date of acquisition. Goodwill on acquisition of subsidiaries is included in intangible assets. Goodwill is not amortised. Instead, it is tested annually for impairment or more frequently if events or changes in circumstances indicate that it might be impaired and is carried at cost less accumulated impairment losses. cash flow generation than estimated in the impairment testing performed at 30 June 2020, exceeding the most optimistic ‘Quick Recovery’ upside scenario. The value in use assessment at 30 June 2021 was therefore established using a discounted cash flow model which included the following key assumptions: • a 5-year forecast period with cash flow projections based on approved FY22 budget submissions from each region for the years 2022, 2023 and 2024, and cash flows beyond the three-year period extrapolated using estimated long-term growth rates • FY22-FY24 average revenue growth rate of 2.9% in Asia Pacific, 4.9% in Americas and 6.7% for EMEA based on business assessments The following nominal discount rates have been used in discounting the projected cash flows: Opening balance Foreign currency exchange differences Carrying value 2021 $000 897,350 17,535 914,885 2020 $000 901,428 (4,078) 897,350 Americas Asia Pacific EMEA Pre-tax Post-tax discount rates discount rates 12.00% 12.75% 10.00% 8.75% 9.50% 8.00% For the purpose of undertaking impairment testing, the Group has identified its cash generating units (CGUs). These are the smallest groups of assets that generate cash inflows that are largely independent of the cash inflows from other assets or groups of assets. This assessment has been determined by considering operating segments and areas of operation. The total carrying value of goodwill at balance sheet date was $914.9 million. This was allocated to the Asia Pacific, Americas and EMEA operating segments based on which CGUs were expected to benefit from the relevant business combinations at the time of acquisition. The total carrying value of indefinite life intangible assets at balance sheet date was $225.3 million. The discount rates represent the current market assessment of the risks specific to each CGU and are derived from its weighted average cost of capital (WACC). The discount rates applied to each impairment model falls within a reasonable range supported by market observed data. The discount rates at 30 June 2021 were unchanged compared to the prior year as market increases in long term interest rates (risk-free rates) were offset by the consideration of lower market-specific risks. 102 103 Reliance Worldwide Corporation Limited Annual Report 2021 Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2021 11. Goodwill and other intangible assets (continued) 11. Goodwill and other intangible assets (continued) The terminal value of the CGUs has been forecast using the following nominal long-term growth rates: (b) Other intangible assets • Americas: 2.0% • Asia Pacific: 2.5% • EMEA: 2.0% Terminal growth rates are considered by management to be an appropriate estimate of the long-term average growth rates achievable in the industries and geographies in which the Group participates. Terminal growth rates are consistent with the prior year. Americas Cash Generating Unit The carrying value of the Americas CGU includes goodwill of $208.3 million. Following a detailed impairment review of future cash flow projections consistent with the Group assumptions detailed above, the recoverable amount of the Americas CGU is estimated to exceed the carrying amount at 30 June 2021. There are no reasonably possible changes to key assumptions used in the determination of the CGU recoverable amounts that would result in a material impairment to the CGU or Group. Asia Pacific Cash Generating Unit The carrying value of the Asia Pacific CGU includes goodwill of $85.8 million. Following a detailed impairment review of future cash flow projections consistent with the Group assumptions detailed above, the recoverable amount of the APAC CGU is estimated to exceed the carrying amount at 30 June 2021. There are no reasonably possible changes to key assumptions used in the determination of the CGU recoverable amounts that would result in a material impairment to the CGU or Group. EMEA Cash Generating Unit The carrying value of the EMEA CGU includes goodwill of $620.8 million and other indefinite life intangible assets (brand names) for an amount of $225.3 million. Following a detailed impairment review of future cash flow projections consistent with the Group assumptions detailed above, the recoverable amount of the EMEA CGU is estimated to exceed the carrying amount at 30 June 2021. During the period ended 30 June 2021, the EMEA CGU performed strongly, with revenue growth, earnings and cash flows above levels estimated in the FY2020 impairment assessment. This was as a result of improved market conditions in the UK, the finalisation of the basis of trade arrangements between the UK and EU member nations following Brexit and the execution of revenue and margin improvement initiatives in the business. As a result of this, there are currently no reasonably possible changes to key assumptions used in the determination of the CGU recoverable amounts that would result in a material impairment to the CGU or Group. Critical accounting estimates and assumptions At the time of acquisition, management determined that some of the intangible assets (Brand names, trade names and trademarks) recognised as part of business combinations had indefinite useful lives. This means that the value of these assets does not reduce over time and therefore they are not amortised. These assets have no legal or contractual expiry date and are integral to future revenue generation. Management intends to continue to promote, maintain and defend the brands, trade names and trademarks to the extent necessary to maintain their values for the foreseeable future. Management assesses the useful lives of the Group’s intangible assets at the end of each reporting period. If an intangible asset is no longer considered to have an indefinite useful life, this change is accounted for prospectively. Accounting Policy Other intangible assets are non-physical assets held by the Group in order to generate revenue and profit. These assets include brand names, trade names, trademarks, intellectual property and licences, software and website development and work in progress. They are recognised either at the cost the Group has paid for them or at their fair value if they are acquired as part of a business combination. They are amortised over their expected useful life unless they are considered to have an indefinite useful life. Type of intangible asset Valuation method Amortisation method Estimated useful life Brand names, trade names Initially at cost, or fair value Indefinite life brands not n/a and trademarks if acquired as part of a amortised, reviewed for business combination impairment at least annually Intellectual property, Initially at cost and Straight-line Up to 10 years software and licence fees subsequently at cost less accumulated amortisation Product technology Initially at cost and Straight-line Up to 20 years subsequently at cost less accumulated amortisation Customer relationship and Initially at fair value at date Straight-line Up to 20 years distribution agreements of business combination (i) Brand names, trade names and trademarks Brand names, trade names and trademarks are registered names, symbols, words or other devices used in trade to indicate the source of a product and distinguish it from other products. (ii) Intellectual property and licence fees Intellectual property consists of technical drawings and certifications. Software and licence fees mainly relate to the accounting and reporting platform being implemented throughout the Group. (iii) Product technology Technology based intangible assets relate to innovations or technological advances, such as patented technology. (iv) Customer relationships and distribution agreements Customer relationship-based intangibles assets relate to established customer relationships and distribution agreements for the supply of product. (v) Research and development Research costs are charged to the profit or loss account as incurred. Development expenditure is only capitalised if it can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Group intends to and has sufficient resources to complete development and to use or sell the asset. Otherwise, it is recognised in the profit and loss as incurred. Subsequent to initial recognition, development expenditure is measured at cost less accumulated amortisation and any accumulated impairment losses. The amortisation of development expenditure is allocated to other expenses as inventory is sold. 104 105 Reliance Worldwide Corporation Limited Annual Report 2021 Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2021 