Washington H. Soul Pattinson and
Company Limited
A.B.N. 49 000 002 728
ASX Code: SOL
Annual Report
2011
Company Profile
Washington H. Soul Pattinson and Company Limited (WHSP) 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, WHSP 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 139 years later their single pharmacy would have evolved into a company as prominent
and diversified as WHSP.
WHSP is now a significant investment house with a portfolio encompassing many industries, its traditional field of
pharmaceutical, as well as coal mining, building materials, equity investments, telecommunications, agriculture 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.
Interior of 160 Pitt Street, Sydney 1916
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 Dividend
Page
2
3
7
16
26
27
32
94
95
97
Ex-Dividend date
8 November 2011
Record date
Payment date
14 November 2011
5 December 2011
Annual General Meeting
2 December 2011 at 12.00 noon
The Heritage Ballroom
Level 6, The Westin Sydney
1 Martin Plac e, Sydney
Chairman -
Non-Executive Director
Deputy Chairman -
Non-Executive Director
Executive Director
Non-Executive Director
DIRECTORS
Robert D Millner
Michael J Millner
Peter R Robinson
David J Fairfull
Thomas C D Millner
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 -
Performance Highlights
CONSOLIDATED FINANCIAL PERFORMANCE
Profit after tax before non-regular items
Profit after tax and non-regular items
DIVIDENDS PAID
Interim Dividend
Final Dividend
Total Ordinary Dividends
Special Dividend
Total Dividends
PARENT ENTITY
2011
$’000
161,197
363,871
2010
$’000
181,555
218,327
15 cents
25 cents
40 cents
14 cents
20 cents
34 cents
-
12.5 cents
40 cents
46.5 cents
Total shareholder return
Total Return Per Annum
1 Year
3 Years
5 Years
10 Years
15 Years
Washington H. Soul Pattinson and
Company Limited
All Ordinaries Accumulation Index
3.1%
4.0%
Outperformance
-0.9% 11.1%
12.8%
11.5%
15.0%
14.0%
11.5%
0.4%
2.2%
7.5%
6.5%
9.1%
2.4%
The above WHSP returns are measured using the share price movement over the period and assume
the reinvestment of all dividends. These returns do not include the benefits of franking credits.
- 2 -
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
Chairman’s Review
Dear Shareholders,
I am pleased to present the 2011 Annual Report for Washington H. Soul Pattinson and Company Limited
(WHSP) on behalf of the Board of Directors of the Company.
Consolidated Financial Performance
The profit of the Group attributable to shareholders, after tax and before non-regular items, for the year
ended 31 July 2011 was $161.2 million, a decrease of 11.2% over the previous year. This net decrease
of $20.4 million was mainly attributable to a reduced contribution from New Hope Corporation Limited
(New Hope). New Hope’s result was impacted by the stronger Australian dollar, increased transportation
costs and reduced sales due to the unavailability of the Western Rail Line following flood damage.
The profit of the Group, after tax and non-regular items, was $363.9 million, an increase of $145.5 million
over the previous year.
The net profit on non-regular items of $202.7 million was principally attributable to the Group’s share of
the gain on the sale of Arrow Energy Limited shares by New Hope.
Comparisons with the prior year are as follows:-
2011
$000
2010
$000
Revenue from continuing operations
758,387
823,307
Profit after tax before non-regular items
161,197
Profit after tax and non-regular items
363,871
Interim Dividend (paid in May each year)
15 cents
Final Dividend
Total Ordinary Dividends
25 cents
40 cents
181,555
218,327
14 cents
20 cents
34 cents
Special Dividend
Total Dividends
-
12.5 cents
40 cents
46.5 cents
%
Change
- 7.9%
- 11.2%
+ 66.7%
+ 7.1%
+ 25.0%
+ 17.6%
- 3 -
Chairman’s Review (continued)
The chart 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.
- 4 -
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
Chairman’s Review (continued)
Dividends
The chart below shows the ordinary and special dividends paid or declared by the company over the last
20 years.
Final Dividend
Directors have declared a fully franked final dividend of 25 cents per share in respect of the year ended
31 July 2011 (2010: 20 cents fully franked).
The record date for this dividend will be 14 November 2011 with payment due on 5 December 2011.
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 paid based on that profit.
- 5 -
Chairman’s Review (continued)
Parent Company Investments
As at 31 July 2011 WHSP held equity investments valued at $4.3 billion. Details of the largest investments,
which also represented significant holdings in those companies, are included below.
As at 31 July 2011
(including controlled and
associated entities)
WHSP
Holdings
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
Ruralco Holdings Limited
Aust. Pharmaceutical Industries Limited
Apex Healthcare Berhad
Other Listed Investments
Unlisted Investments at Cost
CopperChem Limited
Other Unlisted Investments
Total Parent Company Investments
Parent Company Cash
As at 31 July 2011
WHSP cash and deposits
59.7%
44.5%
26.8%
13.7%
23.5%
24.6%
30.3%
52.4%
2,652
650
320
71
42
31
28
3,794
449
4,243
24
43
67
4,310
4,442
1,461
1,195
518
180
127
91
$ million
320
On behalf of the Board, I wish to thank the management and staff of the Washington H. Soul Pattinson
Group for their contribution during the year. I would also like to thank you, the Shareholders, for your
continued support.
R D MILLNER
Chairman
- 6 -
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
Review of Group Entities
Parent Company
The market value of the listed equities held, including controlled entities and associates, was $4.24 billion at 31 July
2011, compared to $4.07 billion as at 31 July 2010.
Excluding controlled entities and associates, the market value of listed equities was $428.1 million at 31 July 2011.
This represents an increase of 6.9% after adjusting for the investment in BKI Investment Company Limited which
was transferred to associates during the year. Under the Group’s accounting policies, movements in the market
values of investment portfolio assets are taken up in other comprehensive income or reflected within the profit for
the period as impairments. Movements in the market values of trading portfolio assets are taken up within the
profit for the period.
Listed Investment Portfolio based on
market value as at 31 July 2011
(excluding controlled and associated entities)
Milton Corporation Limited
103
Market Value
$ million
BHP Billiton Limited
Commonwealth Bank of Australia
National Australia Bank Limited
Exco Resources Limited
Perpetual Limited
Campbell Brothers Limited
Telstra Corporation Limited
Brambles Limited
Bank of Queensland Limited
Total – Ten Largest
Other
Total
57
30
19
17
12
12
11
11
11
283
145
428
During the year Choiseul Investments Limited (Choiseul) merged with Milton Corporation Limited (Milton) resulting
in a disposal of the Company’s Choiseul shares for consideration of $42.2 million and the acquisition of Milton shares
for the same amount. The non-regular gain on the disposal of the Choiseul shares was $23.9 million after tax.
Other acquisitions, excluding controlled entities and associates, totalled $46.7 million and included Exco Resources
Limited (Exco), Industrea Limited, Snowball Group Limited and Lindsay Australia Limited.
Investments in associates consisted of $1.3 million in BKI Investment Company Limited and the reinvestment of
dividends from TPG Telecom Limited totalling $8.7 million.
Proceeds from disposals excluding Choiseul totalled $11.2 million. These included Transurban Group, Intoll Group
and Australian Agricultural Company Limited.
On 30 June 2011 Exco confirmed that it would return $135.0 million from the sale of its Cloncurry Copper Project
to shareholders by 31 October 2011. As a result of the Company’s 7.4% holding in Exco it will receive $10.0 million
of these funds.
Dividend and distribution income from listed equities held, excluding those from controlled and associated entities,
was $23.1 million, up 20.6% compared to last year. Special dividends were $1.8 million (2010: $0.3 million).
Interest income for the year, excluding that from controlled and associated entities, totalled $21.3 million, an
increase of 41.1% compared to $15.1 million last year.
- 7 -
Review of Group Entities (continued)
New Hope Corporation Limited
Controlled entity: 59.7% held*
Contribution to Group profit: $300.8 million
Total Market Capitalisation: $4.44 billion*
Value of WHSP’s Holding: $2.65 billion*
ASX code: NHC
New Hope has reported a net profit after tax and non-regular items for the year ended 31 July 2011 of $503.1
million, up 173.7% from $183.8 million for the year ended 31 July 2010.
The net profit on non-regular items $356.2 million was principally attributable to the sale of Arrow Energy Limited
shares and 10% of the New Lenton project.
Basic earnings per share (excluding non-regular items) for the year were 16.1 cents compared to 22.3 cents per
share last year.
New Hope has declared a final dividend of 5 cents per share (2010: 4.5 cents), and a special dividend of 15 cents
per share (2010: 14 cents).
Net profit after tax and before non-regular items for the year ending 31 July 2011 was $146.9 million. This included
$76.9 million from operations and $70.0 million from investments. Corresponding performance in 2010 was a net
profit of $183.8 million, $112.6 million from operations and $71.2 million from investments. The 2011
performance represented a 20.1% reduction over that achieved in 2010.
Compared to the previous corresponding period, the full year result for 2011 was impacted by:
• Reduced total coal sales (down 4%), but increased export sales (up 2% to a record level of 5.0 million tonnes);
• Increased operating costs (particularly transport costs);
• Increased US$ coal prices offset by higher A$:US$ exchange rate;
• Extended wet weather and localised flooding at all mining operations;
• Closure of the West Moreton Rail System from the New Acland mine in mid January 2011 until mid March 2011.
This was due to a significant number of landslides and washouts as a result of the rain and floods.
Mining Operations
Total clean coal production from New Hope’s operations in 2011 was 5.64 million tonnes. This was 5.0% lower
than for 2010. Production at all operations was negatively impacted by rain in December 2010 and January 2011.
While site flooding was controlled, significant effort was directed to water management, haul road maintenance
and control of in-pit conditions. Performance has rebounded since February, with coal production during the last
quarter of 2011 being at record levels at New Acland mine.
Total sales for 2011 were 5.65 million tonnes, 5.00 million tonnes export and 0.65 million tonnes domestic. This
compared to 5.88 million tonnes in 2010. The export tonnage achieved in 2011 is a record for New Hope and
represents an excellent recovery from the flood events in early 2011.
Queensland Bulk Handling (QBH)
QBH, New Hope’s 100% owned coal export terminal located at the Port of Brisbane, exported 6.52 million tonnes
of coal on 88 vessels during 2011. This compared to 6.67 million tonnes on 102 vessels in 2010. This 2.2%
reduction in volume was due to restricted coal supply due to flooding of the West Moreton Rail System in early 2011
and reduced tonnage from third party mines. Performance over the last quarter of 2011 was at record levels,
annualising in excess of 9 million tonnes. QBH continues to be an essentially demurrage free port.
*As at 31 July 2011
- 8 -
Review of Group Entities (continued)
New Hope Corporation Limited (continued)
New Hope Exploration
New Hope continues an active exploration program utilising 3 New Hope drilling rigs plus contract rigs as required.
The exploration focus in 2011 has been on proving up resources in the Bowen Basin, particularly at New Lenton.
The program was significantly impacted by wet weather restricting access in late 2010 and early 2011. A total of
25,408 metres was drilled during the year.
New Hope announced an increase in both JORC compliant resources and reserves in May 2011 as follows:
• Resources: Increased by 56.0% from 980 million tonnes to 1529 million tonnes
• Reserves: Increased by 12.4% from 484 million tonnes to 544 million tonnes.
Arrow Energy Limited (Arrow)
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.
In July 2010 Arrow shareholders approved the demerger and acquisition schemes. The sale of New Hope’s 16.7%
interest in Arrow settled on 23 August 2010, with New Hope receiving $576 million from the sale. New Hope
recognised an after tax profit of $329.4 million on the sale during the year.
Northern Energy Corporation Limited (NEC)
In late 2010, New Hope made an off market offer for NEC of $1.85 per share. The NEC Directors recommended
acceptance of this offer and by close of the offer on 9 March 2011, New Hope held 80.8% of the equity in NEC.
Subsequently, on 29 August 2011, New Hope made a further offer for the remaining shares at $2.00 per share.
New Hope now has in excess of 97.6% of the equity in NEC.
NEC has been concentrating on the development of the Colton and Elimatta projects.
The Colton Project, located near Maryborough, is an open cut coking coal opportunity. While initial production
tonnage will be about 0.5 million tonnes per annum, further exploration now underway indicates that expansion
to a larger tonnage is possible. Product coal will be railed to and exported through Gladstone.
Elimatta is a thermal open cut coal deposit located in the Northern Surat Basin. NEC has reported JORC resources
of 244 million tonnes.
Outlook
New Hope’s mining operations have recovered well from the flood events of early 2011, have adequate levels of
opening inventory (both in pit and product coal) and as a result are well placed for a solid performance in 2012.
Production for 2012 is planned to increase to 6.1 million tonnes with sales slightly higher at 6.2 million tonnes.
QR National has been performing at or above contract levels in railing coal down the West Moreton Coal System.
The QBH export facility has also been running at very high levels. With the completion of the expansion project it
now has the capacity to handle up to 10 million tonnes per annum.
New Hope is currently working on the development of 4 new projects. While not bringing increased product
volume in 2012 and 2013, they will add significant volume in the near term and in addition will provide both
product mix diversification (coking and PCI coal) and geographical diversification. New Hope’s large cash reserves,
of some $1.5 billion, provide a valuable strategic foundation to fund these proposed developments.
As a result of WHSP’s 59.7% holding in the issued capital of the company, New Hope contributed a net profit of
$300.8 million to the Group (2010: $110.7 million, 59.9% holding).
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 NHC and reviewed by Mr Phillip Bryant, Project Manager New Lenton NHC and Member of AusIMM (no.
210566). Mr Bryant 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 Bryant consents to the inclusion in
this report of the matters based on this information in the form and context in which it appears.
The information in this Coal Reserves Statement that related to coal reserves is based on information compiled by Dr Warren Seib, who is Follow of
AusIMM. Dr Seib is a full time employee of the company. Dr Seib 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
‘Australian Code for Reporting Exploration Results, Mineral Resources and Ore Reserves’. Dr Seib consents to the inclusion in the report of the matters
based on his information in the form and context in which it appears.
- 9 -
Review of Group Entities (continued)
CopperChem Limited
Controlled entity: 52.4% held*
Contribution to Group result: $2.7 million loss
Unlisted entity
CopperChem is a producer of copper sulphate and copper concentrate. The company’s operations are based in
Cloncurry in north-west Queensland, 124 kms from Mt Isa.
The largest single use for copper sulphate in the Australian market is in production of lead/zinc concentrates. Across
the globe the major use of copper sulphate is focused on the animal feed market as an additive to animal feed
where it acts as a growth accelerator for poultry and pigs.
Copper concentrate is the feedstock for pyrometallurgical copper smelters. Copper concentrate can also contain
quantities of precious metals (specifically gold) and other industrial metals such as cobalt.
