Washington H. Soul Pattinson and
Company Limited
A.B.N. 49 000 002 728
ASX Code: SOL
Annual Report
2014
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 142 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 including its traditional
field of pharmaceuticals, as well as coal mining, building materials, copper mining and refining, equity investments,
property investment, telecommunications and corporate consulting.
OBJECTIVE
WHSP’s objective is to hold a diversified portfolio of assets which generate a growing income stream for distribution
to Shareholders in the form of increasing fully franked dividends and to provide capital growth in the value of the
Shareholders’ investments.
DIVIDEND POLICY
Ordinary dividends are generally paid out of regular profits.
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 or are of an unusually large size.
Minutes of the first General Meeting of Shareholders of:
Washington H. Soul Pattinson and Company Limited
29th April 1903
Profit for the six months to 28 February 1903 £5,802-0-5d ∗ Dividend Declared £4,800-0-0d
Total Assets 28 February 1903 £161,255-14-5d ∗ Shareholders’ Equity 28 February 1903 £125,802-0-5d
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
Updates
Directors’ report
Auditor’s independence declaration
Corporate governance statement
Financial report
Directors’ declaration
Independent auditor’s report
ASX additional information
CORPORATE CALENDAR
Final Dividend
Record date
Payment date
Page
2
3
7
19
20
36
37
43
112
113
115
17 November 2014
8 December 2014
Annual General Meeting
5 December 2014 at 12.00 noon
DIRECTORS
Robert D Millner
Peter R Robinson
David J Fairfull
Michael J Hawker
Thomas C D Millner
Robert G Westphal
David E Wills
Appointments effective 1 November 2014
Warwick M Negus
Melinda R Roderick
CHIEF FINANCIAL OFFICER
Melinda R Roderick
COMPANY SECRETARY
Ian D Bloodworth
AUDITORS
Moore Stephens Sydney
The Wesley Theatre
Wesley Conference Centre
220 Pitt Street, Sydney
Chairman - Non-Executive Director
Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Finance Director
- 1 -
Performance Highlights
CONSOLIDATED FINANCIAL PERFORMANCE
Profit after tax attributable to shareholders
2014
$’000
131,729
Regular profit after tax* attributable to shareholders
123,205
2013
$’000
105,421
160,663
18 cents
28 cents
46 cents
19 cents
29 cents
48 cents
DIVIDENDS PAID/DECLARED
Interim Dividend
Final Dividend
Total Dividends
PARENT COMPANY
Total shareholder return
Total Return Per Annum
1 Year
3 Years
5 Years
10 Years
15 Years
Washington H. Soul Pattinson and
Company Limited (WHSP)
15.7%
8.8%
10.3%
11.5%
13.0%
WHSP continues to deliver very attractive long term returns to its shareholders.
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.
* Regular profit after tax is a non-statutory profit measure and represents profit from continuing operations before non-regular
items. A reconciliation to statutory profit is included in the Consolidated Financial Statements – Note 3, Segment information.
- 2 -
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
Chairman’s Review
Dear Shareholders,
I am pleased to present the 2014 Annual Report for Washington H. Soul Pattinson and Company Limited
(WHSP, Parent Company) on behalf of the Board of Directors of the Parent Company.
Consolidated Financial Performance
The profit after tax attributable to shareholders for the year ended 31 July 2014 was $131.7 million, an
increase of 25.0% over the $105.4 million for 2013.
The regular profit after tax* (excluding non-regular items) was $123.2 million, 23.3% lower than the
$160.7 million for 2013. The result was driven by; higher contributions from Brickworks Limited and TPG
Telecom Limited; a positive contribution from the Australian Logistics Property Fund; a lower contribution
from New Hope Corporation Limited; and a loss from CopperChem Limited.
WHSP’s diversified portfolio of investments continues to provide it with protection against the variability
of results from different sectors of the economy. This year, improved results in telecommunications,
building products and property have largely offset lower results from resources.
The net profit from non-regular items was $8.5 million, compared with a loss of $55.2 million in 2013.
Comparisons with the prior year are as follows:-
Revenue from continuing operations
658,116
791,315
2014
$’000
2013
$’000
%
Change
- 16.8%
Profit after tax attributable to
shareholders
Regular profit after tax* attributable
to shareholders
Interim Dividend (paid in May each year)
Final Dividend
Total Dividends
131,729
105,421
+ 25.0%
123,205
160,663
- 23.3%
19 cents
29 cents
48 cents
18 cents
28 cents
46 cents
+ 5.6%
+ 3.6%
+ 4.3%
* Regular profit after tax is a non-statutory profit measure and represents profit from continuing operations before non-regular
items. A reconciliation to statutory profit is included in the Consolidated Financial Statements – Note 3, Segment Information.
- 3 -
Chairman’s Review (continued)
Historical Performance
The chart below shows the Group regular profit after tax* (excluding non-regular items) and the Group
profit after tax (including 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.
Dividends
The chart below shows the ordinary and special dividends paid or declared by the Parent Company over
the last 20 years.
* Regular profit after tax is a non-statutory profit measure and represents profit from continuing operations before non-regular
items. A reconciliation to statutory profit is included in the Consolidated Financial Statements – Note 3, Segment information.
- 4 -
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
Chairman’s Review (continued)
Final Dividend
The Directors have declared a fully franked final dividend of 29 cents per share in respect of the year ended
31 July 2014 (2013: 28 cents fully franked). This brings total dividends for the year to 48 cents fully
franked (2013: 46 cents fully franked).
The record date for the final dividend will be 17 November 2014 with payment due on 8 December 2014.
The Directors consider the regular profit after tax* to be the underlying profit of the Group. Accordingly,
interim and final dividends are declared and paid based on that profit.
The Company receives dividends from its investments and interest from funds on deposit. This year it will
pay out, as dividends, 81.8% of the ordinary dividends and interest received net of regular operating costs
(2013: 78.5%). WHSP’s strong balance sheet and cash flows enable it to continue to deliver reliable cash
returns to its shareholders in the form of fully franked dividends.
Parent Company Investments
As at 31 July 2014 WHSP held listed equity investments valued at $4.47 billion. Details of the largest investments,
which also represented significant holdings in those companies, are included below.
As at 31 July 2014
(including controlled and
associated entities)
Listed Investments at Market Value
New Hope Corporation Limited
TPG Telecom Limited
Brickworks Limited
BKI Investment Company Limited
Aust. Pharmaceutical Industries Limited
Ruralco Holdings Limited
Apex Healthcare Berhad
Clover Corporation Limited
Other Listed Investments
Parent Company Listed Investments
WHSP
Holdings
Value
of WHSP’s
Holding
$ million
Total Market
Capitalisation of
each investment
$ million
59.7%
26.9%
44.3%
11.8%
24.6%
20.6%
30.3%
28.6%
1,487
1,178
939
105
72
55
46
20
3,902
572
4,474
2,493
4,381
2,117
891
293
266
153
69
The cost of acquiring these assets was $851.7 million and any gains on disposal would be subject to tax.
Cash - Parent Company and wholly-owned subsidiaries
As at 31 July 2014
Cash and Deposits
$ million
161
* Regular profit after tax is a non-statutory profit measure and represents profit from continuing operations before non-regular
items. A reconciliation to statutory profit is included in the Consolidated Financial Statements – Note 3, Segment information.
- 5 -
Chairman’s Review (continued)
Changes to the Board of Directors
Since the end of the financial year we have announced a number of changes to the Board of Directors.
Mr. Warwick Negus will join the Board on 1 November 2014 as a Non-executive Director. Warwick has over 20
years experience in the banking and finance sectors including both senior management and director roles. He has
extensive experience in managing equity and property portfolios.
He has a Bachelor of Business Degree from the University of Technology Sydney and a Master of Commerce from
the University of New South Wales. He is a Senior Fellow of the Financial Services Institute of Australasia (FINSIA).
He is also a director of FINSIA, Miller Street Partners Pty. Limited, Tantallon Capital Advisors Pte. Limited and Terrace
Tower Group Pty. Limited.
Ms. Melinda Roderick will join the Board on 1 November 2014 as a Finance Director. Melinda has over 24 years
accounting and operational experience having previously held senior financial roles within the financial services and
insurance sectors including eight years as an external auditor within a chartered accounting practice.
She joined WHSP in 2006 as the Chief Financial Officer and has a comprehensive understanding of the Company’s
complex accounting matters. In this role she has provided valuable input to the Board.
Ms. Roderick is a member of the Institute of Chartered Accountants and holds a Bachelor of Economics Degree from
Macquarie University.
Mr. David Fairfull will retire by rotation from the Board at this year’s Annual General Meeting on 5 December and
will not be standing for re-election. David joined the Board in 1997 and has served on various Board committees.
On behalf of the Board, I wish to thank David for his dedication and significant contribution to the Company over
the past 17 years.
Mr. Peter Robinson will be retiring from his position as Executive Director of the Company at the end of March 2015.
Mr. Todd Barlow will become the Chief Executive Officer of the Company following Mr. Robinson’s retirement. Todd
is currently the Managing Director of Pitt Capital Partners Limited and has an in depth knowledge of WHSP and its
investments.
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 $4.47 billion as at 31 July
2014. The cost of acquiring these assets was $851.7 million and any gains on disposal would be subject to tax.
Excluding controlled entities and associates, the market value of listed equities was $572.3 million at 31 July 2014.
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 investments based on
market value as at 31 July 2014
(excluding controlled and associated entities)
Milton Corporation Limited
Commonwealth Bank of Australia
BHP Billiton Limited
Perpetual Limited
National Australia Bank Limited
Telstra Corporation Limited
Wesfarmers Limited
Bank of Queensland Limited
Lindsay Australia Limited
Westpac Banking Corporation
Total – Ten Largest
Other
Total
Market Value
$ million
156
66
56
30
28
21
20
19
18
17
431
141
572
Acquisitions of listed equities totalled $36.8 million for the year. WHSP participated in a placement by associate
Ruralco Holdings Limited and an entitlement offer by associate BKI Investment Company Limited. The other main
acquisitions were Perpetual Limited (resulting from its takeover of The Trust Company Limited), Lindsay Australia
Limited, Rum Jungle Resources Limited and Bank of Queensland Limited.
Proceeds from disposals totalled $43.8 million and included SFG Australia Limited, The Trust Company Limited
(which was taken over by Perpetual Limited), Primeag Australia Limited and QBE Insurance Group Limited.
During the year WHSP received returns of capital totalling $4.4 million mainly from Primeag Australia Limited.
Ordinary dividend and distribution income from listed equities held, excluding those from controlled entities and
associates, was $23.1 million, an increase of 11.1% over 2013. Special dividends of $0.6 million were received
during the year compared to $0.2 million last year.
Interest income for the year, excluding that from controlled entities and associates, totalled $8.1 million compared
to $13.5 million last year. This reduction was due to both lower interest rates and less funds being on deposit.
- 7 -
Review of Group Entities (continued)
New Hope Corporation Limited
Controlled entity: 59.7% held*
Contribution to Group profit: $34.9 million
Total Market Capitalisation: $2.49 billion*
Value of WHSP’s Holding: $1.49 billion*
ASX code: NHC
New Hope reported a net profit after tax and non-regular items of $58.4 million for the year ended 31 July 2014. The
result comprised $10.8 million from coal mining, marketing and logistics operations; $3.4 million from oil and gas
operations; and $44.3 million from treasury and investments. The result was down 21.2% on the 2013 result of $74.1
million.
Before non-regular items, basic earnings for 2014 were 5 cents per share, compared to 15 cents per share in 2013.
After non regular items, basic earnings were 7 cents per share for 2014 against 8.9 cents in 2013.
The result was lower than 2013 due to the impact of:
• Significantly lower export coal prices; and
• The AUD:USD exchange rate remaining high throughout the year.
New Hope has declared a final dividend of 2 cents per share (2013: 5 cents) and a special dividend of 3.5 cents per
share (2013: 5 cents). Both of these dividends are fully franked.
Mining Operations
As anticipated, production for the year was down as a result of cessation of mining at New Oakleigh following the
recovery of all economic coal reserves in the previous financial year. Production for the year was 5.6 million tonnes
compared to the 5.8 million tonnes produced during 2013. Excluding the New Oakleigh mine, New Acland and
Jeebropilly production was up a combined 1.5% on 2013 production.
Sales for 2014 were 6.0 million tonnes (inclusive of trade coal sales of 0.3 million tonnes), which equalled the 6.0
million tonnes sold in 2013 (inclusive of trade coal sales of 0.1 million tonnes).
The New Acland open cut mine produced 4.9 million tonnes of product coal in 2014. This was an increase of 0.2
million tonnes compared to 2013. Production for the majority of the year was capped by approved production and
transportation limits.
Queensland Bulk Handling (QBH)
QBH, New Hope’s 100% owned coal terminal at the Port of Brisbane, exported 7.9 million tonnes of coal on 100
vessels. This result was down on last year by approximately 0.9 million tonnes, predominantly caused by the closure
of Peabody's Wilkie Creek mine and resultant reduction in throughput. QBH remains essentially a demurrage free
port.
New Hope Exploration
New Hope continues an active exploration program utilising two drilling rigs plus contract rigs as required. The
exploration focus during 2014 has continued with resource definition in the Bowen Basin (Lenton, Bee Creek and
Yamala) and Surat Basin (MDL244 for the revised New Acland Coal Mine Stage 3 Project) as well as Colton in the
Maryborough Basin. Exploration on the mineral tenures has been focused on the eastern edge of the Mount Isa
block and the Laura Basin.
The exploration programs consisted of seismic, aeromagnetic, gravity, electro-magnetic and geochemical surveys in
addition to drilling. The drilling program consisted of 25 water monitoring bore holes, 153 open holes and 65 core
holes, totalling 22,104 metres.
*As at 31 July 2014
- 8 -
Review of Group Entities (continued)
New Hope Corporation Limited (continued)
Pastoral Operations
A comprehensive five year plan has been developed for Acland Pastoral in conjunction with Rural Consulting
Services Pty. Limited. This plan is based on time controlled grazing, and implementation has commenced.
Drought conditions in the region have limited the cropping activity. A pivot irrigation system has been
commissioned to improve the consistency and yields of the cropping activities.
Acland Pastoral’s cattle herd was decreased in size from 2,460 to 1,894 due to the dry conditions. During the year
1,948 head were sold and 1,335 purchased.
Acland Pastoral has successfully continued the cattle trials on rehabilitated mine land with further analysis in the
following areas:
• Soil structure and water holding capacity;
• Volume, diversity and quality of pastures; and
• Various age of pastures.
The results of these trials are encouraging with all cattle gaining weight in spite of the dry conditions.
Oil and Gas
Bridgeport Energy continued the growth of its exploration and production portfolio and the integration of the assets
acquired from Arrow Energy into its portfolio.
Oil production continued to increase with 116,945 barrels produced during the year.
Outlook
During the current year, the coal industry in Australia, and internationally, has experienced significant challenges in
remaining profitable. With the outlook for coal prices in the short term to remain relatively flat, New Hope is
anticipating another difficult year ahead. Some improved revenues may be seen if the Australian dollar were to soften
against the US dollar during the 2015 financial year.
New Hope’s focus for 2015 remains on safe production and active management of risks to ensure ongoing cost
effectiveness. The approval of the Acland expansion is a key issue. Once approved, it will provide certainty for New
Hope, its employees, and the local community. If the Acland expansion is not approved, current reserves will be
exhausted during 2017 at the current mining rates.
Operationally, New Hope’s production for 2015 is anticipated to be similar to the 2014 year, with potential for modest
increases at Acland. Rehabilitation work currently underway at the West Moreton operations will continue during
2015.
Acquisition opportunities are being actively investigated by New Hope, with a focus on open cut operations. The
current soft coal market, combined with New Hope’s strong balance sheet, provides the ability for it to take advantage
of acquisition opportunities which support its long term profitability. Concurrently New Hope will continue to develop
its portfolio, ensuring prudent expenditure continues on exploration and approvals work to allow new projects to be
brought on line when market conditions improve.
New Hope contributed a net profit of $34.9 million to the Group (2013: $44.2 million).
*As at 31 July 2014
- 9 -
Review of Group Entities (continued)
CopperChem Limited
Controlled entity: 100% held*
Contribution to Group result: $38.7 million loss
Unlisted entity
Exco Resources Limited
Controlled entity: 100% held*
Contribution to Group result: $2.1 million loss
Unlisted entity
CopperChem and Exco are producers of Copper Sulphate, Copper Concentrate, and Gold Bullion. The copper
operations (Mount Colin and Cloncurry Operations) are based in north-west Queensland. The gold operation
(White Dam) is based in South Australia, 85km west of Broken Hill.
The copper processing operations at Cloncurry are highly reliant on water. 2014 was defined by the continuation
of extreme drought conditions in north-west Queensland. Cloncurry operations operated on reduced water
supplies for much of the year, with piped water access being withdrawn from the site completely on 30 October
2013, as the township of Cloncurry moved to emergency water restrictions.
As advised last year, 2013 had been a turnaround year for CopperChem, with it moving for the first time to positive
earnings before interest, tax, depreciation and amortisation in the second half of the 2013 financial year.
After transforming the business during 2013 the decision was made to continue the long term development of the
business, despite water restrictions severely inhibiting metal processing. Mine plans were re-developed at the end
of the first half of 2014 in response to these restrictions. Mining activity re-focused on removing waste material
necessary to construct infrastructure for the Mount Colin underground mine and the Cloncurry Operations tailings
storage facility lift stage 2. The removal of this waste has reduced the future cost of mining the ore bodies.
On 28 July 2014, and as a result of continued water access risks, CopperChem and Exco entered into a toll
processing agreement with Glencore. Toll processing has alleviated water risks to the business and has allowed
CopperChem to return to profitable operations. The Mount Colin mine is expected to generate approximately $50
million in revenue in the first half of the 2015 financial year, with previously deferred ore processing now re-started.
As a result of utilising toll treatment, the Cloncurry Operations copper concentrator has now been placed in care-
and-maintenance. CopperChem will review the option to re-start the plant, or move it to one of the upcoming
project areas, pending a review of ongoing water supplies. Freeing up the limited water allocation from the
concentrator has allowed full water allocation to the Cloncurry Operations heap-leach and copper sulphate
facilities, which have significantly increased in processing output as a result.
On 13 September 2013, CopperChem entered into a Joint Venture (JV) agreement with Syndicated Metals Limited
(Syndicated) for the development of the Barbara project, located 64kms North East of Mount Isa. The Barbara
project, and associated deposits, will be developed on a 50% CopperChem: 50% Syndicated JV basis, with
CopperChem providing project and operations management during construction and production. The open-cut
project is due to enter production in the third quarter of the 2015 financial year. As a result of continued favourable
drilling on and around the Barbara deposit, the project is currently being re-modelled to assess the viability of an
underground mine beneath the initial open cut.
Planning works for the Mount Colin underground mine are nearing completion, with underground contract mining
tenders having been received. Underground mining is expected to be initiated in the 2015 financial year. The first
stage of underground will reach 200 metres beneath the open cut pit floor and is expected to generate in excess
of $145 million in revenue, based on current reserves within a detailed mine plan. Further drilling over the coming
year will target an increase in resource base, and associated mine life.
CopperChem contributed a net loss of $38.7 million to the Group (2013: $20.9 million loss).
Exco contributed a net loss of $2.1 million to the Group. Exco became a subsidiary of WHSP on 9 November 2012
and contributed a net profit of $0.9 million to the Group in respect of the period 9 November 2012 to 31 July 2013.
*As at 31 July 2014
- 10 -
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
Review of Group Entities (continued)
Pitt Capital Partners Limited
Controlled entity: 100% held*
Contribution to Group profit: $2.2 million
Unlisted entity
PCP is a corporate advisory firm specialising in mergers, strategic advice, equity capital markets, private equity,
restructuring and debt advisory work.
PCP owns 75% of Pitt Street Real Estate Partners Pty. Limited (PSREP) which is focused on identifying and managing
investments in the real estate sector. PSREP is the manager of the Australian Logistics Property Fund (ALPF) and the
PSRE 46 Carrington Road Trust (Carrington Trust) which are 100% owned by WHSP. The activities of ALPF and the
Carrington Trust are discussed below.
For the year ended 31 July 2014, PCP’s net profit after tax was up 45.4% compared to the previous year due to
increased corporate finance earnings and real estate advisory fees.
PCP contributed a net profit of $2.2 million to the Group (2013: $1.5 million).
Australian Logistics Property Fund
Controlled entity: 100% held*
Contribution to Group profit: $11.3 million
Unlisted entity
PSRE 46 Carrington Road Trust
Controlled entity: 100% held*
Contribution to Group result: $0.1 million loss
Unlisted entity
Pitt Street Real Estate Partners Pty. Limited’s (PSREP) role is to identify and manage investments in the real estate
sector for WHSP. The main projects at year end were two distribution centres for the Super Retail Group (SRG) and
an office and warehouse property in Castle Hill New South Wales.
Australian Logistics Property Fund (ALPF)
ALPF’s current projects are two distribution centres for SRG, located at Erskine Park in New South Wales and
Brendale in Queensland. The buildings form a significant and critical infrastructure development for SRG in their
continued growth across Australia.
Construction of the Erskine Park facility commenced in March 2013 and the facility was completed and delivered
in December 2013. There is additional development land at Erskine Park and final subdivision approval of this is
expected in early 2015.
The Brendale facility was 80% complete at 31 July 2014. The project is on schedule with practical completion
expected in late October 2014.
ALPF contributed a net profit of $11.3 million to the Group (2013: nil).
Since the end of the year PSREP has commenced a sale process for the two SRG facilities.
PSRE 46 Carrington Road Trust (Carrington Trust)
During the year the Carrington Trust was established and in late April 2014 it acquired a property at 46 Carrington
Road in Castle Hill New South Wales. The trust is 100% owned by WHSP.
The property is a four hectare land parcel with over 20,000 square metres of lettable area, made up of 15,000
square metres of warehouse and 5,000 square metres of office space.
PSREP is investigating the potential rezoning of the property while continuing to negotiate with tenants to take up the
space. The area has been announced as an urban activation precinct by the New South Wales Department of Planning.
The Carrington Trust contributed a net loss of $0.1 million to the Group.
At 31 July 2014 the properties held by ALPF and the Carrington Trust were valued at $100.6 million net of
borrowings from outside of the WHSP Group.
*As at 31 July 2014
- 11 -
Review of Group Entities (continued)
Ampcontrol Pty. Limited
Associated entity: 43.3% held*
Contribution to Group profit: $1.3 million
Unlisted entity
Ampcontrol is a leading international supplier of electrical and electronic products with a strong presence in
providing products and services to the mining sector, in particular for underground coal mining. It has
approximately 1,000 staff with operations across Australia and overseas including; Hong Kong, China, New
Zealand, South Africa, Botswana, Russia, the USA and the United Kingdom.
Ampcontrol’s revenue for the year ended 30 June 2014 was $229.4 million. Earnings before interest, tax,
depreciation and amortisation were $19.4 million for the year after incurring $2.4 million of redundancy costs. Net
profit after tax was $3.0 million for the year.
The lower results for the year were consistent with the downturn in the mining cycle. Ampcontrol remains confident
its results will improve with an upswing in commodity prices, especially coal.
WHSP has equity accounted Ampcontrol’s result for the 12 months to June 2014. Ampcontrol contributed a net
profit of $1.3 million to the Group (2013: $6.9 million profit).
Apex Healthcare Berhad
Associated entity: 30.3% held*
Contribution to Group profit: $3.1 million
Total Market Capitalisation: $153 million*
Value of WHSP’s Holding: $46 million*
Listed on Bursa Malaysia, code: APEX MK
Apex is a manufacturer, distributor and retailer of pharmaceuticals, diagnostic products and equipment,
orthopaedics and consumer healthcare products. It has operations in Malaysia, Singapore and Vietnam and is
publicly listed on the Main Board of Bursa Malaysia.
Apex’s financial year ends on 31 December 2014. Apex’s results for the six months ended 30 June 2014 have been
converted into Australian dollars.
Apex generated revenue of $83.9 million, an increase of 22.8% over $68.3 million for the previous corresponding
period. Net profit after tax was $5.6 million, an increase of 9.4% compared to 2013.
An interim dividend of 1.2 cents per share has been paid for the six months ended 30 June 2014. After taking into
account the one for four bonus issue in June 2014 this represents an increase of 6.4% compared to the prior year’s
interim dividend.
WHSP has equity accounted Apex’s result for the 12 months to 30 June 2014. Apex contributed a net profit of $3.1
million to the Group (2013: $2.9 million).
*As at 31 July 2014
- 12 -
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
Review of Group Entities (continued)
Australian Pharmaceutical Industries Limited
Associated entity: 24.6% held*
Contribution to Group result: $24.9 million loss
Total Market Capitalisation: $293 million*
Value of WHSP’s Holding: $72 million*
ASX code: API
API’s financial year ended on 31 August 2014. The results for the full year will not be released to the market until
23 October 2014.
API released a market update on 3 September 2014 due to strong trading results for the financial year ended 31
August 2014 which included Priceline and Priceline Pharmacy comparable store growth of 6.0% and Pharmacy
Distribution underlying growth of 11.9% after adjusting for the effect of PBS Reforms. API reported a net growth
of 27 stores during the year, lifting the Priceline network to 390 stores.
While the results are still subject to finalisation and audit, on current information API expects to report an underlying
net profit after tax before associates and impairments of between $31.0 million and $31.5 million representing an
increase of up to 31.8% on the prior full year result.
For the six months ended 28 February 2014, API reported a statutory loss of $114.9 million following impairment
charges of $111.0 million. Underlying net profit after tax before associates and impairments was $16.2 million, an
increase of 29.6% on the prior corresponding period.
API maintained a fully franked interim dividend of 1.5 cents per share which was paid on 6 June 2014.
WHSP has equity accounted API’s result for the 12 months to 31 July 2014. API contributed a net loss of $24.9
million to the Group (2013: $6.1 million profit).
BKI Investment Company Limited
Associated entity: 11.8% held*
Contribution to Group profit: $4.5 million
Total Market Capitalisation: $891 million*
Value of WHSP’s Holding: $105 million*
ASX code: BKI
For the year ended 30 June 2014 BKI delivered another solid result. The net operating result before special dividend
income increased by 20% to $35.9 million, net profit attributable to shareholders increased by 11% to $37.4 million
and basic earnings per share before special dividend income increased by 5% to 7.15 cents per share.
