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Yancoal Australia Ltd2021Annual Report
Washington H. Soul Pattinson and Company Limited
| ASX Code: SOL
ABN 49 000 002 728
Profile
Calendar
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 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
telecommunications, mining, building products,
property, financial services and other equity
investments.
Final Dividend
Record date
22 November 2021
Payment date
14 December 2021
Annual General Meeting
AGM date
10 December 2021
Given the ongoing changes to restrictions
to manage COVID-19 and for the safety of
shareholders and staff, the AGM
will be held online this year.
To register and join the meeting go to
https://web.lumiagm.com
Online registration commences
AGM commences
11am
12 noon
For more information visit our website
www.whsp.com.au
Washington H. Soul Pattinson and Company LimitedAnnual Report 2021 Contents
Key Highlights
Chairman’s Review
Review of Group Entities
Telecommunications Portfolio
Brickworks Limited
New Hope Corporation Limited
Financial Services Portfolio
Pharmaceutical Portfolio
Round Oak Minerals Pty Limited
Equities Portfolio
Private Equity Portfolio
Property Portfolio
Structured Yield Portfolio
Alternative Performance Measures
Parent Entity Financial Information
Corporate Governance
Risk Management
Sustainability Report
2
3
9
10
12
16
18
19
20
22
22
23
23
24
27
30
37
39
Directors’ Report
Remuneration Report
Auditor’s Independence Declaration
Financial Report
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 Auditor’s Report
ASX Additional Information
46
54
72
73
75
77
78
80
81
174
175
179
1
11
Key Highlights
Group Regular NPAT
Regular profit after tax attributable to members is
the main measure of profitability used by WHSP.
Regular profit after tax is a non-statutory profit
measure and represents profit from continuing
operations before non-regular items. A reconciliation
to group statutory profit is included on page 25.
1
93%
Group Statutory NPAT
$273.2m
5
71%
Group Statutory NPAT
Statutory profit attributable to members of
WHSP is calculated in accordance with Australian
Accounting Standards. The prior year statutory
profit incorporated a one-off accounting gain
of $1.05 billion arising from TPG’s merger with
Vodafone. See WHSP’s Financial Report for
further details.
Pre-tax value of portfolio
$5.8bn
1
12%
Pre-tax value of portfolio
The portfolio value is assessed at market value for
some investments and at cost or Directors’ valuation
for others. See page 7 for details of the portfolio
valuation.
Net cash flow from investments
$180.3m
5
29%
Net cash flow from investments
Net cash flows from investments are after Parent
Entity corporate costs and exclude the effects
of non-regular cash inflows and outflows to
demonstrate the underlying cash flows generated
by the Parent Entity’s investment portfolio. The
WHSP Board determines dividends having regard
to net cash flows from investments.
20 Year TSR
13.4 % p.a
Outperforming
All Ordinaries
Index by
4.7%
20 Year TSR
Performance is compared to the All Ordinaries
Accumulation Index, which also includes the
reinvestment of dividends. WHSP is focused on
delivering long term growth above the market.
2
Washington H. Soul Pattinson and Company Limited
Annual Report 2021
Group Regular NPAT$ 170mGroup Regular NPAT$ 328.1m Chairman’s Review
Dear Shareholders,
I am pleased to present the 2021 Washington H. Soul Pattinson and Company Limited (WHSP, Company,
Parent Entity) Annual Report on behalf of the Board of Directors of the Company.
Key Highlights
Performance for the period
Group regular profit after tax1
Group statutory profit after tax
Key Performance Indicators
WHSP net asset value (pre-tax)2
Net cash flow from investments3
2021 dividends per share (fully franked)
Total Dividend growth over 20 years
(ordinary dividend compound annual growth rate)
Total Shareholder Return over 20 years
(to 31 July 2021)
12 months to
31 July 2021
$328.1 million
$273.2 million
% Change
+93%
-71%
2021
% Change
+12%
-29%
+3%
$5,803 million
$180.3 million
62 cents
+8.1%
+13.4%
per annum
Group Regular
profit after tax1
increased by
93%
Overview
WHSP’s objective is to provide superior returns to our shareholders by creating capital growth along with
steadily increasing dividends over the long term. Despite volatile markets, the Company has again increased
its dividend and continued to generate solid cashflows from its investments.
Dividends are paid out of the net cash flows from our investments, which fell by 29% on the prior
corresponding period, but increased by 6% over the FY2019 result. This is a robust performance given the
significant reduction in the dividends received from New Hope, as well as the large one-off special dividend
received from TPG Telecom in the 2020 financial year following the merger with Vodafone.
Solid cash generation from our diversified investment portfolio continued to support another increase to
the final dividend making WHSP the only company in the All Ordinaries Index to have increased its dividends
every year for over 20 years. WHSP is proud of its history of paying dividends every year since listing in 1903.
WHSP also has a strong track record of delivering outperformance over the long term with its Total
Shareholder Returns exceeding the All Ordinaries Accumulation Index over 1, 3, 5, 10 and 20 year periods.
Despite the ongoing impacts of COVID-19, the portfolio continues to perform well with most investments
increasing earnings in FY21. This was reflected in the Group regular profit after tax increasing 93% on the
previous year.
1 Group regular profit after tax is a non-statutory profit measure and represents profit from continuing operations before non-regular items.
In the prior year, TPG was derecognised as an Associate, which means there is no longer an equity accounted regular profit contribution
from TPG. In addition, following the merger, TPG changed its balance date to 31 December which impacted the timing of its interim and
final dividends. In the current year, there was only one dividend included from TPG recorded in regular profit after tax. A reconciliation to
statutory profit is included in Alternative Performance Measures, page 25.
2 Refer to page 7 for details of the portfolio valuation.
3 Refer to Alternative Performance Measures on page 24 for the definition of net cash flow from investments.
33
Chairman’s Review
20 Year Total
Shareholder
Return
13.4%
per annum
The Net Asset Value of the portfolio significantly outperformed the Index in FY20 when the market was sold
off and WHSP’s defensive portfolio increased. Consequently, the Net Asset Value of the portfolio did not
match the rate of market recovery in FY21, underperforming by 18.3% over the previous 12 months.
One of WHSP’s key advantages to generating returns is its flexible mandate to make long term investment
decisions and adjust its portfolio by changing the mix of investment classes over time. WHSP was an active
investor in FY21, with investments and disposals totalling approximately $1.1 billion.
WHSP maintains a strong balance sheet with modest gearing and a relatively high level of liquidity. WHSP
also has available profit reserves and franking credit balances that provide confidence and support its aim of
paying a stable and growing dividend year-on-year.
Total Shareholder Returns (TSR) to 31 July 2021
Annualised TSRs
1 Year
3 Years
5 Years
10 Years
15 Years
20 Years
WHSP
All Ordinaries Accumulation Index
70.4%
30.4%
17.1%
10.2%
16.4%
10.4%
Relative Performance1
40.0%
6.8%
6.0%
13.0%
13.6%
13.4%
9.9%
3.1%
7.3%
6.3%
8.7%
4.7%
The above table shows the TSRs for WHSP shares for various periods and compares them to the ASX All
Ordinaries Accumulation Index, which also includes the reinvestment of dividends. WHSP is focused on long
term growth and has outperformed the index in every period shown above. Over the last 20 years, WHSP has
outperformed the market by 4.7%.
20 Year Total Shareholder Return
Since 1 August 2001, an investment in WHSP has increased 1,140% over the last 20 years while an investment
in the ASX All Ordinaries Accumulation Index has increased by just 429% for the same period.
+1,140%
+429%
2001
2003
2005
2007
2009
2011
2013
2015
2017
2019
2021
All Ordinaries Accumulation Index
Cumulative performance to 31 July 2021 (Including reinvestment of dividends).
1 Relative performance compared to the All Ordinaries Accumulation Index.
4
Washington H. Soul Pattinson and Company LimitedAnnual Report 2021 40 Year Total Shareholder Return
This performance has been maintained for a long period of time. If a shareholder had
invested $1,000 in 1981 and reinvested all dividends, the shareholding would have
appreciated to $239,182 as at 31 July 2021. This equates to a compound annual growth
rate of 14.7% year on year for 40 years. This growth does not include the value of the
franking credits which have been passed on to shareholders by WHSP.
$1,000 invested in 1981 worth $239,182
Compound annual return of 14.7%
1981
1986
1991
1996
2001
2006
2011
2016
2021
Cumulative performance to 31 July 2021 (Including reinvestment of dividends).
Total
Dividend
for the year
62¢
per annum
Dividends
Given the diversified mix of investments and long term focus on cash generation from investments, WHSP
has an exceptional history of consistently paying dividends to shareholders. WHSP has increased its ordinary
dividend every year since 2000 and is the only company in the All Ordinaries Index to have achieved this. The
Directors determine interim and final dividends based on the Company’s net cash flow from investments.
These cash flows include dividends and distributions from its investments, interest income and gains on
assets held for trading.
The net cash inflow from investments for the year was $180.3 million, down 29% compared to the 2020
financial year. This decrease was mainly due to the large TPG special dividend received in the 2020 financial
year following the merger with Vodafone.
20 Year dividend history
Cents per share
54
56
52
48
50
58
60
62
46
44
40
27
25
28.5
30
32
34
20
17
14
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
55
Chairman’s Review
Full Year dividend1
The Directors have resolved to pay a fully franked final dividend of 36 cents per share in respect of the period
ending 31 July 2021 (2020: 35 cents fully franked).
The record date for the final dividend will be 22 November 2021 with payment due on 14 December 2021.
The last day to purchase shares and be eligible for the final dividend is 18 November 2021.
For the 2021 financial year, WHSP will pay 82% of its net cash flow from investments as dividends to
shareholders (2020: 56%).
Consolidated financial performance and portfolio Net Asset Value
Regular profit after tax attributable to members1
The regular profit after tax attributable to shareholders for the period ending 31 July 2021 was $328.1 million
compared to $169.8 million for the previous corresponding period.
The increase in regular profit after tax was mainly attributable to the following:
Round Oak Minerals saw increased revenues from improved
production levels at all operations combined with strengthening
commodity prices and lower ore treatment charges
Higher investment and trading income
Brickworks building products Australia and property divisions
increased their contributions through cost savings and property
revaluations respectively, partly offset by a lower contribution from
building products North America where the COVID-19 pandemic
significantly disrupted operations
New Hope revenues were higher due to increased USD thermal coal
prices
Partly offset by a reduced contribution from the Telecommunications
portfolio due to the FY2020 derecognition of TPG as an associate,
removing any profit recognition during FY2021
Total
$m
% Change
103.3
50.3
39.9
18.8
243%
89%
95%
45%
(54.0)
– 75%
158.3
93%
WHSP does not consider its earnings to be the key indicator of the Company’s performance. As with any
investment portfolio, the key drivers of success are growth in the capital value of the portfolio and a growing
yield.
1 Refer to Alternative Performance Measures on page 24 for the definition of net cash flow from investments.
6
Washington H. Soul Pattinson and Company LimitedAnnual Report 2021 Net profit after tax attributable to members
The statutory profit after tax attributable to shareholders includes unusual or non-operating gains and losses
which are typically one-off in nature. In FY2021 statutory profit was $273.2 million compared to $953.0 million
for the same time last year. The decrease of $679.8 million was largely due to the prior year including a one-off
accounting gain of $1.05 billion arising from the derecognition of TPG as an equity accounted associate
following the merger of TPG and Vodafone. This large one-off gain in FY2020 was not repeated in FY2021.
A comparison with the previous corresponding period is as follows:
Regular profit after tax1 attributable to shareholders
Statutory profit after tax attributable to shareholders
2021
$m
328.1
273.2
2020
$m
169.8
953.0
Final dividend (to be paid 14 December 2021)
Interim dividend (paid 13 May 2021)
36 cents
26 cents
35 cents
25 cents
Total dividends (calendar year)
62 cents
60 cents
Change
%
93%
– 71%
3%
4%
3%
Net Asset Value of WHSP
As at 31 July 2021
Telecommunications Portfolio2
Brickworks2
New Hope Corporation2
Financial Services Portfolio2,3
Pharmaceutical Portfolio2
Round Oak Minerals3
Equities Portfolio2
Private Equity Portfolio3
Property Portfolio3
Structured Yield Portfolio3
Cash and other net assets (excluding borrowings)
Less: external borrowings4
Net asset value (pre-tax)5,6
Value of
WHSP’s
Holding
$m
1,523
1,592
662
398
280
234
786
367
110
295
71
(515)
5,803
12 month Movement
$m
(444)
520
117
87
(5)
73
275
95
20
148
(193)
(69)
624
%
– 23%
49%
21%
28%
– 2%
45%
54%
35%
22%
100%
– 73%
15%
12%
The net asset value of WHSP is summarised in the table above. The pre-tax value as at 31 July 2021 was
$5.8 billion, up 12.1% compared to 31 July 2020. This is 18.3% below the All Ordinaries Index which increased
by 30.4% for the same period.
1 Regular profit after tax is a non-statutory profit measure and represents profit before non-regular items.
A reconciliation to statutory profit is included in Alternative Performance Measures on page 25.
2 At market value
3 At cost or Directors’ valuation
4 Refer to note 25 for details regarding external borrowings
5 The tax payable would be approximately $1.119 billion if all assets had been realised at NAV as at 31 July 2021
6 Net asset value (pre-tax) is calculated as follows: the value of WHSP’s assets less all its liabilities (other than the tax that would be payable
upon the sale of its assets). Assets are valued at market value, cost or independent valuation or Directors’ valuation
77
Chairman’s Review
Significant investments and divestments in the portfolio over the 2021 financial year were as follows:
1 In December 2020, the investment in New Hope Corporation was sold down from 49.98% to 43.94%
realising proceeds of $70.0 million.
1 In July 2021, the investment in New Hope Corporation was sold down further from 43.94% to 39.85%
(34 million shares) realising proceeds of $61.5 million. Concurrently, WHSP entered into a cash settled
equity swap to maintain its economic exposure to 34 million New Hope shares.
1 New investments included a net increase in the corporate loan book included in the Structured Yield
portfolio.
To fund new acquisitions and to provide liquidity for further investment opportunities WHSP increased
its borrowings by $69 million since 31 July 2020. This included $225 million from an unsecured senior
convertible notes issue in January 2021.
The net proceeds from the convertible notes, after deducting all the related costs and expenses, were
$221.1 million. The issue of the convertible notes lowered WHSP’s average cost of debt and increased WHSP’s
debt maturity profile. The proceeds were used to repay approximately $200 million of existing financial
indebtedness, with the remaining proceeds applied to strengthen the Parent Entity’s liquidity position.
Milton merger provides increased diversification, liquidity and scale
On 13 September 2021, Milton shareholders approved the Scheme of Arrangement where Milton shares
will be exchanged for shares in WHSP. The combination of these two great investment houses, with aligned
value focused long term investment philosophies, will create a leading more diversified Australian investment
house focused on continuing long term market outperformance and growth in dividends. In addition, the
merger will:
1 further diversify WHSP’s portfolio and provide liquidity to pursue new investments in growth asset classes;
1 increase cash generation from higher portfolio dividends;
1 uplift Net Asset Value per share;
1 significantly increase the number of WHSP shareholders creating greater liquidity for our shares;
1 increase the free-float and index weighting of WHSP; and
1 expand the WHSP investment team with the addition of the Milton team who bring complementary skills
and experience.
The merger, including the issue of WHSP shares to Milton shareholders, was completed on 5 October 2021.
Board changes
Director Robert Westphal will be retiring from the Board at the close of this year’s AGM having been
appointed to the Board in April 2006. Since his appointment he has served as Chairman of the Board Audit
Committee. Robert has made a significant contribution to the Company over the time he has served as a
Director. On behalf of the Board, I would like to thank Robert for his commitment and contribution to the
Company.
On behalf of the Board I would like to thank management for their efforts over the last 12 months. In
particular our Managing Director Todd Barlow, David Grbin our CFO and Company Secretary Ida Lawrance.
Also I would like to thank my fellow Board members for their efforts over the last 12 months.
R D Millner
Chairman
8
Washington H. Soul Pattinson and Company LimitedAnnual Report 2021 Review of Group Entities
as at 31 July 2021
Telecommunications Portfolio
Brickworks Limited
New Hope Corporation Limited
Financial Services Portfolio
Pharmaceutical Portfolio
Round Oak Minerals Pty Limited
Equities Portfolio
Private Equity Portfolio
Property Portfolio
Structured Yield Portfolio
10
12
16
18
19
20
22
22
23
23
99
Review of Group Entities
Telecommunications Portfolio
TPG Telecom Limited
Investment: 12.6% held
Total market capitalisation: $11.49 billion
Value of WHSP’s holding: $1.448 billion
ASX code: TPG
Tuas Limited
Associated entity: 25.3% held
Total market capitalisation: $297 million
Value of WHSP’s holding: $75.01 million
ASX code: TUA
The Telecommunications Portfolio is made up of TPG Telecom Limited (ASX:TPG) and Tuas Limited (ASX:TUA)
Limited. WHSP owns 12.6% of TPG and 25.3% of Tuas.
TPG has made strong progress on integrating the former TPG and Vodafone business and realising merger
synergies in the first full year of combined operations. 5G coverage targets were exceeded and in June 2021,
TPG launched its 5G home wireless product as an alternative to the NBN. In addition, the 4G home wireless
customer base tripled over the first half of 2021.
The merged TPG now has 7.5 million consumer and business services, strong visible brands and a valuable
portfolio of infrastructure assets to harness and improve customer experience and shareholder returns.
However, external factors such as NBN margin erosion, the new Regional Broadband Scheme levy and
the impact of COVID-19 on international roaming present challenges and weigh on current financial
performance.
Tuas owns the former TPG Singapore business. Tuas operates a low-cost mobile network in Singapore. As a
new entrant in the market, TPG Singapore is growing its customer base with products that deliver good value
relative to incumbent service providers.
Tuas Limited is in the process of rolling out mobile infrastructure in Singapore. It launched commercial
services at the end of March 2020 and by September 2020 secured 133,000 paid active subscribers. Full
coverage has been reached in outdoor locations and road tunnels. Coverage of rail tunnels is expected to
be completed by the end of 2021.
Performance
TPG announced its half year 2021 results in August 2021. It reported revenue of $2.6 billion, EBITDA of
$886 million and a net profit after tax of $76 million. TPG delivered $38 million in merger cost savings and
expects to achieve annual savings of $70 million over 2021.
In the first full year of trading as a merged entity it generated operating cash flows of $1,367 million and
declared an interim dividend of 8 cents per share that was paid in October 2021. A final 2020 dividend of 7.5
cents was paid in April 2021.
Contribution to WHSP
The value of WHSP’s telecommunications interests (TPG and TUA) fell by 22.5% to $1.523 billion over the
12 months to 31 July 2021.
Dividends
paid to WHSP
$ 46.1
million
10
Washington H. Soul Pattinson and Company LimitedAnnual Report 2021 Contribution
to WHSP
$ 10
million
Source: TPG Telecom website
In the WHSP 2021 financial year, only one dividend was received from TPG, totalling $17.6 million. No dividend
income was recorded as revenue in the first half of the 2021 financial year due to the change in the TPG
balance date. TPG did not contribute equity accounted profits to the Group’s net profit after tax for the 2021
financial year (2020: $1.1 billion) as WHSP ceased to equity account the profits of TPG from 29 June 2020.
Tuas is in a start-up phase and made an equity accounted loss for the 2021 financial year.
Outlook
The merger of TPG and Vodafone has created a strong competitor in the Australian telecommunications
sector with good opportunities for growth. TPG’s strong broadband business and fibre infrastructure is highly
complementary with Vodafone’s mobile infrastructure and customer base.
The merged entity will be able to offer bundled services across better network infrastructure and achieve
synergies through reduction of duplicate costs. It is targeting $70m in annual cost synergies in calendar year
2021, growing to at least $125m annual savings by 2023.
The stronger competitive position of the merged entity should enable it to robustly respond to the
challenges of COVID-19 continuing to negatively impact international roaming and international visitor
revenue, along with margin erosion from the NBN and introduction of the Regional Broadband Scheme levy.
The TPG Singapore network is new and therefore does not have legacy networks or systems to support. TPG
Singapore is well placed to provide modern network technology (such as 5G) at competitive prices. Tuas
expects the TPG Singapore business will be EBITDA breakeven once it has around a 5% market share of the
Singapore mobile market (around 500,000 subscribers).
1111
Review of Group Entities
Brickworks Limited
Associated entity: 43.3% held
Total market capitalisation: $3.68 billion
Value of WHSP’s holding: $1.59 billion
ASX code: BKW
Dividends
paid to WHSP
$ 39.4
million
Performance
Brickworks delivered a strong financial result for the 2021 financial year with underlying net profit after
tax (NPAT) of $285 million, up 95% on the prior year and demonstrating the resilience of its businesses in
challenging times.
After including discontinued operations and the impact of significant items, the statutory NPAT of Brickworks
was $239 million, down 20% on the prior year. Last year’s statutory result included an equity accounted share
of a significant one-off gain booked by WHSP arising from the TPG–Vodafone merger.
The directors of Brickworks have declared a fully franked final dividend of 40 cents per share for the year
ended 31 July 2021, up 2.6% from 39 cents in the prior year. For the 2021 financial year, Brickworks declared
total dividends of 61 cents per share (2020: 59 cents per share).
Building Products Australia
Despite flat revenue, operational performance across all divisions improved significantly due to cost control.
Building Products Australia recorded an EBITDA from continuing operations of $97 million in 2021 up 8%
compared to the same time last year.
Demand was subdued early in the half, steadily increasing as consumer confidence rebounded and
supported by government stimulus. This momentum came to an abrupt halt in New South Wales late in the
financial year, with the State Government announcing a two week pause of all construction work in greater
Sydney, in response to a new outbreak of COVID-19.
A major capital investment program totalling $205 million is underway to enhance Brickworks’ competitive
position. Commissioning of the masonry plant is now well underway. The brick plant is expected to be
completed by the end of calendar 2022.
12
Washington H. Soul Pattinson and Company LimitedAnnual Report 2021 Building Products North America
The total value of building activity over the 12 months to June 2021 was up 5% compared to the same time
last year. Building Products North America delivered EBITDA of US$20 million, up 10% on the prior year and
EBIT of US$6 million, down 6%. Reported in Australian dollars, EBITDA was relatively flat at $26 million and EBIT
was down 15% to $8 million.
Significant plant rationalisation has taken place, with the closure of six manufacturing plants. The remaining
network of 10 plants now comprises the more efficient, modern plants and offers production flexibility, which
has long been an important competitive advantage in Brickworks’ Australian operations. This flexibility is
critical to meet market cycles and fluctuations in demand.
In just under three years Brickworks has built a brick business with significant scale and a leading market
position in the Northeast of the United States. Over the long term, North American operations are expected
to deliver further earnings growth for many years to come, with Brickworks focussed on implementing their
proven market strategy focussed on style and premium product positioning.
Property
The property division delivered EBIT of $253m, up 95% over the previous corresponding period. Revaluations
contributed $149 million to property EBIT, following average basis point compression in capitalisation rates
of 25 basis points in the first half of the 2021 financial year, followed by a further 60 to 65 basis points in the
second half.
As at 31 July 2021, the total value of leased assets held within the Property Trust was $1,982 million. The
annualised gross rent generated from the Property Trust is $89 million, the weighted average lease expiry is
4.9 years and the average capitalisation rate is 4.2%. There are currently no vacancies in the portfolio.
The continuing strong demand for industrial land reflects structural changes across the economy, as
companies modernise their supply chains in response to consumer preferences, such as on-line shopping.
The Property Trust is ideally placed to take advantage of these trends, with well-located prime industrial land
on large lot sizes. Current development activity at Oakdale in New South Wales and Rochedale in Queensland
will drive growth in rent and asset value over both the short and medium term.
In total, there is 284,100m2 of pre-committed gross lettable area (“GLA”) across the various Property Trust
Estates. The completion of these facilities over the next two years will result in gross rent within the Property
Trust increasing by around $51 million, representing an uplift of almost 60% from the current level.
In addition to the pre-committed facilities, a further 227,900m2 of GLA remains available for development
within the Trust and will provide further opportunity for growth in the years ahead.
Outside of the Trust, Brickworks retains other significant parcels of surplus land, suitable for development in
the future. The largest site held for development is at Craigieburn in Victoria. Brickworks is currently reviewing
the option of an industrial development on this land, given recent strong land growth in the Melbourne
industrial market.
1313
Review of Group Entities
Contribution to WHSP
Brickworks contributed $81.8 million to the WHSP Group regular profit after tax for the year (2020:
$42.0 million). This contribution excludes the WHSP profit taken up by Brickworks under the equity
accounting method.
Brickworks contributed $74.2 million to the WHSP Group net profit after tax for the year (2020: $19.9 million).
The increase in contribution was largely due to the strong performance of the property division and tight cost
control in its building products businesses in Australia and North America.
Outlook
Building Products Australia
Within Building Products Australia, underlying demand across the country is strong, with a large backlog
of detached housing construction work in the pipeline. This follows the various state and federal incentives
which prompted an unprecedented surge in approvals early in 2021.
In most states across Australia this healthy pipeline of work is translating to strong sales into the detached
housing segment, and we expect this will continue. In some areas, sales volume is being limited by the
availability of trades.
However, in New South Wales, Brickworks’ largest market, the restrictions in place to suppress the COVID-19
pandemic have adversely impacted sales and required Brickworks to reduce production to prevent stock build.
In the short term significant uncertainty persists, with the potential for new restrictions remaining ever
present across all states. However, with vaccination rates across Australia now approaching government
targets, Brickworks are hopeful that by the second half of the 2022 financial year, the prospect of any further
restrictions will be less likely.
Building Products North America
August 2021 saw further expansion of Building Products North America, with the acquisition of IBC, the leading
brick distributor in Illinois and Indiana. This will significantly increase the scale of Brickworks direct distribution
network, increasing the store count from 10 to 27.
Importantly, sales volume through the IBC network will underpin production volume at Brickworks Midwest
plants, which have ample capacity to accommodate additional sales growth. The acquisition will bring
Brickworks’ total workforce in the United States to more than 1,000.
In North America, supportive government policy and low interest rates is driving a strong increase in single
family residential approvals across the United States. However, the non-residential building segment is expected
to remain relatively subdued.
Over the long term, the North American operations are expected to deliver improved earnings and growth by
implementing its proven market strategy focussed on style and premium product positioning.
Contribution
to WHSP
$ 81.8
million
14
Washington H. Soul Pattinson and Company Limited
Annual Report 2021
Property
Activity within the Property Trust remains strong, with the completion of developments at Oakdale (NSW)
and Rochedale (QLD) to drive growth in rent and asset value over the next few years. With infrastructure to
Oakdale West nearing completion, the Estate is now 58% pre-committed with three new tenants joining
Amazon and Coles. Demand for remaining space is high and availability is becoming limited, particularly for
facilities over 35,000m2.
The completion of the new brick plant at the Horsley Park Plant 2 site in late 2022, will allow the release of
additional land at Oakdale East, where Plant 3 is currently located.
This land is likely to be sold into the Trust and will therefore allow further expansion of the Oakdale East estate
to meet the growing demand from tenants.
Brickworks’ portfolio of well-located industrial facilities close to consumers are increasing in value, as they are
now a key component in the supply chain solution of its tenants.
Brickworks Oakdale West development
Source: Brickworks
1515
Review of Group Entities
New Hope Corporation Limited
Controlled entity: 39.9% held
Total market capitalisation: $1.66 billion
Value of WHSP’s holding: $662 million
ASX code: NHC
New Hope has weathered many coal price cycles in its long history, but never one driven by such a unique
set of circumstances; a pandemic, increasing tension with Australia’s major trading partner, and finishing the
year with thermal coal prices at a 10 year high.
Performance
For 2021 financial year, New Hope generated an underlying earnings before interest, tax and depreciation
(EBITDA) of $367.2 million compared with $289.8 million in the previous financial year. The increase in EBITDA
arose from higher realised coal prices (up 10%) and cost savings, partly offset by lower volumes of coal sales
(down 13%). The decrease in coal sales arose from the mid-life dragline shut-down at the Bengalla mine (80%
owned by New Hope) and the ramp down at Acland following the absence of New Acland Stage 3 project
approvals.
The Bengalla mine has now returned to full operation. For the 2021 financial year, saleable production was at
9.6 million tonnes (2020: 11.3 million tonnes).
At the net profit level, New Hope recorded a profit before tax and non-regular items of $199.3m (2020:
$119.5 million), an increase of 67%. After non-regular items, New Hope reported a net profit after tax of
$79.4 million (2020: a loss of $156.8 million). Non-regular items for the year included the cost of redundancies
across the Queensland operations and corporate office, a provision for an onerous contract liability attached
to New Acland and an impairment in the value of the New Acland Stage 3 project.
New Hope generated a cash operating surplus of $296.1 million (before interest and tax), up 16% on the
comparative period.
On 2 July 2021, New Hope successfully priced $200 million of senior unsecured Convertible Notes, reflecting
a fully subscribed maiden offer. The Convertible Notes are convertible into fully paid ordinary shares in New
Hope. They will mature on 2 July 2026, unless otherwise redeemed, repurchased, or converted. The net
proceeds of the Convertible Notes were $195.2 million after the deduction of commissions, professional fees
and other related administration costs.
Dividends
paid to WHSP
$ 14.6
million
Bengalla Mine
Source: New Hope Group
16
Washington H. Soul Pattinson and Company LimitedAnnual Report 2021 Contribution to WHSP
New Hope contributed $60.8 million to the Group’s regular profit after tax for the year (2020: $42.0 million).
New Hope contributed a profit after tax of $31.6 million to the Group’s net profit after tax (2020: a loss of
$78.4 million).
New Hope declared a fully franked final dividend of 7.0 cents per share (2020: nil) payable on 9 November
2021 and paid a fully franked interim dividend of 4.0 cents per share (2020: 6.0 cents per share).
New Acland Stage 3 Development
On 3 February 2021, the High Court decided that New Acland’s mining lease applications and environmental
authority amendment application for its Stage 3 expansion should be reheard by the Land Court.
Following the High Court decision, the Land Court made orders on 12 February 2021 including to reserve
four weeks commencing 1 November 2021 as tentative dates for the rehearing. This will be the third Land
Court hearing relating to these approvals. The decision that will issue from the Land Court is in the form of
recommendations as to whether the mining lease applications and environmental authority amendment
application for the Stage 3 expansion should be granted.
Following the Land Court recommendations, decisions on the final approvals can then be made by the
Department of Environment and Science and the Minister for Resources.
New Hope remains committed to the project.
Outlook
Thermal coal market fundamentals deteriorated in the first half of 2021 due to the impact of COVID-19. New
Hope quickly responded to the reduction in realised prices by implementing several cost saving initiatives at
its operations and undertook a significant rationalisation across corporate office functions. Towards the end of
2021 financial year thermal coal prices staged a significant rally and closed the financial year at 10-year highs.
Thermal coal pricing is forecast to remain strong off the back of constrained supply and the opening of new
markets.
New Hope has a strong customer base which provides low sales risk and revenue certainty. With Australia
maintaining a leading position in the global trade market even through COVID-19, the future of New Hope’s
high quality, lower emission coal will continue to underpin strong performance. With a focus on operational
resilience while maintaining a robust balance sheet, New Hope is in a key position to capitalise on growth or
transformational opportunities as they arise.
Contribution
to WHSP
$ 60.8
million
Bengalla Mine
Source: New Hope Group
1717
Review of Group Entities
Financial Services Portfolio
Value of WHSP’s holdings: $398 million
Listed and unlisted entities
*Market value, cost or Directors’ valuation
The assets in the Financial Services Portfolio include investments in funds management, corporate advisory
and Listed Investment Companies (LICs). This portfolio provides WHSP with exposure to both Australian and
international equities.
The values of the listed investments in the portfolio improved with market conditions and none of the
unlisted investments were revalued or written down during the year. The total value of the portfolio
continues to be well above its cost base.
Contribution to WHSP
WHSP received dividends of $16.0 million from the Financial Services Portfolio during the year (2020:
$19.9 million).
The Financial Services Portfolio contributed $12.4 million to the Group’s regular profit after tax for the year
(2020: $10.2 million).
Dividends
paid to WHSP
$ 16.0
million
As at 31 July 2021
BKI Investment Company Limited (ASX: BKI)
Contact Asset Management Pty Limited
Ironbark Asset Management
Milton Corporation Limited (ASX: MLT)
Pengana Capital Group Limited (ASX: PCG)
Pengana International Equities Limited (ASX: PIA)
Pitt Capital Partners Limited
360 Capital Total Return Fund (ASX: TOT)
WHSP’s
Holding
%
9%
20%
31%
3%
39%
10%
100%
7%
18
Washington H. Soul Pattinson and Company LimitedAnnual Report 2021 Pharmaceutical Portfolio
Total market capitalisation: $1.2 billion
Value of WHSP’s holdings: $280 million
Listed entities
Dividends
paid to WHSP
$ 5.2
million
The Pharmaceutical Portfolio is made up of Australian Pharmaceutical Industries Limited (API), Palla Pharma
Limited and Apex Healthcare Berhad. API and Palla Pharma are listed on the ASX and Apex Healthcare is listed
on the Main Board of Bursa Malaysia.
Contribution to WHSP
WHSP received dividends of $5.2 million from the Pharmaceutical Portfolio during the year, down from
$5.6 million in the previous financial year, largely due to the impact of COVID-19.
WHSP equity accounted the Apex and Palla results for the full year.
On 1 August 2020, the investment in API was derecognised for equity accounting. Consequently, API did not
contribute equity accounted profits to WHSP during 2021 financial year (2020: $10.3 million).
The investment in API is held at market value and WHSP records dividends from API as revenue.
The Pharmaceutical Portfolio contributed $3.5 million to the Group’s regular profit after tax for the year
(2020: $12.5 million).
As at 31 July 2021
Australian Pharmaceutical Industries Limited (ASX: API)
Apex Healthcare Berhad (Burse Malaysia code: APEX MK)
Palla Pharma Limited (ASX: PAL)
WHSP participated in Palla Pharma’s capital raising in March 2021 investing a further $3.6 million.
WHSP’s
Holding
%
19%
30%
20%
1919
Review of Group Entities
Round Oak Minerals Pty Limited
Controlled entity: 100% held
Value of WHSP’s holding: $234 million*
Unlisted entity
* Directors’ valuation
Round Oak is a mining and exploration company focused primarily on the production of copper and zinc.
Round Oak has several operating assets throughout Australia as well as projects under development.
Queensland operations
The Mt Colin underground copper mine production targets were met for the year with more than 470,000
tonnes of ore processed, producing approximately 34,700 tonnes of concentrate containing 9,848 tonnes
of copper, 4,227 ounces of gold and 11,122 ounces of silver. There was significant focus on resource
development and drilling from underground, increasing resource confidence and identifying additional ore,
extended the current mine life to the end 2023.
The Barbara open pit copper mine completed mining in December 2020 with the processing of stockpiled
ore completed in April 2021. Approximately 404,000 tonnes were processed up until April 2021, producing
28,700 tonnes of concentrate containing 7,382 tonnes of copper, 39,082 ounces of silver, and 1,414 ounces of
gold. Drilling below the completed south pit commenced just prior to year-end as part of a study to evaluate
the potential to extend the mine life via the development of an underground mine.
Western Australian operations
Production at the Jaguar operation was deliberately reduced from 30,000 tonnes per month to 20,000 tonnes
per month over the first half of the 2021 financial year as resources were redirected to development of a
second mining front, the Pegasus lens, discovered in 2019. Production levels were successfully increased to
40,000 tonnes per month from February 2021, combining mining from the high grade Bentayga lens with the
newly developed Pegasus lens.
Jaguar processed approximately 381,000 tonnes of ore for the 2021 financial year, producing 18,202 tonnes
of copper concentrate and 71,659 tonnes of zinc concentrate, together containing 3,740 tonnes of copper,
34,377 tonnes of zinc, and 1,784,000 ounces of silver. Processing plant improvements resulted in increased
copper, zinc and silver recoveries, as well as increased zinc concentrate grades, both contributing to higher
net revenue from the mine.
Two new lenses, Spectre and Turbo, were discovered at Jaguar in mid-2020, with both having the potential
to extend production at Jaguar beyond its current three-year mine life. Underground drilling targeting these
lenses, as well as extensions to the Pegasus lens, was undertaken in the second half of the 2021 financial year.
Early results are encouraging and drilling of these exploration targets will continue for the remainder of the
2021 calendar year.
Victorian development assets
All primary approvals and permits for the Stockman copper-zinc project in north-east Victoria are in
place, including the Mine Work Plan. Work continued on the associated Management Plans and baseline
environmental data continued to be collected. A Definition Phase Study (DPS) commenced in the second half
of the year, the aim of which is to optimise key elements of the project, further enhancing project economics,
leading to a planned final investment decision in the second half of calendar 2022.
Exploration
Exploration activities for the year focused on the brownfield’s exploration on the Jaguar tenements in Western
Australia, the aim of which has been to identify additional near-mine base metals resources, predominantly
underground at the Bentley mine. Greenfields exploration was conducted for both base metals and gold
Contribution
to WHSP
$ 60.9
million
20
Washington H. Soul Pattinson and Company LimitedAnnual Report 2021 Underground mining at Jaguar
Source: Round Oak Minerals
targets further from the current mining operations at Jaguar. Early results have been encouraging and these
programmes will continue over calendar 2021.
Exploration activities in Northwest Queensland continued, investigating several prospective targets for
additional copper resources, the most prospective of these being extensions to the Mt Colin and Barbara
resources at depth.
Exploration activity at Stockman was focused on the identification of targets with potential to increase
mineral inventories beyond the current ten years of reserves. A surface drilling programme as part of the DPS
commenced in the second half, initially completing five holes for providing samples for metallurgical test
work, before commencing resource infill drilling, which will continue for the remainder of calendar 2021.
Contribution to WHSP
Round Oak contributed a regular after-tax profit of $60.9 million to the Group’s result for 2021 year (2020:
$42.5 million loss). Revenue was up 62% to $353.4 million driven by increased production at all operations
combined with higher commodity prices. Mt Colin contributed its first full year of production while Jaguar
production was up following the investment in mine development to open a second mining front, increasing
production rates by over 30% in the second half.
Higher commodity prices for copper, zinc, silver and gold, and lower zinc smelter treatment charges, had
a positive impact on gross margins. Costs remained relatively stable across the operating assets despite
volumes increasing, as operational efficiencies improved the margin contributions.
Outlook
Copper and zinc prices have continued their recovery since the bottom of the market in March 2020. In the
twelve months to 31 July 2021, copper prices increased by more than 50% to over US$4 per pound and zinc
is up more than 30% to over US$3,000 per tonne. Structural tailwinds in supply and demand are expected
to support strong copper price forecasts, underpinned by the transition to a green economy. Operations at
Jaguar and Mt Colin, and the Stockman development project, are well placed to support the supply gap.
2121
Review of Group Entities
Equities Portfolio
WHSP does not make investment decisions to correlate our returns against an index.
Equities
Portfolio value
increased by
$ 275
million
Large Caps portfolio
The WHSP Large Caps Portfolio is externally managed by Contact Asset Management, with the aim of
providing long term capital preservation and an attractive income stream through investment in a diversified
Australian equities portfolio. The strategy aims to deliver capital growth and a yield that exceeds the market
through the cycle.
At 31 July 2021, the WHSP Large Caps Portfolio was valued at $396 million. The Portfolio, which was made
up of 24 companies, is currently providing a grossed-up annual dividend yield of 5.1%. Cash generated from
dividends/distributions from securities within the Portfolio is paid directly to WHSP.
Small Caps portfolio
WHSP’s Small Caps Portfolio is our allocation of capital to earlier stage, higher growth companies. This
portfolio aims to find companies which can grow into a bigger part of WHSP’s overall portfolio. There is also
an allocation to opportunistic trades in small cap securities listed on the ASX and pre-IPO positions.
As at 31 July 2021 the portfolio was worth $391 million, a net increase of $142 million over the balance as at
31 July 2020.
Private Equity Portfolio
The carrying value of the Private Equity Portfolio increased by $95 million to $367 million during the year
ended 31 July 2021. This increase was principally due to new investments in the agricultural sector.
The WHSP Agricultural Holding Trust has total assets as at 31 July 2021 of $167 million, spread across
Queensland, New South Wales, Victoria and Western Australia, producing citrus, stone fruit, table grapes,
kiwifruit, macadamias and cotton, largely for export markets. Some properties are undergoing further
investment and redevelopment to substantially increase production in future years.
As at 31 July 2021
Ampcontrol
Aquatic Achievers
Dimeo Cleaning Services
Seven Miles Coffee Roasters
WHSP Agricultural Holding Trust
WHSP’s
Holding
%
43%
100%
16%
40%
95%
22
Washington H. Soul Pattinson and Company LimitedAnnual Report 2021 Property Portfolio
In late January 2021 the sale of WHSP’s interest in a shopping centre at Penrith settled and outstanding bank
debt was repaid. In the second half of the 2021 financial year further investment into industrial properties in
Sydney was made.
Contribution to WHSP
The Property Portfolio contributed $3.1 million to the Group’s regular profit after tax for the year
(2020: $7.7 million).
Structured Yield Portfolio
The Structured Yield portfolio consists of structured investments which generate fixed income and are
downside protected with asset backing and seniority to equity investors.
Cash generated from this portfolio supplements our dividend income.
Over FY2021, this portfolio has increased by $148 million.
Portfolio value
increased by
$ 148
million
Infinity Farms – WHSP Agricultural Trust
2323
Alternative
Performance Measures
The Consolidated Entity presents certain Alternative Performance Measures (APMs), including regular and
non-regular profit after tax, Net cash flows from investments and net asset value. These APMs are used by
management to assess the performance of the business and may therefore be useful to investors. They are
not a substitute for the Australian Accounting Standards measures and should be considered supplementary
to those measures.
Regular and non-regular profit after tax
Financial performance is measured by regular profit and regular profit after tax attributable to members.
These results are non-statutory profit measures and represent profit 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 to
their size. Regular profit after tax attributable to members is reconciled to its directly comparable Australian
Accounting Standards financial measure, Profit after tax, on page 25.
Regular profit after tax attributable to members is the main measure of profitability used by the Consolidated
Entity.
Net cash flows from investments
Net cash flows from investments are after Parent Entity corporate costs and exclude the effects of non-regular
cash inflows and outflows to demonstrate the underlying cash flows generated by the Parent Entity’s
investment portfolio. The Board of the Parent Entity determines dividends having regard to net cash flows
from investments. Parent entity Net cash flows from investments is reconciled to Profit after tax on page 29.
Net Asset Value (“NAV”)
The Parent Entity is a long term investor. Net asset value (pre-tax) is the value of all of the Parent Entity’s assets
less all its liabilities (excluding any tax payable upon the sale of its assets). Assets are valued at market value or
Directors’ valuation as shown in the NAV statement. The NAV post-tax assumes the Parent Entity disposed of
its assets and incurred an income tax liability based on the market values or Directors’ valuations.
24
Washington H. Soul Pattinson and Company LimitedAnnual Report 2021 Reconciliation between consolidated regular profit after tax and profit after tax
A reconciliation between consolidated regular profit after tax attributable to members and profit after tax attributable to members is set
out below. The Directors have presented this information as they consider the disclosure enhances the understanding of the financial
results to shareholders and other users of the financial statements.
The allocation of revenue and expense items between regular and non-regular profit is consistent with the prior year. Transactions
between business segments are on an arm’s length basis in a manner similar to transactions with third parties.
Regular profit/(loss) after tax attributable to members
TPG Telecom Limited
Brickworks Limited
New Hope Corporation Limited
Round Oak Minerals Pty Limited
Other investing activities
Intersegment/unallocated1
2021
$’000
2020
$’000
17,579
81,842
60,815
60,871
117,211
(10,203)
71,589
41,960
41,968
(42,468)
65,964
(9,213)
Regular profit after tax attributable to members
328,115
169,800
Non-regular items after tax
Fair value gain on de-recognition of TPG as an equity accounted associate
Share of non-regular items from equity accounted associates
Gain on deemed disposal of equity accounted associates
Deferred tax (expense)/benefit recognised on equity accounted associates
Gain/(loss) on de-recognition of an associates reserves
Acquisition costs expensed
Impairment reversal/(expense) on equity accounted associates
Impairment expense on Queensland coal mining assets
Impairment reversal/(expense) on property, plant and equipment (including mine development)
Impairment expense on exploration and evaluation assets
Impairment expense on oil producing and exploration assets
Impairment expense on other assets
Restructuring costs
Reversal/(expense) of New Acland ramp down costs – New Hope
Reversal of provision for liquidation related costs – New Hope
Redundancies
Rehabilitation costs
Onerous contract
Debt waiver consent fees
Expected credit losses allowance
Liquidation related costs
Write off of loan and interest to external party
Other items
–
(17,750)
5,161
(28,952)
2,550
–
25,322
(13,569)
1,484
(842)
–
(869)
–
3,840
–
(5,111)
–
(12,564)
(789)
(1,867)
(834)
(11,550)
1,421
1,050,027
(15,842)
5,225
23,064
(7,452)
(2,245)
(61,640)
–
(90,777)
(67,707)
(23,226)
(14,479)
(12,729)
(4,662)
7,165
(2,704)
3,311
–
–
–
–
–
(2,162)
Total non-regular (loss)/profit after tax attributable to members
(54,919)
783,167
Profit after tax attributable to members
Less: profit/(loss) attributable to non-controlling interests
Profit after tax
273,196
47,243
320,439
952,967
(78,512)
874,455
1
Intersegment/unallocated represents Parent Entity corporate costs that are not allocated to individual segments.
2525
Alternative Performance Measures
TPG special dividend allocation to the Parent Entity net cashflow from investments
The Parent Entity received the TPG special dividend of $120.9 million (or 51.6 cents per share) in July 2020.
With the change to the TPG reporting date (from 31 July to 31 December), the newly merged TPG did not
declare an interim dividend in August 2020.
The Parent Entity has adopted the following treatment of the TPG special dividend in the calculation of the
Parent Entity net cash flows from investments (a non-statutory measure of cash flows) for the 2020 reporting
period and the 2021 reporting period.
The Parent Entity considers the special dividend to have two components. The first is a catchup component
(estimated at $92.4 million), given that TPG has paid very low dividends over the six reporting periods from
reporting period 2018 to reporting period 2020. The second component can be considered as an estimate of
a final reporting period 2020 dividend of $28.5 million for the pre-merger TPG. The following table shows the
allocation of the special dividend to net cash flows from investments in reporting period 2020 and reporting
period 2021.
Net cash flows from investments
Year ended 31 July 2021
2021
$’000
2020
$’000
Catch up dividend
Estimated final FY2021 for the pre-merger TPG usually paid in November
–
28,530
92,418
–
26
Washington H. Soul Pattinson and Company LimitedAnnual Report 2021 Parent Entity
Financial Information
Source of shareholder dividends
Regular profit after tax is a measure of the Parent Entity’s performance. This measurement 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 operations but are unusual due to their size.
The classification of income and expenses as regular or non-regular is consistent with the Consolidated
entity’s measurement of segment results. This is a non-statutory measure and a reconciliation to the Parent
Entity’s profit after tax is provided. The Directors have presented this information, which is used by the Chief
Operating Decision Maker as they consider the disclosure enhances the understanding of the results to
members and users of the financial statements.
ACCOUNTING POLICY
Parent Entity
The statement of financial position, profit after tax and total comprehensive income for the Parent Entity, have been
prepared on the same basis as the consolidated financial statements except for Investments in controlled entities
(subsidiaries) and Investments in associates.
In the Parent Entity, investments in subsidiaries and associates are carried at the lower of cost or impaired cost.
Dividends from these entities are recognised as income within profit. This approach reflects Parent entity’s activities
as an investor.
The consolidated financial statements recognise the individual assets, liabilities, income and expenses of controlled
entities. Associates are equity accounted, with the initial investment being increased/(decreased) by profits/(losses)
recognised in the income statement, movements in other comprehensive income and decreased by dividends
received. Dividends from both controlled entities and associates are not recognised in the consolidated financial
income statement.
Accounting for TPG special dividend
On the 29 June 2020, WHSP received a special dividend of $120 million from TPG. WHSP allocated
$28.53 million to the current reporting period and $92.418 million to the prior reporting period. Refer to the
Alternative Performance Measures section for further details.
