SHRIRO HOLDINGS
LIMITED
ANNUAL REPORT
2018For personal use only NOTICE OF GENERAL MEETING
Notice is given that the 2019 Annual General Meeting of Shriro Holdings Limited will be held at
104 Vanessa Street, Kingsgrove, on Thursday 30 May 2019 at 2:00pm (AEST).
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SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018For personal use only SHRIRO HOLDINGS LIMITED | ACN 605 279 329
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Overview
Brand Blueprint
Chairman’s Report
CEO’s Report
Business at a Glance
Business Review - Kitchen Appliances
Business Review - Consumer Products
Board of Directors
Financial Report
Corporate Directory
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SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018Con-tentsFor personal use only Shriro continues its
global growth strategy.
$181.1 M
Revenue
6.0 M
Net Debt
14.3 M
EBITDA
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SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018Over-viewFor personal use only 14.3 M
Cents per share
fully franked
7.0
CY18 dividends
8
Total distribution centres
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SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018For personal use only Everdure by Heston Blumenthal
Neil Perry Kitchen
Blanco
Everdure by Heston Blumenthal is a range
of barbeques like no other. Working closely
with designers and engineers, Heston
embarked on a mission to create the perfect
modern barbeque. By combining the latest
technology and design aesthetics, with ease
of use and thoughtful attention to detail, he
created a range that will help you go on a
journey of discovery.
Whether you love the convenience of cooking
on gas, or want to reconnect with the primal
beauty of cooking on charcoal – home, or
away – Everdure by Heston Blumenthal will
help you unleash your creativity and bring
out the best in barbequed food.
Imagine Australia’s most awarded chef with
a clean sheet to design his ultimate home
appliances.
Imagine professional quality, reliability and
functional beauty with innovative and precise
control.
Imagine the most powerful domestic testing
and design to allow domestic cooks at home
perform like a professional chef.
Since 1925 we’ve had only one goal, and
that’s to deliver a premium experience
by approaching all that we create with
impeccable style and intelligence. Our fully
integrated kitchen appliance and Sinks/ Taps
optimise the very best in European styling
and quality craftsmanship. Our job is to
ensure each small piece fits perfectly with
the next piece and that we design products
which our customers visualize for the Blanco
brand with a strong focus on functionality
and make it as attractive as possible to suit
every modern kitchen.
Omega Altise
Baby-G
G-Shock
Bringing the ease and convenience of
comfortable living into Australian homes
for over 25 years, Omega Altise continues
to expand, successfully gracing rooms with
only the best range of contemporary, sleek
and reliable new technologies.
Designed to seamlessly satisfy a range of
décors and requirements, these products
are tested to the highest standard to ensure
efficiency and durability. Assuring comfort
and safety where it matters. For comfortable
living, think Omega Altise.
6
in
’94 and
Far from being a case of form over function
as many timepieces today are, BABY-G
watches are as practical as they are pretty.
Born
inspired by G-Shock’s
structure and functionality, BABY-G watches
are completely shock and water resistant –
able to withstand knocks, drops and spills.
Recognised by its liberal use of colour and
distinctive 90s design, BABY-G is made for
the bold, active, tough and creative, BABY-G
is the watch for empowered females, who
show who they are through what they wear.
Since hitting the streets in 1983, G-Shock has
been synonymous with toughness. Born from
a developer’s dream of ‘creating a watch that
never breaks’, G-Shock’s unique structure was
crafted to withstand the 6 elements of torture;
shock, gravity, temperature, vibrations, water
and electricity.
2018 marks G-Shock’s 35th year of Absolute
‘the
Toughness. G-Shock’s reputation for
toughest watch of all time’ can be attributed
to ‘Father of G-Shock’ Mr Ibe and his pursuit
to constantly evolve and fuse new technology
and features without changing the integrity of
the watch people have come to know and trust.
SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018Brand BlueprintFor personal use only Omega
Robinhood
Everdure Kitchens
At Omega, we understand that cooking,
cleaning and washing may not by your
favourite things in the world. That’s why we
created a range of no-nonsense, reliable
products that always get the job done for you.
With the features you need and nothing you
don’t. What’s more, they’re made to fit perfectly
into your home life and your wallet. Each
product in the extensive Omega range – from
oven, cooktop and rangehood to dishwasher,
washing machine and dryer – is testament
to company’s innate sense of balance in the
combination of style with function, longevity
and extreme value for money.
Robinhood is a leading Australasian brand of
kitchen and laundry products. Our product
range
includes rangehoods, and ducting
solutions; laundry tubs and ironing centres;
waste disposers and related accessories.
The Robinhood brands you will recognise
include: Supertub®, Scrapeater®, Uniduct®,
Ironing Centre® and Alto®
Robinhood products are sourced globally
from leading manufactures, and are good
quality products with modern technology
and award winning designs. Most Robinhood
products come in full coloured packaging
to connect with consumers and the detail
describes what the product is in a clever and
unexpected way.
Behind every Robinhood product
is a
warranty of one to five years. We provide
full customer support to ensure ongoing
consumer satisfaction.
tradition of
At Everdure, we’ve been cooking up great
ideas since 1935. Proudly Australian owned,
the range of Everdure Cooking Appliances
innovative
continues our
products: combining clever technology and
functionality with stylish design – all at
surprisingly affordable prices. Delivering the
look and performance you want without the
price tag you’d expect, quality is guaranteed
with 36 months warranty offered on the
Everdure Kitchen Appliance range.
Whether you’re looking for a new replacement
for a current appliance or a complete kitchen
update, Everdure has all the right ingredients
for you. Our easy-installation products
include complete packages, comprised of
fully featured ovens, as well as gas or electric
cooktops, with powerful rangehoods.
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EDIFICE
Casio EMI
Casio Calculators
A sporty and high performance chronograph,
Edifice provides a dynamic and intelligent
timepiece for men who value classically
designed pieces and
innovation. Cutting
edge smartphone technology and Japanese
craftsmanship is fused together to create a
timepiece of precision.
Descendant from G-Shock’s renown internal
casing structure and functionality, EDIFICE
is a timepiece that maintains the lead in
challenging times, unchained from restraints.
A timepiece that interact more freely so that
time knows no limits.
research and
Decades of worldclass
development has placed Casio at the pinnacle
of electronic digital musical
instrument
manufacture, creating a wide range of
innovative products for all musicians.
Casio dominates
the digital piano and
portable keyboard markets in Australia, with
innovative products such as the Grand Hybrid
Piano range, a collaborative effort between
Casio and European premium acoustic grand
piano manufacturer, C.Bechstein.
Marketing initiatives reach music educators,
home hobbyists and professional musicians
alike, and ensure Casio EMI is a market-leading
brand in electronic musical instruments.
Casio is a leading manufacturer of electronic
calculators and office products worldwide. Casio
produces a wide selection of products ranging
from school calculators, desktop calculators,
printer calculators, and label printers. Casio is the
leading brand across many of these categories.
Shriro is a proud partner having been the sole
distributor of Casio products since 1983 in
Australia (35 years).
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SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018Brand BlueprintFor personal use only Throughout the difficult trading conditions, Shriro
has maintained a strong balance sheet, with low
Net Debt, working capital tightly controlled and
Shareholder’s Funds in excess of $50 million.
The Board
independent non-
The Board currently comprises two
executive directors, a non-executive director representing our
major shareholder and the Managing Director. As part of the
Company’s succession planning programme and to ensure a
broad range of skills is available to the Company, it is planned
to seek at least one additional independent non-executive
director during 2019.
The 2018 year has been a challenging year for the Company
and its people, and the Directors take this opportunity to
thank all employees for their efforts and commitment. Tim
Hargreave’s first year as CEO has not been an easy one but
is providing an opportunity to carefully plan the strategy and
structure for the period ahead. I thank Tim for his efforts
during this first year as CEO. On behalf of my fellow Directors,
I also thank all shareholders for their continued support.
Yours sincerely,
John Ingram
Non-Executive Chairman
I regret to report that 2018 was a particularly disappointing
year for the Company. Net Profit after Tax declined 47% to $7.7
million, in line with the market guidance provided in October
2018. Group Sales Revenue, at $181 million was down 3.8% on
the previous year.
Most of the profit decline was attributed to the Australian
Kitchen Appliance business which operated in a very difficult
market for most of the year. This was particularly in the second
half when it proved especially difficult to maintain gross margin
levels, whilst holding sales revenue.
The Australian Consumer Products segment performed more
respectably with Timepiece doing well although there were
some sales declines in the seasonal heating and cooling
products. The ‘Everdure by Heston Blumenthal’ range of
barbeques, which
is spearheading Shriro’s export drive,
continues to grow encouragingly, The expected strong sales
into North America late in 2018 were however, delayed due to
the US/China “tariff war” and to date this remains unresolved.
A cost reduction programme was commenced in the second
half but with the difficult market environment and with some
product range weaknesses before new models were available,
profit recovery was slow. Management’s cost reduction and
efficiency improvement programme is continuing and as
well, targeted marketing initiatives and a continued focus on
innovation to differentiate our products, are areas of key focus
to address the Company’s situation.
Throughout the difficult trading conditions, Shriro has
maintained a strong balance sheet, with low Net Debt, working
capital tightly controlled and Shareholder’s Funds in excess of
$50 million.
Dividends
On 26 February 2019 the Directors declared a fully franked final
dividend of 3.0 cents per share, which was paid on the 5th of
April 2019. Combined with the interim dividend of 4 cents per
share, which was also fully franked, the total dividend for 2018
of 7 cents per share, represents a payout ratio of approximately
86.5%. The higher payout ratio reflects the poorer year but,
importantly, the Company maintains financial resources well
sufficient to implement planned initiatives in the current year.
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SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018Chairman’s ReportFor personal use only This is transforming Shriro into a more efficient
business with a lower cost base.
My first year as CEO could be best characterised as a year
in which necessary structural and operational changes
were made. This is transforming Shriro into a more efficient
business with a lower cost base.
In a year of subdued conditions in many of Shriro’s markets,
overall sales Revenue decline was held to 3.8% due to
Consumer Products sales growth offsetting the
lower
Appliances sales, but Net Profit after Tax fell to $7.7 million.
The underperformance of Shriro’s Kitchen Appliance business
was the major reason for this profit decline. Much of the pain
arose from lower gross margins due to price competition and a
lack of competitiveness in our supply chain. Volatile consumer
confidence, declining residential construction, particularly in
high rise development, little growth in the renovation market
and the reduced wealth effect from downward pressure on
house prices are all thought to be contributing factors to the
subdued market.
To address this, a programme of cost reductions has been
implemented. In addition, a new strengthened and experienced
management team has been appointed to focus on delivering
improved results in this product category into the future.
The Consumer Products segment performed strongly for
Shriro, as its Timepiece division had a record Australian sales
year in 2018. Other products within this segment generally
performed well although the seasonal heating and cooling
products sector had a somewhat poorer year that was mostly
weather related. The ‘Everdure by Heston Blumenthal’ range
of charcoal and gas barbeques continued to grow sales into
export markets, which is a core part of the strategy for these
products. However sales into the US market were below
expectation due to the US/China tariff upheaval. To ensure a
speedy recovery when the tariff situation is resolved, Shriro
has established its own subsidiary in the USA and invested
in some stock holding. Given the significant interest in these
products shown by major retailers in USA and the introduction
of further innovative products into the range, an excellent
future for ‘Everdure by Heston Blumenthal’ barbeques in North
America is anticipated. Due to the planned growth in export
markets for this range and other Shriro products, an Export
Sales Manager has recently been appointed to focus on and
drive this part of the Company’s sales strategy.
Balance Sheet and Cash Flows
Cash flows for Shriro in the second half of CY18 were strong,
assisted by correcting the stock position in Kitchen Appliances,
freeing up cash.
This focus on working capital management has been a major
factor in the Company keeping its low debt position during
the year, despite paying dividends totalling $10.5 million.
Inventories, for example, were reduced 11% in Australia from
the level in December 2017. The Company’s gearing remains
low, with Net Debt of $6.0 million at 31 December 2018
resulting in a very low Net Debt to EBITDA multiple of only 0.4
times. Measured as Net Debt to Net Debt plus Equity, gearing
was a conservative 10%, considered a very secure position.
Strategy and Outlook
The ‘Everdure by Heston Blumenthal’ BBQ range has now
received a total of four Red Dot Awards, including the coveted
Red Dot: Best of the Best. This award-winning innovation and
design remains at the forefront of the company’s commitment
to new product development, accelerating our growth into
international markets.
Although headwinds remain in the Kitchen Appliances market,
the reorganisation and new management structure has been
implemented to provide us with a stronger foundation from
which to improve earnings in challenging market conditions.
The impact of elections in the current period are also difficult to
forecast but tend to result in consumers deferring purchases.
On the other hand, the Consumer Products segment is expected
to have a better year, particularly if the US/China tariff situation
is successfully resolved reasonably quickly. The bias in the
Company’s sales revenue towards the second half of the year
always presents an added uncertainty.
On a personal note, I would like to thank all staff for their
commitment, passion and dedication to their job & the Board
for their ongoing support and counsel.
Yours sincerely,
Tim Hargreaves
Chief Executive Officer
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SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018CEO’s ReportFor personal use only Kitchen
Oven, cooktops,
rangehoods,
dishwashers,
sinks, tapware,
waste disposal and
ducting solutions.
Outdoor Cooking
Barbeques.
Heating / Cooling
Fans, heaters,
air purifiers and
dehumidifiers.
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Office
Calculators and
point of sale.
SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018Business at a GlanceFor personal use only Shriro deals with most retailers
in Australia and New Zealand.
Personal
Watches and cameras.
Audio / Entertainment
Projectors, electronic
musical instruments,
car audio, amplifiers,
professional DJ
equipment, Hi-Fi
products and speakers.
Laundry
Laundry tubs, ironing
centre, washing
machines and dryers.
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SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018Business at a GlanceFor personal use only 12
SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018Kitchen AppliancesFor personal use only • Carl Pauling, NZ CEO, to oversee appliances
•
•
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• Omega brand to be refreshed
Brad Street to run Shriro Commercial
2 showroom closures to reduce costs
Focus staff on channel, above brand
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SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018Kitchen AppliancesFor personal use only 14
SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018ConsumerProductsFor personal use only • Record watch sales in Australia
• New seasonal products to launch
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•
Shriro runs Auckland airport’s G-Shock store
BBQ exports continue to grow
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SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018ConsumerProductsFor personal use only • Director since 14 April 2015.
• Currently serves as Chairman of ASX listed Nick Scali Limited.
•
• Mr Ingram is an Emeritus Councillor of the Australian Industry Group and a past
Previously John was a Non-Executive Director of United Group Limited.
National President.
• Mr Ingram was previously a Trustee Director of Australian Super.
• Director since 14 February 2018.
•
Tim Hargreaves joined Shriro in 1990 as the Segmental Manager of Casio Australia. After
eight years he briefly left the Group to join Canon Australasia as Head of Retail operation
before re-joining Shriro as the General Manager in June 2001 overseeing all Casio segments
(Office Products, Timepiece, Electronic Musical Instruments, Data Projectors, Electronic
Cash Registers and Digital Cameras).
Tim was appointed CEO effective 1 January 2018 and Managing Director effective 14
February 2018.
• Director since 14 April 2015.
•
Vasco has been a director of Shriro since 30 December 1997 and has over 30 years’
experience in various industries.
Vasco is the Group Chief Executive Officer of Shriro Pacific Ltd, an international investment
group with distribution, manufacturing and retail businesses in Asia Pacific, North America
and Europe.
Vasco is a member of the Institute of Chartered Accountants in England and Wales and the
Hong Kong Institute of Certified Public Accountants.
•
•
•
• Director since 14 April 2015.
• Greg has extensive experience in a number of manufacturing and distribution industries.
• He is presently an independent Non-Executive Director and Chairman of the Audit
Committee of Nick Scali Limited and is Chairman of ASX listed Big River Industries Limited.
