ANNUAL
REPORT
2020
Waterco pioneers reliable
solutions for healthy, safe water
environments
This annual report is printed on Maine recycled silk paper which
comprises 60% recycled paper & FSC®certified pulp. This paper meets
ISO 14001 Environmental Accreditation standards. Waterco Limited
is pursuing reduction of its carbon footprint and embraces the new
technologies which make recycled paper available.
Contents
4
Company
Profile
12
Board of
Directors
6
Group
Consolidated
Financial
Highlights
14
Statement
of Corporate
Governance
Practices
7
Chief Executive
Officer’s
Review of
Operations
22
Directors’
Report
32
Auditor’
Independence
Declaration
33
Consolidated
Financial
Report
83
Shareholder
Information
84
Corporate
Directory
1
WATERCO LIMITED ANNUAL REPORT 2020 Company Profile
CANADA
Boucherville
USA
Augusta
UK
Kent
CHINA
Guangzhou
MALAYSIA
Kuala Lumpur
SINGAPORE
INDONESIA
Jakarta
AUSTRALIA
Sydney, Brisbane,
Melbourne, Adelaide, Perth
NEW ZEALAND
Auckland
Waterco pioneers reliable solutions for healthy, safe water environments, which are used in residential,
commercial and industrial applications in over 40 countries.
Established in 1981, it has since become a global brand recognised for designing and manufacturing filtration
and sanitisation innovations for the swimming pool, spa, aquaculture, and water purification sectors.
4
4
Manufacturing Power House
Waterco’s research & development team has created an innovative range of award winning products. Waterco
delivers high quality products at exceptional value with its efficient manufacturing procedures, advanced
fibreglass winding and pioneering plastic moulding.
Swimart is a market leading brand in the Pool care industry across
Australia and New Zealand with over 37 years experience.
Swimart is focussed on making Pool Care Easy, with 68 retail stores and
9 mobile franchises across Australia and New Zealand. Swimart provides
its customers a great range, service and advice through its highly trained
and experienced technicians focussed on their Pool care needs through
its fleet of over 250 Swimart service vans.
Zane Solar Systems consists of a 30-strong dealer network throughout
Australia. These highly skilled and trained professionals install solar, heat
pump and gas pool heating systems for both domestic and commercial
applications using Zane’s Gulfstream and Gulfpanel solar absorber,
Electroheat pool heat pumps and Turbotemp gas pool heaters.
In certain regions of Malaysia, residents experience water discolouration
caused by rust from unlined galvanised pipes. To service this market
Waterco has set up a dealer network of 15 Watershoppes selling
Waterco’s range of water filters and drinking water purifiers.
5
WATERCO LIMITED ANNUAL REPORT 2020 Group Consolidated Financial Highlights
Financial Year Ended
Operating revenue ($ million)
Sales revenue ($ million)
Earnings Before Interest and
Tax (EBIT) ($ million) from
continuing operations
Earnings Before Interest and
Tax (EBIT) ($ million) from
discontinued operations
EBIT (continuing operations)
/ Sales Revenue
Profit before income tax from
continuing operations ($ million)
Profit/(loss) before income tax from
discontinued operations ($ million
2020
98.47
93.58
2019*
88.24
85.62
2018
87.83
86.26
2017
85.21
82.51
2016
83.97
81.72
4.83
5.13
6.73
6.21
5.01
17.92
(0.71)
-
-
-
5.2%
6.0%
7.8%
7.5%
6.1%
3.90
4.17
5.72
5.33
3.82
17.92
(0.86)
-
-
-
Net profit after tax ($ million)
17.56
2.28
3.95
3.71
Total assets ($ million)
146.21
116.83
116.59
100.78
Equity ($ million)
87.26
75.83
74.17
64.38
2.85
92.39
59.31
Basic Earnings per share from
continuing and discontinued
operations
Basic Earnings per share from
continuing operations
Basic Earnings per share from
discontinued operations
48.8 cents
6.1 cents
10.3 cents
9.7 cents
7.6 cents
8.6 cents
8.4 cents
10.3 cents
9.7 cents
7.6 cents
40.2 cents
(2.3 cents)
-
-
-
Dividends per share (Interim and Final)
5.0 cents
5.0 cents
5.0 cents
5.0 cents
5.0 cents
Net Tangible Assets per share
Year-end share price
$2.43
$2.55
$2.06
$1.61
$1.99
$2.05
$1.71
$1.70
$1.57
$1.28
*FY2019 Comparative numbers for discontinued operations in FY2020 have been adjusted.
6
6
Chief Executive Officer’s Review Of Operations
SOON SINN GOH
Chairman/Group CEO
REVENUE AND PROFITABILITY
The Group reports a decrease in Net
The Australian and New Zealand Division, which accounts for a
Profit After Tax (NPAT) and Earnings
major portion of the Group’s profitability and sales, registered a
Before
Interest and Tax
(EBIT)
reduction in EBIT of 15%. This is mainly due to increased costs
from continuing operations. NPAT
affected by the impact of the Covid 19 Pandemic and increased
decreased by 4% to $3.01 million,
stock write offs compared to the previous year.
while EBIT decreased by 6% to $4.83
million.
Swimart Division did not meet expectations due to an increase in
company operated stores resulting in higher operating expenses,
During the year the Group reported an
which adversely impacted its contribution for the year.
abnormal gain (atax) of $15.7m from
the Sale of Waterco (C) Ltd and an
abnormal loss (atax) of $1.09m from
the closure of Waterco Canada Inc.
The continuing operations numbers for
the previous financial year have been
adjusted to reclassify the operations
discontinued in the current year as
“discontinued” in the prior year as well
Since 30th June 2020, a number of company operated stores
have been franchised.
The North America and Europe Division recorded an increase in
EBIT resulting from restructuring over the last few years and the
closure of Waterco Canada Inc at the end of May 2020. The
division (excluding discontinued operations) achieved an increase
of $453,000 from EBIT of $506,000 to an EBIT of $959,000.
even though these operations were
DIVISIONAL EBIT PERFORMANCE
only discontinued operations in the
The breakdown of EBIT contribution by division is as follows:
current year. This is required to comply
with Accounting Standard AASB5.
Continuing Operations
FY20
($000)
FY19
($000)
% Change
The major reasons for the improvement
in sales was industry consolidation
Australia and New Zealand
2,517
2,970
North America and Europe
959
506
and
retail consumers using
the
Asia
1,356
1,650
(15%)
90%
(18%)
funds set aside for travel (restricted
because of Covid 19) to make home
improvements
including
renovating
their existing pools or spending their
Consolidated Reported EBIT
From Continuing Operations
Consolidated Reported EBIT
From Discontinued Operations
4,832
5,126
(6%)
17,915
(710)
2,624%
travel money on a new pool instead.
Consolidated Reported EBIT
22,747
4,416
415%
7
WATERCO LIMITED ANNUAL REPORT 2020 AUSTRALIA AND NEW ZEALAND (ANZ)
The Australia and New Zealand Division derives its revenue
predominantly from the domestic swimming pool industry. In
this market, Waterco offers a wide range of products, including
chemicals for swimming pool water treatment. Waterco also
owns the Swimart franchise, which features 68 pool stores and
9 mobiles in Australia and New Zealand. The success of these
stores is built on more than three decades of experience, during
which Waterco has developed an extremely good understanding
of the factors that drive consumer demand in the after-market.
Franchisees benefit from a programme that has been developed
and improved on in-house since 1983, when a company-owned
pool shop was opened in Sydney. This has since grown into the
Swimart franchising retail system.
Steady market share in the domestic pool sector has underpinned
the Division’s performance.
Despite a challenging year in the ANZ Market, Waterco was able to
achieve a 7.4% increase in sales on the previous year.
NORTH AMERICA AND EUROPE
Waterco North America and Europe comprises the Group’s
operations in the USA, Canada, UK and France.
Waterco USA (WUSA) The US market is the largest in the world.
Waterco has invested significantly in this market, through start-up
operations, as well as a substantial acquisition of Baker Hydro in
March 2005. Our operations in Augusta, Georgia, now distribute a
wide range of filters and assemble commercial pumps.
This entity has experienced another significant sales growth (49%)
during the year under review and is expected to further improve
revenue in the ensuing year.
Waterco Canada (WCI) This Entity was the Group’s original centre
for the manufacture of heat pumps. The manufacturing operations
have since been transferred to other manufacturing entities and
WCI became a trading entity with heat pumps as their key product.
During the year, the Board decided to close down Waterco Canada
Inc and the entity was officially deregistered on 31 May 2020.
The parent entity’s investment in WCI had been fully impaired so
the close down of Waterco Canada Inc did not have a major impact
on the group. The bulk of the stock was returned to Waterco Far
East and majority of the outstanding trade debts were collected
– However, there was some write off of obsolete stock and bad
debts, and expenses incurred in closing the business resulted in
an abnormal loss of $CAD917,140.
8
Swimart has unveiled its new logo and
a three-year rebrand strategy, heralding
an exciting phase for one of Australasia’s
biggest pool and spa networks.
MultiCyclone success in USA
Waterco USA has significantly increased
sales of Waterco’s patented MultiCyclone
centrifugal filtration system. MultiCyclone’s
ability
reduce filter
maintenance, captured the interest of the
US market.
to dramatically
Climate Care Certification
newest
benchmark
Australia's
in
environmental sustainability for swimming
pools and spas,
the Climate Care
Certification Program, has certified
MultiCyclone for its ability to reduce water
consumption.
Electroheat MKV heat pump
Greater interest in environmentally friendly
and cost-effective pool heating has seen
an increase in the use of heat pumps to
efficiently heat pools.
Waterco has recently re-designed
popular side vented Electroheat MKV.
its
Additional
customer
exterior to reduce noise and vibration.
improvements based on
include a robust
feedback
Medical-grade filtration for
hydrotherapy pool.
Southport, UK
Due to the limited access to Southport and
Ormskirk Hospital's plantroom meant that
Waterco’s SMDT split tank filters provided
the perfect solution.
Specifically designed for retrofitting, they
can be delivered in two parts and easily
assembled on-site in the plant room.
Thanks to the istallation of the SMDT
filters, the spinal trauma patients now have
access to crystal clear hydrotherapy pool.
Waterco Europe (WEL) Waterco started operations in the UK
in 1999 and subsequently acquired the business of Lacron Ltd in
2003. This Entity, therefore, enjoys a continuous and successful
history of almost 40 years in the manufacture of fibreglass filters.
The renowned “Lacron” name is synonymous with quality filters and,
coupled with Waterco’s established progressive manufacturing
techniques, this has enabled WEL to bring to the market filters
of quality at acceptable prices. Today, both the Lacron and the
Waterco brands are well-recognised as quality products in Europe.
This recognition continues, even after the manufacturing operations
had been transferred to Malaysia and China, because the same
high standards have been maintained.
Waterco Europe achieved a 22% decrease in sales during the year
despite the challenges in the European Market (including Brexit).
This decline was expected to be more severe due to the extended
lockdown but the impact has been reduced by strong local
management in the UK. This Entity continues to reinforce its interest
in commercial filters of high pressure ratings developed for water
treatment, in particular, as pre-filtration for seawater desalination.
The Group’s ability to manufacture filters of such pressure ratings
from composites provides an opportunity to enhance our presence
into a market that has traditionally used steel to cope with such
pressures.
9
WATERCO LIMITED ANNUAL REPORT 2020 Waterco’s Malaysian manufacturing
facility in Kuala Lumpur
Waterco’s high-tech facility takes up 6.3
hectares and has a total work force of
450 staff.
The Malaysian facility manufactures an
extensive range of fibreglass filters, from
400mm to 3000mm diameter vertical
filters and 860mm diameter to 2200mm
diameter horizontal filters.
Waterco’s Micron commercial fibreglass
filters are made from continuous strands
of high-quality fiberglass filament wound
under controlled tension to create a
seamless, impervious vessel.
ASIA
Waterco Far East in Malaysia (WFE) This Entity was borne out
of Waterco’s familiarity with the Southeast Asian market. WFE was
initially a sales operation designed to service Waterco Australia’s
Southeast Asian customer base. In 1991 WFE added manufacturing
operations to our undertakings in Kuala Lumpur, Malaysia. As well
as bringing the Group closer to our markets in Southeast Asia, this
also gave cost-efficiency in our manufacturing operations. Since
then, WFE has become the principal manufacturing facility for
pumps and filters for the Waterco Group. WFE continues to deliver
new products to give the Group an edge in our marketing activities.
WFE has achieved ISO9001:2008 certification, the internationally
recognised standard for the quality management of businesses,
and demonstrates the existence of an effective and well-designed
quality management system, which stands up to the rigours of
an independent external audit. A key criterion of this standard is
that the management system can provide confidence in creating
products that meet expectations and requirements.
Local sales in Malaysia fell by 15% due to the Covid19 Pandemic
lockdown and continuing political uncertainty. Increased volume,
particularly in labour-intensive large commercial filters, has resulted
in an increase in wages above expectation, with more overtime
worked on top of the extra wages incurred to catch up with
manufacturing after the lockdown ended. The Entity’s capacity has
been increased in the new financial year to address this and this is
expected to lead to an improvement in financial performance.
Waterco China Waterco commenced operations in 2000,
delivering advantages of low operational costs and a foothold into
the huge China market. In 2018, Waterco Guanghzou Ltd (another
fully owned subsidiary) took over the manufacturing operations from
Waterco (C) Ltd. The property where the manufacturing operations
take place was retained by Waterco (C) Ltd. The manufacturing
of filters primarily for the European and the Australian markets
has been relocated to Malaysia, leaving this entity to focus on
development of commercial heat pumps and to improve marketing
of pool equipment to the commercial pool market in China. External
sales fell by 121% during the year due to the impact of the Covid19
Pandemic in addition to the ongoing trade issues and softer
economic conditions that existed prior to the Covid19 Pandemic.
On 23 April 2020, Waterco Ltd signed an agreement to sell its
shares in Waterco (C) Ltd to Guangzhou Yaolong Information
Industry Co Ltd. The sale was subject to Regulatory Approval
which was given on 3 June 2020 when the shares in the company
were transferred to the purchaser. The gain on sale of Waterco (C)
Ltd of $A15.7m has been treated as an abnormal item and shown
as profit from discontinued operations.
10
Waterco’s quality control procedures
ensure that the structural requisites of
the product are achieved at every stage
of production. This results in 100%
compliance of the end product with the
specifications.
SolarMate water heating, Malaysia
Since 1980, SolarMate Malaysia has
paved the way with its innovations in
design, product quality and product
enhancements on its solar stainless-steel
pressure tanks and solar panels (thermal),
and the use of recyclable materials for
long-term sustainability.
SolarMate was acquired by Waterco in
2019.
Waterco International in Singapore (WI) This Entity focuses on
sales in Asian countries, other than Malaysia and China, where we
have our own trading entities. WI also provides technical assistance
to our Indonesian entity and has been able to contribute to the
growth of the latter. Performance during the year was steady.
PRODUCT DEVELOPMENT AND WATER TREATMENT
The Group continues to invest in Research and Development in
order to be at the forefront of the industry.
Product innovation and research and development in the water-
treatment subsector are considered to be critical to Waterco
staying at the forefront of the industry. Waterco considers water-
treatment products and systems to be a key revenue driver for
the Group. As such, ensuring that our products and systems are
appropriately protected is of value and importance.
The array of technology advances and patents will improve
Waterco’s position in the servicing of swimming pool markets
globally and are expected to improve the appeal of the Swimart
franchise.
DIVIDEND AND OUTLOOK
The results (Net Profit After Tax of $3.01m from continuing
operations), is 16% above the profit guidance of $2.6m provided
to the market on 25 October 2019 and withdrawn on 9 April 2020
due to the uncertain impact of the Covid19 Pandemic on the
group. While Australia/New Zealand and Asia reported EBIT (from
continuing operations) fell from last year, EBIT for North America
and Europe showed a strong improvement on the previous year.
This is especially pleasing, as losses in the US and Canadian
entities (in the North America and Europe Division) are not tax-
effected, accentuating their impact.
The Board will provide a profit guidance at a later stage for the
financial year ending 30 June 2021, as more information becomes
available during the year.
Waterco declares a final dividend payment of 3 cents per share,
payable to shareholders on 16 December 2020. With an interim
dividend of 2 cents per share, declared after the announcement of
the Half-Year results, this maintains the total dividend for the year
at 5 cents per share.
11
WATERCO LIMITED ANNUAL REPORT 2020 Board of Directors
SOON SINN GOH - B COM FCPA
Chairman/Group CEO
Mr. Goh is the founder of Waterco Limited. He has been a member of the Board since
the Company’s incorporation in February 1981. Prior to the inception of Waterco, he
was the Managing Director of a company specialising in the construction of water
and sewage treatment facilities. His extensive experience in the water treatment
industry is instrumental to the success of Waterco.
He held no other listed company directorships during the past three financial years.
BRYAN GOH - B ECON
Group Marketing Director
Mr. Goh was appointed to the Board in June 2010.
As the Group Marketing Director, Mr. Goh has overall responsibility for business and
product development in Australia and oversees the marketing activities of Waterco’s
overseas subsidiaries.
Mr. Goh was on the board of directors of The Swimming Pool & Spa Association
of New South Wales Ltd (from February 2005 to February 2009), a non-profit
organisation dedicated to maintaining and improving standards within the industry
for the betterment of consumers, pool builders and suppliers.
He held no other listed company directorships during the past three financial years.
GARRY NORMAN - B COM CA (retired 25 October 2019)
Non-Executive Director
Mr. Norman was appointed to the Board as a Non-Executive Director in October
1993.
He has been in public practice as a Chartered Accountant since 1990, having
been previously employed by Duesburys Chartered Accountants (now Deloitte) for
fourteen years before leaving to establish his own Chartered Accounting firm - G R
Norman & Co.
He has an extensive background in accounting and taxation matters, having been
involved with a wide range of clients in both city and suburban practices – previously
in his role as a manager of the Business Services Division of Duesburys and currently
in his role as principal of a suburban practice.
Mr. Norman was Chairman of the Audit Committee and a member of the
Remuneration Committee up to 25 October 2019.
He held no other listed company directorships during the past three financial years.
Mr Norman retired as a director on 25 October 2019 after the conclusion of the
Annual General Meeting of the Company.
12
BEN HUNT - PHD (ANU)
Non-Executive Director
Dr. Hunt was appointed to the Board as a Non-Executive Director in June 1998. He
has held academic appointments as the Head of the Graduate School of Business,
Associate Dean of the Faculty of Business and Associate Professor of Finance at the
University of Technology, Sydney (UTS).
He has a doctorate from the Australian National University. Although Dr Hunt has
written extensively on Australian financial markets (he is the co-author of the text
Australian Institutions and Markets, 7th Ed.), his knowledge extends to the South
East Asian region. He is a regular presenter of financial seminars in Hong Kong and
Singapore for the UK publishing and training company Euromoney.
Dr Hunt is the Chairman of the Remuneration Committee and a member of the Audit
Committee.
He held no other listed company directorships during the past three financial years.
(RICHARD) CHENG FAH LING - B COM CA
Non-Executive Director
Mr. Ling was appointed to the Board as a Non-Executive Director in May 2009. He
holds a Bachelor of Commerce degree from the University of Newcastle, Australia. He
is a member of Chartered Accountants Australia and New Zealand and the Malaysian
Institute of Accountants. He has experience in total logistics and corporate finance
in capital markets. Mr. Ling is currently a Non-Executive Director of Tiong Nam
Logistics Holdings Berhad, a public company listed on Bursa Malaysia (Malaysian
Stock Exchange). He is a member of the Remuneration and Nomination Committee
and Chairman of the Audit Committee of Tiong Nam Logistics Holdings Berhad.
Mr. Ling is Chairman of the Audit Committee (from 26 October 2019) and a member
of the Remuneration Committee of Waterco Limited.
He held no other listed company directorships during the past three financial years.
JUDY RAPER AM, BE (Hons), PHD, FATSE, FAICD, FIE(Aust), MIET
(appointed 1 April 2020)
Non-Executive Director
Professor Raper holds a Bachelor of Engineering (Hons) and has a doctorate from
The University of New South Wales. She has held several academic and non-
academic appointments in Australia, the United States and the UK as the Dean of
Engineering at the University of Sydney, Head of Chemical & Biological Engineering at
University of Missouri in United States, Division Director of Chemical, Bioengineering,
Environmental Engineering and Transport Systems at the National Science Foundation
in United States and Deputy Vice-Chancellor (Research & Innovation) at the University
of Wollongong. She is currently the Dean and Chief Executive Officer of TEDI-London
responsible for the development of a new start up Engineering Institution.
