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PERFORMANCEß)TßISßVERYßDETAILEDßANDßOPERATIONALLYßDRIVENßANDßGIVESßAßCLEARß
PICTUREßOFßHOWßWEßNEEDßTOßTHINKßABOUTßOURßBUSINESSESß!SßPARTßOFßTHISß
PROCESSßWEßHAVEßDEVELOPEDßAßFRAMEWORKßFORßHOWßWEßVIEWßOURßBUSINESSESß
ANDßTHEIRßCURRENTß±½TNESS²ßLEVELSß4HISßFRAMEWORKßINVOLVESßTHREEßPHASESß
¯ß$IAGNOSEß&IXßANDß$EVELOPßß'ROWß!SßOUTLINEDßINßTHEßDIAGRAMßBELOWß
EACHßOFßOURßDIVISIONSßISßATßAßDIFFERENTßPOINTßINßTHISßJOURNEY
5IJTJTXIFSFXFBSF
0VS'JUOFTT'SBNFXPSL
1
Diagnose
²%JBHOPTF³UIFJTTVFTJOPVS
CVTJOFTTFTBOEXIBUXFDBOEP
UPBEESFTTUIFN
2
Fix
%FWFMPQBOEJNQMFNFOU
QSPHSBNNFTUP²'JY³PVS
CVTJOFTTFTTPUIFZDBOEFMJWFS
JNQSPWFEQFSGPSNBODFBOE
3
Develop & Grow
MUJNBUFMZFBSOUIF
6
SJHIUUP²%FWFMPQ
BOE(SPX³UISPVHI
GVSUIFSJOWFTUNFOU
Garage Doors & Openers
Construction & Mining
Functional & Decorative Products
Water Products & Services
'VODUJPOBM%FDPSBUJWF1SPEVDUTBOE
8BUFS1SPEVDUT4FSWJDFTBSFOPUBT
QSPHSFTTFEBOEXJMMCFPVS
JNNFEJBUFQSJPSJUZ
!LESCOß!NNUALß2EPORT
(BSBHF%PPST0QFOFSTBOE
$POTUSVDUJPO.JOJOHBSFCPUIXFMMJOUP
UIF²'JY³QIBTFBOECFHJOOJOHUPMPPLBUUIF
PQQPSUVOJUJFTUP²%FWFMPQ(SPX³
Current
Status
May 2011
Target
5IJTJTPVSJNQMFNFOUBUJPOQMBO
*NQMFNFOUJOH1SPKFDU3FTUPSF
-FWFSBHFCSBOETUPPQUJNJTF
SFWFOVFBOEHSPTTNBSHJO
…3PMMPVU1SJDJOH.BSHJO1SPHSBNNFT
…*NQSPWF%FMJWFSFEJO'VMMPO5JNF%*'05
QFSGPSNBODFMFWFMT
…&YQBOEBOESFWJUBMJTFQSPEVDUSBOHF
…0QUJNJTFEJTUSJCVUJPOOFUXPSL
*NQSPWFTVQQMZDIBJO
JODMVEJOHNBOVGBDUVSJOH
…4USFOHUIFO4BMFTBOE0QFSBUJPOT1MBOOJOH401
NFUIPEPMPHJFT
…0QUJNJTFQSPDVSFNFOUQSPDFTTFT
…3FEVDFRVBMJUZDMBJNTJNQSPWFQSPDFTTBOEDPOUSBDUDPOUSPMT
…*NQSPWFMBCPVSBOEPWFSIFBEFG¾DJFODZ
3FEVDFPWFSIFBETQFOEJOH
…0QUJNJTFBOE¿FYIFBEDPVOU
….BOBHFEJTDSFUJPOBSZTQFOEJOHUJHIUMZ
3FEVDFDBQJUBMFNQMPZFE
…3FEVDFJOWFOUPSZUISPVHIJNQMFNFOUBUJPOPG401NFUIPEPMPHJFT
…$POUJOVFGPDVTPOTUSPOHEFCUPSNBOBHFNFOU
…*NQSPWFSFUVSOTPODBQJUBMJOWFTUNFOU
1FPQMFBSFPVSFOBCMFSBOE²;FSP)BSN³XJMMDPOUJOVFUPCFBDPSF"MFTDPWBMVF
5IJTJTPVSJNNFEJBUFGPDVT
1SPKFDU3FTUPSF':'PDVT
1SPDFTTJNQSPWFNFOU
$BQJUBMQSPKFDUT
4BMFT0QFSBUJPOT1MBOOJOH401
$.µTOBUJPOBMEJTUSJCVUJPODFOUSFBU8ZPOHBOE
DPOUJOVFEUSBEFTUPSFSPMMPVU
%JTDJQMJOFEQMBOOJOHBOEBCTPMVUFDPOOFDUJWJUZCFUXFFOPVS
PQFSBUJPOTTVQQMZDIBJOBOETBMFTUFBNTESJWFTFG¾DJFODZ
UISPVHIUIFCVTJOFTT*UEFMJWFSTJNQSPWFEBDDVSBDZJOTBMFT
GPSFDBTUJOHCFUUFSJOWFOUPSZDPOUSPMSFEVDUJPOJOXBSFIPVTF
BOEUSBOTQPSUDPTUTBOEPWFSBMMJNQSPWFEFG¾DJFODJFTBOE
¾OBODJBMQFSGPSNBODF5IFCFUUFSXFJOUFHSBUFBMMBTQFDUTPG
PVSCVTJOFTTUIFCFUUFSPVS%*'05QFSGPSNBODF
5IJTNJMMJPOJOWFTUNFOUJOWPMWFTUIFDPOTUSVDUJPOPGB
NXBSFIPVTFBEKBDFOUUPUIF8ZPOHGBDUPSZ"UUIF
TBNFUJNF1BSDIFN$POTUSVDUJPO4VQQMJFTXJMMDPOUJOVFUP
SPMMPVUJUTUSBEFTUPSFOFUXPSLUPCFUUFSTFSWJDFJUT
TQFDJBMJTFEDVTUPNFSCBTFBOEFYQBOEJOHJUTDIBOOFMT
UPNBSLFU
%FMJWFSFEJO'VMMPO5JNF%*'05
QFSGPSNBODF
814SFUBJMTUPSFSFGVSCJTINFOUQSPHSBNNF
FOFFEUPIBWFJOEVTUSZMFBEJOHTFSWJDFQSPQPTJUJPOT5IF
8
NFBTVSFNFOUBOENBOBHFNFOUPG%*'05TIPXTVTIPX
XFMMXFBSFNFFUJOHPVSDVTUPNFSTµFYQFDUBUJPOT5IFCFUUFS
XFTFSWJDFPVSDVTUPNFSTUIFCFUUFSUIFQPUFOUJBMGPS
JNQSPWFESFWFOVFBOENBSHJOPVUDPNFT
5IJTNJMMJPOQSPKFDUJOWPMWFTSFGVSCJTIJOHFYJTUJOHSFUBJM
TUPSFTJODMVEJOHSFCSBOEJOHBOEJNQMFNFOUJOHCBSDPEJOH
UFDIOPMPHZJOUPBMMSFUBJMTJUFTBDSPTTUIFDPVOUSZ*ODSFBTFE
SFWFOVFBOEFG¾DJFODJFTJOJOWFOUPSZDPOUSPMXJMMCFSFBMJTFE
GSPNUIFTFQSPKFDUT
1SJDJOH.BSHJO1SPHSBNNFT1.1
(%0DPNQMFUJPOPGJUT4"1JOGPSNBUJPOTZTUFNTSPMMPVU
5IJTJOJUJBUJWFEFBMTXJUIEJTDJQMJOFEQSJDJOHQSPDFTTFT
BDSPTTPVSQSPEVDUTBOETFSWJDFT
5IJTNJMMJPOQSPKFDUXJMMEFMJWFSBDPNQMFUFJOGPSNBUJPO
TZTUFN4"1
UPUIF#%OFUXPSL4VQQMZDIBJOFG¾DJFODJFT
BOEGVSUIFSJNQSPWFNFOUTUPRVBMJUZMFWFMTBSFFYQFDUFE
PVUDPNFTGPSUIJTQSPKFDU
!LESCOß!NNUALß2EPORT
4BGFUZ3FQPSU
0VSUBSHFUJT´[FSPIBSNµ
*OSFDFOUZFBST"MFTDPIBTFNCBSLFEPOB´[FSPIBSNµ
TUSBUFHZGPSJNQSPWJOHPDDVQBUJPOBMIFBMUIBOETBGFUZ
QFSGPSNBODFXJUIBDMFBSGPDVTPOTZTUFNTMFBEFSTIJQ
BOEQFPQMF
"DIJFWJOHPVSHPBMPG[FSPIBSN
SFNBJOTBLFZUBSHFU*UJTB
DIBMMFOHFXFIBWFFNCSBDFE
BOESFTPVSDFEBOEUPXIJDIXF
SFNBJODPNNJUUFE8FBSF
DPOUJOVJOHUPTFFHPPEQSPHSFTT
XJUIGVSUIFSSFEVDUJPOTJOUIF
OVNCFSPGTFSJPVTJOKVSJFT
BDSPTTPVSCVTJOFTTBOENPSF
JOWPMWFNFOUPGBMMPVSQFPQMFJO
TBGFUZJNQSPWFNFOUBDUJWJUJFT
TVQQPSUFECZBTUSPOHGPDVTPO
QSPBDUJWFTBGFUZMFBEFSTIJQBU
BMMMFWFMT
!LESCOß!NNUALß2EPORT
4UBGGBU#%3FWFTCZQMBOUXIPQBSUJDJQBUFEJOPVSBOOVBM4BGFUZ%BZ
4BGFUZJOBDUJPOBDSPTTPVSXPSLTJUFT
8IBUIBWFXFBDIJFWFE
"MFTDPµT4BGFUZ.BOBHFNFOU4ZTUFNTBOETVQQPSUJOH
TBGFUZGSBNFXPSLBSFMBSHFMZJOQMBDFBOEBSF
DPOUJOVBMMZJNQSPWFEUISPVHIFGGFDUJWFNBOBHFNFOU
SFWJFXTBOETUSVDUVSFEBVEJUQSPHSBNNFT5IF
GPVOEBUJPOTPGUIFTFTZTUFNTBOETUSVDUVSFTJODMVEF
… "
DPNQSFIFOTJWFTFUPGTBGFUZQPMJDJFTBOEWBMVFT
UIBUFTUBCMJTIDMFBSEJSFDUJPOBOEFYQFDUBUJPOTXJUIJO
PVSCVTJOFTT
… "TFUPGPWFSBSDIJOH4BGFUZ.BOBHFNFOU4UBOEBSETUIBU
FTUBCMJTIBDPNNPOCFODINBSLBOEQSPWJEFBGSBNFXPSL
BHBJOTUXIJDIBMM"MFTDPCVTJOFTTFTDBOEFWFMPQUIFJS
PDDVQBUJPOBMIFBMUIBOETBGFUZNBOBHFNFOUTZTUFNTBOE
VQIPMEUIF"MFTDPTBGFUZWBMVFT
… * NQMFNFOUBUJPOPGBDPNQSFIFOTJWFTFUPGSJTLDPOUSPMT
'BUBM3JTL$POUSPMT
UIBUTVQQPSUUIFPWFSBMMSJTL
NBOBHFNFOUQSPHSBNNFBDSPTTUIFHSPVQCVUXJUI
TQFDJ¾DGPDVTPOUIFIJHIDPOTFRVFODFSJTLTDPNNPOUP
NBOZPGUIF"MFTDPCVTJOFTTFT
… &TUBCMJTINFOUPG(SPVQ1SPDFEVSFTUIBUTUBOEBSEJTFLFZ
QSPDFEVSFTBOEQSPDFTTFTBU´CFTUQSBDUJDFµMFWFMTBDSPTT
UIFHSPVQ
… 0
OHPJOHSFWJFXPGUIFHSPVQµT0)4QFSGPSNBODFUISPVHI
JOUFSOBMTFMGBTTFTTNFOUBOEBVEJUUPPMTUPHFUIFSXJUI
BOOVBMFYUFSOBMBVEJUJOHPGTJUFTUPUIF"MFTDP4BGFUZ
.BOBHFNFOU4UBOEBSET
*NQMFNFOUBUJPOPGUIF"MFTDP4BGFUZ.BOBHFNFOU
4ZTUFNIBTDPOUJOVFEUPQSPHSFTTBTQMBOOFE5IFGPDVT
SFNBJOTPOQFPQMFBOEFOTVSJOHTUSPOHWJTJCMFBOE
EFNPOTUSBUFEMFBEFSTIJQBOEDPNNJUNFOUUP
SFJOGPSDJOHTBGFCFIBWJPVST0VSQFPQMFBUBMMMFWFMT
DPOUJOVFUPMFBSOIPXUPFYIJCJUMFBEFSTIJQBOECFIBWF
JOXBZTXIJDIJODPOKVODUJPOXJUIPVSQSBDUJDFTBOE
QSPDFEVSFTXJMMFOBCMFVTUPBDIJFWFPVSUBSHFUPG
[FSPIBSN,FZBDUJWJUJFTJOUIFQFSJPEJODMVEF
… * NQMFNFOUBUJPOPGBDPNQSFIFOTJWFSJTLNBOBHFNFOU
QSPHSBNNFBDSPTTUIFHSPVQJODMVEJOH0)4BOESJTL
NBOBHFNFOUUSBJOJOHGPSBMMNBOBHFSTBOETVQFSWJTPST
… "
MFTDP4BGFUZ%BZXJUIGPDVTTFE´UIFNFTµXIFSFBMM
FNQMPZFFTUBLFBGVMMEBZUPNBLF´TUFQDIBOHFTµUPUIFJS
SFTQFDUJWFTJUFTBGFUZJNQSPWFNFOUQSPHSBNNFT
… "
OBOOVBM4BGFUZ4VNNJUXIFSFTFOJPSNBOBHFSTBOE
HSPVQFYFDVUJWFTSFWJFXBOEFTUBCMJTIQSJPSJUJFTGPSJOQVU
JOUPUIFHSPVQTBGFUZTUSBUFHJDQMBOOJOHQSPDFTT
… 4
UPQGPS4BGFUZJOJUJBUJWFTJOSFTQPOTFUPTFSJPVTJODJEFOUT
BOEMFBSOJOHUIBUIBWFBOJNNFEJBUFHSPVQXJEF
JOUFSWFOUJPOUPMJGUBXBSFOFTTPOTQFDJ¾DTBGFUZSJTLT
BOEIB[BSET
… 6QHSBEFEUSBJOJOHBOEJOEVDUJPOQSPHSBNNFTUIBUSF¿FDU
UIFIJHIFSHSPVQTBGFUZTUBOEBSETBOEFYQFDUBUJPOT
… 5
IFPWFSTJHIUPGUIF"MFTDP#PBSEµT4BGFUZ)FBMUIBOE
&OWJSPONFOU$PNNJUUFFUPGVSUIFSFOIBODFBTZTUFNBUJD
BQQSPBDIUPTBGFUZBDSPTTUIF"MFTDPHSPVQ
… 5
IFDPOUJOVFEPQFSBUJPOPGUIF"MFTDP4BGFUZ/FUXPSL
DPNQSJTJOH0)4SFQSFTFOUBUJWFTGSPNFBDIPGUIF"MFTDP
EJWJTJPOT5IJTHSPVQIBTXPSLFEUPFOIBODFFBDIPGUIF
EJWJTJPOTµBCJMJUJFTUPSFTQPOEUPUIFPVUDPNFTGSPNUIF
TBGFUZBVEJUTTIBSFLFZTBGFUZMFBSOJOHBDSPTTUIFEJWJTJPOT
WJBUIF"MFTDPTBGFUZBMFSUTZTUFNBOEUPMFWFSBHFPVS
SFTPVSDFTBDSPTTUIFHSPVQUPBDIJFWFPVSTBGFUZPCKFDUJWFT
… %
JWJTJPOBMCBTFE0)4DPNNJUUFFTTBGFUZUFBNTBOETBGFUZ
DIBNQJPOTXPSLJOHDMPTFMZXJUIGSPOUMJOFNBOBHFNFOU
POBEBZUPEBZCBTJT
… 4
FDVSFDPOUSPMPGBMMTZTUFNTBOEQSPDFEVSFTPOUIF"MFTDP
JOUSBOFUTVQQPSUFECZBOFXTBGFUZJOGPSNBUJPOTZTUFN
FOIBODJOHSFQPSUJOHJOKVSZBOBMZTJTBOENBOBHFNFOUPG
DPSSFDUJWFBDUJPOT
!LESCOß!NNUALß2EPORT
4BGFUZ3FQPSUDPOUJOVFE
4BGFUZ.BOBHFNFOU4UBOEBSET"VEJU1FSGPSNBODF
*NQSPWFNFOUGSPNDBMFOEBS
)PXBSFXFQFSGPSNJOH
"MFTDPµTMPTUUJNFJOKVSZGSFRVFODZSBUF-5*'3
GPSFNQMPZFFT
JO':SFNBJOFETUFBEZGPSUIFQFSJPEBUNBSHJOBMMZ
VQPO':)PXFWFSEBZTMPTUQFSMPTUUJNFJOKVSZXBT
BQQSPYJNBUFMZBJNQSPWFNFOUPWFSUIFTBNFQFSJPE
%JTBQQPJOUJOHMZUXPPGPVSFNQMPZFFTTVGGFSFETFSJPVT
JOKVSJFTBUXPSLTJUFTUIJTZFBS5IF¾STUJODJEFOUPDDVSSFEBU
UIF-JODPMO(SPVQXIFSFBXBSFIPVTFTUPSFQFSTPO
TVTUBJOFEBTFSJPVTGPPUJOKVSZXIJMFVTJOHBGPSLMJGUBUPVS
EJTUSJCVUJPODFOUSF5IFTFDPOEJODJEFOUPDDVSSFEJOUIF
.BSBUIPO5ZSFTCVTJOFTTXIFSFPOFPGPVSUZSF¾UUFST
TVTUBJOFENVMUJQMFCPEZJOKVSJFTXIJMFDIBOHJOHBMBSHFUZSF
POBDVTUPNFSTJUF#PUIFNQMPZFFTBSFTUJMMSFDPWFSJOHGSPN
UIFTFJODJEFOUT8FEFFQMZSFHSFUUIBUJODJEFOUTTVDIBT
UIFTFDBOIBQQFOXJUIJOPVSCVTJOFTTBOEUIFMFBSOJOH
GSPNUIFJOWFTUJHBUJPOTJODSFBTFTPVSSFTPMWFBOE
DPNNJUNFOUUPBDIJFWFB;FSP)BSNXPSLQMBDFGPSBMM
PVSQFPQMF
5IFHSPVQµTDPNCJOFESFQPSUBCMFJOKVSZGSFRVFODZSBUF
BDPNCJOBUJPOPGMPTUUJNFBOENFEJDBMUSFBUNFOUJOKVSZ
GSFRVFODZSBUFT
TIPXTBJNQSPWFNFOUPWFSUIFQBTU
NPOUITBDSPTTUIFHSPVQ5IJTNFBOTMFTTJODJEFOUT
SFRVJSFENFEJDBMUSFBUNFOUBTFNQMPZFFTDPOEVDUFEUIFJS
EBZUPEBZBDUJWJUJFTJOUIFCVTJOFTT
':
':
-PTU5JNF*OKVSZ'SFRVFODZ3BUF
%BZTMPTUQFS-PTU5JNF*OKVSZ
!LESCOß!NNUALß2EPORT
0CKFDUJWFT5BSHFUT
1MBOOJOH
&TUBCMJTIJOHBO
0DDVQBUJPOBM)FBMUI
4BGFUZ4ZTUFN
.BOBHJOH3JTL
$IBOHF
.BOBHJOH
UIF1SPDFTT
$POTVMUBUJPO
$PNNVOJDBUJPO
*TTVF3FTPMVUJPO
5SBJOJOH
$PNQFUFODZ
1VSDIBTJOH4VQQMZ
"DRVJTJUJPOT
3FQPSUJOH*OWFTUJHBUJPO
$PSSFDUJWF"DUJPO
.BOBHFNFOU
%PDVNFOU$POUSPM
3FDPSE,FFQJOH
.POJUPSJOH
"VEJU3FWJFX
3FUVSOUP8PSL
*NQMFNFOUBUJPOPGUIF"MFTDP4BGFUZ.BOBHFNFOU
4UBOEBSETJTNFBTVSFECZBOFYUFSOBMBVEJUQSPHSBNNFBOE
XFDPOUJOVFUPTFFHPPEQSPHSFTTDPNQBSFEUPUIFBVEJUT
DPODMVEFEEVSJOHDBMFOEBS
-PTU5JNF*OKVSZ'SFRVFODZ3BUF
%BZT-PTUQFS-PTU5JNF*OKVSZ
':
-FBEFSTIJQ
"DDPVOUBCJMJUZ
*OBEEJUJPOUPUIFUSBEJUJPOBMPWFSBMMQFSGPSNBODF
NFBTVSFNFOUVTJOHMBHJOEJDBUPSTXIBUIBTBMSFBEZ
IBQQFOFE
PVSCVTJOFTTFTIBWFFYQBOEFEUIFNFBTVSFT
BSPVOEMFBEJOEJDBUPSTQSPBDUJWFQSFWFOUBUJWFFGGPSU
JODMVEJOHIB[BSETJEFOUJ¾FEBOEDPOUSPMMFESJTLBTTFTTNFOUT
VOEFSUBLFOTBGFXPSLQSPDFEVSFTEFWFMPQFEBOEUSBJOFE
BOEJOEVDUJPOTBOEDPOTVMUBUJPOQSPHSBNNFTVOEFSUBLFO
CZFNQMPZFFT8FSFDPHOJTFUIBUCZGPDVTTJOHPOMFBE
JOEJDBUPSTXFDBOFOTVSFUIBUXFIBWFBTBGFUZTZTUFNUIBU
JTFGGFDUJWFJOQSFWFOUJOHIBSNGSPNPDDVSSJOHJOUIF
¾STUQMBDF
"OFXDPOUBJOFSVOMPBEJOHTZTUFNJOPVS"5"CVTJOFTTJTSFEVDJOHXPSLQMBDFIB[BSET
BOEBTVDDFTTGVMDPTUTBWJOHJOJUJBUJWFEFWFMPQFEGSPNPVSTBGFUZQSPHSBNNF
0VSSFEVDFEXPSLFSTDPNQFOTBUJPOQSFNJVNTBOEFYQFOTFBMTP
JOEJDBUFUIBUPVSJOKVSZNBOBHFNFOUBOEDPNNJUNFOUUP
SFUVSOUPXPSLQSPHSBNNFTDPOUJOVFUPXPSLFGGFDUJWFMZXJUIB
TJHOJ¾DBOUSFEVDUJPOJOUIFOVNCFSPGTFSJPVTJOKVSJFTPDDVSSJOH
BDSPTTPVSCVTJOFTT
3PMMJOH8PSLFSTµ$PNQFOTBUJPO%BZT1BJE
':
':
':
$MBJNTUIBUIBE%BZT1BJE
/VNCFSPG%BZT1BJE
':
8IBUXJMMXFCFEPJOHJO':
0VSSFTPMWFUPBDIJFWF[FSPIBSNSFNBJOTTUSPOH.BOZPGPVS
CVTJOFTTFTBOETJUFTBSFBDIJFWJOHTJHOJ¾DBOUNJMFTUPOFTJO
TBGFUZQFSGPSNBODFXJUITPNFBDIJFWJOHMPOHJOKVSZGSFF
QFSJPET8FDPOUJOVFUPJNQMFNFOUTBGFUZJOJUJBUJWFTBOE
QSPHSBNNFTBOEUPGPDVTPOQSPWJEJOHUIFTVQQPSUTZTUFNT
OFDFTTBSZUPBDIJFWFBOJOKVSZGSFFFOWJSPONFOU8FBSFNBLJOH
TJHOJ¾DBOUJOSPBETUPPVSUBSHFUPG[FSPIBSNBU"MFTDPBTXFMM
BTEFWFMPQJOHBEFNPOTUSBCMFBOEFOEVSJOHTBGFUZDVMUVSF
*OUIFDPNJOHZFBSUIFHSPVQµTLFZJOJUJBUJWFTXJMMCFBSPVOE
UXPLFZBSFBT
… $
POUJOVJOHUPFOTVSFBMMSJTLTBOEIB[BSETBSFDPOUSPMMFEPS
FMJNJOBUFEUISPVHISJHPSPVTBTTFTTNFOUBOESFWJFX
QSPDFTTFTJODMVEJOHUSBJOJOHJO
…4BGFXPSLQSPDFEVSFT
…1SPDFTTFTBSPVOEJOEVDUJPOUSBJOJOHBOEDPNQFUFODZ
…*OTQFDUJPOUFTUJOHBOENPOJUPSJOH
… &
OTVSJOHPVSQFPQMFBUBMMMFWFMTFYIJCJUMFBEFSTIJQBOE
CFIBWFJOXBZTXIJDIJODPOKVODUJPOXJUIPVSQSBDUJDFTBOE
QSPDFEVSFTXJMMFOBCMFVTUPBDIJFWFPVSUBSHFUPG[FSPIBSN
"TQBSUPGUIJTJOJUJBUJWFBTBGFUZCFIBWJPVSBMMFBEFSTIJQ
QSPHSBNNFJTUPCFSPMMFEPVUBDSPTTUIFHSPVQPWFSUIFOFYU
NPOUIT
!LESCOß!NNUALß2EPORT
%JWJTJPOBM3FQPSUT
$P
OTU
H
SVDUJP
O.JOJO
#ONSTRUCTIONßß-ININGß
1BSDIFN$POTUSVDUJPO4VQQMJFT
IBTCSPVHIUUPHFUIFSJOEVTUSZ
MFBEJOHCSBOETXJUIBTUSPOH
DPNNJUNFOUUPTFSWJDFBOE
UFDIOJDBMTVQQPSU5IFSFDFOU
DPNCJOBUJPOPGUIF'MFYUPPM
$PODSFUF5FDIOPMPHJFTBOE
$PSLKPJOUCVTJOFTTFTXJUIUIF
TUSFOHUIPGUIF1BSDIFN
$POTUSVDUJPO1SPEVDUTCVTJOFTTJT
EFMJWFSJOHBOBUUSBDUJWFPOFTUPQ
TIPQGPSDVTUPNFST$PODSFUF1MVT
EJTUSJCVUFTUIFTFTQFDJBMUZ
QSPEVDUTJO/FX;FBMBOE
5PHFUIFSUIFCVTJOFTTTFSWJDFTUIF
DPOTUSVDUJPOQSPEVDUT
DPOTUSVDUJPOFRVJQNFOUUPPMT
BOEEFDPSBUJWFDPODSFUFTPMVUJPOT
NBSLFUT
.BSBUIPO5ZSFTJTBTQFDJBMJTUUZSF
PSHBOJTBUJPOUIBUTFMMTTFSWJDFT
SFQBJSTBOENBOBHFTUZSFTBOE
BTTPDJBUFEQSPEVDUTJONBSLFUT
SBOHJOHGSPNNJOJOHMBSHF
DPOTUSVDUJPOQPSUTNJMJUBSZBOE
UIFJOEVTUSJBMTFDUPS*UJT
QSFEPNJOBOUMZFBTUDPBTUCBTFE
XJUITJUFTGSPN.FMCPVSOFUP
.BDLBZBOESFBDIFTJOUPUIF
)VOUFS7BMMFZJO/FX4PVUI8BMFT
BOE#PXFO#BTJOJO2VFFOTMBOE
5IF$POTUSVDUJPO.JOJOH$.
