15891 WHSP AR Cover 2010 25/10/10 5:24 PM Page 1
Washington H. Soul Pattinson and
Company Limited
A.B.N. 49 000 002 728
ASX Code: SOL
Annual Report
2010
REGISTERED OFFICE
LEVEL 1, 160 PITT STREET MALL
SYDNEY NSW 2000
Telephone: (02) 9232 7166
Facsimile: (02) 9233 1025
Internet Website Address: www.whsp.com.au
SHARE REGISTER
COMPUTERSHARE INVESTOR SERVICES PTY. LIMITED
Level 3, 60 Carrington Street, Sydney NSW 2000
Telephone: 1300 855 080 (within Australia)
Telephone: +61 3 9415 4000 (outside Australia)
Facsimile: +61 3 9473 2500
Email: web.queries@computershare.com
AUDITORS
MOORE STEPHENS SYDNEY
Level 7, 20 Hunter Street, Sydney NSW 2000
GPO Box 473, Sydney NSW 2001
Telephone: (02) 8236 7700
Facsimile: (02) 9233 4636
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
INSIDE BACK COVER
15891 WHSP AR Cover 2010 25/10/10 5:24 PM Page 3
INSIDE FRONT COVER
Company Profile
Washington H. Soul Pattinson and Company Limited was incorporated on 21 January, 1903 having
previously traded as two separate companies, Pattinson and Co. and Washington H. Soul and Co.
Following a public offering of shares, Washington H. Soul Pattinson and Company Limited was listed on the Sydney
Stock Exchange (now the Australian Securities Exchange) on 21 January, 1903.
OVER 100 YEARS AS A LISTED PUBLIC COMPANY
When Caleb Soul and his son Washington opened their first store at 177 Pitt Street, Sydney, in 1872 neither of them
could have envisaged that 138 years later their single pharmacy would have evolved into a company as prominent
and diversified as Washington H. Soul Pattinson and Company Limited.
WHSP is now a significant investment house with a portfolio encompassing many industries, including its traditional
field of pharmaceutical as well as coal mining, building materials, equity investments, telecommunications and
corporate consulting.
OBJECTIVE
WHSP’s objective is to hold a diversified portfolio of assets which generate a growing income stream for distribution
to shareholders in the form of increasing fully franked dividends and to provide capital growth in the value of the
shareholders’ investments.
DIVIDEND POLICY
Ordinary dividends are generally paid out of profits before non-regular items.
Special dividends are generally paid out of profits from non-regular items. Non-regular items typically include those
which are outside of the normal course of business.
160 Pitt Street, Sydney 1886
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 1
Contents and Corporate Directory
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
CONTENTS
Performance highlights
Chairman’s review
Review of group entities
Directors’ report
Auditor’s independence declaration
Corporate governance statement
Consolidated financial statements
Directors’ declaration
Independent auditor’s report
ASX additional information
CORPORATE CALENDAR
Final and Special Dividends
Page
2
3
7
15
24
25
30
91
92
94
Record date
Payment date
22 November 2010
6 December 2010
Annual General Meeting
3 December 2010 at 12.00 noon
The Grand Ballroom
Level 3, Sofitel Sydney Wentworth
61-101 Phillip Street, Sydney
DIRECTORS
Robert D Millner
Michael J Millner
Peter R Robinson
David J Fairfull
Non-Executive Director -
Chairman
Non-Executive Director -
Deputy Chairman
Executive Director
Non-Executive Director
Robert G Westphal
Non-Executive Director
David E Wills
Non-Executive Director
CHIEF FINANCIAL OFFICER
Melinda R Roderick
COMPANY SECRETARY
Ian D Bloodworth
AUDITORS
Moore Stephens Sydney
- 1 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 2
Performance Highlights
CONSOLIDATED FINANCIAL PERFORMANCE
Profit after tax before non-regular items
Profit after tax and non-regular items
DIVIDENDS PAID/RECOMMENDED
Interim Dividend
Final Dividend
Special Dividend
Total Dividends
PARENT ENTITY
2010
$’000
181,555
218,327
2009
$’000
224,685
1,112,652
14 cents
20 cents
12.5 cents
46.5 cents
13 cents
19 cents
25 cents
57 cents
Market value backing per share
$17.23
$17.07
This represents the market value per share of WHSP’s underlying investments based on bid prices at
31 July 2010. As WHSP is a long term investor, this figure is before providing for tax on unrealised
capital gains. In addition, WHSP held cash and deposits of $334,490,000 as at 31 July 2010.
Total shareholder return
Washington H. Soul Pattinson and
Company Limited
All Ordinaries Accumulation Index
Outperformance
Total Return Per Annum
5 Years
10 Years
15 Years
10.6%
5.0%
5.6%
18.0%
7.6%
10.4%
17.5%
9.4%
8.1%
The above compound returns measure the change in value of investments by considering the
movement in their market prices and assuming dividends are reinvested.
- 2 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 3
Chairman’s Review
Dear Shareholders,
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
I am pleased to present the 2010 Annual Report for Washington H. Soul Pattinson and Company Limited
(WHSP) on behalf of the Board of Directors of the Company.
The year ended 31 July 2010 has seen solid results for the Group and an increased market capitalisation
of the Company to $3.11 billion.
Market Capitalisation
2010
2009
Washington H. Soul Pattinson and Company
$3.11 billion
$2.63 billion
Information as at 31 July 2010 and 2009
Consolidated Financial Performance
The profit of the Group, after tax and before non-regular items, attributable to shareholders for the
year ended 31 July 2010 was $181.6 million, a decrease of 19.2% compared to the previous year. This
net decrease of $43.1 million resulted mainly from lower contributions by New Hope Corporation Limited
(New Hope) and Pitt Capital Partners Limited following their particularly strong results in 2009.
The profit of the Group, after tax and non-regular items, attributable to shareholders was $218.3
million, a decrease of $894.3 million compared to the previous year. Last year’s result included the Group’s
$1.03 billion share of the profit on the sale of New Hope’s New Saraji coal project. The result inclusive of
non-regular items represents a 140.4% increase over that of 2008.
The net profit on non-regular items for the year was $36.8 million and was principally composed of gains
on deemed disposals. During the year, Brickworks Limited and TPG Telecom Limited issued additional share
capital via capital raisings and in doing so the Group’s holdings in them were diluted. Under accounting
standards the Group was deemed to have disposed of part of its holdings in those companies at a profit.
Comparisons with the prior two years are as follows:-
2010
$’000
% Change
2009 to 2010
2009
$’000
2008
$’000
Revenue from continuing operations
Profit after tax before non-regular items
Profit after tax and non-regular items
823,307
181,555
218,327
+ 6.2%
- 19.2%
774,953
681,640
224,685
113,146
- 80.4%
1,112,652
90,828
Interim Dividend (paid in May each year)
14 cents
Final Dividend
Special Dividend
Total Dividends
20 cents
12.5 cents
46.5 cents
+ 7.7%
+ 5.3%
13 cents
12 cents
19 cents
18 cents
25 cents
-
57 cents
30 cents
- 3 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 4
Chairman’s Review (continued)
The graph below shows the performance of the Group before and after non-regular items over the last
10 years.
Non-regular Items
Non-regular items typically include those which are outside of the normal course of business or are
of an unusually large size. A schedule of non-regular items is contained in note 4 of the consolidated
financial statements.
Total Shareholder Return
WHSP continues to deliver outstanding returns to its shareholders, consistently outperforming the ASX All
Ordinaries Accumulation Index, as shown below.
Total Return Per Annum
10 Years
5 Years
15 Years
Washington H. Soul Pattinson and
Company Limited
All Ordinaries Accumulation Index
Outperformance
10.6%
5.0%
5.6%
18.0%
7.6%
10.4%
17.5%
9.4%
8.1%
The above compound returns measure the change in value of investments by considering the movement
in their market prices and assuming dividends are reinvested.
- 4 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 5
Chairman’s Review (continued)
Dividends
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
While many companies listed on the ASX have begun to increase their dividends, having previously
lowered them in response to balance sheet pressures, WHSP has continually increased its ordinary
dividends year on year. WHSP has no borrowings from financial institutions and was therefore not
impacted by the financing pressures brought about by the global financial crisis.
The graph below shows how the ordinary dividends paid or recommended by the company have
continually increased over the last 10 years. Further, the eight special dividends which have been paid or
are recommended for this period total 86.5 cents.
Final Dividend
Directors recommend the payment of a fully franked final dividend of 20 cents per share in respect of the
year ended 31 July 2010 (2009: 19 cents fully franked).
This dividend is to be approved by Shareholders at the Annual General Meeting and will be payable on
6 December 2010. The record date for this dividend will be 22 November 2010.
The Directors consider the profit before non-regular items to be the underlying profit of the Group.
Accordingly, interim and final dividends are declared and recommended based on that profit.
Special Dividend
Directors recommend the payment of a fully franked special dividend of 12.5 cents per share in respect of
the Group’s share of New Hope’s non-regular profit on the disposal of its shares in Arrow Energy Limited
in August 2010.
This dividend is to be approved by Shareholders at the Annual General Meeting and will be payable on
6 December 2010. The record date for this dividend will be 22 November 2010.
Special dividends are generally paid out of non-regular profits.
- 5 -
Chairman’s Review (continued)
Parent Company Investments
As at 31 July 2010 WHSP held equity investments valued at $4.1 billion. Details of the largest investments,
which also represented significant holdings in those companies are included below.
WHSP
Holdings
Market Value
of WHSP’s
Holding
$ million
Total Market
Capitalisation of
each investment
$ million
Listed Investments at Market Value
New Hope Corporation Limited
Brickworks Limited
TPG Telecom Limited
BKI Investment Company Limited
Aust. Pharmaceutical Industries Limited
Ruralco Holdings Limited
Apex Healthcare Berhad
59.9%
44.6%
26.6%
13.6%
24.6%
23.5%
30.3%
Other Listed Investments
Unlisted Investments at Cost
Total Parent Company Investments
Parent Company Cash
As at 31 July 2010
WHSP cash and deposits
2,335
775
368
67
49
35
26
3,655
420
36
4,111
3,899
1,739
1,382
496
200
149
85
$ million
334
On behalf of the Board, I wish to thank the management and staff of the Washington H. Soul Pattinson
Group for their contribution in 2010. I would also like to thank you, and all the Shareholders, for your
continued support.
R D MILLNER
Chairman
- 6 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 7
Review of Group Entities
Parent Company
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
The market value of the listed investment portfolio, which includes controlled entities and associates, was $4.07
billion as at 31 July 2010 compared with $4.04 billion as at 31 July 2009.
Excluding controlled entities and associates, the market value of the listed investment portfolio increased by 15.9%,
from $396 million to $459 million. Under the Group’s accounting policies the movements in market values are taken
up in other comprehensive income or reflected within the profit for the year as impairments. Impairments totalling
$3.2 million were made during the year.
Listed Investment Portfolio based on
market value as at 31 July 2010
(excluding controlled and associated entities)
Market Value
$ million
Milton Corporation Limited
BKI Investment Company Limited
BHP Billiton Limited
Choiseul Investments Limited
Commonwealth Bank of Australia
National Australia Bank Limited
Perpetual Limited
Bank of Queensland Limited
Telstra Corporation Limited
Westpac Banking Corporation
Total - Ten largest
Other
Total
67
67
55
43
32
20
15
14
12
12
337
122
459
A total of $110.8 million was invested in the listed equities market during the year. The main purchases were
Australian Pharmaceutical Industries Limited, Commonwealth Bank of Australia, Quickstep Holdings Limited, Telstra
Corporation Limited and TPG Telecom Limited. Purchases of shares in associates totalled $43.0 million.
Proceeds from disposals totalled $4.3 million for the year, being from the sale of Brambles Limited and Rio Tinto
Limited shares.
Dividend and distribution income received from the listed investment portfolio, excluding those from controlled and
associated entities, was $18.7 million, down 6.7% compared to last year. This reflects the wide spread reduction of
dividends paid by listed investments over the last two years.
Interest income for the year totalled $15.1 million, an increase of 125.4% compared to $6.7 million last year.
- 7 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 8
Review of Group Entities (continued)
New Hope Corporation Limited
Controlled entity: 59.9% held*
Contribution to Group profit: $110.7 million
Total Market Capitalisation: $3.90 billion*
Market Value of WHSP’s Holding: $2.34 billion*
ASX code: NHC
New Hope Corporation Limited (New Hope) has reported a net profit after tax (excluding non-regular items) of
$183.8 million ($112.6 million from operations and $71.2 million from investments) for the year ended 31 July 2010
(2009: $262.3 million), a 29.9% decrease from the previous corresponding period. The previous corresponding
period also included a non-regular profit after tax of $1.688 billion on the sale of the New Saraji coal assets.
Basic earnings per share (excluding non-regular items) for the year were 22.3 cents compared to 32.3 cents per
share earned in the previous corresponding period.
New Hope has declared a final dividend of 4.5 cents per share (2009: 4.5 cents per share), and a special dividend
of 14 cents per share (2009: 72.75 cents per share). Both of these dividends are fully franked and payable on
9 November 2010.
Compared to the previous corresponding period, the result for the full year ended 31 July 2010 benefited from:
• Continued saleable coal production growth, which was up 15.2% to 5.9 million tonnes – a new production
record for the Group;
• Higher export sales volume of 4.9 million tonnes, up 26.2% (excluding traded coal sales) – a new export sales
record for the Group; and
• Increased prices for domestic coal sales.
offset by:
• Lower sales volume of domestic coal due to the closure of two units at the CS Energy Swanbank Power Station;
• Lower export coal prices in $US terms, compounded by higher $A:$US foreign exchange rates;
• Increased costs of production due to a greater proportion of production being sourced from the higher cost West
Moreton operations;
• Increased rail and road haulage costs for transportation of saleable coal; and
• Reduced interest income from cash on deposit following the payment of the special dividend and tax on the New
Saraji asset sale.
Mining Operations
Total saleable coal production from New Hope’s operations for the year ended 31st July 2010 was 5.9 million
tonnes, 15.2% higher than the previous corresponding period. Increased production from the New Acland mine
and the ramp up in production from the reactivation of the Jeebropilly mine were the main contributors to the
higher production.
Total coal sold for the year was 18.3% higher at 5.9 million tonnes, compared with 5.0 million tonnes sold in the
previous corresponding period. Coal export volumes rose by 1.0 million tonnes (or 26.2%) to 4.9 million tonnes
while domestic sales were some 107,000 tonnes lower (or 9.7%) at 996,000 tonnes.
Queensland Bulk Handling (QBH)
QBH’s coal loading facility continued to operate effectively, with a record 6.7 million tonnes loaded during the year
ended 31 July 2010, 9.0% higher than the previous corresponding period. The QBH facility continues to operate
essentially demurrage free.
Work on the coal stockpile expansion is continuing on schedule. At full capacity in late 2010, the port will be
capable of handling up to a nominal 10 million tonnes per annum, subject to rail performance and shipping
schedules.
*As at 31 July 2010
- 8 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 9
Review of Group Entities (continued)
New Hope Corporation Limited (continued)
Exploration
New Hope’s exploration strategy continues to be directed towards evaluating open cut and underground coking
coal resources in Central Queensland, open cut thermal coal in South East Queensland and evaluating coals as
potential sources of gasification and liquefaction.
New Hope’s Central Queensland focus has been on the New Lenton Project with preparation of target areas and
the deployment of drilling and geological assessment assets to the project area. Approximately $3 million has been
spent on the New Lenton exploration program during the last year. This work is targeted at identifying a coal
quantity of up to 200 million tonnes within the project area.
The remaining efforts have been directed at New Hope’s operating mines in South East Queensland. At New Acland,
drilling results allowed New Hope to revise its resources and reserves estimates, with a subsequent increase in
resources to 879 million tonnes (Inferred 11mt; Indicated 546mt; Measured 322mt).
At Jeebropilly the drilling results allowed New Hope to revise its resources and reserves estimates, with the
subsequent reporting of resources of 8 million tonnes (Inferred 3mt; Indicated 2mt; Measured 3mt).
Land
New Hope has completed preliminary studies to identify the most appropriate future land use post mining at its
West Moreton operations. For those landholdings around Rosewood and Amberley (approximately 2,700 hectares),
various conceptual plans have been prepared for a combination of urban, commercial, recreational, industrial and
ecological use and presented to both Ipswich City Council and the Queensland Department of Infrastructure and
Planning to contribute to the review of the South East Queensland Regional Plan.
Coal to Synfuels
On 14 September 2010, New Hope announced that it had acquired an initial 25% equity in a 25 year, exclusive
worldwide, licensed technology creating high value carbon products using a direct coal liquefaction process. The
technology produces a pitch product from thermal grades of coal using an environmentally superior liquefaction
process. The pitch can further be processed into synthetic crude oil with a by product that can be a metallurgical
coke substitute.
New Hope’s initial investment will fund the commercialisation programme and the related technology research over
the next few years. New Hope has the right to acquire up to 51% of the worldwide licence for the technology at
an agreed cost.
Detailed engineering is underway and should be completed by the end of 2010 with the construction of a “proof
of concept” plant in 2011 providing process results during 2012.
Arrow Energy Limited
As at 31 July 2010, New Hope held 122.6 million shares in Arrow Energy Limited (Arrow), equivalent to 16.7% of
the company, at an adjusted total cost of $110.0 million.
During 2010, a company jointly owned by Royal Dutch Shell and PetroChina issued a proposal to acquire all shares
in Arrow for $4.70 cash per share, plus a share in a new entity – Dart Energy Limited (Dart) - comprised of Arrow’s
international business and early stage Australian assets.
In July 2010 Arrow shareholders approved the demerger and acquisition schemes at an extraordinary general
meeting. As a result of the demerger and participation in an initial capital raising, New Hope now owns
approximately 17% of the issued capital of Dart.
The sale of the company’s 16.7% interest in Arrow settled on 23 August 2010, with New Hope receiving
$576 million from the sale. New Hope will recognise an after tax profit on the sale of $326 million in the 2011
financial year.
Outlook
Planning is underway to take advantage of a potential new mining lease at the New Acland mine, which if granted
in 2011, will enable production capacity to be incrementally increased to a maximum of 10 million tonnes per
annum, subject to market conditions, rail and port capacity.
- 9 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 10
Review of Group Entities (continued)
New Hope Corporation Limited (continued)
Jeebropilly will continue at a nominal production capacity of 900,000 tonnes per annum during 2010/11, with
continued New Oakleigh nominal production of 230,000 tonnes per annum during the same period.
The QBH port expansion, which will provide a total nominal site throughput of up to 10 million tonnes per annum,
is on schedule and within budget, with final completion due in December 2010.
Interest income from cash on deposit will continue to provide short term profit, with the proceeds from the sale of
Arrow Energy shares adding further to cash on deposit post year end.
New Hope has advised production guidance for 2011 of around 6.0 million tonnes, subject to finalisation of
coal sale contract negotiations with major Asian customers over coming months and achievement of sufficient
rail capacity.
As a result of WHSP’s 59.9% holding in the issued capital of the company, New Hope contributed a net profit of
$110.7 million to the Group (2009: $1.2 billion, 60.7% holding). WHSP’s holding was diluted during 2010 following
the exercise of management options.
JORC Declaration
The estimates of coal resources herein have been prepared in accordance with the guidelines of the “Australasian Code for Reporting of
Exploration Results, Mineral Resources and Ore Resources – The JORC Code”. These resources are inclusive of the reserves reported in the
reserves statement. The work has been undertaken internally by New Hope and reviewed by Mr Wes Nichols, Geology Manager New Hope
and Member of AusIMM (no. 202058). Mr Nichols has sufficient experience which is relevant to the style of mineralisation and type of deposit
under consideration and to the activity which he is undertaking, to qualify as a Competent Person as defined in the 2004 Edition of the
JORC Code.
Mr Nichols consents to the inclusion in this report of the matters based on this information in the form and context in which it appears.
Pitt Capital Partners Limited
Controlled entity: 78.3% held*
Contribution to Group result: $0.3 million loss
Unlisted entity
Pitt Capital Partners Limited (PCP) is a corporate advisory firm specialising in mergers, strategic advice, equity capital
markets, private equity, restructuring and debt advisory work.
2010 was an extremely challenging year for the corporate advisory market as a result of reduced mergers and
acquisitions activity and increased competition in the mid-market area which has led to reduced fees in the sector.
In 2009, among other transactions completed during the year, PCP was the sole advisor to New Hope Corporation
Limited in their sale of the New Saraji coal project to the BHP Billiton Mitsubishi Alliance. As a result of this
transaction, PCP earned significant advisory fees last year. Due to market conditions, PCP was not engaged in any
significant corporate transactions during 2010, it did however, participate in a number of capital raisings.
PCP’s profit before non-regular items was $0.9 million for the year, however due to restructuring costs associated
with the closure of its Hong Kong office and the exit from its Adelaide office, PCP reported a net loss for the year
of $0.4 million.
As a result of WHSP’s 78.3% interest in the issued capital of the company, PCP contributed a net loss to the Group
of $0.3 million (2009: $13.0 million profit).
*As at 31 July 2010
- 10 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 11
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
Review of Group Entities (continued)
Australian Pharmaceutical Industries Limited
Associated entity: 24.6% held*
Contribution to Group profit: $5.5 million
Total Market Capitalisation: $200 million*
Market Value of WHSP’s Holding: $49 million*
ASX code: API
Australian Pharmaceutical Industries Limited’s (API) financial year ended on 31 August 2010. The results for the
full-year will not be released to the market until 28 October 2010.
API released its half-year result on 29 April 2010. For the 6 months, sales increased 6.7% to $1.85 billion and net
profit after tax by 54.5% to $10.3 million.
Sales growth in Pharmacy Distribution grew by 7.4% with margins maintained. The company advised that this
division has focused on working capital and customer trading terms whilst at the same time planning for continued
PBS reforms being led by the Federal Government.
Priceline, API’s mass market health and beauty retailing division, posted retail sales growth of 5.3% and comparable
store sales growth of 2.0% in what was and continues to be a very competitive retail environment. The company
stated that the performance was satisfactory given the uncertainty in consumer confidence created by the global
financial crisis during 2009. Priceline’s ClubCard Loyalty program continues to attract new members with the
member base now exceeding 3.2 million members.
API declared a fully franked interim dividend of 1 cent per share which was paid on 3 June 2010.
WHSP has equity accounted API’s result for the 12 months to February 2010. As a result of WHSP’s 24.6% holding
in the issued capital of the company, API contributed a net profit of $5.5 million to the Group (2009: $3.9m).
Brickworks Limited
Associated entity: 44.6% held*
Contribution to Group profit: $13.0 million
Total Market Capitalisation: $1.74 billion*
Market Value of WHSP’s Holding: $775 million*
ASX code: BKW
Brickworks Limited (Brickworks) posted a net profit after tax and before non-regular items for the year ended
31 July 2010 of $110.2 million, down 3.1% from $113.7 million for the year ended 31 July 2009. After non-regular
items, the profit for the year was $138.8 million, down 54.5% from $305.2 million in the previous year. These
results include the equity accounted profit contribution from WHSP.
Building Products posted a much improved result for the year with EBIT up 44.3% to $53.4 million, driven by
government stimulus spending and improving market demand. This offset the weaker result from both Land and
Development and Investments and again demonstrates the stability of earnings afforded by the diversified business
model. Brickworks’ overall result was assisted by lower borrowing costs as a consequence of reduced debt levels.
Normalised earnings per share were 76.7 cents per share, down from 85.6 cents per share for the previous year due
to the increased number of ordinary shares on issue.
The directors of Brickworks have declared a final dividend of 27 cents fully franked, taking the full year dividend to
40 cents fully franked, up 1 cent from the previous year.
Cash flow from operations increased 11.0% to $146.5 million in the year ended 31 July 2010, from $132.0 million
in the previous year.
*As at 31 July 2010
- 11 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 12
Review of Group Entities (continued)
Brickworks Limited (continued)
Borrowing costs decreased to $24.5 million due to the reduction in average debt levels following a share purchase
plan which raised $175.0 million in November 2010.
Capital expenditure increased to $25.2 million in the year ended 31 July 2010. Spending on acquisitions totalled
$53.1 million for the year, after no acquisitions were made in the previous year. Equity investments of $16.1 million
were made to assist the refinancing of the property trusts.
Divisional Results
Austral Bricks delivered a significantly improved result due to increased sales volume, to meet demand generated
by government stimulus measures, and improved margins. Overall brick sales volumes for the year ended 31 July
2010 were up 14.5% compared to the prior year. Margins were able to be increased during the year with net
average selling prices up 3.0% while unit manufacturing costs only increased by 2.0%.
Austral Masonry delivered an improved result through increased sales volumes, up 9.8% over the previous
corresponding period, and improved margins. A disciplined sales strategy enabled average selling prices to be
increased by 3.8% against determined competition. Following the acquisition of a plant at Port Kembla, masonry
products can be supplied along the east coast from Victoria to Cairns.
Bristile Roofing achieved an improved result driven by strong performance on the east coast. Sales volumes
increased over 20% compared to the previous corresponding year, due to the surge in first home owner activity.
Sasso Precast (now Austral Precast), a manufacturer of precast concrete panels, was acquired by Brickworks in
March 2010, increasing exposure to the commercial and industrial construction markets. The business has
performed to expectations in spite of weak activity levels in these segments of the construction market. There are
signs that the bottom of the current cycle in the industrial market in Sydney may have been reached, with volumes
and prices improving at the end of the year.
Auswest Timbers delivered a substantially improved result for the year ended 31 July 2010 due to improved sales
volumes and average selling prices. Sales volumes were up 4.7% due to strong batten demand in both pine and
hardwood.
Land and Development produced a profit of $28.4 million for the year ended 31 July 2010, down 30.0% from
$40.6 million in the previous corresponding period largely due to depressed conditions in the industrial property
market.
Property Sales contributed a profit of $17.9 million for the year.
The Property Trust generated a profit of $10.3 million from Development Profit, Trust Income and Revaluations. No
new facilities were completed by the Trust during the year.
Significant Items since Reporting Date
Brickworks acquired the precast concrete panel businesses assets of the Girotto Precast Pty Limited and Gocrete Pty
Limited from Boral Limited on 1 September 2010 for $13.8 million plus stock. The businesses have been merged
with Brickworks’ existing Austral Precast business and rebranded Austral Precast. Austral Precast is the only truly
national supplier in the precast concrete panel industry with automated production facilities in Sydney and Perth
and manual facilities in Melbourne and Brisbane.
Brickworks suffered a minor loss of stock in the recent earthquake in Christchurch, New Zealand. It is anticipated
that there will be a lull in building activity in the short term before the opportunities associated with the rebuilding
process present themselves.
As a result of WHSP’s 44.6% holding in the issued capital of the company, Brickworks contributed a $17.5 million
regular profit to the Group (2009: $17.2m, holding 49.4%). In addition, WHSP’s share of non regular expenses was
$4.5 million (2009: $41.3m). These contributions exclude the WHSP profit taken up by Brickworks under the equity
accounting method.
- 12 -
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 13
Review of Group Entities (continued)
Clover Corporation Limited
Associated entity: 28.6% held*
Contribution to Group result: $0.3 million loss
Total Market Capitalisation: $44 million*
Market Value of WHSP’s Holding: $12 million*
ASX code: CLV
Clover Corporation Limited (Clover) reported a net profit before tax (before joint venture impact and non-regular
items) for the financial year ended 30 June 2010 of $7.3 million (2009: $4.9 million), an increase of 48.8%.
However, due to the full impairment of the investment in, shareholder loan to and interest accrued in respect of,
the joint venture Future Foods Ingredients Pty Limited (FFI) and its share of operational losses of $0.98 million, the
net result of Clover decreased from a profit of $3.08 million in 2009 to a net loss after tax in 2010 of $0.97 million.
Despite the impact of the full impairment and the share of the operational losses from FFI on the Clover result there
was a substantial increase in sales revenue and improved cash position.
Total sales revenue increased 65.4% to $35.9 million during the period under review.
Clover directors have declared a fully franked dividend of 1.25 cents per share (2009: 1 cent per share) in respect
of the year ended 30 June 2010, subject to the amendment of the company’s constitution. Provided the
amendment is approved by shareholders, payment of the dividend will be due on 15 December 2010.
Clover’s core business of value-added encapsulated oil products had another impressive year with sales revenue
increasing by 67.6% to $33.7 million (2009: $20.1 million). The significant expansion of sales was as a result of the
company focusing on the Asian region, in particular, in infant formula and children’s food applications.
Sales revenue has also been driven by product innovation and development with 50% of current sales being
attributable to products commercialised over the past four years. Clover’s research and innovation department
continues to expand its strategic position with a long term linkage with CSIRO to improve encapsulation technology
and the recently enacted Technical Cooperation Agreement with Corn Products International Inc. to facilitate the
development of specialty nutritional bioactive combinations and delivery systems.
Clover directors have announced the intended divestment of its associate, FFI and have stated that the company is
now focused on its core Omega-3 and encapsulated nutritional product business with particular emphasis on the
high growth potential Asian markets including China.