Accounting for dividends received from Round Oak Minerals Pty Limited
During the current reporting period, the Parent Entity received $45 million in dividends from Round Oak
Minerals Pty Limited (“Round Oak”). These dividends have been excluded from the net cash flows from
investments. This was done to be consistent with the treatment of Parent Entity funding of prior period
Round Oak trading losses that were excluded from net cash flows from investments.
2727
Parent Entity Financial Information
Statement of Financial Position
Current assets
Cash and term deposits
Assets held for sale
Financial assets held for trading
Other financial assets
Other current assets
Total current assets
Non-current assets
Other financial assets – Listed equities
Long term equity investments – measured at market value
Long term equity investments – measured at fair value
Listed controlled and associated entities – measured at the lower of cost or impaired value
Unlisted controlled and associated entities – measured at the lower of cost or impaired value
Other financial assets – measured at fair value
Loans to controlled entities and associates
Loans to third parties
Other non-current assets
Total non-current assets
Total assets
Current liabilities
Interest bearing liabilities
Other current liabilities
Total current liabilities
Non-current liabilities
Interest bearing liabilities
Other non-current liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Reserves
Retained profits
Total equity
Income Statement
Profit after tax
Less: Non-regular items after tax
Gain on derecognition of an associate
Non-cash franked dividend on demerger of an associate
Gain on sale of partial shareholding in a controlled entity
Expected credit loss allowance
Write off of loan to external party
Net impairment benefit on investments
Sale of property
Net impairment expense on associates
Other
Regular profit after tax
Other comprehensive income
Net movement in the fair value of the listed investment portfolio
28
As at
31 July 2021
$'000
As at
31 July 2020
$'000
134,627
254,862
–
397,582
9,068
19,702
560,979
53
267,372
–
32,544
554,831
8,563
4,065
2,244,881
2,494,201
134,860
183,923
453,688
40,958
196,326
157,790
53,597
3,474,586
4,035,565
289,810
42,714
332,524
216,282
509,110
725,392
1,057,916
2,977,649
47,176
(169,360)
3,099,833
2,977,649
100,079
241,881
443,494
32,812
52,025
–
113,129
3,481,686
4,036,517
235,184
6,091
241,275
199,170
593,118
792,288
1,033,563
3,002,954
43,232
34,085
2,925,637
3,002,954
2021
$'000
2020
$'000
320,226
1,476,877
–
–
(91,390)
1,867
11,550
(10,719)
(1,905)
1,445
3,618
(1,254,227)
(79,683)
–
–
–
98,001
–
32,926
1,528
234,692
275,422
(217,683)
(159,819)
Washington H. Soul Pattinson and Company LimitedAnnual Report 2021 Year ended
31 July 2021
$'000
15,085
17,580
3,166
3,320
1,580
1,012
1,615
1,523
899
1,028
917
860
17,851
39,387
14,628
2,033
–
3,585
45,000
8,503
164,487
5,459
107,194
(18,794)
(5,902)
267,529
(32,837)
234,692
28,530
(45,000)
(67,496)
29,610
180,336
Market value of listed investments as at 31 July 2021
(based on ASX closing prices 31 July 2021)
$'000
Market value of financial assets held for trading
415,213
Long term equity investments
TPG Telecom Limited
Milton Corporation Limited
BKI Investment Company Limited
Bank of Queensland Limited
Clover Corporation Limited
Commonwealth Bank of Australia
Pengana International Equities Limited
Woolworths Limited
Macquarie Group Limited
Wesfarmers Limited
Bailador Technology Investments Limited
BHP Group Limited
Other listed entities
1,448,568
135,963
102,656
83,834
58,490
44,522
34,972
34,492
34,168
30,649
29,213
22,267
185,087
Market value of long term equity investments
2,244,881
Regular Profit after Tax and
Regular Operating Cash Flows
For the year ended 31 July 2021
Interest income (from cash and loans)
Dividend and distribution income
TPG Telecom Limited
Milton Corporation Limited
BKI Investment Company Limited
Bank of Queensland Limited
Clover Corporation Limited
Commonwealth Bank of Australia
Pengana International Equities Limited
Woolworths Limited
Macquarie Group Limited
Wesfarmers Limited
BHP Group Limited
Other listed entities
Brickworks Limited
New Hope Corporation Limited
Apex Healthcare Berhad
Tuas Limited
Pengana Capital Group Limited
Round Oak Minerals
Other controlled and associates
Holding
$'000
Total dividend and distribution income
Listed controlled and associated entities
Brickworks Limited
New Hope Corporation Limited
Apex Healthcare Berhad
Tuas Limited
Pengana Capital Group Limited
Palla Pharma Limited
Market value of listed controlled
and associated entities
43.3%
39.9%
29.8%
25.3%
38.6%
19.9%
1,591,895
661,734
133,550
75,007
63,725
11,915
2,537,826
Total value of WHSP's listed investments
5,197,919
Unlisted investments (Directors valuation)
Gross debt
Net debt and other assets
Consolidated net assets value pre-tax
808,123
(514,809)
312,455
5,803,688
Tax payable if WHSP's listed investments were disposed of:
WHSP is a long term equity investor.
If WHSP had disposed of all of its assets on 31 July 2021, the net capital
gains tax liability of approximately $1,119.3 million would have arisen based
on market values as at 31 July 2021.
Of this amount, only $496.9 million has been recognised in the Parent
Entity’s financial report at 31 July 2021. In the Parent Entity, investments in
subsidiaries and associates are carried at the lower of cost or impaired cost.
The market values of the listed investments are based on the last sale prices
as quoted on the ASX on 31 July 2021 and are therefore subject to price
fluctuations.
Other revenue
Realised and fair value (losses)/gains on equities
Other expenses
Finance costs
Regular profit before tax
Income tax (expense)
Regular profit after tax
Add back the following:
TPG Final dividend escrowed*
Round Oak Minerals dividend**
Non-cash fair value (gains) /loss on equities
Net movements in working capital and tax paid
Net cashflow from investments
The Board declares dividends having regard to regular operating cash
flows before non-regular items. The following information has been
provided to demonstrate the underlying value of the Parent Entity's
investments and regular profit and the cash flows generated by these
investments.
Dividends paid/payable
– Interim of 26 cents per share paid 11 May 2021
– Final of 36 cents per share payable 14 Dec 2021
Total dividends paid/payable
Payout ratio
Dividends as a percentage of regular
operating cash flows
62,243
86,182
148,425
82.30%
* Share of TPG special dividend allocated to FY21. See page 27.
** Share of Round Oak Mineral special dividend allocated to FY21. See page 27.
2929
Corporate Governance
The Board of Washington H. Soul Pattinson and Company Limited (WHSP, the Company)
is committed to ensuring the operation of its policies and practices embed corporate
governance in its day to day activities. We recognise that an appropriate culture needs to
be sustained for our continued success.
WHSP’s corporate governance practices have been reviewed against the ASX Corporate Governance Council
Corporate Governance Principles and Recommendations – 4th Edition (ASX Principles). Other than as set out in
the section below on independence, WHSP’s practices were consistent with the ASX Principles as at 31 July
2021. WHSP’s Corporate Governance Statement has been lodged with ASX and is available on our website at
whsp.com.au
WHSP is an investment holding company with investments across diverse industries and asset classes. Since
listing in 1903, WHSP’s purpose has been to build a resilient long term return to our Shareholders by creating
capital growth along with steadily increasing dividends through disciplined investing in businesses and
assets. The sustainability of industries in which we invest, the quality of the management of our investments
and the impact of existing and potential investments on communities, the environment and people are key
considerations when making investment and divestment decisions.
WHSP has a track record of providing above market returns and dividend growth to its Shareholders. During
the recent COVID-19 pandemic, WHSP’s defensive portfolio preserved shareholder capital and continued to
provide strong long term equity returns.
WHSP employs a small and diverse team of professionals who understand and are aligned to this purpose.
Conduct and culture are set in a highly visible manner by the Board and senior executives, and there is direct
monitoring of activities.
Our disciplined assessment of investments takes a long term view where there is alignment between building
a resilient long term return for shareholders and meeting the broader needs of stakeholders, including the
communities where our investee companies operate. Effective risk management, including the management
of environmental, social and governance (ESG) risks, is embedded in the implementation of WHSP’s strategy.
This balanced view, integration of strategy with disciplined risk management and fostering an ethical, trusted
and respected culture has driven WHSP’s long period of profitability and increased dividends. Our corporate
governance practices reflect this balance.
Board Oversight
The Board has an ongoing focus on sustainable growth with prudent management of associated risks.
The Board’s role is to:
1 Provide leadership and strategic guidance to WHSP;
1 Oversee the performance and conduct of WHSP; and
1 Represent and report to the Shareholders of WHSP.
To fulfil its role, the Board’s responsibilities include approving and overseeing Management’s implementation
of WHSP’s strategy and business plan, as well as approving the Group’s Risk Management Framework and Risk
Appetite Statement. The Board also reviews the framework of systems, policies and processes by which the
Company operates, makes decisions and holds people to account (Corporate Governance Framework).
Corporate Governance Framework
WHSP’s Corporate Governance Framework sets out the roles and responsibilities of the Board and
Management and establishes policies, systems and processes for oversight and monitoring of Board and
management performance, corporate reporting, disclosure, remuneration, risk management and security
holder engagement.
30
Washington H. Soul Pattinson and Company LimitedAnnual Report 2021 Independent
Assurance
1 External auditors
1 Legal and other
professional advisors
Delegation
Accountability
Managing Director and Chief
Executive Officer
Board
n
o
i
t
a
g
e
e
D
l
t
h
g
i
s
r
e
v
o
d
n
a
e
c
n
a
r
u
s
s
A
g
n
i
t
r
o
p
e
r
h
g
u
o
r
h
t
Board Committees
Remuneration
Committee
Nomination
Committee
Risk
Committee
Audit
Committee
WHSP Board and Board Committee Structure
The above diagram shows WHSP’s current Corporate Governance Framework, including the current Committees of the Board.
The role and responsibilities of the Board and its Committees are detailed in the Board and each of the Board Committee Charters on
WHSP’s website at www.whsp.com.au/policies
Culture
The strong principles and values which underpin our approach to corporate governance are designed to promote transparency, fair
dealing and the protection of stakeholder interests. WHSP is committed to embedding high standards of corporate governance, which
it considers integral to building a sustainable and profitable business.
The Board “sets the tone from the top” in a clear and visible way, and the desired behaviours are demonstrated by senior management and
communicated to staff. The Board encourages a culture of open and frank Board discussions, where all views are respectfully considered.
The Board monitors culture by engaging with management and staff in various ways:
1 key management are invited to attend Board and Committee meetings, and other members of management and staff regularly
attend and present on matters as subject matter experts;
1 further information is provided on request, in response to Board questions and particular areas of interest and oversight; and
1 informal meetings between Board members, management and staff occur periodically during the year.
Professional Conduct
WHSP has established a Code of Conduct which articulates our values and deals 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.
3131
Corporate Governance
WHSP expects all Directors and employees to:
1 maintain and further enhance the Company’s reputation. This includes:
1 acting in accordance with ethical and professional standards;
1 acting with honesty and integrity in dealings with Shareholders, suppliers, competitors and other stakeholders; and
1 protecting the reputation of the Company when dealing with actual or potential conflicts of interest between private and
Company matters and avoiding conflicts where possible.
1 as custodians of shareholder wealth, protect Company assets and confidential information. This includes:
1 complying with the Company’s legal and regulatory obligations;
1 following the Company’s policies;
1 not accepting unauthorised benefits as a result of their position in the Company; and
1 not engaging in insider trading.
1 create a respectful workplace. This includes:
1 treating everyone with fairness and respect;
1 reporting discrimination, harassment or bullying; and
1 acting in accordance with the highest standards of workplace behaviour.
Material breaches of the Code of Conduct are reported to the Risk Committee.
Standards of behaviour expected of staff are also set out in key Board approved policies that are intended to instil a culture of acting
lawfully, ethically and responsibly.
WHSP has a Share Trading Policy setting out prohibited periods for Director and staff trading in securities of the Company, a Whistleblowing
Policy to promote a culture of corporate compliance and highly ethical behaviour and an Anti-Bribery and Corruption Policy to articulate
our commitment to a culture of zero tolerance to bribery, corruption and facilitation payments. These policies may be viewed on WHSP’s
website at www.whsp.com.au/policies
Material breaches of these policies are reported to the Risk Committee.
Board and Management
The Board is ultimately responsible for the operations, management and performance of WHSP. In discharging this responsibility, the Board
delegates to Senior Executives, whose role it is to manage WHSP in accordance with the directions and policies set by the Board. The Board
monitors the activities of Senior Executives in the performance of their delegated duties.
It is the responsibility of the Board to determine policies and practices and take steps to satisfy itself that WHSP is compliant with statutory,
legal and other regulatory obligations.
To fulfil its role, the Board’s responsibilities include approving and monitoring management’s implementation of WHSP’s strategy,
monitoring WHSP’s performance, overseeing WHSP’s financial position, approving WHSP’s risk management framework, including major
policies relating to remuneration, conduct and diversity, approving WHSP’s Risk Appetite Statement and reviewing the management of
material risks. The responsibilities of the Board are set out in the Board Charter on the website at www.whsp.com.au
The role of the Board is to provide leadership and strategic guidance, oversee the performance and conduct of WHSP and represent and
report to our Shareholders. The Board appoints a Managing Director and Chief Executive Officer (MD & CEO) who is responsible for the
overall operational management and performance of WHSP. Subject to certain powers the Board reserves for itself and financial limits on
delegated authority, the MD & CEO is authorised to exercise all of the powers of the Board. The powers reserved for the Board are set out in
the Board’s Charter.
The Board has delegated responsibility to management for the overall operational management and performance of WHSP in accordance
with the strategy, plans and policies approved by the Board.
Management’s responsibilities include:
1 Day to day management of WHSP;
1 Monitoring the investment portfolio;
1 Making investment/divestment decisions within Board delegated limits;
1 Producing performance measurement reports;
1 Managing the compliance and risk management systems; and
1 Appointing, managing and developing staff.
The MD & CEO is responsible for ensuring that the responsibilities delegated by the Board are properly discharged.
32
Washington H. Soul Pattinson and Company LimitedAnnual Report 2021 Director Independence
WHSP is governed by a Board comprising a majority of independent, professional and highly experienced directors. The Board assesses
the independence of Directors on appointment and annually against the ASX Corporate Governance Council’s Factors relevant to assessing
independence of a director.
The following non-executive Directors are considered by the Board to be independent Directors:
1 Mr Michael J Hawker – Lead Independent Director
1 Mrs Tiffany L Fuller
1 Mr Warwick M Negus
1 Mrs Josephine L Sukkar
1 Mr Robert G Westphal
Having regard to the ASX Principles, two of the non-executive Directors have interests and/or associations which may impact their
independence.
1 Mr Robert Millner and Mr Thomas Millner have relevant interests in substantial shareholdings in WHSP as disclosed in the Directors’
Report and the Remuneration Report within WHSP’s 2021 Annual Report.
1 Mr Robert Millner is also a director of Brickworks Limited which is a major shareholder of WHSP.
The Board does not believe that a Director:
(a) holding shares in WHSP;
(b) having an interest in a substantial holding in WHSP; or
(c) being associated with a substantial shareholder of WHSP;
is detrimental to other Shareholders. The Board considers that such holdings further align the interests of those Directors with the interests
of the Company’s Shareholders as a whole.
While there are factors that may impact their capacity to bring independent judgement, the Board considers that they act independently
in executing their duties as Directors.
Chairman Robert Millner is a Non-executive Director, however his long tenure and the substantial extended Millner family shareholding
in WHSP might reasonably be seen to impact his capacity to bring independent judgement. The Board acknowledges the importance of
independent board decision making and in addition to appointing Mr Hawker as the Lead Independent Director, the Board has in place
formal Board Guidelines for Dealing with Conflicts of Interest.
The Board believes it is appropriate in the particular circumstances of WHSP for Mr Millner to be Chairman of WHSP, notwithstanding he is
not regarded as independent under the ASX Principles:
1 as there are few people more experienced as a chairman and his skill, experience and shareholding are key assets of the business;
and
1 a substantial, long term family shareholding in the business creates significant alignment with Shareholders’ interests. Mr Millner is
the 4th generation of family members involved in the governance of the business.
The responsibilities of the Lead Independent Director include acting as Chairman when the Chairman may be conflicted, assisting to
review the performance of the Chairman and to provide a separate channel of communication for internal and external stakeholder and
security holders, particularly where those communications may involve the Chairman or an associate of the Chairman.
Management of Conflicts
All Directors are committed to bringing their independent views and judgement to the Board and, in accordance with the Corporations Act
2001, inform the Board if they have any interest that could conflict with those of WHSP. The Board has approved Guidelines for Dealing with
Conflicts of Interest to appropriately manage all perceived, actual and potential conflicts of interest. Directors are required to disclose actual,
potential or perceived conflicts, and to appropriately manage a conflict the Director:
1 will not receive board papers on the subject of interest, but may, at the discretion of the other Directors, be advised that certain
board papers have been excluded;
1 cannot be present when the matter is considered unless otherwise permitted by law or the other Directors resolve that the Director
in question can be present;
1 cannot vote on the matter unless the other Directors resolve that the Director in question can vote;
1 cannot have access to minutes of the Board or any Board Committee meeting in relation to the subject of interest; and
1 may be required by the Board to take such other steps as are necessary and reasonable to resolve any conflict of interest within an
appropriate period.
3333
Corporate Governance
Board Committees
The Board has established and delegated its authority for specific responsibilities to four standing Committees:
1 Nomination Committee
1 Audit Committee
1 Risk Committee
1 Remuneration Committee
The authority of each Committee is set out in its Charter. The Board on occasion may constitute other Committees or request Directors
to undertake additional duties, such as due diligence committees in relation to strategic decisions and capital and funding matters.
The diagram below illustrates the core functions of the four standing Committees.
Risk Committee
Audit Committee
1
Identification of significant financial
and non-financial risks
1 Annual review of the risk
management framework
1 Consideration of risks related to
investee companies
1 Oversee WHSP's insurance program
1 Monitoring the operation of the risk
management framework
1 External audit
1 Accounting
1 Financial reporting
1 Financial reporting risk management,
including compliance
Remuneration Committee
Nomination Committee
1 Recommendations to the Board
with regard to the Remuneration for
Non-executive Directors and Senior
Executives
1 Review WHSP's Remuneration Policy
1 Compliance with statutory obligations
regarding remuneration related
disclosures
1 Review of the Board succession
1 Review the program for inducting
new directors
1 Develop a process for the evaluation
of the performance of the Board and
Directors
34
Washington H. Soul Pattinson and Company LimitedAnnual Report 2021 Diversity and Inclusion
WHSP values and respects the skills that people with diverse backgrounds, experiences and perspectives bring to achieving our purpose
to grow the capital value and yield of our investment portfolio. We believe a diverse workforce incorporates a number of different factors,
including gender, ethnicity, age and educational experience. We are committed to providing a work environment in which everyone is
treated fairly, and with respect.
In promoting diversity we are 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. Recruitment, selection and succession planning have regard to diversity criteria and objectives
for achieving diversity, including gender balance.
WHSP’s Diversity Policy formalises its commitment to providing equal access to opportunities irrespective of background or difference.
The policy may be viewed on the Company’s website at www.whsp.com.au/policies.
The Diversity Policy governs the conduct of all Directors and employees of the Company.
Governance
The Board reviews the diversity of the Board and senior management as part of its review of succession planning.
The Board Remuneration Committee sets measurable objectives for achieving gender balance in the composition of the board, senior
executives and the workforce generally. The objectives set by the Committee include objectives relating to gender balance on the Board,
recruitment, and workplace practices to support a culture that attracts a diverse workforce.
Gender Diversity
Each year WHSP submits reporting under the Workplace Gender Equality Act 2012 (Cth) and reports on the respective proportion of men
and women on the Board and in senior management positions in its Corporate Governance Statement. Despite the relatively small
number of staff that make up the workforce of its direct operations and the low level of staff turnover, the Board and management assess
the diversity of its workforce, including gender diversity, at least annually. The following sets out the gender balance of the Board, senior
management, senior executives and the workforce as at 31 July 2021.
2021
Total
Male
Female
Board of
Directors
Non-Executive
Directors
Senior
Management
Senior
Executive*
WHSP
Workforce
8
75.00%
25.00%
7
71.43%
28.57%
3
66.67%
33.33%
12
75.00%
25.00%
28
60.71%
39.29%
* A Senior Executive is a business head, team leader or professional specialist.
Auditor Engagement and Independence
The external auditor attends Audit Committee meetings and reports on the results of their half year review and full year audit. It is the
policy of the external auditor to rotate audit engagement partners on listed companies in accordance with the requirements of the
Corporations Act 2001, which is generally after five years.
The external auditor provides an annual declaration of their independence to the Company. Information about fees paid to the external
auditor is included in the Directors’ Report and in the notes to the financial statements in the 2021 Annual Report.
Proposals to engage the external auditor for non-audit assignments are notified in writing to the Audit Committee Chairman prior to
engagement and reported to the Audit Committee at the subsequent Audit Committee meeting.
The lead engagement partner for the Company’s external auditor attended the AGM in 2020 and was available to answer Shareholders’
questions about the conduct of the audit and the preparation and content of the audit report. During FY21, following a tender process,
the Company appointed Ernst & Young (EY) as its external auditor. WHSP Shareholders will consider the appointment of EY as auditor of
WHSP at the Company’s FY21 AGM.
3535
Corporate Governance
Commitment to shareholders and an informed market
WHSP respects the rights of its shareholders and provides access to appropriate information about the Company in a timely manner.
Market updates
The Board recognises the need to provide all investors with equal and timely access to material information regarding WHSP and for
announcements to be factual, clear, balanced and complete.
WHSP 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 WHSP that a
reasonable person would expect to have a material effect on the price or value of WHSP’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:
1 New and substantive investor or analyst presentation materials are released to ASX before they are given;
1 Shareholders are given the opportunity to participate in market update presentations; and
1 The Board receives copies of all material market announcements promptly after they have been made.
The Chairman and Managing Director are responsible for determining disclosure obligations and the Company Secretary is the nominated
ASX continuous disclosure contact for the Company. The Continuous Disclosure Policy is available on the Company’s website.
Website
WHSP’s website, www.whsp.com.au, provides information about the Company and its governance. The Governance page provides links to:
1 Details of Directors and Senior Executives;
1 WHSP’s constitution, its charters and policies; and
1 Other corporate governance materials including current and past Corporate Governance Statements and the Company’s Modern
Slavery Statement FY20.
The website also contains copies of current and past annual reports, financial reports, key financial dates, share registry details, material
presentations and ASX announcements.
Shareholder meetings
WHSP facilitates two-way communication with investors. WHSP actively promotes shareholder attendance and participation at the AGM
and other meetings of shareholders. The notice of meeting sent to all shareholders sets out clear instructions for participating at the
meeting.
The safety of shareholders and staff is of primary importance to us. Due to the COVID-19 pandemic, the Company’s FY20 AGM was held as
a virtual meeting. Shareholders were able to vote, ask questions and provide comments via the virtual meeting platform. We will continue
to monitor the progress of COVID-19 and regulatory developments to determine the format for the FY21 AGM.
The external auditor attends the AGM to answer shareholders’ questions regarding the conduct of the audit and the content of the
auditor’s report.
Shareholders who are unable to attend the AGM are encouraged to vote on the resolutions of the meeting by proxy. All resolutions at the
FY20 AGM were decided on a poll.
Shareholders are given the option to receive communications from, and send communications to, the Company and its share registry
electronically.
Further information
For further information concerning the corporate governance practices of the Company, refer to WHSP’s Corporate Governance Statement
which is available in the Governance section of the Company’s website at www.whsp.com.au
36
Washington H. Soul Pattinson and Company LimitedAnnual Report 2021 Risk Management
The success of WHSP’s business requires taking risks that are known, understood, assessed
and managed. We are custodians of shareholder wealth, and as long term, disciplined
investors who value our reputation, sustainable investing is at the core of what we do.
Our long term strategy drives culture and guides conduct at WHSP.
Our disciplined approach to investing includes the assessment and monitoring of financial and non-financial
risks. As an investment holding company, the operations and related operational risks of each investment are
managed by or under the direction of the directors of investee companies. We monitor the performance of
each investee company and of the portfolio as a whole.
Risk Governance
The Board endorses WHSP’s strategy annually taking into consideration the Board approved risk appetite
statement. Risk management is central to decision making.
WHSP has a Board Risk Committee and a Management Risk Committee responsible for monitoring and
reviewing key risk areas. The ongoing review of risk includes an annual risk review that is undertaken
alongside WHSP’s annual strategy review. The annual risk review includes an assessment of whether
adjustments to the risk appetite need to be made as WHSP’s strategy evolves.
Our Investments, our people and our operations
We have a broad investment mandate and our investment activity is guided by core investment principles.
These principles are set out in our Sustainable Investment Policy.
We recruit talented individuals. WHSP employs 28 full time staff who are based at its headquarters in Sydney,
Australia. Our Code of Conduct articulates the standards that guide our daily work.
WHSP’s direct environmental and social impacts predominantly relate to resources consumed in our office
and business travel to assess investment opportunities. We also conduct pre-investment due diligence and
monitor our existing investments in relation to environmental, social and governance matters.
Our Risk Management Framework
WHSP manages risk through its integrated risk management framework (Framework). The Framework sets
the foundations and arrangements for designing, implementing, monitoring and improving risk management
processes and practices across WHSP.
Policies are used to articulate the standards expected of staff and to influence actions. Breaches of policy
are reported to the Management Risk Committee and material breaches are escalated to the Board.
Remuneration decisions of the Board consider returns to shareholders as well as ethical behaviours, operating
within the law and meeting community expectations on environmental, social and governance standards.
While remuneration is set using financial measures the Board is able to exercise its right to make changes to
remuneration should outcomes fall short of expectations in these areas.
WHSP monitors and reports on both financial and non-financial risk in its direct operations and investment
portfolio. Key risk areas include Investment risk, Sustainability and Environment risk, Regulatory and
Compliance risk and Brand and Reputation risk. Investment portfolio monitoring includes scenario analysis
and tolerances for Investment risk and Sustainability and Environment risk. The most conservative risk
appetite is in the management of critical areas such as reputation, regulatory compliance, workplace health
and safety and protection of the environment. This means the Board has a narrower tolerance for these risks.
In relation to risks associated with business growth the Board accepts a higher risk appetite, consistent with
WHSP’s strategic objective.
3737
Risk Management
APPROACH TO
Risk Management
Our approach to managing risk is guided by the following principles:
Disciplined assessment of investment risk
Long term view
Investment managers bring an in-depth understanding of
the sector in which capital is being deployed. They evaluate
opportunities based on facts and information. WHSP assesses
downside risks, but also looks to mitigate these risks. There is
active monitoring of our investments.
Broad investment mandate
While WHSP has historically been an equity investor in a diverse
range of industry sectors, our unconstrained mandate means
that we can invest in any asset class. We look for value in sectors
and/or asset classes which may not be on the radar of other
investors.
We believe that sound environmental, social and governance
(ESG) practices are embedded in successful long term investing.
We can afford to take a long term view as we do not need to
deploy capital within a specified timeframe.
Thinking, behaving, and investing responsibly
We leverage WHSP’s reputation as an investor of choice, trusted
partner and flexible source of capital to differentiate ourselves
from other investors. We look for opportunities where these
characteristics add value.
Senior management remuneration is aligned to generating cash
flow to provide consistent dividends for shareholders and to
conserving capital.
Each year the Board Risk Committee reviews the Framework following the Board’s consideration of strategy to satisfy itself that the
Framework is appropriate to manage the key risks arising from the implementation of the proposed strategy, the Framework is sound
and the Company is operating within its risk appetite.
In the financial year ended 31 July 2019 (FY19), with the assistance of external risk reviews, WHSP identified initiatives to improve its risk
management framework and related disclosure. Actions taken in the first year included revision of WHSP’s Risk Appetite Statement and
risk metrics. A number of policies, including WHSP’s Sustainable Investment Policy, were also put in place to better articulate WHSP’s
approach to risk management. In FY19 WHSP published its inaugural Sustainability Report and in FY20 WHSP published its inaugural
Modern Slavery Statement.
Senior management has continued to enhance the Framework and the Board Risk Committee has monitored progress in achieving
agreed outcomes. The recommendations of the FY19 external risk reviews have largely been implemented and new projects are underway
to further embed the risk management framework in operations and systems.
WHSP’s Sustainability Report and Modern Slavery Statement set out details of other initiatives taken to improve WHSP’s risk management
framework.
Investment Risk
Investment Risk is a material risk for the Company. The Board approved Risk Appetite Statement and delegated limits guide the new
investment approval process and investment portfolio monitoring, measuring and reporting.
Our approach to assessing investment risk is structured to focus on areas considered to be material to the asset, the industry and related
markets as well as to our portfolio as a whole. Through the combined expertise of our in-house investment team and external advisers, we
have a deep understanding of the markets, the industries and the companies that we invest in, including ESG factors; demand and supply
dynamics; competitive environment; and regulation.
We regularly consult with experts and conduct rigorous due diligence prior to making an investment. Due Diligence considers a range
of scenarios in assessing return on investments, as well as taking into account the quality of management of the investment, the industry
trends and macroeconomic factors.
WHSP’s investments are made in accordance with its Sustainable Investment Policy, Climate Change Policy, Human Rights Policy and
Anti-Bribery and Corruption Policies. These policies may be viewed on the Company’s website at www.whsp.com.au/policies. Details of
WHSP’s approach to financial risk management is contained in Note 28 – Financial Risk Management in WHSP’s FY21 Financial Report.
38
Washington H. Soul Pattinson and Company LimitedAnnual Report 2021 Sustainability Report
WHSP recognises the need to address ESG issues in its direct operations and to assess
ESG risks and opportunities as an investor. Thinking, behaving and investing responsibly
underpins our proud history as a value focused investor and trusted partner.
The most material ESG risks for WHSP are within our investment portfolio, therefore the focus of this report is
mainly on prudent ESG risk management as a responsible investor. This report summarises our approach and
actions in the following areas:
Sustainability
in our direct
operations
Sustainable
Investing
Climate
Change
Human Rights
and Modern
Slavery
WHSP and the
Community
Our approach
to Sustainable
Investing
Our climate
change
commitments
Modern Slavery
Legislation
Our actions
Sustainability in
our portfolio
Governance,
Strategy, Risk
Management,
Measuring
Climate Risk
Sustainability in our direct operations
WHSP employs 28 full time staff who are based at its headquarters in Sydney, Australia. Our direct
environmental and social impacts predominantly relate to our headquarters in Sydney, Australia.
Our direct environmental impacts relate to:
1 Office footprint: Resources consumed in our office, such as electricity, water and waste (our headquarters
have a 5.5 Star NABERS Energy rating and a 4 Star NABERS Water rating)
1 Travel: This includes business travel to assess investment opportunities, conduct pre-investment due
diligence, and monitor our existing investments; and employee commuting
1 Carbon emissions: We recognise the importance of minimising our carbon footprint and considering
climate risk in our business resilience planning for our corporate operations. WHSP reports its Scope 1 and
Scope 2 emissions under the National Greenhouse and Energy Reporting Act
Our direct social impacts relate to:
1 Diversity and inclusion: Fostering a diverse and inclusive workplace
1 Talent retention: Our ability to attract and retain top talent and provide a compelling employee value
proposition
1 Modern slavery and human rights: We recognise that there are modern slavery risks in our operations
and supply chains and we engage external experts to conduct analysis when required. For further
information on our commitment to respect human rights and for a description of the action taken to
address modern slavery risks in our role as an employer and a buyer, refer to the Human Rights and
Modern Slavery section of this Report.
3939
Sustainability Report
Sustainable Investing
WHSP believes sustainable investing is a cornerstone of its long term success. Sustainable investing means taking into account
environmental, social and governance (ESG) risks and opportunities in assessing the long term viability of the companies and industries
in which we invest. Our long term, patient and disciplined investment approach includes a focus on building relationships with investee
companies and considering the communities in which they operate.
Our purpose is to hold a diversified portfolio of assets, which generates a growing income stream for distribution to shareholders in the
form of fully franked dividends and to provide capital growth in the value of shareholders’ investments.
Our values are central to our culture and to the long term investment success of the company. At the core of our approach are three values:
1 We are custodians of shareholders’ wealth – we aim to deliver superior returns to our shareholders in a cost efficient manner. We also
aim to influence and encourage our investees, where possible, to be cost effective in what they do.
1 We are long term and disciplined investors – we believe that shareholders’ wealth is enhanced by investing with a long term outlook,
which requires making disciplined investment decisions which will deliver strong returns over the long term. This may require
investment decisions which are contrarian and/or counter cyclical in nature.
1 We value our reputation – trust and reputation are at the heart of our brand. Our reputation as an ethical, trusted and respected
company underpins our long term success. We seek to be an investor of choice to create sustainable investments which make a
positive contribution to their stakeholders.
We proactively assess ESG factors and manage ESG risks to fulfil this purpose and recognise the evolving expectations of our key
stakeholders in considering relevant ESG factors in our investment philosophy.
We make strategic investments in companies where we assess long term shareholder wealth creation through high quality operations.
Our role as investors can include board roles as part of the oversight of significant investments. Our influence and engagement is
predominantly done through active monitoring of our investments and through voting our shareholdings with all shareholders who vote
on items of business considered at a meeting.
Our approach to oversight of our investee companies differs between listed and unlisted companies and depends on the sector, assets or
the type of investments. Set out below is the portfolio weighting of each type of investment. This year approximately 80% of the value of
our investment portfolio was invested in listed companies. Listed companies are subject to reporting requirements to provide disclosure
to the market on their assessment of ESG matters and we review their disclosure as part of our monitoring and engagement.
As at 31 July 2021
Telecommunications Portfolio1
Brickworks Limited1
New Hope Corporation Limited1
Financial Services Portfolio (Listed and Unlisted)1,2
Pharmaceutical Portfolio (Listed)1
Round Oak Minerals Group2
Equities Portfolio1
Private Equity Portfolio2
Property Portfolio (net of borrowings)2
Structured Yield2
Cash and other net assets
Bank borrowings3
Gross value of the portfolio (pre-tax)4,5
Percentage of Portfolio
Listed by Value
%
100% LISTED
100% LISTED
100% LISTED
87% LISTED
100% LISTED
UNLISTED
96% LISTED
UNLISTED
UNLISTED
20% LISTED
UNLISTED
Value of
WHSP’s Holding
$m
1,523
1,592
662
398
280
234
786
367
110
295
71
(515)
5,803
12 month Movement
%
$m
(444)
520
117
87
(5)
73
275
95
20
148
(193)
(69)
624
– 22.6%
48.5%
21.5%
28.0%
– 1.8%
45.3%
53.8%
34.9%
22.2%
100.7%
– 73.1%
15.5%
12.1%
1 At market value
2 At cost or Directors’ valuation
3 Refer to note 25 for details regarding external borrowings
4 The tax payable would be approximately $1.119 billion if all assets had been realised at NAV as at 31 July 2021
5 Net asset value (pre-tax) is calculated as follows: the value of WHSP’s assets less all its liabilities (other than the tax that would be payable upon the sale of its assets). Assets are
valued at market value, cost or independent valuation or Directors’ valuation
40
Washington H. Soul Pattinson and Company LimitedAnnual Report 2021 Our approach to Sustainable Investment
The Board approves delegated limits and risk tolerances to guide the investing activities of WHSP. The Board also monitors investing
activities, approves investments above delegated limits and reviews significant investments. The management team are tasked with
reporting to the Board on ESG issues affecting investments to assist the Board with its monitoring role.
We consider the impact of ESG risks and opportunities initially as part of the investment due diligence process. We evaluate ESG risks and
opportunities associated with potential investee companies when making investment decisions, in line with WHSP’s ESG risk framework
including the various ESG factors outlined in Appendix A of our Sustainable Investment Policy.
Monitoring of the investment portfolio includes review of the performance of investee companies and assessment of the long term
prospects of each industry in our investment portfolio to identify opportunities and potential risks. The level of ESG risk in the investment
portfolio is constrained by limits within the Board approved Risk Appetite Statement consistent with our aim of achieving positive
investment outcomes over the long term.
Our approach to assessing ESG risks and opportunities is guided by three core beliefs:
1 Attention to ESG performance can improve the quality and consistency of long term value creation.
1 As an active owner, we are well positioned to provide counsel and independent challenge to our investees in relation to their
approaches for managing ESG risks, and taking advantage of ESG opportunities, therefore enhancing returns.
1 Our actions and decisions can affect practices in the entities in which we invest. We have both a duty and an interest in managing this
influence to maximise long term value for our investee companies and our investors.
By evaluating the ESG risk profile of our existing and prospective investments, we are able to take a balanced view on how these affect our
investment decisions. As such, we do not exclude investments that are exposed to ESG risk and may take advantage of opportunities that
arise in response to ESG risks. We invest in companies with high quality operations and where we see potential for long term shareholder
wealth creation and cash generation.
We believe our investment principles are fundamental to achieving long term sustainable returns. These are:
1 Make sensible decisions: We bring an in-depth understanding of the sector in which capital is being deployed. This understanding
includes environment, social and governance factors, demand and supply dynamics, the competitive environment and regulation.
Opportunities are evaluated based on facts and information. As an active owner, we focus on the downside risks to any investment, but
also looks at avenues for mitigating these risks.
1 Think outside the box: Our unconstrained mandate means that we can invest in anything and often look for value in sectors and/or
asset classes which are not on the radar of other investors.
1 Have the courage to act: We execute WHSP’s strategy with conviction and believe we have the ability to make the right investments
at the right time, therefore we do not always conform to the market’s views.
1 Think long term and have patience for the right opportunity: WHSP can afford to take a long term view as the company does not
need to deploy capital within a specified timeframe.
1 Be different: WHSP’s reputation as an investor of choice and flexible source of capital differentiates us from other investors. We look for
opportunities where these characteristics add value in any transaction.
Our actions
In FY19 we undertook a strategic review of our investment approach to help us understand where we can improve ESG integration within
our investment lifecycle. Our inaugural Sustainability Report in our FY19 Annual Report described our approach to sustainable investing
and how we consider climate-related risks and opportunities as well as human rights.
In FY20, we took steps to embed our Sustainable Investment, Climate Change and Human Rights Policies into our operations and into
our monitoring framework for our investment portfolio. Then in FY21, we refined the assessment of ESG risks in new investments and
undertook further engagement with significant investee companies regarding ESG risks and opportunities. Our goal is to continue to
take action to understand and manage climate-related risks and opportunities as we continue to make new investments and our ESG
risks evolve.
For further detail on actions taken to review our understanding of the physical risks, transitional risks, and climate change opportunities we
consider as part of WHSP’s approach to sustainable investing refer to the climate change section of this report. WHSP’s inaugural Modern
Slavery Statement outlines steps that we have taken and can undertake to better understand human rights and modern slavery issues and
risks that are relevant to our business operations and supply chain.
In September 2021, Milton shareholders voted in favour of a merger with WHSP. The merger brings together two great investment houses
who share aligned value-focused, long term investment philosophies. The combined group is expected to have substantial scale and
liquidity to fund further diversification and pursue investment opportunities arising across a broad range of asset classes.
4141
Sustainability Report
We are committed to evolving our approach to integrating ESG within our investment lifecycle and providing further transparency on
our progress. As we continue to make new investments and the value of existing investments change, our ESG risks and opportunities will
also vary.
Sustainability in our portfolio
At 31 July 2021, a significant portion of WHSP’s investment portfolio consists of shareholdings in TPG, Brickworks and New Hope. The
following is a summary of their ESG disclosure. As active owners we continue to monitor the ESG performance of our shareholdings and
consider the associated ESG risks and opportunities as we manage our investments in these companies.
TPG Telecom
TPG Telecom is a full-service telecommunications provider listed on the ASX. They operate a number of leading mobile and internet
brands including Vodafone, TPG, iiNet, Internode, Lebara, AAPT and felix.
TPG’s Sustainability Council is comprised of senior leaders from across the TPG Telecom group who are instrumental in developing and
endorsing TPG’s sustainability strategy. TPG is committed to understanding the ways in which its business intersects with the United
Nations Sustainable Development Goals.
TPG Telecom recognises the threat of global climate change and is working towards aligning its business with the aims of the Paris
Agreement. This includes reducing emissions to help mitigate climate change, using their technologies to help reduce emissions within
their wider society, understanding and building resilience to climate impacts, and being transparent in their disclosure of climate impacts,
risks and opportunities. TPG is also working to bring future reporting in line with the requirements of the Taskforce on Climate-related
Financial Disclosures.
TPG reports on its scope 1 and scope 2 greenhouse gas emissions in its Vodafone operations in line with requirements under the National
Greenhouse and Energy Reporting Act (2007) (Cth) and provides data on Vodafone’s energy use and greenhouse gas emissions in its
Sustainability Report.
TPG’s 2021 Sustainability Report is available on its website.
Brickworks
Brickworks is one of the world’s leading providers of a full suite of building products from bricks to precast concrete panels, pavers, roofing
tiles and timber products. It is listed on the ASX.
During FY20, Brickworks developed it sustainability strategy, “Build for Living: Towards 2025”. Brickworks recognises the importance of
increased disclosure and action related to climate risk and discloses its approach to the recommendations of the Task Force on Climate-
related Financial Disclosures.
As a large scale landholder, Brickworks’ approach to rehabilitation is to establish, operate and rehabilitate Brickworks sites in a manner
that promotes the optimum environmental and social outcomes. Brickworks Building Products Australia monitors its environmental
performance and compliance in accordance with its Environmental Management System, aligned with ISO14001:2004, utilised across
the company.
Brickworks’ disclose a target scorecard tracking progress against four key areas – people, community, environment and responsible
business. Environmental disclosure includes energy consumption, scope 1 and scope 2 carbon emissions and Brickworks’ strategy to drive
energy efficiency opportunities including the use of renewable fuels.
Brickworks’ 2021 Sustainability Report is available on its website.
New Hope
New Hope is a diverse Australian energy company listed on the ASX with operations in coal mining, exploration, port operation, oil and
agriculture. New Hope has a robust business model based on efficient and cost-competitive production of high-quality, low emission coal
that is supplied to long standing customers in both Australia and in a diverse range of Asian markets.
New Hope considers the potential impact of climate change risks on future cash flows and the identification and management of climate-
related risks is governed as part of New Hope’s Risk Management Framework. New Hope’s climate-related risks and opportunities are set
out in its FY2021 Sustainability Report.
As custodians of the land on which they operate, New Hope is an industry leader in progressive rehabilitation of land that has been
disturbed by mining operations. New Hope adopts a responsible approach to both hazardous and non-hazardous waste. It reports
metrics on its operational and emissions footprint, water usage, waste collection and recycling and air quality monitoring. Reporting on
its operational energy and emissions footprint includes scope 1 and scope 2 greenhouse gas emissions and energy consumption.
New Hope’s 2021 Sustainability Report is available on its website.
42
Washington H. Soul Pattinson and Company LimitedAnnual Report 2021 Climate Change
Climate change has far reaching consequences for our environment, the global economy and society. This threat is driving regulatory
change and reshaping the flow of finance. It will increasingly influence customer demand for products and services, and create new or
heightened exposures to chronic and acute climate change events.
Consequently we monitor the effect of climate change on our direct operations and on the performance of our investment portfolio.
We seek to manage the impacts on our direct operations by monitoring and reducing the cost of doing business, measuring our carbon
emissions and minimising the environmental footprint of our workplaces. The impacts on our investment portfolio vary by sector, and
geographical location. We assess the impact of climate risk on our material investments and on our portfolio as a whole. We recognise that
from an investment perspective, climate change will lead to both risks and opportunities.
Our climate change commitments
We are committed to assessing the resilience of our investment portfolio against climate-related risks and opportunities, identifying any
associated financial impacts and providing relevant disclosures to our stakeholders. This will increasingly include reference to climate-risk
disclosures published by our current and potential investees.
Building on our approach to date, our climate change commitments will focus on the following four themes:
1 We will continue to consider climate-related impacts in our investment decision making and ongoing engagement, including at the
Board and Senior Executive levels, as they relate to WHSP’s portfolio.
1 We will continue working to understand and assess how climate-related impacts (both risks and opportunities) on our investment
portfolio will develop over time and take this into account when making strategic decisions on behalf of our investors.
1 We will continue integrating ESG risk considerations, including climate change risks, into our investment decisions and ensuring our
active ownership engagement considers climate-related impacts material to the companies in which we invest.
1 We will progressively engage with our investees to provide disclosures on their respective greenhouse gas emissions footprint and
other key climate-related metrics. We will leverage these disclosures to inform our assessment of the carbon intensity associated with
our investment portfolio to understand the risks across our portfolio and to provide our investors and other stakeholders with climate-
related information.
Our Climate Change Policy is available on our website at www.whsp.com.au/policies
1. Governance
WHSP’s Board oversee management’s efforts to understand and manage climate-related risk and opportunities. As part of its annual strategy
review, the Board – with the assistance of external experts – reviews the risks and opportunities relating to climate change. The Board also
receives regular investment portfolio reporting at each meeting and key developments in material investee companies are discussed.
WHSP has a Board Risk Committee and a Management Risk Committee responsible for monitoring and reviewing key risk areas,
including climate-related risks and opportunities. At each meeting of these Committees, a report on the assessment of Sustainability and
Environment risk in the investment portfolio and related metrics are reviewed. The Management Risk Committee reviews compliance with
key policies at each meeting and reports material breaches of policy, including WHSP’s Climate Change Policy and Sustainable Investment
Policy, to the Board Risk Committee.
2. Strategy
WHSP’s long term strategy, broad investment mandate and disciplined investing are key to building a resilient investment portfolio
for WHSP’s investors. The assessment of climate change and the changes brought about by it as well as the actions of governments,
regulators and markets are embedded in WHSP’s investment decision making processes and strategy review. We acknowledge the
importance of effective international policy frameworks to limit greenhouse gas emissions and the uncertainty of the trajectory of this
transition in the short term. WHSP’s strategy continues to be focused on delivering strong returns over the long term.
3. Risk Management
WHSP assesses and monitors climate-related risks in its direct operations and investment portfolio. The success of WHSP’s business requires
taking risks that are known, understood, assessed and managed or mitigated. We regularly consult with experts and conduct rigorous due
diligence prior to making an investment. Investment portfolio monitoring includes scenario analysis of financial outcomes and reviewing
metrics against board approved tolerances for climate related risks.
4343
Sustainability Report
During the year, with the assistance of an expert advisor on physical and transitional risks created by climate change, we conducted a
climate change risk assessment on substantial long term investments within the portfolio. It has assisted in reviewing our understanding
of the physical risks, transitional risks, climate change opportunities and climate reporting maturity in significant investments that we
hold. Through this assessment we will continue to develop our monitoring of the sensitivity of individual investments and the portfolio
as a whole to physical and transition risks. See WHSP’s Climate Change Policy for a description of physical and transition risks and related
opportunities.
For further information on WHSP’s Risk Management practices see the Risk Management Report in our FY21 Annual Report.
4. Measuring climate risk
Our Investment Portfolio
As we continue to make new investments and the value of existing investments change, our exposure to climate related risks will also vary.
The Board approved Risk Appetite Statement includes risk tolerances for single sector concentration risk and concentration risk in net cash
flow from investments. At each Board meeting, the Board reviews the metrics for these risks.
The Board also monitors an estimated exposure to climate-related risks based on Net Asset Value. As at 31 July 2021 :
1 13% of our portfolio value is invested in energy producers with exposure to fossil fuels; and
1 54% of our portfolio value is invested in large energy users.
We continue to advance our thinking on appropriate metrics and supporting methodologies to help us understand, measure and monitor
climate risk.
Our Direct Operations
1 WHSP reports its Scope 1 and Scope 2 emissions under the National Greenhouse and Energy Reporting Act.
1 Scope 1 emissions from WHSP’s head office activities: 4 tCO2-e(1)
1 Scope 2 emissions from WHSP’s head office activities: 34 tCO2-e(2)
1 Our headquarters have a 5.5 Star NABERS Energy rating and a 4 Star NABERS Water rating.
Human Rights and Modern Slavery
We support the fundamental principles of human rights across our business and our investment portfolio. Our respect for the protection
and preservation of human rights is guided by the principles outlined in recognised international standards and frameworks, such as the
UN Guiding Principles on Human Rights and the Universal Declaration on Human Rights.