11. Goodwill and other intangible assets (continued) Intellectual Property, Trade Names, Brand Names and Trademarks Product Customer Licence Fees, Software and Technology Relationships Other Total 2021 $000 2020 $000 2021 $000 2020 $000 2021 $000 2020 $000 2021 $000 2020 $000 2021 $000 2020 $000 Cost Opening balance 257,006 257,560 33,611 30,862 29,526 29,420 40,611 24,408 360,754 342,250 Additions Disposals Transfers from PP&E Net effect of change in – – – – – – – – – – – 2,244 – – – – – – 1,215 15,384 1,215 15,384 – (8) – (8) (17) – (17) 2,244 exchange rates 2,811 (554) (2,689) 505 (470) 106 (538) 827 (887) 884 Closing balance at 30 June 259,817 257,006 30,922 33,611 29,056 29,526 41,271 40,611 361,065 360,754 Accumulated Depreciation and impairment Opening balance (8,774) (1,675) (8,212) (3,489) (3,620) (2,119) (14,488) (7,711) (35,094) (14,994) Amortisation (34) (948) (1,570) (1,906) (1,433) (1,428) (4,508) (4,164) (7,545) (8,446) Impairment Disposals Net effect of change in – – (6,321) – – – (2,886) – – – – – – – (2,709) 7 – – (11,916) 7 exchange rates 698 170 664 69 358 (73) 317 89 2,037 255 Closing balance at 30 June (8,110) (8,774) (9,118) (8,212) (4,695) (3,620) (18,679) (14,488) (40,602) (35,094) Net carrying value at 30 June 251,707 248,232 21,804 25,399 24,361 25,906 22,592 26,123 320,463 325,660 12. Net debt Accounting Policy Borrowings are initially recognised net of transaction costs incurred. Fees paid on the establishment of loan facilities are recognised as transaction costs where it is probable that some or all of the facility will be drawn down. The fee is deferred until the drawdown occurs and is amortised on a straight-line basis over the entire life of the facility. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period. Cash and cash equivalents include cash on hand, deposits held at call with financial institutions, and other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. At 30 June 2021 Syndicated Facility – Tranche A Syndicated Facility – Tranche B Syndicated Facility – Tranche C Cash and cash equivalent Total RWC Group At 30 June 2020 Syndicated Facility – Tranche A Syndicated Facility – Tranche B Syndicated Facility – Tranche C Cash and cash equivalent Total RWC Group (a) Borrowings Facility Limit Borrowings $000 (250,000) (250,000) (250,000) – $000 – (197,333) (5,000) – (750,000) (202,333) Facility Limit Borrowings $000 (250,000) (250,000) (250,000) – $000 (207,247) (177,130) – – (750,000) (384,377) Cash $000 – – – 28,427 28,427 Cash $000 – – – 82,166 82,166 Net cash/(debt) Balance $000 – (197,333) (5,000) 28,427 (173,906) Net cash/(debt) Balance $000 (207,247) (177,130) – 82,166 (302,211) Current Non-current Total 2021 $000 2020 $000 2021 $000 2020 $000 2021 $000 2020 $000 Secured: Borrowings Total secured borrowings – – – – 202,333 384,377 202,333 384,377 202,333 384,377 202,333 384,377 The Company and certain of its subsidiaries are parties to a $750 million syndicated facility agreement (30 June 2020 - $750 million) which is available for drawing by way of cash advances (“Facility”). During October 2020, the Company reached an agreement with its lending syndicate to extend the maturity date of the $250 million Tranche A Facility from 30 September 2021 to 30 September 2023. The Facility will mature as follows: • Tranche A: $250m maturing 30 September 2023 • Tranche B: $250m maturing 30 September 2022 • Tranche C: $250m maturing 30 September 2023 The Facility contains financial covenants which the Company is in compliance with. 106 107 Reliance Worldwide Corporation Limited Annual Report 2021 Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2021 12. Net debt (continued) The security provided to support the Facility is: 12. Net debt (continued) (c) Cash and cash equivalents For the purposes of the Consolidated Statement of Cash Flows, cash and cash equivalents include cash on hand and in banks, net of outstanding bank overdrafts. Cash and cash equivalents at the end of the reporting period as shown in the Consolidated Statement of Cash Flows can be reconciled to the related items in the Statement of Financial Position as follows: • Unlimited cross guarantees from each entity that comprises the Group, other than Reliance Worldwide Corporation (Europe) S.L.U, subsidiaries of Reliance Worldwide Corporation Holdings (UK) Limited which are not incorporated in the United Kingdom (refer Note 18) and Reliance Employee Share Investments Pty Ltd (“Guarantors”); • General security over all assets (or a specified list of assets) from each of the Guarantors, other than Reliance Worldwide Corporation Underfloor Heating Limited and certain of the intermediate holding companies; • Specific share security from Reliance Worldwide Holdings (USA) Corporation over its shares in Reliance Worldwide Corporation (which carries on the Group’s operations in the USA); • Specific share security from Reliance Worldwide Holdings (International) LLC over its shares in Reliance Worldwide Corporation Holdings (UK) Limited and its rights under the acquisition agreement entered into in connection with the acquisition of Reliance Worldwide Corporation Holdings (UK) Limited; and • A real property mortgage from Reliance Worldwide Corporation over a property in Cullman, Alabama, USA. The Facility has a variable interest rate which is based on a variable base rate plus a margin. (b) Changes in liabilities arising from financing activities The table below shows cash and non-cash changes in borrowings for which cash flows were, or will be, classified as financing activities in the Consolidated Statement of Cash Flows. Cash on hand and at bank comprises: AUD USD GBP EUR NZD CAD Australian dollar United States dollar Pound sterling Euro New Zealand dollar Canadian dollar KRW South Korean won PLN CZK CNY Polish zloty Czech koruna Chinese yuan Current Non-current Total 2021 $000 2020 $000 2021 $000 2020 $000 2021 $000 2020 $000 Cash and cash equivalents in the Consolidated Statement of Cash Flows – 384,377 495,886 384,377 495,886 Opening Balance Changes from financing cash flows Proceeds from drawdowns on Facility Repayments of Facility – – – Interest paid (7,155) (14,705) – – (7,155) – – 69,000 59,000 69,000 (223,853) (179,612) (223,853) 59,000 (179,612) (14,705) Total changes from financing cash flows Other non-cash changes Transfers Interest expense Other including foreign exchange movement Closing balance (7,155) (14,705) (154,853) (120,612) (162,008) (135,317) – 7,155 – – – 14,705 – – – – – – – 7,155 – 14,705 (27,191) 9,103 (27,191) 9,103 202,333 384,377 202,333 384,377 108 109 2021 $000 4,902 9,157 276 4,891 765 3,827 2,150 653 715 1,091 28,427 28,427 2020 $000 12,056 44,247 7,954 11,464 839 2,889 1,280 541 630 266 82,166 82,166 Reliance Worldwide Corporation Limited Annual Report 2021 Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2021 12. Net debt (continued) (d) Reconciliation of cash flow from operations with profit from operations after income tax 13. Financial risk management (continued) Foreign exchange risk Profit/(loss) from operations after income tax Depreciation expense Amortisation expense (Profit)/loss on disposal of non-current assets Impairment expense Share-based payments Net interest expense accounted for as financing cash flows Other finance costs Changes in operating assets and liabilities: Trade and other receivables Inventories Prepayments Trade and other payables Tax balances Employee entitlements Other assets and liabilities 2021 $000 188,249 48,760 7,545 (1,405) 8,617 6,588 7,155 4,872 (39,297) (44,945) (315) 65,561 24,803 (4,505) 3,306 2020 $000 89,441 53,582 8,446 (1,299) 18,868 4,229 14,060 5,970 (26,847) 13,640 (3,882) 38,023 8,933 10,497 7,184 Net cash from operating activities 274,989 240,845 13. Financial risk management The Group is exposed to a range of financial risks, including market risk (which includes foreign currency risk, interest rate risk and commodity price risk), liquidity risk and credit risk arising from its operating activities. The carrying amounts and estimated fair values of the Group’s financial instruments recognised in the financial statements are materially the same. The Audit and Risk Committee has the primary responsibility of overseeing and reporting to the Board on the Group’s risk management systems and strategies. Various strategies and methods are used to manage different types of market risks that the Group is exposed to, including: Market risk Group financial performance is largely dependent on activity in the residential and commercial repair and renovation and new construction end-markets. Activities in these end-markets are impacted by changes in general economic conditions such as movements in inflation and interest rates, the level of business spending and consumer confidence and changes to fiscal or monetary policies, legislation and regulation (including plumbing