BKI’s improved result was driven by higher dividend distributions from Woodside Petroleum, Suncorp Group, BHP
Billiton, TPG Telecom, ANZ bank, National Australia Bank, Westpac Bank and Commonwealth Bank. Special
dividends were received from Westpac Bank, New Hope Corporation, Milton Corporation, Coca-Cola Amatil and
Suncorp Group.
BKI’s total shareholder return (including the reinvestment of dividends) for the year ended 30 June 2014 was 21.0%,
outperforming the S&P/ASX 300 Accumulation Index over the same period by 3.7%.
BKI has continued its focus on controlling costs. It is debt free and doesn’t charge shareholders an external portfolio
management or performance fee. BKI’s management expense ratio (MER) for the year was 0.17%.
BKI has paid a fully franked final ordinary dividend of 3.5 cents per share, an increase of 5%.
WHSP has equity accounted BKI’s result for the 12 months to 30 June 2014. BKI contributed a net profit of $4.5
million to the Group (2013: $4.4 million 13.0% held).
*As at 31 July 2014
- 13 -
Review of Group Entities (continued)
Brickworks Limited
Associated entity: 44.3% held*
Contribution to Group profit: $23.3 million
Total Market Capitalisation: $2.12 billion*
Value of WHSP’s Holding: $939 million*
ASX code: BKW
Brickworks posted a net profit after tax (NPAT) for the year ended 31 July 2014 of $102.8 million up 20.7% from
$85.2 million last year. Brickworks’ normalised NPAT of $101.3 million was up 1.2% from $100.0 million for the
year ended 31 July 2013.
On record sales revenue of $636.9 million, Building Products earnings before interest, tax and significant items was
$45.1 million, up 37.4% on the prior year. Improved earnings were achieved on the back of strong growth in sales
volume in the second half, increased pricing in some divisions, a range of operational efficiency measures and
implementation of new business initiatives.
Land and Development earnings before interest and tax (EBIT) was up 25.8% to $62.4 million, driven primarily by
the sale of Rochedale North, the completion of two major property trust developments and a compression in
capitalisation rates in the second half.
The directors of Brickworks have increased the final dividend by 1 cent per share to 28 cents fully franked. This follows
an increase in the interim dividend of 0.5 cents per share and takes the full year dividend to 42 cents fully franked.
Divisional Results
Austral Bricks’ delivered a 17.8% increase in earnings for the year ended 31 July 2014. Sales revenue was up
17.4% to $333.6 million, driven primarily by an increase in volume. Total sales volume increased by approximately
100 million bricks, taking total sales to well above 600 million bricks for the year.
Price increases were patchy across the states. Excluding the impact of tolling and export volumes, solid increases
were achieved in New South Wales, Queensland and South Australia. There was a reduction in average prices in
Western Australia and relatively flat prices in Victoria. Finished goods inventory was down by 16.6% during the
year, with production volume held relatively constant despite the significant increase in sales volume.
Austral Masonry’s earnings more than doubled over the prior year, supported by a strong increase in sales revenue,
up 32.4% to $82.6 million. Sales volume was up 27.9% to more than 400,000 tonnes, due to a range of factors.
These included: the impact of prior period acquisitions; an increase in sales of premium block products into the
residential segment; greater sales of engineered retaining walls and industrial paving products; and product tolling
arrangements in place in Cairns. In addition, a number of internal restructuring initiatives were implemented. These
included significant overhead reductions across many operations, the closure of the inefficient Dandenong plant in
Victoria and the consolidation of operations in New South Wales to the Prospect site. Strong average selling price
increases were achieved, up 8.2% excluding the impact of tolling.
Bristile Roofing’s earnings increased by 12.9% despite a reduction in sales revenue, down 4.3% to $100.4 million.
This result was achieved on the back of cost reduction initiatives that resulted in improved margins, despite only
modest price increases. Cost reduction initiatives included a significant overhead reduction in Caversham, where
operations were restructured during the year, and benefits from the operations excellence program, particularly in
Wacol. Sales of imported La Escandella terracotta products continue to gather momentum, supplementing the
locally manufactured concrete roof tile range on the East Coast.
Austral Precast’s earnings were also higher, with increases in New South Wales, Queensland and Western Australia
partially offset by reduced earnings in Victoria. Sales revenue increased by 10.8% to $70.3 million on the back of
record sales volume for the year. Although precast remains a new business for Brickworks, the potential in most
states appears to be beyond existing manufacturing capacity, with the current order bank in excess of six months
sales volume.
*As at 31 July 2014
- 14 -
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
Review of Group Entities (continued)
Brickworks Limited (continued)
Auswest Timbers’ earnings decreased despite an increase in sales revenue, up 16.3% to $49.8 million on record sales
of around 60,000 cubic metres for the year. Sales growth was due to a number of factors including: recommissioning
of the Deanmill facility after significant disruption to operations in Western Australia during the prior year; pine batten
demand on the East Coast and hardwood batten demand on the west coast; strong export demand; and increased
value added sales in Victoria.
Land and Development produced an EBIT before significant items of $62.4 million for the year ended 31 July 2014,
up 25.8% from $49.6 million for the prior year.
Land sales contributed an EBIT of $21.0 million for the year compared to $28.2 million in the prior year.
The improved result was primarily due to growth in the property trust, generating an EBIT of $43.4 million, up
78.8% from $24.3 million in the prior year. Net property income distributed from the trust was $13.0 million for
the year, up from $10.0 million for the year ended 31 July 2013. The revaluation profit of stabilised trust assets
totalled $11.5 million, up significantly from $5.9 million due to compression in capitalisation rates of between 0.3%
and 0.5%. A significant EBIT of $18.9 million was contributed through fair value adjustment and development
profit following the completion of the expanded Coles cold distribution centre at the M7 Business Hub and the
fourth DHL facility at Oakdale Estate, both in New South Wales.
At 31 July 2014 the total value of the property trust assets was $979.0 million, with borrowings of $381.5 million,
giving a total net value of $597.5 million. Brickworks’ share of the trust’s net asset value was $298.7 million up
$39.8 million from $258.9 million at 31 July 2013. The change was primarily due to the sale of Rochedale North
into the Trust, which increased assets by $51.8 million, together with revaluations of existing and newly completed
assets. This offset the sale of Toll facility in October 2013, which had net value to the Trust of $16.5 million.
Outlook
The first half of the 2015 financial year is likely to be the strongest market for more than a decade, with many
customers reporting order banks that extend for up to a year. These conditions are being driven by the long awaited
upturn in detached housing activity (particularly in New South Wales), combined with record levels of apartment
construction. The latest attached housing approvals data remains strong and is still showing signs of growth in most
states.
The strong market conditions are continuing to drive sales growth momentum, with year to date sales in all divisions
exceeding the prior corresponding period, despite the impact of poor weather in New South Wales. Tempering this
optimistic outlook is the very competitive nature of some markets where some competitors appear intent on
increasing market share, as opposed to profit.
Brickworks contributed a net profit of $23.3 million to the Group (2013: $13.6 million 44.4% held). These
contributions exclude the WHSP profit taken up by Brickworks under the equity accounting method.
*As at 31 July 2014
- 15 -
Review of Group Entities (continued)
Clover Corporation Limited
Associated entity: 28.6% held*
Contribution to Group profit: $0.3 million
Total Market Capitalisation: $69 million*
Value of WHSP’s Holding: $20 million*
ASX code: CLV
Clover reported a net profit after tax for the 12 months ended 31 July 2014 of $1.0 million, down from $6.1 million
in the previous year.
The performance of the business during 2014 was severely impacted by the New Zealand whey protein concentrate
(WPC) incident reported in late 2013. Whilst the incident did not directly involve any of Clover’s products, it has
affected product sales of a number of Clover’s customers. It is important to note that no customers have been lost
as a result of the WPC incident. Throughout 2014 and specifically since the WPC incident, Clover has worked very
closely with its customers to understand the impact on each individual customer. The impact has varied from
customer to customer.
From a revenue perspective, the 2015 financial year has started strongly and customer ordering patterns suggest
that affected customers are beginning to regain market share.
Strong progress was made during 2014 through the qualification of additional crude tuna oil suppliers to provide
Clover with a stable position for oil supply. During 2014 Clover invested $500,000 in a secondary spray dryer in
New Zealand to assist in new product development and manufacture and to accelerate supply of new oil products
to customers.
Expenditure on innovation and research in 2014 was $1.9 million. The research and development commitment
continues to foster strong and collaborative partnerships whilst developing the medical foods initiative.
The medical foods program and its associated pre-term infant DHA emulsion are being developed by Clover to
reduce the incidence of a number of significant problems that can affect pre-term infants. The progress of the
medical foods initiative has been significant. The trial which involves hospitals in three countries is progressing well
with results due in mid 2015. Clover is currently preparing to obtain the regulatory approvals that it will need for
sale of the DHA emulsion once trial results are available and commercialisation plans are being evaluated.
Given the performance of Clover and the impact of the WPC incident, the directors have declared a fully franked
final dividend of 0.5 cents, payable on 20 November 2014.
Clover contributed a net profit of $0.3 million to the Group (2013: $1.7 million).
Ruralco Holdings Limited
Associated entity: 20.6% held*
Contribution to Group profit: $1.3 million
Total Market Capitalisation: $266 million*
Value of WHSP’s Holding: $55 million*
ASX code: RHL
Ruralco’s financial year ended on 30 September 2014. Ruralco’s results for the full year are not scheduled to be
released to the market until 18 November 2014.
Ruralco released its half year result on 20 May 2014. For the six months to March 2014, revenue increased by
12.4% to $544.6 million compared to the previous corresponding period. The net profit after tax was $5.1 million
and underlying profit after tax was $8.5 million an increase of 57% compared to the first half last year.
An interim dividend of 8 cents per share fully franked was paid on 27 June 2014 (2013: 10 cents per share).
WHSP has equity accounted Ruralco’s result for the 12 months to 31 March 2014. Ruralco contributed a net profit
of $1.3 million to the Group (2013: $0.8 million 23.5% held).
*As at 31 July 2014
- 16 -
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
Review of Group Entities (continued)
TPG Telecom Limited
Associated entity: 26.9% held*
Contribution to Group profit: $46.2 million
Total Market Capitalisation: $4.38 billion*
Value of WHSP’s Holding: $1.18 billion*
ASX code: TPM
TPG has reported earnings before interest, tax, depreciation and amortisation (EBITDA) of $363.7 million for the
year ended 31 July 2014, an increase of 24% over last year.
This result has been driven by continued strong organic growth across TPG’s consumer and corporate divisions
(underlying1 EBITDA up by 19% and 20% respectively) accompanied by a maiden contribution from AAPT whose
underlying1 EBITDA was $38.2 million for the 5 month post acquisition period.
1
The Underlying EBITDA of each division is explained in the commentary on each of the respective division’s results below.
Financial highlights
• EBITDA for the year increased by 24% to $363.7 million.
• Net profit after tax (NPAT) increased by 15% to $171.7 million.
• NPAT excluding intangible amortisation increased by 18% to $196.3 million.
• Earnings per share (EPS) increased by 15% to 21.6 cents per share.
• EPS excluding intangible amortisation increased by 18% to 24.7 cents per share.
• Pre-tax operating cash flow increased by 25% to $396.6 million and exceeded EBITDA by $32.9 million.
• Free cash flow after tax, interest and capital expenditure increased by 28% to $223.5 million.
Consumer Business
The consumer division’s EBITDA for the year was $205.6 million which included $3.3 million of non-recurring
benefits arising from credits and commercial settlements related to prior years. The division’s EBITDA for 2013 of
$180.6 million benefitted from $10.0 million of back-dated rebates arising from favourable regulatory
determinations. The consumer division’s underlying EBITDA growth for 2014 relative to 2013 was therefore $31.7
million or 19%.
TPG’s consumer broadband subscriber base continued to grow strongly increasing by a further 77,000 subscribers
during the year, driven by the ongoing appeal of TPG’s bundled internet and home phone plans. As at 31 July 2014
TPG had 748,000 broadband subscribers and 362,000 mobile subscribers.
*As at 31 July 2014
- 17 -
Review of Group Entities (continued)
TPG Telecom Limited (continued)
Corporate Business
TPG’s corporate division (excluding AAPT) achieved an EBITDA of $126.0 million for the year. This result included
$6.3 million of non-recurring benefits (comprising $4.0 million of back-dated supplier credits and a $2.3 million
Indefeasible Right of Use (IRU) gain). The division’s 2013 EBITDA of $110.3 million included a $10.5 million IRU
gain. The corporate division’s underlying EBITDA growth for 2014 relative to 2013 was therefore $19.9 million or
20%. This increase has been achieved through revenue growth as well as an improvement in underlying margin
from 43% to 50%.
AAPT
The acquisition of AAPT on 28 February 2014 contributed $29.9 million to TPG’s 2014 financial year EBITDA.
Excluding $5.1 million of one-off integration costs and $3.2 million of acquisition related costs incurred in the
period, AAPT’s underlying EBITDA for the 5 months to 31 July 2014 was $38.2 million.
Integration activities have focused on the consolidation of teams, systems, networks and processes, resulting in an
uplift in AAPT’s EBITDA margin from circa 18% pre-acquisition to 23% underlying for the 5 months.
Cash Flow and Gearing
TPG’s excellent cash flow performance continued in the 2014 financial year with $396.6 million cash being
generated from operations (pre-tax). After tax, interest and capital expenditure, TPG had free cash flow of $223.5
million.
TPG made total debt repayments of $117 million in the 2014 financial year, meaning that even after a total outlay
of $465.9 million for the acquisition of AAPT during the year TPG had already reduced its outstanding debt to $350
million by 31 July 2014. This level of debt represents a comfortable gearing ratio of less than 0.9 times TPG’s
annualised EBITDA run-rate.
Dividend
In light of TPG’s strong cash flow and earnings growth, its board of directors declared an increased final dividend
of 4.75 cents per share (fully franked) payable on 18 November 2014. This brings total dividends for the year to
9.25 cents per share (fully franked), an increase of 23% over last year.
TPG contributed a net profit of $46.2 million to the Group (2013: $40.2 million).
TPI Enterprises Limited
Associated entity: 19.4% held*
Unlisted entity
Founded in 2004 TPI is an Australian company based in Cressy, Tasmania. TPI is one of nine global companies which
hold licences to manufacture narcotic raw material. From this material morphine sulphate, codeine phosphate and
other specialist narcotic is produced. Final dosage formulations are found in products such as Panadeine, Panadeine
Forte, Tylenol and Endone.
TPI contracts poppy seed growers in Tasmania who grow and harvest the crop in or around February each year.
Tasmania grows approximately 50% of the world’s poppies used in the global licit market. Due to a poor harvest
in Tasmania in the last two years, which has severely impacted the supply of product to an expanding market, TPI
has commenced growing poppies in Victoria. To further mitigate agricultural risk TPI will grow poppies in the
Northern Territory and Portugal in 2015.
Demand for narcotics has exhibited steady annual growth over the past 20 years. The key drivers behind this
demand are; the ageing population and the increasing incidence and severity of chronic disease; a significant global
shortage of morphine; emerging pain management markets in developing countries; and the retreat from
non-narcotic pain management alternatives to more traditional narcotics.
*As at 31 July 2014
- 18 -
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
Review of Group Entities (continued)
TPI Enterprises Limited (continued)
TPI operates a 100 tonne per annum facility and utilises highly efficient technology that eliminates the use of toxic
solvents and the need for waste water treatment. This results in a low cost operation compared with competitors.
During 2014 TPI was severely impacted by a shortage of raw material due to climatic events in Tasmania. With planned
increases in acreage in Victoria, Northern Territory and Portugal, 2015 production should double that of 2014. Given
the likelihood of further demand TPI is in talks with farmers in Victoria and Portugal to increase plantings for 2016.
Following WHSP’s acquisition of additional shares in TPI on 28 January 2014, WHSP’s investment was reclassified as
an investment in an associated company.
Updates
Requisitioned General Meeting Cancelled
In October 2013, entities acting on the directions of M.H. Carnegie & Co. Pty. Limited and Perpetual Investment
Management Limited (Carnegie and Perpetual) requisitioned a general meeting of WHSP to consider a proposal to
restructure WHSP.
The proposal was complex and there were a number of issues, including taxation implications, which needed to be
analysed in order for WHSP to prepare the information shareholders would require to make an informed decision
on the proposal.
The proposal was comprised of two parts:
• an in specie distribution of all shares held by WHSP in TPG Telecom Limited to WHSP's shareholders (TPG
Demerger); and
• a selective reduction of WHSP's share capital by cancelling all of the shares in WHSP held by Brickworks Limited
and its subsidiaries (Share Cancellation).
After liaising with the Australian Taxation Office (ATO), WHSP requested a private tax ruling to determine the
availability of demerger roll-over relief for the TPG Demerger.
The ATO ruled that WHSP and TPG could not form a demerger group. As a result, demerger rollover relief for Capital
Gains Tax was not available to WHSP to implement the TPG Demerger as proposed by Carnegie and Perpetual.
The demerger, as proposed, would have resulted in a capital gains tax liability of approximately $311 million to
WHSP1. In addition, over 99% of the value of the demerged TPG shares would have constituted an unfranked
dividend for WHSP shareholders under the proposal. Such a dividend would have been taxed in the hands of WHSP
shareholders at their relevant tax rates in the year the demerger occurred.
The effect of the ATO ruling was that neither the TPG Demerger nor the Share Cancellation could occur as
envisaged by Carnegie and Perpetual’s proposal.
In light of the ruling from the ATO, WHSP invited Carnegie and Perpetual to withdraw their requisition. Carnegie
and Perpetual accepted this invitation and withdrew their requisition of meeting.
1 Based on TPG Telecom Limited’s share price as at 18 July 2014.
Cross-Claims
In October 2013, entities acting on the directions of M.H. Carnegie & Co. Pty. Limited and Perpetual Investment
Management Limited (Carnegie and Perpetual) called a general meeting of Brickworks Limited (Brickworks). The
resolutions to be considered at the meeting relate to the Carnegie and Perpetual proposal discussed above (refer to
Requisitioned General Meeting Cancelled).
In light of a ruling from the ATO which means that the proposal cannot proceed as envisaged by Carnegie and
Perpetual (refer to Requisitioned General Meeting Cancelled above) Brickworks has requested that Carnegie and
Perpetual cancel the Brickworks meeting. Carnegie and Perpetual have not agreed to do this.
Brickworks have commenced proceedings against Carnegie and Perpetual in the Federal Court in connection with
the Brickworks meeting and Carnegie and Perpetual have served cross-claims against both Brickworks and WHSP.
WHSP is vigorously defending the cross-claims and has applied to the Federal Court to have them struck out.
- 19 -
Directors’ Report
The Directors of Washington H. Soul Pattinson and Company Limited (WHSP, Parent Company) present their report and the financial
statements of the Consolidated Entity, being the Parent Company and its subsidiaries, for the financial year ended 31 July 2014.
DIRECTORS
The following persons were Directors of WHSP for the whole of the financial year and up to the date of this report:
Mr R D Millner
Mr P R Robinson
Mr D J Fairfull
Mr M J Hawker
Mr T C D Millner
Mr R G Westphal
Mr D E Wills
PRINCIPAL ACTIVITIES
The principal activities of the corporations in the Consolidated Entity during the course of the financial year were ownership of
shares, coal mining, copper mining and refining, property investment and consulting. There were no 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 2013
Interim ordinary dividend 2014
Dealt with in the financial report as dividends
Declared after the end of the year
Final ordinary dividend 2014
REVIEW OF OPERATIONS
Cents Per
Share
28
19
47
Total
amount
$’000
67,031
45,485
112,516
Franking
%
Date of
Payment
100%
100%
9 December 2013
8 May 2014
29
69,425
100%
8 December 2014
The profit after tax attributable to shareholders for the year ended 31 July 2014 was $131.7 million, an increase of 25.0% over
the $105.4 million for 2013.
The result was driven by; gains on the sale of equity investments; higher contributions from Brickworks Limited and TPG
Telecom Limited; a positive contribution from the Australian Logistics Property Fund; a lower contribution from Australian
Pharmaceutical Industries Limited and New Hope Corporation Limited; and a loss from CopperChem Limited.
WHSP’s diversified portfolio of investments continues to provide it with protection against the variability of results from different
sectors of the economy.
Comparison with the prior year is as follows:
Revenue from continuing operations
Profit after tax attributable to shareholders
Interim Dividend (paid in May each year)
Final Dividend
Total Dividends
2014
$’000
658,116
131,729
19 cents
29 cents
48 cents
2013
$’000
791,315
105,421
18 cents
28 cents
46 cents
%
Change
- 16.8%
+ 25.0%
+ 5.6%
+ 3.6%
+ 4.3%
For further information regarding the operations of the Group refer to the Chairman’s Review and the Review of Group Entities
on pages 3 to 19 of this annual report.
- 20 -
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
Directors’ Report (continued)
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 44 of the
consolidated financial statements.
LIKELY DEVELOPMENTS, BUSINESS STRATEGY AND PROSPECTS
Other than as discussed in the Review of Group Entities, information about likely developments, business strategy and prospects
and the expected results in subsequent financial years has not been disclosed because the Directors believe, on reasonable
grounds, that to include such information would be likely to result in unreasonable prejudice to the Consolidated Entity.
WORKPLACE GENDER EQUALITY
In accordance with the requirements of the Workplace Gender Equality Act 2012 (the Act), WHSP lodged its annual public
report for the year ended 31 March 2014 with the Workplace Gender Equality Agency (the Agency) on 29 May 2014.
The report may be viewed on the WHSP web site, www.whsp.com.au, on the ‘Employment’ page.
ENVIRONMENTAL COMPLIANCE
The Group was subject to the reporting requirements of both the National Greenhouse and Energy Reporting Act 2007 and
the Energy Efficiency Opportunities Act 2006 during the year.
The National Greenhouse and Energy Reporting Act 2007 requires the Group to report its annual greenhouse gas emissions
and energy use. The Group has implemented systems and processes for the collection and calculation of the data required and
submitted its 2012/13 report to the Greenhouse and Energy Data Officer on 31 October 2013.
The Energy Efficiency Opportunities Act 2006 (EEO Act) required the assessment of energy usage, including the identification
and evaluation of energy saving opportunities, the reporting of assessments undertaken and the action which is intended as
a result. The Group has fulfilled its obligations under the EEO Act. The Energy Efficiency Program was closed with effect from
29 June 2014.
New Hope Group (NHG)
The NHG was not prosecuted for any breach of environmental laws during the year.
Environmental performance
The majority of the NHG’s operations, which include coal mining operations and exploration tenements, the rail loading
facilities, the QBH coal export port facility and oil and gas operations, are in Queensland. The key piece of environmental
legislation in Queensland is the Environmental Protection Act 1994 (EP Act). The EP Act protects our environment with a focus
on ecologically sustainable development.
The NHG’s operations have proactively undertaken initiatives to improve their financial performance. An expanded monitoring
program at QBH which includes areas further from the QBH boundary (including within the suburb of Wynnum North) and
conducting rehabilitation trials at New Acland give focus to environmental performance.
Environmental systems
During the year the NHG’s operations have continued to make improvements to the Environmental Management System (EMS).
The EMS assists the NHG to improve its environmental performance by increasing environmental awareness, optimising
operational control, monitoring compliance and facilitating continuous improvement.
Environmental reporting
The NHG’s operational sites have submitted reports under the National Pollutant Inventory program.
- 21 -
Directors’ Report (continued)
New Hope Group (NHG) (continued)
Bridgeport Energy Limited (Bridgeport)
Bridgeport executed a number of landowner access agreements throughout the year including Cultural Heritage Management
Agreements and Landowner Access Agreement on new permits acquired throughout the period (for example in South
Australia). Bridgeport operates all its permits under an Environmental Management System prepared and issued in accordance
with legislation. Each exploration (ATP) and production (PL) permit is also operated in accordance with the Environmental
Authorities issued at the time permits were or are awarded or transferred to the entity. This includes regular produced water
monitoring and ongoing remediation activities at all our sites.
CopperChem Limited (CopperChem)
CopperChem’s mining operations (Great Australia Operations (GAO) and Mount Colin) and exploration tenements (Wallace and
Barbara) are regulated by the Queensland Department of Environment and Heritage Protection (DEHP) under Queensland’s
Environmental Protection Act (1994). Mining operations and exploration tenements each function under a site specific
Environmental Authority (EA).
Several minor reportable environmental incidents were made to DEHP during the year. Reporting of all incidents was
undertaken in accordance with DEHP processes and the applicable CopperChem EA. The most common cause of these
incidents was ageing infrastructure such as poly pipe couples.
Since commencing a more robust inspection and maintenance programme, CopperChem has been able to identify potential
issues that may cause environmental harm, in a more timely manner. CopperChem aims to continuously improve this process.
As a result of incidents identified at GAO in prior years, the DEHP issued CopperChem an Environmental Evaluation (EE) in June
2014. The premise of this EE was principally directed at identifying potential sources of contamination that are purported to
be affecting groundwater quality and, to propose remedial measures where applicable. This EE was undertaken by
CopperChem environmental personnel and submitted to DEHP in October 2014. If the DEHP is satisfied with the EE and
removes it from the regulatory register, CopperChem’s GAO will no longer have any outstanding environmental compliance
notifications; other than the required EA. This includes the former:
• Environmental Protection Order (EPO): investigation involving potential seepage from the Tailings Storage Facility (TSF) to the
Coppermine Creek (matter closed November 2012);
• Transitional Environmental Programme (TEP): primarily focussed at minimising contamination to soils and groundwater
(matter closed October 2013); and
• Penalty Infringement Notice (PIN): CopperChem failed to report to DEHP that the mandatory reporting level of the TSF had
been reached within the required timeframe (matter closed December 2013, fine of $2,200).
In accordance with CopperChem’s EA, an independent third party is engaged to report any non-compliance issues to DEHP within 12-
months following commencement of operations, and then at regular intervals not exceeding 2 years. This EA requirement was
successfully completed for CopperChem’s Mount Colin operations in August 2014. The third-party audit for GAO is due by April 2015.