EJWJTJPOµTUSBEJOHSFTVMUXBTMPXFSUIBO
UIFQSFWJPVTZFBSCVUJOMJOFXJUI
FYQFDUBUJPOTHJWFOUIFXFBLOFTTPGJUT
NBSLFUTQBSUJDVMBSMZUIFDPOTUSVDUJPO
NBSLFUT3FWFOVFXBTEPXOXIJMF
&#*5"GFMMCZ
1BSDIFN$POTUSVDUJPO4VQQMJFT
%VSJOH':UIF¾OBMTUBHFTPGUIF
BNBMHBNBUJPOPGUIFUISFFDPOTUSVDUJPO
CVTJOFTTFTJOUP1BSDIFN$POTUSVDUJPO
4VQQMJFTXBTDPNQMFUFEBOEBOFXTUZMF
USBEFOFUXPSLTUPSFXBTTVDDFTTGVMMZ
USJBMMFE
.BSBUIPO5ZSFT
&YDMVEJOHUIFJNQBDUPGJUTFYJUGSPNUIF
/48)BOLPPLXIPMFTBMFUZSFCVTJOFTTJO
':)BOLPPLHFOFSBUFESFWFOVFPG
NJMMJPOJO':
SFWFOVFGSPNUIF
.BSBUIPO5ZSFTCVTJOFTTXBTSFMBUJWFMZ
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INCOME STATEMENTS
FOR THE YEAR ENDED 31 MAY 2010
CONSOLIDATED
NOTE
Continuing operations
Sale of goods
Rendering services
THE COMPANY
2010
2009
2010
2009
$000
$000
$000
$000
747,858
828,526
–
–
23,300
25,970
12,335
10,569
Other revenue
2,038
1,613
25,407
177
Total revenue
Cost of sales
773,196
37,742
(503,033)
856,109
(553,750)
–
10,746
–
270,163
302,359
37,742
10,746
244
459
–
–
(92,492)
(97,593)
–
–
(11,427)
(12,739)
–
–
(20,324)
(22,157)
–
–
(2,005)
(48,113)
(2,256)
(49,053)
–
–
–
Distribution expenses
Administration and
general expenses
(60,086)
(65,703)
Gross profit
Other income
3
Selling expenses
Marketing expenses
Customer service
expenses
Purchasing and inventory
management
(16,895)
–
(15,480)
Restructuring and other
expenses
6
Impairment of assets
6
(133,100)
(70,000)
(133,100)
(70,000)
–
(28,327)
–
(3,720)
Termination payment
6
(1,700)
–
(1,700)
–
Share loan plan expense
6
(5,120)
–
(5,120)
–
Results from operating
activities
Financial income
(103,960)
(45,010)
(119,073)
(78,454)
5
14,956
9,761
Financial expenses
5
(15,656)
(40,782)
5
(15,406)
(40,333)
14,877
9,628
22
–
–
Net financing
(costs)/income
Share of associates’ equity
accounted net profit
(Loss)/profit from
continuing operations
before income tax
Income tax (expense)/
benefit
30
7
(Loss)/profit from
continuing operations
Discontinued operation
Profit from discontinued
operation, net of income
tax
32
(Loss)/profit for the period
after income tax
23
250
–
449
(119,366)
(85,321)
(4,935)
1,813
(124,301)
(83,508)
–
(124,301)
70,719
(12,789)
(133)
(79)
(104,196)
(68,826)
396
8
(104,188)
–
(104,188)
(68,430)
28,248
(40,182)
Earnings per share
Basic earnings per share
2
(132.84)¢
(13.94)¢
Diluted earnings per share
2
(132.84)¢
(13.94)¢
Continuing operations
Basic earnings per share
2
(132.84)¢
(91.05)¢
Diluted earnings per share
2
(132.84)¢
(91.05)¢
The notes on pages 69 to 142 are an integral part of these consolidated financial statements.
!LESCOß!NNUALß2EPORT
STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MAY 2010
CONSOLIDATED
NOTE
(Loss)/profit for the period
23
THE COMPANY
2010
2009
2010
$000
$000
$000
(124,301)
(12,789)
(104,188)
2009
$000
(40,182)
Other comprehensive income
Foreign currency translation
differences on translating foreign
subsidiaries
Effective portion of changes in
fair value of cash flow hedges
Net change in fair value of cash
flow hedges transferred to profit
or loss
22
22
1,313
4,371
1,363
–
–
(9,345)
–
–
762
–
–
Income tax (expense)/benefit on
other comprehensive income
(1,706)
2,575
–
–
Other comprehensive
income/(loss) for the period, net
of income tax
4,000
(4,645)
–
–
(17,434)
(104,188)
Total comprehensive income for
the period
(120,301)
The notes on pages 69 to 142 are an integral part of these consolidated financial statements.
!LESCOß!NNUALß2EPORT
(40,182)
STATEMENTS OF FINANCIAL POSITION
AS AT 31 MAY 2010
CONSOLIDATED
NOTE
Assets
Cash and cash equivalents
THE COMPANY
2010
2009
2010
2009
$000
$000
$000
$000
36(a)
–
6,106
–
471
Trade and other
receivables
8
111,663
128,672
–
6,905
Inventories
9
120,614
122,009
–
–
Current tax assets
19
3,901
–
3,901
–
Other
10
6,143
5,022
470
520
242,321
261,809
4,371
7,896
5,764
–
6,869
89
291,795
358,395
310,602
358,391
Total current assets
Non-current assets
Trade and other
receivables
Other investments
11
Property, plant and
equipment
12
55,158
67,521
1,181
2,183
Intangible assets
13
Deferred tax assets
14
371,413
17,204
506,094
19,648
401
3,889
371
3,621
Other
15
8
62
638
62
638
Total non-current assets
449,601
600,859
655,723
675,806
Total assets
691,922
862,668
660,094
683,702
3,881
96,319
–
92,586
8,479
4,781
–
6,304
Liabilities
Bank overdraft
17
Trade and other payables
16
Loans and borrowings
17
Current tax liabilities
Provisions
19
–
5,126
85,262
3,969
–
–
–
887
20
27,871
38,149
3,665
4,178
Other
18
–
3,992
–
–
133,197
223,958
16,925
11,369
Total current liabilities
Non-current liabilities
Loans and borrowings
17
125,000
80,500
221,257
142,777
Provisions
20
6,185
6,773
364
224
Total non-current
liabilities
131,185
87,273
221,621
143,001
Total liabilities
264,382
311,231
238,546
154,370
Net assets
427,540
551,437
421,548
529,332
513,262
4,376
520,407
513,262
639
Equity
Share capital
21
520,407
Reserves
22
Retained earnings
23
10,734
(103,601)
Total equity
427,540
33,799
2,997
(101,856)
551,437
421,548
15,431
529,332
The notes on pages 69 to 142 are an integral part of these consolidated financial statements.
!LESCOß!NNUALß2EPORT
!LESCOß!NNUALß2EPORT
The notes on pages 69 to 142 are an integral part of these consolidated financial statements.
24
22
22
21
3,405
3,740
–
–
–
7,145
520,407
–
Total comprehensive income for the period
21
–
22
–
–
–
–
–
–
–
–
3,218
22
22
–
–
–
22
Transactions with owners, recorded directly in equity contributions
by and distributions to owners
Issue of ordinary shares
Shares granted as part of Total Eden McCracken’s deferred consideration
Equity settled share-based payments
Senior executive share loan plan adjustment
Dividends to equity holders
Total transactions with owners
Balance at 31 May 2010
–
–
2
$000
3,196
$000
TRANSLATION
RESERVE
513,262
NOTE
SHARE CAPITAL
Balance at 1 June 2009
Total comprehensive income for the period
(Loss)/profit for the period
Other comprehensive income
Foreign exchange translation differences on translating foreign subsidiaries
Effective portion of changes in fair value of cash flow hedges, net of tax
Net change in fair value of cash flow hedges transferred to profit or loss,
net of tax
Total other comprehensive income
Consolidated
STATEMENTS OF CHANGES IN EQUITY
–
–
–
–
–
–
1,184
3,978
3,059
3,978
–
919
–
(2,794)
$000
HEDGING
RESERVE
–
–
693
1,665
–
2,358
6,332
–
–
–
–
–
–
3,974
$000
SHARE EQUITY
RESERVE
–
–
–
–
(13,099)
(13,099)
(103,601)
(124,301)
–
–
–
–
(124,301)
33,799
$000
RETAINED
EARNINGS
3,405
3,740
693
1,665
(13,099)
(3,596)
427,540
(120,301)
3,059
4,000
22
919
(124,301)
551,437
$000
TOTAL EQUITY
!LESCOß!NNUALß2EPORT
The notes on pages 69 to 142 are an integral part of these consolidated financial statements.
Balance at 31 May 2009
Total transactions with owners
Shares granted as part of Total Eden McCracken’s deferred consideration
Dividends to equity holders
534
–
–
–
3,196
616
–
8,598
513,262
21,22
24
(2,794)
–
–
–
–
–
–
–
21
4,539
3,443
(6,008)
(6,008)
21
–
1,363
–
1,363
–
Total other comprehensive income
–
(6,542)
–
3,214
$000
HEDGING
RESERVE
–
1,363
–
–
–
22
Total comprehensive income for the period
Transactions with owners, recorded directly in equity contributions
by and distributions to owners
Issue of ordinary shares
Equity settled share-based payments
–
–
2
$000
1,833
$000
TRANSLATION
RESERVE
504,664
NOTE
SHARE CAPITAL
Balance at 1 June 2008
Total comprehensive income for the period
(Loss)/profit for the period
Other comprehensive income
Foreign exchange translation differences on translating foreign subsidiaries
Effective portion of changes in fair value of cash flow hedges, net of tax
Net change in fair value of cash flow hedges transferred to profit or loss,
net of tax
Consolidated
STATEMENTS OF CHANGES IN EQUITY (CONTINUED)
3,974
(751)
(616)
–
–
(135)
–
–
–
–
–
–
4,725
$000
SHARE EQUITY
RESERVE
33,799
(32,608)
–
(32,608)
–
–
(12,789)
–
–
–
–
(12,789)
79,196
$000
RETAINED
EARNINGS
551,437
(24,761)
–
(32,608)
4,539
3,308
(17,434)
(4,645)
534
1,363
(6,542)
(12,789)
593,632
$000
TOTAL EQUITY
!LESCOß!NNUALß2EPORT
22
22
Equity settled share-based payments
Senior executive share loan plan adjustment
Dividends to equity holders
The notes on pages 69 to 142 are an integral part of these consolidated financial statements.
Balance at 31 May 2010
24
21
Total transactions with owners
21
Shares granted as part of Total Eden McCracken’s deferred consideration
NOTE
by and distributions to owners
Issue of ordinary shares
Transactions with owners, recorded directly in equity contributions
Total comprehensive income for the period
(Loss)/profit for the period
Balance at 1 June 2009
Company
STATEMENTS OF CHANGES IN EQUITY (CONTINUED)
520,407
7,145
–
–
–
3,740
3,405
–
513,262
$000
SHARE CAPITAL
2,997
(101,856)
(13,099)
(13,099)
–
2,358
–
–
–
–
(104,188)
15,431
$000
RETAINED EARNINGS
693
1,665
–
–
–
639
$000
SHARE EQUITY RESERVE
421,548
(3,596)
1,665
(13,099)
693
3,740
3,405
(104,188)
529,332
$000
TOTAL EQUITY
!LESCOß!NNUALß2EPORT
The notes on pages 69 to 142 are an integral part of these consolidated financial statements.
Balance at 31 May 2009
Total transactions with owners
Dividends to equity holders
Shares granted as part of Total Eden McCracken’s deferred consideration
Equity settled share-based payments
by and distributions to owners
Issue of ordinary shares
Transactions with owners, recorded directly in equity contributions
Total comprehensive income for the period
(Loss)/profit for the period
Balance at 1 June 2008
Company
STATEMENTS OF CHANGES IN EQUITY (CONTINUED)
24
21,22
21
21
NOTE
(135)
639
513,262
–
–
–
(135)
–
774
$000
SHARE EQUITY RESERVE
8,598
–
4,539
616
3,443
–
504,664
$000
SHARE CAPITAL
15,431
(32,608)
(32,608)
–
–
–
(40,182)
88,221
$000
RETAINED EARNINGS
529,332
(24,145)
(32,608)
4,539
616
3,308
(40,182)
593,659
$000
TOTAL EQUITY
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED 31 MAY 2010
CONSOLIDATED
NOTE
Cash flows from operating activities
Cash receipts in the course of
operations
Cash payments in the course of
operations
Income taxes paid
Net cash provided by/(used in)
operating activities
THE COMPANY
2010
2009
2010
2009
$000
$000
$000
$000
861,524
1,136,319
522
195
(797,213) (1,046,561)
(12,673)
(7,268)
36(b)
Cash flows from investing activities
Proceeds from sale of property, plant
and equipment
Payments for property, plant and
equipment and capitalised
development expenditure
57,043
77,085
819
1,900
(8,871)
Proceeds from sale of investments
(17,974)
(20,665)
(6,818)
(14,773)
(24,270)
(35,243)
–
(16,992)
(579)
–
(2,417)
200
–
–
–
6,905
–
6,905
–
Receipt of deferred consideration on
disposal of entity
Disposal of discontinued operation,
net of cash disposed of
32
–
173,248
–
67,417
Proceeds from sale of equity
accounted investees
30
–
342
–
–
–
–
Payments of deferred consideration
on acquisitions
Payments for assets on acquisition
of business
29(c)
Interest received
–
(1,791)
–
(5,542)
250
Net cash (used in)/provided by
investing activities
(697)
Cash flows from financing activities
Proceeds from issue of shares
–
Dividends paid
Finance lease payments
Proceeds from borrowings, net of
transaction costs
(10,875)
(262)
Repayment of borrowings
Net proceeds from loans with
controlled entities
Payments related to interest rate
hedge restructure
–
–
514
162
206
151,679
6,488
65,206
761
(28,830)
(536)
–
(10,875)
–
262,000
177,207
–
–
(302,500)
(330,130)
–
–
–
19,786
3,508
–
(14,842)
–
Interest paid
(14,704)
(28,158)
(79)
Net cash (used in)/provided by
financing activities
(66,341)
(224,528)
–
Net increase/(decrease) in cash held
Cash and cash equivalents at the
beginning of the financial year
Effects of exchange rate fluctuations
on the balances of cash held in
foreign currencies
Cash and cash equivalents at the
end of the financial year
(9,995)
4,236
6,106
1,910
8
36(a)
(3,881)
8,832
(24,694)
5,269
(40)
6,106
!LESCOß!NNUALß2EPORT
–
(133)
(8,950)
471
(4,798)
–
–
(8,479)
The notes on pages 69 to 142 are an integral part of these consolidated financial statements.
761
(28,830)
–
471
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 2010
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
The significant policies which have been adopted in the preparation of this
financial report are:
(a) Statement of compliance
Alesco Corporation Limited (the “Company”) is a company domiciled in Australia.
The consolidated financial statements of the Company as at and for the year ended
31 May 2010 comprise the Company and its subsidiaries (together referred to as
the “Group”) and the Group’s interest in jointly controlled entities.
The financial report was authorised for issue by the directors on 28 July 2010.
The financial report is a general purpose financial report which has been prepared
in accordance with Australian Accounting Standards (“AASBs”) (including
Australian interpretations) adopted by the Australian Accounting Standards Board
(“AASB”) and the Corporations Act 2001. The consolidated financial report of the
Group and the financial report of the Company comply with the International
Financial Reporting Standards (“IFRSs”) and the interpretations adopted by the
International Accounting Standards Board (“IASB”).
(b) Basis of preparation
These consolidated financial statements are presented in Australian dollars, which
is the Company’s functional currency and the functional currency of the majority
of the Group. The consolidated financial statements have been prepared on the
historical cost basis except for derivative financial instruments that are stated at
fair value.
NOTES TO THE FINANCIAL STATEMENTS
Note
Page
1
Statement of significant
accounting policies
69
2
Earnings per share
81
3
Other income
81
4
Other expenses
82
5
Net financing
income/(costs)
83
6
Significant items
84
7
Income tax expense
85
8
Trade and other receivables
87
9
Inventories
87
10
Other current assets
87
11
Other non-current
investments
88
12
Property, plant and
equipment
88
13
Intangible assets
92
14
Deferred tax assets and
liabilities
98
15
Other non-current assets
98
16
Trade and other payables
98
The Company is of a kind referred to in ASIC Class Order 98/100 dated 10 July 1998
and, in accordance with the Class Order, all financial information presented in
Australian dollars has been rounded to the nearest thousand unless otherwise
stated.
17
Loans and borrowings
99
18
Other current liabilities
100
19
Current tax liabilities
and assets
101
The preparation of financial statements requires management to make
judgements, estimates and assumptions that affect the application of policies and
reported amounts of assets and liabilities, income and expenses. Actual results
may differ from these estimates. Estimates and underlying assumptions are
reviewed on an ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised and in any future period affected.
20
Provisions
101
21
Share capital
103
22
Reserves
105
23
Retained earnings
106
24
Dividends
106
25
Auditors’ remuneration
107
26
Employee benefits
107
27
Commitments and
contingent liabilities
112
28
Deed of cross guarantee
113
29
Controlled entities
115
30
Investments in equity
accounted investees
118
The accounting policies set out below have been applied consistently to all periods
presented in the consolidated financial statements, and have been applied consistently
by Group entities.
In particular, information about significant areas of estimation uncertainty and critical
judgements in applying accounting policies that have the most significant effect on the
amount recognised in the financial statements are described in the following areas:
provisions and contingencies (Notes 8,9,20 and 27).
potential tax liability associated with the tax deductibility of interest on Optional
Convertible Notes (“OCNs”) issued by Alesco New Zealand (Note 7).
31
Segment reporting
119
32
Discontinued operation
124
measurement of the recoverable amounts of cash generating units containing
goodwill and other intangible assets (Note 13).
33
Financial instruments
125
34
Non-key management
personnel disclosures
134
35
Key management personnel
disclosures
135
36
Notes to the statements of
cash flows
141
37
Subsequent events
142
Certain comparative amounts have been reclassified to conform with the current year’s
presentation.
!LESCOß!NNUALß2EPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(c) Changes in accounting policies
Overview
Starting as of 1 June 2009, the Group has changed its accounting policies in the following areas:
Accounting for borrowing costs, see Note 1 (h) and Note 1 (q);
Determination and presentation of operating segments, see Note 1 (u); and
Presentation of financial statements, see Note 1 (v).
(d) Going concern
Whilst the Company’s current liabilities exceed its current assets by $12,554,000 (2009: $3,473,000), the directors are
satisfied that the Company’s financial report be prepared on a going concern basis as the Company has access to cash
generated by the Group via the Deed of Cross Guarantee.
On this basis, the directors believe that it is appropriate to prepare the Company’s financial statements on a going
concern basis.
(e) Basis of consolidation
Subsidiaries
Subsidiaries are entities controlled by the Company. Control exists when the Company has the power, directly or
indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities.
In assessing control, potential voting rights that presently are exercisable or convertible are taken into account.
The financial statements of subsidiaries are included in the financial report from the date that control commences
until the date that control ceases.
Investments in subsidiaries are carried at their cost of acquisition, less any impairment losses, in the Company’s
financial statements.
Joint ventures (equity accounted investees)
Joint ventures are those entities over whose activities the Group has joint control, established by contractual
agreement.
In the financial statements, investments in jointly controlled entities are accounted for using the equity method
(equity accounted investees). The consolidated financial statements include the Group’s share of the income and
expenses of equity accounted investees, after adjustments to align the accounting policies with those of the Group,
from the date that joint control commences until the date that joint control ceases.
Transactions eliminated on consolidation
Intra-group balances, any unrealised gains and losses or income and expenses arising from intra-group transactions,
are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with
equity accounted investees are eliminated to the extent of the Group’s interest in the investee. Unrealised losses are
eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment. Gains
and losses are recognised as the contributed assets are consumed or sold by the equity accounted investees or, if not
consumed or sold by the equity accounted investee, when the Group’s interest in such entities is disposed of.
(f) Foreign currency
Foreign currency transactions
Transactions in foreign currencies are translated to the functional currency of the Group at the foreign exchange rate
ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting
date are translated to the functional currency at the foreign exchange rate at that date. The foreign currency gain or
loss on monetary items is the difference between amortised cost in the functional currency at the beginning of the
period, adjusted for effective interest and payments during the period, and the amortised cost in foreign currency
translated at the exchange rate at the end of the period. Non-monetary assets and liabilities denominated in foreign
currencies that are measured at fair value are translated to the functional currency at the exchange rate at the date
that the fair value was determined.
!LESCOß!NNUALß2EPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(f) Foreign currency (continued)
Foreign operations
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are
translated to Australian dollars at foreign exchange rates ruling at the reporting date. The income and expenses of
foreign operations are translated to Australian dollars at rates approximating the foreign exchange rates ruling at the
dates of the transactions. Foreign exchange differences arising on re-translation are recognised directly in a separate
component of equity in the foreign currency translation reserve (“translation reserve” or FCTR”). When a foreign
operation is disposed of, in part or in full, the relevant amount in the translation reserve is transferred to profit or loss.
Hedge of net investment in foreign operation
Foreign currency differences arising on the retranslation of a financial liability designated as a hedge of a net
investment in a foreign operation are recognised in other comprehensive income, to the extent that the hedge is
effective and are presented within equity in the translation reserve. To the extent that the hedge is ineffective, such
differences are recognised in profit or loss. When the hedged part of a net investment is disposed of, the relevant
amount in the FCTR is transferred to profit or loss as an adjustment to the profit or loss on disposal.
(g) Financial instruments
Non-derivative financial instruments
Non-derivative financial instruments comprise investments in equity instruments, trade and other receivables, cash
and cash equivalents, loans and borrowings and trade and other payables.
The Group initially recognises loans and receivables and deposits on the date that they are originated. All other financial
assets (including assets designated at fair value through profit or loss) are recognised initially on the trade at which the
Group becomes a party to the contractual provisions of the instrument.
The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it
transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially
all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets
that is created or retained by the Group is recognised as a separate asset or liability.
Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and
only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the
asset and settle the liability simultaneously.
Loans and receivables
Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market.
Such assets are recognised initially at fair value plus any directly attributable transactions costs. Subsequent to initial
recognition loans and receivables are measured at amortised cost using the effective interest method, less any
impairment losses.
Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and
form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for
the purposes of the statement of cash flows.
Other
Other non-derivative financial instruments are measured at amortised cost using the effective interest method less any
impairment losses.
Derivative financial instruments
The Group holds derivative financial instruments to hedge its foreign currency and interest rate risk exposures.
Derivatives are recognised initially at fair value and attributable transaction costs are recognised in profit or loss when
incurred. Subsequent to initial recognition, derivatives are measured at fair value and changes therein are accounted
for as described below.
Cash flow hedges
Changes in the fair value of the derivative hedging instrument designated as a cash flow hedge are recognised in other
comprehensive income to the extent that the hedge is effective. To the extent that the hedge is ineffective, changes in
fair value are recognised in profit or loss.
If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised,
then hedge accounting is discontinued prospectively. The cumulative gain or loss previously recognised in other
comprehensive income and presented in the hedging reserve in equity remains there until the forecast transaction
!LESCOß!NNUALß2EPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(g) Financial instruments (continued)
Cash flow hedges (continued)
affects profit or loss. The amount recognised in equity is transferred to the profit or loss in the same period that the
hedged item affects profit or loss. When the hedged item is a non-financial asset, the amount recognised in other
comprehensive income is transferred to the carrying amount of the assets when the asset is recognised. If the forecast
transaction is no longer expected to occur, then the balance in other comprehensive income is recognised immediately
in profit or loss. In other cases the amount recognised in other comprehensive income is transferred to profit or loss in
the same period that the hedged item affects profit or loss.
Share capital
Ordinary shares
Ordinary shares are classified as equity. Incremental costs directly attributable to issue of ordinary shares are
recognised as a deduction from equity, net of any related income tax benefit.
Dividends
Dividends are recognised as a liability in the period in which they are declared.
(h) Property, plant and equipment
Recognition and measurement
Items of property, plant and equipment are measured at cost or deemed cost less accumulated depreciation and
impairment losses. The cost of property, plant and equipment at 1 July 2004, the date of transition to AASBs, was
determined by reference to its fair value at that date.
Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed
assets includes the cost of materials, direct labour, any other costs directly attributable to bringing the asset to a
working condition for its intended use and the cost of dismantling and removing the items and restoring the site on
which they are located.
Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate
items (major components) of property, plant and equipment.
Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds
from disposal with the carrying amount of property, plant and equipment and are recognised within other income in
profit or loss.
Change in accounting policy
In respect of borrowing costs relating to qualifying assets for which the commencement date for capitalisation is on
or after 1 June 2009, the Group capitalises borrowing costs directly attributable to the acquisition, construction or
production of a qualifying asset as part of the cost of that asset. This change in accounting policy was due to the
adoption of AASB 123 Borrowing Costs (2007) in accordance with the transitional provisions of that standard,
comparative figures have not been restated. The change in accounting policy had no material impact on earnings
per share.
The Group has capitalised borrowing costs with respect to property, plant and equipment under construction and
development costs.
Subsequent costs
The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item
if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be
measured reliably. The carrying amount of the replaced part is derecognised. The costs of the day-to-day servicing of
property, plant and equipment are recognised in profit or loss as incurred.
Depreciation
Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each part of an
item of property, plant and equipment. Leased assets are depreciated over the shorter of the lease term and their
useful lives. Land is not depreciated. Depreciation methods, useful lives and residual values are reassessed at the
reporting date.
!LESCOß!NNUALß2EPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(h) Property, plant and equipment (continued)
Depreciation (continued)
The depreciation rates for the current and comparative periods are as follows:
RATES
%
Property, plant and equipment
Buildings
2.5 to 13
Plant and equipment
13 to 33
Motor vehicles
Leasehold improvements
15 to 25
15 to 20
Leased plant and equipment
13 to 33
(i) Intangible assets
Goodwill
Goodwill arises on the acquisition of subsidiaries and joint ventures.
Acquisitions prior to 1 June 2004
As part of its transition to AASBs, the Group elected to restate only those business combinations that occurred on or
after 1 June 2004. In respect of acquisitions prior to 1 June 2004, goodwill represents the amount recognised under the
Group’s previous accounting framework, Australian GAAP.
Acquisitions on or after 1 June 2004
For acquisitions on or after 1 June 2004, goodwill represents the excess of the cost of the acquisition over the Group’s
interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the acquiree.
Subsequent measurement
Goodwill is measured at cost less accumulated impairment losses. In respect of equity accounted investees, the carrying
amount of goodwill is included in the carrying amount of the investment.
Brand names
Brand names represent the value of brands owned by controlled entities determined at acquisition that maintain
a strong presence in the marketplace.
Patents and trademarks
Patents and trademarks represent the value of patents, trademarks and registered designs owned by controlled entities
determined at acquisition which provide the entity with a market advantage.
Agency agreements
Agency agreements represent the value of agreements held by controlled entities with various agents which provide
the entity with a market advantage due to the presence of these agents in the respective industry.
Lease premium
Lease premium represents the value of leases assigned by the vendor to a controlled entity in the acquisition of the
business of Robinson Industries Limited on 30 April 2003.
