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| Name | Symbol | Market | Type |
|---|---|---|---|
| Sims Ltd (PK) | USOTC:SMSMY | OTCMarkets | Depository Receipt |
| Price Change | % Change | Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| -0.227 | -2.64% | 8.363 | 7.66 | 8.83 | 8.363 | 8.26 | 8.26 | 975 | 21:04:01 |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K
REPORT OF FOREIGN PRIVATE ISSUERS
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of October, 2014
Commission File Number 001-33983
Sims Metal Management Limited
(Translation of registrant’s name into English)
16 West 22nd Street, 10th Floor
New York, NY 10010
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
Form 20-F x Form 40-F ¨
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ¨
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ¨
Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes ¨ No x
If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):
This report contains the following:
| Exhibit No. |
||
| 99.1 | Proxy Form and Notice of 2014 Annual General Meeting to the shareholders of Sims Metal Management Limited | |
| 99.2 | Sims Metal Management Limited 2014 Annual Report | |
| 99.3 | Announcement pertaining to Sims Metal Management Limited’s Board succession dated October 10, 2014 | |
| 99.4 | Announcement pertaining to Sims Metal Management Limited’s intention to deregister from the SEC in the US dated October 14, 2014 | |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| October 14, 2014 | SIMS METAL MANAGEMENT LIMITED | |||
| /s/ Frank M. Moratti | ||||
| Frank M. Moratti | ||||
| Group Company Secretary and General Counsel | ||||
Exhibit 99.1
Sims Metal Management Limited
ABN 69 114 838 630
|
├ 000001 000 SGM MR SAM SAMPLE FLAT 123 123 SAMPLE STREET THE SAMPLE HILL SAMPLE ESTATE SAMPLEVILLE VIC 3030 |
13 October 2014
Dear Shareholder
I have pleasure in inviting you to attend the 2014 Annual General Meeting of Sims Metal Management Limited to be held at The Westin, Heritage Ballroom, 1 Martin Place, Sydney NSW on Thursday, 13 November 2014 at 10:30am (AEDT).
Enclosed is the Notice of Annual General Meeting which sets out the items of business to be considered.
If you are attending, please bring this letter with you to facilitate registration into the meeting.
If you are unable to attend the meeting, you are encouraged to complete the enclosed proxy form. The proxy form should be returned in the envelope provided so that it is received no later than 48 hours before the commencement of the meeting. Alternatively, you may vote online at www.investorvote.com.au.
Corporate shareholders will be required to complete a “Certificate of Appointment of Representative” to enable a person to attend on their behalf. A form of this certificate may be obtained from the Company’s share registry.
A copy of the address to be given by each of the Chairman and Chief Executive Officer at the meeting will be available for viewing and downloading from the Company’s website at www.simsmm.com, following the meeting. You may also request a copy from the Company.
I look forward to your attendance at the meeting.
Yours sincerely
Frank Moratti
Company Secretary
Samples/000001/000002
T 000001 000 SGM MR SAM SAMPLE FLAT 123 123 SAMPLE STREET THE SAMPLE HILL SAMPLE ESTATE SAMPLEVILLE VIC 3030 Lodge your vote: Online: www.investorvote.com.au ?By Mail: Computershare Investor Services Pty Limited GPO Box 242 Melbourne Victoria 3001 Australia Alternatively you can fax your form to (within Australia) 1800 783 447 (outside Australia) +61 3 9473 2555 For Intermediary Online subscribers only (custodians) www.intermediaryonline.com For all enquiries call: (within Australia) 1300 850 505 (outside Australia) +61 3 9415 4000 Proxy Form Vote and view the annual report online •Go to www.investorvote.com.au or scan the QR Code with your mobile device. • Follow the instructions on the secure website to vote. Your access information that you will need to vote: Control Number: 999999 SRN/HIN: I9999999999 PIN: 99999 PLEASE NOTE: For security reasons it is important that you keep your SRN/HIN confidential. For your vote to be effective it must be received by 10:30am (AEDT) on Tuesday, 11 November 2014 How to Vote on Items of Business All your securities will be voted in accordance with your directions. Appointment of Proxy Voting 100% of your holding: Direct your proxy how to vote by marking one of the boxes opposite each item of business. If you do not mark a box your proxy may vote or abstain as they choose (to the extent permitted by law). If you mark more than one box on an item your vote will be invalid on that item. Voting a portion of your holding: Indicate a portion of your voting rights by inserting the percentage or number of securities you wish to vote in the For, Against or Abstain box or boxes. The sum of the votes cast must not exceed your voting entitlement or 100%. Appointing a second proxy: You are entitled to appoint up to two proxies to attend the meeting and vote on a poll. If you appoint two proxies you must specify the percentage of votes or number of securities for each proxy, otherwise each proxy may exercise half of the votes. When appointing a second proxy write both names and the percentage of votes or number of securities for each in Step 1 overleaf. A proxy need not be a securityholder of the Company. Signing Instructions for Postal Forms Individual: Where the holding is in one name, the securityholder must sign. Joint Holding: Where the holding is in more than one name, all of the securityholders should sign. Power of Attorney: If you have not already lodged the Power of Attorney with the registry, please attach a certified photocopy of the Power of Attorney to this form when you return it. Companies: Where the company has a Sole Director who is also the Sole Company Secretary, this form must be signed by that person. If the company (pursuant to section 204A of the Corporations Act 2001) does not have a Company Secretary, a Sole Director can also sign alone. Otherwise this form must be signed by a Director jointly with either another Director or a Company Secretary. Please sign in the appropriate place to indicate the office held. Delete titles as applicable. Attending the Meeting Bring this form to assist registration. If a representative of a corporate securityholder or proxy is to attend the meeting you will need to provide the appropriate “Certificate of Appointment of Corporate Representative” prior to admission. A form of the certificate may be obtained from Computershare or online at www.investorcentre.com under the help tab, “Printable Forms”. Comments & Questions: If you have any comments or questions for the company, please write them on a separate sheet of paper and return with this form. GO ONLINE TO VOTE, or turn over to complete the form
MR SAM SAMPLE FLAT 123 123 SAMPLE STREET THE SAMPLE HILL SAMPLE ESTATE SAMPLEVILLE VIC 3030 Change of address. If incorrect, mark this box and make the correction in the space to the left. Securityholders sponsored by a broker (reference number commences with ’X’) should advise your broker of any changes. Proxy Form Please mark to indicate your directions STEP 1 Appoint a Proxy to Vote on Your Behalf XX I/We being a member/s of Sims Metal Management Limited hereby appoint the Chairman OR?PLEASE NOTE: Leave this box blank if you have selected the Chairman of the of the Meeting Meeting. Do not insert your own name(s). or failing the individual or body corporate named, or if no individual or body corporate is named, the Chairman of the Meeting, as my/our proxy to act generally at the Meeting on my/our behalf and to vote in accordance with the following directions (or if no directions have been given, and to the extent permitted by law, as the proxy sees fit) at the Annual General Meeting of Sims Metal Management Limited to be held at The Westin, Heritage Ballroom, 1 Martin Place, Sydney NSW on Thursday, 13 November 2014 at 10:30am (AEDT) and at any adjournment or postponement of that Meeting. Chairman authorised to exercise undirected proxies on remuneration related resolutions: Where I/we have appointed the Chairman of the Meeting as my/our proxy (or the Chairman becomes my/our proxy by default), I/we expressly authorise the Chairman to exercise my/our proxy on Items 7, 8 and 9 (except where I/we have indicated a different voting intention below) even though Items 7, 8 and 9 are connected directly or indirectly with the remuneration of a member of key management personnel, which includes the Chairman. Important Note: If the Chairman of the Meeting is (or becomes) your proxy you can direct the Chairman to vote for or against or abstain from voting on Items 7, 8 and 9 by marking the appropriate box in step 2 below. STEP 2 Items of Business? PLEASE NOTE: If you mark the Abstain box for an item, you are directing your proxy not to vote on your behalf on a show of hands or a poll and your votes will not be counted in computing the required majority. 1. To re-elect Mrs Heather Ridout as a Director of the Company. 2. To re-elect Mr John DiLacqua as a Director of the Company. 3. To re-elect Mr Chris Renwick as a Director of the Company. 4. To elect Ms Deborah O’Toole as a Director of the Company. 5. To elect Ms Georgia Nelson as a Director of the Company. 6. To appoint Deloitte Touche Tohmatsu as auditor of the Company. 7. To adopt the Remuneration Report for the year ended 30 June 2014. 8. To approve the participation in the Sims Metal Management Long Term Incentive Plan by Mr Claro. 9. Termination benefits for employees holding managerial or executive offices. The Chairman of the Meeting intends to vote undirected proxies in favour of each item of business. In exceptional circumstances, the Chairman of the Meeting may change his/her voting intention on any resolution, in which case an ASX announcement will be made. SIGN Signature of Securityholder(s) This section must be completed. Individual or Securityholder 1 Securityholder 2 Securityholder 3 Sole Director and Sole Company Secretary Director Director/Company Secretary Contact Contact Daytime / / Name Telephone Date S G M 1 6 9 1 5 3 A
BUSINESS
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| SIMS METAL MANAGEMENT LIMITED NOTICE OF 2014 ANNUAL GENERAL MEETING |
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EXPLANATORY MEMORANDUM FOR THE 2014 ANNUAL GENERAL MEETING (MEETING)
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EXPLANATORY MEMORANDUM FOR THE 2014 ANNUAL GENERAL MEETING (MEETING)
| SIMS METAL MANAGEMENT LIMITED NOTICE OF 2014 ANNUAL GENERAL MEETING |
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EXPLANATORY MEMORANDUM FOR THE 2014 ANNUAL GENERAL MEETING (MEETING)
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EXPLANATORY MEMORANDUM FOR THE 2014 ANNUAL GENERAL MEETING (MEETING)
| SIMS METAL MANAGEMENT LIMITED NOTICE OF 2014 ANNUAL GENERAL MEETING |
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EXPLANATORY MEMORANDUM FOR THE 2014 ANNUAL GENERAL MEETING (MEETING)
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EXPLANATORY MEMORANDUM FOR THE 2014 ANNUAL GENERAL MEETING (MEETING)
| SIMS METAL MANAGEMENT LIMITED NOTICE OF 2014 ANNUAL GENERAL MEETING |
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EXPLANATORY MEMORANDUM FOR THE 2014 ANNUAL GENERAL MEETING (MEETING)
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EXPLANATORY MEMORANDUM FOR THE 2014 ANNUAL GENERAL MEETING (MEETING)
| SIMS METAL MANAGEMENT LIMITED NOTICE OF 2014 ANNUAL GENERAL MEETING |
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EXPLANATORY MEMORANDUM FOR THE 2014 ANNUAL GENERAL MEETING (MEETING)
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ANNEXURE 1
Comparator companies for TSR performance hurdle
ANNEXURE 2
Summary of potential termination benefits for which approval is being sought
| Potential benefits / treatment on cessation of employment | ||||
| Agreement / Plan |
KMP |
Non KMP Executives | ||
| Employment Agreements
All of the Relevant Executives who are KMPs as described in the Remuneration Report are employed under Employment Agreements. Further details about the Employment Agreements of those KMPs are contained in section F of the Remuneration Report.
For the KMPs (other than Mr McGree, who has a pre-existing agreement), the potential termination benefits available to them under their Employment Agreements are or will be substantially similar to those that Mr Claro is entitled to and which were approved by Shareholders at the Company’s 2013 Annual General Meeting.
The other Relevant Executives (Non KMP Executives) are, or will be, also employed under Employment Agreements, the terms and conditions of which may vary from individual to individual. |
Payment in lieu of notice
The Employment Agreements for KMPs (other than Mr McGree) typically contain or will contain the ability for the Company or the relevant Group Company that is the employer (Employer Company) to make a payment in lieu of some or all of the applicable termination notice period (which is three months).
In the case of Mr McGree, the Employer Company may make a payment in lieu of the applicable termination notice period which is 12 months.
Where payment in lieu of notice is made, the payment will be calculated by reference to the KMP’s total fixed remuneration. |
Payment in lieu of notice
The Employment Agreements for some of the Non KMP Executives also contain or will contain the ability for the Employer Company to make a payment in lieu of some or all of the applicable termination notice period (which is between one month and 12 months).
The payment in lieu of notice will also be calculated by reference to the Non KMP Executive’s total fixed remuneration. | ||
|
Severance payment
Under the Employment Agreements for KMPs (other than Mr McGree), the KMPs may be entitled to a severance payment of up to 12 months total fixed remuneration on termination of their employment:
• by the Employer Company for convenience; or
• by the KMPs for Good Reason.
“Good Reason” includes (amongst other events) where there has been a material diminution or adverse change in the KMP’s title or responsibilities, material reduction in the KMP’s base remuneration or target incentive levels under the STI Plan or LTI Plan, a material breach of the terms of the KMP’s Employment Agreement by the Employer Company that is not cured within a specified period, and a change of control of the Company and the new controller of the Company does not assume the Company’s obligations under the KMP’s Employment Agreement.
Mr McGree is not entitled to a severance payment under his Employment Agreement but, in the case of redundancy, may be entitled to a redundancy payment as described below in the “Redundancy Policy” section of this table. |
Severance payment
Some of the Non KMP Executives may also be entitled to a severance payment of up to 12 months total fixed remuneration on termination of their employment:
• by the Employer Company for convenience; or
• by the Non KMP Executive for Good Reason.
In these Employment Agreements for Non KMP Executives, “Good Reason” will typically include events which are similar to those under the KMP Employment Agreements, but may also include a circumstance where there has been a material change by the Employer Company in the geographic location at which the Non KMP Executive must perform his or her services. | |||
| SIMS METAL MANAGEMENT LIMITED NOTICE OF 2014 ANNUAL GENERAL MEETING |
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| Potential benefits / treatment on cessation of employment | ||||
| Agreement / Plan |
KMP |
Non KMP Executives | ||
| Accrued benefits
Accrued, but untaken total fixed remuneration, holiday leave, long service leave and other leave, and reimbursement for incurred expenses will be paid out on cessation of employment.
Leave will be accrued and paid out in accordance with contractual obligations, the law and practice in the relevant jurisdiction, as well as any applicable Group policy (e.g. the Group’s Paid Time Off Policy for Group employees located in the United States), which may be greater than the entitlements under law.
|
Accrued benefits
The Non KMP Executives are also, or will also be, entitled, under their Employment Agreements, to receive similar accrued and unpaid benefits as described in the previous column for the KMPs.
| |||
| Pro-rata bonus
The Employment Agreements for KMPs typically provide, or will provide, that the unpaid portion of any STI bonus accrued up to the termination date may be payable to the KMP in circumstances where:
• the KMP is terminated by the Employer Company for convenience;
• the KMP terminates his or her employment for Good Reason;
• the employment is terminated on the KMP’s death or permanent disablement; or
• where the employment is terminated in other circumstances determined at the discretion of the Board.
However, in certain circumstances, the Board has the discretion not to pay a KMP their pro-rata bonus having regard to the performance of that KMP over the preceding years. |
Pro-rata bonus
Some Non KMP Executives may also be entitled, under their Employment Agreements, to receive, on termination of their employment by the Employer Company without cause or by the Non KMP Executive for Good Reason (described above), the accrued but unpaid portion of their STI bonus up to the date of termination.
Additional bonus
In addition to an entitlement to a pro-rata bonus as described above, some Non KMP Executives may also be entitled, under their Employment Agreements, if their employment is terminated by the Employer Company without cause or by the Non KMP Executive for Good Reason, to a payment of up to 100% of the Non KMP Executive’s maximum STI bonus entitlement. | |||
| Continued equity award vesting
The Company (or the Employer Company) has agreed with a number of KMPs, and may agree with other KMPs, to continued vesting of equity awards under the LTI Plan (subject to any applicable performance hurdles) granted to them before termination where:
• the KMP is terminated by the Employer Company for convenience;
• the KMP terminates his or her employment for Good Reason;
• the employment is terminated on the KMP’s death or permanent disablement; or
• where the employment is terminated in other circumstances determined at the discretion of the Board. |
Continued equity award vesting
Some Non KMP Executives are, or may, also be entitled to continued vesting (subject to any applicable performance hurdles) of their equity awards granted to them under the LTI Plan before the termination if their employment is terminated by the Employer Company without cause or by the Non KMP Executive for Good Reason. | |||
14
| Potential benefits / treatment on cessation of employment | ||||
| Agreement / Plan |
KMP |
Non KMP Executives | ||
| Payment for restrictive covenants
The Company (or the Employer Company) may make payment in consideration for entry by the departing KMP into (or the extension of) restrictive, non-solicit and/or non-compete covenants as the Board may consider appropriate to protect the interests of the Group, and which would be in addition to any contractual rights the Employer Company may already have under the Employment Agreements.
The length of such covenants would typically be between three and 12 months and the amount of the payment for the covenant will be determined by the Board based on the content and duration of the covenant. |
Payment for restrictive covenants
The Company (or the Employer Company) has agreed, or may agree, to make payment to some Non KMP Executives in consideration for restrictive, non-solicit and/or non-compete covenants. The length of these covenants may be up to 12 months.
The Employment Agreements for some Non KMP Executives provide that if a non-compete or non-solicit covenant period is imposed on the Non KMP Executive, he or she must be paid “as normal” during his or her covenant period. This may include an entitlement to STI bonus payments as if he or she were fulfilling his or her duties as normal during that period. | |||
| Continued medical benefits
The Company (or the Employer Company) may provide continued medical benefits and health insurance coverage (including continued health insurance coverage under the US Consolidated Omnibus Budget Reconciliation Act of 1985), generally for United States employees and for a period of up to 12 months from cessation of employment. |
Continued medical benefits
Some Non KMP Executives may also be entitled to continued medical benefits as described in the previous column for KMPs. | |||
| STI Plan |
Both KMPs and Non KMP Executives may be entitled to participate in the Company’s STI Plan. | |||
| Under the STI Plan, Relevant Executives have the opportunity to earn an annual bonus incentive based on the achievement of pre-defined targets over the fiscal year. Further details about the STI Plan are contained in section C of the Company’s Remuneration Report. | Under the STI Plan and invitation letters issued thereunder, if the Relevant Executive is terminated through a “Qualifying Cessation”, then the Relevant Executive is entitled to receive a pro-rated portion of his or her STI bonus opportunity based on the portion of the performance year served, provided that the Relevant Executive has been performing at a satisfactory level and is considered by the business to be in good standing (ie not the subject of any corrective or disciplinary action instituted by the Group).
A Qualifying Cessation is typically where the Relevant Executive ceases employment due to:
• death;
• total or permanent disablement;
• redundancy; or
• other circumstances determined at the discretion of the Remuneration Committee.
The Company has the discretion to provide, in the Relevant Executive’s invitation letter, for alternative arrangements to that described above.
The Company (or relevant Employer Company) has also agreed to varied arrangements regarding the treatment of the STI bonus on termination of employment with most KMPs and some Non KMP Executives, as described above in the “Employment Agreements” section of this table. | |||
| SIMS METAL MANAGEMENT LIMITED NOTICE OF 2014 ANNUAL GENERAL MEETING |
15 |
| Potential benefits / treatment on cessation of employment | ||||
| Agreement / Plan |
KMP |
Non KMP Executives | ||
| LTI Plan
Under the LTI Plan, Relevant Executives may be granted performance rights, which vest upon the satisfaction of applicable performance hurdles, and options or phantom options, which vest according to a time based vesting schedule. Further details about the LTI Plan are contained in section C of the Company’s Remuneration Report. |
Both KMPs and Non KMP Executives may be entitled to participate in the Company’s LTI Plan.
Generally, unvested awards made under the LTI Plan will lapse if the Relevant Executive ceases to be an employee before the relevant vesting date.
However, the Relevant Executive’s LTI invitation letter may provide that the Relevant Executive’s awards continue to vest in certain circumstances, referred to as a “Qualifying Cessation”.
A Qualifying Cessation is typically where the Relevant Executive ceases employment due to:
• death;
• total or permanent disablement;
• redundancy; or
• other circumstances determined at the discretion of the Board.
A Qualifying Cessation will not include where the Relevant Executive’s employment ceases due to termination by the Employer Company for cause (in such a case, the Relevant Executive’s unvested awards under the LTI Plan will lapse).
However, a Qualifying Cessation may include other circumstances determined at the discretion of the Board. These include where the Employment Agreement of the Relevant Executive provides for circumstances where the LTI award may continue to vest notwithstanding the Relevant Executive’s employment being terminated. These are described above in the “Employment Agreements” section of this table.
In the circumstances of a Qualifying Cessation, specified awards made to a Relevant Executive under the LTI Plan prior to the cessation date will continue to vest in accordance with the terms and conditions of their grant as if the Relevant Executive was still employed by the Employer Company and (if any performance hurdles are applicable) based on the actual performance results of the Group. | |||
| Pension or superannuation schemes
The Group operates or participates in a number of pension and superannuation schemes (including “401(k) plans”, salary deferral plans, defined contribution schemes and defined benefit schemes) throughout the world. The funding of these plans and schemes complies with local regulations but, in some circumstances, may be greater than the minimum entitlements required under law. |
The Company (or relevant Employer Company) makes compulsory superannuation contributions required by Australian law on behalf of applicable Relevant Executives into complying funds. Relevant Executives may also choose to salary sacrifice additional employer contributions. The payment of superannuation benefits to a Relevant Executive on their termination (for instance, due to his or her death, disablement or other circumstances specified by the applicable rules) may be a termination benefit of the type caught by the Corporations Act.
There may also be Relevant Executives who are entitled to benefits under legacy defined benefit schemes.
In addition, the Group’s international presence means that a number of its Relevant Executives may participate in a variety of pension schemes which are not considered superannuation funds for the purposes of the Corporations Act. These include “401(k) plans” and salary deferral plans, under which the Company (or Employer Company) may make company contributions as permitted by applicable law in the relevant jurisdiction. | |||
16
| Potential benefits / treatment on cessation of employment | ||||
| Agreement / Plan |
KMP |
Non KMP Executives | ||
| Redundancy Policies
The Company’s Australian subsidiary Sims Group Australia Holdings Limited has in place a Redundancy Policy for its salaried non-award Australasian employees (General Redundancy Policy).
The Group also has a legacy redundancy policy (Legacy Redundancy Policy). |
General Redundancy Policy
The General Redundancy Policy applies to all salaried non-award employees who are employed by Sims Group Australia Holdings Limited or any of its subsidiaries.
Under the General Redundancy Policy, if a Relevant Executive who falls within the application of the Policy is made redundant, the Relevant Executive will be entitled to three weeks remuneration per year of service (or part thereof), up to a maximum of 12 or 18 months entitlement (depending on the Relevant Executive’s position). Remuneration for this purpose will be calculated on the basis of the Relevant Executive’s then approved base salary, gross value of the most recent annual bonus paid, value of any company vehicle provided in the Relevant Executive’s package and the value (or notional value) of the Group’s contributions to the Relevant Executive’s superannuation or pension fund.
The Relevant Executive will also be entitled to a resignation benefit according to the applicable rules of his or her superannuation or pension fund, his or her company vehicle (if applicable) at market trade-in value and outplacement counselling with a consulting company.
“Redundancy” of a Relevant Executive includes circumstances where:
• the Group no longer requires the Relevant Executive’s job to be done either at all or in another location in the same country as the country the Relevant Executive normally resides (for whatever reason);
• if the Relevant Executive is an expatriate employee, the Group no longer requires the Relevant Executive’s job to be done at all (for whatever reason) or, at the conclusion of his or her period of secondment, does not offer the Relevant Executive a position in another country in which the Group operates of comparable status and authority to that which he or she enjoyed immediately prior to his or her initial period of secondment;
• the job description or requirements of a position are changed or redefined in a way which renders the Relevant Executive who holds that position unsuitable for that position and there is no comparable position available; or
• there is a change in the responsibilities of the Relevant Executive which has the effect of materially diminishing his or her status and authority.
Legacy Redundancy Policy
The Group also has a Legacy Redundancy Policy which may apply to some Relevant Executives. Under this Policy, if a Relevant Executive to whom this Policy applies is made redundant, he or she will be entitled to up to six months’ notice (or payment in lieu) and a severance payment of up to three weeks remuneration per year of service (or part thereof) up to a maximum of six, nine or 12 months (depending on the Relevant Executive’s position). The notice period is included as service for calculating the severance payment. Under this Policy, remuneration will be calculated as the total of the Relevant Executive’s remuneration used in his or her last review, the value of the company vehicle provided and the value of the Company’s contributions to the Relevant Executive’s superannuation fund.
The Relevant Executive will also be entitled to a resignation benefit according to the applicable rules of his or her superannuation fund, his or her company vehicle (if applicable) at market trade-in value (or in accordance with any purchase agreement in place), continuation of housing loans (if applicable) at the then current rate for up to three months following termination and outplacement counselling with a consulting company.
In some cases, the severance payment under the applicable Redundancy Policy may be in addition to payment in lieu of notice or any payment for restrictive covenants. | |||
| SIMS METAL MANAGEMENT LIMITED NOTICE OF 2014 ANNUAL GENERAL MEETING |
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| Agreement / Plan |
Potential benefits / treatment on cessation of employment | |||||
| KMP |
Non KMP Executives | |||||
| Insurance premiums and pay-outs | The Company (or Employer Company) pays insurance premiums to obtain death and disability coverage for Relevant Executives. | |||||
| The types of insurance policies that the Group currently takes out and pays the premiums for include: | ||||||
| • | travel and transportation insurance policies, which include a death and disability benefit; | |||||
| • | death and disability policies; and | |||||
| • | statutory workers’ compensation arrangements, which include a death and disability benefit. | |||||
| In some jurisdictions, particularly the United States, the Group also pays for medical benefits and health insurance coverage in accordance with local market practice. | ||||||
| Under some of these policies, the pay-out by the insurer will be made to the Company (or Employer Company) by the insurer and in most circumstances, that amount is then paid to the insured Relevant Executive or his or her beneficiaries by the Company (or Employer Company). | ||||||
| Other benefits | At the discretion of the Board or the Remuneration Committee, the Company or the Employer Company may pay or give other reasonable termination benefits under the Group’s policies from time to time or in accordance with the Relevant Executive’s Employment Agreement, such as outplacement services, relocation or expatriation benefits and payment of reasonable professional fees (such as for legal or tax advice). In some cases, after cessation of their employment, Relevant Executives may also be permitted to keep the mobile phones, computers, tablets or other electronic devices that had been provided to them by the Company (or Employer Company) or acquire their company vehicle. | |||||
ANNEXURE 3
Matters, events and circumstances which will, or are likely to, affect the calculation of the amount or value of the benefits
| Agreement / Plan |
Matter, event or circumstance | |||
| Employment Agreements | The following are the matters, events and circumstances which will, or are likely to, affect the calculation of the amount or value of the potential termination benefits that may be given under the Employment Agreements for the Relevant Executives: | |||
| • | The circumstances of the Relevant Executive’s cessation of employment (for example, whether the employment is terminated immediately or with notice, or by the Employer Company or the Relevant Executive, and for what reason). | |||
| • | The Relevant Executive’s length of service. | |||
| • | The length of the notice period and whether the Group’s operational requirements at the time require the Relevant Executive to work through all or part of his or her notice period. | |||
| • | The amount of holiday and other leave accrued by the Relevant Executive at the time of cessation of employment. | |||
| • | The Relevant Executive’s total fixed remuneration at the time of cessation of employment. | |||
| • | The statutory requirements and market practice of the jurisdiction in which the Relevant Executive is employed. | |||
| • | The Group’s policies as applicable at the relevant time. | |||
| • | The content and duration of the restrictive covenant and prevailing market practice. | |||
| • | The manner in which the Board or the Remuneration Committee exercises its discretion (for example, in relation to payment for restrictive covenants). | |||
| • | To the extent that the Employment Agreement provides for any termination benefits which are awards under the STI Plan or LTI Plan, the matters, events and circumstances referred to in this table below in relation to the STI Plan and LTI Plan are also relevant. | |||
18
| Agreement / Plan |
Matter, event or circumstance | |||
| STI Plan and LTI Plan | The following are the matters, events and circumstances which will, or are likely to, affect the calculation of the amount or value of the potential termination benefits that may be given under the STI Plan or LTI Plan: | |||
| • | The circumstances of the Relevant Executive’s cessation of employment (for example, whether the cessation of employment arises due to termination by the Employer Company or the Relevant Executive, and for what reason). | |||
| • | The Relevant Executive’s entitlement under the STI Plan or LTI Plan (as applicable) at the time of cessation of employment and the conditions of such entitlement. | |||
| • | The type and number of awards held by the Relevant Executive at the time of cessation of employment, and the conditions (if any) of vesting of such awards. | |||
| • | The applicable performance measures and the achievement of such measures. | |||
| • | The portion of the performance period served by the Relevant Executive up to the cessation of employment. | |||
| • | The personal performance of the Relevant Executive. | |||
| • | The market price of the Company’s shares on the ASX at the relevant time. | |||
| • | The manner in which the Board or the Remuneration Committee exercises its discretion. | |||
| Pension or superannuation schemes | The following are the matters, events and circumstances which will, or are likely to, affect the calculation of the amount or value of the potential termination benefits that may be given under a pension or superannuation scheme or plan: | |||
| • | The applicable legal requirements and market practice of the jurisdiction in which the Relevant Executive is employed. | |||
| • | The pension or superannuation scheme applicable to the Relevant Executive. | |||
| • | The Relevant Executive’s remuneration and number of years of service. | |||
| • | The value of contributions made and earnings and capital growth or loss. | |||
| Redundancy Policies | The following are the matters, events and circumstances which will, or are likely to, affect the calculation of the amount or value of the potential termination benefits that may be given under a Redundancy Policy: | |||
| • | The Relevant Executive’s remuneration and number of years of service. | |||
| • | The Relevant Executive’s position classification. | |||
| • | The Relevant Executive’s age at the time of the redundancy. | |||
| • | The Relevant Executive’s benefits and the value of such benefits as at the time of cessation of employment. | |||
| • | The value of, as applicable, the Relevant Executive’s company vehicle and housing loan, and outplacement counselling provided to the Relevant Executive. | |||
| Insurance premiums and pay-outs | The following are the matters, events and circumstances which will, or are likely to, affect the calculation of the amount or value of the potential termination benefits that may be given in respect of the insurance policies: | |||
| • | The type of insurance policy and the coverage under that policy. | |||
| • | The role, age and salary of the insured Relevant Executive. | |||
| Other benefits | The following are the matters, events and circumstances which will, or are likely to, affect the calculation of the amount or value of the potential termination benefits that may be given in respect of the other benefits described in the last row of the table in Annexure 2: | |||
| • | The Group’s policies as applicable at the relevant time. | |||
| • | The applicable market practice of the jurisdiction in which the Relevant Executive is employed. | |||
| • | The value of the services, benefits and items that the Relevant Executive is provided or entitled to keep. | |||
| • | The circumstances of the Relevant Executive’s cessation of employment. | |||
| • | The manner in which the Board or the Remuneration Committee exercises its discretion. | |||
| SIMS METAL MANAGEMENT LIMITED NOTICE OF 2014 ANNUAL GENERAL MEETING |
19 |
ANNEXURE 4
The Company Secretary
Sims Metal Management Limited
Sir Joseph Banks Corporate Park, Suite 3
Level 2, 32 Lord Street,
Botany NSW 2019
22 September 2014
Dear Sir
Notice of nomination of auditors
I, Geoffrey Brunsdon, being a member of Sims Metal Management Limited (Company), hereby nominate Deloitte Touche Tohmatsu for appointment as auditor of the Company, pursuant to section 328B of the Corporations Act 2001 (Cth), at the next Annual General Meeting of the Company or at any adjournment thereof.