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 Nomination and Remuneration Committees.
Mr Millner has extensive experience in the investment industry.
Other current listed company directorships:
• Apex Healthcare Berhad – Appointed 2000
• Australian Pharmaceutical Industries Limited – Appointed 2000
• Brickworks Limited – Appointed 1997 Chairman since 1999
• BKI Investment Company Limited – Appointed 2003 Chairman since 2003
• Milton Corporation Limited – Appointed 1998 Chairman since 2002
• New Hope Corporation Limited – Appointed 1995 Chairman since 1998
• TPG Telecom Limited – Appointed 2000
Former listed company directorships in the past three years:
• Exco Resources Limited – Appointed 2012 (company delisted January 2013)
• Northern Energy Corporation Limited – Appointed 2011 (company delisted October 2011)
• Souls Private Equity Limited – Appointed 2004 (company delisted January 2012)
- 22 -
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
Directors’ Report (continued)
DIRECTORS (continued)
Peter Raymond Robinson B.Com.(UNSW), F.A.I.C.D.
Executive Director.
Joined the Company 1978, appointed Executive Director 1984.
Mr Robinson has held both executive and non-executive directorships for a period of 30 years and has over 35 years experience
at general management and Chief Executive Officer level. During this period Mr Robinson has had extensive experience in
manufacturing and distribution.
Other current listed company directorships:
• Australian Pharmaceutical Industries Limited – Appointed 2000 Chairman since 2003
• Clover Corporation Limited – Appointed 1997 Chairman since 2002
• New Hope Corporation Limited – Appointed 1997
Former listed company directorships in the past three years:
• Exco Resources Limited – Appointed 2012 (company delisted January 2013)
• Northern Energy Corporation Limited – Appointed 2011 (company delisted October 2011)
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, Nomination and Remuneration Committees.
Mr Fairfull is a merchant banker and professional company director with over 40 years experience in corporate finance.
Other current listed company directorships:
• Heritage Brands Limited – Appointed 2009 Chairman since 2009
• New Hope Corporation Limited – Appointed 1997
Former listed company directorships in the past three years:
• Mitchell Services Limited (formerly Drill Torque Limited) – Appointed 2011, resigned March 2014
• Northern Energy Corporation Limited – Appointed 2011 (company delisted October 2011)
• Souls Private Equity Limited – Appointed 2004 (company delisted January 2012)
Michael John Hawker AM BSc(Sydney), F.A.I.C.D., SF Fin.
Non-executive Director since October 2012. Member of the Audit, Nomination and Remuneration Committees since October 2012.
Mr Hawker is a professional company director with over 30 years experience in financial markets and investment. He was Chief
Executive Officer and Managing Director of Insurance Australia Group from 2001 to 2008. From 1995 to 2001, Mr Hawker
held a range of positions at Westpac, including Group Executive of Business and Consumer Banking and General Manager of
Financial Markets. Prior to this, he held a number of positions at Citibank, including Deputy Managing Director for Australia
and subsequently Executive Director, Head of Derivatives, Europe.
Other current listed company directorships:
• Aviva PLC – Appointed 2010
• Macquarie Group Limited – Appointed 2010
Thomas Charles Dobson Millner B.Des(Industrial), GDipAppFin(Finsia), FFin, G.A.I.C.D.
Non-executive Director since January 2011 and member of the Nomination Committee.
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 (BKI). He joined BKI in 2008 from
Souls Funds Management Limited where he was responsible for the investment portfolio of BKI.
Mr Millner has a Bachelor of Industrial Design degree and a Graduate Diploma in Applied Finance. He is a Fellow of the Financial
Services Institute of Australasia and a Graduate of the Australian Institute of Company Directors.
Other current listed company directorships:
• PM Capital Global Opportunities Fund Limited – Appointed 2013
Former listed company directorships in the past three years:
• Exco Resources Limited – Appointed 2012 (company delisted January 2013)
- 23 -
Directors’ Report (continued)
DIRECTORS (continued)
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 Nomination and Remuneration
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 was formerly the Chairman of the Board of Governors of Queenwood School for Girls Limited
for 10 years.
Former listed company directorships in the past three years:
• Souls Private Equity Limited – Appointed 2005 (company delisted January 2012)
• Xanadu Mines Ltd - Appointed 2010, Resigned November 2013
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. As a result of Mr Wills’ experience and qualifications, he brings financial expertise to the
Board.
Former listed company directorships in the past three years:
• Clover Corporation Limited – Appointed 2005, Resigned June 2013
• Quickstep Holdings Limited – Appointed 2010, Resigned July 2013
• Souls Private Equity Limited – Appointed 2004 (company delisted January 2012)
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 2007. He was also the Company
Secretary of Clover Corporation Limited from 2007 to 2012. 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.
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 P R Robinson
Mr D J Fairfull
Mr M J Hawker
Mr T C D Millner
Mr R G Westphal
Mr D E Wills
R,N
A,R,N
A,R,N
N
A,R,N
A,R,N
20
20
19
19
18
21
18
19
19
19
19
18
20
18
-
-
8
8
-
8
8
-
-
8
8
-
8
8
A Denotes member of the Audit Committee of Directors during the year.
R Denotes member of the Remuneration Committee of Directors during the year.
N Denotes member of the Nomination Committee of Directors during the year.
- 24 -
1
-
1
1
-
1
1
1
-
1
1
-
1
1
1
-
1
1
1
1
1
1
-
1
1
1
1
1
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
Directors’ Report (continued)
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 P R Robinson
Mr D J Fairfull
Mr M J Hawker
Mr T C D Millner
Mr R G Westphal
Mr D E Wills
Ordinary Shares
20,338,602
74,210
163,587
19,000
17,627,977
22,739
266,433
REMUNERATION REPORT (AUDITED)
Scope of Report
This Remuneration Report considers the key management personnel of the Parent Company and the Consolidated Entity. New
Hope Corporation Limited (New Hope) forms part of the Consolidated Entity and the remuneration of certain key management
personnel of New Hope is included in this Report.
New Hope is publicly listed and, accordingly, has its own Remuneration Committee and produces its own Remuneration Report
in accordance with the Corporations Act 2001 to be voted on by its shareholders.
Key management personnel of the Parent Company and Consolidated Entity
Non-executive Directors
Mr R D Millner – Chairman
Mr D J Fairfull
Mr M J Hawker
Mr T C D Millner
Mr R G Westphal
Mr D E Wills
Executive Director
Mr P R Robinson
Other key management personnel of the Parent Company and Consolidated Entity
Mr I D Bloodworth Company Secretary
Ms M R Roderick
Chief Financial Officer
Key management personnel of the Consolidated Entity
Mr M J Busch
Chief Financial Officer, New Hope, promoted from the position of Financial Controller and Company Secretary
from 1 February 2014.
Mr B D Denney
Chief Operating Officer, New Hope.
Mr R C Neale
Managing Director and Chief Executive Officer, New Hope, retired on 31 January 2014.
Mr S O Stephan
Chief Executive Officer, New Hope, promoted from the position of Chief Financial Officer from 1 February 2014.
Remuneration Governance
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 and senior executives are competitively set to
attract and retain qualified and experienced personnel.
New Hope has its own Remuneration Committee which reports to the Board of New Hope.
Remuneration Consultants
The Remuneration Committee is authorised by the Board to obtain independent professional advice on the appropriateness of
remuneration packages if deemed necessary. No such advice was obtained during the financial year.
- 25 -
Directors’ Report (continued)
REMUNERATION REPORT (AUDITED) (continued)
Non-executive Directors
Board policy is to remunerate Non-executive Directors at comparable market rates. Remuneration levels are reviewed annually
by the Remuneration Committee and are not subject to performance based incentives.
The Remuneration Committee reviews various publications/surveys annually to assist in setting Non-executive Director
remuneration. Based on these publications/surveys for 2013 the remuneration received by Non-executive Directors for the year
ended 31 July 2014 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 Company 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 2014 remuneration of the Non-executive Directors by the Parent Company amounted to
$995,383.
With effect from 31 July 2004 the retiring allowance for Non-executive Directors was frozen at three 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
Parent Company
Remuneration levels are reviewed annually by the Remuneration Committee to reflect individual performance, the overall
performance of the Parent Company and Consolidated Entity and prevailing employment market conditions.
Remuneration of the Executive Director and senior executives of the Parent Company consists of a fixed remuneration package
comprising a base salary, superannuation and non-cash benefits, where taken. The total value of each remuneration package
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 2013 the remuneration they received for the
year ended 31 July 2014 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 Company at any
time during the financial year.
As set out in the 2012 and 2013 Remuneration Reports, Mr Peter Robinson is entitled to an employment termination payment
(ETP) on cessation of his employment as part consideration for transferring from a defined benefit superannuation plan to a
target benefit superannuation plan. The ETP will continue to increase by interest calculated at commercial rates. The interest
for the financial year was $29,350 (2013: $31,224). As at 31 July 2014 the balance of the ETP was $868,747 (2013:
$839,397).
New Hope Corporation Limited
New Hope aims to ensure that remuneration packages properly reflect the person's duties, experience and responsibilities and
are aligned so that management is rewarded in creating value for shareholders. Remuneration of senior executives is reviewed
annually after taking into consideration the executives’ performance, the New Hope Group’s performance, market rates and
level of responsibility.
Executive remuneration comprises a mix of base remuneration, short term incentives (STIs), long term incentives (LTIs) and
retention payments. Target remuneration mix (based on the entitlement to 100% of the available STIs and LTIs which is at risk
and subject to performance hurdles) for the year ended 31 July 2014 was: base remuneration 62%; STIs 19%; and LTIs 19%.
Base remuneration
Base remuneration for senior executives is fixed annually by the New Hope Remuneration Committee (NHRC). It comprises a
cash salary, superannuation and other non-cash benefits such as a company vehicle. Executives may elect to take a vehicle
allowance in lieu of a company vehicle and may salary sacrifice a portion of their cash salary into superannuation or other
benefits.
Short-term incentives
STIs are designed to motivate and reward senior executives to achieve the short term goals of New Hope. Maximum allowable
STIs are provided for in senior executive employment contracts and are paid in the form of an annual cash bonus. At the end
of each period the NHRC awards executives a percentage of their maximum allowable STIs having regard to the performance
of the executive and New Hope during the period. The Key Performance Indicators (KPIs) set by the NHRC and their respective
weightings are detailed below.
- 26 -
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
Directors’ Report (continued)
REMUNERATION REPORT (AUDITED) (continued)
Short-term Incentives KPIs
New Hope Group Profit, Sales and Investment Performance
New Hope Group Compliance – Safety, Environment and Risk Management
New Hope Group Production Cost, Project Development and Merger and Acquisition Activities
Weighting
55%
25%
20%
Each of the STIs KPIs is made up of qualitative and quantitative measures with the quantitative measures set annually by the
NHRC. Based on the achievements of New Hope this year, the NHRC determined that executives had achieved 52% of their
maximum STIs.
Long-term Incentives
LTIs are designed to motivate and reward senior executives to achieve the strategic goals set by New Hope, align shareholder
and executive objectives and to retain the services of senior executives.
Maximum allowable LTIs are provided for in senior executive employment contracts. At the end of each period the NHRC
awards executives a percentage of their maximum allowable LTIs having regard to the performance of the executive and New
Hope during the period.
LTIs are paid in the form of Performance Rights at the discretion of the NHRC. The value of an executive’s LTIs is converted into
Performance Rights by reference to the five day volume weighted average share price of New Hope over the five days
immediately preceding issue. The NHRC has discretion to select alternative equity instruments for the award of LTIs in the event
that Performance Rights do not align to the strategic goals set by the NHRC or New Hope.
Performance Rights are issued subject to performance and service conditions. The service condition requires that the executive
remain an employee of New Hope for the duration of the three year vesting period. The performance conditions attaching to
the rights are measured over three years. The NHRC will determine the percentage of rights that will vest based on the
performance of the executive and New Hope during the three year period. The KPIs set by the NHRC and their respective
weightings are detailed below.
Long-term Incentives KPIs
Shareholder Value
Project Development and Merger and Acquisition Activities
Strategic Plan (including Succession Planning and Stakeholder Management)
Company Performance, Shareholder Wealth and Remuneration
Weighting
50%
25%
25%
The Parent Company does not have a policy for paying bonuses or granting rights or options under long term or short term
incentive plans to its key management personnel. Incentive based remuneration linked to the performance of the Parent
Company is considered inappropriate because the Parent Company 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 Company
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 Company, the
Remuneration Committee has regard to the performance of the Consolidated Entity for the current and previous four financial
years, taking into account the following measures:
Revenue from continuing activities
Profit after tax attributable to shareholders
Share price at year end
Ordinary dividends paid/declared
Special dividends paid
2010
$’000
823,307
218,327
$13.02
2011
$’000
758,387
363,871
$12.93
34 cents
40 cents
12.5 cents
-
2012
$’000
912,359
142,989
$13.15
44 cents
-
2013
$’000
791,315
105,421
$13.50
2014
$’000
658,116
131,729
$15.13
46 cents
48 cents
-
-
Voting on the Remuneration Report at the 2013 Annual General Meeting
The Parent Company received a 100% “yes” vote on its Remuneration Report for the 2013 financial year.
- 27 -
Directors’ Report (continued)
REMUNERATION REPORT (AUDITED) (continued)
Details of Remuneration
Remuneration of the key management personnel of the Parent Company by the Parent Company:
Key Management Personnel
of Parent Company
Short Term Benefits
Salary
& Fees
$
Cash Non-monetary
Bonus
$
Benefits
$
Post
Employment
Benefits
Super-
annuation
$
Share
Long-term Termination Based
Benefits
Long Service
Leave
$
Benefits Payments Total
Parent
Entity
$
$
$
Name
Non-executive Directors – 2014
Mr R D Millner (1)
Mr D J Fairfull (1)
Mr M J Hawker
Mr T C D Millner
Mr R G Westphal
Mr D E Wills (1)
Executive Director – 2014
Mr P R Robinson (1)
Other Key Management Personnel
– 2014
Mr I D Bloodworth
Ms M R Roderick
Total
Non-executive Directors – 2013
Mr R D Millner (1)
Mr D J Fairfull (1)
Mr M J Hawker
(appointed 10 October 2012)
Mr T C D Millner
Mr R G Westphal
Mr D E Wills (1)
Mr M J Millner (2)
(resigned 1 October 2012)
Executive Director – 2013
Mr P R Robinson (1)(3)
Other Key Management Personnel
– 2013
Mr I D Bloodworth (3)
Ms M R Roderick (3)
Total
230,118
124,307
124,307
94,657
147,948
133,460
854,797
797,632
280,121
553,790
2,486,340
222,736
129,084
96,340
102,233
137,589
128,416
22,936
839,334
771,563
262,438
502,122
2,375,457
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
32,401
-
-
32,400
-
-
64,801
17,868
11,525
11,525
8,775
13,718
12,374
75,785
-
-
-
-
-
-
-
62,640
17,868
29,466
13,127
-
25,345
25,375
140,568
144,373
6,202
14,632
50,300
36,735
-
-
18,577
-
-
-
16,585
917
8,695
9,190
12,412
11,584
2,064
55,312
61,447
-
-
-
-
-
-
-
-
60,451
16,585
40,005
13,121
-
23,340
24,960
128,884
126,332
6,461
15,112
61,578
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
202,500
202,500
-
-
-
202,500
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
280,387
135,832
135,832
135,832
161,666
145,834
995,383
907,606
324,795
593,797
2,821,581
276,056
130,001
105,035
130,000
150,001
140,000
227,500
1,158,593
888,604
305,360
542,194
2,894,751
(1) Also derive remuneration from controlled entities as shown elsewhere in this Report.
(2) Retiring allowance paid to Mr M J Millner following his resignation from the Board of Directors on 1 October 2012. Refer to the Non-executive
Directors section of this report on page 26 for further details.
(3) Long service leave not previously included in 2013 disclosure.
- 28 -
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
Directors’ Report (continued)
REMUNERATION REPORT (AUDITED) (continued)
Details of Remuneration (continued)
Remuneration of the key management personnel of the Consolidated Entity:
Key Management
Personnel
Short Term Benefits
Post
Employ-
ment
Benefits
Long-
term
Benefits
Termin-
ation
Share
Based
Benefits Payments
Total
Received
From
Salary
& Fees
$
Cash Non-monetary
Bonus
$
Benefits
$
Super-
annuation
$
Long Service
Leave
$
Value of
Rights
$
$
$
Parent Controlled
Entity
$
Entities
$
Name
Non-executive
Directors – 2014
Mr R D Millner
Mr D J Fairfull
Mr M J Hawker
Mr T C D Millner
Mr R G Westphal
Mr D E Wills
573,118
259,307
124,307
94,657
147,948
158,460
Executive Director
– 2014
Mr P R Robinson
982,632
Other Key
Management
Personnel – 2014
Mr I D Bloodworth
280,121
32,401
-
-
32,400
-
-
40,329
24,041
11,525
8,775
13,718
14,692
-
-
-
-
-
-
62,640
35,009
29,466
-
-
-
-
-
-
-
-
-
-
-
-
-
-
645,848
280,387
365,461
283,348
135,832
147,516
135,832
135,832
135,832
135,832
161,666
161,666
-
-
-
173,152
145,834
27,318
995,383
540,295
- 1,109,747
907,606
202,141
-
324,795
324,795
-
-
-
-
-
-
-
-
-
-
-
6,202
47,005
1,838
13,123
176,315 421,744 1,704,693
67,055
874,334
87,605 1,065,118
-
874,334
- 1,065,118
- 1,704,693
Mr M J Busch
456,003
201,863
Mr B D Denney
592,280
340,813
Mr R C Neale
(retired 31 January 2014)
702,688
285,000
13,127
83,535
24,555
96,936
25,345
18,873
18,027
8,887
25,375
18,074
Ms M R Roderick
553,790
-
-
Mr S O Stephan
905,621
433,175
114,269
14,632
65,376
-
-
593,797
593,797
-
- 107,571 1,644,086
- 1,644,086
Total
5,830,932 1,260,851
459,863
262,670
177,642
176,315
683,975
8,852,248
2,821,581 6,030,667
- 29 -
Directors’ Report (continued)
REMUNERATION REPORT (AUDITED) (continued)
Details of Remuneration (continued)
Key Management
Personnel
Short Term Benefits
Post
Employ-
ment
Benefits
Long-
term
Benefits
Termin-
ation
Share
Based
Benefits Payments
Total
Received
From
Salary
& Fees
$
Cash Non-monetary
Bonus
$
Benefits
$
Super-
annuation
$
Long Service
Leave
$
Value of
Rights
$
$
$
Parent Controlled
Entity
$
Entities
$
Name
Non-executive
Directors – 2013
Mr R D Millner
Mr D J Fairfull
Mr M J Hawker
(appointed 10 October 2012)
Mr T C D Millner
Mr R G Westphal
Mr D E Wills
Mr M J Millner (1)
(resigned 1 October 2012)
580,736
264,084
96,340
102,233
137,589
153,416
22,936
Executive Director
– 2013
Mr P R Robinson (2)
971,563
Other Key
Management
Personnel – 2013
Mr I D Bloodworth (2) 262,438
-
-
-
-
-
-
-
-
-
36,735
-
-
18,577
-
-
-
39,014
13,095
8,695
9,190
12,412
13,896
2,064
-
-
-
-
-
-
-
-
-
-
-
-
-
202,500
60,451
34,613
40,005
-
-
-
-
-
-
-
656,485
276,056
380,429
277,179
130,001
147,178
105,035
105,035
130,000
130,000
150,001
150,001
-
-
-
167,312
140,000
27,312
227,500
227,500
-
1,158,593
554,919
- 1,106,632
888,604
218,028
-
305,360
305,360
-
-
-
Mr M J Busch
416,114
106,250
Mr B D Denney
611,770
191,250
Mr R C Neale
1,443,559
550,000
Ms M R Roderick (2)
502,122
-
Mr S O Stephan
596,942
201,375
2,873
13,121
28,964
22,941
44,631
-
23,340
16,579
16,579
16,579
24,960
16,579
6,461
6,981
-
24,074
15,112
-
- 115,469
690,357
- 142,927
985,467
- 808,244 2,887,087
-
-
690,357
985,467
- 2,887,087
-
-
542,194
542,194
-
- 192,730 1,010,499
- 1,010,499
Total
6,161,842 1,048,875
228,293
247,595
92,633
202,500 1,259,370
9,241,108
2,894,751 6,346,357
(1) Retiring allowance paid to Mr M J Millner following his resignation from the Board of Directors on 1 October 2012. Refer to the Non-executive
Directors section of this report on page 26 for further details.
(2) Long service leave not previously included in 2013 disclosure.
- 30 -
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
Directors’ Report (continued)
REMUNERATION REPORT (AUDITED) (continued)
Details of Remuneration (continued)
New Hope Corporation Limited
Name
Fixed Remuneration
At Risk - STI
At Risk - LTI
Mr M J Busch
Mr B D Denney
Mr R C Neale
Mr S O Stephan
2014
69%
60%
58%
67%
2013
68%
66%
53%
61%
2014
23%
32%
17%
26%
2013
17%
15%
28%
19%
2014
8%
8%
25%
7%
2013
15%
19%
19%
20%
Since the LTIs are provided exclusively by way of rights, the percentages disclosed reflect the value of remuneration consisting
of rights, based on the value of rights expensed during the year.
Service Agreements
Parent Company
The agreements with the senior executives of the Parent Company provide for a cash salary and superannuation. Executives
may elect to salary sacrifice a portion of their cash salary into superannuation or other benefits.
Name
Mr P R Robinson
Mr I D Bloodworth
Ms M R Roderick
Term of agreement and
notice period (1)
Base remuneration including
Superannuation
Termination Payments (2)
No fixed term
1 month notice period
No fixed term
3 months notice period
No fixed term
3 months notice period
$870,000
1 month base remuneration
$330,000
3 months base remuneration
$600,000
3 months base remuneration
(1) This notice applies equally to either party.
(2) Base salary payable if the company terminates employees with notice, and without cause (e.g. for reasons other than unsatisfactory performance).
New Hope Corporation Limited
The agreements with the senior executives of New Hope provide for a cash salary, superannuation and a fully maintained motor
vehicle. Executives may elect to take a vehicle allowance in lieu of a company vehicle and may salary sacrifice a portion of their
cash salary into superannuation or other benefits.
Term of agreement and
notice period (1)
Base remuneration including
Superannuation
Termination Payments (2)
Name
Mr M J Busch
Mr B D Denney (3)
No fixed term
3 months notice period
No fixed term
3 months notice period
Mr R C Neale
(retired 31 January 2014)
No fixed term
2 months notice period
Mr S O Stephan
No fixed term
6 months notice period
(1) This notice applies equally to either party.
$600,000
3 months base remuneration
$750,000
3 months base remuneration
$1,500,000
$200,000 index by CPI from 1996
$1,300,000
6 months base remuneration
(2) Base salary payable if the company terminates employees with notice, and without cause (e.g. for reasons other than unsatisfactory performance).
(3) The contract with Mr Denney includes provision for a separation payment in the event of his termination as a result of takeover or merger of New
Hope. The allowance is for less than one years remuneration.
- 31 -
Directors’ Report (continued)
REMUNERATION REPORT (AUDITED) (continued)
Share-based Compensation
Parent Company
WHSP does not provide share-based compensation to any key management personnel of the Consolidated Entity.
New Hope Corporation Limited
Rights are granted under the New Hope Corporation Limited Employee Performance Share Rights Plan. Rights are granted for
no consideration. They vest and automatically convert to ordinary shares in New Hope following the satisfaction of the relevant
performance and service conditions. The assessed fair value of the Rights granted is included in the remuneration of the
executive. Fair values at grant date are determined by reference to the relevant volume weighted average price.
The Board of New Hope considered the outstanding contribution Mr R C Neale had made to New Hope during his tenure as
CEO and Managing Director and it was agreed that upon his retirement all outstanding performance rights would vest.
Details of Rights over ordinary shares in New Hope as at 31 July 2014, provided as remuneration to the key management
personnel of New Hope are set out below.
Name
Grant
Date
Vesting
Date
Number
Granted
Value per
Share ($)
Number
Vested
Vested
Percentage
Number
Forfeited
Forfeited
Percentage
Maximum
value yet
Mr R C Neale
27 Oct 11
01 Aug 13
Mr S O Stephan
27 Oct 11
31 Jan-14 (1)
17 Dec 11
01 Aug 13
17 Dec 11
31 Jan-14 (1)
15 Nov 13
01 Dec 13
15 Nov 13
01 Jan 14
15 Nov 13
31 Jan-14 (1)
27 Oct 11
27 Oct 11
01 Aug 13
01 Aug 14
17 Dec 11
01 Aug 13
17 Dec 11
01 Aug 14
17 Dec 11
01 Aug 15
17 Dec 12
01 Aug 13
17 Dec 12
01 Aug 14
17 Dec 12
01 Aug 15
17 Dec 12
01 Aug 16
Mr B D Denney
17 Dec 11
01 Aug 13
Mr M J Busch
17 Dec 11
01 Aug 14
17 Dec 11
01 Aug 15
17 Dec 12
01 Aug 13
17 Dec 12
01 Aug 14
17 Dec 12
01 Aug 15
17 Dec 12
01 Aug 16
27 Oct 11
27 Oct 11
01 Aug 13
01 Aug 14
17 Dec 11
01 Aug 13
17 Dec 11
01 Aug 14
17 Dec 11
01 Aug 15
17 Dec 12
01 Aug 13
17 Dec 12
01 Aug 14
17 Dec 12
01 Aug 15
17 Dec 12
01 Aug 16
48,999
24,398
36,537
36,538
52,317
52,317
52,317
10,040
10,040
8,432
8,432
8,432
11,211
11,211
11,211
11,210
8,010
8,010
8,010
11,211
11,211
11,211
11,210
5,020
5,020
4,005
4,005
4,005
8,408
8,408
8,408
8,408
5.17
5.17
6.02
6.02
4.03
4.03
4.03
5.17
5.17
6.02
6.02
6.02
4.03
4.03
4.03
4.03
6.02
6.02
6.02
4.03
4.03
4.03
4.03
5.17
5.17
6.02
6.02
6.02
4.03
4.03
4.03
4.03
48,999
24,398
36,537
36,538
52,317
52,317
52,317
10,040
-
8,432
-
-
100%
100%
100%
100%
100%
100%
100%
100%
0%
100%
0%
0%
11,211
100%
-
-
-
0%
0%
0%
8,010
100%
-
-
0%
0%
11,211
100%
-
-
-
5,020
-
4,005
-
-
0%
0%
0%
100%
0%
100%
0%
0%
8,408
100%
-
-
-
0%
0%
0%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1) Rights for Mr R C Neale vested upon retirement as decided by the Board of New Hope.