• Greg holds a Bachelor of Commerce Degree from the University of New South Wales and
an advanced management qualification from the University of Pittsburgh.
• Greg was previously an independent Non-Executive Director and Chairman of the audit and
risk committee of Bradken Limited.
•
•
•
•
Shane Booth joined Shriro in March 2010.
Prior to joining Shriro, Shane was a Senior Executive of Allomak Limited for two years and
Senior Executive of Objective Corporation Limited for three years. In these roles, Shane
undertook restructuring activities and drove efficiencies.
Shane prior to this worked at PKF Australia in their corporate services segment (Audit).
Shane is a Chartered Accountant (CA) and holds a Bachelor of Business in Accounting.
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SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018Board ofDirectorsFor personal use only
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SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018Board ofDirectorsFor personal use only For the financial year ending 31 December 2018
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SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018FinancialReportFor personal use only SHRIRO HOLDINGS LIMITED | ACN 605 279 329
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Appendix 4E
Corporate Governance Statement
Directors’ Report
Auditor’s Independence Declaration
Directors’ Declaration
Consolidated Statement of Profit or Loss
Consolidated Statement of Profit or Loss and Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Financial Statements
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SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018FinancialReportFor personal use only Results for announcement to market
2018
$ million
2017
$ million
Movement
%
Revenue from ordinary activities
181.1
188.3
EBITDA
NPAT
Profit from ordinary activities before tax
Profit from ordinary activities after tax attributable to members
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
14.3
7.7
10.0
7.7
8.1
8.0
24.7
14.5
20.4
14.5
15.3
15.0
Amount per
security
Percentage
franked
Final dividend declared for the financial year ended 31 December 2018
3.0 cents
100%
(3.8%)
(42.1%)
(46.9%)
(51.0%)
(46.9%)
Net tangible assets per share (cents per share)
Diluted net tangible assets per share (cents per share)
2018
$
51.6
51.0
2017
$
54.9
53.9
The Directors have declared a final dividend for the financial year of 3.0 cents per share fully franked with an ex-dividend date of
the 18th March 2019, record date of the 19th March 2019 and payable on 5th April 2019.
Shriro Holdings Limited recorded an after tax profit of $7.7 million during the year ended 31 December 2018.
Shriro Holdings Limited aims to follow best practice recommendations as set out by the ASX Corporate Governance Council.
Where the company has not followed best practice for any recommendation, further clarification relating to all current corporate
governance policies can be found on the company’s website at
http://www.shriro.com.au/investor/corporate_governance. All policies and practices remain under ongoing review.
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SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018Appendix 4ECorporate Governance StatementFor personal use only Revenue from ordinary activities
181.1
188.3
2018
$ million
2017
$ million
Movement
%
EBITDA
NPAT
Profit from ordinary activities before tax
Profit from ordinary activities after tax attributable to members
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
Final dividend declared for the financial year ended 31 December 2018
3.0 cents
100%
(3.8%)
(42.1%)
(46.9%)
(51.0%)
(46.9%)
14.3
7.7
10.0
7.7
8.1
8.0
2018
$
51.6
51.0
24.7
14.5
20.4
14.5
15.3
15.0
2017
$
54.9
53.9
Net tangible assets per share (cents per share)
Diluted net tangible assets per share (cents per share)
The Directors present their report in compliance with the provisions of the Corporations Act 2001 on the consolidated entity (referred
to hereafter as the “Group”) consisting of Shriro Holdings Limited (“Shriro” or the “Company”) and the entities it controlled at the end
of, or during, the year ended 31 December 2018.
DIRECTORS
Directors of Shriro Holdings Limited during and since the year ended 31 December 2018 unless otherwise stated below are:
John Ingram – Chairman
Tim Hargreaves – Executive Director (appointed 14 February 2018)
Mike Westrup – Executive Director (ceased to be a Director 2 January 2018)
Vasco Fung – Non-executive Director
Greg Laurie – Non-executive Director
COMPANY SECRETARY
Shane Booth is Company Secretary
Amount per
security
Percentage
franked
PRINCIPAL ACTIVITIES
The Group is a leading kitchen appliances and consumer products marketing and distribution Group operating in Australia and
New Zealand.
The Group markets and distributes an extensive range of company-owned brands (including Omega, Neil Perry Kitchen by Omega,
Everdure including ‘Everdure by Heston Blumenthal’, Robinhood and Omega Altise) and third party owned brands (such as Casio,
Blanco and Pioneer). Products include calculators, watches, cash registers, musical instruments, audio products, kitchen appliances,
sinks & taps, laundry products, consumer electronics, car audio, amplifiers, professional DJ, Hi-Fi/speakers, fashion, lighting, gas
heaters and gas barbeques, electric heaters and cooling products.
REVIEW OF OPERATIONS
A summary of the revenues and results is as follows:-
Results Summary
Revenue
Gross Margin
Operating Expenses
EBITDA
Depreciation and amortisation
Interest
Profit Before Tax
Profit After Tax
2018
$ million
2017
$ million
181.1
39.4%
(57.1)
14.3
(3.7)
(0.6)
10.0
7.7
188.3
42.3%
(55.0)
24.7
(3.8)
(0.5)
20.4
14.5
Change
%
(3.8%)
3.8%
(42.1%)
(2.6%)
20.0%
(51.0%)
(46.9%)
Operating and Financial Review
Net Profit after Tax for the year ended 31 December 2018 was down 46.9% to $7.7 million. Whilst the Consumer Products division
held up well in a difficult environment, the Kitchen appliances division suffered lower sales and tighter gross margins. Total sales
Revenue was $181.1 million, a 3.8% decrease on the prior year.
Gross Margin for the year was 39.4%, which was significantly below the previous year, when it achieved 42.3%. There were strong
competitive pressures across the Appliances market but the Company faced particular problems with the Omega product range.
Competitive pressures drove down gross margins and a number of Omega cooking products had to be exited to allow for the
introduction of improved products. This resulted in lower gross margins as the discontinued stock was sold.
Operating expenses increased on the prior year by 3.8%, with the major increase being promotion expenses associated with the
launch of ‘Everdure by Heston Blumenthal’ barbeques in the United states. Rental costs also increased as the prior year had some
one-off savings of $1.5 million.
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SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018Directors’ ReportFor personal use only The above factors delivered a 42.1% decrease in EBITDA compared with the previous year, to $14.3 million. This result includes
several non-recurring costs which total $1.5 million, such that Underlying EBITDA for the year was approx. $15.7 million. These Non-
Underlying costs, some of which were non-cash, were:
Closure of two showrooms
Relocation of Compliance & R&D team
Re-arrangements at Auckland Airport G-Shock store
Write-down of residual inventory
Total
2018
$ ‘000
842
146
127
340
1,455
The Company maintained its strong balance sheet and sound cash flows, despite the lower profit and the payment of a total of 11.0
cents per share dividend in the period. Net Debt increased a little, to $6.0 million, but remains low.
The Directors have declared a fully franked final dividend of 3.0 cents per share, with a record date of 28th February 2018 and
payable on 16th March 2018. This dividend, combined with the interim dividend of 4.0 cents per share which was paid in September
2018, results in a total dividend of 7.0 cents per share, fully franked, for the year representing a payout ratio of 86.5 percent.
Consumer Products
The Consumer Products division had a generally solid year in difficult market conditions, with Revenue growing 1.8% to $106.8 million.
The strong performing categories were watches in Australia, BBQs and, in New Zealand, Pioneer Electronics. The remaining product
categories held their market position, with sales similar to the previous year, but did not add growth to the division.
In New Zealand, watch sales were negatively impacted by disruptive changes to the Auckland G-Shock airport store where the
retailer was underperforming due to apparent funding constraints and as a result, Shriro will assume the operation of this very
successful store. Costs of $127,000 were incurred in this changeover.
Shriro has developed new products in cooling and gas heating that will be released to the market in 2019. Potentially these products
can be fed into the global distribution network Shriro has established.
Total EBITDA from the Consumer Products division was $13.9 million which was 14.0% below the prior year, due mainly to the
investment in the USA BBQ launch.
The BBQ brand ‘Everdure by Heston Blumenthal’ continued its international expansion. The launch promotion in the USA was
comprehensive and very well received. Total advertising and promotion costs for this product range were $2.6 million, with the
majority of this expense focused on the US market, where the investment was expected to create material sales orders towards
the end of the year. However, the uncertainty surrounding the current tariff negotiations between the US and China has led to order
delays and lower sales in the last months of 2018. Whilst satisfactory negotiations between the Trump administration and China
would lead to firm orders, Shriro is taking action to ensure sales into the USA are not unduly delayed.
Shriro has also taken a number of steps to improve productivity and control within the ‘Everdure by Heston Blumenthal’ business,
including relocating the Australian compliance, R&D and testing team to its head office in Sydney and is looking to appoint a proven
executive as this brand’s Export Sales Manager, to assist in driving the global expansion.
Kitchen Appliances
The Kitchen Appliances segment endured a tough year, due to some market decline, competition, currency headwinds and a
phasing out of older products. The revenue generated was $74.3 million, which was 10.9% lower than the prior year. The industry
suffered considerable discounting, which put pressure on gross margins.
Blanco retail appliances performed well with 19.0% sales growth, however all other Appliances categories experienced lower sales
revenue compared to the prior year. The Omega product range had a particularly poor year with the need to phase out superseded
products in a period of intense competition.
The Commercial Sales operation, which markets primarily to developers, faced very tight market conditions as high-rise apartment
demand slowed and some projects were deferred.
In total, the Kitchen Appliances segment recorded EBITDA of $0.4 million for the year, with the main driver of this being the
contraction of gross profit from the lower sales. As a result of this disappointing result, the Company has commenced a number
of restructuring initiatives.
22
SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018Directors’ Report (cont’d)For personal use only Balance sheet and cashflow
Operating cash flows for the year, of $8.8 million, exceeded net profit after tax by 13.7%. Cash flows were particularly strong in
the second half of the year with a strong focus on working capital. During this period the inventory level was corrected to be in
line with the lower sales rate. At December 2018 a conservative view on inventory valuation resulted in a non-cash write-down
of $340,000, relating to inventory that was unable to be cleared by that date. Trade debtors continue to be well controlled, with
a low level of bad debts in the period.
Net Debt was $6.0 million as at 31 December 2018, assisted by the focus on working capital. The Company’s gearing remains
low with Net Debt to EBITDA of only 0.4 times at the end of the year. This strong balance sheet places Shriro in a sound position
to take advantage of growth opportunities in the future. Work in this area continues but the Company takes a highly disciplined
approach to the evaluation of acquisition opportunities.
Outlook
The markets in many of the industries in which the Company operates remain volatile, with lower consumer confidence
evidenced in some. Uncertainties in global trade conditions are also impacting sales of some products and margin pressure
continues in the Kitchen Appliances division. In this environment, and given Shriro’s historic seasonality favouring the second
half, it is not possible to give clear guidance on likely results for the 2019 year.
The business is continuing its strong product development and innovation strategy and this is specifically focused on superior
versions of existing products and range expansion into complementary products.
Employees
During this financial year, the number of employees ranged between 252 and 267 and was 255 at year end. (2017: 262).
The Directors wish to recognise the contribution made by all employees during the year.
Earnings per share
The basic and diluted earnings per share are calculated using the weighted average number of shares. This shows the basic
earnings per share at 8.1 cents (2017: 15.3 cents) and diluted earnings per share at 8.0 cents (2017: 15.0 cents).
DIVIDEND
On 16th March 2018, the Group paid the 2017 financial year end dividend of 7.0 cents per share fully franked.
On 14th September 2018, the Group paid an interim dividend for the half year ended 30 June 2018 of 4.0 cents per share fully franked.
On 26th February 2019 the Directors declared a final dividend of 3.0 cents per share fully franked with an ex-dividend date of the
18th March 2019, record date of the 19th March 2019 and payable on 5th April 2019.
DIRECTORS’ ATTENDANCE AT MEETINGS
Attendance at Meetings
The following table sets out the number of meetings held during the financial year that the individual was a director and the
number of meetings attended.
Directors Meetings
Audit and Risk
Committee Meeting
Remuneration
Committee Meetings
Held
Attended
Held
Attended
Held
Attended
John Ingram
Tim Hargreaves
Vasco Fung1
Greg Laurie
16
16
16
16
16
16
16
16
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
4
1 Vasco Fung attended some meetings via teleconference
23
SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018For personal use only BUSINESS STRATEGIES AND RISK
Strategies
Shriro believes its investment in brands, supply chain and distribution capabilities has positioned the Group to benefit from
ongoing growth and increased market share within its product categories.
continual product development and range extensions
geographic expansion including:
Shriro aims to continue to grow through:
•
•
- International expansion of the new ‘Everdure by Heston Blumenthal’ charcoal BBQ range
•
continued assessment of value enhancing acquisition opportunities targeting brand ownership, cost
rationalisation opportunities and channel diversification.
Risks
The key risks for the business are:
•
•
•
•
•
change in consumer spending patterns throughout the year;
deterioration in economic conditions;
changing tax and tariff rates in the US;
foreign exchange movements; and
further reduced housing construction.
INFORMATION ON DIRECTORS
Information on the Directors who held office during and since the end of the financial year is as follows:
Directors
Qualifications, Experience and Special Responsibilities
John Ingram
Member of the Audit, Risk and
Compliance Committee
Member of the Remuneration and
Nomination Committee
Tim Hargreaves
Vasco Fung
Member of the Audit, Risk and
Compliance Committee
Member of the Remuneration and
Nomination Committee
Non-Executive Chairman
Director since 14 April 2015
Currently serves as Chairman of ASX listed Nick Scali Limited.
Previously John was a Non-Executive Director of United Group Limited.
Mr Ingram is an Emeritus Councillor of the Australian Industry Group and a past
National President.
Mr Ingram was previously a Trustee Director of Australian Super.
Managing Director
Director since 14 February 2018
Tim Hargreaves joined Shriro in 1990 as the Segmental Manager of Casio Australia.
After eight years he briefly left the Group to join Canon Australasia as Head of Retail
operation before re-joining Shriro as the General Manager in June 2001 overseeing
all Casio segments (Office Products, Timepiece, Electronic Musical Instruments, Data
Projectors, Electronic Cash Registers and Digital Cameras).
Tim was appointed CEO effective 1 January 2018 and Managing Director effective
14 February 2018.
Non-Executive Director
Director since 14 April 2015
Vasco has been a director of Shriro since 30 December 1997 and has over 30 years’
experience in various industries.
Vasco is the Group Chief Executive Officer of Shriro Pacific Ltd, an international in-
vestment group with distribution, manufacturing and retail businesses in Asia Pacific,
North America and Europe.
Vasco is a member of the Institute of Chartered Accountants in England and Wales
and the Hong Kong Institute of Certified Public Accountants.
Greg Laurie
Chairman of the Audit, Risk and
Compliance Committee
Chairman of the Remuneration
and Nomination Committee
Non-Executive Director
Director since 14 April 2015
Greg has extensive experience in a number of manufacturing and distribution industries.
He is presently an independent Non-Executive Director and Chairman of the Audit
Committee of Nick Scali Limited and is Chairman of ASX listed Big River Industries Limited.
Greg holds a Bachelor of Commerce Degree from the University of New South Wales
and an advanced management qualification from the University of Pittsburgh.
Greg was previously an independent Non-Executive Director and Chairman of the
audit and risk committee of Bradken Limited.
Relevant Interest in
Shares
210,000
278,312
3,321,937
20,000
24
SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018Directors’ Report (cont’d)For personal use only
AUDITED REMUNERATION REPORT
This remuneration report, which forms part of the Directors’ report, details the key management personnel remuneration
arrangements for the Company, in accordance with the requirements of the Corporations Act 2001 and its Regulations.
Principles used to determine the nature and amount of remuneration
The objective of the Company’s remuneration framework is to ensure reward for performance whilst maintaining competitiveness
with the market and appropriateness for the results delivered. The framework aligns executive reward with achievement of strategic
objectives and the creation of value for shareholders, and conforms to market best practice for delivery of reward.