Clover directors have also advised that the company has had a sound start to the new financial year.
As a result of WHSP’s 28.6% holding in the issued capital of the company, Clover contributed a net loss of
$0.3 million to the Group (2009: $0.9 million profit). The contribution to regular profit was $1.2 million while the
Group’s share of the non-regular expenses was $1.5 million.
Ruralco Holdings Limited
Associated entity: 23.5% held*
Contribution to Group profit: $2.7 million
Total Market Capitalisation: $149 million*
Market Value of WHSP’s Holding: $35 million*
ASX code: RHL
Ruralco Holdings Limited’s (Ruralco) financial year ends 30 September 2010. Ruralco’s results for the full year are
scheduled to be released to the market on 23 November 2010.
Ruralco released its half year profit result on 25 May 2010. For the six months to March 2010, sales increased 4%
to $429.9 million and net profit after tax by 23% to $7.8 million on the previous corresponding period.
Ruralco reported improved seasonal conditions in eastern and southern Australia, a more buoyant residential
*As at 31 July 2010
- 13 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 14
Review of Group Entities (continued)
Ruralco Holdings Limited (continued)
market and higher commodity prices which assisted the livestock and wool results. Offsetting these positive trends
were lower milk and grain prices which had a negative impact on stockfeed and seed and grain results and lower
prices for commodity chemicals and fertilisers.
An interim dividend of 8 cents per share fully franked was paid in June 2010 (2009: 6 cents per share).
As a result of WHSP’s 23.5% holding in the issued capital of the company, Ruralco contributed a net profit of
$2.7 million to the Group (2009: $2.6m).
TPG Telecom Limited
Associated entity: 26.6% held*
Contribution to Group profit: $15.4 million
Total Market Capitalisation: $1.4 billion*
Market Value of WHSP’s Holding: $368 million*
ASX code: TPM
At its 2009 Annual General Meeting SP Telemedia Limited changed its name to TPG Telecom Limited (TPG).
TPG’s earnings before interest, tax, depreciation and amortisation (EBITDA) of $171.1m and net profit after tax of
$55.7m, represented increases of 41% and 216% respectively compared to the prior year. These results incorporate
4.5 months post acquisition contribution from the operations of PIPE Networks (PIPE).
Earnings per share for the year of 7.6 cents represent a 192% increase on the 2.6 cents per share last year.
TPG’s excellent cash generation has continued with net cash inflow from operations before interest, tax and capex
during the year of $189.1m, $18.0m in excess of its EBITDA result.
TPG has declared a fully franked final dividend of 2 cents per share, payable on 17 November 2010 to shareholders
on the register at 20 October 2010, bringing total dividends for the year to 4 cents.
TPG has continued to lead the broadband consumer marketplace in providing high speed services of excellent value
with the result that Australian internet users are increasingly expecting unlimited broadband access. TPG added
more than 100,000 net new broadband subscribers during the year, with the 2nd half of the year representing a
record 6 months of on-net subscriber growth for the Company of over 54,000 subscribers. This on-net growth was
supported strongly by TPG’s broadband and home phone bundle offering with over 18,000 active subscribers being
added to-date since its launch in April 2010. TPG’s total number of broadband subscribers is expected to exceed
500,000 by September 2010.
PIPE’s domestic backhaul and metropolitan fibre when combined with TPG’s data and voice services is presenting
excellent corporate revenue and margin growth opportunities. Corporate and wholesale customers are benefitting
from the increased speed and reliability of fibre-based services where TPG’s 100Mbps services are now available to
businesses in Sydney, Melbourne and Brisbane. In the period since its acquisition by TPG, PIPE’s domestic business
has also continued to grow very strongly in its own right.
As a result of WHSP’s 26.6% holding in the issued capital of the company, TPG contributed $15.4 million to the net
profit of the Group (2009: $4.9m, 28.5% holding).
*As at 31 July 2010
- 14 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 15
Directors’ Report
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
The Directors of Washington H. Soul Pattinson and Company Limited (WHSP) present their report and the financial statements
of the consolidated entity, being the company and its subsidiaries, for the financial year ended 31 July 2010.
DIRECTORS
The following persons were directors of WHSP during the whole of the financial year and up to the date of this report:
Mr R D Millner
Mr M J Millner
Mr P R Robinson
Mr D J Fairfull
Mr R G Westphal
Mr D E Wills
PRINCIPAL ACTIVITIES
The principal activities of the corporations in the consolidated entity during the course of the financial year were ownership of
shares, coal mining and consulting.
In November 2009 the consolidated entity sold its funds management company, Soul Funds Management Limited. There were
no other significant changes in the nature of the consolidated entity’s principal activities during the year.
DIVIDENDS
Dividends paid or recommended by the Company since the end of the previous financial year were:-
Declared and paid during the year
Final ordinary dividend 2009
Special dividend 2009
Interim ordinary dividend 2010
Dealt with in the financial report as dividends
Recommended after the end of the year
Proposed final ordinary dividend 2010
Proposed special dividend 2010
REVIEW OF OPERATIONS
Cents Per
Share
19
25
14
58
20
12.5
32.5
Total
amount
$’000
45,342
59,660
33,410
138,412
47,728
29,830
77,558
Franking
%
Date of
Payment
100%
100%
100%
7 December 2009
7 December 2009
13 May 2010
100%
100%
6 December 2010
6 December 2010
The profit of the Group, after tax and before non-regular items, attributable to shareholders for the year ended 31 July 2010
was $181.6 million, a decrease of 19.2% compared to the previous year. This net decrease of $43.1 million resulted mainly from lower
contributions by New Hope Corporation Limited and Pitt Capital Partners Limited following their particularly strong results in
2009.
The profit of the Group, after tax and non-regular items, attributable to shareholders was $218.3 million, a decrease of $894.3
million compared to the previous year. Last year’s result included the Group’s $1.03 billion share of the profit on the sale
of New Hope’s New Saraji coal project. The result inclusive of non-regular items represents a 140.4% increase over that
of 2008.
The net profit on non-regular items for the year was $36.8 million and was principally composed of gains on deemed disposals.
During the year, Brickworks Limited and TPG Telecom Limited issued additional share capital via capital raisings and in doing so
the Group’s holdings in them were diluted. Under accounting standards the Group was deemed to have disposed of part of its
holdings in those companies at a profit.
- 15 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 16
Directors’ Report (continued)
REVIEW OF OPERATIONS (continued)
Comparisons with the prior two years are as follows:-
Revenue from continuing operations
Profit after tax before non-regular items
Profit after tax and non-regular items
Interim Dividend (paid in May each year)
Final Dividend
Special Dividend
Total Dividends
2010
$000
823,307
181,555
218,327
14 cents
20 cents
12.5 cents
46.5 cents
2009
$000
774,953
224,685
1,112,652
13 cents
19 cents
25 cents
57 cents
%
Change
+ 6.2%
- 19.2%
- 80.4%
+ 7.7%
+ 5.3%
For further information regarding the operations of the Group refer to the Chairman’s Review and the Review of Group Entities
on pages 3 to 14 of this annual report.
STATE OF AFFAIRS
In the opinion of the Directors there were no significant changes in the state of affairs of the consolidated entity that occurred
during the financial year under review not otherwise disclosed in this report or the consolidated entity’s Financial Statements.
FINANCIAL POSITION, FINANCIAL INSTRUMENTS AND GOING CONCERN
The Directors believe the Group is in a strong and stable position to grow its current operations.
Details of financial risk management objectives and policies are set out in note 34 of the consolidated financial statements.
The Directors, having made appropriate enquiries, consider that the Group has adequate resources to continue in its operational
businesses for the foreseeable future and have therefore continued to adopt the going-concern basis in preparing the financial
statements.
EVENTS SUBSEQUENT TO THE REPORTING DATE
The Directors are not aware of any other event or circumstance since the end of the financial year not otherwise dealt with in
this report or the consolidated financial statements that has or may significantly affect the operations of the consolidated entity,
the results of those operations, or the state of affairs of the consolidated entity in subsequent years. Refer to note 46 of the
consolidated financial statements.
LIKELY DEVELOPMENTS, BUSINESS STRATEGY AND PROSPECTS
Further information about likely developments, business strategy and prospects and the expected results in subsequent financial
years has not been included in this report because the Directors believe, on reasonable grounds, that to include such
information would be likely to result in unreasonable prejudice to the consolidated entity.
ENVIRONMENTAL COMPLIANCE
New Hope Corporation Limited’s (New Hope) Queensland mining operations and exploration tenements are regulated by the
Queensland Department of Environment and Resource Management under Queensland’s Environmental Protection Act 1994.
New Hope’s coal export port facility, Queensland Bulk Handling (QBH), operates under a site-based Environmental Management
Plan to meet the conditions of its development approval issued under the Integrated Planning Act 1997.
Each of New Hope’s operational sites (mines, exploration tenements and port facility) function under a separate, site specific
environmental authority/development approval.
An Environmental Impact Statement (EIS) for the New Acland Stage 3 expansion project was lodged with the Department of
Infrastructure and Planning during October 2009 and was approved by Queensland's Coordinator General for public comment
and submissions between 14 November 2009 and 3 February 2010. New Hope is currently compiling a Supplementary EIS to
address the submissions received regarding the EIS during the public comment period. The Supplementary EIS will be submitted
to the Department of Infrastructure and Planning early in the 2010/11 financial year.
New Hope has continued its participation in the Commonwealth Energy Efficiency Opportunities (EEO) program. Baseline
energy data was collated and analysed to give New Hope a detailed understanding of its energy use. Electricity and diesel
opportunity workshops were held at all operational sites and potential projects were investigated to establish whether they
would be viable for the business. The annual EEO Public Report was published on New Hope’s website in December 2009.
All three mine sites and QBH submitted reports as required under the National Pollutant Inventory program.
- 16 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 17
Directors’ Report (continued)
ENVIRONMENTAL COMPLIANCE (continued)
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
New Hope meets the corporate threshold for participation under the National Greenhouse and Energy Reporting Act (2007).
The 2008/09 report was submitted to the federal government by the 31 October 2009 deadline.
New Hope developed and implemented an Environmental Management System (EMS) in accordance with ISO4001 during the
2009-2010 financial year. The EMS improves environmental performance by increasing environmental awareness, optimising
operational control and monitoring compliance. The EMS demonstrates the commitment New Hope has to the continual
improvement of environmental management.
DIRECTORS
Information regarding the Directors of the Company.
Robert Dobson Millner F.A.I.C.D.
Chairman.
Non-executive Director since 1984, appointed Chairman 1998. Member of the Remuneration Committee and member of the
Nomination Committee until 4 December 2009.
Mr Millner has extensive experience in the investment industry.
Other listed company directorships held during the past three years:
• Australian Pharmaceutical Industries Limited – Appointed 2000 (current)
• Brickworks Limited – Appointed 1997 (current) Chairman since 1999
• BKI Investment Company Limited – Appointed 2003 (current) Chairman since 2003
• Choiseul Investments Limited – Appointed 1995 (current) Chairman since 2000
• Milton Corporation Limited – Appointed 1998 (current) Chairman since 2002
• New Hope Corporation Limited – Appointed 1995 (current) Chairman since 1998
• Souls Private Equity Limited – Appointed 2004 (current) Chairman since 2004
• TPG Telecom Limited – Appointed 2000 (current)
Michael John Millner M.A.I.C.D.
Deputy Chairman.
Non-executive Director since 1997, appointed Deputy Chairman 1998. Chairman of the Nomination Committee and member
of the Audit and Remuneration Committees.
Mr Millner has extensive experience in the investment industry and is a Councillor of the Royal Agricultural Society of New
South Wales.
Other listed company directorships held during the past three years:
• Brickworks Limited – Appointed 1998 (current)
• Choiseul Investments Limited – Appointed 2001, Resigned 2008
• Ruralco Holdings Limited – Appointed 2007 (current)
• TPG Telecom Limited – Appointed 2000, Resigned 2008
Peter Raymond Robinson B.Com.(UNSW), F.A.I.C.D.
Executive Director.
Joined the Company 1978, appointed Director 1984.
Mr Robinson has held both executive and non-executive directorships for a period of 25 years and has over 30 years experience
at general management and Chief Executive Officer level. He is Chairman of Australian Pharmaceutical Industries Limited and
Clover Corporation Limited.
Other listed company directorships held during the past three years:
• Australian Pharmaceutical Industries Limited – Appointed 2000 (current), Chairman since 2003
• Clover Corporation Limited – Appointed 1997 (current), Chairman since 2002
• KH Foods Limited – Appointed 2008 (company delisted 2009)
• New Hope Corporation Limited – Appointed 1997 (current)
• TPG Telecom Limited – Appointed 2000, Resigned 2008
- 17 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 18
Directors’ Report (continued)
DIRECTORS (continued)
David John Fairfull B.Com., A.C.I.S., C.P.A., fFin, M.A.I.C.D
Non-executive Director since 1997. Member of the Audit, Remuneration and Nomination Committees.
Mr Fairfull is a merchant banker and professional company director with over 40 years experience in corporate finance. He is a
consultant to Pitt Capital Partners Limited which is a Group Company.
Other listed company directorships held during the past three years:
• Australian Pharmaceutical Industries Limited – Appointed 2000, Resigned 2007
• KH Foods Limited – Appointed 2008 (company delisted 2009)
• New Hope Corporation Limited – Appointed 1997 (current)
• Souls Private Equity Limited – Appointed 2004 (current)
• TPG Telecom Limited – Appointed 2000, Resigned 2008
Robert Gordon Westphal B.Com.(UNSW), F.C.A., fFin, M.A.I.C.D.
Non-executive Director since 2006. Chairman of the Audit Committee and member of the Remuneration Committee. Member
of the Nomination Committee since 4 December 2009.
Mr Westphal is a Chartered Accountant and was a partner of Ernst & Young for 25 years. He has many years of experience in
corporate transactions with particular emphasis on mergers and acquisitions, due diligence and valuation across a variety of
industry sectors. Mr Westphal is a non-executive director of a number of companies in which Souls Private Equity Limited has
invested. He is a consultant to Pitt Capital Partners Limited which is a Group Company and was formerly the Chairman of the
Board of Governors of Queenwood School for Girls Limited for 10 years.
Other listed company directorships held during the past three years:
• Souls Private Equity Limited – Appointed 2005 (current)
David Edward Wills B.Com.(UNSW), F.C.A., M.A.I.C.D
Non-executive Director since 2006. Chairman of the Remuneration Committee and member of the Audit Committee. Member
of the Nomination Committee since 4 December 2009.
Mr Wills is a Chartered Accountant, having been a partner in Coopers & Lybrand and then PricewaterhouseCoopers for 25
years. He was Managing Partner of the Sydney office and Deputy Chairman of the Australian firm immediately prior to his
retirement from the firm in 2004. He is also a non-executive director of a number of companies in which Souls Private Equity
Limited has invested.
Other listed company directorships held during the past three years:
• Clover Corporation Limited – Appointed 2005 (current)
• Dyno Nobel Limited – Appointed 2006, Resigned 2008
• Souls Private Equity Limited – Appointed 2004 (current)
COMPANY SECRETARY
Ian David Bloodworth
Mr Bloodworth is a Chartered Accountant with more than 25 years accounting and company secretarial experience and was
appointed Company Secretary of Washington H. Soul Pattinson and Company Limited in July 2007. Prior to joining the
Company, Mr Bloodworth was Company Secretary of the Garratts Limited Group of Companies for 2 years and Chief Financial
Officer of the Group for 6 years. He is also the Company Secretary of Clover Corporation Limited.
- 18 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 19
Directors’ Report (continued)
DIRECTORS’ MEETINGS
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
The number of Directors’ meetings (including meetings of committees of directors) and the number of meetings attended by
each of the Directors of the Company during the financial year are:
Directors’
Meetings
Audit Committee
Meetings
Remuneration
Committee
Meetings
Nomination
Committee
Meetings
Eligible to Number
Eligible to Number
Eligible to Number
Eligible to Number
Attend
Attended
Attend Attended
Attend
Attended
Attend
Attended
Mr R D Millner
Mr M J Millner
Mr P R Robinson
Mr D J Fairfull
Mr R G Westphal
Mr D E Wills
R,N
A,R,N
A,R,N
A,R,N
A,R,N
17
15
17
15
17
15
17
15
16
15
14
14
-
5
-
5
5
5
-
5
-
5
5
5
1
1
-
1
1
1
1
1
-
1
1
1
1
1
-
1
-
-
1
1
-
1
-
-
A Denotes member of the Audit Committee of Directors for the whole of the year.
R Denotes member of the Remuneration Committee of Directors for the whole of the year.
N Denotes member of the Nomination Committee of Directors during the year.
DIRECTORS' INTERESTS
The relevant interest of each Director in the share capital of the Company, as notified to the Australian Securities Exchange in
accordance with section 205G of the Corporations Act 2001, at the date of this report is as follows:-
Mr R D Millner
Mr M J Millner
Mr P R Robinson
Mr D J Fairfull
Mr R G Westphal
Mr D E Wills
Ordinary Shares
19,372,146
19,007,126
74,210
60,000
10,000
133,866
REMUNERATION REPORT (AUDITED)
Scope of Report
The scope of this Remuneration Report covers the parent entity and the unlisted controlled entities Pitt Capital Partners Limited,
Souls Financial Solutions Pty. Limited and Souls Funds Management Limited (for the period to disposal on 13 November 2009).
The other controlled entities of the Group are publicly listed and, accordingly, have their own Remuneration Committees. It is
the policy of the Board to allow those controlled entities to produce their own Remuneration Report in accordance with Section
300A of the Corporations Act 2001 to be voted on by their shareholders.
Remuneration Committee
The Remuneration Committee consists of non-executive directors whose responsibility is to make recommendations to the full
Board on remuneration matters and other terms of employment for executive directors, senior executives and non-executive
directors.
The Remuneration Committee ensures that remuneration levels for directors, senior managers and group executives are
competitively set to attract and retain qualified and experienced directors and executives. The Committee is authorised by the
Board to obtain independent professional advice on the appropriateness of remuneration packages if deemed necessary.
Non-executive Directors
Board policy is to remunerate non-executive directors at comparable market rates and remuneration levels are reviewed
annually by the Remuneration Committee and are not subject to performance based incentives.
- 19 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 20
Directors’ Report (continued)
REMUNERATION REPORT (AUDITED) (continued)
The aggregate amount of fees which may be paid to non-executive directors by the parent entity is subject to the approval of
Shareholders in general meeting and is currently set at $1,500,000 per annum. Approval for this aggregate amount was given
at the 2009 Annual General Meeting.
During the year ended 31 July 2010 fees paid to the non-executive directors by the parent entity amounted to $705,000 which
included the statutory superannuation guarantee contribution of 9%.
With effect from 31 July 2004 the retiring allowance for non-executive directors was frozen at 3 times the average annual fees
for the three years prior to that date. Non-executive directors appointed after 1 August 2004 do not qualify for a retiring
allowance.
Executive Directors and Senior Executives
Remuneration levels are reviewed annually by the Remuneration Committee to reflect individual performance, the overall
performance of the parent and consolidated entity and prevailing employment market conditions.
Remuneration of the executive director and senior executives consists of a fixed remuneration package comprising a base salary,
superannuation and fringe benefits, where taken. In addition to the foregoing, the remuneration of certain executives of Pitt
Capital Partners Limited and Souls Funds Management Limited may include other components which are subject to annual
assessment by the Boards of those companies.
In respect of the parent entity and the unlisted controlled entities, no employment contracts for either executive directors or
senior executives were in place at any time during the financial year.
Company Performance, Shareholder Wealth and Remuneration
In its review of remuneration policies, the Remuneration Committee has regard to the following measures of the consolidated
entity’s performance for the current and previous four financial years.
Revenue from continuing activities
Profit after tax (before non-regular items)
Share price at year end
Ordinary dividends paid/recommended
Special dividends paid
2007*
$’000
$750,618
$99,192
$9.27
28.5 cents
-
2008
$’000
$681,640
$113,146
$10.45
30 cents
-
2009
$’000
$774,953
$224,685
$11.00
32 cents
25 cents
2010
$’000
$823,307
$181,555
$13.02
34 cents
12.5 cents
* 2007 comparatives have been restated for discontinued operations.
Key management personnel of the Parent Entity
Non-executive Directors
Mr R D Millner – Chairman
Mr M J Millner – Deputy Chairman
Mr D J Fairfull
Mr R G Westphal
Mr D E Wills
Executive Director
Mr P R Robinson
Other key management personnel of the Parent Entity
Ms M R Roderick – Chief Financial Officer
Mr I D Bloodworth – Company Secretary
Key management personnel of the Consolidated Entity
Mr M L Bailey – Chief Operations Officer and Acting Chief Financial Officer, New Hope Corporation Limited
Mr B J Garland – General Manager – Resource Development, New Hope Corporation Limited
Mr C C Hopkins – General Manager – Marketing, New Hope Corporation Limited
- 20 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 21
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
Directors’ Report (continued)
REMUNERATION REPORT (AUDITED) (continued)
Key management personnel of the Consolidated Entity (continued)
Mr P K Mantell – Chief Financial Officer and Company Secretary, New Hope Corporation Limited (Resigned 16 March 2009)
Mr R C Neale – Managing Director and Chief Executive Officer, New Hope Corporation Limited
Mr C J Photakis (Deceased 7 August 2009) – Managing Director, Pitt Capital Partners Limited
Mr S O Stephan – Chief Financial Officer, New Hope Corporation Limited (Appointed 31 August 2009)
Other executives being one of the five highest paid executives of the Consolidated Entity.
Mr D Brown-Kenyon – General Manager – Corporate Development and Government Relations, New Hope Corporation Limited
(Resigned 19 March 2010)
Short Term Employee
Benefits
Post Employment
Benefits
Salary
& Fees
$’000
Cash Non Monetary
Bonus
$’000
Benefits
$’000
Super-
annuation
$’000
Termination
Benefits
$’000
Share Based
Payments
Value of
Options
$’000
Total
$’000
542
127
597
215
182
Received
from
Parent Controlled
entity
$’000
entities
$’000
232
127
108
124
114
705
310
-
489
91
68
958
877
724
153
236
407
236
407
-
-
1,293
1,058
750
453
53
388
577
-
-
-
-
-
-
-
1,293
1,058
750
453
53
388
577
-
-
-
-
-
-
-
-
-
372
248
-
-
-
-
620
7,755
2,072
5,683
-
-
-
-
-
-
-
-
-
-
-
-
38
-
309
347
Key Management Personnel
Name
Non-executive Directors – 2010
Mr R D Millner
Mr M J Millner
Mr D J Fairfull
Mr R G Westphal
Mr D E Wills
Executive Director – 2010
Mr P R Robinson (1)(2)
Key Management Personnel of
the Parent Entity – 2010
Mr I Bloodworth (2)
Ms M R Roderick (2)
Key Management Personnel of
the Consolidated Entity – 2010
Mr R C Neale (1)
Mr M L Bailey (1)
Mr B J Garland (1)
Mr C C Hopkins
Mr C J Photakis
(Deceased 7 Aug 2009)
Mr S O Stephan
(Appointed 31 Aug 2009)
Other Executives of the
Consolidated Entity – 2010
Mr D Brown-Kenyon (1)
480
117
577
202
167
689
208
360
802
483
344
272
13
374
-
-
-
-
-
-
-
-
432
161
117
134
-
-
21
-
-
-
-
41
10
20
13
15
65
123
9
14
30
28
26
28
-
-
19
33
29
14
15
19
2
14
(Resigned 19 March 2010)
163
69
Total
5,251
913
24
245
12
379
(1) Denotes one of the five highest paid executives of the Consolidated Entity.
(2) Denotes one of the three highest paid executives of the Company.
- 21 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 22
Directors’ Report (continued)
REMUNERATION REPORT (AUDITED) (continued)
Key Management Personnel
Name
Non-executive Directors – 2009
Mr R D Millner
Mr M J Millner
Mr D J Fairfull
Mr R G Westphal
Mr D E Wills
Short Term Employee
Benefits
Post Employment
Benefits
Salary
& Fees
$’000
Cash Non Monetary
Bonus
$’000
Benefits
$’000
Super-
annuation
$’000
Termination
Benefits
$’000
Share Based
Payments
Value of
Options
$’000
350
97
497
209
143
150
20
-
-
-
-
-
-
-
-
32
9
15
11
13
Executive Director – 2009
Mr P R Robinson (2)
580
150
63
105
Key Management Personnel of
the Parent Entity – 2009
Mr I Bloodworth (2)
Ms M R Roderick (2)
Key Management Personnel of
the Consolidated Entity – 2009
Mr R C Neale (1)
Mr M L Bailey (1)
Mr B J Garland (1)
Mr C C Hopkins (1)
Mr C J Photakis (1)
192
295
687
460
328
260
-
-
1,906
579
453
563
(Deceased 7 Aug 2009)
578
900
Mr P K Mantell
(Resigned 16 March 2009)
197
134
Total
4,873
4,835
-
14
37
29
25
23
-
20
231
17
26
26
14
14
18
52
17
369
(1) Denotes one of the five highest paid executives of the Consolidated Entity.
(2) Denotes one of the three highest paid executives of the Company.
OPTIONS
Total
$’000
552
106
512
220
156
Received
from
Parent Controlled
entity
$’000
entities
$’000
181
106
88
98
88
561
371
-
424
122
68
985
898
631
267
209
335
209
335
-
-
-
-
-
-
-
-
-
-
98
372
248
62
2,754
1,454
1,068
926
-
1,530
74
644
-
-
-
-
-
-
2,754
1,454
1,068
926
1,530
644
854
11,364
1,736
9,628
-
-
-
-
-
-
-
-
-
-
-
-
-
202
202
The Company has not issued any options over its unissued shares during the year or in prior years.
INDEMNIFICATION OF OFFICERS AND AUDITORS
Indemnification
The Parent Company’s constitution provides for an indemnity of Directors, Secretaries and Executive Officers (as defined in the
Corporations Act 2001); where liability is incurred in the performance of their duties in those roles, other than conduct involving
a wilful breach of duty in relation to the Company. The Constitution further provides for an indemnity in respect of any costs
and expenses incurred in defending proceedings in which judgement is given in their favour, they are acquitted, or the Court
grants them relief under the Corporations Act 2001.
Insurance
In accordance with the provisions of the Corporations Act, the Parent Company has a Directors’ and Officers’ Liability policy
covering Directors and officers of the Parent Company and its controlled entities. The insurance policy prohibits disclosure of
the nature of the liability insured against and the amount of the premium.
Auditors
No indemnities have been given or insurance premiums paid during or since the end of the financial year in respect of any
person who is or has been an auditor of the Parent Company and its controlled entities.
- 22 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 23
Directors’ Report (continued)
PROCEEDINGS ON BEHALF OF THE COMPANY
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
No person has applied for leave of Court to bring proceedings on behalf of the Company or to intervene in any proceedings
to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those
proceedings.
The Company was not a party to any such proceedings during the year.
NON AUDIT SERVICES
During the year, Moore Stephens Sydney, the Company’s auditor, has performed certain other services in addition to their
statutory duties. An entity associated with Moore Stephens Sydney was paid $27,695 for providing these other services in
respect of the Group. Details of the amounts paid to the auditors are disclosed in note 43 of the financial statements.
The Board has considered the non-audit services provided during the year by the auditor and is satisfied that the provision of
those non-audit services by the auditor is compatible with, and did not compromise, the auditor independence requirements
of the Corporations Act 2001 for the following reasons:-
• All non-audit services were subject to the corporate governance procedures adopted by the Company and have been
reviewed by the Audit Committee to ensure they do not impact the integrity and objectivity of the auditor, and
• The non-audit services provided do not undermine the general principles relating to auditor independence as set out in
Professional Statement APES 110: Code of Ethics for Professional Accountants, as they did not involve reviewing or auditing
the auditor’s own work, acting in a management or decision making capacity for the Company, acting as an advocate for
the Company or jointly sharing risks and rewards.
AUDITOR’S INDEPENDENCE DECLARATION
The lead auditor’s independence declaration for the year ended 31 July 2010 has been received and is included on page 24.
ROUNDING OF AMOUNTS
The amounts contained in the accompanying financial statements have been rounded off to the nearest one thousand dollars
under the option available to the Company under Class Order 98/100.
Signed in accordance with a resolution of the Board of Directors:
R D MILLNER
Director
P R ROBINSON
Director
Dated this 26th day of October 2010.
- 23 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 24
Auditor’s Independence Declaration
Auditor’s Independence Declaration
to the Directors of Washington H. Soul Pattinson and Company Limited
In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of Washington
H. Soul Pattinson and Company Limited for the year ended 31 July 2010, I declare that, to the best of my knowledge and belief,
there have been:
a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit;
and
b) no contraventions of any applicable code of professional conduct in relation to the audit.
Moore Stephens Sydney
Chartered Accountants
Martin J. (Joe) Shannon
Partner
Dated in Sydney this 25th day of October 2010
- 24 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 25
Corporate Governance Statement
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
The Board of Washington H. Soul Pattinson and Company Limited (the Company) is committed to ensuring its policies and
practices reflect good corporate governance and recognises that for its success an appropriate culture needs to be nurtured
and developed throughout all levels of the Company.