The fair value of the rights is determined based on a weighted average of New Hope’s share price.
- 32 -
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
to vest
-
-
-
-
-
-
-
-
-
-
-
13,844
-
-
16,943
24,642
-
-
13,151
-
-
16,943
24,642
-
-
-
-
6,575
-
-
12,707
18,482
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
Directors’ Report (continued)
REMUNERATION REPORT (AUDITED) (continued)
Equity instruments held by key management personnel
The following tables show the number of:
• shares in WHSP;
• shares in New Hope; and
• rights to shares in New Hope
that were held during the financial year by key management personnel of the Group, including their personally related parties.
There were no shares granted during the financial year as remuneration.
Shares in Washington H. Soul
Pattinson and Company Limited
2014
Directors of Washington H. Soul
Pattinson and Company Limited
R D Millner
P R Robinson
D J Fairfull
M J Hawker
T C D Millner
R G Westphal
D E Wills
Other key management personnel
R C Neale (retired 31 January 2014)
M R Roderick
Shares in New Hope Corporation
Limited
2014
Directors of Washington H. Soul
Pattinson and Company Limited
R D Millner
P R Robinson
D J Fairfull
T C D Millner
D E Wills
Other key management personnel
M J Busch
B D Denney
R C Neale (retired 31 January 2014)
S O Stephan
Balance at
Balance at
start of year during year exercise of options during the year end of year
Disposed of
Received on
Additions
19,790,975
437,627
74,210
163,587
7,680
17,069,965
12,739
256,433
-
-
11,320
448,012
10,000
10,000
4,000
500
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
20,228,602
74,210
163,587
19,000
17,517,977
22,739
266,433
N/A
500
Balance at
Balance at
start of year during year exercise of options during the year end of year
Disposed of
Received on
Additions
-
-
-
-
-
17,433
19,221
303,423
29,683
-
-
-
-
-
-
-
-
-
3,681,962
119,234
11,000
3,654,368
90,670
681,478
27,231
N/A
72,395
3,681,962
119,234
11,000
3,653,215
90,670
664,045
8,010
2,287,736
42,712
-
-
-
1,153
-
-
-
-
-
- 33 -
Directors’ Report (continued)
REMUNERATION REPORT (AUDITED) (continued)
Equity instruments held by key management personnel (continued)
New Hope Corporation Limited
Rights
2014
Key management personnel
M J Busch
B D Denney
R C Neale (retired 31 January 2014)
S O Stephan
The rights held at the end of the year
were not vested.
Balance at
start of year remuneration during the year
Granted as
Exercised
Disposed of
Balance at
during the year end of year
55,687
68,873
303,423
90,219
-
-
-
-
17,433
19,221
303,423
29,683
-
-
-
-
38,254
49,652
N/A
60,536
Loans to key management personnel
No loans have been made to the Directors of WHSP or other key management personnel of the Consolidated Entity.
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 Group companies consistent with other shareholders.
Mr P R Robinson is entitled to an employment termination payment (ETP) on cessation of his employment as part consideration
for transferring from a defined benefit superannuation plan to a target benefit superannuation plan. The ETP will continue to
increase by interest calculated at commercial rates. The interest for the financial year was $29,350 (2013: $31,224). As at 31
July 2014 the balance of the ETP was $868,747 (2013: $839,397).
Unsecured deposits are accepted from some Directors of WHSP and their related entities and interest is paid at normal
commercial rates. Interest paid during the current financial year amounted to $1,732,690 (2013: $2,209,058). The balance of
deposits at 31 July 2014 was $44,795,638 (2013: $49,317,385). Deposits were received from Mr R D Millner, Mr D J Fairfull,
Mr T C D Millner, Mr P R Robinson and Mr R G Westphal and/or their related entities.
OPTIONS
The Parent Company did not issue any options over its unissued shares during the financial year.
INDEMNIFICATION OF OFFICERS AND AUDITORS
Indemnification
The Parent Company’s constitution provides for an indemnity of Directors, Secretaries and Executive Officers (as defined in the
Corporations Act 2001); where liability is incurred in the performance of their duties in those roles, other than conduct involving
a wilful breach of duty in relation to the Company. The Constitution further provides for an indemnity in respect of any costs
and expenses incurred in defending proceedings in which judgement is given in their favour, they are acquitted, or the Court
grants them relief under the Corporations Act 2001.
Insurance
In accordance with the provisions of the Corporations Act, the Parent Company has a Directors’ and Officers’ Liability policy
covering Directors and officers of the Parent Company and 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 or its controlled entities.
- 34 -
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
Directors’ Report (continued)
PROCEEDINGS ON BEHALF OF THE COMPANY
No person has applied for leave of Court to bring proceedings on behalf of the Parent Company or to intervene in any
proceedings to which the Parent Company is a party for the purpose of taking responsibility on behalf of the Parent Company
for all or any part of those proceedings.
The Parent Company was not a party to any such proceedings during the year.
NON AUDIT SERVICES
During the year, Moore Stephens Sydney, the Parent Company’s auditor, performed certain other services in addition to their
statutory duties. An entity associated with Moore Stephens Sydney was paid $175,725 for providing tax compliance services
in respect of the Group. Details of the amounts paid to the auditors are disclosed in note 41 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 Parent 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 Parent Company, acting as an advocate
for the Parent Company or jointly sharing risks and rewards.
AUDITOR’S INDEPENDENCE DECLARATION
The lead auditor’s independence declaration for the year ended 31 July 2014 has been received and is included on page 36.
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 24th day of October 2014.
- 35 -
Auditor’s Independence Declaration
Level 15, 135 King Street
Sydney NSW 2000
GPO Box 473
Sydney, NSW 2001
+61 (0)2 8236 7700
+61 (0)2 9233 4636
Auditor’s Independence Declaration
to the Directors of Washington H. Soul Pattinson and Company Limited
As lead auditor for the audit of Washington H. Soul Pattinson and Company Limited for the year ended 31 July 2014, 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.
This declaration is in respect of Washington H. Soul Pattinson and Company Limited and the entities it controlled during the
period.
Moore Stephens Sydney
Chartered Accountants
John Gavljak
Partner
Dated in Sydney, 23rd October 2014
Moore Stephens Sydney ABN 90 773 984 843. 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.
- 36 -
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”.
The Board has plans in place to ensure its corporate governance framework is updated, as necessary, to comply with the third
edition of the Corporate Governance Principles and Recommendations for the financial year commencing on 1 August 2014.
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 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 during the year and 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
David J Fairfull - Non-executive
Michael J Hawker - Non-executive
Thomas C D Millner - Non-executive
Robert G Westphal - Non-executive
David E Wills - Non-executive
- 37 -
Corporate Governance Statement (continued)
Principle 2 – Structure the Board to add value (continued)
Each Director has undertaken to provide the Board with all information which is relevant to the assessment of his independence
in a timely manner.
Under the ASX Corporate Governance Principles and Recommendations two of the current Non-executive Directors do not
qualify as independent for the following reasons. Mr Robert Millner is a Director of Brickworks Limited a major shareholder in
the Company. Additionally, Mr Robert Millner and Mr Thomas Millner have relevant interests in substantial shareholdings in
the Company as disclosed in the Directors’ Report and the Remuneration Report.
Whilst the above Non-executive Directors do not meet the criteria for independence in accordance with the ASX Corporate
Governance Principles and Recommendations, all Directors are committed to bring their independent views and judgement to
the Board and, in accordance with the Corporations Act 2001, must inform the Board if they have any interest that could
conflict with those of the Company. Where the Board considers that a significant conflict exists it may exercise its discretion to
determine whether the Director concerned may be present at the meeting while the item is considered. For these reasons the
Board believes that Mr Robert Millner and Mr 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 all 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 Nomination Committee
during the year and their attendance at meetings are set out in the Directors’ Report.
The role of the Nomination Committee is to review and consider the structure, balance of 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.
The Board has established a Nomination Committee Charter which includes the process by which candidates are identified and
selected, the use of professional intermediaries and the requirement for a diverse range of candidates to be considered. The
Charter may be viewed in the Corporate Governance section of the Company’s web site at www.whsp.com.au.
Directors are initially appointed by the full Board, following consideration of recommendations made by the Nomination
Committee.
Appointment is subject to re-election by the Shareholders of the Company at the next Annual General Meeting. Under the
Constitution Directors other than the Executive Director 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. Retiring Directors exclude
themselves from Nomination Committee meetings while the remaining members of the Committee consider the suitability of
that Director for re-election.
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.
The Board considers that the Directors bring an appropriate mix of skills, breadth and depth of knowledge and experience to
meet the Board’s responsibilities and objectives. The range of skills and experience possessed by the each of the Directors is
set out in the Directors’ Report.
- 38 -
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
Corporate Governance Statement (continued)
Principle 3 – Promote ethical and responsible decision-making
Code of Conduct
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;
• 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
• Report all breaches of the code.
Share Trading Policy
The Company had a trading policy in place throughout the year. The previous policy was replaced on 11 September 2013 and
a minor amendment was made to that policy on 13 November 2013.
Both of the policies and the amended policy had the following main principles. They relate 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; and
• 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.
The previous policy set share trading windows during which Directors and other key management personnel of the Company
were permitted to trade in the shares of the Company.
The new and amended policies set periods during which Directors and other key management personnel of the Company are
not permitted to trade in the shares of the Company.
The current share trading policy may be viewed in the Corporate Governance section of the Company’s web site at
www.whsp.com.au.
Diversity
The Company values and respects the skills that people with diverse backgrounds, experiences and perspectives bring to the
organisation. The Company is committed to rewarding performance and providing opportunities that allow individuals to reach
their full potential irrespective of background or difference. When appointing new staff or promoting people within the
organisation the most suitably qualified candidates are selected. As a result, diversity is promoted throughout the organisation.
The Company has established a Diversity Policy to formalise its commitment to providing equal access to opportunities
irrespective of background or difference. The policy may be viewed in the Corporate Governance section of the Company’s
web site at www.whsp.com.au.
The policy governs the conduct of the Company, its subsidiaries (other than those in the New Hope Corporation Limited Group)
and all directors and employees of those entities. New Hope Corporation Limited (New Hope) is listed on the Australian Securities
Exchange (ASX) and accordingly is required to establish its own diversity policy and objectives and make the required disclosures
in its Annual Report. Therefore it is not considered appropriate for companies in the New Hope Group to be governed by the
Company’s policy nor for the New Hope Group companies’ diversity reporting to be included in this Annual Report.
The Company has adopted the ASX Corporate Governance Principles and Recommendations on diversity. As at 31 July 2014
the organisation (excluding the New Hope Group) had 220 full time equivalent employees (2013: 229).
- 39 -
Corporate Governance Statement (continued)
Principle 3 – Promote ethical and responsible decision-making (continued)
The proportion of women employees in the organisation as at 31 July 2014 was 31% (2013: 29%). While the Company
believes that this represents a reasonable level of gender diversity, it will continue to ensure that neither gender nor any other
differences interfere with the employment of individuals based on their suitability for the position available. By doing so the
Company aims to increase female representation.
The proportion of women in senior executive positions as at 31 July 2014 was 11% (2013: 25%). This fell due to Austgrains
Pty. Limited, which has one senior executive woman, leaving the Group and the resignation of one senior executive woman
from CopperChem Limited. The Company’s objective is to incrementally grow the proportion of women in senior executive
positions as vacancies allow and suitably qualified candidates are available. The aim is to achieve higher female representation.
The small number of senior executive positions within the organisation and the low turnover rate limits the opportunity to
increase female representation in this area.
There were no women on the Board of Directors of the Company as at 31 July 2014 (2013: nil). The Board has undertaken to
include both male and female candidates in the process for selection of new Directors. No new Directors were appointed
during the year. Candidates will continue to be assessed on their skills, knowledge and experience and on the relevance of
these to the Company’s needs. Two new Directors are to be appointed to the Board with effect from 1 November 2014. One
of these Directors is a woman.
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 Charter may be viewed in the Corporate Governance section of the
Company’s web site at www.whsp.com.au.
The following persons were members of the Audit Committee at the date of this report:
Robert G Westphal - Chairman
David J Fairfull
Michael J Hawker
David E Wills
All of the members of the Audit 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.
Details of the Audit Committee members and their attendance at meetings are set out in the Directors’ Report.
The Non-executive Chairman, Executive Director, Chief Financial Officer, Company Secretary and the Non-executive Director not
on the committee may attend Audit Committee meetings by invitation.
The function of the Audit Committee is to assist the Board in fulfilling its statutory and fiduciary responsibilities relating to:
• The external reporting of financial information, including the selection and application of accounting policies;
• The independence and effectiveness of the external auditors;
• The effectiveness of internal control processes and management information systems;
• Compliance with the Corporations Act, ASX Listing Rules and any other applicable requirements; and
• The application and adequacy of risk management systems within the Company.
The Executive Director and the Chief Financial Officer are required to state in writing to the Board, by submission to the Audit
Committee, that the Company’s financial statements present a true and fair view, in all material respects, of the Company’s
financial position and operational results and that they are in accordance with relevant accounting standards. A declaration
from the Executive Director and the Chief Financial Officer has been received in respect of the current reporting period.
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. It is the policy of the external auditors to rotate audit
engagement partners on listed companies in accordance with the requirements of the Corporations Act 2001, which is
generally after five years, subject to certain exceptions. In accordance with that policy a new audit engagement partner was
introduced for the year ended 31 July 2014.
It is the policy of the external auditors to provide an annual declaration of their independence to the Company. Information
about fees paid to the external auditors is included in the Directors’ Report and in note 41 of the financial statements.
The external auditor will attend the annual general meeting and be available to answer shareholder questions about the
conduct of the audit and the preparation and content of the audit report.
- 40 -
Corporate Governance Statement (continued)
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
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 October or November each year;
• The Chairman’s Address to the Annual General Meeting is distributed to Shareholders in December each year;
• A Half-yearly Review of Operations is distributed to Shareholders in May each year; and
• Significant information is posted on the Company’s website.
In addition, Shareholders are encouraged to attend and participate in the Annual General Meeting of the Company. The
external auditor attends the Annual General Meeting to answer Shareholders’ questions in regard to the conduct of the audit
and the content of the auditor’s report.
Principle 7 – Recognise and manage risk
The Company is committed to identifying and managing areas of significant business risk to protect Shareholders, employees,
earnings and the environment. Arrangements in place include:
• Regular detailed financial, budgetary and management reporting;
• Procedures to manage financial and operational risks;
• Established organisational structures, procedures and policies dealing with the areas of health and safety, environmental
issues, industrial relations and legal and regulatory matters;
• Comprehensive insurance and risk management programs;
• Procedures requiring Board approval for all borrowings, guarantees and capital expenditure beyond minor levels; and
• Where applicable, the utilisation of specialised staff and external advisors.
Management is responsible for the design and implementation of a risk management and internal control system which
manages the material business risks of the Company and reporting to the Board on whether those risks are being managed
efficiently. Management reported to the Board on an ongoing basis during the current reporting period.
The Executive Director and the Chief Financial Officer are required to state in writing to the Board, by submission to the Audit
Committee, that the risk management and internal control compliance systems are operating efficiently and effectively. In their
declaration under section 295A of the Corporations Act the Executive Director and the Chief Financial Officer have made this
statement in respect of the current reporting period.
- 41 -
Corporate Governance Statement (continued)
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 Remuneration 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 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.
- 42 -
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
Financial Report
31 July 2014
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
44
45
46
47
48
49
112
113
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
The financial report was authorised for issue by the Directors on 24th October 2014.
- 43 -
Consolidated Income Statement
For the year ended 31 July 2014
Revenue from continuing operations
Other income
Cost of sales
Selling and distribution expenses
Administration expenses
Other expenses
Impairment reversal/(expense) of assets
Finance costs
Share of results from equity accounted associates
Profit before income tax
Income tax (expense)
Profit after tax for the year
Notes
4
5
6
38
7a
2014
$’000
658,116
63,970
(412,986)
(139,572)
(51,492)
(6,900)
21,374
(3,549)
56,018
184,979
(29,391)
155,588
2013
$’000
791,315
7,198
(414,187)
(143,761)
(56,688)
(7,204)
(58,827)
(2,980)
78,997
193,863
(59,611)
134,252
Profit after tax attributable to non-controlling interests
(23,859)
(28,831)
Profit after tax attributable to members of
Washington H. Soul Pattinson and Company Limited
131,729
105,421
The above consolidated income statement should be read in conjunction with the accompanying notes.
- 44 -
Consolidated Statement of Comprehensive Income
For the year ended 31 July 2014
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
Profit after tax for the year
Other comprehensive income
Items that may be reclassified subsequently to the income statement
Net movement in the fair value of long term equity investments, net of tax
Transfer to profit and loss on disposal of long term equity investments, net of tax
Net movement in hedge reserve, net of tax
Net movement in foreign currency translation reserve, net of tax
Net movement in equity reserve, net of tax
Total other comprehensive income for the year, net of tax
2014
$’000
2013
$’000
155,588
134,252
70,244
(14,227)
27,773
1,957
(3,832)
81,915
91,327
(121)
(50,953)
534
(4,539)
36,248
Total comprehensive income for the year
237,503
170,500
Total comprehensive income attributable to non-controlling interests
(36,959)
(6,663)
Total comprehensive income attributable to members of
Washington H. Soul Pattinson and Company Limited
Earnings per share
Basic and diluted earnings per share to ordinary equity holders of
Washington H. Soul Pattinson and Company Limited
200,544
163,837
2014
cents
2013
cents
Earnings per share from all operations
55.03
44.04
Weighted average number of shares used in calculating basic and
diluted earnings per share
No. of shares
No. of shares
239,395,320
239,395,320
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
- 45 -
Consolidated Statement of Financial Position
As at 31 July 2014
Notes
31 July 2014
$’000
31 July 2013
$’000
Current assets
Cash and cash equivalents
Term deposits
Trade and other receivables
Inventories
Investments fair valued through profit and loss
Held for sale financial assets
Current tax asset
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
Investment properties
Exploration and evaluation assets
Deferred tax assets
Intangible assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Interest bearing liabilities
Derivative financial instruments
Current tax liabilities
Provisions
Total current liabilities
Non-current liabilities
Interest bearing liabilities
Derivative financial instruments
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
9
10
11
12
13
14
15
16
17
18
27
19
20
21
22
23
24
25
27
28
26
27
30
29
31
32
64,933
1,272,912
85,900
72,959
14,695
27,183
3,693
271
1,542,546
13,308
944,726
562,208
7,659
2,447
920,010
139,421
169,726
37,483
26,847
2,823,835
28,078
1,499,724
90,363
80,235
10,779
-
4,401
614
1,714,194
5,102
813,648
542,131
22,387
-
882,588
50,223
129,628
21,115
28,311
2,495,133
4,366,381
4,209,327
74,679
44,829
4,943
61
32,132
156,644
45,425
-
265,840
58,347
369,612
526,256
59,629
51,165
30,537
18,924
35,499
195,754
7,900
11,707
193,735
50,210
263,552
459,306
3,840,125
3,750,021
43,232
665,424
2,334,728
3,043,384
796,741
3,840,125
43,232
597,249
2,295,642
2,936,123
813,898
3,750,021
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
- 46 -
Consolidated Statement of Changes in Equity
For the year ended 31 July 2014
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
Year ended 31 July 2014
Total equity at the beginning of the year -
1 August 2013
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 of tax
Net movement in foreign currency translation
reserve, net of tax
Net movement in equity reserve, net of tax
Total comprehensive income for the year
Transactions with owners
Dividends declared and paid
Net movement in share-based payments reserve
Non-controlling interests share of subsidiaries
Equity transfer from members on issue of
share capital in controlled entity
Total equity at the end of the year
- 31 July 2014
Year ended 31 July 2013
Total equity at the beginning of the year -
1 August 2012
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 of tax
Net movement in foreign currency translation
reserve, net of tax
Net movement in equity reserve, net of tax
Total comprehensive income for the year
Transactions with owners
Dividends declared and paid
Net movement in share-based payments reserve
Non-controlling interests share of subsidiaries
Increase in ownership of CopperChem Limited
Equity transfer to members on issue of
share capital in controlled entity
Total equity at the end of the year
- 31 July 2013
Share
capital
$’000
Retained
profits
Reserves
Total Parent
entity interest
Non-
controlling
interest
$’000
$’000
$’000
$’000
Total
equity
$’000
43,232
2,295,642
597,249
2,936,123
813,898
3,750,021
-
-
-
-
-
-
-
-
-
-
131,729
-
131,729
23,859
155,588
-
-
-
-
131,729
(91,185)
563
-
54,386
16,304
1,957
(3,832)
68,815
-
(640)
-
54,386
16,304
1,957
(3,832)
200,544
(91,185)
(77)
-
1,631
11,469
-
-
36,959
56,017
27,773
1,957
(3,832)
237,503
(54,097)
(1,003)
(2,814)
(145,282)
(1,080)
(2,814)
(2,021)
-
(2,021)
3,798
1,777
43,232
2,334,728
665,424
3,043,384
796,741
3,840,125
43,232
2,281,912
538,713
2,863,857
910,019
3,773,876
-
-
-
-
-
-
-
-
-
-
-
105,421
-
105,421
28,831
134,252
-
-
93,113
(30,692)
-
-
105,421
(87,293)
-
-
(4,896)
498
534
(4,539)
58,416
-
120
-
-
-
93,113
(30,692)
534
(4,539)
163,837
(87,293)
120
-
(4,896)
(1,907)
(20,261)
91,206
(50,953)
-
-
6,663
534
(4,539)
170,500
(105,755)
172
603
2,694
(193,048)
292
603
(2,202)
498
(498)
-
43,232
2,295,642
597,249
2,936,123
813,898
3,750,021
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
- 47 -
Notes
42
Consolidated Statement of Cash Flows
For the year ended 31 July 2014
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 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 proceeds from term deposits
Payments for investments
Payment for acquisition and development of investment properties
Payments for subsidiaries, net of cash acquired
Proceeds from sale of investments
Proceeds from sale of equity accounted associates
Payments to acquire equity accounted associates
Loans advanced
Loan repayments received
Proceeds from sale of non-current assets
Net cash (outflow) from investing activities
Cash flows from financing activities
Joint venture partner contributions
Dividends paid to WHSP shareholders
Dividends paid by subsidiaries to non-controlling interest
Payments for increasing ownership in controlled entities
Payments for interest bearing liabilities
Proceeds from external borrowings
Repayment of external borrowings
Net cash (outflow) from financing activities
Net increase/(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
9a
2014
$’000
595,627
(526,459)
69,168
82,148
51,682
(1,444)
(25,965)
175,589
(121,854)
504
(42,722)
225,357
(29,419)
(62,433)
-
42,028
-
(34,982)
(11,859)
6,624
23,000
(5,756)
108
(112,516)
(54,097)
-
(6,081)
40,886
(121)
(131,821)
38,012
28,078
(1,157)
64,933
2013
$’000
671,391
(561,577)
109,814
75,603
78,556
(699)
(54,352)
208,922
(128,336)
948
(28,947)
220,901
(21,392)
(50,499)
(72,898)
13,720
9,683
(746)
(5,000)
6,585
5,813
(50,168)
601
(107,728)
(105,755)
(3,000)
(122)
5,500
(1,240)
(211,744)
(52,990)
78,173
2,895
28,078
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
- 48 -
Contents of the Notes to the Financial Statements
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
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
Summary of significant accounting policies
Critical accounting estimates and judgements
Segment information
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 – Investments fair valued through profit and loss
Current assets – Held for sale financial assets
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 – Investment properties
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
Non-current liabilities – Interest bearing liabilities
Derivative financial instruments
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
Interests in joint arrangements
Related parties
Remuneration of auditors
Reconciliation of profit after income tax to net cash inflow from operating activities
Share-based payments
Events after the reporting date
- 49 -
50
61
63
67
67
68
69
70
71
71
71
72
72
72
73
73
73
73
74
76
77
78
79
80
81
81
83
84
84
85
86
86
89
93
94
95
96
103
107
108
109
110
110
111
Notes to the Financial Statements For the year ended 31 July 2014
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 (AASB), AASB Interpretations and the
Corporations Act 2001. Washington H. Soul Pattinson and Company Limited is a for-profit entity for the purposes of preparing
the financial statements.
i. Compliance with International Financial Reporting Standards (IFRS)
The consolidated financial statements of the Group also comply with IFRS as issued by the International Financial Reporting
Standards (IASB).
ii. Historical cost convention
Except for the cash flow information, these financial statements have been prepared under historical cost convention, as
modified by the revaluation of long term equity investments, held for sale assets, financial assets and liabilities (including
derivative instruments) carried at fair value through profit or loss, certain classes of property, plant and equipment and
investment properties.
iii. New and amended standards adopted by the Group
The Group has applied the following standards and amendments for the first time for their annual reporting period commencing
1 August 2013:
• AASB 10 Consolidated Financial Statements, AASB 11 Joint Arrangements and AASB 2011-7 Amendments to Australian
Accounting Standards arising from the Consolidation and Joint Arrangements Standards, AASB 12 Disclosure of Interests
in Other Entities, AASB 128 Investments in Associates and Joint Ventures;
• AASB 2012-10 Amendments to Australian Accounting Standards – Transition Guidance and other Amendments which
provides an exemption from the requirement to disclose the impact of the change in accounting policy on the current
period;
• AASB 13 Fair Value Measurement and AASB 2011-8 Amendments to Australian Accounting Standards arising from AASB
13;
• AASB Interpretation 20 (IFRIC 20), Stripping Costs in the Production Phase of a Surface Mine;
• AASB 119 Employee Benefits (September 2011) and AASB 2011-10 Amendments to Australian Accounting Standards
arising from AASB 119 (September 2011);
• AASB 2012-5 Amendments to Australian Accounting Standards arising from Annual Improvements 2009-2011 Cycle; and
• AASB 2012-2 Amendments to Australian Accounting Standards – Disclosure – Offsetting Financial Assets and Financial
Liabilities.
