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ELDERS LIMITED Earnings Release 2006
64835_rns_2006-08-09_c130bde3-2cb9-4b8f-8624-7c67b3e6091c.pdf
Earnings Release
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10 August 2006
Company Announcements Office Australian Stock Exchange
Futuris profit growth continues with strong momentum
- Sales revenue up 6%
- Underlving EBIT up 20%
- Underlying profit after tax, up 23% to record level
- Underlying Earnings per share up 21%
- Reported profit of \$87.4 million
- Final dividend maintained
Futuris has announced its third successive year of double-digit growth in underlying profit with the release today of its financial results for the 12 months to 30 June 2006.
The financial results were released with the following announcement by Company Chairman Stephen Gerlach:
"Futuris Corporation has reported its highest-ever underlying profit with the announcement of an \$88.3 million underlying (ie before non-recurring items) profit to shareholders for 2006. The result is well above the previous year's (AIFRS adjusted1) underlying profit of \$71.8 million.
"After inclusion of non-recurring items totalling -\$0.9 million after tax, Futuris' Reported Profit to shareholders was \$87.4 million.
Underlying earnings per share rose by 21% to 13.2 cents compared with 10.9 cents in $2005$
"Sales revenue for the year was \$3.36 billion, 6% higher than the 2005 sales of \$3.17 billion.
"Directors have maintained the final dividend of 5 cents per share, fully franked. The total dividend for the vear is also unchanged at 9 cents per share, fully franked."
All 2005 comparatives are AIFRS adjusted.
Level 6, 27 Currie Street, Adelaíde, SA 5000 GPO Box 551 Adelaide SA 5001 Telephone: (08) 8425 4999 Facsimile: (08) 8410 1597
Futuris Corporation Limited A.B.N. 34 004 336 636
Chief Executive Les Wozniczka said that the 2006 profit result showed the quality of Futuris' businesses and the drivers that are enabling the company to grow.
"Futuris has, for the second vear in succession, been able to generate strong increases in earnings despite conditions that would have previously threatened a downturn in profit.
"We have maintained momentum because of the growth drivers we have built in Elders, Fertiliser. Forestry and Property.
Futuris generated underlying EBIT of \$157.1 million, 20% higher than the 2005 result of \$131.3 million. Underlying profit before tax rose by 11% to be \$118.2 million compared with \$106.4 million in the previous year. Rural services, Forestry and Property all contributed to the higher earnings.
"Elders performance shows the competitive advantage of the business model through seasonal and market variations.
Mr Wozniczka said that the rural services market in 2006 had suffered as a result of a number of adverse events which included the extraordinarily dry conditions in most of Australia's winter cropping region, lower wool prices, the impact of increased fuel, a contraction in livestock markets and weather related events which such as severe frosts in Western Australia and the damage and disruption brought by Cyclone Larry in Queensland.
"In many regions this has brought a sharp reduction in demand for rural services, while other regions have fared better. Where there was opportunity, Elders competed successfully. Credit is due to the performance and service culture of the Elders team and its leadership which did an outstanding job in maintaining revenue whilst protecting margin and managing costs. The results show a very disciplined and motivated organisation"
Elders lifted its underlying EBIT by 14% to \$86.6 million compared with \$75.9 million. Mr Wozniczka attributed the earnings growth to real estate, merchandise, downstream wool operations and financial services.
Elders merchandise operations maintained sales of \$1.1 billion despite the market contracting substantially because of reduced demand. "Our fertiliser initiative delivered financial gains at both the wholesale and retail level while Elders Real Estate made further inroads in broadacre and residential markets."
Banking and Insurance contributed EBIT of \$37.3 million to Elders result compared with \$33.8 million in the previous year. Profit share from Elders Rural Bank (ERB) rose from \$12.9 million to \$15.5 million. Insurance operations achieved 6% growth in gross written premium; improved net loss ratios and lifted their EBIT contribution by 4% to \$21.8 million. A further \$11.6 million (\$9.8 million in 2005) was earned through interest.
The growing significance of financial services to the business has been recognised through an internal restructuring which has brought the Company's various prudentially regulated entities together to form Elders Financial Services Group. Mr Tim Plant, formerly General Manager, Insurance, has been promoted to the position of Managing Director, Elders Financial Services Group.
Australian Agricultural Company (AACo, 43.1% owned by Elders) contributed equity accounted earnings of \$6.0 million compared with \$5.6 million in 2005. Mr Wozniczka said that the AACo operating result was "below expectations, but clearly affected by seasonal and timing issues in the second half".
Integrated Tree Cropping increased its EBIT contribution by 19% with its underlying EBIT rising from \$33.4 million to \$39.9 million.
"Forestry has been the major focus of our business building investment. ITC's profit performance in 2006 reflects the expansion of its plantation estate and higher income from associate FEA." said Mr Wozniczka. ITC's plantation under management expanded from 121,000 hectares to 151,000 hectares in 2006.
"MIS sales this year were below expectations but the business has the capacity to deliver earnings growth through cyclical improvement in its processing operations and a more competitive performance in the MIS market going forward. Management is addressing both of these areas with a view to achieving improvement."
Contribution from Automotive operations decreased slightly. Futuris Automotive recorded an underlying EBIT of \$20.8 million from sales of \$457.2 million which compares to \$21.6 million from sales of \$639.2 million in 2005. Higher equity accounted earnings from Global Thermal Systems and management initiatives largely offset the effects of a downturn in Australian vehicle production.
Earnings from Property operations rose with higher activity in commercial and residential projects. Property operations generated EBIT of \$18.2 million compared with \$8.4 million in the previous year.
Futuris upheld its commitment to investment with total cash expenditure of over \$250.6 million in 2006. Principal applications included the acquisition of minorities in ITC, increased equity in HiFert (to attain a 50% shareholding), the acquisition of plantation land and funding the growth of Elders Rural Bank.
"Our good results have flowed directly from the investments we made in prior years to build our businesses in financial services, fertiliser and forestry. The 2006 investment program continues the investment into core operations and long standing strategic initiatives."
Mr Wozniczka said that Futuris anticipated maintaining momentum in the new year. Subject to seasonal conditions and balance date mark to market adjustments, the Company was anticipating an underlying net profit to shareholders in FY07 within the range of current market expectations. Achievement of the market expectation will deliver headline growth and further growth in earnings per share on the recently expanded capital.
Les Wozniczka, Chief Executive Officer - Tel: 08 8425 4999 Further comment: Further information: Don Murchland, Investor Relations Manager - Mb: 0439 300 932
Discussion and Analysis of 2006 Financial Results
Results for the twelve months ended 30 June 2006
Financial results
1. Profit
Futuris Corporation has recorded an Underlying Profit to Shareholders of \$88.3 million, 23% higher than the corresponding result (AIFRS adjusted) of \$71.8 million for the 2006 financial year.
The underlying profit to shareholders excludes non-recurring items totalling -\$0.9 million after tax, which are summarised in the table below and discussed on the following page. Inclusive of these items. Futuris' Reported Profit to Shareholders was \$87.4 million. In comparison, the 2005 Reported Profit of \$58.6 million was unfavourably affected by non-recurring items totalling \$13.2 million after tax.
Normalised, or underlying, EBIT was \$157.1 million, 20% above the 2005 underlying EBIT of \$131.3 million.
| Profit after tax Profit before tax EBIT and OEI |
||||||
|---|---|---|---|---|---|---|
| \$ Million | FY06 | FY05 | FY06 | FY 05 | FY06 | FY05 |
| Reported | 156.8 | 143.2 | 117.9 | 118.3 | 87.4 | 58.6 |
| Non-recurring items: | ||||||
| Hi-Fert acquisition benefit | 10.4 | 10.4 | 7.3 | |||
| Redundancies and restructuring affecting Elders |
(2.3) | (2.3) | (1.7) | |||
| BWK redundancies | (2.0) | (2.0) | (1.4) | |||
| Futuris Automotive redundancies and restructuring |
(4.5) | (4.5) | (3.1) | |||
| Take-up of non-recurring items in Westralia Property Trust |
(1.9) | (1.9) | (1.9) | |||
| 2005 non-recurring items | 11.9 | 11.9 | (13.2) | |||
| Total adjustments for underlying profit |
0.3 | (11.9) | 0.3 | (11.9) | 0.9 | 13.2 |
| Underlying result | 157.1 | 131.3 | 118.2 | 106.4 | 88.3 | 71.8 |
Calculation of underlying profit
Underlying earnings per share were 13.2 cents, 21% higher than the 2005 underlying earnings per share of 10.9 cents. Reported earnings per share were 13.1 cents compared with 8.9 cents.
<sup>1 All 2005 comparatives have been restated to conform with AIFRS
Movement in underlying profit before tax
Underlying profit before tax rose 11% to be \$118.2 million, compared with \$106.4 million in the previous year. As set out in the table below, this profit growth is attributable to increased profit generation by almost all of the Company's operating divisions.
| Factors in PBT growth | $$$ million | |
|---|---|---|
| 2005 underlying profit before tax | 106.4 | |
| change in underlying PBT between FY2005 and FY2006: | ||
| Elders (as follows:) | ||
| Elders* EBIT | +6.9 | |
| Elders Insurance investment income | $+1.8$ | |
| HiFert/Webster_ | $+3.3$ | |
| Australian Agricultural Company | + 0.5 | |
| Total Elders | $+12.5$ | |
| Property EBIT | +98 | |
| Integrated Tree Cropping (ITC) EBIT | +6.5 | |
| Futuris Automotive EBIT | - 0.8 | |
| Investment and other EBIT | $-0.3$ | |
| Net interest (excluding insurance interest) |
-15.9 | |
| 2006 underlying profit before tax | 118.2 |
*inclusive of Elders Rural Bank and Elders interests in wool handling and processing.
Discussion of the performance by the Company's operating divisions is provided under the heading "Review of Operations" commencing on page 5 of this document.
Non-recurring items
The 2006 reported profit includes a number of non-recurring items which total to a charge of \$0.3 million before tax. These items include:
- A pre-tax profit of \$10.4 million, arising from Elders' share of the profit realised upon the acquisition by ELF of the remaining 33% of HiFert.
- Redundancies and restructuring costs incurred by Elders of \$2.3 million, principally associated with the acquisition of remaining 50% of PlantTech and the disposal of Primix.