This statement outlines the Company’s Corporate Governance Practices in place throughout the year, unless otherwise stated,
and has been summarised into sections in line with the 8 core principles set out in the ASX Corporate Governance Council’s
“Corporate Governance Principles and Recommendations – 2nd edition”.
Principle 1 – Lay solid foundations for management and oversight
The Board is ultimately responsible for the operations, management and performance of the Company. In discharging this
responsibility the Board delegates to senior management, whose role it is to manage the Company in accordance with the
directions and policies set by the Board. The Board monitors the activities of senior management in the performance of their
delegated duties.
It is the responsibility of the Board to determine policies, practices, management and the operations of the Company and to
ensure that the Company is compliant with statutory, legal and other regulatory obligations.
Responsibilities of the Board include the following:-
• Determining corporate strategies, policies and guidelines for the successful performance of the Company in the present and
in the future;
• Monitoring the performance and conduct of the Company;
• Accountability to Shareholders;
• Ensuring that risk management procedures and compliance and control systems are in place and operating effectively;
• Monitoring the performance and conduct of senior management, and ensuring adequate succession plans are in place; and
• Ensuring the Company continually builds an honest and ethical culture.
The Board has delegated responsibility for the following to management:
• Day to day management of the Company;
• Production of performance measurement reports;
• Managing the compliance and risk management systems; and
• Management of staff including, appointment, termination, staff development and performance measurement.
The Executive Director is responsible for ensuring that the responsibilities delegated by the Board are properly discharged.
The performance of the Executive Director is evaluated by the Board with reference to the overall performance of the Company
and of its subsidiaries and associates in which the Executive Director represents the Company. Both qualitative and quantitative
measures are used to evaluate performance.
The Executive Director evaluates the performance of the other senior executives and reports to the Board. The Board also
reviews the performance of these executives via the monthly Board reports and their attendance at Board meetings.
The performance of the senior executives of the Company was assessed, as set out above, during the reporting period.
Principle 2 – Structure the Board to add value
The Company’s constitution states that its Board is to comprise of no less than three and no more than six Directors. The names
and details of the Directors of the Company at the date of this statement are set out in the Directors’ Report.
At the date of this report the Board consisted of five non-executive and one executive Director. The Board has assessed the
independence of its members and is of the view that the following Directors are independent:
Robert D. Millner - Chairman, non-executive
Michael J. Millner - Deputy Chairman, non-executive
David J. Fairfull - Non-executive
Robert G. Westphal - Non-executive
David E. Wills - Non-executive
- 25 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 26
Corporate Governance Statement (continued)
Principle 2 – Structure the Board to add value (continued)
Each Director has undertaken to provide the Board with all information which is relevant to the assessment of his independence
in a timely manner.
Under the ASX Corporate Governance Principles and Recommendations two non-executive Directors do not qualify as
independent for the following reasons. Mr Robert Millner and Mr Michael Millner are both Directors of Brickworks Limited a
major shareholder in the Company. They also have relevant interests in substantial shareholdings in the Company as disclosed
in the Key Management Personnel note to the financial statements.
Whilst the above non-executive Directors do not meet the criteria for independence in accordance with the ASX Corporate
Governance Principles and Recommendations, all Directors are committed to bring their independent views and judgement to
the Board and, in accordance with the Corporations Act 2001, must inform the Board if they have any interest that could
conflict with those of the Company. Where the Board considers that a significant conflict exists it may exercise its discretion to
determine whether the Director concerned may be present at the meeting while the item is considered. For these reasons the
Board believes that Mr Robert Millner and Mr Michael Millner can be considered to be acting independently in the execution
of their duties.
The current Chairman of the Board is Mr Robert Millner who is a non-executive Director. For the reasons stated above he is
considered to be independent. The current Executive Director is Mr Peter Robinson.
The Nomination Committee consists of non-executive Directors who review the membership of the Board annually having
regard to the Company’s particular needs, both present and future. The names of the members of the Committee at the
date of this statement and their attendance at meetings are set out in the Directors’ Report. Where a Director is due for
re-election at the next Annual General Meeting that Director may not serve on the Nomination Committee during the year
preceding re-election.
The role of the nomination committee is to review and consider the structure, balance and skills of the Board and make
recommendations regarding appointment, retirement and approval for Directors to stand for re-election. When a vacancy
occurs the nomination committee identifies the necessary and desirable skills, expertise and experience required to compliment
the Board and undertakes a process to identify the most appropriate candidates. The nomination committee may engage
recruitment consultants and other independent experts to undertake research and assessment at the Company’s expense.
Directors are initially appointed by the full Board, following consideration of recommendations made by the nomination
committee.
Appointment is subject to election by the Shareholders of the Company at the next Annual General Meeting. Under the
Constitution, one third of the Board is required to retire from office each year. Retiring Directors may stand for re-election
subject to approval by the Board.
In the discharge of their duties and responsibilities, the Directors either individually or jointly, have the right to seek independent
professional advice at the Company’s expense. In respect of advice to individual Directors, the prior approval of the Chairman
is required; such approval is not to be unreasonably withheld. The Chairman is entitled to receive a copy of any such
advice obtained.
The Chairman is responsible for monitoring and assessing the performance of individual Directors, each Board Committee and
the Board as a whole. The Chairman interviews each Director and provides feedback regarding their performance. The Board
as a whole continuously monitors the efficiency and effectiveness of its operations on an informal basis.
The performance of each Director of the Company was assessed, as set out above, during the reporting period.
Principle 3 – Promote ethical and responsible decision-making
The Company has an established code of conduct dealing with matters of integrity and ethical standards. The Board recognises
the need for the Directors and employees to adhere to the highest standards of behaviour and business ethics.
All Directors and employees are expected to abide by the code of conduct which requires them to:-
• Act in accordance with ethical and professional standards;
• Act with honesty and integrity in dealings with shareholders, customers, suppliers and competitors;
• Ensure compliance with all laws and regulations;
• Act in accordance with standards of workplace behaviour and equal opportunity;
• Avoid actual or potential conflicts of interest between private and company matters;
• Not engage in insider trading;
- 26 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 27
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
Corporate Governance Statement (continued)
Principle 3 – Promote ethical and responsible decision-making (continued)
• Not accept unauthorised benefits as a result of their position in the Company;
• Ensure Company assets and confidential information are not used improperly;
• Maintain and further enhance the Company’s reputation and not act in a manner which may harm that reputation; and
• Reporting all breaches of the code.
The Company has established a share trading policy, the main principles are as follows:-
• The policy relates to trading in shares of the Company and controlled and associated entities of the Company that are
publicly listed;
• Trading is prohibited when Directors and employees are in possession of price sensitive information which is not available
to the public;
• In respect of Directors and senior executives trading in its shares, the Company has established the following share trading
windows each for a period of 6 weeks commencing from:-
• The release of the Company’s annual result to the ASX;
• The release of the Company’s half yearly result to the ASX;
• The date of the Annual General Meeting; and
• The release of a prospectus.
At times other than those referred to above, Directors and senior executives, may trade with the prior approval of the
Chairman, or in his absence, two Directors. Subsequent confirmation of any such trades is to be given to the Chairman or
the Directors who approved the trade.
• Directors and senior executives are prohibited from using margin loans to finance the purchase of shares in the Company
or from trading in any financial products issued or created over the Company’s shares.
Principle 4 – Safeguard integrity in financial reporting
The Company has an established audit committee, which has a formal charter outlining the committee’s function, composition,
authority, responsibilities and reporting.
The current members of the audit committee are:
Robert G. Westphal - Chairman
Michael J. Millner
David J. Fairfull
David E. Wills
All of the members of the committee are non-executive, independent Directors. Mr Westphal, who is the Chairman of the
audit committee, is not the Chairman of the Board. The Chairman of the Board is not a member of the audit committee. The
details of the audit committee members at the date of this statement and their attendance at meetings are set out in the
Directors’ Report.
The non-executive Chairman, Executive Director, Chief Financial Officer and Company Secretary may attend audit committee
meetings by invitation. The external auditors, Moore Stephens Sydney, are requested by the audit committee to attend the
appropriate meetings to report on the results of their half-year review and full year audit.
The function of the audit committee is to assist the Board in fulfilling its statutory and fiduciary responsibilities relating to:-
• The external reporting of financial information, including the selection and application of accounting policies;
• The independence and effectiveness of the external auditors;
• The effectiveness of internal control processes and management information systems;
• Compliance with the Corporations Act, ASX Listing Rules and any other applicable requirements; and
• The application and adequacy of risk management systems within the Company.
The Executive Director and the Chief Financial Officer are required to state in writing to the Board, by submission to the audit
committee, that the Company’s financial statements present a true and fair view, in all material respects, of the Company’s
financial position and operational results and that they are in accordance with relevant accounting standards. A declaration
from the Executive Director and the Chief Financial Officer has been received in respect of the current reporting period.
- 27 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 28
Corporate Governance Statement (continued)
Principle 5 – Make timely and balanced disclosure
The Board recognises the need to ensure that all investors have equal and timely access to material information regarding the
Company and for announcements to be factual, clear, balanced and complete.
The Company has established a Continuous Disclosure Policy to ensure compliance with ASX and Corporations Act continuous
disclosure requirements. The policy requires timely disclosure through the ASX announcement platform of information
concerning the Company that a reasonable person would expect to have a material effect on the price or value of the
Company’s securities or which would materially influence the decision making of investors. Internal procedures are in place to
ensure that relevant information is communicated promptly.
The Chairman and Executive Director are responsible for determining disclosure obligations and the Company Secretary is the
nominated continuous disclosure officer for the Company.
Principle 6 – Respect the rights of Shareholders
The Board is committed to ensuring that Shareholders are fully informed of all material matters affecting the Company in a
timely manner.
The dissemination of information is mainly achieved as follows:-
• An Annual Report is distributed to Shareholders in November each year;
• The Chairman’s Address to the Annual General Meeting is distributed to Shareholders in December each year;
• A Half-yearly Review of Operations is distributed to Shareholders in May each year; and
• Significant information is posted on the Company’s website.
In addition, Shareholders are encouraged to attend and participate in the Annual General Meeting of the Company. The
external auditor attends the Annual General Meeting to answer Shareholders’ questions in regard to the conduct of the audit
and the content of the auditor’s report.
Principle 7 – Recognise and manage risk
The Company is committed to identifying and managing areas of significant business risk to protect Shareholders, employees,
earnings and the environment. Arrangements in place include:-
• Regular detailed financial, budgetary and management reporting;
• Procedures to manage financial and operational risks;
• Established organisational structures, procedures and policies dealing with the areas of health and safety, environmental
issues, industrial relations and legal and regulatory matters;
• Comprehensive insurance and risk management programs;
• Procedures requiring Board approval for all borrowings, guarantees and capital expenditure beyond minor levels; and
• Where applicable, the utilisation of specialised staff and external advisors.
Management is responsible for the design and implementation of a risk management and internal control system which
manages the material business risks of the Company and reporting to the Board on whether those risks are being managed
efficiently. Management reported to the Board on an ongoing basis during the current reporting period.
The Executive Director and the Chief Financial Officer are required to state in writing to the Board, by submission to the audit
committee, that the risk management and internal control compliance systems are operating efficiently and effectively. In their
declaration under section 295A of the Corporations Act the Executive Director and the Chief Financial Officer have made this
statement in respect of the current reporting period.
- 28 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 29
Corporate Governance Statement (continued)
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
Principle 8 – Remunerate fairly and responsibly
The Company has established a Remuneration Committee which consists of five Directors, the majority of whom are
independent, and is chaired by an independent Director. The Committee makes recommendations to the full Board on
remuneration matters and other terms of employment for the Executive Director, senior executives and non-executive Directors.
The details of the Remuneration Committee members at the date of this statement and their attendance at meetings are set
out in the Directors’ Report.
Senior executive performance is continually monitored by the Executive Director and the Executive Director’s performance is
subject to continuous monitoring by the full Board.
The remuneration of the Executive Director is reviewed annually by the Remuneration Committee, which consists of all the
non-executive Directors. The remuneration of the senior executive staff is reviewed annually by the full Board after taking into
consideration the recommendations of the Remuneration Committee and the Executive Director.
The Executive Director and senior executive staff are renumerated by way of salary, non monetary benefits, and superannuation
contributions. Neither the Executive Director nor senior executive staff are entitled to receive bonus payments or any equity
based remuneration.
Non-executive Directors’ fees are reviewed annually by the full Board after taking into consideration the Company’s
performance, market rates, level of responsibility and the recommendations of the Remuneration Committee. The aggregate
amount of fees which may be paid to non-executive Directors is subject to the approval of Shareholders at the Annual General
Meeting and is currently set at $1,500,000 per annum. Approval for this amount was given at the 2009 Annual General
Meeting.
Non-executive Directors are renumerated by way of fees in the form of cash, non monetary benefits, and statutory
superannuation contributions and may be entitled to receive a retiring allowance. With effect from 31 July 2004 the retiring
allowance for non-executive Directors was frozen at 3 times the average annual fees for the 3 years prior to that date.
Non-executive Directors appointed after 1 August 2004 do not qualify for a retiring allowance. Non-executive Directors are not
entitled to receive bonus payments or any equity based remuneration.
Remuneration is set so as to attract and retain suitable personnel and to motivate them to pursue the long term growth and
success of the Company.
Further information of Directors’ and executives’ remuneration is set out in the Remuneration Report.
For further information concerning the corporate governance practices of the Company refer to the corporate governance
section of the Company’s web site at www.whsp.com.au.
- 29 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 30
Financial report
31 July 2010
Contents
Financial statements
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the financial statements
Directors’ declaration
Independent audit report to members
Page
31
32
33
34
35
36
91
92
This financial report covers the consolidated financial statements of the Consolidated entity consisting of Washington H. Soul
Pattinson and Company Limited and its controlled entities. The financial statements are presented in Australian currency.
Washington H. Soul Pattinson and Company Limited is a company limited by shares, incorporated and domiciled in Australia.
Its registered office and principal place of business is located in New South Wales:
Washington H. Soul Pattinson and Company Limited
Level 1
160 Pitt Street
SYDNEY NSW 2000
A description of the nature of the Consolidated entity's operations and its principal activities is included in the Directors' report,
which is not part of this financial report.
The financial report was authorised for issue by the directors on 26th October 2010.
- 30 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 31
Consolidated Income Statement
For the year ended 31 July 2010
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
Revenue from continuing operations
Other income
Cost of sales
Selling and distribution expenses
Administration expenses
Other expenses
Impairment of assets
Finance costs
Share of results from equity accounted associates
Profit before income tax
Income tax (expense)
Profit after tax from continuing operations
(Loss) after tax from discontinued operations
Profit after tax for the year
Notes
5
6
7
8a
2010
$’000
823,307
70,205
(393,133)
(124,719)
(33,651)
(1,943)
(706)
(2,437)
40,985
377,908
(86,816)
291,092
-
291,092
2009
$’000
774,953
2,429,851
(259,768)
(88,966)
(46,442)
(4,470)
(147,705)
(1,478)
(5,493)
2,650,482
(798,595)
1,851,887
(578)
1,851,309
Profit after tax attributable to non-controlling interest
(72,765)
(738,657)
Profit after tax attributable to members of
Washington H. Soul Pattinson and Company Limited
218,327
1,112,652
Non statutory information
Profit before non-regular items from ordinary activities after
tax attributable to members
Profit from non-regular items after income tax attributable
to members
Profit after tax and non-regular items attributable to members
181,555
224,685
4
36,772
218,327
887,967
1,112,652
The Directors consider that the disclosure of the impact of non-regular items included in profits, enhances the understanding
of the results attributable to members. Further details are provided in note 4.
Earnings per share
Basic and diluted earnings per share to ordinary equity holders of Washington H.
Soul Pattinson and Company Limited
Continuing operations
Discontinued operations
Earnings per share from all operations
Weighted average number of shares used in calculating basic and diluted
earnings per share
2010
cents
91.49
0.00
91.49
2009
cents
466.49
(0.24)
466.25
No. of shares
238,640,580
238,640,580
The above consolidated income statement should be read in conjunction with the accompanying notes.
- 31 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 32
Consolidated Statement of Comprehensive Income
For the year ended 31 July 2010
Profit after tax for the year
Other comprehensive income
Net movement in the fair value of long term equity investments, net of tax
Net movement in hedge reserve, net of tax
Net movement in foreign currency translation reserve, net of tax
Net movement in equity reserve, net of tax
Total other comprehensive income for the year, net of tax
2010
$’000
2009
$’000
291,092
1,851,309
67,403
3,269
(72)
915
71,515
63,713
4,685
(1,418)
(3,488)
63,492
Total comprehensive income for the year
362,607
1,914,801
Total comprehensive income attributable to non-controlling interest
(101,763)
(774,818)
Total comprehensive income attributable to members of
Washington H. Soul Pattinson and Company Limited
260,844
1,139,983
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
- 32 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 33
Consolidated Statement of Financial Position
As at 31 July 2010
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
Notes
31 July 2010
$’000
31 July 2009
$’000
Current assets
Cash and cash equivalents
Term deposits
Trade and other receivables
Inventories
Investments fair valued through profit and loss
Derivative financial instruments
Current tax asset
Current assets classified as held for sale
Other assets
Total current assets
Non-current assets
Trade and other receivables
Equity accounted associates and joint ventures
Long term equity investments
Other financial assets
Derivative financial instruments
Property, plant and equipment
Exploration and evaluation assets
Investment property
Deferred tax assets
Intangible assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Interest bearing liabilities
Current tax liabilities
Provisions
Total current liabilities
Non-current liabilities
Deferred tax liabilities
Provisions
Other
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Reserves
Retained profits
Parent entity interest
Non-controlling interest
Total equity
10
11
12
13
15
16
17
14
18
19
20
21
16
22
23
24
25
26
27
28
29
31
30
32
33
33
109,821
1,655,365
59,305
53,087
49,011
15,673
1,689
576,211
346
2,520,508
4,919
685,739
547,707
5,000
11,675
458,706
3,030
-
43,437
6,991
1,767,204
228,530
2,619,238
48,144
45,421
45,056
14,525
812
-
124
3,001,850
4,607
526,798
924,907
12,553
8,157
416,121
2,572
35
38,700
8,360
1,942,810
4,287,712
4,944,660
64,113
41,193
24,154
19,941
149,401
298,592
20,079
-
318,671
468,072
43,264
33,827
746,156
20,103
843,350
255,983
17,942
122
274,047
1,117,397
3,819,640
3,827,263
32,900
810,243
1,937,108
2,780,251
1,039,389
3,819,640
32,900
768,942
1,841,068
2,642,910
1,184,353
3,827,263
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
- 33 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 34
Consolidated Statement of Changes in Equity
For the year ended 31 July 2010
Year ended 31 July 2010
Total equity at the beginning of the year
1 August 2009
Net profit for the year after tax
Other comprehensive income for the year
Net movement in the asset revaluation reserve,
net of tax
Net movement in hedge reserve
Net movement in foreign currency translation
reserve
Net movement in equity reserve
Total comprehensive income for the year
Transactions with owners
Dividends declared and paid
Contributions of equity, net of transaction costs
Net movement in share-based payments reserve
Exit from Group of subsidiary
Equity transfer from members on issue of share
capital in controlled entities
Total equity at the end of the year
31 July 2010
Year ended 31 July 2009
Total equity at the beginning of the year
1 August 2008
Net profit for the year after tax
Other comprehensive income for the year
Net movement in the asset revaluation reserve,
net of tax
Net movement in hedge reserve
Net movement in foreign currency translation
reserve
Net movement in equity reserve
Total comprehensive income for the year
Transactions with owners
Dividends declared and paid
Contributions of equity, net of transaction costs
Net movement in share-based payments reserve
Acquisition of additional ownership in subsidiaries
Equity transfer from members on issue of share
capital in controlled entities
Total equity at the end of the year
31 July 2009
Share
capital
$’000
Retained
profits
Reserves
$’000
$’000
Total members controlling
Non-
equity
$’000
interests
$’000
Total
$’000
32,900
1,841,068
768,942
2,642,910
1,184,353
3,827,263
-
-
-
-
-
-
-
-
-
-
-
218,327
-
218,327
72,765
291,092
-
-
-
(164)
218,163
(111,969)
-
-
-
39,698
1,984
(80)
1,079
42,681
-
-
(1,380)
-
39,698
1,984
(80)
915
260,844
27,705
1,285
67,403
3,269
8
-
101,763
(72)
915
362,607
(111,969)
-
(1,380)
-
(273,500)
17,982
(1,263)
(100)
(385,469)
17,982
(2,643)
(100)
(10,154)
-
(10,154)
10,154
-
32,900
1,937,108
810,243
2,780,251
1,039,389
3,819,640
32,900
793,887
744,033
1,570,820
445,175
2,015,995
-
-
-
-
-
-
-
-
-
-
-
1,112,652
-
1,112,652
738,657
1,851,309
-
-
-
-
1,112,652
(58,296)
-
-
44
29,674
2,568
(1,423)
(3,488)
27,331
-
-
(2,422)
-
29,674
2,568
34,039
2,117
63,713
4,685
(1,423)
(3,488)
1,139,983
5
-
774,818
(1,418)
(3,488)
1,914,801
(58,296)
-
(2,422)
44
(51,409)
10,546
629
(3,593)
(109,705)
10,546
(1,793)
(3,549)
(7,219)
-
(7,219)
8,187
968
32,900
1,841,068
768,942
2,642,910
1,184,353
3,827,263
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
- 34 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 35
Consolidated Statement of Cash Flows
For the year ended 31 July 2010
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
Notes
44
Cash flows from operating activities
Receipts from customers inclusive of GST
Receipt of GST on the sale of the New Saraji coal project
Payments to suppliers and employees inclusive of GST
Payment of GST on the sale of the New Saraji coal project
Dividends received
Interest received
Finance costs
Income taxes paid
Net cash (outflow)/inflow from operating activities
Cash flows from investing activities
Payment for property, plant and equipment and intangibles
Proceeds from sale of property, plant and equipment
Costs incurred on the sale of the New Saraji coal project
Payments for exploration and evaluation activities
Net proceeds from/(payments for) term deposits
Payments for investments
Proceeds from sale of investments
Cash outflow from loss of control of a subsidiary
Loans advanced
Loan repayments received
Net cash inflow from investing activities
Cash flows from financing activities
Proceeds from issues of equity
Dividends paid
Proceeds from interest bearing liabilities
Net cash (outflow) from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at the end of the year
10a
2010
$’000
729,199
-
(531,978)
-
197,221
53,846
225,392
(313)
(805,509)
(329,363)
(82,376)
440
-
(13,860)
855,998
(177,815)
27,698
(2,070)
(3,739)
2,117
606,393
14,042
(411,911)
5,314
(392,555)
(115,525)
228,530
(3,184)
109,821
2009
$’000
626,789
245,000
(388,656)
(245,000)
238,133
53,124
40,059
(280)
(65,417)
265,619
(120,138)
2,450,523
(670)
(8,289)
(2,223,898)
(80,326)
28,943
(1,751)
(1,544)
1,066
43,916
9,967
(125,385)
3,961
(111,457)
198,078
34,337
(3,885)
228,530
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
- 35 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 36
Contents of the Notes to the Financial Statements
Note
Page
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
Summary of significant accounting policies
Critical accounting estimates and judgements
Segment information
Non-regular items impacting profit
Revenue
Other income
Expenses
Income tax expense
Dividends
Current assets – Cash and cash equivalents
Current assets – Term deposits
Current assets – Trade and other receivables
Current assets – Inventories
Current assets – Current assets classified as held for sale
Current assets – Investments fair valued through profit and loss
Derivatives
Current assets – Current tax asset
Non-current assets – Trade and trade receivables
Non-current assets – Equity accounted associates and joint ventures
Non-current assets – Long term equity investments
Non-current assets – Other financial assets
Non-current assets – Property, plant and equipment
Non-current assets – Exploration and evaluation assets
Non-current assets – Investment property
Non-current assets – Deferred tax assets
Non-current assets – Intangible assets
Current liabilities – Trade and other payables
Current liabilities – Interest bearing liabilities
Current liabilities – Provisions
Non-current liabilities – Provisions
Non-current liabilities – Deferred tax liabilities
Share capital
Reserves and retained profits
Financial risk management
Contingent liabilities
Commitments for expenditure
Parent entity financial information
Subsidiaries
Discontinued operation
Investments in associates and joint ventures
Key management personnel
Related parties
Remuneration of auditors
Reconciliation of profit after income tax to net cash (outflow)/inflow from operating activities
Share-based payments
Events after the reporting date
- 36 -
37
49
50
53
53
53
54
55
56
57
57
57
58
58
58
59
59
60
60
60
60
61
63
63
63
64
65
65
66
66
66
67
67
70
73
73
74
75
76
77
80
84
86
87
87
90
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 37
Notes to the Financial Statements For the year ended 31 July 2010
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below. These
policies have been consistently applied to all the years presented, unless otherwise stated. The financial statements are for the
consolidated entity (“WHSP”) consisting of Washington H. Soul Pattinson and Company Limited and its controlled entities
(“Consolidated entity” or “Group”). In accordance with the Corporations Amendment (Corporate Reporting Reform) Act 2010,
parent entity accounts are no longer required to be presented in the consolidated financial statements. Summarised parent
entity financial information is provided in note 37.
Washington H. Soul Pattinson and Company Limited is a listed public company, incorporated and domiciled in Australia.
a) Basis of preparation of accounts
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards, other
authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Interpretations and the
Corporations Act 2001.
i. Compliance with International Financial Reporting Standards (IFRS)
Australian Accounting Standards include Australian Equivalents to International Financial Reporting Standards (AIFRS).
Compliance with AIFRS ensures that the consolidated financial statements and notes of Washington H. Soul Pattinson and
Company Limited comply with IFRS.
ii. Historical cost convention
These financial statements have been prepared under historical cost conversion, as modified by the revaluation of long term
equity investments, financial assets and liabilities (including derivative instruments) carried at fair value through profit or loss,
certain classes of property, plant and equipment and investment property.
iii. Critical accounting estimates
The preparation of financial statements requires the use of certain critical accounting estimates. It also requires management
to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of
judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in
note 2.
iv. Financial statement presentation
The Group has applied the revised AASB 101 Presentation of Financial Statements which became effective for financial years
beginning on 1 January 2009. The following provides current terms adopted under the new standard and previously used terms
under the old standard:
Old terminology
Balance Sheet
Cash flow statement
Minority interest or
Outside equity interest
New terminology
Statement of financial position
Statement of cash flows
Non-controlling interest
The Group has attempted to improve the transparency of its reporting by adopting ‘plain English’ where possible. Key ‘plain
English’ phrases and their equivalent AASB terminology are as follows:
‘Plain English’ terminology
Share capital
AASB Terminology
Contributed equity
Investments fair valued through profit and loss
Other financial assets at fair value through profit or loss
Long term equity investments
Available for sale financial assets
Equity accounted associates and joint ventures
Investments accounted for using the equity method
Term deposits
Held to maturity investments
The revised standard also requires the presentation of a statement of comprehensive income which presents all items of
recognised income and expense either in one statement or in two linked statements.The Consolidated entity has elected to
present two statements.
- 37 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 38
Notes to the Financial Statements (continued) For the year ended 31 July 2010
NOTE 1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
b) Principles of consolidation
i. Subsidiaries
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Washington H. Soul Pattinson
and Company Limited (“Company” or “Parent entity”) as at 31 July 2010 and the results of all subsidiaries for the year
then ended.
Subsidiaries are all those entities (including special purpose entities) over which the Group has the power to govern the financial
and operating policies, generally accompanying a shareholding of more than one-half of the voting rights. The existence and
effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group
controls another entity.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from
the date that control ceases.
The acquisition method of accounting is used to account for the acquisition of subsidiaries by the Group.
Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised
losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting
policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
Non-controlling interests in the results and equity of subsidiaries are shown separately in the income statement, statement of
comprehensive income, statement of changes in equity and statement of financial position respectively.
The Group applies a policy of treating transactions with non-controlling interests as transactions with equity owners of the
Group. For purchases from non-controlling interests, the difference between any consideration paid and the relevant share
acquired of the carrying value of net assets of the subsidiary is deducted from equity. For disposals to non-controlling interests,
differences between any proceeds received and the relevant share of non-controlling interests are also recorded in equity.
ii. Associates
Associates are all entities over which the Group has significant influence but not control or joint control, generally
accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for in
the consolidated financial statements using the equity method of accounting, after initially being recognised at cost. The
Group’s investment in associates includes goodwill (net of any accumulated impairment loss) identified on acquisition.
The Group's share of its associates' post-acquisition profits or losses is recognised in the income statement, and its share of
post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted
against the carrying amount of the investment. Dividends receivable from associates are recognised in the consolidated financial
statements by reducing the carrying amount of the investment.