The adoption of AASB 10, AASB 11, AASB 12, AASB 13 and AASB 119 did not affect any of the amounts recognised in the current
period or any prior periods. The standards only affected the disclosures in the notes to the financial statements. The revised AASB
119 Employee Benefits has changed the accounting for the Group’s annual leave obligations, however, this change was not
material.
iv. 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.
- 50 -
Notes to the Financial Statements (continued) For the year ended 31 July 2014
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
a) Basis of preparation of accounts (continued)
v. 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
Equity accounted associates
Term deposits
Available for sale financial assets
Investments accounted for using the equity method
Held to maturity investments
The accounting standards also require the presentation of a statement of comprehensive income which presents all items of
recognised income and expenditure either in one statement or in two linked statements. The Consolidated entity has elected
to present two statements.
b) Principles of consolidation
i. Subsidiaries
Subsidaries are all those entities (including special purpose entities) over which the Group has control. The Group controls an
entity when the Group is exposed to, or has rights to, variable returns from its investment with the entity and has the ability to
affect those returns through its power to direct the activities of the entity. Subsidaries are fully consolidated from the date on
which control is transferred to the Group. They are deconsolidated 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 treats transactions with non-controlling interests that do not result in a loss of control 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. This is generally the
case where the Group holds 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 other comprehensive income is recognised in other comprehensive income. The cumulative post-acquisition
movements are adjusted against the carrying amount of the investment. Dividends received/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.
- 51 -
Notes to the Financial Statements (continued) For the year ended 31 July 2014
NOTE 1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
b) Principles of consolidation (continued)
iii. Joint Arrangements
Under AASB 11 Joint Arrangements, investments in joint arrangements are classified as either joint operations or joint ventures.
The classification depends on the contractual rights and obligations of each investor, rather than the legal structure of the joint
arrangement. The Group has both joint operations and joint ventures.
Joint Operations
The Group recognises its direct right to the assets, liabilities, revenues and expenses of joint operations and its share of any
jointly held or incurred assets, liabilities, revenues and expenses. These have been incorporated in the financial statements under
the appropriate headings. Details of the joint operations are set out in note 39.
Joint Ventures
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, who is responsible for allocating resources and assessing performance of the
operating segments, has been identified as comprising the Board, Executive Director and CFO (together being the Chief
operating decision maker).
d) Foreign currency translation
i. Functional and presentation currency
Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic
environment in which the entity operates ("the functional currency"). The consolidated financial statements are presented in
Australian dollars, which is Washington H. Soul Pattinson and Company Limited’s functional and presentation currency.
ii. Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at
year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income
statement, except when deferred in equity as qualifying cash flow hedges and qualifying net investment hedges.
Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date
when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of
the fair value gain or loss. For example, differences on non-monetary assets and liabilities such as investments fair valued
through profit and loss are recognised in the income statement, as part of the fair value gain or loss and translation differences
on non-monetary assets, such as long term equity investments are included in the asset revaluation reserve in equity.
iii. Group companies
The results and financial position of all of the Group entities that have a functional currency different from the presentation
currency are translated into the presentation currency as follows:
• assets and liabilities are translated at the closing rates at the reporting date;
• income and expenses are translated at average exchange rates (unless this is not a reasonable approximation of the
cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at
the dates of the transactions); and
• all resulting exchange differences are recognised as a separate component of equity.
On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of borrowings
and other financial instruments designated as hedges of such investments, are recognised in other comprehensive income. When
a foreign operation is sold or any borrowings forming part of the net investment are repaid, a proportionate share of such
exchange differences is reclassified to the income statement, as part of the gain or loss where applicable.
- 52 -
Notes to the Financial Statements (continued) For the year ended 31 July 2014
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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 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 (1b).
• 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 respect to situations in which applicable tax regulation is subject to
interpretations. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred tax assets and liabilities are provided in full, using the liability method, on temporary differences arising between the tax
bases of assets and liabilities and the carrying amount in the consolidated financial statements and are determined using tax rates
(and laws) expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or
substantively enacted for each jurisdiction. The relevant tax rates are applied to the cumulative amounts of deductible and taxable
temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising
from the initial recognition of an asset or liability. No deferred tax asset or liability is recognised in relation to these temporary
differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either
accounting profit or taxable profit or loss.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable
amounts will be available to utilise those temporary differences and losses.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and
when the deferred tax balances relate to the same taxation authority. Current tax assets and liabilities are offset where the entity has
a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability
simultaneously.
Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity.
Tax consolidation legislation
Some of the entities within the Consolidated entity have formed tax consolidated groups under the tax consolidation regime. The
Australian Tax Office has been notified on these decisions.
Controlled entities within the relevant tax consolidated groups, continue to be responsible by the operation of tax funding
agreements, for funding tax payments required to be made by the head entity in their tax consolidation groups from underlying
transactions of their controlled entities.
Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts receivable
from or payable to other entities in the Group.
Any difference between the amounts assumed and amounts receivable or payable under the tax funding agreements are recognised
as a contribution to (or distribution from) wholly-owned tax consolidated entities.
- 53 -
Notes to the Financial Statements (continued) For the year ended 31 July 2014
NOTE 1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
g) Business Combinations
The acquisition method of accounting is used to account for all business combinations. 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.
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 the income statement.
If the Group recognises previous acquired deferred tax assets after the initial acquisition accounting is completed there will be 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 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 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 rate 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.
- 54 -
Notes to the Financial Statements (continued) For the year ended 31 July 2014
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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) Held for sale financial assets
Non-current financial assets are classified as held for sale and stated at fair value less cost to sell if their carrying value is
expected to be recovered through a sale transaction rather than through continuing use.
An impairment loss is recognised for any initial or subsequent writedown of the asset 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, but not in excess of any cumulative impairment
loss previously recognised. A gain or loss not previously recognised by the date of the sale of the asset is recognised at the date
of de-recognition.
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. Loans 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 sales of financial assets are recognised on trade date being 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.
When securities classified as long term equity investments are sold, the accumulated fair value adjustments previously
recognised in equity, are transferred to the income statement.
Subsequent measurement
Long term equity investments and investments fair valued through profit and loss are subsequently carried at fair value. Gains
or losses arising from changes in the fair value of the ‘Investments fair valued through profit and loss’ category, are presented
in the income statement within other income in the period in which they arise. Changes in the fair value of long term equity
investments are recognised in equity through the asset revaluation reserve.
Loans and receivables and term deposits are carried at amortised cost using the effective interest method.
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.
- 55 -
Notes to the Financial Statements (continued) For the year ended 31 July 2014
NOTE 1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
n) Derivatives and hedge activities
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 profit or
loss (for instance when the forecast sale that is hedged takes place). However, when the forecast transaction that is hedged
results in the recognition of a non-financial asset (for example, inventory) or a non-financial liability, the gains and losses
previously deferred in equity are transferred from equity and included in the measurement of the initial cost or carrying amount
of the asset or liability.
When a hedging instrument expires or is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting,
any cumulative gain or loss in equity at that time remains in equity and is recognised when the forecast transaction is ultimately
recognised in the 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 or 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 last sale price; the appropriate quoted
market price for financial liabilities is the last sale price.
The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is
determined using valuation techniques. The Group uses a variety of methods and makes assumptions that are based on market
conditions existing at each balance date. The fair value of forward exchange contracts is determined using forward exchange
market rates at the reporting date.
The carrying value less estimated credit adjustments and impairment provision of trade receivables and payables are assumed
to approximate their fair values due to their short-term nature. The fair value of financial liabilities for disclosure purposes is
estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for
similar financial instruments.
p) Property, plant and equipment
Freehold land is carried at the lower of cost and recoverable amount.
Property, plant and equipment, excluding investment properties, are stated at historical cost less accumulated depreciation and
impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Cost may also
include transfers from equity of any gains/losses on qualifying cash flow hedges of foreign currency purchases of property, plant
and equipment. The cost of self constructed assets includes the cost of materials, direct labour, the initial estimate where
relevant, of the cost of dismantling and removing the items and restoring the site under which they are located and an
appropriate portion 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.
- 56 -
Notes to the Financial Statements (continued) For the year ended 31 July 2014
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
p) Property, plant and equipment (continued)
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 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.
The cost of acquiring mineral reserves and mineral resources are capitalised in the statement of financial position as incurred.
r) Deferred stripping costs
The Group does not recognise any deferred stripping costs. Based on the nature of the Group's mining operations and the
stripping ratio for the components of its operations, the recognition criteria of a deferred stripping asset are not satisfied.
Further, it is anticipated that the operations will maintain a consistent stripping ratio at the component level and as such no
overburden in advance should be recognised. In the event that a stripping campaign is undertaken in the future a deferred
stripping asset will be recognised at that time and amortised in accordance with the requirements of IFRIC 20. An asset will be
recognised for stripping activity where the following criteria are met:
• It is probable that the future economic benefit (improved access to the ore body) associated with the stripping activity
will flow to the entity;
• The entity can identify the component of the ore body for which access has been improved; and
• The costs relating to the stripping activity associated with that component can be measured reliably.
s) Investment properties
Investment properties consist of properties held for long term rentals and/or capital appreciation and properties being
constructed or developed for future use as investment properties. Investment properties are initially recognised at cost including
transaction costs, development costs, construction costs and interest incurred during the construction phase. Investment
properties are subsequently recognised at fair value in the financial statements.
Changes in fair value are recorded in the income statement as part of other income. The gain or loss on disposal of an
investment property is calculated as the difference between the carrying amount of the asset at the date of disposal and the
net proceeds from disposal and is included in the income statement in the year of disposal.
Amounts provided to customers as lease incentives and assets relating to fixed rental income increases in operating lease
contracts are included within investment property values. Lease incentives are amortised over the term of the lease on a straight
line basis. The amortisation is applied to reduce gross property income.
Subsequent redevelopment and refurbishment costs (other than repairs and maintenance) are capitalised to the investment
property where they result in enhancement in the future economic benefits of the property.
- 57 -
Notes to the Financial Statements (continued) For the year ended 31 July 2014
NOTE 1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
t) 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.
u) 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 balance 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.
- 58 -
Notes to the Financial Statements (continued) For the year ended 31 July 2014
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
v) 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.
w) Interest bearing liabilities
Subsequent to initial recognition at fair value, net of transactions costs incurred, interest bearing liabilities are measured at
amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in
the income statement over the period of the liability using the effective interest method. Interest bearing liabilities are classified
as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after
the reporting period.
x) Borrowing costs
Borrowing costs incurred for the construction of any qualifying asset are capitalised during the period of time that is required
to complete and prepare the asset for its intended use or sale. Other borrowing costs are expensed.
y) Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable
that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. Provisions
are not recognised for future operating losses.
Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present
obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects
current market assessments of the time value of money and the risks specific to the liability.
i. Restoration, rehabilitation and environmental expenditure
Provisions are raised for restoration, rehabilitation and environmental expenditure as soon as an obligation exists, with the cost
being charged to the income statement in respect of ongoing rehabilitation. Where the obligation relates to decommissioning
of assets and restoring the sites on which they are located, the costs are carried forward in the value of the asset and amortised
over its useful life.
The obligations include profiling, stabilisation and revegetation of the completed area, with cost estimates based on current
statutory requirements and current technology.
z) Employee benefits
i. Short-term obligations
Liabilities for wages and salaries, including non-monetary benefits, annual leave and vesting sick leave, expected to be settled
wholly 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 of annual leave and accumulating sick leave is recognised in the provision for employee
benefits. All other short-term 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 using the projected unit credit method. Consideration is given to expected future wage and salary levels,
experience of employee departures and periods of service. Expected future payments are discounted using market yields at the
end of the reporting period on national government bonds with terms to maturity and currency that match, as closely as
possible, the estimated future cash outflows.
iii. Share-based payments
Share-based payments are provided to employees of Group entities. Details of the scheme is set out in note 43.
- 59 -
Notes to the Financial Statements (continued) For the year ended 31 July 2014
NOTE 1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
aa) 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.
bb) 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.
cc) 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.
dd) 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.
ee) 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; and
• by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements
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 assuming the conversion
of all dilutive potential ordinary shares.
ff) 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.
gg) 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, unless otherwise stated.
- 60 -
Notes to the Financial Statements (continued) For the year ended 31 July 2014
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
hh) Comparative figures
When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for
the current financial year.
ii) New accounting standards and interpretations
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory,
have not been early adopted by the Consolidated entity for the annual reporting period ended 31 July 2014. The Consolidated
entity's assessment of the impact of these new or amended Accounting Standards and Interpretations, most relevant to the
Consolidated entity, are set out below.
AASB 9 Financial Instruments and associated amending standards (applicable for annual reporting periods
commencing on or after 1 January 2018)
The Group does not intend on adopting the new standard before its operative date, which means that it would be first
applicable to annual reporting periods beginning 1 August 2018. AASB 9 will be applicable retrospectively and includes revised
requirements for the classification and measurement of financial instruments, revised recognition and derecognition
requirements for financial instruments and simplified requirements for hedge accounting.
The Consolidated entity has considered the adoption of AASB 9 and the major impact to the Consolidated entity will be to the
Group’s long term equity investments. Currently, changes in the market value of these investments are recognised in the
revaluation reserve. When an investment is disposed of, the gain or loss measured from the original cost is then recognised in
the income statement.
Under the new standard, no gain or loss on the disposal of an investment would be recognised in the income statement and
investments would no longer be subject to impairment reviews as all movements in market value are only recognised in the
revaluation reserve. The Group is not proposing to early adopt the standard.
There will be no impact on the Group’s accounting for financial liabilities, as the new requirements only affect the accounting
for financial liabilities that are designated at fair value through profit or loss and the Group does not have any such liabilities.
The new hedging rules align hedge accounting more closely with the Group’s risk management practices. As a general rule, it
will be easier to apply hedging going forward. The new standard also introduces expanded disclosure requirements and
changes in presentation. The Group has not yet assessed how its own hedging arrangements would be affected by the
new rules.
AASB 2013-5: Amendments to Australian Accounting Standards – Investment Entities
This standard is applicable to annual reporting periods beginning on or after 1 January 2014. AASB 2013-5 amends AASB 10:
Consolidated Financial Statements to define an “investment entity” and requires, with limited exceptions, that the subsidiaries
of such entities be accounted for at fair value through profit or loss in accordance with AASB 9 and not be consolidated.
Additional disclosures are also required. As neither the parent nor its subsidiaries meet the definition of an investment entity,
this Standard is not expected to impact the Group’s financial statements.
AASB 2013-3: Amendments to AASB 136 – Recoverable Amount Disclosures for Non-Financial Assets
This Standard is applicable to annual reporting periods beginning on or after 1 January 2014. The Standard amends the
disclosure requirements in AASB 136: Impairment of Assets pertaining to the use of fair value in impairment assessment.
The amendments include the requirement to disclose additional information about the fair value measurement when the
recoverable amount of impaired assets is based on fair value less costs of disposal. In addition, a further requirement has been
included to disclose the discount rates that have been used in the current and previous measurements if the recoverable amount
of impaired assets based on fair value less costs of disposal was measured using a present value technique. The Group has
assessed the impact of the new standard and are of the opinion that there will be no changes other than additional disclosure
requirements in the financial statements.
NOTE 2.
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Estimates and judgements are continually evaluated and are based on historical experience 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.
- 61 -
Notes to the Financial Statements (continued) For the year ended 31 July 2014
NOTE 2.
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (continued)
a) Critical accounting estimates and assumptions (continued)
i. Impairment
The Group tests annually whether goodwill has suffered an impairment in accordance with the accounting policy stated in note
1(u)(i). Other assets are assessed for impairment at each reporting date where changes in specific conditions or events indicate
that the carrying amount may not be recoverable. 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
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 - Coal
The Group estimates its coal reserves and coal resources based on information compiled by Competent Persons as defined in
accordance with the Australasian Code for Reporting of Mineral Resources and Ore Reserves of December 2004 (the “JORC
code”). Reserves determined in this way are used in the calculation of depreciation, amortisation and impairment charges, the
assessment of mine lives and for forecasting the timing of the payment of decommissioning and restoration costs.
iv. Mineral Resources Rent Tax (MRRT)
THE MRRT legislation, effective from 1 July 2012, has resulted in the recognition of deferred tax balances. The MRRT has been
repealed with an effective date yet to be confirmed. Judgement is required in assessing whether deferred tax assets and
deferred tax liabilities arising from MRRT are recognised in the statement of financial position.
Deferred tax assets are recognised only when it is considered probable that they will be recovered. Recoverability is dependent
on the generation of sufficient future taxable profits. Assumptions about the generation of future taxable profits depend on
management’s estimates of future cash flows. These in turn depend on estimates of future sales volumes, operating costs,
capital expenditure and government royalties' payable.
Judgements are also required about the application of the MRRT tax legislation for example in relation to the hypothetical
valuation point.
The judgements and assumptions made by management are subject to risk and uncertainty; hence, there is a possibility that
changes in circumstances will alter expectations, which may impact the amount of deferred tax assets and deferred tax liabilities
recognised in the statement of financial position. In such circumstances, some or all of the carrying amounts of recognised
deferred tax assets and liabilities may require adjustment, resulting in a corresponding credit or charge to the income statement.
v. Petroleum Resource Rent Tax (PRRT)
As a result of the 100% acquisition of Bridgeport Energy Limited during 2013, the Group is subject to Petroleum Resource Rent
Tax (PRRT) effective 1 July 2012 being the date of the extension of the PRRT to onshore petroleum projects. The Group has
accounted for the current and deferred tax impact of PRRT in accordance with the requirements outlined above in relation to
income tax. As such, the Group has recorded current and deferred tax assets and liabilities relating to PRRT at the prevailing
PRRT rate at 31 July 2014 and 31 July 2013.
A subsidiary of the Group, New Hope Corporation Limited (New Hope), as head company of New Hope income tax
consolidated group; has made a PRRT consolidation election and as such the New Hope tax consolidated group includes two
PRRT consolidated groups at 31 July 2014 and 31 July 2013. New Hope has accounted for its PRRT tax balances in accordance
with the stand alone taxpayer method in alignment with its tax funding arrangement.
vi. Determination of recoverable value – copper processing plant, equipment and capitalised mine development costs
The Group carries its copper processing plant, equipment and capitalised mining costs at historical cost less accumulated
depreciation/amortisation and impairment losses. At 31 July 2014 the carrying value of these assets is $173.2 million.
The assessment of recoverable value includes key estimates in relation to quantities of economically recoverable reserves and
resources, resource grades and mine plans. These are based upon interpretations of geological models and other matters. It
also requires key assumptions to be made regarding a number of factors including short and long-term exchange rates, short
and long-term copper prices, future capital expenditure and working capital. Estimates are also required to be made in relation
to the economic life of the plant and its residual value. Changes in these estimates and applying different assumptions may
impact significantly the assessment of the recoverable value of the plant, equipment and capitalised mine development costs,
as well as the amount of depreciation and amortisation charged to the income statement. The directors are satisfied that the
estimates and assumptions made are based on observable and other supportable inputs and therefore that the carrying value
of the copper processing plant, equipment and capitalised mine development costs at 31 July 2014 is appropriate.
- 62 -
Notes to the Financial Statements (continued) For the year ended 31 July 2014
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
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), CopperChem Limited (CopperChem) and Exco
Resources Limited, capitalised various items of expenditure to the mine development and exploration expenditure asset accounts.
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 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 2014 include the assessment of the recoverable amounts
for financial assets, including investments in long term equities and associates (refer to notes 6 and 38).
iii. Deferred tax asset
Deferred tax assets have been recognised relating to carried forward capital losses, income losses and temporary differences,
based on current tax rates. Utilisation of capital tax losses and income losses requires the realisation of capital gains and taxable
income respectfully, in subsequent years and the ability to satisfy certain tests at the time the losses are recouped. The actual
tax results in future periods may differ from the estimate made at the time the deferred taxes are recognised.
NOTE 3.
SEGMENT INFORMATION
Segment information is provided on the same basis as internal management reporting and reflects how the Group is organised
and managed.
a) Business Segments
Management have determined the following business activities to be operating segments based on product and service type:
Investing activities
The Group engages in investing activities including cash, term deposits, and equity investments.
Coal operations
The Group engages in coal mining activities which includes 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.
Copper operations
The Group engages in copper mining activities which includes exploration, mining and processing of copper ore into copper
concentrate and copper sulphide.
Corporate advisory
The Group provides corporate advisory services.
Property
The Group engages in property management activities which includes properties being held, sold or developed to earn rental
income or capital appreciation, or both.
Measurement of Segment results
Segment results shown are consistent with internal management reporting. Regular profit and regular profit after tax
attributable to members, are the measures of segment profit. These results are non-statutory profit measures and represent
profit from continuing operations before non-regular items. The measurement basis in general, excludes the effects of non-
regular items of income and expense which by nature are outside the ordinary course of business or are part of ordinary activities
but are unusual due their size or nature. The Directors have presented this information as they consider the disclosure enhances
the understanding of the results to members and users of the financial statements. Non-regular items are disclosed in note 3b.
The allocation of income and expense items between regular and non-regular profit is consistent with the prior year.
- 63 -
Notes to the Financial Statements (continued) For the year ended 31 July 2014
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Notes to the Financial Statements (continued) For the year ended 31 July 2014
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 4.
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 5. OTHER INCOME
Fair value gain on revaluation of investment properties
Gain on deemed disposal of equity accounted associates
Gain/(losses) on investments fair valued through profit and loss
Gain/(losses) on disposal of long term equity investments
Gain on disposal of equity accounted associate
Gain on acquisition of controlled entity
Fair value gain on acquisition of equity accounted associate
Other items
Total other income
2014
$’000
2013
$’000
575,323
689,050
23,976
20,973
-
50,489
4,270
4,058
82,793
658,116
16,781
994
1,280
38,518
257
-
6,048
92
63,970
121
75,766
821
4,584
102,265
791,315
-
737
(1,062)
(83)
2,065
5,319
-
222
7,198
- 67 -
Notes to the Financial Statements (continued) For the year ended 31 July 2014
NOTE 6.
EXPENSES
Profit before income tax expense includes the following specific expenses:
Depreciation
Buildings
Plant and equipment
Total depreciation
Amortisation
Mining reserves and mine development
Intangible assets
Oil producing assets
Lease incentive and leasing fee assets
Total amortisation
Impairment (reversals)/charges
Equity accounted associates (a)
Long term equity investments (b)
Property, plant and equipment
Exploration and evaluation assets
Other assets
Total impairment (reversals)/charges
Employee benefits expense
Finance costs
Interest and finance charges paid/payable
Rental expense relating to operating leases
Exploration costs expensed
2014
$’000
1,183
60,178
61,361
11,771
1,767
1,988
208
15,734
(45,331)
8,210
5,687
3,465
6,595
(21,374)
2013
$’000
971
46,380
47,351
9,581
1,404
1,051
-
12,036
2,538
50,889
-
-
5,400
58,827
119,342
123,651
3,549
5,115
18,227
2,980
4,883
14,007
a)
The recoverable amount of investments in equity accounted associates has been assessed as at 31 July 2014. 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 2014, an impairment
reversal of $44.4 million has been recognised in relation to Australian Pharmaceutical Industries Limited. Refer to note 38f.
b) During the year ended 31 July 2014, there were significant decreases in the share prices of certain listed equity investments
held by the Group. 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 last sale price is
lower than the original cost, and the investment is considered by management 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 through profit and loss. Any future increments in the last sale price of these investments
will be recognised as a fair value increment in the asset revaluation reserve. During the year ended 31 July 2014, an
impairment expense of $8.21 million was recognised for listed equity investments, including Rum Jungle Limited $6.42
million and QBE Insurance Limited $0.948 million.
- 68 -
Notes to the Financial Statements (continued) For the year ended 31 July 2014
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 7.
INCOME TAX EXPENSE
a) Income tax expense
Current tax
Adjustment in current tax in respect of prior years
Deferred tax
- Deferred tax expense relating to the origination and reversal of temporary differences
- Adjustment in deferred tax in respect of prior years
- Petroleum resource rent tax benefit
- Under provided in prior year
Deferred income tax (revenue)/expense included in income tax expense
(Increase) in deferred tax assets – (note 22)
Increase in deferred tax liabilities – (note 30)
2014
$’000
7,882
19
28,256
507
(7,317)
44
29,391
(15,287)
36,733
21,446
2013
$’000
48,733
(5,815)
15,366
2,836
(1,509)
-
59,611
(1,789)
18,482
16,693
b) Reconciliation of income tax expense to prima facie tax payable
Profit before income tax
Tax at the Australian tax rate of 30% (2013: 30%)
184,979
193,863
55,494
58,159
Tax effect of amounts which are not deductible/(taxable) in calculating taxable income:
Sale of long term equity investments
Impairment (reversals)/charges
Franking credits received (excluding controlled and associate entities)
Deferred tax asset recognised on losses transferred into the WHSP
tax consolidated group
Deferred tax asset not recognised on current year net losses
Derecognition of deferred tax asset on consolidation
Net effect of New Hope’s Petroleum resource rent tax benefit
Tax expense on equity accounted associates results, net of imputation credits
Other
Total tax expense
(7,232)
(11,608)
(9,428)
(3,090)
6,612
-
(5,122)
269
3,496
29,391
-
12,605
(8,241)
-
6,706
1,742
(1,056)
(8,180)
(2,124)
59,611
The effective tax rates are as follows:
16%
31%
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 charged or credited to equity
Net deferred tax – charged directly to equity (notes 22 and 30)
d) Tax effect of impairments and tax losses
Impairments and unused tax losses for which no deferred tax asset has
been recognised
Potential tax benefit at 30%
34,291
16,620
273,321
81,996
279,775
83,933
- 69 -
Notes to the Financial Statements (continued) For the year ended 31 July 2014
NOTE 8. DIVIDENDS – WASHINGTON H. SOUL PATTINSON AND COMPANY LIMITED
a) Ordinary shares
Final dividend for the year ended 31 July 2013 of 28 cents (2012 – 27 cents)
per fully paid share paid on 9 December 2013 (2012 – 10 December 2012)
fully franked based on tax paid at 30%.