Professor Raper is a Fellow of the Australian Academy of Technology, a fellow of
the Australian Institute of Company Directors and an Honorary Fellow of Engineers
Australia.
Professor Raper is a member of the Remuneration Committee and the Audit
Committee of Waterco Limited.
She held no other listed company directorships during the past three financial years.
13
WATERCO LIMITED ANNUAL REPORT 2020 Statement of Corporate Governance Practices
This statement explains how Waterco Limited ACN 002 070 733 (Waterco or Company) has complied with the ASX
Corporate Governance Council’s Corporate Governance Principles and Recommendations – 3rd Edition, published
27 March 2014 (ASX Recommendations), during the financial year ended 30 June 2020 (Reporting Period).
The Company will comply with the ASX Corporate Governance Council’s Corporate Governance Principles and
Recommendations – 4th Edition, published February 2019 for the financial year ended 30 June 2021.
All Waterco charter, codes and policy documents referred to in this statement are available in the Corporate
Governance section of the Company’s website, www.waterco.com.
This statement has been adopted by the Board as current as of 26 August 2020.
Principle 1: Lay solid foundations for management and oversight
RECOMMENDATION
WATERCO’S COMPLIANCE WITH ASX RECOMMENDATIONS
1.1
Role of Board and
management
The Board Charter sets out the roles and responsibilities of the Board. The Board
is ultimately responsible for the growth, strategic direction and success of the
Company and has set out specific matters reserved for its decision and matters
delegated to the management.
1.2
Information
regarding election
and re-election of
director candidates
The Company has in place a policy for nomination and appointment of directors.
Before appointing a director, the Company will undertake appropriate checks on a
candidate for directorship and will provide all material information in its possession
to its shareholders to make a decision on whether or not to elect or re-elect a
director.
When considering the re-election of an incumbent director or election of a new
director, the Board takes into account the following:
• business experience, particularly in respect of the industries in which the
company operates;
• standing in the community;
• educational qualifications;
• checks against the person’s character, criminal record and bankruptcy history;
• availability and other directorships;
• the possession of particular skills such as finance, marketing or risk
management;
• whether the appointment or re-appointment will contribute positively to the skill
set and diversity of the Board as a whole; and
• gender diversity policy of the Company.
14
1.3 Written appointment
In addition to being set out in the Board Charter, the letters of appointment
executed with all directors describe the key duties and responsibilities of each
member of Board, and further include the terms of appointment, remuneration,
time commitment envisaged, expectations regarding committee work, the
requirement to disclose directors’ interests and confidentiality obligations.
Mr Soon Sinn Goh has an employment agreement with the Company as the Group
Chief Executive Officer. As Mr Goh spends a majority of his time developing and
enhancing manufacturing capabilities in Malaysia and sales in various entities other
than Australia and New Zealand, he also has a letter of employment with Waterco
(Far East) Sdn Bhd setting out his role in Malaysia and a letter of employment with
Waterco International Pte Ltd for his role in Singapore.
Key Management Personnel have written employment agreements setting out a
description of key duties and responsibilities, reporting lines, remuneration and
termination rights.
1.4
Company Secretary
The Company Secretary is appointed by and accountable to the Board and has
particular responsibility for:
1.5 Diversity
• advising the board and its committees on governance matters;
• monitoring whether board and committee policy and procedure are being
followed;
• coordinating timely completion of board and committee papers;
• ensuring that business conducted at board and committee meetings are
accurately recorded in the minutes; and
• helping to organise the induction and professional development of directors.
The Board Charter explicitly reflect this delegation by the Board to the Company
Secretary.
The Board recognises diversity and equity as strengths and adopted a Diversity
& Equity Policy for the Company which includes an express requirement for the
Board to set measurable objectives for achieving gender diversity.
The Diversity & Equity Policy is available in the Corporate Governance section of
the Company’s website, www.waterco.com. In accordance with the Diversity &
Equity Policy, the Board set objectives for achieving gender diversity across its
organisation. The objectives for the Reporting Period were
Women on the Board
Women in senior executive positions
(excluding Board Members)
Women employees in the company
Measurable objective
%
0%
25%
25%
The Board assessed the progress towards these objectives during the Reporting
Period by reviewing the relative proportion or women and men in the Company’s
workforce at all levels. As at 18 June 2020, women represented 25.7% of the
overall workforce. Women made up 50% of senior executives (defined by the
company as the Key Management Personnel). At the Board level, there is one
female director appointed during the Reporting Period. Gender diversity will be
considered at any time of Board renewal or additions.
15
WATERCO LIMITED ANNUAL REPORT 2020 1.6
Board reviews
1.7 Management
reviews
The Board is committed to an ongoing internal process of performance evaluation
of the Board, its committees and individual directors to ensure the diligent and
effective discharge of responsibilities and a consistent mind set in improving
corporate governance practices. The Board has undertaken an evaluation on
the performance of the Board, its committees and individual directors for the
Reporting Period.
The Company is committed to an ongoing internal process of performance
evaluation of Key Management Personnel to ensure the diligent and effective
discharge of their responsibilities The CEO has undertaken a performance
evaluation review of Key Management Personnel for the Reporting Period except
for Sze Tin Lim who retired on 23 July 2019 and Bee Hong Leo who will be retiring
in October 2020.
Principle 2: Structure the Board to add value
RECOMMENDATION
WATERCO’S COMPLIANCE WITH ASX RECOMMENDATIONS
The Company has not established a nomination committee. The ASX
Recommendations acknowledge that such committees may not be required for
smaller boards. The Board is of the opinion that it is appropriate for a company
the size of Waterco for matters that come under the purview of a nomination
committee to be undertaken by the Board through the Remuneration Committee.
Furthermore, the Board has established processes in place to raise and address
issues that would otherwise be considered by a nomination committee.
The Board comprises an executive Chairman who is also the Group Chief
Executive Officer (CEO), an Executive Director and three Non-Executive Directors.
The Board views each of the three Non-Executive directors as being independent.
The Board’s membership is reviewed periodically to ensure that it maintains an
appropriate mix of skills, qualifications and experience. In particular the Board
has identified skills and experience in corporate finance, international trade and
international business environment, marketing and accounting and technical and
industry knowledge in the water treatment and pool industries to be important. The
Board composition represents diversity in gender, age, ethnicity and background.
At each Annual General Meeting (AGM), one third of the directors (excluding the
CEO) and any director appointed to fill a casual vacancy since the previous AGM
must retire but may stand for re-election.
The Company achieved its preferred Board composition of at least five directors
during the Reporting Period, with a majority of Non-Executive (and, where
possible, independent) Directors.
2.1
Nominations
committee
16
2.2 Board skills matrix
Below is the matrix of skills and attributes that Waterco is aiming to achieve across
its Board membership. This matrix was adopted by the Board on 23 June 2015.
The Board is conscious of the need to improve in some areas, such as legal and
engineering experience and female representation, and is considering addressing
these shortcomings by attracting new candidates.
2.3 Disclose
independence and
length of service
General
Executive and Non-Executive
Leadership
Strategic thinking
Industry experience
Governance
Governance committee
Risk management
Ethical and fiduciary duties
Environment and sustainability
Technical
Diversity
Legal
Financial
Engineering
Human resources
Female
Male
Different ethnicities and cultures
Languages other than English
The names of the independent directors in office during the Reporting Period were:
• Garry Norman (for the period 1 July 2019 through to 25 October 2019);
• Ben Hunt;
• (Richard) Cheng Fah Ling ;
• Judy Raper (from 1 April 2020).
The Company’s assessment of the materiality of a director’s interest is considered
on a case by case basis by the Board. Where an entity associated with a Director
provides services to the Company, the Board uses a threshold of $100,000 in fees
in a financial year as a guideline. However the Board does not follow an inflexible
set of criteria but considers whether the relationship in question is reasonably
likely to interfere with that Director’s independent judgement. Further details of
the directors’ skills, experience, expertise and lengths of service are set out in the
Board of Directors' section of the Company’s Annual Report.
2.4 Majority of directors
independent
For the majority of the Reporting Period, a majority of the Board were independent
directors, taking into account the factors relevant to "independence" under the
ASX guidelines.
2.5
Independent Chair
Garry Norman resigned as a director on 25 October 2019 and Judy Raper was
appointed as a director on 1 April 2020. For the period that the Company was
looking for an appropriate replacement for Garry Norman, the majority of the
Board did not consist of independent directors.
The roles of Chairperson and Group CEO are both held by Mr Soon Sinn Goh.
The Board believes that Mr Goh brings a vital level of industry experience to the
operations of the Company. Also, as the major shareholder of the Company, Mr
Goh’s commitment to the success of the Company is unquestionable. Therefore,
it is the Board’s opinion that it is appropriate in the Company’s circumstances that
the two roles be combined. With the majority of the Directors being independent,
and with Independent Directors chairing the Audit and the Remuneration
Committees, the Board is also of the opinion that it is not necessary that the office
of Chairperson be held by an Independent Director.
2.6
Induction and
professional
development
All new directors undergo an induction to familiarise them with the business of
the Company, the Company’s internal control and risk management practices
and policies and procedures. The Company also seeks to provide appropriate
professional development opportunities for directors to develop and maintain the
skills and knowledge needed to perform their role as directors effectively.
17
WATERCO LIMITED ANNUAL REPORT 2020 Principle 3: Act ethically and responsibly
RECOMMENDATION
WATERCO’S COMPLIANCE WITH ASX RECOMMENDATIONS
3.1 Code of conduct
The Board has established a Code of Conduct for directors, key management
personnel and employees.
Principle 4: Safeguard integrity in corporate reporting
RECOMMENDATION
WATERCO’S COMPLIANCE WITH ASX RECOMMENDATIONS
4.1 Audit committee
The Audit Committee operates under the Audit Committee Charter.
The role of the Audit Committee is to assist the Board with its oversight of the
integrity of the financial statements, including overseeing the existence and
maintenance of internal controls, accounting systems, and the financial reporting
process. The Committee also nominates external auditors, reviews existing
audit arrangements and co-ordinates external and internal auditing functions. In
addition, the Audit Committee examines any other matters referred to it by the
Board.
Throughout the Reporting Period the Audit Committee consisted of 3 Independent
Non-Executive Directors and was headed by an Independent Chairperson not
holding the position of Chairperson of the Board.
The members of the Audit Committee during the Reporting Period were:
• Garry Norman (for the period 1 July 2019 to 25 October 2019);
• (Richard) Chang Fah Ling – Chairman (from 26 October 2019);
• Ben Hunt; and
• Judy Raper (from 1 April 2020)
For the period that the Company was looking for an appropriate replacement for
Garry Norman, the majority of the Board did not consist of independent directors.
The number of Audit Committee meetings and details of Committee members’
attendance are included in the Directors’ Report section of the Company’s Annual
Report.
4.2 CEO and CFO
certification of
financial statements
The Board has received a written statement from its Group CEO and Chief
Financial Officer (CFO) which includes a declaration under section 295A of the
Corporations Act 2001 (Cth) advising that:
• in their opinion the Company’s financial reports have been properly maintained
and have complied with the appropriate accounting standards and give a true
and fair view of the Company’s financial position and performance; and
• the opinion has been formed on the basis of a system of risk management
and internal control adopted by the Board, and that this system is operating
efficiently.
4.3
External auditor at
AGM
The external auditor attends the AGM for the purpose of answering shareholder
questions regarding the conduct of the audit and the preparation and content of
the audit report.
18
Principle 5: Make timely and balanced disclosure
RECOMMENDATION
WATERCO’S COMPLIANCE WITH ASX RECOMMENDATIONS
5.1 Disclosure and
Communications
Policy
The Company’s Continuous Disclosure Policy sets out the rules and responsibilities
for Waterco’s officers and employees to ensure compliance with ASX Listing
Rules and promote factual and timely disclosure of all material matters concerning
the Company.
Principle 6: Respect the rights of security holders
RECOMMENDATION
WATERCO’S COMPLIANCE WITH ASX RECOMMENDATIONS
6.1
Information on
website
Waterco keeps investors informed by publishing information on the Company’s
website.
All disclosures made to the ASX and all information provided to analysts or the
media during briefings are promptly posted on the Company’s website after they
have been released to the ASX.
6.2
Investor relations
programs
The Company’s Shareholder Communication Policy details the mechanisms put
in place to ensure that the rights of shareholders are respected and to facilitate
the effective exercise of those rights.
The Shareholder Communication Policy contains information on persons whom
shareholders can contact in relation to procedures at shareholders meetings,
matters being considered at shareholders meetings and other issues. It also
indicates the predominant sources for investors to engage with the Company at
general meetings of the Company.
6.3
Facilitate
participation at
meetings of security
holders
Shareholders who are unable to attend any of the Company’s meetings are
encouraged to vote on the proposed motions by appointing a proxy. Proxy forms
are included with meeting notices which also provides details on how proxy forms
should be completed and submitted.
6.4
Facilitate electronic
communications
The Company recognises the benefits of the use of electronic communications.
Shareholders have the option of selecting to receive the following information
electronically from the share registry: dividend statements; annual reports; notices
of meetings and proxy forms and the ability to vote online; and other general
company communications.
With this in place, shareholders can log into their account to make changes to
their communication preferences. The share registry can also be contacted via
email or telephone. Contact details can be found on the Company’s website.
19
WATERCO LIMITED ANNUAL REPORT 2020 Principle 7: Recognise and manage risk
RECOMMENDATION
WATERCO’S COMPLIANCE WITH ASX RECOMMENDATIONS
7.1 Risk committee
The Company has not established a Risk Committee.
The functions of the Risk Committee are performed by the Audit Committee who
reports to the Board on the effectiveness of the risk management and internal
control processes of the Company regularly by circulation of Minutes of Meetings
to the directors and through other means of formal and informal reporting.
Further details regarding the Audit Committee, its membership and the number
of meetings held during the Reporting Period are set out in response to
Recommendation 4.1.
7.2
Annual risk review
The Board reviews the risk management framework of the Company periodically
as and when necessary to meet the operational requirements of the Company
and changes in the law through the Audit Committee. The Board has performed
the review for the Reporting Period.
7.3
Internal audit
The Company reviews and continually improves the effectiveness of its risk
management and internal control processes.
Further details regarding audit functions are set out in response to Recommendation
4.1.
7.4
Sustainability risks
The Board considers that the Company is not materially exposed to economic,
environmental and social sustainability risks.
20
Principle 8: Remunerate fairly and responsibly
RECOMMENDATION
WATERCO’S COMPLIANCE WITH ASX RECOMMENDATIONS
8.1
Remuneration
committee
The Remuneration Committee is responsible for making recommendations to the
Board on remuneration packages and policies for the Executive Directors and the
Key Management Personnel. The Remuneration Committee Charter is published
on the Company’s website.
For the majority of the reporting period, the Remuneration Committee consisted of
three independent Non-Executive Directors and was headed by an independent
Chairperson not holding the position of Chairperson of the Board.
The members of the Remuneration Committee during the Reporting Period were:
• Ben Hunt – Chairman;
• Garry Norman (for the period 1 July 2019 to 25 October 2019);
• (Richard) Cheng Fah Ling; and
• Judy Raper (from 1 April 2020).
The number of Remuneration Committee meetings and details of Committee
members’ attendance during the Reporting Period are set out in the Directors’
Report section of the Company's Annual Report.
For the period that the Company was looking for an appropriate replacement for
Garry Norman, the majority of the Board did not consist of independent directors.
8.2 Disclosure of
Executive and Non-
Executive Director
remuneration policy
Remuneration of the Company’s Non-Executive Directors operates on different
principles to the remuneration of Executive Directors. Non-Executive Directors
receive fixed fees, and are not entitled to any retirement benefits other than
statutory superannuation.
The Remuneration Report at the Directors’ Report section of the Annual Report
sets out:
• information about the Remuneration Policy developed by the Remuneration
Committee and adopted by the Board; and
• details of remuneration of the directors (executive and non-executive) and Key
Management Personnel.
8.3
Policy on hedging
equity incentive
schemes
The Company did not offer an equity-based remuneration scheme during the
Reporting Period.
21
WATERCO LIMITED ANNUAL REPORT 2020 Directors' Report
Your directors present their report on the Company and its controlled entities for the financial year ended 30 June
2020.
Directors
The names of directors in office during and since the end of the financial year are:
• Soon Sinn Goh
• Bryan Goh
• Garry Norman (retired 25 October 2019)
• Ben Hunt
• (Richard) Cheng Fah Ling
• Judy Raper (appointed 1 April 2020)
All directors have been in office since the start of the financial year except Judy Raper who was appointed on 1 April
2020 and Garry Norman who retired on 25 October 2019
For details of the directors’ qualifications and experience, refer to the section titled “Board of Directors” which is to
be read as part of this report.
Company Secretaries
The following persons held the position of Joint Company Secretary throughout the financial year:
• Bee Hong Leo
Mrs Leo was appointed Company Secretary on 3 March 1983. She has been employed by Waterco since March
1981 performing management roles in the administration and legal divisions. Mrs Leo will be retiring on 30 October
2020.
• Gerard Doumit FCPA JP
Mr Doumit was appointed Company Secretary on 22 July 1991. He has been employed by Waterco since January
1987 as an Accountant and is currently Chief Financial Officer (CFO) and Company Secretary.
He holds a Bachelor of Economics (Accounting ) from Macquarie University.
• Sin Wei Yong
Mr Yong was appointed Company Secretary on 1 July 2020.
He is an admitted solicitor and holds a Bachelor of Laws (Hons) from Northumbria University, United Kingdom.
He joined the Company in 2014 as a Legal Officer. He has extensive experience in corporate governance and has
more than 15 years’ experience in legal and regulatory compliance in a financial services group prior to joining the
Company.
Principal Activities
The principal activities of the consolidated Group during the financial year were:
• wholesale, export and manufacture of equipment and accessories in the swimming pool, spa pool, spa bath, rural
pump and water treatment industries;
• manufacture and sale of solar heating systems for swimming pools and pre-heat industrial solar systems;
• franchise of retail outlets for swimming pool equipment and accessories; and
• formulating, packing and distribution of swimming pool chemicals to independent pool stores and stores in its
Swimart franchise network.
There were no significant changes in the nature of the consolidated Group’s principal activities during the financial
year.
22
Consolidated Results
The consolidated profit of the Group after providing for income tax and eliminating non controlling interests amounted
to $17.662 million.
Dividends
Dividends paid or declared for payment are as follows:
• Final ordinary dividend of 3 cents per share paid on 16 December 2019 as recommended in last year’s report -
$1.094 million
• Interim dividend of 2 cents per share paid on 15 June 2020 as declared in the half yearly report - $0.718m
• Final ordinary dividend of 3 cents per share declared by the directors to be paid on 16 December 2020 - $1.099
million.
All dividends paid or declared since the end of the previous financial year were fully franked.
Review of Operations
A review of operations of the Consolidated Group during the financial year and of the results of those operations
together with likely developments in the operations of the consolidated Group and the expected results of those
operations are set out in the Chief Executive Officer’s Review of Operations.
Financial Position
The net assets of the Consolidated Group have increased by $11.43 million from $75.83 million in June 2019 to
$87.26 million in June 2020.
The change has largely resulted from:
• Upward movement in profits less dividends paid of $21.04 million;
• Net decrease in the asset revaluation reserve of group companies of $5.08 million
• Net decrease in non-controlling Interests of $0.10 million
• Foreign currency translation loss of $2.74 million;
• Net decrease in share capital of $1.69 million from the Waterco Share Buy-Back.
The Group’s working capital being current assets less current liabilities increased from $30.62 million in 2019 to
$46.81 million in 2020.
The Directors believe that the Group is in a strong and stable financial position.
Significant Changes in State of Affairs
The Directors are not aware of any significant changes in the state of affairs of the Consolidated Group that occurred
during the financial year which have not been covered elsewhere in this report.