Yours sincerely
Geoffrey Brunsdon
20
Exhibit 99.2
1
Financial Highlights
| FY 2013 | ||||||||||||
| YEAR ENDED 30 JUNE (A$m) |
FY 2014 | Restated | Change (%) | |||||||||
| Sales Revenue |
7,129.0 | 7,193.0 | (0.9 | ) | ||||||||
| EBITDA |
124.8 | (42.5 | ) | NMF | ||||||||
| Underlying EBITDA1 |
242.4 | 190.4 | 27.3 | |||||||||
| Goodwill & Intangible Asset Impairment |
(28.5 | ) | (304.4 | ) | (90.6 | ) | ||||||
| Depreciation |
(105.6 | ) | (101.1 | ) | 4.5 | |||||||
| Amortisation |
(18.3 | ) | (22.4 | ) | (18.3 | ) | ||||||
| EBIT |
(27.6 | ) | (470.4 | ) | (94.1 | ) | ||||||
| Underlying EBIT1 |
118.5 | 66.9 | 77.1 | |||||||||
| Net Interest Expense |
(14.2 | ) | (18.2 | ) | (22.0 | ) | ||||||
| Tax (Expense)/Benefit |
(47.1 | ) | 21.3 | NMF | ||||||||
| NPAT |
(88.9 | ) | (467.3 | ) | (81.0 | ) | ||||||
| Underlying NPAT1 |
68.8 | 15.9 | 332.7 | |||||||||
| EPS (cents per share) – Diluted |
(43.5 | ) | (228.6 | ) | (81.0 | ) | ||||||
| Underlying EPS (cents per share) – Diluted1 |
33.6 | 7.7 | 336.4 | |||||||||
| Full Fiscal Year Dividend (cents per share) |
10.0 | 0.0 | NMF | |||||||||
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| Total Assets |
2,649.4 | 2,917.4 | (9.2 | ) | ||||||||
| Total Liabilities |
815.5 | 988.2 | (17.5 | ) | ||||||||
| Net Assets |
1,833.9 | 1,929.2 | (4.9 | ) | ||||||||
| Net Cash/(Debt) |
42.3 | (153.8 | ) | NMF | ||||||||
| Net Debt/(Net Debt + Equity) (%) |
NMF | 7.4 | % | NMF | ||||||||
| Net Tangible Assets |
1,618.1 | 1,665.3 | (2.8 | ) | ||||||||
| Net Tangible Assets per share (A$ per share) |
7.91 | 8.15 | (2.9 | ) | ||||||||
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| Net Cash Inflow From Operating Activities |
210.1 | 297.3 | (29.3 | ) | ||||||||
| Capital Expenditures |
64.1 | 149.0 | (57.0 | ) | ||||||||
| Net Cash Outflow From Investing Activities |
(0.9 | ) | (118.8 | ) | (99.2 | ) | ||||||
| Net Cash Inflow From Operating & Investing Activities |
209.2 | 178.5 | 17.2 | |||||||||
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| Employees |
6,011 | 6,393 | (6.0 | ) | ||||||||
| Intake Tonnes (‘000) |
11,783 | 12,453 | (5.4 | ) | ||||||||
| Sales Tonnes (‘000) |
11,815 | 12,786 | (7.6 | ) | ||||||||
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| 1 | Underlying excludes goodwill and other intangible asset impairments, and all other significant items. |
| NMF = Not meaningful percentage change |
2
3
Chairman’s Review
|
GEOFFREY N BRUNSDON |
Dear Shareholders,
The 2014 financial year has seen significant change for Sims Metal Management. In October 2013 we announced the appointment of Galdino Claro as Group CEO & Managing Director. Galdino brings with him 30 years of global experience in the metals industry and a history of success in reinvigorating underperforming businesses, as well as entering new markets. Galdino has moved quickly to bring fresh perspectives, providing our most experienced executives with new management challenges, as well as appointing a number of new executives to the Company’s leadership team.
FIVE YEAR STRATEGIC PLAN
In July 2014, following approval by the Board of Directors, Galdino and a number of members of his leadership team presented the Company’s five year strategic plan. Based on a three stage model of Streamline, Optimise, and Grow, the strategic plan is a roadmap to increase underlying Company earnings before interest and tax (EBIT) by more than 350% over FY13. Importantly, this strategy is based only on factors within the control of management, and does not rely on improving external conditions or acquisitions to be achieved. This is in line with the Board’s view that, even at the bottom of the economic cycle, the Company must achieve a return equal to its cost of capital.
The culture of the Company is changing from one of a material handler captive to commodity flows and business cycles, to one of a customer centric, supply chain manager with constant attention to margin enhancement.
Sims Metal Management has extraordinary potential. The Company has unrivalled global reach, with operations on five continents, trading relationships with customers on six continents, and an extraordinary depth of industry experience, all of which will be fully exploited through this strategy.
FINANCIAL RESULTS
In FY14, underlying EBIT of $119 million increased 77% over the prior year result of $67 million. Underlying net profit after tax (NPAT) of $69 million was 333% higher than the prior year. Despite the improved result, difficult external market conditions continued to impede the business’s recovery. Cyclically low levels of secondary metal generation, intense competition, and severe winter weather conditions in North America posed challenges to the Company’s operations. After recognising $158 million of significant items, the Company reported a statutory net loss after tax of $89 million. At current levels, return on invested capital remains less than satisfactory, and will continue to be an area of attention in the year ahead. | |
|
CAPITAL MANAGEMENT AND DIVIDEND | ||
|
Protecting the Company’s strong balance sheet position is a key priority of the Board. During FY14, capital expenditures were $64 million, down from $149 million in the prior year as major projects, including the New England expansion and New York City Municipal Recycling contract, reached completion. Disciplined capital management and robust cash flow from operations allowed the Company to reduce net debt by $196 million in FY14 to a net cash position of $42 million at 30 June 2014. Capital expenditure will, however, increase as new projects are initiated in line with our strategic plan. | ||
| The Board has determined to pay a final dividend for FY14 of 10.0 cents per share, which will be fully franked, on 21 October 2014 to shareholders on the Company’s register at the record date of 7 October 2014. Pleasingly, the final dividend of FY14 represents the Company’s first payout since the end of FY12. The Company’s dividend policy to distribute 45% to 55% of NPAT, subject to the discretion of the Board, remains unchanged. | ||
4
5
CEO’s review
|
GALDINO J CLARO |
Dear Shareholders,
Since joining Sims Metal Management in November 2013, I’ve spent much of my time travelling around our global operations. I’ve met with our employees, our suppliers, as well as our customers. In that time I discovered a Company with significant differences in operational profitability and approaches to doing business. I also found a global business, built on a long history of acquisitions, but where the full synergies had not yet been fully realised.
More than anything else, however, I found opportunities. Opportunities to build on a solid foundation of successful and sustainable operations run by the best people in the industry; the opportunity to use our scale, our unmatched global trading relationships, and our depth of industry experience, to generate returns superior to our competitors.
A STRATEGY TO STREAMLINE, OPTIMISE, AND GROW
In July 2014 we presented the details of a five year strategic plan to significantly improve the financial returns of the Company. The strategic plan is expected to improve underlying EBIT by more than 350% over FY13, built on internal initiatives alone, and without a reliance on cyclical market recovery or major acquisitions.
The plan is based on three phases; which will first Streamline the business back to lower cost and higher margin operations, then secondly Optimise these businesses based on our core drivers of profitability, and finally Grow the total business through reinvestment into the Group’s most attractive operations.
Our actions to streamline the business resulted in the recent decision to exit our underperforming operations in UK SRS and SRS Canada. Additionally, we have implemented plans to significantly reduce regional and corporate overhead costs through consolidating the North America metals recycling business into three operating regions. These actions are expected to improve EBIT by $32 million per annum, which we anticipate will be fully realised by FY16.
Our optimisation strategies center on maximising our core drivers of profitability, through reducing inefficiencies across the entire value chain, from supplier relationships, logistics, processing, to end product quality and services. To achieve this, we are implementing new business information reporting, and improving the sharing of knowledge and skills across our global operations to make better use of our unparalleled scale and footprint. We anticipate optimisation of the business will improve EBIT by a further $130 million per annum by the end of the five year plan.
We will also return to growth through reinvesting in our most attractive and highest returning businesses. By strengthening our relationships with key suppliers and the strategic expansion of our feeder yard network, we intend to grow total sales volumes by 10% over the five year plan. Any benefit we may receive from a broader economic recovery will be in addition to these gains. As well, in our electronics recycling business we intend to return to growth by expanding our asset management and services offerings and leveraging our global footprint with multi-national corporates. We expect these growth initiatives to deliver a further $40 million per annum in EBIT by the end of the five year plan.
Lastly, and most critically, we will achieve this without losing any of our attention to the safety of our employees. FY14 was an encouraging year with a 25% reduction in lost time incidents. We will press harder to improve on these gains in the year ahead, as we progress towards our goal of a zero harm workplace. |
6
7
8
9
OPERATIONAL & FINANCIAL REVIEW
Five-Year Strategic Plan
The five-year strategic plan is expected to improve underlying EBIT by more than 350% over FY13, based on internal initiatives alone. The plan is based on three phases which will first Streamline the business back to lower cost and higher margin operations, then secondly Optimise the business based on the core drivers of profitability, and finally Grow the total business through reinvestment into the Group’s most attractive operations.
10
11
01 We are streamlining the business to focus on our highest margin operations.
13
02 We are optimising our core drivers of profitability.
15
03 We are returning to growth through investment in our highest margin businesses.
17
OPERATIONAL & FINANCIAL REVIEW
|
PERFORMANCE
Sales revenue for the North America region of $4,253 million was down 6% on FY13. In constant exchange rate terms, sales revenue was down 16%. The decrease was due to lower sales volumes, in part due to severe winter weather in the US, the disposal of certain non-core businesses, and lower non-ferrous and precious metal prices.
Underlying EBITDA of $83 million was down 19% on FY13, primarily due to weaker earnings from both metals recycling and SRS. Correspondingly, underlying EBITDA margins fell to 1.9% from 2.2% in FY13. Lower underlying EBITDA from North America Metals was due largely to lower sales volumes and continued difficult market conditions which constrained the ability to procure intake material. Weaker underlying EBITDA from North America SRS was driven in large part by losses within SRS Canada.
At constant currency, underlying controllable costs were $48 million lower, down 8% during FY14 compared to FY13. A portion of these cost reductions was a result of disposals of non-core businesses. These cost savings are expected to be sustainable until intake volumes change materially. |
18
19
OPERATIONAL & FINANCIAL REVIEW
|
PERFORMANCE
Sales revenue for the Australasia region of $1,224 million was up 13% on FY13. In constant exchange rate terms, sales revenue was up 12%. The increase was due primarily to a 16% lift in sales volumes driven by Australia Metals, which was partially offset by a decrease in non-ferrous metal prices.
Underlying EBITDA of $114 million was up 46% compared to FY13, primarily due to strong performance from Australia Metals, as well as higher income from Australasia SRS and joint ventures. Both sales margins and sales volumes increased compared to FY13 leading to significant earnings improvement. Earnings from Australia Metals also benefited positively from refinements made to the business in recent years. These included the acquisition of the Paramount Browns ferrous metal yard in South Australia, a capital upgrade of the St. Mary’s yard in New South Wales, and the installation of a downstream non-ferrous extraction facility in Victoria.
At constant currency, underlying controllable costs were $40 million higher, up 19% in FY14 compared to FY13. The increase largely relates to the significant increase in business activity which occurred in the Australia Metals business. |
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21
OPERATIONAL & FINANCIAL REVIEW
|
PERFORMANCE
Sales revenue for the Europe region of $1,652 million was up 5% on FY13. In constant exchange rate terms, sales revenue was down 10%. The decrease was primarily due to lower sales from Europe SRS, which was impacted by lower precious metals prices and the restructuring of the SRS business in the UK. In constant exchange rate terms, sales revenue for metals recycling was down a lesser 1.8% due to lower sales volumes.
Underlying EBITDA of $45 million was up 345% on FY13, due to improved performance from UK Metals and Germany SRS, partially offset by lower performance from UK SRS. Performance from UK SRS was negatively impacted by external margin pressure, lower commodity prices, and lower volumes, leading to an underlying EBITDA loss.
Stronger underlying EBITDA from UK Metals was a result of higher sales margins and the cost reduction program which began in the second half of FY13. Despite restructuring activities during FY13 which included the idling of two of UK Metals’ five metal shredders, at Newport and Yately, sales volumes remained relatively steady. Weaker underlying EBITDA from Europe SRS was driven in a large part by losses within UK SRS.
At constant currency, underlying controllable costs were $44 million lower, down 16% in FY14 compared to FY13. |
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23
OPERATIONAL & FINANCIAL REVIEW
Sustainability
| 24 |
25
OPERATIONAL & FINANCIAL REVIEW
Sustainability
26
27
OPERATIONAL & FINANCIAL REVIEW
Financial Review
SENSITIVITY TO MOVEMENTS IN FOREIGN EXCHANGE RATES
The principal currencies in which the Group’s subsidiaries conduct business are United States (“US”) dollars, Australian dollars (“A$”), Euros, and British pounds sterling. Although the Group’s reporting currency is the Australian dollar, a significant portion of the Group’s sales and purchases are made in currencies other than the Australian dollar. In addition, a significant portion of the Group’s net assets are denominated in currencies other than the Australian dollar. The Group’s consolidated financial position, results of operations and cash flows may be materially affected by movements in the exchange rate between the Australian dollar and the respective local currencies to which its subsidiaries are exposed.
Some of the results referred to below are shown on a “constant currency” basis, which means that the current period results are translated into Australian dollars using applicable exchange rates in the prior year comparable period. This allows for a relative performance comparison between the two periods before the translation impact of currency fluctuations. Foreign exchange rates compared with the prior corresponding periods for the major currencies that affect the Group’s results are as follows:
| AVERAGE RATE | CLOSING RATE | |||||||||||||||||||||||
| FY14 | FY13 | VARIANCE % |
AS AT 30 JUNE 2014 |
AS AT 30 JUNE 2013 |
VARIANCE % |
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| US dollar |
0.9187 | 1.0271 | (10.6 | ) | 0.9420 | 0.9275 | 1.6 | |||||||||||||||||
| Euro |
0.6775 | 0.7949 | (14.8 | ) | 0.6906 | 0.7095 | (2.7 | ) | ||||||||||||||||
| Pounds sterling |
0.5657 | 0.6549 | (13.6 | ) | 0.5531 | 0.6072 | (8.9 | ) | ||||||||||||||||
As at 30 June 2014, the cumulative effect of the retranslation of net assets of foreign controlled entities (recognised through the foreign currency translation reserve) was $329.9 million compared to $307.6 million as at 30 June 2013.
REVENUE
Sales revenue of $7,129.0 million in FY14 was down 1% compared to sales revenue of $7,193.0 million in FY13. At constant currency, sales revenue was down 11% due to lower sales volumes and lower average non-ferrous and precious metal scrap prices. Sales volumes decreased by 8% to 11.815 million tonnes in FY14 versus 12.786 million tonnes in FY13.
EARNINGS
Statutory net loss after tax was $88.9 million. Underlying net profit after tax was $68.8 million, 333% higher than FY13. The principal difference between the statutory and underlying results relates to significant items recorded during both FY14 and FY13. Statutory EBITDA for FY14 was $124.8 million compared to a statutory EBITDA loss of $42.5 million in FY13. Underlying EBITDA of $242.4 million was 27% higher than FY13. The increase in underlying EBITDA was primarily due to much improved performance from the Group’s metal recycling operations in Australia and the UK, offset by lower underlying EBITDA from metals recycling in North America and the electronics recycling businesses in North America and the UK. At constant currency, underlying controllable costs were $52.7 million lower in FY14 compared to FY13.
RECONCILIATION OF STATUTORY NPAT TO EBITDA
| A$m |
FY14 | FY13 RESTATED |
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| Statutory Net Loss After Tax |
(88.9 | ) | (467.3 | ) | ||||
| Goodwill and intangible impairment charges |
28.5 | 304.4 | ||||||
| Depreciation and amortisation |
123.9 | 123.5 | ||||||
| Interest expense, net |
14.2 | 18.2 | ||||||
| Income tax expense / (benefit) |
47.1 | (21.3 | ) | |||||
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| Statutory EBITDA |
124.8 | (42.5 | ) | |||||
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Depreciation and amortisation increased by $0.4 million to $123.9 million, while net interest expense decreased by $4.0 million to $14.2 million in FY14. The reduction in net interest expense reflects the decline in net debt during the period.
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29
OPERATIONAL & FINANCIAL REVIEW
RECONCILIATION OF STATUTORY RESULTS TO UNDERLYING RESULTS FOR THE YEARS ENDED 30 JUNE 2014 AND 2013
| EBITDA1 | EBIT | NPAT | ||||||||||||||||||||||
| FY14 | FY13 | FY14 | FY13 | FY14 | FY13 | |||||||||||||||||||
| A$m | A$m | A$m | A$m | A$m | A$m | |||||||||||||||||||
| Statutory Results |
124.8 | (42.5 | ) | (27.6 | ) | (470.4 | ) | (88.9 | ) | (467.3 | ) | |||||||||||||
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| Significant items: |
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| Goodwill impairment |
N/A | 2 | N/A | 2 | 27.8 | 292.2 | 22.2 | 261.9 | ||||||||||||||||
| Other intangible asset impairment |
N/A | 2 | N/A | 2 | 0.7 | 12.2 | 0.7 | 8.9 | ||||||||||||||||
| Impairment of investment in CTG |
— | 14.9 | — | 14.9 | — | 14.9 | ||||||||||||||||||
| Fixed asset impairment |
40.9 | 61.2 | 40.9 | 61.2 | 41.6 | 54.7 | ||||||||||||||||||
| Write-down of equipment spares |
0.8 | 5.1 | 0.8 | 5.1 | 0.7 | 5.1 | ||||||||||||||||||
| Natural disaster expenses, net of insurance recoveries |
(2.8 | ) | 4.3 | (2.8 | ) | 4.3 | (2.8 | ) | 2.7 | |||||||||||||||
| Fire destroyed assets, net of insurance recoveries |
(5.3 | ) | — | (5.3 | ) | — | (5.3 | ) | — | |||||||||||||||
| Net (reversal)/impairment of loans |
(4.9 | ) | 4.8 | (4.9 | ) | 4.8 | (4.9 | ) | 3.0 | |||||||||||||||
| UK inventory write-downs |
— | 63.9 | — | 63.9 | — | 63.9 | ||||||||||||||||||
| Inventory adjustments to net realisable value |
0.9 | 6.0 | 0.9 | 6.0 | 0.9 | 4.9 | ||||||||||||||||||
| Write-down of CTG derivatives and equity accounted losses |
13.0 | 21.3 | 13.0 | 21.3 | 13.0 | 21.3 | ||||||||||||||||||
| Adjustments made by joint ventures |
3.0 | — | 3.0 | — | 3.0 | — | ||||||||||||||||||
| Lease settlements/onerous leases |
31.8 | 13.1 | 31.8 | 13.1 | 31.5 | 9.7 | ||||||||||||||||||
| Redundancies |
16.7 | 7.3 | 16.7 | 7.3 | 16.3 | 5.0 | ||||||||||||||||||
| Settlement of disputes with third parties |
1.3 | 4.7 | 1.3 | 4.7 | 1.3 | 4.7 | ||||||||||||||||||
| Share-based compensation expense related to former CEO3 |
— | 3.4 | — | 3.4 | — | 2.1 | ||||||||||||||||||
| One-time costs associated with new CEO |
1.0 | — | 1.0 | — | 0.9 | — | ||||||||||||||||||
| Yard closure/dilapidations |
9.8 | 8.5 | 9.8 | 8.5 | 9.8 | 7.2 | ||||||||||||||||||
| Credit provisions/losses |
3.5 | 2.9 | 3.5 | 2.9 | 3.4 | 2.0 | ||||||||||||||||||
| Multi-employer pension plan withdrawal liability |
6.3 | — | 6.3 | — | 6.3 | — | ||||||||||||||||||
| Loss on sale of joint arrangements |
— | 1.6 | — | 1.6 | — | 1.5 | ||||||||||||||||||
| Transaction and other legal costs |
— | 3.1 | — | 3.1 | — | 2.4 | ||||||||||||||||||
| Loss on sale of business divisions |
1.3 | 10.1 | 1.3 | 10.1 | 1.2 | 10.0 | ||||||||||||||||||
| Commercial settlements |
— | (3.3 | ) | — | (3.3 | ) | — | (2.7 | ) | |||||||||||||||
| Other |
0.3 | — | 0.3 | — | 0.3 | — | ||||||||||||||||||
| Write-off of deferred tax asset |
— | — | — | — | 17.6 | — | ||||||||||||||||||
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| Underlying results4 |
242.4 | 190.4 | 118.5 | 66.9 | 68.8 | 15.9 | ||||||||||||||||||
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| 1 | EBITDA is a measurement of non-conforming financial information. See table above that reconciles statutory net loss after tax to statutory EBITDA. |
| 2 | N/A indicates that EBITDA is calculated to exclude impairment of goodwill and other identified intangible assets in the presentation of both the statutory and underlying results. |
| 3 | Represents expense associated with good leaver determination for the former CEO with respect to long-term incentive plans. |
| 4 | Underlying result is a non-IFRS measure that is presented to provide an understanding of the underlying performance of the Group. The measure excludes the impacts of impairments, disposals as well as items that are subject to significant variability from one period to the next. The reconciling items above (before tax) have been extracted from the audited financial statements. |
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| 31 |
CORPORATE GOVERNANCE STATEMENT
PRINCIPLE 2: STRUCTURE THE BOARD TO ADD VALUE
2.1 COMPOSITION OF THE BOARD
The board charter sets out the composition of the board and relevant criteria for assessing the independence of directors.
The board currently comprises nine non-executive directors. Mr Claro was appointed an executive director of the Company on 4 November 2013.
Details of board members, including their skills, experience, qualifications and terms in office, are set out on pages 46 and 47.
2.2 BOARD ACCESS TO INFORMATION AND INDEPENDENT ADVICE
A director may, at the Company’s expense and subject to prior approval of the Chairperson, obtain independent professional advice relating to his or her duties and obligations as a board member. Board committees may also seek such independent professional advice. To the extent required to enable them to carry out their duties, all directors and board committees also have access to Company information and records and may consult senior management as required.
2.3 INDEPENDENCE OF DIRECTORS
The board charter states that board members shall be considered independent if they do not have any of the relationships identified in Box 2.1 of the Recommendations, and have been determined by the board to be independent, as defined in and to the extent required by the applicable rules of the United States Securities and Exchange Commission (SEC) and other applicable laws and regulations, as they may be amended from time to time.
Having regard to these criteria, the board has determined that Heather Ridout, Gerald Morris, Norman Bobins, Christopher Renwick, Geoffrey Brunsdon, Jim Thompson, John DiLacqua and Robert Bass were independent non-executive directors of the Company during the 2014 financial year.
Tom Sato, a non-executive director, is not considered to be an independent director of the Company as a result of his association with Mitsui & Co., Ltd, which, through its affiliates, owns an 18% shareholding in the Company.
In accordance with Recommendation 2.1, the board has a majority of directors who are independent.
The independence of the directors is regularly reviewed. In accordance with the board charter, all directors must disclose to the board any actual or perceived conflicts of interest, whether of a direct or indirect nature, of which the director becomes aware and which the director reasonably believes may compromise the reputation or performance of the Company.
2.4 CHAIRPERSON
Geoffrey Brunsdon, an independent non-executive director, has held the position of Chairperson of the board since 1 March 2012.
The roles of CEO of the Company and Chairperson of the board are separate, and the Chairperson must not also be the CEO. The Chairperson is responsible for the leadership of the board, establishing the agenda for board meetings, ensuring the board is effective, and chairing board and shareholders’ meetings.
2.5 BOARD PROCESSES
The board charter provides that the board shall meet at least four times per year, and otherwise as it considers necessary. The board met six times during the 2014 financial year, including three times for full briefing sessions. Details of directors’ attendances at board meetings in the 2014 financial year are reported on page 43.
To assist directors in enhancing their understanding of the Company’s business, directors are briefed from time to time by members of the executive team on divisional performance and key operational and strategic issues, financial matters, risk management, market conditions, compliance and governance. The directors are also provided with an explanation of those proposed activities of the Group which require board approval.
The Group Company Secretary is responsible for ensuring that board procedures and policies are followed, and provides advice to the board on corporate governance and regulatory matters. All directors have unrestricted access to the advice and services of the Group Company Secretary.
2.6 BOARD COMMITTEES
The board has established five board committees to assist in the execution of board functions. Each committee has a written charter which is approved by the board and reviewed periodically. The charters of each of the board committees are available on the Company’s website.
Membership of the board committees is set out in the biographies of directors on pages 46 and 47.
Details of directors’ attendance at each committee meeting in the 2014 financial year are set out on page 43.
To enable each of the committees to discharge its responsibilities adequately and effectively, each committee has the authority to retain advisers and external legal counsel as required.
Each committee reports to the board and, following preparation of the minutes of each committee meeting, provides the board with copies of those minutes at the next occasion the board meets.
32
| 33 |
CORPORATE GOVERNANCE STATEMENT
PRINCIPLE 3: PROMOTE ETHICAL AND RESPONSIBLE DECISION-MAKING
3.1 CODE OF CONDUCT
The Company’s Code of Conduct applies to all directors, officers and employees of the Group. It underpins Sims Metal Management’s commitment to integrity, fair dealing and compliance with the law in its business affairs, and sets out expected standards of conduct with respect to all stakeholders, including fellow employees, customers, suppliers, shareholders and the community.
The Code of Conduct is designed to encourage ethical and appropriate behaviour by all Group personnel, and addresses a wide range of responsibilities to stakeholders, including conflicts of interest, security of information, use of Company assets and resources, discrimination and harassment, occupational health and safety, and the prohibition of corrupt conduct and the consequences in the event thereof.
The Code of Conduct encourages employees to raise any matters of concern without fear of retribution. The Company has implemented the Sims Metal Management Hotline to enable employees, customers, contractors and the like to report misconduct or unethical behaviour within the Group to an external third party. The Company also conducts employee education and compliance programs on a regular basis to help ensure compliance with various laws around the world.
3.2 ANTI-CORRUPTION CODE
In addition to the Code of Conduct, the Company has adopted an Anti-Corruption Code which has been developed to aid employees, agents, contractors, consultants and partners in ensuring that they comply at all times with applicable anti-corruption laws and policies. Among other matters, the Code of Conduct sets out the Company’s policy in relation to conflicts of interests, gifts and hospitality, relationships with governments and political contributions.
Copies of the Company’s Code of Conduct and Anti-Corruption Code are available from the corporate governance section on the Company’s website.
3.3 DEALING IN COMPANY SECURITIES
Directors and employees of the Group are bound by the Company’s policy on dealing in the securities of the Company. Under the policy, directors, senior executives and other ‘designated persons’ may only buy or sell Company securities during the period 24 hours to 28 days after the release of the Company’s yearly and half-yearly results announcements and the filing of the Company’s Form 20-F with the SEC, or during such period following the conclusion of the Company’s Annual General Meeting, or during the currency of any capital raising prospectus issued by the Company or takeover bid for the Company.
A copy of the Company’s policy titled ‘Dealing in Sims Metal Management Limited Securities’ is available from the corporate governance section on the Company’s website.