We recognise that as an investment company, our responsibility in respecting human rights spans the following three domains:
Our role as an employer: we are committed to respecting the human rights of our employees through our internal employment policies
and practices, such as our Code of Conduct and Diversity Policy. The promotion of fair work, equity, diversity and inclusivity are key
components of our corporate culture, and we aim to ensure all our employees work in a safe and professional work environment.
Our role as a buyer: we expect our suppliers to respect human rights in their own operations and related supply chains. We encourage
our suppliers to undertake human rights due diligence and adopt similar principles with their own key suppliers.
Our role as an investor: we integrate the consideration of ESG factors, including human rights, in our investment decision making and
ongoing portfolio management processes. As active owners, this includes engagement with our investee companies where we seek to
incorporate respect for human rights and demonstrate a commitment to fundamental principles of human rights through our various
engagement avenues.
Our Human Rights Policy is available on our website at www.whsp.com.au/policies
Modern Slavery Legislation
We published our inaugural Modern Slavery Statement (Statement) outlining steps that we can undertake to better understand where the
potential risks lie in our operations or supply chain and our sphere of influence to mitigate the risks. Although we have limited control over
the operations of investee companies, we are disciplined in assessing risk and taking steps to mitigate risks we identify, including modern
slavery risk. We will take steps to hold investee companies accountable for addressing modern slavery risks to the extent that we can
influence our investee companies.
1 WHSP’s FY20 National Greenhouse and Energy Reporting submission.
2 WHSP’s FY20 National Greenhouse and Energy Reporting submission.
44
Washington H. Soul Pattinson and Company LimitedAnnual Report 2021 Ahead of publishing the Statement, a number of activities were undertaken to help inform WHSP’s understanding of the human rights
and modern slavery issues and risks that are relevant to our business operations and supply chain. We were supported by an external
consultant to undertake a high-level operational risk assessment to identify potential human rights risks in controlled subsidiaries and
associated entities (excluding New Hope Group). This exercise was complemented with a modern slavery supplier risk assessment to
identify and understand where the risks of modern slavery lie in the relevant supply chains. This assessment focused on tier 1 suppliers,
which relates to the first level of the supply chain, as captured in accounts payable spend data.
In accordance with the requirements of the Australian Modern Slavery Act (2018) our inaugural Modern Slavery Statement described:
1 our reporting structure, operations and supply chains
1 the risks of modern slavery practices in our operations and supply chains and the actions taken to assess and address these risks
1 how we assess the effectiveness of actions taken and the process of consultation taken with any entities we own or control
Our Modern Slavery Statement is available on our website at www.whsp.com.au/policies
WHSP and the community
Lewy Pattinson donated the first plane to the
Royal flying Doctor Service (RFDS).
Since this time, WHSP has had a long association with the Royal
Flying Doctor Service of Australia through its founders and
more recently through direct support.
The Royal Flying Doctor Service aeromedical crews evacuate
injured people from emergency situations in regional, rural and
remote areas 24 hours a day, seven days a week. Each aircraft is
fitted out to be a critical-care medical unit.
In 2020 we funded the purchase of two Flightcell SatCom
systems, which provide better voice, data and aircraft tracking
capabilities. This has enabled pilots to link all communications
through the one unit anywhere in the country, at any altitude,
even when outside coverage of conventional communications
tracking. By allowing pilots to more easily and safely fly solo
missions, the Flightcell SatCom systems have improved
response times resulting in a greater number of evacuations of
injured people in remote areas.
Pilot Neil Taylor demonstrating the
avionics equipment in an RFDS aircraft
Flightcell DZMx – satellite
communications and tracking device
This year, WHSP has funded the purchase of five additional
Flightcell SatCom systems to continue to support the RFDS to
save lives. We are proud supporters of the Royal Flying Doctor
Service and the critical emergency care that they provide in
regional, rural and remote areas.
4545
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
(the Group), for the financial year ended 31 July 2021.
Directors
The following persons were Directors of WHSP for the whole of the financial year and up to the date
of this report:
Chairman
Managing Director
Lead Independent Director
1 Mr R D Millner
1 Mr T J Barlow
1 Mrs T L Fuller
1 Mr M J Hawker AM
1 Mr T C D Millner
1 Mr W M Negus
1 Mrs J L Sukkar AM
1 Mr R G Westphal
Principal Activities
WHSP is an investment company with a diversified portfolio of investments across a range of industries
and asset classes including telecommunications, mining, building products and other investing activities
(encompassing listed equities, private equity, property and fixed income). 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 Parent Company since the end of the previous financial year were:
Cents
Per Share
cents
Total
Amount
$’000
Franking
%
Date of
Payment
35
26
61
83,788
62,243
146,031
100%
100%
14 December 2020
14 May 2021
Declared and paid during the year
Final ordinary dividend 2020
Interim ordinary dividend 2021
Dealt with in the financial report as dividends
Resolved to pay after the end of the year
Final ordinary dividend 2021
36
129,912
100%
14 December 2021
46
Washington H. Soul Pattinson and Company LimitedAnnual Report 2021 Review of Operations
The profit after tax attributable to members for the year ended 31 July 2021 was $273.2 million, 71.3% lower than last year. The decrease
was largely due to the prior year including a one-off accounting gain of $1.05 billion arising from the derecognition of TPG as an equity
accounted associate following the merger of TPG and Vodafone. That large one-off gain in FY2020 was not repeated in FY2021.
Comparison with the prior year is as follows:
Revenue from continuing operations
Profit after tax attributable to members
Interim Dividend (paid in May)
Final Dividend (payable 14 December 2021)
Total Dividends
2021
$000
1,501,778
273,196
26 cents
36 cents
62 cents
2020
$000
1,368,467
952,967
25 cents
35 cents
60 cents
Change
%
+9.7%
-71.3%
+4.0%
+2.9%
+3.3%
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 23 of this annual report.
State of Affairs
In the opinion of the Directors there were no significant changes in the state of affairs of the Consolidated Entity that occurred during the
financial year under review not otherwise disclosed in this report or the Consolidated Entity’s financial statements. See Events Subsequent
to the Reporting Date for a description of significant changes in the state of the affairs of the Consolidated Entity following the end of the
financial year under review.
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 28 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
On 22 June 2021, WHSP entered into a Scheme Implementation Agreement with Milton Corporation Limited (“Milton”), under which it was
proposed that the Parent Entity would acquire 100% of the share capital of Milton it did not already own. Since that date, the following
events have occurred:
1 On 13 September 2021, the Scheme Meeting was held. The Scheme Resolution was passed by the requisite majorities of Milton
shareholders.
1 On 20 September 2021, the Federal Court of Australia approved the Scheme of arrangement.
1 On 5 October 2021, the scheme of arrangement in relation to the merger of WHSP and Milton was implemented, In accordance with
the scheme, all Milton shares not already owned by WHSP have now been transferred to WHSP. Former Milton shareholders were issued
121.47 million newly issued WHSP shares which equates to $4.61 billion in consideration.
4747
Directors’ Report
In July 2021 WHSP granted a call option to Wesfarmers Limited (“Wesfarmers”) over its 19.3% shareholding (95.1 million shares) in
Australian Pharmaceutical Industries Limited (“API”). Since that date, the following events have occurred:
1 On 16 September 2021, Wesfarmers announced it had entered into a Process Deed with API in relation to a proposal to acquire 100 per
cent of the shares in API.
1 On 7 October 2021, Wesfarmers exercised the call option and acquired WHSP’s shareholding in API.
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 have 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.
Environmental Compliance
The Group was subject to the reporting requirements of the National Greenhouse and Energy Reporting Act 2007 during the year. This Act
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 most recent report to the Greenhouse and Energy Data Officer.
New Hope Group (New Hope)
Environmental Compliance
During the 2021 financial year, New Hope did not receive any Penalty Infringement Notices and was not prosecuted for any breach of
environmental laws.
Mining Lease Compliance
In June 2021, Jeebropilly Collieries Pty Ltd received a penalty notice for $56,716 under the Mineral Resources Act (1989) in relation to
historical mining activities at Jeebropilly. All matters are now closed.
Round Oak Minerals Pty Limited (Round Oak)
Environmental regulation
During the year, Round Oak operated in four state government jurisdictions in Australia, regulated under each state’s environmental
legislation and policies.
Queensland
The Queensland operations consist of 13 Exploration Tenements (EPMs) and 9 Mining Leases (MLs) at year end. The mining operations
and exploration tenements are environmentally regulated by the Department of Environment and Science (DES) under Queensland’s
Environmental Protection Act 1994. Mining operations and exploration tenements each function under an Environmental Authority (EA) that
permit and condition site activities. All activities on EPMs have been reported as compliant during the year. During the year, the Mt Colin
underground copper mine was operational, Barbara open pit copper mine transitioned to care and maintenance, and the Cloncurry
operations (GAM and Wallace) continued under care and maintenance. Rehabilitation earthworks at Wallace commenced prior to the site
being placed in care and maintenance during July 2020 and were completed during the year.
Queensland sites are transitioning to Queensland’s new financial provisioning scheme, paying a contribution to the scheme fund under
financial assurance reforms. Mt Colin and GAM have been assessed as medium risk. Barbara and Wallace sites are to be assessed in FY22.
A conditional sales agreement (Agreement) for the Cloncurry operations was signed on 31 July 2021. The Agreement transfers the
environmental obligations under the GAM and Wallace sites to the Purchaser.
Western Australia
The Jaguar base metals operation in Western Australia, acquired in June 2018, is regulated by the Department of Mines, Industry
Regulation and Safety (DMIRS) and the Department of Water and Environment Regulation (DWER) under state legislation. The operation
submitted a revised mine closure plan in January 2021, with DMIRS issuing a request for further information following their review of
the plan. Studies are currently underway to provide the information required to respond to the information request, with a revised plan
scheduled for submission in January 2022.
48
Washington H. Soul Pattinson and Company LimitedAnnual Report 2021 South Australia
The White Dam gold mine in South Australia was regulated by the Department of Energy and Mining (DEM) and the Environmental
Protection Authority (EPA) S.A. under state legislation. Only processing activities were undertaken during the year, utilising the SART
processing plant. Round Oak conducts environmental monitoring and annual compliance reporting in accordance with its MLs and
program for environment protection and rehabilitation (PEPR), and the operation substantially complied with all conditions of approval,
applicable compliance standards and required outcomes during the year.
Sale of the White Dam operation was completed on 29 July 2021.
Victoria
The Stockman base metals project in north-east Victoria, acquired in December 2017, is regulated by the Earth Resources Regulation (ERR)
branch of the Department of Economic Development, Transport and Resources, the Environmental Protection Authority (EPA) Victoria
and the Department of Environment, Land, Water and Planning (DELWP). After the Group had its work plan approved in 2019, secondary
approvals have been sought for both on and off lease activities and securing offsets has been advanced. Reporting of baseline ecological
surveys and water quality has continued during the year and the Group has continued to engage with government agencies and the
community. The Definitive Feasibility Study (DFS) for the project is currently underway.
Directors
Information regarding the Directors of the Parent Company.
Robert Dobson Millner FAICD
Chairman
Non-executive Director since 1984, appointed Chairman 1998
Member of the Nomination, Remuneration and Risk Committees
Mr Millner has extensive experience in the investment industry.
Other current listed company directorships:
1 Apex Healthcare Berhad – Appointed 2000
1 Brickworks Limited – Appointed 1997 Chairman since 1999
1 BKI Investment Company Limited – Appointed Chairman 2003
1 Milton Corporation Limited – Appointed 1998 Chairman since 2002
1 New Hope Corporation Limited – Appointed 1995 Chairman since 1998
1 TPG Telecom Limited – Appointed July 2020
1 Tuas Limited – listed on 30 June 2020. Appointed 14 May 2020
Former listed company directorships in the past three years:
1 Australian Pharmaceutical Industries Limited – Appointed 2000. Resigned 9 July 2020
1 TPG Corporation Limited – Appointed 2000. Resigned July 2020
Todd James Barlow B.Bus, LLB(Hons)(UTS)
Managing Director since 2015
Member of the Risk Committee
Mr Barlow was appointed Chief Executive Officer of the Company in April 2014 having previously been the Managing Director of Pitt
Capital Partners Limited for five years.
Mr Barlow has extensive experience in mergers and acquisitions, equity capital markets and investing and has been responsible for a
number of WHSP’s investments since joining the WHSP Group in 2004. His career has spanned positions in law and investment banking in
Sydney and Hong Kong.
Mr Barlow has a Bachelor of Business and Bachelor of Laws (Honours) from the University of Technology, Sydney. Other current listed
company directorships:
1 New Hope Corporation Limited – Appointed 2015
Former listed company directorships in the past three years:
1 Palla Pharma Limited – Appointed 2015. Resigned 4 February 2021
4949
Directors’ Report
Tiffany Lee Fuller B.Com(UniMelb), CA, GAICD
Non-executive Director since 2017
Member of the Audit, Nomination, Remuneration and Risk Committees
Mrs Fuller is an experienced public company director with a background in chartered accounting, private equity and investment banking.
Her experience includes financial advisory, investment management, mergers and acquisitions and management consulting.
Mrs Fuller holds a Bachelor of Commerce Degree from the University of Melbourne and is a member of Chartered Accountants Australia
and New Zealand and a graduate of the Australian Institute of Company Directors.
Other current listed company directorships:
1 Computershare Limited – Appointed 2014
Former listed company directorships in the past three years:
1 Costa Group Holdings Limited – Appointed 2015. Resigned September 2018
1 Smart Parking Limited – Appointed 2011. Resigned December 2020
Michael John Hawker AM B.Sc(Sydney), FAICD, SFFin
Lead Independent Director
Non-executive Director since 2012
Chairman of the Nomination and Risk Committees, member of the Audit and Remuneration Committees
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.
Mr Hawker is a Director of BUPA (Global UK based board) and Deputy Chairman of BUPA (Australian boards).
Mr Hawker has been Chairman of the Insurance Council of Australia, Chairman of the Australian Financial Markets Association, a member
of the Australian Governments Financial Sector Advisory Committee, and a member of the Business Council of Australia.
Other current listed company directorships:
1 Westpac Banking Corporation – Appointed 2020
Former listed company directorships in the past three years:
1 Macquarie Group Limited – Appointed 2010. Resigned 30 September 2020
1 Aviva PLC – Appointed 2010. Resigned 2019
Thomas Charles Dobson Millner B.Des(Industrial), GDipAppFin(Finsia), FFin, GAICD
Non-executive Director since 2011
Member of the Nomination, Remuneration and Risk Committees
Mr Millner is a Director and Co-Portfolio Manager of Contact Asset Management Pty Limited which is the manager of Listed Investment
Company BKI Investment Company Limited (ASX: BKI).
Mr Millner’s experience includes: 18 years within the financial services industry, including 16 years in active portfolio management of
Australian equities; 9 years as a CEO of an Australian listed company, BKI; and 9 years as a Director of Australian listed companies.
Mr Millner has a Bachelor of Industrial Design 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:
1 New Hope Corporation Limited – Appointed 2015
50
Washington H. Soul Pattinson and Company LimitedAnnual Report 2021 Warwick Martin Negus B.Bus(UTS), M.Com(UNSW), SFFin
Non-executive Director since 2014
Chairman of the Remuneration Committee, member of the Audit, Nomination and Risk Committees
Mr Negus has over 30 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. Mr Negus is a director of Virgin Australia Holdings Limited and
Terrace Tower Group Pty Limited and a Member of the Council of UNSW.
Other current listed company directorships:
1 Bank of Queensland Limited – Appointed 2016
1 Pengana Capital Group Limited – Chairman Appointed 2017
1 Dexus Funds Management Limited – Appointed February 2021
Former listed company directorships in the past three years:
1 URB Investments Limited – Chairman Appointed 2016. Resigned 20 December 2019
1 Virgin Australia Holdings Limited – Appointed 2017. Company delisted November 2020
Josephine Louise Sukkar AM BSc(UNSW), GradDipEd
Non-executive Director since July 2020
Member of the Nomination, Remuneration and Risk Committees
Mrs Sukkar is co-founder and principal of Australian construction company Buildcorp. She is an experienced business owner and public
company director, serving on a number of public, government and honorary boards, including Opera Australia, the Property Council
of Australia, Australian Sports Commission and the Green Building Council of Australia. Mrs Sukkar has a Bachelor of Science (Hons), is a
Fellow of the University of Sydney and is a member of the Order of Australia.
Other current listed company directorships:
1 Growthpoint Properties Australia Limited – Appointed 2017
Robert Gordon Westphal B.Com(UNSW), FCA, FFin, MAICD
Non-executive Director since 2006
Chairman of the Audit Committee and member of the Nomination, Remuneration and Risk Committees
Mr Westphal is a Chartered Accountant and was a partner of EY for 25 years, retiring in 2005. Mr Westphal 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 has a Bachelor of Commerce from the University of NSW. He is a Fellow of the Institute of Chartered Accountants in
Australia and the Financial Services Institute of Australasia, and a member of the Australian Institute of Company Directors. Mr Westphal
was formerly a director and the Chairman of the Board of Governors of Queenwood School for Girls Limited.
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Directors’ Report
Company Secretary
Ida Lawrance BCom(Hon)(Queens’s), LLM(UNSW), FGIA, GAICD
Company Secretary since September 2020
Mrs Lawrance is a legal and governance professional with over 20 years’ experience. Her experience includes 14 years within the financial
services industry, including as a Company Secretary and Division Director of an ASX-listed global financial services company. Prior to this
Mrs Lawrance practised as a lawyer in both the private and public sectors. Mrs Lawrance has a Bachelor of Commerce (Honours) and a
Master of Laws. She is a Fellow of the Governance Institute of Australia and a Graduate of the Australian Institute of Company Directors.
Ian David Bloodworth
Company Secretary until 25 September 2020
Mr Bloodworth is a Chartered Accountant with more than 30 years accounting and company secretarial experience and was appointed
Company Secretary of WHSP 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 Board meetings and meetings of committees of Directors and the number of meetings attended by each of the Directors
of the Company during the financial year were:
Board
Audit
Committee
Nomination
Committee
Remuneration
Committee
Risk
Committee
e
e
t
t
i
m
m
o
C
r
e
b
m
e
M
N,Re,Ri
Ri
A,N,Re,Ri
A,N,Re,Ri
N,Re,Ri
A,N,Re,Ri
N,Re,Ri
A,N,Re,Ri
Mr R D Millner
Mr T J Barlow
Mrs T L Fuller
Mr M J Hawker
Mr T C D Millner
Mr W M Negus
Mrs J L Sukkar*
Mr R G Westphal
o
t
e
b
g
l
i
i
l
E
d
n
e
t
t
a
r
e
b
m
u
N
d
e
d
n
e
t
t
a
o
t
e
b
g
l
i
i
l
E
d
n
e
t
t
a
r
e
b
m
u
N
d
e
d
n
e
t
t
a
o
t
e
b
g
l
i
i
l
E
d
n
e
t
t
a
r
e
b
m
u
N
d
e
d
n
e
t
t
a
o
t
e
b
g
l
i
i
l
E
d
n
e
t
t
a
r
e
b
m
u
N
d
e
d
n
e
t
t
a
o
t
e
b
g
l
i
i
l
E
d
n
e
t
t
a
r
e
b
m
u
N
d
e
d
n
e
t
t
a
19
19
19
19
19
19
19
19
19
19
19
19
18
18
19
18
–
–
9
9
–
9
–
9
–
–
9
9
–
8
–
9
1
–
1
1
1
1
–
1
1
–
1
1
1
1
–
1
1
–
1
1
1
1
–
1
1
–
1
1
1
1
–
1
4
4
4
4
4
4
1
4
4
4
4
4
4
4
1
4
A Member of the Audit Committee of Directors during the year.
N Member of the Nomination Committee of Directors during the year.
Re Member of the Remuneration Committee of Directors during the year.
Ri Member of the Risk Committee of Directors during the year.
* Mrs J L Sukkar was appointed as a Committee Member on 1 April 2021.
52
Washington H. Soul Pattinson and Company LimitedAnnual Report 2021
Directors’ Interests
Ordinary Shares
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 T J Barlow
Mrs T L Fuller
Mr M J Hawker
Mr T C D Millner
Mr W M Negus
Mrs J L Sukkar
Mr R G Westphal
* 21,612,053 shares in which Mr R D Millner and Mr T C D Millner have an interest relate to holdings by the same entities.
Rights to Deferred Shares
Mr T J Barlow
Refer to the following Remuneration Report for further information.
Interests in Contracts
Investment Management Agreement
Ordinary Shares
*22,485,768
146,446
1,800
35,300
*21,630,464
33,000
1,573
23,739
Rights to
Deferred Shares
258,621
In November 2018 WHSP entered into an Investment Management Agreement with Contact Asset Management (Contact). Under this
contract Contact is responsible for managing WHSP’s Large Caps investment portfolio and providing reports on the performance of that
portfolio to WHSP.
Fixed monthly fees totalling $330,000 were paid to Contact for the year ended 31 July 2021 (FY20: $330,000). No performance fees are
payable to Contact under the contract.
The Directors, excluding Mr T C D Millner, reviewed the terms of the contract and concluded that it was more favourable to WHSP than an
arm’s length agreement for similar services.
Mr R D Millner is a director of both WHSP and Contact.
Mr T C D Millner is a director of both WHSP and Contact and is a 50% shareholder of Contact. WHSP was a 20% shareholder of Contact until
15 October 2021.
For further information regarding the above contracts refer to note 37 of the consolidated financial statements.
5353
Directors’ Report – Remuneration Report
Remuneration Report
Letter from the Chair of the Remuneration Committee
Dear Shareholders,
On behalf of the Board I am pleased to present to you WHSP’s Remuneration Report for the financial year ended 31 July 2021.
During the year our shares traded at an all time high, we announced a significant merger and paid, for the 21st year in a row,
an increased dividend. Our TSR outpaces the market over both short and longer term time horizons.
The Company’s remuneration policy is designed with a number of things in mind:
1. Align management incentives with the outcomes desired by our shareholders;
2. Attract and retain our key executives over the long term;
3. Establish goals that can be easily and independently measured; and
4. Reinforce a standard of ethical behaviour, compliance with laws and risk culture that are in line with community
expectations.
WHSP is a member of the ASX100 and in the past year saw its market capitalisation increase from $4.7 billion to $7.8 billion.
Following the completion of the merger with Milton on 5 October 2021, the Company’s market capitalisation is now over
$12 billion and the number of shareholders has increased to 56,309.
Following last year’s remuneration report and our continued engagement with shareholders and their advisors, feedback
about our approach to remuneration has continued to be positive. As a result, we have not made any significant changes. It
continues to be strongly aligned with the interests of our shareholders.
STI objectives focus management on cashflow growth and the growth of our NAV relative to the market (ASX200
Accumulation Index). Cash flow growth is used to fund an increasing dividend. WHSP has consistently grown its dividends
over many years and we reinforce the importance of this in our STI. Equally, we seek to reward management when our NAV
grows ahead of the market.
In FY21, the cashflow growth hurdle was not met due to a high base in FY20 which included a large catch-up dividend from
TPG ahead of its merger with Vodafone. Similarly, the NAV growth hurdle was not met as the market experienced a strong
recovery from the Covid-19 sell-off in FY20 which did not impact on WHSP’s resilient portfolio in FY20.
Despite a strong cashflow result allowing higher dividends to shareholders and a 12% growth in the NAV, no STI will be
awarded to KMP in this financial year.
LTI rewards achievement in two areas: TSR and long term absolute growth in our NAV. The LTI rewards above market TSR over
the three year measurement period. We have also set management a hurdle of growing the overall value of the Company at a
rate that is consistent with the risk taken. If vesting occurs then the shareholder outcomes will have been positive.
The Company has used the All Ordinaries Accumulation Index as the relevant hurdle for assessing LTI performance. We have
selected this benchmark because it is a proxy for the whole of the market and given WHSP’s diverse investment across a range
of industries, our aim is to beat the whole of the market. Additionally, we have not identified a narrower set of companies that
would provide an adequate comparison for assessing WHSP’s TSR performance.
The LTI plan does allow for re-testing. However, this is only permissible if none of the Performance Rights vest in the initial
three-year testing period. In this instance, the testing period is extended once for another year and the necessary hurdles are
also extended for that extra year. The rationale for this approach is to avoid short term market factors eliminating vesting of
Performance Rights issued under the LTI plan.
For the coming year, the Board has extended its long term incentive plan to all levels of management within the company in
the hope that becoming shareholders over time will encourage them to also grow value in the future.
54
Washington H. Soul Pattinson and Company LimitedAnnual Report 2021 The Board of WHSP will continue to periodically review the Company’s remuneration structure. We constantly seek input
from our shareholders, from our advisors and from management themselves. In making remuneration decisions the Board
of WHSP considers a wide range of measures such as ethical behaviours, operating within the law and meeting community
expectations on environmental, social and governance standards. Whilst our remuneration is set using financial measures,
the Board of WHSP is able to exercise its right to make changes to remuneration should outcomes fall short of expectations
in these areas. In confirming the remuneration for this year, the Board is also explicitly confirming that management has met
those standards.
Yours sincerely,
W M Negus
Non-Executive Director
Chair of the Remuneration Committee
Scope of Report
WHSP is an investment company with a diversified portfolio of assets across a range of industries. WHSP manages all of these assets
as investments irrespective of its level of ownership. It does not manage the operations of its investee companies and there are no
operational reporting lines from the management of investee companies to WHSP management.
The KMP of WHSP’s investee companies are not KMP of the WHSP Group as the KMP of WHSP’s investee companies do not have authority
or responsibility for the planning, directing or controlling the investing activities of WHSP. Therefore, the Executive KMP of New Hope are
not included in WHSP’s Remuneration Report. New Hope KMP disclosure is included in the FY21 New Hope Annual Report (ASX:NHC).
Abbreviations used in this report
ASX
CAGR
EPS
KMP
KPI
LTI
Australian Securities Exchange
NAPSG
Net assets per share growth
Compound annual growth rate
New Hope
New Hope Corporation Limited
Earnings per share
Key management personnel
Key performance indicator
Long term incentive
STI
TSR
Short term incentive
Total shareholder return
VWAP
Volume weighted average price
WHSPRP
Washington H. Soul Pattinson and Company
Limited Rights Plan
5555
Directors’ Report – Remuneration Report
Structure of Report
This report includes:
1 KMP included in this report
1 Remuneration policy and framework
1 Elements of remuneration
1 Performance indicators
1 Remuneration expenses for KMP
(statutory remuneration)
KMP included in this report
Non-executive Directors
Mr Robert D Millner
Chairman
Mrs Tiffany L Fuller
Mr Michael J Hawker AM
Lead Independent Director
1 Remuneration received by KMP of WHSP
(non-statutory information)
1 Contractual arrangements for executive KMP
1 Share-based compensation
1 Other statutory information
Mr Warwick M Negus
Mr Thomas C D Millner
Mrs Josephine L Sukkar AM
Mr Robert G Westphal
Executive Directors
Mr Todd J Barlow
Managing Director and Chief Executive Officer
Other key management personnel of the Parent Company and Consolidated Entity
Mrs Ida Lawrance
Group Executive – Legal and Governance
Mr David R Grbin
Chief Financial Officer
Mr Ian D Bloodworth
Company Secretary to 25 September 2020
Details of remuneration paid by New Hope to its Executive KMP can be found in New Hope’s Remuneration Report in its Annual Report.
Remuneration framework
Remuneration Governance
The Remuneration Committee of the Board of WHSP consists of Non-executive Directors. The Committee’s role is to oversee WHSP’s
remuneration policies and practices, and make recommendations to the full Board on remuneration matters including the terms of
employment for the Managing 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.
The Remuneration Committee is authorised by the Board to obtain independent professional advice on the appropriateness of remuneration
packages if deemed necessary. No remuneration advice was received during the year. The responsibilities of the Committee are outlined in its
Charter, which is available on WHSP’s website.
Non-executive Director Remuneration
Board policy is to remunerate Non-executive Directors at comparable market rates. WHSP’s Non-Executive Directors are remunerated for
their services from the maximum aggregate amount approved by shareholders. WHSP shareholders approved the current limit ($2million
per annum) at WHSP’s 2016 AGM. Remuneration levels are reviewed annually by the Remuneration Committee and are not subject to
performance based incentives.
Executive Remuneration
Remuneration levels are reviewed annually by the Remuneration Committee to reflect individual performance, the overall performance of
WHSP and prevailing employment market conditions.
56
Washington H. Soul Pattinson and Company LimitedAnnual Report 2021
The Executive Key management Personnel (KMP) are remunerated by way of fixed remuneration, short term incentives (STIs) and long
term incentives (LTIs). Annual STIs are set in order to drive performance without encouraging undue risk taking. LTIs are assessed over a
three and/or four year period and are designed to promote long term stability in shareholder returns.
The Remuneration Committee attempts to benchmark remuneration against the 50th percentile for ASX listed companies with a
similar market capitalisation. To the extent that an executive’s remuneration is materially below the benchmark data, the Remuneration
Committee will consider increases based on increasing levels of performance, responsibilities and experience.
The Remuneration Committee is responsible for assessing performance against key performance indicators (KPIs) and determining
the extent to which the STI and LTI is to be paid. The STI and LTI have been designed to be payable when value has been created for
shareholders. To assist in this assessment, the Committee receives detailed reports on performance from management which are based on
independently verifiable data.
In the event of serious misconduct or a material misstatement in the Company’s financial statements, the Board may cancel LTI based
remuneration and recover LTI remuneration paid in previous financial years.
Target remuneration mix (based on entitlement to 100% of the target STIs and LTIs which are at risk and subject to performance hurdles)
for the year ended 31 July 2021 was:
Target Remuneration Mix
Managing Director
and CEO
45%
22%
33%
Chief Financial Officer
56%
22%
22%
Group Executive –
Legal and Governance
72%
14%
14%
0%
20%
40%
60%
80%
100%
Fixed Remuneration
STI
LTI
Elements of remuneration
Non-executive Directors
Non-executive Directors receive fixed remuneration based on their position on the Board and the Committees on which they sit or chair, at
comparable market rates. Remuneration levels are reviewed annually by the Remuneration Committee and are not subject to performance
based incentives. FY21 Non-executive Director fees as at 31 July 2021 are set out below.
The Remuneration Committee reviews market data annually to assist in setting Non-executive Director remuneration. Based on this data the
remuneration received by Non-executive Directors for the year ended 31 July 2021 was below the 50th percentile for ASX listed Companies
with a market capitalisation between $3.5 billion and $7.5 billion. Therefore with effect from 15 September 2021 the following changes to
Board and Committee Chair fees were approved by the Remuneration Committee.
Annual Non-executive Director Fees
Chair Fee
Board Member
Audit Chair
Audit Member
Rem Chair
Rem Member
Risk Chair
FY21
FY22
$346,700
$375,000
$162,800
$175,000
$30,000
$40,000
$17,500
$17,500
$25,000
$30,000
$14,000
$14,000
$10,000
$30,000
5757
Directors’ Report – Remuneration Report
The total aggregate amount of fees which may be paid to Non-executive Directors by the Parent Company is subject to the approval of
Shareholders in a general meeting and is currently set at $2,000,000 per annum. Approval for this total aggregate amount was given at the
2016 Annual General Meeting.
During the year ended 31 July 2021 remuneration of the Non-executive Directors by the Parent Company and unlisted controlled entities
amounted to $1,597,892.
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 31 July 2004 do not qualify for a retiring allowance. Mr Robert
Millner is the only Director entitled to a retiring allowance.
Executive Key Management Personnel Remuneration
Fixed Remuneration
Fixed remuneration for senior executives is set annually (or on promotion if applicable) by the Remuneration Committee. It is bench-
marked against market data for comparable roles in companies with similar characteristics and market capitalisation. Fixed remuneration
comprises a cash salary, superannuation and other non-cash benefits where taken.
Short term incentives
Structure of short term incentives
The STI plan is designed to motivate and reward senior executives to generate increasing net cash flow (to facilitate increasing dividends)
and to grow the value of the investment portfolio (measured by net asset value) for the benefit of shareholders.
Feature
STI pool
Description
Based on target performance
50% of Managing Director’s fixed remuneration
40% of Chief Financial Officer’s fixed remuneration
20% of Group Executive Legal and Governance’s fixed remuneration
10% of the fixed remuneration of other participants in the plan
The size of the pool is determined by the performance metrics below, in the event that the targets are exceeded (performance
metrics exceed 100%) the pool will be increased as set out below.
Determination
of STI pool
The pool determination metrics align with WHSP’s strategic goals to maximise shareholders’ returns.
Objective
Weighting
Threshold (80%)
Target (100%)
Outperformance
Regular cash to the parent
company net of regular
expenses
50%
> 0% and
< 4% higher than
previous year
4% to < 5%
higher than
previous year
5% to < 6% = 110%
6% to < 7% = 120%
7% to < 8% = 130%
8% to < 9% = 140%
9% and higher = 150%
As dividends are paid out of parent company cash, increasing net cash inflows enable the payment of increasing dividends.
Adjusted net asset value (post
tax) per share
(adjusted by adding back
dividends paid by the parent
company)
50%
> 0% and
< 2% higher
than ASX200
Accumulation
Index
2% to < 3%
higher than
ASX200
Accumulation
Index
3% to <4% = 110%
4% to < 5% = 120%
5% to < 6% = 130%
6% to < 7% = 140%
7% and higher = 150%
Increases in net asset value per share drive increases in the WHSP share price.
58
Washington H. Soul Pattinson and Company LimitedAnnual Report 2021 Entitlement to
the STI pool
Once the STI Pool is established by the financial measures described above, the Remuneration Committee determines each
participating Executive’s entitlement to an STI based on individual performance.
Individual Executive STIs are determined having regard to achievements throughout the year against a number of Key
Performance Indicators (KPIs). The KPIs encompass a range of financial and non-financial objectives relevant to each
Executive’s role.
The total of all STIs determined by the Remuneration Committee cannot exceed the STI pool.
Delivery of STI
100% of the STI awarded is paid in cash following release of the year end results.
Board
Discretion
The Board retains discretion to increase or decrease, including to nil, the STI pool, if it forms the view that not doing so would
present a risk of a “strike” against the Company’s Remuneration Report issued pursuant to Section 300A of the Corporations
Act. In exercising this discretion the Board shall take into account, amongst other factors it considers relevant, Company
performance from the perspective of Shareholders over the relevant year.
Long term incentive plan
Washington H. Soul Pattinson and Company Limited Rights Plan
The LTI plan was designed to reward senior executives for above market performance.
Executive KMP participate, at the Board’s discretion, in the LTI plan comprising annual grants of performance rights.
Structure of LTIs for the KMP
Feature
Description
Opportunity/
Allocation
75% of Managing Director’s fixed remuneration
40% of Chief Financial Officer’s fixed remuneration
Number of
Performance
Rights
20% of Group Executive – Legal and Governance’s fixed remuneration
Number of Rights = Stretch LTI Value ÷ Right Value
Where:
Stretch LTI Value = Fixed Remuneration x Target LTI % ÷ Target Vesting %
Target vesting
= 50%
Right Value
Share Price
= Share Price – (Annual Dividend x Measurement Period in Years)
=
The volume weighted average share price over the 14 days prior to the fifteenth day following the
announcement of the previous financial year results of the Company.
As 100% of Rights to be granted will only vest when stretch performance goals are achieved, it is expected that a lesser
percentage will actually vest unless exceptional performance is achieved.
TSR rights
50% of rights issued are subject a TSR performance condition – tranche 1
NAPSG rights
50% of rights issued are subject a NAPSG performance condition – tranche 2
TSR
performance
hurdle
The TSR incentive is designed to focus executives on delivering sustainable long term Shareholder returns.
The vesting of TSR Performance Rights will be determined by comparing the Company’s TSR over the Measurement Period with
the movement in the All Ordinaries Accumulation Index over the Measurement Period.
If the Company’s TSR is negative then nil vesting will apply to this Tranche.
Otherwise the following vesting scale will be applied, subject to an overriding discretion held by the Board:
Performance Level
Below Threshold
Target & Threshold
Company’s TSR Compared to the
All Ordinaries Accumulation Index
<100% of Index
100% of Index
Between Target and Stretch
>100% & < 100% of Index Plus 3%
CAGR
Stretch
≥100% of Index Plus 3% CAGR
Vesting %
of Tranche
0%
50%
Pro-rata
100%
TSR is the sum of Share price appreciation and dividends (assumed to be reinvested in Shares) during the Measurement Period
expressed as a growth percentage.
5959
Directors’ Report – Remuneration Report
NAPSG
performance
hurdle
This incentive is designed to focus executives on growing the value of the Company’s assets which increases Shareholder
wealth.
The vesting of Tranche 2 NAPSG Performance Rights will be determined by reference to the following scale:
Performance Level
Below Threshold
Threshold
Between Threshold and Target
Target
Between Target and Stretch
Stretch
CAGR in Net Assets Per Share during
the Measurement Period
Vesting %
of Tranche
<3%
3%
>3% & <5%
5%
>5% & <10%
≥10%
0%
25%
Pro-rata
50%
Pro-rata
100%
CAGR is compound annual growth rate.
Net Assets Per Share at the end of the Measurement Period will be calculated by adding all dividends paid during the
Measurement Period to the closing Net Assets of the Company at the end of the Measurement Period and then dividing by the
number of issued shares at the end of the Measurement Period.
Nil
No amounts are payable by the participants upon the granting or the exercising of the Rights.
Upon the satisfaction of the Vesting Conditions, the value of Rights that vest will be evaluated and will be paid in Shares, cash or
a combination of cash and Shares based on the then Share price.
The Measurement Period will be the three financial years from 1 August of the relevant year of the tranche. Retesting will only
apply if nil vesting occurs for the tranche at the end of the initial Measurement Period. The Extended Measurement Period, if
applicable, will only occur once the following year.
On termination of employment a portion of Performance Rights granted in the financial year in which the termination occurs
will be forfeited. The proportion is that which the remainder of the financial year following the termination represents of the full
financial year. This provision recognises that grants of Performance Rights are part of the remuneration for the year of grant and
that if part of the year is not served then some of the Performance Rights will not have been earned.
The Board of the Company has the discretion to set the terms and conditions on which it will grant Rights under the WHSPRP,
including the Vesting Conditions and modification of the terms and conditions as appropriate to ensuring the plan operates as
intended. All Performance Rights granted are subject to Vesting Conditions which are intended to be challenging and linked to
growth in shareholder value.
The terms and conditions of the WHSPRP include those aspects legally required as well as a method for calculating the appropriate
number to vest in the circumstances of a change of control, a major return of capital to shareholders and the treatment of Rights
in the circumstances of various forms of termination.
Performance Rights will lapse if the prescribed Vesting Conditions are not satisfied within the prescribed Measurement Period,
subject to retesting.
The Board retains discretion to increase or decrease, including to nil, the vesting percentage in relation to each Tranche of
Performance Rights, if it forms the view that not doing so would present a risk of a “strike” against the Company’s Remuneration
Report issued pursuant to Section 300A of the Corporations Act. In exercising this discretion the Board shall take into account,
amongst other factors it considers relevant, Company performance from the perspective of Shareholders over the relevant
Measurement Period.
The Board also has discretion to clawback any incentive remuneration (including unvested or vested Rights and Restricted Shares)
in the event of any error in accounting resulting in a miscalculation of incentives or acts of serious negligence or bad faith on the
part of an LTI participant.
Payable by
participants
Vesting of
Performance
Rights
Measurement
Periods
Cessation of
Employment
Terms and
Conditions
Lapse and
Forfeiture of
Performance
Rights
Board
Discretion and
Clawback
60
Washington H. Soul Pattinson and Company LimitedAnnual Report 2021 Total Remuneration Packages
The total value of each remuneration package is approved by the Remuneration Committee and reflects each executive’s role,
responsibilities and market data. Based on this data the remuneration packages of Executive KMP for the year ended 31 July 2021 were
below or in line with the 50th percentile for ASX listed Companies with a market capitalisation between $3.5 billion and $7.5 billion.
Performance indicators
Performance against key measures:
Metric
Target
Performance
Impact on incentive award
STI
Regular cash to the parent
company net of regular expenses
4% higher than previous year
Below the previous year. Threshold
of >0% higher not met
No STI pool
Adjusted net asset value (post tax)
per share
2% higher than ASX200
Accumulation Index
Below the ASX200 Accumulation
Index. Threshold of >0% higher
not met
No STI pool
Entitlement to the STI pool
The Remuneration Committee typically determines each participating Executive’s entitlement to an STI based
on individual performance.
Individual Executive STIs are determined having regard to achievements throughout the year against a
number of Key Performance Indicators (KPIs). The KPIs encompass a range of financial and non-financial
objectives relevant to each Executive’s role.
The total of all STIs determined by the Remuneration Committee cannot exceed the STI pool. In FY21 the STI
pool thresholds were not achieved, therefore there was no STI pool to allocate to participating Executives.
LTI
Vesting of December 2017 rights in September 2020
TSR performance hurdle
3% higher than ASX All Ordinaries
Accumulation Index
Annualised TSR of 17.1 %
exceeding the ASX All Ordinaries
Accumulation Index by 6.8% per
annum
Vesting of 100% of TSR rights
Net Assets per Share Growth
(NAPSG)
Regular NAPSG CAGR higher than
10%
Annualised NAPSG CAGR of 4.7%
over 3 years
Vesting of 47% of NAPSG rights
In its review of remuneration policies of KMP, the Remuneration Committee has regard to the performance of WHSP for the current and
previous four financial years, taking into account the following measures:
Consolidated Entity
Regular profit after tax
Parent Company
Net cash flow from investments
Share price at year end
Ordinary dividends paid/declared
2016
$’000
2017
$’000
2018
$’000
2019
$’000
2020
$’000
2021
$’000
177,222
282,019
331,143
307,262
169,800
328,100
137,435
$17.43
52 cents
143,511
$17.64
54 cents
143,596
$21.82
56 cents
169,583
$22.71
58 cents
252,300
$19.55
60 cents
180,336
$25.63
62 cents
6161
Directors’ Report – Remuneration Report
Remuneration expenses for KMP (statutory remuneration)
(i) Remuneration of the KMP of the Consolidated Entity:
See the table shown on pages 64–65.
(ii) Relative proportions of remuneration that are fixed and that are linked to performance
Parent Company
T J Barlow
D R Grbin
I Lawrance
I D Bloodworth
Fixed Remuneration
At Risk – STI
At Risk – LTI
2021
2020
2021
2020
2021
2020
49%
63%
78%
N/A
39%
44%
N/A
66%
Nil
Nil
Nil
N/A
26%
32%
N/A
16%
51%
37%
22%
N/A
35%
24%
N/A
18%
As 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.
(iii) STIs granted and forfeited for the year ended 31 July 2021
2021
Parent Company
T J Barlow
D R Grbin
I Lawrance
Target STI
$
Awarded
%
Forfeited
%
650,000
200,000
74,000
0%
0%
0%
100%
100%
100%
Contractual arrangements for current Executive KMP
T J Barlow
D R Grbin
I Lawrance
Term of agreement
and notice period1
Base remuneration
including Superannuation2
Termination
Payments3
No fixed term
6 months notice period
No fixed term
3 months notice period
No fixed term
3 months notice period
$1,300,000
$500,000
$370,000
nil
nil
nil
1. This notice applies equally to either party. The employer may make a payment in lieu of notice.
2. Base remuneration including Superannuation as at 31 July 2021.
3. Base salary payable if the company terminates employees with notice, and without cause (e.g. for reasons other than unsatisfactory performance).
62
Washington H. Soul Pattinson and Company LimitedAnnual Report 2021 Share-based compensation
Rights to deferred shares are granted under the WHSP Long Term Incentive Plan. Rights are granted for nil consideration. Rights are
granted in accordance with the plan at the sole discretion of the WHSP Board. Performance and service conditions applicable to each issue
of Rights are determined by the Board at the time of grant. Rights granted under the plan carry no dividend or voting rights. Vesting of
current rights on issue is subject to the satisfaction of performance conditions only, and upon vesting the rights convert to ordinary shares
in WHSP.
The assessed fair values of the WHSPRP (current plan) Rights are expensed in the year in which the rights are granted. The assessed
fair values of Rights granted in December 2015 and December 2016 are expensed over the period from the commencement of the
measurement period to vesting date. The amounts expensed are included in the remuneration of the relevant executive under the
statutory approach. The fair value of the rights issued during the year was independently determined by valuation specialists Lonergan
Edwards & Associates Limited based on the market price of WHSP’s shares at the grant date, with an adjustment made to take into account
the vesting period, expected dividends during that period that will not be received by the participants and the probability that the market
performance conditions will be met.
At each reporting date, the Company revises its estimate of the number of EPS rights that are expected to be exercised. The total value of
the rights on issue is adjusted accordingly and the employee benefits expense for the period is based on this revised value.
Rights outstanding at balance date affecting the remuneration of KMP in the current or future periods:
WHSP
Grant Date
TSR Rights
December 2017
NAPSG Rights
December 2017
TSR Rights
December 2018
NAPSG Rights
December 2018
TSR Rights
December 2019
NAPSG Rights
December 2019
TSR Rights
February 2021
NAPSG Rights
February 2021
If relevant hurdle met over 3 years
If no vesting over 3 years re-tested over 4 years
Grant Date Value
$
Vesting Date
100% September 2020
100% September 2021
100% September 2020
100% September 2021
100% September 2021
100% September 2022
100% September 2021
100% September 2022
100% September 2022
100% September 2023
100% September 2022
100% September 2023
100% September 2023
100% September 2024
100% September 2023
100% September 2024
6.16
7.70
22.11
17.28
13.52
12.16
21.70
26.19
The exercise price of the above rights is disclosed in Note 36 – Share-based payments. For a description of the relevant terms of the former
LTI plan in place for the years ended 31 July 2016 and 31 July 2017 see page 68.
WHSP
TSR Rights
December 2016
EPS Rights
December 2016
Vesting Date
20% August 2021
20% August 2021
20% August 2021
20% August 2021
Grant Date Value
$
2.56
13.10
6363
Directors’ Report – Remuneration Report
Remuneration expenses for KMP (statutory remuneration)
(i) Remuneration of the KMP of the Consolidated Entity:
Salary
& Fees
$
388,934
194,381
186,575
161,461
206,870
188,858
152,937
1,328,683
478,349
344,935
158,052
3,790,035
358,871
178,848
186,575
161,461
188,973
188,858
8,006
Short term Benefits
WHSP and unlisted controlled entity1
Post-
Employment
Benefits
Long term
Benefits
Listed controlled entity2
New Hope Corporation Limited
(payments from NHC to WHSP KMP who are non-executive directors of NHC)
Share-based
Payments
Short term Benefits
Post-
Employment
Benefits
Long term
Benefits
Share-based
Payments
Consolidated
Entity
STI
$
Non-
monetary3
Super-
annuation
Long Service
Leave3
Termination
Benefits
$
$
$
$
LTI Rights4
$
Total
$
STI
$
Super-
annuation
$
Long Service
Leave
$
LTI Rights4
$
Total
$
26,415
–
–
–
–
–
–
26,444
–
17,725
15,339
–
17,942
14,011
–
–
–
–
–
–
–
107,025
26,444
23,953
–
–
–
–
–
–
–
–
32,539
30,442
(20,360)
21,694
25,000
5,696
–
–
(74,611)
–
–
140,378
309,397
114,476
841,979
514,853
209,155
176,061
170,295
(50,658)
140,378
1,932,167
6,158,277
480,000
45,800
525,800
6,684,077
1,508,294
2,994,339
130,0005
12,4045
142,4045
3,136,803
Salary,
Fees & non-
monetary3
$
220,0005
130,0005
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
441,793
194,381
204,300
176,800
206,870
206,800
166,948
1,597,892
414,196
195,705
204,300
176,800
206,784
206,800
8,766
1,413,351
262,231
102,452
1,082,516
566,571
20,9925
12,4045
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
300,5145
140,8485
20,3075
13,3815
Total
$
682,785
194,381
204,300
319,204
206,870
206,800
166,948
1,981,288
841,979
514,853
209,155
735,017
195,705
204,300
331,029
206,784
206,800
8,766
1,888,401
1,082,516
566,571
240,9925
142,4045
320,8215
154,2295
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,218,826
3,506,852
140,8485
13,3815
154,2295
3,661,081
1,583,509
6,569,290
582,210
47,069
629,279
7,198,569
29,572
–
–
–
–
–
–
25,753
16,857
17,725
15,339
17,811
17,942
761
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,287,272
904,500
32,022
25,753
38,479
478,940
345,795
340,000
91,000
(19,658)
(2,899)
21,003
24,960
–
5,263
Non-executive Directors – 2021
R D Millner
T L Fuller
M J Hawker
T C D Millner
W M Negus
R G Westphal
J L Sukkar
Executive Directors – 2021
T J Barlow
Other KMP – 2021
D R Grbin
I Lawrance
I D Bloodworth – resigned 25 September 2020
Total
Non-executive Directors – 2020
R D Millner
T L Fuller
M J Hawker
T C D Millner
W M Negus
R G Westphal
J L Sukkar – appointed 14 July 2020
Executive Directors – 2020
T J Barlow
Other KMP – 2020
D R Grbin
I D Bloodworth
Total
3,383,599
1,335,500
39,037
183,904
43,742
1. Unlisted controlled entity, Pitt Capital Partners Limited is a wholly owned subsidiary of WHSP.
2. Listed controlled entity, WHSP’s holding in New Hope Corporation Limited as at 31 July 2020 was 50% and 31 July 2021 was 43.94%.