Development costs
Information technology development includes systems re-engineering costs comprising development expenditure and
associated implementation costs.
Expenditure on research activities, undertaken with the prospect of gaining new technical knowledge and
understanding, is recognised in the income statement as an expense as incurred.
Expenditure on development activities, whereby research findings are applied to a plan or design for the production of
new or substantially improved products and processes, is capitalised if the product or process is technically and
commercially feasible, future economic benefits are probable, and the Group has sufficient resources to complete
development.
The expenditure capitalised includes the cost of materials, direct labour and an appropriate proportion of overheads.
Other development expenditure is recognised in the income statement as an expense as incurred. Capitalised
development expenditure is stated at cost less accumulated amortisation and impairment losses.
!LESCOß!NNUALß2EPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(i) Intangible assets (continued)
Customer relationships
Customer relationship intangible assets were acquired by the Group, have finite useful lives, are measured at cost less
accumulated amortisation and accumulated impairment losses.
Other intangible assets
Other intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and
impairment losses.
Subsequent expenditure
Subsequent expenditure on capitalised intangible assets is capitalised only when it increases the future economic
benefits embodied in the specific asset to which it relates. All other expenditure is recognised in profit or loss
when incurred.
Amortisation
Amortisation is calculated over the cost of the asset, or other amounts substituted for cost, less it’s residual value.
Amortisation is recognised in profit or loss on a straight-line basis from the date they are available for use over the
estimated useful lives of intangible assets, unless such lives are indefinite.
Amortisation methods, useful lives and residual values are reviewed at each financial year end and adjusted if
appropriate.
The estimated useful lives for the current and comparative periods are as follows:
USEFUL LIFE
YEARS
Intangibles
Brands – B&D, Flextool, Concrete
Technologies, Lincoln Sentry
Indefinite
Brands – others
Patents and trademarks
Lease premium
5 to 20 years
5 to 15 years
6 years
Development costs
Customer relationships
3 to 7 years
3 to 10 years
(j) Leased assets
Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified
as finance leases. Upon initial recognition the leased asset is measured at an amount equal to the lower of its
fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is
accounted for in accordance with the accounting policy applicable to that asset.
Other leases are operating leases and the leased assets are not recognised on the Group’s statement of financial
position.
(k) Inventories
Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the first-in
first-out principle, includes expenditure incurred in acquiring the inventories and bringing them to their existing
location and condition and is recorded net of rebates and discounts received. In the case of manufactured inventories
and work-in-progress, cost includes an appropriate share of production overheads based on normal operating capacity.
Cost may also include transfers from equity of any gain or loss on qualifying cash flow hedges of foreign currency
purchases of inventories. Net realisable value is the estimated selling price in the ordinary course of business, less the
estimated costs of completion and selling expenses.
(l) Impairment
Financial assets
A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is
impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events have had
a negative effect on the estimated future cash flows of that asset that can be measured reliably.
!LESCOß!NNUALß2EPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(l) Impairment (continued)
Objective evidence that financial assets (including equity securities) are impaired can include default or delinquency
by a debtor, restructuring of an amount due to the Group on terms that the Group would not consider otherwise,
indications that a debtor or issuer will enter bankruptcy, the disappearance of an active market for a security. For an
investment in an equity security, a significant or prolonged decline in its fair value below its cost is objective evidence
of impairment.
Financial assets
The Group considers evidence of impairment for receivables and held-to-maturity investment securities at both a
specific assets and collective level. All individually significant receivables and held-to-maturity investment securities are
assessed for specific impairment. All individually significant receivables and held-to-maturity investment securities
found not to be specifically impaired are then collectively assessed for any impairment that has been incurred but not
yet identified. Receivables and held-to-maturity investment securities that are not individually significant are
collectively assessed for impairment by grouping together receivables and held-to-maturity investment securities with
similar risk characteristics.
In assessing collective impairment the Group uses historical trends of the probability of default, timing of recoveries
and the amount of loss incurred, adjusted for management’s judgement as to whether current economic and credit
conditions are such that the actual losses are likely to be greater or less than suggested by historical trends.
An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between
its carrying amount and the present value of the estimated future cash flows discounted at the original effective
interest rate. An impairment loss in respect of an available-for-sale financial asset is calculated by reference to its
current fair value.
Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets
are assessed collectively in groups that share similar credit risk characteristics.
All impairment losses are recognised in profit or loss. Any cumulative loss in respect of an available-for-sale financial
asset recognised previously in equity is transferred to profit or loss.
An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss
was recognised. For financial assets recognised at amortised cost and available-for-sale financial assets that are debt
securities, the reversal is recognised in profit or loss. For available-for-sale financial assets that are equity securities, the
reversal is recognised directly in equity.
Non-financial assets
The carrying amounts of the Group’s non-financial assets, other than inventories and deferred tax assets are reviewed
at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then
the asset’s recoverable amount is estimated. For goodwill, assets that have an indefinite useful life and intangible
assets that are not yet available-for-use, the recoverable amount is estimated at each reporting date.
An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable
amount. A cash-generating unit is the smallest identifiable asset group that generates cash flows that are largely
independent from other assets and groups. Impairment losses are recognised in profit or loss. Impairment losses
recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill
allocated to units and then to reduce the carrying amount of the other assets in the unit (group of units) on a
pro-rata basis.
The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs
to sell. In assessing value-in-use, the estimated future cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.
An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in
prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists.
An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying
amount that would have been determined, net of depreciation or amortisation, if no impairment loss had
been recognised.
!LESCOß!NNUALß2EPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(m) Employee benefits
Defined contribution plans
A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a
separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions
to defined contribution pension plans are recognised as an employee benefit expense in profit or loss in the periods
during which services are rendered by employees. Prepaid contributions are recognised as an asset to the extent that
a cash refund or a reduction in future payments is available. Contributions to a defined contribution plan that are due
more than 12 months after the end of the period in which the employees render the service are discounted to their
present value.
Short-term benefits
Liabilities for employee benefits for wages, salaries, annual leave and sick leave represent present obligations resulting
from employees’ services provided to reporting date, calculated at undiscounted amounts based on remuneration wage
and salary rates that the Group expects to pay as at reporting date including related on-costs, such as workers’
compensation insurance and payroll tax.
A liability is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the
Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the
employee and the obligation can be estimated reliably.
Long-term benefits
The Group’s net obligation in respect of long-term employee benefits is the amount of future benefit that employees
have earned in return for their service in the current and prior periods plus related on-costs. This benefit is then
discounted to determine its present value and the fair value of any related assets is deducted. The discount rate is the
yield at the reporting date on Commonwealth Government bonds that have maturity dates approximating the term of
the Group’s obligations.
Termination benefits
Termination benefits are recognised as an expense when the Group is committed, without realistic possibility of
withdrawal, to a formal detailed plan to terminate employment before the normal retirement date.
Share-based payment transactions
The fair value of shares granted to employees is recognised as an employee expense with a corresponding increase in
equity. The fair value is measured at grant date and spread over the period during which the employees become
unconditionally entitled to the shares. The amount recognised as an expense is adjusted to reflect the actual number of
shares that vest. The value of shares that are yet to vest are recorded in a share equity reserve and transferred to share
capital once vested (see note 26).
(n) Provisions
A provision is recognised in the statement of financial position when the Group has a present legal or constructive
obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle
the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a
pre-tax rate that reflects current market assessments of the time value of money and, when appropriate, the risks
specific to the liability. The unwinding of the discount is recognised as a finance cost.
Warranties
Provisions for warranty claims are made for claims received and claims expected to be received in relation to sales made
prior to reporting date, based on historical claim rates, adjusted for specific information arising from internal quality
assurance processes.
Restructuring
A provision for restructuring is recognised when the Group has approved a detailed and formal restructuring plan, and
the restructuring either has commenced or has been announced publicly. Future operating costs are not provided for.
!LESCOß!NNUALß2EPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(n) Provisions (continued)
Surplus lease space
Provision is made for non-cancellable operating lease rentals payable on surplus leased premises when it is determined
that no substantive future benefit will be obtained from its occupancy and sub-lease rentals do not recover the full
rental cost. The estimate is calculated based on discounted net future cash flows, using the interest rate implicit in the
lease or an estimate thereof.
Deferred earn-outs
Provisions for deferred earn-outs are made based on management’s estimates of likely payments required to be made
in addition to initial consideration as part of acquisitions based on underlying sale and purchase agreements. These are
generally made based on management budgets for the related earn-out periods.
Operating lease make-good
Provision for make-good in respect of leased properties is recognised over the lease term based on the cost the Group
would incur to restore premises to the required condition.
Operating lease straight-lining
Provision for straight-lining in respect of leased properties is calculated at reporting date based on the difference
between the cost to the Group and the total rent payable under the operating lease if recognised on a straight-line
basis over the lease term.
(o) Revenue
Goods sold and services rendered
Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of returns,
trade discounts and volume rebates. Revenue is recognised when persuasive evidence exists, usually in the form of an
executed sales agreement, that the significant risks and rewards of ownership have been transferred to the buyer,
recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably,
there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably.
Revenue from services rendered is recognised in the income statement in the period in which the services are
performed. No revenue is recognised if there are significant uncertainties regarding recovery of the consideration due,
the costs incurred or to be incurred cannot be measured reliably, there is a risk of return of goods or there is continuing
management involvement with the goods. If it is probable that discounts will be granted and the amount can be
measured reliably, then the discount is recognised as a reduction of revenue as the sales are recognised.
Contract revenue
Revenue on longer-term contracts is recognised progressively over the period of individual contracts, wherever a reliable
estimate can be made, using the percentage of completion method. Where a reliable estimate cannot be made,
revenue is recognised only to the extent that costs will be recoverable. An expected loss on a contract is recognised
immediately in the income statement.
Management fees
Management fee revenue from controlled entities is recognised in the income statement as rendering of service
revenue by the Company when the service is performed.
Shared services revenue from controlled entities is recognised in the income statement as rendering of service revenue
by the Company when the service is performed and is derived from the provision of financial and information
technology services.
(p) Lease payments
Payments made under operating leases are recognised in the income statement on a straight-line basis over the term
of the lease. Lease incentives received are recognised in the income statement as an integral part of the total lease
expense and spread over the lease term.
Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction
of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a
constant periodic rate of interest on the remaining balance of the liability.
!LESCOß!NNUALß2EPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(q) Finance income and finance costs
Finance income comprises interest income on funds invested. Interest income is recognised in the income statement as
it accrues, using the effective interest method. Dividend income is recognised in “other revenue” in the profit or loss on
the date the Group’s right to receive payment is established, which in the case of quoted securities is the ex-dividend
date.
Finance costs comprise interest expense on borrowings. Borrowing costs that are not directly attributable to the
acquisition, construction or production of a qualifying asset are recognised in profit or loss using the effective interest
method.
Foreign currency gains or losses are reported on a net basis.
(r) Goods and services tax
Revenue, expenses and assets are recognised net of the amount of goods and services tax (“GST”), except where the
amount of GST incurred is not recoverable from the taxation authority. In these circumstances, the GST is recognised
as part of the cost of acquisition of the asset or as part of the expense.
Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or
payable to, the Australian Taxation Office (“ATO”) is included as a current asset or liability in the statement of financial
position.
Cash flows are included in the statement of cash flows on a gross basis. The GST components of cash flows arising
from investing and financing activities which are recoverable from, or payable to, the ATO are classified as operating
cash flows.
(s) Income tax
Income tax expense comprises current and deferred tax. Income tax is recognised in the income statement except to
the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially
enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.
Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.
The following temporary differences are not provided for: the initial recognition of goodwill, the initial recognition
of assets or liabilities in a transaction that is not a business combination and that affect neither accounting nor taxable
profit and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the
foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement
of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted by the reporting date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available
against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that
the related tax benefit will be realised.
Additional income taxes that arise from the distribution of dividends are recognised at the same time as the liability to
pay the related dividend.
Tax consolidation
The Company and its wholly-owned Australian resident entities have formed a tax-consolidated group with effect
from 1 June 2004 and are therefore taxed as a single entity from that date. The Company is the head entity within the
tax-consolidated group.
Current tax expense/income, deferred tax liabilities and deferred tax assets arising from temporary differences of the
members of the tax-consolidated group are recognised in the separate financial statements of the members of the
tax-consolidated group using the “separate taxpayer within group” approach by reference to the carrying amounts of
assets and liabilities in the separate financial statements of each entity and the tax values applying under tax
consolidation.
Any current tax liabilities (or assets) and deferred tax assets arising from unused tax losses of the subsidiaries are
assumed by the head entity in the tax-consolidated group and are recognised as amounts payable (receivable) to (from)
other entities in the tax-consolidated group in conjunction with any tax-funding arrangement amounts (refer below).
Any difference between these amounts is recognised by the Company as an equity contribution or distribution.
!LESCOß!NNUALß2EPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(s) Income tax (continued)
Tax consolidation (continued)
The Company recognises deferred tax assets arising from unused tax losses of the tax-consolidated group to the extent
that it is probable that future taxable profits of the tax-consolidated group will be available against which the asset can
be utilised.
Any subsequent period adjustments to deferred tax assets arising from unused tax losses as a result of revised
assessments of the probability of recoverability is recognised by the head entity only.
Nature of tax-funding arrangements and tax-sharing agreements
The head entity, in conjunction with other members of the tax-consolidated group, has entered into a tax-funding
arrangement which sets out the funding obligations of members of the tax-consolidated group in respect of tax
amounts. The tax-funding arrangements require payments to/from the head entity equal to the current tax liability
(asset) assumed by the head entity and any tax-loss deferred tax asset assumed by the head entity, resulting in the
head entity recognising an inter-entity receivable (payable) equal in amount to the tax liability (asset) assumed.
The inter-entity receivable (payable) is at call.
Contributions to fund the current tax liabilities are payable as per the tax-funding arrangement and reflect the timing
of the head entity’s obligation to make payments for tax liabilities to the relevant tax authorities.
The head entity, in conjunction with other members of the tax-consolidated group, has also entered into a tax-sharing
agreement. The tax-sharing agreement provides for the determination of the allocation of income tax liabilities
between the entities should the head entity default on its tax payment obligations. No amounts have been recognised
in the financial statements in respect of this agreement as payment of any amounts under the tax-sharing agreement
is considered remote.
(t) Earnings per share
Basic earnings per share is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company
by the weighted average number of shares outstanding during the period.
Diluted earnings per share is calculated by adjusting the profit attributable to ordinary shareholders and the weighted
average number of ordinary shares outstanding for the effects of dilutive potential ordinary shares.
(u) Segment reporting
Determination and presentation of operating segments
As of 1 June 2009, the Group determines and presents operating segments based on the information that internally is
provided to the Chief Executive Officer (“CEO”), who is the Group’s chief operating decision maker. This change is due to
the adoption of AASB 8 Operating Segments. Previously operating segments were determined and presented in
accordance with AASB 114 Segment Reporting. The new accounting policy in respect of segment operating disclosures is
presented as follows.
Comparative segment information has been re-presented in conformity with the transitional requirements of AASB 8.
Since the change in accounting policy only impacts presentation and disclosure aspects, there is no impact on earnings
per share.
An operating segment is a component of the Group that engages in business activities from which it may earn
revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other
components. All operating segments’ results are regularly reviewed by the Group’s CEO to make decisions about
resources to be allocated to the segment and assess its performance, and for which discrete financial information is
available.
Segment results that are reported to the CEO include items directly attributable to a segment as well as those that can
be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets, head office expenses, and
income tax assets and liabilities.
Segment capital expenditure is the total cost incurred during the period to acquire property, plant and equipment, and
intangible assets other than goodwill.
Segments are determined based on the Group’s management and internal reporting structure.
!LESCOß!NNUALß2EPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(v) Presentation of financial statements
The Group applies revised AASB 101 Presentation of Financial Statements (2007), which became effective as of
1 June 2009. As a result, the Group presents in the consolidated statement of changes in equity all owner changes in
equity, whereas all non-owner changes in equity are presented in the consolidated statement of comprehensive
income.
Comparative information has been re-presented so that it also is in conformity with the revised standard. Since the
change in accounting policy only impacts presentation aspects, there is no impact on earnings per share.
(w) Discontinued operations
A discontinued operation is a component of the Group’s business that represents a separate major line of business
operations that has been disposed of or is a subsidiary acquired exclusively with a view to resale. Classification as a
discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held-for-sale, if
earlier. When an operation is classified as a discontinued operation, the comparative income statement is re-presented
as if the operation had been discontinued from the start of the comparative period.
(x) New standards and interpretations not yet adopted
The following standards, amendments to standards and interpretations have been identified as those which may
impact the entity in the period of initial application. They are available for early adoption at 31 May 2010, but have not
been applied preparing this financial report
Revised AASB 3 Business Combinations (2008) incorporates the following changes that are likely to be relevant to
the Group’s operations:
ƒ
The definition of a business has been broadened, which is likely to result in more acquisitions being treated as
business combinations
ƒ
Contingent consideration will be measured at fair value, with subsequent changes therein recognised in profit
or loss
ƒ
Transaction costs, other than share and debt issue costs, will be expensed as incurred
ƒ
Any pre-existing interest in the acquiree will be measured at fair value with the gain or loss recognised in
profit or loss and
ƒ
Any non-controlling (minority) interest will be measured at either fair value, or at its proportionate interest in
the identifiable assets and liabilities of the acquiree, on a transaction-by-transaction basis.
Revised AASB 3, which becomes mandatory for the Group’s 31 May 2011 financial statements, will be applied
prospectively and therefore there will be no impact on prior periods in the Group’s 2011 consolidated financial
statements.
Amended AASB 127 Consolidated and Separate Financial Statements (2008) requires accounting for changes in
ownership interests by the Group in a subsidiary, while maintaining control, to be recognised as an equity
transaction. When the Group loses control of a subsidiary, any interest retained in the former subsidiary will be
measured at fair value with the gain or loss recognised in profit or loss. The amendments to AASB 127, which
become mandatory for the Group’s 31 May 2011 financial statements, are not expected to have a significant
impact on the consolidated financial statements.
AASB 2009-5 Further amendments to Australian Accounting Standards arising from the Annual Improvements
Process various AASBs resulting in minor changes for presentation, disclosure, recognition and measurement
purposes. The amendments, which become mandatory for the Group’s 31 May 2011 financial statements, are not
expected to have a significant impact on the financial statements.
AASB 2009-8 Amendments to Australian Accounting Standards – Group Cash-settled Share-based payment
Transactions resolves diversity in practice regarding the attribution of cash-settled share-based payments between
different entities within a group. As a result of the amendments AI8 Scope of AASB 2 and AI 11 AASB 2 – Group and
Treasury Share Transactions will be withdrawn from the application date. The amendments, which become
mandatory for the Group’s 31 May 2011 financial statements, are not expected to have a significant impact on the
financial statements.
!LESCOß!NNUALß2EPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 2: EARNINGS PER SHARE
CONSOLIDATED
2010
2009
$000
$000
Earnings reconciliation
Net (loss)/profit
(124,301)
(12,789)
Basic and diluted (loss)/earnings
(124,301)
(12,789)
Significant items (net of tax)
136,658
41,897
Amortisation of intangibles (net of tax)
10,840
15,017
Net profit before significant items and amortisation of intangibles
23,197
44,125
CONSOLIDATED
2010
2009
DIS-
CONTINUING
OPERATIONS
$000
DIS-
CONTINUED
OPERATION
$000
TOTAL
$000
CONTINUING
OPERATIONS
$000
CONTINUED
TOTAL
OPERATION
$000
$000
(Loss)/profit attributable to ordinary
shareholders (basic)
(124,301)
–
(124,301)
(83,508)
70,719
(12,789)
(Loss)/profit attributable to ordinary
shareholders (diluted)
(124,301)
–
(124,301)
(83,508)
70,719
(12,789)
2010
2009
NUMBER
NUMBER
Weighted average number of shares used as the denominator
Number of shares for basic earnings per share
93,574,230
91,712,638
Number of shares for diluted earnings per share
93,574,230
91,712,638
NOTE 3: OTHER INCOME
CONSOLIDATED
THE COMPANY
2010
2009
2010
2009
$000
$000
$000
$000
Gain on sale of investments
126
118
459
–
–
–
–
–
Total other income
244
459
–
–
Gain on disposal of property, plant and equipment
!LESCOß!NNUALß2EPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 4: OTHER EXPENSES
CONSOLIDATED
NOTE
THE COMPANY
2010
2009
2010
2009
$000
$000
$000
$000
Depreciation and amortisation:
Buildings
12
390
391
–
–
Leasehold improvements
12
1,105
1,514
37
–
42
–
526
Motor vehicles
12
1,014
1,241
Plant and equipment
12
7,766
12,734
338
Leased plant and equipment
12
1
–
–
–
10,412
15,744
375
568
Amortisation of identifiable intangibles:
Brand names
13
965
3,188
–
–
Patents and trademarks
13
462
460
–
–
Customer relationships
13
Development costs
13
4,399
4,960
6,847
3,521
–
235
–
56
Lease premium
13
Other
13
–
54
750
883
–
–
–
–
10,840
15,649
235
56
21,252
31,393
610
624
Wages and salaries
122,860
150,897
6,933
7,020
Employee benefits
37,532
45,938
3,381
2,668
Total depreciation and amortisation
Personnel expenses:
Equity-settled share-based payments
Senior executive share loan adjustments
Impairment loss on trade receivables
693
6
(1,752)
693
(892)
5,120
–
5,120
–
166,205
195,083
16,127
8,796
1,588
1,689
–
–
20,021
41
23,332
100
559
–
419
–
126
(1,325)
459
Loss on disposal of property, plant and equipment
(1,098)
–
–
(42)
Net loss on disposal of property, plant and equipment
(1,199)
(639)
–
(42)
Operating lease rental expense
Research and development expenditure
Gain on disposal of property, plant and equipment
!LESCOß!NNUALß2EPORT
–
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 5: NET FINANCING INCOME/(COSTS)
Recognised in profit or loss
CONSOLIDATED
THE COMPANY
2010
2009
2010
2009
$000
$000
$000
$000
250
449
162
206
–
–
14,794
9,555
250
449
14,956
9,761
Interest income:
Cash and cash equivalents
Related parties
Financial income
Interest expense:
Bank loans and overdraft
Interest rate hedging restructure
(15,656)
–
(25,940)
(79)
(14,842)
–
(133)
–
Financial expenses
(15,656)
(40,782)
(79)
(133)
Net financing (costs)/income
(15,406)
(40,333)
14,877
9,628
1,363
–
–
(9,345)
–
–
762
–
–
Recognised in other comprehensive income
Foreign currency translation differences on translating
foreign subsidiaries
Effective portion of changes in fair value of cash flow
hedges
Net change in fair value of cash flow hedges transferred
to profit or loss
22
1,313
4,371
Income tax (expense)/benefit on other comprehensive
income
(1,706)
2,575
–
–
Finance income/(costs) recognised in other
comprehensive income, net of income tax
4,000
(4,645)
–
–
!LESCOß!NNUALß2EPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 6: SIGNIFICANT ITEMS
CONSOLIDATED
Asset write-downs
Impairment loss on goodwill
Impairment loss on brand names
Impairment loss on capitalised software development costs
Impairment loss on customer relationships
Impairment loss on property, plant and equipment
Impairment loss on loans to controlled entities
Impairment of assets
Related income tax benefit
2009
2
2010
2009
$000
$000
$000
$000
–
–
–
(116,341)
–
(1,688)
(12,705)
(2,366)
–
(133,100)
1,216
(131,884)
Termination payment
Termination payment
Related income tax benefit
(1,700)
510
Related income tax benefit
Sale of Scientific & Medical Division
Proceeds on sale of Scientific & Medical division
Carrying value of net assets sold, associated costs
incurred and net impact of foreign exchange
(59,980)
(10,020)
–
–
–
–
–
–
–
–
–
–
–
(133,100)
(70,000)
(70,000)
–
(133,100)
(70,000)
–
(70,000)
(133,100)
–
–
–
(1,700)
510
(70,000)
–
–
–
(1,190)
(5,120)
–
(5,120)
–
1,536
–
1,536
–
(3,584)
–
(3,584)
–
(1,190)
Senior executive share loan plan expense
Senior executive share loan plan expense
THE COMPANY
2010
–
–
181,537
–
73,953
–
(115,162)
–
(38,951)
Gain on sale
–
66,375
–
35,002
Related income tax expense
–
(6,754)
–
(6,754)
–
59,621
–
28,248
–
–
(16,834)
5,050
–
–
(530)
159
–
(371)
Business restructuring
Rationalisation of business operations
Related income tax benefit
–
(11,784)
Inventory
Write-down of inventory to net realisable value
–
(7,920)
–
–
Related income tax benefit
–
2,376
–
–
–
(5,544)
–
–
–
–
(165)
–
–
–
–
–
–
–
Sale of investment
Loss on sale of equity accounted investment
Related income tax expense
–
(165)
Occupational Health and Safety (OH&S)
Provision for costs associated with OH&S
–
(3,408)
Related income tax benefit
–
–
!LESCOß!NNUALß2EPORT
573
(2,835)
–
–
–
(3,190)
507
(2,683)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 6: SIGNIFICANT ITEMS (CONTINUED)
CONSOLIDATED
THE COMPANY
2010
2009
2
2010
2009
$000
$000
$000
$000
–
–
–
1
Interest rate hedge restructure
Costs associated with revaluation and settlement of
interest rate swaps
Related income tax benefit
(14,842)
4,453
–
–
(10,389)
–
Total significant items before income tax expense
Related income tax benefit /(expense) on significant items
1
Interest rate hedge restructuring included in net financing costs.
For continuing operations only.