- \$2.0 million in BWK for redundancies and costs in excess of land revaluation, in line with original restructuring plans.
- \$4.5 million for costs incurred by Futuris Automotive in restructuring to align operations with $\bullet$ demands presented by current and anticipated industry conditions. The restructuring included closure of two Australian operating facilities.
A \$1.9 million take-up of non-recurring items reported by Westralia Property Trust in 2005 after closure of the Futuris accounts.
The 2005 result included a non-recurring charge totalling \$13.2 million after tax comprising profit on the sale of 65% of the Global Thermal business, offset by adjustments to transition financial statements from AGAAP to AIFRS.
Revenue and expenses
Significant revenue and expense outcomes for the vear include:
Total revenue from continuing operations of \$3.427.2 million was 6% higher than the 2005 comparative of \$3,232.0 million.
Sales revenue increased by 6% to be \$3,355.8 million (\$3,174.7 million in 2005). The increase in sales was sourced from Elders, ITC and Property operations.
Income contribution from associates and joint ventures rose from \$24.8 million to \$49.2 million. The increase is due to the non-recurring gain arising from the increase in shareholding in HiFert (see discussion on non-recurring items) and increased contributions from Elders Rural Bank, Forest Enterprises Australia (FEA), Australian Wool Handlers (AWH), Webster and Global Thermal Systems.
Borrowing costs net of interest received rose from \$24.9 million to \$39.0 million reflecting higher average debt levels.
Depreciation and amortisation declined by 23% to be \$36.7 million compared with \$47.8 million in 2005. The reduction is due to lower depreciation and amortisation by Futuris Automotive (as a result of the sale of Global Thermal Systems) and Elders.
2. Dividend
Directors have declared an unchanged final dividend of 5 cents per share, fully franked. The dividend will be payable on 25 October 2006, to shareholders registered in the books of the Company as at 9 October 2006.
Total dividend for the year is unchanged at 9 cents per share, fully franked. The 2006 total dividend represents a distribution to shareholders of \$59.9 million compared with \$53.7 million in 2005.
3. Cash Flow
Operating activities generated a cash flow \$127.4 million which compares to an outflow of \$9.3 million in 2005. The improvement is almost entirely attributable to Elders.
All divisions generated positive cash flow prior to movements in working capital.
Net cash of \$250.6 million was applied to investments during the year with the principal applications being:
- capital expenditure, net of disposals, was \$108.5 million, principally accounted for by land acquisition by ITC of \$98.3 million;
- investments of \$70.3 million with the maior items being increased shareholdings in HiFert. Amcom, Webster and FEA; and
- \$48.1 million on acquisition of controlled entities, being principally payment for minority shareholdings in ITC and BWK.
Financing activities resulted in an inflow of \$295.0 million, with the major items being a \$150 million hybrid equity issue and the issue of 50 million ordinary shares to support funding for the acquisition of minority shareholdings in ITC. The Company recorded a total net cash flow of \$171.7 million for the vear.
4. Statement of financial position
| Statement of financial position |
|||
|---|---|---|---|
| \$ million (unless otherwise indicated) as at: |
30 June 2006 |
31 Dec 2005 |
30 June 2005 |
| Shareholders' equity | 1.227.9 | 1,098.0 | 970.3 |
| Cash* | 537.5 | 334.6 | 365.8 |
| Borrowings | 739.5 | 722.9 | 680.6 |
| Net deht* | 202.0 | 388.3 | 314.8 |
| Gearing # $(%)$ | 14% | 26% | 24% |
| NTA per share $(\$)$ | 1.17 | 0.95 | 0.82 |
*Includes insurance reserves of \$171.5 million and cash held in trust of \$11.0 million
(\$161.5 million & cash held in trust of \$16.2 million as at 30 June '05)
Calculated as net debt/net debt+ shareholders' equity
Futuris completed the year in a strong financial position with its year end balance sheet featuring increased cash, reduced gearing and a 43% increase in net tangible assets per share.
Net debt at year-end was \$202.0 million. Borrowings include \$29.2 million arising from financial instruments on debt. Year-end cash of \$537.5 million includes insurance reserves and cash held in trust totalling \$182.5 million. If this restricted cash is excluded, net debt at year-end would be \$384.5 million and gearing 24%. The year end cash balances included funds of \$134.1 million required to complete payment for the acquisition of minority shareholdings in ITC in July 2006.
Significant movements in the balance sheet during the year included:
- Investments accounted for using the equity method rose from \$491.3 million to \$598.8 million. The increase items includes: reinvestment within Elders Rural Bank: increased shareholding in HiFert, and recognition of the asset revaluation made by AACo in its December 2005 accounts.
- Inventory declined due to reduced inventories within Elders (BWK reduced current inventory by \$94 million), offset by higher inventory holdings within ITC and Property. Current inventory at 30 June was \$452.2 million compared with \$510.5 million at the 2005 year-end.
- Property, plant and equipment rose by 7%, principally due to acquisitions by ITC.
- Investment properties rose from \$113.0 million to \$192.6 million, largely due to expansion of ITC's $\bullet$ estate.
- Intangibles increased by \$54.6 million due to increments provided by goodwill on acquisition of the outstanding minorities in ITC and acquisitions by Elders.
- Capitalised design and development rose marginally from \$24.7 million to \$25.5 million.
Review of operations
Elders
| 12 months to 30 June: | ||||
|---|---|---|---|---|
| \$ million | 2006 | 2005 | ||
| Sales | 2,550.2 | 2,305.2 | $+11%$ | |
| Underlying EBITDA | 100.1 | 92.3 | ||
| Depreciation & amortisation | 13.5 | 16.4 | ||
| Underlying EBIT from: | ||||
| $Elders*$ | 77.3 | 70.3 | $+10%$ | |
| Equity accounted earnings from: | ||||
| AACo | 6.0 | 5.6 | ||
| HiFert/Webster | 3.3 | |||
| Total underlying EBIT | 86.6 | 75.9 | +14% | |
| Non-recurring items | 6.1 | (49.1) | ||
| EBIT reported | 92.7 | 26.8 | ||
| Insurance investment interest | 11.6 | 9.8 | +18% |
* includes Elders Rural Bank and Elders BWK and the Australian Wool Handlers JV
Elders recorded underlying EBIT of \$86.6 million, 14% higher than the 2005 underlying EBIT of \$75.9 million. A further \$11.6 million of earnings through interest income by Elders insurance operations (\$9.8 million in 2005).
Underlying EBITDA increased by 8% to be \$100.1 million.
Elders' underlying EBIT is calculated prior to the impact of the non-recurring items, detailed under the heading "Non-recurring items" earlier in this document.
EBIT generated by Elders operations, (inclusive of Elders Rural Bank, Elders BWK and its wool handling joint venture AWH) rose by 10% to \$77.3 million. Increased earnings by financial services, merchandise, real estate and wool supply chain activities enabled Elders to offset the contraction in earnings brought by seasonal conditions to meat and livestock and wool agency operations.
Income from equity-accounted associates Webster Limited (25.4% interest) and HiFert (50% interest) increased from a breakeven result to EBIT of \$3.3 million. HiFert's contribution to underlying earnings of \$1.5 million compares to the loss of \$0.4 million taken up in 2005.
Sales revenue for the year of \$2,550.2 million was 11% higher than the 2005 sales of \$2,305.2 million.
The growth in revenue is largely due to the contribution of a full year's revenue from the BWK wool processing and trading operations (which were consolidated from 12 January 2005) and increased sales from real estate, insurance and grain.
Key features of Elders' performance in individual product areas are as follows:
* Merchandise: Elders' increased its sales of merchandise marginally despite the contraction in the overall farm merchandise market brought by unfavourable seasonal conditions, lower herd numbers and the reduced cash availability resulting from increased fuel prices and natural disasters.
Elders revenue from merchandise sales was \$1,112 million compared with \$1,102 million in the previous year. Increased sales of fertiliser, agricultural chemicals and seed enabled Elders to mitigate the impact of reduced revenue from almost all other product areas. Elders' fertiliser strategy is continuing to make progress with gains being made in sales revenue, market share and earnings at both the retail and wholesale (through HiFert) levels.
- Livestock: Meat and livestock markets contracted in 2006 due to reduced sales activity as growers sought to rebuild herd numbers. Lower prices for cattle and sheep, and lower cattle volumes contributed to a 8% reduction in Elders revenue from meat and livestock operations.
- . Wool: revenue and contribution from wool operations increased due to the contribution from processing, handling and trading operations. Total revenue from wool operations rose from \$313 million to \$484 million, with the increase being attributable to the BWK processing and trading operations. BWK contributed sales of \$419 million in 2006. Agency operations were affected by reduced wool national wool production and lower prices. The Australian Wool Handlers (AWH) joint venture contributed equity accounted earnings of \$5.0 million compared with \$0.7 million in 2005.
- * Grain: Grain operations are an emerging source of income for Elders as it builds trading relationships with buvers and as growers become more familiar with Elders offerings. Revenue from grain grew by 56% to be \$123 million and the volume sold exceeded 1 million tonnes. Elders sold grain on behalf of approximately 3000 producers during the year, up 63% on the previous year.
- * Banking: Elders Rural Bank, (a 50/50 joint venture with Bendigo Bank) continued to grow, achieving a 10% rise in profit, and increasing gross loans from \$2.3 billion to \$2.8 billion. Equity accounted profit contributed from Elders Rural Bank rose from \$12.9 million to \$15.5 million.
- * Insurance: Insurance operations increased their earnings, notwithstanding a greater incidence of natural catastrophe events. Gross Written Premium rose 6% from \$389 million to \$413 million. Operating ratios improved, despite increased claims. Insurance operations contributed EBIT of \$21.8 million compared with \$20.9 million in 2005. Inclusive of investment interest, insurance operations was \$33.4 million compared with \$30.6 million in the previous year.
- * Real Estate: Elders Real Estate performed strongly, recording significant growth in sales and contribution. Revenue from real estate rose by 36% to be \$78 million. Elders Real Estate increased its market share, sales volume and value in both broadacre and residential markets and expanded its property management operations. At 30 June, Elders Real Estate was responsible for the management of approximately 13,500 properties.