The copper sulphate plant was commissioned in 2004 and has been supplying product to the local and export trade
for seven years. The copper concentrate plant will be fully commissioned and operating at capacity in October 2011.
A strategic benefit for CopperChem is that available ore is mined on-site. Approximately 750,000 tonnes of ore
will be mined per annum as feedstock for both plants. CopperChem has two types of ore available to it:-
• Leachable Ores – these ores are amenable to leaching with sulphuric acid and form the base for the copper
sulphate circuit;
• Non-Leachable Ores – these are copper sulphide ores that will be processed into copper concentrates.
In addition, suitable ore can be sourced in the Mt Isa and Cloncurry areas from third parties.
Through an alliance agreement with a copper exploration company, CopperChem has access to oxide ores located
on 1,800km² of tenements in the region. The general area is well known for its significant copper resources and
much of the tenement area is host to old workings and visible outcroppings of mineralisation.
CopperChem currently employs 80 to 90 staff, many on a fly-in, fly-out basis. As the mine and plant operations
are located adjacent to the centre of Cloncurry, adequate services are readily available avoiding the need to build
infrastructure as is the case with many remote mine sites.
At 31 July 2011 WHSP had a 52.4% holding in CopperChem. Following conversion of its Class B shares into
ordinary shares in October 2011 WHSP’s holding increased to 93.4%. In addition, WHSP has provided funding to
CopperChem through loans, convertible loans and convertible notes. Once the convertible loans and notes convert
to shares, likely to be in the last quarter of this calendar year, WHSP’s holding in the company will increase further.
As at 31 July 2011 WHSP had invested $64.7 million in the project.
The first 6 months of the 2011-2012 financial year will see the final commissioning of the copper concentrate plant.
Plans are already being considered to double the capacity of this plant subject to suitable ore availability.
It is expected that the second half of the current financial year will see CopperChem produce more than satisfactory
profit results and strong cash flows.
As a result of WHSP’s 52.4% holding in the issued capital of the company, CopperChem contributed a net loss of
$2.7 million to the Group.
*As at 31 July 2011
- 10 -
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
Review of Group Entities (continued)
Pitt Capital Partners Limited
Controlled entity: 78.3% held*
Contribution to Group profit: $1.5 million
Unlisted entity
PCP is a corporate advisory firm specialising in mergers, strategic advice, equity capital markets, private equity,
restructuring and debt advisory work.
Despite increased competition in the market and fewer completed transactions PCP recorded strong revenue for the
year ended 31 July 2011. Increased profitability came as a result of this revenue gain and a continued focus on cost
reduction.
During the year PCP established a property advisory division through BW + Partners. PCP will continue to explore
growth opportunities through the provision of additional services.
PCP has successfully taken advantage of its niche in the market by leading smaller transactions with innovative
solutions. PCP has carried over a solid pipeline of work into 2012 financial year.
As a result of WHSP’s 78.3% interest in the issued capital of the company, PCP contributed a net profit of
$1.5 million to the Group (2010: $0.3 million loss).
Australian Pharmaceutical Industries Limited
Associated entity: 24.6% held*
Contribution to Group result: $5.6 million loss
Total Market Capitalisation: $127 million*
Value of WHSP’s Holding: $31 million*
ASX code: API
API’s financial year ended on 31 August 2011. The results for the full year will not be released to the market until
27 October 2011.
API released its half year result on 20 April 2011. For the 6 months the company reported revenue in line with last
year at $1.85 billion and a net loss after non-regular items of $35.1 million. The underlying net profit was consistent
with last year. Earnings were impacted by a number of non-regular items including an impairment of financial
guarantees and an accounting loss associated with the Queensland floods in January 2011.
Sales for the Pharmacy Division decreased by 1.1% reflecting the impact of the Queensland floods. Earnings before
interest and tax (EBIT) declined $2.5 million, compared to last year due to increased supply chain costs following the
floods. The company advised that this division had successfully implemented new trading terms with customers to
coincide with changes to the Pharmaceutical Benefits Scheme and the loss of revenue due to Pfizer’s decision to
end its wholesaling arrangements in Australia, effective 1 February 2011.
Priceline, API’s mass market health and beauty retailing division, posted retail sales growth of 3.1% and comparable
store growth of 1.8% which was a credible result given the intense competition in the retail sector. Priceline’s
unrivalled Clubcard program continues to attract new members and had 3.4 million members at the end of February
2011.
API declared a fully franked interim dividend of 1 cent per share which was paid on 3 June 2011.
WHSP has equity accounted API’s result for the 12 months to February 2011. As a result of WHSP’s 24.6% holding
in the issued capital of the company, API contributed a net loss of $5.6 million to the Group (2010: $5.5m profit).
*As at 31 July 2011
- 11 -
Review of Group Entities (continued)
BKI Investment Company Limited
Associated entity: 13.7% held*
Contribution to Group profit: $1.1 million (3 months)
Total Market Capitalisation: $518 million*
Value of WHSP’s Holding: $71 million*
ASX code: BKI
BKI is a Listed Investment Company on the Australian Securities Exchange. It was formed in October 2003 to take
over and manage the investment portfolio of Brickworks Limited (Brickworks). Brickworks established the core
portfolio during the 1980’s with the objective to generate an increasing income stream through long term
investment in a portfolio of securities that would grow over time.
Today, some 25 years since the inception of the core portfolio, BKI continues to be a long term research driven
manager, focusing on well managed companies, with a profitable history and that offer attractive dividend yields.
Stock selection is bottom up, focusing on the merits of individual companies rather than market and economic
trends. The BKI portfolio valuation has grown from $171 million as at listing on 12 December 2003 to $599 million
as at 30 June 2011.
Following WHSP’s acquisition of additional shares in BKI on 21 March 2011, WHSP’s investment was reclassified as
an investment in an associated company. Accordingly, this investment has been equity accounted since that date.
BKI’s key objective is to generate an increasing income stream for distribution to its shareholders in the form of fully
franked dividends. Total dividends paid by BKI for the year ended 30 June 2011 were 7.0 cents per share which
was an increase of 12.0% on the previous year.
BKI reported a net profit after tax, before special dividend income, for the year ended 30 June 2011 of $25.3 million,
an increase of 13.1% on the previous year.
BKI’s net portfolio return (after all operating expenses, provision and payment of income and capital gains tax and
the reinvestment of dividends) for the 12 months to 30 June 2011 was 12.0% compared to the S&P/ASX 300
Accumulation Index which increased by 11.9%.
As a result of WHSP’s 13.7% holding in the issued capital of the company, BKI contributed a net profit of $1.1
million to the Group in respect of the 3 months to 30 June 2011. In addition, BKI dividends of $3.5 million were
taken up as income by WHSP for the year (2010: $3.2m).
Brickworks Limited
Associated entity: 44.5% held*
Contribution to Group profit: $5.8 million
Total Market Capitalisation: $1.46 billion*
Value of WHSP’s Holding: $650 million*
ASX code: BKW
Brickworks posted a net profit after tax and before non-regular items for the year ended 31 July 2011 of $100.8
million, down 8.5% from $110.2 million for the year ended 31 July 2010. After non-regular items, the profit for
the year was $142.6 million, up 2.7% from $138.8 million in the previous year. These results include the equity
accounted profit contribution from WHSP.
Building Products EBIT in the second half was 38.2% down on the prior corresponding period. The full year EBIT
was $42.0 million, down 21.3% on the prior year.
Land and Development EBIT was up 2.8% to $29.2 million, primarily due to an increased contribution from the
Property Trust.
Brickworks’ overall result was assisted by both lower borrowing costs and tax expense.
*As at 31 July 2011
- 12 -
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
Review of Group Entities (continued)
Brickworks Limited (continued)
Normalised earnings per share were 68.3 cents per share, down from 76.7 cents for the previous year due to the
lower earnings.
The directors of Brickworks have declared a final dividend of 27 cents fully franked, taking the full year dividend to
40.5 cents fully franked (2010: 40 cents).
Borrowing costs decreased to $21.2 million, from $24.5 million in the prior year, due to lower average debt levels.
Interest cover was down marginally to 6.4 times, from 6.5 times at 31 July 2010.
Capital expenditure increased to $35.7 million in the year ended 31 July 2011. Growth capital expenditure was
$15.7 million including upgrades to precast plants in New South Wales and Western Australia and the purchase of
operational land for the Building Products division. Land and Development capital expenditure was $0.9 million.
Spending on acquisitions totalled $17.1 million for the year comprising the Girotto and Gocrete precast businesses
and East Coast Masonry in Coffs Harbour.
Divisional Results
Austral Bricks’ result was lower than the previous year due to lower demand, particularly in the second half. Overall
sales revenue for the year ended 31 July 2011 was $329.7 million, down 4.7% compared to the prior year, due to
the impact of the market downturn in Queensland and Western Australia.
Austral Masonry once again delivered an improved profit result for the year, despite a significant downturn in
trading conditions and fierce competition on the east coast. Sales revenue increased by 14.8% over the previous
corresponding period to $55.2 million, due in part to a full year contribution from the Port Kembla plant. On a like
for like basis sales volume decreased by 1.9% compared to the prior year.
Bristile Roofing achieved another solid result, despite sales revenue being down 4.2% to $123.8 million. The
performance was driven by the east coast operation where a decline in revenue was more than offset by average
selling price increases and strong cost controls.
Austral Precast’s sales revenue increased strongly to $56.6 million as a result of acquired businesses. Following the
successful integration of Sasso Precast last year, Brickworks acquired the Girotto and Gocrete precast concrete panel
businesses from Boral on 1 September 2010 for $14.2 million.
Auswest Timbers delivered a steady result for the year end 31 July 2011 despite sales revenue decreasing 6.0% to
$36.1 million compared to the previous year due to soft domestic market conditions for green structural products.
Higher returns from an improved sales mix assisted the business to achieve a 5.9% lift in average selling prices and
a 3.4% increase in margin.
Land and Development produced an EBIT of $29.2 million for the year ended 31 July 2011, up 2.8% from $28.4
million in the previous corresponding period.
Property Sales contributed an EBIT of $16.3 million for the year.
The Property Trust generated an EBIT of $12.5 million, up from $10.3 million in the prior year.
Carbon Emissions
Brickworks has continually strived to reduce fuel consumption and lower carbon emissions, for both commercial and
environmental reasons. Based on National Greenhouse and Energy Reporting Act data, Brickworks emitted
430,800 tonnes of CO2 for the year ended 31 July 2011. This has been voluntarily reduced from 570,000 tonnes
for the year ended 31 July 2003.
Brickworks continue to pursue significant reductions in energy consumption with a focus on three key themes:
better factory utilisation; product re-engineering and; elimination of products with excessive emissions. When fully
operational the combined Wollert plant in Victoria will achieve annual emissions savings of 115,000 tonnes of
greenhouse gases, a reduction of around 65% compared to the facilities being replaced.
As a result of WHSP’s 44.5% holding in the issued capital of the company, Brickworks contributed a $14.9 million
regular profit to the Group (2010: $17.5m, holding 44.6%). In addition, WHSP’s share of non regular expenses was
$9.1 million (2010: $4.5m). These contributions exclude the WHSP profit taken up by Brickworks under the equity
accounting method.
*As at 31 July 2011
- 13 -
Review of Group Entities (continued)
Clover Corporation Limited
Associated entity: 28.6% held*
Contribution to Group profit: $1.3 million
Total Market Capitalisation: $50 million*
Value of WHSP’s Holding: $14 million*
ASX code: CLV
Clover reported a net profit after tax for the period ended 31 July 2011 of $4.6 million. Clover changed its reporting
date to 31 July 2011 and as a result reported 13 months earnings this year compared to 12 months last year. In
2010 Clover recorded a loss of $0.97 million due to the impairment of its investment in Future Foods Ingredients
Pty Limited.
Clover has stated that 2011 had been a year of consolidation regarding its commercial activities combined with a
significant output from the product innovation program.
Sales revenue for the period under review was $35.6 million (2010: $34.9 million) with growth being recorded in
the key markets of China, South Asia and Australia/New Zealand.
Clover’s expenditure on innovation and research increased in line with its business strategy to $1.7 million (2010:
$1.1 million). The expansion of the targeted innovations program includes interaction with external research
groups. A 3 year Australian Growth Partnership research agreement totalling $1.2 million has commenced with the
CSIRO to develop products directed towards significant developing markets.
Clover’s directors have declared a fully franked dividend of 1.5 cents per share (2010: 1.25 cents) in respect of the
13 months ended 31 July 2011.
WHSP has equity accounted Clover’s result for the 13 months to July 2011. As a result of WHSP’s 28.6%
holding in the issued capital of the company, Clover contributed a net profit of $1.3 million to the Group
(2010: $0.3 million loss).
Ruralco Holdings Limited
Associated entity: 23.5% held*
Contribution to Group profit: $4.1 million
Total Market Capitalisation: $180 million*
Value of WHSP’s Holding: $42 million*
ASX code: RHL
Ruralco’s financial year ends 30 September 2011. Ruralco’s results for the full year are scheduled to be released to
the market on 22 November 2011.
Ruralco released its half year profit result on 24 May 2011. For the six months to March 2011, revenue increased
by 14.9% to $493.7 million and net profit after tax by 31.5% to $10.2 million compared to the previous
corresponding period. Ruralco described the results as pleasing noting that they had been achieved despite the
challenges presented by some extreme weather events across Australia.
Ruralco reported favourable market conditions across rural supplies, livestock and wool, grain marketing and
financial services during the period. The positive result also reflected the establishment of new businesses in under-
represented areas including Western Australia and parts of Queensland and northern NSW.
An interim dividend of 9 cents per share fully franked was paid in June 2011 (2010: 8 cents per share).
WHSP has equity accounted Ruralco’s result for the 12 months to March 2011. As a result of WHSP’s 23.5%
holding in the issued capital of the company, Ruralco contributed a net profit of $4.1 million to the Group
(2010: $2.7m).
*As at 31 July 2010
- 14 -
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
Review of Group Entities (continued)
TPG Telecom Limited
Associated entity: 26.8% held*
Contribution to Group profit: $20.6 million
Total Market Capitalisation: $1.2 billion*
Value of WHSP’s Holding: $320 million*
ASX code: TPM
TPG has reported a net profit after tax for the year ended 31 July 2011 of $78.2 million, an increase of 40.4% over
last year. Earnings before interest, tax, depreciation and amortisation (EBITDA) increased by 36.8% to $234.0
million, compared to the guidance range of $225 million to $230 million.
Strong organic subscriber growth in TPG’s core consumer broadband business has continued with a net increase in
the year of 59,000 subscribers (comprising 77,000 On-Net growth, partially offset by a decline in lower margin Off-
Net subscribers). The On-Net broadband and home phone bundle has continued to be the major growth driver,
adding 98,000 subscribers during the year.