5,698
3,262
Total significant items after income tax
2
(46,794)
(139,920)
–
–
(139,920)
(38,718)
(6,088)
2,046
(41,096)
(136,658)
–
(137,874)
(44,806)
NOTE 7: INCOME TAX EXPENSE
CONSOLIDATED
THE COMPANY
2010
2009
2010
2009
$000
$000
$000
$000
Recognised in the income statement
Current tax expense:
Current year
Adjustments for prior year
5,758
2,929
1,334
(390)
(1,506)
588
(246)
(193)
4,252
3,517
1,088
(583)
(1,096)
187
Deferred tax expense:
Origination and reversal of temporary differences
(881)
683
Total income tax expense/(benefit) excluding gain on sale of
discontinued operation
4,935
2,636
(8)
(396)
Income tax expense/(benefit) from continuing operations
4,935
(1,813)
(8)
(396)
–
4,449
–
4,935
2,636
(8)
–
6,754
–
6,754
4,935
9,390
(8)
6,358
Income tax expense from discontinued operation (excluding
gain on sale)
Income tax expense on gain on sale of discontinued operation
Total income tax expense/(benefit)
CONSOLIDATED
INCOME TAX RECOGNISED IN OTHER COMPREHENSIVE INCOME
Foreign currency translation differences on
translating foreign subsidiaries
BEFORE
TAX
TAX
(EXPENSE)
BENEFIT
2010
2010
$000
$000
22
–
–
(396)
CONSOLIDATED
NET OF TAX
BEFORE
TAX
TAX
(EXPENSE)
BENEFIT
NET OF TAX
2010
2009
2009
2009
$000
$000
$000
$000
22
1,363
–
1,363
(9,345)
Effective portion of changes in fair value of cash
flow hedges
1,313
(394)
919
Net change in fair value of cash flow hedges
transferred to profit or loss
4,371
(1,312)
3,059
5,706
(1,706)
4,000
762
(7,220)
2,804
(6,541)
(229)
2,575
533
(4,645)
There were no amounts recognised in other comprehensive income for the Company for the financial year ended
31 May 2010 (31 May 2009: Nil).
!LESCOß!NNUALß2EPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 7: INCOME TAX EXPENSE (CONTINUED)
CONSOLIDATED
NUMERICAL RECONCILIATION BETWEEN TAX EXPENSE AND PRE-TAX NET
(LOSS)/PROFIT
THE COMPANY
2010
2009
2010
$000
$000
$000
2009
$000
(Loss)/profit for the period
Total income tax expense/(benefit)
(124,301)
4,935
(12,789)
9,390
(104,188)
(8)
(40,182)
6,358
(Loss)/profit excluding income tax expense
(119,366)
(3,399)
(104,196)
(33,824)
(35,810)
(1,020)
(31,259)
(10,147)
1,958
3,921
–
–
307
216
548
1,890
7
216
479
–
1,241
38,714
–
21,000
–
39,930
–
21,000
–
298
–
–
(35)
–
(589)
(3,181)
–
–
Prima facie income tax (benefit)/expense calculated at 30%
(2009: 30%) on (loss)/profit before tax
Increase/(decrease) in income tax expense due to:
Non-deductible amortisation of intangibles
Non-deductible expenses
Non-deductible foreign exchange losses
Derecognition of foreign tax loss benefit
Non-deductible impairment expenses
Non-deductible set up cost
Overseas tax rate differential
Research and development
Recovery of tax benefits not previously brought to account
Non-assessable dividend income
Non-assessable capital gains
Non-assessable foreign exchange gains
Non-assessable interest income
Sundry items
Income tax expense on (loss)/profit
(88)
–
–
–
(194)
–
–
97
–
(10,377)
(3,234)
–
(419)
–
–
(3,181)
–
(566)
–
(7,465)
(158)
–
(926)
(1,033)
(108)
–
6,441
8,802
Income tax (over)/under provided in prior year
(1,506)
588
(246)
Income tax expense/(benefit) attributable to pre-tax
(loss)/profit
4,935
9,390
(8)
238
6,551
(193)
6,358
In February 2009, the New Zealand Inland Revenue Department issued amended assessment notices to Alesco NZ
group entities in relation to an ongoing dispute regarding the tax deductibility of interest on Optional Convertible
Notes (“OCNs”) issued by Alesco NZ Limited in 2003. On the basis of external legal and tax advice, Alesco has
commenced proceedings in the New Zealand High Court in relation to this matter. If Alesco is unsuccessful, the
accounting value of interest deductions claimed since the inception of this financing arrangement in 2003 to
31 May 2010 would be $NZ7,065,000 (2009: $NZ5,964,000). This amount has been fully provided for (progressively
since 2004). No provision has been made in respect of interest or potential penalty that could be levied should Alesco be
unsuccessful in its New Zealand High Court action.
If Alesco NZ Limited is successful in the proceedings, any provision held at that time in relation to the OCNs will be
written back to profit.
The Group will continue to fully provide for any future tax deductions in relation to the interest on the OCNs.
!LESCOß!NNUALß2EPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 8: TRADE AND OTHER RECEIVABLES
CONSOLIDATED
Current
Trade debtors
Trade debtor impairment losses
Other debtors
Non-current
Loans to controlled entities
Impairment charge on loans to controlled entities
33(a)
THE COMPANY
2010
2009
2010
2009
$000
$000
$000
$000
–
–
–
–
113,868
(4,696)
121,729
(5,350)
109,172
116,379
–
–
2,491
12,293
–
6,905
111,663
128,672
–
6,905
–
–
–
–
489,131
(203,100)
373,733
(70,000)
303,733
–
–
286,031
Other loans
2,609
–
2,609
–
Loans to executive directors and employees
3,155
6,869
3,155
6,869
5,764
6,869
291,795
310,602
The Group’s exposure to credit and currency risks and impairment losses related to trade and other receivables are disclosed at
Note 33.
NOTE 9: INVENTORIES
CONSOLIDATED
Finished goods at cost
Provision for obsolescence
2009
2010
2009
$000
$000
$000
$000
114,673
110,258
–
–
(9,265)
–
–
100,993
–
–
(8,767)
105,906
Raw materials at cost
Provision for obsolescence
Work in progress at cost
THE COMPANY
2010
15,382
(1,599)
20,554
(962)
–
–
–
–
13,783
19,592
–
–
925
1,424
–
–
120,614
122,009
–
–
NOTE 10: OTHER CURRENT ASSETS
CONSOLIDATED
Prepayments
Fair value derivatives
THE COMPANY
2010
2009
2010
2009
$000
$000
$000
$000
4,830
1,313
5,022
–
470
–
520
–
6,143
5,022
470
520
The impact of interest rate and currency risk on the fair value of derivatives is disclosed at Note 33.
!LESCOß!NNUALß2EPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 11: OTHER NON-CURRENT INVESTMENTS
CONSOLIDATED
Investments in controlled entities
Unlisted shares at cost
THE COMPANY
2010
2009
2010
2009
$000
$000
$000
$000
–
–
358,395
358,386
Investments in other entities
Unlisted shares and units
–
269
–
5
Impairment loss provision
–
(180)
–
–
–
89
–
5
–
89
358,395
358,391
NOTE 12: PROPERTY, PLANT AND EQUIPMENT
CONSOLIDATED
THE COMPANY
2010
2009
2010
2009
$000
$000
$000
$000
Land and buildings:
At cost
20,302
20,286
–
–
Accumulated depreciation
(3,776)
(3,386)
–
–
16,526
16,900
–
–
Leasehold improvements:
At cost
Accumulated amortisation and impairment losses
8,528
8,433
239
239
(5,085)
(4,047)
(143)
(106)
3,443
4,386
96
133
Motor vehicles:
At cost
Accumulated depreciation and impairment losses
13,339
13,935
–
–
(11,456)
(10,572)
–
–
1,883
3,363
–
–
Plant and equipment:
At cost
Accumulated depreciation and impairment losses
99,802
(67,845)
105,443
(67,285)
31,957
38,158
3,541
(2,606)
935
3,336
(2,270)
1,066
Leased plant and equipment:
At cost
Accumulated amortisation
Capital works in progress at cost
Total property, plant and equipment net book value
!LESCOß!NNUALß2EPORT
28
336
–
–
(20)
(235)
–
–
8
101
–
–
1,341
4,613
150
984
55,158
67,521
1,181
2,183
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 12: PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Reconciliations – cost
Reconciliations of the movement in cost for each class of property, plant and equipment are set out below:
CONSOLIDATED
Land and buildings
Cost at beginning of year
Additions
Disposals
Transfers from capital work in progress
Cost at end of year
Leasehold improvements
Cost at beginning of year
Additions
Disposals
Disposals of companies/businesses
Transfers from capital work in progress and other asset
categories
Translation differences
Cost at end of year
THE COMPANY
2010
2009
2010
2009
$000
$000
$000
$000
20,286
–
20,203
106
–
–
–
–
–
(30)
–
–
16
7
–
–
20,302
20,286
–
–
7,300
239
274
2,905
(293)
–
–
37
(72)
–
(1,585)
–
–
12
136
–
–
9
(30)
–
–
8,433
522
(448)
8,528
8,433
239
239
13,935
610
15,746
381
22
–
–
–
–
–
–
(2,015)
(394)
–
–
–
–
Motor vehicles
Cost at beginning of year
Additions
Acquisitions through entities and businesses acquired
Disposals
Disposals of companies/businesses
Transfers (to)/from capital work in progress and other
asset categories
Translation differences
Cost at end of year
Plant and equipment
Cost at beginning of year
Additions
Acquisitions through entities and businesses acquired
Disposals
Disposals of companies/businesses
Transfers to capital work in progress and other asset
categories
Intra-group transfers to other group companies
Translation differences
Cost at end of year
–
(1,212)
–
(7)
233
–
–
13
(38)
–
–
13,339
13,935
–
–
105,443
135,842
3,336
2,877
3,586
7,592
231
356
–
(6,012)
124
(19,178)
–
–
–
(12)
–
(14,989)
–
–
(2,843)
(3,547)
(26)
235
–
–
–
(120)
(372)
99,802
(401)
105,443
–
–
3,541
3,336
!LESCOß!NNUALß2EPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 12: PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Reconciliations – cost (continued)
CONSOLIDATED
NOTE
Leased plant and equipment
Cost at beginning of year
THE COMPANY
2010
2009
2010
2009
$000
$000
$000
$000
336
3,305
–
–
Additions
–
3
–
–
Disposals
(76)
(99)
–
–
–
(233)
(2,527)
(329)
–
–
–
–
Disposals of companies/businesses
Transfers to other asset categories
Translation differences
Cost at end of year
Capital works in progress
Cost at beginning of year
Additions
Disposals
Transfers to other asset categories
Intragroup transfers
Translation differences
Cost at end of year
1
(17)
–
–
28
336
–
–
4,613
13,939
984
7,471
3,767
(20)
(7,020)
4,002
1,902
–
(13,341)
135
–
(29)
–
1
–
13
(940)
–
(7,552)
–
1,341
4,613
–
(837)
984
150
Reconciliations – accumulated depreciation and impairment losses
Reconciliations of the movement in accumulated depreciation for each class of property, plant and equipment are
set out below:
Land and buildings
Accumulated depreciation at beginning of year
(3,386)
(3,025)
–
–
(390)
–
(391)
30
–
–
–
–
Accumulated depreciation at end of year
(3,776)
(3,386)
–
–
Leasehold improvements
Accumulated depreciation at beginning of year
(4,047)
(4,010)
314
–
152
913
Depreciation expense
4
Disposals
Disposals
Disposals of companies/businesses
Depreciation
4
(1,014)
(1,105)
Impairment write-down
6
(336)
–
Transfers to/(from) capital work in progress and other
asset categories
Translation differences
Accumulated depreciation and impairment losses at end
of year
!LESCOß!NNUALß2EPORT
(106)
(95)
–
31
–
(37)
(42)
–
–
–
9
(48)
–
–
(11)
51
–
–
(5,085)
(4,047)
(143)
(106)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 12: PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Reconciliations – accumulated depreciation and impairment losses (continued)
CONSOLIDATED
NOTE
Motor vehicles
Accumulated depreciation at beginning of year
Disposals
THE COMPANY
2010
2009
2010
2009
$000
$000
$000
$000
(10,572)
910
(10,601)
–
–
1,503
–
–
277
–
Disposals of companies/businesses
Depreciation
4
–
(1,241)
(1,514)
–
–
–
Impairment write down
6
(624)
–
–
–
Transfers to/(from) capital work in progress and other
asset categories
(258)
–
–
(13)
21
–
–
(11,456)
(10,572)
–
–
(67,285)
4,450
(85,913)
17,385
(2,270)
–
(2,186)
11
84
Translation differences
Accumulated depreciation and impairment losses at end
of year
Plant and equipment
Accumulated depreciation at beginning of year
Disposals
Disposals of companies/businesses
11,175
–
(12,734)
–
(338)
–
3,712
2,464
2
365
–
450
–
338
–
–
66
–
(67,845)
(67,285)
(2,606)
(2,270)
(235)
(2,931)
–
–
76
–
6
2,527
–
–
–
–
–
–
–
–
Depreciation
4
Impairment write down
Transfers to capital work in progress and other asset
categories
6
Intragroup transfers
Translation differences
Accumulated depreciation and impairment losses at end
of year
(7,766)
(1,406)
–
(526)
–
Leased plant and equipment
Accumulated amortisation at beginning of year
Disposals
Disposals of companies/businesses
Amortisation
4
(1)
Transfers to capital work in progress and other asset
categories
Translation differences
140
145
–
–
–
18
–
–
Accumulated amortisation at end of year
(20)
(235)
–
–
!LESCOß!NNUALß2EPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 13: INTANGIBLE ASSETS
CONSOLIDATED
THE COMPANY
2010
2009
2010
2009
$000
$000
$000
$000
419,416
419,033
–
–
(59,980)
–
–
243,095
359,053
–
–
117,669
(26,120)
117,607
(25,140)
–
–
–
–
91,549
92,467
–
–
6,719
(2,562)
6,717
(2,099)
–
–
–
–
4,157
4,618
–
–
–
–
–
–
–
–
–
–
Goodwill:
At cost
Accumulated impairment losses
(176,321)
Brand names:
At cost
Accumulated amortisation and impairment losses
Patents and trademarks:
At cost
Accumulated amortisation
Agency agreements:
At cost
Customer relationships:
At cost
Accumulated amortisation and impairment losses
43,337
(26,117)
43,337
(9,013)
–
–
–
–
17,220
34,324
–
–
Development costs:
At cost
Accumulated amortisation and impairment losses
34,917
28,364
1,681
1,414
(19,589)
(12,790)
(1,280)
(1,043)
15,328
15,574
401
371
4,827
(4,827)
4,774
(4,774)
–
–
–
–
–
–
–
190
(126)
130
–
–
–
(72)
64
58
–
–
371,413
506,094
401
371
Lease premium:
At cost
Accumulated amortisation
–
Other intangibles:
At cost
Accumulated amortisation
–
Reconciliations – cost
Reconciliations of the movement in cost for each class of intangible asset are set out below:
Goodwill
Cost at beginning of year
Additions
Acquisitions through entities and businesses acquired
Disposal of companies/businesses
Transfers to other asset categories
Translation differences
Cost at end of year
!LESCOß!NNUALß2EPORT
419,033
522,840
–
–
–
–
1,791
3,042
–
–
–
–
–
(66,384)
–
–
–
(41,139)
–
–
383
(1,117)
–
–
–
–
419,416
419,033
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 13: INTANGIBLE ASSETS (CONTINUED)
Reconciliations – cost (continued)
CONSOLIDATED
Brand names
Cost at beginning of year
Disposal of companies/businesses
Transfers from other asset categories
Translation differences
Cost at end of year
Patents and trademarks
Cost at beginning of year
Disposal of companies/businesses
Translation differences
THE COMPANY
2010
2009
2010
2009
$000
$000
$000
$000
117,607
109,281
–
–
62
117,669
6,717
–
–
–
(975)
9,452
–
–
–
–
(151)
–
–
–
–
7,923
(1,205)
–
–
–
–
(1)
117,607
–
–
6,719
6,717
–
–
Cost at beginning of year
–
7,288
–
–
Disposal of companies/businesses
–
(7,288)
–
–
Cost at end of year
–
–
–
–
43,337
15,153
–
–
(3,050)
31,234
–
–
–
–
43,337
43,337
–
–
28,364
–
9,104
17
1,414
–
689
–
326
2,003
Cost at end of year
2
Agency agreements
Customer relationships
Cost at beginning of year
Disposal of companies/businesses
Transfers from other asset categories
Cost at end of year
Development costs
Cost at beginning of year
Acquisitions through entities and businesses acquired
Expenditure capitalised in current period
Disposals
Disposal of companies/businesses
Transfers from other asset categories
Translation differences
Cost at end of year
Lease premium
Cost at beginning of year
Translation differences
Cost at end of year
–
–
212
122
–
(97)
–
–
–
(208)
–
–
55
603
6,195
17,596
–
–
34,917
28,364
1,681
1,414
4,774
4,906
–
–
–
–
–
–
32
53
4,827
(51)
(132)
4,774
!LESCOß!NNUALß2EPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 13: INTANGIBLE ASSETS (CONTINUED)
Reconciliations – cost (continued)
CONSOLIDATED
NOTE
Other intangibles
Cost at beginning of year
Expenditure capitalised in current period
Transfers from other asset categories
Translation differences
Cost at end of year
THE COMPANY
2010
2009
2010
2009
$000
$000
$000
$000
130
60
–
180
–
(90)
–
–
–
–
–
–
–
40
–
–
190
130
–
–
Reconciliations – accumulated amortisation and impairment losses
Reconciliations of the movement in accumulated amortisation and impairment losses for each class of intangible
asset are set out below:
Goodwill
Accumulated impairment at beginning of year
Impairment write down
6
Accumulated impairment losses at end of year
Brand names
Accumulated amortisation at beginning of year
Amortisation
4
Impairment write down
6
Transfers to other asset categories
Translation differences
Accumulated amortisation and impairment losses at end
of year
(59,980)
–
–
–
(116,341)
(59,980)
–
–
(176,321)
(59,980)
–
–
(25,140)
(11,952)
–
–
(965)
(3,188)
–
–
(10,020)
(17)
–
–
–
–
–
–
(15)
37
–
–
(26,120)
(25,140)
–
–
(2,099)
(462)
(1,640)
(460)
–
–
–
–
Patents and trademarks
Accumulated amortisation at beginning of year
Amortisation
4
Translation differences
(1)
1
–
–
(2,562)
(2,099)
–
–
(9,013)
(2,789)
–
–
391
–
–
(6,847)
–
–
–
–
–
232
–
–
(26,117)
(9,013)
–
–
(12,790)
–
(6,299)
66
(1,043)
–
(621)
–
4
(4,960)
(3,521)
(235)
(56)
6
(1,750)
Accumulated amortisation at end of year
Customer relationships
Accumulated amortisation at beginning of year
Disposal of companies/businesses
–
Amortisation
4
Impairment write down
Transfers to/(from) other asset categories
6
(4,399)
(12,705)
–
Accumulated amortisation and impairment losses at end
of year
Development costs
Accumulated amortisation at beginning of year
Disposals
Amortisation
1
Impairment write down
Transfers to/(from) other asset categories
(65)
–
(3,074)
Translation differences
(24)
38
(19,589)
(12,790)
Accumulated amortisation and impairment losses at end
of year
–
(2)
–
(1,280)
1 This balance includes a $62,000 impairment charge against assets in the ordinary course of business which is not classifed as a significant item as at 31 May 2010.
!LESCOß!NNUALß2EPORT
–
(366)
–
(1,043)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 13: INTANGIBLE ASSETS (CONTINUED)
Reconciliations – accumulated amortisation and impairment losses (continued)
CONSOLIDATED
NOTE
Lease premium
Accumulated amortisation at beginning of year
Amortisation
Translation differences
Accumulated amortisation at end of year
Other intangibles
Accumulated amortisation at beginning of year
Disposal of companies/businesses
Amortisation
Transfers to/(from) other asset categories
2009
2010
2009
$000
$000
$000
$000
–
(4,156)
–
–
(750)
–
–
(53)
132
–
–
(4,827)
(4,774)
–
–
(72)
(45)
–
–
–
(54)
511
(883)
–
–
–
–
–
351
–
–
(4,774)
4
4
Translation differences
–
Accumulated amortisation at end of year
THE COMPANY
2010
(126)
(6)
–
–
(72)
–
–
Amortisation
Amortisation has been recognised in the “Administration and general expenses” line in the income statement.
Impairment tests for cash-generating units containing intangibles with indefinite useful lives
At 31 May 2010, the carrying amounts of intangible assets with indefinite useful lives and all other intangibles with
finite useful lives are allocated to cash-generating units (“CGUs”) as follows:
INDEFINITE USEFUL LIFE
CONSOLIDATED
2010
Construction
Functional & Decorative Products
FINITE
USEFUL LIFE
TOTAL
INTANGIBLES
GOODWILL
BRANDS
TOTAL
TOTAL
TOTAL
$000
$000
$000
$000
$000
51,220
71,823
9,500
16,175
60,720
87,998
3,345
7,113
64,065
95,111
120,052
–
53,500
–
173,552
–
26,859
11,425
200,411
11,425
243,095
79,175
322,270
48,742
371,012
–
–
–
401
401
243,095
79,175
322,270
49,143
371,413
51,170
71,721
9,500
16,175
60,670
87,896
3,959
8,678
64,629
96,574
Garage Door & Openers
119,882
53,500
173,382
28,828
202,210
Water Products & Services
116,337
–
116,337
25,974
142,311
359,110
79,175
438,285
67,439
505,724
Garage Door & Openers
Water Products & Services
Multiple units without significant goodwill
2009
Construction
Functional & Decorative Products
Multiple units without significant goodwill
–
–
–
370
370
359,110
79,175
438,285
67,809
506,094
!LESCOß!NNUALß2EPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 13: INTANGIBLE ASSETS (CONTINUED)
Impairment tests for cash-generating units containing intangibles with indefinite useful lives (continued)
Certain brand names have been determined as maintaining an indefinite useful life as they operate in markets
where they are positioned as premium brands, command high margins and hold a strong market presence. Brands
include B&D, Concrete Technologies, Flextool and other brands within Functional & Decorative Products.
Finite useful life intangible assets primarily include certain other patents, trademarks, customer relationships and
development costs.
For Functional & Decorative Products, Water Products & Services and Garage Doors & Openers, the divisional level is
viewed as the appropriate level of CGU to assess impairment as the Australian and New Zealand business units are
viewed and managed as one operation. For Construction & Mining, the assessment is performed at a lower level
where the Construction and Mining businesses are analysed separately.
In the financial years ended 31 May 2009 and 31 May 2010, the recoverable amounts of all the Group’s CGUs were
determined based upon a value-in-use basis.
Key assumptions used for value-in-use calculations
Value-in-use
The cash-generating unit impairment tests are based on value-in-use calculations, whereby the net present value of
the future cash flows of each CGU is compared against the carrying amount of net operating assets of that CGU.
The value-in-use methodology used is consistent with the prior year. Cash flow projections are based on the latest
financial forecasts for 2011 and the latest management estimates of financial forecasts for the 2012-2014 financial
years. A terminal value growth rate is then used for subsequent years (see table below) as the appropriate period to
value these CGUs is assessed as an indefinite life since the primary assets held by these CGUs are indefinite life
intangible assets. Management has based the assumptions in the models on current market conditions, past
performance and future expectations and forecast growth rates found in industry reports.
Growth rates
Growth rates used were generally determined by factors such as industry sector, the market to which the CGU is
dedicated, the size of the business, geographic location, past performance and other industry factors.
CONSOLIDATED
REVENUE
GROWTH RATE
2012
REVENUE
GROWTH RATE
2013
REVENUE
GROWTH RATE
2014
%
%
%
2010
Construction
5.7
6.4
5.7
Functional & Decorative Products
8.3
5.8
5.8
Garage Doors & Openers
Water Products & Services
7.6
2.0
8.4
2.0
4.8
2.0
The growth rates used to extrapolate cash flows beyond the 2014 financial year were 3.0% and do not exceed the
long-term average growth rates for the markets to which the assets are dedicated.
CONSOLIDATED
REVENUE
GROWTH RATE
2011
REVENUE
GROWTH RATE
2012
REVENUE
GROWTH RATE
2013
%
%
%
Construction
Functional & Decorative Products
Garage Doors & Openers
3.0
5.0
8.5
3.0
5.0
10.2
3.0
5.0
5.5
Water Products & Services
6.8
8.5
5.6
2009
The growth rates used to extrapolate cash flows beyond the 2013 financial year were 3.0% and do not exceed the
long-term average growth rates for the markets to which the assets are dedicated.
!LESCOß!NNUALß2EPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 13: INTANGIBLE ASSETS (CONTINUED)
Key assumptions used for value-in-use calculations (continued)
Discount rate
A pre-tax discount rate determined by reference to the Group’s weighted average cost of capital has been used in
discounting the projected cash flows.
CONSOLIDATED
PRE-TAX
DISCOUNT RATE
2010
PRE-TAX
DISCOUNT RATE
2009
%
%
Construction
Functional & Decorative Products
14.5
14.8
14.8
14.7
Garage Doors & Openers
14.5
14.6
Water Products & Services
14.7
15.9
Impairment
During the year ended 31 May 2010, an impairment charge of $133.1 million was incurred in relation to the Water
Products & Services division. The impairment was caused by the deterioration in the CGU’s actual performance for
the year to 31 May 2010 and decline in future year forecasts. An impairment charge of $116.3 million was taken
against goodwill. A further impairment charge of $16.8 million was taken against other assets of the CGU on a
prorata basis. Impairment charges were made against customer relationships ($12.7 million), fixed assets ($2.4
million) and software development ($1.7 million).
During the year ended 31 May 2009, an impairment charge of $70.0 million was incurred in relation to the Water
Products & Services division. The impairment was caused by the deterioration in the CGU’s actual performance for
the year to 31 May 2009 and decline in future year forecasts. The impairment testing as at May 2009 used a higher
pre-tax discount rate of 15.9% reflecting the increased pricing of risk. An impairment charge of $10.0 million was
taken against brands subsequent to a reassessment of the useful lives of the CGU’s brands. A further $60.0 million
impairment charge was made against goodwill.
The Group determined that there is no impairment of any of its other cash-generating units containing goodwill or
intangible assets with indefinite useful lives.
Impact of possible change in assumptions
With regard to the assessment of the value-in-use of the CGUs, a sensitivity analysis (refer table below) has been
conducted on the effect of a change in the respective key assumptions on the carrying value of each CGU.
For the Construction, Functional & Decorative and Garage Doors & Openers CGUs, the excess of the recoverable
amount over the carrying amount of net operating assets (“headroom”) was significant. The aggregate amount of
that excess is $180.5 million.
CONSOLIDATED
HEADROOM
DISCOUNT RATE
TERMINAL GROWTH RATE
1
CASH FLOWS
2010
DISCOUNT
RATE 2010
IMPACT OF
+/- 0.5%
TERMINAL
GROWTH RATE
IMPACT OF
+/- 0.5%
IMPACT OF
+/- 10%
CHANGE
$M
%
$M
%
$M
$M
Functional & Decorative Products
30.8
88.2
14.5
14.8
5.7
10.8
3.0
3.0
3.7
8.3
11.1
23.9
Garage Doors & Openers
Water Products & Services
61.5
Nil
14.5
14.7
13.2
1.1
3.0
3.0
10.2
0.8
31.9
2.7
2010
Construction
!LESCOß!NNUALß2EPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 13: INTANGIBLE ASSETS (CONTINUED)
Impact of possible change in assumptions (continued)
CONSOLIDATED
HEADROOM
2009
Construction
Functional & Decorative Products
Garage Doors & Openers
Water Products & Services
DISCOUNT RATE
TERMINAL GROWTH RATE
1
CASH FLOWS
2009
DISCOUNT
RATE 2009
IMPACT OF
+/- 0.5%
TERMINAL
GROWTH RATE
IMPACT OF
+/- 0.5%
IMPACT OF
+/- 10.0%
CHANGE
$M
%
$M
%
$M
$M
32.4
14.8
5.1
3.0
3.5
13.5
136.2
14.7
11.5
3.0
7.9
29.0
23.6
Nil
14.4
15.9
11.8
5.7
3.0
3.0
9.0
4.2
28.5
17.2
All sensitivities shown in the above table are on a pre-tax basis.
1
Sensitivity has been applied to net present value of the cash flows over the forecast period including the terminal year.
For the Water Products & Services CGU, subsequent to the impairment charge discussed above, there is no excess of
the recoverable amount over the carrying amount of net operating assets.