3.4 DIVERSITY
Sims Metal Management recognises the value and advantages of having a diversified workforce that reflects the diversity of the communities in which it operates. Accordingly, the Company has adopted a Workplace Diversity Policy, a copy of which can be found on the Company’s website. This policy is designed to support the Company’s organisational core values of respect, integrity and teamwork. The board has responsibility for establishing and monitoring the Company’s overall diversity strategy and policy. The board’s Nom/Gov Committee has responsibility for monitoring the effectiveness of this policy to the extent it relates to board diversity and for reviewing and recommending any updates to this policy as deemed necessary. The board’s Remuneration Committee has an overarching role to establish measurable objectives for achieving diversity, and to assess annually, both the objectives and the Company’s progress in achieving them. The following table shows the objectives in relation to gender diversity that were established for the 2014 financial year and the progress made towards achieving them.
| OBJECTIVE |
PROGRESS | |||
| 1. | In accordance with the Global Gender Diversity Plan (Diversity Plan), deliver leadership diversity training to global managers/supervisors. | Achieved and ongoing. | ||
| 2. | Increase female participation at the Senior Management and Executive levels. | Progress made. The percentage of female participation at the Senior Management level increased from 14% in the 2013 financial year to 17% in the 2014 financial year. The percentage of female participation at the Executive level increased from 11% to 17% over the same period. | ||
| 3. | Following the appointment of a female director in calendar 2011 consider, as retirements permit, appointing at least one further female director within the ensuing two calendar years. | The Company has recently announced the appointment of two additional female directors to the board effective 1 November 2014. This will mean, following the planned retirement of two male directors at the conclusion of the Company’s 2014 Annual General Meeting, that one-third of the non-executive directors on the board will be female. | ||
| 4. | Consider age, cultural and ethnicity issues within the context of the Diversity Plan. | This initiative is slightly behind schedule due to significant restructuring efforts of the past years but will continue to be considered for the 2015 financial year and beyond. | ||
34
| 35 |
CORPORATE GOVERNANCE STATEMENT
The RAC Committee charter establishes a framework for the RAC Committee’s relationship with the internal and external auditor, and a policy has been adopted for the selection and appointment of the external auditor and for rotation of external audit engagement partners. A copy of the RAC Committee charter is available from the corporate governance section on the Company’s website.
4.2 COMPOSITION
The RAC Committee charter provides for the RAC Committee to have at least three members, all of whom must be non-executive independent directors. The current members of the RAC Committee are Mrs Ridout and Messrs Morris (Chairperson), Brunsdon, DiLacqua and Bass, all of whom are non-executive independent directors. Further, all members must be financially literate, and at least one member must have accounting or related financial management expertise. These requirements are satisfied. Under the RAC Committee charter, a director may not be both the Chairperson of the RAC Committee and the Chairperson of the board.
4.3 MEETINGS OF THE RAC COMMITTEE
In accordance with its charter, the RAC Committee is required to meet at least four times each year on a formal basis, and holds additional meetings as necessary. Meetings are attended by invitation by the other directors, the CEO, the CFO, other members of management, including the General Counsel, internal auditors and the external auditor, PricewaterhouseCoopers. The RAC Committee met seven times during the 2014 financial year. Details of attendance at meetings of the RAC Committee are set out on page 43.
4.4 EXTERNAL AUDITOR
The external auditor is responsible for planning and carrying out the audit of the Group’s annual financial reports and reviewing the Group’s half-yearly financial reports. The auditor provides a written confirmation to the Company of its independence in connection with the Company’s financial reports for each half-year and financial year.
The RAC Committee may meet with the external auditor without management being present at any time during each financial year. The external auditor is also provided with the opportunity, on request, to meet with the board of directors without management being present.
The Company has adopted a policy titled “Procedures for the Selection and Appointment of the External Auditors and for the Rotation of External Audit Engagement Partners”, a copy of which is available from the corporate governance section on the Company’s website.
4.5 INTERNAL AUDITORS
The RAC Committee has the responsibility for overseeing the development and execution of the internal audit plan. The Group Vice President of Internal Audit reports directly to the RAC Chairperson. The RAC Committee can appoint, hire, and reassign the Group Vice President of Internal Audit with a recommendation to the board.
PRINCIPLE 5: MAKE TIMELY AND BALANCED DISCLOSURE
5.1 CONTINUOUS DISCLOSURE
The Company is committed to ensuring that the market and its shareholders are provided with complete and timely information. The Company has adopted a Market Disclosure Policy, supplemented by specific procedures, to ensure that it complies with the continuous disclosure obligations imposed by the ASX, and with its disclosure obligations under the rules and regulations of the SEC. A copy of the policy is available from the corporate governance section on the Company’s website.
The Company has formed a Disclosure Committee which, during the 2014 financial year, comprised the CEO (as Chairperson), the CFO and the Group Company Secretary. The committee has a formal charter approved by the board. The primary role of the committee is to manage the Company’s compliance with its continuous disclosure obligations by implementing reporting processes and controls and determining guidelines for the release of disclosable information.
The Group Company Secretary has been appointed as the person responsible for communications with the ASX and SEC, which includes overseeing and co-ordinating information disclosure to the ASX and SEC.
All announcements provided to the ASX are posted on the Company’s website as soon as practicable after release to the market.
5.2 COMMENTARY ON FINANCIAL RESULTS AND PERIODIC DISCLOSURE
Sims Metal Management strives to provide investors with sufficient information to make an informed assessment of the Company’s activities and results. Results announcements and media/analyst presentations are released to the ASX and SEC and made available on the Company’s website. The Annual Report contains an operational and financial review to assist shareholders in evaluating the Company’s operating results, business strategies, prospects and financial position.
36
| 37 |
CORPORATE GOVERNANCE STATEMENT
Sustainability reporting is part of, and is integrated into, the Group’s risk management framework. The CEO has overall responsibility for Group sustainability matters, and a number of initiatives have been implemented to better enable the Group to measure, monitor and report on its sustainability performance.
SAFETY, HEALTH, ENVIRONMENT & COMMUNITY COMMITTEE
The board has established a Safety, Health, Environment & Community (SHEC) Committee.
The primary role of the SHEC Committee is to provide additional focus and advice to the board on key SHEC issues and to assist the board to fulfil and discharge its SHEC obligations.
The SHEC Committee shall comprise at least three directors of the Company, of whom at least one shall be independent. The SHEC Committee is composed of Mrs Ridout and Messrs Thompson (Chairperson), Renwick, Claro and Sato.
The SHEC charter provides that the SHEC Committee shall meet at least four times each year and as required. The SHEC Committee met four times during the 2014 financial year. Details of attendance at meetings of the SHEC Committee are set out on page 43.
FINANCE & INVESTMENT COMMITTEE
The board has established a Finance & Investment (FIC) Committee. The primary role of the FIC Committee is to review, advise and report to the board on the management of the Company’s financial resources and invested assets, shareholder dividend policy and shareholder dividends, the Company’s capital plan and capital position, debt levels, hedging policies and other financial matters. The FIC Committee also reviews broad investment policies and guidelines for the Group and makes recommendations to the board.
The FIC Committee shall comprise at least three directors of the Company, of whom at least one shall be independent. The FIC Committee is composed of Messrs DiLacqua (Chairperson), Brunsdon, Claro, Sato, Bobins and Thompson.
The FIC charter provides that the FIC Committee shall meet at least twice each year and as required. The FIC Committee met seven times during the 2014 financial year. Details of attendance at meetings of the FIC Committee are set out on page 43.
FINANCIAL REPORTING AND INTERNAL CONTROLS
The board has responsibility for reviewing and ratifying internal compliance and control systems.
The RAC Committee reviews the effectiveness and adequacy of internal control processes relating to financial reporting on a regular basis and reports its findings to the board.
Management assumes the primary responsibility for implementing internal controls and for the internal control environment. In accordance with the Company’s policy, each regional President and regional Chief Financial Officer reports every six months to the CEO and the CFO and, if any exceptions, to the RAC Committee, on the operation and effectiveness of key internal controls. Any identified deficiencies in internal controls are followed up and addressed by division management.
In addition, the Company maintains an internal audit function to conduct internal audits and reviews of the Group’s operations.
The RAC Committee reviews the reports from the internal audit function on a regular basis, monitors its scope and resources, and approves the annual internal audit plan.
The Company monitors its control system on a continual basis and, where appropriate, enhances internal control processes to improve their effectiveness.
7.2 RISK MANAGEMENT ASSURANCE
The CEO and the CFO have stated in writing to the board in respect of the 2014 financial year that the Company’s financial reports present a true and fair view, in all material respects, of the Company’s financial condition and operational results and are in accordance with relevant accounting standards.
The board has also received a written statement of assurance from the CEO and the CFO that, in respect of the 2014 financial year, to the best of their knowledge and belief:
| 1. | the declaration provided in accordance with section 295A of the Corporations Act 2001 is founded on a sound system of risk management and internal compliance and control which, in all material respects, implements the policies adopted by the board; and |
| 2. | the Group’s risk management and internal compliance and control system for the financial year is operating effectively in all material respects in relation to financial reporting risks. |
Due to the geographic spread of the Group’s operations and the extensive delegation of authority and responsibility granted to senior business unit management, the CEO and the CFO, when attesting to the adequacy of the Company’s risk management and internal compliance and control system, rely significantly upon internal audit and the control certification reports received from each regional President and regional Chief Financial Officer regarding compliance with the various risk management, compliance and internal control policies and procedures in the region for which each is responsible.
38
39
CORPORATE GOVERNANCE STATEMENT
ASX CORPORATE GOVERNANCE COUNCIL’S CORPORATE GOVERNANCE PRINCIPLES AND RECOMMENDATIONS
| REFERENCE | COMPLY | |||
| Principle 1: Lay solid foundations for management and oversight |
||||
| 1.1 Establish and disclose the functions reserved to the board and those delegated to senior executives |
1.1, 1.2 | ü | ||
| 1.2 Disclose the process for evaluating the performance of senior executives |
1.3, Remuneration Report | ü | ||
| 1.3 Provide the information indicated in the Guide to reporting on Principle 1 |
website, 1.1–1.4 | ü | ||
|
|
| |||
| Principle 2: Structure the board to add value |
||||
| 2.1 A majority of the board should be independent directors |
2.3 | ü | ||
| 2.2 The chair should be an independent director |
2.4 | ü | ||
| 2.3 The roles of chair and CEO should not be exercised by the same individual |
2.4 | ü | ||
| 2.4 The board should establish a nomination committee |
2.6, 2.7, 2.9 | ü | ||
| 2.5 Disclose the process for evaluating the performance of the board, its committees and individual directors |
2.8, 2.10 | ü | ||
| 2.6 Provide the information indicated in the Guide to reporting on Principle 2 |
website, Directors’ Report, 2.1–2.10 |
ü | ||
|
|
| |||
| Principle 3: Promote ethical and responsible decision-making |
||||
| 3.1 Establish a code of conduct and disclose the code or a summary of the code as to the practices necessary to maintain confidence in the company’s integrity, the practices necessary to take into account their legal obligations and the reasonable expectations of their stakeholders, and the responsibility and accountability of individuals for reporting and investigating reports of unethical practices |
3.1, 3.2 | ü | ||
| 3.2 Establish a policy concerning diversity and disclose the policy or a summary of that policy. The policy should include requirements for the board to establish measurable objectives for achieving gender diversity and for the board to assess annually both the objectives and progress in achieving them |
3.4 | ü | ||
| 3.3 Disclose in each annual report the measurable objectives for achieving gender diversity set by the board in accordance with the diversity policy and progress towards achieving them |
3.4 | ü | ||
| 3.4 Disclose in each annual report the proportion of women employees in the whole organisation, women in senior executive positions and women on the board |
3.4 | ü | ||
| 3.5 Provide the information indicated in the Guide to reporting on Principle 3 |
website, 3.1–3.4 | ü | ||
|
|
| |||
| Principle 4: Safeguard integrity in financial reporting |
||||
| 4.1 The board should establish an audit committee |
4.1 | ü | ||
| 4.2 The audit committee should be structured to consist only of non-executive directors, a majority of independent directors and an independent chair (who is not chair of the board), and to have at least three members |
4.2 | ü | ||
| 4.3 The audit committee should have a formal charter |
4.1 | ü | ||
| 4.4 Provide the information indicated in the Guide to reporting on Principle 4 |
website, 4.1–4.4 | ü | ||
|
|
| |||
| Principle 5: Make timely and balanced disclosure |
||||
| 5.1 Establish and disclose written policies designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure accountability at a senior executive level for that compliance |
5.1, 5.2 | ü | ||
| 5.2 Provide the information indicated in the Guide to reporting on Principle 5 |
website, 5.1, 5.2 | ü | ||
|
|
| |||
| Principle 6: Respect the rights of shareholders |
||||
| 6.1 Design and disclose a communications policy for promoting effective communication with shareholders and encouraging their participation at general meetings |
6.1, 6.2 | ü | ||
| 6.2 Provide the information indicated in the Guide to reporting on Principle 6 |
website, 6.1, 6.2 | ü | ||
|
|
|
40
41
| Directors’ Report |
43 | |||
| Consolidated Income Statements for the year ended 30 June 2014 |
75 | |||
| Consolidated Statements of Comprehensive Income for the year ended 30 June 2014 |
76 | |||
| Consolidated Statements of Financial Position as at 30 June 2014 |
77 | |||
| Consolidated Statements of Changes in Equity for the year ended 30 June 2014 |
78 | |||
| Consolidated Statements of Cash Flows for the year ended 30 June 2014 |
79 | |||
| Notes to the Consolidated Financial Statements |
||||
| 1 Summary of significant accounting policies |
80 | |||
| 2 Financial risk management |
92 | |||
| 3 Critical accounting estimates and judgements |
96 | |||
| 4 Loss per share |
96 | |||
| 5 Segment information |
97 | |||
| 6 Revenue |
99 | |||
| 7 Other income and expenses |
100 | |||
| 8 Income taxes |
102 | |||
| 9 Trade and other receivables |
105 | |||
| 10 Inventory |
106 | |||
| 11 Other financial assets and liabilities |
106 | |||
| 12 Property, plant and equipment |
109 | |||
| 13 Goodwill |
110 | |||
| 14 Other intangible assets |
112 | |||
| 15 Trade and other payables |
113 | |||
| 16 Borrowings |
113 | |||
| 17 Provisions |
114 | |||
| 18 Retirement benefit obligations |
115 | |||
| 19 Contributed equity |
119 | |||
| 20 Accumulated deficit and reserves |
120 | |||
| 21 Dividends |
121 | |||
| 22 Contingencies |
122 | |||
| 23 Commitments |
122 | |||
| 24 Share ownership plans |
123 | |||
| 25 Remuneration of auditors |
126 | |||
| 26 Business acquisitions and disposals |
127 | |||
| 27 Subsidiaries |
129 | |||
| 28 Interests in other entities |
133 | |||
| 29 Related party transactions |
135 | |||
| 30 Parent entity financial information |
136 | |||
| 31 Cash flow information |
137 | |||
| 32 Assets/liabilities classified as held for sale |
138 | |||
| Directors’ Declaration |
139 | |||
| Independent auditor’s report to the members of Sims Metal Management Limited |
140 | |||
| Auditor’s Independence Declaration |
141 | |||
| Annual Financial Report Extracts Presented in US Dollars |
142 | |||
| Shareholder Information |
146 | |||
| Five Year Trend Summary |
147 | |||
42
| 43 |
DIRECTORS’ REPORT
DIRECTORS’ INTERESTS
As at the date of this report, the interests of the Directors in the shares, options, or performance rights of the Company are set forth below.
| SHARES | ||||
| G Brunsdon |
22,057 | |||
| R Bass |
10,600 | |||
| N Bobins |
54,600 | |||
| G Claro* |
— | |||
| J DiLacqua |
— | |||
| G Morris |
40,500 | |||
| C Renwick |
13,144 | |||
| H Ridout |
— | |||
| T Sato |
— | |||
| J Thompson |
12,000 | |||
| * | refer to the Remuneration Report for information on options and rights held by Mr Claro. |
DIVIDENDS
Since the end of the financial year, the Directors have determined a final dividend of 10.0 cents per share, 100% franked, will be paid for the year ended 30 June 2014. The Directors have determined that the dividend reinvestment plan will not operate in relation to this dividend.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
On 8 October 2013, the Company announced the appointment of Mr Galdino Claro as the Group Chief Executive Officer and Managing Director of the Company, effective 4 November 2013. Mr Claro has nearly 30 years of global executive leadership experience in the worldwide metals industry. Most recently, since July 2010, he served as Executive Vice President and Chief Executive Officer of Metals & Minerals at Harsco Corporation, a publicly traded company on the New York Stock Exchange with US$3 billion in revenues.
On 6 June 2014, the Company announced that Mr Robert Larry would step down from the position of Group Chief Financial Officer effective 21 August 2014.
There were no other significant changes in the state of affairs of the Group during the financial year not otherwise disclosed elsewhere in this report.
SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE
On 23 July 2014, Mr Claro presented a five year strategic plan a copy of which is available on the Company’s website at www.simsmm.com.
The Directors are not aware of any items, transactions or events of a material or unusual nature that have arisen since the end of the financial year which will significantly affect, 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 years.
LIKELY DEVELOPMENTS
Information as to the likely developments in the operations of the Group is set out in the Chairman and Chief Executive Officer’s Reviews on pages 4 to 7 and the Operational and Financial Review on pages 8 to 30.
Further information on likely developments in the operations of the Group and the expected results of operations in subsequent financial years have not been included in this annual financial report because the Directors believe it would be likely to result in unreasonable prejudice to the Group.
ENVIRONMENTAL REGULATION
The Group is subject to environmental regulations and reporting requirements in Australia as well as other countries in which it operates. The Group has operating licenses and consents in place at each of its operating sites as prescribed by relevant environmental laws and regulations in each respective location and comprehensive environmental management systems and audit procedures to support compliance. Further information on the consolidated entity’s performance in respect of environmental regulation is set out in the Operational and Financial Review on pages 8 to 30 and our Annual Sustainability Report.
The Group’s Australian operations are subject to the reporting requirements of both the Energy Efficiency Opportunities Act 2006 (EEO) and the National Greenhouse and Energy Reporting Act 2007 (NGER).
The EEO Act requires the Group to assess the energy usage of its Australian operations, including the identification, investigation and evaluation of energy saving opportunities, and to report publicly on the assessments undertaken, including intended actions by the Group. The Group continues to meet its obligations under this Act.
44
45
DIRECTORS’ REPORT
BOARD OF DIRECTORS
Geoffrey N Brunsdon B Comm (age 56)
Chairman and Independent non-executive director
|
Mr Brunsdon was appointed as a director in November 2009, appointed Deputy Chairperson in September 2011 and appointed Chairperson of the Company on 1 March 2012. He is a member of the Risk, Audit & Compliance Committee, the Remuneration Committee and the Finance & Investment Committee. Until June 2009, Mr Brunsdon was Managing Director and Head of Investment Banking of Merrill Lynch International (Australia) Limited. He is Chairman of IPE Limited (since 2004), APN Funds Management Limited (since November 2009), and MetLife Insurance Limited (since April 2011) and a member of the Takeovers Panel. He was a member of the listing committee of the Australian Securities Exchange between 1993 and 1997 and was a director of Sims Group Limited between 1999 and 2007. He is a Fellow of the Institute of Chartered Accountants, a Fellow of the Financial Services Institute of Australia and a Fellow of the Institute of Company Directors. | |
| Mr Brunsdon is also a director of several non-profit organisations, including Redkite (supporting families who have children with cancer), the Wentworth Group of Concerned Scientists and Purves Environmental Custodians. | ||
Robert J Bass MBA (age 65)
Independent non-executive director
|
Mr Bass was appointed as a director on 10 September 2013. He is a member of the Risk, Audit & Compliance Committee. Mr Bass was formerly a partner at Deloitte & Touche from 1982, and Vice Chairman at Deloitte LLP from 2006, until his retirement in June 2012. He practiced at that firm for 39 years and was Lead Client Service Partner responsible for the development, planning, management, administration and delivery of services, including audits of consolidated financial statements to multinational clients in a variety of industries. Mr Bass is currently a director of Groupon Inc (since June 2012) and NewPage Holdings Inc (since December 2012) and is Chairman of the Audit Committee of both companies. He is a graduate of Emory University and received an MBA from Columbia University. He is a Certified Public Accountant, New York and Connecticut, and a member of the American Institute of Certified Public Accountants and Connecticut State | |
| Society of Certified Public Accountants. | ||
Norman R Bobins BS, MBA (age 71)
Independent non-executive director
|
Mr Bobins was appointed as a director in March 2008. He is Chairperson of the Nomination/Governance Committee, and is a member of the Finance & Investment Committee. Mr Bobins was formerly a director of Metal Management, Inc (since 2006). He is the Chairman of Norman Bobins Consulting LLC (since 2008). From May 2007 until October 2007, Mr Bobins was the Chairman of the Board of LaSalle Bank Corporation. From 2002 to 2007, he was President and Chief Executive Officer of LaSalle Bank Corporation. From 2006-2007, he was President and Chief Executive Officer of ABN AMRO North America. From 2002-2007, Mr Bobins was Senior Executive Vice President at ABN AMRO Bank N.V., the Dutch parent of LaSalle Bank Corporation. He is the Non-Executive Chairman of The PrivateBank and Trust Company. Mr Bobins is also a director of AGL Resources, Inc, AAR CORP, and Aviv REIT, Inc. He earned his BS from the University | |
| of Wisconsin and his MBA from the University of Chicago. | ||
Galdino Claro B Mech Eng (age 55)
Group Chief Executive Officer and Managing Director
|
Mr Claro was appointed Group Chief Executive Officer and Managing Director of the Company on 4 November 2013. He is a member of the Safety, Health, Environment & Community Committee, the Nomination/Governance Committee, and the Finance & Investment Committee. Mr Claro has nearly 30 years of global executive leadership experience in the worldwide metals industry. He served as Executive Vice President and Chief Executive Officer of Metals & Minerals at Harsco Corporation from July 2010 to November 2013. He also held various positions over a twenty year period with Alcoa Inc. Mr Claro has a Mechanical Engineering background. |
John T DiLacqua MBA (age 62)
Independent non-executive director
|
Mr DiLacqua was appointed as a director in September 2011. He is Chairperson of the Finance & Investment Committee, and is a member of the Risk, Audit & Compliance Committee. Mr DiLacqua was formerly a director of Metal Management, Inc (since 2001), and was a director of Sims Metal Management Limited between March and November 2008. He was the Executive Chairman of Envirosource, Inc from May 2004 to December 2004 and had served as President and Chief Executive Officer of Envirosource from January 1999 to May 2004. From October 1997 to December 1998, Mr DiLacqua served as President of the US Ferrous Operations of Philip Metals, Inc, and, prior to that, from May 1994, as the President of Luria Brothers. He is a graduate of Temple University and received an MBA from Carnegie Mellon University. Mr DiLacqua is a Certified Public Accountant. | |
46
47
DIRECTORS’ REPORT
REMUNERATION REPORT
REMARKS BY THE CHAIRMAN OF THE REMUNERATION COMMITTEE
Dear Shareholder,
We are pleased to present our Remuneration Report for FY14.
Fiscal 2014 proved to be another challenging year for our Company as evidenced by our statutory loss of A$89 million.
In recognition of the difficult market conditions in which we operated as a basic materials processor through our scrap metals and e-recycling businesses, the Remuneration Committee administered the Company’s short-term incentive (STI) and long-term incentive (LTI) plans carefully to control remuneration and cost in FY14.
It was also a year of change, as we appointed Galdino Claro as our new Group CEO effective 4 November 2013. Mr Claro is repositioning our portfolio of businesses and building a new management team well suited to the execution of the Company’s five year strategic plan announced on 23 July 2014.
We have continued to strengthen our executive remuneration framework. Our STI plan now has greater alignment to Group financial performance. In FY14, a financial gateway was introduced into the STI plan, so that a threshold Group return on controlled capital employed (ROCCE) (for the full financial year) must be achieved before any STI payment is awarded to the Group Executives. This will also apply to the Group CEO from FY15. The Group Executives will also continue to have 80% of their target STI based on Group ROCCE, being our key financial measure, as will the Group CEO from FY15. The Regional Executives now have 20% of their STI based on Group ROCCE to encourage collaboration and to drive Group financial performance, with 60% of their target STI based on business unit ROCCE, which is more within their control. Regional Executives must also meet threshold Group and Regional ROCCE gateways before any STI payments are awarded. Furthermore, in order for Executives to receive the 20% of their target STI that is based on individual non-financial measures, a threshold level of ROCCE will need to be achieved. Given the Group CEO’s commencement date with the Company, the Committee determined that a financial measure for the Group CEO in the calculation of his potential STI award for FY14 would be underlying Group EBITDA for the second half of FY14.
Enhancements were also made to the LTI plan. An increased portion of an executive’s LTI grant is now delivered as performance rights (80% for the Group CEO and 67% for executives, up from 50%). This further aligns the LTI plan with Australian market practice. As we compete for the majority of our talent and business in the USA, the balance of an executive’s LTI grant is delivered as options, to align the LTI plan with market practice there. A further performance hurdle was placed on the performance rights so that these are now subject to both relative total shareholder return (TSR) and earnings per share (EPS). The inherent absolute share price growth hurdle in options continues to apply. We also removed the re-test mechanism that previously applied to performance rights. We believe that our LTI plan is one of the more rigorous in the market because, in order for awards to fully vest, there needs to be earnings growth, absolute share price growth and superior total shareholder return relative to our peers.
We will continue to review and strengthen our remuneration framework in FY15, particularly in respect of the individual non-financial measures in the STI plan, more strongly relating pay outcomes with the achievement of the Company’s strategic plan.
The following pages outline the actual remuneration outcomes for FY14 in light of Company performance, as well as providing further detail on our executive remuneration framework. We welcome and value your feedback on our executive remuneration practices.
Yours sincerely,
Christopher Renwick
Remuneration Committee Chair
RemCoChair@simsmm.com
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Executive remuneration philosophy
Our remuneration philosophy is designed to provide remuneration that:
| • | attracts, motivates and retains the best and brightest of its senior executive, leadership and staff positions; |
| • | drives the Company’s strategic plan; and |
| • | aligns reward opportunities with shareholder interests. |
Due to our global scale, our remuneration practices take into account local market practice, particularly in the USA, our largest geographic region, where we compete for much of our talent and business. Our executive remuneration framework consists of fixed remuneration, short-term incentives and long-term incentives.
Actual remuneration outcomes for FY14
| REMUNERATION COMPONENT |
OUTCOME | |
| Fixed remuneration | • Our new Group CEO commenced on 4 November 2013 with total fixed remuneration of US$1.15 million per annum. This is 18% lower than that of our previous Group CEO. | |
| • Executive fixed remuneration levels were frozen for all existing KMP for FY14. | ||
| • Steve Skurnac received a pay increase on 1 July 2013 upon taking on the broader responsibilities of President, Global SRS and became a KMP as of this date. Mr Skurnac’s new remuneration level was determined in the context of remuneration market data based on industry-related companies of a relative size, footprint and complexity to the Company. | ||
| Short-term incentive (STI) | • STI payments were significantly lower than target, due to performance against our key financial measure, ROCCE, generally being below threshold. | |
| • The Group CEO received 67% of his target STI opportunity (also pro-rated for service). The individual performance goals for the Group CEO, as determined by the Committee, were based on specific goals within five categories – safety, financial (including, given that he commenced with the Company on 4 November 2013, underlying Group EBITDA for the second half of FY14), people and culture, accounting and operational controls, and consolidation of corporate headquarters. | ||
| • The Executives (excluding the Group CEO) received an STI award ranging from 0% to 117% of their target STI opportunities based on ROCCE and individual performance. ROCCE for the full year was below threshold at the Group level and for all businesses except Australia Metals and New Zealand Metals, which achieved above target, and Europe SRS excluding UK SRS, which achieved above threshold. | ||
| • The number of employees participating in the STI plan was reduced by 26% Group wide to limit participation to those individuals who could directly influence Company performance. | ||
| Long-term incentive (LTI) | • No performance rights vested during the year as the Company’s TSR performance was below the median against its TSR peer group. | |
| • Options vested during the year in accordance with the terms of their grant. | ||
| • Mr Morris was the only KMP who exercised options during FY14. These options were granted in 2008 by Metal Management Inc (MMI) prior to its merger with the former Sims Group Limited. Neither Mr Morris nor any other NED held any options in the Company at the end of the year. | ||
| • The number of employees participating in the LTI plan was reduced by 48% Group wide to limit participation to those individuals who could directly influence Company performance. | ||
In the context of the above comments, actual remuneration received by Executives during FY14 is set out below. This disclosure is provided on a voluntary basis to provide additional transparency and to clearly demonstrate the strong linkage between ‘at-risk’ pay and Company performance.
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B: REMUNERATION GOVERNANCE FRAMEWORK
We have a strong remuneration governance framework, with the Board being ultimately responsible for the Company’s executive remuneration practices. The Remuneration Committee advises the Board in making remuneration decisions.
The primary role of the Remuneration Committee (Committee) is to support and advise the Board on the implementation and maintenance of coherent, fair and responsible remuneration policies and practices, which are observed by the Company and which enable it to attract and retain executives and directors who will create value for shareholders. The Committee’s charter, which is available on the Company’s website at www.simsmm.com, provides further information on the role and responsibilities of the Committee.
The diagram below illustrates the role of the Board, the Committee, management and external advisors (including remuneration consultants) in relation to remuneration.
In addition to the above, in recognition of the value and advantages of having a diversified workforce and consistent with the Company’s Workforce Diversity Policy (a copy of which can be found on the Company’s website at www.simsmm.com), the Committee is responsible for reviewing and approving the measureable objectives for achieving diversity as noted in the Company’s Corporate Governance Statement.
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A snapshot of the Company’s remuneration principles and its components, and how they support the Company’s overall vision, is illustrated in the diagram below.
MISSION
Our mission is to be the best in class recycler of metals and electronics in all markets we operate. Our industry leadership will be driven by the strengths of our partnership with our suppliers, the excellence of our products and services to our customers, and the attractiveness of our returns to shareholders.
REMUNERATION PRINCIPLES
| Reward capability, experience and performance against business strategy | Provide a competitive reward for contribution to growth in shareholder wealth | Provide a clear structure for earning rewards |
Provide recognition for individual performance contributions in line with the Company’s strategic plan |
Support the Company’s core values of safety, teamwork, respect, integrity, financial discipline and an entrepreneurial spirit |
REMUNERATION COMPONENTS
| FIXED REMUNERATION |
SHORT-TERM INCENTIVE | LONG-TERM INCENTIVE | ||||
| What is the purpose of this remuneration component? | To be able to attract and retain quality talent. | To reward executives for Company, business unit and individual contributions. |
To retain executives and ensure their interests and rewards are aligned with the longer term interests and rewards of shareholders. | |||
| How is this remuneration component determined? | Based on capability, experience, responsibilities and accountability, commensurate with role. Set with reference to market data against a relevant peer group. | Based on financial targets (ROCCE) and individual performance goals (such as safety, environment and sustainability, implementation of the strategic plan, talent management and shareholder and community relations). |
All equity is subject to continued service. Hurdles are based on relative TSR (40%), earnings per share (40%), and absolute share price (20%) (inherent in the options). | |||
| Over what period is performance assessed? | n/a | 12 months. | Performance rights have a 3 year performance period. Options vest over 1-3 years, and can be exercised up to the end of Year 7. | |||
| How is this remuneration component delivered? | Annual salary, benefits and pension / superannuation. | Cash. | Performance rights and options (or phantom options). | |||
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Fixed remuneration
Fixed remuneration primarily seeks to attract and retain high calibre Executives. It rewards for capability, experience, responsibility and accountability, commensurate with role.