codes, tariff rates and import duties). Activities in the repair end-market are also impacted by extreme weather events. The Group operates in different global regions which diversifies these risks. Foreign exchange risk relates to the risk that the fair value of future cash flows of a financial instrument or a highly probable transaction will fluctuate because of changes in foreign exchange rates. The Group is exposed to foreign exchange risk through operating activities (sales and purchases made or derived in currencies other than the functional currency), intercompany financing activities and investment in foreign subsidiaries (which transact in the local currency). The Group does not typically hedge its foreign exchange exposures but may selectively utilise foreign exchange forward contracts to mitigate fluctuations in foreign exchange rates. The Group’s balance sheet exposures of cash, external receivables and payables balances for the major currency exposures at 30 June 2021 are set out below in Australian dollar equivalents. Spot exchange rate Cash Trade and other receivables Trade and other payables Net external exposure USD GBP EUR 2021 $000 0.7500 9,070 3,415 (9,922) 2,563 2020 $000 0.6900 43,989 3,789 (6,424) 41,354 2021 $000 0.5423 275 – (1,417) (1,142) 2020 $000 0.5566 7,953 – (137) 7,816 2021 $000 0.6325 4,891 397 (8,303) (3,015) 2020 $000 0.6144 11,466 332 (2,790) 9,008 The table below shows the effect on profit after income tax expense and total equity from major currency exposures, had the exchange rates been 5% higher or lower than the year end rate. At relevant 30 June 2021 rates If foreign exchange rate +5% If foreign exchange rate - 5% Interest rate risk Increase/(decrease) Increase/(decrease) in profit after income tax in equity 2021 $000 76 (80) 2020 $000 2,770 (3,062) 2021 $000 76 (80) 2020 $000 2,770 (3,062) The Group is exposed to interest rate risk as it borrows funds at floating rates and interest is received on cash deposits at floating rates. Interest rate risk is the risk that the Group will be adversely affected by movements in floating interest rates that will increase the cost of floating rate debt. If the current interest rate was 100 basis points higher the interest expense for the year would have increased by $3.2 million. The Group’s exposure to interest rate risk on the cash and cash equivalents listed in the Consolidated Statement of Financial Position and the interest bearing borrowings is disclosed in Note 12. The Group has determined that if interest rates were to increase or decrease by 50 basis points it would have an immaterial impact on the Group’s interest income on cash deposits. Commodity price risk Commodity price risk is the risk the cost of some key raw material inputs required for the Group’s products are correlated with the underlying commodity price and, as such, fluctuates over time. The most material exposures for the Group are to the market price of copper, which is used in the production of brass and to the cost of resins used in the production of plastics. The Group seeks to manage changing input prices through price negotiations with customers following changes in the underlying commodity prices, working with suppliers to achieve the maximum level of stability in their costs and related pricing and seeking alternative supply sources when necessary. 110 111 Reliance Worldwide Corporation Limited Annual Report 2021 Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2021 13. Financial risk management (continued) Liquidity risk 13. Financial risk management (continued) Credit risk Liquidity risk arises from the ability of the Group to meet its financial liabilities and obligations as and when they fall due. Credit risk relates to the potential failure of the Group’s counterparties (such as customers or financial institutions) to meet their The Group monitors future financial commitments and intends to maintain sufficient cash reserves and headroom in its obligations at the appropriate time. The maximum exposure at any time is equal to the carrying value of the financial assets. The business seeks to monitor and manage counterparty risk through internal controls and protocols, including customer credit policies and performing banking and financial activities with financial institutions. As such the Group does not seek collateral in respect of its trade and other receivables. At 30 June, the maximum exposure to credit risk for trade and other receivables by geographic region is as follows: banking facilities to meet these objectives on an on-going basis. The Group prepares regular cash flow forecasts and monitors its liquidity to ensure it will always have sufficient cash to allow it to meet liabilities as they fall due. The Group had cash and cash equivalents of $28.4m at 30 June 2021 (30 June 2020 – $82.2m). In addition to its operating cash at bank the Group has undrawn borrowing facilities available. Details of the borrowing facilities in place and their terms are disclosed at Note 12. Total facilities available Amount drawn at 30 June Available at 30 June 2021 $000 750,000 202,333 547,667 2020 $000 750,000 384,377 365,623 Americas Asia Pacific EMEA Total 2021 2020 Carrying amount Carrying amount $000 182,487 42,583 68,150 $000 183,177 33,614 46,414 293,220 263,205 The contractual maturity of the Group’s financial liabilities based on the financing arrangements in place at period end date are shown in the table below: 2021 Financial liabilities Trade and other payables Lease liabilities Bank borrowings Total 2020 Financial liabilities Trade and other payables Lease liabilities Bank borrowings Total Carrying amount $000 239,984 103,230 202,333 Less than 1 year $000 239,984 34,806 – 1 to 2 years $000 – 11,291 197,333 545,547 274,790 208,624 Carrying amount $000 168,426 108,881 384,377 Less than 1 year $000 168,426 15,335 – 1 to 2 years $000 – 14,226 207,247 2 to 5 years $000 – 32,048 5,000 37,048 2 to 5 years $000 – 38,169 177,130 More than 5 years $000 Total $000 – 239,984 35,268 – 113,413 202,333 35,268 555,730 More than 5 years $000 – 55,830 – Total $000 168,426 123,560 384,377 661,684 183,761 221,473 215,299 55,830 676,363 At 30 June 2021, the Group’s most significant customer accounted for $56.5 million of the trade debtors and receivables amount. Further details of the Group’s trade receivables are included in Note 8. 14. Share Capital Share Capital Ordinary shares Opening balance Number of shares Company 2021 Number 2020 Number 2021 $ 2020 $ 790,094,765 790,094,765 2,330,533,119 2,329,126,597 Treasury shares (Note 17) – – (124,995) 1,406,522 Total 790,094,765 790,094,765 2,330,408,124 2,330,533,119 The total acquisition cost of treasury shares held at 30 June 2021 was $26,107,978 (30 June 2020 – $25,982,795). Holders of ordinary shares are entitled to dividends as declared from time to time and are entitled to one vote per share at general meetings of the Company. 112 113 Reliance Worldwide Corporation Limited Annual Report 2021 Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2021 15. Reserves Foreign currency translation reserve: Opening balance Movement resulting from translation of financial statements of foreign subsidiaries net of tax impacts Merger reserve: Opening balance Share-based payments reserve: Opening balance Share-based payments expense Hedging reserve: Opening balance Hedging loss during the year 2021 $000 2020 $000 16. Employee benefits Accounting Policy Retirement benefits costs 14,329 21,726 entitling them to the contributions. Payments to defined contribution retirement benefit plans are recognised as an expense when employees render the service 43,313 57,642 (7,397) 14,329 Termination benefits A liability for a termination benefit is recognised at the earlier of when the Group can no longer withdraw the offer of the termination benefit and when the entity recognises any related restructuring costs (1,100,943) (1,100,943) (1,100,943) (1,100,943) A provision is made for restructuring where the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Restructuring provisions 13,153 6,588 19,741 8,923 4,230 13,153 (10,767) (10,767) – – (10,767) (10,767) Share-based payments The fair value of equity settled share-based payment awards granted to employees is recognised as an expense with a corresponding increase in equity over the vesting period of the grant. Short and long-term employee benefits A liability is recognised for benefits accruing to employees in respect of leave entitlements in the period the related service is rendered. Liabilities recognised in respect of short-term employee benefits are measured at their nominal values using the remuneration rate expected to apply at the time of settlement. Liabilities recognised in respect of long-term employee benefits are measured as the present value of the estimated future cash outflows to be made by the Group in respect