The PIPE Networks business has also continued to grow strongly. During its first full 12 months as part of the Group
it has contributed $57.2 million to the EBIDTA result. The result has been driven by continued strong domestic
revenue growth. Its network rollout for the Vodafone Hutchison Australia contract, which will increase PIPE’s
domestic fibre footprint by approximately 30%, is progressing well and to schedule.
Other features of the results:
• Earnings per share (EPS) increased by 33% to 10.1 cents per share;
• EPS, excluding the impact of intangible amortisation expense, was 14.3 cents per share;
• Strong cash flow enabled the reduction of bank debt by $100 million;
• The debt to annual EBITDA leverage ratio at 31 July 2011 reduced to less than 1.0 times.
TPG has declared a fully franked final dividend of 2.25 cents per share, bringing total dividends for the year to 4.5 cents.
TPG has advised that during the first quarter of the 2012 financial year it will formally complete its acquisition of 100%
of IntraPower Limited (IntraPower). IntraPower’s “Trusted Cloud” platform will complement TPG’s extensive network
infrastructure and enable further products and services to be offered to its corporate and government customers.
As a result of WHSP’s 26.8% holding in the issued capital of the company, TPG contributed a net profit of $20.6
million to the Group (2010: $15.4m, 26.6% holding).
UPDATE
Souls Private Equity Limited
On 19 September 2011, WHSP announced a proposal to acquire all of the shares and options of Souls Private Equity
Limited which it does not already own.
Please refer to note 45 of the consolidated financial statements for further information.
New Hope Corporation Limited
On 5 October 2011, New Hope Corporation Limited (New Hope) announced that it had received a number of
preliminary and incomplete proposals from third parties in relation to potential change of control transactions. In
view of ongoing interest from a number of parties, New Hope’s Board of Directors is undertaking a formal process
to determine whether a proposal for New Hope is available at a price, and on terms, that are in the best interests
of all of its shareholders.
CopperChem Limited
On 9 October 2011, WHSP’s shareholding in CopperChem Limited increased from 52.4% to 93.4% on conversion
of its Class B shares into ordinary shares. No additional consideration was paid in respect of the conversion.
- 15 -
Directors’ Report
The Directors of Washington H. Soul Pattinson and Company Limited (WHSP) present their report and the financial statements
of the Company and the consolidated entity, being the Company and its subsidiaries, for the financial year ended 31 July 2011.
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
The following person was appointed as a Director of WHSP on 1 January 2011 and remains a Director at the date of this report:
Mr T C D Millner
PRINCIPAL ACTIVITIES
The principal activities of the corporations in the consolidated entity during the course of the financial year were ownership of
shares, copper mining and refining, coal mining and consulting.
In October, 2010 the consolidated entity took a controlling interest in its copper mining and refining company, CopperChem
Limited. There were no other significant changes in the nature of the consolidated entity’s principal activities during the year.
DIVIDENDS
Dividends paid or declared by the Company since the end of the previous financial year were:-
Declared and paid during the year
Final ordinary dividend 2010
Special dividend 2010
Interim ordinary dividend 2011
Dealt with in the financial report as dividends
Declared after the end of the year
Final ordinary dividend 2011
REVIEW OF OPERATIONS
Cents Per
Share
20
12.5
15
47.5
Total
amount
$’000
47,728
29,830
35,796
113,354
Franking
%
Date of
Payment
100%
100%
100%
6 December 2010
6 December 2010
12 May 2011
25
59,660
100%
5 December 2011
The profit of the Group attributable to shareholders, after tax and before non-regular items, for the year ended 31 July 2011
was $161.2 million, a decrease of 11.2% over the previous year. This net decrease of $20.4 million was mainly attributable to
a reduced contribution from New Hope Corporation Limited (New Hope). New Hope’s result was impacted by the stronger
Australian dollar, increased transportation costs and reduced sales due to the unavailability of the Western Rail Line following
flood damage.
The profit of the Group, after tax and non-regular items, was $363.9 million, an increase of $145.5 million over the
previous year.
The net profit on non-regular items of $202.7 million was principally attributable to the Group’s share of the gain on the sale
of Arrow Energy Limited shares by New Hope.
- 16 -
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
Directors’ Report (continued)
REVIEW OF OPERATIONS (continued)
Comparison with the prior year is 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
Total Ordinary Dividends
Special Dividend
Total Dividends
2011
$000
758,387
161,197
363,871
15 cents
25 cents
40 cents
-
40 cents
2010
$000
823,307
181,555
218,327
14 cents
20 cents
34 cents
12.5 cents
46.5 cents
%
Change
-7.9%
- 11.2%
+ 66.7%
+ 7.1%
+25.0%
+ 17.6%
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 15 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 33 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 45 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 (DERM) under Queensland’s Environmental Protection Act
1994. New Hope’s coal export port facility, Queensland Bulk Handling (QBH), and Jondaryan rail loading facility are regulated
by the DERM under Queensland’s Sustainable Planning Act 2009.
New Hope’s mining operations and exploration tenements each function under a site specific Environmental Authority, whilst
the rail loading facility and port facility each function under a site specific Development Approval.
During the 2011 financial year, New Hope experienced two environmental incidents involving the non compliant discharge of
water off site. The two separate environmental incidents occurred at New Acland Coal Mine and New Oakleigh Coal Mine
during March 2011 and July 2011, respectively. In regard to both matters, New Hope promptly developed a number of
corrective actions to minimise the risk of a similar incident and ensured that DERM was consulted. New Hope received a
"Warning Notice" from the DERM during May 2011 for the environmental incident involving New Acland Coal Mine and has
been advised that it will receive the same compliance action for the environmental incident involving New Oakleigh Coal Mine.
A draft Supplementary Environmental Impact Statement (SEIS) for the New Acland Stage 3 Expansion Project was lodged with
Queensland's Office of the Coordinator General during June 2011 and is currently under review by the Coordinator General
for the purpose of approving the SEIS for public release. Queensland’s Coordinator General is expected to issue a final report
and make a formal decision on the approval of the New Acland Stage 3 Expansion Project during the 2012 financial year.
- 17 -
Directors’ Report (continued)
ENVIRONMENTAL COMPLIANCE (continued)
New Hope continues to participate in the Commonwealth Energy Efficiency Opportunities (EEO) program, which during May 2011
included the successful completion of a desktop audit of statutory EEO requirements by the Commonwealth Department of
Resources, Energy and Tourism. The annual EEO Public Report is published on New Hope’s website during December each year.
New Hope’s three mine sites and QBH submit reports during September each year under the National Pollutant Inventory program.
New Hope meets the corporate threshold for participation under the Commonwealth’s National Greenhouse and Energy
Reporting Act 2007. An annual report is submitted to the Commonwealth Department of Climate Change and Energy
Efficiency during October each year.
New Hope continued to implement its Environmental Management System (EMS) in accordance with ISO14001 during the
2011 financial year. The EMS assists the New Hope to improve its environmental performance by increasing environmental
awareness, optimising operational control, monitoring compliance and facilitating continuous improvement.
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 since 4 December 2010.
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, Resigned 2011
• Milton Corporation Limited – Appointed 1998 (current) Chairman since 2002
• New Hope Corporation Limited – Appointed 1995 (current) Chairman since 1998
• Northern Energy Corporation Limited – Appointed 2011 (current)
• 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. Member of the Audit and Remuneration Committees.
Member of the Nomination Committee until 3 December 2010.
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)
• Ruralco Holdings Limited – Appointed 2007 (current)
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)
• Northern Energy Corporation Limited – Appointed 2011 (current)
- 18 -
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
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 and Remuneration Committees. Member of the Nomination
Committee until 3 December 2010.
Mr Fairfull is a merchant banker and professional company director with over 40 years experience in corporate finance.
Other listed company directorships held during the past three years:
• Drill Torque Limited – Appointed 2011 (current) Chairman since 2011
• Heritage Brands Limited – Appointed 2009 (current)
• KH Foods Limited – Appointed 2008 (company delisted 2009)
• New Hope Corporation Limited – Appointed 1997 (current)
• Northern Energy Corporation Limited – Appointed 2011 (current)
• Souls Private Equity Limited – Appointed 2004 (current)
Thomas Charles Dobson Millner B.Des(Industrial), GDipAppFin(Finsia), fFin
Appointed Non-executive Director on 1 January 2011.
Mr Millner’s experience includes management of investment portfolios, research and analysis of listed equities and business
development. Mr Millner is the Chief Executive Officer of BKI Investment Company Limited.
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 and Nomination
Committees.
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 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)
• Xanadu Mines Ltd - Appointed 2010 (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 and Nomination
Committees.
Mr Wills is a Chartered Accountant, having been a partner of 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
• Quickstep Holdings Limited – Appointed 2010 (current)
• 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.
- 19 -
Directors’ Report (continued)
DIRECTORS’ MEETINGS
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
Eligible to Number
Attended
Attend
Eligible to Number
Attend Attended
Remuneration
Committee
Meetings
Eligible to Number
Attended
Attend
Nomination
Committee
Meetings
Eligible to Number
Attended
Attend
Mr R D Millner
Mr M J Millner
Mr P R Robinson
R,N
A,R,N
Mr D J Fairfull
A,R,N
Mr T C D Millner
Mr R G Westphal
Mr D E Wills
A,R,N
A,R,N
16
14
16
14
7
16
14
15
14
15
14
7
16
14
-
6
-
6
-
6
6
-
6
-
6
-
6
6
1
1
-
1
-
1
1
1
1
-
1
-
1
1
1
1
-
1
-
2
2
1
1
-
1
-
2
2
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 T C D Millner
Mr R G Westphal
Mr D E Wills
Ordinary Shares
19,474,256
19,097,126
74,210
60,000
16,547,669
10,000
138,866
REMUNERATION REPORT (AUDITED)
Scope of Report
This Remuneration Report focuses on the Parent Entity and the unlisted controlled entities CopperChem Limited, Pitt Capital
Partners Limited and Souls Financial Solutions Pty. Limited. The other controlled entities, New Hope Corporation Limited (New
Hope) and Souls Private Equity Limited, are publicly listed and, accordingly, have their own Remuneration Committees and
produce their own Remuneration Reports in accordance with Section 300A of the Corporations Act 2001 to be voted on by
their shareholders. It should be noted that while certain executives of New Hope are included in this Remuneration Report, the
Remuneration Committee focuses on the key management personnel of the Parent Entity.
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 the Executive Director, senior executives and Non-Executive Directors.
The Remuneration Committee ensures that remuneration levels for Directors, senior executives 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.
- 20 -
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
Directors’ Report (continued)
REMUNERATION REPORT (AUDITED) (continued)
Non-executive Directors (continued)
The Remuneration Committee reviews various publications/surveys annually to assist in setting Non-executive Director
remuneration. Based on these publications/surveys for 2010 the remuneration received by Non-executive Directors for the year
ended 31 July 2011 was under the 50th percentile for ASX listed Companies with a market capitalisation greater than $3 billion.
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 2011 fees paid to the Non-executive Directors by the Parent Entity amounted to $916,000 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 of the Parent Entity consists of a fixed remuneration package
comprising a base salary, superannuation and fringe benefits, where taken. Fixed remuneration is approved by the
Remuneration Committee based on data sourced from external sources, including independent salary survey providers.
The Remuneration Committee reviews various publications/surveys annually to assist in setting the remuneration of the Executive
Director and senior executives. Based on these publications/surveys for 2010 the remuneration they received for the year ended
31 July 2011 was under the 50th percentile for ASX listed Companies with a market capitalisation greater than $3 billion.
There were no fixed term contracts of employment in place for any key management personnel of the Parent Entity at any time
during the financial year.
Company Performance, Shareholder Wealth and Remuneration
The Parent Entity does not have a policy for paying bonuses or granting options under long term or short term incentive plans.
Incentive based remuneration linked to the performance of the Parent Entity is considered inappropriate because the Parent
Entity is a holding company with a diversified portfolio of investments and does not employ personnel at the parent company
level to operate those assets. The Parent Entity considers the setting of performance linked remuneration to be the
responsibility of the operating companies.
In its review of remuneration policies, in particular the base salaries of key management personnel of the Parent Entity, the
Remuneration Committee has regard to the performance of the Consolidated Entity’s performance for the current and previous
four financial years, taking into account the following measures:
2007*
$’000
2008
$’000
2009
$’000
2010
$’000
2011
$’000
Revenue from continuing activities
$750,618
$681,640
$774,953
$823,307
$758,387
Profit after tax (before non-regular items)
$99,192
$113,146
$224,685
$181,555
$161,197
Share price at year end
$9.27
$10.45
Ordinary dividends paid/recommended/declared
28.5 cents
30 cents
Special dividends paid
-
-
$11.00
32 cents
25 cents
$13.02
$12.93
34 cents
40 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 T C D Millner
Mr R G Westphal
Mr D E Wills
- 21 -
Directors’ Report (continued)
REMUNERATION REPORT (AUDITED) (continued)
Key management personnel of the Parent Entity (continued)
Executive Director
Mr P R Robinson
Other key management personnel of the Parent Entity
Mr I D Bloodworth – Company Secretary
Ms M R Roderick – Chief Financial Officer
Key management personnel of the Consolidated Entity
Mr M L Bailey – Chief Operations Officer (resigned 10 September 2010), New Hope Corporation Limited
Mr M J Busch – Financial Controller and Company Secretary, New Hope Corporation Limited
Mr B D Denny – Chief Operations Officer (appointed 2 November 2010), New Hope Corporation Limited
Mr B J Garland – General Manager – Resource Development (resigned 30 September 2010), New Hope Corporation Limited
Mr R C Neale – Managing Director and Chief Executive Officer, New Hope Corporation Limited
Mr S O Stephan – Chief Financial Officer, New Hope Corporation Limited
Other executives being one of the five highest paid executives of the Consolidated Entity
Mr J R Randell
Remuneration paid to key management personnel of the Parent Entity by the Parent Entity:-
Key Management Personnel
of Parent Entity
Name
Non-executive Directors – 2011
Mr R D Millner (1)
Mr M J Millner
Mr D J Fairfull (1)
Mr T C D Millner
Mr R G Westphal (1)
Mr D E Wills (1)
Executive Director – 2011
Mr P R Robinson (1)
Key Management Personnel of the Parent Entity – 2011
Mr I D Bloodworth
Ms M R Roderick
Total
Non-executive Directors – 2010
Mr R D Millner (1)
Mr M J Millner
Mr D J Fairfull (1)
Mr R G. Westphal (1)
Mr D E Wills (1)
Executive Director – 2010
Mr P R Robinson (1)
Key Management Personnel of the Parent Entity – 2010
Mr I D Bloodworth
Ms M R Roderick
Total
Short Term Employee
Benefits
Cash Non Monetary
Bonus
$’000
Benefits
$’000
Salary
& Fees
$’000
228
134
116
70
134
125
807
614
230
417
2,068
194
117
99
114
105
629
549
208
360
1,746
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
37
-
-
-
-
-
37
56
13
-
106
21
-
-
-
-
21
65
9
14
109
(1) Also derive remuneration from controlled entities as included elsewhere in this Report.