Remuneration and Nominated Committee
To assist the Board in the remuneration framework objective, a Remuneration and Nomination Committee has been established as
a Committee of the Board. The main responsibilities of the Committee, in relation to remuneration, include:
• Reviewing remuneration arrangements for the CEO, CFO and other senior executives.
• Reviewing Non-Executive Director fees.
• Reviewing and making recommendations on the over-arching executive remuneration framework and incentive plans.
Its objective is to ensure that remuneration policies and structures are fair and competitive and aligned with the long term interests of
the Company. In doing this, the Remuneration and Nomination Committee seeks advice from independent remuneration consultants.
Key Management Personnel
The Key Management Personnel of Shriro Holdings Limited are the non-executive Directors of the Company and:
Tim Hargreaves
Shane Booth
Chief Executive Officer and Managing Director, and
Company Secretary, Chief Financial Officer
Relevant Interest in
Shares
210,000
Non-Executive Director Remuneration
The non-executive Directors at the date of this Report are:
John Ingram - Chairman
Vasco Fung
Greg Laurie
Non-executive Directors are paid an annual fee which is reviewed annually by the Remuneration and Nomination Committee
and the Board. The Board uses the advice of independent remuneration consultants, as appropriate, to ensure non-executive
director fees are appropriate and in line with the market. Non-executive director fees include, where applicable, compulsory
superannuation contributions.
The non-executive Directors do not participate in the Company’s Long Term Incentive Plan.
Total aggregate remuneration for all non-executive Directors, in accordance with the Prospectus dated 27 May 2015, is not to
exceed $600,000. Non-executive director’s base fees are presently $90,000 per annum. The Chairman’s fee is presently $140,000
per annum. Committee fees are:
Chair of Audit, Risk and Compliance Committee
Chair of Remuneration and Nomination Committee
Member of Audit, Risk and Compliance Committee
Member of Remuneration and Nomination Committee
$10,000 p.a.
$ 5,000 p.a.
$ 5,000 p.a.
$ 3,000 p.a.
The Chairman does not receive Committee fees.
Executive Remuneration
The remuneration of the Chief Executive Officer (CEO) and Chief Financial Officer (CFO) comprise base pay, at-risk short term bonus
(STI) and participation in the Company’s Long Term Incentive Plan (LTIP). Details of each executive’s remuneration is set out below.
Chief Executive Officer (CEO) and Chief Financial Officer (CFO)
The CEO and CFO are remunerated on a salary package basis which is a component of a formal employment contract. The salary
package is considered to be appropriate for the experience and expertise needed for the position and is comparable to other
similar sized companies and business units of larger companies. The salary package contains a fixed component and a short term
incentive (STI) component. The STI is determined by the Board annually, based on performance against a range of targets. The CEO
and CFO are also participants in the Company’s long term incentive plan (LTIP).
25
Managing Director
Director since 14 February 2018
278,312
Directors
Qualifications, Experience and Special Responsibilities
John Ingram
Member of the Audit, Risk and
Compliance Committee
Member of the Remuneration and
Nomination Committee
Currently serves as Chairman of ASX listed Nick Scali Limited.
Previously John was a Non-Executive Director of United Group Limited.
Mr Ingram is an Emeritus Councillor of the Australian Industry Group and a past
Mr Ingram was previously a Trustee Director of Australian Super.
National President.
Non-Executive Chairman
Director since 14 April 2015
Tim Hargreaves
Vasco Fung
Member of the Audit, Risk and
Compliance Committee
Member of the Remuneration and
Nomination Committee
Tim Hargreaves joined Shriro in 1990 as the Segmental Manager of Casio Australia.
After eight years he briefly left the Group to join Canon Australasia as Head of Retail
operation before re-joining Shriro as the General Manager in June 2001 overseeing
all Casio segments (Office Products, Timepiece, Electronic Musical Instruments, Data
Projectors, Electronic Cash Registers and Digital Cameras).
Tim was appointed CEO effective 1 January 2018 and Managing Director effective
14 February 2018.
Non-Executive Director
Director since 14 April 2015
experience in various industries.
Vasco has been a director of Shriro since 30 December 1997 and has over 30 years’
Vasco is the Group Chief Executive Officer of Shriro Pacific Ltd, an international in-
vestment group with distribution, manufacturing and retail businesses in Asia Pacific,
North America and Europe.
Vasco is a member of the Institute of Chartered Accountants in England and Wales
and the Hong Kong Institute of Certified Public Accountants.
Non-Executive Director
Director since 14 April 2015
Greg Laurie
Chairman of the Audit, Risk and
Compliance Committee
Chairman of the Remuneration
and Nomination Committee
Greg has extensive experience in a number of manufacturing and distribution industries.
He is presently an independent Non-Executive Director and Chairman of the Audit
Committee of Nick Scali Limited and is Chairman of ASX listed Big River Industries Limited.
Greg holds a Bachelor of Commerce Degree from the University of New South Wales
and an advanced management qualification from the University of Pittsburgh.
Greg was previously an independent Non-Executive Director and Chairman of the
audit and risk committee of Bradken Limited.
3,321,937
20,000
SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018For personal use only
Short Term Incentive
A short term incentive (STI) forms a component of the remuneration of executive Directors and key management personnel in
addition to their base remuneration. The STI for 2018 was structured on the following basis:
In 2018 Tim Hargreaves is entitled to an STI award equivalent to 60% of his fixed remuneration ($360,000) for target performance
or up to 120% of fixed remuneration ($720,000) for stretch performance, measured against the CY2018 financial year’s budgeted
profit after tax. Shane Booth is entitled to an STI award of up to $156,000 for target performance or $312,000 for stretch
performance, measured against the CY2018 financial year’s budgeted profit after tax.
If the Group’s profit after tax is at least 95% of the target profit after tax, Tim Hargreaves will be entitled to a cash STI reward
equivalent to 50% of the target STI ($180,000) and Shane Booth will be entitled to an STI award equivalent to 50% of the target
STI ($78,000).
STI targets are expected to be set by the Board for the 2019 year for CEO Tim Hargreaves and CFO Shane Booth. STI awards are
expected to be paid in cash following the Board’s approval of the Company’s financial statements for the relevant year.
Long Term Incentive
A Long Term Incentive Plan (LTIP) has been implemented in accordance with Shriro’s Employee Share Scheme Rules. The LTIP
allows participants to be issued with Performance Rights (Rights) which have associated performance hurdles that are tested
at the end of three years from the date of issue to determine vesting. Subsequent to vesting, each Right can be exercised and
converted to an equivalent number of shares of the Company, or cash at the Board’s discretion.
Tim Hargreaves has been issued with 150,000 Rights in respect of the 2018 year with an effective date of 1 January 2018 (2017:
44,427; 2016: 66,022). Testing for achievement of the performance hurdle will occur following Board approval of the Company’s
financial statements three years after the Rights effective issue date.
Shane Booth has been issued with 73,125 Rights in respect of the 2018 year (2017: 87,698; 2016: 130,319). Testing for achievement
of the performance hurdle will occur following Board approval of the Company’s financial statements three years after the Rights
effective issue date. It is expected that Shane Booth will be invited, at the Director’s discretion, to apply for Rights in respect of
the 2019 financial year.
The performance hurdle relating to the Rights issued to both Tim Hargreaves and Shane Booth is for the compound annual
growth rate (CAGR) of the Company’s earnings per share (EPS) to be no less than 5% for the three years for 50% of the Rights to
vest (threshold performance) and 10% or higher for 100% of Rights to vest (target performance). EPS performance between 5%
and 10% will result in a pro rata proportion of Rights to vest between 50% and 100%.
Key Terms of Employment Contracts
CEO
The Company entered into a new executive service agreement with Tim Hargreaves as Managing Director and CEO effective
1 January 2018. The remuneration component of the new agreement is considered to be appropriate and in line with relevant
industry comparables. For the 2018 year, the short term variable component (STI) can range between 0% and 120% of the
fixed component, based on performance measured against a profit after tax target, set annually by the Directors. The long term
variable component (LTIP) can range between 0% and 40% of the fixed component based on performance measured against an
EPS target over a three year period set by the Directors.
Term:
Annual Salary:
Notice Period:
No fixed term.
Total fixed remuneration of $600,000, subject to annual adjustment.
Twelve months’ notice by either party.
CFO
The Company entered into a new executive service agreement with Shane Booth as Company Secretary and CFO effective 23
June 2015. The remuneration component of the new agreement is considered to be appropriate and in line with relevant industry
comparables. For the 2018 year, the short term variable component (STI) can range between 0% and 80% of the fixed component,
based on performance measured against a profit after tax target. Based on the initial issue of Rights, the long term variable
component (LTIP) can range between 0% and 30% of the fixed component based on the achievement of a performance hurdle
that is measured after three years, as determined by the Board and included in any invitation to apply for participation in the LTIP.
Term:
Annual Salary:
Notice Period:
No fixed term
Total fixed remuneration of $390,000, subject to annual adjustment
Six months’ notice by either party
26
SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018Directors’ Report (cont’d)For personal use only
Relationship between Remuneration Policy and Group Performance
The remuneration of executive officers includes an annual short term incentive (STI). The total STI paid in a year is discretionary,
and is closely related to and determined mainly by the current profit levels of the Group but can also include a component of non-
financial targets.
Executive officers remuneration is further aligned with the long term Group performance via the long term incentive plan (LTIP)
and the current shareholdings certain executives retain in the Group.
The tables below set out summary information about the Group’s earnings for 31 December 2018.
Revenue
Net profit before tax
Net profit after tax
Share price at start of year
Share price at end of year
Basic earnings per share
Diluted earnings per share
31 December 2018
$ ‘000
31 December 2017
$’000
181,105
10,011
7,698
188,327
20,370
14,500
31 December 2018
cents
31 December 2017
cents
160
55
8.1
8.0
122
160
15.3
15.0
Particulars of Key Management Personnel interests during the year ended 31 December 2018
Fully paid ordinary shares of Shriro Holdings Limited
Non-executive Directors
John Ingram
Vasco Fung
Greg Laurie
TOTAL
Executive Officers
Tim Hargreaves
Shane Booth1
TOTAL
31 December 2017
Number
Received on exercise
of rights during 2018
Number
Net other changes
during 2018
Number
31 December 2018
Number
160,000
3,321,937
20,000
3,501,937
278,312
2,215,625
2,493,937
-
-
-
-
-
87,500
87,500
50,000
210,000
-
-
3,321,937
20,000
50,000
3,551,937
-
-
-
278,312
2,303,125
2,581,437
1 Shane Booth’s immediate family purchased his shares.
27
SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018For personal use only Remuneration of Executive Officers and Key Management Personnel
2018
Short-term Benefits
Post-
Employment
Benefits
Cash
Fee/
Salary
Cash
bonus
Termination
Benefits
Super-
annuation
$
$
$
$
Non-executive Directors
John Ingram
Vasco Fung
Greg Laurie
TOTAL
Executive Officers
127,854
98,000
95,890
321,744
Tim Hargreaves
575,000
-
Shane Booth
TOTAL
369,709
944,709
-
-
-
-
-
-
-
-
-
-
-
-
-
Long-term Benefits
Long
service
leave
Share
rights1
$
-
-
-
-
$
-
-
-
-
Total
$
140,000
98,000
105,000
343,000
12,146
-
9,110
21,256
25,000
64,221
44,554
708,775
20,291
22,010
32,577
444,587
45,291
86,231
77,131
1,153,362
Percentage of
remuneration
related to
performance
%
-
-
-
-
6.3%
7.3%
6.7%
1 Performance rights as an LTIP award in respect of the 2018 financial year is recognised in accordance with AASB 2. These rights will vest subject to the
satisfaction of performance conditions
2017
Short-term Benefits
Post-
Employment
Benefits
Long-term Benefits
Long
service
leave
Share
rights2
Cash
Fee/
Salary
$
127,854
98,000
95,890
321,744
Cash
bonus
Termination
Benefits
Super-
annuation
$
-
-
-
-
$
-
-
-
-
$
12,146
-
9,110
21,256
$
-
-
-
-
$
-
-
-
-
Total
$
140,000
98,000
105,000
343,000
631,350
558,952
49,927
35,000
10,442
259,536
1,545,207
338,967
200,647
-
19,832
4,327
54,612
618,385
970,317 759,599
49,927
54,832
14,769
314,148 2,163,592
Percentage of
remuneration
related to
performance
%
-
-
-
-
53.0%
41.3%
49.6%
Non-executive Directors
John Ingram
Vasco Fung
Greg Laurie
TOTAL
Executive Officers
Mike Westrup1
Shane Booth
TOTAL
1 Mike Westrup retired as Managing Director on 31 December 2017. A total amount of $208,103 was paid in relation to long service leave which had accrued
over Mike’s 27 years of employment. The Board has used their discretion to settle Mike’s LTI as cash in lieu of shares during February 2018.
2 Performance rights as an LTIP award in respect of the 2017 financial year is recognised in accordance with AASB 2. These rights will vest subject to the
satisfaction of performance conditions
No director or senior management person appointed during the year received a payment as part of his remuneration for agreeing
to hold the position.
Non-executive Directors have no further entitlement to cash bonus or non-monetary benefits.
28
SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018Directors’ Report (cont’d)For personal use only 2018
Post-
Employment
Short-term Benefits
Benefits
Long-term Benefits
Cash
Fee/
Cash
Termination
Super-
Salary
bonus
Benefits
annuation
Long
service
leave
Share
rights1
Percentage of
remuneration
related to
Total
performance
Non-executive Directors
$
$
John Ingram
Vasco Fung
Greg Laurie
TOTAL
Executive Officers
Tim Hargreaves
Shane Booth
TOTAL
127,854
98,000
95,890
321,744
369,709
944,709
575,000
-
-
25,000
64,221
44,554
708,775
20,291
22,010
32,577
444,587
45,291
86,231
77,131
1,153,362
-
-
-
-
-
-
$
-
-
-
-
$
-
-
-
-
$
-
-
-
-
$
-
12,146
9,110
21,256
$
-
12,146
9,110
21,256
$
-
-
-
-
-
-
$
-
-
-
-
-
$
-
-
-
-
$
140,000
98,000
105,000
343,000
$
-
-
-
-
$
140,000
98,000
105,000
343,000
%
-
-
-
-
6.3%
7.3%
6.7%
%
-
-
-
-
53.0%
41.3%
49.6%
631,350
558,952
49,927
35,000
10,442
259,536
1,545,207
338,967
200,647
19,832
4,327
54,612
618,385
970,317 759,599
49,927
54,832
14,769
314,148 2,163,592
Cash
Fee/
$
127,854
98,000
95,890
321,744
Non-executive Directors
John Ingram
Vasco Fung
Greg Laurie
TOTAL
Executive Officers
Mike Westrup1
Shane Booth
TOTAL
Bonuses and share-based payments granted as compensation for the current financial year
Cash Bonuses
Both Tim Hargreaves and Shane Booth achieved 0% of their 2018 structured short term incentives, as a result, no bonus will be
paid to them.
Employee Long Term Incentive plan
The Company established the employee long term incentive plan (LTIP) to assist in the motivation, retention and reward of senior
management. The Plan is designed to align the interests of employees and senior management with the interests of Shareholders
by providing an opportunity for employees to receive an equity interest in the Company. From time to time the Board will approve
invitations to certain executives and employees to participate in the LTIP on conditions and performance hurdles determined by
the Board.
The Plan Rules provide flexibility for the Company to grant performance rights, options and/or restricted shares, subject to the
terms of individual offers.
Performance rights have been granted to the CEO, CFO and other members of senior management of the Company in accordance
with the rules of the employee long term incentive plan. It is expected that an invitation to apply for performance rights in respect
of the 2019 year will be approved by the Board.
Tim Hargreaves was granted 150,000 performance rights and Shane Booth was granted 73,125 performance rights (2017: 87,698)
under the LTIP during the financial year ended 31 December 2018.