When the Group's share of losses in an associate equals or exceeds its interest in the associate, including any unsecured
receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the
associate.
Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group's interest in
the associate. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset
transferred. Accounting policies of the associates have been changed where necessary to ensure consistency with the policies
adopted by the Group.
iii. Joint venture entities
The interest in a joint venture is accounted for in the consolidated financial statements using the equity method. Under the
equity method, the share of the profits or losses of the joint venture is recognised in the income statement, and the share of
post-acquisition movements in reserves is recognised in other comprehensive income.
Profits or losses on transactions establishing the joint venture and transactions with the joint venture are eliminated to the
extent of the Group’s ownership interest until such time as they are realised by the joint venture on consumption or sale.
However, a loss on the transaction is recognised immediately if the loss provides evidence of a reduction in the net realisable
value of current assets, or an impairment loss.
c) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision
maker. The chief operating decision maker, is responsible for allocating resources and assessing performance of the operating
segments.
- 38 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 39
Notes to the Financial Statements (continued) For the year ended 31 July 2010
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
c) Segment reporting (continued)
Change in accounting policy
The Group has adopted AASB 8 Operating Segments from 1 July 2009. AASB 8 replaces AASB 114 Segment Reporting. The
new standard requires a ‘management approach’ under which segment information is presented on the same basis as that used
for internal reporting purposes. This has resulted in a re-allocation between reportable segments presented. Comparatives for
2009 have been restated.
d) Foreign currency translation
i. Functional and presentation currency
Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic
environment in which the entity operates ("the functional currency"). The consolidated financial statements are presented in
Australian dollars, which is Washington H. Soul Pattinson and Company Limited’s, functional and presentation currency.
ii. Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at
year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income
statement, except when deferred in equity as qualifying cash flow hedges and qualifying net investment hedges.
Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date
when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of
the fair value gain or loss. For example, differences on non-monetary assets and liabilities such as investments fair valued through
profit and loss are recognised in the income statement, as part of the fair value gain or loss and translation differences on
non-monetary assets, such as long term equity investments are included in the asset revaluation reserve in equity.
iii. Group companies
The results and financial position of all of the Group entities that have a functional currency different from the presentation
currency are translated into the presentation currency as follows:
• assets and liabilities are translated at the closing rates at the reporting date;
• income and expenses are translated at average exchange rates (unless this is not a reasonable approximation of the
cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at
the dates of the transactions); and
• all resulting exchange differences are recognised as a separate component of equity.
On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of borrowings
and other financial instruments designated as hedges of such investments, are recognised in other comprehensive income. When
a foreign operation is sold or any borrowings forming part of the net investment are repaid, a proportionate share of such
exchange differences is reclassified to the income statement, as part of the gain or loss where applicable.
e) Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of
returns, trade allowances, rebates and amounts collected on behalf of third parties.
The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic
benefits will flow to the entity and specific criteria have been met for each of the Group’s activities as described below:
• Revenue from the sale of goods (net of returns, discounts and allowances) is recognised when the goods are despatched to
the customer and for coal sales when title has transferred to the customer in accordance with the sales terms. Where a sale
is settled through instalments, interest revenue is recognised over the contract term, using the effective interest rate method.
• Service fee income is recognised as the services are performed.
• Consulting and management fee income is recognised as the services are performed and the control of the right to be
compensated for the commitments undertaken.
• Interest income is recognised on a time proportion basis using the effective interest method.
• Dividend income is taken into revenue when the right to receive payment is established. Dividends received from
associates are accounted for in accordance with the equity method of accounting. Refer note (1 b).
• Rental income is recognised on a straight-line basis over the lease term.
- 39 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 40
Notes to the Financial Statements (continued) For the year ended 31 July 2010
NOTE 1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
f) Income tax
The income tax expense or revenue for the period is the tax payable on the current period's taxable income based on the
applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to the
temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and
unused tax losses.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the
reporting period in the countries where the company’s subsidiaries and associates operate and generate taxable income.
Management periodically evaluates positions taken in tax returns with repect to situations in which applicable tax regulation is
subject to interpretations. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax
authorities.
Deferred tax assets and liabilities are provided in full using the liability method on temporary differences arising between the
tax bases of assets and liabilities and the carrying amount in the consolidated financial statements are determined using tax
rates (and laws) expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are
enacted or substantively enacted for each jurisdiction. The relevant tax rates are applied to the cumulative amounts of
deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain
temporary differences arising from the initial recognition of an asset or liability. No deferred tax asset or liability is recognised
in relation to these temporary differences if they arose in a transaction, other than a business combination, that at the time of
the transaction did not affect either accounting profit or taxable profit or loss.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future
taxable amounts will be available to utilise those temporary differences and losses.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities
and when the deferred tax balances relate to the same taxation authority. Current tax assets and liabilities are offset where the
entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the
liability simultaneously.
Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity.
Investment allowance
Companies within the Group may be entitled to claim special tax deductions for investments in qualifying assets (investment
allowances). The Group accounts for such allowances as tax credits, which means that the allowance reduces income tax
payable and current tax expense. A deferred tax asset is recognised for unclaimed tax credits that are carried forward.
Tax consolidation legislation
Some of the entities within the consolidated entity have formed tax consolidated groups under the tax consolidation regime.
The Australian Tax Office has been notified on these decisions.
Controlled entities within the relevant tax-consolidated groups, continue to be responsible by the operation of tax funding
agreements, for funding tax payments required to be made by the head entity in their tax consolidation groups from underlying
transactions of their controlled entities.
Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts receivable
from or payable to other entities in the Group.
Any difference between the amounts assumed and amounts receivable or payable under the tax funding agreements are
recognised as a contribution to (or distribution from) wholly-owned tax considated entities.
g) Business Combinations
Business combinations occur where an acquirer obtains control over one or more businesses and results in the consolidation of
its assets and liabilities.
The acquisition method of accounting is used to account for all business combinations, including business combinations
involving entities or businesses under common control, regardless of whether equity instruments or other assets are acquired.
The consideration transferred for the acquisition of a subsidiary comprises the fair values of the assets transferred, the liabilities
incurred and the equity interests issued by the Group. The consideration transferred also includes the fair value of any
contingent consideration arrangement and the fair value of any pre-existing equity interest in the subsidiary. Acquisition-related
costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business
combination are, with limited exceptions, measured initially at their fair values at the acquisition date. On an acquisition-by-
acquisition basis, the Group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling
interest’s proportionate share of the acquiree’s net identifiable assets.
- 40 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 41
Notes to the Financial Statements (continued) For the year ended 31 July 2010
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
g) Business Combinations (continued)
The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date
fair value of any previous equity interest in the acquiree over the fair value of the Group’s share of the net identifiable assets
acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the subsidiary
acquired and the measurement of all amounts has been reviewed, the difference is recognised directly in the income statement
as a bargain purchase.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their
present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at
which a similar borrowing could be obtained from an independent financier under comparable terms and conditions.
Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are
subsequently remeasured to fair value with changes in fair value recognised in profit or loss.
Change in accounting policy
A revised AASB 3 Business Combinations became operative on 1 July 2009. While the revised standard continues to apply the
acquisition method to business combinations, there have been some significant changes.
All purchase consideration is now recorded at fair value at the acquisition date. Contingent payments classified as debt are
subsequently remeasured through profit or loss. Under the Group’s previous policy, contingent payments were only recognised
when the payments were probable and could be measured reliably and were accounted for as an adjustment to the cost of
acquisition.
Acquisition-related costs are expensed as incurred. Previously, they were recognised as part of the cost of acquisition and
therefore included in goodwill.
Non-controlling interests in an acquiree are now recognised either at fair value or at the non-controlling interest’s proportionate
share of the acquiree’s net identifiable assets. This decision is made on an acquisition-by-acquisition basis. Under the previous
policy, the non-controlling interest was always recognised at its share of the acquiree’s net identifiable assets.
If the Group recognises previous acquired deferred tax assets after the initial acquisition accounting is completed there will no
longer be any adjustment to goodwill. As a consequence, the recognition of the deferred tax asset will increase the Group’s
net profit after tax.
h) Impairment of assets
Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for
impairment or more frequently if changes or circumstances indicate that they may be impaired. Other assets are reviewed for
impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An
impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The
recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing
impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows which are largely
independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets other than
goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.
Impairment losses are recognised in the income statement, unless an asset has previously been revalued, in which case the
impairment loss is recognised as a reversal to the extent of that previous revaluation with any excess recognised through the
income statement.
i) Cash and cash equivalents
For the purposes of presentation in the statement of cash flows, cash and cash equivalents include cash on hand, deposits held
at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that
are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank
overdrafts. Bank overdrafts, should they occur, are shown within borrowings in the current liabilities in the statement of
financial position.
j) Trade receivables
Trade receivables are recognised initially at fair value and subsequently at amortised cost, using the effective interest method,
less provision for impairment. Trade receivables are due for settlement between 30 and 45 days from the date of recognition.
Collectibility of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off
by reducing the carrying amount directly. An allowance account (provision for impairment of trade receivables) is used when
there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the
- 41 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 42
Notes to the Financial Statements (continued) For the year ended 31 July 2010
NOTE 1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
j) Trade receivables (continued)
receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial
reorganisation, and default or delinquency in payments (more than 30 to 45 days overdue) are considered indicators that the
trade receivable is impaired. The amount of the impairment allowance is the difference between the asset’s carrying amount
and the present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows relating to
short-term receivables are not discounted if the effect of discounting is immaterial.
The amount of the impairment loss is recognised in the income statement. When a trade receivable for which an impairment
allowance had been recognised becomes uncollectible in a subsequent period, it is written off against the allowance account.
Subsequent recoveries of amounts previously written off are credited to the income statement.
k) Inventories
Inventories are measured at the lower of cost and net realisable value. Cost comprises direct materials, direct labour and an
appropriate portion of variable and fixed overheads, the latter being allocated on the basis of normal operating capacity. Net
realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the
estimated costs necessary to make the sale.
Coal stocks are valued at the lower of cost, including an appropriate proportion of fixed and variable mining overheads, and
net realisable value in the normal course of business.
l) Non-current assets (or disposal groups) held for sale and discontinued operations
Non-current assets (or disposal groups) are classified as held for sale if their carrying amount will be recovered principally
through a sale transaction rather than through continuing use and a sale is considered highly probable.
An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal group) to fair value less cost
to sell. A gain is recognised for any subsequent increases in fair value less cost to sell of an asset (or disposal group), but not
in excess of any cumulative impairment loss previously recognised. Any gain or loss not previously recognised by the date of
the sale of the non-current asset (or disposal group) is recognised at the date of derecognition.
Non-current assets (including those that are part of a disposal group) are not depreciated or amortised while they are classified
as held for sale. Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale continue
to be recognised.
Non-current assets classified as held for sale and the assets of a disposal group classified as held for sale are presented
separately from the other assets in the statement of financial position. The liabilities of a disposal group classified as held for
sale are presented separately from other liabilities in the statement of financial position.
A discontinued operation is a component of the Group that has been disposed of or is classified as held for sale and that
represents a separate major line of the business or geographical area of operations, is part of a single coordinated plan to
dispose of such a line of the business or area of operations, or a subsidiary acquired exclusively with the view to resale. The
results of discontinued operations are presented separately on the face of the income statement.
m) Investments and other financial assets
Classification
The Group classifies its investments in the following categories: long term equity investments, financial assets fair valued
through profit and loss, loans and receivables and term deposits. The classification depends on the purpose for which the
investments are acquired. Management determines the classification of its investments at initial recognition.
i. Long term equity investments
Long term equity investments comprise holdings in marketable equity securities which are intended to be held for the long
term. These investments are included in non-current assets unless management intends to dispose of the investment within 12
months of the reporting date.
ii. Investments fair valued through profit and loss
Investments fair valued through profit and loss comprises principally of securities held for the purpose of selling in the short to
medium term. Derivatives are included in this classification unless they are designated as hedges. Assets in this category are
classified as current assets.
iii. Loans and receivables
Loans and receivables are non-derivative financial assets with fixed determinable payments that are not quoted in an active
market. They are included in current assets, except for those with maturities of greater than 12 months after the reporting
- 42 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 43
Notes to the Financial Statements (continued) For the year ended 31 July 2010
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
m) Investments and other financial assets (continued)
date which are classified as non-current assets. Loan and receivables are included in trade and other receivables in the statement
of financial position.
iv. Term deposits
Term deposit investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the
Group's management has the positive intention and ability to hold to maturity. Term deposit financial assets are included in
current assets, except those with maturities of more than 12 months from the reporting date, which are classified as
non-current assets.
Recognition and derecognition
Regular purchases and sale of financial assets are recognised on trade date – the date on which the Group commits to purchase
or sell the asset. Long term equity investments are initially recognised at fair value plus transaction costs. Investments fair valued
through profit and loss are initially recognised at fair value. Financial assets are derecognised when the rights to receive cash
flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the risks
and rewards of ownership. A financial liability is derecognised when the obligation under the liability is discharged, cancelled
or expired. When an existing financial liability is replaced by another from the same lender on substantially different terms, or
the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of
the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in
statement of comprehensive income.
When securities classified as long term equity investments are sold, the accumulated fair value adjustments previously
recognised in equity, are transferred to the income statement.
Subsequent measurement
Long term equity investments and investments fair valued through profit and loss are subsequently carried at fair value. Gains
or losses arising from changes in the fair value of the ‘Investments fair valued through profit and loss’ category, are presented
in the income statement within other income in the period in which they arise. Changes in the fair value of long term equity
investments are recognised in equity through the asset revaluation reserve.
Loans and receivables and term deposits are carried at amortised cost using the effective interest method.
Fair value
The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active (and for
unlisted securities), the Group establishes fair value by using valuation techniques. These include the use of recent arm’s length
transactions, references to other instruments that are substantially the same, and discounted cash flow analysis.
Impairment
The Group assesses at each reporting date whether there is objective evidence that a financial asset or group of financial assets
is impaired. In the case of equity securities classified as long term equity investments, a significant or prolonged decline in the
value of a security below its cost is considered an indicator that the security may be impaired. Impairment losses are recognised
in the income statement.
n) Derivatives - Forward foreign exchange contracts
The Group hedges its foreign currency exposure by entering into forward 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 method of recognising the resulting gain or loss depends on whether the
derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group designates
derivatives as hedges of highly probable forecast transactions (cash flow hedges).
The Group documents at the inception of the transaction, the relationship between hedging instruments and hedged items, as
well as its risk management objectives and strategy for undertaking various hedge transactions. The Group also documents its
assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions
have been and will continue to be highly effective in offsetting changes in fair values or cash flows of hedged items.
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised
in the hedging reserve. The gain or loss relating to the ineffective portion is recognised immediately in income statement.
- 43 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 44
Notes to the Financial Statements (continued) For the year ended 31 July 2010
NOTE 1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
n) Derivatives - Forward foreign exchange contracts (continued)
Amounts accumulated in equity are recycled in the income statement in the periods when the hedged item will affect profit or
loss (for instance when the forecast sale that is hedged takes place). However, when the forecast transaction that is hedged
results in the recognition of a non-financial asset (for example, inventory) or a non-financial liability, the gains and losses
previously deferred in equity are transferred from equity and included in the measurement of the initial cost or carrying amount
of the asset or liability.
When a hedging instrument expires or is sold or terminated, or when a hedge no longer meets the criteria for hedge
accounting, any cumulative gain or loss in equity at that time remains in equity and is recognised when the forecast transaction
is ultimately recognised in the profit or loss. When a forecast transaction is no longer expected to occur, the cumulative gain
or loss that was reported in equity is immediately transferred to the income statement.
o) Fair value estimation
The fair value of financial assets and financial liabilities must be estimated for recognition and measurement for disclosure
purposes.
The fair value of financial instruments traded in active markets is based on quoted market prices at the reporting date. The
quoted market price used for financial assets held by the Group is the current bid price; the appropriate quoted market price
for financial liabilities is the current ask price.
The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is
determined using valuation techniques. The Group uses a variety of methods and makes assumptions that are based on market
conditions existing at each balance date. The fair value of forward exchange contracts is determined using forward exchange
market rates at the reporting date.
The carrying value less estimated credit adjustments and impairment provision of trade receivables and payables are assumed
to approximate their fair values due to their short-term nature. The fair value of financial liabilities for disclosure purposes is
estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for
similar financial instruments.
p) Property, plant and equipment
Freehold land is carried at the lower of cost and recoverable amount.
Property, plant and equipment, excluding investment properties, are stated at historical cost less accumulated depreciation and
impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Cost may also
include transfers from equity of any gains/losses on qualifying cash flow hedges of foreign currency purchases of property, plant
and equipment. The cost of self constructed assets includes the cost of materials, direct labour, the initial estimate where
relevant, of the cost of dismantling and removing the items and restoring the site under which they are located and an
appropriate proportion of production overhead.
Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be
measured reliably. All other repairs and maintenance are charged to the income statement during the reporting period in which
they are incurred.
The depreciable amount of all fixed assets including building and capitalised lease assets, but excluding freehold land, is
depreciated on a straight line basis over their useful lives to the Group commencing from the time the asset is held ready
for use.
The depreciation rates used for each class of depreciable assets are:
Class of Property, plant and equipment:
Depreciation rate
Buildings
Machinery
Vehicles
1
2 – 5%
2
5 – 33 %
3
1
15 – 33 %
3
1
Furniture, fittings and equipment
5 – 40%
Mining reserves & leases
Mine development costs
Over productive life of mine
Over productive life of mine
The assets residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date.
- 44 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 45
Notes to the Financial Statements (continued) For the year ended 31 July 2010
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
p) Property, plant and equipment (continued)
An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than
its recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These are included in the
income statement.
q) Mine properties, mine development costs, mining reserves and mining leases
Development expenditure incurred by the Group is accumulated separately for each area of interest in which economically
recoverable mineral resources have been identified. Direct development expenditure, pre-operating mine start-up costs, and an
appropriate portion of related overhead expenditure are capitalised as mine development costs up until the relevant mine is in
commercial production.
Mining reserves, leases and mine development costs are amortised over the estimated productive life of each applicable mine
on either a unit of production basis or years of operation basis, as appropriate. Amortisation commences when a mine
commences commercial production.
r) Investment Property
Investment property, principally comprised of land is not occupied by the Group, and is carried at cost.
s) Leases
Leases of property, plant and equipment where the Group, as lessee, has substantially all the risks and benefits incidental to
the ownership of the asset are classified as finance leases. Finance leases are capitalised by recording an asset and a liability at
the lower of the amounts equal to the fair value of the leased property or the present value of the minimum lease payments,
including any guaranteed residual values. Lease payments are allocated between the reduction of the lease liability and the
lease interest expense for the period. Leased assets are depreciated on a straight line basis over their estimated useful lives
where it is likely that the Group will obtain ownership of the asset or over the term of lease.
Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Group as lessee are
classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are
charged to the income statement on a straight-line basis over the period of the lease.
t) Intangible assets
i. Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets
of the acquired subsidiary/associate at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in intangible
assets. Goodwill on acquisitions of associates is included in the carrying amount of investments in associates. Goodwill is not
amortised. Instead, goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate
that it might be impaired, and is carried at cost less accumulated impairment losses. Goodwill acquired is allocated to each of
the cash-generating units expected to benefit from the combination's synergies, unless there is no reasonable and consistent
basis to do so, in which case goodwill is allocated to groups of cash-generating units. Impairment is determined by assessing
the recoverable amount of the cash-generating unit to which the goodwill relates. Where this recoverable amount is less than
the carrying amount, an impairment loss is recognised.
Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
ii. Software
Software is stated at historical cost less applicable amortisation. Historical cost includes expenditure that is directly attributable
to the acquisition of software. Amortisation is calculated so as to write off the cost of each item of software during its expected
economic life to the Group.
iii. Other intangible assets
Other intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and impairment losses.
iv. Subsequent expenditure
Subsequent expenditure on capitalised intangible assets is capitalised only when it increases the future economic benefits
embodied in the specific asset to which it relates. All other expenditure is expensed as incurred.
- 45 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 46
Notes to the Financial Statements (continued) For the year ended 31 July 2010
NOTE 1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
t) Intangible assets (continued)
Amortisation of intangible assets
Amortisation is charged to the income statement on a straight-line basis, unless otherwise stated, over the estimated useful
lives of intangible assets unless such lives are indefinite. Intangible assets with an indefinite useful life are systematically tested
for impairment at each reporting date. Other intangible assets are amortised from the date they are available for use. The
estimated useful lives of intangibles are as follows:
Class of intangible
Goodwill
Software
Useful life
Indefinite life
3 – 5 years
Impairment of assets
The carrying amount of the Group’s assets are reviewed at the end of each reporting period to determine whether there is any
indication of impairment. If any such indication exists, the assets recoverable amount is estimated.
An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable
value. Impairment losses are expensed to the income statement unless an asset has previously been revalued, in which case the
impairment loss is recognised as a reversal to the extent of that previous revaluation with any excess recognised through the
income statement.
The recoverable amount is the higher of an asset’s fair value less cost to sell and its value in use.
u) Trade and other payables
Trade and other payables are stated at their amortised cost. These amounts represent liabilities for goods and services provided
to the Group prior to the end of the financial year and which are unpaid. The amounts are unsecured and usually paid within
30 to 45 days of recognition.
v) Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable
that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. Provisions
are not recognised for future operating losses.
Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present
obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects
current market assessments of the time value of money and the risks specific to the liability.
i. Restoration, rehabilitation and environmental expenditure
Provisions are raised for restoration, rehabilitation and environmental expenditure as soon as an obligation exists, with the cost
being charged to the income statement in respect of ongoing rehabilitation. Where the obligation relates to decommissioning
of assets and restoring the sites on which they are located, the costs are carried forward in the value of the asset and amortised
over its useful life.
The obligations include profiling, stabilisation and revegetation of the completed area, with cost estimates based on current
statutory requirements and current technology.
ii. Premises ‘make good’ provision
Future estimated costs for the restoration of leased factory premises to their condition at lease inception are recognised at the
present value of those future costs.
w) Employee benefits
i. Short term obligations
Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave expected to be
settled within 12 months after the end of the period in which the employees render the related service are recognised in respect
of employees’ services up to the end of the reporting period and are measured at the amounts expected to be paid when the
liabilities are settled. The liability for annual leave and accumulating sick leave is recognised in the provision for employee
benefits. All other short term employee benefit obligations are presented as payables.
- 46 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 47
Notes to the Financial Statements (continued) For the year ended 31 July 2010
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
w) Employee benefits (continued)
ii. Other long-term employee benefit obligations
The liability for long service leave and annual leave which is not expected to be settled within 12 months after the end of the
period in which the employees render the related service is recognised in the provision for employee benefits and measured as
the present value of expected future payments to be made in respect of services provided by employees up to the end of the
reporting period. Consideration is given to expected future wage and salary levels, experience of employee departures and
periods of service. Expected future payments are discounted using appropriate risk free rates as applicable to the estimated
future cash outflows.
iii. Retirement benefit obligations
All employees of the Group are entitled to benefits from the Group’s superannuation plans on retirement, disability or death.
The Group has defined benefit sections and defined contribution sections within its plans. The defined benefit section provides
defined lump sum benefits based on years of service and final average salary. The defined contribution section receives fixed
contributions from Group companies and the Group’s legal or constructive obligation is limited to these contributions.
Contributions are recognised as an expense in the income statement on an accruals basis.
iv. Share-based payments
Share-based payments are provided to employees of Group entities. Details of these schemes are set out in note 45.
The fair value of options granted is recognised as an employee benefit expense with a corresponding increase in equity. The
fair value is measured at grant date and recognised over the period during which the employee becomes unconditionally
entitled to the options. Options are exercisable by current employees during the nominated vesting period or by directors'
consent.
The fair value at grant date is independently determined using various option pricing models and are detailed in note 45.
The fair value of the options granted is adjusted to reflect the market vesting condition, but excludes the impact of any non-
market vesting conditions. Non-market vesting conditions are included in assumptions about the number of options that are
expected to become exercisable. At each reporting date, the entity revises its estimate of the number of options that are
expected to become exercisable. The employee benefit expense recognised each period takes into account the most recent
estimate. The impact of the revision to the original estimates, is recognised in income statement with a corresponding
adjustment to equity.
x) Exploration and evaluation expenditure
Exploration, evaluation and relevant acquisitions costs are accumulated separately for each area of interest. They comprise
acquisition costs, direct exploration and evaluation costs and an appropriate portion of related overhead expenditure. Costs are
carried forward only if they relate to an area of interest for which rights of tenure are current and such costs are expected to
be recouped through successful development and exploitation or from sale of the area. Exploration and evaluation expenditure
which does not satisfy these criteria is written off.
y) Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown
in equity as a deduction net of tax, from the proceeds. The amounts of any capital returns are applied against share capital.
z) Dividends
Provision is made for the amount of any dividend declared on or before the end of the financial year but not distributed at
reporting date.
aa) Parent entity financial information
The financial information for the Parent entity, Washington H. Soul Pattinson and Company Limited, disclosed in note 37 has
been prepared on the same basis as the consolidated financial statements, except as set out below.
i. Investments in subsidiaries, associates and joint venture entities
Investments in subsidiaries, associates and joint venture entities are accounted for at cost in the financial statements of
Washington H. Soul Pattinson and Company Limited. Dividends received from associates are recognised in the Parent entity’s
profit or loss, rather than being deducted from the carrying amount of these investments.
- 47 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 48
Notes to the Financial Statements (continued) For the year ended 31 July 2010
NOTE 1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
bb) Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing:
• the profit attributable to owners of the Company, excluding any costs of servicing equity other than ordinary shares
• by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus element in
ordinary shares issued during the year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account:
• the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and
• the weighted average number of additional ordinary shares that would have been outstanding assumed the conversion of
all dilutive potential ordinary shares
cc) 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 (ATO). 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 receivable or payable. The net
amount of GST recoverable from, or payable to the ATO is included with other receivables or payables in the statement of
financial position.
Cash flows are presented in the statement of cash flows on a gross basis, except for the GST component of investing and
financing activities, which are disclosed as operating cash flows.
dd) Rounding of amounts
The Company is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investment Commission,
relating to the 'rounding off' of amounts in the financial report. Amounts in the financial report have been rounded off in
accordance with that Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar.
ee) Comparative figures
When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for
the current financial year.
ff) New Accounting standards and interpretations
Certain new accounting standards and interpretations have been published that are not mandatory for 31 July 2010 reporting
periods. The Group has elected not to early adopt these standards and interpretations. The Group is currently determining what
impacts these standards and interpretations will have on the amounts recognised in the financial statements. A list of these
standards and interpretations is as follows:
AASB 9: Financial Instruments and AASB 2009-11: Amendments to Australian Accounting Standards arising from
AASB 9 (effective from 1 January 2013).
AASB 9 Financial Instruments addresses the classification and measurement of financial assets and is likely to affect the Group’s
accounting for its financial assets. The standard is not applicable until 1 January 2013 but is available for early adoption. The
Group is yet to assess its full impact. However, initial indications are that it may affect the Group’s accounting for its long term
equity investments, since AASB 9 only permits the recognition of fair value gains and losses in other comprehensive income if
they relate to equity investments that are not investments fair valued through profit and loss. Fair value gains and losses on
long term equity investments debt investments, for example, will therefore have to be recognised directly in profit or loss.
AASB 2009-8 Amendments to Australian Accounting Standards – Group Cash-Settled Sharebased Payment
Transactions [AASB 2] (effective from 1 January 2010)
The amendments made by the AASB to AASB 2 confirm that an entity receiving goods or services in a Group share-based
payment arrangement must recognise an expense for those goods or services regardless of which entity in the Group settles
the transaction or whether the transaction is settled in shares or cash. They also clarify how the Group’s share-based payment
arrangement should be measured, that is, whether it is measured as an equity- or a cash-settled transaction. The Group will
apply these amendments retrospectively for the financial reporting period commencing on 1 August 2010. There will be no
impact on the Group’s financial statements.
- 48 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 49
Notes to the Financial Statements (continued) For the year ended 31 July 2010
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
ff) New Accounting standards and interpretations (continued)
AASB 2009-10 Amendments to Australian Accounting Standards – Classification of Rights Issues
[AASB 132] (effective from 1 February 2010)
In October 2009 the AASB issued an amendment to AASB 132 Financial Instruments: Presentation which addresses the
accounting for rights issues that are denominated in a currency other than the functional currency of the issuer. Provided certain
conditions are met, such rights issues are now classified as equity regardless of the currency in which the exercise price is
denominated. Previously, these issues had to be accounted for as derivative liabilities. The amendment must be applied
retrospectively in accordance with AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors. The Group will
apply the amended standard from 1 August 2010. As the Group has not made any such rights issues, the amendment will not
have any effect on the Group's financial statements.
NOTE 2.