of services provided by employees up to reporting date. Current: Total reserves (1,034,327) (1,084,228) Current employee entitlements include benefits for wages, salaries and annual leave that are expected to be settled within Nature and purpose of reserves (a) 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 and the translation of foreign currency monetary items forming part of a net investment in a foreign operation. (b) Merger reserve The Company, through a wholly owned subsidiary, acquired the entities that carry on the operations of Reliance Worldwide Corporation in April and May 2016 (“Restructure”). The Directors elected to account for the effect of the Restructure as a common control transaction in accordance with the provisions of AASB 3: Business Combinations. Consequently, the net assets acquired were recorded at the carrying values that existed at the time of the transaction. The excess consideration over book value at acquisition date is recorded in the Merger reserve. (c) Share-based payments reserve The share-based payments reserve is used to record the value of share based payments provided to employees, including Key Management Personnel, as part of their remuneration. (d) Hedging reserve The hedging reserve records the effective portion of the cumulative change in the fair value of the hedging instruments used in cash flow hedges. twelve months of the reporting date. The amounts represent present obligations resulting from employees’ services provided to reporting date and are calculated at undiscounted rates based on current remuneration and wage rates including related on-costs such as workers compensation, insurance and payroll tax. Non-current: Non-current employee entitlements include leave benefits that employees have earned in return for their continued service, pursuant to the Legislation and Regulations in the relevant jurisdictions. The entitlement is calculated using expected future increases in wage and salary rates including related on-costs and expected settlement dates and is discounted back to present value. 114 115 Reliance Worldwide Corporation Limited Annual Report 2021 Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2021 16. Employee benefits (continued) (a) Employee benefits expenses Employee benefits expenses recognised in the profit or loss account are: Wages and salaries Severance and restructuring costs Employee leave entitlements Workers compensation premiums Superannuation contributions Payroll related taxes Contract labour Share-based payment expense Other payroll related expenses Recovered in costs of goods sold 2021 $000 192,421 3,182 5,901 1,037 10,158 15,627 18,326 6,286 339 253,277 (49,607) 203,670 2020 $000 186,459 9,799 5,310 811 9,319 14,959 11,790 5,636 498 244,581 (48,953) 195,628 The Group applied for the UK Government wage subsidy in April 2020 under the Coronavirus Job Retention Scheme where 80% of wages were subsidised for the Group’s UK furloughed employees. These support payments are presented as offsets of the related wage expenses in the consolidated profit or loss statement, in line with AASB 120 Accounting for Government Grants and Disclosure of Government Assistance. A total of $1.0 million (2020: $3.7 million) has been recognised in the consolidated statement of profit or loss as the amount offsetting wages paid for the period July to October 2020. (b) Employee benefits provisions Current Non-current Total Employee entitlements Opening balance Charged to profit or loss 2021 $000 16,665 8,131 2020 $000 7,468 14,519 Paid during the period (12,077) (4,229) Foreign currency exchange differences Reclassification Closing balance (205) (443) 12,071 (63) (1,030) 16,665 2021 $000 6,693 62 (107) 35 99 6,782 2020 $000 5,394 590 (648) 327 1,030 6,693 2021 $000 23,358 8,193 (12,184) (170) (344) 2020 $000 12,862 15,109 (4,877) 264 – 18,853 23,358 17. Share-based payments Accounting Policy The cost of share-based payments is recognised by expensing the fair value of the options or rights granted, over the period during which the employees become unconditionally entitled to these benefits. Where the plan will be settled by issuing equity, the corresponding entry is an increase in the share based payments reserve. The Company has established an Equity Incentive Plan (“Plan”) to assist in the motivation, retention and reward of eligible executives. The Plan is designed to align the interests of employees with the interests of shareholders by providing an opportunity for eligible employees to receive an equity interest in the Company. The Plan provides flexibility for the Company to grant rights, options and/or restricted shares as incentives, subject to the terms of individual offers and the satisfaction of performance conditions determined by the Board from time to time. Options Balance at 30 June 2020 Exercised during the reporting period Cancelled, forfeited or lapsed Balance at 30 June 2021 Vested (#) Unvested (#) 567,320 (67,320) – 4,000,000 – – Total (#) 4,567,320 (67,320) – 500,000 4,000,000 4,500,000 Vesting date (subject to vesting conditions) – 30 June 2022 Expiry date 5 December 2024 30 June 2031 Each option provides an entitlement to acquire an ordinary share in Reliance Worldwide Corporation Limited upon payment of the exercise price and meeting certain vesting criteria. These options are equity settled. The Company has not granted any other options. Rights to shares The Board has approved that nominated, eligible executives and employees be invited to participate in the Plan. Participants are granted rights to be awarded fully paid ordinary shares in the Company (“Rights”) in accordance with the rules of the Plan and subject to the offer terms (“Offer”). An Offer constitutes a long-term incentive component of the participant’s remuneration from the grant date until the end of the vesting period. At 30 June 2021, the number of unvested Rights which had been granted by the Company to all participants was 6,364,864 (30 June 2020 – 6,394,624). The opening and closing balances of all unvested Rights granted are reconciled as follows: Granted and unvested at 30 June 2020 Granted during FY2021 with the following vesting dates: 23 December 2022 1 January 2024 6 May 2024 1 July 2025 Total granted during FY2021 Forfeited, cancelled or lapsed during FY2021 Unvested at 30 June 2021 Number of Rights 6,394,624 110,620 331,263 12,100 150,000 603,983 (633,743) 6,364,864 No Rights vested during the reporting period or have subsequently vested. A further 196,546 Rights lapsed or have been forfeited or cancelled subsequent to 30 June 2021 (none of which were granted to Senior Executives). No Rights have been granted subsequent to 30 June 2021 to the date of this report. Vesting conditions for all grants of Rights include a continuous service period ranging between two and five years. Details of Rights granted during the reporting period are set out in the Remuneration Report. 116 117 Reliance Worldwide Corporation Limited Annual Report 2021 Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2021 17. Share-based payments (continued) 18. Group entities Unless the Board determines otherwise, if a participant ceases employment with the Group prior to the vesting date and any of the following has occurred then a pro rata portion of unvested Rights will remain on foot and vest in the ordinary course as though the participant had not ceased employment: • The participant’s employment is terminated by the Company without cause; or • The participant terminates employment for good reason. The remainder of the Rights will lapse. The Company has established a subsidiary, Reliance Employee Share Investments Pty Ltd (“Trustee”) to act as trustee of the Reliance Employee Share Investments Trust. The Trustee will acquire Reliance shares on-market on behalf of the Trust to meet any obligations to deliver shares to a participant who satisfies the vesting conditions. The movement in the number of shares held during the reporting period is: Shares held at 30 June 2020 Acquired during FY2021 (at an average cost of $3.88 per share) Allocated property transferred to participants Shares held at 30 June 2021 Share Match Plan Total 6,913,644 71,327 (130,612) 6,854,359 Reliance Worldwide Corporation Limited was incorporated on 19 February 2016 and is the parent, and ultimate controlling entity of the Group. The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policies described in Note 1 and 25. Country of Class of Holding Holding Functional Equity Equity Name of Entity Reliance Worldwide Group Holdings Pty Ltd Reliance Worldwide Corporation (Aust.) Pty Ltd Reliance Worldwide Pty Ltd Reliance Employee Share Investments Pty Ltd Reliance Worldwide Holdings (NZ) Limited Reliance Worldwide Corporation (NZ) Limited Reliance Manufacturing Company (NZ) Limited1 Titon Limited1 Reliance Worldwide Corporation (Canada) Inc Reliance Worldwide Holdings (USA) Corporation Reliance Worldwide International Group Holdings Corporation Reliance Worldwide Corporation Streamlabs Inc Incorporation Shares Australia Australia Australia Australia Ordinary Ordinary Ordinary Ordinary New Zealand Ordinary New Zealand Ordinary New Zealand Ordinary New Zealand Ordinary Canada America America America America Spain Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary A share match plan was introduced during the reporting period to encourage employees to own shares in the Company. Reliance Worldwide Corporation (Europe) S.L.U. Eligible employees can acquire up to $5,000 of shares in RWC per plan year from post tax income with contributions made via a regular salary deduction (“Purchased Shares”). The Company will match the shares acquired on a 1:2 basis up to a cap $2,500 of Purchased Shares subject to the terms of the Share Match Plan (“Matching Rights”). There is a minimum holding period for Purchased Shares of 2 years and a continuous service obligation for Matching Rights to convert into shares on a 1:1 basis. There are no performance conditions. Participants receive dividends and have voting rights on their Purchased Shares. Matching Rights have no voting or dividend entitlements prior to vesting. 