No non-executive director received any shares in the current or previous years and no non-executive director can participate in
the LTIP.
Shriro Holdings Limited has not issued any options.
The key terms of the awards under the employee long term incentive plan are summarised in the table below:
2017
Short-term Benefits
Benefits
Long-term Benefits
Post-
Employment
Cash
Termination
Super-
Salary
bonus
Benefits
annuation
Long
service
leave
Share
rights2
Percentage of
remuneration
related to
Total
performance
Performance conditions,
performance period and
vesting
Performance rights will vest subject to the satisfaction of performance conditions.
The performance period for LTIP awards will generally be 3 years. The grants have a performance period ending on 31 December
three years subsequent to the issue date.
The grants of performance rights are subject to a performance condition (hurdle) based on the achievement of a target of 10%
compound annual growth rate (CAGR) of EPS over three years from the effective date of the performance review.
The percentage of performance rights that vest, if any, will be determined by reference to the following vesting schedule, subject
to any adjustments for abnormal or unusual profit items considered appropriate by the Board:
Target CAGR of the Company’s EPS over the three year period
% of performance rights that vest
Less than threshold performance (less than 5%)
Threshold performance (5%)
Between threshold and target performance (5%-10%)
Target performance (10% or above)
Nil
50%
50-100% on a straight line pro rata
100%
Any performance rights that remain unvested at the end of the performance period will lapse immediately.
Rights associated with
performance rights
The performance rights do not carry dividends or voting rights prior to vesting.
Restrictions on dealing
The participant must not sell, transfer, encumber, hedge or otherwise deal with performance rights.
The participant will be free to deal with any Shares allocated on vesting of the performance rights, subject to the requirements
of the Company’s Policy for Dealing in Securities.
Cessation of
employment
If the participant’s employment is terminated for cause or the participant resigns, unless the Board determines otherwise, any
unvested performance rights will automatically lapse.
Where the participant ceases employment in any other circumstances, unless the Board determines otherwise:
•
•
a pro-rata portion of the performance rights (calculated by reference to the portion of the performance period that has
elapsed up to the date of cessation) will remain on foot and will vest or lapse in due course, as though the participant had
not ceased employment; and
the remaining portion of the performance rights will automatically lapse.
29
SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018For personal use only Name
Number
Granted
Financial
Year
Shane Booth
Shane Booth
130,319
87,698
Tim Hargreaves 150,000
Shane Booth
73,125
2016
2017
2018
2018
Commencement
date of performance
measurement period Grant date
Percentage
of grant
Vested %
Percentage
of grant
forfeited %
01/01/2016 26/05/2016
01/01/2017 10/04/2017
01/01/2018 19/06/2018
01/01/2018 19/06/2018
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Future
financial
years that
Grant will be
payable
2019
2020
2021
2021
Total
Grant date
fair value $
89,768
86,506
223,500
108,956
508,730
CHANGE IN THE STATE OF AFFAIRS
There were no other significant changes in the state of affairs of the Group during the financial year.
SUBSEQUENT EVENTS
Subsequent to the year ended 31 December 2018, the Group’s banking facilities have been renegotiated resulting in a $5 million
reduction to the trade finance facility which will result in additional cost saving during 2019. There were no other material
changes to the terms and conditions.
There has not been any other matter or circumstance, not already disclosed, occurring subsequent to the end of the financial
year that has 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 future financial years.
FUTURE DEVELOPMENTS
Disclosure of other information regarding likely developments in the operations of the Group in future financial years and the
expected results of those operations is likely to result in unreasonable prejudice to the Group. Accordingly, this information has
not been disclosed in this report.
INDEMNIFICATION OF OFFICERS AND AUDITORS
During the financial year, the Group paid a premium in respect of a contract insuring Directors of the Group, the Group secretary,
and all executive officers of the Group and of any related body corporate against a liability incurred as such a director, secretary
or executive officer to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the
nature of the liability and the amount of the premium.
The Group has not otherwise, during or since the end of the financial year, except to the extent permitted by law, indemnified or
agreed to indemnify an officer or auditor of the company or of any related body corporate against a liability incurred as such an
officer or auditor.
NON-AUDIT SERVICES
Details of amounts paid or payable to the auditor for non-audit services in the prior year are outlined in note 4 to the financial statements.
The directors are satisfied that the provision of non-audit services by the auditor (or by another person or firm on the auditor’s
behalf) is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001.
The directors are of the opinion that the services as disclosed in note 4 to the financial statements do not compromise the
external auditor’s independence, based on advice received from the Audit Committee, for the following reasons:
•
•
all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the
auditor; and
none of the services undermine the general principles relating to auditor independence as set out in APES 110 ‘Code of
Ethics for Professional Accountants’ issued by the Accounting Professional & Ethical Standards Board, including reviewing
or auditing the auditor’s own work, acting in a management or decision-making capacity for the company, acting as advocate
for the company or jointly sharing economic risks and rewards.
30
SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018Directors’ Report (cont’d)For personal use only Number
Financial
date of performance
Name
Granted
Year
measurement period Grant date
of grant
Vested %
of grant
Grant will be
Grant date
forfeited %
payable
fair value $
Commencement
Percentage
Percentage
years that
Shane Booth
Shane Booth
130,319
87,698
Tim Hargreaves 150,000
Shane Booth
73,125
2016
2017
2018
2018
01/01/2016 26/05/2016
01/01/2017 10/04/2017
01/01/2018 19/06/2018
01/01/2018 19/06/2018
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
2019
2020
2021
2021
Total
89,768
86,506
223,500
108,956
508,730
ROUNDING OFF OF AMOUNTS
The Company is a company of the kind referred to in ASIC Corporations (Rounding in Financials/Directors’ Reports) Instrument
2016/191, dated 24 March 2016, and in accordance with that Corporations Instrument amounts in the directors’ report and the
financial statements are rounded off to the nearest thousand dollars, unless otherwise indicated.
This Directors’ report is signed in accordance with a resolution of Directors made pursuant to s298(2) of the Corporations Act 2001.
On behalf of the Directors
Future
financial
AUDITOR’S INDEPENDENCE DECLARATION
The auditor’s independence declaration is included on page 32 of the annual report.
John Ingram
Director
Sydney, 26th of February 2019
Tim Hargreaves
Director
Sydney, 26th of February 2019
31
SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018For personal use only
32
SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018For personal use only 33
SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018For personal use only 34
SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018For personal use only 35
SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018For personal use only 36
SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018For personal use only 37
SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018For personal use only The Directors declare that:-
(a)
(b)
(c)
in the Directors’ opinion, there are reasonable grounds to believe that the company will be able to pay its debts as and
when they become due and payable;
in the Directors’ opinion the attached financial statements are in compliance with International Financial Reporting
Standard, as stated in note 1 to the financial statements;
in the Directors’ opinion, the attached financial statements and notes thereto are in accordance with the Corporations
Act 2001, including compliance with accounting standards and giving a true and fair view of the financial position and
performance of the company, and
(d)
the Directors have been given the declarations required by s.295A of the Corporations Act 2001.
At the date of this declaration, the company is within the class of companies affected by ASIC Class Order 98/1418. The nature
of the deed of cross guarantee is such that each company which is party to the deed guarantees to each creditor payment in full
of any debt in accordance with the deed of cross guarantee. In the Directors’ opinion, there are reasonable grounds to believe
that the company and the companies to which the ASIC Class Order applies, as detailed in note 24 to the financial statements
will, as a group, be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed of
cross guarantee.
Signed in accordance with a resolution of the Directors made pursuant to s295(5) of the Corporations Act 2001.
On behalf of the Directors
John Ingram
Director
Sydney, 26th of February 2019
Tim Hargreaves
Director
Sydney, 26th of February 2019
38
SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018Directors’ DeclarationFor personal use only
FOR THE FINANCIAL YEAR ENDING 31 DECEMBER 2018
Revenue from ordinary activities
Raw materials and consumables used
Employee benefits expense
Advertising and promotion expenses
Freight and delivery expenses
Depreciation and amortisation expenses
Rental costs
Finance costs
Other expenses
Profit before tax
Income tax expense
Profit for the year
Earnings per share
Basic (cents per share)
Diluted (cents per share)
Note
2
3
3
5
16
16
2018
$’000
181,105
(109,702)
(24,692)
(6,831)
(6,930)
(3,697)
(7,309)
(766)
(11,167)
10,011
(2,313)
7,698
8.1
8.0
2017
$’000
188,327
(108,572)
(25,965)
(5,290)
(7,304)
(3,760)
(5,065)
(800)
(11,201)
20,370
(5,870)
14,500
15.3
15.0
The consolidated statement of profit or loss should be read in conjunction with the Notes to the financial statements.
FOR THE FINANCIAL YEAR ENDING 31 DECEMBER 2018
Profit for the year
Items that may be reclassified subsequently to profit or loss
Net change in the fair value of cash flow hedges taken to equity
Exchange differences on translation of foreign operations
Other comprehensive income for the year, net of tax
Total comprehensive income for the year attributable to the owners of
Shriro Holdings Limited
Note
2018
$’000
7,698
321
699
1,020
8,718
2017
$’000
14,500
243
(767)
(524)
13,976
The consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the Notes to the
financial statements.
39
SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018Consolidated Statement of Profit or LossConsolidated Statement of Profit or Loss and Other Comprehensive IncomeFor personal use only AS AT 31 DECEMBER 2018
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other assets
Current tax receivable
Derivative receivable
Total current assets
Non-current assets
Property, plant and equipment
Deferred tax assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Borrowings
Current tax liabilities
Provisions
Derivative payable
Total current liabilities
Non-current liabilities
Borrowings
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained earnings
Total equity
Note
20
6
7
8
9
5
10
11
12
11
12
13
14
15
2018
$’000
1,372
32,924
38,869
926
2,023
859
76,973
7,691
4,900
12,591
89,564
17,120
1,344
-
5,520
524
24,508
6,000
5,053
11,053
35,561
2017
$’000
3,450
36,333
42,151
1,028
-
578
83,540
9,677
5,019
14,696
98,236
23,159
4,466
1,746
6,513
419
36,303
1,000
3,760
4,760
41,063
54,003
57,173
94,617
(76,775)
36,161
54,003
94,541
(76,291)
38,923
57,173
The consolidated statement of financial position should be read in conjunction with the Notes to the financial statements.
40
SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018Consolidated Statement of Financial PositionFor personal use only Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other assets
Current tax receivable
Derivative receivable
Total current assets
Non-current assets
Property, plant and equipment
Deferred tax assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Borrowings
Current tax liabilities
Provisions
Derivative payable
Total current liabilities
Non-current liabilities
Borrowings
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained earnings
Total equity
Note
20
6
7
8
9
5
10
11
12
11
12
13
14
15
2018
$’000
1,372
32,924
38,869
926
2,023
859
76,973
7,691
4,900
12,591
89,564
17,120
1,344
-
5,520
524
24,508
6,000
5,053
11,053
35,561
2017
$’000
3,450
36,333
42,151
1,028
-
578
83,540
9,677
5,019
14,696
98,236
23,159
4,466
1,746
6,513
419
36,303
1,000
3,760
4,760
41,063
54,003
57,173
94,617
(76,775)
36,161
54,003
94,541
(76,291)
38,923
57,173
FOR THE FINANCIAL YEAR ENDING 31 DECEMBER 2018
Group
Reorganisation
Reserve
$’000
Cash
Flow
Hedging
Reserve
$’000
Foreign
Currency
Translation
Reserve
$’000
Equity
Settled
Benefits
Reserve
$’000
(78,585)
(156)
1,973
619
Issue
Capital
$’000
94,541
Balance at 31 December 2016
Profit for the year
Other comprehensive income for the year
Total comprehensive income
Share-based payments expense (net of tax)
Dividends paid
-
-
-
-
-
-
-
-
-
-
Balance at 31 December 2017
94,541
(78,585)
Profit for the year
Other comprehensive income for the year
Total comprehensive income
Dividends paid
Share Issue
Share-based payments reserve (net of tax)
-
-
-
-
76
-
-
-
-
-
-
-
-
243
243
-
-
87
-
321
321
-
-
-
Retained
Earnings
$’000
34,873
14,500
Total
53,265
14,500
-
(524)
14,500
13,976
-
-
-
382
-
382
-
(10,450)
(10,450)
-
(767)
(767)
-
-
1,206
1,001
38,923
57,173
-
699
699
-
-
-
-
-
-
-
-
(1,504)
7,698
-
7,698
7,698
1,020
8,718
(10,460)
(10,460)
-
-
76
(1,504)
Balance at 31 December 2018
94,617
(78,585)
408
1,905
(503)
36,161
54,003
The consolidated statement of changes in equity should be read in conjunction with the Notes to the financial statements.
41
SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018Consolidated Statement of Changes in EquityFor personal use only AS AT 31 DECEMBER 2018
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Finance costs paid
Income taxes paid
Note
Net cash provided by operating activities
20.2
Cash flows from investing activities
Proceeds from sale of property, plant and equipment
Payment for property, plant and equipment
Net cash used in investing activities
Cash flows from financing activities
Proceeds from / (repayment of) borrowings
Dividends paid
Net cash used in financing activities
Net (decrease) / increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash
Cash and cash equivalents at the end of the financial year
20.1
2018
$’000
202,624
(187,183)
(728)
(5,962)
8,751
85
(2,429)
(2,344)
1,878
(10,460)
(8,582)
(2,175)
3,450
97
1,372
2017
$’000
205,760
(182,058)
(771)
(5,732)
17,199
177
(3,625)
(3,448)
(69)
(10,450)
(10,519)
3,232
15
203
3,450
The consolidated statement of cash flows should be read in conjunction with the Notes to the financial statements.
42
SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018Consolidated Statement of Cash FlowsFor personal use only Net cash provided by operating activities
20.2
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Finance costs paid
Income taxes paid
Cash flows from investing activities
Proceeds from sale of property, plant and equipment
Payment for property, plant and equipment
Net cash used in investing activities
Cash flows from financing activities
Proceeds from / (repayment of) borrowings
Dividends paid
Net cash used in financing activities
Net (decrease) / increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash
Cash and cash equivalents at the end of the financial year
20.1
2018
$’000
202,624
(187,183)
(728)
(5,962)
8,751
85
(2,429)
(2,344)
1,878
(10,460)
(8,582)
(2,175)
3,450
97
1,372
2017
$’000
205,760
(182,058)
(771)
(5,732)
17,199
177
(3,625)
(3,448)
(69)
(10,450)
(10,519)
3,232
15
203
3,450
Note
(a)
Statement of Compliance
1. STATEMENT OF ACCOUNTING POLICIES
The following is a summary of the significant accounting policies adopted by the Group in the preparation of the financial report
for the year ended 31 December 2018. The accounting policies have been consistently applied unless otherwise stated.
These financial statements are general purpose financial statements which have been prepared in accordance with the
Corporations Act 2001, Accounting Standards and Interpretations, and comply with other requirements of the law. The financial
statements comprise the consolidated financial statements of the Group. For the purposes of preparing the consolidated financial
statements, the Company is a for-profit entity. Accounting Standards include Australian Accounting Standards. Compliance with
Australian Accounting Standards ensures that the financial statements and notes of the company and the Group comply with
International Financial Reporting Standards (‘IFRS’).
The financial statements were authorised for issue by the Directors on 26 February 2019.
(b)
Basis of preparation
The consolidated financial statements have been prepared on the basis of historical cost, except for the measurement of certain
financial instruments at fair value. Historical cost is generally based on the fair values of the consideration given in exchange for
assets. All amounts are presented in Australian dollars, unless otherwise noted.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date, regardless of whether that price is directly observable or estimated using another
valuation technique. In estimating the fair value of an asset or a liability, the Group takes into account the characteristics of
the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at
the measurement date. Fair value for measurement and/or disclosure purposes in these consolidated financial statements is
determined on such a basis, except for share-based payment transactions that are within the scope of AASB 2 ‘Share-based
Payment’, leasing transactions that are within the scope of AASB 117 ‘Leases’, and measurements that have some similarities
to fair value but are not fair value, such as net realisable value in AASB 2 ‘Share-based Payment’ or value in use in AASB 136
‘Impairment of assets’.