Fixed remuneration comprises base salary and benefits:
| • | Base salary is determined on an individual basis, taking into consideration the individual’s capability, experience, responsibilities and accountability, as well as external market factors and benchmark data. |
| • | Benefits programs vary by market and may include health insurance, life and disability insurance, retirement programs (depending on national government and tax regulations) and automobile allowances. |
Remuneration packages (including fixed components of base salaries and benefits) are reviewed annually. In reviewing any changes to Executive remuneration, the Committee references individual performance, as well as its competitiveness against the remuneration peer group (described above).
There are no guaranteed increases to any components of fixed remuneration for any of the Executives.
‘At-risk’ remuneration
The ‘at-risk’ component of remuneration comprises both short-term and long-term incentives. ‘At-risk’ means an absence of certainty regarding the payment of a particular component of remuneration in the event agreed-upon performance hurdles or employment conditions are not met during the performance period. Details on each of these Plans are outlined below.
STI Plan
Key developments in FY14:
| • | The new Group CEO has a target STI opportunity of 100% of fixed remuneration (reduced from 130% of fixed remuneration for the previous Group CEO). |
| • | A financial gateway was introduced into the STI plan, meaning that for all Executives (including the Group CEO from FY15) a threshold level of financial performance (Group / business unit ROCCE) needs to be achieved before any STI payments are made. This provides greater alignment of STI payments to Company financial performance. |
| • | All Executives now have a portion of their STI based on Group ROCCE. This encourages collaboration and provides an increased focus on Group results. |
| • | The number of employees participating in the STI plan was reduced by 26% Group wide to limit participation to those individuals who could directly influence Company performance. |
Executives are eligible to participate in the Company’s STI plan. The Committee believes that the STI plan is a key motivator to drive alignment with Company strategy and values, by rewarding for a mix of Company, business unit and individual contributions.
The table below summarises the key aspects of the STI plan.
| What is the STI plan? | • Under the STI plan, eligible employees have an opportunity to earn an annual cash-based incentive based on the achievement of pre-defined financial (ROCCE) targets and individual goals over the financial year. | |
| • Company, business unit and individual goals are set on an annual basis, to align with achievement of the Company’s financial, business, and strategic priorities. | ||
| What is ROCCE and why is it used? | • ROCCE is an acronym that means return on controlled capital employed which is calculated as profit divided by funds deployed: | |
| • Profit in the numerator refers to earnings before interest and taxes which the Committee believes represents ordinary earnings within the influence of management. | ||
| • Controlled capital employed in the denominator is total funds used by management in the business and represents the average balances of assets throughout the financial year to generate ordinary earnings. | ||
| • ROCCE rewards investment decisions that deliver higher returns (efficient use of capital) rather than just increased profits. | ||
| • Debt capital cannot be used by management to manipulate higher net asset returns since debt is not subtracted in determining the funds employed in the denominator. | ||
| • For these reasons ROCCE is selected as the most appropriate measure of management’s success in delivering shareholder value. | ||
| • ROCCE is subject to adjustments as approved at the Committee’s discretion. | ||
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| Why aren’t the specific performance targets disclosed? | The Committee understands the desire for greater transparency of specific targets. However, given the Company’s size and position in the industry, the Company believes disclosing precise financial / individual goals would put it at a competitive disadvantage due to commercial sensitivity. | |
| How are the performance measures determined? | • The financial hurdles are determined by referencing the Company’s current year budget and cost of capital in consideration of the current economic cycle. | |
| • The individual goals are determined taking into consideration the areas of specific focus by the Group CEO and Executives to support the delivery of the Company’s 5 year strategic plan. | ||
| How is performance assessed? | Assessing Company performance: | |
| • First, the financial gateway of Group ROCCE / business unit ROCCE is assessed. If the financial gateway is not met, there are no payments made under the STI plan. | ||
| • Second, if the financial gateway is met, payment is then determined by reference to ROCCE and individual goals. Once the threshold hurdle is met, awards against the ROCCE targets are linear in calculation until the maximum hurdle is reached. | ||
| • Actual performance against the financial targets is set out in Section D. | ||
| Assessing individual performance | ||
| • An individual’s performance is rated on a scale of 0 to 4. Participants must receive a weighted average rating of at least 2.0 (meets expectations) in order to receive target payment based on the individual performance component. A rating below 1.75 results in no award with regard to the individual performance component. | ||
| • The Group CEO’s performance is assessed by the Committee and a recommended payment is approved by the Board. Each Executive’s performance is assessed by the Group CEO, and recommended payments are considered and, if appropriate, approved by the Committee. | ||
| Does the Board have discretion? | • The Board maintains full discretion over the level of any STI awards paid to the Group CEO and Executives. | |
| How is the STI delivered? | • The STI is delivered as cash. Any payments are made in September following the finalisation of the Company’s audited financial results. | |
| Why is there no STI deferral and clawback? | • During FY14, the Committee considered the introduction of STI deferral for the Group CEO and Executives. However, given the Group CEO and Executives have a meaningful weighting on the LTI in their remuneration mix (ranging from 30% to 50%), the Committee concluded that it was not necessary at this time to introduce STI deferral for shareholder alignment or retention purposes. | |
| • The Company currently does not have a policy that allows for the clawback of STI payments. The Committee recognises that the clawback of STI payments may be appropriate in certain circumstances and the Company may consider introducing a clawback policy in the future. | ||
| What are the termination provisions? | • A voluntary termination prior to the last calendar day of the fiscal year will result in no STI being paid for the year unless the Committee determines otherwise. Upon a qualifying cessation (i.e. generally, termination due to death, permanent disability, redundancy, or in other circumstances determined at the discretion of the Board), STI performance for the relevant period will be assessed and paid. See Section F for further information on the Group CEO’s entitlement to any STI on termination. | |
| • No STI payments will be made in the case of termination for cause. | ||
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| What is the purpose of the LTI plan? | • The LTI plan incentivises Executives to achieve earnings, share price and relative total shareholder return targets over a 1-3 year period (80% of the Group CEO’s grant and 2/3 of the other Executives’ grants are not eligible for vesting until the third year). Executive rewards under the LTI plan are aligned with the shareholder experience as the ultimate reward an Executive receives is dependent upon the Company’s share price. | |
| What is the frequency and timing of the awards? | • The Company’s shareholders approved an LTI award for the Group CEO at the Company’s 2013 Annual General Meeting (AGM). In conjunction with the AGM, the Committee approved and granted LTI awards for the Executives. | |
| • Awards are typically made on an annual basis. | ||
| What instruments are offered under the LTI plan? | The table below provides further information on the three instruments: | |
| INSTRUMENT |
DESCRIPTION | |
| Performance rights | • A performance right is a contractual right to acquire an ordinary share for nil consideration if specified performance conditions are met. All the Executives received performance rights. | |
| Options | • An option is a contract that gives the holder the right, but not the obligation, to acquire an ordinary share at a fixed price over a specified period of time. In respect of option grants prior to FY14, USA participants have their options settled in American Depositary Shares (ADSs) unless otherwise determined by the Board. | |
| • Options reward Executives for absolute share price performance because the options only have value if the Company’s share price exceeds the exercise price at the end of the vesting period. All the Executives, other than Mr McGree, received options. | ||
| Phantom options | • Phantom options operate in the same manner as options; however, they are cash-settled rather than equity-settled. Accordingly, rather than receiving an ordinary share in the Company upon exercise, the Executive receives the equivalent value in cash. | |
| • Because of its differing securities laws and taxation treatments, phantom options have been offered to participants in Australia since 1 July 2010. Mr McGree, given he is resident in Australia, is the only Executive who receives phantom options. | ||
| Why are options included as part of the LTI plan? | • Options are a small component of the LTI award, representing 20% of the LTI opportunity for the Group CEO and 33% of the LTI opportunity for the Executives. | |
| • Options are included in the LTI plan because it is critical that the Company, in light of the geographic spread of its operations and talent pool, has a globally competitive remuneration framework. While the grant of rights subject to relative TSR and EPS reflects Australian competitive market practice, the grant of options subject to vesting over a 1-3 year period reflects competitive USA market practice. If options were not included as part of the LTI plan, there is a risk that the Company would not be able to attract quality talent in the USA, its largest operating jurisdiction. | ||
| What is the target and maximum LTI opportunity? | • The target LTI opportunity is 200% of fixed remuneration for the Group CEO and ranges between 75% and 125% of fixed remuneration for Executives.
• The maximum LTI opportunity is dependent on the number of rights that vest, the number of options that are exercised, and the Company’s share price at the vesting / exercise date. | |
| How is the number of LTI awards determined? | • The number of rights and options granted is determined based on the fair value of the rights and options on the date of approval by the Committee. The fair value of rights is calculated by Mercer for the Committee using a Black-Scholes, Binomial or Monte Carlo simulation option pricing model as appropriate. | |
| • The Company uses a discounted fair value approach in determining the size of LTI grants to be consistent with the grant date fair value used for expensing and to reflect the degree of difficulty in goal achievement. This method also considers the approach used by Mercer in obtaining competitive data from the Company’s Australian remuneration peer group companies, where Mercer applied discounts to peer company target LTI values to reflect the risk of forfeiture from performing below levels required to receive full target payouts. | ||
| • As a result of the discounts, market LTIs for the Australian peer companies that are reviewed by the Committee are reported at much lower than target levels. The comparable adjustment for the Company is determined at grant using the fair value approach to determining the number of target shares based on the target dollar value. | ||
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| Do participants receive dividends? | • Holders of rights and options are not entitled to dividends over the term of the relevant vesting period (and in the case of options, until exercised). | |
| Treatment of awards on termination of employment | • As all instruments are subject to a continuous service provision, where a participant resigns, or is terminated for cause, his or her awards are forfeited.
• Where termination of employment is the result of a qualifying cessation (i.e. generally death, permanent disablement, redundancy, or in other circumstances at the discretion of the Board), a participant will be entitled to his or her unvested awards subject to any performance conditions, in accordance with the original vesting schedule.
• Any unvested rights held by an eligible terminated participant will be tested at the end of the relevant performance period. Any unvested awards will lapse at the end of the relevant performance period. In respect of the Group CEO’s entitlement to any continual vesting under the LTI plan on termination, see further Section F. | |
| How are awards treated on a change of control? | • The Board has the discretion to immediately vest the rights and options prior to their vesting date if there is a change of control event.
• The rights and options will immediately vest in the event that a takeover bid of the Company is recommended by the Board, or a scheme of arrangement concerning the Company, which would have a similar effect to a full takeover bid, is approved by the Company’s shareholders. | |
| 1 | For USA based Executives, option awards are not Incentive Stock Options for the purposes of section 422 of the United States Internal Revenue Code. |
Guidelines for approval of Discretionary Awards
The guidelines for approval authority limits for individual discretionary cash awards and aggregate discretionary cash and / or equity awards are:
| • | Individual awards: Any individual discretionary cash and / or equity award in excess of US$250,000 must be presented to the Committee for approval. This is a reduction in the prior threshold of US$500,000. |
| • | Aggregate awards: If the aggregate sum of the cash and / or equity award per occurrence is in excess of the Group CEO Discretionary Capital Expenditure authority (currently US$1,000,000), then it must be presented to the Committee for approval. |
All discretionary awards that are approved by the Group CEO are subsequently presented to the Committee for ratification.
Securities Trading Policy
The trading of securities issued to participants pursuant to the LTI plan is subject to, and conditional upon, compliance with the terms of the Company’s policy titled ‘Dealings in Sims Metal Management Limited Securities’ (a copy of which is available on the Company’s website at www.simsmm.com).
Executives are prohibited from entering into any hedging arrangements over unvested awards under the LTI plan. The Company would consider a breach of the Securities Trading Policy as serious misconduct, which may lead to disciplinary action up to and including dismissal.
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Linkage of LTI outcomes to Company performance
The LTI plan is based on relative TSR, EPS and absolute share price growth.
Relative TSR (hurdle for 50% of the rights based on value)
The TSR graph below compares the Company’s (ASX: SGM) TSR against the peer group (as referenced above) for the five-year period ending 30 June 2014. TSR is the return to shareholders provided by share price appreciation plus dividends (which are assumed to be reinvested in the Company’s shares), expressed as a percentage of the share price at the beginning of the measurement period adjusted, where appropriate, for bonus issues, capital consolidation or equivalents.
CUMULATIVE TOTAL SHAREHOLDER RETURN
SGM AGAINST THE COMPARATOR GROUP (EXCLUDING SGM)
As the Company’s TSR has been below the median against its peer group of companies, there has been no vesting under the LTI plan against the relative TSR hurdle since FY11. The table below outlines the status of the LTI grants that were outstanding as of 1 July 2014:
| TSR GRANT |
STATUS | |
| FY09 | 100% forfeited on 23 August 2013 | |
| FY10 | 100% forfeited on 22 August 2014 | |
| FY11 | No vesting as of 30 June 2014. Final re-test on 30 June 2015 | |
| FY12-FY14 | Not yet eligible for testing |
Earnings per share (hurdle for 50% of the rights based on value)
In FY14, an EPS hurdle was re-introduced into the LTI plan. The first time that these rights will be eligible to vest based on EPS performance will be in FY16. Including an EPS hurdle in the LTI plan is consistent with our goal to align management incentive with a reasonable level of net income for shareholders.
Absolute share price growth (hurdle for 100% of the options and phantom options)
Using options as a small part of the LTI grant is aligned to Company performance as it focuses Executives on absolute share price growth. This is because Executives only receive rewards from the options if the Company’s share price increases above the option exercise price. Options create the strongest alignment to the shareholder experience because Executives only receive rewards if shareholders have similarly benefited.
Mr Morris was the only KMP who exercised options during FY14. These options were over ADSs in the Company and were granted by MMI prior to its merger with the former Sims Group Limited in 2008. Neither Mr Morris nor any other NED holds any options in the Company.
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Fixed and actual ‘at-risk’ remuneration for FY14
Outlined below is the percentage of the Executives’ FY14 remuneration that was fixed and ‘at-risk’ based upon the statutory remuneration table. The percentage of their remuneration that consisted of rights and options is also disclosed.
| FIXED | ‘AT-RISK’ | REMUNERATION | REMUNERATION | |||||||||||||
| REMUNERATION | REMUNERATION | CONSISTING | CONSISTING | |||||||||||||
| % | % | OF RIGHTS % | OF OPTIONS % | |||||||||||||
| Executives |
||||||||||||||||
| G Claro |
30 | % | 70 | %1 | 24 | % | 5 | % | ||||||||
| R Kelman |
55 | % | 45 | % | 23 | % | 22 | % | ||||||||
| R Larry |
68 | % | 32 | % | 17 | % | 15 | % | ||||||||
| D McGree |
34 | % | 66 | % | 13 | % | 13 | % | ||||||||
| S Skurnac |
67 | % | 33 | % | 13 | % | 9 | % | ||||||||
| 1 | This includes 23% relating to Mr Claro’s sign-on bonus. This bonus is classified as “at-risk” because there was a service condition imposed on the bonus being that Mr Claro was required to remain in employment until 15 July 2014 to receive the bonus. |
F: EXECUTIVE CONTRACTS
Executive Director and Group CEO
The key terms of Mr Claro’s employment contract are:
| NOTICE PERIOD | ||||||||
| COMMENCEMENT | CONTRACT | NOTICE PERIOD | FROM THE | |||||
| DATE |
DURATION |
FROM THE COMPANY |
EXECUTIVE |
TERMINATION PROVISIONS | ||||
| 4 November 2013 | Ongoing | 3 months prior notice in writing | 3 months prior notice in writing | Mr Claro’s employment may be terminated immediately by the Company for cause, or by either party for convenience, or by Mr Claro for good reason, each term as defined in the contract. |
Signing incentives: Mr Claro was awarded one-off signing incentives, comprised of a cash bonus of US$650,000, that was paid on 17 July 2014, and 116,505 Restricted Stock Units (RSUs), equating to a value of US$1 million, that were granted on 15 November 2013 following shareholder approval. The signing bonus and RSUs grant were designed to compensate Mr Claro for the cash incentive he would have received had he remained with his previous employer.
Termination of employment: If Mr Claro’s employment is terminated by the Company for convenience on 3 months’ written notice, then Mr Claro will be entitled to:
| (a) | a Severance Payment (see below); |
| (b) | a pro-rata STI in respect of the performance year in which the termination occurs and based on the actual performance results of the Group for that year (Pro-Rata Bonus), unless the Board determines otherwise acting reasonably having regard to the performance of Mr Claro over the preceding years; |
| (c) | continued vesting of any equity awards under the LTI plan (subject to any performance hurdles) granted to him before termination (Continued Equity Award Vesting), unless the Board determines otherwise as above; |
| (d) | any accrued but unpaid remuneration, accrued but untaken holiday leave (subject to Company policy) and reimbursement for incurred expenses (Accrued Benefits); and |
| (e) | up to 12 months of Company paid health insurance premiums (Insurance). |
If Mr Claro terminates his employment for good reason, then he will be entitled to the Severance Payment, Pro-Rata Bonus, Continued Equity Award Vesting, Accrued Benefits, and the Insurance.
If his employment is terminated on the death or permanent disablement of Mr Claro, or in other circumstances determined at the discretion of the Board, then Mr Claro (or his beneficiary or legal representative) will be entitled to the Pro-Rata Bonus, Continued Equity Award Vesting and, other than on death, the Insurance.
If his employment is terminated by the Company for Cause, or if Mr Claro terminates for convenience on 3 months’ written notice, then Mr Claro is only entitled to the Accrued Benefits.
Generally, as approved by shareholders on 14 November 2013, a Severance Payment is equal to Mr Claro’s final year’s total fixed remuneration. However, if termination occurs prior to 4 November 2014, then the severance payment will be US$1.15 million and pro-rated based on the proportion that the number of days employed bears to 365 days.
Change of control: A change of control, as defined in the contract, of the Company, may allow Mr Claro to terminate his employment for good reason.
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G: NON-EXECUTIVE DIRECTORS’ FEES
Key development:
In recognition of Company performance, it was agreed that NED fees reduce by 10% in FY14 and revert back to FY13 levels in FY15.
Approach to determining Non-Executive Director (NED) fees
The level of NED fees reflects the need to reward directors for their commitment to the corporate governance of the Company, their active participation in the affairs of the business and the contribution they make generally to the maximisation of shareholder value. The Company aims to provide a level of fees for NEDs taking into account, among other things, fees paid for similar roles in comparable companies, the time commitment, risk and responsibility accepted by NEDs, and recognition of their commercial expertise and experience.
Non-Executive Directors’ fees
The total amount of fees, including superannuation, for all NEDs must not exceed the limit approved by shareholders. The current NED fee cap is A$3,000,000 per annum, approved at the Company’s 2009 AGM.
In recognition of Company performance, and in an effort to reduce costs in FY14, it was agreed that NED fees reduce by 10% in FY14 and revert back to FY13 levels in FY15. With the expectation of improving performance following the adoption by the Board of the Company’s 5 year strategic plan, NED fees will revert, as agreed, to the previous (FY13) fee level in FY15. This change will not require any increase to the NED fee pool.
Under the current fee framework, NEDs receive a base fee and also receive further fees for chairmanship of a Board Committee. There are no additional fees for membership of a Committee. The table below outlines NED fees for FY14 and FY15.
| FINANCIAL YEAR | ||||||||
| NED FEES (AUD) |
20141 | 20152 | ||||||
| Base fee (Chairman) |
405,475 | 450,528 | ||||||
| Base fee (NED) |
183,082 | 203,424 | ||||||
| Chairman Risk, Audit & Compliance Committee3 |
58,500 | 35,000 | ||||||
| Chairman Safety, Health, Environment & Community Committee |
31,500 | 35,000 | ||||||
| Chairman Remuneration Committee |
31,500 | 35,000 | ||||||
| Chairman Finance & Investment Committee |
31,500 | 35,000 | ||||||
| Chairman Nomination/Governance Committee |
31,500 | 35,000 | ||||||
| 1 | Reflecting a 10% decrease from FY13 fee levels. |
| 2 | NED fees reverted back to FY13 fee levels. |
| 3 | The annual fee for the Chairman of the Risk, Audit & Compliance Committee will be reduced to A$35,000 effective from the date of the Company’s 2014 AGM. |
Between July 2013 and November 2013, the Company operated without a Group CEO while an executive search for a new Group CEO was completed. The Board determined that, during this period, the Company would be led by a senior management team, headed by NEDs Geoffrey Brunsdon and James Thompson. As compensation for their services in providing leadership during this transition period, the Board, on the recommendation of the Committee, and in consultation with Mercer, the Committee’s remuneration consultant, determined in November 2013 that the Company pay A$200,000 to Mr Brunsdon and US$200,000 to Mr Thompson as special one-off awards.
NEDs also receive reimbursement for reasonable travel, accommodation and other expenses incurred in travelling to and / or from meetings of the Board, or when otherwise engaged in the business of the Company in accordance with Board policy.
NEDs are not currently covered by any contract of employment; therefore, they have no contract duration, notice period for termination, or entitlement to termination payments.
NEDs do not participate in any incentive (cash or equity-based) arrangements. Mr Morris held options as a result of grants made by MMI prior to its merger with the former Sims Group Limited in March 2008. These options were all exercised in FY14 and neither Mr Morris nor any other NED now holds any options in the Company.
Superannuation and retirement benefits
For Australian resident NEDs, superannuation is paid in addition to the above fees. The Company pays superannuation at 9.25% (increasing to 9.50% in FY15) for each Australian resident NED. Superannuation is not paid in respect of overseas directors.
Statutory NED remuneration disclosures
For NEDs who receive payments in foreign currencies, the table below reflects the Australian dollar equivalent based on the exchange rate at the date of payment. Accordingly, exchange rate movements have influenced the disclosed fee level. In FY14, the Australian dollar weakened considerably against the US dollar as compared to FY13. Therefore, in the table below, even though there was a 10% reduction in NED fees, the FY14 fees for USA based NEDs were higher than that of FY13 as presented in Australian dollars.
68
69
DIRECTORS’ REPORT
H: SHARE-BASED PAYMENT DISCLOSURES AND EQUITY HOLDINGS
Options provided as remuneration
The following table summarises the terms of outstanding option grants (and phantom option grants where applicable) for the Executives.
| NAME |
GRANT DATE |
NUMBER GRANTED |
EXERCISE PRICE |
FAIR VALUE AT GRANT DATE |
DATE NEXT TRANCHE CAN BE EXERCISED |
EXPIRY DATE |
% OF OPTIONS THAT HAVE VESTED |
MAXIMUM TOTAL VALUE OF UNVESTED GRANT1 |
||||||||||||||||||||||||
| Ordinary Shares (A$) |
||||||||||||||||||||||||||||||||
| G Claro |
15 Nov 13 | 138,714 | $ | 9.98 | $ | 2.77 | 29 Aug 14 | 15 Nov 20 | 0 | % | $ | 215,060 | ||||||||||||||||||||
| R Larry |
15 Nov 13 | 125,054 | $ | 9.98 | $ | 2.77 | 29 Aug 14 | 15 Nov 20 | 0 | % | $ | 193,882 | ||||||||||||||||||||
| R Kelman |
15 Nov 13 | 132,356 | $ | 9.98 | $ | 2.77 | 29 Aug 14 | 15 Nov 20 | 0 | % | $ | 205,203 | ||||||||||||||||||||
| D McGree |
11 Nov 11 | 87,260 | 2 | $ | 13.07 | $ | 1.14 | 2 | 22 Aug 14 | 11 Nov 18 | 66.7 | % | $ | 2,023 | ||||||||||||||||||
| 16 Nov 12 | 146,268 | 2 | $ | 9.29 | $ | 2.18 | 2 | 29 Aug 14 | 16 Nov 19 | 33.3 | % | $ | 56,911 | |||||||||||||||||||
| 15 Nov 13 | 101,726 | 2 | $ | 9.98 | $ | 2.16 | 2 | 29 Aug 14 | 15 Nov 20 | 0 | % | $ | 123,513 | |||||||||||||||||||
| S Skurnac |
15 Nov 13 | 54,768 | $ | 9.98 | $ | 2.77 | 29 Aug 14 | 15 Nov 20 | 0 | % | $ | 84,912 | ||||||||||||||||||||
| ADSs (US$) |
||||||||||||||||||||||||||||||||
| R Kelman |
11 Nov 11 | 70,924 | $ | 13.37 | $ | 4.52 | 22 Aug 14 | 11 Nov 18 | 66.7 | % | $ | 7,064 | ||||||||||||||||||||
| 16 Nov 12 | 157,886 | $ | 9.49 | $ | 2.18 | 29 Aug 14 | 16 Nov 19 | 33.3 | % | $ | 62,259 | |||||||||||||||||||||
| R Larry |
11 Nov 11 | 88,655 | $ | 13.37 | $ | 4.52 | 22 Aug 14 | 11 Nov 18 | 66.7 | % | $ | 8,830 | ||||||||||||||||||||
| 16 Nov 12 | 149,175 | $ | 9.49 | $ | 2.18 | 29 Aug 14 | 16 Nov 19 | 33.3 | % | $ | 58,825 | |||||||||||||||||||||
| S Skurnac |
11 Nov 11 | 12,506 | $ | 13.37 | $ | 4.52 | 22 Aug 14 | 11 Nov 18 | 66.7 | % | $ | 1,245 | ||||||||||||||||||||
| 16 Nov 12 | 21,042 | $ | 9.49 | $ | 2.18 | 29 Aug 14 | 16 Nov 19 | 33.3 | % | $ | 8,298 | |||||||||||||||||||||
| 1 | No options will vest if the vesting conditions are not satisfied, hence the minimum value of unvested awards is nil. The maximum value of the unvested awards has been determined as the amount of the grant date fair value that is yet to be expensed. |
| 2 | Represents a cash-settled phantom option grant. In accordance with AASB 2 (IFRS 2), the fair value is as of the end of the reporting period. |
70
71
DIRECTORS’ REPORT
Rights provided as remuneration
The table below summarises the terms of outstanding rights. None of these rights have vested.
| NAME |
GRANT DATE |
NUMBER GRANTED |
FAIR VALUE AT GRANT DATE |
DATE NEXT TRANCHE VESTS |
EXPIRY DATE |
MAXIMUM TOTAL VALUE OF UNVESTED GRANT1 |
||||||||||||
| Ordinary Shares (A$) |
||||||||||||||||||
| G Claro |
15 Nov 13 | 123,436 | $ | 5.38 | 31 Aug 16 | 31 Aug 16 | $ | 454,767 | ||||||||||
| 15 Nov 13 | 78,153 | $ | 9.61 | 31 Aug 16 | 31 Aug 16 | $ | 751,050 | 2 | ||||||||||
| 15 Nov 13 | 58,252 | $ | 10.12 | 01 Dec 14 | 01 Dec 14 | $ | 237,660 | |||||||||||
| 15 Nov 13 | 58,253 | $ | 9.82 | 01 Dec 15 | 01 Dec 15 | $ | 397,437 | |||||||||||
| R Larry |
15 Nov 13 | 72,257 | $ | 5.38 | 31 Aug 16 | 31 Aug 16 | $ | 266,212 | ||||||||||
| 15 Nov 13 | 36,639 | $ | 9.61 | 31 Aug 16 | 31 Aug 16 | $ | 352,100 | 2 | ||||||||||
| R Kelman |
15 Nov 13 | 76,477 | $ | 5.38 | 31 Aug 16 | 31 Aug 16 | $ | 281,759 | ||||||||||
| 15 Nov 13 | 38,778 | $ | 9.61 | 31 Aug 16 | 31 Aug 16 | $ | 372,657 | 2 | ||||||||||
| D McGree |
23 Nov 09 | 20,728 | $ | 15.97 | 22 Aug 14 | 22 Aug 14 | — | |||||||||||
| 30 Nov 10 | 24,517 | $ | 14.04 | 22 Aug 14 | 31 Aug 15 | — | ||||||||||||
| 11 Nov 11 | 35,178 | $ | 10.42 | 22 Aug 14 | 31 Aug 16 | $ | 19,625 | |||||||||||
| 16 Nov 12 | 54,589 | $ | 5.29 | 31 Aug 15 | 31 Aug 17 | $ | 106,575 | |||||||||||
| 15 Nov 13 | 45,261 | $ | 5.38 | 31 Aug 16 | 31 Aug 16 | $ | 166,752 | |||||||||||
| 15 Nov 13 | 28,657 | $ | 9.61 | 31 Aug 16 | 31 Aug 16 | $ | 275,393 | 2 | ||||||||||
| S Skurnac |
15 Nov 13 | 31,646 | $ | 5.38 | 31 Aug 16 | 31 Aug 16 | $ | 116,591 | ||||||||||
| 15 Nov 13 | 16,046 | $ | 9.61 | 31 Aug 16 | 31 Aug 16 | $ | 154,202 | |||||||||||
| ADSs (US$) |
||||||||||||||||||
| R Kelman |
23 Nov 09 | 25,531 | $ | 11.99 | 22 Aug 14 | 22 Aug 14 | — | |||||||||||
| 30 Nov 10 | 33,983 | $ | 9.29 | 22 Aug 14 | 31 Aug 15 | — | ||||||||||||
| 11 Nov 11 | 41,615 | $ | 8.24 | 22 Aug 14 | 31 Aug 16 | $ | 18,359 | |||||||||||
| 16 Nov 12 | 82,838 | $ | 4.12 | 31 Aug 15 | 31 Aug 17 | $ | 125,957 | |||||||||||
| R Larry |
23 Nov 09 | 31,914 | $ | 11.99 | 22 Aug 14 | 22 Aug 14 | — | |||||||||||
| 30 Nov 10 | 42,479 | $ | 9.29 | 22 Aug 14 | 31 Aug 15 | — | ||||||||||||
| 11 Nov 11 | 52,018 | $ | 8.24 | 22 Aug 14 | 31 Aug 16 | $ | 22,949 | |||||||||||
| 16 Nov 12 | 78,268 | $ | 4.12 | 31 Aug 15 | 31 Aug 17 | $ | 119,008 | |||||||||||
| S Skurnac |
17 Dec 09 | 3,388 | $ | 11.75 | 22 Aug 14 | 22 Aug 14 | — | |||||||||||
| 30 Nov 10 | 4,477 | $ | 9.29 | 22 Aug 14 | 31 Aug 15 | — | ||||||||||||
| 11 Nov 11 | 7,338 | $ | 8.24 | 22 Aug 14 | 31 Aug 16 | $ | 3,236 | |||||||||||
| 16 Nov 12 | 11,040 | $ | 4.12 | 31 Aug 15 | 31 Aug 17 | $ | 16,787 | |||||||||||
| 27 Jun 13 | 16,067 | $ | 7.30 | 27 Jun 16 | 27 Jun 16 | $ | 77,836 | |||||||||||
| 1 | No rights will vest if the vesting conditions are not satisfied, hence the minimum value of unvested awards is nil. The maximum value of the unvested rights has been determined as the amount of the grant date fair value that is yet to be expensed. |
| 2 | These grants relate to rights subject to the EPS hurdle. Based on the Company’s assessment at 30 June 2014, these rights will not vest. No amount has been expensed relating to these rights in FY14. |
72
73
DIRECTORS’ REPORT
I: OTHER TRANSACTIONS WITH KMP
Transactions entered into with any Directors or other KMP of the Group, including their personally related parties, are at normal commercial terms.