After Balance Date Events
The impact of the Coronavirus (COVID 19) pandemic is ongoing and while it has been financially positive for the
consolidated entity up to 30 June 2020, it is not practicable to estimate the potential impact, positive or negative,
after the reporting date. The situation is rapidly developing and is dependent on measures imposed by the Australian
Government and other countries, such as maintaining social distancing requirements, quarantine, travel restrictions
and any economic stimulus that may be provided.
23
WATERCO LIMITED ANNUAL REPORT 2020 On 2 June 2020 Waterco Ltd signed an agreement to acquire the business of Automated Pool Products Pty Ltd (a
leading distributor of equipment in the Pool Market) for consideration of $3.085 Million.The purchase was completed
on 17 July 2020.
Since the end of the reporting period, the Board resolved to pay a final dividend of 3 cents per share fully franked
Future Developments, Prospects and Business Strategies
Information as to future developments, prospects and business strategies in the operations of the Consolidated
Group are included in the Chief Executive Officer’s Review of Operations. Other possible developments have not
been included in this report as such inclusions would, in the opinion of the Directors, prejudice the interests of the
Consolidated Group.
Environmental Issues
The Consolidated Group’s operations are subject to some environmental regulations, particularly with regard to
the storage of chemicals and waste management. The Consolidated Group has adequate systems in place for the
management of its environmental requirements. The Directors are not aware of any breaches of the environmental
regulations during the financial year.
Directors’ Shareholdings
Details of the Directors’ shareholdings are contained in Note 7 to the Financial Statements.
Meetings of Directors
During the financial year, 14 meetings of directors (including Audit and Remuneration Committees) were held.
Attendances are set out below:
Director
Directors’ Meeting
Audit Committee Meeting
Remuneration
Committee Meeting
Number
Eligible
To Attend
Number
Attended
Number
Eligible
To Attend
Number
Attended
Number
Eligible
To Attend
Number
Attended
Soon Sinn Goh
Bryan Goh
Garry Norman
Ben Hunt
(Richard) Ling
Judy Raper
5
5
2
5
5
2
5
5
2
5
5
2
-
-
2
5
5
2
-
-
2
5
5
2
-
-
1
4
4
2
-
-
1
4
4
2
Indemnifying Officers or Auditor
During and since the financial year, the Company has paid premiums to insure all directors and officers against
liabilities for costs and expenses incurred by them in defending any legal proceedings arising out of their conduct
while acting in the capacity as director or officer of the Company, other than conduct involving a wilful breach of
duty in relation to the Company. In accordance with common commercial practice, the insurance policy prohibits
disclosure of the nature of the liability insured against and the amount of the premium.
The Company has not otherwise, during or since the financial year, indemnified or agreed to indemnify an officer or
auditor of the Company or any related body corporate against a liability incurred by such an officer or auditor.
24
Directors’ Benefits
No director has received or become entitled to receive, during or since the financial year, a benefit arising from a
contract made by the parent entity, or a related body corporate with a director, a firm of which a director is a member
or a director or an entity in which a director has a substantial financial interest other than:
i. Sales made by a controlled entity to Asiapools (M) Sdn Bhd of which Mr Soon Sinn Goh is a director and
shareholder.
ii. Payments made for rental of warehouses, offices and a pool shop to Mint Holdings Pty Ltd of which Mr Soon Sinn
Goh is a director and shareholder.
iii. Rent charged to Mint Holdings Pty Ltd for office space in Rydalmere,NSW.
This statement excludes a benefit included in the aggregate amount of emoluments received or due and receivable
by directors and shown in the Company’s accounts or the fixed salary of a full time employee of the parent entity,
controlled entity or related body corporate.
Proceedings on Behalf of Company
No person has applied for leave of Court to bring proceedings on behalf of the Company or intervene in any
proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for
all or any part of those proceedings.
The Company was not a party to any such proceedings during the year.
Non-Audit Services
The Board of Directors, in accordance with advice from the Audit Committee, is satisfied that the provision of non-
audit services during the year is compatible with the general standard of independence for auditors imposed by the
Corporations Act 2001. The directors are satisfied that the services disclosed below did not compromise the external
auditor’s independence for the following reasons:
• all non-audit services are reviewed and approved by the Audit Committee prior to commencement to ensure they
do not adversely affect the integrity and objectivity of the auditor; and
• the nature of the services provided do not compromise the general principles relating to auditor independence in
accordance with APES 110: Code of Ethics for Professional Accountants set by the Accounting Professional and
Ethical Standards Board.
Auditor’s Independence Declaration
The lead auditor’s independence declaration for the year ended 30 June 2020 has been received and is included in
the directors’ report.
ASIC Corporations (rounding in Financial/Directors Reports) Instruments 2016/191
The amounts in the financial reports and directors’ report have been rounded to the nearest thousand dollars in
accordance with ASIC Corporations Instruments 2016/191.
25
WATERCO LIMITED ANNUAL REPORT 2020 Remuneration Report
Introduction
This report provides remuneration policy and payment details applying in the financial year for persons who were
members of Key Management Personnel of the Company.
2020 Remuneration Policy
The Remuneration Committee governs the Company’s Remuneration Policy. The Committee comprises Independent
Non-Executive Directors.
It has the following objectives:
• attract, retain and motivate management of the appropriate calibre to further the success of the business;
• align management reward with shareholder value;
• ensure that total remuneration is reasonable and comparable with market standards;
• ensure that remuneration should realistically reflect the responsibilities of the executives;
• ensure that incentive schemes reward superior company performance and be clearly linked to appropriate
performance benchmarks based on improved company performance; and
• ensure that the remuneration costs are disclosed in accordance with the requirements of law and relevant
accounting standards.
The remuneration structure for Key Management Personnel of the Waterco Group comprises:
• Fixed remuneration. This consists of base salary and the full costs of other benefits; and
• Incentives. The level varies with performance. It consists of an annual incentive plan.
The Remuneration Committee reviews market data and the performance of the Group CEO. The Committee then
recommends the fixed remuneration and annual incentive payment of the Group CEO for approval by the Board.
The Group CEO recommends Key Management Personnel’s fixed remuneration and annual incentive payments
to the Remuneration Committee. Fixed remuneration for Key Management Personnel is reviewed annually and
determined by reference to appropriate benchmark information of comparable companies, taking into account
their responsibility, performance, qualifications, experience and potential. Adjustments are made only if there is the
prospect of fixed remuneration levels falling behind market levels.
The remuneration of Non-Executive Directors is fixed and does not change according to the performance of the
company. They do not participate in any incentive plans available to managers. Non-Executive Directors are paid
fees based on the nature of their work and their responsibilities. The Company makes superannuation guarantee (SG)
payments, in addition to those fees. The level and structure of fees is based upon the need for the Company to be
able to attract and retain Non-Executive Directors of an appropriate calibre, the demands of the role and prevailing
market conditions.
The maximum aggregate amount of fees that can be paid to Non-Executive Directors is $300,000. This was approved
by shareholders at the Annual General Meeting held on 25 October 2019.
There has been an increase of 2% in the Non-Executive Director fees for the 2020/2021 financial year. The total fees
are now at an aggregate of $188,663 plus Superannuation Guarantee Charge.
The Remuneration Committee seeks independent external advice when required.
Performance–based Remuneration policy, and its relationship with Company performance
There is an annual incentive plan in place for all Key Management Personnel. This is a payment that varies with
performance measured over a twelve-month period.
There have been no changes in performance based remuneration policy compared with the prior reporting period.
26
Maximum payments are capped.
In the case of the Group CEO, the Remuneration Committee sets the performance requirements; in the case of
other Key Management Personnel, the Group CEO recommends performance requirements for consideration by the
Remuneration Committee.
The annual incentive performance criteria relate to the employee’s responsibilities. If requirements are achieved, there
will be an improvement in shareholder value.
The key performance requirements for an incentive payment are Net Profit After Tax (NPAT). From 1 July 2020, the
basis for key performance requirements for an incentive payment has been changed to Earnings Before Interest and
Tax (EBIT).
This provides a clear alignment between the interests of shareholders and the level of reward for eligible employees.
Performance criteria are tabulated below
Key Management Personnel
with annual incentives
Summary of Performance
Condition FY 20
Why Chosen
Soon Sinn Goh
– Group CEO
Budgeted NPAT for the
Waterco Group.
Key Management Personnel
Budgeted NPAT for the
Waterco Group.
Encourage Group CEO to improve
the performance levels of the Group
as a whole and thereby increase
shareholder wealth.
The performance of other Key
Management Personnel can have a
Group impact, so targets are based
on Group performance.
The satisfaction of the performance conditions of the annual incentive is based on a review of the audited financial
statements of the Group.
If the Group’s performance, as a whole does not reach the relevant target levels, then no annual incentive payments
are made.
None of the Company’s Key Management Personnel achieved their performance targets in the year-ended 30 June
2020.
The following table shows the Sales Revenue, Net Profit Before Tax (NPBT), Net Profit After Tax (NPAT), Earnings Per
Share (EPS), dividends and year-end share price in the financial year just ended and the previous four financial years
for the consolidated Group.
Year ended
June 20
June 19
June 18
June 17
June 16
Sales revenue ($million) from continuing and
discontinued operations
NPBT ($million) from continuing and discontinued
operations
EPS (cents) from continuing and discontinued
operations
Dividends per share paid (cents)
Year end share price ($)
NPAT ($million) continuing operations
NPAT ($million) discontinued operations
93.58
89.62
86.26
82.51
81.72
21.83
3.31
5.72
5.33
3.82
48.8
5.0
2.55
3.01
14.54
6.1
5.0
1.61
3.14
(0.86)
10.3
5.0
2.05
3.95
-
9.7
5.0
1.70
3.71
-
7.6
5.0
1.28
2.85
-
Please see commentary on performance on page 22.
27
WATERCO LIMITED ANNUAL REPORT 2020 Employment Details of Key Management Personnel
The following table provides employment details for the financial year for Key Management Personnel. The table also
illustrates the proportion of remuneration that was performance and non-performance based.
Proportions of elements of
remuneration related to
performance
Proportions of
elements of
remuneration
not related to
performance
Position held as at
30 June 2020 and any
change during the year
Contract details
(duration & termination)
Non- salary
cash-based
incentives
%
Shares/
Units
%
Options/
Rights
%
Fixed
Salary/
Fees
%
Total
%
Key
Management
Personnel
S S Goh
Chairman &
Group CEO
No fixed term; may be
terminated on 6 months’
notice by either party
B Goh
Group Marketing
Director -
Executive
No fixed term; may be
terminated on 2 months'
notice by either party
G Norman 1)
Director -
Non-Executive
B Hunt
Director -
Non-Executive
R Ling
Director -
Non-Executive
J Raper 2)
Director -
Non-Executive
S T Lim 3)
Chief Financial
Officer
B H Leo
Company
Secretary
No fixed term, but subject
to member confirmation
every 3 years after AGM
when first appointed.
No fixed term, but subject
to member confirmation
every 3 years after AGM
when first appointed.
No fixed term, but subject
to member confirmation
every 3 years after AGM
when first appointed.
No fixed term, but subject
to member confirmation
every 3 years after AGM
when first appointed.
No fixed term, may be
terminated on 2 months’
notice by either party
No fixed term, may be
terminated on 2 months’
notice by either party
G Doumit
Chief Financial
Officer/ Company
Secretary
No fixed term, may be
terminated on 2 months’
notice by either party
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Changes in Directors and Key Management Personnel during the Year
1) On 25 October 2019, Mr Garry Norman retired as a Director of Waterco Ltd.
2) On 1 April 2020, Ms Judy Raper was appointed as a Non-Executive Director of Waterco Ltd
3) On 23 July 2019, Mr Sze Tin Lim retired as Chief Financial Officer of Waterco Ltd
Changes in Directors and Key Management Personnel Subsequent to Year-end
There have been no changes in Directors and Key Management Personnel subsequent to year-end.
28
Key Management Personnel Shareholding
Number of Shares held by Key Management Personnel
2020
Key Management Personnel
Balance
1.7.2019
Received as
Remuneration
Net Change
Other
Balance
30.6.2020
Mr S S Goh
Mr B Goh
Mr G Norman 1)
Mr B Hunt
Mr R Ling
Ms J Raper 2)
Mr S T Lim 3)
Mrs B H Leo
Mr G Doumit
21,721,853
540,121
155,114
170,223
-
-
102,817
-
71,300
-
-
-
-
-
-
-
-
-
-
21,721,853
-
(155,114)
-
-
-
(102,817)
-
-
-
540,121
-
170,223
-
-
-
-
71,300
2019
Key Management Personnel
Balance
1.7.2018
Received as
Remuneration
Net Change
Other
Balance
30.6.2019
Mr S S Goh
Mr B Goh
Mr G Norman
Mr B Hunt
Mr R Ling
Mr S T Lim
Mrs B H Leo
Mr G Doumit
21,721,853
540,121
155,114
370,223
-
102,817
6,000
71,300
-
-
-
-
-
-
-
-
-
21,721,853
-
-
(200,000)
-
-
(6,000)
-
540,121
155,114
170,223
-
102,817
-
71,300
1) On 25 October 2019, Mr Garry Norman retired as a Director of Waterco Ltd.
2) On 1 April 2020, Ms Judy Raper was appointed as a Non-Executive Director of Waterco Ltd
3) On 23 July 2019, Mr Sze Tin Lim retired as Chief Financial Officer of Waterco Ltd
29
WATERCO LIMITED ANNUAL REPORT 2020 Remuneration Details
The following table provides remuneration details for the 2020 and 2019 financial years for Key Management
Personnel.
Short-term benefits
Post-
employment
benefits
Long-term
benefits
Renumeration
incl Salary,
fees and leave
Profit
share and
bonus
Non-
monetary
(5)
Pension and
super-
annuation
$
$
$
$
LSL
$
Total
$
Key Management Personnel
Soon Sinn Goh 1)
Bryan Goh
Garry Norman 2)
Ben Hunt
(Richard) Ling
Judy Raper 3)
Sze Tin Lim 4)
Bee Hong Leo
Gerard Doumit
2020
428,914
2019
416,420
2020
248,527
2019
232,269
2020
2019
2020
2019
2020
2019
2020
2019
21,342
59,859
61,655
59,859
61,655
59,859
14,228
-
2020
146,803
2019
228,455
2020
207,766
2019
201,715
2020
204,752
2019
178,045
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
12,773
12,401
21,003
20,531
2,028
5,686
5,857
5,686
5,857
5,686
1,352
-
1,676
20,531
19,675
19,136
24,576
19,451
3,002
3,127
9,205
7,723
-
-
-
-
-
-
-
-
444,689
431,948
278,735
260,523
23,370
65,545
67,512
65,545
67,512
65,545
15,580
-
254
148,733
4,348
3,742
7,728
6,158
253,334
231,183
228,579
254,937
22,944
16,914
18,835
236,738
(1) S S Goh’s Remuneration of $444,689 is made up of $150,231 paid/payable by Waterco Ltd, $147,229 paid by
Waterco (Far East) Sdn Bhd (a subsidiary) and $147,229 paid by Waterco International Pte Ltd (a subsidiary).
(2) Garry Norman’s Remuneration has been calculated up to the date of his retirement 25 October 2019
(3) Judy Raper’s Remuneration has been calculated from the date of her appointment 1 April 2020
(4) Sze Tin Lim’s Remuneration has been calculated up to the date of his retirement 23 July 2019
(5) Non-monetary benefits are made up of Company vehicle benefits.
30
Securities Received that are not Performance Related
No Key Management Personnel are entitled to receive securities which are not performance based as part of their
remuneration package.
Cash incentives, Performance-related Bonus and Share-based Payments
No options or other share based payments were granted in the 2020 financial year.
Maximum cash incentives expressed as a percentage of fixed remuneration and the maximum value that could have
been earned in 2019/2020 if stretch performance targets were achieved are tabulated below:
Position
Maximum possible
incentive
Maximum possible
incentive $
Key Management Personnel
Group CEO, Waterco Limited
Group Marketing Director, Waterco Limited
Chief Financial Officer / Company Secretary,
Waterco Limited
Company Secretary, Waterco Limited
34%
27%
20%
15%
$150,000
$75,000
$50,000
$35,000
The percentage of cash incentives payable and forfeited for the year to key management personnel.
Key Management Personnel
Short term incentive in respect of 2020 financial year
Payable %
Forfeited %
S S Goh
B Goh
B H Leo
G Doumit
0%
0%
0%
0%
100%
100%
100%
100%
This Report of the Directors, incorporating the Remuneration Report, is signed in accordance with a resolution of the
Board of Directors:
Soon Sinn Goh
Chairman
Dated at Sydney this 11 September 2020
31
WATERCO LIMITED ANNUAL REPORT 2020 Auditor’s Independence Declaration
32
Consolidated
Financial
Report
for the year ended
30 June 2020
34
Consolidated
Statement of Profit
or Loss and Other
Comprehensive
Income
35
Consolidated
Statement of
Financial
Position
36
Consolidated
Statement of
Changes in
Equity
37
Consolidated
Statement of
Cash Flows
38
Notes to the
Financial
Statements
79
Directors’
Declaration
80
Independent
Auditor's
Report
33
WATERCO LIMITED ANNUAL REPORT 2020 Consolidated Statement of Profit or Loss and other
Comprehensive Income
For The Year Ended 30 June 2020
Consolidated Group
Continuing Operations
Revenues
Changes in inventories of finished goods and
work in progress
Raw materials and consumables used
Employee benefits expense
Depreciation and amortisation expense
Finance costs
Advertising expense
Discounts allowed
Outward freight expense
Rent expense
Research and development
Insurance – general
Contracted staff expense
Warranty expense
Commission expense
Other expenses
Profit before income tax expense
Income tax expense
Profit for the year from Continuing operations
Discontinued Operations
Profit from Discontinued Operations after tax
Net Profit for the year
Other comprehensive income
Note
No.
3
4
4
4
6
7
Items that will not be classified subsequently to profit or loss
Property revaluation increment (net of tax)
Items that maybe reclassified to profit or loss
Exchange translation differences
Other comprehensive income for the year
Total comprehensive income for the year
Profit attributable to :
Members of the parent entity
Non-controlling interest
Total comprehensive income for the year
Members of the parent entity
Non-controlling interest
Total comprehensive income for the year
Earnings per share
Basic earnings per share from continuing and discontinued
operations (cents per share)
Basic earnings per share from continuing operations
(cents per share)
Basic earnings per share from discontinued operations
(cents per share)
Diluted earnings per share from continuing and discontinued
operations (cents per share)
31
31
31
31
The accompanying notes form part of these financial statements.
34
2020
$000
98,466
6,327
(54,663)
(22,043)
(6,566)
(959)
(2,043)
(306)
(2,010)
(1,324)
(1,366)
(1,051)
(269)
(281)
(409)
(7,599)
3,904
(890)
3,014
14,542
17,556
433
(2,730)
(2,297)
15,259
17,662
(106)
17,556
15,365
(106)
15,259
48.8
8.6
40.2
48.8
2019
$000
88,242
(3,585)
(39,586)
(19,405)
(1,603)
(1,137)
(2,044)
(252)
(2,075)
(2,698)
(1,490)
(917)
(242)
(621)
(336)
(8,081)
4,170
(1,031)
3,139
(857)
2,282
591
1,697
2,288
4,570
2,242
40
2,282
4,530
40
4,570
8.4
6.1
(2.3)
6.1
Consolidated Statement of Financial Position
As At 30 June 2020
ASSETS
Current Assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other current assets
Total Current Assets
Non-Current Assets
Property, plant & equipment
Right of use assets
Intangible assets
Deferred tax assets
Total Non-Current Assets
Total Assets
LIABILITIES
Current Liabilities
Trade and other payables
Borrowings
Current tax liabilities
Short term provisions
Total Current Liabilities
Non-Current Liabilities
Borrowings
Deferred tax liabilities
Long-term provisions
Total Non-Current Liabilities
Total Liabilities
Net Assets
EQUITY
Issued capital
Reserves
Retained earnings
Parent interest
Non-controlling interest
Total Equity
Note
No.
9
10
11
12
14
15
16
19
17
18
19
20
21
19
22
23
24
25
The accompanying notes form part of these financial statements.