In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to
which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement
in its entirety, which are described as follows:
•
•
•
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at
the measurement date;
Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either
directly or indirectly; and
Level 3 inputs are unobservable inputs for the asset or liability.
The Company is a company of the kind referred to in ASIC Corporations (Rounding in Financials/Directors’ Reports) Instrument
2016/191, dated 24 March 2016, and in accordance with that Corporations Instrument amounts in the directors’ report and the
financial statements are rounded off to the nearest thousand dollars, unless otherwise indicated
43
SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018Notes to the Financial StatementsFor personal use only (c)
Adoption of new standards
In the current period, the Group has adopted all of the new and revised Standards and Interpretations issued by the Australian
Accounting Standards Board that are relevant to its operations and effective for annual reporting periods commencing on or
after 1 January 2018.
AASB 15 ‘Revenue from Contracts with Customers’
The Group has adopted AASB 15 ‘Revenue from Contracts with Customers’ and AASB 2014-5 ‘Amendments to Australian
Accounting Standards arising from AASB 15’ from 1 January 2018. AASB 15 establishes a single comprehensive model for
entities to use in accounting for revenue arising from contracts with customers. AASB 15 has replaced past revenue recognition
guidance including AASB 18 Revenue, AASB 11 Construction Contracts and the related Interpretations.
The core principle of AASB 15 is that an entity should recognise revenue to depict the transfer of promised goods or services to
customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or
services. Specifically, the Standard introduces a 5-step approach to revenue recognition:
•
•
•
•
•
Step 1: Identify the contract(s) with a customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation
Under AASB 15, an entity recognises revenue when (or as) a performance obligation is satisfied, i.e. when ‘control’ of the goods or
services underlying the particular performance obligation is transferred to the customer.
The Group recognises revenue from the sale of Kitchen Appliances and Consumer Products as disclosed in notes 2 and 18.
The directors of the Company have assessed that the only performance obligation is from the sale of the products and accordingly,
revenue will be recognised for this performance obligation at the point in time when control over the corresponding goods is
transferred to the customer. This is similar to the current identification of separate revenue components under AASB 18.
The Group has implemented the full retrospective method of transition to AASB 15, however has resulted in no material impact on
comparative figures. As such, comparatives have not been restated.
Apart from providing updated disclosures on the Group’s revenue transactions, the application of AASB 15 has not had a significant
impact on the financial position and/or financial performance of the Group.
AASB 9 ‘Financial Instruments’
The group has adopted AASB 9 ‘Financial Instruments’ from 1 January 2018. AASB 9 implements lighter hedging requirements and
presents a less restrictive Standard for establishing an effective hedge, further supporting the Group’s current approach to hedge
accounting. The new Standard has removed the strict recognition criteria imposed for an effective hege under AASB 139 and has
had no significant impact on the financial position and/or financial performance of the Group.
Under the new standard, impairment losses are recognised using the expected credit loss (ECL) model. This involves a three-stage
approach in which financial assets move through the three stages as their credit quality changes however a simplified approach is
permitted for financial assets that don’t have a significant financing component (eg. trade receivables) and for lease receivables.
The group has applied the simplified approach; refer to Note 6 for the impact of adoption of AASB 9 on the Group.
44
SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018Notes to the Financial Statements (cont’d)For personal use only
(d)
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company
and its subsidiaries. Control is achieved when the Company:
•
•
•
has power over the investee;
is exposed, or has rights, to variable returns from its involvement with the investee; and
has the ability to use its power to affect its returns.
The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one
or more of the three elements of control listed above.
Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the company loses
control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in
the consolidated statement of profit or loss and other comprehensive income from the date the Company gains control until the
date when the Company ceases to control the subsidiary.
Profit or loss and each component of other comprehensive income are attributed to the owners of the Company and to the non-
controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-
controlling interests even if this results in the non-controlling interests having a deficit balance.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with
the Group’s accounting policies.
Changes in the Group’s ownership interests in existing subsidiaries
Changes in the Group’s ownership interests in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted
for as equity transactions. The carrying amounts of the Group’s interests and the non-controlling interests are adjusted to reflect the
changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are
adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Company.
(e)
Tax consolidation
The company and its wholly-owned Australian resident entities have formed a tax-consolidated group with effect from 23 June
2015 and are therefore taxed as a single entity from that date. The head entity within the tax-consolidated group is Shriro
Holdings Limited. The members of the tax-consolidated group are Shriro Australia Pty Limited and Shriro Pty Limited. This
resulted in the closure of the previous multiple entry consolidated group which consisted of Shriro Pty Limited and Shriro Chaplin
Drive Lane Cove Pty Ltd.
Tax expense/income, deferred tax liabilities and deferred tax assets arising from temporary differences of the members of the
tax-consolidated group are recognised in the separate financial statements of the members of the tax-consolidated group using
the ‘separate taxpayer within group’ approach by reference to the carrying amounts in the separate financial statements of each
entity and the tax values applying under tax.
Current tax liabilities and assets and deferred tax assets arising from unused tax losses and relevant tax credits of the members
of the tax-consolidated group are recognised by the company (as head entity in the tax-consolidated group).
Entities within the tax-consolidated group have entered into a tax funding arrangement and a tax sharing agreement with the
head entity. Under the terms of the tax funding arrangement, the company and each of the entities in the tax-consolidated group
has agreed to pay a tax equivalent payment to or from the head entity, based on the current tax liability or current tax asset of
the entity.
Under the terms of the tax funding arrangement, amounts are recognised as payable to or receivable by the company and
each member of the group in relation to the tax contribution amounts paid or payable between the parent entity and the other
members of the tax-consolidated group in accordance with the arrangement.
The tax sharing agreement provides for the determination of the allocation of income tax liabilities between the entities should
the head entity default on its tax payment obligations or if an entity should leave the tax consolidated group. The effect of the tax
sharing agreement is that each member’s liability for tax payable by the tax-consolidated group is limited to the amount payable
to the head entity under the tax funding arrangement.
45
SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018For personal use only (f)
Income Tax
Current Tax
The tax currently payable is based on taxable profit for the period. Taxable profit differs from profit before tax as reported in
the consolidated statement of profit and 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 liability for current tax is
calculated using rates that have been enacted by the end of the reporting period.
Deferred Tax
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the 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 goodwill or from the initial recognition (other
than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the
accounting profit. In addition, deferred tax liabilities are not recognised if the temporary difference arises from the initial
recognition of goodwill.
Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries and
associates, and interests in joint ventures, except where the Company is able to control the reversal of the temporary difference
and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from
deductible temporary differences associated with such investments and interests are only recognised to the extent that it is
probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they
are expected to reverse in the foreseeable future
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no
longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is
settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the
reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from
the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets
and liabilities.
Deferred tax liabilities and assets 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
current tax assets and liabilities on a net basis.
(g)
Foreign currencies
For the purpose of the financial statements, the results and financial position of the Group are expressed in Australian dollars,
which is the functional currency of the company and the presentation currency for the consolidated financial statements.
In preparing the financial statements, transactions in currencies other than the Group’s functional currency (foreign currencies)
are recognised at the rates prevailing at the dates of the transactions. At the end of each reporting period, monetary items
denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value
that are denominated in foreign currencies are retranslated 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 not retranslated.
Exchange differences on monetary items are recognised in profit or loss in the period in which they arise except for:
•
•
exchange differences on transactions entered into in order to hedge certain foreign currency risks (see 1(s) below for
hedging accounting policies); and
exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is
neither planned nor likely to occur (therefore forming part of the net investment in the foreign operation), which are
recognised initially in other comprehensive income and reclassified from equity to profit or loss on repayment of the
monetary items.
For the purpose of presenting the consolidated financial statements, the assets and liabilities of the Company’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 the average monthly exchange rates during the period, unless exchange rates fluctuated significantly during
that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are
recognised in other comprehensive income and accumulated in equity (attributed to non-controlling interests as appropriate).
46
SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018Notes to the Financial Statements (cont’d)For personal use only (h)
Borrowing Costs
Borrowing costs are recognised in profit or loss in the period in which they are incurred.
(i)
Inventories
Inventory on hand is valued at the lower of cost and net realisable value using the weighted average cost method and includes
all costs associated with its acquisition. Inventory in transit is valued at the lower of cost and net realisable value.
Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs
necessary to make the sale.
(j)
Plant and Equipment
Each class of plant and equipment is carried at cost less, where applicable, any accumulated depreciation and impairment losses.
Plant and equipment are measured at their cost of acquisition at the date of acquisition, being the fair value of the consideration
provided plus incidental costs directly attributed to the acquisition.
The carrying amount of plant and equipment is reviewed annually by Directors to ensure it is not in excess of the recoverable
amount from those assets. Refer note 1(k) for impairment of assets.
Depreciation
The depreciable amount of plant and equipment is depreciated on a straight line basis over their estimated useful lives to the
Group commencing from the time the asset is held ready for use.
Depreciation is recognised so as to write off the cost or valuation of assets (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 following average rates of depreciation are used in calculating the depreciation charge:
Furniture and Fittings
Motor Vehicles
Plant and Equipment
Display assets
Office Equipment
Leasehold improvements
10 years
5 years
8 years
3 years
6 years
8 years
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to
arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and
equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised
in profit or loss.
47
SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018For personal use only
(k)
Impairment of assets
At the end of each reporting period, the Group reviews the carrying amounts of its tangible assets to determine whether there
is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of
the asset is estimated in order to determine the extent of the impairment loss (if any). When it is not possible to estimate the
recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash generating unit to which
the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated
to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a
reasonable and consistent allocation basis can be identified.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future
cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying
amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately
in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a
revaluation decrease.
When an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the
revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount
that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years.
A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued
amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
(l)
Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with banks, other short-term highly liquid investments
with original maturities of three months or less.
For the purposes of the statement of cash flows, cash and cash equivalents consist of cash balances. Bank overdrafts and
debtor facilities are considered to be financing activities as they are used interchangeably to fund the operations, and are not
repayable on demand.
(m)
Financial instruments
Financial assets and financial liabilities are recognised when a Group becomes a party to the contractual provisions of the instrument.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the
acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value
through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on
initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value
through profit or loss are recognised immediately in profit or loss.
Financial assets
Financial assets are classified into the following specified categories: financial assets ‘at fair value through profit or loss’ (FVTPL),
‘held-to-maturity’ investments, ‘available-for-sale’ (AFS) financial assets and ‘loans and receivables’. The classification depends on
the nature and purpose of the financial assets and is determined at the time of initial recognition. All regular way purchases or sales
of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales
of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.
Effective interest method
The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest
income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts
(including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other
premiums or discounts) through the expected life of the debt instrument, or (where appropriate) a shorter period, to the net
carrying amount on initial recognition.
Income is recognised on an effective interest basis for debt instruments other than those financial assets classified as at FVTPL.
48
SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018Notes to the Financial Statements (cont’d)For personal use only Impairment of financial assets
Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each reporting period. Financial
assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the
initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.
For AFS equity instruments, including listed or unlisted shares, objective evidence of impairment includes information about
significant changes with an adverse effect that have taken place in the technological, market, economic or legal environment
in which the issuer operates, and indicates that the cost of the investment in the equity instrument may not be recovered. A
significant or prolonged decline in the fair value of the security below its cost is considered to be objective evidence of impairment
for unlisted shares classified as available-for-sale.
For financial assets carried at amortised cost, the amount of the impairment loss recognised is the difference between the
asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective
interest rate. For financial assets that are carried at cost, the amount of the impairment loss is measured as the difference
between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the current market
rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods. The carrying amount
of the financial asset is reduced by the impairment loss directly for all financial assets.
For certain categories of financial assets, such as trade receivables, assets are assessed for impairment on a collective basis
even if they were assessed not to be impaired individually. Objective evidence of impairment for a portfolio of receivables could
include the Group’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio
past the average credit period, age of receivables as well as observable changes in national or local economic conditions that
correlate with default on receivables. The group applies the simplified approach to providing for expected credit losses from
initial recognition of the trade receivable as per AASB 9.
When an AFS financial asset is considered to be impaired, cumulative gains or losses previously recognised in other comprehensive
income are reclassified to profit or loss in the period. For financial assets measured at amortised cost, if, in a subsequent
period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the
impairment was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the
carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have
been had the impairment not been recognised.
Loans and receivables
Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active
market are classified as ‘loans and receivables’. Loans and receivables are measured at amortised cost using the effective
interest method, less any impairment. Interest income is recognised by applying the effective interest rate, except for short-term
receivables when the effect of discounting is immaterial. Trade receivables are regularly reviewed and the group applies the
simplified approach to providing for expected credit losses as per AASB 9.
Derecognition of financial assets
The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or when it
transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party. If the Group
neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset,
the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group
retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the
financial asset and also recognises a collateralised borrowing for the proceeds received.
On derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the
consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income
and accumulated in equity is recognised in profit or loss.
On derecognition of a financial asset other than in its entirety (e.g. when the Group retains an option to repurchase part of a
transferred asset), the Group allocates the previous carrying amount of the financial asset between the part it continues to
recognise under continuing involvement, and the part it no longer recognises on the basis of the relative fair values of those
parts on the date of the transfer. The difference between the carrying amount allocated to the part that is no longer recognised
and the sum of the consideration received for the part no longer recognised and any cumulative gain or loss allocated to it that
had been recognised in other comprehensive income is recognised in profit or loss. A cumulative gain or loss that had been
recognised in other comprehensive income is allocated between the part that continues to be recognised and the part that is no
longer recognised on the basis of the relative fair values of those parts.
Financial Liabilities
Financial liabilities are classified as either financial liabilities ‘at FVTPL’ or ‘other financial liabilities’.
49
SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018For personal use only (n)
Employee benefits
A liability is recognised for benefits accruing to employees in respect of wages and salaries, annual leave, long service leave, and
sick leave when it is probable that settlement will be required and they are capable of being measured reliably.
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. The discount rate adopted
at 31 December 2018 is the High Quality Corporate Bond Rate.
Share based payments transactions of the Company
Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity
instruments at the grant date. Fair value is measured by use of a binomial model. The expected life used in the model is adjusted,
based on management’s best estimate, for the effects of non-transferability, exercise restrictions, and behavioral considerations.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over
the vesting period, based on the Company’s estimate of equity instruments that will eventually vest with a corresponding increase
in equity.
(o)
Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer
returns, rebates and other similar allowances.
Sale of goods
Revenue from the sale of goods is recognised when (or as) a performance obligation is satisfied, i.e. when ‘control’ of the goods
or services underlying the particular performance obligation is transferred to the customer.
The only performance obligation of the group is from the sale of the products and accordingly, revenue will be recognised for this
performance obligation at the point in time when control over the corresponding goods is transferred to the customer.
Rebates
Revenue from the sale of goods is recorded after deducting any variable consideration for future rebates payable in relation to
each sale. Rebates are accrued at a customer and product group level and are settled with customers in line with applicable
trading terms. A rebate accrual is maintained for rebates not yet paid to customers, and forms part of the trade and other
receivables balance. Based on historical data and analysis the accrual is reviewed at the end of each reporting period.
Interest income
Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of
interest would be immaterial. The effective interest method is a method of calculating the amortised cost of a debt instrument
and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated
future cash receipts through the expected life of the debt instrument to the net carrying amount on initial recognition.
(p)
Earnings per share
Basic and diluted earnings per share is calculated on profit after taxation attributable to members of Shriro Holdings Limited and
the weighted average number of shares on issue during the year. Refer to note 16 for the calculation of the weighted average
number of ordinary shares used in calculating basic and diluted earnings per share.
(q)
Leasing
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of
ownership to the lessee. All other leases are classified as operating leases.