Mr Sato serves as the representative director for Mitsui & Co. Prior to his appointment, Mr Sukagawa served as the representative director for Mitsui & Co. As a result, their director remuneration is paid directly to Mitsui & Co. During the year ended 30 June 2014, the Group paid A$183,082 to Mitsui & Co. for director remuneration (2013: A$203,424).
This report is made in accordance with a resolution of the Board of Directors and is signed for and on behalf of the Board of Directors.
|
| |
| G N Brunsdon | G J Claro | |
| Chairman | Managing Director and Group CEO | |
| Sydney | New York | |
| 22 August 2014 | 21 August 2014 | |
74
75
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2014
| NOTE | 2014 A$M |
2013 A$M RESTATED |
2012 A$M RESTATED |
|||||||||||||
| Loss for the year |
(88.9 | ) | (467.3 | ) | (623.0 | ) | ||||||||||
| Other comprehensive income: |
||||||||||||||||
| Items that may be reclassified to profit or loss |
||||||||||||||||
| Changes in the fair value of cash flow hedges, net of tax |
20 | 4.4 | (3.8 | ) | 1.2 | |||||||||||
| Foreign exchange translation differences arising during the period, net of tax |
20 | (17.8 | ) | 121.7 | 87.2 | |||||||||||
| Recycling of foreign currency translation reserve on disposal of foreign operations |
20 | (4.8 | ) | — | — | |||||||||||
| Share of other comprehensive income of associates, net of tax |
28 | 0.3 | 0.6 | (0.4 | ) | |||||||||||
| Items that will not be reclassified to profit or loss |
||||||||||||||||
| Re-measurements of defined benefit plans, net of tax |
18 | (2.6 | ) | 6.3 | (10.4 | ) | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| Other comprehensive (loss)/income for the year, net of tax |
(20.5 | ) | 124.8 | 77.6 | ||||||||||||
|
|
|
|
|
|
|
|||||||||||
| Total comprehensive loss for the year |
(109.4 | ) | (342.5 | ) | (545.4 | ) | ||||||||||
|
|
|
|
|
|
|
|||||||||||
The consolidated statements of comprehensive income should be read in conjunction with the accompanying notes.
See note 1(d) for details regarding restatement of balances for the years ended 30 June 2013 and 30 June 2012 as a result of changes in accounting policies.
76
77
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2014
| NOTE | CONTRIBUTED EQUITY A$M |
RESERVES A$M |
RETAINED EARNINGS/ (DEFICIT) A$M |
TOTAL EQUITY A$M |
||||||||||||||||
| Balance at 1 July 2011 |
2,817.9 | (445.2 | ) | 538.8 | 2,911.5 | |||||||||||||||
| Loss for the year (restated) |
1 | (d) | — | — | (623.0 | ) | (623.0 | ) | ||||||||||||
| Other comprehensive income (restated) |
— | 88.0 | (10.4 | ) | 77.6 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total comprehensive loss for the year |
— | 88.0 | (633.4 | ) | (545.4 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Transactions with owners in their capacity as owners: |
||||||||||||||||||||
| Dividends provided for or paid |
21 | — | — | (92.7 | ) | (92.7 | ) | |||||||||||||
| Share-based payments |
1.5 | 24.3 | — | 25.8 | ||||||||||||||||
| Buy-back of ordinary shares |
19 | (38.5 | ) | — | — | (38.5 | ) | |||||||||||||
| Dividend reinvestment plan |
21 | 23.4 | — | — | 23.4 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| (13.6 | ) | 24.3 | (92.7 | ) | (82.0 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Balance at 30 June 2012 (restated) |
2,804.3 | (332.9 | ) | (187.3 | ) | 2,284.1 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Loss for the year (restated) |
1 | (d) | — | — | (467.3 | ) | (467.3 | ) | ||||||||||||
| Other comprehensive income (restated) |
— | 118.5 | 6.3 | 124.8 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total comprehensive loss for the year |
— | 118.5 | (461.0 | ) | (342.5 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Transactions with owners in their capacity as owners: |
||||||||||||||||||||
| Dividends provided for or paid |
21 | — | — | (20.4 | ) | (20.4 | ) | |||||||||||||
| Share-based payments |
— | 16.6 | — | 16.6 | ||||||||||||||||
| Buy-back of ordinary shares |
19 | (8.6 | ) | — | — | (8.6 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| (8.6 | ) | 16.6 | (20.4 | ) | (12.4 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Balance at 30 June 2013 (restated) |
2,795.7 | (197.8 | ) | (668.7 | ) | 1,929.2 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Loss for the year |
— | — | (88.9 | ) | (88.9 | ) | ||||||||||||||
| Other comprehensive loss |
— | (17.9 | ) | (2.6 | ) | (20.5 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total comprehensive loss for the year |
— | (17.9 | ) | (91.5 | ) | (109.4 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Transactions with owners in their capacity as owners: |
||||||||||||||||||||
| Share-based payments |
0.7 | 13.4 | — | 14.1 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| 0.7 | 13.4 | — | 14.1 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Balance at 30 June 2014 |
2,796.4 | (202.3 | ) | (760.2 | ) | 1,833.9 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
The consolidated statements of changes in equity should be read in conjunction with the accompanying notes. See note 1(d) for details regarding restatement of balances for the years ended 30 June 2013 and 30 June 2012 as a result of changes in accounting policies.
78
79
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014
Note 1 – Summary of significant accounting policies
The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
(a) Reporting entity
Sims Metal Management Limited (the “Company”) is a company domiciled in Australia. The consolidated financial statements for the year ended 30 June 2014 comprise the Company and its subsidiaries (together referred to as the “Group”) and the Group’s interest in associates and joint arrangements. The Group is a for-profit entity for the purpose of preparing the consolidated financial statements.
(b) Basis of preparation
The consolidated financial statements are general purpose financial statements prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards, interpretations and other authoritative pronouncements of the Australian Accounting Standards Board (“AASB”).
Compliance with IFRS
The consolidated financial statements comply with International Financial Reporting Standards (“IFRS”) and interpretations as issued by the International Accounting Standards Board (“IASB”).
Historical cost convention
The consolidated financial statements have been prepared under the historical cost convention, except for certain financial assets and liabilities, defined benefit plan assets associated with retirement benefit obligations and liabilities for cash-settled share based payments, which are measured at fair value.
Rounding of amounts
The Company is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments Commission (“ASIC”), relating to the “rounding off” of amounts in the consolidated financial statements. Amounts in the consolidated financial statements have been rounded off in accordance with that Class Order to the nearest tenth of a million dollars, unless otherwise indicated.
(c) Critical accounting estimates
The preparation of the consolidated financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements, are disclosed in note 3.
(d) New accounting standards and interpretations
New and amended accounting standards issued by the AASB and IASB which became effective on 1 July 2013 that are relevant to the Group include:
| • | AASB 10 (IFRS 10) Consolidated Financial Statements |
| • | AASB 11 (IFRS 11) Joint Arrangements |
| • | AASB 12 (IFRS 12) Disclosure of Interests in Other Entities |
| • | AASB 13 (IFRS 13) Fair Value Measurement |
| • | Revised AASB 119 (revised IAS 19) Employee Benefits |
| • | Revised AASB 127 (revised IAS 27) Separate Financial Statements |
| • | Revised AASB 128 (revised IAS 28) Investments in Associates and Joint Ventures |
| • | AASB 2012-5 Amendments to Australian Account Standards arising from Annual Improvements 2009-2011 Cycle |
Except as described below, the impact of the adoption of the new and amended accounting standards was not material to the Group.
(i) AASB 13 (IFRS 13) Fair Value Measurement
AASB 13 (IFRS 13) establishes a single source of guidance under accounting standards for all fair value measurements. AASB 13 (IFRS 13) does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value. It also replaces and expands the disclosure requirements about fair value measurements in other accounting standards, including AASB 7 (IFRS 7) Financial Instruments: Disclosures. The adoption of AASB 13 (IFRS 13) has not materially impacted the fair value measurements carried out by the Group nor has it materially impacted the disclosures.
80
| 81 |
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014
Note 1 – Summary of significant accounting policies (continued)
(e) Principles of consolidation
(i) Subsidiaries
Subsidiaries are all entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.
The acquisition method of accounting is used to account for business combinations by the Group (refer to note 1(f)).
Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
(ii) Associates
An associate is an entity over whose operating and financial policies the Group exercises significant influence, but not control. Significant influence is presumed to exist where the Group has between 20% and 50% of the voting rights, but can also arise where the Group holds less than 20% if it has the power to be actively involved and influential in policy decisions impacting the entity. The Group’s investment in associates includes goodwill identified on acquisition. Investments in associates are accounted for using the equity method of accounting after initially being recognised at cost.
The Group determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognises the amount in profit or loss.
Dilution gains and losses arising in investments in associates are recognised in profit or loss.
(iii) Joint arrangements
Under AASB 11 (IFRS 11) Joint Arrangements investments in joint arrangements are classified as either joint operations or joint ventures. The classification depends on the contractual rights and obligations of each investor, rather than the legal structure of the joint arrangement. The Group has joint operations and joint ventures.
Joint operations
The Group recognises its direct right to the assets, liabilities, revenues and expenses of joint operations and its share of any jointly held or incurred assets, liabilities, revenues and expenses. These have been incorporated in the financial statements under the appropriate headings. Details of the joint operation are set out in note 28(h).
Joint ventures
Interests in joint ventures are accounted for using the equity method of accounting, after initially being recognised at cost.
(iv) Equity method
Under the equity method of accounting, the investments are initially recognised at cost and adjusted thereafter to recognise the Group’s share of the post-acquisition profits or losses of the investee in profit or loss, and the Group’s share of movements in other comprehensive income of the investee in other comprehensive income. Dividends received or receivable from associates and joint ventures are recognised as a reduction in the carrying amount of the investment.
When the Group’s share of losses in an equity-accounted investment equals or exceeds its interest in the entity, including any other unsecured long-term receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the other entity.
Unrealised gains on transactions between the Group and its associates and joint ventures are eliminated to the extent of the Group’s interest in these entities. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of equity accounted investees have been changed where necessary to ensure consistency with the policies adopted by the Group.
(v) Changes in ownership interests
When the Group ceases to have control, joint control or significant influence, any retained interest in the entity is remeasured to its fair value with the change in carrying amount recognised in profit or loss. This fair value becomes the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.
If the ownership interest in a joint venture or an associate is reduced but joint control or significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income are reclassified to profit or loss where appropriate.
82
| 83 |
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014
Note 1 – Summary of significant accounting policies (continued)
(h) Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns and trade allowances. Amounts billed to customers in respect of shipping and handling are classified as sales revenue where the Group is responsible for carriage, insurance and freight. All shipping and handling costs incurred by the Group are recognised as freight expense in the income statement.
The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and specific criteria have been met for each of the Group’s activities as described below. The amount of revenue is not considered to be reliably measurable until all contingencies relating to the sale have been resolved.
Revenue is recognised for the major business activities as follows:
(i) Sale of goods
Revenue from the sale of goods is recognised when there is persuasive evidence, usually in the form of an executed sales agreement at the time of delivery of goods to the customer, indicating that there has been a transfer of risks and rewards to the customer, no further work or processing is required, the quantity and quality of the goods have been determined, the price is fixed and generally title has passed.
Title for both our ferrous and non-ferrous secondary recycling products and recycling solutions products are based on contract terms which vary across businesses. The majority of the Group’s ferrous bulk cargo sales arrangements specify that title passes once all material has been loaded onto a vessel (i.e. passed the ship’s rail).
A significant portion of these ferrous exports sales are made with letters of credit, reducing credit risk. Further, non-ferrous export sales typically require a deposit prior to shipment. However, domestic ferrous and non-ferrous sales are made on open account.
(ii) Service revenue
Service revenue represents revenue earned from the collection of end-of-life post-consumer products for the purpose of product recycling. Service revenue is recognised when the services have been provided. Service revenue received in advance of the service being rendered is deferred.
(iii) Interest income
Interest income is recognised on an accrual basis using the effective interest method.
(iv) Dividend income
Dividends are recognised when the right to receive payment is established.
(i) Government grants
Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Group will comply with all attached conditions.
Government grants relating to costs are deferred and recognised in profit or loss over the period necessary to match them with the costs that they are intended to compensate.
Government grants relating to the purchase of property, plant and equipment are included in non-current liabilities as deferred income and are credited to other income in the income statement on a straight-line basis over the expected lives of the related assets.
(j) Income tax
The income tax expense or benefit for the period is the tax payable on the current period taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and unused tax losses.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the Group’s subsidiaries and associates operate and generate taxable income. Management periodically evaluates provisions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions, where appropriate, on the basis of amounts expected to be paid to the tax authorities.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction impacts neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.
84
| 85 |
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014
Note 1 – Summary of significant accounting policies (continued)
(o) Trade and other receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost, less provision for impairment. Trade receivables are generally due for settlement within 30 to 60 days following shipment, except in the case of certain ferrous shipments made to export destinations, which are generally secured by letters of credit that are collected on negotiated terms but generally within 10 days of shipment.
Collectability of trade receivables is reviewed on an ongoing basis. Individual debts that are known to be uncollectible are written-off by reducing the carrying amount directly. An allowance account (a provision for impairment of trade receivables) is used when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivable. Indicators of impairment would include significant financial difficulties of the debtor, likelihood of the debtor’s insolvency, default or delinquency in payment, or a significant deterioration in creditworthiness. The amount of the impairment provision is recognised in profit or loss within other expenses.
When a trade receivable for which an impairment provision had been recognised becomes uncollectible in a subsequent period, it is written-off against the provision for impairment account. Subsequent recoveries of amounts previously written-off are credited against other expenses in profit or loss.
(p) Inventory
Inventories are stated at the lower of cost and net realisable value. Cost is based on weighted average and comprises direct materials, direct labour and an appropriate proportion of variable and fixed overhead expenditures, the latter being allocated on the basis of normal operating capacity. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale including freight.
Stores consist of consumable and maintenance stores and spare parts when they do not meet the definition of property, plant and equipment. Stores and spare parts are valued at the lower of cost and net realisable value. Cost is determined using either the first-in-first out (“FIFO”) or the weighted average method.
(q) Non-current assets (or disposal groups) held for sale and discontinued operations
Non-current assets (or disposal groups) are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable. They are measured at the lower of their carrying amount and fair value less costs to sell, except for assets such as deferred tax assets, assets arising from employee benefits and financial assets that are carried at fair value, which are specifically exempt from this requirement.
An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs to sell. A gain is recognised for any subsequent increases in fair value less costs to sell of an asset (or disposal group), but not in excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the sale of the non-current asset (or disposal group) is recognised at the date of derecognition.
Non-current assets (including those that are part of a disposal group) are not depreciated or amortised while they are classified as held for sale. Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale continue to be recognised.
Non-current assets classified as held for sale and the assets of a disposal group classified as held for sale are presented separately from the other assets in the statement of financial position. The liabilities associated with an asset classified as held for sale and the liabilities of a disposal group classified as held for sale are presented separately from other liabilities in the statement of financial position.
A discontinued operation is a component of the entity that has been disposed of or is classified as held for sale and that represents a separate major line of business or geographical area of operations, is part of a single coordinated plan to dispose of such a line of business or area of operations or is a subsidiary acquired exclusively with a view to resale. The results of discontinued operations are presented separately in profit or loss.
(r) Property, plant and equipment
Property, plant and equipment is recorded at historical cost less accumulated depreciation and accumulated impairment. Historical cost includes expenditures that are directly attributable to the acquisition and installation of the items. Cost may also include transfers from equity of any gain or loss on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred.
Land is not depreciated. Depreciation on other assets is calculated using the straight-line method to allocate their cost net of their residual values, over their estimated useful lives, as follows:
| • | Buildings – 25 to 40 years |
| • | Plant and equipment – 1 to 20 years |
| • | Leasehold improvements – lesser of life of asset or life of the lease |
86
| 87 |
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014
Note 1 – Summary of significant accounting policies (continued)
(s) Financial assets (continued)
Assets carried at amortised cost
For loans and receivables, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in profit or loss. If a loan or held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the Group may measure impairment on the basis of an instrument’s fair value using an observable market price.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of the previously recognised impairment loss is recognised in profit or loss.
Impairment testing of trade receivables is described in note 1(o).
Assets classified as available-for-sale
If there is objective evidence of impairment for available-for-sale financial assets, the cumulative loss (measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss) is removed from equity and recognised in profit or loss.
Impairment losses on equity instruments that were recognised in profit or loss are not reversed through profit or loss in a subsequent period.
If the fair value of a debt instrument classified as available-for-sale increases in a subsequent period and the increase can be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss is reversed through profit or loss.
(t) Derivatives and hedging activities
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value at the end of each reporting period. The accounting for subsequent changes in fair value depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group designates certain derivatives as either: (i) hedges of the fair value of recognised assets or liabilities or a firm commitment (“fair value hedges”) or (ii) hedges of a particular risk associated with the cash flows of recognised assets and liabilities and highly probable forecast transactions (“cash flow hedges”).
Certain derivative instruments do not qualify for hedge accounting, despite being valid economic hedges of the relevant risks. Changes in the fair value of any derivative instrument that does not qualify for hedge accounting are recognised immediately in profit or loss and are included in other income or other expenses.
The Group documents, at the inception of the hedging transaction, the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions have been, and will continue to be, highly effective in offsetting changes in fair values or cash flows of hedged items.
The fair values of various derivative financial instruments used for hedging purposes are disclosed in note 11. Movements in the hedging reserve in equity are shown in note 20. The full fair value of a hedging derivative is classified as a non-current asset or liability when the remaining maturity of the hedged item is more than 12 months; it is classified as a current asset or liability when the remaining maturity is less than 12 months.
Options and warrants associated with listed equity securities and the conversion feature of convertible loans are classified as derivatives on the statement of financial position.
(i) Fair value hedge
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in profit or loss, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk.
(ii) Cash flow hedge
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recognised in other comprehensive income and accumulated in the hedging reserve in equity. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss. Amounts accumulated in equity are reclassified to profit or loss in the periods when the hedged item impacts profit or loss (for instance when the forecast sale that is hedged takes place). The gain or loss relating to the effective portion of forward foreign exchange contracts hedging export sales is recognised in profit or loss within revenue.
Where the hedged item is the cost of a non-financial asset or liability, such as a forecast transaction for the purchase of property, plant and equipment, the amounts recognised within other comprehensive income are transferred to the initial carrying amount of the non-financial asset or liability.
When a hedging instrument expires or is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in profit or loss. When a forecast transaction is no longer expected to occur, the cumulative gains or losses that were deferred in equity are immediately transferred to profit or loss.
88
| 89 |
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014
Note 1 – Summary of significant accounting policies (continued)
(z) Employee benefits
(i) Short-term obligations
Liabilities for wages and salaries, including non-monetary benefits and accumulating sick leave that are expected to be settled within 12 months after the end of the period in which employees render the related service are recognised in respect of employees’ services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liability for accumulating sick leave is recognised in the provision for employee benefits. All other short-term benefit obligations are presented as payables.
(ii) Other long-term employee benefit obligations
The liability for long service leave is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period in which the employees render the related service. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.
(iii) Retirement benefits
The cost of providing benefits under the defined benefit plans is determined separately for each plan using the projected unit credit method. Past service costs, resulting from either a plan amendment or a curtailment are recognised immediately in profit or loss.
Net interest expense relating to defined benefit plans represents the net change in present value of plan obligations and the value of plan assets resulting from the passage of time, and is determined by applying the discount rate to the present value of the benefit obligation at the start of the year, and to the fair value of plan assets at the start of the year, taking into account expected changes in the obligation or plan assets during the year.
Re-measurements of the net defined benefit liability or asset, comprising actuarial gains and losses, and the return on plan assets (excluding amounts included in net interest described above) are recognised within other comprehensive income in the period in which they occur. Re-measurements are not reclassified to profit or loss in subsequent periods.
The defined benefit pension plan asset or obligation in the statement of financial position comprises the total for each plan of the present value of the defined benefit obligation (using a discount rate based on high quality corporate bonds), less the fair value of plan assets out of which the obligations are to be settled directly. Fair value is based on market price information and, in the case of quoted securities, is the published bid price.
Contributions to defined contribution plans are recognised in the income statement in the period in which they become payable.
(iv) Termination benefits
Termination benefits are payable when employment is terminated before the normal retirement date, or when an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits at the earlier of the following dates: (a) when the Group can no longer withdraw the offer of those benefits; or (b) when the entity recognises costs for a restructuring that is within the scope of AASB 137 (IAS 37) and involves the payment of termination benefits. In the case of an offer made to encourage voluntary redundancy, the termination benefits are measured based on the number of employees expected to accept the offer. Benefits due more than 12 months after the end of the reporting period are discounted to present value.
(v) Share-based payments
Share-based compensation benefits are provided to certain employees via the schemes set out in note 24. For share-based arrangements, the fair value is measured at grant date and recognised as an employee benefit expense with a corresponding increase in equity. For cash-settled share-based arrangements, the fair value of the amount payable is recognised as an employee benefit expense with a corresponding increase to a liability. The liability is re-measured each reporting date and at settlement date. Any changes in the fair value of the liability are recognised as an employee benefit expense in profit or loss.
The fair value at grant date is independently determined using either a binomial model or a Monte-Carlo simulation model. The model takes into account the exercise price, the term, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the grant. The fair value is adjusted to reflect market vesting conditions, but excludes the impact of any non-market vesting conditions (for example, earnings per share targets). Non-market vesting conditions are included in assumptions about the number of shares that are expected to become exercisable. At the end of each reporting period, the Group revises its estimate of the number of shares that are expected to become exercisable. The employee benefit expense recognised each period takes into account the most recent estimate. The impact of the revision to original estimates, if any, is recognised in profit or loss with a corresponding adjustment to equity.
90
| 91 |
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014
Note 2 – Financial risk management
The Group’s activities expose it to a variety of financial risks: market risk (including interest rate risk, foreign exchange risk, commodity price risk and equity securities price risk), credit risk and liquidity risk. The Group’s overall financial risk management strategy seeks to mitigate these risks to minimise potential adverse effects on the financial performance of the Group.
The Group uses derivative financial instruments in certain circumstances in accordance with Board approved policies to hedge exposure to fluctuations in foreign exchange rates and commodity prices. Derivative financial instruments are used for hedging purposes and not as trading or other speculative instruments. The Group uses different methods to measure different types of risk to which it is exposed. These methods include monitoring key movements in interest rates, key transactions impacted by foreign exchange, commodity prices, equity prices and ageing analysis for credit risk. Risk management is carried out by a limited number of employees as authorised by the Board. The Board provides written principles for overall risk management, as well as written policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments and the investment of excess liquidity.
The Risk, Audit & Compliance Committee (“RAC”) of the Board oversees, on a quarterly basis, the monitoring of compliance by management with the Group’s risk management framework. The RAC 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 also reported to the RAC.
The carrying amounts and estimated fair value of all the Group’s financial assets and liabilities approximate each other. The carrying amount is recognised in the statement of financial position as follows:
| NOTE | 2014 A$M |
2013 A$M |
||||||||||
| Financial assets: |
||||||||||||
| Cash and cash equivalents |
31 | 57.2 | 46.9 | |||||||||
| Trade and other receivables |
9 | 445.6 | 455.4 | |||||||||
| Other financial assets |
11 | 59.0 | 77.0 | |||||||||
|
|
|
|
|
|||||||||
| Total financial assets |
561.8 | 579.3 | ||||||||||
|
|
|
|
|
|||||||||
| Financial liabilities: |
||||||||||||
| Trade and other payables |
15 | 577.9 | 593.5 | |||||||||
| Borrowings |
16 | 14.9 | 200.7 | |||||||||
| Other financial liabilities |
11 | 4.5 | 6.3 | |||||||||
|
|
|
|
|
|||||||||
| Total financial liabilities |
597.3 | 800.5 | ||||||||||
|
|
|
|
|
|||||||||
(a) Market risk
Market risk is the risk that the fair value or future cash flows of the Group’s financial instruments will fluctuate because of changes in market prices. The market risks to which the Group is exposed are discussed in further detail below:
(i) Interest rate risk
Interest rate risk arises from interest bearing financial assets and liabilities that the Group utilises. The Group’s main exposure to interest rate risk arises from borrowings at variable interest rates. The Group does not use any derivative financial instruments to manage its exposure to interest rate risk. Cash deposits, loans to third parties and associates and borrowings issued at fixed rates expose the Group to fair value interest rate risk.
The Group’s borrowings are sourced primarily from domestic, but also offshore, markets. The Group’s borrowings consist primarily of foreign currency denominated borrowings and are managed in accordance with targeted currency, interest rate, liquidity and debt portfolio maturity profiles.
Specifically, interest rate risk is managed on the Group’s net debt portfolio by:
| • | providing access to diverse sources of funding; |
| • | reducing risks of refinancing by establishing and managing in accordance with target maturity profiles; and |
| • | negotiating interest rates with the Group’s banks based on a variable pricing matrix, which generally involves a LIBOR rate plus a margin. |
The Group’s weighted average interest rate on interest-bearing liabilities for the year ended 30 June 2014 was 2.6% (2013: 2.8%). If interest rates had increased by 100 basis points as at the balance date with all other variables held constant, post-tax profit for the year ended 30 June 2014 would have been A$0.1 million lower (2013: A$1.5 million lower). A sensitivity of 100 basis points is deemed reasonable based on current and past market conditions. The calculations are based on interest-bearing financial instruments with variable interest rates at the end of the reporting period. A 100 basis points decrease in interest rates would have an equal and opposite effect.
92
| 93 |
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014
Note 2 – Financial risk management (continued)
(a) Market risk (continued)
(iii) Foreign exchange risk (continued)
The table below shows the net impact of a 10% appreciation of the relevant currency against the Australian dollar for the balances above with all other variables held constant and the corresponding effect on the Group’s forward foreign exchange contracts with all other variables held constant. A sensitivity of 10% has been selected, as this is considered reasonable, given the current level of exchange rates and the volatility observed both on a historical basis and on market expectations for future movements.
| US DOLLAR | EURO | BRITISH POUNDS | ||||||||||||||||||||||
| 2014 A$M |
2013 A$M |
2014 A$M |
2013 A$M |
2014 A$M |
2013 A$M |
|||||||||||||||||||
| Impact on post-tax profit – higher/(lower) |
(1.7 | ) | (1.9 | ) | 0.1 | 0.5 | — | — | ||||||||||||||||
| Impact on equity |
19.8 | 20.2 | (1.2 | ) | (0.5 | ) | — | 10.0 | ||||||||||||||||
The impact on equity includes the effect from intragroup long-term borrowings which, in substance, form part of the Group’s investment in an entity. Exchange gains and losses on these balances are recorded in the foreign currency translation reserve.
A 10% depreciation of the relevant currency against the Australian dollar would have an equal and opposite effect.
Translation risk
The financial statements for each of the Group’s foreign operations are prepared in local currency, being their functional currency. For the purposes of preparing the Group’s consolidated financial information, each foreign operation’s financial statements are translated into Australian dollars using the applicable foreign exchange rates as at the balance date. A translation risk, therefore, exists on translating the financial statements of the Group’s foreign operations into Australian dollars for the purposes of reporting consolidated financial information. As a result, volatility in foreign exchange rates can impact the Group’s net assets, net profit and the foreign currency translation reserve and, as a result, can influence compliance with credit agreements.
(b) Credit risk
Credit risk is the risk that a counterparty will not complete its obligations under a financial instrument and cause a financial loss to the Group. The Group has exposure to credit risk on all financial assets included in the Group’s statement of financial position.
The Group establishes credit limits for its customers. Trade and other receivables consist of a large number of customers, spread across various metal producing sectors in international markets. The Group does not have any significant credit risk exposure to a single customer or groups of customers. Ongoing credit evaluation is performed on the financial condition of the Group’s customers and, where appropriate, an impairment provision is raised. For certain customers, the Group purchases credit insurance to protect itself against collection risks.