Forestry
12 months to 30 June:
| \$ million | 2006 | 2005 | |
|---|---|---|---|
| Total Revenue | 168.6 | 145.0 | $+16%$ |
| Underlying EBITDA | 43.5 | 36.6 | $+22%$ |
| Depreciation & Amortisation | 3.6 | 3.1 | |
| Underlying EBIT | |||
| ITC. | 34.4 | 30.1 | |
| FEA (Equity Acc) | 5.5 | 3.3 | |
| Underlying EBIT | 39.9 | 33.4 | $+19%$ |
| Non-recurring items | ٠ | 1.2 | |
| Reported EBIT | 39.9 | 32.2 |
ITC's underlying EBIT rose by 19% in 2006 due to expansion of its plantation operations and increased income from Forest Enterprises Australia (FEA). ITC holds a 26.6% interest in FEA which is equity accounted.
Total revenue of \$168.6 million was 16% higher than in 2005, with the increase being largely sourced from forestry operations. The 2006 sales revenue benefited from the carry over of revenue from ITC's record MIS sales of the previous year. ITC's 2006 product offering achieved sales of \$47.2 million. 60% of which have been carried over to future years.
The EBIT benefits of the expansion in plantation operations were offset slightly by results from processing operations which experienced weak markets and margins due to low demand levels from the building and construction sector.
Equity accounting of ITC's share of FEA's profit contributed \$5.5 million to ITC's 2005 earnings compared to \$3.3 million in 2005.
ITC maintained a high level of capital expenditure, as it built its plantation estate and associated infrastructure. In 2006, ITC invested net cash of \$98.8 million on property plant and equipment. principally being plantation land. As at 30 June, ITC's estate and area under management totalled 151,000 hectares compared with 121,000 at the beginning of the year.
ITC was accounted as a wholly owned subsidiary of Futuris as at 30 June following a successful takeover offer for outstanding minorities. As at 30 June, Futuris held a 93.2% interest in ITC. The Company proceeded immediately to compulsory acquisition, which has been accrued as at 30 June.
Automotive
| 12 months to 30 June: | |||
|---|---|---|---|
| \$ million | 2006 | 2005 | |
| Sales | 457.2 | 639.2 | - 28% |
| Underlying EBITDA | 40.3 | 49.1 | |
| Depreciation & Amortisation | 19.5 | 27.5 | |
| EBIT: | |||
| Futuris Automotive | 16.1 | 21.3 | |
| Global Thermal (equity acc) | 4.7 | 0.3 | |
| Underlying EBIT | 20.8 | 21.6 | - 4% |
| Non-recurring items | (4.5) | 77.8 | |
| Reported EBIT | 16.3 | 99.4 | ,,,,,,,,,,,,,,,,,,,,,,,, |
Sales revenue from Futuris Automotive in 2006 of \$457.2 million was lower than in the previous vear due to reduced demand from its client sectors and as the previous vear included six months trading results2 from the Global Thermal operations which were divested as at 31 December 2004.
A 35% interest has been retained in Global Thermal Systems.
Interior Systems operations, which accounts for the overwhelming majority of Futuris Automotive, experienced substantial reductions to supply schedules due to lower Australian motor vehicle production. Sales revenue from Interior Systems of \$391.2 million compares with \$448.2 million in the previous year.
The EBIT impact of this was mitigated by management initiatives, which included the rationalisation of manufacturing facilities and other efficiency measures, and an increased contribution from Global Thermal Systems. Global Thermal Systems contributed equity accounted earnings of \$4.7 million (\$0.3 million in 2005).
As a result Futuris Automotive recorded underlying EBIT of \$20.8 million compared with \$21.6 million in the previous year.
Non-recurring items are as detailed earlier in this paper.
$2$ Global Thermal Systems contributed revenue of \$107.5 million in 2005.
Property
| 12 months to 30 June: | ||||
|---|---|---|---|---|
| \$ million | 2005 | |||
| Sales | 189.1 | 92.8 | ||
| EBIT (underlying) | 18.2 | 8.4 | $+217%$ | |
| Non-recurring items | (1.9) | (11.8) | ||
| Reported EBIT | 16.3 | (3.4) |
Income and revenue from Property increased substantially due to increased activity by its Residential and Commercial operations.
Underlying EBIT generated by Property operations rose from \$8.1 million to \$18.2 million. Sales revenue rose to \$189.1 million compared with \$92.8 million in 2005.
In residential, the Company accelerated value realisation from its Byford land holdings. Sale of all developed lots was completed and the undeveloped land of some 233 hectares was sold in two parcels. Futuris' land holdings at Byford at 30 June consisted of approximately 200 hectares, which are being developed for sale as individual allotments.
Income from Commercial operations rose due to the progress of the City Central project in CBD Adelaide. The first stage of the project, Tower 1, was taken to 75% complete and is due for completion in January 2007.
The accounts include non-recurring items announced in the first half accounts in respect of a charge of \$1.9 million to take up non-recurring write-downs reported by Westralia Property Trust in 2005 after closure of the Futuris accounts.
3. Outlook
Futuris anticipates increasing its underlying profit in 2007. As occurred in 2006, the timing of profit emergence is expected to be weighted towards the second half of the financial year. This timing reflects rural expenditure patterns and MIS activity.
The Company's earnings expectation for 2007 is for an underlying profit to shareholders that falls within the range of current market expectations.
This expectation is subject to the achievement of normal seasonal conditions, and no material mark to market adjustments at balance date.
10 August 2006
Further comment: Les Wozniczka Chief Executive Officer
Tel: 08 8425 4999
Further information:
Don Murchland Investor Relations Manager mb: 0439 300 932
FUTURIS
CORPORATION LIMITED
ABN 34 004 336 636
PRELIMINARY FINAL REPORT APPENDIX 4E
30 JUNE 2006
PRELIMINARY FINAL REPORT RESULTS FOR ANNOUNCEMENT TO THE MARKET
FINANCIAL YEAR ENDED 30 JUNE 2006
| \$000 | ||||
|---|---|---|---|---|
| Revenues from continuing operations* | up | $6\%$ | to | 3,427,193 |
| Profit from underlying continuing operations after tax attributable to members |
up | 23% | to | 88,250 |
| Profit from continuing operations after tax attributable to members |
up | 49% | to | 87,439 |
| Net profit for the year attributable to members | up | 49% | to | 87,439 |
| Dividends | Amount per security | Franked amount per security |
||
| Final dividend | 5¢ | 5¢ | ||
| Previous corresponding period | 5¢ | 5¢ | ||
| Record date for determining entitlements to the dividend | 9 October 2006 |
* Revenues from continuing operations comprises:
| 2006 \$'000 |
2005 \$'000 |
|
|---|---|---|
| Sales revenue | 3,355,818 | 3,174,684 |
| Other revenues from continuing operations | 51,165 | 37,402 |
| Interest revenue | 20,210 | 19,878 |
| Total | 3,427,193 | 3.231,964 |
FUTURIS CORPORATION LIMITED CONSOLIDATED INCOME STATEMENT YEAR ENDED 30 JUNE 2006
| Note | 2006 \$000 |
2005 \$000 |
|
|---|---|---|---|
| Continuing operations | |||
| Sales revenue | 2 | 3,355,818 | 3,174,684 |
| Cost of sales | (2,500,687) | (2,430,759) | |
| Other revenues | 51,165 | 37,402 | |
| Other expenses | 2 | (805, 934) | (747, 510) |
| Share of net profits of associates and joint ventures accounted for using the equity method |
5 | 49,187 | 24,753 |
| Profit on sale of non current assets | 2 | 7,273 | 84,620 |
| Profit before net borrowing costs and tax expense | 156,822 | 143,190 | |
| Interest revenue | 20,210 | 19,878 | |
| Borrowing costs | (59, 171) | (44, 733) | |
| Profit before tax expense | 117,861 | 118,335 | |
| Income tax expense | (21, 446) | (47, 876) | |
| Net profit for year | 96,415 | 70,459 | |
| Net profit attributable to minority interest | (8,976) | (11, 825) | |
| Net profit attributable to members of the parent entity | 87,439 | 58,634 |
| Basic earnings per share (cents per share) | 13.06c | 8.87c |
|---|---|---|
| Basic underlying earnings per share (cents per share) | 13.18e | 10.86e |
| Diluted earnings per share (cents per share) | 11.49c | 7.98c |
| Diluted underlying earnings per share (cents per share) | 11.60e | 9.77¢ |
The accompanying notes form an integral part of this income statement.
FUTURIS CORPORATION LIMITED CONSOLIDATED BALANCE SHEET
AS AT 30 JUNE 2006
| 2006 | 2005 | ||
|---|---|---|---|
| Note | \$000 | \$000 | |
| CURRENT ASSETS | |||
| Cash and cash equivalents Trade and other receivables |
537,521 613,846 |
365,803 590,127 |
|
| Livestock | 71,898 | 61,400 | |
| Inventories | 451,454 | 510,546 | |
| Financial instruments | 5,096 | ||
| Held for trading financial assets | 20,341 | 10,940 | |
| Other | 106,729 | 116,502 | |
| TOTAL CURRENT ASSETS | 1,806,885 | 1,655,318 | |
| NON CURRENT ASSETS | |||
| Trade and other receivables | 126,360 | 70,196 | |
| Forestry | 17,164 | 13,940 | |
| Inventories | 33,814 | 55,257 | |
| Other financial assets | 5,662 598,819 |
1,800 | |
| Investments accounted for using the equity method Property, plant and equipment |
198,345 | 491,295 185,643 |
|
| Investment properties | 192,591 | 113,001 | |
| Intangibles | 270,641 | 216,029 | |
| Deferred tax assets | 76,675 | 60,327 | |
| Other (including design and development) | 25,646 | 26,899 | |
| TOTAL NON CURRENT ASSETS | 1,545,717 | 1,234,387 | |
| TOTAL ASSETS | 3,352,602 | 2,889,705 | |
| CURRENT LIABILITIES | |||
| Trade and other payables | 984,910 | 878,108 | |
| Interest bearing loans and borrowings | 144,805 | 145,008 | |
| Current tax payable | 26,100 | 30,542 | |
| Financial instruments | 30,881 | ||
| Provisions | 238,184 | 207,105 | |
| TOTAL CURRENT LIABILITIES | 1,424,880 | 1,260,763 | |
| NON CURRENT LIABILITIES | |||
| Trade and other payables | 32,615 | ||
| Interest bearing loans and borrowings | 565,570 | 535,556 | |
| Deferred tax liabilities Provisions |
102,441 | 60,705 | |
| 31,786 | 29,754 | ||
| TOTAL NON CURRENT LIABILITIES | 699,797 | 658,630 | |
| TOTAL LIABILITIES | 2,124,677 | 1,919,393 | |
| NET ASSETS | 1,227,925 | 970,312 | |
| EQUITY | |||
| Contributed equity Convertible notes |
4 | 577,717 57,384 |
454,420 |
| Hybrid equity | 4 | 145,151 | |
| Reserves | 63,843 | 42,868 | |
| Retained earnings | 371,367 | 351,397 | |
| TOTAL PARENT ENTITY INTEREST IN EQUITY | 1,215,462 | 848,685 | |
| Minority interests | 12,463 | 121,627 | |
| TOTAL EQUITY | 1,227,925 | 970,312 |
The accompanying notes form an integral part of this balance sheet.