- 22 -
Super-
annuation
$’000
21
12
10
6
12
11
72
123
21
36
252
17
10
9
10
9
55
110
19
33
217
Post Employment Share Based Total
Benefits
Payments
Termination Value of
Options
$’000
Benefits
$’000
Parent
Entity
$’000
286
146
126
76
146
136
916
793
264
453
2,426
232
127
108
124
114
705
724
236
407
2,072
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
Directors’ Report (continued)
REMUNERATION REPORT (AUDITED) (continued)
Details of the nature and amount of each major element of the remuneration of the key management personnel of the
Company and the Consolidated Entity and those receiving the highest remuneration, are as follows:-
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
649
146
285
76
187
204
Received
from
Parent Controlled
Entity
$’000
Entities
$’000
286
146
126
76
146
136
916
363
-
159
-
41
68
631
966
793
173
264
453
264
453
-
-
1,798
156
352
415
142
616
489
-
-
-
-
-
-
-
1,798
156
352
415
142
616
489
-
-
-
-
-
-
-
-
-
-
33
-
-
33
-
-
-
-
-
-
-
-
-
-
-
-
14
-
-
10
-
-
66
24
7,198
2,426
4,772
Key Management Personnel
Name
Non-executive Directors – 2011
Mr R D Millner
Mr M J Millner
Mr D J Fairfull
Mr T C D Millner
Mr R G Westphal
Mr D E Wills
Executive Director – 2011
Mr P R Robinson (1)(2)
Key Management Personnel of
the Parent Entity – 2011
Mr I D Bloodworth (2)
Ms M R Roderick (1)(2)
Key Management Personnel of
the Consolidated Entity – 2011
Mr R C Neale (1)
Mr M L Bailey
(resigned 10 September 2010)
Mr M J Busch
Mr B D Denny
(appointed 2 November 2010)
Mr B J Garland
(resigned 30 September 2010)
Mr S O Stephan (1)
Other Executives of the
Consolidated Entity – 2011
Mr J R Randell (1)
Total
567
134
262
70
172
187
773
230
417
-
-
-
-
-
-
-
-
-
1,057
675
96
263
392
87
485
-
50
-
-
113
37
-
-
-
-
-
45
12
23
6
15
17
56
137
13
-
31
11
18
12
8
3
21
36
35
2
21
11
4
15
324
5,516
123
961
27
216
15
415
(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.
- 23 -
Directors’ Report (continued)
REMUNERATION REPORT (AUDITED) (continued)
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
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 D 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.
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
OPTIONS
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.
- 24 -
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
Directors’ Report (continued)
INDEMNIFICATION OF OFFICERS AND AUDITORS (continued)
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 some of 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.
PROCEEDINGS ON BEHALF OF THE COMPANY
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 $19,975 for providing these other services in
respect of the Group. Details of the amounts paid to the auditors are disclosed in note 42 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 2011 has been received and is included on page 26.
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 25th day of October 2011.
- 25 -
Auditor’s Independence Declaration
Level 7, 20 Hunter Street
Sydney NSW 2000
T +61 (0)2 8236 7700
F +61 (0)2 9233 4636
www.moorestephens.com.au
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 31st July 2011, 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 24th day of October 2011
Moore Stephens Sydney ABN 90 773 984 843. Liability limited by a scheme approved under Professional Standards Legislation*
*Other than for the acts or omissions of financial services licensees. An independent member of Moore Stephens International Limited - members in principal cities throughout the
world The Sydney Moore Stephens firm is not a partner or agent of any other Moore Stephens firm.
- 26 -
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 ten 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 six 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
Thomas C.D. Millner – Non Executive
Robert G. Westphal - Non-executive
David E. Wills - Non-executive
- 27 -
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 three 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. Additionally, Mr Robert Millner, Mr Michael Millner and Mr Thomas Millner 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, Mr Michael Millner and Mr Thomas 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 during the
year 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 and diversity 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, Directors are required to retire from office after three years. Retiring Directors may stand for re-election at the
next Annual General Meeting, 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;
- 28 -
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 the securities of the Company, Directors and other key management personnel are also prohibited from trading
during prohibited periods which are imposed by the Company from time to time.
• In respect of Directors and other key management personnel 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.
In exceptional circumstances, Directors and senior executives may trade at times other than those referred to above, with
the prior approval of the Chairman, or in his absence, two Directors.
• 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, Company Secretary and any Non-executive Director
not on the Committee, 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.
- 29 -
Corporate Governance Statement (continued)
Principle 4 – Safeguard integrity in financial reporting (continued)
The Executive Director and the Financial Controller 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 Financial Controller has been received in respect of the current reporting period.
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 Financial Controller 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 Financial Controller have made this
statement in respect of the current reporting period.
- 30 -
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
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 remunerated 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.
- 31 -
Financial report
31 July 2011
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
33
34
35
36
37
38
94
95
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 25th October 2011.
- 32 -
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
Consolidated Income Statement
For the year ended 31 July 2011
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 for the year
Profit after tax attributable to non-controlling interest
Profit after tax attributable to members of
Washington H. Soul Pattinson and Company Limited
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
Notes
5
6
7
8a
4
2011
$’000
758,387
567,309
(345,295)
(132,654)
(39,471)
(4,633)
(41,492)
(2,692)
36,582
796,041
(237,791)
558,250
(194,379)
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
(72,765)
363,871
218,327
161,197
181,555
202,674
363,871
36,772
218,327
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
Earnings per share from all operations
Weighted average number of shares used in calculating basic and
diluted earnings per share
2011
cents
152.48
152.48
2010
cents
91.49
91.49
No. of shares
238,640,580
238,640,580
The above consolidated income statement should be read in conjunction with the accompanying notes.
- 33 -
Consolidated Statement of Comprehensive Income
For the year ended 31 July 2011
Profit after tax for the year
Other comprehensive income
2011
$’000
2010
$’000
558,250
291,092
Net movement in the fair value of long term equity investments, net of tax
(19,880)
Movement to profit and loss on disposal of long term equity investments, net of tax
(355,926)
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
9,346
(752)
48
70,376
(2,973)
3,269
(72)
915
Total other comprehensive income for the year, net of tax
(367,164)
71,515
Total comprehensive income for the year
191,086
362,607
Total comprehensive income attributable to non-controlling interest
(62,651)
(101,763)
Total comprehensive income attributable to members of
Washington H. Soul Pattinson and Company Limited
128,435
260,844
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
- 34 -
Consolidated Statement of Financial Position
As at 31 July 2011
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
Notes
31 July 2011
$’000
31 July 2010
$’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
Long term equity investments
Other financial assets
Derivative financial instruments
Property, plant and equipment
Exploration and evaluation assets
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
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
30
29
31
32
32
79,783
1,927,911
140,941
75,193
37,587
31,880
-
-
3,105
2,296,400
6,637
764,498
507,878
7,040
8,807
775,604
8,508
44,179
56,050
2,179,201
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
4,475,601
4,287,712
62,467
44,168
171,611
21,557
299,803
236,291
25,749
262,040
561,843
64,113
41,193
24,154
19,941
149,401
298,592
20,079
318,671
468,072
3,913,758
3,819,640
32,900
570,092
2,209,757
2,812,749
1,101,009
3,913,758
32,900
810,243
1,937,108
2,780,251
1,039,389
3,819,640
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
- 35 -
Consolidated Statement of Changes in Equity
For the year ended 31 July 2011
Year ended 31 July 2011
Total equity at the beginning of the year
1 August 2010
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
Non-controlling interests on acquisition of subsidary
Equity transfer from members on issue of share
capital in controlled entities
Total equity at the end of the year -
31 July 2011
32,900
Share
capital
$’000
Retained
profits
Reserves
Total parent
entity interest
Non-
controlling
interest
$’000
$’000
$’000
$’000
Total
$’000
32,900
1,937,108
810,243
2,780,251
1,039,389
3,819,640
-
-
-
-
-
-
-
-
-
-
-
363,871
-
363,871
194,379
558,250
-
-
(240,323)
5,586
(240,323)
5,586
(135,483)
3,760
(375,806)
9,346
-
-
363,871
(747)
48
(235,436)
(91,728)
-
406
-
-
-
(1,915)
-
(747)
48
128,435
(91,728)
-
(1,509)
-
(5)
-
62,651
(752)
48
191,086
(79,903)
5,260
1,213
69,699
(171,631)
5,260
(296)
69,699
100
(2,800)
(2,700)
2,700
-
2,209,757
570,092
2,812,749
1,101,009
3,913,758
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
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
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
- 36 -
Consolidated Statement of Cash Flows
For the year ended 31 July 2011
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
Notes
43
37
Cash flows from operating activities
Receipts from customers inclusive of GST
Payments to suppliers and employees inclusive of GST
Dividends received
Interest received
Finance costs
Income taxes paid
Net cash inflow/ (outflow) from operating activities
Cash flows from investing activities
Payment for property, plant and equipment and intangibles
Proceeds from sale of property, plant and equipment
Payments for exploration and evaluation activities
Net (payments for)/proceeds from term deposits
Payments for investments
Payments for subsidiaries, net of cash acquired
Proceeds from sale of investments
Cash outflow from loss of control of a subsidiary
Loans advanced
Loan repayments received
Net cash (outflow)/ 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) 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
2011
$’000
618,203
(503,779)
114,424
59,503
113,742
(116)
(67,043)
220,510
(86,186)
260
(5,778)
(254,609)
(114,892)
(171,218)
595,647
-
(20,455)
2,100
(55,131)
5,261
(193,686)
534
(187,891)
(22,512)
109,821
(7,526)
79,783
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
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
- 37 -
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
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 other receivables
Non-current assets – Equity accounted associates
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 – 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
Investments in associates
Interest in joint ventures
Key management personnel
Related parties
Remuneration of auditors
Reconciliation of profit after income tax to net cash inflow/(outflow) from operating activities
Share-based payments
Events after the reporting date
- 38 -
39
51
52
55
55
55
56
57
58
59
59
59
60
60
60
61
61
62
62
62
62
63
65
65
66
67
67
68
68
68
69
69
72
75
75
76
77
81
84
84
88
89
90
90
93
Notes to the Financial Statements For the year ended 31 July 2011
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 36.
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 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.
- 39 -
Notes to the Financial Statements (continued) For the year ended 31 July 2011
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 2011 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 proportionate interests in the assets, liabilities and expenses of a joint venture activity have been incorporated in the
consolidated financial statements under the appropriate headings. Details of the joint ventures are set out in note 39.
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.
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.
- 40 -
Notes to the Financial Statements (continued) For the year ended 31 July 2011
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
d) Foreign currency translation (continued)
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.
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.
- 41 -
Notes to the Financial Statements (continued) For the year ended 31 July 2011
NOTE 1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
f) Income tax (continued)
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 is recognised in the income statement, except to the extent that it relates to items recognised in other
comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in
equity, respectively.
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 for 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.
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.
- 42 -
Notes to the Financial Statements (continued) For the year ended 31 July 2011
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
g) Business Combinations (continued)
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.
If the Group recognises previous acquired deferred tax assets after the initial acquisition accounting is completed there will
no 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
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.
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.
- 43 -
Notes to the Financial Statements (continued) For the year ended 31 July 2011
NOTE 1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
l) Non-current assets (or disposal groups) held for sale and discontinued operations (continued)
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 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 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.
- 44 -
Notes to the Financial Statements (continued) For the year ended 31 July 2011
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)
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 the income statement.
Amounts accumulated in equity are recycled in the income statement in the periods when the hedged item will affect income
statement (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 income statement. 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 consolidated entity 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.
- 45 -
Notes to the Financial Statements (continued) For the year ended 31 July 2011
NOTE 1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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 %
1
3
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.
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 to the satisfaction of the Directors. 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) 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. Payment 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.
- 46 -
Notes to the Financial Statements (continued) For the year ended 31 July 2011
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
s) 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.
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.
t) 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.
u) 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.
- 47 -
Notes to the Financial Statements (continued) For the year ended 31 July 2011
NOTE 1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
u) Provisions (continued)
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.
v) 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.
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 44.
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 44.
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.
- 48 -
Notes to the Financial Statements (continued) For the year ended 31 July 2011
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
w) 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.
Where a decision is made to proceed with development in respect of a particular area of interest, the relevant exploration and
evaluation asset is tested for impairment and the balance is then reclassified to development.
x) 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.
y) 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.
z) Parent entity financial information
The financial information for the Parent entity, Washington H. Soul Pattinson and Company Limited, disclosed in note 36 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
income statement, rather than being deducted from the carrying amount of these investments.
aa) 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
bb) 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.
cc) 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.
- 49 -
Notes to the Financial Statements (continued) For the year ended 31 July 2011
NOTE 1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
dd) Comparative figures
When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for
the current financial year.
ee) New Accounting standards and interpretations
Certain new accounting standards and interpretations have been published that are not mandatory for 31 July 2011 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 the full impact. However, initial indications are that it may affect the Group’s accounting for 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, for example, will therefore have to be recognised directly in income statement.
Revised AASB 124 Related Party Disclosures and AASB 2009-12 Amendments to Australian Accounting Standards
(effective for annual reporting periods beginning on or after 1 January 2011)
In December 2009 the AASB issued a revised AASB 124 Related Party Disclosures. The Group will apply the amended standard
from 1 August 2011 and will need to disclose any transactions between its subsidiaries and its associates. There will be no
impact on any of the amounts recognised in the financial statements.
AASB 10 Consolidated Financial Statements, AASB 11 Joint Arrangements, AASB 12 Disclosure of Interests in Other
Entities, revised AASB 127 Separate Financial Statements and AASB 128 Investments in Associates and Joint
Ventures and AASB 2011-7 Amendments to Australian Accounting Standards arising from the Consolidation and
Joint Arrangements Standards (effective 1 January 2013)
These standards are first required to be applied in the financial statements for the annual reporting period ending 31 July 2014.
AASB 10 replaces all of the guidance on control and consolidation in AASB 127 Consolidated and Separate Financial
Statements, and Interpretation 12 Consolidation – Special Purpose Entities. The core principle, that a consolidated entity
presents a parent and its subsidiaries as if they are a single economic entity remains unchanged, as do the mechanics of
consolidation. However, the standard introduces a single definition of control that applies to all entities. It focuses on the need
to have both power and rights or exposure to variable returns before control is present. The group has yet to perform a detailed
analysis of the new guidance in the context of its various investees that may or may not be controlled under the new rules.