The company as lessor
Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial direct costs
incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on
a straight-line basis over the lease term.
In the event that lease incentives are provided in order to enter into operating leases, such incentives are recognised as an asset
The aggregate benefit of incentives is recognised as a reduction of rental income on a straight-line basis.
50
SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018Notes to the Financial Statements (cont’d)For personal use only
The company as lessee
Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another
systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred.
In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The
aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis, except where another
systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
(r)
Goods and services tax (GST)
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 an item of the expense. Receivables and payables in the statement of financial position are shown
inclusive of GST.
Cash flows are presented in the statement of cash flows on a gross basis, except for the GST components of investing and
financing activities, which are disclosed as operating cash flows.
(s)
Derivative financial instruments
The Group enters into a variety of derivative financial instruments to manage its exposure to foreign exchange rate risk, including
forward foreign exchange contracts.
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured
to their fair value at each reporting date. The resulting gain or loss is recognised in profit or loss immediately unless the derivative
is designated and effective as a hedging instrument, in which event, the timing of the recognition in profit or loss depends on
the nature of the hedge relationship.
Derivatives are classified as a non-current asset or a non-current liability if the remaining maturity of the hedge relationship is
more than 12 months after the reporting period and as a current asset or a current liability if the remaining maturity of the hedge
relationship is less than 12 months after the reporting period.
Hedge accounting
Hedges of foreign exchange risk on firm commitments are designated as cash flow hedges. At the inception of the hedge
relationship, the Group documents the relationship between the hedging instrument and the hedged item, along with its risk
management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge
and on an ongoing basis, the Group documents whether the hedging instrument that is used in a hedging relationship is highly
effective in offsetting changes in fair values or cash flows of the hedged item.
Cash flow hedge
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised
in other comprehensive income and accumulated under the heading of cash flow hedging reserve. The gain or loss relating to
the ineffective portion is recognised immediately in profit or loss as part of other expenses or other income.
Amounts recognised in other comprehensive income and accumulated in equity are reclassified to profit or loss in the periods
when the hedged item is recognised in profit or loss in the same line of the income statement as the recognised hedge item.
However, when the forecast transaction that is hedged results in the recognition of a non-financial asset or a non-financial
liability, the gains and losses previously recognised in other comprehensive income and accumulated in equity are transferred
from equity and included in the initial measurement of the cost of the non-financial asset or non-financial liability.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies
for hedge accounting. At that time, any cumulative gain or loss deferred in equity remains in equity and is recognised when the
forecast transaction is ultimately recognised in profit or loss. However, if all or a portion of a loss recognised directly in equity
is not expected to be recovered in one or more future periods, the amount that is not expected to be recovered is recognised
immediately in the profit and loss. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that
was deferred in equity is recognised immediately in profit or loss.
51
SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018For personal use only (t)
Provision for Warranty Claims
The Group sells goods or services to a client and provides a formal warranty or guarantee that any defects will be repaired or
rectified and provides assurance that the product complies with agreed-upon specifications. A provision is recorded for the
related liability to an amount of the expected costs to be incurred for repair and rectification.
If the Group has not granted a formal warranty or guarantee to the customer, but by an established pattern of past practice, published
policies or specific statements, the Group has created a valid expectation by its customers that it will settle its responsibilities
resulting from selling the goods or providing the services, a provision is recorded for this constructive obligation.
The Group provides warranties ranging from one to five years, with the majority being less than two years.
(u)
Critical accounting estimates and judgments
In the preparation of the financial report management is required to make judgments, estimates and assumptions about carrying
values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are
based on historical experience and various other factors that are believed to be reasonable under the circumstance, the results
of which form the basis of making the judgments. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised
in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future
periods if the revision affects both current and future periods.
Judgments made by management in the preparation of the financial report that have significant effects on the financial
statements and estimates with a significant risk of material adjustments in the next year are disclosed, where applicable, in the
relevant notes to the financial statements.
Accounting policies are selected and applied in a manner which ensures that the resulting financial information satisfies the
concepts of relevance and reliability, thereby ensuring that the substance of the underlying transactions or other events is reported.
Provision for obsolescence
The provision for obsolescence of inventories assessment requires a degree of estimation and judgment. The level of the
provision is assessed by taking into account the recent sales experience, the ageing of inventories and other factors that affect
inventory obsolescence.
Warranty provision
In determining the level of provision required for warranties, the Group has made judgments in respect of the products, the number
of customers who will actually use the warranty and how often, and the costs of fulfilling the conditions of the warranty. The
provision is based on estimates made from historical warranty data associated with similar products and services.
Rebates provision
The provision for rebates requires a degree of estimation and judgment in relation to whether the customer will achieve the
hurdles required to earn a rebate. The level of the provision is assessed by taking into account past rebates payment history and
contractual arrangements.
52
SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018Notes to the Financial Statements (cont’d)For personal use only (v)
Application of new and revised accounting standards
Changes in accounting policies and disclosures
In the current period, the Group has applied a number of new and revised AASBs issued by the Australian Accounting Standards
Board (AASB). These are:
AASB 9 ‘Financial Instruments’, and the relevant amending standards AASB 2016-2 ‘Amendments to Australian Accounting
Standards – Disclosure initiative: Amendments to AASB 107’
AASB 15 ‘Revenue from Contracts with Customers’
The application of these new and revised standards has had no material effect on the Group’s consolidated financial statements.
Standards and interpretations in issue not yet adopted
At the date of authorisation of these financial statements, the Standards and Interpretations listed below were in issue but not
yet effective.
AASB 16 ‘Leases’
A project to implement this standard is underway and while work is ongoing, the new standard will result in the recognition of
almost all leases on the balance sheet by recognising a lease liability reflecting the future lease payments and a ‘right-of-use
asset’ for all relevant operating leases.
Upon initial adoption of the new standard there is the option of applying the modified retrospective approach or a full retrospective
approach. The group has opted for the full retrospective approach.
Under the full retrospective approach, the treatment is as if AASB 16 was in place at the inception of all leases. This approach
will require a restatement of the 2018 accounts during FY2019.
The group has performed an assessment of AASB 16 had the standard been adopted as at 1 January 2018. The initial estimated
impact of AASB 16 on the Balance Sheet as at 31 December 2018 is a decrease to net assets of between $1.5M and $2.5M.
The initial estimated impact of AASB 16 on profit from ordinary activities as at 31 December 2018 is an increase to EBITDA of
between $4.5M and $5.5M and an increase to NPAT of between $0.0M and $1.0M.
These estimates may be materially different to the actual impact upon initial adoption of AASB 16 on 1 January 2019 due to
changes of the Groups lease portfolio, adoptions of new accounting policies or changes to material judgement areas such as
discount rates and estimated lease-term for leases with renewal options.
Standard / Interpretation
Effective for Annual reporting periods
beginning on or after
Expected to be initially applied in the
financial year ending
•
AASB 16 ‘Leases’
1 January 2019
31 December 2019
53
SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018For personal use only 2. REVENUE
Revenue from continuing operations consisted of the following items:
Sales revenue
Advertising and marketing contributions
3. PROFIT FOR THE YEAR
Profit before tax has been arrived at after charging the following expenses:
Depreciation of property, plant, equipment
(Decrease) / increase in inventory obsolescence provision
Increase / (decrease) in warranty provision provided
Employee benefits expense:
- LTIP share based payments
- Termination benefits
- Other employee benefits
Bad and doubtful debts write back
Operating lease expense
Finance costs
Interest on bank overdrafts and loans
Bank charges
2018
$’000
179,930
1,175
181,105
2018
$’000
3,697
144
(114)
41
391
24,260
(1)
5,994
584
182
2017
$’000
186,930
1,397
188,327
2017
$’000
3,760
(306)
240
382
81
25,502
(3)
5,052
555
245
54
SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018Notes to the Financial Statements (cont’d)For personal use only 4. REMUNERATION OF AUDITOR
Audit and review
Other services
The auditor of Shriro Holdings Limited is Deloitte Touche Tohmatsu
5. INCOME TAX
Income taxes relating to continuing operations
5.1 Income tax recognised in profit or loss
Current tax
In respect of the current year
In respect of prior years
Deferred tax
In respect of the current year
In respect of prior years
Tax losses not brought to account
Total tax expense
Total income tax expense recognised in the current year relating to
continuing operations
Total income tax expense for the year can be reconciled to the accounting profit as follows:
Profit before tax from continuing operations
Income tax expense calculated at 30% (2017:30%)
Effect of expenses that are not deductible in determining taxable profit
Effect of share based payments
Effect of different tax rates of subsidiaries operating in other jurisdictions
Other
Total tax expense
Adjustments recognised in the current year in relation to the current tax of
prior years
Income tax attributable to profit
2018
$’000
190
28
2018
$’000
2,315
(147)
2,168
(46)
191
-
145
2,313
2018
$’000
10,011
3,003
244
(441)
(72)
(274)
2,460
(147)
2,313
2017
$’000
190
-
2017
$’000
5,946
(190)
5,756
(225)
339
-
114
5,870
2017
$’000
20,370
6,111
341
-
(106)
(286)
6,060
(190)
5,870
55
SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018For personal use only The deferred tax expense above is itemised as follows:
5.2 Deferred Tax Balances
Deferred tax assets
Property, plant and equipment
Leases
Superannuation payable
Provisions
Credit loss allowance
Deferred revenue
Net deferred tax asset
Deferred tax assets
Property, plant and equipment
Leases
Superannuation payable
Provisions
Credit loss allowance
Deferred revenue
Net deferred tax asset
Opening Balance
$’000
2018
Recognised in total
comprehensive
income
$’000
Closing balance
$’000
2017
30
(5)
64
4,874
54
2
5,019
(20)
(15)
57
5,098
56
-
5,176
(36)
(4)
(19)
(59)
1
(2)
(119)
50
10
7
(224)
(2)
2
(157)
(6)
(9)
45
4,815
55
-
4,900
30
(5)
64
4,874
54
2
5,019
The Deferred tax asset has been accounted for as it is probable that sufficient taxable profits will be available against which deductible
temporary differences can be utilised.
6.TRADE AND OTHER RECEIVABLES
Trade receivables (net of discounts and rebates)
Credit loss allowance
Other debtors
Trade receivables
Age of receivables that are past due but not impaired
60-90 days
90-120 days
Total
2018
$’000
32,920
(197)
32,723
201
32,924
103
84
187
2017
$’000
36,175
(195)
35,980
353
36,333
181
44
225
The average credit period on sales of goods is 45 days. No interest is charged on trade receivables. With the implementation of
the new standard AASB 9, impairment losses should be recognised using the expected credit loss (ECL) model. This involves a
three-stage approach in which financial assets move through the three stages as their credit quality changes however a simplified
approach is permitted for financial assets that don’t have a significant financing component, such as trade receivables. The
group has applied the simplified approach which requires expected lifetime losses to be recognised from initial recognition of
the receivables. The calculation of impairment losses under this approach impacts the allowance for doubtful debts, now termed
the credit loss allowance.
56
SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018Notes to the Financial Statements (cont’d)For personal use only A provision matrix is determined based on historic credit losses, adjusted for any material expected changes to the future credit
risk. On this basis the credit loss allowance as at 31 December 2018 was determined as follows:
Current
Sum of 0 - 30 days
Sum of 31 - 60 days
Sum of 61 - 90 days
Sum of 90+
Total receivables
Receivables
$’000
Allowance based
on historic credit
losses
Adjustment for
expected changes in
credit risk
Credit loss
allowance
$’000
6,341
12,387
13,036
1,068
88
32,920
0.1%
0.1%
0.2%
3.8%
34.2%
0.1%
0.1%
0.1%
2.7%
24.2%
9
21
46
70
51
197
The Group holds an active credit insurance policy which, as at the reporting date, provided coverage for 90% of debtors, including
all debtors with a balance owing equal to or greater than $40,000. The maximum exposure under this policy is 10% of the
irrecoverable amount.
Movement in the credit loss allowance
Balance at beginning of the year
Impairment loss recognised
Amounts w/o during year as uncollectable
Amounts recovered during the year
Other debtors
Balance at the end of the year
7. INVENTORIES
Finished goods
Stock in transit
Allowance for inventory obsolescence
Balance at the end of the year
2018
$’000
(195)
(4)
4
-
(2)
(197)
31,031
9,779
(1,941)
38,869
2017
$’000
(198)
(7)
9
(3)
4
(195)
33,299
10,649
(1,797)
42,151
The cost of inventories recognised as an expense during the year in respect of continuing operations was $109,702,000 (2017: $108,572,000)
8. OTHER ASSETS
Prepayments
9. PLANT AND EQUIPMENT
Leasehold improvements
Plant and equipment
Fixtures and fittings
Office equipment
Motor vehicles
Display Assets
Total capitalised plant and equipment
Capital work in progress
Total Plant and Equipment
926
1,028
1,411
1,861
267
837
787
1,909
7,072
619
7,691
2,559
2,032
329
1,098
633
2,607
9,258
419
9,677
57
SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018For personal use only Cost
Leasehold
improvements
$’000
Plant and
equipment
$’000
Fixtures and
fittings
$’000
Office
equipment
$’000
Motor
vehicles
$’000
Display assets
$’000
Total
$’000
Balance at 31 December
2017
Additions
Disposals
5,249
-
4,993
372
941
9
5,430
271
(1,247)
(1,038)
(349)
(1,001)
FX Translation gain
18
54
Balance at 31 December
2018
4,020
4,381
26
627
41
1,676
432
(326)
39
9,876
28,165
1,102
2,186
(1,357)
(5,318)
51
229
4,741
1,821
9,672
25,262
Accumulated
depreciation and
impairment
Balance at 31 December
2017
Additions
Disposals
FX Translation gain
Balance at 31 December
2017
Leasehold
improvements
$’000
Plant and
equipment
$’000
Fixtures and
fittings
$’000
Office
equipment
$’000
Motor
vehicles
$’000
Display assets
$’000
Total
$’000
(2,690)
(2,961)
(612)
(4,332)
(1,043)
(7,269)
(18,907)
(717)
811
(13)
(507)
997
(49)
(52)
326
(22)
(467)
932
(37)
(266)
307
(32)
(1,688)
(3,697)
1,229
(35)
4,602
(188)
(2,609)
(2,520)
(360)
(3,904)
(1,034)
(7,763)
(18,190)
The following average useful lives are used in the calculation of depreciation.
Leasehold improvements
Plant and equipment
Fixtures and fittings
Office equipment
Motor vehicles
Display assets
8 years
8 years
10 years
6 years
5 years
3 years
Assets pledged as security
As detailed in note 11, all property, plant and equipment, along with all other assets of the Group, have been pledged to secure the borrowings
of the Group with ANZ. The Group is not allowed to pledge these assets as security for other borrowings or to sell them to another entity.
10. TRADE AND OTHER RECEIVABLES
Current
Trade payables
GST Payable
Employee related payables
Sundry creditors
2018
$’000
9,863
990
469
5,798
17,120
2017
$’000
17,248
1,436
1,685
2,790
23,159
The majority of trade payables relate to purchases of inventory from Asia and Europe. The average credit period on purchases from Asia
is 45 days. The average credit period for purchases from Europe is 90 days. The Group has financial risk management policies in place
to ensure that all payables are paid within the pre-agreed credit terms.
58
SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018Notes to the Financial Statements (cont’d)For personal use only 11. BORROWINGS
Secured – at amortised cost
Overdraft facility (i)
Trade finance facility (i)
Current
Non-current
11.1 Facility
2018
$’000
1,344
6,000
7,344
1,344
6,000
7,344
2017
$’000
4,466
1,000
5,466
4,466
1,000
5,466
During the financial year the Group had the following banking facilities.
(i)
(ii)
The Group has a trade finance facility available to meet working capital requirements. To account for seasonality in
working capital requirements, on the 1st September each year, the facility limit for the combination of the overdraft
facility and trade finance facility increases to $26,000,000 and reduces back to $21,000,000 between 1 January and 31
August each year.