Interim dividend for the year ended 31 July 2014 of 19 cents (2013 – 18 cents)
per fully paid share paid on 8 May 2014 (2013 – 9 May 2013) fully franked
based on tax paid at 30%.
Total dividends provided for or paid
b) Dividends not recognised at year end
In addition to the above dividends, since year end the Directors have
declared the payment of:
A final dividend of 29 cents per fully paid ordinary share, (2013 – 28 cents)
fully franked based on tax paid at 30%.
This dividend is due to be paid on 8 December 2014
(2013 – 9 December 2013) out of retained profits as at 31 July 2014,
and has not been recognised as a liability at year end.
c) Franked Dividends
The final dividend for 31 July 2014 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 2014.
Franking credits available for subsequent financial years based on a
tax rate of 30% (2013 – 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 final
dividend to be paid on 8 December 2014 (2013 – 9 December 2013).
2014
$’000
2013
$’000
67,031
64,637
45,485
112,516
43,091
107,728
69,425
67,031
523,523
507,487
(29,753)
493,770
(28,727)
478,760
d) Dividend reinvestment plans
There were no dividend reinvestment plans in operation at any time during or since the end of the financial year.
- 70 -
Notes to the Financial Statements (continued) For the year ended 31 July 2014
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 9.
CURRENT ASSETS – CASH AND CASH EQUIVALENTS
2014
$’000
64,933
2013
$’000
28,078
64,933
28,078
Cash at bank and on hand
a) Reconciliation of cash balance at the end of the year
Cash at the end of the financial year as shown in the statement of cash
flows is reconciled to items in the statement of financial position as follows:-
Cash and cash equivalents
b) Cash at bank and on hand and cash equivalents
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 2.65% per annum (2013: 0% and 2.75%).
c) Risk exposure
Information about the Group’s exposure to credit risk and foreign exchange
risk is detailed in note 33.
NOTE 10. CURRENT ASSETS – TERM DEPOSITS
Term deposits
1,272,912
1,499,724
Term deposits are held to their maturity of less than one year and carry a
weighted average interest rate of 3.44% per annum (2013:4.54%).
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 11. 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
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 carrying value less impairment provisions of trade receivables are
assumed to approximate their fair values due to their short-term nature.
- 71 -
51,519
(5)
51,514
-
-
-
6,927
22,961
4,498
85,900
47,349
(115)
47,234
1,231
(1,171)
60
12,515
23,077
7,477
90,363
Notes to the Financial Statements (continued) For the year ended 31 July 2014
NOTE 12. CURRENT ASSETS – INVENTORIES
Raw materials and stores – at cost
Work in progress – at cost
Finished goods – at cost
Inventory expense
Inventories recognised as an expense during the year ended 31 July 2014
amounted to $268.482 million (2013: $278.646 million).
Write-down of inventory to net realisable value recognised as an expense
during the year amounted to $2.242 million (2013: $nil).
2014
$’000
29,832
8,362
34,765
72,959
NOTE 13. CURRENT ASSETS – INVESTMENTS FAIR VALUED THROUGH PROFIT AND LOSS
2014
$’000
11,992
2,703
14,695
Investments held for the short to medium term
Listed equity securities
Other securities
Information regarding the Group’s fair value classification and exposure
to price risk is set out in note 33.
Listed equity securities are traded in an active market. The fair value of these
investments is based on quoted market prices at the reporting date. The quoted
market price used by the Group is the last sale 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.
NOTE 14. CURRENT ASSETS – HELD FOR SALE FINANCIAL ASSETS
2013
$’000
27,542
11,834
40,859
80,235
2013
$’000
8,714
2,065
10,779
Listed equity securities
27,183
-
The Held for sale financial assets relate to the reclassification during the
year of equity securities held in Dart Energy Limited. In the prior year,
Dart Energy Limited was classified as a long term equity investment.
Information regarding the Group’s fair value classification is set out in note 33.
The Held for sale financial assets are traded in an active market.
The fair value of this investment is based on the quoted market price at the
reporting date. The quoted market price used by the Group is the last sale
price at reporting date.
- 72 -
Notes to the Financial Statements (continued) For the year ended 31 July 2014
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 15. NON-CURRENT ASSETS – TRADE AND OTHER RECEIVABLES
Loans to related entities
Less impairment on loans to related entities
Loans to others – secured
Prepayments
Other receivables
2014
$’000
3,332
(2,146)
1,186
7,426
729
3,967
13,308
2013
$’000
12,023
(11,007)
1,016
-
1,244
2,842
5,102
a) Impairment – Loan receivables
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.
NOTE 16. NON-CURRENT ASSETS – EQUITY ACCOUNTED ASSOCIATES
Shares in associated companies (refer note 38)
NOTE 17. NON-CURRENT ASSETS – LONG TERM EQUITY INVESTMENTS
Listed equity securities
Unlisted equity securities
Information regarding the Group’s fair value classification and exposure to price
risk is set out in note 33.
Long term equity investments are traded in an active market. The fair value of
these investments is based on quoted market prices at the reporting date.
The quoted market price used by the Group is the last sale price at reporting date.
NOTE 18. NON-CURRENT ASSETS – OTHER FINANCIAL ASSETS
2014
$’000
2013
$’000
944,726
813,648
562,205
542,128
3
3
562,208
542,131
Other financial assets
7,659
22,387
Other financial assets at reporting date do not trade in an active market.
The cost or impaired cost approximates the fair value.
Information regarding the Group’s fair value classification is set out in note 33.
- 73 -
Notes to the Financial Statements (continued) For the year ended 31 July 2014
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Notes to the Financial Statements (continued) For the year ended 31 July 2014
NOTE 20. NON-CURRENT ASSETS – INVESTMENT PROPERTIES
Investment properties
Reconciliation
Opening net book amount
Acquisitions
Capitalised costs
Transfers in/(out)
Movement in tenant incentives, contracted rent
uplift balances and leasing fee asset
Net fair value gain on investment properties
Closing net book amount
Stabilised
property
$’000
88,821
Properties under
development
$’000
2014
$’000
50,600
139,421
-
20,771
271
55,796
3,852
8,131
88,821
50,223
-
47,523
(55,796)
-
8,650
50,600
50,223
20,771
47,794
-
3,852
16,781
139,421
2013
$’000
50,223
-
36,802
13,421
-
-
-
50,223
A stabilised property is an investment property that is in a completed state and available to generate rental income.
a) Amounts recognised in income statement for investment properties
Rental income
Direct operating expenses from property that generated rental income
Direct operating expenses from property that did not generate rental income
Fair value gain recognised in other income
2014
$’000
3,336
(1,142)
(17)
16,781
2013
$’000
-
-
(45)
-
Operating expenses for property that generated income includes finance costs of $1.126 million (2013: $Nil). Finance costs
capitalised during the construction phase totalled $419,000 (2013: $797,000).
b) Measuring investment properties at fair value
Investment properties are industrial properties that are held for long-term rental yields and are not occupied by the Group. They
are carried at fair value. Changes in fair value are presented in the income statement as part of other income.
The Group obtains independent valuations for all investment properties at least annually. Independent valuations have been
determined by Registered Property Valuers, CBRE Valuations Pty Limited and Knight Frank Valuations who hold recognised and
relevant professional qualifications and have recent experience in the location and categories of the properties held.
At the end of each reporting period, the Directors update their assessment of the fair value of each property, taking into
account the most recent independent valuations.
The basis of valuations for investment properties is fair value, being the amounts for which the assets could be exchanged
between knowledgeable willing parities in an arm’s length transaction, based on current prices in an active market for similar
properties in the same location and condition and subject to similar leases. In determining fair value, an appropriate valuation
method is used, which may include the discounted cashflow and the capitalisation method. Discount rates and capitalisation
rates are determined based on industry experience and knowledge and where possible, a direct comparison to third party rates
for similar assets in a comparable location. Rental revenue from current leases and assumptions about future leases, as well as
any expected operational cash outflows in relation to the property, are reflected in fair value.
In relation to properties under development, fair value is determined based on the market value of the property on the
assumption it had already been completed at the valuation date less costs still required to complete the project, including an
appropriate adjustment for profit and risk.
The fair value hierarchy, as discussed in note 33(f) to this report, provides an indication of the observability of inputs used in
determining fair value. The fair value estimates for Investment properties are included in level 3 of the hierarchy due to
significant unobservable inputs used in the valuation methodologies.
- 76 -
Notes to the Financial Statements (continued) For the year ended 31 July 2014
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 20. NON-CURRENT ASSETS – INVESTMENT PROPERTIES (continued)
b) Measuring investment properties at fair value (continued)
The following table summarises the ranges of the significant valuation inputs:
Class of property
Fair value hierarchy
Fair value at
31 July 2014
$’000
Significant unobservable inputs
used to measure fair value
Range of inputs
Stabilised
Level 3
88,821
Capitalisation rate
7.00% - 9.50%
Property under
development
Level 3
50,600
Estimated costs to completion
$15.116 million
Capitalisation rate
7.50%
Total
139,421
Sensitivity to changes in significant valuation inputs
A significant movement in any one of the inputs listed in the table may result in a change in the fair value of the Group’s
investment properties.
Market approach - Capitalisation valuation methodology
Under the capitalisation approach, fair value is determined by capitalising net rental income in perpetuity. The impact to the
valuation of any increase/(decrease) in the capitalisation rate, may be offset by the impact of an increase/(decrease) in the
current rental income.
c) Non-current assets pledged as security
For the year ending 31 July 2014, $118.650 million (2013:$50.223 million) of the Group’s investment property was pledged
as security.
Refer to note 26 for information on non-current assets pledged as security by the Group.
d) Leasing arrangements
The Stabilised investment property is leased to a tenant under a long-term operating lease with rentals payable monthly.
Minimum lease payments receivable on this property are as follows:
Minimum lease payments under a non-cancellable operating lease of
an investment property not recognised in the financial statements are
receivable as follows:
Within one year
Later than one year but not later than five years
Later than five years
NOTE 21. NON-CURRENT ASSETS – EXPLORATION AND EVALUATION ASSETS
2014
$’000
2013
$’000
2,880
25,423
52,880
81,183
2014
$’000
-
-
-
-
2013
$’000
Exploration and evaluation at cost
169,726
129,628
Reconciliation
Opening net book amount
Additions
Asset acquired by purchase of subsidiaries
Impairment of asset
Transfers in/(out)
Closing net book amount
- 77 -
129,628
41,908
-
(3,465)
1,655
169,726
41,334
26,602
63,678
-
(1,986)
129,628
Notes to the Financial Statements (continued) For the year ended 31 July 2014
NOTE 22. NON-CURRENT ASSETS – DEFERRED TAX ASSETS
The balance comprises temporary differences attributed to:
Amounts recognised in the income statement
Provisions
Accrued expenses
Impairment losses
Petroleum resource rent tax
Tax value of losses carried-forward
Other
Amounts recognised directly in equity
Cash flow hedges
Long term equity investments
Share issue costs
2014
$’000
26,955
2,306
14,697
2,614
56,440
5,071
108,083
242
5,595
10
5,847
2013
$’000
24,851
1,963
9,692
-
48,152
7,891
92,549
12,429
5,798
10
18,237
Total deferred tax assets
113,930
110,786
Set-off of deferred tax liabilities pursuant to set-off provisions (notes 1f and 30)
Net deferred tax assets
Movements:
Opening balance at 1 August
Amounts recognised on acquisition of subsidiaries
Credited to the income statement – operating profit (note 7a)
(Charged)/credited to equity (note 7c)
Closing balance at 31 July
(76,447)
37,483
110,786
-
15,287
(12,143)
113,930
(89,671)
21,115
96,285
7,282
1,789
5,430
110,786
- 78 -
Notes to the Financial Statements (continued) For the year ended 31 July 2014
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 23. NON-CURRENT ASSETS – INTANGIBLE ASSETS
At 31 July 2012
Cost
Accumulated amortisation and impairment
Net book amount
Year ended 31 July 2013
Opening net book amount
Assets acquired on purchase of subsidiary
Additions
Amortisation (charge)
Disposals
Transfers in
Closing net book amount
At 31 July 2013
Cost
Accumulated amortisation and impairment
Net book amount
Year ended 31 July 2014
Opening net book amount
Additions
Amortisation (charge)
Disposals
Transfers in
Closing net book amount
At 31 July 2014
Cost
Accumulated amortisation and impairment
Net book amount
Goodwill
$'000
18,098
-
18,098
18,098
4,732
-
-
-
-
22,830
22,830
-
22,830
22,830
-
-
-
-
22,830
22,830
-
22,830
Other
$’000
11,830
(7,931)
3,899
3,899
-
851
(1,404)
(2)
2,137
5,481
14,816
(9,335)
5,481
5,481
474
(1,767)
(28)
(143)
4,017
Total
$’000
29,928
(7,931)
21,997
21,997
4,732
851
(1,404)
(2)
2,137
28,311
37,646
(9,335)
28,311
28,311
474
(1,767)
(28)
(143)
26,847
14,748
(10,731)
4,017
37,578
(10,731)
26,847
Amortisation of $1.767 million (2013: $1.404 million) has been charged to the income statement (note 6).
- 79 -
Notes to the Financial Statements (continued) For the year ended 31 July 2014
NOTE 23. NON-CURRENT ASSETS – INTANGIBLE ASSETS (continued)
a) Recoverable amount of goodwill
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 subsidiary
Consulting
- Goodwill
Carrying amount at beginning of year
Acquisition of subsidiary
Closing net book value
Country of
operation
Australia
Australia
2014
$'000
22,255
-
22,255
575
-
575
22,830
2013
$'000
18,098
4,157
22,255
-
575
575
22,830
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:
(i) Coal Mining
Brought forward goodwill relates to the acquisition of Queensland Bulk Handling Pty Ltd, Northern Energy Corporation Limited
(NEC) and Bridegport Energy Limited.
The recoverable amount of the NEC cash generating units has been based on fair values less cost to sell. This assessment is
determined under Level 2 of the Fair value hierarchy based on observable external market data for reserve and resource
transaction multiples, rather than quoted prices (refer note 33f for an explantation on Fair value hierarchy). The transaction
multiples observed have included recent transactions only and included similar Australian coal exploration projects, with respect
of coal type to the NEC assets.
(ii) Consulting
Brought forward goodwill relates to obtaining control of Pitt Street Real Estate Partners Pty Limited in the prior year.
NOTE 24. CURRENT LIABILITIES – TRADE AND OTHER PAYABLES
Trade payables and other payables
Fair value measurement
2014
$’000
74,679
2013
$’000
59,629
The carrying value less impairment provisions of trade and other payables are assumed to approximate their fair values due to
their short-term nature.
- 80 -
Notes to the Financial Statements (continued) For the year ended 31 July 2014
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 25. CURRENT LIABILITIES – INTEREST BEARING LIABILITIES
Deposits accepted - Directors and Director related parties (note 26a)
Short term borrowings (note 26c)
Lease liability (note 26d)
Further information relating to interest bearing liabilities is set out in note 26.
NOTE 26. NON-CURRENT LIABILITIES – INTEREST BEARING LIABILITIES
Long term borrowings (c)
Lease liabilities (d)
a) Director deposits
2014
$’000
44,796
-
33
44,829
45,303
122
45,425
2013
$’000
49,317
1,750
98
51,165
7,806
94
7,900
The Parent entity accepts deposits from Directors and Director related parties under normal commercial agreements and
consistent with deposits received from other parties. Deposits are repayable at call and carry an interest rate of 3.23% per
annum (2013: 3.69%) at the reporting date. The effective interest rate applicable to these Directors and Director related
deposits is consistent with the interest rate that deposits of the Parent entity receives and ensures a margin of at least 25 basis
points is earned by the Parent entity.
b) Fair value disclosures
The carrying value of financial liabilities as disclosed approximates their fair values.
c) Borrowings
Secured financing facilities and assets pledged as security
The total secured financing facilities are as follows:
Bank loan facilities (i)
Trade finance facility (ii)
Business flexible rate loan (ii)
Lease liabilities (d)
2014
$’000
68,066
-
-
155
68,221
2013
$’000
33,400
5,000
2,500
192
41,092
(i) The bank loan facilities are secured by registered mortgages over the individual properties classified as stabilised properties
and investment properties under development in the financial statements (refer note 20). Each facility is for a period of five
years with a variable interest rate. To manage fluctuations in interest rates over the term of the facilities, five year interest
rate swap arrangements have also been established, effectively fixing interest rates as follows:
Stabilised investment property
- Facility commenced 25 June 2013
6.555% to 25 June 2014
6.155% from 25 June 2014
Construction phase interest rate
Stabilised asset interest rate
Property under development
- Facility commenced 28 May 2014
6.005% (estimated to finalise
24 November 2014)
5.505% from 24 November 2014
- 81 -
Notes to the Financial Statements (continued) For the year ended 31 July 2014
NOTE 26. NON-CURRENT LIABILITIES – INTEREST BEARING LIABILITIES (continued)
c) Borrowings (continued)
Secured financing facilities and assets pledged as security
(ii) The Trade finance facility and the business flexible rate loan facility were jointly guaranteed by a subsidiary of Souls Private
Equity Limited (SPEL). The two facilities were secured against a fixed and floating charge over the company and a registered
mortgage over the property owned by the subsidiary of SPEL. The subsidiary of SPEL was deconsolidated during the year.
d) Lease liabilities
Lease liabilities are effectively secured as the rights to the leased assets recognised in the financial statements and revert to the
lessor in the event of default.
e) Other financing arrangements
The Consolidated entity has access to bank overdraft and bank guarantee
facilities as follows:
Bank overdraft
Total facility
Used at balance date
Unused at balance date
Bank guarantees
Total facilities
Used at balance date
Unused at balance date
2014
$’000
2013
$’000
1,000
-
1,000
105,738
(69,674)
36,064
1,000
-
1,000
79,374
(67,475)
11,899
The majority of 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
39,054
38,230
The liability has been recognised by New Hope Corporation Limited in relation
to its rehabilitation obligations.
ii. Statutory body suppliers
24,882
24,871
No liability was recognised by New Hope Corporation Limited in relation to
these guarantees as no losses are foreseen on these contingent liabilities.
63,936
63,101
- 82 -
Notes to the Financial Statements (continued) For the year ended 31 July 2014
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 27. DERIVATIVE FINANCIAL INSTRUMENTS
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.
The Australian Logistics Property Fund and its controlled entities, are also party to derivative financial instruments to hedge
exposure to fluctuations in interest 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):
Non-current assets
- Forward exchange contracts
Current liabilities
- Forward exchange contracts
- Interest rate swaps
Non-current liabilities
- Forward exchange contracts
Net derivative financial instruments liability
Fair value measurement
2014
$’000
2,447
3,255
1,688
4,943
-
2,496
2013
$’000
-
29,721
816
30,537
11,707
42,244
The fair value meaurement of forward exchange contracts is determined using forward exchange market rates at the
reporting date.
The fair value of interest rate swaps is determined using forward interest rates at the reporting date.
Credit risk exposures of derivative financial instruments – forward exchange contracts
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 losses in the event that
counterparties fail to deliver the contracted amount. Refer to note 33 for additional information.
At balance date the details of outstanding forward exchange contracts are:
Sell US dollars
Maturity
0 to 6 months
6 to 12 months
1 to 2 years
2 to 5 years
Receivable
Buy Australian dollars
2013
2014
$’000
$’000
93,974
42,242
45,954
-
182,170
129,884
121,122
130,854
45,955
427,815
Average exchange rate
2013
2014
0.95771
0.92325
0.84867
-
1.00090
0.98250
0.94760
0.84870
- 83 -
Notes to the Financial Statements (continued) For the year ended 31 July 2014
NOTE 28. CURRENT LIABILITIES – PROVISIONS
Mining restoration and site rehabilitation
Employee benefits (i)
Native title claims
Movements in total provisions 2014
Carrying amount at beginning of year
Additional provisions recognised
Carrying amount at end of year
Disclosed as:
Current liabilities
Non-current liabilities
2014
$’000
4,150
27,845
137
32,132
Native
title
claims
$'000
137
10
147
137
10
147
2013
$’000
6,415
28,967
117
35,499
Mining
restoration
and site
rehabilitation
$'000
50,950
5,449
56,399
4,150
52,249
56,399
Current liabilities not expected to be settled within the next 12 months
(i) The current provision for employee benefits includes accrued annual leave, vested sick leave and long service leave for all
unconditional settlements where employees have completed the required period of service and also those where employees
are entitled to pro-rata payment in certain circumstances. The entire amount is presented as current, since the Group does
not have an unconditional right to defer settlement. However, on past experience, the Group does not expect all employees
to take the full amount of accrued long service leave or require payment within the next 12 months.
NOTE 29. NON-CURRENT LIABILITIES – PROVISIONS
Mining restoration and site rehabilitation
Employment benefits
Native title claims
2014
$’000
52,249
6,088
10
58,347
2013
$’000
44,535
5,655
20
50,210
- 84 -
Notes to the Financial Statements (continued) For the year ended 31 July 2014
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 30. NON-CURRENT LIABILITIES – DEFERRED TAX LIABILITIES
The balance comprises temporary differences attributed to:
Amounts recognised in the income statement
Property, plant and equipment
Mine reserves
Capitalised exploration
Arising on Petroleum resource rent tax
Inventories
Investments
Receivables
Other
Amounts recognised directly in equity
Long term equity investments
Property, plant and equipment
Other investments
Total deferred tax liabilities
Set-off of deferred tax liabilities pursuant to set-off provisions (notes 1f and 22)
Net deferred tax liabilities
Movements:
Opening balance 1 August
Charged to the income statement – operating profit (note 7a)
Charged to equity (note 7c)
Amounts recognised on acquisition of subsidiaries
Closing balance at 31 July
2014
$’000
35,003
65,276
24,205
-
7,185
96,048
3,343
4,632
2013
$’000
30,354
66,899
14,916
4,701
5,989
71,144
1,626
3,334
235,692
198,963
92,567
7,160
6,868
106,595
342,287
(76,447)
72,981
7,160
4,302
84,443
283,406
(89,671)
265,840
193,735
283,406
36,733
22,148
-
342,287
235,316
18,482
22,050
7,558
283,406
- 85 -
Notes to the Financial Statements (continued) For the year ended 31 July 2014
NOTE 31.
SHARE CAPITAL
(a) Share capital
Fully paid ordinary shares
Parent entity
Parent entity
2014
No of shares
2014
$’000
2013
No of shares
2013
$’000
239,395,320
43,232
239,395,320
43,232
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.
(b) Movements in ordinary share capital
Date
Details
31 July 2013
Closing balance
No of shares
239,395,320
31 July 2014
Closing balance
239,395,320
$’000
43,232
43,232
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.
There were no changes to the Group’s approach to capital management during the year.
The Group’s capital consists of shareholders’ equity net of debt. The movement in shareholders equity is shown in the statement
of changes in equity. Refer to page 47.
At 31 July 2014, the Parent entity has no external borrowings from financial institutions. The Parent entity is not subject to any
externally imposed capital requirements. The Parent entity has accepted deposits from Directors and their related parties
totalling $44.796 million (2013: $49.317 million) refer to note 25 and 26. Non-recourse debt of $45.303 million is used to
finance investment properties held within 100% controlled entities.
The Board also monitors the level of dividends ensuring that ordinary dividends are paid from the Parent entity’s cash profits
before non-regular items.
NOTE 32. RESERVES AND RETAINED PROFITS
a) Reserves
General reserve
Asset revaluation reserve
Capital profits reserve
Hedging reserve
Share-based payments reserve
Foreign currency translation reserve
Treasury share reserve
Equity reserve
Balance 31 July
2014
$’000
404,548
264,747
11,368
(1,877)
525
(537)
(327)
(13,023)
665,424
2013
$’000
404,548
210,361
11,368
(18,181)
1,165
(2,494)
(327)
(9,191)
597,249
- 86 -
Notes to the Financial Statements (continued) For the year ended 31 July 2014
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 32. RESERVES AND RETAINED PROFITS (continued)
b) Movements:
General reserve
Balance 31 July
Asset revaluation reserve
Balance 1 August
Revaluation of long term equity investments, gross
Revaluation of long term equity investments, deferred tax
Transfer on sale of long term equity investments to profit, gross
Transfer on sale of long term equity investments to profit, deferred tax
Transfer on impairment of long term equity investments to profit, gross
Transfer on impairment of long term equity investments to profit, deferred tax
Transfer of Exco Resources Limited to a controlled entity previously classified as
a long term equity investment, gross
Transfer of Exco Resources Limited to a controlled entity previously classified
as a long term equity investment, deferred tax
Share of associates increments
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
Share of associates increments
Balance 31 July
Share-based payments reserve
Balance 1 August
Share-based payment and option expense
Transfer to equity
Balance 31 July
Foreign currency translation reserve
Balance 1 August
Exchange difference on translation of foreign controlled entity and associates
Share of associates increments
Balance 31 July
Treasury share reserve
Balance 31 July
Equity reserve
Balance 1 August
Share of associates (decrements) and deferred taxes on associates
Balance 31 July
- 87 -
2014
$’000
2013
$’000
404,548
404,548
210,361
73,221
(19,414)
(15,994)
1,767
7,810
(2,427)
117,248
95,439
(33,896)
(67)
(54)
9,991
2,352
-
6,201
-
9,423
264,747
(1,864)
15,011
210,361
11,368
11,368
(18,181)
11,469
(3,701)
11,898
(3,570)
208
(1,877)
1,165
401
(1,041)
525
(2,494)
-
1,957
(537)
12,511
(34,767)
10,186
(8,894)
2,668
115
(18,181)
1,045
617
(497)
1,165
(3,028)
(3)
537
(2,494)
(327)
(327)
(9,191)
(3,832)
(13,023)
(4,652)
(4,539)
(9,191)
Notes to the Financial Statements (continued) For the year ended 31 July 2014
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.
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 the 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 the income statement when the associated hedged
transaction affects profit or loss.