NOTE 14: DEFERRED TAX ASSETS AND LIABILITIES
CONSOLIDATED
RECOGNISED DEFERRED TAX ASSETS/(LIABILITIES)
Property, plant and equipment
THE COMPANY
2010
2009
2010
2009
$000
$000
$000
$000
2
(775)
(15)
(405)
–
–
–
Intangibles
(1,572)
Provisions
3,757
6,844
3,948
6,195
1,553
603
1,038
399
1,407
3,102
3,217
1,609
3,078
3,342
–
–
937
–
–
957
231
1,198
–
–
–
–
Employee benefits
Receivables
Inventories
Accruals not yet deductible
Unrealised foreign exchange losses
Derivatives
Deductible capital raising costs
Net deferred tax asset
30
(394)
811
1,227
811
1,227
17,204
19,648
3,889
3,621
NOTE 15: OTHER NON-CURRENT ASSETS
CONSOLIDATED
Other prepayments - executive directors and employees
THE COMPANY
2010
2009
2010
2009
$000
$000
$000
$000
62
638
62
638
62
638
62
638
NOTE 16: TRADE AND OTHER PAYABLES
CONSOLIDATED
THE COMPANY
2010
2009
2010
2009
$000
$000
$000
$000
Current
Trade creditors
76,901
70,255
1,755
1,745
Other creditors and accruals
19,418
22,331
3,026
4,559
96,319
92,586
4,781
6,304
The Group’s exposure to currency and liquidity risk related to trade and other payables is disclosed in note 33.
!LESCOß!NNUALß2EPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 17: LOANS AND BORROWINGS
CONSOLIDATED
2009
2010
2009
NOTE
$000
$000
$000
$000
27
–
–
85,000
262
–
–
–
–
36(a)
3,881
–
8,479
–
3,881
85,262
8,479
–
125,000
80,500
–
–
–
–
221,257
142,777
125,000
80,500
221,257
142,777
Current
Bank loans – unsecured
Finance lease liabilities
Bank overdraft
Non-current
Bank loans – unsecured
THE COMPANY
2010
Loans from controlled entities
Financing facilities
Total facilities available:
Bank overdrafts
Bank loans
Standby letters of credit
4,000
4,000
240,000
270,000
7,434
6,000
251,434
280,000
3,881
125,000
–
165,500
Facilities utilised at reporting date:
Bank overdrafts
Bank loans
Standby letters of credit
1,576
–
130,457
165,500
119
115,000
4,000
104,500
Facilities not utilised at reporting date:
Bank overdrafts
Bank loans
Standby letters of credit
5,858
6,000
120,977
114,500
Loan facilities
Loan facilities are denominated in Australian dollars and mature as follows:
Within one year
Later than one year but not later than two years
–
120,000
115,000
15,000
Later than two years but not later than three years
120,000
140,000
240,000
270,000
Financing arrangements
Bank overdrafts
The bank overdrafts of the Company and its controlled entities are subject to annual review. Interest is charged at
prevailing market rates. The weighted average interest rate for all overdrafts as at 31 May 2010 is 7.5% (2009: 5.2%).
The Group’s banking arrangements allow a netting of overdrafts across the Group.
!LESCOß!NNUALß2EPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 17: LOANS AND BORROWINGS (CONTINUED)
Financing arrangements (continued)
Bank loans
On 24 July 2009, Alesco Finance Pty Limited (a wholly owned subsidiary of Alesco Corporation Limited) signed an
unsecured Syndicated Facility Agreement and Common Terms Deed with four banks, including Alesco’s three
existing core lenders: ANZ, BNP Paribas, Commonwealth Bank of Australia, and a new lender: National Australia
Bank Limited.
As at 31 May 2010 the Group had $240 million of committed debt facilities with a $120 million tranche to be
repaid in July 2011 and $120 million in July 2012. At 31 May 2010, the Group has drawn down $125 million on
these facilities.
Bank loans are denominated in Australian dollars. The weighted average interest rate for bank loans at 31 May 2010
is 8.1% (2009: 7.0%).
The facilities provided to the Group by its principal bankers are unsecured but subject to certain quarterly financial
covenants, which are contained in the Group’s banking agreements. The Group complied with these covenants
during the year ended 31 May 2010.
Standby letter of credit
The standby letter of credit facility is a committed facility and is subject to annual review. Interest is payable at the
bank bill rate plus the Company’s credit margin.
Interest rate swap
At 31 May 2010, the Group has an Australian dollar interest rate swap, floating to fixed, with a face value of $40
million (31 May 2009: $40 million). The swap matures on 7 June 2011 (31 May 2009: 7 June 2011).
Terms and conditions
The terms and conditions of outstanding loans were as follows:
CONSOLIDATED
CONSOLIDATED
CARRYING AMOUNT
NET FAIR VALUE
2010
2009
2010
$000
$000
$000
$000
1
125,000
165,500
125,000
165,500
Finance lease liabilities
–
262
–
262
Variable interest debt
1
2009
The total variable interest debt comprises only Australian dollar debt with their nominal interest rates ranging from 4.2% to 4.9% (2009: 3.2% to 4.5%) with 1-3 year maturities
(2009: 2 year maturity).
The Company does not have any other outstanding loans as at 31 May 2010 (2009: nil).
The impact of interest rate risk on the fair value of derivatives is disclosed at note 33.
NOTE 18: OTHER CURRENT LIABILITIES
CONSOLIDATED
Fair value derivatives
THE COMPANY
2010
2009
2010
2009
$000
$000
$000
$000
–
3,992
–
–
–
3,992
–
–
The impact of interest rate and currency risk on the fair value of derivatives is disclosed at Note 33.
!LESCOß!NNUALß2EPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 19: CURRENT TAX LIABILITIES AND ASSETS
The Group has a net current tax liability of $1,225,000 (2009: $3,969,000) and the Company has a current tax asset
of $3,901,000 (2009: $887,000 current tax liability) at year end. These amounts represent the amount of income tax
payable/receivable in respect of current and prior periods.
In accordance with the tax consolidation legislation, the Company as the head entity in the Australian
tax-consolidated group has assumed the current tax liability/asset initially recognised by the members in the
tax-consolidated group.
NOTE 20: PROVISIONS
CONSOLIDATED
Current
Employee benefits
Restructuring
Warranties
Surplus leased premises
Deferred earn-out
Other
THE COMPANY
2010
2009
2010
2009
$000
$000
$000
$000
18,827
83
16,572
5,898
1,663
–
989
–
1,749
1,898
–
–
16
621
–
–
4,875
9,115
–
–
2,321
4,045
2,002
3,189
27,871
38,149
3,665
4,178
Employee benefits
2,554
2,974
364
224
Lease make-good
1,629
1,939
–
–
Lease straight-lining
1,577
1,435
–
–
425
425
–
–
6,185
6,773
364
224
Non-current
Other
Reconciliations
Reconciliations of the carrying amounts for each class of provision, except for employee benefits, are set out below:
Restructuring (current)
Carrying amount at beginning of year
Provisions made during the year
Provisions used during the year
Reversed during the year
5,898
–
–
–
8,158
–
–
(2,152)
–
–
–
–
–
(108)
–
–
–
–
(5,011)
(803)
Translation differences
(1)
Carrying amount at end of year
83
Warranties (current)
Carrying amount at beginning of year
Provisions made during the year
Provisions reversed during the year
Provisions used during the year
5,898
1,898
1,571
–
–
277
1,060
–
–
(37)
(3)
–
–
(395)
–
–
–
–
–
–
–
–
Decrease through disposal of entities and businesses
–
(693)
(25)
Translation differences
6
(12)
Carrying amount at end of year
–
1,749
1,898
!LESCOß!NNUALß2EPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 20: PROVISIONS (CONTINUED)
Reconciliations (continued)
CONSOLIDATED
Surplus leased premises (current)
Carrying amount at beginning of year
THE COMPANY
2010
2009
2010
2009
$000
$000
$000
$000
621
148
–
–
Provisions used during the year
–
(346)
643
(162)
–
–
–
–
Provisions reversed during the year
(259)
–
–
–
(8)
–
–
Provisions made during the year
Translation differences
Carrying amount at end of year
–
16
621
–
–
9,115
11,574
–
–
Provisions used during the year
–
(4,240)
100
(2,559)
–
–
–
–
Carrying amount at end of year
4,875
9,115
–
–
Other provisions (current)
Carrying amount at beginning of year
4,045
727
3,189
100
453
4,825
–
3,190
Deferred earn-out (current)
Carrying amount at beginning of year
Provisions made during the year
Provisions made during the year
Provisions used during the year
Provisions reversed during the year
Intragroup transfers
Translation differences
(1,922)
(245)
(1,075)
(425)
–
–
(10)
(7)
(1,437)
–
–
(101)
250
–
–
–
Carrying amount at end of year
2,321
4,045
2,002
3,189
Lease make-good (non-current)
Carrying amount at beginning of year
1,939
2,398
–
–
33
163
–
–
(118)
(225)
(232)
(171)
–
–
–
–
Provisions made during the year
Provisions reversed during the year
Provisions used during the year
Decrease through disposal of entities and businesses
–
–
Carrying amount at end of year
1,629
1,939
–
–
Lease straight-lining (non-current)
Carrying amount at beginning of year
1,435
1,534
–
–
–
–
–
–
–
–
1,435
–
–
–
Provisions made during the year
Provisions reversed during the year
Decrease through disposal of entities and businesses
Carrying amount at end of year
–
142
–
–
1,577
(219)
653
(146)
(606)
Deferred earn-out (non-current)
Carrying amount at beginning of year
–
200
–
Provisions reversed during the year
–
(200)
–
–
Carrying amount at end of year
–
–
–
–
425
422
3
–
–
–
–
–
425
425
–
–
Other provisions (non-current)
Carrying amount at beginning of year
Provisions made during the year
Carrying amount at end of year
!LESCOß!NNUALß2EPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 21: SHARE CAPITAL
THE COMPANY
Share capital
Ordinary shares, fully paid
Ordinary shares – movements during the year
Balance at beginning of year
Shares issued:
as part of dividend reinvestment plan
Associated transaction costs
shares granted as part of Total Eden McCracken’s
deferred consideration
shares granted for no consideration under the
employee and management share plans
shares issued for consideration under the employee
share plans
shares issued for consideration under the
management share plans
shares issued under the senior executive share
acquisition plan
Balance at end of year
THE COMPANY
2010
2009
2010
2009
SHARES
SHARES
$000
$000
94,193,403
92,115,140
520,407
513,262
92,115,140
90,577,876
513,262
504,664
521,068
587,892
2,233
3,787
–
–
1,078,609
48,114
3,740
616
–
315,043
–
1,026
–
90,673
–
613
–
21,726
–
148
(9)
(9)
478,586
473,816
1,181
2,417
94,193,403
92,115,140
520,407
513,262
Terms and conditions
The Company does not have authorised capital or par value in respect of its issued shares. All issued shares are fully paid.
Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote
per share at shareholders’ meetings. In the event of winding up of the Company, ordinary shareholders rank after
creditors and are fully entitled to any proceeds of liquidation.
At reporting date, there were 136,422 (2009: 67,984) shares forfeited under the employee share plans held by a third
party plan trustee.
Capital management
The consolidated entity’s and the parent entity’s overall strategic capital management objective is to:
safeguard the consolidated entity’s ability to continue as a going concern so that it can continue to provide
returns for shareholders and benefits for other stakeholders;
provide optimal capital structure to reduce the cost of capital;
maintain a strong/conservative capital base so as to maintain creditor and market confidence and to sustain
future development of the business;
maintain a conservative funding structure which provides sufficient flexibility to fund the operational demands
of the business and to underwrite any strategic opportunities; and
manage capital to ensure sufficient buffer over and beyond any banking covenants.
!LESCOß!NNUALß2EPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 21: SHARE CAPITAL (CONTINUED)
Capital management (continued)
The consolidated entity monitors the return on capital, which the consolidated entity defines as net operating
income divided by total shareholders’ equity. The consolidated entity’s target is for all divisions to achieve a return
on average net operating assets over the medium-term which is greater than the Group’s cost of capital. During the
year, the return on average net operating assets was 6.9% (2009: 9.8%).
Returns on capital fluctuate according to prevailing economic circumstances and, in particular, the level of merger
and acquisition activity the consolidated entity undertakes and the mix of debt and equity used to fund the
consolidated entity.
The consolidated entity monitors capital with reference to having an optimal level of gearing. The level of gearing is
measured by reference to the net debt gearing ratio which is calculated as net debt divided by total capital. Net debt
is calculated at total interest-bearing financial assets and liabilities less cash and cash equivalents. Total capital is
calculated as equity as shown in the statement of financial position plus net debt.
The consolidated entity’s net debt gearing ratio at the end of the reporting period was as follows:
CONSOLIDATED
2010
2009
$000
$000
Net debt
128,881
159,656
Total equity
427,540
551,437
Net debt
128,881
159,656
Total capital
556,421
711,093
Net debt gearing ratio at 31 May
23.2%
22.5%
The consolidated entity also monitors the level of dividends to ordinary shareholders.
In order to maintain or adjust the capital structure, the consolidated entity may adjust the amount of dividends paid
to the shareholders, return capital to shareholders or issue new shares.
The consolidated entity’s capital management objectives will be effected through:
an ongoing flow of fully franked dividends, which subject to the consolidated entity’s franking ability and
ongoing profitability will be on an annually progressive basis; and
from time to time, on-market purchases mitigate the dilutionary impact of share issues which would be
otherwise necessary to satisfy obligations under employee share-based remuneration plans as they crystallise.
The consolidated entity expects to continue the payment of fully franked dividends on an ongoing basis subject to its
overall earnings performance, prevailing economic circumstances, alternative demands on funds or alternative more
effective capital management opportunities becoming available.
The Board of directors and management review the Capital Management Policy on a periodic basis and implement
initiatives which are deemed appropriate in the environment existing at that time. External consultants and advisers
are used as required to determine the appropriate capital structure for the consolidated entity and advise on other
capital management related items.
Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements.
!LESCOß!NNUALß2EPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 22: RESERVES
CONSOLIDATED
THE COMPANY
2010
2009
2010
2009
$000
$000
$000
$000
3,218
3,196
–
–
1,184
6,332
(2,794)
3,974
–
2,997
–
639
10,734
4,376
2,997
639
3,196
1,833
–
–
6,333
(4,970)
–
–
–
–
3,218
3,196
–
–
Net gain/(loss) transferred to/from hedging reserve
(2,794)
3,978
3,214
(6,008)
–
–
–
–
Balance at end of year
1,184
(2,794)
–
–
3,974
693
4,725
1,068
639
693
774
1,068
Foreign currency translation reserve
Hedging reserve
Share equity reserve
Movements during the year:
Foreign currency translation reserve
Balance at beginning of year
Decrease through disposal of entities and businesses
Net translation adjustment
Balance at end of year
–
22
Hedging reserve
Balance at beginning of year
Share equity reserve
Balance at beginning of year
Employee share-based payments
Reversal of employee share-based expenses
Senior executive share loan plan expense
Deferred earn-out
Balance at end of year
–
1,665
–
6,332
(1,203)
–
(616)
3,974
–
(1,203)
–
1,665
–
–
2,997
639
Nature and purpose of reserves
Foreign currency translation
The foreign currency translation reserve comprises all foreign exchange differences arising from the translation of
the financial statements of foreign operations where their functional currency is different to the presentation
currency of the reporting entity as well as from the translation of liabilities that hedge the Company’s net
investment in a foreign subsidiary. Refer to accounting policy Note 1(f).
Hedging reserve
The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow
hedging instruments related to hedged transactions that have not yet occurred.
Share equity
The share equity reserve relates to shares issued, and held on trust, associated with the Group’s equity compensation
plans that have not vested at the reporting date as well as an amount in relation to potential deferred consideration
associated with previous acquisitions. The fair value of the shares is expensed over the vesting period and credited to
this reserve. The reserve will reverse against share capital when the underlying shares vest in the employee.
!LESCOß!NNUALß2EPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 23: RETAINED EARNINGS
CONSOLIDATED
NOTE
Balance at beginning of year
Net loss attributable to members of the parent
entity
Dividends
24
Balance at end of year
THE COMPANY
2010
2009
2010
2009
$000
$000
$000
$000
33,799
79,196
15,431
88,221
(124,301)
(13,099)
(12,789)
(104,188)
(13,099)
(40,182)
(32,608)
(103,601)
33,799
(101,856)
15,431
(32,608)
NOTE 24: DIVIDENDS
Dividends recognised in the current year by the Company are:
NOTE
CENTS
PER
SHARE
TOTAL
AMOUNT
$000
DATE OF PAYMENT
FRANKED/
UNFRANKED
2010
Interim 2010 ordinary
7.0
6,575
5 March 2010
Franked
Final 2009 ordinary
7.0
6,524
1 September 2009
Franked
14.0
13,099
Total amount
23
2009
Interim 2009 ordinary
Final 2008 ordinary
Total amount
23
nil
–
–
–
36.0
32,608
1 September 2008
Franked
36.0
32,608
Franked dividends declared or paid during the year were franked at the tax rate of 30%.
Final dividend 2010
The directors have determined that no final dividend will be declared or paid for the year ended 31 May 2010.
Dividend reinvestment plan
Alesco has a dividend reinvestment plan, however, this plan will not be utilised in the current period because there is
no 2010 final dividend.
Dividend franking account
THE COMPANY
30% franking credits available to shareholders of Alesco Corporation Limited for
subsequent financial years
2010
2009
$000
$000
43,036
46,620
The above available amounts are based on the balance of the dividend franking account at year-end adjusted for:
(a) franking credits that will reverse upon receipt of the current tax receivable; and
(b) franking credits that the entity may be prevented from distributing in subsequent years.
The ability to utilise the franking credits is dependent upon there being sufficient available profits to declare
dividends. The impact on the dividend franking account of the dividend proposed subsequent to year-end but not
recognised as a liability is to reduce it by nil (2009: $2,795,000). In accordance with the tax consolidation legislation,
the Company as the head entity in the tax-consolidated group has assumed all franking credits from all entities
within the tax-consolidated group.
!LESCOß!NNUALß2EPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 25: AUDITORS’ REMUNERATION
CONSOLIDATED
THE COMPANY
2010
2009
2010
2009
$
$
$
$
667,000
821,480
155,200
155,200
131,000
185,583
–
–
798,000
1,007,063
155,200
155,200
Audit services (Auditors of the Company)
KPMG Australia:
Audit and review of financial reports
Overseas KPMG firms:
Audit and review of financial reports
Other services (Auditors of the Company)
KPMG Australia:
Taxation services
114,565
221,855
114,565
221,855
Other services
17,800
149,585
14,500
69,190
Overseas KPMG firms:
Taxation services
172,282
50,236
–
–
304,647
421,676
129,065
291,045
NOTE 26: EMPLOYEE BENEFITS
Superannuation funds
The Company and its controlled entities contribute to defined contribution superannuation funds.
The amount recognised as an expense within the Group during the year was $10,041,925 (2009: $12,636,138).
The amount recognised as an expense in the Company during the year was $541,243 (2009: $550,674).
Directors’ retirement scheme
During the year, a retirement benefit of $257,850, calculated on the number of years service provided, was paid to
the former chairman upon his retirement. This entitlement was frozen as at 31 May 2004 following the decision by
the Board to discontinue retirement benefits for non-executive directors in preference for payment of directors fees
only. This was the final entitlement relating to this scheme.
Equity-based plans
Alesco operates share plans for its employees and executives. These plans have been approved by shareholders, most
recently at the 2008 and 2009 Annual General Meetings.
The fair value of shares issued during the reporting period at their issue date is the volume weighted average market
price of the shares of the Company listed on the Australian Stock Exchange in the five days up to and including the
grant date. Shares issued under the plans rank equally with other fully paid ordinary shares but are subject to certain
trading restrictions for a period of time. Participation in the plans is voluntary.
The Group has the following share plan arrangements:
Employee share plans
Under the Alesco Employee Share Plan (“AESP”) all eligible employees may acquire up to $1,000 worth of ordinary
shares in the Company, subject to rounding. Eligible employees within the Group (other than employees resident
and working in New Zealand) can receive the first $500 worth of shares for no consideration. Eligible employees can
!LESCOß!NNUALß2EPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 26: EMPLOYEE BENEFITS (CONTINUED)
Employee share plans (continued)
The AESP complies with current Australian tax legislation, enabling employees to have up to $1,000 of shares, in
respect of an employee share scheme, excluded from their assessable income.
The New Zealand Employee Share Plan (“AESPNZ”) was designed to mirror the AESP to the extent permitted under
New Zealand law. Any differences are due to statutory requirements of relevant New Zealand legislation. Alesco
New Zealand Trustee Limited, a subsidiary of Alesco Corporation Limited, is the trustee appointed to administer the
AESPNZ plan and holds shares for New Zealand employee participants.
Eligible employees in New Zealand can acquire up to NZ $2,340 worth of ordinary shares in the Company over a
three-year period, at a discount of up to 95% of the market value of shares. The discount is determined by the Board
and was set at 95% for the issue made during the reporting period. This limit has been set in accordance with
currently available tax concessions to employees under New Zealand law.
Eligible employees include all full-time and part-time employees who are employed by an entity in the Group as at
the allocation date. The shares cannot be sold, transferred, or otherwise disposed of, until the earlier of three years
from the allocation date or when the employee is no longer employed by an entity within the Group.
During the year, no offers were made to employees under the AESP (2009: 237,702 shares) given the uncertainty
following the Federal Budget in May and the subsequent Productivity Commission review. An expense
of nil (2009: $1,656,783) was recognised in the income statement.
Management share plans
The Alesco management share plans enable eligible senior management the opportunity to receive part of their
potential remuneration in shares in the Company (“remuneration shares”) and to apply for shares which are
allocated to them at the discretion of the Board on the satisfaction of specific performance conditions (“incentive
shares”). Remuneration shares cannot be sold, transferred, or otherwise disposed of, until they have been paid for in
full or when the employee is no longer employed by an entity within the Group. Incentive shares cannot be sold,
transferred, or otherwise disposed of, until the relevant performance conditions attaching to those shares have
been satisfied. Currently, the performance condition attached to incentive shares issued to date is that the earnings
per share growth (before amortisation of intangibles and significant items) for the Group is equal to or exceeds 5.0%,
compounded annually over the three financial years subsequent to the grant date. The trustee also has the
discretion to waive performance conditions.
In order to purchase shares under the New Zealand Management Share Plan (“AMSPNZ”), the New Zealand company
of which the manager is an employee is required to make an interest-free loan on behalf of the manager to the plan
trustee. The plan trustee then applies these funds to acquire Alesco shares on behalf of the New Zealand
participating managers.
The shares issued by the management share plans are either issued or acquired on-market and are held by a trustee
on trust for the participant for up to a maximum period of 10 years.
During the year, no offers were made to employees under the AMSP (2009: 221,045 shares) given the uncertainty
following the Federal Budget in May and the subsequent Productivity Commission review. Additionally, no existing
shares vested under this plan in the current year as performance hurdles were not met. An expense of nil (2009: Nil )
was recognised in the income statement.
Executive share acquisition plan
The Alesco Performance Share Acquisition Plan (“Plan”) is for the Group’s most senior executives. Under the Plan,
interest-free loans are provided to key senior executives to fund the acquisition of ordinary fully paid shares in the
Company. Senior executives are entitled to receive interest-free loans with full recourse from the Company to fund
the purchase of shares in the entity. These interest-free loans have a term of up to 10 years.
Eligible senior executives receiving loans to purchase shares are the registered owners of the shares from the date
they are purchased or issued and have the right to vote and receive cash from dividends to meet their individual tax
liability on the dividends. The balance of the dividends is used to repay the loans. A holding lock is placed on these
shares to prevent sale until the respective loan has been repaid in full to the Company.
Awards may be earned based on the Company’s compound annual growth rate in earnings per share (before
amortisation of intangibles and significant items) over a three-year period (EPS Growth). The maximum award
allowed under the Plan is currently 53.5% of the loan extended to eligible senior executives. Awards can be earned by
senior executives in the form of either cash bonuses (used to pay down the outstanding loan) or loan waivers.
!LESCOß!NNUALß2EPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 26: EMPLOYEE BENEFITS (CONTINUED)
Executive share acquisition plan (continued)
The size of the annual acquisition of shares and therefore loans is calculated by the base salary package of the
eligible employee multiplied by the stretch long-term incentive target, divided by the prevailing share price of the
Company at the date of issue.
During the year ended 31 May 2010, the Group extended loans to eligible employees under the Plan for an amount
of $2,321,524 (31 May 2009: $3,219,864).
Information regarding loans extended to eligible key management personnel during the year is provided in the
Remuneration Report section of the Directors’ Report on pages 38 to 59 and note 35.
During the year, the Board had exercised its discretion to extend the repayment of the interest free loans made
available to Mr Ryan to 10 years following his termination of employment. The Company was then required to
recognise an acceleration of a non-cash accounting expense of $5.1 million in respect of this change in decision
because the accounting requirements dictate that the acceleration of the non-cash accounting expense in relation
to the plan be applied to all plan participants. While the acceleration of the non-cash accounting expense impacts
the current year financial results, this will reverse over the remaining period of the loans with the Company
progressively recognising the notional interest income over the remaning period of the loans. As a result, there is
zero financial impact over the life of the Share Plan.
Alesco cash incentive plan
In November 2009 the Company established the Alesco Cash Incentive Plan (“CIP”) for its most senior executives as
an alternative to the Alesco Performance Share Acquisition Plan (“APSAP”) allowing participating executives the
choice between the APSAP and the CIP.
Under the CIP participating executives have the opportunity to receive cash bonuses over the medium term. The
amount of the cash bonus is dependent upon the Company’s performance across two performance hurdles, each of
which accounts for 50% of the maximum cash bonus amount. The hurdles are based on the compound annual
growth in earnings per share (before amortisation of intangibles and significant items) and total shareholder return
over a three year period commencing from 1 June 2009 until 31 May 2012. The executives must also remain
employed by Alesco throughout the three year performance period. In determining the compound annual growth in
earnings per share (before amortisation of intangibles and significant items) the base number for the current year
arrangements is 45.3 cents per share. The amount of the maximum cash bonus is based on a percentage of each
participating executive’s fixed annual remuneration as at 1 June 2009.