FUTURIS CORPORATION LIMITED
CONSOLIDATED CASH FLOW STATEMENT
YEAR ENDED 30 JUNE 2006
| 2006 | 2005 | ||
|---|---|---|---|
| Note | \$000 | \$000 | |
| CASH FLOWS FROM OPERATING ACTIVITIES | |||
| Receipts from customers | 8,876,564 | 8,294,850 | |
| Payments to suppliers and employees | (8,727,061) | (8, 245, 493) | |
| Dividends received | 26,276 | 22,002 | |
| Interest received | 20,210 | 19,771 | |
| Interest and other costs of finance paid | (60, 110) | (53, 830) | |
| GST paid (net) | (11,690) | (22,190) | |
| Income taxes paid | (22, 531) | (50,755) | |
| Other operating inflows | 25,698 | 26,375 | |
| Net operating cash flows | 127,356 | ||
| (9,270) | |||
| CASH FLOWS FROM INVESTING ACTIVITIES | |||
| Payment for property, plant and equipment | (137, 689) | (96, 772) | |
| Payment for investments | (70, 324) | (229, 862) | |
| Payment for design and development capitalised | (7,385) | (23, 663) | |
| Proceeds from sale of property, plant and equipment | 29,168 | 16,041 | |
| Proceeds from sale of investments | 2,647 | 3,364 | |
| Proceeds from sale of other non current assets | 192 | ||
| Loans to associated entities | (26, 924) | (16,940) | |
| Repayment of loans by related parties | 8,505 | ||
| Loans to growers | (2,811) | (25,703) | |
| Loans repaid by growers | 20,233 | 11,932 | |
| Loans to employees | (10, 991) | (8,291) | |
| Payment for outside equity interests in controlled entity | (3,160) | ||
| Payment for controlled entity (net of cash acquired) | (48,075) | (60,260) | |
| Proceeds from disposal of controlled entity | 11 | 1,556 | 252,100 |
| Net investing eash flows | (250, 595) | (172, 517) | |
| CASH FLOWS FROM FINANCING ACTIVITIES | |||
| Proceeds from issue of shares and other equity, net of costs | 268,448 | 1,596 | |
| Proceeds from borrowings | 175,269 | 393,253 | |
| Repayment of borrowings | (92, 568) | (212,773) | |
| Princípal repayments of lease liabilities | (1,763) | (1, 536) | |
| Proceeds from leasing | 3,521 | 8,621 | |
| Dividends paid | (72, 143) | (47, 847) | |
| Proceeds from issue of shares by controlled entity (net) | 14,193 | 16,978 | |
| Net financing cash flows | 294,957 | 158,292 | |
| Net increase/(decrease) in cash held | 171,718 | (23, 495) | |
| Cash at the beginning of the financial year | 365,803 | 389,298 | |
| Cash at the end of the financial year | 537,521 | 365,803 | |
The accompanying notes form an integral part of this cash flow statement.
FUTURIS CORPORATION LIMITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
YEAR ENDED 30 JUNE 2006
| $($ \$000 $)$ | Issued Capital |
Convertible Notes |
Reserves | Hybrid Equity |
Retained Earnings |
Minority Interest |
Total Equity |
|---|---|---|---|---|---|---|---|
| As at 1 July 2005* | 454,420 | 54,576 | 46,616 | 355,081 | 121,627 | 1,032,320 | |
| Issue of share capital | 14,193 | 14,193 | |||||
| Exercise of options | 5,646 | 5,646 | |||||
| Cost of share based payments | 5,035 | 5,035 | |||||
| Shares vested to employees (net) | (5,059) | (5,059) | |||||
| Share placement | 112,000 | 112,000 | |||||
| Share placement direct costs | (2,729) | (2,729) | |||||
| Issue of Hybrid Equity | 150,000 | 150,000 | |||||
| Hybrid equity direct costs | (4, 849) | (4, 849) | |||||
| Scrip consideration | 5,694 | 5,694 | |||||
| Dividend Reinvestment Plan | 2,686 | 2,686 | |||||
| Dividends to shareholders | ă. | (70, 307) | (70, 307) | ||||
| Hybrid Equity Distribution | (1, 836) | (1, 836) | |||||
| Fair value revaluations of | |||||||
| associate's land and buildings | 24,237 | 24,237 | |||||
| Fair value revaluations of | |||||||
| livestock carrier | (4,270) | (4,270) | |||||
| Currency translation differences | 3,670 | 3,670 | |||||
| Recognition of share of reserve | |||||||
| for losses in associate | (990) | 990 | |||||
| Cash flow hedge reserve | (5,396) | (5,396) | |||||
| Convertible notes reissued | 2,808 | 2,808 | |||||
| Acquisition of minority interests | |||||||
| in controlled entity | (133, 621) | (133, 621) | |||||
| Partnership profits | 1,288 | 1,288 | |||||
| Profit for year | 87,439 | 8,976 | 96,415 | ||||
| As at 30 June 2006 | 577,717 | 57,384 | 63,843 | 145,151 | 371,367 | 12,463 | 1,227,925 |
* post adjustments for AASB 139 Financial Instruments: Recognition and Measurement
The accompanying notes form an integral part of this statement of changes in equity.
FUTURIS CORPORATION LIMITED
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (CONTINUED) YEAR ENDED 30 JUNE 2006
| (\$000) | Issued Capital |
Convertible Notes |
Reserves | Retained Earnings |
Minority Interest |
Total Equity |
|---|---|---|---|---|---|---|
| As at 1 July 2004 | 446,920 | 18,088 | 358,996 | 71,048 | 895,052 | |
| Issue of share capital | 5,904 | 22,634 | 28,538 | |||
| Exercise of options | 1,596 | 1,596 | ||||
| Cost of share based payments | 3,775 | 3,775 | ||||
| Shares vested to employees | (8,371) | (8,371) | ||||
| Dividends to shareholders | (53, 752) | (53,752) | ||||
| Fair value revaluations of associate's | ||||||
| land and buildings | 16,780 | 16,780 | ||||
| Fair value revaluations of livestock carrier |
4,270 | (6,100) | (1, 830) | |||
| Currency translation differences | 1,945 | 1,945 | ||||
| Recognition of share of reserve for | ||||||
| losses in associate | 6,381 | (6, 381) | ||||
| Partnership profits | 1,103 | 1,103 | ||||
| Acquisition of minority interests in | ||||||
| controlled entity | (8,568) | (8,568) | ||||
| Acquisition of partly owned | ||||||
| subsidiaries | 40.000 | 40,000 | ||||
| Disposal of partly owned | ||||||
| subsidiaries | (16, 415) | (16, 415) | ||||
| Profit for year | 58,634 | 11,825 | 70,459 | |||
| As at 30 June 2005 | 454,420 | $\overline{a}$ | 42,868 | 351,397 | 121,627 | 970,312 |
The accompanying notes form an integral part of this statement of changes in equity.
BASIS OF PREPARATION NOTE 1.
This report has been prepared in accordance with the Corporations Act 2001, Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board and other mandatory professional reporting requirements. This report is based on financial statements that are in the process of being audited.
This is the first preliminary final report prepared based on AIFRS and comparatives for the year ended 30 June 2005 have been restated accordingly except for the adoption of AASB 132 Financial Instruments: Presentation and Disclosure and AASB 139 Financial Instruments: Recognition and Measurement, as the Group has adopted the exemption under AASB 1 First-time Adoption of Australian Equivalents to International Financial Reporting Standards and has applied AASB 132 and AASB 139 from 1 July 2005.
A reconciliation of AIFRS equity and profit for 30 June 2005 to the balances reported in the 30 June 2005 financial report and at transition to AIFRS is detailed in Note 12.
| NOTE 2. | REVENUE AND EXPENSES | 2006 SOOO |
CONSOLIDATED 2005 \$000 |
|---|---|---|---|
| Sales revenue: Sale of goods |
Commission and other selling charges Construction contract revenue Insurance premium revenue Other sales related income |
2,648,747 389,330 115,623 164,202 37,916 3,355,818 |
2,521,966 413,440 67,856 131,514 39,908 3,174,684 |
| Other expenses: Distribution expenses Marketing expenses Occupancy expenses Other expenses |
Administrative expenses Insurance claims & related expenses |
412,514 34,836 13,391 113,019 150,148 82.026 805,934 |
391,680 38,396 10,734 57,850 133,137 115,713 747,510 |
| - investments - controlled entities |
Profit on sale of non current assets - property, plant and equipment |
4,230 1,622 1,421 7,273 |
215 1,045 83,360 84,620 |
| Included in equity profits and other expenses are the following: Depreciation and amortisation Employee benefits expense |
36,727 308,501 |
47,819 313,507 |
| NOTE 2. REVENUE AND EXPENSES (continued) |
2006 \$000 |
CONSOLIDATED 2005 \$000 |
|---|---|---|
| Included in equity profits and other expenses are the following (continued): | ||
| Hi-Fert acquisition benefit Redundancies and restructuring costs |
10,400 (8,800) (1,931) |
|
| Write down of Westralia Property Trust (share of equity loss) Write down and depreciation of Livestock Carrier Costs associated with exit of Middle Eastern livestock |
(15,200) | |
| business (as principal) Write down of Kareelya investment |
(7,958) (5, 476) |
|
| Loss on sale of hospitals & associated provisions Impairment losses - goodwill and other intangibles |
(3,760) (9,987) |
|
| Impairment losses - other non current assets Redundancy provision |
(331) | (23,981) (5,159) (71, 521) |
| NOTE 3. DIVIDENDS |
CONSOLIDATED | |
| 2006 \$000 |
2005 \$000 |
|
| Parent entity equity dividends on ordinary shares: | ||
| Dividends paid during the year - Final fully franked dividend for June 2005 of $5¢$ per share |
33,200 | 26,827 |
| $(2005: 5¢$ per share, fully franked) - Interim fully franked dividend paid April 2006 of $4¢$ per share (2005: 4¢ per share, partly franked) |
26,656 | 26,925 |
| - Hybrid distribution (2005: nil) | 1,836 | |
| 61,692 | 53,752 | |
| Dividends proposed and not recognised as a liability - Final fully franked dividend for June 2006 payable 25 October 2006 of $5¢$ per share (2005: $5¢$ per share, fully franked) |
36,046 | 33,162 |
| Subsidiary Equity dividends on ordinary shares: | ||
| Dividends paid to external parties during the year - Fully franked dividend paid September 2005 of $5¢$ per share |
10,451 | |
| 108,189 | 86,914 |
Shareholders can elect to have all or a certain number of their shares participate in the Company's Dividend Reinvestment Plan ("DRP"). The issue price of shares under the DRP is the weighted average closing market price of the Company's shares sold through Australian Stock Exchange Limited during the five (5) days immediately following the Books Close (Record) Date, less a discount of 2.5%. The maximum number of shares an individual shareholder can receive under the DRP is 2,000 shares at each dividend date.