AASB 12 sets out the required disclosures for entities reporting under the two new standards, AASB 10 and AASB 11, and
replaces the disclosure requirements currently found in AASB 128. Application of this standard by the group will not affect any
of the amounts recognised in the financial statements, but will impact the type of information disclosed in relation to the
group's investments. The group is still assessing the impact of these amendments.
AASB 13 Fair Value Measurement and AASB 2011-8 Amendments to Australian Accounting Standards arising from
AASB 13 (effective 1 January 2013)
AASB 13 explains how to measure fair value and aims to enhance fair value disclosures. The group has yet to determine which,
if any, of its current measurement techniques will have to change as a result of the new guidance. It is therefore not possible
to state the impact, if any, of the new rules on any of the amounts recognised in the financial statements. However, application
of the new standard will impact the type of information disclosed in the notes to the financial statements.
AASB 2011-9 Amendments to Australian Accounting Standards – Presentation of Items of Other Comprehensive
Income (effective 1 July 2012)
AASB 101 Presentation of Financial Statements requires entities to separate items presented in other comprehensive income
into two groups, based on whether they may be recycled to income statement in the future. This will not affect the
measurement of any of the items recognised in the statement of financial position or the income statement in the current
period. The group will adopt the new standard from 1 August 2012.
AASB 2011-4 Amendments to Australian Accounting Standards to Remove Individual Key Management Personnel
Disclosure Requirements (effective 1 July 2013)
In July 2011 the AASB decided to remove the individual key management personnel (KMP) disclosure requirements from AASB
124 Related Party Disclosures, to achieve consistency with the international equivalent standard and remove a duplication of
the requirements with the Corporations Act 2001. The amendments apply from 1 July 2013 and cannot be adopted early.
- 50 -
Notes to the Financial Statements (continued) For the year ended 31 July 2011
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
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 – 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 reserves and resources
The Group estimates its reserves and 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;
– 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.
- 51 -
Notes to the Financial Statements (continued) For the year ended 31 July 2011
NOTE 2.
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (continued)
b) Critical judgements in applying the entity’s accounting policies
i. Exploration and development expenditure
During the year, the controlled entities New Hope Corporation Limited (New Hope) and CopperChem Limited (CopperChem),
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.
Factors that could impact the future commercial production at the CopperChem mine include the level of reserves and
resources, future technology changes, which could impact the cost of mining, future legal changes and changes in commodity
prices.
To the extent that capitalised costs are determined not to be recoverable in the future, profits and net assets will be reduced in
the period in which this determination is made.
ii. 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 2011 include the assessment of the recoverable amounts
for financial assets, including investments in associates and long term equity investments (refer to notes 7 and 38).
NOTE 3.
SEGMENT INFORMATION
Business Segments
The Group is organised into the following divisions by product and service type:
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.
- 52 -
Notes to the Financial Statements (continued) For the year ended 31 July 2011
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
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Notes to the Financial Statements (continued) For the year ended 31 July 2011
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 to
attributable to members. These items are stated after tax and represent the member’s share of non-regular gains and losses.
Gain on disposal of Arrow Energy Limited
Gain on disposal of Long term equity investments
Gain on sale of New Lenton Joint Venture
Gain on deemed disposal of equity accounted associates
Gain on transfer of BKI Investment Company Limited to an equity
accounted associate
Gain/(loss) on acquisition of a controlled entity
Impairment expense
Reversal of impairment of equity accounted associate
Share of non-regular items from equity accounted associates
Tax credits
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
NOTE 6. OTHER INCOME
Gain on sale of Arrow Energy Limited
Gain on sale of New Lenton Joint Venture
Gain on deemed disposal of equity accounted associates
Gain on transfer of BKI Investment Company Limited to an equity accounted associate
(Losses)/gains on investments fair valued through profit and loss
Gain on sale of long term equity investments
Net gain/(loss) on acquisition/disposal of controlled entity
Other items
Total other income
- 55 -
2011
$’000
196,954
23,213
24,134
611
10,968
4,150
(41,930)
5,274
(20,700)
-
202,674
2010
$’000
-
670
-
42,443
-
(1,047)
(1,157)
-
(6,734)
2,597
36,772
607,296
667,269
24,418
19,693
-
122,484
905
3,284
151,091
758,387
466,192
57,740
873
14,847
(7,139)
30,435
4,150
211
567,309
4
117,929
845
17,567
156,038
823,307
-
-
60,665
-
8,692
1,914
(1,023)
(43)
70,205
Notes to the Financial Statements (continued) For the year ended 31 July 2011
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)
Investments – Equity accounted 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
2011
$’000
903
33,931
34,834
6,024
961
6,985
26,795
13,531
1,166
41,492
2010
$’000
743
29,490
30,233
7,477
2,169
9,646
(1,487)
3,215
(1,022)
706
92,145
81,512
2,692
3,621
16,294
2,437
2,768
13,402
a)
b)
The recoverable amount of investments in equity accounted associates has been assessed as at 31 July 2011. 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. During the year ended 31 July 2011, the carrying
value of Australian Pharmaceutical Industries Limited has been impaired by $33.0 million. In addition, an impairment
reversal of $5.2 million has been recorded in relation to Ruralco Limited. Refer to note 38.
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 consider 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.
- 56 -
Notes to the Financial Statements (continued) For the year ended 31 July 2011
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
Tax expense on transfers from equity
(Over) provided in prior years
Deferred income tax/(revenue) included in income tax expense
(Increase) in deferred tax assets – (note 24)
Increase in deferred tax liabilities – (note 30)
b) Reconciliation of income tax expense to prima facie tax payable
Profit before income tax
Tax at the Australian tax rate of 30% (2010: 30%)
Tax effect of amounts which are not deductible/
(taxable) in calculating taxable income:
Goodwill impairment and 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
Total 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 24 and 30)
d) Tax effect of impairments
Impairments and unused tax losses for which no deferred tax asset has
been recognised
Potential tax benefit at 30%
2011
$’000
216,257
16,388
7,339
(2,193)
237,791
(13,816)
30,204
16,388
796,041
238,812
12,837
(6,164)
(8,797)
1,860
7
1,429
239,984
(2,193)
237,791
2010
$’000
87,903
4,362
-
(5,449)
86,816
(1,043)
5,405
4,362
377,908
113,372
(872)
107
(14,574)
1,645
(6,315)
(1,098)
92,265
(5,449)
86,816
(144,308)
(33,346)
217,112
65,134
188,934
56,680
- 57 -
Notes to the Financial Statements (continued) For the year ended 31 July 2011
NOTE 9. DIVIDENDS - WASHINGTON H. SOUL PATTINSON AND COMPANY LIMITED
a) Ordinary shares
Final dividend for the year ended 31 July 2010 of 20 cents (2009: 19 cents)
per fully paid share paid on 6 December 2010 (2009: 7 December 2009) fully
franked based on tax paid at 30%.
2011
$’000
2010
$’000
47,728
45,342
Special dividend for the year ended 31 July 2010 of 12.5 cents (2009 : 25 cents)
per fully paid share paid on 6 December 2010 fully franked based on tax paid at 30%.
29,830
59,660
Interim dividend for the year ended 31 July 2011 of 15 cents (2010: 14 cents)
per fully paid share paid on 12 May 2011 (2010: 13 May 2010) fully franked based
on tax paid at 30%.
Total dividends paid
35,796
113,354
33,410
138,412
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 25 cents per fully paid ordinary share,
(2010: 20 cents) fully franked based on tax paid at 30%.
In the prior year, an additional special dividend per fully paid
ordinary share of 12.5 cents fully franked based on tax paid at 30%.
The aggregate amount of the proposed dividends expected to be paid on
5 December 2011 (2010: 6 December 2010) out of retained profits as
at 31 July 2011, but not recognised as a liability at year end is
c) Franked Dividends
The franked portions of the final dividends recommended after 31 July 2011
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 2011.
Franking credits available for subsequent financial years based on a tax rate of
30% (2010: 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
dividend (and for 2010, special dividend) to be paid on 5 December 2011
(2010: 6 December 2010).
59,660
47,728
-
29,830
59,660
77,558
376,257
344,723
(25,569)
350,688
(33,239)
311,484
d) Dividend reinvestment plans
There were no dividend reinvestment plans in operation at any time during or since the end of the financial year.
- 58 -
Notes to the Financial Statements (continued) For the year ended 31 July 2011
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
2011
$’000
79,783
2010
$’000
109,821
79,783
109,821
b) Cash at bank and on hand and cash equivalents
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 5.1% (2010: 0% and 4.8%).
c) Risk exposure
Information about the Group’s exposure to credit risk and foreign exchange risk is detailed in note 33.
NOTE 11. CURRENT ASSETS – TERM DEPOSITS
Term deposits
2011
$’000
2010
$’000
1,927,911
1,655,365
Term deposits are held to their maturity of less than one year and carry a weighted average interest rate of 5.94%
(2010: 5.46%).
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 33.
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
2011
$’000
43,908
(5)
43,903
3
-
3
15,543
76,514
4,978
140,941
2010
$’000
45,100
(53)
45,047
3,409
(156)
3,253
-
7,479
3,526
59,305
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 33.
b) Fair value of receivables
The fair value of receivables approximates their carrying values.
- 59 -
Notes to the Financial Statements (continued) For the year ended 31 July 2011
NOTE 13. CURRENT ASSETS – INVENTORIES
Raw materials and stores – at cost
Work in progress – at cost
Finished goods – at cost
2011
$’000
21,130
4,929
49,134
75,193
2010
$’000
18,546
-
34,541
53,087
Inventory expense
Inventories recognised as expense during the year ended 31 July 2011 amounted to $248,399,000 (2010: $223,739,000).
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
2011
$’000
-
-
-
-
2010
$’000
576,211
-
576,211
576,211
* Represents the investment in Arrow Energy Limited held by controlled entity New Hope Corporation Limited (New Hope).
Prior to this, the investment was classified as a long term equity investment.
The sale of New Hope’s 16.7% interest in Arrow Energy Limited settled on the 23 August 2010, with New Hope receiving
$576,211,000 from the sale. The profit after tax of $329,300,000 was recognised in the year ended 31 July 2011.
Information about the Group’s exposure to price risk is included in note 33.
NOTE 15. CURRENT ASSETS – INVESTMENTS FAIR VALUED THROUGH PROFIT AND LOSS
Investments held for the short to medium term
- Listed equity securities
- Other securities
2011
$’000
36,325
1,262
37,587
2010
$’000
48,076
935
49,011
Information regarding the Group’s exposure to price risk is set out in note 33.
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.
- 60 -
Notes to the Financial Statements (continued) For the year ended 31 July 2011
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
2011
$’000
2010
$’000
31,880
15,673
8,807
40,687
11,675
27,348
Average exchange rate
2010
2011
0.95050
0.94359
0.75913
-
0.82239
0.79409
0.73179
0.75913
Buy Australian dollars
2010
2011
$’000
$’000
112,572
182,283
39,519
-
334,374
94,845
99,485
71,058
39,519
304,907
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 $334,374,000 (2010: $304,907,000) 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
2011
$’000
-
2010
$’000
1,689
- 61 -
Notes to the Financial Statements (continued) For the year ended 31 July 2011
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
2011
$’000
12,204
(11,007)
1,197
2,275
3,165
6,637
2010
$’000
11,642
(11,007)
635
2,789
1,495
4,919
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 33.
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 40 and 41.
NOTE 19. NON-CURRENT ASSETS – EQUITY ACCOUNTED ASSOCIATES
Shares in associated companies (refer note 38)
NOTE 20. NON-CURRENT ASSETS – LONG TERM EQUITY INVESTMENTS
Listed securities
Equity securities
Preference shares
Unlisted securities
Equity securities
2011
$’000
2010
$’000
764,498
685,739
504,558
3,317
507,875
3
507,878
544,476
3,228
547,704
3
547,707
Information regarding the Group entity’s exposure to price risk is set out in note 33.
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
Other financial assets – at cost
7,040
5,000
Other financial assets at reporting date do not trade in an active market. The cost price approximates the fair value.
- 62 -
Notes to the Financial Statements (continued) For the year ended 31 July 2011
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
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Notes to the Financial Statements (continued) For the year ended 31 July 2011
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 – DEFERRED TAX ASSETS
The balance comprises temporary differences attributed to:
Amounts recognised in income statement
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
2011
$’000
8,508
3,030
5,478
8,508
12,120
808
1,650
47,965
4,651
67,194
5,208
14
72,416
2010
$’000
3,030
2,572
458
3,030
10,185
1,036
1,970
33,582
2,949
49,722
5,394
17
55,133
Set-off of deferred tax liabilities pursuant to set-off provisions (note 30)
Net deferred tax assets
(28,237)
44,179
(11,696)
43,437
Movements:
Opening balance at 1 August
Add: Gain of control of subsidiary
Credited to the income statement – operating profit (note 8)
(Charged)/credited to equity (note 8)
Less: (Loss) of control of subsidiary
Closing balance at 31 July
55,133
3,505
13,816
(38)
-
72,416
48,925
-
1,043
5,394
(229)
55,133
- 65 -
Notes to the Financial Statements (continued) For the year ended 31 July 2011
NOTE 25. NON-CURRENT ASSETS – INTANGIBLE ASSETS
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
Year ended 31 July 2011
Opening net book amount
Additions
Amortisation (charge)
Disposals
Transfers in
Closing net book amount
At 31 July 2011
Cost
Accumulated amortisation and impairment
Net book amount
Goodwill
$'000
16,308
(10,712)
5,596
5,596
-
-
-
-
5,596
16,308
(10,712)
5,596
5,596
45,889
-
-
-
51,485
62,197
(10,712)
51,485
Other
$’000
6,382
(3,618)
2,764
2,764
6
(2,169)
(2)
796
1,395
7,178
(5,783)
1,395
1,395
1,164
(961)
(2)
2,969
4,565
11,309
(6,744)
4,565
Total
$’000
22,690
(14,330)
8,360
8,360
6
(2,169)
(2)
796
6,991
23,486
(16,495)
6,991
6,991
47,053
(961)
(2)
2,969
56,050
73,506
(17,456)
56,050
Amortisation of $961,000 (2010: $2,169,000) 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
Carrying amount at beginning of year
Acquisition of subsidary
Country of
operation
Australia
2011
$'000
5,596
45,889
51,485
2010
$'000
5,596
-
5,596
- 66 -
Notes to the Financial Statements (continued) For the year ended 31 July 2011
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 25. NON-CURRENT ASSETS – INTANGIBLE ASSETS (continued)
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
Brought forward goodwill relates to the acquisition of a subsidiary from an independent third party in an arms length
transaction. The increase in goodwill in the current year primarly relates to the acquisition of Northern Energy Corporation
Limited in an arm’s length transaction as set out in Note 37. The recoverable amount of the cash generating units (being the
mining tenements in Northern Energy Corporation Limited) are determined based on value in use calculations These
calculations use post-tax cash flow projections based on constant annual coal production over the life of the mines (12-30 years)
discounted using a post-tax real discount rate, coal prices of US $85-$145 per tonne and a AUD/USD exchange rate of $0.80.