!LESCOß!NNUALß2EPORT
!LESCOß!NNUALß2EPORT
GRANT DATE
1 Nov 07
1 Nov 07
1 Sep 08
1 Sep 08
1 Sep 08
AESPHK
AESPNZ
AESP
AESPHK
AESPNZ
1 Nov 06
1 Nov 06
1 Nov 06
1 Nov 07
1 Nov 07
1 Nov 07
1 Sep 08
1 Sep 08
1 Sep 08
AESP
AESPHK
AESPNZ
AESP
AESPHK
AESPNZ
AESP
AESPHK
AESPNZ
Employee share plans – 2009
1 Nov 07
AESP
Employee share plans – 2010
SHARE PLAN
39,118
237,702
249,212
4,088
194,496
–
–
–
–
–
–
–
–
25,061
1,804
126,710
22,075
1,650
–
–
367,613
71,912
–
–
–
–
–
–
38,166
4,088
184,878
22,905
1,804
115,772
6.97
6.97
6.97
–
–
–
–
–
–
–
–
–
–
–
–
–
(30,593)
(952)
–
(9,618)
(2,156)
–
(10,938)
(1,865)
–
(5,064)
(107,362)
(23,453)
(4,088)
(43,997)
(12,706)
(1,804)
(21,314)
1.93
–
3.19
5.12
–
5.52
5.61
–
6.46
4.52
2.97
4.52
4.52
2.97
4.52
NUMBER
NUMBER
FAIR VALUE
PER SHARE
$
FAIR VALUE
PER SHARE
$
NUMBER
DISTRIBUTIONS DURING THE YEAR
ISSUED DURING THE YEAR
OPENING
BALANCE
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
NUMBER
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
FAIR VALUE
PER SHARE
$
FORFEITED DURING THE YEAR
Shares issued, distributed and forfeited during the year were made at varied dates throughout the year. A summary of share movements in the employee share plans are as follows:
Equity-based plans - Summary of share plan movements
NOTE 26: EMPLOYEE BENEFITS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
456,321
38,166
4,088
184,878
22,905
1,804
115,772
20,210
1,650
66,848
260,251
14,713
–
140,881
10,199
–
94,458
NUMBER
1,496,732
125,184
13,409
606,400
75,128
5,917
379,732
66,289
5,412
219,261
853,624
48,259
–
462,090
33,453
–
309,822
FAIR VALUE
AGGREGATE
$
CLOSING BALANCE
!LESCOß!NNUALß2EPORT
GRANT DATE
–
4,600
224,803
1 Jun 07
AMSP
1 Nov 07
1 Nov 07
1 Sep 08
1 Sep 08
1 Sep 08
AMSPHK
AMPSNZ
AMSP
AMSPHK
AMSPNZ
1 Nov 07
28 Mar 07
AMSP
AMSP
2 Nov 06
12 Feb 07
AMPSNZ
2 Nov 06
AMSP
2 Nov 06
AMSP
AMSPHK
Management share plans – 2009
–
1,050
1 Sep 08
1 Sep 08
AMSPHK
AMSPNZ
4,900
221,045
166,370
1,050
211,795
–
–
3,300
–
–
–
–
–
–
–
–
–
6,550
1,300
61,020
10,000
20,000
1,000
6,500
1,300
58,700
–
–
164,203
1 Sep 08
AMSP
6.80
6.80
6.80
–
–
11.28
–
–
–
–
–
–
–
–
–
–
–
5,550
1 Nov 07
–
AMSPNZ
–
–
1 Nov 07
1,300
1 Nov 07
–
NUMBER
FAIR VALUE
PER SHARE
$
ISSUED DURING THE YEAR
AMSP
48,100
NUMBER
OPENING
BALANCE
AMSPHK
Management share plans – 2010
SHARE PLAN
Summary of share plan movements (continued)
Equity-based plans (continued)
NOTE 26: EMPLOYEE BENEFITS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
(5,300)
–
–
–
–
–
(3,300)
–
–
–
(2,000)
–
–
–
–
–
–
–
–
–
NUMBER
(20,000)
–
(157,312)
(300)
–
–
–
(47,592)
–
–
(1,000)
–
–
(12,920)
11.28
(10,000)
(1,000)
–
(4,500)
(1,300)
–
(58,700)
–
(75,650)
(3,800)
(1,050)
(15,850)
(5,550)
(1,300)
(48,100)
–
–
–
–
–
–
–
NUMBER
6.80
–
6.80
6.80
–
11.28
14.56
12.58
9.90
9.90
9.90
9.90
6.80
6.80
6.80
11.28
11.28
11.28
FAIR VALUE
PER SHARE
$
FORFEITED DURING THE YEAR
9.90
FAIR VALUE
PER SHARE
$
DISTRIBUTIONS DURING THE YEAR
224,803
4,600
1,050
164,203
5,550
1,300
48,100
–
–
–
–
–
–
149,153
800
–
148,353
–
–
–
NUMBER
CLOSING BALANCE
737,353
15,088
3,444
538,585
18,204
4,264
157,768
–
–
–
–
–
–
396,747
2,128
–
394,619
–
–
–
FAIR VALUE
AGGREGATE
$
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 27: COMMITMENTS AND CONTINGENT LIABILITIES
The estimated maximum amount of commitments and contingent liabilities not provided for in the financial statements
is set out below:
CONSOLIDATED
NOTE
Capital expenditure commitments
Plant and equipment contracted but not provided for and
payable within one year
THE COMPANY
2010
$000
2009
$000
2010
$000
2009
$000
208
331
–
207
23,201
17,067
988
592
37,371
33,318
2,502
2,785
Non-cancellable operating lease expense commitments
Future operating lease commitments not provided for in
the financial statements and payable:
within one year
later than one year but within five years
later than five years
1,588
4,231
–
–
62,160
54,616
3,490
3,377
The Group leases property, plant and equipment under non-cancellable operating leases expiring in one to thirteen years.
Leases generally provide the Group with a right of renewal at which time all terms are renegotiated. Lease payments
comprise a base amount plus an incremental contingent rental. Contingent rentals are based on either movements in
the Consumer Price Index or operating criteria.
Finance lease payment commitments
Finance lease commitments are payable:
within one year
Future lease finance charges
–
267
–
–
–
267
–
–
–
–
–
(5)
–
262
–
–
–
262
–
–
–
262
–
–
Lease liabilities provided for in the financial statements:
Current
Total lease liabilities
17
Contingent liabilities
In the ordinary course of business, Group entities are involved in commercial disputes and in legal proceedings. Where
appropriate, the Company takes legal advice. The Group does not consider that the outcome of any such disputes or
current proceedings is likely to have a material effect on its operations or financial position. Occupational Health & Safety
proceedings relating to three workplace fatalities have been provided for at 31 May 2010 (refer to Note 6). A liability has
been recognised for any known losses expected to be incurred where such losses are capable of reliable measurement.
The Group is involved in a dispute in relation to the tax deductibility of interest on Optional Convertible Notes (“OCN”).
Please refer to Note 7 for further details.
At balance date there remained outstanding disputes with certain vendors in connection with the final purchase price to
be paid for the Total Eden McCracken’s business. A provision has been set aside for the estimated additional consideration
to be paid in relation to the settlement of these disputes.
The directors are of the opinion that provisions are not required in respect of the following matters, as it is not probable
that a future sacrifice of economic benefits will be required or the amount is not capable of reliable measurement.
CONSOLIDATED
THE COMPANY
2010
2009
2010
2009
$000
$000
$000
$000
750
1,700
750
1,700
Contingent liabilities considered remote:
Guarantees
Benefits payable to CEO under service agreements, where
terminated prior to the conclusion of the contract
!LESCOß!NNUALß2EPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 28: DEED OF CROSS GUARANTEE
Pursuant to ASIC Class Order 98/1418 (as amended), a number of wholly-owned controlled entities as listed below are
relieved from the Corporations Act 2001 requirements for preparation, audit and lodgement of financial reports and
Directors’ Report.
It is a condition of the class order that the Company and each of the controlled entities enter into a Deed of Cross
Guarantee (“Deed”). The effect of the Deed is that the Company guarantees to each creditor payment in full of any debt in
the event of winding up any of the controlled entities under certain provisions of the Corporations Act 2001. If a winding up
occurs under other provisions of the Corporations Act 2001, the Company will only be liable in the event that after six
months any creditor has not been paid in full. The controlled entities have also given similar guarantees in the event that
the Company is wound up.
The controlled entities subject to the Deed are:
Alesco Finance Pty Limited
Concrete Technologies Pty Limited
Pargone Pty Limited
Alesco No. 1 Pty Limited
Flextool (Aust) Pty Limited
Parchem Construction Supplies Pty
Alesco No. 2 Pty Limited
Lincoln Sentry Group Pty Limited
Alesco Holdings Pty Limited
Marathon Tyres Pty Limited
Automatic Technology (Australia)
McCracken’s Water Services Pty
Pty Limited
Limited
B&D Australia Pty Limited
Paludal Pty Limited
Capricorn Stockhorses Pty Limited
Parbury Pty Limited
Limited
Plastic Plumbing Supplies Pty
Limited
Total Eden Holdings Pty Limited
Total Eden Watering Systems Pty
Limited
A consolidated income statement and consolidated statement of financial position, comprising the Company and
controlled entities which are a party to the Deed, after eliminating all transactions between parties to the Deed is as
follows:
CONSOLIDATED
Statement of comprehensive income and retained earnings
Revenue
Cost of sales
Gross profit
2010
2009
$000
$000
697,932
(447,818)
757,399
(486,352)
250,114
271,047
(356,303)
(240,971)
(2,393)
(15,553)
–
3,679
(40,651)
22
(Loss)/profit before related income tax expense
Income tax expense
(124,135)
(396)
(6,874)
(7,172)
(Loss)/profit after related income tax expense
(124,531)
(14,046)
1,313
(9,345)
Operating expenses
Finance income
Finance costs
Share of profit of equity accounted investees
Other comprehensive income
Effective portion of changes in fair value of cash flow hedges
Net change in fair value of cash flow hedges transferred
to profit or loss
Income tax (expense)/benefit on other comprehensive income
Total comprehensive income for the period
762
4,371
2,575
(1,706)
(120,553)
(20,054)
Retained profits at beginning of year
26,766
73,420
Dividends recognised during the year
(13,099)
(32,608)
(110,864)
26,766
Retained (losses)/profits at end of year
Attributable to:
Equity holders of the Company
(124,531)
(14,046)
Loss for the period
(124,531)
(14,046)
!LESCOß!NNUALß2EPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 28: DEED OF CROSS GUARANTEE (CONTINUED)
CONSOLIDATED
Statement of financial position
Cash and cash equivalents
2010
2009
$000
$000
–
3,912
96,687
112,702
Inventories
Current tax assets
Other
105,484
3,901
5,919
99,089
–
4,213
Total current assets
211,991
219,916
Trade and other receivables
Receivables
5,766
6,869
43,393
47,308
43,393
57,535
352,240
486,704
15,385
62
16,142
638
Total non-current assets
464,154
611,281
Total assets
676,145
831,197
Other investments
Property, plant and equipment
Intangible assets
Deferred tax assets
Other
Bank overdraft
Trade and other payables
Loans and borrowings
Fair value derivatives
Provisions
3,526
–
99,327
–
–
83,799
85,262
3,992
25,760
29,816
Total current liabilities
128,613
202,869
Loans and borrowings
Provisions
125,000
5,946
80,500
6,516
Total non-current liabilities
130,946
87,016
Total liabilities
259,559
289,885
Net assets
416,586
541,312
Share capital
Reserves
520,407
7,043
513,262
1,284
Retained earnings
Total equity
!LESCOß!NNUALß2EPORT
(110,864)
26,766
416,586
541,312
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 29: CONTROLLED ENTITIES
(a) Particulars in relation to controlled entities
ORDINARY SHARE
CONSOLIDATED EQUITY INTEREST
NOTE
2010
2009
%
%
Parent entity
Alesco Corporation Limited
Controlled entities
Alesco Finance Pty Limited
Alesco HK Limited
100
100
(i),(ii)
100
100
(ii)
100
100
100
100
100
100
Marathon Tyres Pty Limited
100
Marathon Tyres (WA) Pty Limited
Pargone Pty Limited
100
100
100
Finac Pty Limited
Alesco No. 2 Pty Limited
Alesco No. 1 Pty Limited
100
100
Parbury Pty Limited
100
Dekorform Pty Limited
Parchem Construction Supplies Pty Limited
100
100
100
100
100
100
100
100
100
100
100
Robinhood Australia Pty Limited
Lincoln Sentry Group Pty Limited
Joinery Products Hardware Supplies Pty Limited
(ii)
Biolab (Aust) Pty Limited
(iii)
Promedica Pty Limited
EnviroEquip Pty Limited
(iii)
–
–
–
–
(iii)
–
–
Technology Design Solutions Pty Limited
(iii)
–
App-Tek Pty Limited
App-Tek Safety Pty Limited
(iii)
–
–
–
(iii)
–
–
(iii)
–
100
–
100
Total Eden McCracken’s Group Pty Limited
100
100
Total Eden Watering Systems Pty Limited
100
100
Elegant Landscapes Pty Limited
100
100
Hydro Engineering Pty Limited
100
100
Diamond Industrial Tools (WA) Pty Limited
100
100
100
100
100
100
McCracken’s Water Services (Townsville) Pty Limited
100
100
McCracken’s Water Services (East Gippsland) Pty Limited
100
100
McCracken’s Water Services (Melbourne) Pty Limited
100
100
McCracken’s Water Services (SEQ) Pty Limited
100
100
McCracken’s Water Services (Bomaderry) Pty Limited
100
100
App-Tek Victoria Pty Limited
Alesco Holdings Pty Limited
Capricorn Stockhorses Pty Limited
McCracken’s Water Services Pty Limited
(ii)
!LESCOß!NNUALß2EPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 28: DEED OF CROSS GUARANTEE (CONTINUED)
(a) Particulars in relation to controlled entities (continued)
NOTE
ORDINARY SHARE
CONSOLIDATED EQUITY
INTEREST
2010
2009
%
%
McCracken’s Water Services (Cairns) Pty Limited
100
100
McCracken’s Water Services (Mareeba) Pty Limited
100
100
J De Wit and Associates Pty Limited
100
100
Pump N Power Pty Limited
100
100
Central Air & Water Pty Limited
100
100
100
Leewall Pty Limited
PC & Ridgeway & Co Pty Limited
(ii)
100
100
100
Paludal Pty Limited
(ii)
100
100
PPS Properties Pty Limited
(ii)
100
100
(ii)
100
100
100
100
(iv)
100
100
100
100
100
100
(i)
100
100
(v)
100
(vi)
100
–
(ii)
100
100
100
100
(ii)
100
100
(vii)
100
100
100
100
Plastic Plumbing Supplies Pty Limited
Plastic Pipe Australia Pty Limited
B&D Australia Pty Limited
Automatic Technology (Australia) Pty Limited
ATA Garage Door Openers Limited
Countermast Limited
Countermast Technology (Dalian) Company Limited
Lux-a-Door Pty Limited
Concrete Technologies Pty Ltd
ACN 109 245 990 Pty Limited
Flextool (Aust) Pty Limited
Alesco New Zealand Limited
Alesco NZ Trustee Limited
Biolab Limited
(vii)
–
(iii),(vii)
–
–
(vii)
100
100
(vii)
(vii)
100
100
100
100
Parbury Buildings Products (NZ) Limited
(vii)
100
100
Concrete Plus Limited
Lincoln Sentry Group NZ Limited
(vii)
(vii)
100
100
100
100
B&D Doors (NZ) Limited
(vii)
100
100
Robinhood Limited
Supertub Limited
Easyiron Limited
(i)
Incorporated and carries on business in Hong Kong.
(ii)
Alesco is in the process of liquidating this company and the liquidation process has not been finalised at 31 May 2010.
(iii)
Sold to Thermo Fisher Scientific Inc. on 30 April 2009.
(iv)
Incorporated and carries on business in United Kingdom.
(v)
Incorporated on 27 February 2009 and carries on business in China.
(vi)
Incorporated and carries on business in South Africa. On 30 November 2008, the consolidated entity sold its 50% interest in
Lux-a-Door Pty Limited.
(vii)
Incorporated and carries on business in New Zealand.
!LESCOß!NNUALß2EPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 29: CONTROLLED ENTITIES (continued)
(b) Acquisition of controlled entities and businesses
The Group did not have any business acquisitions during the financial year ended 31 May 2010.
(c) Prior period acquisitions of controlled entities / businesses
Acquisitions of businesses
On 2 June 2008, the consolidated entity acquired certain business assets of Datataker Pty Ltd, a manufacturer and
supplier of data logging, recording and data acquisition systems for a purchase price of $2,565,000.
This business was a bolt on acquisition for the Scientific & Medical segment.
The consolidated entity also acquired certain business assets of Brandos Industrial Supplies Pty Ltd on 2 June 2008, a
business involved in the processing and distribution of industrial tapes, for a purchase price of $2,977,000. This
business is a bolt on acquisition for the Functional & Decorative Products segment.
During the period to 31 May 2009, acquisition of these controlled entities and businesses contributed earnings
before interest and tax of approximately $2,462,000. The consolidated entity has not disclosed the revenue and net
profit as if these acquisitions had occurred on 1 June 2008 due to dissimilar accounting policies and reporting
periods of the acquired entities making it impractical to do so.
The above acquisitions, in aggregate, had the following effect on the consolidated entity’s assets and liabilities:
Receivables
Inventories
Other assets
Property, plant and equipment
Intangible assets
Payables
Provisions
Loans and borrowings
Net identifiable assets and liabilities
Goodwill on acquisition
Consideration paid, satisfied in cash
Cash acquired
Net cash outflow
PRE-ACQUISITION
CARRYING
AMOUNTS
FAIR VALUE
ADJUSTMENTS
RECOGNISED VALUES
ON ACQUISITION
$000
$000
$000
672
–
2,287
(238)
672
2,049
15
–
15
191
17
(45)
146
17
(53)
(266)
(80)
2,783
–
–
–
–
(283)
(53)
(266)
(80)
2,500
3,042
5,542
–
5,542
!LESCOß!NNUALß2EPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 30: INVESTMENTS IN EQUITY ACCOUNTED INVESTEES
ORDINARY SHARE OWNERSHIP
INTEREST
NAME
PRINCIPAL ACTIVITIES
Lux-a-Door Pty Limited
Manufacturing
INVESTMENT CARRYING
AMOUNT
REPORTING
DATE
2010
2009
2010
2009
%
%
$000
$000
30 June
–
–
–
–
CONSOLIDATED
2010
2009
$000
$000
Results of joint venture entities
The Group’s share of the joint venture entity’s results consists of:
Revenues
–
240
Expenses
–
(209)
Profit before income tax expense
–
31
Income tax expense
–
(9)
Net profit – accounted for using the equity method
–
22
Current assets
–
–
Non-current assets
–
–
Total assets
–
–
Current liabilities
–
–
Non-current liabilities
–
–
Total liabilities
–
–
Net assets – accounted for using the equity method
–
–
Share of retained profits at beginning of year
–
478
Share of net result
–
22
Share of retained profits at end of year
–
500
Carrying amount at beginning of year
–
485
Disposal of investment
–
(507)
Share of net result
–
22
Carrying amount at end of year
–
–
Statement of financial position
The Group’s share of the joint venture entity’s assets and liabilities consists of:
Share of post-acquisition retained profits
Movements in carrying amount of investment
During the prior year, the consolidated entity sold its 50% interest in Lux-a-Door Pty Ltd for $342,000. A loss on sale
was incurred for $165,000.
!LESCOß!NNUALß2EPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 31: SEGMENT REPORTING
Information about reportable segments
The Group has four reportable segments as described below, which are the Group’s strategic business units. The
strategic business units offer different products and services, and are managed separately because they require
different technology and marketing strategies. For each of the strategic business units, the CEO reviews internal
management reports on a monthly basis.
Inter-segment pricing is determined on an arm’s length basis.
Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be
allocated on a reasonable basis. Unallocated and elimination items mainly comprise corporate entities and
intercompany elimination adjustments.
The following summary describes the operations in each of the Group’s reportable segments:
Continuing operations
Construction & Mining
Concrete products including construction chemicals, decorative concrete and
associated equipment, specialised construction chemicals, earthmoving and heavy
duty industrial tyres.
Functional & Decorative Products
Home building and renovation products to the kitchen, laundry and bathroom
markets.
Garage Doors & Openers
Garage doors and openers to the domestic housing and light industrial markets.
Water management products and services to agricultural, industrial, commercial,
domestic and mining industries.
Water Products & Services
Discontinued operation
Scientific & Medical
Scientific and medical consumables and equipment for laboratory, environmental
and research markets. This business was sold during the prior year on 30 April 2009.
Refer Note 32.
Geographical segments
In presenting information on the basis of geographical segments, segment revenue is based on the geographical
location of customers. Segment assets are based on the geographical location of the assets.
The Group’s reportable segments operate predominantly in Australia and New Zealand.
!LESCOß!NNUALß2EPORT
!LESCOß!NNUALß2EPORT
(2,592)
12,880
Depreciation
EBITA (pre-significant items)
2
1 See Discontinued Operation – Note 32
(Loss)/profit for the year
operation (net of income tax)
Gain on sale of discontinued
gain on sale
(Loss)/profit after income tax before
Income tax (expense)/benefit
(Loss)/profit before income taxes
Net financing costs
EBIT
Significant items
intangibles
17,354
12,172
12,871
–
(1,512)
14,383
(1,988)
16,371
–
16,371
270,375
71
270,304
548
–
269,756
2010
$000
8,207
(12,429)
(1,999)
22,635
(4,124)
26,759
–
26,759
296,520
–
296,520
681
–
295,839
2009
$000
18,927
–
(3,237)
22,164
(3,623)
25,787
–
25,787
171,915
(26)
171,941
479
11,715
159,747
2010
$000
12,963
(4,950)
(2,815)
20,728
(4,648)
25,376
22
25,354
180,938
5
180,933
421
12,719
167,793
2009
$000
GARAGE DOORS &
OPENERS
OPERATING SEGMENTS
FUNCTIONAL &
DECORATIVE
PRODUCTS
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2010
$000
15,510
(1,142)
(511)
17,163
(1,510)
18,673
–
18,673
155,226
–
155,226
9
8,448
146,769
2009
$000
SCIENTIFIC &
MEDICAL1
(DISCONTINUED)
(134,491)
(133,100)
(3,423)
2,032
(1,700)
3,732
–
3,732
169,276
–
169,276
298
(5)
168,983
2010
$000
(67,280)
(73,976)
(5,898)
12,594
(1,729)
14,323
–
14,323
194,942
–
194,942
270
(70)
194,742
2009
$000
WATER PRODUCTS
& SERVICES
2 Prior year balance includes $14.842 million before tax shown as a significant item in note 6
(2,954)
(526)
23,796
–
(708)
15,472
EBITDA (pre-significant items)
Amortisation of identifiable
(2,962)
20,834
–
–
15,472
Share of associates’ net profit
23,796
–
183,535
–
183,535
161,111
161,111
62
13,321
170,152
2009
$000
share of associates’ net profit)
EBITDA (pre-significant items and
Result
Total revenue
Inter-segment revenue
External segment revenue
149
11,590
Other revenue
149,372
Revenue from rendering of services
2010
$000
Revenue from sale of goods
Revenue
BUSINESS SEGMENTS
CONSTRUCTION
& MINING
FOR THE YEAR ENDED 31 MAY 2010
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
(90,521)
(133,100)
(8,880)
51,459
(9,903)
61,362
–
61,362
772,677
45
772,632
1,474
23,300
747,858
2010
$000
(13,246)
(95,451)
(11,749)
93,954
(14,973)
108,927
22
108,905
1,011,161
5
1,011,156
1,443
34,418
975,295
2009
$000
OPERATING SEGMENT
TOTAL
(13,439)
(6,820)
(1,960)
(4,659)
(509)
(4,150)
–
(4,150)
519
(45)
564
564
–
–
2010
$000
(16,232)
(4,018)
(3,900)
(8,314)
(771)
(7,543)
–
(7,543)
174
(5)
179
179
–
–
2009
$000
UNALLOCATED &
ELIMINATIONS
59,621
(12,789)
–
(72,410)
(124,301)
(124,301)
(2,636)
(69,774)
(4,935)
(40,296)
(119,366)
(29,478)
(99,469)
(15,649)
85,640
(15,744)
101,384
22
101,362
1,011,335
–
1,011,335
1,622
34,418
975,295
2009
$000
(15,406)
(103,960)
(139,920)
(10,840)
46,800
(10,412)
57,212
–
57,212
773,196
–
773,196
2,038
23,300
747,858
2010
$000
CONSOLIDATED
TOTAL
!LESCOß!NNUALß2EPORT
2,514
** Restated for discontinued operation for the year ended 31 May 2009.
Capital expenditure
7,178
–
2009
$000
12,575
532,976
929,946
2009
$000
3,222
60,281
284,483
AUSTRALIA
2010
$000
3,235
42,341
276,388
–
2010
$000
407,670
1,267
80,912
210,724
–
2009
$000
Non-current segment assets by location
1,605
71,500
206,712
–
2010
$000
736,148
1,695
57,028
140,994
131,037
67,707
–
–
2009
$000
GARAGE DOORS &
OPENERS
OPERATING SEGMENTS
FUNCTIONAL &
DECORATIVE
PRODUCTS
External revenue by location of customers
GEOGRAPHICAL SEGMENTS
Capital expenditure
Reportable segment liabilities
Reportable segment assets
Impairment on intangible assets
Other material non-cash items:
BUSINESS SEGMENTS
2010
$000
CONSTRUCTION &
MINING
NOTE 31: SEGMENT REPORTING (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
–
–
–
–
2010
$000
1,307
24,727
37,048
OTHER
2010
$000
2,134
–
–
–
2009
$000
SCIENTIFIC &
MEDICAL1
(DISCONTINUED)
2,415
48,235
81,389
2009
$000
1,921
251,686
56,107
(133,100)
2010
$000
8,118
433,234
670,244
(133,100)
2010
$000
8,485
432,397
773,196
14,990
581,211
1,011,335
12,698
454,632
834,479
(70,000)
2009
$000
OPERATING SEGMENT
TOTAL
CONSOLIDATED
2010
2009
$000
$000
3,223
256,411
198,278
(70,000)
2009
$000
WATER PRODUCTS &
SERVICES
367
(168,852)
21,678
–
2010
$000
2,292
(143,401)
28,189
–
2009
$000
UNALLOCATED &
ELIMINATIONS
8,485
264,382
691,922
(133,100)
2010
$000
14,990
311,231
862,668
(70,000)
20092
$000
CONSOLIDATED
TOTAL
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 31: SEGMENT REPORTING (CONTINUED)
Reconciliations of reportable segment revenues, profit or loss, assets and liabilities and other material items
NOTE
CONSOLIDATED
2010
$000
2009
$000
Revenues
Total revenue for reportable segments
772,677
1,011,161
Elimination of inter-segment revenue
519
174
Elimination of discontinued operation
–
(155,226)
773,196
856,109
Consolidated revenue
Profit or loss
Total profit before interest, amortisation and income tax
(pre-significant items) for reportable segments
Elimination of discontinued operations
51,459
93,954
–
(17,163)
(4,659)
(8,314)
Amortisation of identifiable intangibles
(10,840)
(15,138)
Net financing costs
(15,406)
(40,333)
(139,920)
(98,327)
(119,366)
(85,321)
670,244
834,479
10,135
16,355
3,650
4,786
Unallocated amounts: other corporate expenses
Significant items
Consolidated loss before income tax and discontinued operation
6
Assets
Total assets for reportable segments
Unallocated receivables
Unallocated property, plant and equipment
401
370
Other unallocated assets
7,492
6,678
Consolidated total assets
691,922
862,668
433,234
454,632
Unallocated intangible assets
Liabilities
Total liabilities for reportable segments
Unallocated payables and provisions
Unallocated bank loans and bank overdraft
Elimination of inter-segment liabilities
Consolidated total liabilities
21,347
23,179
128,881
165,500
(319,080)
(332,080)
264,382
311,231
There have been no changes to the basis of segmentation or the measurement basis for the segment profit or loss during the
current year.
!LESCOß!NNUALß2EPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 31: SEGMENT REPORTING (CONTINUED)
Reconciliations of reportable segment revenues, profit or loss, assets and liabilities and other material
items (continued)
REPORTABLE
SEGMENT
$000
DISCONTINUED
OPERATION
$000
UNALLOCATED &
ELIMINATIONS
$000
CONSOLIDATED
TOTAL
$000
Capital expenditure
8,118
–
367
8,485
Depreciation
9,903
–
509
10,412
Amortisation of identifiable intangibles
8,880
–
1,960
10,840
133,100
–
6,820
139,920
REPORTABLE
SEGMENT
$000
DISCONTINUED
OPERATION
$000
UNALLOCATED &
ELIMINATIONS
$000
CONSOLIDATED
TOTAL1
$000
Capital expenditure
12,698
(2,134)
2,292
12,856
Depreciation
14,973
(1,510)
771
14,234
Amortisation of identifiable intangibles
11,749
(511)
3,900
15,138
Significant items
95,451
(1,142)
4,018
98,327
OTHER MATERIAL ITEMS 2010
Significant items
OTHER MATERIAL ITEMS 2009
1
shown on a continuing basis
!LESCOß!NNUALß2EPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 32: DISCONTINUED OPERATION
During the prior year, the Group sold its entire Scientific & Medical segment. The Group did not sell any business unit during
the financial year ended 31 May 2010.