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Estimates and judgements are continually evaluated and are based on historical knowledge and best available current
information. Estimates assume a reasonable expectation of future events and are based on trends and economic data, obtained
both externally and within the Group.
a) Critical accounting estimates and assumptions
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition,
seldom equal actual results. The estimates and assumptions that have significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next financial year are discussed below.
i. Impairment
The Group assesses impairment at each reporting date by evaluating conditions specific to the Group that may lead to
impairment of assets, including receivables, property, plant and equipment, goodwill and intangibles and other assets. Where
an impairment trigger exists, the recoverable amount of the asset is determined. Value-in-use and fair value less costs to sell
calculations are performed in assessing recoverable amounts and require the use of assumptions.
ii. Rehabilitation – coal mining operations
The Group makes estimates about the future cost of rehabilitating tenements which are currently disturbed, based on legislative
requirements and current costs. Cost estimates take into account past experience, and expectations of future events that are
expected to alter past experiences. Any changes to legislative requirements could have a significant impact on the expenditure
required to restore these areas.
iii. Determination of coal reserves and coal resources
The Group estimates its coal reserves and coal resources based on information compiled by Competent Persons as defined in
accordance with the Australasian Code for Reporting of Mineral Resources and Ore Reserves of December 2004 (the “JORC
code”). Reserves determined in this way are used in the calculation of depreciation, amortisation and impairment charges, the
assessment of mine lives and for forecasting the timing of the payment of close down and restoration costs.
iv. Determination of fair value – equity accounted associates
Where it is considered that an active market does not exist or where quoted prices are not reflective of the fair value, fair value
is determined by using a variety of valuation techniques.
The methodologies applied include:
a) Valuation techniques using market observable inputs. Such techniques may include:
– using recent arm’s length market transactions; and/or
– reference to the current fair value of similar instruments; and/or
– discounted cash flow analysis, pricing models or other techniques commonly used by market participants.
b) Valuation techniques using the above, but which include significant inputs that are not observable.
In applying these valuation techniques, the Group uses a number of assumptions and estimates involved in calculating the net
present value of future cash flows from the Group’s businesses, including management’s expectations of:
– growth in earnings,
– timing and quantum of future capital expenditure;
- 49 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 50
Notes to the Financial Statements (continued) For the year ended 31 July 2010
NOTE 2.
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
a) Critical accounting estimates and assumptions (continued)
– movements in net working capital
– long term growth rates; and
– the selection of discount rates to reflect the risks involved.
Due to their nature and the judgement applied, the application of assumptions and estimates means that any selection of
different assumptions, in particular the discount rate and growth rate used in the cash flow projections, could significantly
affect the Group’s impairment evaluation and, hence, results. We consider that the assumptions we have made are appropriate,
and that our financial statements therefore present our financial position and results fairly, in all material respects.
b) Critical judgements in applying the Group’s accounting policies
i. Exploration and development expenditure
During the year, the controlled entity New Hope Corporation Limited (New Hope), capitalised various items of expenditure to
the mine development and exploration expenditure asset account. The relevant items of expenditure were deemed to be part
of the capital cost of developing future mining operations, which would then be amortised over the useful life of the mine. The
key judgement applied in considering whether the costs should be capitalised, is that costs are expected to be recovered
through either successful development or sale of the relevant mining interest.
ii. Investment in Arrow Energy Limited
At 31 July 2010, the controlled entity, New Hope held an investment in Arrow Energy Limited (Arrow). At this time Arrow had
accepted a takeover offer from CS CSG (Australia) Pty Ltd and as a result New Hope’s investment in Arrow has been reclassified
as a current asset held for sale. The Arrow investment was previously classified as a non-current asset, long term equity
investment. Further information regarding the Arrow takeover is provided in note 46.
iii. Investments in Plant Gas Limited and WestSide Corporation Limited
The investments in Planet Gas Limited and WestSide Corporation Limited have been classified as long term equity investments
on the grounds that the Group does not exert significant influence over their operations.
iv. Impairment of financial assets
Significant areas of estimation, uncertainty and critical judgements in applying accounting policies that have the most
significant effect on the financial results for the year ended 31 July 2010 include the assessment of the recoverable amounts
for financial assets, including investments in associates and long term equity investments (refer to notes 7 and 40).
NOTE 3.
SEGMENT INFORMATION
Business Segments
The Group is organised into the following divisions by product and service type:
Continuing operations
Investing activities
The Group engages in investments, including cash, term deposits, and equity investments.
Coal Mining
The Group engages in coal mining activities including exploration, development, production, processing, associated transport
infrastructure and ancillary activities. Coal mining operations are managed as a single integrated coal chain including
transportation and infrastructure.
Consulting
The Group is involved in the provision of consulting services.
Discontinued operations
Bakery
In the prior year, the Group controlled KH Foods Limited, an entity involved in the manufacture and sale of bakery products.
- 50 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 51
Notes to the Financial Statements (continued) For the year ended 31 July 2010
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
-
0
0
0
’
$
7
0
3
,
3
2
8
7
0
3
,
3
2
8
5
8
9
,
0
4
5
0
2
,
0
7
7
9
4
,
4
3
9
8
0
9
,
7
7
3
)
6
1
8
,
6
8
(
2
9
0
,
1
9
2
d
e
t
a
d
i
l
o
s
n
o
C
)
9
7
8
,
5
1
4
(
)
7
5
1
(
7
9
7
2
4
1
,
7
4
1
1
5
6
,
t
n
e
m
g
e
s
r
e
t
n
I
s
n
o
i
t
a
n
m
i
i
l
e
0
0
0
’
$
7
5
4
,
0
1
)
3
0
2
,
8
1
4
(
)
6
4
7
,
7
0
4
(
-
8
2
3
)
8
1
4
,
7
0
4
(
0
0
0
’
$
4
4
1
,
3
3
2
8
,
2
7
6
9
,
5
)
1
3
(
)
7
2
1
(
9
0
8
,
5
d
e
t
a
c
o
l
l
a
n
u
/
g
n
i
t
l
u
s
n
o
C
l
a
o
C
i
g
n
n
m
i
-
0
0
0
$
’
6
9
1
3
4
6
,
0
0
0
$
’
g
n
i
t
s
e
v
n
I
s
e
i
t
i
v
i
t
c
a
,
0
1
5
6
6
1
0
8
3
5
1
4
,
6
9
1
3
4
6
,
0
9
8
1
8
5
,
-
7
2
1
8
8
6
0
4
,
5
0
2
0
7
,
)
d
e
u
n
i
t
n
o
c
(
N
O
I
T
A
M
R
O
F
N
I
T
N
E
M
G
E
S
.
3
E
T
O
N
s
t
n
e
m
g
e
s
s
s
e
n
i
s
u
B
0
1
0
2
s
e
t
a
i
c
o
s
s
a
d
e
t
n
u
o
c
c
a
y
t
i
u
q
e
m
o
r
f
s
t
l
u
s
e
r
f
o
e
r
a
h
S
e
m
o
c
n
i
r
e
h
t
O
s
r
e
m
o
t
s
u
c
l
a
n
r
e
t
x
e
m
o
r
f
e
u
n
e
v
e
R
e
u
n
e
v
e
r
t
n
e
m
g
e
s
r
e
t
n
I
e
u
n
e
v
e
r
l
a
t
o
T
3
2
3
3
4
6
,
3
8
7
2
9
6
,
e
m
o
c
n
i
/
e
u
n
e
v
e
r
t
n
e
m
g
e
s
l
a
t
o
T
2
1
7
,
7
8
2
,
4
)
9
8
4
,
2
3
(
3
3
4
,
4
1
1
3
6
0
7
5
,
,
7
3
1
5
3
7
3
,
9
3
7
,
5
8
6
)
9
7
8
,
9
3
(
)
6
0
7
(
-
-
)
9
4
6
,
6
(
-
-
)
1
8
(
-
8
8
3
2
9
6
,
s
e
t
a
i
c
o
s
s
a
n
i
s
t
n
e
m
t
s
e
v
n
I
)
3
8
9
7
3
(
,
)
5
1
8
1
(
,
)
e
s
n
e
p
x
e
(
n
o
i
t
a
s
i
t
r
o
m
a
d
n
a
n
o
i
t
a
i
c
e
r
p
e
D
-
)
6
0
7
(
)
e
s
n
e
p
x
e
(
t
n
e
m
r
i
a
p
m
I
r
a
e
y
e
h
t
r
o
f
)
s
s
o
l
(
/
t
i
f
o
r
p
t
e
N
)
e
s
n
e
p
x
e
(
x
a
t
e
m
o
c
n
I
s
t
l
u
s
e
r
t
n
e
m
g
e
S
- 51 -
s
t
e
s
s
a
t
n
e
m
g
e
S
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 52
Notes to the Financial Statements (continued) For the year ended 31 July 2010
d
e
t
a
d
i
l
o
s
n
o
C
l
a
t
o
T
s
n
o
i
t
a
r
e
p
o
d
e
u
n
i
t
n
o
c
s
i
d
s
n
o
i
t
a
n
m
i
i
l
e
d
e
t
a
c
o
l
l
a
n
u
/
y
r
e
k
a
B
-
s
n
o
i
t
a
r
e
p
o
i
g
n
u
n
i
t
n
o
c
s
n
o
i
t
a
r
e
p
o
s
n
o
i
t
a
n
m
i
i
l
e
d
e
t
a
c
o
l
l
a
n
u
/
0
0
0
$
’
0
0
0
$
’
0
0
0
$
’
0
0
0
$
’
0
0
0
’
$
0
0
0
’
$
-
5
5
1
,
5
7
7
5
5
1
,
5
7
7
-
2
0
2
2
0
2
)
3
9
4
,
5
(
1
5
8
,
9
2
4
,
2
-
-
3
1
5
,
9
9
1
,
3
2
0
2
-
-
-
-
-
-
6
5
2
,
0
5
6
,
2
)
6
2
2
(
7
4
2
-
2
0
2
2
0
2
-
-
2
0
2
)
3
7
4
(
,
3
5
9
4
7
7
4
1
5
1
1
,
-
,
3
5
9
4
7
7
)
3
9
4
5
(
,
)
5
5
3
3
1
1
,
(
)
1
4
8
1
0
1
,
(
)
5
6
6
3
,
(
,
1
5
8
9
2
4
2
,
0
0
0
9
2
,
,
1
1
3
9
9
1
3
,
,
2
8
4
0
5
6
2
,
)
6
0
5
6
7
,
(
)
8
5
8
3
8
,
(
)
5
9
5
,
8
9
7
(
-
)
5
9
5
8
9
7
(
,
)
2
5
3
(
9
0
3
,
1
5
8
,
1
8
9
7
,
6
2
5
0
6
6
,
4
4
9
,
4
)
4
9
8
,
0
3
(
)
5
0
7
,
7
4
1
(
-
-
-
-
)
2
5
3
(
)
8
7
5
(
-
-
-
-
-
-
-
-
-
)
2
5
3
(
-
,
7
8
8
1
5
8
1
,
,
8
9
7
6
2
5
,
0
6
6
4
4
9
4
,
)
5
7
6
5
3
,
(
0
0
0
’
$
5
5
7
4
,
g
n
i
t
l
u
s
n
o
C
l
a
o
C
i
g
n
n
m
i
g
n
i
t
s
e
v
n
I
s
e
i
t
i
v
i
t
c
a
9
0
0
2
0
0
0
’
$
0
0
0
’
$
4
3
8
0
4
5
,
0
5
8
7
1
2
,
s
r
e
m
o
t
s
u
c
l
a
n
r
e
t
x
e
m
o
r
f
e
u
n
e
v
e
R
2
7
2
1
3
,
-
3
8
0
2
8
,
e
u
n
e
v
e
r
t
n
e
m
g
e
s
r
e
t
n
I
7
2
0
6
3
,
4
3
8
0
4
5
,
3
3
9
9
9
2
,
e
u
n
e
v
e
r
l
a
t
o
T
-
7
8
4
1
1
6
3
,
3
8
8
4
2
,
-
,
7
7
1
1
1
4
2
,
,
1
1
0
2
5
9
2
,
,
1
6
5
4
1
6
2
,
4
9
8
9
2
,
3
4
3
8
0
5
,
)
5
1
9
1
,
(
)
6
2
3
0
1
,
(
y
t
i
u
q
e
m
o
r
f
s
t
l
u
s
e
r
f
o
e
r
a
h
S
s
e
t
a
i
c
o
s
s
a
d
e
t
n
u
o
c
c
a
e
m
o
c
n
i
r
e
h
t
O
2
9
6
7
8
2
,
e
m
o
c
n
i
/
e
u
n
e
v
e
r
t
n
e
m
g
e
s
l
a
t
o
T
6
9
8
4
9
,
s
t
l
u
s
e
r
t
n
e
m
g
e
S
,
8
9
0
2
4
4
4
,
d
e
u
n
i
t
n
o
c
s
i
d
f
o
l
a
s
o
p
s
i
d
n
o
)
s
s
o
L
(
x
a
t
r
e
t
f
a
r
a
e
y
e
h
t
r
o
f
)
s
s
o
l
(
/
t
i
f
o
r
p
t
e
N
)
e
s
n
e
p
x
e
(
x
a
t
e
m
o
c
n
I
s
t
e
s
s
a
t
n
e
m
g
e
S
- 52 -
)
4
9
8
0
3
(
,
)
5
0
7
7
4
1
(
,
-
-
)
7
4
1
(
)
2
2
6
8
2
,
(
)
5
2
1
2
,
(
n
o
i
t
a
s
i
t
r
o
m
a
d
n
a
n
o
i
t
a
i
c
e
r
p
e
D
)
e
s
n
e
p
x
e
(
-
-
)
,
5
0
7
7
4
1
(
)
e
s
n
e
p
x
e
(
t
n
e
m
r
i
a
p
m
I
)
3
7
7
9
,
(
7
2
3
-
4
4
2
6
3
5
,
s
e
t
a
i
c
o
s
s
a
n
i
s
t
n
e
m
t
s
e
v
n
I
t
n
e
m
g
e
s
r
e
t
n
I
d
e
u
n
i
t
n
o
c
s
i
D
l
a
t
o
T
t
n
e
m
g
e
s
r
e
t
n
I
)
d
e
u
n
i
t
n
o
c
(
I
N
O
T
A
M
R
O
F
N
I
T
N
E
M
G
E
S
.
3
E
T
O
N
s
t
n
e
m
g
e
s
s
s
e
n
i
s
u
B
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 53
Notes to the Financial Statements (continued) For the year ended 31 July 2010
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 4. NON-REGULAR ITEMS IMPACTING PROFIT
Non-statutory measure:
The Directors consider the disclosure of the impact of non-regular items enhances the understanding of the results attributable
to members. These items are stated after tax and represents the member’s share of non-regular gains and losses.
2010
$’000
670
-
42,443
(1,047)
(1,157)
(6,734)
2,597
-
36,772
2009
$’000
8,452
1,031,082
-
(352)
(138,498)
(43,382)
32,286
(1,621)
887,967
667,269
577,101
19,693
21,834
4
117,929
845
17,567
156,038
823,307
-
-
60,665
8,692
1,914
(1,023)
(43)
70,205
7
169,022
718
6,271
197,852
774,953
202
2,440,352
344
(19,161)
6,525
1,936
(145)
2,429,851
Profit on disposal of investments
Profit on sale of the New Saraji coal project
Gain on deemed disposal in equity accounted associates
Loss on disposal of a controlled entity
Impairment expense
Share of non-regular items from associates
Tax credits
Other non-regular items
Total non-regular items
NOTE 5.
REVENUE
From operating activities
Sales revenue
Other revenue
Dividends received
- Other corporations
Interest received
- Associates
- Other corporations
Rental income
Other
Total other revenue
Total revenue from continuing operation
Revenue from discontinued operations
NOTE 6. OTHER INCOME
From continuing operations
Gain on sale of the New Saraji coal project
Gain on deemed disposal in equity accounted associates
Gains/(losses) on financial assets fair valued through profit and loss
Net gain on sale of long term equity investments
Net (loss)/gain on sale of related entities
Other items
- 53 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 54
Notes to the Financial Statements (continued) For the year ended 31 July 2010
NOTE 7.
EXPENSES
Profit before income tax expense includes the following specific expenses:
Depreciation
Buildings
Plant and equipment
Total depreciation
Amortisation
Non-current assets
Mining reserves and mine development
Intangible assets
Total amortisation – non-current assets
Impairment charges/(reversals)
Intangibles - Goodwill
Investments – Associates (a)
Investments – Long term equity investments (b)
Other assets
Total impairment
Employee benefits expense
Finance Costs
Interest and finance charges paid/payable
Rental expense relating to operating leases
Exploration costs expensed
2010
$’000
743
29,490
30,233
7,477
2,169
9,646
-
(1,487)
3,215
(1,022)
706
2009
$’000
406
22,167
22,573
6,018
2,303
8,321
4,953
127,901
14,480
371
147,705
81,512
77,852
2,437
2,768
13,402
1,478
2,202
7,693
a)
b)
The recoverable amount of investments in equity accounted associates has been assessed as at 31 July 2010. Where the
carrying values of the investments exceeded the recoverable amounts, the investment has been impaired. At each reporting
date, an assessment will be made as to whether there are any circumstances that would indicate that the impairment
recognised has decreased or no longer exists. Where evidence supports a reduction in the impairment expense, the
impairment expense may be reversed through the income statement. In the current year ended 31 July 2010, an
impairment expense relating to Clover Corporation Limited of $1.49 million was reversed. Refer to note 40.
In accordance with AASB 139, a ‘prolonged decline in the fair value of an investment in an equity instrument below its
cost is objective evidence of impairment’. Where a long term equity investment’s market bid price is lower than the original
cost and management considers the investment to be ‘impaired’, the Group has recognised an impairment expense in
respect of these investments. An impairment recognised for a long term equity investment is prohibited from being
reversed in subsequent periods. Any future increments in the bid price of an impaired investment is to be recognised as a
fair value increment in the asset revaluation reserve.
- 54 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 55
Notes to the Financial Statements (continued) For the year ended 31 July 2010
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 8.
INCOME TAX EXPENSE
a) Income tax expense
Current tax
Deferred tax – excluding gain on sale of discontinued operations
(Over)/under provided in prior years
Income tax expense is attributed to:
Profit from continuing operations
Aggregate income tax expense for operations
Deferred income tax/(revenue) included in income tax expense
(Increase) in deferred tax assets – (note 25)
Increase in deferred tax liabilities – (note 31)
b) Reconciliation of income tax expense to prima facie tax payable
Profit from continuing operations before income tax
(Loss) from discontinued operations before income tax
Tax at the Australian tax rate of 30% (2009: 30%)
Tax effect of amounts which are not deductible/
(taxable) in calculating taxable income:
Goodwill impairment & other amortisation
Non-assessable income
Franked dividends and other investment income
Tax losses and timing differences for which no deferred tax assets are recognised
Share-based payment expense
Sundry items
Total tax expense
(Over) provision in prior years
Income tax expense
c) Amounts recognised directly in equity
Aggregate current and deferred tax arising in the reporting period and not
recognised in net profit or loss but directly debited or credited to equity
Net deferred tax – (credited) directly to equity (notes 25 and 31).
d) Tax effect of impairments and unused tax losses
Impairments and unused tax losses for which no deferred tax asset has
been recognised
Potential tax benefit at 30%
- 55 -
2010
$’000
87,903
4,362
(5,449)
86,816
86,816
86,816
(1,043)
5,405
4,362
2009
$’000
796,813
5,447
(3,665)
798,595
798,595
798,595
(24,090)
29,537
5,447
377,908
-
377,908
2,650,482
(578)
2,649,904
113,372
794,971
(872)
107
(14,574)
1,645
(6,315)
(1,098)
92,265
(5,449)
86,816
41,699
(22,021)
(11,145)
4,605
(4,808)
(1,041)
802,260
(3,665)
798,595
(33,346)
(26,184)
188,934
56,680
180,408
54,122
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 56
Notes to the Financial Statements (continued) For the year ended 31 July 2010
NOTE 9. DIVIDENDS - WASHINGTON H. SOUL PATTINSON AND COMPANY LIMITED
a) Ordinary shares
Final dividend for the year ended 31 July 2009 of 19 cents (2008: 18 cents)
per fully paid share paid on 7 December 2009 (2008: 8 December 2008)
fully franked based on tax paid at 30%
Special dividend for the year ended 31 July 2009 of 25 cents (2008: nil) per fully
paid share paid on 7 December 2009 fully franked based on tax paid at 30%.
Interim dividend for the year ended 31 July 2010 of 14 cents (2009: 13 cents)
per fully paid share paid on 13 May 2010 (2009: 14 May 2009) fully franked
based on tax paid at 30%
Total dividends provided for or paid
b) Dividends not recognised at year end
In addition to the above dividends, since year end the directors have
recommended the payment of:
A final dividend of 20 cents per fully paid ordinary share,
(2009: 19 cents) fully franked based on tax paid at 30%.
A special dividend of 12.5 cents per fully paid ordinary share,
(2009: 25 cents) fully franked based on tax paid at 30%.
The aggregate amount of the proposed dividends expected to be paid on
6 December 2010 (2009: 7 December 2009) out of retained profits as
at 31 July 2010, but not recognised as a liability at year end is
c) Franked Dividends
The franked portions of the final dividends recommended after 31 July 2010
will be franked out of existing franking credits or out of franking credits
arising from the payment of income tax in the year ending 31 July 2010.
Franking credits available for subsequent financial years based on a tax
rate of 30% (2009: 30%)
The above amounts represent the balance of the franking account as at
the end of the financial year, adjusted for franking credits that will arise
from the payment of provision for income tax, franking debits that will arise
from the payment of dividends recognised as a liability at the reporting
date, and franking credits that will arise from the receipt of dividends
recognised as receivables at the reporting date.
Subsequent to year end, the franking account will be reduced by the
proposed final and special dividends to be paid on 6 December 2010
(2009: 7 December 2009).
2010
$’000
2009
$’000
45,342
42,955
59,660
-
33,410
138,412
31,023
73,978
47,728
45,342
29,830
59,660
77,558
105,002
344,723
198,365
(33,239)
311,484
(45,001)
153,364
d) Dividend reinvestment plans
There were no dividend reinvestment plans in operation at any time during or since the end of the financial year.
- 56 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 57
Notes to the Financial Statements (continued) For the year ended 31 July 2010
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 10. CURRENT ASSETS – CASH AND CASH EQUIVALENTS
Cash at bank and on hand
a) Reconciliation of cash balance at the end of the year
Cash at the end of the financial year as shown in the statement of cash flows
is reconciled to items in the statement of financial position as follows:-
Cash and cash equivalents
b) Cash at bank and on hand and cash equivalents
2010
$’000
2009
$’000
109,821
228,530
109,821
228,530
Cash includes deposits for which there is a short term identified use in the operating cashflows of the Group, and attracts
interest at rates between 0% and 4.8% (2009: 0% and 3.6%).
c) Risk exposure
Information about the Group’s exposure to credit risk and foreign exchange risk is detailed in note 34.
NOTE 11. CURRENT ASSETS –TERM DEPOSITS
Term deposits
2010
$’000
2009
$’000
1,655,365
2,619,238
Term deposits are held to their maturity of less than one year and carry a weighted average interest rate of 5.46%
(2009: 6.43%).
Due to their short term nature their carrying value is assumed to approximate their fair value. Information regarding the Group’s
exposure to credit risk is disclosed in note 34.
NOTE 12. CURRENT ASSETS –TRADE AND OTHER RECEIVABLES
Trade receivables
Less: provision for impairment of receivables
Loans and receivables to related entities
Less: impairment loss
Loans to other parties – secured
Other receivables
Prepayments
2010
$’000
45,100
(53)
45,047
3,409
(156)
3,253
-
7,479
3,526
59,305
2009
$’000
36,022
(286)
35,736
208
(156)
52
1,536
7,414
3,406
48,144
a) Credit, foreign exchange and interest rate risk
Information about the Group’s exposure to these risks in relation to trade and other receivables is provided in note 34.
b) Fair value of receivables
The fair value of receivables approximates their carrying values.
- 57 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 58
Notes to the Financial Statements (continued) For the year ended 31 July 2010
NOTE 13. CURRENT ASSETS – INVENTORIES
Raw materials and stores – at cost
Finished goods – at cost
2010
$’000
18,546
34,541
53,087
Inventory expense
Inventories recognised as expense during the year ended 31 July 2010 amounted
to $223,739,000 (2009: $159,941,000).
NOTE 14. CURRENT ASSETS – CURRENT ASSETS CLASSIFIED AS HELD FOR SALE
Listed securities
Equity securities*
Reconciliation
Opening net book value
Transfer from long term equity investments
At end of year
2010
$’000
576,211
-
576,211
576,211
2009
$’000
16,356
29,065
45,421
2009
$’000
-
-
-
-
* Represents the investment in Arrow Energy Limited held by controlled entity New Hope Corporation Limited, which at 31 July
2010 was valued at $576,211,000. In the prior year, this investment was classified as a long term equity investment. Refer to
note 20.
Information about the Group’s exposure to price risk is included in note 34.
Information about the sale of the investment in Arrow Energy Limited is included in note 46.
NOTE 15. CURRENT ASSETS – INVESTMENTS FAIR VALUED THROUGH PROFIT AND LOSS
Investments held for the short to medium term
- Listed equity securities
- Other securities
2010
$’000
48,076
935
49,011
2009
$’000
44,956
100
45,056
Information regarding the Group’s exposure to price risk is set out in note 34.
Listed equity securities are traded in an active market. The fair value of the investments is based on quoted market prices at
the reporting date. The quoted market price used by the Group is the bid price at reporting date.
Other securities do not trade in an active market, therefore the fair value measurement of other financial assets is approximated
by the cost price.
- 58 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 59
Notes to the Financial Statements (continued) For the year ended 31 July 2010
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 16. DERIVATIVES
New Hope Corporation Limited and certain of its controlled entities are parties to derivative financial instruments in the normal
course of business in order to hedge exposure to fluctuations in foreign currency exchange rates.
These instruments are used in accordance with the Group’s financial risk management policies. The portion of the gain or loss
on the hedging instruments that is determined to be an effective hedge is recognised directly in equity. When the cash flows
occur, the Group reclassifies the gain or loss into the income statement.
Refer to note 1(n) for additional information on the accounting policy for derivatives.
At reporting date the details of outstanding contracts at fair value are (AUD Equivalents):
Current assets
- Forward exchange contracts
Non-current assets
- Forward exchange contracts
Sell US dollars
Maturity
0 to 6 months
6 to 12 months
1 to 2 years
2 to 5 years
2010
$’000
2009
$’000
15,673
14,525
11,675
27,348
8,157
22,682
Average exchange rate
2009
2010
0.82239
0.79409
0.73179
0.75913
0.74907
0.74545
0.74611
0.72922
Buy Australian dollars
2009
2010
$’000
$’000
94,845
99,485
71,058
39,519
304,907
88,109
89,879
76,396
91,878
346,262
Credit risk exposures of derivative financial instruments
Credit risk arises from the potential failure of counterparties to meet their obligations under the respective contracts at maturity.
A material exposure arises from forward exchange contracts and the Group is exposed to loss in the event that counterparties
fail to deliver the contracted amount.
At balance date $304,907,000 (2009: $346,262,000) was receivable (AUD equivalents).
The fair value meaurement of forward exchange contracts is determined using forward exchange market rates at the reporting
date.
NOTE 17. CURRENT ASSETS – CURRENT TAX ASSET
Current tax asset
2010
$’000
1,689
2009
$’000
812
- 59 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 60
Notes to the Financial Statements (continued) For the year ended 31 July 2010
NOTE 18. NON-CURRENT ASSETS – TRADE AND OTHER RECEIVABLES
Loans to related entities
Less impairment on loans to related entities
Prepayments
Other receivables
a) Impairment – Loan receivables
2010
$’000
11,642
(11,007)
635
2,789
1,495
4,919
2009
$’000
11,107
(11,007)
100
3,305
1,202
4,607
The provision for impairment relates to loans provided by a controlled entity to its related parties. At reporting date, these loans
were determined to be unrecoverable and were fully impaired.
b) Credit, foreign exchange, fair value and interest rate risk.
Information about the Group’s exposure to these risks in relation to trade and other receivables is provided in note 34.
The carrying value less impairment provisions of trade receivables are assumed to approximate their fair value due to their short
term nature.
c) Related parties.
Further information relating to loans to related parties and loans to executives is set out in notes 41 and 42.
NOTE 19. NON-CURRENT ASSETS – EQUITY ACCOUNTED ASSOCIATES AND JOINT VENTURES
Shares in associated and joint venture companies (refer note 40)
685,739
526,798
NOTE 20. NON-CURRENT ASSETS – LONG TERM EQUITY INVESTMENTS
2010
$’000
2009
$’000
Listed securities
Equity securities
Preference shares
Unlisted securities
Equity securities
Floating rate notes
Information regarding the Group entity’s exposure to price risk is set out in note 34.
Long term equity investments are traded in an active market. The fair value of
the investments is based on quoted market prices at the reporting date. The quoted
market price used by the Group is the bid price at reporting date.