The equivalent pre-tax discount rate is 10%. These assumptions are consistent with external sources of information.
NOTE 26. CURRENT LIABILITIES – TRADE AND OTHER PAYABLES
Trade payables and other payables
2011
$’000
62,467
2010
$’000
64,113
NOTE 27. CURRENT LIABILITIES – INTEREST BEARING LIABILITIES
Deposits from related parties - Directors (a)
44,168
41,193
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 5.78%
(2010: 5.45%). Interest rates applicable to these deposits ensure a margin of at least 25 basis points to the parent entity.
b) Fair value disclosures
The carrying value of financial liabilities as disclosed approximate their fair values.
c) Financing arrangements
The consolidated entity 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.
- 67 -
2011
$’000
1,000
-
1,000
55,000
(37,578)
17,422
2010
$’000
1,000
-
1,000
55,540
(36,748)
18,792
23,526
22,401
14,052
14,347
37,578
36,748
Notes to the Financial Statements (continued) For the year ended 31 July 2011
NOTE 28. CURRENT LIABILITIES – PROVISIONS
Mining restoration and site rehabilitation
Employee benefits
Movements in total provisions 2011
Carrying amount at beginning of year
Additional provisions recognised
Carrying amount at end of year
Disclosed as:
Current liabilities
Non-current liabilities
NOTE 29. NON-CURRENT LIABILITIES – PROVISIONS
Mining restoration and site rehabilitation
Employee benefits
NOTE 30. NON-CURRENT LIABILITIES – DEFERRED TAX LIABILITIES
The balance comprises temporary differences attributed to:
Amounts recognised in income statement
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 24)
Net deferred tax liabilities
- 68 -
2011
$’000
20,263
5,486
25,749
32,110
66,384
4,979
60,022
14,299
10,505
188,299
56,198
12,206
7,160
665
76,229
264,528
(28,237)
236,291
2011
$’000
1,923
19,634
21,557
2010
$’000
2,453
17,488
19,941
Mining
Restoration
and site
rehabilitation
$'000
19,752
2,434
22,186
1,923
20,263
22,186
2010
$’000
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
Notes to the Financial Statements (continued) For the year ended 31 July 2011
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 30. NON-CURRENT LIABILITIES – DEFERRED TAX LIABILITIES (continued)
Movements:
Opening balance 1 August
Charged to the income statement – operating profit (note 8)
(Credited)/charged to equity (note 8c)
Gain (loss) of control of subsidiary
Closing balance at 31 July
NOTE 31.
SHARE CAPITAL
2011
$’000
310,288
30,204
(144,346)
68,382
264,528
2010
$’000
266,208
5,405
38,740
(65)
310,288
Share capital
Fully paid ordinary shares
Parent entity
Parent entity
2011
No of shares
2011
$’000
2010
No of shares
2010
$’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 2011, the Group has no external borrowings to financial institutions. The Group is not subject to any externally
imposed capital requirements.
NOTE 32. 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
- 69 -
2011
$’000
404,548
-
144,892
11,368
17,217
(73)
(3,414)
(327)
(4,119)
570,092
2010
$’000
404,548
2,800
385,215
11,368
11,631
1,842
(2,667)
(327)
(4,167)
810,243
Notes to the Financial Statements (continued) For the year ended 31 July 2011
NOTE 32. RESERVES AND RETAINED PROFITS (continued)
b) Movements:
General reserve
Balance 31 July
Capital redemption reserve
Balance 1 August
Transfer to share capital of subsidary
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 to profit of equity accounted investment previously classified as an
long term equity investment
Share of associates increments
Elimination on acquisition of subsidiary – Northern Energy Limited
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
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
- 70 -
2011
$’000
2010
$’000
404,548
404,548
2,800
(2,800)
-
385,215
(14,512)
4,208
(309,409)
91,153
5,655
(13,552)
5
(3,871)
144,892
2,800
-
2,800
345,517
58,177
(18,878)
(2,556)
(417)
2,663
-
709
-
385,215
11,368
11,368
11,631
42,978
(12,894)
(35,012)
10,504
10
17,217
1,842
15
(1,930)
(73)
(2,667)
(14)
(733)
(3,414)
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)
(327)
(327)
(4,167)
48
(4,119)
(5,246)
1,079
(4,167)
Notes to the Financial Statements (continued) For the year ended 31 July 2011
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 32. 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 income statement 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.
Refer to note 37 for the Parent entity’s interest in controlled entities.
- 71 -
Notes to the Financial Statements (continued) For the year ended 31 July 2011
NOTE 33. 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
2011
$’000
2010
$’000
79,783
1,927,911
147,578
37,587
40,687
-
507,878
7,040
2,748,464
62,467
44,168
106,635
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
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
2011
USD $’000
2010
USD $’000
17,265
37,306
309,000
1,500
365,071
50,494
26,158
239,000
9,415
325,067
- 72 -
Notes to the Financial Statements (continued) For the year ended 31 July 2011
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 33. FINANCIAL RISK MANAGEMENT (continued)
a) Market Risk (continued)
Sensitivity analysis
Based on the trade receivables and cash held at 31 July 2011, 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 $3,981,000/($3,257,000) (2010:$5,819,000/($4,761,000)), 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 2011, 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
$25,644,000/($28,209,000) (2010:$16,925,000/($20,686,000)). There is no effect on post-tax profits. Equity in 2011 is more
sensitive to movements in the Australian dollar/USD exchange rates than in 2010 because of increased value of forward
exchange contracts in 2011.
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 13.0% (2010: 14.3%)
of the Group’s net assets.
Investments held for the short to medium term and 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 1.0%
(2010: 1.3%) 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 value 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
2011
$’000
(1,271)
(1,222)
(2,493)
2010
$’000
(1,683)
-
(1,683)
2011
$’000
-
(20,854)
(20,854)
2010
$’000
-
(40,751)
(40,751)
Investments fair valued through profit and loss
Long term equity investment
Total
iii. Fair value interest rate risk
Refer to (e) below.
- 73 -
Notes to the Financial Statements (continued) For the year ended 31 July 2011
NOTE 33. 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 27c). 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
2011
$’000
79,783
1,927,911
147,578
40,687
2,195,959
2010
$’000
109,821
1,655,365
64,224
27,348
1,856,758
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, 13.9% (2010: 30.7%) 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 2011, the Group had no external borrowings from financial institutions. Details of financial facilities available are
set out in note 27(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 27(a).
- 74 -
Notes to the Financial Statements (continued) For the year ended 31 July 2011
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 33. 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 $14.1 million (2010: $12.4
million). This scenario assumes all cash and term deposits at balance date continue to remain invested for the whole year.
At 31 July 2011, 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 34. 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’s bankers for
stages 1 and 2 of the Wiggins Island Coal Export Terminal expansion project
and expansion of rail facilities
ii. Undertakings and guarantees issued by a Controlled entity to related party
For contingent liabilities relating to associates refer to note 38.
NOTE 35. COMMITMENTS FOR EXPENDITURE
a) Capital commitments
Capital expenditure contracted for at the reporting date
Property, plant and equipment
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 refer to note 38.
- 75 -
2011
$’000
2010
$’000
15,017
14,454
11,892
6,000
32,909
-
6,000
20,454
13,263
10,934
13,540
20,660
57,795
91,995
3,168
13,347
60,368
76,883
Notes to the Financial Statements (continued) For the year ended 31 July 2011
NOTE 36. 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
Trade and other receivables
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
- 76 -
2011
$’000
2,528
317,500
57,719
1,045
-
11,253
390,045
4,067
415,861
421,725
3,362
31,011
876,026
1,266,071
932
44,249
4,596
521
50,298
43,382
1,149
44,531
94,829
1,171,242
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
32,900
32,900
402,206
103,690
632,446
1,171,242
402,206
142,500
556,897
1,134,503
188,903
483,286
(39,771)
149,132
(2,086)
481,200
Notes to the Financial Statements (continued) For the year ended 31 July 2011
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 36. 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 2011 or 31 July 2010.
c) Contingent liabilities of the parent entity
The Parent entity did not have any contingent liabilities as at 31 July 2011 or 31 July 2010.
d) Contractual commitments for the acquisition of property, plant or equipment
The Parent entity did not have any contractual commitments as at 31 July 2011 or 31 July 2010.
NOTE 37. 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 *
CopperChem Limited
Souls Financial Solutions Pty. Limited
Souls Private Equity Limited +*
PCP Holdings 1 Pty. Limited*
PCP Holdings 2 Pty. Limited*
Cromford Group Pty. Limited*
Comford Pipe Pty. Limited (formerly Australian Film
and Pipe Manufacturing Pty. Limited)
Food and Beverage Company Limited
Pitt Capital Partners Limited
Corporate & Administrative Services Pty. Ltd
Pitt Capital Nominees Pty. 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 *
Country of
incorporation
Equity holding
2011
%
2010
%
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
- 77 -
100.0
100.0
100.0
52.4
65.0
13.4
13.4
13.4
13.4
13.4
13.4
78.3
78.3
78.3
78.3
59.7
59.7
59.7
59.7
59.7
59.7
59.7
59.7
59.7
59.7
59.7
59.7
59.7
59.7
59.7
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
Notes to the Financial Statements (continued) For the year ended 31 July 2011
NOTE 37. SUBSIDIARIES (continued)
Name of entity
b) Controlled entities (continued)
New Hope Corporation Limited* (continued)
New Lenton Coal Pty. Limited *
New Saraji Coal Pty. Limited *
New Hope Water Pty. Limited *
New Hope Coal Marketing Pty. Limited *
New Hope Energy Pty. Limited *
New Hope Services Pty. Limited *
Hueridge Pty. Limited *
Uniford Pty. Limited *
eCOALogical Pty. Limited *
Lenton Management and Marketing Pty Limited *
Krestlake Pty Limited *
Mattvale Pty Limited *
Estwood Pty Limited *
Northern Energy Corporation Limited ++
Taroom Coal Proprietary Limited ++
Colton Coal Pty. Limited ++
Yamala Coal Pty. Limited ++
Country of
incorporation
Equity holding
2011
%
2010
%
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
59.7
59.7
59.7
59.7
59.7
59.7
59.7
59.7
59.7
59.7
59.7
59.7
59.7
48.3
48.3
48.3
48.3
59.9
59.9
59.9
59.9
59.9
59.9
59.9
59.9
59.9
-
-
-
-
-
-
-
-
* 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.
++ On 3 October 2011, New Hope Corporation Limited, increased its shareholding from 80.8% to 98.7%.
c) Acquisition of controlled entities
i) Acquisitions during the year included:
During the year ended 31 July 2011, the Group acquired control of the following entities:
CopperChem Limited (CopperChem) – Held by WHSP
In September 2009, WHSP acquired a 50% share of CopperChem for $21,000,000. On 1 October 2010, WHSP acquired an
additional 2.38% share of CopperChem for $3,000,000 and on this date, WHSP obtained control of CopperChem. As a result
of this transaction, the initial 50% investment held by WHSP was fair valued, resulting in a gain on acquisition of $4,150,000.
All consideration has been settled in cash and was paid directly by WHSP to CopperChem in exchange for issue of shares in
CopperChem. There is no contingent consideration.
The fair value of CopperChem’s assets and liabilities at acquisition date was $50,300,000, with goodwill recognised on
consolidation of $231,000. The fair value of assets acquired includes property, plant and equipment of $63,966,000 and cash
balances of $742,000.
In accordance with the Group’s accounting policies, WHSP elected to recognise the non-controlling interests in CopperChem
at its proportionate share of the acquired net identifiable assets, being $25,381,000.
The revenues and profits contributed by CopperChem to the WHSP consolidated revenues and profits for the year ended
31 July 2011 are considered to be of an immaterial nature.
- 78 -
Notes to the Financial Statements (continued) For the year ended 31 July 2011
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 37. SUBSIDIARIES (continued)
c) Acquisition of controlled entities (continued)
i) Acquisitions during the year included:
Northern Energy Corporation Limited (Northern Energy) – Held by New Hope Corporation Limited
On 28 February 2011, New Hope's wholly owned subsidiary, Arkdale Pty Ltd, acquired 80.8% of the issued share capital of
Northern Energy. Northern Energy is a coal exploration company with interests in a portfolio of coking and thermal coal projects
in Queensland and New South Wales that are being progressed towards development.
Details of the purchase consideration and the net assets acquired are as follows:
Purchase consideration (refer below)
Cash paid – prior years
Cash paid – current years
Total purchase consideration
The assets and liabilities recognised as a result of the acquisition are as follows:
Cash
Term deposits
Trade and other receivables
Property, plant and equipment (iv)
Trade payables
Provision
Deferred tax liability
Net identifiable assets acquired
Less: non-controlling interests (ii)
Add: Goodwill (i)
Net assets acquired
$’000
3,286
183,634
186,920
Fair Value
$’000
11,674
10,255
2,289
218,563
(112)
(107)
(56,982)
185,580
(44,318)
45,658
186,920
(i) Goodwill arising on consolidation of $45,658,000 is calculated in accordance with the requirement in IFRS to recognise a
deferred tax liability on the difference between the provisional fair value of newly consolidated assets and liabilities and
their tax base.
(ii) Non-controlling interests
In accordance with the group accounting policies, the group elected to recognise the non-controlling interest in Northern
Energy Corporation Limited at its proportionate share of the acquired net identifiable assets.
(iii) Revenue and profit contribution
The acquired business contributed revenues of $415,000 and net loss of $703,000 to the group for the period from
28 February 2011 to 31 July 2011.
(iv) Property, plant and equipment
On acquisition mining reserves and leases of $218,484,000 have been capitalised and included in the value of property
plant and equipment.
It has been deemed as impracticable to determine the effect on consolidated revenue and profit for the year ended 31 July
2011, if the acquisition had occurred on 1 August 2010. Further, the impact is considered to be of an immaterial nature.
- 79 -
Notes to the Financial Statements (continued) For the year ended 31 July 2011
NOTE 37. SUBSIDIARIES (continued)
c) Acquisition of controlled entities (continued)
Purchase consideration
Outflow of cash to acquire subsidiary, net of cash acquired
Cash consideration
Less: Cash balances acquired
Outflow of cash – investing activities
Acquisition Related Costs
2011
$’000
183,634
(11,674)
171,960
Acquisition related costs of $3,400,000 are included in other expenses in profit or loss and in operating cash flows in the
statement of cash flows.
ii) Details of acquisitions completed during the prior year include:
The Group did not acquire any controlled entities during the prior year.
d) Loss of control and disposals of controlled entities
i) Transactions during the year:
The Group did not dispose of any controlled entities during the year ending 31 July 2011.
ii) Transactions during the prior 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.