Share-based payments reserve
The share-based payments 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 as issued by group or associate
entities. The reserve will be reversed against share capital in the relevant entity when the underlying shares vest with employees.
Equity reserve
This reserve includes the tax effect of movements in the carrying value of equity accounted associates where this movement
has been recognised directly in equity.
d) Retained profits movements
Increases in ownership of controlled entities
In accordance with AASB 10 Consolidated 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.
- 88 -
Notes to the Financial Statements (continued) For the year ended 31 July 2014
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
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 and interest rate swaps to hedge certain risk exposures.
Derivatives are used exclusively for hedging purposes, i.e. 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 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
Held for sale financial assets
Derivative financial instruments
Long term equity investments
Other financial assets
Total financial assets
Financial liabilities
Trade and other payables
Deposits accepted
Derivative financial instruments
Borrowings
Lease liabilities
Total financial liabilities
a) Market Risk
i. Foreign exchange risk
2014
$’000
2013
$’000
64,933
1,272,912
99,208
14,695
27,183
2,447
562,208
7,659
2,051,245
74,679
44,796
4,943
45,303
155
169,876
28,078
1,499,724
95,465
10,779
-
-
542,131
22,387
2,198,564
59,629
49,317
42,244
9,556
192
160,938
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 export coal sales risk management policy is to hedge up to 65% of anticipated transactions in US Dollars for the
subsequent year, up to 57% of anticipated revenue beyond a year but less than two years and up to 50% for revenue beyond
two years but less than three 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 US Dollar
- 89 -
2014
USD $’000
2013
USD $’000
26,596
18,003
168,000
12
212,611
5,919
21,575
412,000
-
439,494
Notes to the Financial Statements (continued) For the year ended 31 July 2014
NOTE 33. FINANCIAL RISK MANAGEMENT (continued)
a) Market Risk (continued)
Sensitivity analysis
Based on the trade receivables, cash held and trade payables at 31 July 2014, 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 $3.769 million/($3.165 million) (2013: $2.382 million/($1.998 million)), mainly as a result of foreign
exchange gains/(losses) on translation of US dollar receivables and cash balances as detailed in the above table. The Group's
equity as at reporting date would have increased/(decreased) by the same amounts.
Based on the forward exchange contracts held at 31 July 2014, 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 $20.314
million/($16.569 million) (2013: $41.820 million/($46.003 million)). There is no effect on post-tax profits. Equity in 2014 is less
sensitive to movements in the Australian dollar / USD exchange rates than in 2013 due to the decreased value of forward
exchange contracts in 2014.
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 long term equity investments, held for sale financial assets 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 in the statement of financial position as ‘long term equity investments’. As the
market value of individual companies fluctuate, the fair value of the portfolio changes with the movement being recognised
directly to equity. Where an investment’s value falls below its cost, management may consider the investment to be impaired.
An impairment expense is recognised in the income statement. Long term equity investments represent 14.6% (2013: 14.5%)
of the Group’s net assets.
Investments held for the short to medium term are classified in 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 0.4%
(2013: 0.3%) of the Group’s net assets.
Held for sale financial assets represent an investment in listed equities that is likely to be disposed of due to a takeover offer
being accepted by the majority of shareholders post year end.
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 may be recognised in the income statement where Directors consider the investment to be impaired. 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
2014
$’000
(600)
(75)
(675)
2013
$’000
(305)
(1,550)
(1,855)
Impact on reserves
2013
2014
$’000
$’000
-
(21,289)
(21,289)
-
(17,930)
(17,930)
Investments fair valued through profit and loss
Long term equity investments
Total
iii. Fair value interest rate risk
Refer to (e) below.
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.
- 90 -
Notes to the Financial Statements (continued) For the year ended 31 July 2014
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 33. FINANCIAL RISK MANAGEMENT (continued)
b) Credit Risk (continued)
Credit risk further arises in relation to financial guarantees given to certain parties (refer note 26e). 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 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
2014
$’000
64,933
2013
$’000
28,078
1,272,912
1,499,724
99,208
2,447
1,439,500
95,465
-
1,623,267
The loans and receivables balances as stated above reflect the recoverable value and are net of any impairments or provisions.
Refer notes 11 and 15 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, 15.7% (2013: 14.8%) 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
Details of financial facilities available are set out in note 26.
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 27.
The Group’s maturity analysis for other financial liabilities is described in note 26.
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 9 and 10 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 $9.365 million (2013: $10.695
million). This scenario assumes all cash and term deposits at balance date continue to remain invested for the whole year.
The Group is exposed to interest rate risk arising from long term borrowings. Long term borrowing facilities have been issued
at variable rates. The Group has hedged the majority of the Group’s exposure to cash flow interest rate risk by entering into
a derivative financial instrument, an interest rate swap, to effectively convert the variable interest rate facility into a fixed
interest rate facility. Refer to note 26c for further details.
- 91 -
Notes to the Financial Statements (continued) For the year ended 31 July 2014
NOTE 33. FINANCIAL RISK MANAGEMENT (continued)
f) Fair value estimation
The fair value of certain assets and liabilities must be estimated for recognition and measurement or for disclosure purposes.
Fair value hierarchy
Judgements and estimates are made in determining the fair values of assets and liabilities. To provide an indication of the
reliability of the inputs used in determining fair value, the Group categorises each asset and liability into one of the following
three levels as prescribed by accounting standards:
Level 1: Fair value is determined by reference to quoted prices (unadjusted) in active markets for identical assets or liabilities as
at the end of the reporting period.
Level 2: Fair value is determined by using valuation techniques incorporating observable market data inputs.
Level 3: Fair value is determined by using valuation techniques that rely on inputs that are not based on observable market data.
Fair value measurements
The following table presents the Group’s assets measured and recognised at fair value as at 31 July 2014 and 31 July 2013.
Level 1
$’000
11,992
27,183
562,205
-
-
-
601,380
-
-
-
8,714
542,128
-
-
550,842
As at 31 July 2014
Financial assets
Investments held for short to medium term fair
valued though profit and loss
Held for sale financial asset
Long term equity investments
Other financial assets – equity investments
Derivatives - Foreign exchange hedge
Non-financial assets
Investment properties
Total assets
Financial liabilities
Derivatives - Foreign exchange hedge
Derivatives – Interest rate swaps
Total liabilities
As at 31 July 2013
Financial assets
Investments held for short to medium term fair
valued through profit and loss
Long term equity investments
Other financial assets – equity investments
Non-financial assets
Investment properties
Total assets
Financial liabilities
Derivatives - Foreign exchange hedge
Derivatives – Interest rate swaps
Total liabilities
Note
13
14
17
18
27
20
27
27
13
17
18
20
27
27
- 92 -
Level 2
$’000
Level 3
$’000
-
-
-
-
2,447
-
2,447
3,255
1,688
4,943
-
-
-
-
-
2,703
-
3
7,659
-
139,421
149,786
-
-
-
2,065
3
22,387
50,223
74,678
-
-
-
-
-
-
41,428
816
42,244
Total
$’000
14,695
27,183
562,208
7,659
2,447
139,421
753,613
3,255
1,688
4,943
10,779
542,131
22,387
50,223
625,520
41,428
816
42,244
Notes to the Financial Statements (continued) For the year ended 31 July 2014
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 33. FINANCIAL RISK MANAGEMENT (continued)
The following table presents the changes in level 3 financial assets and liabilities for the years ended 31 July 2014 and 31 July
2013. Changes in Investment properties are included in note 20.
Level 3 - Financial assets
Unlisted equity
securities fair
valued through
profit and loss
Unlisted long term
equity investments
fair valued through
equity
Opening balance 1 August 2012
Acquisitions
Impairment expense
Closing balance 31 July 2013
Additions
Transfer (to) Level 1 (listed equities)
Impairment expense
Transfer to Equity accounted associate
Closing balance 31 July 2014
$’000
1,662
403
-
2,065
800
(162)
-
-
2,703
$’000
3
-
-
3
-
-
-
-
3
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
For contingent liabilities relating to associates refer to note 38e.
Other
Financial
assets
$’000
17,601
9,786
(5,000)
22,387
2,177
-
(5,338)
(11,567)
7,659
Total
$’000
19,266
10,189
(5,000)
24,455
2,977
(162)
(5,338)
(11,567)
10,365
2014
$’000
2013
$’000
19,206
19,196
10,049
29,255
10,049
29,245
- 93 -
Notes to the Financial Statements (continued) For the year ended 31 July 2014
NOTE 35. COMMITMENTS FOR EXPENDITURE
a) Capital commitments
Capital expenditure contracted for at the reporting date
Property, plant and equipment and investment properties under development
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 fifteen 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
ii. Finance leases
The Consolidated entity leases various plant and equipment under finance
leases expiring within one to five years.
Commitments for minimum lease payments in relation to finance leases
are payable as follows:
Within one year
Later than one year but not later than five years
Future finance charges
Recognise as a liability
Representing lease liabilities:
Current (note 25)
Non-current (note 26)
The weighted average interest rate implicit in the leases is 7.74% per annum (2013: 9.04%)
For commitments relating to associates refer to note 38d.
2014
$’000
2013
$’000
24,301
82,983
6,966
23,562
48,915
79,443
7,137
15,928
48,012
71,077
34
138
172
(17)
155
33
122
155
106
99
205
(13)
192
98
94
192
- 94 -
Notes to the Financial Statements (continued) For the year ended 31 July 2014
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
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
Investments fair valued through profit and loss
Current tax asset
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
Provisions
Total current liabilities
Non-current liabilities
Interest bearing 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 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
- 95 -
2014
$’000
3,583
163,000
11,213
1,136
14,695
-
193,627
95,249
560,324
782,377
2,598
50,233
1,490,781
1,684,408
1,258
44,877
684
46,819
18,686
60,901
2,249
81,836
2013
$’000
2,182
226,000
14,114
1,064
10,779
3,277
257,416
69,653
512,287
695,354
2,789
27,331
1,307,414
1,564,830
1,069
69,065
720
70,854
-
40,217
2,057
42,274
128,655
1,555,753
113,128
1,451,702
43,232
43,232
402,206
208,911
901,404
1,555,753
402,206
166,360
839,904
1,451,702
174,016
194,931
42,551
216,567
80,925
275,856
Notes to the Financial Statements (continued) For the year ended 31 July 2014
NOTE 36. PARENT ENTITY FINANCIAL INFORMATION (continued)
b) Guarantees entered into by the Parent entity
During the prior year, the Parent entity provided a guarantee for an environmental bond of $504,000 to CopperChem Limited.
Total guarantees provided by the Parent entity for CopperChem Limited amount to $4.374 million.
No further guarantees were provided by the Parent entity during the current financial year.
c) Contingent liabilities of the Parent entity
The Parent entity did not have any contingent liabilities as at 31 July 2014 or 31 July 2013.
d) Contractual commitments for the acquisition of property, plant or equipment
The Parent entity did not have any contractual commitments as at 31 July 2014 or 31 July 2013.
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*
Exco Resources Limited*
Boomara Mines Pty Limited*
Eliza Creek Mines Limited*
Exco Cloncurry Operations Pty Limited*
Exco Operations (SA) Limited*
Exco Resources (QLD) Pty Limited*
Exco Resources (SA) Pty Limited*
Exco Resources (WA) Pty Limited*
Mitchell River Exploration Pty Limited*
Polymetals (White Dam) Pty Limited*
Polymetals Operations Pty Limited*
CopperChem Limited
Souls Private Equity Limited*
PCP Holdings 1 Pty. Limited*
PCP Holdings 2 Pty. Limited*
Cromford Group Pty. Limited*
Cromford Pipe Pty Limited*
Food and Beverage Company Limited
Austgrains Pty Limited
Pitt Capital Partners Limited
Corporate & Administrative Services Pty. Ltd
Pitt Capital Nominees Pty. Ltd
Pitt Street Real Estate Partners Pty Limited
ALPF Head Trust Company Pty. Limited
Pitt Street Real Estate #1 Pty Limited
Australian Logistics Property Fund*
ALPF No. 1 SRG Sydney Trust*
ALPF No. 2 SRG Brisbane Trust*
PSRE No. 8 Dev Co Pty Limited*
Country of
incorporation
Equity holding
in subsidiaries
2014
%
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
-
100.0
100.0
100.0
75.0
100.0
100.0
100.0
100.0
100.0
100.0
2013
%
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
51.0
100.0
100.0
100.0
75.0
100.0
100.0
100.0
100.0
100.0
-
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
- 96 -
Notes to the Financial Statements (continued) For the year ended 31 July 2014
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 37. SUBSIDIARIES (continued)
Name of entity
b) Controlled entities (continued)
PSRE 46 Carrington Road Trust*
New Hope Corporation Limited*
Jeebropilly Collieries Pty. Limited*
Fowlers Engineering Pty. Limited*
Tivoli Coal (Hawaii) Pty. Limited*
New Hope Collieries Pty. Limited*
Tivoli Collieries Pty. Limited*
Andrew Wright Holdings Pty. Limited*
Tetard Holdings Pty. Limited*
Queensland Bulk Handling Pty. Limited
New Oakleigh Coal Pty. Limited*
New Hope Exploration Pty. Limited*
Seven Mile Coal Pty. Limited*
New Acland Coal Pty. Limited*
Acland Pastoral Co. Pty Limited*
Arkdale Pty. Limited*
New Lenton Coal Pty. Limited*
New Saraji Coal Pty. Limited*
New Hope Water Pty. Limited*
New Hope Coal Marketing Pty. Limited*
New Hope Energy Pty. Limited*
New Hope Energy (USA) Inc
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*
Elimatta Pastrol Pty Limited*
Elmsvale Pty Limited*
Bridgeport Energy Limited*
Bridgeport Drilling Pty Limited*
Bridgeport Eromanga Pty Limited*
Bridgeport Energy (QLD) Pty Limited*
Bridgeport (Cooper Basin) Pty Limited*
Oilwells Inc of Kentucky (Sole Risk) Pty Limited*
Oilwells Inc of Kentucky
Country of
incorporation
Equity holding
in subsidiaries
2014
%
100.0
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
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
59.7
59.7
59.7
59.7
59.7
59.7
59.7
59.7
59.7
59.7
59.7
59.7
2013
%
-
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
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
59.7
59.7
59.7
59.7
59.7
59.7
59.7
59.7
59.7
59.7
59.7
59.7
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
USA
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
USA
*Companies marked with an asterisk are part of tax consolidation groups.
- 97 -
Notes to the Financial Statements (continued) For the year ended 31 July 2014
NOTE 37. SUBSIDIARIES (continued)
c) Acquisition of controlled entities
i) Acquisitions during the year included:
The Group did not acquire control of any entities during the year ended 31 July 2014.
ii) Details of acquisitions completed during the prior year include:
During the year ended 31 July 2013, the Group acquired control of the following entities:
Bridgeport Energy Limited – held by a subsidiary of New Hope Corporation Limited
On 1 August 2012, New Hope Corporation Limited's wholly owned subsidiary, Mattvale Pty Ltd, acquired 69.62% of the issued
share capital of Bridgeport Energy Limited. Bridgeport Energy Limited is an oil and gas exploration company with interests in
a portfolio of projects in Queensland that are being progressed towards development.
Details of the purchase consideration and the net assets acquired are as follows:
Purchase consideration (refer below (i))
Previously held interest
Revaluation of previous interest to $0.41 cents per share
Cash paid – current year
The assets and liabilities recognised as a result of the acquisition are as follows:
Cash
Trade receivables
Term deposits
Other receivables and prepayments
Inventory
Oil producing assets
Exploration assets
Property, plant and equipment
Accounts payables
Provisions
Deferred tax liabilities
Net identifiable assets acquired
Add: Goodwill
Net assets acquired
2013
$’000
18,876
4,109
45,488
68,473
Fair Value
$’000
1,228
685
838
157
87
47,512
16,807
1,118
(968)
(1,768)
(1,380)
64,316
4,157
68,473
Goodwill arising on consolidation of $4.157 million 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. None of the goodwill is expected to be deductible for tax purposes.
Revenue and profit contribution
The revenues and profits contributed by Bridgeport Energy Limited to WHSP consolidated revenues and profits for the full year
ended 31 July 2013 are considered to be of an immaterial nature.
(i). Purchase consideration
Outflow of cash to acquire subsidiary, net of cash acquired
Total cash consideration
Less: Cash balances acquired
Outflow of cash – investing activities
- 98 -
2013
$’000
45,488
(1,228)
44,260
Notes to the Financial Statements (continued) For the year ended 31 July 2014
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 37. SUBSIDIARIES (continued)
c) Acquisition of controlled entities (continued)
Bridgeport Energy Limited – held by a subsidiary of New Hope Corporation Limited (continued)
Acquisition related costs
Acquisition costs of $3.199 million are included in other expenses in the income statement and in operating cash flows in the
statement of cash flows.
Exco Resources Limited (Exco) – held by WHSP
On 9 November 2012, Washington H. Soul Pattinson and Company Limited’s (WHSP) holding in Exco had increased to 90%.
As a result, WHSP was required to acquire the remaining shares in Exco which it did not already own. The acquisition was
completed by 28 December 2012.
Exco is an exploration and mining company with exploration interests in northwest Queensland and a gold mine at White Dam
in South Australia.
Details of the purchase consideration and the net assets acquired are as follows:
Purchase consideration (refer below (i))
Previously held interest
Revaluation of previous interest to $0.265 cents per share
Cash paid
The assets and liabilities recognised as a result of the acquisition are as follows:
Cash
Trade and other receivables
Inventory
Property, plant and equipment
Exploration and evaluation assets
Deferred tax asset
Trade and other payables
Income tax payable
Provisions
Deferred tax liability
Net identifiable assets acquired
Revenue and profit contribution
2013
$’000
11,366
7,410
78,555
97,331
Fair Value
$’000
51,353
2,829
2,859
1,713
46,871
806
(4,534)
(3,442)
(830)
(294)
97,331
The revenues and profits contributed by Exco to WHSP consolidated revenues and profits for the full year ended 31 July 2013
are considered to be of an immaterial nature.
(i). Purchase consideration
Outflow of cash to acquire subsidiary, net of cash acquired
Total cash consideration
Less: Cash balances acquired
Outflow of cash – investing activities
Acquisition related costs
2013
$’000
78,555
(51,353)
27,202
There were no external acquisition costs included in other expenses in the income statement and in operating cash flows in the
statement of cash flows.
- 99 -
Notes to the Financial Statements (continued) For the year ended 31 July 2014
NOTE 37. SUBSIDIARIES (continued)
d) New Group entities
i) Transactions during the year
PSRE 46 Carrington Road Trust – held by WHSP
On 31 March 2014, Washington H. Soul Pattinson and Company Limited established PSRE 46 Carrington Road Trust. The trust
was established to purchase and hold the industrial property situated at 46 Carrington Road, Castle Hill. This property is
classified as an investment property. Refer to note 20 for further information.
ii) Transactions during the the prior year
Australian Logistics Property Fund – held by WHSP
In the prior year, on 27 February 2013, Washington H. Soul Pattinson and Company Limited established the Australian Logistics
Property Fund to construct distribution centres in Sydney and Brisbane which will be leased to Super Retail Group Limited. The
Sydney distribution centre was completed and leased in December 2013. Brisbane distribution centre was currently under
construction as at 31 July 2014.
e) Loss of control and disposals of controlled entities
i) Transactions during the year:
On 18 June 2014, a controlled entity of Washington H Soul Pattinson and Company, Souls Private Equity Limited finalised the
disposal of Austgrains Limited.
ii) Transactions during the prior year:
The Group did not dispose of any controlled entities during the prior year.
f) Changes in ownership of controlled entities
i) Transactions during the year:
The Group did not change ownership of any controlled entities during the current year.
ii) Changes in ownership of controlled entities in the prior year
Washington H. Soul Pattinson and Company Limited’s - Increase in share holding of CopperChem Limited
On 27 May 2013, Washington H. Soul Pattinson and Company Limited’s shareholding in CopperChem Limited increased from
93.4% to 100% on acquisition of the remaining ordinary shares for $3 million. The acquisition was recognised by the Group
as an increase in non-controlling interests of $1.897 million and decrease in equity attributable to owners of $4.897 million.
- 100 -
Notes to the Financial Statements (continued) For the year ended 31 July 2014
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 37. SUBSIDIARIES (continued)
g) Deed of cross guarantee
During 2012, Washington H. Soul Pattinson and Company Limited and Souls Private Equity Limited entered into a deed of cross
guarantee under which each company guarantees the debts of the other. During 2013, Exco Resources Limited and its wholly-
owned subsidiaries became party to the deed of cross guarantee.
By entering into the deed, Souls Private Equity Limited and Exco Resources Limited are relieved from the requirements to prepare
a financial report and directors’ report under Class Order 98/1418 (as amended) issued by the Australian Securities and
Investments Commission.
i) Consolidated income statement, statement of comprehensive income and summary of movements in
consolidated retained profits and consolidated balance sheet
The above companies represent a ‘closed group’ for the purposes of the Class Order, and as there are no other parties to the
deed of cross guarantee that are controlled by Washington H. Soul Pattinson and Company Limited, they also represent the
‘extended closed group’.
Set out below is a consolidated income statement, a consolidated statement of comprehensive income, a summary of
movements in consolidated retained earnings for the year ended 31 July 2014 of the closed group and a consolidated balance
sheet as at 31 July 2014 for the closed group.
Consolidated income statement – closed group
Profit before income tax
Income tax benefit/(expense)
Profit after income tax
Profit after tax attributable to parties outside the closed group
2014
$’000
166,044
3,514
169,558
-
2013
$’000
210,903
(1,105)
209,798
-
Profit after tax attributable to closed group
169,558
209,798
Other comprehensive income
Net movement in fair value of long term equity investments, net of tax
Share of other comprehensive income movements, net of tax
Total other comprehensive income for the year, net of tax
51,970
(1,672)
50,298
95,935
(4,023)
91,912
Total comprehensive income attributable to the closed group
219,856
301,710
Summary of movements in consolidated retained earnings
Retained profits attributable to the closed group
Retained profits at the beginning of the year
Profit for the year
Dividends declared and paid
Retained profits at the end of the year
1,165,655
1,043,150
169,558
(91,185)
209,798
(87,293)
1,244,028
1,165,655
- 101 -
Notes to the Financial Statements (continued) For the year ended 31 July 2014
NOTE 37. SUBSIDIARIES (continued)
g) Deed of cross guarantee (continued)
Consolidated balance sheet – closed group
Current assets
Cash and cash equivalents
Term deposits
Trade and other receivables
Inventories
Investments fair valued through profit and loss
Current tax asset
Total current assets
Non-current assets
Trade and other receivables
Equity accounted associates
Long term equity investments
Other financial assets
Property, plant and equipment
Exploration and evaluation costs
Deferred tax assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Interest bearing 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
Total equity
- 102 -
2014
$’000
2013
$’000
3,835
202,121
10,861
2,512
14,695
-
2,299
266,500
16,762
3,017
10,779
3,391
234,024
302,748
99,559
948,452
559,952
167,904
10,761
59,459
28,373
106,019
821,956
511,916
129,726
5,888
52,298
28,491
1,874,460
2,108,484
1,656,294
1,959,042
9,852
44,877
2,242
56,971
133,178
2,249
135,427
192,398
1,916,086
43,232
628,826
1,244,028
1,916,086
2,578
51,293
1,446
55,317
114,253
2,057
116,310
171,627
1,787,415
43,232
578,528
1,165,655
1,787,415
Notes to the Financial Statements (continued) For the year ended 31 July 2014
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
Reclassification of unlisted investment to equity accounted associate
Bridgeport Energy Limited transferred from an equity accounted associate to a
controlled entity
Gain on deemed disposal of equity accounted associates
Fair value gain on acquisition of an equity accounted associates
Other equity accounted associate transferred (to) controlled entity
Share of profits after income tax, before write downs
Impairment reversal/(expense) of equity accounted associate
Dividends received/receivable
Add back share of dividends received by associate
Share of associates increment in reserves
Disposal of equity accounted associates
Carrying amount at 31 July
c) Summarised share of associates financial information
Assets
Liabilities
Net assets
Revenue
Profit before income tax
Income tax expense
Profit after income tax
2014
$’000
813,648
36,603
11,567
-
994
6,048
-
56,018
45,331
(58,213)
21,331
12,042
(643)
944,726
2013
$’000
782,506
49,630
-
(68,473)
737
-
(354)
78,997
(2,538)
(54,644)
20,435
15,789
(8,437)
813,648
2,202,945
(841,822)
1,361,123
2,025,426
(727,478)
1,297,948
1,809,441
1,710,542
89,285
(33,267)
56,018
106,820
(27,823)
78,997
- 103 -
Notes to the Financial Statements (continued) For the year ended 31 July 2014
NOTE 38.
INVESTMENTS IN ASSOCIATES (continued)
c) Summarised share of associates financial information (continued)
The tables below provides summarised financial information for those associates that are material to the Group. The
information disclosed reflects the amounts presented in the financial statements of the relevant associates, amended to reflect
adjustments made by the Group in applying the equity method.
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets
Brickworks Limited
TPG Telecom Limited
2014
$’000
317,364
994,223
(157,545)
(332,488)
2013
$’000
307,240
950,029
2014
$’000
221,459
1,287,835
2013
$’000
154,516
844,300
(166,591)
(257,840)
(194,836)
(312,100)
(419,032)
(88,014)
821,554
778,578
832,422
715,966
Group’s percentage holding
44.34%
44.41%
26.88%
26.88%
Group’s share of total net assets
Goodwill
Equity accounted carrying value
$’000
364,277
14,139
378,416
$’000
345,766
14,808
360,574
$’000
223,755
1,119
224,874
$’000
192,452
1,119
193,571
Revenue
670,268
606,509
970,920
724,533
Profit after tax from continuing operations
Other comprehensive income
Total comprehensive income
Dividends received by WHSP from the associate
102,755
20,866
123,621
26,915
85,165
19,335
104,500
26,586
Refer to note 38 (f) for associates profit contributions to the Group.
d) Share of associates’ expenditure commitments
Capital commitments
Lease commitments
e) Contingent liabilities of associates
Share of contingent liabilities incurred jointly with other investors
of the associate
171,679
12,573
184,252
18,139
2014
$’000
20,428
149,741
149,165
24,458
173,623
13,338
2013
$’000
17,532
135,764
17,768
10,369
- 104 -
Notes to the Financial Statements (continued) For the year ended 31 July 2014
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 38.