2020
$000
9,697
36,848
33,060
792
80,397
51,606
13,350
292
560
65,808
Consolidated Group
2019
$000
5,310
12,120
36,189
829
54,448
61,459
-
432
487
62,378
146,205
116,826
14,056
16,761
810
1,956
33,583
19,177
5,974
210
25,361
58,944
87,261
35,982
15,413
35,233
86,628
633
87,261
11,159
11,268
(407)
1,811
23,831
11,094
5,869
202
17,165
40,996
75,830
37,676
23,224
14,191
75,091
739
75,830
35
WATERCO LIMITED ANNUAL REPORT 2020 Consolidated Statement of Changes in Equity
For the year ended 30 June 2020
Ordinary
Shares
Retained
Earnings
Capital
Profits
Reserve
Asset
Revaluation
Reserve
Foreign
Currency
Translation
Reserve
Non-
Controlling
Interests
Total
Consolidated Group
Note
No.
$000
$000
$000
$000
$000
$000
$000
Balance at 30/6/18
Adjustment for change in
accounting policy (note 1)
Restated Balance at 30/6/18
Comprehensive income
Profit for the year
Other comprehensive
income for the year
Total comprehensive
income for the year
Transactions with
owners, in their
capacity as owners
and other transfers
38,590
13,944
-
38,590
(154)
13,790
211
-
211
24,643
(3,918)
699 74,169
-
24,643
-
(3,918)
-
(154)
699 74,015
-
-
-
2,242
-
2,242
-
-
-
-
-
-
-
591
591
-
-
-
-
40
2,282
1,697
1,697
-
2,288
40
4,570
-
-
-
-
-
-
(914)
(1,841)
(2,755)
Balance at 30/6/19
37,676
14,191
211
25,234
(2,221)
739 75,830
-
37,676
(36)
14,155
-
211
-
25,234
-
(2,221)
-
(36)
739 75,794
Cancellation of shares under
Waterco Share Buyback
Dividends paid
30
(914)
-
-
(1,841)
Total transactions with
owners and other transfers
(914)
(1,841)
Adjustment for change in
accounting policy (note 1)
Restated Balance at 30/6/20
Comprehensive income
Profit/(loss) for the year
Other comprehensive
Income/(loss) for the year
Total comprehensive
income for the year
Transactions with
owners, in their
capacity as owners
and other transfers
Cancellation of shares under
Waterco Share Buyback
Disposal of controlled entities
Dividends paid
Total transactions with
-
-
-
17,662
-
-
17,662
(1,694)
-
-
-
5,227
(1,811)
30
owners and other transfers
(1,694)
3,416
-
-
-
-
-
-
-
-
433
433
-
(106) 17,556
(2,730)
-
(2,297)
(2,730)
(106) 15,259
-
(5,514)
-
-
-
-
-
-
-
-
-
-
(1,694)
(287)
(1,811)
1,722
Balance at 30/6/20
35,982
35,233
211
20,153
(4,951)
633 87,261
The accompanying notes form part of these financial statements.
36
Consolidated Statement of Cash Flows
For the year ended 30 June 2020
Consolidated Group
Cash Flows from Operating Activities
Receipts from customers
Payments to suppliers and employees
Interest received
Other Income
Finance costs
Income tax paid
Net cash provided by operating activities (note 34)
Cash Flows from Investing Activities
Dividend received
Payment for property, plant & equipment
Payment for intangibles
Proceeds from sale of property, plant & equipment
Net cash (used in) investing activities
Cash Flows from Financing Activities
Proceeds from bank borrowings
Repayment of bank borrowings
Proceeds from issue of shares (to outside interests)
Share buyback
Payment of rou liabilities
Payment of lease liabilities
Dividends paid
Dividends paid-outside interests
Net cash (used in) financing activities
Net (decrease) in cash held
Cash at beginning of the year
Effects of exchange rate changes on balance of
cash held in foreign currencies
Cash and cash equivalents the end of the year (Note 9)
2020
$000
102,176
(87,193)
39
945
(959)
(3,022)
11,986
1
(1,919)
-
-
(1,918)
1,016
(1,257)
-
(1,695)
-
(309)
(1,811)
-
(4,056)
6,012
4,166
(1,866)
8,312
The accompanying notes form part of these financial statements.
2019
$000
95,207
(86,897)
35
1,210
(1,138)
(1,848)
6,569
1
(2,154)
(237)
51
(2,339)
-
(1,688)
30
(914)
-
(245)
(1,841)
(29)
(4,687)
(457)
3,419
1,204
4,166
37
WATERCO LIMITED ANNUAL REPORT 2020 Notes To The Financial Statements
For the year ended 30 June 2020
Note 1: Statement of Significant Accounting
Policies
These consolidated financial statements and notes
represent those of Waterco Limited and controlled
entities, (“Group”).
Waterco Limited (a for-profit entity) is a listed public
company, incorporated and domiciled in Australia.
The separate financial statements of the parent entity,
Waterco Limited, have not been presented within this
financial report as permitted by the Corporations Act
2001.
The financial statements were authorised for issue on
11 September 2020.
Basis of Preparation
The financial statements are general purpose financial
statements that have been prepared in accordance with
Australian Accounting Standards, Australian Accounting
Interpretations, other authoritative pronouncements of
the Australian Accounting Standards Board (AASB) and
the Corporations Act 2001.
Australian Accounting Standards set out accounting
policies that the AASB has concluded would result in
financial statements containing relevant and reliable
information about transactions, events and conditions.
Compliance with Australian Accounting Standards
ensures that the financial statements and notes also
comply with International Financial Reporting Standards
as issued by the IASB. Material accounting policies
adopted in the preparation of these financial statements
are presented below and have been consistently
applied unless otherwise stated.
New or amended Accounting Standards and
Interpretations adopted
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 Accounting Standards and Interpretations
are most relevant to the consolidated entity:
AASB 16 Leases
The consolidated entity has adopted AASB 16 from
1 July 2019. The standard replaces AASB 117
38
'Leases' and for lessees eliminates the classifications
of operating leases and finance leases. Except for
short-term leases and leases of low-value assets,
right-of-use assets and corresponding lease liabilities
are recognised in the statement of financial position.
Straight-line operating lease expense recognition is
replaced with a depreciation charge for the right-of-
use assets (included in operating costs) and an interest
expense on the recognised lease liabilities (included
in finance costs). In the earlier periods of the lease,
the expenses associated with the lease under AASB
16 will be higher when compared to lease expenses
under AASB 117. However, EBITDA (Earnings Before
Interest, Tax, Depreciation and Amortisation) results
improve as the operating expense is now replaced
by interest expense and depreciation in profit or loss.
For classification within the statement of cash flows,
the interest portion is disclosed in operating activities
and the principal portion of the lease payments are
separately disclosed in financing activities. For lessor
accounting, the standard does not substantially change
how a lessor accounts for leases.
a. Principles of Consolidation
The consolidated financial statements incorporate
all of the assets, liabilities and results of the parent
(Waterco Limited) and all of
the subsidiaries
(including any structured entities). Subsidiaries are
entities the parent controls. The parent controls an
entity when it 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
over the entity. A list of the subsidiaries is provided
in Note 13. All subsidiaries have a 30 June financial
year end except for Waterco Guangzhou Ltd,
Waterco (C) Ltd, and PT Waterco Indonesia which
have a 31 December financial year end. The reason
for this is local company regulation.
The assets, liabilities and results of all subsidiaries
are fully consolidated into the financial statements
of the Group from the date on which control is
obtained by the Group. The consolidation of a
subsidiary is discontinued from the date that control
ceases. Intercompany transactions, balances and
unrealised gains or losses on transactions between
group entities are fully eliminated on consolidation.
Accounting policies of subsidiaries have been
changed and adjustments made where necessary to
ensure uniformity of the accounting policies adopted
by the Group.
Notes To The Financial Statements
For the year ended 30 June 2020
Note 1: Statement of Significant Accounting
Policies (continued)
a. Principles of Consolidation (continued)
Equity interests in a subsidiary not attributable,
directly or indirectly, to the Group are presented
as “non-controlling interests”. The Group initially
recognises non-controlling interests that are present
ownership interests in subsidiaries and are entitled
to a proportionate share of the subsidiary’s net
assets on liquidation at either fair value or at the
non-controlling interests’ proportionate share of
the subsidiary’s net assets. Subsequent to initial
recognition, non-controlling interests are attributed
their share of profit or loss and each component
of other comprehensive income. Non-controlling
interests are shown separately within the equity
section of the statement of financial position and
statement of comprehensive income.
Business combinations
Business combinations occur where an acquirer
obtains control over one or more businesses.
A business combination is accounted for by applying the
acquisition method, unless it is a combination involving
entities or businesses under common control. The
business combination will be accounted for from the
date that control is attained, whereby the fair value of
the identifiable assets acquired and liabilities (including
contingent liabilities) assumed is recognised (subject to
certain limited exemptions).
When measuring the consideration transferred in the
business combination, any asset or liability resulting
from a contingent consideration arrangement is also
included. Subsequent to initial recognition, contingent
consideration classified as equity is not remeasured
and its subsequent settlement is accounted for within
equity. Contingent consideration classified as an asset
or liability is remeasured each reporting period to fair
value, recognising any change to fair value in profit or
loss, unless the change in value can be identified as
existing at acquisition date.
All transaction costs incurred in relation to the business
combination are expensed
the statement of
comprehensive income.
to
The acquisition of a business may result in the recognition
of goodwill or a gain from a bargain purchase.
b. Fair Value of Assets and Liabilities
The Group measures some of its assets and
liabilities at fair value on either a recurring or non-
recurring basis, depending on the requirements of
the applicable Accounting Standard.
Fair value is the price the Group would receive to sell
an asset or would have to pay to transfer a liability
in an orderly (ie unforced) transaction between
independent, knowledgeable and willing market
participants at the measurement date.
As fair value is a market-based measure, the closest
equivalent observable market pricing information
is used to determine fair value. Adjustments to
market values may be made having regard to the
characteristics of the specific asset or liability.
The fair values of assets and liabilities that are not
traded in an active market are determined using
one or more valuation techniques. These valuation
techniques maximise, to the extent possible, the use
of observable market data.
To the extent possible, market information is
extracted from either the principal market for the
asset or liability (ie the market with the greatest
volume and level of activity for the asset or liability)
or, in the absence of such a market, the most
advantageous market available to the entity at
the end of the reporting period (ie the market that
maximises the receipts from the sale of the asset
or minimises the payments made to transfer the
liability, after taking into account transaction costs
and transport costs).
For non-financial assets, the fair value measurement
also takes into account a market participant’s ability
to use the asset in its highest and best use or to sell
it to another market participant that would use the
asset in its highest and best use.
The fair value of liabilities and the entity’s own equity
instruments (excluding those related to share-
based payment arrangements) may be valued,
where there is no observable market price in
relation to the transfer of such financial instrument,
by reference to observable market information
where such instruments are held as assets. Where
this information is not available, other valuation
techniques are adopted and, where significant,
are detailed in the respective note to the financial
statements.
39
WATERCO LIMITED ANNUAL REPORT 2020 Notes To The Financial Statements
For the year ended 30 June 2020
Note 1: Statement of Significant Accounting
Policies (continued)
tax relates to items that are recognised outside profit
or loss.
c. Lease liabilities
A lease liability is recognised at the commencement
date of a lease. The lease liability is initially recognised
at the present value of the lease payments to be
made over the term of the lease, discounted using
the interest rate implicit in the lease or, if that rate
cannot be readily determined, the consolidated
entity's incremental borrowing rate. Lease payments
comprise of fixed payments less any lease incentives
receivable, variable lease payments that depend on
an index or a rate, amounts expected to be paid
under residual value guarantees, exercise price of
a purchase option when the exercise of the option
is reasonably certain to occur, and any anticipated
termination penalties. The variable lease payments
that do not depend on an index or a rate are
expensed in the period in which they are incurred.
Lease liabilities are measured at amortised cost using
the effective interest method. The carrying amounts
are remeasured if there is a change in the following:
future lease payments arising from a change in
an index or a rate used; residual guarantee; lease
term; certainty of a purchase option and termination
penalties. When a lease liability is remeasured, an
adjustment is made to the corresponding right-of
use asset, or to profit or loss if the carrying amount
of the right-of-use asset is fully written down.
d. Inventories
Inventories are measured at the lower of cost
and net realisable value. Cost is determined on
a standard cost basis. The cost of manufactured
products includes direct materials, direct labour
and an appropriate portion of variable and fixed
overheads. Overheads are applied on the basis of
normal operating capacity. Net realisable value is
determined as the estimated selling price less costs
to sell.
e. Income Tax
The income tax expense/(income) for the year
comprises current income tax expense/(income)
and deferred tax expense/(income).
Current income tax expense charged to profit or
loss is the tax payable on taxable income. Current
tax liabilities/(assets) are measured at the amounts
expected to be paid to/(recovered from) the relevant
taxation authority.
Deferred income tax expense reflects movements in
deferred tax asset and deferred tax liability balances
during the year as well unused tax losses.
Current and deferred income tax expense/(income)
is charged or credited outside profit or loss when the
40
Except for business combinations, no deferred
income tax is recognised from the initial recognition
of an asset or liability, where there is no effect on
accounting or taxable profit or loss.
Deferred tax assets and liabilities are calculated at
the tax rates that are expected to apply to the period
when the asset is realised or the liability is settled
and their measurement also reflects the manner in
which management expects to recover or settle the
carrying amount of the related asset or liability.
Deferred tax assets relating to temporary differences
and unused tax losses are recognised only to the
extent that it is probable that future taxable profit
will be available against which the benefits of the
deferred tax asset can be utilised.
Where temporary differences exist in relation to
investments in subsidiaries, branches, associates,
and joint ventures, deferred tax assets and liabilities
are not recognised where the timing of the reversal
of the temporary difference can be controlled and
it is not probable that the reversal will occur in the
foreseeable future.
Current tax assets and liabilities are offset where
a legally enforceable right of set-off exists and it
is intended that net settlement or simultaneous
realisation and settlement of the respective asset
and liability will occur. Deferred tax assets and
liabilities are offset where: (a) a legally enforceable
right of set-off exists; and (b) the deferred tax assets
and liabilities relate to income taxes levied by the
same taxation authority on either the same taxable
entity or different taxable entities where it is intended
that net settlement or simultaneous realisation and
settlement of the respective asset and liability will
occur in future periods in which significant amounts
of deferred tax assets or liabilities are expected to be
recovered or settled.
Waterco Limited and its wholly-owned Australian
Subsidiaries have formed a consolidated group for
the purposes of the tax consolidation provisions of
the Income Tax Assessment Act 1997. Each entity
in the group recognises its own current and deferred
tax assets and liabilities. Such taxes are measured
using the “stand-alone taxpayer” approach to
allocation. All of the deferred tax assets and liabilities
of the subsidiary members have become part of the
deferred assets and liabilities of Waterco Ltd. Each
company in the group contributes to the income
tax payable in proportion to their contribution to the
net profit before tax of the consolidated group. The
group notified the ATO on 20 January 2005 that it
had formed an income tax consolidated group to
apply from 1 July 2003.
Notes To The Financial Statements
For the year ended 30 June 2020
Note 1: Statement of Significant Accounting
Policies (continued)
• income and expenses are translated at average
exchange rates for the period; and
f. Discontinued operations
A discontinued operation is a component of the
consolidated entity that has been disposed of or
is classified as held for sale and that represents a
separate major line of business or geographical
area of operations, is part of a single co-ordinated
plan to dispose of such a line of business or area
of operations, or is a subsidiary acquired exclusively
with a view to resale. The results of discontinued
operations are presented separately on
the
face of the statement of profit or loss and other
comprehensive income.
g. Foreign Currency Transactions and Balances
Functional and presentation currency
• retained earnings are translated at the exchange
rates prevailing at the date of the transaction
Exchange differences arising on translation of foreign
operations are transferred directly to the Group’s
foreign currency translation reserve in the statement
of comprehensive income. These differences are
recognised in the statement of comprehensive
income in the period in which the operation is
disposed.
h. Employee Benefits
Provision for employee benefits, which include long
service leave, and annual leave are computed to
cover expected benefits at balance date.
The functional currency of each of the group’s
entities is measured using the currency of the
primary economic environment in which that entity
operates. The consolidated financial statements are
presented in Australian dollars which is the parent
entity’s functional and presentation currency.
Employee benefits expected to be settled within one
year together with benefits arising from wages and
salaries, annual leave and sick leave which will be
settled after one year, have been measured at the
amounts expected to be paid when the liability is
settled plus related on-costs. (see note 20)
Transaction and balances
Foreign currency transactions are translated into
functional currency using
the exchange rates
prevailing at the date of the transaction. Foreign
currency monetary items are translated at the year-
end exchange rate. Non-monetary items measured
at historical cost continue to be carried at the
exchange rate at the date of the transaction. Non-
monetary items measured at fair value are reported
at the exchange rate at the date when fair values
were determined.
Exchange differences arising on the translation of
monetary items are recognised in the statement of
comprehensive income, except where deferred in
equity as a qualifying cash flow or net investment
hedge.
Exchange differences arising on the translation
of non-monetary items are recognised directly in
equity to the extent that the gain or loss is directly
in equity, otherwise the exchange
recognised
difference
the statement of
is recognised
comprehensive income.
in
Group companies
The financial results and position of foreign operations
whose functional currency is different from the
group’s presentation currency are translated as
follows:
• assets and liabilities are translated at year-end
exchange rates prevailing at that reporting date;
Employee benefits (long service leave) payable
later than one year have been measured at the
present value of the estimated future cash outflows
to be made for those benefits. In determining the
liability, consideration is given to employee wage
increases and the probability that the employee
may satisfy any vesting requirements. Those cash
flows are discounted using market yields on national
government bonds with terms to maturity that
match the expected timing of cash flows attributable
to employee benefits.
Contributions are made by the consolidated group to
an employee superannuation fund and are charged
as expenses when incurred. The consolidated group
has no legal obligation to cover any shortfall in the
funds obligations to provide benefits to employees
on retirement.
i. Deferred Expenditure
Expenditure during the research phase of a project
is recognised as an expense when incurred.
Development costs are capitalised only when
technical feasibility studies identify that the project
will deliver future economic benefits and these
benefits can be measured reliably.
Development costs have a finite life and are
amortised on a systematic basis matched to the
future economic benefits over the useful life of the
project.
41
WATERCO LIMITED ANNUAL REPORT 2020 Notes To The Financial Statements
For the year ended 30 June 2020
Note 1: Statement of Significant Accounting
Policies (continued)
The above valuation was performed by an
independent valuer.
j. Acquisition of Assets
The cost method of accounting has been used for
acquisition of all assets (including shares). Cost
is defined as the fair value of the assets given up
at the date of acquisition plus costs incidental to
acquisition. Where goodwill arises, it is brought to
account.
k. Property, Plant and Equipment
Each class of property, plant and equipment is
carried at cost or fair value less, where applicable,
any accumulated depreciation.
Property
Land and buildings are measured on a fair value
basis being the amount for which an asset could be
exchanged between knowledgeable willing parties
in an arms length transaction.
The value of the land and buildings owned by the
consolidated group are based on the following
independent valuations:
Land &
Buildings
Rydalmere
NSW
Date of
Valuation
Amount
27 April 2018
AUD 21,700,000
Malaysia
15 May 2020
USA
7 March 2019
AUD 20,426,227
(MYR 60,000,000)
AUD 2,426,979
(USD 1,720,000)
Increases (net of deferred taxes) in the carrying
amount arising on revaluation of land and buildings
are credited to a revaluation surplus in equity.
Decreases that offset previous increases of the
same asset are charged against fair value reserves
directly in equity; all other decreases are charged
to the statement of comprehensive income. Any
accumulated depreciation at the date of revaluation
is eliminated against the gross carrying amount of
the asset and the net amount is restated to the
revalued amount of the asset.
On 15 May 2020, Waterco Far East Sdn Bhd revalued
its property resulting in no change (RM6om) from the
last valuation of the property done on 13th April
2017. Due to the weakening of the $A against the
Malaysian Ringitt (from the date of the last valuation
conducted in April 2017), the translated value has
gone up from $A18,165,854 to $A20,426,227.
42
Plant and equipment
Plant and equipment are measured on the cost
basis and therefore carried at cost less accumulated
depreciation and any accumulated impairment. In the
event the carrying amount of plant and equipment
is greater than the estimated recoverable amount,
the carrying amount is written down immediately to
the estimated recoverable amount and impairment
losses are recognised either in profit or loss or as
a revaluation decrease if the impairment losses
relate to a revalued asset. A formal assessment
of recoverable amount is made when impairment
indicators are present (refer to Note 1(m) for details
of impairment).