307 employees were participating in this plan at 30 June 2021. The total number of Matching Rights granted at 30 June 2021 was 42,884. Reliance Worldwide Holdings (UK) Limited United Kingdom Ordinary Reliance Worldwide Corporation Underfloor Heating Limited United Kingdom Ordinary Reliance Worldwide Corporation (R.W.C Israel) Ltd Israel Ordinary Reliance Worldwide Finance Limited United Kingdom Ordinary Reliance Worldwide Holdings (International) LLC America Ordinary Reliance Worldwide Corporation Holdings (UK) Limited United Kingdom Ordinary 2021 100% 100% 100% 100% 100% 100% – – 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 2020 Currency 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% AUD AUD AUD AUD NZD NZD NZD NZD CAD USD USD USD USD Euro GBP GBP ILS USD USD GBP GBP GBP GBP GBP Euro Euro Euro Euro NZD KRW CNY CZK PLN John Guest International Ltd John Guest Speedfit Ltd John Guest Engineering Ltd Reliance Worldwide Corporation (UK) Limited John Guest Automotive GmbH John Guest GmbH Reliance Worldwide Corporation France SAS John Guest SRL John Guest Pacific Ltd2 John Guest Korea Ltd John Guest (Shanghai) Trading Co. Ltd John Guest Czech S.R.O John Guest Sp zoo United Kingdom Ordinary United Kingdom Ordinary United Kingdom Ordinary United Kingdom Ordinary Germany Germany France Italy Ordinary Ordinary Ordinary Ordinary New Zealand Ordinary – Korea China Ordinary Ordinary Czech Republic Ordinary Poland Ordinary 100% 100% 100% 100% 118 119 1 De-registered from the New Zealand Companies register on 15 March 2021 2 John Guest Pacific Limited amalgamated with Reliance Worldwide Corporation (NZ) on 7 December 2020 Reliance Worldwide Corporation Limited Annual Report 2021 Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2021 19. Commitments and contingencies (a) Expenditure commitments 20. Key Management Personnel and related party transactions (continued) (a) Key Management Personnel compensation Capital expenditure commitments contracted for at balance date but not provided for in respect of plant and equipment: Details of the total remuneration of Key Management Personnel of the Group during the reporting period are: Payable not later than one year Payable later than one year and not later than five years Details of the Group’s lease commitments are captured in lease liabilities in Note 10. (b) Contingencies Financial guarantees 2021 $000 18,818 – 18,818 2020 $000 3,694 – 3,694 Short-term employee benefits Post-employment benefits Termination benefits Share-based payments Total 2021 $ 2020 $ 5,073,214 4,794,096 124,169 - 2,593,676 7,791,059 130,964 614,192 1,635,202 7,174,454 (b) Key Management Personnel transactions in shares and options The total direct and indirect interests of Key Management Personnel, including their related parties, in the share capital and options The Company has agreed to provide guarantees to third parties for certain commitments made or entered into by of the Company at 30 June 2021 are: subsidiary entities in the ordinary course of business. The Company does not consider these guarantees to be material in the context of the Group’s business. The Group has provided bank guarantees at 30 June 2021 totalling $1,344,884 (2020: $1,233,733). General contingencies The Group may be involved in legal claims, administrative actions and proceedings related to the normal conduct of its business including, among other things, general liability, commercial, employment, intellectual property, and products liability matters such as the proceeding listed below. Based upon existing information, it is not possible to predict with certainty the outcome or cost of current legal claims, actions and proceedings. The Directors believe that current matters of which they are aware should not significantly affect the operations of the Group, the results of those operations or the state of affairs of the Group in subsequent financial periods. The Company is aware of a legal proceeding filed in the United States federal district court in Atlanta, Georgia, against Reliance Worldwide Corporation, a member of the Group, (“RWC USA”) to a putative class action in connection with alleged product liability claims. At this stage, it is not possible to provide a reasonable or accurate assessment of RWC USA’s potential exposure, if any. In any event, RWC USA does not accept any liability and intends to continue vigorously defending this matter. The Directors are not aware of any other material contingent liabilities at balance date or arising since the end of the financial period. Shares Options¹ Rights¹ 2021 Number 155,217 150,506 – – 20,000 10,000 – 2020 Number 155,217 150,506 32,457 – 20,000 – – 2021 Number 2020 Number 2021 Number 2020 Number – – – – – – – – – – – – – – – – – – – – – – – – – – – – Russell Chenu Stuart Crosby Ross Dobinson2 Sharon McCrohan Christine Bartlett Ian Rowden Darlene Knight Heath Sharp Andrew Johnson 512 – – – 1,275,368 1,204,041 4,000,000 4,000,000 611,201 582,919 611,2013 251,400 Total 1,611,603 1,562,221 4,000,000 4,000,000 1,194,120 862,201 At 30 June 2021, no Key Management Personnel had been offered or held any rights to be awarded shares other than 20. Key Management Personnel and related party transactions as disclosed above. Under Australian Accounting Standards, the term Key Management Personnel refers to directors (both non-executive directors and Details of movements in holdings during the period are disclosed in the Remuneration Report. executive directors) and those persons having the authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly. The Key Management Personnel of the Group during the reporting period until the date of this report (c) Transactions with other related parties are set out below. All Key Management Personnel held their positions for the entire reporting period unless otherwise noted. New employment agreements have been entered into with Senior Executives. Key terms and conditions are summarised in the Stuart Crosby Independent Non-executive Chairman Russell Chenu Independent Non-Executive Director Ross Dobinson Independent Non-Executive Director (until 14 April 2021) Sharon McCrohan Independent Non-Executive Director Christine Bartlett Independent Non-Executive Director Ian Rowden Independent Non-Executive Director (appointed 6 July 2020) Darlene Knight Independent Non-Executive Director (appointed 14 April 2021) Heath Sharp Managing Director and Group Chief Executive Officer Andrew Johnson Group Chief Financial Officer Remuneration Report. There were no other material contracts between a KMP or a related party and the Company or any of its subsidiaries entered into during the reporting period. No KMP has entered into a loan made, guaranteed or secured, directly or indirectly, with or by the Company or any of its subsidiaries during the reporting period. 120 121 1 Details of Options and Rights granted to Key Management Personnel are disclosed in the Remuneration Report 2 Ceased to be a member of KMP on 14 April 2021 3 After forfeiture of Rights following assessment of performance conditions subsequent to 30 June 2020 Reliance Worldwide Corporation Limited Annual Report 2021 Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2021 21. Auditor’s remuneration 22. Deed of cross guarantee (continued) KPMG are the auditors of the Company. The total remuneration received, or due and receivable by KPMG from the Group is: A consolidated statement of comprehensive income, comprising the Company and controlled entities which are party to the KPMG Australia Audit services Other assurance and non-audit services • Tax services • Other services Total remuneration paid to KPMG Australia Overseas KPMG offices Audit services Tax services Total remuneration paid to KPMG overseas 2021 $ 2020 $ 699,500 623,500 43,750 – 743,250 328,119 127,861 455,980 35,000 – 658,500 404,914 249,100 654,014 Total remuneration to KPMG 1,199,230 1,312,514 Total remuneration for audit services Total remuneration for non-audit services 22. Deed of cross guarantee 1,027,619 171,611 1,028,414 284,100 The wholly-owned subsidiaries listed below are relieved from the Corporations Act 2001 requirements for preparation, audit and lodgement of financial reports and Directors’ reports following the execution of a Deed of Cross Guarantee (“Deed”) on 29 June 2016. The Deed complies with the relevant ASIC instrument/class order. 