64
Washington H. Soul Pattinson and Company LimitedAnnual Report 2021
Short term Benefits
WHSP and unlisted controlled entity1
Post-
Employment
Benefits
Long term
Benefits
Listed controlled entity2
New Hope Corporation Limited
(payments from NHC to WHSP KMP who are non-executive directors of NHC)
Share-based
Payments
Short term Benefits
Post-
Employment
Benefits
Long term
Benefits
Share-based
Payments
Consolidated
Entity
Non-executive Directors – 2021
26,415
26,444
STI
$
Non-
monetary3
Super-
annuation
$
$
Long Service
Termination
Leave3
$
Benefits
$
LTI Rights4
$
Total
$
–
–
–
–
–
–
–
441,793
194,381
204,300
176,800
206,870
206,800
166,948
1,597,892
Salary,
Fees & non-
monetary3
$
220,0005
–
–
130,0005
–
–
–
107,025
26,444
23,953
1,508,294
2,994,339
130,0005
I D Bloodworth – resigned 25 September 2020
(74,611)
140,378
32,539
30,442
(20,360)
21,694
25,000
5,696
309,397
114,476
–
841,979
514,853
209,155
–
–
–
176,061
170,295
(50,658)
140,378
1,932,167
6,158,277
480,000
–
–
–
–
–
–
–
414,196
195,705
204,300
176,800
206,784
206,800
8,766
1,413,351
300,5145
–
–
140,8485
–
–
–
1,287,272
904,500
32,022
25,753
38,479
1,218,826
3,506,852
140,8485
478,940
345,795
340,000
91,000
(19,658)
(2,899)
21,003
24,960
–
5,263
262,231
102,452
1,082,516
566,571
–
–
Total
3,383,599
1,335,500
39,037
183,904
43,742
1,583,509
6,569,290
582,210
Salary
& Fees
$
388,934
194,381
186,575
161,461
206,870
188,858
152,937
1,328,683
478,349
344,935
158,052
3,790,035
358,871
178,848
186,575
161,461
188,973
188,858
8,006
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
29,572
17,725
15,339
–
–
17,942
14,011
25,753
16,857
17,725
15,339
17,811
17,942
761
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
R D Millner
T L Fuller
M J Hawker
T C D Millner
W M Negus
R G Westphal
J L Sukkar
Total
R D Millner
T L Fuller
M J Hawker
T C D Millner
W M Negus
R G Westphal
Executive Directors – 2021
Other KMP – 2021
T J Barlow
D R Grbin
I Lawrance
Non-executive Directors – 2020
J L Sukkar – appointed 14 July 2020
Executive Directors – 2020
T J Barlow
Other KMP – 2020
D R Grbin
I D Bloodworth
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
STI
$
Super-
annuation
Long Service
Leave
$
$
LTI Rights4
$
Total
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
20,9925
–
–
12,4045
–
–
–
12,4045
–
–
–
45,800
20,3075
–
–
13,3815
–
–
–
13,3815
–
–
47,069
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
$
682,785
194,381
204,300
319,204
206,870
206,800
166,948
1,981,288
240,9925
–
–
142,4045
–
–
–
142,4045
3,136,803
–
–
–
841,979
514,853
209,155
525,800
6,684,077
320,8215
–
–
154,2295
–
–
–
735,017
195,705
204,300
331,029
206,784
206,800
8,766
1,888,401
154,2295
3,661,081
–
–
1,082,516
566,571
629,279
7,198,569
3. Non-monetary remuneration includes fringe benefits provided and movements in annual leave and long service leave provisions. When annual leave or long
service leave provided for in prior years is utilised, or paid out on resignation, a negative non-monetary amount will result.
4. The LTI remuneration is determined by expensing the fair value of the rights as set out in Share-based Compensation on page 63 of this report.
5. Director fees are paid by New Hope from the total annual aggregate amount approved by its shareholders.
6565
Directors’ Report – Remuneration Report
Remuneration received by KMP of WHSP (non-statutory information)
The tables below provide summaries of the remuneration received by KMP of WHSP during the 2021 and 2020 financial years. This
information differs from the statutory remuneration tables which present remuneration in accordance with accounting standards.
WHSP and unlisted
controlled entity1
Total Fixed
Remuneration
$
STI Paid
$
441,793
194,381
204,300
176,800
206,870
206,800
166,948
–
–
–
–
–
–
–
1,355,127
904,500
3,025,659
5,285,286
142,4043
142,4043
5,427,690
500,043
369,935
163,748
340,000
-
91,000
154,394
–
269,146
140,378
3,986,745
1,335,500
3,449,199
140,378
8,911,822
525,800
525,800
9,437,622
414,196
195,705
204,300
176,800
206,784
206,800
8,766
–
–
–
–
–
–
–
1,313,025
448,076
2,250,257
154,2293
154,2293
2,404,486
499,943
372,723
150,292
49,468
3,599,042
647,836
4,808,759
629,279
629,279
5,438,038
WHSP and
unlisted controlled entity1
Listed controlled entity2
New Hope Corporation Limited
non-executive directors of NHC)
(payments from NHC to WHSP KMP who are
Consolidated
LTI Vested
$
Termination
Payments
Total
Remuneration
Total Fixed
Remuneration
$
$
$
Other
$
Remuneration
Remuneration
Remuneration
–
–
–
–
–
–
–
–
–
–
–
–
–
–
489,156
–
72,725
561,881
441,793
194,381
204,300
176,800
206,870
206,800
166,948
994,437
369,935
664,272
414,196
195,705
204,300
176,800
206,784
206,800
8,766
650,235
494,916
240,9923
142,4043
320,8213
154,2293
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
$
240,9923
142,4043
320,8213
154,2293
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Entity
Total
$
682,785
194,381
204,300
319,204
206,870
206,800
166,948
994,437
369,935
664,272
735,017
195,705
204,300
331,029
206,784
206,800
8,766
650,235
494,916
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Non-executive Directors – 2021
R D Millner
T L Fuller
M J Hawker
T C D Millner
W M Negus
R G Westphal
J L Sukkar
Executive Directors – 2021
T J Barlow
Other KMP – 2021
D R Grbin
I Lawrance
I D Bloodworth
Total
Non-executive Directors – 2020
R D Millner
T L Fuller
M J Hawker
T C D Millner
W M Negus
R G Westphal
J L Sukkar – appointed 14 July 2020
Executive Directors – 2020
T J Barlow
Other KMP – 2020
D R Grbin
I D Bloodworth
Total
1. Unlisted controlled entity, Pitt Capital Partners Limited is a wholly owned subsidiary of WHSP.
2. Listed controlled entity, WHSP’s holding in New Hope Corporation Limited as at 31 July 2020 was 50% and 31 July 2021 was 43.94%.
3. Director fees are paid by New Hope from the total annual aggregate amount approved by its shareholders.
66
Washington H. Soul Pattinson and Company LimitedAnnual Report 2021
Non-executive Directors – 2021
R D Millner
T L Fuller
M J Hawker
T C D Millner
W M Negus
R G Westphal
J L Sukkar
Executive Directors – 2021
T J Barlow
Other KMP – 2021
D R Grbin
I Lawrance
I D Bloodworth
Total
Non-executive Directors – 2020
R D Millner
T L Fuller
M J Hawker
T C D Millner
W M Negus
R G Westphal
J L Sukkar – appointed 14 July 2020
Executive Directors – 2020
T J Barlow
Other KMP – 2020
D R Grbin
I D Bloodworth
Total
WHSP and unlisted
controlled entity1
Total Fixed
Remuneration
$
STI Paid
$
WHSP and
unlisted controlled entity1
Listed controlled entity2
New Hope Corporation Limited
(payments from NHC to WHSP KMP who are
non-executive directors of NHC)
Consolidated
Entity
LTI Vested
$
Termination
Payments
Total
Remuneration
Total Fixed
Remuneration
Other
Remuneration
Total
Remuneration
Total
Remuneration
$
$
$
$
$
$
–
–
–
–
–
–
–
1,355,127
904,500
3,025,659
–
–
–
–
–
–
–
–
441,793
194,381
204,300
176,800
206,870
206,800
166,948
240,9923
–
–
142,4043
–
–
–
5,285,286
142,4043
340,000
-
91,000
154,394
–
269,146
–
–
140,378
994,437
369,935
664,272
–
–
–
3,986,745
1,335,500
3,449,199
140,378
8,911,822
525,800
–
–
–
–
–
–
–
489,156
–
72,725
561,881
–
–
–
–
–
–
–
–
–
–
–
414,196
195,705
204,300
176,800
206,784
206,800
8,766
320,8213
–
–
154,2293
–
–
–
2,250,257
154,2293
650,235
494,916
–
–
4,808,759
629,279
441,793
194,381
204,300
176,800
206,870
206,800
166,948
500,043
369,935
163,748
414,196
195,705
204,300
176,800
206,784
206,800
8,766
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,313,025
448,076
499,943
372,723
150,292
49,468
3,599,042
647,836
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
240,9923
–
–
142,4043
–
–
–
682,785
194,381
204,300
319,204
206,870
206,800
166,948
142,4043
5,427,690
–
–
–
994,437
369,935
664,272
525,800
9,437,622
320,8213
–
–
154,2293
–
–
–
735,017
195,705
204,300
331,029
206,784
206,800
8,766
154,2293
2,404,486
–
–
650,235
494,916
629,279
5,438,038
Total Fixed Remuneration
Salary, directors’ fees, superannuation and non-monetary benefits paid or provided to KMP during the year.
STI Paid
LTI Vested
STI paid during the year. These payments were in respect of performance in the previous year.
The value of shares received upon vesting of performance rights during the year in respect of performance in previous years.
6767
Directors’ Report – Remuneration Report
Rights to deferred shares granted, vested and forfeited during the year:
WHSP
Rights to deferred shares
Balance
at start
of year
Granted
during
the year
Vested
Forfeited
Balance
at end of
year
Maximum
value in
future
periods1
T J Barlow
M R Roderick3
D R Grbin
I Lawrance
I D Bloodworth4
Grant
Date
Dec 2015
Dec 2016
Dec 2017
Dec 2018
Dec 2019
Feb 2021
Dec 2017
Apr 2018
Dec 2018
Dec 2019
Feb 2021
Feb 2021
Dec 2015
Dec 2016
Dec 2017
Dec 2018
Dec 2019
Number
Number
Number
%2
Number
%2
Number
$
6,209
17,201
124,839
75,144
91,902
–
26,747
7,319
15,029
20,423
–
–
993
2,408
9,987
6,012
7,556
–
–
–
–
86,696
–
–
–
–
17,784
6,580
–
–
–
–
–
6,209
7,318
90,886
–
–
–
19,473
5,328
–
–
–
–
993
1,024
7,271
–
–
20%
25%
73%
–
–
–
73%
73%
–
–
–
–
20%
25%
73%
–
–
–
5,004
33,953
–
–
–
7,274
1,991
–
–
–
–
–
701
2,716
–
–
–
17%
27%
–
–
–
27%
27%
–
–
–
–
–
17%
27%
–
–
NIL
4,879
NIL
75,144
91,902
86,696
NIL
NIL
15,029
20,423
17,784
6,580
NIL
683
NIL
6,012
7,556
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1. The maximum value of the deferred rights in future periods has been determined
as the fair value of the rights that is yet to be expensed.
2. Percentage of the original number of rights granted.
3. Finance Director and Chief Financial Officer until 12 April 2018.
4. Company Secretary until 25 September 2020.
The minimum value of the rights yet to vest is nil, as the rights will be forfeited if the vesting conditions are not met. The following sets out
the key terms of the LTI plan in place for the years ended 31 July 2016 and 31 July 2017.
Feature
TSR rights
EPS rights
Description
50% of rights issued are subject a TSR performance condition
50% of rights issued are subject an EPS performance condition
TSR performance hurdle
TSR is initially assessed over a 3 year period and compared to the ASX All Ordinaries Accumulation Index (Index). Vesting will occur based
on the company’s positioning relative to the Index. If less than 100% of the rights vest, performance is reassessed over a 4 year period.
This incentive is designed to focus executives on delivering sustainable long term shareholder returns.
TSR performance per annum
TSR% < Index
TSR% = Index
Rights to vest
Nil
50%
Index < TSR% < (Index + 3% per annum)
Progressive pro-rata from 50% to 100%
TSR% = (Index + 3% per annum) or higher
100%
EPS performance hurdle
EPS movement is initially assessed over a 3 year period and compared to the target set out below. Vesting will occur based on the
company’s achievement of that target. If less than 100% of the rights vest, performance is reassessed over a 4 year period.
This incentive was designed to align the interests of executives with shareholders.
Regular EPS
Regular EPS is the regular profit after tax of the consolidated WHSP Group, divided by the weighted average
number of WHSP shares on issue across the measurement period.
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 Alternative Performance
Measures information.
Regular EPS CAGR over measurement period
Regular EPS CAGR < 5%
Regular EPS CAGR = 5%
5% < Regular EPS CAGR < 10%
Regular EPS CAGR = 10% or higher
Rights to vest
Nil
50%
Progressive pro-rata from 50% to 100%
100%
Payable by participants
Nil
No amounts are payable by the participants upon the granting or the exercising of the rights.
68
Washington H. Soul Pattinson and Company LimitedAnnual Report 2021 Other statutory information
Shareholdings of KMP
The following tables show the number of:
1 shares in WHSP; and
1 shares in New Hope;
that were held during the financial year by key management personnel, including their personally related parties.
Shares in WHSP
Directors of WHSP
R D Millner
T J Barlow
T L Fuller
M J Hawker
T C D Millner
W M Negus
R G Westphal
J L Sukkar
Balance at
start of year
Purchased/
(sold)
Received
on the vesting
of LTI rights
Other changes
during the Year
Balance at
end of year
19,760,093
42,033
1,800
35,300
19,057,977
47,000
23,739
–
295,000
–
–
–
290,000
(14,000)
–
1,573
–
104,413
–
–
–
–
–
–
–
–
–
–
–
–
–
20,055,093*
146,446
1,800
35,300
19,347,977*
33,000
23,739
1,573
5,328
Other key management personnel1
D R Grbin
–
–
5,328
*
19,332,592 shares in which Mr R D Millner and Mr T C D Millner have an interest relate to holdings by the same entities.
1.
I D Bloodworth was no longer a KMP at year end.
Shares in New Hope Corporation Limited
Balance at
start of year
Purchased/
(sold)
Received on the
vesting
of LTI rights
Other changes
during the Year
Balance at
end of year
Directors of WHSP
R D Millner
T J Barlow
T C D Millner
R G Westphal
4,177,774
19,900
3,994,368
40,000
–
–
10,000
–
–
–
–
–
–
–
–
–
4,177,774
19,900
4,004,368
40,000
None of the shares above are held nominally by the Directors or any of the other KMP.
Loans to KMP
No loans have been made to the Directors or other KMP.
Other transactions with KMP
The KMP and their related entities received dividends during the year in respect of their shareholdings in Group companies consistent with
other shareholders.
Reliance on external remuneration consultants
No remuneration advice was received during the year.
Voting on the 2020 Remuneration Report
The Parent Company’s Remuneration Report for the 2020 financial year was adopted at its 2020 Annual General Meeting on a poll.
This is the end of the Remuneration Report
This Remuneration Report has been prepared in accordance with the Corporations Act 2001 and Australian Accounting Standards, and has
been audited by EY.
6969
Directors’ Report
Shares Under Option
The Parent Company did not issue any options over its unissued shares during the financial year or in the period to the date of this report.
There are no such options on issue at the date of this report.
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 2001, 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.
Proceedings on Behalf of the Company
No person has applied to the Court for leave 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 part of those
proceedings. The Parent Company was not a party to any such proceedings during the year.
Non-Audit Services
Pitcher Partners Sydney was the Parent Company’s auditor until 3 February 2021 when EY was appointed auditor. During the year,
Pitcher Partners and EY performed certain other services in addition to their statutory audit duties. An entity associated with Pitcher
Partners Sydney was paid $155,047 for providing tax compliance and other services in respect of the Group. EY was paid $171,804 for the
Independent Limited Assurance Report for the Milton Corporation Limited Scheme Booklet and taxation services. Details of the amounts
paid to the auditors are disclosed in note 39 of the financial statements.
The Board has considered the non-audit services provided during the year by Pitcher Partners and EY and is satisfied that the provision
of those non-audit services by each auditor is compatible with, and did not compromise, the auditor independence requirements of the
Corporations Act 2001 for the following reasons:
1. 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
2. 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 (including Independence Standards), 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.
70
Washington H. Soul Pattinson and Company LimitedAnnual Report 2021 Auditor’s Independence Declaration
The lead auditor’s independence declaration for the year ended 31 July 2021 has been received and is included on page 72.
Rounding of Amounts
The company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191, and in
accordance with that legislative instrument, amounts in the Directors’ Report and Financial Report have been rounded to the nearest
thousand dollars, unless otherwise stated.
Signed in accordance with a resolution of the Board of Directors:
R D Millner
Director – Chairman
T J Barlow
Managing Director
Dated this 25th day of October 2021.
7171
Auditor’s Independence
Declaration
Auditor’s Independence Declaration
to the Directors of Washington H. Soul Pattinson
and Company Limited
As lead auditor for the audit of the financial report of Washington H. Soul Pattinson and Company
Limited for the financial year ended 31 July 2021, I declare 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 financial year.
Ernst & Young
Ryan Fisk
Partner
Sydney
25 October 2021
72
Washington H. Soul Pattinson and Company LimitedAnnual Report 2021 Financial Report
for the year ended 31 July 2021
About this report
The financial report is for the Consolidated Entity consisting of Washington H. Soul Pattinson and Company
Limited and its subsidiaries for the year ended 31 July 2021. Throughout the report, the Consolidated Entity is
also referred to as the ‘Group’.
The notes to the financial statements are ordered so as to focus on the drivers of the Group’s performance.
Please refer to the contents page for how the notes are structured and ordered. In addition to the relevant
financial information, the notes include a description of the accounting policies applied, and where
applicable key judgements and estimates used by management in applying these policies.
Consolidated Entity perspective
This consolidated financial report combines the operating results, financial positions and cash flows of
Washington H. Soul Pattinson and Company Limited (the Parent Entity) and each entity that it controls
(subsidiaries), into a single set of financial statements.
A controlling stake in a subsidiary often occurs where the Parent Entity owns less than 100% of the
subsidiary. The term ‘non-controlling interest’ is used to describe that portion not owned by the
Parent Entity. The non-controlling interest’s share of the consolidated profit and net assets is disclosed
separately in the Consolidated Statement of Comprehensive Income, the Consolidated Statement of
Financial Position and the Consolidated Statement of Changes in Equity.
Investments in which the Parent Entity or a subsidiary has significant influence but does not have control
are termed ‘associate entities’. Unlike subsidiaries, the individual financial reports of associates are not
consolidated. Associates are equity accounted with the Group’s share of an associate’s result recorded
in profit. The investment in associates is disclosed as a line item (equity accounted associates) in the
Consolidated Statement of Financial Position and is adjusted for the Group’s share of the associate’s result
and decreased by any dividends received. This method treats dividends from associates as if they are a
return of capital rather than being recognised in profit or loss.
Parent Entity perspective
Financial information for Washington H. Soul Pattinson and Company Limited, the ‘Company’ or
‘Parent Entity’ has also been provided. In contrast to the consolidated financial report, the Parent Entity
information reflects Washington H. Soul Pattinson and Company Limited’s activities as an ‘investor’ and
provides details of its investments (subsidiaries, associate entities and other investments), together with
the cash flows generated by them (largely dividend income).
Washington H. Soul Pattinson and Company Limited is a for profit company limited by shares, incorporated and
domiciled in Australia. The shares are publicly traded on the Australian Securities Exchange. Its registered office
and principal place of business is as follows:
Washington H. Soul Pattinson and Company Limited Level 14, 151 Clarence Street, Sydney, NSW 2000
A description of the nature of the Consolidated Entity’s operations and its principal activities is included in the
Directors’ report, which is not part of this financial report.
This financial report was authorised for issue in accordance with a resolution of the Directors on 25 October 2021.
7373
Financial Report
Contents
Financial Statements
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Notes to the Financial Statements
01 Basis of preparation
02 Payment of Dividends to Shareholders
03 Segment Information
04 Revenue
05 Other income
06 Expenses
07
Income tax expense
08 Deferred tax assets and deferred tax liabilities
09 Trade and other receivables
10
Inventories
11 Biological assets
12 Assets classified as held for sale
13 Financial assets held for trading
14 Other financial assets
15 Equity accounted associates
16 Long term equity investments
17
Investment properties
18 Property, plant and equipment
19 Exploration and evaluation assets
20 Lease assets and liabilities
Directors’ Declaration
Independent Auditor’s Report
ASX Additional Information
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
21
Intangible assets
22 Trade and other payables
23 Provisions
24 Cash and cash equivalents
25
Interest bearing liabilities
26 Share capital
27 Reserves
28 Financial risk management
29 Fair value estimation
30 Contingent liabilities
31 Commitments
32 Events after the reporting period
33 Parent entity information
34 Controlled entities and joint ventures
35 New or amended accounting standards
and interpretations
36 Share based payments
37 Related party transactions
38 Other accounting policies
39 Remuneration of auditors
40 Coronavirus (COVID-19)
75
77
81
83
84
87
91
92
100
102
104
105
106
107
108
109
111
116
117
120
125
126
174
175
179
78
80
128
132
133
136
138
142
143
145
150
154
155
156
157
159
165
166
168
170
172
173
74
Washington H. Soul Pattinson and Company Limited
Annual Report 2021
Consolidated Statement of Comprehensive Income
for the year ended 31 July 2021
Revenue
Other income
Expenses
Cost of sales
Selling and distribution expenses
Administration expenses
Acquisition costs expensed
Impairment expense
Other expenses
Finance costs
Total contribution from equity accounted associates, including
fair value gain on derecognition of TPG
Profit before income tax expense
Income tax (expense)
Profit after income tax expense for the year
Profit for the year is attributable to:
Owners of Washington H. Soul Pattinson and Company Limited
Non-controlling interests
Other comprehensive income/(loss)
Items that will not be reclassified subsequently to profit or loss
Changes in the fair value of equity investments at fair value through
other comprehensive income
Disposal of long term equity investments, net of tax
Net movement after tax in capital gains reserve
Items that may be reclassified subsequently to profit or loss
Net movement after tax in hedge reserve
Net movement after tax in foreign currency translation reserve
Net movement after tax in equity reserve
Total other comprehensive income for the year, net of tax
Total comprehensive income for the year
Total comprehensive income for the year is attributable to:
Owners of Washington H. Soul Pattinson and Company Limited
Non-controlling interests
Total comprehensive income for the year
Notes
4
5
6
6
6
6
15
7
2021
$’000
1,501,778
144,829
(895,940)
(225,819)
(71,854)
–
(17,911)
(24,368)
(35,652)
67,212
442,275
(121,836)
320,439
273,196
47,243
320,439
(198,328)
(15,713)
16,075
(31,383)
(2,170)
(4,295)
(235,814)
84,625
54,701
29,924
84,625
2020
$’000
1,368,467
9,885
(1,021,189)
(193,679)
(67,500)
(2,366)
(483,887)
14,058
(35,474)
1,534,868
1,123,183
(248,728)
874,455
952,967
(78,512)
874,455
(143,437)
(16,575)
9,159
57,512
(2,821)
1,756
(94,406)
780,049
835,943
(55,894)
780,049
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
7575
Consolidated Statement of Comprehensive Income (continued)
for the year ended 31 July 2021
Profit attributable to ordinary equity holders of the parent for basic earnings
Interest on convertible note, after tax
Profit attributable to ordinary equity holders of the parent adjusted for the effect of dilution
Weighted average number of ordinary shares for basic EPS
Effects of dilution from convertible note
Weighted average number of ordinary shares adjusted for the effect of dilution
Earnings per share attributable to the Owners of
Washington H. Soul Pattinson and Company Limited
Basic earnings per share
Diluted earnings per share1
2021
$’000
273,196
1,140
274,336
239,395,320
2,501,693
241,897,013
2020
$’000
952,967
–
952,967
239,395,320
–
239,395,320
2021
Cents
2020
Cents
114.12
113.41
398.07
398.07
1
FY21: Diluted EPS includes the impact of the convertible bond holders converting into ordinary equity of the parent and assumes any long term incentive rights that vest in
future reporting periods are expected to be satisfied by purchasing shares on the market.
FY20: Diluted EPS is equal to the basic earnings per share as any long term incentive plan rights that vest in future reporting periods, are expected to be satisfied by purchasing
shares on the market.
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
76
Washington H. Soul Pattinson and Company LimitedAnnual Report 2021
Consolidated Statement of Financial Position
as at 31 July 2021
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Biological assets
Assets classified as held for sale
Financial assets held for trading
Other financial assets
Current tax asset
Total current assets
Non-current assets
Trade and other receivables
Equity accounted associates
Long term equity investments
Other financial assets
Investment properties
Property, plant and equipment
Exploration and evaluation assets
Right-of-use assets
Deferred tax assets
Intangible assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Contract liabilities
Interest bearing liabilities
Lease liabilities
Current tax liabilities
Provisions
Total current liabilities
Non-current liabilities
Trade and other payables
Interest bearing liabilities
Lease liabilities
Deferred tax liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Reserves
Retained profits
Parent Entity interest
Non-controlling interests
Total equity
Notes
24
9
10
11
12
13
14
9
15
16
14
17
18
19
20
8
21
22
25
20
23
22
25
20
8
23
26
27
2021
$’000
610,324
163,987
126,966
4,658
13,655
397,582
18,814
–
1,335,986
233,514
899,236
2,362,838
49,521
87,158
2,117,066
124,181
125,324
30,324
133,339
6,162,501
7,498,487
112,717
1,031
294,727
18,596
56,345
63,703
547,119
143
747,905
112,816
619,567
317,356
1,797,787
2,344,906
5,153,581
47,177
(155,144)
4,201,400
4,093,433
1,060,148
5,153,581
2020
$’000
344,813
148,845
114,102
2,062
26,879
267,371
45,852
16,283
966,207
16,997
810,407
2,616,094
45,789
75,724
2,239,586
109,422
117,512
95,909
117,186
6,244,626
7,210,833
134,973
829
248,213
22,215
1,410
58,851
466,491
773
575,422
99,151
672,843
284,166
1,632,355
2,098,846
5,111,987
43,232
63,253
4,133,308
4,239,793
872,194
5,111,987
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.
7777
Consolidated Statement of Changes in Equity
for the year ended 31 July 2021
Year ended 31 July 2021
Total equity at the beginning of the year
1 August 2020
Share
capital
$’000
Retained
profits
$’000
Reserves
$’000
Total
Parent
Entity
interest
$’000
Non-
controlling
interest
$’000
Total
equity
$’000
43,232
4,133,308
63,253
4,239,793
872,194
5,111,987
Net profit for the year after tax
–
273,196
–
273,196
47,243
320,439
Other comprehensive income/(loss) for the year
Net movement after tax in asset revaluation reserve
Net movement after tax in hedge reserve
Net movement after tax in foreign currency
translation reserve
Net movement after tax in equity reserve
Net movement after tax in capital gains reserve
Total comprehensive income/(loss) for the year
–
–
–
–
–
–
(4,287)
(210,014)
(214,301)
260
(214,041)
–
–
(939)
114
(13,819)
(13,819)
(17,564)
(31,383)
(2,155)
(3,356)
(2,155)
(4,295)
15,961
16,075
(15)
–
–
(2,170)
(4,295)
16,075
268,084
(213,383)
54,701
29,924
84,625
Transactions with owners
Dividends provided for or paid1
–
(121,028)
Equity portion of convertible bond issued
3,945
Net movement in share based payments reserve
Tax on partial disposal of a subsidiary to non-controlling
interest
Transactions with non-controlling interests
Return of capital
Equity transfer from members on issue of share capital
in a subsidiary
Reclassification of a fair value investment to an associate
Total equity at the end of the year
31 July 2021
–
405
(37,084)
(37,709)
(2,421)
–
(2,155)
–
–
–
–
–
–
–
–
(1,043)
(121,028)
(19,303)
(140,331)
3,945
(638)
6,613
10,558
22
(616)
–
(37,084)
–
(37,084)
(3,971)
(41,680)
173,237
131,557
–
–
–
(2,421)
(4,854)
(7,275)
–
2,315
(2,155)
–
2,315
(2,155)
47,177
4,201,400
(155,144)
4,093,433
1,060,148
5,153,581
1 After the elimination of $25.0 million of the Parent Entity dividend paid to Brickworks Limited (2021: 43.3%).
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
78
Washington H. Soul Pattinson and Company LimitedAnnual Report 2021 Year ended 31 July 2020
Total equity at the beginning of the year
1 August 2019
Share
capital
$’000
Retained
profits
$’000
Reserves
$’000
Total
Parent
Entity
interest
$’000
Non-
controlling
interest
$’000
Total
equity
$’000
43,232
3,301,831
176,603
3,521,666
989,803
4,511,469
Effect of initial adoption of AASB 16
–
(2,859)
–
(2,859)
–
(2,859)
Restated balance at the beginning of the year
1 August 2019
Net profit for the year after tax
Other comprehensive income/(loss) for the year
Net movement after tax in asset revaluation reserve
Net movement after tax in hedge reserve
Net movement after tax in foreign currency
translation reserve
Net movement after tax in equity reserve
Net movement after tax in general reserve1
Net movement after tax in capital gains reserve
Total comprehensive income/(loss) for the year
Transactions with owners
Dividends provided for or paid2
Net movement in share based payments reserve
Transactions with non-controlling interests
Return of capital
Total equity at the end of the year
31 July 2020
43,232
3,298,972
176,603
3,518,807
989,803
4,508,610
–
–
–
–
–
–
–
–
–
–
–
–
952,967
–
952,967
(78,512)
874,455
(1,534)
(158,216)
(159,750)
(262)
(160,012)
–
–
(1,035)
2,342
–
34,633
34,633
22,879
57,512
(2,822)
2,791
(2,342)
9,159
(2,822)
1,756
–
9,159
1
–
–
–
(2,821)
1,756
–
9,159
952,740
(116,797)
835,943
(55,894)
780,049
(116,876)
–
(116,876)
(64,946)
(181,822)
(1,828)
3,447
300
–
–
–
1,619
300
–
346
3,520
(635)
1,965
3,820
(635)
43,232
4,133,308
63,253
4,239,793
872,194
5,111,987
1 The general reserve historically recorded funds set aside for future requirements of the Group and relates to the Parent Entity.
2 After the elimination of $24.4 million of the Parent Entity dividend paid to Brickworks Limited (2020: 43.8%).
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
7979
Consolidated Statement of Cash Flows
for the year ended 31 July 2021
Cash flows from operating activities
Receipts from customers inclusive of GST
Payments to suppliers and employees inclusive of GST
Dividends received
Interest received
Interest on lease liabilities
Payments for financial assets held for trading
Proceeds from sale of financial assets held for trading
Acquisition costs expensed
Finance costs paid
Income taxes refund/(paid)
Net cash inflow from operating activities
Cash flows from investing activities
Payments for property, plant, equipment and intangibles
Proceeds from sale of property, plant and equipment
Payments for capitalised exploration and evaluation activities
Payments for acquisition and development of investment properties
Proceeds from sale of investment properties
Payments for equity investments
Proceeds from sale of equity investments
Payments to acquire equity accounted associates
Payments for acquisition of business, net of cash acquired
Payments for deferred consideration
Proceeds from sale of business, net of cash received
Loan repayments from external parties
(Payments for)/proceeds from security and bond guarantee
Loans advanced to external parties
Net cash outflow from investing activities
Cash flows from financing activities
Dividends paid to WHSP shareholders
Dividends paid by subsidiaries to non-controlling interests
Proceeds from external borrowings
Repayments of external borrowings
Return of capital to non-controlling interest
Principal repayments of lease liabilities
Proceeds from part sale of shares in a subsidiary and joint venture
Proceeds from issue of convertible notes
Payment of shares acquired for the employee long term incentive plan
Transactions with subsidiaries non-controlling interest
Net cash inflow from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at the end of the financial year
Notes
2021
$’000
2020
$’000
1,477,683
(1,015,846)
1,418,130
(1,131,485)
461,837
101,229
10,573
(6,909)
(219,524)
165,514
–
(17,034)
19,029
514,715
(167,006)
24,060
(14,546)
(7,952)
28,273
(120,553)
50,020
(4,674)
–
(17,060)
62
34,863
(4,786)
(209,475)
(408,774)
(146,031)
(19,306)
202,899
(392,380)
(7,275)
(26,954)
132,034
416,791
(4,123)
2,338
157,993
263,934
344,813
1,577
610,324
286,645
211,664
4,393
(6,703)
(164,630)
57,391
(2,366)
(16,877)
(27,748)
341,769
(205,543)
7,510
(17,523)
(406)
3,794
(95,031)
71,969
(17,989)
(52,683)
(16,060)
–
27,966
64
(10,760)
(304,692)
(141,243)
(64,941)
583,341
(168,206)
(629)
(30,003)
–
–
(590)
2,379
180,108
217,185
126,915
713
344,813
20
24
2
20
24
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
80
Washington H. Soul Pattinson and Company LimitedAnnual Report 2021 Notes to the
Financial Statements
01 Basis of preparation
This financial report is a general purpose financial report which:
1 has been prepared in accordance with the requirements of the Corporations Act 2001,
Australian Accounting Standards and other authoritative pronouncements of the Australian
Accounting Standards Board (AASB);
1 complies with International Financial Reporting Standards (IFRS) as issued by the
International Accounting Standards Board (IASB);
1 has been prepared on a for profit basis;
1 is presented in Australian dollars with all values rounded to the nearest thousand dollars
($’000), or in certain cases, to the nearest dollar, unless otherwise stated, in accordance with
ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191;
1 adopts all new and amended Accounting Standards and Interpretations issued by the AASB
that are relevant to the operations of the Group and effective for reporting periods beginning
on or after 1 August 2020;
1 does not adopt any Accounting Standards and Interpretations that have been issued
or amended but are not yet effective. Refer to Note 35 – New or amended accounting
standards and interpretations for more information;
1 has been prepared on a historical cost basis except for certain items, which are measured on
an alternative basis, identified in the accounting policies;
1 Where Parent Entity information is disclosed, relevant accounting policies are described
when different to the Group accounting policies.
RECLASSIFICATION OF COMPARATIVE INFORMATION
Prior period information has been reclassified where appropriate, to enhance the comparability with current year
disclosures. A summary of such restatements is provided below:
1 The Group reassessed the classification of Australian Pharmaceutical Industries Limited (API) as an equity
accounted associate as a result of Robert Millner resigning as a Director of API in July 2020. The Company has
classified API as a Fair Value through Profit and Loss (FVTPL) asset in the current period and has reclassified the
prior period comparative. The carrying value restated was $105.1 million from equity accounted associate to
financial assets held for sale.
1 The Group performed a review of the classification of the investments which resulted in the allocation of loans
at fair value and financial assets held for trading being reclassified to non-current other financial assets. The total
carrying value reclassified from current to non-current was $23.8 million.
1 The Company corrected the accounting treatment applied to certain derivative financial assets and financial
liabilities in the prior period. The comparative was reclassified resulting in a decrease in financial assets held
for trading of $18.0 million and an increase in Trade and other payables of $7.2 million and Interest-bearing
liabilities of $10.8 million respectively.
OTHER ACCOUNTING POLICIES
Significant and other accounting policies relevant to gaining an understanding of the financial statements have
been grouped with the relevant notes to the financial statements.
8181
Notes to the Financial Statements
01 Basis of preparation (continued)
Key judgements and estimates
The preparation of financial statements requires the use of certain critical accounting estimates which by definition, will seldom
equal the actual results. 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 within the following notes:
Note reference
Key judgements and estimates
Note 4
Note 6
Note 8
Note 10
Note 11
Note 13
Note 15
Note 16
Note 17
Note 18
Note 19
Note 21
Note 23
Note 29
Note 34a
Note 34b
Note 34d
Provisional pricing arrangements – sale of commodities
Revenue recognition from sale of goods – supply of agricultural products
Recoverable value of non-current assets
Deferred tax assets
Recoverable value of inventory
Fair value of biological assets
Fair value accounting
Recoverable value of investments in associates
Equity accounting of Brickworks Limited
Fair value accounting
Recoverable value of investment properties
Impairment assessments of property, plant and equipment
Estimation of coal, ore and oil reserves and resources (New Hope and Round Oak)
Assessment of recoverable value of New Hope Queensland coal mining operations
Assessment of recoverable value of New Hope Port operations CGU
Assessment of recoverable value of Round Oak capitalized mine development costs and
associated plant and equipment
Exploration and evaluation expenditure
Impairment of intangible assets
Determination of reserves estimates and rehabilitation costs
Financial assets (level 3) – valuation techniques
Consolidation of entities with less than 50% ownership
Business combinations – acquisition fair value
Classification of joint arrangements
Page
88
93
103
105
106
108
114
116
119
124
125
131
134
150
160
161
164
82
Washington H. Soul Pattinson and Company LimitedAnnual Report 2021 02 Payment of Dividends to Shareholders
ACCOUNTING POLICY
A liability is recognised for any dividend declared on or before the end of the reporting period but not distributed at reporting date. As the
final dividend was declared by Directors after the end of the reporting period, the final dividend has not been recognised as a liability.
2021
$’000
2020
$’000
a) Dividends paid during the year
Final dividend for the year ended 31 July 2020 of 35 cents (2019: 34 cents) per fully paid
ordinary share paid on 14 December 2020 (2019: 9 December 2019) fully franked based
on tax paid at 30%
Interim dividend for the year ended 31 July 2021 of 26 cents (2020: 25 cents) per fully
paid ordinary share paid on 14 May 2021 (2020: 14 May 2020) fully franked based on tax
paid at 30%
Total dividends paid
83,788
81,394
62,243
146,031
59,849
141,243
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 36 cents fully paid ordinary share, (2020: 35 cents) fully franked based
on tax paid of 30%
129,912
83,788
The dividend is due to be paid on 14 December 2021 (2020: 14 December 2020) out of
retained profits as at 31 July 2021, and has not been recognised as a liability at year end.
c) Franking of dividends
The final dividend for 31 July 2021 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 2022
Franking credits available for future dividend payments
Franking credits available for subsequent financial years based on an Australian
company tax rate of 30% (2020: 30%)
Subsequent to year end, the franking account will be reduced by the final dividend
to be paid on 14 December 2021 (2020: 14 December 2020)
Balance of franking credits available after payment of the final dividend
628,911
645,193
(55,676)
573,235
(35,909)
609,284
On 5 October 2021, the scheme of arrangement in relation to the merger of the Company and Milton Corporation Limited
(“Milton”) was implemented. In accordance with the scheme, all Milton shares not already owned by the Company have
now been transferred to the Company. As a result, the final dividend to be paid by the Company on 14 December 2021 will
include those shares issued to Milton shareholders.
8383
Notes to the Financial Statements
Notes to the Financial Statements
03 Segment Information
Segment reporting
The Consolidated Entity operates within five segments. Four segments are based on material holdings of individual investments,
where the Parent Entity has board representation. All segments are predominately based in Australia.
Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision
Maker (CODM). The CODM, who is responsible for allocating resources and assessing performance of the operating segments,
has been identified as the Board of the Parent Entity.
The Group’s operating segments are described as:
TPG Telecom Limited (TPG)
TPG is a provider of telecommunications services to consumers, business, enterprise, government and wholesale customers in
Australia.
As at 31 July 2021, the Parent Entity had a 12.6% investment in TPG. During the last reporting period, the Group’s share of
ownership in TPG was diluted from 25.3% to 12.6% as a result of the TPG and Vodafone Hutchison Australia Pty Limited (“VHA”)
merger. As of the merger date (29 June 2020), the Group lost significant influence over TPG and discontinued equity accounting
for its investment in TPG. In the prior reporting period, the Group reclassified TPG as a fair value through other comprehensive
income (FVOCI) asset.
Brickworks Limited (Brickworks)
Brickworks has four divisions: the manufacture of building products in Australia, the manufacture of building products in North
America, property ownership and development, and an investment in Washington H. Soul Pattinson and Company Limited.
The Parent Entity has a 43.3% investment in Brickworks. Brickworks has been assessed as being an associate of the Group, and the
Group therefore adopts equity accounting for its investment in Brickworks.
New Hope Corporation Limited (New Hope)
New Hope engages in coal, oil and gas activities which include exploration, development, production, processing, associated
transport infrastructure and ancillary activities.
The Parent Entity has a 39.9% investment in New Hope. New Hope has been assessed as being a controlled entity of the Group,
and New Hope’s financial statements are therefore included in the Group’s consolidated financial statements.
Round Oak Minerals Pty Limited (Round Oak)
Round Oak engages in zinc, copper and gold mining activities which includes exploration, mining and processing of ore into zinc
and copper concentrate, copper sulphide and gold.
The Parent Entity has a 100% investment in Round Oak. Round Oak has been assessed as being a controlled entity of the Group,
and Round Oak’s financial statements are therefore included in the Group’s consolidated financial statements.
Other investing activities
Other investing activities include the Group’s diversified investment portfolio across different asset classes (including equities,
hybrid instruments, derivatives, property, corporate loans and cash), subsidiaries (that own and operate farmland assets, direct
property and swim schools) and equity accounted associates.
84
Washington H. Soul Pattinson and Company LimitedAnnual Report 2021 8585
SEGMENTSSegments are based on the component’s contributions to the Consolidated Entity and internal reporting provided to the CODM to allocate resource and assess performanceCONTROLLED ENTITIESASSOCIATED ENTITYINVESTMENT held at Fair Value through other Comprehensive IncomeWHSP Other Financial AssetsOTHERINVESTINGACTIVITIES ACTIVITIESWHSPPropertyWHSPLoans Other controlled entities and associatesWHSP EquitiesPortfoliosRound Oak Minerals Pty LimitedWHSP: 100%New HopeCorporationLimitedWHSP: 39.9%ASX: NHCBrickworksLimitedWHSP: 43.3%ASX: BKWTPG TelecomLimitedWHSP: 12.6%ASX: TPGWHSP GROUP(CONSOLIDATED ENTITY) Notes to the Financial Statements
03 Segment Information (continued)
m
o
c
e
l
e
T
G
P
T
1
d
e
t
i
m
i
L
$’000
17,579
–
17,579
17,579
–
s
k
r
o
w
k
c
i
r
B
2
d
e
t
i
m
i
L
$’000
n
o
i
t
a
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o
p
r
o
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e
p
o
H
w
e
N
d
e
t
i
m
i
L
y
t
P
s
l
a
r
e
n
M
i
k
a
O
d
n
u
o
R
d
e
t
i
m
i
L
g
n
i
t
s
e
v
n
I
s
e
i
t
i
v
i
t
c
a
r
e
h
t
O
$’000
$’000
$’000
/
t
n
e
m
g
e
s
r
e
t
n
I
d
e
t
a
c
o
l
l
a
n
u
$’000
d
e
t
a
d
i
l
o
s
n
o
C
$’000
–
–
1,048,239
–
353,370
–
82,590
99,015
–
(99,015)
1,501,778
–
–
1,048,239
353,370
181,605
(99,015)
1,501,778
74,230
(25,225)5
110,720
(31,370)
94,841
(29,873)
160,962
(40,186)
(16,057)4
4,818
442,275
(121,836)
17,579
49,005
79,350
64,968
120,776
(11,239)
320,439
–
–
(47,734)
–
491
–
(47,243)
17,579
49,005
31,616
64,968
121,267
(11,239)
273,196
n
o
i
t
a
r
o
p
r
o
C
e
p
o
H
w
e
N
d
e
t
i
m
i
L
y
t
P
s
l
a
r
e
n
M
i
k
a
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d
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u
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d
e
t
i
m
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s
e
i
t
i
v
i
t
c
a
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n
i
t
s
e
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n
I
r
e
h
t
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$’000
$’000
$’000
s
k
r
o
w
k
c
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r
B
6
d
e
t
i
m
i
L
$’000
/
t
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m
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s
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e
t
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l
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a
n
u
$’000
d
e
t
a
d
i
l
o
s
n
o
C
$’000
–
–
1,083,918
–
222,878
–
61,671
234,261
–
(234,261)
1,368,467
–
–
1,083,918
222,878
295,932
(234,261)
1,368,467
m
o
c
e
l
e
T
G
P
T
6
d
e
t
i
m
i
L
$’000
–
–
–
Reporting Segments
Year ended 31 July 2021
Revenue from continuing
operations
Intersegment revenue3
Total revenue from continuing
operations
Profit/(loss) before income tax
Less income tax (expense)/benefit
Profit/(loss) after tax
Less (profit)/loss attributable to
non-controlling interests
Profit/(loss) after tax
attributable to members
Reporting Segments
Year ended 31 July 2020
Revenue from continuing
operations
Intersegment revenue3
Total revenue from continuing
operations
Profit/(loss) before income tax
Less income tax (expense)/benefit
1,510,803
(389,187)5
2,032
17,1795
(225,551)
68,768
(134,879)
40,049
(13,879)
9,860
(15,343)4
4,603
1,123,183
(248,728)
Profit/(loss) after tax
Less loss attributable to
non-controlling interests
Profit/(loss) after tax
attributable to members
1,121,616
19,211
(156,783)
(94,830)
(4,019)
(10,740)
874,455
–
–
78,424
–
88
–
78,512
1,121,616
19,211
(78,359)
(94,830)
(3,931)
(10,740)
952,967
1 TPG is classified as a FVOCI investment. Following the merger of TPG with Vodafone in June 2020, TPG changed its financial year end to 31 December.
During this transition period, TPG only declared one dividend during the current reporting period.
2 No revenue recognised as only the share of associates profit after tax is recognised for equity accounted associates.
3 Represents inter-segment dividends and interest received from subsidiaries and associates that are eliminated on consolidation.
4 Unallocated represents Parent Entity corporate costs that are not allocated to individual segments.
5 The income tax expense relates to the deferred tax recognised on consolidation in respect of this investment.
6 No revenue recognised as only the share of associates profit after tax is recognised for equity accounted associates. TPG was derecognised as an associate on 29 June 2020.
86
Washington H. Soul Pattinson and Company LimitedAnnual Report 2021
04 Revenue
ACCOUNTING POLICY
Revenue from contracts with customers
Revenue is recognised at an amount that reflects the consideration to which the Consolidated Entity is expected to be entitled in
exchange for transferring goods or services to a customer. For each contract with a customer, the Consolidated Entity: identifies the
contract with the customer; identifies the performance obligations in the contract; determines the transaction price which takes into
account estimates of variable consideration and the time value of money; allocates the transaction price to the separate performance
obligations on the basis of the relative stand-alone selling price of each distinct goods and service to be delivered; and recognises
revenue when or as each performance obligation is satisfied in a manner that depicts the transfer to the customer of the goods or
services performed.
Variable consideration within the transaction price, if any, reflects concessions provided to the customer such as discounts, rebates
and refunds and any other contingent events. Such estimates are determined using either the ‘expected value’ or ‘most likely amount’
method. The measurement of variable consideration is subject to a constraining principle whereby revenue will only be recognised
to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur. The
measurement constraint continues until the uncertainty associated with the variable consideration is subsequently resolved.