The carrying amount of plant and equipment is
reviewed annually by directors to ensure it is not in
excess of the recoverable amount from these assets.
The recoverable amount is assessed on the basis
of the expected net cash flows that will be received
from the asset’s employment and subsequent
disposal. The expected net cash flows have been
discounted to their present values in determining
recoverable amounts.
The cost of fixed assets constructed within the
consolidated group includes the cost of materials,
direct labour, borrowing costs and an appropriate
proportion of fixed and variable overheads.
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 statement of comprehensive
income during the financial period in which they are
incurred.
Depreciation
The depreciable amount of all fixed assets including
building and capitalised leased assets, but excluding
freehold land, is depreciated over their useful lives
commencing from the time the asset is ready for
use. Leasehold improvements are depreciated over
the shorter of either the unexpired period of the lease
or the estimated useful lives of the improvements.
The gain or loss on disposal of all fixed assets is
determined as the difference between the carrying
amount of the asset at the time of disposal and the
proceeds of disposal, and is included in operating
profit before income tax of the consolidated group in
the year of disposal.
Notes To The Financial Statements
For the year ended 30 June 2020
Note 1: Statement of Significant Accounting
Policies (continued)
k. Property, Plant and Equipment (continued)
Depreciation (continued)
Depreciation where applicable has been charged in
the accounts so as to write off each asset over the
estimated useful life of the asset concerned. Either
the diminishing value or straight line method, as
considered appropriate, is used. The depreciation
rates used for each class of depreciable assets are:
Class of Fixed
Assets
Depreciation Rate
Buildings
1.50% - 2.50%
Plant and equipment
6.00% -
33.33%
Leased plant and
equipment
13.00% -
20.00%
The assets’ residual values and useful lives are
reviewed, and adjusted if appropriate, at each
balance date.
An asset’s carrying amount
is written down
immediately to its recoverable amount if the asset’s
carrying amount is greater than its estimated
recoverable amount.
Gains and losses on disposals are determined by
comparing the proceeds with the carrying amount.
These gains and losses are included in the statement
of comprehensive income. When revalued assets
are sold, amounts included in the revaluation reserve
relating to that asset are recognised in the profit and
loss in the period in which they arise.
l. Right-of-use assets
A
recognised at
right-of-use asset
the
is
commencement date of a lease. The right-of-use
asset is measured at cost, which comprises the
initial amount of the lease liability, adjusted for, as
applicable, any lease payments made at or before
the commencement date net of any lease incentives
received, any initial direct costs incurred, and,
except where included in the cost of inventories,
an estimate of costs expected to be incurred for
dismantling and removing the underlying asset, and
restoring the site or asset.
Right-of-use assets are depreciated on a straight-
line basis over the unexpired period of the lease or
the estimated useful life of the asset, whichever is
the shorter. Where the consolidated entity expects
to obtain ownership of the leased asset at the
end of the lease term, the depreciation is over its
estimated useful life. Right-of use assets are subject
to impairment or adjusted for any remeasurement of
lease liabilities.
The consolidated entity has elected not to recognise
a right-of-use asset and corresponding lease liability
for short-term leases with terms of 12 months or less
and leases of low-value assets. Lease payments
on these assets are expensed to profit or loss as
incurred.
m. Revenue recognition
The consolidated entity recognises revenue as
follows:
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 a customer;
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
good or 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 promised.
identifies
Variable consideration within
the
transaction
price, if any, reflects concessions provided to the
customer such as discounts, rebates and refunds,
any potential bonuses receivable from the customer
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. Amounts received that are subject to the
constraining principle are recognised as a refund
liability.
43
WATERCO LIMITED ANNUAL REPORT 2020 Notes To The Financial Statements
For the year ended 30 June 2020
Note 1: Statement of Significant Accounting
Policies (continued)
m. Revenue recognition (continued)
Revenue from the sale of goods is recognised at the
point of delivery as this corresponds to the transfer
of significant risks and rewards of ownership of the
goods and the cessation of all involvement in those
goods.
Interest revenue is recognised using the effective
interest rate method.
Dividend revenue is recognised when the right to
receive a dividend has been established.
Franchise fee income is invoiced and recognised as
revenue on a monthly basis.
All revenue is stated net of the amount of goods and
services tax (GST).
n. Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net
of the amount of GST, except where the amount of
GST incurred is not recoverable from the Australian
Taxation Office. In these circumstances the GST
is recognised as part of the cost of acquisition
of the asset or as part of an item of the expense.
Receivables and payables in the statement of
financial position are shown inclusive of GST.
Cashflows are presented in the cash flow statement
on a gross basis, except for the GST component
of investing and financing activities, which are
disclosed as operating cash flows.
o. Impairment of Assets
At the end of each reporting period, the Group
assesses whether there is any indication that an
asset may be impaired. The assessment will include
the consideration of external and internal sources
of information including dividends received from
subsidiaries, associates or jointly controlled entities
deemed to be out of pre-acquisition profits. If such
an indication exists, an impairment test is carried
out on the asset by comparing the recoverable
amount of the asset, being the higher of the asset’s
fair value less costs to sell and value in use, to the
asset’s carrying amount. Any excess of the asset’s
carrying amount over its recoverable amount is
recognised immediately in profit or loss, unless the
asset is carried at a revalued amount in accordance
with another Standard (eg in accordance with the
44
revaluation model in AASB 116). Any impairment
loss of a revalued asset is treated as a revaluation
decrease in accordance with that other Standard.
Where it is not possible to estimate the recoverable
amount of an individual asset, the Group estimates
the recoverable amount of the cash-generating unit
to which the asset belongs.
Impairment testing is performed annually for goodwill
and intangible assets with indefinite lives.
p. Trade and Other Receivables
Trade receivables are initially recognised at fair value
and subsequently measured at amortised cost using
the effective interest method, less any allowance
for expected credit losses. Trade receivables are
generally due for settlement within 30 days.
The consolidated entity has applied the simplified
approach to measuring expected credit losses,
which uses a lifetime expected loss allowance.
To measure the expected credit losses, trade
receivables have been grouped based on days
overdue.
Other receivables are recognised at amortised cost,
less any allowance for expected credit losses.
q. Trade and Other Payables
These amounts represent liabilities for goods and
services provided to the consolidated entity prior to
the end of the financial year and which are unpaid.
Due to their short-term nature they are measured
at amortised cost and are not discounted. The
amounts are unsecured and are usually paid within
30 days of recognition.
r. Provisions
Provisions are recognised when the group has a
legal or constructive obligation, as a result of past
events, for which it is probable that an outflow of
economic benefits will result and that outflow can be
reliably measured.
s. Cash and Cash Equivalents
Cash and cash equivalents include cash on hand,
deposits held at call with banks, other short-term
highly liquid investments with original maturities of
three months or less, and bank overdrafts. Bank
overdrafts are shown within short-term borrowings
in current liabilities in the statement of financial
position.
Notes To The Financial Statements
For the year ended 30 June 2020
Note 1: Statement of Significant Accounting
Policies (continued)
t. Borrowings and Borrowing Costs
Loans and borrowings are initially recognised at
the fair value of the consideration received, net of
transaction costs. They are subsequently measured
at amortised cost using the effective interest method.
to
Borrowing costs directly attributable
the
acquisition, construction or production of assets
that necessarily take a substantial period of time to
prepare for their intended use or sale, are added
to the cost of those assets, until such time as the
assets are substantially ready for their intended use
or sale.
All other borrowing costs are recognised in income
in the period in which they are incurred.
u. Investments and Other Financial Assets
Investments and other financial assets are initially
measured at fair value. Transaction costs are
included as part of the initial measurement, except
for financial assets at fair value through profit or
loss. Such assets are subsequently measured at
either amortised cost or fair value depending on
their classification. Classification
is determined
based on both the business model within which
such assets are held and the contractual cash
flow characteristics of the financial asset unless, an
accounting mismatch is being avoided.
Financial assets are derecognised when
the
rights to receive cash flows have expired or have
been transferred and the consolidated entity has
transferred substantially all the risks and rewards of
ownership. When there is no reasonable expectation
of recovering part or all of a financial asset, it's
carrying value is written off.
Financial assets at fair value through profit or loss
Financial assets not measured at amortised cost or
at fair value through other comprehensive income
are classified as financial assets at fair value through
profit or loss. Typically, such financial assets will be
either:
(i) held for trading, where they are acquired for the
purpose of selling in the short-term with an
intention of making a profit, or a derivative; or
(ii) designated as such upon initial recognition
where permitted. Fair value movements are
recognised in profit or loss.
fair value
through other
Financial assets at
comprehensive income
Financial assets at
fair value
through other
comprehensive income include equity investments
which the consolidated entity intends to hold for the
foreseeable future and has irrevocably elected to
classify them as such upon initial recognition.
Impairment of financial assets
The consolidated entity recognises a loss allowance
for expected credit losses on financial assets
which are either measured at amortised cost or fair
value through other comprehensive income. The
measurement of the loss allowance depends upon
the consolidated entity's assessment at the end of
each reporting period as to whether the financial
instrument's credit risk has increased significantly
since initial recognition, based on reasonable and
supportable information that is available, without
undue cost or effort to obtain.
Where there has not been a significant increase
in exposure to credit risk since initial recognition,
a 12-month expected credit loss allowance is
estimated. This represents a portion of the asset's
lifetime expected credit losses that is attributable to
a default event that is possible within the next 12
months. Where a financial asset has become credit
impaired or where it is determined that credit risk
has increased significantly, the loss allowance is
based on the asset's lifetime expected credit losses.
The amount of expected credit loss recognised is
measured on the basis of the probability weighted
present value of anticipated cash shortfalls over
the life of the instrument discounted at the original
effective interest rate.
For financial assets measured at fair value through
other comprehensive income, the loss allowance is
recognised within other comprehensive income. In
all other cases, the loss allowance is recognised in
profit or loss.
45
WATERCO LIMITED ANNUAL REPORT 2020
Notes To The Financial Statements
For the year ended 30 June 2020
Note 1: Statement of Significant Accounting
Policies (continued)
v. Current and Non-Current Classifications
Assets and liabilities are presented in the statement
of financial position based on current and non-
current classification.
An asset is classified as current when:
i.
it is either expected to be realised or intended to
be sold or consumed in the consolidated entity's
normal operating cycle;
ii.
it is held primarily for the purpose of trading;
iii. it is expected to be realised within 12 months
after the end of the reporting period; or
iv. the asset is cash or cash equivalent unless
restricted from being exchanged or used to
settle a liability for at least 12 months after the
reporting period.
All other assets are classified as non-current.
A liability is classified as current when:
i.
it is either expected to be settled in the
consolidated entity's normal operating cycle;
ii.
it is held primarily for the purpose of trading;
iii. it is due to be settled within 12 months after the
end of the reporting period; or
iv. there is no unconditional right to defer the
settlement of the liability for at least 12 months
after the reporting period.
All other liabilities are classified as non-current.
w. Rounding of Amounts
The amounts in the financial statements and directors’
report have been rounded off to the nearest $1,000
in accordance with ASIC Corporations (Rounding in
Financial/Directors Reports) Instrument 2016/191.
x. Critical Accounting Estimates and Judgements
The directors evaluate estimates and judgements
incorporated into the financial report based on
historical knowledge and best available current
reasonable
information. Estimates assume a
expectation of future events and are based on
current trends and economic data, obtained both
externally and within the group.
Coronavirus (COVID-19) pandemic
Judgement has been exercised in considering the
impacts that the Coronavirus (COVID-19) pandemic
has had, or may have, on the consolidated entity
based on known information. This consideration
46
extends to the nature of the products and services
offered, customers, supply chain, staffing and
geographic regions in which the consolidated entity
operates. Other than as addressed in specific notes,
there does not currently appear to be either any
significant impact upon the financial statements or
any significant uncertainties with respect to events or
conditions which may impact the consolidated entity
unfavourably as at the reporting date or subsequently
as a result of the Coronavirus (COVID-19) pandemic.
Key Estimates
(i)
Inventory Classification
Included in inventory are certain inventory items
held to service existing products and various
components used in the manufacturing process.
The nature of these items may require them to
be included in inventory for more than one year.
Management have evaluated these inventory
items and do not consider the carrying value of
these items as material. All inventory items have
therefore been classified as current.
(ii) Inventory Obsolescence
Management review inventory reports on a
regular basis to determine slow-moving or
obsolescence.
Appropriate provisions are carried for impairment
of slow-moving
items are
items. Obsolete
disposed of as and when identified.
(iii) Impairment-General
The Group assesses impairment at the end of
each reporting period by evaluating conditions
and events specific to the Group that may be
indicative of impairment triggers. Recoverable
amounts of relevant assets are reassessed using
value-in-use calculations which
incorporate
various key assumptions.
(iv) Allowance for expected credit losses
for expected credit
The allowance
losses
assessment requires a degree of estimation
and judgement. It is based on the lifetime
expected credit loss, grouped based on days
overdue, and makes assumptions to allocate
an overall expected credit loss rate for each
group. These assumptions
recent
sales experience, historical collection rates, the
impact of the Coronavirus (COVID-19) pandemic
and forward-looking information that is available.
The allowance for expected credit losses, as
disclosed in note 10, is calculated based on the
information available at the time of preparation.
The actual credit losses in future years may be
higher or lower.
include
Notes To The Financial Statements
For the year ended 30 June 2020
y. New and Revised Accounting Requirements
Applicable to the Reporting Period
For the reporting period to ending 30 June 2020,
a number of new and revised Accounting Standard
requirements became mandatory for the first time,
some of which are relevant to the Group.
The
and
following Accounting Standards
Interpretations are most relevant to the consolidated
entity:
AASB 16 Leases
The consolidated entity has adopted AASB 16 from
1 July 2019. The standard replaces AASB 117
'Leases' and for lessees eliminates the classifications
of operating leases and finance leases. Except for
short-term leases and leases of low-value assets,
right-of-use assets and corresponding
lease
liabilities are recognised in the statement of financial
position. Straight-line operating
lease expense
recognition is replaced with a depreciation charge
for the right-of-use assets (included in operating
costs) and an interest expense on the recognised
lease liabilities (included in finance costs). In the
earlier periods of the lease, the expenses associated
with the lease under AASB 16 will be higher when
compared to lease expenses under AASB 117.
However, EBITDA (Earnings Before Interest, Tax,
Depreciation and Amortisation) results improve as
the operating expense is now replaced by interest
expense and depreciation in profit or loss. For
classification within the statement of cash flows, the
interest portion is disclosed in operating activities
and the principal portion of the lease payments are
separately disclosed in financing activities. For lessor
accounting, the standard does not substantially
change how a lessor accounts for leases.
Note 1: Statement of Significant Accounting
Policies (continued)
x. Critical Accounting Estimates and Judgements
(continued)
Key Estimates (continued)
(v) Lease term
The lease term is a significant component in
the measurement of both the right-of-use asset
and lease liability. Judgement is exercised
in determining whether there is reasonable
certainty that an option to extend the lease or
purchase the underlying asset will be exercised,
or an option to terminate the lease will not be
exercised, when ascertaining the periods to
be included in the lease term. In determining
the lease term, all facts and circumstances
that create an economical incentive to exercise
an extension option, or not to exercise a
termination option, are considered at the lease
commencement date. Factors considered
may include the importance of the asset to the
consolidated entity's operations; comparison of
terms and conditions to prevailing market rates;
incurrence of significant penalties; existence
of significant
improvements; and
the costs and disruption to replace the asset.
The consolidated entity reassesses whether it
is reasonably certain to exercise an extension
option, or not exercise a termination option, if
there is a significant event or significant change
in circumstances.
leasehold
(v1) Incremental borrowing rate
Where the interest rate implicit in a lease cannot
be readily determined, an incremental borrowing
rate is estimated to discount future lease
payments to measure the present value of the
lease liability at the lease commencement date.
Such a rate is based on what the consolidated
entity estimates it would have to pay a third
party to borrow the funds necessary to obtain
an asset of a similar value to the right-of-use
asset, with similar terms, security and economic
environment.
47
WATERCO LIMITED ANNUAL REPORT 2020
Notes To The Financial Statements
For the year ended 30 June 2020
Note 1: Statement of Significant Accounting Policies (continued)
y. New and Revised Accounting Requirements Applicable to the Reporting Period
AASB 16 Leases (continued)
Impact of adoption
AASB 16 was adopted using the modified retrospective approach and as such the comparatives have not been
restated. The impact of adoption on opening retained profits as at 1 July 2019 was as follows:
Operating lease commitments as at 1 July 2019 (AASB 117)
Operating lease commitments discount based on the weighted average incremental
borrowing rate of 4% (AASB 16)
Short-term leases not recognised as a right-of-use asset (AASB 16)
Low-value assets leases not recognised as a right-of-use asset (AASB 16)
Accumulated depreciation as at 1 July 2019 (AASB 16)
Right-of-use assets (AASB 16)
Lease liabilities - current (AASB 16)
Lease liabilities - non-current (AASB 16)
Tax effect on the above adjustments
Reduction in opening retained profits as at 1 July 2019
1 July 2019
$000
26,592
(624)
-
(12,950)
13,018
(5,134)
(7,941)
21
(36)
Right-of-use assets
A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured
at cost, which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments
made at or before the commencement date net of any lease incentives received, any initial direct costs incurred,
and, except where included in the cost of inventories, an estimate of costs expected to be incurred for dismantling
and removing the underlying asset, and restoring the site or asset.
Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated
useful life of the asset, whichever is the shorter. Where the consolidated entity expects to obtain ownership of the
leased asset at the end of the lease term, the depreciation is over its estimated useful life. Right-of use assets are
subject to impairment or adjusted for any remeasurement of lease liabilities.
The consolidated entity has elected not to recognise a right-of-use asset and corresponding lease liability for
short-term leases with terms of 12 months or less and leases of low-value assets. Lease payments on these
assets are expensed to profit or loss as incurred.
Lease liabilities
A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the
present value of the lease payments to be made over the term of the lease, discounted using the interest rate
implicit in the lease or, if that rate cannot be readily determined, the consolidated entity's incremental borrowing
rate. Lease payments comprise of fixed payments less any lease incentives receivable, variable lease payments
that depend on an index or a rate, amounts expected to be paid under residual value guarantees, exercise price of
a purchase option when the exercise of the option is reasonably certain to occur, and any anticipated termination
penalties. The variable lease payments that do not depend on an index or a rate are expensed in the period in
which they are incurred.
Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are
remeasured if there is a change in the following: future lease payments arising from a change in an index or a
rate used; residual guarantee; lease term; certainty of a purchase option and termination penalties. When a lease
liability is remeasured, an adjustment is made to the corresponding right-of use asset, or to profit or loss if the
carrying amount of the right-of-use asset is fully written down.
48
Notes To The Financial Statements
For the year ended 30 June 2020
Note 1: Statement of Significant Accounting Policies (continued)
z. New Accounting Standards and Interpretations not yet mandatory or early adopted
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet
mandatory, have not been early adopted by the consolidated entity for the annual reporting period ended 30 June
2020. The consolidated entity's assessment of the impact of these new or amended Accounting Standards and
Interpretations, most relevant to the consolidated entity, are set out below.
Conceptual Framework for Financial Reporting (Conceptual Framework)
The revised Conceptual Framework is applicable to annual reporting periods beginning on or after 1 January 2020
and early adoption is permitted. The Conceptual Framework contains new definition and recognition criteria as
well as new guidance on measurement that affects several Accounting Standards. Where the consolidated entity
has relied on the existing framework in determining its accounting policies for transactions, events or conditions
that are not otherwise dealt with under the Australian Accounting Standards, the consolidated entity may need to
review such policies under the revised framework. At this time, the application of the Conceptual Framework is
not expected to have a material impact on the consolidated entity's financial statements.
zi. Comparative Figures
Where required by Accounting Standards comparative figures have been adjusted to conform with changes in
presentation for the current financial year.
zii. Annual report differences lodged Appendix 4E
The corresponding profit for the year for the prior year (30 June 2019) has been changed to comply with Accounting
Standard AASB5 as follows:
Profit for the year from Continuing operations
Profit from Discontinued Operations after tax
Annual Report
3,139
(857)
Lodged 4E
2,282
-
Difference
857
(857)
In drafting the annual report, it was identified that the 2019 comparative balances were not updated to adjust
the 30 June 2019 post tax losses relating to the discontinued operations disclosed within note 7 of the financial
statements. AASB5 requires that the previous years corresponding figures for the discontinued operations of the
current year be reclassified as “discontinued” operations for comparative purposes even though these operations
were continuing operations in the previous year.