The last date for receipt of election notices for the dividend plan is 9 October 2006.
| NOTE 4 . EQUITY |
CONSOLIDATED | ||
|---|---|---|---|
| 2006 | 2005 | ||
| \$000 | \$000 | ||
| Contributed Equity | |||
| Ordinary shares: | |||
| Issued and fully paid up | 577,717 | 454,420 | |
| Number of | |||
| shares | \$2000 | ||
| Movements in ordinary shares: | |||
| Opening balance | 663,243,696 | 454,420 | |
| Conversion of options | 3,910,000 | 5,646 | |
| Share Placement, net of costs | 50,000,000 | 109,271 | |
| Scrip consideration | 2,530,790 | 5,694 | |
| Dividend reinvestment plan | 1,226,603 | 2,686 | |
| Closing balance | 720,911,089 | 577,717 | |
| CONSOLIDATED | |||
| 2006 | 2005 | ||
| Hybrid Equity | \$000 | \$000 | |
| Issued and fully paid up | 145,151 | ||
| Number of | |||
| notes | \$7000 | ||
| Movements in Hybrid Equity: | |||
| Opening balance | |||
| Issue of Hybrid Equity, net of costs | 1,500,000 | 145,151 | |
| Closing balance | 1,500,000 | 145,151 | |
NOTE 5. DETAILS OF EQUITY ACCOUNTED ASSOCIATES AND JOINT VENTURES
| Name of Associate or Joint Venture |
Principal activity of Associate or Joint Venture |
Ownership Interest | Contribution to net profit or (loss) |
||
|---|---|---|---|---|---|
| 2006 $\frac{0}{0}$ |
2005 $\%$ |
2006 \$000 |
2005 \$000 |
||
| Air International Thermal (US) Holdings Inc |
Automotive | 35 | 35 | 6,405 | (133) |
| Air International Thermal (Belgium) NC |
Automotive | 35 | 35 | (1,598) | 203 |
| Australian Agricultural Company Ltd |
Beef production | 43 | 43 | 6.057 | 5,563 |
| Australian Wool Handlers | Wool processing | 50 | 50. | 4.992 | 702 |
| Elders Rural Bank Limited | Financial Services | 50 | 50 | 15,476 | 12,891 |
| Forest Enterprises Australia | Forestry | 27 | 24 | 5.500 | 3,300 |
NOTE 5. DETAILS OF EOUITY ACCOUNTED ASSOCIATES AND JOINT VENTURES (continued)
| Name of Associate or Joint Venture |
Principal activity of Associate or Joint Venture |
Ownership Interest | Contribution to net profit or (loss) |
|||
|---|---|---|---|---|---|---|
| 2006 $\%$ |
2005 $\%$ |
2006 \$000 |
2005 \$000 |
|||
| HiFert Pty Ltd | Fertiliser | 50. | 33 | 11,855 | (414) | |
| Webster Ltd | Agribusiness | 25 | 19 | 1.800 | 361 | |
| Other | (1,300) | 2,280 | ||||
| 49.187 | 24,753 |
The Group has taken up its share of the revaluation of rural property assets undertaken by its associate. Australian Agricultural Company Ltd. The effect in the current year is to increase investments by \$35m, the asset revaluation reserve by \$24m and deferred tax liability by \$11m.
| NOTE 6. | NET TANGIBLE ASSETS | CONSOLIDATED | ||||
|---|---|---|---|---|---|---|
| 30 June 1 July |
30 June | |||||
| 2006 | 2005 | 2005 | ||||
| Net tangible asset backing per ordinary security | \$1.17 | \$0.92 | \$0.82 |
NOTE7 SEGMENT INFORMATION
The Group is organised and managed separately according to the nature of the products and services provided. The consolidated entity comprises the following distinguishable components; Rural Services, Forestry, Automotive Components, Property and Investment & Other.
Rural Services include the provision of a range of agricultural products and services through a common distribution channel and its associate Australian Agricultural Company Ltd.
Forestry includes the Group's interests in forestry plantations and processing.
Automotive Components include the manufacturing and sales of automotive components of which the key components are seating, heating ventilating and air-conditioning systems.
Property includes the sale and development of land and commercial developments and holding an equity interest in a listed property trust.
The Investment & Other segment includes the general investment activities not associated with the other business segments and the administrative corporate office activities.
Segment results have been determined on a consolidated basis and represent the earnings before corporate net borrowing costs and meome tax expense.
The Group operates predominantly within Australia. All other geographical operations are not material to the financial statements.
NOTE 7. SEGMENT INFORMATION (continued)
Business Segments
| Rural Services |
Forestry | Automotive Components |
Property | Investment & Other |
Total | |
|---|---|---|---|---|---|---|
| 2006 | \$000 | \$000 | \$000 | \$000 | \$000 | \$000 |
| External sales | 2,550,210 | 159,239 | 457,225 | 189,144 | 3,355,818 | |
| Other revenue | 47,276 | 3,881 | 16,717 | 1,263 | 9,511 | 78,648 |
| Share of net profit (loss) of | ||||||
| associates | 41,359 | 5,500 | 4,717 | (1, 444) | (945) | 49,187 |
| Total revenue | 2,638,845 | 168,620 | 478,659 | 188,963 | 8,566 | 3,483,653 |
| Underlying EBIT | 86,630 | 39,922 | 20,758 | 18,230 | (8,387) | 157,153 |
| Significant items | 6,100 | (4,500) | (1,931) | (331) | ||
| Segment Result | 92,730 | 39,922 | 16,258 | 16,299 | (8,387) | 156,822 |
| Earnings before interest, tax, | ||||||
| depreciation & amortisation | 106,201 | 43,480 | 35,761 | 16,463 | (8,356) | 193,549 |
| Depreciation & amortisation | (13, 471) | (3,558) | (19, 503) | (164) | (31) | (36, 727) |
| Segment Result | 92,730 | 39,922 | 16,258 | 16,299 | (8,387) | 156,822 |
| Corporate net interest expense | (38, 961) | |||||
| Profit from ordinary activities before tax |
117,861 | |||||
| Segment assets | 1,695,856 | 512,578 | 216,388 | 257,684 | 55,900 | 2,738,406 |
| Unallocated assets (including tax assets) |
614,196 | |||||
| Segment liabilities Unallocated liabilities (including |
896,523 | 91,484 | 108,091 | 16,900 | 164,175 | 1,277,173 |
| tax liabilities) | 847,505 | |||||
| Carrying value of equity investments |
524,210 | 50,372 | 2,621 | 20,571 | 1,045 | 598,819 |
| Acquisition of property, plant & equipment, intangible assets and other non current assets, including design and development |
33,234 | 104,884 | 18,169 | 43 | 156,330 | |
| Non cash expenses other than depreciation and amortisation |
4,808 | 22 | 3,121 | 1,088 | 1,065 | 10,104 |
| Profit on sale of investments | 784 | 2,259 | 3,043 | |||
NOTE 7. SEGMENT INFORMATION (continued)
Business Segments
| Rural Services |
Forestry | Automotive Components |
Property | Investment & Other |
Total | |
|---|---|---|---|---|---|---|
| 2005 | \$000 | \$000 | \$000 | \$000 | \$000 | \$000 |
| External sales | 2,305,235 | 106,517 | 639,159 | 92,809 | 30,964 | 3,174,684 |
| Other revenue | 20,652 | 35,171 | 260,997 | 4,206 | 7,759 | 328,785 |
| 21,171 | 3,300 | 282 | 24,753 | |||
| Total revenue | 2,347,058 | 144,988 | 900,438 | 97,015 | 38,723 | 3,528,222 |
| Underlying EBIT | 75,906 | 33,442 | 21,585 | 8,440 | (8,108) | 131,265 |
| Significant items | (49,118) | (1,201) | 77,760 | (11,756) | (3,760) | 11,925 |
| Segment Result | 26,788 | 32,241 | 99,345 | (3,316) | (11, 868) | 143,190 |
| 43,154 | 35,371 | 126,862 | (3,048) | (11,330) | 191,009 | |
| (16, 366) | (3,130) | (27,517) | (268) | (538) | (47, 819) | |
| Segment Result | 26,788 | 32,241 | 99,345 | (3,316) | (11, 868) | 143,190 |
| Corporate net interest expense | (24, 855) | |||||
| Profit from ordinary activities before tax |
118,335 | |||||
| Segment assets | 1,570,401 | 373,536 | 243,262 | 238,269 | 38,107 | 2,463,575 |
| Share of net profit of associates Earnings before interest, tax, depreciation & amortisation Depreciation & amortisation Unallocated assets (including tax assets) Unallocated liabilities (including Carrying value of equity other non current assets, including depreciation and amortisation Profit on sale of investments |
$\blacksquare$ | $\blacksquare$ | 426,130 | |||
| Segment liabilities | 822,612 | 104,926 | 122,291 | 46,272 | 51,481 | 1,147,582 |
| tax liabilities) | $\blacksquare$ | $\blacksquare$ | $\tilde{\phantom{a}}$ | 771,915 | ||
| investments | 429,044 | 34,487 | 5,749 | 22,015 | $\tilde{\phantom{a}}$ | 491,295 |