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 the Company is wound up. The holding entity for the purpose of the Deed is Reliance Worldwide Corporation Limited. The subsidiaries who are parties to the Deed are: • Reliance Worldwide Group Holdings Pty Ltd; and • Reliance Worldwide Corporation (Aust.) Pty Ltd. Deed and after eliminating all transactions between those entities, for the year ended 30 June 2021 and a Statement of Financial Position for the same group for entities at balance date are set out below. Statement of profit or loss and other comprehensive income Revenue from sale of goods Cost of sales Gross profit Other income Product development expenses Selling, warehousing and marketing expense Administration expense Other expenses Operating profit Finance income Finance costs Net finance costs Dividend income Profit before tax Income tax expense Profit for the period attributable to the Owners of the Company Other comprehensive profit Items that may be classified to profit or loss: Foreign currency translation differences Total comprehensive profit for the period attributable to the Owners of the Company 2021 $000 246,509 (181,213) 65,296 179 (3,226) (18,031) (19,895) (3,117) 21,206 1,771 (7,700) (5,929) 128,929 144,206 (7,116) 137,090 2020 $000 227,788 (162,773) 65,015 249 (3,800) (18,543) (19,103) (1,284) 22,534 44,218 (8,916) 35,302 – 57,874 (17,162) 40,712 – – 137,090 40,712 122 123 Reliance Worldwide Corporation Limited Annual Report 2021 Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2021 22. Deed of cross guarantee (continued) Statement of financial position at 30 June 2021 Assets Current Assets Cash and cash equivalents Trade and other receivables Inventories Current tax assets Other current assets Total Current Assets Non-current Assets Property, plant and equipment Right-of-use assets Investment in subsidiaries Deferred tax assets Goodwill Other intangible assets Other non-current assets Total Non-current assets Total Assets Liabilities Current Liabilities Trade and other payables Current tax liabilities Employee benefits Dividend payable Other current liabilities Total Current Liabilities Non-current Liabilities Borrowings Deferred tax liabilities Employee benefits Other non-current liabilities Total Non-current Liabilities Total Liabilities Net Assets Equity Share capital Reserves Retained earnings Total Equity 124 2021 $000 8,352 67,731 58,096 7,749 7,365 2020 $000 32,652 49,486 59,365 – 8,763 149,293 150,266 33,334 38,598 30,664 43,128 2,139,815 2,098,099 7,088 39,825 8,857 15,256 2,282,773 2,432,066 70,887 – 4,325 – 5,671 80,883 5,000 2,281 5,254 35,292 47,827 128,710 5,989 39,825 10,665 42,945 2,271,315 2,421,581 34,027 2,956 3,131 35,554 5,518 81,186 38,000 2,132 5,120 69,095 114,347 195,533 2,303,356 2,226,048 2,330,408 (141,637) 114,585 2,330,533 (148,224) 43,739 2,303,356 2,226,048 23. Parent entity disclosure As at, and throughout, the financial year ended 30 June 2021, the parent entity of the Group was Reliance Worldwide Corporation Limited. (a) Result of the parent entity Profit/(Loss) for the period Other comprehensive income Total comprehensive profit/(loss) for the period (b) Statement of financial position of the parent entity at 30 June Assets Current Assets Non-current Assets Total Assets Liabilities Current Liabilities Non-current Liabilities Total Liabilities Net Assets Equity Share-capital Reserves Retained Profits/(Accumulated Losses) Total Equity (c) Parent entity contingent liabilities 2021 $000 154,561 – 154,561 2021 $000 19,623 2,475,105 2020 $000 115,758 – 115,758 2020 $000 156,024 2,318,391 2,494,728 2,474,415 3,676 16,189 19,865 54,287 39,122 93,409 2,474,863 2,381,006 2,318,324 2,318,449 19,741 136,798 13,153 49,404 2,474,863 2,381,006 The Company has agreed to provide guarantees for certain commitments made or entered into by subsidiary entities in the ordinary course of business. The Company does not consider these guarantees to be material in the context of the Group’s business. Refer to Note 19. (d) Parent entity capital commitments for acquisition of property plant and equipment The Company did not enter into any material contracts to purchase plant and equipment during the year. (e) Parent entity guarantees in respect of the debts to its subsidiaries The Company has entered into a Deed of Cross Guarantee with the effect that it guarantees liabilities and obligations in respect of some Australian subsidiaries in certain circumstances. Refer to Note 22. 125 Reliance Worldwide Corporation Limited Annual Report 2021 Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2021 24. Subsequent events On 23 August 2021, the Directors resolved to declare a final dividend for the 2021 financial year of 7 cents per share franked to 20%. The aggregate dividend payment amount is $55.3 million. The dividend will be paid to eligible shareholders on 8 October 2021. The Company does not have a dividend reinvestment plan. On 20 July 2021, the Group announced that it had entered into an agreement to acquire the business assets of LCL Pty Ltd (“LCL”); the transaction completed on 2 August 2021 for a final purchase price of $36.7 million. The acquisition was funded through existing committed borrowing facilities. LCL is one of Australia’s largest producers of high-quality copper-based alloys and processes both new and recycled non-ferrous materials to produce a range of brass copper alloys. In addition to being the principal supplier of brass to RWC in Australia, LCL also recycles excess brass (swarf) arising from RWC’s product manufacturing activities. Preliminary net asset value and allocation of the purchase price to acquired assets are as follows: Final purchase price Payment – Working Capital Adjustment Final consideration transferred Property, plant and equipment Inventories Employee leave entitlements Total identifiable net assets acquired Preliminary goodwill arising from acquisition $000 36,712 1,647 38,359 10,961 10,647 (577) 21,031 17,328 The acquisition accounting will be finalised within 12 months of the acquisition date. The Group intends to change its reporting currency from Australian dollars to US dollars with effect from 1 July 2021. Consolidated financial results for the half year ending 31 December 2021 and for the year ending 30 June 2022 will be reported in US dollars, with comparative prior year financial information restated in US dollar. The Directors are not aware of any other matters or circumstances that have occurred since the end of the financial year that have significantly affected or may significantly affect the operations of the Group, the results of those operations or the state of affairs of the Group in subsequent financial periods. 25. Other accounting policies (a) Basis of consolidation This note sets out details of accounting policies which aid the understanding of the financial statements as a whole. Accounting policies which are specific to a particular income, expense or account balance are described in the note to which that policy relates. (i) Principles of consolidation Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns 25. Other accounting policies (continued) (b) Foreign currency The individual financial statements of each entity comprising the Group are presented in the currency of the primary economic environment in which the entity operates (its functional currency). For the purposes of these consolidated financial statements, Australian dollars is the presentation currency, which is also the functional currency of the Company. The functional currency of each subsidiary is provided in Note 18. (i) Foreign currency transactions In preparing the financial statements of each individual entity, transactions in currencies other than the entity’s functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are translated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the date of the transaction. (ii) Foreign operations For the purpose of presenting these consolidated financial statements, the assets and liabilities of the Group’s foreign operations are translated into Australian dollars using exchange rates prevailing at the end of the reporting period. Income and expense items are translated at average exchange rates. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in Net Investment within Foreign Currency Translation Reserve (“FCTR”). The FCTR comprises all foreign currency differences arising from the translation of the financial statements of the foreign operations. (c) Financial instruments (i) Non-derivative financial instruments: Recognition, Measurement, Classification and Derecognition Non-derivative financial assets are classified into the following categories: (a) cash and cash equivalents and (b) trade and other receivables. Non-derivative financial liabilities are classified into the following categories: (a) trade and other payables and (b) borrowings. Trade receivables are initially recognised when they are originated. All other financial assets and financial liabilities are initially recognised when the Group becomes a party to the contractual provisions of the instruments. A financial asset (unless it is a trade receivable without a significant financing component) or financial liability is initially measured at fair value plus, for an item not at fair value through the profit and loss (FVTPL), transaction costs attributable to its acquisition or issue. A trade receivable without a significant financing component is initially measured at the transaction price. On initial recognition a financial asset is classified as measured at amortised cost, fair value through other comprehensive income (FVOCI) or FVTPL. A financial asset is measured at amortised cost if it meets both of the following conditions and not designated as FVTPL: • it is held within a business model whose objective is to hold assets to collect contractual cash flows and; • its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial The Group classifies and measures financial assets it has recognised at amortised cost. These assets are subsequently measured statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until at amortised cost using the effective interest method. The amortised cost is reduced by impairment losses. Interest income, the date on which control ceases. (ii) Transactions eliminated on consolidation Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated. foreign exchange gains and losses and impairment are recognised in profit or loss. Any gain or loss on derecognition is recognised in profit or loss. 126 127 Reliance Worldwide Corporation Limited Annual Report 2021 Directors’ Declaration NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2021 DIRECTORS’ DECLARATION For the year ended 30 June 2021 25. Other accounting policies (continued) In the opinion of the Directors of Reliance Worldwide Corporation Limited (“the Company”): Financial liabilities are classified as measured at amortised cost or FVTPL. A financial liability is classified as FVTPL if it is 1. the consolidated financial statements and notes set out on pages 85 to 128, are in accordance with the classified as held for trading, it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are Corporations Act 2001, including: measured at fair value. Other financial liabilities are subsequently measured at amortised cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognised in profit or loss. Any gain or loss on derecognition is also recognised in profit or loss. Financial assets are derecognised when the contractual rights to cash flows from the financial asset expire or when the financial asset and all the substantial risks and benefits are transferred. Financial liabilities are derecognised when they are extinguished, (i) giving a true and fair view of the Group’s financial position as at 30 June 2021 and of its performance for the financial year ended on that date; and (ii) complying with Australian Accounting Standards, other mandatory professional reporting requirements and the Corporations Regulations 2001. discharged, cancelled or they expire. On derecognition of a financial liability, the difference between the carrying amount 2. there are reasonable grounds to believe that the Company will be able to pay its debts as and when they extinguished and the consideration paid is recognised in profit or loss. become due and payable. (ii) Derivative financial instruments The Group may hold derivative instruments to hedge its foreign currency risk exposures. Derivatives are initially measured at fair value; any directly attributable transaction costs are recognised in profit or loss as incurred. Subsequent to initial recognition, 3. there are reasonable grounds to believe that the Company and the Group entities identified in Note 22 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 described in Note 22. derivatives are measured at fair value; any changes therein are generally recognised in profit or loss. The Directors draw attention to Note 1 to the consolidated financial statements which includes a statement of When a derivative is designated as a cash flow hedging instrument, the effective portion of changes in the fair value of the compliance with International Financial Reporting Standards. derivative is recognised in other comprehensive income and accumulated in the hedging reserve. Any ineffective portion of changes The Directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer as in the fair value of the derivative is recognised immediately in profit or loss. The amount accumulated in equity is retained in other required by Section 295A of the Corporations Act 2001. comprehensive income and reclassified to profit or loss in the same period or periods during which the hedged forecast cash flows affect profit or loss or the hedged item affects profit or loss. (d) Goods and services tax (GST) – Australia Revenues, expenses and assets are recognised net of the amount of GST except where the amount of GST incurred is not recoverable from the Australian Taxation Office. In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as part of the item of expense. Receivables and payables in the statement of financial position are shown inclusive of GST. Cash flows are presented on a gross basis. The GST components arising from investing and financing activities are presented as operating activities. Any commitments are disclosed net of GST. Signed in accordance with resolution of the Directors. Stuart Crosby Chairman Melbourne 23 August 2021 Heath Sharp Group Chief Executive Officer and Managing Director 128 129 130 131 KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under Professional Standards Legislation. Independent Auditor’s Report To the shareholders of Reliance Worldwide Corporation Limited Report on the audit of the Financial Report Opinion We have audited the Financial Report of Reliance Worldwide Corporation 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 2021 and of its financial performance for the year ended on that date; and • complying with Australian Accounting Standards and the Corporations Regulations 2001. The Financial Report comprises: • Consolidated statement of financial position as at 30 June 2021; • 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; • Directors' Declaration. The Group consists of Reliance Worldwide Corporation Limited (the Company) and the entities it controlled at the year end or from time to time during the financial year. Basis for opinion 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 (including Independence Standards) (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 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. This matter was 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 this matter. Valuation of goodwill and indefinite life intangible assets ($1,140 million) Refer to Note 11 Goodwill and other intangible assets in 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 indefinite life intangible assets for impairment, given the size of the balance (being 51% of total assets), and the significant estimation uncertainty continuing from the business disruption impact of the COVID-19 global pandemic. We exercised significant judgement in evaluating the evidence available. We focussed on the significant forward-looking assumptions the Group applied in their value in use model, including: • Forecast operating cash flows – there remains a level of future economic uncertainty as a result of COVID-19. These conditions increase the risk of inaccurate forecasts or a significantly wider range of possible outcomes, for us to consider. We focused on what the Group considers as its future business plans when assessing the feasibility of the Group’s forecast cashflows. • Terminal growth rates – in addition to the uncertainties described above, the Group’s models are sensitive to changes in terminal growth rates. This drives additional audit effort specific to their feasibility and consistency of application to the Group’s