The Group is also exposed to credit risk arising from the Group’s transactions in derivative contracts. For credit purposes, there is only a credit risk where the counterparty is liable to pay the Group in the event of a closeout. The Group has policies that limit the amount of credit exposure to any financial institution. Derivative counterparties and cash transactions are limited to financial institutions that have a minimum credit rating of “A” by either Standard & Poor’s or Moody’s. Management also monitors the current credit exposure with each counterparty. Any changes to counterparties or their credit limits must be approved by the Group Chief Financial Officer. Refer to note 9 for quantitative data.
(c) Liquidity risk
Liquidity risk is associated with ensuring that there is sufficient cash and cash equivalents on hand and the availability of funding through an adequate amount of committed credit facilities to meet the Group’s obligations as they mature and the ability to close out market positions.
The Group manages liquidity risk by monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. Due to the dynamic and volatile nature of the underlying businesses, the Group aims at maintaining flexibility in funding by keeping committed credit lines available with a variety of counterparties.
The Group has access to unsecured global multi-currency/multi-option loan facilities, all of which are subject to common terms. The loan facilities have maturities through 31 October 2016. The Group also has annual rights to extend the maturity by an additional year in certain circumstances. The Group had access to the following credit standby arrangements at the balance date. The amount of credit available is subject to limits from covenants as specified in the loan facilities.
| 2014 | 2013 | |||||||
| A$M | A$M | |||||||
| Unsecured global multi-currency/multi-option loan facilities |
1,352.9 | 1,396.7 | ||||||
| Amount of credit unused |
1,314.9 | 1,177.4 | ||||||
There have been no breaches of the Group’s bank covenants during the period.
| 94 |
95
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014
Note 3 – Critical accounting estimates and judgements
Certain amounts included in the consolidated financial statements involve the use of estimation and/or judgement. Estimates and judgements used in preparation of the consolidated financial statements are continually evaluated and are based on historical experience and other factors, including the expectations of future events that may have a financial impact on the Group and that are believed to be reasonable under the circumstances. The resulting accounting estimates may differ from actual results.
The Group has identified the following areas that involve critical judgements and estimations that have the most significant effect on the amounts recognised in the consolidated financial statements.
Impairment of goodwill
Goodwill is tested for impairment in accordance with the accounting policy stated in note 1(m). For goodwill impairment testing, the recoverable amount of each CGU is determined based on the higher of its value in use or fair value less costs to sell. These calculations require the use of assumptions such as discount rates, exchange rates, growth rates and other assumptions. As at 30 June 2014, the carrying amount of goodwill was A$139.3 million. Refer to note 13 for details of these assumptions and the potential impact of changes to the assumptions.
Taxation
The Group is subject to income taxes in numerous jurisdictions. Significant judgement is required in determining the worldwide provision for income taxes due to the complexity of legislation. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.
The Group recognises the net future tax benefit related to deferred income tax assets to the extent that it is probable that the deductible temporary differences will reverse in the foreseeable future. Assessing the recoverability of deferred income tax assets requires the Group to make significant estimates related to expectations of future taxable income. Estimates of future taxable income are based on forecast cash flows from operations and the application of existing tax laws in each jurisdiction. To the extent that future cash flows and taxable income differ significantly from estimates, the ability of the Group to realise the net deferred tax assets recorded at the reporting date could be impacted. Additionally, future changes in tax laws in the jurisdictions in which the Group operates could limit the ability of the Group to obtain tax deductions in future periods. For more information see note 8(f).
Valuation of inventories
The Group’s inventories primarily consist of ferrous and non-ferrous scrap metals. Quantities of inventories are determined using various estimation techniques, including observation, weighing and other industry methods and are subject to periodic physical verification.
Inventories are stated at the lower of cost and net realisable value, with due allowance for excess, obsolete or slow moving items. Cost is determined by the weighted average method and comprises direct purchase costs, direct labour and an appropriate portion of fixed and variable overhead costs (refer to note 1(p)). The Group reviews its inventory at the end of each reporting period to determine if it is properly stated at net realisable value. Net realisable value is based on current assessments of future demand and market conditions. The amount of write-downs of inventories to net realisable value is disclosed in note 7. Given the significance of inventories to the consolidated statement of financial position, the determination of net realisable value is considered to be a critical accounting estimate. Impairment losses may be recognised on inventory in the next financial year if management needs to revise its estimates of net realisable value in response to changing market conditions.
Note 4 – Loss per share
| 2014 | 2013 RESTATED |
2012 RESTATED |
||||||||||
| Loss per share (in cents) |
||||||||||||
| Basic |
(43.5 | ) | (228.6 | ) | (302.7 | ) | ||||||
| Diluted |
(43.5 | ) | (228.6 | ) | (302.7 | ) | ||||||
| Weighted average number of shares used in the denominator (’000) |
||||||||||||
| Basic shares |
204,410 | 204,391 | 205,828 | |||||||||
| Dilutive effect of share-based awards |
— | — | — | |||||||||
| Diluted shares |
204,410 | 204,391 | 205,828 | |||||||||
Due to the loss after tax in the years ended 30 June 2014, 2013 and 2012, the dilutive effect of share-based awards, which was approximately 0.3 million, 2.8 million and 2.0 million shares, respectively, was not included as the result would have been anti-dilutive. Details relating to share awards are set out in note 24.
96
97
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014
Note 5 – Segment information (continued)
(b) Information about reportable segments (continued)
| NORTH AMERICA A$M |
AUSTRALASIA A$M |
EUROPE A$M |
A$M | |||||||||||||
| 2013 (RESTATED) |
||||||||||||||||
| Total sales revenue |
4,534.6 | 1,083.1 | 1,575.3 | 7,193.0 | ||||||||||||
| Other revenue/income |
1.2 | 8.0 | 0.9 | 10.1 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total segment revenue |
4,535.8 | 1,091.1 | 1,576.2 | 7,203.1 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Segment EBIT |
(329.0 | ) | 9.2 | (150.6 | ) | (470.4 | ) | |||||||||
|
|
|
|
|
|
|
|||||||||||
| Interest income |
7.3 | |||||||||||||||
| Finance costs |
(25.5 | ) | ||||||||||||||
|
|
|
|||||||||||||||
| Loss before income tax |
(488.6 | ) | ||||||||||||||
|
|
|
|||||||||||||||
| Segment total assets |
1,660.0 | 672.0 | 585.4 | 2,917.4 | ||||||||||||
| Segment total liabilities |
477.7 | 165.0 | 345.5 | 988.2 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net assets |
1,182.3 | 507.0 | 239.9 | 1,929.2 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Other items: |
||||||||||||||||
| Depreciation and amortisation expense |
(68.1 | ) | (26.0 | ) | (29.4 | ) | (123.5 | ) | ||||||||
| Share of results of investments accounted for using the equity method |
(0.4 | ) | (27.3 | ) | — | (27.7 | ) | |||||||||
| Investments accounted for using the equity method |
233.1 | 96.9 | — | 330.0 | ||||||||||||
| Acquisitions of property, plant and equipment |
79.2 | 50.2 | 19.6 | 149.0 | ||||||||||||
| Impairment charge: |
||||||||||||||||
| Goodwill |
(292.2 | ) | — | — | (292.2 | ) | ||||||||||
| Other intangible assets |
(8.5 | ) | — | (3.7 | ) | (12.2 | ) | |||||||||
| Property, plant and equipment |
(17.1 | ) | — | (44.1 | ) | (61.2 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| 2012 (RESTATED) |
||||||||||||||||
| Total sales revenue |
6,027.0 | 1,228.1 | 1,780.6 | 9,035.7 | ||||||||||||
| Other revenue/income |
0.5 | 5.3 | 0.8 | 6.6 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total segment revenue |
6,027.5 | 1,233.4 | 1,781.4 | 9,042.3 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Segment EBIT |
(615.9 | ) | 92.7 | (100.8 | ) | (624.0 | ) | |||||||||
|
|
|
|
|
|
|
|||||||||||
| Interest income |
3.8 | |||||||||||||||
| Finance costs |
(25.1 | ) | ||||||||||||||
|
|
|
|||||||||||||||
| Loss before income tax |
(645.3 | ) | ||||||||||||||
|
|
|
|||||||||||||||
| Segment total assets |
2,066.3 | 733.0 | 709.7 | 3,509.0 | ||||||||||||
| Segment total liabilities |
608.6 | 190.1 | 426.1 | 1,224.8 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net assets |
1,457.7 | 542.9 | 283.6 | 2,284.2 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Other items: |
||||||||||||||||
| Depreciation and amortisation expense |
(77.1 | ) | (24.9 | ) | (27.9 | ) | (129.9 | ) | ||||||||
| Share of results of investments accounted for using the equity method |
(11.9 | ) | 3.9 | — | (8.0 | ) | ||||||||||
| Investments accounted for using the equity method |
230.9 | 120.2 | — | 351.1 | ||||||||||||
| Acquisitions of property, plant and equipment |
79.0 | 39.5 | 42.6 | 161.1 | ||||||||||||
| Impairment (charge)/reversal: |
||||||||||||||||
| Goodwill |
(510.8 | ) | (3.6 | ) | (102.9 | ) | (617.3 | ) | ||||||||
| Other intangible assets |
(0.8 | ) | — | — | (0.8 | ) | ||||||||||
| Property, plant and equipment |
(3.1 | ) | (0.3 | ) | 3.0 | (0.4 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
98
99
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014
Note 7 – Other income and expenses
(a) Other income
| 2014 A$M |
2013 A$M |
2012 A$M |
||||||||||
| Net gain on commodity derivatives |
— | 31.2 | 34.0 | |||||||||
| Net gain on currency derivatives |
1.5 | 6.1 | 4.1 | |||||||||
| Net gain on revaluation of financial assets at fair value through profit or loss |
0.3 | — | — | |||||||||
| Gain on sale of joint venture1 |
— | — | 35.7 | |||||||||
| Commercial settlements |
— | 3.3 | 1.4 | |||||||||
| Gain on sale of other financial assets |
0.3 | — | — | |||||||||
| Insurance recoveries |
8.9 | 1.4 | 5.3 | |||||||||
| Government grants |
0.4 | 0.7 | 0.5 | |||||||||
| Net gain on disposal of property, plant and equipment |
— | — | 2.8 | |||||||||
| Reimbursement of expenses from a third party |
1.2 | 2.7 | — | |||||||||
| Third party commissions |
2.2 | 3.2 | 4.2 | |||||||||
| Other |
6.3 | 4.0 | 3.2 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total other income |
21.1 | 52.6 | 91.2 | |||||||||
|
|
|
|
|
|
|
|||||||
| 1 | Represents the gain from the sale of the Group’s 50% ownership interest in the secondary lead producing facility in Sydney, Australia of Australian Refined Alloys (see note 26). |
(b) Specific expenses recognised in loss before income tax
| 2014 A$M |
2013 A$M RESTATED |
2012 A$M RESTATED |
||||||||||
| Depreciation and amortisation: |
||||||||||||
| Depreciation expense |
105.6 | 101.1 | 103.1 | |||||||||
| Amortisation expense |
18.3 | 22.4 | 26.8 | |||||||||
|
|
|
|
|
|
|
|||||||
| 123.9 | 123.5 | 129.9 | ||||||||||
|
|
|
|
|
|
|
|||||||
| Finance costs1 |
23.2 | 25.5 | 25.1 | |||||||||
| Net foreign exchange loss |
0.9 | 6.2 | 2.5 | |||||||||
| Net loss on revaluation of financial assets at fair value through profit or loss2 |
— | 6.1 | 2.0 | |||||||||
| Equity-settled share-based payments expense3 |
11.8 | 16.1 | 24.3 | |||||||||
| Cash-settled share-based payments expense |
0.9 | 0.4 | — | |||||||||
| Defined contribution plan expense |
13.3 | 11.2 | 10.8 | |||||||||
| Rental expenses relating to operating leases |
104.7 | 90.2 | 79.5 | |||||||||
| Net loss on disposal of property, plant and equipment |
2.4 | 0.6 | — | |||||||||
| Net loss on commodity derivatives |
7.8 | — | — | |||||||||
| 1 | Finance costs include commitment fees paid on the Group’s loan facilities of A$8.1 million (2013: A$7.6 million; 2012: A$7.0 million). |
| 2 | Primarily represents losses from the revaluation of derivatives acquired in connection with the Group’s investment in Chiho-Tiande Group (see note 11). |
| 3 | 2013 amount includes the acceleration of A$3.4 million of expense as a result of the good leaver provision of the former CEO who retired on 30 June 2013. 2012 amount includes A$7.9 million of expense associated with the final settlement of a business arrangement. |
100
101
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014
Note 8 – Income taxes
| 2014 A$M |
2013 A$M RESTATED |
2012 A$M RESTATED |
||||||||||
| (a) Income tax expense/(benefit) |
||||||||||||
| Current income tax charge |
37.8 | 20.8 | 33.0 | |||||||||
| Adjustments for prior years |
(3.6 | ) | (1.7 | ) | (6.6 | ) | ||||||
| Deferred income tax |
12.9 | (40.4 | ) | (48.7 | ) | |||||||
|
|
|
|
|
|
|
|||||||
| Income tax expense/(benefit) |
47.1 | (21.3 | ) | (22.3 | ) | |||||||
|
|
|
|
|
|
|
|||||||
| Deferred income tax expense included in income tax expense comprises: |
||||||||||||
| Decrease/(increase) in deferred tax assets |
20.3 | 1.6 | (27.3 | ) | ||||||||
| Decrease in deferred tax liabilities |
(7.4 | ) | (42.0 | ) | (21.4 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| 12.9 | (40.4 | ) | (48.7 | ) | ||||||||
|
|
|
|
|
|
|
|||||||
| (b) Reconciliation of income tax expense/(benefit) to prima facie tax payable |
||||||||||||
| Loss before income tax |
(41.8 | ) | (488.6 | ) | (645.3 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Tax at the standard Australian rate of 30% |
(12.5 | ) | (146.5 | ) | (193.6 | ) | ||||||
| Non-deductible impairment of goodwill and intangibles |
3.6 | 65.8 | 169.5 | |||||||||
| Non-deductible impairment of goodwill in joint venture |
— | — | 11.9 | |||||||||
| Effect of unused losses and tax offsets not recognised as deferred tax assets |
51.6 | 50.4 | 10.8 | |||||||||
| Non-deductible expenses |
7.9 | 7.9 | 4.7 | |||||||||
| Effect of tax rates in other jurisdictions |
1.6 | (7.4 | ) | (9.8 | ) | |||||||
| Non-deductible impairment of investment in associate |
— | 4.5 | — | |||||||||
| Share-based payments |
1.4 | 4.0 | 6.5 | |||||||||
| Assessable gain on disposal of business divisions |
— | 2.8 | — | |||||||||
| Non-assessable income |
(3.7 | ) | (2.4 | ) | (2.5 | ) | ||||||
| Equity accounted investees results reported net of tax |
1.7 | 1.8 | (1.6 | ) | ||||||||
| Adjustments for prior years |
(3.6 | ) | (1.7 | ) | (6.6 | ) | ||||||
| Prior year tax loss not previously recognised |
(0.6 | ) | (0.4 | ) | (1.5 | ) | ||||||
| Non-assessable gain on disposal of joint venture |
— | — | (10.7 | ) | ||||||||
| Other |
(0.3 | ) | (0.1 | ) | 0.6 | |||||||
|
|
|
|
|
|
|
|||||||
| Income tax expense/(benefit) |
47.1 | (21.3 | ) | (22.3 | ) | |||||||
|
|
|
|
|
|
|
|||||||
| (c) Income tax charged/(credited) directly to equity |
||||||||||||
| Share-based payments |
(1.6 | ) | (0.5 | ) | 0.0 | |||||||
| Exchange gain on foreign denominated intercompany loans |
3.0 | 14.6 | 7.0 | |||||||||
|
|
|
|
|
|
|
|||||||
| 1.4 | 14.1 | 7.0 | ||||||||||
|
|
|
|
|
|
|
|||||||
| (d) Tax expense/(benefit) relating to items of other comprehensive income |
||||||||||||
| Cash flow hedges |
1.4 | (1.6 | ) | 0.4 | ||||||||
| Defined benefit plans |
2.4 | 2.5 | (4.9 | ) | ||||||||
|
|
|
|
|
|
|
|||||||
| 3.8 | 0.9 | (4.5 | ) | |||||||||
|
|
|
|
|
|
|
|||||||
102
103
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014
Note 8 – Income taxes (continued)
| 2014 A$M |
2013 A$M RESTATED |
|||||||
| (e) Deferred tax assets and liabilities (continued) |
||||||||
| Deferred tax liabilities (continued) |
||||||||
| Movements |
||||||||
| Balance at 1 July |
74.0 | 109.3 | ||||||
| Charged to income statement |
(7.4 | ) | (42.0 | ) | ||||
| Adjustments for prior years |
— | 1.2 | ||||||
| Charged directly to equity and other comprehensive income |
0.2 | (0.4 | ) | |||||
| Acquisitions |
— | 0.2 | ||||||
| Foreign exchange differences |
(0.8 | ) | 5.7 | |||||
|
|
|
|
|
|||||
| Balance at 30 June |
66.0 | 74.0 | ||||||
|
|
|
|
|
|||||
| Deferred tax liabilities expected to be settled within 12 months |
6.1 | 8.1 | ||||||
| Deferred tax liabilities expected to be settled after 12 months |
59.9 | 65.9 | ||||||
|
|
|
|
|
|||||
| 66.0 | 74.0 | |||||||
|
|
|
|
|
|||||
(f) Unrecognised deferred tax assets
In the year ended 30 June 2014, the Group wrote-off a deferred tax asset of A$17.6 million related to unused tax losses for a tax group in the US as it is uncertain as to when these losses will be utilised. This amount is included in the table above under the heading “effect of unused losses and tax offsets not recognised as deferred tax assets”. Refer to note 3.
Deferred tax assets totaling A$107.2 million (2013: A$69.2 million) have not been recognised as it is not probable that they will be realised. The majority of the unrecognised deferred tax asset relates to unused tax losses of A$83.2 million (2013: A$62.3 million) due to either a history of tax losses or it is not considered probable that there will be sufficient future taxable profits to realise the benefit of deferred tax assets within certain subsidiary entities. Included in unrecognised tax losses are tax losses of A$36.1 million (2013: A$24.3 million) that will expire in 5 to 20 years. Other unused tax losses may be carried forward indefinitely.
(g) Unrecognised temporary differences associated with investments and interests
As at 30 June 2014, there were no unrecognised temporary differences associated with the Group’s investments in subsidiaries, associates or joint ventures, as the Group has no liability for additional taxation should unremitted earnings be remitted.
104
| 105 |
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014
Note 10 – Inventory
| 2014 A$M |
2013 A$M RESTATED |
|||||||
| Raw materials |
115.6 | 133.5 | ||||||
| Finished goods |
411.3 | 407.9 | ||||||
| Stores and spare parts (note 1(d)) |
18.1 | 23.4 | ||||||
|
|
|
|
|
|||||
| 545.0 | 564.8 | |||||||
|
|
|
|
|
|||||
The cost of inventories recognised as expense during the year ended 30 June 2014 amounted to A$5,349.6 million (2013: A$5,580.5 million). Write-down of inventories to net realisable value are disclosed in note 7.
Note 11 – Other financial assets and liabilities
| 2014 A$M |
2013 A$M |
|||||||
| Other financial assets – Current: |
||||||||
| Financial assets at fair value through profit or loss: |
||||||||
| Investments in marketable securities |
7.5 | 7.1 | ||||||
| Loans and other receivables: |
||||||||
| Convertible loan to an associate carried at amortised cost (a) |
41.1 | — | ||||||
| Loans to third parties carried at amortised cost (d) |
0.1 | 14.8 | ||||||
| Derivative financial instruments (c): |
||||||||
| Forward foreign exchange contracts |
3.0 | 1.3 | ||||||
| Forward commodity contracts |
0.1 | 5.9 | ||||||
|
|
|
|
|
|||||
| 51.8 | 29.1 | |||||||
|
|
|
|
|
|||||
| Other financial assets – Non-current: |
||||||||
| Loans and other receivables: |
||||||||
| Convertible loan to an associate carried at amortised cost (a) |
— | 38.9 | ||||||
| Other receivables |
7.2 | 8.6 | ||||||
| Financial assets at fair value through profit or loss: |
||||||||
| Embedded conversion feature of convertible loan (a) |
— | 0.4 | ||||||
| Warrants (a) |
— | 0.0 | ||||||
| Options (b) |
— | 0.0 | ||||||
|
|
|
|
|
|||||
| 7.2 | 47.9 | |||||||
|
|
|
|
|
|||||
| Other financial liabilities – Current: |
||||||||
| Derivative financial instruments (c): |
||||||||
| Forward foreign exchange contracts |
0.2 | 5.5 | ||||||
| Forward commodity contracts |
4.3 | 0.8 | ||||||
|
|
|
|
|
|||||
| 4.5 | 6.3 | |||||||
|
|
|
|
|
|||||
(a) Convertible loan
On 1 March 2012, the Group subscribed for a HK$315.6 million (A$37.8 million) convertible loan from Chiho-Tiande Group Limited (“CTG”), an associate of the Group. The convertible loan carries an annual interest rate of 4% and is convertible at HK$6.00 per share. In connection with the subscription, CTG also issued to the Group, warrants to purchase 12,638,441 shares of CTG at an exercise price of HK$6.00 per share. Both the convertible loan and warrants have a term of three years from the date of issue. In certain instances, the conversion period can be extended for a further two years.
The conversion feature of the convertible loan represents an embedded derivative, which along with the warrants, are recorded as financial assets at fair value through profit or loss. The convertible loan is recorded at amortised cost using the effective interest method.
(b) Options
On 17 January 2012, the Group received options to purchase 20,837,095 shares of CTG as part of its investment in CTG (see note 28). The options have an exercise price of HK$6.00 per share, are immediately exercisable and expire on 17 January 2015.
The options are recorded as financial assets at fair value through profit or loss. The fair value of the options at the issue date was A$1.1 million and was independently calculated by a valuation firm. Subsequent to its initial recognition, the options have been measured at fair value, with any gains or losses being recognised in profit or loss.
106
107
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014
Note 11 – Other financial assets and liabilities (continued)
(f) Fair value (continued)
| 2014 |
LEVEL 1 A$M |
LEVEL 2 A$M |
LEVEL 3 A$M |
TOTAL A$M |
||||||||||||
| Financial assets: |
||||||||||||||||
| Financial assets at fair value through profit or loss: |
||||||||||||||||
| Investments in marketable securities |
7.5 | — | — | 7.5 | ||||||||||||
| Embedded conversion feature of convertible loan |
— | — | — | — | ||||||||||||
| Warrants |
— | — | — | — | ||||||||||||
| Options |
— | — | — | — | ||||||||||||
| Derivative financial instruments |
0.1 | 3.0 | — | 3.1 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| 7.6 | 3.0 | — | 10.6 | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Financial liabilities: |
||||||||||||||||
| Derivative financial instruments |
4.3 | 0.2 | — | 4.5 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| 4.3 | 0.2 | — | 4.5 | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| 2013 |
||||||||||||||||
| Financial assets: |
||||||||||||||||
| Financial assets at fair value through profit or loss: |
||||||||||||||||
| Investments in marketable securities |
7.1 | — | — | 7.1 | ||||||||||||
| Embedded conversion feature of convertible loan |
— | — | 0.4 | 0.4 | ||||||||||||
| Warrants |
— | — | 0.0 | 0.0 | ||||||||||||
| Options |
— | — | 0.0 | 0.0 | ||||||||||||
| Derivative financial instruments |
5.9 | 1.3 | — | 7.2 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| 13.0 | 1.3 | 0.4 | 14.7 | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Financial liabilities: |
||||||||||||||||
| Derivative financial instruments |
0.8 | 5.5 | — | 6.3 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| 0.8 | 5.5 | — | 6.3 | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
The fair value of financial instruments traded on active markets (such as publicly traded derivatives and investments in marketable securities) is based on quoted market prices at the reporting date. The quoted market price used for financial assets held by the Group is the current bid price. These instruments are included in level 1.
The fair value of financial instruments that are not traded in an active market (for example, forward foreign exchange contracts) is determined using forward exchange market rates at the end of the reporting period. These instruments are included in level 2.
If one or more of the significant inputs is not based on observable market data, the fair value of financial instruments is included in level 3. This is the case for the embedded conversion feature of the convertible loan and unlisted warrants and options.
The following table presents the changes in level 3 instruments for the years ended 30 June 2014 and 2013.
| WARRANTS A$M |
CONVERSION FEATURE A$M |
OPTIONS A$M |
TOTAL A$M |
|||||||||||||
| Balance at 30 June 2012 |
0.5 | 2.7 | 1.0 | 4.2 | ||||||||||||
| Revaluation loss recognised in profit or loss |
(0.7 | ) | (4.6 | ) | (1.0 | ) | (6.3 | ) | ||||||||
| Equity accounting elimination (note 28) |
0.2 | 2.3 | — | 2.5 | ||||||||||||
| Foreign exchange differences |
0.0 | 0.0 | 0.0 | 0.0 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Balance at 30 June 2013 |
0.0 | 0.4 | 0.0 | 0.4 | ||||||||||||
| Revaluation loss recognised in profit or loss |
0.0 | (0.4 | ) | 0.0 | (0.4 | ) | ||||||||||
| Foreign exchange differences |
0.0 | 0.0 | 0.0 | 0.0 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Balance at 30 June 2014 |
— | — | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
During the reporting period, there were no transfers between level 1 and level 2 fair value measurements, or no transfers into or out of level 3 fair value measurements.
108
109
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014
Note 13 – Goodwill
(a) Movements in carrying amounts
| 2014 A$M |
2013 A$M |
|||||||
| Cost |
1,290.2 | 1,294.2 | ||||||
| Accumulated impairment |
(1,150.9 | ) | (1,127.7 | ) | ||||
|
|
|
|
|
|||||
| Net book amount |
139.3 | 166.5 | ||||||
|
|
|
|
|
|||||
| Balance at 1 July |
166.5 | 446.3 | ||||||
| Acquisition of subsidiaries (note 26) |
— | 14.0 | ||||||
| Derecognised on sale of business divisions (note 26) |
— | (9.9 | ) | |||||
| Impairment charge |
(27.8 | ) | (292.2 | ) | ||||
| Foreign exchange differences |
0.6 | 8.3 | ||||||
|
|
|
|
|
|||||
| Balance at 30 June |
139.3 | 166.5 | ||||||
|
|
|
|
|
|||||
Goodwill acquired through business combinations has been allocated to groups of CGUs that are expected to benefit from the acquisition. Goodwill is monitored and tested for impairment by management at the CGU level. The following CGUs have significant amounts of goodwill:
| CGU |
SEGMENT | 2014 A$M |
2013 A$M |
|||||||
| US Recycling Solutions |
North America | 32.2 | 61.0 | |||||||
| Continental Europe Recycling Solutions |
Europe | 62.4 | 60.8 | |||||||
| Australia Metals |
Australasia | 40.8 | 40.8 | |||||||
| All other CGUs |
3.9 | 3.9 | ||||||||
|
|
|
|
|
|||||||
| Total |
139.3 | 166.5 | ||||||||
|
|
|
|
|
|||||||
(b) Key assumptions used for goodwill and intangible asset impairment tests
The recoverable amount of each of the Group’s CGUs has been determined based on the higher of fair value less costs to sell or value in use calculations. The Group believes its methodology is the most meaningful method, in order to reflect the cyclicality of its business and the volatile nature of commodity markets that can impact its business.
The value in use calculations use a five year cash flow projection, which is based initially on the budget for the 2015 financial year (as approved by the Board) and a four year forecast prepared by management. The four year forecast is developed using historical averages derived from four years of historical results and the budget for the 2015 financial year. These five year projections also incorporate management estimates related to the inherent impact of future volatility in volumes, commodity prices and margins drawn from past experience and factor in current and expected future economic conditions. A terminal value is determined from the final year of cash flow based on application of the Gordon Growth model.
The cash flows are discounted using rates that reflect management’s estimate of the time value of money and the risks specific to each CGU that are not already reflected in the cash flows. In determining appropriate discount rates for each CGU, consideration has been given to a weighted average cost of capital of the entity as a whole and adjusted for country and business risk specific to the CGU.
The cash flow projections are based on management’s best estimates, with reference to historical results, to determine income, expenses, capital expenditures and cash flows for each CGU. Expected future cash flows used to determine the value in use of goodwill are inherently uncertain and could materially change over time. Should management’s estimate of the future not reflect actual events, further impairments may be identified.