| Acquisition of property, plant & equipment, intangible assets and |
||||||
| design and development | 44,291 | 50,718 | 41,651 | 12,987 | 246 | 149,893 |
| Non cash expenses other than | 46,823 | 1,473 | 14,595 | 13,595 | 589 | 77,075 |
| 7 | 9 | 83,360 | 995 | 34 | 84,405 |
NOTE 8. SUPPLEMENTARY STATEMENT OF NET DEBT BY SEGMENT
| 2006 | Rural Services \$000 |
Forestry \$000 |
Automotive Components \$000 |
Property \$000 |
Investment & Other \$000 |
Total \$000 |
|---|---|---|---|---|---|---|
| Earnings before interest & tax | 92,730 | 39,922 | 16,258 | 16,299 | (8,387) | 156,822 |
| Depreciation and amortisation | 13,471 | 3,558 | 19,503 | 164 | 31 | 36,727 |
| Equity accounted earnings | (41, 359) | (5,500) | (4,717) | 1,444 | 945 | (49, 187) |
| Dividends received from associates | 25,223 | 794 | 26,017 | |||
| Profit/loss on sale of property, plant | ||||||
| $&$ equipment | (3, 816) | (392) | (22) | $\blacksquare$ | (4,230) | |
| Profit on sale of investments | (784) | (838) | (1,622) | |||
| Profit on sale of controlled entities | $\tilde{\phantom{a}}$ | ш. | (1, 421) | (1, 421) | ||
| Interest (net) | 1,239 | (2,761) | 50 | (33) | (38, 395) | (39,900) |
| Tax (paid)/refund | (26,094) | (13, 783) | (1,631) | $\tilde{\phantom{a}}$ | 18,977 | (22, 531) |
| Share based payments | 2,892 166 |
322 | 674 | 120 | 1,027 | 5,035 |
| Impairment losses Fair value adjustments |
(16, 555) | w 4,627 |
332 |
1,164 | $\overline{\phantom{a}}$ 61 |
1,662 (11, 867) |
| Provisions and other | 13,053 | 1,382 | (7, 397) | 2,743 | 22,443 | 32,224 |
| Operating cash flow before | ||||||
| movements in working capital | 60,166 | 28,169 | 23,050 | 21,901 | (5, 557) | 127,729 |
| Movement in working capital | 98,176 | (50,005) | 17,528 | (47,253) | (18, 819) | (373) |
| Operating cash flow | 158,342 | (21, 836) | 40,578 | (25, 352) | (24, 376) | 127,356 |
| Capital expenditure Proceeds on sale of property, plant |
(21, 978) | (104, 884) | (10, 784) | (43) | (137,689) | |
| and equipment | 23,000 | 6,125 | 43 | 29,168 | ||
| Proceeds sale of investments | 879 | 1,768 | 2,647 | |||
| Proceeds sale of controlled entity | . | ш. | Ξ. | 1,556 | 1,556 | |
| Payments for investments and other | (38, 383) | (11, 179) | (2,131) | $\blacksquare$ | (18, 631) | (70, 324) |
| D&D capitalised | (7,385) | $\tilde{\phantom{a}}$ | $\blacksquare$ | (7,385) | ||
| Loans to associated parties | (2, 869) | (3,607) | μ. | $\blacksquare$ | (20, 448) | (26, 924) |
| Loans from growers (net) | 17,422 | 17,422 | ||||
| Loans to employees | (9,059) | (1,515) | (139) | (278) | (10, 991) | |
| Acquisition of controlled entity (net) | (17, 184) | (532) | (30, 359) | (48, 075) | ||
| Investing cash flow | (65, 594) | (96, 655) | (21, 772) | (139) | (66, 435) | (250, 595) |
| Proceeds from issue of shares and | 14,193 | 268,448 | 282,641 | |||
| other equity Dividends paid |
(10, 451) | u. | $\frac{1}{2}$ | (61, 692) | (72, 143) | |
| Other flows | $\blacksquare$ | 3,742 | μ. | 206,756 | 210,498 | |
| TOTAL | 92,748 | (114, 749) | 18,806 | (25, 491) | 115,945 | 87,259 |
| Opening net debt Total flows AIFRS reclassification of debt to |
(314,761) 87,259 |
|||||
| equity AIFRS fair value adjustments to debt |
54,576 (29,086) |
AIFRS fair value adjustments to debt
Closing net debt
$(202, 012)$
NOTE 8. SUPPLEMENTARY STATEMENT OF NET DEBT BY SEGMENT
| 2005 | Rural Services |
Forestry | Automotive | Property | Investment & Other |
Total |
|---|---|---|---|---|---|---|
| \$000 | \$000 | Components \$000 |
\$000 | \$000 | \$000 | |
| Earnings before interest & tax | 26,788 | 32,241 | 99,345 | (3,316) | (11, 868) | 143,190 |
| Depreciation and amortisation | 16,366 | 3,130 | 27,517 | 268 | 538 | 47,819 |
| Equity accounted earnings Dividends received from |
(21, 171) | (3,300) | (282) | (24, 753) | ||
| associates | 20,738 | 1,007 | $\blacksquare$ | 21,745 | ||
| Profit on sale of property, plant & | ||||||
| equipment Profit on sale of investments |
(341) (7) |
196 (9) |
(73) $\tilde{\phantom{a}}$ |
÷ (995) |
3 (34) |
(215) (1,045) |
| Profit on sale of controlled entity | w. | w | (83,360) | $\tilde{}$ | (83,360) | |
| Interest (net) | (3,902) | (634) | (1,764) | 49 | (27, 808) | (34, 059) |
| Tax paid | (11,767) | (6, 587) | (844) | (81) | (31, 476) | (50,755) |
| Impairment losses | 20,801 | 1,201 | 5,600 | 6,280 | $\tilde{\phantom{a}}$ | 33,882 |
| Provisions and other | 26,439 | 1,703 | 12,558 | 7,248 | 1,900 | 49,848 |
| Operating cash flow before | ||||||
| movements in working capital | 73,944 | 27,941 | 58,697 | 10,460 | (68,745) | 102,297 |
| Movement in working capital | (83,987) | 10,261 | (18,924) | (17,999) | (918) | (111, 567) |
| Operating Cash Flow | (10, 043) | 38,202 | 39,773 | (7, 539) | (69, 663) | (9,270) |
| Capital expenditure Proceeds on sale of property, |
(27,701) | (50,718) | (17,988) | (119) | (246) | (96, 772) |
| plant and equipment | 1,601 | 14,361 | 79 | w | $\frac{1}{2}$ | 16,041 |
| Proceeds sale of investments | 7 | 50 | $\tilde{\phantom{a}}$ | 2,748 | 559 | 3,364 |
| Proceeds sale of other assets | 192 | $\tilde{\phantom{a}}$ | $\blacksquare$ | 192 | ||
| Payments for investments | (124, 612) | (31,087) | (61,295) | (12, 868) | $\blacksquare$ | (229, 862) |
| D&D capitalised | . | (23, 663) | $\tilde{\phantom{a}}$ | (23, 663) | ||
| Loans to associated parties Loans from related parties |
(6, 591) | u. | u, | (10, 349) 8,505 |
(16,940) | |
| Loans to growers (net) | $\blacksquare$ | (13, 771) | $\blacksquare$ | $\tilde{\phantom{a}}$ | 8,505 (13,771) |
|
| Loans to employees | (6,671) | (1,785) | 165 | (8,291) | ||
| Payment for outside equity | ||||||
| interests in controlled entity | (3,160) | (3,160) | ||||
| Acquisition of controlled entity | (30, 161) | (30,099) | (60, 260) | |||
| Proceeds on sale of controlled entity |
252,100 | 252,100 | ||||
| Investing cash flow | (187, 345) | (121, 015) | 147,448 | (10, 239) | (1, 366) | (172, 517) |
| Proceeds from issue of shares | 16,978 | 1,596 | 18,574 | |||
| Dividends paid | w | (47, 847) | (47, 847) | |||
| Other flows | $\blacksquare$ | 16,978 | $\tilde{\phantom{a}}$ | ÷. | (46, 251) | (29, 273) |
| TOTAL | (197, 388) | (65, 835) | 187,221 | (17, 778) | (117,280) | (211,060) |
| Opening net debt | 1,405 | |||||
| Total flows | (211,060) | |||||
| Net Debt Acquired/Repaid | (116,086) | |||||
| Exchange rate adjustments to debt | 10,980 | |||||
| Closing net debt | (314,761) |
NOTE 9. SUBSEQUENT EVENTS
At 30 June 2006, \$134 million was provided to complete the ITC takeover. Subsequent to year end the majority of this liability has been settled.
No other matter or circumstance has arisen since the end of the financial year which is not otherwise dealt with in this report or in the consolidated financial statements, that has significantly affected or may significantly affect the operations of the Group, the results of those operations or the state of affairs of the Group in subsequent financial periods.
CHANGES IN CONTINGENT LIABILITIES AND ASSETS NOTE 10.
Tax
The Group has previously advised of a review by the Australian Taxation Office (ATO) of the tax treatment of the sale of the Building Products Division in October 1997, for which assessments of \$47m have been received, inclusive of penalties and interest.
The Group has sought independent professional advice in relation to the issues involved and is objecting to the further amended assessment. At 30 June 2006, the provision for taxation is sufficient to cover any anticipated payment under the assessment, should the Group be unsuccessful in its objection.
The Group's tax returns for 2002 and 2003 are being audited as part of the ATO's large business audit program. No amended assessment has been received.