49
WATERCO LIMITED ANNUAL REPORT 2020
Notes To The Financial Statements
For the year ended 30 June 2020
Note 2: Parent Information
The following information has been extracted from the books and records of the parent and has been prepared in
accordance with accounting standards.
STATEMENT OF FINANCIAL POSITION
ASSETS
Current Assets
TOTAL ASSETS
LIABILITIES
Current Liabilities
TOTAL LIABILITIES
EQUITY
Issued capital
Capital profits reserve
Asset revaluation reserve
Retained earnings
TOTAL EQUITY
2020
$000
50,274
116,246
29,500
49,679
35,982
180
11,132
19,273
66,567
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
Total profit after tax
Total comprehensive income
2020
$000
17,906
17,906
2019
$000
19,746
82,326
17,989
30,122
37,676
180
11,132
3,215
52,204
2019
$000
2,953
2,953
Guarantees
At 30th June 2020, Waterco Ltd has provided guarantees up to RM11,150,000 and USD1,000,000 (AUD5,157,622)
(2019: RM11,150,000 and USD1,000,000 (AUD5,265,323) to two Malaysian Banks for loans provided to a subsidiary,
Waterco (Far East) Sdn Bhd.
Contingent Liabilities
At 30th June 2020, Waterco Ltd has provided guarantees of $nil (2019: $5,771,779) to landlords for leases of premises
subleased to its Swimart Franchisees.Under AASB16, these leases have now been treated as ROU Liabilities.
Contractual Commitments
On 2 June 2020,Waterco Ltd signed a contract to purchase the business of Automated Pool Products Pty Ltd
Plant & Equipment and Intangibles
Inventory
1,285,000
1,800,000
3,085,000
The settlement of the business took place (after year end ) on 17 July 2020.
At 30th June 2020, Waterco Ltd has not entered into any other material contractual commitments for the acquisition
of any property, plant and equipment. (2019: nil).
50
Notes To The Financial Statements
For the year ended 30 June 2020
Note 3: Revenue and Other Income
Revenue from Continuing Operations
Sales revenue
• Sale of goods
Other revenue
• Interest received 3(a)
• Dividends received
• Rental income
• Rent-Other
• Other
Total Revenue
Timing of revenue recognition
- Goods transferred at a point in time
- Services transferred over time
(a) Interest received or receivable from
• Other persons
Total interest revenue
Other Income
Net gain on disposal of non-current assets
• Property, plant and equipment
• Goodwill
Consolidated Group
2020
$000
2019
$000
93,583
87,291
39
1
3,291
155
1,397
34
-
-
229
688
98,466
88,242
93,788
4,688
98,466
39
39
49
206
87,314
688
88,242
34
34
7
-
51
WATERCO LIMITED ANNUAL REPORT 2020 Notes To The Financial Statements
For the year ended 30 June 2020
Note 4: Profit for the Year
Profit for the year has been determined after:
(a) Expenses:
Cost of Sales
Finance costs:
• Borrowings
• ROU liabilities
• Finance charges on finance leases
Depreciation of non-current assets :
• Buildings
• Plant & equipment
• Capitalised leased assets
• ROU assets
Amortisation of non-current assets:
• Land use rights
• Goodwill on acquisition
• Goodwill on consolidation
• Expenditure carried forward
Total depreciation and amortisation
Bad and doubtful debts
• Trade debtors
Rental expense on Operating leases
• Minimum lease payments
Note 5: Auditors’ Remuneration
Remuneration of the auditor of the parent entity for:
• Audit or reviewing the financial report
Remuneration of other auditors of subsidiaries for:
• Auditing or reviewing the financial report of subsidiaries
52
Consolidated Group
2020
$000
2019
$000
48,218
45,789
912
24
23
959
487
1,144
205
4,798
6,634
(97)
4
25
-
(68)
6,566
300
1,324
210
186
1,111
-
27
1,138
637
908
171
-
1,716
17
4
-
12
33
1,749
140
2,826
152
191
Notes To The Financial Statements
For the year ended 30 June 2020
Note 6: Income Tax Expense
(a) The components of tax expense comprise:
• Current tax
• Deferred tax
• Recoupment of prior year tax losses
Income tax attributable to:
- Profit from continuing operations
- Profit from discontinued operations
(b) The prima facie tax on profit before income tax is
to the income tax as follows:
Profit before income tax
Prima facie tax payable on profit before income tax at 30%
(2019: 30%)
Add
Tax effect of:
• Depreciation of buildings
• Foreign controlled entities tax losses not tax effected
• Unrealised foreign exchange losses
• Transfer of revaluation gain on sale of controlled entity
to retained profits
• ROU assets
• Non deductible expenses
• Other
Less
Tax effect of:
• Research and development
• Effects of lower rates in overseas countries
• Unrealised foreign exchange gains
• Exempt income
• Overprovision for tax in prior years
• Reinvestment allowance
• Foreign controlled entities tax losses not tax effected
• Other
Income tax expense attributable to entity
The applicable weighted average effective tax rates are as follows:
2020
$000
4,325
(73)
19
4,271
890
3,381
4,271
21,828
6,548
105
-
-
1,655
77
9
10
114
133
115
-
66
-
3,638
67
4,271
20%
Consolidated Group
2019
$000
1,177
(105)
(41)
1,031
1,031
-
1,031
3,313
994
77
530
68
-
14
119
270
-
29
171
63
-
-
1,031
31%
53
WATERCO LIMITED ANNUAL REPORT 2020 Notes To The Financial Statements
For the year ended 30 June 2020
Note 7: Discontinued Operations
On 31 May 2020, Waterco Ltd closed Waterco Canada Inc
and deregistered the company.
On 3 June 2020, Waterco Ltd sold its shares in Waterco (C) Ltd
Financial information relating to the discontinued operations
to the date of closure/sale is set out below
The financial performance of the discontinued operations to
the date of closure/sale, which is included in the profit/(loss)
from discontinued operations per the statement of
comprehensive income, is as follows:
Revenue
Expenses
Profit before income tax
Income tax expense
(Loss) attributable to the members of the parent entity
Profit on sale before income tax
Income tax expense
Profit on sale after income tax
Total profit/(loss) after tax attributable to discontinued
operations
The net cash flows for the discontinued divisions, which
have been incorporated into the statement of cash flows
are as follows:
Net cash inflow/(outflow) from operating activities
Net cash inflow/(outflow) from investing activities
Net cash inflow/(outflow) from financing activities
Net increase/(decrease) in cash generated by the
discontinued division
Consolidated Group
2020
$000
2019
$000
1,991
(3,084)
(1,093)
-
(1,093)
19,016
3,381
15,635
2,621
(3,478)
(857)
-
(857)
-
-
-
14,542
(857)
4,416
-
-
4,416
(686)
(344)
958
(72)
Net gain/(loss) on disposal of divisions included in gain from
discontinued operations per the statement of comprehensive
income.
14,542
(857)
54
Notes To The Financial Statements
For the year ended 30 June 2020
Note 8: Key Management Personnel Compensation
(a) Key Management Personnel (KMP) Compensation
The total remuneration paid to KMP of the company and the Group during the year are as follows:
Short-term employee benefits
Post-employment benefits
Other long term benefits
2020
$000
1,420
90
22
1,532
Consolidated Group
2019
$000
1,459
107
42
1,608
Refer to the remuneration report contained in the directors’ report for remuneration paid or payable to each KMP
for the year ended 30 June 2020.
(b) Compensation Practices
In constructing, reviewing and determining the remuneration policy for Executive Directors and the
senior executive team, the Board and Remuneration Committee have considered a number of factors
including:
•
the importance of attracting, retaining and motivating management of the appropriate calibre to further the
success of the business;
linking pay to performance by rewarding effective individual achievement as well as business performance;
and
the mix within the package which is designed to align personal reward with enhanced shareholder value over
both the short and long-term.
•
•
The Executive Directors’ and the senior executive team’s package consists of two general components:
• fixed remuneration component consisting of base salary which executives may “salary sacrifice” and other
benefits; and
• variable or “at risk” component consisting of an annual short term incentive plan for executives
Remuneration of the company’s Non-Executive Directors is determined by the Board, based on the nature of
their work, responsibilities and market comparisons. The maximum aggregate amount of fees that can be paid
to Non-Executive Directors is subject to approval by shareholders.
55
WATERCO LIMITED ANNUAL REPORT 2020
Notes To The Financial Statements
For the year ended 30 June 2020
CURRENT ASSETS
Note 9: Cash and cash equivalents
Cash at bank and in hand (1)
Reconciliation of cash
Cash at the end of the year as shown in the statement of cash
flows is reconciled to the related items in the balance sheet as fol-
lows:
Cash and cash equivalents
Bank overdraft (note 18)
(1) Includes $491,539 (2019:$554,575) in advertising levies held by
Waterco Ltd in its capacity as the franchisor of the Swimart
network and included in other creditors (see note 17).
Amounts are held in a separate bank account at year end and
are subject to in accordance with the franchise agreement and are
available for general use by Waterco Ltd.
Note 10: Trade and other receivables
Trade receivables
Less: allowance for expected credit loss
impairment of receivables)
Other receivables
2020
$000
9,697
9,697
(1,385)
8,312
9,063
(455)
8,608
28,240
36,848
Consolidated Group
2019
$000
5,310
5,310
(1,144)
4,166
11,389
(524)
10,865
1,255
12,120
56
Notes To The Financial Statements
For the year ended 30 June 2020
Note 10: Trade and other receivables (continued)
Movements in the allowance of expected credit loss of receivables are as follows:
Opening
Balance
1.7.2018
$000
Charge for
the Year
$000
Amounts
Written Off
$000
Closing
Balance
30.6.2019
$000
Consolidated Group
Current trade receivables
431
233
(140)
524
Opening
Balance
1.7.2019
$000
Charge for
the Year
$000
Amounts
Written Off
$000
Closing
Balance
30.6.2020
$000
Consolidated Group
Current trade receivables
524
231
(300)
455
There are $868,000 (2019: $2,903,000) within trade and other receivables that are not impaired and are past due. It
is expected these balances will be received in full. Impaired receivables are provided for in full.
The following table details the Group’s trade and other receivables exposed to credit risk (prior to collateral and other
credit enhancements) with ageing analysis and impairment provided for thereon. Amounts are considered as ‘past
due’ when the debt has not been settled, with the terms and conditions agreed between the Group and the customer
or counter party to the transaction. Receivables that are past due are assessed for impairment by ascertaining
solvency of the debtors and are provided for where there are specific circumstances indicating that the debt may not
be fully repaid to the Group.
The balances of receivables that remain within initial trade terms (as detailed in the table) are considered to be of high
credit quality.
Gross
amount
Past due
and
impaired
$000
$000
Past due but not impaired (days overdue)
< 30
$000
31–60
$000
61–90
$000
Within initial
trade terms
$000
> 90
$000
Consolidated Group
2020
Trade and term receivables
Other receivables
Total
2019
Trade and term receivables
Other receivables
Total
9,063
28,240
37,303
11,389
1,255
12,644
455
-
455
524
-
524
648
648
1,129
-
1,129
128
128
473
-
473
92
92
137
-
137
-
-
1,164
-
1,164
7,740
28,240
35,980
7,962
1,255
9,217
The Group does not hold any financial assets with terms that have been renegotiated, but which would otherwise be
past due or impaired.
The consolidated entity has increased its monitoring of debt recovery as there is an increased probability of customers
delaying payment or being unable to pay, due to the Coronavirus (COVID-19) pandemic. As a result, the calculation
of expected credit losses has been revised as at 30 June 2020 and rates have increased in each category up to 6
months overdue.
57
WATERCO LIMITED ANNUAL REPORT 2020 Notes To The Financial Statements
For the year ended 30 June 2020
Note 11: Inventories
Raw materials and stores at cost
Work in progress at cost
Finished goods at cost
Goods in transit at cost
Provision for inventory write-down
Note 12: Other current assets
Prepayments
NON CURRENT ASSETS
Note 13: Interests in Subsidiaries
Parent Entity
Waterco Limited
Controlled Entities of Waterco Limited:
Swimart Pty Ltd
Zane Solar Systems Australia Pty Ltd
Swimart Network Pty Ltd
Ezera Systems Pty Ltd
Waterco USA Inc
Waterco Engineering Sdn Bhd
Waterco (Far East) Sdn Bhd
Watershoppe (M) Sdn Bhd
Baker Hydro (Far East) Sdn Bhd
Solar-Mate Sdn Bhd
Waterco (NZ) Ltd
Swimart (NZ) Ltd
Waterco (Guangzhou) Ltd
Waterco (C) Ltd**
Waterco (Europe) Ltd
Waterco Canada Inc*
PT Waterco Indonesia
Waterco International Pte Ltd
Medipool Pte Ltd
Waterco France
Beijing Waterco Trading Co Ltd
Guangzhou Waterco Environmental
Technology Co Ltd ***
Shanghai Waterco Trading Co Ltd
2020
$000
10,499
2,255
21,340
2,169
(3,203)
33,060
792
792
Consolidated Group
2019
$000
7,300
5,675
23,915
1,591
(2,292)
36,189
829
829
Country of
incorporation
Carries on
business in
% owned
2020
2019
Australia
Australia
-
-
Australia
Australia
Australia
Australia
USA
Malaysia
Malaysia
Malaysia
Malaysia
Malaysia
New Zealand
New Zealand
China
China
United Kingdom
Canada
Indonesia
Singapore
Singapore
France
China
Australia
Australia
Australia
Australia
USA
Malaysia
Malaysia
Malaysia
Malaysia
Malaysia
New Zealand
New Zealand
China
China
United Kingdom
Canada
Indonesia
Singapore
Singapore
France
China
China
China
China
China
100
100
100
60
100
100
100
100
100
100
100
100
100
-
100
-
51
100
60
100
100
100
100
100
100
100
60
100
100
100
100
100
100
100
100
100
100
100
100
51
100
60
100
100
100
100
* On 31 May 2020, Waterco Canada Inc was deregistered.
** On 3 June 2020, Waterco (C) Ltd was sold to Guangzhou Yaolong Information Industry Co Ltd
*** On 19 August 2020, Guangzhou Waterco Trading Co Ltd changed its name to Guangzhou Waterco Environmental Technology
Co Ltd
58
Notes To The Financial Statements
For the year ended 30 June 2020
Note 14: Property, plant & equipment
Freehold land at independent valuation
Land use rights
Less: accumulated amortisation
Freehold buildings at independent valuation
Less: accumulated depreciation
Plant & equipment at cost
Less: accumulated depreciation
Leased plant & equipment at cost
Less: accumulated depreciation
Total written down value
Movements in Carrying Amounts
2020
Consolidated Group:
Balance at the beginning of year
Effects of exchange rate changes
Additions
Revaluation
Disposals
Depreciation expense*
Carrying amount at the end of year
2020
$000
17,850
-
-
-
27,091
(973)
26,118
32,352
(25,288)
7,064
781
(207)
574
51,606
Consolidated Group
2019
$000
17,763
5,077
(98)
4,979
32,036
(1,274)
30,762
32,613
(25,302)
7,311
877
(233)
644
61,459
Freehold
Land Buildings
$000
$000
Land
use
$000
Plant &
Equipment
$000
Leased
Plant
$000
Total
$000
17,763
(117)
-
204
-
-
17,850
30,761
(71)
17
393
(4,308)
(674)
26,118
4,980
(4,980)
-
-
7,311
(14)
2,176
-
(543)
(1,866)
7,064
(1)
644 61,459
(203)
234 2,427
597
-
(9,929)
(98)
(205)
(2,745)
574 51,606
*Depreciation expense that is absorbed into the cost of manufactured inventory is $889,805
2019
Consolidated Group:
Balance at the beginning of year
Effects of exchange rate changes
Additions
Revaluation
Disposals
Depreciation expense*
Carrying amount at the end of year
Freehold
Land Buildings
$000
$000
Land
use
$000
Plant &
Equipment
$000
Leased
Plant
$000
Total
$000
17,442
308
-
13
-
-
17,763
30,587
344
134
339
-
(643)
30,761
4,923
57
-
-
-
-
4,980
7,078
36
2,020
-
(52)
(1,771)
7,311
3
666 60,696
748
199 2,353
352
-
(105)
(53)
(2,585)
(171)
644 61,459
*Depreciation expense that is absorbed into the cost of manufactured inventory is $872,299
59
WATERCO LIMITED ANNUAL REPORT 2020 Notes To The Financial Statements
For the year ended 30 June 2020
Note 14: Property, Plant & Equipment (continued)
If Land & Buildings were stated at historic cost,
amounts would be as follows:
Cost
Less: Accumulated depreciation
Net book value
Consolidated Group
2020
$000
2019
$000
25,254
(4,916)
20,338
29,022
(6,629)
22,393
The Group’s land and buildings were revalued as per the disclosures in note 1(j). The directors consider the
carrying value of the land and buildings to be a fair reflection of their market value.
Note 15: Right of use Assets
Leased building
Accumulated depreciation
30,116
(16,766)
13,350
-
-
-
The consolidated entity leases land and buildings for its offices, warehouses and retail outlets under agreements of
between five to fifteen years with, in some cases, options to extend. The leases have various escalation clauses.
On renewal, the terms of the leases are renegotiated. The consolidated entity also leases plant and equipment
under agreements of between three to seven years.
Note 16: Intangible assets
Goodwill
Less: accumulated impairment
Goodwill on consolidation
Less: accumulated impairment
Product development costs
less: accumulated amortisation
Movements in Carrying Amounts
Consolidated Group:
Balance at the beginning of year
Additions
Disposals
Effects of exchange rate changes
Impairment/amortisation expense
Carrying amount at the end of year
60
79
(12)
67
249
(37)
212
13
-
13
292
Goodwill on
consolidation
$000
Goodwill
$000
Deferred
expenditure
$000
237
-
-
-
(25)
212
73
-
-
(2)
(4)
67
122
-
(96)
(13)
-
13
81
(8)
73
249
(12)
237
122
-
122
432
Total
$000
432
-
(96)
(15)
(29)
292
Notes To The Financial Statements
For the year ended 30 June 2020
CURRENT LIABILITIES
Note 17: Trade and other payables - unsecured
Trade creditors
Sundry creditors and accrued expenses (1)
(1) Included in sundry creditors are advertising levies collected of
$491,539 (2019:$554,575) and held by Waterco Ltd in its
capacity as the franchisor of the Swimart network. These amounts
are held in a separate bank account at year end (see Note 9).