The key assumptions used for the value in use calculations were as follows:
| DISCOUNT RATE (PRE-TAX) | GROWTH RATE | |||||||||||||||
| CGU |
2014 % |
2013 % |
2014 % |
2013 % |
||||||||||||
| US Recycling Solutions |
14.2 | 13.4–14.0 | 2.4 | 3.0 | ||||||||||||
| Continental Europe Recycling Solutions |
9.9 | 14.0–14.3 | 1.8–2.7 | 1.5–2.5 | ||||||||||||
| Australia Metals |
15.3 | 16.0–16.8 | 2.7 | 2.5 | ||||||||||||
| North America Metals1 |
12.6 | 13.1–14.0 | 2.4 | 3.0 | ||||||||||||
| Bulk Stainless1 |
15.2 | 14.5–15.1 | 2.4 | 3.0 | ||||||||||||
| All other CGUs |
11.5-17.3 | 12.0–16.9 | 1.2–2.7 | 2.5–3.0 | ||||||||||||
| 1 | In 2013, goodwill related to these CGUs were fully impaired. The disclosed 2014 assumptions were utilised when assessing whether the carrying amount of the CGU’s long-lived assets exceeded its estimated recoverable amount. |
110
111
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014
Note 14 – Other intangible assets
| SUPPLIER RELATIONSHIPS A$M |
PERMITS A$M |
LICENSES/ CONTRACTS A$M |
TRADENAMES A$M |
TOTAL A$M |
||||||||||||||||
| At 30 June 2014 |
||||||||||||||||||||
| Cost |
221.6 | 9.1 | 36.7 | 32.4 | 299.8 | |||||||||||||||
| Accumulated impairment |
(4.9 | ) | (7.3 | ) | (0.1 | ) | (0.1 | ) | (12.4 | ) | ||||||||||
| Accumulated amortisation |
(167.4 | ) | — | (33.4 | ) | (10.1 | ) | (210.9 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net book amount |
49.3 | 1.8 | 3.2 | 22.2 | 76.5 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Year ended 30 June 2014 |
||||||||||||||||||||
| Balance at 1 July |
65.4 | 1.9 | 5.9 | 24.2 | 97.4 | |||||||||||||||
| Disposals (note 26) |
(1.0 | ) | — | — | — | (1.0 | ) | |||||||||||||
| Impairment1 |
(0.5 | ) | — | (0.1 | ) | (0.1 | ) | (0.7 | ) | |||||||||||
| Amortisation charge |
(14.0 | ) | — | (2.6 | ) | (1.7 | ) | (18.3 | ) | |||||||||||
| Foreign exchange differences |
(0.6 | ) | (0.1 | ) | — | (0.2 | ) | (0.9 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Balance at 30 June |
49.3 | 1.8 | 3.2 | 22.2 | 76.5 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| At 30 June 2013 |
||||||||||||||||||||
| Cost |
227.3 | 9.2 | 37.2 | 32.8 | 306.5 | |||||||||||||||
| Accumulated impairment |
(4.1 | ) | (7.3 | ) | — | — | (11.4 | ) | ||||||||||||
| Accumulated amortisation |
(157.8 | ) | — | (31.3 | ) | (8.6 | ) | (197.7 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net book amount |
65.4 | 1.9 | 5.9 | 24.2 | 97.4 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Year ended 30 June 2013 |
||||||||||||||||||||
| Balance at 1 July |
87.6 | 7.9 | 6.9 | 24.2 | 126.6 | |||||||||||||||
| Acquisitions (note 26) |
4.6 | 0.1 | 1.3 | 0.3 | 6.3 | |||||||||||||||
| Disposals (note 26) |
(9.3 | ) | (0.6 | ) | — | — | (9.9 | ) | ||||||||||||
| Reclassification (note 12) |
0.7 | — | (0.5 | ) | 0.3 | 0.5 | ||||||||||||||
| Impairment1 |
(5.6 | ) | (5.5 | ) | — | (1.1 | ) | (12.2 | ) | |||||||||||
| Amortisation charge |
(18.5 | ) | — | (2.3 | ) | (1.6 | ) | (22.4 | ) | |||||||||||
| Foreign exchange differences |
5.9 | — | 0.5 | 2.1 | 8.5 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Balance at 30 June |
65.4 | 1.9 | 5.9 | 24.2 | 97.4 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| 1 | For the year ended 30 June 2014, A$0.6 million of impairments were attributed to the decision to exit the Canada Recycling Solutions business. For the year ended 30 June 2013, A$3.0 million of impairments were related to assets held for sale. The remaining impairments were recorded in connection with the Group’s impairment analysis of goodwill and intangible assets (see note 13). |
112
113
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014
Note 17 – Provisions
| 2014 A$M |
2013 A$M |
|||||||
| Employee benefits |
61.5 | 45.2 | ||||||
| Onerous lease provisions |
29.8 | 1.3 | ||||||
| Legal provisions |
15.2 | 17.9 | ||||||
| Environmental and dilapidations |
13.3 | 11.1 | ||||||
| Other |
3.0 | 3.5 | ||||||
|
|
|
|
|
|||||
| 122.8 | 79.0 | |||||||
|
|
|
|
|
|||||
| Current |
76.4 | 38.5 | ||||||
| Non-current |
46.4 | 40.5 | ||||||
|
|
|
|
|
|||||
| 122.8 | 79.0 | |||||||
|
|
|
|
|
|||||
Movements in each class of provision during the financial year, other than employee benefits, are set out below:
| ONEROUS LEASES A$M |
LEGAL A$M |
ENVIRONMENTAL AND DILAPIDATIONS A$M |
OTHER A$M |
|||||||||||||
| Balance at 1 July |
1.3 | 17.9 | 11.1 | 3.5 | ||||||||||||
| Provisions recognised in profit or loss |
29.8 | 2.5 | 2.8 | (0.2 | ) | |||||||||||
| Payments |
(1.0 | ) | (5.0 | ) | (1.3 | ) | (0.8 | ) | ||||||||
| Foreign exchange differences |
(0.3 | ) | (0.2 | ) | 0.7 | 0.5 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Balance at 30 June |
29.8 | 15.2 | 13.3 | 3.0 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
Onerous lease provisions comprise obligations for future rents payable net of rents receivable on onerous leases. The majority of the provisions recognised during the financial year relate to real estate leases in the UK and Canada which will be exited as a result of the SRS restructuring initiatives determined and announced in June 2014. The exact timing of utilisation of these provisions will vary according to the individual leases.
The Group is involved in legal and other disputes and, after taking legal advice, has established provisions taking into account the relevant facts of each dispute. The timing of cash outflows associated with legal claims cannot be reasonably determined. The environmental and dilapidations provision is an estimate of costs for property remediation that is expected to be required in the future.
114
115
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014
Note 18 — Retirement benefit obligations (continued)
(a) Financial statement amounts (continued)
| PRESENT VALUE OF OBLIGATIONS A$M |
FAIR VALUE OF PLAN ASSETS A$M |
NET AMOUNT A$M |
||||||||||
| Balance as at 1 July 2011 |
64.6 | (62.6 | ) | 2.0 | ||||||||
| Service cost |
1.1 | — | 1.1 | |||||||||
| Interest expense/(income) |
3.6 | (3.4 | ) | 0.2 | ||||||||
|
|
|
|
|
|
|
|||||||
| Total amount recognised in profit or loss |
4.7 | (3.4 | ) | 1.3 | ||||||||
|
|
|
|
|
|
|
|||||||
| Remeasurements: |
||||||||||||
| Return on plan assets greater than interest income |
— | 3.8 | 3.8 | |||||||||
| Actuarial (gains)/losses – experience |
0.7 | — | 0.7 | |||||||||
| Actuarial (gains)/losses – financial assumptions |
10.2 | — | 10.2 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total amount recognised in other comprehensive income |
10.9 | 3.8 | 14.7 | |||||||||
|
|
|
|
|
|
|
|||||||
| Contributions: |
||||||||||||
| Employers |
— | (4.3 | ) | (4.3 | ) | |||||||
| Plan participants |
0.3 | (0.3 | ) | — | ||||||||
| Benefit payments |
(3.2 | ) | 3.2 | — | ||||||||
| Foreign exchange differences |
1.5 | (1.3 | ) | 0.2 | ||||||||
|
|
|
|
|
|
|
|||||||
| Balance as at 30 June 2012 (restated) |
78.8 | (64.9 | ) | 13.9 | ||||||||
|
|
|
|
|
|
|
|||||||
| Service cost |
1.4 | — | 1.4 | |||||||||
| Interest expense/(income) |
3.1 | (2.5 | ) | 0.6 | ||||||||
|
|
|
|
|
|
|
|||||||
| Total amount recognised in profit or loss |
4.5 | (2.5 | ) | 2.0 | ||||||||
|
|
|
|
|
|
|
|||||||
| Remeasurements: |
||||||||||||
| Return on plan assets greater than interest income |
— | (5.8 | ) | (5.8 | ) | |||||||
| Actuarial (gains)/losses – experience |
(1.5 | ) | — | (1.5 | ) | |||||||
| Actuarial (gains)/losses – financial assumptions |
(1.9 | ) | — | (1.9 | ) | |||||||
|
|
|
|
|
|
|
|||||||
| Total amount recognised in other comprehensive income |
(3.4 | ) | (5.8 | ) | (9.2 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Contributions: |
||||||||||||
| Employers |
— | (3.3 | ) | (3.3 | ) | |||||||
| Plan participants |
0.3 | (0.3 | ) | — | ||||||||
| Benefit payments |
(7.0 | ) | 7.0 | — | ||||||||
| Foreign exchange differences |
4.5 | (4.0 | ) | 0.5 | ||||||||
|
|
|
|
|
|
|
|||||||
| Balance as at 30 June 2013 (restated) |
77.7 | (73.8 | ) | 3.9 | ||||||||
|
|
|
|
|
|
|
|||||||
| Service cost |
1.2 | — | 1.2 | |||||||||
| Interest expense/(income) |
3.4 | (3.3 | ) | 0.1 | ||||||||
|
|
|
|
|
|
|
|||||||
| Total amount recognised in profit or loss |
4.6 | (3.3 | ) | 1.3 | ||||||||
|
|
|
|
|
|
|
|||||||
| Remeasurements: |
||||||||||||
| Return on plan assets greater than interest income |
— | (4.6 | ) | (4.6 | ) | |||||||
| Actuarial (gains)/losses – experience |
0.1 | — | 0.1 | |||||||||
| Actuarial (gains)/losses – demographic |
0.1 | — | 0.1 | |||||||||
| Actuarial (gains)/losses – financial assumptions |
4.6 | — | 4.6 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total amount recognised in other comprehensive income |
4.8 | (4.6 | ) | 0.2 | ||||||||
|
|
|
|
|
|
|
|||||||
| Contributions: |
||||||||||||
| Employers |
— | (3.0 | ) | (3.0 | ) | |||||||
| Plan participants |
0.3 | (0.3 | ) | — | ||||||||
| Benefit payments |
(7.1 | ) | 7.1 | — | ||||||||
| Foreign exchange differences |
3.8 | (3.7 | ) | 0.1 | ||||||||
|
|
|
|
|
|
|
|||||||
| Balance as at 30 June 2014 |
84.1 | (81.6 | ) | 2.5 | ||||||||
|
|
|
|
|
|
|
|||||||
116
117
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014
Note 18 — Retirement benefit obligations (continued)
(c) Principal actuarial assumptions (continued)
Comparative information has not been provided for the sensitivity analysis as permitted by the transitional provisions of AASB 119R (IAS 19R).
The sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligation as it is unlikely that the change in assumptions would occur in insolation of one another as some of the assumptions may be correlated. Furthermore, in presenting the above sensitivity analysis, the present value of the defined benefit obligation has been calculated using the projected unit credit method at the end of the reporting period, which is the same as that applied in calculating the defined benefit obligation liability recognised in the statement of financial position.
The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the prior period.
(d) Risk exposure
Through its defined benefit plans, the Group is exposed to a number of risks, the most significant of which are detailed below:
| • | Asset volatility: The plan liabilities are calculated using a discount rate set with reference to corporate bond yields; if plan assets underperform this yield, this will create a deficit. The plans hold a significant proportion of equities, which are expected to outperform bonds in the long-term while contributing volatility and risk in the short-term. The Group believes that due to the long-term nature of the plan liabilities, a level of continuing equity investment is an appropriate element of the Group’s long-term strategy to manage the plans efficiently. |
| • | Change in bond yields: A decrease in corporate bond yields will increase plan liabilities, although this will be partially offset by an increase in the value of the plans’ bond holdings. |
| • | Inflation risk: Some of the plans’ benefit obligations are linked to inflation, and higher inflation will lead to higher liabilities, although, in most cases, caps on the level of inflationary increases are in place to protect the plan against extreme inflation. |
| • | Life expectancy: The majority of the plans’ obligations are to provide benefits for the life of the member, so increases in life expectancy will result in an increase in the plans’ liability. |
| • | Salary increases: Some of the plans’ benefit obligations related to active members are linked to their salaries. Higher salary increases will therefore tend to lead to higher plan liabilities. |
(e) Employer contributions and maturity profile
In accordance with British regulation, the UK defined benefit plan is required to perform a valuation every three years, and agree on a recovery plan to correct any deficit. The last valuation revealed a funding deficit of £4.5 million. The current recovery plan agreement was signed in January 2013, and the Group agreed to pay £70,000 per month with the goal of eliminating the shortfall by November 2018.
Including the funding deficit contributions in the UK, the Group expects to make contributions of A$2.5 million to the defined benefit plans during the next financial year.
The weighted average duration of the benefit obligation at 30 June 2014 is 15.3 years (2013:14.6 years).
(f) Multi-employer pension plans
The Group participates in several multi-employer pension plans in the US which are based on collective bargaining agreements. The risks of participating in these multi-employer plans are different from single-employer plans in that (i) assets contributed to the multi-employer plan by one employer may be used to provide benefits to employees of other participating employers; (ii) if a participating employer stops contributing to the plan, the unfunded obligations of the plan may be required to be assumed by the remaining participating employers, and (iii) if the Group chooses to stop participating in any of its multi-employer plans, the Group may be required to pay those plans a withdrawal amount based on the underfunded status of the plan.
While these plans provide for defined benefits, as a result of insufficient information provided to the Group by the administrators of the plans, the Group accounts for these plans as defined contribution plans.
In the year ended 30 June 2014, the Group recorded an estimated withdrawal liability of A$6.3 million with respect to a multi-employer plan. The liability has been estimated as the Group believes the plan administrator’s calculation of the withdrawal liability is incorrect and is currently challenging the assessment. As such, the liability represents management’s best estimate.
118
| 119 |
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014
Note 20 — Accumulated deficit and reserves
(a) Accumulated deficit
| 2014 A$M |
2013 A$M RESTATED |
|||||||
| Balance at 1 July |
(668.7 | ) | (187.3 | ) | ||||
| Loss after tax |
(88.9 | ) | (467.3 | ) | ||||
| Dividends paid |
— | (20.4 | ) | |||||
| Actuarial (loss)/gain on defined benefit plans, net of tax |
(2.6 | ) | 6.3 | |||||
|
|
|
|
|
|||||
| Balance at 30 June |
(760.2 | ) | (668.7 | ) | ||||
|
|
|
|
|
|||||
(b) Reserves
| SHARE-BASED PAYMENTS A$M |
AVAILABLE- FOR-SALE INVESTMENTS A$M |
CASH FLOW HEDGING A$M |
FOREIGN CURRENCY TRANSLATION A$M |
TOTAL A$M |
||||||||||||||||
| Balance at 30 June 2012 |
96.2 | (0.1 | ) | 1.0 | (430.0 | ) | (332.9 | ) | ||||||||||||
| Equity-settled share-based payment expense |
16.1 | — | — | — | 16.1 | |||||||||||||||
| Revaluation — gross |
— | — | (6.7 | ) | — | (6.7 | ) | |||||||||||||
| Transfer to profit or loss — gross |
— | — | 1.3 | — | 1.3 | |||||||||||||||
| Foreign currency translation differences |
— | — | — | 136.3 | 136.3 | |||||||||||||||
| Associates |
— | 0.2 | (0.3 | ) | 0.7 | 0.6 | ||||||||||||||
| Deferred tax |
0.5 | — | 1.6 | (14.6 | ) | (12.5 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Balance at 30 June 2013 |
112.8 | 0.1 | (3.1 | ) | (307.6 | ) | (197.8 | ) | ||||||||||||
| Equity-settled share-based payment expense |
11.8 | — | — | — | 11.8 | |||||||||||||||
| Revaluation — gross |
— | — | 1.4 | — | 1.4 | |||||||||||||||
| Transfer to profit or loss — gross |
— | — | 4.4 | — | 4.4 | |||||||||||||||
| Foreign currency translation differences |
— | — | — | (19.6 | ) | (19.6 | ) | |||||||||||||
| Associates |
— | — | — | 0.3 | 0.3 | |||||||||||||||
| Deferred tax |
1.6 | — | (1.4 | ) | (3.0 | ) | (2.8 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Balance at 30 June 2014 |
126.2 | 0.1 | 1.3 | (329.9 | ) | (202.3 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
(c) Nature and purpose of reserves
(i) Share-based payments reserve
The share-based payments reserve is used to recognise the fair value of share-based awards issued to employees.
(ii) Available-for-sale investments reserve
Changes in the fair value and exchange differences arising on translation of investments, such as equities classified as available-for-sale investments, are recognised in other comprehensive income as described in note 1(s) and accumulated in a separate reserve within equity. Amounts are reclassified to profit or loss when the associated assets are sold or impaired.
(iii) Cash flow hedging reserve
The cash flow hedging reserve is used to record gains or losses on a hedging instrument in a cash flow hedge that are recognised in other comprehensive income, as described in note 1(t). Amounts are recognised in profit or loss when the associated hedged transaction impacts profit or loss.
(iv) Foreign currency translation reserve
Exchange differences arising on translation of foreign controlled entities are recognised in other comprehensive income, as described in note 1(g) and accumulated in a separate reserve within equity. The cumulative amount is reclassified to profit or loss when the Group no longer controls the foreign operation.
120
121
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014
Note 22 – Contingencies
(a) Guarantees
The Group has given guarantees in respect of the performance of contracts entered into in the ordinary course of business. The amounts of these guarantees provided by the Group, for which no amounts are recognised in the consolidated financial statements, as at 30 June 2014 was A$54.1 million (2013: A$61.9 million).
See note 30(b) for information related to guarantees provided by the Company.
(b) Tax audits
The Group files income tax returns in many jurisdictions throughout the world. Various tax authorities are currently reviewing or auditing the Group’s income tax returns. Tax returns contain matters that could be subject to differing interpretations of applicable tax laws and regulations. While it is difficult to predict the ultimate outcome in some cases, the Group does not anticipate that there will be any material impact on the Group’s consolidated financial statements from such audits or reviews.
(c) Environmental claims
The Group is subject to comprehensive environmental requirements relating to, among others, the acceptance, storage, treatment, handling and disposal of solid waste and hazardous waste; the discharge of materials and storm water into the environment; the management and treatment of wastewater and storm water; and the remediation of soil and groundwater contamination. As a consequence, the Group has incurred and will continue to incur environmental costs and liabilities associated with site and facility operation, closure, remediation, monitoring and licensing. Provisions have been made in respect of estimated environmental liabilities where obligations are known to exist and can be reasonably measured. However, additional liabilities may emerge due to a number of factors, including changes in environmental laws and regulations in each of the jurisdictions in which the Group operates or has operated. The Group cannot predict the extent to which it may be impacted in the future by any such changes in legislation or regulation.
(d) Legal claims
Various Group companies are parties to legal actions and claims that arise in the ordinary course of their business. While the outcome of such legal proceedings cannot be readily foreseen, the Group believes that they will be resolved without material effect on its financial statements. Provision has been made for known obligations where the existence of the liability is probable and can be reasonably estimated.
(e) Subsidiaries
Under the terms of a Deed of Cross Guarantee (“DCG”) entered into in accordance with ASIC Class Order 98/1418 (as amended by Class Orders 98/2107, 00/0321, 01/1087, 02/0248 and 02/1017), the Company has undertaken to meet any shortfall that might arise on the winding up of controlled entities that are party to the deed, as described in note 27. The controlled entities are not in liquidation and there is no indication that they will be wound up.
Note 23 – Commitments
(a) Capital commitments
Capital expenditures contracted for at the reporting date but not recognised as liabilities are as follows:
| 2014 A$M |
2013 A$M |
|||||||
| Property, plant and equipment |
50.9 | 40.8 | ||||||
The capital commitments included above also include the Group’s share relating to associates and joint arrangements.
(b) Lease commitments
(i) Operating leases
The Group has entered into various operating leases on property, plant and equipment. The leases have varying terms, escalation clauses and renewal rights. On renewal, the terms of the leases are renegotiated. Lease commitments for operating leases are as follows:
| 2014 A$M |
2013 A$M |
|||||||
| Not later than one year |
78.7 | 81.8 | ||||||
| Later than one year, but not later than five years |
157.1 | 172.5 | ||||||
| Later than five years |
125.6 | 113.8 | ||||||
|
|
|
|
|
|||||
| Total lease commitments not recognised as liabilities |
361.4 | 368.1 | ||||||
|
|
|
|
|
|||||
The lease commitments included above also include the Group’s share relating to associates and joint arrangements.
122
123
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014
Note 24 – Share ownership plans (continued)
(b) Long-Term Incentive Plan (“LTIP”) (continued)
(i) Equity-settled options (continued)
Information about outstanding and exercisable equity-settled options as at 30 June 2014 is as follows:
| OUTSTANDING | EXERCISABLE | |||||||||||||||||||||||
| EXERCISE PRICE RANGE |
NUMBER OF OPTIONS |
WEIGHTED AVERAGE EXERCISE PRICE |
WEIGHTED AVERAGE REMAINING CONTRACTUAL LIFE (YEARS) |
NUMBER OF OPTIONS |
WEIGHTED AVERAGE EXERCISE PRICE |
WEIGHTED AVERAGE REMAINING CONTRACTUAL LIFE (YEARS) |
||||||||||||||||||
| Ordinary shares: |
||||||||||||||||||||||||
| A$9.00–A$9.29 |
209,777 | A$9.29 | 5.38 | 69,927 | A$9.29 | 5.38 | ||||||||||||||||||
| A$9.30–A$9.99 |
1,380,456 | A$9.98 | 6.38 | — | — | — | ||||||||||||||||||
| A$10.00–A$26.00 |
774,502 | A$20.16 | 2.64 | 730,810 | A$20.59 | 2.54 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| 2,364,735 | A$13.25 | 5.07 | 800,737 | A$19.60 | 2.79 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| ADSs: |
||||||||||||||||||||||||
| US$9.00–US$10.99 |
1,980,912 | US$9.49 | 5.38 | 671,040 | US$9.49 | 5.38 | ||||||||||||||||||
| US$11.00–US$19.99 |
2,225,097 | US$14.57 | 3.75 | 1,855,557 | US$14.82 | 3.62 | ||||||||||||||||||
| US$20.00–US$25.00 |
1,288,318 | US$20.65 | 2.23 | 1,288,318 | US$20.65 | 2.23 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| 5,494,327 | US$14.17 | 3.98 | 3,814,915 | US$15.85 | 3.46 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
(ii) Cash-settled options
The fair value of cash-settled options is determined in the same manner as equity-settled options. The liability for cash-settled options is remeasured at each reporting date. The significant weighted assumptions used to remeasure the fair value at 30 June 2014 were as follows:
| GRANTED DURING YEAR ENDED 30 JUNE |
2014 | 2013 | ||||||
| Risk-free interest rate |
3.0 | % | 3.3 | % | ||||
| Dividend yield |
3.0 | % | 3.0 | % | ||||
| Volatility |
33.0 | % | 34.0 | % | ||||
| Expected life (years) |
3.3 | 4.2 | ||||||
| Share price at reporting date |
A$9.68 | A$8.26 | ||||||
| Weighted average fair value |
A$2.16 | A$1.69 | ||||||
| CASH-SETTLED OPTIONS OUTSTANDING |
NUMBER OF OPTIONS 2014 |
WEIGHTED AVERAGE EXERCISE PRICE $2014 |
NUMBER OF OPTIONS 2013 |
WEIGHTED AVERAGE EXERCISE PRICE $2013 |
||||||||||||
| Ordinary Shares: |
||||||||||||||||
| Balance at 1 July |
1,102,193 | A$11.97 | 566,166 | A$14.88 | ||||||||||||
| Granted |
364,527 | A$9.98 | 611,251 | A$9.29 | ||||||||||||
| Forfeited |
(88,677 | ) | A$10.84 | (75,224 | ) | A$12.02 | ||||||||||
| Exercised |
— | — | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Balance at 30 June |
1,378,043 | A$11.52 | 1,102,193 | A$11.97 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Exercisable at 30 June |
581,309 | A$13.54 | 248,905 | A$15.68 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
(iii) Performance rights
Performance rights vest after a period of three to five years, but only if the performance hurdle has been met. Performance hurdles are either based on Total Shareholder Return (“TSR”) or on Earnings per Share (“EPS”) criteria. In the year ended 30 June 2014, 103,118 share rights (2013: 461,994) were forfeited as the performance conditions were not satisfied.
TSR right grants made in the years ended 30 June 2014 and 2013 are measured using a hurdle over a three-year period (commencing at the beginning of the financial year) against a comparator group of companies. Full vesting of the TSR rights occurs when the Company’s TSR is at (or exceeds) the 75th percentile relative to the comparator group, scaling down to 50% vesting on a straight-line basis for median performance. Below median performance, no vesting occurs.
EPS right grants made in the year ended 30 June 2014 are measured based on the achievement of cumulate EPS of A$3.00 per share over a three-year period (commencing at the beginning of the financial year). Full vesting of the EPS rights occurs when the Company’s EPS exceeds A$3.00 per share, scaling down to 50% vesting on a straight-line basis for cumulative EPS of A$2.00 per share. No vesting occurs if cumulative EPS is below A$2.00 per share.
124
125
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014
Note 24 – Share ownership plans (continued)
(c) Transition Incentive Share Plan related to the Metal Management merger
In accordance with the terms and conditions of the merger agreement with Metal Management Inc., the Sims Group Limited Transition Incentive Plan (“SGLTIP”) was established. The SGLTIP assumed the rights and obligations of Metal Management under its former plan (“MMI Plan”). No additional grants can be made under the SGLTIP.
The options assumed were held by the former directors of Metal Management Inc. who became directors of the Company on the merger date. Each outstanding share option under the MMI Plan was converted into 2.05 options of the Company. Each option represents the right to acquire one ADS. In addition, the exercise price of each outstanding option under the MMI Plan was converted at the same exchange ratio. All the options assumed were fully vested and therefore the fair value was recorded as a component of the purchase price for Metal Management Inc. As at 30 June 2014, no directors of the Company hold options.
The following table sets out details of outstanding options under the SGLTIP:
| NUMBER OF OPTIONS 2014 |
WEIGHTED AVERAGE EXERCISE PRICE US$ 2014 |
NUMBER OF OPTIONS 2013 |
WEIGHTED AVERAGE EXERCISE PRICE US$ 2013 |
|||||||||||||
| Balance at 1 July |
492,000 | $ | 13.89 | 492,000 | $ | 13.89 | ||||||||||
| Exercised |
(82,000 | ) | $ | 8.62 | — | — | ||||||||||
| Forfeited/cancelled |
(410,000 | ) | $ | 14.95 | — | — | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Balance at 30 June |
— | — | 492,000 | $ | 13.89 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Exercisable at 30 June |
— | — | 492,000 | $ | 13.89 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
Note 25 – Remuneration of auditors
It is the Group’s policy to employ PricewaterhouseCoopers on assignments additional to their statutory audit duties where PricewaterhouseCoopers’ expertise and experience with the Group are important. These assignments are principally for tax advice and due diligence on acquisitions, or where PricewaterhouseCoopers is awarded assignments on a competitive basis. All audit and non-audit services provided by PricewaterhouseCoopers are subject to pre-approval by the RAC of the Board in accordance with the Group Independence Policy.
The following fees were paid and payable for services provided by the auditor of the Group and its related practices:
| 2014 | 2013 | |||||||
| A$’000 | A$’000 | |||||||
| PricewaterhouseCoopers Australia: |
||||||||
| Audit and review of financial statements |
1,910 | 1,980 | ||||||
| Audit-related fees1 |
— | 115 | ||||||
| Taxation services |
54 | 6 | ||||||
| Other |
20 | — | ||||||
|
|
|
|
|
|||||
| 1,984 | 2,101 | |||||||
| Network firms of PricewaterhouseCoopers Australia: |
||||||||
| Audit and review of financial statements |
3,435 | 3,024 | ||||||
| Audit-related fees1 |
— | 385 | ||||||
| Taxation services |
13 | 26 | ||||||
|
|
|
|
|
|||||
| 3,448 | 3,435 | |||||||
|
|
|
|
|
|||||
| Total remuneration for PricewaterhouseCoopers |
5,432 | 5,536 | ||||||
|
|
|
|
|
|||||
| 1 | Audit-related fees include fees related to the restatement of the Group’s financial statements in 2013, due diligence related to acquisitions, internal control reviews, accounting consultations and regulatory related matters. |
126
127
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014
Note 26 – Business acquisitions and disposals (continued)
(b) Disposals (continued)
The loss on the disposal of the businesses was calculated as follows:
| 2014 A$M |
2013 A$M |
|||||||
| Total consideration |
38.9 | 44.9 | ||||||
| Net carrying value of disposed assets: |
||||||||
| Cash |
(0.5 | ) | — | |||||
| Receivables |
(13.0 | ) | — | |||||
| Inventories |
(19.2 | ) | (2.4 | ) | ||||
| Prepayments |
(0.3 | ) | — | |||||
| Property, plant and equipment |
(16.5 | ) | (32.8 | ) | ||||
| Goodwill and other intangibles |
(1.0 | ) | (19.8 | ) | ||||
| Accounts payable |
6.0 | — | ||||||
| Recycling of foreign currency translation reserve on disposal of foreign operations |
4.8 | — | ||||||
| Transaction costs associated with disposals |
(0.5 | ) | — | |||||
|
|
|
|
|
|||||
| Loss on business disposals |
(1.3 | ) | (10.1 | ) | ||||
|
|
|
|
|
|||||
In the year ended 30 June 2012, the Group sold its 50% ownership interest in the secondary lead producing facility in Sydney, Australia of Australian Refined Alloys (“ARA”) to companies associated with Renewed Metal Technologies for total sales proceeds of A$40.0 million. The disposal transaction was an asset sale only comprising the sale of land, buildings, and plant and equipment. The gain on the disposal of the assets recorded in other income in the year ended 30 June 2012 was calculated as follows:
| A$M | ||||
| Cash consideration received |
40.0 | |||
| Net carrying value of disposed assets: |
||||
| Land and buildings |
(2.4 | ) | ||
| Plant and equipment |
(1.3 | ) | ||
| Capital work-in-progress |
(0.2 | ) | ||
| Transaction costs associated with disposal |
(0.4 | ) | ||
|
|
|
|||
| Gain on disposal |
35.7 | |||
|
|
|
|||
In the year ended 30 June 2013, additional assets related to the Group’s 50% ownership interest ARA were sold resulting in a loss on disposal of A$1.3 million. This amount has been recorded in other expenses (refer to note 7).