NOTE
CONSOLIDATED
2010
$000
2009
$000
THE COMPANY
2010
$000
2009
$000
Results of discontinued operation
Revenue
–
155,226
–
–
Expenses
–
(139,679)
–
–
–
15,547
–
–
–
(4,449)
–
–
–
11,098
–
–
–
66,375
–
35,002
–
(6,754)
–
(6,754)
–
70,719
–
28,248
Results from operating activities
Income tax
7
Results from operating activities, net of income tax
Gain on sale of discontinued operation
Income tax on gain on sale of discontinued operation
7
Profit for the period
Basic earnings per share
2
–
77.11¢
Diluted earnings per share
2
–
77.11¢
Net cash from operating activities
–
2,076
Cash flows from/(used in) discontinued operation
Net cash used in investing activities
–
(288)
Net cash used in financing activities
–
(150)
Net cash from/(used in) discontinued operation
–
1,638
Effect of disposal on the financial position of the Group
Property, plant and equipment
–
(4,603)
Intangibles
–
(78,208)
Inventories
–
(21,378)
Trade and other receivables
–
(30,771)
Cash and cash equivalents
–
(1,752)
Deferred tax assets
–
(680)
Trade and other payables
–
22,838
Provisions
–
4,178
Net assets and liabilities
–
(110,376)
Consideration received, satisfied in cash
–
175,000
Cash disposed of
–
(1,752)
Net cash inflow
–
173,248
Consideration received, satisfied in cash
–
175,000
Deferred consideration to be received
–
6,537
Total proceeds from sale
–
181,537
!LESCOß!NNUALß2EPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 33: FINANCIAL INSTRUMENTS
The Company and the Group is exposed to a variety of financial risks in the normal course of its business activities. These risks
include credit risk, liquidity risk, market risk and operational risk. The Group’s overall risk management strategy focuses on
minimising potential adverse affects on the Group’s financial performance. This note presents information about the
Company’s and Group’s exposure to each of the above risks, their objectives, policies and processes for measuring and
managing risk. Further quantitative disclosures are included throughout these consolidated financial statements.
The Board of directors has overall responsibility for the establishment and oversight of the Group’s financial risk management
framework. The Treasury Department is responsible for developing and monitoring the Group’s financial risk management
policies and procedures. The Treasury Department reports regularly to the Board of directors.
The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate
risk limits and controls, and to monitor risk and adherence to limits. Risk management policies and systems are reviewed
regularly to reflect changes in market conditions and the Group’s activities. The Group, through its training and management
standards and procedures, aims to develop a disciplined and constructive control environment in which employees
understand their roles and obligations.
The Group Audit & Compliance Committee oversees how management monitors compliance with the Group’s risk
management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks
faced by the Group. The Audit & Compliance Committee is assisted in its oversight role by Internal Audit. Internal Audit
undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to
the Audit & Compliance Committee.
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect
the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to
manage and control market risk exposures within acceptable parameters, while optimising the return.
(a) Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its
contractual obligations, and arises principally from the Group’s receivables from customers and derivative financial
instruments. For the Company, it arises from receivables due from subsidiaries.
To manage this risk, the Group has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis.
Credit evaluations are performed on all customers requiring credit over a certain amount. Transactions involving derivative
financial instruments are with counterparties with sound credit ratings. Given their high credit ratings, the Group does not
expect any counterparty to fail to meet its obligations.
At the balance sheet date there were no significant concentrations of credit risk. The maximum exposure to credit risk is
represented by the carrying amount of each financial asset, including derivative financial instruments, in the statement of
financial position. In respect to those financial assets and the credit risk embodied within them, the Group holds no
significant collateral as security and there are no other significant credit enhancements in respect of these assets. The credit
quality of all financial assets that are neither past due nor impaired is appropriate and is consistently monitored in order to
identify any potential adverse changes in the credit quality. There are no significant financial assets that have had
renegotiated terms that would otherwise, without that renegotiation, have been past due or impaired.
Trade and other receivables
The Group’s exposure to credit risk is mainly influenced by the individual characteristics of each customer. The demographics
of the Group’s customer base, including the default risk of the industry and country in which customers operate, has less of
an influence on credit risk. There is no concentration for credit risk in relation to specific customers or geographically.
The Group has established a credit policy under which each new customer is analysed individually for creditworthiness before
the Group’s standard payment and delivery terms and conditions are offered. The Group’s review includes external ratings,
where available, and in some cases bank references. Purchase limits are established for each customer which represents the
maximum open amount without requiring the approval from corporate management; these limits are reviewed quarterly.
Customers that fail to meet the Group’s benchmark creditworthiness may transact with the Group only a prepayment basis.
In monitoring customer credit risk, customers are grouped according to their credit characteristics, including whether they are
an individual or legal entity, whether they are a wholesale or retail customer, geographic location, industry, ageing profile,
maturity and existence of previous financial difficulties. Trade and other receivables relate mainly to the Group’s wholesale
customers. Customers who are graded as “high risk” are placed on a restricted customer list, and future sales are made on a
prepayment basis with the approval of senior management.
Goods are sold subject to retention of title clauses, so that in the event of non-payment the Group may have a secured claim.
The Group does not require collateral in respect of trade and other receivables.
!LESCOß!NNUALß2EPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 33: FINANCIAL INSTRUMENTS (CONTINUED)
(a) Credit risk (continued)
Trade and other receivables (continued)
The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and
other receivables and investments. The main components of this allowance are a specific loss component that relates to
individually significant exposures, and a collective loss component established for groups of similar assets in respect of losses
that have been incurred but not yet identified. The collective loss allowance is determined based on historical data of
payment statistics for similar financials assets.
Impairment losses on trade receivables are recorded in the “Administration and general expenses” line in the Income
Statement.
Guarantees
The Group’s policy is to provide financial guarantees only to wholly-owned subsidiaries. Refer to note 33(b) for details on
guarantees provided by the Company.
Exposure to credit risk
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk as at
the reporting date was:
CONSOLIDATED
2010
$000
Trade and other receivables
Loans to controlled entities
117,427
135,541
THE COMPANY
2010
$000
2009
$000
5,764
13,774
373,733
–
–
489,131
Impairment charge on loans to controlled entities
–
–
(203,100)
(70,000)
Cash and cash equivalents
–
–
–
6,106
286,031
–
303,733
471
1
Fair value derivatives
1
2009
$000
1,313
–
–
–
118,740
141,647
291,795
317,978
Loans to controlled entities were impaired as a result of the impairment testing of the recoverability of the parent entity’s investment in its Water Products &
Services subsidiaries.
The maximum exposure to credit risk for trade receivables carrying amount as at the reporting date by geographic
region was:
CONSOLIDATED
2010
$000
Australia
New Zealand
Other
2009
$000
THE COMPANY
2010
$000
2009
$000
107,935
115,692
–
–
4,734
1,199
4,814
1,223
–
–
–
–
113,868
121,729
–
–
The maximum exposure to credit risk for trade receivables carrying amount at the reporting date by type of customer was:
CONSOLIDATED
2010
$000
2009
$000
THE COMPANY
2010
$000
2009
$000
Construction & Mining
22,305
24,587
–
–
Functional & Decorative Products
45,897
23,397
47,815
23,493
–
–
–
–
22,269
25,834
–
–
113,868
121,729
–
–
Garage Doors & Openers
Water Products & Services
The Group does not have any individually significant customers.
!LESCOß!NNUALß2EPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 33: FINANCIAL INSTRUMENTS (CONTINUED)
(a) Credit risk (continued)
Impairment losses
The ageing of gross trade receivables at the reporting date was:
CONSOLIDATED
2010
$000
2009
$000
THE COMPANY
2010
$000
2009
$000
Not past due
52,437
51,521
–
–
Past due 0-30 days
40,921
12,710
4,211
48,221
11,138
6,954
–
–
–
–
–
–
3,579
10
3,560
335
–
–
–
–
113,868
121,729
–
–
Past due 31-60 days
Past due 61-90 days
Past due 91-365 days
More than one year
The ageing of trade receivables impairment at the reporting date was:
CONSOLIDATED
2010
$000
2009
$000
THE COMPANY
2010
$000
2009
$000
Not past due
874
818
–
–
Past due 0-30 days
487
118
431
385
–
–
–
–
845
2,362
1,262
2,275
–
–
–
–
Past due 31-60 days
Past due 61-90 days
Past due 91-365 days
More than one year
10
179
–
–
4,696
5,350
–
–
The movement in the allowance for impairment in respect of trade receivables during the year was:
CONSOLIDATED
2010
$000
Balance at 1 June
Disposal of businesses or companies
Provided during year
Charged to provision for debts written off
Reversed during year
Foreign currency translation
Balance as at 31 May
2009
$000
THE COMPANY
2010
$000
2009
$000
6,255
(403)
–
–
–
–
1,588
1,689
–
–
(2,022)
(225)
(1,615)
–
–
–
5,350
–
5
4,696
(562)
(14)
5,350
–
–
–
–
–
The allowance account in respect of trade receivables is used to record impairment losses unless the Group is satisfied that no
recovery of the amount owing is possible; at this point the amount considered irrecoverable is written off against the
financial asset directly.
(b) Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach
to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when
due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s
reputation.
For details on the Group’s financing facilities refer to note 17.
!LESCOß!NNUALß2EPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 33: FINANCIAL INSTRUMENTS (CONTINUED)
(b) Liquidity risk (continued)
The following are the contractual maturities of financial liabilities, including the impact of netting arrangements.
CONSOLIDATED
31 MAY 2010
CARRYING
AMOUNT
$000
CONTRACTUAL
CASH FLOW
$000
6 MONTHS
OR LESS
$000
Non-derivative financial liabilities
1
Unsecured bank loans
Bank overdraft
125,000
3,881
143,752
3,881
6,128
3,881
Customer deposits
Trade payables and accruals
1
6 - 12
MONTHS
$000
1 -2
YEARS
$000
2 -3
YEARS
$000
6,128
–
100,832
–
30,664
–
–
829
829
829
–
–
95,490
95,490
95,381
109
–
–
225,200
243,952
106,219
6,237
100,832
30,664
The Group assumes the interest rate remains constant throughout the period and the contractual cash flow has included the net impact of interest rate swap.
The disclosure is prepared on the same basis as prior year.
THE COMPANY
31 MAY 2010
CARRYING
AMOUNT
$000
CONTRACTUAL
CASH FLOW
$000
6 MONTHS
OR LESS
$000
6 - 12
MONTHS
$000
1 -2
YEARS
$000
2 -3
YEARS
$000
Non-derivative financial liabilities
Trade payables and accruals
4,781
4,781
4,781
–
–
–
Bank overdraft
8,479
8,479
8,479
–
–
–
–
Loans from subsidiaries
221,257
221,257
–
–
–
221,257
234,517
234,517
13,260
–
221,257
The Company is party to a deed of cross guarantee with a number of wholly owned subsidiaries. Under this deed, the
Company guarantees to each creditor payment in full of any debt in the event of winding up any of the controlled entities. At
31 May 2010, the total liabilities of the deed of cross guarantee group was $259,559,000 (2009: $289,885,000). Refer to Note
28 for further information on the deed of cross guarantee.
CONSOLIDATED
31 MAY 2009
Non-derivative financial liabilities
1
Unsecured bank loans
Finance lease liabilities
Customer deposits
Trade payables and accruals
1
CARRYING
AMOUNT
$000
CONTRACTUAL
CASH FLOW
$000
6 MONTHS
OR LESS
$000
6 - 12
MONTHS
$000
1 -2
YEARS
$000
2 -3
YEARS
$000
165,500
178,552
30,062
63,251
19,618
65,621
262
715
91,871
262
715
91,871
244
715
91,554
18
–
317
–
–
–
–
–
–
258,348
271,400
122,575
63,586
19,618
65,621
The Group assumes the interest rate remains constant throughout the period and the contractual cash flow has included the net impact of interest rate swap.
THE COMPANY
31 MAY 2009
CARRYING
AMOUNT
$000
CONTRACTUAL
CASH FLOW
$000
6 MONTHS
OR LESS
$000
Non-derivative financial liabilities
Trade payables and accruals
Loans from subsidiaries
6,304
142,777
6,304
142,777
6,304
–
149,081
149,081
6,304
!LESCOß!NNUALß2EPORT
6 - 12
MONTHS
$000
1 -2
YEARS
$000
2 -3
YEARS
$000
–
–
–
142,777
–
–
142,777
–
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 33: FINANCIAL INSTRUMENTS (CONTINUED)
(b) Liquidity risk (continued)
Cash flow hedges
The following table indicates the periods in which the cash flows associated with derivatives that are cash flow hedges are
expected to occur:
CONSOLIDATED
CARRYING
AMOUNT
$000
EXPECTED
CASH FLOW
$000
6 MONTHS
OR LESS
$000
6 - 12
MONTHS
$000
1 -2
YEARS
$000
Interest rate swaps
574
589
200
316
73
–
Foreign currency forwards – Inflow
739
739
739
–
–
–
1,313
1,328
939
316
73
–
6 - 12
MONTHS
$000
1 -2
YEARS
$000
2 -3
YEARS
$000
31 MAY 2010 (INFLOW/(OUTFLOW))
2 -3
YEARS
$000
The Company does not hold any interest rate swaps or foreign currency forwards.
CONSOLIDATED
31 MAY 2009 (INFLOW/(OUTFLOW))
Interest rate swaps
Foreign currency forwards – Outflow
CARRYING
AMOUNT
$000
EXPECTED
CASH FLOW
$000
6 MONTHS
OR LESS
$000
–
(3,992)
–
(3,992)
–
(3,992)
–
–
–
–
–
–
(3,992)
(3,992)
(3,992)
–
–
–
The Company does not hold any interest rate swaps or foreign currency forwards.
(c) Currency risk
The Group is exposed to currency risk on purchases and sales that are denominated in a currency other than the respective
currencies of the group entities, primarily the Australian dollar (“AUD”), but also the New Zealand dollar (“NZD”).
The Group’s policy is to hedge an appropriate portion of its foreign currency exposures in respect of forecast purchases and
sales over the following six months. The Group used forward exchange contracts to hedge its currency risk, all of which have
maturity dates of six months or less from reporting date.
The Group’s exposure to foreign currency risk was as follows based on notional amounts:
CONSOLIDATED
31 MAY 2010
Trade receivables
AUD
$000
Trade payables
–
(104)
Gross balance sheet exposure
(104)
231
Estimated forecast purchases
(3,409)
Gross exposure
Estimated forecast sales
Forward exchange contracts
Net exposure
NZD
$000
–
(2)
USD
$000
EURO
$000
GBP
$000
OTHER
$000
5,133
(5,587)
7
(5,634)
12
–
42
(1,124)
(2)
(454)
(5,627)
12
(1,082)
334
26,970
172
81
1,099
(750)
(69,254)
(46,616)
(20)
(21,534)
(3,178)
(416)
(42,284)
(46,444)
61
(20,435)
–
–
20,429
18,382
–
783
(3,282)
(418)
(22,309)
(33,689)
73
(20,734)
The Company does not have any exposure to foreign currency risk as at 31 May 2010.
!LESCOß!NNUALß2EPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 33: FINANCIAL INSTRUMENTS (CONTINUED)
(c) Currency risk (continued)
CONSOLIDATED
31 MAY 2009
AUD
$000
NZD
$000
USD
$000
EURO
$000
GBP
$000
OTHER
$000
Trade receivables
Trade payables
848
(216)
–
(96)
13,519
(13,471)
91
(2,735)
–
(12)
–
(347)
632
(96)
48
(2,644)
(12)
(347)
Estimated forecast sales
Estimated forecast purchases
Gross balance sheet exposure
–
(4,179)
–
(40)
35,898
(100,170)
91
(44,495)
–
(125)
–
(257)
Gross exposure
(4,179)
(40)
(64,272)
(44,404)
(125)
(257)
–
–
16,209
18,526
243
448
(48,015)
(28,522)
106
(156)
Forward exchange contracts
Net exposure
(3,547)
(136)
The Company does not have any exposure to foreign currency risk as at 31 May 2009.
The following significant exchange rates were applied during the year:
CONSOLIDATED
AVERAGE RATE
REPORTING DATE RATE
AUD:
2010
2009
2010
2009
NZD
1.2573
1.2716
1.2430
1.2569
USD
0.8782
0.7593
0.8490
0.7912
EURO
0.6253
0.5517
0.5451
0.4954
0.6901
0.5876
0.5648
0.4937
GBP
The Company has the same exchange rates as the Group for the years ended 31 May 2010 and 31 May 2009.
Sensitivity analysis for currency risk
A 10% strengthening of the AUD against the following currencies at period end would have decreased equity by the amounts
shown below. This analysis assumes that all other variables, in particular interest rates, remain constant.
The analysis is performed on the same basis for 2009.
CONSOLIDATED
EQUITY
2010
$000
2009
$000
USD
1,856
1,526
EURO
1,669
–
1,690
22
CAD
–
21
JPY
71
NZD
–
20
–
3,596
3,279
GBP
The Company does not have any foreign currency risk.
A 10% weakening of the AUD against the above currencies at period end would have had an equal but opposite effect to that
shown above, on the basis that all other variables remain constant.
!LESCOß!NNUALß2EPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 33: FINANCIAL INSTRUMENTS (CONTINUED)
(d) Interest rate risk
The Group has a policy of ensuring that between 25% and 75% of its exposure to changes in interest rates on borrowings is on
a fixed rate basis. This is achieved by entering into interest rate swaps.
At the reporting date the interest rate profile of the Group’s interest-bearing financial instruments was:
CONSOLIDATED
2010
$000
Fixed rate instruments
Financial liabilities
Variable rate instruments
Financial assets
Financial liabilities
THE COMPANY
2010
$000
2009
$000
2009
$000
262
–
–
–
6,106
286,031
304,204
128,881
165,500
8,479
–
–
Fair value sensitivity analysis for fixed rate instruments
The Group does not account for any fixed rate financial assets and liabilities at fair value through profit and loss
and the Group does not designate derivatives (interest rate swaps) as a hedging instrument under a fair value
hedge accounting model. Therefore, a change in interest rates at the reporting date would not affect profit and loss.
The Group holds an interest rate swap contract as at 31 May 2010 under a cash flow hedge accounting model.
The details of this interest rate swap were disclosed in note 33(b) Liquidity Risk.
The Company does not hold any fixed rate financial instruments.
Cash flow sensitivity analysis for variable rate instruments
A change of 100 basis points in interest rates at the reporting date would have increased (decreased) equity and profit
or loss by the amounts shown below. This analysis assumes that all other variables remain constant. The analysis is
performed on the same basis for May 2009.
CONSOLIDATED
31 MAY 2010
Variable rate instruments
Interest rate swap
Cash flow sensitivity (net)
PROFIT OR LOSS
100 BP
100 BP
INCREASE
DECREASE
$000
$000
(1,289)
400
(889)
EQUITY
100 BP
INCREASE
$000
100 BP
DECREASE
$000
1,289
(400)
–
389
–
(389)
889
389
(389)
CONSOLIDATED
31 MAY 2009 (INCREASE/(DECREASE))
1
PROFIT OR LOSS
100 BP
100 BP
INCREASE
DECREASE
$000
$000
EQUITY
100 BP
INCREASE
$000
100 BP
DECREASE
$000
Variable rate instruments
1
Interest rate swap
(1,594)
1,594
–
–
–
–
–
–
Cash flow sensitivity (net)
(1,594)
1,594
–
–
The Group did not hold any interest rate swap contracts as at 31 May 2009 due to the timing difference in finalising the interest swap contract prior to
year end. With the sale of Scientific & Medical division, it was necessary for the Group to reformulate its interest rate swap contracts. A new interest rate
swap contract was executed in June 2009. This interest rate swap contract had a principal value of $40,000,000.
!LESCOß!NNUALß2EPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 33: FINANCIAL INSTRUMENTS (CONTINUED)
(d) Interest rate risk (continued)
COMPANY
31 MAY 2010 (INCREASE/(DECREASE))
Variable rate instruments
PROFIT OR LOSS
100 BP
100 BP
INCREASE
DECREASE
$000
$000
1,919
EQUITY
100 BP
INCREASE
$000
(1,919)
100 BP
DECREASE
$000
–
–
COMPANY
31 MAY 2009 (INCREASE/(DECREASE))
Variable rate instruments
PROFIT OR LOSS
100 BP
100 BP
INCREASE
DECREASE
$000
$000
2,806
EQUITY
100 BP
INCREASE
$000
(2,806)
100 BP
DECREASE
$000
–
–
(e) Fair values
The fair values of financial assets and liabilities together with the carrying amounts shown in the Group’s statement of
financial position are as follows:
CONSOLIDATED
Cash and cash equivalents
Receivables
Fair value derivatives
Other investments
Bank overdraft
Bank loans
Payables
Finance lease liabilities
CARRYING AMOUNT
2010
2009
$000
$000
NET FAIR VALUE
2010
$000
2009
$000
–
117,427
6,106
141,647
–
117,427
6,106
141,647
1,313
(3,992)
1,313
(3,992)
–
89
–
89
(3,881)
–
(3,881)
–
(125,000)
(165,500)
(125,000)
(165,500)
(96,319)
–
(92,586)
(262)
(96,319)
–
(92,586)
(262)
The following summarises the major methods and assumptions used in estimating the fair values of financial instruments:
Derivatives
Forward exchange contracts are marked to market using listed market prices. For interest rate swaps, broker quotes
are used.
Interest-bearing loans and borrowings
Fair value is calculated based on discounted expected future principal and interest cash flows discounted at the market rate
of interest at the reporting date.
Finance lease liabilities
The fair value is estimated as the present value of future cash flows, discounted at market interest rates for homogeneous
lease agreements. The estimated fair values reflect change in interest rates.
Trade and other receivables/payables
For receivables/payables with a remaining life of less than one year, the notional amount is deemed to reflect the fair value.
All other receivables/payables are discounted to determine the fair value.
The carrying value of the Company’s financial assets and liabilities approximate fair value.
!LESCOß!NNUALß2EPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 33: FINANCIAL INSTRUMENTS (CONTINUED)
(f) Fair value hierarchy
The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been
defined as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities
Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e.,
as prices) or indirectly (i.e., derived from prices)
Level 3: inputs for the assets or liability that are not based on observable market data (unobservable inputs).
CONSOLIDATED
31 MAY 2010
Derivative financial assets
CONSOLIDATED
31 MAY 2009
Derivative financial liabilities
LEVEL 1
LEVEL 2
LEVEL 3
$000
$000
$000
$000
–
1,313
–
1,313
LEVEL 1
LEVEL 2
LEVEL 3
TOTAL
$000
$000
$000
–
(3,992)
–
TOTAL
$000
(3,992)
There have been no transfers from Level 2 to Level 1 during the year ended 30 June 2010 (2009: no transfers in either
direction).
The Company did not have any instruments carried at fair value at year end (31 May 2009: Nil)
!LESCOß!NNUALß2EPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 34: NON-KEY MANAGEMENT PERSONNEL DISCLOSURES
Identity of related parties
The Group has a related party relationship with its subsidiaries and with its key management personnel. Details of interests in
wholly-owned controlled entities are set out at Note 29.
Other related party transactions
Subsidiaries
During the year the Company received interest income from related parties totalling $14,794,150 (2009: $9,555,366) and
dividend income totalling $24,884,500 (2009: nil).
During the year the Company entered into the following transactions with wholly-owned subsidiaries:
current income tax balances transferred under tax-funding agreements in accordance with the tax consolidation
regime;
received service fee income of $5,535,329 (2009: $3,538,931); and
received management fee income of $6,800,000 (2009: $7,029,993).
Loans between entities in the wholly-owned group are repayable at call. Interest is generally charged at commercial rates. The
Company has a receivable of $286,030,803 (2009: $303,732,508) and a payable of $221,257,449 (2009: $142,776,140)
from/to subsidiaries.
Last year, the Group sold its investment in Lux-a-Door Pty Ltd. Total sales made to the joint venture entity, whilst jointly
owned by the Group were $6,044. Transactions with the joint venture entity were based on normal commercial terms and
conditions.
Other
During the year, the Group paid rent of $960,340 (2009: $1,054,940) to entities associated with MD Nesbitt and GM Nesbitt,
directors of a controlled entity. During the year, a controlled entity, Marathon Tyres Pty Limited, paid consulting fees of
$55,000 (2009: $55,000) to MD Nesbitt, a director of that entity.
!LESCOß!NNUALß2EPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 35: KEY MANAGEMENT PERSONNEL DISCLOSURES
The following were the key management personnel of the Group at any time during the reporting period and unless
otherwise indicated were key management personnel for the entire period.
Non-executive directors
MB Luby
SP Wareing (retired on 23 September 2009)
RM Aitken
JW Hall
RV McKinnon
EJ Pope
Executive directors
1
PJ Boyd (appointed on 3 May 2010)
JJ Ryan (until 2 May 2010)
NA Thompson
Executives
J Brennan
Group General Manager, Functional & Decorative Products (until 3 February 2010)
S Cox
Group General Manager, Construction & Mining
R Guttentag
Group General Manager, Functional & Decorative Products (appointed on 3 February 2010)
R Moriarty
Group General Manager, Human Resources (appointed on 19 April 2010)
B O’Connor
Group Chief Information Officer
W Powell
Group General Manager, Water Products & Services
L Rafferty
Group General Manager, Legal & Corporate Affairs, Company Secretary
1
PJ Boyd formerly Group General Manager, Garage Doors & Openers was appointed Managing Director and Chief Executive Officer on
3 May 2010.
A Sullivan resigned from the Executive Committee on 3 September 2008 on the termination of his employment.
N Schoerie was appointed as Group General Manager, Scientific & Medical on 1 August 2008 and served on the Executive Committee until
the Scientific & Medical division was sold on 30 April 2009.
J Wedge resigned from the Executive Committee on 30 June 2008.
Key management personnel remuneration
The key management personnel remuneration included in “personnel expenses” are as follows:
CONSOLIDATED
2010
$
2009
$
THE COMPANY
2010
$
2009
$
Short-term employee benefits
4,879,817
4,545,930
2,923,206
2,883,682
Other long-term benefits
1,207,309
482,592
713,334
212,697
Post-employment benefits
431,961
253,883
1,700,000
262,021
Termination benefits
373,815
1,700,000
Equity compensation benefits
4,604,274
(308,759)
3,488,264
(140,749)
12,765,215
–
5,151,724
9,078,687
–
3,217,651
!LESCOß!NNUALß2EPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 35: KEY MANAGEMENT PERSONNEL DISCLOSURES (CONTINUED)
Individual directors’ and executives’ remuneration disclosures
Information regarding individual directors’ and executives’ remuneration is provided in the Remuneration Report section of
the Directors’ Report on pages 38 to 59.
Transactions with key management personnel
Apart from the details disclosed in this note and the Remuneration Report, no director has entered into a material contract
with the Company or the Group since the end of the previous financial year and there were no material contracts involving
directors’ interests existing at year-end.