strategy. • Discount rate - these are complicated in nature and vary according to the conditions and environment the specific Cash Generating Unit (CGU) is subject Our procedures included: • Considering the appropriateness of the value in use method applied by the Group to perform the annual impairment test against the requirements of the accounting standards. • Testing key controls in the Group’s valuation process including Board approval of budgets and review and approval of the impairment assessment, including cash flow forecasts, by examining information reviewed and approved by the Board. • Comparing the forecast cash flows contained in the value in use model to forecasts reflecting the expected ongoing impact for the Group arising from COVID-19 and the future business plans approved by the Board. • Assessing the integrity of the value in use model used, including the accuracy of the underlying calculation formulas. • Assessing the accuracy of previous Group forecasts for each CGU’s cash flows to inform our evaluation of forecasts incorporated in the models. • Considering the sensitivity of the models by varying key assumptions such as forecast operating cash flows in light of the impacts of COVID-19 on the expected rate of recovery for the Group and its future business plans, copper pricing, terminal growth rates and discount rates, within a reasonably possible range, to identify those assumptions at higher risk of bias or inconsistency in application and to focus our further procedures. • We challenged the Group’s significant forecast cash flow and terminal growth rate assumptions in light of the ongoing impacts of COVID-19 on the Group’s ongoing business plans. We used our knowledge of the Group’s operations, their past performance and our 132 133 to from time to time, and the models approach to incorporating risks into the cash flows or discount rates. We involved valuation specialists to supplement our senior audit team members in assessing this key audit matter. industry experience to evaluate the feasibility of these plans. • Working with our valuation specialists, we independently developed a discount rate range for each CGU, using publicly available market data for comparable entities, adjusted for risk factors specific to the Group and the industry it operates in. We compared the discount rates applied by the Group for each CGU to our acceptable range. • Assessing the disclosures in the financial report using our understanding of the matter obtained from our testing and against the requirements of the Accounting Standards. Other Information Other Information is financial and non-financial information in Reliance Worldwide Corporation 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. Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do 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; • assessing the Group and Company's ability to continue as a going concern and whether the use of the going concern basis of accounting is appropriate. 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: https://www.auasb.gov.au/admin/file/content102/c3/ar2_2020.pdf. This description forms part of our Auditor’s Report. Report on the Remuneration Report Opinion In our opinion, the Remuneration Report of Reliance Worldwide Corporation Limited for the year ended 30 June 2021, complies with Section 300A of the Corporations Act 2001. Directors’ responsibilities The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with Section 300A of the Corporations Act 2001. Our responsibilities We have audited the Remuneration Report included in the Directors’ report exclusively within the section labelled “Remuneration Report”, for the year ended 30 June 2021. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. KPMG Tony Romeo Partner Melbourne 23 August 2021 Reliance Worldwide Corporation Annual Report 2021 SHAREHOLDER INFORMATION The information set out below was applicable at 30 July 2021. Distribution of Equities – Ordinary Shares Range 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over Total Shareholder Information Total holders 3,154 5,425 2,054 1,625 93 Number of shares 1,586,290 14,567,578 15,066,420 35,790,035 723,084,442 % of issued shares 0.20 1.84 1.91 4.53 91.52 12,351 790,094,765 100.00 SHAREHOLDER INFORMATION Buy-back The Company does not have a current on-market buy-back. Voting rights Every shareholder present at a general meeting has one vote on a show of hands and one vote for every fully paid share held if a poll is conducted. Shareholders entitled to cast two or more votes may appoint up to two proxies. Where more than one proxy is appointed, each proxy may be appointed to represent a specific number or proportion of the shareholder’s votes. If the appointment does not specify the proportion or number of votes that each proxy may exercise, each proxy may exercise half of the shareholder’s votes. Shareholder enquiries Shareholders with enquiries about their shareholding should contact the Company’s share registry: The number of shareholders holding less than a marketable parcel of shares was 151. Largest Shareholders The names of the 20 largest registered holders of ordinary shares are listed below. Name HSBC Custody Nominees (Australia) Limited J P Morgan Nominees Australia Pty Limited Citicorp Nominees Pty Limited BNP Paribas Nominees Pty Ltd National Nominees Limited BNP Paribas Noms Pty Ltd Australian Foundation Investment Company Limited Reliance Employee Share Investments Pty Limited HSBC Custody Nominees (Australia) Limited Citicorp Nominees Pty Limited Netwealth Investments Limited BNP Paribas Nominees Pty Ltd Six Sis Ltd BNP Paribas Nominees Pty Ltd Hub24 Custodial Serv Ltd AMP Life Limited BNP Paribas Nominees Pty Ltd HSBC Custody Nominees (Australia) Limited Buttonwood Nominees Pty Ltd Mr Heath Sharp Broadgate Investments Pty Ltd Powerwrap Limited Substantial Shareholders The number of shares held by substantial shareholders at 30 July 2021 was: Name Australian Super Bennelong Australian Equity Partners Limited Challenger Limited The Vanguard Group, Inc. 134 Number of shares held 226,370,998 184,588,533 135,985,874 48,949,591 44,863,580 14,966,447 10,963,279 6,854,359 5,725,735 4,319,355 3,285,264 2,232,795 1,963,784 1,690,082 1,394,046 1,342,630 1,321,269 1,275,368 1,247,264 1,206,941 Number of shares held 86,100,059 69,918,362 48,346,568 39,565,578 % of issued shares 28.65 23.36 17.21 6.20 5.68 1.89 1.39 0.87 0.72 0.55 0.42 0.28 0.25 0.21 0.18 0.17 0.17 0.16 0.16 0.15 % 10.90 8.85 6.12 5.01 Computershare Investor Services Pty Limited Yarra Falls 452 Johnson Street Abbotsford Vic 3067 T: 1300 850 505 (within Australia) T: +61 3 9415 4000 (international) Please mail all share registry correspondence to: Computershare Investor Services Pty Ltd GPO Box 2975 Melbourne VIC 3001 Please include your Shareholder Reference Number (SRN) or Holder Identification Number (HIN) in all correspondence to the share registry. Change of address It is important for shareholders to notify the share registry in writing promptly of any change of address. As an added security measure, please quote your Shareholder Reference Number and your old address. Investor information The Company maintains a website at www.rwc.com where company information is available and a service for any queries is provided. For further queries, please email the Company at investorrelations@rwc.com or call +61 3 8352 1400. Stock Exchange listing Reliance Worldwide Corporation Limited’s ordinary shares are quoted on the Australian Securities Exchange under the code “RWC”. Annual General Meeting Details of the Annual General Meeting of Reliance Worldwide Corporation Limited will be advised in the Notice of Meeting which will be despatched to shareholders. 135 Reliance Worldwide Corporation Annual Report 2021 Corporate Directory CORPORATE DIRECTORY Board of Directors Stuart Crosby (Chairman) Heath Sharp Christine Bartlett Russell Chenu Darlene Knight Sharon McCrohan Ian Rowden Company Secretary David Neufeld Registered Office 28 Chapman Place Eagle Farm, QLD 4009 T: +61 7 3018 3400 F: +61 7 3105 8130 Principal Place of Business Level 26, 140 William Street Melbourne, VIC 3000 T: +61 3 8352 1400 F: +61 3 8080 9128 Auditor KPMG Tower Two Collins Square 727 Collins Street Melbourne Vic 3008 Share Registry Computershare Investor Services Pty Limited Yarra Falls 452 Johnson Street Abbotsford Vic 3067 T: 1300 850 505 (within Australia) T: +61 3 9415 4000 (international) Please mail all share registry correspondence to: Computershare Investor Services Pty Ltd GPO Box 2975 Melbourne VIC 3001 Stock Exchange Listing Reliance Worldwide Corporation Limited’s shares are quoted on the Australian Securities Exchange. Website address www.rwc.com 136 Reliance Worldwide Corporation Limited 28 Chapman Place Eagle Farm, QLD 4009 ACN 610 855 877 

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