The Group recognises revenue from sales from contracts with customers as follows:
1 Coal sales revenue is recognised at a point in time when control of the products has been transferred to the customer in accordance
with the sale terms. In this instance, when the risks and benefits of ownership has transferred. The legal title, risks and rewards,
and therefore the fulfillment of performance obligations normally occurs at the time of loading the shipment for export sales, and
generally at the time the coal is delivered to the customer for domestic sales.
1 Oil sales revenue is recognised at the point in time when control of the products has been transferred to the customer in accordance
with the sales terms. In this instance, when the risks and benefits of ownership have transferred. This is normally when the oil is
delivered to the customer.
1 Copper, zinc and gold sales revenue is initially recognised at estimated sales value when the control and the risks of ownership of the
product are passed to the customer. Adjustments are made for changes in commodity prices, assays, weight and currency between
the time of the sale and the time of the final settlement of sales proceeds.
1 Revenue from sale of agricultural products is recognised at the point in time when the customer obtains control of the goods and
the revenue can be reliably measured. Where a commodity is harvested and sold to separate counterparties for full contract price,
revenue is generally recognised at the time of delivery. There are no specified performance obligations as all products are provided
under contract. Where the sale of goods is subject to supply contracts consisting of pool allocations (whereby a commodity is
allocated to distribution pools based on class of variety, size and distribution channel), revenue is recognised in two stages. Interim
pool payments, representing gross selling price less initial distribution costs, are recognised as revenue as notified and paid by the
purchaser within 1 month of delivery. The balance of pool revenue, representing the final pooled prices received adjusted for returns
and finalised costs and interim pool distributions received, is recognised upon receipt of final payment from the purchaser.
1 Revenue from the sale of other 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.
1 Rental income is recognised on a straight-line basis over the lease term.
1 Swimming fee revenue is recognised from the provision of swimming lessons over time once the swimming school gains the right to
be compensated for the lessons delivered.
1 Service fee income, including consulting and management fee income, is recognised as revenue over time as the services are
performed.
Other revenue
1 Interest revenue is recognised on a time proportion basis using the effective interest method.
1 Dividend income is taken into revenue when the right to receive payment is established. As earnings from subsidiaries and associates
are included in consolidated profit, dividends from subsidiaries and associates are not included in consolidated revenue.
1 Government grants relating to costs are deferred and recognised in profit or loss over the period necessary to match them with the
costs that they are intended to compensate.
8787
Notes to the Financial Statements
04 Revenue (continued)
KEY JUDGEMENTS AND ESTIMATES
Provisional pricing arrangements – sale of commodities
Judgement is required by Management to determine the provisional transaction price for each shipment at the port of loading, having
regard for variability in the precise quantity and quality of the commodity being delivered and estimated forward market prices at the
end of quotational periods. Variable consideration is determined using either the “expected value” or “most likely amount” method.
Further judgement will be required to determine whether variable consideration is subject to significant reversal. This might be
particularly relevant where the final quality of products will not be known until testing at its destination. Provisionally priced sales are
repriced at each reporting period until final pricing and settlement is confirmed based on final quality of products delivered and testing
at its destination. The period between provisional pricing and final invoice is generally between 30 to 180 days.
Revenue recognition from sale of goods – supply of agricultural products
Judgement is required in recognising revenue derived from supply contracts to pack and distribution houses who grade, pack, market
and distribute (sell) a range of the Group’s agricultural commodities.
Upon harvest and delivery to the pack and distribution house, the Group’s commodity is allocated to distribution pools based on class
of variety, size and distribution channel, where appropriate for the specific commodity. Pools are credited for the gross selling price less
costs of handling, packing, delivering, and other selling costs.
The Group receives interim payment from the pack and distribution house up to 1 month from date of delivery at the interim pooled
price less initial bin deductions for freight and levies. Final payments are received at the final pooled price less returns and finalisation of
distributions costs when the commodities have been distributed. Final payments are generally received several months post-delivery
and at times, straddle reporting years.
The Group has adopted the policy to recognise the revenue for final pool payments upon receipt of payment, as this is when significant
uncertainty is resolved around the transaction price.
Revenue from contracts with customers
Revenue from sale of goods
Revenue from provisional pricing adjustment
Rental revenue
Revenue from services
Other revenue
Dividend and distribution revenue
Interest revenue
Other
Total revenue
2021
$’000
2020
$’000
1,330,841
61,356
6,135
28,012
1,299,851
(10,236)
7,990
21,383
1,426,344
1,318,988
51,456
12,742
11,236
75,434
30,417
8,242
10,820
49,479
1,501,778
1,368,467
88
Washington H. Soul Pattinson and Company LimitedAnnual Report 2021 Revenue from contracts with customers
Disaggregation of revenue
The Consolidated Entity presents disaggregated revenue based on what each major strategic investment provided to customers
and the timing of transfer of goods and services.
Year ended 31 July 2021
Major product lines
Coal, oil and gas
Copper, gold and zinc
Other goods and services
Total revenue from contracts with customers1
Other revenue
New Hope
Corporation
Limited
$’000
Round Oak
Minerals Pty
Limited
$’000
Other
Investing
activities
$’000
Total
$’000
1,025,869
–
13,735
1,039,604
8,635
–
353,361
–
353,361
9
–
–
33,379
33,379
66,790
1,025,869
353,361
47,114
1,426,344
75,434
Total revenue
1,048,239
353,370
100,169
1,501,778
Total revenue from contracts with
customers by geographical regions
Australia
Japan
Taiwan
Korea/Indonesia
India
Chile
Malaysia
Finland
China
Vietnam
Other2
87,883
434,697
239,727
61,643
59,291
63,371
–
–
20,869
15,885
56,238
194,084
–
–
72,539
–
–
56,906
26,444
3,388
–
–
33,379
–
–
–
–
–
–
–
–
–
–
315,346
434,697
239,727
134,182
59,291
63,371
56,906
26,444
24,257
15,885
56,238
Total revenue from contracts with customers1
1,039,604
353,361
33,379
1,426,344
Timing of revenue recognition from
contracts with customers
Goods and services transferred at a point in time
Goods and services transferred over time
1,025,869
13,735
353,361
–
30,608
2,771
1,409,838
16,506
Total revenue from contracts with customers
1,039,604
353,361
33,379
1,426,344
1 Revenue from customers contracts includes income from commodity sales and services.
2 Other revenue relates to third party customer contracts with undisclosed geographical information.
Major product lines
Revenue from contracts with customers comes from the sale of coal, oil, gas, copper, zinc, gold and the provision of
management and consulting services.
Major customer
Revenues of $161.91 million (2020: $nil) are derived from a single external customer of New Hope, representing 16% of
New Hope’s total revenue from contracts with customers.
Revenues of $322.63 million (2020: $217.53 million) are sourced from four (2020: three) external customers of Round Oak,
representing 91% (2020: 98%) of Round Oak’s total revenue from contracts with customers.
There are no other individual customers who represent more than 10% of revenue from contracts with customers for the year
ended 31 July 2021.
8989
Notes to the Financial Statements
04 Revenue (continued)
Revenue from contracts with customers (continued)
Major customer (continued)
Year ended 31 July 2020
Major product lines
Coal, oil and gas
Copper, gold and zinc
Other goods and services
Total revenue from contracts with customers1
Other revenue
Total revenue
Total revenue from contracts with
customers by geographical regions
Australia
Japan
Switzerland
China
Taiwan
Korea
India
Chile
Vietnam
Other2
New Hope
Corporation
Limited
$’000
Round Oak
Minerals Pty
Limited
$’000
Other
Investing
activities
$’000
Total
$’000
1,060,621
222,862
35,505
1,318,988
49,479
1,368,467
174,688
446,852
189,370
127,418
80,069
68,680
27,094
26,280
10,196
168,341
–
–
22,292
22,292
39,379
61,671
22,292
–
–
–
–
–
–
–
–
–
22,292
1,318,988
15,379
6,913
22,292
1,298,862
20,126
1,318,988
1,060,621
–
13,213
1,073,834
10,084
1,083,918
118,904
446,852
–
127,418
80,069
68,680
27,094
26,280
10,196
168,341
–
222,862
–
222,862
16
222,878
33,492
–
189,370
–
–
–
–
–
–
–
222,862
222,862
–
222,862
Total revenue from contracts with customers1
1,073,834
Timing of revenue recognition from
contracts with customers
Goods and services transferred at a point in time
Goods and services transferred over time
Total revenue from contracts with customers
1,060,621
13,213
1,073,834
1 Revenue from customers contracts includes income from commodity sales and services.
2 Other revenue relates to third party customer contracts with undisclosed geographical information.
90
Washington H. Soul Pattinson and Company LimitedAnnual Report 2021 05 Other income
ACCOUNTING POLICY
Other income includes gains or losses made on:
1 changes in fair value for certain assets including financial assets held for trading, biological assets, investment properties and where
an equity accounted associate becomes an equity investment;
1 the sale of assets including the sale of financial assets held for trading, investment properties and equity accounted associates.
The gain or loss is calculated as the difference between the proceeds received and the carrying value of the asset; and
1 deemed disposals of equity accounted associates. This occurs when the Group’s percentage holding in an associate decreases, with
no loss of significant influence and no legal disposal of shares by the Group. The Group continues to equity account the associate.
Gain on sale of property, plant and equipment
Reclassification adjustment from reserves on derecognition of an associate
Gain on fair value of biological assets
Gain on deemed disposal of equity accounted associates
Gain on financial assets held for trading at fair value through profit or loss
Gain/(loss) on revaluation of investment property
(Loss)/gain on sale of investment properties
Insurance recovery
Other
2021
$’000
4,833
3,643
11,114
7,373
107,194
3,600
(873)
5,739
2,206
144,829
2020
$’000
2,975
(11,653)
4,951
5,348
5,780
(692)
38
56
3,082
9,885
9191
06 Expenses
ACCOUNTING POLICY
Depreciation and amortisation expense
Depreciation and amortisation expenses are non-cash expenses and represent the allocation of the cost of certain fixed assets such as
buildings, plant and equipment, mining reserves and development and right-of-use assets, over the time that the asset is expected to
generate revenue for the Group.
Different depreciation rates apply to each asset and are included in the notes for each asset.
Impairment expense
Impairment charges are non-cash expenses and are recognised when the carrying value of an asset or group of assets exceeds its
recoverable amount either through the use or sale of the asset. Recoverable value assessment for each asset class is discussed within the
notes for each asset.
Impairment charges are expensed to profit or loss unless the asset has been previously revalued. Where the asset has been previously
revalued, the reduction in value is recognised as a reversal to the extent of the previous revaluation, and any residual is recognised as an
impairment expense.
An impairment expense recognised on goodwill is permanent and is prohibited from being reversed.
For all other assets, an assessment is made at each reporting date as to whether an impairment charge recognised in a prior period no
longer exists or has decreased. If it is determined that the impairment is no longer required, the impairment expense is reversed in the
profit or loss. The carrying value of the asset is recalculated based on net book value had the asset continued depreciating.
Employee benefits expenses
Employee benefits expense includes the payment of salary and wages (including the value of non-cash benefits such as share based
payments), sick leave, superannuation and accruals for annual leave and long service leave.
Finance costs
Finance costs are expensed when incurred, except for interest incurred on borrowings that relate to the construction of Investment
properties. This interest is included in the cost of the properties.
Exploration costs expensed
Exploration costs that do not satisfy the criteria to be capitalised are expensed. Refer Note 19 for discussion on the criteria.
92
Notes to the Financial StatementsWashington H. Soul Pattinson and Company LimitedAnnual Report 2021 Profit before income tax includes the following specific expenses:
Depreciation
Buildings
Plant and equipment
Bearer plant
Right of use asset
Total depreciation
Amortisation
Mining reserve and mine development
Intangible assets
Oil producing assets
Lease incentive and leasing fee assets
Total amortisation
Impairment expense
Equity accounted associates1
Property, plant and equipment (including mine development costs)2
Land and buildings2
Exploration and evaluation assets3
Oil producing and exploration assets4
Right-of-use assets5
Intangibles5
Other assets5
Total impairment expense
Operating lease costs expensed6
Employee benefits expenses7
Finance costs8
Exploration costs expensed9
Onerous contract10
Redundancy costs11
Other expenses12
2021
$’000
2020
$’000
(4,284)
(92,352)
(1,826)
(22,915)
(3,517)
(85,336)
(958)
(32,453)
(121,377)
(122,264)
(115,914)
(4,194)
(5,529)
(22)
(125,659)
25,322
(28,774)
(9,053)
(1,672)
–
(2,136)
(915)
(683)
(17,911)
(1,481)
(212,007)
(35,652)
(8,499)
(37,276)
(15,733)
(24,368)
(114,878)
(4,210)
(7,791)
(57)
(126,936)
(61,640)
(119,133)
–
(238,007)
(47,629)
–
(16,776)
(702)
(483,887)
(3,600)
(250,041)
(35,474)
(19,677)
106
(7,405)
14,058
KEY JUDGEMENTS AND ESTIMATES
Recoverable value
The assessment of the recoverable value of non-current assets involves significant areas of estimation and judgement by management.
Valuations have an element of uncertainty and therefore may not reflect the actual values of these assets in the future.
9393
06 Expenses (continued)
1
Impairment of equity accounted associates
The recoverable amounts of investments in equity accounted associates have been assessed as at 31 July 2021. Where the
carrying value of an investment exceeds the recoverable amount, the investment is impaired. At each reporting date an
assessment is also made as to whether there are any circumstances that would indicate that any impairment recognised
has decreased or no longer exists. Where evidence supports a reduction in an impairment, the impairment expense may be
reversed through the Consolidated Statement of Comprehensive Income.
During the current reporting period, an additional impairment of $2.28 million was recognised on the investment in Palla
Pharma Limited, and a reversal of impairment of $27.60 million was recognised on the investment in Pengana Capital Group
Limited.
In the previous reporting period, an impairment expense of $22.07 million was recognised on the investment in Pengana
Capital Group Limited, $32.55 million on the investment in Australian Pharmaceutical Industries Limited and $7.58 million
on the investment in Palla Pharma Limited. A reversal of an impairment of $0.56 million was recognised for Verdant Minerals
Limited.
2
Impairment of property, plant and equipment
An impairment loss on property, plant and equipment (including mine development costs and land and buildings) is
recognised for the amount by which the asset’s carrying values exceeds its recoverable amount. The recoverable amount
is the higher of an asset’s fair value less costs of disposal (“FVLCD”) and its value in use (“VIU”). For the purpose of assessing
impairment under value in use testing, assets are grouped at the lowest levels for which there are separately identifiable
cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash generating units
or CGUs). At each reporting date, an assessment is undertaken to determine if there are any circumstances that would
indicate that an asset has been impaired. Individual business units adopt assumptions on pricing and exchange rates
suitable for the markets in which they operate.
For the year ended 31 July 2021 New Hope recognised the following impairment expenses:
1 Property, plant and equipment: $30.19 million (2020: $65.45 million) and $1.39 million (2020: $nil) was recognised for the
Queensland Coal Mining CGU of New Hope (refer to Note A below) and the Coal Exploration and Evaluation Assets CGU
of New Hope (refer to Note B below) respectively.
1 Queensland Coal Mining CGU buildings: $9.05 million (2020: $nil) was recognised (refer to Note A below).
For the year ended 31 July 2021, an impairment expense of $1.91 million (2020: $0.27 million) was recognised on Agricultural
assets.
For the year ended 31 July 2021, a reversal of impairment of $4.71 million (2020: impairment of $52.60 million) was
recognised on property, plant and equipment and mine development costs in Round Oak.
3
Impairment of exploration and evaluation assets
An impairment loss on exploration and evaluation assets is recognised for the amount by which an asset’s carrying
value exceeds its recoverable amount. At each reporting date, an assessment is undertaken to determine if there are any
circumstances that would indicate that an asset has been impaired. Individual segments of the Consolidated Entity adopt
valuation models most suitable for the assets in question.
For the year ended 31 July 2021, the following impairment expenses were recognised by New Hope:
1 $1.02 million (2020: $45.33 million) and $0.23 million (2020: $157.20 million) was recognised for the Queensland
Coal Mining CGU (refer to Note A below) and the Coal Exploration and Evaluation Assets CGU (refer Note B below)
respectively.
For the year ended 31 July 2021, an impairment expense of $0.42 million (2020: $17.54 million) was recognised by
Round Oak.
For the year ended 31 July 2020, an impairment expense of $17.94 million was recognised on exploration and evaluation
assets on oil producing assets of New Hope (2021: $nil).
94
Notes to the Financial StatementsWashington H. Soul Pattinson and Company LimitedAnnual Report 2021 4 Oil producing assets
For the year ended 31 July 2020, an impairment expense of $47.63 million was recognised on oil producing assets of
New Hope (2021: $nil).
5 Other assets
For the year ended 31 July 2021, an impairment expense of $2.14 million (2020: $nil) was recognised in respect of Right-
of-Use Assets. In May 2021 New Hope executed a contract to partially sublease its head office building, and the impairment
charge was recognised on remeasurement of the Right-of-Use Asset to fair value following a change in assumptions
pertaining to the original fair value measurement assessment.
For the year ended 31 July 2021, the following impairment expenses were recognised by New Hope:
1 $0.05 million (2020: $nil) was recognised in respect of Queensland Coal Mining CGU Mining Land. In June 2021 New
Hope reclassified land with a net book value of $0.57 million as assets held for sale, and at year end remeasured the land
to fair value less costs to sell, resulting in the impairment charge.
1 $0.64 million (2020: $0.81 million) was recognised on Other Buildings. On 28 July 2021 New Hope executed a contract for
sale of certain building assets. The assets were reclassified as assets classified as held for sale and remeasured to fair value
less costs to sell.
For the year ended 31 July 2021, an impairment expense of $0.92 million (2020: $0.35 million) was recognised in respect of
water rights held by the Group’s agricultural investment properties.
For the year ended 31 July 2020, an impairment expense of $16.43 million was recognised in respect of goodwill attached to
coal and copper exploration assets (2021: nil).
For the year ended 31 July 2020, an impairment expense of $0.69 million was recognised in respect of investment property
(2021: nil).
6 Operating lease costs expensed
Lease payments made in relation to short term and low value leases are recognised as an expense on a straight-line basis
over the lease term.
7 Employee benefits expenses
Employee benefits expenses represent expenses paid to all employees within the Group. This amount mainly relates to
$150.04 million (2020: $193.98 million) paid to employees of New Hope and $45.60 million (2020: $48.05 million) paid
to employees of Round Oak. Employee benefits expenses include superannuation expenses of $45.60 million (2020:
$16.04 million).
8 Finance costs
This amount mainly relates to $26.68 million (2020: $26.38 million) paid by New Hope, $1.08 million (2020: $3.76 million) paid
by Round Oak and $6.98 million (2020: $4.31 million) paid by the Parent Entity on interest bearing liabilities, unwinding of
the discount on provisions and interest expense in relation to lease liabilities.
9 Exploration costs expensed
This amount relates to New Hope exploration costs expensed.
10 Onerous contract
During the year ended 31 July 2021, New Hope recognised an expense of $37.28 million in respect of one onerous
take-or-pay contract that ends in December 2021. The expense was recognised as a selling and distribution expense, and
includes actual costs paid during the current period and estimated costs expected to be paid in future periods. As at 31 July
2021, New Hope retained a provision of $16.48 million in relation to these future costs (refer to Note 23).
11 Redundancy costs
During the year ended 31 July 2021, New Hope incurred $15.73 million in redundancy costs across its Queensland
operations and corporate office as part of an overall group restructure.
9595
06 Expenses (continued)
12 Other expenses
This amount mainly relates to $16.50 million (2020: $nil) write off of loan and interest to an external party; $2.67 million
(2020: $nil) expected credit losses allowance on external loans; $2.62 million (2020: reversal provision of $14.06 million)
liquidation related expenses incurred by New Hope; and $1.30 million (2020: $nil) loss on fair value recognition of a loan.
Impairment (expenses)/ reversals by segment and by asset class is shown in the table below:
Year ended 31 July 2021
Impairment expense
Equity accounted associates
Property, plant and equipment
(including mine development costs)
Land and buildings
Exploration and evaluation assets
Right-of-use assets
Intangibles
Other assets
Year ended 31 July 2020
Impairment expense
Equity accounted associates
Property, plant and equipment
(including mine development costs)
Exploration and evaluation assets
Oil producing and exploration assets
Intangibles
Other assets
New Hope
Coal
Exploration
& Evaluation
Assets
$’000
Qld Coal
Mining
Assets
$’000
Other
activities
$’000
Round Oak
Minerals Pty
Limited
$’000
Other
Investing
activities
$’000
Total
$’000
–
–
–
–
25,322
25,322
(30,191)
(9,053)
(1,015)
–
–
(48)
(1,385)
–
(233)
–
–
–
–
–
–
(2,136)
–
(635)
4,710
–
(424)
–
–
–
(1,908)
–
–
–
(915)
–
(28,774)
(9,053)
(1,672)
(2,136)
(915)
(683)
(40,307)
(1,618)
(2,771)
4,286
22,499
(17,911)
–
–
–
–
(61,640)
(61,640)
(65,449)
(45,334)
–
–
–
–
(157,197)
–
–
–
(812)
(17,940)
(47,629)
(12,272)
–
(52,600)
(17,536)
–
–
–
(272)
–
–
(4,504)
(702)
(119,133)
(238,007)
(47,629)
(16,776)
(702)
(110,783)
(157,197)
(78,653)
(70,136)
(67,118)
(483,887)
96
Notes to the Financial StatementsWashington H. Soul Pattinson and Company LimitedAnnual Report 2021 New Hope
Further information on New Hope CGU recoverable amounts and impairment charges are set out in Notes A and B below:
Note A: Queensland Coal Mining Operations CGU
New Hope has undertaken a detailed assessment of the recoverable amount of its Queensland Coal Mining CGU (Qld Coal CGU)
at 31 July 2021. The impairment assessment process is detailed below.
The Queensland Coal Mining operations is predominantly comprised of the New Acland mine. New Hope carefully considered
the potential impact that recent developments in the complex legal and regulatory environment may have and the possibility of
resultant impacts on future cash flows and recoverable amount for the CGU.
A summary of key events in prior years pertaining to New Acland Stage 3 project (NAC03) approvals is detailed in Note 17 of the
Group’s 2020 Financial Report.
During the year ended 31 July 2021 and to the date of this financial report the following key developments occurred:
1 The NAC03 project requires a Regional Interests Development Approval (RIDA) in accordance with the Regional Planning
Interests Act 2014. The application was approved, with conditions, by the Queensland Treasury on 27 August 2020.
1 On 3 February 2021, the High Court of Australia upheld the appeal by Oakey Coal Action Alliance (OCAA) against NAC03 in
respect of the orders issued by the Queensland Court of Appeal given on 1 November 2019.
1 The High Court ordered the matter to be re-heard in the Queensland Land Court. The Land Court hearing has been reserved
for 3 November 2021.
New Hope determined the recoverable amount for the CGU based on a FVLCD calculation. This calculation uses discounted
cashflow projections, adjusted with probability weightings specific to individual scenarios to derive a weighted average
recoverable amount. Several scenarios have been assessed, considering a combination of different assumptions. These key
assumptions are detailed below:
Assumption
Description
Approvals, timelines,
probabilities and coal
tonnages
Coal Price
The extension of approval timelines and the nature of approvals has a direct impact on assumptions
relating to the volume of coal tonnages to be produced and sold. The assessments have been
considered based on project approvals being granted in 2022 in the earliest instance (highest
probability), or at the latest with operations recommencing on 1 August 2026 (lowest probability).
The assumptions of the impairment assessment reflect that once approvals are granted, NAC03
operates for the full life of mine with varying tonnage scenarios considered to optimise the return
from the assets. An assessment was also considered based on the project approvals not being
granted and New Hope not pursuing approvals, placing the operations into care and maintenance
(lowest probability).
Short term coal prices have improved since October 2020 and long term indications of pricing have
remained largely consistent and in line with pricing reflected at 31 July 2020. The coal price range
for assessments at 31 July 2021 is US$55.13 – US$127.54 (2020: US$47.80 – US$133.50) per tonne
(nominal basis).
Foreign exchange
The assumed AUD:USD foreign exchange rate modelled is 0.75 – 0.77 (2020: 0.68 – 0.73).
Discount rates
The future cash flows have been discounted using a post-tax discount rate of 10.5% (2020: 10.5%)
Further considerations
In undertaking its impairment assessment, New Hope considered the potential impact of climate change risk on the future cash
flows contained within the FVLCD calculation. These risks include the potential impact on future coal prices of changes in market
supply and demand dynamics over the life of NAC03, and the potential for cost volatility associated with factors such as climate
change related regulatory changes.
The Queensland Coal Mining Operations CGU of New Hope (Qld Coal CGU) has take-or-pay agreements for rail, port and water
supply. The rail agreement is generally aligned to the mining of Stage 2 coal, while the port and water agreements are for a
longer term. Refer to Note 23 for information on onerous take-or-pay contracts identified.
The Queensland Coal Mining Operations CGU is a customer of the New Hope Port Operations CGU. During the year ended
31 July 2021 no indicators of impairment were noted with regard to the Port Operations CGU. In the event that there are
circumstances which impact the QLD Coal CGU, this may be relevant to the recoverable value of the Port Operations CGU and
will be a factor in any future impairment considerations.
9797
06 Expenses (continued)
Recoverable amount and impairment charge
Property, plant and equipment
Land and buildings – mining
Plant and equipment
Mining reserves, leases and development assets
Plant under construction
Intangibles
Software
Exploration and evaluation assets
Exploration and evaluation at cost
2021
2020
Recoverable
amount
$’000
Impairment
expenses
$’000
Recoverable
amount
$’000
Impairment
expenses
$’000
18,859
19,007
97
252
9,053
30,191
–
–
373
–
2,204
40,792
1,015
40,259
29,592
62,208
866
516
688
–
93,870
–
12,864
–
52,585
–
45,334
110,783
In assessing the recoverable amount for the CGU, New Hope has used assumptions and judgements of future uncertainties
in key pricing, discounts rate, foreign exchange assumptions and probabilities of scenarios. Any changes in actual scenario
outcomes could either result in additional impairment of the remaining carrying value of the CGU at risk of $40.79 million (2020:
$93.87 million) or reversal of previously booked impairments.
As at 31 July 2021, New Hope concluded that in aggregate the above matters result in the recoverable amount for the CGU
being below its carrying value and an impairment charge of $40.26 million was booked in the current reporting period.
Note B: Coal Exploration and Evaluation Assets CGU
New Hope determined that an indicator of impairment existed as at 31 July 2021 in respect of the North Surat Coal Exploration
projects. The indicator arose due to market conditions for coal exploration assets.
The recoverable amount of the Coal Exploration and Evaluation Assets CGU was determined based on a FVLCD calculation
underpinned by a resource multiple. A resource multiple is considered the appropriate valuation methodology for an exploration
asset of this type as it represents the price paid for the resources in market transactions for exploration tenures. In the current
market conditions, New Hope determined that a resource multiple of $0.03 be ascribed to the JORC resources.
New Hope concluded the recoverable amount for the CGU was below its carrying value and an impairment charge of
$1.62 million was recognised during the current reporting period. Any changes in assumptions could result in an additional
impairment. The residual carrying value of the New Hope CGU at risk as at 31 July 2021 is $39.32 million (2020: $39.87 million).
North Surat coal project
Exploration and evaluation
Property, plant and equipment
Yamala coal project
Exploration and evaluation
2021
2020
Recoverable
amount
$’000
Impairment
expenses
$’000
Recoverable
amount
$’000
Impairment
expenses
$’000
25,530
8,797
4,989
39,316
233
1,385
–
1,618
23,069
10,861
5,939
39,869
147,816
–
9,381
157,197
98
Notes to the Financial StatementsWashington H. Soul Pattinson and Company LimitedAnnual Report 2021
Round Oak
Round Oak performed its annual impairment assessment of recoverable value of its capitalised mine development costs and
associated plant and equipment in July 2021 and July 2020. The assessment of recoverable value includes making estimates
in relation to quantities of economically recoverable reserves that are supported by detailed mine plans and interpretations of
geological models. The assessment of recoverable value also requires assumptions to be made that include short and long term
exchange rates, short and long term commodity prices, future capital expenditure requirements, working capital needs and
estimates of the economic life of plant and equipment 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 profit or loss.
Jaguar – impairment reversal
During the current reporting period, Jaguar successfully executed on the Bentley 500 Strategy of opening up two mining fronts
to decongest the decline, allowing production to increase to a sustained 40,000 tonnes per month. As a consequence, Round
Oak management believes that impairment reversal indicators are present at the balance sheet date as the sustained levels of
production provide greater confidence in future cash flows.
Round Oak has calculated the recoverable amount of the Jaguar CGU based on a VIU calculation. The calculation uses key
including key pricing, discount rate and foreign exchange assumptions, as well as those associated with COVID-19 and climate
risk.
The key assumptions used in 2021 VIU calculations were:
Assumption
Description
Commodity prices
The commodity price ranges for assessments as at 31 July 2021 are:
1 Zinc (US$/t): US$2,517 – US$2,613
1 Copper (US$/t): US$7,496 – US$8,145
1 Gold (US$/oz): US$1,718 – US$1,806
1 Silver (US$/oz): US$23 – US$25
Foreign exchange
The assumed AUD:USD foreign exchange rate modelled is 0.741 – 0.745.
Discount rates
The future cash flows have been discounted using a post-tax discount rate of 7.8%.
The recoverable amount for the Jaguar CGU was calculated as $58.4 million, which is higher than the carrying value of
$46.2 million. As such, a pre-tax reversal of $4.71 million was recognised at 31 July 2021 ($3.3 million post tax), representing the
written down value of a previously recognised impairment losses.
In assessing the recoverable amount of the Jaguar CGU, various sensitivity analyses were performed. A 10% reduction in
commodity prices would not have impacted the amount of impairment reversal recognised at 31 July 2021 due to the level of
headroom available.
Prior reporting period impairments
As at 31 July 2020, the recoverable value assessment determined that the carrying values of the Jaguar, Wallace, Cloncurry and
Barbara CGU’s exceeded their respective recoverable amounts and a pre-tax impairment charge of $70.14 million ($49.10 million
post-tax) was recognised as an impairment expense in the Consolidated Statement of Comprehensive Income.
The key assumptions used in the 2020 VIU calculations were:
Assumption
Description
Commodity prices
The commodity price ranges for assessments as at 31 July 2020 are:
1 Zinc (US$/t): US$2,186 – US$2,379
1 Copper (US$/t): US$5,592 – US$6,378
1 Gold (US$/oz): US$1,485 – US$1,521
1 Silver (US$/oz): US$17 – US$18
Foreign exchange
The assumed AUD:USD foreign exchange rate modelled is 0.642 – 0.669.
Discount rates
The future cash flows have been discounted using a post-tax discount rate of 7.8%.
9999
07 Income tax expense
ACCOUNTING POLICY
The income tax expense or benefit for the year represents the tax payable on the current reporting period’s taxable income based on
the Australian corporate income tax rate (30%) 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
interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Income taxes relating to items recognised directly in equity are recognised in equity and not in the profit or loss.
Tax consolidation legislation
Some of the entities within the Group have formed tax consolidated groups under the tax consolidation regime. The Australian Tax Office
has been notified on these decisions.
Subsidiaries within the relevant tax consolidated groups, continue to be responsible under tax funding agreements, for funding their
share of tax payments that are required to be made by the head entity in their tax consolidated group. These tax amounts are measured
as if each entity within the tax consolidated group, continues to be a stand-alone tax payer in their own right.
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 differences between the amounts assumed and amount receivable or payable under the tax funding agreements are recognised as
a contribution to (or distribution from) wholly-owned tax consolidated entities.
a) Income tax expense comprises:
Current income tax expense
Current year
(Over) provision in prior year
Deferred income tax expense
Related to the origination and reversal of temporary differences
Adjustment in respect of prior year's deferred tax liabilities/(assets)
previously not recognised
Income tax expense recongised in the profit or loss
Deferred tax included in income tax expense comprises:
Decrease/(increase) in deferred tax assets
Increase in deferred tax liabilities
2021
$’000
2020
$’000
56,028
(9,379)
73,952
1,235
121,836
11,695
62,257
73,952
7,650
(10,674)
268,727
(16,975)
248,728
(26,917)
295,644
268,727
100
Notes to the Financial StatementsWashington H. Soul Pattinson and Company LimitedAnnual Report 2021 b) Reconciliation of prima facie tax expense
to income tax expense:
Profit before income tax expense
Tax at the Australian rate of 30% (2020: 30%)
Tax effect of amounts which are not deductible/(taxable) in calculating taxable income:
Net impairment expenses
Franking credits received (excluding subsidiary and associate entities)
Tax (benefit) on the carrying value of equity accounted associates
Under/(over) provision for income tax
Other
Total income tax expense
Effective tax rate:
c) Amounts recognised directly in equity
Aggregate current and deferred tax arising in the year and not
recognised in net profit or loss but directly charged or credited to equity
Decrease/(increase) to deferred tax assets
(Decrease) to deferred tax liabilities
Net deferred tax charged directly to equity
d) Unrecognised deferred tax assets
Relating to the tax consolidated groups of:
Washington H. Soul Pattinson and Company Limited
New Hope Corporation Limited
Total unrecognised deferred tax assets
Potential tax benefit at 30%
2021
$’000
2020
$’000
442,275
132,683
–
(11,349)
(404)
797
109
121,836
27.5%
1,123,183
336,955
23,628
(7,280)
(94,855)
(10,674)
954
248,728
22.1%
41,808
(103,452)
(61,644)
(10,798)
(46,757)
(57,555)
70,679
12,316
82,995
24,899
100,075
12,799
112,874
33,862
101101
08 Deferred tax assets and deferred tax liabilities
ACCOUNTING POLICY
Deferred tax assets and liabilities are calculated on the differences (temporary differences) between the carrying amount of assets and
liabilities as recognised in the consolidated financial statements and their tax cost base multiplied by the tax rate expected to apply
when these assets are recovered or liabilities are settled. The current Australian corporate tax rate applicable to the Group is 30%.
Deferred tax assets or liabilities are provided in full, using the liability method. 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.
a) Deferred tax assets comprises temporary
differences attributable to:
Provision
Accrued expenses
Impairment losses
Capitalised exploration
Property, plant and equipment
Tax value of losses carried-forward
Lease liabilities
Other
Long term equity investments
Share issue costs
Total deferred tax assets
Set-off of deferred tax liabilities pursuant to set-off provisions
Net deferred tax assets
Movements:
Opening balance at 1 August
Adjustment on adoption of AASB 16
Credited/(debited) to profit or loss
Credited/(debited) to equity
Additions through business combinations
Closing balance at 31 July
2021
$’000
2020
$’000
104,672
44
–
750
15,673
6,736
33,035
6,041
1,331
10
168,292
(137,968)
30,324
221,795
–
(11,695)
(41,808)
–
168,292
105,130
138
60,399
2,260
3,298
20,123
25,952
2,895
1,590
10
221,795
(125,886)
95,909
162,739
21,327
26,917
10,798
14
221,795
102
Notes to the Financial StatementsWashington H. Soul Pattinson and Company LimitedAnnual Report 2021 KEY ESTIMATE
Deferred tax assets
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
respectively, 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.
b) Deferred tax liabilities1 comprises temporary
differences attributable to:
Property, plant and equipment
Inventories
Capitalised exploration
Investments
Long term equity investments
Cashflow hedges
Intangibles
Other
Total deferred tax liabilities
Set-off of deferred tax assets pursuant to set-off provisions
Net deferred tax liabilities
Movements:
Opening balance at 1 August
Adjustment on adoption of AASB 16
Charged to profit or loss
(Debited)/credited to equity
Closing balance at 31 July
2021
$’000
2020
$’000
108,890
16,387
12,966
118,195
488,340
2,923
2,036
7,798
757,535
(137,968)
619,567
798,729
–
62,257
(103,451)
757,535
92,715
4,475
10,327
142,331
526,465
16,429
–
5,987
798,729
(125,886)
672,843
528,515
21,327
295,644
(46,757)
798,729
1 It is important to note that the deferred tax liability recognised above does not represent the total tax that would be incurred if
all assets of the Group were to be sold. This is predominately due to subsidiaries and the associate entities not being carried at
their market value in the consolidated financial statements.
103103
09 Trade and other receivables
ACCOUNTING POLICY
Trade receivables are recognised initially at fair value and subsequently at amortised cost, less any allowance for expected credit losses
(ECL). Trade receivables are due for settlement between 30 and 45 days from the date of recognition.
Sales contracts for commodities often incorporate provisional pricing. Under provisional pricing arrangements, the price to be received on
the sales of commodity is provisionally priced using either the ‘expected value’ or ‘most likely amount’ method. Subsequently, provisionally
priced sales are repriced at each reporting period until final pricing and settlement is confirmed based on final quality of products
delivered and testing at its destination. The period between provisional pricing and final invoice is generally between 30–180 days.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.
They are initially recognised at fair value, and subsequently at amortised costs less any ECLs.
The Consolidated Entity measures the loss allowance for trade and other receivables at an amount equal to the lifetime ECL except
where the financial asset’s credit risk is considered low or has not increased significantly since initial recognition, in which case the loss
allowance is based on 12-months ECL. A simplified approach is taken whereby the Consolidated Entity uses its historical experience,
external indicators and forward looking information to calculate the ECL.
The amount of any allowance for expected credit loss is recognised in the profit or loss. When a trade receivable for which an allowance
had been recognised becomes uncollectable in a subsequent period, it is written off against the allowance account. Subsequent
recoveries of amounts previously written off are credited to the profit or loss.
Measurement
Loans to external parties
Loans to external parties are held at amortised cost, less any allowance for expected credit loss.
Other receivables
These amounts generally arise from transactions outside the usual operating activities of the Group. Interest may be charged at
commercial rates where the terms of repayment exceed the due date. Other receivables are carried at amortised cost.
Current assets
Trade receivables
Trade receivables – provisionally priced
Loans to external parties – secured
Other receivables
Prepayments
Non-current assets
Loans to external parties – secured
Loans to external parties – unsecured
Other receivables and prepayments
Allowance for expected credit losses
2021
$’000
107,819
1,990
2,815
33,188
18,175
2020
$’000
41,198
19,075
44,755
26,361
17,456
163,987
148,845
153,936
79,454
2,791
236,181
(2,667)
233,514
14,750
–
2,247
16,997
–
16,997
At 31 July 2021, the Group assessed allowance for expected credit losses in relation to trade and other receivables (including
loans) and provided for $2.67 million during the current reporting period (2020: $nil).
104
Notes to the Financial StatementsWashington H. Soul Pattinson and Company LimitedAnnual Report 2021 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 28.
The carrying value less impairment of trade receivables are assumed to approximate their fair value.
Trade receivables
The balance at 31 July 2021 includes $88.21 million (2020: $26.25 million) relating to New Hope and $12.71 million relating to Round
Oak (2020: $13.18 million). As at reporting date, trade receivables past due but not impaired were $nil (2020: $nil).
Trade receivables – provisionally priced
The balance at 31 July 2021 of $1.99 million (2020: $19.08 million) was related to Round Oak.
Loans to external parties – secured
During the reporting period, the Consolidated Entity provided loans to external parties on commercial rates. The total balance of loans at
31 July 2021 was $156.75 million (2020: $59.51 million). These loans are secured by general security deeds that provide fixed and floating
charges over all assets and/or property mortgages.
Loans to external parties – unsecured
During the reporting period, the Consolidated Entity invested $79.45 million in preference shares. This investment was determined to
be an advance held at amortised cost, as the contractual terms of the preference shares are akin to a lending arrangement. This loan is
unsecured and attracts an effective interest rate of 6.5% per annum.
10 Inventories
ACCOUNTING POLICY
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.
Current assets
Raw materials and stores
Work in progress
Finished goods
Provision for obsolescence
Inventory expense
2021
$’000
41,407
17,899
71,043
(3,383)
2020
$’000
48,069
4,183
64,732
(2,882)
126,966
114,102
Inventories recognised as an expense during the year ended 31 July 2021 amounted to $1.052 billion (2020: $1.049 billion).
The write-down of inventory to net realisable value recognised as an expense during the current reporting period amounted to
$4.70 million (2020: $38.91 million).
KEY JUDGEMENTS AND ESTIMATES
Recoverable value of inventory
The Group determines the estimated value of finished goods and work in progress based upon interpretations of the commodity
and concentrate stockpile surveys and mapping provided by a registered and licensed independent surveyor, as well as estimates of
commodity recovery rates and quality from these stockpiles. It also requires assumptions to be made regarding the estimated future
sales price of the products based on the estimated commodity prices less the estimated costs of completion. Outcomes that differ from
these estimates and assumptions may impact the carrying value of inventory.
105105
11 Biological assets
ACCOUNTING POLICY
The Group only recognise biological assets when:
a) it controls the asset as a result of past events;
b) it has determined that the future economic benefits associated with the asset will flow to the Group; and
c) the fair value or cost of the asset can be measured reliably.
Biological assets are measured at fair value less cost to dispose at each reporting date. The fair value is determined as the risk adjusted
value of cash flows expected to be generated by the crops (including costs to bring the crop to a saleable condition). Where the fair
value cannot be measured reliably, biological assets are measured at cost.
Net increments and decrements in the fair value of the growing assets are recognised as income or expense in the statement of
comprehensive income, determined as:
1 the difference between the total fair value of the biological assets recognised at the beginning of the reporting period and the total
fair value of the biological assets recognised at reporting date.
1 costs incurred in maintaining or enhancing the biological assets recognised at the beginning of the reporting period and the total
fair value of the biological assets recognised at reporting date.
1 the market value of the produce picked during the reporting period is measured at their fair value less estimated costs to be incurred
up until the time of picking. Market price is determined based on underlying market prices of the product.
Current assets
Opening balance
Business combination additions
Additions
Sale or transfer to inventory
Change in fair value due to biological transformation
2021
$’000
2,062
–
663
(9,181)
11,114
4,658
2020
$’000
–
102
452
(3,443)
4,951
2,062
KEY JUDGEMENTS AND ESTIMATES
Fair value of biological assets
Fair value is to be determined with regards to quoted prices of an active market in which the assets are located. Where more than one
active market is available, the market expected to be used is the market from which the value of the asset is derived.
In the event that there is no active market, a determination shall be made taking into various factors including the most recent market
transaction price, market prices for similar assets with adjustments to reflect differences and sector benchmarks.
The determination of fair value of biological assets requires Management to make estimates and assumptions about the expected prices,
production timing and recovery rates, foreign exchange rates, operating costs and discount rates. The fair value measurements used in
these calculations are based on non-observable market data which are considered in level 3 of the fair value hierarchy.
Biological yield estimates included in the fair value measurement are provided by Farm Managers who engage agronomists and
undertake agronomic practices to achieve target yields based on various factors, including, but not limited to, historical yields, industry
averages, current climatic outlook, nutrition programs, age of plants and tree health.
106
Notes to the Financial StatementsWashington H. Soul Pattinson and Company LimitedAnnual Report 2021 12 Assets classified as held for sale
ACCOUNTING POLICY
Assets classified as held for sale during the reporting period were measured at the lower of their carrying amounts and fair value less
cost of disposal at the time of their reclassification.
Current assets
Assets classified as held for sale at carrying amount
Property, plant and equipment1
Equity accounted associate
Inventory
Trade and other receivables
Intangibles
Investment property
Liabilities classified as held for sale at carrying amount
Provisions
Net assets classified as held for sale
Notes
18
15
21
23
2021
$’000
21,210
5,642
697
267
5
–
(14,166)
13,655
2020
$’000
–
–
–
–
–
26,879
–
26,879
1
Impairment expense of $0.68 million was recognised on property, plant and equipment following transfer to assets classified as held for sale.
New Hope
As at 31 July 2021 New Hope reclassified land with a net book value of $7.12 million from property, plant and equipment to
assets classified as held for sale following the execution of an unconditional contract for sale on 8 June 2021. The sale completed
on 9 August 2021. An Impairment charge of $0.05 million has been recognised in the Statement of Comprehensive Income on
the remeasurement of a certain parcel of this land to fair value less costs to sell, which is lower than its carrying value (refer to
Note 6). A gain on disposal of certain other parcels of land of $5.25 million was recorded on disposal on 9 August 2021 and will
be recognised in the 2022 financial period.
On 28 July 2021, New Hope entered a contract for sale of their old corporate office at Brookwater, Queensland. The sale is subject
to a Put and Call Option with New Hope intending to exercise their Put option within 30 days of the contract date in line with the
contract for sale. New Hope reclassified this building with a net book value of $3.0 million from property, plant and equipment to
assets classified as held for sale.
There is no cumulative income or expense included in Other Comprehensive Income relating to the disposal of this land or
buildings.
Round Oak
Various entities within the Round Oak group entered into an agreement on 31 July 2021 to sell various assets and associated
liabilities collectively referred to as the ‘Cloncurry operations’. The sale is expected to be completed within twelve months of
contract execution date.
As at 31 July 2021, the Cloncurry operations was classified as a disposal group held for sale, with a net book value of negative
$2.05 million. It is not considered a discontinued operation because it does not constitute a separate major line of business or
geographical area that is material to the Group’s results.
The assets within the disposal group have a gross value of $12.11 million and include property, plant and equipment, inventory,
and mining leases & exploration permits associated with the Great Australia Mine; and mining tenements, mining leases and
exploration permits associated with other nearby areas.
The liabilities within the disposal group have a gross value of $14.17 million, and represent environmental liabilities associated
with mining leases and tenements being disposed.
107107
12 Assets classified as held for sale (continued)
Souls Private Equity
As at 31 July 2021, Souls Private Equity Limited was in negotiations to sell its shares in Seven Miles Roasters Pty Limited (Seven
Miles), and consequently the Group’s investment in Seven Miles was reclassified to assets classified as held for sale, with a book
value of $5.64 million. The sale of Seven Miles occurred in early September 2021, with the total settlement expected to complete
by the end of October 2021.
Investment Property
In the prior reporting period, a subsidiary, in which the Group owns a 50.1% interest, executed contracts for the sale of a
property and associated business in Penrith, New South Wales, for a combined value of $27.50 million. Settlement was finalised
in January 2021.
13 Financial assets held for trading
ACCOUNTING POLICY
Financial assets held for trading are initially recognised at fair value and any transaction costs are immediately expensed. These financial
assets are principally held for the purpose of selling in the short to medium term.
Recognition
Purchases or sales of financial assets held for trading are recognised on trade-date, the date on which the Group commits to purchase or
sell the asset.
Classification
Financial assets held for trading are classified as financial assets at fair value through profit or loss and are included in current assets.
Subsequent measurement
At each reporting date, financial assets held for trading are remeasured to fair value. Gains or losses arising from changes in the fair value
of financial assets held for trading are recognised in the profit or loss within other income in the period in which they arise.
Derecognition
Financial assets held for trading are derecognised on trade date and when the rights to receive cash flows from the investments have
expired or have been sold and the Group has transferred substantially all the risks and rewards of ownership.
Current assets
Financial assets held for trading – listed
Financial assets held for trading – unlisted
2021
$’000
383,319
14,263
397,582
2020
$’000
263,057
4,314
267,371
Fair value and price risk
Information regarding the Group’s exposure to price risk is set out in Note 28 and fair value classification is set out in Note 29.
The Group has used the following valuation techniques: market approach, income approach, cost approach and net asset
approach; to determine the fair value of unlisted equity investments. Refer to Note 29 for details of these valuation techniques.
KEY JUDGEMENTS AND ESTIMATES
Fair value accounting
The Directors of the Parent Entity have concluded that the Consolidated Entity does not have significant influence over its investments in
Australian Pharmaceutical Industries Limited (19.3%). This is due to the Consolidated Entity not having board representation on these entities,
nor are there any arrangements to inter-change staff or technical resources. The Consolidated Entity has no role in setting policies and
procedures in these entities. The Consolidated Entity has adopted fair value accounting to determine the carrying value of these investments.
108
Notes to the Financial StatementsWashington H. Soul Pattinson and Company LimitedAnnual Report 2021 14 Other financial assets
ACCOUNTING POLICY
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).
At the inception of the transaction, the Group documents 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.
Cash flow hedges
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 profit or loss.
Amounts accumulated in equity are recycled in the profit or loss 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 carrying amount of the asset or liability.
When a hedging instrument expires, or is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, any
cumulative gain or loss in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised
in the profit or loss. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is
immediately reclassified to profit or loss.