From time to time directors of the Company or its controlled entities may purchase goods from the Group. These purchases
are on the same terms and conditions as those entered into by other Group employees. All transactions with directors and
their related entities were based on normal commercial terms and conditions.
During the year ended 31 May 2007, the Company implemented the Alesco Performance Share Acquisition Plan (“Plan”) for its
most senior executives. Under the Plan, loans are provided to key senior executives to fund the acquisition of ordinary
fully paid shares in the Company. Ownership in the shares vests immediately with the senior executive, the loan is interestfree and full recourse. Awards will be earned by senior executives in the form of either cash bonuses (used to pay down the
outstanding loan) or loan waivers and will be calculated by reference to the Company’s compound annual growth rate in
earnings per share (before amortisation of intangibles and significant items) over a three-year period (EPS Growth).
The Group has issued four tranches of shares to senior executives since the inception of this Plan. The first tranche issued in
the year ended 31 May 2007 was issued from shares purchased on market. Subsequent issues made in the financial years
ended 2008, 2009 and 2010 have arisen from the issue of new shares. Details of loans provided to key senior executives for
each tranche are listed in the following tables.
The carrying value of the loans is net of any associated expected performance discount benefit and interest free benefit.
Repayments of the loan balance are made via any dividends paid by the Company on a post-tax basis (using the highest
marginal tax rate, including Medicare levy and the benefit of imputation credits).
Amounts included in compensation for the financial year represent the estimated award that will be earned by senior
executives in the form of the interest free benefit associated with the loans over expected 10 year loan term, and either
estimated cash bonuses (used to pay down the outstanding loan) or loan waivers which are calculated by reference to the
Company’s compound annual growth rate in earnings per share (before amortisation of intangibles and significant items)
over a three-year performance period (EPS Growth).
Historically, the assumption used to account for the senior executives loan repayment was five years. It was assumed that the
senior executive would to repay the loan in five years or repay the loan in full on termination. The Company had also
recognised a non-cash accounting expense progressively each year, which had been off-set by notional interest income in that
same year.
During the year, the Board had exercised its discretion to extend the repayment of the interest free loans made available to
Mr Ryan to 10 years following his termination of employment. The Company was then required to recognise an acceleration
of a non-cash accounting expense of $5.1 million in respect of this change in decision because the accounting requirements
dictate that the acceleration of the non-cash accounting expense in relation to the Plan be applied to all plan participants.
While the acceleration of the non-cash accounting expense impacts the current year financial results, this will reverse over
the remaining period of the loans with the Company progressively recognising the notional interest income over the
remaning period of the loans. As a result, there is zero financial impact over the life of the Share Plan.
!LESCOß!NNUALß2EPORT
!LESCOß!NNUALß2EPORT
5
4
3
2
1
72,215
86,628
91,990
B O’Connor
W Powell
L Rafferty
5
2,829,486
563,486
535,285
453,627
544,506
363,563
654,105
236,071
257,689
63,495
–
46,178
60,609
–
30,000
–
NUMBER
SHARES
GRANTED
DURING
YEAR
639,709
157,625
–
114,636
150,461
–
74,475
–
$
PRESENT
VALUE OF
LOAN
GRANTED
DURING THE
1
YEAR
(1,328,095)
(274,138)
(220,688)
(216,892)
(264,412)
(152,726)
(290,643)
(61,288)
(13,240)
(9,269)
(10,198)
(12,645)
(6,841)
(11,870)
(2,828)
$
$
(99,953)
REPAYMENTS
MADE
LOANS
ADJUST2
MENTS
372,394
77,740
57,317
61,098
74,833
39,272
77,447
25,209
$
UNWIND OF
INTEREST
FREE
ELEMENT OF
3
LOAN
701,631
155,485
86,628
118,393
148,478
63,939
125,931
26,426
NUMBER
TOTAL
SHARES HELD
AT 31 MAY
2010
–
–
–
–
–
–
–
–
$
VALUE OF
LOANS
FORGIVEN
DURING YEAR
2,452,206
511,473
362,645
402,271
492,743
243,268
503,514
158,499
$
CARRYING
VALUE OF
LOANS AT
31 MAY
1
2010
4,971,803
1,059,714
714,320
824,339
1,018,310
501,626
1,001,392
308,869
$
FACE VALUE
OF LOANS AT
31 MAY 2010
Amounts shown are at present value, and are therefore net of any performance discount expected to be achieved and the interest-free element of the loan.
There is a change in accounting treatment in relation to the interest-free benefit associated with these loans compared to prior years resulting from the Board exercising its discretion to extend the repayment of
the interest-free loans made available to Mr Ryan. In accordance with Accounting Standard requirements, the estimated interst-free benefit associated with these loans over the 10-year term has been recognised
in the FY10 financial statements and applied to all plan participants. The loan adjustments represent the present value adjustments associated with a change to assumptions that loans would be repaid in 10
years. Previously, the Group accounted for this by using an assumption of five years. The acceleration of the non-cash accounting expense impacts the FY10 financial results, this will reverse over the remaining
period of the loans with the Company progressively recognising the notional interest income over the remaining period of the loans. As a result, there is zero financial impact over the life of the APSAP.
This amount is the value of the notional interest income recognised by the Company on the loan balance.
R Guttentag and R Moriaty were appointed in February and April 2010 respectively and do not have any loans under APSAP as at 31 May 2010.
J Ryan resigned from the Company on 2 May 2010 and prior to the performance conditions under the APSAP being met. As permitted under the rules of the APSAP, the Board exercised its discretion to extend the
repayment of these interest-free loans following his termination of employment. Mr Ryan is required to repay the outstanding loan amounts under the Alesco Performance Share Acquisition Plan by no later than
10 years from the drawdown dates with the first repayment due in 2016 and the last repayment due in 2019. He is not entitled to any loan waiver due to any performance hurdle targets in the relevant
measurement period being met. Historically, the Company has recognised this non-cash accounting expense progressively each year which has been off-set by notional interest income in that same year.
J Ryan
443,942
87,869
S Cox
Former
executive
63,939
J Brennan
4
95,931
Executives
26,426
NUMBER
N Thompson
$
TOTAL
SHARES HELD
AT 1 JUNE
2009
P Boyd
Directors
CARRYING
VALUE OF
LOANS HELD
AT 1 JUNE
1
2009
Senior Executive Performance Share Acquisition Plan
Transactions with key management personnel (continued)
NOTE 35: KEY MANAGEMENT PERSONNEL DISCLOSURES (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
!LESCOß!NNUALß2EPORT
3
2
1
44,606
37,930
L Rafferty
A Sullivan2
176,819
214,806
248,294
240,937
217,092
248,294
110,358
370,946
1,426,195
–
47,384
43,263
32,963
43,263
45,323
30,000
183,942
–
NUMBER
SHARES
GRANTED
DURING YEAR
–
199,938
182,550
139,088
182,550
191,242
126,586
776,149
–
$
YEAR
1
PRESENT
VALUE OF
LOAN
GRANTED
DURING THE
–
56,196
54,646
49,492
56,196
23,253
82,945
328,180
36,818
LOANS
ADJUSTMENTS
$
(116,418)
(12,273)
(10,907)
(10,800)
(12,273)
(4,012)
(18,141)
(71,537)
(7,271)
$
REPAYMENTS
MADE
–
71,331
68,059
58,755
69,739
42,722
91,769
370,499
29,705
$
UNWIND OF
INTEREST
FREE
ELEMENT OF
2
LOAN
(37,930)
–
–
–
–
–
–
–
–
NUMBER
SHARES SOLD
ON
3
RETIREMENT
–
91,990
86,628
72,215
87,869
63,939
95,931
443,942
26,426
NUMBER
TOTAL
SHARES HELD
AT 31 MAY
2009
(98,388)
–
–
–
–
–
–
–
–
$
VALUE OF
LOANS
FORGIVEN
DURING THE
YEAR
–
563,486
535,285
453,627
544,506
363,563
654,105
2,829,486
236,071
$
CARRYING
VALUE OF
LOANS AT
31 MAY
1
2009
–
764,954
724,614
610,536
736,954
509,577
867,737
3,783,088
311,697
$
FACE VALUE
OF LOANS AT
31 MAY 2009
Amounts shown are at present value, and are therefore net of any performance discount expected to be achieved and the interest free element of the loan.
This amount is the value of the notional interest income recognised by the Company on the loan balance.
During the prior year, A Sullivan resigned from the Company prior to the performance conditions under the APSAP being met. As permitted under the rules of the APSAP, the senior executive was required to repay the outstanding loan
amount up to the market value of the shares as at the date of termination, with the balance of the loan ($98,388) being waived. The shares acquired by the senior executive under APSAP were sold amd the proceeds of sale were
applied to repay the outstanding loan amount.
39,252
43,365
W Powell
44,606
B O’Connor
18,616
S Cox
65,931
J Brennan
Executives
N Thompson
26,426
260,000
NUMBER
J Ryan
$
TOTAL
SHARES HELD
AT 1 JUNE
2008
P Boyd
Directors
CARRYING
VALUE OF
LOANS HELD
AT 1 JUNE
1
2008
Senior Executive Performance Share Acquisition Plan
Transactions with key management personnel (continued)
NOTE 35: KEY MANAGEMENT PERSONNEL DISCLOSURES (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 35: KEY MANAGEMENT PERSONNEL DISCLOSURES (CONTINUED)
Movements in shares
The movement during the reporting period in the number of ordinary shares in the Company held directly, indirectly
or beneficially, by each key management person, including their related parties, is as follows:
Directors
MB Luby
SP Wareing
EJ Pope
JW Hall
RM Aitken
RV McKinnon
PJ Boyd
JJ Ryan
NA Thompson
Executives
B O’Connor
J Brennan
L Rafferty
R Guttentag
R Moriarty
S Cox
W Powell
HELD AT
1 JUNE 2009
GRANTED
UNDER SHARE
PLANS
PURCHASED
SOLD
NUMBER
NUMBER
NUMBER
NUMBER
32,000
62,059
45,163
26,667
126,280
7,500
108,089
689,479
119,925
–
–
–
–
–
–
–
257,689
30,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
96,533
63,939
111,046
–
–
110,704
103,057
46,178
–
63,495
–
–
60,609
–
–
–
–
–
–
–
–
(3,000)
–
–
–
–
–
–
HELD ON
APPOINTMENT/ HELD AT 31 MAY
RETIREMENT
2010
NUMBER
NUMBER
–
(62,059)
–
–
–
–
–
(947,168)
–
32,000
–
45,163
26,667
126,280
7,500
108,089
–
149,925
–
–
–
–
–
–
–
139,711
63,939
174,541
–
–
171,313
103,057
The shares issued to executive directors and other senior executives include shares granted under the Alesco
Management Share Plan and the Alesco Performance Share Acquisition Plan. Shares under the Alesco Management
Share Plan may not vest as at 31 May 2010.
!LESCOß!NNUALß2EPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 35: KEY MANAGEMENT PERSONNEL DISCLOSURES (CONTINUED)
Movements in shares (continued)
The movement during the previous reporting period in the number of ordinary shares in the Company held directly,
indirectly or beneficially, by each key management person, including their related parties, is as follows:
Directors
SP Wareing
RM Aitken
JW Hall
BJ Jackson
MB Luby
RV McKinnon
EJ Pope
JJ Ryan
NA Thompson
Executives
P Boyd
J Brennan
S Cox
B O’Connor
W Powell
L Rafferty
A Sullivan
N Schoerie
J Wedge
!LESCOß!NNUALß2EPORT
HELD AT
1 JUNE 2008
GRANTED
UNDER SHARE
PLANS
SOLD
HELD ON
APPOINTMENT/
RETIREMENT
PURCHASED
HELD AT
31 MAY 2009
NUMBER
NUMBER
NUMBER
NUMBER
NUMBER
NUMBER
62,059
44,280
6,667
40,484
7,000
–
14,163
505,537
89,925
–
–
–
–
–
–
–
183,942
30,000
–
82,000
20,000
–
25,000
7,500
31,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(40,484)
–
–
–
–
–
62,059
126,280
26,667
–
32,000
7,500
45,163
689,479
119,925
51,586
18,616
67,441
60,570
59,031
63,662
81,838
–
1,254,812
51,503
45,323
43,263
32,963
43,235
47,384
–
33,992
–
5,000
–
–
3,000
791
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(81,838)
(33,992)
(1,254,812)
108,089
63,939
110,704
96,533
103,057
111,046
–
–
–
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 36: NOTES TO THE STATEMENTS OF CASH FLOWS
(a) Reconciliation of cash
For the purposes of the statements of cash flows, cash includes cash on hand and at bank and short-term deposits at
call, net of outstanding bank overdrafts. Cash at the end of the financial year as shown in the statements of cash
flows is reconciled to the related items in the statement of financial position as follows:
CONSOLIDATED
2010
$000
Cash and cash equivalents
Bank overdrafts
2009
$000
6,106
–
–
(3,881)
CONSOLIDATED
2010
$000
2009
$000
THE COMPANY
2010
$000
2009
$000
471
–
–
(8,479)
THE COMPANY
2010
$000
2009
$000
(b) Reconciliation of profit after income tax to net cash provided by operating activities
(Loss)/profit for the year
(124,301)
(12,789)
(104,188)
(40,182)
Add/(less) items classified as investing/financing activities:
Loss on sale of property, plant and equipment
Profit on sale of investments
Net financing costs/(income)
1,199
639
42
–
(59,456)
–
15,406
42,486
(83)
–
–
(24,885)
–
–
133,161
–
–
70,000
(14,794)
(12,335)
133,100
21,252
–
31,393
(22)
(118)
(35,002)
–
Add/(less) non-cash items:
Dividend income from controlled entities
Net financing income from controlled entities
Management fees from controlled entities
Impairment of assets
Depreciation and amortisation
Share of joint venture entities result
Goodwill written off as part of business sale
Equity-settled share-based payment expenses
Net cash provided by/(used in) operating activities before
changes in assets and liabilities
–
5,207
31
(1,752)
51,806
70,530
10,164
22,665
13,255
–
(9,555)
(10,569)
70,000
624
–
610
–
–
–
5,207
(1,752)
(17,368)
(26,394)
Changes in assets and liabilities during the year adjusted
for effects of purchase and disposal of controlled entities
during the financial year:
Decrease/(increase) in receivables
Decrease/(increase) in inventories
Decrease/(increase) in other current assets
Decrease/(increase) in deferred tax assets
1,525
211
882
7,556
(322)
2,730
–
–
–
–
50
(266)
521
(Decrease)/increase in payables and provisions
(4,810)
(35,530)
(1,898)
5,054
(Decrease)/increase in current tax liabilities
(2,735)
(1,069)
(4,788)
(17,154)
57,043
77,085
(24,270)
(35,243)
Net cash provided by/(used in) operating activities
During the year, dividends totalling $2,223,935 (2009: $3,786,674) were reinvested in the Company pursuant to the
Dividend Reinvestment Plan.
During the year, Alesco also issued 1,078,609 shares to the value of $3,740,000 to certain key management vendors
in relation to the purchase price for their shareholdings in Total Eden Holdings Pty Ltd. This was a non-cash
transaction.
!LESCOß!NNUALß2EPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 MAY 2010
NOTE 37: SUBSEQUENT EVENTS
On 26 May 2010, the Corporations Amendment (Corporate Reporting Reform) Bill 2010 was introduced into federal
parliament. The bill was passed and received Royal Assent on 28 June 2010. The Corporations Amendment
(Corporate Reporting Reform) Act 2010 (“the Act”), inter alia, allows for more flexible arrangements surrounding the
circumstances in which companies may pay dividends. Under the new law, the Company may pay dividends if:
The Company’s assets exceed its liabilities immediately before the dividend is declared and the excess is
sufficient for the payment of the dividend;
It is fair and reasonable to the Company’s shareholders as a whole; and
It does not materially prejudice the Company’s ability to pay its creditors.
The Act applies to dividends declared after 28 June 2010.
!LESCOß!NNUALß2EPORT
DIRECTORS’ DECLARATION
1.
(a)
In the opinion of the directors of Alesco Corporation Limited (the “Company”):
the financial statements and notes, and the Remuneration Report in the Directors’ Report, set out on pages
23 to 142, are in accordance with the Corporations Act 2001, including:
(i)
giving a true and fair view of the Company and Group’s financial position as at
31 May 2010 and of their performance, for the financial year ended on that date; and
(ii)
complying with Australian Accounting Standards (including the Australian Accounting
Interpretations) and the Corporations Regulations 2001;
(b)
the financial report also complies with International Financial Reporting Standards as disclosed in Note 1(a)
(c)
the audited remuneration disclosures that are contained in the Directors’ Report comply with Australian
Accounting Standard AASB 124 Related Party Disclosures, the Corporations Act 2001 and the Corporations
Regulations 2001; and
(d)
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they
become due and payable.
2.
There are reasonable grounds to believe that the Company and the Group entities identified in Note 28
will be able to meet any obligations or liabilities to which they are or may become subject to by virtue
of the Deed of Cross Guarantee between the Company and those Group entities pursuant to
ASIC Class Order 98/1418.
3.
The directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer for
the financial year ended 31 May 2010 as required by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of the directors:
MARK LUBY
Chairman
28 July 2010
Sydney
!LESCOß!NNUALß2EPORT
INDEPENDENT AUDIT REPORT
TO THE MEMBERS OF ALESCO CORPORATION LIMITED
Report on the financial report
We have audited the accompanying financial report of Alesco Corporation Limited (the Company), which comprises
the statements of financial position as at 31 May 2010, and the income statements and statements of
comprehensive income, statements of changes in equity and statements of cash flows for the year ended on that
date, a summary of significant accounting policies and other explanatory Notes 1 to 37 and the directors’ declaration
of the Group comprising the Company and the entities it controlled at the year’s end or from time to time during the
financial year.
Directors’ responsibility for the financial report
The directors of the Company are responsible for the preparation and fair presentation of the financial report in
accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the
Corporations Act 2001. This responsibility includes establishing and maintaining internal control relevant to the
preparation and fair presentation of the financial report that is free from material misstatement, whether due to
fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are
reasonable in the circumstances. In note 1, the directors also state, in accordance with Australian Accounting
Standard AABS 101 Presentation of Financial Statements, that the financial report of the Group, comprising the
financial statements and notes, complies with International Financial Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in
accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant
ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance
whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial
report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material
misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the entity’s preparation and fair presentation of the financial report in order to
design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by the directors, as well as
evaluating the overall presentation of the financial report.
We performed the procedures to assess whether in all material respects the financial report presents fairly, in
accordance with the Corporations Act 2001 and Australian Accounting Standards (including the Australia Accounting
Interpretations), a view which is consistent with our understanding of the Company’s and the Group’s financial
position and of their performance.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.
(continued overleaf)
!LESCOß!NNUALß2EPORT
INDEPENDENT AUDITOR’S REPORT (CONTINUED)
TO THE MEMBERS OF ALESCO CORPORATION LIMITED
Report on the financial report (continued)
Auditor’s opinion
In our opinion:
(a) the financial report of Alesco Corporation Limited is in accordance with the Corporations Act 2001, including:
(i)
giving a true and fair view of the Company’s and Group’s financial position as at 31 May 2010 and of
their performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations)
and the Corporations Regulations 2001.
(b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 1.
Report on the remuneration report
We have audited the Remuneration Report included on pages 38 to 59 of the directors’ report for the year
ended 31 May 2010. The directors of the Company are responsible for the preparation and presentation of the
remuneration report in accordance with Section 300A of the Corporations Act 2001. Our responsibility is to express
an opinion on the remuneration report, based on our audit conducted in accordance with auditing standards.
Auditor’s opinion
In our opinion, the remuneration report of Alesco Corporation Limited for the year ended 31 May 2010, complies with
Section 300A of the Corporations Act 2001.
KPMG
Phillip M Napier
Partner
Sydney
28 July 2010
!LESCOß!NNUALß2EPORT
LEAD AUDITOR’S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE
CORPORATIONS ACT 2001
TO THE DIRECTORS OF ALESCO CORPORATION LIMITED
I declare that, to the best of my knowledge and belief, in relation to the audit for the financial year ended
31 May 2010 there have been:
(i)
no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in
relation to the audit; and
(ii)
no contraventions of any applicable code of professional conduct in relation to the audit.
KPMG
Phillip M Napier
Partner
28 July 2010
Sydney
!LESCOß!NNUALß2EPORT
STATEMENT OF SHAREHOLDERS
AS AT 21 JULY 2010
1.
Number of ordinary shareholders
Voting rights – on a show of hands, one vote for every registered holder and on a
poll one vote for each share held by registered holders
2.
Number of holders of options over unissued ordinary shares
3.
Percentage of the total holdings by or on behalf of the 20 largest holders
15,651
No voting rights
–
Ordinary shares
Options
4(a).
Distribution of shareholders and option holders
ORDINARY
OPTIONS
1 – 1,000
1,001 – 5,000
7,005
6,199
–
–
5,001 – 10,000
1,370
–
887
50
–
–
2,509
–
10,001 – 100,000
100,001 and over
4(b).
Number of holders holding less than a marketable parcel
5.
Notification of substantial shareholdings
The number of shares held by substantial shareholders and their associates are:
Westpac Banking Corporation
Northcape Capital Pty Ltd
6.
8.
6,291,923
5,839,167
Restricted securities
There are no restricted securities
7.
44.24%
–
–
NO. OF
SHARES
%
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Limited
8,540,658
8,036,518
9.07
8.53
National Nominees Limited
Citicorp Nominees Pty Limited
ARGO Investments Limited
6,739,213
3,839,564
2,545,979
7.15
4.08
2.70
RBC Dexia Investor Services Australia Nominees Pty Limited <PIPOOLED A/C>
Cogent Nominees Pty Limited
ANZ Nominees Limited <CASH INCOME A/C>
2,483,816
1,873,495
1,436,916
2.64
1.99
1.53
Queensland Investment Corporation
RBC Dexia Investor Services Australia Nominees Pty Limited <BKCUST A/C>
Australian Reward Investment Alliance
1,082,883
875,194
864,155
1.15
0.93
0.92
Mr Justin James Ryan
701,631
0.74
ANZ Nominees Limited
Pacific Custodians Pty Limited < MGMNTSHARE PLAN TST A/C>
486,012
464,391
0.52
0.49
Clearview Pty Ltd
UBS Wealth Management Australia Nominees Pty Ltd
AMP Life Limited
307,991
306,185
299,957
0.33
0.33
0.32
Mr James Rodney Wedge
Suncorp Custodian Services Pty Limited <AET>
289,504
256,028
0.31
0.27
Michael Nesbitt Nominees Pty Ltd <E/MAITLAND TYRE SERV S/F A/C>
230,000
0.24
Top 20 ordinary shareholders
On-market buy-back
There is no current on-market buy-back.
!LESCOß!NNUALß2EPORT
NINE YEARS AT A GLANCE
2010
$M
20091
$M
2008
$M
2007
$M
2006
$M
2005
$M
2004
$M
2003
$M
2002
$M
773.2
1,011.3
1,071.1
738.2
601.5
632.6
481.5
392.1
400.4
123.5
88.0
24.1
NINE YEARS AT A GLANCE
Income statement
Revenue
Profit before interest, tax, amortisation of
intangibles and significant items
46.8
85.6
75.7
66.6
40.2
27.0
Significant items (net of tax)
(136.7)
(41.9)
(7.5)
(4.1)
0.7
12.2
0.1
–
Amortisation of intangibles
(10.8)
(15.6)
(6.8)
(4.8)
(4.4)
(4.0)
(6.8)
Net interest
(Loss)/profit before income tax
(15.4)
(25.5)
(26.0)
(16.0)
(11.1)
(10.3)
(116.1)
2.6
83.2
63.1
60.9
64.5
(8.2)
(15.4)
(25.2)
(19.1)
(18.1)
(15.2)
Income tax
(Loss)/profit after income tax from
continuing operations
(3.7)
29.8
(9.9)
(4.0)
–
(3.7)
(4.3)
(5.2)
18.7
15.2
(6.0)
(5.9)
(124.3)
(12.8)
58.0
44.0
42.8
49.3
19.9
12.7
9.3
24.8¢
48.1¢
83.8¢
74.6¢
66.5¢
60.3¢
54.2¢
42.7¢
38.5¢
7.0¢
7.0¢
67.0¢
63.5¢
56.0¢
45.0¢
33.0¢
26.0¢
24.0¢
Receivables
123.6
141.2
203.9
142.5
98.0
93.9
79.4
77.0
72.3
Inventories
120.6
122.0
155.0
129.0
89.9
89.6
78.4
93.8
92.7
Intangibles
371.4
506.1
649.8
434.0
340.1
296.0
99.8
105.4
56.8
1.2
Earnings per share
2
Dividends per share
Statement of financial position
Net operating assets
Other investments
–
0.1
0.6
0.6
0.6
0.3
0.8
1.2
Land and buildings
16.5
16.9
17.2
16.8
17.6
21.4
7.0
9.5
9.9
Plant and equipment
38.7
50.6
72.7
65.6
45.6
39.2
21.2
23.1
17.1
Employee benefits
(21.4)
(19.6)
(30.2)
(23.8)
(20.1)
(16.9)
(12.8)
(11.1)
(7.8)
Payables
(96.3)
(92.6)
(149.4)
(114.7)
(67.8)
(73.3)
(60.4)
(63.6)
(68.3)
Other operating assets/liabilities
(13.8)
(29.3)
Net operating assets
539.3
695.4
900.4
(19.2)
(26.1)
Parent entity equity interests
427.5
551.4
593.6
344.4
Net debt
128.9
159.7
319.3
294.2
Other funds
(17.1)
(15.7)
(15.7)
(2.6)
Funds employed
539.3
695.4
900.4
623.9
471.8
420.0
8.5%
11.5%
11.9%
12.6%
10.5%
623.9
(32.1)
(30.2)
(5.6)
(6.6)
471.8
420.0
207.6
(5.8)
229.7
167.3
332.7
319.1
208.2
151.3
102.4
154.8
103.5
4.1
80.8
67.9
(4.7)
(2.4)
(3.0)
207.6
229.7
167.3
8.4%
6.9%
6.0%
Funded by
(12.5)
(14.7)
Statistics
3
Operating profit margin
6.1%
Return on average net operating
assets (RNOA)
Return on average shareholders’ funds
Interest cover (times)
6.9%
9.8%
14.9%
15.7%
16.8%
15.2%
18.1%
15.3%
14.1%
4.2%
7.6%
13.6%
15.8%
14.5%
13.3%
15.5%
13.0%
12.3%
4.2
4.0
5.4
6.3
6.8
6.5
10.8
6.4
4.6
n/a
n/a
1.3
1.2
1.2
1.3
1.6
1.6
1.6
23.2%
22.5%
35.0%
46.1%
31.8%
25.1%
1.9%
34.8%
66.0%
3
3
Dividend cover (times)
Gearing %
Share information
Weighted average number of shares
Market capitalisation
1
93.6m
91.7m
86.4m
70.8m
69.9m
68.4m
49.1m
39.1m
33.3m
$250.6m
$302.1m
$710.1m
$1,067.3m
$686.5m
$486.2m
$372.5m
$204.6m
$120.4m
Includes 11 months of discontinued operation.
2
2009 Earnings per share calculated on a before significant items and amortisation of intangibles basis and on a continuing operations basis.
3
Before significant items and amortisation of intangibles.
The 2005-2010 results are prepared under AIFRS and the 2002-2004 results are prepared under AGAAP.
!LESCOß!NNUALß2EPORT
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