Heritage Brands Limited (formerly known as SODA Brands Limited) – (Heritage) – Held by SPEL
As a result of capital raisings by Heritage on the 1 December 2009, the Group’s shareholding in Heritage 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%,
Heritage ceased to be accounted for as a subsidiary of SPEL and is equity accounted as an associate entity.
- 80 -
Notes to the Financial Statements (continued) For the year ended 31 July 2011
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 38.
INVESTMENTS IN ASSOCIATES
a) Carrying amounts
Investments in associates 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
BKI Investment Company Limited transferred from Long term equity
investment to an equity accounted associate
Gain on BKI Investment Company Limited fair valued on transfer to equity
accounted associate
Gain on deemed disposal of equity accounted associates
Equity accounted associate transferred (to) controlled entity
Share of profits/(losses) after income tax, before writedowns
Impairment (expense)/ reversal of equity accounted associate
Dividends received/receivable
Add back share of dividends received by associate
Share of associates (decrement)/ increment in reserves
Carrying amount at 31 July
c) Summarised share of associates financial information
Assets
Liabilities
Net assets
The share of associates net assets of $1,237,669,000 (2010: $1,113,633,000)
includes the Group’s share of the total net assets of Brickworks Limited.
Brickworks Limited owns 42.85% (2010: 42.85%) of the issued capital in
Washington H. Soul Pattinson and Company Limited. The equity accounted
carrying value of this associate of $377,504,000 (2010: $375,044,000) 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’ expenditure commitments
Capital commitments
Lease commitments
e) Contingent liabilities of associates
Share of incurred jointly with other investors
- 81 -
2011
$’000
685,739
43,525
53,309
14,847
873
(21,000)
36,582
(26,795)
(43,113)
21,626
(1,095)
764,498
2010
$’000
526,798
66,021
-
-
60,665
-
40,985
1,487
(38,732)
26,443
2,072
685,739
$’000
1,989,190
(751,521)
1,237,669
$’000
1,833,282
(719,649)
1,113,633
1,752,865
1,681,959
52,616
(16,034)
36,582
57,729
(16,744)
40,985
23,914
115,743
14,488
134,864
9,934
22,542
Notes to the Financial Statements (continued) For the year ended 31 July 2011
NOTE 38.
INVESTMENTS IN ASSOCIATES (continued)
f) Details of investments and results in associates
Name and Principal Activity
Associates – held by WHSP
Brickworks Limited (i)
Balance
date
Group’s percentage of
holding at balance dates
Contribution to
Group net profit
Fair value of
listed investments
Balance date
Company
2011
%
2010
%
Balance date
Associate
2011
%
2010
%
2011
$’000
2010
$’000
2011
$’000
2010
$’000
Manufacturer of clay products
31 July
44.5
44.6
44.5
44.6
5,832
12,982
649,887 775,269
Australian Pharmaceutical Industries Limited
Pharmaceutical wholesaler
Ruralco Holdings Limited
Rural supplies and services
Apex Healthcare Berhad
31 Aug
24.6
24.6
24.6
24.6
(5,622)
5,478
31,256
73,356
30 Sept
23.5
23.5
23.5
23.5
4,090
2,675
42,439
35,429
Pharmaceutical manufacturer and distributor
30 June
30.3
30.3
30.3
30.3
3,983
2,909
27,672
25,743
TPG Telecom Limited (ii)
Telecommunications and internet provider
31 July
26.8
26.6
26.8
26.6
20,643
15,350
320,128 367,635
Clover Corporation Limited
Refinement and processing of natural oil
31 July
28.6
28.6
28.6
28.6
1,314
(276)
14,384
12,498
BKI Investment Company Limited (iii)
Listed investment company
KH Roberts Group Pte Ltd. (formerly Keith
Harris & Company (Far East) Pte Limited)
30 June
13.7
-
13.7
-
1,103
-
70,891
-
Manufacturer of flavours, essences and colours
31 July
49.0
49.0
49.0
49.0
252
312
n/a
n/a
Jointly controlled entity – held by WHSP
CopperChem Limited (iv)
Producer of copper sulphate &
copper concentrate
Associates – held by Controlled entities
(Souls Private Equity Limited and New
Hope Corporation Limited)
Ampcontrol Pty Limited
31 July
-
50.0
-
50.0
-
-
n/a
n/a
Supplier of electrical and electronic products
30 June
45.0
45.0
45.0
45.0
4,644
3,166
Austgrains Pty Limited
Agricultural supplies
Belaroma Coffee Pty Ltd
30 June
48.0
48.0
48.0
48.0
(56)
(1,611)
Coffee roaster and distributor
30 June
40.0
40.0
40.0
40.0
310
197
Bridgeport Energy Ltd (v)
Oil and gas production
BW Partners Pty Limited (vi)
30 June
35.0
Property investment advisory service
31 July
50.0
-
-
35.0
50.0
-
-
(18)
(314)
-
-
InterRISK Australia Pty Ltd
Insurance broker
Heritage Brands
(formerly SODA Brands Limited) (vii)
30 June
40.0
40.0
40.0
40.0
547
333
Distribution of hair care and skin car products
30 June
25.1
25.1
25.1
47.9
(102)
(837)
Quantex Energy Inc (viii)
Developing Coal to liquid oil technologies
31 July
25.0
Quantex Research Corporation (viii)
Reasearching Coal to liquid oil technologies
31 July
25.0
-
-
25.0
25.0
-
-
Specialist Oncology Property Pty Limited
Specialist medical services
Supercorp Pty Limited
30 June
26.5
31.5
26.5
21.3
Financial services administration
30 June
34.6
30.2
34.6
30.2
Share of results from equity accounted
associates before impairment
Impairment (expense)/ reversal
- Australian Pharmaceutical Industries Limited
- Ruralco Holdings Limited
- Other associates
Total impairment (expense)/ reversal of investment in associates
Share of results and impairment from equity accounted associates
- 82 -
(185)
(244)
250
155
-
-
329
(22)
36,582
40,985
(33,005)
6,210
-
(26,795)
-
-
1,487
1,487
9,787
42,472
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Notes to the Financial Statements (continued) For the year ended 31 July 2011
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 38.
INVESTMENTS IN ASSOCIATES (continued)
With the exception of Apex Healthcare Berhad and KH Roberts Group Pte Ltd (KHR), all associates as listed above are
incorporated in Australia. Apex Healthcare Berhad is incorporated in Malaysia. KHR 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) On the 1 November 2010, Brickworks Limited issued shares as part of their employee share scheme. As a result of this
transaction, of which WHSP did not participate, WHSP’s percentage holding in Brickworks decreased by 0.1% to 44.5%.
(ii) WHSP participated in the TPG Telecom Limited dividend reinvestment plan (DRP) issued on 17 November 2010 and 24 May
2011. As a result of the DRP, WHSP increased its shareholding from 26.6% (31 July 2010) to 26.8% (31 July 2011).
(iii) On 21 March 2011 an additional investment in BKI Investment Company Limited (BKI) of $1.3 million was made by WHSP
resulting in WHSP’s ownership interest in BKI increasing by 0.25% to 13.7% and during the year, the CEO of BKI (Mr Tom
Millner) was appointed to the WHSP Board of Directors. As a result of these events, on 21 March 2011, BKI went from
being accounted for as a long term equity investment to an equity accounted associate. From this date, BKI has been
equity accounted.
(iv) On 1 October 2010, WHSP acquired an additional 2.4% of CopperChem Limited for $3 million and at this date, WHSP
obtained control of CopperChem Limited. Prior to this date, CopperChem was jointly controlled and was equity accounted
by the Group.
(v) On 20 April 2011, a controlled entity of WHSP, New Hope Corporation (NHC), acquired a 35% interest in Bridgeport
Energy Limited for consideration of $17.2 million. NHC as of this date equity account Bridgeport Energy Limited as an
associate.
(vi) On 1 November 2010, the controlled entity Pitt Capital Partners Limited, acquired a 50% shareholding in BW Partners Pty
Limited (BWP) for $1 million. From that date, BWP was equity accounted by the Group.
(vii) As a result of a capital raising by Heritage Brands Limited (Heritage) (Formerly SODA Brands Limited), on the 18th
December 2009, the Group’s shareholding in Heritage was reduced from 50.3% to 47.9%. From the date of this change
in shareholding, Heritage ceased to be accounted for as a subsidiary of Souls Private Equity Limited and is equity accounted
as an associate entity. On 1 July 2010, SPEL further reduced its holding in Heritage to 25.1%.
(viii) On the 13 September 2010, a controlled entity of WHSP, New Hope Corporation (NHC), acquired a 25% shareholding in
a stapled investment including Quantex Energy Inc. and Quantex Research Corporation for consideration of $15.4 million.
NHC as of this date equity accounts both companies.
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. During the year ended 31 July 2011, $6,210,000 (2010: $1,487,000) of
this impairment has been reversed.
The fair value of listed equity accounted investments represents:
i.
ii
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
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).
- 83 -
Notes to the Financial Statements (continued) For the year ended 31 July 2011
NOTE 39.
INVESTMENTS IN JOINT VENTURES
a. Lenton Project and Joint Venture
On 19 May 2011, the New Hope Corporation (New Hope) announced that the terms of sale of a 10% interest in the Lenton
project has been executed between member companies of New Hope and Mai-Liao Power Corporation (MPC), a member of
the Formosa Plastic Group of Taiwan. At 31 July 2011, an amount of $58.04 million has been recognised as a receivable in the
financial statements which represents the sale of a 10% interest in the Lenton Project.
b. Taroom-Yamala Joint Venture
In March 2006, Northern Energy Corporation Limited, entered into a joint venture in relation to its Yamala (EPC927) project on
the follow terms:
An external company will earn a 30% Joint Venture interest in the Yamala project (EPC927) through sole funding a three-stage
$5.3 million exploration and evaluation programme designed to take the project from its current status as an exploration target
to completion of a bankable feasibility study for establishment of a mine within the tenement. On completion of the funding
of the $5.3 million farm-in, the external company will have the option to acquire a further 10% joint venture interest for $6.7
million. As at 31 July 2011 the first two stages had been completed by funding of $3.0 million and had earned a 17% interest
in the project. At 31 July $nil is carried as exploration expenditure in relation to EPC927.
NOTE 40. KEY MANAGEMENT PERSONNEL
a) Directors
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
Mr T C D Millner (appointed 1 January 2011)
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
Company
Mr I D Bloodworth
Company Secretary
Ms M R Roderick
Chief Financial Officer
Washington H. Soul Pattinson and
Company Limited
Washington H. Soul Pattinson and
Company Limited
New Hope Corporation Limited
Mr M L Bailey
Mr M J Busch
Mr B D Denny
Mr B J Garland
Mr R C Neale
Mr S O Stephan
Chief Operations Officer
(resigned 10 September 2010)
Financial Controller and Company Secretary
New Hope Corporation Limited
Chief Operations Officer
(appointed 2 November 2010)
General Manager – Resource Development
(resigned 30 September 2010)
New Hope Corporation Limited
New Hope Corporation Limited
Managing Director and Chief Executive Officer
New Hope Corporation Limited
Chief Financial Officer
New Hope Corporation Limited
- 84 -
Notes to the Financial Statements (continued) For the year ended 31 July 2011
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 40. 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
2010
2011
$’000
$’000
6,219
466
24
6,709
6,153
405
620
7,178
Paid to KMP of the
Parent entity
2011
$’000
2,918
312
-
3,230
2010
$’000
2,909
274
-
3,183
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 44.
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
2011
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
T C D Millner
R G Westphal
D E Wills
Other key management personnel
of the Group
R C Neale
2010
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
R C Neale
19,272,146
18,907,126
74,210
60,000
N/A
5,000
205,000
190,000
-
-
16,545,869b
5,000
123,866
15,000
4,000
-
19,104,996
18,739,976
167,150
167,150
74,210
60,000
5,000
113,866
850
4,000
-
-
-
10,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,890a
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
19,474,256
19,097,126
74,210
60,000
16,547,669
10,000
138,866
4,000
19,272,146
18,907,126
74,210
60,000
5,000
123,866
850
4,000
a. R D Millner ceased to have a relevant interest in a family related holding of 2,890 shares.
b. T C Millner gained a relevant interest in family related holdings totalling 16,504,669 shares following his appointment as a Director of family related companies.
- 85 -
Notes to the Financial Statements (continued) For the year ended 31 July 2011
NOTE 40. KEY MANAGEMENT PERSONNEL (continued)
d) Equity instrument disclosures relating to key management personnel (continued)
Shares in New Hope
Corporation Limited
2011
Directors of New Hope Corporation Limited
Balance at
start of year
Acquired
Balance at
during year exercise of options during year end of year
Received on
Sold
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 (to 10 September 2010)
M J Busch
3,620,573
2,005,500
11,000
20,000
109,234
20,000
50,000
-
-
10,000
-
-
-
-
-
-
-
-
5,000
675,000
(885,000)
(25,000)
1,500,000
-
B J Garland (to 30 September 2010)
-
(1,000,000)
1,000,000
-
-
-
-
-
-
-
-
-
-
3,670,573
2,005,500
11,000
30,000
109,234
20,000
N/A
650,000
N/A
3,620,573
2010
Directors of New Hope Corporation Limited
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
3,570,573
1,005,500
11,000
20,000
67,447
20,000
-
-
Shares in Souls Private Equity Limited
Balance at
start of year
2011
Directors of Souls Private Equity Limited
R D Millner
D J Fairfull
R G Westphal
D E Wills
2010
Directors of Souls Private Equity Limited
R D Millner
D J Fairfull
R G Westphal
D E Wills
1,725,193
8,700,001
370,000
423,277
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
50,000
-
-
-
-
41,787
-
5,000
-
2,000,000
1,000,000
2,005,500
-
-
-
-
-
-
-
-
-
-
1,250,000
1,212,770
11,000
20,000
109,234
20,000
5,000
37,230
Acquired
Balance at
during year exercise of options during year end of year
Received on
Sold
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,725,193
8,700,001
370,000
623,277
1,725,193
8,700,001
370,000
423,277
N/A
-
-
-
200,000
500,000
-
-
-
-
- 86 -
Notes to the Financial Statements (continued) For the year ended 31 July 2011
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 40. 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
2011
Directors of New Hope Corporation Limited
None
Other key management personnel
of the Group
M L Bailey (to 10 September 2010)
B J Garland (to 30 September 2010)
The above options were vested and exercisable
during the year.