Note 18: Borrowings
Bank loans - secured (refer Note 21)
Bank trade bills
Bank overdraft
ROU lease liability
Lease liability
Note 19: Taxes
a) Liabilities
Current
Income Tax
Non Current Deferred tax liability comprises:
Tax allowances relating to property, plant & equipment
Revaluation adjustments taken direct to equity
Other
Parent entity DTA netted off against DTL
Consolidated DTL
b) Assets
Current
Income Tax
Deferred tax assets comprises:
Provisions
Attributable to tax losses
Tax allowances relating to property, plant & equipment
Other
Parent entity DTA netted off against DTL
Consolidated DTA
Consolidated Group
2020
$000
2019
$000
9,701
4,355
14,056
6,569
4,590
11,159
8,328
2,532
1,385
4,291
225
16,761
810
1,428
4,771
295
6,494
(520)
5,974
-
981
(239)
338
1,080
(520)
560
8,048
1,796
1,144
-
280
11,268
-
1,428
5,706
(745)
6,389
(520)
5,869
407
899
-
(232)
340
1,007
(520)
487
61
WATERCO LIMITED ANNUAL REPORT 2020 Notes To The Financial Statements
For the year ended 30 June 2020
Note 19: Taxes (continued)
c) Reconciliations
i. Gross Movements
The overall movement in the deferred tax account is
as follows:
Opening balance
Credit/(Charge) to statement of comprehensive income
Credit/(Charge) to equity
Closing Balance
ii. Deferred Tax Liability
The movement in deferred tax liability for each
temporary difference during the year is as follows:
Tax allowances relating to property, plant & equipment
Opening balance
Transfer to deferred tax asset
Credit/(Charge) to statement of comprehensive income
Closing balance
Property revaluation adjustments taken direct to equity
Opening balance
Net revaluations during current period taken direct to equity
Net revaluation during current period charged to statement
of comprehensive income
Closing balance
Other
Opening balance
Credit/(charge) to statement of comprehensive income
Closing balance
iii. Deferred Tax Assets
The movement in deferred tax asset for each
temporary difference during the year is as follows:
Provisions
Opening balance
Credit/(Charge) to statement of comprehensive income
Closing balance
Tax allowances relating to
Property plant & equipment
Opening balance
Transfer from deferred tax liability
Credit/(Charge) to statement of comprehensive income
Closing balance
Other
Opening balance
Credit/(charge) to statement of comprehensive income
Closing balance
62
Consolidated Group
2020
$000
2019
$000
(5,382)
(33)
-
(5,415)
1,428
-
(22)
1,406
5,706
1,470
-
7,176
(745)
(1,345)
(2,090)
899
82
981
(232)
-
(7)
(239)
340
(2)
338
(5,579)
131
66
(5,382)
1,172
-
256
1,428
5,525
181
-
5,706
(245)
(500)
(745)
742
157
899
(217)
-
(15)
(232)
347
(7)
340
Notes To The Financial Statements
For the year ended 30 June 2020
Note 19: Taxes (continued)
d) Deferred tax assets not brought to account the benefits
of which can only be realised in if the conditions for
deductibility set out in note 1e) occur - tax losses
- Operating losses
Note 20: Short-term provisions
Employee Benefits (see note 1g)
Opening Balance
Additional provisions
Amounts used
Closing Balance
Consolidated Group
2020
$000
2019
$000
2,866
2,866
1,811
977
(832)
1,956
6,101
6,101
2,132
762
(1,083)
1,811
Amounts not expected to be settled within the next 12 months
The current provision for employee benefits includes all unconditional entitlements where employees have
completed the required period of service and also those where employees are entitled to pro-rata payments in
certain circumstances. The entire amount is presented as current, since the consolidated entity does not have an
unconditional right to defer settlement.
NON-CURRENT LIABILITIES
Note 21: Borrowings
Bank loans - secured (1)
Bank overdraft
ROU lease liability
Lease liability
9,584
-
9,361
232
19,177
10,842
-
-
252
11,094
(1) Bank facilities of the group are secured by a first ranking general security interest over all the assets and undertakings
of the parent entity (including a first registered mortgage over the Rydalmere Property), and corporate guarantees
from the parent entity to the banks of an overseas subsidiary. That part of the facilities that are payable or subject
to an annual review within 12 months are classified as current.
Bank loan amount of AUD10,500,000 relates to the parent entity and bears interest at 1.99%- 2.25% repayable
by quarterly instalments with a maturity date of 27 November 2021. Bank loan amount of AUD11,184,000 relates
to a subsidiary and bears interest at 4.80%-5.10% repayable by monthly instalments with maturity dates of
December 2021 and June 2031.
Note 22: Long-term provisions
Employee Benefits (see note 1g)
Opening balance
Additional provisions
Amounts used
Closing balance
a) Aggregate employee entitlement liability
b) Number of employees at year end
202
8
-
210
2,166
660
211
11
(20)
202
2,013
682
63
WATERCO LIMITED ANNUAL REPORT 2020
Notes To The Financial Statements
For the year ended 30 June 2020
Note 23: Issued capital
Ordinary shares are classified as equity.
36,632,651 ordinary shares fully paid at beginning of the year
(2019: 37,083,405)
On 31 July 2019, 12,469 shares were purchased at $1.62 and
cancelled under Waterco Ltd Share-buyback Scheme
On 31 August 2019, 680 shares were purchased at $1.75 and
cancelled under Waterco Ltd Share-buyback Scheme
On 30 September 2019, 26,028 shares were purchased at $1.94 and
cancelled under Waterco Ltd Share-buyback Scheme
On 31 October 2019, 22,145 shares were purchased at $2.03 and
cancelled under Waterco Ltd Share-buyback Scheme
On 30 November 2019, 150,587 shares were purchased at $2.12 and
cancelled under Waterco Ltd Share-buyback Scheme
On 31 December 2019, 45,108 shares were purchased at $2.15 and
cancelled under Waterco Ltd Share-buyback Scheme
On 31 January 2020, 13,232 shares were purchased at $2.12 and
cancelled under Waterco Ltd Share-buyback Scheme
On 29 February 2020, 388,779 shares were purchased at $2.27 and
cancelled under Waterco Ltd Share-buyback Scheme
On 31 March 2020, 50,731 shares were purchased at $2.10 and
cancelled under Waterco Ltd Share-buyback Scheme
On 30 April 2020, 39,926 shares were purchased at $2.02 and
cancelled under Waterco Ltd Share-buyback Scheme
On 30 June 2020, 27,745 shares were purchased at $2.33 and
cancelled under Waterco Ltd Share-buyback Scheme
On 31 July 2018, 30,177 shares were purchased at $2.00 and
cancelled under Waterco Ltd Share-buyback Scheme
On 31 August 2018, 51,230 shares were purchased at $2.00 and
cancelled under Waterco Ltd Share-buyback Scheme
On 30 September 2018, 39,972 shares were purchased at $2.06 and
cancelled under Waterco Ltd Share-buyback Scheme
On 31 October 2018, 15,789 shares were purchased at $2.10 and
cancelled under Waterco Ltd Share-buyback Scheme
On 30 November 2018, 61,385 shares were purchased at $2.12 and
cancelled under Waterco Ltd Share-buyback Scheme
On 31 January 2019, 9,025 shares were purchased at $2.10 and
cancelled under Waterco Ltd Share-buyback Scheme
On 28 February 2019, 17,372 shares were purchased at $2.12 and
cancelled under Waterco Ltd Share-buyback Scheme
On 31 March 2019, 209,424 shares were purchased at $2.00 and
cancelled under Waterco Ltd Share-buyback Scheme
On 30 April 2019, 11,769 shares were purchased at $2.00 and
cancelled under Waterco Ltd Share-buyback Scheme
On 31 May 2019, 3,611 shares were purchased at $1.59 and
cancelled under Waterco Ltd Share-buyback Scheme
On 30 June 2019, 1,000 shares were purchased at $1.60 and
cancelled under Waterco Ltd Share-buyback Scheme
35,855,221 ordinary shares fully paid at the end of
the year (2019: 36,632,651)
64
Consolidated Group
2020
$000
2019
$000
37,676
38,590
(20)
(1)
(50)
(45)
(319)
(97)
(28)
(881)
(107)
(81)
(65)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(60)
(102)
(83)
(33)
(130)
(19)
(37)
(419)
(23)
(6)
(2)
35,982
37,676
Notes To The Financial Statements
For the year ended 30 June 2020
Note 23: Issued Capital (continued)
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the company in
proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value
and the company does not have a limited amount of authorised capital.
On a show of hands, every member present at a meeting in person or by proxy shall have one vote and, upon a poll,
each share shall have one vote.
Share buy-back
On 23 April 2018, the company announced a third share buyback of $2,500,000 worth of shares (approximately
1,250,000 shares) commencing on 24 April 2018 and ending on 23 April 2019 (or earlier if the $2,500,000 is
purchased before then). During the previous year, the company purchased and cancelled 446,143 (2018:15,952)
shares costing $906,514 (2018:$29,904).
This Share buyback expired on 23 April 2019.
On 10 May 2019, the company announced a fourth share buyback of $2,500,000 worth of shares (approximately
1,666,666 shares) commencing on 13 May 2019 and ending on 12 May 2020 (or earlier if the $2,500,000 is purchased
before then). During the current year, the company purchased and cancelled 749,685 (2019: 4,611) shares costing
1,630,060 (2019 $7,324).
This Share buyback expired on 12 May 2020.
On 28 May 2020, the company announced a fifth share buyback of $3,000,000 worth of shares (approximately
1,363,636 shares) commencing on 1 June 2020 and ending on 31 May 2021 (or earlier if the $3,000,000 is purchased
before then). During the current year, the company purchased and cancelled 27,745 shares costing $64,742.
Capital Management
Management controls the capital of the group in order to maintain a good debt to equity ratio, provide the shareholders
with adequate returns and ensure that the group can fund its operations and continue as a going concern.
The group’s debt and capital includes ordinary share capital and financial liabilities supported by financial assets.
There are no externally imposed capital requirements.
Management effectively manages the group’s capital by assessing the group’s financial risks and adjusting its capital
structure in response to changes in these risks and in the market. These responses include the management of debt
levels, distributions to shareholders and share issues.
There have been no changes in the strategy adopted by management to control the capital of the group since the
prior year. This strategy is to ensure that the group’s gearing ratio remains between 30% and 70%. The gearing ratios
for the year ended 30 June 2020 and 30 June 2019 are as follows:
Consolidated Group
Total borrowings
Less cash and cash equivalents
Net debt
Total equity
Total capital
Gearing ratio
2020
$000
35,938
(9,697)
26,241
87,261
113,502
30%
2019
$000
22,362
(5,310)
17,052
75,830
92,882
22%
65
WATERCO LIMITED ANNUAL REPORT 2020 Notes To The Financial Statements
For the year ended 30 June 2020
Note
No.
Note 24: Reserves
a) Capital profits
The capital profits reserve relates to non taxable
profits on sale of property.
b) Foreign currency translation
The foreign currency translation reserve records
exchange differences on translation of foreign
controlled subsidiaries
c) Asset revaluation reserve
Balance at the beginning of the year
Sale of controlled entity
Property revaluation increment (net of tax and
reinstatement)
Effect of foreign exchange changes on translation
Balance at the end of the year
The asset revaluation reserve records the revaluation
of non-current assets
Note 25: Retained earnings
Opening retained earnings
Adjustment to retained earnings (AASB16) Rou asset
Adjustment to retained earnings (AASB15)
Unearned income
Transfer from asset revaluation reserve on disposal
of controlled entities
Net profit attributable to the members of the parent
entity
Dividends paid
Closing retained earnings
28
Consolidated Group
2019
$000
211
2020
$000
211
(4,951)
(2,221)
25,234
(5,514)
485
(52)
20,153
24,643
352
239
25,234
15,413
23,224
14,191
(36)
-
5,227
17,662
(1,811)
35,233
13,944
-
(154)
-
2,242
(1,841)
14,191
66
Notes To The Financial Statements
For the year ended 30 June 2020
Note 26: Lease commitments
Finance leases
Lease expenditure contracted and provided for:
not later than one year
later than one year but not later than five years
Total minimum lease commitments
Less: future finance charges
Lease liability
Current portion
Non-current portion
Note
No.
18
21
Consolidated Group
2019
$000
300
261
561
(29)
532
280
252
532
2020
$000
236
242
478
(21)
457
225
232
457
Finance leases of 3 or 4 years are taken out on motor vehicles, forklifts and IT equipment with an option to
purchase the asset at the end of the lease term at a residual of 30% to 45% depending on the asset.
Operating lease payable:
Non-cancellable operating leases contracted but not
capitalised in the financial statements
not later than one year
later than one year but not later than five years
Note 27: Contingent Liabilities
Estimate of the maximum amount of contingent
liabilities that may become payable
Guarantees provided to banks on behalf of a subsidiary
Guarantees of leases of premises subleased to franchisees
Note 28: Related Parties
Transactions with director related parties
i) Sales made to Asiapools (M) Sdn Bhd.
Mr S S Goh, a shareholder has significant influence over
Asiapools (M) Sdn Bhd.
(ii) Payments made to Mint Holdings Pty Ltd for rental of
warehouses, offices and a retail shop
Mr S S Goh is a director and shareholder of Mint Holdings
Pty Ltd
(iii) Management fee charged to Mint Holdings Pty Ltd for
administration and secretarial services.
-
-
-
5,372
-
5,372
162
660
30
Terms and conditions
All transactions were made on normal commercial terms and conditions and at market rates.
2,348
3,328
5,676
5,977
10,003
15,980
155
657
38
67
WATERCO LIMITED ANNUAL REPORT 2020 Notes To The Financial Statements
For the year ended 30 June 2020
Segment assets
Where an asset is used across multiple segments,
the asset is allocated to the segment that receives
the majority of the economic value from the asset. In
the majority of instances, segment assets are clearly
identifiable on the basis of their nature and physical
location.
Segment liabilities
Liabilities are allocated to segments where is a direct
nexus between the incurrence of the liability and the
operations of the segment.
Unallocated items
The following items of revenue, expenses, assets and
liabilities are not allocated to operating segments as
they are not considered part of the core operations of
any segment:
– other revenues
Note 29: Operating Segments
Segment Information
Identification of reportable segments
The group has identified its operating segments based
on the internal reports that are reviewed and used by the
Board of Directors (chief operating decision makers) in
assessing performance and determining the allocation
of resources.
The group is managed primarily on the basis of location
since the group’s operations have similar risk profiles
and performance criteria. Operating segments are
therefore determined on the same basis.
The group operates predominantly in one industry
being the manufacture and wholesale of swimming pool
chemicals, accessories and equipment, manufacture
and sale of solar pool heating systems and as a
franchisor of swimming pool outlets retailing swimming
pool accessories and equipment.
Basis of accounting for the purposes of reporting
by operating segments
Accounting Policies Adopted
Unless stated otherwise, all amounts reported to the
Board of Directors as the chief decision maker with
respect to operating segments are determined in
accordance with accounting policies that are consistent
to those adopted in the annual financial statements of
the Group.
Inter-segment transactions
An internally determined transfer price is set for all
inter-entity sales. The price is reviewed annually (unless
special circumstances arise) and is based on what
would be realised in the event the sale was made to
an external party at arm’s length under the same terms
and conditions. All such transactions are eliminated on
consolidation for the Group’s financial statements.
Corporate charges are allocated to reporting segments
based on the services provided to those reporting
segments. Inter-segment loans payable and receivable
are initially recognised at the consideration received net
of transaction costs. If inter-segment loans receivable
and payable are not on commercial terms, these are
not adjusted to fair valued based on market interest
rates.
68
Notes To The Financial Statements
For the year ended 30 June 2020
Note 29: Operating Segments (continued)
Geographical Segments
REVENUE
Sales to customers outside the
consolidated group
Intersegment sales
Total segment revenue
Reconciliation of segment
revenue to group revenue
Other revenue
Intersegment elimination
Total group revenue
SEGMENT NET PROFIT FROM
CONTINUING OPERATIONS
BEFORE TAX
DISCONTINUED
OPERATIONS BEFORE TAX
Reconciliation of segment result to
group net profit before tax
Unallocated items
- other
Net profit before tax
from continuing operations
from discontinued
operations
SEGMENT ASSETS
Segment asset increases for
the period
Reconciliation of segment
assets to group assets
Intersegment eliminations
Total group assets
CAPITAL EXPENDITURE
SEGMENT LIABILITIES
Reconciliation of segment
liabilities to group liabilities
Intersegment eliminations
Total group liabilities
2020
NORTH
AMERICA &
EUROPE
$000
CONSOLIDATED
GROUP
$000
AUSTRALIA &
NEW ZEALAND
$000
63,874
934
64,808
ASIA
$000
11,189
27,993
39,182
18,520
951
19,471
6,318
5,757
1,352
100
1,125
12,059
93,583
29,878
123,461
4,883
(29,878)
98,466
8,795
17,916
26,711
(4,883)
21,828
3,904
17,924
21,828
122,015
59,374
16,892
198,281
789
53,047
1,428
32,907
210
2,427
27,720
113,674
(52,076)
146,205
(54,730)
58,944
69
WATERCO LIMITED ANNUAL REPORT 2020 Notes To The Financial Statements
For the year ended 30 June 2020
Note 29: Operating Segments (continued)
Geographical Segments
2019
NORTH
AMERICA &
EUROPE
$000
CONSOLIDATED
GROUP
$000
AUSTRALIA &
NEW ZEALAND
$000
59,539
821
60,360
ASIA
$000
13,152
26,332
39,484
16,926
759
17,685
3,206
-
1,263
(15)
653
(548)
89,617
27,912
117,529
1,246
(27,912)
90,863
5,122
(563)
4,559
(1,246)
3,313
4,170
(857)
3,313
86,698
61,383
(12,802)
135,279
644
32,284
1,656
29,348
52
7,761
(18,453)
116,826
2,352
69,393
(28,397)
40,996
REVENUE
Sales to customers outside the
consolidated group
Intersegment sales
Total segment revenue
Reconciliation of segment
revenue to group revenue
Other revenue
Intersegment elimination
Total group revenue
SEGMENT NET PROFIT FROM
CONTINUING OPERATIONS
BEFORE TAX
DISCONTINUED OPERATIONS
BEFORE TAX
Reconciliation of segment result to
group net profit/(loss) before tax
Unallocated items
- other
Net profit before tax
from continuing operations
from discontinued
operations
SEGMENT ASSETS
Segment asset increases for
the period
Reconciliation of segment
assets to group assets
Intersegment eliminations
Total group assets
CAPITAL EXPENDITURE
SEGMENT LIABILITIES
Reconciliation of segment liabilities
to group liabilities
Intersegment eliminations
Total group liabilities
70
Notes To The Financial Statements
For the year ended 30 June 2020
Note 30: Dividends Paid or Proposed
Dividends are recognised when declared during the financial year
and no longer at the discretion of the company.
Final fully franked ordinary dividend of 3c per share (2019:3c)
franked at the tax rate of 30% paid
Interim fully franked ordinary dividend of 2c per share (2019:2c)
franked at the tax rate of 30% paid
Proposed final fully franked ordinary dividend of 3c per share
(2019: 3c) franked at the tax rate of 30%
Balance of franking account at year end adjusted for franking
credits arising from payment of income tax payable, payment of
proposed dividends and franking credits not available
for distribution
Note 31: Earnings Per Share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit (after
tax) attributable to members of Waterco Ltd by the weighted
average number of ordinary shares outstanding during the financial
year adjusted for any share issues and share buybacks that have
taken place during the year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the
calculation of the basic earnings per share after income tax effect
of interest and other financing costs associated with the dilutive
potential ordinary shares and the weighted average number of
shares assumed to have been issued for no consideration in
relation to dilutive potential ordinary shares.
Reconciliation of Earnings to Net Profit
Net Profit – continuing operations
Net Profit – discontinued operations
Net Profit
Net Profit/(loss) attributable to outside equity interest
Earnings used in the calculation of basic EPS
Earnings used in the calculation of diluted EPS
a) Weighted average number of ordinary shares outstanding
during the year used in calculation of basic EPS
b) Weighted average number of ordinary shares outstanding
during the year used in calculation of diluted EPS
Note 32: Events Subsequent to Reporting Date
On 17 July 2020, Waterco Ltd completed the purchase of the
business of Automated Pool Products Pty Ltd.
There were no other reportable events subsequent to balance date.
Consolidated Group
2020
$000
2019
$000
1,093
718
1,811
1,076
1,108
733
1,841
1,099
6,432
5,623
3,014
14,542
17,556
(106)
17,662
17,662
35,855
35,855
3,085
3,139
(857)
2,282
40
2,242
2,242
36,872
36,872
-
71
WATERCO LIMITED ANNUAL REPORT 2020 Notes To The Financial Statements
For the year ended 30 June 2020
Note 33: Financial Risk Management
The Audit Committee
(AC) has been delegated
responsibility by the Board of Directors for, amongst
other issues, monitoring and managing financial risk
exposures of the Group. The AC monitors the Group’s
financial risk management policies and exposures and
approves financial transactions within the scope of its
authority. It also reviews the effectiveness of internal
controls relating to commodity price risk, counter party
credit risk, currency risk, financing risk and interest rate
risk. The AC meets on a bi-monthly basis and minutes
of the AC are reviewed by the Board.
The AC’s overall risk management strategy seeks to
assist the consolidated group in meeting its financial
targets, while minimising potential adverse effects on
financial performance. Its functions include the review
of the use of hedging derivative instruments, credit risk
policies and future cash flow requirements.
The main risks the group is exposed to through its
financial instruments are interest rate risk, credit risk,
foreign currency risk, liquidity risk and price risk.