NOTE 21. NON-CURRENT ASSETS – OTHER FINANCIAL ASSETS
Units in unlisted trusts – at cost
Convertible notes – at cost
Other financial assets – at cost
544,476
3,228
547,704
3
-
3
547,707
920,834
3,033
923,867
3
1,037
1,040
924,907
-
-
5,000
5,000
11,046
1,500
7
12,553
Other financial assets at reporting date do not trade in an active market. The cost price approximates the fair value.
- 60 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 61
Notes to the Financial Statements (continued) For the year ended 31 July 2010
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
3
4
9
,
5
9
5
1
7
0
,
3
5
1
2
1
,
6
1
4
4
4
0
,
9
2
)
2
2
8
,
9
7
1
(
)
7
2
0
,
4
2
(
)
6
9
7
(
8
7
3
,
2
8
1
2
1
,
6
1
4
)
7
8
2
,
1
(
)
0
1
7
,
7
3
(
6
0
7
,
8
5
4
3
8
2
,
4
0
7
9
,
1
4
4
0
,
9
2
)
8
3
(
)
3
4
1
,
7
(
6
1
1
,
8
2
8
0
4
,
2
7
6
6
8
2
,
9
5
)
2
0
7
,
3
1
2
(
)
0
7
1
,
1
3
(
6
0
7
,
8
5
4
6
1
1
,
8
2
l
a
t
o
T
0
0
0
’
$
e
n
M
i
0
0
0
’
$
t
n
e
m
p
o
l
e
v
e
d
s
e
s
a
e
l
0
0
0
’
$
3
1
8
,
9
)
6
6
3
,
6
(
7
4
4
,
3
7
4
4
,
3
-
-
-
)
4
3
3
(
3
1
1
,
3
3
1
8
,
9
)
0
0
7
,
6
(
3
1
1
,
3
d
n
a
s
e
v
r
e
s
e
r
i
g
n
n
M
i
2
4
6
4
1
4
,
)
0
4
2
7
4
1
(
,
2
0
4
7
6
2
,
2
0
4
7
6
2
,
1
6
6
1
7
,
)
8
1
1
8
(
,
)
9
4
2
1
(
,
)
0
9
4
9
2
(
,
6
0
2
0
0
3
,
,
6
0
1
3
7
4
)
0
0
9
2
7
1
(
,
6
0
2
0
0
3
,
0
0
0
$
’
,
t
n
a
P
l
d
n
a
s
e
r
u
t
x
i
f
s
e
l
c
i
h
e
v
r
o
t
o
m
0
0
0
$
’
2
3
7
1
2
,
)
9
8
1
2
(
,
3
4
5
9
1
,
6
9
2
3
2
,
3
4
5
9
1
,
-
)
3
4
7
(
5
3
1
1
2
,
7
6
0
4
2
,
)
2
3
9
2
(
,
5
3
1
1
2
,
s
g
n
d
i
l
i
u
B
d
n
a
L
0
0
0
$
’
-
5
8
6
6
9
,
5
8
6
6
9
,
8
2
4
6
,
3
2
0
3
,
5
8
6
6
9
,
-
-
n
o
i
t
a
s
i
t
r
o
m
a
/
n
o
i
t
a
i
c
e
r
p
e
d
l
d
e
t
a
u
m
u
c
c
A
p
u
o
r
g
l
a
s
o
p
s
i
d
a
n
i
d
e
d
u
l
c
n
i
s
t
e
s
s
A
r
e
h
t
o
d
n
a
l
e
a
s
r
o
f
l
d
e
h
s
a
d
e
i
f
i
s
s
a
l
c
s
l
a
s
o
p
s
i
d
)
e
g
r
a
h
c
(
n
o
i
t
a
s
i
t
r
o
m
a
/
n
o
i
t
a
i
c
e
r
p
e
D
0
1
0
2
y
l
u
J
1
3
d
e
d
n
e
r
a
e
Y
t
n
u
o
m
a
k
o
o
b
t
e
n
i
g
n
n
e
p
O
)
t
u
o
(
/
n
i
s
r
e
f
s
n
a
r
T
s
n
o
i
t
i
d
d
A
t
n
u
o
m
a
k
o
o
b
t
e
N
9
0
0
2
t
s
u
g
u
A
1
t
A
e
u
a
v
l
r
i
a
f
r
o
t
s
o
C
0
1
0
2
6
3
1
6
0
1
,
t
n
u
o
m
a
k
o
o
b
t
e
n
g
n
i
s
o
C
l
6
3
1
6
0
1
,
-
6
3
1
6
0
1
,
n
o
i
t
a
s
i
t
r
o
m
a
/
n
o
i
t
a
i
c
e
r
p
e
d
l
d
e
t
a
u
m
u
c
c
A
0
1
0
2
y
l
u
J
1
3
t
A
e
u
a
v
l
r
i
a
f
r
o
t
s
o
C
t
n
u
o
m
a
k
o
o
b
t
e
N
s
t
e
s
s
a
d
e
g
d
e
l
P
.
i
- 61 -
.
y
t
i
r
u
c
e
s
s
a
d
e
g
d
e
p
l
e
r
e
w
p
u
o
r
G
e
h
t
f
o
s
t
e
s
s
a
o
n
,
9
0
0
2
d
n
a
0
1
0
2
y
l
u
J
1
3
i
g
n
d
n
e
s
r
a
e
y
r
o
F
T
N
E
M
P
I
U
Q
E
D
N
A
T
N
A
L
P
,
Y
T
R
E
P
O
R
P
–
S
T
E
S
S
A
T
N
E
R
R
U
C
-
N
O
N
.
2
2
E
T
O
N
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 62
Notes to the Financial Statements (continued) For the year ended 31 July 2010
9
2
5
,
1
8
4
)
5
7
8
,
3
5
1
(
4
5
6
,
7
2
3
3
6
5
,
3
4
)
0
4
6
,
8
1
(
3
2
9
,
4
2
)
0
2
(
4
5
6
,
7
2
3
3
6
5
,
7
1
1
4
8
7
5
2
7
,
8
3
2
9
,
4
2
)
2
9
4
(
-
)
1
9
5
,
8
2
(
)
8
8
3
,
5
(
7
-
1
2
1
,
6
1
4
4
4
0
,
9
2
3
4
9
,
5
9
5
)
2
2
8
,
9
7
1
(
1
2
1
,
6
1
4
1
7
0
,
3
5
)
7
2
0
,
4
2
(
4
4
0
,
9
2
l
a
t
o
T
0
0
0
’
$
e
n
M
i
0
0
0
’
$
t
n
e
m
p
o
l
e
v
e
d
s
e
s
a
e
l
0
0
0
’
$
3
1
8
,
9
7
7
0
,
4
)
6
3
7
,
5
(
7
7
0
,
4
-
-
-
-
)
0
3
6
(
7
4
4
,
3
3
1
8
,
9
7
4
4
,
3
)
6
6
3
,
6
(
d
n
a
s
e
v
r
e
s
e
r
i
g
n
n
M
i
)
d
e
u
n
i
t
n
o
c
(
T
N
E
M
P
I
U
Q
E
D
N
A
T
N
A
L
P
,
Y
T
R
E
P
O
R
P
–
S
T
E
S
S
A
T
N
E
R
R
U
C
-
N
O
N
.
2
2
E
T
O
N
0
0
0
$
’
,
t
n
a
P
l
d
n
a
s
e
r
u
t
x
i
f
s
e
l
c
i
h
e
v
r
o
t
o
m
0
0
0
$
’
s
g
n
d
i
l
i
u
B
6
6
6
4
2
3
,
5
9
8
4
1
,
)
1
7
9
7
2
1
,
(
)
8
2
5
1
,
(
5
9
6
6
9
1
,
7
6
3
3
1
,
3
3
3
5
9
,
5
9
6
6
9
1
,
)
4
7
9
1
,
(
)
2
9
4
(
)
7
6
1
2
2
,
(
-
2
1
4
5
,
0
7
1
1
,
7
6
3
3
1
,
)
6
0
4
(
7
2
0
4
7
6
2
,
-
3
4
5
9
1
,
2
4
6
4
1
4
,
2
3
7
1
2
,
)
0
4
2
7
4
1
,
(
)
9
8
1
2
,
(
2
0
4
7
6
2
,
3
4
5
9
1
,
d
n
a
L
0
0
0
$
’
-
2
9
5
8
8
,
2
9
5
8
8
,
3
9
0
8
,
2
9
5
8
8
,
-
-
-
-
n
o
i
t
a
s
i
t
r
o
m
a
/
n
o
i
t
a
i
c
e
r
p
e
d
l
d
e
t
a
u
m
u
c
c
A
p
u
o
r
g
l
a
s
o
p
s
i
d
a
n
i
d
e
d
u
l
c
n
i
s
t
e
s
s
A
r
e
h
t
o
d
n
a
l
e
a
s
r
o
f
l
d
e
h
s
a
d
e
i
f
i
s
s
a
l
c
s
l
a
s
o
p
s
i
d
)
e
g
r
a
h
c
(
n
o
i
t
a
s
i
t
r
o
m
a
/
n
o
i
t
a
i
c
e
r
p
e
D
9
0
0
2
y
l
u
J
1
3
d
e
d
n
e
r
a
e
Y
t
n
u
o
m
a
k
o
o
b
t
e
n
i
g
n
n
e
p
O
)
t
u
o
(
/
n
i
s
r
e
f
s
n
a
r
T
s
n
o
i
t
i
d
d
A
t
n
u
o
m
a
k
o
o
b
t
e
N
9
0
0
2
t
s
u
g
u
A
1
t
A
e
u
a
v
l
r
i
a
f
r
o
t
s
o
C
9
0
0
2
t
n
e
m
t
s
u
d
a
j
e
g
n
a
h
c
x
e
i
n
g
e
r
o
F
- 62 -
5
8
6
6
9
,
t
n
u
o
m
a
k
o
o
b
t
e
n
g
n
i
s
o
C
l
-
5
8
6
6
9
,
5
8
6
6
9
,
n
o
i
t
a
s
i
t
r
o
m
a
/
n
o
i
t
a
i
c
e
r
p
e
d
l
d
e
t
a
u
m
u
c
c
A
t
n
u
o
m
a
k
o
o
b
t
e
N
9
0
0
2
y
l
u
J
1
3
t
A
e
u
a
v
l
r
i
a
f
r
o
t
s
o
C
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 63
Notes to the Financial Statements (continued) For the year ended 31 July 2010
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 23. NON-CURRENT ASSETS – EXPLORATION AND EVALUATION ASSETS
Exploration and evaluation at cost
Reconciliation
Opening net book amount
Additions
Closing net book amount
NOTE 24. NON-CURRENT ASSETS – INVESTMENT PROPERTY
The Group has elected to apply the cost model to accounting for investment properties.
Freehold land at cost
Reconciliation
Opening net book amount
Additions/(disposals)
Closing net book amount
a) Amounts recognised in profit and loss for investment property
No rental income was recognised in the profit and loss during the year (2009: $12,000).
No direct operating expenses from income generating properties was recognised in the
profit and loss during the year. (2009: ($2,000)).
b) Contractual obligations
There are no contractual obligations to purchase, construct or develop investment
property or for any repairs, maintenance or enhancements.
NOTE 25. NON-CURRENT ASSETS – DEFERRED TAX ASSETS
The balance comprises temporary differences attributed to:
Amounts recognised in profit and loss
Provisions
Receivables and accrued expenses
Impairment losses
Tax value of losses carried-forward
Other
Amounts recognised directly in equity
Long term equity investments
Share issue costs
Set-off of deferred tax liabilities pursuant to set-off provisions (note 31)
Net deferred tax assets*
Movements:
Opening balance at 1 August
Credited to the income statement – operating profit (note 8)
Credited to equity (note 8)
Less : (Loss) of control of subsidiary
Other adjustments
Closing balance at 31 July
2010
$’000
3,030
2,572
458
3,030
-
35
(35)
-
10,185
1,036
1,970
33,582
2,949
49,722
5,394
17
55,133
(11,696)
43,437
48,925
1,043
5,394
(229)
-
55,133
2009
$’000
2,572
1,976
596
2,572
35
35
-
35
9,002
1,177
2,308
33,749
2,654
48,890
-
35
48,925
(10,225)
38,700
24,918
24,090
-
-
(83)
48,925
*The deferred tax assets attributed to tax losses does not exceed taxable amounts arising from the reversal of existing assessable
temporary differences.
- 63 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 64
Notes to the Financial Statements (continued) For the year ended 31 July 2010
NOTE 26. NON-CURRENT ASSETS INTANGIBLE ASSETS
At 1 August 2008
Cost
Accumulated amortisation and impairment
Net book amount
Year ended 31 July 2009
Opening net book amount
Additions
Impairment (charge)
Amortisation (charge)
Assets included in a disposed group and other disposals
Transfers in
Closing net book amount
At 31 July 2009
Cost
Accumulated amortisation and impairment
Net book amount
Year ended 31 July 2010
Opening net book amount
Additions
Amortisation (charge)
Assets included in a disposed group and other disposals
Transfers in
Closing net book amount
At 31 July 2010
Cost
Accumulated amortisation and impairment
Net book amount
Goodwill
$'000
15,699
(5,759)
9,940
9,940
609
(4,953)
-
-
-
5,596
16,308
(10,712)
5,596
5,596
-
-
-
-
5,596
16,308
(10,712)
5,596
Other
$’000
7,028
(2,318)
4,710
4,710
344
-
(2,303)
(7)
20
2,764
6,382
(3,618)
2,764
2,764
6
(2,169)
(2)
796
1,395
7,178
(5,783)
1,395
Total
$’000
22,727
(8,077)
14,650
14,650
953
(4,953)
(2,303)
(7)
20
8,360
22,690
(14,330)
8,360
8,360
6
(2,169)
(2)
796
6,991
23,486
(16,495)
6,991
Amortisation of $2,169,000 (2009: $2,303,000) is charged to the income statement (note 7).
a) Impairment
Intangible assets, which have indefinite lives are allocated to the Group’s cash-generating units (CGU’s) identified according to
business segment and country of operation.
A segment-level summary of the goodwill allocation is presented below:
Coal mining
- Goodwill
Country of
operation
2010
$'000
2009
$'000
Australia
5,596
5,596
The recoverable amount of the cash-generating units has been determined based on value-in-use calculations and contracted
business sales values, as appropriate. Assumptions and methodology applied to each cash-generating unit are as follows:
Coal Mining
Goodwill relates to the acquisition of a subsidiary of an independent third party in an arms length transaction based on the
market value for the entity as a the date of acquisition. Since that date, there have been no adverse movements in the key
assumptions used in the market value, namely expected future throughput and revenues and anticipated useful asset life.
- 64 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 65
Notes to the Financial Statements (continued) For the year ended 31 July 2010
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 26. NON-CURRENT ASSETS INTANGIBLE ASSETS (continued)
b) Impairment charges
Continuing operations
Operational investments
In the prior year, an impairment charge of $4,953,000 was recognised in relation to goodwill allocated to the Group’s
‘Distribution’ and ‘Manufacturing’ cash-generating units. Management assessed the recoverable amount of the goodwill
allocated to both ‘Distribution’ and ‘Manufacturing’ and determined that the amounts were not recoverable. The whole
amount was impaired.
NOTE 27. CURRENT LIABILITIES – TRADE AND OTHER PAYABLES
Trade payables and other payables
2010
$’000
64,113
2009
$’000
43,264
NOTE 28. CURRENT LIABILITIES – INTEREST BEARING LIABILITIES
Deposits from related parties - Directors (a)
41,193
33,827
a) Director deposits
The Parent entity accepts deposits from Directors and Director related entities under normal commercial agreements and
consistent with deposits received from other parties. Deposits are repayable at call and carry an interest rate of 5.45%
(2009: 3.73%). Interest rates applicable to these deposits ensures a margin of at least 25 basis points to the Group.
b) Fair value disclosures
The carrying value of financial liabilities as disclosed approximate their fair values.
c) Financing arrangements
The Group has access to facilities as follows:
Bank overdraft
Used at balance date
Unused at balance date
Other facilities – bank guarantees
Total facilities
Used at balance date
Unused at balance date
The major facilities relate to bank guarantees of New Hope Corporation Limited,
are unsecured, for no fixed term and bear variable rates:
i. Mining restoration and rehabilitation
The liability has been recognised by New Hope Corporation Limited in relation
to its rehabilitation obligations.
ii. Statutory body suppliers
No liability was recognised by New Hope Corporation Limited in relation to
these guarantees as no losses are foreseen on these contingent liabilities.
2010
$’000
1,000
-
1,000
55,540
(36,748)
18,792
2009
$’000
1,000
-
1,000
44,247
(28,219)
16,028
22,401
13,747
14,347
14,470
36,748
28,217
- 65 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 66
Notes to the Financial Statements (continued) For the year ended 31 July 2010
2010
$’000
2,453
17,488
19,941
Mining
Restoration
and site
rehabilitation
$'000
Premises
‘make good’
$’000
17,919
1,833
-
19,752
2,453
17,299
19,752
55
-
(55)
-
-
-
-
NOTE 29. CURRENT LIABILITIES – PROVISIONS
Mining restoration and site rehabilitation
Employee benefits
Movements in total provisions 2010
Carrying amount at beginning of year
Additional provisions recognised
Less provisions for subsidiary no longer controlled
Carrying amount at end of year
Disclosed as:
Current liabilities
Non-current liabilities
NOTE 30. NON-CURRENT LIABILITIES – PROVISIONS
Mining restoration and site
Premises ‘make good’
Employment benefits
NOTE 31. NON-CURRENT LIABILITIES – DEFERRED TAX LIABILITIES
The balance comprises temporary differences attributed to:
Amounts recognised in profit and loss
Property, plant and equipment
Mine reserves
Inventories
Investments
Receivables
Other
Amounts recognised directly in equity
Long term equity investments
Cash flow hedges
Property, plant and equipment
Other
Total deferred tax liabilities
Set-off of deferred tax liabilities pursuant to set-off provisions (note 25)
Net deferred tax liabilities
- 66 -
2009
$’000
2,453
17,650
20,103
Total
$’000
17,974
1,833
(55)
19,752
2,453
17,299
19,752
2009
$’000
15,466
55
15,521
2,421
17,942
10,263
1,034
4,410
24,969
40,505
1,246
82,427
169,100
6,805
7,160
716
183,781
266,208
(10,225)
255,983
2010
$’000
17,299
-
17,299
2,780
20,079
11,622
934
4,754
46,475
22,206
3,726
89,717
204,440
8,204
7,160
767
220,571
310,288
(11,696)
298,592
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 67
Notes to the Financial Statements (continued) For the year ended 31 July 2010
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 31. NON-CURRENT LIABILITIES – DEFERRED TAX LIABILITIES (continued)
Movements:
Opening balance 1 August
Charged to the income statement – operating profit (note 8)
Charged to equity (note 8c)
Less: Loss of control of subsidiary
Other adjustments
Closing balance at 31 July
NOTE 32.
SHARE CAPITAL
2010
$’000
266,208
5,405
38,740
(65)
-
310,288
2009
$’000
211,322
29,537
26,184
-
(835)
266,208
Share capital
Fully paid ordinary shares
Parent entity
Parent entity
2010
No of shares
2010
$’000
2009
No of shares
2009
$’000
238,640,580
32,900
238,640,580
32,900
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to
the number of and amounts paid on the shares held. On a show of hands every holder of ordinary shares present at a meeting
in person or by proxy is entitled to one vote, and upon a poll each share is entitled to one vote. Ordinary shares have no par
value.
Capital Management
The Group’s capital management approach is conservative with the objective to maintain a strong capital base in order to
maintain investor, creditor and market confidence and to sustain the future development of the consolidated entity. The Board
also monitors the level of dividends ensuring that ordinary dividends are paid from profits before non-regular items.
There were no changes to the Group’s approach to capital management during the year.
The Group’s capital consists of shareholders’ equity plus net debt. The movement in equity is shown in the statement of changes
in equity.
At 31 July 2010, the Group has no external borrowings to financial institutions.
The Group is not subject to any externally imposed capital requirements.
NOTE 33. RESERVES AND RETAINED PROFITS
a) Reserves
General reserve
Capital redemption reserve
Asset revaluation reserve
Capital profits reserve
Hedging reserve
Share-based payments reserve
Foreign currency translation reserve
Treasury share reserve
Equity reserve
- 67 -
2010
$’000
404,548
2,800
385,215
11,368
11,631
1,842
(2,667)
(327)
(4,167)
810,243
2009
$’000
404,548
2,800
345,517
11,368
9,647
3,222
(2,587)
(327)
(5,246)
768,942
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 68
Notes to the Financial Statements (continued) For the year ended 31 July 2010
NOTE 33. RESERVES AND RETAINED PROFITS (continued)
b) Movements:
General reserve
Balance 31 July
Capital redemption reserve
Balance 31 July
Asset revaluation reserve
Balance 1 August
Revaluation of long term equity investments, gross
Revaluation of long term equity investments, deferred tax
Transfer on sale of long term equity investments to profit, gross
Transfer on sale of long term equity investments to profit, deferred tax
Transfer on impairment of long term equity investments to profit, gross
Transfer on impairment of long term equity investments to profit, deferred tax
Share of associates increments/(decrements)
Balance 31 July
Capital profits reserve
Balance 31 July
Hedging reserve
Balance 1 August
Revaluation, gross
Revaluation, deferred tax
Transfer to profit, gross
Transfer to profit, deferred tax
Shares of associates (decrements)
Balance 31 July
Share-based payment reserve
Balance 1 August
Share-based payment and option expense
Transfer to share capital
Balance 31 July
Foreign currency translation reserve
Balance 1 August
Exchange difference on translation of foreign controlled entity and associates
Share of associates (decrement)
Balance 31 July
Treasury share reserve
Balance 31 July
Equity reserve
Balance 1 August
Movement
Balance 31 July
- 68 -
2010
$’000
2009
$’000
404,548
404,548
2,800
2,800
345,517
58,177
(18,878)
(2,556)
(417)
2,663
-
709
385,215
315,843
44,350
(11,379)
(12,935)
1,503
10,824
(2,545)
(144)
345,517
11,368
11,368
9,647
19,769
(5,931)
(16,934)
5,080
-
11,631
3,222
963
(2,343)
1,842
(2,587)
4
(84)
(2,667)
7,079
(20,455)
6,137
24,716
(7,414)
(416)
9,647
5,644
984
(3,406)
3,222
(1,164)
16
(1,439)
(2,587)
(327)
(327)
(5,246)
1,079
(4,167)
(1,758)
(3,488)
(5,246)
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 69
Notes to the Financial Statements (continued) For the year ended 31 July 2010
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 33. RESERVES AND RETAINED PROFITS (continued)
c) Nature and purpose of reserves
General reserve
The general reserve records funds set aside for future requirements of the Group.
Capital redemption reserve
This reserve represents amounts allocated from retained profits that were preserved for capital redemption.
Asset revaluation reserve
This reserve includes net revaluation increments and decrements arising from the revaluation of non-current assets. Changes in
the fair value and exchange differences arising from translation of investments, such as equities classified as long term equity
investments, are taken to the asset revaluation reserve as described in note 1(m). Amounts are recognised in income statement
when the associated assets are sold or impaired.
Capital profits reserve
This reserve represents amounts allocated from retained profits that were profits of a capital nature.
Hedging reserve
The hedging reserve is used to record the gains and losses on a hedging instrument in a cash flow hedge that are recognised
directly in equity, as described in note 1(n). Amounts are reclassified to profit or loss when the associated hedged transaction
affects profit or loss.
Share-based payment reserve
The share-based payment reserve is used to recognise the fair value of options issued but not exercised.
Foreign currency translation reserve
The foreign currency translation reserve records the foreign currency differences which arise from the translation of
self-sustaining foreign operations, and foreign exchange movements.
Treasury share reserve
The treasury share reserve represents the value of shares held by an equity compensation plan. The reserve will be reversed
against share capital when the underlying shares vest with employees.
Equity reserve
This reserve includes amounts for tax adjustments that are unrelated to other specific reserves and are posted directly to equity.
d) Retained profits movements
Increases in ownership of controlled entities
In accordance with AASB 127 Consolidated and Separate Financial Statements and the Group’s accounting policy for changes
in ownership of a subsidiary (without gain or loss of control), any excess purchase consideration paid to non-controlling interest
holders, over the net assets acquired, is recognised directly in equity as a transaction between equity holders of the Group. The
Group applies this policy by adjusting retained profits.
For both the current and prior years, there were no significant increases in ownership of controlled entities, refer to note 38 for
the Parent entity’s interest in controlled entities.
- 69 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 70
Notes to the Financial Statements (continued) For the year ended 31 July 2010
NOTE 34. FINANCIAL RISK MANAGEMENT
The Group’s activities expose it to a variety of financial risks; market risk (including currency risk, price risk and interest risk),
credit risk, and liquidity risk. The Group’s overall risk management program focuses on the unpredictability of financial markets
and seeks to minimise potential adverse effects on the financial performance of the Group. Entities within the Group use
derivative financial instruments such as foreign exchange contracts to hedge certain risk exposures. Derivatives are used
exclusively for hedging purposes, ie not as trading or other speculative instruments. The Group uses different methods to
measure different types of risk to which it is exposed. These methods include sensitivity analyses in the case of interest rate,
foreign exchange and other price risks and ageing analyses for credit risk.
Risk management is carried out in accordance with policies approved by the Board of Directors. These policies cover specific
areas, such as mitigating foreign exchange, interest rate and credit risks, use of forward exchange contracts and investment of
excess liquidity.
The Group holds the following financial instruments:
Financial assets
Cash and cash equivalents
Term deposits
Loans and receivables
Investments fair valued through profit and loss
Derivative financial instruments
Current assets classified as held for sale
Long term equity investments
Other financial assets
Total financial assets
Financial liabilities
Trade and other payables
Deposits accepted
Total financial liabilities
a) Market Risk
i. Foreign exchange risk
2010
$’000
2009
$’000
109,821
1,655,365
64,224
49,011
27,348
576,211
547,707
5,000
3,034,687
64,113
41,193
105,306
228,530
2,619,238
52,751
45,056
22,682
-
924,907
12,553
3,905,717
43,264
33,827
77,091
Foreign exchange risk arises when future commercial transactions and recognised assets and liabilities are denominated in a
currency that is not the entity’s functional currency. The Group is exposed to foreign exchange risk arising from currency
exposures to the US Dollar.
Forward contracts are used to manage foreign exchange risk. Senior management is responsible for managing exposures in
each foreign currency by using external forward currency contracts. Contracts are designated as cash flow hedges. External
foreign exchange contracts are designated at Group level as hedges of foreign exchange risk on specific future transactions.
The Group’s risk management policy is to hedge up to 60% of anticipated transactions (export coal sales) in US Dollars for the
subsequent 5 years. All hedges of projected export coal sales qualify as “highly probable” forecast transactions for hedge
accounting purposes.
The Group’s exposure to foreign currency risk at the reporting date was as follows:
US dollar exposure
Cash and cash equivalents
Trade receivables
Forward exchange contracts – sell foreign currency (cash flow hedge)
Trade payables
Total exposure to USD
2010
USD $’000
2009
USD $’000
50,494
26,158
239,000
9,415
325,067
12,219
16,620
257,000
-
285,839
- 70 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 71
Notes to the Financial Statements (continued) For the year ended 31 July 2010
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 34. FINANCIAL RISK MANAGEMENT (continued)
a) Market Risk (continued)
Sensitivity analysis
Based on the trade receivables and cash held at 31 July 2010, had the Australian dollar weakened/strengthened by 10% against
the US dollar with all other variables held constant, the Group's post-tax profit for the year would have increased/(decreased)
by $5,819,000/($4,761,000) (2009 $2,709,000/($2,216,000), mainly as a result of foreign exchange gains/losses on translation
of US dollar receivables as detailed in the above table. The Group's equity as at balance date would have increased/(decreased)
by the same amounts.
Based on the forward exchange contracts held at 31 July 2010, had the Australian dollar weakened/strengthened by 10%
against the US dollar with all other variables held constant, the Group's equity would have increased/(decreased) by
$16,925,000/($20,686,000) (2009 $19,749,000/($24,138,000)). There is no effect on post-tax profits. Equity in 2010 is less
sensitive to movements in the Australian dollar / USD exchange rates than in 2009 because of the decreased value of forward
exchange contracts in 2010.
ii. Price Risk
The Group is exposed to equity securities price risk. This arises from investments held by the Group and classified in the
statement of financial position as either long term equity investments or investments fair valued through profit and loss. The
majority of the Group’s investments are publicly traded on the Australian Securities Exchange.
Investments held for the long-term are classified on the statement of financial position as ‘long term equity investments’. As
the market value of individual companies fluctuate, the fair value of the portfolio changes with the movement being recognised
directly to equity. Where an investment’s value falls below its cost, management may consider the investment to be impaired.
An impairment expense is recognised in the income statement. Long term equity investments represent 14.3% (2009: 24.2%)
of the Group’s net assets.