1,500,000
1,000,000
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.
1,500,000
1,000,000
1,250,000
-
-
-
-
-
-
1,500,000
1,000,000
2,000,000
-
-
1,250,000
-
-
-
-
-
-
N/A
N/A
-
1,500,000
1,000,000
-
Souls Private Equity Limited -
options
Balance at
start of year
Expired
during year
Exercised
during year
Issued
during year
Balance at
end of year
2011
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.
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.
153,151
1,087,501
46,250
52,910
-
-
-
-
87,524
87,524
1,037,500
1,037,500
10,000
27,909
10,000
27,909
- 87 -
-
-
-
-
-
-
-
-
-
-
-
-
153,151
1,087,501
46,250
52,910
153,151
1,087,501
46,250
52,910
153,151
1,087,501
46,250
52,910
Notes to the Financial Statements (continued) For the year ended 31 July 2011
NOTE 40. 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 $2,668,331(2010: $2,156,425). The balance of deposits at 31 July
2011 was $44,167,955 (2010: $41,192,836).
Deposits were received from Mr R D Millner, Mr M J Millner and Mr D J Fairfull and/or their related entities.
Mr R D Millner and Mr P R Robinson are Directors of Pitt Capital Partners Limited (PCP) which is a 78.3% (2010: 78.3%)
controlled entity of Washington H. Soul Pattinson and Company Limited.
Mr R G Westphal received consultancy fees from PCP in the prior year of $49,992. Richvale Pty Ltd, an associated company of
Mr D J Fairfull, received consultancy fees from PCP of $18,333 during the year (2010: $350,000). These consultancy service
arrangements were terminated in August 2010.
During the current financial year PCP provided services to Group related entities:-
1. Clover Corporation Limited $59,060 (2010: $135,638);
2. Brickworks Limited $nil (2010: $50,000); and
WHSP charged BKI Investment Company Limited $6,880 for rental of office space in its own premises during the financial year.
PCP provided services to Drill Torque Limited of $440,000 (2010: $nil) during the current year. This company is considered a
related party as Mr D J Fairfull is Chairman of Drill Torque Limited.
In the prior year, 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.
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.
NOTE 41. RELATED PARTIES
a) Parent entity
The ultimate Parent entity is Washington H. Soul Pattinson and Company Limited.
b) Subsidiaries, Associates and Joint Ventures
Interests in Subsidiaries, Associates and Joint Ventures are set out in note 37, note 38 and note 39 respectively.
c) Key management personnel
Disclosures relating to key management personnel are set out in note 40.
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.
Transactions between each parent company and its subsidiaries, which are related parties of that company, are eliminated on
consolidation and are not disclosed in this note.
- 88 -
Notes to the Financial Statements (continued) For the year ended 31 July 2011
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 41. 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 associates
2011
$’000
2010
$’000
168
1,396
4,838
5,456
-
4
At the 31 July 2010, the net impaired loan balance owing to the Parent entity from KH Roberts Private Limited (Formerly Keith
Harris and Company (Far East) Private Limited) was $7,338 which was repaid to the Parent during 2011. At 31 July 2011, the
loan balance, net is $3,386. Interest is charged at market rates.
NOTE 42. 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
2011
$’000
277
482
759
20
430
340
309
1,099
2010
$’000
201
458
659
28
422
250
377
1,077
- 89 -
Notes to the Financial Statements (continued) For the year ended 31 July 2011
NOTE 43. RECONCILIATION OF PROFIT AFTER INCOME TAX TO NET CASH INFLOW /(OUTFLOW) FROM
OPERATING ACTIVITIES
Profit after tax for the year
Adjustments for non-cash items:
Depreciation and amortisation
Impairment losses
Bad and doubtful debts
Dividends received (non-cash)
Net (gains) on financial assets
Net (profit) on sale of non-current assets
Share based payments
Share of losses/(profits) of associates not received as dividends or distributions
Net exchange losses
Gain on acquisition of controlled entity
Gain on transfer of BKI Investment Company Limited to an equity accounted associate
Gain on deemed disposal of associate
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) in inventory
(Decrease)/increase in trade creditors and accruals
Increase in employee entitlements, other liabilities and provisions
Increase/(decrease) in current tax payable
Increase in deferred tax liability
(Increase) in deferred tax asset
Net cash inflow/(outflow) from operating activities
NOTE 44. SHARE-BASED PAYMENTS
2011
$’000
2010
$’000
558,250
291,092
41,819
41,492
907
(8,628)
(23,296)
(524,120)
25
6,530
7,526
(4,150)
(14,847)
(873)
16,294
(32,404)
(20,575)
(3,622)
9,583
156,376
14,871
(648)
220,510
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)
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 $25,000 (2010: $692,000).
- 90 -
Notes to the Financial Statements (continued) For the year ended 31 July 2011
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 44. SHARE-BASED PAYMENTS (continued)
New Hope Corporation Limited (continued)
Set out below are the summaries of options granted under the plan:
2011
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
13 Aug 2007 12 Aug 2012
$2.104
2,500,000
-
2,500,000
-
-
-
Weighted average exercise price
2.1040
2.1040
The weighted average share price at the date of exercise of options exercised during the 2011 year was $4.79 (2010: $5.45).
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 remaining contractual life of share options outstanding at the end of the period was 0.0 years (2010 –
0.1 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. Detailed vesting conditions are set out in the
Directors’ report.
- 91 -
Notes to the Financial Statements (continued) For the year ended 31 July 2011
NOTE 44. SHARE-BASED PAYMENTS (continued)
New Hope Corporation Limited (continued)
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.
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
3 Jan 2006
2 Jan 2011
8 May 2006
7 May 2011
02 Jan 2007
01 Jan 2012
19 Jan 2007
18 Jan 2012
13 Aug 2007
12 Aug 2012
$1.235
$1.288
$1.413
$1.360
$2.104
$1.230
$1.280
$1.430
$1.370
$2.220
41.3%
40.5%
38.0%
38.0%
44.0%
4.6%
3.8%
6.2%
6.4%
4.0%
5.1%
5.6%
5.9%
5.9%
6.0%
$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 2011 (2010: nil).
The movement in the number of management options for the prior year held by eligible employees is summarised below:
Movement during year ended 31 July 2010
Class
of options
Expiry and
exercise date
Exercise
price
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
Balance at
01/08/09
Number
1,220,000
1,220,000
1,220,000
1,220,000
4,880,000
Expired
during
2010
Number
(1,220,000)
(1,220,000)
(1,220,000)
(1,220,000)
(4,880,000)
Exercisable
at the end
of 2010
Number
-
-
-
-
-
- 92 -
Notes to the Financial Statements (continued) For the year ended 31 July 2011
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 45. 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:
Washington H. Soul Pattinson and Company Limited and Souls Private Equity Limited – CMA Corporation Limited
Rights Issue
On 17 August 2011, CMA Corporation Limited received shareholder approval for a recapitalisation of the company through
which $77.5 million was raised by way of rights issue to be conducted at $0.01 per share. Washington H. Soul Pattinson and
Company Limited acquired 853 million shares and its controlled entity, Souls Private Equity Limited acquired 300 million shares
in CMA Corporation Limited via the rights issue.
New Hope Corporation Limited – Northern Energy Corporation Limited Takeover Offer
Subsequent to year end, on 29 August 2011, New Hope Corporation Limited, through one of its subsidiaries, announced an
unconditional, cash offer for Northern Energy Corporation Limited of $2.00 per Northern Energy Corporation Limited share.
As of 3 October 2011, New Hope Corporation Limited has a relevant interest of 98.7% of Northern Energy Corporation
Limited's shares and this off market takeover offer is to acquire all outstanding Northern Energy Corporation Limited shares not
already owned by New Hope Corporation Limited.
New Hope Corporation Limited – Lenton Project and Joint Venture
On 6 September 2011, New Hope Corporation Limited received $58.04 million in cash for the sale of 10% of the Lenton
Project. Upon receipt of these funds, a subsidiary of New Hope Corporation Limited together with Mai-Liao Power Corporation
have formed the Lenton Joint Venture with the objective of furthering the exploration and development of the Lenton Project.
The subsidiary has a 90% interest in the joint venture and is entitled to 90% of the output of the joint venture. The Group's
interest in the assets employed in the joint venture are included in the statement of financial position in accordance with the
accounting policies.
Washington H. Soul Pattinson and Company Limited - Souls Private Equity Limited Takeover Offer
On 19 September 2011, Washington H. Soul Pattinson and Company Limited announced a proposal to acquire all of the
outstanding Souls Private Equity Limited (ASX: SOE) shares not already owned by Washington H. Soul Pattinson and Company
Limited for $0.163 per share. The proposal values Souls Private Equity Limited at approximately $97.5 million (fully diluted,
including options). Under the proposal, Souls Private Equity Limited shareholders will be able to receive consideration in cash
or in Washington H. Soul Pattinson and Company Limited shares. The proposal is to be effected by way of a scheme of
arrangement.
New Hope Corporation Limited – Formal process for potential bidders
On 5 October 2011, New Hope Corporation Limited announced that it had received a number of preliminary and incomplete
proposals from third parties in relation to potential change of control transactions. In view of ongoing interest from a number
of parties, New Hope’s Board of Directors is undertaking a formal process to determine whether a proposal for New Hope is
available at a price, and on terms, that are in the best interests of all its shareholders.
Washington H. Soul Pattinson and Company Limited’s - Increase in shareholding of CopperChem Limited
On 9 October 2011, Washington H. Soul Pattinson and Company Limited’s shareholding in CopperChem Limited increased
from 52.4% to 93.4% on conversion of Class B shares into ordinary shares of the company. No additional consideration was
paid in respect of the conversion.
Other than declared in these financial statements, no other events have occurred after reporting date which would materially
affect the full year financial statements.
- 93 -
Directors’ Declaration
The Directors of the Company declare that:
1. the financial statements and notes, as set out on pages 32 to 93 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 2011 and the performance for the year ended on that
date of the consolidated group;
2. the Executive Director and Financial Controller 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 25th day of October 2011.
- 94 -
Independent Auditor’s Report
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
Level 7, 20 Hunter Street
Sydney NSW 2000
T +61 (0)2 8236 7700
F +61 (0)2 9233 4636
www.moorestephens.com.au
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF WASHINGTON H. SOUL PATTINSON AND COMPANY LIMITED
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 31st July 2011, 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 ended 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 of the financial report
that gives a true and fair view in accordance with Australian Accounting Standards (including the Australian Accounting
Interpretations) and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable
the preparation of the financial report that is free from material misstatement, whether due to fraud or error.
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. Those 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 of the financial report that gives a true and fair view in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s
internal 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.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
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 Corporation Act 2001, provided to the directors of Washington H. Soul
Pattinson and Company Limited on 24th October 2011, would be in the same terms if provided to the directors as at the date
of signing this auditor’s report.
Moore Stephens Sydney ABN 90 773 984 843. Liability limited by a scheme approved under Professional Standards Legislation*
*Other than for the acts or omissions of financial services licensees. An independent member of Moore Stephens International Limited - members in principal cities throughout the
world The Sydney Moore Stephens firm is not a partner or agent of any other Moore Stephens firm.
- 95 -
Independent Auditor’s Report (continued)
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 31st July 2011 and of its 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 20 to 24 of the directors’ report for the year ended 31st July
2011. 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 31st July
2011, complies with section 300A of the Corporations Act 2001.
Moore Stephens Sydney
Chartered Accountants
Martin J. (Joe) Shannon
Partner
Dated in Sydney this 25th day of October 2011.
Moore Stephens Sydney ABN 90 773 984 843. Liability limited by a scheme approved under Professional Standards Legislation*
*Other than for the acts or omissions of financial services licensees. An independent member of Moore Stephens International Limited - members in principal cities throughout the
world The Sydney Moore Stephens firm is not a partner or agent of any other Moore Stephens firm.
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Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
ASX Additional Information
DISTRIBUTION OF EQUITY SECURITIES AS AT 11 OCTOBER 2011
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
3,038
3,653
919
799
83
8,492
160
SUBSTANTIAL SHAREHOLDERS AS AT 11 OCTOBER 2011
As disclosed in notices received by the Company.
Brickworks Limited
Perpetual Limited
TOP 20 SHAREHOLDERS AS AT 11 OCTOBER 2011
Brickworks Limited
1,733,659
9,537,289
7,071,574
20,436,227
199,861,831
238,640,580
653
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
42.85
RBC Dexia Investor Services Australia Nominees Pty Limited (Pipooled A/C)
15,029,212
Milton Corporation Limited
Dixson Trust Pty Limited
J S Millner Holdings Pty Limited
J P Morgan Nominees Australia Limited
National Nominees 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)
Citicorp Nominees Pty Limited (Colional First State Inv A/C)
Argo Investments Limited
HSBC Custody Nominees (Australia) Limited
RBC Dexia Investor Services Australia Nominees Pty Limited (PIIC A/C)
Cogent Nominees Pty Limited
Citicorp Nominees Pty Limited
Farjoy Pty Ltd
UBS Nominees Pty Ltd
Dixson Trust Pty Limited (A/C NO 1)
- 97 -
9,094,840
8,499,940
7,573,110
6,863,350
6,434,155
3,151,051
2,837,472
2,753,127
2,514,477
2,340,688
2,182,606
2,180,134
1,846,588
1,838,806
1,451,982
1,300,000
1,202,557
1,175,290
6.30
3.81
3.56
3.17
2.88
2.70
1.32
1.19
1.15
1.05
0.98
0.92
0.91
0.77
0.77
0.61
0.55
0.50
0.49
ASX Additional Information (continued)
VOTING RIGHTS
Votes of Members –The Company’s Constitution provides:
Subject to the Constitution, the Listing Rules, the Corporations Act and to any rights or restrictions attaching to any class of
shares, at a meeting of the Company’s members:
a)
one vote for each fully paid share held by that member; and
(b)
subject to section 250L(4) on a poll, each member has:
(i)
for each fully paid share held by the member, one vote; and
(ii)
for each partly-paid share held by the member, a fraction of a vote equivalent to the proportion which the
amount paid (not credited nor paid in advance of a call) is of the total amounts paid and payable (excluding
amounts credited) for the share.
UNQUOTED EQUITY SECURITIES
The Company had no unquoted equity securities at any time during the year ended 31 July 2011 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.
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Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
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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
ADVANCED SHARE REGISTRY LIMITED
150 Stirling Highway, Nedlands WA 6009
Telephone: (08) 9389 8033 (within Australia)
(02) 8003 6825 (NSW)
(07) 3103 3838 (QLD)
(03) 9018 7102 (VIC)
Telephone: +61 8 9389 8033 (outside Australia)
Facsimile: +61 8 9389 7871
Internet Website Address: www.advancedshare.com.au
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