NOTE 11. CHANGES IN THE COMPOSITION OF THE ENTITY
(a) Controlled Entities Acquired
The following controlled entities were acquired by the consolidated entity at the date stated and their operating results have been included within the income statement from the relevant date.
| Equity and consideration paid | Date | Proportion | CONSOLIDATED | |
|---|---|---|---|---|
| Control Acquired |
of Shares Acquired |
2006 \$000 |
2005 \$000 |
|
| PlantTech Pty Limited* | ||||
| - Cash | 2/9/05 | 50% | 5.416 | |
| Neville Smith Group Pty Limited | ||||
| – Cash | 10/9/04 | 100% | u. | 30,099 |
| Pitt Son & Keene Pty Ltd | ||||
| - Cash | 1/7/04 | 100% | 2.710 | |
| Bremer Woll Kämmerei AG** | 12/1/05 | 93% | $\blacksquare$ | 27,451 |
| BWK Elders Australia Pty Ltd** | 12/1/05 | 97% | ||
| BWK Elders Europe GmbH** | 12/1/05 | 93% | ||
| BWK Holdings Pty Ltd** | 12/1/05 | 100% | ||
| 5.416 | 60,260 |
* PlantTech Pty Limited was a 50% equity accounted associate at 30 June 2005
** Previously equity accounted
The consolidated entity also acquired during the financial year the remaining minority interest in controlled entity, Integrated Tree Cropping Ltd.
NOTE 11. CHANGES IN THE COMPOSITION OF THE ENTITY (continued)
(a) Controlled Entities Acquired (continued)
| CONSOLIDATED | ||
|---|---|---|
| 2006 | 2005 | |
| The aggregate amounts of assets and liabilities acquired by | \$000 | \$000 |
| major class are: | ||
| Cash | (3,351) | 12,963 |
| Receivables | 2,133 | 77,763 |
| Inventories | 2,976 | 87,163 |
| Investments | 971 | 45,742 |
| Property, plant and equipment | 127 | 97,573 |
| Goodwill | 3,672 | 65,669 |
| Other assets | 64 | 2,749 |
| Tax assets and liabilities | 1,606 | 9,618 |
| Creditors and provisions | (6, 133) | (88, 296) |
| Borrowings | w | (116,086) |
| Outside equity interests | (40,000) | |
| 2,065 | 154,858 | |
| Loans and investments in associates now controlled | (81, 635) | |
| 2,065 | 73,223 | |
| Outflow of cash to acquire the entities, net of cash acquired: | ||
| Cash consideration | (2,065) | (73, 223) |
| Cash balance acquired | (3,351) | 12,963 |
| Net Outflow of eash | (5,416) | (60, 260) |
(b) Controlled Entities Disposed
In 2006, the Group sold down equity in Australian Fine China, retaining 48% equity interest. The 2005 comparative relates to the disposal of Air International's Global Thermal Operations.
| CONSOLIDATED | ||
|---|---|---|
| 2006 | 2005 | |
| \$000 | \$000 | |
| Proceeds receivable on disposal of shares | 1,556 | 252,100 |
| Less costs of disposal | $\overline{\phantom{a}}$ | (12, 486) |
| 1,556 | 239,614 | |
| The carrying amounts of assets and liabilities disposed of by | ||
| major class are: | ||
| Receivables | 2.366 | 46,917 |
| Inventories | 5,753 | 14,100 |
| Other assets (including design $&$ development) | 806 | 51,603 |
| Property, plant & equipment | 1,389 | 27,356 |
| Intangibles | 1.605 | |
| Payables | (12, 284) | (34,251) |
| Provisions | (631) | (3,802) |
| Net (liabilities)/assets of entity sold | (2,601) | 103,528 |
| Unrealised amounts eliminated | 4,022 | (20, 168) |
| Profit on disposal (before tax) | 1,421 | 83,360 |
NOTE12 TRANSITION TO AIFRS
For all periods up to and including the year ended 30 June 2005, the Group prepared its financial statements in accordance with Australian generally accepted accounting principles (AGAAP). These financial statements for the year ended 30 June 2006 are the first the Group is required to prepare in accordance with Australian equivalents to International Financial Reporting Standards (AIFRS).
Accordingly, the Group has prepared financial statements that comply with AIFRS applicable for periods beginning on or after 1 January 2005. In preparing these financial statements, the Group has started from an opening balance sheet as at 1 July 2004, the Group's date of transition to AIFRS, and made those changes in accounting policies and other restatements required by AASB 1.
This note explains the principal adjustments made by the Group in restating its AGAAP balance sheet as at 1 July 2004 and its previously published AGAAP financial statements for the year ended 30 June 2005.
AASB 1 allows first time adopters certain exemptions from the general requirement to apply AIFRS retrospectively. The Group has taken the following exemptions:
Business combinations
AASB 3 Business Combinations was not applied retrospectively to past business combinations (i.e. business combinations that occurred before the date of transition to AIFRS).
Financial instruments
Comparative information for financial instruments is prepared in accordance with AGAAP - the Group having adopted AASB 139 Financial Instruments: Recognition and Measurement and AASB 132 Financial Instruments: Disclosure and Presentation from 1 July 2005.
Share-based payment transactions
AASB 2 Share-Based Payments is applied only to equity instruments granted after 7 November 2002 that had not vested on or before 1 January 2005.
Restated AIFRS Statement of Cash Flows
There are no material impacts between the cash flows presented under AGAAP and those presented under AIFRS.
The impacts of adopting AIFRS on the total equity and profit after tax as reported under Australian Accounting Standards applicable before 1 January 2005 ('AGAAP') are illustrated below.
TRANSITION TO AIFRS (continued) NOTE12
Reconciliation of Balance Sheet under AGAAP to that under AIFRS as at 30 June 2005
| Note | CONSOLIDATED | |||
|---|---|---|---|---|
| AGAAP | AIFRS | AIFRS | ||
| \$000 | Impact | \$000 | ||
| Current Assets | ||||
| Cash and cash equivalents | 365,803 | 365,803 | ||
| Trade and other receivables | 10,13 | 617,254 | (27,127) | 590,127 |
| Livestock | 61,400 | 61,400 | ||
| Inventories | 510,546 | 510,546 | ||
| Held for trading financial assets | 10,940 | 10,940 | ||
| Other assets | $\overline{2}$ | 117,792 | (1,290) | 116,502 |
| Total Current Assets | 1,683,735 | (28, 417) | 1,655,318 | |
| Non Current Assets | ||||
| Trade and other receivables | 70,196 | 70,196 | ||
| Forestry Inventories |
13,940 | 13,940 | ||
| 55,257 | 55,257 | |||
| Other financial assets | 15 | 1,800 | 1,800 | |
| Investments in associates and joint ventures Property, plant and equipment |
4, 5, 7 | 492,829 | (1, 534) | 491,295 |
| Investment properties | 5 | 289,622 37,403 |
(92, 118) 63,737 |
197,504 101,140 |
| Intangibles | 3,4 | 219,473 | (3, 444) | 216,029 |
| Deferred tax assets | 11 | 60,615 | (288) | 60,327 |
| Other | $\overline{2}$ | 48,058 | (21, 159) | 26,899 |
| Total Non Current Assets | 1,289,193 | (54,806) | 1,234,387 | |
| Total Assets | 2,972,928 | (83, 223) | 2,889,705 | |
| Current Liabilities | ||||
| Trade and other payables | 878,108 | 878,108 | ||
| Interest bearing loans and borrowings | 145,008 | 145,008 | ||
| Current tax payable | 11 | 32,480 | (1,938) | 30,542 |
| Provisions | 6,7 | 198,308 | 8,797 | 207,105 |
| Total Current Liabilities | 1,253,904 | 6,859 | 1,260,763 | |
| Non Current Liabilities | ||||
| Trade and other payables | 32,615 | 32,615 | ||
| Interest bearing loans and borrowings | 11 | 535,556 | 535,556 60,705 |
|
| Deferred tax payable | 38,761 29,754 |
21,944 | 29,754 | |
| Provisions | ||||
| Total Non Current Liabilities Total Liabilities |
636,686 1,890,590 |
21,944 28,803 |
658,630 1,919,393 |
|
| Net Assets | 1,082,338 | (112,026) | 970,312 | |
| Equity | ||||
| Issued capital Reserves |
454,420 80,180 |
454,420 | ||
| 13,14 | 426,242 | (37,312) | 42,868 | |
| Retained Earnings | 960,842 | (74, 845) (112, 157) |
351,397 | |
| Minority interests | 12 | 121,496 | 131 | 848,685 121,627 |
| Total Equity | 1,082,338 | (112,026) | 970,312 |
TRANSITION TO AIFRS (continued) NOTE12
Reconciliation of Balance Sheet under AGAAP to that under AIFRS as at 1 July 2004
| Note | CONSOLIDATED | |||
|---|---|---|---|---|
| AGAAP | AIFRS | AIFRS | ||
| \$000 | Impact | \$000 | ||
| Current Assets | ||||
| Cash and cash equivalents | 389,298 | 389,298 | ||
| Trade and other receivables | 10,13 | 646,408 | (17, 535) | 628,873 |
| Livestock | 36,391 | 36,391 | ||
| Inventories | 266,314 | 266,314 | ||
| Other assets | 2 | 119,936 | (646) | 119,290 |
| Total Current Assets | 1,458,347 | (18, 181) | 1,440,166 | |
| Non Current Assets | ||||
| Trade and other receivables | 75,002 | 75,002 | ||
| Forestry | 12,643 | 12,643 | ||
| Inventories | 70,349 | 70,349 | ||
| Other financial assets | 23,371 | 23,371 | ||
| Investments in associates and joint ventures | 290,908 | 290,908 | ||
| Property, plant and equipment | 4,5,7 | 228,582 | (13,323) | 215,259 |
| Investment properties | 5. | 7,465 | 7,465 | |
| Intangibles | 3,4 | 133,805 | (3,784) | 130,021 |
| Deferred tax assets | 43,332 | 43,332 | ||
| Other | $\overline{c}$ | 94,940 | (20, 904) | 74,036 |
| Total Non Current Assets | 972,932 | (30, 546) | 942,386 | |
| Total Assets | 2,431,279 | (48, 727) | 2,382,552 | |
| Current Liabilities | ||||
| Trade and other payables | 825,023 | 825,023 | ||
| Interest bearing loans and borrowings | 58,416 | 58,416 | ||
| Current tax payable | 24,859 | $\blacksquare$ | 24,859 | |
| Provisions | 6,7 | 158,062 | 3,048 | 161,110 |
| Total Current Liabilities | 1,066,360 | 3,048 | 1,069,408 | |
| Non Current Liabilities | ||||
| Trade and other payables | 21,635 | 21,635 | ||
| Interest bearing loans and borrowings | 336,999 | 336,999 | ||
| Deferred tax payable | 11 | 30,938 | 14,331 | 45,269 |
| Provisions | 14,189 | 14,189 | ||
| Total Non Current Liabilities | 403,761 | 14,331 | 418,092 | |
| Total Liabilities | 1,470,121 | 17,379 | 1,487,500 | |
| Net Assets | 961,158 | (66, 106) | 895,052 | |
| Equity | ||||
| Issued capital | 446,920 | 446,920 | ||
| Reserves | 13,14 | 54,265 | (36,177) | 18,088 |
| Retained Earnings | 388,969 | (29, 973) | 358,996 | |
| 890,154 | (66, 150) | 824,004 | ||
| Minority interests | 12 | 71,004 | 44 | 71,048 |
| Total Equity | 961,158 | (66, 106) | 895,052 |
NOTE12 TRANSITION TO AIFRS (continued)
Reconciliation of Net Profit under AGAAP to that under AIFRS for the year ended 30 June 2005
| Note | CONSOLIDATED | |||
|---|---|---|---|---|
| AGAAP | AIFRS | AIFRS | ||
| \$000 | Impact | \$000 | ||
| Continuing operations | ||||
| Sales revenue | 9 | 3,176,115 | (1, 431) | 3,174,684 |
| Cost of sales | 2 | (2,428,655) | (2,104) | (2,430,759) |
| Other revenues | 37,402 | 37,402 | ||
| Other expenses | 1,3,10 | (681, 387) | 5,331 | (676, 056) |
| Share of net profits of associate and joint ventures accounted for using the equity method |
15 | 26,287 | (1, 534) | 24,753 |
| Profit on sale of non current assets | 8 | 81,833 | 2,787 | 84,620 |
| Other expenses – write down of assets $\&$ provisions | 4,6 | (32, 394) | (39,060) | (71, 454) |
| Profit before net borrowing costs and tax expense | 179,201 | (36, 011) | 143,190 | |
| Interest revenue | 19,878 | 19,878 | ||
| Borrowing costs | (45,385) | 652 | (44, 733) | |
| Profit before tax expense | 153,694 | (35,359) | 118,335 | |
| Income tax expense | 11 | (50, 931) | 3,055 | (47, 876) |
| Profit after income tax expense | 102,763 | (32, 304) | 70,459 | |
| Net profit attributable to minority interest | 12 | (11, 738) | (87) | (11, 825) |
| Net profit attributable to members of the parent entity | 91,025 | (32, 391) | 58,634 | |
| Net profit from underlying continuing operations attributable to members of the parent equity |
70,634 | 1,247 | 71,811 |
Notes:
- Share based payment costs are charged to the income statement under AASB 2 "Share Based Payment" but not $\mathbf{1}$ . under AGAAP.