Fair value hedges
The change in the fair value of a hedging instrument is recognised in the Consolidated Statement of Comprehensive Income as other
income/(expense). The change in the fair value of the hedged item attributable to the risk hedged is recorded as part of the carrying
value of the hedged item and is also recognised in the Consolidated Statement of Comprehensive Income.
There is an economic relationship between the hedged items and the hedging instruments as the terms of the foreign exchange
contracts match the terms of the expected highly probable forecast transactions.
Financial assets held for trading
Financial assets held for trading are initially recognised at fair value and any transaction costs are immediately expensed. These financial
assets are principally held for the purpose of selling in the short to medium term. Those financial assets not expected to be sold within
12 months have been classified as non-current assets. Refer to Note 13 for further detail.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.
They are initially recognised at fair value, and subsequently fair valued at subsequent reporting dates.
At reporting date, the outstanding contractual receivables/payables at fair value are (AUD Equivalents):
Current assets
Total return swaps
Forward foreign exchange contracts
Non-current assets
Forward foreign exchange contracts
Loans to external parties (secured) – measured at fair value
Other financial assets – listed
Other financial assets – unlisted
2021
$’000
9,068
9,746
18,814
–
19,669
8,563
21,289
49,521
2020
$’000
–
45,852
45,852
8,912
13,034
4,065
19,778
45,789
109109
14 Other financial assets (continued)
New Hope
New Hope and its controlled entities are parties to derivative financial instruments in the normal course of business in order to
hedge exposure to fluctuations in exchange rates and commodity prices.
These instruments are used in accordance with New Hope’s financial risk management policies.
At reporting date foreign exchange contracts represent assets with a fair value of $9.75 million (2020: $54.76 million). At balance
date the details of outstanding contracts are:
Sell US dollars
Buy Australian dollars
Average
exchange rate
2021
$’000
46,319
–
–
46,319
2020
$’000
225,630
202,736
46,319
474,685
2021
USD:AUD
0.5829
–
–
2020
USD:AUD
0.6648
0.6215
0.5829
Maturity
0 to 6 months
6 to 12 months
12 to 18 months
Fair value measurement
The fair values of forward foreign exchange contracts are determined using forward exchange market rates at the reporting date.
Credit risk exposures of derivative financial instruments
Credit risk arises from the potential failure of counterparties to meet their obligations under the respective contracts at maturity.
A material exposure arises from forward exchange contracts and New Hope is exposed to losses in the event that counterparties
fail to deliver the contracted amount. At reporting date $46.32 million (2020: $474.69 million) was receivable relating to forward
foreign exchange contracts. Refer to Note 28 for additional information.
Parent Entity
During the current reporting period, the Parent Entity provided secured loans to unrelated external parties (hedged item) of
$14.3 million and $23.5 million in Canadian dollars (‘CAD”) and New Zealand dollars (“NZD”) respectively. The Parent Entity
entered into cross currency interest swaps (hedged instrument) to hedge changes in fair value.
The Parent Entity has defined the hedged risk on a spot rate basis. Consequently, the fair value of the hedged instrument
is bifurcated into spot and forward components with only the spot component designated as part of the fair value hedge
relationship. The spot component is measured as movements in spot rates between the inception of the hedge relationship
and reporting date over the notional amount of the hedged instrument. The forward component represents the residual of the
hedged instruments fair value. The Group has elected to defer the forward component in hedge reserve. These instruments are
used in accordance with the Parent Entity’s hedging policy.
At the reporting date the cross-currency interest rate swaps represent assets with a fair value of $0.8 million (2020: $nil).
At the reporting date the details of outstanding contracts are:
2021
$’000
15,297
2021
$’000
22,113
2020
$’000
2020
$’000
–
–
2021
CAD:AUD
0.9452
2021
NZD:AUD
2020
CAD:AUD
–
2020
NZD:AUD
1.0627
–
Maturity
12 to 18 months
Maturity
12 to 18 months
110
Notes to the Financial StatementsWashington H. Soul Pattinson and Company LimitedAnnual Report 2021 15 Equity accounted associates
ACCOUNTING POLICY
Associates are equity accounted, with the initial investment being increased/(decreased) by the Group’s share of the associate’s profits/
(losses) as recognised in the profit or loss and movements in their reserves (other comprehensive income), and decreased by dividends
received. Dividends from associates are not recognised in the Consolidated Statement of Comprehensive Income.
Associates are all entities over which the Group has significant influence and are neither subsidiaries nor jointly controlled. 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 profit or loss and its share of post-acquisition other
comprehensive income is recognised in the Consolidated Statement of 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. As the accounting policy for Investments in
associates is considered key to understanding the Group’s results and financial position, the detailed accounting policy is set out in the
Basis of consolidation in Note 34.
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.
Non-current assets
Equity accounted associates
a) Movement in equity accounted carrying values
Opening balance at 1 August
New investments during the period
Reclassification of an equity accounted associate to financial asset held for sale
Reclassification of a long term equity investment to equity accounted associate
Reclassification of equity accounted associate to an asset held for sale
Reclassification of equity accounted associate to a long term equity investment
Gain on deemed disposal of equity accounted associates
Share of profits after income tax, before impairment1
Net impairment income/(expense) of equity accounted associates
Dividends received/receivable
Non-cash in specie dividend of Tuas Limited from TPG Telecom Limited
Add back share of dividends received by associate
Share of associates (decrements)/increments in reserves
Effect of initial adoption of AASB 15 from associates
Closing balance at 31 July
2021
$’000
2020
$’000
899,236
810,407
810,407
6,041
–
14,272
(5,642)
–
7,373
67,212
25,322
(49,417)
–
25,003
(1,335)
–
899,236
1,603,610
17,990
(105,051)
–
–
(553,704)
5,348
60,343
(61,640)
(260,093)
79,683
24,367
2,414
(2,860)
810,407
1
In the prior reporting period, the share of equity accounted associates’ profits after income tax, before impairment excludes the fair value gain on derecognition of
TPG Telecom Limited as associate which is included in the total contribution from equity accounted associates in 15(b) below.
111111
15 Equity accounted associates (continued)
b) Details of investments and results in associates
Group’s percentage
of holding
at balance date1
Contribution to
Group result
for the year2
Equity accounted
carrying value3
Reporting
Date
2021
%
2020
%
2021
Total
$’000
2020
Total
$’000
2021
Total
$’000
2020
Total
$’000
30-Jun
31-Dec
42.9
29.8
42.9
3,620
2,314
49,629
47,192
30.1
5,176
5,947
47,130
43,986
31-Aug
–
19.3
–
10,302
–
–
31-Jul
43.3
43.8
74,230
2,032
588,584
519,195
30-Jun
30-Jun
31-Dec
30.5
38.6
19.9
31.2
590
3,773
36,070
42,912
38.6
3,367
2,366
68,017
39,828
19.9
(11,702)
(2,500)
11,915
22,286
31-Dec
–
12.6
–
1,510,803
–
–
31-Jul
25.3
25.3
(7,558)
–
72,208
79,683
various
various
various
(511)
(169)
25,683
15,325
Year ended 31 July
Associates – held by the Parent Entity
Ampcontrol Limited
Integrated electrical, electronic and control
solutions provider
Apex Healthcare Berhad4
Pharmaceutical manufactuer and distributor
Australian Pharmaceutical Industries
Limited5
Manufacturer of building products
and investor
Brickworks Limited6
Manufacturer of building products
and investor
Ironbark Investment Partners
Pty Limited13
Investment management services
Pengana Capital Group Limited7
Funds management
Palla Pharma Limited8
Manufacturer of narcotic concentrate
from poppy straw
TPG Telecom Limited, including fair
value gain on derecognition9
Telecommunications and internet provider
Tuas Limited10
Telecommunications provider
Other associates11,12
Total contributions from equity accounted associates,
including fair value gain on derecognition of TPG
67,212
1,534,868
899,236
810,407
Gain on deemed disposal of equity accounted associates, net of tax
5,161
5,225
Deferred tax expense on gain on derecognition of TPG Telecom as an associate9
–
(389,187)
Deferred tax (expense)/benefit recognised on equity accounted associates
(28,952)
14,210
Net reversal/(impairment) expense of associates
25,322
(61,640)
Net contribution from equity accounted associates
68,743
1,103,476
112
Notes to the Financial StatementsWashington H. Soul Pattinson and Company LimitedAnnual Report 2021 1
The percentage holding represents the Group’s total holding in each associate.
2 Contribution to Group result represents the amount included in profit after income tax before non-controlling interests
as shown on the Consolidated Statement of Comprehensive Income.
3
Equity accounted carrying value is the carrying value of the associates in the Consolidated Statement of Financial
Position.
4 During the current reporting period, Apex Healthcare Berhad issued shares by way of employee share schemes. The
Parent Entity did not participate in the share issues. As a result, there has been an immaterial decrease in the Group’s
shareholding in this investment.
5 During the current reporting period, the Parent Entity reassessed the classification of Australian Pharmaceutical
Industries Limited (API) as an equity accounted associate as a result of Robert Millner resigning as a Director of API in
July 2020. Accordingly, WHSP has classified API as a Fair Value through Profit and Loss (FVTPL) asset in the current period
and has restated the prior year comparative. The carrying value restated was $105.05 million from equity accounted
associate to financial assets held for trading.
6 During the current reporting period, Brickworks issued shares under its dividend reinvestment plan (DRP). The Parent
Entity did not participate in the DRP. As a result, the Group’s shareholding in this investment has reduced by 0.5% to
43.3%.
7 During the current reporting period, Pengana Capital issued shares under Pengana Capital’s Employee Share Plan. Due
to the Parent Entity’s non-participation in the issue of shares, the Group’s shareholding decreased by 0.05% to 38.6%.
8 During the current reporting period, the Parent Entity purchased additional shares in Palla Pharma Limited for $3.58
million under its retail and institutional entitlement offer. The Group’s shareholding increased by 0.01% to 19.89% as a
result.
9 During the previous reporting period, the Group’s share of ownership in TPG was diluted from 25.3% to 12.6% as a
result of the TPG and Vodafone Hutchison Australia Pty Limited (“VHA”) merger. As of the merger date (29 June 2020),
the Group lost significant influence over TPG and discontinued equity accounting its investment in TPG contributing
$1.12 billion (after tax) to profit during the reporting period. This contribution reflects the Group’s share of TPG’s equity
accounted results and reserves up until the merger date, and a gain from initial recognition of a financial asset held
at fair value through other comprehensive income. From 29 June 2020, the Group’s investment in TPG is held as an
investment at fair value through other comprehensive income.
10 Following the approval of the merger of TPG and VHA, the Tuas Limited Group (“Tuas”) was demerged from TPG via a
non-cash in-specie dividend of Tuas shares. Tuas owns and operates the fourth largest mobile network in Singapore.
The Parent Entity received an in-specie dividend of $79.70 million on 13 July 2020. The Group owns 25.26% of Tuas and
holds a board seat. As at the de-merger date the Group has significant influence over Tuas and commenced equity
accounting of the investment. Tuas was listed on the ASX from 30 June 2020. In the segment information note (refer to
Note 3 above), the equity accounted results of Tuas are included in the other investing activities.
11 On 1 August 2020, the Group reclassified Heritage Brands Limited from fair value through other comprehensive income
to equity accounted associate. As a result of this change, the opening balance of this investment was restated.
12 On 1 August 2020, the Group reclassified Seven Miles Roasters Pty Limited (Seven Miles) from fair value through
other comprehensive income to equity accounted associate. As a result of this change, the opening balance of this
investment was restated. As at 31 July 2021, the investment in Seven Miles was reclassified to Asset classified as held for
sale. The sale of Seven Miles occurred in early September 2021, with the total settlement expected to complete by the
end of October 2021.
13
In prior reporting periods, Ironbark had issued multiple tranches of shares. Several of these tranches of shares were
issued incorrectly. In May 2021, Ironbark undertook a share consolidation to convert the number of shares issued in
certain tranches into smaller amounts, to properly reflect their correct number. As a result of this share consolidation,
the Group’s shareholding reduced by 0.7% to 31.2%.
113113
15 Equity accounted associates (continued)
KEY JUDGEMENTS AND ESTIMATES
Recoverable value of investments in associates
The recoverable value of investments in equity accounted associates is reviewed at each reporting date after taking into consideration
any applicable impairment indicators. Refer to Note 6 for more details.
Equity accounting of Brickworks Limited
The Directors of the Parent Entity have concluded that the Consolidated Entity has significant influence over Brickworks Limited and
equity accounts this investment. This is due to the cross holding structure whereby the Consolidated Entity owns 43.3% of the equity in
Brickworks Limited and in turn Brickworks Limited owns 39.4% of the Consolidated Entity. The remaining shares in the Parent Entity and
Brickworks are widely dispersed.
c) Group’s share of associates’ expenditure
commitments
Capital commitments
2021
$’000
2020
$’000
17,736
27,719
d) Group’s share of associates’ contingent liabilities
Share of contingent liabilities incurred jointly with other investors of the associate
27,993
27,798
e) Summarised Group’s share of associates
financial information
Assets
Liabilities
Net assets
Revenue
Profit before income tax
Income tax expense
Profit after income tax
2,136,683
(775,362)
1,361,321
649,482
101,380
(34,168)
67,212
1,904,490
(704,632)
1,199,858
1,737,530
86,702
(26,359)
60,343
114
Notes to the Financial StatementsWashington H. Soul Pattinson and Company LimitedAnnual Report 2021 f ) Extract of financial information as reported by associates that are material
to the Group
The information disclosed reflects the total amounts reported in the financial statements of Brickworks Limited 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
Group's percentage holding
Group's share of total net assets
Goodwill
Equity accounted carrying value
Revenue
Profit after tax attributable to members
Other comprehensive income
Total comprehensive income
Dividends received by the Parent Entity from the associate
Derecognition of TPG Telecom Limited
Brickworks Limited
2021
$’000
579,863
2,029,422
(268,282)
(1,033,942)
2020
$’000
637,416
1,646,297
(232,882)
(917,025)
1,307,061
1,133,806
43.3%
43.8%
565,991
22,593
588,584
890,313
239,163
(97,402)
141,761
39,387
496,399
22,796
519,195
953,404
298,883
8,115
306,998
38,074
During the previous reporting period, the Group’s share of ownership in TPG was diluted from 25.3% to 12.6% as a result of
the TPG and Vodafone Hutchison Australia Pty Limited (“VHA”) merger. As of the merger date (29 June 2020), the Group lost
significant influence over TPG and discontinued equity accounting for its investment in TPG.
115115
16 Long term equity investments
ACCOUNTING POLICY
Long term equity investments are initially recognised at fair value plus any transaction costs. These investments are intended to be held
for the long term for capital growth and dividend income. These investments are included in non-current assets unless management
intends to dispose of the investment within 12 months of the reporting date, at which time they are transferred to and disclosed as held
for sale equities.
Recognition
Purchases of long term equity investments are recognised on trade date being the date on which the Group commits to purchase the
asset.
Classification
Long term equity investments are classified as financial assets at fair value through other comprehensive income.
Subsequent measurement
At each reporting date, long term equity investments are remeasured to fair value. Changes in the fair value of long term equity
investments are recognised in equity through the asset revaluation reserve after allowing for deferred capital gains tax. All long term
equity investments are subject to capital gains tax.
Derecognition
Long term equity investments are derecognised on trade date and when the rights to receive cash flows from the long term equity
investments have expired or have been sold 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 capital gains reserve in equity.
Non-current assets
Long term equity investments – listed
Long term equity investments – unlisted
Total long term equity investments
Dividends
Dividends from long term equity investments held at FVOCI
recognised in profit or loss in other income:
Related to investments sold during the year
Related to investments held at the end of the year
Total dividends
2021
$’000
2,244,687
118,151
2,362,838
2020
$’000
2,502,944
113,150
2,616,094
219
45,095
45,314
2,326
24,614
26,940
At 31 July 2021, the Parent Entity held $2.36 billion (2020: $2.62 billion) of long term equity investments.
KEY JUDGEMENTS AND ESTIMATES
Fair value accounting
The Directors of the Parent Entity have concluded that the Consolidated Entity does not have significant influence over its investment in
the Argyle Water Fund (21.3%). This is due to the Argyle Water Fund having an independent responsible entity governing and operating
this fund. The Consolidated Entity does not have board representation nor has a role in setting policies and procedures of this fund
and there no arrangements to inter-change staff or technical resources. The Consolidated Entity has adopted fair value accounting to
determine the carrying value of this investment.
116
Notes to the Financial StatementsWashington H. Soul Pattinson and Company LimitedAnnual Report 2021 a) Long term equity investments pledged as security for short term finance and long term loan
Long term equity investments with a fair value of $653.37 million (2020: $334.69 million) have been transferred to various
Parent Entity’s financiers as security for the $289.81 million (2020: $235.18 million) equity finance loans. As the Parent Entity
retains the risks and benefits of ownership of the transferred long term equity investments, including the right to receive
dividends, these long term equity investments continue to be included as an asset on the Consolidated Statement of
Financial Position.
In addition, during the current reporting period, the Parent Entity utilised a long term loan facility with Credit Suisse. This
facility was repaid and closed on the 29 January 2021. As at 31 July 2020, there were long term equity investments with fair
value of $759.84 million that were transferred to Credit Suisse as security for the $200 million Parent Entity’s term loan facility.
As at 31 July 2021, all secured long term equity investments have been transferred back to the Parent Entity. Refer to Note 25
for further details.
b) Fair value and price risk
Information regarding the Group’s exposure to price risk is set out in Note 28 and fair value classification is set out in Note 29.
The Group has used the following valuation techniques: market approach, income approach and cost approach to
determine the fair value of unlisted long term equity investments. Refer to Note 29 for details of these valuation techniques.
17 Investment properties
ACCOUNTING POLICY
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.
Recognition
Investment properties are initially recognised at cost including transaction costs. Other costs capitalised into the carrying value of
investment properties include development, construction, redevelopment, refurbishment (other than repairs and maintenance) and
interest (until the property is ready for its intended use).
Classification
Investment properties are classified as non-current assets at fair value. Changes in fair value are recognised as gains or losses in the profit
or loss as part of ‘Other income’.
Subsequent measurement
Valuations are obtained periodically, and at least every three years from independent Registered Property Valuers who hold recognised
and relevant qualifications and have recent valuation experience in the location and categories of each property held.
At the end of each reporting period, the Directors update their assessment of the fair value of each property, taking account of the most
recent independent valuations.
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 rental income. Rental income is recognised on a straight line basis within revenue.
Derecognition
On disposal of an investment property, a gain or loss is recognised in the profit or loss in the year of disposal. It is calculated as the
difference between the carrying amount of the asset at the date of disposal and the net proceeds received.
117117
17 Investment properties (continued)
Non-current assets
Investment properties
Industrial property
Commercial property
Property under development
Total investment properties
Reconciliation
Opening balance at 1 August
Acquisitions
Disposals
Transfer to held for sale assets
Net fair value gain/(loss) on investment properties
Movement in tenant incentives, 'make good' contributions, contracted rent uplift balance and
leasing fee asset
Closing balance at 31 July
2021
$’000
34,301
46,666
6,191
87,158
75,724
8,002
(277)
–
3,600
109
87,158
2020
$’000
30,051
45,673
–
75,724
106,281
489
(3,757)
(26,583)
(692)
(14)
75,724
During the prior financial period, a subsidiary, in which the Group owned a 50.1% interest, executed contracts for the sale of a property and
associated business in Penrith, New South Wales, for a combined value of $27.50 million. Settlement was finalised in January 2021.
a) Amounts recognised in the profit or loss
for investment properties
Rental revenue
Direct operating expenses from property that generated rental income*
* Direct operating expenses includes finance costs of $0.13 million (2020: $0.35 million).
b) Measuring investment properties at fair value
2021
$’000
4,715
3,152
2020
$’000
6,465
5,837
The basis of valuations for investment properties is fair value, being the amounts for which the assets could be exchanged
between knowledgeable willing parties 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.
The fair value hierarchy, as discussed in Note 29 to this report, provides an indication about the reliability of the inputs used
in determining fair value. All investment properties have been categorised within the Level 3 fair value basis as some of the
inputs required to value property are not based on ‘observable market data’.
Investment Properties
Two investment properties were independently externally valued as at 31 January 2021. The independent, qualified valuers
engaged in the valuation process experienced challenges regarding the continued uncertainties of COVID-19 and its
potential impact on property fair values. This resulted in the insertion of a ‘significant valuation uncertainty’ clause in each
independent valuation report. The clause continues to imply that valuations are current at valuation date only, and less
certainty and a higher degree of caution should be attached to the valuation. Estimated fair values may change significantly
and unexpectedly over a relatively short period.
118
Notes to the Financial StatementsWashington H. Soul Pattinson and Company LimitedAnnual Report 2021 The Consolidated Entity obtained an updated desktop valuation for both investment properties from the same independent
valuer as at 31 July 2021. The valuer reviewed updated property-specific financial information and reperformed valuations
for each property using market capitalisation and DCF methodologies, with their adopted market value being the mid-point
of each methodology. In addition, the valuer prepared a “Material Movement” letter for each property, providing an overview
of relevant current market conditions for the particular asset class, and confirming for each property that they do not believe
there has been any material change to the 31 January 2021 valuation they provided.
c) Non-current assets pledged as security
As at 31 July 2021, none of the Group’s investment properties were pledged as security.
In the prior reporting period, one of the Group’s investment properties, the Tattersalls Centre with a carrying value of
$26.58 million was classified as a held for sale asset at 31 July 2020, and was pledged as security as at 31 July 2020.
This property was subsequently sold and the debt repaid in January 2021.
d) Leasing arrangements
The Group is entitled to receive rental income from non-cancellable operating leases
on investment properties. The amounts have not been recognised in the financial
statements and are receivable as follows:
Within one year
Later than one year but not later than five years
Later than five years
2021
$’000
1,580
4,173
775
6,528
2020
$’000
1,373
2,187
964
4,524
KEY JUDGEMENTS AND ESTIMATES
Recoverable value of investment properties
In determining the fair value of a property, appropriate valuation techniques are used, including the discounted cashflow and
capitalisation methods. 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 comparable locations.
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 has already been completed at the valuation date less costs to complete the project, including an appropriate adjustment for profit
and risk.
119119
18 Property, plant and equipment
ACCOUNTING POLICY
Freehold land is carried at the lower of cost and recoverable amount.
Property, plant and equipment (excluding investment properties, refer to Note 17), are stated at historical cost less accumulated
depreciation and impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of the assets.
Cost may also include transfers from equity relating to 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 profit or loss during the reporting period in which they are incurred.
The depreciable amount of all fixed assets including buildings and capitalised lease assets, but excluding freehold land, is depreciated
commencing from the time the asset is held ready for use.
Depreciation is calculated so as to write off the cost of each item of property, plant and equipment during its expected economic life
to the Group. Each item’s useful life has due regard both to its own physical life limitations and to present assessments of economically
recoverable resources (when related to mining activities). Estimates of residual values and remaining useful lives are made on an
annual basis. The straight line method is predominately used (Copper float and solvent extraction plants are depreciated on the units of
production method). The expected useful life of plant and equipment is 4 to 20 years, buildings is 25 to 40 years and motor vehicles is
4 to 8 years. Land is not depreciated.
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 profit or loss.
Capitalised lease property and plant and equipment have been transferred to right-of-use assets (refer to Note 20) at the adoption of
AASB 16 Leases from 1 August 2019.
Mine development costs, mining reserves and leases and oil producing assets
Development expenditure incurred by the Group is accumulated separately for each area of interest in which economically recoverable
mineral and oil 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 costs of acquiring mineral reserves and mineral resources are capitalised in the statement of financial position as incurred.
Oil producing assets are amortised on a unit of production basis. The method uses the actual costs of the asset to date plus all its
projected future costs. Amortisation commences when an area of interest is ready for use.
Farmland assets and bearer plants
Agricultural assets comprising farming property and improvements (“farmland assets”) are carried at their revalued amount, which is
their fair value at the date of the revaluation, less, where applicable, any subsequent accumulated depreciation and impairment losses.
Bearer plants are carried at cost less any accumulated depreciation and impairment.
Revaluations are performed at least every 12 months, by independent valuers, so as to ensure that the carrying amount of an asset does
not differ materially from fair value.
Under the revaluation model, increases in the carrying amount of an asset arising on revaluation are recognised in other comprehensive
income and accumulated in the asset revaluation reserve in equity (except where an increase reverses a revaluation decrease of the
same asset previously recognised in profit or loss, in which case the increase is recognised in profit or loss to the extent of that decrease).
Decreases in the carrying amount of an asset arising on revaluation are recognised in profit or loss (except where a decrease reverses
a revaluation increase of the same asset recognised in the revaluation reserve, in which case the decrease is recognised in other
comprehensive income and reduces the revaluation reserve).
120
Notes to the Financial StatementsWashington H. Soul Pattinson and Company LimitedAnnual Report 2021 Bearer plants are plants used in the production or supply of agricultural produce, are expected to bear produce for more than one period
and have a remote likelihood of being sold as agricultural produce, except for incidental scrap sales. They include, for example, the
Group’s citrus trees, macadamia trees and table grapevines. Bearer plants are accounted for as property, plant and equipment. However,
produce growing on bearer plants is accounted for as a biological asset (refer Note 11, above).
Depreciable agricultural assets are depreciated on a straight-line basis consistent with other property, plant and equipment as described
above. The expected useful life of property improvements, including buildings, is 2 to 20 years and bearer plants is 10 to 30 years.
Impairment of non-current assets
Assets are tested 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 cost to sell and its value in use. For the purposes of assessing impairment under value in
use testing, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent
of the cash inflows from other assets or groups of assets (cash generating units). Annual assessments of impairments are undertaken.
All property, plant and equipment allocated to cash generating units (CGU’s) containing goodwill must be tested for impairment at
the CGU level on an annual basis. Other property, plant and equipment assets must also be tested for impairment when impairment
indicators are identified.
Valuation of farming land and buildings
During the current reporting period ended 31 July 2021, the Group obtained a number of external valuations of farming land and
buildings from an independent, properly qualified external valuer. Due to COVID-19 the external valuer has indicated that there is
some market instability and uncertainty in determining the fair value of farming property, plant and equipment. This resulted in
the insertion of a “significant valuation uncertainty” clause into each independent valuation report. The standard valuation reliance
periods incorporated in these external valuations have shortened to match the uncertainties in the rapidly changing economic
environment.
Impairments of property plant and equipment
During the current reporting period ended 31 July 2021, the impairment charges to property, plant and equipment were
$37.83 million mainly attributable to the impairment of plant and equipment and buildings of New Hope and reversal of mine
development impairment of Round Oak. In the prior reporting period, the impairment charge was $166.76 million. Refer to Note 6
for details.
121121
18 Property, plant and equipment (continued)
At 1 August 2020
Cost
Accumulated depreciation/amortisation and impairment
Net book value
Opening net book value
Additions
Mining and restoration and rehabilitation
Transfers in/(out)
Transfer to exploration and evaluation assets
Transfer to held for sale asset
Transfer from right-of-use assets
Disposal of assets
Fair value adjustments
Impairment of assets
Depreciation/amortisation
Closing net book value
At 31 July 2021
Cost
Accumulated depreciation/amortisation and impairment
Net book value
At 1 August 2019
Cost
Accumulated depreciation/amortisation and impairment
Net book value
Initial adoption of AASB 16
Adjusted net book value
Opening net book value
Acquisition of businesses
Additions
Mining and restoration and rehabilitation
Transfers in/(out)
Transfer to intangibles
Transfer to held for sale asset
Transfer from investment properties
Disposal of assets
Fair value adjustments
Impairment of assets
Depreciation/amortisation
Closing net book value
At 31 July 2020
Cost
Accumulated depreciation/amortisation and impairment
Net book value
122
Land
$’000
180,458
–
180,458
180,458
–
–
–
–
(3,719)
–
(5,431)
–
–
–
171,308
171,308
–
171,308
180,458
–
180,458
–
180,458
180,458
–
–
–
–
–
–
–
–
–
–
–
180,458
180,458
–
180,458
Buildings
$’000
Farmland
assets
$’000
Plant, fixtures,
motor vehicles
$’000
Oil producing
Mining reserves
and leases
development
95,862
(32,149)
63,713
63,713
2,590
–
(22,206)
–
(8,343)
–
(2,102)
–
(9,053)
(3,412)
21,187
66,484
(45,297)
21,187
90,358
(28,785)
61,573
–
61,573
61,573
–
3,898
–
5,401
–
–
–
(3,795)
–
–
(3,364)
63,713
95,862
(32,149)
63,713
assets
$’000
199,972
(154,145)
45,827
45,827
4,942
55
(5,529)
45,295
204,969
(159,674)
45,295
180,839
(98,725)
82,114
82,114
82,114
13,819
5,314
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
$’000
1,245,869
(201,633)
1,044,236
1,044,236
(61,664)
982,572
1,245,869
(263,297)
982,572
1,245,869
(138,880)
1,106,989
1,106,989
1,106,989
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(47,629)
(7,791)
45,827
(62,753)
1,044,236
199,972
(154,145)
1,245,869
(201,633)
45,827
1,044,236
Mine
$’000
457,908
(252,496)
205,412
205,412
47,477
(2,605)
(992)
–
–
–
(7)
–
3,325
(54,250)
198,360
501,781
(303,421)
198,360
353,242
(174,771)
178,471
178,471
178,471
69,650
16,969
18,047
–
–
–
–
–
–
–
(25,600)
(52,125)
205,412
457,908
(252,496)
205,412
Bearer
plants
$’000
17,725
(958)
16,767
16,767
13,571
1,444
(1,826)
29,956
32,740
(2,784)
29,956
17,725
(958)
16,767
17,725
(958)
16,767
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
$’000
3,693,563
(1,453,977)
2,239,586
2,239,586
148,308
22,547
–
(992)
(21,894)
4,868
(20,343)
2,718
(37,827)
(219,905)
2,117,066
3,829,458
(1,712,392)
2,117,066
3,426,534
(1,074,735)
2,351,799
(6,444)
2,345,355
2,345,355
50,678
196,123
33,380
–
(459)
(239)
61
(10,934)
4,863
(166,762)
(212,480)
2,239,586
3,693,563
(1,453,977)
2,239,586
74,334
(3,206)
71,128
1,531,973
(934,713)
597,260
40,144
(426)
39,718
39,718
33,159
(1,371)
–
–
–
–
(316)
2,718
(1,908)
(872)
71,128
–
–
–
–
–
–
–
–
–
–
–
29,655
5,871
(245)
4,863
(273)
(153)
39,718
40,144
(426)
39,718
1,455,625
(812,170)
643,455
643,455
46,569
25,097
22,133
(9,832)
4,868
(12,487)
–
–
(30,191)
(92,352)
597,260
1,375,768
(633,574)
742,194
(6,444)
735,750
735,750
3,298
102,885
11,097
(23,203)
(459)
(239)
61
(7,139)
–
(93,260)
(85,336)
643,455
1,455,625
(812,170)
643,455
Notes to the Financial StatementsWashington H. Soul Pattinson and Company LimitedAnnual Report 2021 Accumulated depreciation/amortisation and impairment
At 1 August 2020
Cost
Net book value
Opening net book value
Additions
Mining and restoration and rehabilitation
Transfers in/(out)
Transfer to exploration and evaluation assets
Transfer to held for sale asset
Transfer from right-of-use assets
Accumulated depreciation/amortisation and impairment
Accumulated depreciation/amortisation and impairment
Disposal of assets
Fair value adjustments
Impairment of assets
Depreciation/amortisation
Closing net book value
At 31 July 2021
Cost
Net book value
At 1 August 2019
Cost
Net book value
Initial adoption of AASB 16
Adjusted net book value
Opening net book value
Acquisition of businesses
Additions
Disposal of assets
Fair value adjustments
Impairment of assets
Depreciation/amortisation
Closing net book value
At 31 July 2020
Cost
Net book value
Mining and restoration and rehabilitation
Transfers in/(out)
Transfer to intangibles
Transfer to held for sale asset
Transfer from investment properties
Accumulated depreciation/amortisation and impairment
Land
$’000
180,458
180,458
180,458
(3,719)
(5,431)
171,308
171,308
–
171,308
180,458
180,458
180,458
180,458
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
180,458
180,458
180,458
95,862
(32,149)
63,713
63,713
2,590
(22,206)
–
–
–
–
(8,343)
(2,102)
(9,053)
(3,412)
21,187
66,484
(45,297)
21,187
90,358
(28,785)
61,573
61,573
61,573
3,898
5,401
–
–
–
–
–
–
–
–
(3,795)
(3,364)
63,713
95,862
(32,149)
63,713
Buildings
$’000
Farmland
assets
$’000
Plant, fixtures,
motor vehicles
$’000
Oil producing
assets
$’000
Mining reserves
and leases
$’000
Mine
development
$’000
40,144
(426)
39,718
39,718
33,159
–
(1,371)
–
–
–
(316)
2,718
(1,908)
(872)
71,128
1,455,625
(812,170)
199,972
(154,145)
643,455
643,455
46,569
25,097
22,133
–
(9,832)
4,868
(12,487)
–
(30,191)
(92,352)
597,260
45,827
45,827
4,942
55
–
–
–
–
–
–
–
(5,529)
45,295
1,245,869
(201,633)
1,044,236
1,044,236
–
–
–
–
–
–
–
–
–
(61,664)
982,572
74,334
(3,206)
71,128
1,531,973
(934,713)
597,260
204,969
(159,674)
45,295
1,245,869
(263,297)
982,572
–
–
–
–
–
–
29,655
5,871
–
(245)
–
–
–
–
4,863
(273)
(153)
39,718
40,144
(426)
39,718
1,375,768
(633,574)
742,194
(6,444)
735,750
735,750
3,298
102,885
11,097
(23,203)
(459)
(239)
61
(7,139)
–
(93,260)
(85,336)
643,455
1,455,625
(812,170)
643,455
180,839
(98,725)
82,114
–
82,114
82,114
–
13,819
5,314
–
–
–
–
–
–
(47,629)
(7,791)
45,827
1,245,869
(138,880)
1,106,989
–
1,106,989
1,106,989
–
–
–
–
–
–
–
–
–
–
(62,753)
1,044,236
199,972
(154,145)
1,245,869
(201,633)
45,827
1,044,236
457,908
(252,496)
205,412
205,412
47,477
(2,605)
–
(992)
–
–
(7)
–
3,325
(54,250)
198,360
501,781
(303,421)
198,360
353,242
(174,771)
178,471
–
178,471
178,471
–
69,650
16,969
18,047
–
–
–
–
–
(25,600)
(52,125)
205,412
457,908
(252,496)
205,412
Bearer
plants
$’000
17,725
(958)
16,767
16,767
13,571
–
1,444
–
–
–
–
–
–
(1,826)
29,956
Total
$’000
3,693,563
(1,453,977)
2,239,586
2,239,586
148,308
22,547
–
(992)
(21,894)
4,868
(20,343)
2,718
(37,827)
(219,905)
2,117,066
32,740
(2,784)
29,956
3,829,458
(1,712,392)
2,117,066
–
–
–
–
–
–
17,725
–
–
–
–
–
–
–
–
–
(958)
16,767
17,725
(958)
16,767
3,426,534
(1,074,735)
2,351,799
(6,444)
2,345,355
2,345,355
50,678
196,123
33,380
–
(459)
(239)
61
(10,934)
4,863
(166,762)
(212,480)
2,239,586
3,693,563
(1,453,977)
2,239,586
123123
18 Property, plant and equipment (continued)
KEY JUDGEMENTS AND ESTIMATES
Impairment assessments
The Consolidated Entity has undertaken a detailed assessment of the recoverable amount of all CGUs at 31 July 2021. Recoverable
amounts were determined using either a FVLCD or VIU discounted cash flow model, with the exception of exploration related CGUs
which use a comparable resource multiple. These methodologies are subject to critical judgement, estimates and assumptions. The
recoverable amount of certain CGUs was determined to be below their carrying amount. These are detailed in Note 6.
Estimation of coal, ore and oil reserves and resources (New Hope and Round Oak)
New Hope and Round Oak estimate their coal and ore reserves and resources based on information compiled by Competent Persons
as defined in accordance with the JORC Code, which is produced by the Australasian Joint Ore Reserves Committee (JORC). New Hope
oil reserves and resources are equivalently calculated by appropriately qualified persons in accordance with the Society of Petroleum
Engineers Petroleum Reserves Management System (SPE-PRMS) (updated June 2019).
The estimation of reserves and resources requires judgement to interpret available geological data and then to select an appropriate
mining method and establish an extraction schedule. It also requires assumptions about future commodity prices, exchange rates,
production costs, recovery rates and discount rates and, in some instances, the renewal of mining licences. There are many uncertainties
in the estimation process and assumptions that are valid at the time of estimation may change significantly when new information
becomes available. In particular, the increasing global focus on climate change and associated policy and regulatory risks may impact on
future coal demand and prices which could impact reserves and resource estimations.
Changes in coal, ore and oil reserves could have an impact on the calculation of depreciation, amortisation and impairment charges;
the timing of the payment of closedown and restoration costs; and the recovery of deferred tax assets. Changes in coal and oil
resources could have an impact on the recoverability of exploration and evaluation costs capitalised. Refer to Note 6 for details on
impairment of assets.
Assessment of recoverable value of New Hope Queensland coal mining operations
New Hope continued to monitor the recoverable amount of certain CGUs during the current reporting period. Recoverable amounts
have been determined using either a FVLCD or VIU discounted cash flow model. These methodologies are subject to critical judgement,
estimates and assumptions.
Refer to Note 6 for details on impairment of assets.
Assessment of recoverable value of New Hope Port operations CGU
The recoverable amount of the Port Operation CGU has been determined based on a VIU calculation. This calculation uses a discounted
cash flow model. The future cashflows have been discounted using a post-tax discount rate of 9.5 per cent (2020: 9.5 per cent).
Refer to Note 6 for details on impairment of assets.
Assessment of recoverable value of Round Oak capitalised mine development costs and associated plant and equipment
The determination of FVLCD and VIU requires Round Oak’s management to make estimates and assumptions about the expected long
term commodity prices, production timing and recovery rates, foreign exchange rates, operating costs, reserves and resources estimates,
closure costs and discount rates. Estimates in respect of the timing of project expansions and the cost to complete asset construction
are also critical to determine the recoverable amount for CGUs. The fair value measurements used in these calculations are based on
non-observable market data which are considered in level 3 of the fair value hierarchy.
Judgement is involved in assessing whether indicators of impairment exist, including the impact of events or changes in
circumstances on CGUs, in addition to assessing the potential for expiration of exploration rights without renewal and the potential
timing of such events.
These judgements, estimates and assumptions are subject to risk and uncertainty. To the extent that the recoverable amount of
assets is impacted by changes in these, the carrying amount of the assets may be further impaired or the impairment charge may
be reduced with the impact recognised in the Consolidated Statement of Comprehensive Income. Refer to Note 6 for details on
impairment of assets.
124
Notes to the Financial StatementsWashington H. Soul Pattinson and Company LimitedAnnual Report 2021 19 Exploration and evaluation assets
ACCOUNTING POLICY
Exploration, evaluation and relevant acquisition costs are accumulated separately for each area of interest for which a mining tenement
is current. They are initially recognised at cost and include acquisition of rights to explore, studies, exploratory drilling, trenching,
sampling 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 to the development of a mine, the relevant exploration and evaluation costs for that area of
interest are transferred to mine development (disclosed within Note 18 – Property, plant and equipment).
Non-current assets
Exploration and evaluation assets at cost
Movement
Opening net book value
Additions
Impairment expenses (refer note 6)
Transfer from property, plant and equipment
Movement in rehabilitation
Closing net book value at 31 July
2021
$’000
2020
$’000
124,181
109,422
109,422
14,686
(1,672)
992
753
124,181
333,623
17,524
(241,931)
–
206
109,422
Exploration and evaluation assets include New Hope of $105.53 million (2020: $94.22 million) and Round Oak of $18.65 million
(2020: $15.20 million).
KEY JUDGEMENTS AND ESTIMATES
Exploration and evaluation expenditure
During the current financial period, the subsidiaries of New Hope and Round Oak capitalised various items of expenditure to exploration
and evaluation assets. 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 (through mining operations) or sale of the relevant mining interest.
Factors that could impact the exploration and evaluation costs being transferred to future mine operations include the level of reserves
and resources, changes in commodity prices and foreign exchange rates, future legal changes, future technology changes and climate
changes.
If information becomes available suggesting the recovery of capitalised costs is unlikely, the amount capitalised is recognised in the
profit or loss in the period when the new information becomes available. Refer to Note 6 for the details of the impairment assessments
performed at 31 July 2021 and related impairment charge to the profit or loss.
125125
20 Lease assets and liabilities
ACCOUNTING POLICY
Lease assets or right-of-use assets
Lease assets are initially recognised at cost, comprising the amount of the initial measurement of the lease liability, any lease payments
made at or before the commencement date of the lease (less any lease incentives received) any initial direct costs incurred by the Group,
and an estimate of costs to be incurred by the Group in dismantling and removing the underlying asset, restoring the site on which it
is located or restoring the underlying asset to the condition required by the terms and conditions of the lease, unless those costs are
incurred to produce inventories.
Subsequent to initial recognition, lease assets are measured at cost (adjusted for any remeasurement of the associated lease liability), less
accumulated depreciation and any accumulated impairment loss.
Lease assets are depreciated over the shorter of the lease term and the estimated useful life of the underlying asset, consistent with the
estimated consumption of the economic benefits embodied in the underlying asset.
Lease liabilities
Lease liabilities are initially recognised at the present value of the future lease payments. These lease payments are discounted using the
interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in the Group, the lessee’s
incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain
an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions.
Subsequent to initial recognition, lease liabilities are measured at the present value of the remaining lease payments. Interest expense
on lease liabilities are remeasured to reflect changes to lease terms, changes to lease payments and any modifications not accounted for
as separate leases.
Variable lease payments not included in the measurement of lease liabilities are recognised as an expense when incurred.
Lease payments made in relation to leases of 12 months or less and leases of low value assets are recognised as an expense on a
straight-line basis over the lease term.
The Consolidated Entity recognised the following right-of-use assets:
Right-of-use assets
Carrying amount of lease assets, by class of underlying asset:
Buildings (primarily relates to office premises and swimming pool sites)
Plant, fixtures and motor vehicles
Water leases
Total carrying amount of right-of-use assets
Reconciliation of the carrying amount of right-of-use assets at the beginning and end of the year:
Opening carrying amount
Amount recognised at 1 August 2019 upon adoption of AASB 161
Acquisition of businesses
Additions
Disposals
Transfer to property, plant and equipment
Remeasurement of leases2
Depreciation
Impairment of right-of-use assets
Carrying amount at 31 July
1 The Group adopted AASB 16 for the first time on 1 August 2019.
2 Remeasurement of assets relates to remeasurement of Right-of-use Assets due to a change in lease terms.
2021
$’000
24,673
94,667
5,984
125,324
117,512
–
–
42,538
–
(4,868)
(4,807)
(22,915)
(2,136)
125,324
2020
$’000
33,276
80,264
3,972
117,512
–
125,594
706
24,516
(851)
–
–
(32,453)
–
117,512
126
Notes to the Financial StatementsWashington H. Soul Pattinson and Company LimitedAnnual Report 2021
Set out below are carrying amounts of right-of-use assets recognised and the movements during the period.
As at 1 August 2019
Additions
Depreciation
Disposals
As at 31 July 2020
Additions
Depreciation
Impairment
Remeasurement of Assets
Transfer out
At 31 July 2021
Land &
Buildings
$’000
Plant, fixtures
and motor
vehicle
$’000
35,680
(2,404)
–
33,276
1,579
(3,239)
(2,136)
(4,807)
–
24,673
110,442
(29,952)
(226)
80,264
38,450
(19,179)
–
–
(4,868)
94,667
The Consolidated Entity recognised the following lease liabilities:
Lease liabilities
The present value of lease liabilities is as follows:
Current
Non-current
Recognised as lease liabilities
Opening carrying amount
Opening balance at 1 August upon adoption of AASB 16
Acquisition of businesses
Additions
Disposals
Accretion of interests
Payments
Remeasurement of leases1
Closing balance at 31 July
The Group leases property, including office buildings and port facilities, and
plant and equipment. Lease terms are negotiated on an individual basis and
contain a wide range of terms and conditions.
The maturity profile of lease liabilities recognised at the end of the reporting
period is set out below:
Lease liabilities (undiscounted) maturity analysis
Within one year
Later than one year but not later than five years
Greater than five years
Total
1 Remeasurement of lease liability due to a change in lease terms.
Water
rights
$’000
4,697
(100)
(625)
3,972
2,509
(497)
–
–
–
Total
$’000
150,819
(32,456)
(851)
117,512
42,538
(22,915)
(2,136)
(4,807)
(4,868)
5,984
125,324
2021
$’000
18,596
112,816
131,412
121,366
–
–
42,538
–
6,909
(33,863)
(5,538)
131,412
2020
$’000
22,215
99,151
121,366
–
126,949
706
24,521
(807)
6,703
(36,706)
–
121,366
24,089
65,215
86,285
175,589
27,228
36,189
111,625
175,042
127127
20 Lease assets and liabilities (continued)
Secured liabilities
Lease liabilities are effectively secured as the rights to the leased assets recognised in the consolidated financial statements revert
to the lessor in the event of default. No other assets are pledged as security for the lease liabilities. The total cash outflow for
leases for the reporting period ended 31 July 2021 was $33.86 million (2020: $36.71 million).
The Group recognised the following amounts in the
consolidated statement of comprehensive income:
Depreciation expense of right-of-use assets
Interest expense on lease liabilities
Short term and low value lease expenses
2021
$’000
22,915
6,909
1,481
2020
$’000
32,453
6,703
3,600
21 Intangible assets
ACCOUNTING POLICY
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 may be impaired, and is carried at cost less accumulated impairment losses. Goodwill acquired is allocated to cash
generating units for the purpose of impairment testing. The allocation is made to those cash generating units or group of cash
generating units that are expected to benefit from the business combination in which the goodwill arose. Cash generating units are
discussed in the impairment section below.
Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
Water rights and mining information
The Group benefits from water rights associated with its mining operations through the efficient and cost effective operations of the
mine. These rights are amortised on a straight line basis over the life of the mine. The value of exploration, pre-feasibility and feasibility
costs necessary for regulatory, reporting and internal control purposes have been recognised as a mining information intangible asset.
The total value is amortised over the estimated life of the mine.
Permanent water rights associated with agricultural activities are treated as an intangible asset at acquisition cost. It has an indefinite life
and is not subject to amortisation. Indefinite useful life assets are tested annually for impairment.
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.
Other intangible assets
Other intangible assets including brands and curriculum that are acquired by the Group are stated at cost less accumulated amortisation
and impairment losses.
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 profit or loss on a straight line basis, unless otherwise stated, over the estimated useful lives of intangible
assets unless such lives are indefinite. Intangible assets with an indefinite useful life are systematically tested for impairment at each
reporting date.
128
Notes to the Financial StatementsWashington H. Soul Pattinson and Company LimitedAnnual Report 2021 Class of intangible assets
Goodwill
Water rights and mining information
Water rights (agriculture)
Software
Other intangible assets (includes brands and curriculum)
Useful life
Indefinite life
Estimated life of mine
Indefinite life
3–5 years
Indefinite life
Impairment
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 events or changes in 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. Refer to Note 6 for details on
impairment testing.
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 of disposal 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). Intangible assets other than goodwill that suffered impairment are reviewed for
possible reversal of the impairment at each reporting date. Goodwill impairments are not reversible.
Impairment losses for intangible assets are recognised in the profit or loss.