(a) Interest Rate Risk
The consolidated group’s exposure to interest rate
risk, which is the risk that a financial instrument’s
value will fluctuate as a result of changes in market
interest rates and the effective weighted average
interest rates on classes of financial assets and
liabilities.
(b) Credit Risk
The maximum exposure to credit risk, excluding the
value of any collateral or other security, at balance
date to recognised financial assets is the carrying
amount, net of any provisions for doubtful debts, as
disclosed in the statement of financial position and
notes to the financial statements.
Credit risk is managed through maintenance of
procedures in relation to approval, granting and
renewal of credit limits, regular monitoring of
exposures against such limits and the monitoring
of the financial stability of significant customers.
Such monitoring is used in assessing receivables
for impairment. Depending on the subsidiary, credit
terms are generally 30 days from invoice month.
Credit risk for derivative financial instruments arises
from the potential failure by counter parties to the
contract to meet their obligations. The credit risk
exposure to forward exchange contracts and interest
rate swaps is the net fair value of these contracts as
disclosed in (c).
The Group has no single concentration of credit risk
with any single debtor or group of debtors. However,
on a geographical basis, the group has significant
credit exposure to Australia, New Zealand and USA
given the substantial operations in those regions.
Trade and other receivables that are neither past
due or impaired are considered to be of high credit
quality. Aggregates of such amounts are as detailed
in Note 10.
The consolidated entity has adopted a lifetime
expected loss allowance in estimating expected
credit losses to trade receivables through the
use of a provisions matrix using fixed rates of
loss provisioning. These provisions are
credit
considered representative across all customers
of the consolidated entity based on recent sales
experience, historical collection rates and forward-
looking information that is available. As disclosed
in note 10, due to the Coronavirus (COVID-19)
pandemic, the calculation of expected credit losses
has been revised as at 30 June 2020 and rates have
increased in each category up to 6 months overdue.
Management closely monitors receivable balances
on a monthly basis and is in regular contact with its
customers to mitigate risk
(c) Foreign Currency Risk
The parent entity is exposed to fluctuations in foreign
currencies arising from the sale and purchase
of goods in currencies other than the group’s
measurement currency.
The parent entity has forward contracts in place at
balance date relating to highly probable forecast
transactions. These contracts commit the group to
buy and sell specified amounts of foreign currencies
in the future at specified exchange rates.
72
Notes To The Financial Statements
For the year ended 30 June 2020
Note 33: Financial Risk Management (continued)
(c) Foreign Currency Risk (continued)
Contracts are taken out with terms that reflect the underlying settlement terms of the commitment to the maximum
extent possible so that hedge ineffectiveness is minimised.
The following table summarises the notional amounts of the Group (and parent entity) commitments in relation to
forward exchange contracts.
Notional Amounts
2020
$000
2019
$000
Average Exchange Rate
2019
$000
2020
$000
Consolidated Group (and Parent Entity)
Buy USD/Sell AUD
- Less than 6 months
4,307
-
0.6965
-
d) Liquidity Risk
The group manages liquidity risk by monitoring forecast cash flows and ensuring that adequate unutilised
borrowing facilities are maintained.
Financial liability and financial asset maturity analysis
Consolidated Group
Within 1 Year
1 to 5 Years
Over 5 years
Total
2020
$000
2019
$000
2020
$000
2019
$000
2020
$000
2019
$000
2020
$000
2019
$000
Financial Assets
Cash
Receivables
Total anticipated
inflows
Financial Liabilities
Bank overdraft
Bank loans
Trade and other
payable
ROU Liabilities
Lease Liabilities
Total contractual
outflows
Less bank overdrafts
Total expected
9,697
36,848
5,310
12,120
46,545
17,430
1,385
10,860
14,056
4,291
225
1,144
9,844
11,159
-
280
-
-
-
-
-
-
-
9,584
-
9,361
232
-
10,842
-
-
253
30,817
1,385
22,427
1,144
19,177
-
11,095
-
outflows
29,432
21,283
19,177
11,095
Net (outflow)/ inflow on
financial instruments
17,113
(3,853)
(19,177)
(11,095)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
9,697
36,848
5,310
12,120
46,545
17,430
1,385
20,444
1,144
20,686
14,056
13,652
457
11,159
-
533
49,994
1,385
33,522
1,144
48,609
32,378
(2,064)
(14,948)
73
WATERCO LIMITED ANNUAL REPORT 2020 Notes To The Financial Statements
For the year ended 30 June 2020
Note 33: Financial Risk Management (continued)
e) Price Risk
Price risk relates to the risk that the fair value or future cashflows of a financial instrument will fluctuate because of
changes in market prices largely due to demand and supply factors for commodities;
Net Fair Values
The net fair value of bank overdrafts, bank loans and lease liabilities is determined by discounting the cash flows, at
market interest rates of similar borrowings, to their present value. Their net fair value is adjusted for any costs involved
in settling the instrument.
Financial Assets
Cash at bank and in hand
Receivables
Financial Liabilities
Bank overdraft
Bank loans
Lease liabilities
ROU lease liability
2020
2019
Carrying
Amount
$000
Net Fair
Value
$000
Carrying
Amount
$000
Net Fair
Value
$000
9,697
36,848
46,545
1,385
20,444
457
13,652
35,938
9,697
36,848
46,545
1,399
20,648
480
13,652
36,179
5,310
12,120
17,430
1,144
20,686
532
-
22,362
5,310
12,120
17,430
1,155
20,893
559
-
22,607
For financial assets and other liabilities, the net fair value approximates their carrying value. Financial assets where
the carrying amount exceeds the net fair values have not been written down as the consolidated group intends to
hold these assets to maturity.
Sensitivity Analysis
The following table illustrates sensitivities to the Group’s exposures to changes in interest rates and exchange rates.
The table indicates the impact on how profit and equity values reported at balance date would have been affected by
changes in the relevant risk variable that management considers to be reasonably possible. The sensitivity assumes
the movement in a particular variable is independent to other variables.
Consolidated Group
Profit
$000
+/-489
+/-936
Equity
$000
+/-489
+/-936
+/-473
+/-1,055
+/-473
+/-1,055
Year ended 30 June 2020
+/- 2% in interest rates
+/- 5% in $A/$US
Year ended 30 June 2019
+/- 2% in interest rates
+/- 5% in $A/$US
74
Notes To The Financial Statements
For the year ended 30 June 2020
Note 34: Cash Flow Information
a) Reconciliation of cash flows from operations with profit
after income tax.
Profit after income tax
Non-cash flows in profit
Depreciation
Rental income
Impairment and amortisation
(Profit)/loss on sale of non current assets
Changes in Assets and Liabilities:-
Trade debtors
Provision for doubtful debts
Other debtors
Inventories
Prepayments
Deferred tax assets
Expenditure carried forward
Trade creditors
Other creditors
Provision for employee benefits
Provision for tax
Provision for deferred tax
Cashflow – Non Operating Activities:
Dividends Received
Cash Flows (used in) /provided by operations
b) Non Cash Financial and investment activities
Consolidated Group
2020
$000
2019
$000
17,556
6,634
(3,281)
(68)
(19,102)
2,326
(70)
417
3,129
37
(72)
110
3,132
(235)
153
1,216
105
(1)
11,986
2,281
2,588
-
33
1
(104)
93
527
1,401
3
(70)
(7)
188
712
(330)
(684)
(62)
(1)
6,569
1) Property, Plant and Equipment
During the year, the consolidated group acquired plant and equipment with an aggregate fair value of
$233,615 (2019:$198,553) by means of finance leases. These acquisitions are not reflected in the
statement of cash flows.
c) Financing Facilities
The following lines of credit were available at balance date:
Fully Drawn Advance Facilities
Master lease facilities
Amount utilised
Amount unutilised
30,415
1,761
32,176
12,502
19,674
31,624
1,795
33,419
18,731
14,688
The Fully Drawn Advance Facilities of the parent entity are due to expire on 27 November 2021 (refer to note 21).
The parent entity expects to renew these facilities on expiry date.
The Fully Drawn Advance Facilities of the controlled entity are due to expire on 31 December 2021 and 30 June
2031. The controlled entity expects to renew these facilities on expiry date.
75
WATERCO LIMITED ANNUAL REPORT 2020
Notes To The Financial Statements
For the year ended 30 June 2020
Valuation techniques
The Group selects a valuation technique that is
appropriate in the circumstances and for which sufficient
data is available to measure fair value. The availability of
sufficient and relevant data primarily depends on the
specific characteristics of the asset or liability being
measured. The evaluation techniques selected by the
Group are consistent with one or more of the following
valuation approaches:
– Market approach: valuation techniques that use
prices and other relevant information generated by
market transactions for identical or similar assets or
liabilities.
–
Income approach: valuation techniques that convert
estimated future cash flows or income and expenses
into a single discounted present value.
– Cost approach: valuation techniques that reflect the
current replacement cost of an asset at its current
service capacity.
Each valuation technique requires inputs that reflect the
assumptions that buyers and sellers would use when
pricing the asset or liability, including assumptions
about risks. A change in those inputs might result in
a significantly higher or lower fair value measurement.
When selecting a valuation technique, the Group 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, whereas inputs
for which market data is not available and therefore are
developed using the best information available about
such assumptions are considered unobservable.
Note 35: Fair Value Measurements
The Group measures and recognises the following
assets and liabilities at fair value on a recurring basis
after initial recognition:
- derivative financial instruments;
- freehold land and buildings;
The Group subsequently measures some items of
freehold land and buildings at fair value on a non
recurring basis.
The Group does not subsequently measure any
liabilities at fair value on a non-recurring basis.
a. Fair Value Hierarchy
AASB 13: Fair Value Measurement requires the
disclosure of fair value information by level of the
fair value hierarchy, which categorises fair value
measurements into one of three possible levels based
on the lowest level that an input that is significant
to the measurement. They can be categorised as
follows:
Level 1
Level 2
Level 3
Measurements
based on
unobservable
inputs for
the asset or
liability.
Measurements
based on
quoted prices
(unadjusted) in
active markets for
identical assets
or liabilities that
the entity can
access at the
measurement
date
Measurements
based on
inputs other
than quoted
prices included
in Level 1 that
are observable
for the asset or
liability, either
directly or
indirectly
The fair values of assets and liabilities that are not
traded in an active market are determined using
one or more valuation techniques. These valuation
techniques maximise, to the extent possible, the
use of observable market data. If all significant
inputs required to measure fair value are observable,
the asset or liability is included in Level 2. If one or
more significant inputs are not based on observable
market data, the asset or liability is included in Level
3.
76
Notes To The Financial Statements
For the year ended 30 June 2020
Note 35: Fair Value Measurements (continued)
The following tables provide the fair values of the Group’s assets and liabilities measured and recognised on a
recurring basis after initial recognition and their categorisation within the fair value hierarchy:
Note
No
14
14
Note
No
14
14
Recurring fair value measurements
Non-financial assets
Freehold land
Freehold buildings
Total non-financial assets
recognised at fair value on a
recurring basis
Total non-financial assets
recognised at fair value
Recurring fair value measurements
Non-financial assets
Freehold land
Freehold buildings
Total non-financial assets
recognised at fair value on a
recurring basis
Total non-financial assets
recognised at fair value
Level 1
$000
30 June 2020
Level 2
$000
Level 3
$000
Total
$000
-
-
-
-
-
-
-
-
17,850
26,118
17,850
26,118
43,968
43,968
43,968
43,968
Level 1
$000
30 June 2019
Level 2
$000
Level 3
$000
Total
$000
-
-
-
-
-
-
-
-
17,763
30,762
17,763
30,762
48,525
48,525
48,525
48,525
b. Valuation Techniques and Inputs Used to Measure Level 3 Fair Values
Description
Fair Value at
30 June 2020
$000
Non-financial assets
Freehold land(i)
17,850
Freehold buildings(i)
26,118
43,968
Valuation Technique(s)
Inputs Used
Market approach using recent
observable market data for similar
properties; income approach using
discounted cash flow methodology
Market approach using recent
observable market data for similar
properties; income approach using
discounted cash flow methodology
Price per hectare; market
borrowing rate
Price per square metre;
market borrowing rate
(i) The fair value of freehold land and buildings is determined at least every three years based on valuations from
independent valuers. At the end of each intervening period, the directors review the independent valuation and,
when appropriate, update the fair value measurement to reflect current market conditions using a range of valuation
techniques, including recent observable market data and/or discounted cash flow methodologies.
(ii) There were no changes during the period in the valuation techniques used by the Group to determine Level 3 fair values.
77
WATERCO LIMITED ANNUAL REPORT 2020 Notes To The Financial Statements
For the year ended 30 June 2020
Note 35: Fair Value Measurements (continued)
c. Disclosed Fair Value Measurements
The following assets and liabilities are not measured at fair value in the statement of financial position, but their
fair values are disclosed in the notes:
– lease liability;
– bank debt;
The following table provides the level of the fair value hierarchy within which the disclosed fair value
measurements are categorised in their entirety and a description of the valuation technique(s) and inputs used:
Description
Note
Fair Value
Hierarchy Level
Valuation Technique(s)
Inputs Used
Liabilities
Lease liability
Bank debt
33
33
2
2
Income approach using
discounted cash flow
methodology
Current commercial
borrowing rates for similar
instruments
Income approach using
discounted cash flow
methodology
Current commercial
borrowing rates for similar
instruments
There has been no change in the valuation technique(s) used to calculate the fair values disclosed in the notes to
the financial statements.
Note 36: Company Details
The registered office of the company is:
Waterco Limited
36 South Street
Rydalmere NSW 2116
78
Directors' Declaration
In accordance with a resolution of the directors of Waterco Limited, the directors of the company declare that:
1. the financial statements and notes, as set out on pages 34 to 78 are in accordance with the Corporations Act
2001 and:
a. comply with Australian Accounting Standards, which, as stated in accounting policy Note 1 to the financial
statements, constitutes compliance with International Financial Reporting Standards (IFRS);
b. give a true and fair view of the financial position as at 30 June 2020 and of the performance for the year ended
on that date of the consolidated group; and
c. that the opinion has been formed on the basis of a sound system of risk management and internal control
adopted by the Board, and that this system is operating efficiently;
2. in the directors’ opinion there are reasonable grounds to believe that the company will be able to pay its debts as
and when they become due and payable; and
3. the directors have been given the declarations required by s295A of the Corporations Act 2001 from the Chief
Executive Officer and Chief Financial Officer.
Soon Sinn Goh
Chief Executive Officer
Dated at Sydney this 11 September 2020
79
WATERCO LIMITED ANNUAL REPORT 2020
Independent Auditor's Report
to the members of Waterco Ltd
80
Independent Auditor's Report
to the members of Waterco Ltd
81
WATERCO LIMITED ANNUAL REPORT 2020 Independent Auditor's Report
to the members of Waterco Ltd
82
Shareholder Information
For the year ended 30 June 2020
(a) Distribution of Shareholders as at 4 September 2020
1
1,001
5,001
10,001
100,001
Range
-
-
-
-
-
1,000
5,000
10,000
100,000
and over
Total Holders
235
163
59
71
27
555
Options
-
-
-
-
-
(b) Marketable Parcel
28 shareholders hold less than a marketable parcel.
(c) Substantial Shareholders
The following information is extracted from the company’s register as at 4 September 2020
Name
S S Goh Group
Redbrook Nominees Pty Ltd
Acres Holdings Pty Ltd
(d) Voting Rights
Number of shares
21,721,853
3,114,529
2,964,883
For all shares, voting rights are one vote per member on a show of hands and one vote per share on a poll
(e) Twenty Largest Shareholders
The twenty largest shareholders hold 90.85% of the total shares issued.
Name
Number of shares
Leitch Pty Ltd (Leitch Super Fund A/C)
Deuteronomy Pty Ltd (Dennis Hambleton SF A/C)
Redbrook Nominees Pty Ltd
Acres Holdings Pty Ltd
Goh Lai Huat & Sons Sdn Bhd
1 Mr Soon Sinn Goh
2
3
4
5 Mr Soon Leong Goh
6 Mr Swee Kheong Goon
7 Mrs Christine Goh
8 Mrs Janet Swee Nyet Goh
9
10 Mr Chu Shien Chang
11 GWK Corporation Pty Ltd
12
13 GSS Holdings Sdn Bhd
14
15
16 Mr Tiow Lip Lee
17 Ms May-Yin Goh
18 Mr Bryan Weng Keong Goh
19 Mr Shane Goh
20 Mr Khoon Ping Kuok
Brazil Enterprises Pty Ltd
S G Corporation Pty Limited
TOTAL
(f) Stock Exchange Listing
18,921,853
3,112,943
2,578,322
2,500,000
681,384
562,717
500,000
447,112
350,000
340,281
334,387
312,000
300,000
295,173
281,739
245,386
225,267
205,734
188,607
173,000
32,555,905
%
52.80
8.69
7.19
6.98
1.90
1.57
1.40
1.25
0.98
0.95
0.93
0.87
0.84
0.82
0.79
0.68
0.63
0.57
0.53
0.48
90.85
The shares of Waterco Limited are listed on the Australian Stock Exchange under the trade symbol WAT.
83
WATERCO LIMITED ANNUAL REPORT 2020 Corporate Directory
Directors
Soon Sinn Goh
Bryan Goh
Ben Hunt
(Richard) Cheng Fah Ling
Judy Raper (appointed 1 April 2020)
Secretaries
Bee Hong Leo (retiring October 2020)
Gerard Doumit
Sin Wei Yong (appointed 1 July 2020)
Registered office
36 South Street, Rydalmere NSW 2116
Tel: + 61 2 9898 8600
Fax: + 61 2 9898 1877
Website: www.waterco.com
E-mail: administration@waterco.com
Share Registry
Computershare Investor Services Pty Limited
GPO Box 2975, Melbourne VIC 3001
Tel: 1300 850 505
Offices – Australia
NSW
36 South Street, Rydalmere NSW 2116
Tel: + 61 2 9898 8600
QLD
77 Nealdon Drive, Meadowbrook QLD 4131
Postal Address: PO Box 606
Springwood QLD 4127
Tel: + 61 7 3299 9999
VIC
Unit 1, 6 Samantha Court, Knoxfield Vic 3180
Tel: + 61 3 9764 1211
WA
2 Stretton Place, Balcatta WA 6021
Tel: + 61 8 9273 1900
SA
580 Torrens Road, Woodville North SA 5012
Tel: + 61 8 8244 6000
Autopool Division
Autopool Division
QLD
Unit 2, 5 Stockwell Place, Archerfield Qld 4108
Tel: 1300 656 956
WA
Unit 4, 115 Belmont Ave, Belmont WA 6104
Tel: 1300 656 956
84
Auditors
RSM Australia Partners
Level 13,
60 Castlereagh St Sydney, NSW 2000
Banker
Commonwealth Bank of Australia
Level 9, Darling Park Tower 1
201 Sussex Street, Sydney NSW 2000
Offices – International
China
No.132 Buling Road, Yonghe District, GETDD
Guangzhou 511356, PR China
Tel: + 86 20 3222 2180
Indonesia
Inkopal Plaza Kelapa Gading
Blok B No. 31-32
Jl. Raya Boulevard Barat Jakarta 14240, Indonesia
Tel: + 62 21 45851481
Malaysia
Lot 832, Jalan Kusta
Kawasan Perindustrian SB Jaya
47000 Sungai Buloh, Selangor Darul Ehsan
Tel: + 60 3 6145 6000
New Zealand
7 Industry Road, Penrose
1061 Auckland, New Zealand
Tel: + 64 9 525 7570
Singapore
24 Peck Seah Street
#05-02/04 Nehsons Building
Singapore 079314
Tel: + 65 6344 2378
United Kingdom and France
Radfield, London Road, Teynham Sittingbourne
Kent, ME9 9PS, UK
Tel: + 44 1795 521733
United States Of America (and Canada Office)
1812 Tobacco Rd Augusta, GA 30906, USA
Tel: + 1 706 793 7291
6185-118 boul. Taschereau, suite 389
Brossard, QC J4Z 0E4 CANADA
Tel: + 1 450 748-1421
WATERCO LIMITED ABN 62 002 070 733
Registered Office
36 South Street, Rydalmere NSW 2116
T: +61 2 9898 8600
W: www.waterco.com.au E: administration@waterco.com
F: +61 2 9898 1877