- $\overline{2}$ . Research costs and certain other costs are not allowed to be capitalised under AASB 138 "Intangible Assets" but were capitalised under AGAAP where future benefits were expected beyond reasonable doubt.
- $\overline{3}$ . Goodwill is not amortised under AASB 3 "Business Combinations" but was amortised under AGAAP.
NOTE12 TRANSITION TO AIFRS (continued)
Notes (continued):
- $\overline{4}$ . AASB 136 "Impairment of Assets" requires the recoverable amount of an asset to be determined as the higher of its fair value less costs to sell and value in use. The Group's assets were tested for impairment as part of the cash generating unit to which they belong and impairment losses were recognised under AIFRS. The change from the expected impairment disclosed in 30 June 2005 relates to the finalisation of all cash generating unit impairment transition adjustments during the year to 30 June 2006.
- $\overline{5}$ . Investment properties were recorded at fair value under AGAAP but disclosed as part of property, plant and equipment. They remain at fair value under AIFRS but are disclosed separately.
- A restructuring provision is recognised under AASB 137 "Provisions, Contingent Liabilities and Contingent 6. Assets" but not under AGAAP.
- Under AIFRS at the commencement of a lease or operation, the present value of restoration obligations is 7. recognised as a non current liability and the cost of future restoration is capitalised as part of the asset. The capitalised cost is depreciated over the life of the lease or project and the provision is decreased as the discounting of the liability unwinds.
- As a result of AIFRS adjustments to research costs capitalised, the profit on the sale of the Thermal Operation in 8. 2005 had to be restated. This resulted in an additional \$2.8m increase to profit for that year.
- $Q_{\perp}$ Income from managed investment schemes (MIS) is recognised in each reporting period in accordance with the amount of work done during that period. Under AIFRS, certain costs incurred are excluded from the calculation of work done, as they are not directly attributable to the revenue earned. This has resulted in a reduction in the amount of income recognised in prior periods.
- A pension asset is recognised under AASB 119 "Employee Benefits" from the defined benefit pension fund, but $10.$ was not recognised under AGAAP. This increase in pension asset during the period has resulted in an increase in profit.
- $11.$ The tax effect of the adjustments arising from AIFRS has resulted in an increase in deferred tax liability of \$14.3m on transition as at 1 July 2004. This has also resulted in an increase in deferred tax liability of \$21.9m, increase in current tax payable of \$1.9m and decrease in deferred tax asset of \$0.3m in the opening balance sheet of 30 June 2005 and a reduction in current tax expense for 30 June 2005 of \$3m.
- $12.$ Some of the AIFRS adjustments result from adjustments made in partially owned subsidiaries.
- Loans to employees under company share incentive schemes were disclosed as a receivable under AGAAP but 13. as part of reserves under AIFRS.
- $14.$ Existing revaluation reserves have been tax effected for the first time under AASB 116 "Property Plant and Equipment" at a rate of 30%.
- $157$ The net AIFRS effect recognised in the Group's associate investments financial position has been recognised as an adjustment to equity earnings in the 2005 year.
Restated Balance Sheet on adoption of AASB 132 and AASB 139 as at 1 July 2005
| Note | CONSOLIDATED | |||
|---|---|---|---|---|
| AIFRS | AIFRS | |||
| 30 June 05 | Adjust | 1 July 05 | ||
| \$000 | \$000 | |||
| Current Assets | ||||
| Cash and cash equivalents | 365,803 | $\blacksquare$ | 365,803 | |
| Trade and other receivables | 1 | 590,127 | (273) | 589,854 |
| Livestock | 61,400 | 61,400 | ||
| Inventories | 1 | 510,546 | (317) | 510,229 |
| Financial instruments | 1 | 243 | 243 | |
| Held for trading financial assets | 10,940 | 812 | 11,752 | |
| Other assets | 116,502 | $\blacksquare$ | 116,502 | |
| Total Current Assets | 1,655,318 | 465 | 1,655,783 | |
| Non Current Assets | ||||
| Trade and other receivables | 70,196 | 70,196 | ||
| Forestry | 13,940 | 13,940 | ||
| Inventories | 55,257 | 55,257 | ||
| Other financial assets | 2 | 1,800 | 1,800 | |
| Investments in associates and joint ventures | 491,295 | 491,295 | ||
| Property, plant and equipment | 185,643 | 185,643 | ||
| Investment properties | 113,001 | 113,001 | ||
| Intangibles | 216,029 | 216,029 | ||
| Deferred tax assets | 60,327 | 60,327 | ||
| Other | 26,899 | 26,899 | ||
| Total Non Current Assets | 1,234,387 | $\overline{\phantom{a}}$ | 1,234,387 | |
| Total Assets | 2,889,705 | 465 | 2,890,170 | |
| Current Liabilities | ||||
| Trade and other payables | 1 | 878,108 | (792) | 877,316 |
| Interest bearing loans and borrowings | 145,008 | 145,008 | ||
| Current tax payable | 30,542 | 30,542 | ||
| Provisions | 1 | 207,105 | (1,071) | 206,034 |
| Financial instruments | 1 | 20,314 | 20,314 | |
| Total Current Liabilities | 1,260,763 | 18,451 | 1,279,214 | |
| Non Current Liabilities | ||||
| Trade and other payables | l | 32,615 | (32, 615) | |
| Interest bearing loans and borrowings | l | 535,556 | (47, 574) | 487,982 |
| Deferred tax payable | l | 60,705 | 195 | 60,900 |
| Provisions | 29,754 | 29,754 | ||
| Total Non Current Liabilities Total Liabilities |
658,630 1,919,393 |
(79, 994) (61, 543) |
578,636 1,857,850 |
|
| Net Assets | 970,312 | 62,008 | 1,032,320 | |
NOTE12 TRANSITION TO AIFRS (continued)
Restated Balance Sheet on adoption of AASB 132 and AASB 139 as at 1 July 2005
| Note | CONSOLIDATED | |||
|---|---|---|---|---|
| AIFRS 30 June 05 \$000 |
Adjust | AIFRS $1$ July 05 \$000 |
||
| Equity | ||||
| Issued capital | 454,420 | $\overline{\phantom{a}}$ | 454,420 | |
| Convertible notes | 3 | ٠ | 54,576 | 54,576 |
| Reserves | 42,868 | 3,748 | 46,616 | |
| Retained Earnings | 351,397 | 3,684 | 355,081 | |
| 848,685 | 62,008 | 910,693 | ||
| Minority interests | 121,627 | 121,627 | ||
| Total Equity | 970,312 | 62,008 | 1,032,320 |
Notes:
- $\mathbf{1}$ Under AASB 139 "Financial Instruments: Recognition and Measurement" derivative financial instruments such as foreign currency contracts and interest rate swaps are fair valued. Unrealised gains on unexpired foreign exchange contracts that qualify for hedge accounting will be accounted for depending on whether they are classified as a fair value hedge or a cash flow hedge. Fair value hedge movements are recognised immediately in the income statement, as is the fair value of associated hedged item. Cash flow hedge movements are recognised directly in equity, although any ineffective portion is recognised in the income statement.
- Financial assets that are classified as held for short term trading or designated as fair value through profit or loss $\overline{2}$ under AASB 139 "Financial Instruments: Recognition and Measurement" are carried at fair value. They were carried at cost under AGAAP.
- 3 Convertible notes were treated as interest bearing liabilities under AGAAP. Under AIFRS an equity portion has been determined in accordance with AASB 139 "Financial Instruments: Recognition and Measurement" and reclassified to equity.