128
129
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014
Note 27 – Subsidiaries (continued)
| EQUITY HOLDING % | ||||||||||
| NAME OF ENTITY |
COUNTRY OF INCORPORATION |
2014 | 2013 | |||||||
| ER Coley (Steel) Limited (iii) |
UK | 0 | % | 100 | % | |||||
| ER Coley (Cast) Limited (iii) |
UK | 0 | % | 100 | % | |||||
| Evans & Mondon Limited |
UK | 100 | % | 100 | % | |||||
| Sims Recycling Solutions UK Holdings Limited |
UK | 100 | % | 100 | % | |||||
| Sims Recycling Solutions UK Group Limited |
UK | 100 | % | 100 | % | |||||
| Sims Recycling Solutions UK Limited |
UK | 100 | % | 100 | % | |||||
| United Castings Limited |
UK | 100 | % | 100 | % | |||||
| Sims Group UK Pension Trustees Limited |
UK | 100 | % | 100 | % | |||||
| Recommit Limited (iii) |
UK | 0 | % | 100 | % | |||||
| Cooper Metal Recycling Ltd |
UK | 100 | % | 100 | % | |||||
| Dunn Brothers (1995) Limited |
UK | 100 | % | 100 | % | |||||
| Cheque Swap Limited |
UK | 100 | % | 100 | % | |||||
| Deane Wood Export Limited |
UK | 100 | % | 100 | % | |||||
| S3 Interactive Limited |
UK | 100 | % | 100 | % | |||||
| Sims FE Mottram Limited |
UK | 100 | % | 100 | % | |||||
| Sims Recycling Solutions Inc. |
US | 100 | % | 100 | % | |||||
| Sims Recycling Solutions Holdings Inc. |
US | 100 | % | 100 | % | |||||
| Sims Metal Management USA GP |
US | 100 | % | 100 | % | |||||
| Sims Group USA Holdings Corporation |
US | 100 | % | 100 | % | |||||
| Dover Barge Company |
US | 100 | % | 100 | % | |||||
| Simsmetal East LLC |
US | 100 | % | 100 | % | |||||
| Sims Municipal Recycling of New York LLC |
US | 100 | % | 100 | % | |||||
| Schiabo Larovo Corporation |
US | 100 | % | 100 | % | |||||
| Simsmetal West LLC |
US | 100 | % | 100 | % | |||||
| Sims Group Global Trade Corporation |
US | 100 | % | 100 | % | |||||
| Sims Group USA Corporation |
US | 100 | % | 100 | % | |||||
| Metal Management, Inc. |
US | 100 | % | 100 | % | |||||
| Metal Dynamics Detroit LLC |
US | 100 | % | 100 | % | |||||
| SMM Gulf Coast LLC |
US | 100 | % | 100 | % | |||||
| Metal Management Midwest, Inc. |
US | 100 | % | 100 | % | |||||
| CIM Trucking, Inc. |
US | 100 | % | 100 | % | |||||
| Metal Management Indiana, Inc. |
US | 100 | % | 100 | % | |||||
| Metal Management Memphis, L.L.C. |
US | 100 | % | 100 | % | |||||
| Metal Management Ohio, Inc. |
US | 100 | % | 100 | % | |||||
| SMM – North America Trade Corporation |
US | 100 | % | 100 | % | |||||
| Metal Management Pittsburgh, Inc. |
US | 100 | % | 100 | % | |||||
| Metal Management Aerospace, Inc. (iii) |
US | 0 | % | 100 | % | |||||
| Metal Management Arizona, L.L.C. |
US | 100 | % | 100 | % | |||||
| Proler Southwest Corporation |
US | 100 | % | 100 | % | |||||
| SMM South Corporation |
US | 100 | % | 100 | % | |||||
| Naporano Iron & Metal, Inc. |
US | 100 | % | 100 | % | |||||
| Metal Management Northeast, Inc. |
US | 100 | % | 100 | % | |||||
| SMM New England Corporation |
US | 100 | % | 100 | % | |||||
| New York Recycling Ventures, Inc. |
US | 100 | % | 100 | % | |||||
| Reserve Iron & Metal Limited Partnership |
US | 100 | % | 100 | % | |||||
| Port Albany Ventures, LLC |
US | 100 | % | 100 | % | |||||
| SMM Southeast LLC |
US | 100 | % | 100 | % | |||||
| (i) | These subsidiaries and the Company are parties to a DCG under which each entity guarantees the debts of the others. The above entities represent a Closed Group and an Extended Closed Group for the purposes of the relevant Australian Securities and Investments Commission Class Order. |
| (ii) | These subsidiaries were acquired or incorporated during the year. |
| (iii) | These subsidiaries were disposed of or deregistered during the year. |
The voting power held in each subsidiary is proportionate to the equity holdings.
130
131
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014
Note 27 – Subsidiaries (continued)
(iv) Consolidated statement of financial position (continued)
| 2013 | ||||||||
| 2014 | A$M | |||||||
| A$M | RESTATED | |||||||
| Non-current assets |
||||||||
| Investments in associates and joint ventures |
29.0 | 23.5 | ||||||
| Other financial assets |
1,652.2 | 1,552.5 | ||||||
| Property, plant and equipment |
153.6 | 160.7 | ||||||
| Retirement benefit assets |
2.1 | 1.0 | ||||||
| Deferred tax assets |
37.9 | 20.4 | ||||||
| Goodwill |
40.4 | 40.4 | ||||||
| Other intangible assets |
1.7 | 2.6 | ||||||
|
|
|
|
|
|||||
| Total non-current assets |
1,916.9 | 1,801.1 | ||||||
|
|
|
|
|
|||||
| Total assets |
2,243.2 | 2,259.1 | ||||||
|
|
|
|
|
|||||
| LIABILITIES |
||||||||
| Current liabilities |
||||||||
| Trade and other payables |
95.2 | 151.0 | ||||||
| Borrowings |
0.5 | — | ||||||
| Other financial liabilities |
0.2 | 4.0 | ||||||
| Current tax liabilities |
17.3 | 3.8 | ||||||
| Provisions |
12.6 | 15.4 | ||||||
|
|
|
|
|
|||||
| Total current liabilities |
125.8 | 174.2 | ||||||
|
|
|
|
|
|||||
| Non-current liabilities |
||||||||
| Payables |
2.2 | 1.4 | ||||||
| Borrowings |
12.6 | 7.7 | ||||||
| Deferred tax liabilities |
10.0 | 6.9 | ||||||
| Provisions |
2.7 | 1.7 | ||||||
|
|
|
|
|
|||||
| Total non-current liabilities |
27.5 | 17.7 | ||||||
|
|
|
|
|
|||||
| Total liabilities |
153.3 | 191.9 | ||||||
|
|
|
|
|
|||||
| Net assets |
2,089.9 | 2,067.2 | ||||||
|
|
|
|
|
|||||
| EQUITY |
||||||||
| Contributed equity |
2,796.4 | 2,795.7 | ||||||
| Reserves |
124.9 | 112.1 | ||||||
| Accumulated deficit |
(831.4 | ) | (840.6 | ) | ||||
|
|
|
|
|
|||||
| Total equity |
2,089.9 | 2,067.2 | ||||||
|
|
|
|
|
|||||
132
| 133 |
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014
Note 28 – Interests in other entities (continued)
(e) Investment in Chiho-Tiande
On 17 January 2012, the Group acquired 16% of the existing shares of CTG, a Hong Kong listed metals and electronics recycler with operations in the People’s Republic of China and Hong Kong. The shares were acquired from founder Chairman Ankong Fang and Delco Participation B.V. (Delco), a Netherlands-based investment holding company, for total consideration of HK$750.1 million (A$93.1 million). The cost of the acquisition also included transaction costs of A$0.4 million. In addition, Delco granted an option to the Group to acquire a further 2% of CTG (see note 11).
The Group accounts for CTG as an associate, although the Group holds less than 20% equity interest. This is because the Group exercises significant influence through its nominated director’s active participation on CTG’s board of directors as well as a significant trading relationship with CTG.
(f) Summarised financial information of associates and joint ventures
| GROUP’S SHARE OF ASSETS AND LIABILITIES |
2014 A$M |
2013 A$M |
||||||
| Current assets |
142.9 | 186.7 | ||||||
| Non-current assets |
306.7 | 297.6 | ||||||
|
|
|
|
|
|||||
| Total assets |
449.6 | 484.3 | ||||||
|
|
|
|
|
|||||
| Current liabilities |
95.5 | 105.1 | ||||||
| Non-current liabilities |
82.2 | 112.9 | ||||||
|
|
|
|
|
|||||
| Total liabilities |
177.7 | 218.0 | ||||||
|
|
|
|
|
|||||
| Net assets |
271.9 | 266.3 | ||||||
|
|
|
|
|
|||||
| GROUP’S SHARE OF REVENUE, EXPENSES AND RESULTS |
2014 A$M |
2013 A$M |
2012 A$M |
|||||||||
| Revenues |
786.9 | 731.5 | 837.9 | |||||||||
| Expenses |
(788.1 | ) | (745.5 | ) | (845.7 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Loss before income tax |
(1.2 | ) | (14.0 | ) | (7.8 | ) | ||||||
| Tax expense |
(4.7 | ) | (1.1 | ) | (2.5 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Loss for the year |
(5.9 | ) | (15.1 | ) | (10.3 | ) | ||||||
|
|
|
|
|
|
|
|||||||
(g) Contingent liabilities and capital commitments
The Group’s share of the contingent liabilities of joint arrangements is disclosed in note 22. The Group’s share of the capital commitments and other expenditure commitments of joint arrangements is disclosed in note 23.
(h) Joint operations
The Group has a 50% interest in a joint operation called Sims Pacific Metals (“SPM”) which is engaged in metal recycling in New Zealand. The partners in the joint operation own the assets as tenants in common and are jointly and severally liable for the liabilities incurred by the joint operation. SPM is therefore classified as a joint operation and the Group recognises its direct right to the jointly held assets, liabilities, revenues and expenses as described in note 1(e)(iii). The Group’s interest in SPM is included in the statement of financial position under the classifications shown below:
| 2014 A$M |
2013 A$M |
|||||||
| Current assets |
22.0 | 15.9 | ||||||
| Non-current assets |
8.0 | 8.4 | ||||||
|
|
|
|
|
|||||
| Total assets |
30.0 | 24.3 | ||||||
|
|
|
|
|
|||||
| Current liabilities |
25.3 | 18.6 | ||||||
| Non-current liabilities |
0.1 | 0.2 | ||||||
|
|
|
|
|
|||||
| Total liabilities |
25.4 | 18.8 | ||||||
|
|
|
|
|
|||||
| Net assets |
4.6 | 5.5 | ||||||
|
|
|
|
|
|||||
The Group’s share of SPM’s contingent liabilities and capital expenditure commitments is included in notes 22 and 23, respectively.
134
135
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014
Note 30 – Parent entity financial information
The Company was incorporated on 20 June 2005. Under the terms of a scheme of arrangement entered into between Sims Metal Management Limited (formerly known as Sims Group Limited from 20 June 2005 to 21 November 2008) and Sims Group Australia Holdings Limited (“SGAHL”) (formerly known as Sims Group Limited prior to 20 June 2005) on 31 October 2005, the shareholders in SGAHL exchanged their shares in that entity for the shares in Sims Metal Management Limited. As required by AASB 3 (IFRS 3), Business Combinations at the time, SGAHL was deemed to be the acquirer in this business combination. This transaction has therefore been accounted for as a reverse acquisition. Accordingly, the consolidated financial statements of Sims Metal Management Limited have been prepared as a continuation of the consolidated financial statements of SGAHL. SGAHL, as the deemed acquirer, has applied purchase accounting for its acquisition of Sims Metal Management Limited as at 31 October 2005.
(a) Summary financial information
| 2014 A$M |
2013 A$M |
|||||||
| Statement of financial position: |
||||||||
| Current assets |
87.8 | 59.1 | ||||||
| Total assets |
2,511.4 | 2,585.2 | ||||||
| Current liabilities |
79.6 | 62.3 | ||||||
| Total liabilities |
81.4 | 63.7 | ||||||
| Shareholders’ equity: |
||||||||
| Contributed equity |
4,117.0 | 4,116.3 | ||||||
| Reserves |
126.2 | 112.8 | ||||||
| Accumulated deficit |
(1,813.2 | ) | (1,707.6 | ) | ||||
|
|
|
|
|
|||||
| Total equity |
2,430.0 | 2,521.5 | ||||||
|
|
|
|
|
|||||
| Loss for the year1 |
(105.6 | ) | (408.4 | ) | ||||
|
|
|
|
|
|||||
| Total comprehensive loss |
(105.6 | ) | (408.4 | ) | ||||
|
|
|
|
|
|||||
| 1 | The parent entity’s loss for 2014 and 2013 included an after-tax non-cash impairment charge of A$105.0 million and A$427.0 million, respectively, against the parent entity’s investment in subsidiaries. In accordance with AASB 136 (IAS 36), the parent entity’s investment in subsidiary balance was compared to the higher of its value in use or fair market value less costs to sell, and the comparison identified an impairment in the carrying value of the parent entity’s investment in subsidiaries. This non-cash charge is reversed on consolidation and does not impact the consolidated financial statements of the Group. |
As at 30 June 2013, the Company had current liabilities greater than current assets. The current liabilities primarily represent intercompany balances between entities, which are a party to a DCG to which the Parent is also a party. Refer to note 27.
(b) Guarantees entered into by the parent entity
The Company has not provided financial guarantees for which a liability has been recognised in the Company’s statement of financial position. The Company and certain of its subsidiaries have given guarantees in respect of the performance of contracts entered into in the ordinary course of business. The amount of these guarantees provided by the Company as at 30 June 2014 was A$38.4 million (2013: A$46.1 million).
On 31 March 2011, the Company provided a guarantee for its proportional share of a lease obligation of a joint venture of the Group. The Company’s proportional amount of the lease obligation remaining as at 30 June 2014 was A$11.8 million (2013: A$14.8 million).
The Company is party to a number of financing facilities and a Deed of Cross Guarantee under which it guarantees the debts of a number of its subsidiaries. Refer to notes 16 and 27 for details.
(c) Lease commitments
| 2014 A$M |
2013 A$M |
|||||||
| Not later than one year |
2.1 | 2.0 | ||||||
| Later than one year, but not later than five years |
8.6 | 8.5 | ||||||
| Later than five years |
38.7 | 40.7 | ||||||
|
|
|
|
|
|||||
| Total lease commitments not recognised as liabilities |
49.4 | 51.2 | ||||||
|
|
|
|
|
|||||
136
137
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014
Note 32 – Assets/liabilities classified as held for sale
| 2014 A$M |
2013 A$M |
|||||||
| Assets classified as held for sale |
||||||||
| Trade and other receivables |
— | 16.1 | ||||||
| Inventory |
— | 25.3 | ||||||
| Property, plant and equipment |
7.4 | 11.3 | ||||||
| Prepayments |
— | 0.4 | ||||||
|
|
|
|
|
|||||
| 7.4 | 53.1 | |||||||
|
|
|
|
|
|||||
| Liabilities directly associated with assets classified as held for sale |
||||||||
| Trade and other payables |
— | 6.9 | ||||||
| Provisions |
— | 9.7 | ||||||
|
|
|
|
|
|||||
| — | 16.6 | |||||||
|
|
|
|
|
|||||
Assets held for sale at 30 June 2014 include excess property and equipment in the US and Australia which the Group expects to sell within the next financial year.
Assets held for sale at 30 June 2013, including directly associated liabilities, represented non-core assets in the US which were sold during the year ended 30 June 2014. Refer to note 26(b) for additional information.
138
139
FINANCIAL STATEMENTS
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF SIMS METAL MANAGEMENT LIMITED
REPORT ON THE FINANCIAL REPORT
We have audited the accompanying financial report of Sims Metal Management Limited (the company), which comprises the statement of financial position as at 30 June 2014, the income statement, the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year ended on that date, a summary of significant accounting policies, other explanatory notes and the directors’ declaration for Sims Metal Management Limited (the consolidated entity). The consolidated entity comprises 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 of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements comply with International Financial Reporting Standards as issued by the International Accounting Standards Board.
AUDITOR’S RESPONSIBILITY
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance 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 consolidated 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 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.
PricewaterhouseCoopers, ABN 52 780 433 757
Darling Park Tower 2, 201 Sussex Street, GPO BOX 2650, SYDNEY NSW 1171
DX 77 Sydney, Australia
T +61 2 8266 0000, F +61 2 8266 9999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
140
| 141 |
OTHER INFORMATION
ANNUAL FINANCIAL REPORT EXTRACTS PRESENTED IN US DOLLARS
The audited financial statements of the Group presented in Australian dollars (“A$”) are included in pages 75 to 79. On pages 143 to 145, extracts from the audited financial statements are presented in US dollars (“US”). This information does not form the part of the audited financial statements. The translation from A$ to US$ is included solely for the convenience of the reader. The financial statements as at and for the year ended 30 June 2014 have been translated into US$ at US$1.00 = A$1.0616 based on the closing exchange rate published by the Reserve Bank of Australia.
142
143
OTHER INFORMATION
CONSOLIDATED US$ STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2014
| 2014 US$M |
||||
| ASSETS |
||||
| Current assets |
||||
| Cash and cash equivalents |
53.9 | |||
| Trade and other receivables |
419.7 | |||
| Inventory |
513.4 | |||
| Other financial assets |
48.8 | |||
| Assets classified as held for sale |
7.0 | |||
|
|
|
|||
| Total current assets |
1,042.8 | |||
|
|
|
|||
| Non-current assets |
||||
| Investments in associates and joint ventures |
296.6 | |||
| Other financial assets |
6.8 | |||
| Property, plant and equipment |
850.6 | |||
| Retirement benefit assets |
2.0 | |||
| Deferred tax assets |
93.6 | |||
| Goodwill |
131.2 | |||
| Other intangible assets |
72.1 | |||
|
|
|
|||
| Total non-current assets |
1,452.9 | |||
|
|
|
|||
| Total assets |
2,495.7 | |||
|
|
|
|||
| LIABILITIES |
||||
| Current liabilities |
||||
| Trade and other payables |
538.1 | |||
| Borrowings |
0.5 | |||
| Other financial liabilities |
4.2 | |||
| Current tax liabilities |
23.4 | |||
| Provisions |
72.0 | |||
|
|
|
|||
| Total current liabilities |
638.2 | |||
|
|
|
|||
| Non-current liabilities |
||||
| Payables |
6.1 | |||
| Borrowings |
13.6 | |||
| Deferred tax liabilities |
62.2 | |||
| Provisions |
43.7 | |||
| Retirement benefit obligations |
4.3 | |||
|
|
|
|||
| Total non-current liabilities |
129.9 | |||
|
|
|
|||
| Total liabilities |
768.1 | |||
|
|
|
|||
| Net assets |
1,727.6 | |||
|
|
|
|||
| EQUITY |
||||
| Contributed equity |
2,634.3 | |||
| Reserves |
(190.6 | ) | ||
| Accumulated deficit |
(716.1 | ) | ||
|
|
|
|||
| Total equity |
1,727.6 | |||
|
|
|
|||
144
145
OTHER INFORMATION
SHAREHOLDER INFORMATION AS AT 4 SEPTEMBER 2014
EQUITY SECURITIES
SUBSTANTIAL SHAREHOLDERS
| NUMBER HELD | % | |||||||
| Mitsui Raw Materials Developments Pty Limited |
36,151,787 | 17.7 | ||||||
| Commonwealth Bank of Australia |
23,879,794 | 11.7 | ||||||
| Perpetual Limited |
19,334,648 | 9.4 | ||||||
| FIL Limited |
12,457,894 | 6.1 | ||||||
| National Australia Bank Limited |
11,218,658 | 5.4 | ||||||
ORDINARY SHARES
Distribution of ordinary share holdings
| RANGE |
HOLDERS | |||
| 1–1,000 |
7,667 | |||
| 1,001–5,000 |
6,174 | |||
| 5,001–10,000 |
834 | |||
| 10,001–100,000 |
340 | |||
| 100,001 and over |
36 | |||
|
|
|
|||
| Total |
15,051 | |||
|
|
|
|||
There were 760 holders of less than a marketable parcel of shares.
Voting rights attaching to the ordinary shares are, on a show of hands, one vote for every person present as a member, proxy, attorney or representative thereof and upon a poll each share shall have one vote.
PERFORMANCE RIGHTS/RESTRICTED SHARE UNITS
Distribution of performance rights/restricted share units holdings
| RANGE |
HOLDERS | |||
| 1–1,000 |
4 | |||
| 1,001–5,000 |
47 | |||
| 5,001–10,000 |
32 | |||
| 10,001–100,000 |
68 | |||
| 100,001 and over |
7 | |||
|
|
|
|||
| Total |
158 | |||
|
|
|
|||
A total of 4,996,132 performance rights and restricted share units to take up ordinary shares or American Depositary Shares are issued under the Sims Metal Management Limited Long Term Incentive Plan and individual contracts, held by 158 holders.
The performance rights and restricted share units do not have any voting rights.
OPTIONS
Distribution of options holdings
| RANGE |
HOLDERS | |||
| 1–1,000 |
5 | |||
| 1,001–5,000 |
35 | |||
| 5,001–10,000 |
30 | |||
| 10,001–100,000 |
111 | |||
| 100,001 and over |
13 | |||
|
|
|
|||
| Total |
194 | |||
|
|
|
|||
A total of 7,851,449 options to take up ordinary shares or American Depositary Shares are issued under the Sims Metal Management Limited Long Term Incentive Plan, held by 194 holders.
The options do not have any voting rights.
146
147
OTHER INFORMATION
CORPORATE DIRECTORY
SECURITIES EXCHANGE LISTING
The Company’s ordinary shares are quoted on the Australian Securities Exchange under the ASX Code ‘SGM’.
The Company’s American Depositary Shares (ADSs) are quoted on the Over-the-Counter market under the symbol ‘SMSMY’. The Company has a Level I ADS program, and the depositary bank is The Bank of New York Mellon Corporation. ADSs trade under CUSIP number 829160100 with each ADS representing one (1) ordinary share. Further information and investor enquiries on ADSs may be directed to:
The Bank of New York Mellon
P.O. Box 358516
Pittsburgh, PA 15252-8516
Telephone: (1 888) BNY ADRS
Email: shrrelations@bnymellon.com
REGISTERED OFFICE
Sir Joseph Banks Corporate Park
Suite 3, Level 2
32–34 Lord Street Botany NSW 2019
Telephone: (02) 8113 1600
HEAD OFFICE
16 West 22nd Street, 10th Floor
New York, NY 10010
United States
Telephone: (1 212) 604-0710
SHAREHOLDER ENQUIRIES
Enquiries from investors regarding their share holdings should be directed to:
Computershare Investor Services Pty Limited
Level 4
60 Carrington Street
Sydney NSW 2000
Postal Address:
GPO Box 2975
Melbourne VIC 3001
Telephone: 1300 855 080
Facsimile: (03) 9473 2500
COMPANY SECRETARIES
Frank Moratti
Scott Miller
For more up-to-the-minute investor relations, visit www.simsmm.com.
148
Exhibit 99.3
| ASX & MEDIA RELEASE | (ASX: SGM, NYSE: SMS) | 10 October 2014 |
BOARD SUCCESSION
Sims Metal Management Limited today announced that Deborah O’Toole and Georgia Nelson have agreed to join the Board of the Company as independent non-executive directors effective 1 November 2014.
Ms O’Toole (age 57) has extensive executive experience across a number of sectors including over 20 years in the mining industry and, more recently, in transport and logistics. She has been Chief Financial Officer in three ASX listed companies, M.I.M Holdings Limited, Queensland Cotton Holdings Limited and, most recently, through the privatisation of Aurizon Holdings Limited. Ms O’Toole is currently a director of Credit Union Australia and the Wesley Research Institute and previously served as a director of The Commonwealth Scientific and Industrial Research Organisation (CSIRO). She has a Bachelor of Laws degree and resides in Brisbane. Ms O’Toole will also serve as a member of the Company’s Risk, Audit & Compliance Committee and Finance & Investment Committee.
Ms Nelson (age 64) is the former founding president of Midwest Generation EME, LLC, an Edison International company with its corporate headquarters in Chicago. Previously, she was senior vice president of worldwide operations for Edison Mission Energy where she was responsible for worldwide power plant construction, as well as international environmental, fuel and technical policy, and plant personnel and operations on four continents. Before that, Ms Nelson spent more than 25 years with Southern California Edison, a large U.S. electric utility. Ms Nelson serves as a director of three publicly traded corporations: Cummins Inc. (CMI) a global engine and equipment manufacturer, Ball Corporation (BLL) a global metals container manufacturing company, and TransAlta Corporation (TAC), a power generation and wholesale marketing company. Ms Nelson holds an MBA and a Bachelor of Science and resides in Chicago. She will also serve as a member of the Company’s Safety, Health, Environment & Community Committee and Remuneration Committee.
Messrs O’Toole and Nelson will each stand for election at the Company’s 2014 Annual General Meeting to be held on 13 November 2014.
Sims Metal Management Limited Chairman Geoff Brunsdon said, “I am delighted that two outstanding individuals have agreed to join our Board. Ms O’Toole brings a skillset comprising strategic, financial, commercial and operational expertise, as well as substantial knowledge and understanding of global metals markets and supply chains and innovation. Ms Nelson has broad experience as a corporate director with particular expertise in large and complex organizations, international and domestic operations, and manufacturing and human resources. I am confident that both Deborah and Georgia will be outstanding directors.
These appointments fulfil an important part of the Company’s Board succession plans, with current non-executive directors Gerry Morris and Norm Bobins due to retire from the Board at the conclusion of the Company’s 2014 Annual General Meeting.”
Cautionary Statements Regarding Forward-Looking Information
This release may contain forward-looking statements, including statements about Sims Metal Management’s financial condition, results of operations, earnings outlook and prospects. Forward-looking statements are typically identified by words such as “plan,” “believe,” “expect,” “anticipate,” “intend,” “outlook,” “estimate,” “forecast,” “project” and other similar words and expressions.
These forward-looking statements involve certain risks and uncertainties. Our ability to predict results or the actual effects of our plans and strategies is subject to inherent uncertainty. Factors that may cause actual results or earnings to differ materially from these forward-looking statements include those discussed and identified in filings we make with the Australian Securities Exchange and the United States Securities and Exchange Commission (“SEC”), including the risk factors described in the Company’s Annual Report on Form 20-F, which we filed with the SEC on 16 October 2013.
Because these forward-looking statements are subject to assumptions and uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements. You are cautioned not to place undue reliance on these statements, which speak only as of the date of this release.
All subsequent written and oral forward-looking statements concerning the matters addressed in this release and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this release. Except to the extent required by applicable law or regulation, we undertake no obligation to update these forward-looking statements to reflect events or circumstances after the date of this release.
All references to currencies, unless otherwise stated, reflect measures in Australian dollars.
About Sims Metal Management
Sims Metal Management is the world’s largest listed metal recycler with over 250 facilities and 6,000 employees globally. Sims’ core businesses are metal recycling and electronics recycling. Sims Metal Management generates approximately 60% of its revenue from operations in North America. The Company’s ordinary shares are listed on the Australian Securities Exchange (ASX: SGM) and its ADRs are listed in the United States on the Over-the-Counter market (OTC:SMSMY). Please visit our website (www.simsmm.com) for more information on the Company and recent developments.
Investor and media inquiries contact
Todd Scott
Group Vice President – Investor Relations
Tel: +61 4 0960 0352
2
Exhibit 99.4
| ASX & MEDIA RELEASE | (ASX: SGM, OTC: SMSMY) | 14 October 2014 |
Sims Metal Management Limited to deregister from SEC in US
Sims Metal Management Limited (the Company) announced today that it intends to deregister its American Depositary Receipts (ADRs) under the U.S. Securities Exchange Act (Exchange Act). This follows the delisting of the ADRs from the New York Stock Exchange (NYSE) on 11 October 2013.
As the Company has now met the criteria for deregistration, the Company plans to file a Form 15F with the U.S. Securities and Exchange Commission (SEC) to terminate the registration of the Company’s ADRs under the Exchange Act. Upon the filing of the Form 15F, the Company’s obligation to file certain reports with the SEC, including Forms 20-F and 6-K, will immediately be suspended. The Company expects that the deregistration of its ADRs will become effective, and the Company’s Exchange Act reporting obligations will be terminated, 90 days after the filing of the Form 15F with the SEC.
The Company will continue to provide a sponsored ADR programme in conjunction with Bank of New York Mellon in the U.S. on the ‘over-the-counter’ (OTC) market to enable investors to trade ADRs. The Company’s ordinary shares are entirely unaffected by the proposed deregistration and will continue to be listed on the Australian Securities Exchange.
Cautionary Statements Regarding Forward-Looking Information
This release may contain forward-looking statements, including statements about Sims Metal Management’s financial condition, results of operations, earnings outlook and prospects. Forward-looking statements are typically identified by words such as “plan,” “believe,” “expect,” “anticipate,” “intend,” “outlook,” “estimate,” “forecast,” “project” and other similar words and expressions.
These forward-looking statements involve certain risks and uncertainties. Our ability to predict results or the actual effects of our plans and strategies is subject to inherent uncertainty. Factors that may cause actual results or earnings to differ materially from these forward-looking statements include those discussed and identified in filings we make with the Australian Securities Exchange and the risk factors described in the Corporate Governance section of the Company’s web site. Because these forward-looking statements are subject to assumptions and uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements. You are cautioned not to place undue reliance on these statements, which speak only as of the date of this release.
All subsequent written and oral forward-looking statements concerning the matters addressed in this release and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this release. Except to the extent required by applicable law or regulation, we undertake no obligation to update these forward-looking statements to reflect events or circumstances after the date of this release.
All references to currencies, unless otherwise stated, reflect measures in Australian dollars.
About Sims Metal Management
Sims Metal Management is the world’s largest listed metal recycler with over 250 facilities and 6,000 employees globally. Sims’ core businesses are metal recycling and electronics recycling. Sims Metal Management generates approximately 60% of its revenue from operations in North America. The Company’s ordinary shares are listed on the Australian Securities Exchange (ASX: SGM) and its ADRs are listed in the United States on the Over-the-Counter market (OTC:SMSMY). Please visit our website (www.simsmm.com) for more information on the Company and recent developments.
Investor and media inquiries contact
Todd Scott
Group Vice President – Investor Relations
Tel: +61 4 0960 0352
2
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