The Group has a non-cash guarantees facility of $11,000,000. Under the terms of this facility, financial institutions
provide guarantees to the Group’s suppliers and property owners in the form of Letters of Credit and Bank Guarantees
These Letters of Credit and Bank Guarantees act like insurance and provide assurance to suppliers and property owners
that payment up to the amount of the guarantees will be made if certain documentary conditions are met. The Group
has no obligation to make any payments under this non-cash facility.
The Group’s facilities are denominated in Australian dollars and variable interest rates apply.
The facilities have financial covenants relating to fixed charge cover ratio, borrowing base cover ratio and financial indebtness
to EBITDA ratio.
Borrowing facility
Overdraft facility (i)
Trade finance facility (i)
Total borrowing facility
Non-cash guarantees facility (ii)
Total Group facility
Usage of borrowing facility
Drawn – cash
Less cash and bank balances
Undrawn limit available for use
Total borrowing facility
Utilisation of non-cash guarantees facility
Utilised – non-cash
Unutilised limit available for use
Total non-cash guarantees facility
Total Group facility
2018
$’000
15,000
11,000
26,000
11,000
37,000
7,344
(1,372)
20,028
26,000
7,663
3,337
11,000
37,000
2017
$’000
15,000
11,000
26,000
11,000
37,000
5,466
(3,450)
23,984
26,000
7,335
3,665
11,000
37,000
59
SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018For personal use only
12. PROVISIONS
Employee benefits (i)
Other provisions (see below)
Current
Non-current
OTHER PROVISIONS
Other Provisions
Balance as at 1 January 2018
Additional provisions recognised
2018
$’000
4,021
6,552
2017
$’000
3,934
6,339
10,573
10,273
5,520
5,053
6,513
3,760
10,573
10,273
Provision for warranty
(ii) $’000
Lease incentives &
make good (iii) & (iv)
$’000
2,994
(114)
2,880
3,345
327
3,672
Total
$’000
6,339
213
6,552
(i)
(ii)
(iii)
The provision for employee benefits represents annual leave and long service leave entitlements accrued. The discount rate
adopted at 31 December 2018 is the High Quality Corporate Bond Rate, previously a risk free bond rate, and the change
represents a change in accounting estimates. The impact is not significant.
The provision for warranty claims represents the present value of the Directors’ best estimate of the future sacrifice of
economic benefits that will be required under the Group’s warranty program as outlined in note 1(t). The estimate has been
made on the basis of historical warranty trends and other events affecting product quality discounted to present value with
the exclusion of net margin on spares sold.
The lease incentives provision arises when incentives are received from landlords as part of the Group’s operating leases.
The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis, except where
another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are
consumed.
(iv)
The provision for make-good represents management’s best estimate of future cash outlays required to refit leased
premises in line with the requirements of each operating lease agreement.
13. ISSUED CAPITAL
95,087,500 fully paid ordinary shares (2017: 95,000,000)
2018
$’000
94,617
2017
$’000
94,541
Date
Details
1 January 2018
7 February 2018
31 December 2018
Opening balance
Issue of shares
Closing Balance
Values of Shares
$’000
Number of Shares
94,541
76
94,617
95,000,000
87,500
95,087,500
60
SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018Notes to the Financial Statements (cont’d)For personal use only 14. RESERVES
Cash flow hedging reserve
Foreign currency translation reserve
Equity settled employee benefits reserve
Group reorganisation reserve
Balance at end of financial year
14.1 Cash flow hedging reserve
Balance at the beginning of the financial year
Forward exchange contracts
Balance at end of financial year
2018
$’000
408
1,905
(503)
(78,585)
(76,775)
2018
$’000
87
321
408
2017
$’000
87
1,206
1,001
(78,585)
(76,291)
2017
$’000
(156)
243
87
The cash flow hedging reserve represents the cumulative effective portion of gains or losses arising on changes in fair value of hedging
instruments entered into for cash flow hedges. The cumulative gain or loss arising on changes in fair value of the hedging instruments
that are recognised and accumulated under the heading of cash flow hedging reserve will be reclassified to profit or loss only when the
hedged transaction affects the profit or loss, or is included as a basis adjustment to the nonfinancial hedged item, consistent with the
relevant accounting policy.
14.2 Foreign currency translation reserve
Balance at the beginning of the financial year
Exchange differences arising on translating the foreign operation
Balance at end of financial year
2018
$’000
1,206
699
1,905
2017
$’000
1,973
(767)
1,206
Exchange differences relating to the translation of the results and net assets of the Group’s foreign operations from their functional
currencies to the Group’s presentation currency (i.e. Australian dollars) are recognised directly in other comprehensive income
and accumulated in the foreign currency translation reserve. Exchange differences previously accumulated in the foreign currency
translation reserve (in respect of translating both the net assets of foreign operations and hedges of foreign operations) are reclassified
to profit or loss on the disposal of the foreign operation.
14.3 Equity settled employee benefits reserve
Balance at the beginning of the financial year
Arising on share-based payments
Balance at end of financial year
14.4 Group reorganisation reserve
Balance at beginning of financial year
Balance at end of financial year
2018
$’000
1,001
(1,504)
(503)
2018
$’000
(78,585)
(78,585)
2017
$’000
619
382
1,001
2017
$’000
(78,585)
(78,585)
61
SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018For personal use only 15. RETAINED EARNINGS
Balance at beginning of financial year
Profit for the year
Dividends paid
Balance at end of financial year
16. EARNINGS PER SHARE
Basic earnings per share
Diluted earnings per share
Reconciliation of earnings used in calculating earnings per share
Net profit
Reconciliation of shares used in calculating earnings per share
Opening balance of shares for the financial year
Issue of shares
Closing balance of shares for the financial year
Weighted average number of ordinary shares used in the calculation of basic
earnings per share
Shares deemed to be issued for no consideration in respect of:
Employee performance rights
Closing number of shares deemed to be issued for the financial year
Number of ordinary shares used in the calculation of diluted earnings per
share
2018
$’000
38,923
7,698
(10,460)
36,161
2017
$’000
34,873
14,500
(10,450)
38,923
2018
Cents per share
2017
Cents per share
8.1
8.0
2018
$’000
7,698
2018
No.
95,000,000
87,500
95,087,500
95,078,630
2017
No.
1,090,389
96,177,889
96,271,588
15.3
15.0
2017
$’000
14,500
2017
No.
95,000,000
-
95,000,000
95,000,000
2016
No.
1,709,621
96,709,621
96,709,621
62
SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018Notes to the Financial Statements (cont’d)For personal use only 17. DIVIDENDS
On 26th February 2019 the Directors declared a final dividend of 3.0 cents per share fully franked with an ex-dividend date of the
18th March 2019, record date of the 19th March 2019 and payable on 5th April 2019.
Franking account balance
2018
$’000
3,232
2017
$’000
6,9731
1The exempting credit balance results from credits earned from tax paid prior to Shriro’s change of ownership at the IPO, at which
time Shriro became a “former exempting entity”, and this exempting credit balance is quarantined in accordance with Division
208 of the Income Tax assessment act 1997 (ITAA1997).
Post IPO, Shriro is able to declare distributions to all its shareholders which include both or either “franking credits” or “exempting
credits”. All distributions to shareholders must be fair and reasonable to Shriro’s shareholders as a whole and continue to adhere
to the franking credit benchmark rules (for distributions of franking credits) and the exempting credit benchmark rules (for
distributions of exempting credits).
All shareholders are entitled to receive exempting credits as long as all shareholders receive the same, however it is only “eligible
continuing substantial members” (as defined at section 208-155(2)-(7)) of the ITAA 1997) who receive a tax benefit by way of an
exemption from withholding tax. In the case of Shriro, the only eligible continuing substantial member is Shriro Pacific Limited.
There is no legislative requirement for a former exempting entity to attach franking credits to a distribution in preference to
an exempting credit. However, it is general Australian Taxation Office (ATO) supported practice to make distributions in this
sequence, as franking credits benefit all shareholder profiles.
As such, to comply with the supported ATO practice, Shriro will endeavour to distribute franking credits in preference to exempting
credits (including with respect to any distributions that are paid to Shriro Pacific Limited in the future).
In order to ensure the ATO practice referred to above has been applied, Shriro and its tax advisors have reviewed the franking
credit balance and exempting credit balance and the Company has subsequently reclassified an amount of $2,657,550 from its
franking credit balance to its exempting credit balance, as at 31 December 2017, such that the franking credit balance as at that
date is $6,972,947.
The declaration of a dividend and any attached franking credits is at the discretion of the Board of Directors and not any
shareholder. Potential access to exempting credits does not change the voting or dividend rights attached to the Shriro shares
or impact access to capital on a winding-up. On this basis, all Shriro shares currently on issue continue to rank pari passu. Shriro
expects that it will have sufficient franking credits to declare fully franked dividends for the foreseeable future.
63
SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018For personal use only 18. SEGMENT INFORMATION
Operating segments are reported in a manner which is consistent with the internal reporting provided to the chief operating
decision makers. The chief operating decision makers have been identified as the Board of Directors for the Group.
The internal reports reviewed by the Board, which are used to make strategic decisions, are separated into the Group’s key
market segments Kitchen Appliances and Consumer Products:
•
•
Kitchen Appliances – ovens, cooktops, rangehoods, dishwashers, sinks, taps, ironing systems, laundry tubs, waste
disposal and ducting solutions.
Consumer Products – watches, calculators, electronic musical instruments, projectors, point of sale terminals, cameras,
barbeques, heaters, fans, air purifiers/ dehumidifiers, fashion, car audio, professional DJ, amplifiers and Hi Fi products
and speakers.
The information regarding these segments is presented below. The accounting policies of the reportable segments are the same
as Group’s accounting policies.
Full year ended 31 December 2018
Revenue from external customers
Other revenue / income
Total revenue from ordinary activities
Earnings before Interest, Tax, Depreciation and Amortisation
Depreciation and amortisation expense
Segments result
Interest expense
Segment profit before income tax
Income tax expense
Net profit after income tax
Full year ended 31 December 2017
Revenue from external customers
Other revenue / income
Total revenue from ordinary activities
Earnings before Interest, Tax, Depreciation and Amortisation
Depreciation and amortisation expense
Segments result
Interest expense
Segment profit before income tax
Income tax expense
Net profit after income tax
Kitchen Appliances
$’000
74,232
66
74,298
380
Consumer
Products
$’000
105,698
1,109
106,807
13,912
Kitchen Appliances
$’000
83,309
57
83,366
8,517
Consumer
Products
$’000
103,621
1,340
104,961
16,168
Total
$’000
179,930
1,175
181,105
14,292
(3,697)
10,595
(584)
10,011
(2,313)
7,698
Total
$’000
186,930
1,397
188,327
24,685
(3,760)
20,925
(555)
20,370
(5,870)
14,500
The Group’s assets are not split by reportable operating segment as the chief operating decision maker does not utilise this information
for the purposes of resource allocation and assessment of segment performance.
64
SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018Notes to the Financial Statements (cont’d)For personal use only Earnings before Interest, Tax, Depreciation and Amortisation
Depreciation and amortisation expense
Full year ended 31 December 2018
Revenue from external customers
Other revenue / income
Total revenue from ordinary activities
Segments result
Interest expense
Segment profit before income tax
Income tax expense
Net profit after income tax
Full year ended 31 December 2017
Revenue from external customers
Other revenue / income
Total revenue from ordinary activities
Segments result
Interest expense
Segment profit before income tax
Income tax expense
Net profit after income tax
Earnings before Interest, Tax, Depreciation and Amortisation
Depreciation and amortisation expense
Kitchen Appliances
Consumer
Products
$’000
105,698
1,109
106,807
13,912
Consumer
Products
$’000
103,621
1,340
104,961
16,168
$’000
74,232
66
74,298
380
$’000
83,309
57
83,366
8,517
Kitchen Appliances
Total
$’000
179,930
1,175
181,105
14,292
(3,697)
10,595
(584)
10,011
(2,313)
7,698
Total
$’000
186,930
1,397
188,327
24,685
(3,760)
20,925
(555)
20,370
(5,870)
14,500
18.1 Geographical information
The Group operates in two principal geographical areas – Australia (country of domicile), and New Zealand. The Group’s revenue
from continuing operations from external customers by location of operations are detailed below.
Revenue from external customers
Australia
New Zealand
Other
2018
$’000
136,773
39,207
5,125
181,105
2017
$’000
146,465
38,913
2,949
188,327
18.2 Information about major customers
Included in kitchen appliances revenue from ordinary activities are revenues of approximately $24 million (2017: $26 million)
which arose from sales to the Group’s largest customer. No other single customer contributed 10% or more to the Group’s
revenue for both 2018 and 2017.
19. OPERATING LEASE AGREEMENTS
19.1 The Group as lessee
Operating leases relate to the leasing of premises with lease terms of between 1 and 10 years. The Group does not have an
option to purchase the leased land or buildings at the expiry of the lease periods.
19.2 Payments recognised as an expense
Lease and sub-lease payments recognised as an expense
19.3 Non-cancellable operating lease commitments
Not later than 1 year
Later than 1 year and not later than 5 years
Later than 5 years
19.4 Liabilities recognised in respect of non-cancellable leases
Make good provisions
Current
Non-current
2018
$’000
5,994
2018
$’000
5,019
15,032
1,579
21,630
2018
$’000
-
(3,672)
(3,672)
Operating lease commitments
The Group is not party to any finance lease liabilities. As at 31 December 2018 there were no other material liabilities.
2017
$’000
5,052
2017
$’000
4,984
18,186
3,842
27,012
2017
$’000
-
(3,345)
(3,345)
65
SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018For personal use only 20. NOTES TO THE STATEMENT OF CASH FLOWS
20.1 Cash and cash equivalents
For the purposes of the statement of cash flows, cash and cash equivalents consist of cash balances. Bank overdrafts are
considered to be financing activities as they are used interchangeably to fund the operations, and are not repayable on demand.
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 consolidated statement of financial position as follows:
Cash and bank balances
20.2 Reconciliation of profit for the year to net cash flows from operating activities
Profit for the year
Add non-cash and non-operating cash items
Depreciation and amortisation
Net loss on sale of assets
LTIP rights
Changes in assets and liabilities:
(Decrease)/ increase in trade payables & other payables
Increase in provisions
Decrease/ (increase) in inventory
Decrease/ (increase) in trade receivables
Increase in other current assets
(Decrease)/ increase in tax assets/liabilities
Net cash provided by operating activities
21. FINANCIAL INSTRUMENTS
2018
$’000
1,372
2018
$’000
7,698
3,697
631
41
(6,583)
300
3,282
3,409
(74)
(3,650)
8,751
2017
$’000
3,450
2017
$’000
14,500
3,760
-
382
1,699
708
(2,497)
(1,400)
(92)
139
17,199
The Group has four significant categories of financial instruments which are described below together with the policies in note
1 and risk management processes which the Company utilises:
(a) Cash and cash equivalents
The Group deposits its cash and cash equivalents with Australian banks. Funds can be deposited in cheque accounts, cash
management accounts and term deposits. The policy is to utilise at least two Australian banks for cash management accounts
and term deposits. The policy with term deposits is to provide for liquidity with a range of maturities up to 6 months.
(b) Debtors and credit risk management
The Group has a credit risk policy to protect against the risk of debtor default. The majority of the Group’s debtors are long
term customers and are large Australian corporations where the credit risk is considered to be generally low. New customers
are assessed for credit risk using credit references and reports from credit agencies as necessary.
The Group holds an active credit insurance policy which, as at the reporting date, provided coverage for 90% of debtors,
including all debtors with a balance owing equal to or greater than $40,000. The maximum exposure under this policy is 10%
of the irrecoverable amount.
(c) Bank guarantees and letters of credit
The Group has a preference to provide bank guarantees to customers, and letters of credit to suppliers in lieu of cash retention.
(d) Foreign currency forward contracts
The Group hedges its cash flows by using forward exchange contracts to minimise the impacts of currency movements.