Investments held for the short to medium term are classified on the statement of financial position as ‘investments fair valued
through profit and loss’. As the market value of individual companies fluctuate, the fair value of this portfolio changes with the
movement being recognised through the income statement. ‘Investments fair valued through profit and loss’ represent 1.3%
(2009: 1.2%) of the Group’s net assets.
The performance of the investment portfolios are monitored by the individual Board’s of the Group. The Group seeks to reduce
market risk by ensuring that it is not exposed to one group or one particular sector of the market.
Sensitivity analysis
The following table summarises the financial impacts of a hypothetical 5% decrease in the market of investments for the Group
as at reporting date. Where this decrease results in an individual security being valued below its cost, the reduction below cost
has been recognised in the income statement. For long term equity investments, a 5% increase in market values would have
no impact on the income statement as all increases are recognised directly in equity.
Impact to post-tax profit
Impact on reserves
2010
$’000
(1,683)
-
(1,683)
2009
$’000
(1,573)
(3,555)
(5,128)
2010
$’000
-
(40,751)
(40,751)
2009
$’000
-
(30,458)
(30,458)
Investments fair valued through profit and loss
Long term equity investment
Total
iii. Fair value interest rate risk
Refer to (e) below.
- 71 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 72
Notes to the Financial Statements (continued) For the year ended 31 July 2010
NOTE 34. FINANCIAL RISK MANAGEMENT (continued)
b) Credit Risk
Exposure to credit risk relating to financial assets arises from the potential non-performance by counterparties of contract
obligations that could lead to a financial loss to the Group.
Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial
institutions, as well as credit exposure to export and domestic customers, including outstanding receivables and committed
transactions.
The Group has no significant concentrations of credit risk. The Group’s derivative counterparties, term deposits and cash
transactions are limited to financial institutions with a rating of at least BBB. The Group has policies that limit the maximum
amount of credit exposure to any one financial institution.
Credit risk further arises in relation to financial guarantees given to certain parties (refer note 28c). Such guarantees are only
provided in exceptional circumstances and are subject to specific Board approval.
The credit quality of financial assets that are neither past due nor impaired, can be assessed by reference to historical
information about counterparty defaults. To mitigate credit risk, management within each of the Group entities apply policies
to assess and monitor the credit worthiness of customers and set of appropriate credit limits for each customer, taking into
account their financial positions, past experience and other factors pertaining to each industry segment.
The maximum exposure to credit risk at the reporting date is the carrying amount of assets as stated in the statement of
financial position. The following table summarises these assets:
Cash and cash equivalents
Term deposits
Loans and receivables
Derivative financial instruments
2010
$’000
109,821
1,655,365
64,224
27,348
1,856,758
2009
$’000
228,530
2,619,238
52,751
22,682
2,923,201
The loans and receivables balances as stated above reflect the recoverable value and are net of any impairments or provisions.
Refer notes 12 and 18 for further description on certain impairments.
c) Liquidity risk
Liquidity risk is the risk that an entity is unable to meet its financial obligations as they fall due.
Prudent liquidity risk management is adopted by the Group through maintaining sufficient cash and marketable securities, the
ability to borrow funds from credit providers and to close-out market positions.
The Group entities manage liquidity risk by continually monitoring forecast and actual cashflows and matching maturity profiles
of financial assets and liabilities. Surplus funds are only invested in conservative financial instruments such as term deposits with
major banks.
In addition, 30.7% (2009: 25.4%) of the Group’s net assets are in the form of readily tradeable listed investments which could
be liquidated through on-market sales if necessary.
Financing arrangements
At 31 July 2010, the Group had no external borrowings from financial institutions. Details of financial facilities available are set
out in note 28(c).
d) Maturity of financial liabilities
The Group’s trade and other payables are all payable within one year.
The Group’s maturity analysis for derivative financial instrument is set out in note 16.
The Group’s maturity analysis for other financial liabilities is described in note 28(a).
- 72 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 73
Notes to the Financial Statements (continued) For the year ended 31 July 2010
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 34. FINANCIAL RISK MANAGEMENT (continued)
e) Cash flow and fair value interest rate risk
The Group currently has significant interest-bearing assets which are placed with reputable investment counterparties for up to
12 months. The Group has treasury investment policies approved by each of the relevant entity’s Board which stipulates the
maximum exposure to each financial institution. Significant changes in market interest rates may have an effect on the Group's
income and operating cash flows. Cash flow interest rate risk is managed by placing excess funds in term deposits and other fixed
interest bearing assets. Refer to notes 10 and 11 for details. Based on the deposits held at reporting date, the sensitivity to a
hypothetical 1% per annum increase or decrease in interest rates would increase/(decrease) after tax profit by $12.4 million (2009:
$19.9 million). This scenario assumes all cash and term deposits at reporting date continue to remain invested for the whole year.
At 31 July 2010, the Group has no external borrowings and therefore their income statements and operating cash flows are
substantially independent of changes in market interest lending rates.
f) Fair value estimation
The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure
purposes.
NOTE 35. CONTINGENT LIABILITIES
The Group had contingent liabilities at 31 July in respect of:
Not secured by a charge on the Consolidated entity’s assets
i. Undertakings and guarantees issued by a Controlled entity’s bankers to the
Department of Minerals & Energy, Statutory Power Authorities and various
other entities.
ii. Undertakings and guarantees issued by a Controlled entity to related party
For contingent liabilities relating to associates and joint ventures refer to note 40.
NOTE 36. COMMITMENTS FOR EXPENDITURE
a) Capital commitments
Capital expenditure contracted for at the reporting date
Property, plant and equipment
Payable:
All payable within one year
b) Lease commitments:
Commitments in relation to leases consist of:
i. Operating leases
The Group’s main leases relates to the leasing of port facilities under non-cancellable
operating leases expiring within one to nineteen years. The leases have varying
terms, escalation clauses and renewal rights. On renewal, the terms of the leases
are renegotiated.
Commitments for minimum lease payments in relation to non-cancellable operating
leases are payable as follows:
Within one year
Later than one year but not later than five years
Later than five years
For commitments relating to associates and joint ventures refer to note 40.
- 73 -
2010
$’000
14,454
6,000
20,454
2009
$’000
14,470
-
14,470
10,934
51,464
3,168
13,347
60,368
76,883
2,732
13,257
53,001
68,990
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 74
Notes to the Financial Statements (continued) For the year ended 31 July 2010
NOTE 37. PARENT ENTITY FINANCIAL INFORMATION
a) Summary financial information
The individual financial statements for the Parent entity show the following aggregate amounts:
Statement of financial position
Current assets
Cash and cash equivalents
Term deposits
Trade and other receivables
Inventories
Current tax asset
Investments fair valued through profit and loss
Total current assets
Non-current assets
Long term equity investments
Other financial assets
Property plant and equipment
Deferred tax assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Interest bearing liabilities
Current tax liability
Provisions
Total current liabilities
Non current liabilities
Deferred tax liabilities
Provisions
Non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Reserves
General reserve
Asset revaluation reserve
Retained profits
Total equity
Profit or loss for the year
Other comprehensive income
Net movement in the fair value of long term equity investments, net of tax
Total comprehensive income for the year
- 74 -
2010
$’000
2,990
331,500
6,759
1,198
957
9,832
353,236
458,893
382,551
3,578
35,826
880,848
1,234,084
772
41,274
-
414
42,460
56,078
1,043
57,121
99,581
1,134,503
2009
$’000
1,784
109,000
2,221
1,025
-
5,370
119,400
396,256
326,564
3,848
29,348
756,016
875,416
803
33,908
122
376
35,209
47,504
987
48,491
83,700
791,716
32,900
32,900
402,206
142,500
556,897
1,134,503
483,286
(2,086)
481,200
402,206
144,587
212,023
791,716
11,058
(22,745)
(11,687)
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 75
Notes to the Financial Statements (continued) For the year ended 31 July 2010
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 37. PARENT ENTITY FINANCIAL INFORMATION (continued)
b) Guarantees entered into by the Parent entity
The Parent entity did not provide any guarantees as at 31 July 2010 or 31 July 2009.
c) Contingent liabilities and contractual commitments of the Parent entity
The Parent entity did not have any contingent liabilities or any contractual commitments for the acquisition of property, plant
or equipment as at 31 July 2010 or 31 July 2009.
NOTE 38. SUBSIDIARIES
Name of entity
a) Parent entity
Washington H. Soul Pattinson and Company Limited *
b) Controlled entities
SP Laboratories Pty. Limited *
SP Newcastle Pty. Limited *
SP Runaway Bay Pty. Limited *
Souls Funds Management Limited
Souls Financial Solutions Pty. Limited
Souls Private Equity Limited +*
PCP Holdings 1 Pty. Limited*
PCP Holdings 2 Pty. Limited*
Cromford Pty. Limited*
Australian Film and Pipe Manufacturing Pty Limited
Soda Brands Limited
Food and Beverage Company Limited
Pitt Capital Partners Limited
Corporate & Administrative Services Pty. Ltd
Pitt Capital Nominees Pty. Ltd
Rundle Capital Partners Ltd
Pitt Capital Asia Ltd
New Hope Corporation Limited*
Jeebropilly Collieries Pty. Limited *
Fowlers Engineering Pty. Limited *
Tivoli Coal (Hawaii) Pty. Limited *
New Hope Collieries Pty. Limited *
Tivoli Collieries Pty. Limited *
Andrew Wright Holdings Pty. Limited *
Tetard Holdings Pty. Limited *
Queensland Bulk Handling Pty. Limited
New Oakleigh Coal Pty. Limited *
New Hope Exploration Pty. Limited *
Seven Mile Coal Pty. Limited *
New Acland Coal Pty. Limited *
Acland Pastoral Co. Pty Limited *
Arkdale Pty. Limited *
New Lenton Coal Pty. Limited *
New Saraji Coal Pty. Limited *
Country of
incorporation
Equity holding
2010
%
2009
%
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Hong Kong
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
- 75 -
100.0
100.0
100.0
-
65.0
13.4
13.4
13.4
13.4
13.4
-
13.4
78.3
78.3
78.3
-
78.3
59.9
59.9
59.9
59.9
59.9
59.9
59.9
59.9
59.9
59.9
59.9
59.9
59.9
59.9
59.9
59.9
59.9
100.0
100.0
100.0
78.8
65.0
13.4
13.4
13.4
13.4
13.4
6.7
13.4
78.3
78.3
78.3
78.3
78.3
60.7
60.7
60.7
60.7
60.7
60.7
60.7
60.7
60.7
60.7
60.7
60.7
60.7
60.7
60.7
60.7
60.7
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 76
Notes to the Financial Statements (continued) For the year ended 31 July 2010
NOTE 38. SUBSIDIARIES (continued)
Name of entity
b) Controlled entities (continued)
New Hope Corporation Limited* (continued)
New Hope Water Pty. Limited *
New Hope Marketing Pty. Limited *
Hueridge Pty. Limited *
New Hope Energy Pty. Limited *
Uniford Pty. Limited *
eCOALogical Pty. Limited *
New Hope Services Pty. Limited *
Country of
incorporation
Equity holding
2010
%
2009
%
Australia
Australia
Australia
Australia
Australia
Australia
Australia
59.9
59.9
59.9
59.9
59.9
59.9
59.9
60.7
60.7
60.7
60.7
-
-
-
*Companies marked with an asterisk are part of tax consolidation groups.
+ Souls Private Equity Limited and its subsidiaries have been consolidated on the basis of control of the board of directors and management
control.
c) Acquisition of controlled entities
i) Acquisitions during the year included:
The Group did not acquire any controlled entities during the year ended 31 July 2010.
ii) Details of acquisitions completed during the prior year include:
Acquisitions by controlled entities of Souls Private Equity Limited (SPEL)
SODA Brands Limited, a controlled entity of Souls Private Equity Limited, completed the acquisition of the business owned by
HairFX Australia Pty Limited. Cash consideration of $516,000 was paid.
d) Loss of control and disposals of controlled entities
i) Transactions during the year:
Souls Funds Management Limited (SFM)
SFM was disposed of on 11 November 2009. From this date, SFM was no longer controlled by the Group.
Rundle Capital Limited (Rundle) – Held by Pitt Capital Partners Limited
Rundle was disposed of on 1 October 2009. From this date, Rundle was no longer controlled by the Group.
SODA Brands Limited – (SODA) – Held by SPEL
As a result of capital raisings by SODA on the 1 December 2009, the Group’s shareholding in SODA was reduced from 50.3%
to 47.9% and further reduced to 25.1% from 1 July 2010. From the date of this change in shareholding below 50%, SODA
ceased to be accounted for as a subsidiary of SPEL and is equity accounted as an associate entity.
ii) Transactions during the prior year:
Loss of control – KH Foods Limited (in liquidation)
On 23 March 2009, KH Foods Limited (KHF) was placed into members’ voluntary liquidation. From this date, KHF was no longer
controlled by the Group.
NOTE 39. DISCONTINUED OPERATION
a) Description
During 2009, KH Foods Limited (in liquidation) (KHF) divested all of its remaining businesses. Results are disclosed as
discontinued operations.
- 76 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 77
Notes to the Financial Statements (continued) For the year ended 31 July 2010
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 40.
INVESTMENTS IN ASSOCIATES AND JOINT VENTURES
a) Carrying amounts
Investments in associates and joint ventures are accounted for using the equity method of accounting. Information relating to
investments in associates is set out in (f) below.
b) Movement in carrying amounts
Carrying amount at 1 August
New investments during the period
Associates transferred (to) long term equity investments
Disposal of the interest in an equity accounted associate
Gain on deemed disposal in equity accounted associates
Share of profits/(losses) after income tax, before writedowns
Impairment reversal/(expense) of associates
Dividends received/receivable
Add back share of dividends received by associate
Share of associates increment/(decrement) in reserves
Carrying amount at 31 July
c) Summarised financial information of associates and joint ventures
Assets
Liabilities
Net assets
The share of associates net assets of $1,113,633,000 (2009: $965,638,000)
includes the Group’s share of the total net assets of Brickworks Limited.
Brickworks Limited owns 42.85% (2009: 42.85%) of the issued capital in
Washington H. Soul Pattinson and Company Limited. The equity accounted
carrying value of this associate of $375,044,000 (2009:$ 311,929,000)
excludes the Group’s share of Brickworks Limited equity accounted carrying
value of Washington H. Soul Pattinson and Company Limited.
Revenue
Profit before income tax
Income tax expense
Profit after income tax
d) Share of associates’ and joint ventures expenditure commitments
Capital commitments
Lease commitments
2010
$’000
526,798
66,021
-
-
60,665
40,985
1,487
(38,732)
26,443
2,072
685,739
$’000
1,833,282
(719,649)
1,113,633
2009
$’000
671,894
18,133
(3,205)
(2,496)
344
(5,493)
(127,901)
(31,774)
15,682
(8,386)
526,798
$’000
1,666,249
(700,611)
965,638
1,681,959
1,589,279
57,729
(16,744)
40,985
(8,099)
2,606
(5,493)
14,488
134,864
5,821
111,687
e) Contingent liabilities of associates and joint ventures
Share of incurred jointly with other investors
22,542
25,763
- 77 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 78
Notes to the Financial Statements (continued) For the year ended 31 July 2010
NOTE 40.
INVESTMENTS IN ASSOCIATES AND JOINT VENTURES (continued)
f) Details of investments and results in associates
Balance
date
Group’s percentage of
holding at balance dates
Contribution to
Group net profit
Fair value of
listed investments
Balance date
Company
2010
%
2009
%
Balance date
Associate
2010
%
2009
%
2010
$’000
2009
$’000
2010
$’000
2009
$’000
Name and Principal Activity
Associates – held by WHSP
Brickworks Limited (i)
Manufacturer of clay products
31 July
44.6
49.4
44.6
49.4
12,982
(24,100)
775,269 843,540
Australian Pharmaceutical Industries Limited (ii)
Pharmaceutical wholesaler
31 Aug
24.6
24.6
24.6
24.6
5,478
Ruralco Holdings Limited (iii)
Rural supplies and services
30 Sept
23.5
23.5
23.5
23.5
2,675
3,879 +73,356
33,438
2,177 +35,429
33,640
Apex Healthcare Berhad
Pharmaceutical manufacturer and distributor 30 June
30.3
30.3
30.3
30.3
2,909
1,930
25,743
11,137
TPG Telecom Limited (iv)
Telecommunications and internet provider
31 July
26.6
28.5
26.6
28.5
15,350
4,939
367,635 103,401
Clover Corporation Limited
Refinement and processing of natural oil
30 June
28.6
28.6
28.6
28.6
(276)
880
12,498
9,388
Keith Harris & Company (Far East) Pte Limited
Manufacturer of flavours, essences
and colours
Associates – held by Controlled entity
(Souls Private Equity Limited)
Ampcontrol Pty Limited
Electrical supplies
Austgrains Pty Limited
Agricultural supplies
Belaroma Coffee Pty Ltd
Beverage manufacturer
InterRISK Australia Pty Ltd (v)
Insurance broker
SODA Brands Limited (vi)
Distribution of hair care and skin car
products
Specialist Oncology Property Pty Limited
31 July
49.0
49.0
49.0
49.0
312
271
n/a
n/a
30 June
45.0
45.0
45.0
45.0
3,166
3,448
n/a
n/a
30 June
48.0
48.0
48.0
48.0
(1,611)
25
n/a
n/a
30 June
40.0
40.0
40.0
40.0
197
109
n/a
30 June
40.0
40.0
40.0
40.0
333
499
n/a
30 June
25.1
-
47.9
-
(837)
-
n/a
n/a
n/a
n/a
n/a
n/a
Specialist medical services
30 June
31.5
31.5
21.3
21.3
329
135
n/a
Supercorp Pty Limited
Financial services administration
30 June
30.2
30.2
30.2
30.2
(22)
315
n/a
Share of results from equity accounted
associates before impairment
Impairment reversal/(expense)
- Australian Pharmaceutical Industries Limited
- Ruralco Holdings Limited
- Other associates
Total impairment reversal/(expense) of investment in associates
Share of results and impairment from equity accounted associates
40,985
(5,493)
-
-
(101,137)
(18,557)
1,487
(8,207)
1,487 (127,901)
42,472 (133,394)
- 78 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 79
Notes to the Financial Statements (continued) For the year ended 31 July 2010
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 40.
INVESTMENTS IN ASSOCIATES AND JOINT VENTURES (continued)
With the exception of Apex Healthcare Berhad and Keith Harris & Company (Far East) Pte Limited (KHFE), all associates as listed
in the table are incorporated in Australia. Apex Healthcare Berhad is incorporated in Malaysia. KHFE is incorporated in
Singapore.
The percentage holding of each associate represents the Group’s total holding in each associate.
Contribution to Group net profit represents the amount included in profit after tax including the non-controlling interest’s
share.
(i) During the year, Brickworks Limited (Brickworks) completed share issues to their employees (September 2009) and to
ordinary shareholders (November 2009).
WHSP did not participate in the Brickworks share issues, resulting in WHSP’s percentage holding in Brickworks decreasing
by 4.9% to 44.6%.
In accordance with accounting standards, a ‘deemed disposal’ was considered to have taken place and a gain of $49.1
million (less tax $14.8 million) has been recognised in profit.
(ii) Australian Pharmaceutical Industries Limited (API) raised capital through an institutional placement and completed an
equity raising (November 2009). WHSP maintained its percentage shareholding in API by participating in these offers.
API has a financial year ending on 31 August. As a result WHSP has equity accounted API’s results for the 12 months to
28 February 2010. By considering these results and by taking into account information API has provided to the market
under the continuous disclosure regime, Directors do not consider that the different accounting period would have a
material effect on the results of the Group.
(iii) Ruralco Holdings Limited (Ruralco) has a financial year ending on 30 September. As a result WHSP has equity accounted
Ruralco’s result for the 12 months to March 2010 (being the most recently published). By considering these results and by
taking into account information Ruralco has provided to the market under the continuous disclosure regime, Directors do
not consider that the different accounting period would have a material effect on the results of the Group.
(iv) WHSP participated in the TPG Telecom Limited (TPG) dividend reinvestment plan (DRP) issues on 25 November 2009 and
27 May 2010. During the year, TPG raised capital through an institutional placement on the 10 February 2010 and issued
shares to employees in accordance with their employee share plan. WHSP did not participate in either of these issues.
The cumulative effect of the above share issues resulted in WHSP decreasing its shareholding by 1.9% to 26.6%.
In accordance with accounting standards, a ‘deemed disposal’ was considered to have taken place and a gain of $11.6
million (less tax $3.5 million) has been recognised in profit.
(v)
In December 2008 the Group increased its shareholding in InterRISK Australia Pty Ltd (InterRISK) to 40% . From this date
InterRISK was deemed to be an associate.
(vi) As a result of a capital raising by SODA Brands Limited (SODA), on the 18th December 2009, the Group’s shareholding in
SODA was reduced from 50.3% to 47.9%. From the date of this change in shareholding, SODA ceased to be accounted
for as a subsidiary of SPEL and is equity accounted as an associate entity. On 1 July 2010, SPEL further reduced its holding
in SODA to 25.1%.
g) Fair value
The recoverable amount of investments in equity accounted associates is reviewed at each reporting date after taking into
consideration any applicable impairment indicators. At 31 July 2009, several associates were considered to be impaired and an
impairment expense was recognised totalling $127.9 million. During the year ended 31 July 2010, $1.49 million of this
impairment has been reversed.
The fair value of listed equity accounted investments represents:
(i) Unadjusted quoted prices in active markets where the quoted price is readily available and the price represents actual and
regularly occurring market transactions on an arm’s length basis; or
(ii)
+
the equity accounted carrying value where Directors consider the current quoted market price is not reflective of the long
term underlying value of the business. In these instances, alternative valuation techniques have been applied to determine
the fair value, using a combination of market observable and unobservable inputs, including management’s judgement in
selecting appropriate assumptions and estimates (refer note 2).
The following table provides a comparison between the bid value of the listed associates at balance date where an
alternative valuation technique has been applied in determining that the fair value equals or exceeds the equity accounted
carrying value.
- 79 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 80
Notes to the Financial Statements (continued) For the year ended 31 July 2010
NOTE 40.
INVESTMENTS IN ASSOCIATES AND JOINT VENTURES (continued)
As at 31 July 2010
Associates carrying values assessed by valuation techniques
Australian Pharmaceutical Industries Limited
Ruralco Limited
Sub-total
Total for all listed associates
NOTE 41. KEY MANAGEMENT PERSONNEL
a) Directors
Bid
value
$’000
49,288
34,935
84,223
1,265,368
Equity
accounted
carrying value
$’000
73,356
35,429
108,785
626,390
The following persons were Directors of Washington H. Soul Pattinson and Company Limited during the financial year:
i. Chairman – non-executive
Mr R D Millner
ii. Deputy Chairman – non-executive
Mr M J Millner
iii. Executive Director
Mr P R Robinson
iv. Non-executive Directors
Mr D J Fairfull
Mr R G Westphal
Mr D E Wills
b) Other key management personnel
The following persons also had authority and responsibility for planning, directing and controlling the activities of the Group,
directly or indirectly, during the financial year:
Name
Position
Mr I D Bloodworth
Company Secretary
Ms M R Roderick
Chief Financial Officer
Company
Washington H. Soul Pattinson and
Company Limited
Washington H. Soul Pattinson and
Company Limited
New Hope Corporation Limited
Mr M L Bailey
Mr B J Garland
Mr C C Hopkins
Mr R C Neale
Mr S O Stephan
Mr C J Photakis
(Deceased 7 August 2009)
Chief Operations Officer
Acting Chief Financial Officer until
31 August 2009
General Manager – Resource Development
New Hope Corporation Limited
General Manager – Marketing
New Hope Corporation Limited
Managing Director and Chief Executive Officer
New Hope Corporation Limited
Chief Financial Officer since 31 August 2009
New Hope Corporation Limited
Managing Director
Pitt Capital Partners Limited
- 80 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 81
Notes to the Financial Statements (continued) For the year ended 31 July 2010
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 41. KEY MANAGEMENT PERSONNEL (continued)
c) Key management personnel (KMP) compensation
Short-term employee benefits
Post-employment benefits
Share-based payments
Total
Paid to KMP of the
Consolidated entity
2009
2010
$’000
$’000
6,153
405
620
7,178
9,939
571
854
11,364
Paid to KMP of the
Parent entity
2010
$’000
2,909
274
-
3,183
2009
$’000
2,760
228
-
2,988
Key management personnel remuneration has been included in the Remuneration Report section of the Directors’ Report.
d) Equity instrument disclosures relating to key management personnel
i. Options provided as remuneration and shares issued on exercise of such options
Details of options provided as remuneration can be found in the Remuneration Report section of the Directors’ Report. Terms
and conditions of options are detailed in note 45.
ii. Share holdings
The numbers of shares in each Group entity held during the financial year by each Director of Washington H. Soul Pattinson
and Company Limited and other key management personnel of the Group, including their personally related parties, are set
out below:
Shares in Washington H. Soul
Pattinson and Company Limited
Balance at
start of year
2010
Directors of Washington H. Soul
Pattinson and Company Limited
Acquired
Balance at
during year exercise of options during year end of year
Received on
Sold
R D Millner
M J Millner
P R Robinson
D J Fairfull
R G Westphal
D E Wills
Other key management personnel
of the Group
C C Hopkins
R C Neale
2009
Directors of Washington H. Soul
Pattinson and Company Limited
R D Millner
M J Millner
P R Robinson
D J Fairfull
R G Westphal
D E Wills
Other key management personnel
of the Group
C C Hopkins
P K Mantell (to 16 March 2009)
R C Neale
19,104,996
18,739,976
167,150
167,150
74,210
60,000
5,000
113,866
850
4,000
-
-
-
10,000
-
-
18,856,496
18,491,476
248,500
248,500
74,210
60,000
5,000
113,866
850
200
4,000
-
-
-
-
-
-
-
- 81 -
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
19,272,146
18,907,126
74,210
60,000
5,000
123,866
850
4,000
19,104,996
18,739,976
74,210
60,000
5,000
113,866
850
N/A
4,000
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 82
Notes to the Financial Statements (continued) For the year ended 31 July 2010
NOTE 41. KEY MANAGEMENT PERSONNEL (continued)
d) Equity instrument disclosures relating to key management personnel (continued)
Shares in New Hope
Corporation Limited
2010
Directors of New Hope Corporation Limited
Balance at
start of year
R D Millner
R C Neale
D J Fairfull
W H Grant
P R Robinson
D C Williamson
Other key management personnel
of the Group
M L Bailey
C C Hopkins
2009
Directors of New Hope Corporation Limited
R D Millner
R C Neale
D J Fairfull
W H Grant
P R Robinson
D C Williamson
3,570,573
1,005,500
11,000
20,000
67,447
20,000
-
-
3,190,573
1,005,500
10,000
20,000
57,357
20,000
Other key management personnel
of the Group
P K Mantell (to 16 March 2009)
927,500
Shares in Souls Private Equity Limited
Balance at
start of year
2010
Directors of Souls Private Equity Limited
R D Millner
D J Fairfull
R G Westphal
D E Wills
1,225,193
8,700,001
370,000
423,277
Other key management personnel
of the Group
C J Photakis (Deceased 7 August 2009)
50,000
2009
Directors of Souls Private Equity Limited
R D Millner
D J Fairfull
R G Westphal
D E Wills
1,225,193
8,700,001
370,000
423,277
Other key management personnel
of the Group
C J Photakis (Deceased 7 August 2009)
50,000
Acquired
Balance at
during year exercise of options during year end of year
Received on
Sold
50,000
-
-
3,620,573
-
-
-
41,787
-
5,000
-
380,000
-
-
-
10,090
-
-
2,000,000
1,000,000
2,005,500
-
-
-
-
-
-
-
-
-
-
1,250,000
1,212,770
-
-
1,000
-
-
-
1,500,000
-
-
-
-
-
-
-
11,000
20,000
109,234
20,000
5,000
37,230
3,570,573
1,005,500
11,000
20,000
67,447
20,000
N/A
Acquired
Balance at
during year exercise of options during year end of year
Received on
Sold
-
-
-
-
-
-
-
-
-
-
1,725,193
8,700,001
370,000
423,277
N/A
1,225,193
8,700,001
370,000
423,277
50,000
-
-
-
-
-
-
-
-
-
-
500,000
-
-
-
-
-
-
-
-
-
- 82 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 83
Notes to the Financial Statements (continued) For the year ended 31 July 2010
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 41. KEY MANAGEMENT PERSONNEL (continued)
d) Equity instrument disclosures relating to key management personnel (continued)
iii. Option holdings
The numbers of options over ordinary shares in each Group entity held during the financial year by each Director of Washington
H. Soul Pattinson and Company Limited and other key management personnel of the Group, including their personally related
parties, are set out below.
New Hope Corporation Limited -
options
Balance at
start of year
Expired
during year
Exercised
during year
Issued
during year
Balance at
end of year
2010
Directors of New Hope Corporation Limited
R C Neale
2,000,000
The above options were vested and exercisable
during the year.
Other key management personnel
of the Group
M L Bailey
B J Garland
C C Hopkins
The above options were not vested at the
end of the year.