Goodwill
$’000
Water
rights
$’000
Mining
information
Other
intangibles
$’000
$’000
Software
$’000
Total
$’000
At 31 July 2020
Cost
Accumulated amortisation and impairment
20,184
(4,157)
32,170
(1,624)
70,809
(8,667)
Net book value
16,027
30,546
62,142
Year ended 31 July 2021
Opening net book value
Additions
Disposals
Transfers out to assets held for sale
Transfers out to cost of sales
Transfers in from deferred tax liability
Impairment charged to profit or loss
Amortisation charged to the profit or loss
(refer to note 6)
16,027
–
–
–
–
2,036
–
30,546
20,099
(72)
–
(782)
–
(915)
–
(555)
Closing net book value
18,063
48,321
62,142
–
–
–
–
–
–
(2,969)
59,173
6,786
–
6,786
6,786
–
–
–
–
–
–
–
6,786
18,506
(16,821)
148,455
(31,269)
1,685
117,186
1,685
1
(15)
(5)
–
–
–
(670)
996
117,186
20,100
(87)
(5)
(782)
2,036
(915)
(4,194)
133,339
At 31 July 2021
Cost
Accumulated amortisation and impairment
22,220
(4,157)
51,765
(3,444)
70,809
(11,636)
Net book value
18,063
48,321
59,173
6,786
–
6,786
18,734
(17,738)
170,314
(36,975)
996
133,339
129129
21 Intangible assets (continued)
Goodwill
$’000
Water
rights
$’000
Mining
information
Other
intangibles
$’000
$’000
Software
$’000
Total
$’000
At 31 July 2019
Cost
Accumulated amortisation and impairment
Net book value
Year ended 31 July 2020
Opening net book value
Additions
Acquisition of businesses
Disposals
Transfers in from property, plant and
equipment
Impairment charged to profit or loss
Amortisation charged to the profit or loss
(refer to note 6)
33,262
(4,157)
29,105
29,105
–
–
(576)
–
(12,502)
–
13,071
(1,067)
12,004
12,004
10,208
9,240
–
–
(349)
(557)
Closing net book value
16,027
30,546
At 31 July 2020
Cost
Accumulated amortisation and impairment
Net book value
20,184
(4,157)
16,027
32,170
(1,624)
30,546
70,809
(5,690)
65,119
65,119
–
–
–
–
–
(2,977)
62,142
70,809
(8,667)
62,142
6,786
–
6,786
6,786
–
–
–
–
–
–
17,610
(16,145)
141,538
(27,059)
1,465
114,479
1,465
437
–
–
459
–
114,479
10,645
9,240
(576)
459
(12,851)
(676)
(4,210)
6,786
1,685
117,186
6,786
–
6,786
18,506
(16,821)
148,455
(31,269)
1,685
117,186
Recoverable amount of goodwill
Intangible assets which have indefinite lives are allocated to the Group’s business segment and country of operation.
A segment summary of the goodwill allocation is presented below:
New Hope1
Carrying amount of goodwill
Other Investing activities (Aquatic Achievers)2
Opening balance at 1 August
Transfers in from deferred tax liability
Closing net book value
Country of
operation
Australia
Australia
Australia
2021
$’000
5,595
10,432
2,036
12,468
18,063
2020
$’000
5,595
10,432
–
10,432
16,027
The recoverable amount of goodwill is determined based on the fair value less cost of disposal (FVLCD) or value in use (VIU)
method. Assumptions and methodology applied to each segment are as follows:
130
Notes to the Financial StatementsWashington H. Soul Pattinson and Company LimitedAnnual Report 2021
1 New Hope
The brought forward balance of goodwill relates to acquisitions by New Hope, primarily Queensland Bulk Handling Pty Limited
of $5.60 million.
The recoverable amount to which the exploration asset’s goodwill is attributable has been based on the FVLCD method
using a comparable resource transaction multiple multiplied by the resources attributable to this segment. This assessment
is determined under Level 2 of the fair value hierarchy based on observable external market data for reserve and resources
transaction multiples, rather than quoted prices (refer Note 29 for an explanation on fair value hierarchy). Observable
transactions included in the assessment of an appropriate multiple are comparable transactions in the last four years
for Australian coal exploration projects with the same coal type. The estimation of the resources used to determine the
recoverable amount requires judgement and assumptions as detailed in Note 18.
The recoverable amount of the Queensland Bulk Handling Pty Limited asset has been based on value in use calculations using
a discounted cash flow model. The future cash flows have been discounted using a post-tax rate of 9.5% (2020: 9.5%).
The recoverable amount of the exploration asset has been determined based on a comparable resource multiple attributable
to the New Hope segment. The impairment assessment is outlined in Note 6.
2 Other investing activities (Aquatic Achievers)
The brought forward balance of goodwill relates to the Group’s acquisition of the Aquatic Achievers business, a swimming
pool owner and operator providing learn-to-swim programs.
In addition, intangible assets comprising the Aquatic Achiever brand ($1.43 million) and curriculum ($5.36 million) were
recognised on acquisition. These intangible assets are all considered to have indefinite lives with no amortisation applied.
During the current financial period, a deferred tax liability of $2.04 million was recognised in respect of those held for use
indefinite life intangible assets identified on the initial acquisition of the Aquatic Achievers business. The Group increased
the value of Goodwill recognised by the same amount.
Th recoverable amounts of Intangibles assets, including brand and curriculum, have been determined based on FVLCD and
VIU calculations. These calculations require the use of assumptions, including estimated discount rates based on current
cost of capital and growth rates of the estimated future cash flows. The resulting income stream was used in the discounted
cash flow model over a 5 year period at the post-tax discount rate of 10.8% per annum. This assessment is determined under
level 3 of the fair value hierarchy.
KEY ESTIMATES
Impairment of intangible assets
At each reporting date the Group considers the recoverable value of intangible assets. Intangible assets are allocated to
cash generating units for which the recoverable value is determined. The recoverable value may be determined based
on fair value less costs of disposal or value in use calculations and is estimated based on recent market transaction
information. These calculations require the use of assumptions. Refer to Note 6.
131131
22 Trade and other payables
ACCOUNTING POLICY
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 reporting period and are unpaid. The amounts are unsecured and usually paid within 30 to 45 days of
recognition.
Non-current trade and other payables are stated at the present value of the future expected cash flows. These amounts are contractually
due for settlement at least 12 months after the reporting date.
Current liabilities
Trade and other payables
Non-current liabilities
Trade and other payables
Current Liabilities
2021
$’000
2020
$’000
112,717
134,973
143
773
Trade and other payables
The balance at 31 July 2021 includes $78.79 million (2020: $82 million) relating to creditors of New Hope and $22.82 million
(2020: $42.08 million) relating to creditors of Round Oak.
132
Notes to the Financial StatementsWashington H. Soul Pattinson and Company LimitedAnnual Report 2021 23 Provisions
ACCOUNTING POLICY
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.
Restoration, rehabilitation and environmental expenditure
Provisions are recognised for restoration, rehabilitation and environmental expenditure as soon as an obligation exists, with the cost
being charged to profit or loss 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.
Employee entitlements
Short term obligations
Liabilities for wages and salaries, including non-monetary benefits, annual leave and vesting sick leave and redundancy expected to
be settled within 12 months after the end of the period in which the employees render the related service are recognised in respect of
employees’ services up to the end of the reporting period. These 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 employee benefit obligations are presented as payables.
Other long term employee benefit obligations
The liabilities for long service leave and annual leave which are not expected to be settled within 12 months of reporting date are
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 a high quality corporate bond rate with terms
to maturity and currency that match, as closely as possible, the estimated future cash outflows.
Current liabilities
Mining restoration and site rehabilitation (a)
Employee benefits
Onerous contracts (b)
Non-current liabilities
Mining restoration and site rehabilitation (a)
Employee benefits
Other
2021
$’000
906
46,310
16,487
63,703
308,779
7,963
614
317,356
2020
$’000
11,400
47,441
10
58,851
275,873
7,701
592
284,166
133133
23 Provisions (continued)
a) Mining restoration and site rehabilitation
Movements
Opening balance at 1 August
Provisions recognised
Derecognition from disposals
Provisions debited/(credited) to profit or loss
Unwinding of discount charged to profit or loss
Transfer to assets held for sale
Closing balance at 31 July
Disclosed as:
Current liabilities
Non-current liabilities
Total provision for mining restoration and site rehabilitation
2021
$’000
287,273
23,411
(970)
10,104
4,033
(14,166)
309,685
906
308,779
309,685
2020
$’000
260,553
30,945
(930)
(7,787)
4,492
–
287,273
11,400
275,873
287,273
As at 31 July 2021 New Hope has recognised a mining restoration and rehabilitation provision of $267.96 million
(2020: $249.06 million) and Round Oak has recognised a mining restoration and site rehabilitation provision
of $41.73 million (2020: $38.22 million).
KEY ESTIMATES
Determination of reserves estimates and rehabilitation costs
Provision is made for rehabilitation, restoration and environmental costs when the obligation arises, based on the net present value
of estimated future costs. The ultimate cost of rehabilitation and restoration is uncertain, and management uses its judgement and
experience to provide for these costs over the life of the operations.
The Group makes estimates about the future cost of rehabilitating tenements which are currently disturbed, based on legislative
requirements and current costs. There are policy change risks, in particular with the growing global focus on climate change, which
may impact on rehabilitation obligations. 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.
The estimation of reserves and resources are also a key judgement that affects the timing of the payment of closedown and
restoration costs as detailed in Note 18.
New Hope
As at 31 July 2021, New Hope has recognised a mining restoration and rehabilitation provision of $267.96 million
(2020: $249.06 million) for Bengalla, New Lenton, New Acland, New Oakley, and Jeebropilly coal tenements and Bridgeport
oil fields.
Provision is made for rehabilitation, restoration and environmental costs when the obligation arises, based on the net
present value of estimated future costs. The ultimate cost of rehabilitation and restoration is uncertain, and management
uses its judgment and experience to provide for these costs over the life of the operations.
The Group makes estimates about the future cost of rehabilitating tenements which are currently disturbed, based on
legislative requirements and current costs. There are policy change risks, in particular with the growing global focus on
climate change, which may impact on rehabilitation obligations. 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.
The estimation of reserves and resources are also a key judgement that affects the timing of the payment of closedown and
restoration costs.
134
Notes to the Financial StatementsWashington H. Soul Pattinson and Company LimitedAnnual Report 2021 Round Oak
As at 31 July 2021 Round Oak has recognised a mining restoration and site rehabilitation provision of $41.73 million
(2020: $38.22 million). The provision is the net present value of the estimated cost of rehabilitating the Jaguar, Mount Colin,
and Barbara sites in compliance with future regulations and practices at the end of commercial production.
Until January 2021, Round Oak operated its Jaguar mine using the mine closure plan in place at the time of its acquisition
in June 2018. This plan estimated the mine closure cost at $14.6 million. In January 2021, Round Oak submitted an updated
mine closure plan to the Western Australian Department of Mines, Industry Regulation and Safety (“DMIRS”). The revised
plan estimated the revised mine closure cost at $37.8 million. As at the reporting date, the Jaguar mine rehabilitation
provision, updated for inflation and interest rate assumptions, is $35.9 million.
Round Oak is working to an agreed timetable with DMIRS to submit an update to the revised mine closure plan in October
2021. The final mine closure plan is due to be submitted to DMIRS in January 2022. The final estimated mine closure cost will
not be known until the plan is agreed with DMIRS.
b) Onerous contracts (New Hope)
New Hope has recognised a provision for an onerous take or pay rail contract as a result of the ramp down of its QLD Mining
Operations CGU with $37.28 million charged to the Statement of Comprehensive Income in the current reporting period
and a provision of $16.48 million (2020: $nil) remains at the reporting date. This contract ends in December 2021.
c) Other provisions (New Hope)
The Directors of New Hope’s subsidiaries, Northern Energy Corporation Limited (NEC) and Colton Coal Pty Ltd (Colton
Coal), placed the companies into voluntary administration on 17 October 2018. The companies were subsequently placed
into liquidation by creditors at a meeting on 26 July 2019. At 31 July 2019, when Wiggins Island Coal Export Terminal Pty
Ltd (WICET) and the liquidators for NEC and Colton Coal were claiming in proceedings that New Hope and certain of its
subsidiaries had guaranteed the debts of NEC and Colton Coal under the Deed of Cross Guarantee (DOCG) in an amount of
approximately $155 million, the Group had recognised a provision for $16 million which it considered at that time was the
best estimate of the future probable net economic outflows associated with the NEC and Colton Coal (DOCG) matter.
A summary of the developments associated with this matter, are outlined below:
Deed of Cross Guarantee (DOCG) proceedings
1 On 20 August 2019, WICET and the Liquidators on behalf of NEC and Colton filed appeals with the Court of Appeal in
New South Wales in relation to the Supreme Court’s decision in favour of New Hope on the DOCG.
1 On 20 December 2019, the Court of Appeal in New South Wales dismissed (with costs) the WICET, NEC and Colton
appeal, confirming the Supreme Court’s declaration that New Hope had not guaranteed the debts of NEC and Colton
Coal under the DOCG.
1 In January 2020, applications were made by WICET and by the Liquidators on behalf of NEC and Colton for special leave
to appeal to the High Court of Australia in relation to the New South Wales Court of Appeal decision.
1 On 12 June 2020, the High Court of Australia dismissed (with costs) WICET, NEC and Colton’s applications for special leave
to appeal. This left in place the determinations of the Supreme Court and Court of Appeal in New South Wales that New
Hope had not guaranteed the debts of NEC and Colton under the Company’s DOCG.
1 Due to the successful results in relation to the DOCG proceedings, New Hope released the previously held provision in
the year ended 31 July 2020.
Administration/liquidation process
The Liquidators commenced proceedings in the Supreme Court of New South Wales on 26 March 2021 against New Hope,
associated subsidiary companies and former directors and officers of NEC and Colton. The claims made by the Liquidators
include that NEC and Colton were trading whilst insolvent. The Liquidators estimate the total value of the alleged claims to
be approximately $175 million plus interest and costs.
On 26 August 2021, the Liquidators filed and served an Amended Statement of Claim joining Wiggins Island Coal Export
Terminal Pty Limited as a plaintiff to the proceedings.
The Liquidators filed and served their evidence during September 2021. On 5 October 2021, the Court directed the Defendants
to file and serve their evidence by 21 February 2022 and further directed the Liquidators to file an serve evidence in reply by
18 April 2022. The Court has provisionally reserved an 8 week block during 28 June 2022 to 26 August 2022 for the hearing. The
Court will convene for further directions on 26 April 2022 at which time the Court will formally set down the hearing dates.
New Hope denies the claims made by the Liquidators and intends to vigorously defend the proceedings.
Given the successful results in relation to the DOCG proceedings, New Hope has considered its position and has determined
that no provision is required to be made as at 31 July 2021.
135135
24 Cash and cash equivalents
ACCOUNTING POLICY
Cash and short term deposits in the statement of financial position comprise cash on hand, cash at bank and short term highly liquid
deposits with financial institutions with a maturity of three months or less, that are readily convertible to a known amount of cash. Bank
overdrafts, should they occur, are shown within borrowings in current liabilities in the Consolidated Statement of Financial Position.
Current assets
Cash at banks
Short term deposits
2021
$’000
610,202
122
610,324
2020
$’000
293,231
51,582
344,813
Cash at bank earns interest at floating rates based on daily bank deposits rates. Short term deposits are made for varying periods
of between one day and three months, depending on the immediate cash requirements of the Group, and earn interest at the
respective short term deposit rates.
Cash at bank and short term deposits attract interest at rates between 0% and 0.6% per annum (2020: 0% and 1.2%).
Cash and short term deposits in the Consolidated Statement of Financial Position at reporting date includes cash and short term deposits
held by the Parent Entity and its subsidiaries. At 31 July 2021, the balances were predominately held by the Parent Entity of $134.63 million
(2020: $254.86 million), New Hope of $424.66 million (2020: $70.38 million) and Round Oak of $37.54 million (2020: $1.58 million).
136
Notes to the Financial StatementsWashington H. Soul Pattinson and Company LimitedAnnual Report 2021 Reconciliation of profit after income tax and
net cash flow from operations
Profit after tax for the year
Adjustments for non-cash items:
Depreciation and amortisation
Amortisation of transaction costs
Gain on deemed disposal of equity accounted associates
(Gain)/loss on associate reserves recycled back through profit and loss
Gain on derecognition of TPG as an equity accounted associate
Gain on revaluation of investment property
Loss/(gain) on sale of investment property
Net (gain)/loss on sale of non-current asset
(Gain)/loss on sale of controlled entity/joint venture
Gain on fair value of biological assets
Gain on trading equities fair value through profit or loss
Expected credit loss allowance
Impairment expense
Write off loan and interest to external party
Provision for Onerous contract
Net foreign exchange loss/(gain)
Non-cash in-specie dividend
Non-cash share based payments
Unwinding of interest on deferred purchase consideration
Share of (profits)/loss of associates not received as dividends or distributions
Other non-cash items
Changes in operating assets and liabilities,
net of effects from purchase and sales of business:
(Increase)/decrease in trade debtors, other debtors and prepayments
(Increase)/decrease in inventory
Increase in financial assets held for trading
Increase/(decrease) in trade creditors and accruals
Increase/(decrease) in employee entitlements and provisions
Decrease/(Increase) in current tax asset
Decrease/(increase) in deferred tax asset
Increase in current tax liability
Increase in deferred tax liability
Net cash inflow from operating activities
2021
$’000
2020
$’000
320,439
874,455
247,036
2,076
(7,373)
(3,643)
–
(3,600)
873
(8,257)
(1,567)
(11,114)
(80,327)
2,667
17,911
16,500
16,477
3,343
–
2,094
905
(17,794)
37
(76,557)
(13,442)
(67,190)
3,558
14,160
16,283
55,451
56,345
29,424
514,715
249,200
2,076
(5,348)
11,653
(1,474,526)
–
(38)
1,161
785
(4,951)
(5,780)
–
483,887
–
–
(713)
(79,683)
2,372
928
198,759
1,131
13,964
11,370
(107,239)
(18,267)
(34,400)
(15,254)
(39,240)
25,069
250,398
341,769
137137
25 Interest bearing liabilities
ACCOUNTING POLICY
Interest bearing liabilities are initially recognised at fair value, net of any transaction costs incurred. These balances are subsequently
measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised
in the profit or loss over the term of the liability using the effective interest method. Fees paid on the establishment of loan facilities are
recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case,
the fee is deferred until the draw down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be
drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the term of the facility to which it relates.
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 date.
Convertible notes
The component of convertible notes that exhibit characteristics of a liability is recognised as a liability in the balance sheet, net of transaction
costs. On issuance of convertible notes, the fair value of the liability component is determined using a market rate for an equivalent
non-convertible note. This amount is carried as a long term liability on an amortised basis until extinguished on conversion or redemption.
The increase in liability due to the passage of time is recognised as a finance cost. The remainder of the proceeds are allocated to the
conversion option that is recognised and included in shareholders’ equity, net of transaction costs. The carrying amount of the conversion
option is not remeasured in subsequent years. Transaction costs are apportioned between the liability and equity components of the
convertible notes based on the allocation of proceeds to the liability and equity components when the instruments are first recognised.
Current liabilities
Secured
Bank overdraft (WHSP Agriculture Trust)1
Equity finance loans (Parent Entity)2
Secured loans (New Hope)3
Secured loans (PSRE Urban Regeneration Trust)4
Equipment finance loans (WHSP Agriculture Trust)1
Non-current liabilities
Unsecured
Convertible notes (Parent Entity)2
Convertible notes (New Hope)3
Secured
Market rate loan (WHSP Agriculture Trust)1
Equipment finance loans (WHSP Agriculture Trust)1
Other loans facilities (Parent Entity)2
Secured loans (New Hope)3
Total interest bearing liabilities
Less: cash and cash equivalents
Net debt
Financing facilities5
Less: facilities utilised at reporting date
Convertible bonds
Equity finance and other loan facilities
Capitalised transaction costs
Facilities unutilised at reporting date
2021
$’000
3,085
289,810
953
–
879
294,727
216,282
189,193
33,000
2,329
–
307,101
747,905
1,042,632
(610,324)
432,308
2020
$’000
30
235,182
928
12,000
73
248,213
–
–
21,025
203
199,170
355,024
575,422
823,635
(344,813)
478,822
1,186,460
1,441,606
(405,475)
(637,157)
–
143,828
–
(823,635)
(4,878)
613,093
The fair values of interest bearing liabilities materially approximate their respective carrying values as at 31 July 2021.
138
Notes to the Financial StatementsWashington H. Soul Pattinson and Company LimitedAnnual Report 2021 Financing facilities
As at 31 July 2021, the Consolidated Entity had the following financing facilities in place:
1 WHSP Agriculture Holding Trust
In the prior reporting period, the WHSP Agriculture Holding Trust entered into a 5-year secured loan facility, comprising a
$4 million bank overdraft, $26 million market rate loan and a $3.33 million asset finance facility. The expiry date is 30 July 2025.
Security includes first ranking mortgages over property and specific pieces of agricultural machinery, first ranking water
mortgages over water entitlements, water leases and General Security Interests.
On 20 December 2020, the market rate loan facility was increased to $33 million.
To finance the purchase of various pieces of agricultural equipment, the WHSP Agricultural Holding Trust entered into
various financing agreements with a financier. These credit contracts are specific to the agricultural equipment and are
secured with a mortgage over the equipment for a term ranging between 24 to 36 months.
As at 31 July 2021, WHSP Agriculture Holding Trust utilised:
1 $3.09 million of the bank overdraft facility (2020: $0.03 million) at an average interest rate of 2.85% per annum
(2020: 2.85% per annum). The unutilised facility as at 31 July 2021 was $0.91 million (2020: $3.97 million).
1 $33 million of the market rate loan facility (2020: $21.02 million) at an interest rate of 1.87% per annum (2020: 2% per
annum). The unutilised facility as at 31 July 2021 was $nil (2020: $4.98 million).
1 $2.33 million of the asset finance facility (2020: $nil) at a weighted average interest rate of 3.10% per annum (2020: $nil).
The unutilised facility as at 31 July 2021 was $0.97 million (2020: $3.30 million).
1 $0.88 million of the agricultural equipment finance facility (2020: $0.28 million) at a weighted average interest rate of
0.93% per annum (2020: 0.56% per annum). The unutilised facility as at 31 July 2021 was $nil (2020: $nil).
2 Parent Entity
(i) Equity finance facilities
As at 31 July 2021, the Parent Entity has increased its access to secured financial asset finance with the addition of a further
two financiers, bringing the total to four.
As security for each of these loans, the Parent Entity transfers ownership of title over certain securities to the finance
provider. As the Parent Entity retains the risks and benefits of ownership of the transferred investments, including the right to
receive dividends, these securities continue to be included as assets on the Consolidated Entity and Parent Entity statements
of financial position. Upon repayment of the debt, legal title of the investments is transferred back to the Parent Entity.
The increase in the panel of providers helped facilitate the specific representation that the Parent Entity made to make a
stock loan available to support the $200 million New Hope convertible note issue (refer to Note 25(3), below).
The tenor for each borrowing under these facilities ranges from 30 to 365 days, and the average cost was 0.88% per annum
(2020: 1.08% per annum).
Capacity to draw further funds under these facilities is a function of the prevailing value of the pool of securities that is
eligible to be loaned.
(ii) Other financing facilities
In the prior reporting period, the Parent Entity entered into a $200 million three year secured term loan facility with Credit
Suisse AG. The facility was for making investments, refinancing existing debt and general corporate purposes.
On 29 January 2021, the facility was repaid and extinguished using the proceeds of the convertible note issue.
(iii) Convertible Notes
On 29 January 2021, the Parent Entity issued convertible notes with an aggregate principal amount of $225 million. There
has been no movement in the number of these convertible notes since the issue date.
The notes are convertible at the option of the noteholders into ordinary shares based on an initial conversion price of $34.99
per share at any time on or after 11 March 2021 up to the date falling five business days prior to the final maturity date
(29 January 2026). The holder of the option has the right to redeem all or some of the holder’s notes on 1 February 2024
for an amount equal to 100% of the principal amount of the notes plus any accrued but unpaid interest. Any notes not
converted will be redeemed on 29 January 2026 at the principal amount of the notes plus any accrued but unpaid interest.
The notes carry interest at a rate of 0.625% per annum which is payable semi-annually in arrears on 29 January and 29 July.
139139
25 Interest bearing liabilities (continued)
The net proceeds from the convertible notes, after deducting all the related costs and expenses, were $221.09 million.
As of 31 July 2021, the proceeds were used to repay approximately $200 million of existing financial indebtedness, with the
remaining proceeds applied to further strengthen the Parent Entity’s liquidity position.
The fair value of the liability component of the convertible notes was estimated at the issuance date using an equivalent
market interest rate for a similar bond without a conversion option. This amount is carried as a long term liability on an
amortised cost basis until extinguished on conversion or redemption. The remainder of the proceeds were allocated to the
conversion option and have been recognised and included in shareholders’ equity, net of transaction costs. The carrying
amount of the conversion option is not remeasured in subsequent years.
Transaction costs were apportioned between liability and equity components of the convertible notes based on the
allocation of the proceeds to the liability and equity component when the instruments were first recognised.
Convertible notes split into the liability and equity components
Opening balance at 1 August 2020
Nominal value of convertible notes issued on 29 January 2021
Equity component of the convertible notes
Transaction fees
Liability component of the convertible notes (net of capitalised transaction fees)
Interest on convertible notes
Payment of interest on convertible notes
Liability component at 31 July 2021
Transaction costs of $3.81 million related to the liability component and $0.10 million to the equity component.
Changes in liabilities arising from financing activities
Opening balance at 1 August 2020
Net present value of cashflows – proceeds from issuance of convertible notes, net of transaction costs
Equity component of convertible notes, net of transaction costs
Interest on convertible notes
Payment of interest on convertible notes
Closing balance at 31 July 2021
3 New Hope
Secured loan facility
2021
$’000
–
225,000
(5,634)
(3,911)
215,455
1,530
(703)
216,282
221,089
(5,634)
1,530
(703)
216,282
New Hope’s secured loan facility is with a syndicate of Australian and international banks. The facility originally comprised a
$600 million drawable amortising facility and a $300 million credit support facility. The facility’s drawable line for credit is for
general corporate purposes and has a maturity of November 2023. The secured loan facility holds a fixed and floating charge
over all assets held by the New Hope, except for certain excluded subsidiaries.
As at the reporting date, the secured loan facility had amortised to $450 million (2020: $510 million).
Facilities utilised as at the reporting date were $310 million (2020: $360 million). During the reporting period an additional $20
million (2020: $135 million) of debt was drawn down under the facility, with $70 million (2020: $135 million) being repaid.
Transaction costs capitalised were $2.90 million as at 31 July 2021 (2020: $4.98 million).
140
Notes to the Financial StatementsWashington H. Soul Pattinson and Company LimitedAnnual Report 2021 Convertible Notes
On 2 July 2021, New Hope issued convertible notes with an aggregate principal amount of $200 million. There has been no
movement in the number of these convertible notes since the issue date.
The notes are convertible at the option of the note holders into ordinary shares based on an initial conversion price of $2.10
per share at any time on or after 12 August 2021 up to the date falling five business days prior to the final maturity date (2
July 2026). The holder of the option has the right to redeem all or some of the holder’s notes on 2 July 2024 for an amount
equal to 100% of the principal amount of the notes plus any accrued but unpaid interest. Any notes not converted will be
redeemed on 2 July 2026 at the principal amount of the notes plus any accrued but unpaid interest.
The coupon rate is 2.75% per annum payable semi-annually in arrears on 2 January and 2 July.
The net proceeds from the convertible notes, after deducting all the related costs and expenses, were $195.20 million. The
proceeds are recorded in cash and short term deposits at 31 July 2021. New Hope intends to use the net proceeds from the
convertible notes for general corporate purposes, which may include further growth expansion and opportunistic merger
and acquisition activity.
The fair value of the liability component of the convertible notes was estimated at the issuance date using an equivalent
market interest rate of a similar bond without a conversion option. This amount is carried as a long term liability on an
amortised cost basis until extinguished on conversion or redemption. The remainder of the proceeds were allocated to the
conversion option and have been recognised and included in shareholders’ equity, net of transaction costs. The carrying
amount of the conversion option is not remeasured in subsequent years.
Transaction costs were apportioned between liability and equity components of the convertible notes based on the
allocation of the proceeds to the liability and equity component when the instruments were first recognised.
Convertible notes split into the liability and equity components
Opening balance at 1 August 2020
Nominal value of convertible notes issued on 2 July 2021
Equity component of the convertible notes
Transaction fees
Liability component of the convertible notes (net of capitalised transaction fees)
Interest on convertible notes
Liability component at 31 July 2021
Transaction costs of $4.64 million related to the liability component and $0.16 million to the equity component.
Changes in liabilities arising from financing activites
Opening balance at 1 August 2020
Net present value of cashflows – proceeds from issuance of convertible notes, net of transaction costs
Equity component of convertible notes, net of transaction costs
Interest on convertible notes
Closing balance at 31 July 2021
4 Other subsidiaries
2021
$’000
–
200,000
(6,610)
(4,798)
188,592
601
189,193
195,202
(6,610)
601
189,193
As at 31 July 2020, a subsidiary property trust of the Parent Entity had a $12 million loan facility secured over a commercial
property in Penrith, New South Wales. A contract for sale of this property was exchanged in July 2020.
The property settled on 28 January 2021 and the loan was repaid and the facility extinguished also on this date.
5
Includes convertible notes, secured loans, bank overdraft and lines of credit.
141141
26 Share capital
ACCOUNTING POLICY
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 return are applied against share capital.
2021
Number of shares
239,395,320
Group and Parent Entity
2021
$’000
2020
Number of shares
239,395,320
43,232
3,945
47,177
2020
$’000
43,232
–
43,232
Fully paid ordinary shares
Convertible notes
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion
to the number of shares held. Every shareholder 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.
Convertible notes
On 29 January 2021, the Parent Entity issued convertible notes with an aggregate principal amount of $225 million. The
convertible notes are convertible into fully paid ordinary shares in the Company. The notes will mature on 29 January 2026,
unless otherwise redeemed, repurchased, or converted. The fair value of the liability component of the convertible notes was
estimated at the issuance date and is carried as a long term liability. The remainder of the proceeds net of transaction costs and
taxes, being $3.95 million has been recognised in shareholders’ equity.
There has been no movement in the number of these convertible notes since the issue date. Refer to Note 25 interest bearing
liabilities.
Capital Management
The objective of the Group’s capital management approach is to maintain a strong capital base in order to maintain investor,
creditor and market confidence and to sustain the future development of the Group.
The Group’s capital consists of total shareholders’ equity, borrowings and other interest bearing liabilities. The movement in
shareholders equity is shown in the Consolidated Statement of Changes in Equity.
For details of interest bearing liabilities, refer to Note 25.
The Parent Entity has complied with the financial covenants of its borrowing facilities during the 2021 and 2020 financial periods.
Securities purchased on market
The Company purchased 141,808 shares (2020: 25,854 shares) on market to satisfy the rights that vested during the reporting
period under the Company’s Rights Plan. The average share price per share was $28.98 (2020: $22.74).
142
Notes to the Financial StatementsWashington H. Soul Pattinson and Company LimitedAnnual Report 2021 27 Reserves
Certain changes in the value of assets and liabilities are not recognised in the profit or loss but are instead included in other
comprehensive income.
Also included in reserves is the Group’s share of the reserves of equity accounted associates.
Reserves attributable to members
Asset revaluation reserve
Capital gains reserve
Hedge reserve
Foreign currency translation reserve
Capital profits reserve
Share-based payments reserve
Equity reserve
Closing balance at 31 July
Major movements in reserves consist of:
Asset revaluation reserve
Opening balance at 1 August
Revaluation of long term equity investments, gross
Revaluation of long term equity investments, deferred tax
Transfer gain on sale of long term equity investments to capital gains reserve, gross
Transfer gain on sale of long term equity investments to capital gains reserve, deferred tax
Impairment of long term equity investments, gross
Impairment of long term equity investments, deferred tax
Share of associates – increments/(decrements)
Transfer from capital gains reserve
Closing balance at 31 July
2021
$’000
(214,602)
52,294
6,747
(919)
8,881
9,161
(16,706)
(155,144)
(4,588)
(281,938)
87,965
(21,481)
5,768
(2,374)
712
1,334
–
(214,602)
2020
$’000
(4,588)
36,333
20,566
1,236
8,881
10,204
(9,379)
63,253
167,561
(183,091)
50,957
(25,563)
8,988
(12,762)
3,828
(573)
(13,933)
(4,588)
Asset revaluation reserve
At reporting date, the asset revaluation reserve predominately relates to the net unrealised gains/(loss) of the Parent Entity’s long term
equity investments.
Capital gains reserve
Opening balance at 1 August
Transfer from asset revaluation reserve
Gains on sale of long term equity investments, net of tax
Closing balance at 31 July
2021
$’000
36,333
–
15,961
52,294
2020
$’000
13,241
13,933
9,159
36,333
Capital gains reserve
The capital gains reserve predominately records net gains/(loss) on the sale of the Parent Entity’s long term equity investments.
143143
27 Reserves (continued)
Hedge reserve
Opening balance at 1 August
Revaluation, gross
Revaluation, deferred tax
Transfer to profit, gross
Transfer to profit, deferred tax
Share of associates – increments/(decrements)
Closing balance at 31 July
2021
$’000
20,566
(45,943)
13,806
26,091
(7,827)
54
6,747
2020
$’000
(14,067)
48,215
(14,465)
(15,554)
4,666
11,771
20,566
Hedge Reserve
Movements in the hedge reserve predominately relate to:
1 New Hope’s derivative financial instruments which are used to hedge exposures to foreign currency exchange rates.
1 The Parent Entity cross currency interest rate swaps which are used to hedge exposures to foreign currency on secured loans to
external parties.
Equity reserve
Opening balance at 1 August
Share of associates – increments/(decrements)
Transactions with non-controlling interests (New Hope)
Others
Closing balance at 31 July
2021
$’000
(9,379)
(3,377)
(3,971)
21
(16,706)
2020
$’000
(11,150)
1,771
–
–
(9,379)
Equity Reserve
Movements in the equity reserve predominately relate to the reduction in the Parent’s shareholding in New Hope and movement in
associates’ equity reserves.
144
Notes to the Financial StatementsWashington H. Soul Pattinson and Company LimitedAnnual Report 2021 28 Financial risk management
The Group’s activities expose it to a variety of financial risks; market risk (including currency risk, price risk and interest rate 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 have also
developed their own risk management programs tailored to address their business specific risks. The Parent entity and certain
group entities use derivative financial instruments such as foreign exchange contracts and interest rate swaps to hedge certain
risk exposures. Derivatives are used for hedging and funding purposes. The Group uses different methods to measure different
types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate, foreign exchange and
other price risks and ageing analysis for credit risk.
Risk management is carried out in accordance with written policies approved by the boards of each relevant business within
the Group. These written policies cover specific areas such as mitigating foreign exchange, interest rate and credit risks, use of
forward exchange contracts and investment of excess liquidity.
Financial assets
2021
Cash and cash equivalents
Trade and other receivables
Biological assets
Financial assets held for trading
Other financial assets
Long term equity investments
Total financial assets
2020
Cash and cash equivalents
Trade and other receivables
Biological assets
Financial assets held for trading
Other financial assets
Long term equity investments
Total financial assets
Financial liabilities
2021
Trade and other payables
Interest bearing liabilities
Lease liabilities
Total financial liabilities
2020
Trade and other payables
Interest bearing liabilities
Lease liabilities
Total financial liabilities
Fair value
through Other
Comprehensive
Income
$’000
Hedging
Derivatives
$’000
Amortised
cost
$’000
Fair Value
through
Profit or Loss
$’000
–
–
–
–
–
2,362,838
2,362,838
–
–
–
–
–
2,616,094
2,616,094
–
–
–
–
–
–
–
–
–
–
–
–
18,814
–
18,814
–
–
–
–
54,764
–
54,764
–
–
–
–
–
–
–
–
610,324
397,501
4,658
–
19,669
–
1,032,152
344,813
165,842
2,062
–
13,034
–
525,751
113,891
1,042,632
131,412
1,287,935
136,575
823,635
121,366
1,081,576
–
–
–
397,582
29,852
–
427,434
–
–
–
267,371
23,843
–
291,214
–
–
–
–
–
–
–
–
Total
$’000
610,324
397,501
4,658
397,582
68,335
2,362,838
3,841,238
344,813
165,842
2,062
267,371
91,641
2,616,094
3,487,823
113,891
1,042,632
131,412
1,287,935
136,575
823,635
121,366
1,081,576
145145
28 Financial risk management (continued)
a) Market risk
i.
Foreign exchange risk
Foreign exchange risk arises when future commercial transactions and recognised assets and liabilities are
denominated in a currency that is not the Group’s functional currency. There are two sources of exposure:
1 The Group through its subsidiaries, New Hope and Round Oak, is exposed to foreign exchange risk arising from
currency exposures to the US dollar.
New Hope uses forward contracts to manage foreign exchange risk. Senior management is responsible for
managing exposures in each foreign currency by using forward currency contracts. Contracts are designated as
cash flow hedges. Foreign exchange contracts are designated by New Hope as hedges of foreign exchange risk
on specific future transactions.
New Hope’s risk management framework is to hedge anticipated transactions (export coal sales) in US dollars
for the subsequent year as deemed necessary. All hedges of projected export coal sales qualify as “highly
probable” forecast transactions for hedge accounting purposes.
Round Oak’s market risk management strategy is to manage and control market risk exposures within
acceptable parameters, while optimising returns. During the current and previous financial periods Round Oak
did not engage in any foreign exchange hedging.
1 The Parent Entity has exposure to foreign exchange risk on external secured loans to third parties denominated
in Canadian (“CAD”) and New Zealand (“NZD”) dollars.
Cross currency interest rate swaps are used to manage foreign exchange risk. To comply with Parent Entity’s
foreign exchange risk management strategy to hedge exposures arising in foreign currency, the Parent Entity’s
objective is to hedge the exposure arising from CAD and NZD denominated external loan assets against the
changes in the spot exchange rate of CAD/AUD and NZD/AUD respectively.
The hedged items create an exposure to foreign currency denominated fixed interest and principal amounts in
local currency terms. As such, there is an expectation that the value of the hedging instruments and the value
of the hedged items move in the opposite direction as a result of movements in the CAD/AUD and NZD/AUD
spot exchange rates.
Determination of the hedge ratio and sources of hedge ineffectiveness on NZD and CAD exposures
To comply with the Parent Entity’s hedging policy, the hedge ratio is based on a hedging instrument with the
same notional amount in foreign currency terms as the underlying hedged item. This results in a hedge ratio of 1:1
or 100%. This is the ratio that the Parent Entity uses for risk management purposes, and this ratio is appropriate for
purposes of hedge accounting as it does not result in an imbalance that would create hedge ineffectiveness.
The following potential sources of hedge ineffectiveness are identified:
1 Reduction or modification in the hedged item (that is; a debt repayment or interest rate reduction);
1 A change in the credit risk of the borrower or the swap counterparty; and
1 A mismatch between the cash flows of the hedged item and the hedging instrument.
US dollar exposure
Cash and cash equivalents
Trade receivables
Trade payables
Forward exchange contracts – sell foreign currency (cash flow hedge)
2021
US$’000
51,410
58,171
5,304
27,000
2020
US$’000
23,853
34,567
661
303,000
146
Notes to the Financial StatementsWashington H. Soul Pattinson and Company LimitedAnnual Report 2021 New Zealand dollar exposure
Cash and cash equivalents
Loan to external parties – secured
Cross currency swap (pay NZD fix/receive AUD fix)
Canadian dollar exposure
Cash and cash equivalents
Loan to external parties – secured
Cross currency swap (pay CAD fix/receive AUD fix)
2021
NZ$’000
431
23,500
23,500
C$’000
393
14,300
14,300
2020
NZ$’000
–
–
–
C$’000
–
–
–
ii. Commodity hedge risk
Commodity hedge contracts are used to manage price risk. Senior management is responsible for managing exposures
in pricing by using commodity hedge contracts as deemed necessary. Contracts are designated as cash flow hedges.
Commodity price contracts are designated as hedges of price risk on specific future transactions.
Sensitivity analysis
Based on the cash, trade receivables, and trade payables held at 31 July 2021, 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 $9.26 million/($10.82 million) (2020: $5.63 million/($5.65 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 2021, 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 $3.32 million/($4.06 million) (2020: $38.14 million/($46.61 million). There is no effect on post-tax profits.
iii. Price risk
The Group is exposed to equity securities price risk as the majority of the Group’s investments are publicly traded on the
Australian Securities Exchange.
Long term investments held for capital growth and dividend income are classified in the Consolidated Statement of
Financial Position as long term equity investments. As the market value of individual equities fluctuate, the fair value of
the portfolio changes. Fair value adjustments are recognised in the asset revaluation reserve within equity.
Investments held principally for the purpose of selling in the short to medium term are classified in the Consolidated
Statement of Financial Position as financial assets held for trading. As the market value of individual companies
fluctuate, the fair value of this portfolio changes with the movement being recognised through the profit or loss.
Investments in associates are not carried at fair value in the Consolidated Statement of Financial Position but are instead
equity accounted. The initial investment is increased/(decreased) by the Group’s share of the associate’s profits/(losses)
as recognised in the profit or loss, movements in their reserves (other comprehensive income) and decreased by
dividends received. For listed associates the market value is taken into consideration when assessing the recoverable
value of an equity accounted associate.
Sensitivity analysis
The following table summarises the financial impacts of a 5% increase/(decrease) in the market value of those investments
(financial assets held for trading and long term equity investments) that are carried at fair value 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 profit or
loss where Directors consider the investment to be impaired. For long term equity investments, a 5% increase/(decrease) in market
values would have no impact on the profit or loss as all fair value movements are recognised directly in equity.
147147
28 Financial risk management (continued)
Impact to post-tax profit
Impact on reserves
2021
$’000
(13,716)
–
(13,716)
2020
$’000
(9,349)
–
(9,349)
2021
$’000
–
(78,585)
(78,585)
2020
$’000
–
(87,622)
(87,622)
Financial assets held for trading
Long term equity investments
iv. Fair value interest rate risk
Refer to note 28e 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,
long term equity investments provided to the bank as security for short term debt, as well as credit exposure to export and domestic
customers, including outstanding receivables and committed transactions.
The Group has policies in place to ensure that sales of products and services are made to customers with an appropriate credit history.
The majority of customers, both export and domestic, have long term relationship with the Group and sales are secured with long term
supply contracts. Sales are secured by letters of credit when deemed appropriate.
The Group’s derivative counterparties and term deposits are limited to financial institutions with a rating of at least BBB. The Group has
policies that limit the maximum amount of credit exposure to any one financial institution.
Credit risk further arises in relation to financial guarantees given to certain parties. 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 Consolidated Statement of
Financial Position. The following table summarises these assets:
Cash and cash equivalents
Trade and other receivables2
Other financial assets3
Long term equity investments1
2021
$’000
610,324
397,501
18,814
289,810
1,316,449
2020
$’000
344,813
165,842
54,764
235,182
800,601
1 The long term equity investments balance as stated above represents amounts that banks hold as security against short term debt. Refer Note 25.
2 The trade and other receivables balance as stated above reflects the recoverable value and is net of any impairments or allowance for expected credit loss.
Refer Note 9 for further description on the impairment of receivables.
3 The other financial assets balance as stated above represents derivative financial assets. Refer Note 14.
148
Notes to the Financial StatementsWashington H. Soul Pattinson and Company LimitedAnnual Report 2021 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 manages liquidity risk by continually monitoring forecast and actual cashflows and matching maturity profiles
of financial assets and liabilities. Surplus funds are generally only invested in instruments that are tradeable in highly liquid
markets.
Financing arrangements
Details of existing financing arrangements are set out in Note 25.
d) Maturity of financial liabilities
The Group has trade and other payables that are payable within 12 months (current liabilities) and greater than 12 months
(non-current liabilities). Trade and other payables classified as current are predominately trade payables which are generally
due or paid within 45 days of invoice date. Trade and other payables classified as non-current relate to the purchase
consideration for business acquisitions during the current and prior reporting period and are due to be settled within the
next two years. This non-current balance is calculated using the present value of the future expected cash flows. Details of
non-current trade payables are set out in Note 22.
New Hope’s secured borrowings as outlined in Note 25 are an amortising facility reducing by $30 million six monthly with
any final balance up to $330 million at the end of the facility term being payable in the two to five year period.
The Parent Entity utilises short term bank financing. The balance at year end was $289.81 million (2020: $235.18 million).
The outstanding debt can be repaid by providing 30 days notice.
As security for the Parent Entity’s short term bank financing, the Parent Entity transferred ownership of title over certain
long term equity investments to the banks. As the Parent Entity retains the risks and benefits of ownership of the transferred
equity investments, including the right to receive dividends, these securities continue to be included as assets on the
Group’s statement of financial position. Upon repayment of the debt, legal title of the equity investments are transferred
back to the Parent Entity.
The Group’s maturity analysis for derivative financial instruments is set out in Note 14. The Group’s maturity analysis for lease
liabilities is set out in Note 20.
e) Cash flow and fair value interest rate risk
The Group may from time to time have significant interest-bearing assets which are placed with reputable financial
institutions 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 profit or loss and operating cash flows. Cash flow interest rate risk is managed by placing excess
funds in at call deposits, term deposits and other fixed interest bearing assets. Refer to Notes 24 for details.
Based on the deposits held at reporting date, the sensitivity to a 1% per annum increase or decrease in interest rates would
increase/(decrease) after tax profit by $4.27 million (2020: $2.41 million). This scenario assumes all cash and cash equivalents
at reporting date continue to remain invested for the whole year.
The Parent Entity utilises short term bank financing. The balance at year end was $289.81 million (2020: $235.18 million). The
debt is exposed to variable interest rates. Interest rate risk is minimised as the outstanding debt can be repaid by providing
30 day notice.
f ) Climate related risk
Climate risk is a risk for the Group. The impacts of climate change have the potential to affect the value of assets and
liabilities of the Group, in particular the carrying value of its investments in mining, natural resources and significant energy
users. These impacts include long term changes in climatic conditions, extreme weather events, and the action taken by
governments, regulators or society more generally to transition to a low carbon economy. A key step in the Group’s due
diligence on potential investments is the assessment of environmental, social and governance (ESG) risks, including climate
risk, in accordance with our Sustainable Investment Policy and Climate Risk Policy. All investments are evaluated through the
Group’s compulsory ESG risk assessment process. The risk of climate change is assessed at origination and continues after
an investment is made through the on-going investment review process. Exposures with medium or high risk profiles are
subject to additional due diligence and heightened consideration and assessment. The Directors considered climate-related
risk in the preparation of the this Financial Report.
149149
29 Fair value estimation
ACCOUNTING POLICY
The fair value of financial assets, financial liabilities and investment properties 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 and financial liabilities held by the Group 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 reporting 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 expected credit loss 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.
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.
Valuation techniques
Listed equities
The fair value of listed equities and hybrid instruments is based on quoted market prices, being the last sale price, at the
reporting date. Listed equities are traded in an active market with most of the Consolidated Entity’s investments being publicly
traded on the Australian Securities Exchange.
KEY JUDGEMENTS AND ESTIMATES
Financial assets (level 3) – valuation techniques
Unlisted equities
In the absence of an active market for unlisted equities, the Consolidated Entity selects and uses one or more valuation techniques to
measure the fair value of these unlisted equities.
The Consolidated Entity selects a valuation technique that is appropriate in the circumstances and for which sufficient data is available to
measure fair value. The following valuation techniques are used by the Consolidated Entity:
1 Market approach: valuation techniques that use prices and other relevant information generated by market transactions for identical
or similar assets including ongoing discussions with potential purchasers.
1 Income approach: valuation techniques that convert estimated future cash flows or income and expenses into a single discounted
present value.
Amortised cost : Trade and other receivables and loans to external parties
1 Cost approach: valuation techniques that reflect the current replacement cost of an asset at its current service capacity.
1 Expected credit loss approach (ECL): valuation technique that measures the loss allowance for trade and other receivables at an
amount equal to the lifetime ECL except where the financial asset’s credit risk is considered low or has not increased significantly
since initial recognition, the loss allowance is based on 12-months ECL. A simplified approach is taken to accounting for trade and
other receivables and records the loss allowance at the amount equal to the lifetime ECL. In applying this simplified method, the
Consolidated Entity uses its historical experience, external indicators and forward looking information to calculate the ECL.
150
Notes to the Financial StatementsWashington H. Soul Pattinson and Company LimitedAnnual Report 2021 KEY JUDGEMENTS AND ESTIMATES (CONTINUED)
Each valuation technique requires inputs that reflect the assumptions that buyers and sellers would use when pricing the asset or
liability, including the assumptions about risk. When selecting a valuation technique, the Consolidated Entity gives priority to those
techniques that maximise the use of observable inputs and minimise the use of unobservable inputs. Inputs that are developed using
market data (such as publicly available information on actual transactions) and reflect the assumptions that buyers and sellers would
generally use when pricing the asset or liability are considered observable. Unobservable inputs are those for which market data is not
available and therefore are developed using the best information available about such assumptions.