INVESTMENTS IN ASSOCIATES (continued)
f) Details of investments and results in associates
Name and principal activity
Associates – held by WHSP
Apex Healthcare Berhad
Balance
date
Group’s percentage of
holding at balance dates
Contribution to
Group net profit
Fair value of
listed investments
Balance date
Company
2014
%
2013
%
Balance date
Associate
2014
%
2013
%
2014
$’000
2013
$’000
2014
$’000
2013
$’000
Pharmaceutical manufacturer and distributor
31 Dec
30.3
30.3
30.3
30.3
3,144
2,921
46,201
46,970
Australian Pharmaceutical Industries Limited
Pharmaceutical wholesaler
BKI Investment Company Limited (i)
Listed investment company
Brickworks Limited (ii)
31 Aug
24.6
24.6
24.6
24.6
(24,875)
6,115
72,129
52,895
30 June
11.8
13.0
11.8
13.0
4,491
4,422
104,974
92,611
Manufacturer of clay products
31 July
44.3
44.4
44.3
44.4
23,261
13,632
938,725 800,871
Clover Corporation Limited
Refinement and processing of natural oil
31 July
28.6
28.6
28.6
28.6
276
1,735
19,808
25,467
KH Roberts Group Pte Ltd. (iii)
Manufacturer of flavours, essences and colours
31 July
-
-
-
-
-
586
n/a
n/a
Ruralco Holdings Limited (iv)
Rural supplies and services
TPG Telecom Limited
30 Sept
20.6
23.5
20.6
23.5
1,331
790
54,860
40,757
Telecommunications and internet provider
31 July
26.9
26.9
26.9
26.9
46,153
40,169 1,179,972
783,181
TPI Enterprises Limited (v)
Manufacturer of concentrate of poppy straw
31 Dec
19.4
-
19.4
-
-
-
n/a
n/a
Associates – held by 100% controlled entities
Ampcontrol Pty Limited
Supplier of electrical and electronic products
30 June
43.3
43.3
43.3
43.3
1,288
6,855
411
935
96
208
393
-
7
230
(87)
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
Belaroma Coffee Pty Ltd
Coffee roaster and distributor
InterRISK Australia Pty Ltd (vi)
Insurance broker
Heritage Brands Limited
30 June
40.0
40.0
40.0
40.0
563
30 June
-
-
-
-
Distribution of hair care and skin care products
30 June
25.1
25.1
25.1
25.1
Specialist Oncology Property Pty Limited (vii)
Specialist medical services
Supercorp Pty Limited (viii)
30 June
25.5
26.1
25.5
26.1
Financial services administration
30 June
29.4
34.6
29.4
34.6
Syndicated Metals Limited (ix)
Explorator/developer of copper-gold deposits
30 June
18.9
Pitt Street Real Estate Partners Pty Limited (x)
Property investment advisory service
31 July
-
-
-
18.9
-
-
-
(141)
-
2,495
-
(28)
n/a
Associate – held by 75% controlled entity
Xact Property Solutions Pty Limited
Property management services
Associates – held by New Hope
Corporation Limited
Quantex Energy Inc (xi)
30 June
33.8
33.8
33.8
33.8
377
143
n/a
n/a
Developing Coal to liquid oil technologies
31 July
Quantex Research Inc (xi)
Researching Coal to liquid oil technologies
31 July
-
-
25.0
25.0
-
-
25.0
25.0
-
-
(386)
-
n/a
n/a
n/a
n/a
Share of results from equity accounted
associates before impairment
Impairment reversal/(expense)
- Australian Pharmaceutical Industries Limited
- Quantex Energy Inc
- Other associates
Total impairment reversal/(expense)
of investment in associates
Share of results and impairment from
equity accounted associates
56,018
78,997
44,373
10,614
-
(13,286)
958
134
45,331
(2,538)
101,349
76,459
- 105 -
Notes to the Financial Statements (continued) For the year ended 31 July 2014
NOTE 38.
INVESTMENTS IN ASSOCIATES (continued)
f) Details of investments and results in associates (continued)
All associates are incorporated in Australia except for Apex Healthcare Berhad (incorporated in Malaysia), KH Roberts Group
Pte Ltd (incorporated in Singapore), and Quantex Energy Inc and Quantex Research Inc (both incorporated in Canada).
The percentage holding of each Associate represents the Group’s total holding in each associate.
Contribution to Group net profit represents the amount included in profit after tax including the non-controlling interest’s
share.
(i) During the year, WHSP did not participate in BKI Investment Company Limited’s (BKI) dividend reinvestment plans issued
on 28 August 2013 and 27 February 2014.
On 5 September 2013, BKI announced a placement to sophisticated and professional investors of which WHSP did not
participate and a non-renounceable entitlement offer to eligible shareholders for which WHSP did participate.
On 4 April 2014, BKI issued shares as part of an acquisition of an unlisted investment company.
As a result of these issues of shares, WHSP decreased its shareholding from 13.0% (31 July 2013) to 11.8%.
(ii) On 27 September 2013, Brickworks Limited issued shares as part of its employee share scheme. As a result of this
transaction, WHSP’s percentage holding in Brickworks decreased by 0.07% to 44.34%.
(iii)
In the prior year, on 2 May 2013, WHSP disposed of its equity accounted associate, KH Roberts Group Pte Ltd.
(iv) On 18 December 2013, Ruralco Holdings Limited (RHL) issued shares as part of an institutional placement of which WHSP
did not participate. As a result of this placement, WHSP decreased its shareholding from 23.5% to 20.6%.
On 21 February 2014, RHL announced a non-renounceable pro-rata entitlement offer for new shares in RHL of which
WHSP participated. As a result of this new issue of shares, WHSP’s shareholding was maintained at 20.6%.
(v) On 28 January 2014, TPI Enterprises Limited (TPI) issued shares as part of a capital raising of which WHSP participated. As
a result of the capital raising, WHSP’s shareholding increased to 19.4%. In addition, WHSP has one Director on the TPI
Board. WHSP recognised TPI as an associate from this date.
(vi)
In the prior year, on 12 June 2013, a controlled entity of WHSP, Souls Private Equity Limited (SPEL), disposed of an equity
accounted associate, InterRISK Australia Pty Ltd and recognised a net gain after tax of $2.5 million.
(vii) At various times throughout the period, Specialist Oncology Property Limited issued shares to medical practitioners
operating in its facilities, diluting the shareholding held by WHSP.
(viii) In August 2013, a controlled entity of WHSP, Souls Private Equity Limited’s (SPEL) shareholding in Supercorp Pty Limited
was diluted from 34.6% to 29.4% as a result of an issue of shares to a new shareholder.
(ix) On 16 September 2013, Syndicated Metals Limited (Syndicated) announced a joint venture with CopperChem Limited
(CopperChem), a controlled entity of WHSP. As part of a broader agreement between the two parties, Copperchem
participated in a share placement and agreed to an off-market purchase of shares from an existing shareholding owning
7%. As a result of these two transactions, CopperChem’s shareholding at 31 July 2014 was 18.9% and Syndicated is
therefore deemed to be an associate. WHSP has one Director on the Syndicated Board. Results from Syndicated have been
equity accounted.
(x) During the prior year ended 31 July 2013, a controlled entity of WHSP, Pitt Capital Partners Limited, increased its interest
in Pitt Street Real Estate Partners Pty Limited from 50% to 75%. From this date, Pitt Street Real Estate Partners Pty Limited
was accounted for as a controlled entity.
(xi) During the period, a controlled entity of WHSP, New Hope Corporation Limited, disposed of Quantex Energy and Quantex
Research Corporation. From 10 March 2014, both entities were no longer accounted for as equity accounted associates.
g) Fair value
The recoverable amount of investments in equity accounted associates is reviewed at each reporting date after taking into
consideration of any applicable impairment indicators. During the year ended 31 July 2014, $45.331 million (2013: $10.748
million) of previously recognised impairment has been reversed. During the prior year, an impairment expense of $13.289
million was recognised in relation to Quantex Energy Inc.
The fair value of listed equity accounted investments represents 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.
- 106 -
Notes to the Financial Statements (continued) For the year ended 31 July 2014
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 39.
INTERESTS IN JOINT ARRANGEMENTS
a) Lenton Joint Venture
A subsidiary of New Hope Corporation Limited has entered into a joint venture to develop the Lenton project. The subsidiary
has a 90% participating interest in this joint venture and is entitled to 90% of the output of the Lenton project. The Group's
interests employed in the joint venture are included in the statement of financial position, in accordance with the accounting
policy described in note 1(b).
b) Taroom-Yamala Joint Venture
In March 2006, New Hope 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
$5.80 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 $5.80 million farm-in, the external company will have the option to acquire a further 19% joint venture interest
for $6.65 million.
As at 31 July 2014 the concept study for establishment of a mine within the tenement had been completed along with the
funding of the $5.80 million farm-in and the external company had earned a 30% interest in the project. At 31 July 2014 $nil
is carried as exploration expenditure in relation to EPC927.
c) Utopia Joint Venture
A subsidiary of New Hope Corporation has a 60% interest in the Utopia Joint Venture. The principal activity of this joint
operation is to extract oil from PL 124 of which the subsidiary is entitled to 60% of the output. The joint venture also conducts
oil exploration on ATP 560 of which the subsidiary is entitled to 60% of the output. The Group’s interests in the joint operation
are included in the statement of financial position in accordance with the accounting policy described in note 1(b).
d) Cuisiner Joint Venture
During the year, a subsidiary of New Hope Corporation Limited entered into a joint operation in relation to the Cuisiner project.
The principal activity of this joint operation is to extract oil from PL 303. This project also includes the Barta project which
conducts oil exploration on ATP752 Barta and the Wompi project which conducts oil exploration on ATP752 Wompi. The
subsidiary has a 15% participating interest in Cusinier and Barta projects of 17.5% in the Wompi project and is entitled to 15%
and 17.5% of the output respectively. The Group’s interests in the joint operation are included in the statement of financial
position in accordance with the accounting policy described in note 1(b).
e) Barbara Joint Venture
During the year, a subsidiary of WHSP, CopperChem Limited entered into a joint venture to explore and develop the Barbara
Copper-Gold project. The subsidiary has an earn in agreement with the external company to acquire 50% share of the Barbara
project. The subsidiary is funding and managing a Feasibility Study over the Barbara project up to a decision to mine the
tenements. The subsidiary is also funding 50% share of the exploration expenditure in surrounding prospects.
As at 31 July 2014 the concept study for establishment of a mine within the Barbara project tenement had not been completed
and the subsidiary continues to meet costs associated with the earn in of 50% share of the Barbara project. At 31 July 2014
$1.03 million is carried as exploration expenditure in relation to EPM 16112 and 15564.
- 107 -
Notes to the Financial Statements (continued) For the year ended 31 July 2014
NOTE 40. RELATED PARTIES
a) Parent entity
The ultimate Parent entity is Washington H. Soul Pattinson and Company Limited.
b) Subsidiaries, Associates and Joint arrangements
Interests in Subsidiaries, Associates and Joint Arrangements are set out in note 37, note 38 and note 39 respectively.
c) Key management personnel (KMP) compensation
Short-term employee benefits
Post-employment benefits
Long-term employee benefits
Termination benefits
Share-based payments
Paid to KMP of the
Consolidated entity
2013
2014
$’000
$’000
7,552
7,439
263
178
176
683
8,852
247
93
203
1,259
9,241
Paid to KMP of the
Parent entity
2014
$’000
3,315
199
50
-
-
2013
$’000
3,223
181
61
203
-
3,564
3,668
Key management personnel remuneration has been included in the Remuneration Report section of the Directors’ Report on
pages 25 to 34.
d) Related parties transactions and balances
Details of loans to and transactions with key management personnel are included in the Directors report on page 26.
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 parent entities and subsidiaries, are eliminated on consolidation and are not disclosed in this note.
ii. Associates
Transactions with associates are at normal commercial terms and conditions.
Transactions consist of the supply of pharmaceutical products to the Parent entity, advisory, consulting, underwriting,
management fees, rent and insurance commissions received from/paid to associates, loans advanced and repaid, interest and
dividend payments.
Summary of transactions
Advisory, consulting, underwriting and management fees:
- received by subsidiaries from associates
- received by associates from subsidiaries
- rent income received by Parent entity from associate
Purchases of pharmaceutical products from associate
Insurance commissions paid by Parent entity/subsidiaries to associate
Interest income from associate
2014
$’000
2,194
8,678
10
5,472
-
198
2013
$’000
1,537
1,516
7
5,653
211
101
- 108 -
Notes to the Financial Statements (continued) For the year ended 31 July 2014
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 40. RELATED PARTIES (continued)
Unrealised profits and losses resulting from transactions between the Consolidated entity and an associate are eliminated to
the extent of the Consolidated entity’s interest in the associate.
Xact Property Solutions Pty Limited (XPS), is an equity accounted associate of the controlled entity PCP. XPS provided project
management and related services for the properties under development that are held within the 100% controlled entity,
Australian Property Logistics Fund (ALPF).
These costs are capitalised in the carrying value of the investment properties and recognised in XPS as income. During the
current year, fees incurred by ALPF totalled $8.678 million (2013: $1.076 million). As a result of the Group’s 45% holding in
XPS, 45% of these fees, being $2.928 million (2013: $484,000) cannot be recognised by XPS as income until such time that
the investment property is no longer controlled by the Group. This amount has therefore been excluded from both current
year income of the associate and from capitalised costs of the investment property.
Loans to associates
During the year, the Parent entity converted a loan balance of $10,750,000 owed from TPI Enterprises Limited (TPI) to equity.
Outstanding accrued interest of $215,480 was repaid. Interest was charged at market rates.
During the prior year, Pitt Capital Partners Limited provided a loan to Pitt Street Real Estate Partners Pty Limited (PSREP) (75%
owned by PCP) of $1.262 million (2013: $1.194 million). Pitt Street Real Estate Partners Pty Limited became a controlled entity
as of 26 April 2013.
During the prior year, the Parent entity was repaid the outstanding loan balance of $127,000 and interest of $10,123 from KH
Roberts Private Limited. Interest was charged at market rates.
NOTE 41. 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
Tax compliance services
Other auditors
Transaction advisory services
Tax compliance services
Other services
2014
$’000
2013
$’000
479
511
990
176
436
140
280
531
434
965
170
421
433
334
Total remuneration for other services
1,032
1,358
- 109 -
2014
$’000
2013
$’000
155,588
134,252
77,095
(21,374)
-
-
(38,518)
(84)
(16,781)
684
146
1,157
(6,048)
-
(257)
(994)
59,387
58,827
144
(1)
359
(184)
-
1,259
(24,353)
(2,895)
-
(5,319)
(2,065)
(737)
(37,723)
4,804
(2,313)
17,150
(4,401)
(4,322)
18,842
(1,789)
208,922
Notes to the Financial Statements (continued) For the year ended 31 July 2014
NOTE 42. RECONCILIATION OF PROFIT AFTER INCOME TAX TO NET CASH INFLOW FROM OPERATING
ACTIVITIES
Profit after tax for the year
Adjustments for non-cash items:
Depreciation and amortisation
Impairment (reversals)/charges
Bad and doubtful debts
Dividends received (non-cash)
Net (gain)/losses on disposal of long term equity investments
Net (profit) on sale of non-current assets
Fair value (gain) on revaluation of investment properties
Share based payments
Share of losses/(profits) of associates not received as dividends or distributions
Net exchange losses/(gain)
Fair value (gain) on acquisition of equity accounted entity
(Gain) on acquisition of controlled entity
Net (profit) on sale of equity accounted associate
(Gain) on deemed disposal of associate
Changes in operating assets and liabilities, net of effects from purchase and sales of business
(Increase) in trade debtors, other debtors and prepayments
Decrease in inventory
Increase/(decrease) in trade creditors and accruals
Increase in employee entitlements, other liabilities and provisions
Decrease/(increase) in current tax asset
(Decrease) in current tax payable
Increase in deferred tax liability
(Increase) in deferred tax asset
Net cash inflow from operating activities
NOTE 43. SHARE-BASED PAYMENTS
(3,400)
7,276
13,038
4,770
708
(18,863)
36,733
(15,287)
175,589
New Hope Corporation Limited grants rights under the New Hope Corporation Ltd Employee Performance Rights Share Plan.
Membership of the Plan is open to those senior employees and those Directors 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.
Rights are granted for no consideration. Rights will vest and automatically convert to ordinary shares in New Hope Corporation
Limited following the satisfaction of the relevant service conditions. Service conditions applicable to each issue of rights are
determined by the New Hope Corporation Limited’s Board at the time of the grant. Total expense arising from rights issued
under the employee performance share rights plan during the financial year was $684,000 (2013: $1.259 million).
- 110 -
Notes to the Financial Statements (continued) For the year ended 31 July 2014
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
NOTE 43. SHARE-BASED PAYMENTS (continued)
Performance rights
Set out below are the summaries of rights granted under the plan:
As at 1 August
Granted during the year
Exercised during the year
As at 31 July
2014
2013
Average
price per
share
$4.774
-
$4.806
$4.694
Number
of rights
518,202
-
(369,760)
148,442
Average
exercise price
per share
$5.587
$4.030
$5.489
$4.774
Number
of rights
389,751
280,269
(151,818)
518,202
The weighted average share price at the date of exercise of rights vested during the 2014 year was $3.56 (2013:$4.02)
Share rights outstanding at the end of the year have the following expiry date and fair value at grant date:
Grant date
27 Oct 2011
27 Oct 2011
17 Dec 2011
17 Dec 2011
17 Dec 2011
17 Dec 2012
17 Dec 2012
17 Dec 2012
17 Dec 2012
15 Nov 2013
15 Nov 2013
15 Nov 2013
Total
Vesting
date
Value of
right at
grant date
Share Rights
1 Aug 2013
1 Aug 2014
1 Aug 2013
1 Aug 2014
1 Aug 2015
1 Aug 2013
1 Aug 2014
1 Aug 2015
1 Aug 2016
1 Dec 2013
1 Jan 2014
1 Jan 2015
$5.170
$5.170
$6.020
$6.020
$6.020
$4.030
$4.030
$4.030
$4.030
$4.030
$4.030
$4.030
2014
number
-
15,060
-
20,447
20,447
-
30,830
30,830
30,828
-
-
-
148,442
2013
number
64,059
39,458
56,984
56,985
20,447
30,830
30,830
30,830
30,828
52,317
52,317
52,317
518,202
Weighted average remaining contractual life of rights outstanding at end of period
0.8 years
0.9 years
NOTE 44. 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 of the
Group in subsequent financial years:
On 28 August 2014, an expression of interest campaign was opened for the sale of SRG Sydney and SRG Brisbane investment
properties.
Dart Energy Limited (held by New Hope Corporation Limited and classified as a held for sale investment at 31 July 2014) was
removed from the official list of the Australian Stock Exchange as of Tuesday 21 October 2014, following implementation of
the scheme of arrangement whereby IGas Energy plc acquired all of the ordinary shares in Dart Energy Limited.
- 111 -
Directors’ Declaration
The Directors of the Company declare that:
1. the financial statements and notes, as set out on pages 43 to 111 are in accordance with the Corporations Act 2001 and:
a)
b)
c)
d)
comply with Accounting Standards and the Corporations Regulations 2001;
give a true and fair view of the financial position as at 31 July 2014 and the performance for the year ended on that
date of the Consolidated entity;
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; and
at the date of this declaration, there are reasonable grounds to believe that the Company and the wholly owned
subsidiaries identified in note 37 to the financial statements as being parties to a Deed of Cross Guarantee will be able
to meet any obligations or liabilities to which they are, or may become subject to, by virtue of the Deed.
2. the Chief Executive Officer and Chief Financial Officer have each declared that:
a)
b)
c)
the financial records of the Company for the financial year have been properly maintained in accordance with section
286 of the Corporations Act 2001;
the financial statements and notes for the financial year comply with Accounting Standards; and
the financial statements and notes for the financial year give a true and fair view.
This declaration is made in accordance with a resolution of the Board of Directors.
R D MILLNER
Director
P R ROBINSON
Director
Dated this 24th day of October 2014.
- 112 -
Independent Auditor’s Report
Washington H. Soul Pattinson and Company Limited ABN 49 000 002 728
Independent Auditor’s Report
To the Members of Washington H. Soul Pattinson
and Company Limited
A.B.N. 49 000 002 728
Report on the Financial Report
Level 15, 135 King Street
Sydney NSW 2000
GPO Box 473
Sydney, NSW 2001
+61 (0)2 8236 7700
+61 (0)2 9233 4636
We have audited the accompanying financial report of Washington H. Soul Pattinson and Company Limited, which comprises
the consolidated statement of financial position as at 31 July 2014, the consolidated income statement, the consolidated
statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash
flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information
and the directors’ declaration of the consolidated entity comprising Washington H. Soul Pattinson and Company Limited and
the entities it controlled at the year’s end or from time to time during the financial year.
Directors’ Responsibility for the Financial Report
The directors of Washington H. Soul Pattinson and Company Limited are responsible for the preparation and fair presentation
of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations
Act 2001 and for such internal controls as the directors determine are necessary to enable the preparation of the financial
report that is free from material misstatement, whether due to fraud or error. In Note 1, the directors also state that, in
accordance with Accounting Standard AASB 101: Presentation of Financial Statements, that the financial statements comply
with International Financial Reporting Standards.
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 about whether the financial report is free from
material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report.
The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of
the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls
relevant to the entity’s preparation and fair presentation of the financial report in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal
controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of
accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.
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 Corporations Act 2001, provided to the directors of Washington H. Soul
Pattinson and Company Limited on 23 October 2014, would be in the same terms if provide to the directors as at the date of
signing this auditors report.
Moore Stephens Sydney ABN 90 773 984 843. 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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Independent Auditor’s Report (continued)
Auditor's Opinion
In our opinion,
a.
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) giving a true and fair view of the consolidated entity’s financial position as at 31 July 2014 and of its performance
for the year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and
b.
the financial report also complies with International Financial Reporting Standards as disclosed in Note 1.
Report on the Remuneration Report
We have audited the Remuneration Report included in pages 25 to 34 of the directors’ report for the year ended 31 July 2014.
The directors of Washington H. Soul Pattinson and Company Limited are responsible for the preparation and presentation of
the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an
opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.
Auditor’s Opinion
In our opinion, the Remuneration Report of Washington H. Soul Pattinson and Company Limited for the year ended 31 July 2014,
complies with section 300A of the Corporations Act 2001.
Moore Stephens Sydney
Chartered Accountants
John Gavljak
Partner
Dated in Sydney this 24th day of October 2014.
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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 1 OCTOBER 2014
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
5,071
4,281
1,001
836
89
11,278
202
2,555,103
10,852,423
7,507,404
21,399,363
197,081,027
239,395,320
961
SUBSTANTIAL SHAREHOLDERS AS AT 1 OCTOBER 2014
As disclosed in notices received by the Company.
Brickworks Limited and its subsidiaries
Perpetual Limited and subsidiaries (Perpetual Group)
By reason of an agreement with Perpetual Investment Management Limited the
Carnegie Group lodged a substantial holder notice in respect of 28,553,113
ordinary shares held by the Perpetual Group. The notice was lodged on
26 November 2012 and may be viewed on the ASX announcements list for
WHSP (ASX code: SOL).
Ordinary Shares
Held
% of Issued
Shares
102,257,830
29,318,700
42.72
12.25
Mr Robert Dobson Millner
Mr Thomas Charles Dobson Millner
19,921,975
17,211,350
8.32
7.19
17,502,592 of the above ordinary shares in which Mr R Millner and Mr T Millner
have an interest relate to holdings by the same entities.
For further details refer to the notices lodged on 3 March 2014 on the
ASX announcements list for WHSP (ASX code: SOL).
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ASX Additional Information (continued)
TOP 20 SHAREHOLDERS AS AT 1 OCTOBER 2014
Brickworks Limited
Ordinary Shares
Held
% of Issued
Shares
102,257,830
42.72
RBC Dexia Investor Services Australia Nominees Pty Limited (PI Pooled A/C)
13,478,899
1
2
3
4
5
6
7
8
9
Milton Corporation Limited
Dixson Trust Pty Limited
J S Millner Holdings Pty Limited
J P Morgan Nominees Australia Limited
Citicorp Nominees Pty Limited
T G Millner Holdings Pty Limited
Hexham Holdings Pty Limited
10 National Nominees Limited
11 Mr Robert Dobson Millner & Mr Michael John Millner (Est James S Millner A/C)
2,522,092
12
RBC Investor Services Australia Nominees Pty Limited (PIIC A/C)
13 Argo Investments Limited
14
BNP Paribas Noms Pty Ltd (DRP)
15 Australian Foundation Investment Company Limited
16
Farjoy Pty Ltd
17 UBS Nominees Pty Ltd
18 HSBC Custody Nominees (Australia) Limited
19 Dixson Trust Pty Limited (A/C NO 1)
20 Mary Millner Holdings Pty Limited
VOTING RIGHTS
Votes of Members – The Company’s Constitution provides:
a)
on a show of hands, each member has one vote;
(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
2,185,117
2,182,606
1,991,229
1,708,571
1,344,463
1,327,759
1,317,758
1,175,290
1,106,860
9,174,640
8,499,940
8,172,859
5,278,288
4,914,663
3,271,051
2,843,127
2,703,479
5.63
3.83
3.55
3.41
2.21
2.05
1.37
1.19
1.13
1.05
0.91
0.91
0.83
0.71
0.56
0.55
0.55
0.49
0.46
(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 2014 or for the period to the date
of this report.
ON-MARKET BUY-BACK
No on-market buy-back was current at any time during the year ended 31 July 2014 or during 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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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
110 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: (08) 9262 3723
Facsimile: +61 8 9262 3723 (outside Australia)
Internet Website Address: www.advancedshare.com.au
AUDITORS
MOORE STEPHENS SYDNEY
Level 15, 135 King Street, Sydney NSW 2000
GPO Box 473, Sydney NSW 2001
Telephone: (02) 8236 7700
Facsimile: (02) 9233 4636