2009
Directors of New Hope Corporation Limited
D J Fairfull
R C Neale
The above options were vested and exercisable
at the end of the year.
Other key management personnel
of the Group
M L Bailey
B J Garland
C C Hopkins
P K Mantell (to 16 March 2009)
The above options were not vested at the
end of the year.
1,500,000
1,000,000
1,250,000
1,000
2,000,000
1,500,000
1,000,000
1,250,000
1,500,000
-
-
-
-
-
-
-
-
-
-
2,000,000
-
-
1,250,000
1,000
-
-
-
-
1,500,000
-
-
-
-
-
-
-
-
-
-
-
1,500,000
1,000,000
-
-
2,000,000
1,500,000
1,000,000
1,250,000
-
Souls Private Equity Limited -
options
Balance at
start of year
Expired
during year
Exercised
during year
Issued
during year
Balance at
end of year
2010
Directors of Souls Private Equity Limited
R D Millner
D J Fairfull
R G Westphal
D E Wills
The above options were vested and exercisable
at the end of the year.
2009
Directors of Souls Private Equity Limited
R D Millner
D J Fairfull
R G Westphal
D E Wills
The above options were not vested at the
end of the year.
87,524
87,524
1,037,500
1,037,500
10,000
27,909
10,000
27,909
87,524
1,037,500
10,000
27,909
-
-
-
-
- 83 -
-
-
-
-
-
-
-
-
153,151
1,087,501
46,250
52,910
153,151
1,087,501
46,250
52,910
-
-
-
-
87,524
1,037,500
10,000
27,909
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 84
Notes to the Financial Statements (continued) For the year ended 31 July 2010
NOTE 41. KEY MANAGEMENT PERSONNEL (continued)
e) Loans to key management personnel
No loans have been made to the Directors of Washington H. Soul Pattinson and Company Limited (WHSP) or other key
management personnel of the Group.
f) Other transactions with key management personnel
The key management personnel and their related entities received dividends during the year in respect of their shareholdings
in the Group companies consistent with other shareholders.
Unsecured deposits are accepted from Directors and their related entities and interest is paid at normal commercial rates.
Interest paid during the current financial year amounted to $2,156,425 (2009: $1,372,183). The balance of deposits at 31 July
2010 was $41,192,836 (2009: $33,826,959).
Deposits were received from Mr R D Millner, Mr M J Millner, Mr D J Fairfull and Mr R G Westphal and/or their related parties.
Mr R D Millner and Mr P R Robinson are Directors of Pitt Capital Partners Limited (PCP) which is a 78.3% (2009: 78.3%)
controlled entity of Washington H. Soul Pattinson and Company Limited.
Mr R G Westphal received consultancy fees from PCP of $49,992 during the year (2009: $81,162). Richvale Pty Ltd, an
associated company of Mr D J Fairfull, received consultancy fees from PCP of $350,000 during the year (2009: $320,833).
During the current financial year PCP provided services to Group related entities:-
1. Clover Corporation Limited $135,638 (2009: $147,969);
2. Brickworks Limited $50,000 (2009: $nil);
3. KH Foods Limited $nil (2009: $12,750);
4. New Hope Corporation Limited $615,452 (2009: $29,000,000);
5. Souls Financial Solutions Pty Limited $12,000 (2009 $12,000);
6. Souls Private Equity Limited $2,195,544 (2009: $2,272,324); and
7. TPG Telecom Limited – $nil (2009: $2,681,500).
WHSP charged PCP $136,305 for rental of office space in its own premises during the year (2009: $140,688).
WHSP disposed of Souls Funds Management Limited (SFM) to Treasury Group Limited on 11 November 2009. The management
agreement between SFM and PCP was also terminated on this date. Up until the date of disposal, SFM received $33,401 from
PCP for management fees (2009 - $121,599).
Mr R D Millner, Mr P R Robinson and Mr R G Westphal were also directors of SFM. Nil director’s fees were paid by SFM in the
period to November 2009 or the prior year.
NOTE 42. RELATED PARTIES
a) Parent entities
The ultimate Parent entity is Washington H. Soul Pattinson and Company Limited.
b) Subsidiaries and associates
Interests in subsidiaries and associates are set out in note 38 and note 40 respectively.
c) Key management personnel
Disclosures relating to key management personnel are set out in note 41.
d) Related parties transactions and balances
i. Subsidiaries
Transactions between the Parent entity and its subsidiaries, and between subsidiaries are at normal commercial terms and
conditions. Transactions consist of the transfer of funds for day to day financing, provision of consulting, management and
advisory services, loans advanced and repaid, interest, dividend and rental payments.
- 84 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 85
Notes to the Financial Statements (continued) For the year ended 31 July 2010
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 42. RELATED PARTIES (continued)
d) Related parties transactions and balances (continued)
ii. Associates
Transactions with associates are at normal commercial terms and conditions.
Transactions consist of the supply of pharmaceutical products to the Parent entity, consulting, management and advisory fees
received from associates, loans advanced and repaid, interest and dividend payments.
Summary of transactions
Advisory, consulting , underwriting and management fees received from subsidiaries:
- by subsidiaries from associates
Purchases of pharmaceutical products from:
- Associates
Interest income from:
- Associates
Loans to subsidiaries
2010
$’000
1,396
5,456
4
2009
$’000
941
5,917
7
During the year, the Parent entity advanced $100,000 (2009: $150,000) to Souls Financial Solutions Pty Limited. Interest is
charged at market rates. At 31 July 2010, the balance due was $547,457 (2009: $432,411). This loan has been fully impaired.
Impairment expense for 2010 was $115,046 (2009: 432,411).
During the prior year, the Parent entity received $1,000,000 from the previously controlled entity, KH Foods Limited (in
liquidation) as part repayment of the $6,500,000 loan receivable. At 31 July 2009 the balance owing to the Parent entity was
$5,500,000 which was fully impaired. Interest was charged at BBSY plus a margin with the total incurred for the prior year
being 2009: $234,993. This loan was unsecured.
In the prior year, the Parent entity also received $2,800,000 from KHF in respect of the Parent’s right of indemnity arising from
the financial guarantee provided to KHF in prior years. The Parent has formally forgiven its right to recover $16,990,276 under
this indemnity.
The Parent entity has a loan agreement with Pitt Capital Partners Limited to provide a loan facility of up to $1,000,000. No
amount has been advanced to date.
Souls Private Equity Limited (SPEL) provides loans to its controlled entity Cromford Group Pty Limited (Cromford), to fund capital
and working capital requirements. During the year $28,212,227 of loans and interest receivable from Cromford was converted
to equity by SPEL. SPEL also made several additional loans to Cromford totalling $8,939,000 to fund construction costs for their
Moss Vale factory and working capital. Total loan due from Cromford at 31 July 2010 was $8,934,117 (2009: $25,609,807)
with no fixed repayment date. Interest incurred on the loan for the year was $1,383,166 (2009: $1,485,700). No repayments
were made in 2010 (2009: $nil).
During the year, SPEL converted $395,411 of loans to Soda Brands Limited (SODA) to equity. The amount represented the full
loan balance due from SODA at the time SODA ceased to be accounted for as a controlled entity of SPEL. Since this time, SPEL
has loaned a further $385,000 to SODA. Interest is payable on this loan at 10% per annum and the loan is secured over the
assets of SODA. Interest of $3,271 was charged to SODA on this loan and is payable to SPEL at 31 July 2010.
In prior years, SPEL advanced loans to its controlled entity Food and Beverage Company Limited (FBC). The total loans to FBC
at the beginning of the financial year (including accrued interest) were $30,358,737. No interest has been charged on the loan
amount since 1 December 2006. At 31 July 2009, SPEL considered $27,101,266 of this loan to be non-recoverable and fully
impaired this amount. No additional loans have been made to FBC during the 2010 financial year, nor has any additional
impairment been recognised on these loans.
Advances made by SPEL to FBC in prior years were on-loaned to associates and related entities of FBC. The total amount
advanced to those entities through FBC up to 31 July 2009 was $11,357,000 of which $11,257,000 was considered non-
recoverable and was impaired at 31 July 2009. The recoverable amount of the loans at 31 July 2010 is considered to be
$100,000 (2009: $100,000). No additional loans have been made by FBC during the 2010 financial year, nor has any additional
impairment been recognised on existing loans.
- 85 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 86
Notes to the Financial Statements (continued) For the year ended 31 July 2010
NOTE 42. RELATED PARTIES (continued)
d) Related parties transactions and balances (continued)
Loans to associates
At the beginning of the year, the loan balance owing to the Parent entity from Keith Harris and Company (Far East) Pte Limited
was $156,818. This balance was fully impaired at 31 July 2009. At 31 July 2010, the loan balance, net of impairments is $7,338.
Interest is charged at market rates.
During the prior year, the Parent entity advanced $214,000 to Windsor Farm Foods Group Limited. Prior to the sale of Windsor
Farm Foods Group Limited in June 2009, the loan balance of $214,000 was fully impaired and formally forgiven.
NOTE 43. REMUNERATION OF AUDITORS
During the year the following fees were paid or payable for services provided by the auditor.
a) Audit Services
Moore Stephens Sydney for audit and review of financial reports and other audit
work under the Corporations Act 2001
Other audit firms for the audit or review of financial reports of any entity in
the Group
Total remuneration for audit services
b) Other services
Moore Stephens Sydney
Other auditors
Transaction advisory services
Tax compliance services
Other services
Total remuneration for other services
2010
$’000
201
458
659
28
422
250
377
1,077
2009
$’000
193
561
754
7
880
311
358
1,556
- 86 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 87
Notes to the Financial Statements (continued) For the year ended 31 July 2010
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 44. RECONCILIATION OF PROFIT AFTER INCOME TAX TO NET CASH (OUTFLOW)/INFLOW FROM
OPERATING ACTIVITIES
Profit after tax for the year
Adjustments for non-cash items:
Depreciation and amortisation
Impairment losses
Bad and doubtful debts
Loss/(gain) on disposal of discontinuing operations
Dividends received (non-cash)
Net (gains)/losses on financial assets
Net (profit) on sale of non-current assets
Share-based payments
Share of profits of associates not received as dividends or distributions
Net exchange losses
Gain on deemed disposal in associates
Mining exploration and evaluation costs
Changes in operating assets and liabilities, net of effects from purchase and
sales of business
(Increase)/decrease in trade debtors, other debtors and prepayments
(Increase)/decrease in inventory
(Increase)/decrease in intangible assets
Increase/(decrease) in trade creditors and accruals
Increase/(decrease) in employee entitlements, other liabilities and provisions
Increase/(decrease) in current tax payable
Increase/(decrease) in deferred tax liability
(Increase)/decrease in deferred tax asset
Net cash (outflow)/inflow from operating activities
NOTE 45. SHARE-BASED PAYMENTS
2010
$’000
2009
$’000
291,092
1,851,309
39,879
706
22
-
(6,055)
(9,429)
(111)
692
(2,252)
3,184
(60,665)
13,402
99,267
(7,666)
-
24,848
2,266
(722,905)
5,405
(1,043)
(329,363)
30,894
147,705
507
352
(1,875)
10,700
(2,440,119)
1,613
37,208
3,885
(344)
7,693
(129,558)
(11,562)
(184)
15,784
7,765
728,399
29,537
(24,090)
265,619
Entities within the Group grant options and shares to employees through entity specific agreements. Details of these
transactions are set out below for each entity.
New Hope Corporation Limited
Options are granted under the New Hope Corporation Limited Employee Share Option Plan. Membership of the Plan is open
to those senior employees of New Hope Corporation Limited, its subsidiaries and associated bodies corporate whom the
Directors believe have a significant role to play in the continued development of the Group’s activities.
Options are granted for no consideration. Options are granted for a 5 year period, and vest after the third anniversary of the
date of the grant. Total expense arising from options issued under the employee share option plan during the financial year
was $692,000 (2009 - $1,610,000).
- 87 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 88
Notes to the Financial Statements (continued) For the year ended 31 July 2010
NOTE 45. SHARE-BASED PAYMENTS (continued)
New Hope Corporation Limited (continued)
Set out below are the summaries of options granted under the plan:
2010
Grant
date
Expiry
date
Exercise
price
Balance at
beginning of
the year
Granted
during
the year
Exercised
during
the year
Expired
during
the year
Balance at
the end of
the year
Exercisable
at the end
of the year
Number
Number
Number
Number
Number
Number
3 Jan 2006
2 Jan 2011
8 May 2006
7 May 2011
2 Jan 2007
1 Jan 2012
$1.235
$1.288
$1.413
9,218,000
500,000
1,000,000
19 Jan 2007
18 Jan 2012
$1.360
500,000
13 Aug 2007 12 Aug 2012
$2.104
2,500,000
Total
13,718,000
-
-
-
-
-
-
(9,218,000)
(500,000)
(1,000,000)
(500,000)
-
(11,218,000)
-
-
-
-
-
-
Weighted average exercise price
1.4128
1.2588
-
-
-
-
2,500,000
2,500,000
2.1040
-
-
-
-
-
-
The weighted average share price at the date of exercise of options exercised during the 2010 year was $5.45 (2009: $4.01).
2009
Grant
date
Expiry
date
Exercise
price
Balance at
beginning of
the year
Granted
during
the year
Exercised
during
the year
Expired
during
the year
Balance at
the end of
the year
Exercisable
at the end
of the year
Number
Number
Number
Number
Number
Number
31 Aug 2005 30 Aug 2010
$1.198*
800,000
3 Jan 2006
2 Jan 2011
$1.235
15,500,000
8 May 2006
7 May 2011
2 Jan 2007
1 Jan 2012
19 Jan 2007
18 Jan 2012
$1.288
$1.413
$1.360
500,000
1,000,000
500,000
13 Aug 2007 12 Aug 2012
$2.104
2,500,000
Total
20,800,000
-
-
-
-
-
-
-
(800,000)
(6,282,000)
-
-
-
-
(7,082,000)
-
-
-
-
-
-
-
-
-
9,218,000
9,218,000
500,000
500,000
1,000,000
500,000
2,500,000
-
-
-
13,718,000
9,718,000
Weighted average exercise price
1.3509
1.2308
1.4128
1.2377
*In accordance with ASX guidelines, the option exercise price was reduced by 10 cents following the return of capital paid to
shareholders on 16 December 2005. These prices are current exercise prices.
The weighted average remaining contractual life of share options outstanding at the end of the period was 0.1 years (2009 –
0.8 years).
The fair value of options granted under the New Hope Corporation Limited Employee Share Option Plan is recognised as an
employee benefit expense with a corresponding increase in equity. The fair value is measured at grant date and recognised over
the period during which the employee becomes unconditionally entitled to the options. Options are exercisable by current
employees during the nominated vesting period or by Directors’ consent.
The fair value at grant date is independently determined using a Monte Carlo option pricing model that takes into account the
exercise price, the term of the option, the vesting criteria, the impact of dilution, the non-tradeable nature of the option, the
share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free
interest rate for the term of the option.
At each reporting date, the entity revises its estimate of the number of options that are expected to become exercisable. The
employee benefit expense recognised each period takes into account the most recent estimate.
- 88 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 89
Notes to the Financial Statements (continued) For the year ended 31 July 2010
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 45. SHARE-BASED PAYMENTS (continued)
New Hope Corporation Limited (continued)
The inputs and assumptions for each grant made during the year are as follows:
Grant date
Expiry date
Exercise price
Share price
at grant date
Assessed fair
Expected
value at
volatility dividend yield interest rate grant date
Expected
Risk free
31 Aug 2005
3 Jan 2006
8 May 2006
02 Jan 2007
19 Jan 2007
13 Aug 2007
30 Aug 2010
2 Jan 2011
7 May 2011
01 Jan 2012
18 Jan 2012
12 Aug 2012
$1.198
$1.235
$1.288
$1.413
$1.360
$2.104
$1.350
$1.230
$1.280
$1.430
$1.370
$2.220
38.7%
41.3%
40.5%
38.0%
38.0%
44.0%
4.6%
4.6%
3.8%
6.2%
6.4%
4.0%
4.9%
5.1%
5.6%
5.9%
5.9%
6.0%
$0.372
$0.346
$0.384
$0.338
$0.318
$0.745
Expected volatility was estimated using the weekly (continuously-compounded) returns to New Hope Corporation Limited since
its listing in 2003. There are no market related vesting conditions.
Souls Private Equity Limited
Souls Private Equity Limited previously established an Employee Share Option Plan (“ESOP”) under which Directors and eligible
employees of the Company, its controlled and associated entities may be granted management options.
All unlisted options expired on 16 December 2009 and no new options were issued. No shares were issued following exercise
of any management options in 2010 (2009: nil).
The movement in the number of management options held by eligible employees is summarised below:
Movements
Class
Expiry and
of options exercise date
Exercise
price
Balance at
beginning
of 2009
Lapsed
during
2009
Balance at
the end
of 2009
Exercisable
at the end
of 2009
Expired
during
2010
Exercisable
at the end
of 2010
Number
Number
Number
Number
Number
Number
Class 1
Class 2
Class 3
Class 4
Total
16 Dec 2009
16 Dec 2009
16 Dec 2009
16 Dec 2009
$0.30
$0.32
$0.35
$0.38
2,185,000
(965,000)
1,220,000
1,220,000
(1,220,000)
2,185,000
(965,000)
1,220,000
1,220,000
(1,220,000)
2,185,000
(965,000)
1,220,000
1,220,000
(1,220,000)
2,185,000
(965,000)
1,220,000
1,220,000
(1,220,000)
8,740,000
(3,860,000) 4,880,000
4,880,000
(4,880,000)
-
-
-
-
-
- 89 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 90
Notes to the Financial Statements (continued) For the year ended 31 July 2010
NOTE 46. EVENTS AFTER THE REPORTING DATE
Since the end of the financial year the following matters or circumstances not referred to elsewhere in this report have arisen
that have or will significantly affect the operations of the Group, the results of those operations or the state of affairs or the
Group in subsequent financial years:
New Hope Corporation Limited – Sale of investment in Arrow Energy Limited
As at 31 July 2010, New Hope Corporation Limited held (NHC) 122.6 million shares in Arrow Energy Limited (Arrow) at a total
cost of $110.0 million, equivalent to 16.7% of the company.
As at reporting date, the shareholders of Arrow had accepted an offer from CS CSG (Australia) Pty Ltd (CS CSG) to purchase
all of their shares in Arrow. The offer consisted of a scheme to move certain assets held by Arrow into a new entity, Dart Energy
Limited (Dart), and for CS CSG to then purchase the shares of Arrow. This scheme was approved by the Federal Court of
Australia on 16 July 2010. The Implementation Date for the Acquisition Scheme was 23 August 2010.
As a result of the offer from CS CSG being accepted, NHC received $4.70 for each of the shares in Arrow. Based on the
settlement price of $4.70 per share, the value of NHC's investment in Arrow as at 31 July 2010 was $576.2 million, representing
an unrealised gain before tax of $466.2 million (after tax gain of $326.3 million).
The issue of shares in Dart took place on 28 July 2010, with NHC receiving a total of 61,299,067 shares in Dart. NHC
consequently transferred 7.79% of the cost base of its investment in Arrow to the cost base of its investment in Dart to reflect
the portion of assets transferred.
New Hope Corporation Limited – Quantex Research Corporation
On 14 September 2010, New Hope Corporation Limited (NHC) announced that it had agreed to acquire an initial 25% equity
interest in a 25 year licensed technology, creating high value carbon products using a direct coal liquefaction process. The other
shareholder in the technology company is Quantex Research Corporation (QRC), a private Canadian company which has
acquired the technology rights. As at 14 September 2010, through a wholly owned subsidiary company, NHC had made
payments to the value of US $5 million representing an initial 8.33% interest in QRC. Additionally, NHC has the right to acquire
an interest of up to 51% at agreed prices.
Other than declared in these financial statements, no other events have occurred after reporting date which would materially
affect the full year financial statements.
- 90 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 91
Directors’ Declaration
The Directors of the Company declare that:
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
1. the financial statements and notes, as set out on pages 30 to 90 are in accordance with the Corporations Act 2001 and:
a)
comply with Accounting Standards and the Corporations Regulations 2001 and;
b)
give a true and fair view of the financial position as at 31 July 2010 and the performance for the year ended on that
date of the consolidated group;
2. the Chief Executive Officer and Chief Financial Officer have each declared that:
a)
the financial records of the Company for the financial year have been properly maintained in accordance with section
286 of the Corporations Act 2001;
b)
the financial statements and notes for the financial year comply with Accounting Standards; and
c)
the financial statements and notes for the financial year give a true and fair view;
3.
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.
This declaration is made in accordance with a resolution of the Board of Directors.
R D MILLNER
Director
P R ROBINSON
Director
Dated this 26th day of October 2010.
- 91 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 92
Independent Auditor’s Report
TO THE MEMBERS OF
WASHINGTON H. SOUL PATTINSON AND COMPANY LIMITED
AND CONTROLLED ENTITIES
We have audited the accompanying financial report of Washington H. Soul Pattinson and Company Limited and its Controlled
Entities (the consolidated entity), which comprises the consolidated statement of financial position as at 31 July 2010, the
consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in
equity and consolidated statement of cash flows for the year ended on that date, a summary of significant accounting policies
and other explanatory notes and the directors’ declaration of the consolidated entity comprising Washington H. Soul Pattinson
and Company Limited and the entities it controlled at the year’s end or from time to time during the financial year.
Directors’ Responsibility for the Financial Report
The directors of Washington H. Soul Pattinson and Company Limited are responsible for the preparation and fair presentation
of the financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations)
and the Corporations Act 2001. This responsibility includes establishing and maintaining internal controls relevant to the
preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error;
selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the
circumstances.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance
with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements
relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is
free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report.
The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of
the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls
relevant to the entity’s preparation and fair presentation of the financial report in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal
controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of
accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.
Our procedures include reading the other information in the Annual Report to determine whether it contains any material
inconsistencies with the financial report.
Our audit did not involve an analysis of the prudence of business decisions made by directors or management.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
- 92 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 93
Independent Auditor’s Report (continued)
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. We confirm
that the independence declaration required by the Corporations Act 2001, provided to the directors of Washington H. Soul
Pattinson and Company Limited on 25 October 2010, would be in the same terms if provided to the directors as at the date
of signing this auditor’s report.
Auditor's Opinion
In our opinion the financial report of Washington H. Soul Pattinson and Company Limited and its Controlled Entities is in
accordance with the Corporations Act 2001, including:
(i)
(ii)
giving a true and fair view of Washington H. Soul Pattinson and Company Limited’s consolidated financial position
as at 31 July 2010 and of their performance for the year ended on that date; and
complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the
Corporations Regulations 2001.
Report on the Remuneration Report
We have audited the Remuneration Report included in pages 19 to 22 of the directors’ report for the year ended 31 July 2010.
The directors of Washington H. Soul Pattinson and Company Limited are responsible for the preparation and presentation of
the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an
opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.
Auditor’s Opinion
In our opinion the Remuneration Report of Washington H. Soul Pattinson and Company Limited for the year ended 31 July 2010,
complies with section 300A of the Corporations Act 2001.
Moore Stephens Sydney
Chartered Accountants
Martin J. (Joe) Shannon
Partner
Dated in Sydney this 26th day of October 2010
- 93 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 94
ASX Additional Information
DISTRIBUTION OF EQUITY SECURITIES AS AT 11 OCTOBER 2010
Size of Shareholding
Number of Shareholders
Number of Shares
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
TOTAL
Holding less than a marketable parcel
2,959
3,785
961
807
82
8,594
121
SUBSTANTIAL SHAREHOLDERS AS AT 11 OCTOBER 2010
As disclosed in notices received by the Company.
Brickworks Limited
Perpetual Limited
TOP 20 SHAREHOLDERS AS AT 11 OCTOBER 2010
Brickworks Limited
RBC Dexia Investor Services Australia Nominees Pty Limited (Pipooled A/C)
J P Morgan Nominees Australia Limited
Dixson Trust Pty Limited
J S Millner Holdings Pty Limited
National Nominees Limited
Milton Corporation Limited
Choiseul Investments Limited
T G Millner Holdings Pty Limited
Perpetual Trustee Company Limited
Hexham Holdings Pty Limited
Mr Robert Dobson Millner & Mr Michael John Millner (Est James S Millner A/C)
Cogent Nominees Pty Limited
Citicorp Nominees Pty Limited (CFSIL Cwlth Aust SHS 4 A/C)
Argo Investments Limited
RBC Dexia Investor Services Australia Nominees Pty Limited (PIIC A/C)
Farjoy Pty Limited
Dixson Trust Pty Limited (A/C No 1)
Mary Millner Holdings Pty Limited
Millane Pty Limited
- 94 -
1,729,812
10,012,555
7,443,639
20,709,225
198,745,349
238,640,580
692
Ordinary Shares
Held
% of Issued
Shares
102,257,830
29,318,700
42.85
12.29
Ordinary Shares
Held
% of Issued
Shares
102,257,830
16,045,542
8,926,384
8,499,940
7,508,110
5,703,849
4,843,150
4,251,690
3,151,051
2,806,771
2,753,127
2,489,477
2,264,629
2,233,977
1,992,507
1,789,008
1,250,000
1,175,290
1,086,860
857,990
42.85
6.72
3.74
3.56
3.15
2.39
2.03
1.78
1.32
1.18
1.15
1.04
0.95
0.94
0.83
0.75
0.52
0.49
0.46
0.36
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 95
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
ASX Additional Information (continued)
VOTING RIGHTS
Votes of Members – Article 24.4 of the Company’s Constitution provides:
Subject to any rights or restrictions attached to any share or class of shares in respect of voting, and subject to these Articles,
on a show of hands every member has the right to vote and every member present in person or by proxy or attorney, and each
authorised representative of a corporation, at a general meeting shall have one vote and in the case of a poll every member
present in person or by proxy or attorney and every authorised representative shall have:
a)
b)
one vote for each fully paid share held by that member; and
for each contributing share held by that member a fraction of a vote equivalent to the proportion which the amount
paid up bears to the total issue price of the share.
UNQUOTED EQUITY SECURITIES
The Company had no unquoted equity securities at any time during the year ended 31 July 2010 or for the period to the date
of this report.
AUSTRALIAN SECURITIES EXCHANGE LISTING
Washington H. Soul Pattinson and Company Limited shares are listed on the Australian Securities Exchange under the
ASX Code SOL.
- 95 -
15891 WHSP Annual Report 2010 26/10/10 11:49 AM Page 96
This page was left blank intentionally
- 96 -
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
INSIDE BACK COVER
15891 WHSP AR Cover 2010 25/10/10 5:24 PM Page 3
INSIDE FRONT COVER
Company Profile
Washington H. Soul Pattinson and Company Limited was incorporated on 21 January, 1903 having
previously traded as two separate companies, Pattinson and Co. and Washington H. Soul and Co.
Following a public offering of shares, Washington H. Soul Pattinson and Company Limited was listed on the Sydney
Stock Exchange (now the Australian Securities Exchange) on 21 January, 1903.
OVER 100 YEARS AS A LISTED PUBLIC COMPANY
When Caleb Soul and his son Washington opened their first store at 177 Pitt Street, Sydney, in 1872 neither of them
could have envisaged that 138 years later their single pharmacy would have evolved into a company as prominent
and diversified as Washington H. Soul Pattinson and Company Limited.
WHSP is now a significant investment house with a portfolio encompassing many industries, including its traditional
field of pharmaceutical as well as coal mining, building materials, equity investments, telecommunications and
corporate consulting.
OBJECTIVE
WHSP’s objective is to hold a diversified portfolio of assets which generate a growing income stream for distribution
to shareholders in the form of increasing fully franked dividends and to provide capital growth in the value of the
shareholders’ investments.
DIVIDEND POLICY
Ordinary dividends are generally paid out of profits before non-regular items.
Special dividends are generally paid out of profits from non-regular items. Non-regular items typically include those
which are outside of the normal course of business.
160 Pitt Street, Sydney 1886
15891 WHSP AR Cover 2010 25/10/10 5:24 PM Page 1
Washington H. Soul Pattinson and
Company Limited
A.B.N. 49 000 002 728
ASX Code: SOL
Annual Report
2010
REGISTERED OFFICE
LEVEL 1, 160 PITT STREET MALL
SYDNEY NSW 2000
Telephone: (02) 9232 7166
Facsimile: (02) 9233 1025
Internet Website Address: www.whsp.com.au
SHARE REGISTER
COMPUTERSHARE INVESTOR SERVICES PTY. LIMITED
Level 3, 60 Carrington Street, Sydney NSW 2000
Telephone: 1300 855 080 (within Australia)
Telephone: +61 3 9415 4000 (outside Australia)
Facsimile: +61 3 9473 2500
Email: web.queries@computershare.com
AUDITORS
MOORE STEPHENS SYDNEY
Level 7, 20 Hunter Street, Sydney NSW 2000
GPO Box 473, Sydney NSW 2001
Telephone: (02) 8236 7700
Facsimile: (02) 9233 4636