Investment Properties
Refer to Note 17b for details on the valuation techniques used for investment properties.
Biological assets
Risk adjusted value approach: valuation techniques that calculates the projected cash inflows from the sale of the matured commodity
(including a risk adjustment factor) less the cash outflows needed to grow the commodity to its matured state.
Fair value measurement
The following table represents the Group’s assets and liabilities measured and recognised at fair value as at 31 July 2021
and 31 July 2020.
As at 31 July 2021
Financial assets
Biological assets
Financial assets held for trading
Other financial assets
Long term equity investments
Loan at amortised cost
Non-financial assets
Investment properties
Total assets
As at 31 July 2020
Financial assets
Biological assets
Financial assets held for trading
Other financial assets
Long term equity investments
Loan at amortised cost
Non-financial assets
Investment properties
Total assets
Level 1
$’000
–
383,319
8,564
2,244,687
–
Level 2
$’000
–
–
40,102
81,982
–
–
–
2,636,570
122,084
Level 1
$’000
–
263,057
4,065
2,502,944
–
Level 2
$’000
–
–
74,542
74,686
–
–
–
2,770,066
149,228
Level 3
$’000
4,658
14,263
19,669
36,169
236,205
87,158
398,122
Level 3
$’000
2,062
4,314
13,034
38,464
59,505
75,724
193,103
Total
$’000
4,658
397,582
68,335
2,362,838
236,205
87,158
3,156,776
Total
$’000
2,062
267,371
91,641
2,616,094
59,505
75,724
3,112,397
151151
29 Fair value estimation (continued)
Fair value measurements using significant unobservable inputs (level 3)
The following table presents the change in level 3 items for the year ended 31 July 2021 and 31 July 2020:
l
a
c
i
g
o
o
B
l
i
1
s
t
e
s
s
a
Opening balance at 1 August 2019
Acquisitions
Disposals/repaid
Change in fair value due to biological
transformation
Transfer to inventory
Interest charged
Gain recognised in other income
– unrealised
Gain recognised in other comprehensive
income – unrealised
Transfer to Financial assets held for trading
Transfer to held-for-sale asset
$’000
–
554
–
4,952
(3,444)
–
–
–
–
–
s
t
e
s
s
a
l
a
i
c
n
a
n
i
F
i
2
g
n
d
a
r
t
r
o
f
d
l
e
h
$’000
2,580
1,734
–
–
–
–
–
–
–
–
l
a
i
c
n
a
n
fi
r
e
h
t
O
3
s
t
e
s
s
a
$’000
5,646
7,388
–
–
–
–
–
–
–
–
y
t
i
u
q
e
m
r
e
t
g
n
o
L
,
6
4
s
t
n
e
m
t
s
e
v
n
i
$’000
5
t
s
o
c
d
e
s
i
t
r
o
m
a
t
a
s
n
a
o
L
$’000
t
n
e
m
t
s
e
v
n
I
7
s
e
i
t
r
e
p
o
r
p
$’000
l
a
t
o
T
$’000
31,169
77,588
106,281
223,264
4,109
(14)
–
11,741
(27,944)
–
437
(3,757)
–
–
–
–
3,200
–
–
–
3,975
–
–
–
–
38
–
(5,855)
–
–
(27,275)
(5,855)
(27,275)
25,963
(31,715)
4,952
(3,444)
3,975
38
3,200
Closing balance at 31 July 2020
2,062
4,314
13,034
38,464
59,505
75,724
193,103
Acquisitions
Disposals/repaid
Transfer to Financial assets held for trading
(listed)
Change in fair value due to biological
transformation
Transfer to inventory
Transfer to Equity accounted associate
Transfer to Investment properties
Gain recognised in other income
– unrealised
Gain recognised in other comprehensive
income – unrealised
Transfer to held-for-sale asset
664
–
–
11,113
(9,181)
–
–
–
–
–
12,633
–
(2,684)
6,635
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
25
–
–
–
–
(11,971)
(1,109)
–
10,760
–
220,219
(43,519)
–
8,020
–
–
248,196
(43,519)
(2,684)
–
–
–
–
–
–
–
–
11,113
–
–
–
3,691
(9,181)
(11,971)
(1,109)
3,691
–
10,760
(277)
(277)
Closing balance at 31 July 2021
4,658
14,263
19,669
36,169
236,205
87,158
398,122
152
Notes to the Financial StatementsWashington H. Soul Pattinson and Company LimitedAnnual Report 2021
Fair value measurement, valuation techniques and inputs
Class of assets
Biological assets:
Included in level 3 of the fair value hierarchy are valued at a risk adjusted value of expected
cash flows.
Financial assets held for trading:
Unlisted financial assets held for trading included in level 3 fair value hierarchy are held for
short term trading. Purchase price is a proxy to fair value.
1
2
3 Other financial assets:
Loans at fair value have been included in level 3 fair value hierarchy. Fair value is anchored
to the underlying net asset value of the underlying company.
4
5
6
7
Long term equity investments:
Unlisted long term equity investments are valued under various valuation techniques.
Loans at amortised cost:
Loans at amortised cost: loans at amortised cost have been included in level 3 fair value
hierarchy. Fair value is anchored to expected credit losses valuation technique.
Class of assets
Assets
Valuation
technique
Fair value
hierarchy
Range
Inputs used
to measure
fair value
Significant
unobservable inputs
Long term
equity
investments
Investment
properties
Unlisted
investment
EBITDA
multiple
Level 3
$28.1 million to
$25.4 million
Discount rate
multiple
Industrial
and
commercial
properties
Level 3
Capitalisation
rate
approach
2021: 6.0% to
6.5%; 2020:
6.5% to 7.5%
Adopted
capitalisation
rate
A increase/decrease of 5% on
discount rate multiple would
increase/decrease the value by
$1.34 million and $1.34 million
respectively.
A increase/decrease of 25
basis points in the adopted
capitalisation rate would
increase/decrease the market
capitalisation value by
$2.5 million and $1.8 million
respectively.
153153
30 Contingent liabilities
Details and estimates of maximum amounts of contingent liabilities for which no provision is included in the accounts,
are as follows:
Undertakings and guarantees issued by a subsidiary's bankers to the Department of
Natural Resources and Mines, Statutory Power Authorities and various other entities
Undertakings and guarantees issued by the bankers of the Bengalla Joint Venture
(of which a subsidiary is a party) for rail and port suppliers1
2021
$’000
21,982
–
21,982
2020
$’000
37,002
13,669
50,671
1 During the period to 31 July 2021 the participants have assumed responsibility for providing guarantees directly to rail and port suppliers.
The contingent liabilities as described above are not secured by any charges on the Group’s assets.
Certain companies in the Group are recipients of complaints made or are defendants in certain claims and/or proceedings (either
commenced or threatened).
In the opinion of the Directors, all such matters are not anticipated to have a material effect on the financial position of the Group
or are at a stage which does not support a reasonable evaluation of the likely outcome of the matters.
Other than the above and the matters set out in Note 23, there are no other contingent liabilities of the Group as at 31 July 2021.
The Consolidated Entity had unrestricted access at 31 July 2021 to bank guarantee facilities of $335.1 million (2020: $335.0 million).
At 31 July 2021, the Consolidated Entity had drawn down on these facilities by $125.5 million (2020: $269.6 million).
154
Notes to the Financial StatementsWashington H. Soul Pattinson and Company LimitedAnnual Report 2021 31 Commitments
a) Lease commitments – operating
Commitments for minimum lease payments in relation to non-cancellable
operating leases are payable as follows:
Within one year
One to five years
More than five years
b) Capital commitments
Capital expenditure contracted for at year end but not recognised
as liabilities is as follows:
Within one year
One to five years
More than five years
2021
$’000
2020
$’000
180
–
–
180
126
56
–
182
81,497
8,225
5,255
94,977
111,178
34,613
3,262
149,053
Capital commitments include contracted management services for mining services, exploration permits and acquisition of
property, plant and equipment.
c) Parent Entity investment in API
In July 2021 the Parent Entity granted a call option to Wesfarmers Limited (“Wesfarmers”) over its 19.3% shareholding (95.1
million shares) in API and agreed, subject to certain conditions, to vote in favour of any formal proposal made by Wesfarmers
to gain control of API. Refer to Note 32 for further information.
d) Commitments relating to associates
For commitments relating to associates refer to Note 15.
155155
32 Events after the reporting period
On 22 June 2021, the Parent Entity entered into a Scheme Implementation Agreement with Milton Corporation Limited
(“Milton”), under which it was proposed that the Parent Entity would acquire 100% of the share capital of Milton it did not already
own. Since that date, the following events have occurred:
1 On 13 September 2021, the Scheme Meeting was held. The Scheme Resolution was passed by the requisite majorities of
Milton shareholders.
1 On 20 September 2021, the Federal Court of Australia approved the Scheme of arrangement.
1 On 5 October 2021, the scheme of arrangement in relation to the merger of WHSP and Milton was implemented. In
accordance with the scheme, all Milton shares not already owned by WHSP have now been transferred to WHSP. Former
Milton shareholders were issued 121.47 million newly issued WHSP shares which equates to $4.61 billion in consideration.
In July 2021 the Parent Entity granted a call option to Wesfarmers over its 19.3% shareholding (95.1 million shares) in API. Since
that date, the following events have occurred:
1 On 16 September 2021, Wesfarmers announced it had entered into a Process Deed with API in relation to a proposal to
acquire 100 per cent of the shares in API.
1 On 7 October 2021, Wesfarmers exercised the call option and acquired the Parent Entity’s shareholding in API.
156
Notes to the Financial StatementsWashington H. Soul Pattinson and Company LimitedAnnual Report 2021 33 Parent entity information
ACCOUNTING POLICY
The statement of financial position, profit after tax and total comprehensive income for the Parent Entity, have been prepared on the
same basis as the consolidated financial statements except for investments in subsidiaries and investments in associates.
In the Parent Entity, investments in subsidiaries and associates are carried at the lower of cost or impaired value. Dividends from these
entities are recognised as income within profit or loss. This approach reflects the Parent Entity’s activities as an investor.
The consolidated financial statements recognise the individual assets, liabilities, income and expenses of subsidiaries. Associates
are equity accounted, with initial investment increased/(decreased) by profits/(losses) recognised in the Consolidated Statement of
Comprehensive Income and decreased by dividends received. Dividends from both subsidiaries and associates are not recognised in the
Consolidated Statement of Comprehensive Income.
Statement of Financial Position
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Shareholders' equity
Issued capital
Reserves
Retained earnings
Profit after tax for the year
Total comprehensive income
Restatement of comparative information
2021
$’000
560,979
3,474,586
4,035,565
332,524
725,392
1,057,916
2,977,649
47,176
(169,360)
3,099,833
2,977,649
320,226
102,543
2020
$’000
554,831
3,481,686
4,036,517
241,275
792,288
1,033,563
3,002,954
43,232
34,085
2,925,637
3,002,954
1,476,877
1,317,058
Deferred tax assets were reassessed at reporting date requiring a restatement to the comparative of $78.2 million to Non-Current
Assets and Retained Earnings and $31.7 million to profit after tax.
Refer to Basis of Preparation in Note 1 for further information on the reclassification of the Parent Entity’s 2020 comparative.
157157
33 Parent entity information (continued)
a) Interest bearing liabilities of the Parent Entity
The Parent Entity has complied with all the financial covenants of its borrowing facilities during the 2021 and 2020 reporting
periods. Refer to Note 25(2) for details of interest bearing liabilities of the Parent Entity.
b) Guarantees entered into by the Parent Entity
The Parent Entity provides guarantees for leases of offices and swimming pool sites, and environmental bonds that are
required by the 100% owned subsidiary, Round Oak.
As at 31 July 2021 these guarantees totalled $9.21 million (2020: $22.21 million).
c) Contingent liabilities of the Parent Entity
The Parent Entity did not have any contingent liabilities at 31 July 2021 or 31 July 2020.
d) Contractual commitments made by the Parent Entity, for the acquisition
of property, plant or equipment
The Parent Entity did not have any contractual commitments for property, plant or equipment at 31 July 2021
(2020: $51.80 million).
158
Notes to the Financial StatementsWashington H. Soul Pattinson and Company LimitedAnnual Report 2021 34 Controlled entities and joint ventures
Basis of consolidation
The consolidated financial statements of the Group incorporates the financial statements of Washington H. Soul Pattinson
and Company Limited and its subsidiaries, and its equity accounted associates. A diagram is set out in Note 3, listing the main
subsidiaries and associates.
i. Subsidiaries
Subsidiaries are all 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 involvement with the entity and has the ability to affect those returns through its
power to direct the activities of the entity.
Subsidiaries are consolidated from the date on which control is obtained to the date on which control is disposed. The
acquisition of subsidiaries is accounted for using the acquisition method of accounting.
The financial statements of subsidiaries are prepared for the same reporting period as the Parent Entity, using consistent
accounting policies. Adjustments are made to bring into line any dissimilar accounting policies that may exist.
Non-controlling interests in the results and equity of subsidiaries are shown separately in the Consolidated Statement of
Comprehensive Income, Consolidated Statement of Changes in Equity and Consolidated 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.
Joint arrangements
A joint arrangement is an arrangement where two or more parties share control. 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.
Joint operations
A joint operation is a joint arrangement in which the parties share joint control, have rights to the assets, and obligations
for the liabilities relating to the arrangement. 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 into the Group’s financial statements under the appropriate headings.
Joint ventures
A joint venture is a joint arrangement in which the parties that share joint control have rights to the net assets of the
arrangement. Interests in joint ventures are accounted for using the equity method, after initially being recognised at cost.
iii. Associates
Associates are all entities over which the Group has significant influence and are neither subsidiaries nor jointly controlled.
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 profit or loss and its share of
post-acquisition other comprehensive income is recognised in the Consolidated Statement of 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.
159159
34 Controlled entities and joint ventures (continued)
iv. Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions are
eliminated. Unrealised gains arising from transactions with an associate are eliminated to the extent of the Group’s interest
in the associate. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no
evidence of impairment. Where practical, accounting policies of the associates have been changed to ensure consistency
with the policies adopted by the Group.
a) Investments in subsidiaries
ACCOUNTING POLICY
Investments in subsidiaries are not recognised as individual investments in the consolidated financial statements. The assets and
liabilities of each subsidiary are instead recognised in the Consolidated Statement of Financial Position. Dividends from subsidiaries
are not recognised in the profit or loss, instead the results from each subsidiary are included in profit or loss.
Details of significant subsidiaries within the Group are as follows:
Name of entity
Subsidiaries
New Hope Corporation Limited
Round Oak Minerals Pty Limited
Round Oak Jaguar Pty Limited
WHSP Stockman Pty Limited
Exco Resources Pty Limited
WHSP Aquatic Achievers Pty Limited
WHSP Agriculture Holding Trust
WHSP Water Holding Trust
Pitt Capital Partners Limited
Soul Private Equity Limited
Ownership interest
Principal place
of business
2021
2020
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
40%
100%
100%
100%
100%
100%
95%
100%
100%
100%
50%
100%
100%
100%
100%
100%
95%
100%
100%
100%
KEY JUDGEMENTS AND ESTIMATES
Consolidation of entities with less than 50% ownership
The directors of the Parent Entity have concluded that the Consolidated Entity controls New Hope Corporation Limited even
though it holds less than half of the voting rights of this subsidiary. This is because the Consolidated Entity is the largest shareholder
with a 39.85% equity interest while the remaining shares are widely dispersed. In addition, three of the directors on the Board of
New Hope Corporation Limited are directors of the Parent Entity.
Material partly owned subsidiary
The Parent Entity has a 39.85% (2020: 50.00%) shareholding in its subsidiary, New Hope. In December 2020 and July 2021,
the Parent Entity sold down its shareholding in New Hope by 10.15%. Total consideration received was $61.54 million in
July 2020 and $70.20 million in December 2021.
New Hope is an Australian listed company, its shares are publicly traded on the Australian Securities Exchange. It is a
diversified energy company with operations covering coal mining and production, coal port operations and oil and gas
production and exploration. Operations are mainly based in South East Queensland and in the Hunter Valley region,
NSW with the Bengalla Joint Venture. The remaining 60.15% (2020: 50.00%) shareholding in New Hope (non-controlling
interests) has a proportional share in the results and equity of New Hope.
The Group consolidates the net assets and results of subsidiaries in full, and discloses separately for each, the amounts
not controlled by the Group (non-controlling interests).
160
Notes to the Financial StatementsWashington H. Soul Pattinson and Company LimitedAnnual Report 2021 The following provides a summary of the financial information of New Hope:
1 Non-controlling interest share of profit after income tax for the year $47.73 million (2020: loss after income tax of
$78.51 million);
1 Net increase in cash and cash equivalents $351.83 million (2020: increase $11.11 million);
1 Total assets $2.78 billion (2020: $2.55 billion);
1 Total liabilities $1.03 billion (2020: $0.82 billion);
1 Net assets $1.75 billion (2020: $1.73 billion); and
1 Non-controlling interest share of net assets $1.05 billion (2020: $0.863 billion).
b) Business combinations
ACCOUNTING POLICY
The acquisition method of accounting is used to account for all business combinations regardless of whether equity instruments
or assets are acquired. The consideration transferred for the acquisition of a business combination comprises the fair value of
the assets transferred and the liabilities incurred. 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 at 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 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 profit or loss as a bargain purchase.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to present
value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at which
similar borrowings could be obtained from an independent financier under comparable terms and conditions.
Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are
subsequently remeasured to fair value with changes in fair value recognised in profit or loss.
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.
Acquisition during the prior reporting period
On 18 October 2019, a subsidiary of the Parent Entity, WHSP Agriculture Holding Trust, acquired a 100% interest in the
Mildura Citrus, MC Property, HK Farming and HK Farmland Trusts and a 97% interest in the Fitzroy Macadamias Trust, for
a total purchase consideration of $37.2 million. Collectively these entities formed the WHSP agricultural business. This
portfolio of farming businesses produces citrus fruit, macadamia nuts, cereal crops and cotton.
On 1 May 2020, WHSP Agriculture Holding Trust acquired 97% of Infinity Farms, a horticultural enterprise in Victoria
which produces table grapes and stone fruits and owns serviced and uncleared horticultural development land. Total
purchase price was $16.971 million.
There are no acquisitions in the current reporting period.
KEY JUDGEMENT AND ESTIMATES
Acquisition fair value
The determination of the fair values of net identifiable assets acquired, and of any goodwill, involves significant judgement.
The allocation of fair value between intangible assets, and the tangible assets with which they are used, is also judgemental.
The Group engages third-party valuers to advise on the purchase price allocation for significant acquisitions.
161161
34 Controlled entities and joint ventures (continued)
c) Deed of cross guarantee
During 2012 the Parent Entity and a subsidiary, Souls Private Equity Limited, entered into a deed of cross guarantee under
which each company guarantees the debts of the other.
Whilst party to this deed, wholly owned entities are relieved from the requirements to prepare a financial report and
directors’ report under ASIC Corporations (Wholly-owned Companies) Instrument 2016/785 issued by the Australian
Securities and Investments Commission.
The parties to this deed are referred to as the ‘Closed Group’. The effect of the deed is that each party to it has guaranteed to
pay any deficiency in the event of the winding up of any of the entities in the Closed Group.
i) Consolidated Statement of Comprehensive Income and summary of
movements in consolidated retained profits and Consolidated Statement
of Financial Position for the members of the Closed Group
Consolidated statement of comprehensive income – closed group
Profit before income tax
Income tax expense
Profit after tax attributable to closed group
Other comprehensive income – closed group
Changes in the fair value of equity investments at fair value
through other comprehensive income
Share of other comprehensive income movements, net of tax
Total other comprehensive income for the year, net of tax
2021
$’000
424,403
(84,448)
339,955
(212,782)
10,891
(201,891)
2020
$’000
1,479,993
(351,575)
1,128,418
(162,428)
20,898
(141,530)
Total comprehensive income for the year
138,064
986,888
Summary of movements in consolidated retained earnings – closed group
Opening balance at 1 August
Profit for the year
Transfer from general reserve to retained profits
Effect for initial adoption of AASB 16
Derecognition of TPG as an associate
Reclassification of a fair value investment to an associate
Dividends declared and paid
Closing balance at 31 July
3,336,525
339,955
–
–
–
(3,570)
(121,028)
3,551,882
2,330,086
1,128,418
2,342
(2,859)
(4,586)
–
(116,876)
3,336,525
162
Notes to the Financial StatementsWashington H. Soul Pattinson and Company LimitedAnnual Report 2021
Consolidated statement of financial position
Current assets
Cash and cash equivalents
Trade and other receivables
Assets classified as held for sale
Financial assets held for trading
Other financial assets
Total current assets
Non-current assets
Trade and other receivables
Equity accounted associates
Long term equity investments
Other financial assets
Property, plant and equipment
Right-of-use assets
Deferred tax assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Interest bearing liabilities
Lease liabilities
Current tax liabilities
Provisions
Total current liabilities
Non-current liabilities
Trade and other payables
Interest bearing liabilities
Lease liabilities
Deferred tax liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Reserves
Retained profits
Total equity
2021
$’000
135,095
26,888
–
397,582
9,068
568,633
369,379
900,557
2,667,086
49,521
7,087
11,102
17,905
4,022,637
4,591,270
10,137
289,810
689
30,260
881
331,777
41
216,282
11,559
614,107
649
842,638
1,174,415
3,416,855
47,176
(182,203)
3,551,882
3,416,855
2020
$’000
254,952
40,556
53
180,317
–
475,878
81,851
917,810
2,942,722
36,877
7,516
12,251
61,324
4,060,351
4,536,229
13,012
245,980
612
–
788
260,392
–
199,170
12,249
664,361
612
876,392
1,136,784
3,399,445
43,232
19,688
3,336,525
3,399,445
163163
34 Controlled entities and joint ventures (continued)
d) Investments in joint arrangements
ACCOUNTING POLICY
A joint arrangement is an arrangement where two or more parties share control. 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.
Joint operations
A joint operation is a joint arrangement in which the parties that share joint control, have rights to the assets, and obligations for
the liabilities relating to the arrangement. 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
into the Group’s financial statements under the appropriate headings.
Joint ventures
A joint venture is a joint arrangement in which the parties that share joint control have rights to the net assets of the arrangement.
Interests in joint ventures are accounted for using the equity method, after initially being recognised at cost.
Through its subsidiaries, the Group holds interests in the following Joint arrangements, each of which have been accounted
for as a joint operation as described in the accounting policy above.
Name
Accounted for as:
Group's interest
Segment allocated to:
Bengalla Joint Venture
Lenton Joint Venture
Joint operation
Joint operation
80%
90%
New Hope Corporation Limited
New Hope Corporation Limited
White Dam Joint Venture
In the prior reporting period, Round Oak held a 50% interest in the White Dam Joint Venture which operated the White Dam
Gold Mine in South Australia. Round Oak disposed of its 50% interest on 29 July 2021. A gain of $0.7 million (net of tax) was
recorded on disposal.
KEY JUDGEMENT AND ESTIMATES
Classification of joint arrangements
The Group assesses whether it has the power to direct the relevant activities of the investee by considering the rights it holds
with respect to the work programme and budget approval, investment decision approval, voting rights in joint operating
committees and changes to the joint arrangement participant holdings. Judgement is required by the Group to assess whether the
arrangement is a joint operation or a joint venture.
164
Notes to the Financial StatementsWashington H. Soul Pattinson and Company LimitedAnnual Report 2021 35 New or amended accounting standards and interpretations
The Consolidated Entity has adopted all of the new or amended Accounting Standards and Interpretations issued by the
Australian Accounting Standards Board (AASB) that are mandatory for the current reporting period. Any new or amended
Accounting Standards or interpretations that are not yet mandatory have not been early adopted.
The following amendments have been identified as those which may impact the Group in the period of initial application, are
effective for annual periods beginning after 1 August 2021:
Amendments to IAS 1 – Classification of liabilities as current or non-current
The amendments clarify that the classification of liabilities as current or non-current is based on rights that are in existence at
the end of the reporting period, specify that classification is unaffected by expectations about whether the entity will exercise
its right to defer settlement of a liability, explain that rights are in existence if covenants are complied with at the end of the
reporting period, and introduce a definition of ‘settlement’ to make clear that settlement refers to the transfer to the counterparty
of cash, equity instruments, other assets or services. The amendments are applied retrospectively for annual periods beginning
on or after 1 January 2023, with early application permitted. The potential effects on adoption of the amendment are yet to be
determined.
AASB 9 Financial instruments
The amendment clarifies that in applying the ’10 per cent’ test to assess whether to derecognise a financial liability, an entity
includes only fees paid or received between the entity (the borrower) and the lender, including fees paid or received by either
the entity or the lender on the other’s behalf. The amendment is applied prospectively to modifications and exchanges that
occur on or after the date the entity first applies the amendment. The amendment is effective for annual periods beginning
on or after 1 January 2022, with early application permitted. The potential effects on adoption of the amendment are yet to be
determined.
Cloud computer costs
In April 2021, IFRIC published an agenda decision in relation to the accounting treatment for cloud computing costs. The Group
is currently assessing the impact of the agenda decision and expects to complete the implementation of the IFRIC agenda
decision as part of its 31 January 2022 reporting.
AASB 102 Inventories
In June 2021, IFRIC published an agenda decision in relation to the accounting treatment when determining net realisable value
(NRV) of inventories, in particular, what costs are necessary to sell inventories under AASB 102 ‘Inventories’. The Group is currently
assessing the impact the agenda decision will have on its current accounting policy and whether an adjustment to inventory
may be necessary. Accordingly, a reliable estimate of the impact of the IFRIC agenda decision on the Group cannot be made
at the date of this report. The Group expects to complete the implementation of the above IFRIC agenda decision as part of its
31 July 2022 reporting.
165165
36 Share based payments
ACCOUNTING POLICY
Share-based compensation benefits are provided to selected employees of the Parent Entity via an employee incentive scheme. A
summary of the scheme is provided below.
The fair value of options and rights granted under the scheme is recognised as an employee benefits expense with a corresponding
increase in the share-based payment reserve within equity.
The fair value is measured at grant date and the total amount to be expensed is recognised over the period during which the employee
becomes unconditionally entitled to the options and rights. The fair value of options and rights granted is based on the market price
of the issuing company’s shares, adjusted to reflect any market performance conditions and the impact of any non-vesting conditions.
Non-market vesting conditions are included in assumptions about the number of options and rights that are expected to become
exercisable. At each reporting date, the entity revises its estimate of the number of options and rights that are expected to become
exercisable. The employee benefits expense each period takes into account the most recent estimate. The impact of the revision to the
original estimate is recognised in profit or loss with a corresponding adjustment to equity.
Washington H. Soul Pattinson and Company Limited – Long term incentive plan
The Parent Entity provides share based compensation benefits to its executive team and management team via a Long Term
Incentive Plan (LTI plan) whereby rights to shares are granted for nil consideration. Rights are granted in accordance with the plan
at the sole discretion of the Parent Entity’s Board. Rights vest and automatically convert to ordinary shares in the Parent Entity
following the satisfaction of the relevant performance and service conditions. Performance and service conditions applicable
to each issue of rights are determined by the Board at the time of granting. Rights granted under the plan carry no dividend or
voting rights until they have vested and have been converted into shares in the Parent Entity. Detailed vesting conditions are set
out in the Remuneration Report.
The fair value of services received in return for performance rights granted is based on the fair value of the performance rights
granted. The fair value of rights was independently determined by valuation specialists Lonergan Edwards & Associates Limited
and was based on the market price of the Parent Entity’s shares at the grant date, with an adjustment made to take into account
the vesting period, expected dividends during that period that will not be received by the participants and the probability that
the market performance conditions will be met.
166
Notes to the Financial StatementsWashington H. Soul Pattinson and Company LimitedAnnual Report 2021 Performance
hurdle
TSR Hurdle
or Non TSR
Hurdle
Non-TSR
TSR
Non-TSR
TSR
Non-TSR
TSR
Non-TSR
TSR
Non-TSR
TSR
Non-TSR
TSR
Non-TSR
TSR
Non-TSR
TSR
Non-TSR
TSR
Non-TSR
TSR
Non-TSR
TSR
Non-TSR
TSR
Non-TSR
TSR
Non-TSR
TSR
Grant
Date
Feb-21
Feb-21
Dec-19
Dec-19
Dec-19
Dec-19
Dec-19
Dec-19
Dec-18
Dec-18
Dec-18
Dec-18
Dec-18
Dec-18
Dec-17
Dec-17
Dec-17
Dec-17
Dec-17
Dec-17
Dec-16
Dec-16
Dec-16
Dec-16
Dec-16
Dec-16
Dec-15
Dec-15
Vest
Date
Jul-23
Jul-23
Sep-22
Sep-23*
Sep-22
Sep-23*
Aug-23
Sep-23*
Aug-23
Sep-23*
Aug-24
Aug-24
Sep-21
Sep-22*
Sep-21
Sep-22*
Aug-22
Sep-22*
Aug-22
Sep-22*
Aug-23
Aug-23
Sep-20
Sep-21*
Sep-20
Sep-21*
Aug-21
Sep-21*
Aug-21
Sep-21*
Aug-22
Aug-22
Sep-19
Sep-20*
Sep-19
Sep-20*
Aug-20
Sep-20*
Aug-20
Sep-20*
Aug-21
Aug-21
Aug-20
Aug-20
Movement in number of performance rights granted
Fair value
Balance at
start of year
$13.10
$21.70
$12.16
$13.52
$12.16
$13.52
$12.16
$13.52
$17.28
$22.11
$17.28
$22.11
$17.28
$22.11
$7.70
$6.16
$7.70
$6.16
$7.70
$6.16
$13.10
$5.22
$13.10
$3.25
$13.10
$2.56
$13.86
$10.87
–
–
30,656
30,656
18,394
18,394
12,262
12,261
24,591
24,591
14,755
14,754
9,836
9,835
43,110
43,110
25,865
25,864
17,244
17,244
1,490
1,489
7,630
7,630
5,086
5,086
5,679
5,678
Granted
during
the year
57,917
57,917
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Vested
Forfeited
Balance at
year end
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(19,661)
(23,449)
(43,110)
–
(11,796)
(14,069)
(25,864)
(7,865)
(17,244)
(1,490)
(1,489)
(5,250)
(3,460)
–
–
(3,780)
(3,779)
–
(9,379)
–
–
–
(2,380)
(4,170)
–
–
(1,899)
(1,899)
57,917
57,917
30,656
30,656
18,394
18,394
12,262
12,261
24,591
24,591
14,755
14,754
9,836
9,835
–
–
–
–
–
–
–
–
–
–
5,086
5,086
–
–
433,190
115,834
(144,788)
(57,245)
346,991
* Certain tranches of performance rights are subject to ‘re-testing dates. Details of vesting conditions and performance hurdles are set out in the Remuneration
Report.
During the current reporting period an expense of $2.01 million (2020: $1.62 million) was recognised in the profit or loss for the rights
issued under the Parent Entity LTI plan. The total fair value of the performance rights outstanding at year end was $3.59 million (2020:
$5.08 million).
167167
37 Related party transactions
a) Parent Entity
The ultimate Parent Entity is Washington H. Soul Pattinson and Company Limited.
b) Subsidiaries and associates
Interest in subsidiaries are set out in Note 34 and associates in Note 15.
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
Paid to KMP of the
Parent Entity
2021
$’000
4,446
216
(50)
140
1,932
6,684
2020
$’000
5,340
231
44
–
1,584
7,199
2021
$’000
3,966
170
(50)
140
1,932
6,158
2020
$’000
4,757
184
44
–
1,584
6,569
Key management personnel remuneration has been included in the Remuneration Report section of the Directors’ Report.
d) Transactions
Subsidiaries
i
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 advances and repayments, subscribing to additional capital and capital
returns, interest, dividend and rental payments.
Transactions between members of the Group which are eliminated on consolidation are not disclosed in this note.
ii Associates
Transactions with associates are at normal commercial terms and conditions.
Transactions consist of advisory, consulting, underwriting, management fees, and rent received from/paid to associates,
loans advanced and repaid, interest and dividend payments.
Summary of transactions
Advisory, consulting, underwriting, management and other fees:
received by subsidiaries from associates
rent income received by Parent Entity from an associate
Management fees paid by Parent Entity to an associate
Interest income from associate
2021
$’000
38
154
330
1,869
2020
$’000
46
168
330
1,516
168
Notes to the Financial StatementsWashington H. Soul Pattinson and Company LimitedAnnual Report 2021 Loans to associates
During the reporting period, the Parent Entity:
1 increased its stand-by loan facility to Palla Pharma Limited from $16 million to $20 million. The amount owed at 31 July
2021 was $18 million (2020: $13.50 million). Interest is charged at commercial rates. The facility matures on 1 April 2022
(2020: 31 August 2021). The facility is secured by a first ranking mortgage over property.
1 advanced $20.22 million in property development loans to the Cronulla by Moran partnership. The amount owed at
31 July 2021 was $21.36 million. No interest is charged on these loans. The facility matures on 30 September 2022 and
secured.
In the prior reporting period, the Parent Entity advanced Heritage Brand Limited $1.25 million. The amount owed at 31 July
2021 was $1.25 million (2020: $1.25 million). Interest was charged at commercial rates. The facility is secured with a second
ranking charge over all assets.
Director related entities
Transactions with Contact Asset Management Pty Limited (Contact)
Mr R D Millner and Mr T C D Millner are both Directors of the Parent Entity and are Directors of Contact Asset Management
Pty Limited. Mr T C D Millner is also a 40% shareholder of Contact.
In the prior reporting period, the Parent Entity entered into an Investment Management Agreement with Contact. Under
this agreement Contact is responsible for managing the Parent Entity’s Large Caps investment portfolio and providing
reports on the performance of that portfolio to the Parent Entity.
During the current reporting period, Contact was paid $0.33 million (2020: $0.33 million) to manage the Large Caps portfolio
on behalf of the Parent Entity. No performance fees are payable to Contact.
The Directors, excluding Mr T C D Millner, reviewed the terms of the agreement and concluded that it was more favourable
to the Parent Entity than an arm’s length agreement for similar services.
Transactions with Bank of Queensland
Mr W M Negus is a Director of the Parent Entity and the Bank of Queensland.
During the reporting period, the Parent Entity participated in the Bank of Queensland Limited capital raising offer resulting
in the purchase of 9,262,668 shares for $68.08 million (2020: $nil).
169169
38 Other accounting policies
a) Foreign currency translation
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 the Group’s functional and presentation currency.
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 or losses resulting from the settlement of such transactions and from the
translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are recognised
in the profit or loss. They are deferred in equity if they relate to qualifying cash flow hedges and qualifying net investment
hedges or are attributable to part of the net investment in a foreign operation.
Transaction differences on non-monetary items, such as equity instruments held at fair value through profit or loss, are
reported as part of the fair value gain or loss on the instrument. Translation differences on non-monetary items are included
in the fair value reserve in equity.
Group companies
The results and financial position of all of the Group’s foreign operations (none of which has the currency of a hyper-
inflationary economy) that have a functional currency different from the presentation currency are translated into the
presentation currency as follows:
1 assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that
statement of financial position;
1 income and expenses for each statement of comprehensive income 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
1 all resulting exchange differences are recognised in other comprehensive income.
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,
the exchange differences are reclassified to the Consolidated Statement of Comprehensive Income, as part of the gain or
loss on sale.
b) Deferred stripping costs
Stripping costs are costs incurred when removing overburden or waste materials in order to access mineral deposits.
Under AASB Interpretation 20: Stripping costs in the production phase of a surface mine, stripping costs incurred during
the development phase are capitalised as part of the mine development costs. Stripping costs incurred during the
production phase are generally accounted for as part of the cost of producing the ore inventory or recognised for stripping
activity where the following criteria are met:
1 It is probable that the future economic benefit (improved access to the ore body) associated with the stripping activity
will flow to the entity;
1 The entity can identify the component of the ore body for which access has been improved; and
1 The costs relating to the stripping activity associated with that component can be measured reliably.
New Hope
New Hope does not recognise any deferred stripping costs. Based on the nature of the New Hope’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.
Round Oak
Round Oak has applied AASB Interpretation 20 to its stripping costs incurred in the production phase as part of its inventory
cost. Amortisation of these costs is allocated on units of production basis.
170
Notes to the Financial StatementsWashington H. Soul Pattinson and Company LimitedAnnual Report 2021 c) Finance costs
Finance 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 finance costs are expensed.
d) Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing:
1 the profit attributable to owners of the Company, excluding any costs of servicing equity other than ordinary shares; and
1 by the weighted average number of ordinary shares outstanding during the reporting period.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account:
1 the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares; and
1 the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion
of dilutive potential ordinary shares.
Long term incentive plan rights that vest in future financial years are expected to be satisfied by purchasing shares on
Market and therefore not considered dilutive.
e) 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 consolidation 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 Consolidated Statement of Financial Position.
Cash flows are presented in the Consolidated 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.
f ) Financial statements 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
AASB terminology
Share capital
Contributed equity
Financial assets held for trading
Other financial assets at fair value through profit or loss
Other financial assets
Other financial assets at fair value through profit or loss
Long term equity investments
Financial assets at fair value through other comprehensive income
Equity accounted associates
Investments accounted for using the equity method
Term deposits
Financial assets at amortised cost
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 Group has elected to present
one statement.
171171
39 Remuneration of auditors
During the reporting period, the following fees were paid or payable for services provided by the auditor:
Fees to Ernst & Young (Australia)
Fees for the audit and review of the financial reports of the Group
and any controlled entities
Fees for other assurance and agreed-upon-procedures services
Fees for other services
– tax compliance
Total fees to Ernst & Young (Australia)
Fees to Pitcher Partners (Sydney) and other auditors
Fees for the audit and review of the financial reports of the Group and any controlled entities
Fees for other assurance and agreed-upon-procedures services
Fees for other services
– tax compliance
– others
Total fees to Pitcher Partners (Sydney) and other auditors
2021
$’000
935
165
7
1,107
666
42
113
–
821
2020
$’000
–
–
–
–
1,308
234
58
337
1,937
172
Notes to the Financial StatementsWashington H. Soul Pattinson and Company LimitedAnnual Report 2021 40 Coronavirus (COVID-19)
Since the last reporting period, the Coronavirus (Covid-19) continued to have a significant impact on local and world economies.
It has impacted the financial position and financial performance of the Consolidated Entity and may affect the future financial
performance of the Consolidated Entity.
The majority of the Consolidated Entity’s investments operated uninterrupted, with a priority to protect the health and safety of
all employees. The operating businesses of the Consolidated Entity used strict workplace protocols, including physical distancing,
travel restrictions, roster changes, flexible working arrangements, rapid screening and personal hygiene controls.
Key financial impacts to the Consolidated Entity during the twelve months to 31 July 2021 were as follows:
1 Changes to demand resulting in higher commodity prices, in particular, increased average realised prices achieved for thermal
coal, copper and zinc. Since August 2020, copper and zinc prices have significantly improved. In contrast, realised thermal
coal prices declined over the August 2020 to November 2020 period, before rebounding in December and January 2021.
An appreciating Australian dollar has partly offset the gains from the increase in commodity prices.
1 The impact of reduced sales volumes of major product lines, both in response to market demand and in response to
government directives. For example, a reduction in demand for thermal coal from markets such as India and regulatory
changes in China favouring its domestic coal producers.
1 The Consolidated Entity has not needed to grant any material deferrals or waiver of rents received from its investment
properties.
1 Changes to operating costs, including additional costs incurred to manage the impact on our assets (e.g., costs relating
to controls such as cleaning, screening and roster changes) and the effect of favourable exchange rate and input cost
movements. The Consolidated Entity has not received any material benefit from the deferral or waiver of lease payments.
1 Receipt of Federal Government JobKeeper support for two operating businesses in the WHSP investment portfolio of
$6.86 million comprising New Hope ($5.86 million) and a subsidiary operating a network of swimming schools ($1 million).
For the swimming schools operation, the support was received for periods where Covid-19 restrictions shut down or severely
restricted operations. New Hope received support for the period where Covid-19 disrupted the global thermal coal market,
reducing consumption and substantially lowering prices.
173173
Directors’ Declaration
In the Directors’ opinion:
1 the attached financial statements and notes comply with the Corporations Act 2001, the Accounting
Standards, the Corporations Regulations 2001 and other mandatory professional reporting
requirements;
1 the attached financial statements and notes comply with International Financial Reporting Standards
as issued by the International Accounting Standards Board as described in Note 1 to the financial
statements;
1 the attached financial statements and notes give a true and fair view of the Consolidated Entity’s
financial position as at 31 July 2021 and of its performance for the financial year ended on that date;
1 there are reasonable grounds to believe that the Parent Entity will be able to pay its debts as and
when they become due and payable; and
1 at the date of this declaration, there are reasonable grounds to believe that the members of the
Extended Closed Group will be able to meet any obligations or liabilities to which they are, or may
become, subject by virtue of the deed of cross guarantee described in Note 34 c) to the financial
statements.
The Directors have been given the declarations required by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of Directors made pursuant to section 295(5)(a) of the
Corporations Act 2001.
On behalf of the Directors
R D Millner
Director – Chairman
25 October 2021
T J Barlow
Managing Director
174
Washington H. Soul Pattinson and Company LimitedAnnual Report 2021 Independent Auditor’s
Report
Independent Auditor’s Report
to the Members of Washington H. Soul Pattinson
and Company Limited
Report on the Financial Report
Opinion
We have audited the financial report of Washington H. Soul Pattinson and Company Limited (the Company)
and its subsidiaries (collectively the Group), which comprises the consolidated statement of financial position
as at 31 July 2021, the consolidated statement of comprehensive income, consolidated statement of changes
in equity and consolidated statement of cash flows for the year then ended, notes to the financial statements,
including a summary of significant accounting policies, and the directors’ declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001,
including:
a. Giving a true and fair view of the consolidated financial position of the Group as at 31 July 2021 and
of its consolidated financial performance for the year ended on that date; and
b. Complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis of Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those
standards are further described in the Auditor’s responsibilities for the audit of the financial report section of
our report. We are independent of the Group in accordance with the auditor independence requirements of
the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards
Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code)
that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical
responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
175175
Independent Auditor’s Report
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial report of
the current year. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion
thereon, but we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed
the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the financial report section of our report,
including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our
assessment of the risks of material misstatement of the financial report. The results of our audit procedures, including the procedures
performed to address the matters below, provide the basis for our audit opinion on the accompanying financial report.
Direction, supervision and evaluation of the work of component auditors
Why significant
How our audit addressed the key audit matter
As auditor of the Group, we are responsible for the direction,
supervision, and performance of the Group audit and are
required to obtain sufficient appropriate audit evidence on
which to base our audit opinion.
Given the size and structure of the Group, there are a
number of significant components of the Group, which
are audited by auditors, other than the Group auditors
(“Component Auditors”). The direction, supervision and
evaluation of the work of the Component Auditors was
considered a key audit matter.
Our audit procedures included the following:
1 We assessed the significance and risks associated with each
component of the Group and identified the components where
audit procedures were required to be performed, to support our
audit opinion on the financial report of the Group.
1 We communicated our requirements to the Component auditors,
detailing the work to be performed, the use to be made of that work
and the form and content of their communication to us as auditor of
the Group.
1 Meetings with the Component Auditors during the planning stage,
execution and when audit procedures were completed to discuss
the extent and outcome of these procedures.
1 Review of the work performed by the Component Auditors
focussing on selected areas, based upon our risk assessment
1 Considered the results of this work on our audit opinion
Classification of investments
Why significant
How our audit addressed the key audit matter
Our audit procedures included the following:
1 Evaluated the Group’s assessment of the classification of a sample
of investments against the requirements of Australian Accounting
Standards.
1 Assessed whether a sample of investments were accounted for in
accordance with Australian Accounting Standards, based upon the
determined classification.
1 Considered the appropriateness of the disclosures in the financial
report.
Refer to Note 13: Financial assets held for trading, Note 15:
Equity accounted associates, Note 16: Long Term Equity
Investments, and Note 34: Controlled entities and joint
ventures.
Equity investments, excluding investments in controlled
entities amount to $2.8 billion representing 38.0% of total
assets.
There are significant differences in how investments are
accounted for depending upon whether they have been
classified by the Group as fair value through profit or loss,
fair value through other comprehensive income, an equity
accounted associate or a consolidated controlled entity, in
accordance with Australian Accounting Standards.
Given the complexity and judgements involved in
determining the appropriate classification of these equity
investments and the significance to the financial report of
the different accounting outcomes impacting revenue and
income in particular, this was considered a key audit matter.
176
Washington H. Soul Pattinson and Company LimitedAnnual Report 2021 Valuation of investments in unlisted entities carried at fair value
Why significant
How our audit addressed the key audit matter
Our audit procedures included the following:
1 With the assistance of our valuation specialists, we assessed the fair
values of a sample of financial assets carried at fair value. Our procedures
included assessing future cash flows, industry data, comparable
benchmarks, and suitability of the valuation methodology based on the
type of investment.
1 Considered the associated financial report disclosures.
Refer to Note 13: Financial assets held for trading, Note
14: Other financial assets, and Note 16: Long Term Equity
Investments.
The determination of the valuation of financial assets
held at fair value by the Group was based upon a range of
inputs and judgements. Where observable data to support
these inputs and the valuations was not available, such
as for unlisted investments, estimates were developed by
the Group based upon the most appropriate source data,
with these valuations being subject to a higher level of
judgement. The value of unlisted investments amounted to
$173 million.
Accordingly, our audit procedures related to the fair value of
these investments is considered a key audit matter.
Information other than the financial report and auditor’s report thereon
The directors are responsible for the other information. The other information comprises the information included in the Group’s 2021
annual report, but does not include the financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance
conclusion thereon, with the exception of the Remuneration Report and our related assurance opinion.
In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether
the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to
be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to
report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the financial report
The directors of the Company are responsible for the preparation 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 control as the directors determine is necessary to
enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud
or error.
In preparing the financial report, the directors are responsible for assessing the Group’s ability to continue as a going concern, disclosing,
as applicable, matters relating to going concern and using the going concern basis of accounting unless the directors either intend to
liquidate the Group or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgment and maintain professional
scepticism throughout the audit. We also:
1 Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit
procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.
The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
1 Obtain an understanding of internal control relevant to the audit 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 Group’s internal control.
177177
Independent Auditor’s Report
1 Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures
made by the directors.
1 Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to
continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report
to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based
on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to
cease to continue as a going concern.
1 Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial
report represents the underlying transactions and events in a manner that achieves fair presentation.
1 Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group
to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group audit. We
remain solely responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings,
including any significant deficiencies in internal control that we identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and
to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where
applicable, actions taken to eliminate threats or safeguards applied.
From the matters communicated to the directors, we determine those matters that were of most significance in the audit of the financial
report of the current year and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation
precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be
communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest
benefits of such communication.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 54 to 69 of the directors’ report for the year ended 31 July 2021.
In our opinion, the Remuneration Report of Washington H. Soul Pattinson and Company Limited for the year ended 31 July 2021, complies
with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with
section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit
conducted in accordance with Australian Auditing Standards.
Ernst & Young
Ryan Fisk
Partner
Sydney
25 October 2021
178
Washington H. Soul Pattinson and Company LimitedAnnual Report 2021 ASX Additional Information
Distribution of Equity Securities as at 5 October 2021
Size of Holding
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
TOTAL
Ordinary Shares
Performance Rights
Number of
Holders
% of Total
Ordinary Shares
Number of
Holders
% of Total
Issued Rights
33,835
16,901
3,194
2,176
203
56,309
3.22%
10.88%
6.21%
13.98%
65.71%
100%
–
1
2
2
1
6
–
1%
4%
20%
75%
100%
Holding less than a marketable parcel
833
Top 20 Shareholders as at 5 October 2021
Ordinary Shares
Held
% of Issued
Shares
1
2
3
4
5
6
7
8
9
BRICKWORKS LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
J S MILLNER HOLDINGS PTY LIMITED
MILTON CORPORATION LIMITED
DIXSON TRUST PTY LIMITED
CITICORP NOMINEES PTY LIMITED
T G MILLNER HOLDINGS PTY LIMITED
HIGLETT PTY LTD
10 WARBONT NOMINEES PTY LTD
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