Derivative financial instruments such as foreign currency forward contracts, which are used purely for hedging purposes, are
measured and recognised at fair value and are included in level 2 of the fair value measurement hierarchy.
66
SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018Notes to the Financial Statements (cont’d)For personal use only Categories of financial instruments
Financial assets
Cash and cash equivalents
Trade and other receivables
Forward exchange contracts receivable
Current Tax receivable
Financial liabilities
Trade payables and other payables
Bank loans
Forward exchange contracts payable
Current Tax Liabilities
2018
$’000
1,372
32,924
859
2,023
2018
$’000
17,120
7,344
524
-
2017
$’000
3,450
36,333
578
-
2017
$’000
23,159
5,466
419
1,746
The Directors consider the fair value of the financial assets and financials liabilities to approximate their carrying amounts.
Loans and receivables
Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market
are classified as ‘loans and receivables’. Loans and receivables are measured at amortised cost using the effective interest method,
less any impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables when
the effect of discounting is immaterial.
Financial risk management objectives
The company’s exposure to market risk is mainly arising from interest rate risk, foreign currency risk, operating expenditure risk
and price risk (sales and margin).
Key sensitivities
Sales (+/- 1%)
Gross profit margin (+/- 1%)
Other operating costs (+/- 1%)
Interest expense (+/- 1%)
*AUD/NZD (+/- 5%)
Impact on NPAT
$’000
Impact on NPAT
%
280
1,384
462
4
128
3.6%
18.0%
6.0%
0.1%
1.7%
Foreign currency risk management
The Group undertakes transactions denominated in foreign currencies; consequently, exposures to exchange rate fluctuations
arise. Exchange rate exposures are managed within approved policy parameters utilising forward foreign exchange contracts.
It is the policy of the Group to enter into forward foreign exchange contracts to cover specific foreign currency payments and
receipts to 100% of the exposure generated. The Group also enters into forward foreign exchange contracts to manage the risk
associated with anticipated purchase transactions out to 9 months with 80% of the expected exposure hedged.
67
SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018For personal use only Forward foreign exchange contracts
The group’s exposure through foreign currency hedges at the reporting date was as follows:
Outstanding contracts maturity profile
Buy Currency:
Less than 3 months
3 to 6 months
6 to 9 months
Sell Currency:
Less than 3 months
3 to 6 months
6 to 9 months
Outstanding hedges
Buy Currency:
USD
EURO
JPY
AUD
Sell Currency:
USD
EUR
2018
$’000
8,253
25,650
12,526
262
-
-
2018
$’000
16,207
9,342
19,024
1,856
262
-
2017
$’000
13,780
20,461
655
1,107
10
-
2017
$’000
13,675
9,832
9,791
1,598
1,040
77
Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the Board of Directors, who have built an appropriate liquidity risk
management framework for the management of the Company’s short, medium and long-term liquidity management requirements.
The Company manages liquidity risk by continually monitoring and maintaining adequate banking facilities.
Liquidity and interest risk tables
The following tables detail the Company’s remaining contractual maturity for its non-derivative financial liabilities. The tables have
been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Company can
be required to receive or pay. The table includes both interest and principal cash flows.
Weighted average
effective interest rate
%
Less than 1
month
$’000
1 to 3
months
$’000
3 months
to 1 years
$’000
1 to 5 years
$’000
Total
$’000
2.89%
1,344
2.71%
4,466
-
-
-
-
6,000
7,344
1,000
5,466
2018
Variable interest rate
instruments
2017
Variable interest rate
instruments
Interest Rate Sensitivity Analysis
The sensitivity analysis has been determined based on exposure to interest rates for cash and cash equivalents that were subject
to interest rate fluctuations at the reporting date. At reporting date, if interest rates had been 1% higher or lower and all other
variables were held constant, the Company’s profit or loss before tax would increase or decrease by $202,000 (2017: $205,000).
68
SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018Notes to the Financial Statements (cont’d)For personal use only Capital Management
The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns while maximising the
return to stakeholders through the optimisation of the debt and equity balance. The Group’s overall strategy remains unchanged
from 2017. The capital structure of the Group consists of net debt (borrowings as detailed in note 11 offset by cash and bank
balances) and equity of the Group (comprising issued capital, reserves, retained earnings as detailed in notes 13, 14 and 15). The
Group is not subject to any externally imposed capital requirements.
22. DIRECTORS AND KEY MANAGEMENT PERSONNEL COMPENSATION
The Board of Directors approves on an annual basis the amounts of compensation for Directors and key management personnel
with reference to the company’s performance and general compensation levels in equivalent companies and industries.
Remuneration of Directors and Key Management Personnel
Short-term employee benefits
Long-term employee benefits
Post-employment benefits
23. SHARE-BASED PAYMENTS
2018
$’000
945
163
45
1,153
2017
$’000
2,102
329
76
2,507
23.1 LTI Plan
The Company established an equity incentive plan (LTI Plan) to assist in the motivation, retention and reward of senior management.
The Plan is designed to align the interests of employees and senior management with the interests of Shareholders by providing
an opportunity for employees to receive an equity interest in the Company. Long term incentives are established under the Plan.
The Plan Rules provide flexibility for the Company to grant performance rights, options and/or restricted shares, subject to the
terms of individual offers.
Performance rights have been granted to the CEO, CFO and other senior management.
No non-executive director holds any performance rights over the shares in Shriro Holdings Limited. Tim Hargreaves was issued
with 150,000 Rights and Shane Booth was granted 73,125 performance rights (2017: 87,698) under the LTIP during the financial
year ended 31 December 2018. Other senior management have been issued with 174,785 of performance rights in respect
of the 2018 year (2017: 205,722) in line with the long term incentives plan during the financial year ended 31 December 2018.
The amortised LTIP performance rights recognised in consolidated statement of profit or loss for the financial year ended 31
December 2018 was $41,000 (2017: $382,000).
No director received any shares under the employee gift offer in the current or previous years.
The following share-based payment arrangements were in existence during the current reporting periods:
Performance rights series
Grant date Grant date fair value
Number Granted
Expiry date
Vesting Testing
Series 1
Series 2
Series 3
26/05/2016
10/04/2017
19/06/2018
$295,303
$289,432
$548,720
428,701
293,420
368,268
31/12/2018
31/12/2018
31/12/2019
31/12/2020
31/12/2019
31/12/2020
69
SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018For personal use only Fair value of performance rights granted
23.2
Where relevant, the expected life used in the model has been adjusted based on management’s best estimate for the effects
of non-transferability, performance hurdles (including the probability of meeting market conditions attached to the rights), and
behavioural considerations.
Performance rights series
Grant date fair value
Rights life
Dividend yield
Risk-free interest rate
Series 1
Series 2
Series 3
$0.69
$0.99
$1.49
3 years
3 years
3 years
8.65%
8.20%
6.88%
3.05%
3.44%
3.44%
Performance rights outstanding at the end of the year
23.3
The performance rights outstanding at the end of the year had no exercise price and a weighted average remaining contractual
life of 1.22 years.
24. SUBSIDIARIES
Name of subsidiary
Principal activity
Place of incorporation
and operation
Proportion of ownership interest and
voting power held by the group
Shriro Australia Pty Limited 1
Monaco Corporation Limited
Shriro USA,INC 2
Wholesaler of consumer goods
and appliances
Wholesaler of consumer goods
and appliances
Wholesaler of consumer goods
and appliances
Australia
New Zealand
USA
2018
100%
100%
100%
2017
100%
100%
-
1 This wholly-owned subsidiary is a member of the tax-consolidated group and has entered into a deed of cross guarantee with
Shriro Holdings Limited pursuant to ASIC Class Order 98/1418 and are relieved from the requirement to prepare and lodge an
audited financial report.
2 This wholly-owned subsidiary was incorporated on the 26th of November 2018. As at reporting date this wholly-owned
subsidiary had no reporting balances with the intention for trading to begin in 2019
70
SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018Notes to the Financial Statements (cont’d)For personal use only The consolidated income statement and consolidated statement of financial position of entities party to the deed of cross
guarantee are:
Statement of Profit or Loss and Other Comprehensive Income
Revenue from ordinary activities
Raw materials and consumables used
Employee benefits expense
Advertising and promotion expenses
Freight and delivery expenses
Depreciation and amortisation expenses
Rental costs
Finance costs
Other expenses
Profit before tax
Income tax expense
Profit for the year
Other comprehensive income, net of income tax
Items that may be reclassified subsequently to profit or loss
Net change in the fair value of cash flow hedges taken to equity
Other comprehensive income for the year, net of tax
Total comprehensive income for the year attributable to the owners of Shriro Holdings Limited
2018
$’000
145,301
(86,347)
(19,768)
(5,918)
(5,326)
(3,499)
(5,945)
(683)
(8,628)
9,187
(1,277)
7,910
2017
$’000
151,635
(86,552)
(20,993)
(4,250)
(5,862)
(3,092)
(3,961)
(727)
(9,217)
16,981
-
(4,354)
12,627
378
378
8,288
263
263
12,890
71
SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018For personal use only Consolidated Statement of Financial Position
Current assets
Cash and bank balances
Trade and other receivables
Inventories
Other current assets
Current tax receivable
Derivative receivable
Total current assets
Non-current assets
Property, plant and equipment
Deferred tax assets
Investments
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Borrowings
Current tax liabilities
Provisions
Derivative payable
Total current liabilities
Non-current liabilities
Borrowings
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained earnings
Total equity
2018
$’000
7
24,388
29,011
551
1,916
834
56,707
6,595
12,553
4,350
23,498
80,205
12,379
1,344
-
4,815
354
2017
$’000
13
28,397
34,812
844
-
532
64,598
8,298
12,552
4,429
25,279
89,877
19,282
4,466
1,281
5,824
307
18,892
31,160
6,000
4,792
10,792
29,684
50,521
94,617
(78,545)
34,449
50,521
1,000
3,596
4,596
35,756
54,121
94,541
(77,419)
36,999
54,121
25. RELATED PARTY TRANSACTIONS
Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, have been
eliminated on consolidation and are not disclosed in this note.
During the year, Shane Booth’s (CFO) immediate family purchased shares in Shriro Holdings Limited amounting to a value of
$1,351,266. The shares were purchased on market in December 18 and was settled in cash.
72
SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018Notes to the Financial Statements (cont’d)For personal use only
Significant Influence
In accordance with AASB128 Shriro Pacific is deemed to have significant influence in the Group as it holds 20% or more of the
voting power in Shriro Holdings Limited.
26. PARENT ENTITY INFORMATION
Financial Position
Assets
Current Assets
Non-current assets
Total assets
Liabilities
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained earnings
Total equity
Financial Performance
Profit/(loss) for the year
Total comprehensive income
27. EVENTS AFTER THE REPORTING DATE
2018
$’000
1,916
88,585
90,501
7,261
-
7,261
2017
$’000
-
88,585
88,585
14,891
-
14,891
83,240
73,694
94,617
(503)
(10,874)
83,240
2018
$’000
21,434
21,434
94,541
1,001
(21,848)
73,694
2017
$’000
(258)
(258)
Subsequent to the year ended 31 December 2018, the Group’s banking facilities have been renegotiated resulting in a $5 million
reduction to the trade finance facility which will result in additional cost saving during 2019. There were no other material changes
to the terms and conditions.
There has not been any other matter or circumstance, not already disclosed, occurring subsequent to the end of the financial year
that has 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 future financial years.
28. ADDITIONAL COMPANY INFORMATION
Principal activities
The Group is a leading kitchen appliances and consumer products marketing and distribution group operating in Australia and
New Zealand.
The Group markets and distributes an extensive range of company-owned brands (including Omega, Robinhood, Everdure
including ‘Everdure by Heston Blumenthal’ and Omega Altise) and third party owned brands (such as Casio, Blanco and Pioneer).
Products include calculators, watches, cash registers, musical instruments, audio products, kitchen appliances, sinks & taps,
laundry products, consumer electronics, car audio, amplifiers, professional DJ, Hi-Fi/speakers, fashion, lighting, gas heaters, gas
and charcoal barbeques, electric heaters and cooling products.
General Information
Shriro Holdings Limited is incorporated and operating in Australia.
Shriro Holdings Limited’s registered office and its principal place of business is as follows:
Registered office and Principal place of business
104 Vanessa Street
Kingsgrove NSW 2208
Tel: 9415 5000
Shriro Holdings Limited’s Annual General Meeting will be held on the 30th of May 2019.
73
SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018For personal use only 29. ADDITIONAL ASX INFORMATION
Number of holders of equity securities
There are 95,087,500 fully paid ordinary shares held by 2,735 individual shareholders.
Substantial share holders
Shriro Pacific Limited
Twenty largest holders of quoted equity securities
SHRIRO PACIFIC
NATIONAL NOMINEES LIMITED
PORTFOLIO SERVICES PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
CITICORP NOMINEES PTY LIMITED
MISS AMANDA BERNADETTE DE ANGELIS
AUST EXECUTOR TRUSTEES LTD
MCNEIL NOMINEES PTY LIMITED
HORRIE PTY LTD
AUST EXECUTOR TRUSTEES LTD
ECAPITAL NOMINEES PTY LIMITED
ANACACIA PTY LIMITED
MORGAN STANLEY AUSTRALIA SECURITIES (NOMINEE) PTY LIMITED
MR DERMOT FRANCIS MCGARRY & MRS CHRISTINE MCGARRY
HILLMORTON CUSTODIANS PTY LTD
J & P CHICK PTY LIMITED
MR JOHN ANDREW SWEET & MRS CHARMAINE LOUISE SWEET
DR JEFFREY ERIC DALE CHICK & DR PAMELA HAZEL CHICK
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
Fully Paid Ordinary Shares
23,004,750
Fully Paid Ordinary Shares
Number
Percentage
23,004,750
11,638,474
4,587,779
4,577,922
4,171,775
2,653,458
2,303,125
1,952,675
1,870,000
1,273,426
1,018,736
822,301
792,178
601,282
576,292
540,000
540,000
476,294
449,000
375,003
24.19%
12.24%
4.82%
4.81%
4.39%
2.79%
2.42%
2.05%
1.97%
1.34%
1.07%
0.86%
0.83%
0.63%
0.61%
0.57%
0.57%
0.50%
0.47%
0.39%
64,224,470
67.54%
Category - Number of shares
Number of shares
1 - 1000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
574
1,016
507
576
62
2,735
Voting rights
As at 26 February 2019, there were 2,735 holders of ordinary shares of the Company.
Holders of ordinary shares are entitled to vote as follows:
(a) Every shareholder may vote;
(b) On a show of hands every shareholder has one vote; and
(c) On a poll every shareholder has one vote for each fully paid share
As at 26 February 2019 there were no unquoted options over unissued ordinary shares.
Shareholders with less than a marketable parcel
As at 26 February 2019, there were 266 shareholders holding less than a marketable parcel of 910 ordinary shares ($0.55 on 26
February 2019) in the Company totalling 143,904 ordinary shares.
74
SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018Notes to the Financial Statements (cont’d)For personal use only Category - Number of shares
Number of shares
1 - 1000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
574
1,016
507
576
62
2,735
DIRECTORS
John Weir Ingram
Non-Executive Chairman
Tim Hargreaves
Managing Director
Vasco Fung
Non-Executive Director
Greg Laurie
Non-Executive Director
COMPANY SECRETARY
Shane Booth
Chief Financial Officer and Company Secretary
REGISTERED OFFICE AND
PRINCIPAL PLACE OF BUSINESS
104 Vanessa Street
Kingsgrove NSW 2208
Tel: (02) 9415 5000
AUDITORS
Deloitte Touche Tohmatsu
SHARE REGISTRY
Link Market Services Limited
Level 12
680 George Street
Sydney NSW 2000
75
SHRIRO HOLDINGS LIMITED | ANNUAL REPORT 2018CorporateDirectoryFor personal use only SHRIRO HOLDINGS
LIMITED
For personal use only